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Danaher Corporation
GAAP net earnings for the first nine months of 2009 were $885 million, or $2.66 per diluted share, compared with GAAP net earnings of $1.01 billion, or $3.03 per diluted share for the first nine months of 2008. Sales for the first nine months of 2009 were $8.05 billion compared to $9.52 billion for the first nine months of 2008, a decrease of 15.5%.
H. Lawrence Culp, Jr., President and Chief Executive Officer, stated, "We were encouraged by the sequential improvement in revenues and our very strong margin and cash flow performance in the quarter. Our free cash flow was $472 million in the quarter, with a free cash flow to net income conversion ratio of 134%. Our focus on capturing market share while also accelerating cost reductions in a difficult economy, coupled with our continued progress in our acquisition efforts, positions us well for the balance of 2009 and beyond."
Danaher will discuss its results during its investor conference call today starting at 8:00 a.m. EDT. The call and an accompanying slide presentation will be webcast on the "Investors" section of Danaher's website at www.danaher.com. A replay of the webcast can be accessed on the "Investors" section of Danaher's website (under the subheading "Investor Events") shortly after the conclusion of the presentation, and the webcast will remain available until the next quarterly earnings call. The conference call can be accessed by dialing 888-438-5449 or 719-325-2495 a few minutes before the 8:00 a.m. EDT start and telling the operator that you are dialing in for Danaher's investor conference call, access code 8728742. A replay of the conference call will be available shortly after the conclusion of the call until October 27, 2009 and you can access the replay by dialing 888-203-1112 or 719-457-0820, access code 8728742. In addition, presentation materials relating to Danaher's results have been posted to the "Investors" section of Danaher's website under the subheading "Earnings."
Danaher is a diversified technology leader that designs, manufactures, and markets innovative products and services to professional, medical, industrial, and commercial customers. Our portfolio of premier brands is among the most highly recognized in each of the markets we serve. Driven by a foundation provided by the Danaher Business System, our 50,000 associates serve customers in more than 125 countries and generated $12.7 billion of revenue in 2008. For more information please visit our website: www.danaher.com.
In addition to the financial measures prepared in accordance with generally accepted accounting principles (GAAP), this earnings announcement also contains non-GAAP financial measures. The reasons why we use these measures, a reconciliation of these measures to the most directly comparable GAAP measures and other information relating to these measures are included in the supplemental reconciliation schedule attached.
Statements in this release that are not strictly historical, including the statements regarding cost reduction activities, acquisitions, efforts to increase market share and expectations for the balance of 2009 and future periods and any other statements regarding events or developments that we believe or anticipate will or may occur in the future, may be "forward-looking" statements. There are a number of important factors that could cause actual events to differ materially from those suggested or indicated by such forward-looking statements. These factors include, among other things, the current global economic recession and the upheaval in the credit markets and financial services industry, competition, our ability to develop and successfully market new products and technologies, the contractions or growth rates and cyclicality of markets we serve, our ability to expand our business in new markets, our ability to successfully identify, consummate and integrate appropriate acquisitions, the impact of our debt obligations on our operations, litigation and other contingent liabilities including intellectual property and environmental matters, our compliance with applicable laws and regulations and changes in applicable laws and regulations, tax audits and changes in our tax rate, risks relating to potential impairment of goodwill and other long-lived assets, currency exchange rates, pension plan costs, commodity costs and surcharges, labor matters, our relationships with and the performance of our channel partners, our ability to achieve projected efficiencies, cost reductions, sales growth and earnings, and international economic, political, legal and business factors. 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 2008 Annual Report on Form 10-K and Quarterly Report on Form 10-Q for the quarter ended October 2, 2009. These forward-looking statements speak only as of the date of this release and the Company does not assume any obligation to update any forward-looking statement.
To download a copy of the full earnings report, please go to www.danaher.com.
