My name is Leo. I will be your conference facilitator this morning. At this time, I would like to welcome everyone to Danaher Corporation's fourth quarter 2015 earnings results conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you'd like to ask a question during that time, simply press star then the number one on your telephone keypad. If you would like to withdraw your question, please press the pound key. I will now turn the call over to Mr. Matthew Gugino, Vice President of Investor Relations. Mr. Gugino, you may begin your conference.
Thank you, Leo. Good morning, everyone. Thanks for joining us on the call. With us today are Tom Joyce, our President and Chief Executive Officer, and Dan Comas, our Executive Vice President and Chief Financial Officer. I'd like to point out that our earnings release, the slide presentation supplementing today's call, and other information required by SEC Regulation G relating to any non-GAAP financial measures provided during the call are all available on the investors section of our website, www.danaher.com, under the heading Financial Information. The audio portion of this call will be archived on the investors section of our website later today under the heading Events and Presentation, and will remain archived until our next quarterly call. A replay of this call will also be available until February 2, 2016.
The replay number is 888-203-1112 within the U.S. or 719-457-0820 outside the U.S. The confirmation code is 9714607. During the presentation, we will describe certain of the more significant factors that impacted year-over-year performance. The supplemental materials describe additional factors that impacted year-over-year performance. Unless otherwise noted, all references in these remarks and supplemental materials to company-specific financial metrics relate to the continuing operations of the company in the fourth quarter of 2015, and all references to period-to-period increases or decreases in financial metrics are year-over-year. During the call, we will make forward-looking statements within the meaning of the federal securities laws, including statements regarding events or developments that we believe or anticipate will or may occur in the future.
These forward-looking statements are subject to a number of risks and uncertainties, including those set forth in our SEC filings, and actual results might differ materially from any forward-looking statements that we make today. These forward-looking statements speak only as of the date that they are made, and we do not assume any obligation to update any forward-looking statements. With that, I'd like to turn the call over to Tom.
Thanks, Matt, and good morning, everyone. We're pleased with our results for the fourth quarter, in which the team delivered double-digit earnings growth, strong core operating margin expansion, and record free cash flow. Despite the more challenging economic landscape, particularly in our industrially oriented markets, we continued to build our competitive advantage and drove share gains across a number of our businesses. As always, the Danaher Business System is the foundation for our team's outstanding execution. We also made meaningful progress toward establishing a new industrial growth company, Fortive, which will be spun out of Danaher later this year. At our year-end investor meeting, we announced Fortive's name, branding, future operating structure, and additional leadership positions. We also achieved an important milestone in December, filing Fortive's Form 10 registration statement with the Securities and Exchange Commission.
We are confident that Fortive will launch with a strong foundation and will be poised for success upon completion of the separation in the third quarter of 2016. For the full year, our investments in organic growth initiatives helped drive solid 3% core revenue growth. With the addition of our recent acquisitions and other portfolio moves, our total annual revenues are now over $20 billion. From an M&A perspective, 2015 was a historic year for Danaher. Including Pall, we announced or closed 14 acquisitions for nearly $14.5 billion, expanding our capabilities across the portfolio. Looking forward, our funnels at both Danaher and Fortive are strong, and we'll continue to focus on small and mid-size transactions throughout the separation process. In 2015, we generated a record $3.2 billion of free cash flow, including over $1 billion in the fourth quarter.
Our free cash flow to net income conversion ratio in 2015 was 123%, representing the 24th consecutive year in which our free cash flow has exceeded net income. We recognize the importance of this metric, particularly in a more challenging macro environment, as strong free cash flow is the fuel used to fund both our organic and inorganic growth initiatives. Now turning to the fourth quarter. Sales grew 12.5% to $5.9 billion, while core revenue was roughly flat. Core revenue growth, particularly for our consumables businesses, was negatively impacted by four fewer selling days in the quarter. In addition, the impact of currency translation eased this quarter, but still decreased revenues by 5%, while acquisitions increased revenues by 17.5%. In a weakening global macro environment, the Danaher Business System helped protect and expand many of our market-leading positions, driving share gains at Hach, ChemTreat, Matco, Gilbarco, Radiometer, SCIEX, and Videojet.
In the high-growth markets, declines in Latin America, Russia, and the Middle East were more than offset by double-digit growth in India and high single-digit growth in China. Notably, annual revenues in China exceeded $2 billion for the first time, and we remain well-positioned in the most attractive sectors in the market. In the developed markets, revenues were down slightly due to incremental softness in the U.S. and Western Europe. Gross margin for the quarter was 51.2%. For the full year, our gross margin was 52.3%, and our gross profit increased by almost $900 million. In the quarter, core operating margin increased 120 basis points, with all five segments improving by 60 basis points or better. Our reported operating margin was flat at 16.6%, negatively affected by the dilutive impact of recent acquisitions and acquisition-related transaction costs.
