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ITEM 2. 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 material information relevant to an assessment of Danaher Corporation’s (“Danaher,” the “Company,” “we,” “us” or “our”) financial condition and results of operations, including an evaluation of the amounts and certainty of cash flows from operations and from outside sources. The MD&A is designed to focus specifically on material events and uncertainties known to management that are reasonably likely to cause reported financial information not to be necessarily indicative of future operating results or of future financial condition. This includes descriptions and amounts of matters that have had a material impact on reported operations, as well as matters that are reasonably likely based on management’s assessment to have a material impact on future operations. The Company’s MD&A is divided into five sections:
•Information Relating to Forward-Looking Statements
•Overview
•Results of Operations
•Liquidity and Capital Resources
•Critical Accounting Estimates
You should read this discussion along with the Company’s MD&A and audited financial statements and Notes thereto as of and for the year ended December 31, 2024, included in the Company’s 2024 Annual Report and the Company’s Consolidated Condensed Financial Statements and related Notes as of and for the three-month period ended March 28, 2025 included in this Quarterly Report on Form 10-Q (“Report”).
INFORMATION RELATING TO FORWARD-LOOKING STATEMENTS
Certain statements included or incorporated by reference in this Report, in other documents we file with or furnish to the Securities and Exchange Commission, in our press releases, webcasts, conference calls, presentations, materials delivered to shareholders and other communications, are “forward-looking statements” within the meaning of the U.S. federal securities laws. All statements other than historical factual information are forward-looking statements, including without limitation statements regarding: projections of tariff impacts, revenue, expenses, profit, profit margins, asset values, pricing, 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, customer demand, cost reductions, restructuring activities, new product and service developments, competitive strengths or market position, acquisitions and the integration thereof, divestitures, spin-offs, split-offs, initial public offerings, other securities offerings or other distributions, strategic opportunities, stock repurchases, dividends, executive compensation and potential executive stock sales or purchases; growth, declines and other trends in markets we sell into; future, new or modified laws, regulations, accounting pronouncements or public policy changes; regulatory approvals and the timing and conditionality thereof; outstanding claims, legal proceedings, tax audits and assessments and other contingent liabilities; future currency exchange rates and fluctuations in those rates; the potential or anticipated direct or indirect impact of public health crises, climate change, military conflicts or other man-made or natural disasters on our business, results of operations and/or financial condition; general economic and capital markets conditions; the anticipated timing of any of the foregoing; 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,” “assume,” “continue,” “should,” “could,” “intend,” “will,” “plan,” “aim,” “expect,” “estimate,” “project,” “target,” “can,” “may,” “possible,” “potential,” “upcoming,” “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. Forward-looking statements are not guarantees of future performance and actual results may differ materially from the results, developments and business decisions contemplated by our forward-looking statements. Accordingly, you should not place undue reliance on any such forward-looking statements. Important factors, risks and uncertainties that in the future could cause actual results to differ materially from those envisaged in the forward-looking statements, and that in some cases have affected us in the past, include the following:
Business and Strategic Risks
•Conditions in the global economy, the particular markets we serve and the financial markets can adversely affect our business and financial statements.
•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 the prices we charge.
•Our growth depends on the timely development and commercialization, and customer acceptance, of new and enhanced products and services based on technological innovation. Our growth can also suffer if the markets into which we sell our products and services decline, do not grow as anticipated or experience cyclicality.
•The healthcare industry and related industries that we serve are undergoing significant changes in an effort to reduce (and increase the predictability of) costs, which can adversely affect our business and financial statements.
•Economic, political, geopolitical, legal, compliance, social and business factors (including the impact of military conflicts), both in the U.S. and outside the U.S., can negatively affect our business and financial statements. For example, elections can result in significant political shifts and/or disruptions, and the change in the U.S. administration as well as recent Supreme Court decisions have resulted in policy, regulatory and economic changes and uncertainty, including with respect to tariffs.
•Uncertainties with respect to the development, deployment and use of artificial intelligence in our business and products may result in harm to our business and reputation.
•Global heath crises, pandemics, epidemics or other outbreaks can adversely impact certain elements of our business and financial statements.
•Business partners and other third-parties we rely on for development, supply and/or marketing of certain products, potential products and technologies could fail to perform sufficiently.
Acquisitions, Divestitures and Investment Risks
•Any inability to consummate acquisitions at our historical rate and appropriate prices, realize the economic benefits of consummated acquisitions or, to make appropriate investments that support our long-term strategy, could negatively impact our business. Our acquisition of businesses, investments, joint ventures and other strategic relationships could also negatively impact our business and financial statements and our indemnification rights may not fully protect us from liabilities related thereto.
