WASHINGTON, Oct. 22, 2020 /PRNewswire/ -- Danaher Corporation
(NYSE: DHR) (the "Company") today announced results for the quarter
ended October 2, 2020. All results in
this release reflect only continuing operations unless otherwise
noted.
For the third quarter 2020, net earnings were $883.5 million, or $1.16 per diluted common share which represents a
38.0% year-over-year increase from the comparable 2019 period.
Non-GAAP adjusted diluted net earnings per common share were
$1.72 which represents a 62.0%
increase over the comparable 2019 period. Revenues increased 34.5%
year-over-year to $5.9 billion, with
14.0% non-GAAP core revenue growth including Cytiva.
Operating cash flow for the third quarter 2020 was $1.7 billion, representing a 93.0% increase
year-over-year, and non-GAAP free cash flow was $1.5 billion, representing a 110.0% increase
year-over-year.
For the fourth quarter 2020 the Company anticipates that
non-GAAP core revenue growth including Cytiva will be in the
low-double digit range.
Rainer M. Blair, President and
Chief Executive Officer, stated, "We delivered outstanding third
quarter results, achieving double-digit revenue growth, over 60%
adjusted EPS growth, and we more than doubled our free cash flow
year-over-year. Since the onset of the COVID-19 pandemic, our team
has turned unprecedented challenges into impactful opportunities to
support our customers and the global community, and we're proud to
play a pivotal role in tackling COVID-19 head-on."
Blair continued, "Our performance is a testament to our
associates' dedication, as they stay focused on executing for our
customers during the pandemic. With the Danaher Business System as
our driving force and the powerful combination of our innovative
team, strong portfolio of businesses, and solid balance sheet, we
believe Danaher will continue to outperform well into the
future."
Danaher will discuss its results during its quarterly investor
conference call on October 22, 2020
starting at 8:00 a.m. ET. The call
and an accompanying slide presentation will be webcast on the
"Investors" section of Danaher's website, www.danaher.com, under
the subheading "Events & Presentations." A replay of the
webcast will be available in the same section of Danaher's website
shortly after the conclusion of the presentation and will remain
available until the next quarterly earnings call.
The conference call can be accessed by dialing 866-503-8675
within the U.S. or by dialing +1 786-815-8792 outside the U.S. a
few minutes before the 8:00 a.m. ET
start and telling the operator that you are dialing in for
Danaher's earnings conference call (access code 6799891). A replay
of the conference call will be available shortly after the
conclusion of the call and until November
5, 2020. You can access the replay dial-in information
on the "Investors" section of Danaher's website under the
subheading "Events & Presentations." In addition, presentation
materials relating to Danaher's results have been posted to the
"Investors" section of Danaher's website under the subheading
"Quarterly Earnings."
ABOUT DANAHER
Danaher is a global science and technology innovator committed
to helping its customers solve complex challenges and improving
quality of life around the world. Its family of world class brands
has leadership positions in the demanding and attractive health
care, environmental and applied end-markets. With more than 20
operating companies, Danaher's globally diverse team of
approximately 67,000 associates is united by a common culture and
operating system, the Danaher Business System, and its Shared
Purpose, Helping Realize Life's Potential. For more
information, please visit www.danaher.com.
NON-GAAP MEASURES
In addition to the financial measures prepared in accordance
with generally accepted accounting principles (GAAP), this earnings
release also contains non-GAAP financial measures.
Calculations of these measures, the reasons why we believe these
measures provide useful information to investors, a reconciliation
of these measures to the most directly comparable GAAP measures, as
applicable, and other information relating to these non-GAAP
measures are included in the supplemental reconciliation schedule
attached.