Fourth quarter adjusted diluted net EPS was $1.27, which represents an increase of 13.5% over last year. For the full year, adjusted diluted net EPS was $4.30, up 8.5% from 2014. Turning to our five operating segments. Test and measurement revenues decreased 9%, while core revenues were down 5%. Core operating margin increased 110 basis points, primarily due to new product introductions and good cost management. Core revenue in our instruments platform decreased at a high single-digit rate, with declines across most major geographies. Fluke core revenues were down high single digits as industrial markets continued to weaken in North America, Latin America, and the Middle East. In December, Fluke acquired Pacific Laser Systems, a leader in handheld laser alignment tools, to enhance its product offerings for professional contractors, electricians, and general maintenance customers. At Tektronix, core sales declined high single digits.
Declines in North America, Latin America, and the Middle East more than offset growth in China that resulted from solid execution by our local sales teams. The team's continued investments in innovation place Tek in a position of technology leadership within its industry. This quarter, Tek launched the MDO4000C, a mixed-domain oscilloscope that combines up to six instruments in one unit. The new MDO4000C is completely customizable and upgradable, allowing engineers to start with a high-performance oscilloscope and add functionality over time as needs change or budgets allow. Matco, a business that will be a significant contributor to Fortive's results, delivered its third consecutive year of double-digit core growth in 2015. Even after three decades as part of the Danaher portfolio, Matco continues to find new ways to improve using DBS.
By deploying such DBS tools as web marketing, accelerated product development, and lean conversion, the team continues to expand its franchise distribution network, gain market share, and expand margins. Turning now to our environmental segment. Revenues grew 1%, with core revenues up 4%. Core operating margin expanded 60 basis points, and reported operating margin expanded 260 basis points to 21.8%. Water quality core revenues increased at a low single-digit rate. A combination of fewer selling days and slower demand from our more industrial customers in the developed markets resulted in essentially flat core growth at Hach, while ChemTreat grew slightly. Trojan had another very good quarter, driven by healthy demand and increased bidding activity in the North American muni market. Hach delivered another impressive year in 2015. In addition to mid-single-digit organic growth, Hach continued its healthy cadence of bolt-on acquisitions.
The team has done a terrific job implementing DBS in newly acquired businesses to help improve sales and drive innovation. One such example is BioTector, which was acquired in 2014 and had double-digit growth in the quarter. BioTector provides online total organic carbon analyzers that help our customers monitor water quality in real time and reduce waste. BioTector's early and effective application of DBS tools such as lean conversion and funnel management led to more than 200 basis points of margin expansion, significant inventory reductions, and market share gains in the chemical and dairy segments. Gilbarco Veeder-Root's core revenues grew high single digits with strength across the platform. In the U.S., point-of-sale solutions and dispensers increased over 20% as our customers continued to upgrade their payment systems to comply with EMV security requirements. We expect EMV-related demand to continue to accelerate for the next several years.
Moving to life science and diagnostics. Core revenues grew 2%, with reported revenues up 34.5%, largely due to our recent Pall, Microscan, and Devicor acquisitions. Core operating margin expanded 75 basis points. Core revenues in our diagnostics platform increased low single digits with growth in the high growth markets, partially offset by slight declines in developed markets. As previously mentioned, fewer selling days in the quarter negatively impact our recurring revenue streams across the platform. At Beckman Coulter, core revenues increased at a low single-digit rate, led by our immunoassay and urinalysis solutions. Utilization rates in Asia remain healthy, leading to high single-digit growth across the region. In Europe, we celebrated our first orders with the commercial launch of our DxN VERIS molecular diagnostics system. DxN VERIS's streamlined sample in, result out workflow offers breakthrough ease of use in a market that is experiencing a shortage of skilled technicians.
In short, it's helping our lab customers process more tests, reduce training requirements, and save money. Thus far, customer feedback has been extremely positive. Radiometer's core revenues were up slightly, a deceleration from previous quarters due to the effect of fewer selling days and a difficult comparison in instrument sales. Geographically, we saw healthy growth in China and Japan, while Latin America and the Middle East declined. Leica Biosystems had a good finish to the year, delivering low double-digit core growth as strong demand across most major product lines was partially offset by the impact from fewer selling days. Notably, the team delivered a record year of placements for our BOND advanced staining instrument. Last December, we closed the acquisition of Devicor, a leading provider of breast biopsy devices and markers that move Leica further upstream in the anatomical pathology workflow.