•Divestitures or other dispositions could negatively impact our business, and contingent liabilities from businesses that we or our predecessors have previously disposed could adversely affect our business and financial statements. For example, we could incur significant liability if any of the split-off or spin-off transactions we have previously consummated are determined to be a taxable transaction or otherwise pursuant to our indemnification obligations with respect to such transactions.
Operational Risks
•Significant disruptions in, or breaches in security of, our information technology (“IT”) systems or data; data privacy violations; other losses or disruptions to facilities, supply chains, distribution systems or IT systems due to catastrophe; and labor disputes can all adversely affect our business and financial statements.
•Defects, manufacturing problems and unanticipated use or inadequate disclosure with respect to our products or services, or allegations thereof, can adversely affect our business and financial statements.
•Climate change, legal or regulatory measures to address climate change and other sustainability topics and any inability to address regulatory requirements or stakeholder expectations with respect to climate change and other sustainability topics, may negatively affect our business and financial statements.
•Our financial results are subject to fluctuations in the cost and availability of the supplies we use in, and the labor we need for, our operations, as well as adverse changes with respect to key distributors and channel partners.
•Our success depends on our ability to recruit, retain and motivate talented employees.
•Our restructuring actions can have long-term adverse effects on our business and financial statements.
Intellectual Property Risks
•Any inability to adequately protect or avoid third-party infringement of our intellectual property, and third-party claims we are infringing intellectual property rights, can adversely affect our business and financial statements.
•The U.S. government has certain rights with respect to incremental production capacity attributable to, and/or the intellectual property we have developed using, government financing. In addition, in times of national emergency the U.S. government could also control our allocation of manufacturing capacity.
Financial and Tax Risks
•From time to time our outstanding debt has increased significantly as a result of acquisitions, and we may incur additional debt. Such indebtedness may limit our operations and use of cash flow and negatively impact our credit ratings; and failure to comply with our indebtedness-related covenants could adversely affect our business and financial statements.
•Our business and financial statements can be adversely affected by foreign currency exchange rates, changes in our tax rates (including as a result of changes in tax laws) or income tax liabilities/assessments, the outcome of tax audits, recognition of impairment charges for our goodwill or other intangible assets and fluctuations in the cost and availability of commodities.
Legal, Regulatory, Compliance and Reputational Risks
•Significant developments or changes in national laws or policies to protect or promote domestic interests and/or address foreign competition can have an adverse effect on our business and financial statements.
•Our businesses are subject to extensive regulation (including those applicable to the healthcare industry). Failure to comply with those regulations (including by our employees, agents or business partners) or significant developments or changes in U.S. or non-U.S. laws or policies can adversely affect our business and financial statements.
•We are subject to, or otherwise responsible for, a variety of litigation and other legal and regulatory proceedings in the course of our business that can adversely affect our business and financial statements.
•With respect to the regulated medical devices we offer, product introductions or modifications can require regulatory clearance or authorizations and we can be required to recall or cease marketing such products; off-label marketing can result in penalties; and clinical trials can have results that are unexpected or are perceived unfavorably by the market, all of which can adversely affect our business and financial statements.
•Our operations, products and services also expose us to the risk of environmental, health and safety liabilities, costs and violations that can adversely affect our business and financial statements.
•Our By-law exclusive forum provisions could limit our stockholders’ ability to choose their preferred judicial forum for disputes.
See “Part I—Item 1A. Risk Factors” of the Company’s 2024 Annual Report and Part II-Item 1A of this report for further discussion regarding reasons that actual results may differ materially from the results, developments and business decisions contemplated by our forward-looking statements. Forward-looking statements speak only as of the date of the report, document, press release, webcast, call, presentation, materials or other communication in which they are made. Except to the extent required by applicable law, 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.
OVERVIEW
General
As a result of the Company’s geographic and industry diversity, the Company faces a variety of opportunities and challenges, including rapid technological development (particularly with respect to computing, automation, artificial intelligence, mobile connectivity and digitization) in most of the Company’s served markets, the expansion and evolution of opportunities in high-growth markets, trends and costs associated with a global labor force, consolidation of the Company’s competitors and increasing regulation. 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 market segments, identify, consummate and integrate appropriate acquisitions and identify and consummate appropriate investments and strategic partnerships, 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 global environment. The Company is making significant investments, organically and through acquisitions and investments, 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) to be responsive to the Company’s customers throughout the world and improve the efficiency of the Company’s operations.
