Danaher Corporation — 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023; quarterly figures below are for the fourth quarter. Financial results are presented for continuing operations unless stated otherwise.
Business context
Danaher is a global science and technology company operating in Biotechnology, Life Sciences and Diagnostics, with more than 15 operating companies and facilities in over 50 countries. About 60% of 2023 continuing-operations sales came from outside the United States. On September 30, 2023, Danaher completed the spin-off of its former Environmental & Applied Solutions business as Veralto; that business is reported as discontinued operations. Danaher acquired Abcam for approximately $5.6 billion in cash on December 6, 2023, adding it to Life Sciences.
Key financial results
| Metric | 2023 | 2022 |
|---|---|---|
| Sales | $23.890 billion | $26.643 billion |
| GAAP sales change | Down 10.5% | Up 7.5% |
| Core sales change | Down 10.0% | Up 10.0% |
| Gross profit margin | 58.7% | 60.8% |
| Operating profit | $5.202 billion | $7.536 billion |
| Operating profit margin | 21.8% | 28.3% |
| Net earnings from continuing operations | $4.221 billion | $6.328 billion |
| Diluted EPS from continuing operations | $5.65 | $8.47 |
| Operating cash flow from continuing operations | $6.490 billion | $7.613 billion |
| Capital expenditures | $1.383 billion | $1.118 billion |
| Interest expense / interest income | $286 million / $303 million | $204 million / $41 million |
Fourth-quarter 2023 sales were $6.405 billion, operating profit was $1.337 billion, continuing-operations net earnings were $1.121 billion, and diluted continuing-operations EPS was $1.50. Fourth-quarter 2022 sales were $7.134 billion.
Segments and material changes
| Segment | 2023 sales | Sales change vs. 2022 | 2023 operating margin |
|---|---|---|---|
| Biotechnology | $7.172 billion | Down 18.0%; core down 18.0% | 26.6%, down from 34.3% |
| Life Sciences | $7.141 billion | Up 1.5%; core up 1.0% | 16.9%, down from 20.1% |
| Diagnostics | $9.577 billion | Down 11.5%; core down 10.5% | 25.1%, down from 31.7% |
- Lower demand for COVID-19-related products was the principal driver of the consolidated sales decline, alongside weaker demand in other product lines. Biotechnology was affected by lower demand for COVID-19 vaccines and therapeutics, bioprocessing customer inventory reductions and tighter funding for emerging biotechnology companies.
- Diagnostics declined mainly because of lower COVID-19 molecular testing sales; non-respiratory molecular tests grew more than 20%, while clinical diagnostics businesses grew.
- Life Sciences core growth reflected strength in industrial filtration, mass spectrometry and microscopy, partly offset by weaker genomic medicines and flow cytometry and lab automation demand.
- Reported sales also reflected a 1.0% unfavorable currency impact and a 0.5% contribution from acquisitions. Price increases contributed 3.0% to consolidated sales growth but did not offset volume and mix pressures.
- Operating margin fell 650 basis points. Drivers included lower core sales, mix, inventory charges and reduced cost-structure leverage. Abcam-related transaction and purchase-accounting items, and impairment charges, also weighed on results.
Cash, debt and liquidity
- Cash and cash equivalents were $5.864 billion at year-end, compared with $5.995 billion a year earlier. Operating cash flow from continuing operations declined 15% to $6.490 billion, primarily reflecting lower earnings.
- Total debt was $18.402 billion, down from $19.677 billion; $1.695 billion was classified as current. The company had no borrowings under its $5.0 billion revolving credit facility and reported approximately $4.0 billion of additional borrowing capacity based on facility availability and commercial-paper backstop needs.
- Danaher reported compliance with debt covenants. It expects operating cash flow, cash on hand and other liquidity sources to support operations, investment, debt service and dividends.
- Cash paid for acquisitions was $5.610 billion, primarily for Abcam. The company paid $821 million in dividends during 2023. No common shares were repurchased during the year.
- Goodwill and other intangible assets totaled approximately $62.4 billion. The annual goodwill impairment test found no impairment; the company recorded $77 million of long-lived asset impairment charges in 2023.
Outlook, risks and unusual items
- Management expects bioprocessing core revenue to decline for full-year 2024, with declines in the first half more than offsetting gradual improvement toward year-end. Reduced demand and customer inventory adjustments are expected to continue into the first half.
- 2024 capital expenditures are expected to be at levels similar to those of the prior three years. Management expects a 2024 effective tax rate of approximately 17.5%, above 2023’s 16.3%, largely because certain 2023 discrete tax benefits are not expected to recur.
- Veralto separation costs were $145 million in 2023 and were recorded in discontinued operations. The separation generated approximately $2.6 billion in net cash distributions to Danaher; a portion was used to redeem commercial paper.
- Abcam added approximately $3.9 billion of goodwill and $2.1 billion of intangible assets. The purchase-price allocation remained preliminary, and the acquisition’s internal controls were excluded from management’s 2023 internal-control assessment because integration was not complete.
- Key risks include further COVID-related demand declines, weak bioprocessing demand and funding, competition and pricing pressure, economic and geopolitical uncertainty, currency movements, acquisitions and integration, cybersecurity and data privacy, product and regulatory compliance, and the company’s substantial debt and intangible-asset balances.
- Danaher disclosed a Danish tax assessment of approximately DKK 2.1 billion, or about $307 million at year-end exchange rates, which it is contesting. Management does not expect resolution to have a future material adverse effect, taking prior payments into account. Environmental reserves were $183 million. Management stated that litigation losses exceeding reserves were not reasonably expected to have a material effect.
Most important facts for investors to verify
- Whether bioprocessing demand, customer inventories and biotechnology funding recover as management anticipates, and whether 2024 revenue follows the stated trajectory.
- How much of the 2023 decline reflects temporary COVID-related normalization versus broader weakness, especially by segment and geography.
- Abcam’s integration, purchase-price allocation, expected earnings contribution and the establishment of its internal controls.
- Cash generation, debt maturities and refinancing access, including the company’s reliance on commercial paper and available credit facilities.
- Developments in the Danish tax dispute, environmental matters and other contingencies, and any changes to recorded reserves or management’s assessments.