Devicor continues to track well and has exceeded our expectations, posting high single-digit core growth or better in each quarter since acquisition. Core revenues in our life science platform were up low single digits with growth in both developed and high growth markets. SCIEX core revenues grew mid-single digits with continued strength in our clinical and applied end markets. 2015 marked the fifth year since our acquisition of SCIEX. Since then, SCIEX has proven to be a remarkable example of how thoughtful application of DBS principles can drive tremendous financial results. The team has taken a business that was growing below market rates to mid to high single-digit growth and share gains. We've seen significant improvement on the cost side as well, which has enabled SCIEX to invest those savings into higher impact growth initiatives.
Progress at SCIEX continues today. 2015 marked one of the most important product innovation years in SCIEX's history, with the launch of its X-Series mass spectrometry platform. The X-Series introduces an entirely new design, easy-to-use software, and custom models for targeted application in routine food, environmental, and forensic testing labs. Leica Microsystems core revenues were essentially flat as strong performance in China and Japan was offset by declines in Europe, the Middle East, and Latin America. Turning now to dental. Segment revenues increased 17%, largely due to our Nobel Biocare acquisition. Core revenues were up slightly. Core operating margins increased by over 500 basis points in the quarter, primarily due to consistent DBS implementation across a number of operational areas. Reported operating margins were 15.8%.
Revenues in our consumables business were negatively impacted by fewer selling days in the quarter, but our team continued to execute well and saw strong demand for several product lines throughout the year. In particular, our investments in innovation have provided us with truly differentiated technologies such as SonicFill, TF Adaptive, and elements e-motion, which all launched in 2014. In dental technology, we saw our first quarter of positive growth since the fourth quarter of 2014. Top-line results continued to be impacted by destocking within our U.S. distribution channels, but to a much lesser degree than in previous quarters. December marked the one-year anniversary of our acquisition of Nobel Biocare. The team has quickly embraced growth, lean, and leadership tools of DBS, helping to not only accelerate growth, but also improve operating margins by over 300 basis points since the acquisition.
Moving to Industrial Technologies, revenues declined 8.5%, while core revenues were down 4.5%. Core operating margin expanded 80 basis points, and reported operating margin expanded 120 basis points to 21.6%. Automation core revenues decreased at a high single-digit rate due to weakening in industrial markets in China and North America. Despite the challenging market and revenue decline, the team continues to identify cost savings opportunities and delivered solid core margin expansion in the quarter. Core revenues in our product identification platform were up slightly. In the fourth quarter, we continued to extend our reach into new product ID adjacencies with the acquisition of Laetus, a leading supplier of track and trace inspection systems for pharmaceutical packaging plants. Increasingly, pharmaceutical tracking is becoming a regulatory and public safety concern, and Laetus gives us exposure to this important vertical. We're excited to welcome Laetus to the Danaher team.
At Videojet, core revenues were up low single digits. A strong performance in Europe and North America was somewhat offset by weakness in the high-growth markets. Results were negatively impacted by fewer selling days in the quarter. Throughout the full year, Videojet has placed a major focus on digital investments, driving key innovations in areas such as network monitoring, remote service-enabled printers, and predictive maintenance. As a result, we achieved record new equipment vitality of over 40% for the year. These tremendous technology capabilities have not only solidified Videojet's leadership position in the market, they have also meaningfully improved our customers' experiences. To wrap up, we're pleased with our record fourth quarter results. During the quarter, the team delivered double-digit earnings growth, significantly expanded core operating margins, generated record free cash flow, and announced several bolt-on acquisitions.
Despite the more challenging economic landscape, particularly in our industrially oriented markets, we continue to execute well. Looking back, 2015 was a remarkable year for Danaher. We completed the largest acquisition in our history with Pall, announced our pending separation into two independent publicly traded companies with Fortive, and drove excellent overall financial results. With the Danaher Business System as our foundation, we believe we'll continue to deliver earnings outperformance and create long-term shareholder value in 2016 and for years to come. We're initiating first quarter adjusted diluted net EPS guidance between $1 and $1.04, which assumes approximately flat core revenue growth.
As we announced at our annual investor event in December, we continue to expect full year 2016 core revenue growth of 2%-3% and adjusted diluted net earnings per share to be in the range of $4.80-$4.95, which would represent a 12%-15% increase year-on-year. Thanks, Tom. That concludes our formal remarks. Leo, we are now ready for questions.
