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ITEM 7. 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’s 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:

•Overview

•Results of Operations

•Liquidity and Capital Resources

•Critical Accounting Estimates

•New Accounting Standards

This discussion and analysis should be read together with Danaher’s audited financial statements and related Notes thereto as of December 31, 2022 and 2021 and for each of the three years in the period ended December 31, 2022 included in this Annual Report. Management's discussion and analysis of financial condition and results of operations for 2020 is included in Item 7 of the Company’s Annual Report on Form 10-K with respect to the year ended December 31, 2021 filed with the Securities and Exchange Commission, as supplemented by the discussion herein of the new Biotechnology and Life Sciences segments (which were previously reported together as the former Life Sciences segment), and should be referred to for information regarding this period.

Unless otherwise indicated, all financial results in this report refer to continuing operations.

OVERVIEW

General

Refer to “Item 1. Business—General” for a discussion of Danaher’s strategic objectives and methodologies for delivering long-term shareholder value. Danaher is a multinational business with global operations. During 2022, approximately 58% of Danaher’s sales were derived from customers outside the United States. As a diversified, global business, Danaher’s operations are affected by worldwide, regional and industry-specific economic and political factors. Danaher’s geographic and industry diversity, as well as the range of its products and services, help limit the impact of any one industry or the economy of any single country on its consolidated operating results. 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 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, communications 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) in order to be responsive to the Company’s customers throughout the world and improve the efficiency of the Company’s operations.

Business Performance

Consolidated revenues for the year ended December 31, 2022 increased 7.0% as compared to 2021. Acquisitions contributed 1.5% to the increase in revenues in 2022 and the impact of currency translation decreased reported sales 4.0%. Core sales

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increased 9.5% in 2022 compared to 2021 (for the definition of “core sales” refer to “—Results of Operations” below). The Company’s continued investments in sales growth initiatives and the other business-specific factors referenced below contributed to core sales growth. Geographically, both high-growth and developed markets contributed to year-over-year core sales growth during 2022. Core sales in developed markets grew at a low-teens rate in 2022 as compared to 2021 and were driven by North America and Western Europe. Core sales in high-growth markets grew at a low-single digit rate in 2022 as compared to 2021, with broad-based growth across these markets, led by growth in China. High-growth markets represented approximately 29% of the Company’s total sales in 2022.

The Company’s net earnings from continuing operations for the year ended December 31, 2022 totaled approximately $7.2 billion, compared to approximately $6.3 billion for the year ended December 31, 2021. Net earnings attributable to common stockholders for the year ended December 31, 2022 totaled approximately $7.1 billion or $9.66 per diluted common share compared to approximately $6.3 billion or $8.61 per diluted common share for the year ended December 31, 2021. The increase in net earnings in 2022 as compared to 2021 was driven by increased sales in the Company’s existing businesses and sales from acquired businesses, by a lower effective tax rate in 2022 driven by discrete tax benefits and by the impact of the non-recurring charge incurred in 2021 related to the modification and partial termination of a prior commercial arrangement and resolution of the associated litigation recorded, partially offset by investment losses recorded in 2022. Refer to “—Results of Operations” for further discussion of the year-over-year changes in net earnings and diluted net earnings per common share for the year ended December 31, 2022.

For a discussion of the impact of supply chain disruptions, labor availability constraints and increased labor costs on our businesses in 2022, please see “Item 1. Business – Materials.” For a discussion of the impact of the Russia-Ukraine conflict on our businesses in 2022, please see “Item 1. Business – Russia-Ukraine Conflict.”

The COVID-19 Pandemic

The global spread of a novel strain of coronavirus (COVID-19) has led to unprecedented restrictions on, and disruptions in, business and personal activities, including as a result of preventive and precautionary measures that we, other businesses, our communities and governments have taken and are taking to mitigate the spread of the virus and to manage its impact. The Company continues to actively monitor the COVID-19 pandemic, including the current spread of certain variants of the virus and plan for potential impacts on its business. The Company has deployed our capabilities, expertise and scale to address the critical health needs related to COVID-19, including developing and making available diagnostic tests for the rapid detection of COVID-19 as well as providing critical support to firms that are developing and producing vaccines and therapies for COVID-19. While the conditions related to the pandemic generally improved in most geographies in 2022 compared to 2021, conditions vary significantly by geography. For example, during the first half of 2022, COVID-19 considerations resulted in the re-imposition of widespread shutdowns and restrictions in China. During the fourth quarter of 2022, China relaxed many of these restrictions and began experiencing increasing COVID-19 related cases resulting in lower patient volumes for elective procedures and wellness visits as hospitals prioritized treating COVID-19 related cases. These higher COVID-19 related cases in China are anticipated to continue at least into the first quarter of 2023. The resulting impact to the Company will depend upon the prevalence of COVID-19 in the impacted regions of China and the resulting impact on economic activity, including demand and production capacity.

Demand for the Company’s products that support COVID-19 related vaccines and therapeutics (including initiatives that seek to prevent or mitigate similar, future pandemics) decreased in 2022 versus 2021. The Company expects overall demand for these products to decrease in 2023 versus 2022. Additionally, demand for the Company’s products that support COVID-19 testing continues to fluctuate significantly driven by increases or decreases in COVID-19 cases in particular geographies. While sales of COVID-19 related testing products increased in 2022 compared to 2021, the Company expects overall demand for these products to decrease in 2023 as the pandemic subsides in most geographies and evolves toward endemic status.

Due to the speed with which the COVID-19 situation has evolved, the global breadth of its spread, the range of governmental and community responses thereto and our geographic and business line diversity, its further impact on our business remains highly uncertain, but may be materially negative to certain elements of our business. The potential negative impact will depend on future developments including but not limited to:

•the degree of spread and severity of COVID-19 variants and government responses thereto;

•the timing and durability of continued recovery in the global demand for our non-COVID-19 related products and services; and

•the degree and pace of continuing declines in demand for products supporting COVID-19 testing and for products related to developing and producing vaccines and therapies for COVID-19.

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For additional information on the risks of COVID-19 to the Company’s operations, refer to the “Item 1A. Risk Factors” section of this Annual Report.

Acquisitions

During 2022 the Company acquired 10 businesses for total consideration of $637 million in cash, net of cash acquired. The businesses acquired complement existing units of each of the Company’s four segments. The aggregate annual sales of the 10 businesses acquired in 2022 at the time of their acquisition, in each case based on the company’s revenues for its last completed fiscal year prior to the acquisition, were approximately $91 million.

Refer to Note 2 to the Consolidated Financial Statements for discussion regarding the Company’s acquisitions.

RESULTS OF OPERATIONS

In this report, references to the non-GAAP measures of core sales (also referred to as core revenues or sales/revenues from existing businesses) and core sales including Cytiva refer to sales from continuing operations calculated according to generally accepted accounting principles in the United States (“GAAP”) but excluding:

•sales from acquired businesses (as defined below, as applicable); 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; provided that in calculating core sales including Cytiva, Cytiva’s sales (net of the sales of the Company product lines divested in 2020 to obtain regulatory approval to acquire Cytiva, or the “divested product lines”) (“Cytiva sales”) are excluded from the definition of sales attributable to acquisitions or acquired businesses. 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, as applicable)); and

•the period-to-period change in revenue (excluding sales from acquired businesses (as defined above, as applicable)) after applying current period foreign exchange rates to the prior year period.

As noted above, beginning with results for the second quarter of 2020, the Company also presents core sales on a basis that includes Cytiva sales. Prior to the acquisition of Cytiva, Danaher calculated core sales solely on a basis that excluded sales from acquired businesses recorded prior to the first anniversary of the acquisition. However, given Cytiva’s significant size and historical core sales growth rate, in each case compared to Danaher’s existing businesses, management believes it is appropriate to also present core sales on a basis that includes Cytiva sales. Management believes this presentation provides useful information to investors by demonstrating beginning immediately after the acquisition Cytiva’s impact on the Company’s growth profile, rather than waiting to demonstrate such impact until 12 months after the acquisition when Cytiva would normally have been included in Danaher’s core sales calculation. Danaher calculates period-to-period core sales growth including Cytiva by adding Cytiva sales to core sales for both the baseline and current periods. Beginning in the second quarter of 2021, Cytiva sales are included in core sales, and therefore the measure “core sales including Cytiva” is no longer provided for quarterly periods beginning with the second quarter of 2021.

Core sales growth (and the related measure of core sales including Cytiva) 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 these non-GAAP financial measures 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 these non-GAAP financial measures to measure the Company’s operating and financial performance and uses core sales growth (and previously used core sales growth including Cytiva) as one of the performance measures in the Company’s executive short-term cash incentive program. The Company excludes the effect of currency translation from these measures because currency translation is not under management’s control, is subject to volatility and can obscure underlying business trends, and excludes the effect of acquisitions (other than Cytiva sales, in the case of core sales growth including Cytiva) 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.

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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 DBS.

The Company deems acquisition-related transaction costs incurred in a given period to be significant (generally relating to the Company’s larger acquisitions) if it determines that such costs exceed the range of acquisition-related transaction costs typical for Danaher in a given period.

Sales Growth, Core Sales Growth and Core Sales Growth Including Cytiva

Total sales growth (GAAP) 7.0 % 32.0 %

Impact of:

Acquisitions/divestitures (1.5) % (7.5) %

Currency exchange rates 4.0 % (1.5) %

Core sales growth (non-GAAP) 9.5 % 23.0 %

Impact of Cytiva sales growth (net of divested product lines) 2.0 %

Core sales growth including Cytiva (non-GAAP) 25.0 %

2022 Sales Compared to 2021

Total sales increased 7.0% on a year-over-year basis in 2022 primarily as a result of an increase in core sales resulting from the factors discussed below by segment as well as an increase in sales from acquired businesses. The impact of changes in currency exchange rates decreased reported sales by 4.0% on a year-over-year basis in 2022 primarily due to the unfavorable impact of the strengthening of the U.S. dollar against most other major currencies in 2022.

Operating Profit Performance

Operating profit margins were 27.6% for the year ended December 31, 2022 as compared to 25.3% in 2021. The following factors impacted year-over-year operating profit margin comparisons.

2022 vs. 2021 operating profit margin comparisons were favorably impacted by:

•Third quarter 2021 impact of the modification and partial termination of a prior commercial arrangement and resolution of the associated litigation - 185 basis points

•Higher 2022 core sales and the impact of product mix, incremental year-over-year cost savings associated with continuing productivity improvement initiatives, net of incremental year-over-year costs associated with various new product development and sales, service and marketing growth investments and incremental year-over-year material, transportation and labor costs - 60 basis points

•2021 acquisition-related fair value adjustments to inventory and transaction costs deemed significant, in each case related to the acquisition of Aldevron - 20 basis points

•2021 acquisition-related fair value adjustments to inventory and deferred revenue related to the acquisition of Cytiva - 15 basis points.

2022 vs. 2021 operating profit margin comparisons were unfavorably impacted by:

•The incremental dilutive effect in 2022 of acquired businesses, net of product line dispositions which did not qualify as discontinued operations - 30 basis points

•2022 impairments of accounts receivable and inventory as well as accruals for contractual obligations in Russia - 15 basis points

•Fourth quarter 2022 costs incurred related to the anticipated separation of the Company's Environmental & Applied Solutions business - 5 basis points

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Business Segments

In the fourth quarter of 2022, the Company realigned its reportable segments to reflect changes in the Company’s internal organization resulting from the rate of growth within certain of the Company’s businesses in the former Life Sciences segment. There were no changes to the Company’s Diagnostics or Environmental & Applied Solutions segments. Prior period amounts have been restated to conform to the revised segment presentation. Sales by business segment for the years ended December 31 are as follows ($ in millions):

For information regarding the Company’s sales by geographical region, refer to Note 5 to the Consolidated Financial Statements.

