Management's Discussion and Analysis of Financial Condition and Results of Operations is designed to provide a reader of Danaher Corporation's ("Danaher," "Company," "we," "us," "our") financial statements with a narrative from the perspective of Company management. The Company's MD&A is divided into four main sections:

• Overview

• Results of Operations

• Liquidity and Capital Resources

• Critical Accounting Policies

OVERVIEW

General

We strive to create shareholder value through:

• delivering sales growth, excluding the impact of acquired businesses, in excess of the overall market growth for our products and services;

• upper quartile financial performance compared to our peer companies; and

• upper quartile cash flow generation from operations compared to our peer companies.

To accomplish these goals, we use a set of tools and processes, known as the DANAHER BUSINESS SYSTEM, which are designed to continuously improve business performance in critical areas of quality, delivery, cost and innovation. Within the DBS framework, we pursue a number of ongoing strategic initiatives intended to improve our performance, including initiatives relating to manufacturing improvement, idea generation, product development and commercialization and global sourcing of materials and services. To further these objectives we also acquire businesses that either strategically fit within our existing business portfolio or expand our portfolio into a new and attractive business area. We believe that many acquisition opportunities remain available within our target markets. The extent to which appropriate acquisitions are made and effectively integrated can affect our overall growth and operating results. We also continually assess the strategic fit of our existing businesses and may divest businesses that are deemed not to fit with our strategic plan or are not achieving the desired return on investment.

Danaher is a multinational corporation with global operations. In 2008, approximately 53% of Danaher's sales were derived outside the United States. As a global business, Danaher's operations are affected by worldwide, regional and industry-specific economic and political factors. For example, in those industry segments 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. Danaher's geographic and industry diversity, as well as the diversity of its product sales and services, typically helps limit the impact of any one industry or the economy of any single country on the consolidated operating results. However, the broad impact of the worldwide credit market turmoil and economic downturn have negatively impacted the growth rates of most of the Company's businesses and resulted in the Company's overall revenue from existing businesses contracting in the fourth quarter as compared to the prior year fourth quarter.

Given the broad range of products manufactured and geographies served, management does not use any indices other than general economic trends to predict the overall outlook for the Company. 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 revenue in the short term and thus a key measure of anticipated performance.

Significant Acquisitions

In November 2007, the Company significantly expanded its test and measurement business with the acquisition of all of the outstanding shares of Tektronix, Inc. for total cash consideration of approximately $2.8 billion, including transaction costs and net of cash and debt acquired. Tektronix is part of Danaher's test and measurement business

included in the Professional Instrumentation segment. The Company funded the purchase price of the Tektronix acquisition with proceeds from the issuance of commercial paper and the Company's November 2007 common stock offering, and to a lesser extent from available cash.

Business Performance

While differences exist among the Company's businesses, the Company experienced overall growth during 2008 as compared to 2007. As a result of the deterioration in global economic conditions that occurred in the latter part of 2008, all of the year-over-year growth from existing businesses experienced by the Company occurred in the first nine months of the year. Demand weakened significantly in the fourth quarter resulting in a decline in revenue from existing businesses in the fourth quarter of 2008 as compared to the fourth quarter of 2007. Notwithstanding the fourth quarter decline, the Company's full year growth was led by strength throughout the entire year in the Company's environmental, acute care diagnostic and life sciences businesses. Growth from the test and measurement business during the first nine months of 2008 was partially offset by sales declines experienced in the fourth quarter due to weak demand. Sales growth was also impacted adversely in the fourth quarter 2008 due to weak demand in the Company's industrial and consumer oriented businesses as demand slowed considerably in the dental technologies, product identification, enterprise network performance management and mechanics' hand tools businesses.

