Matt Gugino - VP, IR Tom Joyce - President and CEO Dan Comas - EVP and CFO.

Scott Davis - Barclays Nigel Coe - Morgan Stanley Steven Winoker - Bernstein Research Steve Tusa - JPMorgan Jeff Sprague - Vertical Research Partners Julian Mitchell - Credit Suisse Richard Eastman - Robert W. Baird Isaac Ro - Goldman Sachs.

My name is Debby, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Danaher Corporation Third Quarter 2014 Earnings Results Conference Call. Today’s call is being recorded. All lines have been placed on mute to prevent any background noise.

After the speakers’ remarks, there will be a question-and-answer session. (Operator Instructions). I will now turn the conference over to Mr. Matt Gugino, Vice President of Investor Relations. Mr. Gugino, please begin your conference..

Thanks Debby. Good morning, everyone, and thanks for joining us. On the call today are Tom Joyce, our President and Chief Executive Officer and Dan Comas, our Executive Vice President and Chief Financial Officer.

I’d like to point out that our earnings release, a slide presentation supplementing today’s call, our third quarter Form 10-Q and the reconciling and other information required by SEC Regulation G relating to any non-GAAP financial measures provided during the call are all available in the Investor section of our website, www.danaher.com under the heading Financial Information-Quarterly Earnings and will remain available following the call.

The audio portion of this call will be archived on the Investor section of our website later today under the heading Investor Events and will remain archived until our next quarterly call. A replay of this call will also be available until October 23, 2014. The replay number is (888) 203-1112 in the U.S.

and (719) 457-0820 internationally and the confirmation code is 9389793. During the presentation, we will describe certain of the more significant factors that impacted year-over-year performance. Please refer to the supplemental materials and our third quarter Form 10-Q for additional factors that impacted year-over-year performance.

Unless otherwise noted, all references in these remarks and accompanying presentation to earnings, revenues and other company-specific financial metrics relate to the third quarter of 2014 and relate only to the continuing operation of Danaher's businesses, and all references to period-to-period increases or decreases in the financial metrics are year-over-year.

I would also like to note that we are making some statements during the call that are forward-looking statements within the meaning of the federal securities laws, including statements regarding events or developments that we believe or anticipate will or may occur in the future.

These forward-looking statements are subject to a number of risks and uncertainties, including those set forth in our SEC filings. It is possible that actual results might differ materially from any forward-looking statements that we make today.

These forward-looking statements speak only as of the date that they are made, and we do not assume any obligation to update any forward-looking statements whether as a result of new information, future events and developments or otherwise. With that I’d like to turn the call over to Tom..

Thanks Matt and good morning everyone. We are pleased with the quarterly results we announced this morning. Earnings came in above our expectations, thanks to the Danaher teams’ very strong execution. Danaher Business System continues to drive superior margin expansion, increase cash flow and healthy top line performance in a modest growth environment.

The investments we’ve made in innovation and expansion in high growth markets drove share gains in many of our operating companies. Fluke, Hach, Veeder-Root, Radiometer, AB Sciex, Implant Direct and Esko are among the businesses that we believe outperformed relative to their markets during the quarter.

These share gains and the teams’ execution also helped drive more than 85 basis points of core operating margin improvement in four of our five segments. Our cash flow performance is also very good, resulting in free cash flow to net income conversion ratio of a 128%.

We are encouraged by our increased M&A activity of late, as we’ve announced $3.3 billion of deals across our portfolio in the first nine months of the year. These acquisition will strengthen our dental, life science and diagnostics, environmental and Test & Measurement segments.

Cultivation funnels across our portfolio remained full, giving us confidence in our ability to deploy our substantial M&A capacity in a strategic and disciplined way. So with that as a backdrop, let’s get in to the details of the quarter.

This morning we reported diluted net earnings per share of $0.95, up 13% and representing another record third quarter for Danaher. Revenues grew 4.5% to 4.9 billion, with core revenues up 3%. The positive impact of acquisitions increased revenues by 2%, while currency translation reduced revenues by 50 basis points.

Geographically, high growth markets led the way increasing high single digits. Despite the headlines in China, our businesses grew double digit, led by our T&M Instruments, Gilbarco Veeder-Root, Diagnostics and Dental platforms. Developed markets remained relatively stable and the US and Western Europe both grew low single digits.

