What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-03-01 compared with 2021-02-26 · 307 added, 378 removed, 1429 unchanged (32% of the section changed)

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Based on this assessment, management concluded that, as of December 31, 2021, the Company’s internal control over financial reporting is effective.

The Company completed the acquisitions of the ServiceChannel business on August 24, 2021 and Provation on December 27, 2021, collectively the “Acquired Businesses.” The Company has not yet fully incorporated the internal controls and procedures of the Acquired Businesses into the Company’s internal control over financial reporting, and as such, management excluded the Acquired Businesses from its assessment.

The Company has included goodwill and other intangible assets of the Acquired Businesses in this assessment.

The assets and revenues of the Acquired Businesses excluded from management’s assessment of internal controls constituted 1% of the Company’s total assets as of December 31, 2021 and 1% of the Company’s total revenues for the year ended December 31, 2021, respectively.

The Company’s independent registered public accounting firm has issued an audit report on the effectiveness of the Company’s internal control over financial reporting.

This report dated February 28, 2022 appears on page 51 of this Form 10-K.

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Report of Independent Registered Public Accounting Firm

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In our opinion, Fortive Corporation and subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on the COSO criteria.

As indicated in the accompanying Report of Management on Fortive Corporation’s Internal Control Over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of ServiceChannel and Provation, collectively the “Acquired Businesses”, which are included in the 2021 consolidated financial statements of the Company.

Collectively, the Acquired Businesses constituted 1% of the Company’s total assets as of December 31, 2021 and 1% of the Company’s total revenues for the year then ended.

Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of the Acquired Businesses.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of Fortive Corporation and subsidiaries as of December 31, 2021 and 2020, the related consolidated statements of earnings, comprehensive income, changes in equity and cash flows for each of the three years in the period ended December 31, 2021, and the related notes and financial statement schedule listed in the Index at Item 15(a)(2) and our report dated February 28, 2022 expressed an unqualified opinion thereon.

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February 28, 2022

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Report of Independent Registered Public Accounting Firm

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To estimate the fair value, management uses a market approach based on multiples of earnings before interest, taxes, depreciation and amortization (EBITDA).

In certain circumstances, management also evaluates other factors including the fair value computed through a discounted cash flow analysis to assess whether the reporting unit is impaired, and if so, the amount of impairment.

The evaluation is performed on an annual basis, or more frequently if a triggering event is identified.

In certain circumstances, management computes the estimated fair value through a discounted cash flow analysis to validate the results of the market approach.

The goodwill evaluation is performed on an annual basis, or more frequently if a triggering event is identified.

As described in Note 7, the Company’s goodwill balance is $9.2 billion as of December 31, 2021.

Due in large part to the COVID-19 pandemic and an updated forecast for Telematics (a component of discontinued operations), the Company determined that an interim quantitative impairment assessment of the Telematics reporting unit was necessary to be performed as of March 27, 2020.

As described in Note 4, the Company estimated the fair value of the Telematics reporting unit using the discounted cash flow method and it resulted in the recording of a non-cash goodwill impairment charge of $85.3 million, which is presented in discontinued operations.

The determination of the fair value using the discounted cash flow method requires management to make significant estimates and assumptions related to future revenue, future profitability, and appropriate discount and terminal growth rates.

Auditing the Company’s annual goodwill impairment assessment is complex and highly judgmental due to the significant estimation required in determining the fair value of the reporting units.

In particular, the estimated fair value is sensitive to significant assumptions including the selection of market multiples, projected financial information and, when applicable, discount rates and terminal growth rates.

In particular, the estimated fair value is sensitive to the significant assumptions related to the selection of market multiples and projected financial information.

A high degree of audit judgment and an increased extent of effort including the need to involve our fair value specialists was required.

How We Addressed the Matter in Our Audit We tested controls over management’s goodwill impairment assessment, including those related to the determination of the estimated interim fair value of the Telematics reporting unit.

This included controls related to management’s forecasting, selection of market multiples and review of key assumptions including revenue growth, discount rate and terminal growth rate.

To test the annual evaluation of goodwill and the measurement of the recorded Telematics goodwill impairment, among other procedures, we evaluated the reasonableness of management’s forecasts, tested the completeness and accuracy of the underlying data used to develop the forecast and tested the carrying value of the reporting unit.

With the support of our fair value specialists, we evaluated the significant assumptions in the Telematics model, including the discount rate and terminal growth rate.

Our fair value specialists also assisted us with our testing of management’s selected EBITDA multiples for the annual goodwill evaluation.

We also evaluated the Company’s disclosures included in Notes 4 and 7 to the consolidated financial statements in relation to these matters.

Description of the Matter Accounting for unrecognized tax benefits

The Company operates in a complex, multinational tax environment, and its effective tax rate is affected by implementation of global tax planning strategies, including those related to business acquisition and divestiture structuring.

The Company’s uncertain tax positions are subject to audit by taxing authorities in various jurisdictions, and the resolution of such audits may span multiple years.

The Company uses significant judgment to (1) determine whether, based on the technical merits, a tax position is more likely than not to be sustained and (2) measure the amount of tax benefit that qualifies for recognition.

As more fully described in Note 14 - Income Taxes, as of December 31, 2020, the Company’s gross unrecognized tax benefits were $200 million.

Auditing the recognition and measurement of tax positions, including those related to business acquisitions and divestiture restructuring, was challenging because the measurement of the tax position is complex, highly judgmental and based on interpretations of tax laws and legal rulings.

How We Addressed the Matter in Our Audit We tested controls over the Company’s process to assess the technical merits of tax positions, including management’s process to measure the benefits of those tax positions.

In testing the measurement criteria, we involved our tax professionals to assess the technical merits of the Company’s tax positions.

This included assessing the Company’s correspondence with relevant tax authorities as well as evaluating their third-party income tax opinions or memorandums and application of case law, rulings or other relevant tax authority obtained or considered by the Company.

To support our evaluation, among other things, we separately interviewed certain key external tax advisers of the Company.

We analyzed the Company’s assumptions and data used to determine the amount of tax benefit to recognize and tested the accuracy of the calculations.

We also evaluated the Company’s income tax disclosures included in Note 14 to the consolidated financial statements in relation to these matters.

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How We Addressed the Matter in Our Audit We tested controls over management’s goodwill impairment assessment.

This included controls related to management’s forecasting and selection of market multiples.

To test the annual evaluation of goodwill, among other procedures, we evaluated the reasonableness of management’s forecasts, tested the completeness and accuracy of the underlying data used to develop the forecast and tested the carrying value of the reporting units.

Our fair value specialists assisted us with our testing of management’s selected EBITDA multiples for the annual goodwill evaluation.

We also evaluated the Company’s disclosures included in Note 7 to the consolidated financial statements in relation to these matters.

Description of the Matter Valuation of acquired intangible assets

As described in Note 3 to the consolidated financial statements, the Company completed two acquisitions during 2021 for a total consideration of $2.6 billion.

Auditing the accounting for the acquisitions was complex and highly judgmental due to the significant estimation required in determining the fair value of customer relationships, technology, database and trade names acquired (collectively, “intangible assets”), which totaled $792 million in aggregate.

In particular, the estimated fair values were sensitive to significant assumptions such as the projected financial information, royalty rates and discount rates used in the valuation models, which are affected by expectations about future market and economic conditions.

How We Addressed the Matter in Our Audit We tested controls over the measurement of the acquired intangible assets, including management’s review of the significant assumptions mentioned above and the completeness and accuracy of the data used in the measurements.

To test the estimated fair value of the intangible assets, we read the related purchase agreements, evaluated, among other things, whether (1) the valuation methodologies used were appropriate, (2) the significant assumptions, including discount rates, royalty rates, revenue growth rates, and projected free cash flow, used in valuing these intangibles were reasonable, and (3) the underlying data used by the Company in its analyses was appropriate.

Specifically, when evaluating the assumptions related to the projected free cash flow, we compared the assumptions to the past performance of the acquired entities, the Company's history related to similar acquisitions, and the Company’s future plans for the acquired entities.

We involved our fair value specialists to assist in our completion of our audit procedures.

We also evaluated the Company’s disclosures included in Note 3 to the consolidated financial statements in relation to these matters.

/s/ Ernst & Young LLP

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February 28, 2022

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FORTIVE CORPORATION AND SUBSIDIARIES

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Cash and equivalents $ 819.3 $ 1,824.8

Accounts receivable less allowance for doubtful accounts of $ 42.5 million and $ 26.4 million at December 31, 2020 and December 31, 2019, respectively

Accounts receivable less allowance for doubtful accounts of $ 39.7 million and $ 42.5 million, respectively

Inventories 512.7 455.5

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Other intangible assets, net 3,890.2 3,290.6

Other assets, discontinued operations — 2,008.3

Total assets $ 16,465.5 $ 16,051.5

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Long-term debt 1,807.3 2,830.3

Long-term liabilities, discontinued operations — 272.6

Commitments and Contingencies

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$ 0.01 par value, 15.0 million shares authorized;

5.0 % Mandatory convertible preferred stock, series A, 1.4 million shares designated, issued and outstanding at December 31, 2020 and December 31, 2019

5.0 % Mandatory convertible preferred stock, series A, zero shares and 1.4 million shares designated, issued and outstanding at December 31, 2021 and December 31, 2020, respectively.

Common stock:

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Retained earnings 6,023.6 5,547.4

Accumulated other comprehensive income (loss) ( 141.1 ) ( 56.3 )

Accumulated other comprehensive loss ( 185.0 ) ( 141.1 )

Total Fortive stockholders’ equity 9,512.2 8,964.2

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See the accompanying Notes to the Consolidated Financial Statements.

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FORTIVE CORPORATION AND SUBSIDIARIES

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Non-operating income (expense), net:

Gain from combination of business — 40.8 —

Interest expense, net ( 103.2 ) ( 148.5 ) ( 142.6 )

Unrealized gain on investment in Vontier Corporation 1,119.2 — —

Gain from combination of business — — 40.8

Loss on extinguishment of debt ( 104.9 ) — —

Gain on litigation resolution 29.9 — —

Gain on investment in Vontier Corporation 57.0 1,119.2 —

Other non-operating expenses, net ( 14.1 ) ( 2.4 ) ( 5.4 )

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Diluted 352.3 359.0 340.0

The sum of net earnings per share amount may not add due to rounding.

The sum of net earnings per common share amount may not add due to rounding.

See the accompanying Notes to the Consolidated Financial Statements.

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FORTIVE CORPORATION AND SUBSIDIARIES

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See the accompanying Notes to the Consolidated Financial Statements.

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FORTIVE CORPORATION AND SUBSIDIARIES

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Comprehensive

Income (Loss) Noncontrolling

Loss Noncontrolling

Shares Amount Shares Amount

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Mandatory convertible preferred dividends — — — — — ( 69.0 ) — —

Non-cash adjustment to Net Former Parent investment — — — — 9.1 — — —

Other comprehensive income — — — — — — 30.3 —

Common stock-based award activity 1.5 — — — 88.8 — — —

Issuance of mandatory convertible preferred stock — — 1.4 — 1,337.0 — — —

Split-off of A&S Business ( 15.8 ) ( 0.2 ) — — ( 759.9 ) ( 576.0 ) 44.7 —

Issuance of 0.875 % senior convertible notes due 2022

— — — — 100.4 — — —

Changes in noncontrolling interests — — — — — — — ( 4.2 )

Net transfers to Former Parent — — — — ( 4.1 ) — —

Balance, December 31, 2019 336.0 3.4 1.4 — 3,311.1 4,128.8 ( 56.3 ) 13.2

Adoption of accounting standards ( 31.3 )

Balance, January 1, 2020 336.0 3.4 1.4 — 3,311.1 4,097.5 ( 56.3 ) 13.2

Net earnings for the period — — — — — 1,613.3 — —

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Common stock-based award activity 3.0 — — — 112.9 — — —

Issuance of 0.875 % senior convertible notes due 2022

— — — 100.4 — — —

Vontier Separation and other — — — 130.5 — ( 135.6 ) —

Change in noncontrolling interests — — — — — — — ( 4.7 )

Net transfers to Former Parent — — — — ( 4.1 ) — — —

Balance, December 31, 2020 339.0 3.4 1.4 — 3,554.5 5,547.4 ( 141.1 ) 8.5

Adoption of accounting standards — — — — — ( 31.3 ) — —

Balance, January 1, 2020 336.0 3.4 1.4 — 3,311.1 4,097.5 ( 56.3 ) 13.2

Net earnings for the period — — — — — 608.4 — —

Dividends to common shareholders — — — — — ( 97.7 ) — —

Mandatory convertible preferred dividends — — — — — ( 69.0 ) — —

Mandatory convertible preferred stock cumulative dividends — — — — — ( 34.5 ) — —

Conversion of Mandatory convertible preferred stock to common stock 19.4 0.2 ( 1.4 ) — — — — —

Other comprehensive income — — — — — — ( 43.9 ) —

Common stock-based award activity 0.7 — — — 117.7 — — —

Early extinguishment of 0.875 % senior convertible notes due 2022

— — — — ( 11.6 ) — — —

Vontier Separation and other — — — — 8.6

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See the accompanying Notes to the Consolidated Financial Statements.

