Danaher Annual Report 2005

FY2005 Annual Report · Danaher
Loading PDF…
A N N U A L   R E P O RT

D A N A H E R

2005

E
R
U
T
U
F

R
U
O

S
E
N

I
F
E
D

N
O

I
T
A
V
O
N
N

I

E
L
P
O
E
P

S
E
I

G
O
L
O
N
H
C
E
T

L
A
C
I

D
E
M

 
 
 
 
Microscopes that let researchers see life at 100 nanometers in three dimensions. Dental diagnostics
that spot decay as it forms, enabling painless noninvasive treatments. Disinfection technologies that
help ensure safe drinking water for billions of gallons of water a day. Transaction systems that bring
new levels of speed and security to consumers. Network analyzers that link seamlessly with sophis-
ticated software to maximize uptime.

Danaher products span some of the most demanding applications in the world, creating new
possibilities not only for those who use them, but for millions more who never give them a moment’s
thought. In every case, they’re delivering benefits that matter to markets that are eager for innova-
tion. And we are doing it through a customer-centric approach that unites our businesses and has made
them global leaders.

S
E
C
N
E
I
C
S

E
F
I
L

Y
T
I
V
I
T
C
U
D
O
R
P

 
1

T
N
E
M
E
V
O
R
P
M

I

S
U
O
U
N

I
T
N
O
C

N
A
L
P

T
S
E
T

C
I

N
O
R
T
C
E
L
E

 
 
2

N
E
T
S
I
L

E
W

,

K
L
A
T

S
R
E
M
O
T
S
U
C

S
E
I

G
O
L
O
N
H
C
E
T

L
A
T
N
E
D

S
S
E
C
O
R
P

Fluke, Hach, KaVo and Videojet are just some of the Danaher brands that have become synonymous 
with market-leading technology. In 2005 we added a new one, Leica Microsystems, built on over a
century of respected expertise. Our consistent ability to deliver for investors comes from putting the
right businesses together, drawing on the strengths that attracted us to them in the first place, and
empowering them to grow even stronger by out-performing their competition. 

Several of our innovations drew international attention in 2005. Leica Microsystems became
a three-time winner of the German Business Innovation Award with its ultra-high-resolution TCS 4Pi
microscope. Kollmorgen’s patented Cartridge DDR™ servomotor was named a Product of the Year by
both Design Newsand Electronic ProductsNewsmagazines. Other industry awards spanned almost
every Danaher business as we continued on the course that has served us so well for over two decades: 

 
 
 
 
3

S
H
G
U
O
R
H
T
K
A
E
R
B

H
T
W
O
R
G

Y
T
I
L
A
U
Q

R
E
T
A
W

N
E
Z
I
A
K

 
 
4

listening to the Voice of the Customer, finding nuances of unspoken need in the mind of the customer,
and translating our insights into market-changing innovations.

There’s no magic to what we do — it’s all right there in the Danaher Business System (DBS),
which guides strategy and execution and makes us better every year. Better for investors, as we 
continue to evolve the portfolio into more attractive and less cyclical businesses. Better for associ-
ates, as their command of DBS helps them grow personally as well as professionally. And better for
customers, as DBS accelerates new technology and service breakthroughs.

S
N

I

W

M
A
E
T

T
S
E
B

E
H
T

E
C
N
A
M
R
O
F
R
E
P

S
R
E
D
L
O
H
E
R
A
H
S

R
O
F

E
T
E
P
M
O
C

E
W

 
 
 
 
 
 
5

I N N O VAT I O N

Innovation  and  execution  drive  top  and  bottom  line  growth  for
Danaher year after year. In 2005 we hit new records for sales, earn-
ings and cash flow, just as we did in 2004. In 2006 we will leverage
our market-leading know-how and disciplined approach benefiting
customers across six continents. The following stories describe some
of the wealth of innovation embedded in our products and how it
makes a difference for our customers. They also capture the global
reach of Danaher brands through offices, laboratories, factories,
home and retail environments around the world.

Financial Operating Highlights
(dollars in thousands except per share data and number of associates)

Sales
Operating profit
Net earnings   
Earnings per share (diluted)
Operating cash flow
Capital expenditures
Free cash flow (operating cash flow less capital expenditures)
Number of associates 
Total assets
Total debt
Stockholders’ equity
Total capitalization (total debt plus stockholders’ equity) 

2005

2004

$ 7,984,704
$ 1,264,668
$ 897,800
$
2.76
$ 1,203,801
$ 121,206
$ 1,082,595
40,000
$ 9,163,109
$ 1,041,722
$ 5,080,350
$ 6,122,072

$ 6,889,301
$ 1,105,133
$ 746,000
$
2.30
$ 1,033,216
$ 115,906
$ 917,310
35,000
$ 8,493,893
$ 1,350,298
$ 4,619,682
$ 5,969,980

6

YIWEI ZHANG AND FRIEND
STUDENTS

M A R K E T
Electronic Test

D A N A H E R   B R A N D S
Fluke, Fluke Networks

D R I V E R S
Productivity, preventative maintenance

A global leader in electronic test, Fluke
continued to gain share in 2005, with
sales in China growing more than 25%.

7

A
N

I

H
C

,

G
N

I
J
I
E
B

Power quality analysis is one of several segments where Fluke innovations 
are driving double-digit growth. Fluke’s 430 series power quality analyzers
combine easy-to-use design with the accuracy and versatility needed to help
ensure a consistent, high quality flow of electrical power.

C U R R E N T   C O N D I T I O N S :   E X C E L L E N T

Amidst growing concern over climate change, the China Meteorological Administration
CMA) set up an automatic climate monitoring system in 2005. Initial results were alarm-
(
ingly erratic, until a Fluke 434 power quality analyzer proved that the fluctuations were
caused by power surges at the data center. For CMA officials, it was an object lesson
in the relationship between power quality and data quality — and the value of Fluke
analyzers in preventing downtime and damage to stored information. Organizations around
the world seem to agree, as Fluke power quality sales in 2005 rose more than 25%.

 
8

M A R K E T
Environmental and Retail
Automation Products for
Petroleum Marketers

D A N A H E R   B R A N D S
Gilbarco Veeder-Root

D R I V E R S
Regulatory compliance,
consumer convenience,
retail management

Danaher is a global leader in 
environmental and automation 
technology for petroleum retailers,
with more than 50% of sales 
outside the United States.

Y
L
A
T
I

,

E
C
N
E
R
O
L
F

Gilbarco is a leading supplier of outdoor payment solutions for petroleum 
markets. Gilbarco’s SPOT product line (Secure Pinpad for Outdoor payment Terminals),
introduced in 2005, simplifies purchases while meeting the newest international 
standards for Europay, MasterCard and Visa processing.

F U E L I N G   FA S T E R   S A L E S

At  Barbara  Pacetti’s  petrol  station  in  Florence,  Italy,  customers  are  streaming
through faster than ever thanks to a state-of-the-art Gilbarco payment system.
Automated outdoor payment solutions are expected to spread across Europe as
currency and security standards have stabilized. Yet only a few hundred of Italy’s
20,000 stations are equipped to meet the new requirements. Gilbarco’s system
promises to change that through new designs that speed transactions, enable higher
revenues and reduce ownership costs — not only in Italy, but throughout the world.

 
BARBARA PACETTI
GAS STATION PROPRIETOR

9

10

DR. LORI TROST
DMD, PC

11

M A R K E T
Dental Technology

D A N A H E R   B R A N D S
KaVo, Gendex,
DEXIS, Pelton & Crane

D R I V E R S
Clinical outcomes, doctor 
productivity, patient comfort

Danaher helps dentists improve
patient care around the world,
with approximately 30% of 2005 
revenues from new products intro-
duced in the last three years.

S
I

O
N

I
L
L
I

,

A
I

B
M
U
L
O
C

Advances in minimally invasive treatment have radically improved patient
comfort while enhancing dentists’ productivity. Gendex’s digital radiography
product line and KaVo’s DIAGNOdent laser, used to detect cavities, are just two
of the ways Danaher is leading this revolution in dentistry.With the 2005
acquisitions of DEXIS and Pelton & Crane, Danaher is now the world’s largest
manufacturer of dental technology.

PA I N L E S S   I S   J U S T   PA RT   O F   I T

“The DIAGNOdent is a breakthrough in diagnostics,” says Dr. Lori Trost. “It discovers
decay long before it’s visible on X-rays, when there’s minimal penetration of tooth struc-
ture and a great opportunity for noninvasive treatment. The more I use it, the more I
believe in it. As lifespans get longer, its value will only grow.” Dr. Trost is one of about
40,000 dentists around the world who have embraced the DIAGNOdent since its 
introduction in 1998. Last fall she also made the move to digital radiography with a new
panoramic system from Gendex. “It’s fast, safe, cost-effective and environmentally right,”
she says. “It’s another way they help me serve my patients better.”

 
12

M A R K E T
Microscopy

D A N A H E R   B R A N D S
Leica Microsystems

D R I V E R S
Cellular research, clinical and 
laboratory productivity

Leica microscopes originated in
Germany, and have been manufactured
and sold globally for generations. Sales
outside of Europe accounted for 
60% of total Leica Microsystems 
revenues in 2005.

Y
N
A
M
R
E
G

,

N
E
G
N

I
T
T
Ö
ö
G

Leica Microsystems’ products include the world’s highest-resolution 
commercial fluorescence microscope. Producing three-dimensional 
images with 100-nanometer resolution, it offers life scientists a detailed 
view of intracellular structures and processes critical to 
drug discovery and disease research.

V I S I O N A R Y   R E S O U R C E

From AIDS researchers to neurosurgeons, physicians and life science professionals rely
on instruments and innovations from Leica Microsystems. Acquired by Danaher in 2005,
Leica Microsystems combines a strong global brand with outstanding technologies and
close relationships with academic and clinical visionaries. One example is Professor
Doctor Stefan Hell, Director of the Max Planck Institute of Biophysical Chemistry in
Göttingen, Germany, whose revolutionary “4Pi” microscope technology is embodied in
the award-winning Leica TCS 4Pi. A rising market for cellular research and proven tech-
nological leadership make Leica Microsystems an excellent strategic fit in Danaher’s
Medical Technologies group.

 
PROF. DR. STEFAN HELL
MAX-PLANCK-INSTITUT FÜR BIOPHYIKALISCHE CHEMIE

13

14

THE VAN DER POST FAMILY 
AND FRIENDS

15

M A R K E T
Water Quality

D A N A H E R   B R A N D S
Hach, Hach/Lange,Trojan UV

D R I V E R S
Regulatory compliance, public 
safety, quality and improved taste

Danaher’s Trojan Technologies 
ultraviolet (UV) disinfection systems
serve more than 4000 municipalities  
— the largest installed base in the world.

D
N
A
L
L
O
H

,

M
A
D
R
E
T
T
O
R

Trojan’s UV disinfection systems provide safe drinking water 
for millions of families every day. Its installation at Evides, a utility serving
Rotterdam, is the largest in Europe, with a flow rate of 432,000 cubic 
meters (114 million gallons) per day.

T R U S T E D   S O U R C E

“

Population  growth  and  economic  development  are  raising  the  pressure  on  water 
supplies everywhere. Danaher is a world leader in UV disinfection solutions that enable
municipalities  to  meet  escalating  water  needs  safely  and  without  chemicals. 
We  consider  UV  treatment  the  way  of  the  future,” says  Paul  Oostdam,  production 
manager at the Rotterdam water facility in the Netherlands. “Our Trojan system handles
tremendous volume while eliminating the health and environmental risks of chemical
treatment. There’s another important benefit too: the water we produce tastes better.”

 
16

S E G M E N T S

P L AT F O R M S

Professional 
Instrumentation

Environmental
Hach/Lange  and  Hach  Ultra  Analytics  provide  advanced  analytical  systems  and  solutions  for 
laboratory,  industrial  and  field  applications.  Trojan  UV  is  a  world  leader  in  ultraviolet  water 
disinfection systems.  

Gilbarco  Veeder-Root  is  a  leading  global  provider  of  solutions  and  technologies  that  combine 
convenience, control and environmental integrity for retail fueling and adjacent markets.

Electronic Test
Fluke Corporation is a world leader in the manufacture, distribution and service of electronic test
tools and software. From industrial electronic installation, maintenance and service, to precision
measurement and quality control, Fluke tools help keep business and industry around the globe
up and running.  

Fluke Networks provides innovative solutions for the testing, monitoring and analysis of enterprise and
telecommunication networks. The company’s comprehensive line of Network SuperVision Solutions TM
provides professionals with speed, accuracy and ease of use to help optimize network performance.

Medical Technologies
Kavo  is  a  leading  manufacturer  of  precision  dental  hand  pieces,  treatment  units,  diagnostic 
systems, laboratory equipment and digital imaging dental products.

Radiometer is a leading provider of diagnostic equipment focused on critical care applications for
the measurement of blood gases in hospitals’ central labs as well as point-of-care locations.

Leica Microsystems is a premier global provider of high precision optical instruments and 
solutions for life sciences and medical applications including a comprehensive portfolio of 
laboratory microscopes, pathology diagnostics products and surgical microscopes.

Industrial 
Technologies

Motion
Danaher  Motion  provides  innovative  solutions  combining  flexibility,  precision,  efficiency,  and
reliability for applications as diverse as robotics, wheelchairs, lift trucks, electric vehicles and
packaging machines.

Product Identification
Danaher’s  printing  and  marking  technologies  apply  codes  to  more  than  one  trillion  products
each year worldwide. Danaher’s scanning and tracking products currently sort more than half
of all packages shipped in the U.S.   

Focused Niche Businesses: Aerospace and Defense, Power Quality, Sensors and Controls

Tools & 
Components

Mechanics’ Hand Tools
Danaher Tool Group and Matco enjoy a leading share position in the U.S. mechanics’ hand tool
market. Danaher is committed to delivering customer-driven innovation with new products that
improve safety, strength, speed and access. 

Focused Niche Businesses: Delta Consolidated Industries, Hennessy Industries, Jacobs Chuck
Manufacturing Company, Jacobs Vehicle Systems

Footnote: Core  growth  represents  sales  from  existing  businesses  which  includes  sales  from  acquired  businesses  starting  from  and  after  the  first  anniversary  of  the 

acquisition, but exclude currency effects.

B U S I N E S S E S   /   E N D   M A R K E T S

B U S I N E S S   H I G H L I G H T S

17

Hach, Hach/Lange, Hach Ultra Analytics, Trojan UV

— Our environmental businesses generated core revenue growth of 5% in 2005.

(Municipal  Drinking  Water  Facilities,  Municipal  Waste  Water  Plants,

Industrial Plants, Environmental Monitoring and Regulatory Agencies)

—  Recent environmental regulations for water treatment as well as air quality 

Professional Instrumentation

Gilbarco Veeder-Root, Red Jacket

(Major Oil Companies, Convenience Stores, Retail Fueling Franchises,

Commercial Fueling, Major Retailors and Supermarkets)

Fluke, Raytek, Fluke Biomedical

(Technicians,  Electricians,  Engineers,  Metrologists,  Commercial  and

Residential Electricians)

Fluke Networks, OptiView, DTX, EtherScope, Visual Networks

(CIOs, CTOs, Network Engineers and Technicians, Network Installation

and  Maintenance  Professionals,  Telecommunications  Engineers  and

Managers, Telecommunications Technicians)

KaVo, Gendex, DEXIS, Pelton & Crane

(Dental Professionals)

Radiometer

(Physicians, Hospitals, Point of Care Centers)

Leica Microsystems

(Research Institutions, Pathology Labs, Physicians and Technicians)

initiatives in California  continue to provide significant opportunities for our water

and retail petroleum businesses.

—  Gilbarco Veeder-Root began shipping In-Station-Diagnostics systems designed to

monitor retail petroleum sites in accordance with the California Air Resource Board

executive  order.  This  executive  order  represents  a  $50  million  plus  revenue

opportunity over the next four years.

— 

Electronic  Test  delivered  another  solid  year  in  2005  generating  6.5%  core 

revenue growth.

—  Key  acquisitions  in  2005  strengthened  our  competitive  positions  in  the 

thermography, power quality, biomedical and network test markets.  

— 

Innovation within Fluke Networks continues to drive sales with new products intro-

duced in the last three years contributing more than 50% of total 2005 sales.

—  Our  dental,  life  sciences  and  critical  care  diagnostics  equipment  businesses

delivered mid-single digit pro forma revenue growth in 2005. During the year, KaVo

earned first and second place in the DZW/Pluradent Dental Innovation awards for

its breakthrough DIAGNOdent and GENTLEsilence products and also received the

REALITY Product of the Year Award for the ELECTROtorque Plus.  

— 

Leica Microsystems received the prestigious German Business Innovation award for

2005 for the third time in its history.

Kollmorgen, Pacific Scientific, Thomson, Dover, Portescap

—  Key system design wins and significant success in cross selling highlighted a year

(Factory Automation, Medical, Health & Fitness, Factory and Personal

of innovative solutions from the Motion team, generating more than $100 million

Mobility, Aerospace and Defense)

of potential revenue opportunities over the next three years .  

Industrial Technologies

Videojet, Willett, Accu-Sort, LINX

—  Danaher continues to strengthen its position in product identification with one of

the broadest technology and solution suites in the market, addressing both mark-

ing and reading requirements. The breadth of the portfolio in turn contributed to strong

(Food  and  Beverage,  Pharmaceutical,  Retail  Distribution,  Mail  and

core revenue growth of 9.5%.  

Parcel Services

Sears Craftsman ®, Armstrong, Matco, Allen, NAPA®, SATA

— A combination of new product introductions and strength from our high-end mobile

(Sears,  Professional  Automotive  Mechanics,  NAPA,  Industrial

distribution business continued to drive share gains in 2005. 

Tools and Components

Manufacturing, Consumer Retail)

18

D E A R   S H A R E H O L D E R S :

Now 21 years young, Danaher has truly come of age, expanding into new and attractive global markets and executing
better than ever for both our customers and our shareholders. Building on a strong 2004, we finished 2005 with the
highest sales, earnings and cash flow in our history, reflecting solid core revenue growth and the benefit of acquisi-
tions that have strengthened existing competitive positions and opened up exciting opportunities in medical technology.
A decade of portfolio evolution and an outstanding organization of dedicated associates have resulted in a superior
lineup of businesses and products, all of which continue to improve daily through the rigorous application of the Danaher
Business System (DBS). We currently have a leading position in all of our major markets, with plenty of room to grow.
We believe that continued innovation in technology and service will fuel top line growth through share gains
and market expansion, and that earnings growth will follow.  

Highlights
—  Revenues increased 16% to $8.0 billion, including core revenue growth of 4.5%. 
—  Earnings per share grew 20% to $2.76, on top of a 36% increase a year ago.
—  Operating cash flow increased 16.5% to a record $1.2 billion.
—  Our free cash flow grew 18% to more than $1 billion in 2005, and exceeded net income for the 14th consecutive 

year in a row.

—  We continued to strengthen our portfolio, particularly in Medical Technology as Leica Microsystems brought us a
leading position in life sciences instrumentation to complement our existing leadership positions in critical care
diagnostics and dentistry.

DBS is Danaher
That’s how some people think of Danaher — so pervasive is the day-to-day presence and long-term impact of the Danaher
Business System. Other companies have systems too, but few other than Toyota have been at it as long as we have.
Today, DBS is more than a management system or business model — it’s part of the mentality of virtually everyone in
the company. And we want it that way, because it works so well. 

Every year I use this letter to present some aspect of what makes DBS so special. You can see our focus on inno-
vation in the front of this report. DBS is the turbocharger inside our innovation engine. Whatever the opportunity, 
whatever the market, DBS guides us and propels us to the right solution. 

How do we do that? By taking a deep systematic view of what customers actually need and what we can do
about it. In last year’s letter I talked about the “four P’s” of DBS: making the connection between people, plans,
processes and performance to deliver measurable gains in Quality, Delivery or Service, Cost and Innovation (QDCI).
These are just part of a whole DBS vocabulary of terms and tools that help us capture incremental value at each
stage of everything we do. 

People sometimes think innovation depends on inspiration alone. DBS doesn’t discount creativity — it sup-
ports it with a comprehensive framework that starts with the Voice of the Customer and carries all the way through

19

product development and marketing. How well it works can be seen in our success at Fluke Biomedical where
we rapidly enhanced our competitive position in the medical quality assurance market by listening to the 
customer. This feedback allowed Fluke Biomedical to expand into the ultrasound quality assurance segment by
targeting the needs of the biomedical engineer and has helped deliver double digit annual growth in the biomed-
ical market over the last three years.

Investing in Innovation
Our investments are increasing, with over $350 million invested in research and development in 2005. These and prior
year investments have accelerated our new product development successes across the company. As a result, almost 25%
of our 2005 revenues were derived from new products introduced over the last three years. We’re particularly proud of
what we call our Growth Breakthrough investments, which fund projects of varying sizes but all with outstanding revenue
potential. In 2004 we had 32 such projects, representing a combined revenue potential of $1 billion over a three to five
year period. At the end of 2005 we had 38 projects, and the $1 billion had grown to $1.2 billion. 

We’re also getting more value from our other investments, as we continue to become more global in our thinking
and our resource allocation. More than 47% of our revenues came from outside the United States this year, compared
to 27% in 1996. Our acquisitions made news in Europe in 2005, but we’ve been busy everywhere. In China our 
revenues were up by more than 20%, and in India we now have more than 300 development engineers supporting our
Global Product Development initiatives. Our manufacturing footprint and supply base have mirrored this geographic
shift, placing us at the heart of the action in the world’s fastest-growing economies. 

Outlook
Powerful macro trends of globalization, personalization and environmental concerns are creating exciting opportunities
for Danaher. Our strong businesses, disciplined approach and excellent customer relationships continue to provide a solid
foundation for growth. Building on this, our 2005 acquisitions further enhance our competitiveness. We are in the 
markets we want to be, with leading positions supporting significant organic growth opportunities. At the same time, we
continue to generate robust cash flow, which gives us the resources to seize new opportunities when we find them. Our
innovation engine is in high gear, not only in research and development labs around the world but also through the efforts
of our 40,000 Danaher associates. I am deeply grateful for the hard work, professionalism and enthusiasm they bring to
this company — and our customers — every day. With a team like ours, no wonder Forbescalled Danaher one of the “Best
Managed Companies of 2005.” We’ve come a long way together — but our future is what most excites this team.

H. Lawrence Culp, Jr.
President and Chief Executive Officer
March 17, 2006

20

F I N A N C I A L   C H A R T S

Sales
Five-year Compounded
Annual Growth 
Rate 16%

Operating Income
Five-year Compounded
Annual Growth 
Rate 18%

In millions

In millions

EPS
Five-year Compounded
Annual Growth Rate
20% before effect of
accounting change
and reduction of
income tax reserves
related to previously 
discontinued 
operations

Operating 
Cash Flow
Five-year Compounded
Annual Growth 
Rate 19%

In millions

Year End Market
Price of Stock
Five-year Compounded
Annual Growth 
Rate 10%

2
8
7

,

3
$

7
7
5

,

4
$

4
9
2

,

5
$

9
8
8

,

6
$

5
8
9

,

7
$

2
0
5
$

1
0
7
$

6
4
8
$

5
0
1

,

1
$

5
6
2

,

1
$

0
0

.

1
$

9
3

.

1
$

9
6

.

1
$

0
3

.

2
$

6
7

.

2
$

9
0
6
$

0
1
7
$

2
6
8
$

3
3
0

,

1
$

4
0
2

,

1
$

6
1

.

0
3
$

5
8

.

2
3
$

8
8

.

5
4
$

1
4

.

7
5
$

8
7

.

5
5
$

01

02 03 04 05

01 02 03 04 05

01 02 03 04 05

01 02 03 04 05

01 02 03 04 05

F O R M   1 0 - K

2005

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-K

(Mark One)
[ X ]

OR

[

]

Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the ﬁscal year ended December 31, 2005

Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from
Commission File Number: 1-8089

to

Danaher Corporation

(Exact name of registrant as speciﬁed in its charter)

Delaware
(State of incorporation)
2099 Pennsylvania Ave. N.W., 12th Floor, Washington, D.C.
(Address of Principal Executive Ofﬁces)

Registrant’s telephone number, including area code: 202-828-0850
Securities Registered Pursuant to Section 12(b) of the Act:

Title of each class

Common Stock $.01 par Value
Securities registered pursuant to Section 12(g) of the Act:

None
(Title of Class)

59-1995548
(I.R.S. Employer Identiﬁcation number)

20006-1813
(Zip Code)

Name of Exchanges
on which registered
New York Stock Exchange
Paciﬁc Exchange

Indicate by check mark if the registrant is a well-known seasoned issuer, as deﬁned in Rule 405 of the Securities Act.
Yes X

No

Indicate by check mark if the registrant is not required to ﬁle reports pursuant to Section 13 or Section 15(d) of the Act.
Yes

No X

Indicate by check mark whether the Registrant (1) has ﬁled all reports required to be ﬁled by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such ﬁling requirements for the past 90 days.
Yes X

No

Indicate by check mark if disclosure of delinquent ﬁlers pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of registrant’s knowledge, in deﬁnitive proxy or information statements incorporated by ref-
erence in Part III of this Form 10-K or any amendment to this Form 10-K. X

Indicate by check mark whether the registrant is a large accelerated ﬁler, an accelerated ﬁler or a non-accelerated ﬁler. See
deﬁnition of “accelerated ﬁler and large accelerated ﬁler” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated ﬁler X

Non-accelerated ﬁler

Accelerated ﬁler

Indicate by check mark whether the registrant is a shell company (as deﬁned in Rule 12b-2 of the Exchange Act)
Yes

No X

As of February 24, 2006, the number of shares of Registrant’s common stock outstanding was 305.6 million. The aggregate
market value of common shares held by non-afﬁliates of the Registrant on July 1, 2005 was $12.4 billion, based upon the closing
price of the Registrant’s common shares as quoted on the New York Stock Exchange composite tape on such date. Shares
of Registrant’s common stock held by each executive ofﬁcer and director and by each person known to beneﬁcially own more
than 10% of Registrant’s outstanding common stock have been excluded from such calculation in that such persons may be
deemed afﬁliates. The determination of afﬁliate status for purposes of the foregoing calculation is not necessarily a conclusive
determination for other purposes.

Table of Contents

PART I

Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.

PART II

Item 5.

Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.

Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Submission of Matters to a Vote of Security Holders

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information

Page

3
11
14
14
14
15

16
17
18
35
36
66
66
66

Information Relating to
Forward-Looking Statements

Certain information included or incorporated by reference
in this document, in press releases, written statements or
other documents ﬁled with the SEC, or in the Company’s
communications and discussions through webcasts, phone
calls and conference calls, may be deemed to be “forward-
looking statements” within the meaning of the federal secu-
rities laws. All statements other than statements of historical
fact are statements that could be deemed forward-looking
statements, including projections of revenue, gross margin,
expenses, earnings or losses from operations, synergies or
other ﬁnancial items; any statements of the plans, strategies
and objectives of management for future operations; any
statement concerning developments, performance or indus-
try rankings relating to products or services; any statements
regarding future economic conditions or performance; any
statements of assumptions underlying any of the foregoing;
and any other statements that address activities, events or
developments that Danaher Corporation (“Danaher,” the
“Company,” “we,” “us,” “our”) intends, expects, projects,
believes or anticipates will or may occur in the future.
Forward-looking statements may be characterized by termi-
nology such as “believe,” “anticipate,” “should,” “intend,”
“plan,” “will,” “expects,” “estimates,” “projects,” “posi-
tioned,” “strategy,” and similar expressions. These statements
are based on assumptions and assessments made by the Com-
pany’s management in light of its experience and its percep-
tion of historical trends, current conditions, expected future
developments and other factors it believes to be appropriate.
These forward-looking statements are subject to a number
of risks and uncertainties, including but not limited to
the risks and uncertainties set forth under “Item 1A. Risk
Factors” in this Annual Report.

Any such forward-looking statements are not guaran-
tees of future performances and actual results, developments
and business decisions may differ materially from those envis-
aged by such forward-looking statements. The forward-
looking statements included herein speak only as of the date
of this Annual Report. The Company disclaims any duty to
update any forward-looking statement, all of which are
expressly qualiﬁed by the foregoing.

Part I

I T E M 1 . B U S I N E S S

3

in three business segments: Professional Instrumentation,
Industrial Technologies, and Tools & Components.
The Company strives to create shareholder value through:

— delivering sales growth, excluding the impact of
the overall market

acquired businesses, in excess of
growth for its products and services;

— upper quartile ﬁnancial performance when compared

against peer companies; and

— upper quartile cash ﬂow generation from operations

when compared against peer companies.

To accomplish these goals, the Company uses a set of
tools and processes, known as the DANAHER BUSINESS
SYSTEM (“DBS”), which are designed to continuously
improve business performance in critical areas of quality,
delivery, cost and innovation. The Company also acquires
businesses that it believes can help it achieve the objectives
described above. The Company will acquire businesses when
they strategically ﬁt with existing operations or when they
are of such a nature and size as to establish a new strategic
line of business. The extent to which appropriate acquisi-
tions are made and integrated can affect the Company’s over-
all growth and operating results.

Danaher Corporation, originally DMG, Inc., was orga-
nized in 1969 as a Massachusetts real estate investment trust.
In 1978 it was reorganized as a Florida corporation under the
name Diversiﬁed Mortgage Investors, Inc. (“DMI”) which
in a second reorganization in 1980 became a subsidiary of a
newly created holding company named DMG, Inc. The
Company adopted the name Danaher in 1984 and was rein-
corporated as a Delaware corporation following the 1986
annual meeting of shareholders.

Operating Segments
The Company reports its business in three segments: Profes-
sional Instrumentation, Industrial Technologies, and Tools &
Components.

The table below describes the percentage of the Com-
pany’s total annual revenues attributable to each of the seg-
ments over each of the last three ﬁscal years:

For the years ended December 31

Segment

2005

2004

2003

Professional Instrumentation
Industrial Technologies
Tools & Components

47%
37%
16%

43%
38%
19%

37%
40%
23%

General
Danaher Corporation derives its sales from the design,
manufacture and marketing of
industrial and consumer
products, which are typically characterized by strong brand
names, proprietary technology and major market positions,

Sales in 2005 by geographic destination were: United States,
53%; Europe, 29%; Asia, 12%; and other regions, 6%. For addi-
tional information regarding the Company’s segments and sales
by geography, please refer to Note 15 in the Consolidated
Financial Statements included in this Annual Report.

4

Professional Instrumentation
Businesses in the Professional Instrumentation segment offer
professional and technical customers various products and
services that are used in connection with the performance of
their work. For the year ended December 31, 2005, Profes-
sional Instrumentation was Danaher’s largest segment and
encompassed three strategic lines of business: environmental,
electronic test, and medical technologies. Sales for this seg-
ment in 2005 by geographic destination were: United States,
41%; Europe, 37%; Asia, 14%; and other regions, 8%.

E N V I R O N M E N T A L . The environmental businesses serve two
main markets: water quality and retail/commercial petroleum.
The Company entered the water quality sector in 1996 through
the acquisition of American Sigma and has enhanced its geo-
graphical coverage and product and service breadth through
subsequent acquisitions, including the acquisitions of Dr. Lange
in 1998, Hach Company in 1999, and Viridor Instrumentation
in 2002. Danaher further expanded its product and geographic
breadth through the 2004 acquisition of Trojan Technologies
Inc. Today, the Company is a worldwide leader in the water
quality instrumentation market. Danaher’s water quality opera-
tions provide a wide range of instruments, related consumables,
and services used to detect and measure chemical, physical, and
microbiological parameters in drinking water, wastewater,
groundwater, and ultrapure water. The Company also designs,
manufactures, and markets ultraviolet disinfection systems.
Typical users of these products include municipal drinking
water and wastewater treatment plants, industrial process water
and wastewater treatment facilities, and third-party testing labo-
ratories. The water quality business provides products under a
variety of well-known brands,
including HACH, DR.
LANGE, HACH ULTRA ANALYTICS, ORBISPHERE,
and TROJAN TECHNOLOGIES. Manufacturing facilities
are located in the United States, Canada, Europe, and Asia. Sales
to end-customers are generally made through the Company’s
direct sales personnel, independent representatives, indepen-
dent distributors and e-commerce.

Danaher has participated in the retail/commercial
petroleum market since the mid-1980s through its Veeder-
Root business, and has substantially enhanced its geographic
coverage and product and service breadth through various
acquisitions including Red Jacket in 2001 and Gilbarco (for-
merly known as Marconi Commerce Systems) in 2002.
Today, Danaher is a leading worldwide provider of products
and services for the retail/commercial petroleum market.
Through the Gilbarco Veeder-Root business, the Company
designs, manufactures, and markets a wide range of retail/
commercial petroleum products and services, including:

— monitoring and leak detection systems;
— vapor recovery equipment;
— fuel dispensers;
— point-of-sale and merchandising systems;
— submersible turbine pumps; and
— remote monitoring and outsourced fuel management ser-
vices, including compliance services, fuel system mainte-
nance, and inventory planning and supply chain support.

these products include independent and
Typical users of
company-owned retail petroleum stations, high-volume retail-
ers, convenience stores, and commercial vehicle ﬂeets. Dana-
her’s retail/commercial petroleum products are marketed under
including GILBARCO, VEEDER-
a variety of brands,
ROOT, and RED JACKET. Manufacturing facilities are
located in the United States, Europe, Asia and South America.
Sales to end-customers are generally made through indepen-
dent distributors and the Company’s direct sales personnel.

E L E C T R O N I C TE S T . Danaher’s electronic test business was
created in 1998 through the acquisition of Fluke Corpora-
tion, and has since been supplemented by the acquisitions of
a number of additional electronic test businesses. These busi-
nesses design, manufacture, and market a variety of compact
professional test tools, as well as calibration equipment, for
electrical, industrial, electronic, and calibration applications.
These test products measure voltage, current, resistance,
power quality, frequency, temperature, pressure, and other
key electrical parameters. Typical users of these products
include electrical engineers, electricians, electronic techni-
cians, medical technicians, and industrial maintenance pro-
fessionals. In addition, Fluke Networks provides software and
hardware products used for the testing, monitoring, and
analysis of
local and wide area (“enterprise”) networks
and the ﬁber and copper infrastructure of those networks.
Typical users of these products include computer network
engineers and technicians.

