Danaher Reports Third Quarter 2017 Results

 

 
[19-October-2017]
 
 

WASHINGTON, Oct. 19, 2017 /PRNewswire/ -- Danaher today announced results for the third quarter of 2017. For the quarter ended September 29, 2017, net earnings were $572.1 million, or $0.81 per diluted share which represents a 42.0% year-over-year increase.

Non-GAAP adjusted diluted net earnings per share were $1.00. This represents a 15.0% increase over the comparable 2016 period. For the third quarter 2017, revenues increased 9.5% year-over-year to $4.5 billion, with non-GAAP core revenue growth of 3.0%.

For the fourth quarter of 2017, the Company anticipates that diluted net earnings per share will be in the range of $0.94 to $0.98 and non-GAAP adjusted diluted net earnings per share will be in the range of $1.12 to $1.16.

For the full year 2017, the Company anticipates that diluted net earnings per share will be in the range of $3.23 to $3.27. The Company is raising its 2017 non-GAAP adjusted diluted net earnings per share guidance, and now expects a range of $3.96 to $4.00.

Thomas P. Joyce, Jr., President and Chief Executive Officer, stated, "We are pleased with our third quarter performance, with the team delivering mid-teens adjusted earnings per share growth, strong margin expansion and cash flow, and improving revenue growth. With the Danaher Business System as our foundation, the team's commitment to continuous improvement was a key driver of our results."

Joyce continued, "Our performance in the quarter - combined with significant opportunities across the portfolio and our strong balance sheet - positions us to build on this momentum through the end of 2017 and into next year."

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 888-280-4443 within the U.S. or by dialing +1 719-325-4886 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 1825026). A replay of the conference call will be available shortly after the conclusion of the call and until Thursday, October 26, 2017. 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 over 62,000 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 fourth quarter and full year 2017, the Company's opportunities and positioning for 2017 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, 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, consummate and integrate appropriate acquisitions and successfully complete divestitures and other dispositions, our ability to integrate the recent acquisitions of Pall Corporation and Cepheid and achieve the anticipated benefits of such transactions, contingent liabilities relating to acquisitions and divestitures (including tax-related and other contingent liabilities relating to the distributions of each of Fortive Corporation and our communications business), 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 UK'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 2016 Annual Report on Form 10-K and Quarterly Report on Form 10-Q for the third quarter of 2017. 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 CONDENSED STATEMENTS OF EARNINGS

                                                                   ($ and shares in millions, except per share amounts)

                                                                                        (unaudited)


                                                                                          Three-Month Period Ended                               Nine-Month Period Ended

                                                                                   September 29,               September 30,             September 29,               September 30,
                                                                                            2017                         2016                       2017                         2016
                                                                                            ----                         ----                       ----                         ----

    Sales                                                                                           $4,528.2                                               $4,132.1                      $13,244.0  $12,298.1

    Cost of sales                                                                      (1,991.4)                              (1,846.1)                                   (5,890.6)     (5,463.5)
                                                                                        --------                                --------                                    --------       --------

    Gross profit                                                                         2,536.8                                 2,286.0                                     7,353.4        6,834.6

    Operating costs:

    Selling, general and administrative expenses                                       (1,490.1)                              (1,345.8)                                   (4,448.4)     (4,105.2)

    Research and development expenses                                                    (279.2)                                (241.1)                                    (829.9)       (707.1)
                                                                                          ------                                  ------                                      ------         ------

    Operating profit                                                                       767.5                                   699.1                                     2,075.1        2,022.3

    Nonoperating income (expense):

    Other income                                                                               -                                      -                                          -         223.4

    Loss on early extinguishment of borrowings                                                 -                                (178.8)                                          -       (178.8)

    Interest expense                                                                      (39.9)                                 (43.7)                                    (120.9)       (152.1)

    Interest income                                                                          2.2                                     0.1                                         5.6            0.1
                                                                                             ---                                     ---                                         ---            ---

    Earnings from continuing operations before income taxes                                729.8                                   476.7                                     1,959.8        1,914.9

