2012 AnnuAl RepoRt
1
table OF cOntents
Environmental
Test & Measurement
Dental
Life Sciences & Diagnostics
Industrial Technologies
Letter to the Shareholders
2012 Form 10-K
Supplemental Financial Information
Directors & Executive Officers
Shareholder Information
2
4
6
8
10
12
16
141
143
144
Danaher Financial Operating highlights
(dollars in millions, except per share data and number of associates)
Sales*
Operating Profit*
Net Earnings*
Earnings per share (diluted)*
Operating Cash Flow*
Capital Expenditures*
2012
2011
$ 18,260.4
$ 16,090.5
$ 3,165.1
$ 2,617.2
$ 2,299.3
$ 1,935.3
$
3.23
$
2.77
$ 3,502.1
$ 2,732.1
$
458.3
$ 334.5
Free Cash Flow (operating cash flow less capital expenditures)*
$ 3,043.8
$ 2,397.6
Number of Associates
Total Assets
Total Debt
Stockholders’ Equity
63,000
59,000
$ 32,941.0
$ 29,949.5
$ 5,343.1
$ 5,305.2
$ 19,083.9
$ 16,971.8
Total Capitalization (total debt plus stockholders’ equity)
$ 24,427.0
$ 22,277.0
*from continuing operations
Environmental
We provide products that help protect
our water supply and air quality
by serving two primary markets:
water quality and retail/commercial
petroleum. Our water quality business
provides instrumentation and
disinfection systems to help analyze
and manage the quality of ultra-
pure, potable, waste, ground and
ocean water in residential, commercial,
industrial and natural resource
applications. Our retail/commercial
petroleum business is a leading
worldwide provider of solutions and
services focused on fuel dispensing,
remote fuel management, point-of-
sale systems, payment systems and
environmental compliance.
3
Test &
Measurement
We are a global provider
of electronic measurement
instruments, professional
test tools, thermal imaging and
calibration equipment used
in electrical and industrial
applications. We offer test,
measurement and monitoring
products that are used in
electronic design, manufacturing
and advanced technology
development. We also offer
monitoring, management and
optimization tools as well
as security solutions for
communications and
enterprise networks.
5
Dental
We are a leading worldwide
provider of a broad range of
consumables, equipment and
services for the dental market.
Our products are used to
diagnose, treat and prevent
disease and ailments of the
teeth, gums and supporting
bone, as well as improve the
aesthetics of the human smile.
7
Life Sciences
& Diagnostics
We offer a broad range of
research and clinical tools
that scientists use to study
cells and cell components
in order to understand the
causes of disease, identify
new therapies and test new
drugs and vaccines. We also
offer analytical instruments,
reagents, consumables,
software and services that
hospitals, physician’s offices,
reference laboratories and
other critical care settings use
to diagnose disease and
make treatment decisions.
9
Industrial
Technologies
We develop and manufacture
equipment, consumables and
software for various printing,
marking, coding, design and
color management applications
on consumer and industrial
products. We also provide
electromechanical motion
control solutions for the
industrial automation and
packaging markets.
11
Dear Shareholders
2012 was another record year for Danaher. Our
teams executed well amidst economic uncertainty
with excellent free cash flow, superior earnings
growth and strong operating margin expansion for
the year. We achieved many financial milestones:
• Revenues increased 13.5% to $18.3 billion with core
revenue growth of 2.5%
• Free cash flow exceeded $3 billion for the first time
in our history with a free cash flow to net income
conversion ratio of 132%, representing the 21st
consecutive year in which free cash flow exceeded
net income
• Deployed $1.8 billion of capital on 14 acquisitions
H. Lawrence cuLp, Jr.
president & chief executive Officer
• Repurchased 12.5 million shares of Danaher stock
at an average price of approximately $52 per share
• Diluted net earnings per share increased more
than 16% to $3.23
Danaher tODay
The evolution of our portfolio continued throughout
2012, as evidenced by our theme of “Building a Global
Science and Technology Company with DBS.” Today,
our portfolio includes market-leading brands, as
it always has, but with a discernible shift towards
more global, more science and technology focused
businesses. Across our five segments our businesses
will continue to benefit from exposure to favorable long-
term macro trends such as heightened environmental
concerns, greater healthcare requirements around
the world and the rapid expansion of wireless networks.
13
> X-rite
In 2012, we acquired X-rite, the global
leader in color science and technology.
X-rite, which includes color industry
leader Pantone, develops, manufactures,
markets and supports innovative color
solutions through measurement systems,
software, color standards and services.
Combining these capabilities with Esko’s
suite of products and services enables
us to offer industry leading solutions in
each step of the consumer packaging
workflow, from brand management to
marking and coding.
Two key underlying themes that highlight the
expansion and reshaping of the Danaher portfolio
are a bias for growing our recurring revenue base
and an increased emphasis on expanding our
presence in high-growth markets.
We have placed a particular focus on growing our
recurring revenue base organically and inorganically.
Organically, we’re making innovation investments
and improving our go-to-market initiatives. From
an inorganic perspective, we’ve acquired new
businesses like ChemTreat, Beckman Coulter and
EskoArtwork, which have high recurring revenues
and where the Danaher Business System (DBS)
has had a significant impact. We believe these
businesses not only provide more stability in
tough times, but also strong margin opportunities
throughout an entire economic cycle. Our approach
has helped significantly increase our recurring
revenue base to 40% of total revenues in 2012, up
from 25% in 2007.
We have also expanded our presence in high-growth
markets around the world. In 2001 our high-growth
market exposure was fairly limited, representing
7% of total revenues. In 2012, those geographies
represented 25% of a much bigger revenue base. Our
growth has been a function of a number of investments
and DBS activities that have positioned Danaher to
serve more fully the faster-growing geographic markets
of the future.
A quieter, but no less significant part of our evolution,
has been our transition out of some of our legacy
businesses that were no longer considered core.
In the last five years, we’ve divested businesses
which represented 30% of Danaher’s 2001 revenue
base while reinvesting those proceeds back into
our strategic growth platforms. Ten years ago,
approximately 50% of our revenues were derived
from what we consider to be our strategic growth
platforms. In 2012, that number was nearly 90%,
reflecting the move towards higher growth, higher
margin, more global businesses, where many of
our brands are market leaders.
Dbs tODay
When we began developing DBS at Jake Brake
back in the 1980s, our objective was to increase
productivity and efficiency on the factory floor
while improving quality and customer service.
Today, that goal is as much a part of DBS as it was
in those early years. As Danaher’s portfolio has
transformed, DBS has evolved to meet new needs.
We’ve expanded DBS to address both our growth
and leadership development priorities as well
as our long-standing lean agenda.
> beckman cOulter – UPdatE
We had an outstanding first full year with Beckman
Coulter. dBS has had an immediate impact on product
quality, regulatory compliance, customer satisfaction
and growth. the team achieved several milestones in
2012, including:
• On-time delivery improved to over 90%
• Greater than 25% reduction in unscheduled service
calls since danaher’s acquisition
• Launched several new products including the aU
5800 Series, the UniCel dxH Slidemaker Stainer
and the Biomek 4000
Our Dream-Develop-Deliver (3D) growth tool set
helps drive market share gains and organic growth
across our operating businesses. Whether we’re
identifying new “white space” opportunities at
Fluke, accelerating the pace of new product
development in Dental or increasing our use of
the Internet to generate and nurture sales leads at
Videojet, our 3D tools take core DBS fundamentals
into research and development, marketing, sales
and service to improve performance.
Our most important core value is “The Best Team
Wins.” Recruiting, developing and retaining a great
team is a priority for every Danaher operating
business. Leadership matters a lot, as does building
a deep bench of talent within each of our businesses.
DBS helps us in each of these important functions,
whether we’re working on senior management
succession or recruiting sales people in Brazil.
We see the positive impact DBS has on our lean,
growth and leadership efforts every day. Within
our businesses, we’ve delivered above-market
revenue growth at many operating companies as
DBS improved execution in key areas. Notably,
ChemTreat had seen ten consecutive quarters of
double-digit growth through the end of 2012. We’ve
also seen an increase in the cadence of new product
development at businesses like Videojet where
localized product initiatives in high-growth markets
have led to above market growth in those regions.
Finally, we’ve seen DBS accelerate new product
introductions and improve go-to-market initiatives
at Radiometer, Tektronix Communications and Leica
Biosystems to help capture market share.
All told, our efforts to evolve and enhance both the
portfolio and DBS over the past decade have helped
drive a mid-teens compounded annual growth rate
for both our revenues and free cash flow.
15
> high grOwth markets
High-growth markets accounted for 25%
of danaher’s total revenues in 2012.
during the course of the year, many of
our businesses focused on the local
development and manufacturing of
products that serve specific needs in
high-growth markets. In China, Hach now
satisfies a unique waste water monitoring
regulation with its amtax Compact II,
Fluke fills a gap in the local panel meter
calibration market with its 5080a and
Videojet introduced a cost-effective,
lower-maintenance solution to local
markets with its Willett 630 CIJ printer.
However, we are never done at Danaher because at the heart of DBS is a values-based culture, committed
to continuous improvement and oriented toward driving superior results. That commitment extends far
beyond our doors and into our communities. We encourage all our associates to be active participants
in their communities and provide support in times of need. We saw that in 2012 with the outpouring of
support from many of our associates in response to Hurricane Sandy. These efforts included Danaher’s
company-wide support of the American Red Cross, the contributions of our Pantone associates in New
Jersey to feed and clothe those in need, while faced with their own power outages and fuel shortages,
and the rapid response provided by Hach, Fluke, Gilbarco and Beckman Coulter to help get critical
services back up and running.
Final thOughts
We are proud of our performance in 2012, particularly
in light of the challenging economic environment.
We believe we have positioned both our portfolio
and DBS well for the opportunities and challenges
of the future. Though we have grown considerably
over the last decade, our primary thrust has been to
build a global science and technology company with
an expanded DBS at its core. We are pleased with
our progress and past performance but we are most
excited about our future. We have never been so
well positioned for the road ahead.
Thank you for your continued
support and confidence.
> matcO “tOOls FOr the cause”
In October 2012, Matco launched its “tools for the
Cause” campaign to support breast cancer research
and awareness. Matco held raffles, a chili cook-off,
and even introduced a specialty line of pink toolboxes
and other products, from which a portion of the proceeds
were donated to Susan G. Komen for the Cure®. these
efforts raised over $250,000 and generated an enormous
response from the community. We are proud of what
Matco has accomplished from both a fundraising and
awareness perspective.
2012
Danaher FOrm 10-k
Table of Contents
(Mark One)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________________
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 2012
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
Commission File Number: 1-8089
____________________________________
DANAHER CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
(State or Other Jurisdiction of
Incorporation or Organization)
2200 Pennsylvania Ave. N.W., Suite 800W
Washington, D.C.
(Address of Principal Executive Offices)
59-1995548
(I.R.S. Employer
Identification Number)
20037-1701
(Zip Code)
Registrant’s telephone number, including area code: 202-828-0850
Securities Registered Pursuant to Section 12(b) of the Act:
Title of Each Class
Common Stock $.01 par value
Name of Each Exchange On Which Registered
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
NONE
(Title of Class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes
No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes
No
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to
file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes
No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12
months (or for such shorter period that the registrant was required to submit and post such files). Yes
No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K
.
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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a
smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company”
in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
Accelerated filer
Non-accelerated filer
(Do not check if a smaller reporting company)
Smaller reporting company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)
Yes
No
As of February 11, 2013, the number of shares of Registrant’s common stock outstanding was 690,246,149. The aggregate
market value of common stock held by non-affiliates of the Registrant on June 29, 2012 was $30.1 billion, based upon the
closing price of the Registrant’s common stock as quoted on the New York Stock Exchange composite tape on such date.
EXHIBIT INDEX APPEARS ON PAGE 111
____________________________________
DOCUMENTS INCORPORATED BY REFERENCE
Part III incorporates certain information by reference from the Registrant’s proxy statement for its 2013 annual meeting
of stockholders to be filed pursuant to Regulation 14A within 120 days after Registrant’s fiscal year end. With the exception of
the sections of the 2013 Proxy Statement specifically incorporated herein by reference, the 2013 Proxy Statement is not deemed
to be filed as part of this Form 10-K.
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INFORMATION RELATING TO FORWARD-LOOKING STATEMENTS
Certain statements included or incorporated by reference in this Annual Report, in other documents filed with or furnished by
us to the SEC, in our press releases, webcasts, conference calls and other communications, are “forward-looking statements”
within the meaning of the United States federal securities laws. All statements other than historical factual information are
forward-looking statements, including without limitation statements regarding: projections of revenue, expenses, profit, profit
margins, tax rates, tax provisions, cash flows, pension and benefit obligations and funding requirements, our liquidity position
or other projected financial measures; management’s plans and strategies for future operations, including statements relating to
anticipated operating performance, cost reductions, restructuring activities, new product and service developments, competitive
strengths or market position, acquisitions and related synergies, divestitures, securities offerings, stock repurchases and
executive compensation; growth, declines and other trends in markets we sell into; the anticipated impact of adopting new
accounting pronouncements; the anticipated impact from and outcome of outstanding claims, legal proceedings, tax audits and
other contingent liabilities; foreign currency exchange rates and fluctuations in those rates; general economic conditions;
assumptions underlying any of the foregoing; and any other statements that address events or developments that Danaher
intends or believes will or may occur in the future. Terminology such as “believe,” “anticipate,” “should,” “could,” “intend,”
“plan,” “expects,” “estimates,” “projects,” “may,” “possible,” “potential,” “forecast” and “positioned” and similar references to
future periods are intended to identify forward-looking statements, although not all forward-looking statements are
accompanied by such words. Forward-looking statements are based on assumptions and assessments made by our management
in light of their experience and perceptions of historical trends, current conditions, expected future developments and other
factors they believe to be appropriate. These forward-looking statements are subject to a number of risks and uncertainties,
including but not limited to the risks and uncertainties set forth under “Item 1A. Risk Factors” in this Annual Report.
Forward-looking statements are not guarantees of future performance and actual results may differ materially from those
envisaged by such forward-looking statements. Accordingly, you should not place undue reliance on any such forward-looking
statements. Forward-looking statements speak only as of the date of the report, document, press release, webcast, call or other
communication in which they are made. We do not assume any obligation to update or revise any forward-looking statement,
whether as a result of new information, future events and developments or otherwise.
PART I
ITEM 1. BUSINESS
General
Danaher Corporation designs, manufactures and markets professional, medical, industrial and commercial products and
services, which are typically characterized by strong brand names, innovative technology and major market positions. Our
research and development, manufacturing, sales, distribution, service and administrative facilities are located in more than 50
countries. Our business consists of five segments: Test & Measurement; Environmental; Life Sciences & Diagnostics; Dental
and Industrial Technologies. We strive to create shareholder value through:
•
•
•
delivering sales growth, excluding the impact of acquired businesses, in excess of the overall market growth for the
types of products and services we provide;
upper quartile financial performance compared to our peer companies; and
upper quartile cash flow generation from operations compared to our peer companies.
To accomplish these goals, we use a set of lean, leadership, and growth tools and processes, known as the DANAHER
BUSINESS SYSTEM (“DBS”), which are designed to continuously improve business performance in the critical areas of
quality, delivery, cost and innovation. Within the DBS framework, we pursue a number of ongoing strategic initiatives relating
to idea generation, product development and commercialization, global sourcing of materials and services, manufacturing
improvement and sales and marketing.
To further these objectives we also acquire businesses that either strategically fit within our existing business portfolio or
expand our portfolio into a new and attractive business area. Given the rapid pace of technological development and the
specialized expertise typical of our served markets, acquisitions also provide us important access to new technologies and
domain expertise. We believe there are many acquisition opportunities available within our targeted markets. The extent to
which we make and effectively integrate appropriate acquisitions will affect our overall growth and operating results. We also
continually assess the strategic fit of our existing businesses and may divest businesses that are deemed not to fit with our
strategic plan or are not achieving the desired return on investment.
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Danaher Corporation, originally DMG, Inc., was organized in 1969 as a Massachusetts real estate investment trust. In 1978 it
was reorganized as a Florida corporation under the name Diversified Mortgage Investors, Inc. which in a second reorganization
in 1980 became a subsidiary of a newly created holding company named DMG, Inc. DMG, Inc. adopted the name Danaher in
1984 and was reincorporated as a Delaware corporation in 1986. In this Annual Report, the terms “Danaher” or the
“Company” refer to either Danaher Corporation or to Danaher Corporation and its consolidated subsidiaries, as the context
requires.
Sales in 2012 by geographic destination were: North America, 46% (including 43% in the United States); Europe, 26%; Asia/
Australia, 21% and all other regions, 7%. For additional information regarding sales by geography, please refer to Note 19 in
the Consolidated Financial Statements included in this Annual Report.
Reportable Segments
The table below describes the percentage of our total annual revenues attributable to each of our five segments (and to the
businesses we contributed to the Apex joint venture, as described below) over each of the last three years. For additional
information regarding sales, operating profit and identifiable assets by segment, please refer to Note 19 in the Consolidated
Financial Statements included in this Annual Report.
Test & Measurement
Environmental
Life Sciences & Diagnostics
Dental
Industrial Technologies
Businesses contributed to the Apex joint venture
TEST & MEASUREMENT
For the Years Ended December 31
2012
2011
2010
19%
17%
35%
11%
18%
—
21%
18%
29%
13%
19%
—
23%
22%
18%
15%
20%
2%
Our Test & Measurement segment is a leading global provider of electronic measurement instruments and monitoring,
management and optimization tools for communications and enterprise networks and related services. The segment’s products
are used in the design, development, manufacture, installation, deployment and operation of electronics equipment and
communications networks and services. Customers for these products and services include manufacturers of electronic
instruments; service, installation and maintenance professionals; manufacturers who design, develop, manufacture and install
network equipment; and service providers who implement, maintain and manage communications networks and services. Sales
for this segment in 2012 by geographic destination were: North America, 54%; Europe, 18%; Asia/Australia, 21% and all other
regions, 7%.
We established our Test & Measurement business in 1998 through the acquisition of Fluke Corporation, and have expanded the
business through numerous subsequent acquisitions, including the acquisition of Tektronix, Inc. in 2007 and Keithley
Instruments, Inc. in 2010. Our Test & Measurement segment consists of the following lines of business.
Instruments
• Professional test tools. Our instruments business designs, manufactures, and markets a variety of compact
professional test tools, thermal imaging and calibration equipment for electrical, industrial, electronic and calibration
applications. These test products measure voltage, current, resistance, power quality, frequency, pressure, temperature
and air quality. Typical users of these products include electrical engineers, electricians, electronic technicians,
medical technicians, and industrial maintenance professionals.
• General purpose test instruments. Our instruments business also offers general purpose test products and video test,
measurement and monitoring products used in electronic design, manufacturing and advanced technology
development.
The business’ general purpose test products, including oscilloscopes, logic analyzers, signal sources and
spectrum analyzers, are used to capture, display and analyze streams of electrical data. We sell these products
into a variety of industries with significant electronic content, including the communications, computer,
consumer electronics, education, military/aerospace and semiconductor industries. Typical users of these
products include research and development engineers who use our general purpose test products to design,
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de-bug, monitor and validate the function and performance of electronic components, subassemblies and end-
products.
Our video test products include waveform monitors, video signal generators, compressed digital video test
products and other test and measurement equipment used to enhance a viewer’s video experience. Typical
users of these products include video equipment manufacturers, content developers and traditional television
broadcasters.
Products in this business are marketed under the FLUKE, FLUKE BIOMEDICAL, TEKTRONIX, KEITHLEY, AMPROBE
and MAXTEK brands. Competition in the instruments business is based on a number of factors, including the performance,
ruggedness, ease of use, ergonomics and aesthetics of the product, as well as the other factors described under “—
Competition.” Sales in the instruments business are generally made through independent distributors and direct sales
personnel.
Communications
Our communications business offers network management solutions, handheld and fixed diagnostic equipment and security
solutions, as well as related installation and maintenance services, for a wide range of private network applications as well as
fixed and mobile communications networks. Communications service providers use our products to ensure the reliability of
their network equipment, expand their service offerings and operate their networks more efficiently. Typical users of the
business’ products include network engineers, installers, operators, and technicians. Our network management tools help
network operators continuously manage network performance and optimize the utilization, uptime and service quality of the
network.
Products in this business are marketed under the AIRMAGNET, ARBOR, FLUKE NETWORKS, TEKTRONIX and VSS
MONITORING brands. Competition in the communications business is based on a number of factors, including product
performance, technology and product availability as well as the other factors described under “—Competition.” Sales in the
communications business are generally made through direct sales personnel as well as independent distributors and resellers.
Other Businesses
Matco Tools manufactures and distributes professional tools, toolboxes and automotive maintenance equipment through
independent mobile distributors, who sell primarily to professional mechanics under the MATCO brand. Professional
mechanics typically select tools based on relevant innovative features and the other factors described under “—Competition.”
Hennessy Industries is a leading North American full-line wheel service equipment manufacturer, providing brake lathes,
vehicle lifts, tire changers, wheel balancers, and wheel weights under the AMMCO, BADA and COATS brands. Typical users
of these products are automotive tire and repair shops. Sales are generally made through our direct sales personnel,
independent distributors, retailers and original equipment manufacturers. Competition in the wheel service equipment business
is based on the factors described under “—Competition.”
Test & Measurement segment manufacturing facilities are located in North America, Europe, and Asia.
ENVIRONMENTAL
Our Environmental segment provides products that help protect our water supply and air quality and serves two primary
markets: water quality and retail/commercial petroleum. Sales for this segment in 2012 by geographic destination were: North
America, 49%; Europe, 25%; Asia/Australia, 15% and all other regions, 11%. Our Environmental segment consists of the
following lines of business.
Water Quality
Danaher’s water quality business is a global leader in water quality analysis and treatment, providing instrumentation and
disinfection systems to help analyze and manage the quality of ultra pure water, potable water, wastewater, groundwater and
ocean water in residential, commercial, industrial and natural resource applications. We entered the water quality sector in the
late 1990’s through the acquisitions of Dr. Lange and Hach Company, and have enhanced our geographic coverage and product
and service breadth through subsequent acquisitions, including the acquisition of Trojan Technologies Inc. in 2004 and
ChemTreat, Inc. in 2007. Our water quality operations design, manufacture and market:
•
a wide range of analytical instruments, related consumables, and associated services that detect and measure chemical,
physical, and microbiological parameters in ultra pure water, potable water, wastewater, groundwater and ocean water;
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•
•
ultraviolet disinfection systems, which disinfect billions of gallons of municipal, industrial and consumer water every
day in more than 35 countries; and
industrial water treatment solutions, including chemical treatment solutions intended to address corrosion, scaling and
biological growth problems in boiler, cooling water and industrial wastewater applications as well as associated
analytical services.
Typical users of our analytical instruments, ultraviolet disinfection systems, industrial water treatment solutions and related
consumables and services include professionals in municipal drinking water and wastewater treatment plants and industrial
process water and wastewater treatment facilities, third-party testing laboratories and environmental field operations.
Customers in these industries choose suppliers based on a number of factors including the customer’s existing supplier
relationships, product performance and ease of use, the comprehensiveness of the supplier’s product offering and the other
factors described under “—Competition.” Our water quality business provides products under a variety of brands, including
CHEMTREAT, HACH, HACH/LANGE and TROJAN TECHNOLOGIES. Manufacturing facilities are located in North
America, Europe, and Asia. Sales are made through our direct sales personnel, independent representatives and independent
distributors.
Retail/Commercial Petroleum
We have served the retail/commercial petroleum market since the mid-1980s through our Veeder-Root business, and have
enhanced our geographic coverage and product and service breadth through various acquisitions including the acquisitions of
Red Jacket in 2001 and Gilbarco in 2002. To expand our presence in emerging markets, in 2010 the Company acquired the
petroleum dispenser business of Larsen & Toubro, an Indian manufacturer of retail petroleum equipment. Today, Gilbarco
Veeder-Root is a leading worldwide provider of products and services for the retail/commercial petroleum market, including:
•
•
•
•
•
•
environmental monitoring and leak detection systems;
vapor recovery equipment;
fuel dispensers;
point-of-sale and secure electronic payment technologies for retail petroleum stations;
submersible turbine pumps; and
remote monitoring and outsourced fuel management services, including compliance services, fuel system
maintenance, and inventory planning and supply chain support.
Typical users of these products include independent and company-owned retail petroleum stations, high-volume retailers,
convenience stores, and commercial vehicle fleets. Customers in this industry choose suppliers based on a number of factors
including product features, performance and functionality, the supplier’s geographic coverage and the other factors described
under “—Competition.” We market our retail/commercial petroleum products under a variety of brands, including
GILBARCO, GILBARCO AUTOTANK and VEEDER-ROOT. Manufacturing facilities are located in North America, Europe,
Asia and South America. Sales are generally made through independent distributors and our direct sales personnel.
LIFE SCIENCES & DIAGNOSTICS
Our diagnostics businesses offer a broad range of analytical instruments, reagents, consumables, software and services that
hospitals, physician’s offices, reference laboratories and other critical care settings use to diagnose disease and make treatment
decisions. Our life sciences businesses offer a broad range of research and clinical tools that are used by scientists to study
cells and cell components to gain a better understanding of complex biological matters. Pharmaceutical and biotechnology
companies, universities, medical schools and research institutions use these tools to study the causes of disease, identify new
therapies and test new drugs and vaccines. Sales for this segment in 2012 by geographic destination were: North America,
39%; Europe, 28%; Asia/Australia, 27% and all other regions, 6%.
Diagnostics
We established our diagnostics business in 2004 through the acquisition of Radiometer. We have expanded the business
through numerous subsequent acquisitions, including the acquisitions of Leica Microsystems in 2005, Vision Systems in 2006,
Genetix in 2009, Beckman Coulter in 2011 (which more than doubled the size of the segment) and Iris International and Aperio
Technologies in 2012. The diagnostics business consists of our clinical laboratory (or clinical lab), acute care and pathology
diagnostics businesses.
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Our clinical lab business is a leading manufacturer and marketer of biomedical testing instrument systems, tests and supplies
that are used to evaluate and analyze samples made up of body fluids, cells and other substances. The information generated is
used to diagnose disease, monitor and guide treatment and therapy, assist in managing chronic disease and assess patient status
in hospital, outpatient and physician's office settings. The business offers the following products:
• Our chemistry systems use electrochemical detection and chemical reactions with patient samples to detect and
quantify substances of diagnostic interest in blood, urine and other body fluids. Commonly performed tests include
glucose, cholesterol, triglycerides, electrolytes, proteins and enzymes, as well as tests to detect urinary tract infections
and kidney and bladder disease.
• Our immunoassay systems also detect and quantify chemical substances of diagnostic interest in body fluids,
particularly in circumstances where more specialized diagnosis is required. Commonly performed immunoassay tests
assess thyroid function, screen and monitor for cancer and cardiac risk and provide important information in fertility
and reproductive testing.
• Our cellular analysis business includes hematology and flow cytometry products. The business’ hematology systems
use principles of physics, optics, electronics and chemistry to separate cells of diagnostic interest and then quantify
and characterize them, allowing clinicians to study formed elements in blood (such as red and white blood cells and
platelets). The business’ flow cytometry products rapidly sort, identify, categorize and characterize multiple types of
cells in suspension, allowing clinicians to determine cell types and characteristics and analyze specific cell populations
based on molecular differences. The business also offers genome profiling services.
• We also offer systems and workflow solutions that allow laboratories to automate a number of steps from the pre-
analytical through post-analytical stages including sample barcoding/information tracking, centrifugation, aliquotting,
storage and conveyance. These systems along with the analyzers described above are controlled through laboratory
level software that enables laboratory managers to monitor samples, results and lab efficiency.
Typical users of the business’ clinical lab products include hospitals, physician’s offices, veterinary laboratories, reference
laboratories and pharmaceutical clinical trial laboratories.
Our acute care diagnostics business is a leading worldwide provider of instruments and related consumables and services that
are used in both laboratory and point-of-care environments to rapidly measure critical parameters, including blood gases,
electrolytes, metabolites and cardiac markers. Typical users of these products include hospital central laboratories, intensive
care units, hospital operating rooms and hospital emergency rooms.
Our pathology diagnostics business is a leading histology company in the anatomical pathology market, offering a
comprehensive suite of instrumentation and related consumables used across the entire workflow of a pathology laboratory.
Our pathology diagnostics products include tissue embedding, processing and slicing (microtomes) instruments and related
reagents and consumables; chemical and immuno-staining instruments, reagents, antibodies and consumables; slide
coverslipping and slide/cassette marking instruments; and imaging instrumentation including slide scanners, microscopes,
cameras and software solutions to store, share and analyze pathology images digitally. Typical users of these products include
pathologists, lab managers and researchers.
Customers in the diagnostics industry select products based on a number of factors, including product quality and reliability,
the scope of tests that can be performed, the accuracy and speed of the product, the product’s ability to enhance productivity,
total cost of ownership and access to a highly qualified service and support network as well as the other factors described under
“—Competition.” Our diagnostics business generally markets its products under the APERIO, BECKMAN COULTER, IRIS,
LEICA BIOSYSTEMS, RADIOMETER and SURGIPATH brands. Manufacturing facilities are located in North America,
Europe, Asia and Australia. The businesses sell to customers primarily through direct sales personnel and to a lesser extent
through independent distributors.
Life Sciences
We established our life sciences business in 2005 through the acquisition of Leica Microsystems, and have expanded the
business through numerous subsequent acquisitions, including the acquisitions of AB Sciex and Molecular Devices in 2010 and
Beckman Coulter in 2011. The life sciences business consists of the following businesses.
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Our microscopy business is a leading global provider of professional microscopes designed to manipulate, preserve and capture
images of, and enhance the user’s visualization and analysis of, microscopic structures. Our microscopy products include:
•
•
•
•
•
laser scanning (confocal) microscopes;
compound microscopes and related equipment;
surgical and other stereo microscopes;
specimen preparation products for electron microscopy; and
digital pathology solutions, including scanners, software and related services.
Typical users of these products include research, medical and surgical professionals operating in research and pathology
laboratories, academic settings and surgical theaters.
Our mass spectrometry business is a leading global provider of high-end mass spectrometers. Mass spectrometry is a technique
for identifying, analyzing and quantifying elements, chemical compounds and biological molecules, individually or in complex
mixtures. Our products utilize various combinations of quadrupole, time-of-flight and ion trap technologies, and are typically
used in conjunction with a third party liquid chromatography instrument. Our mass spectrometer systems are used in numerous
applications such as drug discovery and clinical development of therapeutics as well as in basic research, clinical testing, food
and beverage quality testing and environmental testing. To support our installations around the world, we provide
implementation, validation, training, maintenance and support from our global services network. Typical users of our mass
spectrometry products include molecular biologists, bioanalytical chemists, toxicologists, and forensic scientists as well as
quality assurance and quality control technicians. We also provide high-performance bioanalytical measurement systems,
including microplate readers, automated cellular screening products and associated reagents, and imaging software. Typical
users of these products include biologists and chemists engaged in research and drug discovery, who use these products to
determine electrical or chemical activity in cell samples.
We also offer workflow instruments and consumables that help researchers analyze genomic, protein and cellular information.
Key product areas include sample preparation equipment such as centrifugation and capillary electrophoresis instrumentation
and consumables; liquid handling automation instruments and associated consumables; flow cytometry instrumentation and
associated antibodies and reagents; and particle characterization instrumentation. Researchers use the business' products to
study biological function in the pursuit of basic research, as well as therapeutic and diagnostic development. Typical users of
these products include pharmaceutical and biotechnology companies, universities, medical schools and research institutions and
in some cases industrial manufacturers.
Customers in the life sciences industry select products based on a number of factors, including product quality and reliability,
innovation (particularly productivity and sensitivity improvements), the product’s capacity to enhance productivity, product
performance and ergonomics, access to a highly qualified service and support network and the other factors described under
“—Competition.” Our life sciences business generally markets its products under the AB SCIEX, BECKMAN COULTER,
LEICA MICROSYSTEMS and MOLECULAR DEVICES brands. Manufacturing facilities are located in Europe, Australia,
Asia and North America. The businesses sell to customers primarily through direct sales personnel and to a lesser extent
through independent distributors.
DENTAL
Our Dental segment is a leading worldwide provider of a broad range of consumables, equipment and services for the dental
market, which encompasses the diagnosis, treatment and prevention of disease and ailments of the teeth, gums and supporting
bone. The market we serve encompasses the whole working environment of an oral health professional and we are dedicated to
driving technological innovations that help dental professionals improve clinical outcomes and enhance productivity. Sales for
this segment in 2012 by geographic destination were: North America, 51%; Europe, 32%; Asia/Australia, 10% and all other
regions, 7%.
We entered the dental business in 2004 through the acquisitions of KaVo and Gendex and have enhanced our geographic
coverage and product and service breadth through subsequent acquisitions, including the acquisition of Sybron Dental
Specialties in 2006 and PaloDEx Group Oy in 2009. Today, our dental businesses develop, manufacture and market the
following dental consumables and dental equipment:
•
•
orthodontic bracket systems and lab products;
impression, bonding and restorative materials;
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•
•
•
•
•
•
•
endodontic systems and related consumables;
infection prevention products;
implant systems;
diamond and carbide rotary instruments;
digital imaging and other visualization and magnification systems;
air and electric handpieces and associated consumables; and
treatment units.
Typical customers and users of these products include general dentists, dental specialists, dental hygienists, dental laboratories
and other oral health professionals, as well as educational, medical and governmental entities. Dental professionals choose
dental products based on a number of factors including product performance, the product’s capacity to enhance productivity
and the other factors described under “—Competition.” Our dental products are marketed primarily under the DEXIS,
GENDEX, iCAT, INSTRUMENTARIUM DENTAL, KAVO, KERR, ORMCO, PELTON & CRANE, PENTRON, SOREDEX,
SYBRON ENDO and TOTAL CARE brands. Manufacturing facilities are located in Europe, North America and South
America. Sales are primarily made through independent distributors and, to a lesser extent, through direct sales personnel.
INDUSTRIAL TECHNOLOGIES
Our Industrial Technologies segment designs and manufactures components and systems that are typically incorporated by
original equipment manufacturers and systems integrators for sale into a diverse set of applications and end-markets. The
businesses in this segment also provide service and support, including helping customers with integration and installation and
providing services to ensure performance and up-time. Sales for this segment in 2012 by geographic destination were: North
America, 45%; Europe, 29%; Asia/Australia, 18% and all other regions, 8%. Our Industrial Technologies segment consists of
the following lines of business.
Product Identification
Danaher’s product identification business is a leading global provider of equipment and consumables for variable printing,
marking and coding on a wide variety of consumer and industrial products. We entered the product identification market
through the acquisition of Videojet in 2002, and have expanded our product and geographic coverage through various
subsequent acquisitions, including the acquisitions of Willett International Limited in 2003, Linx Printing Technologies PLC in
2005, EskoArtwork in 2011 and X-Rite in 2012. Our product identification businesses design, manufacture, and market the
following products and services:
• We provide a variety of equipment used to print bar codes, date codes, lot codes and other information on primary and
secondary packaging. Our equipment can apply high-quality alphanumeric codes, logos and graphics to a wide range
of surfaces at a variety of line speeds, angles and locations on a product or package.
• We are a leading global supplier of integrated solutions for packaging, sign and display finishing, commercial printing
and professional publishing. We provide software for artwork creation, structural design, workflow automation,
quality assurance and online collaboration, flexo computer-to-plate imagers and digital finishing systems.
• We provide innovative color solutions through measurement systems, software, color standards and related services.
Our expertise in inspiring, selecting, measuring, formulating, communicating and matching color helps users improve
the quality and effectiveness of their products and reduce costs.
Typical users of the product identification business’ products include food and beverage manufacturers, pharmaceutical
manufacturers, retailers, commercial printing, packaging and mailing operations, graphic design firms, and paints, plastics and
textile manufacturers. Customers in this industry choose suppliers based on a number of factors, including printer speed and
accuracy, equipment uptime and reliable operation without interruption, ease of maintenance, service coverage and the other
factors described under “—Competition.” Our product identification products are primarily marketed under the ESKO, FOBA,
LINX, PANTONE, VIDEOJET and X-RITE brands. Manufacturing facilities are located in North America, Europe, South
America, and Asia. Sales are generally made through our direct sales personnel and independent distributors.
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Motion
We are one of the leading worldwide providers of electromechanical motion control solutions for the industrial automation and
packaging markets. We entered the motion control industry through the acquisition of Pacific Scientific Company in 1998, and
subsequently expanded our product and geographic breadth with the acquisitions of American Precision Industries, Kollmorgen
Corporation and the motion businesses of Warner Electric Company in 2000, and Thomson Industries in 2002, among others.
Our businesses provide a wide range of products including:
•
•
•
standard and custom motors;
drives;
controls; and
• mechanical components (such as ball screws, linear bearings, clutches/brakes, and linear actuators).
These products are sold in various precision motion markets such as the markets for packaging equipment, medical equipment,
robotics, circuit board assembly equipment, elevators and electric vehicles (such as lift trucks). Customers are typically
systems integrators who use our products in production and packaging lines and OEMs that integrate our products into their
machines and systems. Customers in this industry choose suppliers based on a number of factors, including product
performance, the comprehensiveness of the supplier’s product offering, the geographic coverage offered by the supplier and the
other factors described under “—Competition.” Our motion products are marketed under a variety of brands, including
DOVER, KOLLMORGEN, PORTESCAP and THOMSON. Manufacturing facilities are located in North America, Europe
and Asia. Sales are generally made through our direct sales personnel and independent distributors.
Other Businesses
Our sensors & controls products include instruments that monitor, sense and control discrete manufacturing variables such as
temperature, position, quantity, level, flow and time. Users of these products span a wide variety of manufacturing markets.
Certain businesses included in this group also make and sell instruments, controls and monitoring systems used by the electric
utility industry to monitor their transmission and distribution systems. These products are marketed under a variety of brands,
including DYNAPAR, GEMS SENSORS, HENGSTLER, IRIS POWER, QUALITROL, SETRA and WEST. Sales are
generally made through our direct sales personnel and independent distributors.
Our energetic materials business designs, manufactures, and markets energetic material systems. Typical users of these
products include systems integrators and prime contractors. Customers in this industry choose suppliers based on a number of
factors, including the supplier’s experience with the particular technology or application and the other factors described under
“—Competition.” These products are typically marketed under the PACIFIC SCIENTIFIC ENERGETIC MATERIALS
COMPANY brand.
Jacobs Vehicle Systems is a leading worldwide supplier of supplemental braking systems for commercial vehicles, selling
JAKE BRAKE brand engine retarders for class 6 through 8 vehicles and bleeder and exhaust brakes for class 2 through 7
vehicles. Customers are primarily major manufacturers of class 2 through class 8 vehicles, and sales are typically made
through our direct sales personnel.
Manufacturing facilities of our sensors & controls, energetic materials and JVS businesses are located in North America, South
America, Europe and Asia.
APEX TOOL GROUP JOINT VENTURE
In 2010, the Company entered into a joint venture with Cooper Industries, plc, combining certain of the Company’s hand tool
businesses with Cooper’s Tools business to form a new entity called Apex Tool Group, LLC (“Apex”). In February 2013, Apex
was sold to an unrelated third party.
************************************
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The following discussion includes information common to all of our segments.
Materials
Our manufacturing operations employ a wide variety of raw materials, including steel, copper, cast iron, electronic components,
aluminum, plastics and other petroleum-based products. Prices of oil and gas also affect our costs for freight and utilities. We
purchase raw materials from a large number of independent sources around the world. No single supplier is material, although
for some components that require particular specifications or qualifications there may be a single supplier or a limited number
of suppliers that can readily provide such components. We utilize a number of techniques to address potential disruption in and
other risks relating to our supply chain, including in certain cases the use of safety stock, alternative materials and qualification
of multiple supply sources. During 2012 we had no raw material shortages that had a material effect on our business. For a
further discussion of risks related to the materials and components required for our operations, please refer to “Item 1A. Risk
Factors.”
Intellectual Property
We own numerous patents, trademarks, copyrights, trade secrets and licenses to intellectual property owned by others.
Although in aggregate our intellectual property is important to our operations, we do not consider any single patent, trademark,
copyright, trade secret or license to be of material importance to any segment or to the business as a whole. From time to time
we engage in litigation to protect our intellectual property rights. For a discussion of risks related to our intellectual property,
please refer to “Item 1A. Risk Factors.” All capitalized brands and product names throughout this document are trademarks
owned by, or licensed to, Danaher.
Competition
Although our businesses generally operate in highly competitive markets, our competitive position cannot be determined
accurately in the aggregate or by segment since none of our competitors offer all of the same product lines or serve all of the
same markets as we do. Because of the range of the products we sell and the variety of markets we serve, we encounter a wide
variety of competitors, including well-established regional competitors, competitors who are more specialized than we are in
particular markets, as well as larger companies or divisions of larger companies with substantial sales, marketing, research, and
financial capabilities. We are facing increased competition in a number of our served markets as a result of the entry of new,
large companies into certain markets, the entry of competitors based in low-cost manufacturing locations, and increasing
consolidation in particular markets. The number of competitors varies by product line. Our management believes that we have
a market leadership position in many of the markets we serve. Key competitive factors vary among our businesses and product
lines, but include the specific factors noted above with respect to each particular business and typically also include price,
quality, delivery speed, service and support, innovation, distribution network, breadth of product and service offerings and
brand name recognition. For a discussion of risks related to competition, please refer to “Item 1A. Risk Factors.”
Seasonal Nature of Business
General economic conditions impact our business and financial results, and certain of our businesses experience seasonal and
other trends related to the industries and end-markets that they serve. For example, European sales are often weaker in the
summer months, sales to the United States government are often stronger in the third calendar quarter, medical and capital
equipment sales are often stronger in the fourth calendar quarter and sales to original equipment manufacturers are often
stronger immediately preceding and following the launch of new products. However, as a whole, we are not subject to material
seasonality.
Working Capital
We maintain an adequate level of working capital to support our business needs. There are no unusual industry practices or
requirements relating to working capital items. In addition, our sales and payment terms are generally similar to those of our
competitors.
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Backlog
The table below provides the unfulfilled orders attributable to each of our five segments at the end of 2012 and 2011 ($ in
millions):
Test & Measurement
Environmental
Life Sciences & Diagnostics
Dental
Industrial Technologies
Total
$
As of December 31
2012
2011
$
621
417
490
58
602
715
378
455
64
555
$
2,188
$
2,167
We expect that a large majority of the unfilled orders as of December 31, 2012 will be delivered to customers within 3 to 4
months of such date. Given the relatively short delivery periods and rapid inventory turnover that are characteristic of most of
our products and the shortening of product life cycles, we believe that backlog is indicative of short-term revenue performance
but not necessarily a reliable indicator of medium or long-term revenue performance.
Employee Relations
At December 31, 2012, we employed approximately 63,000 persons, of whom approximately 26,000 were employed in the
United States and approximately 37,000 were employed outside of the United States. Of our United States employees,
approximately 1,900 were hourly-rated, unionized employees. Outside the United States, we have government-mandated
collective bargaining arrangements and union contracts in certain countries, particularly in Europe where many of our
employees are represented by unions and/or works councils. For a discussion of risks related to employee relations, please
refer to “Item 1A. Risk Factors.”
Research and Development
The table below describes our research and development expenditures over each of the last three years, by segment and in the
aggregate ($ in millions):
Test & Measurement
Environmental
Life Sciences & Diagnostics
Dental
Industrial Technologies
Businesses contributed to the Apex joint venture
Total
Year Ended December 31
2012
2011
2010
$
$
335
155
418
76
154
—
$
312
153
341
78
135
—
$
1,138
$
1,019
$
258
136
193
73
111
3
774
We conduct research and development activities for the purpose of developing new products, enhancing the functionality,
effectiveness, ease of use and reliability of our existing products and expanding the applications for which uses of our products
are appropriate. Our research and development efforts include internal initiatives and those that use licensed or acquired
technology. The Company conducts research and development activities on a business-by-business basis, primarily in North
America, Europe and Asia. We anticipate that we will continue to make significant expenditures for research and development
as we seek to provide a continuing flow of innovative products to maintain and improve our competitive position. For a
discussion of the risks related to the need to develop and commercialize new products and product enhancements, please refer
to “Item 1A. Risk Factors.” Customer-sponsored research and development was not significant in 2012, 2011 or 2010.
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Government Contracts
Although the substantial majority of our revenue in 2012 was from customers other than governmental entities, each of our
segments has agreements relating to the sale of products to government entities. As a result, we are subject to various statutes
and regulations that apply to companies doing business with governments. For a discussion of risks related to government
contracting requirements, please refer to “Item 1A. Risk Factors.”
Regulatory Matters
We face comprehensive government regulation both within and outside the United States relating to the development,
manufacture, sale and distribution of our products and services. The following sections describe certain significant regulations
that we are subject to. These are not the only regulations that our businesses must comply with. For a description of the risks
related to the regulations that our businesses are subject to, please refer to “Item 1A. Risk Factors.”
Environmental Laws and Regulations
Our operations, products and services are subject to environmental laws and regulations in the jurisdictions in which they
operate, which impose limitations on the discharge of pollutants into the environment and establish standards for the
generation, use, treatment, storage and disposal of hazardous and non-hazardous wastes. A number of our operations involve
the handling, manufacturing, use or sale of substances that are or could be classified as hazardous materials within the meaning
of applicable laws. We must also comply with various health and safety regulations in both the United States and abroad in
connection with our operations. Compliance with these laws and regulations has not had and, based on current information and
the applicable laws and regulations currently in effect, is not expected to have a material effect on our capital expenditures,
earnings or competitive position, and we do not anticipate material capital expenditures for environmental control facilities.
For a discussion of risks related to compliance with environmental and health and safety laws, please refer to “Item 1A. Risk
Factors.”