Danaher’s electronic test products are marketed under
including FLUKE, FLUKE NET-
a variety of brands,
WORKS, VISUAL NETWORKS, RAYTEK and FLUKE
BIOMEDICAL. Manufacturing facilities are located in the
United States, Europe, and Asia. Sales to customers are gen-
erally made through the Company’s direct sales personnel
and independent distributors. Both Fluke and Fluke Net-
works are leaders in their served market segments.

M E D I C A L TE C H N O L O G I E S . The Company added the medi-
cal technologies line of business in 2004 through the acqui-
sitions of Kaltenbach & Voigt GmbH & Co KG (KaVo), the
Gendex business of Dentsply International Inc., and Radi-
ometer A/S. In 2005 the Company expanded its presence in
the medical technologies segment through the acquisition of
Leica Microsystems and three additional smaller acquisitions.
The medical
serve three main
markets: dental products, critical care diagnostics, and life
sciences instrumentation.

technologies businesses

Danaher is a leading worldwide provider of dental products.
Through its dental products businesses the Company designs,
manufactures and markets a variety of dental products
including:

— treatment systems;
— handpieces;
— digital imaging systems;
— diagnostic systems;
— CAD/CAM systems; and
— laboratory products.

Typical users of these products include dentists, periodon-
tists, oral surgeons, dental technicians, and other oral health
professionals. Danaher’s dental products are marketed prima-
rily under the KAVO, GENDEX, PELTON & CRANE and
DEXIS brands. Manufacturing facilities are located in
Europe, the United States, and South America. Sales are gen-
erally made to customers through independent distributors.

Danaher’s critical care diagnostics business was created in
2004 through the acquisition of Radiometer and has since
been supplemented by an additional acquisition. The Com-
pany’s critical care diagnostics business is a leading worldwide
provider of blood gas analysis instrumentation, designs,
manufactures, and markets a variety of critical care diagnos-
tic instruments used to measure blood gases and related criti-
cal care parameters, primarily in clinical applications, under
the RADIOMETER brand. The company also provides
consumables and services for its instruments. Typical users of
Radiometer products include hospital central laboratories,
intensive care units, critical care units, hospital operating
rooms, and hospital emergency rooms. Manufacturing facili-
ties are located in Europe and the United States, and sales are
made to customers primarily through the Company’s direct
sales personnel.

Danaher’s life sciences instrumentation business was created
in 2005 through the acquisition of Leica Microsystems. The
Company’s life sciences instrumentation business is a leading
global provider of professional microscopes designed to
manipulate, preserve and capture images of, and enhance the
user’s visualization of, microscopic structures. Leica is also a
leading global provider of pathology instrumentation, pro-
viding a complete line of instrumentation used in the prepa-
ration of tissue samples for examination by medical and
research pathologists. Leica’s life sciences products include:

— optical and laser scanning microscopes;
— two and three dimensional imaging systems;
— automated specimen manipulation stages and live speci-

men environmental support systems;
— tissue handling and processing equipment;
— automated specimen staining instruments; and
— automated slide handlers and printers.

5

Typical users of Leica’s products include research and surgical
professionals operating in research laboratories, academic
settings and surgical theaters. Leica’s manufacturing facilities
are located in Germany, Switzerland, Singapore and China.
Leica markets its products under the LEICA brand, and sales
are made to customers through a combination of the com-
pany’s direct sales personnel, independent representatives and
independent distributors.

Industrial Technologies
Businesses in the Industrial Technologies segment manufac-
ture products and sub-systems that are typically incorporated
by customers and systems integrators into production and
packaging lines and by original equipment manufacturers
into various end-products and systems. Many of the busi-
nesses also provide services to support these products, includ-
ing helping customers integrate and install the products and
helping ensure product uptime. As of December 31, 2005,
the Industrial Technologies segment encompassed two stra-
tegic lines of business, motion and product identiﬁcation,
and three focused niche businesses, aerospace and defense,
sensors & controls and power quality. Sales for this segment
in 2005 by geographic destination were: United States, 53%;
Europe, 32%; Asia, 10%; and other regions, 5%.

M O T I O N . Danaher entered the motion industry through the
acquisition of Paciﬁc Scientiﬁc Company in 1998, and has sub-
sequently expanded its product and geographic breadth with
various additional acquisitions, including the acquisitions of
American Precision Industries, Kollmorgen Corporation, and
the motion businesses of Warner Electric Company in 2000,
and Thomson Industries in 2002. The Company is currently
one of the leading worldwide providers of precision motion
control equipment. These businesses provide motors, drives,
controls, mechanical components (such as ball screws, linear
bearings, clutches/brakes, and linear actuators) and related
products for various precision motion markets such as packag-
ing equipment, medical equipment, robotics, circuit board
assembly equipment, elevators, and electric vehicles (such as lift
trucks). Customers are typically systems integrators who use our
products in production and packaging lines and original equip-
ment manufacturers (OEMs) that integrate our products into
various end-products and systems. The Company’s motion
products are marketed under a variety of brands, including
KOLLMORGEN, THOMSON, DOVER, PORTESCAP
and PACIFIC SCIENTIFIC. Manufacturing facilities are
located in the United States, Europe, Latin America, and Asia.
Sales to customers are generally made through the Company’s
direct sales personnel and independent distributors.

P R O D U C T I D E N T I F I C A T I O N . Danaher entered the product
identiﬁcation market through the acquisition of Videojet (for-
merly known as Marconi Data Systems) in 2002, and has
expanded its product and geographic coverage through various
subsequent acquisitions, including the acquisitions of Willett
International Limited and Accu-Sort Systems Inc. in 2003 and
Linx Printing Technologies PLC in January 2005. Danaher is

6

a leader in its served product identiﬁcation market segments.
These businesses design, manufacture, and market a variety of
equipment used to print and read bar codes, date codes, lot
codes, and other information on primary and secondary pack-
aging. The Company’s products are also used in certain high-
speed printing applications. Typical users of these products
include food and beverage manufacturers, pharmaceutical
manufacturers, retailers, package and parcel delivery companies,
the United States Postal Service and commercial printing and
mailing operations. The Company’s product identiﬁcation
products are marketed under a variety of brands, including
VIDEOJET, ACCU-SORT, WILLETT, ZIPHER, ALLTEC
and LINX. Manufacturing facilities are located in the United
States, Europe, South America, and Asia. Sales to customers are
generally made through the Company’s direct sales personnel
and independent distributors.

A E R O S P A C E A N D D E F E N S E . The aerospace and defense
business designs, manufactures, and markets a variety of air-
craft safety equipment, including:

— smoke detection and ﬁre suppression systems;
— energetic material systems;
— electronic security systems;
— motors and actuators;
— electrical power generation and management

sub-

systems; and

— submarine periscopes and photonic masts.

These product
lines came principally from the Paciﬁc
Scientiﬁc and Kollmorgen acquisitions and have been
supplemented by several subsequent acquisitions. Typical
users of these products include commercial and business air-
craft manufacturers as well as defense systems integrators and
prime contractors. The Company’s aerospace and defense
products are marketed under a variety of brands, including
the PACIFIC SCIENTIFIC, SUNBANK, SECURA-
PLANE, KOLLMORGEN ELECTRO-OPTICAL, and
CALZONI brands. Sales to customers are generally made
through the Company’s direct sales personnel.

S E N S O R S & C O N T R O L S . Danaher’s sensors & controls prod-
ucts include instruments that measure and control discrete
manufacturing variables such as temperature, position, quan-
tity, level, ﬂow, and time. Users of these products span a wide
variety of manufacturing markets, from makers of elevators
to makers of
in-vitro diagnostics instrumentation. These
products are marketed under a variety of brands, including
DYNAPAR, EAGLE SIGNAL, HENGSTLER, PART-
LOW, WEST, DOLAN-JENNER, NAMCO, GEMS
SENSORS, and SETRA. Sales to customers are generally
made through the Company’s direct sales personnel and
independent distributors.

P O W E R Q U A L I T Y. Danaher’s power quality business serves
two general markets. Through the Danaher Power Solutions
business, Danaher provides products such as digital static

transfer switches, power distribution units, and transient
voltage surge suppressors. Sold under the CYBEREX,
CURRENT TECHNOLOGY, JOSLYN and UNITED
POWER brands, these products are typically incorporated
within systems used to ensure high-quality, reliable power in
commercial and industrial environments. Danaher’s other
power quality businesses provide a variety of products, mar-
keted under
JOSLYN,
QUALITROL, JENNINGS, and HATHAWAY brands, and
are mainly used in power transmission and distribution sys-
tems. Electric utilities are typical users of these products.
Sales to customers are generally made through the Compa-
ny’s direct sales personnel, independent representatives, and
independent distributors.

the JOSLYN HI-VOLTAGE,

Manufacturing facilities of the Industrial Technologies
focused niche businesses are located in the United States,
Latin America, Europe, and Asia.

Tools & Components
As of December 31, 2005, the Tools & Components seg-
ment encompassed one strategic line of business, mechanics’
hand tools, and four focused niche businesses: Delta Consoli-
dated Industries, Hennessy Industries, Jacobs Chuck Manu-
facturing Company and Jacobs Vehicle Systems. Sales for this
segment in 2005 by geographic destination were United
States, 86%; Europe, 3%; Asia, 6%; and other regions, 5%.

M E C H A N I C S ’ H A N D TO O L S . The mechanics’ hand tools busi-
ness encompasses the Danaher Tool Group (“DTG”) and
Matco Tools (“Matco”). DTG is one of the largest worldwide
producers of general purpose mechanics’ hand tools, primarily
ratchets, sockets, and wrenches, and specialized automotive ser-
vice tools for the professional and “do-it-yourself ” markets.
DTG has been the principal manufacturer of Sears, Roebuck
and Co.’s Craftsmant line of mechanics’ hand tools for over 60
years. DTG has also been the primary supplier of specialized
automotive service tools to the National Automotive Parts
Association (NAPA) for over 30 years and the designated sup-
plier of general purpose mechanics’ hand tools to NAPA for
over 20 years. Matco manufactures and distributes professional
tools, toolboxes and automotive equipment, through indepen-
dent mobile distributors, who sell primarily to professional
mechanics under the MATCO brand. The business is one of
the leaders in the hand tool mobile distribution channel in the
United States. In addition to DTG’s private label business,
Danaher also markets various products under its own brand
names, including mechanics’ hand tools for industrial and con-
sumer markets under the ARMSTRONG, ALLEN, GEAR-
WRENCH and SATA brands, and automotive service tools
under the K-D TOOLS brand. Typical users of DTG products
include professional automotive and industrial mechanics as
well as individual consumers. Manufacturing facilities are
located in the United States and Asia. Sales to customers are
generally made through independent distributors and retailers.

D E L T A C O N S O L I D A T E D I N D U S T R I E S . Delta is a leading
manufacturer of automotive truckboxes and industrial gang

boxes, which it sells under the DELTA and JOBOX brands.
These products are used by both commercial users, such as
contractors, and individual consumers. Sales to end users are
generally made through independent distributors and retailers.

H E N N E S S Y I N D U S T R I E S . Hennessy is a leading North
American full-line wheel service equipment manufacturer,
providing brake lathes, vehicle lifts, tire changers, wheel bal-
ancers, and wheel weights under the AMMCO, BADA,
these products are
and COATS brands. Typical users of
automotive tire and repair shops. Sales to end users are
generally made through the Company’s direct sales person-
nel, independent distributors, retailers, and original equip-
ment manufacturers.

J A C O B S C H U C K M A N U F A C T U R I N G C O M P A N Y. Jacobs designs,
manufactures, and markets chucks and precision tool and
workholders, primarily for the portable power tool industry
under the JACOBS brand. Founded by the inventor of the
three-jaw drill chuck, Jacobs maintains a worldwide leader-
ship position in drill chucks. Customers are primarily major
manufacturers of portable power tools, and sales are typically
made through the Company’s direct sales personnel.

J A C O B S VE H I C L E S Y S T E M S ( “ J V S ” ) . JVS is a leading world-
wide supplier of supplemental braking systems for commer-
cial vehicles, selling JAKE BRAKE brand engine retarders
for class 6 through 8 vehicles and bleeder and exhaust brakes
for class 2 through 7 vehicles. With over 3 million engine
retarders installed, JVS has maintained a leadership position
in its industry since introducing the ﬁrst engine retarder in
1961. Customers are primarily major manufacturers of
class 2 through class 8 vehicles, and sales are typically made
through the Company’s direct sales personnel.

Manufacturing facilities of the Tools & Components
focused niche businesses are located in the United States
and Asia.

The following discussions of Raw Materials, Intellectual
Property, Competition, Seasonal Nature of Business, Backlog,
Employee Relations,Research and Development,Government Con-
tracts,Regulatory Matters,International Operations,Major Custom-
ers and Other Matters include information common to all of
the Company’s segments.

Raw Materials
The Company’s manufacturing operations employ a wide
variety of raw materials, including steel, copper, cast iron,
electronic components, aluminum, plastics and other
petroleum-based products. The Company purchases raw
independent sources
materials from a large number of
around the world. There have been no raw materials short-
ages that have had a material adverse impact on the Com-
pany’s business, although market forces during the past two
years have caused signiﬁcant increases in the costs of certain
raw materials such as steel and petroleum-based products.

7

such as

While certain raw materials
steel and certain
petroleum-based products remain subject to supply con-
straints, Danaher believes that it will generally be able to
obtain adequate supplies of major raw material requirements
or reasonable substitutes at reasonable costs.

Intellectual Property
The Company owns numerous patents, trademarks, copy-
rights, trade secrets and licenses to intellectual property
owned by others. Although in aggregate the Company’s
intellectual property is important to its operations, the Com-
pany does not consider any single patent or trademark to be
of material importance to any segment or to the business as
a whole. From time to time, however, the Company does
engage in litigation to protect its intellectual property. For a
discussion of risks related to the Company’s intellectual
property, please refer to “Item 1A. Risk Factors.” All
capitalized brands and product names throughout this docu-
ment are trademarks owned by, or licensed to, the Company
or its subsidiaries.

Competition
Although the Company’s businesses generally operate in
highly competitive markets, its competitive position cannot
be determined accurately in the aggregate or by segment
since its competitors do not offer all of the same product lines
or serve all of the same markets as the Company. Because of
the diversity of products sold and the variety of markets
served, the Company encounters a wide variety of competi-
tors, including well-established regional or specialized com-
petitors, as well as larger companies or divisions of larger
companies
that have greater sales, marketing, research,
and ﬁnancial resources than Danaher. The number of com-
petitors varies by product line. Management believes that
Danaher has a market leadership position in many of the
markets served. Key competitive factors typically include
price, quality, delivery speed, service and support, innova-
tion, product features and performance, knowledge of appli-
cations, distribution network, and brand name.

Seasonal Nature of Business
General economic conditions have an impact on the Com-
pany’s business and ﬁnancial results, and certain of the Com-
pany’s businesses experience seasonal and other trends related
to the industries and end-markets that they serve. For
example, European sales are often weaker in the summer
months, capital equipment sales are often stronger in the
fourth calendar quarter, sales to original equipment manu-
facturers are often stronger immediately preceding and fol-
lowing the launch of new products, and sales to the United
States government are often stronger in the third calendar
quarter. However, as a whole, the Company is not subject
to material seasonality.

8

Backlog
Backlog is generally not considered a signiﬁcant factor in
the Company’s businesses as relatively short delivery periods
and rapid inventory turnover are characteristic of most of
its products.

Employee Relations
At December 31, 2005, the Company employed approxi-
mately 40,000 persons, of which approximately 18,000 were
employed in the United States. Of
these United States
employees, approximately 1,500 were hourly-rated union-
ized employees. The Company also has government-
mandated collective bargaining arrangements or union
contracts in other countries. Though the Company consid-
ers its labor relations to be good, it is subject to potential
union campaigns, work stoppages, union negotiations and
other potential labor disputes.

Research and Development
The table below describes the Company’s research and devel-
opment expenditures over each of the last three ﬁscal years,
by segment and in the aggregate:

For the years ended December 31
($ in millions)

Segment

2005

2004

2003

Professional Instrumentation
Industrial Technologies
Tools & Components
Total

$232
135
12
$379

$173
112
9
$294

$107
90
10
$207

The Company conducts research and development activities
for the purpose of developing new products and services and
improving existing products and services. In particular, the
Company emphasizes the development of new products that
are compatible with, and build upon, its manufacturing and
marketing capabilities.

Government Contracts
The Company has agreements relating to the sale of products
to government entities, primarily involving products in the
aerospace and defense, product identiﬁcation, water quality
and motion businesses. As a result, the Company is subject
to various statutes and regulations that apply to companies
doing business with the government. The laws governing
government contracts differ from the laws governing private
contracts. For example, many government contracts contain
pricing and other terms and conditions that are not appli-
cable to private contracts. The Company’s agreements relat-
ing to the sale of products to government entities may be
subject to termination, reduction or modiﬁcation in the
event of changes in government requirements, reductions in
federal spending and other factors. The Company is also sub-

ject to investigation and audit for compliance with the
requirements governing government contracts, including
requirements related to procurement integrity, export con-
trol, employment practices, the accuracy of records and the
recording of costs. A failure to comply with these require-
ments might result in suspension of these contracts, criminal
or civil sanctions, administrative penalties or suspension or
debarment from government contracting or subcontracting
for a period of time.

Regulatory Matters
Environmental, Health & Safety
Certain of the Company’s operations are subject to environ-
mental laws and regulations in the jurisdictions in which they
operate, which impose limitations on the discharge of pollut-
ants into the ground, air and water and establish standards for
the generation, treatment, use, storage and disposal of solid and
hazardous wastes. The Company must also comply with various
health and safety regulations in both the United States and
abroad in connection with its operations. The Company
believes that it is in substantial compliance with applicable envi-
ronmental, health and safety laws and regulations. Compliance
with these laws and regulations has not had and, based on cur-
rent information and the applicable laws and regulations cur-
rently in effect, is not expected to have a material adverse effect
on the Company’s capital expenditures, earnings or competitive
position. For a discussion of
risks related to compliance
with environmental and health and safety laws, please refer to
“Item 1A. Risk Factors.”

In addition to environmental compliance costs, the
Company may incur costs related to alleged environmental
damage associated with past or current waste disposal prac-
tices or other hazardous materials handling practices. For
example, generators of hazardous substances found in dis-
posal sites at which environmental problems are alleged to
exist, as well as the owners of those sites and certain other
classes of persons, are subject to claims brought by state and
federal regulatory agencies pursuant to statutory authority.
The Company has received notiﬁcation from the U.S. Envi-
ronmental Protection Agency, and from state and non-U.S.
environmental agencies, that conditions at a number of sites
where the Company and others disposed of hazardous wastes
require clean-up and other possible remedial action, includ-
ing sites where the Company has been identiﬁed as a poten-
tially responsible party under federal and state environmental
laws and regulations. The Company has projects underway
at several current and former manufacturing facilities, in
both the United States and abroad, to investigate and reme-
diate environmental contamination resulting from past
operations. In particular, Joslyn Manufacturing Company
(“JMC”), a subsidiary of the Company acquired in Septem-
ber 1995 and the assets of which were divested in November
2004, previously operated wood treating facilities
that
chemically preserved utility poles, pilings, railroad ties and
wood ﬂooring blocks. These facilities used wood preserva-
and
tives

included creosote, pentachlorophenol

that

chromium-arsenic-copper. All such treating operations were
discontinued or sold prior to 1982. While preservatives were
handled in accordance with then existing law, environmental
law now imposes retroactive liability, in some circumstances,
on persons who owned or operated wood-treating sites.
JMC is remediating some of its former sites and expects to
remediate other sites in the future. In connection with the
divestiture of the assets of JMC, JMC retained the environ-
mental liabilities described above and agreed to indemnify
the buyer of the assets with respect to certain environmental-
related liabilities. The Company is also from time to time
party to personal injury or other claims brought by private
parties alleging injury due to the presence of or exposure to
hazardous substances.

involvement

The Company has made a provision for environmental
remediation and environmental-related personal
injury
claims. The Company generally makes an assessment of the
costs involved for its remediation efforts based on environ-
mental studies as well as its prior experience with similar sites.
If the Company determines that it has potential remediation
liability for properties currently owned or previously sold, it
accrues the total estimated costs, including investigation and
remediation costs, associated with the site. The Company
also estimates its exposure for environmental-related per-
sonal injury claims and accrues for this estimated liability as
such claims become known. While the Company actively
pursues appropriate insurance recoveries as well as appropri-
ate recoveries from other potentially responsible parties, it
does not recognize any insurance recoveries for environmen-
tal liability claims until realized. The ultimate cost of site
cleanup is difﬁcult to predict given the uncertainties of the
Company’s
in certain sites, uncertainties
regarding the extent of the required cleanup, the availability
of alternative cleanup methods, variations in the interpreta-
tion of applicable laws and regulations, the possibility of
insurance recoveries with respect to certain sites and the fact
that imposition of joint and several liability with right of
contribution is possible under the Comprehensive Environ-
mental Response, Compensation and Liability Act of 1980
and other environmental laws and regulations. As such, there
can be no assurance that the Company’s estimates of envi-
ronmental liabilities will not change. In view of the Com-
pany’s ﬁnancial position and reserves for environmental
matters and based on current information and the applicable
laws and regulations currently in effect,
the Company
believes that its liability, if any, related to past or current waste
disposal practices and other hazardous materials handling
practices will not have a material adverse effect on its ﬁnan-
cial condition or cash ﬂow. For a discussion of risks related
to past or future releases of, or exposures to, hazardous sub-
stances, please refer to “Item 1A. Risk Factors.”

Medical Devices
Certain of the Company’s products are medical devices that
are subject to regulation by the United States Food and Drug
Administration (the “FDA”) and by the counterpart agencies
of the non-U.S. countries where its products are sold. Some

9

of the regulatory requirements of these foreign countries are
different than those applicable in the United States. The
Company believes that it is in substantial compliance with
applicable medical device regulations.

Pursuant to the Federal Food, Drug, and Cosmetic Act
(the “FDCA”), the FDA regulates virtually all phases of the
manufacture, sale, and distribution of medical devices,
including their
introduction into interstate commerce,
manufacture, advertising, labeling, packaging, marketing,
distribution and record keeping. Pursuant to the FDCA and
FDA regulations, certain facilities of the Company’s operat-
ing subsidiaries are registered with the FDA as medical device
manufacturing establishments. The FDA and the Company’s
ISO Notiﬁed Bodies regularly inspect the Company’s regis-
tered and/or certiﬁed facilities.

Products sold by the Company include Class I, Class II,
and Class III medical devices. A medical device, whether
exempt from, or cleared pursuant to, the premarket notiﬁ-
cation requirements of the FDCA, or cleared pursuant to a
premarket approval application, is subject to ongoing regu-
latory oversight by the FDA to ensure compliance with regu-
latory requirements, including, but not limited to, product
including those
labeling requirements and limitations,
related to promotion and marketing efforts, current good
manufacturing practices and quality system requirements,
record keeping, and medical device (adverse event) report-
ing. For a discussion of risks related to the regulation of the
Company by the FDA and counterpart agencies of other
countries, please refer to “Item 1A. Risk Factors.”

In addition, certain of the Company’s products utilize
radioactive material. The Company is subject to federal, state
and local regulations governing the management, storage,
handling and disposal of these materials and believes that it
is in substantial compliance with these regulations.

imposes

Export Compliance
The Company is required to comply with various export
control and economic sanctions laws, including: the Inter-
national Trafﬁc in Arms Regulations administered by the
U.S. Department of State, Directorate of Defense Trade
Controls, which, among other things,
license
requirements on the export from the United States of
defense articles and defense services (i.e., items speciﬁcally
designed or adapted for a military application and/or listed
on the United States Munitions List); the Export Adminis-
tration Regulations administered by the U.S. Department of
Commerce, Bureau of Industry and Security, which, among
other things, impose licensing requirements on the export or
re-export of certain dual-use goods, technology and soft-
ware (i.e., items that potentially have both commercial and
military applications); and the regulations administered by
the U.S. Department of Treasury, Ofﬁce of Foreign Assets
Control, which implement economic sanctions imposed
against designated countries, governments and persons based
on United States foreign policy and national security con-
siderations. Non-United States governments have also
implemented similar export control regulations, which may

10

affect Company operations or transactions subject to their
jurisdictions. For a discussion of risks related to export con-
trol and economic sanctions laws, please refer to “Item 1A.
Risk Factors.” The Company believes that it is in substantial
compliance with applicable regulations governing such
export control and economic sanctions laws.

Company’s non-US operations
exchange, please refer to “Item 1A. Risk Factors.”

and foreign currency

Major Customers
The Company has no customers that accounted for more
than 10% of consolidated sales in 2005, 2004 or 2003.

International Operations
The table below describes the Company’s annual net revenue
by geographic destination outside the U.S. as a percentage of
the Company’s total annual net revenue for each of the last
three ﬁscal years, by segment and in the aggregate:

Years ended December 31

Segment

2005

2004

2003

Professional Instrumentation
Industrial Technologies
Tools & Components
Total Company

59%
47%
14%
47%

58%
44%
14%
45%

49%
45%
11%
39%

The Company’s principal markets outside the United States
are in Europe and Asia.

The table below describes the Company’s long-lived
assets located outside the U.S. as a percentage of the Com-
pany’s total long-lived assets in each of the last three ﬁscal
years, by segment and in the aggregate:

Years ended December 31

Segment

2005

2004

2003

Professional Instrumentation
Industrial Technologies
Tools & Components
Total Company

64%
18%
6%
42%

64%
10%
5%
37%

33%
11%
5%
18%

For additional information related to revenues and long-lived
assets by country, please refer to Note 15 to the Consolidated
Financial Statements.

Most of the Company’s sales in non-U.S. markets are
made by non-U.S. sales subsidiaries or from manufacturing
entities located outside the United States. In countries with
low sales volumes, sales are generally made through various
representatives and distributors. However, the Company also
sells into non-U.S. markets directly from the U.S.

Financial information about the Company’s interna-
tional operations is contained in Note 15 of the Consoli-
dated Financial Statements included in “Item 8. Financial
Statements and Supplementary Data,” and additional infor-
mation about the possible effects on the Company of foreign
currency ﬂuctuations is set forth in “Item 7. Management’s
Discussion and Analysis of Financial Condition and Results
of Operations.” For a discussion of risks related to the

Other Matters
The Company’s businesses maintain sufﬁcient
levels of
working capital to support customer requirements. The
Company’s sales and payment terms are generally similar to
those of its competitors.

Available Information
The Company maintains an internet website at www.dana-
her.com. The Company makes available free of charge on
the website its annual reports on Form 10-K, quarterly
reports on Form 10-Q and current reports on Form 8-K and
amendments to those reports ﬁled or furnished pursuant to
Section 13(a) or 15(d) of the Exchange Act, as soon as rea-
sonably practicable after ﬁling such material electronically
with, or furnishing such material to, the SEC. The Compa-
ny’s Internet site and the information contained therein or
connected thereto are not incorporated by reference into this
Form 10-K.

Corporate Governance Guidelines and
Committee Charters
Danaher has adopted Corporate Governance Guidelines,
which are available in the “Investors” section of Danaher’s
website at www.danaher.com. The charters of each of the
Audit Committee, the Compensation Committee and the
Nominating and Governance Committee of the Board of
Directors are also available in the “Investors” section of the
Company’s website at www.danaher.com. Stockholders
may request a free copy of these committee charters and the
Corporate Governance Guidelines from:

Danaher Corporation
Attention: Investor Relations
2099 Pennsylvania Avenue, N.W,
12th Floor
Washington, DC 20006

Certiﬁcations
The Company has ﬁled certiﬁcations under Rule 13a-14(a)
under the Exchange Act as exhibits to this Annual Report on
Form 10-K. In addition, an annual CEO Certiﬁcation was sub-
mitted by the Company’s CEO to each of the New York Stock
Exchange and the Paciﬁc Exchange on May 18, 2005 in accor-
dance with the respective listing standards of those exchanges.

I T E M 1 A . R I S K FA C T O R S
You should carefully consider the risks and uncertainties described
below, together with the information included elsewhere in this
Annual Report on Form 10-K and other documents we ﬁle with
the SEC. The risks and uncertainties described below are those that
we have identiﬁed as material, but are not the only risks and uncer-
tainties facing us. Our business is also subject to general risks and
uncertainties that affect many other companies, such as overall U.S.
and non-U.S. economic and industry conditions, including a global
economic slowdown,geopolitical events,changes in laws or accounting
rules, ﬂuctuations in interest rates, terrorism, international conﬂicts,
major health concerns, natural disasters or other disruptions of
expected economic/business conditions. Additional risks and uncer-
tainties not currently known to us or that we currently believe are
immaterial also may impair our business operations and liquidity.

We face intense competition and if we are unable to compete
effectively, we may face decreased demand or price reductions
for our products.
Our businesses operate in industries that are intensely com-
petitive. Because of the diversity of products sold and the
variety of markets served, we encounter a wide variety of
competitors. In order to compete effectively, we must retain
longstanding relationships with major customers, establish
relationships with new customers, continually develop new
products and services designed to maintain our leadership
position in various product categories and penetrate new
markets. Our failure to compete effectively may reduce our
revenues, proﬁtability and cash ﬂow, and pricing pressures
may adversely impact our proﬁtability.

Technologies, product offerings and customer requirements in
many of our markets change rapidly. If we fail to keep up with
these changes, we may not be able to meet our customers’ needs
and demand for our products may decline.
Rapid technological change and frequent introductions of
new products and services characterize many of the markets
we serve. Changes in regulations can also impact demand for
new products in our markets. Our failure to successfully
embrace and respond to these changes and developments
may reduce our revenues and cash ﬂow and adversely affect
our proﬁtability. Even if we successfully embrace and
respond to these changes and developments, we may incur
substantial costs in doing so, and our proﬁtability may suffer.

Our acquisition of businesses could negatively impact our
proﬁtability and return on invested capital. Conversely, any
inability to consummate acquisitions at our prior rate could
negatively impact our growth rate.
As part of our business strategy we acquire businesses in the
ordinary course, some of which may be material. During 2005,
2004 and 2003, we acquired 13, 13 and 12 businesses, respec-
tively. Our acquisitions involve a number of risks and ﬁnancial,
managerial and operational challenges, including the following,
any of which could cause signiﬁcant operating inefﬁciencies
and adversely affect our growth and proﬁtability:

11

— Any acquired business, technology, service or product
could under-perform relative to our expectations and
the price that we paid for it.

— Acquisition-related earnings charges could adversely

impact operating results.

— Acquisitions could place unanticipated demands on our
management, operational resources and ﬁnancial and
internal control systems.

— We could experience difﬁculty in integrating personnel,

operations and ﬁnancial and other systems.

— We may be unable to achieve cost savings anticipated in
connection with the integration of an acquired business.
— We may assume by acquisition unknown liabilities,
that become realized,
liabilities
known contingent
known liabilities that prove greater than anticipated, or
internal control deﬁciencies. The realization of any of
these liabilities may increase our expenses and reduce
our cash reserves.

Conversely, we may not be able to consummate acquisitions
at similar rates to the past, which could adversely impact our
growth rate. Our ability to achieve our growth goals depends
in part upon our ability to identify and successfully acquire
and integrate companies and businesses at appropriate prices
and realize anticipated cost savings. In addition, changes in
accounting or regulatory requirements could also adversely
impact our ability to consummate acquisitions.

The indemniﬁcation provisions of acquisition agreements by
which we have acquired companies may not fully protect us and
may result in unexpected liabilities.
Certain of the acquisition agreements by which we have
acquired companies require the former owners to indemnify
us against certain liabilities related to the operation of their
company before we acquired it. In most of these agreements,
however, the liability of the former owners is limited and
certain former owners may not be able to meet their indem-
niﬁcation responsibilities. We cannot assure that
these
indemniﬁcation provisions will fully protect us, and we may
face unexpected liabilities that adversely affect our proﬁtabil-
ity and ﬁnancial position.

The resolution of contingent liabilities from businesses that we
have sold could adversely affect our results of operations and
ﬁnancial condition.
We have retained responsibility for some of the known and
unknown contingent liabilities related to a number of busi-
nesses we have sold, such as lawsuits, product liability claims
and environmental matters, and agreed to indemnify the pur-
chasers of these businesses for certain known and unknown
contingent liabilities. The resolution of these contingencies
has not had a material adverse effect on our results of opera-
tions or ﬁnancial condition but we can not be certain that
this favorable pattern will continue.

12

Our success depends on our ability to maintain and protect our
intellectual property and avoid claims of infringement or
misuse of third party intellectual property.
We own numerous patents, trademarks, copyrights, trade
secrets and licenses to intellectual property owned by others,
which in aggregate are important to our operations. The
steps we have taken to maintain and protect our intellectual
property may not prevent it from being challenged, invali-
dated or circumvented. Unauthorized use of our intellectual
property rights could adversely impact our competitive posi-
tion and results of operations. In addition, from time to time
in the usual course of business, we receive notices from third
parties regarding intellectual property infringement or mis-
appropriation. In the event of a successful claim against us,
we could lose our rights to needed technology or be required
to pay substantial damages or license fees with respect to the
infringed rights, any of which could adversely impact our
revenues, proﬁtability and cash ﬂows. Even where we are
successful in defending claims of infringement or misappro-
priation, we may incur
signiﬁcant costs which could
adversely affect our proﬁtability and cash ﬂows.

We are subject to a variety of litigation in the course of our
business that could adversely affect our results of operations
and ﬁnancial condition.
We are subject to a variety of litigation incidental to our busi-
ness, including claims for damages arising out of the use of
our products, claims relating to intellectual property matters
and claims involving employment matters and commercial
disputes. Some of these lawsuits include claims for punitive
and consequential as well as compensatory damages. The
defense of these lawsuits may divert our management’s atten-
tion, we may incur signiﬁcant expenses in defending these
lawsuits, and we may be required to pay damage awards or
settlements or become subject to equitable remedies that
could adversely affect our ﬁnancial condition and results of
operations. Moreover, any insurance or indemniﬁcation
rights that we may have may be insufﬁcient or unavailable to
protect us against potential loss exposures.

that

costs,

litigation and violations

Our operations expose us to the risk of environmental
liabilities,
could
adversely affect our ﬁnancial condition, results of operations
and reputation.
Certain of our operations are subject to environmental laws
and regulations in the jurisdictions in which they operate,
which impose limitations on the discharge of pollutants into
the ground, air and water and establish standards for the gen-
eration, treatment, use, storage and disposal of solid and haz-
ardous wastes. We must also comply with various health and
safety regulations in the U.S. and abroad in connection with
our operations. There can be no assurance that we have been
or will be at all times in substantial compliance with envi-
ronmental and health and safety laws. Failure to comply with
any of these laws could result in civil and criminal, monetary
and non-monetary penalties and damage to our reputation.
In addition, we cannot provide assurance that our costs of

complying with current or future environmental protection
and health and safety laws will not exceed our estimates or
adversely affect our ﬁnancial condition, results of operations
and reputation.

