UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 ________________________________________________________

FORM 10-Q

 ________________________________________________________

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023

OR

☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission File Number: 001-08089

DANAHER CORPORATION

(Exact name of registrant as specified in its charter)

Delaware		59-1995548
(State of Incorporation)		(I.R.S. Employer Identification Number)
2200 Pennsylvania Avenue, N.W., Suite 800W		20037-1701
Washington,	DC
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s telephone number, including area code: 202-828-0850

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, $0.01 par value	DHR	New York Stock Exchange
5.00% Mandatory Convertible Preferred Stock, Series B, without par value	DHR.PRB	New York Stock Exchange
1.700% Senior Notes due 2024	DHR 24	New York Stock Exchange
0.200% Senior Notes due 2026	DHR/26	New York Stock Exchange
2.100% Senior Notes due 2026	DHR 26	New York Stock Exchange
1.200% Senior Notes due 2027	DHR/27	New York Stock Exchange
0.450% Senior Notes due 2028	DHR/28	New York Stock Exchange
2.500% Senior Notes due 2030	DHR 30	New York Stock Exchange
0.750% Senior Notes due 2031	DHR/31	New York Stock Exchange
1.350% Senior Notes due 2039	DHR/39	New York Stock Exchange
1.800% Senior Notes due 2049	DHR/49	New York Stock Exchange

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 every Interactive Data File required to be submitted 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 such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer	☒	Accelerated Filer	☐
Non-accelerated Filer	☐	Smaller Reporting Company	☐
Emerging Growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)    Yes  ☐    No  ☒

The number of shares of common stock outstanding at April 20, 2023 was 737,898,789.

DANAHER CORPORATION

INDEX

FORM 10-Q

		Page
PART I -	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Condensed Balance Sheets	1
	Consolidated Condensed Statements of Earnings	2
	Consolidated Condensed Statements of Comprehensive Income	3
	Consolidated Condensed Statements of Stockholders’ Equity	4
	Consolidated Condensed Statements of Cash Flows	5
	Notes to Consolidated Condensed Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35
Item 4.	Controls and Procedures	36
PART II -	OTHER INFORMATION
Item 1.	Legal Proceedings	37
Item 1A.	Risk Factors	37
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37
Item 5.	Other Information	37
Item 6.	Exhibits	38
	Signatures	39

DANAHER CORPORATION AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEETS

($ in millions, except per share amount)

(unaudited)

	March 31, 2023		December 31, 2022
ASSETS
Current assets:
Cash and equivalents	$	7,379	$	5,995
Trade accounts receivable, less allowance for doubtful accounts of $125 and $126, respectively	4,313		4,918
Inventories:
Finished goods	1,620		1,504
Work in process	542		473
Raw materials	1,221		1,133
Total inventories	3,383		3,110
Prepaid expenses and other current assets	1,457		1,860
Total current assets	16,532		15,883
Property, plant and equipment, net of accumulated depreciation of $4,022 and $3,893, respectively	4,065		3,956
Other long-term assets	4,611		4,459
Goodwill	39,856		39,752
Other intangible assets, net	19,976		20,300
Total assets	$	85,040	$	84,350
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Notes payable and current portion of long-term debt	$	1,571	$	591
Trade accounts payable	2,081		2,296
Accrued expenses and other liabilities	5,078		5,502
Total current liabilities	8,730		8,389
Other long-term liabilities	6,563		6,785
Long-term debt	18,261		19,086
Stockholders’ equity:
Preferred stock, no par value, 15.0 million shares authorized; 1.72 million shares of 5.00% Mandatory Convertible Preferred Stock, Series B, issued and outstanding as of March 31, 2023 and December 31, 2022	1,668		1,668
Common stock - $0.01 par value, 2.0 billion shares authorized; 870.4 million issued and 729.2 million outstanding as of March 31, 2023; 869.3 million issued and 728.3 million outstanding as of December 31, 2022	9		9
Additional paid-in capital	12,130		12,072
Retained earnings	40,437		39,205
Accumulated other comprehensive income (loss)	(2,766)		(2,872)
Total Danaher stockholders’ equity	51,478		50,082
Noncontrolling interests	8		8
Total stockholders’ equity	51,486		50,090
Total liabilities and stockholders’ equity	$	85,040	$	84,350

See the accompanying Notes to the Consolidated Condensed Financial Statements.