Our gross margin expanded 80 basis points or approximately a $140 million to 52.7%. This increase in gross profit enabled us to increase our sales and marketing and R&D by nearly 60 million in the quarter and deliver 70 basis points of core operating margin expansion.

Turning to our five operating segments, Test and measurement revenues increased 1.5%, while core revenues decreased 1%, primarily due to a decline in our communications platform. Reported operating margin declined a 170 basis points, while core operating margins decreased a 115 basis points.

On Monday, you saw that we announced an agreement to combine our communications business with NetScout Systems to create a premier global provider of network management solutions for both carrier and enterprise customers. We are excited about this transaction which is the culmination of a multi-year discussion with NetScout about working together.

This is a powerful opportunity to combine highly complementary businesses in a transaction that we believe will benefit all Danaher and NetScout stakeholders, associates, shareholders and customers alike.

Danaher’s premier troubleshooting, cyber security, and engineering solutions combined with NetScout’s high performance monitoring technologies will give customers access to the most expansive suites of best-in-class product in the industry.

The combined company will offer even greater breadth and depth across both carrier and enterprise networks, expanding opportunity through innovation and growth and improving our customers overall experience.

We anticipate that this transaction will close in 2015, subject to customary closing conditions, including regulatory NetScout shareholder and other approvals. Upon close, our Executive Vice President, Jim Lico will join NetScout’s Board of Directors, while retaining his responsibility to Danaher.

Now back to the results from the quarter, our communications platform core revenues decreased at a double-digit rate. High teens growth in our security solutions business was more than offset by a decline in network management solutions due to spending delays from a wireless carrier customers, primarily in North America.

Despite the revenue decline, we were encouraged by the positive order growth in the platform that we believe will continue for the remainder of the year. At Arbor demand for Pravail enterprise security products grew more than 50% as IT Security customers continue to rely on Arbor to prevent and mitigate attacks on their networks.

Around the world conducting business has become increasingly virtual, and Arbor is responding with flexible solutions to help customers of all sizes quickly and cost effectively launch or expand best-in-class security solutions. Fluke Network saw robust demand for its enterprise TruView system and portable network tools which were each up 15%.

F Net’s TruView system continues to receive industry recognition and we are honored with the 2014 Communications Solutions Product of the Year Award from the global media company, TMC. Our instruments platform core revenue increased at low single-digit rate with growth in most major geographies.

Fluke core revenues were up mid-single digits representing its highest quarterly growth rate in over three years. Growth was solid across most major product lines, led by calibration and biomedical which each increased double-digits.

Distribution [sell-out] [ph] remained strong globally, particularly in North America and China, where growth was mid-single digit or better. Fluke plans to build on this momentum by launching Fluke Connect in China later this month.

At Tektronix core sales were up slightly, with modest growth in point of sales in North America and healthy demand for power supplies and oscilloscopes in China. Turning to our environmental segment, revenues increased 10.5% with core revenues up 5%.

Segment core operating margin improved 85 basis points with reported operating margin down 30 basis points due to the dilutive effect of recent acquisitions. Water quality core revenues increased at a mid-single digit rate with strength in analytical instrumentation and chemical treatment solutions.

Hach executed well in a temperate municipal spending environment driving above market growth in both North America and Europe. Sales also healthy in China growing double-digits. This month, Hach will launch the SL1000 Portable Parallel Analyzer or PPA, a breakthrough system that dramatically streamlines water quality testing.

The PPA system is the only testing solution in the market that uses a disposable cartridge to improve ease of use and reduce the manual steps by over 50% in an EPA compliant drinking water testing environment. Importantly, it provides technicians of all experience levels with a fail safe way to achieve highly accurate and consistent results.

In Trojan demand for large municipal projects remain weak globally. Encouragingly, we received two Ballast Water Treatment system orders that will be installed in a total of 15 ships. We anticipate the delivery of these systems will start in the second half of 2015.

On the regulatory front, we received Alternative Management System or AMS acceptance from the US Coast Guard for a full suite of UU ballast water treatment product in July, this is a temporary designation that allows customers to use Trojan solutions in US waters, while our application for US type approval is pending.

