WASHINGTON, July 23, 2020 /PRNewswire/ -- Danaher Corporation
(NYSE: DHR) (the "Company") today announced results for the quarter
ended July 3, 2020. All results
in this release reflect only continuing operations unless otherwise
noted.
For the second quarter 2020, net earnings were $927.3 million, or $1.24 per diluted common share which represents a
38.0% year-over-year increase from the comparable 2019 period.
Non-GAAP adjusted diluted net earnings per common share were
$1.44 which represents a 32.0%
increase over the comparable 2019 period. Revenues increased
19.0% year-over-year to $5.3 billion,
with 3.5% non-GAAP core revenue growth including Cytiva.
Operating cash flow for the second quarter 2020 was $1.4 billion, representing a 37.0% increase
year-over-year, and non-GAAP free cash flow was $1.3 billion, representing a 41.0% increase
year-over-year.
For the third quarter 2020 the Company anticipates that non-GAAP
core revenue growth including Cytiva will be in the mid- to
high-single digit range.
Thomas P. Joyce, Jr., President
and Chief Executive Officer, stated, "We are very pleased with our
second quarter results—especially in such a challenging
environment. Our solid revenue growth, strong cash flow
generation and more than 30% adjusted EPS growth are a testament to
our team's commitment to the Danaher Business System and the
outstanding portfolio of businesses that comprise Danaher
today."
Joyce continued, "We are tackling the challenges presented by
the COVID-19 pandemic head-on, providing critical diagnostic
testing capabilities and accelerating our customers' pursuit of new
vaccines and treatments. We're fortunate to navigate through
this environment from a position of strength and believe that the
combination of our team's DBS-driven execution, resilient portfolio
and strong balance sheet uniquely position Danaher in 2020 and
beyond."
Danaher will discuss its results during its quarterly investor
conference call on July 23, 2020
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 866-503-8675
within the U.S. or by dialing +1 786-815-8792 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 earnings conference call (access code 5251859). A
replay of the conference call will be available shortly after the
conclusion of the call and until August
6, 2020. 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."
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 the demanding and attractive health
care, environmental and applied end-markets. 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, and its Shared
Purpose, Helping Realize Life's Potential. 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 statements regarding the Company's anticipated third
quarter financial performance, the Company's contributions to the
response to the COVID-19 pandemic, the positioning of the Company's
portfolio, the Company's differentiation 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, the
highly uncertain and unpredictable severity, magnitude and duration
of the COVID-19 pandemic (and the related governmental, business
and community responses thereto) on our business, results of
operations and financial condition, Danaher's ability to
successfully integrate the operations and employees of the
Biopharma business Danaher acquired from General Electric Company
(now known as Cytiva) with Danaher's existing business, the ability
to realize anticipated financial, tax and operational synergies and
benefits from such acquisition, Cytiva's performance and
maintenance of important business relationships, the impact of our
debt obligations (including the debt incurred to finance the
acquisition of Cytiva) on our operations and liquidity,