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FORTIVE CORPORATION AND SUBSIDIARIES

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Noncash items:

Unrealized gain on investment in Vontier Corporation ( 1,119.2 ) — —

Depreciation 74.1 80.5 69.7

Amortization 320.8 309.9 261.0

Depreciation 74.7 74.1 80.5

Stock-based compensation expense 77.4 62.6 52.5

Loss on extinguishment of debt 104.2 — —

Unrealized gain on investment in Vontier Corporation — ( 1,119.2 ) —

Gain from combination of business — — ( 40.8 )

Impairment charges on intangibles — — 0.6

Gain on sale of property — ( 5.3 ) —

Gain on investment in Vontier Corporation ( 57.0 ) — —

Gain on litigation resolution ( 29.9 ) — —

Change in deferred income taxes ( 41.0 ) ( 97.6 ) ( 8.5 )

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Total operating cash provided by continuing operations 992.9 977.7 702.0

Total operating cash provided by discontinued operations 459.0 569.4 660.3

Total operating cash (used in) provided by discontinued operations ( 31.8 ) 459.0 569.4

Net cash provided by operating activities 961.1 1,436.7 1,271.4

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Proceeds from sale of property 4.5 5.3 —

All other investing activities — — 2.2

Total investing cash used in continuing operations ( 2,615.6 ) ( 110.8 ) ( 4,014.3 )

Total investing cash (used in) provided by discontinued operations ( 37.6 ) ( 40.3 ) 879.7

Total investing cash used in discontinued operations — ( 37.6 ) ( 40.3 )

Net cash used in investing activities ( 2,615.6 ) ( 148.4 ) ( 4,054.6 )

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Repayment of borrowings (maturities greater than 90 days) ( 611.1 ) ( 1,730.8 ) ( 455.3 )

Proceeds from issuance of mandatory convertible preferred stock, net of $ 43.0 million of issuance costs

Payment of common stock cash dividend to shareholders ( 97.7 ) ( 94.4 ) ( 93.8 )

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Total financing cash (used in) provided by continuing operations 652.0 ( 675.7 ) 2,813.1

Total financing cash (used in) provided by discontinued operations ( 20.4 ) ( 10.2 ) 5.9

Total financing cash used in discontinued operations — ( 20.4 ) ( 10.2 )

Net cash (used in) provided by financing activities 652.0 ( 696.1 ) 2,802.9

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Supplemental disclosure:

Transfer of non-cash net liabilities to Vontier Corporation $ 147.4 $ — $ —

Transfer of noncash net liabilities to Vontier Corporation $ — $ 147.4 $ —

See the accompanying Notes to the Consolidated Financial Statements.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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Fortive Corporation (“Fortive,” “the Company,” “we,” “our,” “us”) is a provider of essential technologies for connected workflow solutions across a range of attractive end-markets.

Our well-known brands hold leading positions in intelligent operating solutions, precision technologies, and advanced healthcare solutions.

Our businesses design, develop, service, manufacture, and market professional and engineered products, software, and services for a variety of end markets, building upon leading brand names, innovative technologies, and significant market positions.

Our research and development, manufacturing, sales, distribution, service, and administrative facilities are located in more than 50 countries across North America, Asia Pacific, Europe, and Latin America.

Our strategic segments - Intelligent Operating Solutions, Precision Technologies, and Advanced Healthcare Solutions - include well-known brands with leading positions in their markets.

Our businesses design, develop, manufacture, and service professional and engineered products, software, and services, building upon leading brand names, innovative technologies, and significant market positions.

We are headquartered in Everett, Washington and employ a team of more than 18,000 research and development, manufacturing, sales, distribution, service, and administrative employees in more than 50 countries around the world.

Basis of Presentation

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Vontier Separation and Discontinued Operations

On October 9, 2020, we completed the separation of our former Industrial Technologies segment by distributing 80.1 % of the outstanding shares of Vontier Corporation (“Vontier”) to our stockholders (“the Separation”) on a pro rata basis.

To effect the Separation, we distributed to our stockholders two shares of Vontier common stock for every five shares of Fortive common stock outstanding held on September 25, 2020, the record date for the distribution, and retained 19.9 % of the shares of Vontier common stock immediately following the Separation (the “Retained Vontier Shares”).

On January 19, 2021, we completed an exchange (the “Debt-for-Equity Exchange”) of 33.5 million shares of common stock of Vontier, representing all of the Retained Vontier Shares, for $ 1.1 billion in aggregate principal amount of indebtedness of the Company held by Goldman Sachs & Co., including (i) all $ 400 million of the term loan outstanding under the 364 -Day Term Loan Credit Agreement, dated as of March 23, 2020 (“2021 Term Loan”) and (ii) $ 683.2 million of the $ 1.0 billion of term loan outstanding under the Term Loan Credit Agreement, dated as of March 1, 2019 (the “2020 Delayed-Draw Term Loan”).

The accounting requirements for reporting the Separation of Vontier as a discontinued operation were met when the Separation was completed.

On October 9, 2020, we completed the separation of Vontier Corporation (“Vontier”), the entity we created to hold our former Industrial Technologies segment (the “Separation”).

The accounting requirements for reporting the Vontier business as a discontinued operation were met when the Separation was completed.

Accordingly, the consolidated financial statements reflect the results of the Vontier business as a discontinued operation for all periods presented.

Fortive did not retain a controlling interest in Vontier and therefore the Retained Vontier Shares and subsequent fair value changes in our Retained Vontier Shares are included in our assets of and results from continuing operations as of and for the year ended December 31, 2020.

On October 1, 2018, we completed the split-off of businesses in our automation and specialty platform (excluding our Hengstler and Dynapar businesses) (the “A&S Business”) to our shareholders who elected to exchange shares of our common stock for all issued and outstanding shares of Stevens Holding Company, Inc.

(“Stevens”), the entity we incorporated to hold the A&S Business.

The split-off was immediately followed by the merger of Stevens with a subsidiary of Altra Industrial Motion Corp.

Our shareholders who participated in the exchange offer tendered approximately 15.8 million shares of our common stock in exchange for 35.0 million shares of Altra.

Concurrently with such split-off, we sold directly to Altra the remainder of the assets and liabilities of the A&S Business that were not otherwise contributed to Stevens.

Accordingly, the A&S Business has been reported as discontinued operations in our Consolidated Statements of Earnings, and the related assets and liabilities have been presented as assets and liabilities of discontinued operations in the Consolidated Balance Sheets for all periods presented.

Refer to Note 4 for additional information about our discontinued operations.

On January 19, 2021, we completed an exchange (the “Debt-for-Equity Exchange”) of 33.5 million shares of common stock of Vontier, representing all of the Retained Vontier Shares, for $ 1.1 billion in aggregate principal amount of indebtedness of the Company held by Goldman Sachs & Co., including (i) all $ 400 million of the term loan outstanding under the 364-Day Term Loan Credit Agreement, dated as of March 23, 2020 (“Term Loan due March 2021”) and (ii) $ 683.2 million of the $ 1.0 billion of term loan outstanding under the Term Loan Credit Agreement, dated as of March 1, 2019 (the “Term Loan Due May 2021”).

On October 1, 2018, we completed the split-off of businesses in our automation and specialty platform (the “A&S Business”).

Accordingly, the A&S Business has been reported as discontinued operations in our consolidated financial statements for all periods presented.

Segment Presentation

In light of the Separation described above, Fortive changed its internal reporting structure on the first day of the fourth quarter, September 26, 2020, to reflect organizational and leadership changes that allow the Company to enhance and better evaluate the operational performance of and allocate resources to its businesses.

Fortive’s chief operating decision maker assesses

performance and allocates resources based on its new operating segments, which are also its new reportable segments.

Below is a description of Fortive’s new reportable segments:

Reportable Segment Operating Company

Intelligent Operating Solutions Fluke

Industrial Scientific, including Intelex

Precision Technologies Tektronix

Pacific Scientific Energetic Materials Company

Andersen-Negele

Hengstler and Dynapar

Advanced Healthcare Solutions Advanced Sterilization Products

Fluke Health Solutions

Our Intelligent Operating Solutions segment provides leading solutions to accelerate industrial and facility reliability and performance, as well as compliance and safety across a range of vertical end markets, including manufacturing, process industries, healthcare, utilities and power, communications and electronics, among others.

The businesses in our Intelligent Operating Solutions segment provide a broad and differentiated offering of instrumentation, sensors, software, and services to address these critical workflows for our customers.

Our Precision Technologies segment supplies technologies to a broad set of vertical end markets, enabling our customers to accelerate the development of innovative products and solutions.

We operate and report our results in three segments, Intelligent Operating Solutions, Precision Technologies, and Advanced Healthcare Solutions, each of which is further described below.

Our Intelligent Operating Solutions segment provides leading workflow solutions to accelerate industrial and facility reliability and performance, as well as compliance and safety across a range of vertical end markets, including manufacturing, process industries, healthcare, utilities and power, communications and electronics, among others.

The businesses in our Intelligent Operating Solutions segment provide differentiated instrumentation and sensors, software and services to address our customers’ toughest workflow challenges.

Our Precision Technologies segment supplies instrumentation and sensing technologies to a broad set of vertical end markets, enabling our customers to accelerate the development, manufacture and launch of innovative products and solutions.

We provide our customers with electrical test and measurement instruments and services, energetic material devices, and a broad portfolio of sensor and control system solutions.

Our Advanced Healthcare Solutions segment serves healthcare customers with enabling products and services for critical activities that help ensure safe, efficient, and timely healthcare.

Through the Advanced Healthcare Solutions segment, we provide broad hardware and software portfolio offerings optimized around our end-users’ most critical workflows, including instrument and device reprocessing, instrument tracking, cell therapy equipment design and manufacturing, biomedical test tools, radiation safety monitoring, and asset management.

Our Advanced Healthcare Solutions segment supplies critical workflow solutions to hospitals and other healthcare customers, enabling safer, more efficient, and higher quality healthcare.

Through the Advanced Healthcare Solutions segment, we provide hardware, consumables, software and services that optimize our customers’ most critical workflows, including instrument

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sterilization and device reprocessing, instrument tracking, cell therapy equipment design and manufacturing, biomedical test tools, radiation safety monitoring, end-to-end clinical productivity solutions and asset management.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which amended the impairment model by requiring entities to use a forward-looking approach, based on expected losses, to estimate credit losses on certain types of financial instruments, including financing, trade accounts, and unbilled receivables.

1, 2020, we adopted ASU 2016-13 and recognized in our Consolidated Balance Sheet as of January 1, 2020 an increase in the allowance for trade accounts, unbilled, and financing receivables of $ 40.0 million, of which $ 11.5 million related to our continuing operations and was related primarily to trade accounts and unbilled receivables, with a corresponding net of tax adjustment to beginning retained earnings of $ 31.3 million.

Results for reporting periods beginning January 1, 2020 reflect the adoption of ASU 2016-13, while prior period amounts were not adjusted and continue to be reported in accordance with our historical accounting practices.

Prior to the adoption of ASU 2016-13 on January 1, 2020, we recognized an allowance for incurred losses when they were probable based on many quantitative and qualitative factors, including delinquency.

After the adoption of ASU 2016-13, we measure our allowance to reflect expected credit losses over the remaining contractual life of the asset.

On January 1, 2020, we adopted ASU 2016-13 and recognized in our Consolidated Balance Sheet as of January 1, 2020 an increase in the allowance for trade accounts, unbilled, and financing receivables of $ 40.0 million, of which $ 11.5 million related to our continuing operations and was related primarily to trade accounts and unbilled receivables, with a corresponding net of tax adjustment to beginning retained earnings of $ 31.3 million.

After the adoption of ASU 2016-13 on January 1, 2020, we measure our allowance to reflect expected credit losses over the remaining contractual life of the asset.

We pool assets with similar risk characteristics for this measurement based on attributes that may include asset type, duration, and/or credit risk rating.

The future expected losses of each pool are estimated based on numerous quantitative and qualitative factors reflecting management’s estimate of collectibility over the remaining contractual life of the pooled assets, including:

The future expected losses of each pool are estimated based on numerous quantitative and qualitative factors reflecting management’s estimate of collectability over the remaining contractual life of the pooled assets, including:

• historical, current, and forecasted future loss experience by asset type;

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We did not realize notable increases in loss rates and delinquencies during the year ended December 31, 2021, and given the nature of our portfolio of receivables, our historical experience during times of challenging economic conditions, and our forecasted future impact of COVID-19 on our customer’s ability to pay, we did not record material provisions for credit losses as a result of the COVID-19 pandemic during the year ended December 31, 2021.

If the financial condition of our customers were to deteriorate beyond our current estimates, resulting in an impairment of their ability to make payments, we would be required to write-off additional receivable balances, which would adversely impact our net earnings and financial condition.

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financial condition of our customers were to deteriorate beyond our current estimates, resulting in an impairment of their ability to make payments, we would be required to write-off additional receivable balances, which would adversely impact our net earnings and financial condition.

The following is a rollforward of the aggregated allowance for credit losses related to our trade accounts receivables as of December 31, 2021 ($ in millions):

Balance, December 31, 2020 $ 42.5

Continuing operations transition adjustment 11.5

Provision 7.1

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

Fair Value of Financial Instruments —Our financial instruments consist primarily of cash and cash equivalents, trade accounts receivable, our investment in Vontier common stock, nonqualified deferred compensation plans, obligations under trade accounts payable, and short and long-term debt.

Fair Value of Financial Instruments —Our financial instruments consist primarily of cash and cash equivalents, trade accounts receivable, nonqualified deferred compensation plans, obligations under trade accounts payable, and short and long-term debt.

Due to their short-term nature, the carrying values for trade accounts receivable, trade accounts payable, and short-term debt approximate fair value.

Our investment in Vontier common stock is remeasured at fair value based on Vontier’s closing stock price on the measurement date, with an unrealized gain recorded in the Consolidated Statement of Earnings.

While outstanding, we remeasured our investment in Vontier common stock at fair value based on Vontier's closing stock price on the measurement date, with unrealized gains recorded in the Consolidated Statement of Earnings.

Refer to Note 8 for the fair values of our other obligations.

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Goodwill and Other Intangible Assets —Goodwill and other intangible assets result from our acquisition of existing businesses.

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Refer to Note 3 and Note 7 for additional information about our goodwill and other intangible assets.

Revenue Recognition —We derive revenues primarily from the sale of Intelligent Operating Solutions, Precision Technologies and Advanced Healthcare Solutions products and services.

Revenue Recognition —We derive revenue from the sale of products and services.

Revenue is recognized when control of promised products or services is transferred to customers in an amount that reflects the consideration we expect to be entitled to in exchange for those products or services.

Product sales include revenues from the sale of products and equipment, which includes our software as a service product offerings and equipment rentals.

Product sales include revenue from the sale of products and equipment, which includes our software and software as a service (“SaaS”) product offerings and equipment rentals.