Gilbarco Veeder-Root’s core revenues grew mid-single digits with real robust demands for our dispensers, vapor recovery products and point-of-sales solutions. Vapor recover sales grew more than 50% in China as businesses continue to work towards compliance with environmental regulations.

In point-of-sale, North American customers are choosing GVR’s reliable and affordable payment security solutions as they operate their systems in advance of the new EMV regulations that begin to take affect in 2015.

In the quarter, Gilbarco Veeder Root acquired FuelQuest a leading provider of fuel management solutions for suppliers, distributors and buyers of petroleum products.

This acquisition further expands the capabilities of our Insite360 cloud-based fuel management platform by allowing our customers to remotely monitor fuel acquisition, planning and distribution. Moving to life sciences and diagnostics; revenue increased 4% with core revenues up 3%.

Core operating margin was up 120 basis points, while our reported operating margin increased 100 basis points. Core revenues in our diagnostics platform grew mid-single digits. At Beckman Coulter, core revenues increased a mid-single digit rate with double-digit growth in immunoassay, urinalysis, and automation.

Growth was particularly strong in China where revenues grew over 20%. Beckman received FDA 510 clearance for its Power Express Sample Processing System in the quarter, further expanding its world-class suite of automation products.

The Power Express is a scalable, high speed system designed to automate sample processing in labs of all sizes across all core disciplines including chemistry, immunoassay and hematology.

The Power Express is just one of several new FDA cleared solutions that will help our US customers improve efficiency and reduce turnaround time for critical diagnostic tests. Radiometers core revenues increased at a mid-single digit rate, led by more than 35% growth in AQT sales.

High growth market sales were up more than 20% as we continued to expand our market position in China. Leica Biosystems core sales were up low-single digits, as mid-teens growth in high growth markets was offset by weakness in core histology instruments in Europe.

Advanced staining instrument placements were particularly strong as revenues increased over 20% in the quarter. We expect our advance staining growth rates to remain healthy, as our growing installed base continues to drive sales of reagents and other consumables.

Core revenues in our life science platform grew at a low-single digit rate, compared to high-single digit growth in the third quarter of last year. Sales in the US and Western Europe were positive, but we continue to experience uncertainty in tender timings and funding in China.

AB SCIEX core revenues grew mid-single digits with strength in academic, clinical and applied markets. We continue to expand our in vitro diagnostic offerings by launching the Triple Quad 4500MD and QTRAP 4500 systems.

4500 series offers greater flexibility, exception sensitivity and faster data acquisition affording doctors and patients quicker access to reliable and accurate diagnostic test results. Leica Microsystems core sales increased low-single digits.

Our SP8 microscope continues to be very well received and drove double-digit growth for our Confocal microscope systems. Last Wednesday, the Nobel Prize in Chemistry was awarded to three scientists including Leica long time collaborator and key opinion leader Professor Stefan Hell.

Professor Hell and others were recognized for their work in developing a way to use optical microscopy to study the molecular processes in the living cells. This work is especially meaningful to Leica, as we collaborated with Professor Hell to commercialize the first microscope that uses this technology back in 2004.

Remarkably, this is the fourth year in a row that Leica Microscopes have been sighted in Nobel Prize wining work, and we are honored that our products continue to be used to support this and in other important scientific research. Turning to Dental, segment revenues increased 3.5%, while core revenues were up 2%.

Our core operating margin increased 100 basis points and reported operating margin increased 110 basis points to 17.2%. The team has done a terrific job in using DBS to drive productivity and improve segment margins over the past several years.

In early September, we announced the pending acquisition of Nobel Biocare, premier global brand and a pioneer in dental innovation.

Nobel Biocare has expertise in implant dentistry; digital prosthetics and software combined with our extensive capabilities in 3-D imaging, intra-oral scanning and digital restorative solutions will benefit both patients and dentists by further optimizing clinical workflows.

We believe DBS will make a significant impact on Nobel Biocare’s performance by helping to drive further innovation, growth and collaboration with our other dental companies. We are confident that Nobel Biocare is an outstanding bid for Danaher and we look forward to working with this capable team.

The purchase price of $2.2 billion equates to approximately three times revenues and less than four times gross profit, which we believe positions us well from a return perspective.