Business Performance and Outlook
During the first quarter of 2025, the Company’s overall revenues decreased 1.0% compared to the comparable period of 2024. Core sales were flat in the first quarter of 2025 compared to the comparable prior year period as higher core sales in the Biotechnology segment were offset by lower core sales in the Life Sciences and Diagnostics segments. The impact of acquisitions increased reported sales 0.5% and foreign currency decreased reported sales 1.5%. Price increases did not have a significant impact on the change in sales on a year-over-year basis during the three-month period ended March 28, 2025 and are reflected as a component of core sales above. For the definitions of “core sales” and “acquisitions” refer to “—Results of Operations” below.
Geographically, the Company’s sales in the three-month period ended March 28, 2025 in developed markets decreased year-over-year by 1% and core sales in developed markets were down slightly. Low-single digit core sales declines in North America more than offset low-single digit core sales increases in Western Europe. The decrease in core sales in developed markets was primarily driven by declines in the Life Sciences segment, partially offset by increased core sales in the Biotechnology segment. For the same period, sales in high-growth markets were flat year-over-year and core sales in high-growth markets increased at a low-single digit rate as increased core sales in other regions more than offset a high-single digit decline in core revenue in China. The increase in core sales in high-growth markets was primarily driven by increased demand in the Biotechnology segment, partially offset by core sales declines in the Diagnostics segment. High-growth markets represented approximately 27% of the Company’s total sales in the first quarter of 2025. For additional information regarding the Company’s sales by geographical region during the three-month periods ended March 28, 2025 and March 29, 2024, refer to Note 4 to the accompanying Consolidated Condensed Financial Statements.
The Company’s net earnings for the three-month period ended March 28, 2025 totaled $954 million or $1.32 per diluted common share compared to approximately $1.1 billion or $1.45 per diluted common share for the three-month period ended March 29, 2024. Increased 2025 operating expenses, investment losses and net interest expense, drove the year-over-year decline in net earnings and diluted net earnings per common share for the three-month period ended March 28, 2025.
Currency exchange rates decreased reported sales by approximately 1.5% for the three-month period ended March 28, 2025 compared to the comparable period of 2024, primarily due to the exchange rates of the U.S. dollar compared to the euro and other major currencies in 2025. In future periods, strengthening of the U.S. dollar against other major currencies compared to the exchange rates in effect as of March 28, 2025 would adversely impact the Company’s sales and results of operations on an overall basis, and any weakening of the U.S. dollar against other major currencies compared to the exchange rates in effect as of March 28, 2025 would positively impact the Company’s sales and results of operations.
As a diversified, global business, Danaher operates a global supply chain and sources parts and materials globally. In the second quarter of 2025, the U.S. implemented significant new tariffs on imports from a wide range of countries, which has also prompted retaliatory tariffs by a number of countries and a cycle of retaliatory tariffs by both the U.S. and other countries. In early April 2025, actions were taken by the U.S. and certain other countries to delay the effective date of certain of these tariffs, but a number of the new tariffs remain in effect, including significant tariffs between the U.S. and China.
Based on the tariffs enacted and in effect as of April 20, 2025 (the “enacted tariffs”), the Company anticipates incurring incremental tariff costs in 2025 of several hundred millions of dollars. These incremental tariff costs reflect the impact of the enacted tariffs on the costs of parts and materials used by the Company to produce products, as well as costs the Company may incur on finished goods shipped to customers. The Company expects to largely offset the operating profit impact of the enacted tariffs with manufacturing footprint changes, supply chain adjustments, surcharges and additional productivity and cost savings actions. To the extent the Company is unable to offset the tariffs or the tariffs negatively impact demand, the Company’s revenue and profitability would be adversely impacted. If the delayed tariffs come into effect or other additional tariffs are adopted, the Company would incur additional tariff costs that could be material.
In addition to changes in trade policy, the new U.S. administration has implemented a number of other policy and regulatory changes, including the elimination, downsizing and reduced funding of certain government agencies and programs as well as changes in the policy positions of such agencies.
The full impact of the matters noted above on the Company, our business partners, the overall economy and capital markets remains uncertain, but the Company currently expects end-market demand for the remainder of 2025 to be relatively consistent with the first quarter of 2025. Refer to “Risk Factors” for additional information.
RESULTS OF OPERATIONS
Non-GAAP Measures
In this report, references to the non-GAAP measure of core sales (also referred to as core revenues or sales/revenues from existing businesses) refer to sales calculated according to U.S. GAAP, but excluding:
•sales from acquired businesses (as defined below); and
•the impact of currency translation.