deterioration of or instability in the economy, the markets we
serve and the financial markets (including as a result of the
COVID-19 pandemic), developments and uncertainties in U.S. policy
stemming from the U.S. 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), the results of our clinical trials and perceptions
thereof, 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 IPOs, 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, 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 separation from
the EU and uncertainty relating to the terms of such separation),
disruptions relating to man-made and natural disasters (including
pandemics such as COVID-19) 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 2019 Annual Report
on Form 10-K, our first and second quarter 2020 Quarterly Reports
on Form 10-Q and our Prospectus Supplement filed with the SEC on
April 6, 2020 pursuant to Rule
424(b)(5) under the Securities Act of 1933, as amended. 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 (unaudited)
|
($ and shares in
millions, except per share amounts)
|
|
|
Three-Month Period
Ended
|
|
Six-Month Period
Ended
|
|
|
July 3,
2020
|
|
June 28,
2019
|
|
July 3,
2020
|
|
June 28,
2019
|
|
Sales
|
$
|
5,297.4
|
|
|
$
|
4,444.5
|
|
|
$
|
9,640.5
|
|
|
$
|
8,664.7
|
|
|
Cost of
sales
|
(2,444.8)
|
|
|
(1,960.7)
|
|
|
(4,345.1)
|
|
|
(3,826.0)
|
|
|
Gross
profit
|
2,852.6
|
|
|
2,483.8
|
|
|
5,295.4
|
|
|
4,838.7
|
|
|
Operating
costs:
|
|
|
|
|
|
|
|
|
Selling, general and
administrative expenses
|
(1,685.4)
|
|
|
(1,390.0)
|
|
|
(3,143.7)
|
|
|
(2,757.7)
|
|
|
Research and
development expenses
|
(322.6)
|
|
|
(282.1)
|
|
|
(609.6)
|
|
|
(549.6)
|
|
|
Operating
profit
|
844.6
|
|
|
811.7
|
|
|
1,542.1
|
|
|
1,531.4
|
|
|
Nonoperating income
(expense):
|
|
|
|
|
|
|
|
|
Other (expense)
income, net
|
(0.7)
|
|
|
5.0
|
|
|
(2.2)
|
|
|
10.1
|
|
|
Gain on sale of
product lines
|
454.6
|
|
|
—
|
|
|
454.6
|
|
|
—
|
|
|
Interest
expense
|
(78.6)
|
|
|
(19.7)
|
|
|
(126.0)
|
|
|
(40.2)
|
|
|
Interest
income
|
1.0
|
|
|
26.2
|
|
|
63.5
|
|
|
41.9
|
|
|
Earnings from
continuing operations before income taxes
|
1,220.9
|
|
|
823.2
|
|
|
1,932.0
|
|
|
1,543.2
|
|
|
Income
taxes
|
(293.6)
|
|
|
(146.8)
|
|
|
(409.6)
|
|
|
(534.5)
|
|
|
Net earnings from
continuing operations
|
927.3
|
|
|
676.4
|
|
|
1,522.4
|
|
|
1,008.7
|
|
|
Earnings from
discontinued operations, net of income taxes
|
—
|
|
|
54.9
|
|
|
—
|
|
|
56.4
|
|
|
Net
earnings
|
927.3
|
|
|
731.3
|
|
|
1,522.4
|
|
|
1,065.1
|
|
|
Mandatory convertible
preferred stock dividends
|
(34.6)
|
|
|
(22.7)
|
|
|
(54.2)
|
|
|
(29.2)
|
|
|
Net earnings
attributable to common stockholders
|
$
|
892.7
|
|
|
$
|
708.6
|
|
|
$
|
1,468.2
|
|
|
$
|
1,035.9
|
|
|
Net earnings per
common share from continuing operations:
|
|
|
|
|
|
|
|
|
Basic
|
$
|
1.27
|
|
|
$
|
0.91
|
|
|
$
|
2.09
|
|
(b)
|
$
|
1.37
|
|
|
Diluted
|
$
|
1.24
|
|
|
$
|
0.90
|
|
|
$
|
2.06
|
|
(b)
|
$
|
1.36
|
|
|
Net earnings per
common share from discontinued operations:
|
|
|
|
|
|
|
|
|
Basic
|
$
|
—
|
|
|
$
|
0.08
|
|
|
$
|
—
|
|
|
$
|
0.08
|
|
|
Diluted
|
$
|
—
|
|
|
$
|
0.08
|
|
|
$
|
—
|
|
|
$
|
0.08
|
|
|
Net earnings per
common share:
|
|
|
|
|
|
|
|
|
Basic
|
$
|
1.27
|
|
|
$
|
0.99
|
|
|
$
|
2.09
|
|
(b)
|
$
|
1.45
|
|
|
Diluted
|
$
|
1.24
|
|
|
$
|
0.97
|
|
(a)
|
$
|
2.06
|
|
(b)
|
$
|
1.43
|
|
(a)
|
Average common stock
and common equivalent shares outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
705.1
|
|
|
717.6
|
|
|
701.1
|
|
|
712.6
|
|
|
Diluted
|
718.2
|
|
|
727.9
|
|
|
713.1
|
|
|
723.2
|
|
|
|
(a) Net earnings per common share
does not add due to rounding.
