Item 2. 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 Corporation’s (“Danaher,” the “Company,” “we,” “us” or “our”) 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:

• Information Relating to Forward-Looking Statements

• Overview

• Results of Operations

• Liquidity and Capital Resources

• Critical Accounting Estimates

You should read this discussion along with the Company’s MD&A and audited financial statements and Notes thereto as of and for the year ended December 31, 2021, included in the Company’s 2021 Annual Report and the Company’s Consolidated Condensed Financial Statements and related Notes as of and for the three-month period ended April 1, 2022 included in this Quarterly Report on Form 10-Q (“Report”).

INFORMATION RELATING TO FORWARD-LOOKING STATEMENTS

Certain statements included or incorporated by reference in this Report, in other documents we file with or furnish to the Securities and Exchange Commission, in our press releases, webcasts, conference calls, materials delivered to shareholders and other communications, are “forward-looking statements” within the meaning of the U.S. federal securities laws. All statements other than historical factual information are forward-looking statements, including without limitation statements regarding: projections of revenue, expenses, profit, profit margins, pricing, tax rates, tax provisions, cash flows, pension and benefit obligations and funding requirements, our liquidity position or other projected financial measures; management’s plans and strategies for future operations, including statements relating to anticipated operating performance, cost reductions, restructuring activities, new product and service developments, competitive strengths or market position, acquisitions and the integration thereof, divestitures, spin-offs, split-offs or other distributions, strategic opportunities, securities offerings, stock repurchases, dividends and executive compensation; growth, declines and other trends in markets we sell into; new or modified laws, regulations and accounting pronouncements; future regulatory approvals and the timing and conditionality thereof; outstanding claims, legal proceedings, tax audits and assessments and other contingent liabilities; future foreign currency exchange rates and fluctuations in those rates; the potential or anticipated direct or indirect impact of COVID-19 on our business, results of operations and/or financial condition; general economic and capital markets conditions; the anticipated timing of any of the foregoing; assumptions underlying any of the foregoing; and any other statements that address events or developments that Danaher intends or believes will or may occur in the future. Terminology such as “believe,” “anticipate,” “should,” “could,” “intend,” “will,” “plan,” “expect,” “estimate,” “project,” “target,” “may,” “possible,” “potential,” “forecast” and “positioned” and similar references to future periods are intended to identify forward-looking statements, although not all forward-looking statements are accompanied by such words.

Forward-looking statements are based on assumptions and assessments made by our management in light of their experience and perceptions of historical trends, current conditions, expected future developments and other factors. Forward-looking statements are not guarantees of future performance and actual results may differ materially from the results, developments and business decisions contemplated by our forward-looking statements. Accordingly, you should not place undue reliance on any

such forward-looking statements. Important factors that in some cases have affected us in the past and that in the future could cause actual results to differ materially from those envisaged in the forward-looking statements include the following:

Business and Strategic Risks

• The COVID-19 pandemic has adversely impacted, and continues to pose risks to, certain elements of our business and our financial statements, the nature and extent of which are highly uncertain and unpredictable.

• Conditions in the global economy, the particular markets we serve and the financial markets can adversely affect our business and financial statements.

• We face intense competition and if we are unable to compete effectively, we may experience decreased demand and market share. Even if we compete effectively, we may be required to reduce the prices we charge.

• Our growth depends on the timely development and commercialization, and customer acceptance, of new and enhanced products and services based on technological innovation. Our growth can also suffer if the markets into which we sell our products and services decline, do not grow as anticipated or experience cyclicality.

• The health care industry and related industries that we serve have undergone, and are in the process of undergoing, significant changes in an effort to reduce (and increase the predictability of) costs, which can adversely affect our business and financial statements.

• Non-U.S. economic, political, legal, compliance, social and business factors (including the United Kingdom’s departure from the European Union (“EU”)) can negatively affect our business and financial statements.

• Collaborative partners and other third-parties we rely on for development, supply and marketing of certain products, potential products and technologies could fail to perform sufficiently.

Acquisitions, Divestitures and Investment Risks

• Any inability to consummate acquisitions at our historical rate and appropriate prices, and to make appropriate investments that support our long-term strategy, could negatively impact our business. Our acquisition of businesses, investments, joint ventures and other strategic relationships could also negatively impact our business and financial statements and our indemnification rights may not fully protect us from liabilities related thereto.

• Divestitures or other dispositions could negatively impact our business, and contingent liabilities from businesses that we or our predecessors have disposed could adversely affect our business and financial statements. For example, we could incur significant liability if any of the split-off or spin-off transactions we have consummated is determined to be a taxable transaction or otherwise pursuant to our indemnification obligations with respect to such transactions.

