Danaher Reports Second Quarter 2024 Results
Danaher (NYSE: DHR) reported its Q2 2024 results, with net earnings of $907 million or $1.22 per diluted share. Non-GAAP adjusted diluted EPS was $1.72. Revenues decreased 3.0% year-over-year to $5.7 billion, while non-GAAP core revenue decreased 3.5%. Operating cash flow was $1.4 billion, and non-GAAP free cash flow was $1.1 billion.
CEO Rainer M. Blair noted better-than-expected revenue, earnings, and cash flow, highlighting sustained momentum in bioprocessing and strong performance at Cepheid. For Q3 2024, Danaher anticipates non-GAAP core revenue to be down low-single digits year-over-year. The full-year 2024 outlook remains unchanged, expecting non-GAAP core revenue to be down low-single digits year-over-year.
Danaher (NYSE: DHR) ha riportato i risultati per il secondo trimestre del 2024, con un utile netto di 907 milioni di dollari o 1,22 dollari per azione diluita. L'EPS diluito rettificato non GAAP è stato di 1,72 dollari. I ricavi sono diminuiti del 3,0% rispetto all'anno precedente, attestandosi a 5,7 miliardi di dollari, mentre i ricavi core non GAAP hanno subito una diminuzione del 3,5%. Il flusso di cassa operativo è stato di 1,4 miliardi di dollari, e il flusso di cassa libero non GAAP è stato di 1,1 miliardi di dollari.
Il CEO Rainer M. Blair ha evidenziato risultati di ricavi, utili e flusso di cassa migliori del previsto, sottolineando il di slancio sostenuto nella bioprocessing e la forte performance di Cepheid. Per il terzo trimestre del 2024, Danaher prevede che i ricavi core non GAAP diminuiscano di un basso numero a cifra singola rispetto all'anno precedente. Le stime per l'intero anno 2024 rimangono invariate, con l'aspettativa che i ricavi core non GAAP siano in calo di un basso numero a cifra singola rispetto all'anno precedente.
Danaher (NYSE: DHR) reportó los resultados del segundo trimestre de 2024, con ganancias netas de 907 millones de dólares o 1,22 dólares por acción diluida. El EPS diluido ajustado no GAAP fue de 1,72 dólares. Los ingresos disminuyeron un 3,0% en comparación con el año anterior, alcanzando los 5,7 mil millones de dólares, mientras que los ingresos centrales no GAAP cayeron un 3,5%. El flujo de efectivo operativo fue de 1,4 mil millones de dólares, y el flujo de efectivo libre no GAAP fue de 1,1 mil millones de dólares.
El CEO Rainer M. Blair destacó ingresos, ganancias y flujos de efectivo mejores de lo esperado, enfatizando el impulso sostenido en el bioproceso y un sólido rendimiento en Cepheid. Para el tercer trimestre de 2024, Danaher anticipa que los ingresos centrales no GAAP disminuyan un bajo número de un solo dígito en comparación con el año anterior. Las previsiones para todo el año 2024 se mantienen sin cambios, esperando que los ingresos centrales no GAAP disminuyan un bajo número de un solo dígito en comparación con el año pasado.
다나허(Danaher, NYSE: DHR)는 2024년 2분기 실적을 발표하며 순이익 9억 7백만 달러 또는 희석 주당 1.22달러를 기록했습니다. 비GAAP 조정 희석 EPS는 1.72달러였습니다. 수익은 전년 대비 3.0% 감소하여 57억 달러에 달했습니다, 비GAAP 핵심 수익은 3.5% 감소했습니다. 운영 현금 흐름은 14억 달러였고, 비GAAP 자유 현금 흐름은 11억 달러였습니다.
CEO 라이너 M. 블레어(Rainer M. Blair)는 생명과학 분야에서 지속적인 모멘텀과 세페이드(Cepheid)에서의 강력한 성과를 강조하며 수익, 수익률, 현금 흐름이 예상보다 좋았다고 밝혔습니다. 2024년 3분기에는 비GAAP 핵심 수익이 전년 대비 소폭 감소할 것으로 예상하고 있습니다. 2024년 전체 연간 전망은 변동이 없으며, 비GAAP 핵심 수익이 전년 대비 소폭 감소할 것으로 기대하고 있습니다.
Danaher (NYSE: DHR) a publié ses résultats pour le deuxième trimestre de 2024, avec des bénéfices nets de 907 millions de dollars ou 1,22 dollar par action diluée. Le BPA dilué ajusté selon les normes non-GAAP s'élevait à 1,72 dollar. Le chiffre d'affaires a diminué de 3,0 % par rapport à l'année précédente, atteignant 5,7 milliards de dollars, tandis que le chiffre d'affaires core non-GAAP a baissé de 3,5 %. Le flux de trésorerie d'exploitation s'élevait à 1,4 milliard de dollars, et le flux de trésorerie libre non-GAAP était de 1,1 milliard de dollars.