FORWARD-LOOKING STATEMENTS
Statements in this release that are not strictly historical,
including statements regarding the Company's anticipated fourth
quarter and future financial performance, the Company's
contributions to the response to the COVID-19 pandemic, the
positioning of the Company's portfolio and any other statements
regarding events or developments that we believe or anticipate will
or may occur in the future are "forward-looking" statements within
the meaning of the federal securities laws. There are a number of
important factors that could cause actual results, developments and
business decisions to differ materially from those suggested or
indicated by such forward-looking statements and you should not
place undue reliance on any such forward-looking statements. These
factors include, among other things, the highly uncertain and
unpredictable severity, magnitude and duration of the COVID-19
pandemic (and the related governmental, business and community
responses thereto) on our business, results of operations and
financial condition, Danaher's ability to successfully integrate
the operations and employees of the Biopharma business Danaher
acquired from General Electric Company (now known as Cytiva) with
Danaher's existing business, the ability to realize anticipated
financial, tax and operational synergies and benefits from such
acquisition, Cytiva's performance and maintenance of important
business relationships, the impact of our debt obligations
(including the debt incurred to finance the acquisition of Cytiva)
on our operations and liquidity, deterioration of or instability in
the economy, the markets we serve and the financial markets
(including as a result of the COVID-19 pandemic), developments and
uncertainties in U.S. policy stemming from the U.S. administration,
such as changes in U.S. trade and tariff policies and the reaction
of other countries thereto, contractions or growth rates and
cyclicality of markets we serve, competition, our ability to
develop and successfully market new products and technologies and
expand into new markets, the potential for improper conduct by our
employees, agents or business partners, our compliance with
applicable laws and regulations (including regulations relating to
medical devices and the health care industry), the results of our
clinical trials and perceptions thereof, our ability to effectively
address cost reductions and other changes in the health care
industry, our ability to successfully identify and consummate
appropriate acquisitions and strategic investments and successfully
complete divestitures and other dispositions, our ability to
integrate the businesses we acquire and achieve the anticipated
benefits of such acquisitions, contingent liabilities relating to
acquisitions, investments and divestitures (including tax-related
and other contingent liabilities relating to past and future IPOs,
split-offs or spin-offs), security breaches or other disruptions of
our information technology systems or violations of data privacy
laws, the impact of our restructuring activities on our ability to
grow, risks relating to potential impairment of goodwill and other
intangible assets, currency exchange rates, tax audits and changes
in our tax rate and income tax liabilities, changes in tax laws
applicable to multinational companies, litigation and other
contingent liabilities including intellectual property and
environmental, health and safety matters, the rights of
the United States government to
use, disclose and license certain intellectual property we license
if we fail to commercialize it, risks relating to product, service
or software defects, product liability and recalls, risks relating
to product manufacturing, our relationships with and the
performance of our channel partners, uncertainties relating to
collaboration arrangements with third-parties, commodity costs and
surcharges, our ability to adjust purchases and manufacturing
capacity to reflect market conditions, reliance on sole sources of
supply, the impact of deregulation on demand for our products and
services, labor matters, international economic, political, legal,
compliance and business factors (including the impact of the
United Kingdom's separation from
the EU and uncertainty relating to the terms of such separation),
disruptions relating to man-made and natural disasters (including
pandemics such as COVID-19) and pension plan costs. Additional
information regarding the factors that may cause actual results to
differ materially from these forward-looking statements is
available in our SEC filings, including our 2019 Annual Report on
Form 10-K and our first, second and third quarter 2020 Quarterly
Reports on Form 10-Q. These forward-looking statements speak only
as of the date of this release and except to the extent required by
applicable law, the Company does not assume any obligation to
update or revise any forward-looking statement, whether as a result
of new information, future events and developments or
otherwise.