|
(b) Net earnings per common share
amounts for the relevant three-month periods do not add to the
six-month period amounts 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 Common Share from Continuing Operations
1
|
|
|
Three-Month Period
Ended
|
|
Six-Month Period
Ended
|
|
July 3,
2020
|
|
June 28,
2019
|
|
July 3,
2020
|
|
June 28,
2019
|
Diluted Net
Earnings Per Common Share from Continuing Operations
(GAAP)
|
$
|
1.24
|
|
|
$
|
0.90
|
|
|
$
|
2.06
|
|
|
$
|
1.36
|
|
Pretax amortization
of acquisition-related intangible assets A
|
0.43
|
|
|
0.21
|
|
|
0.65
|
|
|
0.43
|
|
Pretax
acquisition-related fair value adjustments to inventory and
deferred revenue, incremental transaction costs deemed significant
and integration preparation costs, in each case related to the
acquisition of Cytiva B
|
0.31
|
|
|
0.03
|
|
|
0.39
|
|
|
0.05
|
|
Pretax impairment
charges related to a facility in the Diagnostics segment and a
trade name and other intangible assets in the Environmental &
Applied Solutions segment C
|
—
|
|
|
—
|
|
|
0.01
|
|
|
—
|
|
Pretax fair value
adjustments and losses on the Company's equity and limited
partnership investments D
|
0.01
|
|
|
—
|
|
|
0.02
|
|
|
—
|
|
Gain on the sale of
certain product lines in the Life Sciences segment in the second
quarter of 2020 E
|
(0.62)
|
|
|
—
|
|
|
(0.62)
|
|
|
—
|
|
Tax effect of all
adjustments reflected above F
|
0.05
|
|
|
(0.04)
|
|
|
—
|
|
|
(0.09)
|
|
Discrete tax
adjustments and other tax-related adjustments
G
|
—
|
|
|
(0.02)
|
|
|
(0.04)
|
|
|
0.31
|
|
Declared dividends on
the MCPS assuming "if-converted" method H
|
0.02
|
|
|
0.01
|
|
|
0.03
|
|
|
0.02
|
|
Adjusted Diluted
Net Earnings Per Common Share from Continuing Operations
(Non-GAAP)
|
$
|
1.44
|
|
|
$
|
1.09
|
|
|
$
|
2.50
|
|
|
$
|
2.08
|
|
|
|
1
|
Each of the per share
amounts above have been calculated assuming the Mandatory
Convertible Preferred Stock ("MCPS") had been converted into
shares of common stock.
|
Adjusted Diluted
Shares Outstanding
|
|
|
Three-Month Period
Ended
|
|
Six-Month Period
Ended
|
|
July 3,
2020
|
|
June 28,
2019
|
|
July 3,
2020
|
|
June 28,
2019
|
(shares in
millions)
|
|
|
|
|
|
|
|
Average common stock
and common equivalent shares outstanding - diluted
|
718.2
|
|
|
727.9
|
|
|
713.1
|
|
|
723.2
|
|
Converted shares
2
|
16.8
|
|
|
11.9
|
|
|
14.6
|
|
|
8.1
|
|
Adjusted average
common stock and common equivalent shares outstanding -
diluted
|
735.0
|
|
|
739.8
|
|
|
727.7
|
|
|
731.3
|
|
|
|
2
|
The number of
converted shares assumes the conversion of all MCPS and issuance of
the underlying shares applying the "if-converted" method of
accounting and using an average 20 trading-day trailing volume
weighted average price ("VWAP") of $172.83 and $139.04 as of July
3, 2020 and June 28, 2019, respectively.
|
See the accompanying Notes to Reconciliation of
GAAP to Non-GAAP Financial Measures
Core Sales Growth
and Core Sales Growth Including Cytiva
|
|
|
% Change
Three-Month Period
Ended July 3, 2020
vs.
Comparable 2019 Period
|
|
% Change
Six-Month Period
Ended July 3, 2020
vs.
