DANAHER CORPORATION | ||
(Exact Name of Registrant as Specified in Its Charter) |
Delaware | ||
(State or Other Jurisdiction of Incorporation) |
001-08089 | 59-1995548 | |
(Commission File Number) | (IRS Employer Identification No.) | |
2200 Pennsylvania Avenue, NW, Suite 800W, Washington, D.C. | 20037-1701 | |
(Address of Principal Executive Offices) | (Zip Code) |
202-828-0850 |
(Registrant’s Telephone Number, Including Area Code) |
Not applicable |
(Former Name or Former Address, if Changed Since Last Report) |
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Emerging growth company | o |
ITEM 2.02 | RESULTS OF OPERATIONS AND FINANCIAL CONDITION |
ITEM 9.01 | FINANCIAL STATEMENTS AND EXHIBITS | |
(c) | Exhibits: | |
Exhibit No. | Description | |
99.1 |
DANAHER CORPORATION | |||
Date: | April 19, 2018 | By: | /s/ Daniel L. Comas |
Daniel L. Comas | |||
Executive Vice President and Chief Financial Officer |
Three-Month Period Ended | |||||||
March 30, 2018 | March 31, 2017 | ||||||
Sales | $ | 4,695.4 | $ | 4,205.7 | |||
Cost of sales | (2,051.8 | ) | (1,871.4 | ) | |||
Gross profit | 2,643.6 | 2,334.3 | |||||
Operating costs: | |||||||
Selling, general and administrative expenses | (1,601.9 | ) | (1,449.9 | ) | |||
Research and development expenses | (298.7 | ) | (267.4 | ) | |||
Operating profit | 743.0 | 617.0 | |||||
Nonoperating income (expense): | |||||||
Other income, net | 7.8 | 6.9 | |||||
Interest expense | (39.1 | ) | (40.3 | ) | |||
Interest income | 1.4 | 1.6 | |||||
Earnings from continuing operations before income taxes | 713.1 | 585.2 | |||||
Income taxes | (146.5 | ) | (101.4 | ) | |||
Net earnings from continuing operations | 566.6 | 483.8 | |||||
Earnings from discontinued operations, net of income taxes | — | 22.3 | |||||
Net earnings | $ | 566.6 | $ | 506.1 | |||
Net earnings per share from continuing operations: | |||||||
Basic | $ | 0.81 | $ | 0.70 | |||
Diluted | $ | 0.80 | $ | 0.69 | |||
Net earnings per share from discontinued operations: | |||||||
Basic | $ | — | $ | 0.03 | |||
Diluted | $ | — | $ | 0.03 | |||
Net earnings per share: | |||||||
Basic | $ | 0.81 | $ | 0.73 | |||
Diluted | $ | 0.80 | $ | 0.72 | |||
Average common stock and common equivalent shares outstanding: | |||||||
Basic | 698.6 | 694.3 | |||||
Diluted | 709.5 | 705.7 |
Three-Month Period Ended | |||||||
March 30, 2018 | March 31, 2017 | ||||||
Diluted Net Earnings Per Share from Continuing Operations (GAAP) | $ | 0.80 | $ | 0.69 | |||
Pretax amortization of acquisition-related intangible assets A | 0.24 | 0.24 | |||||
Tax effect of all adjustments reflected above B | (0.05 | ) | (0.05 | ) | |||
Discrete tax adjustments and other tax-related adjustments C | — | (0.03 | ) | ||||
Adjusted Diluted Net Earnings Per Share from Continuing Operations (Non-GAAP) | $ | 0.99 | $ | 0.85 |
Three-Month Period Ending June 29, 2018 | Year Ending December 31, 2018 | ||||||||||||||
Low End | High End | Low End | High End | ||||||||||||
Forecasted Diluted Net Earnings Per Share from Continuing Operations (GAAP) | $ | 0.88 | $ | 0.91 | $ | 3.62 | $ | 3.69 | |||||||
Anticipated pretax amortization of acquisition-related intangible assets A | 0.24 | 0.24 | 0.96 | 0.96 | |||||||||||
Tax effect of all adjustments reflected above B | (0.05 | ) | (0.05 | ) | (0.20 | ) | (0.20 | ) | |||||||
Forecasted Adjusted Diluted Net Earnings Per Share from Continuing Operations (Non-GAAP) | $ | 1.07 | $ | 1.10 | $ | 4.38 | $ | 4.45 |
1 | These forward-looking estimates do not reflect future gains and charges that are inherently difficult to predict and estimate due to their unknown timing, effect and/or significance, such as certain future gains or losses on the sale of investments, acquisition or divestiture-related gains or charges and discrete tax items. |
Three-Month Period Ended March 30, 2018 vs. Comparable 2017 Period | |||||
Total Company | Diagnostics Segment | ||||
Total Revenue Growth from Continuing Operations (GAAP) | 11.5 | % | 14.5 | % | |
Less the impact of: | |||||
Acquisitions | (1.0 | )% | — | % | |
Currency exchange rates | (5.0 | )% | (5.0 | )% | |
Core Revenue Growth from Continuing Operations (Non-GAAP) 2 | 5.5 | % | 9.5 | % |
2 | We use the term “core revenue” to refer to GAAP revenue from continuing operations excluding (1) sales from acquired businesses recorded prior to the first anniversary of the acquisition less the amount of sales attributable to divested businesses or product lines not considered discontinued operations (“acquisition sales”) and (2) the impact of currency translation. The portion of GAAP revenue from continuing operations attributable to currency translation is calculated as the difference between (a) the period-to-period change in revenue (excluding acquisition sales) and (b) the period-to-period change in revenue (excluding acquisition sales) after applying current period foreign exchange rates to the prior year period. We use the term “core revenue growth” to refer to the measure of comparing current period core revenue with the corresponding period of the prior year. |
Three Month Period Ended | Year-over-Year Increase | ||||||||
March 30, 2018 | March 31, 2017 | ||||||||
Free Cash Flow from Continuing Operations ($ in millions): | |||||||||
Operating Cash Flows from Continuing Operations (GAAP) | $ | 828.9 | $ | 560.2 | 48% | ||||
Less: payments for additions to property, plant & equipment (capital expenditures) from continuing operations (GAAP) | (137.9 | ) | (158.6 | ) | |||||
Plus: proceeds from sales of property, plant & equipment (capital disposals) from continuing operations (GAAP) | 0.4 | 0.7 | |||||||
Free Cash Flow from Continuing Operations (Non-GAAP) | $ | 691.4 | $ | 402.3 | 72% | ||||
Ratio of Free Cash Flow to Net Earnings ($ in millions): | |||||||||
Free Cash Flow from Continuing Operations from Above (Non-GAAP) | $ | 691.4 | $ | 402.3 | |||||