BIOTECHNOLOGY

The Biotechnology segment includes the bioprocessing and discovery and medical businesses and offers a broad range of tools, consumables and services that are primarily used by customers to advance and accelerate the research, development, manufacture and delivery of biological medicines. The biotherapeutics that the Company’s solutions support range from replacement therapies such as insulin, vaccines, recombinant proteins and other biologic drugs, to novel cell, gene, mRNA and other nucleic acid therapies.

Biotechnology Selected Financial Data

Year Ended December 31

Operating profit as a % of sales 34.3 % 35.9 % 20.5 %

Depreciation as a % of sales 2.2 % 1.8 % 1.7 %

Amortization as a % of sales 9.3 % 10.5 % 12.7 %

Sales Growth, Core Sales Growth and Core Sales Growth Including Cytiva

Total sales growth (GAAP) 2.0 % 62.5 %

Impact of:

Acquisitions/divestitures (0.5) % (31.5) %

Currency exchange rates 4.5 % (1.5) %

Core sales growth (non-GAAP) 6.0 % 29.5 %

Impact of Cytiva sales growth (net of divested product lines) 7.0 %

Core sales growth including Cytiva (non-GAAP) 36.5 %

2022 Sales Compared to 2021

Price increases in the segment contributed 4.0% to sales growth on a year-over-year basis during 2022 as compared with 2021 and are reflected as a component of the change in core revenue growth.

During 2022, total Biotechnology segment sales increased 2.0% primarily as a result of increased core sales resulting from the factors discussed below, partially offset by the impact of changes in currency exchange rates due to the strengthening of the U.S. dollar in 2022 compared to 2021. Increased year-over-year core sales in the segment’s bioprocessing business were led by North America and Western Europe as the business experienced strong underlying demand for non-COVID-19 related

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instruments and consumables offsetting a decline in sales of instruments and consumables used in the research, development and production of COVID-19 related treatments and vaccines and the completion of a major project in China during 2021. Core sales of the businesses’ COVID-19 related products decreased year-over-year as a result of lower underlying demand for COVID-19 related therapeutics and vaccines and as customers reduce inventory levels of these products in light of this lower demand. Core sales for the discovery and medical business increased in 2022 compared to 2021 driven by higher sales of lab filtration and protein research products. Geographically, core sales in the discovery and medical business were led by North America, Western Europe and China.

2021 Sales Compared to 2020

Price increases in the segment contributed 2.0% to sales growth on a year-over-year basis during 2021 as compared with 2020 and are reflected as a component of the change in core revenue growth.

During 2021, total Biotechnology segment sales increased 62.5% primarily as a result of increased sales from the acquisition of Cytiva on March 31, 2020 (the “Cytiva Acquisition”), increased core sales resulting from the factors discussed below and the impact of changes in currency exchange rates due to the weakening of the U.S. dollar against most major currencies in 2021 compared to 2020. In 2021, the bioprocessing business experienced significant increased year-over-year core sales, driven by demand for instruments and consumables used in the research and development and production of COVID-19 therapeutics and vaccines and increased demand for non-COVID-19 related products as well as from the completion of a major project in China. Geographically, demand for these products increased across all major geographies, led by North America, Western Europe and China. Core sales for the discovery and medical business increased in 2021 compared to 2020 driven by higher sales of protein research and lab filtration products.

Operating Profit Performance

Operating profit margins declined 160 basis points during 2022 as compared to 2021. The following factors impacted year-over-year operating profit margin comparisons.

2022 vs. 2021 operating profit margin comparisons were unfavorably impacted by:

•Incremental year-over-year costs associated with various new product development, sales, service and marketing growth investments, restructuring and continuing productivity improvement initiatives, the impact of product mix, and incremental year-over-year material, transportation and labor costs, net of the impact of higher 2022 core sales - 170 basis points

•The incremental dilutive effect in 2022 of acquired businesses - 30 basis points

•2022 impairment of accounts receivable and inventory in Russia - 15 basis points

2022 vs. 2021 operating profit margin comparisons were favorably impacted by:

•2021 acquisition-related fair value adjustments to inventory and deferred revenue, in each case related to the acquisition of Cytiva - 55 basis points

Depreciation as a percentage of sales increased in 2022 as compared with 2021 as the increase in depreciation attributable to assets related to the acquisition of Cytiva and capital expenditures exceeded the increase in sales. Amortization of intangible assets as a percentage of sales decreased in 2022 as compared with 2021 primarily due to the increase in sales.

Operating profit margins increased 1,540 basis points during 2021 as compared to 2020. The following factors favorably impacted year-over-year operating profit margin comparisons.

•2020 acquisition-related fair value adjustments to inventory and deferred revenue, transaction costs deemed significant and integration preparation costs, net of 2021 acquisition-related fair value adjustments to inventory and deferred revenue in each case related to the acquisition of Cytiva - 875 basis points

•Higher 2021 core sales, the impact of product mix and the impact of foreign currency exchange rates, net of incremental year-over-year costs associated with various new product development and sales and marketing growth investments and incremental year-over-year material and labor costs - 585 basis points

•The incremental accretive effect in 2021 of acquired businesses, net of product line dispositions which did not qualify as discontinued operations - 80 basis points

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Depreciation as a percentage of sales increased in 2021 as compared with 2020 as the increase in depreciation attributable to assets related to the acquisition of Cytiva and capital expenditures exceeded the increase in sales. Amortization of intangible assets as a percentage of sales decreased in 2021 as compared with 2020 primarily due to increased sales from the acquisition of Cytiva exceeding the increase in amortization.

LIFE SCIENCES

The Life Sciences segment offers a broad range of instruments and consumables 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

Year Ended December 31

Operating profit as a % of sales 20.1 % 20.2 % 18.3 %

Depreciation as a % of sales 1.6 % 1.6 % 1.7 %

Amortization as a % of sales 6.0 % 4.4 % 3.8 %

Sales Growth and Core Sales Growth

Total sales growth (GAAP) 10.0 % 20.5 %

Impact of:

Acquisitions/divestitures (5.5) % (2.0) %

Currency exchange rates 5.0 % (1.5) %

Core sales growth (non-GAAP) 9.5 % 17.0 %

2022 Sales Compared to 2021

Price increases in the segment contributed 5.0% to sales growth on a year-over-year basis during 2022 as compared with 2021 and are reflected as a component of the change in core revenue growth.

During 2022, total Life Sciences segment sales increased 10.0% primarily as a result of increased core sales resulting from the factors discussed below and increased sales from acquisitions, partially offset by the impact of changes in currency exchange rates due to the strengthening of the U.S. dollar in 2022 compared to 2021. Core sales for the Company’s flow cytometry, genomics, lab automation, centrifugation, particle counting and characterization business decreased in 2022 primarily as a result of declines in Western Europe due to lower demand for genomic sample preparation consumables used in COVID-19 testing. These declines were partially offset by core sales growth in all other major product lines, led geographically by North America and China. Core sales in the mass spectrometry business increased in 2022 across all major end-markets driven in part by demand from recent product launches. Geographically, demand increased across all major geographies, led by North America, Western Europe and China. In 2022, core sales for the genomic consumables businesses increased compared to 2021 due to strong demand across most major product lines, led geographically by North America. Core sales for the industrial filtration business increased in 2022 compared to 2021 due to strong demand for these products across all major end-markets, led by microelectronics, aerospace and fluid technology and asset protection. Core sales for the industrial filtration business increased across all major geographies.

2021 Sales Compared to 2020

Price increases in the segment contributed 1.5% to sales growth on a year-over-year basis during 2021 as compared with 2020 and are reflected as a component of the change in core revenue growth.

During 2021, total Life Sciences segment sales increased 20.5% primarily as a result of increased core sales resulting from the factors discussed below, increased sales from acquisitions and the impact of changes in currency exchange rates due to the

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weakening of the U.S. dollar in 2021 compared to 2020. Core sales for the Company’s flow cytometry, genomics, lab automation, centrifugation, particle counting and characterization business increased in 2021 across all major geographies, led by North America and Western Europe. Core sales for the business were driven by demand earlier in the year for genomic sample preparation consumables related to COVID-19 as well as demand for flow cytometry products. Core sales in the mass spectrometry business increased in 2021 across all major end-markets driven in part by demand for new products. Geographically, demand increased across all major geographies, led by North America, Western Europe and China. In 2021, core sales for the industrial filtration business increased compared to 2020 due to strong demand for these products led by the microelectronics end-market, partially offset by weaker demand in the aerospace end-market. Geographically, core sales for the business were led by China and other high-growth markets, partially offset by North America.

The acquisition of Aldevron on August 30, 2021 has provided, and is expected to continue to provide, additional sales and earnings growth opportunities for the Company’s Life Sciences segment by expanding the business’ product line diversity, including new product and service offerings that complement the Company’s genomic medicine solutions. Since acquisition, Aldevron has seen sales growth in all major product lines compared to the prior year period.

Operating Profit Performance

Operating profit margins declined 10 basis points during 2022 as compared to 2021. The following factors impacted year-over-year operating profit margin comparisons.

2022 vs. 2021 operating profit margin comparisons were favorably impacted by:

•2021 acquisition-related fair value adjustments to inventory and transaction costs deemed significant, in each case related to the acquisition of Aldevron - 90 basis points

•Higher 2022 core sales, net of incremental year-over-year costs associated with various sales and marketing growth investments, incremental year-over-year material, transportation and labor costs and incremental restructuring and continuing productivity improvement initiatives - 50 basis points

2022 vs. 2021 operating profit margin comparisons were unfavorably impacted by:

•The incremental dilutive effect in 2022 of acquired businesses, net of product line dispositions which did not qualify as discontinued operations - 115 basis points

•2022 impairment of accounts receivable and inventory as well as accruals for contractual obligations in Russia - 35 basis points

Depreciation as a percentage of sales was consistent in 2022 as compared with 2021. Amortization of intangible assets as a percentage of sales increased in 2022 as compared with 2021 primarily as a result of the increase in intangible assets related to the acquisition of Aldevron.

Operating profit margins increased 190 basis points during 2021 as compared to 2020. The following factors impacted year-over-year operating profit margin comparisons.

2021 vs. 2020 operating profit margin comparisons were favorably impacted by:

• Higher 2021 core sales and the impact of product mix, incremental year-over-year cost savings associated with continuing productivity improvement initiatives and the impact of foreign currency exchange rates, net of incremental year-over-year costs associated with various new product development and sales and marketing growth investments and incremental year-over-year material and labor costs - 360 basis points

2021 vs. 2020 operating profit margin comparisons were unfavorably impacted by:

•2021 acquisition-related fair value adjustments to inventory and transaction costs deemed significant, in each case related to the acquisition of Aldevron - 90 basis points

•The incremental dilutive effect in 2021 of acquired businesses, net of product line dispositions which did not qualify as discontinued operations - 80 basis points

Depreciation as a percentage of sales were relatively consistent in 2021 as compared with 2020. Amortization of intangible assets as a percentage of sales increased in 2021 as compared with 2020 primarily due to the increase in intangible assets related to the acquisition of Aldevron.

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DIAGNOSTICS

The Diagnostics segment offers clinical instruments, reagents, 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

Year Ended December 31

Operating profit as a % of sales 31.7 % 23.5 % 20.8 %

Depreciation as a % of sales 3.6 % 4.2 % 5.4 %

Amortization as a % of sales 1.9 % 2.1 % 2.8 %

Sales Growth and Core Sales Growth

Total sales growth (GAAP) 10.0 % 33.0 %

Impact of:

Acquisitions/divestitures (0.5) % (0.5) %

Currency exchange rates 4.0 % (1.5) %

Core sales growth (non-GAAP) 13.5 % 31.0 %

2022 Sales Compared to 2021

Price increases in the segment contributed 1.0% to sales growth on a year-over-year basis during 2022 as compared with 2021 and are reflected as a component of the change in core sales growth.

