Danaher Corp. (DHR)

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Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.

Economic Profit
Net Operating Profit after Taxes (NOPAT)
Cash Operating Taxes
Invested Capital
Cost of Capital
Economic Spread
Economic Profit Margin

Danaher Corp., economic profit calculation

USD $ in thousands

12 months ended	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013
Net operating profit after taxes (NOPAT)¹
Cost of capital²	%	%	%	%	%
Invested capital³

Economic profit⁴

Source: Based on data from Danaher Corp. Annual Reports

2017 Calculations

¹ NOPAT. See Details »

² Cost of capital. See Details »

³ Invested capital. See Details »

⁴ Economic profit = NOPAT – Cost of capital × Invested capital
= hidden – hidden % × hidden = hidden

Item	Description	The company
Economic profit	Economic profit is a measure of corporate performance computed by taking the spread between the return on invested capital and the cost of capital, and multiplying by the invested capital.	Danaher Corp.'s economic profit declined from 2015 to 2016 but then slightly increased from 2016 to 2017.

Danaher Corp., NOPAT calculation

USD $ in thousands

	12 months ended	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013
	Net earnings
	Deferred income tax expense (benefit)¹
	Increase (decrease) in allowance for doubtful accounts²
	Increase (decrease) in LIFO reserve³
	Increase (decrease) in deferred revenue⁴
	Increase (decrease) in accrued warranty liability⁵
	Increase (decrease) in accrual balance of restructuring cost⁶
	Increase (decrease) in equity equivalents⁷
	Interest expense
	Interest expense, operating lease obligations⁸
	Adjusted interest expense
	Tax benefit of interest expense⁹
	Adjusted interest expense, after taxes¹⁰
	(Gain) loss on marketable securities
	Interest income
	Investment income, before taxes
	Tax expense (benefit) of investment income¹¹
	Investment income, after taxes¹²
	(Income) loss from discontinued operations, net of tax¹³
	Net operating profit after taxes (NOPAT)

Source: Based on data from Danaher Corp. Annual Reports

2017 Calculations

¹ Elimination of deferred tax expense. See Details »

² Addition of increase (decrease) in allowance for doubtful accounts.

³ Addition of increase (decrease) in LIFO reserve. See Details »

⁴ Addition of increase (decrease) in deferred revenue.

⁵ Addition of increase (decrease) in accrued warranty liability.

⁶ Addition of increase (decrease) in accrual balance of restructuring cost.

⁷ Addition of increase (decrease) in equity equivalents to net earnings.

⁸ Addition of interest expense on capitalized operating leases. See Details »

⁹ Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= hidden × 35% = hidden

¹⁰ Addition of after taxes interest expense to net earnings.

¹¹ Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= hidden × 35% = hidden

¹² Elimination of after taxes investment income.

¹³ Elimination of discontinued operations.

Item	Description	The company
NOPAT	Net operating profit after taxes is income from operations, but after removement of taxes calculated on cash basis that are relevant to operating income.	Danaher Corp.'s NOPAT declined from 2015 to 2016 but then increased from 2016 to 2017 not reaching 2015 level.

Danaher Corp., cash operating taxes calculation

USD $ in thousands

	12 months ended	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013
	Income tax provision
	Less: Deferred income tax expense (benefit)
	Add: Tax savings from interest expense
	Less: Tax imposed on investment income
	Cash operating taxes

Source: Based on data from Danaher Corp. Annual Reports

Item	Description	The company
Cash operating taxes	Cash operating taxes are estimated by adjusting income tax expense for changes in deferred taxes and tax benefit from the interest deduction.	Danaher Corp.'s cash operating taxes declined from 2015 to 2016 but then increased from 2016 to 2017 not reaching 2015 level.

Danaher Corp., invested capital calculation (financing approach)

USD $ in thousands

		Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013
	Notes payable and current portion of long-term debt
	Long-term debt, excluding current portion
	PV of operating lease payments¹
	Total reported debt & leases
	Total Danaher stockholders' equity
	Net deferred tax (assets) liabilities²
	Allowance for doubtful accounts³
	LIFO reserve⁴
	Deferred revenue⁵
	Accrued warranty liability⁶
	Accrual balance of restructuring cost⁷
	Equity equivalents⁸
	Accumulated other comprehensive (income) loss, net of tax⁹
	Noncontrolling interests
	Adjusted total Danaher stockholders' equity
	Available-for-sale securities¹⁰
	Invested capital

Source: Based on data from Danaher Corp. Annual Reports

¹ Addition of capitalized operating leases. See Details »

² Elimination of deferred taxes from assets and liabilities. See Details »

³ Addition of allowance for doubtful accounts receivable.

⁴ Addition of LIFO reserve. See Details »

⁵ Addition of deferred revenue.

⁶ Addition of accrued warranty liability.

