Danaher 2009 Annual Report Download - page 43

Table of Contents
2008 COMPARED TO 2007
Price increases accounted for approximately 2.0% sales growth on a year-over-year basis which is reflected as a component of the sales from existing
businesses.
The fourth quarter 2008 restructuring activities adversely impacted operating profit margins in the Tools and Components segment by 30 basis points in 2008
as compared to 2007. Elevated commodity costs and lower overall sales volumes in the mechanics’ hand tools business also adversely impacted operating
profit margins. A 2008 gain from the settlement of an insurance claim related to a 2007 plant fire, coupled with the impact of charges recorded in 2007
associated with the fire, favorably impacted year-over-year operating profit margin comparisons by 50 basis points. Commodity costs declined significantly
in the fourth quarter of 2008.
Overview of Businesses within the Tools & Components Segment
Mechanics’ hand tools sales, representing approximately 69% of segment sales in 2008, declined 5.5% in 2008 compared to 2007. Sales from existing
businesses declined 6.0% during 2008, offset by a 0.5% positive impact as a result of foreign currency translation. The sales decline is primarily attributable
to weak North American demand in both the retail, mobile and industrial hand tools end markets. Partially offsetting the weak North American demand was
sales growth in the Asian market, primarily in the first half of 2008, as the rate of growth in the region slowed during the second half of the year.
The segment’s niche businesses experienced a modest sales increase during 2008 as compared to 2007. Higher customer demand in the segment’s engine
retarder business, which rebounded from the impact of regulatory changes that resulted in reduced 2007 sales levels, were largely offset by lower demand in
the segment’s other niche businesses during year, with particularly lower demand in the fourth quarter.
GROSS PROFIT


  
Sales $11,184.9 $12,697.5 $11,025.9
Cost of sales 5,904.7 6,757.3 5,985.0
Gross profit 5,280.2 5,940.2 5,040.9
Gross profit margin 47.2% 46.8% 45.7%
Gross profit margins for 2009 increased 40 basis points from 2008. Cost savings related to 2008 and 2009 restructuring activities primarily drove the year-
over-year improvements in gross profit margin from 2008 to 2009. Lower year-over-year commodity costs also contributed to the improvement, as costs for
several types of raw materials increased sharply in 2008 before declining late in 2008 and into 2009. Lower overall sales volumes during 2009 as compared to
2008 diminished the leverage of the Company’s fixed cost base and partially offset these positive factors. In addition, costs incurred associated with year-over-
year incremental 2009 restructuring activities adversely impacted gross profit margins by 65 basis points.
Gross profit margins for 2008 increased 110 basis points from 2007. Included in the 2008 gross profit margins is $33 million (25 basis points) of
restructuring and other related costs. The increase in gross profit margins over 2007 is primarily a result of leverage on increased sales volume, particularly in
higher-margin consumable oriented businesses, the impact of cost-saving initiatives that began in late 2007 and generally higher gross profit margins in
businesses recently acquired, primarily Tektronix. The impact on gross margins of higher commodity costs prevalent through the majority of 2008 was
partially mitigated by price increases implemented throughout the Company.
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Source: DANAHER CORP /DE/, 10-K, February 24, 2010 Powered by Morningstar® Document Research℠
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