In addition, we may incur costs related to alleged envi-
ronmental damage associated with past or current waste
disposal practices or other hazardous materials handling prac-
tices. We are also from time to time party to personal injury
or other claims brought by private parties alleging injury due
to the presence of or exposure to hazardous substances. For
additional information regarding these risks, please refer to
“Item 1. Business—Regulatory Matters.” There can be no
assurance that our liabilities arising from past or future
releases of, or exposures to, hazardous substances will not
exceed our estimates or adversely affect our ﬁnancial condi-
tion, results of operations and reputation or that we will
not be subject to additional claims for personal injury or
cleanup in the future based on our past, present or future
business activities.

subject

Our businesses are
to extensive governmental
regulation; failure to comply with those regulations could
adversely affect our results of operations, ﬁnancial condition
and reputation.
In addition to the environmental regulations noted above,
our businesses are subject to extensive regulation by U.S. and
non-U.S. governmental entities at the federal, state and local
levels, including the following:

— We are required to comply with various export control
and economic sanctions laws, which may affect Com-
pany transactions with certain customers, business part-
ners and other persons, including in certain cases deal-
ings with or between Company employees and
Company subsidiaries. In certain circumstances these
regulations may prohibit the export of certain products,
services and technologies, and in other circumstances
the Company may be required to obtain an export
license before exporting the controlled item.

— Certain of our products are medical devices and other
products that are subject to regulation by the FDA, by
counterpart agencies of other countries and by regulations
governing the management, storage, handling and disposal
of radioactive materials. Violations of these regulations,
efﬁcacy or safety concerns or trends of adverse events with
respect to our products could lead to declining sales, recalls,
seizures, injunctions, administrative detentions, suspension
or withdrawal of approvals, premarket notiﬁcation rescis-
sions, and warning letters.

— We also have agreements relating to the sale of products
to government entities and are subject to various statutes
and regulations that apply to companies doing business
with the government. Our agreements relating to the
sale of products to government entities may be subject
to termination, reduction or modiﬁcation in the event

of changes in government requirements, reductions in
federal spending and other factors. A failure to comply
with these requirements might result in suspension of
these contracts and suspension or debarment from gov-
ernment contracting or subcontracting.

In addition, failure to comply with any of these regulations
could result in civil and criminal, monetary and non-
monetary penalties and damage to our reputation.

Our reputation and our ability to do business may be impaired
by improper conduct by any of our employees, agents or
business partners.
We cannot provide assurance that our internal controls will
always protect us from reckless or criminal acts committed
by our employees, agents or business partners that would vio-
late U.S. and/or non-U.S. laws, including the laws governing
to government ofﬁcials. Any such improper
payments
actions could subject us to civil or criminal investigations in
the U.S. and in other jurisdictions, could lead to substantial
monetary and non-monetary penalties against us or our sub-
sidiaries, and could damage our reputation.

Cyclical economic conditions have affected and may continue to
adversely affect our ﬁnancial condition and results of operations.
Certain of our businesses operate in industries that have his-
torically experienced periodic downturns, which have
adversely impacted demand for the equipment and services
that we manufacture and market. Any downturn or competi-
tive pricing pressures in these industries could adversely
affect our ﬁnancial condition and results of operations in any
given period.

Foreign currency exchange rates and commodity prices
may adversely affect our results of operations and ﬁnancial
condition.
We are exposed to a variety of market risks, including the
effects of changes in foreign currency exchange rates and
commodity prices. Changes in currency exchange rates and
commodity prices may have an adverse effect on our results
of operations and ﬁnancial condition.

If we cannot obtain sufﬁcient quantities of materials,
components and equipment required for our manufacturing
activities at competitive prices and quality and on a timely
basis, or if our manufacturing capacity does not meet demand,
our business and ﬁnancial results will suffer.
We purchase materials, components and equipment from
third parties for use in our manufacturing operations. If we
cannot obtain sufﬁcient quantities of these items at competi-
tive prices and quality and on a timely basis, we may not be
able to produce sufﬁcient quantities of product to satisfy
market demand, product shipments may be delayed or our
material or manufacturing costs may increase. In addition,

13

because we cannot always immediately adapt our cost struc-
tures to changing market conditions, our manufacturing
capacity may at times exceed our production requirements
or fall short of our production requirements. Any or all of
these problems could result in the loss of customers, provide
an opportunity for competing products to gain market
acceptance and otherwise adversely affect our business and
ﬁnancial results.

Work stoppages, union and works council campaigns, labor
disputes and other matters associated with our labor force could
adversely impact our results of operations and cause us to incur
incremental costs.
We have a number of domestic collective bargaining units
and various foreign collective labor arrangements. While we
generally have experienced satisfactory relations at our vari-
ous locations, we are subject to potential work stoppages,
union and works council campaigns and potential labor dis-
putes, any of which could adversely impact our results of
operations and cause us to incur incremental costs.

factors

legal, accounting and
results of

International economic, political,
could negatively affect our
business
operations, cash ﬂows and ﬁnancial condition.
In 2005, approximately 47% of our sales were derived out-
side the U.S. and we continue to increase our sales outside
the U.S. In addition, many of our manufacturing operations
and suppliers are located outside the U.S. Our international
business is subject to risks that are customarily encountered
in foreign operations and could negatively affect our results
of operations, cash ﬂows and ﬁnancial condition, including:

— interruption in the transportation of materials to us and

ﬁnished goods to our customers;

— changes in a speciﬁc country’s or region’s political or

economic conditions;
— trade protection measures;
— import or export licensing requirements;
— unexpected changes in laws or licensing and regulatory

requirements;

— difﬁculty in stafﬁng and managing widespread operations;
— differing labor regulations;
— differing protection of intellectual property; and
— terrorist activities and the U.S. and international

response thereto.

Audits by tax authorities could result in additional tax
payments for prior periods.
The amount of income taxes we pay is subject to ongoing
audits by U.S. federal, state and local tax authorities and by
non-U.S. tax authorities. If these audits result in assessments
different from our reserves, our future results may include
unfavorable adjustments to our tax liabilities.

14

Our deﬁned beneﬁt pension plans are subject to ﬁnancial market
risks that could adversely affect our operating results.
Our deﬁned beneﬁt pension plan obligations are affected by
changes in market interest rates and the majority of plan
assets are invested in publicly traded debt and equity secu-
rities, which are affected by market risks. Signiﬁcant changes
in market interest rates, decreases in the fair value of plan
assets and investment losses on plan assets may adversely
impact our future operating results.

I T E M 1 B . U N R E S O LV E D S TA F F
C O M M E N T S

None

I T E M 2 . P R O P E RT I E S
The Company’s corporate headquarters are located in
Washington, D.C. At December 31, 2005, the Company had
204 signiﬁcant manufacturing and distribution locations
worldwide, comprising approximately 18 million square
feet, of which approximately 12 million square feet are
owned and approximately 6 million square feet are leased. Of
these manufacturing and distribution locations, 111 facilities
are located in the United States and 93 are located outside
the United States, primarily in Europe and to a lesser extent
in Asia, Canada, and Latin America. The number of manu-
facturing and distribution locations by business segment are:

— Professional Instrumentation, 83;
— Industrial Technologies, 84; and
— Tools and Components, 37.

The Company considers its facilities suitable and adequate
for the purposes for which they are used and does not antici-
pate difﬁculty in renewing existing leases as they expire or
in ﬁnding alternative facilities. Please refer to Note 10 in the
Consolidated Financial Statements included in this Annual
to the
for additional
Report
Company’s lease commitments.

information with respect

I T E M 3 . L E G A L P R O C E E D I N G S
In addition to the litigation noted under “Item 1. Business
—Regulatory Matters—Environmental, Health & Safety” and
described in Notes 11 and 18 in the Consolidated Financial
Statements included in this Annual Report, the Company is,
from time to time, subject to a variety of litigation incidental
to its business. These lawsuits primarily involve claims for dam-
ages arising out of the use of the Company’s products, claims
relating to intellectual property matters and claims involving
employment matters and commercial disputes. The Company
may also become subject to lawsuits as a result of past or future
acquisitions. Some of these lawsuits include claims for punitive
and consequential as well as compensatory damages. While the
Company maintains workers compensation, property, cargo,
auto, product, general liability, and directors’ and ofﬁcers’ liabil-
ity insurance (and have acquired rights under similar policies in
connection with certain acquisitions) that it believes covers a
portion of these claims, this insurance may be insufﬁcient or
unavailable to protect it against potential loss exposures. In addi-
tion, while the Company believes it is entitled to indemniﬁca-
tion from third parties for some of these claims, these rights may
also be insufﬁcient or unavailable to protect the Company
against potential loss exposures. The Company believes that the
results of these litigation matters and other pending legal pro-
ceedings will not have a materially adverse effect on the Com-
pany’s cash ﬂows or ﬁnancial condition, even before taking into
account any related insurance or indemniﬁcation recoveries.
The Company carries signiﬁcant deductibles and self-
insured retentions for workers’ compensation, property,
automobile, product and general liability costs, and manage-
ment believes that the Company maintains adequate accruals
to cover the retained liability. Management determines the
Company’s accrual for self-insurance liability based on claims
ﬁled and an estimate of claims incurred but not yet reported.
The Company maintains third party insurance policies up to
certain limits to cover liability costs in excess of predeter-
mined retained amounts.

15

I T E M 4 . S U B M I S S I O N O F M AT T E R S T O A V O T E O F S E C U R I T Y H O L D E R S
No matters were submitted to a vote of security holders during the fourth quarter of 2005.

Executive Ofﬁcers of the Registrant
Set forth below are the names, ages, positions and experience of the Company’s executive ofﬁcers. All executive ofﬁcers hold
ofﬁce at the pleasure of the Board of Directors.

Name
Steven M. Rales
Mitchell P. Rales
H. Lawrence Culp, Jr.
Patrick W. Allender
Daniel L. Comas
Philip W. Knisely
Steven E. Simms
James A. Lico
James H. Ditkoff
Robert S. Lutz
Daniel A. Raskas

Age
54
49
42
59
42
51
50
40
59
48
39

Position

Chairman of the Board
Chairman of the Executive Committee
Chief Executive Ofﬁcer and President
Executive Vice President
Executive Vice President and Chief Financial Ofﬁcer
Executive Vice President
Executive Vice President
Executive Vice President
Senior Vice President—Finance and Tax
Vice President—Chief Accounting Ofﬁcer
Vice President—Corporate Development

Ofﬁcer
Since
1984
1984
1995
1987
1996
2000
1996
2002
1991
2002
2004

Steven M. Rales has served as Chairman of the Board
since January 1984. In addition, during the past ﬁve years,
he has been a principal in a number of private business enti-
ties with interests in manufacturing companies and publicly
traded securities. Mr. Rales is a brother of Mitchell P. Rales.
Mitchell P. Rales has served as Chairman of
the
Executive Committee since 1990. In addition, during the
past ﬁve years, he has been a principal in a number of private
business entities with interests in manufacturing companies
and publicly traded securities. Mr. Rales is a brother of
Steven M. Rales.

H. Lawrence Culp, Jr. was appointed President and
Chief Executive Ofﬁcer in 2001. He has served in general
management positions within the Company for more than
the past ﬁve years, including serving as Chief Operating
Ofﬁcer from July 2000 to May 2001.
Patrick W. Allender was

appointed Executive
Vice President in 1999. He also served as Chief Financial
Ofﬁcer and Secretary of the Company from March 1987
until April 2005.

Daniel L. Comas was appointed Executive Vice Presi-
dent and Chief Financial Ofﬁcer in April 2005. He served
as Vice President—Corporate Development
from 1996
to April 2004 and as Senior Vice President—Finance and
Corporate Development from April 2004 to April 2005.

Philip W. Knisely has served as Executive Vice President

since he joined the Company in June 2000.

Steven E. Simms was appointed Executive Vice Presi-
dent in November 2000. He joined the Company in 1996
as Vice President and Group Executive.

James A. Lico was appointed Executive Vice President
in September 2005. He has served in a variety of general
management positions since joining the Company in 1996,
including most recently as President of Fluke Corporation
from July 2000 until September 2005, as Vice President and
Group Executive of Danaher Corporation from December
2002 until September 2005, and as Vice President—Danaher
Business Systems Ofﬁce from September 2004 until
September 2005.

James H. Ditkoff served as Vice President—Finance
and Tax from January 1991 to December 2002 and has
served as Senior Vice President—Finance and Tax since
December 2002.

Robert S. Lutz joined the Company as Vice President-
Audit and Reporting in July 2002 and was appointed Vice
President—Chief Accounting Ofﬁcer in March 2003. Prior
to joining the Company, he served in various positions at
Arthur Andersen LLP, an accounting ﬁrm, from 1979 until
2002, most recently as partner from 1991 to July 2002.

Daniel A. Raskas was appointed Vice President—
Corporate Development in November 2004. Prior to join-
ing the Company, he worked for Thayer Capital Partners, a
private equity investment ﬁrm, from 1998 through October
2004, most recently as Managing Director from 2001
through October 2004.

16

Part II

I T E M 5 . M A R K E T F O R T H E R E G I S T R A N T ’ S C O M M O N E Q U I T Y A N D R E L AT E D

S T O C K H O L D E R M AT T E R S

On April 22, 2004, the Company’s Board of Directors declared a two-for-one split of its common stock. The split was affected
in the form of a stock dividend paid on May 20, 2004 to shareholders of record on May 6, 2004. All share and per share
information presented in this Annual Report on Form 10-K has been retroactively restated to reﬂect the effect of this split.
The Company’s common stock is traded on the New York Stock Exchange and the Paciﬁc Exchange under the symbol
DHR. On February 24, 2006, there were approximately 3,400 holders of record of the Company’s common stock. The
high and low common stock prices per share as reported on the New York Stock Exchange, and the dividends paid per share,
in each case for the periods described below, were as follows:

First quarter
Second quarter
Third quarter
Fourth quarter

2005

Low
$52.60
48.56
51.76
49.93

High
$56.23
55.73
56.68
58.07

Dividends
Per Share
$.0150
.0150
.0200
.0200

High
$48.10
52.02
52.96
58.90

2004

Low
$43.83
44.13
47.65
51.44

Dividends
Per Share
$.0125
.0150
.0150
.0150

On September 13, 2005, the Board of Directors approved an increase in the quarterly dividend on the Company’s common
stock from $.015 to $.02 per share. The payment of dividends by the Company in the future will be determined by the Com-
pany’s Board of Directors and will depend on business conditions, the Company’s ﬁnancial earnings and other factors.

Issuer Purchase of Equity Securities
Repurchases of equity securities during the fourth quarter of 2005 are listed in the following table.

Period
10/1/05–10/31/05(1)
11/1/05–11/30/05(1)
12/1/05–12/31/05(2)
Total

Total Number
of Shares
Purchased
1,417,500
1,723,000
11,211
3,151,711

Average
Price Paid
per Share
$50.53
$51.87
$55.84
$51.28

Total Number of Shares
Purchased as Part of Publicly
Announced
Plans or Programs
1,417,500
1,723,000
0
3,140,500

Maximum Number of Shares
that May Yet Be Purchased
Under The
Plans or Programs
6,719,000
4,996,000
4,996,000
4,996,000

(1) On April 21, 2005, the Company announced that on April 20, 2005, the Company’s Board of Directors authorized the repurchase of up to 10 million
shares of the Company’s common stock from time to time on the open market or in privately negotiated transactions. There is no expiration date for
the Company’s repurchase program. The timing and amount of any shares repurchased will be determined by the Company’s management based on
its evaluation of market conditions and other factors. The repurchase program may be suspended or discontinued at any time. Any repurchased shares
will be available for use in connection with the Company’s 1998 Stock Option Plan and for other corporate purposes. The Company expects to fund
the repurchase program using the Company’s available cash balances or existing lines of credit.

(2) During the fourth quarter of 2005, the Company accepted an aggregate of 11,211 previously issued shares tendered by three employees as payment
of the strike price in connection with the exercise of stock options. The average price paid per share is based on the closing price of the Company’s
common stock as reported on the NYSE on the date of the transaction. None of these transactions were made in the open market.

17

I T E M 6 . S E L E C T E D F I N A N C I A L D ATA

(in thousands, except per share information)
Sales
Operating Proﬁt
Net earnings before effect of accounting
change and reduction of income tax
reserves related to previously
discontinued operation(c)

Net earnings
Earnings per share before accounting

change and reduction of income tax
reserves related to previously
discontinued operation(c)
Basic
Diluted

Earnings per share

Basic
Diluted

Dividends per share
Total assets
Total debt

2005
$7,984,704
1,264,668

2004
$6,889,301
1,105,133

2003
$5,293,876

845,995(a)

2002
$4,577,232

701,122(b)

2001
$3,782,444

502,011(b)

897,800
897,800

746,000
746,000

536,834(a)
536,834(a)

434,141(b)
290,391(b)

297,665(b)
297,665(b)

2.91
2.76

2.91
2.76
0.070
9,163,109
1,041,722

2.41
2.30

2.41
2.30
0.058
8,493,893
1,350,298

1.75(a)
1.69(a)

(b)

1.45
1.39(b)

1.04(b)
1.00(b)

1.75(a)
1.69(a)
0.050
6,890,050
1,298,883

0.97(b)
0.94(b)
0.045
6,029,145
1,309,964

1.04(b)
1.00(b)
0.040
4,820,483
1,191,689

(a) Includes a beneﬁt of $22.5 million ($14.6 million after-tax or $0.05 per share) from a gain on curtailment of the Company’s Cash Balance Pension Plan

recorded in the fourth quarter of 2003.

(b) Includes $69.7 million ($43.5 million after-tax or $0.14 per share) in costs from restructuring charges taken in the fourth quarter of 2001 and a beneﬁt
of $6.3 million ($4.1 million after-tax or $0.01 per share) from the reversal of unutilized restructuring accruals recorded in the fourth quarter of 2002.
(c) In 2002, the Company recorded an after-tax charge for $173.8 million ($0.58 per basic share and $0.55 per diluted share) related to impairment of goodwill
resulting from the adoption of SFAS No. 142. In addition, the Company recorded an after-tax beneﬁt of $30 million ($0.10 per basic and diluted share)
due to reduction of tax reserves established related to a previously discontinued operation.

18

I T E M 7 . M A N A G E M E N T ’ S D I S C U S S I O N
A N D A N A LY S I S O F F I N A N C I A L
C O N D I T I O N A N D R E S U LT S O F
O P E R AT I O N S

The following discussion and analysis of the Company’s ﬁnan-
cial condition and results of operations should be read in con-
junction with its audited consolidated ﬁnancial statements.

Overview
Danaher Corporation strives to create shareholder value
through:

— delivering sales growth, excluding the impact of
the overall market

acquired businesses, in excess of
growth for its products and services;

— upper quartile ﬁnancial performance when compared

against peer companies; and

— upper quartile cash ﬂow generation from operations

when compared against peer companies.

To accomplish these goals, the Company uses a set of tools and
processes, known as the DANAHER BUSINESS SYSTEM
(“DBS”), which are designed to continuously improve business
performance in critical areas of quality, delivery, cost and inno-
vation. The Company also acquires businesses that it believes
can help it achieve the objectives described above. The Com-
pany will acquire businesses when they strategically ﬁt with
existing operations or when they are of such a nature and size
as to establish a new strategic line of business. The extent to
which appropriate acquisitions are made and integrated can
affect the Company’s overall growth and operating results.

Danaher is a multinational corporation with global
operations. Approximately 47% of Danaher’s sales were
derived outside the United States in 2005. As a global busi-
ness, Danaher’s operations are affected by worldwide,
regional and industry economic and political factors. How-
ever, Danaher’s geographic and industry diversity, as well as
the diversity of its product sales and services, has helped limit
the impact of any one industry or the economy of any single
country on the consolidated operating results. Given the
broad range of products manufactured and geographies
served, management does not use any indices other than gen-
eral economic trends to predict the outlook for the Com-
pany. The Company’s individual businesses monitor key
competitors and customers, including to the extent possible
their sales, to gauge relative performance and the outlook for
the future. In addition, the Company’s order rates are highly
indicative of the Company’s future revenue and thus a key
measure of anticipated performance. In those industry seg-
ments where the Company is a capital equipment provider,
revenues depend on the capital expenditure budgets and
spending patterns of the Company’s customers, who may
delay or accelerate purchases in reaction to changes in their
businesses and in the economy.

While differences exist among the Company’s busi-
nesses, the Company generally continued to see broad-based

market expansion during 2005, but at lower rates than in
2004. Management believes that this moderation in growth
rates reﬂects more difﬁcult comparisons with the Company’s
2004 ﬁscal periods, which were strong for the Company by
historical standards, as well as slower growth in technology
end markets and current global economic conditions.

Consolidated sales for 2005 increased approximately
16.0% over 2004. Sales from existing businesses for the year
(references to “sales from existing businesses” in this report
include sales from acquired businesses starting from and after
the ﬁrst anniversary of the acquisition, but exclude currency
effect) contributed approximately 4.5% growth. Acquisitions
accounted for approximately 11.5% growth. The impact of
currency translation on sales was negligible for the year as the
strengthening of the U.S. dollar in the second half of the year
offset weakness of the U.S. dollar in the ﬁrst half of the year.
The growth in sales resulting from acquisitions in 2005
primarily relates to acquisitions in the Company’s medical
technologies business. The Company established its medical
technologies business through the acquisitions of Radiom-
eter A/S and substantially all the assets and certain liabilities
of the Gendex business of Dentsply International Inc. in
January 2004 and Kaltenbach & Voight Gmbh (KaVo) in
May 2004. The medical technologies business has provided
a foundation for additional sales and earnings growth as the
Company has acquired additional companies to complement
the initial medical technologies businesses. During 2005, the
Company acquired four medical technologies businesses, the
largest being the acquisition of Leica Microsystems AG in
August 2005. Leica Microsystems is a leading global provider
of life sciences instrumentation and had annual revenues of
approximately $540 million in 2004 (excluding the approxi-
mately $120 million of revenue attributable to the semicon-
ductor business that has been divested). The Company’s
medical technologies business is expected to continue to
provide sales and earnings growth opportunities for the
Company, both through expansion of existing products and
services and through the potential acquisition of comple-
mentary businesses.

The Company continues to operate in a highly com-
petitive business environment in the markets and geographies
served. The Company’s performance will be impacted by its
ability to address a variety of challenges and opportunities in
the markets and geographies served, including trends toward
increased utilization of the global labor force, consolidation
of competitors, the expansion of market opportunities in
Asia and recent increases in raw material costs. The Com-
pany will continue to assess market needs with the objective
of positioning itself to provide superior products and ser-
vices to its customers in a cost efﬁcient manner. With the for-
mation of the medical technologies business in 2004 and
expansion of this business in 2005, the Company is devoting
signiﬁcant attention to the successful integration and restruc-
turing of these acquired businesses.

Although the Company has a U.S. Dollar functional
currency for reporting purposes, a substantial portion of its
sales are derived from foreign countries. Sales of subsidiaries

operating outside of the United States are translated using
exchange rates effective during the respective period. There-
fore, reported sales are affected by changes in currency rates,
which are outside of the control of management. The Com-
pany has generally accepted the exposure to exchange rate
movements relative to its investment in foreign operations
without using derivative ﬁnancial instruments to manage this
risk. Therefore, both positive and negative movements in
currency exchange rates against the U.S. Dollar will continue
to affect the reported amount of sales and proﬁt in the
Company’s consolidated ﬁnancial statements.

As noted above, the impact of currency trends in
the Company’s international businesses during 2005 when
compared to 2004 was negligible for the full year, despite
ﬂuctuations during periods within the year. The following
sensitivity analysis demonstrates the recent strengthening of
the U.S. Dollar against other major currencies. Applying the
exchange rates in effect at December 31, 2005 to the trans-
lation of the ﬁnancial statements for the Company’s non-
U.S. operations for 2005 would result in approximately
1.3% lower overall Company sales than what was actually
reported using the rates in effect during this reporting
period. Any further strengthening of the U.S. Dollar against
other major currencies would have a further adverse impact
on the Company’s reported sales and results of operations.

Results of Operations
The following table summarizes sales by business segment for
each of the periods indicated:

For the years ended December 31
($ in millions)

2005

2004

2003

Professional

Instrumentation
Industrial Technologies
Tools & Components
Total

$3,782.1
2,908.1
1,294.5
$7,984.7

$2,963.5
2,619.5
1,306.3
$6,889.3

$1,939.7
2,157.0
1,197.2
$5,293.9

Professional Instrumentation
As of December 31, 2005, the Professional Instrumentation
segment was Danaher’s largest segment and encompasses
three strategic businesses: environmental, electronic test, and
medical technologies.

19

Professional Instrumentation Selected Financial Data

For the years ended December 31
($ in millions)

Sales
Operating Proﬁt
Operating proﬁt as a

% of sales

2005

2004

2003

$3,782.1
677.0

$2,963.5
554.5

$1,939.7
362.6

17.9%

18.7%

18.7%

Components of Sales Growth

2005 vs. 2004

2004 vs. 2003

Existing businesses
Acquisitions
Impact of foreign currency
Total

4.5%
23.0%
0.0%
27.5%

8.5%
40.5%
4.0%
53.0%

2005 Compared to 2004
As detailed in the table above, segment sales increased 27.5%
for 2005 compared to 2004. Price increases, which are
included in sales from existing businesses, contributed less
than 1% to overall sales growth compared to 2004. Sales from
existing businesses increased in all three of the Company’s
strategic lines of business with the highest growth resulting
from the electronic test and environmental water quality
businesses. Sales in the Company’s environmental and retail
petroleum automation business were up low single digits for
the year. The Company’s dental equipment businesses were
essentially ﬂat compared with the period of ownership in
2004, but showed mid-single digit growth for the fourth
quarter of 2005 and on a full year pro forma basis when com-
pared with the prior year.

Operating proﬁt margins for the segment were 17.9%
in 2005 compared to 18.7% for 2004. Operating proﬁt mar-
gins in the segment for 2005 compared with 2004 were
adversely impacted by the dilutive impact of acquisitions,
principally Leica Microsystems and KaVo. These recent
acquisitions operate at lower overall operating proﬁt margins
than the segment’s ongoing businesses. In addition, 2005
operating proﬁt margins for the segment reﬂect additional
costs associated with restructuring actions within the dental
business, which generally commenced in the third quarter of
2005. Operating proﬁt margins for 2005 were also impacted
by higher expense levels to support strategic growth initia-
tives in certain businesses. On-going cost reduction initia-
tives through the application of the Danaher Business Sys-
tem, low-cost region sourcing and production initiatives and
the additional leverage created from sales growth compared
with the prior year period, partially offset these adverse
impacts. The ongoing application of the Danaher Business
System in each of the segment’s businesses, the Company’s
low-cost region sourcing and production initiatives and
the additional leverage from anticipated sales growth are
all expected to further improve operating margins at both
including Leica
existing and newly acquired businesses,

20

Microsystems and KaVo, in future periods, but are expected
to be offset to varying extents by continued investments in
growth and restructuring initiatives. In particular, the Com-
pany expects that operating margins in its dental businesses
will improve in 2006 as the Company’s integration activities
in those businesses take hold.

Overview of Businesses within Professional
Instrumentation Segment

E N V I R O N M E N T A L . Sales from the Company’s environmental
businesses, representing approximately 44% of segment sales
for 2005, increased approximately 12.5% in 2005 compared
to 2004. Sales
from existing businesses accounted for
approximately 5.0% growth. Acquisitions accounted for
approximately 7.5% growth. The impact of currency trans-
lation was negligible for 2005 compared to 2004.

The Company’s Hach/Lange water quality businesses
reported high-single digit growth in 2005 primarily driven
by mid-single digit growth in laboratory sales and low-
double digit growth in process instrumentation sales in both
the United States and European markets. New product
launches in 2005 positively impacted process instrumenta-
tion sales. The business’ sales in China also grew over 35%
in 2005 on a year-over-year basis. The Company’s Hach
Ultra Analytics business reported mid-single digit growth in
2005, driven primarily by high-single digit growth in the
U.S. partially offset by slowing sales in electronics end-
markets and in Europe. Sales growth from acquired busi-
nesses primarily reﬂects the impact of the acquisition of
Trojan Technologies in November 2004 and two smaller
water quality businesses during 2005.

The Gilbarco Veeder-Root environmental and retail
petroleum automation business reported low-single digit
sales growth for 2005 compared to 2004. The business expe-
rienced growth in sales of environmental equipment in Asia
and Latin America. Sales in Europe were down compared to
2004, due in part to the fact that 2004 sales included the
impact of a large shipment. Sales in the U.S. were ﬂat com-
pared to 2004.

E L E C T R O N I C TE S T . Sales from the Company’s electronic test
businesses, representing approximately 25% of segment sales
for 2005, grew 16.0% compared to 2004. Sales from existing
businesses
accounted for 6.5% growth. Acquisitions
accounted for 8.5% growth and favorable currency transla-
tion accounted for 1.0% growth.

Sales growth from existing businesses for 2005 built on
strong performance experienced by this business throughout
2004. Key contributors to the 2005 growth included strength
in the U.S. and European industrial and electrical channels,
in each case driven by strong demand for recently introduced
product offerings. Sales in China also showed strong growth
during 2005. The Company’s network-test business reported
ﬂat sales growth for 2005 compared to a very strong 2004.
The business’s 2004 results beneﬁted from delivery of a large

shipment in the fourth quarter of 2004 for test equipment
to service a telecommunication customer.

M E D I C A L TE C H N O L O G I E S . Sales from the Company’s medi-
cal technologies business, representing approximately 31% of
segment sales for 2005, increased 75.5% compared to 2004.
Sales from existing businesses contributed approximately
2.5% growth during 2005. Acquisitions accounted for 75.0%
growth. Unfavorable currency translation accounted for a
2.0% sales decline. As described above, the Company estab-
lished the medical technologies business with the acquisi-
tions of Radiometer and Gendex in the ﬁrst quarter of 2004
and added to this business with the acquisition of KaVo
in May 2004, the acquisition of Leica Microsystems AG
in August 2005 as well as the acquisition of three smaller
dental and medical
instrumentation products companies
during 2005.

Radiometer’s business experienced mid-single digit
growth for 2005 over the comparable period of 2004. This
performance was primarily the result of growth in North
America and Japan, driven by placements of recently intro-
duced products and related accessory sales, offset by weaker
performance in Europe.

Sales from existing businesses in the Company’s dental
businesses experienced mid-single digit growth in fourth
quarter of 2005 compared to the fourth quarter of 2004. For
the full year 2005, the dental businesses sales growth was ﬂat
for the period of ownership, but would have reported mid-
single digit growth on a full year pro forma basis had they
been included for a full year in both 2005 and 2004. Sales
for 2005 were negatively impacted by changes in German
reimbursement regulations as well as the reduction in pro-
motional activity in 2005 while the business restructured cer-
tain German operations which occurred in the third and
fourth quarters of 2005. Sales for 2005 beneﬁted from strong
growth experienced with the introduction of a new digital
imaging product offering in the second half of 2005. The
business also experienced sales growth due to the third quar-
ter launch of a sensor line with US distribution as well as
strong sales growth at Pelton & Crane, the Company’s newest
dental acquisition.

The results of Leica Microsystems have been reﬂected
in the Company’s results of operations since its acquisition
in August 2005. Leica Microsystems had annual revenues
from continuing operations of approximately $540 million
in 2004 (excluding approximately $120 million of revenue
attributable to the semiconductor equipment business that
has been divested). Leica Microsystems’ current gross mar-
gins approximate the Company’s overall gross margins and
are not expected to dilute gross margins in future periods.
However, Leica Microsystems operating proﬁt margins are
below the Company and segment average and will be dilutive
in the near-term. The Company expects to enhance the
business’ operating margins through the application of the
Danaher Business System.

2004 Compared to 2003
Sales of the Professional Instrumentation segment increased
approximately 53.0% in 2004 compared to 2003, largely as
a result of sales from acquired businesses, which contributed
approximately 40.5% of the overall increase. Sales from exist-
ing businesses for this segment contributed approximately
8.5% growth compared to 2003, principally from sales
increases in the environmental and electronic test and mea-
surement businesses. Price increases, which are included as
a component of sales from existing businesses, contributed
less than 1% to overall sales growth compared to 2003. Favor-
able currency translation impact accounted for approxi-
mately 4.0% of the overall sales increase.

Operating proﬁt margins for the segment were 18.7% in
2004, ﬂat compared to 2003. Operating proﬁt margin improve-
ments in the Company’s existing operations were offset by the
lower operating margins of acquired businesses, primarily
KaVo, which diluted segment margins compared with 2003.
The Company continues to pursue on-going cost reductions
through application of the Danaher Business System and low-
cost region sourcing and production initiatives which are
expected to further improve operating margins at both existing
and newly acquired businesses in future periods.

Overview of Businesses within Professional
Instrumentation Segment

E N V I R O N M E N T A L . Sales from the Company’s environmental
businesses increased approximately 16.0% in 2004 compared
to 2003. Acquisitions accounted for approximately 3.0%
growth, sales from existing businesses provided 9.0% growth
and favorable currency translation provided 4.0% growth.
Sales were positively impacted by continued strength in
the Gilbarco Veeder-Root retail petroleum equipment busi-
ness. Gilbarco Veeder-Root delivered low double-digit
growth rates for the full year 2004, but slowed to a mid-single
digit growth rate on a comparable basis during the fourth
quarter of 2004 compared to the fourth quarter of 2003 as
a result of comparisons with the higher sales levels that began
in the fourth quarter of 2003. In addition, growth rates for
the ﬁrst quarter of 2004 beneﬁted from the comparison to
the softness experienced in the ﬁrst quarter of 2003 prior to
the Iraq war. Strength in sales of retail automation and leak-
detection equipment in the U.S., Europe and China were the
primary drivers of the growth from existing businesses.