In addition to environmental compliance costs, we from time to time incur costs related to alleged damages associated with past
or current waste disposal practices or other hazardous materials handling practices. For example, generators of hazardous
substances found in disposal sites at which environmental problems are alleged to exist, as well as the current and former
owners of those sites and certain other classes of persons, are subject to claims brought by state and federal regulatory agencies
pursuant to statutory authority. We have received notification from the U.S. Environmental Protection Agency, and from state
and non-U.S. environmental agencies, that conditions at certain sites where we and others previously disposed of hazardous
wastes and/or are or were property owners require clean-up and other possible remedial action, including sites where we have
been identified as a potentially responsible party under U.S. federal and state environmental laws. We have projects underway
at a number of current and former facilities, in both the United States and abroad, to investigate and remediate environmental
contamination resulting from past operations. Remediation activities generally relate to soil and/or groundwater contamination
and may include pre-remedial activities such as fact-finding and investigation, risk assessment, feasibility study, and/or design,
as well as remediation actions such as contaminant removal, monitoring and/or installation, operation and maintenance of
longer-term remediation systems. We are also from time to time party to personal injury or other claims brought by private
parties alleging injury due to the presence of or exposure to hazardous substances.
We have made a provision for environmental investigation and remediation and environmental-related claims with respect to
sites owned or formerly owned by the Company and its subsidiaries and third-party sites where we have been determined to be
a potentially responsible party. We generally make an assessment of the costs involved for our remediation efforts based on
environmental studies, as well as our prior experience with similar sites. The ultimate cost of site cleanup is difficult to predict
given the uncertainties of our involvement in certain sites, uncertainties regarding the extent of the required cleanup, the
availability of alternative cleanup methods, variations in the interpretation of applicable laws and regulations, the possibility of
insurance recoveries with respect to certain sites and the fact that imposition of joint and several liability with right of
contribution is possible under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 and other
environmental laws and regulations. If we determine that potential liability for a particular site or with respect to a personal
injury claim is probable and reasonably estimable, we accrue the total estimated loss, including investigation and remediation
costs, associated with the site or claim. As of December 31, 2012, the Company had a reserve of $143 million for
environmental matters which are probable and reasonably estimable (of which $94 million are non-current), which reflects the
Company’s best estimate of the costs to be incurred with respect to such matters. Please see Note 9 to the Consolidated
Financial Statements for additional information about our environmental reserves.
All reserves have been recorded without giving effect to any possible future third party recoveries. While we actively pursue
insurance recoveries, as well as recoveries from other potentially responsible parties, we do not recognize any insurance
recoveries for environmental liability claims until realized or until such time as a sustained pattern of collections is established
related to historical matters of a similar nature and magnitude.
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For a discussion of risks related to past or future releases of, or exposures to, hazardous substances, please refer to “Item 1A.
Risk Factors.”
Medical Device and Other Healthcare Regulations
Certain of our products are classified as medical devices under the United States Food, Drug, and Cosmetic Act (the “FDCA”).
The FDCA requires these products, when sold in the United States, to be safe and effective for their intended use and to comply
with the regulations administered by the United States Food and Drug Administration (“FDA”). Our medical device products
are also regulated by comparable agencies in non-U.S. countries where our products are sold.
The FDA’s regulatory requirements include:
• Establishment Registration. We must register with the FDA each facility where regulated products are developed or
manufactured. The FDA periodically inspects these facilities.
• Marketing Authorization. We must obtain FDA authorization to begin marketing a regulated, non-exempted product
in the United States. For some of our products, this authorization is obtained by submitting a 510(k) pre-market
notification, which generally provides data on the performance of the product to allow the FDA to determine
substantial equivalence to a product already in commercial distribution in the United States. Other of our products
must go through a formal pre-market approval process which includes the review of non-clinical laboratory studies
and clinical investigations, as well as an inspection by the FDA prior to market approval.
• Quality Systems. We are required to establish a quality system that includes procedures for ensuring regulated
products are developed, manufactured and distributed in accordance with specified standards. We also must establish
procedures for investigating and responding to customer complaints regarding the performance of regulated products.
• Labeling. The labeling for the products must contain specified information. In some cases, the FDA must review and
approve the labeling and any quality assurance protocols specified in the labeling.
•
•
Imports and Exports. The FDCA establishes requirements for importing products into and exporting products from the
United States. In general, any limitations on importing and exporting products apply only to products that have not
received marketing authorization.
Post-Market Reporting. After regulated products have been distributed to customers, we may receive product
complaints requiring us to investigate and report to the FDA certain events involving the products. We also must
notify the FDA when we conduct recalls involving our products.
In the European Union, a single medical device regulatory approval process exists. Regulated products must meet minimum
standards of performance, safety, and quality (known as the “essential requirements”), and then, according to their
classification, comply with one or more of a selection of conformity assessment routes. Unlike United States regulations,
which require most devices to undergo some level of premarket review by the FDA, the European Union regulations allow
manufacturers to bring many devices to market using a process in which the manufacturer certifies that the device conforms to
the essential requirements for that device. Certain products must go through a more formal pre-market review process. We are
also required to report device failures and injuries potentially related to product use in a timely manner to the competent
authorities of the European Union countries. A number of other countries, including Australia, Brazil, Canada, China and
Japan, have also adopted or are in the process of adopting standards for medical devices sold in those countries.
We are also subject to various healthcare related laws regulating fraud and abuse, pricing and sales and marketing practices
and the privacy and security of health information, including the United States federal regulations described below. Many
states, foreign countries and supranational bodies have also adopted laws and regulations similar to, and in some cases more
stringent than, the federal regulations discussed above and below.
• The Federal Anti-Kickback Statute prohibits persons from knowingly and willfully soliciting, offering, receiving or
providing remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual, or the
furnishing or arranging for a good or service, for which payment may be made under a federal health care program,
such as Medicare or Medicaid.
• The Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) prohibits knowingly and willfully
(1) executing a scheme to defraud any health care benefit program, including private payors, or (2) falsifying,
concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in
connection with the delivery of or payment for health care benefits, items or services. In addition, HIPAA, as
amended by the Health Information Technology for Economic and Clinical Health Act of 2009, also restricts the use
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and disclosure of personal health information, mandates the adoption of standards relating to the privacy and security
of individually identifiable health information and requires us to report certain breaches of unsecured, individually
identifiable health information.
• The Physician Payments Sunshine Act requires manufacturers of medical devices covered under Medicare and
Medicaid to record transfers of value to physicians and teaching hospitals and to report this data beginning in 2013 to
the Centers for Medicare and Medicaid Services for subsequent public disclosure. Similar reporting requirements
have also been enacted on the state level, and an increasing number of countries worldwide either have adopted or are
considering similar laws requiring transparency of interactions with health care professionals.
• The False Claims Act imposes liability on any person or entity that, among other things, knowingly presents, or causes
to be presented, a false or fraudulent claim for payment by a federal health care program. The qui tam provisions of
the False Claims Act allow a private individual to bring actions on behalf of the federal government alleging that the
defendant has submitted a false claim to the federal government, and to share in any monetary recovery.
In addition, certain of our products utilize radioactive material, and we are subject to federal, state and local regulations
governing the management, storage, handling and disposal of these materials. For a discussion of risks related to our regulation
by the FDA and comparable agencies of other countries, and the other regulatory regimes referenced above, please refer to
“Item 1A. Risk Factors.”
Export/Import Compliance
We are required to comply with various U.S. export/import control and economic sanctions laws, including:
•
•
•
the International Traffic in Arms Regulations administered by the U.S. Department of State, Directorate of Defense
Trade Controls, which, among other things, imposes license requirements on the export from the United States of
defense articles and defense services (which are items specifically designed or adapted for a military application and/
or listed on the United States Munitions List);
the Export Administration Regulations administered by the U.S. Department of Commerce, Bureau of Industry and
Security, which, among other things, impose licensing requirements on the export or re-export of certain dual-use
goods, technology and software (which are items that potentially have both commercial and military applications);
the regulations administered by the U.S. Department of Treasury, Office of Foreign Assets Control, which implement
economic sanctions imposed against designated countries, governments and persons based on United States foreign
policy and national security considerations; and
•
the import regulatory activities of the U.S. Customs and Border Protection.
Other nations’ governments have implemented similar export and import control regulations, which may affect our operations
or transactions subject to their jurisdictions. For a discussion of risks related to export/import control and economic sanctions
laws, please refer to “Item 1A. Risk Factors.”
International Operations
Our products and services are available worldwide, and our principal markets outside the United States are in Europe and Asia.
We also have operations around the world, and this geographic diversity allows us to draw on the skills of a worldwide
workforce, provides stability to our operations, allows us to drive economies of scale, provides revenue streams that may help
offset economic trends that are specific to individual economies and offers us an opportunity to access new markets for
products. In addition, we believe that our future growth depends in part on our ability to develop products and sales models
that successfully target high-growth markets.
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The table below describes annual revenue derived from customers outside the United States as a percentage of total annual
revenue for each of the last three years, by segment and in the aggregate:
Test & Measurement
Environmental
Life Sciences & Diagnostics
Dental
Industrial Technologies
Businesses contributed to the Apex joint venture
Total percentage of revenue derived from customers outside of the United
States
Year Ended December 31
2012
2011
2010
48%
55%
64%
54%
56%
—
57%
52%
57%
66%
56%
57%
—
58%
49%
53%
70%
58%
55%
22%
55%
The table below describes long-lived assets located outside the United States as a percentage of total long-lived assets at the
end of each of the last three years, by segment and in the aggregate (including assets held for sale):
Test & Measurement
Environmental
Life Sciences & Diagnostics
Dental
Industrial Technologies
Total percentage of long-lived assets located outside of the United States
Year Ended December 31
2012
2011
2010
19%
39%
45%
34%
38%
37%
17%
44%
31%
35%
37%
31%
17%
44%
85%
34%
24%
38%
For additional information related to revenues and long-lived assets by country, please refer to Note 19 to the Consolidated
Financial Statements and for information regarding deferred taxes by geography, please refer to Note 13 to the Consolidated
Financial Statements.
The manner in which our products and services are sold outside the United States differs by business and by region. Most of
our sales in non-U.S. markets are made by our subsidiaries located outside the U.S., though we also sell directly from the U.S.
into non-U.S. markets through various representatives and distributors and, in some cases, directly. In countries with low sales
volumes, we generally sell through representatives and distributors.
Financial information about our international operations is contained in Note 19 of the Consolidated Financial Statements and
information about the effects of foreign currency fluctuations on our business is set forth in “Item 7. Management’s Discussion
and Analysis of Financial Condition and Results of Operations.” For a discussion of risks related to our non-U.S. operations
and foreign currency exchange, please refer to “Item 1A. Risk Factors.”
Major Customers
No customer accounted for more than 10% of consolidated sales in 2012, 2011 or 2010.
Available Information
We maintain an internet website at www.danaher.com. We make available free of charge on the website our annual reports on
Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K and amendments to those reports, filed or
furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after filing such material
with, or furnishing such material to, the SEC. Our Internet site and the information contained on or connected to that site are
not incorporated by reference into this Form 10-K.
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ITEM 1A. RISK FACTORS
You should carefully consider the risks and uncertainties described below, together with the information included elsewhere in
this Annual Report on Form 10-K and other documents we file with the SEC. The risks and uncertainties described below are
those that we have identified as material, but are not the only risks and uncertainties facing us. Our business is also subject to
general risks and uncertainties that affect many other companies, such as market conditions, geopolitical events, changes in
laws or accounting rules, fluctuations in interest rates, terrorism, wars or conflicts, major health concerns, natural disasters or
other disruptions of expected economic or business conditions. Additional risks and uncertainties not currently known to us or
that we currently believe are immaterial also may impair our business, including our results of operations, liquidity and
financial condition.
Conditions in the global economy, the markets we serve and the financial markets may adversely affect our business and
financial statements.
Our business is sensitive to general economic conditions, both inside and outside the United States. Slower global economic
growth, credit market crisis, high levels of unemployment, reduced levels of capital expenditures, government deficit reduction,
sequestration and other austerity measures and other challenges affecting the global economy adversely affect the Company
and its distributors, customers and suppliers, including having the effect of:
•
•
•
•
•
•
reducing demand for our products and services, limiting the financing available to our customers, increasing order
cancellations and resulting in longer sales cycles and slower adoption of new technologies;
increasing the difficulty in collecting accounts receivable and the risk of excess and obsolete inventories;
increasing price competition in our served markets;
resulting in supply interruptions, which could disrupt our ability to produce our products;
increasing the risk of impairment of goodwill and other long-lived assets; and
increasing the risk that counterparties to our contractual arrangements will become insolvent or otherwise unable to
fulfill their contractual obligations which, in addition to increasing the risks identified above, could result in
preference actions against us.
In particular, the European debt crisis, the instability and uncertainty relating to the Euro and generally weak economic
conditions in Europe have constrained government budgets, limited the financing available to our suppliers and customers and
adversely affected demand for our products, the availability of supplies and the value of our Euro-denominated assets and
obligations.
In addition, although we have been able to continue accessing the commercial paper markets through the date of this report,
there can be no assurances that the commercial paper markets will remain available to us or that the lenders participating in our
revolving credit facilities will be able to provide financing in accordance with their contractual obligations.
If slower growth in the global economy or in any of the markets we serve continues for a significant period, if there is
significant deterioration in the global economy or such markets or if improvements in the global economy don't benefit the
markets we serve, our business and financial statements could be adversely affected.
Our restructuring actions could have long-term adverse effects on our business.
In 2008, 2009, 2011 and 2012, we implemented significant restructuring activities across our businesses to adjust our cost
structure, and we may engage in similar restructuring activities in the future. These restructuring activities and our regular
ongoing cost reduction activities (including in connection with the integration of acquired businesses) reduce our available
talent, assets and other resources and could slow improvements in our products and technologies, adversely affect our ability to
respond to customers and limit our ability to increase production quickly if demand for our products increases. These
circumstances could adversely impact our business and financial statements.
Our growth could suffer if the markets into which we sell our products decline, do not grow as anticipated or experience
cyclicality.
Our growth depends in part on the growth of the markets which we serve, and visibility into our markets is limited (particularly
for markets into which we sell through distribution). Our quarterly sales and profits depend substantially on the volume and
timing of orders received during the fiscal quarter, which are difficult to forecast. Any decline or lower than expected growth
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in our served markets could diminish demand for our products and services, which would adversely affect our financial
statements. Certain of our businesses operate in industries that may experience periodic, cyclical downturns. In addition, in
certain of our businesses product demand depends on customers' capital spending budgets as well as government funding
policies, and matters of public policy as well as product and economic cycles can affect the spending decisions of these entities.
Our product demand is also sensitive to changes in customer order patterns, which may be affected by announced price
changes, changes in incentive programs, new product introductions and customer inventory levels. Any of these factors could
adversely affect our growth and results of operations in any given period.
We face intense competition and if we are unable to compete effectively, we may experience decreased demand and
decreased market share. Even if we compete effectively, we may be required to reduce prices for our products.
Our businesses operate in industries that are intensely competitive and have been subject to increasing consolidation. Because
of the range of the products and services we sell and the variety of markets we serve, we encounter a wide variety of
competitors; please see “Item 1. Business - Competition” for additional details. In order to compete effectively, we must retain
longstanding relationships with major customers and continue to grow our business by establishing relationships with new
customers, continually developing new products and services to maintain and expand our brand recognition and leadership
position in various product and service categories and penetrate new markets, including in developing countries. Our failure to
compete effectively and/or pricing pressures resulting from competition may adversely impact our financial statements.
Our growth depends in part on the timely development and commercialization, and customer acceptance, of new products
and product enhancements based on technological innovation.
We generally sell our products in industries that are characterized by rapid technological changes, frequent new product
introductions and changing industry standards. If we do not develop innovative new products and product enhancements on a
timely basis, our products will become obsolete over time and our competitive position and financial statements will suffer.
Our success will depend on several factors, including our ability to:
• correctly identify customer needs and preferences and predict future needs and preferences;
• allocate our research and development funding to products with higher growth prospects;
• anticipate and respond to our competitors' development of new products and technological innovations;
• differentiate our offerings from our competitors' offerings and avoid product commoditization;
•
innovate and develop new technologies and applications, and acquire or obtain rights to third-party technologies that
may have valuable applications in our served markets;
• obtain adequate intellectual property rights with respect to key technologies before our competitors do;
•
successfully commercialize new technologies in a timely manner, price them competitively and cost-effectively
manufacture and deliver sufficient volumes of new products of appropriate quality on time;
• obtain necessary regulatory approvals of appropriate scope, including with respect to medical device products by
demonstrating satisfactory clinical results where applicable; and
• convince customers to adopt new technologies.
In addition, if we fail to accurately predict future customer needs and preferences or fail to produce viable technologies, we
may invest heavily in research and development of products that do not lead to significant revenue, which would adversely
affect our profitability. Even if we successfully innovate and develop new products and product enhancements, we may incur
substantial costs in doing so, and our profitability may suffer. In addition, promising new products may fail to reach the market
or realize only limited commercial success because of efficacy or safety concerns, failure to achieve positive clinical outcomes
or uncertainty over third-party reimbursement.
Our reputation, ability to do business and financial statements may be impaired by improper conduct by any of our
employees, agents or business partners.
We cannot provide assurance that our internal controls and compliance systems will always protect us from acts committed by
our employees, agents or business partners that would violate U.S. and/or non-U.S. laws, including the laws governing
payments to government officials, bribery, fraud, anti-kickback and false claims rules, competition, export and import
compliance, money laundering and data privacy. In particular, the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act,
and similar anti-bribery laws in other jurisdictions generally prohibit companies and their intermediaries from making improper
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payments to government officials for the purpose of obtaining or retaining business, and we operate in many parts of the world
that have experienced governmental corruption to some degree. Any such improper actions could damage our reputation and
subject us to civil or criminal investigations in the United States and in other jurisdictions and related shareholder lawsuits,
could lead to substantial civil and criminal, monetary and non-monetary penalties and could cause us to incur significant legal
and investigatory fees.
Any inability to consummate acquisitions at our historical rate and at appropriate prices could negatively impact our growth
rate and stock price.
We may not be able to consummate acquisitions at rates similar to the past, which could adversely impact our growth rate and
our stock price. Promising acquisitions are difficult to identify and complete for a number of reasons, including high
valuations, competition among prospective buyers, the availability of affordable funding in the capital markets and the need to
satisfy applicable closing conditions and obtain antitrust and other regulatory approvals on acceptable terms. In addition,
competition for acquisitions in our current and anticipated business areas is significant and may result in higher purchase
prices. Changes in accounting or regulatory requirements or instability in the credit markets could also adversely impact our
ability to consummate acquisitions. Our ability to grow revenues, earnings and cash flow at or above our historic rates depends
in part upon our ability to identify and successfully acquire and integrate businesses at appropriate prices and realize
anticipated synergies.
Our acquisition of businesses, including our acquisition of Beckman Coulter, could negatively impact our financial
statements.
As part of our business strategy we acquire businesses and enter into joint ventures and other strategic relationships in the
ordinary course, some of which may be material; please see “Management's Discussion and Analysis of Financial Condition
and Results of Operations” (“MD&A”) for additional details. In particular, as of the date of this report the acquisition of
Beckman Coulter, Inc. in June 2011 was Danaher's largest acquisition and has expanded Danaher's business into new markets.
Our acquisitions involve a number of financial, accounting, managerial, operational, legal and other risks and challenges,
including the following, any of which could adversely affect our financial statements:
• Any acquired business, technology, service or product could under-perform relative to our expectations and
the price that we paid for it, or not perform in accordance with our anticipated timetable.
• We may incur or assume significant debt in connection with our acquisitions.
• Acquisitions could cause our financial results to differ from our own or the investment community's
expectations in any given period, or over the long-term.
• Pre-closing and post-closing acquisition-related earnings charges could adversely impact operating results in
any given period, and the impact may be substantially different from period to period.
• Acquisitions could create demands on our management, operational resources and financial and internal
control systems that we are unable to effectively address.
• We could experience difficulty in integrating personnel, operations and financial and other systems and
retaining key employees and customers.
• We may be unable to achieve cost savings or other synergies anticipated in connection with an acquisition.
• We may assume by acquisition unknown liabilities, known contingent liabilities that become realized, known
liabilities that prove greater than anticipated, internal control deficiencies or exposure to regulatory sanctions
resulting from the acquired company's activities. The realization of any of these liabilities or deficiencies
may increase our expenses, adversely affect our financial position or cause us to fail to meet our public
financial reporting obligations.
•
In connection with acquisitions, we often enter into post-closing financial arrangements such as purchase
price adjustments, earn-out obligations and indemnification obligations, which may have unpredictable
financial results.
• As a result of our acquisitions, we have recorded significant goodwill and other intangible assets on our
balance sheet. If we are not able to realize the value of these assets, we may be required to incur charges
relating to the impairment of these assets.
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The indemnification provisions of acquisition agreements by which we have acquired companies may not fully protect us
and as a result we may face unexpected liabilities.
Certain of the acquisition agreements by which we have acquired companies require the former owners to indemnify us against
certain liabilities related to the operation of the company before we acquired it. In most of these agreements, however, the
liability of the former owners is limited and certain former owners may be unable to meet their indemnification responsibilities.
We cannot assure you that these indemnification provisions will protect us fully or at all, and as a result we may face
unexpected liabilities that adversely affect our financial statements.
Divestitures could negatively impact our business, and contingent liabilities from businesses that we have sold could
adversely affect our financial statements.
We continually assess the strategic fit of our existing businesses and may divest businesses that are deemed not to fit with our
strategic plan or are not achieving the desired return on investment. Divestitures pose risks and challenges that could
negatively impact our business. For example, when we decide to sell a business or assets, we may be unable to do so on
satisfactory terms and within our anticipated timeframe, and even after reaching a definitive agreement to sell a business the
sale is typically subject to satisfaction of pre-closing conditions which may not become satisfied. In addition, divestitures may
dilute the Company's earnings per share, have other adverse accounting impacts and distract management, and disputes may
arise with buyers. In addition, we have retained responsibility for and/or have agreed to indemnify buyers against some known
and unknown contingent liabilities related to a number of businesses we have sold. The resolution of these contingencies has
not had a material effect on our financial statements but we cannot be certain that this favorable pattern will continue.
Certain of our businesses are subject to extensive regulation by the FDA and by comparable agencies of other countries, as
well as laws regulating fraud and abuse in the healthcare industry and the privacy and security of health information.
Failure to comply with those regulations could adversely affect our reputation and financial statements.
Certain of our products are medical devices and other products that are subject to regulation by the FDA, by comparable
agencies of other countries and regions and by regulations governing radioactive or other hazardous materials (or the
manufacture and sale of products containing such materials). For more information regarding these regulations please see
“Item 1 - Business - Regulatory Matters.” We cannot guarantee that we will be able to obtain regulatory clearance (such as 510
(k) clearance) for our new products or modifications to (or additional indications or uses of) existing products within our
anticipated timeframe or at all, and if we do obtain such clearance it may be time-consuming, costly and subject to restrictions.
Our ability to obtain such regulatory clearances will depend on many factors, including our ability to obtain the necessary
clinical trial results, and the process for obtaining such clearances could change over time and may require the withdrawal of
products from the market until such clearances are obtained. Failure to obtain such regulatory clearances before marketing our
products (or before implementing modifications to or additional indications or uses of our products), other violations of these
regulations, efficacy or safety concerns or trends of adverse events with respect to our products (even after obtaining clearance
for distribution) and unfavorable or inconsistent clinical data from existing or future clinical trials can lead to FDA Form 483
Inspectional Observations, warning letters, notices to customers, declining sales, loss of customers, loss of market share,
recalls, seizures of adulterated or misbranded products, injunctions, administrative detentions, refusals to permit importations,
partial or total shutdown of production facilities or the implementation of operating restrictions, narrowing of permitted uses
for a product, suspension or withdrawal of approvals and pre-market notification rescissions. We are also subject to various
laws regulating (1) fraud and abuse in the healthcare industry, and (2) the privacy and security of health information, including
the federal regulations described in “Item 1 - Business - Regulatory Matters.” Many states and foreign countries have also
adopted laws and regulations similar to, and in some cases more stringent than, such federal regulations. For more information
regarding these regulations please see “Item 1 - Business - Regulatory Matters.”
Failure to comply with the regulations described above could result in the adverse effects referenced below under “Our
businesses are subject to extensive regulation; failure to comply with those regulations could adversely affect our financial
statements and reputation.” Compliance with these and other regulations may also require us to incur significant expenses.
The healthcare industry and related industries that we serve have undergone, and are in the process of undergoing,
significant changes in an effort to reduce costs, which could adversely affect our financial statements.
The healthcare industry and related industries that we serve have undergone, and are in the process of undergoing, significant
changes in an effort to reduce costs, including the following:
• Many of our customers, and the end-users to whom our customers supply products, rely on government funding of and
reimbursement for healthcare products and services and research activities. The Patient Protection and Affordable
Care Act, as amended by the Health Care and Education Affordability Reconciliation Act (collectively, the “PPACA”),
healthcare austerity measures in Europe and other potential healthcare reform changes and government austerity
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measures may reduce the amount of government funding or reimbursement available to customers or end-users of our
products and services. Global economic uncertainty or deterioration can also adversely impact government funding
and reimbursement.
• Beginning in 2013, the PPACA imposes a 2.3% excise tax on any entity that manufactures or imports medical devices
offered for sale in the United States as well as new reporting and disclosure requirements on medical device
manufacturers.
• Governmental and private healthcare providers and payors around the world are increasingly utilizing managed care
for the delivery of healthcare services, forming group purchasing organizations to improve their purchasing leverage
and using competitive bid processes to procure healthcare products and services.
These changes may cause participants in the healthcare industry and related industries that we serve to purchase fewer of our
products and services, reduce the prices they are willing to pay for our products or services, reduce the amounts of
reimbursement and funding available for our products services from governmental agencies or third-party payors, reduce the
volume of medical procedures that use our products and services, increase our tax liabilities and increase our compliance and
other costs. In addition, we may be unable to enter into contracts with group purchasing organizations and integrated health
networks on terms acceptable to us, and even if we do enter into such contracts they may be on terms that negatively affect our
current or future profitability. All of the factors described above could adversely affect our financial statements.
Our operations, products and services expose us to the risk of environmental, health and safety liabilities, costs and
violations that could adversely affect our financial statements and reputation.
Our operations, products and services are subject to environmental laws and regulations, which impose limitations on the
discharge of pollutants into the environment and establish standards for the use, generation, treatment, storage and disposal of
hazardous and non-hazardous wastes. We must also comply with various health and safety regulations in the United States and
abroad in connection with our operations. We cannot assure you that our environmental, health and safety compliance program
has been or will at all times be effective. Failure to comply with any of these laws could result in civil and criminal, monetary
and non-monetary penalties and damage to our reputation. In addition, we cannot provide assurance that our costs of
complying with current or future environmental protection and health and safety laws will not exceed our estimates or
adversely affect our financial statements.
In addition, we may incur costs related to remedial efforts or alleged environmental damage associated with past or current
waste disposal practices or other hazardous materials handling practices. We are also from time to time party to personal injury
or other claims brought by private parties alleging injury due to the presence of or exposure to hazardous substances. We may
also become subject to additional remedial, compliance or personal injury costs due to future events such as changes in existing
laws or regulations, changes in agency direction or enforcement policies, developments in remediation technologies, changes in
the conduct of our operations and changes in accounting rules. For additional information regarding these risks, please refer to
“Item 1. Business - Regulatory Matters.” We cannot assure you that our liabilities arising from past or future releases of, or
exposures to, hazardous substances will not exceed our estimates or adversely affect our financial statements and reputation or
that we will not be subject to additional claims for personal injury or cleanup in the future based on our past, present or future
business activities. However, based on the information we currently have we do not believe that it is reasonably possible that
any amounts we may be required to pay in connection with environmental matters in excess of our reserves as of December 31,
2012 will have a material effect on our financial statements.
Our businesses are subject to extensive regulation; failure to comply with those regulations could adversely affect our
financial statements and reputation.
In addition to the anticorruption, environmental, health, safety, healthcare and medical device-related regulations noted above,
our businesses are subject to extensive regulation by U.S. and non-U.S. governmental and self-regulatory entities at the federal,
state and local levels, including the following:
• We are required to comply with various import laws and export control and economic sanctions laws, which may
affect our transactions with certain customers, business partners and other persons and dealings between our
employees and subsidiaries. In certain circumstances, export control and economic sanctions regulations may prohibit
the export of certain products, services and technologies. In other circumstances, we may be required to obtain an
export license before exporting the controlled item. Compliance with the various import laws that apply to our
businesses can restrict our access to, and increase the cost of obtaining, certain products and at times can interrupt our
supply of imported inventory.
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• We also have agreements to sell products and services to government entities and are subject to various statutes and
regulations that apply to companies doing business with the government. The laws governing government contracts
differ from the laws governing private contracts. For example, many government contracts contain pricing and other
terms and conditions that are not applicable to private contracts. Our agreements with government entities may be
subject to termination, reduction or modification at the convenience of the government or in the event of changes in
government requirements, reductions in federal spending and other factors, and we may underestimate our costs of
performing under the contract. Government contracts that have been awarded to us following a bid process could
become the subject of a bid protest by a losing bidder, which could result in loss of the contract. We are also subject to
investigation and audit for compliance with the requirements governing government contracts.
These are not the only regulations that our businesses must comply with. Failure to comply with these or any other regulations
could result in civil and criminal, monetary and non-monetary penalties, damage to our reputation, disruptions to our business,
limitations on our ability to manufacture, import, export and sell products and services, disbarment from selling to certain
federal agencies, damage to our reputation and loss of customers and could cause us to incur significant legal and investigatory
fees. Compliance with these and other regulations may also require us to incur significant expenses. Our products and
operations are also often subject to the rules of industrial standards bodies such as the ISO, and failure to comply with these
rules could result in withdrawal of certifications needed to sell our products and services and otherwise adversely impact our
financial statements. For additional information regarding these risks, please refer to “Item 1. Business - Regulatory Matters.”
We may be required to recognize impairment charges for our goodwill and other intangible assets.
As of December 31, 2012, the net carrying value of our goodwill and other intangible assets totaled approximately $21.8
billion. In accordance with generally accepted accounting principles, we periodically assess these assets to determine if they
are impaired. Significant negative industry or economic trends, disruptions to our business, inability to effectively integrate
acquired businesses, unexpected significant changes or planned changes in use of the assets, divestitures and market
capitalization declines may impair our goodwill and other intangible assets. Any charges relating to such impairments would
adversely affect our results of operations in the periods recognized.
Foreign currency exchange rates may adversely affect our financial statements.
Sales and purchases in currencies other than the U.S. dollar expose us to fluctuations in foreign currencies relative to the U.S.
dollar and may adversely affect our financial statements. Increased strength of the U.S. dollar will increase the effective price
of our products sold in U.S. dollars into other countries, which may require us to lower our prices or adversely affect sales to
the extent we do not increase local currency prices. Decreased strength of the U.S. dollar could adversely affect the cost of
materials, products and services purchased overseas. Sales and expenses of our non-U.S. businesses are also translated into
U.S. dollars for reporting purposes and the strengthening or weakening of the U.S. dollar could result in unfavorable translation
effects. In addition, certain of our businesses may invoice customers in a currency other than the business' functional currency,
and movements in the invoiced currency relative to the functional currency could also result in unfavorable translation effects.
The Company also faces exchange rate risk from its investments in subsidiaries owned and operated in foreign countries.
Changes in our tax rates or exposure to additional income tax liabilities could affect our profitability. In addition, audits by
tax authorities could result in additional tax payments for prior periods.
We are subject to income taxes in the U.S. and in various non-U.S. jurisdictions. Please see the MD&A for a discussion of the
factors that may adversely affect our effective tax rate and decrease our profitability in any period. The impact of these factors
may be substantially different from period to period. In addition, the amount of income taxes we pay is subject to ongoing
audits by U.S. federal, state and local tax authorities and by non-U.S. tax authorities. Due to the potential for changes to tax
law and the ambiguity of tax laws, the subjectivity of factual interpretations and other factors, our estimates of income tax
liabilities may differ from actual payments or assessments. If these audits result in payments or assessments different from our
reserves, our future results may include unfavorable adjustments to our tax liabilities. Intercompany transactions associated
with the sale or licensing of inventory, services and intellectual property are complex and can also affect our tax liabilities. In
addition, any significant change to the tax system in the United States or in other jurisdictions, including changes in the
taxation of international income, could adversely affect our financial statements.
We are subject to a variety of litigation and similar proceedings in the course of our business that could adversely affect our
financial statements.
We are subject to a variety of litigation and similar proceedings incidental to our business (or the business operations of
previously owned entities), including claims for damages arising out of the use of products or services and claims relating to
intellectual property matters, employment matters, tax matters, commercial disputes, competition and sales and trading
practices, environmental matters, personal injury, insurance coverage and acquisition or divestiture-related matters. These
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lawsuits may include claims for compensatory damages, punitive and consequential damages and/or injunctive relief. The
defense of these lawsuits may divert our management's attention, we may incur significant expenses in defending these
lawsuits, and we may be required to pay damage awards or settlements or become subject to equitable remedies that could
adversely affect our operations and financial statements. Moreover, any insurance or indemnification rights that we may have
may be insufficient or unavailable to protect us against such losses. In addition, developments in legal proceedings in any
given period may require us to adjust the loss contingency estimates that we have recorded in our financial statements, record
estimates for liabilities or assets previously not susceptible of reasonable estimates or pay cash settlements or judgments. Any
of these developments could adversely affect our financial statements in any particular period. We cannot assure you that our
liabilities in connection with litigation and similar proceedings will not exceed our estimates or adversely affect our financial
statements and reputation. However, based on the information we currently have we do not believe that it is reasonably
possible that any amounts we may be required to pay in connection with litigation and similar proceedings in excess of our
reserves as of December 31, 2012 will have a material effect on our financial statements.
If we do not or cannot adequately protect our intellectual property, or if third parties infringe our intellectual property
rights, we may suffer competitive injury or expend significant resources enforcing our rights.
We own numerous patents, trademarks, copyrights, trade secrets and other intellectual property and licenses to intellectual
property owned by others, which in aggregate are important to our business. The intellectual property rights that we obtain,
however, may not be sufficiently broad or otherwise may not provide us a significant competitive advantage, and patents may
not be issued for pending or future patent applications owned by or licensed to us. In addition, the steps that we and our
licensors have taken to maintain and protect our intellectual property may not prevent it from being challenged, invalidated,
circumvented or designed-around, particularly in countries where intellectual property rights are not highly developed or
protected. In some circumstances, enforcement may not be available to us because an infringer has a dominant intellectual
property position or for other business reasons, or countries may require compulsory licensing of our intellectual property. Our
failure to obtain or maintain intellectual property rights that convey competitive advantage, adequately protect our intellectual
property or detect or prevent circumvention or unauthorized use of such property and the cost of enforcing our intellectual
property rights could adversely impact our competitive position and financial statements.
We also rely on nondisclosure and noncompetition agreements with employees, consultants and other parties to protect, in part,
trade secrets and other proprietary rights. There can be no assurance that these agreements will adequately protect our trade
secrets and other proprietary rights and will not be breached, that we will have adequate remedies for any breach, that others
will not independently develop substantially equivalent proprietary information or that third parties will not otherwise gain
access to our trade secrets or other proprietary rights.
Third parties may claim that we are infringing or misappropriating their intellectual property rights and we could suffer
significant litigation expenses, losses or licensing expenses or be prevented from selling products or services.
From time to time, we receive notices from third parties alleging intellectual property infringement or misappropriation. Any
dispute or litigation regarding intellectual property could be costly and time-consuming due to the complexity of many of our
technologies and the uncertainty of intellectual property litigation. Our intellectual property portfolio may not be useful in
asserting a counterclaim, or negotiating a license, in response to a claim of infringement or misappropriation. In addition, as a
result of such claims of infringement or misappropriation, we could lose our rights to critical technology, be unable to license
critical technology or sell critical products and services, be required to pay substantial damages or license fees with respect to
the infringed rights or be required to redesign our products at substantial cost, any of which could adversely impact our
competitive position and financial statements. Even if we successfully defend against claims of infringement or
misappropriation, we may incur significant costs and diversion of management attention and resources, which could adversely
affect our financial statements.
Product defects and unanticipated use or inadequate disclosure with respect to our products could adversely affect our
business, reputation and financial statements.
Manufacturing or design defects in, unanticipated use of, safety or quality issues with respect to, or inadequate disclosure of
risks relating to the use of products that we make or sell (including in products or components that we source from third
parties) can lead to personal injury, death or property damage. These events could lead to recalls or safety alerts relating to our
products, result in the removal of a product from the market and result in product liability claims being brought against us.
Recalls, removals and product liability claims can result in significant costs, as well as negative publicity and damage to our
reputation that could reduce demand for our products.
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The manufacture of many of our products is a highly exacting and complex process, and if we directly or indirectly
encounter problems manufacturing products, our business could suffer.
The manufacture of many of our products is a highly exacting and complex process, due in part to strict regulatory
requirements. Problems may arise during manufacturing for a variety of reasons, including equipment malfunction, failure to
follow specific protocols and procedures, problems with raw materials, natural disasters and environmental factors, and if not
discovered before the product is released to market could result in recalls and product liability exposure. Because of the time
required to approve and license certain regulated manufacturing facilities, an alternative manufacturer may not be available on
a timely basis to replace such production capacity. Any of these manufacturing problems could result in significant costs and
liability, as well as negative publicity and damage to our reputation that could reduce demand for our products.
Our indebtedness may limit our operations and our use of our cash flow, and any failure to comply with the covenants that
apply to our indebtedness could adversely affect our liquidity and financial condition.
As of December 31, 2012, we had approximately $5.3 billion in outstanding indebtedness. In addition, based on the
availability under our credit facilities as of December 31, 2012, we had the ability to incur an additional $1.3 billion of
indebtedness in direct borrowings or under our outstanding commercial paper facilities. Our debt level and related debt service
obligations can have negative consequences, including (1) requiring us to dedicate significant cash flow from operations to the
payment of principal and interest on our debt, which reduces the funds we have available for other purposes such as
acquisitions and capital investment; (2) reducing our flexibility in planning for or reacting to changes in our business and
market conditions; and (3) exposing us to interest rate risk since a portion of our debt obligations are at variable rates. We may
incur significantly more debt in the future, particularly to finance acquisitions.
Our current revolving credit facility and long-term debt obligations also impose certain restrictions on us; for more information
please refer to the MD&A. If we breach any of these restrictions and do not obtain a waiver from the lenders, subject to
applicable cure periods the outstanding indebtedness (and any other indebtedness with cross-default provisions) could be
declared immediately due and payable, which would adversely affect our liquidity and financial condition. In addition, any
failure to maintain the credit ratings assigned to us by independent rating agencies would adversely affect our cost of funds and
could adversely affect our liquidity and access to the capital markets. If we add new debt, the risks described above could
increase.
Adverse changes in our relationships with, or the financial condition, performance or purchasing patterns of, key
distributors and other channel partners could adversely affect our financial statements.
Certain of our businesses sell a significant amount of their products to key distributors and other channel partners that have
valuable relationships with customers and end-users. Some of these distributors and other partners also sell our competitors'
products, and if they favor our competitors' products for any reason they may fail to market our products effectively. Adverse
changes in our relationships with these distributors and other partners, or adverse developments in their financial condition,
performance or purchasing patterns, could adversely affect our financial statements. The levels of inventory maintained by our
distributors and other channel partners, and changes in those levels, can also significantly impact our results of operations in
any given period. In addition, the consolidation of distributors in certain of our served industries, as well as the formation of
large and sophisticated purchasing groups in industries such as healthcare, could adversely impact our profitability.
Our financial results are subject to fluctuations in the cost and availability of commodities that we use in our operations.
As discussed in “Item 1. Business - Materials,” our manufacturing and other operations employ a wide variety of components,
raw materials and other commodities. Prices for and availability of these components, raw materials and other commodities
have fluctuated significantly in the past. Any sustained interruption in the supply of these items could adversely affect our
business. In addition, due to the highly competitive nature of the industries that we serve, the cost-containment efforts of our
customers and the terms of certain contracts we are party to, if commodity prices rise we may be unable to pass along cost
increases through higher prices. If we are unable to fully recover higher commodity costs through price increases or offset
these increases through cost reductions, or if there is a time delay between the increase in costs and our ability to recover or
offset these costs, we could experience lower margins and profitability and our financial statements could be adversely affected.
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If we cannot adjust our manufacturing capacity or the purchases required for our manufacturing activities to reflect
changes in market conditions and customer demand, our profitability may suffer. In addition, our reliance upon sole
sources of supply for certain materials and components could cause production interruptions, delays and inefficiencies.
We purchase materials, components and equipment from third parties for use in our manufacturing operations. Our income
could be adversely impacted if we are unable to adjust our purchases to reflect changes in customer demand and market
fluctuations, including those caused by seasonality or cyclicality. During a market upturn, suppliers may extend lead times,
limit supplies or increase prices. If we cannot purchase sufficient products at competitive prices and quality and on a timely
enough basis to meet increasing demand, we may not be able to satisfy market demand, product shipments may be delayed or
our costs may increase. Conversely, in order to secure supplies for the production of products, we sometimes enter into non-
cancelable purchase commitments with vendors, which could impact our ability to adjust our inventory to reflect declining
market demands. If demand for our products is less than we expect, we may experience additional excess and obsolete
inventories and be forced to incur additional charges and our profitability may suffer.
In addition, some of our businesses purchase certain requirements from sole or limited source suppliers for reasons of quality
assurance, cost effectiveness, availability or uniqueness of design. If these or other suppliers encounter financial, operating or
other difficulties or if our relationship with them changes, we might not be able to quickly establish or qualify replacement
sources of supply. The supply chains for our businesses could also be disrupted by supplier capacity constraints, decreased
availability of key raw materials or commodities and external events such as natural disasters, pandemic health issues, terrorist
actions, governmental actions and legislative or regulatory changes. Any of these factors could result in production
interruptions, delays, extended lead times and inefficiencies.
Because we cannot always immediately adapt our production capacity and related cost structures to changing market
conditions, our manufacturing capacity may at times exceed or fall short of our production requirements. Any or all of these
problems could result in the loss of customers, provide an opportunity for competing products to gain market acceptance and
otherwise adversely affect our profitability.
Changes in governmental regulations may reduce demand for our products or increase our expenses.
We compete in markets in which we or our customers must comply with federal, state, local and foreign regulations, such as
regulations governing health and safety, the environment, food and drugs, privacy and electronic communications. We develop,
configure and market our products to meet customer needs created by these regulations. These regulations are complex, change
frequently and have tended to become more stringent over time. Any significant change in any of these regulations could
reduce demand for our products or increase our costs of producing these products. In addition, in certain of our markets our
growth depends in part upon the introduction of new regulations. In these markets, the delay or failure of governmental and
other entities to adopt or enforce new regulations, or the adoption of new regulations which our products and services are not
positioned to address, could adversely affect demand for our products. In addition, regulatory deadlines may result in
substantially different levels of demand for our products and services from period to period.
Work stoppages, union and works council campaigns and other labor disputes could adversely impact our productivity and
results of operations.
We have a number of U.S. collective bargaining units and various non-U.S. collective labor arrangements. We are subject to
potential work stoppages, union and works council campaigns and other labor disputes, any of which could adversely impact
our productivity and results of operations.
International economic, political, legal and business factors could negatively affect our financial statements.
In 2012, approximately 57% of our sales were derived from customers outside the United States. In addition, many of our
manufacturing operations, suppliers and employees are located outside the United States. Since our growth strategy depends in
part on our ability to further penetrate markets outside the United States and increase the localization of our products and
services, we expect to continue to increase our sales and presence outside the United States, particularly in high-growth
markets, such as China, India, Brazil and the Middle East. Our international business (and particularly our business in
emerging markets) is subject to risks that are customarily encountered in non-U.S. operations, including:
•
•
•
interruption in the transportation of materials to us and finished goods to our customers;
differences in terms of sale, including payment terms;
local product preferences and product requirements;
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•
•
•
•
•
•
•
•
•
•
•
changes in a country's or region's political or economic conditions (including safety and health issues and actual or
anticipated default on sovereign debt);
trade protection measures and import or export restrictions and requirements;
unexpected changes in laws or regulatory requirements, including negative changes in tax laws;
limitations on ownership and on repatriation of earnings and cash;
the potential for nationalization of enterprises;
changes in medical reimbursement policies and programs;
limitations on legal rights and our ability to enforce such rights;
difficulty in staffing and managing widespread operations;
differing labor regulations;
difficulties in implementing restructuring actions on a timely or comprehensive basis; and
differing protection of intellectual property.
Any of these risks could negatively affect our financial statements and growth.
If we suffer loss to our facilities, supply chains, distribution systems or information technology systems due to catastrophe
or other events, our operations could be seriously harmed.
Our facilities, supply chains, distribution systems and information technology systems are subject to catastrophic loss due to
fire, flood, earthquake, hurricane, terrorism or other natural or man-made disasters. If any of these facilities, supply chains or
systems were to experience a catastrophic loss, it could disrupt our operations, delay production and shipments, result in
defective products or services, damage customer relationships and our reputation and result in legal exposure and large repair
or replacement expenses. The third-party insurance coverage that we maintain with respect to these and other risks will vary
from time to time in both type and amount depending on cost, availability and our decisions regarding risk retention, and may
be insufficient or unavailable to protect us against losses.
A significant disruption in, or breach in security of, our information technology systems could adversely affect our business.
We rely on information technology systems, some of which are managed by third parties, to process, transmit and store
electronic information, and to manage or support a variety of critical business processes and activities. We also collect and
store sensitive data, including confidential business information and personal data. These systems may be susceptible to
damage, disruptions or shutdowns due to attacks by computer hackers, computer viruses, employee error or malfeasance,
power outages, hardware failures, telecommunication or utility failures, catastrophes or other unforeseen events. In addition,
security breaches of our systems could result in the misappropriation or unauthorized disclosure of confidential information or
personal data belonging to us or to our employees, partners, customers or suppliers. Any such events could disrupt our
operations, delay production and shipments, result in defective products or services, damage customer relationships and our
reputation and result in legal claims or proceedings, liability or penalties under privacy laws, each of which could adversely
affect our business and our financial statements.