Operational Risks

• Significant disruptions in, or breaches in security of, our information technology systems or data; other losses or disruptions due to catastrophe; and labor disputes can all adversely affect our business and financial statements.

• Defects and unanticipated use or inadequate disclosure with respect to our products or services, or allegations thereof, can adversely affect our business and financial statements.

• If we encounter problems manufacturing products, fail to adjust our manufacturing capacity or related purchases to reflect changing conditions, or suffer disruptions due to sole or limited sources of supply or due to limited availability of labor, our business and financial statements may suffer. Adverse changes with respect to key distributors and other channel partners can also adversely affect our business and financial statements.

• Climate change, or legal or regulatory measures to address climate change, may negatively affect us.

• Our success depends on our ability to recruit, retain and motivate talented employees representing diverse backgrounds, experiences and skill sets.

• Our restructuring actions can have long-term adverse effects on our business and financial statements.

Intellectual Property Risks

• Any inability to adequately protect or avoid third-party infringement of our intellectual property, and third-party claims we are infringing intellectual property rights, can adversely affect our business and financial statements.

Financial and Tax Risks

• Our outstanding debt has increased significantly as a result of acquisitions and we may incur additional debt in the future. Our existing and future indebtedness may limit our operations and our use of our cash flow and negatively impact our credit ratings; and any failure to comply with the covenants that apply to our indebtedness could adversely affect our business and financial statements.

• Our business and financial statements can be adversely affected by foreign currency exchange rates, changes in our tax rates (including as a result of changes in tax laws) or income tax liabilities/assessments, the outcome of tax audits, financial market risks related to our defined benefit pension plans, recognition of impairment charges for our goodwill or other intangible assets and fluctuations in the cost and availability of commodities.

Legal, Regulatory, Compliance and Reputational Risks

• Our businesses are subject to extensive regulation (including applicable to the healthcare industry). Failure to comply with those regulations (including by our employees, agents or business partners) or significant developments or changes in U.S. laws or policies can adversely affect our business and financial statements. Changes in governmental regulations can also reduce demand for our offerings or increase our expenses.

• With respect to the regulated medical devices we offer, certain modifications to such products may require new regulatory clearance (such as 510(k) clearances) or other marketing authorizations and may require us to recall or cease marketing such products; off-label marketing of such products could result in penalties; and clinical trials we conduct with respect to such products or potential products may have results that are unexpected or are perceived unfavorably by the market, all of which could adversely affect our business and financial statements.

• We are subject to or otherwise responsible for a variety of litigation and other legal and regulatory proceedings in the course of our business that can adversely affect our business and financial statements.

• Our operations, products and services also expose us to the risk of environmental, health and safety liabilities, costs and violations that could adversely affect our business and financial statements.

• Our By-law exclusive forum provisions could limit our stockholders’ ability to choose their preferred judicial forum for disputes with us or our directors, officers or employees.

See Part I—Item 1A of the Company’s 2021 Annual Report and Part II-Item 1A of this report for further discussion regarding reasons that actual results may differ materially from the results, developments and business decisions contemplated by our forward-looking statements. Forward-looking statements speak only as of the date of the report, document, press release, webcast, call, materials or other communication in which they are made. Except to the extent required by applicable law, we do not assume any obligation to update or revise any forward-looking statement, whether as a result of new information, future events and developments or otherwise.

OVERVIEW

General

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) to be responsive to the Company’s customers throughout the world and improve the efficiency of the Company’s operations.

Business Performance and Outlook

During the first quarter of 2022, the Company’s overall revenues increased 12.0% compared to the comparable period of 2021. Core sales increased 12.0% in the first quarter of 2022 compared to the prior period and acquisitions contributed 2.0% to the increase in revenues. The impact of currency translation decreased reported sales 2.0%. For the definition of “core sales” refer to “—Results of Operations” below.

Geographically, the Company saw increases in core sales in both developed markets and the high-growth markets. Developed markets grew more than 15% during the first quarter of 2022 compared to the first quarter of 2021, driven primarily by North America and Western Europe. High-growth markets increased at a low-single-digit rate during the first quarter of 2022 as compared to the comparable period of 2021, as growth in India and other high-growth markets offset lower demand in China as a result of a difficult prior year comparison due to the completion of a major project in China in 2021 as well as the impact of COVID-related shutdowns in China that accelerated in late March. High-growth markets represented approximately 28% of the Company’s total sales in the first quarter of 2022. For additional information regarding the Company’s sales by geographical region during the three-month periods ended April 1, 2022 and April 2, 2021, refer to Note 4 to the accompanying Consolidated Condensed Financial Statements.