1

DANAHER CORPORATION AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS

($ and shares in millions, except per share amounts)

(unaudited)

	Three-Month Period Ended
	March 31, 2023		April 1, 2022
Sales	$	7,167	$	7,688
Cost of sales	(2,797)		(2,983)
Gross profit	4,370		4,705
Operating costs:
Selling, general and administrative expenses	(2,147)		(2,092)
Research and development expenses	(429)		(441)
Operating profit	1,794		2,172
Nonoperating income (expense):
Other income (expense), net	24		(20)
Interest expense	(68)		(54)
Interest income	48		1
Earnings before income taxes	1,798		2,099
Income taxes	(348)		(374)
Net earnings	1,450		1,725
Mandatory convertible preferred stock dividends	(21)		(41)
Net earnings attributable to common stockholders	$	1,429	$	1,684
Net earnings per common share:
Basic	$	1.96	$	2.35
Diluted	$	1.94	$	2.31
Average common stock and common equivalent shares outstanding:
Basic	729.4		716.3
Diluted	737.2		737.7

See the accompanying Notes to the Consolidated Condensed Financial Statements.

2

DANAHER CORPORATION AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME

($ in millions)

(unaudited)

	Three-Month Period Ended
	March 31, 2023		April 1, 2022
Net earnings	$	1,450	$	1,725
Other comprehensive income (loss), net of income taxes:
Foreign currency translation adjustments	25		(343)
Pension and postretirement plan benefit adjustments	—		14
Cash flow hedge adjustments	81		(20)
Total other comprehensive income (loss), net of income taxes	106		(349)
Comprehensive income	$	1,556	$	1,376

See the accompanying Notes to the Consolidated Condensed Financial Statements.

3

DANAHER CORPORATION AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY

($ in millions)

(unaudited)

	Three-Month Period Ended
	March 31, 2023		April 1, 2022
Preferred stock:
Balance, beginning and end of period	$	1,668	$	3,268
Common stock:
Balance, beginning and end of period	$	9	$	9
Additional paid-in capital:
Balance, beginning of period	$	12,072	$	10,090
Common stock-based award	58		48
Acquisition of noncontrolling interests	—		(15)
Balance, end of period	$	12,130	$	10,123
Retained earnings:
Balance, beginning of period	$	39,205	$	32,827
Net earnings	1,450		1,725
Common stock dividends declared	(197)		(179)
Mandatory Convertible Preferred Stock dividends declared	(21)		(41)
Balance, end of period	$	40,437	$	34,332
Accumulated other comprehensive income (loss):
Balance, beginning of period	$	(2,872)	$	(1,027)
Other comprehensive income (loss)	106		(349)
Balance, end of period	$	(2,766)	$	(1,376)
Noncontrolling interests:
Balance, beginning of period	$	8	$	10
Change in noncontrolling interests	—		(4)
Balance, end of period	$	8	$	6
Total stockholders’ equity, end of period	$	51,486	$	46,362

See the accompanying Notes to the Consolidated Condensed Financial Statements.

4

DANAHER CORPORATION AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

($ in millions)

(unaudited)

	Three-Month Period Ended
	March 31, 2023		April 1, 2022
Cash flows from operating activities:
Net earnings	$	1,450	$	1,725
Noncash items:
Depreciation	173		179
Amortization of intangible assets	384		386
Stock-based compensation expense	79		80
Investment (gains) losses	(22)		24
Change in trade accounts receivable, net	631		80
Change in inventories	(257)		(431)
Change in trade accounts payable	(228)		(131)
Change in prepaid expenses and other assets	30		(22)
Change in accrued expenses and other liabilities	(293)		78
Net cash provided by operating activities	1,947		1,968
Cash flows from investing activities:
Cash paid for acquisitions	—		(17)
Payments for additions to property, plant and equipment	(275)		(250)
Proceeds from sales of property, plant and equipment	—		2
Payments for purchases of investments	(43)		(274)
Proceeds from sales of investments	1		17
All other investing activities	13		19
Total cash used in investing activities	(304)		(503)
Cash flows from financing activities:
Payments for the issuance of common stock in connection with stock-based compensation, net	(34)		(46)
Payment of dividends	(204)		(191)
Net (repayments of) proceeds from borrowings (maturities of 90 days or less)	(4)		10
All other financing activities	(20)		(47)
Total cash used in financing activities	(262)		(274)
Effect of exchange rate changes on cash and equivalents	3		(60)
Net change in cash and equivalents	1,384		1,131
Beginning balance of cash and equivalents	5,995		2,586
Ending balance of cash and equivalents	$	7,379	$	3,717
Supplemental disclosures:
Cash interest payments	$	82	$	84
Cash income tax payments	228		227

See the accompanying Notes to the Consolidated Condensed Financial Statements.