Our defined benefit pension plans are subject to financial market risks that could adversely affect our financial statements.
The performance of the financial markets and interest rates impact our defined benefit pension plan expenses and funding
obligations. Significant changes in market interest rates, decreases in the fair value of plan assets, investment losses on plan
assets and changes in discount rates may increase our funding obligations and adversely impact our financial statements.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable.
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ITEM 2. PROPERTIES
Our corporate headquarters are located in Washington, D.C. in a facility that we lease. At December 31, 2012, we had
approximately 242 significant manufacturing and distribution facilities worldwide. 125 of these facilities are located in the
United States in over 40 states and 117 are located outside the United States in over 50 other countries, primarily in Europe and
to a lesser extent in Asia, the rest of North America, South America and Australia. These facilities cover approximately
23.6 million square feet, of which approximately 13.7 million square feet are owned and approximately 9.9 million square feet
are leased. Particularly outside the United States, facilities often serve more than one business segment and may be used for
multiple purposes, such as administration, sales, manufacturing, warehousing and/or distribution. The number of significant
facilities by business segment is:
• Test & Measurement, 40;
• Environmental, 42;
• Life Sciences & Diagnostics, 74;
• Dental, 29; and
•
Industrial Technologies, 57.
We consider our facilities suitable and adequate for the purposes for which they are used and do not anticipate difficulty in
renewing existing leases as they expire or in finding alternative facilities. We believe our properties and equipment have been
well-maintained. Please refer to Note 15 in the Consolidated Financial Statements included in this Annual Report for
additional information with respect to our lease commitments.
ITEM 3. LEGAL PROCEEDINGS
Not applicable.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
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EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below are the names, ages, positions and experience of our executive officers as of February 11, 2013. All of our
executive officers hold office at the pleasure of our Board of Directors. Unless otherwise stated, the positions indicated are
Danaher positions.
Name
Age
Position
Officer Since
Steven M. Rales
Mitchell P. Rales
H. Lawrence Culp, Jr.
Daniel L. Comas
William K. Daniel II
Thomas P. Joyce, Jr.
James A. Lico
James H. Ditkoff
Jonathan P. Graham
Angela S. Lalor
Robert S. Lutz
Daniel A. Raskas
61
56
49
49
48
52
47
66
52
47
55
46
Chairman of the Board
Chairman of the Executive Committee
Chief Executive Officer and President
Executive Vice President and Chief Financial Officer
Executive Vice President
Executive Vice President
Executive Vice President
Senior Vice President – Finance and Tax
Senior Vice President – General Counsel
Senior Vice President – Human Resources
Senior Vice President – Chief Accounting Officer
Senior Vice President – Corporate Development
1984
1984
1995
1996
2006
2002
2002
1991
2006
2012
2002
2004
Steven M. Rales is a co-founder of Danaher and has served on Danaher’s Board of Directors since 1983, serving as Danaher’s
Chairman of the Board since 1984. He was also CEO of the Company from 1984 to 1990. In addition, for more than the past
five years he has been a principal in a private business entity in the area of film production. Mr. Rales is a brother of Mitchell
P. Rales.
Mitchell P. Rales is a co-founder of Danaher and has served on Danaher’s Board of Directors since 1983, serving as Chairman
of the Executive Committee of Danaher since 1984. He was also President of the Company from 1984 to 1990. In addition,
for more than the past five years he has been a principal in private and public business entities in the manufacturing area.
Mr. Rales is also a member of the board of directors of Colfax Corporation, and is a brother of Steven M. Rales.
H. Lawrence Culp, Jr. has served on Danaher’s Board of Directors and as Danaher’s President and Chief Executive Officer
since May 2001.
Daniel L. Comas has served as Executive Vice President and Chief Financial Officer since 2005.
William K. Daniel II served as Vice President and Group Executive from 2006 until July 2008 and has served as Executive
Vice President since July 2008.
Thomas P. Joyce, Jr. has served as Executive Vice President since 2006.
James A. Lico has served as Executive Vice President since 2005.
James H. Ditkoff has served as Senior Vice President – Finance and Tax since 2002.
Jonathan P. Graham has served as Senior Vice President – General Counsel since 2006.
Angela S. Lalor has served as Senior Vice President – Human Resources since April 2012. Prior to joining Danaher,
Ms. Lalor served for 22 years in a series of progressively more responsible positions in the human resources department of 3M
Company, including most recently as Senior Vice President, Human Resources.
Robert S. Lutz served as Vice President – Chief Accounting Officer from March 2003 to February 2010 and has served as
Senior Vice President – Chief Accounting Officer since February 2010.
Daniel A. Raskas joined Danaher as Vice President – Corporate Development in November 2004 and has served as Senior Vice
President – Corporate Development since February 2010.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
Our common stock is traded on the New York Stock Exchange under the symbol DHR. As of February 11, 2013, there were
approximately 3,608 holders of record of our common stock. The high and low common stock prices per share as reported on
the New York Stock Exchange, and the dividends paid per share, in each case for the periods described below, were as follows:
First quarter
Second quarter
Third quarter
Fourth quarter
High
55.92
55.99
55.61
56.80
$
$
$
$
$
$
$
$
2012
Low
Dividends
Per Share
High
2011
Low
Dividends
Per Share
48.24
49.75
49.48
51.39
$
$
$
$
0.025
0.025
0.025
0.050
$
$
$
$
52.52
55.72
55.02
50.86
$
$
$
$
45.99
51.11
40.52
40.42
$
$
$
$
0.020
0.020
0.025
0.025
Our payment of dividends in the future will be determined by our Board of Directors and will depend on business conditions,
our earnings and other factors.
Issuer Purchases of Equity Securities
The Company's repurchases of its equity securities during the fourth quarter of 2012 are listed in the following table:
Total Number of
Shares Purchased
as
Part of Publicly
Announced Plans
or
Programs (1)
—
6,760,832
743,323
7,504,155
Maximum
Number
of Shares that
May Yet Be
Purchased
Under The
Plans
or Programs (1)
15,022,690
8,261,858
7,518,535
Total Number
of Shares
Purchased
Average
Price Paid
per Share
— $
6,760,832
743,323
7,504,155
$
$
$
—
51.92
52.36
51.97
Period
September 29, 2012 - October 28, 2012
October 29, 2012 - November 28, 2012
November 29, 2012 - December 31, 2012
Total
(1)
On May 11, 2010, the Company's Board of Directors authorized 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 Company's repurchase program. The timing and
amount of any shares repurchased 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.
Recent Issuances of Unregistered Securities
During the fourth quarter of 2012, holders of certain of the Company’s Liquid Yield Option Notes (“LYONs”) converted such
LYONs into an aggregate of 458,372 shares of Danaher common stock, par value $0.01 per share. In each case, the shares of
common stock were issued solely to existing security holders upon conversion of the LYONs pursuant to the exemption from
registration provided under Section 3(a)(9) of the Securities Act of 1933, as amended.
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Stock Split
On May 11, 2010, the Company’s Board of Directors approved a two-for-one stock split (effected in the form of a dividend by
issuing one additional share of common stock for each issued share of common stock) which was paid on June 10, 2010 to
stockholders of record at the close of business on May 25, 2010. All prior period share and per share amounts set forth in this
report, including earnings per share, dividends per share and the weighted average number of shares outstanding for basic and
diluted earnings per share for each respective period, have been adjusted to reflect the stock split.
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ITEM 6. SELECTED FINANCIAL DATA
($ in millions, except per share information)
Sales
Operating profit
Net earnings from continuing
operations
Earnings from discontinued
operations, net of income
taxes
Net earnings
Net earnings per share from
continuing operations:
Basic
Diluted
Net earnings per share from
discontinued operations:
Basic
Diluted
Net earnings per share:
Basic
Diluted
Dividends per share
Total assets
Total debt
$
$
$
$
$
$
$
2012
18,260.4
3,165.1
$
2011
16,090.5
2,617.2
$
2010
12,550.0
2,049.6
$
2009
10,516.7
1,439.7
$
2008
11,980.6
1,758.1
2,299.3
1,935.3
1,718.2 (c)
1,087.0
1,248.2
92.9 (a)
2,392.2 (a)
237.0 (b)
2,172.3 (b)
74.8
1,793.0 (c)
64.7
1,151.7
69.4
1,317.6
3.32
3.23
$
2.86
$
2.77
2.63 (c) $
2.53 (c)
1.69
$
1.63
0.13 (a) $
0.13 (a)
0.35 (b) $
0.34 (b)
0.11
$
0.10
$
0.11
0.10
3.45 (a) $
3.36 (a)
0.13
$
3.21 (b)
3.11 (b)
0.09
32,941.0
5,343.1
$
$
29,949.5
5,305.2
$
$
$
2.74 (c) $
2.64 (c)
0.08
$
1.80 * $
1.73
0.06
22,217.1
2,824.7
$
$
19,595.4
2,933.2
1.95
1.87
0.11
0.10
2.06
1.98 *
0.06
17,490.1
2,619.3
$
$
$
(a)
(b)
(c)
Includes $149 million ($94 million after-tax or $0.13 per diluted share) gain on sale of the Company’s Accu-Sort and
Kollmorgen Electro-Optical businesses. Refer to Note 3 of the Notes to the Consolidated Financial Statements for
additional information.
Includes $328 million ($202 million after-tax or $0.29 per diluted share) gain on sale of the Company’s Pacific Scientific
Aerospace business. Refer to Note 3 of the Notes to the Consolidated Financial Statements for additional information.
Includes $291 million ($232 million after-tax or $0.34 per diluted share) gain on contribution of certain of the Company’s
hand tools businesses to the Apex Tool Group, LLC joint venture. Refer to Note 4 of the Notes to the Consolidated
Financial Statements for additional information.
* Net earnings per share amounts do not add due to rounding.
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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is designed to provide a
reader of Danaher’s financial statements with a narrative from the perspective of Company management. The Company’s
MD&A is divided into five main sections:
• Overview
• Results of Operations
• Liquidity and Capital Resources
• Critical Accounting Estimates
• New Accounting Standards
OVERVIEW
General
Please see “Item 1. Business – General” for a discussion of Danaher’s objectives and methodologies for delivering shareholder
value. Danaher is a multinational corporation with global operations. During 2012, approximately 57% of Danaher’s sales
were derived from customers outside the United States. As a diversified, global business, Danaher’s operations are affected by
worldwide, regional and industry-specific economic and political factors. Danaher’s geographic and industry diversity, as well
as the range of its products and services, typically helps limit the impact of any one industry or the economy of any single
country on the consolidated operating results. Given the broad range of products manufactured, services provided and
geographies served, management does not use any indices other than general economic trends to predict the overall outlook for
the Company. The Company’s individual businesses monitor key competitors and customers, including to the extent possible
their sales, to gauge relative performance and the outlook for the future.
As a result of the Company’s geographic and industry diversity, the Company faces a variety of opportunities and challenges,
including rapid technological development in most of the Company’s served markets, the expansion of opportunities in
emerging markets (also referred to in this report as "high-growth markets"), trends toward increased utilization of the global
labor force, consolidation of the Company’s competitors and increasing regulation. The Company defines high-growth markets
as developing markets of the world experiencing rapid growth in gross domestic product and infrastructure which includes
Eastern Europe, the Middle East, Africa, Latin America and Asia with the exception of Japan and Australia. The Company
operates in a highly competitive business environment in most markets, and the Company’s long-term growth and profitability
will depend in particular on its ability to expand its business in high-growth geographies and high-growth product segments,
identify, consummate and integrate appropriate acquisitions, develop innovative and differentiated new products and services
with higher gross profit margins, expand and improve the effectiveness of the Company’s sales force, continue to reduce costs
and improve operating efficiency and quality, and effectively address the demands of an increasingly regulated environment.
The Company is making significant investments, organically and through acquisitions, to address the rapid pace of
technological change in its served markets and to globalize its manufacturing, research and development and customer-facing
resources (particularly in high-growth markets) in order to be responsive to the Company’s customers throughout the world and
improve the efficiency of the Company’s operations.
Business Performance and Outlook
While differences exist among the Company’s businesses, on an overall basis, demand for the Company’s products and services
increased in 2012 as compared to 2011 resulting in aggregate year-over-year sales growth from existing businesses. In
addition, the Company’s previous investment in sales growth initiatives and the other business-specific factors discussed below
contributed to year-over-year sales growth. Geographically, year-over-year sales growth rates from existing businesses during
2012 were led primarily by the high-growth markets. Sales in high-growth markets grew at a high-single digit rate in 2012
compared to 2011 and represented approximately 25% of the Company's total sales in 2012. Sales growth rates in developed
markets grew at a low-single digit rate compared to 2011 and were led by North America which grew at a low-single digit rate
in 2012, partially offset by modest year-over-year contraction in Western Europe and Japan. Providing no significant
deterioration in general economic conditions occurs, the Company expects sales from existing businesses to continue to grow
on a year-over-year basis during 2013 with sales growth returning to the Test & Measurement segment and the other segments
growing at rates experienced in 2012.
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The acquisition of Beckman Coulter, Inc. (“Beckman Coulter”) in June 2011 has provided additional sales and earnings growth
opportunities for the Company’s Life Sciences and Diagnostics segment by expanding the businesses’ geographic and product
line breadth, including new and complementary product and service offerings in the areas of clinical diagnostics and life
sciences research, and through the potential acquisition of complementary businesses. As Beckman Coulter continues to be
integrated into the Company, the Company is also realizing significant cost synergies through the application of the Danaher
Business System and the combined purchasing power of the Company and Beckman Coulter. For a discussion of the
acquisition’s impact on the Company and segment results, refer to the “Results of Operations” section of this MD&A.
Restructuring Activities
In light of the continuing uncertainties in the macro-economic environment and consistent with the Company's approach of
positioning itself to provide superior products and services to its customers in a cost efficient manner, in July 2012, Danaher's
Board of Directors (the "Board") committed to a plan to implement further cost reductions in the Company's businesses. The
plan, which was substantially completed by December 31, 2012, resulted in pre-tax charges of $123 million, the majority of
which was incurred in the fourth quarter of 2012. The charges, including both employee-related termination costs as well as
other termination and exit costs, are expected to result in annualized savings of approximately $90 million in 2013 compared to
2012 expense levels.
In addition, the Company incurred $179 million of costs associated with restructuring activities in 2011, including costs
associated with the integration and restructuring of the Beckman Coulter business subsequent to the acquisition. Excluding
Beckman Coulter, the 2011 restructuring activities resulted in savings of approximately $100 million in 2012 compared to 2011
expense levels.
Acquisitions
During 2012, the Company acquired fourteen businesses for total consideration of $1.8 billion in cash, net of cash acquired.
The businesses acquired complement existing units of each of the Company's five segments. The aggregate annual sales of the
fourteen businesses acquired at the time of their respective acquisitions, in each case based on the company’s revenues for its
last completed fiscal year prior to the acquisition, were $666 million.
On June 30, 2011, following the successful completion of the Company’s tender offer for all of the outstanding shares of
common stock of Beckman Coulter, the Company completed the acquisition of Beckman Coulter for total cash consideration of
$5.5 billion (net of cash acquired) and the assumption of $1.6 billion in indebtedness of Beckman Coulter. Beckman Coulter
had revenues of $3.7 billion in 2010, and is included in the Company’s Life Sciences & Diagnostics segment.
For a full discussion of the Company’s 2011 and 2010 acquisition activity, refer to “Liquidity and Capital Resources —
Investing Activities”.
Divestitures
In January 2012, the Company completed the sale of its integrated scanning system business (the Accu-Sort ("ASI") business)
for a sale price of $132 million in cash. In addition, in February 2012, the Company completed the sale of its Kollmorgen
Electro-Optical ("KEO") business for a sale price of $205 million in cash. These businesses were part of the Industrial
Technologies segment. The businesses had combined annual revenues of $275 million in 2011. The Company recorded an
aggregate after-tax gain on the sale of these businesses of $94 million or $0.13 per diluted share in its first quarter 2012 results
in connection with the closing of these transactions.
In April 2011, the Company completed the divestiture of its Pacific Scientific Aerospace (“PSA”) business for a sale price of
$680 million in cash. This business, which was also part of the Industrial Technologies segment had annual revenues of $377
million in 2010. The Company recorded an after-tax gain on the sale of PSA of $202 million or $0.29 per diluted share in its
second quarter 2011 results in connection with the closing of the transaction.
The Company has reported the ASI, KEO and PSA businesses as discontinued operations in its consolidated financial
statements. Accordingly, the results of operations for all periods presented reflect these businesses as discontinued operations
and the assets and liabilities of these businesses have been classified as held for sale for all periods presented.
Sale of Investment in Joint Venture
During 2010, the Company entered into a joint venture with Cooper Industries, plc (“Cooper”), combining certain of the
Company’s hand tool businesses with Cooper’s Tools business to form a new entity called Apex Tool Group, LLC (“Apex”). In
February 2013, the Company and Cooper sold Apex to an unrelated third party for approximately $1.6 billion. The Company
expects to realize after-tax net proceeds of approximately $650 million and recognize an after-tax gain of approximately $138
million or $0.19 per diluted share from the sale in the first quarter of 2013.
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RESULTS OF OPERATIONS
Consolidated sales for the year ended December 31, 2012 increased 13.5% compared to 2011. Sales from existing businesses
contributed 2.5% growth and sales from acquired businesses contributed 13.0% growth on a year-over-year basis. The impact
of currency translation decreased sales by 2.0% as the U.S. dollar was, on average, stronger against other major currencies
during 2012 as compared to exchange rate levels during 2011.
In this report, references to sales from existing businesses refers to sales from continuing operations calculated according to
generally accepted accounting principles in the United States (“GAAP”) but excluding (1) sales from acquired businesses,
(2) 2010 sales attributable to the businesses contributed to the Apex joint venture, and (3) the impact of currency translation.
References to sales or operating profit attributable to acquisitions or acquired businesses refer to GAAP sales or operating
profit, as applicable, from acquired businesses recorded prior to the first anniversary of the acquisition less the impact from the
2012 divestiture of certain Beckman Coulter product lines, the sales from which (prior to the divestiture) were included in sales
from acquired businesses. The portion of revenue attributable to currency translation is calculated as the difference between
(a) the period-to-period change in revenue (excluding sales from acquired businesses and 2010 sales attributable to the
businesses contributed to the Apex joint venture) and (b) the period-to-period change in revenue (excluding sales from acquired
businesses and 2010 sales attributable to the businesses contributed to the Apex joint venture) after applying current period
foreign exchange rates to the prior year period. Sales from existing businesses should be considered in addition to, and not as a
replacement for or superior to, sales, and may not be comparable to similarly titled measures reported by other companies.
Management believes that reporting the non-GAAP financial measure of sales from existing businesses provides useful
information to investors by helping identify underlying growth trends in our business and facilitating easier comparisons of our
revenue performance with prior and future periods and to our peers. The Company excludes the effect of currency translation
from sales from existing businesses because currency translation is not under management’s control, is subject to volatility and
can obscure underlying business trends, and excludes the effect of acquisitions and related items because the nature, size and
number of acquisitions can vary dramatically from period to period and between the Company and its peers and can also
obscure underlying business trends and make comparisons of long-term performance difficult. The Company excludes the
effect of the 2010 sales attributable to the businesses contributed to the Apex joint venture because the Company did not
recognize sales from those businesses in any period subsequent to the formation of the joint venture. References to sales
volume refer to the impact of both price and unit sales.
Operating profit margins were 17.3% for the year ended December 31, 2012 compared to 16.3% in 2011. Year-over-year
operating profit margin comparisons benefited 100 basis points from the favorable impact of higher sales volumes and
incremental year-over-year cost savings associated with ongoing productivity improvement initiatives including the
restructuring actions taken in 2012 and 2011, net of incremental year-over-year costs associated with various sales, marketing
and product development growth investments. In addition, acquisition related charges recorded in 2011 associated with the
Beckman Coulter acquisition, including transaction costs deemed significant, change in control charges and fair value
adjustments to acquisition related inventory and deferred revenue balances favorably impacted year-over-year operating profit
margin comparisons by 100 basis points. During 2012, the Company also recognized a gain relating to the resolution of
contingencies with respect to a prior disposition of assets which favorably impacted operating profit margin comparisons by 5
basis points. The dilutive effect of acquisitions adversely impacted operating profit margin comparisons by 105 basis points
and partially offset these positive factors.
Operating profit margins were 16.3% for each of the years ended December 31, 2011 and 2010. Year-over-year operating profit
margin comparisons benefited 160 basis points from the favorable impact of higher sales volumes and ongoing productivity
improvements net of the impact of costs associated with various sales, marketing and product development growth investments.
The dilutive effect of acquisitions (net of the favorable impact to operating profit margin of contributing certain businesses to
the Apex joint venture in July 2010) adversely impacted operating margin comparisons by 110 basis points. In addition,
acquisition related charges associated with the Beckman Coulter acquisition, including transaction costs deemed significant,
change in control charges and fair value adjustments to acquisition related inventory and deferred revenue balances (net of
comparable acquisition related charges in 2010) adversely impacted year-over-year operating profit margin comparisons by 50
basis points.
The Company deems acquisition-related transaction costs incurred in a given period to be significant (generally relating to the
Company’s larger acquisitions) if it determines that such costs exceed the range of acquisition-related transaction costs typical
for the Company in a given period.
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Business Segments
The following table summarizes sales by business segment for each of the periods indicated ($ in millions):
Test & Measurement
Environmental
Life Sciences & Diagnostics
Dental
Industrial Technologies
Businesses contributed to Apex joint venture
Total
TEST & MEASUREMENT
For the Year Ended December 31
2012
2011
2010
$
3,381.0
$
3,390.9
$
3,063.5
6,485.1
2,022.9
3,307.9
—
2,939.6
4,627.4
2,011.2
3,121.4
—
2,832.9
2,738.0
2,298.3
1,824.6
2,540.6
315.6
$
18,260.4
$
16,090.5
$
12,550.0
The Company’s Test & Measurement segment is a leading global provider of electronic measurement instruments and
monitoring, management and optimization tools for communications and enterprise networks and related services. The
segment’s products are used in the design, development, manufacture, installation, deployment and operation of electronics
equipment and communications networks and services. Customers for these products and services include manufacturers of
electronic instruments; service, installation and maintenance professionals; manufacturers who design, develop, manufacture
and install network equipment; and service providers who implement, maintain and manage communications networks and
services. Also included in the Test & Measurement segment are the Company’s mobile tool and wheel service businesses.
Test & Measurement Selected Financial Data ($ in millions)
Sales
Operating profit
Depreciation and amortization
Restructuring and other related charges
Operating profit as a % of sales
Depreciation and amortization as a % of sales
Restructuring and other related charges as a % of sales
Components of Sales Growth
Existing businesses
Acquisitions
Currency exchange rates
Total
2012 COMPARED TO 2011
For the Year Ended December 31
2012
3,381.0
$
2011
3,390.9
$
2010
2,832.9
$
701.2
132.3
22.2
20.7%
3.9%
0.7%
751.2
126.6
18.8
22.2%
3.7%
0.6%
572.9
107.8
—
20.2%
3.8%
—
2012 vs. 2011
2011 vs. 2010
(1.5)%
2.0 %
(1.0)%
(0.5)%
9.5%
8.0%
2.0%
19.5%
Price increases in the segment contributed 0.5% to sales growth on a year-over-year basis during 2012 as compared to 2011 and
are reflected as a component of the change in sales from existing businesses.
Sales in the segment's instrument businesses declined at a high-single digit rate during 2012 as compared to 2011, as lower
demand for most product categories more than offset modest sales increases of service solutions. Instrument demand was weak
in all major geographies although the North American market showed improvement in the fourth quarter of 2012 compared to
the results reported during the first nine months of 2012. Europe and Japan continued to remain weak in the fourth quarter of
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2012.
Sales in the segment's communications businesses grew at a high-single digit rate during 2012 compared to 2011 with strong
growth in North America and Western Europe in the first six months of 2012 moderating in the second half of 2012 due
primarily to project timing and difficult prior year comparisons. Demand for network management solutions and, to a lesser
extent, core network enterprise solutions drove the 2012 growth.
Operating profit margins declined 150 basis points during 2012 as compared to 2011. Year-over-year operating profit margin
comparisons were adversely impacted by 120 basis points as lower instrument sales volumes and incremental year-over-year
costs associated with various sales, marketing and product development growth investments more than offset the favorable
impacts of increased sales volumes of higher operating profit margin communication business products and incremental year-
over-year cost savings associated with ongoing productivity improvement initiatives, including the restructuring actions taken
in 2012 and 2011. The dilutive effect of acquired businesses adversely impacted year-over-year operating profit margin
comparisons by 30 basis points.
2011 COMPARED TO 2010
Year-over-year price increases in the segment had a negligible impact on sales growth during 2011.
During 2011, sales in the segment’s instrument businesses grew on a year-over-year basis due to increased demand for
oscilloscopes and service and installation tools, partially offset by year-over-year declines in sales attributable to products
serving the video end markets. Instrument sales grew in all major geographies during the year led by Asia and other high-
growth markets. Instrument sales grew primarily during the first three quarters of 2011 as fourth quarter 2011 sales were
essentially flat compared to 2010.
Sales in the segment’s communications businesses also grew during 2011 on a year-over-year basis, primarily in North
America, as a result of strong demand for both network management solutions and core network enterprise solutions. Global
demand for network security and analysis solutions was also robust in 2011.
Operating profit margins increased 200 basis points during 2011 as compared to 2010. Year-over-year operating profit margin
comparisons benefited 220 basis points from the favorable impact of higher sales volumes and ongoing productivity
improvements net of the impact of costs associated with various sales, marketing and product development growth investments.
The dilutive effect of acquired businesses adversely impacted year-over-year operating profit margin comparisons by 20 basis
points.
ENVIRONMENTAL
The Company’s Environmental segment provides products that help protect customers’ water supply and air quality and serves
two primary markets: water quality and retail/commercial petroleum. Danaher’s water quality business is a global leader in
water quality analysis and treatment, providing instrumentation and disinfection systems to help analyze and manage the
quality of ultra pure water, potable water, wastewater, groundwater and ocean water in residential, commercial, industrial and
natural resource applications. Danaher’s retail/commercial petroleum business is a leading worldwide provider of products and
services for the retail/commercial petroleum market including vapor recovery equipment and leak detection systems.
Environmental Selected Financial Data ($ in millions)
Sales
Operating profit
Depreciation and amortization
Restructuring and other related charges
Operating profit as a % of sales
Depreciation and amortization as a % of sales
Restructuring and other related charges as a % of sales
For the Year Ended December 31
2012
3,063.5
$
2011
2,939.6
$
2010
2,738.0
$
652.5
48.9
8.0
21.3%
1.6%
0.3%
622.7
45.9
7.5
21.2%
1.6%
0.3%
564.3
45.9
—
20.6%
1.7%
—
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Components of Sales Growth
Existing businesses
Acquisitions
Currency exchange rates
Total
2012 COMPARED TO 2011
2012 vs. 2011
2011 vs. 2010
3.5 %
2.5 %
(2.0)%
4.0 %
4.0%
1.5%
2.0%
7.5%
Price increases in the segment contributed 1.5% to sales growth on a year-over-year basis during 2012 compared with 2011 and
are reflected as a component of the change in sales from existing businesses.
Sales from existing businesses in the segment’s water quality businesses grew at a low-single digit rate during 2012 compared
to 2011. Sales growth was driven by increased demand for the businesses' laboratory and process instruments, consumables
and related service primarily in the high-growth markets (other than China) and the North American industrial market. This
growth was partially moderated by flat year-over-year demand in China and Western Europe. Sales in the business' chemical
treatment solutions product line grew at a low-double digit rate on a year-over-year basis due primarily to the addition of new
customers in the U.S. market and to a lesser extent continued international expansion. Sales in the business' ultraviolet water
disinfection product line declined during the year due primarily to lower 2012 demand from municipal end markets.
Sales from existing businesses in the segment's retail petroleum equipment businesses grew at a mid-single digit rate during
2012 compared to 2011. Increased demand for the business' dispensing equipment and associated services in North America
were partially offset by contraction in Western Europe as demand for retail and payment systems declined from 2011's level.
Demand for most major product categories was strong in high-growth markets, especially Latin America, Russia and the
Middle East.
Operating profit margins increased 10 basis points during 2012 as compared to 2011. Year-over-year operating profit margin
comparisons benefited 70 basis points from the favorable impact of higher sales volumes and incremental year-over-year cost
savings associated with ongoing productivity improvement initiatives, including the restructuring actions taken in 2012 and
2011, offsetting incremental year-over-year costs associated with various sales, marketing and product development growth
investments. The dilutive effect of acquisitions adversely impacted year-over-year operating margin comparisons by 60 basis
points.
2011 COMPARED TO 2010
Price increases in the segment contributed 1.5% to sales growth on a year-over-year basis during 2011 as compared to 2010 and
are reflected as a component of the change in sales from existing businesses.
Sales from existing businesses in the segment’s water quality businesses grew at a high-single digit rate during 2011 as
compared to 2010. Strong demand during the first half of 2011 for the businesses’ laboratory and process instrumentation
product lines in the municipal and industrial markets moderated slightly during the second half of 2011. While demand in the
China municipal market increased on a year-over-year basis during 2011, the rate of revenue growth for the year declined
compared to the 2010 growth rate. Sales in the business’ ultraviolet water treatment product line grew at a low-double digit
rate on a year-over-year basis as municipal markets returned to growth in the second half of the year, and in particular during
the fourth quarter, after having declined in the first half of 2011. Sales in the business’ chemical treatment solutions product
line also grew at a low-double digit rate on a year-over-year basis primarily due to the addition of new customers in the U.S.
market and to a lesser extent to continued international expansion.
Sales from existing businesses in the segment’s retail/commercial petroleum equipment businesses declined at a low-single
digit rate during 2011 as compared to 2010. The year-over-year sales decline during the period is primarily attributable to 2010
performance dynamics. The business generated strong sales of payment and point-of-sale retail solutions product offerings in
2010, particularly the first half of 2010, driven by deadlines for compliance with enhanced industry security standards. During
2011, increased demand for the business’ automatic tank gauge products and dispensing equipment in all major geographies
resulted in year-over-year sales growth that partially offset the unfavorable impact of the difficult prior year comparison.
Operating profit margins increased 60 basis points during 2011 as compared to 2010. Year-over-year operating profit margin
comparisons benefited 70 basis points from the favorable impact of higher sales volumes and continued productivity
improvements net of the impact of costs associated with various sales, marketing and product development growth investments.
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The dilutive effect of acquired businesses adversely impacted year-over-year operating profit margin comparisons by 10 basis
points.
LIFE SCIENCES & DIAGNOSTICS
The Company’s diagnostics businesses offer a broad range of analytical instruments, reagents, consumables, software and
services that hospitals, physician’s offices, reference laboratories and other critical care settings use to diagnose disease and
make treatment decisions. The Company’s life sciences businesses offer a broad range of research and clinical tools that
scientists use to study cells and cell components to gain a better understanding of complex biological processes.
Pharmaceutical and biotechnology companies, universities, medical schools and research institutions use these tools to study
the causes of disease, identify new therapies and test new drugs and vaccines.
Life Sciences & Diagnostics Selected Financial Data ($ in millions)
Sales
Operating profit
Depreciation and amortization
Restructuring and other related charges
Operating profit as a % of sales
Depreciation and amortization as a % of sales
Restructuring and other related charges as a % of sales
$
Components of Sales Growth
Existing businesses
Acquisitions
Currency exchange rates
Total
2012 COMPARED TO 2011
$
For the Year Ended December 31
2011
4,627.4
402.3
297.2
100.9
$
2012
6,485.1
861.1
478.2
51.5
13.3%
7.4%
0.8%
8.7%
6.4%
2.2%
2010
2,298.3
227.9
90.7
—
9.9%
3.9%
—
2012 vs. 2011
2011 vs. 2010
4.5 %
37.5 %
(2.0)%
40.0 %
7.0%
91.0%
3.5%
101.5%
Year-over-year price increases in the segment had a negligible impact on sales during 2012.
The significant growth related to acquisitions for 2012 was primarily attributable to the acquisition of Beckman Coulter in June
2011. Sales associated with acquisitions are presented net of the impact of the 2012 divestiture of certain Beckman Coulter
product lines, the sales from which (prior to the divestiture) were included in sales from acquired businesses. Given the
insignificance of these product line sales to the segment's results of operations, prior year information was not restated to reflect
these divestitures as discontinued operations.
Sales from existing businesses in the segment's diagnostics business grew at a mid-single digit rate during 2012 as compared to
2011 due to increased demand in the clinical, acute care and pathology diagnostic businesses. Strong sales of consumables and
automation hardware in the clinical diagnostic business in high-growth markets, especially China, more than offset weaker
year-over-year sales performance in North America and Europe. In the acute care diagnostic business, sales grew due to
continued strong global consumable sales related to the business' installed base of instrumentation as well as robust demand for
compact blood gas analyzers. Increased demand for the business' cardiac care instruments, particularly in China, also
contributed to year-over-year sales growth. Increased demand, primarily in North America and high-growth markets, for
advanced staining consumables, and to a lesser extent histology systems, drove the majority of year-over-year sales growth in
the pathology diagnostics business.
Sales from existing businesses in the segment's life sciences businesses grew at a low-single digit rate during 2012 as compared
to 2011. Sales of the business' broad range of mass spectrometers grew on a year-over-year basis as sales growth in the applied
and clinical research markets was partially offset by sales declines in the pharmaceutical and academic research markets. Sales
growth in the mass spectrometry business was strong in China and other high-growth markets. Sales of the business'
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microscopy products also grew for the year in most major geographic markets due to strong demand for the business' recently
introduced confocal product offering.
Operating profit margins increased 460 basis points during 2012 as compared to 2011. Acquisition related charges associated
with the 2011 Beckman Coulter acquisition, including transaction costs deemed significant, change in control charges and fair
value adjustments to inventory and deferred revenue balances favorably impacted year-over-year operating profit margin
comparisons by 365 basis points. Higher sales volumes and incremental year-over-year cost savings associated with ongoing
productivity improvement initiatives, including the restructuring actions taken in 2012 and 2011, net of the impact of
incremental year-over-year costs associated with various sales, marketing and product development growth investments,
favorably impacted year-over-year comparisons by 200 basis points. The dilutive effect of acquisitions adversely impacted
segment operating profit margins by 105 basis points.
Depreciation and amortization as a percentage of sales increased during 2012 primarily as a result of the inclusion of twelve
months of Beckman Coulter's results in 2012 as compared to six months of Beckman Coulter's results in 2011. Depreciation
and amortization expense in the segment in future periods is expected to be in line with 2012 levels reflecting the continued
impact of Beckman Coulter. For a discussion of the impact of Beckman Coulter's business model on the Company's
depreciation and amortization costs, please see “—Liquidity and Capital Resources—Operating Activities.”
2011 COMPARED TO 2010
Price increases in the segment contributed 0.5% to sales growth on a year-over-year basis during 2011 as compared to 2010 and
are reflected as a component of the change in sales from existing businesses.
The significant growth related to acquisitions was primarily attributable to the acquisition of Beckman Coulter in June 2011
which significantly expanded the segment’s product and service offerings, as further described below.
Sales from existing businesses in the segment’s acute care diagnostics business grew at a high-single digit rate during 2011 as
compared to 2010 primarily due to continued strong consumable sales related to the business’ installed base of acute care
diagnostic instrumentation and new instrument placements, primarily in Europe, China and other Asian markets. Demand for
the business’ compact blood gas analyzer also remained strong, particularly in high-growth markets. Increased European and
high-growth market demand for the business’ cardiac care instruments also contributed to year-over-year sales growth. Sales
from existing businesses in the segment’s pathology diagnostics business also grew at a high-single digit rate during 2011 as
compared to 2010 as a result of increased demand for advanced staining instruments and consumables, as well as higher sales
of core histology systems and consumables, primarily in North America and high-growth markets, and to a lesser extent,
Europe. The acquisition of Beckman Coulter has significantly expanded the segment’s product portfolio in the area of clinical
diagnostics through the addition of new and complementary product and service offerings.
Sales from existing businesses in the segment’s microscopy businesses grew at a mid-single digit rate during 2011 as compared
to 2010 as a result of strong demand for confocal and compound instrumentation serving the life sciences research and
industrial markets, particularly in China and high-growth markets, and to a lesser extent, Europe. A difficult prior year
comparison resulting from first quarter 2010 sales associated with Japanese economic stimulus funding partially reduced the
sales growth for 2011. Strong demand for the business’ broad range of mass spectrometers serving both the academic and
proteomic research markets as well as the applied markets resulted in a low-double digit growth rate from sales from existing
businesses in the segment’s mass spectrometry business during 2011 as compared to 2010. Sales from existing businesses in
the mass spectrometry business grew in all major geographies during 2011 led by strong performance in the Asia Pacific region
and North America and to a lesser extent Europe. The acquisition of Beckman Coulter has also expanded the segment’s
product portfolio in the area of life sciences research through the addition of new and complementary product and service
offerings.
Operating profit margins decreased 120 basis points during 2011 as compared to 2010. The dilutive effect of acquisitions,
primarily related to costs associated with Beckman Coulter’s restructuring and integration activities, adversely impacted
segment operating profit margins by 295 basis points. Acquisition related charges associated with the Beckman Coulter
acquisition, including transaction costs deemed significant, change in control charges and fair value adjustments to inventory
and deferred revenue balances (net of comparable acquisition related charges in 2010) also adversely impacted operating profit
margins by 95 basis points. Higher sales volumes and ongoing productivity improvements, net of the impact of costs
associated with various sales, marketing and product development growth investments, favorably impacted year-over-year
comparisons by 270 basis points.
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Depreciation and amortization as a percentage of sales increased during 2011 primarily as a result of the increase in
amortization expense associated with the intangible assets acquired in connection with the Beckman Coulter acquisition. In
addition, as a majority of the Beckman Coulter customers enter into operating-type lease arrangements for the use of the
business’ instrumentation, depreciation expense increased on a year-over-year basis.
DENTAL
The Company’s Dental segment is a leading worldwide provider of a broad range of equipment, consumables and services for
the dental market, focused on driving technological innovations that help dental professionals improve clinical outcomes and
enhance productivity.
Dental Selected Financial Data ($ in millions)
Sales
Operating profit
Depreciation and amortization
Restructuring and other related charges
Operating profit as a % of sales
Depreciation and amortization as a % of sales
Restructuring and other related charges as a % of sales
Components of Sales Growth
Existing businesses
Acquisitions
Currency exchange rates
Total
2012 COMPARED TO 2011
For the Year Ended December 31
$
$
2012
2,022.9
293.1
92.4
2011
2,011.2
236.1
94.0
$
2010
1,824.6
203.3
81.7
9.8
14.5%
4.6%
0.5%
28.3
11.7%
4.7%
1.4%
—
11.1%
4.5%
—
2012 vs. 2011
2011 vs. 2010
3.5 %
0.5 %
(3.5)%
0.5 %
4.5%
2.5%
3.0%
10.0%
Year-over-year price increases in the segment had a negligible impact on sales during 2012.
Sales from existing businesses in the segment's dental consumables businesses grew at a mid-single digit rate during 2012 as
compared to 2011, primarily as a result of increased sales of general dentistry consumables and orthodontic products. Sales of
dental consumables grew in all major geographies. Sales from existing businesses in the segment's dental equipment business
grew at a low-single digit rate on a year-over-year basis as a result of increased demand for treatment units and associated
equipment, primarily in high-growth markets, as well as higher year-over-year sales of imaging products. During 2012, sales
increased in all major product categories on a year-over-year basis as increased demand in North America and high-growth
markets more than offset lower demand in Europe.
Operating profit margins increased 280 basis points during 2012 as compared to 2011. Higher operating profit margins from
additional sales volume in addition to incremental year-over-year cost savings associated with ongoing productivity
improvement initiatives including the restructuring actions taken in 2012 and 2011, net of incremental year-over-year costs
associated with various sales, marketing and product development growth investments, increased operating profit margins by
270 basis points on a year-over-year basis. In addition, net higher overall operating profit margins of acquired businesses
favorably impacted year-over-year comparisons by 10 basis points.
2011 COMPARED TO 2010
Price increases throughout the segment contributed 1.0% to sales growth on a year-over-year basis during 2011 as compared to
2010 and are reflected as a component of the change in sales from existing businesses.
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Sales from existing businesses in the dental consumables businesses grew at a mid-single digit rate in 2011 driven primarily by
increased demand for general dentistry consumables and orthodontic products and, to a lesser extent, infection control products.
Sales in the dental consumables business grew in all major geographies. Sales from existing businesses in the segment’s dental
equipment business grew on a year-over-year basis at a mid-single digit rate due to strong imaging and instrument product
demand. Increased sales of imaging products were led by North America, and to lesser extent, high-growth markets, while
instrument sales growth was driven largely by North America and Europe.
Operating profit margins increased 60 basis points during 2011 as compared to 2010. Higher sales volumes and ongoing
productivity improvements, including cost reduction actions in the dental equipment businesses, net of the impact of costs
associated with various sales, marketing and product development growth investments increased operating profit margin by 95
basis points on a year-over-year basis. The dilutive effect of acquired businesses adversely impacted year-over-year operating
profit margin comparisons by 35 basis points.
INDUSTRIAL TECHNOLOGIES
The Company’s Industrial Technologies segment designs and manufactures components and systems that are typically
incorporated by original equipment manufacturers and system integrators for sale into a diverse set of applications and end-
markets. The businesses in this segment also provide service and support, including helping customers with integration and
installation and providing services to ensure performance and up-time. The Industrial Technologies segment consists of two
strategic lines of business, product identification and motion, as well as the sensors and controls, energetic materials and engine
retarder businesses. The Company sold its ASI business in January 2012, its KEO business in February 2012 and its PSA
business in April 2011. These businesses were previously reported as part of the Industrial Technologies segment. The results
of these discontinued operations are excluded from all periods presented in the financial information provided in the tables
below.
Industrial Technologies Segment Selected Financial Data ($ in millions)
Sales
Operating profit
Depreciation and amortization
Restructuring and other related charges
Operating profit as a % of sales
Depreciation and amortization as a % of sales
Restructuring and other related charges as a % of sales
Components of Sales Growth
Existing businesses
Acquisitions
Currency exchange rates
Total
2012 COMPARED TO 2011
For the Year Ended December 31
2012
3,307.9
$
2011
3,121.4
$
2010
2,540.6
$
685.6
80.8
29.1
20.7%
2.4%
0.9%
655.0
65.8
23.8
21.0%
2.1%
0.8%
513.3
51.5
—
20.2%
2.0%
—
2012 vs. 2011
2011 vs. 2010
1.5 %
6.5 %
(2.0)%
6.0 %
11.5%
9.5%
2.0%
23.0%
Price increases throughout the segment contributed 1.5% to sales growth on a year-over-year basis during 2012 and are
reflected as a component of the change in sales from existing businesses.
Sales from existing businesses in the segment's product identification businesses grew at a mid-single digit rate during 2012 as
compared to 2011, due primarily to continued demand for marking and coding equipment and related consumables, with strong
growth experienced in both Europe and China. Increased year-over-year demand for the business' integrated packaging
solutions product lines also contributed to the existing business' sales growth in the second half of 2012, with growth in most
major geographies and particular strength in North America. The Company's acquisition of X-Rite, Incorporated, a global
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leader in color measurement technology, in the second quarter of 2012 expands the product identification business into a new,
adjacent market and has broadened the sales and earnings growth opportunities for the business by expanding the business'
product line range as well as through the potential acquisition of complementary businesses.
Sales from existing businesses in the segment's motion businesses declined at a mid-single digit rate during 2012 as compared
to 2011 due to continued soft demand in the majority of end markets served, particularly technology and factory automation
related end markets. Both the industrial automation and engineered solutions product lines experienced year-over-year sales
declines. The businesses saw improved growth in the fourth quarter of 2012 in part due to easier year-over-year comparisons.
Sales from existing businesses in the segment's other businesses collectively grew at a low-single digit rate during 2012 as
compared to 2011. Sales in the segment's energetic materials business increased on a year-over-year basis, partially offset by
lower demand in the segment's sensors and controls and engine retarder businesses.
Operating profit margins declined 30 basis points during 2012 compared to 2011. The net dilutive effect of acquired businesses
adversely impacted year-over-year operating profit margin comparisons by 105 basis points. Higher sales volumes and
incremental year-over-year cost savings associated with continuing productivity improvement initiatives, including the
restructuring actions taken in 2012 and 2011, net of incremental year-over-year costs associated with various sales, marketing
and product development growth investments, increased operating profit margins by 75 basis points on a year-over-year basis.
2011 COMPARED TO 2010
Price increases throughout the segment contributed 2.5% to sales growth on a year-over-year basis during 2011 and are
reflected as a component of the change in sales from existing businesses.
Sales from existing businesses in the segment’s product identification businesses grew at a high-single digit rate on a year-over-
year basis during 2011, primarily due to continued strong demand for core marking and coding equipment. Consumable sales
associated with the installed base of marking and coding equipment also contributed to year-over-year growth. Sales grew in
all major geographies. The 2011 acquisition of EskoArtwork, a leading full service solutions provider for the digital packaging
and design and production market, provides additional sales and earnings growth opportunities for the segment by expanding
the businesses’ product line range and through the potential acquisition of complementary businesses.
Sales from existing businesses in the segment’s motion businesses grew at a high-single digit rate during 2011. Sales growth
rates declined in the second half of 2011 compared to growth rates in the first half of 2011, in part due to easier prior year
comparisons in the first half of 2011 as well as the impact of slowing demand on a global basis in the second half of 2011,
primarily in the technology-related and solar end markets. Year-over-year sales increases in engineered solutions and linear and
mechanical motion products during the second half of 2011 more than offset sales declines in industrial automation that
occurred primarily in the fourth quarter 2011. Sales grew in all major geographies.
