Danaher Reports Second Quarter 2018 Results
WASHINGTON, July 19, 2018 /PRNewswire/ -- Danaher Corporation (NYSE: DHR) today announced results for the second quarter 2018. For the quarter ended June 29, 2018, net earnings were $673.8 million, or $0.95 per diluted share which represents a 20.0% year-over-year increase.
Non-GAAP adjusted diluted net earnings per share were $1.15. This represents a 16.0% increase over the comparable 2017 period. For the second quarter 2018, revenues increased 10.5% year-over-year to $5.0 billion, with non-GAAP core revenue growth of 6.0%.
Year-to-date operating cash flow was $1.9 billion, representing a 18.5% increase over the comparable 2017 period. Year-to-date non-GAAP free cash flow increased 21.5% versus the prior year to $1.6 billion.
For the third quarter 2018, the Company anticipates that diluted net earnings per share will be in the range of $0.85 to $0.88 and non-GAAP adjusted diluted net earnings per share will be in the range of $1.05 to $1.08.
For the full year 2018, the Company now anticipates that diluted net earnings per share will be in the range of $3.64 to $3.71. The Company now expects its 2018 non-GAAP adjusted diluted net earnings per share to be in the range of $4.43 to $4.50 versus previous guidance of $4.38 to $4.45.
Thomas P. Joyce, Jr., President and Chief Executive Officer, stated, "We had an outstanding second quarter, with the team delivering results ahead of expectations. We achieved 6.0% core revenue growth, healthy margin expansion, mid-teens adjusted earnings per share growth, and strong cash flow. Our performance was broad-based, with four of our five platforms delivering mid-single digit or better core revenue growth, and we believe we are taking market share in many of our businesses."
Joyce continued, "These market share gains are being driven by recent growth investments and the team's strong new product innovation and commercial execution utilizing the Danaher Business System. Our performance in the quarter - combined with significant opportunities across the portfolio, and our solid balance sheet - positions us well for strong performance through 2018 and beyond."
Danaher will discuss its results during its quarterly investor conference call today starting at 8:00 a.m. ET. The call and an accompanying slide presentation will be webcast on the "Investors" section of Danaher's website, www.danaher.com, under the subheading "Events & Presentations." A replay of the webcast will be available in the same section of Danaher's website shortly after the conclusion of the presentation and will remain available until the next quarterly earnings call.
The conference call can be accessed by dialing 866-575-6539 within the U.S. or by dialing +1 323-794-2423 outside the U.S. a few minutes before the 8:00 a.m. ET start and telling the operator that you are dialing in for Danaher's investor conference call (access code 2517479). A replay of the conference call will be available shortly after the conclusion of the call and until July 26, 2018. You can access the replay dial-in information on the "Investors" section of Danaher's website under the subheading "Events & Presentations." In addition, presentation materials relating to Danaher's results have been posted to the "Investors" section of Danaher's website under the subheading "Quarterly Earnings."
All results in this release reflect only continuing operations unless otherwise noted.
ABOUT DANAHER
Danaher is a global science and technology innovator committed to helping its customers solve complex challenges and improving quality of life around the world. Its family of world class brands has leadership positions in some of the most demanding and attractive industries, including health care, environmental and industrial. With more than 20 operating companies, Danaher's globally diverse team of approximately 67,000 associates is united by a common culture and operating system, the Danaher Business System. For more information, please visit www.danaher.com.
NON-GAAP MEASURES
In addition to the financial measures prepared in accordance with generally accepted accounting principles (GAAP), this earnings release also contains non-GAAP financial measures. Calculations of these measures, the reasons why we believe these measures provide useful information to investors, a reconciliation of these measures to the most directly comparable GAAP measures and other information relating to these non-GAAP measures are included in the supplemental reconciliation schedule attached.
