What changed in this filing

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Item 1. Financial Statements

2022-04-28 compared with 2021-10-28 · 168 added, 388 removed, 389 unchanged (59% of the section changed)

3 unchanged sentences

($ in millions, except per share amounts)

October 1, 2021 December 31, 2020

April 1, 2022 December 31, 2021

Current assets:

6 unchanged sentences

Prepaid expenses and other current assets 281.1 252.7

Investment in Vontier Corporation — 1,119.2

Current assets, discontinued operations — 30.4

Total current assets 2,447.7 2,514.9

Property, plant and equipment, net of accumulated depreciation of $ 701.1 and $ 674.5 at October 1, 2021 and December 31, 2020, respectively

Operating lease right-of-use assets 180.3 188.7

Property, plant and equipment, net of accumulated depreciation of $ 723.2 and $ 679.0 at April 1, 2022 and December 31, 2021, respectively

Other assets 484.3 512.9

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Current liabilities:

Commercial paper $ 215.0 $ —

Current portion of long-term debt 999.8 2,151.7

Trade accounts payable 576.1 557.9

Current operating lease liabilities 45.4 47.0

Accrued expenses and other current liabilities 985.7 1,005.3

Current liabilities, discontinued operations 1.2 33.3

Total current liabilities 2,561.6 3,714.9

Operating lease liabilities 144.3 154.3

Other long-term liabilities 1,399.2 1,426.3

2 unchanged sentences

Preferred stock:

$ 0.01 par value, 15.0 million shares authorized at October 1, 2021 and December 31, 2020;

5.0 % Mandatory convertible preferred stock, series A, 0.0 million and 1.4 million shares designated, issued, and outstanding at October 1, 2021 and December 31, 2020, respectively

$ 0.01 par value, 15.0 million shares authorized and no shares issued or outstanding at April 1, 2022 and December 31, 2021

Common stock:

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360.9 and 360.4 million issued;

358.6 and 337.9 million outstanding at October 1, 2021 and December 31, 2020, respectively

358.4 and 359.1 million outstanding at April 1, 2022 and December 31, 2021, respectively

Additional paid-in capital 3,619.1 3,670.0

Treasury shares, at cost:

Retained earnings 6,226.4 6,023.6

8 unchanged sentences

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

Three Months Ended Nine Months Ended

October 1, 2021 September 25, 2020 October 1, 2021 September 25, 2020

Three Months Ended

April 1, 2022 April 2, 2021

Sales of products and software $ 1,152.7 $ 1,077.2

13 unchanged sentences

Gain on investment in Vontier Corporation — 57.0

Gain on litigation dismissal — — 26.0 —

Other non-operating expense, net ( 2.7 ) ( 3.3 )

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($ in millions)

Three Months Ended Nine Months Ended

October 1, 2021 September 25, 2020 October 1, 2021 September 25, 2020

Three Months Ended

April 1, 2022 April 2, 2021

Net earnings $ 165.1 $ 110.2

8 unchanged sentences

($ and shares in millions)

Common Stock Preferred Stock Additional Paid-In Capital Retained Earnings Accumulated

Common Stock Preferred Stock Treasury Stock Additional Paid-In Capital Retained Earnings Accumulated

Comprehensive

Income (Loss) Noncontrolling

Shares Amount Shares Amount

Shares Outstanding Amount Shares Amount

Balance, December 31, 2021 359.1 $ 3.6 — $ — $ — $ 3,670.0 $ 6,023.6 $ ( 185.0 ) $ 4.8

Adoption of ASU 2020-06 — — — — — ( 65.7 ) 62.8 — —

Balance, January 1, 2022 359.1 3.6 — — — 3,604.3 6,086.4 ( 185.0 ) 4.8

Net earnings for the period — — — — — — 165.1 — —

Dividends to common shareholders — — — — — — ( 25.1 ) — —

Mandatory convertible preferred stock cumulative dividends — — — — — ( 17.3 ) — —

Other comprehensive income (loss) — — — — — — — ( 38.9 ) —

Common stock-based award activity 0.5 — — — — 23.8 — — —

Early extinguishment of 0.875 % senior convertible notes due 2022

— — — — 11.6 — — —

Common stock repurchases ( 1.0 ) — — — ( 63.8 ) — — — —

Shares withheld for taxes ( 0.2 ) — — — — ( 9.0 ) — — —

Change in noncontrolling interests — — — — — — — — 0.5

Balance, April 1, 2022 358.4 $ 3.6 — $ — $ ( 63.8 ) $ 3,619.1 $ 6,226.4 $ ( 223.9 ) $ 5.3

