10-QPeriod: Q3 FY2015

DANAHER CORP /DE/ Quarterly Report for Q3 Ended Jul 3, 2015

Filed July 23, 2015For Securities:DHR

Summary

Danaher Corporation's Q2 2015 filing highlights a period of strategic transformation and solid operational performance despite currency headwinds. The company reported a consolidated sales increase of 3.5% for the quarter, driven by a 3.5% growth in existing businesses, demonstrating resilience in its diverse portfolio. However, currency translation negatively impacted reported sales by approximately 6.5% due to a strengthening U.S. dollar, a trend expected to continue impacting full-year sales. Key developments include the pending acquisition of Pall Corporation for approximately $13.8 billion, a significant move expected to expand Danaher's reach in filtration, separation, and purification solutions. Additionally, the company announced its intention to separate into two independent publicly traded companies by the end of 2016, creating a science and technology company and a diversified industrial company. The company also completed the split-off of its communications business. Operating profit margins showed slight improvement for the quarter, reflecting cost savings initiatives and higher sales volumes, though acquisition-related charges and investments in growth initiatives were also noted.

Financial Highlights

51 data points
Beta

Revenue

$3.41B

55.2% Gross Margin

Net Income

$695.70M

20.4% Net Margin

EPS (Diluted)

$0.97

Total Assets

$36.99B

Cash & Equivalents

$3.34B

Free Cash Flow

$957.80M

Financial Statements
Beta
Revenue$3.41B
Cost of Revenue$2.32B
Gross Profit$1.88B
R&D Expenses$304.60M
SG&A Expenses$1.41B
Operating Income$582.90M
Interest Expense$29.00M
Net Income$695.70M
EPS (Basic)$0.98
EPS (Diluted)$0.97
Shares Outstanding (Basic)709.50M
Shares Outstanding (Diluted)719.60M

Key Highlights

  • 1Consolidated sales increased by 3.5% year-over-year for the second quarter of 2015, with existing businesses contributing 3.5% growth.
  • 2The company is pursuing a significant acquisition of Pall Corporation for approximately $13.8 billion, expected to close in the second half of 2015.
  • 3Danaher announced plans to separate into two independent publicly traded companies by the end of 2016, a strategic move to unlock further value.
  • 4The communications business within the Test & Measurement segment was disposed of via a split-off and merger with NetScout Systems.
  • 5Foreign currency exchange rates negatively impacted reported sales by approximately 6.5% for the quarter due to a strong U.S. dollar.
  • 6Operating profit margins saw a modest increase for the quarter (18.2% vs. 17.9% in Q2 2014), driven by higher sales volumes and cost savings initiatives.
  • 7The company generated $1.6 billion in operating cash flows in the first half of 2015, an increase of $115 million year-over-year, and held $3.3 billion in cash and cash equivalents as of July 3, 2015.

Frequently Asked Questions

The acquisition of Pall Corporation for approximately $13.8 billion is expected to expand Danaher's business into new markets and regulatory areas. While it presents growth opportunities, the company acknowledges risks such as Pall underperforming expectations, potential adverse impacts on financial position and profitability, integration challenges, and the possibility of not achieving anticipated cost savings or synergies. Significant goodwill and intangible assets are expected to be recorded, with a risk of impairment charges if value is not realized.

Danaher plans to separate into two independent publicly traded companies by the end of 2016. This strategic move aims to create a science and technology growth company ('New Danaher') and a diversified industrial growth company ('NewCo'). The separation is expected to be tax-free, but potential risks include delays, challenges in achieving intended benefits, and higher-than-anticipated expenses. The combined value of the two new companies may not necessarily exceed the value of the current Danaher.

The strengthening U.S. dollar significantly impacted Danaher's reported sales, causing a 6.5% decrease year-over-year for the second quarter of 2015. The company anticipates this trend will continue, reducing estimated full-year 2015 sales by approximately 5.5%. This currency headwind affects both revenues and results of operations.

Overall, Danaher experienced an increase in demand for its products and services, leading to aggregate year-over-year sales growth of 3.5% from existing businesses in Q2 2015. Acquisitions also contributed positively to sales. The company expects overall sales growth to continue but remains cautious due to macro-economic and geopolitical uncertainties. High-growth markets saw mid-single digit growth, while developed markets experienced low-single digit growth.