During 2022, total segment sales increased 10.0% primarily as a result of increased core sales resulting from the factors discussed below, particularly higher year-over-year core sales of molecular diagnostics tests for COVID-19 which contributed significantly to overall segment core sales growth, partially offset by the impact of changes in currency exchange rates. Core sales in the molecular diagnostics business increased on a year-over-year basis led by North America and Western Europe as the business experienced strong growth in sales of consumables. The increase was driven primarily by increased sales of diagnostic test solutions for COVID-19 as well as higher year-over-year demand for non-respiratory disease tests. Additional production capacity added in 2021 allowed the business to produce more diagnostic tests in 2022 and meet continued strong demand by private and government customers. Core sales in the segment’s clinical lab business grew on a year-over-year basis as increased demand in North America and Japan offset weaker demand in China where COVID-19 related restrictions reduced patient volumes. During 2022, core sales in the acute care diagnostic business increased year-over-year primarily due to increased demand for its blood gas product line. Geographically, demand was driven by Western Europe, North America and China. Core sales in the pathology business grew year-over-year across all major geographies, driven by increased demand for core histology, advanced staining and pathology imaging products.

Operating Profit Performance

Operating profit margins increased 820 basis points during 2022 as compared to 2021. The following factors impacted year-over-year operating profit margin comparisons.

2022 vs. 2021 operating profit margin comparisons were favorably impacted by:

•Third quarter 2021 impact of the modification and partial termination of a prior commercial arrangement and resolution of the associated litigation - 555 basis points

•Higher 2022 core sales and the impact of product mix, net of incremental year-over-year costs associated with material, transportation and labor, restructuring and continuing productivity improvement initiatives, sales and marketing growth initiatives and various new product development initiatives - 250 basis points

•The incremental accretive effect in 2022 of acquired businesses - 10 basis points

•First quarter 2021 impairment charge related to a trade name - 10 basis points

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2022 vs. 2021 operating profit margin comparisons were unfavorably impacted by:

•2022 impairments of accounts receivable as well as accruals for contractual obligations in Russia - 5 basis points

Depreciation and amortization of intangible assets both decreased as a percentage of sales during 2022 as compared with 2021, primarily as a result of the increase in sales.

ENVIRONMENTAL & APPLIED SOLUTIONS

The Environmental & Applied Solutions segment offers products and services that help protect precious resources and keep global food and water supplies safe. The Company’s water quality business provides instrumentation, consumables, software, services and disinfection systems to help analyze, treat and manage the quality of ultra-pure, potable, industrial, waste, ground, source and ocean water in residential, commercial, municipal, industrial and natural resource applications. The Company’s product identification business provides instruments, software, services and consumables for various color and appearance management, packaging design and quality management, packaging converting, printing, marking, coding and traceability applications for consumer, pharmaceutical and industrial products.

Environmental & Applied Solutions Selected Financial Data

Year Ended December 31

Amortization of intangible assets 50 62 63

Operating profit as a % of sales 23.5 % 22.7 % 22.7 %

Depreciation as a % of sales 0.8 % 0.9 % 1.1 %

Amortization as a % of sales 1.0 % 1.3 % 1.5 %

Sales Growth and Core Sales Growth

Total sales growth (GAAP) 4.0 % 8.0 %

Impact of:

Acquisitions/divestitures 0.5 % 1.5 %

Currency exchange rates 3.5 % (1.5) %

Core sales growth (non-GAAP) 8.0 % 8.0 %

2022 Sales Compared to 2021

Price increases in the segment contributed 7.5% to sales growth on a year-over-year basis during 2022 as compared with 2021 and are reflected as a component of the change in core revenue growth.

In 2022, total Environmental & Applied Solutions segment sales increased 4.0%, primarily as a result of core sales growth driven by the factors discussed below, partially offset by the impact of changes in currency exchange rates and divestitures, net of acquisitions.

On an overall basis, in 2022 core sales in the segment’s water quality businesses increased at a low-double digit rate. Year-over-year core sales in the analytical instrumentation product line increased driven by higher core sales in the municipal and industrial end-markets. Geographically, core sales growth was led by North America and Western Europe. Core sales in the chemical treatment solutions product line increased as a result of higher core sales across all major end-markets. Geographically, the increase in core sales of chemical treatment solutions was driven by North America and Latin America.

The segment’s product identification businesses’ core sales grew at a mid-single digit rate. Core sales in the marking and coding business increased led by the food and beverage end-market. Geographically, core sales growth was led by North America, Western Europe and Latin America, partially offset by the core sales decline from the suspension of shipments to Russia. Year-over-year core sales in the packaging and color solutions products and services business increased, geographically led by Western Europe.

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In September 2022, the Company announced its intention to spin-off its Environmental & Applied Solutions business into a publicly traded company. The transaction is expected to be tax-free to the Company’s shareholders. The Company is targeting to complete the EAS Separation 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.

Operating Profit Performance

Operating profit margins increased 80 basis points during 2022 as compared to 2021. The following factors impacted year-over-year operating profit margin comparisons.

2022 vs. 2021 operating profit margin comparisons were favorably impacted by:

•Higher 2022 core sales and incrementally lower year-over-year costs associated with various new product development initiatives, net of the impact of product mix, incremental year-over-year costs associated with material, transportation and labor and restructuring and continuing productivity improvement initiatives and incremental year-over-year costs for sales, service and marketing growth investments - 85 basis points

•The incremental net accretive effect in 2022 of acquired businesses and product line dispositions which did not qualify as discontinued operations - 20 basis points

2022 vs. 2021 operating profit margin comparisons were unfavorably impacted by:

•Second quarter 2022 impairment charge related to technology and customer relationships - 20 basis points

•2022 impairments of accounts receivable and inventory in Russia - 5 basis points

Depreciation and amortization of intangible assets as a percentage of sales decreased in 2022 as compared with 2021 primarily as a result of the increase in sales.

COST OF SALES AND GROSS PROFIT

Year Ended December 31

The year-over-year increase in cost of sales during 2022 as compared with 2021 was due primarily to the impact of higher year-over-year sales volumes, including sales volumes from recently acquired businesses and incremental year-over-year costs associated with material, transportation, labor and restructuring and continuing productivity improvement initiatives. This increase was partially offset by lower incremental year-over-year acquisition-related charges associated with fair value adjustments to inventory in connection with the 2021 acquisition of Aldevron, which increased cost of sales by $59 million in 2021.

The year-over-year decrease in gross profit margin during 2022 as compared with 2021 was driven by incremental year-over-year costs associated with material, transportation, labor and restructuring and continuing productivity improvement initiatives. In addition, the gross profit margin was negatively impacted by a 2022 inventory charge related to reduction of business activities in Russia. Gross profit margins declines were partially offset by increased year-over-year core sales and product mix as well as the impact of acquisition-related charges incurred in 2021. The 2021 acquisition-related charges of $76 million included fair value adjustments to deferred revenue related to the acquisition of Cytiva and fair value adjustments to inventory in connection with the acquisitions of Aldevron and Cytiva.

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OPERATING EXPENSES

Year Ended December 31

Selling, general and administrative (“SG&A”) expenses (8,516) (8,198) (6,896)

Research and development (“R&D”) expenses (1,745) (1,742) (1,348)

Other operating expenses — (547) —

R&D as a % of sales 5.5 % 5.9 % 6.0 %

Other operating expenses as a % of sales — % 1.9 % — %

SG&A expenses as a percentage of sales declined 70 basis points on a year-over-year basis for 2022 compared with 2021. The decline was driven by the benefit of increased leverage of the Company’s general and administrative cost base, including amortization expense, resulting from higher 2022 sales, including sales volumes from recently acquired businesses, as well as incremental year-over-year cost savings associated with continuing productivity improvement initiatives. The Company’s 2021 transaction costs for the acquisition of Aldevron also benefited the year-over-year comparison of SG&A as a percentage of sales. These decreases were partially offset by continued investments in sales and marketing growth initiatives, increased labor costs and incremental restructuring and continuing productivity improvement costs as well as higher amortization expense. Additionally, the declines were partially offset by charges related to impairments of certain accounts receivable and accrual of contractual obligations incurred in Russia and by an impairment charge related to technology and customer relationships incurred in 2022, net of the impact of an impairment charge related to a trade name in 2021.

R&D expenses (consisting principally of internal and contract engineering personnel costs) as a percentage of sales declined in 2022 as compared with 2021, primarily due to the sales growth rate exceeding the spending growth related to new product development initiatives.

Other operating expenses and other operating expenses as a percentage of sales decreased in 2022 compared with 2021 as a result of the contract settlement expense related to the modification and partial termination of a prior commercial arrangement and resolution of the associated litigation during 2021. Refer to Note 8 to the Consolidated Financial Statements.

NONOPERATING INCOME (EXPENSE)

Nonoperating income (expense) consists primarily of net unrealized and realized gains/losses resulting from changes in the fair value of the Company’s investments in equity securities and investments in partnerships, the non-service cost components of net periodic benefit costs, gains on the sale of product lines and impairments of equity method investments. Refer to Note 9 to the Consolidated Financial Statements.

LOSS ON EARLY EXTINGUISHMENT OF BORROWINGS

In the fourth quarter of 2021, the Company redeemed the €800 million aggregate principal amount of 2.5% senior unsecured notes due 2025 at a redemption price equal to the outstanding principal amount and a make-whole premium as specified in the applicable indenture, plus accrued and unpaid interest. The Company recorded a loss on early extinguishment of these borrowings related to the payment of the make-whole premiums and deferred costs in connection with the redemption of $96 million ($73 million after-tax). The Company funded the redemption using available cash balances, including proceeds from the fourth quarter 2021 issuance of the $1.0 billion aggregate principal amount of 2.8% senior unsecured notes due 2051.

In the fourth quarter of 2020, the Company redeemed the €800 million aggregate principal amount of 1.7% senior unsecured notes due 2022 at a redemption price equal to the outstanding principal amount and a make-whole premium as specified in the applicable indenture, plus accrued and unpaid interest. The Company recorded a loss on early extinguishment of these borrowings of $26 million ($20 million after-tax) related to the payment of make-whole premiums in connection with the redemption. The Company funded the redemption using available cash balances, including proceeds from the fourth quarter 2020 issuance of the $1.0 billion aggregate principal amount of 2.6% senior unsecured notes due 2050.

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INTEREST COSTS

Interest expense of $211 million for 2022 was $27 million lower than in 2021, due primarily to lower average debt balances in 2022 compared to 2021 and the impact of the stronger U.S. dollar in 2022 on the interest expense for the Company’s foreign currency denominated debt (and U.S. dollar debt that has been effectively converted into foreign currency through cross-currency swap derivative contracts). Interest income of $41 million for 2022 was $30 million higher than in 2021, due primarily to higher interest rates and higher cash balances in 2022.

For a further description of the Company’s debt and cross-currency swap derivative contracts related to the debt as of December 31, 2022 refer to Notes 14 and 15 to the Consolidated Financial Statements.

INCOME TAXES

General

Income tax expense and deferred tax assets and liabilities reflect management’s assessment of future taxes expected to be paid on items reflected in the Company’s Consolidated Financial Statements. The Company records the tax effect of discrete items and items that are reported net of their tax effects in the period in which they occur.

The Company’s effective tax rate can be affected by changes in the mix of earnings in countries with different statutory tax rates (including as a result of business acquisitions and dispositions), changes in the valuation of deferred tax assets and liabilities, accruals related to contingent tax liabilities and period-to-period changes in such accruals, the results of audits and examinations of previously filed tax returns (as further discussed below), the expiration of statutes of limitations, the implementation of tax planning strategies, tax rulings, court decisions, settlements with tax authorities, changes in tax laws and regulations, and legislative policy changes that may result from the OECD’s initiative on Base Erosion and Profit Shifting. For a description of the tax treatment of earnings that are planned to be reinvested indefinitely outside the United States, refer to “—Liquidity and Capital Resources—Cash and Cash Requirements” below.

