Danaher Reports Third Quarter 2018 Results

WASHINGTON, Oct. 18, 2018 /PRNewswire/ -- Danaher Corporation (NYSE: DHR) today announced results for the third quarter 2018. For the quarter ended September 28, 2018, net earnings were $663.7 million, or $0.93 per diluted share which represents a 15.0% year-over-year increase.

Non-GAAP adjusted diluted net earnings per share for the third quarter were $1.10. This represents a 10.0% increase over the comparable 2017 period. For the third quarter 2018, revenues increased 7.0% year-over-year to $4.9 billion, with non-GAAP core revenue growth of 6.5%.

For the fourth quarter 2018, the Company anticipates that diluted net earnings per share will be in the range of $1.04 to $1.07 and non-GAAP adjusted diluted net earnings per share will be in the range of $1.25 to $1.28.

For the full year 2018, the Company is increasing its diluted net earnings per share guidance to a range of $3.72 to $3.75 versus previous guidance of $3.64 to $3.71. The Company is increasing its 2018 non-GAAP adjusted diluted net earnings per share guidance to a range of $4.49 to $4.52 versus previous guidance of $4.43 to $4.50.

Thomas P. Joyce, Jr., President and Chief Executive Officer, stated, "We are very pleased with our performance in the third quarter, as the team maintained strong momentum and delivered outstanding results. We achieved 6.5% core revenue growth, solid operating margin expansion and double-digit adjusted earnings per share growth. Four of our five platforms delivered mid-single digit or better core revenue growth, and we believe our investments in innovation and commercial execution are driving market share gains in many of our businesses."

Joyce continued, "Our recent performance is a testament to the team's execution and drive for continuous improvement. We believe the strength and differentiation of our portfolio - combined with the power of the Danaher Business System - provides us with the foundation to deliver sustainable, long-term shareholder value."

Danaher will discuss its results during its quarterly investor conference call today 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 877-260-1479 within the U.S. or by dialing +1 334-323-0522 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 investor conference call (access code 2512928). A replay of the conference call will be available shortly after the conclusion of the call and until October 25, 2018. 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."

All results in this release reflect only continuing operations unless otherwise noted.

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 some of the most demanding and attractive industries, including health care, environmental and industrial. 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. 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 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 the statements regarding the Company's anticipated financial performance for the fourth quarter and full year 2018, the Company's increasing market share, the Company's opportunities and positioning for 2018 and beyond 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, Danaher's ability to complete the previously-announced spin-off of its Dental business on the currently contemplated timeline and achieve the intended benefits, deterioration of or instability in the economy, the markets we serve and the financial markets, developments and uncertainties in U.S. policy stemming from the current 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), 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 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, the impact of our debt obligations on our operations and liquidity, 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 decision to leave the EU), disruptions relating to man-made and natural disasters, 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 2017 Annual Report on Form 10-K and Quarterly Report on Form 10-Q for the third quarter of 2018. 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 STATEMENTS OF EARNINGS (unaudited)


                                                                              
            
              ($ and shares in millions, except per share amounts)




                                                                                      Three-Month Period Ended                                                              Nine-Month Period Ended


                                                                 September 28,                                           September 29,                 September 28,                                September 29,
                                                                          2018                                                     2017                           2018                                          2017

                                                                                                                                                                                                              ---


     Sales                                                                      $
            4,853.1                                                                     $
            4,528.2                                 $
           14,529.5  $
         13,244.0



     Cost of sales                                                  (2,162.6)                                                           (1,991.4)                                                       (6,378.3)              (5,890.6)




     Gross profit                                                     2,690.5                                                              2,536.8                                                         8,151.2                 7,353.4



     Operating costs:



     Selling, general and administrative expenses                   (1,558.6)                                                           (1,498.4)                                                       (4,798.4)              (4,470.6)



     Research and development expenses                                (301.2)                                                             (279.2)                                                        (911.6)                (829.9)




     Operating profit                                                   830.7                                                                759.2                                                         2,441.2                 2,052.9



     Nonoperating income (expense):



     Other income, net                                                    9.1                                                                  8.3                                                            25.2                    22.2



     Interest expense                                                  (41.3)                                                              (39.9)                                                        (123.6)                (120.9)