Comparable 2019 Period
|
Total sales growth
(GAAP)
|
19.0
|
%
|
|
11.5
|
%
|
Impact of:
|
|
|
|
Acquisitions/divestitures
|
(21.5)
|
%
|
|
(11.0)
|
%
|
Currency exchange
rates
|
2.0
|
%
|
|
1.5
|
%
|
Core sales growth
(decline) (non-GAAP)
|
(0.5)
|
%
|
|
2.0
|
%
|
Impact of Cytiva
sales growth (net of divested product lines)
|
4.0
|
%
|
|
2.0
|
%
|
Core sales growth
including Cytiva (non-GAAP)
|
3.5
|
%
|
|
4.0
|
%
|
Forecasted Core
Sales Growth and Core Sales Growth Including Cytiva
|
|
|
% Change
Three-Month Period Ending
October 2, 2020 vs. Comparable 2019 Period
|
Core sales growth
(non-GAAP)
|
+Low- to mid-single
digit
|
Impact of Cytiva
sales growth (net of divested product lines)
|
~300-400
bps
|
Core sales growth
including Cytiva (non-GAAP)
|
+Mid- to high-single
digit
|
See the accompanying Notes to Reconciliation of
GAAP to Non-GAAP Financial Measures
Reconciliation of
Operating Cash Flows from Continuing Operations (GAAP) to Free Cash
Flow from Continuing Operations (Non-GAAP)
|
|
|
Three-Month Period
Ended
|
|
Year-over-Year
Change
|
|
July 3,
2020
|
|
June 28,
2019
|
|
Cash Flows from
(used in) Continuing Operations ($ in millions):
|
|
|
|
|
|
Operating Cash Flows
from Continuing Operations (GAAP)
|
$
|
1,445.0
|
|
|
$
|
1,056.4
|
|
|
|
Investing Cash Flows
from (used in) Continuing Operations (GAAP)
|
$
|
539.3
|
|
|
$
|
(202.3)
|
|
|
|
Financing Cash Flows
(used in) from Continuing Operations (GAAP)
|
$
|
(888.0)
|
|
|
$
|
605.0
|
|
|
|
|
|
|
|
|
|
Free Cash Flow
from Continuing Operations ($ in millions):
|
|
|
|
|
|
Operating Cash Flows
from Continuing Operations (GAAP)
|
$
|
1,445.0
|
|
|
$
|
1,056.4
|
|
|
≈ 37.0%
|
Less: payments for
additions to property, plant and equipment (capital expenditures)
from continuing operations (GAAP)
|
(155.4)
|
|
|
(154.3)
|
|
|
|
Plus: proceeds from
sales of property, plant and equipment (capital disposals) from
continuing operations (GAAP)
|
0.3
|
|
|
11.2
|
|
|
|
Free Cash Flow from
Continuing Operations (Non-GAAP)
|
$
|
1,289.9
|
|
|
$
|
913.3
|
|
|
≈ 41.0%
|
|
|
|
|
|
|
Ratio of Free Cash
Flow from Continuing Operations to Net Earnings from Continuing
Operations ($ in millions):
|
|
|
|
|
|
Free Cash Flows from
Continuing Operations from Above (GAAP)
|
$
|
1,289.9
|
|
|
$
|
913.3
|
|
|
|
Net Earnings from
Continuing Operations (GAAP)
|
927.3
|
|
|
676.4
|
|
|
|
Free Cash Flow from
Continuing Operations to Net Earnings from Continuing Operations
Conversion Ratio (Non-GAAP)
|
1.39
|
|
|
1.35
|
|
|
|
We define free cash flow as operating cash flows from continuing
operations, less payments for additions to property, plant and
equipment from continuing operations ("capital expenditures") plus
the proceeds from sales of plant, property and equipment from
continuing operations ("capital disposals").