Net earnings for the period — — — — — 180.9

Dividends to common shareholders — — — — — ( 23.7 ) — —

Mandatory convertible preferred stock cumulative dividends — — — — — ( 17.2 ) — —

Other comprehensive income — — — — — — 17.5 —

Common stock-based award activity 0.5 — — — 35.3 — — —

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

Changes in noncontrolling interests — — — — 3.0 — — ( 3.0 )

Balance, July 2, 2021 358.4 $ 3.6 — $ — $ 3,602.1 $ 5,756.6 $ ( 157.3 ) $ 4.7

Net earnings for the period — — — — — 150.8

Dividends to common shareholders — — — — — ( 25.2 ) — —

Other comprehensive income (loss) — — — — — — ( 34.8 ) —

Common stock-based award activity 0.2 — — — 26.0 — — —

Changes in noncontrolling interests — — — — ( 3.8 ) — — 0.1

Balance, October 1, 2021 358.6 $ 3.6 — $ — $ 3,624.3 $ 5,882.2 $ ( 192.1 ) $ 4.8

See the accompanying Notes to Consolidated Condensed Financial Statements.

FORTIVE CORPORATION AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CHANGES IN EQUITY

($ and shares in millions)

Common Stock Preferred Stock Additional Paid-In Capital Retained Earnings Accumulated

Common Stock Preferred Stock Treasury Stock Additional Paid-In Capital Retained Earnings Accumulated

Comprehensive

Income (Loss) Noncontrolling

Shares Amount Shares Amount

Shares Outstanding Amount Shares Amount

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

Adoption of accounting standard — — — — — ( 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 — — — — — — 110.2

3 unchanged sentences

Common stock-based award activity ( 0.4 ) — — — — 34.1 — — —

Change in noncontrolling interests — — — — — — — ( 2.0 )

Balance, March 27, 2020 336.8 $ 3.4 1.4 $ — $ 3,333.7 $ 4,098.6 $ ( 193.6 ) $ 11.2

Net earnings for the period — — — — — 130.0 — —

Dividends to common shareholders — — — — — ( 23.6 ) — —

Mandatory convertible preferred stock cumulative dividends — — — — — ( 17.2 ) — —

Other comprehensive income — — — — — — 37.0 —

Common stock-based award activity 0.2 — — — 27.0 — — —

Change in noncontrolling interests — — — — — — — 0.4

Balance, June 26, 2020 337.0 $ 3.4 1.4 $ — $ 3,360.7 $ 4,187.8 $ ( 156.6 ) $ 11.6

Net earnings for the period — — — — — 225.8 — —

Dividends to common shareholders — — — — — ( 23.6 ) — —

Mandatory convertible preferred stock cumulative dividends — — — — — ( 17.3 ) — —

Other comprehensive income — — — — — — 64.9 —

Common stock-based award activity 0.2 — — — 31.0 — — —

Change in noncontrolling interests — — — — — — — 0.4

Balance, September 25, 2020 337.2 $ 3.4 1.4 $ — $ 3,391.7 $ 4,372.7 $ ( 91.7 ) $ 12.0

Shares withheld for tax ( 0.1 ) — — — — ( 13.2 ) — — —

Early extinguishment of 0.875 % convertible senior notes due 2022

— — — — — ( 11.6 ) — — —

Change in noncontrolling interest — — — — — — — — ( 0.8 )

Balance, April 2, 2021 338.5 $ 3.4 1.4 $ — $ — $ 3,563.8 $ 5,616.6 $ ( 174.8 ) $ 7.7

See the accompanying Notes to Consolidated Condensed Financial Statements.

2 unchanged sentences

($ in millions)

Nine Months Ended

October 1, 2021 September 25, 2020

Three Months Ended

April 1, 2022 April 2, 2021

Cash flows from operating activities:

6 unchanged sentences

Gain on investment in Vontier Corporation — ( 57.0 )

Gain on litigation dismissal ( 26.0 ) —

Change in trade accounts receivable, net ( 1.4 ) ( 26.9 )

4 unchanged sentences

Total operating cash provided by continuing operations 214.8 152.0

Total operating cash provided by (used in) discontinued operations ( 19.4 ) 503.7

Total operating cash used in discontinued operations — ( 7.2 )