    Income taxes                                                                         (157.7)                                 (74.1)                                    (346.6)       (508.5)
                                                                                          ------                                   -----                                      ------         ------

    Net earnings from continuing operations                                                572.1                                   402.6                                     1,613.2        1,406.4

    Earnings from discontinued operations, net of income taxes                                 -                                 (11.0)                                       22.3          400.3
                                                                                             ---                                  -----                                        ----          -----

    Net earnings                                                                                      $572.1                                                 $391.6                       $1,635.5   $1,806.7
                                                                                                      ======                                                 ======                       ========   ========

    Net earnings per share from continuing operations:

    Basic                                                                                              $0.82                                                  $0.58                          $2.32      $2.04

    Diluted                                                                                            $0.81                                                  $0.57                          $2.29      $2.01

    Net earnings per share from discontinued operations:

    Basic                                                                                      $           -                                               $(0.02)                         $0.03      $0.58

    Diluted                                                                                    $           -                                               $(0.02)                         $0.03      $0.57

    Net earnings per share:

    Basic                                                                                              $0.82                                                  $0.57                   *      $2.35      $2.62

    Diluted                                                                                            $0.81                                                  $0.56                   *      $2.32      $2.59 *

    Average common stock and common equivalent shares outstanding:

    Basic                                                                                  696.2                                   692.2                                       695.3          690.6

    Diluted                                                                                705.6                                   701.3                                       705.5          699.1


    * Net earnings per share amount does not add due to rounding.

 

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                      Nine-Month Period Ended

                                                                                           September 29,             September 30,          September 29,             September 30,
                                                                                                    2017                       2016                    2017                       2016
                                                                                                    ----                       ----                    ----                       ----

    Diluted Net Earnings Per Share from Continuing                                                           $0.81                                             $0.57                      $2.29  $2.01
    Operations (GAAP)

    Pretax amortization of acquisition-related intangible assets A                                  0.24                               0.20                                      0.70       0.61

    Pretax gain on sale of investments B                                                               -                                 -                                        -    (0.32)

    Pretax charge for early extinguishment of borrowings C                                             -                              0.26                                         -      0.26

    Pretax gain on resolution of acquisition-related matters D                                         -                            (0.02)                                        -    (0.02)

    Pretax restructuring, impairment and other related                                                 -                                 -                                     0.11          -
    charges recorded in the second quarter of 2017 E

    Tax effect of all adjustments reflected above F                                               (0.05)                            (0.14)                                   (0.18)    (0.12)

    Discrete and other tax-related adjustments G                                                       -                                 -                                   (0.08)      0.14
                                                                                                     ---                               ---                                    -----       ----

    Adjusted Diluted Net Earnings Per Share from                                                             $1.00                                             $0.87                      $2.84  $2.56
    Continuing Operations (Non-GAAP)

 

 

    Forecasted Adjusted Diluted Net Earnings Per Share from Continuing Operations
    -----------------------------------------------------------------------------


                                                                                   Three-Month Period Ending                   Year Ending

                                                                                       December 31, 2017                    December 31, 2017

                                                                                  Low End             High End         Low End             High End
                                                                                  -------             --------         -------             --------

    Forecasted Diluted Net Earnings Per Share from                                            $0.94                                 $0.98                 $3.23  $3.27
    Continuing Operations (GAAP) (1)

    Anticipated pretax amortization of acquisition-related                            0.23                        0.23                            0.93      0.93
    intangible assets A

    Pretax restructuring, impairment and other related                                   -                          -                           0.11      0.11
    charges recorded in the second quarter of 2017 E

    Anticipated tax effect of all adjustments reflected above F                     (0.05)                     (0.05)                         (0.23)   (0.23)

    Discrete and other tax-related adjustments recorded                                  -                          -                         (0.08)   (0.08)
    during the first nine months of 2017 G

    Forecasted Adjusted Diluted Net Earnings Per Share                                        $1.12                                 $1.16                 $3.96  $4.00
    from Continuing Operations (Non-GAAP) (1)

 

         (1)    The forward-looking estimates set
                 forth above 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 other discrete tax
                 items (including equity
                 compensation-related excess tax
                 benefits that exceed or fall below
                 anticipated levels).