The Company continues to operate in a highly competitive business environment in most markets and geographies served. The Company's future performance will depend on its ability to address a variety of challenges and opportunities in the markets and geographies served, including contraction in most of the world's major economies, access to funding in the global capital markets, trends toward increased utilization of the global labor force, consolidation of competitors, the expansion of market opportunities in Asia and volatility in raw material costs. The Company regularly evaluates market needs and conditions with the objective of positioning itself to provide superior products and services to its customers in a cost efficient manner. Consistent with this approach, and in light of the worsening global economic environment, the Company initiated a series of restructuring actions during the fourth quarter of 2008 to better position the Company's cost base for future periods. Please refer to "Results of Operations-Restructuring and Other Related Charges" below for additional discussion.

Although the Company has a U.S. dollar functional currency for reporting purposes, a substantial portion of its sales and profits are generated in foreign currencies. Sales and profits generated by subsidiaries operating outside of the United States are translated into U.S. dollars using exchange rates effective during the respective period and as a result are affected by changes in exchange rates. With limited exceptions, the Company has accepted the exposure to exchange rate movements 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, profit, and assets and liabilities in the Company's consolidated financial statements. Please refer to "Financial Instruments and Risk Management" section below for additional information.

On average, the U.S. dollar weakened against other major currencies during 2008, particularly during the first half of 2008. The U.S. Dollar strengthened against other major currencies in the second half of 2008 and, as of December 31, 2008, U.S. Dollar exchange rate levels were stronger than as of the end of 2007. Currency exchange rates increased reported sales for 2008 by approximately 2.0% as compared to 2007. Given the lower overall profit margins in the Company's European businesses, currency rate changes lowered year-over-year comparisons of reported operating profit margins. If the exchange rates in effect as of December 31, 2008 prevail throughout 2009, currency exchange rates will adversely impact 2009 sales and operating results relative to the Company's performance in 2008. Additional strengthening of the U.S. dollar against other major currencies would further adversely impact the Company's sales and results of operations. Any weakening of the U.S. dollar against other major currencies would benefit the Company's sales and results of operations on an overall basis.

Outlook

During the fourth quarter of 2008, worldwide credit markets and overall global economic conditions deteriorated significantly, resulting in a general decline in worldwide demand for the Company's products and services. The economic uncertainties that continue to exist suggest that global demand will continue to contract, at least in the early months of 2009. While none of the Company's businesses are insulated from the slowing demand, the contraction is anticipated to impact adversely certain of the Company's businesses more than others. In particular, the Company's industrial and consumer businesses are likely to be most impacted with the medical technologies and environmental businesses less affected. The Company expects further contraction in the industrial technologies and tools and components segments as well as portions of the test and measurement businesses. To minimize the impact of the recessionary economic conditions, as discussed below, the Company initiated restructuring actions in the fourth quarter of 2008, and will continue to assess market conditions and take actions as it deems necessary to appropriately position its businesses in light of the economic environment. The Company currently estimates additional pre-tax restructuring costs in the range of $40 to $60 million to be incurred during 2009. Consistent with past practice, the Company will also continue to actively manage working capital with a view to maximizing cash flow.

Although recent distress in the financial markets has not had a significant impact on the Company's financial position or liquidity as of the filing date of this Report, management continues to monitor the financial markets and general global economic conditions. If further changes in financial markets or other areas of the economy adversely affect the Company's access to the commercial paper markets, the Company would expect to rely on a combination of available cash and existing committed credit facilities to provide short-term funding. Please refer to the "Liquidity and Capital Resources" section for additional discussion.

RESULTS OF OPERATIONS

Consolidated sales from continuing operations for the year ended December 31, 2008 increased 15.0% over the comparable period of 2007. Sales from existing businesses contributed 2.5% growth, acquisitions contributed 10.5% growth and currency translation provided 2.0% growth. The majority of the growth related to currency translation occurred during the first nine months of 2008, as currency translation adversely impacted results in the fourth quarter of 2008. References in this report to sales from existing businesses include sales from acquired businesses starting from and after the first anniversary of the acquisition, but exclude currency effect.