Le PDG Rainer M. Blair a souligné des revenus, des bénéfices et des flux de trésorerie meilleurs que prévu, mettant en évidence un élan soutenu dans le bioprocessing et de solides performances chez Cepheid. Pour le troisième trimestre de 2024, Danaher prévoit que le chiffre d'affaires core non-GAAP diminuera d'un faible chiffre à un chiffre. Les prévisions pour l'année 2024 demeurent inchangées, s'attendant à ce que le chiffre d'affaires core non-GAAP baisse d'un faible chiffre à un chiffre par rapport à l'année précédente.
Danaher (NYSE: DHR) hat die Ergebnisse für das zweite Quartal 2024 veröffentlicht, mit Nettoeinkünften von 907 Millionen US-Dollar oder 1,22 US-Dollar pro verwässerter Aktie. Der nicht-GAAP angepasste verwässerte EPS betrug 1,72 US-Dollar. Der Umsatz verringerte sich um 3,0 % im Vergleich zum Vorjahr auf 5,7 Milliarden US-Dollar, während der nicht-GAAP Kernumsatz um 3,5 % gefallen ist. Der operative Cashflow betrug 1,4 Milliarden US-Dollar, und der nicht-GAAP freie Cashflow betrug 1,1 Milliarden US-Dollar.
CEO Rainer M. Blair bemerkte bessere als erwartete Umsätze, Gewinne und Cashflow und hob das anhaltende Wachstum im Bioprozess und die starke Leistung von Cepheid hervor. Für das dritte Quartal 2024 erwartet Danaher, dass der nicht-GAAP Kernumsatz im Vergleich zum Vorjahr um einen niedrigen einstelligen Prozentwert zurückgeht. Die Prognose für das gesamte Jahr 2024 bleibt unverändert, mit der Erwartung, dass der nicht-GAAP Kernumsatz um einen niedrigen einstelligen Prozentwert im Vergleich zum Vorjahr zurückgeht.
- Better-than-expected revenue, earnings, and cash flow in Q2 2024
- Sustained positive momentum in bioprocessing business
- Strong performance at Cepheid, gaining market share in molecular testing
- Operating cash flow of $1.4 billion and non-GAAP free cash flow of $1.1 billion
- Revenues decreased 3.0% year-over-year to $5.7 billion
- Non-GAAP core revenue decreased 3.5% year-over-year
- Anticipated low-single digit decrease in non-GAAP core revenue for Q3 2024
- Full-year 2024 outlook expects non-GAAP core revenue to be down low-single digits
Insights
Danaher Corporation's second-quarter earnings provide critical insights into the company's financial health. Despite a
The operating cash flow of
However, the forecast is somewhat cautious, with an expectation for non-GAAP core revenue to be down in the low single digits year-over-year for both the third quarter and the full year of 2024. This conservative outlook may reflect uncertainties in the market or specific business challenges. Investors should monitor these trends closely, especially any shifts in core revenue, which could impact long-term growth prospects.
Danaher's performance in its bioprocessing business and its subsidiary Cepheid is noteworthy. Sustained positive momentum in bioprocessing suggests that Danaher remains competitive in this high-growth sector, likely due to continued innovation and strong customer relationships. Cepheid's gain in market share within molecular testing demonstrates the company's leadership in diagnostics, critical during health crises like the Covid-19 pandemic.
CEO Rainer M. Blair's comments on the transformation of Danaher's portfolio highlight strategic shifts towards life sciences and diagnostics. This focus positions Danaher for higher long-term growth, expanded margins and stronger cash flow. Investors should see this as a strategic advantage, capitalizing on high-margin sectors with robust demand.
However, the overall decrease in revenue and cautious outlook suggests external pressures or internal hurdles. These could include market saturation, increased competition, or changes in customer buying patterns. Investors should consider how these factors might influence Danaher's future performance and strategic responses to mitigate risks.
The strong performance of Cepheid in gaining market share in molecular testing is significant in the tech landscape of diagnostics. Molecular testing technology is important for rapid and accurate diagnosis of diseases and Cepheid's advancements here indicate strong R&D capabilities and effective product positioning.