 

 

    Revenue Performance
    -------------------


                                                                    % Change Three-      % Change Nine-
                                                                  Month Period Ended  Month Period Ended
                                                                  September 29, 2017  September 29, 2017
                                                                  vs. Comparable 2016 vs. Comparable 2016
                                                                         Period              Period

    Total Sales Growth (GAAP)                                                    9.5%                       7.5%

    Less the impact of:

    Acquisitions                                                               (5.5)%                     (5.5)%

    Currency translation                                                       (1.0)%                       0.5%

    Core Revenue Growth from Continuing Operations (Non-GAAP) (2)                3.0%                       2.5%
                                                                                  ===                         ===

 

               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.

 

 

       DANAHER CORPORATION
    RECONCILIATION OF GAAP TO
           NON-GAAP FINANCIAL MEASURES
    (continued)


                 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
    A             item above):

 

                                                                                                                           Forecasted

                    Three-Month Period Ended                   Nine-Month Period Ended                   Three-Month                  Year Ending
                                                                                                        Period Ending
                                                                                                        -------------

              September 29,             September 30,        September 29,             September 30,          December 31, 2017            December 31, 2017
                       2017                       2016                  2017                       2016
                       ----                       ----                  ----                       ----

    Pretax                     $166.4                                          $143.2                                       $492.9                               $426.6       $164.3 $657.2

    After-tax         131.5                            113.1                                     391.0                        332.8                        129.8        520.8

 

    B                Gain on sale of investments in nine-
                     month period ended September 30, 2016
                     ($223 million pretax as presented in
                     this line item, $140 million after-
                     tax).


    C                Charge for early extinguishment of
                     borrowings for the nine-month period
                     ended September 30, 2016 ($179 million
                     pretax as presented in this line item,
                     $112 million after-tax).


    D                Gain on resolution of acquisition-
                     related matters for the nine-month
                     period ended September 30, 2016  ($18
                     million pretax as presented in this
                     line item, $14 million after-tax).


    E                During the nine-month period ended
                     September 29, 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 a
                     molecular diagnostic product line 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."


    F                This line item reflects the aggregate
                     tax effect of all nontax adjustments
                     reflected in the table above.  In
                     addition, the footnotes above indicate
                     the after-tax amount of each
                     individual adjustment item.  Danaher
                     estimates the tax effect of the
                     adjustment items identified in the
                     reconciliation schedule above 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.


    G                Represents (1) discrete income tax gains,
                     primarily related to expiration of
                     statute of limitations ($35 million in
                     the nine-month period ended September
                     29, 2017), (2) equity compensation-
                     related excess tax benefits ($16 million
                     in the nine-month period ended
                     September 29, 2017) and (3) Fortive
                     separation-related tax costs related to
                     repatriation of earnings, legal entity
                     realignments and other discrete matters
                     ($99 million in the nine-month period
                     ended September 30, 2016).  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
                     second and third quarters of 2017,
                     realized equity compensation-related
                     excess tax benefits approximated the
                     anticipated benefit and no adjustments
                     were 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; and
  • 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.

Management uses these non-GAAP measures to measure the Company's operating and financial performance, and uses a non-GAAP measure similar to Adjusted Diluted Net EPS 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.
    • We exclude costs incurred pursuant to discrete restructuring plans that are fundamentally different (in terms of the size, strategic nature and planning requirements, as well as the inconsistent frequency, of such plans) from the ongoing productivity improvements that result from application of the Danaher Business System. Because these restructuring plans are incremental to the core activities that arise in the ordinary course of our business and we believe are not indicative of Danaher's ongoing operating costs in a given period, we exclude these costs from the calculation of Adjusted Diluted Net EPS to facilitate a more consistent comparison of operating results over time.
    • 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 are not indicative of Danaher's ongoing operating costs or gains in a given period; 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.

 

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SOURCE Danaher Corporation

 
 
Company Codes: NYSE:DHR
 

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