Danaher 2009 Annual Report Download - page 31

Table of Contents
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Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is designed to provide a reader of Danaher’s financial
statements with a narrative from the perspective of Company management. The Company’s MD&A is divided into four main sections:
• Overview
• Results of Operations
• Liquidity and Capital Resources
• Critical Accounting Policies
OVERVIEW
General
Please see “Item 1. Business – General” for a discussion of Danaher’s objectives and methodologies for delivering shareholder value. Danaher is a
multinational corporation with global operations. During 2009, approximately 52% of Danaher’s sales were derived from customers outside the United States.
As a global business, Danaher’s operations are affected by worldwide, regional and industry-specific economic and political factors. For example, in those
industry segments where the Company is a capital equipment provider, revenues depend on the capital expenditure budgets and spending patterns of the
Company’s customers, who may delay or accelerate purchases in reaction to changes in their businesses and in the economy. Danaher’s geographic and
industry diversity, as well as the diversity of its products and services, typically helps limit the impact of any one industry or the economy of any single
country on the consolidated operating results. However, the broad impact of the worldwide credit market turmoil and economic downturn in 2008 and 2009
negatively impacted the results of operations of most of the Company’s businesses. Given the broad range of products manufactured and geographies served,
management does not use any indices other than general economic trends to predict the overall outlook for the Company. The Company’s individual
businesses monitor key competitors and customers, including to the extent possible their sales, to gauge relative performance and the outlook for the future.
As a result of our geographic and industry diversity we face a variety of challenges and opportunities, including rapid technological development in most of
our served markets, the expansion of opportunities in emerging markets, trends toward increased utilization of the global labor force and consolidation of our
competitors. We operate in a highly competitive business environment in most markets, and our long-term growth will depend in particular on our ability to
expand our business (including through geographical and product line expansion), identify, consummate and integrate appropriate acquisitions, develop
innovative new products with higher gross profit margins and continue to improve operating efficiency and organizational effectiveness. We are making
significant investments, organically and through acquisitions, to address the rapid pace of technological change in our served markets and to globalize our
manufacturing and customer facing resources in order to be responsive to our customers throughout the world and improve the efficiency of our operations.
Business Performance
During 2009, lower spending and investment by both businesses and consumers resulted in a substantial decline in demand for most of the Company’s
products. These conditions began in the third quarter of 2008 as global financial markets were in turmoil and continued throughout 2009. Demand stabilized
in most businesses in the fourth quarter of 2009. Sales declined across all segments and major geographic regions, particularly in the United States and
Europe. Unfavorable foreign currency translation also negatively impacted results for the year due to the strengthening of the U.S. dollar as compared with
2008. Given the difficult economic environment, the Company implemented significant restructuring actions to rationalize its cost structure to a level
appropriate for the conditions (refer Note 17 to the Consolidated Financial Statements.) Despite the challenging environment, the operating margin impacts of
lower sales levels and restructuring costs were partially offset by the benefits of 2008 and 2009 restructuring actions, other productivity improvements, higher
pricing in certain markets and lower material costs. The Company also generated operating cash flow near the same level as 2008 primarily by reducing
inventory levels to reflect the lower levels of customer demand and by effectively managing accounts receivable. The Company also took advantage of an
improving acquisition market in 2009 by consummating fifteen acquisitions, as discussed below, and signing definitive agreements to acquire an additional
three businesses.
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Source: DANAHER CORP /DE/, 10-K, February 24, 2010 Powered by Morningstar® Document Research℠
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