Investors should note that continued investment in technology and innovation is critical for sustaining competitive advantage in diagnostics. Danaher's ability to deliver better-than-expected earnings despite decreased revenues suggests that technology-driven efficiencies and innovative product lines are mitigating some of the financial pressures. It's important to watch for any announcements regarding technological advancements or new product launches, as these will likely drive future growth.
In summary, Danaher's alignment with high-tech diagnostics and life sciences provides a robust foundation for long-term success, assuming continued innovation and effective market adaptation.
Key Second Quarter 2024 Results
- Net earnings were
$907 million $1.22 $1.72 - Revenues decreased
3.0% year-over-year to$5.7 billion 3.5% . - Operating cash flow was
$1.4 billion $1.1 billion
Rainer M. Blair, President and Chief Executive Officer, stated, "Our team executed well during the second quarter, delivering better-than-expected revenue, earnings and cash flow. We were particularly pleased with the sustained positive momentum in our bioprocessing business and with strong performance at Cepheid, which we believe gained market share in molecular testing again this quarter."
Blair continued, "There's a bright future ahead for Danaher. The transformation in our portfolio over the last several years has created a focused life sciences and diagnostics leader positioned for higher long-term growth, expanded margins, and stronger cash flow."
Third Quarter and Full Year 2024 Outlook
The Company provides forecasted sales only on a non-GAAP core revenue basis because of the difficulty in estimating the other components of GAAP revenue, such as currency translation, acquisitions and divested product lines.
For the third quarter 2024, the Company anticipates that non-GAAP core revenue will be down low-single digits year-over-year. For full year 2024, the Company continues to expect that non-GAAP core revenue will be down low-single digits year-over-year.
Conference Call and Webcast Information
Danaher will discuss its second quarter results and financial guidance for the third quarter and full year 2024 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" and additional related materials will be posted to the same section of Danaher's website. 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 800-245-3047 within the
ABOUT DANAHER
Danaher is a leading global life sciences and diagnostics innovator, committed to accelerating the power of science and technology to improve human health. Our businesses partner closely with customers to solve many of the most important health challenges impacting patients around the world. Danaher's advanced science and technology - and proven ability to innovate - help enable faster, more accurate diagnoses and help reduce the time and cost needed to sustainably discover, develop and deliver life-changing therapies. Focused on scientific excellence, innovation and continuous improvement, our approximately 63,000 associates worldwide help ensure that Danaher is improving quality of life for billions of people today, while setting the foundation for a healthier, more sustainable tomorrow. Explore more at www.danaher.com.
FORWARD-LOOKING STATEMENTS
Statements in this release that are not strictly historical, including the statements regarding the anticipated financial results for the third quarter and full year 2024, the Company's long-term positioning and financial prospects 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: unanticipated, further declines in demand for our COVID-19 related products, the impact of global health crises, the impact of our debt obligations on our operations and liquidity, deterioration of or instability in the global economy, the markets we serve and the financial markets, uncertainties with respect to the development, deployment, and use of artificial intelligence in our business and products, uncertainties relating to national laws or policies, including laws or policies to protect or promote domestic interests and/or address foreign competition, 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 rules relating to off-label marketing and other 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, our ability to integrate the businesses we acquire and achieve the anticipated growth, synergies and other benefits of such acquisitions, contingent liabilities and other risks relating to acquisitions, investments, strategic relationships 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
DANAHER CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS ($ and shares in millions, except per share amounts) (unaudited) | ||||||||
Three-Month Period Ended | Six-Month Period Ended | |||||||
June 28, 2024 | June 30, 2023 | June 28, 2024 | June 30, 2023 | |||||
Sales | $ 5,743 | $ 5,912 | $ 11,539 | $ 11,861 | ||||
