What changed in this filing

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Item 1A. Risk Factors

2022-03-01 compared with 2021-02-26 · 100 added, 91 removed, 302 unchanged (39% of the section changed)

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Additional risks and uncertainties not currently known to us or that we currently believe are immaterial also may impair our business, including our results of operations, liquidity, and financial condition.

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Risk Related to Our Business Operations

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Our global operations expose us broadly to the COVID-19 pandemic.

In particular, continued efforts to mitigate the spread of the virus have caused us, our suppliers, and customers to reduce commercial activities and utilization of facilities and manufacturing sites, adversely impacting demand for our products and services, our ability to source required materials and components, and our ability to manufacture, sell, and service our products.

In addition, implementation of measures to help control the spread of the virus, including internal work-from-home policies to protect the health of our employees and community, travel restrictions, social distancing measures, and re-opening restrictions have negatively impacted our collaboration efforts with our global colleagues, customers, vendors, and service providers, and increased the risk and cost of protecting against cyber attacks.

While we continue to implement global and local response teams, incremental cost reduction efforts, and business continuity efforts internally and with our customers, suppliers, and vendors, the duration and extent of the operational and financial impact of the COVID-19 pandemic remains highly uncertain.

The degree to which COVID-19 impacts us going forward will depend on future developments that are highly uncertain and therefore cannot be predicted, including, but not limited to, the duration and spread of the pandemic, its severity, or the actions taken to contain the spread and impact of COVID-19, the general availability, effectiveness, and distribution of any vaccine, and how quickly and to what extent normal economic, market, and operating conditions resume.

Even after the COVID-19 pandemic has subsided as a public health matter, we may experience material adverse impacts to our business as a result of its adverse impact on the global economy, in-person collaboration efforts, and consumer confidence.

In particular, continued efforts to mitigate the spread of the virus, including new variants of the virus, have caused us, our suppliers, and customers to alter commercial activities and utilization of facilities and manufacturing sites, adversely impacting our ability to manufacture, sell, transport and service our products.

In addition, implementation of measures to help control the spread of the virus, including vaccine mandates, remote work policies, travel restrictions, and social distancing measures have negatively impacted our collaboration efforts with our global colleagues, customers, vendors, and service providers, and increased the risk and cost of workforce retention, protecting against cyber attacks and adequately sourcing raw materials, components and transportation for our products.

While we continue to implement global and local response teams, supply chain management and business continuity efforts internally and with our customers, suppliers, and vendors, the duration and extent of the operational and financial impact of the COVID-19 pandemic remains highly uncertain.

The degree to which COVID-19 continues to impact us going forward will depend on future developments that are highly uncertain and therefore cannot be predicted, including, but not limited to, the duration and spread of the pandemic, new variants, its severity, or the actions taken to contain the spread and impact of COVID-19, the broad acceptance, effectiveness, and distribution of vaccines, the overall vaccination rate in the relevant jurisdictions, continued impact on supply chain and transportation, and how quickly and to what extent normal economic, market, and operating conditions resume.

Even after the COVID-19 pandemic has subsided as a public health matter, we may experience material adverse impacts to our business as a result of its adverse impact on the global economy, supply chain disruptions, inflation, in-person collaboration efforts, workforce dynamic, and consumer confidence.

If we cannot adjust our manufacturing capacity, supply chain management or the purchases required for our manufacturing activities to reflect changes in market conditions, customer demand and supply chain or transportation disruptions, our profitability may suffer.

In addition, our reliance upon sole or limited sources of supply for certain materials, components, and services could cause production interruptions, delays, and inefficiencies.

We purchase materials, components, and equipment from third parties for use in our manufacturing operations.

Our income could be adversely impacted if we are unable to adjust our purchases and supply chain management to reflect any supply chain or transportation disruptions or changes in customer demand and market fluctuations, including those caused by the COVID-19 pandemic, increases in demand outpacing supply capabilities, labor shortages, seasonality or cyclicality.

During a market upturn or general supply chain disruptions, suppliers have extended lead times, limited supplies, or increased prices.

If we cannot purchase sufficient products at competitive prices and quality and on a timely enough basis to meet demand for our products, we may not be able to satisfy market demand, product shipments may be delayed, our costs may increase, or we may breach our contractual commitments and incur liabilities.