Sales from existing businesses in the segment’s other businesses grew collectively at a mid-teens rate during 2011 as compared
to 2010 due to generally higher demand in the majority of end-markets served.
Operating profit margins increased 80 basis points during 2011 as compared to 2010. Year-over-year operating profit margin
comparisons benefited 135 basis points from the favorable impact of higher sales volumes and ongoing productivity
improvements. The net dilutive effect of acquired businesses adversely impacted year-over-year operating profit margin
comparisons by 55 basis points.
COST OF SALES AND GROSS PROFIT
($ in millions)
Sales
Cost of sales
Gross profit
Gross profit margin
For the Year Ended December 31
$
2012
18,260.4
8,846.1
9,414.3
$
2011
16,090.5
7,913.9
8,176.6
$
2010
12,550.0
6,145.5
6,404.5
51.6%
50.8%
51.0%
Gross profit margins increased 80 basis points on a year-over-year basis for 2012 compared to 2011. Year-over-year gross
profit margin comparisons were favorably impacted by 70 basis points as a result of acquisition related charges recorded in
2011 associated with fair value adjustments to acquired inventory and deferred revenue balances in connection with the
acquisition of Beckman Coulter in June 2011. In addition, year-over-year gross profit margin comparisons also benefited from
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higher year-over-year sales volumes, incremental year-over-year cost savings associated with 2011 restructuring activities (net
of 2012 restructuring spending) and ongoing productivity improvements. The impact of a full twelve months of Beckman
Coulter results in 2012 (compared to only six months of Beckman Coulter results in 2011), partially offset these positive factors
as the Beckman Coulter business has lower gross profit margins on average than the Company's existing businesses.
Gross profit margins decreased 20 basis points during 2011 as compared to 2010. The combination of the acquisition of
Beckman Coulter, which has lower gross profit margins on average than the Company’s existing businesses, and 35 basis
points of incremental restructuring costs incurred during 2011 compared to 2010 adversely impacted year-over-year gross profit
margin comparisons. In addition, acquisition related charges associated with fair value adjustments to acquired inventory and
deferred revenue balances in connection with the acquisition of Beckman Coulter (net of comparable acquisition related
charges in 2010 relating primarily to the AB Sciex, Molecular Devices and certain other acquisitions) adversely impacted gross
profit margin comparisons by 45 basis points. Higher year-over-year sales volumes and ongoing productivity improvements
partially offset these adverse impacts. The gross profit margin comparison also reflects the benefit of 65 basis points from the
contribution to the Apex joint venture at the beginning of the third quarter 2010 of certain of the Company’s hand tools
businesses, which had lower average gross profit margins than the remainder of the Company.
In 2010, the U.S. government passed health care reform legislation which, among other provisions, imposes a 2.3% excise tax
on the sale or importation of certain medical devices. These provisions apply to various products in the Company's Life
Sciences and Diagnostics and Dental segments and become effective in 2013. The excise tax is expected to increase the
Company's cost of sales in 2013 by approximately $35 million compared to 2012.
OPERATING EXPENSES
($ in millions)
Sales
Selling, general and administrative (“SG&A”) expenses
Research and development (“R&D”) expenses
SG&A as a % of sales
R&D as a % of sales
For the Year Ended December 31
$
2012
18,260.4
5,181.2
1,137.9
$
2011
16,090.5
4,607.7
1,018.5
$
2010
12,550.0
3,603.7
774.0
28.4%
6.2%
28.6%
6.3%
28.7%
6.2%
Selling, general and administrative expenses as a percentage of sales decreased 20 basis points on a year-over-year basis for
2012 compared to 2011. Increased leverage of the Company's cost base resulting from higher sales and incremental year-over-
year cost savings associated with 2011 restructuring activities (net of 2012 restructuring activities) were partially offset by
incremental year-over-year investments in the Company's sales and marketing growth investments. Year-over-year
comparisons were also favorably impacted by a mark to market gain on a currency swap arrangement in 2012 (refer to
“Financial Instruments and Risk Management—Currency Exchange Rate Risk”). In addition, change in control payments to
Beckman Coulter employees in connection with the closing of the Beckman Coulter acquisition in June 2011, as well as
associated restructuring and integration charges, favorably impacted the year-over-year comparison.
Selling, general and administrative expenses as a percentage of sales decreased 10 basis points on a year-over-year basis for
2011 as compared to 2010. Increased leverage of the Company’s cost base resulting from higher sales volumes during 2011
was partially offset by 60 basis points of incremental restructuring costs incurred during 2011 compared to 2010 and ongoing
investments in the Company’s sales growth initiatives. In addition, change in control payments to Beckman Coulter employees
in connection with the closing of the Beckman Coulter acquisition adversely impacted selling, general and administrative
expenses as a percentage of sales during 2011.
Research and development expenses consist principally of internal and contract engineering personnel costs. Research and
development expenses have remained relatively consistent as a percentage of sales over the last three years. The increase in
these expenses on a year-over-year basis is primarily attributable to the full year impact of research and development
expenditures associated with recently acquired businesses, primarily Beckman Coulter, as well as incremental year-over-year
investments in the Company's new product development initiatives.
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EARNINGS FROM UNCONSOLIDATED JOINT VENTURE
In July 2010 the Company closed on the formation of the Apex joint venture. As of the closing of the transaction, the Company
deconsolidated its contributed businesses and commenced accounting for its investment in the joint venture based on the equity
method of accounting. The equity in the earnings of Apex, reflecting the Company’s 50% ownership position subsequent to the
formation, is reflected in the earnings from unconsolidated joint venture caption in the Consolidated Statements of Earnings.
The impact on the Company’s results of operations from (1) the contributed business prior to the formation of Apex, and (2) the
Company’s equity in the earnings of Apex subsequent to the formation of Apex, is reflected in the table below ($ in millions):
Prior to formation of Apex
Sales
Operating profit
Subsequent to formation of Apex
—
—
— $
—
Earnings from unconsolidated joint venture
$
69.9
$
66.8
315.6
41.5
22.8
For the Year Ended December 31
2012
2011
2010
Earnings from unconsolidated joint venture increased $3 million for 2012 as compared to 2011, primarily due to the favorable
impact of higher production volumes and Apex's actions to improve overall cost productivity. Earnings from unconsolidated
joint venture increased $44 million in 2011 as compared to 2010 as 2011 reflected a full year of earnings as compared to only
six months of earnings in 2010 following the closing of the formation of the joint venture in July 2010.
INTEREST COSTS
For a description of the Company’s outstanding indebtedness, refer to “–Liquidity and Capital Resources – Financing Activities
and Indebtedness” below.
Interest expense of $158 million for 2012 was approximately $16 million higher than in 2011. The increase in interest expense
in 2012 results primarily from the additional debt incurred during the second quarter of 2011 in connection with the Beckman
Coulter acquisition. Interest expense of $142 million in 2011 was approximately $25 million higher than 2010 interest expense
of $117 million. The increase in interest expense during 2011 also results primarily from the additional debt incurred in
connection with the Beckman Coulter acquisition. The Company's average commercial paper borrowings were also higher in
2011 as compared to 2010, in large part due to borrowings used to partially fund the acquisition of Beckman Coulter.
Interest income of $3 million, $5 million and $6 million in 2012, 2011 and 2010, respectively, was essentially flat on a year-
over-year basis.
INCOME TAXES
General
Income tax expense and deferred tax assets and liabilities reflect management’s assessment of future taxes expected to be paid
on items reflected in the Company’s financial statements. The Company records the tax effect of discrete items and items that
are reported net of their tax effects in the period in which they occur.
The Company’s effective tax rate can be affected by changes in the mix of earnings in countries with differing statutory tax
rates (including as a result of business acquisitions and dispositions), changes in the valuation of deferred tax assets and
liabilities, accruals related to contingent tax liabilities and period-to-period changes in such accruals, the results of audits and
examinations of previously filed tax returns (as discussed below), the expiration of statutes of limitations, the implementation
of tax planning strategies, tax rulings, court decisions and changes in tax laws. For a description of the tax treatment of
earnings held outside the United States, refer to “—Cash and Cash Requirements” below.
The amount of income taxes the Company pays is subject to ongoing audits by federal, state and foreign tax authorities, which
often result in proposed assessments. Management performs a comprehensive review of its global tax positions on a quarterly
basis and accrues amounts for contingent tax liabilities. Based on these reviews, the results of discussions and resolutions of
matters with certain tax authorities, tax rulings and court decisions and the expiration of statutes of limitations, reserves are
adjusted as necessary. For a discussion of risks related to these and other tax matters, please refer to “Item 1A. Risk Factors”.
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Tax Provision and Effective Tax Rate
The Company’s effective tax rate related to continuing operations for the years ended December 31, 2012, 2011 and 2010 was
23.6%, 20.9% and 22.9%, respectively.
The Company’s effective tax rate for each of 2012, 2011 and 2010 differs from the U.S. federal statutory rate of 35% due
principally to the Company’s earnings outside the United States that are indefinitely reinvested and taxed at rates lower than the
U.S. federal statutory rate.
The effective tax rate of 23.6% in 2012 is also lower than the U.S. federal statutory rate due to recognition of tax benefits
associated with favorable resolution of certain international and domestic uncertain tax positions and the lapse of certain
statutes of limitations, in addition to changes in estimates related to reserves associated with prior period uncertain tax
positions. These matters have been treated as discrete items in the periods they occurred and reduced the provision for income
taxes by approximately 30 basis points in 2012.
The effective tax rate of 20.9% in 2011 is also lower than the U.S. federal statutory rate due to recognition of tax benefits
associated with favorable resolutions of certain international and domestic uncertain tax positions as a result of a tax ruling,
court decision, and the lapse of certain tax statutes of limitations, in addition to changes in estimates related to reserves
associated with prior period uncertain tax positions. These matters have been treated as discrete items in the periods they
occurred and reduced the provision for income taxes by approximately 240 basis points in 2011.
The Company’s 2010 effective tax rate of 22.9% is also lower than the U.S. federal statutory rate due to recognition of tax
benefits associated with favorable resolution of certain international and domestic tax positions and the lapse of certain tax
statutes of limitations. These matters have been treated as discrete items in the periods they occurred and reduced the provision
for income taxes by approximately 60 basis points in 2010.
On January 2, 2013, the American Tax Relief Act of 2012 (the "Act") was signed into law which included tax relief for
businesses by reinstating retroactively to January 1, 2012, certain tax benefits and credits that had expired. Included in the
reinstatement were the U.S. federal research and development tax credit and the controlled foreign corporation look-through
provision, which would have collectively lowered the Company's effective tax rate by approximately 75 basis points for 2012.
However, as the Act was enacted in 2013, the retroactive tax benefit was not included in the 2012 effective tax rate and will be
treated as a discrete benefit during the first quarter of 2013.
The effective tax rate for 2013 is expected to be approximately 24%, excluding the discrete benefit from the Act noted above.
The anticipated increase from the 2012 rate is primarily attributable to changes in international tax legislation, partially offset
by the benefit on 2013's effective tax rate from the reinstatement of the tax benefits under the Act noted above.
INFLATION
The effect of inflation on the Company’s revenues and net earnings was not significant in the years ended December 31, 2012,
2011 or 2010.
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FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
The Company is exposed to market risk from changes in interest rates, foreign currency exchange rates, credit risk, equity
prices and commodity prices, each of which could impact its financial statements. The Company generally addresses its
exposure to these risks through its normal operating and financing activities. In addition, the Company’s broad-based business
activities help to reduce the impact that volatility in any particular area or related areas may have on its operating profit as a
whole.
Interest Rate Risk
The Company manages interest cost using a mixture of fixed-rate and variable-rate debt. A change in interest rates on long-
term debt impacts the fair value of the Company’s fixed-rate long-term debt but not the Company’s earnings or cash flow
because the interest on such debt is fixed. Generally, the fair market value of fixed-rate debt will increase as interest rates fall
and decrease as interest rates rise. As of December 31, 2012, an increase of 100 basis points in interest rates would have
decreased the fair value of the Company’s fixed-rate long-term debt (excluding the LYONs, which have not been included in
this calculation as the value of this convertible debt is primarily derived from its underlying common stock) by approximately
$137 million. However, since the Company currently has no plans to repurchase its outstanding fixed-rate instruments before
their maturity, the impact of market interest rate fluctuations on the Company’s fixed-rate long-term debt does not affect the
Company’s results of operations or stockholders’ equity.
As of December 31, 2012, the Company’s variable-rate debt obligations consisted primarily of U.S. dollar and Euro
denominated commercial paper borrowings and to a lesser extent, the Company's $300 million floating rate senior notes due
2013. As a result, the Company’s primary interest rate exposure results from changes in short-term U.S. dollar and Euro
interest rates. Refer to Note 10 to the Consolidated Financial Statements for information regarding the Company’s outstanding
commercial paper balances as of December 31, 2012. As these shorter duration obligations mature, the Company anticipates
issuing additional short-term commercial paper obligations to refinance all or part of these borrowings. In 2012, a 150%
increase in average market interest rates on the Company’s commercial paper borrowings would have increased the Company’s
interest expense by approximately $2 million. A 150% hypothetical fluctuation is used as the Company’s actual commercial
paper interest rates fluctuated near that amount during 2012. In 2012, a 50% increase in average market interest rates on the
Company’s $300 million floating rate senior notes due 2013 would have increased the Company’s interest expense by
approximately $1 million. A 50% hypothetical fluctuation is used as the Company’s actual coupon interest rates on such debt
fluctuated near that amount during 2012.
Currency Exchange Rate Risk
The Company faces exchange rate risk from its investments in subsidiaries owned and operated in foreign countries. The
Eurobond Notes described below provide a natural hedge to a portion of the Company’s European net asset position. The effect
of a change in currency exchange rates on the Company’s net investment in international subsidiaries, net of the translation
effect of the Company’s Eurobond Notes, is reflected in the accumulated other comprehensive income component of
stockholders’ equity. A 10% depreciation in major currencies, relative to the U.S. dollar at December 31, 2012 (net of the
translation effect of the Company’s Eurobond Notes) would have resulted in a reduction of stockholders’ equity of
approximately $706 million.
The Company also faces exchange rate risk from transactions with customers in countries outside the United States and from
intercompany transactions between affiliates. Although the Company has a U.S. dollar functional currency for reporting
purposes, it has manufacturing sites throughout the world and a substantial portion of its costs are incurred, and sales are
generated in foreign currencies. Costs incurred and sales recorded by subsidiaries operating outside of the United States are
translated into U.S. dollars using exchange rates effective during the respective period. As a result, the Company is exposed to
movements in the exchange rates of various currencies against the U.S. dollar. In particular, the Company has more sales in
European currencies than it has expenses in those currencies. Therefore, when European currencies strengthen or weaken
against the U.S. dollar, operating profits are increased or decreased, respectively.
Currency exchange rates negatively impacted 2012 sales by 2.0% on a year-over-year basis as the U.S. dollar was, on average,
stronger against other major currencies during 2012 as compared to exchange rate levels during 2011. The U.S. dollar's
strength against other major currencies throughout the majority of 2012 more than offset the positive impact on sales from the
slight weakening of the U.S. dollar prior to the end of the fourth quarter 2012.
If the exchange rates in effect as of December 31, 2012 were to prevail throughout 2013, currency exchange rates would
positively impact 2013 sales by approximately 0.5% relative to the Company’s performance in 2012. Additional weakening of
the U.S. dollar against other major currencies would further positively impact the Company’s sales and results of operations.
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Any strengthening of the U.S. dollar against other major currencies would adversely impact the Company’s sales and results of
operations on an overall basis.
The Company has generally accepted the exposure to exchange rate movements without using derivative financial instruments
to manage this risk. Both positive and negative movements in currency exchange rates against the U.S. dollar will therefore
continue to affect the reported amount of sales, profit, and assets and liabilities in the Company’s Consolidated Financial
Statements.
In connection with a 2011 acquisition, the Company acquired a currency swap agreement that requires the Company to
purchase approximately 184 million Japanese Yen (JPY/¥) at a rate of $1/¥102.25 on a monthly basis through June 1, 2018. As
of December 31, 2012, the aggregate Japanese Yen purchase commitment was approximately ¥11.9 billion (approximately
$138 million based on exchange rates as of December 31, 2012). The currency swap does not qualify for hedge accounting,
and as a result changes in the fair value of the currency swap are reflected in selling, general and administrative expenses in the
Consolidated Statements of Earnings. During the years ended December 31, 2012 and 2011, the Company recorded pre-tax
income of approximately $22 million and a pre-tax charge of approximately $8 million, respectively, related to changes in the
fair value of this currency swap.
Credit Risk
The Company is exposed to potential credit losses in the event of nonperformance by counterparties to its financial instruments.
Financial instruments that potentially subject the Company to credit risk consist of cash and temporary investments, receivables
from customers and derivatives. The Company places cash and temporary investments with various high-quality financial
institutions throughout the world and exposure is limited at any one institution. Although the Company typically does not
obtain collateral or other security to secure these obligations, it does regularly monitor the third-party depository institutions
that hold our cash and cash equivalents. The Company’s emphasis is primarily on safety and liquidity of principal and
secondarily on maximizing yield on those funds.
In addition, concentrations of credit risk arising from receivables from customers are limited due to the diversity of the
Company’s customers. The Company’s businesses perform credit evaluations of their customers’ financial conditions as
appropriate and also obtain collateral or other security when appropriate.
The Company enters into derivative transactions infrequently and with the exception of the Yen swap noted above such
transactions are generally insignificant to the Company's financial condition and results of operations. These transactions are
entered into only with high-quality financial institutions and exposure at any one institution is limited.
Equity Price Risk
The Company’s available-for-sale investment portfolio includes publicly traded equity securities that are sensitive to
fluctuations in market price. Changes in equity prices would result in changes in the fair value of the Company’s available-for-
sale investments due to the difference between the current market price and the market price at the date of purchase or issuance
of the equity securities. A 10% decline in the value of these equity securities as of December 31, 2012 would have reduced the
fair value of the Company’s available-for-sale investment portfolio by approximately $33 million.
Commodity Price Risk
For a discussion of risks relating to commodity prices, refer “Item 1A. Risk Factors.”
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LIQUIDITY AND CAPITAL RESOURCES
Management assesses the Company’s liquidity in terms of its ability to generate cash to fund its operating, investing and
financing activities. The Company continues to generate substantial cash from operating activities and believes that its
operating cash flow and other sources of liquidity will be sufficient to allow it to continue investing in existing businesses,
consummating strategic acquisitions, paying interest and servicing debt and managing its capital structure on a short and long-
term basis.
Following is an overview of the Company's cash flows and liquidity for the years ended December 31, 2012, 2011 and 2010:
Overview of Cash Flows and Liquidity
($ in millions)
Total operating cash flows provided by continuing operations
Payments for additions to property, plant and equipment
Cash paid for acquisitions
Proceeds from sale of discontinued operations
Other sources
Net cash used in investing activities
Proceeds from the issuance of common stock
Purchase of treasury stock
Repayments of long-term debt
Proceeds from public debt offerings
Net proceeds from borrowings with maturities of less than 90 days
Payment of dividends
Net cash (used in) provided by financing activities
$
$
$
$
$
For the Years Ended December 31
2012
2011
2010
3,502.1
$
2,732.1
$
2,018.7
(458.3) $
(334.5) $
(1,796.8)
337.5
(6,210.8)
680.1
30.0
(1,887.6) $
17.9
(5,847.3) $
(191.1)
(2,129.7)
—
31.9
(2,288.9)
212.0
(648.4)
(61.5)
—
195.9
(86.4)
(388.4) $
$
1,112.5
$
178.4
—
(1,602.4)
1,785.8
854.0
(61.3)
2,088.6
$
—
(9.4)
—
—
(52.2)
116.8
• Operating cash flows from continuing operations, a key source of the Company’s liquidity, increased $770 million, or
approximately 28%, during 2012 as compared to 2011.
• Cash paid for acquisitions constituted the most significant use of cash during 2012. The Company acquired fourteen
businesses during 2012 for total consideration (net of cash acquired) of approximately $1.8 billion.
•
In January 2012, the Company completed the sale of its ASI business and, in February 2012, the Company completed
the sale of its KEO business. Aggregate cash proceeds in 2012 in connection with the completed sales were $337
million.
• The Company repurchased approximately 12.5 million shares of Company common stock in open market transactions
at a cost of $648 million and an average price of approximately $52 per share.
• The Company contributed approximately $55 million in cash to the Company’s U.S. defined benefit pension plan and
approximately $53 million to the Company’s non-U.S. defined benefit pension plans during 2012.
• The Company’s 2012 and 2011 restructuring activities used $140 million in cash during 2012.
• As of December 31, 2012, the Company held approximately $1.7 billion of cash and cash equivalents.
Operating Activities
The Company continues to generate substantial cash from operating activities and remains in a strong financial position. Cash
flows from operating activities can fluctuate significantly from period to period as working capital needs and the timing of
payments for items such as income taxes, restructuring activities, pension funding and other items impact reported cash flows.
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Operating cash flows from continuing operations were $3.5 billion for 2012, an increase of $770 million, or 28% as compared
to 2011. The year-over-year change in operating cash flows from 2011 to 2012 was primarily attributable to the following
factors:
• Earnings from continuing operations increased by $364 million in 2012 as compared to 2011.
• Earnings for 2012 reflected an increase of $205 million of depreciation and amortization expense as compared to
2011. The increase in amortization expense primarily relates to the amortization of intangible assets acquired in
connection with the Beckman Coulter acquisition. The increase in depreciation expense results from the fact that a
majority of the Beckman Coulter customers enter into operating-type lease arrangements for the use of the business'
instrumentation and each new operating-type lease arrangement entered into increases the Company's depreciable
assets. The increased depreciation and amortization expense decreases earnings without a corresponding impact to
operating cash flows.
• The aggregate of trade accounts receivable, inventories and trade accounts payable provided $47 million in operating
cash flows during 2012, a $16 million decline compared to 2011 during which these items provided $63 million in
operating cash flows. The amount of cash flow generated from or used by the aggregate of trade accounts receivable,
inventory and trade accounts payable depends upon how effectively the Company manages the cash conversion cycle,
which effectively represents the number of days that elapse from the day it pays for the purchase of raw materials and
components to the collection of cash from its customers.
• Cash income tax payments from continuing operations increased by $52 million during 2012 as compared to 2011.
Net cash payments for income taxes from continuing operations totaled $355 million and $303 million in 2012 and
2011, respectively.
Operating cash flows from continuing operations were $2.7 billion for 2011, an increase of $713 million, or 35% as compared
to 2010. The increase in operating cash flows was primarily attributable to the increase in earnings in 2011 as compared to
2010. In addition, trade accounts receivable, inventories and accounts payable in the aggregate contributed $63 million of
operating cash flows during 2011 as compared to using $195 million in operating cash flows during 2010.
In connection with the Company’s restructuring activities, the Company records appropriate accruals for the costs of closing
facilities, severing personnel and, in connection with acquisitions, integrating the acquired businesses into existing Company
operations. Cash flows from operating activities are reduced by the amounts expended against the various accruals established
in connection with these activities. During 2012, the Company paid $140 million related to its 2012 and 2011 restructuring
activities. During 2011, the Company paid approximately $49 million related to its 2011 restructuring activities. The
Company anticipates cash payments of approximately $94 million during 2013 related to its 2012 restructuring activities.
Please refer to Note 14 to the Consolidated Financial Statements for additional information about these expenditures.
Investing Activities
Cash flows relating to investing activities consist primarily of cash used for acquisitions and capital expenditures and cash
proceeds from divestitures of businesses or assets.
Net cash used in investing activities was $1.9 billion during 2012 compared to $5.8 billion of net cash used in 2011 and $2.3
billion of net cash used in 2010.
Acquisitions and Divestitures
2012 Acquisitions and Divestitures
For a discussion of the Company’s 2012 acquisitions and divestitures and the pending divestiture of the Company's ownership
interest in Apex, refer to “—Overview.”
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2011 Acquisitions and Divestitures
On June 30, 2011, following the successful completion of the Company’s tender offer for all of the outstanding shares of
common stock of Beckman Coulter, the Company completed the acquisition of Beckman Coulter by merging one of its
indirect, wholly-owned subsidiaries with and into Beckman Coulter such that Beckman Coulter became an indirect, wholly-
owned subsidiary of the Company. Beckman Coulter develops, manufactures and markets products that simplify and automate
complex biomedical testing. Beckman Coulter’s diagnostic systems are found in hospitals and other clinical settings around the
world and produce information used by physicians to diagnose disease and make treatment decisions. Scientists use its life
science research instruments to study complex biological problems including causes of disease and potential new therapies or
drugs. Beckman Coulter had revenues of $3.7 billion in 2010, and is included in the Company’s Life Sciences & Diagnostics
segment from the acquisition date. The Company recorded an aggregate of $3.7 billion of goodwill related to the acquisition of
Beckman Coulter. The Company obtained control of Beckman Coulter on June 24, 2011 and, as a result, the earnings of
Beckman Coulter are reflected in the Company’s results from June 25, 2011 forward.
The Company paid $5.5 billion in cash (net of $450 million of cash acquired) to acquire all of the outstanding shares of
common stock of Beckman Coulter and assumed $1.6 billion of indebtedness in connection with the acquisition. The Company
financed the acquisition of Beckman Coulter using (1) $2.3 billion of available cash, (2) net proceeds, after expenses and the
underwriters’ discount, of $966 million from the underwritten public offering of the Company’s common stock on June 21,
2011, (3) net proceeds, after expenses and the underwriters’ discount, of $1.8 billion from the underwritten public offering of
senior unsecured notes on June 23, 2011, and (4) net proceeds from the sale of additional commercial paper under the
Company’s U.S. commercial paper program prior to the closing of the acquisition.
In addition to the acquisition of Beckman Coulter, during 2011, the Company completed the acquisition of thirteen other
businesses (including the acquisition of EskoArtwork, a leading full service solutions provider for the digital packaging design
and production market), for total consideration of $669 million in cash, net of cash acquired. The additional businesses
acquired complement existing units of each of the Company's five segments. The aggregate annual sales of the businesses
acquired at the time of their respective acquisitions, in each case based on the acquired company’s revenues for its last
completed fiscal year prior to the acquisition, were $325 million.
For a discussion of the Company's April 2011 divestiture of the PSA business, please see “—Overview.”
2010 Acquisitions and Apex Joint Venture
On January 30, 2010, the Company completed the acquisition of the Analytical Technologies division of MDS Inc., which
included a 50% ownership position in the AB Sciex joint venture and a 100% ownership position in Molecular Devices. In a
separate but related transaction, the Company simultaneously completed the acquisition of the remaining 50% ownership
position in AB Sciex from Life Technologies Corporation. The aggregate purchase price for the combined transactions was
$1.0 billion, including debt assumed and net of cash acquired. The aggregate sales of AB Sciex and Molecular Devices in their
last completed fiscal year prior to the acquisition were $650 million and these businesses now operate within the Company’s
Life Sciences & Diagnostics segment. The acquisitions of AB Sciex and Molecular Devices significantly expanded the
Company’s position in the life sciences and diagnostics business and in particular established a position in the mass
spectrometry market.
In addition to the acquisitions of AB Sciex and Molecular Devices, the Company acquired seventeen businesses during 2010
for aggregate consideration of approximately $1.1 billion in cash, net of cash acquired. The additional businesses acquired
complement existing units of each of the Company's five segments. The aggregate annual sales of these seventeen acquired
businesses at the time of their respective acquisitions, in each case based on the company’s revenues for its last completed
fiscal year prior to the acquisition, were $440 million.
As discussed above, on July 4, 2010, the Company entered into a joint venture with Cooper, combining certain of the
Company’s hand tools businesses with Cooper’s Tools business to form a new entity called Apex. The 2010 sales, on a
combined basis, of the two tools businesses contributed to Apex were approximately $1.2 billion. During the period that
Cooper and the Company owned Apex, each of Cooper and the Company owned a 50% interest in Apex and had an equal
number of representatives on Apex’s Board of Directors. Upon the closing of the joint venture formation, Apex simultaneously
obtained a credit facility and term debt financing and used $45 million of the term debt financing to purchase from the
Company certain assets of the Company’s hand tools business. In addition to the cash received for the purchase of these assets,
the Company recorded a receivable from Apex of $45 million upon closing. The Company has collected all of this receivable
as of December 31, 2012. As of the closing of the joint venture formation, the Company deconsolidated the financial results of
its contributed businesses and began accounting for its investment in the joint venture based on the equity method of
accounting. In accordance with accounting standards applicable to non-controlling interests in subsidiaries, the Company
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recognized a $291 million gain ($232 million or $0.34 per diluted share on an after-tax basis) during the third quarter 2011
associated with the transaction reflecting the difference between the book value of the contributed business that was
deconsolidated and the fair value of the consideration received in exchange, including the 50% interest in Apex and the cash
and receivables received from Apex in connection with the transaction. As further discussed above, in February 2013, the
Company and Cooper sold Apex to an unrelated third party for approximately $1.6 billion.
Capital Expenditures
Capital expenditures are made primarily for increasing capacity, replacing equipment, supporting new product development and
improving information technology systems. In addition, capital expenditures are made for the manufacture of instruments that
are used in operating-type lease arrangements that certain of the Company’s businesses enter into with customers. Capital
expenditures totaled $458 million in 2012, $334 million in 2011 and $191 million in 2010. The increase in capital spending in
2011 and 2012 is primarily due to the acquisition of Beckman Coulter in June 2011 and the associated capitalization of
instruments subject to operating-type leases through customer arrangements. In 2013, the Company expects capital spending to
approximate $500 million, though actual expenditures will ultimately depend on business conditions.
Financing Activities and Indebtedness
Cash flows from financing activities consist primarily of proceeds from the issuance of commercial paper, common stock and
debt, excess tax benefits from stock-based compensation, payments of principal on indebtedness, payments for repurchases of
common stock and payments of dividends to shareholders. Financing activities used cash of $388 million during 2012
compared to $2.1 billion of cash provided during 2011. The year-over-year change was primarily due to the Company's
repurchase of shares of its common stock at a cost of $648 million in 2012, whereas in 2011 the Company received $1.8 billion
from the issuance of the 2011 Financing Notes (as defined below).
Total debt was $5.3 billion as of December 31, 2012 and 2011. The Company’s debt as of December 31, 2012 was as follows:
•
•
•
•
•
•
•
•
•
•
$1.2 billion of outstanding U.S. dollar and Euro denominated commercial paper;
$660 million (€500 million) aggregate principal amount of 4.5% guaranteed Eurobond Notes due 2013 (the “Eurobond
Notes”);
$300 million aggregate principal amount of floating rate senior notes due 2013 (the “2013 Notes”);
$400 million aggregate principal amount of 1.3% senior notes due 2014 (the “2014 Notes”);
$500 million aggregate principal amount of 2.3% senior notes due 2016 (the “2016 Notes”);
$500 million aggregate principal amount of 5.625% senior notes due 2018 (the “2018 Notes”);
$750 million aggregate principal amount of 5.4% senior notes due 2019 (the “2019 Notes”);
$600 million aggregate principal amount of 3.9% senior notes due 2021 (the “2021 Notes” and together with the 2013
Notes, 2014 Notes and 2016 Notes, the “2011 Financing Notes”);
$281 million of zero coupon Liquid Yield Option Notes due 2021 (“LYONs”); and
$127 million of other borrowings.
The 2011 Financing Notes, the Eurobond Notes, the 2018 Notes and the 2019 Notes are collectively referred to as the “Notes”.
Commercial Paper Programs and Credit Facility
The Company satisfies any short-term liquidity needs that are not met through operating cash flow and available cash primarily
through issuances of commercial paper under its U.S. and Euro commercial paper programs. Under these programs, the
Company or a subsidiary of the Company, as applicable, may issue and sell unsecured, short-term promissory notes. Interest
expense on the notes is paid at maturity and is generally based on the ratings assigned to the Company by credit rating agencies
at the time of the issuance and prevailing market rates measured by reference to LIBOR. Borrowings under the program are
available for general corporate purposes, including acquisitions. During 2012, as commercial paper balances matured the
Company either paid such balances from available cash or refinanced such balances by issuing new commercial paper. The
Company issued commercial paper under the Euro commercial paper program during 2012 and as of December 31, 2012, $66
million (€50 million) of commercial paper was outstanding under this program. There was no commercial paper outstanding
under the Euro program as of December 31, 2011 or at any other time during 2011.
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As of December 31, 2012, borrowings outstanding under the Company’s U.S. and Euro commercial paper programs had a
weighted average annual interest rate of 0.2% and a weighted average remaining maturity of approximately seven days.
Commercial paper balances during the year carried interest at annual rates ranging between 0.1% and 0.7% and original
maturities between one and thirty-six days. The Company classified its borrowings outstanding under the commercial paper
programs as of December 31, 2012, as well as its 2013 Notes and its Eurobond Notes, as long-term debt in the Consolidated
Balance Sheet as the Company had the intent and ability, as supported by availability under the Credit Facility referenced
below, to refinance these borrowings for at least one year from the balance sheet date.
Credit support for the commercial paper program is provided by a $2.5 billion unsecured multi-year revolving credit facility
with a syndicate of banks that expires on July 15, 2016 (the “Credit Facility”). The Credit Facility can also be used for working
capital and other general corporate purposes. Under the Credit Facility, borrowings (other than bid loans) bear interest at a rate
equal to (at the Company’s option) either (1) a LIBOR-based rate plus a margin that varies according to the Company’s long-
term debt credit rating (the “Eurodollar Rate”), or (2) the highest of (a) the Federal funds rate plus 1/2 of 1%, (b) the prime rate
and (c) the Eurodollar Rate plus 1%, plus in each case a margin that varies according to the Company’s long-term debt credit
rating. In addition to certain initial fees the Company paid at inception of the Credit Facility, the Company is obligated to pay
an annual commitment fee that varies according to its long-term debt credit rating. The Credit Facility requires the Company to
maintain a consolidated leverage ratio (as defined in the facility) of 0.65 to 1.00 or less, and also contains customary
representations, warranties, conditions precedent, events of default, indemnities and affirmative and negative covenants. As of
December 31, 2012, no borrowings were outstanding under the Credit Facility and the Company was in compliance with all
covenants under the facility. The non-performance by any member of the Credit Facility syndicate would reduce the maximum
capacity of the Credit Facility by such member's commitment amount. In addition to the Credit Facility, the Company has
entered into reimbursement agreements with various commercial banks to support the issuance of letters of credit.
The availability of the Credit Facility as a standby liquidity facility to repay maturing commercial paper is an important factor
in maintaining the existing credit ratings of the Company’s commercial paper program. The Company expects to limit any
borrowings under the Credit Facility to amounts that would leave sufficient credit available under the facility to allow the
Company to borrow, if needed, to repay all of the outstanding commercial paper as it matures.
The Company’s ability to access the commercial paper market, and the related costs of these borrowings, is affected by the
strength of the Company’s credit rating and market conditions. Any downgrade in the Company’s credit rating would increase
the cost of borrowings under the Company’s commercial paper program and the Credit Facility, and could limit or preclude the
Company’s ability to issue commercial paper. If the Company’s access to the commercial paper market is adversely affected
due to a downgrade, change in market conditions or otherwise, the Company would expect to rely on a combination of
available cash, operating cash flow and the Company’s Credit Facility to provide short-term funding. In such event, the cost of
borrowings under the Company’s Credit Facility could be higher than the cost of commercial paper borrowings.
On June 17, 2011, the Company entered into a $3.0 billion 364-day unsecured revolving credit facility (the “364-Day Facility”)
in connection with the acquisition of Beckman Coulter. The Company reduced the commitments under the 364-Day Facility
over the balance of the year and terminated the facility as of December 29, 2011. There were no outstanding borrowings under
the 364-Day Facility at any time during the term of the facility.
Other Long-Term Indebtedness
2011 Financing Notes—On June 23, 2011, the Company completed the underwritten public offering of the 2011 Financing
Notes, all of which are unsecured. The 2013 Notes were issued at 100% of their principal amount, will mature on June 21,
2013 and accrue interest at a floating rate equal to three-month LIBOR plus 0.25% per year. The 2014 Notes were issued at
99.918% of their principal amount, will mature on June 23, 2014 and accrue interest at the rate of 1.3% per year. The 2016
Notes were issued at 99.84% of their principal amount, will mature on June 23, 2016 and accrue interest at the rate of 2.3% per
year. The 2021 Notes were issued at 99.975% of their principal amount, will mature on June 23, 2021 and accrue interest at the
rate of 3.9% per year. The net proceeds from the 2011 Financing Notes offering, after deducting expenses and the underwriters’
discount, were approximately $1.8 billion and were used to fund a portion of the purchase price for the acquisition of Beckman
Coulter. The Company pays interest on the 2013 Notes quarterly in arrears on March 21, June 21, September 21 and
December 21 of each year. The Company pays interest on the 2014 Notes, 2016 Notes and 2021 Notes semi-annually in
arrears, on June 23 and December 23 of each year.
2019 Notes—In March 2009, the Company completed an underwritten public offering of the 2019 Notes, which were issued at
99.93% of their principal amount, will mature on March 1, 2019 and accrue interest at the rate of 5.4% per year. The net
proceeds, after expenses and the underwriters’ discount, were approximately $745 million. A portion of the net proceeds were
used to repay a portion of the Company’s outstanding commercial paper and the balance was used for general corporate
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purposes, including acquisitions. The Company pays interest on the 2019 Notes semi-annually in arrears, on March 1 and
September 1 of each year.
2018 Notes—In December 2007, the Company completed an underwritten public offering of the 2018 Notes, which were
issued at 99.39% of their principal amount, will mature on January 15, 2018 and accrue interest at the rate of 5.625% per year.
The net proceeds, after expenses and the underwriters’ discount, were approximately $493 million, which were used to repay a
portion of the commercial paper issued to finance the acquisition of the Tektronix business. The Company pays interest on the
2018 Notes semi-annually in arrears, on January 15 and July 15 of each year.
Eurobond Notes—On July 21, 2006, a financing subsidiary of the Company issued the Eurobond Notes in a private placement
outside the United States. Payment obligations under these Eurobond Notes are guaranteed by the Company. The net proceeds
of the offering, after the deduction of underwriting commissions but prior to the deduction of other issuance costs, were
€496 million ($627 million based on exchange rates in effect at the time the offering closed) and were used to pay down a
portion of the Company’s outstanding commercial paper and for general corporate purposes, including acquisitions.
LYONs—In 2001, the Company issued $830 million (value at maturity) in LYONs. The net proceeds to the Company were
$505 million, of which approximately $100 million was used to pay down debt and the balance was used for general corporate
purposes, including acquisitions. The LYONs carry a yield to maturity of 2.375% (with contingent interest payable as
described below). Holders of the LYONs may convert each $1,000 of principal amount at maturity into 29.0704 shares of the
Company’s common stock (in the aggregate for all LYONs that were originally issued, approximately 24.0 million shares of the
Company’s common stock) at any time on or before the maturity date of January 22, 2021. As of December 31, 2012, an
aggregate of approximately 14 million shares of the Company’s common stock had been issued upon conversion of LYONs.
As of December 31, 2012, the accreted value of the outstanding LYONs was lower than the traded market value of the
underlying common stock issuable upon conversion. The Company may redeem all or a portion of the LYONs for cash at any
time at scheduled redemption prices. Holders had the right to require the Company to purchase all or a portion of the notes for
cash and/or Company common stock, at the Company’s option, on each of January 22, 2004 and January 22, 2011, which
resulted in aggregate notes with an accreted value of approximately $1 million being redeemed by the Company for cash.
Under the terms of the LYONs, the Company will pay contingent interest to the holders of LYONs during any six month period
from January 23 to July 22 and from July 23 to January 22 if the average market price of a LYON for a specified measurement
period equals 120% or more of the sum of the issue price and accrued original issue discount for such LYON. The amount of
contingent interest to be paid with respect to any quarterly period is equal to the higher of either 0.0315% of the bonds’ average
market price during the specified measurement period or the amount of the common stock dividend paid during such quarterly
period multiplied by the number of shares issuable upon conversion of a LYON. The Company paid $1 million of contingent
interest on the LYONs for each of the years ended December 31, 2012 and 2011 and paid $2 million in contingent interest in
2010. Except for the contingent interest described above, the Company will not pay interest on the LYONs prior to maturity.
Covenants and Redemption Provisions Applicable to the Notes
The Company may redeem some or all of the 2014 Notes, the 2016 Notes, the 2018 Notes and/or the 2019 Notes at any time by
paying the principal amount and a “make-whole” premium, plus accrued and unpaid interest. Prior to March 23, 2021 (three
months prior to their maturity date), the Company may redeem some or all of the 2021 Notes by paying the principal amount
and a “make-whole” premium, plus accrued and unpaid interest. On or after March 23, 2021, the Company may redeem some
or all of the 2021 Notes for their principal amount plus accrued and unpaid interest. If a change of control triggering event
occurs with respect to the Notes, each holder of Notes may require the Company to repurchase some or all of its Notes at a
purchase price equal to 101% of the principal amount of the Notes, plus accrued interest (100% of the principal amount plus
accrued interest in the case of Eurobond Notes). A change of control triggering event means the occurrence of both a change of
control and a rating event, each as defined in the applicable supplemental indenture or comparable instrument. Except in
connection with a change of control triggering event as described above, the Company does not have any credit rating
downgrade triggers that would accelerate the maturity of a material amount of outstanding debt. In addition, the Company may
redeem the Eurobond notes upon the occurrence of specified, adverse changes in tax laws, or interpretations under such laws, at
a redemption price equal to the principal amount of the notes to be redeemed.
The indentures and comparable instruments pursuant to which the Notes were issued each contain customary covenants
including, for example, limits on the incurrence of secured debt and sale/leaseback transactions. None of these covenants are
considered restrictive to the Company’s operations and as of December 31, 2012, the Company was in compliance with all of
its debt covenants.
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Beckman Coulter Indebtedness
In connection with the acquisition of Beckman Coulter in June 2011, the Company assumed indebtedness with a fair value of
$1.6 billion (the “Beckman Coulter Notes”). During the third quarter of 2011, the Company retired substantially all of the
Beckman Coulter Notes using proceeds from the issuance of U.S. dollar commercial paper and recorded an approximate $33
million ($21 million, after tax or $0.03 per diluted share) charge to earnings due to “make whole” payments associated with the
extinguishment of certain of the Beckman Coulter Notes. The charge to earnings is reflected as loss on early extinguishment of
debt in the Consolidated Statement of Earnings.
For additional details regarding the Company’s debt as of December 31, 2012 see Note 10 to the Consolidated Financial
Statements.
Shelf Registration Statement
The Company maintains a “well-known seasoned issuer” shelf registration statement on Form S-3 on file with the SEC that
registers an indeterminate amount of debt securities, common stock, preferred stock, warrants, depositary shares, purchase
contracts and units for future issuance. The Company expects to use the net proceeds from future securities sales off this shelf
registration statement for general corporate purposes, including without limitation reduction or refinancing of debt or other
corporate obligations, acquisitions, capital expenditures, share repurchases and dividends and working capital. In May 2012,
the Company filed a new shelf registration statement to replace the shelf registration statement that was filed in May 2009 and
expired in May 2012.
On June 21, 2011, the Company used its then-current shelf registration statement to complete the underwritten public offering
of 19,250,000 shares of Danaher common stock at a price to the public of $51.75 per share. The net proceeds, after deducting
expenses and the underwriters' discount, were approximately $966 million and were used to fund a portion of the purchase
price for Beckman Coulter. On June 23, 2011, the Company also used this shelf registration statement to complete the
underwritten public offering of the 2011 Financing Notes.
Stock Repurchase Program
On May 11, 2010, the Company’s Board authorized 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 Company’s
repurchase program. The timing and amount of any shares repurchased is 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.
Pursuant to the stock repurchase program, during the year ended December 31, 2012, the Company repurchased approximately
12.5 million shares of Company common stock in open market transactions at a cost of $648 million. Neither the Company nor
any “affiliated purchaser” repurchased any shares of Company common stock during 2011 or 2010. As of December 31, 2012,
the Company had approximately 7.5 million shares remaining for stock repurchases under the existing Board authorization.
The Company expects to fund any future stock repurchases using the Company's available cash balance or proceeds from the
issuance of commercial paper.
Dividends
The Company declared a regular dividend of $0.025 per share that was paid on December 28, 2012 to holders of record on
December 14, 2012. Aggregate cash payments for dividends during 2012 were approximately $86 million. Dividend payments
were higher in 2012 as compared to 2011 because the Company's Board determined to accelerate the quarterly dividend
payment that normally would have been paid in January 2013 and paid it in December 2012 instead.
Cash and Cash Requirements
As of December 31, 2012, the Company held $1.7 billion of cash and cash equivalents that were invested in highly liquid
investment grade debt instruments with a maturity of 90 days or less with an approximate weighted average annual interest rate
of 0.3%. $625 million of this amount was held within the United States and $1.1 billion was held outside of the United States.
The Company will continue to have cash requirements to support working capital needs, capital expenditures and acquisitions,
to pay interest and service debt, pay taxes, fund its restructuring activities and pension plans as required, repurchase shares of
the Company’s common stock, pay dividends to shareholders and support other business needs. The Company generally
intends to use available cash and internally generated funds to meet these cash requirements, but in the event that additional
liquidity is required, particularly in connection with acquisitions, the Company may also borrow under its commercial paper
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program or the Credit Facility, enter into new credit facilities and either borrow directly thereunder or use such credit facilities
to backstop additional borrowing capacity under its commercial paper program and/or access the capital markets as needed.
The Company also may from time to time access the capital markets to take advantage of favorable interest rate environments
or other market conditions. With respect to the Eurobond Notes and the 2013 Notes, each of which matures in 2013, the
Company expects to repay the principal amounts when due under these notes using available cash, proceeds from the issuance
of commercial paper and/or proceeds from other debt issuances.