DANAHER
CORPORATION AND SUBSIDIARIES
|
CONSOLIDATED
CONDENSED STATEMENTS OF EARNINGS (unaudited)
|
($ and shares in
millions, except per share amounts)
|
|
|
Three-Month Period
Ended
|
|
Nine-Month Period
Ended
|
|
|
October 2,
2020
|
|
September 27,
2019
|
|
October 2,
2020
|
|
September 27,
2019
|
|
Sales
|
$
|
5,883.2
|
|
|
$
|
4,378.0
|
|
|
$
|
15,523.7
|
|
|
$
|
13,042.7
|
|
|
Cost of
sales
|
(2,657.7)
|
|
|
(1,936.6)
|
|
|
(7,002.8)
|
|
|
(5,762.6)
|
|
|
Gross
profit
|
3,225.5
|
|
|
2,441.4
|
|
|
8,520.9
|
|
|
7,280.1
|
|
|
Operating
costs:
|
|
|
|
|
|
|
|
|
Selling, general and
administrative expenses
|
(1,795.3)
|
|
|
(1,382.5)
|
|
|
(4,939.0)
|
|
|
(4,140.2)
|
|
|
Research and
development expenses
|
(342.6)
|
|
|
(282.6)
|
|
|
(952.2)
|
|
|
(832.2)
|
|
|
Operating
profit
|
1,087.6
|
|
|
776.3
|
|
|
2,629.7
|
|
|
2,307.7
|
|
|
Nonoperating income
(expense):
|
|
|
|
|
|
|
|
|
Other (expense)
income, net
|
6.4
|
|
|
4.2
|
|
|
4.2
|
|
|
14.3
|
|
|
Gain on sale of
product lines
|
—
|
|
|
—
|
|
|
454.6
|
|
|
—
|
|
|
Interest
expense
|
(76.7)
|
|
|
(24.0)
|
|
|
(202.7)
|
|
|
(64.2)
|
|
|
Interest
income
|
4.2
|
|
|
30.1
|
|
|
67.7
|
|
|
72.0
|
|
|
Earnings from
continuing operations before income taxes
|
1,021.5
|
|
|
786.6
|
|
|
2,953.5
|
|
|
2,329.8
|
|
|
Income
taxes
|
(138.0)
|
|
|
(155.9)
|
|
|
(547.6)
|
|
|
(690.4)
|
|
|
Net earnings from
continuing operations
|
883.5
|
|
|
630.7
|
|
|
2,405.9
|
|
|
1,639.4
|
|
|
Earnings from
discontinued operations, net of income taxes
|
—
|
|
|
37.3
|
|
|
—
|
|
|
93.7
|
|
|
Net
earnings
|
883.5
|
|
|
668.0
|
|
|
2,405.9
|
|
|
1,733.1
|
|
|
Mandatory convertible
preferred stock dividends
|
(41.1)
|
|
|
(19.6)
|
|
|
(95.3)
|
|
|
(48.8)
|
|
|
Net earnings
attributable to common stockholders
|
$
|
842.4
|
|
|
$
|
648.4
|
|
|
$
|
2,310.6
|
|
|
$
|
1,684.3
|
|
|
Net earnings per
common share from continuing operations:
|
|
|
|
|
|
|
|
|
Basic
|
$
|
1.18
|
|
|
$
|
0.85
|
|
|
$
|
3.28
|
|
(a)
|
$
|
2.23
|
|
|
Diluted
|
$
|
1.16
|
|
|
$
|
0.84
|
|
|
$
|
3.22
|
|
|
$
|
2.20
|
|
|
Net earnings per
common share from discontinued operations:
|
|
|
|
|
|
|
|
|
Basic
|
$
|
—
|
|
|
$
|
0.05
|
|
|
$
|
—
|
|
|
$
|
0.13
|
|
|
Diluted
|
$
|
—
|
|
|
$
|
0.05
|
|
|
$
|
—
|
|
|
$
|
0.13
|
|
|
Net earnings per
common share:
|
|
|
|
|
|
|
|
|
Basic
|
$
|
1.18
|
|
|
$
|
0.90
|
|
|
$
|
3.28
|
|
(a)
|
$
|
2.36
|
|
|
Diluted
|
$
|
1.16
|
|
|
$
|
0.89
|
|
|
$
|
3.22
|
|
|
$
|
2.32
|
|
(b)
|
Average common stock
and common equivalent shares outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
710.9
|
|
|
718.8
|
|
|
704.4
|
|
|
714.7
|
|
|
Diluted
|
724.3
|
|
|
729.3
|
|
|
716.8
|
|
|
725.2
|
|
|
|
(a) Net earnings per common share
amounts for the relevant three-month periods do not add to the
nine-month period amounts due to rounding.
|
(b) Net
earnings per common share does not add due to rounding.
|
This information is presented for reference
only. A complete copy of Danaher's Form 10-Q financial
statements is available on the Company's website
(www.danaher.com).