References to sales or operating profit attributable to acquisitions or acquired businesses refer to sales or operating profit, as applicable, from acquired businesses recorded prior to the first anniversary of the acquisition less any sales and operating profit, during the applicable period, attributable to divested product lines not considered discontinued operations. The portion of revenue attributable to currency translation is calculated as the difference between:
•the period-to-period change in revenue (excluding sales from acquired businesses (as defined above)); and
•the period-to-period change in revenue (excluding sales from acquired businesses (as defined above)) after applying current period foreign exchange rates to the prior year period.
Core sales growth (decline) 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 this non-GAAP financial measure provides useful information to investors by helping identify underlying growth trends in Danaher’s business and facilitating comparisons of Danaher’s revenue performance with its performance in prior and future periods and to Danaher’s peers. Management also uses this non-GAAP financial measure to measure the Company’s operating and financial performance and uses core sales growth as one of the performance measures in the Company’s executive short-term cash incentive compensation program. The Company excludes the effect of currency translation from this measure because currency translation is not under management’s control, is subject to volatility and can obscure underlying business trends. The Company excludes the effect of acquisitions and divestiture-related items because the nature, size, timing and number of acquisitions and divestitures 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.
Throughout this discussion, references to sales growth or decline refer to the impact of both price and unit sales and references to productivity improvements generally refer to improved cost-efficiencies resulting from the ongoing application of the Danaher Business System.
Sales Decline and Core Sales Growth
| | | | | |
| % Change Three-Month Period Ended March 28, 2025 vs. Comparable 2024 Period |
| Total sales decline (GAAP) | (1.0) | % |
| Impact of: | |
| Acquisitions/divestitures | (0.5) | % |
| Currency exchange rates | 1.5 | % |
| Core sales growth (non-GAAP) | — | % |
|
|
Operating Profit Performance
Operating profit margins decreased 40 basis points from 22.6% during the three-month period ended March 29, 2024 to 22.2% for the three-month period ended March 28, 2025.
First quarter 2025 vs. first quarter 2024 operating profit margin comparisons were unfavorably impacted by:
•The impact of product mix, reduced leverage on the Company’s operations and administrative cost structure and the impact of currency exchange rates - 30 basis points
•Incremental dilutive effect in 2025 of acquired businesses and the impact of a product line disposition which did not qualify as discontinued operations - 25 basis points
•First quarter 2025 impairment charge related to a facility in the Biotechnology segment - 25 basis points
First quarter 2025 vs. first quarter 2024 operating profit margin comparisons were favorably impacted by:
•First quarter 2024 acquisition-related fair value adjustment to inventory - 40 basis points
Business Segments
Sales by business segment for each of the periods indicated were as follows ($ in millions):
| | | | | | | | | | | |
| | Three-Month Period Ended |
| | March 28, 2025 | | March 29, 2024 |
| Biotechnology | $ | 1,612 | | | $ | 1,524 | |
| Life Sciences | 1,680 | | | 1,745 | |
| Diagnostics | 2,449 | | | 2,527 | |
| Total | $ | 5,741 | | | $ | 5,796 | |
|
For information regarding the Company’s sales by geographical region, refer to Note 4 to the accompanying Consolidated Condensed Financial Statements.
BIOTECHNOLOGY
The Biotechnology segment includes the bioprocessing and discovery and medical businesses and offers a broad range of equipment, consumables and services that are primarily used by customers to advance and accelerate the research, development, manufacture and delivery of biological medicines. The Company’s solutions support a broad range of biotherapeutics including monoclonal antibodies, recombinant proteins, replacement therapies such as insulin and vaccines, as well as novel cell, gene, mRNA and other nucleic acid therapies.
Biotechnology Selected Financial Data
| | | | | | | | | | | |
| | Three-Month Period Ended |
| ($ in millions) | March 28, 2025 | | March 29, 2024 |
| Sales | $ | 1,612 | | | $ | 1,524 | |
| Operating profit | 441 | | | 325 | |
| Depreciation | 34 | | | 42 | |
| Amortization of intangible assets | 213 | | | 218 | |
| Operating profit as a % of sales | 27.4 | % | | 21.3 | % |
| Depreciation as a % of sales | 2.1 | % | | 2.8 | % |
| Amortization as a % of sales | 13.2 | % | | 14.3 | % |
Sales Growth and Core Sales Growth | | | | | |
| % Change Three-Month Period Ended March 28, 2025 vs. Comparable 2024 Period |
| Total sales growth (GAAP) | 6.0 | % |
| Impact of: | |
| |
| Currency exchange rates | 1.0 | % |
| Core sales growth (non-GAAP) | 7.0 | % |
| |
| |
Price increases in the segment contributed 1.0% to sales growth on a year-over-year basis during the three-month period ended March 28, 2025 and are reflected as a component of core sales above.