The amount of income taxes the Company pays is subject to ongoing audits by federal, state and non-U.S. tax authorities, which often result in proposed assessments. Management performs a comprehensive review of its global tax positions on a quarterly basis. Based on these reviews, which take into account the results of discussions and resolutions of matters with certain tax authorities and the other factors referenced in the prior paragraph, reserves for contingent tax liabilities are accrued or adjusted as necessary. For a discussion of risks related to these and other tax matters, refer to “Item 1A. Risk Factors”.

Year-Over-Year Changes in the Tax Provision and Effective Tax Rate

Year Ended December 31

Effective tax rate from continuing operations 13.1 % 16.5 % 18.9 %

The Company’s effective tax rate for 2022 differs from the U.S. federal statutory rate of 21.0% due principally to net deferred tax benefits resulting from legal and operational actions undertaken to realign certain of its businesses, as well as excess tax benefits from stock-based compensation, the release of reserves for uncertain tax positions due to the expiration of statutes of limitation and audit settlements and changes in estimates related to prior year tax filing positions, net of changes in estimates associated with prior period uncertain tax positions.

The Company’s effective tax rate for 2021 differs from the U.S. federal statutory rate of 21.0% due principally to net discrete benefits related primarily to the release of reserves for uncertain tax positions due to the expiration of statutes of limitation and audit settlements and excess tax benefits from stock-based compensation, net of changes in estimates associated with prior period uncertain tax positions.

The Company conducts business globally and files numerous consolidated and separate income tax returns in the U.S. federal and state and non-U.S. jurisdictions. The non-U.S. countries in which the Company has a significant presence include 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 non-U.S. country would not have a material effect on the Company’s Consolidated Financial Statements given the geographic 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 2018. In addition, the Company has subsidiaries in Belgium, Canada, China, Denmark, France, Germany, India, Italy, Japan, Korea, Switzerland, the United Kingdom and various other countries, states and provinces that are currently under audit for years ranging from 2004 through 2021.

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Similar to the position it took in connection with the audit of the Company’s taxable income for the years 2012 through 2015, 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. The settlement of this matter for the 2012 through 2015 audit was not material to the Company’s financial statements but did not preclude the IRS from proposing similar adjustments in future audit periods, as the IRS has with the 2022 assessment. For income tax purposes, the recognition of premium income has been deferred in accordance with U.S. tax laws related to insurance. The IRS is challenging the deferral of premium income for certain types of the Company’s self-insurance policies. The proposed adjustments would increase the Company’s taxable income over the 2016 through 2018 periods by approximately $2.5 billion. Due to the enactment of the TCJA in 2017 and the resulting reduction in the U.S. corporate tax rate for years after 2017, the Company remeasured its deferred tax liabilities related to the temporary differences associated with this deferred premium income from 35.0% to 21.0%. If the Company is unsuccessful in defending its position, taxes owed to the IRS may be computed under the previous 35.0% statutory tax rate and the Company may be required to remeasure the related deferred tax liabilities from 21.0% to 35.0%, which in addition to any interest due on the amounts assessed, would require a charge to future earnings. Management believes the positions the Company has taken in its U.S. tax returns are in accordance with the relevant tax laws and intends to vigorously defend these positions.

Tax authorities in Denmark have issued tax assessments related to interest accrued by certain of the Company’s subsidiaries for the years 2004 through 2015. During the first quarter of 2021, the Company received a notice from the Danish tax authorities that included a significant reduction in the interest amounts imposed in the original tax assessments. Taking into account the revised interest amounts, the assessments total approximately DKK 2.1 billion including applicable accrued interest (approximately $298 million based on the exchange rate as of December 31, 2022). The Company’s appeal of the tax assessments with the Danish National Tax Tribunal has been put on hold awaiting the final outcome of other preceding withholding tax cases that have been brought before the Danish High Court and the Danish Supreme Court. Management believes the positions the Company has taken in Denmark are in accordance with the relevant tax laws and is vigorously defending its positions. The Company intends on pursuing this matter through the Danish High Court and the Danish Supreme Court should the appeal to the Danish National Tax Tribunal be unsuccessful. While the ultimate resolution of this matter is uncertain and could take many years, taking into account the payments the Company has previously made related to these assessments in order to mitigate further interest accrual claims, the Company does not expect the resolution of this matter will have a future material adverse impact to the Company’s financial statements, including its cash flow and effective tax rate.

The Company expects its 2023 effective tax rate to be approximately 19.5% which is higher than the 2022 rate due primarily to the impact of net discrete tax benefits on the 2022 effective tax rate that are not expected to repeat in 2023 and the geographic mix of earnings anticipated for 2023. Any future legislative changes in the United States and/or potential tax reform in other jurisdictions could cause the Company’s effective tax rate to differ from this estimate. Refer to Note 7 to the Consolidated Financial Statements for additional information related to income taxes.

DISCONTINUED OPERATIONS AND ENVIRONMENTAL & APPLIED SOLUTIONS SEPARATION

Fortive Corporation Separation

On July 2, 2016, the Company completed the separation of its former Test & Measurement segment, Industrial Technologies segment (excluding the product identification businesses) and retail/commercial petroleum business by distributing to Danaher stockholders on a pro rata basis all of the issued and outstanding common stock of Fortive Corporation (“Fortive”), the entity the Company incorporated to hold such businesses. In 2021, the Company recorded an income tax benefit of $86 million related to the release of previously provided reserves associated with uncertain tax positions on certain of the Company’s tax returns which were jointly filed with Fortive entities. These reserves were released due to the expiration of statutes of limitations for those returns. This income tax benefit is included in earnings from discontinued operations, net of income taxes in the Consolidated Statements of Earnings.

Environmental & Applied Solutions Separation

In September 2022, the Company announced its intention to spin-off its Environmental & Applied Solutions business into a publicly traded company. The transaction is expected to be tax-free to the Company’s shareholders. The Company is targeting to complete the EAS Separation 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 IRS and receipt of other regulatory approvals.

Refer to Note 3 to the Consolidated Financial Statements for additional information.

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COMPREHENSIVE INCOME

Comprehensive income decreased by $410 million in 2022 as compared to 2021, primarily driven by the impact of higher losses from foreign currency translation adjustments in 2022 compared to 2021 and a decrease in the income from pension and postretirement plan benefit adjustments and cash flow hedge adjustments in 2022 compared to 2021, partially offset by higher net earnings in 2022 compared to 2021. The Company recorded a foreign currency translation loss of approximately $2.1 billion for 2022 compared to a loss of approximately $1.3 billion for 2021. The Company recorded a pension and postretirement plan benefit gain of $209 million for 2022 compared to a gain of $378 million for 2021. The Company recorded gains from cash flow hedge adjustments related to the Company’s derivative contracts in 2022 of $51 million compared to gains of $247 million in 2021.

FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

The Company is exposed to market risk from changes in interest rates, foreign currency exchange rates, equity prices and commodity prices as well as credit risk, each of which could impact its Consolidated Financial Statements. The Company generally addresses its exposure to these risks through its normal operating and financing activities. The Company also periodically uses derivative financial instruments to manage foreign exchange risks and interest rate risks. In addition, the Company’s broad-based business activities help to reduce the impact that volatility in any particular area or related areas may have on its financial statements as a whole.

Interest Rate Risk

The Company manages interest cost using a mixture of fixed-rate and at times variable-rate debt. A change in interest rates on fixed-rate debt impacts the fair value of the debt but not the Company’s earnings or cash flow because the interest on such debt is fixed. Generally, the fair market value of fixed-rate debt will increase as interest rates fall and decrease as interest rates rise. As of December 31, 2022, an increase of 100 basis points in interest rates would have decreased the fair value of the Company’s fixed-rate long-term debt by approximately $1.5 billion.

As of December 31, 2022, the Company had no variable-rate debt obligations, however, the interest rates of the Company’s euro-based commercial paper borrowings are fixed based on short-term market rates at the time of issuance (refer to Note 14 to the Consolidated Financial Statements for information regarding the Company’s outstanding commercial paper balances as of December 31, 2022). As a result, the Company’s primary interest rate exposure results from changes in short-term interest rates. As these shorter duration obligations mature, the Company may issue additional short-term commercial paper obligations to refinance all or part of these borrowings, to the extent commercial paper markets are available. In 2022, the average annual interest rate associated with the Company’s outstanding commercial paper borrowings was approximately 43 basis points. A hypothetical increase of this average by 100 basis points would have increased the Company’s 2022 interest expense by approximately $21 million.

Refer to “Results of Operations—Interest Costs” for discussion of the Company’s cross-currency swap derivative contracts and interest rate swap agreements.

Currency Exchange Rate Risk

The Company faces transactional exchange rate risk from transactions with customers in countries outside the United States and from intercompany transactions between affiliates. Transactional exchange rate risk arises from the purchase and sale of goods and services in currencies other than Danaher’s functional currency or the functional currency of its applicable subsidiary. The Company also faces translational exchange rate risk related to the translation of financial statements of its foreign operations into U.S. dollars, Danaher’s functional currency. Costs incurred and sales recorded by subsidiaries operating outside of the United States are translated into U.S. dollars using exchange rates effective during the respective period. As a result, the Company is exposed to movements in the exchange rates of various currencies against the U.S. dollar. In particular, the Company has more sales in European currencies than it has expenses in those currencies. Therefore, when European currencies strengthen or weaken against the U.S. dollar, operating profits are increased or decreased, respectively. The effect of a change in currency exchange rates on the Company’s net investment in non-U.S. subsidiaries is reflected in the accumulated other comprehensive income (loss) component of stockholders’ equity.

Currency exchange rates negatively impacted 2022 reported sales on a year-over-year basis primarily due to the strengthening of the U.S. dollar against most major currencies during 2022. If the currency exchange rates in effect as of December 31, 2022 were to prevail throughout 2023, the Company’s 2023 sales would be essentially flat relative to 2022 sales. Strengthening of the U.S. dollar against other major currencies compared to the exchange rates in effect as of December 31, 2022 would adversely impact the Company’s sales and results of operations on an overall basis. Any weakening of the U.S. dollar against other major currencies compared to the exchange rates in effect as of December 31, 2022 would positively impact the Company’s sales and results of operations.

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The Company has generally accepted the exposure to exchange rate movements without using derivative financial instruments to manage this transactional exchange risk, although the Company has used foreign currency-denominated debt and cross-currency swaps to hedge a portion of its net investments in non-U.S. operations against adverse movements in exchange rates. Both positive and negative movements in currency exchange rates against the U.S. dollar will continue to affect the reported amount of sales and net earnings in the Company’s Consolidated Financial Statements. In addition, the Company has assets and liabilities held in foreign currencies. A 10% depreciation in major currencies relative to the U.S. dollar as of December 31, 2022 would have reduced foreign currency-denominated net assets and stockholders’ equity by approximately $1.7 billion. Refer to Note 15 to the Consolidated Financial Statements for information regarding the Company’s hedging of a portion of its net investment in non-U.S. operations.

Equity Price Risk

The Company’s investment portfolio from time to time includes publicly-traded equity securities that are sensitive to fluctuations in market price. As of December 31, 2022, the Company held $16 million of publicly-traded equity securities, excluding equity-method investments. Additionally, the Company holds non-marketable equity investments in privately held companies that may be impacted by equity price risks. These non-marketable equity investments are accounted for under the Fair Value Alternative method with changes in fair value recorded in earnings. Volatility in the equity markets or other fair value considerations could affect the value of these investments and require losses or gains to be recognized in earnings.

Commodity Price Risk

For a discussion of risks relating to commodity prices, refer to “Item 1A. Risk Factors.”

Credit Risk

The Company is exposed to potential credit losses in the event of nonperformance by counterparties to its financial instruments. Financial instruments that potentially subject the Company to credit risk consist of cash and temporary investments, receivables from customers and derivatives. The Company places cash and temporary investments with various high-quality financial institutions throughout the world and exposure is limited at any one institution. Although the Company typically does not obtain collateral or other security to secure these obligations, it does regularly monitor the third-party depository institutions that hold its cash and cash equivalents. The Company’s emphasis is primarily on safety and liquidity of principal and secondarily on maximizing yield on those funds.