DANAHER
CORPORATION
|
RECONCILIATION OF
GAAP TO NON-GAAP FINANCIAL MEASURES
|
|
Adjusted Diluted
Net Earnings Per Common Share from Continuing
Operations 1
|
|
|
Three-Month Period
Ended
|
|
Nine-Month Period
Ended
|
|
October 2,
2020
|
|
September 27,
2019
|
|
October 2,
2020
|
|
September 27,
2019
|
Diluted Net
Earnings Per Common Share from Continuing Operations
(GAAP)
|
$
|
1.16
|
|
|
$
|
0.84
|
|
|
$
|
3.22
|
|
|
$
|
2.20
|
|
Pretax amortization of
acquisition-related intangible assets A
|
0.45
|
|
|
0.21
|
|
|
1.09
|
|
|
0.64
|
|
Pretax
acquisition-related fair value adjustments to inventory and
deferred revenue, incremental transaction costs deemed significant
and integration preparation costs, in each case related to the
acquisition of Cytiva B
|
0.31
|
|
|
0.04
|
|
|
0.71
|
|
|
0.09
|
|
Pretax impairment
charges related to a facility in the Diagnostics segment in the
first quarter of 2020, trade name and other intangible assets in
the Environmental & Applied Solutions segment in the first
quarter of 2020 and trade names in the Environmental & Applied
Solutions segment in the third quarter of 2020
C
|
0.02
|
|
|
—
|
|
|
0.03
|
|
|
—
|
|
Pretax fair value
adjustments and losses on the Company's equity and limited
partnership investments D
|
—
|
|
|
—
|
|
|
0.02
|
|
|
—
|
|
Gain on the sale of
certain product lines in the Life Sciences segment in the second
quarter of 2020 E
|
—
|
|
|
—
|
|
|
(0.62)
|
|
|
—
|
|
Tax effect of all
adjustments reflected above F
|
(0.16)
|
|
|
(0.04)
|
|
|
(0.16)
|
|
|
(0.13)
|
|
Discrete tax
adjustments and other tax-related adjustments
G
|
(0.08)
|
|
|
—
|
|
|
(0.12)
|
|
|
0.31
|
|
Declared dividends on
the MCPS assuming "if-converted" method
H
|
0.02
|
|
|
0.01
|
|
|
0.06
|
|
|
0.03
|
|
Adjusted Diluted
Net Earnings Per Common Share from Continuing Operations
(Non-GAAP)
|
$
|
1.72
|
|
|
$
|
1.06
|
|
|
$
|
4.23
|
|
|
$
|
3.14
|
|
|
|
1
|
Each of the per share
amounts above have been calculated assuming the Mandatory
Convertible Preferred Stock ("MCPS") had been converted into
shares of common stock.
|
|
|
Adjusted Diluted
Shares Outstanding
|
|
|
Three-Month Period
Ended
|
|
Nine-Month Period
Ended
|
|
October 2,
2020
|
|
September 27,
2019
|
|
October 2,
2020
|
|
September 27,
2019
|
(shares in
millions)
|
|
|
|
|
|
|
|
Average common stock
and common equivalent shares outstanding - diluted
|
724.3
|
|
|
729.3
|
|
|
716.8
|
|
|
725.2
|
|
Converted shares
2
|
19.6
|
|
|
11.6
|
|
|
16.3
|
|
|
9.3
|
|
Adjusted average
common stock and common equivalent shares outstanding -
diluted
|
743.9
|
|
|
740.9
|
|
|
733.1
|
|
|
734.5
|
|
|
|
2
|
The number of
converted shares assumes the conversion of all MCPS and issuance of
the underlying shares applying the "if-converted" method of
accounting and using an average 20 trading-day trailing volume
weighted average price ("VWAP") of $205.90 and $142.26 as of
October 2, 2020 and September 27, 2019, respectively.
|
See the accompanying Notes to Reconciliation of
GAAP to Non-GAAP Financial Measures
Core Sales Growth
and Core Sales Growth Including Cytiva
|
|
|
% Change
Three-
Month Period Ended
October 2, 2020 vs.