At this time, if you would like to ask a question, please press *1 on your touch-tone phone. That is *1 on your touch-tone phone. To withdraw yourself from the queue, you may press the # key. We ask that you please limit your questions to one question and one follow-up. We will take our first question from Scott Davis of Barclays. Your line is open.
Hi. Good morning, guys.
Good morning, Scott.
Given that it's been about a month since you gave the last guidance in mid-December, the formal guidance, I guess, things seem to have degraded a bit on the macro side. What confidence do you have now that you've seen, I guess, most of January? Have things stabilized? Your guidance seems to indicate that you think that was a bit of a blip, I suppose. Just a little color there.
Sure, Scott. I think, Scott, what we're assuming is that what we saw with some of the slowing in December is essentially the environment that we're going to see in the near term here. It's clearly impacting our more industrial businesses more than our other businesses. We're not immune to the slowdown, but I think we took some appropriate actions in the fourth quarter. Those actions are going to pay off here, certainly from a margin standpoint. I think the other thing to keep in mind is that the portfolio that we have today truly does differentiate us. I think when we look at the opportunities that we have in our life science businesses, our diagnostic businesses, some improvement that we're seeing here in our dental businesses, continued good progress at GVR.
While we remain cautious in some respects around the macro environment and are not assuming things get materially better there, we're playing offense in a number of areas that I think will bode well. I don't think there's anything particularly optimistic in our outlook around the macro, I think some of the things that we're doing from an investment standpoint and across our growth initiatives should continue to position a very good portfolio and a differentiated portfolio and continue to move it into an even better place.
Yeah, makes sense. Then just as a follow-up, the emerging market currencies have degraded a fair amount. Are you able to get local price to offset that? How do you manage that volatility specifically, just given the exposures you guys have?
Yeah, it's an issue. I'd probably bifurcate the answer. Where we have the aftermarket business, the consumables, the service, we're typically able to get price. With equipment and instruments, we're not able to, and we're taking a little bit of a margin hit there. Fortunately, the euro stabilized, so the overall currency impact is not what it was in 2015, but it's a little bit of a negative right now.
Okay. Good luck. Thanks. I'll pass it on.
Thank you, Scott.
We'll take our next question from Nigel Coe of Morgan Stanley. Your line is open.
Oh, thanks. Good morning, guys.
Hi, Nigel.
Yeah. Just on the $0.40 from Pall, can maybe just first of all comment on how Pall is tracking or how it tracked through the quarter Maybe commenting on the industrial versus life sciences sides. Has the composition of the $0.40 in the plan changed at all in the last couple of months?
Nigel, we're very happy with how we've gotten started with Pall. Starting with the team that we have in place, a terrific team, both the Pall leadership team, many of whom have taken on added responsibilities. In addition, the added resources that we've put in place, and the leadership that we have brought to bear in the business. I think together, that team is off to a terrific start. We'll talk to the $0.40 and the cost opportunities that we have here in just a minute. Coming to the growth side of the house, about what we expected, continued very good progress, and growth rates on the life science side. Keeping in mind that that business has an exceptional position in the biopharma market, in life science. We're seeing continued good growth there.
We're also seeing outstanding growth in single-use technologies, which are a key part and a key growth driver of the biopharma segment of the life science business as time goes on. On the industrial side, again, what we would have expected, which is a slowing on that side of the house. We've seen those businesses impacted far more than obviously on the more life science-oriented side of the house. I think it's also important to keep in mind that business is also strongly skewed towards consumables. In total, the portfolio is about 70% aftermarket consumables, primarily. That's a strong foundation and I think continues to give us confidence that while we'll have some segments that are challenged, the business overall will continue to perform quite well. Relative to the cost side of the house, again, off to a very good start.
You heard us in December take the 2016 number up to $100 million because we had gotten off to an earlier start. We're getting the kinds of cost reductions that you would expect us to get out of a public company in the early going. The public company costs beginning to get after some of the indirect cost leverage that we get and some of the procurement cost leverage that we get by consolidating procurement across our other businesses where appropriate. Over time, we'll see some of the benefits coming from on the gross margin side as we look at the operational footprint, but that'll obviously take a little bit more time.
Okay. That's helpful. Thanks Tom. Then on the balance sheet, you've taken down an impressive amount of debt since the acquisition of Pall, I think about $3 billion of debt paydown. Given the bit more challenging macro, is there a change in your bias towards delevering this year?