FORWARD-LOOKING STATEMENTS
Statements in this release that are not strictly historical, including the statements regarding the Company's anticipated financial performance for the third quarter and full year 2018, the Company's increasing market share, the Company's opportunities and positioning for 2018 and beyond and any other statements regarding events or developments that we believe or anticipate will or may occur in the future are "forward-looking" statements within the meaning of the federal securities laws. There are a number of important factors that could cause actual results, developments and business decisions to differ materially from those suggested or indicated by such forward-looking statements and you should not place undue reliance on any such forward-looking statements. These factors include, among other things, deterioration of or instability in the economy, the markets we serve and the financial markets, developments and uncertainties in U.S. policy stemming from the current administration, such as changes in U.S. trade and tariff policies and the reaction of other countries thereto, contractions or growth rates and cyclicality of markets we serve, competition, our ability to develop and successfully market new products and technologies and expand into new markets, the potential for improper conduct by our employees, agents or business partners, our compliance with applicable laws and regulations (including regulations relating to medical devices and the health care industry), our ability to effectively address cost reductions and other changes in the health care industry, our ability to successfully identify and consummate appropriate acquisitions and strategic investments and successfully complete divestitures and other dispositions, our ability to integrate the businesses we acquire and achieve the anticipated benefits of such acquisitions, contingent liabilities relating to acquisitions, investments and divestitures (including tax-related and other contingent liabilities relating to past and future split-offs or spin-offs), security breaches or other disruptions of our information technology systems or violations of data privacy laws, the impact of our restructuring activities on our ability to grow, risks relating to potential impairment of goodwill and other intangible assets, currency exchange rates, tax audits and changes in our tax rate and income tax liabilities, changes in tax laws applicable to multinational companies, litigation and other contingent liabilities including intellectual property and environmental, health and safety matters, the rights of the United States government to use, disclose and license certain intellectual property we license if we fail to commercialize it, risks relating to product, service or software defects, product liability and recalls, risks relating to product manufacturing, the impact of our debt obligations on our operations and liquidity, our relationships with and the performance of our channel partners, uncertainties relating to collaboration arrangements with third-parties, commodity costs and surcharges, our ability to adjust purchases and manufacturing capacity to reflect market conditions, reliance on sole sources of supply, the impact of deregulation on demand for our products and services, labor matters, international economic, political, legal, compliance and business factors (including the impact of the United Kingdom's decision to leave the EU), disruptions relating to man-made and natural disasters, and pension plan costs. Additional information regarding the factors that may cause actual results to differ materially from these forward-looking statements is available in our SEC filings, including our 2017 Annual Report on Form 10-K and Quarterly Report on Form 10-Q for the second quarter of 2018. These forward-looking statements speak only as of the date of this release and except to the extent required by applicable law, the Company does not assume any obligation to update or revise any forward-looking statement, whether as a result of new information, future events and developments or otherwise.
DANAHER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS (unaudited)
($ and shares in millions, except per share amounts)
Three-Month Period Ended Six-Month Period Ended
June 29, 2018 June 30, 2017 June 29, 2018 June 30, 2017
------------- ------------- ------------- -------------
Sales $4,981.0 $4,510.1 $9,676.4 $8,715.8
Cost of sales (2,163.9) (2,027.8) (4,215.7) (3,899.2)
-------- -------- -------- --------
Gross profit 2,817.1 2,482.3 5,460.7 4,816.6
Operating costs:
Selling, general and administrative expenses (1,637.9) (1,522.3) (3,239.8) (2,972.2)
Research and development expenses (311.7) (283.3) (610.4) (550.7)
------ ------ ------ ------
Operating profit 867.5 676.7 1,610.5 1,293.7
Nonoperating income (expense):
Other income, net 8.3 7.0 16.1 13.9
Interest expense (43.2) (40.7) (82.3) (81.0)
Interest income 2.5 1.8 3.9 3.4
--- --- --- ---
Earnings from continuing operations before income taxes 835.1 644.8 1,548.2 1,230.0
Income taxes (161.3) (87.5) (307.8) (188.9)
------ ----- ------ ------
Net earnings from continuing operations 673.8 557.3 1,240.4 1,041.1
Earnings from discontinued operations, net of income taxes - - - 22.3
--- --- --- ----
Net earnings $673.8 $557.3 $1,240.4 $1,063.4
====== ====== ======== ========
Net earnings per share from continuing operations:
Basic $0.96 $0.80 $1.77 $1.50
Diluted $0.95 $0.79 $1.75 $1.48
Net earnings per share from discontinued operations:
Basic $ - $ - $ - $0.03
Diluted $ - $ - $ - $0.03
Net earnings per share:
Basic $0.96 $0.80 $1.77 $1.53
Diluted $0.95 $0.79 $1.75 $1.51
Average common stock and common equivalent shares outstanding:
Basic 700.2 695.4 699.4 694.9
Diluted 709.5 705.4 709.5 705.5
This information is presented for reference
only. A complete copy of Danaher's Form 10-Q
financial statements is available on the
Company's website (www.danaher.com).
