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Stock Transactions And Stock-Based Compensation | 12 Months Ended
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Dec. 31, 2019
Share-based Payment Arrangement, Noncash Expense [Abstract] |
Stock Transactions and Stock-Based Compensation | STOCK TRANSACTIONS AND STOCK-BASED COMPENSATION On July 16, 2013, the Company’s Board of Directors approved a repurchase program (the “Repurchase Program”) authorizing the repurchase of up to 20 million shares of the Company’s common stock from time to time on the open market or in privately negotiated transactions. There is no expiration date for the Repurchase Program, and the timing and amount of any shares repurchased under the program will be determined by the Company’s management based on its evaluation of market conditions and other factors. The Repurchase Program may be suspended or discontinued at any time. Any repurchased shares will be available for use in connection with the Company’s equity compensation plans (or any successor plan) and for other corporate purposes. As of December 31, 2019, 20 million shares remained available for repurchase pursuant to the Repurchase Program. The Company expects to fund any future stock repurchases using the Company’s available cash balances or proceeds from the issuance of debt. Except in connection with the Envista Split-Off in 2019, neither the Company nor any “affiliated purchaser” repurchased any shares of Company common stock during 2019, 2018 or 2017. Refer to Note 4 for discussion of the 22.9 million shares of Danaher common stock tendered to and repurchased by the Company in connection with the Envista Split-Off. The following table summarizes the Company’s share activity for the years ended December 31 (shares in millions):
| 2019 |  | 2018 |  | 2017
Preferred stock - shares issued: |  |  |  |  |
Balance, beginning of period | — |  |  | — |  |  | — |
Issuance of MCPS | 1.7 |  |  | — |  |  | — |
Balance, end of period | 1.7 |  |  | — |  |  | — |
Common stock - shares issued: |  |  |  |  |
Balance, beginning of period | 817.9 |  |  | 812.5 |  |  | 807.7 |
Common stock-based award activity | 4.6 |  |  | 4.6 |  |  | 4.8 |
Common stock issued in connection with acquisitions | — |  |  | 0.2 |  |  | — |
Common stock issued in connection with LYONs’ conversions | 0.9 |  |  | 0.6 |  |  | — |
Issuance of common stock | 12.1 |  |  | — |  |  | — |
Balance, end of period | 835.5 |  |  | 817.9 |  |  | 812.5 |
On March 1, 2019, the Company completed the underwritten public offering of 12.1 million shares of Danaher common stock at a price to the public of $123.00 per share (the “Common Stock Offering”), resulting in net proceeds of approximately $1.4 billion, after deducting expenses and the underwriters’ discount of $45 million. Simultaneously, the Company completed the underwritten public offering of 1.65 million shares of its 4.75% MCPS, Series A, without par value and with a liquidation preference of $1,000 per share (the “MCPS Offering”), resulting in net proceeds of approximately $1.6 billion, after deducting expenses and the underwriters’ discount of $50 million. The Company intends to use the net proceeds from the Common Stock Offering and the MCPS Offering to fund a portion of the cash consideration payable for, and certain costs associated with, the GE Biopharma Acquisition. Prior to the completion of the GE Biopharma Acquisition, the Company has invested the net proceeds in short-term bank deposits and/or interest-bearing, investment-grade securities. As a result of the dividends paid to shareholders of the Company’s common stock subsequent to the issuance of the MCPS and through the date of this Annual Report, the Company triggered an anti-dilution adjustment pursuant to the terms of the MCPS. After giving affect to these adjustments, each share of MCPS will mandatorily convert on the mandatory conversion date, which is expected to be April 15, 2022, into between 6.6531 and 8.1500 shares of the Company’s common stock, subject to further anti-dilution adjustments. The number of shares of the Company’s common stock issuable upon conversion will be determined based on the average volume-weighted average price per share of the Company’s common stock over the 20 consecutive trading day period beginning on, and including, the 21st scheduled trading day immediately before April 15, 2022. Subject to certain exceptions, at