DANAHER CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
($ and shares in thousands, except per share amounts)
(unaudited)
Three Months Ended Nine Months Ended
October 2, September October 2, September 26,
2009 26, 2008 2009 2008
---------- --------- ---------- ------------
Sales $2,750,693 $3,208,181 $8,052,046 $9,520,950
---------- ---------- ---------- ----------
Operating
costs and
expenses:
Cost of sales 1,429,736 1,697,611 4,210,211 5,032,365
Selling,
general and
administrative
expenses 782,438 806,424 2,299,756 2,484,783
Research and
development
expenses 159,040 182,006 478,435 557,976
Other (income)
expense (85,118) -- (85,118) --
------- -------
Total
operating
expenses 2,286,096 2,686,041 6,903,284 8,075,124
--------- --------- --------- ---------
Operating
profit 464,597 522,140 1,148,762 1,445,826
Interest
expense (31,842) (30,218) (87,228) (104,741)
Interest
income 1,594 1,070 3,385 6,004
----- ----- ----- -----
Earnings
before income
taxes 434,349 492,992 1,064,919 1,347,089
Income taxes (82,986) (121,000) (180,150) (335,144)
------- -------- -------- --------
Net earnings $351,363 $371,992 $884,769 $1,011,945
======== ======== ======== ==========
Net earnings
per share:
Basic $1.09 $1.16 $2.78 $3.17
----- ----- ----- -----
Diluted $1.05 $1.11 $2.66 $3.03
===== ===== ===== =====
Average common
stock and
common
equivalent
shares
outstanding:
Basic 321,093 319,887 318,519 319,307
Diluted 336,268 337,334 334,763 336,619
See the accompanying Notes to Consolidated Condensed Financial Statements.
A complete copy of Danaher's Form 10-Q financial statements is available
on the Company's website (www.danaher.com).
DANAHER CORPORATION
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
($ in 000's except per share data)
Three Months Ended
------------------
October 2, September 26,
Adjusted Net Earnings 2009 2008 % Change
--------------------- ---------- ------------- --------
Net Earnings (GAAP) $351,363 $371,992 -5.5%
====
Restructuring
activities (other than
restructuring
activities originally
budgeted for 2009)
approved by the Company
totaling $33 million
and $67 million pre-tax
for the three and nine
months ended October 2,
2009, respectively
(included as part of
the total restructuring
charges incurred by the
Company of $45 million
and $101 million for
the three and nine
months ended October 2,
2009, respectively).
("2009 Additional
Restructurings") 25,115 -
2009 transaction costs
associated with
completed and pending
acquisitions expensed
in accordance with the
adoption of the new
business combination
accounting standard ($8
million and $11 million
pre-tax for the three
and nine months ended
October 2, 2009) and
fair value adjustments
to recorded inventory
and deferred revenue
balances related to
2009 acquisitions ($7
million and $11 million
pre-tax for the three
months and nine months
ended October 2, 2009)
and 2008 acquisitions
($13 million & $53
million pre-tax for
the three months and
nine months ended
September 26, 2008,
respectively).
("Acquisition Related
Costs") 12,697 9,727
Gain on intellectual
property litigation
settlement with Align
Technology, Inc.($85
million pre-tax for
both the three and nine
months ended October 2,
2009, respectively).
("Align Settlement
Gain") (53,412) -
Gains from net
reduction in income tax
reserves and discrete
tax benefits ("Discrete
Income Tax Items") (36,729) (149)
-------- --------
Adjusted Net Earnings
(Non-GAAP) $299,034 $381,570 -21.6%
======== ======== =====
Adjusted Diluted Net
Earnings per Share
--------------------
Diluted Net Earnings Per
Share (GAAP) $1.05 $1.11 -5.4%
====
2009 Additional
Restructurings 0.07 -
Acquisition Related
Costs 0.04 0.03
Align Settlement Gain (0.16) -
Discrete Income Tax
Items (0.11) -
----- -----
Adjusted Diluted Net
Earnings Per Share (Non-
GAAP) $0.89 $1.14 -21.9%
===== ===== =====
Nine Months Ended
-----------------
October 2, September 26,
Adjusted Net Earnings 2009 2008 % Change
--------------------- ---------- ------------- --------
Net Earnings (GAAP) $884,769 $1,011,945 -12.6%
=====
Restructuring
activities (other than
restructuring
activities originally
budgeted for 2009)
approved by the Company
totaling $33 million
and $67 million pre-tax
for the three and nine
months ended October 2,
2009, respectively
(included as part of
the total restructuring
charges incurred by the
Company of $45 million
and $101 million for
the three and nine
months ended October 2,
2009, respectively).