The Company’s net earnings for the three-month period ended April 1, 2022 totaled $1,725 million, compared to $1,702 million for the three-month period ended April 2, 2021. Net earnings attributable to common stockholders for the three-month period ended April 1, 2022 totaled $1,684 million or $2.31 per diluted common share, compared to $1,661 million or $2.29 per diluted common share for the three-month period ended April 2, 2021. The increase in net earnings and diluted net earnings per common share for the three-month period ended April 1, 2022 compared to the three-month period ended April 2, 2021 was primarily driven by increased core sales, partially offset by the impact of foreign currency exchange rates, Russia-related charges described below and higher material, transportation and labor costs.

Russia-Ukraine Conflict

In response to the ongoing conflict in Ukraine, in addition to suspending sales prohibited by sanctions, the Company has suspended the shipment of products to Russia with the exception of products for the purposes of diagnosing and treating patients and producing vaccines and therapeutics. The Company has recorded a pretax charge of $43 million in the first quarter of 2022, primarily related to the impairment of accounts receivable and inventory as well as accruals for contractual obligations related to Russian operations. The Company will continue monitoring the social, political, regulatory and economic environment in Ukraine and Russia, and will consider further actions as appropriate.

The COVID-19 Pandemic

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 is also deploying 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 conditions related to the pandemic generally have improved in 2022 compared to 2021, conditions vary significantly by geography. Late in the first quarter of 2022, an increase of COVID-19 related cases in certain parts of China resulted in the re-imposition of widespread shut-downs and restrictions, with a modest impact on portions of the Company’s operations in China. These stay-at-home and quarantine mandates have also impacted patient volumes for the Company’s Diagnostics business and have continued with a more significant impact in the second quarter of 2022 through the date of this Report. The Company anticipates the situation will ease in the coming weeks with an eventual return to normalized activity levels by the end of June. The extent to which these restrictions continue will depend upon the prevalence of COVID-19 in the impacted regions of China. Due to the speed with which the COVID-19 situation continues to evolve, 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 such as Omicron BA.2 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 of ongoing demand for products supporting COVID-19 testing and for products related to developing and producing vaccines and therapies for COVID-19.

For additional information on the risks of COVID-19 to the Company’s operations, refer to the “Item 1A. Risk Factors” section of the Company’s 2021 Annual Report.

Acquisitions

During the three-month period ended April 1, 2022, the Company acquired one business for total consideration of $13 million in cash, net of cash acquired and recorded goodwill and intangible assets of $3 million and $10 million, respectively. The business acquired complements an existing unit of the Company’s Environmental & Applied Solutions segment. The aggregate annual sales of this business at the time of acquisition based on the company’s revenues for its last completed fiscal year prior to the acquisition, were $7 million. The Company also paid $4 million for working capital adjustments related to 2021 acquisitions during the first quarter of 2022.

Currency Exchange Rates

On a year-over-year basis, currency exchange rates negatively impacted reported sales by approximately 2.0% for the three-month period ended April 1, 2022 compared to the comparable period of 2021, primarily due to the strengthening of the U.S. dollar against most major currencies in 2022. If the currency exchange rates in effect as of April 1, 2022 were to prevail throughout the remainder of 2022, currency exchange rates would decrease the Company’s estimated full year sales by approximately 2.0% on a year-over-year basis. Any further strengthening of the U.S. dollar against major currencies would adversely impact the Company’s sales and results of operations for the remainder of the year, and any weakening of the U.S. dollar against major currencies would positively impact the Company’s sales and results of operations for the remainder of the year.

RESULTS OF OPERATIONS

Non-GAAP Measures

In this report, references to the non-GAAP measures of core sales (also referred to as core revenues or sales/revenues from existing businesses) refer to sales calculated according to U.S. 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. 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)); and

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

Core sales growth 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 this non-GAAP financial measure 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 this non-GAAP financial measures to measure the Company’s operating and financial performance and uses core sales growth 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 this measure 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 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.

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 the Danaher Business System.

Core Sales Growth

			% Change Three-Month Period Ended April 1, 2022 vs. Comparable 2021 Period
Total sales growth (GAAP)			12.0		%
Impact of:
Acquisitions/divestitures			(2.0)		%
Currency exchange rates			2.0		%
Core sales growth (non-GAAP)			12.0		%

2022 Sales Compared to 2021

Total sales increased 12.0% during the three-month period ended April 1, 2022 compared to the three-month period ended April 2, 2021 primarily as a result of the 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 currency translation decreased reported sales 2.0% on a year-over-year basis during the three-month period ended April 1, 2022 primarily due to the unfavorable impact of the strengthening of the U.S. dollar against most other major currencies in 2022 compared to the comparable period of 2021.

