Microsoft Excel LibreOffice Calc

Danaher Corp. (DHR)


Analysis of Goodwill and Intangible Assets

Difficulty: Advanced


Goodwill and Intangible Assets Accounting Policy

Goodwill and other intangible assets result from Danaher’s acquisition of existing businesses. In accordance with accounting standards related to business combinations, goodwill is not amortized; however, certain finite-lived identifiable intangible assets, primarily customer relationships and acquired technology, are amortized over their estimated useful lives. Intangible assets with indefinite lives are not amortized. In-process research and development (“IPR&D”) is initially capitalized at fair value and when the IPR&D project is complete, the asset is considered a finite-lived intangible asset and amortized over its estimated useful life. If an IPR&D project is abandoned, an impairment loss equal to the value of the intangible asset is recorded in the period of abandonment. Danaher reviews identified intangible assets and goodwill for impairment whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable. Danaher also tests intangible assets with indefinite lives and goodwill at least annually for impairment.

Source: 10-K (filing date: 2019-02-21).


Goodwill and Intangible Assets Disclosure

Danaher Corp., Statement of Financial Position, Goodwill and Intangible Assets

USD $ in thousands

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Patents and technology 2,985,300  2,363,500  2,211,300  2,212,200  1,644,100 
Customer relationships and other intangibles 7,302,800  7,354,900  6,990,900  6,469,500  4,255,600 
Trademarks and trade names 190,700  23,900  –  –  – 
Finite-lived intangibles, gross carrying amount 10,478,800  9,742,300  9,202,200  8,681,700  5,899,700 
Accumulated amortization (3,634,500) (3,001,300) (2,245,600) (2,232,400) (2,021,400)
Finite-lived intangibles, net 6,844,300  6,741,000  6,956,600  6,449,300  3,878,300 
Trademarks and trade names 4,828,800  4,926,100  4,861,400  4,821,000  3,490,900 
Indefinite-lived intangibles 4,828,800  4,926,100  4,861,400  4,821,000  3,490,900 
Intangibles 11,673,100  11,667,100  11,818,000  11,270,300  7,369,200 
Goodwill 25,906,000  25,138,600  23,826,900  25,070,300  16,964,200 
Goodwill and other intangible assets 37,579,100  36,805,700  35,644,900  36,340,600  24,333,400 

Based on: 10-K (filing date: 2019-02-21), 10-K (filing date: 2018-02-21), 10-K (filing date: 2017-02-22), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-25).

Item Description The company
Intangibles Sum of the carrying amounts of all intangible assets, excluding goodwill, as of the balance sheet date, net of accumulated amortization and impairment charges. Danaher Corp.’s intangibles declined from 2016 to 2017 but then slightly increased from 2017 to 2018.
Goodwill Amount after accumulated impairment loss of an asset representing future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized. Danaher Corp.’s goodwill increased from 2016 to 2017 and from 2017 to 2018.
Goodwill and other intangible assets Sum of the carrying amounts of all intangible assets, including goodwill, as of the balance sheet date, net of accumulated amortization and impairment charges. Danaher Corp.’s goodwill and other intangible assets increased from 2016 to 2017 and from 2017 to 2018.

Analyst Adjustments: Removal of Goodwill

Danaher Corp., adjustments to financial data

USD $ in thousands

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Adjustment to Total Assets
Total assets (as reported) 47,832,500  46,648,600  45,295,300  48,222,200  36,991,700 
Less: Goodwill 25,906,000  25,138,600  23,826,900  25,070,300  16,964,200 
Total assets (adjusted) 21,926,500  21,510,000  21,468,400  23,151,900  20,027,500 
Adjustment to Total Danaher Stockholders’ Equity
Total Danaher stockholders’ equity (as reported) 28,214,400  26,358,200  23,002,800  23,690,300  23,378,100 
Less: Goodwill 25,906,000  25,138,600  23,826,900  25,070,300  16,964,200 
Total Danaher stockholders’ equity (adjusted) 2,308,400  1,219,600  (824,100) (1,380,000) 6,413,900 

Based on: 10-K (filing date: 2019-02-21), 10-K (filing date: 2018-02-21), 10-K (filing date: 2017-02-22), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-25).


Danaher Corp., Financial Data: Reported vs. Adjusted


Adjusted Ratios: Removal of Goodwill (Summary)

Danaher Corp., adjusted ratios

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Total Asset Turnover
Reported total asset turnover 0.42 0.39 0.37 0.43 0.54
Adjusted total asset turnover 0.91 0.85 0.79 0.89 0.99
Financial Leverage
Reported financial leverage 1.70 1.77 1.97 2.04 1.58
Adjusted financial leverage 9.50 17.64 3.12
Return on Equity (ROE)
Reported ROE 9.40% 9.45% 11.10% 14.17% 11.11%
Adjusted ROE 114.84% 204.34% 40.51%
Return on Assets (ROA)
Reported ROA 5.54% 5.34% 5.64% 6.96% 7.02%
Adjusted ROA 12.09% 11.59% 11.90% 14.50% 12.97%

Based on: 10-K (filing date: 2019-02-21), 10-K (filing date: 2018-02-21), 10-K (filing date: 2017-02-22), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-25).

Ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Danaher Corp.’s adjusted total asset turnover improved from 2016 to 2017 and from 2017 to 2018.
Adjusted financial leverage A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.
Danaher Corp.’s adjusted financial leverage increased from 2016 to 2017 but then slightly declined from 2017 to 2018.
Adjusted ROE A profitability ratio calculated as net income divided by adjusted shareholders’ equity. Danaher Corp.’s adjusted ROE improved from 2016 to 2017 but then slightly deteriorated from 2017 to 2018.
Adjusted ROA A profitability ratio calculated as net income divided by adjusted total assets. Danaher Corp.’s adjusted ROA deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.