Nigel, I think we remain in that kind of $2 billion target for M&A this year. We are incrementally encouraged. We were able to get some deals done in December. Granted, they were small, but we actually saw a flurry of deals get done towards the end of the year. Clearly, what's going on in the high yield market has made it very difficult for the private equity parties, let alone industrial companies have a lower credit rating. Some of the anxiety out here is definitely helping some of the conversation. On the margin, we're a little bit more encouraged than we were 60, 90 days ago on the M&A front.
Oh.
Sorry, Nigel. We may have lost Nigel there briefly.
Hope I didn't offend you, Nigel. Operator, we can move to the next question.
Very good. Our next question is from Steve Tusa of J.P. Morgan. Your line is open.
Hey, how's it going?
Hey, Steve.
Can you just maybe talk a little bit more specifically about Pall Industrial trends? What kind of organic are you seeing there, and what are you expecting for 2016 a little more kind of precisely?
Steve, for the four months that we own the business on a constant currency basis, Pall grew about 4% on a combined basis.
Okay.
Clearly, would have been accretive to our core growth here. Life science was up high single digits. Industrial was down low to mid single digits. We see that for the near term, not a bad way to be looking at the business. Clearly the Industrial piece is more challenged, but more than making up for it with the very strong growth on the Life science side.
What was Pall's contribution to free cash flow in the quarter?
On the working capital side, where we contributed north of $300 million of cash out of working capital, Pall was a nice piece of it, but maybe 15%. The working capital improvements were very broad-based. Really exceptional performance across all the five segments. It was a nice contributor, but it was not an overwhelming piece.
Okay, great, just one last question. What's kind of the restructuring contingency look like in 2016? Is there any change to that as you kind of exited the year at a bit of a weaker rate, or are you kind of in kind of normal day-to-day planning? How kind of extreme are things around some of the more industrial businesses?
Steve, I think one of the things that we learned from 2015, and we're pleased about, is that we did a number of things throughout the course of the year from a productivity perspective, and I think particularly in an environment like this it's important that we stay cognizant of the fact that there may be opportunities that present themselves and things that we may need to do. We're going to keep the teams active at looking for opportunities throughout the course of the year, and we'll take advantage of those as they come up. I think we got a lot done in 2015. We got a lot more done in December than we anticipated, probably $20 million north of what we thought in December. That's a good thing. Sets us up well, a little bit more than we would've anticipated.
Again, I think it's important that we stay cognizant of the environment business by business and look for opportunities to take action where good projects present themselves.
Okay, great. Thanks a lot.
Thanks.
We'll take our next question from Steven Winoker of Bernstein. Your line is open.
Thanks and good morning, guys.
Morning, Steve.
Hey, what was the Fortive versus Danaher core growth, if you split it that way for the quarter?
Sure. Looking at Fortive probably being rough down 2%-3% and Danaher go forward up 1%, 1.5%. I think that's roughly the way it would split.
Okay. Just a couple of things-
Steve, I'm sorry to interrupt. Just wanted to make one other quick point just for clarification on that. It's important to recognize on the Danaher side of the house, that 1%-1.5%, that side of the house has a higher percentage of consumables and recurring revenue than you do on the Fortive side. The result of that, the fewer selling days in Q4 had a little bit greater impact on the Danaher side. When you normalize for the days impact on the Danaher side, that's going to be potentially, could be 1.5%-2% maybe even on that side. Again, rough numbers, but it has a little bit more of an impact there.
Oh, okay. All right. Just on a couple of the segments, I think this was the what? It's been at least 11 quarters since I've seen Fluke go negative. Maybe a little commentary on what's going on in the industrial environment, specifically on Fluke and then-
Sure
and then also life sciences and diagnostics. It's the lowest I think I've seen in 14 quarters. You went through a lot of detail there, but to what extent should we be concerned about any kind of bleed over from the broader environment into their markets?
Sure. We'll start with Fluke. Fluke clearly impacted by the downshift in the macro environment in the quarter, Fluke being one of our more industrially oriented businesses. I think the macro environment, while it had its impact on us on a broad basis, also had an influence on the way our distributors were thinking about inventories during the course of the quarter. I think one of the things that, although we don't have all the numbers right now for full transparency on what happened to channel inventories, it's a pretty good hypothesis right now based on some early data we have that would suggest that there was some inventory control that went on in the channel that certainly would've had some impact as well. I think those two factors combined, again, broad-based macro on sell-out and probably some impact on sell-in based on inventory contraction.
On the diagnostics side, Steve, the bigger piece is obviously diagnostics. That's largely consumables. Diagnostics were up 4% organically for the year. As you remember, Q1, when we had the extra days, we were up 6%. Q4, when we had the fewer days, we were up 2%. Actually on a days-adjusted basis, diagnostics tracked pretty close to that 3% to 4% rate all year, including the fourth quarter.