The growth in sales from acquisitions in the year ended December 31, 2008 is primarily attributable to the acquisitions of ChemTreat in July 2007 and Tektronix in November 2007, both of which are included in the Professional Instrumentation segment. The acquisitions of other, smaller businesses in the Medical Technologies, Professional Instrumentation and Industrial Technologies segments also contributed to the year-over-year growth. The Company acquired seventeen businesses and twelve businesses during the year ended December 31, 2008 and 2007, respectively.

Operating profit margins from continuing operations for the Company were 14.7% in the year ended December 31, 2008 as compared to 15.8% for the year ended December 31, 2007. Charges recorded related to the fourth quarter 2008 restructuring activities reduced the Company's 2008 operating profit margins by 65 basis points. In addition, the dilutive impact of acquisitions reduced 2008 operating profit margins by 80 basis points, including the adverse impact of $60 million ($45 million or $0.13 per diluted share, net of tax) of acquired inventory and acquired deferred revenue fair value charges recorded related to the acquisition of Tektronix. The Company also incurred Tektronix related charges in 2007 associated with acquired in-process research and development that affected year-over-year operating profit margin comparisons by 55 basis points. A gain recorded in the second quarter of 2007 from the collection of indemnification proceeds related to a lawsuit also affected year-over-year comparisons of operating profit margins by 10 basis points.

Restructuring and Other Related Charges

In light of the worsening global economic environment, the Company initiated a series of restructuring actions during the fourth quarter of 2008 to better position the Company's cost base for future periods. As a result, the Company recorded pre-tax restructuring and other related charges totaling $82.0 million ($61.5 million, net of tax or $0.18 per diluted share) as indicated in the following table ($ in thousands):

                                                              Total
             Restructuring Charges
             Employee severance and related charges          $ 72,257
             Facility exit and related charges                  3,753

             Total Restructuring Charges                     $ 76,010

             Other Related Charges
             Property, plant & equipment impairment          $  1,557
             Inventory impairment                               4,398

             Total Restructuring and Other Related Charges   $ 81,965

The restructuring and other related charges are intended to improve future operational efficiency through targeted workforce reductions and manufacturing facility consolidations and closures. Approximately 93% of the total pre-tax charges require cash payments, which are being funded with cash generated from operations. Through December 31, 2008, approximately $20 million of required cash payments had been made. The majority of the remaining cash expenditures are expected to occur in the first quarter of 2009. As a result of these restructuring activities, the Company expects recurring pre-tax savings to exceed $100 million during 2009.

The fourth quarter 2008 restructuring activities resulted in net workforce reductions of approximately 1,800 associates and thirteen facility closures, the majority of which have been completed as of December 31, 2008. Remaining workforce reductions and facility closure activities associated with the fourth quarter 2008 restructuring activities to be completed during 2009 are not significant. In conjunction with the closing of facilities, certain inventory was written off as unusable in future operating locations. This inventory consisted principally of component parts and raw materials, which were either redundant to inventory at the facilities being merged or were not economically feasible to relocate since the inventory was purchased to operate on equipment and tooling which was not being relocated. In addition, property, plant and equipment at closed facilities were evaluated based on expected future use and written down to fair value where impairments were identified.

In the accompanying consolidated statement of earnings, the pre-tax restructuring and related charges, consisting of $76 million cash charges and $6 million non-cash charges, are reflected in the following captions ($ in thousands):

                                                            Year Ended
                                                           December 31,
           Statement of Earnings Caption                       2008

           Cost of sales                                  $       33,130
           Selling, general and administrative expenses           48,835

                                                          $       81,965

The impact of these restructuring and related charges in each of the Company's segments is discussed in the following analysis of the segment results of operations.