Conversely, in order to secure supplies for the production of products, we sometimes enter into noncancelable purchase commitments with vendors, which could impact our ability to adjust our inventory to reflect declining market demands.

If demand for our products is less than we expect, we may experience additional excess and obsolete inventories and be forced to incur additional charges and our profitability may suffer.

In addition, some of our businesses purchase certain requirements from sole or limited source suppliers for reasons of quality assurance, cost effectiveness, availability, contractual obligations or uniqueness of design.

If these or other suppliers encounter financial, operating, quality, or other difficulties or if our relationship with them changes, including as a result of contractual disputes, we might not be able to quickly establish or qualify replacement sources of supply.

The supply chains for our businesses could also be disrupted by supplier capacity constraints, operational or quality issues, bankruptcy or exiting of the business for other reasons, decreased availability of key raw materials or commodities, and external events such as natural disasters, pandemic health issues, war, terrorist actions, governmental actions, and legislative or regulatory changes, among others.

Any of these factors could result in production interruptions, delays, extended lead times, and inefficiencies.

Because we cannot always immediately adapt our production capacity and related cost structures to changing market conditions, our manufacturing capacity may at times exceed or fall short of our production requirements.

Any or all of these problems could result in the loss of customers, provide an opportunity for competing products to gain market acceptance, and otherwise adversely affect our profitability.

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Our financial results are subject to fluctuations in the cost and availability of commodities or components that we use in our operations.

As discussed in the section entitled “Business-Materials,” our manufacturing and other operations employ a wide variety of components, raw materials, and other commodities.

Prices for and availability of these components, raw materials, and other commodities have fluctuated significantly in the past.

In particular, the COVID-19 pandemic and the widespread supply chain challenges due to labor, raw material, and component shortages, as well as widespread logistics issues, affected multiple industries, raised material and shipping costs, limited the quantities available, and extended the lead time required for supplies and deliveries.

Any sustained interruption in the supply of these items, including as a result of general supply chain constraints, increasing demand outpacing supplies, or contractual disputes with suppliers or vendors, could adversely affect our business.

In addition, due to the highly competitive nature of the industries that we serve, the cost-containment efforts of our customers, and the terms of certain contracts we are party to, if commodity or component prices rise we may be unable to pass along cost increases through higher prices.

If we are unable to fully recover higher commodity or component costs through price increases or offset these increases through cost reductions, or if there is a time delay between the increase in costs and our ability to recover or offset these costs, we could experience lower margins and profitability and our financial statements could be adversely affected.

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

Our business is sensitive to general economic conditions.

Slower global economic growth, actual or anticipated default on sovereign debt, changes in global trade policies, volatility in the currency and credit markets, high levels of unemployment and underemployment, reduced levels of capital expenditures, changes in government fiscal and monetary policies, government deficit reduction and budget negotiation dynamics, sequestration, other austerity measures, political and social instability, natural disasters, terrorist attacks, and other challenges that affect the global economy adversely affect us and our distributors, customers, and suppliers, including having the effect of:

Slower global economic growth, actual or anticipated default on sovereign debt, changes in global trade policies, volatility in the currency and credit markets, high levels of unemployment and underemployment, inflation, reduced levels of capital expenditures, changes in government fiscal and monetary policies, government deficit reduction and budget negotiation dynamics, sequestration, other austerity measures, political and social instability, war, sanctions, natural disasters, terrorist attacks, and other challenges that affect the global economy adversely affect us and our distributors, customers, and suppliers, including having the effect of:

• reducing demand for our products, software, and services, limiting the financing available to our customers and suppliers, increasing order cancellations, and resulting in longer sales cycles and slower adoption of new technologies;

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Certain of our businesses operate in industries that may experience periodic, cyclical downturns.

In addition, in certain of our businesses, demand depends on customers’ capital spending budgets, and product and economic cycles can affect the spending decisions of these entities.

In addition, in certain of our

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businesses, demand depends on customers’ capital spending budgets, and product and economic cycles can affect the spending decisions of these entities.

Demand for our products and services is also sensitive to changes in customer order patterns, which may be affected by announced price changes, changes in incentive programs, new product introductions, and customer inventory levels.

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Our success will depend on several factors, including our ability to:

• correctly identify customer needs and preferences and predict future needs and preferences;

• accurately identify customer needs and preferences and predict future needs and preferences;

• allocate our research and development funding to products and services with higher growth prospects;

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In particular, the markets for highly skilled employees and leaders in the technology and healthcare industries are extremely competitive.