Maybe one other thing to add there is that, best we can tell, Steve, we didn't see any year-end budget flush there in the fourth quarter. That's a little bit more of a life science-oriented phenomena than a diagnostic-oriented phenomena. In some past fourth quarters, we've seen the impact of that. We didn't see any of that in the fourth.
Okay, great. Thanks, guys.
Good news and bad news on that front. It has an impact on the fourth quarter. Sometimes that budget flush can drive some inventories out that then creates some go-forward weakness as you start the new year. We're hoping we and the early numbers coming out here in January look like we're off to a decent start.
Yeah, that's good. Thanks.
Thank you. We'll take our next question from Jeff Sprague of Vertical Research. Your line is open.
Thank you. Good morning, gentlemen.
Hi, Jeff. Good morning.
Morning. Thanks for that color on Fluke. I wanted to ask that question a little bit more broadly. To what extent do you think the more industrially oriented organic growth rates clearly reflect end demand versus maybe a broader channel liquidation? I don't know if you have any good insight into your other channels or any even anecdotal color there would be helpful.
I don't have much there, Jeff. I know the teams are still out talking to customers and trying to get a better sense of that. One reason for a little bit more insight on Fluke than, and less so, Fluke's a little bit more concentrated with some big distributor partners that we can get a little bit more transparency a little bit more quickly. Some of the more automation sensors and controls businesses, more fragmented channels, and it's just taken us a little longer to get any sense of channel inventories.
Just shifting gears a little bit, any thoughts on how the device tax plays through? Do you see any change in demand there or any change in the way people are pricing competitively and maybe just size what you think the impact could be to your business this year?
Sure. Jeff, when the device tax was first put in place, the impact of that was fairly modest on us. There's money at stake, but overall, not a huge number. What comes back in terms of a little bit of a lift to operating margins is also modest. Net net, it's a good thing for the industry. We didn't see much impact in the market from a pricing standpoint when it all happened, or I should say from a competitive standpoint. We did get some of that back in price over time, and probably some competitors did as well. In terms of real impact to competitive dynamics, I think it's too modest a change, certainly to the scale of our business and maybe to the scale of others to really impact the competitive field.
Jeff, I think we said in 2013 it was about a $0.05 hit.
Yeah.
We've recovered some of that in price. I think it'll be less than a $0.05, but maybe a $0.03 benefit year-over-year.
Great. Thank you.
Thanks, Jeff.
We'll move next to Ross Muken of Evercore ISI. Your line is open.
Hi. Good morning, gentlemen.
Hi.
Maybe on Dental, can you just give us a little bit more color, just sort of on the progress you made throughout the year? It looks like, ending the year, you had some of your best results, obviously, adjusting for the days. So as we sort of now roll Nobel into the sort of core, and we think about the margin progression in that business over the year, help us think through kind of the pushes and pulls and how happy you are with the progress made.
Sure. Yeah. Thanks, Ross. I think 2015 was a year of very good progress across the platform. You mentioned Nobel. Let me just start with that. We have a tremendous team of folks at Nobel. Largely the leadership team that was in place when we acquired the business. They have really embraced DBS and are off to a terrific start, both in terms of continuing to use DBS tools to drive growth, but also, as in my comments earlier, some great progress on operating margins. Now as that goes core to the Dental platform, we'll see some impact to that, to the good. On the business that existed prior to 2015, I think, again, 2015 was a year of a lot of progress. I've mentioned a couple of times that we've had outstanding relationships with our distribution partners.
We worked in a collaborative way with them on channel inventories throughout the course of the year. That was obviously somewhat of a painful process to go through in the sense of the impact on core growth, but net net, a very good process in terms of positioning the channel efficiently. We're pleased that the vast majority of that's behind us. There can always be a little bit of a tail to that of stuff we're still moving out in slower-moving inventories. Again, I think a ton of progress. We've also got a very good leadership team in place in our dental platform today, with some new players in place that I think are doing some wonderful things in terms of driving innovation. It was a very good year of new product introductions, and I think we'll see the benefit of that as core growth improves this year.
We know we still have work to do there, the good news is that there's opportunities for value creation as we go on here.
Great. Maybe just quickly, a little color, more on the M&A pipeline. Can you just give us a sense, I mean, there's obviously been a ton of equity market volatility. We've seen, obviously, a shift in how the private equity folks are also sort of transacting. Just give us a feel for maybe healthcare versus industrial-oriented assets and the like, whether there's more activity at one side of the spectrum versus the other, and how sort of the valuation dislocations have been kind of digested by the various groups. You're obviously doing smaller things at this point, and it's obviously the large end of the market that's probably been most impacted.