("2009 Additional
Restructurings") 50,615 -
2009 transaction costs
associated with
completed and pending
acquisitions expensed
in accordance with the
adoption of the new
business combination
accounting standard ($8
million and $11 million
pre-tax for the three
and nine months ended
October 2, 2009) and
fair value adjustments
to recorded inventory
and deferred revenue
balances related to
2009 acquisitions ($7
million and $11 million
pre-tax for the three
months and nine months
ended October 2, 2009)
and 2008 acquisitions
($13 million & $53
million pre-tax for
the three months and
nine months ended
September 26, 2008,
respectively).
("Acquisition Related
Costs") 17,517 39,315
Gain on intellectual
property litigation
settlement with Align
Technology, Inc.($85
million pre-tax for
both the three and nine
months ended October 2,
2009, respectively).
("Align Settlement
Gain") (53,412) -
Gains from net
reduction in income tax
reserves and discrete
tax benefits ("Discrete
Income Tax Items") (97,229) (8,364)
-------- ----------
Adjusted Net Earnings
(Non-GAAP) $802,260 $1,042,896 -23.1%
======== ========== =====
Adjusted Diluted Net
Earnings per Share
--------------------
Diluted Net Earnings Per
Share (GAAP) $2.66 $3.03 -12.2%
=====
2009 Additional
Restructurings 0.15 -
Acquisition Related
Costs 0.05 0.12
Align Settlement Gain (0.16) -
Discrete Income Tax
Items (0.29) (0.03)
----- -----
Adjusted Diluted Net
Earnings Per Share (Non-
GAAP) $2.41 $3.12 -22.8%
===== ===== =====
DANAHER CORPORATION
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
($ in 000's except per share data)
Core Sales Growth
-----------------
Three Months
Ended
October 2,
2009 vs. Nine Months Ended October
Components of Sales Comparable 2, 2009 vs. Comparable
Growth 2008 Period 2008 Period
------------ -------------------------
Core (non-GAAP) -14.0% -13.0%
Acquisitions (non-GAAP) 1.5% 2.0%
Impact of currency
translation (non-GAAP) -2.0% -4.5%
---- ----
Total Sales Growth
(GAAP) -14.5% -15.5%
===== =====
Free Cash Flow
--------------
Three Months
Ended
October 2, Nine Months Ended October
2009 2, 2009
------------ -------------------------
Operating Cash Flow
(GAAP) $503,148 $1,305,492
Less: Purchases of
Property, Plant and
Equipment (31,471) (115,414)
------- --------
Free Cash Flow (Non-
GAAP) 471,677 1,190,078
Net Income (GAAP) 351,363 884,769
------- -------
Free Cash Flow to Net
Income Conversion Ratio
(Non-GAAP) 134% 135%
=== ===
General
We believe that the non-GAAP measures set forth above, when viewed with and reconciled to the corresponding GAAP measures, provide additional understanding of Danaher's performance and help identify underlying trends in Danaher's business. The non-GAAP measures should be considered in addition to, and not as a replacement for or superior to, the comparable GAAP measures. A general limitation of these non-GAAP measures is that use of these measures (as compared to the related GAAP measures) may reduce comparability with other companies who may define or calculate similar non-GAAP measures differently. Danaher management compensates, and believes that investors should compensate, for the limitations of these measures by also considering Danaher's financial performance as determined in accordance with GAAP.