See the accompanying Notes to Reconciliation of
GAAP to Non-GAAP Financial Measures
Notes to
Reconciliation of GAAP to Non-GAAP Financial
Measures
|
|
A
|
Amortization of
acquisition-related intangible assets in the following historical
periods ($ in millions) (only the pretax amounts set forth below
are reflected in the amortization line item above):
|
|
|
|
Three-Month Period
Ended
|
|
Six-Month Period
Ended
|
|
July 3,
2020
|
|
June 28,
2019
|
|
July 3,
2020
|
|
June 28,
2019
|
Pretax
|
$
|
314.1
|
|
|
$
|
156.3
|
|
|
$
|
470.5
|
|
|
$
|
313.7
|
|
After-tax
|
252.9
|
|
|
126.1
|
|
|
378.8
|
|
|
252.9
|
|
|
|
B
|
Pretax costs incurred
for fair value adjustments to inventory and deferred revenue
related to the Cytiva Acquisition in the three-month period ended
July 3, 2020 ($228 million pretax as reported in this line item,
$178 million after-tax) and fair value adjustments to inventory and
deferred revenue, transaction costs deemed significant and
integration preparation costs related to the Cytiva Acquisition for
the six-month period ended July 3, 2020 ($288 million pretax as
reported in this line item, $231 million after-tax). Pretax
costs incurred for transaction costs deemed significant and
integration preparation costs related to the Cytiva Acquisition for
the three-month period ended June 28, 2019 ($18 million pretax as
reported in this line item, $16 million after-tax) and the
six-month period ended June 28, 2019 ($33 million pretax as
reported in this line item, $29 million after-tax). 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.
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C
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Pretax impairment
charges related to a facility in the Diagnostics segment and a
trade name and other intangible assets in the Environmental &
Applied Solutions segment recorded in the six-month period ended
July 3, 2020 ($8 million pretax as reported in this line item, $6
million after-tax).
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D
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Pretax fair value
adjustments and losses on the Company's equity and limited
partnership investments recorded in the three and six-month periods
ended July 3, 2020 ($6 million pretax as reported in this line
item, $4 million after-tax and $13 million pretax as reported in
this line item, $10 million after-tax, respectively).
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E
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Pretax gain on the
sale of certain product lines in the Life Sciences segment in the
three and six-month periods ended July 3, 2020 ($455 million pretax
as reported in this line item, $305 million after-tax).
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F
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This line item
reflects the aggregate tax effect of all nontax adjustments
reflected in the preceding line items of the table. In
addition, the footnotes above indicate 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. The MCPS
dividends are not tax deductible and therefore the tax effect of
the adjustments does not include any tax impact of the MCPS
dividends.
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G
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Discrete tax
adjustments and other tax-related adjustments for the six-month
period ended July 3, 2020, include the impact of net discrete tax
gains of $27 million (or $0.04 per diluted common share) related
primarily to excess tax benefits from stock-based compensation and
the release of reserves for uncertain tax positions due to the
expiration of statutes of limitation. Discrete tax
adjustments and other tax-related adjustments for the three-month
period ended June 28, 2019 includes the impact of net discrete tax
gains of $18 million or $0.02 per diluted common share.
Discrete tax adjustments and other tax-related adjustments for the
six-month period ended June 28, 2019 includes the impact of net
discrete tax charges of $227 million or $0.31 per diluted common
share. The discrete tax matters for the six-month period
ended June 28, 2019 relate primarily to changes in estimates
associated with prior period uncertain tax positions and audit
settlements, net of the release of valuation allowances associated
with certain foreign tax credits and tax benefits resulting from a
change in law and excess tax benefits from stock-based compensation
realized in the three and six-month periods ended June 28, 2019 in
excess of anticipated levels. The Company anticipates excess
tax benefits from stock compensation of approximately $7 million
per quarter and therefore excludes benefits in excess of this
amount in the calculation of Adjusted Diluted Net Earnings Per
Common Share from Continuing Operations.