5

DANAHER CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(unaudited)

NOTE 1. GENERAL

The Consolidated Condensed Financial Statements included herein have been prepared by Danaher Corporation (“Danaher” or the “Company”) without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). In this quarterly report, the terms “Danaher” or the “Company” refer to Danaher Corporation, Danaher Corporation and its consolidated subsidiaries, or the consolidated subsidiaries of Danaher Corporation, as the context requires. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) have been condensed or omitted pursuant to SEC rules and regulations; however, the Company believes that the disclosures are adequate to make the information presented not misleading. The Consolidated Condensed Financial Statements included herein should be read in conjunction with the financial statements as of and for the year ended December 31, 2022 and the Notes thereto included in the Company’s 2022 Annual Report on Form 10-K filed on February 22, 2023 (the “2022 Annual Report”).

In the opinion of the Company, the accompanying financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position of the Company as of March 31, 2023 and December 31, 2022, its results of operations for the three-month periods ended March 31, 2023 and April 1, 2022 and its cash flows for each of the three-month periods then ended.

There have been no changes to the Company’s significant accounting policies described in the Company’s 2022 Annual Report that have a material impact on the Company’s Consolidated Condensed Financial Statements and the related Notes. Reclassifications of certain prior year amounts have been made to conform to the current year presentation.

Operating Leases—As of March 31, 2023 and December 31, 2022, operating lease right-of-use assets where the Company was the lessee were approximately $1.1 billion and $1.0 billion, respectively, and are included within other long-term assets in the accompanying Consolidated Condensed Balance Sheets.  The associated operating lease liabilities were approximately $1.1 billion as of both March 31, 2023 and December 31, 2022 and are included in accrued expenses and other liabilities and other long-term liabilities.

NOTE 2. VERALTO CORPORATION SEPARATION

In September 2022, the Company announced its intention to separate its Environmental & Applied Solutions business into a publicly traded company, to be known as Veralto Corporation (“Veralto”). The Environmental & Applied Solutions business had sales for the year ended December 31, 2022 of approximately $4.8 billion. The transaction is expected to be tax-free to the Company’s shareholders. The Company is targeting to complete the planned separation of the Environmental & Applied Solutions business in the fourth quarter of 2023, subject to the satisfaction of certain conditions, including obtaining final approval from the Danaher Board of Directors, satisfactory completion of financing, receipt of tax opinions, receipt of favorable rulings from the Internal Revenue Service (“IRS”) and receipt of other regulatory approvals. Until the completion of the planned separation, the Environmental & Applied Solutions business will be reported as continuing operations.

The Company incurred separation costs of $28 million ($25 million after-tax) related to preparation for the anticipated separation of the Company’s Environmental & Applied Solutions business primarily related to professional fees for legal, tax, finance and information technology services and duplicative general and administrative costs in the three-month period ended March 31, 2023.

NOTE 3. NET EARNINGS PER COMMON SHARE

Basic net earnings per common share (“EPS”) is calculated by taking net earnings less the Mandatory Convertible Preferred Stock (“MCPS”) dividends divided by the weighted average number of common shares outstanding for the applicable period. Diluted net EPS is computed by taking net earnings less the MCPS dividends divided by 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 three-month periods ended March 31, 2023 and April 1, 2022, approximately 2.4 million and 418 thousand options, respectively, to purchase shares were excluded from the diluted EPS calculation, as the impact of their inclusion would have been anti-dilutive.

6

The impact of the MCPS Series B calculated under the if-converted method was anti-dilutive for the three-month periods ended March 31, 2023 and April 1, 2022, and as such 8.6 million shares underlying the MCPS Series B were excluded from the calculation of diluted EPS in both periods and the related MCPS Series B dividends of $21 million were included in the calculation of net earnings for diluted EPS for the periods. As of April 17, 2023, all outstanding shares of the MCPS Series B converted into 8.6 million shares of the Company’s common stock.

The impact of the MCPS Series A calculated under the if-converted method was dilutive for the three-month period ended April 1, 2022, and as such 11.0 million shares underlying the MCPS Series A were included in the calculation of diluted EPS in the three-month period and the related MCPS Series A dividends of $20 million were excluded from the calculation of net earnings for diluted EPS. On April 15, 2022, all outstanding shares of the MCPS Series A converted into 11.0 million shares of the Company’s common stock. Refer to Note 14 for additional information about the MCPS Series A and B conversions.

Information related to the calculation of net earnings per common share is summarized as follows ($ and shares in millions, except per share amounts):

	Three-Month Period Ended
	March 31, 2023		April 1, 2022
Numerator:
Net earnings	$	1,450	$	1,725
MCPS dividends	(21)		(41)
Net earnings attributable to common stockholders for Basic EPS	1,429		1,684
Adjustment for MCPS dividends for dilutive MCPS	—		20
Net earnings attributable to common stockholders after assumed conversions for Diluted EPS	$	1,429	$	1,704
Denominator:
Weighted average common shares outstanding used in Basic EPS	729.4		716.3
Incremental common shares from:
Assumed exercise of dilutive options and vesting of dilutive restricted stock units (“RSUs”) and performance stock units (“PSUs”)	7.8		10.4
Weighted average MCPS converted shares	—		11.0
Weighted average common shares outstanding used in Diluted EPS	737.2		737.7
Basic EPS	$	1.96	$	2.35
Diluted EPS	$	1.94	$	2.31

7

NOTE 4. REVENUE

The following tables present the Company’s revenues disaggregated by geographical region and revenue type for the three-month periods ended March 31, 2023 and April 1, 2022 ($ in millions). Sales taxes and other usage-based taxes collected from customers are excluded from revenue.