Total segment sales increased 6.0% during the three-month period. In the three-month period, the increase in segment sales was led by increased core sales in the bioprocessing business, partially offset by the impact of currency exchange rates. Total segment core sales increased across most major geographic regions. Improved demand for consumables was partially offset by lower demand for equipment. Year-over-year core sales increases in the bioprocessing business were primarily driven by improved consumables demand from large pharmaceutical customers, primarily in North America, Europe and Southeast Asia. Core sales decreased slightly in China as a result of weaker demand for equipment. Core sales in the discovery and medical business increased year-over-year as core sales growth in the high-growth markets was partially offset by lower core sales in North America.
Operating Profit Performance
Operating profit margins increased 610 basis points during the three-month period ended March 28, 2025 as compared to the comparable period of 2024.
First quarter 2025 vs. first quarter 2024 operating profit margin comparisons were favorably impacted by:
•Higher 2025 core sales, the impact of product mix and improvements in the segment’s operational and administrative cost structure, net of the impact of currency exchange rates - 700 basis points
First quarter 2025 vs. first quarter 2024 operating profit margin comparisons were unfavorably impacted by:
•First quarter 2025 impairment charge related to a facility in the Biotechnology segment - 90 basis points
Depreciation and amortization of intangible assets as a percentage of sales decreased during the three-month period ended March 28, 2025 as compared to the comparable period of 2024, primarily as a result of the increase in sales.
LIFE SCIENCES
The Life Sciences segment offers a broad range of instruments, consumables, services and software that are primarily used by customers to study the basic building blocks of life, including DNA and RNA, nucleic acid, proteins, metabolites and cells, in order to understand the causes of disease, identify new therapies, and test and manufacture new drugs, vaccines and gene editing technologies. Additionally, the segment provides products and consumables used to filter and remove contaminants from a variety of liquids and gases in many end-market applications.
Life Sciences Selected Financial Data
| | | | | | | | | | | |
| | Three-Month Period Ended |
| ($ in millions) | March 28, 2025 | | March 29, 2024 |
| Sales | $ | 1,680 | | | $ | 1,745 | |
| Operating profit | 201 | | | 235 | |
| Depreciation | 45 | | | 38 | |
| Amortization of intangible assets | 149 | | | 141 | |
| Operating profit as a % of sales | 12.0 | % | | 13.5 | % |
| Depreciation as a % of sales | 2.7 | % | | 2.2 | % |
| Amortization as a % of sales | 8.9 | % | | 8.1 | % |
Sales Decline and Core Sales Decline
| | | | | |
| % Change Three-Month Period Ended March 28, 2025 vs. Comparable 2024 Period |
| Total sales decline (GAAP) | (3.5) | % |
| Impact of: | |
| Acquisitions | (2.0) | % |
| Currency exchange rates | 1.5 | % |
| Core sales decline (non-GAAP) | (4.0) | % |
|
|
Price increases in the segment did not have a significant impact on the change in sales on a year-over-year basis during the three-month period ended March 28, 2025 and are reflected as a component of core sales above.
Total segment sales decreased 3.5% during the three-month period ended March 28, 2025, primarily as a result of decreased core sales and to a lesser extent the impact of currency exchange rates, partially offset by acquisitions. The year-over-year decrease in core sales in the three-month period was led by the genomics consumables business, primarily in North America. The year-over-year core sales decline in the genomics consumables business was primarily driven by lower demand for the plasmids and protein product lines at two large customers, which more than offset increased demand for next generation sequencing products. Lower demand in the academic and government end-markets reduced core sales in the protein consumables and in the flow cytometry and lab automation solutions businesses while in the filtration business, decreased demand in the energy-related end-market more than offset increased demand in the microelectronic end-market. During the three-month period, year-over-year core sales increased in the microscopy and mass spectrometry businesses with increased demand for consumables. The microscopy business also saw increased demand for equipment in the confocal product line.
Operating Profit Performance
Operating profit margins decreased 150 basis points during the three-month period ended March 28, 2025 as compared to the comparable period of 2024.
First quarter 2025 vs. first quarter 2024 operating profit margin comparisons were unfavorably impacted by:
•Lower first quarter 2025 core sales, the impact of product mix and the impact of reduced leverage in the segment’s operational and administrative cost structure - 250 basis points
•The incremental dilutive effect in 2025 of acquired businesses - 40 basis points
First quarter 2025 vs. first quarter 2024 operating profit margin comparisons were favorably impacted by:
•First quarter 2024 acquisition-related fair value adjustment to inventory - 140 basis points
Depreciation and amortization of intangible assets increased as a percentage of sales during the three-month period ended March 28, 2025, primarily as a result of the decrease in sales and the impact of acquisitions.