The acquisition remains subject to customary closing conditions, including regulatory approvals and is expected to close in the fourth quarter of 2014 or the first quarter of 2015. Dental consumables core revenues grew low-single digits as healthy demand in China and the Middle East was partially offset by a modest decline in the developed markets.

In the US, the sluggishness we saw in the second quarter continues. Encouragingly, demand for our implant products remain robust increasing globally at a double-digit rate. Dental technologies core revenues were up mid-single digits, driven by demand for our dental hand pieces and imaging equipment globally.

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

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

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

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

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

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

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

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

So to wrap up, the Danaher team executed well this quarter, using the Danaher business system to expand margins, generate strong cash flow performance, and deliver higher than expected earnings.

Across the portfolio our outstanding presence in high growth market, investments in innovative new products and focus on improving sales and marketing have helped our businesses continue to take share in their markets. As we plan for 2015, we remain mindful of the challenging macroeconomic outlook, including the recently strong dollar.

Thus, we are continuing to invest in high-impact areas while also increasing spending on productivity initiatives to approximately $125 million in the second half of 2014.

We believe our focus on growth investments and margin expansion combined with our robust balance sheet and M&A capacity position us to finish 2014 well, and drive long term results. We are initiating fourth quarter diluted net EPS guidance of $1-$1.04, which assumes fourth quarter core revenue growth similar to the first three quarters of 2014.

so before we go to Q&A, I wanted to take a moment to share a few thoughts after the first six weeks of my time as Danaher’s CEO. When this transition began, I knew that Danaher’s future was bright. I believe it’s now firmer than ever. The caliber of our team, the depth of incredible talent, that deep commitment to DBS and our culture is second to none.

Financially, our balance sheet has never been stronger, much as we have done in the past, and more recently with the $3.3 billion, we have committed so far this year, I look forward to channeling this strength to build upon our leading portfolio of companies. At Danaher, we compete for shareholders and that is on the top of my mind everyday.

We continue to look for smart ways to create value for our shareholders and other stakeholders such as this week’s announcement regarding the combination of our communications business with NetScout, the recent divestiture of our electric vehicle and hybrid motor product lines, and our pending acquisition of Nobel Biocare.

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

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

(Operator Instructions). We’ll take our first question today from Scott Davis with Barclays..

Speaking of that, the equity market are telling us that there is bad stuff out there, but you guys don’t seem to sense any panic amongst your customers or anything.

Can you tell us if anything has changed in October, any activity amongst your customers, particularly in your more cyclical businesses like Industrial Tech or Fluke that folks are starting to hunker down a bit..

Scott it’s obviously still pretty early here in October, and I’m sure they are all watching their screens or reading the paper day to day, but I think the simple answer to your question is, no.

We’ve seen a start to the October here is pretty consistent with what we’ve seen through the last couple of quarters, but that is certainly not to suggest that this environment unfolds day to day here. Those screens and those headlines won’t start to influence people’s behavior.

Obviously over time we’ve seen that happen, and frankly not that the last week has necessarily been the overwriting influence on us, but concerns over the macroeconomic situation, obviously the changes in currency, the shift and the strengthening of the dollar have all influenced the way we want to position ourselves going in to 2015.

But again going back to the short answer to your question, no, we are not seeing customer panic in the order book at the moment. .

Okay, and then the natural follow-on to that is the sellers, you know a bid ad spreads have been a little frustrating I think for most guys in industrial the last couple of years and the sellers have gotten a little, I don’t want to call it greedy, but its certainly opportunistic.

Have you seen your phone light up in the last couple of weeks where sellers might be a little bit more amenable to compromise. .

Again, I don’t know that there has necessarily been any particular inflexion in the last couple of weeks or phone lines lighting up. But I would say that as the general direction we have seen some increased activity. We have seen I think the sellers interested in taking advantage of what are still some pretty rich valuations.

But those same sellers are interested in the transaction. So I think we would generalize by saying that we are pleased with how the funnels are sitting today, the cultivation conversations are good and we seem to be making progress in some those conversations. So, directionally we feel pretty good about where we are. .

We’ll go to Nigel Coe with Morgan Stanley..

Just wanted to pick up on the comments about what might be changing, and you are obviously planning for a pretty similar growth environment to what we’ve seen both in 3Q and year-to-date.