Business Segments

The table below summarizes sales by business segment for each of the periods
indicated:



                                            For the Years Ended December 31
                                                    ($ in millions)
                                             2008           2007        2006
          Professional Instrumentation   $    4,860.8    $  3,537.9   $ 2,906.5
          Medical Technologies                3,277.0       2,998.0     2,220.0
          Industrial Technologies             3,265.5       3,153.4     2,988.8
          Tools & Components                  1,294.2       1,336.6     1,350.8

          Total                          $   12,697.5    $ 11,025.9   $ 9,466.1

PROFESSIONAL INSTRUMENTATION

Businesses in the Company's Professional Instrumentation segment offer professional and technical customers various products and services that are used to enable or enhance the performance of their work. The Professional Instrumentation segment encompasses two strategic lines of business:
environmental, and test and measurement. These businesses produce and sell bench top and compact, professional electronic test tools and calibration equipment; a variety of video test and monitoring products, network management solutions, network diagnostic equipment and related services; water quality instrumentation and consumables and ultraviolet disinfection systems; industrial water treatment solutions; and retail/commercial petroleum products and services, including dispensers, payment systems, underground storage tank leak detection and vapor recovery systems.

Professional Instrumentation Selected Financial Data



                                                           For the Years Ended December 31
                                                                   ($ in millions)
                                                        2008              2007            2006
Sales                                                $   4,860.8        $ 3,537.9       $ 2,906.5
Operating Profit                                           907.3            709.5           625.6
Depreciation and amortization                              130.4             64.8            48.8
Restructuring and other related charges                     28.8               -               -
Operating profit as a % of sales                            18.7 %           20.1 %          21.5 %
Depreciation and amortization as a % of sales                2.7 %            1.8 %           1.7 %
Restructuring and other related charges as a %
of sales                                                     0.6 %             -               -

Components of Sales Growth



                                                2008     2007
                                                vs.      vs.
                                                2007     2006
                      Existing businesses        4.0 %    6.5 %
                      Acquisitions              32.0 %   12.0 %
                      Currency exchange rates    1.5 %    3.5 %

                      Total                     37.5 %   22.0 %

2008 COMPARED TO 2007

Segment sales for Professional Instrumentation increased 37.5% for 2008 as compared to 2007. Sales growth was experienced in both of the segment's strategic lines of business during the year, with the majority of the growth coming from acquisitions. Price increases accounted for approximately 2.0% sales growth which is reflected as a component of the sales from existing businesses.

Fourth quarter 2008 restructuring activities adversely impacted operating profit margins in the Professional Instrumentation segment by 60 basis points in 2008 as compared to 2007. In addition, the dilutive impact of recently acquired businesses reduced 2008 operating profit margins by 295 basis points, including the adverse impact of acquired inventory and acquired deferred revenue fair value charges recorded related to the acquisition of Tektronix (which charges will not recur in 2009). The Company also incurred Tektronix-related charges in 2007 associated with acquired in-process research and development that affected year-over-year operating profit margin comparisons by 170 basis points.

Depreciation and amortization as a percentage of sales increased during 2008 as compared to 2007 primarily as a result of the increase in amortization expense associated with the intangible assets acquired in connection with the Tektronix acquisition.

Overview of Businesses within Professional Instrumentation Segment

Environmental. Sales from the Company's environmental businesses, representing approximately 51% of segment sales for 2008, increased 15.5% in 2008 compared to 2007. Sales from existing businesses accounted for 6.5% growth while acquisitions accounted for 7.5% growth and currency translation accounted for 1.5% growth.

The segment's water quality businesses experienced high-single digit revenue growth from existing businesses in 2008 as compared to 2007. This growth was primarily a result of strong laboratory and process sales, reflecting in part the results of increased sales force investments and penetration into emerging markets. Growth in sales was experienced in all major geographic regions with particular strength in Asia where sales increased at a double digit rate. Also contributing to the year-over-year growth was increased demand by municipalities for the businesses' ultraviolet disinfection water treatment product offerings which experienced a mid-teens sales growth rate.