DANAHER CORPORATION
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
Adjusted Diluted Net Earnings Per Share from Continuing Operations
------------------------------------------------------------------
Three-Month Period Ended Six-Month Period Ended
June 29, 2018 June 30, 2017 June 29, 2018 June 30, 2017
------------- ------------- ------------- -------------
Diluted Net Earnings
Per Share from
Continuing Operations
(GAAP) $0.95 $0.79 $1.75 $1.48
Pretax amortization of
acquisition-related
intangible assets A 0.26 0.22 0.50 0.46
Pretax acquisition-
related transaction
costs deemed
significant and fair
value adjustments to
inventory, in each
case related to the
acquisition of IDT and
incurred in the second
quarter of 2018 B 0.02 - 0.02 -
Pretax gain on
resolution of
acquisition-related
matters recognized in
the second quarter of
2018 C (0.01) - (0.01) -
Pretax restructuring,
impairment and other
related charges
recorded in the second
quarter of 2017 D - 0.11 - 0.11
Tax effect of all
adjustments reflected
above E (0.06) (0.08) (0.11) (0.13)
Discrete tax
adjustments and other
tax-related
adjustments F (0.01) (0.05) (0.01) (0.08)
----- ----- ----- -----
Adjusted Diluted Net
Earnings Per Share
from Continuing
Operations (Non-GAAP) $1.15 $0.99 $2.14 $1.84
===== ===== ===== =====
Forecasted Adjusted Diluted Net Earnings Per Share from Continuing Operations (1)
--------------------------------------------------------------------------------
Three-Month Period Ending Year Ending
September 28, 2018 December 31, 2018
Low End High End Low End High End
------- -------- ------- --------
Forecasted Diluted
Net Earnings Per
Share from
Continuing
Operations (GAAP) $0.85 $0.88 $3.64 $3.71
Anticipated pretax
amortization of
acquisition-related
intangible assets A 0.25 0.25 1.00 1.00
Pretax acquisition-
related transaction
costs deemed
significant and fair
value adjustments to
inventory, in each
case related to the
acquisition of IDT
and incurred in the
second quarter of
2018 B - - 0.02 0.02
Pretax gain on
resolution of
acquisition-related
matters recognized
in the second
quarter of 2018 C - - (0.01) (0.01)
Tax effect of all
adjustments
reflected above E (0.05) (0.05) (0.21) (0.21)
Discrete tax
adjustments and
other tax-related
adjustments F - - (0.01) (0.01)
Forecasted Adjusted
Diluted Net Earnings
Per Share from
Continuing
Operations (Non-
GAAP) $1.05 $1.08 $4.43 $4.50
===== ===== ===== =====
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.
DANAHER CORPORATION
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(continued)
Revenue Performance
-------------------
Three-Month Six-Month
Period Ended Period Ended
June 29, 2018 vs. June 29, 2018 vs.
Comparable Comparable
2017 Period 2017 Period
-----------
Total Revenue Growth from Continuing Operations (GAAP) 10.5% 11.0%
Less the impact of:
Acquisitions (2.0)% (1.5)%
Currency exchange rates (2.5)% (4.0)%
----- -----
Core Revenue Growth from Continuing Operations (Non-GAAP) (2) 6.0% 5.5%
=== ===
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.