But I am wondering if the mix of that 3% is somewhat different and obviously Europe, there is focus attention here and are you projecting a weaker Europe, maybe stronger US; any change in the mix of that 3%?.

I wouldn’t necessarily say we are thinking about any dramatic shifts in that mix, but I would say there are probably a few things to note. I would say we’ve seen and perhaps we’d expect to see some marginal improvement here in the US.

I would say while the European environment has been stable quarter-to-quarter, obviously there is a bit of concern out there right now about Germany and some potential slowing there. So as Germany goes as we know, sometimes Europe goes and so I think there is a reason for some caution as it relates to Europe.

More recently we have seen softness in Latin America specifically in Brazil, and of course the situation in Russia has changed the trajectory of that market.

So I think when you put all of that together, and then you add some continued very good growth in China maybe not quite as high as over a long period of time, but certainly some continued very big growth.

I think you see some shifts on the margin, but we’d still consider the high growth market to be the leaders, the developed markets sort of hanging in there. But maybe within each of those two major – that split, you might see some shifts here and there. .

Nigel maybe just to add one thing on Europe. As Tom and I went through the strategic reviews here, over the summer and the fall, we actually think on a relative basis Europe’s one of the places we are doing pretty well, and some businesses where we felt we were taking share, a chunk of that was in Europe.

Hard not to be worried about all the headlines here in Europe, news about Greece today and their sudden rise again in interest rates, borrowing rates over there. But actually at a relative basis I feel we like we performed pretty well there. .

Okay, so [Inaudible] some mug shakings there, that’s pretty clear.

And then just digging a little bit deeper, one of the hospital providers called out some benefits from the Affordable Care Act on their patient volumes, and I am wondering if you’ve seen some benefits from that on your consumables, and then on top of that life sciences remains a great challenge in China and I am wondering if you have a line of sight of when that might start improving.

.

So on the Affordable Care Act and the impact on consumables, first of all we are very encouraged by the progress that we are making at that, and I would say largely the progress we are making there and frankly across the entire diagnostic portfolio is very good execution across those businesses and those businesses I think are particularly Radiometer taking share and Leica Biosystems doing very well particularly in advanced staining which is an important area of future growth in one of the better market segments.

We think utilization is probably marginally improved as a function of the Affordable Care Act, and I think there are some out there who would certainly say that the states with Medicaid expansion are the ones where we are seeing that uptake.

We are also seeing improvements in the hospital’s balance sheets, with a little bit of pressure taken off the bad debt side.

So you kind of put those things together and yeah there’s a marginally improving environment there, but relative to any improvement beyond that right now, I think its probably still a little early to tell, but improvements on the margin.

In terms of life science and in China specifically that’s probably one of the most challenging environment out there today.

You’ve heard us talk and perhaps others talk about some of the delays in funding in the life sciences market, some of the concerns around compliance in that market that may be underpinning some of those delays, as China enforces what we believe are ultimately good policies for how that market will operate.

But nevertheless, that is a market that continues to be a slow market today, and we don’t think that’s necessarily a phenomenon that’s going to ease up here in the next couple of weeks, let alone perhaps even in the next couple of months.

So I think we are sort of thinking that that could be something that continues to be under some pressure, a slower growth market, maybe into 2015..

We’ll take our next question from Steven Winoker with Bernstein Research..

Tom may be a little perspective on Tektronix specifically; you know this is the first quarter in 11 quarters almost three years I suppose that where it’s turned positive even if you said it was up low-single digit but slightly.

Is this the start of something a little more significant, and what drove that turn, you know is there something fundamental that that’s starting to shift a little bit in that business that you’re seeing. .

It’s obviously been a challenging time over a number of quarters, but we are very encouraged by what we’ve seen in the last couple of quarters and the change there. I think that team has executed very well. I think they have done some very good things from a product and from a go-to-market standpoint.

Seeing two data points together is always a good thing to do on the positive side, but I think that’s still a business that will be probably a low-single digit grower here over the near term. So I would attribute it a little bit more on the execution side that necessarily a fundamental shift to an inflexion point in the market.

I mean clearly there are some things going on that will drive market growth over time, but I put a little bit more on the teams execution here more recently..

And you mentioned Ballast Water for Trojan, that’s another encouraging sign.

Is this just a one-off you think or something more significant again?.

No, we would not consider this to be just a one-off.