Comparable 2019
Period
|
|
% Change
Nine-
Month Period Ended
October 2, 2020 vs.
Comparable 2019
Period
|
Total sales growth
(GAAP)
|
34.5
|
%
|
|
19.0
|
%
|
Impact of:
|
|
|
|
Acquisitions/divestitures
|
(24.5)
|
%
|
|
(15.5)
|
%
|
Currency exchange
rates
|
(1.0)
|
%
|
|
1.0
|
%
|
Core sales growth
(non-GAAP)
|
9.0
|
%
|
|
4.5
|
%
|
Impact of Cytiva
sales growth (net of divested product lines)
|
5.0
|
%
|
|
3.0
|
%
|
Core sales growth
including Cytiva (non-GAAP)
|
14.0
|
%
|
|
7.5
|
%
|
Forecasted Core
Sales Growth and Core Sales Growth Including Cytiva
|
|
|
% Change
Three-Month Period Ending December
31, 2020 vs. Comparable 2019 Period
|
Core sales growth
(non-GAAP)
|
+High-single
digit
|
Impact of Cytiva
sales growth (net of divested product lines)
|
~300-400
bps
|
Core sales growth
including Cytiva (non-GAAP)
|
+Low-double
digit
|
See the accompanying Notes to Reconciliation of
GAAP to Non-GAAP Financial Measures
Reconciliation of
Operating Cash Flows from Continuing Operations (GAAP) to Free Cash
Flow from Continuing Operations (Non-GAAP)
|
|
|
Three-Month Period
Ended
|
|
Year-over-Year
Change
|
|
October 2,
2020
|
|
September 27,
2019
|
|
Cash Flows from
(used in) Continuing Operations ($ in millions):
|
|
|
|
|
|
Operating Cash Flows
from Continuing Operations (GAAP)
|
$
|
1,722.7
|
|
|
$
|
892.6
|
|
|
|
Investing Cash Flows
used in Continuing Operations (GAAP)
|
$
|
(328.4)
|
|
|
$
|
(223.9)
|
|
|
|
Financing Cash Flows
(used in) from Continuing Operations (GAAP)
|
$
|
(1,319.8)
|
|
|
$
|
8,127.7
|
|
|
|
|
|
|
|
|
|
Free Cash Flow
from Continuing Operations ($ in millions):
|
|
|
|
|
|
Operating Cash Flows
from Continuing Operations (GAAP)
|
$
|
1,722.7
|
|
|
$
|
892.6
|
|
|
~ 93.0%
|
Less: payments for
additions to property, plant and equipment (capital expenditures)
from continuing operations (GAAP)
|
(187.3)
|
|
|
(162.1)
|
|
|
|
Plus: proceeds from
sales of property, plant and equipment (capital disposals) from
continuing operations (GAAP)
|
0.6
|
|
|
0.8
|
|
|
|
Free Cash Flow from
Continuing Operations (Non-GAAP)
|
$
|
1,536.0
|
|
|
$
|
731.3
|
|
|
~ 110.0%
|
|
|
|
|
|
|
Ratio of Free Cash
Flow from Continuing Operations to Net Earnings from Continuing
Operations ($ in millions):
|
|
|
|
|
|
Free Cash Flows from
Continuing Operations from Above (GAAP)
|
$
|
1,536.0
|
|
|
$
|
731.3
|
|
|
|
Net Earnings from
Continuing Operations (GAAP)
|
883.5
|
|
|
630.7
|
|
|
|
Free Cash Flow from
Continuing Operations to Net Earnings from Continuing Operations
Conversion Ratio (Non-GAAP)
|
1.74
|
|
|
1.16
|
|
|
|
We define free cash flow as operating cash flows from continuing
operations, less payments for additions to property, plant and
equipment from continuing operations ("capital expenditures") plus
the proceeds from sales of plant, property and equipment from
continuing operations ("capital disposals").