	Biotechnology		Life Sciences		Diagnostics		Environmental & Applied Solutions		Total
For the Three-Month Period Ended March 31, 2023:
Geographical region:
North America(a)	$	618	$	708	$	1,124	$	572	$	3,022
Western Europe	647		364		420		277		1,708
Other developed markets	79		128		117		29		353
High-growth markets(b)	520		509		715		340		2,084
Total	$	1,864	$	1,709	$	2,376	$	1,218	$	7,167
Revenue type:
Recurring	$	1,511	$	1,039	$	2,112	$	724	$	5,386
Nonrecurring	353		670		264		494		1,781
Total	$	1,864	$	1,709	$	2,376	$	1,218	$	7,167
For the Three-Month Period Ended April 1, 2022:
Geographical region:
North America(a)	$	782	$	738	$	1,306	$	528	$	3,354
Western Europe	707		328		524		269		1,828
Other developed markets	85		137		124		32		378
High-growth markets(b)	642		463		690		333		2,128
Total	$	2,216	$	1,666	$	2,644	$	1,162	$	7,688
Revenue type:
Recurring	$	1,801	$	1,037	$	2,370	$	690	$	5,898
Nonrecurring	415		629		274		472		1,790
Total	$	2,216	$	1,666	$	2,644	$	1,162	$	7,688

(a) The Company defines North America as the United States and Canada.

(b) The Company defines high-growth markets as developing markets of the world experiencing extended periods of accelerated growth in gross domestic product and infrastructure which include Eastern Europe, the Middle East, Africa, Latin America (including Mexico) and Asia (with the exception of Japan, Australia and New Zealand). The Company defines developed markets as all markets of the world that are not high-growth markets.

The Company sells equipment to customers as well as consumables and services, some of which customers purchase on a recurring basis. Consumables sold for use with the equipment sold by the Company are typically critical to the use of the equipment and are typically used on a one-time or limited basis, requiring frequent replacement in the customer’s operating cycle. Examples of these consumables include reagents used in diagnostic tests, chromatography resins used for research and bioprocessing, filters used in filtration, separation and purification processes and cartridges for marking and coding equipment. Additionally, some of the Company’s consumables are used on a standalone basis, such as water treatment solutions, custom nucleic acids and genomics solutions. The Company separates its goods and services between those typically sold to a customer on a recurring basis and those typically sold to a customer on a nonrecurring basis. Recurring revenue includes revenue from consumables, services and operating-type leases (“OTLs”). Nonrecurring revenue includes sales of equipment and sales-type leases (“STLs”). OTLs and STLs are included in the above revenue amounts. For the three-month periods ended March 31, 2023 and April 1, 2022, lease revenue was $120 million and $124 million, respectively.

8

Remaining performance obligations related to Topic 606, Revenue from Contracts with Customers, represent the aggregate transaction price allocated to performance obligations with an original contract term greater than one year which are fully or partially unsatisfied at the end of the period. As of March 31, 2023, the aggregate amount of the transaction price allocated to remaining performance obligations was approximately $4.9 billion. The Company expects to recognize revenue on approximately 57% of the remaining performance obligations over the next 12 months, 25% over the subsequent 12 months, and the remainder recognized thereafter.

The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables (“contract assets”) and deferred revenue, customer deposits and billings in excess of revenue recognized (“contract liabilities”) on the Consolidated Condensed Balance Sheets.

Most of the Company’s long-term contracts are billed as work progresses in accordance with the contract terms and conditions, either at periodic intervals or upon achievement of certain milestones. Often this results in billing occurring subsequent to revenue recognition resulting in contract assets. Contract assets are generally classified as other current assets in the Consolidated Condensed Balance Sheets. The balance of contract assets as of March 31, 2023 and December 31, 2022 was $84 million and $90 million, respectively.