While repatriation of some cash held outside the United States may be restricted by local laws, most of the Company's foreign
cash balances could be repatriated to the United States but, under current law, could be subject to U.S. federal income taxes,
less applicable foreign tax credits. For most of its foreign subsidiaries, the Company makes an election regarding the amount
of earnings intended for indefinite reinvestment, with the balance available to be repatriated to the United States. A deferred
tax liability has been accrued for the funds that are available to be repatriated to the United States. No provisions for U.S.
income taxes have been made with respect to earnings that are planned to be reinvested indefinitely outside the United States,
and the amount of U.S. income taxes that may be applicable to such earnings is not readily determinable given the various tax
planning alternatives the Company could employ if it repatriated these earnings. The cash that our foreign subsidiaries hold for
indefinite reinvestment is generally used to finance foreign operations and investments, including acquisitions. As of
December 31, 2012 and 2011, the total amount of earnings planned to be reinvested indefinitely outside the United States for
which deferred taxes have not been provided was approximately $9.3 billion and $7.8 billion, respectively. As of December 31,
2012, management believes that is has sufficient liquidity to satisfy its cash needs, including its cash needs in the United States.
During 2012, the Company contributed approximately $55 million to its U.S. defined benefit pension plan and approximately
$53 million to its non-U.S. defined benefit pension plans. During 2013, the Company’s cash contribution requirements for its
U.S. defined benefit pension plan are not expected to be significant and the Company’s cash contribution requirements for its
non-U.S. defined benefit pension plans are expected to be approximately $52 million. The ultimate amounts to be contributed
depend upon, among other things, legal requirements, underlying asset returns, the plan’s funded status, the anticipated tax
deductibility of the contribution, local practices, market conditions, interest rates and other factors.
Contractual Obligations
The following table sets forth, by period due or year of expected expiration, as applicable, a summary of the Company’s
contractual obligations relating to continuing operations as of December 31, 2012 under (1) long-term debt obligations,
(2) leases, (3) purchase obligations and (4) other long-term liabilities reflected on the Company’s balance sheet under GAAP.
The amounts presented in the table below do not reflect $592 million of gross unrecognized tax benefits, the timing of which is
uncertain. Refer to Note 13 to the Consolidated Financial Statements for additional information on unrecognized tax benefits.
($ in millions)
Debt & Leases:
Long-Term Debt Obligations (a)(b)
Capital Lease Obligations (b)
Total Long-Term Debt
Interest Payments on Long-Term Debt and
Capital Lease Obligations (c)
Operating Lease Obligations (d)
Other:
Purchase Obligations (e)
Other Long-Term Liabilities Reflected on the
Company’s Balance Sheet Under GAAP (f)
Total
Total
Less Than
One Year
1-3 Years
3-5 Years
More Than
5 Years
$
5,292.8
$
46.0
$
427.8
$
2,684.3
$
2,134.7
50.3
5,343.1
771.6
750.1
9.5
55.5
138.4
201.2
898.7
851.3
3,695.5
—
7.8
435.6
229.3
286.8
43.9
759.8
18.3
2,702.6
14.7
2,149.4
199.1
162.8
3.0
626.2
204.8
99.3
0.5
2,309.5
4,763.5
$
11,459.0
$
1,246.4
$
1,755.4
$
3,693.7
$
(a) As described in Note 10 to the Consolidated Financial Statements.
(b) Amounts do not include interest payments. Interest on long-term debt and capital lease obligations is reflected in a
(c)
separate line in the table.
Interest payments on long-term debt are projected for future periods using the interest rates in effect as of December 31,
2012. Certain of these projected interest payments may differ in the future based on changes in market interest rates.
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(d) As described in Note 15 to the Consolidated Financial Statements, certain leases require the Company to pay real estate
taxes, insurance, maintenance and other operating expenses associated with the leased premises. These future costs are not
included in the schedule above.
(e) Consist of agreements to purchase goods or services that are enforceable and legally binding on the Company and that
specify all significant terms, including fixed or minimum quantities to be purchased, fixed, minimum or variable price
provisions and the approximate timing of the transaction.
(f) Primarily consist of obligations under product service and warranty policies and allowances, performance and operating
cost guarantees, estimated environmental remediation costs, self-insurance and litigation claims, post-retirement benefits,
pension obligations, deferred tax liabilities (excluding unrecognized tax benefits) and deferred compensation obligations.
The timing of cash flows associated with these obligations is based upon management’s estimates over the terms of these
arrangements and is largely based upon historical experience.
Off-Balance Sheet Arrangements
The following table sets forth, by period due or year of expected expiration, as applicable, a summary of off-balance sheet
commitments of the Company as of December 31, 2012.
($ in millions)
Guarantees
Amount of Commitment Expiration per Period
Total Amounts
Committed
Less Than
One Year
1-3 Years
4-5 Years
More Than
5 Years
$
355.4
$
286.4
$
39.0
$
12.7
$
17.3
Guarantees consist primarily of outstanding standby letters of credit, bank guarantees and performance and bid bonds. These
guarantees have been provided in connection with certain arrangements with vendors, customers, financing counterparties and
governmental entities to secure the Company’s obligations and/or performance requirements related to specific transactions.
Other Off-Balance Sheet Arrangements
The Company has from time to time divested certain of its businesses and assets. In connection with these divestitures, the
Company often provides representations, warranties and/or indemnities to cover various risks and unknown liabilities, such as
claims for damages arising out of the use of products or relating to intellectual property matters, commercial disputes,
environmental matters or tax matters. The Company has not included any such items in the contractual obligations table above
because they relate to unknown conditions and the Company cannot estimate the potential liabilities from such matters, but the
Company does not believe it is reasonably possible that any such liability will have a material effect on the Company’s
financial statements. In addition, as a result of these divestitures, as well as restructuring activities, certain properties leased by
the Company have been sublet to third parties. In the event any of these third parties vacates any of these premises, the
Company would be legally obligated under master lease arrangements. The Company believes that the financial risk of default
by such sub-lessors is individually and in the aggregate not material to the Company’s financial statements.
In the normal course of business, the Company periodically enters into agreements that require it to indemnify customers,
suppliers or other business partners for specific risks, such as claims for injury or property damage arising out of the
Company’s products or claims alleging that Company products infringe third-party intellectual property. The Company has not
included any such indemnification provisions in the contractual commitments table above. Historically, the Company has not
experienced significant losses on these types of indemnification obligations.
The Company’s Restated Certificate of Incorporation requires it to indemnify to the full extent authorized or permitted by law
any person made, or threatened to be made a party to any action or proceeding by reason of his or her service as a director or
officer of the Company, or by reason of serving at the request of the Company as a director or officer of any other entity,
subject to limited exceptions. Danaher’s Amended and Restated By-laws provide for similar indemnification rights. In
addition, Danaher has executed with each director and executive officer of Danaher Corporation an indemnification agreement
which provides for substantially similar indemnification rights and under which Danaher has agreed to pay expenses in advance
of the final disposition of any such indemnifiable proceeding. While the Company maintains insurance for this type of liability,
a significant deductible applies to this coverage and any such liability could exceed the amount of the insurance coverage.
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Legal Proceedings
Please refer to Note 16 to the Consolidated Financial Statements included in this Annual Report for information regarding
certain litigation matters.
In addition to the litigation matters noted under “Item 1. Business – Regulatory Matters – Environmental, Health & Safety”, the
Company is, from time to time, subject to a variety of litigation and similar proceedings incidental to its business (or the
business operations of previously owned entities). These lawsuits primarily involve claims for damages arising out of the use
of the Company’s products and services and claims relating to intellectual property matters, employment matters, tax matters,
commercial disputes, competition and sales and trading practices, personal injury and insurance coverage. The Company may
also become subject to lawsuits as a result of past or future acquisitions or as a result of liabilities retained from, or
representations, warranties or indemnities provided in connection with, divested businesses. Some of these lawsuits may
include claims for punitive and consequential, as well as compensatory damages. Based upon the Company’s experience,
current information and applicable law, it does not believe it is reasonably possible that these proceedings and claims will have
a material effect on its financial statements.
While the Company maintains general, products, property, workers’ compensation, automobile, cargo, aviation, crime,
fiduciary and directors’ and officers’ liability insurance (and has acquired rights under similar policies in connection with
certain acquisitions) up to certain limits that cover certain of these claims, this insurance may be insufficient or unavailable to
cover such losses. For general, products and property liability and most other insured risks, the Company purchases outside
insurance coverage only for severe losses (“stop loss” insurance) and must establish and maintain reserves with respect to
amounts within the self-insured retention. In addition, while the Company believes it is entitled to indemnification from third
parties for some of these claims, these rights may also be insufficient or unavailable to cover such losses.
In accordance with accounting guidance, the Company records a liability in the consolidated financial statements for loss
contingencies when a loss is known or considered probable and the amount can be reasonably estimated. If the reasonable
estimate of a known or probable loss is a range, and no amount within the range is a better estimate than any other, the
minimum amount of the range is accrued. If a loss does not meet the known or probable level but is reasonably possible and a
loss or range of loss can be reasonably estimated, the estimated loss or range of loss is disclosed. The Company's reserves
consist of specific reserves for individual claims and additional amounts for anticipated developments of these claims as well as
for incurred but not yet reported claims. The specific reserves for individual known claims are quantified with the assistance of
legal counsel and outside risk professionals where appropriate. In addition, outside risk professionals assist in the
determination of reserves for incurred but not yet reported claims through evaluation of the Company’s specific loss history,
actual claims reported and industry trends among statistical and other factors. Reserve estimates are adjusted as additional
information regarding a claim becomes known. Because most contingencies are resolved over long periods of time, liabilities
may change in the future due to new developments (including litigation developments, the discovery of new facts, changes in
legislation and outcomes of similar cases), changes in assumptions or changes in our settlement strategy. While the Company
actively pursues financial recoveries from insurance providers, it does not recognize any recoveries until realized or until such
time as a sustained pattern of collections is established related to historical matters of a similar nature and magnitude. If the
Company’s self-insurance and litigation reserves prove inadequate, it would be required to incur an expense equal to the
amount of the loss incurred in excess of the reserves, which would adversely affect the Company’s net earnings. Please see
Note 9 to the Consolidated Financial Statements for information about the amount of our accruals for self-insurance and
litigation liability.
For a discussion of additional risks related to legal proceedings, please refer to “Item 1A. Risk Factors.”
CRITICAL ACCOUNTING ESTIMATES
Management’s discussion and analysis of the Company’s financial condition and results of operations are based upon the
Company’s Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally
accepted in the United States. The preparation of these financial statements requires management to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent
assets and liabilities. The Company bases these estimates and judgments on historical experience, the current economic
environment and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may
differ from these estimates and judgments.
The Company believes the following accounting estimates are most critical to an understanding of its financial statements.
Estimates are considered to be critical if they meet both of the following criteria: (1) the estimate requires assumptions about
material matters that are uncertain at the time the estimate is made, and (2) material changes in the estimate are reasonably
likely from period to period. For a detailed discussion on the application of these and other accounting estimates, refer to Note
1 in the Company’s Consolidated Financial Statements.
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Accounts Receivable. The Company maintains allowances for doubtful accounts to reflect probable credit losses inherent in its
portfolio of receivables. Determination of the allowances requires management to exercise judgment about the timing,
frequency and severity of credit losses that could materially affect the allowances for doubtful accounts and, therefore, net
income. The allowances for doubtful accounts represent management’s best estimate of the credit losses expected from the
Company’s trade accounts, contract and finance receivable portfolios based on ongoing assessments and evaluations of
collectability and historical loss experience. The level of the allowances is based on many quantitative and qualitative factors
including historical loss experience by receivable type, portfolio duration, delinquency trends, economic conditions and credit
risk quality. The Company regularly performs detailed reviews of its accounts receivable portfolio to determine if an
impairment has occurred and to assess the adequacy of the allowances. Additions to the allowances for doubtful accounts are
charged to current period earnings; amounts determined to be uncollectible are charged directly against the allowances, while
amounts recovered on accounts previously determined to be uncollectible increase the allowances. If the financial condition of
the Company’s customers were to deteriorate resulting in an impairment of their ability to make payments, additional
allowances would be required and net earnings would be adversely impacted.
Inventories. The Company records inventory at the lower of cost or market value. The Company estimates the market value of
its inventory based on assumptions for future demand and related pricing. Estimating the market value of inventory is
inherently uncertain because levels of demand, technological advances and pricing competition in many of the Company’s
markets can fluctuate significantly from period to period due to circumstances beyond the Company’s control. As a result, such
fluctuations can be difficult to predict. If actual market conditions are less favorable than those projected by management, the
Company could be required to reduce the value of its inventory, which would adversely impact the Company’s financial
statements.
Acquired Intangibles. The Company’s business acquisitions typically result in the recognition of goodwill, in-process research
and development ("IPR&D") and other intangible assets, which affect the amount of future period amortization expense and
possible impairment charges that the Company may incur. The Company does not amortize goodwill but does amortize certain
identifiable intangible assets, primarily customer relationships and acquired technology, over the estimated useful life of the
identified asset. IPR&D is initially capitalized at fair value as an indefinite-lived intangible asset and is subject to annual
impairment reviews or more often upon the occurrence of certain events. When the IPR&D project is complete, the asset is
reclassified as a finite-lived intangible asset and amortized over the asset's 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.
During 2012, accounting guidance became effective that simplifies how entities test goodwill for impairment. The guidance
permits the Company to first assess qualitative factors to determine whether it is more likely than not (defined as having a
likelihood of more than 50 percent) that the fair value of a reporting unit is less than its carrying amount as a basis for
determining whether it is necessary to perform the two-step goodwill impairment test. Alternatively, the Company may decide
to proceed directly to the two-step goodwill impairment test. The Company may resume performing the qualitative assessment
in any subsequent period. For 2012, the Company elected to bypass the optional qualitative assessment and performed a
quantitative impairment test for all reporting units as this was determined to be the most efficient method to assess for
impairment across a large spectrum of reporting units.
On an annual basis (the first day of the Company’s fiscal fourth quarter) the Company quantitatively estimates the fair value of
each of its reporting units and compares the estimated fair value of each reporting unit to its carrying value. If the estimated
fair value of the reporting unit is less than its carrying value, the Company must perform additional analysis to determine if the
reporting unit’s goodwill has been impaired. If circumstances or events prior to the date of the required annual assessment
indicate that, in management’s judgment, it is more likely than not that there has been diminution of fair value of a reporting
unit below its carrying value, the Company performs an impairment analysis at the time of such circumstance or event.
The Company estimates the fair value of its reporting units primarily using a market based approach. The Company estimates
fair value based on earnings before interest, taxes, depreciation and amortization (“EBITDA”) multiples determined by current
trading market multiples of earnings for companies operating in businesses similar to each of the Company’s reporting units, in
addition to recent market available precedent transactions of comparable businesses. In evaluating the estimates derived by the
market based approach, management assesses the relevance and reliability of the multiples by considering factors unique to its
reporting units, including operating results, business plans, economic projections, anticipated future cash flows, and
transactions and marketplace data. In certain circumstances the Company also estimates fair value utilizing a discounted cash
flow analysis (i.e., an income approach) in order to validate the results of the market approach. The discounted cash flow
model requires judgmental assumptions about projected revenue growth, future operating margins, discount rates and terminal
values. There are inherent uncertainties related to these assumptions and management’s judgment in applying them to the
analysis of goodwill impairment. If the estimated fair value of the reporting unit is less than its carrying value, the Company
must perform additional analysis to determine if the reporting unit's goodwill has been impaired.
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While the Company believes it has made reasonable estimates and assumptions to calculate the fair value of its reporting units,
if actual results are not consistent with management’s estimates and assumptions, goodwill and other intangible assets may be
overstated and a charge would need to be taken against net earnings.
As of December 31, 2012, the Company had twenty-one reporting units for goodwill impairment testing. The carrying value of
the goodwill included in each individual reporting unit ranges from $7 million to $3.9 billion. The Company’s annual goodwill
impairment analysis in 2012 indicated that in all instances, the fair value of the Company’s reporting units exceeded their
carrying values and consequently did not result in an impairment charge. The excess of the estimated fair value over carrying
value (expressed as a percentage of carrying value for the respective reporting unit) for each of the Company’s reporting units
as of the annual testing date ranged from approximately 27% to approximately 804%. In order to evaluate the sensitivity of the
fair value calculations used in the goodwill impairment test, the Company applied a hypothetical 10% decrease to the fair
values of each reporting unit and compared those values to the reporting unit carrying values. Based on this hypothetical 10%
decrease, the excess of the estimated fair value over carrying value (expressed as a percentage of carrying value for the
respective reporting unit) for each of the Company’s reporting units ranged from approximately 15% to approximately 714%.
Reporting units resulting from recent acquisitions generally present the highest risk of impairment. Management believes the
impairment risk associated with these reporting units decreases as these businesses are integrated into the Company and better
positioned for potential future earnings growth.
Contingent Liabilities. As discussed above under “—Legal Proceedings”, the Company is, from time to time, subject to a
variety of litigation and similar contingent liabilities incidental to its business (or the business operations of previously owned
entities). The Company recognizes a liability for any contingency that is probable of occurrence and reasonably estimable.
These assessments require judgments concerning matters such as litigation developments and outcomes, the anticipated
outcome of negotiations, the number of future claims and the cost of both pending and future claims. In addition, because most
contingencies are resolved over long periods of time, liabilities may change in the future due to various factors, including those
discussed above under “—Legal Proceedings”. If the reserves established by the Company with respect to these contingent
liabilities are inadequate, the Company would be required to incur an expense equal to the amount of the loss incurred in excess
of the reserves, which would adversely affect the Company’s financial statements.
Revenue Recognition: The Company derives revenues from the sale of products and services. For revenue related to a product
or service to qualify for recognition, there must be persuasive evidence of a sale, delivery must have occurred or the services
must have been rendered, the price to the customer must be fixed and determinable and collectability of the balance must be
reasonably assured. Refer to Note 1 to the Company’s Consolidated Financial Statements for a description of the Company’s
revenue recognition policies. Although most of the Company’s sales agreements contain standard terms and conditions, certain
agreements contain multiple elements or non-standard terms and conditions. As a result, judgment is sometimes required to
determine the appropriate accounting, including whether the deliverables specified in these agreements should be treated as
separate units of accounting for sales recognition purposes, and, if so, how the sales price should be allocated among the
elements and when to recognize sales for each element. For fiscal 2011 and future periods, revenues for contractual
arrangements consisting of multiple elements (i.e. deliverables) are recognized for the separate elements when the product or
services that are part of the multiple element arrangement have value on a stand-alone basis and, in arrangements that include a
general right of refund relative to the delivered element, performance of the undelivered element is considered probable and
substantially in the Company’s control. The Company allocates revenue to each element in the contractual arrangement based
on a selling price hierarchy that, in some instances, may require the Company to estimate the selling price of certain
deliverables that are not sold on a stand-alone basis or where third party evidence of pricing is not observable. The Company’s
estimate of selling price impacts the amount and timing of revenue recognized in multiple element arrangements. For
transactions entered into prior to fiscal year 2011, revenue for multiple element arrangements was recognized for the separate
elements when the product or services that are part of the multiple element arrangement had value on a stand-alone basis, fair
value of the separate elements exists (or in the case of software related products, vendor specific objective evidence of fair
value) and, in arrangements that include a general right of refund relative to the delivered element, performance of the
undelivered element was considered probable and substantially in the Company’s control. A portion of the Company’s
revenues relate to lease payment arrangements, which require the Company to evaluate whether to account for the arrangement
as an operating or sales type lease. Certain of the Company’s lease contracts are customized for larger customers and often
result in complex terms and conditions that typically require significant judgment in applying the lease accounting criteria.
Stock-Based Compensation: The Company accounts for stock-based compensation by measuring the cost of employee services
received in exchange for all equity awards granted, including stock options, restricted stock units (“RSUs”) and restricted
shares, based on the fair value of the award as of the grant date. For a description of the Company’s stock-based compensation
accounting practices, refer to Note 17 to the Company’s Consolidated Financial Statements. Determining the appropriate fair
value model and calculating the fair value of stock-based payment awards require subjective assumptions, including the
expected life of the awards and stock price volatility. The assumptions used in calculating the fair value of stock-based
payment awards represent the Company’s best estimates, but these estimates involve inherent uncertainties and the application
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of management judgment. As a result, if factors change and the Company uses different assumptions, the Company’s equity-
based compensation expense could be materially different in the future. In addition, the Company is required to estimate the
expected forfeiture rate and recognize expense only for those shares expected to vest. If the Company’s actual forfeiture rate
during a reporting period is materially different than its estimate, the Company’s earnings may be significantly impacted as the
Company records the effect of actual experience in the period it occurs.
Pension and Other Post-retirement Benefits: Certain of the Company’s employees and retired employees are covered by
defined benefit pension plans (“pension plans”) and certain eligible retirees are entitled to health care and life insurance
benefits under post-retirement benefit plans (“post-retirement plans”). The Company measures its pension and post retirement
plans’ assets and obligations as of the end of each year to determine the funded status of each plan. The Company recognizes
an asset for a plan’s overfunded status or a liability for a plan’s underfunded status in its balance sheet. Changes in the funded
status of the plans are recognized in the year in which the changes occur and are reported in comprehensive income.
Accounting standards require that the amounts the Company records, including the expense or income, associated with the
pension and post-retirement plans be computed using actuarial valuations. For a description of the Company's pension benefit
accounting practices, refer to Notes 11 and 12 to the Company's Consolidated Financial Statements.
Calculations of the amount of pension and other post-retirement benefit costs and obligations depend on the assumptions used
in the actuarial valuations, including assumptions regarding discount rates, expected return on plan assets, rates of salary
increases, health care cost trend rates, mortality rates, and other factors. Upon the sale of the KEO business during 2012, the
Danaher U.S. defined benefit pension plan became fully frozen and plan participants are therefore no longer accruing benefits
under this plan. In connection with this triggering event, the Company updated the loss amortization period for actuarial gains
and losses in the plan to record them over the remaining life expectancy of the plan participants, rather than over the average
future working lifetime of the plan participants as had been the case before the plan became fully frozen. In addition, the
Company updated the mortality assumptions used to estimate the projected benefit obligation to reflect updated mortality tables
which extend the life expectancy of the participants. The impact of these changes will reduce pension expense in 2013 by $29
million compared to what would have been recorded had these changes not been made. While the Company believes that the
assumptions used in calculating its pension and other post-retirement benefits costs and obligations are appropriate, changes in
the assumptions (as a result of differences in actual experience, changes in key economic indicators or other factors) the
Company’s financial statements could be materially impacted. A 50 basis point reduction in the discount rates used for the
plans would have increased the U.S. net obligation by $158 million ($99 million on an after tax basis) and the non-U.S. net
obligation by $106 million ($79 million on an after tax basis) from the amounts recorded in the financial statements at
December 31, 2012.
For 2012, the expected long-term rate of return assumption applicable to assets held in the U.S. plan has been estimated at
7.50%. This expected rate of return reflects the asset allocation of the plan and the expected long-term returns on equity and
debt investments included in plan assets. The U.S. plan targets to invest between 60% and 70% of its assets in equity portfolios
which are invested in funds that are expected to mirror broad market returns for equity securities or in assets with
characteristics similar to equity investments. The balance of the asset portfolio is generally invested in bond funds. If the
expected long-term rate of return on plan assets for 2012 was reduced by 50 basis points, pension expense for the U.S. and non-
U.S. plans for 2012 would have increased $12 million (or $8 million on an after-tax basis). The Company intends to use an
expected long-term rate of return assumption of 7.5% for 2013 for its U.S. plan. The Company’s non-U.S. plan assets consist
of various insurance contracts, equity and debt securities as determined by the administrator of each plan. The estimated long-
term rate of return for the non-U.S. plans was determined on a plan by plan basis based on the nature of the plan assets and
ranged from 1.25% to 7.10%.
For a discussion of the Company’s 2012 and anticipated 2013 defined benefit pension plan contributions, please see “—
Liquidity and Capital Resources—Cash and Cash Requirements”.
Income Taxes: The Company’s income tax expense represents the current tax liability for the year and the tax benefit or
expense for the net change in deferred tax liabilities and assets during the year. Deferred tax liabilities and assets are
determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted rates
expected to be in effect during the year in which the differences reverse. Deferred tax assets generally represent items that can
be used as a tax deduction or credit in the Company’s tax return in future years for which the tax benefit has already been
reflected on the Company’s Consolidated Statement of Earnings. For a description of the Company's income tax accounting
policies, refer to Note 1 to the Company's Consolidated Financial Statements. The Company establishes valuation allowances
for its deferred tax assets if it is more likely than not that some or all of the deferred tax asset will not be realized. Judgment is
required in estimating valuation allowances. The determination of the amount of valuation allowance to be provided on
recorded deferred tax assets involves estimates regarding: (1) the timing and amount of the reversal of taxable temporary
differences, (2) expected future taxable income, and (3) the impact of tax planning strategies, and can also be impacted by
changes to tax laws. Deferred tax liabilities generally represent items that have already been taken as a deduction on the
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Company’s tax return but have not yet been recognized as an expense in the Company’s Consolidated Statements of Earnings.
The effect on deferred tax assets and liabilities due to a change in tax rates is recognized in income tax expense in the period
that includes the enactment date.
The Company accounts for uncertain tax positions by recognizing the financial statement effects of a tax position only when,
based upon the technical merits, it is “more-likely-than-not” that the position will be sustained upon examination. Judgment is
required in evaluating tax positions and determining income tax provisions. The Company generally re-evaluates the technical
merits of its tax positions and recognizes an uncertain tax benefit when: (i) there is completion of tax audit; (ii) there is a
change in applicable tax law including a tax case ruling or legislative guidance; or (iii) there is an expiration of the statute of
limitations.
An increase in our nominal tax rate of 1.0% would have resulted in an additional income tax provision for continuing
operations for the fiscal year ended December 31, 2012 of approximately $30 million.
NEW ACCOUNTING STANDARDS
In February 2013, updated accounting guidance was issued which adds new disclosure requirements for items reclassified out
of accumulated other comprehensive income. The guidance does not amend any existing requirements for reporting net income
or other comprehensive income in the financial statements. This guidance is effective prospectively for reporting periods
beginning after December 15, 2012, with early adoption permitted. As this new guidance is related to presentation only, the
implementation of this guidance in the first quarter of fiscal year 2013 will not have a material impact on the Company's results
of operations, financial position or cash flows.
In July 2012, updated accounting guidance was issued which allows entities to perform a qualitative assessment by applying a
more likely than not scenario (defined as having a likelihood of more than 50 percent) to determine whether an indefinite-lived
intangible asset is impaired. The guidance is effective for indefinite-lived intangible asset impairment tests performed in
interim and annual periods for fiscal years beginning after September 15, 2012, with early adoption permitted. The
implementation of this guidance is not expected to have a material impact on the Company's results of operations, financial
position or cash flows.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required by this item is included under “Item 7. Management’s Discussion and Analysis of Financial
Condition and Results of Operations.”
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Report of Management on Danaher Corporation’s Internal Control Over Financial Reporting
The management of the Company is responsible for establishing and maintaining adequate internal control over financial
reporting for the Company. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) promulgated
under the Securities Exchange Act of 1934.
The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of
December 31, 2012. In making this assessment, the Company’s management used the criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission (“COSO”) in “Internal Control-Integrated Framework”. Based on this
assessment, management concluded that, as of December 31, 2012, the Company’s internal control over financial reporting is
effective.
The Company’s independent registered public accounting firm has issued an audit report on the effectiveness of the Company’s
internal control over financial reporting. This report dated February 22, 2013 appears on page 63 of this Form 10-K.
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The Board of Directors of Danaher Corporation:
Report of Independent Registered Public Accounting Firm
We have audited Danaher Corporation and subsidiaries’ internal control over financial reporting as of December 31, 2012,
based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission (the COSO criteria). Danaher Corporation and subsidiaries’ management is responsible for
maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control
over financial reporting included in the accompanying Report of Management on Danaher Corporation’s Internal Control Over
Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over financial reporting
based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal
control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and
operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, Danaher Corporation and subsidiaries maintained, in all material respects, effective internal control over
financial reporting as of December 31, 2012, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),
the consolidated balance sheets of Danaher Corporation and subsidiaries as of December 31, 2012 and 2011, and the related
consolidated statements of earnings, comprehensive income, stockholders’ equity, and cash flows for each of the three years in
the period ended December 31, 2012 and our report dated February 22, 2013 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
McLean, Virginia
February 22, 2013
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The Board of Directors of Danaher Corporation:
Report of Independent Registered Public Accounting Firm
We have audited the accompanying consolidated balance sheets of Danaher Corporation and subsidiaries as of December 31,
2012 and 2011, and the related consolidated statements of earnings, comprehensive income, stockholders’ equity, and cash
flows for each of the three years in the period ended December 31, 2012. Our audits also included the financial statement
schedule listed in the Index at Item 15(a). These financial statements and schedule are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial
position of Danaher Corporation and subsidiaries at December 31, 2012 and 2011, and the consolidated results of their
operations and their cash flows for each of the three years in the period ended December 31, 2012, in conformity with U.S.
generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth
therein.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States), Danaher Corporation’s internal control over financial reporting as of December 31, 2012, based on criteria established
in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
and our report dated February 22, 2013 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
McLean, Virginia
February 22, 2013
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DANAHER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
($ and shares in millions)
ASSETS
Current Assets:
Cash and equivalents
Trade accounts receivable, less allowance for doubtful accounts of $121.4 and $117.4,
respectively
Inventories
Prepaid expenses and other current assets
Total current assets
Property, plant and equipment, net
Investment in joint venture
Other assets
Goodwill
Other intangible assets, net
Total assets
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Notes payable and current portion of long-term debt
Trade accounts payable
Accrued expenses and other liabilities
Total current liabilities
Other long-term liabilities
Long-term debt
Stockholders’ Equity:
Common stock - $0.01 par value, 2.0 billion shares authorized; 774.6 and 761.1 issued;
687.5 and 687.7 outstanding, respectively
Additional paid-in capital
Retained earnings
Accumulated other comprehensive income (loss)
Total Danaher stockholders’ equity
Non-controlling interests
Total stockholders’ equity
Total liabilities and stockholders’ equity
As of December 31
2012
2011
$
1,678.7
$
537.0
$
$
3,267.3
1,813.4
828.4
7,587.8
2,140.9
548.3
858.0
15,462.0
6,344.0
3,049.9
1,781.4
904.1
6,272.4
2,101.0
521.9
739.7
14,474.3
5,840.2
32,941.0
$
29,949.5
55.5
$
1,546.3
2,604.3
4,206.1
4,363.4
5,287.6
7.7
3,688.1
15,379.9
(59.2)
19,016.5
67.4
19,083.9
98.4
1,422.4
2,651.2
4,172.0
3,598.9
5,206.8
7.6
3,877.2
13,056.9
(36.9)
16,904.8
67.0
16,971.8
29,949.5
$
32,941.0
$
See the accompanying Notes to the Consolidated Financial Statements.
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DANAHER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
($ and shares in millions, except per share data)
Sales
Cost of sales
Gross profit
Operating costs and other:
Selling, general and administrative expenses
Research and development expenses
Earnings from unconsolidated joint venture
Operating profit
Non-operating income (expense):
Gain on contribution of businesses to joint venture
Loss on early extinguishment of debt
Interest expense
Interest income
Earnings from continuing operations before income taxes
Income taxes
Net earnings from continuing operations
Earnings from discontinued operations, net of income taxes
Net earnings
Net earnings per share from continuing operations:
Basic
Diluted
Net earnings per share from discontinued operations:
Basic
Diluted
Net earnings per share:
Basic
Diluted
Average common stock and common equivalent shares outstanding:
Basic
Diluted
Year Ended December 31
$
$
2012
18,260.4
(8,846.1)
9,414.3
$
2011
16,090.5
(7,913.9)
8,176.6
2010
12,550.0
(6,145.5)
6,404.5
(5,181.2)
(1,137.9)
69.9
3,165.1
—
—
(157.5)
3.2
3,010.8
(711.5)
2,299.3
92.9
2,392.2
3.32
3.23
0.13
0.13
3.45
3.36
693.4
713.1
$
$
$
$
$
$
$
(4,607.7)
(1,018.5)
66.8
2,617.2
—
(32.9)
(141.6)
5.1
2,447.8
(512.5)
1,935.3
237.0
2,172.3
2.86
2.77
0.35
0.34
3.21
3.11
676.2
701.2
$
$
$
$
$
$
$
(3,603.7)
(774.0)
22.8
2,049.6
291.0
—
(117.1)
6.1
2,229.6
(511.4)
1,718.2
74.8
1,793.0
2.63
2.53
0.11
0.11
2.74
2.64
653.2
683.3
$
$
$
$
$
$
$
See the accompanying Notes to the Consolidated Financial Statements.
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DANAHER CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
($ in millions)
Net earnings
Other comprehensive income (loss), net of income taxes:
Foreign currency translation adjustments
Pension and post-retirement plan benefit adjustments
Unrealized gain on available-for-sale securities
Total other comprehensive loss, net of income taxes
Comprehensive income
Year Ended December 31
2012
2011
2010
$
2,392.2
$
2,172.3
$
1,793.0
90.8
(139.7)
26.6
(22.3)
2,369.9
$
(226.8)
(171.2)
15.7
(382.3)
1,790.0
$
0.6
(26.7)
24.6
(1.5)
1,791.5
$
See the accompanying Notes to the Consolidated Financial Statements.
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DANAHER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
($ and shares in millions)
Common Stock
Shares
Amount
Additional
Paid-
in Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Non-
Controlling
Interests
Balance, January 1, 2010
358.9
$
3.6
$
2,074.5
$
9,205.1
$
346.9
$
—
—
—
—
—
—
—
61.8
61.8
—
—
—
—
—
—
5.2
67.0
—
—
—
—
—
—
0.4
67.4
Net earnings for the year
Other comprehensive loss
Dividends declared
Common stock based award activity
Stock dividend
Common stock issued in connection with LYONs’
conversions
Non-controlling interest acquired
Balance, December 31, 2010
Net earnings for the year
Other comprehensive loss
Dividends declared
Common stock issuance
Common stock based award activity
Common stock issued in connection with LYONs’
conversions
Change in non-controlling interests
Balance, December 31, 2011
761.1
$
Net earnings for the year
Other comprehensive loss
Dividends declared
Common stock based award activity
Common stock issued in connection with LYONs’
conversions
Treasury stock purchase (12.5 shares)
Change in non-controlling interests
—
—
—
9.7
3.8
—
—
—
—
—
6.0
362.2
2.4
—
—
—
—
0.1
3.6
—
—
—
—
—
266.4
(3.6)
75.1
—
1,793.0
—
(52.2)
—
—
—
—
—
(1.5)
—
—
—
—
—
729.5
$
7.3
$
2,412.4
$
10,945.9
$
345.4
$
—
—
—
19.3
4.8
7.5
—
—
—
—
0.2
—
0.1
—
7.6
—
—
—
0.1
—
—
—
—
—
—
966.3
241.5
257.0
—
2,172.3
—
(61.3)
—
—
—
—
—
(382.3)
—
—
—
—
—
$
3,877.2
$
13,056.9
$
(36.9) $
—
—
—
321.7
137.6
(648.4)
—
2,392.2
—
(69.2)
—
—
—
—
—
(22.3)
—
—
—
—
—
Balance, December 31, 2012
774.6
$
7.7
$
3,688.1
$
15,379.9
$
(59.2) $
See the accompanying Notes to the Consolidated Financial Statements.
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DANAHER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in millions)
Cash flows from operating activities:
Net earnings
Less earnings from discontinued operations, net of income taxes
Net earnings from continuing operations
Non-cash items:
Depreciation
Amortization
Stock compensation expense
Earnings from unconsolidated joint venture, net of cash dividends received
Pre-tax gain on contribution of businesses to joint venture
Change in deferred income taxes
Change in trade accounts receivable, net
Change in inventories
Change in trade accounts payable
Change in prepaid expenses and other assets
Change in accrued expenses and other liabilities
Total operating cash provided by continuing operations
Total operating cash (used in) provided by discontinued operations
Net cash provided by operating activities
Cash flows from investing activities:
Payments for additions to property, plant and equipment
Proceeds from disposals of property, plant and equipment and other assets
Proceeds from contribution of businesses to joint venture
Cash paid for acquisitions
Total investing cash used in continuing operations
Total investing cash used in discontinued operations
Proceeds from sale of discontinued operations
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from the issuance of common stock
Payment of dividends
Purchase of treasury stock
Net proceeds from borrowings (maturities of 90 days or less)
Proceeds from borrowings (maturities longer than 90 days)
Repayments of borrowings (maturities longer than 90 days)
Net cash (used in) provided by financing activities
Effect of exchange rate changes on cash and equivalents
Net change in cash and equivalents
Beginning balance of cash and equivalents
Ending balance of cash and equivalents
Year Ended December 31
2012
2011
2010
$
2,392.2
$
2,172.3
$
92.9
2,299.3
497.8
342.0
109.9
(25.4)
—
184.9
(79.7)
69.8
57.0
(100.3)
146.8
3,502.1
(87.1)
3,415.0
(458.3)
30.0
—
(1,796.8)
(2,225.1)
—
337.5
237.0
1,935.3
350.7
284.3
95.6
(18.4)
—
271.4
(135.3)
162.0
36.6
(111.0)
(139.1)
2,732.1
(105.8)
2,626.3
(334.5)
8.6
14.8
(6,210.8)
(6,521.9)
(5.5)
680.1
1,793.0
74.8
1,718.2
189.7
198.6
88.1
(22.8)
(291.0)
37.6
(250.9)
(161.7)
217.2
67.5
228.2
2,018.7
65.7
2,084.4
(191.1)
1.6
56.5
(2,129.7)
(2,262.7)
(26.2)
—
(1,887.6)
(5,847.3)
(2,288.9)
212.0
(86.4)
(648.4)
195.9
—
(61.5)
(388.4)
2.7
1,141.7
537.0
1,112.5
(61.3)
—
854.0
1,785.8
(1,602.4)
2,088.6
36.4
(1,096.0)
1,633.0
$
1,678.7
$
537.0
$
178.4
(52.2)
—
—
—
(9.4)
116.8
(1.2)
(88.9)
1,721.9
1,633.0
See the accompanying Notes to the Consolidated Financial Statements.
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(1) BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business—Danaher Corporation (the “Company”) designs, manufactures and markets professional, medical, industrial and
commercial products and services, which are typically characterized by strong brand names, innovative technology and major
market positions. The Company operates in five business segments: Test & Measurement, Environmental, Life Sciences &
Diagnostics, Dental and Industrial Technologies. The Company’s Test & Measurement segment is a leading global provider of
electronic measurement instruments and monitoring, management and optimization tools for communications and enterprise
networks and related services. The segment’s products are used in the design, development, manufacture, installation,
deployment and operation of electronics equipment and communications networks and services. Also included in the Test &
Measurement segment are the Company’s mobile tool and wheel service businesses. The Company’s Environmental segment
provides products that help protect customers' water supply and air quality and serves two primary markets: water quality and
retail/commercial petroleum. The Company’s water quality business is a global leader in water quality analysis and treatment,
providing instrumentation and disinfection systems to help analyze and manage the quality of ultra pure water, potable water,
wastewater, ground water and ocean water in residential, commercial, industrial and natural resource applications. The
Company’s retail/commercial petroleum business is a leading worldwide provider of products and services for the retail/
commercial petroleum market including vapor recovery equipment and leak detection systems. In the Life Sciences &
Diagnostics segment, the Company’s diagnostics businesses offer a broad range of analytical instruments, reagents,
consumables, software and services that hospitals, physician’s offices, reference laboratories and other critical care settings use
to diagnose disease and make treatment decisions. The Company’s life sciences businesses offer a broad range of research and
clinical tools that are used by scientists to study cells and cell components to gain a better understanding of complex biological
matters. Pharmaceutical and biotechnology companies, universities, medical schools and research institutions use these tools to
study the causes of disease, identify new therapies and test new drugs and vaccines. The Company’s Dental segment is a
leading worldwide provider of a broad range of equipment, consumables and services for the dental market, focused on driving
technological innovations that help dental professionals improve clinical outcomes and enhance productivity. The Company’s
Industrial Technologies segment designs and manufactures components and systems that are typically incorporated by original
equipment manufacturers and system integrators for sale into a diverse set of applications and end-markets. The businesses in
this segment also provide service and support, including helping customers with integration and installation and providing
services to ensure performance and up-time. The Industrial Technologies segment consists of two strategic lines of business,
product identification and motion, as well as the sensors and controls, energetic materials and engine retarder businesses.
Accounting Principles—The consolidated financial statements include the accounts of the Company and its subsidiaries. All
intercompany balances and transactions have been eliminated upon consolidation. The consolidated financial statements also
reflect the impact of non-controlling interests. Non-controlling interests do not have a significant impact on the Company’s
consolidated results of operations, therefore earnings and earnings per share attributable to non-controlling interests are not
presented separately in the Company’s Consolidated Statements of Earnings. Earnings attributable to non-controlling interests
have been reflected in selling, general and administrative expenses and were insignificant in all periods presented.
Use of Estimates—The preparation of these financial statements in conformity with accounting principles generally accepted in
the United States requires management to make estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses, and related disclosure of contingent assets and liabilities. The Company bases these estimates on
historical experience, the current economic environment and on various other assumptions that are believed to be reasonable
under the circumstances. However, uncertainties associated with these estimates exist and actual results may differ from these
estimates.
Stock Split—On May 11, 2010, the Company’s Board of Directors approved a two-for-one stock split (effected in the form of a
dividend by issuing one additional share of common stock for each issued share of common stock) which was paid on June 10,
2010 to stockholders of record at the close of business on May 25, 2010. All prior period share and per share amounts set forth
in this report, including earnings per share and the weighted average number of shares outstanding for basic and diluted
earnings per share for each respective period, have been adjusted to reflect the stock split.
Cash and Equivalents—The Company considers all highly liquid investments with a maturity of three months or less at the date
of purchase to be cash equivalents.
Accounts Receivable and Allowances for Doubtful Accounts—All trade accounts, contract and finance receivables are reported
on the accompanying Consolidated Balance Sheets adjusted for any write-offs and net of allowances for doubtful accounts.
The allowances for doubtful accounts represent management’s best estimate of the credit losses expected from the Company’s
trade accounts, contract and finance receivable portfolios. Determination of the allowances requires management to exercise
judgment about the timing, frequency and severity of credit losses that could materially affect the provision for credit losses
and, therefore, net earnings. The Company regularly performs detailed reviews of its portfolios to determine if an impairment
has occurred and evaluates the collectability of receivables based on a combination of various financial and qualitative factors
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that may affect customers’ ability to pay, including customers’ financial condition, collateral, debt-servicing ability, past
payment experience and credit bureau information. In circumstances where the Company is aware of a specific customer’s
inability to meet its financial obligations, a specific reserve is recorded against amounts due to reduce the recognized receivable
to the amount reasonably expected to be collected. Additions to the allowances for doubtful accounts are charged to current
period earnings, amounts determined to be uncollectible are charged directly against the allowances, while amounts recovered
on previously written-off accounts increase the allowances. If the financial condition of the Company’s customers were to
deteriorate, resulting in an impairment of their ability to make payments, additional reserves would be required. The Company
does not believe that accounts receivable represent significant concentrations of credit risk because of the diversified portfolio
of individual customers and geographical areas. The Company recorded $40 million associated with doubtful accounts for each
of the years ended December 31, 2012 and 2011 and recorded $47 million in doubtful accounts in 2010.
Included in the Company’s trade accounts receivable and other long-term assets as of December 31, 2012 and 2011 are $175
million and $133 million of net aggregate financing receivables, respectively. All financing receivables are evaluated
collectively for impairment due to the homogeneous nature of the portfolio.
Inventory Valuation—Inventories include the costs of material, labor and overhead. Domestic inventories are stated at the
lower of cost or market primarily using the first-in, first-out (“FIFO”) method with certain businesses applying the last-in, first-
out method (“LIFO”) to value inventory. Inventories held outside the United States are stated at the lower of cost or market
primarily using the FIFO method.
Property, Plant and Equipment—Property, plant and equipment are carried at cost. The provision for depreciation has been
computed principally by the straight-line method based on the estimated useful lives of the depreciable assets as follows:
Category
Buildings
Leased assets and leasehold improvements
Machinery and equipment
Customer-leased instruments
Useful Life
30 years
Amortized over the lesser of the economic life of the
asset or the term of the lease
3 – 10 years
5 – 7 years
Estimated useful lives are periodically reviewed and, when appropriate, changes are made prospectively.
Investments—Investments over which the Company has a significant influence but not a controlling interest, are accounted for
using the equity method of accounting. Equity investments are recorded at the amount of the Company’s initial investment and
adjusted each period for the Company’s share of the investee’s income or loss and dividends paid. All equity investments are
periodically reviewed to determine if declines in fair value below cost basis are other-than-temporary. Significant and
sustained decreases in quoted market prices or a series of historic and projected operating losses by investees are strong
indicators of other-than-temporary declines. If the decline in fair value is determined to be other-than-temporary, an
impairment loss is recorded and the investment is written down to a new carrying value. Other investments relate to available-
for-sale securities and are carried at market value, if readily determinable, or at cost. Unrealized gains or losses on securities
classified as available-for-sale are recorded in stockholders’ equity as a component of accumulated other comprehensive
income (loss).
Other Assets—Other assets principally include, non-current trade receivables, non-current deferred tax assets, other
investments and capitalized costs associated with obtaining financings which are amortized over the term of the related debt.
Fair Value of Financial Instruments—The Company’s financial instruments consist primarily of cash and cash equivalents,
trade accounts receivable, available-for-sale securities, obligations under trade accounts payable and short and long-term debt.
Due to their short-term nature, the carrying values for cash and cash equivalents, trade accounts receivable and trade accounts
payable approximate fair value. Refer to Note 8 for the fair values of the Company’s available-for-sale securities and other
obligations.