any time prior to April 15, 2022, holders may elect to convert each share of the MCPS into 6.6531 shares of common stock, subject to further anti-dilution adjustments. In the event of a fundamental change, the MCPS will convert at the fundamental change rates specified in the certificate of designations, and the holders of MCPS would be entitled to a fundamental change make-whole dividend. Holders of MCPS will be entitled to receive, when and if declared by the Company’s Board of Directors, cumulative dividends at the annual rate of 4.75% of the liquidation preference of $1,000 per share (equivalent to $47.50 annually per share), payable in cash or, subject to certain limitations, by delivery of shares of the Company’s common stock or any combination of cash and shares of the Company’s common stock, at the Company’s election. If declared, dividends on the MCPS will be payable quarterly on January 15, April 15, July 15 and October 15 of each year (to, and including, April 15, 2022), to the holders of record of the MCPS as they appear on the Company’s stock register at the close of business on the immediately preceding December 31, March 31, June 30 and September 30, respectively. If the GE Biopharma Acquisition has not closed on or before 5:00 p.m. (New York City time) on August 25, 2020, the GE Biopharma Purchase Agreement is terminated or the Company’s Board of Directors, in its good faith judgment, determines that the GE Biopharma Acquisition will not occur, the Company has the option to redeem the shares of MCPS, in whole but not in part, subject to certain terms and conditions. Stock options, RSUs and PSUs have been issued to directors, officers and other employees under the Company’s 2007 Omnibus Incentive Plan. In addition, in connection with the 2016 acquisition of Cepheid, the Company assumed certain outstanding stock options and RSUs, as applicable, that had been awarded under the stock compensation plan of the acquired business. This plan (the “Assumed Plan”) operates in a similar manner to the Company’s 2007 Omnibus Incentive Plan, and no further equity awards will be issued under the Assumed Plan. The 2007 Omnibus Incentive Plan provides for the grant of stock options, stock appreciation rights, RSUs, restricted stock, PSUs or any other stock-based award and cash based awards. A total of approximately 127 million shares of Danaher common stock have been authorized for issuance under the 2007 Omnibus Incentive Plan. As of December 31, 2019, approximately 60 million shares of the Company’s common stock remain available for issuance under the 2007 Omnibus Incentive Plan. Stock options granted under the 2007 Omnibus Incentive Plan generally vest pro rata over a five-year period and terminate ten years from the grant date, though the specific terms of each grant are determined by the Compensation Committee of the Company’s Board (the “Compensation Committee”). The Company’s executive officers and certain other employees have been awarded options with different vesting criteria, and options granted to outside directors are fully vested as of the grant date. Option exercise prices for options granted by the Company equal the closing price of the Company’s common stock on the NYSE on the date of grant. In connection with the Company’s assumption of options issued pursuant to the Assumed Plan, the number of shares underlying each option and exercise price of each option were adjusted to reflect the substitution of the Company’s stock for the stock of the applicable acquired company. RSUs issued under the 2007 Omnibus Incentive Plan provide for the issuance of a share of the Company’s common stock at no cost to the holder. The RSUs that have been granted to employees under the 2007 Omnibus Incentive Plan generally provide for time-based vesting over a five-year period, although executive officers and certain other employees have been awarded RSUs with different time-based vesting criteria, and RSUs granted to members of the Company’s senior management have also been subject to performance-based vesting criteria. The RSUs that have been granted to directors under the 2007 Omnibus Incentive Plan vest on the earlier of the first anniversary of the grant date or the date of, and immediately prior to, the next annual meeting of the Company’s shareholders following the grant date, but the underlying shares are not issued until the earlier of the director’s