Sure. I'll let Dan comment in a second on kind of the environment that we're seeing. If you just look at what we did in the fourth quarter, which I think is a bit instructive. We got four or five small deals done in the fourth quarter. By the way, two or three of those deals were Fortive related. I mentioned Pacific Laser Systems in my earlier comments, but there were a couple other smaller situations that we were able to complete during the quarter for Fortive's benefit, along with a couple on the Danaher side. I think the fourth quarter was indicative perhaps of some things opening up a bit. I think the environment is generally a favorable one for businesses like ours, with a balance sheet that's ready to deploy into small and midsize situations.
I think to your question, there are some folks who are perhaps a bit more on the sidelines right now than in previous days.
Great.
Thank you. Our next question comes from Shannon O'Callaghan of UBS. Your line is open.
Morning, guys.
Shannon.
Test and Measurement and Industrial Tek are both generating pretty good core margin expansion here despite these mid-single-digit declines. Can you give a little more color on how they're managing to do that? I mean, both of them have pretty good leverage in the model, so that's a lot to offset. What's going on in those businesses, and can it continue?
Shannon, a real testament to those businesses, given the challenging environment they're in from a core growth perspective, that they are getting the operating margin lift that they're getting without the benefit of the top line dropping that through. I think it is a testament to the strength of the Danaher Business System, the tools that we use, not just in newly acquired businesses, but in businesses with long histories with Danaher that have gotten a lot done using DBS in the past and are still getting it done. If you think about some of the businesses in T&M, be it Fluke and the associated acquisitions around Fluke that have been done quite a number of years ago, think about other businesses like Qualitrol, like some of the businesses in our automation and sensors and controls areas.
Those guys are using DBS, whether those are lean tools specifically in the plants or deploying those tools in areas of SG&A. They're just demonstrating that those tools are still highly effective in businesses with long histories with Danaher. It's kudos to those guys, they continue to get 'er done.
Okay, thanks. You talked a little bit about the diagnostic comps and things, Radiometer, that's been one that seemed like it was just going to grow to the sky forever in the equipment business.
Correct. Right.
Was a little weaker there. Maybe a little just color. Is anything there to be concerned about?
Yeah, no. Radiometer is a tremendous business with a long track record of high single-digit growth at Danaher. I'm sure Matt or Dan can find how many quarters it's been, but it's quite a number of them in a row that we've been high single digits and taking share. It's a high consumables business. It's probably in the 80% neighborhood of consumables, so the days impact was fairly significant there. They also had a challenging comp in the fourth quarter on the instrumentation side. A couple big orders that had some impact there. I think Radiometer is in as good a shape today as it's ever been. No meaningful shift in the competitive dynamics there, so we still feel very good about it.
I think if there was anything there, Shannon, wouldn't be unique to Radiometer, it's simply the fact that some of the growth that we have seen in the high growth markets, while still strong in places like China and India, are still now very weak in Latin America, in Russia, in the Middle East. Even our best businesses are probably going to feel a little bit of impact there.
Okay, great. Thanks.
Thanks, Shannon.
Our next question comes from Brandon Couillard of Jefferies. Your line is open.
Thanks. Good morning.
Morning.
Just back on the dental business. Dan, any chance you could give us the impact of the fewer days on core growth overall, and how should we think about margin expansion for the year?
Well, it has less of an impact on equipment. We were up slightly in the quarter. It's the first time we've been up, albeit modestly, but it impacts consumables probably, as Tom alluded to, probably a point and a half, two points, when it comes to consumables.
Good progress on the margin side. Granted, we had a pretty weak performance a year ago. Part of it was a comp. We've also took part of our incremental restructuring here in Q4 with the dental. We should see some continued margin expansion coming out of dental, hopefully with a little better growth than what we've seen here in 2015.
That's all I got. Thanks.
Thanks, Brandon.
Our next question comes from Julian Mitchell of Credit Suisse. Your line is open.
Hi. Thank you.
Hey, Julian.
Hey, just a question around Western Europe. I think I heard you say that sales were down slightly in Q4, having been up sort of around a mid-single digit pace in the nine-month period. I think a lot of other companies have sort of been saying Europe's okay. Maybe just talk a little bit about what you saw there, specific countries or segments that slowed down.