The Company often receives cash payments from customers in advance of the Company’s performance resulting in contract liabilities that are classified as either current or long-term in the Consolidated Condensed Balance Sheets based on the timing of when the Company expects to recognize revenue. As of March 31, 2023 and December 31, 2022, contract liabilities were approximately $2.0 billion and $1.9 billion, respectively, and are included within accrued expenses and other liabilities and other long-term liabilities in the accompanying Consolidated Condensed Balance Sheets. The increase in the contract liability balance during the three-month period ended March 31, 2023 was primarily a result of cash payments received in advance of satisfying performance obligations, partially offset by revenue recognized during the period that was included in the opening contract liability balance. Revenue recognized during the three-month periods ended March 31, 2023 and April 1, 2022 that was included in the contract liability balance on December 31, 2022 and December 31, 2021 was $686 million and $662 million, respectively. Contract assets and liabilities are reported on a net basis on the accompanying Consolidated Condensed Balance Sheets on a contract-by-contract basis at the end of each reporting period.

NOTE 5. SEGMENT INFORMATION

The Company operates and reports its results in four separate business segments consisting of the Biotechnology, Life Sciences, Diagnostics, and Environmental & Applied Solutions segments. When determining the reportable segments, the Company aggregated operating segments based on their similar economic and operating characteristics. Operating profit represents total revenues less operating expenses, excluding nonoperating income and expense, interest and income taxes. Operating profit amounts in the Other segment consist of unallocated corporate costs and other costs not considered part of management’s evaluation of reportable segment operating performance. Intersegment amounts are not significant and are eliminated to arrive at consolidated totals.

Segment results are shown below ($ in millions):

	Three-Month Period Ended
	March 31, 2023		April 1, 2022
Sales:
Biotechnology	$	1,864	$	2,216
Life Sciences	1,709		1,666
Diagnostics	2,376		2,644
Environmental & Applied Solutions	1,218		1,162
Total	$	7,167	$	7,688
Operating profit:
Biotechnology	$	596	$	800
Life Sciences	321		318
Diagnostics	677		886
Environmental & Applied Solutions	299		236
Other	(99)		(68)
Total	$	1,794	$	2,172

9

NOTE 6. INCOME TAXES

The following table summarizes the Company’s effective tax rate:

	Three-Month Period Ended
	March 31, 2023		April 1, 2022
Effective tax rate	19.4	%	17.8	%

The Company operates globally, including in certain jurisdictions with lower tax rates than the United States (“U.S.”) federal statutory rate. Therefore, the impact of operating in such jurisdictions contributes to a lower effective tax rate compared to the U.S. federal statutory tax rate.

The effective tax rate for the three-month period ended March 31, 2023 differs from the U.S. federal statutory rate of 21.0% principally due the geographic mix of earnings described above and net discrete benefits of $5 million related primarily to excess tax benefits from stock-based compensation and the release of reserves for uncertain tax positions due to the expiration of statutes of limitation, partially offset by tax costs related to the planned separation of the Environmental & Applied Solutions business and changes in estimates associated with prior period uncertain tax positions. The net discrete benefits reduced the effective tax rate by 0.3% for the three-month period ended March 31, 2023.

The effective tax rate for the three-month period ended April 1, 2022 differs from the U.S. federal statutory rate of 21.0% principally due to net discrete benefits of $41 million related primarily to excess tax benefits from stock-based compensation and changes in estimates associated with prior period uncertain tax positions. These factors reduced the effective tax rate by 2.0% for the three-month period ended April 1, 2022.

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 IRS challenged the deferral of premium income for certain types of the Company’s self-insurance policies. 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 subsequent to 2018. Management believes the positions the Company has taken in its U.S. tax returns are in accordance with the relevant tax laws.

For a description of the Company’s significant tax matters, reference is made to the financial statements as of and for the year ended December 31, 2022 and Note 7 thereto included in the Company’s 2022 Annual Report.

NOTE 7. OTHER INCOME (EXPENSE), NET

The following sets forth the components of the Company’s other income (expense), net ($ in millions):

	Three-Month Period Ended
	March 31, 2023		April 1, 2022
Other components of net periodic benefit costs	$	2	$	4
Investment gains (losses):
Realized investment gains (losses)	—		37
Unrealized investment gains (losses)	22		(61)
Total investment gains (losses)	22		(24)
Total other income (expense), net	$	24	$	(20)

Other Components of Net Periodic Benefit Costs

The Company disaggregates the service cost component of net periodic benefit costs of noncontributory defined benefit pension plans and other postretirement employee benefit plans and presents the other components of net periodic benefit costs in other income (expense), net. These other components of net periodic benefit costs include the assumed rate of return on plan assets, partially offset by amortization of actuarial losses and interest. The Company’s net periodic benefit costs for the three-month period ended April 1, 2022 included a settlement loss of $10 million ($9 million after-tax) as a result of the transfer of a portion of its non-U.S. pension liabilities related to one defined benefit plan to a third-party.

