Questions based on the 2010 annual report of Danaher Corpora
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Answer the following questions based on the 2010 annual report of Danaher Corporation at the link below:
http://www.sec.gov/Archives/edgar/data/313616/000119312511044412/d10k.htm
The financial statements are on pp. 62-104 of the annual report, and all questions can be answered within those pages.
For each answer, specify where (name of financial statement, number of footnote, or page number) you found the answer. Some answers may be found in more than one place.
*Any calculations must be shown explicitly in the Word document. .
1. What firm audited the financial statements? What type of opinion was issued?
2. With regard to amortized intangibles:
a. What are the main types of asset being amortized?
b. What is the trend in amortization expense 2008-2010?
c. Is this trend expected to continue?
3. With regard to US defined benefit pension plans:
a. What was the funded status as of December 31, 2010?
b. What effect did acquisitions have on funded status in 2010?
c. Why is the service cost for 2010 so low?
4. What amount, if any, of treasury stock did Danaher purchase in 2010?
5. Did Danaher incur any restructuring expenses in 2010? What, if any, was the amount of outstanding restructuring liabilities at year-end?
6. What was the major non-operating cash outflow in 2010? In summary, what was acquired for this cash?
7. Does Danaher have 100% ownership of all consolidated subsidiaries?
8. Did Danaher have a LIFO liquidation in 2010? Was the effect material?
9. What was rent expense for 2010? What is the amount of rent commitments for 2011?
10. Describe briefly the stock split on May 11, 2010. Reconstruct the journal entry used to record this event.
11. Explain briefly why there is a negative amount for "accounts receivable" in the operating section of the 2010 statement of cash flows.
12. Compute the debt/equity and debt/tangible net worth ratios for 2009 and 2010. Comment briefly.
13. Describe briefly the Apex Tool joint venture. What impact did formation and operation of this firm have on Danaher's 2010 net income?
14. With regard to the approximately $2,048 million of accrued expenses as of December 31, 2010, what is the largest component? What does that tell us about Danaher's operations?
15. Compute Danaher's gross margin, operating margin, and return on sales for 2008-2010. Present your results in tabular form. Comment briefly.
16. With regard to stock-based compensation:
a. What is the after-tax expense for stock options for 2010?
b. What method is used to determine fair value of stock options?
c. Describe briefly the vesting requirements for restricted stock.
17. What is the amount of product warranty expense for 2010?
18. In the calculation of basic and diluted earnings per share, the numerators differ, as well as the denominators. Explain briefly why the numerators differ.
19. Compute return on operating assets for the firm as a whole, and for each operating segment, for 2009 and 2010. Comment.
20. In what overseas market does Danaher do the greatest volume of business?
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Solution Summary
Your tutorial is 1,195 words and includes computation of ratios and tables for analysis in Excel (click in cells to see computations). Each response gives you the exact page in the annual report where you can see the needed information. Selected quotes from the annual report are given.
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1. What firm audited the financial statements? What type of opinion was issued?
P 62 Ernst & Young. The audit opinion is "clean opinion," meaning unqualified.
2. With regard to amortized intangibles:
a. What are the main types of asset being amortized?
P 77-78 = Footnote 6 "GOODWILL & OTHER INTANGIBLE ASSETS"
The main types of amortized intangibles were:
Patents & technology
Customer relationships
Trademarks & trade names
b. What is the trend in amortization expense 2008-2010?
P 78 = "Total intangible amortization expense in 2010, 2009 and 2008 was $199 million, $157 million and $145 million, respectively."
c. Is this trend expected to continue?
Yes! P 78 = "Based on the intangible assets recorded as of December 31, 2010, amortization expense is estimated to be $225 million during 2011, $214 million during 2012, $203 million during 2013, $193 million during 2014 and $183 million during 2015."
3. With regard to US defined benefit pension plans:
a. What was the funded status as of December 31, 2010?
P 83-87 Footnote 10
Benefit obligation at end of year was $1,382.4
Fair value of plan assets at end of year was $1,073.6
So, the plan was "underfunded" by $308.8
b. What effect did acquisitions have on funded status in 2010?
Acquisitions added $56.5 million in obligations to the pension plan and $45.8 in assets to the plan. So, the net of $10.7 million increased the underfunded status.
c. Why is the service cost for 2010 so low?
P 83 = "Benefit accruals under most of these plans have ceased. The Company also has noncontributory defined benefit pension plans which cover certain of its non-U.S. employees, and under certain of these plans, benefit accruals continue." What this means is that there are no new employees being added to the defined benefit plan in the US (there are new ones still be added in the non-US segments) and so the only "service cost" is the increment of workers who were added in previous years. What you see is that the service cost is very low for US segments but larger for non-US segment (see table on p 83) because they have ceased to add employees to the US plan.
4. What amount, if any, of treasury stock did Danaher purchase in 2010?
P 66 See financing section of cash flow statement == none!
5. Did Danaher incur any restructuring expenses in 2010? What, if any, was the amount of outstanding restructuring liabilities at year-end?
No, Danaher did not incur any restructuring expenses in 2010 (none shown on face of the income statement and footnote 17 (p 99) shows the balance in the restructuring left over from prior years of $12 million (p 100).
6. What was the major non-operating cash outflow in 2010? In summary, what was ...
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