Service sales include revenues from extended warranties, post-contract customer support, maintenance contracts or services, contract labor to perform ongoing service at a customer location, and services related to previously sold products.

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Sometimes this evaluation involves judgment to determine whether the goods or services are highly dependent on or highly interrelated with one another, or whether such goods or services significantly modify or customize one another.

Certain customer arrangements include multiple performance obligations, typically hardware, installation, training, consulting, other services, and/or post contract support (“PCS”).

Certain customer arrangements include multiple performance obligations, typically hardware, installation, training, consulting, other services, and/or post-contract customer support (“PCS”).

Generally, these elements are delivered within the same reporting period, except PCS and other services.

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Allocating the transaction price to each performance obligation sometimes requires significant judgment.

Our principal terms of sale are FOB Shipping Point, or equivalent, and, as such, we primarily record revenue upon shipment as we have transferred control to the customer at that point and our performance obligations are satisfied.

We evaluate contracts with delivery terms other than FOB Shipping Point and recognize revenue when we have transferred control and satisfied our performance obligations.

Revenue from sales of hardware is recognized when control transfers to the customer, which is generally when the product is shipped.

If any significant obligation to the customer with respect to a sales transaction remains to be fulfilled following shipment (typically installation, other services noted above, or acceptance by the customer), revenue recognition is deferred until such obligations have been fulfilled.

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Research and development costs are expensed as incurred.

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Restructuring —We periodically initiate restructuring activities to appropriately position our cost base relative to prevailing economic conditions and associated customer demand, as well as in connection with certain acquisitions.

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Refer to Note 15 for additional information.

Foreign Currency Translation and Transactions —Exchange rate adjustments resulting from foreign currency transactions are recognized in Net earnings, whereas effects resulting from the translation of financial statements are reflected as a component of Accumulated other comprehensive income (loss) within Stockholders’ equity.

Assets and liabilities of subsidiaries operating outside the United States with a functional currency other than U.S.

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Refer to Note 14 for additional information.

Accumulated Other Comprehensive Income (Loss) —Foreign currency translation adjustments are generally not adjusted for income taxes as they relate to indefinite investments in non-U.S.

Accumulated Other Comprehensive Loss —Foreign currency translation adjustments are generally not adjusted for income taxes as they relate to indefinite investments in non-U.S.

subsidiaries.

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Accordingly, foreign currency transaction gains or losses on the debt were deferred in the foreign currency translation component of Accumulated other comprehensive income (loss) (“AOCI”) as an offset to the foreign currency translation adjustments on our investments in foreign subsidiaries.

We recognized gains of $ 1.9 million, $ 5.7 million and $ 9.4 million for the years ended December 31, 2020, 2019, and 2018, respectively, in Other comprehensive income (loss) related to the net investment hedges.

We exited our Euro-denominated commercial paper positions during the second quarter of 2020 and repaid our ¥ 13.8 billion senior unsecured term facility loan during the fourth

Table of Conten t s

quarter of 2020.We did no t designate any net investment hedges during the year ended December 31, 2021.

In 2020 and 2019 we recognized gains of $ 1.9 million and $ 5.7 million, respectively, in Other comprehensive income (loss) related to the net investment hedges.

We recorded no ineffectiveness from our net investment hedges during the years ended December 31, 2020 and 2019.

Any amounts deferred in AOCI will remain until the hedged investment is sold or substantially liquidated.

The Company recorded no ineffectiveness from its net investment hedges during the years ended December 31, 2020, 2019, and 2018.

As of December 31, 2021, we had no designated net investment hedges.

Table of Conten t s

The changes in AOCI by component are summarized below ($ in millions):

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50.5 ( 20.2 ) 30.3

Divestiture of A&S Business 34.0 10.7 44.7

Balance, December 31, 2019 $ 21.2 $ ( 77.5 ) $ ( 56.3 )

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Net current period other comprehensive income (loss) 63.5 ( 12.7 ) 50.8

Vontier Separation ( 138.7 ) 3.1 ( 135.6 )

Balance, December 31, 2020 $ ( 54.0 ) $ ( 87.1 ) $ ( 141.1 )

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Net current period other comprehensive income (loss) ( 68.7 ) 24.8 ( 43.9 )

Vontier Separation ( 138.7 ) 3.1 ( 135.6 )

Balance, December 31, 2021 $ ( 122.7 ) $ ( 62.3 ) $ ( 185.0 )

(a) This component of AOCI is included in the computation of net periodic pension cost (refer to Note 12) and also includes activity related to the Vontier business prior to the cumulative Vontier Separation adjustment shown above.

(b) Includes balances relating to defined benefit pension plans and other postretirement employee benefit plans.

(b) Includes balances relating to defined benefit plans, supplemental executive retirement plans, and other postretirement employee benefit plans.

Pension —We measure our pension assets and obligations to determine the funded status as of December 31st each year, and recognize an asset for an overfunded status or a liability for an underfunded status in our Consolidated Balance Sheets.

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Refer to Note 12 for additional information on our pension plans including a discussion of

Table of Conten t s

actuarial assumptions, our policy for recognizing associated gains and losses, and the method used to estimate service and interest cost components.

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Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity , which amends the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity.

We may adopt this standard using either a modified retrospective or a fully retrospective method of transition.

This standard is effective for us beginning January 1, 2022, with early adoption permitted.

We are currently evaluating the impact of this standard on our financial statements and the method of adoption we plan to utilize.

This standard was effective for us beginning January 1, 2022 and impacts the accounting treatment of our Convertible Notes.

Upon adoption of the standard using a modified retrospective approach, we expect to record an adjustment to reclassify the remaining value of the conversion feature that was originally recognized as equity to debt, and adjust beginning retained earnings for the amount previously recognized as noncash interest expense.

We do not expect this standard to have material impacts on our consolidated financial statements.

In October 2021, the FASB issued ASU No.

2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers.

The amendments in this update require that an acquirer recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606, rather than at fair value as previously required under Topic 805.

Fortive elected to early adopt ASU No.

2021-08 in the fourth quarter of 2021 and the amendments have been applied to all business combinations that occurred on or after January 1, 2021.

Accordingly, during the fourth quarter of 2021, we adjusted the deferred revenue balance recognized in the opening balance sheet for ServiceChannel in accordance with the amendments, resulting in a $ 1.5 million increase in revenue recognized during the year ended December 31, 2021.

Further, we have applied these amendments to our initial recognition of the contract assets and contract liabilities assumed in the Provation acquisition, discussed in Note 3.

We continually evaluate potential mergers, acquisitions, and divestitures that align with our strategy and expedite the evolution of our portfolio of businesses into new and attractive areas.

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In the months after closing, as we obtain additional information about these assets and liabilities, including through tangible and intangible asset appraisals, and learn more about the newly acquired business, we are able to refine the estimates of fair value and more accurately allocate the purchase price.

Only items identified as of the acquisition date are considered for subsequent adjustment.

Only facts and circumstances that existed as of the acquisition date are considered for subsequent adjustment.

We are in the process of obtaining valuations of certain acquired assets and evaluating the tax impact of certain acquisitions.

The determination of the fair value of the acquired intangible assets involves judgment and is sensitive to significant assumptions, including projected financial information, royalty rates and discount rates used in the valuation models, and are affected by uncertainties about future market and economic conditions.

We make appropriate adjustments to purchase price allocations prior to completion of the applicable measurement period, as required.

The following describes our acquisition activity for the years ended December 31, 2021, 2020, and 2019.

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On December 27, 2021, we acquired Provation Software, Inc.

(“Provation”), a leading provider of clinical workflow software solutions used in hospitals and ambulatory surgery centers.

The acquisition of Provation extends our digital offering and software capabilities in the healthcare space.

The total consideration paid was approximately $ 1.4 billion, net of acquired cash and was primarily financed with proceeds from our financing activities and available cash.

We preliminarily recorded $ 970 million of goodwill related to the acquisition, which is not tax deductible.

Provation had revenue in 2020 of approximately $ 90 million and is an operating company within our Advanced Healthcare Solutions segment.

ServiceChannel

On August 24, 2021, we acquired ServiceChannel Holdings, Inc.

(“ServiceChannel”), a privately held, global provider of SaaS based multi-site facilities maintenance service solutions with an integrated service-provider network.

The acquisition of ServiceChannel broadens our offering of software-enabled solutions for the facility and asset lifecycle workflow.

The total consideration paid was approximately $ 1.2 billion, net of acquired cash, and includes approximately $ 28 million of deferred compensation consideration that is being recognized ratably over a twelve month service period.

The ServiceChannel acquisition was primarily financed with available cash and proceeds from our financing activities.

We preliminarily recorded approximately $ 873 million of goodwill related to the ServiceChannel acquisition, which is not tax deductible.

ServiceChannel had revenue in 2020 of approximately $ 70 million and is an operating company within our Intelligent Operating Solutions segment.

Revenue and operating loss attributable to these acquisitions were $ 46.4 million and $ 60.9 million for the year ended December 31, 2021, respectively.

The operating loss includes $ 12.0 million of intangible asset amortization and $ 47.9 million of transaction and integration costs, primary comprised of compensation cost for employee retention and amounts paid to third party advisors, which are recorded in Selling, general and administration expenses.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed from acquisitions discussed above as of December 31, 2021 ($ in millions):

Provation ServiceChannel Total

Accounts receivable $ 39.6 $ 10.0 $ 49.6

Goodwill 969.6 873.4 1,843.0

Other intangible assets, primarily customer relationships, technology, database, and trade names 586.5 342.9 929.4

Deferred revenue, current ( 50.2 ) ( 1.7 ) ( 51.9 )

Deferred tax liabilities ( 119.4 ) ( 50.8 ) ( 170.2 )

Other assets and liabilities, net ( 20.5 ) ( 7.1 ) ( 27.6 )

Net cash consideration $ 1,405.6 $ 1,166.7 $ 2,572.3

Advanced Sterilization Products

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ASP has operations in an additional 39 countries (“Non-Principal Countries”).

The transferred assets and liabilities associated with these operations will close when requirements of country-specific agreements or regulatory approvals are satisfied.

The transferred assets and liabilities associated with these operations closed when requirements of country-specific agreements or regulatory approvals were satisfied.

The $ 2.7 billion purchase price was paid in exchange for ASP’s businesses in both Principal and Non-Principal Countries.

As of December 31, 2020 we have closed 20 Principal Countries and 34 Non-Principal Countries that, in aggregate, accounted for more th an 99 % of the preliminary valuation of ASP.

The remaining five Non-Principal Countries represent less than 1 % of the preliminary valuation of ASP, or $ 10.1 million, which is included as a prepaid asset in Other assets in the Consolid ated Balance

As each Non-Principal Country closes, we reduce the prepaid asset and record the fair value of the assets acquired and liabilities assumed.

As of December 31, 2021 we have closed all Principal Countries and Non-Principal Countries.

All of the provisional goodwill associated with the Transaction is included in goodwill in our Advanced Healthcare Solutions segment at December 31, 2021, and the majority of the provisional goodwill is tax deductible.

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In addition, the Company entered into a transition services agreement with Johnson & Johnson for certain administrative and operational services (“TSA”) with Principal Countries and distribution agreements in the Non-Principal Countries.

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As of December 31, 2021, ASP had exited the TSAs and substantially all of the distribution agreements.

ASP expects to close the remaining Non-Principal countries in early 2021.

Revenue and operating loss attributable to ASP for the year ended December 31, 2019 were $ 525 million and $ 111 million, respectively, and are included in our Advanced Healthcare Solutions segment beginning April 1, 2019.

Prior to our acquisition of ASP, Johnson & Johnson received a Civil Investigative Demand from the United States Department of Justice (“DOJ”) regarding a False Claims Act investigation arising from a whistleblower lawsuit pertaining to the pricing, quality, marketing, and promotion of certain of ASP’s products.

Based on the totality of available information at the Principal Closing Date and throughout the applicable measurement period, management allocated $ 26 million of the $ 2.7 billion purchase price to a potential liability related to the aforementioned litigation.

Following the Principal Closing Date, management continually evaluated the likelihood and magnitude of the asserted claims based on any new information that became available.

In the second quarter of 2021, following the unsealing of the whistleblower lawsuit and DOJ’s declination to intervene in the litigation, the plaintiff dismissed the whistleblower lawsuit.

Based on these developments, management derecognized the litigation liability from our Consolidated Balance Sheet and recorded a Gain on litigation resolution of $ 26 million within Non-operating income (expense), net in our Consolidated Statements of Earnings during the year ended December 31, 2021.

Operating loss includes amortization of intangible assets, acquisition-related fair value adjustments, and post-close transaction and integration costs associated with the Transaction of $ 230 million during the year ended December 31, 2019.

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Other assets and liabilities, net ( 94.5 )

Total consideration allocated to closed Principal and Non-Principal Countries 2,735.4

Prepaid acquisition asset related to remaining Non-Principal Countries 10.1

Net cash consideration $ 2,742.0

Completed Acquisitions in 2019

In addition to the acquisition of ASP, during 2019, we acquired four businesses including Intelex Technologies and Pruftechnik, both of which complement existing businesses in our Intelligent Operation Solutions segment, and Censis Technologies within our Advanced Healthcare Solutions segment, for total consideration of $ 1.2 billion in cash, net of cash acquired.

In addition to the acquisition of ASP, during 2019, we acquired Intelex Technologies and Pruftechnik, both of which complement existing businesses in our Intelligent Operation Solutions segment, and Censis Technologies (“Censis”) within our Advanced Healthcare Solutions segment, for total consideration of $ 1.2 billion in cash, net of cash acquired.

We recorded an aggregate of $ 781 million of goodwill related to these acquisitions.

Approximately $ 21 million of goodwill associated with these acquisitions is tax deductible.

At the closing date of the purchase of Censis Technologies, a contractual liability existed which management allocated to the purchase price and was recorded in our Consolidated Balance Sheet.