Operating Profit Performance

Operating profit margins decreased 80 basis points from 29.1% during the three-month period ended April 2, 2021 to 28.3% for the three-month period ended April 1, 2022.

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

• First quarter 2021 acquisition-related fair value adjustments to inventory and deferred revenue, in each case related to the acquisition of Cytiva - 65 basis points

• First quarter 2021 impairment charges related to a trade name in the Diagnostics segment - 15 basis points

First quarter 2022 vs. first quarter 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, incremental year-over-year material, transportation and labor costs, the impact of foreign currency exchange rates, the impact of product mix and incremental year-over year costs associated with continuing productivity improvement initiatives in the first quarter of 2022, net of higher 2022 core sales volumes - 65 basis points

• First quarter 2022 impairments of accounts receivable and inventory as well as accruals for contractual obligations in Russia - 55 basis points

• The incremental dilutive effect in 2022 of acquired businesses, net of product line dispositions which did not qualify as discontinued operations - 40 basis points

Business Segments

Sales by business segment for each of the periods indicated were as follows ($ in millions):

			Three-Month Period Ended
			April 1, 2022						April 2, 2021
Life Sciences			$	3,882					$	3,546
Diagnostics			2,644						2,178
Environmental & Applied Solutions			1,162						1,134
Total			$	7,688					$	6,858

For information regarding the Company’s sales by geographical region, refer to Note 4 to the accompanying Consolidated Condensed Financial Statements.

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 genes, proteins, metabolites and cells, in order to understand the causes of disease, identify new therapies and test and manufacture new drugs and vaccines.

Life Sciences Selected Financial Data

			Three-Month Period Ended
($ in millions)			April 1, 2022						April 2, 2021
Sales			$	3,882					$	3,546
Operating profit			1,118						1,151
Depreciation			72						52
Amortization of intangible assets			321						277
Operating profit as a % of sales			28.8		%				32.5		%
Depreciation as a % of sales			1.9		%				1.5		%
Amortization as a % of sales			8.3		%				7.8		%

Core Sales Growth

			% Change Three-Month Period Ended April 1, 2022 vs. Comparable 2021 Period
Total sales growth (GAAP)			9.5		%
Impact of:
Acquisitions/divestitures			(4.0)		%
Currency exchange rates			2.0		%
Core sales growth (non-GAAP)			7.5		%

Price increases in the segment contributed 2.5% to sales growth on a year-over-year basis during the three-month period ended April 1, 2022 and are reflected as a component of core sales growth.

Total segment sales increased 9.5% during the three-month period led by increased core sales resulting from the factors discussed below as well as the impact of the acquisition of Aldevron L.L.C. (for a description of the Aldevron Acquisition, refer to Note 2 in the Company’s 2021 Annual Report). Core sales in the bioprocess business increased during the three-month period with continued strong underlying demand despite a difficult prior year comparison due to strong sales in 2021 of instruments and consumables used in the research and development of COVID-19-related treatments and vaccines and the completion of a major project in 2021. Geographically, core sales in the business were led by North America and Western Europe, partially offset by lower core sales in China as a result of a difficult prior year comparison due to the completion of a major project in China in 2021. In the first three months of 2022, core sales for filtration, separation and purification technologies increased versus the comparable period in 2021, led by Western Europe and China. Demand for these products in the period increased across all major end-markets, led by biopharmaceuticals, microelectronics and aerospace. Demand for the Company’s flow cytometry, genomics, lab automation, centrifugation, particle counting and characterization business decreased in the three-month period, primarily as a result of declines in Western Europe due to lower demand for genomic sample preparation consumables and automation products for COVID-19 testing. Core sales in the mass spectrometry business increased during the three-month period across all major end-markets and geographies driven in part by demand for new products.

Depreciation increased as a percentage of sales during the three-month period ended April 1, 2022 as compared to the comparable period of 2021 primarily as a result of the impact of depreciation from recent capital expenditures related to manufacturing capacity expansion. Amortization increased as a percentage of sales during the three-month period ended April 1, 2022 as compared to the comparable period of 2021 primarily due to the impact of the Aldevron Acquisition.

Operating Profit Performance

Operating profit margins decreased 370 basis points during the three-month period ended April 1, 2022 as compared to the comparable period of 2021.