21

Hach/Lange’s sales growth from existing businesses also
contributed to the increase with high single-digit growth.
Hach/Lange achieved higher- than-market growth in both
the laboratory and process instrumentation markets in both
the U.S. and, to a lesser extent, Europe, and also experienced
continued strength in China. The Company’s Hach Ultra
Analytics business reported accelerated growth in the second
half of 2004 driven by strong U.S. and Asian sales. The busi-
ness beneﬁted from strength in the electronics and food and
beverage end markets.

E L E C T R O N I C TE S T . Electronic test sales grew 19.5% during
2004 compared to 2003. Acquisitions accounted for approxi-
mately 7.5% growth, revenues from existing businesses
provided 8.5% growth and favorable currency translation
provided 3.5% growth.

Year-over-year growth rates in the second half of 2004
declined somewhat from the rates reported in the ﬁrst half
of 2004. The decline is the result of lapping stronger sales
quarters which began for this business in the second half of
2003 as well as a result of the expiration of a multi-year resale
agreement relating to a low-margin product line. Growth
resulted from strength in the U.S. industrial channel, the
European electrical channel and overall strong growth in
China. The Company’s network-test business achieved 20%
growth during the year, reﬂecting continued strength in net-
work analysis, copper and ﬁber equipment sales and strong
enterprise market share gains. The business also beneﬁted
from delivery of a large order in the fourth quarter of 2004
for test equipment to service a telecommunication custom-
er’s next generation service offerings.

M E D I C A L TE C H N O L O G I E S . All of the medical technologies
sales growth represents acquisition related growth as this line
of business was established in 2004 with the acquisitions of
Radiometer, Gendex and KaVo. Radiometer’s critical care
diagnostics business experienced growth across all major
geographies, driven by strong instrument placements and
related accessory sales. Radiometer’s high single digit sales
growth was somewhat offset by the KaVo and Gendex dental
unit business, which was
impacted by signiﬁcant pre-
acquisition sales incentive programs in the United States and
Japan implemented by the former owners.

22

Industrial Technologies
The Industrial Technologies segment encompasses two stra-
tegic businesses, product identiﬁcation and motion, and
three focused niche businesses, power quality, aerospace and
defense, and sensors & controls.

Industrial Technologies Segment Selected Financial Data

For the years ended December 31
($ in millions)

Operating Performance

2005

2004

2003

Sales
Operating proﬁt
Operating proﬁt as a

% of sales

$2,908.1
426.4

$2,619.5
383.1

$2,157.0
311.7

operations. Operating margin also beneﬁted from a $4.6 mil-
lion pre-tax gain on the sale of a small business which
occurred in the second quarter of 2005. These positive
impacts were partly offset by a $5 million impairment charge
recorded in the third quarter of 2005 related to a minority
investment; the dilutive effects of operating margins from
businesses recently acquired; and higher expense levels to
support strategic growth and restructuring initiatives, prima-
rily in the product identiﬁcation and motion businesses. The
ongoing application of the Danaher Business System in each
of the segment’s businesses, and the Company’s low-cost
region sourcing and production initiatives, are both expected
to further improve operating margins at both existing and
newly acquired businesses in the segment in future periods.

14.7%

14.6%

14.5%

Overview of Businesses within Industrial
Technologies Segment

Components of Sales Growth

2005 vs. 2004

2004 vs. 2003

Existing businesses
Acquisitions
Impact of foreign currency
Total

5.0%
6.0%
0.0%
11.0%

9.0%
9.5%
3.0%
21.5%

2005 Compared to 2004
As detailed in the above table, sales of the Industrial Tech-
nologies segment increased 11.0% in 2005 over 2004. Sales
from existing businesses increased due primarily to sales
growth in the product identiﬁcation and aerospace and
defense businesses. Sales from existing businesses for the
Company’s motion businesses were ﬂat during 2005 com-
pared to 2004. Price increases, which are included as a com-
ponent of sales from existing businesses, contributed less
than 1% to overall sales growth compared to 2004. The ﬁrst
quarter 2005 acquisition of Linx Printing Technologies PLC
together with several other smaller acquisitions in 2005
accounted for a 6.0% increase in segment sales. The impact
of currency translation in the year was negligible.

Operating proﬁt margins for the segment were 14.7%
in 2005 including the effect of a $15.5 million charge (0.5%)
to settle litigation associated with activities of a business that
occurred prior to the Company’s ownership of the business.
Under U.S. generally accepted accounting principles, the
impact of this settlement is required to be accounted for in
2005 since the settlement occurred after December 31, 2005
but before the release of the ﬁnancial statements (refer to
Note 18 to the Consolidated Financial Statements for further
information) Operating proﬁt margins were 14.6% in 2004.
The improvements in operating proﬁt margins for the year
reﬂect additional leverage from sales growth; on-going cost
reductions associated with our Danaher Business System ini-
tiatives completed during 2004 and 2005, primarily within
the Company’s motion businesses; and margin improve-
ments in businesses acquired in prior years, which typically
have higher cost structures than the Company’s existing

I D E N T I F I C A T I O N . The product

identiﬁcation
P R O D U C T
businesses accounted for approximately 28% of segment sales
in 2005. Sales from the Company’s product identiﬁcation
businesses increased 26.0% in 2005 compared to 2004. Exist-
ing businesses provided 9.5% growth. Acquisitions
accounted for 16.0% growth, and favorable currency impacts
accounted for approximately 0.5% growth.

Sales of marking systems equipment and related service
within the Videojet business for 2005 increased at mid-single
digit rates over 2004. This marking systems growth primarily
resulted from strength in the North American, China and
Latin American markets. The Company also continued to
see growth in both its laser product offerings and thermo-
transfer overlay product offerings. The Company’s increased
sales and marketing efforts implemented earlier in 2005 also
contributed to this growth. In addition, growth in sales from
existing operations for 2005 were driven by strong systems
installation sales within the Accu-Sort scanning business,
particularly sales to the United States Postal Service (USPS).
The Company expects AccuSort’s sales to decline in 2006
compared to 2005 as a result of completing this large USPS
project in early 2006.

segment

M O T I O N . Sales in the Company’s motion businesses, repre-
senting approximately 34% of
in 2005,
increased approximately 2.5% compared to the same period
of 2004. Sales from existing businesses were ﬂat compared
with prior year levels; acquisitions accounted for approxi-
mately 2.5% growth in sales and the impact of currency
translation was negligible.

sales

Sales from existing businesses slowed from strong 2004
levels. The business continued to experience strength in its
electric vehicle product line, although at lower growth rates
than experienced in 2004, as well as growth in the aviation
and defense market. In addition, the elevator end-market
showed continued strength in 2005. However, the business

experienced softness in the technology and electronic assem-
bly end markets in 2005.

F O C U S E D N I C H E B U S I N E S S E S . The segment’s niche busi-
nesses in the aggregate showed 10.0% sales growth in 2005
compared to 2004. Growth in the existing businesses was pri-
marily driven by sales growth from the Company’s aerospace
and defense businesses, principally the electro-optical and
safety product lines as well as strength in the Company’s
power quality businesses. These improvements were partially
offset by slight declines in the Company’s sensors and con-
trols business due to a slowing technology market and more
difﬁcult comparisons with the business’ 2004 results which
were strong by historical standards. 2005 sales were nega-
tively impacted by 1.0% due to the sale of a small business
in June 2005 for which previously reported sales have not
been restated.

2004 Compared to 2003
Sales of
increased
the Industrial Technologies segment
approximately 21.5% in 2004 compared to 2003. Sales from
existing businesses for this segment contributed approxi-
mately 9% to the overall growth compared to 2003, driven
by sales increases in all businesses with particularly strong sales
increases
in the Company’s motion businesses. Price
increases, which are included as a component of sales from
existing businesses, were negligible compared to 2003.
Acquisitions contributed approximately 9.5% to the growth
during the year driven in large part by acquisitions within the
Company’s product identiﬁcation business. The impact of
favorable currency translation generated approximately 3%
growth compared to 2003.

Operating proﬁt margins for the segment were 14.6%
in 2004 compared to 14.5% in 2003. The overall improve-
ment in operating proﬁt margins for 2004 was driven prima-
rily by additional leverage from sales growth, on-going cost
reductions associated with Danaher Business System initia-
tives and reductions in manufacturing costs through low-cost
region sourcing and production initiatives implemented dur-
ing 2004 and 2003. Margin improvements were partially off-
set by lower margins associated with the start-up stage of new
business initiatives with certain OEMs in the Company’s
motion business.

Overview of Businesses within Industrial
Technologies Segment

P R O D U C T I D E N T I F I C A T I O N . For 2004, product identiﬁcation
revenues grew 38.5% compared to 2003, with acquisitions pro-
viding 29.0% growth, favorable currency impacts of approxi-
mately 3.5%, and sales from existing operations providing
6.0% growth.

23

Growth in sales from existing businesses was broad-
based across the product portfolio. The growth was driven
by strong equipment sales, primarily continuous ink-jet
printer sales in China and North America, but increasingly
in the laser, thermal transfer overprint and binary array prod-
uct offerings. Year-over-year growth rates for the second half
of 2004 were somewhat lower compared with the growth
rates in the ﬁrst half of 2004 reﬂecting the normalization of
revenues associated with the 2003 Willett acquisition as well
as continued integration activities related to recent acquisi-
tions. The reading and scanning business acquired in late
2003 also experienced growth, primarily from systems instal-
lation projects with the United States Postal Service.

M O T I O N . Sales in the Company’s motion businesses grew
20% in 2004 compared to 2003, as sales from existing busi-
nesses contributed 13.0% to the overall reported growth,
acquisitions provided growth of 3.5% and favorable currency
translation effects provided 3.5% growth.

The growth in sales from existing businesses was broad-
based, both geographically and across the markets served.
The North American market for direct drive products, and
the worldwide semiconductor and ﬂat-panel display markets
demonstrated particular strength during 2004 and contrib-
uted signiﬁcantly to the businesses’ overall growth. The busi-
ness experienced a signiﬁcant increase in sales associated with
electric vehicle projects won in prior periods and believes it
captured market share in 2004 as many motion control appli-
cations have shifted to the use of AC motor technology solu-
tions. The Company’s linear actuator product businesses
continued to grow in 2004, primarily resulting from strong
market growth for ball screw and gearbox product offerings
in both North America and Europe.

N I C H E

segment’s niche
B U S I N E S S E S . The
F O C U S E D
businesses in the aggregate showed 16% sales growth in 2004,
primarily from high-single digit growth from existing
businesses, largely attributable to the Company’s sensors &
controls and aerospace & defense businesses, and to a lesser
extent due to the impact of acquisitions in the Company’s
aerospace and defense businesses.

Tools & Components
The Tools & Components segment is one of
the larg-
est domestic producers and distributors of general purpose
and specialty mechanics’ hand tools. Other products manu-
factured by the businesses in this segment include toolboxes
and storage devices; diesel engine retarders; wheel ser-
vice equipment; drill chucks; and precision fasteners and
miniature components.

24

Tools & Components Selected Financial Data

For the years ended December 31
($ in millions)

Sales
Operating proﬁt
Operating proﬁt as a

% of sales

2005

2004

2003

$1,294.5
199.3

$1,306.3
198.3

$1,197.2
173.8

15.4%

15.2%

14.5%

Components of Sales Growth

2005 vs. 2004

2004 vs. 2003

Existing businesses
Divestiture
Impact of foreign currency
Total

4.0%
(5.0%)
0.0%
(1.0%)

9.5%
(0.5%)
0.0%
9.0%

2005 Compared to 2004
Sales in the Tools & Components segment decreased 1.0%
in 2005 compared to 2004. The 2005 period sales were nega-
tively impacted by 5.0% on a year-over-year basis due to the
sale of a small business in late 2004 for which previously
reported sales have not been restated. Sales from existing
businesses contributed approximately 4.0% growth for the
segment in 2005, including approximately 2.0% growth due
to price increases that the Company implemented as a result
of cost increases in steel and other commodities. There were
no acquisitions in this segment during 2004 or 2005 and cur-
rency impacts on sales were negligible in both periods.

Mechanics’ Hand Tools sales, representing approxi-
mately two-thirds of segment sales in 2005, grew approxi-
mately 4.0% in 2005, compared with 2004. The sales growth
was driven primarily by sales growth in the group’s high-end
mobile tool distribution business which experienced low-
double digit growth during the year driven by increases in
both the number of distributors and their average purchase
levels. Mechanics’ Hand Tools also experienced signiﬁcant
growth in 2005 in the China market. The business’ retail
mechanics’ hand tools business declined at low-single digit
levels during 2005 compared with 2004. The integration of
Sears and Kmart, a major customer of the segment, tempered
the business’ 2005 sales growth. The Company believes the
merger of Sears and Kmart may result in further reductions
to Sears/Kmart’s inventory levels during the ﬁrst half of
2006. The segment’s niche businesses also experienced mid-
single digit growth during 2005 due primarily to strength in
the truck box and engine retarder businesses.

Operating proﬁt margins for the segment were 15.4%
in 2005 compared to 15.2% in 2004. The improvement in
operating proﬁt margins for 2005 primarily relates to the
pricing initiatives implemented to offset a portion of the steel
and other commodity cost increases experienced beginning
in 2004; the impact of higher sales levels and the impact of
Danaher Business System cost reduction programs imple-
mented in 2004 and 2005; and the impact of a gain recorded

on the sale of real estate totaling $5.3 million ($3.9 million
after taxes) during the ﬁrst quarter of 2005. These improve-
ments more than offset the incremental costs associated with
closing one of the segment’s manufacturing facilities. The
Company incurred approximately $11 million in costs asso-
ciated with this plant closure in 2005. This plant closure pro-
vided minimal beneﬁt to operating margins in 2005 but is
expected to contribute to earnings in 2006. The ongoing
application of the Danaher Business System in each of the
segment’s businesses and the Company’s low-cost region
sourcing and production initiatives are all expected to further
improve segment operating margins in future periods.

2004 Compared to 2003
Sales in the Tools & Components segment grew 9.0% in
2004 compared to 2003. Sales volumes from existing busi-
nesses contributed 9.5% and were offset slightly by the
impact of a small divestiture during 2004. Price increases,
which are included as a component of sales from existing
businesses, contributed less than 1% to reported revenue.
There were no acquisitions in this segment during either
2004 or 2003 and currency impacts on revenues were neg-
ligible in both periods.

Sales in the Mechanics Hand Tools business grew
approximately 8.5% for the year, driven primarily by
increases in sales from the group’s retail hand tool product
lines, high-end mobile distribution business and industrial
distribution businesses. The Company’s Matco business grew
at low double-digit rates for 2004 which the Company
believes outpaced the overall market growth. The Compa-
ny’s engine retarder and chuck businesses also experienced
low double-digit growth rates. The other niche businesses
within the segment also experienced mid to high-single digit
growth rates during 2004.

Operating proﬁt margins for the segment were 15.2%
in 2004 compared to 14.5% in 2003. This improvement was
driven by leverage on increased sales volume and the impact
of cost reduction programs implemented in 2003 and 2004
offset partially by increases in price and surcharges related to
steel purchases incurred in the third quarter. Price increases
were implemented to recover a portion of the increase in raw
material costs. The Company commenced a plant closing in
the fourth quarter of 2004 which reduced overall operating
proﬁt for 2004 by about $5 million.

Gross Proﬁt

For the years ended December 31
($ in millions)

2005

2004

2003

Sales
Cost of sales
Gross proﬁt
Gross proﬁt margin

$7,984.7
4,539.7
$3,445.0

$6,889.3
3,996.6
$2,892.7

$5,293.9
3,154.8
$2,139.1

43.1%

42.0%

40.4%

25

Gross proﬁt margins for 2005 improved 110 basis points to
43.1% from 42.0% in 2004. This improvement resulted prima-
rily from generally higher gross proﬁt margins in businesses
recently acquired, leverage on increased sales volume, the
on-going cost improvements in existing business units driven by
our DBS processes and low-cost region initiatives, and cost
reductions in recently acquired business units. In addition,
selected increases in selling prices and recent reductions of
commodity costs also contributed to gross proﬁt expansion.
Partly offsetting these improvements are the costs associated
with closing a manufacturing facility in the Tools & Compo-
nents segment referred to above. Gross proﬁt could be nega-
tively impacted in future periods by higher raw material costs
and supply constraints resulting from the improving overall
economy or any signiﬁcant slowdown in the economy.

Gross proﬁt margins for 2004 improved 160 basis points
to 42.0% compared to 40.4% in 2003. This improvement
resulted primarily from leverage on increased sales volume.
In addition, gross proﬁt margins beneﬁted from generally
higher gross proﬁt margins in businesses acquired (principally
Radiometer) and the ongoing cost improvements in existing
business units driven by the Company’s DBS processes and
region sourcing and production initiatives.
low-cost
Increases in cost and surcharges related to steel purchases par-
tially offset these improvements.

Operating Expenses

For the years ended December 31
($ in millions)

Sales
Selling, general and
administrative
expenses
SG&A as a %
of sales

2005

2004

2003

$7,984.7

$6,889.3

$5,293.9

2,175.8

1,795.7

1,316.4

27.2%

26.1%

24.9%

The year-over-year increases in selling, general and
administrative expenses are due primarily to the impact of
recently acquired businesses (principally KaVo and Leica
Microsystems in 2005 and Radiometer and KaVo in 2004)
and their higher relative operating expense structures, addi-
tional spending to fund growth opportunities throughout the
Company, and the increased proportion of sales derived from
our international operations which generally have higher
operating expense structures compared to the Company as
a whole. In addition, selling, general and administrative
expenses for 2005 reﬂect a charge for settlement of pre-
acquisition litigation (refer to Note 18 of the Consolidated
Financial Statements for additional information).

Gain on Pension Plan Curtailment
The Company recorded a curtailment gain in 2003 as a result
of freezing substantially all associates’ ongoing participation
in its Cash Balance Plan effective December 31, 2003.

The gain totaled $22.5 million ($14.6 million after tax, or
$0.05 per share) and represented the unrecognized beneﬁts
associated with prior plan amendments that were being
amortized into income over the remaining service period of
the participating associates prior to freezing the plan. The
Company will continue recording pension expense related
to this plan, primarily representing interest costs on the accu-
mulated beneﬁt obligation and amortization of actuarial
losses accumulated in the plan prior to the curtailment.

Interest Costs and Financing Transactions
For a description of the Company’s outstanding indebted-
ness, please refer to “—Liquidity and Capital Resources—
Interest
Financing Activities and Indebtedness” below.
expense for 2005 was lower than the prior year by approxi-
mately $10.1 million. The decrease in interest expense was
due primarily to lower debt levels in 2005 as a result of the
repayment of the Company’s 6.25% Eurobond notes and to
a lesser extent, lower borrowing rates on new borrowings
during the period.

Interest expense of $55 million in 2004 was approxi-
mately $4 million lower than the corresponding 2003 period.
The decrease in interest expense was due primarily to the
cessation of amortization of deferred ﬁnancing costs related
to the Company’s LYONS, offset slightly by the unfavorable
impact of the Euro/US Dollar exchange rate on interest
expense related to the Company’s $406.8 million of 6.25%
Eurobond notes (which were subsequently repaid in the
third quarter of 2005).

Interest income of $14.7 million, $7.6 million and
$10.1 million was recognized in 2005, 2004 and 2003,
respectively. During the second quarter of 2005, the Com-
pany collected $4.6 million of interest on a note receivable
which had not previously been recorded due to collection
risk (see Note 2 to the Consolidated Financial Statements for
additional information). In addition, higher overall interest
rates in 2005 compared to 2004 increased interest income
from prior year levels. Average invested cash balances
decreased in 2004 compared with the 2003 levels due to
deploying these cash balances to complete several acquisi-
tions. The decline in interest income as a result of these lower
invested cash balances was partially offset by the Company
maintaining a higher proportion of available cash in inter-
national markets which had higher overall interest rates and
higher short-term rates in 2004.

Income Taxes
The Company’s effective tax rate for 2005 of 27.3% was
2.2 percentage points lower than the 2004 effective rate, mainly
due to the effect of a higher proportion of foreign earnings in
2005 compared to 2004. The Company also resolved exami-
nations of certain previously ﬁled U.S. and international tax
returns and provided additional reserves for other matters aris-
ing during the third ﬁscal quarter of 2005. Resolution of these
matters resulted in a small beneﬁt from the reversal of previously
provided tax reserves. The effective tax rate for the ﬁrst quarter
of 2006 is expected to be approximately 26.5%.

26

The 2004 effective tax rate of 29.5% was 3.1 percentage
points lower than the 2003 effective rate, mainly due to the
effect of a higher proportion of non-U.S. earnings in 2004
compared to 2003 as well as the impact of changes made to
the Company’s international tax structure, primarily related
to the acquisition and integration of Radiometer and KaVo
during 2004.

The Company’s effective tax rate can be affected by
changes in the mix of earnings in countries with differing
statutory tax rates (including as a result of business acquisi-
tions and dispositions), changes in the valuation of deferred
tax assets and liabilities, material audit assessments and
changes in tax laws. The tax effect of signiﬁcant unusual
items or changes in tax regulations is reﬂected in the period
in which they occur. The Company’s effective tax rate in
2005, 2004 and 2003 differed from the United States federal
statutory rate of 35% primarily as a result of lower effective
tax rates on certain earnings from operations outside of the
United States. United States income taxes have not been pro-
vided on earnings that are planned to be reinvested indeﬁ-
nitely outside the United States. The amount of United
States income taxes that may be applicable to such earnings
is not readily determinable given the various tax planning
alternatives the Company could employ should it decide to
repatriate these earnings. As of December 31, 2005, the total
amount of earnings planned to be reinvested indeﬁnitely
outside the United States was approximately $2.1 billion.
The American Jobs Creation Act of 2004 (the Act) provided
the Company with an opportunity to repatriate up to $500
million of foreign earnings during 2005 at an effective US
tax rate of 5.25%. The Company did not repatriate any for-
eign earnings under the provisions of the Act.

The amount of income taxes the Company pays is sub-
ject to ongoing audits by federal, state and foreign tax
authorities, which often result in proposed assessments.
Management performs a comprehensive review of its global
tax positions on a quarterly basis and accrues amounts for
potential tax contingencies. Based on these reviews and the
result of discussions and resolutions of matters with certain
tax authorities and the closure of tax years subject to tax
audit, reserves are adjusted as necessary. However, future
results may include favorable or unfavorable adjustments to
the Company’s estimated tax liabilities in the period the
assessments are determined or resolved. Additionally, the
jurisdictions
in which the Company’s earnings and/or
deductions are realized may differ from current estimates.

Inﬂation
Other than increases in commodity pricing noted above, the
effect of inﬂation on the Company’s operations has been
minimal in 2005, 2004, and 2003.

Financial Instruments and Risk Management
The Company is exposed to market risk from changes in
interest rates, foreign currency exchange rates and credit risk,
which could impact its results of operations and ﬁnancial
condition. The Company addresses its exposure to these risks
through its normal operating and ﬁnancing activities. In
addition, the Company’s broad-based business activities help
to reduce the impact that volatility in any particular area or
related areas may have on its operating earnings as a whole.

Interest Rate Risk
The fair value of the Company’s ﬁxed-rate long-term debt is
sensitive to changes in interest rates. Sensitivity analysis is one
technique used to evaluate this potential impact. Based on a
hypothetical, immediate 100 basis-point increase in interest
rates at December 31, 2005, the fair value of the Company’s
ﬁxed-rate long-term debt would decrease by approximately
$4 million. This methodology has certain limitations, and these
hypothetical gains or losses would not be reﬂected in the Com-
pany’s results of operations or ﬁnancial condition under current
accounting principles. In January 2002, the Company entered
into two interest rate swap agreements for the term of the
$250 million aggregate principal amount of 6% notes due 2008
having an aggregate notional principal amount of $100 million
whereby the effective interest rate on $100 million of these
notes is the six month LIBOR rate plus approximately 0.425%.
In accordance with SFAS No. 133, “Accounting for Derivative
Instruments and Hedging Activities”, as amended, the Com-
pany accounts for these swap agreements as fair value hedges.
These instruments qualify as “effective” or “perfect” hedges.
Other than the above noted swap arrangements, there were no
material derivative ﬁnancial instrument transactions during any
of the periods presented. Additionally, the Company does not
have signiﬁcant commodity contracts or other derivatives.

Exchange Rate Risk
The Company has a number of manufacturing sites
throughout the world and sells its products globally. As a
result, it is exposed to movements in the exchange rates of
various currencies against the U.S. Dollar and against the cur-
rencies of other countries in which it manufactures and sells
products and services. In particular, the Company has more
sales in European currencies than it has expenses in those cur-
rencies. Therefore, when European currencies strengthen or
weaken against
the U.S. Dollar, operating proﬁts are
increased or decreased, respectively. The Company has gen-
erally accepted the exposure to exchange rate movements
relative to its non-U.S. operations without using derivative
ﬁnancial instruments to manage this risk. The Company’s
previously outstanding Eurobond notes, which were repaid
in the third quarter of 2005, provided a natural hedge to a
portion of the Company’s European net asset position.

27

Credit Risk
Financial instruments that potentially subject the Company
to signiﬁcant concentrations of credit risk consist of cash and
temporary investments, interest rate swap agreements and
trade accounts receivable. The Company is exposed to credit
losses in the event of nonperformance by counter parties to
its ﬁnancial instruments. The Company anticipates, how-
ever, that counter parties will be able to fully satisfy their obli-
gations under these instruments. The Company places cash
and temporary investments and its interest rate swap agree-
institutions
ments with various high-quality ﬁnancial

throughout the world, and exposure is limited at any one
institution. Although the Company does not obtain collat-
eral or other security to support these ﬁnancial instruments,
it does periodically evaluate the credit standing of
the
counter party ﬁnancial institutions. In addition, concentra-
tions of credit risk arising from trade accounts receivable are
limited due to the diversity of the Company’s customers.
The Company performs ongoing credit evaluations of its
customers’ ﬁnancial conditions and obtains collateral or
other security when appropriate.

Liquidity and Capital Resources

Overview of Cash Flows and Liquidity

Total operating cash ﬂows
Purchases of property, plant and equipment
Cash paid for acquisitions
Other sources
Net cash used in investing activities
Proceeds from the issuance of common stock
Repayments of borrowings, net
Dividends paid
Purchase of treasury stock
Net cash used in ﬁnancing activities

For the years ended December 31
($ in millions)

2005

2004

2003

$1,203.8
(121.2)
(885.1)
40.9
(965.4)
59.9
(292.2)
(21.6)
(257.7)
(511.6)

$ 1,033.2
(115.9)
(1,591.7)
74.0
(1,633.6)
45.9
(66.3)
(17.7)
—
(38.1)

$ 861.5
(80.3)
(312.3)
24.5
(368.1)
50.5
(145.5)
(15.3)
—
(110.3)

— Operating cash ﬂow, a key source of the Company’s
liquidity was $1,203.8 million for 2005, an increase of
$170.6 million, or approximately 16.5% as compared to
2004. Earnings growth contributed $151.8 million to
the increase in operating cash ﬂow in 2005 compared to
2004. As of December 31, 2005, the Company held
$315.6 million of cash and cash equivalents.

— Acquisitions constituted the most signiﬁcant use of cash
in all periods presented. The Company acquired
13 companies and product lines during 2005 for total
consideration of $885.1 million in cash, including trans-
action costs and net of cash acquired.

— In the second quarter of 2005, the Company’s Board of
Directors also authorized the repurchase of up to
10 million shares of the Company’s common stock from
time to time. During 2005 the Company repurchased
approximately 5 million shares of Company common
stock at an aggregate cost of $257.7 million, funded
from available cash and from borrowings under uncom-
mitted lines of credit.

— The Company’s Eurobond notes with a stated amount
of E300 million were issued in July 2000 and bore inter-
est at 6.25% per annum. Upon maturity in July 2005,
the Company repaid these notes from available cash in
the amount of $362 million.

— The Company currently has a total of $1 billion avail-
able for borrowing under two $500 million lines of
credit which mature in June and July, 2006, respectively.
As of December 31, 2005 there were no amounts out-
standing under these credit facilities.

Operating Activities
The Company continues to generate substantial cash from
operating activities and remains in a strong ﬁnancial position,
with resources available for reinvestment in existing busi-
nesses, strategic acquisitions and managing its capital struc-
ture on a short and long-term basis. Operating cash ﬂow, a
key source of the Company’s liquidity, was approximately
$1.2 billion for 2005, an increase of $171 million, or approxi-
mately 16.5% as compared to 2004. Earnings growth con-
tributed $152 million to the increase in operating cash ﬂow
in the 2005 compared to 2004. Depreciation and amortiza-
tion accounted for $21 million of the improvement in cash
ﬂow on a year-over year basis. Operating working capital,
which the company deﬁnes as accounts receivable plus
inventory less accounts payable, also favorably impacted the
year-over-year comparison. Cash used for accounts receiv-
able decreased by $43 million during 2005 compared to
2004. This decrease primarily relates to signiﬁcant increases

28

in accounts receivable in 2004 as a result of an accelerating
sales environment. In addition, the Company realized higher
cash ﬂow beneﬁts from accounts payable compared to 2004,
primarily as a result of the timing of vendor payments. These
improvements were partially offset by cash used for inventory
to support growing sales levels which used $88 million more
cash in 2005 compared to 2004. Inventory turns improved
on a year-to-year basis, driven particularly by improvements
in newly acquired businesses. The timing of tax payments
and changes in deferred taxes in 2005 compared to 2004
negatively impacted cash ﬂow by $17 million for 2005 com-
pared to 2004. In addition, timing related increases in prepaid
expenses associated with the timing of payments for certain
of the Company’s beneﬁt programs, including 401(k) and
employee health plan contributions negatively impacted
2005 cash ﬂow.

In connection with its acquisitions, the Company
records appropriate accruals for the costs of closing duplicate
facilities, severing redundant personnel and integrating the
acquired businesses into existing Company operations. Cash
ﬂows from operating activities are reduced by the amounts
expended against the various accruals established in connec-
tion with each acquisition.

Investing Activities
Net cash used in investing activities was $965 million in 2005
compared to approximately $1.6 billion in 2004. Capital
spending increased $5 million in 2005 from 2004 levels to
$121 million. Capital expenditures are made primarily to
increasing capacity,
support product development,
replacement of equipment and improving information tech-
nology systems.

for

Net cash used in investing activities was approximately
$1.6 billion in 2004 compared to $368 million of net cash
used in 2003. Gross capital spending of $116 million for 2004
increased $36 million from 2003, due to capital spending
relating to new acquisitions and spending related to the
Company’s low-cost region manufacturing initiatives, new
products and other growth opportunities. In 2006, the Com-
pany expects capital spending of approximately $150 mil-
lion, although actual expenditures will ultimately depend on
business conditions. Disposals of ﬁxed assets yielded approxi-
mately $19 million and $31 million of cash proceeds for 2005
and 2004, respectively.

As discussed below, the Company completed several
business acquisitions and divestitures during 2005, 2004 and
2003. All of the acquisitions during this time period have
resulted in the recognition of goodwill in the Company’s
ﬁnancial statements. This goodwill typically arises because
the purchase prices for these businesses reﬂect the competi-
the process by which the businesses are
tive nature of
acquired and the complementary strategic ﬁt and resulting
synergies these businesses are expected to bring to existing
operations. For a discussion of other factors resulting in the
recognition of goodwill see Notes 2 and 5 to the accompa-
nying Consolidated Financial Statements.

2005 Acquisitions
In the ﬁrst quarter of 2005 the Company acquired all of the
outstanding shares of Linx Printing Technologies PLC, a
publicly-held U.K based coding and marking business, for
$171 million in cash, including transaction costs and net of
cash acquired of $2 million. Linx complements the Compa-
ny’s product identiﬁcation businesses and had annual revenue
of approximately $93 million in 2004.

In August 2005, the Company acquired all of the out-
standing shares of German-based Leica Microsystems AG,
for an aggregate purchase price of E210 million in cash,
including transaction costs and net of cash acquired of
E12 million and the assumption and repayment at closing
of E125 million outstanding Leica debt ($429 million in
aggregate). The Company funded this acquisition and the
payment of debt assumed using available cash and through
borrowings under uncommitted lines of credit totaling
$222 million, a portion of which was repaid prior to
December 31, 2005. Leica complements the Company’s
medical technologies business and had annual revenues of
approximately $540 million in 2004 (excluding the approxi-
mately $120 million of revenue attributable to the semicon-
ductor business that has been divested, as described below).
In September 2005, the Company also completed the
sale of Leica Microsystems semiconductor equipment busi-
ness which was held for sale at the time of the acquisition.
This business had historically operated at a loss. Proceeds
from the sale have been reﬂected as a reduction in the pur-
chase price for Leica Microsystems in the accompanying
Consolidated Statement of Cash Flows. Operating losses for
this business for the period from acquisition to disposition
totaled approximately $1.3 million and are reﬂected in
“Other expense (income), net” in the accompanying Con-
solidated Statement of Earnings.

In addition to Linx and Leica Microsystems, the Com-
pany acquired 11 smaller companies and product lines during
2005 for total consideration of $285 million in cash, includ-
ing transaction costs and net of cash acquired. In general,
each company is a manufacturer and assembler of environ-
mental or instrumentation products, in markets such as elec-
tronic test, dental, sensors and controls, aerospace and
defense and motion controls. These companies were all
acquired to complement existing units of either the Profes-
sional Instrumentation or Industrial Technologies segments.
The aggregated annual sales of these 11 acquired businesses
at the time of their respective acquisitions were approxi-
mately $260 million and each of these companies individu-
ally had less than $125 million in annual revenues and were
purchased for a purchase price of less than $125 million.

In June 2005, the Company divested one insigniﬁcant
business that was reported as a continuing operation within
the Industrial Technologies segment for aggregate proceeds
of $12.1 million in cash net of related transaction expenses.
The Company recorded a pre-tax gain of $4.6 million on the
divestiture which is reported as a component of “Other
expense (income), net” in the accompanying Consolidated
Statement of Earnings. Sales related to this business included

in the Company’s results for 2005 were $7.5 million. Net
cash proceeds received on the sale are included in “Proceeds
from Divestitures” in the accompanying Consolidated State-
ment of Cash Flows.