death or the first day of the seventh month following the director’s retirement from the Board. Prior to vesting, RSUs granted under the 2007 Omnibus Incentive Plan do not have dividend equivalent rights, do not have voting rights and the shares underlying the RSUs are not considered issued and outstanding. With respect to RSUs granted under the Assumed Plan, in connection with the Company’s assumption of these RSUs the number of shares underlying each RSU were adjusted to reflect the substitution of the Company’s stock for the stock of the applicable acquired company, and certain of these RSUs have dividend equivalent rights. PSUs issued under the 2007 Omnibus Incentive Plan provide for the issuance of a share of the Company’s common stock at no cost to the holder, vest based on the Company’s total shareholder return ranking relative to the S&P 500 Index over an approximately three-year performance period, are subject to an additional two-year holding period and are entitled to dividend equivalent rights. The PSU dividend equivalent rights are subject to the same vesting and payment restrictions as the related shares, but do not have voting rights and the shares underlying the PSU’s are not considered issued and outstanding. In connection with the Envista Disposition, Envista adopted a stock-based compensation plan, which provides for stock-based awards denominated in shares of Envista common stock. Envista employees who participated in the Danaher stock compensation program prior to the Separation continued to participate in such program solely with respect to outstanding compensation awards received prior to the Separation, until the Split-Off (at which time such awards were terminated and replaced with awards denominated in Envista common stock under the Envista stock compensation plan). From and after the Envista Separation, all equity compensation awarded to Envista employees has been awarded under the Envista stock compensation plan. Stock-based compensation expense for Envista is included in results from discontinued operations. The equity compensation awards granted by the Company generally vest only if the employee is employed by the Company (or in the case of directors, the director continues to serve on the Company Board) on the vesting date or in other limited circumstances. To cover the exercise of options and vesting of RSUs and PSUs, the Company generally issues new shares from its authorized but unissued share pool, although it may instead issue treasury shares in certain circumstances. The Company accounts for stock-based compensation by measuring the cost of employee services received in exchange for all equity awards granted based on the fair value of the award as of the grant date. The Company recognizes the compensation expense over the requisite service period (which is generally the vesting period but may be shorter than the vesting period if the employee becomes retirement eligible before the end of the vesting period). The fair value for RSU awards was calculated using the closing price of the Company’s common stock on the date of grant, adjusted for the fact that RSUs (other than certain RSUs granted under the Assumed Plans) do not accrue dividends. The fair value of the PSU awards was calculated using a Monte Carlo pricing model. The fair value of the options granted was calculated using a Black-Scholes Merton option pricing model (“Black-Scholes”). The following summarizes the assumptions used in the Black-Scholes model to value options granted during the years ended December 31:
| 2019 |  | 2018 |  | 2017
Risk-free interest rate | 1.7 – 2.6% |  |  | 2.6 – 3.1% |  |  | 1.8 – 2.2% |
Weighted average volatility | 20.4 | % |  | 21.4 | % |  | 17.9 | %
Dividend yield | 0.5 | % |  | 0.6 | % |  | 0.7 | %
Expected years until exercise | 5.0 – 8.0 |  |  | 5.0 – 8.0 |  |  | 5.0 – 8.0 |