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

• First quarter 2021 acquisition-related fair value adjustments to inventory and deferred revenue related to the acquisition of Cytiva - 130 basis points

First quarter 2022 vs. first quarter 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, the impact of product mix, incremental year-over-year costs associated with continuing productivity improvement initiatives and incremental year-over-year material, transportation and labor costs, net of higher 2022 core sales volumes - 250 basis points

• The incremental dilutive effect in 2022 of acquired businesses, net of product line dispositions which did not qualify as discontinued operations - 150 basis points

• First quarter 2022 impairments of accounts receivable and inventory as well as accruals for contractual obligations in Russia - 100 basis points

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

			Three-Month Period Ended
($ in millions)			April 1, 2022						April 2, 2021
Sales			$	2,644					$	2,178
Operating profit			886						626
Depreciation			94						93
Amortization of intangible assets			51						51
Operating profit as a % of sales			33.5		%				28.7		%
Depreciation as a % of sales			3.6		%				4.3		%
Amortization as a % of sales			1.9		%				2.3		%

Core Sales Growth

			% Change Three-Month Period Ended April 1, 2022 vs. Comparable 2021 Period
Total sales growth (GAAP)			21.5		%
Impact of:
Acquisitions/divestitures			(1.0)		%
Currency exchange rates			2.0		%
Core sales growth (non-GAAP)			22.5		%

Price increases in the segment contributed 0.5% to sales growth on a year-over-year basis during the three-month period ended April 1, 2022 and are reflected as a component of core sales growth.

Total segment sales increased 21.5% during the three-month period primarily as a result of increased core sales resulting from the factors discussed below. In the first three months of 2022, the segment experienced higher year-over-year demand for molecular diagnostics tests for COVID-19 which contributed significantly to overall segment core sales growth. Core sales in the segment’s clinical lab business grew on a year-over-year basis in the three-month period ended April 1, 2022, driven by

increased demand across most major end-markets, partially offset by lower demand in China. Continued demand for the chemistry and immunoassay product lines drove core sales growth. During the three-month period, core sales in the molecular diagnostics business increased on a year-over-year basis in all major geographies as the business experienced strong growth in sales of consumables, 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 response to year-over-year market growth. Core sales in the acute care diagnostic business increased year-over-year in the three-month period due to demand for blood gas and immunoassay consumables, largely offset by lower year-over-year instrument sales primarily due to a difficult prior year comparison as a result of strong COVID-19-related demand in 2021. Geographically, demand was driven by North America and Western Europe, partially offset by lower year-over-year core sales in China. Core sales in the pathology business grew year-over-year across all major product lines in the three-month period ended April 1, 2022, led by demand in North America and Western Europe.

Operating Profit Performance

Operating profit margins increased 480 basis points during the three-month period ended April 1, 2022 as compared to the comparable period of 2021.

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

• Higher first quarter 2022 core sales volumes, the impact of product mix and 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, sales and marketing growth initiatives, incremental year-over-year material, transportation and labor costs and the impact of foreign currency exchange rates in the first quarter of 2022 - 400 basis points

• The incremental accretive effect in 2022 of acquired businesses - 45 basis points

• First quarter 2021 impairment charge related to a trade name - 45 basis points

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

• First quarter 2022 impairment of accounts receivable as well as accruals for contractual obligations in Russia - 10 basis points

Depreciation and amortization of intangible assets both decreased as a percentage of sales during the three-month period ended April 1, 2022, 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

			Three-Month Period Ended
($ in millions)			April 1, 2022						April 2, 2021
Sales			$	1,162					$	1,134
Operating profit			236						285
Depreciation			11						11
Amortization of intangible assets			14						16
Operating profit as a % of sales			20.3		%				25.1		%
Depreciation as a % of sales			0.9		%				1.0		%
Amortization as a % of sales			1.2		%				1.4		%

Core Sales Growth

			% Change Three-Month Period Ended April 1, 2022 vs. Comparable 2021 Period
Total sales growth (GAAP)			2.5		%
Impact of:
Acquisitions/divestitures			2.5		%
Currency exchange rates			1.5		%
Core sales growth (non-GAAP)			6.5		%

Price increases in the segment contributed 5.0% to sales growth on a year-over-year basis during the three-month period ended April 1, 2022 and are reflected as a component of core sales growth. Total segment sales increased 2.5% during the three-month period primarily as a result of core sales growth driven by the factors discussed below.

Core sales in the segment’s water quality business increased at a high-single digit rate during the three-month period ended April 1, 2022 compared to the comparable period of 2021. Year-over-year core sales in the analytical instrumentation product line increased in the three-month period driven by increased sales in Western Europe and North America, partially offset by declines in China. Core sales in the business’ chemical treatment solutions product line increased during the three-month period as a result of increased demand across most major end-markets. Geographically, the increase in core sales of chemical treatment solutions in the period was driven by North America and Latin America.

Core sales in the segment’s product identification businesses grew at a mid-single digit rate during the three-month period ended April 1, 2022 compared to the comparable period of 2021. Core sales in the marking and coding business increased during the three-month period across most major end-markets, driven primarily by continued demand for consumables. Geographically, the increase in core sales for the marking and coding business was driven by North America and Western Europe. For the packaging and color solutions products and services, core sales decreased in the three-month period as declines in core sales of color solution products more than offset increased core sales of packaging products.