Goodwill and Other Intangible Assets—Goodwill and other intangible assets result from the Company’s acquisition of existing
businesses. In accordance with accounting standards related to business combinations, goodwill is not amortized, however,
certain identifiable intangible assets, primarily customer relationships and acquired technology, are amortized over the
estimated useful life of the identified asset. Other intangible assets and in-process research and development ("IPR&D") are
subject to annual impairment reviews or more often upon the occurrence of certain events. IPR&D is initially capitalized at fair
value and when the IPR&D project is complete, the asset is reclassified as a finite-lived intangible asset and amortized over the
asset's estimated useful life. If an IPR&D project is abandoned, an impairment loss equal to the value of the intangible asset is
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recorded in the period of abandonment. Refer to Notes 2 and 7 for additional information about the Company's goodwill and
other intangible assets.
Revenue Recognition—As described above, the Company derives revenues primarily from the sale of test and measurement,
environmental, life science and diagnostic, dental and industrial technologies products and services. For revenue related to a
product or service to qualify for recognition, there must be persuasive evidence of an arrangement with a customer, delivery
must have occurred or the services must have been rendered, the price to the customer must be fixed and determinable and
collectability of the associated fee must be reasonably assured. The Company’s principal terms of sale are FOB Shipping Point
and, as such, the Company primarily records revenue for product sales upon shipment. Sales arrangements entered with
delivery terms that are not FOB Shipping Point are not recognized upon shipment and the delivery criteria for revenue
recognition is evaluated based on the associated shipping terms. If any significant obligation to the customer with respect to a
sales transaction remains to be fulfilled following shipment, typically involving obligations relating to installation and
acceptance by the buyer, revenue recognition is deferred until such obligations have been fulfilled. Returns for products sold
are estimated and recorded as a reduction in reported revenues at the time of sale. Customer allowances and rebates, consisting
primarily of volume discounts and other short-term incentive programs, are recorded as a reduction in reported revenues at the
time of sale because these allowances reflect a reduction in the purchase price. Product returns, customer allowances and
rebates are estimated based on historical experience and known trends. Revenue related to separately priced extended warranty
and product maintenance agreements is deferred when appropriate and recognized as revenue over the term of the agreement.
Certain of the Company’s revenues relate to operating-type lease (“OTL”) payment arrangements. When a customer enters into
an OTL agreement, instrument lease revenue is recognized on a straight-line basis over the life of the lease, while the cost of
the customer-leased instrument is recorded within property, plant and equipment in the accompanying Consolidated Balance
Sheets and depreciated over its estimated useful life. The depreciation expense is reflected in cost of sales in the accompanying
Consolidated Statements of Earnings. The OTLs are generally not cancellable until after the first two years. Certain of the
Company’s lease contracts are customized for larger customers and often result in complex terms and conditions that typically
require significant judgment in applying the criteria used to evaluate whether the arrangement should be considered an OTL or
a “sales-type” lease. A sales-type lease would result in earlier recognition of instrument revenue as compared to an OTL.
Effective January 1, 2011, the Company adopted, on a prospective basis, the provisions of recently updated accounting
standards related to revenue recognition associated with contractual arrangements involving multiple elements and contractual
arrangements involving tangible products that include software. Consistent with these revenue recognition standards, revenues
for contractual arrangements consisting of multiple elements (i.e., deliverables) are recognized for the separate elements when
the product or services that are part of the multiple element arrangement have value on a stand-alone basis and, in arrangements
that include a general right of refund relative to the delivered element, performance of the undelivered element is considered
probable and substantially in the Company’s control. Certain subsidiaries of the Company have multiple element arrangements
that include hardware, installation, training, consulting and/or post contract support (“PCS”) revenues. Generally, these are
delivered within the same reporting period, except PCS, for which revenue is recognized over the service period. The
Company allocates revenue to each element in the contractual arrangement based on a selling price hierarchy. The selling price
for a deliverable is based on its vendor-specific objective evidence (“VSOE”) if available, third-party evidence (“TPE”) if
VSOE is not available, or estimated selling price (“ESP”) if neither VSOE or TPE is available. The Company considers
relevant internal and external market factors in cases where the Company is required to estimate selling prices. Allocation of
the consideration is determined at the arrangements’ inception on the basis of each element’s relative selling price.
For transactions entered into prior to January 1, 2011, revenue for multiple element arrangements was recognized for the
separate elements when the product or services that are part of the multiple element arrangement had value on a stand-alone
basis, fair value of the separate elements existed (or in the case of software related products, vendor specific objective evidence
of fair value) and, in arrangements that include a general right of refund relative to the delivered element, performance of the
undelivered element was considered probable and substantially in the Company’s control. While determining fair value and
identifying separate elements requires judgment, generally the fair value of each separate element is identifiable as the elements
are also sold unaccompanied by other elements.
Shipping and Handling—Shipping and handling costs are included as a component of cost of sales. Revenue derived from
shipping and handling costs billed to customers are included in sales.
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Research and Development—The Company conducts research and development activities for the purpose of developing new
products, enhancing the functionality, effectiveness, ease of use and reliability of the Company’s existing products and
expanding the applications for which uses of the Company’s products are appropriate. Research and development costs are
expensed as incurred.
Income Taxes—The Company’s income tax expense represents the tax liability for the current year, the tax benefit or expense
for the net change in deferred tax liabilities and assets during the year, as well as reserves for unrecognized tax benefits and
return to provision adjustments. Deferred tax liabilities and assets are determined based on the difference between the financial
statement and tax basis of assets and liabilities using enacted rates expected to be in effect during the year in which the
differences reverse. Deferred tax assets generally represent items that can be used as a tax deduction or credit in the
Company’s tax return in future years for which the tax benefit has already been reflected on the Company’s Consolidated
Statements of Earnings. The Company establishes valuation allowances for its deferred tax assets if it is more likely than not
that some or all of the deferred tax asset will not be realized. Deferred tax liabilities generally represent items that have already
been taken as a deduction on the Company’s tax return but have not yet been recognized as an expense in the Company’s
Consolidated Statements of Earnings. The effect on deferred tax assets and liabilities due to a change in tax rates is recognized
in income tax expense in the period that includes the enactment date. The Company accounts for uncertain tax positions by
recognizing the financial statement effects of a tax position only when, based upon the technical merits, it is “more-likely-than-
not” that the position will be sustained upon examination. The Company recognizes potential accrued interest and penalties
associated with unrecognized tax positions in income tax expense. Refer to Note 13 for additional information.
Restructuring—The Company periodically initiates restructuring activities to appropriately position the Company’s cost base
relative to prevailing economic conditions and associated customer demand as well as in connection with certain acquisitions.
Costs associated with restructuring actions can include one-time termination benefits and related charges in addition to facility
closure, contract termination and other related activities. The Company records the cost of the restructuring activities when the
associated liability is incurred. Refer to Note 14 for additional information.
Foreign Currency Translation—Exchange rate adjustments resulting from foreign currency transactions are recognized in net
earnings, whereas effects resulting from the translation of financial statements are reflected as a component of accumulated
other comprehensive income (loss) within stockholders’ equity. Assets and liabilities of subsidiaries operating outside the
United States with a functional currency other than U.S. dollars are translated into U.S. dollars using year-end exchange rates
and income statement accounts are translated at weighted average rates. Net foreign currency transaction gains or losses were
not material in any of the years presented.
Derivative Financial Instruments—The Company is neither a dealer nor a trader in derivative instruments. The Company has
generally accepted the exposure to exchange rate movements without using derivative instruments to manage this risk. The
Company will periodically enter into foreign currency forward contracts not exceeding twelve months to mitigate a portion of
its foreign currency exchange risk. When utilized, the derivative instruments are recorded on the balance sheet as either an
asset or liability measured at fair value. To the extent the foreign currency forward contract qualifies as an effective hedge,
changes in fair value are recognized in other comprehensive income (loss) in stockholders’ equity. The Company’s use of
foreign currency forward contracts during 2012 was not significant and no such contracts were outstanding at December 31,
2012. The Company is also party to a foreign currency swap agreement acquired as a part of a business combination. The
currency swap does not qualify for hedge accounting, and, as a result, changes in the fair value of the currency swap are
reflected in earnings. Refer to Note 8 for additional information.
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Accumulated Other Comprehensive Income (Loss)—The components of accumulated other comprehensive income (loss) as of
December 31 are summarized below. Foreign currency translation adjustments are generally not adjusted for income taxes as
they relate to indefinite investments in non-U.S. subsidiaries ($ in millions).
January 1, 2010
Increase (decrease)
Income tax (expense) benefit
December 31, 2010
(Decrease) increase
Income tax (expense) benefit
December 31, 2011
Increase (decrease)
Income tax (expense) benefit
December 31, 2012
Foreign
currency
translation
adjustment
Unrealized
gain on
available-for-
sale securities
Unrecognized
pension and
post-retirement
costs
Total
$
610.7
$
54.3
$
0.6
—
611.3
(226.8)
—
384.5
90.8
—
$
475.3
$
37.9
(13.3)
78.9
30.0
(14.3)
94.6
42.5
(15.9)
121.2
$
(318.1) $
(37.8)
11.1
(344.8)
(261.9)
90.7
(516.0)
(224.6)
84.9
(655.7) $
346.9
0.7
(2.2)
345.4
(458.7)
76.4
(36.9)
(91.3)
69.0
(59.2)
See Notes 11 and 12 for additional information related to the unrecognized pension and post-retirement cost components and
Note 8 for the available-for-sale securities component of accumulated other comprehensive income (loss).
Accounting for Stock-Based Compensation—The Company accounts for stock-based compensation by measuring the cost of
employee services received in exchange for all equity awards granted, including stock options, restricted stock units (“RSUs”)
and restricted shares, based on the fair value of the award as of the grant date. Equity-based compensation expense is
recognized net of an estimated forfeiture rate on a straight-line basis over the requisite service period of the award, except that
in the case of RSUs, compensation expense is recognized using an accelerated attribution method.
Pension & Post-Retirement Benefit Plans—The Company measures its pension and post-retirement plans’ assets and its
obligations that determine the respective plan’s funded status as of the end of the Company’s fiscal year, and recognizes an
asset for a plan’s overfunded status or a liability for a plan’s underfunded status in its balance sheet. Changes in the funded
status of the plans are recognized in the year in which the changes occur and reported in comprehensive income (loss).
Recently Issued Accounting Pronouncements—In February 2013, updated accounting guidance was issued which adds new
disclosure requirements for items reclassified out of accumulated other comprehensive income. The guidance does not amend
any existing requirements for reporting net income or other comprehensive income in the financial statements. This guidance
is effective prospectively for reporting periods beginning after December 15, 2012, with early adoption permitted. As this new
guidance is related to presentation only, the implementation of this guidance in the first quarter of fiscal year 2013 will not have
a material impact on the Company's results of operations, financial position or cash flows.
In July 2012, updated accounting guidance was issued which allows entities to perform a qualitative assessment by applying a
more likely than not scenario (defined as having a likelihood of more than 50 percent) to determine whether an indefinite-lived
intangible asset is impaired. The guidance is effective for indefinite-lived intangible asset impairment tests performed in
interim and annual periods for fiscal years beginning after September 15, 2012, with early adoption permitted. The
implementation of this guidance is not expected to have a material impact on the Company's results of operations, financial
position or cash flows.
(2) ACQUISITIONS
The Company continually evaluates potential acquisitions that either strategically fit with the Company’s existing portfolio or
expand the Company’s portfolio into a new and attractive business area. The Company has completed a number of acquisitions
that have been accounted for as purchases and have resulted in the recognition of goodwill in the Company’s financial
statements. This goodwill arises because the purchase prices for these businesses reflect a number of factors including the
future earnings and cash flow potential of these businesses, the multiple to earnings, cash flow and other factors at which
similar businesses have been purchased by other acquirers, the competitive nature of the processes by which the Company
acquired the businesses and the complementary strategic fit and resulting synergies these businesses bring to existing
operations.
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The Company makes an initial allocation of the purchase price at the date of acquisition based upon its understanding of the
fair value of the acquired assets and assumed liabilities. The Company obtains this information during due diligence and
through other sources. In the months after closing, as the Company obtains additional information about these assets and
liabilities, including through tangible and intangible asset appraisals, and learns more about the newly acquired business, it is
able to refine the estimates of fair value and more accurately allocate the purchase price. Only items identified as of the
acquisition date are considered for subsequent adjustment. The Company is continuing to evaluate certain pre-acquisition
contingencies associated with certain of its 2012 acquisitions and is also in the process of obtaining valuations of acquired
intangible assets and certain acquisition related liabilities in connection with these acquisitions. The Company will make
appropriate adjustments to the purchase price allocation prior to completion of the measurement period, as required. The
Company evaluated whether any adjustments to the prior year purchase price allocations were material and concluded no
retrospective adjustment to prior year financial statements was required.
The following briefly describes the Company’s acquisition activity for the three years ended December 31, 2012.
The Company acquired fourteen businesses during 2012 for total consideration of $1.8 billion in cash, net of cash acquired.
The businesses acquired complement existing units of each of the Company's five segments. The aggregate annual sales of the
fourteen businesses acquired at the time of their respective acquisitions, in each case based on the company’s revenues for its
last completed fiscal year prior to the acquisition, were $666 million. The Company preliminarily recorded an aggregate of
$1.0 billion of goodwill related to these acquisitions.
On June 30, 2011, following the successful completion of the Company’s tender offer for all of the outstanding shares of
common stock of Beckman Coulter, Inc. (“Beckman Coulter”), the Company completed the acquisition of Beckman Coulter by
merging one of its indirect, wholly-owned subsidiaries with and into Beckman Coulter such that Beckman Coulter became an
indirect, wholly-owned subsidiary of the Company. Beckman Coulter develops, manufactures and markets products that
simplify and automate complex biomedical testing. Beckman Coulter’s diagnostic systems are found in hospitals and other
clinical settings around the world and produce information used by physicians to diagnose disease and make treatment
decisions. Scientists use its life science research instruments to study complex biological problems including causes of disease
and potential new therapies or drugs. Beckman Coulter had revenues of $3.7 billion in 2010, and is included in the Company’s
Life Sciences & Diagnostics segment from the acquisition date. The Company recorded an aggregate of $3.7 billion of
goodwill related to the acquisition of Beckman Coulter. The Company obtained control of Beckman Coulter on June 24, 2011
and, as a result, the earnings of Beckman Coulter are reflected in the Company’s results from June 25, 2011 forward.
The Company paid $5.5 billion in cash (net of $450 million of cash acquired) to acquire all of the outstanding shares of
common stock of Beckman Coulter and assumed $1.6 billion of indebtedness in connection with the acquisition. The Company
financed the acquisition of Beckman Coulter using (1) $2.3 billion of available cash, (2) net proceeds, after expenses and the
underwriters’ discount, of $966 million from the underwritten public offering of the Company’s common stock on June 21,
2011, (3) net proceeds, after expenses and the underwriters’ discount, of $1.8 billion from the underwritten public offering of
senior unsecured notes on June 23, 2011, and (4) net proceeds from the sale of additional commercial paper under the
Company’s U.S. commercial paper program prior to the closing of the acquisition.
In addition to the acquisition of Beckman Coulter, during 2011, the Company completed the acquisition of thirteen other
businesses (including the acquisition of EskoArtwork, a leading full service solutions provider for the digital packaging design
and production market), for total consideration of $669 million in cash, net of cash acquired. The additional businesses
acquired complement existing units of each of the Company's five segments. The aggregate annual sales of the businesses
acquired at the time of their respective acquisitions, in each case based on the acquired company’s revenues for its last
completed fiscal year prior to the acquisition, were $325 million. The Company recorded an aggregate of $419 million of
goodwill related to these acquisitions.
On January 30, 2010, the Company completed the acquisition of the Analytical Technologies division of MDS Inc., which
included a 50% ownership position in the AB Sciex joint venture and a 100% ownership position in Molecular Devices. In a
separate but related transaction, the Company simultaneously completed the acquisition of the remaining 50% ownership
position in AB Sciex from Life Technologies Corporation. The aggregate purchase price for the combined transactions was
$1.0 billion, including debt assumed and net of cash acquired. The aggregate sales of AB Sciex and Molecular Devices in their
last completed fiscal year prior to the acquisition were $650 million and these businesses now operate within the Company's
Life Sciences & Diagnostics segment.
In addition, during 2010, the Company completed the acquisition of seventeen other businesses for total consideration of $1.1
billion in cash, net of cash acquired. The additional businesses acquired complement existing units of each of the Company's
five segments. The aggregate annual sales of these seventeen acquired businesses at the time of their respective acquisitions, in
each case based on the company’s revenues for its last completed fiscal year prior to the acquisition, were $440 million. The
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Company recorded $1.2 billion of goodwill in connection with its 2010 acquisitions, including AB Sciex and Molecular
Devices.
The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition
for all acquisitions consummated during 2012, 2011 and 2010 ($ in millions):
Total
Trade accounts receivable
Inventories
Property, plant and equipment
Goodwill
Other intangible assets, primarily trade names, customer relationships and
patents
In-process research and development
Trade accounts payable
Other assets and liabilities, net
Assumed debt
Non-controlling interest acquired
Net cash consideration
2012
2011
2010
$
105.4
$
859.5
$
97.0
87.5
1,015.7
768.3
61.5
(50.8)
(287.7)
—
(0.1)
1,796.8
$
812.4
1,042.1
4,164.7
2,772.4
143.0
(278.2)
(1,662.9)
(1,640.4)
(1.8)
6,210.8
$
$
178.7
171.2
84.8
1,157.8
870.9
26.5
(59.6)
(238.4)
(0.9)
(61.3)
2,129.7
The following tables summarize the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition
for the individually significant acquisitions in 2011 and 2010 discussed above, and all of the other 2011 and 2010 acquisitions
as a group ($ in millions):
2011 Acquisitions
Trade accounts receivable
Inventories
Property, plant and equipment
Goodwill
Other intangible assets, primarily customer relationships, trade names
and patents
In-process research and development
Trade accounts payable
Other assets and liabilities, net
Assumed debt
Attributable to non-controlling interest
Net cash consideration
Beckman Coulter
783.3
$
$
774.0
1,036.2
3,745.8
2,518.0
143.0
(257.3)
(1,561.0)
(1,640.4)
—
$
5,541.6
$
Others
Total
76.2
38.4
5.9
418.9
254.4
—
(20.9)
(101.9)
—
(1.8)
669.2
$
$
859.5
812.4
1,042.1
4,164.7
2,772.4
143.0
(278.2)
(1,662.9)
(1,640.4)
(1.8)
6,210.8
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2010 Acquisitions
Trade accounts receivable
Inventories
Property, plant and equipment
Goodwill
Other intangible assets, primarily customer relationships, trade names
and patents
In-process research and development
Trade accounts payable
Other assets and liabilities, net
Assumed debt
Attributable to non-controlling interest
Net cash consideration
AB Sciex &
Molecular Devices
102.7
$
$
104.3
54.5
496.9
342.0
7.4
(37.9)
(30.7)
(0.9)
—
$
1,038.3
$
Others
Total
76.0
66.9
30.3
660.9
528.9
19.1
(21.7)
(207.7)
—
(61.3)
1,091.4
$
$
178.7
171.2
84.8
1,157.8
870.9
26.5
(59.6)
(238.4)
(0.9)
(61.3)
2,129.7
During 2011 and 2010, in connection with completed acquisitions, the Company incurred $57 million and $36 million,
respectively, of pre-tax transaction related costs, primarily banking fees, legal fees, amounts paid to other third party advisers
and change in control costs. In addition, the Company’s earnings for 2011 and 2010 reflect the impact of additional pre-tax
charges totaling $117 million and $54 million, respectively, associated with fair value adjustments to acquired inventory and
acquired deferred revenue related to significant acquisitions. Transaction related costs and acquisition related fair value
adjustments were not material to 2012 earnings.
Pro Forma Financial Information (Unaudited)
The unaudited pro forma information for the periods set forth below gives effect to the 2012 and 2011 acquisitions as if they
had occurred as of January 1, 2011. The pro forma information is presented for informational purposes only and is not
necessarily indicative of the results of operations that actually would have been achieved had the acquisitions been
consummated as of that time ($ in millions except per share amounts):
Sales
Net earnings from continuing operations
Diluted net earnings per share from continuing operations
2012
18,623.8
2,304.8
3.24
$
$
$
2011
18,635.6
2,038.9
2.88
$
$
$
The 2011 unaudited pro forma revenue and earnings set forth above were adjusted to exclude the impact of approximately $117
million in non-recurring acquisition date fair value adjustments to inventory and deferred revenue related to the Beckman
Coulter acquisition. Acquisition-related transaction costs associated with the Beckman Coulter transaction incurred by both the
Company and Beckman Coulter of approximately $60 million were also excluded from the 2011 pro-forma earnings.
(3) DISCONTINUED OPERATIONS
In January 2012, the Company completed the sale of its integrated scanning system business (the Accu-Sort ("ASI") business)
for a sale price of $132 million in cash. In addition, in February 2012, the Company completed the sale of its Kollmorgen
Electro-Optical ("KEO") business for a sale price of $205 million in cash. These businesses were part of the Industrial
Technologies segment. ASI supplies bar code scanning and dimensional measurement systems and KEO designs, develops,
manufactures and integrates highly engineered, stabilized electro-optical/ISR systems that integrate into submarines, surface
ships, and combat and ground vehicles. The businesses had combined annual revenues of $275 million in 2011. The Company
recorded an aggregate after-tax gain on the sale of these businesses of $94 million or $0.13 per diluted share in its first quarter
2012 results.
In April 2011, the Company completed the divestiture of its Pacific Scientific Aerospace (“PSA”) business for a sale price of
$680 million in cash. This business, which was also part of the Industrial Technologies segment and supplies safety, security
and electric power components to commercial and military aerospace markets globally, had annual revenues of $377 million in
2010. The Company recorded an after-tax gain on the sale of PSA of $202 million or $0.29 per diluted share in its second
quarter 2011 results.
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The Company has reported the PSA, ASI and KEO businesses as discontinued operations in its consolidated financial
statements. Accordingly, the results of operations for all periods presented reflect these businesses as discontinued operations
and the assets and liabilities of these businesses have been classified as held for sale for all periods presented. The Company
allocated a portion of the consolidated interest expense to discontinued operations based on the ratio of the discontinued
businesses’ net assets to the Company’s consolidated net assets.
The key components of income from discontinued operations for the years ended December 31 were as follows ($ in millions):
Net sales
Operating expenses
Allocated interest expense
(Loss) earnings before income taxes
Income tax benefit (expense)
(Loss) earnings from discontinued operations
Gain on sale, net of $55.0 million and $126.0 million of related income
taxes for the years ended December 31, 2012 and 2011, respectively
Earnings from discontinued operations, net of income taxes
2012
2011
2010
9.9
(11.2)
—
(1.3)
0.5
(0.8)
93.7
92.9
$
$
385.8
(328.3)
(2.0)
55.5
(20.2)
35.3
201.7
$
237.0
$
652.6
(535.9)
(3.6)
113.1
(38.3)
74.8
—
74.8
$
$
As of December 31, 2011, the aggregate components of assets and liabilities classified as discontinued operations and included
in other current assets and other current liabilities consisted of the following ($ in millions):
Trade accounts receivable, net
Inventories
Prepaid expenses and other
Property, plant & equipment, net
Goodwill and other intangibles, net
Total assets
Trade accounts payable
Accrued expenses and other
Total liabilities
$
$
$
$
82.7
10.5
9.3
31.5
104.0
238.0
32.7
47.8
80.5
(4) INVESTMENT IN JOINT VENTURE
On July 4, 2010, the Company entered into a joint venture with Cooper Industries, plc (“Cooper”), combining certain of the
Company’s hand tool businesses with Cooper’s Tools business to form a new entity called Apex Tool Group, LLC (“Apex”).
The 2009 sales, on a combined basis, of the two tools businesses contributed to Apex were approximately $1.2 billion. During
the period that Cooper and the Company owned Apex, each of Cooper and the Company owned a 50% interest in Apex and had
an equal number of representatives on Apex’s Board of Directors. Neither joint venture partner controlled the significant
operating and financing activities of Apex. Upon the closing of the joint venture formation, Apex simultaneously obtained a
credit facility and term debt financing and used $45 million of the term debt financing to purchase from the Company certain
assets of the Company’s hand tool businesses. In addition to the cash received for the purchase of these assets, the Company
recorded a receivable from Apex of $45 million upon closing which has been fully paid. As of the closing of the joint venture
formation, the Company deconsolidated the financial results of its contributed businesses and began accounting for its
investment in the joint venture based on the equity method of accounting.
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In accordance with accounting standards applicable to non-controlling interests in subsidiaries, the Company recognized a $232
million after-tax gain ($0.34 per diluted share) during the third quarter of 2010 associated with the transaction. The gain is
computed as the difference between the book value of the contributed businesses that were deconsolidated and the fair value of
the consideration received in exchange, including the 50% interest in Apex and the cash and receivables received from Apex in
connection with the transaction as indicated in the table below ($ in millions):
Fair value of consideration received:
Fair value of 50% equity interest received
Cash received
Receivable from joint venture
Total fair value of consideration received
Less book value of net assets contributed
Pre-tax gain on contribution to joint venture
Income tax expense
After-tax gain on contribution to joint venture
$
$
480.0
45.2
44.8
570.0
(279.0)
291.0
(58.8)
232.2
As a result of the Company’s continuing involvement with the joint venture, the contributed businesses were not presented as a
discontinued operation. The Company recorded its equity in the earnings of Apex in an amount equal to $70 million , $67
million and $23 million for the three years ended December 31, 2012, 2011 and 2010, respectively, reflecting its 50%
ownership position.
Sales and operating profit generated by the contributed business prior to the closing of the transaction and included in the
Company’s consolidated results of operations during the year ended December 31, 2010 were $316 million and $42 million,
respectively.
In February 2013, the Company and Cooper sold Apex to an unrelated third party for approximately $1.6 billion. The
Company expects to realize after-tax net proceeds of approximately $650 million and recognize an after-tax gain of
approximately $138 million or $0.19 per diluted share from the sale in the first quarter of 2013.
(5) INVENTORIES
The classes of inventory as of December 31 are summarized as follows ($ in millions):
Finished goods
Work in process
Raw materials
2012
2011
899.9
$
291.2
622.3
930.9
262.2
588.3
1,813.4
$
1,781.4
$
$
At December 31, 2012 and 2011, the difference between inventories valued at LIFO and the value of that same inventory if the
FIFO method had been used was not significant. The liquidation of LIFO inventory did not have a significant impact on the
Company’s results of operations in any period presented.
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Table of Contents
(6) PROPERTY, PLANT AND EQUIPMENT
The classes of property, plant and equipment as of December 31 are summarized as follows ($ in millions):
Land and improvements
Buildings
Machinery and equipment
Customer-leased instruments
Less accumulated depreciation
2012
2011
$
181.0
$
954.1
2,210.8
757.3
4,103.2
(1,962.3)
2,140.9
$
$
180.1
937.4
2,117.7
531.8
3,767.0
(1,666.0)
2,101.0
(7) GOODWILL & OTHER INTANGIBLE ASSETS
As discussed in Note 2, goodwill arises from the purchase price for acquired businesses exceeding the fair value of tangible and
intangible assets acquired less assumed liabilities and non-controlling interests. Management assesses the goodwill of each of
its reporting units for impairment at least annually at the beginning of the fourth quarter and as “triggering” events occur that
indicate that it is more likely than not that an impairment exists.
During 2012, accounting guidance became effective that simplifies how entities test goodwill for impairment. The guidance
permits the Company to first assess qualitative factors to determine whether it is more likely than not (defined as having a
likelihood of more than 50 percent) that the fair value of a reporting unit is less than its carrying amount as a basis for
determining whether it is necessary to perform the two-step goodwill impairment test. Alternatively, the Company may decide
to proceed directly to the two-step goodwill impairment test. The Company may resume performing the qualitative assessment
in any subsequent period. For 2012, the Company elected to bypass the optional qualitative assessment and performed a
quantitative impairment test for all reporting units as this was determined to be the most effective method to assess for
impairment across a large spectrum of reporting units.
The Company estimates the fair value of its reporting units primarily using a market based approach. The market based
approach is based on earnings before interest, taxes, depreciation and amortization (“EBITDA”) multiples determined by
current trading market multiples of earnings for companies operating in businesses similar to each of the Company's reporting
units, in addition to recent available market precedent transactions of comparable businesses. In evaluating the estimates
derived by the market based approach, management assesses the relevance and reliability of the multiples by considering
factors unique to its reporting units, including operating results, business plans, economic projections, anticipated future cash
flows and transactions and marketplace data. In certain circumstances the Company also estimates fair value utilizing a
discounted cash flow analysis (i.e., an income approach) in order to validate the results of the market approach. If the
estimated fair value of the reporting unit is less than its carrying value, the Company must perform additional analysis to
determine if the reporting unit's goodwill has been impaired.
As of December 31, 2012, the Company had twenty-one reporting units for goodwill impairment testing. The carrying value of
the goodwill included in each individual reporting unit ranges from approximately $7 million to approximately $3.9 billion.
The Company’s annual impairment test was performed as of the first day of the Company’s fiscal fourth quarters of 2012, 2011
and 2010 and no impairment was identified in any period. Reporting units resulting from recent acquisitions generally present
the highest risk of impairment. Management believes the impairment risk associated with these reporting units typically
decreases as such businesses are integrated into the Company and positioned for improved future earnings growth. The factors
used by management in its impairment analysis are inherently subject to uncertainty. While the Company believes it has made
reasonable estimates and assumptions to calculate the fair value of its reporting units, if actual results are not consistent with
management’s estimates and assumptions, goodwill and other intangible assets may be overstated and a charge would need to
be taken against net earnings.
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Table of Contents
The following table shows the rollforward of goodwill reflected in the financial statements resulting from the Company’s
activities during 2012 and 2011 ($ in millions).
Test &
Measurement
3,001.6
$
Environmental
1,383.6
$
Life
Sciences &
Diagnostics
$ 2,122.4
Dental
$ 2,114.5
Industrial
Technologies
$ 1,771.6
Total
$ 10,393.7
90.6
3,758.3
2.8
277.6
4,164.7
Balance, January 1, 2011
Attributable to 2011 acquisitions
Adjustments due to finalization of
purchase price allocations
Effect of foreign currency translation
Balance, December 31, 2011
Attributable to 2012 acquisitions
Adjustments due to finalization of
purchase price allocations
Effect of foreign currency translation
35.4
0.4
0.6
3,038.0
187.9
(2.5)
(1.3)
Balance, December 31, 2012
$
3,222.1
$
1,554.9
(3.9)
(21.1)
1,449.2
104.6
(6.8)
7.9
(5.7)
(33.0)
5,842.0
356.2
26.8
(22.0)
2,122.1
—
(26.2)
2,023.0
17.6
(101.7)
14,474.3
32.6
334.4
1,015.7
(0.9)
(58.4)
$ 6,138.9
(1.6)
14.9
0.9
19.8
$ 2,168.0
$ 2,378.1
(10.9)
(17.1)
$ 15,462.0
Finite-lived intangible assets are amortized over their legal or estimated useful life. The following summarizes the gross
carrying value and accumulated amortization for each major category of intangible asset ($ in millions):
Finite–Lived Intangibles:
Patents and technology
Customer relationships and other intangibles
Total finite–lived intangibles
Indefinite–Lived Intangibles:
Trademarks and trade names
Total intangibles
December 31, 2012
December 31, 2011
Gross
Carrying
Amount
Accumulated
Amortization
Gross
Carrying
Amount
Accumulated
Amortization
$
1,289.2
$
3,528.1
4,817.3
2,890.0
$
7,707.3
$
(499.5) $
(863.8)
(1,363.3)
1,180.0
$
3,009.0
4,189.0
(384.8)
(633.2)
(1,018.0)
—
(1,363.3) $
2,669.2
6,858.2
$
—
(1,018.0)
During 2012, the Company acquired finite-lived intangible assets, consisting primarily of customer relationships and patents,
with a weighted average life of 13 years. Refer to Note 2 for additional information on the intangible assets acquired.
Total intangible amortization expense in 2012, 2011 and 2010 was $342 million, $284 million and $199 million, respectively.
Based on the intangible assets recorded as of December 31, 2012, amortization expense is estimated to be $364 million during
2013, $327 million during 2014, $294 million during 2015, $265 million during 2016 and $238 million during 2017.
(8) FAIR VALUE MEASUREMENTS
Accounting standards define fair value based on an exit price model, establish a framework for measuring fair value where the
Company’s assets and liabilities are required to be carried at fair value and provide for certain disclosures related to the
valuation methods used within a valuation hierarchy as established within the accounting standards. This hierarchy prioritizes
the inputs into three broad levels as follows. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets
or liabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active markets, quoted prices for identical or
similar assets in markets that are not active, or other observable characteristics for the asset or liability, including interest rates,
yield curves and credit risks, or inputs that are derived principally from, or corroborated by, observable market data through
correlation. Level 3 inputs are unobservable inputs based on the Company’s assumptions. A financial asset or liability’s
classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement
in its entirety.
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Table of Contents
A summary of financial assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2012 and
2011 were as follows ($ in millions):
Quoted Prices in
Active Market
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total
December 31, 2012:
Assets:
Available-for-sale securities
$
329.5
Liabilities:
Deferred compensation plans
Currency swap agreement
December 31, 2011:
Assets:
— $
—
Available-for-sale securities
$
287.0
Liabilities:
Deferred compensation plans
Currency swap agreement
— $
—
—
64.5
24.9
—
58.2
53.9
— $
329.5
—
—
64.5
24.9
— $
287.0
—
—
58.2
53.9
Available-for-sale securities are measured at fair value using quoted market prices in an active market and are included in other
long-term assets in the accompanying Consolidated Balance Sheets.
The Company has established nonqualified deferred compensation programs that permit officers, directors and certain
management employees to defer a portion of their compensation, on a pre-tax basis, until after their termination of employment
(or board service, as applicable). All amounts deferred under this plan are unfunded, unsecured obligations of the Company
and are presented as a component of the Company’s compensation and benefits accrual included in accrued expenses in the
accompanying Consolidated Balance Sheets (refer to Note 9). Participants may choose among alternative earning rates for the
amounts they defer, which are primarily based on investment options within the Company’s 401(k) program (except that the
earnings rates for amounts deferred by the Company’s directors and amounts contributed unilaterally by the Company are
entirely based on changes in the value of the Company’s common stock). Changes in the deferred compensation liability under
these programs are recognized based on changes in the fair value of the participants’ accounts, which are based on the
applicable earnings rates.
In connection with a 2011 acquisition, the Company acquired a currency swap agreement that requires the Company to
purchase approximately 184 million Japanese Yen (JPY/¥) at a rate of $1/¥102.25 on a monthly basis through June 1, 2018. As
of December 31, 2012, the aggregate Japanese Yen purchase commitment was approximately ¥11.9 billion (approximately
$138 million based on exchange rates as of December 31, 2012). The currency swap does not qualify for hedge accounting and
as a result changes in the fair value of the currency swap are reflected in selling, general and administrative expenses in the
accompanying Consolidated Statements of Earnings each reporting period. During the years ended December 31, 2012 and
2011, the Company recorded pre-tax income of approximately $22 million and a pre-tax charge of approximately $8 million,
respectively, related to changes in the fair value of this currency swap. The fair value of the currency swap is included in other
long-term liabilities in the accompanying Consolidated Balance Sheets. Since there is not an active market for the currency
swap, the Company obtains a market quote based on observable inputs, including foreign currency exchange market data, from
the swap counterparties to adjust the currency swap to fair value each quarter.
Fair Value of Financial Instruments
In addition to the fair value disclosure requirements related to financial instruments carried at fair value, accounting standards
require disclosures regarding the fair value of all the Company’s financial instruments. The methods and significant
assumptions used to estimate the fair value of financial instruments and any changes in methods or significant assumptions
from prior periods are also required to be disclosed.
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The carrying amounts and fair values of financial instruments as of December 31, 2012 and 2011 were as follows ($ in
millions):
Financial Assets:
Available-for-sale securities
$
329.5
$
329.5
$
287.0
$
287.0
2012
2011
Carrying
Amount
Fair Value (1)
Carrying
Amount
Fair Value
Liabilities:
Short-term borrowings
Long-term borrowings
Currency swap agreement
55.5
5,287.6
24.9
55.5
5,917.3
24.9
98.4
5,206.8
53.9
98.4
5,790.1
53.9
(1) Effective January 1, 2012, the Company is required to disclose, on a prospective basis, the level within the fair value
hierarchy at which the fair values of the financial instruments are categorized. As of December 31, 2012, available-for-
sale securities and short and long-term borrowings were categorized as level 1, while the currency swap agreement was
categorized as level 2.
The fair values of available-for-sale securities and long-term borrowings were computed based on quoted market prices. The
differences between the fair value and the carrying amounts of long-term borrowings (other than the Company’s Liquid Yield
Option Notes due 2021 (the “LYONs”)) are attributable to changes in interest rates and/or the Company’s credit ratings
subsequent to the incurrence of the borrowing. In the case of the LYONs, differences in the fair value from the carrying value
are attributable to changes in the price of the Company’s common stock due to the LYONs' conversion features. The available-
for-sale securities represent the Company’s investment in marketable securities that are accounted for at fair value. The
currency swap agreement is accounted for at fair value based on a market quote obtained from the swap counterparties on a
quarterly basis. The fair values of short-term borrowings, as well as cash and cash equivalents, trade accounts receivable, net
and trade accounts payable, approximate the carrying amounts due to the short-term maturities of these instruments.
Refer to Note 11 for information related to the fair value of the Company sponsored defined benefit pension plan assets.
(9) ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities as of December 31 include the following ($ in millions):
Compensation and benefits
Restructuring
Claims, including self-insurance and litigation
Pension and post-retirement benefits
Environmental and regulatory compliance
Taxes, income and other
Deferred revenue
Sales and product allowances
Warranty
Attributable to discontinued operations
Other
2012
2011
Current
Non-Current
Current
Non-Current
$
767.7
$
332.1
$
773.7
$
103.7
126.9
68.2
48.3
194.5
730.0
171.5
125.7
—
267.8
—
82.9
1,367.2
94.2
2,286.3
105.2
2.0
15.0
—
78.5
124.2
128.7
71.8
48.9
234.0
645.0
140.1
121.9
80.5
282.4
269.9
—
88.8
1,160.3
92.3
1,841.9
75.7
1.5
15.0
—
53.5
$
2,604.3
$
4,363.4
$
2,651.2
$
3,598.9
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(10) FINANCING
The components of the Company’s debt as of December 31 were as follows ($ in millions):
2012
2011
Commercial paper
$
1,224.5
$
4.5% guaranteed Eurobond Notes due 2013 (€500 million) (the “Eurobond Notes”)
Floating rate senior notes due 2013 (the “2013 Notes”)
1.3% senior notes due 2014 (the “2014 Notes”)
2.3% senior notes due 2016 (the “2016 Notes”)
5.625% senior notes due 2018 (the “2018 Notes”)
5.4% senior notes due 2019 (the “2019 Notes”)
3.9% senior notes due 2021 (the “2021 Notes”)
Zero-coupon LYONs due 2021
Other
Subtotal
Less – currently payable
Long-term debt
659.8
300.0
400.0
500.0
500.0
750.0
600.0
281.4
127.4
977.3
647.3
300.0
400.0
500.0
500.0
750.0
600.0
379.6
251.0
5,343.1
55.5
5,305.2
98.4
$
5,287.6
$
5,206.8
The 2013 Notes, the 2014 Notes, the 2016 Notes and the 2021 Notes are collectively referred to as the “2011 Financing Notes”.
The 2011 Financing Notes, the Eurobond Notes, the 2018 Notes and the 2019 Notes are collectively referred to as the “Notes”.
Commercial Paper Program and Credit Facility
The Company satisfies any short-term liquidity needs that are not met through operating cash flow and available cash primarily
through issuances of commercial paper under its U.S. and Euro commercial paper programs. Under these programs, the
Company or a subsidiary of the Company, as applicable, may issue and sell unsecured, short-term promissory notes. Interest
expense on the notes is paid at maturity and is generally based on the ratings assigned to the Company by credit rating agencies
at the time of the issuance and prevailing market rates measured by reference to LIBOR. Borrowings under the program are
available for general corporate purposes, including acquisitions. The Company issued commercial paper under the Euro
commercial paper program during 2012 and as of December 31, 2012, $66 million (€50 million) of commercial paper was
outstanding under this program. There was no commercial paper outstanding under the Euro program as of December 31, 2011
or at any other time during 2011.
As of December 31, 2012, borrowings outstanding under the Company’s U.S. and Euro commercial paper programs had a
weighted average annual interest rate of 0.2% and a weighted average remaining maturity of approximately seven days. The
Company classified its borrowings outstanding under the commercial paper programs as of December 31, 2012, as well as its
2013 Notes and its Eurobond Notes, as long-term debt in the accompanying Consolidated Balance Sheet as the Company has
the intent and ability, as supported by availability under the Credit Facility referenced below, to refinance these borrowings for
at least one year from the balance sheet date.
Credit support for the commercial paper program is provided by a $2.5 billion unsecured multi-year revolving credit facility
with a syndicate of banks that expires on July 15, 2016 (the “Credit Facility”). The Credit Facility can also be used for working
capital and other general corporate purposes. Under the Credit Facility, borrowings (other than bid loans) bear interest at a rate
equal to (at the Company’s option) either (1) a LIBOR-based rate plus a margin that varies according to the Company’s long-
term debt credit rating (the “Eurodollar Rate”), or (2) the highest of (a) the Federal funds rate plus 1/2 of 1%, (b) the prime rate
and (c) the Eurodollar Rate plus 1%, plus in each case a margin that varies according to the Company’s long-term debt credit
rating. In addition to certain initial fees the Company paid at inception of the Credit Facility, the Company is obligated to pay
an annual commitment fee that varies according to its long-term debt credit rating. The Credit Facility requires the Company to
maintain a consolidated leverage ratio (as defined in the facility) of 0.65 to 1.00 or less, and also contains customary
representations, warranties, conditions precedent, events of default, indemnities and affirmative and negative covenants. As of
December 31, 2012, no borrowings were outstanding under the Credit Facility and the Company was in compliance with all
covenants under the facility. The non-performance by any member of the Credit Facility syndicate would reduce the maximum
capacity of the Credit Facility by such member's commitment amount. In addition to the Credit Facility, the Company has
entered into reimbursement agreements with various commercial banks to support the issuance of letters of credit.
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The availability of the Credit Facility as a standby liquidity facility to repay maturing commercial paper is an important factor
in maintaining the existing credit ratings of the Company’s commercial paper program. The Company expects to limit any
borrowings under the Credit Facility to amounts that would leave sufficient credit available under the facility to allow the
Company to borrow, if needed, to repay all of the outstanding commercial paper as it matures.
On June 17, 2011, the Company entered into a $3.0 billion 364-day unsecured revolving credit facility (the “364-Day Facility”)
in connection with the acquisition of Beckman Coulter. The Company reduced the commitments under the 364-Day Facility
over the balance of the year and terminated the facility as of December 29, 2011. There were no outstanding borrowings under
the 364-Day Facility at any time during the term of the facility.
Other Long-Term Indebtedness
2011 Financing Notes—On June 23, 2011, the Company completed the underwritten public offering of the 2011 Financing
Notes, all of which are unsecured. The 2013 Notes were issued at 100% of their principal amount, will mature on June 21,
2013 and accrue interest at a floating rate equal to three-month LIBOR plus 0.25% per year. The 2014 Notes were issued at
99.918% of their principal amount, will mature on June 23, 2014 and accrue interest at the rate of 1.3% per year. The 2016
Notes were issued at 99.84% of their principal amount, will mature on June 23, 2016 and accrue interest at the rate of 2.3% per
year. The 2021 Notes were issued at 99.975% of their principal amount, will mature on June 23, 2021 and accrue interest at the
rate of 3.9% per year. The net proceeds from the 2011 Financing Notes offering, after deducting expenses and the underwriters’
discount, were approximately $1.8 billion and were used to fund a portion of the purchase price for the acquisition of Beckman
Coulter. The Company pays interest on the 2013 Notes quarterly in arrears on March 21, June 21, September 21 and
December 21 of each year. The Company pays interest on the 2014 Notes, 2016 Notes and 2021 Notes semi-annually in
arrears, on June 23 and December 23 of each year.
2019 Notes—In March 2009, the Company completed an underwritten public offering of the 2019 Notes, which were issued at
99.93% of their principal amount, will mature on March 1, 2019 and accrue interest at the rate of 5.4% per year. The net
proceeds, after expenses and the underwriters’ discount, were approximately $745 million. A portion of the net proceeds were
used to repay a portion of the Company’s outstanding commercial paper and the balance was used for general corporate
purposes, including acquisitions. The Company pays interest on the 2019 Notes semi-annually in arrears, on March 1 and
September 1 of each year.
2018 Notes—In December 2007, the Company completed an underwritten public offering of the 2018 Notes, which were
issued at 99.39% of their principal amount, will mature on January 15, 2018 and accrue interest at the rate of 5.625% per year.
The net proceeds, after expenses and the underwriters’ discount, were approximately $493 million, which were used to repay a
portion of the commercial paper issued to finance the acquisition of the Tektronix business. The Company pays interest on the
2018 Notes semi-annually in arrears, on January 15 and July 15 of each year.
Eurobond Notes—On July 21, 2006, a financing subsidiary of the Company issued the Eurobond Notes in a private placement
outside the United States. Payment obligations under these Eurobond Notes are guaranteed by the Company. The net proceeds
of the offering, after the deduction of underwriting commissions but prior to the deduction of other issuance costs, were €496
million ($627 million based on exchange rates in effect at the time the offering closed) and were used to pay down a portion of
the Company’s outstanding commercial paper and for general corporate purposes, including acquisitions.