See the accompanying Notes to Reconciliation of
GAAP to Non-GAAP Financial Measures
Notes to
Reconciliation of GAAP to Non-GAAP Financial
Measures
|
|
|
A
|
Amortization of
acquisition-related intangible assets in the following historical
periods ($ in millions) (only the pretax amounts set forth below
are reflected in the amortization line item above):
|
|
|
|
Three-Month Period
Ended
|
|
Nine-Month Period
Ended
|
|
October 2,
2020
|
|
September 27,
2019
|
|
October 2,
2020
|
|
September 27,
2019
|
Pretax
|
$
|
331.1
|
|
|
$
|
155.6
|
|
|
$
|
801.6
|
|
|
$
|
469.3
|
|
After-tax
|
265.7
|
|
|
126.1
|
|
|
644.5
|
|
|
379.0
|
|
|
|
B
|
Pretax costs incurred
for fair value adjustments to inventory and deferred revenue
related to the acquisition of Cytiva in the three-month period
ended October 2, 2020 ($232 million pretax as reported in this line
item, $181 million after-tax) and fair value adjustments to
inventory and deferred revenue, transaction costs deemed
significant and integration preparation costs related to the
acquisition of Cytiva for the nine-month period ended October 2,
2020 ($519 million pretax as reported in this line item, $411
million after-tax). Pretax costs incurred for transaction
costs deemed significant and integration preparation costs related
to the acquisition of Cytiva for the three-month period ended
September 27, 2019 ($30 million pretax as reported in this line
item, $28 million after-tax) and the nine-month period ended
September 27, 2019 ($63 million pretax as reported in this line
item, $57 million after-tax). The Company deems
acquisition-related transaction costs incurred in a given period to
be significant (generally relating to the Company's larger
acquisitions) if it determines that such costs exceed the range of
acquisition-related transaction costs typical for Danaher in a
given period.
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C
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Pretax impairment
charges related to trade names in the Environmental & Applied
Solutions segment recorded in the three-month period ended October
2, 2020 ($14 million pretax as reported in this line item, $11
million after-tax) and pretax impairment charges related to a
facility in the Diagnostics segment and trade name and other
intangible assets in the Environmental & Applied Solutions
segment recorded in the nine-month period ended October 2, 2020
($22 million pretax as reported in this line item, $17 million
after-tax).
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D
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Pretax fair value
adjustments and losses on the Company's equity and limited
partnership investments recorded in the nine-month period ended
October 2, 2020 ($13 million pretax as reported in this line item,
$10 million after-tax, respectively).
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E
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Pretax gain on the
sale of certain product lines in the Life Sciences segment in the
nine-month period ended October 2, 2020 ($455 million pretax as
reported in this line item, $305 million after-tax).
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F
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This line item
reflects the aggregate tax effect of all nontax adjustments
reflected in the preceding line items of the table. In
addition, the footnotes above indicate the after-tax amount of each
individual adjustment item. Danaher estimates the tax effect
of each adjustment item by applying Danaher's overall estimated
effective tax rate to the pretax amount, unless the nature of the
item and/or the tax jurisdiction in which the item has been
recorded requires application of a specific tax rate or tax
treatment, in which case the tax effect of such item is estimated
by applying such specific tax rate or tax treatment. The MCPS
dividends are not tax deductible and therefore the tax effect of
the adjustments does not include any tax impact of the MCPS
dividends.
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G
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Discrete tax
adjustments and other tax-related adjustments for the three and
nine-month periods ended October 2, 2020, include the impact of net
discrete tax gains of $58 million (or $0.08 per diluted common
share) and $85 million (or $0.12 per diluted common share),
respectively, related primarily to the release of reserves for
uncertain tax positions due to audit settlements and expiration of
statutes of limitation, and excess tax benefits from stock-based
compensation. Discrete tax adjustments and other tax-related
adjustments for the nine-month period ended September 27, 2019
includes the impact of net discrete tax charges of $227 million (or
$0.31 per diluted common share). The discrete tax matters for
the nine-month period ended September 27, 2019 relate primarily to
changes in estimates associated with prior period uncertain tax
positions and audit settlements, net of the release of valuation
allowances associated with certain foreign tax credits and tax
benefits resulting from a change in law and excess tax benefits
from stock-based compensation realized in the nine-month period
ended September 27, 2019 in excess of anticipated levels. The
Company anticipates excess tax benefits from stock compensation of
approximately $7 million per quarter and therefore excludes
benefits in excess of this amount in the calculation of Adjusted
Diluted Net Earnings Per Common Share from Continuing
Operations.
