01—Abstract
Summary
Summary of the 10-K filed February 24, 2016. Cited figures are marked; the original filing is the authoritative source.
Danaher Corporation's 2015 10-K filing reveals a company strategically positioned for significant transformation with a notable increase in debt driven by the substantial acquisition of Pall Corporation.
Despite a strong revenue growth of 7.5% to $20.6 billiona, operating profit saw a slight decrease to $3.47 billion due to acquisition-related charges, separation costs, and currency headwinds. The company is actively preparing to split into two distinct entities: a science and technology-focused "New Danaher" and a diversified industrial firm named "Fortive." This separation, slated for the third quarter of 2016, is a key strategic move aiming to unlock value and allow each entity to pursue tailored growth strategies. Financially, the period was marked by the large-scale Pall acquisition, significantly increasing total assets and long-term debt.
While operating cash flow remained robust, the substantial debt load taken on for the acquisition warrants investor attention. The company maintained its commitment to shareholders through dividends, and its diversified business segments across Test & Measurement, Environmental, Life Sciences & Diagnostics, Dental, and Industrial Technologies provided a resilient revenue base.
The Life Sciences & Diagnostics segment, bolstered by Pall, became the largest revenue contributor. Investors should monitor the successful integration of Pall and the execution of the forthcoming corporate separation.
02—Key points
Key Highlights
- Danaher announced its intention to separate into two independent public companies in Q3 2016: 'New Danaher' (Life Sciences & Diagnostics, Dental, Water Quality, Product Identification) and 'Fortive' (Test & Measurement, Industrial Technologies excluding product ID, Retail/Commercial Petroleum).
- The company completed its largest acquisition to date, Pall Corporation, for approximately $13.6 billion, significantly expanding its Life Sciences & Diagnostics segment.
- Total sales increased by 7.5% to $20.56 billion in 2015, driven by both existing businesses (3.0% growth) and acquisitions (10.5% growth).
- Long-term debt increased substantially to $12.03 billion from $3.40 billion, primarily due to financing the Pall acquisition.
- Despite increased sales, operating profit saw a slight decrease to $3.47 billion from $3.35 billion, impacted by acquisition-related charges and separation costs.
- The Life Sciences & Diagnostics segment became the largest by revenue, reaching $8.21 billion, largely due to the Pall acquisition.
- The company continued to return capital to shareholders, increasing its quarterly dividend in 2015 and maintaining a share repurchase program with 20 million shares available.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2015, Danaher Corp kept $0.23.
- Revenue$14.43B100.0%
- Cost of revenue−$6.66B46.2%
- Gross profit$7.77B53.8%
- Operating costs−$5.61B38.9%
- Operating income$2.16B15.0%
- Interest, other & tax$1.20B8.3%
- Net income$3.36B23.3%
Where FY2015 revenue went
$14.43B- Cost of revenue: $6.66B, 46% of revenue
- SG&A: $4.75B, 33% of revenue
- Operating income: $2.16B, 15% of revenue
- R&D: $861.4M, 6.0% of revenue
Kept 15% as operating income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2015filed February 24, 2016Financial Statements
FY2015 against FY2014
| Line item | FY2015FY2014 | Change |
|---|---|---|
| Revenue | $14.43B$12.87B | +12.2% |
| Cost of Revenue | $6.66B$6.02B | +10.7% |
| Gross Profit | $7.77B$6.85B | +13.5% |
| R&D Expenses | $861.40M$769.40M | +12.0% |
| SG&A Expenses | $4.75B$4.04B | +17.7% |
| Operating Income | $2.16B$2.04B | +5.7% |
| Interest Expense | $139.80M$94.70M | +47.6% |
| Net Income | $3.36B$2.60B | +29.2% |
| EPS (Basic) | $4.81$3.70 | +30.0% |
| EPS (Diluted) | $4.74$3.63 | +30.6% |
| Shares Outstanding (Basic) | 698.10M702.20M | −0.6% |
| Shares Outstanding (Diluted) | 708.50M716.10M | −1.1% |
05—Questions
Frequently Asked Questions
What is the primary strategic initiative Danaher is undertaking?
Danaher announced a plan to separate into two independent, publicly traded companies. This separation is expected to occur in the third quarter of 2016. One entity, retaining the Danaher name, will focus on science and technology (Life Sciences & Diagnostics, Dental, Water Quality, Product Identification), while the other, named Fortive, will focus on diversified industrial growth (Test & Measurement, Industrial Technologies excluding product ID, Retail/Commercial Petroleum).
How did the acquisition of Pall Corporation impact the company's financial position?
The acquisition of Pall Corporation for approximately $13.6 billion was a major event in 2015. It significantly increased Danaher's total assets and goodwill, and also led to a substantial rise in long-term debt to $12.03 billion. While Pall bolstered the Life Sciences & Diagnostics segment, contributing significantly to revenue growth, the integration costs and financing expenses impacted overall profitability for the year.
What was the overall financial performance in 2015?
In 2015, Danaher reported total sales of $20.56 billion, a 7.5% increase from 2014. However, operating profit slightly decreased to $3.47 billion from $3.35 billion. This was primarily due to increased acquisition-related charges, costs associated with the planned separation, and the negative impact of a stronger U.S. dollar on foreign sales. The company generated strong operating cash flow, but the significant increase in debt for the Pall acquisition is a key financial metric to watch.
Which business segments performed the best in terms of revenue?
The Life Sciences & Diagnostics segment emerged as the largest revenue generator in 2015, with sales of $8.21 billion, significantly boosted by the acquisition of Pall Corporation. Other segments like Environmental ($3.64 billion) and Industrial Technologies ($3.32 billion) also contributed substantial revenue, while Test & Measurement ($2.65 billion) and Dental ($2.74 billion) represented smaller portions of the overall sales.
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