The retail petroleum equipment business experienced mid-single digit revenue growth from existing businesses in 2008 as compared to 2007. This growth was primarily driven by strong sales of payment and point of sale retail and payment solution product offerings offset by a decline in dispensing equipment sales primarily in North America and Europe. An increase in demand for the business' vapor recovery products in North America also contributed to the year-over-year sales growth, primarily related to an enhanced vapor recovery product that received regulatory approval and launched during the fourth quarter of 2008.

Test and Measurement. Sales from the Company's test and measurement businesses, representing approximately 49% of segment sales for 2008, grew 70% compared to 2007. Sales from existing businesses were essentially flat while acquisitions accounted for 68.0% growth and currency translation accounted for approximately 2.0% growth.

Sales growth from existing businesses was driven primarily by performance during the first nine months of 2008 as a result of strong sales of the business' thermography and precision measurement product offerings as well as strong growth from investments in emerging markets. While demand for the business' thermography products continued to increase as compared to 2007 during the fourth quarter, demand slowed for the business' traditional industrial digital hand-held instruments and precision measurement products resulting in a mid-single digit rate sales decline in the quarter and offsetting the growth experienced in the first nine months. In addition, the sales decline in the fourth quarter is a result of reductions of inventory in the distribution channel as well as the impact of currency exchange rate volatility on customer demand in certain emerging markets. Sales also declined throughout 2008 in the business' enterprise network performance management line of business as a result of generally lower telecommunications demand and slower information technology spending by customers.

2007 COMPARED TO 2006

Segment sales for Professional Instrumentation increased 22.0% for 2007 compared to 2006. Sales from existing businesses increased in both of the segment's strategic lines of business. Price increases accounted for approximately 1.5% sales growth and the impact of that increase is reflected in sales from existing businesses.

Operating profit margins were 20.1% in 2007 compared to 21.5% in 2006. Operating profit margin improvements of 135 basis points related to existing businesses were more than offset by the dilutive impact of lower operating profit margins of acquired businesses, which reduced segment operating profit margins by 260 basis points compared to 2006. Included in the dilutive impact on operating margins from acquired businesses is approximately $68 million (185 basis points) in charges associated with the acquisition of Tektronix, primarily related to acquired in-process research and development activities, acquired inventory and acquired deferred revenue. In addition, year over year comparisons are impacted by a gain on the sale of real estate during 2006 and recovery of certain previously written-off receivables during 2006 which increased that period's operating profit margins by 15 basis points. Leverage on increased sales volume in 2008 contributed positively to overall Professional Instrumentation operating profit margins.

Overview of Businesses within Professional Instrumentation Segment

Environmental. Sales from the Company's environmental businesses, representing approximately 60% of segment sales for 2007, increased 16.5% in 2007 compared to 2006. Sales from existing businesses accounted for 6.0% growth. Acquisitions accounted for 7.0% growth and currency translation accounted for 3.5% growth.

The Company's water quality businesses experienced low-double digit revenue growth for 2007 compared to 2006, primarily as a result of strength in sales of laboratory and process instrumentation products in all major geographic regions. In addition, sales of the Company's ultraviolet water treatment systems grew double-digit compared to 2006. Investment in sales forces and other growth initiatives, in addition to continued penetration of the Asian wastewater market, including a significant reclamation project in Australia, contributed to the growth. Sales growth from acquisitions primarily related to the acquisition of ChemTreat in July 2007.

The retail petroleum equipment business experienced low-single digit revenue growth in 2007 compared to 2006. The business' point of sale payment systems and service business enjoyed robust growth in 2007, primarily in Europe. In addition, the business experienced strong demand during 2007 in North America and China for its leak detection systems that were introduced during the period. These sales gains were offset by difficult prior year comparisons, a result of strong dispenser sales in 2006 due to extensive refurbishment activity in Europe and regulatory mandates in Mexico that did not repeat in 2007.

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