During the fourth quarter of 2021, that liability was discharged for an amount less than the amount allocated, and the excess was recorded as a Gain on litigation resolution of $ 3.9 million within Non-operating income (expense), net in our Consolidated Statements of Earnings during the year ended December 31, 2021.

The aggregate annual sales of these businesses in 2018 were approximately $ 191 million.

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The revenue and operating loss from these acquisitions included in our results were approximately $ 76 million and $ 53 million, respectively, during the year ended December 31, 2019.

Completed Acquisitions in 2018

On September 6, 2018, we acquired Athena SuperHoldCo, Inc., including Accruent, LLC (“Accruent”), a privately-held, leading provider of facilities asset management software, for a total purchase price of approximately $ 2.0 billion net of acquired cash (the “Accruent Acquisition”).

Accruent is a recognized leader in the facilities asset management industry, combining deep domain and industry capabilities with an integrated, cloud-based framework that provides insights spanning the full lifecycle of real estate, facilities, and asset management.

Accruent serves over 10,000 global customers, and helps assure clients fulfill the

mission of their organization by extending the lifecycle of assets, monitoring full compliance, and reducing safety risks.

Accruent is headquartered in Austin, Texas, and is included in our Intelligent Operating Solutions Segment.

Accruent generated annual revenues of approximately $ 200 million in 2017.

We financed the Accruent Acquisition with available cash and proceeds from our financing activities.

We recorded $ 1.2 billion of goodwill related to the Accruent Acquisition which is not tax deductible.

On July 27, 2018, we acquired TGG Ultimate Holdings, Inc.

and its subsidiaries, including The Gordian Group, Inc.

(“Gordian”), a privately-held, leading provider of construction cost data, software, and service, for a total purchase price of $ 778 million net of cash acquired (the “Gordian Acquisition”).

Gordian’s comprehensive offerings serve the entire building lifecycle and provide workflow solutions designed to optimize every stage of an asset owner’s construction and maintenance needs, including connecting the owner and contractors in the same exchange and providing access to cost and facility metrics databases via a subscription-based model.

Gordian is headquartered in Greenville, South Carolina, and is included in our Intelligent Operating Solutions segment.

Gordian generated annual revenues of approximately $ 110 million in 2017.

We financed the Gordian Acquisition with available cash.

We recorded $ 435 million of goodwill related to the Gordian Acquisition which is not tax deductible.

Revenue and operating losses attributable to these acquisitions for the year ended December 31, 2018 were $ 115 million and $ 51 million, respectively.

We recorded approximately $ 25 million of pretax transaction-related costs related to the acquisitions in 2018, which are recorded in Selling, general, and administrative expenses in the Consolidated Statements of Earnings.

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Acquisitions Summary

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Vontier Separation

On October 9, 2020, we completed the Separation by distributing 80.1 % of the outstanding shares of Vontier, the entity we created to hold the corresponding businesses, to Fortive stockholders on a pro rata basis.

To effect the Separation, the Company distributed to its stockholders two shares of Vontier common stock for every five shares of the Company’s common stock outstanding held on September 25, 2020, the record date for the distribution, with the Company retaining 19.9 % of the shares of Vontier common stock immediately following the Separation (the “Retained Vontier Shares”).

On October 9, 2020, we completed the Vontier Separation, by distributing 80.1 % of the outstanding shares of Vontier to Fortive stockholders on a pro rata basis.

To effect the Separation, we distributed to our stockholders two shares of Vontier common stock for every five shares of our common stock outstanding held on September 25, 2020, the record date for the distribution.

We retained 19.9 % of the shares of Vontier common stock immediately following the Separation (the “Retained Vontier Shares”).

On September 29, 2020, Vontier entered into a credit agreement (the “Credit Agreement”) with a syndicate of banks, consisting of a three-year , $ 800 million senior unsecured delayed draw term loan facility (the “ Three-Year Term Loans”), a two-year , $ 1 billion senior unsecured delayed draw term loan facility (the “ Two-Year Term Loans” and together with the Three-Year Term Loans, the “Term Loans”) and a three-year , $ 750 million senior unsecured multi-currency revolving credit facility (the “Revolving Credit Facility” and, together with the Term Loans, the “Credit Facilities”).

On the Distribution Date, Vontier drew down the full $ 1.8 billion available under the Term Loans.

Vontier used the proceeds from the Term Loans to make payments to the Company, with $ 1.6 billion used as part of the consideration for the contribution of certain assets and liabilities to Vontier by the Company in connection with the Separation and $ 202 million used as an adjustment for excess cash balances

remaining with Vontier (collectively, the “Cash Consideration”).

The Company intends to apply the Cash Consideration to repay certain outstanding indebtedness, interest on certain debt instruments, and to pay certain of the Company’s regular, quarterly cash dividends.

We applied the Cash Consideration to repay certain outstanding indebtedness, interest on certain debt instruments, and to pay certain of the Company’s regular, quarterly cash dividends.

Refer to Note 11 for the description of the debt repayments made subsequent to the Distribution Date.

Interest expense and extinguishment costs related to the debt retired during the fourth quarter of 2020 using the Cash Consideration was allocated to discontinued operations for all periods presented.

The accounting requirements for reporting the Separation of Vontier as a discontinued operation were met when the Separation was completed.

Accordingly, the consolidated financial statements for all periods presented reflect this business as a discontinued operation.

On January 19, 2021, we completed the Debt-for-Equity Exchange of 33.5 million shares of common stock of Vontier, representing all of the Retained Vontier Shares, for $ 1.1 billion in aggregate principal amount of indebtedness of the Company held by Goldman Sachs & Co., including (i) all $ 400 million of the outstanding 2021 Term Loan and (ii) $ 683.2 million of the 2020 Delayed-Draw Term Loan.

The accounting requirements for reporting the Vontier business as a discontinued operation were met when the Vontier Separation was completed.

Accordingly, the consolidated financial statements reflect the results of the Vontier business as a discontinued operation for all periods presented.

On January 19, 2021, we completed the Debt-for-Equity Exchange of 33.5 million shares of common stock of Vontier, representing all of the Retained Vontier Shares, for $ 1.1 billion in aggregate principal amount of indebtedness of the Company held by Goldman Sachs & Co., including (i) all $ 400.0 million of the Term Loan due March 2021 and (ii) $ 683.2 million of the Term Loan due May 2021.

We recorded a loss on extinguishment of the debt included in the Debt-for-Equity Exchange of $ 94.4 million in the year ended December 31, 2021.

Table of Conten t s

In preparation for and executing the Separation, the Company incurred $ 84 million and $ 35 million in Vontier stand-up and separation-related transaction costs during the years ended December 31, 2020 and 2019, respectively, which were recorded in the Selling, general, and administrative expenses component of Earnings from discontinued operations, net of income taxes in the Consolidated Statements of Earnings.

These stand-up and separation-related costs primarily relate to professional fees associated with preparation of regulatory filings and transaction execution and separation activities within finance, tax, legal, and information system functions.

In connection with the Separation, Fortive and Vontier entered into various agreements to effect the Separation and provide a framework for Vontier’s relationship with Fortive after the Separation, including a transition services agreement, an employee matters agreement, a tax matters agreement, an intellectual property matters agreement, a Fortive Business System (“FBS”) license agreement, and a stockholder’s and registration rights agreement (“the Agreements”).

These Agreements govern the Separation between Fortive and Vontier of the assets, employees, liabilities and obligations (including its investments, property and employee benefits and tax-related assets and liabilities) of Fortive and its subsidiaries attributable to periods prior to, at and after Vontier’s separation and also govern certain relationships between Fortive and Vontier after the Separation.

The impact of these services on our consolidated financial statements was immaterial.

Vontier Impairment Charge

We test goodwill for impairment annually in the fourth quarter of each year and may review goodwill in interim periods if certain events occur or circumstances change.

The results of our fourth quarter 2019 goodwill impairment testing of the Telematics reporting unit indicated the excess of the estimated fair value over the carrying value (expressed as a percentage of carrying value) was approximately 5 %, and as such, management continued to monitor the performance of Telematics during the first quarter of 2020.

In connection with management’s updated forecast for the Telematics reporting unit that indicated a decline in sales and operating profit to levels lower than previously forecasted, due in large part to the impacts of the COVID-19 pandemic, we performed a quantitative impairment assessment over the Telematics reporting unit on March 27, 2020.

We estimated the fair value of the Telematics reporting unit by considering an income approach, using the discounted cash flow method.

The income approach was based on projected future (debt-free) cash flows that were discounted to present value and assumed a terminal growth value.

The discount rate was based on Telematics’ weighted average cost of capital, taking into account market participant assumptions.

Management’s revenue and profitability forecasts used in the valuation considered recent and historical performance of the reporting unit, strategic initiatives, industry trends, and the current and future expectations of the macroeconomic environment.

Assumptions used in the valuation were similar to those that would be used by market participants performing independent valuations of this reporting unit.

Key assumptions developed by management and used in the quantitative analysis included the following:

• Near-term revenue declines in 2020 with later-term improvements over the projection period;

• Improved profitability over the projection period, trending consistent with revenues;

• Market-based discount rates.

We did not consider the market approach in our fair value calculation given the near term uncertainty in the market data and forecasts of the guideline companies upon which the approach relies.

As a result of the interim impairment testing performed, we concluded that the estimated fair value of the Telematics reporting unit was less than its carrying value as of March 27, 2020, and recorded a non-cash goodwill impairment charge of $ 85.3 million during the three month period ended March 27, 2020 to reduce the carrying value of goodwill to $ 235.9 million.

As a result of the 2020 interim impairment testing performed, we concluded that the estimated fair value of the Telematics reporting unit was less than its carrying value as of March 27, 2020, and recorded a noncash goodwill impairment charge of $ 85.3 million during the three month period ended March 27, 2020.

The Telematics reporting unit was included in our former Industrial Technologies segment and part of the Vontier Separation.

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Divestiture of A&S Business

On March 7, 2018, we entered into a definitive agreement to combine four of our operating companies from our Automation & Specialty platform (the “A&S Business”) with Altra Industrial Motion Corp.

(“Altra”) in a tax-efficient Reverse Morris Trust transaction.

The A&S Business includes the market-leading brands of Kollmorgen, Thomson, Portescap, and Jacobs Vehicle Systems.

On October 1, 2018, we completed the split-off of the A&S Business.

The total consideration received was $ 2.7 billion and consisted of (i) $ 1.3 billion through a fully-subscribed exchange offer, in which we accepted and subsequently retired 15,824,931 shares of our own common stock from our stockholders in exchange for the 35,000,000 shares of common stock of Stevens Holding Company, Inc.;

(ii) $ 1.0 billion in cash paid to us for the direct sales of certain assets and liabilities of the A&S Business;

(iii) $ 250 million as part of a non-cash debt-for-debt exchange that reduced outstanding indebtedness of Fortive, which was inclusive of accrued interest and related fees;

and (iv) $ 150 million in cash paid to us by Stevens Holding Company, Inc.

as a dividend.

We recognized an after-tax gain on the transaction of $ 1.9 billion.

On October 1, 2018, we completed the separation of our A&S Business.

The accounting requirements for reporting the disposition of the A&S Business as a discontinued operation were met when the separation and merger were completed.

Accordingly, the consolidated financial statements for all periods presented reflect this business as discontinued operations.

We incurred approximately $ 77 million of pretax transaction-related costs associated with the divestiture during the year ended December 31, 2018, which was primarily for professional fees.

These amounts are recorded in the Gain (loss) on disposition of discontinued operations before income taxes component of Earnings from discontinued operations, net of income taxes.

Interest expense related to the debt retired as part of the debt-for-debt exchange was allocated to discontinued operations for all periods presented.

We provided certain support services under transition services agreements, and the impact of these services on our consolidated financial statements was immaterial.

The key components of income from discontinued operations for the years ended December 31 were as follows ($ in millions):

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Earnings from discontinued operations, net of income taxes $ ( 5.8 ) $ 161.1 $ 470.8

Table of Conten t s

The following table summarizes the major classes of assets and liabilities of discontinued operations that were included in the Company’s Consolidated Balance Sheets as of December 31 ($ in millions):

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Property, plant and equipment, net — —

Goodwill — 1,157.8

Other intangible assets, net — —

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At December 31, 2021 and December 31, 2020, the carrying amount of the investment in the Combined Business included in other assets in the Consolidated Balance Sheets was $ 66 million and $ 77 million, respectively.

For the years ended December 31, 2020 and December 31, 2019, the loss from our equity investment in the Combined Business recorded in Other non-operating expenses, net in the Consolidated Statements of Earnings was $ 4 million in both respective periods.

For the years ended December 31, 2021 and December 31, 2020, the loss from our equity investment in the Combined Business recorded in Other non-operating expenses, net in the Consolidated Statements of Earnings was $ 11 million and $ 4 million, respecti vely.

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

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The liquidation of LIFO inventory did not have a significant impact on our results of operations in any period presented.

Table of Conten t s

PROPERTY, PLANT AND EQUIPMENT

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Refer to Note 4 for information on goodwill impairment charges for discontinued operations.

Table of Conten t s

The following is a rollforward of our goodwill by segment ($ in millions):

Advanced Healthcare Solutions Intelligent Operating Solutions Precision Technologies Total

Intelligent Operating Solutions Precision Technologies Advanced Healthcare Solutions Total

Balance, January 1, 2020 $ 3,208.9 $ 1,842.9 $ 2,189.7 $ 7,241.5

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Attributable to 2020 acquisitions 21.0 — 9.9 30.9

Attributable to Tektronix Video Business combination — — ( 40.2 ) ( 40.2 )

Foreign currency translation and other 24.1 25.0 2.8 51.9

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Total intangibles $ 5,434.6 $ ( 1,544.4 ) $ 4,589.9 $ ( 1,299.3 )

During 2020 we acquired finite-lived intangible assets, consisting primarily of developed technology, with a weighted average life of 11 years.

During 2021 we acquired finite-lived intangible assets, consisting primarily of customer relationships, trade names and technology, with a weighted average life of 16 years.