In addition, concentrations of credit risk arising from receivables from customers are limited due to the diversity of the Company’s customers. The Company’s businesses perform credit evaluations of their customers’ financial conditions as deemed appropriate and also obtain collateral or other security when deemed appropriate.

The Company enters into derivative transactions infrequently and typically with high-quality financial institutions, so that exposure at any one institution is limited.

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, funding restructuring activities and managing 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 the COVID-19 pandemic or other market disruptions (such as the disruptions in the financial and capital markets that occurred at times in 2020), the Company anticipates following the same approach in the future.

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Overview of Cash Flows and Liquidity

Following is an overview of the Company’s cash flows and liquidity for the years ended December 31:

Payments for additions to property, plant and equipment (1,152) (1,294) (791)

Proceeds from sales of property, plant and equipment 9 13 2

Payments for purchases of investments (523) (934) (342)

Proceeds from sales of investments 18 126 13

Proceeds from sale of product lines — 26 826

All other investing activities 51 37 24

Proceeds from borrowings (maturities longer than 90 days) — 984 8,670

Repayments of borrowings (maturities longer than 90 days) (965) (1,186) (5,933)

Make-whole premiums to redeem borrowings prior to maturity — (96) (26)

All other financing activities (95) (16) (3)

•Operating cash flows from continuing operations increased $161 million, or 2%, during 2022 as compared to 2021, due primarily to higher net earnings from continuing operations (after excluding charges for depreciation, amortization (including intangible assets and inventory step-up), stock compensation, gain on sale of product lines, unrealized investment gains/losses, loss on the extinguishment of debt and the contract settlement expense in 2021). These increases were partially offset by higher cash used in aggregate for accounts receivables, inventories, trade accounts payable and prepaid and accrued expenses, including deferred taxes, in 2022 compared to the prior year.

•Net cash used in investing activities consisted primarily of capital expenditures, cash paid for acquisitions and investments, net of proceeds from the sale of investments, and decreased primarily as a result of lower cash paid for acquisitions in 2022 compared to 2021. Refer to Notes 2 and 12 to the Consolidated Financial Statements included in this Annual Report for a discussion of the Company’s acquisitions and investments.

•As of December 31, 2022, the Company held approximately $6.0 billion of cash and cash equivalents.

Operating Activities

Cash flows from operating activities can fluctuate significantly from period-to-period as working capital needs and the timing of payments for income taxes, restructuring activities and productivity improvement initiatives, pension funding and other items impact reported cash flows.

Operating cash flows from continuing operations were approximately $8.5 billion for 2022, an increase of $161 million, or 2%, as compared to 2021. The year-over-year change in operating cash flows from 2021 to 2022 was primarily attributable to the following factors:

•2022 operating cash flows benefited from higher net earnings in 2022 as compared to 2021.

•Net earnings for 2022 reflected an increase of $160 million of depreciation, amortization, stock compensation expense, unrealized investment gains/losses, net of loss on the extinguishment of debt and contract settlement expense as

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compared to 2021. Amortization expense primarily relates to the amortization of intangible assets and inventory fair value adjustments. Depreciation expense relates to both the Company’s manufacturing and operating facilities as well as instrumentation leased to customers under operating-type lease (“OTL”) arrangements. Contract settlement expense represents the pretax charge related to the modification and partial termination of a prior commercial arrangement and resolution of the associated litigation. Refer to Note 8 to the Consolidated Financial Statements for additional information on the contract settlement expense. Depreciation, amortization, stock compensation and contract settlement expense are noncash expenses that decrease earnings without a corresponding impact to operating cash flows. Cash flows from the gain on sale of product lines and loss on the extinguishment of debt are reflected in cash flows from investing activities while unrealized investment gains/losses impact net earnings without immediately impacting cash flows as the cash flow impact from investments occurs when the invested capital is returned to the Company.

•The aggregate of trade accounts receivable, inventories and trade accounts payable used $958 million in operating cash flows during 2022, compared to $564 million of operating cash flows used in 2021. The amount of cash flow generated from or used by the aggregate of trade accounts receivable, inventories and trade accounts payable depends upon how effectively the Company manages the cash conversion cycle, which effectively represents the number of days that elapse from the day it pays for the purchase of raw materials and components to the collection of cash from its customers and can be significantly impacted by the timing of collections and payments in a period.

•The aggregate of prepaid expenses and other assets, deferred income taxes and accrued expenses and other liabilities used $561 million in operating cash flows during 2022, compared to $94 million used in 2021. The timing of cash payments for taxes and the impact of deferred tax benefits and charges, various employee-related liabilities, customer funding and accrued expenses drove the majority of this change.

Investing Activities

Cash flows relating to investing activities consist primarily of cash used for acquisitions and capital expenditures, including instruments leased to customers, cash used for investments and cash proceeds from divestitures of businesses or assets.

Net cash used in investing activities was approximately $2.2 billion during 2022 compared to approximately $13.0 billion of net cash used in 2021.

Acquisitions, Divestitures and Sale of Investments

For a discussion of the Company’s 2022 and 2021 acquisitions and divestitures refer to “—Overview” and Note 2 to the Consolidated Financial Statements. In addition, in 2022 and 2021, the Company invested $523 million and $934 million, respectively, in non-marketable equity securities and partnerships.

Capital Expenditures

Capital expenditures are made primarily for increasing manufacturing capacity, replacing equipment, supporting new product development, improving information technology systems and the manufacture of instruments that are used in OTL arrangements that certain of the Company’s businesses enter into with customers. Capital expenditures totaled approximately $1.2 billion in 2022 and $1.3 billion in 2021. The year-over-year decrease in capital spending in 2022 was primarily due to higher 2021 expenditures related to diagnostic testing capacity and declines in expenditures for instruments used in OTL arrangements, partially offset by incremental capital expenditures at Aldevron and Cytiva. In 2023, the Company expects capital expenditures to be approximately $1.5 billion primarily to increase manufacturing capacity and to support other growth opportunities.

During 2021, certain agencies of the U.S. government, including the Biomedical Advanced Research and Development Authority (“BARDA”) within the U.S. Department of Health and Human Services, agreed to finance an expansion of production capacity related to chromatography, liquid cell culture media, buffers and cell culture powder media and single-use consumables at certain of the Company’s Biotechnology businesses and the development of diagnostics testing technologies and the expansion of testing production capacity at certain of the Company’s Diagnostics businesses. The Company’s businesses may enter into similar agreements in the future. In consideration of this financing, the U.S. government has certain rights, including rights with respect to the allocation of certain of the incremental production capacity associated with such expansion and/or rights in intellectual property produced with its financial assistance. The amount awarded pursuant to these grants in 2021 totaled $568 million and will be paid over periods ranging from one year to four years. In 2022, the Company received aggregate payments related to the BARDA grants and other government assistance of $137 million that offset operating expenses of $50 million and purchases of property, plant and equipment of $87 million. Property, plant and equipment purchased using funds provided by governments are recorded net of government assistance.

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Financing Activities

Cash flows from financing activities consist primarily of cash flows associated with the issuance and repayments of commercial paper, issuance and repayment of long-term debt, borrowings under committed credit facilities, issuance and repurchases of common stock, issuance of preferred stock and payments of cash dividends to shareholders. Financing activities used cash of approximately $2.6 billion during 2022 compared to approximately $1.3 billion of cash provided during 2021. The year-over-year increase in cash used by financing activities was due primarily to net repayments of borrowings in 2022 compared to net proceeds from borrowings in 2021.

Total debt was approximately $19.7 billion and $22.2 billion as of December 31, 2022 and 2021, respectively, including notes payable and current portion of long-term debt was $591 million and $8 million as of December 31, 2022 and 2021, respectively. As of December 31, 2022, the Company had the ability to incur approximately $3.0 billion of additional indebtedness in direct borrowings or under the outstanding commercial paper facilities based on the amounts available under the Company’s $5.0 billion Five-Year Facility which were not being used to backstop outstanding commercial paper balances. As of December 31, 2022, the Company has classified approximately $2.0 billion of its borrowings outstanding under the euro-denominated commercial paper program as long-term debt in the Consolidated Balance Sheet as the Company has the intent and ability, as supported by availability under the Five-Year Facility, to refinance these borrowings for at least one year from the balance sheet date. As commercial paper obligations mature, the Company may issue additional short-term commercial paper obligations to refinance all or part of these borrowings, to the extent commercial paper markets are available.

Under the Company’s U.S. dollar and euro-denominated commercial paper program, the notes are typically issued at a discount from par, generally based on the ratings assigned to the Company by credit rating agencies at the time of the issuance and prevailing market rates measured by reference to the Secured Overnight Financing Rate or Euro Interbank Offer Rate, depending on the applicable currency of the borrowing.

Refer to Note 14 to the Consolidated Financial Statements for additional information regarding the Company’s financing activities and indebtedness, including the Company’s outstanding debt as of December 31, 2022, and the Company’s commercial paper program and Five-Year Facility.

Common Stock Offering and MCPS Offering

For a description of the 2020 Common Stock and MCPS Offerings, refer to Note 19 to the Consolidated Financial Statements.

Shelf Registration Statement

The Company has filed a “well-known seasoned issuer” shelf registration statement on Form S-3 with the SEC that registers an indeterminate amount of debt securities, common stock, preferred stock, warrants, depositary shares, purchase contracts and units for future issuance. The Company expects to use net proceeds realized by the Company from future securities sales off this shelf registration statement for general corporate purposes, including without limitation repayment or refinancing of debt or other corporate obligations, acquisitions, capital expenditures, share repurchases, dividends and/or working capital.

Stock Repurchase Program

Please see Note 19 to the Consolidated Financial Statements for a description of the Company’s stock repurchase program.

Dividends

The Company declared a regular quarterly dividend of $0.25 per share of Company common stock that was paid on January 27, 2023 to holders of record on December 30, 2022. In addition, the Company declared a quarterly cash dividend of $12.50 per MCPS Series B that was paid on January 15, 2023 to holders of record as of December 31, 2022. Aggregate 2022 and 2021 cash payments for dividends on Company common stock were $693 million and $578 million, respectively, and aggregate 2022 and 2021 cash payments for the dividends on the Company’s MCPS were $125 million and $164 million, respectively. The year-over-year increase in dividend payments in 2022 primarily relates to an increase in the quarterly dividend rate on common stock effective with respect to the dividend paid in the second quarter of 2022, partially offset by lower dividends paid on the MCPS Series A as a result of their conversion into common shares in April 2022.

Cash and Cash Requirements

As of December 31, 2022, the Company held approximately $6.0 billion of cash and cash equivalents that were on deposit with financial institutions or invested in highly liquid investment-grade debt instruments with a maturity of 90 days or less with an approximate weighted average annual interest rate of 2.09%. Of the cash and cash equivalents, approximately $3.4 billion was held within the United States and approximately $2.6 billion was held outside of the United States. The Company will continue to have cash requirements to support general corporate purposes, which may include working capital needs, capital expenditures, acquisitions and investments, paying interest and servicing debt, paying taxes and any related interest or penalties,

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funding its restructuring activities and pension plans as required, paying dividends to shareholders, repurchasing shares of the Company’s common stock and supporting other business needs.

The Company generally intends to use available cash and internally generated funds to meet these cash requirements, but in the event that additional liquidity is required, the Company may also borrow under its commercial paper programs (if available) or borrow under the Company’s Five-Year Facility, enter into new credit facilities and either borrow directly thereunder or use such credit facilities to backstop additional borrowing capacity under its commercial paper programs (if available) and/or access the capital markets. The Company also may from time to time seek to access the capital markets to take advantage of favorable interest rate environments or other market conditions.

While repatriation of some cash held outside the United States may be restricted by local laws, most of the Company’s foreign cash could be repatriated to the United States. Following enactment of the TCJA and the associated Transition Tax, in general, repatriation of cash to the United States can be completed with no incremental U.S. tax; however, repatriation of cash could subject the Company to non-U.S. taxes on distributions. The cash that the Company’s non-U.S. subsidiaries hold for indefinite reinvestment is generally used to finance non-U.S. operations and investments, including acquisitions. The income taxes, if any, applicable to such earnings including basis differences in our non-U.S. subsidiaries are not readily determinable. As of December 31, 2022, management believes that it has sufficient sources of liquidity to satisfy its cash needs, including its cash needs in the United States.