In June 2005, the Company collected $14.6 million in
full payment of a retained interest that was in the form of a
$10 million note receivable and an equity interest arising
from the sale of a prior business. The Company had recorded
this note net of applicable allowances and had not previously
recognized interest income on the note due to uncertainties
associated with collection of the principal balance of the
note and the related interest. As a result of the collection, the
Company recorded $4.6 million of interest income related
to the cumulative interest received on this note in the second
quarter of 2005. In addition, the Company recorded a pre-
tax gain of $5.3 million related to collection of the note bal-
ance in the second quarter of 2005 which has been recorded
as a component of “Gains on Sales of Real Estate and Other
Assets, Net” in the accompanying Consolidated Statement
of Earnings. Cash proceeds from the collection of the prin-
cipal balance of $10 million are included in “Proceeds from
Divestitures” in the accompanying Consolidated Statement
of Cash Flows.

2004 Acquisitions
In January 2004, the Company acquired all of the share
capital of Radiometer S/A for $684 million in cash (net of
$77 million in acquired cash), including transaction costs. In
addition, the Company assumed $66 million of debt in
connection with the acquisition. Radiometer designs, manu-
factures, and markets a variety of blood gas diagnostic instru-
mentation, primarily used in hospital applications. The
Company also provides consumables and services for its
instruments. Radiometer is a worldwide leader in its served
markets, and had total annual
approximately
$300 million at the time of acquisition.

sales of

In May 2004, the Company acquired all of the out-
standing shares of Kaltenbach & Voight Gmbh (KaVo) for
E350 million ($412 million) in cash, including transaction
costs and net of $45 million in acquired cash. KaVo, head-
quartered in Biberach, Germany, with 2003 revenues of
approximately $450 million, is a worldwide leader in the
design, manufacture and sale of dental equipment, including
hand pieces, treatment units and diagnostic systems and labo-
ratory equipment.

In November 2004, the Company acquired all of the
outstanding shares of Trojan Technologies, Inc. for aggregate
consideration of $185 million in cash, including transaction
costs and net of $23 million in acquired cash. In addition,
the Company assumed $4 million of debt in connection with
the acquisition. Trojan is a leader in the ultraviolet disinfec-
tion market for drinking and wastewater applications and had
annual revenues of approximately $115 million at the time
of acquisition.

29

In addition to Radiometer, KaVo and Trojan, the
Company acquired ten smaller companies and product lines
during 2004 for total consideration of $311 million in cash,
including transaction costs and net of cash acquired. In gen-
eral, each company is a manufacturer and assembler
instrumentation products, in markets such as medical
of
technologies, electronic test, motion, environmental, prod-
uct identiﬁcation, sensors and controls, and aerospace and
defense. These companies were all acquired to complement
existing businesses or as additions to the newly formed medi-
cal technology line of business within the Professional
Instrumentation segment. The aggregate annual sales of
these acquired businesses as of the respective dates of acqui-
sition were approximately $280 million and each of these
companies individually had less than $125 million in annual
revenues and were purchased for a purchase price of less than
$125 million.

In addition, the company sold a business that was part
of the Tools & Components segment during 2004. This
business was insigniﬁcant to reported sales and earnings. Pro-
ceeds from this sale have been included in proceeds from
divestitures in the accompanying Consolidated Statements of
Cash Flows. The pre-tax gain on the sale of $1.5 million
($1.1 million
“Other
expense (income), net” in the accompanying Consolidated
Statements of Earnings.

included

after

tax)

in

is

2003 Acquisitions
The Company acquired twelve companies and product lines
during 2003 for total consideration of $312 million in cash,
including transaction costs and net of cash acquired. The
Company also assumed debt with an estimated fair market
value of $45 million in connection with these acquisitions.
In connection with one of the 2003 acquisitions, the Com-
pany entered into an agreement to pay an additional maxi-
mum contingent consideration of up to $36.8 million in
November 2008 based on future performance of
the
acquired business through November 2008. In general, each
company is a manufacturer and assembler of environmental
or instrumentation products, in markets such as product
identiﬁcation, environmental and aerospace and defense.
These companies were all acquired to complement existing
business units of the Professional Instrumentation or Indus-
trial Technologies segments. The aggregated annual revenues
of the acquired businesses at the time of their respective
acquisitions were approximately $361 million and each of
these twelve companies individually had less than $125 mil-
lion in annual revenues and were purchased for a purchase
price of less than $125 million. In addition, the Company
sold one facility acquired in connection with a prior acqui-
sition for approximately $11.6 million in net proceeds. No
gain or loss was recognized on the sale and the proceeds have
been included in proceeds from divestitures in the accompa-
nying Consolidated Statements of Cash Flows.

30

Recent Acquisition Developments
Subsequent to December 31, 2005, the Company completed
the acquisition of Visual Networks, Inc. for a total purchase
price of $75 million in cash, including transaction costs and
net of estimated cash acquired. Visual Networks will
complement businesses within the electronic test business
and had 2004 revenues of approximately $53 million.

In January 2006, the Company commenced an all cash
tender offer for all of the outstanding ordinary shares of First
Technology plc, a U.K. based public company. In connection
with the offer, the Company acquired an aggregate of 19.5%
of First Technology’s issued share capital for approximately
$86 million. A competing bidder subsequently made an offer
that surpassed the Company’s bid, and as a result the Company
has lapsed its offer for First Technology. The Company is evalu-
ating its options, one of which may be to tender its shares into
the other bidder’s offer. If the Company tenders into the other
bidder’s offer and such other offer obtains regulatory approval
and successfully closes at the current offer price, the Company
would record a gain related to this transaction of approximately
$13 million,
including a break-up fee of approximately
$3 million, net of transaction related costs.

Financing Activities and Indebtedness
Financing activities used cash of $512 million during 2005
compared to $38 million used during the comparable period
of 2004, primarily for the repurchase of common stock and
the repayment of indebtedness.

On April 21, 2005, the Company’s Board of Directors
authorized the repurchase of up to 10 million shares of the
Company’s common stock from time to time on the open
market or in privately negotiated transactions. There is no
expiration date for the Company’s repurchase program. The
timing and amount of any shares repurchased will be deter-
mined by the Company’s management based on its evalua-
tion of market conditions and other factors. The repurchase
program may be suspended or discontinued at any time. Any
repurchased shares will be available for use in connection
with the Company’s 1998 Stock Option Plan and for other
corporate purposes.

During 2005, the Company repurchased 5 million
shares of Company common stock in open market transac-
tions at an aggregate cost of $257.7 million. The repurchases
were funded from available cash and from borrowings under
uncommitted lines of credit. At December 31, 2005,
the Company had 5 million shares remaining for stock
repurchases under the existing Board authorization. The
Company expects to fund any further repurchases using the
Company’s available cash balances or existing lines of credit.
Total debt was $1,042 million at December 31, 2005
compared to $1,350 million at December 31, 2004. This
decrease was due primarily to repayment of $362 million of
the Company’s Eurobonds as required upon maturity in July
2005. This decrease was partially offset by $104 million in
borrowings, net of repayments, associated with the purchase

of Leica Microsystems described above and by the accretion
of amounts due under the LYONs discussed below.

The Company’s debt ﬁnancing as of December 31,
2005 was comprised primarily of $580 million of zero
coupon Liquid Yield Option Notes due 2021 (“LYONs”),
$250 million of 6% notes due 2008 (subject to the interest
rate swaps described above) and $177 million of borrowings
under uncommitted lines of credit.

the LYONs may convert each of

During the ﬁrst quarter of 2001, the Company issued
$830 million (value at maturity) in LYONs. The net proceeds
to the Company were $505 million, of which approximately
$100 million was used to pay down debt and the balance was
used for general corporate purposes, including acquisitions.
The LYONs carry a yield to maturity of 2.375%. Holders
of
their LYONs into
14.5352 shares of Danaher common stock (in the aggregate
for all LYONs, approximately 12.0 million shares of Danaher
common stock) at any time on or before the maturity date
of January 22, 2021. As of December 31, 2005, the accreted
value of the outstanding LYONs was $48 per share which,
at that date, was lower than the traded market value of the
underlying common stock issuable upon conversion. The
Company may redeem all or a portion of the LYONs for cash
at any time. Holders may require the Company to purchase
all or a portion of the notes for cash and/or Company com-
mon stock, at the Company’s option, on January 22, 2011.
The holders had a similar option to require the Company to
purchase all or a portion of the notes as of January 22, 2004,
which resulted in notes with an accreted value of $1.1 mil-
lion being redeemed by the Company for cash. The Com-
pany will pay contingent interest to the holders of LYONs
during any six-month period commencing after January 22,
2004 if the average market price of a LYON for a measure-
ment period preceding such six-month period equals 120%
or more of the sum of the issue price and accrued original
issue discount for such LYON. The Company has not and
is not currently required to pay contingent interest under this
agreement. Except for the contingent interest described
above, the Company will not pay interest on the LYONs
prior to maturity.

The Company maintains two revolving senior unse-
cured credit facilities totaling $1 billion available for general
corporate purposes. Borrowings under the revolving credit
facilities bear interest of Eurocurrency rate plus 0.21% to
0.70%, depending on the Company’s debt rating. The credit
facilities, each $500 million, have a ﬁxed term expiring
June 28, 2006 and July 23, 2006, respectively. There were no
the Company’s
borrowings outstanding under either of
credit facilities at any time during 2004 or 2005. The Com-
pany expects to enter into a new credit facility in 2006.

The Company does not have any rating downgrade
triggers that would accelerate the maturity of a material
amount of outstanding debt. However, a downgrade in the
Company’s credit rating would increase the cost of borrow-
ings under the Company’s credit facilities. Also, a downgrade
in the Company’s credit rating could limit, or in the case of

a signiﬁcant downgrade, preclude the Company’s ability to
consider commercial paper as a potential source of ﬁnancing.
The Company declared a regular quarterly dividend of
$0.02 per share payable on January 27, 2006 to holders of
record on December 31, 2005. Aggregate cash payments for
dividends during 2005 were $21.6 million.

Cash and Cash Requirements
As of December 31, 2005, the Company held $316 million
of cash and cash equivalents that were invested in highly
liquid investment grade debt instruments with a maturity of
90 days or less. As of December 31, 2005, the Company was
in compliance with all debt covenants under the aforemen-
tioned debt instruments, including limitations on secured
debt and debt levels. In addition, as of the date of this
Form 10-K, the Company could issue up to $1 billion of
securities under its shelf registration statement with the
Securities and Exchange Commission.

The Company will continue to have cash requirements
to support working capital needs and capital expenditures
and acquisitions, to pay interest and service debt, fund its
pension plans as required, pay dividends to shareholders and
repurchase shares of the Company’s common stock. In order
to meet these cash requirements, the Company generally
intends to use available cash and internally generated funds.
The Company currently anticipates that any acquisitions
consummated during 2006 would be funded from available
cash and internally generated funds and, if necessary, through
the establishment of a commercial paper program, through
borrowings under its credit facilities, under uncommitted
lines of credit or by accessing the capital markets. The Com-
pany believes that it has sufﬁcient liquidity to satisfy both
short-term and long-term requirements.

The Company’s cash balances are generated and held in
numerous locations throughout the world, including sub-
stantial amounts held outside the United States. Most of the
amounts held outside the United States could be repatriated
to the United States, but, under current law, would poten-
tially be subject to United States federal income taxes, less
applicable foreign tax credits. Repatriation of some foreign
balances is restricted by local laws. Where local restrictions
funds, the
prevent an efﬁcient inter-company transfer of
Company’s intent is that cash balances would remain in the
foreign country and it would meet United States liquidity
needs through ongoing cash ﬂows, external borrowings, or
both. The Company utilizes a variety of tax planning and
ﬁnancing strategies in an effort to ensure that its worldwide
cash is available in the locations in which it is needed.

Pension and Other Post Retirement & Employee
Beneﬁt Plans
Due to declines in the equity markets in 2001 and 2002, the
fair value of the Company’s United States pension fund assets
decreased below the accumulated beneﬁt obligation due to
the
the participants in the plan. In addition, certain of

31

Company’s non-United States plans are under-funded. As a
in accordance with SFAS No. 87, “Employers’
result,
Accounting for Pensions”, the Company has recorded a
minimum pension liability of $175.5 million ($116.0 million
net of tax beneﬁts) cumulatively through December 31,
2005. The minimum pension liability is calculated as the dif-
ference between the actuarially determined accumulated
beneﬁt obligation and the value of
the plan assets as of
September 30, 2005 (see Note 8 to the consolidated ﬁnancial
statements for the year ended December 31, 2005 for addi-
tional information). This adjustment results in a direct reduc-
tion of
stockholders’ equity and does not immediately
impact net earnings, but is included in other comprehensive
income (loss).

Calculations of the amount of pension and other pos-
tretirement beneﬁts costs and obligations depend on the
assumptions used in such calculations. These assumptions
include discount rates, expected return on plan assets, rate of
salary increases, health care cost trend rates, mortality rates,
and other factors. While the Company believes that the
assumptions used in calculating its pension and other postre-
tirement beneﬁts costs and obligations are appropriate, dif-
ferences in actual experience or changes in the assumptions
may affect the Company’s ﬁnancial position or results of
operations. For the United States plan, the Company used
a 5.5% discount rate in computing the amount of the mini-
mum pension liability to be recorded at December 31, 2005,
which represented a decrease in the discount rate of 0.25%
from the rate used at December 31, 2004. For non-U.S.
plans, rates appropriate for each plan are determined based
on investment grade instruments with maturities approxi-
mately equal to the average expected beneﬁt payout under
the plan. A further 25 basis point reduction in the discount
rate used for the plans would have increased the after-tax
minimum pension liability $9.4 million ($6.8 million on an
after-tax basis) from the amount recorded in the ﬁnancial
statements at December 31, 2005.

For 2005,

the expected long-term rate of

return
assumption applicable to assets held in the United States plan
was estimated at 8.0% which reﬂects a 50 basis point reduc-
tion from the rate used in 2004. This expected rate of return
reﬂects the asset allocation of the plan and the expected long-
term returns on equity and debt investments included in plan
assets. The plan maintains between 60% to 70% of its assets
in equity portfolios, which are invested in funds
that
are expected to mirror broad market returns for equity secu-
rities. The balance of
the asset portfolio is invested in
corporate bonds and bond index funds. Pension expense for
the U.S. plan for the year ended December 31, 2005 was
$8.1 million (or $5.9 million on an after-tax basis), compared
with $4.3 million (or $3.0 million on an after-tax basis) for
this plan in 2004. If the expected long-term rate of return
on plan assets was reduced by an additional 0.50%, pension
expense for 2005 would have increased $2.2 million (or
$1.6 million on an after-tax basis). While the Company was
not required to make a contribution to the plan in 2005, it
made a voluntary contribution of $10 million in the fourth

32

ﬁscal quarter of 2005. The Company is not statutorily
required to make contributions to the plan in 2006. The
Company’s non-U.S. plan assets are comprised of various
insurance contracts, equity and debt securities as determined

by the administrator of each plan. The estimated long-term
rate of return was determined on a plan by plan basis based
on the nature of the plan assets and ranged from 3.0% to 7.5%
for 2005.

Contractual Obligations
The following table sets forth, by period due or year of expected expiration, as applicable, a summary of the Company’s
contractual obligations as of December 31, 2005 under (1) long-term debt obligations, (2) leases, (3) purchase obligations
and (4) other long-term liabilities reﬂected on the Company’s balance sheet under GAAP.

Total

Less Than
One Year

1–3 Years

3–5 Years

($ in millions)

Debt & Leases:

Long-Term Debt Obligations(a)(b)
Capital Lease Obligations(b)

Total Long-Term Debt
Interest Payments on Long-Term Debt and

Capital Lease Obligations
Operating Lease Obligations(c)

Other:

Purchase Obligations(d)

Other Liabilities Reﬂected on the Company’s

Balance Sheet Under GAAP(e)

Total

$1,024.9
16.8
1,041.7

$ 181.4
2.6
184.0

307.2
285.0

5.3

25.6
58.8

5.3

2,258.2
$3,897.4

1,301.8
$1,575.5

$252.6
5.3
257.9

31.6
100.2

—

158.9
$548.6

More Than
5 Years

$ 584.5
2.9
587.4

248.4
57.9

—

$ 6.4
6.0
12.4

1.6
68.1

—

119.0
$201.1

678.5
$1,572.2

(a) As described in Note 7 to the Consolidated Financial Statements
(b) Amounts do not include interest payments. Interest on long-term debt and capital lease obligations is reﬂected in a separate line in the table.
(c) As described in Note 10 to the Consolidated Financial Statements
(d) Consist of agreements to purchase goods or services that are enforceable and legally binding on the Company and that specify all signiﬁcant terms, includ-
ing ﬁxed or minimum quantities to be purchased; ﬁxed, minimum or variable price provisions; and the approximate timing of the transaction.
(e) Primarily consist of obligations under product service and warranty policies and allowances, performance and operating cost guarantees, estimated envi-
ronmental remediation costs, self-insurance and litigation claims, post-retirement beneﬁts, certain pension obligations, deferred tax liabilities and deferred
compensation liabilities. The timing of cash ﬂows associated with these obligations are based upon management’s estimates over the terms of these agree-
ments and are largely based upon historical experience.

Off-Balance Sheet Arrangements
The Company has no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on
the Company’s ﬁnancial condition, changes in ﬁnancial condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources that are material to investors.

The following table sets forth, by period due or year of expected expiration, as applicable, a summary of off-balance

sheet commercial commitments of the Company.

Standby Letters of Credit and

Performance Bonds

Guarantees
Contingent Acquisition Consideration
Total

Amount of Commitment Expiration per Period

Total
Amounts
Committed

Less Than
One Year

1–3 Years

3–5 Years

($ in millions)

$136.2
36.6
47.2
$220.0

$33.0
25.2
6.0
$64.2

$55.6
1.9
4.4
$61.9

$13.0
0.3
36.8
$50.1

More Than
5 Years

$34.6
9.2
—
$43.8

Standby letters of credit and performance bonds are
generally issued to secure the Company’s obligations under
short-term contracts to purchase raw materials and compo-

nents for manufacture and for performance under speciﬁc
manufacturing agreements.

In connection with four separate past acquisitions, the
Company has entered into agreements with the respective
sellers to pay certain amounts in the future as additional pur-
chase price. The Company could pay nothing in the aggre-
gate over the next ﬁve years pursuant to these agreements,
or a maximum of up to $47.2 million over the next
ﬁve years depending on the future performance of
the
respective businesses.

The Company has from time to time divested certain
of its businesses and assets. In connection with these dives-
titures, the Company often provides representations, warran-
ties and/or indemnities to cover various risks and unknown
liabilities, such as environmental liabilities and tax liabilities.
The Company cannot estimate the potential liability from
such representations, warranties and indemnities because
they relate to unknown conditions. However, the Company
does not believe that the liabilities relating to these represen-
tations, warranties and indemnities will have a material
adverse effect on the Company’s ﬁnancial position, results of
operations or liquidity.

Due to the Company’s downsizing of certain opera-
tions pursuant to acquisitions, restructuring plans or other-
wise, certain properties leased by the Company have been
sublet to third parties. In the event any of these third parties
vacates any of these premises, the Company would be legally
obligated under master lease arrangements. The Company
believes that the ﬁnancial risk of default by such sub-lessors
is individually and in the aggregate not material to the Com-
pany’s ﬁnancial position, results of operations or liquidity.
Except as described above, the Company has not
entered into any off-balance sheet ﬁnancing arrangements as
of December 31, 2005. Also, the Company does not have
any unconsolidated
as of
December 31, 2005.

purpose

entities

special

Legal Proceedings
Please refer to Notes 11 and 18 to the Consolidated Financial
Statements included in this Annual Report for information
regarding certain outstanding litigation matters.

In addition, the Company is, from time to time, subject
to routine litigation incidental to its business. These lawsuits
primarily involve claims for damages arising out of the use
of the Company’s products, allegations of patent and trade-
mark infringement and trade secret misappropriation, and
litigation and administrative proceedings involving employ-
ment matters and commercial disputes. The Company may
also become subject to lawsuits as a result of past or future
acquisitions. Some of these lawsuits include claims for puni-
tive as well as compensatory damages. While the Company
maintains workers compensation, property, cargo, auto,
product, general liability, and directors’ and ofﬁcers’ liability
insurance (and have acquired rights under similar policies in
connection with certain acquisitions) that it believes covers
a portion of these claims, this insurance may be insufﬁcient
or unavailable to protect the Company against potential loss
exposures. In addition, while the Company believes it is

33

entitled to indemniﬁcation from third parties for some of
these claims, these rights may also be insufﬁcient or unavail-
able to protect the Company against potential loss exposures.
The Company believes that the results of existing litigation
matters will not have a materially adverse effect on the
Company’s cash ﬂows or ﬁnancial condition, even before
taking into account any related insurance recoveries.

The Company carries signiﬁcant deductibles and self-
insured retentions for workers’ compensation, property,
automobile, product and general liability costs, and manage-
ment believes that the Company maintains adequate accruals
to cover the retained liability. Management determines the
Company’s accrual for self-insurance liability based on claims
ﬁled and an estimate of claims incurred but not yet reported.
For more information regarding how the Company deter-
mines
see
“—Critical Accounting Policies—Risk Insurance”. The
Company maintains third party insurance policies up to cer-
tain limits to cover liability costs in excess of predetermined
retained amounts.

for certain self-insurance liabilities,

reserves

The Company’s Certiﬁcate of Incorporation requires it
to indemnify to the full extent authorized or permitted by
law any person made, or threatened to be made a party to
any action or proceeding by reason of his or her service as
a director or ofﬁcer of
the Company, or by reason of
such director or ofﬁcer serving any other entity at the
the Company, subject to limited exceptions.
request of
While the Company maintains insurance for this type of
liability, any such liability could exceed the amount of the
insurance coverage.

For a discussion of risks related to environmental, health

and safety laws, please refer to “Item 1A. Risk Factors.”

Critical Accounting Policies
Management’s discussion and analysis of
the Company’s
ﬁnancial condition and results of operations are based upon
the Company’s Consolidated Financial Statements, which
have been prepared in accordance with accounting principles
generally accepted in the United States. The preparation of
these ﬁnancial statements requires management to make esti-
mates and judgments that affect the reported amounts of
assets, liabilities, revenues and expenses, and related disclo-
sure of contingent assets and liabilities. The Company bases
these estimates on historical experience and on various other
assumptions that are believed to be reasonable under the cir-
cumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual
results may differ from these estimates.

The Company believes the following critical account-
ing policies affect management’s more signiﬁcant judgments
and estimates used in the preparation of the Consolidated
Financial Statements. For a detailed discussion on the appli-
cation of these and other accounting policies, see Note 1 in
the Company’s Consolidated Financial Statements.

34

A C C O U N T S R E C E I V A B L E . The Company maintains allow-
ances for doubtful accounts for estimated losses resulting
from the inability of
the Company’s customers to make
required payments. The Company estimates its anticipated
losses from doubtful accounts based on historical collection
history as well as by speciﬁcally reserving for known doubtful
accounts. Estimating losses from doubtful accounts is inher-
ently uncertain because the amount of such losses depends
substantially on the ﬁnancial condition of the Company’s
customers, and the Company typically has limited visibility
as to the speciﬁc ﬁnancial state of its customers. If the ﬁnan-
cial condition of the Company’s customers were to deterio-
rate beyond estimates, resulting in an impairment of their
ability to make payments, the Company would be required
to write off additional accounts receivable balances, which
would adversely impact the Company’s net earnings and
ﬁnancial condition.

I N V E N T O R I E S . The Company records inventory at the lower
of cost or market. The Company estimates the market value of
its inventory based on assumptions for future demand and
related pricing. Estimating the market value of inventory is
inherently uncertain because levels of demand, technological
advances and pricing competition in many of the Company’s
markets can ﬂuctuate signiﬁcantly from period to period due
to circumstances beyond the Company’s control. As a result,
such ﬂuctuations can be difﬁcult to predict. If actual market
conditions are less favorable than those projected by manage-
ment, the Company would be required to reduce the value of
its inventory, which would adversely impact the Company’s net
earnings and ﬁnancial condition.

the reporting unit to determine if

A C Q U I R E D I N T A N G I B L E S . The Company’s business acquisi-
tions typically result in goodwill and other intangible assets,
future period amortization
which affect the amount of
expense and possible impairment expense that the Company
will incur. The Company follows Statement of Financial
Accounting Standards (“SFAS”) No. 142, the accounting
standard for goodwill, which requires that the Company, on
an annual basis, calculate the fair value of the reporting units
that contain the goodwill and compare that to the carrying
value of
impairment
exists. Impairment testing must take place more often if cir-
cumstances or events indicate a change in the impairment
status. In calculating the fair value of the reporting units,
management relies on a number of factors including oper-
ating results, business plans, economic projections, antici-
pated future cash ﬂows, and transactions and market place
data. There are inherent uncertainties related to these factors
and management’s judgment in applying them to the analysis
of goodwill impairment. If actual fair value is less than the
Company’s estimates, goodwill and other intangible assets
may be overstated on the balance sheet and a charge would
need to be taken against net earnings.

The Company’s annual goodwill impairment analysis,
which was performed during the fourth quarter of ﬁscal
2005, did not result in an impairment charge. The excess of

fair value over carrying value for each of the Company’s
reporting units as of October 1, 2005, the annual testing
date, ranged from approximately $130 million to approxi-
mately $2.8 billion. In order to evaluate the sensitivity of the
fair value calculations on the goodwill impairment test, the
Company applied a hypothetical 10% decrease to the fair val-
ues of each reporting unit. This hypothetical 10% decrease
would result in excess fair value over carrying value ranging
from approximately $100 million to approximately $2.4 bil-
lion for each of the Company’s reporting units.

L O N G - L I V E D A S S E T S . The Company reviews its long-lived
assets for impairment whenever events or changes in circum-
stances indicate the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of the
assets to the future net cash ﬂows expected to be generated
by the assets. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by
which the carrying amount of the assets exceeds their fair
value. Judgments made by the Company relate to the
expected useful lives of long-lived assets and its ability to real-
ize any undiscounted cash ﬂows in excess of the carrying
amounts of such assets and are affected by factors such as the
ongoing maintenance and improvements of
the assets,
changes in the expected use of the assets, changes in eco-
nomic conditions, changes in operating performance and
anticipated future cash ﬂows. Since judgment is involved in
determining the fair value of long-lived assets, there is risk
that the carrying value of the Company’s long-lived assets
may require adjustment in future periods. If actual fair value
is less than the Company’s estimates, long-lived assets may be
overstated on the balance sheet and a charge would need to
be taken against net earnings.

P U R C H A S E A C C O U N T I N G . In connection with its acquisi-
tions, the Company formulates a plan related to the future
integration of
the acquired entity. In accordance with
Emerging Issues Task Force Issue No. 95-3, “Recognition of
Liabilities in Connection with a Purchase Business Combi-
nation”, the Company accrues estimates for certain of the
integration costs anticipated at the date of acquisition,
including personnel reductions and facility closures or
restructurings. Adjustments to these estimates are made up
to 12 months from the acquisition date as plans are ﬁnalized.
The Company establishes these accruals based on infor-
mation obtained during the due diligence process, the
Company’s experience in acquiring other companies, and
information obtained after the closing about the acquired
company’s business, assets and liabilities. The accruals estab-
lished by the Company are inherently uncertain because they
are based on limited information on the fair value of the
assets and liabilities of the acquired business as well as the
uncertainty of the cost to execute the integration plans for
the business. If the accruals established by the Company are
insufﬁcient to account for all of the activities required to
the Company would be
integrate the acquired entity,

required to incur an expense, which would adversely affect
the Company’s results of operations. To the extent these
accruals are not utilized for the intended purpose, the excess
is recorded as a reduction of the purchase price, typically by
reducing recorded goodwill balances.

carries

I N S U R A N C E . The Company

signiﬁcant
R I S K
deductibles and self-insured retentions with respect to vari-
ous business risks. The business risk areas involving the most
signiﬁcant accounting estimates are workers’ compensation
and product liability. For domestic workers’ compensation
and product liability risk, the Company generally purchases
outside insurance coverage only for severe losses (“stop loss”
insurance) and must establish and maintain reserves with
respect to the retained liability. These reserves are comprised
of
speciﬁc reserves for individual claims and additional
amounts expected for development of these claims as well as
for incurred but not yet reported claims. The speciﬁc reserves
for individual known claims are quantiﬁed by third party
administrator specialists for workers’ compensation and by
outside risk insurance experts for product liability. In addi-
tion, outside risk experts recommend reserves for incurred
but not yet reported claims by evaluating the Company’s spe-
ciﬁc loss history, actual claims reported, and industry trends
among statistical and other factors. The Company believes
the liability recorded for such risk insurance reserves as of
December 31, 2005 is adequate, but due to judgments inher-
ent in the reserve process it is possible the ultimate costs will
differ from this estimate.

E N V I R O N M E N T A L . The Company has made a provision for
environmental remediation and environmental-related per-
sonal injury claims with respect to sites owned or formerly
owned by the Company and its subsidiaries. The Company
generally makes an assessment of the costs involved for its
remediation efforts based on environmental studies as well as
its prior experience with similar sites. If the Company deter-
mines that it has potential remediation liability for properties
currently owned or previously sold, it accrues the total esti-
mated costs, including investigation and remediation costs,
associated with the site. The Company also estimates its
exposure for environmental-related personal injury claims
and accrues for this estimated liability as such claims become
known. While the Company actively pursues appropriate
insurance recoveries as well as appropriate recoveries from
other potentially responsible parties, it does not recognize
any insurance recoveries for environmental liability claims
until realized. The ultimate cost of site cleanup is difﬁcult to
predict given the uncertainties of the Company’s involve-

35

ment in certain sites, uncertainties regarding the extent of
the required cleanup, the availability of alternative cleanup
methods, variations in the interpretation of applicable laws
and regulations, the possibility of insurance recoveries with
respect to certain sites and the fact that imposition of joint
and several liability with right of contribution is possible
under the Comprehensive Environmental Response, Com-
pensation and Liability Act of 1980 and other environmental
laws and regulations. As such, there can be no assurance that
the Company’s estimates of environmental liabilities will not
change. Refer to Note 11 of the Notes to the Consolidated
Financial Statements for additional information.

C O N T I N G E N T L I A B I L I T I E S . The Company is, from time to
time, subject to routine litigation incidental to its business.
These lawsuits primarily involve claims for damages arising
out of the use of the Company’s products, allegations of
patent and trademark infringement and trade secret misap-
propriation, and litigation and administrative proceedings
involving employment matters and commercial disputes.
The Company may also become subject to lawsuits as a result
of past or future acquisitions. Some of these lawsuits include
claims for punitive as well as compensatory damages. The
Company recognizes a liability for any contingency that is
probable of occurrence and reasonably estimable. The Com-
pany periodically assesses the likelihood of adverse judg-
ments or outcomes for these matters, as well as potential
amounts or ranges of probable losses, and if appropriate rec-
ognizes a liability for these contingencies with the assistance
of
legal counsel and, if applicable, other experts. These
assessments require judgments concerning matters such as
the anticipated outcome of negotiations, the number and
cost of pending and future claims, and the impact of eviden-
tiary requirements. Because most contingencies are resolved
over long periods of time, liabilities may change in the future
due to new developments or changes in the Company’s
settlement strategy. For a discussion of these contingencies,
including management’s judgment applied in the recognition
and measurement of speciﬁc liabilities, refer to Note 11 of
the Notes to Consolidated Financial Statements.

I T E M 7 A . Q U A N T I TAT I V E A N D

Q U A L I TAT I V E D I S C L O S U R E S
A B O U T M A R K E T R I S K
The information required by this item is included under
“Item 7. Management’s Discussion and Analysis of Financial
Condition and Results of Operations.”

36

I T E M 8 . F I N A N C I A L S TAT E M E N T S A N D S U P P L E M E N TA R Y D ATA

Report of Management on Danaher Corporation’s Internal Control Over Financial Reporting

The management of the Company is responsible for establishing and maintaining adequate internal control over ﬁnancial
reporting. Internal control over ﬁnancial reporting is deﬁned in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities
Exchange Act of 1934. Because of its inherent limitations, internal control over ﬁnancial reporting may not prevent or detect
misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

The Company’s management assessed the effectiveness of the Company’s internal control over ﬁnancial reporting as of
December 31, 2005. In making this assessment, the Company’s management used the criteria set forth by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO) in “Internal Control-Integrated Framework”. Based
on this assessment, management concluded that, as of December 31, 2005, the Company’s internal control over ﬁnancial
reporting is effective based on those criteria.

The Company’s independent auditors have issued an audit report on management’s assessment of the effectiveness of the Com-
pany’s internal control over ﬁnancial reporting. This report dated February 22, 2006 appears on page 37 of this Form 10-K.

37

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Danaher Corporation:

We have audited management’s assessment, included in the accompanying Report of Management on Danaher Corporation’s
Internal Control Over Financial Reporting, that Danaher Corporation maintained effective internal control over ﬁnancial
reporting as of December 31, 2005, based on criteria established in Internal Control—Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Danaher Corporation’s man-
agement is responsible for maintaining effective internal control over ﬁnancial reporting and for its assessment of the effec-
tiveness of internal control over ﬁnancial reporting. Our responsibility is to express an opinion on management’s assessment
and an opinion on the effectiveness of the Company’s internal control over ﬁnancial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective
internal control over ﬁnancial reporting was maintained in all material respects. Our audit included obtaining an understanding
of internal control over ﬁnancial reporting, evaluating management’s assessment, testing and evaluating the design and oper-
ating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances.
We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over ﬁnancial reporting is a process designed to provide reasonable assurance regarding the reli-
ability of ﬁnancial reporting and the preparation of ﬁnancial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over ﬁnancial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reﬂect the transactions and dis-
positions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of ﬁnancial statements in accordance with generally accepted accounting principles, and that receipts and expen-
ditures of the company are being made only in accordance with authorizations of management and directors of the company;
and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition
of the company’s assets that could have a material effect on the ﬁnancial statements.

