Danaher 2009 Annual Report Download - page 24

Table of Contents
• reducing our flexibility in planning for or reacting to changes in our business and market conditions; and
• exposing us to interest rate risk since a portion of our debt obligations are at variable rates.
We may incur significantly more debt in the future, particularly in connection with acquisitions. If we add new debt, the risks described above could increase.
Our current revolving credit facilities impose restrictions on us, including certain restrictions on our ability to incur liens on our assets, and require us to
maintain a consolidated leverage ratio (the ratio of consolidated indebtedness to consolidated indebtedness plus shareholders’ equity) as of the last day of any
fiscal quarter of 0.65 to 1.0 or less. In addition, our long-term debt obligations include covenants that may adversely affect our ability to incur certain secured
indebtedness or engage in certain types of sale and leaseback transactions. Our ability to comply with these restrictions and covenants may be affected by
events beyond our control. If we breach any of these restrictions or covenants and do not obtain a waiver from the lenders, then, subject to applicable cure
periods, the outstanding indebtedness (and any other indebtedness with cross-default provisions) could be declared immediately due and payable, which
would adversely affect our liquidity and financial condition.
Our defined benefit pension plans are subject to financial market risks that could adversely affect our results of operations and cash flows.
The performance of the financial markets and interest rates impact our expenses and funding obligations relating to our defined benefit pension plans.
Significant changes in market interest rates, decreases in the fair value of plan assets and investment losses on plan assets may increase our funding
obligations and adversely impact our results of operations and cash flows. For example, the declines in the global capital markets since the first half of 2008
have resulted in significant declines in the fair value of our pension plan assets.
We may incur higher costs to produce our products if commodity prices rise.
As discussed in “Item 1. Business – Materials,” our manufacturing and other operations employ a wide variety of raw materials. Over the last two years, the
prices of raw materials have been volatile. Due to the highly competitive nature of the industries which we serve and the cost-containment efforts of our
customers, if commodity prices rise we may be unable to fully pass along cost increases through higher prices. If we are unable to fully recover higher raw
material costs through price increases or offset these increases through other cost reductions, or if there is a time delay between the increase in costs and our
ability to recover or offset these costs, we could experience lower margins and profitability and our results of operations, financial condition and cash flows
could be adversely affected.
If we cannot adjust our purchases of materials, components and equipment required for our manufacturing activities to reflect changing market
conditions or customer demand, our income and results of operations may suffer.
We purchase materials, components and equipment from third parties for use in our manufacturing operations. Our income could be adversely impacted if we
are unable to adjust our purchases to reflect changes in customer demand and market fluctuations. During a market upturn, suppliers may extend lead times,
limit supplies or increase prices. If we cannot purchase sufficient products at competitive prices and quality and on a timely enough basis to meet increasing
demand, we may not be able to satisfy market demand, product shipments may be delayed or our material or manufacturing costs may increase. Conversely,
in order to secure supplies for the production of products, we sometimes enter into non-cancelable purchase commitments with vendors, which could impact
our ability to adjust our inventory to reflect declining market demands. If demand for our products is less than we expect, we may experience additional excess
and obsolete inventories and be forced to incur additional charges and our profitability may suffer.
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Source: DANAHER CORP /DE/, 10-K, February 24, 2010 Powered by Morningstar® Document Research℠
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