Adjusted Net Earnings and Adjusted Diluted Net Earnings Per Share
We use the term adjusted net earnings and adjusted diluted net earnings per share (on an actual and/or forecasted basis) to refer to GAAP earnings per share, excluding the items above. These items have been excluded from the non-GAAP measures because items of this nature and/or size occur with inconsistent frequency, for reasons that may be unrelated to Danaher's commercial performance during the period and/or we believe are not indicative of Danaher's ongoing operating costs or gains in a given period. We believe that these measures reflect additional ways of viewing aspects of Danaher's operations that, when viewed with and reconciled to the corresponding GAAP measures, help us and our investors to better understand the long-term profitability trends of our business, and facilitate easier comparisons of our profitability to prior and future periods and to our peers. We use these measures, and believe that investors use these measures, to (1) generally assess the performance of our operating model, including assessing Danaher's performance against prior period performance, forecasted performance and/or peer company performance, (2) forecast financial results for future periods, (3) identify trends in Danaher's performance, and (4) value Danaher. Danaher's management also uses these measures in making decisions about internal budgets, resource allocation and financial goals for its business units. A particular limitation of these non-GAAP measures is that they exclude charges or gains that can significantly affect Danaher's results of operations and that may recur in the course of Danaher's business (though at times and in amounts that may be difficult to predict).
Core Revenue and Core Revenue Growth/Decline
We use the term "core revenue" to refer to GAAP revenue from (1) existing businesses and (2) acquired businesses starting from and after the first anniversary of the acquisition, but in both cases excluding the effect of foreign currency translation. We use the related term "core revenue growth/decline" to refer to the measure of comparing current period core revenue with the corresponding period of the prior year. We exclude the effect of foreign currency translation from these measures because foreign currency translation is not completely under management's control, is subject to volatility and can therefore obscure underlying business trends. We exclude the effect of acquisitions and divestitures because the nature, size and number of acquisitions and divestitures can vary dramatically from period to period and between us and our peers, which we believe may obscure underlying business trends and makes comparisons of long-term performance difficult. We believe that these measures reflect additional ways of viewing aspects of Danaher's operations that, when viewed with and reconciled to the corresponding GAAP measures, help us and our investors to better identify and understand underlying growth trends in our business, and facilitate easier comparisons of our results of operations with prior and future periods and to our peers. We use these measures, and believe that investors use these measures, to help gauge Danaher's long-term growth prospects and to value Danaher. A particular limitation of these non-GAAP measures is that they exclude items that can significantly affect Danaher's revenues and that may recur in the course of Danaher's business (though at times and in amounts that may be difficult to predict).
Free Cash Flow and Free Cash Flow to Net Income Conversion Ratio
We use the term "free cash flow" to refer to GAAP operating cash flow less purchases of property, plant and equipment. We use the related term "free cash flow to net income conversion ratio" to refer to free cash flow divided by GAAP net income. We believe that these measures reflect additional ways of viewing aspects of Danaher's operations that, when viewed with and reconciled to the corresponding GAAP measures, helps us and our investors to better understand Danaher's ability to generate cash without external financings. We use these measures, and believe investors use these measures, to help gauge the resources available for strategic opportunities such as making acquisitions, investing in the business and strengthening the balance sheet, and to assess the strength of Danaher's earnings performance. In addition, management uses these measures in making operating decisions, allocating financial resources and for budget planning purposes. A particular limitation of these non-GAAP measures is that they do not take into account the Company's debt service requirements and other non-discretionary expenditures and therefore are not necessarily indicative of amounts of cash that may be available for discretionary uses.
First Call Analyst:
FCMN Contact:
SOURCE: Danaher Corporation
CONTACT: Matt R. McGrew, Vice President, Investor Relations, Danaher
Corporation, +1-202-828-0850, Fax: +1-202-828-0860
Web Site: http://www.danaher.com/