Because of its inherent limitations, internal control over ﬁnancial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that Danaher Corporation maintained effective internal control over ﬁnancial
reporting as of December 31, 2005, is fairly stated, in all material respects, based on the COSO criteria. Also, in our opinion,
Danaher Corporation maintained, in all material respects, effective internal control over ﬁnancial reporting as of December 31,
2005, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),
the consolidated balance sheets of Danaher Corporation as of December 31, 2005 and 2004, and the related consolidated
statements of earnings, stockholders’ equity and cash ﬂows for each of the three years in the period ended December 31,
2005 of Danaher Corporation and our report dated February 22, 2006, except for Note 18, as to which the date is March 14,
2006, expressed an unqualiﬁed opinion thereon.

Ernst & Young LLP

Baltimore, Maryland
February 22, 2006

38

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Danaher Corporation:

We have audited the accompanying consolidated balance sheets of Danaher Corporation and subsidiaries as of December 31,
2005 and 2004 and the related consolidated statements of earnings, stockholders’ equity and cash ﬂows for each of the three
years in the period ended December 31, 2005. These ﬁnancial statements are the responsibility of the Company’s management.
Our responsibility is to express an opinion on these ﬁnancial statements based on our audits.

We conducted our audits in accordance with auditing the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether
the ﬁnancial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the consolidated ﬁnancial statements. An audit also includes assessing the accounting principles
used and signiﬁcant estimates made by management, as well as evaluating the overall ﬁnancial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.

In our opinion, the ﬁnancial statements referred to above present fairly, in all material respects, the consolidated ﬁnancial posi-
tion of Danaher Corporation and subsidiaries at December 31, 2005 and 2004 and the consolidated results of its operations
and its cash ﬂows for each of the three years in the period ended December 31, 2005, in conformity with U.S. generally
accepted accounting principles.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),
the effectiveness of Danaher Corporation’s internal control over ﬁnancial reporting as of December 31, 2005, based on the
criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission and our report dated February 22, 2006, expressed and unqualiﬁed opinion thereon.

Ernst & Young LLP

Baltimore, Maryland
February 22, 2006, except for Note 18,
as to which the date is March 14, 2006

Danaher Corporation and Subsidiaries Consolidated Statements of Earnings

Year Ended December 31 (in thousands)
Sales
Cost of sales
Selling, general and administrative expenses
Gain on pension plan curtailment
Other expense (income), net
Total operating expenses
Operating proﬁt
Interest expense
Interest income
Earnings before income taxes
Income taxes
Net earnings
Earnings Per Share:

Basic net earnings per share
Diluted net earnings per share

Average common stock and common equivalent shares outstanding:

Basic
Diluted

See the accompanying Notes to the Consolidated Financial Statements.

39

2003
$5,293,876
3,154,809
1,316,357
(22,500)
(785)
4,447,881
845,995
(59,049)
10,089
797,035
260,201
$ 536,834

2005
$7,984,704
4,539,689
2,175,751
—
4,596
6,720,036
1,264,668
(44,933)
14,707
1,234,442
336,642
$ 897,800

2004
$6,889,301
3,996,636
1,795,673
—
(8,141)
5,784,168
1,105,133
(54,984)
7,568
1,057,717
311,717
$ 746,000

$
$

2.91
2.76

$
$

2.41
2.30

$
$

1.75
1.69

308,905
327,983

308,964
327,701

306,792
323,140

40

Danaher Corporation and Subsidiaries Consolidated Balance Sheets

Year Ended December 31 (in thousands)
ASSETS
Current assets:
Cash and equivalents
Trade accounts receivable, less allowance for doubtful accounts of $91,115

2005

2004

$ 315,551

$ 609,115

and $78,423

Inventories
Prepaid expenses and other current assets

Total current assets

Property, plant and equipment, net
Other assets
Goodwill
Other intangible assets, net

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Notes payable and current portion of long-term debt
Trade accounts payable
Accrued expenses

Total current liabilities

Other liabilities
Long-term debt
Stockholders’ equity:
Common stock, one cent par value; 1,000,000 shares authorized; 338,547

and 336,946 issued; 305,571 and 308,920 outstanding

Additional paid-in capital
Accumulated other comprehensive income (loss)
Retained earnings

Total stockholders’ equity

See the accompanying Notes to the Consolidated Financial Statements.

1,407,858
825,263
396,347
2,945,019
748,172
160,780
4,474,991
834,147
$9,163,109

$ 183,951
782,854
1,301,781
2,268,586
956,402
857,771

3,385
861,875
(109,279)
4,324,369
5,080,350
$9,163,109

1,231,065
703,996
374,514
2,918,690
752,966
91,705
3,970,269
760,263
$8,493,893

$ 424,763
612,066
1,165,457
2,202,286
746,390
925,535

3,369
1,052,154
116,037
3,448,122
4,619,682
$8,493,893

Danaher Corporation and Subsidiaries Consolidated Statements of Cash Flows

41

Year Ended December 31 (in thousands)
Cash ﬂows from operating activities:
Net earnings from operations
Depreciation and amortization
Change in trade accounts receivable, net
Change in inventories
Change in accounts payable
Change in accrued expenses and other liabilities
Change in prepaid expenses and other assets

Total operating cash ﬂows

Cash ﬂows from investing activities:
Payments for additions to property, plant and equipment
Proceeds from disposals of property, plant and equipment
Cash paid for acquisitions
Proceeds from divestitures

Net cash used in investing activities

Cash ﬂows from ﬁnancing activities:
Proceeds from issuance of common stock
Dividends paid
Proceeds from debt borrowings
Purchase of treasury stock
Debt repayments

Net cash used in ﬁnancing activities
Effect of exchange rate changes on cash
Net change in cash and equivalents
Beginning balance of cash and equivalents
Ending balance of cash and equivalents

See the accompanying Notes to the Consolidated Financial Statements.

2005

2004

2003

$ 897,800
176,972
(66,611)
(22,478)
138,144
118,605
(38,631)
1,203,801

(121,206)
18,783
(885,083)
22,100
(965,406)

59,931
(21,553)
355,745
(257,696)
(647,987)
(511,560)
(20,399)
(293,564)
609,115
$ 315,551

$

746,000
156,128
(110,007)
65,528
65,315
135,616
(25,364)
1,033,216

(115,906)
30,894
(1,591,719)
43,100
(1,633,631)

45,957
(17,731)
130,000
—
(196,281)
(38,055)
17,429
(621,041)
1,230,156
609,115

$

$ 536,834
133,436
1,505
21,061
58,209
72,097
38,402
861,544

(80,343)
12,926
(312,283)
11,648
(368,052)

50,497
(15,326)
5,262
—
(150,771)
(110,338)
36,539
419,693
810,463
$1,230,156

42

Danaher Corporation and Subsidiaries Consolidated Statements of Stockholders’ Equity
(in thousands)

Balance, December 31, 2002
Net earnings for the year
Dividends declared
Amendment of deferred

compensation plan, common stock
issued for options exercised and
restricted stock grants

Increase from translation of foreign

ﬁnancial statements

Minimum pension liability (net of tax

beneﬁt of $19,985)

Balance, December 31, 2003
Net earnings for the year
Dividends declared
Common stock issued for options

exercised and restricted stock grants

Stock dividend
Increase from translation of foreign

ﬁnancial statements

Minimum pension liability (net of tax

expense of $3,710)

Balance, December 31, 2004
Net earnings for the year
Dividends declared
Common stock issued for options

exercised and restricted stock grants
Treasury stock purchase (5 million shares)
Decrease from translation of foreign

ﬁnancial statements

Minimum pension liability (net of tax

Common Stock

Shares
166,545
—
—

Amount
$1,665
—
—

Additional
Paid-in
Capital
$ 915,562
—
—

Retained
Earnings
$2,198,345
536,834
(15,326)

Accumulated
Other
Comprehensive
Income (Loss)
$(105,973)
—
—

Comprehensive
Income

$ 536,834
—

1,149

—

—
167,694
—
—

1,039
168,213

12

—

—
1,677
—
—

10
1,682

84,224

—

—
999,786
—
—

54,050
(1,682)

—

—

—

—
336,946
—
—

1,601
—

—

—
3,369
—
—

16
—

—

—
1,052,154
—
—

67,417
(257,696)

—

—

—

—

—

68,481

68,481

—
2,719,853
746,000
(17,731)

—
—

—

—
3,448,122
897,800
(21,553)

—
—

—

(37,115)
(74,607)
—
—

—
—

(37,115)
$ 568,200
$ 746,000
—

—
—

183,754

183,754

6,890
116,037
—
—

—
—

6,890
$ 936,644
$ 897,800
—

—
—

(216,447)

(216,447)

beneﬁt of $3,579)

Balance, December 31, 2005

—
338,547

—
$3,385

—
$ 861,875

—
$4,324,369

(8,869)
$(109,279)

(8,869)
$ 672,484

See the accompanying Notes to the Consolidated Financial Statements.

(1) Business and Summary of Signiﬁcant
Accounting Policies:
B U S I N E S S . Danaher Corporation designs, manufactures
and markets industrial and consumer products with strong
brand names, proprietary technology and major market posi-
tions in three business segments: Professional Instrumenta-
tion, Industrial Technologies and Tools & Components.
Businesses in the Professional Instrumentation segment offer
professional and technical customers various products and
services that are used in connection with the performance of
their work. As of December 31, 2005, Professional Instru-
mentation was Danaher’s largest segment and encompassed
three strategic businesses—environmental, electronic test,
and medical technologies. These businesses produce and sell
compact, professional electronic test tools and calibration
equipment; water quality instrumentation and consumables
and ultraviolet disinfection systems;
retail/commercial
petroleum products and services, including underground
storage tank leak detection and vapor recovery systems; criti-
cal care diagnostic instruments, high-precision optical sys-
tems for the analysis of microstructures and a wide range of
products used by dental professionals. Businesses in the
Industrial Technologies segment manufacture products and
sub-systems that are typically incorporated by customers and
systems integrators into production and packaging lines and
by original equipment manufacturers (OEMs) into various
end-products and systems. Many of the businesses also pro-
vide services to support their products, including helping
customers integrate and install the products and helping
ensure product uptime. The Industrial Technologies seg-
ment encompassed two strategic businesses, motion and
product identiﬁcation, and three focused niche businesses,
aerospace and defense, sensors & controls, and power quality.
These businesses produce and sell product identiﬁcation
equipment and consumables; motion, position, speed, tem-
perature, and 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
is one of the largest domestic producers and distributors of
general purpose and specialty mechanics’ hand tools. Other
products manufactured by the businesses in this segment
include toolboxes and storage devices; diesel engine retard-
ers; wheel service equipment; and drill chucks.

P R I N C I P L E S . The

consolidated ﬁnancial
A C C O U N T I N G
statements include the accounts of the Company and its
subsidiaries. All signiﬁcant intercompany balances and trans-
actions have been eliminated upon consolidation.

U S E O F E S T I M A T E S . The preparation of ﬁnancial statements
in conformity with accounting principles generally accepted in
the United States requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities
at the date of the ﬁnancial statements as well as the reported

43

amounts of revenue and expenses during the reporting period.
Actual results could differ from those estimates.

I N V E N T O R Y VA L U A T I O N . Inventories include the costs of
material, labor and overhead. Depending on the business,
domestic inventories are stated at either the lower of cost or
market using the last-in, ﬁrst-out method (LIFO) or
the lower of cost or market using the ﬁrst-in, ﬁrst-out
(FIFO) method. Inventories held outside the United States
are primarily stated at the lower of cost or market using the
FIFO method.

P R O P E R T Y, P L A N T A N D E Q U I P M E N T . Property, plant and
equipment are carried at cost. The provision for depreciation
has been computed principally by the straight-line method
based on the estimated useful lives (3 to 35 years) of the
depreciable assets.

O T H E R A S S E T S . Other assets include principally noncurrent
trade receivables and capitalized costs associated with obtain-
ing ﬁnancings which are amortized over the term of the
related debt.

F A I R VA L U E O F F I N A N C I A L I N S T R U M E N T S . For cash and
equivalents, the carrying amount is a reasonable estimate of
fair value. For long-term debt, where quoted market prices
are not available, rates available for debt with similar terms
and remaining maturities are used to estimate the fair value
of existing debt.

G O O D W I L L A N D O T H E R I N T A N G I B L E A S S E T S . Goodwill and
other intangible assets result from the Company’s acquisition
of existing businesses. In accordance with Statement of
Financial Accounting Standard (SFAS) No. 142, amortiza-
recorded goodwill balances ceased effective
tion of
January 1, 2002. However, amortization of certain identiﬁ-
able intangible assets continues over the estimated useful
lives of the identiﬁed asset. Amortization expense for all
other intangible assets was $36.0 million, $26.6 million,
and $11.1 million, for the years ended December 31, 2005,
2004, and 2003, respectively. See Notes 2 and 5 for additional
information.

S H I P P I N G A N D H A N D L I N G . Shipping and handling costs are
included as a component of cost of sales. Shipping and han-
dling costs billed to customers are included in sales.

R E V E N U E R E C O G N I T I O N . As described above, the Company
derives revenues primarily from the sale of industrial and
consumer products and services. For revenue related to a
product or service to qualify for recognition, there must be
persuasive evidence of a sale, delivery must have occurred or
the services must have been rendered, the price to the cus-
tomer must be ﬁxed and determinable and collectibility of
the balance must be reasonably assured. The Company’s stan-
dard terms of sale are FOB Shipping Point and, as such, the
Company principally records revenue upon shipment. If any

44

signiﬁcant obligations to the customer with respect to such
sale remain to be fulﬁlled following shipment, typically
involving obligations relating to installation and acceptance
by the buyer, revenue recognition is deferred until such
obligations have been fulﬁlled. Product returns consist of
estimated returns for products sold and are recorded as a
reduction in reported revenues at the time of sale as required
by SFAS No. 48. Customer allowances and rebates, consist-
ing primarily of volume discounts and other short-term
incentive programs, are recorded as a reduction in reported
revenues at the time of sale because these allowances reﬂect
a reduction in the purchase price for the products purchased
in accordance with EITF 01-9. Product returns, customer
allowances and rebates are estimated based on historical
experience and known trends. Revenue related to mainte-
nance agreements is recognized as revenue over the term of
the agreement as required by FASB Technical Bulletin 90-1.

R E S E A R C H A N D D E V E L O P M E N T . The Company conducts
research and development activities for the purpose of devel-
oping new products and services and improving existing
products and services. Research and development costs are
expensed as incurred and totaled $379 million, $294 million,
and $207 million in the years ended December 31, 2005,
2004, and 2003, respectively.

F O R E I G N C U R R E N C Y TR A N S L A T I O N . Exchange adjustments
resulting from foreign currency transactions are recognized
in net earnings, whereas adjustments resulting from the trans-
lation of ﬁnancial statements are reﬂected as a component of
accumulated other comprehensive income within stock-
holders’ equity. Net foreign currency transaction gains or
losses are not material in any of the years presented.

C A S H A N D E Q U I V A L E N T S . The Company considers all
highly liquid investments with a maturity of three months
or less at the date of purchase to be cash equivalents.

I N C O M E TA X E S . The Company accounts for income taxes in
accordance with SFAS No. 109, “Accounting for Income
Taxes.”

A C C U M U L A T E D O T H E R C O M P R E H E N S I V E I N C O M E ( L O S S ) .
Accumulated other comprehensive income (loss) consists of
cumulative foreign translation gain adjustments of $6.7 mil-
lion, $223.2 million, and $39.4 million, as of December 31,
2005, 2004, and 2003,
respectively and a cumulative
minimum pension liability loss adjustment of $116.0 million
(net of $59.5 million tax beneﬁt), $107.2 million (net of
$55.9 million tax beneﬁt) and $114.1 million (net of
$59.6 million tax beneﬁt), as of December 31, 2005, 2004
and 2003, respectively. See Note 8.

A C C O U N T I N G F O R S T O C K O P T I O N S . As described in Note
14, the Company accounts for the issuance of stock options
under the intrinsic value method under Accounting Prin-
ciples Board (APB) Statement No. 25, “Accounting for
Stock Issued to Employees” and the disclosure requirements
of SFAS Nos. 123 and 148, “Accounting for Stock-Based
Compensation.” The Company has adopted the fair
value method of accounting for stock options beginning
in the ﬁrst quarter of 2006 (see Note 17 for additional
information).

Nonqualiﬁed options have been issued at grant prices
equal to the fair market value of the underlying security as
of the date of grant during all the periods presented. Under
APB No. 25, the Company does not recognize compensa-
tion costs for options with no intrinsic value at the grant date.
The weighted-average grant date fair value of options issued
was $20 per share in 2005, $16 per share in 2004, and $13 per
share in 2003. The weighted average value of options
granted in 2005 was calculated using the Black-Scholes
option pricing model and assuming a 4.3% risk-free interest
rate, a 7-year life for the option, a 23% expected volatility and
dividends at the current annual rate.

The following table illustrates the pro forma effect of net
earnings and earnings per share if the fair value based method
had been applied to all outstanding and unvested awards in each
year ($ in thousands, except per share amounts):

Net earnings—as reported
Deduct: Stock-based employee compensation expense

determined under fair value based method for all awards, net
of related tax beneﬁts
Pro forma net earnings
Earnings per share:

Basic—as reported
Basic—pro forma
Diluted—as reported
Diluted—pro forma

N E W A C C O U N T I N G P R O N O U N C E M E N T S—See Note 17.

2005
$897,800

2004
$746,000

2003
$536,834

(29,501)
$868,299

$
$
$
$

2.91
2.81
2.76
2.67

(28,487)
$717,513

$
$
$
$

2.41
2.32
2.30
2.22

(26,755)
$510,079

$
$
$
$

1.75
1.66
1.69
1.60

(2) Acquisitions and Divestitures:
The Company has completed numerous acquisitions of
businesses during the years ended December 31, 2005, 2004
and 2003. These acquisitions have either been completed
because of their strategic ﬁt with an existing Company busi-
ness or because they are of such a nature and size as to estab-
lish a new strategic line of business for growth for the
Company. All of the acquisitions during this time period
have been accounted for as purchases and have resulted in the
recognition of goodwill in the Company’s ﬁnancial state-
ments. This goodwill arises because the purchase prices for
these businesses reﬂect a number of factors including the
future earnings and cash ﬂow potential of these businesses;
the multiple to earnings, cash ﬂow and other factors at which
similar businesses have been purchased by other acquirers;
the competitive nature of the process by which the Company
acquired the business; and because of the complementary
strategic ﬁt and resulting synergies these businesses bring to
existing operations.

The Company makes an initial allocation of the pur-
chase price at the date of acquisition based upon its under-
standing of the fair market value of the acquired assets and
liabilities. The Company obtains this information during
due diligence and through other sources. In the months after
closing, as the Company obtains additional
information
about these assets and liabilities and learns more about the
newly acquired business, it is able to reﬁne the estimates of
fair market value and more accurately allocate the purchase
price. Examples of factors and information that the Com-
pany uses to reﬁne the allocations include: tangible and
intangible asset appraisals; cost data related to redundant
facilities; employee/personnel data related to redundant
functions; product line integration and rationalization infor-
mation; management capabilities; and information systems
compatibilities. The only items considered for subsequent
adjustment are items identiﬁed as of the acquisition date.
The Company’s acquisitions in 2005, 2004 and 2003 did
not have any signiﬁcant pre-acquisition contingencies (as
contemplated by SFAS No. 38, “Accounting for Preacqui-
sition Contingencies of Purchased Enterprises”) which
were expected to have a signiﬁcant effect on the purchase
price allocation.

The Company also periodically disposes of existing
operations that are not deemed to strategically ﬁt with its
ongoing operations or are not achieving the desired
return on investment. The following brieﬂy describes the
Company’s acquisition and divestiture activity for the above-
noted periods.

In January 2005, the Company acquired all the out-
standing shares of Linx Printing Technologies PLC, a pub-
licly held United Kingdom company, for $171 million in
cash, including transaction costs and net of cash acquired of
$2 million. Linx is a manufacturer of continuous ink-jet and
laser marking equipment and complements the Company’s
product identiﬁcation businesses and had annual revenue of
approximately $93 million in 2004. This acquisition resulted
in the recognition of goodwill of $96 million, primarily

45

related to the future earnings and cash ﬂow potential of Linx
and its synergies with the Company’s existing operations.
Linx has been included in the Company’s Consolidated
Statement of Earnings since January 3, 2005.

In August 2005, the Company acquired all of the out-
standing shares of German-based Leica Microsystems AG,
for an aggregate purchase price of E210 million in cash,
including transaction costs and net of cash acquired of
E12 million and the repayment at closing of E125 million
outstanding Leica debt ($429 million in aggregate). The
Company funded the acquisition and the repayment of debt
using available cash and through borrowings under uncom-
mitted lines of credit totaling $222 million, a portion of
which was repaid prior to December 31, 2005. Leica Micro-
systems is a leading global provider of life sciences instru-
mentation. Leica complements
the Company’s medical
technologies business and had annual revenues of approxi-
mately $540 million in 2004 (excluding the approximately
$120 million of revenue attributable to the semiconductor
business that has been divested, as described below). The
Leica acquisition resulted in the recognition of a preliminary
estimate of goodwill of $332 million primarily related to
Leica’s future earnings and cash ﬂow potential and world-
wide leadership position of Leica in its served markets. Leica
has been included in the Company’s Consolidated Statement
of Earnings since August 31, 2005.

In September 2005, the Company completed the sale
of Leica Microsystems semiconductor equipment business
which was held for sale at the time of the acquisition. This
business had historically operated at a loss. Proceeds from the
sale have been reﬂected as a reduction in the purchase price
for Leica Microsystems in the accompanying Consolidated
Statement of Cash Flows. Operating losses for this business
for the period from acquisition to disposition totaled
approximately $1.3 million and are reﬂected in “Other
expense (income), net” in the accompanying Consolidated
Statement of Earnings.

In addition to Linx and Leica Microsystems, the Com-
pany acquired 11 smaller companies and product lines during
2005 for total consideration of $285 million in cash, includ-
ing transaction costs and net of cash acquired. In general,
each company is a manufacturer and assembler of environ-
in markets such as
mental or instrumentation products,
medical technologies, electronic test, motion, environmen-
tal, product identiﬁcation, sensors and controls and aerospace
and defense. These companies were all acquired to comple-
ment existing units of either the Professional Instrumenta-
tion or Industrial Technologies segments. The Company
recorded an aggregate of $222 million of goodwill related
to these acquired businesses. The aggregate annual sales of
these acquired businesses as of the time of their respective
acquisitions was approximately $260 million and each of
these 11 companies individually had less than $125 million
in annual revenues at the time of their respective acquisition
and were purchased for a purchase price of
less than
$125 million.

46

In June 2005, the Company divested one insigniﬁcant
business that was reported as a continuing operation within
the Industrial Technologies segment for aggregate proceeds
of $12.1 million in cash net of related transaction expenses.
The Company recorded a pre-tax gain of $4.6 million on the
divestiture which is reported as a component of “Other
expense (income), net” in the accompanying Consolidated
Statement of Earnings. Sales related to this divested business
included in the Company’s results for 2005 were $7.5 mil-
lion. Net cash proceeds received on the sale are included in
“Proceeds from Divestitures” in the accompanying Consoli-
dated Statement of Cash Flows.

In June 2005, the Company collected $14.6 million in
full payment of a retained interest that was in the form of a
$10 million note receivable and an equity interest arising
from the sale of a prior business. The Company had recorded
this note net of applicable allowances and had not previously
recognized interest income on the note due to uncertainties
associated with collection of the principal balance of the
note and the related interest. As a result of the collection,
during the second ﬁscal quarter of 2005 the Company
recorded $4.6 million of
interest income related to the
cumulative interest received on this note. In addition, during
the second ﬁscal quarter of 2005 the Company recorded a
pre-tax gain of $5.3 million related to collection of the note
balance which has been recorded as a component of “Other
expense (income), net” in the accompanying Consolidated
Statement of Earnings. Cash proceeds from the collection of
the principal balance of $10 million are included in “Pro-
ceeds from Divestitures” in the accompanying Consolidated
Statement of Cash Flows.

In January 2004, the Company acquired all of the share
capital in Radiometer S/A for $684 million in cash (net of
$77 million in acquired cash), including transaction costs. In
addition, the Company assumed $66 million of debt in con-
nection with the acquisition. Radiometer designs, manufac-
tures, and markets a variety of blood gas diagnostic instru-
mentation, primarily in hospital applications. Radiometer
also provides consumables and services for its instruments.
This acquisition resulted in the recognition of goodwill of
$445 million primarily related to the anticipated future earn-
ings and cash ﬂow potential and worldwide leadership
position of Radiometer in critical care diagnostic instrumen-
tation. Radiometer is a worldwide leader in its served
segments, and had total annual
sales of approximately
$300 million at the time of acquisition. The results of
Radiometer have been included in the Company’s Consoli-
dated Statements of Earnings since January 22, 2004.

In May 2004, the Company acquired all of the out-
standing stock of Kaltenbach & Voigt GmbH (“KaVo”) for
E350 million ($412 million) in cash, including transaction
costs and net of $45 million in acquired cash. KaVo, head-
quartered in Biberach, Germany, with 2003 revenues of
approximately $450 million, is a worldwide leader in the
design, manufacture and sale of dental equipment, including
hand pieces, treatment units and diagnostic systems and labo-
ratory equipment. This acquisition resulted in the recogni-

tion of goodwill of $82 million primarily related to the
anticipated future earnings of KaVo and its leadership posi-
tion in dental instrumentation. The results of KaVo have
been included in the Company’s Consolidated Statements of
Earnings since May 28, 2004.

In November 2004, the Company acquired all of the
outstanding shares of Trojan Technologies, Inc. for aggregate
consideration of $185 million in cash, including transaction
costs and net of $23 million in acquired cash. In addition,
the Company assumed $4 million of debt in connection with
the acquisition. This acquisition resulted in the recognition
of goodwill of $117 million primarily related to the antici-
pated future earnings. The acquisition is being included in
the Company’s Professional Instrumentation Segment in the
environmental business. Trojan is a leader in the ultraviolet
disinfection market for drinking and wastewater applications
and had annual revenues of approximately $115 million at
the time of acquisition. The results of Trojan have been
included in the Company’s Consolidated Statements of
Earnings since November 8, 2004.

In addition to Radiometer, KaVo, and Trojan, the
Company acquired ten smaller companies and product lines
during 2004 for total consideration of $311 million in cash,
including transaction costs and net of cash acquired. In gen-
eral, each company is a manufacturer and assembler of
instrumentation products, in markets such as medical tech-
nology, electronic test, motion, environmental, product
identiﬁcation,
sensors and controls and aerospace and
defense. These companies were all acquired to complement
existing units of the Professional Instrumentation and Indus-
trial Technologies segments. The Company recorded an
aggregate of $182 million of goodwill related to these
acquired businesses. The aggregate annual sales of
these
acquired businesses is approximately $280 million and each
of these ten companies individually has less than $125 mil-
lion in annual revenues and was purchased for a purchase
price of less than $125 million. In addition, the Company
sold a business that was part of the Tools & Components seg-
ment during 2004 for approximately $43 million in cash and
the proceeds have been included in proceeds from divesti-
tures in the accompanying Consolidated Statements of Cash
Flows. A gain of approximately $1.5 million ($1.1 million
net of tax) was recognized and has been included in “Other
expense (income), net” in the accompanying Consolidated
Statements of Earnings.

The Company completed twelve business acquisitions
during 2003 for total consideration of $312 million in cash
including transaction costs and net of cash acquired. The
Company also assumed debt with an estimated fair market
value of $45 million in connection with these acquisitions.
In connection with one of the 2003 acquisitions, the Com-
pany entered into an agreement to pay an additional maxi-
mum contingent consideration of up to $36.8 million in
November 2008 based on future performance of
the
acquired business through November 2008. In general, each
company is a manufacturer and assembler of environmental
or instrumentation products, in markets such as product

47

identiﬁcation, environmental and aerospace and defense.
These companies were all acquired to complement existing
units of either the Professional Instrumentation or Industrial
Technologies segments. The aggregated annual revenue of
the acquired businesses at the time of their respective acqui-
sition were approximately $360 million and each of these
twelve companies individually had less than $125 million in
annual revenues and was purchased for a purchase price of
less than $125 million. In addition, the Company sold one
facility in connection with a prior acquisition for $11.6 mil-

lion in net proceeds. No gain or loss was recognized on the
sale and the proceeds have been included in proceeds from
the divestiture in the accompanying Consolidated State-
ments of Cash Flows.

The following table summarizes the estimated fair val-
ues of the assets acquired and liabilities assumed at the date
of acquisition for all acquisitions consummated during 2005,
2004, and 2003 and the individually signiﬁcant acquisitions
discussed above (in thousands):

Overall
Accounts Receivable
Inventory
Property, Plant and Equipment
Goodwill
Other Intangible Assets, Primarily Customer Relationships,

Trade Names and Patents

Accounts Payable
Other Assets and Liabilities, net
Assumed Debt
Net Cash Consideration

Signiﬁcant 2005 Acquisitions
Accounts Receivable
Inventory
Property, Plant & Equipment
Goodwill
Other Intangible Assets, Primarily
Customer Relationships, Trade
Names and Patents

Accounts Payable
Other Assets and Liabilities, net
Assumed Debt
Net Cash Consideration

2005
$ 171,978
138,626
77,088
650,261

172,362
(65,706)
(245,162)
(14,364)
$ 885,083

2004
$ 232,696
224,703
224,685
825,869

466,902
(67,444)
(245,826)
(69,866)
$1,591,719

Leica
$ 123,064
105,454
56,239
331,806

85,592
(40,358)
(226,912)
(5,503)
$ 429,382

Linx
$ 17,094
8,437
8,498
96,480

47,188
(7,430)
600
—
$170,867

All Others
$ 31,820
24,735
12,351
221,975

39,582
(17,918)
(18,850)
(8,861)
$284,834

Signiﬁcant 2004 Acquisitions
Accounts Receivable
Inventory
Property, Plant & Equipment
Goodwill
Other Intangible Assets, Primarily

Customer Relationships, Trade Names
and Patents
Accounts Payable
Other Assets and Liabilities, net
Assumed Debt
Net Cash Consideration

Radiometer
$ 66,171
40,997
86,139
445,144

207,170
(21,121)
(74,755)
(65,923)
$683,822

KaVo
$ 98,539
131,150
96,566
81,859

132,595
(10,993)
(117,922)
—
$ 411,794

Trojan
$ 35,264
10,175
15,247
117,172

62,617
(16,063)
(35,102)
(3,943)
$185,367

All Others
$ 32,722
42,381
26,733
181,694

64,520
(19,267)
(18,047)
—
$310,736

2003
$ 64,794
48,366
25,163
253,503

48,468
(31,061)
(52,342)
(44,608)
$312,283

Total
$ 171,978
138,626
77,088
650,261

172,362
(65,706)
(245,162)
(14,364)
$ 885,083

Total
$ 232,696
224,703
224,685
825,869

466,902
(67,444)
(245,826)
(69,866)
$1,591,719

48

The unaudited pro forma information for the periods
set forth below gives effect to the above noted acquisitions
as if they had occurred at the beginning of the period. The
pro forma information is presented for informational pur-
poses only and is not necessarily indicative of the results of
operations that actually would have been achieved had the
acquisitions been consummated as of that time (unaudited,
in thousands except per share amounts):

2005

2004

Net sales
Net earnings
Diluted earnings per share

$8,475,370
886,379
2.73

$

$8,163,240
735,514
2.27

$

In connection with its acquisitions, the Company
assesses and formulates a plan related to the future integration
of the acquired entity. This process begins during the due

diligence process and is concluded within 12 months of the
acquisition. The Company accrues estimates for certain
costs, related primarily to personnel reductions and facility
closures or restructurings, anticipated at the date of acqui-
sition,
in accordance with Emerging Issues Task Force
(EITF) Issue No. 95-3, “Recognition of Liabilities in Con-
nection with a Purchase Business Combination.” Adjust-
ments to these estimates are made up to 12 months from the
acquisition date as plans are ﬁnalized. To the extent these
accruals are not utilized for the intended purpose, the excess
is recorded as a reduction of the purchase price, reducing
recorded goodwill balances. Costs incurred in excess of the
recorded accruals are expensed as incurred. The Company
is still ﬁnalizing its restructuring plans with respect to certain
of its 2005 acquisitions, including Leica, and will adjust cur-
rent accrual levels to reﬂect such restructuring plans as such
plans are ﬁnalized.