We would consider it to be just the beginning and early and very positive indication of the market acceptance, and I think its just important to remember that these regulatory approvals are really kind of threshold events for starting to bring this market to an inflexion point of higher growth, and so we are excited by the approval that we got, the AMS approval that I mentioned.

But that’s not as big a deal quite frankly as getting formal US Type approval that I mentioned that we expect next year. So more to come on that, very encouraging early indication of acceptance and it’s I think an indication of good things to come. .

And if I could just sneak one more in on the separation all through this week, the value of the business combination you’ve made abundantly clear. Just may be a little more thinking on the shareholder value of doing this outside of Danaher rather than within Danaher. .

Steve its Dan, I think it’s a reflection of our long held view, NetScout’s long held view that there was a lot of increment – and this is a one plus one equals three. It’s a little bit like our tools joint venture, but we think with a greater growth profile, and we just ultimately concluded this was the best way to affect that. .

We’ll take our next question from Steve Tusa with JPMorgan..

So you mentioned Ballast water and I guess are there any other businesses may be Beckman perhaps that just from some company specific dynamics should perhaps look better at this time next year versus what they are doing now, just outside of the macro..

Steve I saw several opportunities that businesses had as I came through the strategic reviews that would point towards growth potential in a number of businesses.

I think for example, if you think about Gilbarco Veeder-Root, and what we are seeing around the early indications around the customer baser moving towards compliance with the EMV regulations that I mentioned. I think that’s an indicator of some momentum that we could see later in 2015. I think and you mentioned Beckman Diagnostics specifically.

I think that Beckman continues to drive their improvements in quality, in service, in delivery and the overall customer experience, and then you combine that with some of the new product clearances and then the introduction of our molecular diagnostics platform [Barrettes] next year. I think that too has exciting potential for Beckman.

So I think because it would be too outside and there would be a number of others if we walked across the portfolio. .

Right, and from a macro perspective it sounds like this is 3% type of economy. It doesn’t sound like you think even though you highlight the macro challenge that’s out there, it doesn’t sound like you think this is kind of a 1% -2% economy, this is just kind of a stable and steady growth type of environment we are in right now. .

Yeah, I don’t think we want to go Chicken Little on here, but I think we want to be ready for what comes. We’ve done that obviously over a long period of time when the cycles moved through, we try to anticipate where challenges come and we think there’s some indications out there that would be challenges, but we are not trying to call a crisis here. .

Yeah, and then one last question just on portfolio mix, by buying Nobel and doing this deal for the comps business I would assume this kind of reinforces the view that you guys aren’t particularly stuck in a frame of mind that was a certain percentage from a healthcare and a certain percentage from industrial businesses.

You are going to go where the opportunities provide the best strategic and financial returns. .

Steve I probably couldn’t say it any better than you just said it. We are not stuck on percentages and we absolutely moved to where we can add the greatest value for our shareholders by making those portfolio moves that come our way and that we can make happen over time. .

Is it too late for sellers to get something done by the end of this year or is everybody just kind of looking more towards ’15.

How robust is the pipeline?.

Steve it’s not a tax driver here that – but on the margin here the last two or three months and just what we’ve seen in the last four-five months has been encouraging regarding conversations. .

We’ll take our next question from Jeff Sprague with Vertical Research Partners. .

Just a quick one or two; just on the sell side of things Tom, the NetScout deal is interesting right in an environment where its tough to buy perhaps it makes sense to sell a few things.

So I just wonder, we are all fairly acquainted with your portfolio, but what’s the prospect for other moves perhaps structured in different ways but kind of pruning opportunities in the portfolio. .

First of all it’s important to recognize that there was not motivation behind the partnership with NetScout that had to do with it being tough to buy. We thought that was just a great opportunity not matter what as you might have expected.

But we will continue to evaluate the portfolio and make sure that that our businesses are well positioned for the future. I think we have a tremendous portfolio today.

I think going across the strategic plans that I did and not that I saw every operating company during the season but I saw all the major operating companies and certainly all of them from a platform point of view. And I think there’s just a lot of potential that we have across the entire portfolio today.

But that being said, you’ve heard Larry say it over a long period of time that no business has a permanent home at Danaher, and we’ll continue to evaluate whether each of our businesses is well positioned in the portfolio and if we see opportunities for smart partnering or an opportunity where that business is better served to be in a better place, we’ll certainly look to make that happen.