Operating Profit Performance

Operating profit margins decreased 480 basis points during the three-month period ended April 1, 2022 as compared to the comparable period of 2021.

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

• The incremental net accretive effect in 2022 of acquired businesses, net of product line dispositions which did not qualify as discontinued operations - 50 basis points

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

• Incremental year-over-year costs associated with sales, service and marketing growth investments, incremental year-over-year material, transportation and labor costs, incremental year-over year costs associated with continuing productivity improvement initiatives and the impact of foreign currency exchange rates in the first quarter of 2022, net of higher 2022 core sales volumes - 520 basis points

• First quarter 2022 impairments of accounts receivable and inventory in Russia - 10 basis points

COST OF SALES AND GROSS PROFIT

			Three-Month Period Ended
($ in millions)			April 1, 2022						April 2, 2021
Sales			$	7,688					$	6,858
Cost of sales			(2,983)						(2,605)
Gross profit			$	4,705					$	4,253
Gross profit margin			61.2		%				62.0		%

The year-over-year increase in cost of sales during the three-month period ended April 1, 2022 as compared to the comparable period in 2021, was due primarily to the impact of higher year-over-year sales volumes, including sales from recently acquired businesses, incremental year-over-year material, transportation and labor costs and an inventory charge related to Russia. This increase was partially offset by the impact of acquisition-related charges associated with fair value adjustments to inventory in connection with the acquisition of Cytiva which increased cost of sales by $29 million in the first quarter of 2021.

The year-over-year decrease in gross profit margin during the three-month period ended April 1, 2022 as compared to the comparable period in 2021, was due primarily to the impact of foreign exchange rates, incremental year-over-year material, transportation and labor costs and an inventory charge related to Russia. This decrease was partially offset by the impact of price increases, year-over-year productivity improvement initiatives and the impact of acquisition-related charges associated with fair value adjustments to inventory and deferred revenue recorded in connection with the acquisition of Cytiva totaling $46 million which adversely impacted the gross profit margin in the first quarter of 2021.

OPERATING EXPENSES

			Three-Month Period Ended
($ in millions)			April 1, 2022						April 2, 2021
Sales			$	7,688					$	6,858
Selling, general and administrative (“SG&A”) expenses			2,092						1,876
Research and development (“R&D”) expenses			441						380
SG&A as a % of sales			27.2		%				27.4		%
R&D as a % of sales			5.7		%				5.5		%

SG&A expenses as a percentage of sales declined slightly for the three-month period ended April 1, 2022 as compared to the comparable period in 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 volumes, including sales volumes from recently acquired businesses, incremental year-over-year cost savings associated with continuing productivity improvement initiatives and the impact of an impairment charge related to a trade name which was incurred in the first quarter of 2021. This decline was partially offset by continued investments in sales and marketing growth initiatives, increased labor costs and a charge related to impairments of certain accounts receivable and accrual of contractual obligations incurred in Russia.

R&D expenses (consisting principally of internal and contract engineering personnel costs) as a percentage of sales increased slightly during the three-month period ended April 1, 2022 as compared to the comparable period of 2021, primarily due to spending growth related to the Company’s new product development initiatives exceeding the sales growth rate for the period.

OTHER INCOME (EXPENSE), NET

For a description of the Company’s other income (expense), net during the three-month periods ended April 1, 2022 and April 2, 2021, refer to Note 7 to the accompanying Consolidated Condensed Financial Statements.

INTEREST COSTS AND FINANCING

For a discussion of the Company’s outstanding indebtedness, refer to Note 10 to the accompanying Consolidated Condensed Financial Statements.

Interest expense of $54 million for the three-month period ended April 1, 2022 was $4 million lower than the comparable period of 2021, due primarily to lower average debt balances in the three-month period in 2022 versus the comparable period of 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 converted into a foreign currency through cross-currency swap derivative contracts).

Interest income of $1 million for the three-month period ended April 1, 2022 was $3 million lower than the comparable period of 2021, due primarily to lower average cash balances in 2022 compared to 2021.

INCOME TAXES

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

			Three-Month Period Ended
			April 1, 2022						April 2, 2021
Effective tax rate			17.8		%				18.3		%

The Company operates globally, including in certain jurisdictions with lower tax rates than the U.S. federal statutory rate. Therefore, the impact of operating in such jurisdictions reduces the effective tax rate compared to the U.S. statutory tax rate.