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H
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In March 2019, the
Company issued $1.65 billion in aggregate liquidation preference of
4.75% MCPS. In May 2020. the Company issued $1.72 billion in
aggregate liquidation preference of 5.0% MCPS. Dividends on
the 4.75% and 5.0% MCPS are payable on a cumulative basis at an
annual rate of 4.75% and 5.0%, respectively, on the liquidation
preference of $1,000 per share. Unless earlier converted,
each share of 4.75% MCPS will automatically convert on April 15,
2022 into between 6.6556 and 8.1530 shares of Danaher's common
stock, subject to further anti-dilution adjustments. Unless
earlier converted, each share of 5.0% MCPS will automatically
convert on April 15, 2023 into between 5.0081 and 6.1349 shares of
Danaher's common stock, subject to further anti-dilution
adjustments. The number of shares of Danaher's common stock
issuable on conversion of the MCPS will be determined based on the
VWAP per share of the Company's common stock over the 20
consecutive trading day period beginning on, and including, the
21st scheduled trading day immediately before April 15, 2022 and
April 15, 2023 for the 4.75% and 5.0% MCPS, respectively. For
the purposes of calculating adjusted earnings per share, the
Company has excluded the paid and anticipated MCPS cash dividends
and assumed the "if-converted" method of share dilution (the
incremental shares of common stock deemed outstanding applying the
"if-converted" method of calculating share dilution are referred to
as the "Converted Shares".)
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Statement Regarding Non-GAAP Measures
Each of the non-GAAP measures set forth above should be
considered in addition to, and not as a replacement for or superior
to, the comparable GAAP measure, and may not be comparable to
similarly titled measures reported by other companies.
Management believes that these measures provide useful information
to investors by offering additional ways of viewing Danaher
Corporation's ("Danaher" or the "Company") results that, when
reconciled to the corresponding GAAP measure, help our investors
to:
- with respect to Adjusted Diluted Net Earnings Per Common Share
from Continuing Operations, understand the long-term profitability
trends of our business and compare our profitability to prior and
future periods and to our peers;
- with respect to core sales from continuing operations, identify
underlying growth trends in our business and compare our sales
performance with prior and future periods and to our peers;
and
- with respect to free cash flow (the "FCF Measure"), understand
Danaher's ability to generate cash without external financings,
strengthen its balance sheet, invest in its business and grow its
business through acquisitions and other strategic opportunities
(although a limitation of free cash flow is that it does not take
into account the Company's debt service requirements and other
non-discretionary expenditures, and as a result the entire free
cash flow amount is not necessarily available for discretionary
expenditures).
We also present core sales from continuing operations on a basis
that includes sales attributable to Cytiva (formerly the Biopharma
Business of General Electric Company's ("GE") Life Sciences
business), which Danaher acquired from GE on March 31, 2020. Historically Danaher has
calculated core sales solely on a basis that excludes sales from
acquired businesses recorded prior to the first anniversary of the
acquisition. However, given Cytiva's significant size and
historical core sales growth rate, in each case compared to
Danaher's existing businesses, management believes it is
appropriate to also present core sales on a basis that includes
Cytiva sales. Management believes this presentation provides
useful information to investors by demonstrating the impact Cytiva
has on the Company's current growth profile, rather than waiting to
demonstrate such impact 12 months after the acquisition when Cytiva
would normally have been included in Danaher's core sales
calculation. Danaher calculates period-to-period core sales
growth including Cytiva by adding to the baseline period sales
Cytiva's historical sales from such period (when it was owned by
GE), net of the sales of the divested product lines and also adding
the Cytiva sales to the current period.