Net Earnings from Continuing Operations (GAAP) | 566.6 | 483.8 | |||||||
Free Cash Flow from Continuing Operations to Net Earnings from Continuing Operations Conversion Ratio (Non-GAAP) | 1.22 | 0.83 |
A | Amortization of acquisition-related intangible assets in the following historical and forecasted periods ($ in millions) (only the pretax amounts set forth below are reflected in the amortization line item above): |
Forecasted | |||||||||||||||
Three-Month Period Ended | Three-Month Period Ending | Year Ending | |||||||||||||
March 30, 2018 | March 31, 2017 | June 29, 2018 | December 31, 2018 | ||||||||||||
Pretax | $ | 172.3 | $ | 166.1 | $ | 171.7 | $ | 687.6 | |||||||
After-tax | 137.0 | 132.0 | 136.5 | 546.6 |
B | This line item reflects the aggregate tax effect of all nontax adjustments reflected in the preceding line items of the table. In addition, the footnote above indicates the after-tax amount of each individual adjustment item. Danaher estimates the tax effect of each adjustment item by applying Danaher's overall estimated effective tax rate to the pretax amount, unless the nature of the item and/or the tax jurisdiction in which the item has been recorded requires application of a specific tax rate or tax treatment, in which case the tax effect of such item is estimated by applying such specific tax rate or tax treatment. |
C | Represents discrete income tax gains, primarily related to equity compensation-related excess tax benefits. On January 1, 2017, Danaher adopted the updated accounting guidance required by ASU 2016-09, Compensation—Stock Compensation, which requires income statement recognition of all excess tax benefits and deficiencies related to equity compensation. We exclude from Adjusted Diluted Net EPS any excess tax benefits that exceed the levels we believe are representative of historical experience. In the first quarter of 2017, we anticipated $10 million of equity compensation-related excess tax benefits and realized $26 million of excess tax benefits, and therefore we have excluded $16 million of these benefits in the calculation of Adjusted Diluted Net EPS. In the first quarter of 2018, we anticipated $10 million of equity compensation-related excess tax benefits and realized $17 million of excess tax benefits. The benefit realized in excess of the amount estimated ($7 million) was offset by discrete income tax changes during the period and as a result there was no adjustment required in the calculation of Adjusted Diluted Net EPS for the first quarter of 2018. |
• | with respect to Adjusted Diluted Net EPS, understand the long-term profitability trends of our business and compare our profitability to prior and future periods and to our peers; |
• | with respect to core revenue, identify underlying growth trends in our business and compare our revenue performance with prior and future periods and to our peers; and |
• | with respect to free cash flow and free cash flow-to-net income ratio (the “FCF Measures”), understand Danaher’s ability to generate cash without external financings, strengthen its balance sheet, invest in its business and grow its business through acquisitions and other strategic opportunities (although a limitation of free cash flow is that it does not take into account the Company’s debt service requirements and other non-discretionary expenditures, and as a result the entire free cash flow amount is not necessarily available for discretionary expenditures). |
• | With respect to Adjusted Diluted Net EPS: |
◦ | We exclude the amortization of acquisition-related intangible assets because the amount and timing of such charges are significantly impacted by the timing, size, number and nature of the acquisitions we consummate. While we have a history of significant acquisition activity we do not acquire businesses on a predictable cycle, and the amount of an acquisition’s purchase price allocated to intangible assets and related amortization term are unique to each acquisition and can vary significantly from acquisition to acquisition. Exclusion of this amortization expense facilitates more consistent comparisons of operating results over time between our newly acquired and long-held businesses, and with both acquisitive and non-acquisitive peer companies. We believe however that it is important for investors to understand that such intangible assets contribute to revenue generation and that intangible asset amortization related to past acquisitions will recur in future periods until such intangible assets have been fully amortized. |
◦ | With respect to the other items excluded from Adjusted Diluted Net EPS, we exclude these items because they are of a nature and/or size that occur with inconsistent frequency, occur for reasons that may be unrelated to Danaher's commercial performance during the period and/or we believe that such items may obscure underlying business trends and make comparisons of long-term performance difficult. |
• | With respect to core revenue, (1) we exclude the impact of currency translation because it is not under management’s control, is subject to volatility and can obscure underlying business trends, and (2) we exclude the effect of acquisitions and divested product lines because the timing, size, number and nature of such transactions can vary significantly from period-to-period and between us and our peers, which we believe may obscure underlying business trends and make comparisons of long-term performance difficult. |
• | With respect to the FCF Measures, we exclude payments for additions to property, plant and equipment (net of the proceeds from capital disposals) to demonstrate the amount of operating cash flow for the period that remains after accounting for the Company’s capital expenditure requirements. |
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