The Black-Scholes model incorporates assumptions to value stock-based awards. The risk-free rate of interest for periods within the contractual life of the option is based on a zero-coupon U.S. government instrument whose maturity period equals or approximates the option’s expected term. Expected volatility is based on implied volatility from traded options on the Company’s stock and historical volatility of the Company’s stock. The dividend yield is calculated by dividing the Company’s annual common stock dividend, based on the most recent quarterly dividend rate, by the closing stock price on the grant date. To estimate the option exercise timing used in the valuation model (which impacts the risk-free interest rate and the expected years until exercise), in addition to considering the vesting period and contractual term of the option, the Company analyzes and considers actual historical exercise experience for previously granted options. The Company stratifies its employee population into multiple groups for option valuation and attribution purposes based upon distinctive patterns of forfeiture rates and option holding periods, as indicated by the ranges set forth in the table above for the risk-free interest rate and the expected years until exercise. The amount of stock-based compensation expense recognized during a period is also based on the portion of the awards that are ultimately expected to vest. The Company estimates pre-vesting forfeitures at the time of grant by analyzing historical data and revises those estimates in subsequent periods if actual forfeitures differ from those estimates. Ultimately, the total expense recognized over the vesting period will equal the fair value of awards that actually vest. The following summarizes the components of the Company’s continuing operations stock-based compensation expense for the years ended December 31 ($ in millions):
| 2019 |  | 2018 |  | 2017
RSUs/PSUs: |  |  |  |  |
Pretax compensation expense | $ | 97.3 |  |  | $ | 86.5 |  |  | $ | 82.6 |
Income tax benefit | (20.1 | ) |  | (17.7 | ) |  | (25.2 | )
RSU/PSU expense, net of income taxes | 77.2 |  |  | 68.8 |  |  | 57.4 |
Stock options: |  |  |  |  |
Pretax compensation expense | 61.5 |  |  | 51.6 |  |  | 44.5 |
Income tax benefit | (12.8 | ) |  | (10.7 | ) |  | (14.0 | )
Stock option expense, net of income taxes | 48.7 |  |  | 40.9 |  |  | 30.5 |
Total stock-based compensation: |  |  |  |  |
Pretax compensation expense | 158.8 |  |  | 138.1 |  |  | 127.1 |
Income tax benefit | (32.9 | ) |  | (28.4 | ) |  | (39.2 | )
Total stock-based compensation expense, net of income taxes | $ | 125.9 |  |  | $ | 109.7 |  |  | $ | 87.9 |
Stock-based compensation has been recognized as a component of selling, general and administrative expenses in the accompanying Consolidated Statements of Earnings. As of December 31, 2019, $149 million of total unrecognized compensation cost related to RSUs/PSUs is expected to be recognized over a weighted average period of approximately two years. As of December 31, 2019, $147 million of total unrecognized compensation cost related to stock options is expected to be recognized over a weighted average period of approximately three years. Future compensation amounts will be adjusted for any changes in estimated forfeitures. The following summarizes option activity under the Company’s stock plans (in millions, except weighted exercise price and number of years):
| Options |  | Weighted Average Exercise Price |  | Weighted Average Remaining Contractual Term (in years) |  | Aggregate Intrinsic Value
Outstanding as of January 1, 2017 | 18.9 |  |  | $ | 50.07 |  |  |  |  |
Granted | 4.4 |  |  | 86.14 |  |  |  |  |
Exercised | (3.3 | ) |  | 35.26 |  |  |  |  |
Cancelled/forfeited | (1.2 | ) |  | 70.40 |  |  |  |  |
Outstanding as of December 31, 2017 | 18.8 |  |  | 59.84 |  |  |  |  |
Granted | 4.1 |  |  | 99.51 |  |  |  |  |
Exercised | (3.4 | ) |  | 41.88 |  |  |  |  |
Cancelled/forfeited | (0.9 | ) |  | 80.14 |  |  |  |  |
Outstanding as of December 31, 2018 | 18.6 |  |  | 70.86 |  |  |  |  |
Granted | 4.3 |  |  | 117.32 |  |  |  |  |
Exercised | (3.5 | ) |  | 53.02 |  |  |  |  |
Cancelled/forfeited | (0.9 | ) |  | 98.98 |  |  |  |  |
Adjustment due to Envista Split-Off (a) | (1.5 | ) |  | 91.65 |  |  |  |  |
Outstanding as of December 31, 2019 | 17.0 |  |  | 82.95 |  |  | 7 |  | $ | 1,202.3 |
Vested and expected to vest as of December 31, 2019 (b) | 16.5 |  |  | $ | 82.18 |  |  | 7 |  | $ | 1,176.3 |
Vested as of December 31, 2019 | 7.0 |  |  | $ | 62.53 |  |  | 5 |  | $ | 632.3 |
(a) | The “Adjustment due to Envista Split-Off” reflects the cancellation of options which were outstanding as of December 18, 2019 and held by Envista employees, which have been terminated and replaced by Envista equity awards as part of the Envista Split-Off.
(b) | The “expected to vest” options are the net unvested options that remain after applying the forfeiture rate assumption to total unvested options.