Management uses these non-GAAP measures to measure the Company's
operating and financial performance, and uses core sales and
non-GAAP measures similar to Adjusted Diluted Net Earnings Per
Common Share from Continuing Operations and the FCF Measure in the
Company's executive compensation program.
The items excluded from the non-GAAP measures set forth above
have been excluded for the following reasons:
- With respect to Adjusted Diluted Net Earnings Per Common Share
from Continuing Operations:
-
- We exclude the amortization of acquisition-related intangible
assets because the amount and timing of such charges are
significantly impacted by the timing, size, number and nature of
the acquisitions we consummate. While we have a history of
significant acquisition activity we do not acquire businesses on a
predictable cycle, and the amount of an acquisition's purchase
price allocated to intangible assets and related amortization term
are unique to each acquisition and can vary significantly from
acquisition to acquisition. Exclusion of this amortization expense
facilitates more consistent comparisons of operating results over
time between our newly acquired and long-held businesses, and with
both acquisitive and non-acquisitive peer companies. We believe
however that it is important for investors to understand that such
intangible assets contribute to sales generation and that
intangible asset amortization related to past acquisitions will
recur in future periods until such intangible assets have been
fully amortized.
- We exclude costs incurred pursuant to discrete restructuring
plans that are fundamentally different (in terms of the size,
strategic nature and planning requirements, as well as the
inconsistent frequency, of such plans) from the ongoing
productivity improvements that result from application of the
Danaher Business System. Because these restructuring plans are
incremental to the core activities that arise in the ordinary
course of our business and we believe are not indicative of
Danaher's ongoing operating costs in a given period, we exclude
these costs to facilitate a more consistent comparison of operating
results over time.
- With respect to the other items excluded from Adjusted Diluted
Net Earnings Per Common Share from Continuing Operations, we
exclude these items because they are of a nature and/or size that
occur with inconsistent frequency, occur for reasons that may be
unrelated to Danaher's commercial performance during the period
and/or we believe that such items may obscure underlying business
trends and make comparisons of long-term performance
difficult.
- Danaher's Mandatory Convertible Preferred Stock ("MCPS") will
mandatorily convert into Danaher common stock on the mandatory
conversion date, which is expected to be April 15, 2022 and April
15, 2023 for the 4.75% and 5.0% MCPS, respectively, (unless
converted or redeemed earlier in accordance with the terms of the
applicable certificate of designations). On the prior pages, we
present the earnings per share-related measures on a basis which
assumes the MCPS had already been converted as of the beginning of
the applicable period (and accordingly also exclude the dividends
that were actually paid on the MCPS during such period, since such
dividends would no longer be paid once the MCPS convert). We
believe this presentation provides useful information to investors
by helping them understand what the net impact will be on Danaher's
earnings per share-related measures once the MCPS convert into
Danaher common stock.
- With respect to core sales from continuing operations and core
sales from continuing operations including Cytiva, (1) we exclude
the impact of currency translation because it is not under
management's control, is subject to volatility and can obscure
underlying business trends, and (2) we exclude the effect of
acquisitions (other than Cytiva, in the case of core sales from
continuing operations including Cytiva) and divested product lines
because the timing, size, number and nature of such transactions
can vary significantly from period-to-period and between us and our
peers, which we believe may obscure underlying business trends and
make comparisons of long-term performance difficult.
- With respect to the FCF Measure, we exclude payments for
additions to property, plant and equipment (net of the proceeds
from capital disposals) to demonstrate the amount of operating cash
flow for the period that remains after accounting for the Company's
capital expenditure requirements.
With respect to forecasted core sales from continuing operations
and forecasted core sales from continuing operations including
Cytiva, we do not reconcile these measures to the comparable GAAP
measure because of the inherent difficulty in predicting and
estimating the future impact and timing of currency translation,
acquisitions and divested product lines, which would be reflected
in any forecasted GAAP revenue.
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SOURCE Danaher Corporation