During 2020, we acquired finite-lived intangible assets, consisting primarily of customer relationships and developed technology, with a weighted average life of 11 years.

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A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

Table of Conten t s

Financial assets and liabilities that are measured at fair value on a recurring basis were as follows ($ in millions):

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December 31, 2021

Investment in Vontier $ 1,119.2 $ — $ — $ 1,119.2

Deferred compensation liabilities — 36.0 — 36.0

December 31, 2020

Investment in Vontier $ 1,119.2 $ — $ — $ 1,119.2

Deferred compensation liabilities $ — $ 34.8 $ — $ 34.8

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On January 19, 2021, we completed the Debt-for-Equity Exchange of 33.5 million shares of common stock of Vontier, representing all of the Retained Vontier Shares, for $ 1.1 billion in aggregate principal amount of indebtedness of the Company held by Goldman Sachs & Co., including (i) all $ 400 million of the 2021 Term Loan and (ii) $ 683.2 million of the 2020 Delayed-Draw Term Loan.

The subsequent change in the fair value of the Retained Vontier Shares and the resulting gain will be recorded in the first quarter of 2021.

During the first quarter of 2021 we recognized a gain of $ 57.0 million related to the subsequent change in the fair value of the Retained Vontier Shares.

Certain management employees participate in our nonqualified deferred compensation programs that permit such employees to defer a portion of their compensation, on a pretax basis, until after their termination of employment.

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Refer to Note 12 for information related to the fair value of the Company-sponsored defined benefit pension plan assets.

Table of Conten t s

ACCRUED EXPENSES AND OTHER LIABILITIES

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Warranty period terms depend on the nature of the product and range from 90 days up to the life of the product.

The amount of the accrued warranty liability is determined based on historical information such as past experience, product failure rates or number of units repaired, estimated cost of material and labor, and, in certain instances, estimated property

The accrued warranty liability is reviewed on a quarterly basis and may be adjusted as additional information regarding expected warranty costs becomes known.

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and (iii) operating lease liabilities.

Table of Conten t s

Operating lease cost was $ 60 million, $ 60 million, and $ 58 million for the years ended December 31, 2021, 2020, and 2019, respectively.

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During the years ended December 31, 2021 and 2020, cash paid for operating leases included in operating cash flows wa s $ 53 million and $ 52 million, respectively.

ROU assets obtained in exchange for operating lease liabilities were $ 55 million and $ 67 million for the years ended December 31, 2020 and 2019, respectively, and of those ROU assets exchanged for operating lease obligations, $ 31 million for the year ended December 31, 2019 were related to operating leases acquired with ASP.

ROU assets obtained in exchange for operating lease liabilities were $ 34 million and $ 55 million for the years ended December 31, 2021 and 2020, respectively.

The following table presents the maturities of our operating lease liabilities as of December 31, 2021 ($ in millions):

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Total lease liabilities $ 184.5

As of December 31, 2020 and 2019, the weighted average lease term of our opera ting leases was 7.5 years and 6.8 years, respectively, and the weighted average discount rate of our operating leases was 2.8 % and 3.0 %, respectively.

We primarily use

our incremental borrowing rate as the discount rate for our operating leases, as we are generally unable to determine the interest rate implicit in the lease.

As of December 31, 2020, we entered into operating leases for which the lease term had not yet commenced.

These leases will commence in 2021 with lease terms between 2 and 3 years and fixed payments over the non-cancelable lease terms of less than $ 1.0 million.

As of December 31, 2021 and 2020, the weighted average lease term of our opera ting leases was 7.85 years and 7.5 years, respectively, and the weighted average discount rate of our operating leases w as 2.6 % a nd 2.8 %, respectively.

We primarily use our incremental borrowing rate as the discount rate for our operating leases, as we are generally unable to determine the interest rate implicit in the lease.

As of December 31, 2021, we did not enter into any operating leases for which the lease term had not yet commenced.

The carrying value of the components of our long-term debt as of December 31 were as follows ($ in millions):

dollar-denominated commercial paper $ 364.9 $ —

Euro-denominated commercial paper — 264.1

Delayed-draw term loan due 2020 1,000.0 1,000.0

Term Loan due 2020 — 500.0

Term Loan due 2021 399.8 —

Yen variable interest rate term loan due 2022 — 127.1

3.15 % senior unsecured notes due 2026

4.30 % senior unsecured notes due 2046

0.875 % senior convertible notes due 2022

1,152.0 1,389.0

Delayed-Draw Term Loan 999.7 —

Term Loan due May 2021 — 1,000.0

Term Loan due March 2021 — 399.8

Long-term debt 3,959.0 4,230.1

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Aggregate unamortized debt discounts, premiums, and issuance costs of $ 13 million and $ 57 million as of December 31, 2021 and December 31, 2020, respectively, are netted against the principal amounts of the components of debt in the table above.

Table of Conten t s

Credit Facilities

On April 24, 2020, we amended (the “Amendments”) the credit agreement for each of our (i) $ 500 million delayed draw term loan facility, which has been repaid as of December 31, 2020 (“2020 Term Loan”), (ii) $ 1.0 billion delayed draw term loan facility, with $ 1.0 billion in principal amount outstanding as of December 31, 2020 (the “2020 Delayed-Draw Term Loan”), (iii) $ 750 million delayed draw term loan facility, with $ 400 million in principal amount outstanding as of December 31, 2020 (“2021 Term Loan”), and (iv) $ 2.0 billion Revolving Credit Facility, with no borrowings thereunder as of December 31, 2020 as follows:

• For any four fiscal quarters ending in the periods noted below (each an “Adjusted Four Quarters”) that end prior to the maturity date of the applicable facility, the maximum permitted consolidated net leverage ratio of consolidated net funded indebtedness to consolidated EBITDA was increased from 3.50 to 1.00 to, (i) with respect to the four fiscal quarters ending June 26, 2020, September 25, 2020, December 31, 2020, or April 2, 2021, 4.75 to 1.00, (ii) with respect to the four fiscal quarters ending July 2, 2021, 4.5 to 1.0, (iii) with respect to the four fiscal quarters ending October 1, 2021, 4.25 to 1.0 and (iv) with respect to the four fiscal quarters ending December 31, 2021, 3.75 to 1.0;

provided however, that for any four fiscal quarters that are not an Adjusted Four Quarters, the maximum permitted consolidated net leverage ratio remains at 3.5 to 1.0, as may be increased to 4.0 to 1.0 following a material acquisition (the “Unadjusted Maximum Ratio”).

• The maturity date for the 2020 Delayed-Draw Term Loan was extended from August 28, 2020 to May 30, 2021.

• From April 24, 2020 to December 31, 2021, the minimum London inter-bank offered rate (“LIBOR”) for each of the facilities will increase from 0 % to 0.25 %, and the minimum base rate for each of the facilities will increase from 1.00 % to 1.25 %.

In addition, with respect to the Revolving Credit Facility and for any Adjusted Four Quarters in which the consolidated net leverage ratio is greater than the Unadjusted Maximum Ratio, the applicable margin (as determined based on our long-term debt credit rating) for any LIBOR rate loans will increase from a range of 80.5 and 117.5 basis points to a range of 118.0 and 155.0 basis points and for any base rate loans from a range of 0.0 and 17.5 basis points to a range of 18.0 and 55.0 basis points.

Furthermore, with respect to the 2020 Delayed-Draw Term Loan,

the applicable margin (as determined based on our long-term debt credit rating) for any LIBOR rate loans will increase from a range of 75.0 and 97.5 basis points to a range of 155.0 and 180.0 basis points and for any base rate loans from 0.0 to a range of 55.0 and 80.0 basis points.

• From April 24, 2020 to December 31, 2021, the maximum principal amount of secured indebtedness, other than certain types of secured indebtedness expressly permitted under each credit agreement, is decreased from 15 % of our consolidated net assets (when added together with indebtedness incurred or guaranteed by any of our subsidiaries) to 11.25 % of our consolidated net assets (when added together with indebtedness incurred or guaranteed by any of our subsidiaries).

In connection with the Amendments, we incurred approximately $ 6.5 million of fees.

Delayed-Draw Term Loan

On December 16, 2021, we entered into a term loan credit agreement, which provides for a 364 -day delayed-draw term loan facility up to an aggregate principal amount of $ 1.0 billion.

Borrowings under the Delayed-Draw Term Loan facility may be Base Rate Loans, Daily Floating London Interbank Offered Rate (“LIBOR”) Loans or Eurodollar Rate Loans and bear interest as follows:

(1) Eurodollar Rate Loans bear interest at a variable rate equal to the London inter-bank offered rate plus a margin of between 60.0 and 80.0 basis points, depending on the Company’s long-term debt credit rating;

(2) Daily Floating LIBOR Rate Loans, like Eurodollar Rate Loans, bear interest at a variable rate equal to the London inter-bank offered rate plus a margin of between 60.0 and 80.0 basis points, depending on the Company’s long-term debt credit rating;

and (3) Base Rate Loans bear interest at a variable rate equal to the highest of (a) the Federal funds rate (as published by the Federal Reserve Bank of New York from time to time) plus 1/2 of 1%, (b) Bank of America’s prime rate as publicly announced from time to time and (c) the Eurodollar Rate (as defined in the Credit Agreement) plus 1 %;

provided that in no event will the Eurodollar Rate be less than 0.0 %.

We immediately drew down the full $ 1.0 billion available under the facility as a daily floating LIBOR rate loan (“Delayed-Draw Term Loan”) with repayment of the principal due December 15, 2022.

The Delayed-Draw Term Loan bears interest at a variable rate equal to the daily LIBOR rate plus a spread of 60 basis points, based on Fortive’s current credit rating.

Borrowings under the Delayed-Draw Term Loan facility are prepayable at the Company’s option in whole or in part without premium or penalty and amounts borrowed may not be reborrowed once repaid.

Debt-for-Equity Exchange

On January 19, 2021, we completed the Debt-for-Equity Exchange of 33.5 million shares of common stock of Vontier, representing all of the Retained Vontier Shares, for $ 1.1 billion in aggregate principal amount of indebtedness of the Company held by Goldman Sachs & Co., including (i) all $ 400.0 million of the Term Loan due March 2021 and (ii) $ 683.2 million of the Term Loan due May 2021.

We recorded a loss on extinguishment of the debt included in the Debt-for-Equity Exchange of $ 94.4 million in the year ended December 31, 2021.

Term Loan due May 2021

On January 21, 2021, we repaid the remaining $ 316.8 million outstanding of the Term Loan due May 2021 from the cash proceeds received from Vontier in the Vontier Separation.

The fees associated with the prepayment were immaterial.

Our credit facility agreements require, among others, that we maintain certain financial covenants and we were in compliance with all of our financial covenants on December 31, 2021.

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The Convertible Notes were issued in a private placement to certain initial purchasers for resale to qualified institutional buyers pursuant to Rule 144A under the Securities Act.

The Convertible Notes are fully and unconditionally guaranteed, jointly and severally, on an unsecured basis, by four of our wholly-owned domestic subsidiaries (the “Guarantees”).

The Convertible Notes are our senior unsecured obligations, and the Convertible Notes and the Guarantees rank equally in right of payment with all of our and the guarantors’ existing and future liabilities that are not subordinated, but effectively rank junior to any of our and the guarantors secured indebtedness to the extent of the value of the assets securing such indebtedness.

In addition, the Convertible Notes are structurally subordinated to all of the existing and future obligations, including trade payables, of our subsidiaries that do not guarantee the Convertible Notes.

The Convertible Notes bear interest at a rate of 0.875 % per year, payable semiannually in arrears on February 15 and August 15 of each year, beginning on August 15, 2019.

The Convertible Notes mature on February 15, 2022, unless earlier repurchased or converted in accordance with their terms prior to such date.

As a result of the Vontier Separation and in accordance with the anti-dilution provisions of the Convertible Notes, effective October 9, 2020, the Convertible Notes are convertible into shares of our common stock at an adjusted conversion rate of 10.9568 shares per $1,000 principal amount of Convertible Notes (which is equivalent to an initial conversion price of $ 91.27 per share), subject to future adjustment upon the occurrence of certain events.

The conversion rate is subject to customary anti-dilution adjustments.

If certain corporate events described in the Indenture occur prior to the maturity date, the conversion rate will be increased for a holder that elects to convert its Convertible Notes in connection with such corporate event in certain circumstances.

Upon conversion of the Convertible Notes, holders will receive cash, shares of our common stock, or a combination thereof, at Fortive’s election.

Our current intention is to settle such conversions through cash up to the principal amount of the converted Convertible Notes and through shares of our common stock for conversion value, if any, in excess of the principal amount of the converted Convertible Notes.

Of the $ 1.4 billion in principal amount from the issuance of the Convertible Notes, $ 1.3 billion was classified as debt and $ 102.2 million was classified as equity, using an assumed effective interest rate of 3.38 %.

Debt issuance costs of $ 24.3 million were proportionately allocated to debt and equity.

On February 9, 2021, we repurchased $ 281 million of the Convertible Notes using the remaining cash proceeds received from Vontier in the Separation and other cash on hand.

In connection with the repurchase, we recorded a loss on debt extinguishment during 2021 of $ 10.5 million.

In addition, upon repurchase we recorded $ 11.6 million as a reduction to additional paid-in capital related to the equity component of the repurchased Convertible Notes.

We recognized $ 45 million in interest expense during the year ended December 31, 2021, of which $ 10 million related to the contractual coupon rate of 0.875 %, $ 6 million was attributable to the amortization of debt issuance costs, and $ 29 million was attributable to the amortization of the discount.

Additionally, we recognized $ 0.3 million interest expense related to the Delayed- Draw Term Loan.

We recognized $ 54 million in interest expense during the year ended December 31, 2020, of which $ 13 million related to the contractual coupon rate of 0.875 %, $ 8 million was attributable to the amortization of debt issuance costs, and $ 34 million was attributable to the amortization of the discount.

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The unamortized discount at December 31, 2021 was $ 4 million.

Prior to November 15, 2021, the Convertible Notes will be convertible only upon the occurrence of certain events and will be convertible thereafter at any time until the close of business on the business day immediately preceding the maturity date of the Convertible Notes.