The aggregate intrinsic value in the table above represents the total pretax intrinsic value (the difference between the Company’s closing stock price on the last trading day of 2019 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on December 31, 2019. The amount of aggregate intrinsic value will change based on the price of the Company’s common stock. Options outstanding as of December 31, 2019 are summarized below (in millions, except price per share and number of years):
| Outstanding |  | Exercisable
Exercise Price | Shares |  | Average Exercise Price |  | Average Remaining Life (in years) |  | Shares |  | Average Exercise Price
$19.89 to $41.64 | 1.2 |  |  | $ | 36.79 |  |  | 2 |  | 1.2 |  |  | $ | 36.79 |
$41.65 to $62.18 | 2.2 |  |  | 54.47 |  |  | 4 |  | 2.2 |  |  | 54.51 |
$62.19 to $83.27 | 4.0 |  |  | 67.03 |  |  | 6 |  | 2.2 |  |  | 67.12 |
$83.28 to $101.64 | 5.8 |  |  | 92.70 |  |  | 8 |  | 1.3 |  |  | 90.74 |
$101.65 to $142.99 | 3.8 |  |  | 116.76 |  |  | 9 |  | 0.1 |  |  | 113.57 |
The aggregate intrinsic value of options exercised during the years ended December 31, 2019, 2018 and 2017 was $266 million, $202 million and $162 million, respectively. Exercise of options during the years ended December 31, 2019, 2018 and 2017 resulted in cash receipts of $179 million, $133 million and $117 million, respectively. Upon exercise of the award by the employee, the Company derives a tax deduction measured by the excess of the market value over the grant price at the date of exercise. The Company realized a tax benefit of $51 million, $40 million and $50 million in 2019, 2018 and 2017, respectively, related to the exercise of employee stock options. The following summarizes information on unvested RSU and PSU activity (in millions, except weighted average grant-date fair value):
| Number of RSUs/PSUs |  | Weighted Average Grant-Date Fair Value
Unvested as of January 1, 2017 | 4.5 |  |  | $ | 62.16 |
Granted | 1.4 |  |  | 86.04 |
Vested | (1.5 | ) |  | 58.48 |
Forfeited | (0.5 | ) |  | 68.83 |
Unvested as of December 31, 2017 | 3.9 |  |  | 71.27 |
Granted | 1.5 |  |  | 99.15 |
Vested | (1.2 | ) |  | 68.37 |
Forfeited | (0.3 | ) |  | 78.41 |
Unvested as of December 31, 2018 | 3.9 |  |  | 82.21 |
Granted | 1.4 |  |  | 115.38 |
Vested | (1.1 | ) |  | 75.51 |
Forfeited | (0.3 | ) |  | 92.82 |
Adjustment due to Envista Split-Off (a) | (0.4 | ) |  | 98.18 |
Unvested as of December 31, 2019 | 3.5 |  |  | 94.85 |
(a) | The “Adjustment due to Envista Split-Off” reflects the cancellation of RSUs and PSUs which were outstanding as of December 18, 2019 and held by Envista employees which have been terminated and replaced by Envista equity awards as part of the Envista Split-Off.
The Company realized a tax benefit of $25 million, $17 million and $35 million in the years ended December 31, 2019, 2018 and 2017, respectively, related to the vesting of RSUs. The excess tax benefit of $55 million, $38 million and $55 million related to the exercise of employee stock options and vesting of RSUs for the years ended December 31, 2019, 2018 and 2017, respectively, has been recorded as a reduction to the current income tax provision and is reflected as an operating cash inflow in the accompanying Consolidated Statements of Cash Flows. In connection with the exercise of certain stock options and the vesting of RSUs previously issued by the Company, a number of shares sufficient to fund statutory minimum tax withholding requirements has been withheld from the total shares issued or released to the award holder (though under the terms of the applicable plan, the shares are considered to have been issued and are not added back to the pool of shares available for grant). During the year ended December 31, 2019, 402 thousand shares with an aggregate value of $49 million were withheld to satisfy the requirement. During the year ended December 31, 2018, 400 thousand shares with an aggregate value of $41 million were withheld to satisfy the requirement. The withholding is treated as a reduction in additional paid-in capital in the accompanying Consolidated Statements of Stockholders’ Equity.

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