Our brand, our culture, our ability to provide competitive compensation, our locations of operations, and our reputation are important to our ability to recruit and retain key employees in these competitive markets.

Furthermore, the workforce shortage in the United States during the COVID-19 pandemic has increased the overall competitiveness and cost of

retaining and attracting qualified employees.

If we are not competitive or successful in our recruiting efforts, if we cannot attract or retain key employees, or if we do not adequately ensure effective succession planning or transfer of knowledge for our key employees, our ability to deliver and execute on our operational, development, or portfolio strategies would be adversely affected.

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We rely on information technology systems, some of which are managed by third parties and some of which are managed on a decentralized, independent basis by our operating companies, to process, transmit, and store electronic information (including sensitive data such as confidential business information and personally identifiable data relating to employees, customers, and other business partners), and to manage or support a variety of critical business processes and activities.

These systems may be damaged, disrupted, or shut down due to attacks by computer hackers, nation states, cyber-criminals, computer viruses, employee error or malfeasance, power outages, hardware failures, telecommunication or utility failures, catastrophes, or other unforeseen events, and in any such circumstances our system redundancy and other disaster recovery planning may be ineffective or inadequate.

These systems may be

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damaged, disrupted, or shut down due to attacks by computer hackers, nation states, cyber-criminals, computer viruses, employee error or malfeasance, power outages, hardware failures, telecommunication or utility failures, catastrophes, or other unforeseen events, and in any such circumstances our system redundancy and other disaster recovery planning may be ineffective or inadequate.

In addition, security breaches of our systems (or the systems of our customers, suppliers or other business partners) could result in the misappropriation, destruction, or unauthorized disclosure of confidential information or personal data belonging to us or to our employees, partners, customers, or suppliers.

Any of the attacks, breaches, or other disruptions or damage described above can interrupt our operations, delay production and shipments, result in theft of our and our customers’ intellectual property and trade secrets, damage customer and business partner relationships and our reputation, or result in defective products or services, legal claims and proceedings, liability and penalties under privacy laws, and increased costs for security and remediation, each of which could adversely affect our business and financial statements.

Like many multinational corporations, our information technology systems have been subject to computer viruses, malicious codes, unauthorized access, and other cyber-attacks and, although, as of December 31, 2021, such attacks have not had a material impact on our operations or financial results, we expect to be subject to similar incidents in the future as such attacks become more sophisticated and frequent, any of which may have a material adverse impact on our business continuity, operations or financial results.

Any of the attacks, breaches, or other disruptions or damage described above, as well as corresponding remediation efforts, can interrupt our operations, delay production and shipments, result in theft of our and our customers’ intellectual property and trade secrets, damage customer and business partner relationships and our reputation, or result in defective products or services, legal claims and proceedings, liability and penalties under privacy laws, and increased costs for security and remediation, each of which could adversely affect our business and financial statements.

Defects and unanticipated use or inadequate disclosure with respect to our products (including software) or services could adversely affect our business, reputation, and financial statements.

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The levels of inventory maintained by our distributors and other channel partners, and changes in those levels, can also significantly impact our results of operations in any given period.

In addition, the consolidation of distributors and customers in certain of our served industries could adversely impact our profitability.

Our financial results are subject to fluctuations in the cost and availability of commodities or components that we use in our operations.

As discussed in the section entitled “Business-Materials,” our manufacturing and other operations employ a wide variety of components, raw materials, and other commodities.

Prices for and availability of these components, raw materials, and other commodities have fluctuated significantly in the past.

Any sustained interruption in the supply of these items, including as a result of contractual disputes with suppliers or vendors, could adversely affect our business.

If we cannot adjust our manufacturing capacity or the purchases required for our manufacturing activities to reflect changes in market conditions and customer demand, our profitability may suffer.

In addition, our reliance upon sole or limited sources of supply for certain materials, components, and services could cause production interruptions, delays, and inefficiencies.

We purchase materials, components, and equipment from third parties for use in our manufacturing operations.

Our income could be adversely impacted if we are unable to adjust our purchases to reflect changes in customer demand and market fluctuations, including those caused by seasonality or cyclicality.

During a market upturn, suppliers may extend lead times, limit supplies, or increase prices.