The Convertible Notes are not redeemable prior to maturity, and no sinking fund is provided for the Convertible Notes.

If we undergo a “fundamental change,” as defined in the Indenture, subject to certain conditions, holders may require us to repurchase for cash all or any portion of their Convertible Notes.

The fundamental change purchase price will

be 100 % of the principal amount of the Convertible Notes to be repurchased plus any accrued and unpaid additional interest up to but excluding the fundamental change repurchase date.

The Indenture contains customary terms and covenants, including that upon certain events of default occurring and continuing, either the Trustee or the holders of at least 25 % in aggregate principal amount of the outstanding Convertible Notes may declare 100 % of the principal of, and accrued and unpaid interest, if any, on all the Convertible Notes to be due and payable.

We used the net proceeds from the offering to fund a portion of the cash consideration payable for, and certain costs associated with, our acquisition of ASP.

In connection with this offering of the Convertible Notes, on February 21, 2019, we entered into amendments to our credit facilities to exclude the Guarantees from the limitations on subsidiary indebtedness under our credit facilities.

2020 Term Loan

On October 25, 2019, we entered into a credit facility agreement that provides for the 2020 Term Loan in an aggregate principal amount of $ 300 million.

On October 25, 2019, we drew down the full $ 300 million available under the 2020 Term Loan in order to fund, in part, the Censis acquisition.

We subsequently increased the size of this facility by $ 200 million on November 8, 2019 and drew the additional amount on the same day resulting in an outstanding amount of $ 500 million.

The 2020 Term Loan bore interest at a variable rate equal to LIBOR plus a ratings-based margin currently at 75 basis points.

The 2020 Term Loan was due on October 23, 2020 and prepayable at our option.

We are not permitted to re-borrow once the term loan is repaid.

The terms and conditions, including covenants, applicable to the 2020 Term Loan are substantially similar to those applicable to our Revolving Credit Facility.

On February 26, 2020, we prepaid $ 250 million and on October 9, 2020, we repaid the remaining $ 250 million of the 2020 Term Loan.

The fees associated with both prepayments were immaterial.

2020 Delayed-Draw Term Loan

On March 1, 2019, we entered into a credit facility agreement that provides for the 2020 Delayed-Draw Term Loan in an aggregate principal amount of $ 1.0 billion.

On March 20, 2019, we drew down the full $ 1.0 billion available under the 2020 Delayed-Draw Term Loan in order to fund, in part, the ASP acquisition.

The 2020 Delayed-Draw Term Loan bears interest at a variable rate equal to LIBOR plus a ratings based margin, prior to the Amendments, at 75 basis points and, following the Amendments, at 155 basis points.

As of December 31, 2020, borrowings under this facility bore an interest rate of 1.80 % per annum.

The 2020 Delayed-Draw Term Loan is prepayable at our option, and we are not permitted to re-borrow once the term loan is repaid.

The terms and conditions, including covenants, applicable to the 2020 Delayed-Draw Term Loan are substantially similar to those applicable to our Revolving Credit Facility.

On February 25, 2020, we extended the maturity of the 2020 Delayed-Draw Term Loan to August 28, 2020.

Additionally, on April 24, 2020 we further extended the maturity to May 30, 2021.

We were in compliance with our covenants both before and after the extensions.

The 2020 Delayed-Draw Term Loan is not callable and remains prepayable at our option.

2021 Te rm Loan

On March 23, 2020, we entered into a credit facility agreement that provides for the 2021 Term Loan in an aggregate principal amount of $ 425 million.

On the same day, we drew down $ 375 million available under the 2021 Term Loan.

We subsequently increased the size of this facility by $ 325 million on April 3, 2020, and drew the additional $ 375 million in April 2020, resulting in an outstanding amount of $ 750 million.

On October 9, 2020, we repaid $ 350 million of the outstanding $ 750 million of the 2021 Term Loan, resulting in an outstanding balance of $ 400 million.

The fees associated with the prepayment were immaterial.

We paid approximately $ 2 million in debt issuance costs associated with the 2021 Term Loan.

The borrowings from this credit facility were used for settlement of outstanding commercial paper.

The 2021 Term Loan bears interest at a variable rate equal to LIBOR plus a ratings-based margin currently at 155 basis points.

As of December 31, 2020, borrowings under this facility bore an interest rate of 1.80 % per annum.

The 2021 Term Loan is due on March 19, 2021 and prepayable at our option.

We are not permitted to re-borrow once the term loan is repaid.

The terms and conditions, including covenants, applicable to the 2021 Term Loan, are substantially similar to those applicable to our Revolving Credit Facility.

Yen Variable Interest Rate Term Loan

On August 24, 2017, we entered into a term loan agreement that provides for a five-year ¥ 13.8 billion senior unsecured term facility (“Yen Term Loan”) that matures on August 24, 2022.

We borrowed the entire ¥ 13.8 billion available under this facility on August 28, 2017, which yielded net proceeds of approximately $ 126 million.

The Yen Term Loan bears interest at a rate

equal to LIBOR plus 50 basis points, provided however that LIBOR may not be less than zero for the purposes of the Yen Term Loan.

The Yen Term Loan is pre-payable at our option, and re-borrowing is not permitted once the term loan is repaid.

On October 15, 2020, we repaid the outstanding ¥ 13.8 billion balance of the Yen variable interest rate term loan due 2022 which approximated $ 131 million.

Table of Conten t s

The Convertible Notes matured on February 15, 2022, as described in the Subsequent Event section below.

Revolving Credit Facility

On June 16, 2016, we entered into a five-year $ 1.5 billion Revolving Credit Facility that expires on June 16, 2021.

On June 16, 2016, we entered into a five-year $ 1.5 billion Revolving Credit Facility that expired on June 16, 2021.

On November 30, 2018, we entered into an amended and restated agreement (the “Credit Agreement”) extending the availability period of the Revolving Credit Facility to November 30, 2023 and increased the facility to $ 2.0 billion.

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Commercial Paper Programs

In prior periods, we generally satisfied any short-term liquidity needs that are not met through operating cash flows and available cash through issuances of commercial paper under our U.S.

We periodically issue commercial paper under our U.S.

dollar and Euro-denominated commercial paper programs (“Commercial Paper Programs”).

Due to the volatility and disruption in the commercial paper markets during the first six months of 2020, we temporarily reduced our reliance on this source of funding, and consequently paid down and refinanced our outstanding commercial paper with a 364 -day delayed-draw term loan, as detailed in the 2021 Term Loan section above.

Credit support for the Commercial Paper Programs is provided by a five-year $ 2.0 billion senior unsecured revolving credit facility that expires on November 30, 2023 (the “Revolving Credit Facility”) which, to the extent not otherwise providing credit support for the commercial paper programs, can also be used for working capital and other general corporate purposes.

Under these programs, we may issue unsecured promissory notes with maturities not exceeding 397 and 183 days, respectively.

During 2020 we paid down and refinanced our outstanding commercial paper with the Term Loan that was initially due March 2021 and was retired in the Debt-for-Equity Exchange.

In August 2021, we resumed borrowing under our Commercial Paper Program.

As of December 31, 2021, no borrowings were outstanding under the Revolving Credit Facility.

The details of our Commercial Paper Programs as of December 31, 2021 were as follows ($ in millions):

Carrying value Annual effective rate Weighted average remaining maturity (in days)

dollar-denominated commercial paper $ 364.9 0.32 % 30.3

The availability of the Revolving Credit Facility as a standby liquidity facility to repay maturing commercial paper is an important factor in maintaining the Commercial Paper Programs’ credit ratings.

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In such event, the cost of borrowings under the Revolving Credit Facility could be higher than the historic cost of commercial paper borrowings.

We classified our borrowings outstanding under the Commercial Paper Programs as of December 31, 2021 as long-term debt in the accompanying Consolidated Balance Sheets as we have the intent and ability, as supported by availability under the Revolving Credit Facility referenced above, to refinance these borrowings for at least one year from the balance sheet date.

Proceeds from borrowings under the commercial paper programs are typically available for general corporate purposes, including acquisitions.

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• $ 350 million and $ 200 million aggregate principal amounts of senior notes due June 15, 2046 issued at 99.783 % and 101.564 %, respectively, of their principal amounts and bearing interest at the rate of 4.30 % per year.

Table of Conten t s

Interest on the Registered Notes is payable semi-annually in arrears on June 15 and December 15 of each year.

On November 13, 2020, we redeemed for cash all $ 750 million aggregate principal of our outstanding 2.35 % Senior Notes due 2021 (the “Notes”) in accordance with the terms of the indenture governing the Notes using proceeds received from Vontier in the Separation.

In connection with the transaction, we wrote-off the remaining unamortized deferred financing costs of $ 1 million and recorded a make-whole charge for the loss on extinguishment of the debt represented by the Notes of $ 8 million,

both of which are included in Earnings from discontinued operations, net of income taxes in the Consolidated Statement of Earnings.

Covenants and Redemption Provisions Applicable to Registered Notes

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None of these covenants are considered restrictive to our operations and as of December 31, 2021, we were in compliance with all of our covenants.

We made interest payments, including amounts allocated to interest expense from discontinued operations, of $ 123 million during 2020, $ 127 million during 2019, and $ 102 million during 2018.

We made interest payments, including amounts allocated to interest expense from discontinued operations during 2020 and 2019 of $ 123 million and $ 127 million, respectively.

We had no interest payments from discontinued operations during 2021.

There are $ 2.2 billion of minimum principal payments due under our total long-term debt during 2022.

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$ 1,000.0 $ 2,606.5 $ 3,606.5

(a) Not included in the table above are discounts, net of premiums and issuance costs associated with the Convertible and Registered Notes, which totaled $ 57 million as of December 31, 2020, and have been recorded as an offset to the carrying amount of the related debt in the accompanying Consolidated Balance Sheet as of December 31, 2020.

Subsequent Events

On January 19, 2021, we completed an exchange (the “Debt-for-Equity Exchange”) of 33,507,410 shares of common stock of Vontier, representing all of the Retained Vontier Shares, for $ 1.1 billion in aggregate principal amount of indebtedness of the Company held by Goldman Sachs & Co., including (i) all $ 400 million of the 2021 Term Loan and (ii) $ 683.2 million of the 2020 Delayed-Draw Term Loan.

Furthermore, on January 21, 2021 we repaid the remaining $ 316.8 million outstanding of the 2020 Delayed-Draw Term Loan from the cash proceeds received from Vontier in the Separation.

The fees associated with the prepayment were immaterial.

On February 9, 2021, we repurchased $ 281 million of the Convertible Notes using the remaining cash proceeds received from Vontier in the Separation and other cash on hand.

In connection with the repurchase, we will record a loss on extinguishment in the first quarter of 2021.

(a) Not included in the table above are discounts, net of premiums and issuance costs associated with the Convertible and Registered Notes and Commercial Paper, which totaled $ 13 million as of December 31, 2021, and have been recorded as an offset to the carrying amount of the related debt in the accompanying Consolidated Balance Sheet as of December 31, 2021.

In addition, the table above does not include principal balance of $ 365 million under the Commercial Paper Programs.

Subsequent Event

On February 15, 2022, the maturity date of the Convertible Notes, Fortive repaid, in cash, $ 1.2 billion in outstanding principal and accrued interest thereon.

PENSION PLANS

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pension plans.

Table of Conten t s

The following sets forth the funded status of our plans and amounts recorded in Accumulated other comprehensive income (loss) as of the most recent actuarial valuations using measurement dates of December 31 ($ in millions):

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Total recorded in AOCI, before tax $ ( 3.5 ) $ 6.8 $ 79.5 $ 102.5

Table of Conten t s

Weighted average assumptions used to determine benefit obligations at date of measurement

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plans, rates appropriate for each plan are determined based on investment grade instruments with maturities approximately equal to the average expected benefit payout under the plan.

The expected rates of return reflect the asset allocation of the plans and ranged from 1.25 % to 4.86 % in 2020, 1.50 % to 5.75 % in 2019, and 1.75 % to 5.75 % in 2018.

The expected rates of return reflect the asset allocation of the plans and ranged from 1.25 % to 4.32 % i n 2021, 1.25 % to 4.86 % in 2020, and 1.50 % to 5.75 % in 2019.

The domestic plan rate is based primarily on broad publicly-traded-equity and fixed-income indices and forward-looking estimates of active portfolio and investment management.

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The value of the plan assets directly affects the funded status of our pension plans recorded in the financial statements.

Table of Conten t s

The fair values of our pension plan assets as of December 31, 2021, by asset category were as follows ($ in millions):

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Cash and equivalents $ 5.4 $ — $ — $ 5.4

Equity securities:

Common stock 6.1 — — 6.1

Preferred stock 1.7 — — 1.7

Fixed income securities:

Corporate bonds — 8.2 — 8.2

Government Issued — 2.7 — 2.7

Mutual funds — 30.8 — 30.8

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Mutual funds 155.1

Real estate funds 15.2

Other private investments 19.4

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Certain mutual funds and other private investments are valued using NAV based on the information provided by the asset fund managers, which reflects the plan’s share of the fair value of the net assets of the investment.

Depending on the nature of the

assets, the underlying investments are valued using a combination of either discounted cash flows, earnings and market multiples, third party appraisals, or through reference to the quoted market prices of the underlying investments held by the venture, partnership, or private entity where available.

Depending on the nature of the assets, the underlying investments are valued using a combination of either discounted cash flows, earnings and market multiples, third party appraisals, or through reference to the quoted market prices of the underlying investments held by the venture, partnership, or private entity where available.

In addition, some of these investments have limits on their redemption to monthly, quarterly, semiannually, or annually and may require up to 90 days prior written notice.

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Expected Contributions

During 2020, we contribute d $ 1 million and $ 11 million to our U.S.

Table of Conten t s

During 2021, we contributed $ 1 million and $ 10 million t o our U.S.

defined benefit pension plans, respectively.