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

The effective tax rate for the three-month period ended April 2, 2021 differs from the U.S. federal statutory rate of 21.0% principally due to net discrete benefits of $44 million related primarily to excess tax benefits from stock-based compensation and the benefit from release of reserves for uncertain tax positions from audit settlements, net of changes in estimates associated with prior period uncertain tax positions. These factors reduced the effective tax rate by 2.1% for the three-month period ended April 2, 2021.

The Company conducts business globally, and files numerous consolidated and separate income tax returns in federal, state and foreign jurisdictions. In addition to the Company’s significant presence in the U.S., the Company also has a significant presence in China, Denmark, Germany, Singapore, Sweden, Switzerland and the UK. Excluding these jurisdictions, the Company believes that a change in the statutory tax rate of any individual foreign country would not have a material impact on the Company’s financial statements given the geographical dispersion of the Company’s taxable income.

The Company and its subsidiaries are routinely examined by various domestic and international taxing authorities. The Internal Revenue Service (“IRS”) has completed the examinations of substantially all 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 Austria, Belgium, Canada, China, Denmark, France, Germany, India, Japan, Korea, Switzerland, the UK and various other countries, states and provinces that are currently under audit for years ranging from 2004 through 2020.

Refer to Note 6 to the Consolidated Condensed Financial Statements for discussion regarding the Company’s significant tax matters.

The Company expects its effective tax rate for the remainder of 2022 to be approximately 19.5%. The Company’s effective tax rate could vary as a result of many factors, including but not limited to the following:

• The expected rate for the remainder of 2022 includes the anticipated discrete income tax benefits from excess tax deductions related to the Company’s stock compensation programs, which are reflected as a reduction in tax expense, though the actual benefits (if any) will depend on the Company’s stock price and stock option exercise patterns.

• The actual mix of earnings by jurisdiction could fluctuate from the Company’s projection.

• The tax effects of other discrete items, including accruals related to tax contingencies, the resolution of worldwide tax matters, tax audit settlements, statute of limitations expirations and changes in tax regulations.

• Any future changes in tax law or the implementation of recently proposed increases in tax rates, the impact of future regulations and any related additional tax planning efforts to address these changes.

As a result of the uncertainty in predicting these items, it is reasonably possible that the actual effective tax rate used for financial reporting purposes will change in future periods.

COMPREHENSIVE INCOME

In 2022, comprehensive income increased $628 million for the three-month period as compared to the comparable period of 2021, primarily driven by a decrease in losses from foreign currency translation adjustments and from cash flow hedge adjustments as well as higher net earnings. The Company recorded foreign currency translation loss of $343 million for the three-month period ended April 1, 2022, as compared to a loss of $922 million for the three-month period ended April 2, 2021.

The Company recorded a loss of $20 million from cash flow hedge adjustments related to the Company’s cross-currency swap derivative contracts for the three-month period ended April 1, 2022, as compared to a loss of $42 million for the comparable period of 2021.

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, the Company anticipates following the same approach in the future.

Overview of Cash Flows and Liquidity

Following is an overview of the Company’s cash flows and liquidity ($ in millions):

			Three-Month Period Ended
($ in millions)			April 1, 2022						April 2, 2021
Total operating cash flows			$	1,968					$	1,871
Cash paid for acquisitions			$	(17)					$	(419)
Payments for additions to property, plant and equipment			(250)						(251)
Proceeds from sales of property, plant and equipment			2						12
Payments for purchases of investments			(274)						(420)
Proceeds from sales of investments			17						43
Proceeds from sale of product lines			—						26
All other investing activities			19						16
Total cash used in investing activities			$	(503)					$	(993)
Payments for the issuance of common stock in connection with stock-based compensation, net			$	(46)					$	(12)
Payment of dividends			(191)						(169)
Net proceeds from (repayments of) borrowings (maturities of 90 days or less)			10						(1)
Net repayments of borrowings (maturities longer than 90 days)			—						(279)
All other financing activities			(47)						12
Total cash used in financing activities			$	(274)					$	(449)

• Operating cash flows increased $97 million, or 5%, during the three-month period ended April 1, 2022 as compared to the comparable period of 2021, due to higher net earnings (after excluding in both periods charges for depreciation, amortization (including intangible assets and inventory step-up), stock compensation, gain on sale of product lines and unrealized investment gains/losses). These increases were partially offset by higher cash used in aggregate for accounts receivables, inventories, trade accounts payable and accrued and prepaid expenses in 2022 compared to the prior year.

• Net cash used in investing activities consisted primarily of investments and capital expenditures and decreased year-over-year primarily as a result of lower cash paid for acquisitions and investments in the 2022 period compared to 2021. Refer to Note 2 to the accompanying Consolidated Condensed Financial Statements for information on the Company’s acquisitions.