Danaher Corp., Ratios: Reported vs. Adjusted


Adjusted Total Asset Turnover

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
As Reported
Selected Financial Data (USD $ in thousands)
Sales 19,893,000  18,329,700  16,882,400  20,563,100  19,913,800 
Total assets 47,832,500  46,648,600  45,295,300  48,222,200  36,991,700 
Ratio
Total asset turnover1 0.42 0.39 0.37 0.43 0.54
Adjusted for Goodwill
Selected Financial Data (USD $ in thousands)
Sales 19,893,000  18,329,700  16,882,400  20,563,100  19,913,800 
Adjusted total assets 21,926,500  21,510,000  21,468,400  23,151,900  20,027,500 
Ratio
Adjusted total asset turnover2 0.91 0.85 0.79 0.89 0.99

Based on: 10-K (filing date: 2019-02-21), 10-K (filing date: 2018-02-21), 10-K (filing date: 2017-02-22), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-25).

2018 Calculations

1 Total asset turnover = Sales ÷ Total assets
= 19,893,000 ÷ 47,832,500 = 0.42

2 Adjusted total asset turnover = Sales ÷ Adjusted total assets
= 19,893,000 ÷ 21,926,500 = 0.91

Ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Danaher Corp.’s adjusted total asset turnover improved from 2016 to 2017 and from 2017 to 2018.

Adjusted Financial Leverage

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
As Reported
Selected Financial Data (USD $ in thousands)
Total assets 47,832,500  46,648,600  45,295,300  48,222,200  36,991,700 
Total Danaher stockholders’ equity 28,214,400  26,358,200  23,002,800  23,690,300  23,378,100 
Ratio
Financial leverage1 1.70 1.77 1.97 2.04 1.58
Adjusted for Goodwill
Selected Financial Data (USD $ in thousands)
Adjusted total assets 21,926,500  21,510,000  21,468,400  23,151,900  20,027,500 
Adjusted total Danaher stockholders’ equity 2,308,400  1,219,600  (824,100) (1,380,000) 6,413,900 
Ratio
Adjusted financial leverage2 9.50 17.64 3.12

Based on: 10-K (filing date: 2019-02-21), 10-K (filing date: 2018-02-21), 10-K (filing date: 2017-02-22), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-25).

2018 Calculations

1 Financial leverage = Total assets ÷ Total Danaher stockholders’ equity
= 47,832,500 ÷ 28,214,400 = 1.70

2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted total Danaher stockholders’ equity
= 21,926,500 ÷ 2,308,400 = 9.50

Ratio Description The company
Adjusted financial leverage A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.
Danaher Corp.’s adjusted financial leverage increased from 2016 to 2017 but then slightly declined from 2017 to 2018.

Adjusted Return on Equity (ROE)

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
As Reported
Selected Financial Data (USD $ in thousands)
Net earnings 2,650,900  2,492,100  2,553,700  3,357,400  2,598,400 
Total Danaher stockholders’ equity 28,214,400  26,358,200  23,002,800  23,690,300  23,378,100 
Ratio
ROE1 9.40% 9.45% 11.10% 14.17% 11.11%
Adjusted for Goodwill
Selected Financial Data (USD $ in thousands)
Net earnings 2,650,900  2,492,100  2,553,700  3,357,400  2,598,400 
Adjusted total Danaher stockholders’ equity 2,308,400  1,219,600  (824,100) (1,380,000) 6,413,900 
Ratio
Adjusted ROE2 114.84% 204.34% 40.51%

Based on: 10-K (filing date: 2019-02-21), 10-K (filing date: 2018-02-21), 10-K (filing date: 2017-02-22), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-25).

2018 Calculations

1 ROE = 100 × Net earnings ÷ Total Danaher stockholders’ equity
= 100 × 2,650,900 ÷ 28,214,400 = 9.40%

2 Adjusted ROE = 100 × Net earnings ÷ Adjusted total Danaher stockholders’ equity
= 100 × 2,650,900 ÷ 2,308,400 = 114.84%

Ratio Description The company
Adjusted ROE A profitability ratio calculated as net income divided by adjusted shareholders’ equity. Danaher Corp.’s adjusted ROE improved from 2016 to 2017 but then slightly deteriorated from 2017 to 2018.

Adjusted Return on Assets (ROA)

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
As Reported
Selected Financial Data (USD $ in thousands)
Net earnings 2,650,900  2,492,100  2,553,700  3,357,400  2,598,400 
Total assets 47,832,500  46,648,600  45,295,300  48,222,200  36,991,700 
Ratio
ROA1 5.54% 5.34% 5.64% 6.96% 7.02%
Adjusted for Goodwill
Selected Financial Data (USD $ in thousands)
Net earnings 2,650,900  2,492,100  2,553,700  3,357,400  2,598,400 
Adjusted total assets 21,926,500  21,510,000  21,468,400  23,151,900  20,027,500 
Ratio
Adjusted ROA2 12.09% 11.59% 11.90% 14.50% 12.97%

Based on: 10-K (filing date: 2019-02-21), 10-K (filing date: 2018-02-21), 10-K (filing date: 2017-02-22), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-25).

2018 Calculations

1 ROA = 100 × Net earnings ÷ Total assets
= 100 × 2,650,900 ÷ 47,832,500 = 5.54%

2 Adjusted ROA = 100 × Net earnings ÷ Adjusted total assets
= 100 × 2,650,900 ÷ 21,926,500 = 12.09%

Ratio Description The company
Adjusted ROA A profitability ratio calculated as net income divided by adjusted total assets. Danaher Corp.’s adjusted ROA deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.