During 2022, the Company contributed $10 million to its U.S. defined benefit pension plans and $40 million to its non-U.S. defined benefit pension plans. During 2023, the Company’s cash contribution requirements for its U.S. and its non-U.S. defined benefit pension plans are forecasted to be approximately $10 million and $35 million, respectively. The ultimate amounts to be contributed depend upon, among other things, legal requirements, underlying asset returns, the plan’s funded status, the anticipated tax deductibility of the contribution, local practices, market conditions, interest rates and other factors.

Contractual and Other Obligations

For a description of the Company’s debt and lease obligations, commitments, and litigation and contingencies, refer to Notes 10, 14, 17 and 18 to the Consolidated Financial Statements.

Legal Proceedings

Refer to Note 18 to the Consolidated Financial Statements for information regarding legal proceedings and contingencies, and for a discussion of risks related to legal proceedings and contingencies, refer to “Item 1A. Risk Factors.”

CRITICAL ACCOUNTING ESTIMATES

Management’s discussion and analysis of the Company’s financial condition and results of operations is based upon the Company’s Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. The Company bases these estimates and judgments on historical experience, the current economic environment and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ materially from these estimates and judgments.

The Company believes the following accounting estimates are most critical to an understanding of its financial statements. Estimates are considered to be critical if they meet both of the following criteria: (1) the estimate requires assumptions about material matters that are uncertain at the time the estimate is made, and (2) material changes in the estimate are reasonably likely from period-to-period. For a detailed discussion on the application of these and other accounting estimates, refer to Note 1 to the Consolidated Financial Statements.

Acquired Intangibles—The Company’s business acquisitions, including the Cytiva and Aldevron acquisitions, typically result in the recognition of goodwill, developed technology and other intangible assets, which affect the amount of future period amortization expense and possible impairment charges that the Company may incur. The fair values of acquired intangibles are determined using information available near the acquisition date based on estimates and assumptions that are deemed reasonable by the Company. Significant assumptions include the discount rates and certain assumptions that form the basis of the forecasted results of the acquired business including earnings before interest, taxes, depreciation and amortization (“EBITDA”), revenue, revenue growth rates, royalty rates and technology obsolescence rates. These assumptions are forward looking and could be affected by future economic and market conditions. The Company engages third-party valuation specialists who review the Company’s critical assumptions and calculations of the fair value of acquired intangible assets in connection with significant acquisitions. In connection with acquisitions during the year ended December 31, 2022, the Company recognized aggregate goodwill of $427 million and intangible assets of $218 million. Refer to Notes 1, 2 and 11 to

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the Consolidated Financial Statements for a description of the Company’s policies relating to goodwill, acquired intangibles and acquisitions.

In performing its goodwill impairment testing, the Company estimates the fair value of its reporting units primarily using a market-based approach which relies on current trading multiples of forecasted EBITDA for companies operating in businesses similar to each of the Company’s reporting units to calculate an estimated fair value of each reporting unit. In evaluating the estimates derived by the market-based approach, management makes judgments about the relevance and reliability of the multiples by considering factors unique to its reporting units, including operating results, business plans, economic projections, anticipated future cash flows, and transactions and marketplace data as well as judgments about the comparability of the market proxies selected. There are inherent uncertainties related to these assumptions and management’s judgment in applying them to the analysis of goodwill impairment.

As a result of the Company’s change to its reportable segments in the fourth quarter of 2022, the Company also changed its reporting units. As of December 31, 2022, the Company had eight reporting units for goodwill impairment testing. Reporting units resulting from recent acquisitions generally present the highest risk of impairment. Management believes the impairment risk associated with these reporting units generally decreases as these businesses are integrated into the Company and better positioned for potential future earnings growth. The Company performed the annual goodwill impairments analysis on both the prior five reporting units (that existed before the change in reportable segments) as well as the Company’s eight reporting units (that resulted from the change in reportable segments). The Company’s annual goodwill impairment analysis and the analysis after the change in the Company’s reporting units in 2022 indicated that in all instances, the fair values of the Company’s reporting units exceeded their carrying values and consequently did not result in an impairment charge. The excess of the estimated fair value over carrying value (expressed as a percentage of carrying value for the respective reporting unit) for each of the Company’s eight reporting units as of the testing date ranged from approximately 145% to approximately 565%. In the test of the prior five reporting units, the excess of the estimated fair value over carrying value for each of the previous reporting units as of the testing date also ranged from approximately 145% to approximately 565%. To evaluate the sensitivity of the fair value calculations used in both goodwill impairment tests, the Company applied a hypothetical 10% decrease to the fair values of each reporting unit and compared those hypothetical values to the reporting unit carrying values in both tests. Based on this hypothetical 10% decrease, the excess of the estimated fair value over carrying value (expressed as a percentage of carrying value for the respective reporting unit) for each of the Company’s reporting units ranged from approximately 120% to approximately 500%.

The Company reviews identified intangible assets for impairment whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable. Determining whether an impairment loss occurred for finite-lived intangibles requires a comparison of the carrying amount to the sum of undiscounted cash flows expected to be generated by the asset. These analyses require management to make judgments and estimates about future revenues, expenses, market conditions and discount rates related to these assets. Indefinite-lived intangibles are subject to impairment testing at least annually or more frequently if events or changes in circumstances indicate that potential impairment exists. Determining whether an impairment loss occurred for indefinite-lived intangible assets involves calculating the fair value of the indefinite-lived intangible assets and comparing the fair value to their carrying value. If the fair value is less than the carrying value, the difference is recorded as an impairment loss. Refer to Note 11 to the Consolidated Financial Statements for a description of intangible assets impairment charges recorded during 2022.

If actual results are not consistent with management’s estimates and assumptions, goodwill and other intangible assets may be overstated and a charge would need to be taken against net earnings which would adversely affect the Company’s financial statements.

Contingent Liabilities—As discussed in “Item 3. Legal Proceedings” and Notes 8 and 18 to the Consolidated Financial Statements, the Company is, from time to time, subject to a variety of litigation and similar contingent liabilities incidental to its business (or the business operations of previously owned entities). The Company recognizes a liability for any legal contingency or contract settlement expense that is known or probable of occurrence and reasonably estimable. These assessments require judgments concerning matters such as litigation developments and outcomes, the anticipated outcome of negotiations, the number of future claims, the cost of both pending and future claims and the value of the elements in the outcome. In addition, because most contingencies are resolved over long periods of time, liabilities may change in the future due to various factors, including those discussed in Note 18 to the Consolidated Financial Statements. If the reserves established by the Company with respect to these contingent liabilities are inadequate, the Company would be required to incur an expense equal to the amount of the loss incurred in excess of the reserves, which would adversely affect the Company’s financial statements.

Income Taxes—For a description of the Company’s income tax accounting policies, refer to Notes 1 and 7 to the Consolidated Financial Statements. The Company establishes valuation allowances for its deferred tax assets if it is more likely than not that

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some or all of the deferred tax asset will not be realized. This requires management to make judgments and estimates regarding: (1) the timing and amount of the reversal of taxable temporary differences, (2) expected future taxable income and (3) the impact of tax planning strategies. Future changes to tax rates would also impact the amounts of deferred tax assets and liabilities and could have an adverse impact on the Company’s financial statements.

The Company provides for unrecognized tax benefits when, based upon the technical merits, it is “more likely than not” that an uncertain tax position will not be sustained upon examination. Judgment is required in evaluating tax positions and determining income tax provisions. The Company re-evaluates the technical merits of its tax positions and may recognize an uncertain tax benefit in certain circumstances, including when: (1) a tax audit is completed; (2) applicable tax laws change, including a tax case ruling or legislative guidance; or (3) the applicable statute of limitations expires.

In addition, certain of the Company’s tax returns are currently under review by tax authorities including in Denmark and the United States (refer to “—Results of Operations—Income Taxes” and Note 7 to the Consolidated Financial Statements). Management believes the positions taken in these returns are in accordance with the relevant tax laws. However, the outcome of these audits is uncertain and could result in the Company being required to record charges for prior year tax obligations which could have a material adverse impact to the Company’s financial statements, including its effective tax rate.

An increase of 1.0% in the Company’s 2022 nominal tax rate would have resulted in an additional income tax provision for continuing operations for the year ended December 31, 2022 of $83 million.

Valuation of Investments in Equity Securities—For a description of the Company’s investments in equity securities and partnerships refer to Notes 1, 9 and 12 to the Consolidated Financial Statements. The Company invests in publicly-traded securities, non-marketable securities of early-stage companies and equity method investments, including partnerships that invest primarily in early-stage companies.

Investments in early-stage companies have significant risks, including uncertainty regarding the investee company’s ability to successfully develop new technologies and services, bring these new technologies and services to market and gain market acceptance, maintain adequate capitalization and access to cash or other forms of liquidity, and retain critical management personnel. Refer to “Item 1A. Risk Factors” for a further discussion of the risks related to investing in early-stage companies.

The Company’s investments in publicly traded securities are measured at fair value based on quotes in active markets. For investments in non-marketable equity securities where the Company does not have influence over the investee, the Company has elected the measurement alternative and records these investments at cost and adjusts the carrying value for impairments and observable price changes with a same or similar security from the same issuer adjusted to reflect the specific rights and preferences of the securities, if applicable. Valuations of non-marketable equity securities are complex and require judgment due to the absence of market prices, lack of liquidity and the risks inherent in early-stage companies. The uncertainty in the process of valuing securities for which a ready market does not exist may cause our estimated values of these securities to differ significantly from the values that would have been derived had a ready market for the securities existed, and those differences could be material.

The Company accounts for its investments in the partnerships using the equity method. Accordingly, the investments are initially recorded at cost and adjusted each period for the Company’s share of the partnership’s income or loss and distributions received. The partnerships’ investments are recorded by the partnerships on an estimated fair value basis and pose the same risks and require the same valuation judgments discussed above. As a result, changes in the value of investments in the partnership will have a direct impact on the Company’s earnings. Impairment losses are recognized to reduce the investment’s carrying value to its fair value if there is a decline in fair value below carrying value that is considered to be other-than-temporary. To determine whether there is an other-than-temporary impairment, the Company uses qualitative and quantitative valuation methods.

Realized and unrealized gains and losses for these investments in equity securities and partnerships are recorded in other income (expense), net, in the Consolidated Statements of Earnings. A 10% decrease in the carrying value of the Company’s investments in equity securities and partnerships as of December 31, 2022 would result in a loss of approximately $180 million.

NEW ACCOUNTING STANDARDS

For a discussion of the new accounting standards impacting the Company, refer to Note 1 to the Consolidated Financial Statements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information required by this item is included under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Report of Management on Danaher Corporation’s Internal Control Over Financial Reporting

The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Securities Exchange Act of 1934.

The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2022. In making this assessment, the Company’s management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in “Internal Control-Integrated Framework” (2013 framework). Based on this assessment, management concluded that, as of December 31, 2022, the Company’s internal control over financial reporting is effective.

The Company’s independent registered public accounting firm has issued an audit report on the effectiveness of the Company’s internal control over financial reporting. This report dated February 22, 2023 appears on page 60 of this Form 10-K.

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Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Danaher Corporation

Opinion on Internal Control over Financial Reporting

We have audited Danaher Corporation and subsidiaries’ internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Danaher Corporation and subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2022 and 2021, the related consolidated statements of earnings, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2022, and the related notes and financial statement schedule listed in the Index at Item 15(a) and our report dated February 22, 2023 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Report of Management on Danaher Corporation’s Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

Tysons, Virginia

February 22, 2023

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Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Danaher Corporation

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Danaher Corporation and subsidiaries (the Company) as of December 31, 2022 and 2021, the related consolidated statements of earnings, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2022, and the related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 22, 2023 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

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Uncertain Tax Positions

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2002.