But in general I am thrilled with the portfolio we have today..

Right, and then I was just wondering if we could get a little additional color on just what’s going on restructuring, just kind of a couple of questions and points around that. Tom I think you said a 125 million in second half implying some of it started in Q3.

I am wondering Dan if you can just kind of give us a little color kind of Q3 versus Q4 and if there is any change in deal cost and other things that are going on in the fourth quarter and may be just a little thought if you could on where the activity is taking place and what the payback might be..

Jeff on the about where it’s taking place, obviously a lot of communication to do here, so we are going to avoid to get in to specifics. But the 125 million largely, and that over 90% of this will be in the fourth quarter. Broad based, we would expect about a little bit less than a one year pay back.

So on an annualized basis, we expect about a 100 million of savings and roughly $0.10 a share. Probably don’t get all of that until we get to the end of the first quarter, given there’s often some kind of lag effect, but found a lot of good projects here and obviously we made decision to execute upon them. .

Any change in deal cost in it. .

Jeff I just might add to that, I think if Dan and I went through each of the individual businesses both during the operating reviews earlier or during the strategic plan reviews, it was clear that the businesses were already thinking ahead as to where those opportunities might be and how to take advantage of it.

So we were really pleased with how the businesses looked broadly across the portfolio and came up with really a terrific group of projects. .

And then Jeff just in terms of deal costs we highlighted some of that in July. I don’t think its changed much clearly loosing the motion business and the earnings in the fourth quarter that’s obviously in the guide here, we continue to work on the integration of the Siemens business that’s going well, but we are spending money on that.

The only thing that could be of significance that we would call it out, if we were to Nobel here in the fourth quarter which was a possibility, we would have some one-time expense which given the magnitude we would call out separately. .

We’ll take our next question from Julian Mitchell with Credit Suisse..

Just a question on Dental firstly, sort of earlier in the quarter you talked about US sell-through of consumables being a little bit better, doesn’t seem to have shown up yet in your number. Is that something you think reverses pretty soon, and also dental very, very strong core margin improvement performance in Q3 that after a pretty weak Q2.

What do you think is a kind of steady-state run rate on that dental margin trajectory should be?.

On the dental consumables Julian, it clearly is a business that is still closely tied to what we think is a fairly slow growth macro environment, and so I think we are doing a good job from an execution standpoint I think, but clearly we don’t have any tailwind from a market standpoint.

So, we’ve got work to do there, but I don’t think there’s anything impressive, any more noteworthy than the environment in which that business is performing today. Dan will comment on the second on kind of an outlook on margins, but you are right to note certainly that it’s a good performance from dental on the margin side in Q3.

Dental technologies in particular did a very good job on driving margins, some of that a function of things we did last year around productivity, some of that just continuing good work this year from an execution standpoint, and then a little bit of help overall across the segment from a mix standpoint with consumables despite the slightly slower growth that you commented on, generally providing a pretty good mix for the segment overall..

And Julian in terms of margin, for the full year, and there will be some noise in Q4 obviously because of restructuring but from a core basis, we would expect core margin expansion in that 75-100 basis points core margin improvement during the year. You obviously saw more than that here in the third quarter.

It’s a little bit hard for me to kind of quote a number here given the expectation of Nobel coming in, because we will have a lot of noise for a couple of quarters. But ultimately with Nobel what we have we think this is a 20% segment in four to five year from now. .

And then just on the outlook, you obviously talked about restructuring measures you are enacting now, and you talked earlier about the decent increases in SG&A and R&D in Q3 funded by the gross margins.

Have your own spending plans whether OPEX or CapEx changed in light of the macro conditions that you sight or for now you are kind of proceeding as you were and you will just watch to be able to put closely for changes. .

Julian probably important to note here that we are just now entering in to budget season here, so we’ll have work to do with each of the individual operating companies to understand how they are positioning for 2015.

And one of the things we try to make sure we do through that process is to recognize that there’s not a one size fits all across the portfolio when it comes to investment, where those gross margin improvements either come from and/or where they get reinvested.