Julian, I think that was one of the areas versus what we expected at the beginning of the quarter that surprised us a little bit to the downside. It wasn't dramatic. Clearly, our consumable businesses over there were impacted by the selling days, and maybe we were not as well calibrated as we should have been. Having gone through most of the business here in the first couple weeks here, the tone in Europe's still decent, it doesn't feel like the step down that our numbers in Q4 would suggest. We think we'll get back to sort of modest growth here pretty quickly, in 2016. Watching that carefully, because it probably caught us a little bit by surprise here in the fourth quarter. Again, the tone still seems pretty good.
Understood. Thank you. You laid out the overall EPS seasonality through the year about just over a month ago. Maybe just talk a little bit about the pooled seasonality of that $0.40, particularly given the industrial organic sales trend in that business right now, and how you would contrast that $0.40-impact versus overall Danaher.
The $0.40 should ramp during the year as we go after costs. Again, we were able to get some more things done in December, and that was inclusive of Pall as well. We're getting it out of the gate a little bit faster in Q1 from a margin perspective. I think the offset, as you suggest, is the industrial side. I think we'll get nice accretion here in Q1, but it'll clearly ramp through the year.
Great. Thank you.
Thanks, Julian.
Question comes from Andrew Kaplowitz of Citigroup. Your line is open.
Hey, good morning, guys. Obviously good performance in margin in the quarter. Are raw materials, lower raw material costs helping at all with price cost? The price cost, was it stable in Q4 versus Q3? Did it improve? I know you mentioned covering FX, are raw materials helping at all?
I don't have any great analysis on that yet. Given our gross margin, raw materials tend to be less of a factor for us than a lot of other companies you might cover. We are continuing to get price, still getting 60, 70 basis points. It's hard not to think raw materials are helping us a little bit, for us, it's really on the margin.
Okay, got it. How do you get visibility into what to forecast, for example, in the Middle East? I mean, the region looks like it inflected down a bit in Q4, with oil's recent leg down, how difficult is it to get visibility, and what do you forecast for 2016?
Well, Andrew, there's a couple of different ways to come at that in the Middle East. One is simply conversations with distribution partners, a lot of what we do in the Middle East does involve some form of a distributor partner. Making sure that we have transparency as much as we possibly can into the opportunity funnels that those distributors are seeing, as well as making sure that the conversations we're having with our own sales team around those funnels as they roll up to our leadership team are as well pressure tested as possible. The key thing about markets like the Middle East is, particularly in businesses like ours, you have a fairly high level of project or tender related business, at least on the equipment side.
Really making sure that we understand opportunity funnels and are not overly optimistic about the timing within which funding will be released, as in many cases that funding has some governmental influence to it, is really important. It is easy to have a sales team get overly optimistic that the timing of funding release is going to be the same as it was a year ago or two years ago when the reality is things may have slowed down and tenders may be being let at a much slower pace. Being diligent about how we pressure test those funnels is key.
It's fair to say you're being pretty conservative with the Middle East forecast?
We're trying to be increasingly conservative as we see how government funding is being influenced. I think it was interesting watching the course of the year. Oil continued to drop, as you know, throughout the course of the year. Yet we actually saw our Middle East numbers hang in there reasonably well throughout the middle part of the year. It wasn't until the latter part of the year that we saw a more acute shift in the Middle East. There was a little bit of a lag there, and it's taken a bit of time for the team to fully recalibrate.
Yeah. Thanks, Tom.
Yeah. Thank you.
We'll take our final question from Deane Dray of RBC Capital Markets. Your line is open.
Morning, Deane.
Thank you. Good morning, everyone. Just a quick question on R&D spending overall came in lighter year-over-year versus our estimates. Did you throttle back on any spending? Is it just timing of some of the projects?
Yeah. As you probably saw in the numbers that we put out, Dean, we're showing R&D down about 20 basis points, but the reality is that that was primarily influenced by Pall, and R&D spending normalized for the Pall influence was actually up on the quarter. We're continuing to make sure that innovation is a key priority for the businesses and that R&D spending is maintained to the greatest extent possible for the opportunities that we think have the greatest impact in the next year or two.
Just last question from me is the incremental restructuring done in December, did you say what portion of that was Danaher versus Fortive?
It was roughly the split you'd expect, 70/30. That's 70 Danaher inclusive of Pall.
Great. Thank you.
Thanks, Deane.
I'd be happy to turn the program back over to our hosts.
Thanks, Leo. Thanks everyone for joining us. We're around all day for questions.
Thank you. This does conclude today's Danaher Corporation's fourth quarter 2015 earnings results conference call. You may now all disconnect your lines, and everyone have a great day.