Tysons, Virginia

February 22, 2023

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DANAHER CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

($ in millions, except per share amount)

As of December 31

ASSETS

Current assets:

Prepaid expenses and other current assets 1,860 1,664

Property, plant and equipment, net 3,956 3,790

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Notes payable and current portion of long-term debt $ 591 $ 8

Accrued expenses and other liabilities 5,502 5,563

Stockholders’ equity:

Accumulated other comprehensive income (loss) (2,872) (1,027)

Noncontrolling interests 8 10

Total liabilities and stockholders’ equity $ 84,350 $ 83,184

See the accompanying Notes to the Consolidated Financial Statements.

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DANAHER CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

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

Year Ended December 31

Operating costs:

Selling, general and administrative expenses (8,516) (8,198) (6,896)

Other operating expenses — (547) —

Nonoperating income (expense):

Loss on early extinguishment of borrowings — (96) (26)

Earnings from continuing operations before income taxes 8,292 7,598 4,495

Earnings from discontinued operations, net of income taxes — 86 —

Mandatory convertible preferred stock dividends (106) (164) (136)

Net earnings attributable to common stockholders $ 7,103 $ 6,269 $ 3,510

Net earnings per common share from continuing operations:

Net earnings per common share from discontinued operations:

Basic $ — $ 0.12 $ —

Diluted $ — $ 0.12 $ —

Net earnings per common share:

Average common stock and common equivalent shares outstanding:

* Net earnings per common share amount does not add due to rounding.

See the accompanying Notes to the Consolidated Financial Statements.

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DANAHER CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

($ in millions)

Year Ended December 31

Other comprehensive income (loss), net of income taxes:

Foreign currency translation adjustments (2,105) (1,284) 2,919

Pension and postretirement plan benefit adjustments 209 378 (147)

Cash flow hedge adjustments 51 247 (72)

Total other comprehensive income (loss), net of income taxes (1,845) (659) 2,700

See the accompanying Notes to the Consolidated Financial Statements.

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DANAHER CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

($ in millions)

Year Ended December 31

Preferred stock:

Issuance of Mandatory Convertible Preferred Stock — — 1,668

Conversion of Mandatory Convertible Preferred Stock to common stock (1,600) — —

Common stock:

Balance, beginning of period $ 9 $ 9 $ 8

Common stock-based award activity — — 1

Balance, end of period $ 9 $ 9 $ 9

Additional paid-in capital:

Common stock issued in connection with acquisitions — 23 —

Common stock issued in connection with LYONs’ conversions — 34 53

Issuance of common stock — — 1,729

Acquisition of noncontrolling interests (14) — —

Retained earnings:

Adoption of accounting standards — — (8)

Common stock dividends declared (725) (601) (509)

Mandatory Convertible Preferred Stock dividends declared (106) (164) (136)

Accumulated other comprehensive income (loss):

Balance, beginning of period $ (1,027) $ (368) $ (3,068)

Noncontrolling interests:

Balance, beginning of period $ 10 $ 11 $ 11

Change in noncontrolling interests (2) (1) —

Balance, end of period $ 8 $ 10 $ 11

See the accompanying Notes to the Consolidated Financial Statements.

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DANAHER CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

($ in millions)

Year Ended December 31

Cash flows from operating activities:

Less: earnings from discontinued operations, net of income taxes — (86) —

Noncash items:

Amortization of acquisition-related inventory fair value step-up — 59 457

Contract settlement expense — 542 —

Pretax loss on early extinguishment of borrowings — 96 26

Change in deferred income taxes (559) (229) 518

Change in trade accounts receivable, net (477) (611) (264)

Change in trade accounts payable 5 549 227

Change in prepaid expenses and other assets (78) (4) 102

Change in accrued expenses and other liabilities 76 139 119

Total operating cash provided by continuing operations 8,519 8,358 6,215

Total operating cash used in discontinued operations — — (7)

Cash flows from investing activities:

Payments for additions to property, plant and equipment (1,152) (1,294) (791)

Proceeds from sales of property, plant and equipment 9 13 2

Payments for purchases of investments (523) (934) (342)

Proceeds from sales of investments 18 126 13

Proceeds from sale of product lines — 26 826

All other investing activities 51 37 24

Cash flows from financing activities:

Proceeds from borrowings (maturities longer than 90 days) — 984 8,670

Repayments of borrowings (maturities longer than 90 days) (965) (1,186) (5,933)

Make-whole premiums to redeem borrowings prior to maturity — (96) (26)

All other financing activities (95) (16) (3)

Effect of exchange rate changes on cash and equivalents (306) (115) 148

Ending balance of cash and equivalents $ 5,995 $ 2,586 $ 6,035

See the accompanying Notes to the Consolidated Financial Statements.

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DANAHER CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business—Danaher Corporation (“Danaher” or the “Company”) designs, manufactures and markets professional, medical, industrial and commercial products and services, which are typically characterized by strong brand names, innovative technology and major market positions. As of December 31, 2022, the Company operates in four business segments:

•The Biotechnology segment includes the bioprocessing and discovery and medical businesses and offers a broad range of tools, consumables and services that are primarily used by customers to advance and accelerate the research, development, manufacture and delivery of biological medicines. The biotherapeutics that the Company’s solutions support range from replacement therapies such as insulin, vaccines, recombinant proteins and other biologic drugs, to novel cell, gene, mRNA and other nucleic acid therapies.

•The Life Sciences segment offers a broad range of instruments and consumables 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.

•The Diagnostics segment offers clinical instruments, reagents, consumables, software and services that hospitals, physicians’ offices, reference laboratories and other critical care settings use to diagnose disease and make treatment decisions.

•The Environmental & Applied Solutions segment offers products and services that help protect precious resources and keep global food and water supplies safe. The Company’s water quality business provides instrumentation, consumables, software, services and disinfection systems to help analyze, treat and manage the quality of ultra-pure, potable, industrial, waste, ground, source and ocean water in residential, commercial, municipal, industrial and natural resource applications. The Company’s product identification business provides instruments, software, services and consumables for various color and appearance management, packaging design and quality management, packaging converting, printing, marking, coding and traceability applications for consumer, pharmaceutical and industrial products.

Refer to Notes 2 and 3 for a discussion of significant acquisitions, discontinued operations and other dispositions.

Accounting Principles—The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The Consolidated Financial Statements include the accounts of the Company and its subsidiaries. All intercompany balances and transactions have been eliminated upon consolidation. The Consolidated Financial Statements also reflect the impact of noncontrolling interests. Noncontrolling interests do not have a significant impact on the Company’s consolidated results of continuing operations, therefore earnings attributable to noncontrolling interests for continuing operations are not presented separately in the Company’s Consolidated Statements of Earnings. Earnings attributable to noncontrolling interests have been reflected in selling, general and administrative expenses and were insignificant in all periods presented. Reclassifications of certain prior year amounts have been made to conform to the current year presentation.

Use of Estimates—The preparation of these financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. The Company bases these estimates on historical experience, the current economic environment and on various other assumptions that are believed to be reasonable under the circumstances. However, uncertainties associated with these estimates exist and actual results may differ materially from these estimates.

Cash and Equivalents—The Company considers all highly liquid investments with a maturity of three months or less at the date of purchase to be cash equivalents.

Accounts Receivable and Allowances for Doubtful Accounts—All trade accounts, contract and finance receivables are reported on the accompanying Consolidated Balance Sheets adjusted for any write-offs and net of allowances for doubtful accounts. The allowances for doubtful accounts represent management’s best estimate of the expected future credit losses from the Company’s trade accounts, contract and finance receivable portfolios. Determination of the allowances requires management to exercise judgment about the timing, frequency and severity of credit losses that could materially affect the provision for credit losses and, therefore, net earnings. The Company regularly performs detailed reviews of its portfolios to determine if an

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impairment has occurred and evaluates the collectability of receivables based on a combination of various financial and qualitative factors that may affect customers’ ability to pay, including customers’ financial condition, collateral, debt-servicing ability, past payment experience and credit bureau information. In circumstances where the Company is aware of a specific customer’s inability to meet its financial obligations, a specific reserve is recorded against amounts due to reduce the recognized receivable to the amount reasonably expected to be collected. Additions to the allowances for doubtful accounts are charged to current period earnings, amounts determined to be uncollectible are charged directly against the allowances, while amounts recovered on previously written-off accounts increase the allowances. If the financial condition of the Company’s customers were to deteriorate, resulting in an impairment of their ability to make payments, additional reserves would be required. The Company does not believe that trade accounts receivable represents significant concentrations of credit risk because of the diversified portfolio of individual customers and geographical areas. On January 1, 2020, the Company adopted Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments—Credit Losses(Topic 326): Measurement of Credit Losses on Financial Instruments, using the modified retrospective transition method and recorded a net increase to the allowance for doubtful accounts of $10 million due to the cumulative impact of adoption. The Company’s allowance for doubtful accounts as of December 31, 2022 reflects the Company’s best estimate of the expected future losses for its accounts receivables; however, these estimates may change and future actual losses may differ from the Company’s estimates. The Company will continue to monitor economic conditions and will revise the estimates of the expected future losses for accounts receivable as necessary. The Company recorded $29 million, $31 million and $31 million of expense associated with doubtful accounts for the years ended December 31, 2022, 2021 and 2020, respectively.

Included in the Company’s trade accounts receivable and other long-term assets as of December 31, 2022 and 2021 are $254 million and $247 million of net aggregate financing receivables, respectively. All financing receivables are evaluated for impairment based on individual customer credit profiles.

Inventories—Inventories include the costs of material, labor and overhead. Inventories are stated at the lower of cost and net realizable value primarily using the first-in, first-out method.

The classes of inventory as of December 31 are summarized as follows ($ in millions):

Prepaid Expenses and Other Current Assets—Prepaid expenses and other current assets primarily result from advance payments to vendors for good and services and are capitalized until the related goods are received or services are performed and advanced payments to tax authorities. Included in the Company’s prepaid expenses and other current assets as of December 31, 2022 and 2021 are prepaid expenses of $802 million and $770 million, respectively, and taxes receivable for income and other taxes of $962 million and $812 million, respectively.

Property, Plant and Equipment—Property, plant and equipment are carried at cost. The provision for depreciation has been computed principally by the straight-line method based on the estimated useful lives of the depreciable assets as follows:

Category Useful Life

Buildings 30 years

Machinery and equipment 3 – 10 years

Customer-leased instruments 5 – 7 years

Estimated useful lives are periodically reviewed and, when appropriate, changes to estimates are made prospectively.

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The classes of property, plant and equipment as of December 31 are summarized as follows ($ in millions):

Land and improvements $ 216 $ 203

Gross property, plant and equipment 7,849 7,255

Less: accumulated depreciation (3,893) (3,465)

Property, plant and equipment, net $ 3,956 $ 3,790

Investments—Investments over which the Company has a significant influence but not a controlling interest, are accounted for using the equity method of accounting which requires the Company to record its initial investment at cost and adjust the balance each period for the Company’s share of the investee’s income or loss and dividends paid. The Company also invests in start-up companies where the Company has neither control of nor significant influence over the investee. The Company measures these non-marketable equity securities at fair value and recognizes changes in fair value in net earnings. For securities without readily available fair values, the Company has elected the measurement alternative to record these investments at cost and to adjust for impairments and observable price changes with a same or similar security from the same issuer within net earnings (the “Fair Value Alternative”). Additionally, the Company is a limited partner in partnerships that invest in start-up companies. While the partnerships record these investments at fair value, the Company’s investment in the partnerships is accounted for under the equity method of accounting. The Company made minority investments in equity method investments and non-marketable equity securities totaling $523 million, $934 million and $342 million in 2022, 2021 and 2020, respectively, including investments in partnerships of $283 million, $662 million and $172 million in 2022, 2021 and 2020, respectively. The Company recorded net realized and unrealized gains and losses related to changes in the fair value of these investments, as well as an impairment to an equity-method investment in other income (expense), net, in the Consolidated Statements of Earnings. Refer to Notes 9 and 12 for additional information about the Company’s investments.