DIAGNOSTICS
The Diagnostics segment offers clinical instruments, consumables, software and services that hospitals, physicians’ offices, reference laboratories and other critical care settings use to diagnose disease and make treatment decisions.
Diagnostics Selected Financial Data
| | | | | | | | | | | |
| | Three-Month Period Ended |
| ($ in millions) | March 28, 2025 | | March 29, 2024 |
| Sales | $ | 2,449 | | | $ | 2,527 | |
| Operating profit | 718 | | | 830 | |
| Depreciation | 100 | | | 97 | |
| Amortization of intangible assets | 48 | | | 48 | |
| Operating profit as a % of sales | 29.3 | % | | 32.8 | % |
| Depreciation as a % of sales | 4.1 | % | | 3.8 | % |
| Amortization as a % of sales | 2.0 | % | | 1.9 | % |
Sales Decline and Core Sales Decline
| | | | | |
| % Change Three-Month Period Ended March 28, 2025 vs. Comparable 2024 Period |
| Total sales decline (GAAP) | (3.0) | % |
| Impact of: | |
| Divestitures | 0.5 | % |
| Currency exchange rates | 1.0 | % |
| Core sales decline (non-GAAP) | (1.5) | % |
Price decreases, attributable to factors discussed below, in the segment of 0.5% negatively impacted the year-over-year change in sales during the three-month period ended March 28, 2025 and are reflected as a component of core sales above.
Total segment sales decreased 3.0% during the three-month period, primarily as a result of decreased core sales and to a lesser extent currency exchange rates and the impact of divestitures. Overall segment core sales decline was driven primarily by decreased core sales in China attributable to the impact of China’s volume-based procurement program and healthcare reimbursement changes. During the three-month period, core sales in the molecular diagnostics business declined year-over-year as decreased core sales of respiratory disease tests more than offset increased core sales in non-respiratory tests. In the segment’s clinical diagnostics businesses core sales increased during the three-month period on a year-over-year basis as increases in the pathology and acute care diagnostics businesses more than offset declines in the clinical lab business.
Operating Profit Performance
Operating profit margin decreased 350 basis points during the three-month period ended March 28, 2025 as compared to the comparable period of 2024. The following factors unfavorably impacted year-over-year operating profit margin:
•Lower first quarter 2025 core sales, the impact of product mix and the impact of reduced leverage in the segment’s operational and administrative cost structure - 340 basis points
•The impact of a product line disposition which did not qualify as discontinued operations - 10 basis points
COST OF SALES AND GROSS PROFIT
| | | | | | | | | | | |
|
| ($ in millions) | March 28, 2025 | | March 29, 2024 |
| Sales | $ | 5,741 | | | $ | 5,796 | |
| Cost of sales | (2,230) | | | (2,309) | |
| Gross profit | $ | 3,511 | | | $ | 3,487 | |
| Gross profit margin | 61.2 | % | | 60.2 | % |
Cost of sales decreased year-over-year during the three-month period ended March 28, 2025 as compared to the comparable period in 2024. The decrease during the three-month period was primarily due to the impact of currency exchange rates, product mix and a $25 million acquisition-related charge associated with the fair value adjustment to inventory recorded in the first quarter of 2024 in connection with the acquisition of Abcam plc. These decreases were partially offset by a $15 million impairment charge related to a facility in the Biotechnology segment recorded in the first quarter of 2025.
Year-over-year gross profit margin increased during the three-month period ended March 28, 2025 as compared to the comparable period in 2024. In the three-month period, the increase was due to the impact of product mix and the impact of an acquisition-related charge recorded in the first quarter of 2024, net of the facility impairment recorded in the first quarter of 2025, both referenced above.
OPERATING EXPENSES
| | | | | | | | | | | |
|
| ($ in millions) | March 28, 2025 | | March 29, 2024 |
| Sales | $ | 5,741 | | | $ | 5,796 | |
| Selling, general and administrative expenses | 1,858 | | | 1,807 | |
| Research and development expenses | 379 | | | 368 | |
|
| SG&A as a % of sales | 32.4 | % | | 31.2 | % |
| R&D as a % of sales | 6.6 | % | | 6.3 | % |
|
SG&A expenses as a percentage of sales increased during the three-month period ended March 28, 2025 as compared to the comparable period in 2024, primarily driven by a year-over-year increase in costs incurred for productivity improvement actions, and to a lesser extent, the impact of recent acquisitions, including the associated amortization expenses, net of incremental year-over-year cost savings associated with continuing productivity improvement initiatives and cost structure improvements.