LYONs—In 2001, the Company issued $830 million (value at maturity) in LYONs. The net proceeds to the Company were
$505 million, of which approximately $100 million was used to pay down debt and the balance was used for general corporate
purposes, including acquisitions. The LYONs carry a yield to maturity of 2.375% (with contingent interest payable as
described below). Holders of the LYONs may convert each $1,000 of principal amount at maturity into 29.0704 shares of the
Company’s common stock (in the aggregate for all LYONs that were originally issued, approximately 24 million shares of the
Company’s common stock) at any time on or before the maturity date of January 22, 2021. As of December 31, 2012, an
aggregate of approximately 14 million shares of the Company’s common stock had been issued upon conversion of LYONs.
As of December 31, 2012, the accreted value of the outstanding LYONs was lower than the traded market value of the
underlying common stock issuable upon conversion. The Company may redeem all or a portion of the LYONs for cash at any
time at scheduled redemption prices. Holders had the right to require the Company to purchase all or a portion of the notes for
cash and/or Company common stock, at the Company’s option, on each of January 22, 2004 and January 22, 2011, which
resulted in aggregate notes with an accreted value of approximately $1 million being redeemed by the Company for cash.
Under the terms of the LYONs, the Company will pay contingent interest to the holders of LYONs during any six month period
from January 23 to July 22 and from July 23 to January 22 if the average market price of a LYON for a specified measurement
period equals 120% or more of the sum of the issue price and accrued original issue discount for such LYON. The amount of
contingent interest to be paid with respect to any quarterly period is equal to the higher of either 0.0315% of the bonds’ average
market price during the specified measurement period or the amount of the common stock dividend paid during such quarterly
period multiplied by the number of shares issuable upon conversion of a LYON. The Company paid $1 million of contingent
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interest on the LYONs for each of the years ended December 31, 2012 and 2011 and paid $2 million in contingent interest in
2010. Except for the contingent interest described above, the Company will not pay interest on the LYONs prior to maturity.
Covenants and Redemption Provisions Applicable to the Notes
The Company may redeem some or all of the 2014 Notes, the 2016 Notes, the 2018 Notes and/or the 2019 Notes at any time by
paying the principal amount and a “make-whole” premium, plus accrued and unpaid interest. Prior to March 23, 2021 (three
months prior to their maturity date), the Company may redeem some or all of the 2021 Notes by paying the principal amount
and a “make-whole” premium, plus accrued and unpaid interest. On or after March 23, 2021, the Company may redeem some
or all of the 2021 Notes for their principal amount plus accrued and unpaid interest. If a change of control triggering event
occurs with respect to the Notes, each holder of Notes may require the Company to repurchase some or all of its Notes at a
purchase price equal to 101% of the principal amount of the Notes, plus accrued interest (100% of the principal amount plus
accrued interest in the case of Eurobond Notes). A change of control triggering event means the occurrence of both a change of
control and a rating event, each as defined in the applicable supplemental indenture or comparable instrument. Except in
connection with a change of control triggering event as described above, the Company does not have any credit rating
downgrade triggers that would accelerate the maturity of a material amount of outstanding debt. In addition, the Company may
redeem the Eurobond notes upon the occurrence of specified, adverse changes in tax laws, or interpretations under such laws, at
a redemption price equal to the principal amount of the notes to be redeemed.
The indentures and comparable instruments pursuant to which the Notes were issued each contain customary covenants
including, for example, limits on the incurrence of secured debt and sale/leaseback transactions. None of these covenants are
considered restrictive to the Company’s operations and as of December 31, 2012, the Company was in compliance with all of
its debt covenants.
Beckman Coulter Indebtedness
In connection with the acquisition of Beckman Coulter in June 2011, the Company assumed indebtedness with a fair value of
$1.6 billion (the “Beckman Coulter Notes”). During the third quarter of 2011, the Company retired substantially all of the
Beckman Coulter Notes using proceeds from the issuance of U.S. dollar commercial paper and recorded an approximate $33
million ($21 million, after tax or $0.03 per diluted share) charge to earnings due to “make whole” payments associated with the
extinguishment of certain of the Beckman Coulter Notes. The charge to earnings is reflected as a loss on early extinguishment
of debt in the accompanying Consolidated Statement of Earnings.
Other
The minimum principal payments during the next five years are as follows: 2013 - $55 million, 2014 - $407 million, 2015 - $29
million, 2016 - $2,689 million, 2017 - $14 million and $2,149 million thereafter.
The Company made interest payments of approximately $150 million, $133 million and $107 million in 2012, 2011 and 2010,
respectively.
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(11) PENSION BENEFIT PLANS
The Company has noncontributory defined benefit pension plans which cover certain of its U.S. employees. During 2012, all
remaining benefit accruals under the U.S. plans ceased. The Company also has noncontributory defined benefit pension plans
which cover certain of its non-U.S. employees, and under certain of these plans, benefit accruals continue. In general, the
Company’s policy is to fund these plans based on considerations relating to legal requirements, underlying asset returns, the
plan’s funded status, the anticipated deductibility of the contribution, local practices, market conditions, interest rates and other
factors. The following sets forth the funded status of the U.S. and non-U.S. plans as of the most recent actuarial valuations
using measurement dates of December 31, 2012 and 2011 ($ in millions):
U.S. Pension Benefits
Non-U.S. Pension Benefits
2012
2011
2012
2011
Change in pension benefit obligation:
Benefit obligation at beginning of year
$
2,316.1
$
1,382.4
$
1,038.5
$
Service cost
Interest cost
Employee contributions
Benefits paid and other
Acquisitions
Actuarial loss
Amendments, settlements and curtailments
Foreign exchange rate impact
Benefit obligation at end of year
Change in plan assets:
Fair value of plan assets at beginning of year
Actual return on plan assets
Employer contributions
Employee contributions
Plan settlements
Benefits paid and other
Acquisitions
Foreign exchange rate impact
Fair value of plan assets at end of year
Funded status
5.6
101.8
—
(163.6)
—
277.8
(31.5)
—
15.0
91.1
—
(120.3)
852.7
159.2
(64.0)
—
23.9
42.5
6.5
(41.5)
37.1
108.3
(13.5)
26.4
2,506.2
2,316.1
1,228.2
1,735.4
202.7
55.4
—
(29.9)
(163.6)
—
—
1,800.0
(706.2)
1,073.6
(0.7)
131.9
—
—
(120.3)
650.9
—
1,735.4
(580.7)
642.9
53.7
53.0
6.5
(13.4)
(41.6)
36.1
18.2
755.4
(472.8)
Less: Funded status attributable to discontinued
operations
Accrued benefit cost – continuing operations
$
—
(706.2) $
1.9
(578.8) $
—
(472.8) $
Weighted average assumptions used to determine benefit obligations at date of measurement:
685.4
17.4
39.2
5.7
(38.8)
323.5
49.2
(16.5)
(26.6)
1,038.5
406.7
8.2
45.4
5.6
(12.7)
(38.8)
243.3
(14.8)
642.9
(395.6)
4.6
(391.0)
Discount rate
Rate of compensation increase
U.S. Plans
Non-U.S. Plans
2012
2011
2012
2011
3.90%
N/A
4.50%
4.00%
3.45%
3.00%
4.10%
3.00%
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Components of net periodic pension cost ($ in millions):
Service cost
Interest cost
Expected return on plan assets
Amortization of prior service credit
Amortization of net loss
Curtailment and settlement losses (gains) recognized
U.S. Pension Benefits
Non-U.S. Pension Benefits
2012
2011
2012
2011
$
5.6
$
15.0
$
23.9
$
101.8
(129.9)
—
44.3
0.3
91.1
(115.2)
—
28.9
(3.3)
16.5
42.5
(32.8)
(0.2)
4.7
1.5
$
39.6
$
17.4
39.2
(27.4)
(0.3)
3.3
1.2
33.4
Net periodic pension cost
$
22.1
$
Weighted average assumptions used to determine net periodic pension cost at date of measurement:
Discount rate
Expected long-term return on plan assets
Rate of compensation increase
U.S. Plans
Non-U.S. Plans
2012
2011
2012
2011
4.50%
7.50%
N/A
5.20%
8.00%
4.00%
4.10%
4.95%
3.00%
4.70%
4.90%
3.00%
The discount rate reflects the market rate on December 31 for high-quality fixed-income investments with maturities
corresponding to the Company’s benefit obligations and is subject to change each year. For non-U.S. plans, rates appropriate
for each plan are determined based on investment grade instruments with maturities approximately equal to the average
expected benefit payout under the plan. Upon the sale of the KEO business during 2012, the Danaher U.S. defined benefit
pension plan became fully frozen and plan participants are therefore no longer accruing benefits under this plan. In connection
with this triggering event, the Company updated the loss amortization period for actuarial gains and losses in the plan to record
them over the remaining life expectancy of the plan participants, rather than over the average future working lifetime of the
plan participants as had been the case before the plan became fully frozen. In addition, the Company updated the mortality
assumptions used to estimate the projected benefit obligation to reflect updated mortality tables which extend the life
expectancy of the participants.
Included in accumulated other comprehensive loss as of December 31, 2012 are the following amounts that have not yet been
recognized in net periodic pension cost: unrecognized prior service credits of $2 million ($2 million, net of tax) and
unrecognized actuarial losses of $1.0 billion ($639 million, net of tax). The unrecognized losses and prior service credits, net,
is calculated as the difference between the actuarially determined projected benefit obligation and the value of the plan assets
less accrued pension costs as of December 31, 2012. The prior service credits and actuarial loss included in accumulated
comprehensive income and expected to be recognized in net periodic pension costs during the year ending December 31, 2013
is $0.2 million ($0.1 million, net of tax) and $36 million ($23 million, net of tax), respectively. No plan assets are expected to
be returned to the Company during the year ending December 31, 2013.
Selection of Expected Rate of Return on Assets
For the years ended December 31, 2012, 2011 and 2010, the Company used an expected long-term rate of return assumption of
7.5%, 8.0% and 8.0%, respectively, for its U.S. defined benefit pension plan. The Company intends to use an expected long-
term rate of return assumption of 7.5% for 2013 for its U.S. plan. This expected rate of return reflects the asset allocation of the
plan, and is based primarily on broad, publicly traded equity and fixed-income indices and forward-looking estimates of active
portfolio and investment management. Long-term rate of return on asset assumptions for the non-U.S. plans were determined
on a plan-by-plan basis based on the composition of assets and ranged from 1.25% to 7.10% and 1.25% to 7.90% in 2012 and
2011, respectively, with a weighted average rate of return assumption of 4.95% and 4.90% in 2012 and 2011, respectively.
Plan Assets
The U.S. plan’s goal is to maintain between 60% and 70% of its assets in equity portfolios, which are invested in individual
equity securities or funds that are expected to mirror broad market returns for equity securities or in assets with characteristics
similar to equity investments, such as venture capital funds and partnerships. Asset holdings are periodically rebalanced when
equity holdings are outside this range. The balance of the U.S. plan asset portfolio is invested in bond funds. Non-U.S. plan
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Table of Contents
assets are invested in various insurance contracts, equity and debt securities as determined by the administrator of each plan.
The value of the plan assets directly affects the funded status of the Company’s pension plans recorded in the financial
statements.
The fair values of the Company’s pension plan assets for both the U.S. and non-U.S. plans as of December 31, 2012, by asset
category were as follows ($ in millions):
Cash
Equity securities:
Common stock
Preferred stock
Fixed income securities:
Corporate bonds
Government issued
Mutual funds
Common/collective trusts
Venture capital and partnerships
Real estate
Insurance contracts
Total
Quoted Prices in
Active Market
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total
$
22.5
$
— $
— $
22.5
298.5
15.1
—
—
540.2
—
—
—
—
21.4
—
155.9
5.0
414.4
664.9
—
—
103.1
—
—
—
—
—
—
163.9
150.5
—
319.9
15.1
155.9
5.0
954.6
664.9
163.9
150.5
103.1
$
876.3
$
1,364.7
$
314.4
$
2,555.4
The fair values of the Company’s pension plan assets for both the U.S. and non-U.S. plans as of December 31, 2011, by asset
category were as follows ($ in millions):
Cash
Equity securities:
Common stock
Preferred stock
Fixed income securities:
Corporate bonds
Government issued
Mutual funds
Common/collective trusts
Venture capital and partnerships
Real estate
Insurance contracts
Total
Quoted Prices in
Active Market
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total
$
39.5
$
— $
— $
39.5
290.4
12.4
—
—
619.5
—
—
—
—
58.2
—
171.9
14.1
279.8
515.4
—
—
61.2
—
—
—
—
—
—
163.9
152.0
—
348.6
12.4
171.9
14.1
899.3
515.4
163.9
152.0
61.2
$
961.8
$
1,100.6
$
315.9
$
2,378.3
Common stock, preferred stock, corporate bonds, U.S. government securities and certain mutual funds are valued at the quoted
closing price reported on the active market on which the individual securities are traded. Corporate bonds and U.S.
government securities that are not traded on an active market are valued at quoted prices reported by investment brokers and
dealers based on the underlying terms of the security and comparison to similar securities traded on an active market.
Common/collective trusts are valued based on the plan’s interest, represented by investment units, in the underlying
investments held within the trust that are traded in an active market by the trustee.
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Venture capital and partnership investments are valued based on the information provided by the asset fund managers, which
reflects the plan’s share of the fair value of the net assets of the investment. The investments are valued using a combination of
discounted cash flows, earnings and market multiples and through reference to the quoted market prices of the underlying
investments held by the venture or partnership where available. Valuation adjustments reflect changes in operating results,
financial condition, or prospects of the applicable portfolio company.
Real estate investments are valued periodically using discounted cash flow models which consider long-term lease estimates,
future rental receipts and estimated residual values. The real estate investment fund managers supplement the discounted cash
flow valuations with third-party appraisals that are performed on either a quarterly or an annual basis.
The methods described above may produce a fair value estimate that may not be indicative of net realizable value or reflective
of future fair values. Furthermore, while the Company believes the valuation methods are appropriate and consistent with the
methods used by other market participants, the use of different methodologies or assumptions to determine the fair value of
certain financial instruments could result in a different fair value measurement at the reporting date.
The table below sets forth a summary of changes in the fair value of the Level 3 investments for the years ended December 31,
2012 and 2011 ($ in millions):
Balance, January 1, 2011
Actual return on plan assets:
$
— Relating to assets sold during the period
— Relating to assets still held at December 31, 2011
Acquisitions
Purchases
Sales
Settlements
Balance, December 31, 2011
Actual return on plan assets:
— Relating to assets sold during the period
— Relating to assets still held at December 31, 2012
Acquisitions
Purchases
Sales
Settlements
Common
Stock
0.7
—
—
—
—
(0.7)
—
$
— $
—
—
—
—
—
—
Venture Capital
and Partnerships
62.6
$
Real Estate
Total
$
101.7
$
165.0
—
(16.0)
114.2
7.0
(1.3)
(2.6)
163.9
(0.3)
4.7
—
14.8
(19.2)
—
0.9
8.6
40.2
2.3
(1.7)
—
$
152.0
$
6.1
11.8
—
0.7
(20.1)
—
0.9
(7.4)
154.4
9.3
(3.7)
(2.6)
315.9
5.8
16.5
—
15.5
(39.3)
—
314.4
Balance, December 31, 2012
$
— $
163.9
$
150.5
$
Expected Contributions
During 2012, the Company contributed approximately $55 million to its U.S. defined benefit pension plan and approximately
$53 million to its non-U.S. defined benefit pension plans. During 2013, the Company’s cash contribution requirements for its
U.S. defined benefit pension plan are not expected to be significant. The Company’s cash contribution requirements for its
non-U.S. defined benefit pension plans are expected to be approximately $52 million. The ultimate amounts to be contributed
depend upon, among other things, legal requirements, underlying asset returns, the plan’s funded status, the anticipated tax
deductibility of the contribution, local practices, market conditions, interest rates and other factors.
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The following table sets forth benefit payments, which reflect expected future service, as appropriate, expected to be paid by
the plans in the periods indicated ($ in millions):
2013
2014
2015
2016
2017
2018-2022
Other Matters
U.S. Pension
Plans
Non-U.S.
Pension Plans
All Pension
Plans
$
143.9
$
146.1
150.3
151.8
157.0
792.8
$
44.3
47.1
47.0
48.0
48.3
188.2
193.2
197.3
199.8
205.3
271.3
1,064.1
Substantially all employees not covered by defined benefit plans are covered by defined contribution plans, which generally
provide for Company funding based on a percentage of compensation.
A limited number of the Company’s subsidiaries participate in multiemployer defined benefit and contribution plans, primarily
outside of the United States, that require the Company to periodically contribute funds to the plan. The risks of participating in
a multiemployer plan differ from the risks of participating in a single-employer plan in the following respects: (1) assets
contributed to the multiemployer plan by one employer may be used to provide benefits to employees of other participating
employers, (2) if a participating employer ceases contributing to the plan, the unfunded obligations of the plan may be required
to be borne by the remaining participating employers and (3) if the Company elects to stop participating in the plan, the
Company may be required to pay the plan an amount based on the unfunded status of the plan. None of the multiemployer
plans in which the Company’s subsidiaries participate are considered to be quantitatively or qualitatively significant, either
individually or in the aggregate. In addition, contributions made to these plans during 2012, 2011 and 2010 were not
considered significant, either individually or in the aggregate.
Expense for all defined benefit and defined contribution pension plans amounted to $181 million, $166 million and $126
million for the years ended December 31, 2012, 2011 and 2010, respectively.
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(12) OTHER POST-RETIREMENT EMPLOYEE BENEFIT PLANS
In addition to providing pension benefits, the Company provides certain health care and life insurance benefits for some of its
retired employees in the United States. Certain employees may become eligible for these benefits as they reach normal
retirement age while working for the Company. The following sets forth the funded status of the domestic plans as of the most
recent actuarial valuations using measurement dates of December 31, 2012 and 2011 ($ in millions):
Change in benefit obligation:
Benefit obligation at beginning of year
Service cost
Interest cost
Amendments, curtailments and other
Actuarial (gain) loss
Acquisitions
Retiree contributions
Benefits paid
Benefit obligation at end of year
Change in plan assets:
Fair value of plan assets
Funded status/accrued benefit cost
Attributable to discontinued operations
Funded status/accrued benefit cost – continuing operations
Post-Retirement Medical Benefits
2012
2011
$
264.8
$
123.7
1.9
11.0
(0.8)
(11.7)
4.6
8.6
(22.0)
256.4
—
(256.4) $
—
(256.4)
1.6
9.5
2.0
16.0
125.1
6.6
(19.7)
264.8
—
(264.8)
2.5
(262.3)
$
At December 31, 2012, $240 million of the total underfunded status of the plan was recognized as long-term accrued post-
retirement liability since it is not expected to be funded within one year. At December 31, 2011, $245 million of the total
underfunded status of the plan was recognized as long-term accrued post-retirement liability.
Weighted average assumptions used to determine benefit obligations at date of measurement:
Discount rate
Medical trend rate – initial
Medical trend rate – grading period
Medical trend rate – ultimate
2012
2011
3.90%
7.50%
16 years
4.50%
4.50%
7.70%
17 years
4.50%
Effect of a one-percentage-point change in assumed health care cost trend rates ($ in millions):
Effect on the total of service and interest cost components
Effect on post-retirement medical benefit obligation
1% Increase
1% Decrease
$
1.4
$
27.7
(1.1)
(23.5)
The medical trend rate used to determine the post-retirement benefit obligation was 7.50% for 2012. The rate decreases
gradually to an ultimate rate of 4.50% in 2028 and remains at that level thereafter. The trend is a significant factor in
determining the amounts reported.
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Components of net periodic benefit cost ($ in millions):
Service cost
Interest cost
Amortization of loss
Amortization of prior service credit
Curtailment loss
Net periodic benefit cost
Post-Retirement Medical Benefits
2012
2011
$
$
1.9
$
11.0
2.8
(5.7)
—
10.0
$
1.6
9.5
4.0
(5.9)
3.0
12.2
Included in accumulated other comprehensive loss as of December 31, 2012 are the following amounts that have not yet been
recognized in net periodic benefit cost: unrecognized prior service credits of $10 million ($7 million, net of tax) and
unrecognized actuarial losses of $40 million ($26 million, net of tax). The unrecognized losses and prior service credits, net, is
calculated as the difference between the actuarially determined projected benefit obligation and the value of the plan assets less
accrued benefit costs as of December 31, 2012. The prior service credits and actuarial loss included in accumulated
comprehensive loss and expected to be recognized in net periodic benefit costs during the year ending December 31, 2013 is $5
million ($3 million, net of tax) and $3 million ($2 million, net of tax), respectively.
The following table sets forth benefit payments, which reflect expected future service, as appropriate, expected to be paid in the
periods indicated ($ in millions):
2013
2014
2015
2016
2017
2018-2022
$
Amount
18.2
18.3
18.5
18.9
19.0
92.3
(13) INCOME TAXES FROM CONTINUING OPERATIONS
Earnings from continuing operations before income taxes for the years ended December 31 consist of the following ($ in
millions):
United States
International
Total
2012
2011
2010
$
$
1,349.9
1,660.9
3,010.8
$
$
1,168.1
1,279.7
2,447.8
$
$
1,006.3
1,223.3
2,229.6
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The provision for income taxes from continuing operations for the years ended December 31 consists of the following ($ in
millions):
Current:
Federal U.S.
Non-U.S.
State and local
Deferred:
Federal U.S.
Non-U.S.
State and local
Income tax provision
2012
2011
2010
$
290.5
$
(6.3) $
197.2
38.9
175.0
0.8
9.1
206.0
41.4
265.9
(13.3)
18.8
$
711.5
$
512.5
$
362.2
88.7
22.8
45.1
(12.4)
5.0
511.4
The provision for income taxes from discontinued operations for the years ended December 31, 2012, 2011 and 2010 was $55
million, $146 million and $38 million, respectively.
Net current deferred income tax assets are reflected in prepaid expenses and other current assets and net long-term deferred
income tax liabilities are included in other long-term liabilities in the accompanying Consolidated Balance Sheets. Deferred
income tax assets and liabilities as of December 31 consist of the following ($ in millions):
Deferred tax assets:
Allowance for doubtful accounts
Inventories
Pension and post-retirement benefits
Environmental and regulatory compliance
Other accruals and prepayments
Stock compensation expense
Tax credit and loss carryforwards
Other
Valuation allowances
Total deferred tax asset
Deferred tax liabilities:
Property, plant and equipment
Insurance, including self–insurance
Basis difference in LYONs
Goodwill and other intangibles
Deferred service income
Unrealized gains on marketable securities
Total deferred tax liability
Net deferred tax liability
2012
2011
$
18.2
$
113.9
397.8
26.5
442.3
111.1
916.4
22.0
(382.5)
1,665.7
(214.2)
(381.2)
(99.7)
(2,146.3)
(71.6)
(72.7)
(2,985.7)
(1,320.0) $
$
70.9
154.5
382.0
35.5
425.1
114.6
864.0
2.8
(316.6)
1,732.8
(258.5)
(195.9)
(118.6)
(2,016.4)
(174.7)
(56.8)
(2,820.9)
(1,088.1)
Deferred taxes associated with temporary differences resulting from timing of recognition for income tax purposes of fees paid
for services rendered between consolidated entities are reflected as deferred service income in the above table. These fees are
fully eliminated in consolidation and have no effect on reported revenue, income or reported income tax expense. The
Company evaluates the future realizability of tax credits and loss carryforwards considering the anticipated future earnings of
the Company’s subsidiaries as well as tax planning strategies in the associated jurisdictions. Deferred taxes associated with
U.S. entities consist of net deferred tax liabilities of approximately $1.3 billion and $1.1 billion as of December 31, 2012 and
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2011, respectively. Deferred taxes associated with non-U.S. entities consist of net deferred tax liabilities of approximately $33
million and $13 million as of December 31, 2012 and 2011, respectively.
The effective income tax rate for the years ended December 31 varies from the statutory federal income tax rate as follows:
Statutory federal income tax rate
Increase (decrease) in tax rate resulting from:
State income taxes (net of Federal income tax benefit)
Foreign income taxed at lower rate than U.S. statutory rate
Resolution of uncertain tax positions/statute expirations
Acquisition costs
Research and experimentation credits and other
Joint venture formation
Effective income tax rate
Percentage of Pre-Tax Earnings
2012
2011
2010
35.0%
35.0%
35.0%
1.1
(14.1)
(0.3)
0.1
1.8
—
1.0
(12.8)
(2.4)
0.4
(0.3)
—
23.6%
20.9%
1.4
(10.5)
(0.6)
—
(0.3)
(2.1)
22.9%
The Company’s effective tax rate for each of 2012, 2011 and 2010 differs from the U.S. federal statutory rate of 35% due
principally to the Company’s earnings outside the United States that are indefinitely reinvested and taxed at rates lower than the
U.S. federal statutory rate.
The effective tax rate of 23.6% in 2012 is also lower than that U.S. federal statutory rate due to recognition of tax benefits
associated with favorable resolution of certain international and domestic uncertain tax positions and the lapse of certain
statutes of limitations, in addition to changes in estimates related to reserves associated with prior period uncertain tax
positions. These matters have been treated as discrete items in the periods they occurred and reduced the provision for income
taxes by approximately 30 basis points in 2012.
The effective tax rate of 20.9% in 2011 is also lower than that U.S. federal statutory rate due to recognition of tax benefits
associated with favorable resolutions of certain international and domestic uncertain tax positions as a result of a tax ruling,
court decision, and the lapse of certain tax statutes of limitations, in addition to changes in estimates related to reserves
associated with prior period uncertain tax positions. These matters have been treated as discrete items in the periods they
occurred and reduced the provision for income taxes by approximately 240 basis points in 2011.
The Company's 2010 effective tax rate of 22.9% is also lower than that U.S. federal statutory rate due to recognition of tax
benefits associated with favorable resolution of certain international and domestic tax positions and the lapse of certain tax
statutes of limitations. These matters have been treated as discrete items in the periods they occurred and reduced the provision
for income taxes by approximately 60 basis points in 2010.
The Company made income tax payments related to continuing operations of $358 million, $303 million and $282 million in
2012, 2011 and 2010, respectively. In addition, the Company made tax payments related to discontinued operations, including
the gain on the sale of ASI, KEO and PSA (refer to Note 3) totaling $55 million and $129 million in 2012 and 2011,
respectively. Current income tax payable has been reduced by $70 million, $25 million, and $57 million in 2012, 2011 and
2010, respectively, for tax deductions attributable to stock-based compensation. The net income tax benefit attributable to
stock-based compensation in excess of the benefit recorded for financial reporting purposes has been recorded as an increase to
additional paid-in capital.
Included in deferred income taxes as of December 31, 2012 are tax benefits for U.S. and non-U.S. net operating loss
carryforwards totaling $279 million (net of applicable valuation allowances of $377 million). Certain of the losses can be
carried forward indefinitely and others can be carried forward to various dates from 2013 through 2032. In addition, the
Company had general business and foreign tax credit carryforwards of $255 million (net of applicable valuation allowances of
$5 million) at December 31, 2012. Included in the deferred tax asset related to net operating loss carryforwards and tax credits
is $164 million associated with the indirect impact of certain unrecognized tax benefits (see below).
As of December 31, 2012, gross unrecognized tax benefits totaled approximately $613 million ($534 million, net of offsetting
indirect tax benefits and including $145 million associated with potential interest and penalties). As of December 31, 2011,
gross unrecognized tax benefits totaled approximately $518 million ($451 million, net of offsetting indirect tax benefits and
including $129 million associated with potential interest and penalties). The Company recognized approximately $34 million,
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$56 million and $25 million in potential interest and penalties associated with uncertain tax positions during 2012, 2011 and
2010, respectively. To the extent unrecognized tax benefits (including interest and penalties) are not assessed with respect to
uncertain tax positions, amounts accrued will be reduced and reflected as a reduction of the overall income tax provision.
Unrecognized tax benefits and associated accrued interest and penalties are included in taxes, income and other in accrued
expenses as detailed in Note 9.
A reconciliation of the beginning and ending amount of unrecognized tax benefits, excluding amounts accrued for potential
interest and penalties, is as follows ($ in millions):
2012
2011
2010
Unrecognized tax benefits, beginning of year
$
518.3
$
517.5
$
Additions based on tax positions related to the current year
Additions for tax positions of prior years
Reductions for tax positions of prior years
Acquisitions
Lapse of statute of limitations
Settlements
Effect of foreign currency translation
Unrecognized tax benefits, end of year
60.8
94.7
(38.4)
19.7
(20.7)
(23.2)
2.0
613.2
$
46.6
77.1
(59.7)
85.5
(124.3)
(21.2)
(3.2)
518.3
$
$
439.3
62.2
101.8
(50.0)
5.7
(32.8)
(4.9)
(3.8)
517.5
The Company and its subsidiaries are routinely examined by various taxing authorities. The Internal Revenue Service (“IRS”)
has initiated examinations of the Company's consolidated income tax returns for years ending 2008 and 2009, which will be
completed within the next twelve months. The IRS has proposed and management has agreed to certain adjustments to these
returns which will not have a material impact on the Company's financial position or results of operations. In addition, the
Company has subsidiaries in Australia, Belgium, Brazil, Canada, Denmark, France, Germany, Hong Kong, India, Italy, Japan,
Norway, Singapore, Sweden, United Kingdom and various other countries, provinces and states, that are currently under audit
for years ranging from 2000 through 2011.
The Company files numerous consolidated and separate income tax returns in the United States Federal jurisdiction and in
many state and foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal income tax
examinations for years before 2006 and is no longer subject to state, local and foreign income tax examinations by tax
authorities for years before 2000.
Management estimates that it is reasonably possible that the amount of unrecognized tax benefits may be reduced by
approximately $115 million within twelve months as a result of resolution of worldwide tax matters, tax audit settlements and/
or statute expirations.
The Company operates in various non–U.S. tax jurisdictions where “tax holiday” income tax incentives have been granted for a
specified period. These tax benefits are not material to the Company’s financial statements.
As of December 31, 2012, the Company held $1.1 billion of cash and cash equivalents outside of the United States. While
repatriation of some cash held outside the United States may be restricted by local laws, most of the Company's foreign cash
balances could be repatriated to the United States but, under current law, could be subject to U.S. federal income taxes, less
applicable foreign tax credits. For most of its foreign subsidiaries, the Company makes an election regarding the amount of
earnings intended for indefinite reinvestment, with the balance available to be repatriated to the United States. A deferred tax
liability has been accrued for the funds that are available to be repatriated to the United States. No provisions for U.S. income
taxes have been made with respect to earnings that are planned to be reinvested indefinitely outside the United States, and the
amount of U.S. income taxes that may be applicable to such earnings is not readily determinable given the various tax planning
alternatives the Company could employ if it repatriated these earnings. The cash that the Company’s foreign subsidiaries hold
for indefinite reinvestment is generally used to finance foreign operations and investments, including acquisitions. As of
December 31, 2012 and 2011, the total amount of earnings planned to be reinvested indefinitely outside the United States for
which deferred taxes have not been provided was approximately $9.3 billion and $7.8 billion, respectively.
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(14) RESTRUCTURING AND OTHER RELATED CHARGES
During 2012, the Company recorded pre-tax restructuring and other related charges totaling $123 million. Substantially all
restructuring activities initiated in 2012 were completed by December 31, 2012 resulting in $112 million of employee
severance and related charges and $11 million of facility exit and other related charges. The Company expects substantially all
cash payments associated with remaining termination benefits will be paid during 2013. During 2011, the Company recorded
pre-tax restructuring and other related charges totaling $179 million. Substantially all planned restructuring activities related to
the 2011 plans were completed by December 31, 2011 resulting in approximately $160 million of employee severance and
related charges and $19 million of facility exit and other related charges. The Company did not incur significant restructuring
and other related charges during the year ended December 31, 2010.
The nature of the restructuring and related activities initiated in both 2012 and 2011 were broadly consistent throughout the
Company’s reportable segments and focused on improvements in operational efficiency through targeted workforce reductions
and facility consolidations and closures. These costs were incurred to position the Company to provide superior products and
services to its customers in a cost efficient manner, and in light of the uncertainties in the macro-economic environment.
In conjunction with the closing of facilities, certain inventory was written off as unusable in future operating locations. This
inventory consisted primarily of component parts and raw materials, which were either redundant to inventory at the facilities
being merged or were not economically feasible to relocate since the inventory was purchased to operate on equipment and
tooling which was not being relocated. In addition, asset impairment charges have been recorded to reduce the carrying
amounts of the long-lived assets that will be sold or disposed of to their estimated fair values. Charges for the asset impairment
reduce the carrying amount of the long-lived assets to their estimated salvage value in connection with the decision to dispose
of such assets.
Restructuring and other related charges recorded for the year ended December 31 by segment, for years when charges were
significant, are summarized in the table below ($ in millions):
Test & Measurement
Environmental
Life Sciences & Diagnostics
Dental
Industrial Technologies
Other
2012
2011
$
22.2
$
8.0
51.5
9.8
29.1
2.1
18.8
7.5
100.9
28.3
23.8
—
$
122.7
$
179.3
The table below summarizes the accrual balance and utilization by type of restructuring cost associated with the 2012 and 2011
actions ($ in millions):
Restructuring charges:
Employee severance and related
Facility exit and related
Total restructuring
Balance as of
December 31,
2011
Costs
Incurred
Paid/
Settled
Balance as of
December 31,
2012
$
$
116.7
7.5
124.2
$
$
111.6
11.1
122.7
$
$
(131.4) $
(11.8)
(143.2) $
96.9
6.8
103.7
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The restructuring and other related charges incurred during 2012 include cash charges of $120 million and $3 million of non-
cash charges. The restructuring and other related charges incurred during 2011 include cash charges of $173 million and $6
million of non-cash charges. These charges are reflected in the following captions in the accompanying Consolidated
Statements of Earnings ($ in millions):
Cost of sales
Selling, general and administrative expenses
(15) LEASES AND COMMITMENTS
2012
2011
$
$
34.1
88.6
122.7
$
$
67.9
111.4
179.3
The Company’s operating leases extend for varying periods of time up to twenty years and, in some cases, contain renewal
options that would extend existing terms beyond twenty years. Future minimum rental payments for all operating leases having
initial or remaining non-cancelable lease terms in excess of one year are $201 million in 2013, $162 million in 2014, $125
million in 2015, $89 million in 2016, $74 million in 2017 and $99 million thereafter. Total rent expense for all operating leases
was $247 million, $210 million and $146 million for the years ended December 31, 2012, 2011 and 2010, respectively.
The Company generally accrues estimated warranty costs at the time of sale. In general, manufactured products are warranted
against defects in material and workmanship when properly used for their intended purpose, installed correctly, and
appropriately maintained. Warranty period terms depend on the nature of the product and range from ninety days up to the life
of the product. The amount of the accrued warranty liability is determined based on historical information such as past
experience, product failure rates or number of units repaired, estimated cost of material and labor, and in certain instances
estimated property damage. The accrued warranty liability is reviewed on a quarterly basis and may be adjusted as additional
information regarding expected warranty costs becomes known.
In certain cases, the Company will sell extended warranty or maintenance agreements. The proceeds from these agreements is
deferred and recognized as revenue over the term of the agreement.
The following is a rollforward of the Company’s accrued warranty liability for the years ended December 31, 2012 and 2011 ($
in millions):
Balance, January 1, 2011
Accruals for warranties issued during the period
Settlements made
Additions due to acquisitions
Effect of foreign currency translation
Balance, December 31, 2011
Accruals for warranties issued during the period
Settlements made
Additions due to acquisitions
Effect of foreign currency translation
Balance, December 31, 2012
(16) LITIGATION AND CONTINGENCIES
$
$
127.7
115.2
(125.4)
21.3
(1.9)
136.9
134.0
(134.9)
4.1
0.6
140.7
The Company is, from time to time, subject to a variety of litigation and similar proceedings incidental to its business (or the
business operations of previously owned entities). These lawsuits primarily involve claims for damages arising out of the use
of the Company’s products and services and claims relating to intellectual property matters, employment matters, tax matters,
commercial disputes, competition and sales and trading practices, personal injury and insurance coverage. The Company may
also become subject to lawsuits as a result of past or future acquisitions or as a result of liabilities retained from, or
representations, warranties or indemnities provided in connection with, divested businesses. Some of these lawsuits may
include claims for punitive and consequential, as well as compensatory damages. Based upon the Company’s experience,
current information and applicable law, it does not believe it is reasonably possible that these proceedings and claims will have
a material effect on its financial statements.
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While the Company maintains general, products, property, workers’ compensation, automobile, cargo, aviation, crime,
fiduciary and directors’ and officers’ liability insurance (and has acquired rights under similar policies in connection with
certain acquisitions) up to certain limits that cover certain of these claims, this insurance may be insufficient or unavailable to
cover such losses. For general, products and property liability and most other insured risks, the Company purchases outside
insurance coverage only for severe losses (“stop loss” insurance) and must establish and maintain reserves with respect to
amounts within the self-insured retention. In addition, while the Company believes it is entitled to indemnification from third
parties for some of these claims, these rights may also be insufficient or unavailable to cover such losses.
The Company records a liability in the consolidated financial statements for loss contingencies when a loss is known or
considered probable and the amount can be reasonably estimated. If the reasonable estimate of a known or probable loss is a
range, and no amount within the range is a better estimate than any other, the minimum amount of the range is accrued. If a
loss does not meet the known or probable level but is reasonably possible and a loss or range of loss can be reasonably
estimated, the estimated loss or range of loss is disclosed. The Company's reserves consist of specific reserves for individual
claims and additional amounts for anticipated developments of these claims as well as for incurred but not yet reported claims.
The specific reserves for individual known claims are quantified with the assistance of legal counsel and outside risk
professionals where appropriate. In addition, outside risk professionals assist in the determination of reserves for incurred but
not yet reported claims through evaluation of the Company’s specific loss history, actual claims reported and industry trends
among statistical and other factors. Reserve estimates are adjusted as additional information regarding a claim becomes
known. Because most contingencies are resolved over long periods of time, liabilities may change in the future due to new
developments (including litigation developments, the discovery of new facts, changes in legislation and outcomes of similar
cases), changes in assumptions or changes in the Company’s settlement strategy. While the Company actively pursues
financial recoveries from insurance providers, it does not recognize any recoveries until realized or until such time as a
sustained pattern of collections is established related to historical matters of a similar nature and magnitude. If the Company’s
self-insurance and litigation reserves prove inadequate, it would be required to incur an expense equal to the amount of the loss
incurred in excess of the reserves, which would adversely affect the Company’s net earnings. Refer to Note 9 for information
about the amount of the Company’s accruals for self-insurance and litigation liability.
In addition, the Company’s operations, products and services are subject to environmental laws and regulations in the
jurisdictions in which they operate, which impose limitations on the discharge of pollutants into the environment and establish
standards for the generation, use, treatment, storage and disposal of hazardous and non-hazardous wastes. A number of the
Company’s operations involve the handling, manufacturing, use or sale of substances that are or could be classified as
hazardous materials within the meaning of applicable laws. The Company must also comply with various health and safety
regulations in both the United States and abroad in connection with the Company's operations. Compliance with these laws
and regulations has not had and, based on current information and the applicable laws and regulations currently in effect, is not
expected to have a material effect on the Company’s capital expenditures, earnings or competitive position, and the Company
does not anticipate material capital expenditures for environmental control facilities.
In addition to environmental compliance costs, the Company from time to time incurs costs related to alleged damages
associated with past or current waste disposal practices or other hazardous materials handling practices. For example,
generators of hazardous substances found in disposal sites at which environmental problems are alleged to exist, as well as the
current and former owners of those sites and certain other classes of persons, are subject to claims brought by state and federal
regulatory agencies pursuant to statutory authority. The Company has received notification from the U.S. Environmental
Protection Agency, and from state and non-U.S. environmental agencies, that conditions at certain sites where the Company
and others previously disposed of hazardous wastes and/or are or were property owners require clean-up and other possible
remedial action, including sites where the Company has been identified as a potentially responsible party under U.S. federal
and state environmental laws. The Company has projects underway at a number of current and former facilities, in both the
United States and abroad, to investigate and remediate environmental contamination resulting from past operations.
Remediation activities generally relate to soil and/or groundwater contamination and may include pre-remedial activities such
as fact-finding and investigation, risk assessment, feasibility study and/or design, as well as remediation actions such as
contaminant removal, monitoring and/or installation, operation and maintenance of longer-term remediation systems. The
Company is also from time to time party to personal injury or other claims brought by private parties alleging injury due to the
presence of, or exposure to, hazardous substances.
The Company has recorded a provision for environmental investigation and remediation and environmental-related claims with
respect to sites owned or formerly owned by the Company and its subsidiaries and third-party sites where the Company has
been determined to be a potentially responsible party. The Company generally makes an assessment of the costs involved for
its remediation efforts based on environmental studies, as well as its prior experience with similar sites. The ultimate cost of
site cleanup is difficult to predict given the uncertainties of the Company’s involvement in certain sites, uncertainties regarding
the extent of the required cleanup, the availability of alternative cleanup methods, variations in the interpretation of applicable
laws and regulations, the possibility of insurance recoveries with respect to certain sites and the fact that imposition of joint and
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several liability with right of contribution is possible under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 and other environmental laws and regulations. If the Company determines that potential liability for a
particular site or with respect to a personal injury claim is probable and reasonably estimable, the Company accrues the total
estimated loss, including investigation and remediation costs, associated with the site or claim. As of December 31, 2012, the
Company had a reserve of $143 million for environmental matters which are probable and reasonably estimable (of which $94
million are non-current), which reflects the Company's best estimate of the costs to be incurred with respect to such matters.
Refer to Note 9 for additional information about the Company’s environmental reserves.
All reserves have been recorded without giving effect to any possible future third party recoveries. While the Company
actively pursues insurance recoveries, as well as recoveries from other potentially responsible parties, it does not recognize any
insurance recoveries for environmental liability claims until realized or until such time as a sustained pattern of collections is
established related to historical matters of a similar nature and magnitude.
The Company’s Restated Certificate of Incorporation requires it to indemnify to the full extent authorized or permitted by law
any person made, or threatened to be made a party to any action or proceeding by reason of his or her service as a director or
officer of the Company, or by reason of serving at the request of the Company as a director or officer of any other entity,
subject to limited exceptions. Danaher’s Amended and Restated By-laws provide for similar indemnification rights. In
addition, Danaher has executed with each director and executive officer of Danaher Corporation an indemnification agreement
which provides for substantially similar indemnification rights and under which Danaher has agreed to pay expenses in advance
of the final disposition of any such indemnifiable proceeding. While the Company maintains insurance for this type of liability,
a significant deductible applies to this coverage and any such liability could exceed the amount of the insurance coverage.
At December 31, 2012 and 2011, the Company had approximately $355 million and $330 million, respectively, of guarantees
consisting primarily of outstanding standby letters of credit, bank guarantees and performance and bid bonds. These guarantees
have been provided in connection with certain arrangements with vendors, customers, financing counterparties and
governmental entities to secure the Company’s obligations and/or performance requirements related to specific transactions.
The Company believes that if the obligations under these instruments were triggered, it would not have a material effect on its
financial statements.
(17) STOCK TRANSACTIONS AND STOCK-BASED COMPENSATION
In May 2012, the Company's shareholders approved an amendment to the Company's Restated Certificate of Incorporation to
increase the number of authorized shares of common stock of the Company from 1.0 billion shares to 2.0 billion shares, $0.01
par value per share, which was filed and became effective on May 10, 2012.
On May 11, 2010, the Company’s Board of Directors (the “Board”) approved a two-for-one stock split (effected in the form of
a dividend by issuing one additional share of common stock for each issued share of common stock), which was paid on
June 10, 2010 to stockholders of record at the close of business on May 25, 2010. All prior period share and per share amounts
set forth in this report, including earnings per share and the weighted average number of shares outstanding for basic and
diluted earnings per share for each respective period, have been adjusted to reflect the stock split.
On May 11, 2010, the Company’s Board authorized 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 Company’s
repurchase program. The timing and amount of any shares repurchased is 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.
Pursuant to the stock repurchase program, during the year ended December 31, 2012, the Company repurchased approximately
12.5 million shares of Company common stock in open market transactions at a cost of $648 million. Neither the Company nor
any “affiliated purchaser” repurchased any shares of Company common stock during 2011 or 2010. At December 31, 2012, the
Company had approximately 7.5 million shares remaining for stock repurchases under the existing Board authorization.
Stock options and RSUs have been issued to directors, officers and other employees under the Company’s 1998 Stock Option
Plan and the 2007 Stock Incentive Plan. In addition, in connection with the November 2007 Tektronix acquisition, the
Company assumed the Tektronix 2005 Stock Incentive Plan and the Tektronix 2002 Stock Incentive Plan (the “Tektronix
Plans”) and assumed certain outstanding stock options, restricted stock and RSUs that had been awarded to Tektronix
employees under the plans. These plans operate in a similar manner to the Company’s 2007 Stock Incentive Plan and 1998
Stock Option Plan. No further equity awards will be issued under the 1998 Stock Option Plan or the Tektronix Plans. The
2007 Stock Incentive Plan provides for the grant of stock options, stock appreciation rights, RSUs, restricted stock or any other
stock based award. In May 2011, the Company’s shareholders approved amendments to the 2007 Stock Incentive Plan that,
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among other items, authorized the issuance of an additional 7 million shares pursuant to the plan bringing the total number of
shares authorized for issuance under the plan to 45 million. No more than 14 million of the 45 million authorized shares may
be granted in any form other than stock options or stock appreciation rights.
Stock options granted under the 2007 Stock Incentive Plan, the 1998 Stock Option Plan and the Tektronix Plans 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 under these
plans equal the closing price of the Company’s common stock on the NYSE on the date of grant. Option exercise prices for the
options outstanding under the Tektronix Plans were based on the closing price of Tektronix common stock on the date of grant.
In connection with the Company’s assumption of these options, 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 Tektronix stock underlying these awards.