If we cannot purchase sufficient products at competitive prices and quality and on a timely enough basis to meet increasing demand, we may not be able to satisfy market demand, product shipments may be delayed, our costs may increase, or we may breach our contractual commitments and incur liabilities.

If demand for our products is less than we expect, we may experience additional excess and obsolete inventories and be forced to incur additional charges and our profitability may suffer.

Any of these factors could result in production interruptions, delays, extended lead times, and inefficiencies.

Any or all of these problems could result in the loss of customers, provide an opportunity for competing products to gain market acceptance, and otherwise adversely affect our profitability.

Our restructuring actions could have long-term adverse effects on our business.

In addition, the consolidation of distributors and customers in certain of the industries in which we operate could adversely impact our profitability.

Our restructuring activities could have long-term adverse effects on our business.

In recent years, we have implemented multiple, significant restructuring activities across our businesses to adjust our cost structure, and we may engage in similar restructuring activities in the future.

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If we suffer loss to our facilities, supply chains, distribution systems, or information technology systems due to catastrophe or other events, our operations could be seriously harmed.

Our facilities, supply chains, distribution systems, and information technology systems are subject to catastrophic loss due to fire, flood, earthquake, hurricane, public health crisis, war, terrorism, or other natural or man-made disasters.

If any of these facilities, supply chains, or systems were to experience a catastrophic loss, it could disrupt our operations, delay production and shipments, result in defective products or services, damage customer relationships and our reputation, and result in legal exposure and large repair or replacement expenses.

If any of these facilities, supply chains, or systems were to

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experience a catastrophic loss, it could disrupt our operations, delay production and shipments, result in defective products or services, damage customer relationships and our reputation, and result in legal exposure and large repair or replacement expenses.

The third-party insurance coverage that we maintain will vary from time to time in both type and amount depending on cost, availability, and our decisions regarding risk retention, and may be unavailable or insufficient to protect us against losses.

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We are subject to a variety of litigation and other legal and regulatory proceedings in the course of our business that could adversely affect our financial statements.

We are subject to a variety of litigation and other legal and regulatory proceedings incidental to our business (or the business operations of previously owned entities), including claims for damages arising out of the use of products or services and claims relating to intellectual property matters, employment matters, appropriate classification of franchisee relationship, tax matters, commercial disputes, disputes with our supplier or vendors, competition and sales and trading practices, environmental matters, personal injury, insurance coverage, and acquisition or divestiture-related matters, as well as regulatory investigations or enforcement.

We are subject to a variety of litigation and other legal and regulatory proceedings incidental to our business (or the business operations of previously owned entities), including claims for damages arising out of the use of products or services and claims relating to intellectual property matters, employment matters, tax matters, commercial disputes, disputes with our supplier or vendors, competition and sales and trading practices, environmental matters, personal injury, insurance coverage, and acquisition or divestiture-related matters, as well as regulatory investigations or enforcement.

We may also become subject to lawsuits as a result of past or future acquisitions or as a result of liabilities retained from, or representations, warranties, or indemnities provided in connection with, divested businesses.

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We cannot assure you that our liabilities in connection with litigation and other legal and regulatory proceedings will not exceed our estimates or adversely affect our financial statements and reputation.

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Risk Related to our International Operations

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Our principal markets outside the United States are in Europe and Asia.

In addition, many of our manufacturing operations, suppliers, and employees are

located outside the United States.

In addition, many of our manufacturing operations, suppliers, and employees are located outside the United States.

Since our growth strategy depends in part on our ability to further penetrate markets outside the United States and increase the localization of our products and services, we expect to continue to increase our sales and presence outside the United States, particularly in high-growth markets, such as Eastern Europe, the Middle East, Africa, Latin America, and Asia.

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We have experienced growth in various end markets in China.

During 2020, year-over-year sales from existing businesses grew slightly in China, and sales in China accounted for approximately 12% of our total sales for the year.

In addition, we have numerous facilities in China, many of which serve multiple businesses and are used for multiple purposes.

During 2021, sales in China accounted for approximately 12% of our total sales for the year.

In addition, we have numerous facilities in China, many of which serve multiple Fortive operating companies in manufacturing, distribution, product design, and selling, general and administrative functions.

There continues to be significant uncertainty about the future relationship between the United States and China, including with respect to trade policies, treaties, government regulations, and tariffs.