R&D expenses (consisting principally of internal and contract engineering personnel costs) as a percentage of sales increased during the three-month period ended March 28, 2025 as compared to the comparable period of 2024 primarily as a result of increased spending on R&D activities, including the impact of recent acquisitions.
OTHER INCOME (EXPENSE), NET
For a description of the Company’s other income (expense), net during the three-month periods ended March 28, 2025 and March 29, 2024, refer to Note 7 to the accompanying Consolidated Condensed Financial Statements.
INTEREST COSTS AND FINANCING
For a discussion of the Company’s outstanding indebtedness, refer to Note 10 to the accompanying Consolidated Condensed Financial Statements.
Interest expense of $72 million for the three-month period ended March 28, 2025 was $7 million higher than the comparable period of 2024.
Interest income of $6 million for the three-month period ended March 28, 2025 was $54 million lower than the comparable period of 2024, due primarily to lower average cash balances in 2025 as a result of share repurchases and acquisitions.
INCOME TAXES
The following table summarizes the Company’s effective tax rate:
| | | | | | | | | | | |
|
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| Effective tax rate | 15.5 | % | | 14.4 | % |
The Company operates globally, including in certain jurisdictions with lower tax rates than the U.S. federal statutory rate. Therefore, the impact of Danaher’s global operations and benefits from tax credits and incentives contributes to a lower effective tax rate compared to the U.S. federal statutory tax rate. For each period presented, the effective tax rate differs from the U.S. federal statutory rate of 21.0% principally due to the impact of the Company’s global operations, research tax credits, foreign-derived intangible income and aggregate net discrete benefits or charges.
For the three-month period ended March 28, 2025, net discrete tax benefits of $10 million reduced the effective tax rate by 0.9% and related primarily to changes in estimates of prior year tax filing positions, release of reserves for uncertain tax positions due to the expiration of statutes of limitation and excess tax benefits from stock-based compensation, net of charges related to changes in estimates associated with prior period uncertain tax positions.
For the three-month period ended March 29, 2024, net discrete tax benefits of $36 million reduced the effective tax rate by 2.8% and related primarily to excess tax benefits from stock-based compensation, release of reserves for uncertain tax positions due to the expiration of statutes of limitation and changes in estimates associated with prior period uncertain tax positions.
The Company (including its subsidiaries) conducts business globally, and files numerous consolidated and separate income tax returns in federal, state and foreign jurisdictions. In addition to the Company’s significant presence in the U.S., the Company also has a significant presence in China, Denmark, Germany, Singapore, Sweden, Switzerland and the United Kingdom. Excluding these jurisdictions, the Company believes that a change in the statutory tax rate of any
individual foreign country would not have a material impact on the Company’s financial statements given the geographical dispersion of the Company’s taxable income.
The Company and its subsidiaries are routinely examined by various U.S. and non-U.S. taxing authorities. The IRS has completed substantially all of the examinations of the Company’s federal income tax returns through 2015 and is currently examining certain of the Company’s federal income tax returns for 2016 through 2022. In addition, the Company has subsidiaries in Canada, China, Denmark, France, Germany, India, Italy, Switzerland, the United Kingdom and various other countries, states and provinces that are currently under audit for years ranging from 2004 through 2023.
In the fourth quarter of 2022, the IRS proposed significant adjustments to the Company’s taxable income for the years 2016 through 2018 with respect to the deferral of tax on certain premium income related to the Company’s self-insurance programs. For income tax purposes, the recognition of premium income has been deferred in accordance with U.S. tax laws related to insurance. The proposed adjustments would have increased the Company’s taxable income over the 2016 through 2018 periods by approximately $2.5 billion. In the first quarter of 2023, the Company settled these proposed adjustments with the IRS, although the audit is still open with respect to other matters for the 2016 through 2018 period. The impact of the settlement with respect to the Company’s self-insurance policies was not material to the Company’s financial statements, including cash flows and the effective tax rate. As the settlement with the IRS was specific to the audit period, the settlement does not preclude the IRS from proposing similar adjustments to the Company’s self-insurance programs with respect to periods after 2018. Management believes the positions the Company has taken in its U.S. tax returns are in accordance with the relevant tax laws.