Cost of sales | (2,315) | (2,594) | (4,624) | (4,881) | ||||
Gross profit | 3,428 | 3,318 | 6,915 | 6,980 | ||||
Operating costs: | ||||||||
Selling, general and administrative expenses | (1,869) | (1,794) | (3,676) | (3,566) | ||||
Research and development expenses | (391) | (361) | (759) | (734) | ||||
Operating profit | 1,168 | 1,163 | 2,480 | 2,680 | ||||
Nonoperating income (expense): | ||||||||
Other income (expense), net | (59) | (15) | (95) | 9 | ||||
Interest expense | (65) | (65) | (130) | (131) | ||||
Interest income | 39 | 59 | 99 | 107 | ||||
Earnings before income taxes | 1,083 | 1,142 | 2,354 | 2,665 | ||||
Income taxes | (176) | (222) | (359) | (505) | ||||
Net earnings from continuing operations | 907 | 920 | 1,995 | 2,160 | ||||
Earnings from discontinued operations, net of income taxes | — | 186 | — | 396 | ||||
Net earnings | 907 | 1,106 | 1,995 | 2,556 | ||||
Mandatory convertible preferred stock dividends | — | — | — | (21) | ||||
Net earnings attributable to common stockholders | $ 907 | $ 1,106 | $ 1,995 | $ 2,535 | ||||
Net earnings per common share from continuing operations: | ||||||||
Basic | $ 1.23 | $ 1.25 | $ 2.70 | $ 2.92 | ||||
Diluted | $ 1.22 | $ 1.24 | $ 2.68 | (a) | $ 2.89 | |||
Net earnings per common share from discontinued operations: | ||||||||
Basic | $ — | $ 0.25 | $ — | $ 0.54 | ||||
Diluted | $ — | $ 0.25 | $ — | $ 0.53 | ||||
Net earnings per common share: | ||||||||
Basic | $ 1.23 | $ 1.50 | $ 2.70 | $ 3.46 | ||||
Diluted | $ 1.22 | $ 1.49 | $ 2.68 | (a) | $ 3.42 | (a) | ||
Average common stock and common equivalent shares outstanding: | ||||||||
Basic | 737.6 | 737.3 | 739.1 | 733.4 | ||||
Diluted | 742.4 | 744.7 | 745.5 | 740.2 | ||||
(a) Net earnings per common share amounts for the relevant three-month periods do not add to the six-month period amount 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
| |||||||
Diluted Net Earnings Per Common Share and Adjusted Diluted Net Earnings Per Common Share 1 | |||||||
Three-Month Period Ended | Six-Month Period Ended | ||||||
June 28, 2024 | June 30, 2023 | June 28, 2024 | June 30, 2023 | ||||
Diluted Net Earnings Per Common Share From Continuing Operations (GAAP) | $ 1.22 | $ 1.24 | $ 2.68 | $ 2.89 | |||
Amortization of acquisition-related intangible assets A | 0.54 | 0.50 | 1.09 | 1.00 | |||
Fair value net (gains) losses on investments B | 0.08 | 0.02 | 0.13 | (0.01) | |||
Acquisition-related items C | — | — | 0.03 | — | |||
Impairments D | — | 0.06 | — | 0.06 | |||
Tax effect of the above adjustments E | (0.11) | (0.11) | (0.23) | (0.19) | |||
Discrete tax adjustments F | (0.01) | 0.03 | (0.06) | 0.03 | |||
Rounding | — | (0.01) | (0.01) | — | |||
Adjusted Diluted Net Earnings Per Common Share From Continuing Operations (Non-GAAP) | $ 1.72 | $ 1.73 | $ 3.63 | $ 3.78 | |||
1 | For the six-month period ended June 30, 2023, 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 prior to their conversion on April 17, 2023. Net earnings from continuing operations per diluted common share for the relevant three-month periods may not add to the year-to-date amounts due to rounding. |
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 | Six-Month Period Ended | ||||||
June 28, 2024 | June 30, 2023 | June 28, 2024 | June 30, 2023 | ||||
Pretax | $ 402 | $ 372 | $ 809 | $ 744 | |||
After-tax | 331 | 304 | 667 | 608 | |||
B | Net (gains) losses on the Company's equity and limited partnership investments recorded in the following historical periods ($ in millions) (only the pretax amounts set forth below are reflected in the fair value net (gains) losses on investments line above): |
Three-Month Period Ended | Six-Month Period Ended | ||||||
June 28, 2024 | June 30, 2023 | June 28, 2024 | June 30, 2023 | ||||
Pretax | $ 59 | $ 17 | $ 96 | $ (5) | |||
After-tax | 45 | 13 | 73 | (4) | |||
C | Costs incurred for the fair value adjustment to inventory related to the acquisition of Abcam plc for the six-month period ended June 28, 2024 ( |
D | Impairment charges related to technology and other assets in the Biotechnology segment recorded in the three and six-month periods ended June 30, 2023 ( |
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 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. |
F | Discrete tax adjustments and other tax-related adjustments for the three-month period ended June 28, 2024, include the impact of net discrete tax benefits of |
Average and Adjusted Average Common Stock and Common Equivalent Diluted Shares Outstanding (shares in millions) | |||||||
Three-Month Period Ended | Six-Month Period Ended | ||||||
June 28, 2024 | June 30, 2023 | June 28, 2024 | June 30, 2023 | ||||
Average common stock and common equivalent shares outstanding - diluted (GAAP) 2 | 742.4 | 744.7 | 745.5 | 740.2 | |||
Converted shares 3 | — | — | — | 5.1 | |||
Adjusted average common stock and common equivalent shares outstanding - diluted (non-GAAP) | 742.4 | 744.7 | 745.5 | 745.3 | |||
