10-QPeriod: Q3 FY2016

DANAHER CORP /DE/ Quarterly Report for Q3 Ended Jul 1, 2016

Filed July 25, 2016For Securities:DHR

Summary

Danaher Corporation reported a significant increase in consolidated sales for the second quarter of 2016, driven by a substantial contribution from acquisitions, particularly the acquisition of Pall. Sales from existing businesses showed modest growth, with high-growth markets leading the way. The company also successfully completed the separation of its Fortive business, which included the Test & Measurement and Industrial Technologies segments (excluding product identification businesses), and the retail/commercial petroleum business. This separation resulted in a substantial cash distribution to Danaher shareholders and involved incurring separation-related costs. Despite overall sales growth, operating profit margins saw a slight decrease compared to the prior year period, influenced by factors such as growth investments, the dilutive effect of recent acquisitions, and separation costs. The company highlighted continued investments in sales growth initiatives and cost-saving measures. Danaher also continued to manage its capital structure, utilizing cash from the Fortive distribution to repay debt. The company maintained a strong liquidity position with substantial cash and cash equivalents on hand.

Financial Highlights

52 data points
Beta

Revenue

$4.24B

56.1% Gross Margin

Net Income

$656.70M

15.5% Net Margin

EPS (Diluted)

$0.94

Total Assets

$41.30B

Cash & Equivalents

$971.40M

Free Cash Flow

$1.80B

Financial Statements
Beta
Revenue$4.24B
Cost of Revenue$1.85B
Gross Profit$2.38B
R&D Expenses$241.10M
SG&A Expenses$1.35B
Operating Income$710.10M
Interest Expense$43.70M
Net Income$656.70M
EPS (Basic)$0.95
EPS (Diluted)$0.94
Shares Outstanding (Basic)692.20M
Shares Outstanding (Diluted)701.30M

Key Highlights

  • 1Consolidated sales from continuing operations increased by 16.5% in Q2 2016 compared to Q2 2015, driven by 15.0% growth from acquired businesses and 2.0% from existing businesses.
  • 2Danaher completed the separation of its Fortive business on July 2, 2016, distributing Fortive common stock to Danaher shareholders and receiving approximately $3.0 billion in net cash distributions.
  • 3The Life Sciences & Diagnostics segment showed robust sales growth of 41.5% in Q2 2016, significantly boosted by the acquisition of Pall.
  • 4Operating profit margins for continuing operations decreased slightly to 17.9% in Q2 2016 from 18.8% in Q2 2015, impacted by growth investments, acquisition dilution, and separation costs.
  • 5The company generated $2.05 billion in operating cash flow from continuing operations in the first six months of 2016, an increase of 26% year-over-year.
  • 6Danaher utilized a portion of the Fortive cash distribution to repay $500 million in senior unsecured notes.
  • 7The company declared a quarterly dividend of $0.16 per share, an increase of 18.5% compared to the prior year's second quarter dividend.

Frequently Asked Questions

The primary driver of sales growth in the second quarter of 2016 was the significant contribution from acquired businesses, notably the acquisition of Pall, which boosted the Life Sciences & Diagnostics segment. Existing businesses also contributed to growth, with high-growth markets showing particular strength.

The separation of Fortive, completed on July 2, 2016, resulted in Danaher receiving approximately $3.0 billion in net cash distributions, which was used to repay debt and for other corporate purposes. The separation also led to $17 million and $26 million in separation-related costs incurred during the three and six-month periods ending July 1, 2016, respectively. Fortive's financial results will be reported as discontinued operations from the third quarter of 2016 onwards.

Operating profit margins slightly decreased to 17.9% in the second quarter of 2016 from 18.8% in the same period of 2015. This decrease was attributed to increased investments in new product development, sales, and marketing initiatives, the dilutive impact of recent acquisitions, and costs associated with the Fortive separation. These factors were partially offset by cost savings from restructuring actions and productivity improvements.

Danaher maintained a strong liquidity position, holding approximately $4.1 billion in cash and cash equivalents as of July 1, 2016. The company stated that its operating cash flow and other liquidity sources are expected to be sufficient for its ongoing investments, acquisitions, debt servicing, and capital structure management.