01—Abstract
Summary
Summary of the 10-K filed February 22, 2017. Cited figures are marked; the original filing is the authoritative source.
Danaher Corporation's 2016 10-K report highlights a year of significant strategic moves and growth, driven by its "Danaher Business System" (DBS) and a focus on enhancing its portfolio in science and technology markets.
The company successfully executed the separation of its former Test & Measurement and Industrial Technologies segments into Fortive Corporation, a move that streamlined its operations and allowed for a more concentrated focus on its core segments: Life Sciences, Diagnostics, Dental, and Environmental & Applied Solutions. Financially, Danaher demonstrated robust sales growth, driven by both existing businesses and strategic acquisitions, notably the significant acquisition of Cepheid. The company also managed its debt effectively, utilizing proceeds from the Fortive separation to repay existing notes.
Danaher's commitment to innovation and operational efficiency through DBS appears to be a key driver of its performance, positioning it for continued growth in its specialized markets. The report underscores the company's diversified business model and global reach as strengths in navigating economic uncertainties.
02—Key points
Key Highlights
- Completed the separation of its Test & Measurement and Industrial Technologies segments into a new public company, Fortive Corporation, to focus on core life sciences, diagnostics, dental, and environmental & applied solutions businesses.
- Reported consolidated sales growth of 17.0% year-over-year, driven by a 3.0% increase in sales from existing businesses and a substantial 15.0% contribution from acquisitions.
- Acquired Cepheid for approximately $4.0 billion, significantly expanding its Diagnostics segment with a leading molecular diagnostics platform.
- Life Sciences segment sales grew by 62.0% due to the acquisition of Pall Corporation in the prior year, with existing businesses showing a 3.5% increase.
- Diagnostics segment sales grew by 4.5%, supported by the acquisition of Cepheid and organic growth in its clinical lab and pathology businesses.
- Operating profit margins improved to 16.3% from 15.0% in the prior year, reflecting operational efficiencies and benefits from acquired businesses, despite acquisition-related charges.
- Generated $3.1 billion in operating cash flow from continuing operations, demonstrating strong cash generation capabilities to support strategic initiatives.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2016, Danaher Corp kept $0.15.
- Revenue$16.88B100.0%
- Cost of revenue−$7.55B44.7%
- Gross profit$9.33B55.3%
- Operating costs−$6.60B39.1%
- Operating income$2.74B16.2%
- Interest, other & tax−$181.5M1.1%
- Net income$2.55B15.1%
Where FY2016 revenue went
$16.88B- Cost of revenue: $7.55B, 45% of revenue
- SG&A: $5.62B, 33% of revenue
- Net income: $2.55B, 15% of revenue
- R&D: $975.1M, 5.8% of revenue
- Interest, other & tax: $181.5M, 1.1% of revenue
Kept 15% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2016filed February 22, 2017Financial Statements
FY2016 against FY2015
| Line item | FY2016FY2015 | Change |
|---|---|---|
| Revenue | $16.88B$14.43B | +17.0% |
| Cost of Revenue | $7.55B$6.66B | +13.3% |
| Gross Profit | $9.33B$7.77B | +20.1% |
| R&D Expenses | $975.10M$861.40M | +13.2% |
| SG&A Expenses | $5.62B$4.75B | +18.5% |
| Operating Income | $2.74B$2.16B | +26.5% |
| Interest Expense | $184.40M$139.80M | +31.9% |
| Net Income | $2.55B$3.36B | −23.9% |
| EPS (Basic) | $3.69$4.81 | −23.3% |
| EPS (Diluted) | $3.65$4.74 | −23.0% |
| Shares Outstanding (Basic) | 691.20M698.10M | −1.0% |
| Shares Outstanding (Diluted) | 699.80M708.50M | −1.2% |
05—Questions
Frequently Asked Questions
What was the impact of the Fortive separation on Danaher's financial performance in 2016?
The separation of Fortive in July 2016 allowed Danaher to focus on its core Life Sciences, Diagnostics, Dental, and Environmental & Applied Solutions segments. While Fortive's results prior to separation are presented as discontinued operations, Danaher utilized approximately $3.0 billion in net cash distributions from Fortive to repay debt and fund dividends, strengthening its financial position.
How did the acquisition of Cepheid affect Danaher's business?
The acquisition of Cepheid for approximately $4.0 billion in November 2016 significantly bolstered Danaher's Diagnostics segment. Cepheid, a leader in molecular diagnostics, expanded Danaher's product and service offerings and is expected to contribute to future growth, with the company anticipating significant synergies through the integration under the Danaher Business System.
What is the "Danaher Business System" (DBS) and how does it contribute to the company's success?
The Danaher Business System (DBS) is a set of growth, lean, and leadership tools and processes designed to continuously improve business performance in areas like quality, delivery, cost, growth, and innovation. It is a core part of Danaher's strategy to drive shareholder value by enhancing operational efficiency and competitive advantage across all its businesses.
How did Danaher manage its debt and capital in 2016?
Danaher generated substantial operating cash flow and used proceeds from the Fortive separation to repay approximately $2.4 billion in debt, including redemption premiums. The company also utilized commercial paper programs and credit facilities to fund its operations and strategic acquisitions, maintaining a manageable debt level.
06—Continue