Danaher to lay off 2,300; close 16 facilities

Sales for diversified manufacturer Danaher Corp. drop 13 percent in first quarter; will accelerate cost reductions
Jack Keough -- Industrial Distribution, 4/23/2009 8:09:13 PM

The Danaher Corp. says revenues for the first quarter decreased roughly 13 percent year-over-year to $2.6 billion, with core revenues down 10 percent. The impact of currency reduced revenues by 5.5 percent, offset by acquisitions which contributed 2.5 percent to sales growth. Revenues also benefited from four extra days in the first quarter. The corresponding offset of days will be realized in the second and fourth quarters of this year.
"Given the (economic) environment, we are accelerating our cost reduction and restructuring activities, which now total $150 million to $170 million this year," Larry Culp, Danaher president and CEO told financial analysts in a conference call, according to a transcript provided by www.seekingalpha.com "These initiatives will result in the elimination of 2,300 positions and 16 facilities and provide annual cost savings of approximately $140 million. This is in addition to the more than $100 million of savings we discussed with you during our year-end call."
During the quarter, Danaher completed the acquisition of three companies, comprising about $50 million of annualized revenue to strengthen its environmental, test and measurement and sensors and controls businesses.
"We believe the acquisition environment is becoming more attractive and that we are well positioned to capitalize on strategic acquisition opportunities," Culp said.
Year-over-year gross margin for the first quarter increased approximately 110 basis points to 47.9 percent. Excluding the impact of prior-year Tektronix charges, gross margins were up slightly despite the revenue decline. This was primarily due to the impact of recent restructuring activities and lower raw material costs.
Mechanics hand tool core revenues declined 14 percent in the quarter, primarily due to lower sales to both the consumer and professional channels. Sales of Danaher's domestic China tool brand were also soft, although it saw sequential improvements through the quarter.
In March, Danaher was awarded a new multi-million dollar contract from the U.S. Marine Corps to supply tool kits, which it will begin shipping in the second quarter of this year.
"Our expectation is for the second quarter core revenues to be slightly worse than the first. And for the full year, we are forecasting core revenue declines approximately in line with our first-quarter decline of 10 percent," Culp said.
The $100 million to $120 million of additional restructuring charges are expected to reduce EPS by approximately $0.08 per share in the second quarter and $0.25 per share for the full year.