• As of April 1, 2022, the Company held approximately $3.7 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 were approximately $2.0 billion for the first three months of 2022, an increase of $97 million, or 5%, as compared to the comparable period of 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 reflected an increase of $23 million in net earnings for the first three months of 2022 as compared to the comparable period in 2021.

• Net earnings for the first three months of 2022 also reflected an increase of $186 million of depreciation, intangible asset amortization and stock compensation expense as compared to the comparable period of 2021, net of a decrease in amortization of an acquisition-related inventory step-up, unrealized investment gains/losses and the gain on sale of product lines in 2022 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 arrangements. Depreciation, amortization and stock compensation are noncash expenses that decrease earnings without a corresponding impact to operating cash flows. Cash flows from the gain on sale of product lines 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 $482 million in operating cash flows during the first three months of 2022, compared to $150 million of operating cash flows used in the comparable period of 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 provided $56 million of operating cash flows during the first three months of 2022, compared to $164 million of operating cash flows used in the comparable period of 2021. The timing of cash payments for income taxes, various employee-related liabilities, customer funding and changes in 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 decreased $490 million in the three-month period ended April 1, 2022 compared to the comparable period of 2021, primarily as a result of cash used for the Company’s acquisitions in the first quarter of 2021 exceeding the cash used for acquisitions in the first quarter of 2022. For a discussion of the Company’s acquisitions during the first three months of 2022 refer to “—Overview”. In addition, in the first quarter of 2022 and 2021, the Company invested $274 million and $420 million, respectively, in non-marketable equity securities and partnerships.

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 were essentially flat on a year-over-year basis for the three-month period ended April 1, 2022 compared to the comparable period in 2021. For the full year 2022, the Company forecasts capital spending to be approximately $1.5 billion, driven primarily by continued expenditures primarily to support customer demand for products related to testing, treatment and vaccine production for COVID-19 and other growth opportunities.

Financing Activities and Indebtedness

Cash flows relating to financing activities typically 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 $274 million during the three-month period ended April 1, 2022 compared to $449 million of cash used in the comparable period of 2021. The year-over-year decrease in cash used by financing activities was due primarily to repayment of borrowings in 2021.

For a description of the Company’s outstanding debt as of April 1, 2022 and the Company’s commercial paper programs and credit facility, refer to Note 10 to the accompanying Consolidated Condensed Financial Statements. As of April 1, 2022, the Company was in compliance with all of its respective debt covenants.

As discussed in Note 14 to the accompanying Consolidated Condensed Financial Statements, all outstanding shares of the Company’s 4.75% MCPS Series A converted on April 15, 2022 at a rate of 6.6632 common shares per share of preferred stock.

Stock Repurchase Program

For information regarding the Company’s stock repurchase program, refer to Part II—Item 2, “Unregistered Sales of Equity Securities and Use of Proceeds”.

Dividends

Aggregate cash payments for dividends on Company common stock during the three-month period ended April 1, 2022 were $150 million and aggregate cash payments for dividends on the Company’s MCPS during the three-month period ended April 1, 2022 were $41 million. The increase in dividend payments over the comparable period of 2021 primarily relates to an increase in the quarterly dividend rate for common stock beginning with respect to the dividend paid in the second quarter of 2021.

In the first quarter of 2022, the Company declared a regular quarterly dividend of $0.25 per share of Company common stock payable on April 29, 2022 to holders of record as of March 25, 2022. In addition, the Company declared a quarterly cash dividend of $11.875 per MCPS Series A that was paid on April 15, 2022 to holders of record as of March 31, 2022 and quarterly cash dividend of $12.50 per MCPS Series B that was paid on April 15, 2022 to holders of record as of March 31, 2022.

Cash and Cash Requirements

As of April 1, 2022, the Company held approximately $3.7 billion of cash and cash equivalents that were held on deposit with financial institutions or invested in highly liquid investment-grade debt instruments with a maturity of 90 days or less. Of the cash and cash equivalents, $186 million was held within the United States and approximately $3.5 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, 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 (if available). 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. With respect to the commercial paper and other notes scheduled to mature during the remainder of 2022, the Company expects to repay the principal amounts when due using available cash, proceeds from new issuances of commercial paper (if available), drawing on its Five-Year Facility and/or proceeds from other debt issuances.

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 Tax Cuts and Jobs Act 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 foreign operations and investments, including acquisitions. The income taxes, if any, applicable to such earnings including basis differences in our foreign subsidiaries are not readily determinable. As

of April 1, 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’s cash contribution requirements for its U.S. and non-U.S. defined benefit pension plans are forecasted to be approximately $10 million and $49 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.

CRITICAL ACCOUNTING ESTIMATES

There have been no material changes to the Company’s critical accounting estimates as described in the 2021 Annual Report.