Accrued liabilities associated with these exit activities include the following (in thousands, except headcount):

Planned Headcount Reduction:
Balance December 31, 2002
Headcount related to 2003 acquisitions
Headcount reductions in 2003
Adjustments to previously provided

headcount estimates

Balance December 31, 2003
Headcount related to 2004 acquisitions
Headcount reductions in 2004
Adjustments to previously provided

headcount estimates

Balance December 31, 2004
Headcount related to 2005 acquisitions
Adjustments to previously provided

headcount estimates

Headcount reductions in 2005
Balance December 31, 2005

Involuntary Employee Termination Beneﬁts:
Balance December 31, 2002
Accrual related to 2003 acquisitions
Costs incurred in 2003
Adjustments to previously provided reserves
Balance December 31, 2003
Accrual related to 2004 acquisitions
Costs incurred in 2004
Adjustments to previously provided reserves
Balance December 31, 2004
Accrual related to 2005 acquisitions
Costs incurred in 2005
Adjustments to previously provided reserves
Balance December 31, 2005

Facility Closure and Restructuring Costs:
Balance December 31, 2002
Accrual related to 2003 acquisitions
Costs incurred in 2003
Adjustments to previously provided reserves
Balance December 31, 2003
Accrual related to 2004 acquisitions
Costs incurred in 2004
Adjustments to previously provided reserves
Balance December 31, 2004
Accrual related to 2005 acquisitions
Costs incurred in 2005
Adjustments to previously provided reserves
Balance December 31, 2005

Radiometer

KaVo

Trojan

Linx

—
—
—

—
—
131
(100)

—
31
—

—
(29)
2

$ —
—
—
—
—
7,199
(2,615)
—
4,584
—
(3,190)
(1,154)
240
$

$ —
—
—
—
—
2,231
(134)
—
2,097
—
(2,097)
—
$ —

—
—
—

—
—
325
—

—
325
—

228
(494)
59

$

—
—
—
—
—
21,665
—
—
21,665
—
(15,475)
(1,516)
$ 4,674

$

—
—
—
—
—
16,211
—
—
16,211
—
(5,333)
(4,041)
$ 6,837

—
—
—

—
—
26
—

—
26
—

—
(26)
—

$ —
—
—
—
—
1,341
—
—
1,341
—
(572)
(81)
$ 688

$ —
—
—
—
—
—
—
—
—
—
(137)
430
$ 293

—
—
—

—
—
—
—

—
—
185

—
(185)
—

$ —
—
—
—
—
—
—
—
—
2,793
(2,705)
—
88

$

$ —
—
—
—
—
—
—
—
—
659
(598)
—
61

$

All
Others

1,409
756
(1,496)

(278)
391
160
(501)

131
181
635

(24)
(157)
635

$ 51,935
9,073
(33,110)
(11,102)
16,796
3,818
(15,323)
2,224
7,515
21,553
(5,116)
(1,754)
$ 22,198

$ 34,909
5,676
(20,013)
(695)
19,877
3,912
(10,875)
2,386
15,300
13,682
(9,799)
(3,796)
$ 15,387

49

Total

1,409
756
(1,496)

(278)
391
642
(601)

131
563
820

204
(891)
696

$ 51,935
9,073
(33,110)
(11,102)
16,796
34,023
(17,938)
2,224
35,105
24,346
(27,058)
(4,505)
$ 27,888

$ 34,909
5,676
(20,013)
(695)
19,877
22,354
(11,009)
2,386
33,608
14,341
(17,964)
(7,407)
$ 22,578

50

In 2003,

the adjustments

to previously provided
reserves relate primarily to the Company’s Thomson acqui-
sition. These reductions related to reserves that were not nec-
essary and reserves associated with facilities that were not
closed due to unexpected delays in commencing certain
planned integration activities. In 2004, the adjustments to
previously provided reserves established severance and facil-
ity closure reserves for acquisitions which occurred in late
2003 and for which plans for integrating the businesses were
not ﬁnalized until 2004. The 2005 adjustments to previously
provided reserves for KaVo reﬂect ﬁnalization of the restruc-
turing plans for this business and include costs and headcount
reductions associated with the planned sale of certain opera-
tions in lieu of closure. All adjustments to the previously
provided reserves resulted in adjustments to Goodwill in
accordance with EITF 95-3. Involuntary employee termina-
tion beneﬁts are presented as a component of the Company’s
included in accrued
compensation and beneﬁts accrual
expenses in the accompanying balance sheet. Facility closure
and restructuring costs are reﬂected in other accrued
expenses (See Note 6).

(3) Inventory:
The major classes of inventory are summarized as follows
(in thousands):

Finished goods
Work in process
Raw material

December 31,
2005
$314,772
178,630
331,861
$825,263

December 31,
2004
$281,325
138,261
284,410
$703,996

If the ﬁrst-in, ﬁrst-out (FIFO) method had been used
for inventories valued at LIFO cost, such inventories would
have been $9.4 million and $4.6 million higher at
December 31, 2005 and 2004, respectively.

(4) Property, Plant and Equipment:
The major classes of property, plant and equipment are sum-
marized as follows (in thousands):

Land and improvements
Buildings
Machinery and equipment

Less accumulated
depreciation

$

December 31,
2005
66,672
474,363
1,337,916
1,878,951

$

December 31,
2004
55,714
451,683
1,260,605
1,768,002

(1,130,779)
748,172

$

(1,015,036)
752,966

$

(5) Goodwill:
As discussed in Note 2, goodwill arises from the excess of the
purchase price for acquired businesses exceeding the fair
value of tangible and intangible assets acquired. Manage-
ment assesses goodwill for impairment for each of its report-
ing units at least annually at the beginning of the fourth quar-
ter or as “triggering” events occur. Danaher has nine
reporting units closely aligned with the Company’s strategic
lines of business and specialty niche businesses. They are as
follows: tools, motion, electronic test, power quality, envi-
ronmental, aerospace and defense, sensors and controls,
product identiﬁcation and medical technologies. In making
its assessment of goodwill impairment, management relies
on a number of factors including operating results, business
plans, economic projections, anticipated future cash ﬂows,
and transactions and market place data. The Company’s
annual impairment test was performed in the fourth quarters
of 2005, 2004 and 2003 and no impairment requiring adjust-
ment was identiﬁed. There are inherent uncertainties related
to these factors and management’s judgment in applying
them to the analysis of goodwill impairment which may
effect the carrying value of goodwill.

The following table shows the rollforward of goodwill
reﬂected in the ﬁnancial statements resulting from the
Company’s acquisition activities for 2003, 2004, and 2005
($ in millions).

Balance January 1, 2003

Attributable to 2003 acquisitions
Adjustments due to ﬁnalization of

purchase price allocations

Effect of foreign currency translation

Balance December 31, 2003

Attributable to 2004 acquisitions
Adjustments due to ﬁnalization of

purchase price allocations
Attributable to 2004 disposition
Effect of foreign currency translation

Balance December 31, 2004

Attributable to 2005 acquisitions
Adjustments due to ﬁnalization of

purchase price allocations
Attributable to 2005 disposition
Effect of foreign currency translation

Balance December 31, 2005

$2,777
254

(22)
55
3,064
826

(2)
(18)
100
3,970
650

(1)
(5)
(139)
$4,475

The carrying amount of goodwill changed by approximately
$505 million in 2005. The components of the change were
$650 million of additional goodwill associated with business
combinations completed in the year ended December 31, 2005,
a net decrease of $1 million in adjustments related to ﬁnalization
of purchase price allocations associated with prior year acqui-
sitions, a decrease of $5 million due to the disposition of a small
business in 2005 and foreign currency translation adjustments
of $139 million. The carrying value of goodwill at
December 31, 2005 for the Tools & Components segment,
Professional Instrumentation segment and Industrial Technolo-
gies segment was approximately $194 million, $2,308 million
and $1,973 million, respectively.

The carrying amount of goodwill changed by approxi-
mately $906 million in 2004. The components of the change
were $826 million of additional goodwill associated with
business
ended
December 31, 2004, a net decrease of $2 million in adjustments
related to ﬁnalization of purchase price allocations associated
with prior year acquisitions, a decrease of $18 million due to
the disposition of a small business in 2004 and foreign currency

completed in the year

combinations

51

translation adjustments of $100 million. The carrying value of
goodwill at December 31, 2004 for the Tools & Components
segment, Professional Instrumentation segment and Industrial
Technologies
segment was approximately $194 million,
$1,848 million and $1,928 million, respectively.

The carrying amount of goodwill changed by approxi-
mately $287 million in 2003. The components of the change
were $254 million of additional goodwill associated with busi-
ness combinations completed in the year ended December 31,
2003, a net decrease of $22 million in adjustments related to
ﬁnalization of purchase price allocations associated with acqui-
sitions consummated in prior years and foreign currency trans-
lation adjustments of $55 million. There were no dispositions
of businesses with related goodwill in 2003. The Company
reduced previously recorded goodwill related to acquisitions
that occurred in 2002 primarily as a result of ﬁnalization of the
integration plans with respect to the Thomson business and
other smaller acquisitions, the receipt of information relative to
the fair market value of other assets acquired and the ﬁnalization
of the acquired businesses deferred tax position reﬂecting the
above changes.

(6) Accrued Expenses and Other Liabilities:
Accrued expenses and other liabilities include the following (in thousands):

Compensation and beneﬁts
Claims, including self-insurance and litigation
Postretirement beneﬁts
Environmental and regulatory compliance
Taxes, income and other
Sales and product allowances
Warranty
Other, individually less than 5% of overall balance

December 31, 2005

December 31, 2004

Current
$ 352,681
83,025
9,000
45,016
412,075
135,789
79,487
184,708
$1,301,781

Non-Current
$378,305
71,773
97,600
76,230
297,618
—
13,650
21,226
$956,402

Current
$ 342,969
64,281
8,000
44,915
323,257
100,991
65,105
215,939
$1,165,457

Non-Current
$186,523
71,821
100,900
80,963
277,652
—
15,001
13,530
$746,390

Approximately $136.2 million of accrued expenses and other liabilities were guaranteed by standby letters of credit and per-
formance bonds as of December 31, 2005. The increase in non-current compensation and beneﬁt accruals primarily relates
to pension obligations assumed for acquired businesses in 2005, primarily Leica Microsystems (refer to Note 8 for additional
information). Refer to Note 12 for further discussion of the Company’s income tax obligations.

(7) Financing:
Financing consists of the following (in thousands):

Notes payable due 2008
Notes payable due 2005
Zero-coupon convertible
senior notes due 2021

Other

Less—currently payable

December 31,
2005
$ 250,000
—

580,375
211,347
1,041,722
183,951
$ 857,771

December 31,
2004
$ 250,000
406,800

566,834
126,664
1,350,298
424,763
$ 925,535

The Notes due 2008 were issued in October 1998 at an inter-
est cost of 6.1%. The fair value of the 2008 Notes, after tak-
ing into account the interest rate swaps discussed below, is
approximately $254.3 million at December 31, 2005. In
January 2002, the Company entered into two interest rate
swap agreements for the term of the $250 million aggregate
principal amount of 6% notes due 2008 having an aggregate
notional principal amount of $100 million whereby the
effective net interest rate on $100 million of the Notes is the
six-month LIBOR rate plus approximately 0.425%. Rates
are reset twice per year. At December 31, 2005, the net inter-
est rate on $100 million of the Notes was 4.77% after giving
effect to the interest rate swap agreement. In accordance with
SFAS No. 133 (“Accounting for Derivative Instruments and
Hedging Activities”, as amended), the Company accounts

52

for these swap agreements as fair value hedges. These instru-
ments qualify as “effective” or “perfect” hedges.

The Notes due 2005 (the Eurobond Notes), with a
stated amount of E300 million were issued in July 2000 and
bore interest at 6.25% per annum. In July 2005, the company
repaid these notes in the amount of $362 million as required
upon maturity.

In March 2001, the Company issued $830 million
(value at maturity) in LYONs. The net proceeds to the Com-
pany were approximately $505 million. The LYONs carry a
yield to maturity of 2.375%. Holders of the LYONs may
convert each of their LYONs into 14.5352 shares of Danaher
common stock (in the aggregate for all LYONs, approxi-
mately 12 million shares of Danaher common stock) at any
time on or before the maturity date of January 22, 2021. As
of December 31, 2005, the accreted value of the outstanding
LYONs was approximately $48 per share which was lower,
at that date, than the traded market value of the underlying
common stock issueable upon conversion. The Company
may redeem all or a portion of the LYONs for cash at any
time. Holders may require the Company to purchase all or
a portion of the notes for cash and/or Company common
stock, at the Company’s option, on January 22, 2011. The
holders had a similar option to require the Company to pur-
chase all or a portion of the notes as of January 22, 2004,
which resulted in notes with an accreted value of $1.1 mil-
lion being redeemed by the Company for cash. The Com-
pany will pay contingent interest to the holders of LYONs
during any six-month period commencing after January 22,
2004 if the average market price of a LYON for a measure-
ment period preceding such six-month period equals 120%
or more of the sum of the issue price and accrued original
issue discount for such LYON. The Company has not and
is not currently required to pay contingent interest under this
agreement. Except for the contingent interest described
above, the Company will not pay interest on the LYONs
prior to maturity. The fair value of the LYONs notes is
approximately $681 million at December 31, 2005.

The Company had borrowings under uncommitted lines
of credit totaling $177 million as of December 31, 2005 which
are included in other borrowings in the above table. These bor-
rowings are principally short-term borrowings payable upon

demand and bear interest at ﬂoating rates tied to the Euribor and
(weighted average rate of 3.40% at
U.S. Libor
December 31, 2005). There were no outstanding amounts
under uncommitted lines of credit at December 31, 2004.

rates

The Company maintains two revolving senior unse-
cured credit facilities totaling $1 billion available for general
corporate purposes. Borrowings under the revolving credit
facilities bear interest of Eurocurrency rate plus 0.21% to
0.70%, depending on the Company’s debt rating. The credit
facilities, each $500 million, have a ﬁxed term expiring
June 28, 2006 and July 23, 2006, respectively. There were no
borrowings under bank facilities during the three years
ended December 31, 2005. The Company is charged a fee
of 0.065% to 0.175% per annum for the facility, depending
on the Company’s current debt rating. Commitment and
facility fees of $841,000, $828,000 and $613,000 were
incurred in 2005, 2004 and 2003, respectively.

The Company has complied with all debt covenants,
including limitations on secured debt and debt levels. None
of the Company’s debt instruments contain trigger clauses
requiring the Company to repurchase or pay off its debt if
rating agencies downgrade the Company’s debt rating.

The minimum principal payments during the next ﬁve
years are as follows: 2006—$184.0 million; 2007—$4.7 million;
2008—$253.2 million; 2009—$3.5 million, 2010—$8.9 mil-
lion and $587.4 million thereafter.

The Company made interest payments of $42.6 mil-
lion, $46.2 million and $47.4 million in 2005, 2004 and
2003, respectively.

(8) Pension Beneﬁt Plans:
The Company has noncontributory deﬁned beneﬁt pension
plans which cover certain of its domestic employees. Beneﬁt
accruals under most of these plans have ceased. It is the Com-
pany’s policy to fund, at a minimum, amounts required by
the Internal Revenue Service.

In January and May 2004, the Company acquired Radi-
ometer S/A and Kaltenbach & Voigt GmbH, respectively,
their pension plans. The Company
including each of
acquired Leica Microsystems in August 2005, including its
pension plans.

The following sets forth the funded status of the U.S. and non-U.S. plans as of the most recent actuarial valuations using

a measurement date of September 30 ($ in millions):

U.S. Pension Beneﬁts

Non-U.S. Pension Beneﬁts

2005

2004

2005

2004

53

Change in pension beneﬁt obligation
Beneﬁt obligation at beginning of year
Service cost
Interest cost
Actuarial loss
Acquisition (transfer or divestiture)
Beneﬁts paid
Foreign exchange rate impact
Beneﬁt obligation at end of year

Change in plan assets
Fair value of plan assets at beginning of year
Actual return on plan assets
Employer contribution
Acquisition (transfer or divestiture)
Beneﬁts paid
Foreign exchange rate impact
Fair value of plan assets at end of year
Funded status
Accrued contribution
Unrecognized loss
Prepaid (accrued) beneﬁt cost

$ 573.0
2.1
31.8
6.6
58.0
(41.7)
—
629.8

474.9
36.1
0.8
39.7
(41.8)
—
509.7
(120.1)
10.8
190.1
$ 80.8

$564.2
1.8
32.4
6.9
—
(32.3)
—
573.0

449.3
47.3
10.6
—
(32.3)
—
474.9
(98.1)
—
193.7
$ 95.6

$ 96.4
4.2
8.6
20.3
351.6
(3.6)
(30.5)
447.0

48.4
14.0
4.2
189.0
(3.6)
(16.4)
235.6
(211.4)
3.6
21.8
$(186.0)

$ 71.5
2.0
5.0
6.6
11.3
(5.4)
5.4
96.4

39.4
3.9
7.5
—
(5.4)
3.0
48.4
(48.0)
—
(1.5)
$(49.5)

Weighted average assumptions used to determine beneﬁt obligations measured at September 30:

Discount rate
Rate of compensation increase

Components of net periodic pension cost

($ in millions)

Service cost
Interest cost
Expected return on plan assets
Amortization of transition obligation
Amortization of (gain) loss
Net periodic pension cost

U.S. Plans

Non-U.S. Plans

2005
5.50%
4.00%

2004
5.75%
4.00%

2005
4.05%
3.00%

2004
5.50%
2.90%

U.S. Pension Beneﬁts

Non-U.S. Pension Beneﬁts

2005

2004

2005

2004

$ 2.1
31.8
(37.8)
—
12.0
$ 8.1

$ 1.8
32.4
(40.7)
(0.1)
10.9
$ 4.3

$ 4.2
8.6
(5.0)
—
(0.1)
$ 7.7

$ 2.0
5.0
(3.3)
—
—
$ 3.7

Weighted average assumptions used to determine net periodic pension cost measured at September 30:

Discount rate
Expected long-term return on plan assets
Rate of compensation increase

U.S. Pension Beneﬁts

Non-U.S. Pension Beneﬁts

2005
5.75%
8.00%
4.00%

2004
6.00%
8.50%
4.00%

2005
4.78%
6.12%
2.66%

2004
5.50%
6.90%
2.90%

54

Selection of Expected Rate of Return on Assets
For 2005, 2004, and 2003, the Company used an expected long-term rate of return assumption of 8.0%, 8.5% and 8.5%,
respectively, for the Company’s U.S. deﬁned beneﬁt pension plan. The Company intends on using an expected long-term
rate of return assumption of 8.0% for 2006 for its U.S. plan. The expected long-term rate of return assumption for the non-
U.S. plans was determined on a plan-by-plan basis based on the composition of assets and ranged from 3.0% to 7.5% in 2005.

Investment Policy
The US plan’s goal is to maintain between 60% to 70% of its assets in equity portfolios, which are invested in funds that are
expected to mirror broad market returns for equity securities. The balance of the asset portfolio is invested in corporate bonds
and bond index funds. Non-U.S. plan assets are invested in various insurance contracts, equity and debt securities determined
by the administrator of each plan.

Asset Information
% of measurement date assets by asset categories

Equity securities
Debt securities
Cash & Other
Total

Expected Contributions
The Company made no contributions to the U.S. plans in 2004.
While not statutorily required to make contributions to the plan
for 2005, the Company contributed $10 million to the
U.S. plan in December 2005. The Company anticipates there
will be no statutory funding requirements for the U.S. deﬁned
beneﬁt plan in 2006 and plans to make approximately $15 mil-
lion in contributions to the non-U.S. plans in 2006.

Other Matters
The Company recorded a curtailment gain in 2003 as a result
of freezing substantially all of the ongoing contributions to
its Cash Balance Pension Plan effective December 31, 2003.
The gain totaled $22.5 million ($14.6 million after tax, or
$0.05 per share) and represented the unrecognized beneﬁts
associated with prior plan amendments that were being
amortized into income over the remaining service period of
participating associates prior to freezing the plan. The Com-
pany will continue recording pension expense related to this
plan, representing interest costs on the accumulated beneﬁt
obligation and amortization of actuarial losses.

Due to declines in the equity markets in 2001 and 2002,
the Company’s pension fund assets has
the fair value of
decreased below the accumulated beneﬁt obligation due to
the participants in the U.S. plan. In addition, certain non-
U.S. plans are not fully funded. As a result, in accordance with
SFAS No. 87, “Employers’ Accounting for Pensions”, the

U.S. Pension Beneﬁts

Non-U.S. Pension Beneﬁts

2005

71%
26%
3%
100%

2004

70%
27%
3%
100%

2005

29%
48%
23%
100%

2004

20%
45%
35%
100%

Company has recorded a minimum pension liability of
$175.5 million ($116.0 million net of tax beneﬁts) cumula-
tively through December 31, 2005. The minimum pension
liability is calculated as the difference between the actuarially
determined accumulated beneﬁt obligation and the value of
the plan assets as of September 30, 2005. This adjustment
results in a direct reduction of stockholders’ equity and does
not immediately impact net earnings, but is included in other
comprehensive income.

Substantially all employees not covered by deﬁned
beneﬁt plans are covered by deﬁned contribution plans,
which generally provide funding based on a percentage
of compensation.

Pension expense for all plans, including the $22.5 million
gain on curtailment in 2003, amounted to $66.4 million,
$63.0 million, and $22.9 million for the years ended
December 31, 2005, 2004 and 2003, respectively.

9. Other Post Retirement Employee Beneﬁt Plans:
In addition to providing pension beneﬁts, the Company pro-
vides certain health care and life insurance beneﬁts for some
of
its retired employees in the United States. Certain
employees may become eligible for these beneﬁts as they
reach normal retirement age while working for the Com-
pany. The following sets forth the funded status of
the
domestic plans as of the most recent actuarial valuations
using a measurement date of September 30 ($ in millions):

Change in beneﬁt

obligation

Beneﬁt obligation at
beginning of year

Service cost
Interest cost
Amendments and other
Actuarial loss (gain)
Acquisition (transfer or

divestiture)

Retiree contributions
Beneﬁts paid
Beneﬁt obligation at end

of year

Change in plan assets
Fair value of plan assets at

beginning and end of year

Funded status
Accrued contribution
Unrecognized loss
Unrecognized prior
service credit

Accrued beneﬁt cost

Post Retirement
Medical Beneﬁts

2005

2004

$ 123.8
0.7
6.3
(10.3)
(6.5)

0.6
2.4
(11.6)

$ 159.8
2.5
9.4
(38.9)
9.0

(7.1)
3.1
(14.0)

105.4

123.8

—
(105.4)
1.7
46.0

—
(123.8)
2.7
55.5

(48.9)
$(106.6)

(43.3)
$(108.9)

Weighted average assumptions used to determine beneﬁt
obligations measured at September 30:

Discount rate
Medical trend rate—initial
Medical trend rate—grading

period

Medical trend rate—ultimate

2005
5.50%
10.00%

2004
5.75%
11.00%

5 years

5.00%

6 years

5.00%

The medical trend rate used to determine the post retirement
beneﬁt obligation was 10.00% for 2005. The rate decreases
gradually to an ultimate rate of 5.00% in 2010, and remains
at that level thereafter. The trend is a signiﬁcant factor in
determining the amounts reported.

Effect of a one-percentage-point change in assumed health
care cost trend rates ($ in millions)

Effect on the total of service

and interest cost components

Effect on post retirement

medical beneﬁt obligation

1% Point
Increase

1% Point
Decrease

$0.6

$7.2

$(0.5)

$(6.4)

55

Post Retirement
Medical Beneﬁts

2005

2004

$ 0.7
6.3
3.0

(4.7)
$ 5.3

$ 2.5
9.4
3.3

(1.0)
$14.2

Components of net

periodic beneﬁt cost
($ in millions)

Service cost
Interest cost
Amortization of loss
Amortization of prior

service credit

Net periodic beneﬁt cost

Weighted average assumptions used to
determine net periodic beneﬁt cost measured at
September 30:

Discount rate
Medical trend rate—initial
Medical trend rate—grading

period

Medical trend rate—ultimate

2005
5.75%
11.0%

2004
6.00%
11.00%

6 years

5.00%

6 years

5.00%

Other Matters
In May 2004, the Financial Accounting Standards Board issued
Staff Position No. 106-2 (“FSP 106-2”), “Accounting and Dis-
closure Requirements Related to the Medicare Prescription
Drug, Improvement and Modernization Act of 2003” (the
“Act”). The Act introduces a prescription drug beneﬁt under
Medicare (“Medicare Part D”) as well as a federal subsidy to
sponsors of post-retirement health care beneﬁt plans that pro-
vide a beneﬁt that is at least actuarially equivalent to Medicare
Part D. FSP 106-2 provides authoritative guidance on the
accounting for the federal subsidy and speciﬁes the disclosure
requirements for employers who have adopted FSP 106-2.
FSP 106-2 was effective for the Company’s third quarter of
2004 and was reﬂected for all of 2005. Detailed ﬁnal regulations
necessary to implement the Act were issued in 2005, including
those that specify the manner in which actuarial equivalency
must be determined, the evidence required to demonstrate
actuarial equivalency, and the documentation requirements
necessary to be entitled to the subsidy based on an actuarial
analysis prepared in 2005. The Company has conﬁrmed that
certain beneﬁt options within its retiree medical plans provide
beneﬁts that are at least actuarially equivalent to Medicare Part
D. As a result, the accrued post-retirement beneﬁt obligation
reﬂects a reduction of
approximately $7.6 million at
December 31, 2005 and the annual net periodic beneﬁt cost for
the year ended December 31, 2005 was reduced by approxi-
mately $1.5 million.

During 2005, the Company amended the retiree medi-
cal plan for certain current and future retirees effective
January 1, 2006. The result was a $10.3 million reduction in
the accrued post retirement beneﬁt obligation, and has been
reﬂected in the Amendments and other line of the Change
in Beneﬁt Obligations.

56

(10) Leases and Commitments:
The Company’s leases extend for varying periods of time up
to 10 years and, in some cases, contain renewal options.
Future minimum rental payments for all operating leases hav-
ing initial or remaining non-cancelable lease terms in excess
of one year are $59 million in 2006, $56 million in 2007,
$45 million in 2008, $46 million in 2009, $22 million in 2010
and $58 million thereafter. Total rent expense charged to
income for all operating leases was $68 million, $62 million
and $56 million, for the years ended December 31, 2005,
2004, and 2003, respectively.

The Company generally accrues estimated warranty
costs at the time of sale. In general, manufactured products
are warranted against defects in material and workmanship
when properly used for their intended purpose, installed cor-
rectly, and appropriately maintained. Warranty period terms
depend on the nature of the product and range from 90 days
up to the life of the product. The amount of the accrued
warranty liability is determined based on historical informa-
tion such as past experience, product failure rates or number
of units repaired, estimated cost of material and labor, and
in certain instances estimated property damage. The liability,
shown in the following table, is reviewed on a quarterly basis
and may be adjusted as additional information regarding
expected warranty costs becomes known.

In certain cases the Company will sell extended war-
ranty or maintenance agreements. The proceeds from these
agreements is deferred and recognized as revenue over the
term of the agreement.

The following is a roll forward of the Company’s war-
ranty accrual for the years ended December 31, 2005 and
2004 ($ in 000’s):

Balance December 31, 2003
Accruals for warranties issued during period
Changes in estimates related to

pre-existing warranties

Settlements made
Additions due to acquisitions
Balance December 31, 2004
Accruals for warranties issued during period
Changes in estimates related to

pre-existing warranties

Settlements made
Additions due to acquisitions
Balance December 31, 2005

$ 70,465
56,712

3,395
(65,382)
14,916
80,106
86,519

—
(84,808)
11,320
$ 93,137

(11) Litigation and Contingencies:
In June 2004, a federal jury in the United States District
Court for the District of Connecticut returned a liability
the
ﬁnding against Raytek Corporation, a subsidiary of
Company, in a patent infringement action relating to sighting
technology for infrared thermometers, ﬁnding that the sub-
sidiary willfully infringed two patents and awarding the
plaintiff, Omega Engineering Inc., approximately $8 million
in damages. In October 2004, the judge entered an order tre-

bling the awarded damages and requiring the subsidiary to
pay plaintiff ’s legal fees. After appealing the ﬁnding to the
Court of Appeals for the Federal Circuit, in November 2005
Raytek settled the case with Omega for an amount less than
the judgment and which the Company believes is not mate-
rial to its ﬁnancial position. Pursuant to the settlement the
parties agreed to dismiss the case with prejudice and to a
release of claims related to the litigation. The purchase agree-
ment pursuant to which the Company acquired the subsid-
iary in 2002 provides indemniﬁcation for the Company with
respect to these matters and the Company is pursuing recov-
ery under the agreement.

Accu-Sort, Inc., a subsidiary of the Company, was a
defendant in a suit ﬁled by Federal Express Corporation on
May 16, 2001 and subsequently removed to the United States
District Court for the Western District of Tennessee alleging
breach of contract, misappropriation of trade secrets, breach
of ﬁduciary duty, unjust enrichment and conversion.
Plaintiff engaged Accu-Sort to develop a scanning and
dimensioning system, and alleged that prior to becoming a
subsidiary of the Company Accu-Sort breached its con-
tractual obligations to, and misappropriated trade secrets
of, plaintiff by developing dimensioning and scanning/
dimensioning products for other customers. Subsequent to
December 31, 2005, this matter was settled. See Note 18 for
further information.

In addition, the Company is, from time to time, subject
to routine litigation incidental to its business. These lawsuits pri-
marily involve claims for damages arising out of the use of the
Company’s products, allegations of patent and trademark
infringement and trade secret misappropriation, and litigation
and administrative proceedings involving employment matters
and commercial disputes. The Company may also become sub-
ject to lawsuits as a result of past or future acquisitions. Some
of these lawsuits include claims for punitive as well as compen-
satory damages. While the Company maintains workers com-
pensation, property, cargo, auto, product, general liability, and
directors’ and ofﬁcers’ liability insurance (and have acquired
rights under similar policies in connection with certain acqui-
sitions) that it believes covers a portion of these claims, this
insurance may be insufﬁcient or unavailable to protect the
Company against potential loss exposures. In addition, while
the Company believes it is entitled to indemniﬁcation from
third parties for some of these claims, these rights may also be
insufﬁcient or unavailable to protect the Company against
potential loss exposures. The Company believes that the results
of existing litigation matters will not have a materially adverse
effect on the Company’s cash ﬂows or ﬁnancial condition, even
before taking into account any related insurance or indemni-
ﬁcation recoveries.

The Company carries signiﬁcant deductibles and self-
insured retentions for workers’ compensation, property,
automobile, product and general liability costs, and manage-
ment believes that the Company maintains adequate accruals
to cover the retained liability. Management determines the
Company’s accrual for self-insurance liability based on claims
ﬁled and an estimate of claims incurred but not yet reported.

The Company maintains third party insurance policies up to
certain limits to cover liability costs in excess of predeter-
mined retained amounts.

The Company’s Certiﬁcate of Incorporation requires it
to indemnify to the full extent authorized or permitted by
law any person made, or threatened to be made a party to any
action or proceeding by reason of his or her service as a director
or ofﬁcer of the Company, or by reason of such director or
ofﬁcer serving any other entity at the request of the Company,
subject to limited exceptions. While the Company maintains
insurance for this type of liability, any such liability could exceed
the amount of the insurance coverage.

Certain of the Company’s operations are subject to
environmental laws and regulations in the jurisdictions in
which they operate, which impose limitations on the dis-
charge of pollutants into the ground, air and water and estab-
lish standards for the generation, treatment, use, storage and
disposal of solid and hazardous wastes. The Company must
also comply with various health and safety regulations in
both the United States and abroad in connection with its
operations. The Company believes that it is in substantial
compliance with applicable environmental, health and safety
laws and regulations. Compliance with these laws and regu-
lations has not had and, based on current information and the
applicable laws and regulations currently in effect, is not
expected to have a material adverse effect on the Company’s
capital expenditures, earnings or competitive position.

In addition to environmental compliance costs, the
Company may incur costs related to alleged environmental
damage associated with past or current waste disposal prac-
tices or other hazardous materials handling practices. For
example, generators of hazardous substances found in dis-
posal sites at which environmental problems are alleged to
exist, as well as the owners of those sites and certain other
classes of persons, are subject to claims brought by state and
federal regulatory agencies pursuant to statutory authority.
The Company has received notiﬁcation from the U.S. Envi-
ronmental Protection Agency, and from state and non-U.S.
environmental agencies, that conditions at a number of sites
where the Company and others disposed of hazardous wastes
require clean-up and other possible remedial action, includ-
ing sites where the Company has been identiﬁed as a poten-
tially responsible party under federal and state environmental
laws and regulations. The Company has projects underway
at several current and former manufacturing facilities, in
both the United States and abroad, to investigate and reme-
diate environmental contamination resulting from past
operations. In particular, Joslyn Manufacturing Company
(“JMC”), a subsidiary of the Company acquired in Septem-
ber 1995 and the assets of which were divested in November
2004, previously operated wood treating facilities
that
chemically preserved utility poles, pilings, railroad ties and
wood ﬂooring blocks. These facilities used wood preserva-
tives
and
chromium-arsenic-copper. All such treating operations were
discontinued or sold prior to 1982. While preservatives were
handled in accordance with then existing law, environmental

included creosote, pentachlorophenol

that

57

law now imposes retroactive liability, in some circumstances,
on persons who owned or operated wood-treating sites.
JMC is remediating some of its former sites and expects to
remediate other sites in the future. In connection with the
divestiture of the assets of JMC, JMC retained the environ-
mental liabilities described above and agreed to indemnify
the buyer of the assets with respect to certain environmental-
related liabilities. The Company is also from time to time
party to personal injury or other claims brought by private
parties alleging injury due to the presence of or exposure to
hazardous substances.

The Company has made a provision for environmental
remediation and environmental-related personal
injury
claims. The Company generally makes an assessment of the
costs involved for its remediation efforts based on environ-
mental studies as well as its prior experience with similar sites.
If the Company determines that it has potential remediation
liability for properties currently owned or previously sold, it
accrues the total estimated costs, including investigation and
remediation costs, associated with the site. The Company
also estimates its exposure for environmental-related per-
sonal injury claims and accrues for this estimated liability as
such claims become known. While the Company actively
pursues appropriate insurance recoveries as well as appropri-
ate recoveries from other potentially responsible parties, it
does not recognize any insurance recoveries for environmen-
tal liability claims until realized. The ultimate cost of site
cleanup is difﬁcult to predict given the uncertainties of the
Company’s
in certain sites, uncertainties
regarding the extent of the required cleanup, the availability
of alternative cleanup methods, variations in the interpreta-
tion of applicable laws and regulations, the possibility of
insurance recoveries with respect to certain sites and the fact
that imposition of joint and several liability with right of
contribution is possible under the Comprehensive Environ-
mental Response, Compensation and Liability Act of 1980
and other environmental laws and regulations. As such, there
can be no assurance that the Company’s estimates of envi-
the
ronmental
Company’s ﬁnancial position and reserves for environmental
matters and based on current information and the applicable
laws and regulations currently in effect,
the Company
believes that its liability, if any, related to past or current waste
disposal practices and other hazardous materials handling
practices will not have a material adverse effect on its ﬁnan-
cial condition or cash ﬂow.

liabilities will not change. In view of

involvement

The Company’s Matco subsidiary had sold, with
recourse, or provided credit enhancements for certain of its
accounts receivable and notes receivable. Amounts outstand-
ing under this program approximated $29 million as of
December 31, 2004. No amounts were outstanding as of
December 31, 2005.

As of December 31, 2005, the Company had no known
probable but inestimable exposures that are expected to have
a material effect on the Company’s ﬁnancial position and
results of operations.