10

Investment Gains (Losses)

The Company estimates the fair value of its investments in equity securities using the Fair Value Alternative and records adjustments to fair value within net earnings. Additionally, the Company is a limited partner in partnerships that invest primarily in early-stage companies. While the partnerships record these investments at fair value, the Company’s investments in the partnerships are accounted for under the equity method of accounting. The investment gains (losses) include realized and unrealized gains and losses related to changes in the fair value of the Company’s investments in equity securities and the Company’s equity in earnings of the partnerships that reflect the changes in fair value of the investments of the partnerships, and related management fees and operating expenses.

NOTE 8. GOODWILL AND OTHER INTANGIBLE ASSETS

The following is a rollforward of the Company’s goodwill ($ in millions):

Balance, December 31, 2022	$	39,752
Adjustments due to finalization of purchase price allocations	(4)
Foreign currency translation and other	108
Balance, March 31, 2023	$	39,856

The carrying value of goodwill by segment is summarized as follows ($ in millions):

	March 31, 2023		December 31, 2022
Biotechnology	$	22,167	$	22,087
Life Sciences	8,319		8,314
Diagnostics	6,883		6,875
Environmental & Applied Solutions	2,487		2,476
Total	$	39,856	$	39,752

The Company has not identified any “triggering” events which indicate an impairment of goodwill in the first quarter of 2023.

The Company reviews identified intangible assets for impairment whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable. The Company has not identified any impairment triggers which resulted in impairments of intangible assets in the first quarter of 2023.

NOTE 9. 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.

A summary of financial assets that are measured at fair value on a recurring basis were as follows ($ in millions):

	Balance				Quoted Prices in Active Market (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)
	March 31, 2023		December 31, 2022		March 31, 2023		December 31, 2022		March 31, 2023		December 31, 2022		March 31, 2023		December 31, 2022
Assets:
Available-for-sale debt securities	$	9	$	11	$	—	$	—	$	9	$	11	$	—	$	—
Investment in equity securities	318		315		21		16		—		—		—		—
Cross-currency swap derivative contracts	682		653		—		—		682		653		—		—

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Available-for-sale debt securities, which are included in other long-term assets in the accompanying Consolidated Condensed Balance Sheets, are measured at fair value using 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. As of March 31, 2023 and December 31, 2022, available-for-sale debt securities primarily included U.S. Treasury Notes and corporate debt securities.

The Company’s investments in equity securities consist of investments in publicly traded equity securities and investments in non-marketable equity securities. The publicly traded securities are classified as Level 1 in the fair value hierarchy as they are measured based on quotes in active markets. For the non-marketable equity securities, the Company estimates the fair value of the investments in equity securities based on the measurement alternative and adjusts for impairments and observable price changes with a same or similar security from the same issuer within net earnings (the “Fair Value Alternative”). The Company’s investments in these equity securities are not classified in the fair value hierarchy due to the use of these measurement methods. Additionally, the Company is a limited partner in partnerships that invest primarily in early-stage companies. While the partnerships record these investments at fair value, the Company’s investments in the partnerships are accounted for under the equity method of accounting and are not subject to fair value measurement disclosures. As of March 31, 2023 and December 31, 2022, the Company’s equity method investments included investments in partnerships with a carrying value of approximately $1.6 billion and $1.5 billion, respectively. Refer to Note 7 for additional information on gains and losses on the Company’s investments including investments in the partnerships.

The cross-currency swap derivative contracts are used to partially hedge the Company’s net investments in non-U.S. operations against adverse movements in exchange rates between the U.S. dollar and the Danish kroner, Japanese yen, euro and Swiss franc. The Company also uses cross-currency swap derivative contracts to hedge the exchange rate exposure from long-term debt issuances in a foreign currency other than the functional currency of the borrower. The cross-currency swap derivative contracts are classified as Level 2 in the fair value hierarchy as they are measured using the income approach with the relevant interest rates and current foreign currency exchange rates and forward curves as inputs. Refer to Note 11 for additional information.

Fair Value of Other Financial Instruments

The carrying amounts and fair values of the Company’s other financial instruments were as follows ($ in millions):

	March 31, 2023				December 31, 2022
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Debt obligations:
Notes payable and current portion of long-term debt	$	1,571	$	1,551	$	591	$	584
Long-term debt	18,261		15,606		19,086		16,079

As of March 31, 2023 and December 31, 2022, short and long-term borrowings were categorized as Level 1. The fair value of long-term borrowings was based on quoted market prices. The difference between the fair value and the carrying amounts of long-term borrowings is attributable to changes in market interest rates and/or the Company’s credit ratings subsequent to the incurrence of the borrowing. The fair values of borrowings with original maturities of one year or less, as well as cash and cash equivalents, trade accounts receivable, net and trade accounts payable generally approximate their carrying amounts due to the short-term maturities of these instruments.