Other Assets—Other assets principally include noncurrent financing receivables, noncurrent deferred tax assets and other investments.

Fair Value of Financial Instruments—The Company’s financial instruments consist primarily of cash and cash equivalents, trade accounts receivable, investments in equity securities, available-for-sale debt securities and cross-currency swaps, obligations under trade accounts payable and short and long-term debt. Due to their short-term nature, the carrying values for cash and cash equivalents, trade accounts receivable and trade accounts payable approximate fair value. Refer to Note 12 for the fair values of the Company’s investments in equity securities, available-for-sale debt securities and cross-currency swaps and other obligations.

Goodwill and Other Intangible Assets—Goodwill and other intangible assets result from the Company’s acquisition of existing businesses. In accordance with accounting standards related to business combinations, goodwill is not amortized; however, certain finite-lived identifiable intangible assets, primarily customer relationships and acquired technology, are amortized over their estimated useful lives. Intangible assets with indefinite lives are not amortized. In-process research and development (“IPR&D”) is initially capitalized at fair value and when the IPR&D project is complete, the asset is considered a finite-lived intangible asset and amortized over its estimated useful life. If an IPR&D project is abandoned, an impairment loss equal to the value of the intangible asset is recorded in the period of abandonment. The Company reviews identified intangible assets and goodwill for impairment whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable. The Company also tests intangible assets with indefinite lives and goodwill for impairment at least annually. Refer to Notes 2 and 11 for additional information about the Company’s goodwill and other intangible assets.

Revenue Recognition—The Company derives revenues primarily from the sale of Biotechnology, Life Sciences, Diagnostics and Environmental & Applied Solutions products and services. Revenue is recognized when control of the promised products or services is transferred to the Company’s customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those products or services (the transaction price). A performance obligation is a promise in a contract to transfer a distinct product or service to a customer and is the unit of account under Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers. For equipment and consumables sold by the Company, control transfers to the customer at a point in time. To indicate the transfer of control, the Company must have a present right to payment, legal title must have passed to the customer, the customer must have the significant risks and rewards of ownership, and where acceptance is not a formality, the customer must have accepted the product or service. The Company’s principal terms of sale are Free On Board (“FOB”) Shipping Point, or equivalent, and, as such, the Company primarily transfers control

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and records revenue for product sales upon shipment. Sales arrangements with delivery terms that are not FOB Shipping Point are not recognized upon shipment and the transfer of control for revenue recognition is evaluated based on the associated shipping terms and customer obligations. If a performance obligation to the customer with respect to a sales transaction remains to be fulfilled following shipment (typically installation or acceptance by the customer), revenue recognition for that performance obligation is deferred until such commitments have been fulfilled. Returns for products sold are estimated and recorded as a reduction of revenue at the time of sale. Customer allowances and rebates, consisting primarily of volume discounts and other short-term incentive programs, are recorded as a reduction of revenue at the time of sale because these allowances reflect a reduction in the transaction price. Product returns, customer allowances and rebates are estimated based on historical experience and known trends. For extended warranty and service, control transfers to the customer over the term of the arrangement. Revenue for extended warranty and service is recognized based upon the period of time elapsed under the arrangement. Revenue for other long-term contracts is generally recognized based upon the cost-to-cost measure of progress, provided that the Company meets the criteria associated with transferring control of the good or service over time.

Certain of the Company’s revenues relate to operating-type lease (“OTL”) arrangements. Leases are outside the scope of ASC 606 and are therefore accounted for in accordance with ASC 842, Leases. Equipment lease revenue for OTL agreements is recognized on a straight-line basis over the life of the lease, and the cost of customer-leased equipment is recorded within property, plant and equipment in the accompanying Consolidated Balance Sheets and depreciated over the equipment’s estimated useful life. Depreciation expense associated with the leased equipment under OTL arrangements is reflected in cost of sales in the accompanying Consolidated Statements of Earnings. The OTLs are generally not cancellable until after an initial term and may or may not require the customer to purchase a minimum number of consumables or tests throughout the contract term. The Company also enters into sales-type lease (“STL”) arrangements with customers which result in earlier recognition of equipment lease revenue as compared to an OTL.

For a contract with multiple performance obligations, the Company allocates the contract’s transaction price to each performance obligation on a relative standalone selling price basis using the Company’s best estimate of the standalone selling price of each distinct product or service in the contract. The primary method used to estimate standalone selling price is the price observed in standalone sales to customers. Allocation of the transaction price is determined at the contracts’ inception.

Shipping and Handling—Shipping and handling costs are included as a component of cost of sales. Revenue derived from shipping and handling costs billed to customers is included in sales.

Advertising—Advertising costs are expensed as incurred.

Research and Development—The Company conducts research and development activities for the purpose of developing new products, enhancing the functionality, effectiveness, ease of use and reliability of the Company’s existing products and expanding the applications for which uses of the Company’s products are appropriate. Research and development costs are expensed as incurred.

Income Taxes—The Company’s income tax expense represents the tax liability for the current year, the tax benefit or expense for the net change in deferred tax liabilities and assets during the year, as well as reserves for unrecognized tax benefits and return to provision adjustments. Deferred tax liabilities and assets are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted rates expected to be in effect during the year in which the differences reverse. Deferred tax assets generally represent items that can be used as a tax deduction or credit in the Company’s tax return in future years for which the tax benefit has already been reflected on the Company’s Consolidated Statements of Earnings. The Company establishes valuation allowances for its deferred tax assets if it is more likely than not that some or all of the deferred tax asset will not be realized. Deferred tax liabilities generally represent items that have already been taken as a deduction on the Company’s tax return but have not yet been recognized as an expense in the Company’s Consolidated Statements of Earnings. The effect on deferred tax assets and liabilities due to a change in tax rates is recognized in income tax expense in the period that includes the enactment date. The Company provides for unrecognized tax benefits when, based upon the technical merits, it is “more likely than not” that an uncertain tax position will not be sustained upon examination. Judgment is required in evaluating tax positions and determining income tax provisions. The Company re-evaluates the technical merits of its tax positions and may recognize an uncertain tax benefit in certain circumstances, including when: (1) a tax audit is completed; (2) applicable tax laws change, including a tax case ruling or legislative guidance; or (3) the applicable statute of limitations expires. The Company recognizes potential accrued interest and penalties associated with unrecognized tax positions in income tax expense. Refer to Note 7 for additional information.

Productivity Improvement and Restructuring—The Company periodically initiates productivity improvement and restructuring activities to appropriately position the Company’s cost base relative to prevailing economic conditions and associated customer demand as well as in connection with certain acquisitions. Costs associated with productivity improvement and restructuring actions can include one-time termination benefits and related charges in addition to facility closure, contract termination and

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other related activities. The Company records the cost of the productivity improvement and restructuring activities when the associated liability is incurred.

Foreign Currency Translation—Exchange rate adjustments resulting from foreign currency transactions are recognized in net earnings, whereas effects resulting from the translation of financial statements are reflected as a component of accumulated other comprehensive income (loss) within stockholders’ equity. Assets and liabilities of subsidiaries operating outside the United States with a functional currency other than U.S. dollars are translated into U.S. dollars using year end exchange rates and income statement accounts are translated at weighted average rates. Net foreign currency transaction gains or losses were not material in any of the years presented. As discussed below, the Company uses its foreign currency-denominated debt and cross-currency swap arrangements whereby existing U.S. dollar-denominated borrowings are effectively converted to foreign currency borrowings to partially hedge its net investments in foreign operations against adverse movements in exchange rates.

Derivative Financial Instruments—The Company is neither a dealer nor a trader in derivative instruments. The Company has generally accepted the exposure to transactional exchange rate movements without using derivative instruments to manage this risk, although the Company from time to time partially hedges its net investments in foreign operations against adverse movements in exchange rates through foreign currency-denominated debt and cross-currency swaps. The Company periodically enters into foreign currency forward contracts to mitigate a portion of its foreign currency exchange risk and forward starting swaps to mitigate interest rate risk related to the Company’s debt. The Company also uses cross-currency swap derivative contracts to hedge long-term debt issuances in a foreign currency other than the functional currency of the borrower. When utilized, the derivative instruments are recorded on the Consolidated Balance Sheets as either an asset or liability measured at fair value. To the extent the derivative instrument qualifies as an effective hedge, changes in fair value are recognized in accumulated other comprehensive income (loss) in stockholders’ equity. Changes in the value of the foreign currency denominated debt and cross-currency swaps designated as hedges of the Company’s net investment in foreign operations based on spot rates are recognized in accumulated other comprehensive income (loss) in stockholders’ equity and offset changes in the value of the Company’s foreign currency denominated operations. Refer to Note 15 for additional information.

Accumulated Other Comprehensive Income (Loss)—Accumulated other comprehensive income (loss) refers to certain gains and losses that under U.S. GAAP are included in comprehensive income (loss) but are excluded from net earnings as these amounts are initially recorded as an adjustment to stockholders’ equity. Foreign currency translation adjustments are generally not adjusted for income taxes as they relate to indefinite investments in non-U.S. subsidiaries. Cash flow hedge adjustments reflect the gains or losses on the derivative contract designated as the hedging instrument. Pension and postretirement plan benefit adjustments relate to unrecognized prior service credits and actuarial losses. Refer to Notes 15, 16 and 19 for additional information.

Accounting for Stock-Based Compensation—The Company accounts for stock-based compensation by measuring the cost of employee services received in exchange for all equity awards granted, including stock options, restricted stock units (“RSUs”) and performance stock units (“PSUs”), based on the fair value of the award as of the grant date. Equity-based compensation expense is recognized net of an estimated forfeiture rate on a straight-line basis over the requisite service period of the award, except that in the case of RSUs, compensation expense is recognized using an accelerated attribution method. Refer to Note 19 for additional information on the stock-based compensation plans in which certain employees of the Company participate.

Pension and Postretirement Benefit Plans—The Company measures its pension and postretirement plans’ assets and its obligations that determine the respective plan’s funded status as of the end of the Company’s fiscal year, and recognizes an asset for a plan’s overfunded status or a liability for a plan’s underfunded status in its balance sheet. Changes in the funded status of the plans are recognized in the year in which the changes occur and reported in comprehensive income (loss). Refer to Note 16 for additional information on the Company’s pension and postretirement plans including a discussion of the actuarial assumptions, the Company’s policy for recognizing the associated gains and losses and the method used to estimate service and interest cost components.

Accounting Standards Recently Adopted—In October 2021, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2021-08, Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The ASU requires companies to apply the definition of a performance obligation under ASC 606 to recognize and measure contract assets and contract liabilities (i.e., deferred revenue) relating to contracts with customers acquired in a business combination. Prior to the adoption of this ASU, an acquirer generally recognized assets acquired and liabilities assumed in a business combination, including contract assets and contract liabilities arising from revenue contracts with customers, at fair value on the acquisition date. The ASU results in the acquirer recording acquired contract assets and liabilities on the same basis that would have been recorded by the acquiree before the acquisition under ASC 606. The ASU is effective for fiscal years beginning after December 15, 2022, with early adoption permitted. The Company early adopted the ASU effective January 1, 2021 and did not apply the standard to immaterial transactions that occurred in 2021. The impact of the adoption of the ASU was not significant.

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In August 2020, the FASB issued ASU No. 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The ASU includes amendments to the guidance on convertible instruments and the derivative scope exception for contracts in an entity’s own equity and simplifies the accounting for convertible instruments which include beneficial conversion features or cash conversion features by removing certain separation models in Subtopic 470-20. Additionally, the ASU requires entities to use the “if-converted” method when calculating diluted earnings per common share for convertible instruments. On January 1, 2022, the Company adopted the ASU and the ASU did not have a significant impact on the Company’s financial statements.