     Interest income                                                      2.8                                                                  2.2                                                             6.7                     5.6




     Earnings from continuing operations before income taxes            801.3                                                                729.8                                                         2,349.5                 1,959.8



     Income taxes                                                     (137.6)                                                             (157.7)                                                        (445.4)                (346.6)




     Net earnings from continuing operations                            663.7                                                                572.1                                                         1,904.1                 1,613.2



     Earnings from discontinued operations, net of income taxes             -                                                                                                                                                      22.3




     Net earnings                                                                 $
            663.7                                                                       $
            572.1                                  $
           1,904.1   $
         1,635.5




     Net earnings per share from continuing operations:



     Basic                                                                         $
            0.95                                                                        $
            0.82                                     $
           2.72      $
         2.32



     Diluted                                                                       $
            0.93                                                                        $
            0.81                                     $
           2.68      $
         2.29



     Net earnings per share from discontinued operations:



     Basic                                                         
            $                                                                            
            $                                                 
     $                     $
         0.03



     Diluted                                                       
            $                                                                            
            $                                                 
     $                     $
         0.03



     Net earnings per share:



     Basic                                                                         $
            0.95                                                                        $
            0.82                                     $
           2.72      $
         2.35



     Diluted                                                                       $
            0.93                                                                        $
            0.81                                     $
           2.68      $
         2.32



     Average common stock and common equivalent shares


     outstanding:



     Basic                                                              701.4                                                                696.2                                                           700.1                   695.3



     Diluted                                                            710.6                                                                705.6                                                           709.9                   705.5

                 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 Share from Continuing Operations

    ---



                                                                                                                         Three-Month Period Ended                                                                            Nine-Month Period Ended


                                                                                                       September 28,                                         September 29,                                September 28,                              September 29,

                                                                                                                2018                                                   2017                                          2018                                        2017

                                                                                                                                                                                                                                                               ---


       
                Diluted Net Earnings Per Share from Continuing                                                  $
     
                0.93                                                                                 $
         
                0.81                    $
     
         2.68  $
     
     2.29


       
                Operations (GAAP)



       Pretax amortization of acquisition-related intangible                                                   0.25                                                               0.24                                                                         0.75            0.70


       assets A



       Pretax acquisition-related transaction costs deemed                                                        -                                                                                                                                          0.02


       significant and fair value adjustments to inventory, in


       each case related to the acquisition of IDT and incurred


       in the second quarter of 2018 B



       Pretax gain on resolution of acquisition-related matters                                                   -                                                                                                                                        (0.01)


       recognized in the second quarter of 2018 C



       Pretax restructuring, impairment and other related                                                         -                                                                                                                                                         0.11


       charges recorded in the second quarter of 2017 D



       Tax effect of all adjustments reflected above E                                                       (0.05)                                                            (0.05)                                                                      (0.16)         (0.18)



       Discrete tax adjustments and other tax-related                                                        (0.03)                                                                                                                                        (0.04)         (0.08)


       adjustments F




       
                Adjusted Diluted Net Earnings Per Share from                                                    $
     
                1.10                                                                                 $
         
                1.00                    $
     
         3.24  $
     
     2.84


       
                Continuing Operations (Non-GAAP)



       
                
                  Forecasted Adjusted Diluted Net Earnings Per Share from Continuing Operations (1)

    ---



                                                                                                                                  Three-Month Period Ending                                Year Ending

                                                                                                                                      December 31, 2018                                 December 31, 2018


                                                                                                                      Low End                               High End         Low End                      High End




       
                Forecasted Diluted Net Earnings Per Share from                                                           $
     
                1.04                                   $
     
                1.07            $
     
         3.72  $
     
     3.75


       
                Continuing Operations (GAAP)



       Anticipated pretax amortization of acquisition-related                                                           0.25                                           0.25                                    1.00           1.00


       intangible assets A



       Pretax acquisition-related transaction costs deemed                                                                                                                                                   0.02           0.02


       significant and fair value adjustments to inventory, in


       each case related to the acquisition of IDT and incurred


       in the second quarter of 2018 B



       Pretax gain on resolution of acquisition-related matters                                                                                                                                            (0.01)        (0.01)


       recognized in the second quarter of 2018 C



       Pretax costs incurred in the three-month period ending                                                           0.01                                           0.01                                    0.01           0.01