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We recognized compensation expense for our participating U.S.

employees in the 401(k) programs totali ng $ 51 million in 2020, $ 48 million in 2019, and $ 38 million in 2018.

On January 1, 2018, we adopted ASU 2014-09, Revenue from Contracts with Customers (“Topic 606”), using the modified retrospective method applied to those contracts which were not completed as of January 1, 2018.

employees in the 401(k) programs totaling $ 57 million in 2021, $ 51 million in 2020, and $ 48 million in 2019.

We derive revenue primarily from the sales of products and software, and services.

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In the year ended December 31, 2021, we recognized $ 307 million of revenue-related to our contract liabilities at January 1, 2021.

The change in our contract liabilities from December 31, 2019 to December 31, 2020 was primarily due to the timing of cash receipts and sales of PCS and extended warranty services.

Remaining Performance Obligations — Our remaining performance obligations represent the transaction price of firm, noncancelable orders and the average contract value for software contracts with expected delivery dates to customers greater than one year from December 31, 2020, for which work has not been performed.

The change in our contract liabilities from December 31, 2020 to December 31, 2021 was primarily due to an increase of $ 52.4 million from acquisitions and the timing of cash receipts and sales of PCS and extended warranty services.

Table of Conten t s

We have excluded performance obligations with an original expected duration of one year or less from the amounts below.

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We disaggregate revenue from contracts with customers by sales of product and services, geographic location, and end market for each of our segments, as we believe it best depicts how the nature, amount, timing, and uncertainty of our revenue and cash flows are affected by economic factors.

Table of Conten t s

Disaggregation of revenue for the year ended December 31, 2021 is presented as follows ($ in millions):

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(a) Direct Sales also include sales made through third-party distributors to these end markets.

Table of Conten t s

Disaggregation of revenue for the year ended December 31, 2020 is presented as follows ($ in millions):

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(a) Direct Sales also include sales made through third-party distributors to these end markets.

Table of Conten t s

Disaggregation of revenue for the year ended December 31, 2019 is presented as follows ($ in millions):

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(a) Direct Sales also include sales made through third-party distributors to these end markets.

Tax Cuts and Jobs Act

On December 22, 2017, the U.S.

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

Government continues to issue significant amounts of TCJA guidance and we expect that to continue for the foreseeable future.

The Company is actively monitoring the impact of new Treasury Regulations.

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

During 2018, the Company made the election on the 2017 Federal Income Tax Return to pay the one-time TCJA Transition Tax liability over an eight-year period without interest, as allowed by TCJA.

The IRS has issued guidance that requires offset of 2017 and 2018 tax return refunds against the long-term liability subject to the eight-year payment election.

Separation from Danaher, Disposition of the A&S Business, and Separation of Vontier

In connection with the separation from Danaher, we entered into certain agreements with Danaher, including a tax matters agreement.

The tax matters agreement distinguishes between the treatment of tax matters for “joint” filings compared to “separate” filings prior to the separation from Danaher.

“Joint” filings involve legal entities, such as those in the United States,

that include operations from both Danaher and the Company.

By contrast, “separate” filings involve certain entities (primarily outside of the United States), that exclusively include either Danaher’s or the Company’s operations, respectively.

In accordance with the tax matters agreement, the Company is liable for and has indemnified Danaher against all income tax liabilities involving “separate” filings for periods prior to the Separation.

During 2018, the Company entered into a Tax Matters Agreement in connection with the split-off of the A&S Business.

The Company remains liable for pre-disposition income tax liabilities related to the A&S Business.

In connection with the separation of Vontier, we entered into the Agreements with Vontier , including a tax matters agreement.

The tax matters agreement distinguishes between the treatment of tax matters for “joint” filings compared to “separate” filings prior to the Separation.

“Joint” filings involve legal entities, such as those in the United States, that include operations from both Vontier and the Company.

By contrast, “separate” filings involve certain entities (primarily outside of the United States), that exclusively include either Vontier’s or the Company’s operations, respectively.

In accordance with the tax matters agreement, the Company remains liable for all income tax liabilities involving “joint” filings and Vontier has indemnified the Company against all income tax liabilities involving “separate” filings for periods prior to the Separation.

Table of Conten t s

Earnings and Income Taxes

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Other ( 0.3 ) % ( 0.2 ) % 4.9 %

Effective income tax rate before adjustments related to the unrealized gain on the Retained Vontier Shares and other 2017 TCJA provisional estimates 19.3 % 20.4 % 16.8 %

Deferred tax revaluation — % — % ( 3.5 ) %

Transition tax — % — % 0.1 %

Effective income tax rate before adjustments related to the unrealized gain on the Retained Vontier Shares 11.3 % 19.3 % 20.4 %

Adjustment for the unrealized gain on the Retained Vontier Shares ( 2.0 ) % ( 15.6 ) % — %

Total adjustments for the unrealized gain on Retained Vontier Shares and other 2017 TCJA provisional estimates ( 15.6 ) % — % ( 3.4 ) %

Effective income tax rate after adjustments related to the unrealized gain on the Retained Vontier Shares and other 2017 TCJA provisional estimates 3.7 % 20.4 % 13.4 %

Effective income tax rate after adjustments related to the unrealized gain on the Retained Vontier Shares 9.3 % 3.7 % 20.4 %

Our effective tax rate for 2021 differs from the U.S.

federal statutory rate of 21% due primarily to the effect of the Tax Cuts and Jobs Act of 2017 (the “TCJA”) U.S.

federal permanent differences, the impact of credits and deductions provided by law, earnings outside the United States that are indefinitely reinvested and taxed at rates lower than the U.S.

federal statutory rate, and a permanent difference on the realized gain on our Retained Vontier Shares due to the tax-free treatment of our disposition of the shares through the Debt-for-Equity Exchange that was completed on January 19, 2021.

The Debt-for-Equity Exchange included an exchange of all of our Vontier common stock owned as of December 31, 2020.

Our effective tax rate for 2020 differs from the U.S.

federal statutory rate of 21% due primarily to the effect of the TCJA U.S.

federal permanent differences, the impact of credits and deductions provided by law, earnings outside the United States that are indefinitely reinvested and taxed at rates lower than the U.S.

federal statutory rate, offset by tax costs associated with repatriating a portion of our previously reinvested earnings outside of the United States, and a permanent difference on the unrealized gain on our Retained Vontier Shares due to the tax-free treatment of our disposition of the shares through the Debt-for-Equity Exchange that was completed on January 19, 2021.

federal statutory rate, offset by tax costs associated with

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repatriating a portion of our previously reinvested earnings outside of the United States, and a permanent difference on the unrealized gain on our Retained Vontier Shares due to the tax-free treatment of our disposition of the shares through the Debt-for-Equity Exchange that was completed on January 19, 2021.

The Debt-for-Equity Exchange included an exchange of all of our Vontier common stock owned as of December 31, 2020.

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federal statutory rate.

Our effective tax rate for 2018 differs from the U.S.

federal statutory rate of 21% due primarily to the effect of the TCJA U.S.

federal permanent differences, the impact of credits and deductions provided by law, earnings outside the United States that are taxed at rates lower than the U.S.

federal statutory rate, and the effect of adjustments to the provision estimates recorded in 2017 related to the TCJA as permitted under the SEC Staff Accounting Bulletin No.

118 (“SAB 118”) issued on December 22, 2017.

SAB 118 provides guidance on the financial statement implications of the TCJA.

Pursuant to SAB 118, the Company recorded cumulatively $ 19 million of net favorable adjustments during the year ended December 31, 2018.

The 2018 effective tax rate included the true-up to the 2017 provisional estimates as a discrete adjustment.

We conduct business globally, and, as part of our global business, we file numerous income tax returns in the U.S.

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After the TCJA, our ability to obtain a tax benefit in certain countries that continue to have lower statutory tax rates than the United States is dependent on our levels of taxable income in such foreign countries.

We believe that a change in the statutory tax rate of any individual foreign country would not have a material effect on our financial statements given the geographic dispersion of our taxable income.

We believe that a change in the statutory tax rate of any individual foreign country would not typically have a material effect on our financial statements given the geographic dispersion of our taxable income.

We are routinely examined by various domestic and international taxing authorities.

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The Company is subject to examination in the United States, various states, and foreign jurisdictions for the tax years 2010 to 2021.

These examinations include filings of tax returns prior to our separation from Danaher, tax returns of enterprises no longer in our portfolio, and tax returns for pre-acquisition periods of enterprises added to our portfolio.

We review our global tax positions on a quarterly basis.

Based on these reviews, the results of discussions and resolutions of matters with

certain tax authorities, tax rulings and court decisions, and the expiration of statutes of limitations reserves for contingent tax liabilities are accrued or adjusted as necessary.

Based on these reviews, the results of discussions and resolutions of matters with certain tax authorities, tax rulings and court decisions, and the expiration of statutes of limitations reserves for contingent tax liabilities are accrued or adjusted as necessary.

We made income tax payments related to continuing operations of $ 103 million, $ 95 million, and $ 79 million during the years ended December 31, 2021, December 31, 2020 and December 31, 2019, respectively.

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Deferred Tax Assets and Liabilities

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These factors include historical operating results, known or planned operating developments, the period of time over which certain temporary differences will reverse, consideration of the utilization of certain deferred income tax liabilities, tax law carryback capability in the particular country, and prudent and feasible tax planning strategies.

After evaluation of these factors, if the deferred income tax assets are expected to be realized within the tax carryforward period allowed for that specific country, we would conclude

that no valuation allowance would be required.

After evaluation of these factors, if the deferred income tax assets are expected to be realized within the tax carryforward period allowed for that specific country, we would conclude that no valuation allowance would be required.

To the extent that the deferred income tax assets exceed the amount that is expected to be realized within the tax carryforward period for a particular jurisdiction, we establish a valuation allowance.

Applying the above methodology, valuation allowances have been established for certain deferred income tax assets to the extent they are not expected to be realized within the particular tax carryforward period.

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Deferred taxes associated with U.S.

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entities from continuing operations consist of net deferred tax liabilities of $ 0.1 million and $ 23 million, inclusive of valuation allowances of $ 21 million and $ 22 million, as of December 31, 2021 and December 31, 2020, respectively.

Our valuation allowance increased by $ 3 million and by $ 15 million during the years ended December 31, 2020 and December 31, 2019, respectively, due primarily to foreign net operating losses in both years and net state operating losses in 2019.

Our valuation allowance increased by $ 27 million and by $ 3 million during the years ended December 31, 2021 and December 31, 2020, respectively, due primarily to foreign net operating losses in both years and acquired domestic tax attributes in 2021.

As of December 31, 2021, our U.S.

net operating loss carryforwards totaled $ 957 million, of which $ 108 million is related to federal net operating loss carryforwards, $ 454 million is related to state net operating loss carryforwards, and $ 395 million is related to non-U.S.

net operating loss carryforwards totaled $ 1.8 billion, of which $ 285 million is related to federal net operating loss carryforwards, $ 1.0 billion is related to state net operating loss carryforwards, and $ 483 million is related to non-U.S.

net operating loss carryforwards.

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The Company is subject to examination in the United States, various states, and foreign jurisdictions for the tax years 2010 to 2021.

Some examinations may conclude in the next twelve months and the unrecognized tax benefits recorded in relation to the audits may differ from actual settlement amounts.

Significant obligations are detailed in the tax matters agreements in connection with the separation of Fortive from Danaher on July 1, 2016, the split-off of the A&S business on October 1, 2018, and the Vontier separation on October 9, 2020.Some examinations may conclude in the next twelve months and the unrecognized tax benefits recorded in relation to the audits may differ from actual settlement amounts.

It is not practical to estimate the effect, if any, of any amount of such change during the next twelve months to previously recorded uncertain tax positions in connection with the audits.

The Company does not anticipate that there will be a material increase or decrease in the total amount of unrecognized tax benefits in the next twelve months.

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A reconciliation of the beginning and ending amount of unrecognized tax benefits, excluding amounts accrued for potential interest and penalties, is as follows ($ in millions):

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Separation related adjustments (a)

( 9.9 ) — 9.2

Unrecognized tax benefits, end of year $ 193.0 $ 200.1 $ 214.9

(a) Unrecognized tax benefit reserves increased by $ 9 million during the year ended December 31, 2018 due primarily to unrecognized tax benefits from pre-Separation periods.

Unrecognized tax benefit reserves decreased by $ 10 million in 2020 upon separation from Vontier in accordance with the Agreements.

(a) Unrecognized tax benefit reserves decreased in 2020 by $ 10 million upon separation from Vontier in accordance with the Agreements.

Repatriation and Unremitted Earnings

Given the impact of the COVID-19 pandemic and current market conditions in the U.S., we have updated our assertion for previously unremitted earnings from 2019 and prior periods due to new facts and circumstances that we did not face in prior periods.

The TCJA eliminated the U.S.

tax cost for qualified repatriation beginning in 2018 but foreign cumulative earnings remain subject to foreign remittance taxes.

During the twelve month period ended December 31, 2020, we provided foreign remittance taxes of $ 13 million on the repatriation of $ 310 million of previously unremitted earnings from 2019 and prior periods.

As of December 31, 2021, we recorded estimated incremental foreign remittance taxes of $ 1 million on the planned 2022 repatriation of $ 542 million of previously unremitted earnings from 2021 and prior periods.

The TCJA imposed a final U.S.

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Facility exit and other related 5.9 5.7 3.5

Impairment charges — — 0.6

Total restructuring and other related charges $ 18.7 $ 26.8 $ 50.4

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We expect substantially all cash payments associated with remaining termination benefits recorded in 2021 will be paid in 2022, and all planned restructuring activities related to the 2020 and 2019 plans have been completed.

Impairment charges relate to certain intangible assets.

The nature of our restructuring and related activities initiated in 2021, 2020 and 2019 were broadly consistent throughout our segments and focused on improvements in operational efficiency through targeted workforce reductions and facility consolidations and closures.

We incurred these costs to position ourselves to provide superior products and services to our customers in a cost-efficient manner, while taking into consideration broad economic uncertainties.