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NOTE 10. FINANCING

As of March 31, 2023, the Company was in compliance with all of its debt covenants. The components of the Company’s debt were as follows ($ in millions):

	Outstanding Amount
Description and Aggregate Principal Amount	March 31, 2023		December 31, 2022
Euro-denominated commercial paper (€1.9 billion)(e)	$	2,034	$	2,013
0.5% senior unsecured bonds due 12/08/2023 (CHF 540 million) (the “2023 CHF Bonds”)(c)	590		584
1.7% senior unsecured notes due 3/30/2024 (€900 million) (the “2024 Euronotes”)(f)	975		962
2.2% senior unsecured notes due 11/15/2024 ($700 million) (the “2024 Biopharma Notes”)(b)	699		698
3.35% senior unsecured notes due 9/15/2025 ($500 million) (the “2025 U.S. Notes”)(f)	499		499
0.2% senior unsecured notes due 3/18/2026 (€1.3 billion) (the “2026 Biopharma Euronotes”)(b)	1,351		1,333
2.1% senior unsecured notes due 9/30/2026 (€800 million) (the “2026 Euronotes”)(f)	865		854
0.3% senior unsecured notes due 5/11/2027 (¥30.8 billion) (the “2027 Yen Notes”)(d)	231		234
1.2% senior unsecured notes due 6/30/2027 (€600 million) (the “2027 Euronotes”)(a)	648		639
0.45% senior unsecured notes due 3/18/2028 (€1.3 billion) (the “2028 Biopharma Euronotes”)(b)	1,349		1,331
1.125% senior unsecured bonds due 12/08/2028 (CHF 210 million) (the “2028 CHF Bonds”)(c)	232		230
2.6% senior unsecured notes due 11/15/2029 ($800 million) (the “2029 Biopharma Notes”)(b)	796		796
2.5% senior unsecured notes due 3/30/2030 (€800 million) (the “2030 Euronotes”)(f)	867		856
0.75% senior unsecured notes due 9/18/2031 (€1.8 billion) (the “2031 Biopharma Euronotes”)(b)	1,888		1,863
0.65% senior unsecured notes due 5/11/2032 (¥53.2 billion) (the “2032 Yen Notes”)(d)	399		404
1.35% senior unsecured notes due 9/18/2039 (€1.3 billion) (the “2039 Biopharma Euronotes”)(b)	1,340		1,323
3.25% senior unsecured notes due 11/15/2039 ($900 million) (the “2039 Biopharma Notes”)(b)	891		890
4.375% senior unsecured notes due 9/15/2045 ($500 million) (the “2045 U.S. Notes”)(f)	499		499
1.8% senior unsecured notes due 9/18/2049 (€750 million) (the “2049 Biopharma Euronotes”)(b)	804		794
3.4% senior unsecured notes due 11/15/2049 ($900 million) (the “2049 Biopharma Notes”)(b)	890		889
2.6% senior unsecured notes due 10/01/2050 ($1.0 billion) (the “2050 U.S. Notes”)(f)	981		981
2.8% senior unsecured notes due 12/10/2051 ($1.0 billion) (the “2051 U.S. Notes”)(f)	984		984
Other	20		21
Total debt	19,832		19,677
Less: currently payable	(1,571)		(591)
Long-term debt	$	18,261	$	19,086

(a) Issued by DH Europe Finance S.A. (“Danaher International”).

(b) Issued by DH Europe Finance II S.a.r.l. (“Danaher International II”).

(c) Issued by DH Switzerland Finance S.A. (“Danaher Switzerland”).

(d) Issued by DH Japan Finance S.A. (“Danaher Japan”).

(e) Issued by Danaher Corporation or Danaher International II.

(f) Issued by Danaher Corporation.

Debt discounts, premiums and debt issuance costs totaled $114 million and $118 million as of March 31, 2023 and December 31, 2022, respectively, and have been netted against the aggregate principal amounts of the related debt in the components of debt table above. For additional details regarding the Company’s debt financing, refer to Note 14 of the Company’s financial statements as of and for the year ended December 31, 2022 included in the Company’s 2022 Annual Report.

The Company has historically satisfied 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. dollar and euro-denominated commercial paper programs. The Company’s $5.0 billion unsecured, multi-year revolving credit facility with a syndicate of banks that expires on August 27, 2024 (the “Five-Year Facility”), is available for direct borrowings and provides credit support for the commercial paper programs. For a description of the Five-Year Facility, refer to the Company’s 2022 Annual Report.

As of March 31, 2023, borrowings outstanding under the Company’s euro-denominated commercial paper program had a weighted average annual interest rate of 3.0% and a weighted average remaining maturity of approximately 48 days.