So as we walk across the businesses we will be thoughtful as we’ve always been about making sure that we are investing smartly in to those businesses that have the best opportunities, that they are at the best positions in their market and that’s where you see [less] for example in R&D and in sales and marketing and perhaps some other spots you might see us stay a little tighter.

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We’ll take our next question from Richard Eastman with Robert W. Baird. .

Just a couple of quick questions, on Siemens is that transaction that’s tracking on the timeline is that a first quarter close and Dan could you just give the IT integration expenses in Q3 and Q4 are those still kind of summing to may be 10 million but between the quarters. .

That’s directionally correct; I don’t have them to break down. We just debrief with the Beckman team the other day on the integration and its going well and all our expectations are for a Q1 close. .

And then also Tom just in terms of China we continue to put up some very nice double digit growth there as mentioned, and I think we understand the issues in the life sciences market place there and being regulatory and hopefully they clear sooner rather than later.

But it feels a little bit contradictory, your growth in China coming in some of these more cyclical markets, T&M, I think motion was mentioned. It seems contrary may be to the macro perspective that people have in China. So do you attribute your double-digit growth to your initiatives distribution, sales, marketing or how do you reconcile that. .

Sure Rich thanks for the question. Jim Lico and I were together in China, I think its now two or three weeks ago for a number of days, and we’ve sat with each one of our individual businesses, in many case I was sitting with businesses that I was less familiar with.

But clearly I think what we saw was, we saw a very good group of people , an outstanding set of teams that are continuing to build commercial reach in those markets.

We are seeing teams now putting innovation related resources on the ground, product planning resources we are adding to our local R&D presence, developing product for that local market and commercializing those product in ways that I think are helping to drive our growth.

And you are right to observe that, that growth is coming fairly broadly across not just for example places where we’ve talked about it in the past like Beckman Diagnostics that continues to do an excellent job. Of course that’s a very big business over there, so that’s obviously part of that growth, but it is broad based.

The dental team for example, an outstanding over there that’s continuing to drive double digit growth and that’s not only good market but the team executing very well. So I think if you put that altogether and it’s a good portfolio, well positioned in a number of good markets with good teams that are continuing to invest aggressively. .

We’ll take our next question from Isaac Ro with Goldman Sachs. .

Just one follow-up question on the life science business; if I look at your comments here you did say a combination of pressure in China both in terms of the overall demand environment as well as budget delays.

So I was wondering which of the two was may be a bigger factor just to give us an insight on what your visibility is on our recovery there heading in to next year. .

Isaac tough to parse what you described as budget delays versus overall demand. But if I were to try and generalize, we know that there has been and continues to be scrutiny over, particularly the larger tenders, the instrumentation related tenders, and whether you call that budgetary or you call it a demand, I am not sure.

Now that being said there is another dimension which is, we are on a macro basis, our investments going at the moment, and clearly we see investments going in to the diagnostics that’s more in the healthcare side of the house, and we are seeing obviously the benefit of that and our business is doing very well there.

And perhaps that means slightly less in to the true research side of the house, but I think it’s a little tough to parse that much more precisely..

I think I would say compared to 90 days ago, initially goes to kind of Rich’s previous question, there are some parts in China that we actually incrementally feel a little better about. But I think to be fair on life science we’d have to say we are incrementally a little bit more negative than we were 90 days ago. .

That’s helpful. And then on T&M you guys have been (inaudible) tell a little bit expectations for a continued negative growth there in the wireless business in to 2015 so. So just wondering how broad based that is across to customers and just confirming that you don’t think it’s an issue of market share just more of the environment. .

We think it’s largely an environment and I think that the thing that’s kind of most encouraging here is we saw orders turn positive in the third quarter for the platform, and that trend actually looks pretty good heading here in to Q4 as well.

The issue there is, we often get - some of that orders we actually get upfront payment, you see that in some of the numbers in our cash flow statement, but we actually won’t book revenues for six, nine and 12 months out. So we are seeing a nice turn in terms of orders.

The next couple of quarters are going to be challenged here, I don’t think that’s changed, but I think the outlook’s looking a little better here. .

Ladies and Gentlemen that does conclude our question and answer session. Mr. Gugino, I will turn it back to you for closing remarks. .

Thanks everyone for joining us, we’ll be around all day for questions. .

Ladies and Gentlemen thank you so much for your participation this morning. This does conclude today’s conference..