       December 31, 2018 related to preparation for the 2019


       separation of the Dental segment ("Dental Separation")


       primarily related to professional fees for legal, tax,


       finance and information technology services G



       Tax effect of all adjustments reflected above E                                                                (0.05)                                        (0.05)                                 (0.21)        (0.21)



       Discrete tax adjustments and other tax-related adjustments F                                                                                                                                        (0.04)        (0.04)



       
                Forecasted Adjusted Diluted Net Earnings Per Share                                                       $
     
                1.25                                   $
     
                1.28            $
     
         4.49  $
     
     4.52


       
                from Continuing Operations (Non-GAAP)


              
                1               These forward-looking estimates
                                             do not reflect future gains and
                                             charges that are inherently
                                             difficult to predict and
                                             estimate due to their unknown
                                             timing, effect and/or
                                             significance, such as certain
                                             future gains or losses on the
                                             sale of investments,
                                             acquisition or divestiture-
                                             related gains or charges and
                                             discrete tax items.


                                                                                       
           
                DANAHER CORPORATION


                                                                                   
     
         RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES


                                                                                         
             
                (continued)





       
                
                  Core Revenue

    ---

                                                                                                                                                 % Change Three-     % Change Nine-

                                                                                                                                               Month Period Ended  Month Period Ended

                                                                                                                                                  September 28,    September, 2018 vs.
                                                                                                                                                                        Comparable 2017
                                                                                                                                               2018 vs. Comparable
                                                                                                                                                                       Period
                                                                                                                                                   2017 Period

                                                                                                                                                                                      ---


       
                Total Revenue Growth from Continuing Operations (GAAP)                                                                                    7.0                           9.5
                                                                                                                                                                 %                            %



       Less the impact of:



       Acquisitions                                                                                                                                         (2.0)                        (1.5)
                                                                                                                                                                 %                            %



       Currency exchange rates                                                                                                                                1.5                         (2.0)
                                                                                                                                                                 %                            %




       
                Core Revenue Growth from Continuing Operations (Non-GAAP) (2)                                                                             6.5                           6.0
                                                                                                                                                                 %                            %

                                                                                                                                                                                                 ===


     
     2 We use the term "core revenue" to
           refer to GAAP revenue from
           continuing operations excluding
           (1) sales from acquired businesses
           recorded prior to the first
           anniversary of the acquisition
           less the amount of sales
           attributable to divested
           businesses or product lines not
           considered discontinued operations
           ("acquisition sales") and (2) the
           impact of currency translation.
           The portion of GAAP revenue from
           continuing operations attributable
           to currency translation is
           calculated as the difference
           between (a) the period-to-period
           change in revenue (excluding
           acquisition sales) and (b) the
           period-to-period change in
           revenue (excluding acquisition
           sales) after applying current
           period foreign exchange rates to
           the prior year period.  We use the
           term "core revenue growth" to
           refer to the measure of comparing
           current period core revenue with
           the corresponding period of the
           prior year.



       
                
                  Free Cash Flow from Continuing Operations

    ---

                                                                                                                 Nine-Month Period Ended


                                                                                                September 28,                            September 29,

                                                                                                         2018                                      2017




       
                ($ in millions):



       Operating Cash Flows from Continuing Operations (GAAP)                                                $
         2,784.4                                     $
     2,643.1



       Less: payments for additions to property, plant & equipment (capital expenditures) from       (441.3)                                           (445.8)


       continuing operations (GAAP)



       Plus: proceeds from sales of property, plant & equipment (capital disposals) from                 1.6                                               32.3


       continuing operations (GAAP)



       Free Cash Flow from Continuing Operations (Non-GAAP)                                                  $
         2,344.7                                     $
     2,229.6


                                                                                                                                                                                                          
           
                DANAHER CORPORATION


                                                                                                                                                                                                 
          
         RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES


                                                                                                                                                                                                            
             
                (continued)





           
                A   Amortization of acquisition-related intangible assets in the following historical and forecasted periods ($ in millions) (only the pretax
      amounts set forth below are reflected in the amortization line item above):