In particular, there continues to be uncertainty about U.S.

foreign trade policy with respect to China, including any changes to the trade policies that may be adopted by the new administration.

foreign trade policy with respect to China, including any changes to the trade policies that may be adopted by the Biden administration.

Any increased trade barriers or restrictions on global trade, especially trade with China, could adversely impact our business and financial statements.

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dollars for reporting purposes and the strengthening or weakening of the U.S.

dollar could result in unfavorable translation effects.

dollar could result in unfavorable translation

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In addition, certain of our businesses transact in a currency other than the business’ functional currency, and movements in the transaction currency relative to the functional currency could also result in unfavorable exchange rate effects.

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We may not be able to consummate acquisitions at rates anticipated, which could adversely impact our growth rate and our stock price.

Promising acquisitions are difficult to identify and complete for a number of reasons, including high valuations, competition among prospective buyers, the availability of affordable funding in the capital markets and the need to satisfy applicable closing conditions and obtain antitrust and other regulatory approvals on acceptable terms.

Acquisitions that align with our portfolio strategy may be difficult to identify and execute for a number of reasons, including high valuations, competition among prospective buyers, the availability of affordable funding in the capital markets and the need to satisfy applicable closing conditions and obtain antitrust and other regulatory approvals on acceptable terms.

In addition, competition for acquisitions may result in higher purchase prices.

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Certain of the acquisition agreements by which we have acquired companies require the former owners to indemnify us against certain liabilities related to the operation of the company before we acquired it.

In most of these agreements, however, the liability of the former owners is limited and certain former owners may be unable to meet their indemnification responsibilities.

In most of these agreements, however, the

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liability of the former owners is limited and certain former owners may be unable to meet their indemnification responsibilities.

We cannot assure you that these indemnification provisions will protect us fully or at all, and as a result we may face

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Foreign Corrupt Practices Act, the U.K.

Bribery Act, and similar anti-bribery laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments to government officials for the purpose of obtaining or retaining business, and we operate in many parts of the world that have experienced governmental corruption to some degree.

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Any such improper actions or allegations of such acts could damage our reputation and subject us to civil or criminal investigations in the United States and in other jurisdictions and related shareholder lawsuits, could lead to substantial civil and criminal, monetary and non-monetary penalties and could cause us to incur significant legal and investigatory fees.

addition, though we rely on our suppliers to adhere to our supplier standards of conduct, material violations of such standards of conduct could occur that could have a material effect on our financial statements.

In addition, though we rely on our suppliers to adhere to our supplier standards of conduct, material violations of such standards of conduct could occur that could have a material effect on our financial statements.

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

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• we are also required to comply with increasingly complex and changing data privacy regulations in multiple jurisdictions that regulate the collection, use, protection, and transfer of personal data, including the transfer of personal data between or among countries.

In particular, the General Data Protection Regulation became effective in the European Union in May 2018 and the California Consumer Privacy Act became effective in January 2020.

In particular, the General Data Protection Regulation became effective in

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the European Union in May 2018 and the California Consumer Privacy Act became effective in January 2020.

We may also face audits or investigations by one or more domestic or foreign government agencies relating to our compliance with these regulations.

An adverse outcome under any such investigation or audit could subject us to fines

or other penalties.

An adverse outcome under any such investigation or audit could subject us to fines or other penalties.

That or other circumstances related to our collection, use, and transfer of personal data could cause a loss of reputation in the market and/or adversely affect our business and financial position;

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We are subject to income and transaction taxes in the United States and in multiple foreign jurisdictions.

A change in the tax laws of the jurisdictions where we operate, including any increase in U.S.

corporate income tax rates, could result in a material increase in our tax expense.

In addition, foreign remittance taxes have not been provided for on undistributed earnings of certain of our non-U.S.

subsidiaries to the extent such earnings are considered to be indefinitely reinvested in the operations of those subsidiaries.

If our intentions regarding reinvestment of such earnings change, then our income tax expense could increase.

On December 22, 2017, the U.S.

enacted comprehensive tax reform commonly referred to as the Tax Cut and Jobs Act (“TCJA”).

The TCJA represents one of the most significant overhauls to the U.S.

federal tax code since 1986 according to the SEC.

The TCJA includes numerous provisions that affect businesses and introduces changes that impact U.S.

corporate tax rates, business-related exclusions, deductions, and credits.

Further guidance, regulations, and technical corrections pertaining to TCJA continue to be issued by the tax authorities, some of which may have retroactive application.

