10-QPeriod: Q1 FY2014

DANAHER CORP /DE/ Quarterly Report for Q1 Ended Mar 28, 2014

Filed April 16, 2014For Securities:DHR

Summary

Danaher Corporation reported solid overall sales growth of 5.0% for the first quarter of 2014, driven by a 3.5% increase in sales from existing businesses and a 2.0% contribution from acquisitions. High-growth markets were the primary drivers of growth, with sales from existing businesses in these regions increasing at a high-single digit rate. The company's operating profit margin improved to 16.9% from 16.4% in the prior year's comparable quarter, benefiting from higher sales volumes and cost savings from previous restructuring initiatives, partially offset by the dilutive effect of recent acquisitions. The company made strategic acquisitions totaling $163 million in the quarter, focusing on complementary businesses within its Environmental and Test & Measurement segments. Despite a decrease in operating cash flows, largely due to working capital timing and the absence of a significant one-time inflow from a prior year's joint venture sale, Danaher maintains a strong liquidity position with $3.3 billion in cash and cash equivalents. Management expresses confidence in its ability to fund ongoing operations, investments, and strategic acquisitions.

Financial Highlights

50 data points
Beta

Revenue

$4.44B

51.5% Gross Margin

Net Income

$579.70M

13.1% Net Margin

EPS (Diluted)

$0.81

Total Assets

$35.04B

Cash & Equivalents

$3.35B

Free Cash Flow

$380.30M

Financial Statements
Beta
Revenue$4.44B
Cost of Revenue$2.21B
Gross Profit$2.29B
R&D Expenses$313.40M
SG&A Expenses$1.35B
Operating Income$738.10M
Interest Expense$32.50M
Net Income$579.70M
EPS (Basic)$0.83
EPS (Diluted)$0.81
Shares Outstanding (Basic)700.10M
Shares Outstanding (Diluted)714.80M

Key Highlights

  • 1Total consolidated sales increased by 5.0% to $4,662.7 million in Q1 2014 compared to Q1 2013.
  • 2Sales from existing businesses grew by 3.5%, indicating underlying organic growth, with high-growth markets leading the pace.
  • 3Operating profit margin improved by 50 basis points to 16.9%, driven by higher volumes and cost savings, with acquisitions having a net dilutive impact on margins.
  • 4The company completed five strategic acquisitions for $163 million, enhancing its Environmental and Test & Measurement segments.
  • 5Despite a 20% decrease in operating cash flow, the company ended the quarter with $3.3 billion in cash and cash equivalents, ensuring strong liquidity.
  • 6Effective tax rate decreased to 23.9% in Q1 2014 from 25.0% in Q1 2013, influenced by the geographic mix of earnings.
  • 7The company continues to invest in growth initiatives, including sales and marketing, and productivity improvements.

Frequently Asked Questions

The primary driver of Danaher's sales growth was the increase in sales from existing businesses, which grew by 3.5%. Acquisitions also contributed 2.0% to the overall 5.0% consolidated sales increase. Growth in high-growth markets was particularly strong.

Danaher's operating profit margin improved to 16.9% in the first quarter of 2014, up from 16.4% in the comparable period of 2013. This improvement was attributed to higher sales volumes and cost savings from restructuring and productivity initiatives, partially offset by the dilutive impact of recent acquisitions.

As of March 28, 2014, Danaher reported $3.3 billion in cash and cash equivalents. Management believes this liquidity, combined with operating cash flow and access to credit facilities, is sufficient to meet its short-term and long-term obligations, including investments and acquisitions.

Danaher's MD&A section outlines numerous risks, including adverse global economic conditions, intense competition, dependence on new product development, potential impacts from acquisitions and divestitures, regulatory compliance in the healthcare industry, environmental liabilities, intellectual property protection, and potential litigation. The report also notes specific tax-related issues in Denmark and Germany that could materially impact financial statements.