We incurred these costs to position ourselves to provide superior products and services to our customers in a cost-efficient manner, while taking into consideration broad economic uncertainties, including those created by the COVID-19 pandemic.

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Restructuring and other related charges recorded for the years ended December 31 by segment were as follows ($ in millions):

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If risk insurance reserves we have established are inadequate, we would be required

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to incur an expense equal to the amount of the loss incurred in excess of the reserves, which would adversely affect our net earnings.

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While we actively pursue insurance recoveries, as well as recoveries from other potentially responsible parties, we do not recognize any insurance recoveries for environmental liability claims until realized or until such time as a sustained pattern of collections is established related to historical matters of a similar nature and magnitude.

As of December 31, 2020 and 2019, we had approximately $ 87 million and $ 75 million, respectively, of guarantees consisting primarily of outstanding standby letters of credit, bank guarantees, and performance and bid bonds.

As of both December 31, 2021 and 2020, we had approximately $ 64 million and $ 68 million, respectively, of guarantees consisting primarily of outstanding standby letters of credit, bank guarantees, and performance and bid bonds.

These guarantees have been provided in connection with certain arrangements with vendors, customers, financing counterparties, and governmental entities to secure our obligations and/or performance requirements related to specific transactions.

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As of December 31, 2021, the aggregate amount of our purchase obligations totaled $ 493 million, of which $ 369 million are expected to be settled within one year of December 31, 2021.

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STOCK BASED COMPENSATION

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As of December 31, 2021, approximately 18.6 million shares of our common stock remain available for issuance under the Stock Plan.

Stock options under the Stock Plan generally vest pro rata over a five-year period and terminate 10 years from the grant date, though the specific terms of e ach grant are determined by the Compensation Committee of our Board of Directors.

Stock options under the Stock Plan generally vest pro rata over a four-year or five-year period and terminate 10 years from the grant date, though the specific terms of e ach grant are determined by the Compensation Committee of our Board of Directors.

Our executive officers and certain other employees may be awarded stock options with different vesting criteria and stock options granted to non-employee directors are fully vested as of the grant date.

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RSUs and RSAs issued under the Stock Plan provide for the issuance of common stock at no cost to the holder.

RSUs granted to employees under the Stock Plan generally provide for time-based vesting over five years , although certain employees may be awarded RSUs with different time-based vesting criteria.

RSUs granted to employees under the Stock Plan generally provide for time-based vesting over four or five years , although certain employees may be awarded RSUs with different time-based vesting criteria.

Time-based vesting RSUs granted to members of our senior management are also accompanied by incremental RSUs subject to performance-based vesting criteria.

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PSUs issued under the Stock Plan provide for the issuance of a share of the Company’s common stock at no cost to the holder, vest based on the Company’s total shareholder return ranking relative to the S&P 500 Index over a performance period of approximately three years , are subject to an additional two-year holding period and are entitled to dividend equivalent rights.

The PSU dividend equivalent rights are subject to the same vesting and payment restrictions as the related shares, but do not have voting rights and the shares underlying the PSU’s are not considered issued and outstanding.

The PSU dividend equivalent rights are subject to the same vesting and payment restrictions as the related shares, but do not have voting rights and the shares underlying the PSUs are not considered issued and outstanding.

In connection with the Vontier separation and pursuant to the anti-dilution provisions of the 2016 Stock Incentive Plan, the number of shares underlying each stock-based award outstanding as of the date of the Separation was multiplied by a factor of 1.20 and the related exercise price for the stock options was divided by a factor of 1.20 , which was intended to preserve the intrinsic value of the awards prior to the Separation.

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During the year ended December 31, 2021, approximately 252

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thousand shares of Fortive common stock with an aggregate value of approximately $ 17 million, were withheld to satisfy this requirement.

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Total unrecognized compensation cost $ 132.0

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Stock Options

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Expected years until exercise 5.5 - 8.0

(a) Beginning August 2018, expected volatility was based on a weighted average blend of the company’s historical stock price volatility from July 2, 2016 (the date of separation from Danaher) through the stock option grant date and the average historical stock price volatility of a group of peer companies for the expected term of the options.

The weighted average volatility from July 2, 2016 to July 2018 was estimated based on an average historical stock price volatility of a group of peer companies given our limited trading history.

(a) Expected volatility is based on a weighted average blend of the company’s historical stock price volatility from July 2, 2016 (the date of separation from Danaher) through the stock option grant date and the average historical stock price volatility of a group of peer companies for the expected term of the options.

(b) The dividend yield is calculated by dividing our annual dividend, based on the most recent quarterly dividend rate, by Fortive’s closing stock price on the grant date.

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(years) Aggregate

Outstanding as of January 1, 2018 13.1 $ 30.88

Outstanding as of January 1, 2019 (a)

Granted 2.7 57.28

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Canceled/forfeited ( 0.7 ) 61.39

Outstanding as of December 31, 2019 (a)

Adjustment due to Vontier Separation (b)

( 1.4 ) 44.94

Outstanding as of December 31, 2020 10.6 50.07

Granted 2.0 69.07

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Canceled/forfeited ( 0.7 ) 64.28

Adjustment due to Vontier Separation (b)

( 1.4 ) 44.94

Outstanding as of December 31, 2021 10.4 54.81 6 $ 224.3

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Vested as of December 31, 2021 4.8 42.78 4 $ 160.9

(a) The outstanding options as of December 31, 2019 and the option activity prior to December 31, 2019 (except those options canceled as part of the Separation as noted below) have been adjusted by a factor of 1.20 , as noted above, due to the Separation.

Further, the January 1, 2018 balance excludes the options for employees of the A&S Business that was divested on October 1, 2018.

(a) The outstanding options as of December 31, 2019 have been adjusted by a factor of 1.20 , as noted above, due to the Separation.

(b) The “Adjustment due to Vontier Separation” reflects the cancellation of outstanding options held by Vontier employees as of October 8, 2020, which were replaced with Vontier options issued by Vontier as part of the Separation.

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The amount of aggregate intrinsic value will change based on the price of Fortive’s common stock.

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Options outstanding as of December 31, 2021 are summarized below (in millions;

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Forfeited ( 0.2 ) 61.00

Adjustment due to Vontier Separation (b)

( 0.2 ) 60.40

Unvested as of December 31, 2020 2.3 63.04

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Forfeited ( 0.3 ) 65.28

Adjustment due to Vontier Separation (b)

( 0.2 ) 60.40

Unvested as of December 31, 2021 2.6 66.43

(a) The outstanding stock awards as of December 31, 2019 and the award activity prior to December 31, 2019 have been adjusted by a factor of 1.20 , as noted above, due to the Separation.

Further, the January 1, 2018 balance excludes the stock awards for employees of the A&S Business that was divested on October 1, 2018.

(a) The outstanding stock awards as of December 31, 2019 have been adjusted by a factor of 1.20 , as noted above, due to the Separation.

(b) The “Adjustment due to Vontier Separation” reflects the cancellation of unvested awards held by Vontier employees as of October 8, 2020, which were replaced by Vontier equity awards issued by Vontier as part of the Separation.

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The Board’s authority to issue preferred stock with voting rights or

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conversion rights that, if exercised, could adversely affect the voting power of the holders of common stock, could potentially discourage attempts by third parties to obtain control of the Company through certain types of takeover practices.

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Aggregate cash payments for the dividends paid to shareholders are recorded as dividends to shareholders in our Consolidated Statements of Changes in Equity and Consolidated Statements of Cash Flows.

Subsequent Events

On January 25, 2022 we declared a regular quarterly cash dividend of $ 0.07 per share payable on March 25, 2022 to common stockholders of record on February 25, 2022.

On February 17, 2022, the Company's Board of Directors approved a share repurchase program authorizing the Company to repurchase up to 20 million shares of the Company's outstanding common stock from time to time on the open market or in privately negotiated transactions.

There is no expiration date for the repurchase program, and the timing and amount of repurchases under the program are determined by the Company's management based on market conditions and other factors.

The repurchase program may be suspended or discontinued at any time by the Board of Directors.

Mandatory Convertible Preferred Stock

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We used the net proceeds from the issuance of MCPS to fund our acquisition activities and for general corporate purposes, including repayment of debt, working capital, and capital expenditures.

In connection with the split-off of the A&S Business and the Vontier Separation on October 9, 2020, we triggered anti-dilution adjustments pursuant to the terms of the MCPS.

After giving affect to these adjustments, each then outstanding share of MCPS will convert automatically on July 1, 2021 (“Mandatory Conversion Date”) into between 12.8364 and 15.7246 common shares, subject to further anti-dilution adjustments.

The number of shares of our common stock issuable on conversion will be determined based on the average volume weighted average price per share of our common stock over the 20 consecutive trading day period beginning on the 22nd scheduled trading day preceding the Mandatory Conversion Date.

At any time prior to July 1, 2021, holders may elect to convert each share of the MCPS into shares of common stock at the rate of 12.8364 , subject to further anti-dilution adjustments.

In the event of a fundamental change, the MCPS will convert at the fundamental change rates specified in the certificate of designations, as adjusted, and the holders of MCPS would be entitled to a fundamental change make-whole dividend.

We may pay declared dividends in cash or, subject to certain limitations, in shares of our common stock, or in any combination of cash and shares of our common stock in January, April, July, and October of each year, commencing on October 1, 2018 and ending on July 1, 2021.

Dividends that are declared will be payable on the dividend payment dates to holders of record on the immediately preceding March 15, June 15, September 15, and December 15 (each a “record date”), whether or not such holders convert their shares, or such shares are automatically converted, after the corresponding record date.

Dividends on our MCPS are payable on a cumulative basis when, as, and if declared by our Board, at an annual rate of 5.0 % of the liquidation preference of $ 1,000 per share (equivalent to $ 50.00 annually per share).

On July 1, 2021, all outstanding shares of our 5.0 % Mandatory Convertible Preferred Stock (“MCPS”) converted at a rate of 14.0978 common shares per share of preferred stock into an aggregate of approximately 19.4 million shares (net of fractional shares) of the Company’s common stock, pursuant to the terms of the Certificate of Designation governing the Series A Preferred Stock.

Fortive issued cash in lieu of fractional shares of common stock in the conversion.

These payments were recorded as a reduction to additional paid-in capital.

The final dividend of $ 12.50 per share, or $ 17.2 million in the aggregate, was paid on July 1, 2021.

The impact of the MCPS calculated under the if-converted method was anti-dilutive for the periods in 2021 prior to conversion.

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We declared and paid cash dividends on our MCPS during the periods presented as follows:

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Total $ 50.00 $ 69.0

On January 26, 2021 we declared a regular quarterly cash dividend of $ 12.50 per share on our MCPS payable on April 1, 2021 to preferred stockholders of record on March 15, 2021.

Net Earnings Per Share

Basic net earnings per share (“EPS”) is calculated by dividing net earnings attributable to common stockholders by the

weighted average number of shares of common stock outstanding for the applicable period.

Diluted EPS from continuing operations is similarly calculated, except that the calculation includes the dilutive effect of the assumed issuance of shares under stock-based compensation plans and the assumed conversion of the MCPS, except where the inclusion of such shares would have an anti-dilutive impact.

For the years ended December 31, 2020 and 2019, the anti-dilutive options to purchase shares excluded from the diluted EPS calculation were 4.9 million shares and 3.0 million shares, respectively.

For the year ended December 31, 2018, the anti-dilutive options to purchase shares excluded from the diluted EPS calculation were immaterial.

The impact of our MCPS calculated under the if-converted method was anti-dilutive for the years ended December 31, 2019 and 2018, and as such, 18.3 million and 18.4 million respective shares were excluded from the dilutive EPS calculation.

Basic net earnings per share (“EPS”) is calculated by dividing net earnings attributable to common stockholders by the weighted average number of shares of common stock outstanding for the applicable period.

Diluted EPS is similarly calculated, except that the calculation includes the dilutive effect of the assumed issuance of shares under stock-based compensation plans under the treasury stock method, except where the inclusion of such shares would have an anti-dilutive impact.

For the years ended December 31, 2021, 2020, and 2019 the anti-dilutive options to purchase shares excluded from the diluted EPS calculation were 0.3 million shares, 4.9 million shares, and 3.0 million shares respectively.

The impact of our MCPS calculated under the if-converted method was anti-dilutive for the year ended December 31, 2019, and as such, 18.3 million shares were excluded from the dilutive EPS calculation.

The impact of our MCPS calculated under the if-converted method was dilutive for the year ended December 31, 2020, and therefore the 19.9 million shares were included in the calculation of diluted EPS.

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Because the fair value of our common stock is below the conversion price, the Convertible Notes had no impact on our earnings per share for the years ended December 31, 2021 and 2020.

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Information related to the calculation of net earnings per share of common stock is summarized as follows ($ and shares in millions, except per share amounts):

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Inter-segment amounts are not significant and are eliminated in the combined totals.

Operating profit amounts in the Other category consist of unallocated corporate costs and other costs not considered part of our evaluation of reportable segment operating performance.

Amounts in the Other category consist of unallocated corporate costs and other costs not considered part of our evaluation of reportable segment operating performance.

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Segment results are shown below ($ in millions):

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Total $ 50.0 $ 75.7 $ 74.5

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Operations in Geographic Areas:

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Purchases from Danaher and its subsidiaries were approximately $ 14 million, $ 12 million, and $ 13 million during the years ended December 31, 2021, 2020, and 2019, respectively.

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QUARTERLY DATA - UNAUDITED

($ in millions, except per share data) 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter

Sales $ 1,108.1 $ 1,041.6 $ 1,159.8 $ 1,324.9

$ 1,259.2 $ 1,319.7 $ 1,301.0 $ 1,374.8

Gross profit 711.9 755.5 745.7 794.0

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The sum of net earnings per share amount may not add due to rounding.

(a) Sales in the third quarter of 2021 include an increase of $ 1.5 million, as a result of our adoption of ASU 2021-08 and the retrospective application to the ServiceChannel acquisition.

Refer to Note 2 for details.

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CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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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 8. Financial Statements and Supplementary Data