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Guarantors of Debt

The Company has guaranteed long-term debt and commercial paper issued by certain of its wholly-owned finance subsidiaries: Danaher International, Danaher International II, Danaher Switzerland and Danaher Japan. All of the outstanding and future securities issued by each of these entities are or will be fully and unconditionally guaranteed by the Company and these guarantees rank on parity with the Company’s unsecured and unsubordinated indebtedness.

NOTE 11. HEDGING TRANSACTIONS AND DERIVATIVE FINANCIAL INSTRUMENTS

The Company uses cross-currency swap derivative contracts to partially hedge its net investments in non-U.S. operations against adverse movements in exchange rates between the U.S. dollar and the Danish kroner, Japanese yen, euro and Swiss franc. The cross-currency swap derivative contracts are agreements to exchange fixed-rate payments in one currency for fixed-rate payments in another currency. These contracts effectively convert U.S. dollar-denominated bonds to obligations denominated in Danish kroner, Japanese yen, euro and Swiss franc, and partially offset the impact of changes in currency rates on the Company’s foreign currency denominated net investments. These contracts also reduce the interest rate from the stated interest rates on the U.S. dollar-denominated debt to the interest rates of the swaps. The changes in the spot rate of these instruments are recorded in accumulated other comprehensive income (loss) in stockholders’ equity, partially offsetting the foreign currency translation adjustment of the Company’s related net investment that is also recorded in accumulated other comprehensive income (loss). The interest income or expense from these swaps are recorded in interest expense in the accompanying Consolidated Condensed Statements of Earnings consistent with the classification of interest expense attributable to the underlying debt. These instruments mature on dates ranging from September 2025 to November 2032.

The Company also uses cross-currency swap derivative contracts to hedge U.S. dollar-denominated long-term debt issuances in a foreign subsidiary whose functional currency is the euro against adverse movements in exchange rates between the U.S. dollar and the euro. These contracts effectively convert these U.S. dollar-denominated bonds to obligations denominated in euro. The changes in the fair value of these instruments are recorded in accumulated other comprehensive income (loss), with a reclassification from accumulated other comprehensive income (loss) to net earnings to offset the remeasurement of the hedged debt that is also recorded in net earnings. The interest income or expense from these swaps are recorded in interest expense in the accompanying Consolidated Condensed Statements of Earnings consistent with the classification of interest expense attributable to the underlying debt. These instruments mature on dates ranging from November 2024 to November 2049.

The Company has also issued foreign currency denominated long-term debt as partial hedges of its net investments in foreign operations against adverse movements in exchange rates between the U.S. dollar and the euro, Japanese yen and Swiss franc. These foreign currency denominated long-term debt issuances are designated and qualify as nonderivative hedging instruments. Accordingly, the foreign currency translation of these debt instruments is recorded in accumulated other comprehensive income (loss), offsetting the foreign currency translation adjustment of the Company’s related net investment that is also recorded in accumulated other comprehensive income (loss). These instruments mature on dates ranging from April 2023 to May 2032.

The Company used interest rate swap agreements to hedge the variability in cash flows due to changes in benchmark interest rates related to a portion of the U.S. debt the Company issued to fund the acquisition of Cytiva and a portion of the 2051 U.S. Notes. These contracts effectively fixed the interest rate for a portion of the Company’s U.S. dollar-denominated debt equal to the notional amount of the swaps to the rate specified in the interest rate swap agreements and were settled in November 2019 and December 2021, respectively. The changes in the fair value of these instruments were recorded in accumulated other comprehensive income (loss) prior to the issuance of the debt and are subsequently being reclassified to interest expense over the life of the related debt.

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The following table summarizes the notional values as of March 31, 2023 and April 1, 2022 and pretax impact of changes in the fair values of instruments designated as net investment hedges and cash flow hedges in accumulated other comprehensive income (“OCI”) for the three-month periods ended March 31, 2023 and April 1, 2022 ($ in millions):

	Original Notional Amount		Notional Amount Outstanding		Gain (Loss) Recognized in OCI		Amounts Reclassified from OCI
For the Three-Month Period Ended March 31, 2023:
Net investment hedges:
Cross-currency contracts	$	3,875	$	3,000	$	(8)	$	—
Foreign currency denominated debt	5,832		5,832		(57)		—
Cash flow hedges:
Cross-currency contracts	4,000		3,300		37		43
Interest rate swaps	1,600		—		—		1
Total	$	15,307	$	12,132	$	(28)	$	44
For the Three-Month Period Ended April 1, 2022:
Net investment hedges:
Cross-currency contracts	$	3,875	$	3,000	$	51	$	—
Foreign currency denominated debt	3,761		3,761		124		—
Cash flow hedges:
Cross-currency contracts	4,000		4,000		125		(116)
Interest rate swaps	1,600		—		—		1
Total	$	13,236	$	10,761	$	300	$	(115)