2 | The impact of the MCPS calculated under the if-converted method was dilutive for the three-month period ended June 30, 2023, and as such 1.5 million shares underlying the MCPS were included in the calculation of diluted EPS in the three-month period. The impact of the MCPS calculated under the if-converted method was anti-dilutive for the six-month period ended June 30, 2023, and as such, 5.1 million shares underlying the MCPS were excluded from the calculation of diluted EPS and the related MCPS dividends of |
3 | 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 the actual conversion rates as of June 30, 2023. |
Sales (Decline) Growth by Segment and Core Sales (Decline) Growth by Segment | |||||||
% Change Three-Month Period Ended June 28, 2024 vs. Comparable 2023 Period | |||||||
Segments | |||||||
Total Company | Biotechnology | Life Sciences | Diagnostics | ||||
Total sales (decline) growth (GAAP) | (3.0) % | (9.0) % | (1.5) % | 1.5 % | |||
Impact of: | |||||||
Acquisitions | (2.0) % | — % | (6.0) % | — % | |||
Currency exchange rates | 1.5 % | 2.0 % | 2.0 % | 1.5 % | |||
Core sales (decline) growth (non-GAAP) | (3.5) % | (7.0) % | (5.5) % | 3.0 % | |||
% Change Six-Month Period Ended June 28, 2024 vs. Comparable 2023 Period | |||||||
Segments | |||||||
Total Company | Biotechnology | Life Sciences | Diagnostics | ||||
Total sales (decline) growth (GAAP) | (2.5) % | (13.5) % | 0.5 % | 4.0 % | |||
Impact of: | |||||||
Acquisitions/divestitures | (2.0) % | — % | (6.5) % | — % | |||
Currency exchange rates | 1.0 % | 1.5 % | 1.5 % | 1.0 % | |||
Core sales (decline) growth (non-GAAP) | (3.5) % | (12.0) % | (4.5) % | 5.0 % | |||
Forecasted Core Sales Decline | |||
% Change Three-Month Period Ending | % Change Year Ending December 31, 2024 | ||
Core sales decline (non-GAAP) | -Low-single digit | -Low-single digit | |
Cash Flow from Continuing Operations and Free Cash Flow from Continuing Operations ($ in millions) | |||||
Three-Month Period Ended | Year-over-Year | ||||
June 28, 2024 | June 30, 2023 | ||||
Total Cash Flow from Continuing Operations: | |||||
Net cash provided by operating activities from continuing operations (GAAP) | $ 1,417 | $ 1,646 | |||
Total cash used in investing activities from continuing operations (GAAP) | $ (360) | $ (421) | |||
Total cash used in financing activities from continuing operations (GAAP) | $ (5,715) | $ (208) | |||
Free Cash Flow from Continuing Operations: | |||||
Net cash provided by operating activities from continuing operations (GAAP) | $ 1,417 | $ 1,646 | ~ (14.0) % | ||
Less: payments for additions to property, plant & equipment (capital expenditures) from continuing operations (GAAP) | (287) | (329) | |||
Plus: proceeds from sales of property, plant & equipment (capital disposals) from continuing operations (GAAP) | 1 | 2 | |||
Free cash flow from continuing operations (non-GAAP) | $ 1,131 | $ 1,319 | ~ (14.5) % | ||
We define free cash flow from continuing operations 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"). |
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:
- with respect to Adjusted Diluted Net Earnings Per Common Share, 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, 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 from continuing operations (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 the non-GAAP measures referenced above 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:
- Amortization of Intangible Assets: 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.
- Restructuring Charges: 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.
- Other Adjustments: 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.
- With respect to adjusted average common stock and common equivalent shares outstanding, Danaher's MCPS mandatorily converted into Danaher common stock on the mandatory conversion date of April 17, 2023 (unless converted or redeemed earlier in accordance with the terms of the applicable certificate of designations). With respect to the calculation of Adjusted Diluted Net Earnings Per Common Share from Continuing Operations, we apply the "if converted" method of share dilution to the MCPS in all applicable periods irrespective of whether such preferred shares would be dilutive or anti-dilutive in the period. We believe this presentation provides useful information to investors by helping them understand the net impact on Danaher's earnings per share-related measures irrespective of the period.
- With respect to core sales, (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.
The Company provides forecasted sales only on a non-GAAP core revenue basis because of the difficulty in estimating the other components of GAAP revenue, such as currency translation, acquisitions and divested product lines.
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SOURCE Danaher Corporation
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