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H
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In March 2019, the
Company issued $1.65 billion in aggregate liquidation preference of
4.75% MCPS. In May 2020. the Company issued $1.72 billion in
aggregate liquidation preference of 5.0% MCPS. Dividends on
the 4.75% and 5.0% MCPS are payable on a cumulative basis at an
annual rate of 4.75% and 5.0%, respectively, on the liquidation
preference of $1,000 per share. Unless earlier converted,
each share of 4.75% MCPS will automatically convert on April 15,
2022 into between 6.6549 and 8.1522 shares of Danaher's common
stock, subject to further anti-dilution adjustments. Unless
earlier converted, each share of 5.0% MCPS will automatically
convert on April 15, 2023 into between 5.0081 and 6.1349 shares of
Danaher's common stock, subject to further anti-dilution
adjustments. The number of shares of Danaher's common stock
issuable on conversion of the MCPS will be determined based on the
VWAP per share of the Company's common stock over the 20
consecutive trading day period beginning on, and including, the
21st scheduled trading day immediately before April 15, 2022 and
April 15, 2023 for the 4.75% and 5.0% MCPS, respectively. For
the purposes of calculating adjusted earnings per share, the
Company has excluded the paid and anticipated MCPS cash dividends
and assumed the "if-converted" method of share dilution (the
incremental shares of common stock deemed outstanding applying the
"if-converted" method of calculating share dilution are referred to
as the "Converted Shares".)
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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 Earnings Per Common Share
from Continuing Operations, 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 sales from continuing operations, identify
underlying growth trends in our business and compare our sales
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).
We also present core sales from continuing operations on a basis
that includes sales attributable to Cytiva (formerly the Biopharma
Business of General Electric Company's ("GE") Life Sciences
business), which Danaher acquired from GE on March 31, 2020. Historically Danaher has
calculated core sales solely on a basis that excludes sales from
acquired businesses recorded prior to the first anniversary of the
acquisition. However, given Cytiva's significant size and
historical core sales growth rate, in each case compared to
Danaher's existing businesses, management believes it is
appropriate to also present core sales on a basis that includes
Cytiva sales. Management believes this presentation provides
useful information to investors by demonstrating the impact Cytiva
has on the Company's current growth profile, rather than waiting to
demonstrate such impact 12 months after the acquisition when Cytiva
would normally have been included in Danaher's core sales
calculation. Danaher calculates period-to-period core sales
growth including Cytiva by adding to the baseline period sales
Cytiva's historical sales from such period (when it was owned by
GE), net of the sales of the divested product lines and also adding
the Cytiva sales to the current period.
Management uses these non-GAAP measures to measure the Company's
operating and financial performance, and uses core sales and
non-GAAP measures similar to Adjusted Diluted Net Earnings Per
Common Share from Continuing Operations 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 Earnings Per Common Share
from Continuing Operations:
-
- 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
sales 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 to facilitate a more consistent comparison of operating
results over time.
- With respect to the other items excluded from Adjusted Diluted
Net Earnings Per Common Share from Continuing Operations, 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.
- Danaher's Mandatory Convertible Preferred Stock ("MCPS") will
mandatorily convert into Danaher common stock on the mandatory
conversion date, which is expected to be April 15, 2022 and April
15, 2023 for the 4.75% and 5.0% MCPS, respectively, (unless
converted or redeemed earlier in accordance with the terms of the
applicable certificate of designations). On the prior pages, we
present the earnings per share-related measures on a basis which
assumes the MCPS had already been converted as of the beginning of
the applicable period (and accordingly also exclude the dividends
that were actually paid on the MCPS during such period, since such
dividends would no longer be paid once the MCPS convert). We
believe this presentation provides useful information to investors
by helping them understand what the net impact will be on Danaher's
earnings per share-related measures once the MCPS convert into
Danaher common stock.
- With respect to core sales from continuing operations and core
sales from continuing operations including Cytiva, (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 (other than Cytiva, in the case of core sales from
continuing operations including Cytiva) 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.
With respect to forecasted core sales from continuing operations
and forecasted core sales from continuing operations including
Cytiva, we do not reconcile these measures to the comparable GAAP
measure because of the inherent difficulty in predicting and
estimating the future impact and timing of currency translation,
acquisitions and divested product lines, which would be reflected
in any forecasted GAAP revenue.
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SOURCE Danaher Corporation