RSUs issued under the 2007 Stock Incentive Plan and the 1998 Stock Option Plan provide for the issuance of a share of the
Company’s common stock at no cost to the holder. Most RSU awards granted prior to the third quarter of 2009 were granted
subject to performance criteria determined by the Compensation Committee, and RSU awards granted during or after the third
quarter of 2009 to members of the Company’s senior management are also subject to performance criteria. The RSUs that have
been granted to employees under the 2007 Stock Incentive Plan and the 1998 Stock Option Plan generally provide for time-
based vesting over a five year period, although the specific time-based vesting terms vary depending on grant date and on
whether the recipient is a member of senior management. The RSUs that have been granted to directors under the 2007 Stock
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 do not have dividend equivalent rights, do not have voting rights and the shares underlying the RSUs are not
considered issued and outstanding.
Restricted shares issued under the Tektronix Plans were granted subject to certain time-based vesting restrictions such that the
restricted share awards fully vested after a period of five years. The holders of these restricted shares had the right to vote such
shares and receive dividends and the shares were considered issued and outstanding at the date the award was granted. As of
December 31, 2012, all of the restricted shares and RSUs granted under the Tektronix Plans have fully vested.
The options, RSUs and restricted shares 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, the Company generally issues new shares from its authorized but unissued
share pool, although it may instead issue treasury shares in certain circumstances. At December 31, 2012, approximately 16
million shares of the Company’s common stock were reserved for issuance under the 2007 Stock Incentive Plan.
The Company accounts for stock-based compensation by measuring the cost of employee services received in exchange for all
equity awards granted, including stock options, RSUs and restricted shares, 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 and restricted stock awards was calculated using the closing price of the Company’s common
stock on the date of grant. 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, 2012, 2011 and 2010:
Risk-free interest rate
Weighted average volatility
Dividend yield
Expected years until exercise
Year Ended December 31
2012
2011
2010
0.7 – 1.7%
1.2 – 3.2%
1.4 – 3.4%
30.1%
0.2%
28.0%
0.2%
28.0%
0.2%
6.0 – 8.5
6.0 – 8.5
6.0 – 8.5
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
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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 dividend, based on the most recent quarterly dividend rate, by the closing stock price on the grant date. To estimate the
option exercise timing to be used in the valuation model, 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.
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 table summarizes the components of the Company’s stock-based compensation program recorded as expense ($
in millions):
RSUs and restricted shares:
Pre-tax compensation expense
Income tax benefit
RSU and restricted share expense, net of income taxes
Stock options:
Pre-tax compensation expense
Income tax benefit
Stock option expense, net of income taxes
Total stock-based compensation:
Pre-tax compensation expense
Income tax benefit
Total stock-based compensation expense, net of income taxes
Year Ended December 31
2012
2011
2010
$
$
$
$
$
$
61.1
(19.6)
41.5
48.8
(15.0)
33.8
109.9
(34.6)
75.3
$
$
$
$
$
$
47.9
(17.8)
30.1
47.7
(14.6)
33.1
95.6
(32.4)
63.2
$
$
$
$
$
$
32.2
(12.0)
20.2
55.9
(16.5)
39.4
88.1
(28.5)
59.6
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, 2012, $131 million of total unrecognized
compensation cost related to RSUs is expected to be recognized over a weighted average period of approximately two years.
As of December 31, 2012, $131 million of total unrecognized compensation cost related to stock options is expected to be
recognized over a weighted average period of approximately two years. Both amounts will be adjusted for any future changes
in estimated forfeitures.
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Option activity under the Company’s stock plans as of December 31, 2012 and changes during the three years ended
December 31, 2012 were as follows (in thousands; except exercise price and number of years):
Outstanding as of January 1, 2010
Granted
Exercised
Cancelled/forfeited
Outstanding as of December 31, 2010
Granted
Exercised
Cancelled/forfeited
Outstanding as of December 31, 2011
Granted
Exercised
Cancelled/forfeited
Outstanding as of December 31, 2012
Vested and Expected to Vest as of December 31,
2012 (1)
Vested as of December 31, 2012
Options
38,794
$
4,425
(7,028)
(1,371)
34,820
3,807
(4,488)
(1,685)
32,454
4,268
(8,133)
(1,217)
27,372
26,590
14,673
$
$
$
Weighted
Average
Exercise Price
Weighted Average
Remaining
Contractual Term
(in Years)
Aggregate
Intrinsic
Value
27.57
38.26
19.49
33.62
30.31
50.02
25.73
35.62
32.98
52.21
25.25
40.52
37.94
37.67
32.91
6
6
4
$
$
$
491,528
484,806
337,339
(1) The “Expected to Vest” options are the net unvested options that remain after applying the pre-vesting forfeiture rate
assumption to total unvested options.
The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the
Company’s closing stock price on the last trading day of 2012 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,
2012. The amount of aggregate intrinsic value will change based on the price of the Company’s common stock.
Options outstanding as of December 31, 2012 are summarized below:
Exercise Price
$15.23 to $23.56
$23.57 to $31.26
$31.27 to $38.81
$38.82 to $46.81
$46.82 to $55.07
Outstanding
Exercisable
Shares
(thousands)
Average
Exercise Price
Average
Remaining
Life
Shares
(thousands)
Average
Exercise Price
910
8,167
8,183
2,539
7,573
$
$
$
$
$
19.93
28.40
36.44
40.32
51.23
1
4
5
6
9
904
6,080
5,323
1,878
488
$
$
$
$
$
19.94
28.65
35.83
40.17
50.23
The aggregate intrinsic value of options exercised during the years ended December 31, 2012, 2011 and 2010 was $226
million, $105 million and $151 million, respectively. Exercise of options during the years ended December 31, 2012, 2011 and
2010 resulted in cash receipts of $201 million, $114 million, and $134 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 $75 million, $33 million, and $49 million in 2012, 2011 and 2010,
respectively, related to the exercise of employee stock options. The net income tax benefit in excess of the expense recorded
for financial reporting purposes (the “excess tax benefit”) has been recorded as an increase to additional paid-in capital and is
reflected as a financing cash inflow in the accompanying Consolidated Statements of Cash Flows.
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The following table summarizes information on unvested RSUs and restricted shares activity during the three years ended
December 31, 2012:
Unvested as of January 1, 2010
Granted
Vested
Forfeited
Unvested as of December 31, 2010
Granted
Vested
Forfeited
Unvested as of December 31, 2011
Granted
Vested
Forfeited
Unvested as of December 31, 2012
Number of RSUs/
Restricted
Shares (in thousands)
5,580
$
1,759
(1,877)
(309)
5,153
1,628
(405)
(397)
5,979
1,776
(1,704)
(466)
5,585
$
Weighted Average
Grant-Date
Fair Value
29.53
38.17
25.19
34.37
33.77
49.96
35.81
38.59
37.72
52.26
34.86
36.84
43.29
The Company realized a tax benefit of $31 million, $7 million and $27 million in the years ended December 31, 2012, 2011
and 2010, respectively, related to the vesting of RSUs. The excess tax benefit attributable to RSUs and restricted stock have
been recorded as an increase to additional paid-in capital and is reflected as a financing cash inflow in the accompanying
Consolidated Statements of Cash Flows.
In connection with the exercise of certain stock options and the vesting of RSUs and restricted shares 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, 2012,
1.2 million shares with an aggregate value of $65 million were withheld to satisfy the requirement. During the year ended
December 31, 2011, 147 thousand shares with an aggregate value of $7 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.
(18) NET EARNINGS PER SHARE FROM CONTINUING OPERATIONS
Basic net earnings per share (“EPS”) from continuing operations is calculated by dividing net earnings from continuing
operations by the weighted average number of common shares outstanding for the applicable period. Diluted net EPS from
continuing operations is computed based on the weighted average number of common shares outstanding increased by the
number of additional shares that would have been outstanding had the potentially dilutive common shares been issued and
reduced by the number of shares the Company could have repurchased with the proceeds from the issuance of the potentially
dilutive shares. For the years ended December 31, 2012 and 2011, approximately 2 million and 3 million options to purchase
shares, respectively, were not included in the diluted earnings per share calculation as the impact of their inclusion would have
been anti-dilutive. There were no anti-dilutive options for the year ended December 31, 2010.
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Information related to the calculation of net earnings from continuing operations per share of common stock is summarized as
follows (in millions, except per share amounts):
For the Year Ended December 31, 2012:
Basic EPS
Adjustment for interest on convertible debentures
Incremental shares from assumed exercise of dilutive options and
vesting of dilutive RSUs
Incremental shares from assumed conversion of the convertible
debentures
Diluted EPS
$
$
For the Year Ended December 31, 2011:
Net Earnings from
Continuing Operations
(Numerator)
Shares
(Denominator)
693.4
Per Share
Amount
$
3.32
—
9.8
9.9
2,299.3
5.7
—
—
2,305.0
713.1
$
3.23
Basic EPS
Adjustment for interest on convertible debentures
Incremental shares from assumed exercise of dilutive options and
vesting of dilutive RSUs
Incremental shares from assumed conversion of the convertible
debentures
Diluted EPS
$
$
For the Year Ended December 31, 2010:
Net Earnings from
Continuing Operations
(Numerator)
Shares
(Denominator)
676.2
Per Share
Amount
$
2.86
—
11.3
13.7
1,935.3
7.1
—
—
1,942.4
701.2
$
2.77
Net Earnings from
Continuing Operations
(Numerator)
Basic EPS
Adjustment for interest on convertible debentures
Incremental shares from assumed exercise of dilutive options and
vesting of dilutive RSUs
Incremental shares from assumed conversion of the convertible
debentures
Diluted EPS
$
$
1,718.2
10.6
—
—
1,728.8
Shares
(Denominator)
653.2
Per Share
Amount
$
2.63
—
9.0
21.1
683.3
$
2.53
(19) SEGMENT INFORMATION
The Company operates and reports its results in five separate business segments consisting of the Test & Measurement,
Environmental, Life Sciences & Diagnostics, Dental and Industrial Technologies segments. In addition, the historical results of
the hand tools related business (which was contributed to the Apex joint venture) and the Company’s equity in earnings of the
Apex joint venture is shown separately in the Company’s segment disclosures. Operating profit represents total revenues less
operating expenses, excluding other expense, interest and income taxes. The identifiable assets by segment are those used in
each segment’s operations. Inter-segment amounts are not significant and are eliminated to arrive at consolidated totals.
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Detailed segment data for the years ended December 31, 2012, 2011 and 2010 is presented in the following table ($ in
millions):
2012
2011
2010
Total sales:
Test & Measurement
Environmental
Life Sciences & Diagnostics
Dental
Industrial Technologies
Businesses contributed to Apex joint venture attributable to periods
prior to contribution
Operating profit:
Test & Measurement
Environmental
Life Sciences & Diagnostics
Dental
Industrial Technologies
Businesses contributed to Apex joint venture:
Attributable to periods prior to contribution
Equity method earnings subsequent to joint venture formation
Other
Identifiable assets (including assets held for sale):
Test & Measurement
Environmental
Life Sciences & Diagnostics
Dental
Industrial Technologies
Other
Depreciation and amortization:
Test & Measurement
Environmental
Life Sciences & Diagnostics
Dental
Industrial Technologies
Businesses contributed to Apex joint venture attributable to periods
prior to contribution
Other
$
3,381.0
$
3,390.9
$
$
$
$
$
$
$
3,063.5
6,485.1
2,022.9
3,307.9
—
18,260.4
701.2
652.5
861.1
293.1
685.6
—
69.9
(98.3)
3,165.1
5,505.8
3,146.6
13,305.2
4,079.9
4,235.6
2,667.9
$
$
$
$
2,939.6
4,627.4
2,011.2
3,121.4
—
16,090.5
751.2
622.7
402.3
236.1
655.0
—
66.8
(116.9)
2,617.2
5,280.6
2,784.8
12,888.4
4,047.5
3,394.9
1,553.3
$
$
$
$
2,832.9
2,738.0
2,298.3
1,824.6
2,540.6
315.6
12,550.0
572.9
564.3
227.9
203.3
513.3
41.5
22.8
(96.4)
2,049.6
5,322.9
2,634.9
4,071.7
4,120.2
2,876.8
3,190.6
32,941.0
$
29,949.5
$
22,217.1
132.3
$
126.6
$
107.7
48.9
478.2
92.4
80.8
—
7.2
45.9
297.2
94.0
65.8
—
5.5
45.9
90.7
81.7
51.5
6.2
4.6
$
839.8
$
635.0
$
388.3
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Table of Contents
Capital expenditures, gross
Test & Measurement
Environmental
Life Sciences & Diagnostics
Dental
Industrial Technologies
Businesses contributed to Apex joint venture attributable to periods
prior to contribution
Other
Operations in Geographical Areas
Year Ended December 31
($ in millions)
Sales:
United States
Germany
China
Japan
All other (each country individually less than 5% of total sales)
Long-lived assets (Including assets held for sale):
United States
Germany
All other (each country individually less than 5% of total long-lived
assets)
Sales by Major Product Group
Year Ended December 31
($ in millions)
Analytical and physical instrumentation
Medical & dental products
Motion and industrial automation controls
Mechanics and related hand tools
Product identification
All other
2012
2011
2010
$
$
37.5
29.5
296.8
30.2
49.0
—
15.3
$
37.7
29.1
167.0
35.4
51.3
—
14.0
35.6
25.4
49.6
31.8
35.4
6.9
6.4
$
458.3
$
334.5
$
191.1
2012
2011
2010
$
7,809.8
$
6,787.8
$
5,703.3
1,111.3
1,443.5
892.8
7,003.0
18,260.4
15,980.8
1,957.1
$
$
1,189.0
1,133.2
809.4
6,171.1
16,090.5
16,433.0
1,455.8
$
$
928.9
748.7
603.0
4,566.1
12,550.0
9,979.4
1,398.9
$
$
7,415.3
5,788.3
4,773.4
$
25,353.2
$
23,677.1
$
16,151.7
2012
2011
2010
$
6,000.8
$
5,920.9
$
8,509.1
1,592.4
330.5
1,410.3
417.3
6,653.5
1,677.1
305.2
1,162.1
371.7
5,206.0
4,122.9
1,517.7
590.9
818.4
294.1
$
18,260.4
$
16,090.5
$
12,550.0
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(20) QUARTERLY DATA-UNAUDITED ($ in millions, except per share data)
Prior period quarterly data has been reclassified to reflect businesses identified as discontinued operations. Refer to Note 3 for
information regarding these discontinued operations.
Net sales
Gross profit
Operating profit
Net earnings from continuing operations
Net earnings
Net earnings per share from continuing operations:
Basic
Diluted
Net earnings per share:
Basic
Diluted
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
2012
$
4,316.2
$
4,553.5
$
4,415.5
$
2,235.5
2,355.5
2,278.0
734.9
520.0
612.9
0.75
0.73
0.89
0.86
$
$
$
$
811.3
600.2
600.2
0.86
0.84
0.86
0.84
$
$
$
$
755.8
548.7
548.7
0.79
0.77
0.79
0.77
$
$
$
$
$
$
$
$
4,975.2
2,545.3
863.1
630.4
630.4
0.91 *
0.89
0.91
0.89
* Basic net earnings per share from continuing operations does not cross add to the full year amount due to rounding.
Net sales
Gross profit
Operating profit
Net earnings from continuing operations
Net earnings
Net earnings per share from continuing operations:
Basic
Diluted
Net earnings per share:
Basic
Diluted
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
2011
$
3,292.2
$
3,635.9
$
4,445.8
$
1,748.9
1,917.6
2,183.1
584.9
416.8
429.4
0.63
0.61
0.65
0.63
$
$
$
$
610.0
439.6
648.8
0.66
0.64
0.97
0.94
$
$
$
$
643.1
515.4
523.4
0.75
0.73
0.76
0.74
$
$
$
$
$
$
$
$
4,716.6
2,327.1
779.2
563.5
570.7
0.82
0.79
0.83
0.80
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
Not applicable.
ITEM 9A. CONTROLS AND PROCEDURES
The Company’s management, with the participation of the Company’s President and Chief Executive Officer, and Executive
Vice President and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and
procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended
(the “Exchange Act”)) as of the end of the period covered by this report. Based on such evaluation, the Company’s President
and Chief Executive Officer, and Executive Vice President and Chief Financial Officer, have concluded that, as of the end of
such period, the Company’s disclosure controls and procedures were effective.
Management’s annual report on our internal control over financial reporting and the independent registered public accounting
firm’s audit report on the effectiveness of our internal control over financial reporting are included in our financial statements
for the year ended December 31, 2012 included in Item 8 of this Annual Report on Form 10-K, under the headings “Report of
Management on Danaher Corporation’s Internal Control Over Financial Reporting” and “Report of Independent Registered
Public Accounting Firm,” respectively, and are incorporated herein by reference.
There have been no changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15
(f) and 15d-15(f) under the Exchange Act) that occurred during the Company’s most recent completed fiscal quarter that have
materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
Not applicable.
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PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Code of Ethics
Other than the information below, the information required by this Item is incorporated by reference from the sections entitled
Election of Directors of Danaher, Corporate Governance and Section 16(a) Beneficial Ownership Reporting Compliance in
the Proxy Statement for the Company’s 2013 annual meeting and to the information under the caption “Executive Officers of
the Registrant” in Part I hereof. No nominee for director was selected pursuant to any arrangement or understanding between
the nominee and any person other than the Company pursuant to which such person is or was to be selected as a director or
nominee.
We have adopted a code of business conduct and ethics for directors, officers (including Danaher’s principal executive officer,
principal financial officer and principal accounting officer) and employees, known as the Standards of Conduct. The Standards
of Conduct are available in the “Investors – Corporate Governance” section of our website at www.danaher.com.
We intend to disclose any amendment to the Standards of Conduct that relates to any element of the code of ethics definition
enumerated in Item 406(b) of Regulation S-K, and any waiver from a provision of the Standards of Conduct granted to any
director, principal executive officer, principal financial officer, principal accounting officer, or any of our other executive
officers, in the “Investors – Corporate Governance” section of our website, at www.danaher.com, within four business days
following the date of such amendment or waiver.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated by reference from the sections entitled Executive Compensation and
Director Compensation in the Proxy Statement for the Company’s 2013 annual meeting (other than the Compensation
Committee Report, which shall not be deemed to be “filed”).
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
The information required by this Item is incorporated by reference from the sections entitled Beneficial Ownership of Danaher
Common Stock by Directors, Officers and Principal Shareholders and Equity Compensation Plan Information in the Proxy
Statement for the Company’s 2013 annual meeting.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
The information required by this Item is incorporated by reference from the sections entitled Corporate Governance and
Certain Relationships and Related Transactions in the Proxy Statement for the Company’s 2013 annual meeting.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this Item is incorporated by reference from the section entitled Fees Paid to Independent
Registered Public Accounting Firm in the Proxy Statement for the Company’s 2013 annual meeting.
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
a) The following documents are filed as part of this report.
(1) Financial Statements. The financial statements are set forth under “Item 8. Financial Statements and Supplementary Data”
of this Annual Report on Form 10-K.
(2) Schedules. An index of Exhibits and Schedules is on page 111 of this report. Schedules other than those listed below have
been omitted from this Annual Report on Form 10-K because they are not required, are not applicable or the required
information is included in the financial statements or the notes thereto.
(3) Exhibits. The exhibits listed in the accompanying Exhibit Index are filed or incorporated by reference as part of this
Annual Report on Form 10-K.
110
Table of Contents
DANAHER CORPORATION
INDEX TO FINANCIAL STATEMENTS, SUPPLEMENTARY DATA AND FINANCIAL STATEMENT SCHEDULE
Schedule:
Valuation and Qualifying Accounts
EXHIBIT INDEX
Exhibit Number
Description
Page Number in
Form 10-K
119
3.1
3.2
4.1
4.2
4.3
4.4
4.5
4.6
Restated Certificate of Incorporation of Danaher
Corporation
Amended and Restated By-laws of Danaher
Corporation
Incorporated by reference from Exhibit 3.1 to
Danaher Corporation's Quarterly Report on Form 10-
Q for the quarter ended June 29, 2012 (Commission
File Number: 1-8089)
Incorporated by reference from Exhibit 3.2 to
Danaher Corporation's Annual Report on Form 10-K
for the year ended December 31, 2011 (Commission
File Number: 1-8089)
Senior Indenture dated as of December 11, 2007
by and between Danaher Corporation and The
Bank of New York Trust Company, N.A. as trustee
(“Senior Indenture”)
Incorporated by reference from Exhibit 4.1 to
Danaher Corporation's Quarterly Report on Form 10-
Q for the quarter ended July 1, 2011 (Commission
File Number: 1-8089)
Supplemental Indenture to Senior Indenture, dated
as of December 11, 2007, by and between Danaher
Corporation and The Bank of New York Trust
Company, N.A. as trustee relating to the 5.625%
Senior Notes Due 2018
Incorporated by reference from Exhibit 4.2 to
Danaher Corporation's Quarterly Report on Form 10-
Q for the quarter ended July 1, 2011 (Commission
File Number: 1-8089)
Form of 5.625% Senior Notes due 2018
Included in Exhibit 4.2
Supplemental Indenture to Senior Indenture, dated
as of March 5, 2009, by and between Danaher
Corporation and The Bank of New York Mellon
Trust Company, N.A. as trustee relating to the
5.4% Senior Notes due 2019
Incorporated by reference from Exhibit 4.4 to
Danaher Corporation's Quarterly Report on Form 10-
Q for the quarter ended July 1, 2011 (Commission
File Number: 1-8089)
Form of 5.4% Senior Notes due 2019
Included in Exhibit 4.4
Supplemental Indenture to Senior Indenture, dated
as of June 23, 2011, by and between Danaher
Corporation and The Bank of New York Mellon
Trust Company, N.A. as trustee relating to the
Floating Rate Notes due 2013
Incorporated by reference from Exhibit 4.6 to
Danaher Corporation's Quarterly Report on Form 10-
Q for the quarter ended July 1, 2011 (Commission
File Number: 1-8089)
4.7
Form of Floating Rate Notes due 2013
Included in Exhibit 4.6
111
Table of Contents
4.8
Supplemental Indenture to Senior Indenture, dated
as of June 23, 2011, by and between Danaher
Corporation and The Bank of New York Mellon
Trust Company, N.A. as trustee relating to the
1.3% Senior Notes due 2014
Incorporated by reference from Exhibit 4.8 to
Danaher Corporation's Quarterly Report on Form 10-
Q for the quarter ended July 1, 2011 (Commission
File Number: 1-8089)
4.9
Form of 1.3% Senior Notes due 2014
Included in Exhibit 4.8
4.10
Supplemental Indenture to Senior Indenture, dated
as of June 23, 2011, by and between Danaher
Corporation and The Bank of New York Mellon
Trust Company, N.A. as trustee relating to the
2.3% Senior Notes due 2016
Incorporated by reference from Exhibit 4.10 to
Danaher Corporation’s Quarterly Report on Form
10-Q for the quarter ended July 1, 2011
(Commission File Number: 1-8089)
4.11
Form of 2.3% Senior Notes due 2016
Included in Exhibit 4.10
4.12
Supplemental Indenture to Senior Indenture, dated
as of June 23, 2011, by and between Danaher
Corporation and The Bank of New York Mellon
Trust Company, N.A. as trustee relating to the
3.9% Senior Notes due 2021
Incorporated by reference from Exhibit 4.12 to
Danaher Corporation’s Quarterly Report on Form
10-Q for the quarter ended July 1, 2011
(Commission File Number: 1-8089)
4.13
Form of 3.9% Senior Notes due 2021
Included in Exhibit 4.12
10.1
Danaher Corporation 2007 Stock Incentive Plan,
as amended*
Incorporated by reference from Exhibit 10.1 to
Danaher Corporation’s Current Report on Form 8-K
filed on May 11, 2011 (Commission File Number:
1-8089)
10.2
10.3
10.4
10.5
Danaher Corporation Non-Employee Directors’
Deferred Compensation Plan, as amended, a sub-
plan under the 2007 Stock Incentive Plan*
Incorporated by reference from Exhibit 10.2 to
Danaher Corporation’s Annual Report on Form 10-K
for the year ended December 31, 2008 (Commission
File Number: 1-8089)
Amended Form of Election to Defer under the
Danaher Corporation Non-Employee Directors’
Deferred Compensation Plan*
Incorporated by reference from Exhibit 10.3 to
Danaher Corporation’s Annual Report on Form 10-K
for the year ended December 31, 2008 (Commission
File Number: 1-8089)
Form of Danaher Corporation 2007 Stock
Incentive Plan Stock Option Agreement for Non-
Employee Directors*
Incorporated by reference from Exhibit 10.6 to
Danaher Corporation’s Quarterly Report on Form
10-Q for the quarter ended July 1, 2011
(Commission File Number: 1-8089)
Form of Danaher Corporation 2007 Stock
Incentive Plan RSU Agreement for Non-Employee
Directors*
Incorporated by reference from Exhibit 10.7 to
Danaher Corporation’s Quarterly Report on Form
10-Q for the quarter ended July 1, 2011
(Commission File Number: 1-8089)
10.6
Form of Danaher Corporation 2007 Stock
Incentive Plan Stock Option Agreement *
10.7
Form of Danaher Corporation 2007 Stock
Incentive Plan RSU Agreement *
Incorporated by reference from Exhibit 10.4 to
Danaher Corporation’s Quarterly Report on Form
10-Q for the quarter ended July 1, 2011
(Commission File Number: 1-8089)
Incorporated by reference from Exhibit 10.5 to
Danaher Corporation’s Quarterly Report on Form
10-Q for the quarter ended July 1, 2011
(Commission File Number: 1-8089)
112
Table of Contents
10.8
Amended and Restated Danaher Corporation 1998
Stock Option Plan*
Incorporated by reference from Exhibit 10.5 to
Danaher Corporation’s Quarterly Report on Form
10-Q for the quarter ended July 3, 2009
(Commission File Number: 1-8089)
10.9
10.10
Form of Grant Acceptance Agreement under
Amended and Restated Danaher Corporation 1998
Stock Option Plan*
Incorporated by reference from Exhibit 10.2 to
Danaher Corporation’s Annual Report on Form 10-K
for the year ended December 31, 2004 (Commission
File Number: 1-8089)
Danaher Corporation & Subsidiaries Amended
and Restated Executive Deferred Incentive
Program*
Incorporated by reference from Exhibit 10.13 to
Danaher Corporation’s Annual Report on Form 10-K
for the year ended December 31, 2008 (Commission
File Number: 1-8089)
10.11
Danaher Corporation 2007 Executive Cash
Incentive Compensation Plan, as amended *
10.12
Danaher Corporation Senior Leader Severance
Pay Plan*
Incorporated by reference from Exhibit 10.1 to
Danaher Corporation's Current Report on Form 8-K
filed on May 9, 2012 (Commission File Number:
1-8089)
Incorporated by reference from Exhibit 10.15 to
Danaher Corporation’s Annual Report on Form 10-K
for the year ended December 31, 2008 (Commission
File Number: 1-8089)
10.13
10.14
Employment Agreement by and between Danaher
Corporation and H. Lawrence Culp, Jr., dated as of
July 18, 2000 and as subsequently amended
Incorporated by reference from Exhibit 10.2 to
Danaher Corporation's Quarterly Report on Form 10-
Q for the quarter ended September 28, 2012
(Commission File Number: 1-8089)
Letter Agreement by and between Danaher
Corporation and Angela S. Lalor, dated March 19,
2012
10.15
Form of Proprietary Interest Agreement for
Named Executive Officers (with severance) (1)*
Incorporated by reference from Exhibit 10.33 to
Danaher Corporation’s Annual Report on Form 10-K
for the year ended December 31, 2008 (Commission
File Number: 1-8089)
10.16
Proprietary Interest Agreement by and between
Danaher Corporation and Angela S. Lalor, dated
March 23, 2012*
10.17
Description of compensation arrangements for
non-management directors*
10.18
Credit Agreement, dated as of June 17, 2011,
among Danaher Corporation, Morgan Stanley
Senior Funding, Inc., as Administrative Agent,
Morgan Stanley Senior Funding, Inc., Barclays
Capital, Citigroup Global Markets Inc., and UBS
Securities LLC, as Joint Lead Arrangers and Joint
Book Managers, and the lenders referred to therein
(terminated effective as of December 29, 2011)
113
Incorporated by reference from Exhibit 10.8 to
Danaher Corporation’s Quarterly Report on Form
10-Q for the quarter ended July 1, 2011
(Commission File Number: 1-8089)
Incorporated by reference from Exhibit 10.1 to
Danaher Corporation’s Current Report on Form 8-K
filed on June 17, 2011 (Commission File Number:
1-8089)
Table of Contents
10.19
10.20
10.21
10.22
10.23
10.24
10.25
10.26
10.27
10.28
Incorporated by reference from Exhibit 10.1 to
Danaher Corporation’s Current Report on Form 8-K
filed on July 19, 2011 (Commission File Number:
1-8089)
Credit Agreement, dated as of July 15, 2011,
among Danaher Corporation, Bank of America,
N.A., as Administrative Agent and Swing Line
Lender, Citibank, N.A. as Syndication Agent, The
Bank of Tokyo-Mitsubishi UFJ, Ltd. and JP
Morgan Chase Bank, N.A. as Documentation
Agents, Banc of America Securities LLC, The
Bank of Tokyo-Mitsubishi UFJ, Ltd., Citigroup
Global Markets Inc., J.P. Morgan Securities, LLC
and Wells Fargo Securities, LLC as Joint Lead
Arrangers and Joint Book Managers and the
lenders referred to therein
Commercial Paper Dealer Agreement between
Danaher Corporation, as Issuer, and Goldman,
Sachs & Co., as Dealer, dated May 5, 2006
Incorporated by reference from Exhibit 10.22 to
Danaher Corporation’s Annual Report on Form 10-K
for the year ended December 31, 2009 (Commission
File Number: 1-8089)
Commercial Paper Issuing and Paying Agent
Agreement by and between Danaher Corporation
and Deutsche Bank Trust Company Americas,
dated May 5, 2006
Incorporated by reference from Exhibit 10.23 to
Danaher Corporation’s Annual Report on Form 10-K
for the year ended December 31, 2009 (Commission
File Number: 1-8089)
Commercial Paper Dealer Agreement between
Danaher Corporation, as Issuer, and Citigroup
Global Markets Inc., as Dealer, dated November 6,
2006
Incorporated by reference from Exhibit 10.24 to
Danaher Corporation’s Annual Report on Form 10-K
for the year ended December 31, 2009 (Commission
File Number: 1-8089)
Dealer Agreement among Danaher Luxembourg
Finance S.A., as Issuer, Danaher Corporation, as
Guarantor and Barclays Bank PLC as Dealer and
Arranger, dated December 6, 2011
Incorporated by reference from Exhibit 10.23 to
Danaher Corporation's Annual Report on Form 10-K
for the year ended December 31, 2011 (Commission
File Number: 1-8089)
Issuing and Paying Agency Agreement among
Danaher Luxembourg Finance S.A., as Issuer,
Danaher Corporation, as Guarantor and Deutsche
Bank AG, London Branch, as Issuing and Paying
Agent, dated December 6, 2011
Incorporated by reference from Exhibit 10.24 to
Danaher Corporation's Annual Report on Form 10-K
for the year ended December 31, 2011 (Commission
File Number: 1-8089)
Management Agreement dated February 23, 2012
by and between FJ900, Inc. and Joust Capital III,
LLC (2)
Incorporated by reference from Exhibit 10.25 to
Danaher Corporation's Annual Report on Form 10-K
for the year ended December 31, 2011 (Commission
File Number: 1-8089)
Interchange Agreement dated July 22, 2011 by and
between Danaher Corporation and Joust Capital
III, LLC (3)
Incorporated by reference from Exhibit 10.10 to
Danaher Corporation’s Quarterly Report on Form
10-Q for the quarter ended July 1, 2011
(Commission File Number: 1-8089)
Limited Liability Company Interest Purchase
Agreement by and among Danaher Corporation,
Steven M. Rales and Joust Group, L.L.C., dated
February 23, 2012
Incorporated by reference from Exhibit 10.28 to
Danaher Corporation's Annual Report on Form 10-K
for the year ended December 31, 2011 (Commission
File Number: 1-8089)
Aircraft Time Sharing Agreement by and between
Danaher Corporation and H. Lawrence Culp, Jr.,
dated December 18, 2012 (4)
114
Table of Contents
10.29
Form of Director and Officer Indemnification
Agreement
Incorporated by reference from Exhibit 10.35 to
Danaher Corporation's Annual Report on Form 10-K
for the year ended December 31, 2008 (Commission
File Number: 1-8089)
10.30
Amendment to Danaher Corporation and
Subsidiaries Executive Deferred Incentive
Program*
11.1
Computation of per-share earnings (5)
12.1
Calculation of Ratio of Earnings to Fixed Charges
21.1
Subsidiaries of Registrant
23.1
31.1
31.2
32.1
32.2
Consent of Independent Registered Public
Accounting Firm
Certification of Chief Executive Officer Pursuant
to Item 601(b)(31) of Regulation S-K, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002
Certification of Chief Financial Officer Pursuant
to Item 601(b)(31) of Regulation S-K, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002
Certification of Chief Executive Officer, Pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
Certification of Chief Financial Officer, Pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
101.INS
XBRL Instance Document (6)
101.SCH
XBRL Taxonomy Extension Schema Document
(6)
101.CAL
XBRL Taxonomy Extension Calculation Linkbase
Document (6)
101.DEF
XBRL Taxonomy Extension Definition Linkbase
Document (6)
101.LAB
XBRL Taxonomy Extension Label Linkbase
Document (6)
101.PRE
XBRL Taxonomy Extension Presentation
Linkbase Document (6)
115
Table of Contents
Danaher is a party to additional long-term debt instruments under which, in each case, the total amount of debt authorized does
not exceed 10% of the total assets of Danaher and its subsidiaries on a consolidated basis. Pursuant to paragraph 4(iii)(A) of
Item 601(b) of Regulation S-K, Danaher agrees to furnish a copy of such instruments to the Securities and Exchange
Commission upon request.
*
(1)
(2)
(3)
(4)
(5)
(6)
Indicates management contract or compensatory plan, contract or arrangement.
In accordance with Instruction 2 to Item 601(a)(4) of Regulation S-K, Danaher has entered into agreements with
each of Daniel L. Comas, Thomas P. Joyce, Jr. and James A. Lico that are substantially identical in all material
respects to the form of agreement attached, except as to the name of the counterparty.
In accordance with Instruction 2 to Item 601(a)(4) of Regulation S-K, FJ900, Inc. (a subsidiary of Danaher) has
entered into a management agreement with Joust Capital II, LLC that is substantially identical in all material
respects to the form of agreement referenced as Exhibit 10.25, except as to the referenced aircraft and the name
of the counterparty.
In accordance with Instruction 2 to Item 601(a)(4) of Regulation S-K, Danaher Corporation or a subsidiary
thereof has entered into additional interchange agreements with each of Joust Capital II, LLC and Joust Capital
III, LLC that are substantially identical in all material respects to the form of agreement attached as Exhibit
10.26, except as to the referenced aircraft and, in certain cases, the name of the counterparty.
In accordance with Instruction 2 to Item 601(a)(4) of Regulation S-K, Danaher Corporation has entered into an
aircraft time sharing agreement with Daniel L. Comas that is substantially identical in all material respects to the
form of agreement referenced as Exhibit 10.28, except as to the name of the counterparty.
See Note 18, “Net Earnings Per Share From Continuing Operations”, to our Consolidated Financial Statements.
Attached as Exhibit 101 to this report are the following documents formatted in XBRL (Extensible Business
Reporting Language): (i) Consolidated Balance Sheets as of December 31, 2012 and 2011, (ii) Consolidated
Statements of Earnings for the twelve months ended December 31, 2012, 2011 and 2010, (iii) Consolidated
Statements of Comprehensive Income for the twelve months ended December 31, 2012, 2011 and 2010, (iv)
Consolidated Statements of Stockholders’ Equity for the twelve months ended December 31, 2012, 2011 and
2010, (v) Consolidated Statements of Cash Flows for the twelve months ended December 31, 2012, 2011 and
2010 and (vi) Notes to Consolidated Financial Statements.
116
Table of Contents
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Date: February 21, 2013
DANAHER CORPORATION
By:
/s/ H. LAWRENCE CULP, JR.
H. Lawrence Culp, Jr.
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this annual report has been signed below by the following
persons on behalf of the Registrant and in the capacities and on the date indicated:
Name, Title and Signature
Date
/s/ STEVEN M. RALES
Steven M. Rales
Chairman of the Board
/s/ MITCHELL P. RALES
Mitchell P. Rales
Chairman of the Executive Committee
/s/ MORTIMER M. CAPLIN
Mortimer M. Caplin
Director
/s/ H. LAWRENCE CULP, JR.
H. Lawrence Culp, Jr.
President, Chief Executive Officer and Director
/s/ DONALD J. EHRLICH
Donald J. Ehrlich
Director
/s/ LINDA P. HEFNER
Linda P. Hefner
Director
/s/ TERI LIST-STOLL
Teri List-Stoll
Director
/s/ WALTER G. LOHR, JR.
Walter G. Lohr, Jr.
Director
117
February 21, 2013
February 21, 2013
February 21, 2013
February 21, 2013
February 21, 2013
February 21, 2013
February 21, 2013
February 21, 2013
Table of Contents
/s/ JOHN T. SCHWIETERS
John T. Schwieters
Director
/s/ ALAN G. SPOON
Alan G. Spoon
Director
/s/ ELIAS A. ZERHOUNI, M.D.
Elias A. Zerhouni, M.D.
Director
/s/ DANIEL L. COMAS
Daniel L. Comas
Executive Vice President and Chief Financial Officer
/s/ ROBERT S. LUTZ
Robert S. Lutz
Senior Vice President and Chief Accounting Officer
February 21, 2013
February 21, 2013
February 21, 2013
February 21, 2013
February 21, 2013
118
Table of Contents
DANAHER CORPORATION AND SUBSIDIARIES
SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS
($ in millions)
Classification
Year Ended December 31, 2012:
Allowances deducted from asset account
Allowance for doubtful accounts
Year Ended December 31, 2011:
Allowances deducted from asset account
Allowance for doubtful accounts
Year Ended December 31, 2010:
Allowances deducted from asset account
Balance at
Beginning
of
Period (a)
Charged to
Costs &
Expenses
Impact of
Currency
Charged to
Other Accounts
Write Offs,
Write Downs
&
Deductions
Balance at End
of Period (a)
$
145.2
$
39.7
$
(0.7) $
4.6 (b) $
37.7
$
151.1
$
134.2
$
39.7
$
(4.0) $
5.4 (b) $
30.1
$
145.2
Allowance for doubtful accounts
$
130.1
$
47.3
$
0.3
$
6.2 (b) $
49.7
$
134.2
Notes:
(a) Amounts include allowance for doubtful accounts classified as current and non-current.
(b) Amounts related to businesses acquired, net of amounts related to businesses disposed.
119
I, H. Lawrence Culp, Jr., certify that:
CERTIFICATION
1.
I have reviewed this Annual Report on Form 10-K of Danaher Corporation;
Exhibit 31.1
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in
all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is
being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons
performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and
report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Date: February 21, 2013
/s/ H. Lawrence Culp, Jr.
H. Lawrence Culp, Jr.
By:
Name
:
Title: President and Chief Executive Officer
I, Daniel L. Comas, certify that:
CERTIFICATION
1.
I have reviewed this Annual Report on Form 10-K of Danaher Corporation;
Exhibit 31.2
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in
all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is
being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons
performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and
report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Date: February 21, 2013
/s/ Daniel L. Comas
Daniel L. Comas
By:
Name
:
Title: Executive Vice President and Chief Financial Officer
CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.1
I, H. Lawrence Culp, Jr., certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that to my knowledge, Danaher Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31,
2012 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information
contained in such Annual Report on Form 10-K fairly presents in all material respects the financial condition and results of
operations of Danaher Corporation.
Date: February 21, 2013
/s/ H. Lawrence Culp, Jr.
By:
Name: H. Lawrence Culp, Jr.
Title: President and Chief Executive Officer
This certification accompanies the Annual Report on Form 10-K pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and
shall not be deemed filed for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section. This
certification shall not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act,
except to the extent that Danaher Corporation specifically incorporates it by reference.
CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.2
I, Daniel L. Comas, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, that to my knowledge, Danaher Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2012
fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information
contained in such Annual Report on Form 10-K fairly presents in all material respects the financial condition and results of
operations of Danaher Corporation.
Date: February 21, 2013
/s/ Daniel L. Comas
By:
Name: Daniel L. Comas
Title: Executive Vice President and Chief Financial Officer
This certification accompanies the Annual Report on Form 10-K pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and
shall not be deemed filed for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section. This
certification shall not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act,
except to the extent that Danaher Corporation specifically incorporates it by reference.
supplemental recOnciliatiOn OF nOn-gaap Financial
inFOrmatiOn tO cOrrespOnDing Financial inFOrmatiOn
presenteD in accOrDance with gaap
Free cash Flow from continuing Operations
($ in Millions)
Operating cash Flow from continuing Operations
payments for property, plant and equipment
(capital expenditures) from continuing Operations
Free cash Flow from continuing Operations
Full year
12/31/12
$ 3,502.1
$ (458.3)
$ 3,043.8
12 / 31/11
$ 2,732.1
$ ( 334.5 )
$ 2,397.6
ratio of Free cash Flow to net earnings
($ in Millions)
Free cash Flow from continuing Operations from above
net earnings from continuing Operations
Free cash Flow from continuing Operations to net
earnings from continuing Operations conversion ratio
Full year
12/31/12
$ 3,043.8
$ 2,299.3
12 / 31/11
$ 2,397.6
$ 1,935.3
1.32
1.24
core revenue growth
components of revenue Growth
core ( non- Gaap)
acquisitions ( non- Gaap)
Impact of currency translation ( non- Gaap)
Total revenue Growth (Gaap)
year ended 12/31/12 vs.
year ended 12/31/11
2.5 %
13.0 %
-2.0 %
13.5 %
cOmparisOn OF 5-year tOtal sharehOlDer return
amOng Danaher cOrpOratiOn, s&p 500 inDeX
anD s&p 500 inDustrials inDeX
The following graph compares the yearly percentage change in the cumulative total shareholder
return in Danaher common stock during the five years ended December 31, 2012 with the
cumulative total return of the S&P 500 Index (the equity index) and the S&P 500 Industrials
Index (the peer index). The comparison assumes $1.00 was invested on December 31, 2007
in Danaher common stock and in both of the above indices with reinvestment of dividends.
The graph is not deemed to be “soliciting material” or to be “filed” with the SEC or subject
to the SEC’s proxy rules or to the liabilities of Section 18 of the Securities Exchange Act of
1934, except to the extent that Danaher specifically requests that such information be treated
as soliciting material or specifically incorporates it by reference into a filing under the Securities
Act or the Securities Exchange Act.
Danaher corporation
S&p 500 ( equity Index)
S&p Industrial Index ( peer Index)
1.5
1.2
0.9
0.6
12/31/07
12/31/08
12/31/09
12/31/10
12/31/11
12/31/12
12 / 31/ 07
12 / 31/ 08
12 / 31/ 09
12 / 31/ 10
12 / 31/ 11
12 / 31/ 12
Danaher
corporation
S&P 500
(Equity Index)
S&P Industrial Index
(Peer Index)
1.00
0.65
0.86
1.08
1.08
1.26
1.00
0.62
0.76
0.86
0.86
0.97
1.00
0.60
0.73
0.92
0.92
1.06
Directors
MortiMer M. Caplin
Founder and Member
caplin and Drysdale
H. lawrenCe Culp, Jr.
President and Chief Executive Officer
Danaher corporation
DonalD J. eHrliCH
Retired Chairman and CEO
wabash national corp.
linDa Hefner filler
President
claire’s north america
MitCHell p. rales
Chairman of the Executive Committee
Danaher corporation
steven M. rales
Chairman of the Board
Danaher corporation
JoHn t. sCHwieters
Senior Executive
perseus, LLc
alan G. spoon
General Partner
polaris Venture partners
teri list-stoll
Senior Vice President and Treasurer
The procter and Gamble company
elias a. ZerHouni, M.D.
President, Global Research and Development
Sanofi-aventis
walter G. loHr, Jr.
Retired Partner
Hogan Lovells
executive Officers
steven M. rales
Chairman of the Board
JaMes a. liCo
Executive Vice President
MitCHell p. rales
Chairman of the Executive Committee
JaMes H. DitKoff
Senior Vice President – Finance and Tax
H. lawrenCe Culp, Jr.
President and Chief Executive Officer
JonatHan p. GraHa M
Senior Vice President – General Counsel
Daniel l. CoMas
Executive Vice President and
Chief Financial Officer
williaM K. Daniel ii
Executive Vice President
tHoMas p. JoyCe, Jr.
Executive Vice President
anGela s. lalor
Senior Vice President – Human Resources
robert s. lutZ
Senior Vice President – Chief Accounting Officer
Daniel a. rasKas
Senior Vice President – Corporate Development
shareholder information
our transfer aGent
can help you with a variety of shareholder
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ContaCtinG our transfer aGent
Computershare
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Toll Free: 800.568.3476
Outside the u.S.: 312.588.4991
investor relations
This annual report, along with a variety
of other financial materials, can be viewed
at www.danaher.com.
aDDitional inquiries
may be directed to Investor Relations at:
Danaher
2200 pennsylvania avenue, nw
Suite 800w, washington, Dc 20037
Phone: 202.828.0850
Fax: 202.828.0860
Email: investor.relations@danaher.com
annual MeetinG
Danaher’s annual shareholder meeting will
be held on May 7, 2013 in Washington, DC.
Shareholders who would like to attend the
meeting should register with Investor
Relations by calling 202.828.0850 or via
email at investor.relations@danaher.com.
auDitors
Ernst & Young LLP, McLean, Virginia
stoCK listinG
Symbol: DHr
New York Stock Exchange