Reconciliation of Operating Cash Flows from Continuing Operations (GAAP) to Free Cash Flow from Continuing Operations (Non-GAAP)
-------------------------------------------------------------------------------------------------------------------------------
Six-Month Period Ended Year-over-Year
Change
------
June 29, 2018 June 30, 2017
------------- -------------
Free Cash Flow from Continuing Operations ($ in millions):
Operating Cash Flows from Continuing Operations (GAAP) $1,864.9 $1,570.7 18.5%
Less: payments for additions to property, plant & equipment (capital (291.7) (306.5)
expenditures) from continuing operations (GAAP)
Plus: proceeds from sales of property, plant & equipment (capital 1.4 30.0
disposals) from continuing operations (GAAP)
Free Cash Flow from Continuing Operations (Non-GAAP) $1,574.6 $1,294.2 21.5%
======== ========
DANAHER CORPORATION
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(continued)
A Amortization of acquisition-
related intangible assets in
the following historical and
forecasted periods ($ in
millions) (only the pretax
amounts set forth below are
reflected in the amortization
line item above):
Forecasted
Three-Month Period Ended Six-Month Period Ended Three-Month Period Ending Year Ending
------------------------- -----------
June 29, 2018 June 30, 2017 June 29, 2018 June 30, 2017 September 28, 2018 December 31, 2018
------------- ------------- ------------- ------------- ------------------ -----------------
Pretax $181.1 $160.3 $353.4 $326.4 $181.1 $716.6
After-tax 144.3 127.4 281.3 259.5 144.9 571.9
B Acquisition-related transaction costs
deemed significant ($15 million pretax
as presented in this line item, $13
million after-tax), and fair value
adjustments to inventory ($1 million
pretax as presented in this line item,
$0.8 million after-tax), in each case
related to the acquisition of IDT and
incurred in the three and six-month
periods ended June 29, 2018. The
Company deems acquisition-related
transaction costs incurred in a given
period to be significant (generally
relating to the Company's larger
acquisitions) if it determines that
such costs exceed the range of
acquisition-related transaction costs
typical for Danaher in a given period.
C Net gains on resolution of acquisition-
related matters in the Life Sciences
segment ($9 million pretax as presented
in this line item, $7 million after-
tax) for the three and six-month
periods ended June 29, 2018.
D During the three-month period ended
June 30, 2017, the Company recorded $76
million of pretax restructuring,
impairment and other related charges
($51 million after-tax) primarily
related to the Company's strategic
decision to discontinue certain product
development efforts in its Diagnostics
segment. As a result, the Company
incurred noncash charges for the
impairment of certain technology-
related intangibles as well as related
inventory and plant, property, and
equipment with no further use totaling
$49 million. In addition, the Company
incurred cash restructuring costs
primarily related to employee severance
and related charges totaling $27
million. This is addressed in more
detail in the "Statement Regarding Non-
GAAP Measures."
E 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.
F Represents (1) discrete income tax gains,
primarily related to expiration of
statute of limitations ($9 million in
the three and six-month periods ended
June 29, 2018 and $35 million in the
three and six-month periods ended June
30, 2017, respectively) and (2) equity
compensation-related excess tax
benefits ($16 million in the six-month
period ended June 30, 2017). 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 Earnings per Share. In the
other periods presented, realized equity
compensation-related excess tax
benefits approximated the anticipated
benefit and no adjustment was required.
Statement Regarding Non-GAAP Measures
Each of the non-GAAP measures set forth above should be considered in addition to, and not as a replacement for or superior to, the comparable GAAP measure, and may not be comparable to similarly titled measures reported by other companies. Management believes that these measures provide useful information to investors by offering additional ways of viewing Danaher Corporation's ("Danaher" or the "Company") results that, when reconciled to the corresponding GAAP measure, help our investors to:
- 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 (the "FCF Measure"), 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).
Management uses these non-GAAP measures to measure the Company's operating and financial performance, and uses non-GAAP measures similar to Adjusted Diluted Net EPS and the FCF Measure in the Company's executive compensation program.
The items excluded from the non-GAAP measures set forth above have been excluded for the following reasons:
- 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 Measure, 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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SOURCE Danaher Corporation