⁷ Addition of accrual balance of restructuring cost.

⁸ Addition of equity equivalents to total Danaher stockholders' equity.

⁹ Removal of accumulated other comprehensive income.

¹⁰ Subtraction of available-for-sale securities.

Item	Description	The company
Invested capital	Capital is an approximation of the economic book value of all cash invested in going-concern business activities.	Danaher Corp.'s invested capital declined from 2015 to 2016 but then slightly increased from 2016 to 2017.

Danaher Corp., cost of capital calculations


Equity²	÷	=	×	%	=	%
Borrowings³	÷	=	×	% × (1 – 35%)	=	%
PV of operating lease payments⁴	÷	=	×	% × (1 – 35%)	=	%
Total:						%

Source: Based on data from Danaher Corp. Annual Reports

¹ USD $ in thousands

² Equity. See Details »

³ Borrowings. See Details »

⁴ PV of operating lease payments. See Details »


Equity²	÷	=	×	%	=	%
Borrowings³	÷	=	×	% × (1 – 35%)	=	%
PV of operating lease payments⁴	÷	=	×	% × (1 – 35%)	=	%
Total:						%

Source: Based on data from Danaher Corp. Annual Reports

¹ USD $ in thousands

² Equity. See Details »

³ Borrowings. See Details »

⁴ PV of operating lease payments. See Details »


Equity²	÷	=	×	%	=	%
Borrowings³	÷	=	×	% × (1 – 35%)	=	%
PV of operating lease payments⁴	÷	=	×	% × (1 – 35%)	=	%
Total:						%

Source: Based on data from Danaher Corp. Annual Reports

¹ USD $ in thousands

² Equity. See Details »

³ Borrowings. See Details »

⁴ PV of operating lease payments. See Details »


Equity²	÷	=	×	%	=	%
Borrowings³	÷	=	×	% × (1 – 35%)	=	%
PV of operating lease payments⁴	÷	=	×	% × (1 – 35%)	=	%
Total:						%

Source: Based on data from Danaher Corp. Annual Reports

¹ USD $ in thousands

² Equity. See Details »

³ Borrowings. See Details »

⁴ PV of operating lease payments. See Details »


Equity²	÷	=	×	%	=	%
Borrowings³	÷	=	×	% × (1 – 35%)	=	%
PV of operating lease payments⁴	÷	=	×	% × (1 – 35%)	=	%
Total:						%

Source: Based on data from Danaher Corp. Annual Reports

¹ USD $ in thousands

² Equity. See Details »

³ Borrowings. See Details »

⁴ PV of operating lease payments. See Details »

Danaher Corp., economic spread calculation

	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013
Selected Financial Data (USD $ in thousands)
Economic profit¹
Invested capital²
Ratio
Economic spread³	%	%	%	%	%

Source: Based on data from Danaher Corp. Annual Reports

2017 Calculations

¹ Economic profit. See Details »

² Invested capital. See Details »

³ Economic spread = 100 × Economic profit ÷ Invested capital
= 100 × hidden ÷ hidden = hidden %

Ratio	Description	The company
Economic spread	The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital.	Danaher Corp.'s economic spread deteriorated from 2015 to 2016 but then slightly improved from 2016 to 2017.

Danaher Corp., economic profit margin calculation

	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013
Selected Financial Data (USD $ in thousands)
Economic profit¹
Sales
Increase (decrease) in deferred revenue
Ratio
Economic profit margin²	%	%	%	%	%

Source: Based on data from Danaher Corp. Annual Reports

2017 Calculations

¹ Economic profit. See Details »

² Economic profit margin = 100 × Economic profit ÷ (Sales + Change in deferred revenue)
= 100 × hidden ÷ ( hidden + hidden ) = hidden %

Ratio	Description	The company
Economic profit margin	The ratio of economic profit to sales. It is the company's profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin.	Danaher Corp.'s economic profit margin deteriorated from 2015 to 2016 but then slightly improved from 2016 to 2017.

	Danaher Corp.	Other companies (not purchased previously)
Financial Statements
Common-Size Financial Statements
Ratios
Relative Valuation
Discounted Cash Flow (DCF) Valuation
Economic Value Added (EVA)
Long-term Trends
Analysis
Financial Reporting Quality

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Financial Statements
Common-Size Financial Statements
Ratios
Relative Valuation
Discounted Cash Flow (DCF) Valuation
Economic Value Added (EVA)
Long-term Trends
Analysis
Financial Reporting Quality

Economic Value Added (EVA)

Economic Profit

Net Operating Profit after Taxes (NOPAT)

Cash Operating Taxes

Invested Capital

Cost of Capital

Dec 31, 2017

Dec 31, 2016

Dec 31, 2015

Dec 31, 2014

Dec 31, 2013

Economic Spread

Economic Profit Margin