We will continue to assess such new guidance, regulations, and corrections as they are issued.

However, there can be no assurance that the retroactive applications of such new guidance, regulations, or corrections issued by the tax authorities will not result in revisions to our prior interpretation of the corresponding provisions of TCJA that may have a material adverse effect on our financial statements.

Further changes in the tax laws of foreign jurisdictions could arise as a result of the base erosion and profit shifting project undertaken by the Organisation for Economic Co-operation and Development (“OECD”), which represents a coalition of member countries.

The OECD has issued significant global tax policy changes that include both expanded reporting as well as technical global tax policy changes.

Many countries in which we operate have implemented tax law and administrative changes that align with many aspects of the OECD policy guidelines.

The breadth of this project may impact all multinational businesses by potentially redefining jurisdictional taxation rights, and could materially impact the law for transfer pricing and permanent establishment taxation.

We have taken measures to address the requirements of these changes in global tax policy.

The Company will continue to monitor and evaluate the impact of these new OECD developments.

Changes in relation to international tax reform could increase uncertainty in the corporate tax area and may adversely affect our provision for income taxes.

In addition, the amount of income taxes we pay is subject to ongoing audits by U.S.

As such, changes to applicable tax laws or policies, including interpretations or retroactive applications thereof, could result in a material change in our tax provision, cash taxes paid, and effective tax rate.

Furthermore, certain tax laws are inherently ambiguous requiring subjective interpretation on the application thereof.

Our interpretation and the corresponding amount of income taxes we pay is, and may in the future continue to be, subject to audits by U.S.

federal, state, and local tax authorities and by non-U.S.

tax authorities.

Due to the potential for changes to tax laws (or changes to the interpretation thereof) and the ambiguity of tax laws, the subjectivity of factual interpretations, the complexity of our intercompany arrangements and other factors, our estimates of income tax liabilities may differ from actual payments or

If these audits result in payments or assessments different from our reserves, our future results may include unfavorable adjustments to our tax liabilities and our financial statements could be adversely affected.

If we determine to repatriate earnings from foreign jurisdictions that have been considered permanently reinvested under existing accounting standards, it could also increase our effective tax rate.

We could incur significant liability if the separation and distribution of Vontier is determined to be a taxable transaction.

We have received an opinion from outside tax counsel to the effect that the separation and distribution of Vontier qualifies as a transaction that is described in Sections 355(a) and 368(a)(1)(D) of the Internal Revenue Code.

The opinion relies on certain facts, assumptions, representations, and undertakings from Vontier and us regarding the past and future conduct of the companies’ respective businesses and other matters.

If any of these facts, assumptions, representations, or undertakings are incorrect or not satisfied, our stockholders and we may not be able to rely on the opinion of tax counsel and could be subject to significant tax liabilities.

Notwithstanding the opinion of tax counsel we have received, the IRS could determine on audit that the separation and distribution are taxable if it determines that any of these facts, assumptions, representations, or undertakings are not correct or have been violated or if it disagrees with the conclusions in the opinion.

If the separation and distribution of Vontier are determined to be taxable for U.S.

federal income tax purposes, our stockholders that are subject to U.S.

federal income tax and we could incur significant U.S.

Foreign remittance taxes have not been provided for on undistributed earnings of certain of our non-U.S.

subsidiaries to the extent such earnings are considered to be indefinitely reinvested in the operations of those subsidiaries.

If our intentions regarding reinvestment of such earnings change, or we determine to repatriate earnings from foreign jurisdictions that had previously been considered permanently reinvested under existing accounting standards, then our income tax provision, cash taxes paid, and effective tax rate could increase.

In addition, changes by the U.S.

in relation to international tax reform could increase uncertainty and may adversely affect our income tax provision, cash taxes paid, and effective tax rate.

Comprehensive tax reform was enacted through the Tax Cuts and Jobs Act of 2017 (the “TCJA”) which includes numerous provisions that impact U.S.

corporate tax rates, business-related exclusions, deductions, and credits.

The taxing authorities continue to issue regulations and guidance, some with retrospective application, to the provisions of the TCJA, and we expect this to continue for the foreseeable future.

Any future adjustments resulting from retrospective regulations and guidance issued will be considered a discrete income tax expense or benefit in the period guidance is issued.