58

(12) Income Taxes:
The provision for income taxes for the years ended December 31 consists of the following (in thousands):

Current:

Federal U.S.
Other than U.S.
State and local

Deferred:

Federal U.S.
Other than U.S.
State and Local
Income tax provision

2005

2004

2003

$ 96,918
124,160
12,654

87,561
9,903
5,446
$336,642

$ 18,900
106,945
9,816

179,677
(9,605)
5,984
$311,717

$

—
64,652
15,186

163,944
13,605
2,814
$260,201

Current deferred income tax assets are reﬂected in prepaid expenses and other current assets. Long-term deferred income
tax liabilities are included in other long-term liabilities in the accompanying balance sheets. Deferred income taxes consist
of the following (in thousands):

Bad debt allowance
Inventories
Property, plant and equipment
Pension and postretirement beneﬁts
Insurance, including self-insurance
Basis difference in LYONs Notes
Goodwill and other intangibles
Environmental and regulatory compliance
Other accruals and prepayments
Deferred service income
Tax credit and loss carryforwards
All other accounts
Net deferred tax liability

2005

$ 10,208
63,727
(49,220)
56,969
(29,660)
(64,981)
(299,328)
29,941
100,217
(145,657)
83,554
(15,448)
$(259,678)

2004

$ 10,923
55,637
(48,573)
17,885
(25,120)
(48,756)
(251,163)
29,402
80,579
(131,156)
85,953
(8,840)
$(233,229)

Deferred taxes associated with temporary differences resulting from timing of recognition for income tax purposes of
fees paid for services rendered between consolidated entities are reﬂected as deferred service income in the above table. These
fees are fully eliminated in consolidation and have no effect on reported revenue, income or reported income tax expense.
The effective income tax rate for the years ended December 31 varies from the statutory federal income tax rate as follows:

Statutory federal income tax rate
Increase (decrease) in tax rate resulting from:
Basis difference on sale of business
State income taxes (net of Federal income tax beneﬁt)
Taxes on foreign earnings
Research and experimentation credits and other
Effective income tax rate

Percentage of Pre-tax Earnings

2005
35.0%

0.1
1.0
(8.3)
(0.5)
27.3%

2004
35.0%

0.6
1.0
(6.6)
(0.5)
29.5%

2003
35.0%

—
1.5
(3.0)
(0.9)
32.6%

The Company made income tax payments of $168.3 million,
$126.9 million, and $93.7 million in 2005, 2004, and 2003,
respectively. The Company recognized a tax beneﬁt of
approximately $15.2 million, $16.5 million, and $27.5 million
in 2005, 2004 and 2003, respectively, related to the exercise
of employee stock options, which has been recorded as an
increase to additional paid-in capital. During 2003, the
Company made U.S. Federal payments of $65 million,
related to reviews of prior years’ tax return ﬁlings, which are
included in the total tax payments for 2003.

Included in deferred income taxes as of December 31, 2005
are tax beneﬁts for U.S. and non-U.S. net operating loss car-
ryforwards primarily associated with acquired businesses
totaling approximately $30 million (net of applicable valu-
ation allowances of approximately $103 million). Certain of
the losses can be carried forward indeﬁnitely and others can
be carried forward to various dates through 2025. The rec-
ognition of any future beneﬁt resulting from the reduction
of
the
the valuation allowance will reduce goodwill of
acquired business. In addition, the Company also had general
business and foreign tax credit carryforwards of approxi-
mately $53 million (net of applicable valuation allowances of
approximately $48 million) at December 31, 2005.

The Company provides income taxes for unremitted
foreign subsidiaries that are not considered

earnings of

59

permanently reinvested overseas. As of December 31, 2005,
the approximate amount of earnings from foreign subsidiar-
ies that the Company considers permanently reinvested and
for which deferred taxes have not been provided was
approximately $2.1 billion. United States income taxes have
not been provided on earnings that are planned to be rein-
vested indeﬁnitely outside the United States and the amount
of such taxes that may be applicable is not readily determin-
able given the various tax planning alternatives the Company
could employ should it decide to repatriate these earnings.
The Company’s legal and tax structure reﬂects both the
number of acquisitions and dispositions that have occurred
over the years as well as the multi-jurisdictional nature of the
Company’s businesses. Management performs a comprehen-
sive review of its global tax positions on a quarterly basis and
accrues amounts for potential tax contingencies. Based on
these reviews and the result of discussions and resolutions of
matters with certain tax authorities and the closure of tax
years subject to tax audit, reserves are adjusted as necessary.
Reserves for these tax matters are included in “Taxes, income
and other” in accrued expenses as detailed in Note 6 in the
accompanying ﬁnancial statements.

60

(13) Earnings Per Share (EPS):
Basic EPS is calculated by dividing earnings by the weighted-average number of common shares outstanding for the applicable
period. Diluted EPS is calculated after adjusting the numerator and the denominator of the basic EPS calculation for the
effect of all potential dilutive common shares outstanding during the period. Information related to the calculation of earnings
per share of common stock before the effect of the accounting change and reduction of income tax reserves related to a
previously discontinued operation is summarized as follows:

For the Year Ended December 31, 2005:
(in thousands, except per share amounts)
Basic EPS
Adjustment for interest on convertible debentures
Incremental shares from assumed exercise of dilutive options
Incremental shares from assumed conversion of the

convertible debenture

Diluted EPS

For the Year Ended December 31, 2004:
(in thousands, except per share amounts)
Basic EPS
Adjustment for interest on convertible debentures
Incremental shares from assumed exercise of dilutive options
Incremental shares from assumed conversion of the

convertible debenture

Diluted EPS

For the Year Ended December 31, 2003:
Basic EPS
Adjustment for interest on convertible debentures
Incremental shares from assumed exercise of dilutive options
Incremental shares from assumed conversion of the

convertible debenture

Diluted EPS

Net Earnings
(Numerator)
$897,800
8,802
—

—
$906,602

$746,000
8,598
—

—
$754,598

$536,834
8,412
—

—
$545,246

Shares
(Denominator)
308,905
—
7,040

Per Share
Amount
$2.91

12,038
327,983

308,964
—
6,699

12,038
327,701

306,792
—
4,286

12,062
323,140

$2.76

$2.41

$2.30

$1.75

$1.69

(14) Stock Transactions:
On April 21, 2005, the Company’s Board of Directors
authorized the repurchase of up to 10 million shares of the
Company’s common stock from time to time on the open
market or in privately negotiated transactions. There is no
expiration date for the Company’s repurchase program. The
timing and amount of any shares repurchased will be deter-
mined by the Company’s management based on its evalua-
tion of market conditions and other factors. The repurchase
program may be suspended or discontinued at any time. Any
repurchased shares will be available for use in connection
with the Company’s 1998 Stock Option Plan and for other
corporate purposes.

During 2005, the Company repurchased 5 million
shares of Company common stock in open market transac-

tions at an aggregate cost of $257.7 million. The repurchases
were funded from available cash and from borrowings under
uncommitted lines of credit. At December 31, 2005, the
Company had approximately 5 million shares remaining for
stock repurchases under the existing Board authorization.
The Company expects to fund any further repurchases using
the Company’s available cash balances or existing lines
of credit.

On April 22, 2004, the company’s Board of Directors
declared a two-for-one split of its common stock. The split was
effected in the form of a stock dividend paid on May 20, 2004
to shareholders of record on May 6, 2004. All share and per
share information presented in this Form 10-K has been retro-
actively restated to reﬂect the effect of this split.

Changes in stock options outstanding under the Amended and Restated Danaher Corporation 1998 Stock Option Plan

were as follows:

61

(in thousands, except per share data)
Outstanding at December 31, 2002 (average $22.55 per share)
Granted (average $35.82 per share)
Exercised (average $15.39 per share)
Cancelled (average $23.25 per share)
Outstanding at December 31, 2003 (average $27.14 per share)
Granted (average $48.85 per share)
Exercised (average $21.10 per share)
Cancelled (average $32.42 per share)
Outstanding at December 31, 2004 (average $30.80 per share)
Granted (average $56.66 per share)
Exercised (average $23.55 per share)
Cancelled (average $39.00 per share)
Outstanding at December 31, 2005
(at $10.41 to $57.14 per share, average $34.14 per share)

Number of Shares
Under Option
18,800
6,462
(2,120)
(1,392)
21,750
3,702
(1,487)
(456)
23,509
3,078
(1,601)
(1,594)

23,392

All options under the plan are granted at not less than existing market prices, expire ten years from the date of grant and
generally vest ratably over a ﬁve-year period. As of December 31, 2005, options with a weighted average remaining life of
6 years covering 11.5 million shares were exercisable at $10.41 to $57.00 per share (average $25.03 per share) and options
covering 15.0 million shares remain available to be granted.

Options outstanding at December 31, 2005 are summarized below:

Exercise Price
$10.41 to $13.58
$14.85 to $20.72
$22.69 to $30.64
$31.85 to $41.74
$41.75 to $57.14

Shares
(thousands)
1,469
474
8,549
6,824
6,076

Outstanding

Average
Exercise Price
$11.73
16.17
24.86
35.52
52.46

Average
Remaining
Life
1
2
5
7
9

Exercisable

Shares
(thousands)
1,469
461
7,237
1,822
470

Average
Exercise Price
$11.73
16.20
24.25
34.61
50.20

Nonqualiﬁed options have been issued only at fair market value exercise prices as of the date of grant during the periods
presented herein, and the Company has not recognized compensation costs for options of this type. The weighted-average
grant date fair market value of options issued was $20 per share in 2005, $16 per share in 2004, and $13 per share in 2003.
The weighted average costs of options granted in 2005 was calculated using the Black-Scholes option pricing model and
assuming a 4.3% risk-free interest rate, a 7-year life for the option, a 23% expected volatility and dividends at the current
annual rate.

The following table illustrates the pro-forma effect of net income and earnings per share if the fair value based method

had been applied to all outstanding and unvested awards in each year ($ in thousands, except per share amounts):

Net earnings—as reported

Deduct: Stock-based employee compensation expense

determined under fair value based method for all awards, net of
related tax effects
Pro forma net earnings
Earnings per share:

Basic—as reported
Basic—pro forma
Diluted—as reported
Diluted—pro forma

2005
$897,800

2004
$746,000

2003
$536,834

(29,501)
$868,299

(28,487)
$717,513

(26,755)
$510,079

$
$
$
$

2.91
2.81
2.76
2.67

$
$
$
$

2.41
2.32
2.30
2.22

$
$
$
$

1.75
1.66
1.69
1.60

62

At various dates in 2003, 2004 and 2005, the Company’s
Board of Directors granted an aggregate of 1.2 million
restricted share units to certain members of management. At
December 31, 2005, there were 1.1 million restricted share
units outstanding, none of which are
at
December 31, 2005. The Company expensed $7.5 million,
$8.1 million and $3.6 million in 2005, 2004 and 2003,
respectively, in connection with these awards which were
amounts equal to the expected ultimate fair value of the
awards on the measurement date recorded ratably over the
respective vesting periods.

vested

In August 2003, the Company amended its Executive
Deferred Incentive Program available to certain of the Com-
pany’s executives. In connection with this amendment,
certain deferred compensation amounts, that previously
could have been settled for cash, will be settled in Company
stock. Due this change, approximately $14 million was
reclassiﬁed as additional paid-in-capital from other liabilities
in 2003.

(15) Segment Data:
The Company reports under three segments: Professional Instrumentation, Industrial Technologies, and Tools & Components.
Operating proﬁt represents total revenues less operating expenses, excluding other expense, interest and income taxes.
The identiﬁable assets by segment are those used in each segment’s operations. Intersegment amounts are not signiﬁcant and
are eliminated to arrive at consolidated totals.

Detailed segment data for the years ended December 31, 2005, 2004 and 2003 is presented in the following table

(in thousands):

Total Sales:

Professional Instrumentation
Industrial Technologies
Tools & Components

Operating Proﬁt:

Professional Instrumentation
Industrial Technologies
Tools & Components
Other
Pension curtailment

Identiﬁable Assets:

Professional Instrumentation
Industrial Technologies
Tools & Components
Other

Liabilities:

Professional Instrumentation
Industrial Technologies
Tools & Components
Other

Depreciation and Amortization:
Professional Instrumentation
Industrial Technologies
Tools & Components

Capital Expenditures, Gross

Professional Instrumentation
Industrial Technologies
Tools & Components

2005

2004

2003

$3,782,109
2,908,141
1,294,454
$7,984,704

$ 676,994
426,399
199,289
(38,014)
—
$1,264,668

$4,997,597
3,236,290
785,833
143,389
$9,163,109

$1,650,175
919,984
240,907
1,271,693
$4,082,759

$

92,045
62,171
22,756
$ 176,972

$

48,480
49,320
23,406
$ 121,206

$2,963,549
2,619,495
1,306,257
$6,889,301

$ 554,453
383,073
198,251
(30,644)
—
$1,105,133

$4,116,244
3,472,246
768,659
136,744
$8,493,893

$1,092,456
854,321
315,406
1,612,028
$3,874,211

$

66,390
60,576
29,162
$ 156,128

$

46,217
51,104
18,585
$ 115,906

$1,939,658
2,157,028
1,197,190
$5,293,876

$ 362,611
311,732
173,821
(24,669)
22,500
$ 845,995

$1,889,934
3,423,881
786,949
789,286
$6,890,050

$ 534,359
781,048
313,224
1,614,710
$3,243,341

$

42,093
62,529
28,814
$ 133,436

$

$

21,534
46,755
12,054
80,343

Operations in Geographical Areas
Year Ended December 31

Total Sales:

United States
Germany
United Kingdom
All other

Long-lived assets:
United States
Germany
United Kingdom
All other

Sales Originating outside the US
Professional Instrumentation
Industrial Technologies
Tools & Components

Sales by Major Product Group:

(in thousands)
Analytical and physical instrumentation
Motion and industrial automation controls
Medical & dental products
Mechanics and related hand tools
Product identiﬁcation
Aerospace and defense
Power quality and reliability
All other
Total

(16) Quarterly Data—Unaudited (In Thousands, Except Per Share Data):

Net sales
Gross proﬁt
Operating proﬁt
Net earnings
Earnings per share:

Basic
Diluted

Net sales
Gross proﬁt
Operating proﬁt
Net earnings
Earnings per share:

Basic
Diluted

1st Quarter
$1,825,948
775,184
271,837
188,256

$
$

0.61
0.58

1st Quarter
$1,543,191
631,261
224,966
145,244

$
$

0.47
0.45

2005

2004

2nd Quarter
$1,928,627
849,603
321,021
229,020

$
$

0.74
0.70

2nd Quarter
$1,621,245
685,709
272,242
182,233

$
$

0.59
0.56

3rd Quarter
$1,966,375
847,871
319,682
228,821

$
$

0.74
0.70

3rd Quarter
$1,745,285
739,993
291,921
200,793

$
$

0.65
0.62

63

2005

2004

2003

$4,592,990
1,160,637
336,822
1,894,255
$7,984,704

$3,618,629
950,397
410,087
1,238,977
$6,218,090

$2,231,444
1,366,826
181,224
$3,779,494

2005
$2,607,963
1,372,940
1,181,534
892,778
826,031
502,859
226,471
374,128
$7,984,704

$4,461,389
773,163
250,627
1,404,122
$6,889,301

$3,509,695
545,021
256,315
1,264,172
$5,575,203

$1,725,971
1,153,626
182,876
$3,062,473

2004
$2,384,462
1,239,694
672,926
856,183
655,247
431,371
284,580
364,838
$6,889,301

$3,635,305
398,317
246,959
1,013,295
$5,293,876

$3,256,113
201,819
234,824
255,143
$3,947,899

$ 956,251
979,291
131,691
$2,067,233

2003
$2,023,821
1,098,222
—
787,678
472,888
311,921
264,708
334,638
$5,293,876

4th Quarter
$2,263,754
972,357
352,128
251,703

$
$

0.82
0.78

4th Quarter
$1,979,580
835,702
316,004
217,730

$
$

0.70
0.67

64

(17) New Accounting Pronouncements:
In November 2004, the FASB issued Statement of Financial
Accounting Standards (“SFAS”) No. 151, “Inventory Costs,
an amendment of ARB No. 43, Chapter 4.” SFAS No. 151
amends Accounting Research Bulletin (“ARB”) No. 43,
Chapter 4, to clarify that abnormal amounts of idle facility
expense, freight, handling costs and wasted materials (spoil-
age) should be recognized as current-period charges. In
addition, SFAS No. 151 requires that allocation of ﬁxed pro-
duction overhead to inventory be based on the normal
capacity of the production facilities. SFAS No. 151 will be
effective in the Company’s ﬁrst quarter of ﬁscal 2006. The
adoption of SFAS No. 151 is not expected to have a signiﬁ-
its operations,
cant impact on the Company’s results of
ﬁnancial position or cash ﬂows.

(ESPPs). The statement eliminates

In December 2004, the FASB issued SFAS No. 123(r),
“Accounting for Stock-Based Compensation: Statement
123(r) sets accounting requirements for ”share-based“ com-
pensation to employees, including employee stock purchase
plans
the ability to
account for share-based compensation transactions using
APB Opinion No. 25, Accounting for Stock Issued to
Employees, and generally requires instead that such transac-
tions be accounted for using a fair-value-based method. Dis-
closure of the effect of expensing the fair value of equity
compensation is currently required under existing literature.
The statement also requires the tax beneﬁt associated with
these share based payments be classiﬁed as ﬁnancing activities
in the Statement of Cash Flows rather than operating activi-
ties as currently permitted. In April 2005, the Securities and
Exchange Commission delayed the effective date for this
statement from the Company’s third quarter of 2005 to the
beginning of the Company’s 2006 ﬁscal year. The Company
currently uses the Black-Scholes model to compute the fair
value of our stock options in connection with its disclosure
of the pro forma effects on net earnings and earnings per
share as if compensation cost had been recognized for such
options at the date of grant.

In March 2005, the SEC issued Staff Accounting Bul-
letin (“SAB”) No. 107 regarding the Staff ’s interpretation of
SFAS No. 123(r). This interpretation provides the Staff ’s
views regarding interactions between SFAS No. 123(r) and
certain SEC rules and regulations and provides interpreta-
tions of the valuation of share-based payments for public
companies. The interpretive guidance is intended to assist
companies in applying the provisions of SFAS No. 123(r) and
investors and users of the ﬁnancial statements in analyzing
the information provided. The Company will follow the
guidance prescribed in SAB No. 107 in connection with its
adoption of SFAS No. 123(r) in the ﬁrst quarter of 2006.
The Company intends on continuing to use the Black-
Scholes valuation methodology and will begin recording an
expense for stock compensation beginning in the ﬁrst quar-
ter of 2006 under the modiﬁed prospective method of
transition. See note 14 for the pro forma impact of stock
compensation on earnings for 2005.

In March 2005, the Financial Accounting Standards
Board published FASB Interpretation No. 47, ”Accounting
for Conditional Asset Retirement Obligations“ (FIN 47).
FIN 47 clariﬁes the term ”conditional asset retirement
obligation“ used in FASB Statement No. 143, ”Accounting
For Asset Retirement Obligations,“ and when an entity
would have sufﬁcient information to reasonably estimate
the fair value of an asset retirement obligation. FIN 47 is
effective for ﬁscal years ending after December 15, 2005.
this statement did not have a material
The adoption of
impact on the Company’s consolidated results of operations
or ﬁnancial condition.

In May 2005,

the FASB issued SFAS No. 154,
“Accounting Changes and Error Corrections” (“SFAS 154”)
which replaces Accounting Principles Board Opinion
No. 20 “Accounting Changes” and SFAS No. 3, “Reporting
Accounting Changes in Interim Financial Statements—An
Amendment of APB Opinion No. 28.” SFAS 154 provides
guidance on the accounting for and reporting of accounting
changes and error corrections. It establishes retrospective
application, or the latest practicable date, as the required
method for reporting a change in accounting principle and
the reporting of a correction of an error. SFAS 154 is effec-
tive for accounting changes and corrections of errors made
in ﬁscal years beginning after December 15, 2005. The
Company does not expect adoption of this statement to have
a material impact on its consolidated results of operations and
ﬁnancial condition.

In July 2005, the FASB issued a proposed interpretation
of FAS 109, ”Accounting for Income Taxes“, to clarify certain
aspects of accounting for uncertain tax positions, including
issues related to the recognition and measurement of those
tax positions. This interpretation is being reconsidered by the
FASB. As a result, the impact of adoption of the interpre-
tation on our ﬁnancial position or results of operations can-
not be determined at this time.

(18) Subsequent Events
In January 2006, the Company completed the acquisition of
Visual Networks, Inc. for a total purchase price of approxi-
mately $75 million in cash, including transaction costs and
net of estimated cash acquired. Visual Networks will
complement businesses within the electrical test business and
had 2004 revenues of approximately $53 million.

In January 2006, the Company commenced an all cash
tender offer for all of the outstanding ordinary shares of First
Technology plc, a U.K. based public company. In connection
with the offer, the Company acquired an aggregate of 19.5%
of First Technology’s issued share capital for approximately
$86 million. A competing bidder subsequently made an offer
that surpassed the Company’s bid, and as a result
the
Company has lapsed its offer for First Technology. The
Company is evaluating its options, one of which may be to
tender its shares into the other bidder’s offer. If the Company
tenders into the other bidder’s offer and such other offer
obtains regulatory approval and successfully closes at the cur-
rent offer price, the Company would record a gain related

65

to this transaction of approximately $13 million, including
a break-up fee of approximately $3 million, net of transac-
tion related costs.

Accu-Sort, Inc., a subsidiary of the Company, was a
defendant in a suit ﬁled by Federal Express Corporation on
May 16, 2001 and subsequently removed to the United States
District Court for the Western District of Tennessee alleging
breach of contract, misappropriation of trade secrets, breach
of ﬁduciary duty, unjust enrichment and conversion.
Plaintiff engaged Accu-Sort to develop a scanning and
dimensioning system, and alleged that prior to becoming a
subsidiary of the Company Accu-Sort breached its contrac-
tual obligations to, and misappropriated trade secrets of,
plaintiff by developing dimensioning and scanning/
dimensioning products for other customers. On March 9, 2006
Accu-Sort settled the case with Federal Express for an
amount which the Company believes is not material to its

ﬁnancial position. Pursuant to the settlement, the parties
agreed to a release of claims related to the litigation and
on March 10, 2006 jointly dismissed the litigation with
prejudice. The purchase agreement pursuant to which the
Company acquired Accu-Sort in 2003 provides certain
indemniﬁcation for the Company with respect to this matter
and the Company will pursue recovery under the agreement.
U.S. generally accepted accounting principles
require
subsequent events such as the settlement of this litigation to
be reﬂected in the prior year results of the Company to the
extent they become known before the release of the prior
year ﬁnancial statements. As a result of
this subsequent
event,
the Company has increased previously provided
reserves for this matter by $15.5 million ($9.9 million after-
tax, or $0.03 per share) through a charge to other expense
(income) in 2005.

66

I T E M 9 . C H A N G E S I N A N D

D I S A G R E E M E N T S W I T H
A C C O U N TA N T S O N A C C O U N T I N G
A N D F I N A N C I A L D I S C L O S U R E

None

I T E M 9 A . C O N T R O L S A N D P R O C E D U R E S
The Company’s management, with the participation of the
Company’s President and Chief Executive Ofﬁcer, and
Executive Vice President and Chief Financial Ofﬁcer, has
the Company’s disclosure
evaluated the effectiveness of
controls and procedures
such term is deﬁned in
(as
Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as
of the end of the period covered by this report. Based on
such evaluation,
the Company’s President and Chief
Executive Ofﬁcer, and Executive Vice President and
Chief Financial Ofﬁcer, have concluded that, as of the end
of
such period, the Company’s disclosure controls and
procedures were effective.

Management’s annual report on the Company’s internal
control over ﬁnancial reporting and the independent regis-
tered public accounting ﬁrm’s attestation report are included
in the Company’s 2005 Financial Statements in Item 8 of this
Annual Report on Form 10-K, under the headings “Report
of Management on Danaher Corporation’s Internal Control
Over Financial Reporting” and “Report of Independent
Registered Public Accounting Firm”, respectively, and are
incorporated herein by reference.

There have been no changes in the Company’s internal
control over ﬁnancial reporting that occurred during the
Company’s most recent completed ﬁscal quarter that have
materially affected, or are reasonably likely to materially affect,
the Company’s internal control over ﬁnancial reporting.

I T E M 9 B . O T H E R I N F O R M AT I O N
None

67

Exhibit 31.1

Certiﬁcation

I, H. Lawrence Culp, Jr., certify that:

1.

I have reviewed this report on Form 10-K of Danaher Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;

3. Based on my knowledge, the ﬁnancial statements, and other ﬁnancial information included in this report, fairly present
in all material respects the ﬁnancial condition, results of operations and cash ﬂows of the registrant as of, and for, the
periods presented in this report;

4. The registrant’s other certifying ofﬁcer and I are responsible for establishing and maintaining disclosure controls and pro-
cedures (as deﬁned in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over ﬁnancial reporting (as
deﬁned in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated sub-
sidiaries, is made known to us by others within those entities, particularly during the period in which this report
is being prepared;

b. Designed such internal control over ﬁnancial reporting, or caused such internal control over ﬁnancial reporting
to be designed under our supervision, to provide reasonable assurance regarding the reliability of ﬁnancial reporting
and the preparation of ﬁnancial statements for external purposes in accordance with generally accepted accounting
principles;

c.

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over ﬁnancial reporting that occurred during
the registrant’s most recent ﬁscal quarter (the registrant’s fourth ﬁscal quarter in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over ﬁnancial
reporting; and

5. The registrant’s other certifying ofﬁcer and I have disclosed, based on our most recent evaluation of internal control
over ﬁnancial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or
persons performing the equivalent functions):

a. All signiﬁcant deﬁciencies and material weaknesses in the design or operation of internal control over ﬁnancial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and
report ﬁnancial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a signiﬁcant role in

the registrant’s internal control over ﬁnancial reporting.

Date: March 15, 2006

By: /s/ H. Lawrence Culp, Jr.

Name: H. Lawrence Culp, Jr.
Title: President and Chief Executive Ofﬁcer

68

Exhibit 31.2

Certiﬁcation

I, Daniel L. Comas, certify that:

1.

I have reviewed this report on Form 10-K of Danaher Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;

3. Based on my knowledge, the ﬁnancial statements, and other ﬁnancial information included in this report, fairly present
in all material respects the ﬁnancial condition, results of operations and cash ﬂows of the registrant as of, and for, the
periods presented in this report;

4. The registrant’s other certifying ofﬁcer and I are responsible for establishing and maintaining disclosure controls and pro-
cedures (as deﬁned in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over ﬁnancial reporting (as
deﬁned in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated sub-
sidiaries, is made known to us by others within those entities, particularly during the period in which this report
is being prepared;

b. Designed such internal control over ﬁnancial reporting, or caused such internal control over ﬁnancial reporting
to be designed under our supervision, to provide reasonable assurance regarding the reliability of ﬁnancial reporting
and the preparation of ﬁnancial statements for external purposes in accordance with generally accepted accounting
principles;

c.

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over ﬁnancial reporting that occurred during
the registrant’s most recent ﬁscal quarter (the registrant’s fourth ﬁscal quarter in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over ﬁnancial
reporting; and

5. The registrant’s other certifying ofﬁcer and I have disclosed, based on our most recent evaluation of internal control
over ﬁnancial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or
persons performing the equivalent functions):

a. All signiﬁcant deﬁciencies and material weaknesses in the design or operation of internal control over ﬁnancial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and
report ﬁnancial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a signiﬁcant role in

the registrant’s internal control over ﬁnancial reporting.

Date: March 15, 2006

By: /s/ Daniel L. Comas

Name: Daniel L. Comas
Title: Executive Vice President and Chief Financial

Ofﬁcer

69

Exhibit 32.1

Certiﬁcation of Chief Executive Ofﬁcer Pursuant to
18 U.S.C. Section 1350,

As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002

I, H. Lawrence Culp, Jr., certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that to my knowledge, Danaher Corporation’s Annual Report on Form 10-K for the ﬁscal year ended
December 31, 2005 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934
and that information contained in such Annual Report on Form 10-K fairly presents in all material respects the ﬁnancial
condition and results of operations of Danaher Corporation.

Date: March 15, 2006

By: /s/ H. Lawrence Culp, Jr.

Name: H. Lawrence Culp, Jr.
Title: President and Chief Executive Ofﬁcer

This certiﬁcation accompanies the Annual Report on Form 10-K pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
and shall not be deemed ﬁled for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that
section. This certiﬁcation shall not be deemed to be incorporated by reference into any ﬁling under the Securities Act or
the Exchange Act, except to the extent that Danaher Corporation speciﬁcally incorporates it by reference.

70

Certiﬁcation of Chief Financial Ofﬁcer Pursuant to
18 U.S.C. Section 1350,

As Adopted Pursuant to
Section 906 of the Sarbanes Oxley Act of 2002

Exhibit 32.2

I, Daniel L. Comas, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that to my knowledge, Danaher Corporation’s Annual Report on Form 10-K for the ﬁscal year ended
December 31, 2005 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934
and that information contained in such Annual Report on Form 10-K fairly presents in all material respects the ﬁnancial
condition and results of operations of Danaher Corporation.

Date: March 15, 2006

By: /s/ Daniel L. Comas

Name: Daniel L. Comas
Title: Executive Vice President and Chief Financial

Ofﬁcer

This certiﬁcation accompanies the Annual Report on Form 10-K pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
and shall not be deemed ﬁled for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that
section. This certiﬁcation shall not be deemed to be incorporated by reference into any ﬁling under the Securities Act or
the Exchange Act, except to the extent that Danaher Corporation speciﬁcally incorporates it by reference.

THIS PAGE INTENTIONALLY LEFT BLANK

72

D I R E C T O R S

Mortimer M. Caplin
Founder and Member
Caplin & Drysdale

Steven E. Simms 
Executive Vice President

Fluke
Barbara B. Hulit

James H. Ditkoff
Senior Vice President — Finance & Tax

Fluke Networks
James A. Lico

H. Lawrence Culp, Jr.
President and Chief Executive Officer
Danaher Corporation

Robert S. Lutz 
Vice President — Chief Accounting
Officer

Donald J. Ehrlich
Chief Executive Officer
Schwab Corporation

Linda P. Hefner
Executive Vice President, Global
Strategy and Business Development 
Kraft Foods Inc.

Walter G. Lohr, Jr.
Partner
Hogan & Hartson

Mitchell P. Rales
Chairman of the Executive Committee
Danaher Corporation

Steven M. Rales
Chairman of the Board
Danaher Corporation

John T. Schwieters
Vice Chairman 
Perseus, LLC

Alan G. Spoon
Managing General Partner
Polaris Venture Partners

A. Emmet Stephenson, Jr.
Chairman of the Board
StarTek, Inc.

E X E C U T I V E   O F F I C E R S

Steven M. Rales
Chairman of the Board

Mitchell P. Rales
Chairman of the Executive Committee

H. Lawrence Culp, Jr. 
President and Chief Executive Officer

Patrick W. Allender  
Executive Vice President

Daniel L. Comas  
Executive Vice President, 
Chief Financial Officer

Philip W. Knisely 
Executive Vice President

James A. Lico
Executive Vice President

Daniel A. Raskas
Vice President — Corporate
Development

C O R P O R AT E   O F F I C E R S

Alexander Granderath
Vice President and Group Executive

Alex A. Joseph
Vice President and Group Executive

Thomas P. Joyce, Jr.
Vice President and Group Executive

Craig B. Purse
Vice President and Group Executive

Jeffrey A. Svoboda
Vice President and Group Executive

J. David Bergmann
Vice President — Audit

Brian E. Burnett
Vice President — Danaher 
Business System

William H. King
Vice President — Strategic
Development

Frank T. McFaden
Vice President — Treasurer

James F. O’Reilly
Associate General Counsel and
Secretary

Philip B. Whitehead
Vice President — Managing Director

James P. Williams
Vice President — Human Resources

Frank A. Wilson
Vice President — Investor Relations

M A J O R   O P E R AT I N G  
C O M PA N Y   P R E S I D E N T S

Accu-Sort
Greggory W. Branning

Danaher Tool Group
Consumer Tools
John P. Constantine

Gilbarco
Martin Gafinowitz

Hach/Lange
Thomas P. Joyce, Jr.

Hach Ultra Analytics  
Yves Ducommun

Hennessy Industries, Inc.
Vincent E. Placenti

Jacobs Vehicle Systems
Scott W. Wine

KaVo
Alexander Granderath

Kollmorgen Drives 
Hans Dreijer

Kollmorgen Electro-Optical
Michael J. Wall

Kollmorgen Motors
Kevin E. Layne

Leica Microsystems
Wolf-Otto Reuter

Matco Tools Corporation
Thomas N. Willis

Pacific Scientific Energetic 
Materials Company
H. Kenyon Bixby

Pacific Scientific Safety &
Aviation Group
Richard G. Knoblock

Radiometer
Peter Kürstein

Sensors and Controls
Steven E. Brietzka

Thomson
Michael L. Douglas

Trojan Technologies
Marvin R. DeVries

Veeder-Root
Brian E. Burnett

Videojet Technologies
Craig B. Purse

S H A R E H O L D E R   I N F O R M AT I O N
www.danaher.com

Our transfer agent can help you with a variety of 
shareholder related services including:
— Change of address
— Lost stock certificates
— Transfer of stock to another person
— Additional administrative services

Contacting our Transfer Agent
Sun Trust Bank
Stock Transfer Department
Mail Code 258
P.O. Box 4625
Atlanta, Georgia  30302
Toll Free: 800.568.3476
Outside of the US: 404.588.7815
Fax: 404.332.3875

Additional inquiries may be directed to 
Investor Relations at:
Danaher Corporation
2099 Pennsylvania Avenue NW, 12th Floor
Washington, DC 20006
Phone: 202.828.0850
Fax: 202.828.0860
Email: ir@danaher.com

Annual Meeting
Danaher’s annual shareholder meeting will be held on 
May 2, 2006 in Washington, D.C. Shareholders who would
like to attend the meeting should register with Investor
Relations by calling 202.828.0850 or via 
e-mail at ir@danaher.com.  

Investor Relations
This annual report along with a variety of other financial
materials can be viewed at www.danaher.com.

Auditors
Ernst & Young LLP
Baltimore, Maryland

Stock Listing
Symbol: DHR
New York and Pacific Stock Exchanges

2 0 9 9   P E N N S Y LVA N I A   AV E N U E   N W,   1 2 T H   F L O O R

WA S H I N G T O N ,   D C   2 0 0 0 6

T:   2 0 2 . 8 2 8 . 0 8 5 0

W W W. D A N A H E R . C O M