                                                                                                                                                                                                                                                                    
      
               Forecasted


                                                                     Three-Month Period Ended                                                                                   Nine-Month Period Ended                                                                                          Three-Month                         Year Ending

                                                                                                                                                                                                                                                                                                 Period Ending



                                                     September 28, 2018                                               September 29, 2017                                     September 28, 2018                             September 29, 2017                                 December 31, 2018                   December 31, 2018

                                                                                                                                                                                                                                                                                                               ---

            Pretax                                                        $
              174.1                                                                    $
          166.4                                                                                        $
      527.5                                                                   $
     492.9       $
     177.1 $
     704.6


            After-
             tax                                                  139.1                                       131.5                                                                420.4                                                                                 391.0                                              141.7                        562.1

     B Acquisition-related transaction costs
        deemed significant ($15 million pretax
        as presented in this line item, $13
        million after-tax), and fair value
        adjustments to inventory ($1 million
        pretax as presented in this line item,
        $0.8 million after-tax), in each case
        related to the acquisition of IDT and
        incurred in the second quarter of 2018.
         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.




     C Net gains on resolution of acquisition-
        related matters in the Life Sciences
        segment ($9 million pretax as presented
        in this line item, $7 million after-
        tax) for the second quarter of 2018.




     D During the second quarter of 2017, the
        Company recorded $76 million of pretax
        restructuring, impairment and other
        related charges ($51 million after-
        tax) primarily related to the Company's
        strategic decision to discontinue
        certain product development efforts in
        its Diagnostics segment.  As a result,
        the Company incurred noncash charges
        for the impairment of certain
        technology-related intangibles as well
        as related inventory and plant,
        property, and equipment with no further
        use totaling $49 million.  In addition,
        the Company incurred cash restructuring
        costs primarily related to employee
        severance and related charges totaling
        $27 million.  This is addressed in more
        detail in the "Statement Regarding Non-
        GAAP Measures."




     E This line item reflects the aggregate
        tax effect of all nontax adjustments
        reflected in the preceding line items
        of the table.  In addition, the
        footnote above indicates 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.




     F Represents discrete income tax gains,
        primarily related to the release of
        valuation allowances associated with
        certain foreign operating losses ($23
        million and $32 million, respectively,
        in the three and nine-month periods
        ended September 28, 2018) and (1) $35
        million in the nine-month period ended
        September 29, 2017 and (2) equity
        compensation-related excess tax
        benefits ($16 million in the nine-month
        period ended September 29, 2017).  On
        January 1, 2017, Danaher adopted the
        updated accounting guidance required by
        ASU 2016-09, Compensation-Stock
        Compensation, which requires income
        statement recognition of all excess tax
        benefits and deficiencies related to
        equity compensation.  We exclude from
        Adjusted Diluted Net EPS any excess tax
        benefits that exceed the levels we
        believe are representative of historical
        experience.  In the first quarter of
        2017, we anticipated $10 million of
        equity compensation-related excess tax
        benefits and realized $26 million of
        excess tax benefits, and therefore, we
        have excluded $16 million of these
        benefits in the calculation of Adjusted
        Diluted Net Earnings per Share.  In the
        other periods presented, realized equity
        compensation-related excess tax
        benefits approximated the anticipated
        benefit and no adjustment was required.




     G Pretax costs incurred in the three-
        month period ending December 31, 2018
        ($10 million pretax as reported in this
        line item, $8 million after-tax)
        related to preparation for the 2019
        separation of the Dental segment
        ("Dental Separation") primarily related
        to professional fees for legal, tax,
        finance and information technology
        services.

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 EPS, 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 revenue, identify underlying growth trends in our
        business and compare our revenue 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).

Management uses these non-GAAP measures to measure the Company's operating and financial performance, and uses non-GAAP measures similar to Adjusted Diluted Net EPS 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 EPS:


        --  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 revenue generation and that intangible asset
            amortization related to past acquisitions will recur in future
            periods until such intangible assets have been fully amortized.


        --  With respect to the other items excluded from Adjusted Diluted Net
            EPS, 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.


    --  With respect to core revenue, (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 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.

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SOURCE Danaher Corporation