For example, the TCJA eliminated the deduction of certain domestic and foreign research and development expenditures beginning on January 1, 2022 and requires capitalization and amortization of such expenditures over a specified a period;

any revision, regulation, or new guidance to this rule may impact our future income tax provision, cash taxes paid, and effective tax rate.

Furthermore, changes in multilateral agreements and the tax laws of foreign jurisdictions could arise as a result of the base erosion and profit shifting project undertaken by the Organisation for Economic Co-operation and Development (the “OECD”)

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and could significantly increase our tax provision, cash taxes paid, and effective tax rate.

The OECD has issued significant global tax policy changes that include both expanded reporting as well as technical global tax policy changes and many countries in which we operate have implemented tax law and administrative changes to align with new OECD policies.

For example, in October 2021, OECD announced an agreed framework for an expansion of the taxing rights of market countries and to establish a global minimum corporate tax rate.

In December 2021, OECD published detailed model rules for a global minimum corporate tax rate of fifteen percent which will require multilateral agreement(s) and/or country-specific legislative action to be effective.

A global minimum corporate tax rate and any other implemented changes could significantly increase tax uncertainty due to differing interpretations and increased audit scrutiny.

We could incur significant liability if any of our separation from Danaher, our separation of our Automation and Specialty business or our separation of Vontier (collectively, the “Separation Transactions”) is determined to be a taxable transaction.

We have received an opinion from outside tax counsel to the effect that each of the Separation Transactions qualifies as a transaction that is described in Sections 355(a) and 368(a)(1)(D) of the Internal Revenue Code.

The opinion relies on certain facts, assumptions, representations, and undertakings from the applicable parties regarding the past and future conduct of the companies’ respective businesses and other matters.

If any of these facts, assumptions, representations, or undertakings are incorrect or not satisfied, our stockholders and we may not be able to rely on the applicable opinion of tax counsel and could be subject to significant tax liabilities.

Notwithstanding the opinion of tax counsel we have received, the IRS could determine on audit that any of the Separation Transactions is taxable if it determines that any of the corresponding facts, assumptions, representations, or undertakings are not correct or have been violated or if it disagrees with the conclusions in any of the applicable opinions.

If any of the Separation Transactions is determined to be taxable for U.S.

federal income tax purposes, we, as well as our stockholders that are subject to U.S.

federal income tax, would incur significant U.S.

federal income tax liabilities.

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• reducing our flexibility in planning for or reacting to changes in our business and market conditions;

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• exposing us to interest rate risk since a portion of our debt obligations are at variable rates;

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Our business may not generate sufficient cash flow to meet these obligations.

If we are unable

to service our debt or obtain additional financing, we may be forced to delay strategic acquisitions, capital expenditures, or research and development expenditures.

If we are unable to service our debt or obtain additional financing, we may be forced to delay strategic acquisitions, capital expenditures, or research and development expenditures.

We may not be able to obtain additional financing on terms acceptable to us or at all.

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Also, an acceleration of the debt under one of our debt instruments would trigger an event of default under other of our debt instruments.

The interest rates on our credit facilities may be impacted by the phase out of the London Interbank Offered Rate (“LIBOR”).

Pursuant to the terms of our credit facilities, the interest rate on our credit facilities may be based on LIBOR, which is in the process of being phased-out.

The FCA, which regulates LIBOR, has announced that it has commitments from panel banks to continue to contribute to LIBOR through the end of 2021, but that the FCA will not use its powers to compel contributions beyond such date.

Accordingly, there is considerable uncertainty regarding the publication of LIBOR beyond 2021 and it is not currently possible to determine precisely whether, or to what extent, the withdrawal and replacement of LIBOR would affect the Company;

however, the implementation of alternative benchmark rates to LIBOR may have an adverse impact on the cost of our borrowings under our credit facilities.

Risk Related to Shareholder Rights

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These provisions include, among others:

• the inability of our shareholders to call a special meeting;

• the inability of our shareholders to act by written consent;

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These provisions are not intended to make our company immune from takeovers.

However, these provisions will apply even if the offer may be considered beneficial by some shareholders and could delay or prevent an acquisition that the Board determines is not in the best interests of our company and our shareholders.

However, these provisions will apply even if the offer may be considered beneficial by some shareholders and could delay or prevent an acquisition that the Board

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determines is not in the best interests of our company and our shareholders.

These provisions may also prevent or discourage attempts to remove and replace incumbent directors.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors