01—Abstract
Summary
Summary of the 10-K filed February 25, 2009. Cited figures are marked; the original filing is the authoritative source.
Danaher Corporation's 2008 Form 10-K filing reveals a company navigating a challenging economic environment, marked by a significant increase in sales driven by acquisitions, particularly the large Tektronix acquisition in late 2007.
Despite overall revenue growth, the company experienced a notable slowdown in demand in the fourth quarter of 2008 due to the deteriorating global economic conditions. Management responded with restructuring actions to align costs with the prevailing economic climate, expecting significant savings in 2009. The company's diversified business segments—Professional Instrumentation, Medical Technologies, Industrial Technologies, and Tools & Components—demonstrated varying resilience, with environmental and acute care diagnostic businesses showing strength, while industrial and consumer-oriented segments faced greater headwinds.
Danaher's strategic focus on the Danaher Business System (DBS) for continuous improvement, coupled with an aggressive acquisition strategy, remains central to its value creation approach. Investors should monitor the integration of acquired businesses and the company's ability to adapt to ongoing economic uncertainty.
02—Key points
Key Highlights
- Total sales increased by 15.0% in 2008, largely due to acquisitions, particularly Tektronix, which contributed significantly to the Professional Instrumentation segment.
- The company initiated restructuring actions in Q4 2008, recording $82.0 million in charges, aimed at reducing costs and improving future operational efficiency, with an expectation of over $100 million in recurring pre-tax savings for 2009.
- Deteriorating global economic conditions led to a significant decline in demand in the fourth quarter of 2008, impacting the company's existing businesses, especially in industrial and consumer-oriented segments.
- Operating profit margins decreased slightly from 15.8% in 2007 to 14.7% in 2008, impacted by restructuring charges, acquisition-related costs (inventory and deferred revenue fair value adjustments), and acquired in-process R&D charges from Tektronix.
- Research and development expenditures increased by approximately 20.6% year-over-year, reflecting continued investment in new product development across key segments like Medical Technologies and Professional Instrumentation.
- The company maintained a strong liquidity position, with $393 million in cash and cash equivalents at year-end 2008, and ample availability under its $1.45 billion revolving credit facility.
- Debt levels decreased significantly from $3.7 billion in 2007 to $2.6 billion in 2008, primarily due to debt repayments and the use of operating cash flow.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2008, Danaher Corp kept $0.10.
- Revenue$12.70B100.0%
- Cost of revenue−$6.76B53.2%
- Gross profit$5.94B46.8%
- Operating costs−$4.07B32.1%
- Operating income$1.87B14.7%
- Interest, other & tax−$551.8M4.3%
- Net income$1.32B10.4%
Where FY2008 revenue went
$12.70B- Cost of revenue: $6.76B, 53% of revenue
- SG&A: $3.35B, 26% of revenue
- Net income: $1.32B, 10% of revenue
- R&D: $725.4M, 5.7% of revenue
- Interest, other & tax: $551.8M, 4.3% of revenue
Kept 10% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2008filed February 25, 2009Financial Statements
FY2008 against FY2007
| Line item | FY2008FY2007 | Change |
|---|---|---|
| Revenue | $12.70B$11.03B | +15.2% |
| Cost of Revenue | $6.76B$5.99B | +12.9% |
| Gross Profit | $5.94B$5.04B | +17.8% |
| R&D Expenses | $725.44M$601.42M | +20.6% |
| SG&A Expenses | $3.35B$2.71B | +23.3% |
| Operating Expenses | $10.83B$9.29B | +16.6% |
| Operating Income | $1.87B$1.74B | +7.4% |
| Interest Expense | $130.17M$109.70M | +18.7% |
| Net Income | $1.32B$1.37B | −3.8% |
| EPS (Basic) | $2.06$2.20 | −6.4% |
| EPS (Diluted) | $1.98$2.10 | −5.5% |
| Shares Outstanding (Basic) | 638.72M622.45M | +2.6% |
| Shares Outstanding (Diluted) | 671.73M658.92M | +1.9% |
05—Questions
Frequently Asked Questions
How did Danaher's revenue perform in 2008, and what were the main drivers?
Danaher's total sales grew by 15.0% to $12.7 billion in 2008. This growth was primarily driven by acquisitions, which contributed 10.5% to sales growth, notably the acquisition of Tektronix in late 2007. Sales from existing businesses grew by 2.5%, and currency translation added another 2.0%. However, the company noted a significant slowdown in demand in the fourth quarter of 2008 due to deteriorating global economic conditions.
What is Danaher's outlook for 2009, considering the economic downturn?
The company anticipates continued contraction in global demand for its products and services in early 2009. Industrial and consumer-oriented businesses are expected to be most affected, while medical technologies and environmental businesses may be more resilient. Danaher has initiated restructuring actions in late 2008 to reduce its cost base and expects to incur $40-$60 million in additional pre-tax restructuring costs in 2009. The company is focused on managing working capital to maximize cash flow.
How has Danaher's debt situation evolved, and what are its financing plans?
Danaher significantly reduced its total debt from $3.7 billion at the end of 2007 to $2.6 billion at the end of 2008. This reduction was achieved through debt repayments, partly funded by operating cash flow and proceeds from commercial paper. The company maintains a $1.45 billion revolving credit facility as a key source of liquidity. Danaher plans to use available cash and potentially issue debt securities in early 2009 to repay outstanding commercial paper and for general corporate purposes.
What is the impact of the Tektronix acquisition on Danaher's financial performance?
The acquisition of Tektronix in November 2007 for approximately $2.8 billion significantly boosted Danaher's Professional Instrumentation segment, specifically its Test and Measurement business. While contributing to overall sales growth, the acquisition also resulted in acquisition-related charges, including amortized intangible assets and acquired inventory/deferred revenue fair value adjustments, which impacted operating profit margins in 2008. The company also incurred charges for acquired in-process R&D in 2007 related to Tektronix.
06—Continue