Danaher Corporation — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. This is an annual report, not a standalone fourth-quarter filing. Financial results are for continuing operations unless stated otherwise. Danaher operates in Life Sciences, Diagnostics, and Environmental & Applied Solutions.
Financial performance
| Metric | FY2021 | FY2020 | Change / context |
|---|---|---|---|
| Revenue | $29.453 billion | $22.284 billion | Up 32.0%; core sales rose 23.0%, acquisitions contributed 7.5%, and currency 1.5%. |
| Gross profit / margin | $17.952 billion / 61.0% | $12.475 billion / 56.0% | Margin improved 500 basis points, primarily from volume and sales mix. |
| Operating profit / margin | $7.465 billion / 25.3% | $4.231 billion / 19.0% | Margin improved 630 basis points; the 2021 Quidel settlement partly offset gains. |
| Net earnings from continuing operations | $6.347 billion | $3.646 billion | Increased with higher sales and acquired-business contribution. |
| Diluted EPS from continuing operations | $8.50 | $4.89 | FY2021 total diluted EPS, including discontinued operations, was $8.61. |
| Operating cash flow from continuing operations | $8.358 billion | $6.215 billion | Up 34%; working-capital investment partly offset higher earnings. |
| Capital expenditures | $1.294 billion | $791 million | Higher spending supported capacity expansion, including diagnostics and biopharma products. |
| Cash and equivalents | $2.586 billion | $6.035 billion | At year-end; approximately $2.2 billion was held outside the U.S. |
| Total debt | $22.176 billion | $21.204 billion | Includes commercial paper; $2.2 billion of additional borrowing capacity was reported under the credit facility framework. |
Segment results
| Segment | FY2021 sales | Sales growth | Operating margin |
|---|---|---|---|
| Life Sciences | $14.958 billion | 41.5% reported; 23.0% core | 29.2%, versus 19.4% in 2020 |
| Diagnostics | $9.844 billion | 33.0% reported; 31.0% core | 23.5%, versus 20.8% in 2020 |
| Environmental & Applied Solutions | $4.651 billion | 8.0% reported and core | 22.7%, unchanged from 2020 |
Recurring revenue was $21.795 billion, approximately 74% of total sales. Sales outside the U.S. represented approximately 62% of revenue; China contributed $3.975 billion.
Material changes and significant items
- Danaher acquired Aldevron on August 30, 2021, for approximately $9.6 billion in cash, funded with cash and commercial paper. Aldevron joined Life Sciences; it generated about $300 million of 2020 revenue. The company also acquired 13 other businesses for approximately $1.4 billion.
- Life Sciences benefited from a full year of Cytiva sales, acquired in 2020, and strong demand for bioprocessing and genomics products tied to COVID-19 vaccines and therapeutics. Diagnostics benefited from COVID-19 testing and recovering non-COVID testing volumes.
- A $547 million pretax contract-settlement expense followed the modification and partial termination of a prior Beckman Coulter–Quidel arrangement and resolution of litigation. Most of the charge was noncash at recognition. Danaher agreed to make predominantly fixed payments of approximately $75 million annually through 2029.
- Other income included $401 million of realized and unrealized investment gains. Danaher also recorded a $96 million loss on early debt extinguishment, related to redeeming €800 million of notes due 2025.
- The effective tax rate was 16.5%, compared with 18.9% in 2020; the 2021 rate benefited from discrete tax items, including releases of uncertain-tax-position reserves and stock-based compensation tax benefits.
Outlook, risks, and contingencies
- Management estimated 2022 capital expenditures of approximately $1.5 billion and an effective tax rate of approximately 20.0%. At December 31, 2021 exchange rates, currency was expected to reduce 2022 sales by approximately 1.0% versus 2021.
- Management expected overall demand for COVID-19-related products to moderate as the pandemic subsided, while anticipating continued demand for products supporting vaccines and therapeutics; testing demand was expected to fluctuate more.
- COVID-19-related supply shortages, freight delays, cost inflation, and labor constraints persisted at year-end. Danaher said these pressures had not materially adversely affected 2021 results, but warned that future effects were uncertain.
- Principal risks include supply-chain and labor constraints, changing COVID-19 demand, competition and pricing pressure, acquisition integration and elevated debt, foreign-exchange exposure, cybersecurity and data privacy, and extensive healthcare and product regulation.
- Tax authorities’ assessments in Denmark totaled approximately DKK 2.1 billion, or $317 million at year-end exchange rates; the matter remained under appeal. Gross unrecognized tax benefits were approximately $1.1 billion. Danaher also reported a $181 million reserve for environmental matters. The company stated it did not believe reasonably possible losses above recorded litigation reserves would materially affect its financial statements.
- Danaher reported effective internal control over financial reporting, but excluded Aldevron from management’s and the auditor’s internal-control assessment. Aldevron represented 12% of year-end assets and less than 1% of 2021 revenue.
Investor verification points
- Assess how much FY2021 growth and margin expansion reflected durable core demand versus acquisitions, COVID-related sales, favorable mix, and lower acquisition-related charges than in 2020.
- Review Aldevron’s integration, returns on the $9.6 billion purchase price, and the resulting debt and amortization burden.
- Monitor the Quidel payment obligation through 2029 and its cash-flow classification, along with other acquisition and contractual commitments.
- Track cash conversion and working capital: receivables and inventories used cash in 2021, while planned 2022 capital expenditures increase investment needs.
- Follow COVID-19 demand normalization, supply and labor pressures, the Danish tax appeal and other tax audits, and the continued assessment of Aldevron’s internal controls.