The Company expects its effective tax rate for the remainder of 2025 to be approximately 17.0% based on its projected mix of earnings. The Company’s effective tax rate could vary as a result of many factors, including but not limited to the following:
•The expected rate for the remainder of 2025 includes the anticipated discrete income tax benefits from excess tax deductions related to the Company’s stock compensation programs, which are reflected as a reduction in tax expense, though the actual benefits (if any) will depend on the Company’s stock price and stock option exercise patterns.
•The actual mix of earnings by jurisdiction could fluctuate from the Company’s projection.
•The tax effects of other discrete items, including accruals related to tax contingencies, the resolution of worldwide tax matters, tax audit settlements, statute of limitations expirations and changes in tax regulations.
•Any future changes in tax law or the implementation of increases in tax rates, the impact of future regulations and any related additional tax planning efforts to address these changes.
As a result of the uncertainty in predicting these items, it is reasonably possible that the actual effective tax rate used for financial reporting purposes will change in future periods compared to the estimate above.
Refer to Note 6 to the Consolidated Condensed Financial Statements for discussion regarding the Company’s significant tax matters.
COMPREHENSIVE INCOME
Comprehensive income increased during the three-month period ended March 28, 2025 by approximately $2.5 billion as compared to the comparable period of 2024. For the three-month period ended March 28, 2025, the increase in comprehensive income was primarily driven by increased gains from foreign currency translation adjustments and to a lesser extent, gains on cash flow hedges, partially offset by lower net earnings. The Company recorded foreign currency translation gains of approximately $1.4 billion for the three-month period ended March 28, 2025 compared to losses of $948 million for the three-month period ended March 29, 2024. The foreign currency translation gains in the three-month period ended March 28, 2025 were primarily driven by the change in the exchange rates between the U.S. dollar and the Swedish krona. Foreign currency translation adjustments reflect the gain or loss resulting from the impact of the change in currency exchange rates on the Company’s foreign operations as they are translated to the Company’s reporting currency, the U.S. dollar. The Company recorded gains of $156 million from cash flow hedge adjustments related to the Company’s cross-currency swap derivative contracts for the three-month period ended March 28, 2025 as compared to losses of $50 million for the comparable period of 2024.
LIQUIDITY AND CAPITAL RESOURCES
Management assesses the Company’s liquidity in terms of its ability to generate cash to fund its operating, investing and financing activities. The Company continues to generate substantial cash from operating activities and believes that its operating cash flow, cash on hand and other sources of liquidity will be sufficient to allow it to continue investing in existing businesses (including capital expenditures), consummating strategic acquisitions and investments, paying interest and servicing debt, paying dividends and funding restructuring activities, as well as to repurchase common stock when deemed appropriate and manage its capital structure on a short-term and long-term basis.
The Company has relied primarily on borrowings under its commercial paper program to address liquidity requirements that exceed the capacity provided by its operating cash flows and cash on hand, while also accessing the capital markets from time to time including to secure financing for more significant acquisitions. Subject to any limitations that may result from market disruptions, the Company anticipates following the same approach in the future.
Overview of Cash Flows and Liquidity
Following is an overview of the Company’s cash flows and liquidity ($ in millions):
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| Three-Month Period Ended |
| March 28, 2025 | | March 29, 2024 |
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| Net cash provided by operating activities | $ | 1,299 | | | $ | 1,739 | |
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| Payments for additions to property, plant and equipment | (245) | | | (291) | |
| Proceeds from sales of property, plant and equipment | 6 | | | — | |
| Payments for purchases of investments | (18) | | | (53) | |
| Proceeds from sales of investments | 5 | | | 9 | |
| Proceeds from sale of product line | 9 | | | — | |
| All other investing activities | 1 | | | 14 | |
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| Total cash used in investing activities | $ | (242) | | | $ | (321) | |
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| Payments for the issuance of common stock in connection with stock-based compensation, net | $ | (5) | | | $ | (1) | |
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| Payment of dividends | (194) | | | (177) | |
| Net borrowings (maturities longer than 90 days) | 4 | | | — | |
| Net (repayments of) proceeds from borrowings (maturities of 90 days or less) | (3) | | | 68 | |
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| * | Indicates management contract or compensatory plan, contract or arrangement. |
SIGNATURES
Pursuant to the requirements 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.
| | | | | | | | | | | |
| | DANAHER CORPORATION |
| | | |
| Date: | April 22, 2025 | By: | /s/ Matthew R. McGrew |
| | | Matthew R. McGrew |
| | | Executive Vice President and Chief Financial Officer |
| | | |
| Date: | April 22, 2025 | By: | /s/ Christopher M. Bouda |
| | | Christopher M. Bouda |
| | | Vice President and Chief Accounting Officer |
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