Net cash provided by operating activities 214.8 144.8

2 unchanged sentences

Payments for additions to property, plant and equipment ( 18.8 ) ( 8.4 )

All other investing activities 1.1 5.3

Total investing cash used in continuing operations ( 1,183.6 ) ( 68.8 )

Total investing cash used in discontinued operations — ( 36.3 )

Net cash used in investing activities ( 17.9 ) ( 8.6 )

Cash flows from financing activities:

Net proceeds from (repayment of) commercial paper borrowings 215.0 ( 1,141.9 )

Proceeds from borrowings (maturities greater than 90 days), net of issuance costs of $ 8 million in 2020

Payment of 0.875 % convertible senior notes due 2022

( 1,156.5 ) —

Net proceeds from commercial paper borrowings 930.7 —

Repayment of borrowings (maturities greater than 90 days) — ( 611.1 )

1 unchanged sentence

Payment of mandatory convertible preferred stock cash dividend to shareholders — ( 17.3 )

Repurchase of common shares ( 63.8 ) —

All other financing activities ( 17.9 ) ( 2.8 )

Total financing cash used in continuing operations ( 485.1 ) ( 756.0 )

Total financing cash used in discontinued operations — ( 4.2 )

Net cash used in financing activities ( 332.6 ) ( 654.9 )

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Fortive Corporation (“Fortive,” “the Company,” “we,” “us,” or “our”) 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.

Our research and development, manufacturing, sales, distribution, service, and administrative facilities are located in more than 50 countries around the world.

We prepared the unaudited consolidated condensed financial statements included herein in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules and regulations of the U.S.

Securities and Exchange Commission (the “SEC”) applicable for interim periods.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations;

Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted pursuant to such rules and regulations;

however, we believe the disclosures are adequate to make the information presented not misleading.

The consolidated condensed financial statements included herein should be read in conjunction with the audited annual consolidated financial statements as of and for the year ended December 31, 2021 and the footnotes (“Notes”) thereto included within our 2021 Annual Report on Form 10-K.

In our opinion, the accompanying financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to fairly present our financial position as of October 1, 2021 and December 31, 2020, our results of operations for the three and nine month periods ended October 1, 2021 and September 25, 2020, and cash flows for the nine month periods ended October 1, 2021 and September 25, 2020.

In our opinion, the accompanying financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to fairly present our financial position as of April 1, 2022 and December 31, 2021, our results of operations and cash flows for the three month periods ended April 1, 2022 and April 2, 2021.

Reclassification of certain prior year amounts have been made to conform to current year presentation.

Vontier Separation and Discontinued Operations

On October 9, 2020 (the “Distribution Date”), the Company completed the separation of its Industrial Technologies segment by distributing 80.1 % of the outstanding shares of Vontier Corporation (“Vontier”), the entity incorporated to hold such businesses, to Fortive stockholders (the “Vontier Separation”) on a pro rata basis.

To effect the Vontier 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 outstanding immediately following the Vontier Separation (the “Retained Vontier Shares”).

On the Distribution Date, Vontier paid the Company $ 1.8 billion, including $ 1.6 billion as part of the consideration for the contribution of certain assets and liabilities to Vontier by the Company in connection with the Vontier Separation and $ 202 million as an adjustment for excess cash balances remaining with Vontier (collectively, the “Cash Consideration”).

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

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 condensed financial statements reflect the results of separation activities associated with the prior Vontier business as a discontinued operation, which was immaterial for all periods presented.

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.

Refer to Note 11 of our 2020 Annual Report on Form 10-K and Note 6 to the consolidated condensed financial statements 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 first quarter of 2021 are included in continuing operations.

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.

Fortive did not retain a controlling interest in Vontier and therefore the Retained Vontier Shares were included in our assets of continuing operations as of December 31, 2020 and subsequent fair value changes in the Retained Vontier Shares prior to the Debt-for-Equity Exchange are included in our results from continuing operations for the nine month period ended October 1, 2021.

Interest expense and extinguishment costs related to the Debt-for-Equity Exchange during the first quarter of 2021 are included in continuing operations.

Segment Presentation

In light of the Vontier Separation, we changed our internal reporting structure on the first day of the fourth quarter of 2020, September 26, 2020, to reflect organizational and leadership changes that allow us to better assess the operational performance of, and allocate resources to, our businesses.

Our chief operating decision maker assesses performance and allocates resources based on our new operating segments, which are also our new reportable segments.

Our new reportable segments are comprised of Intelligent Operating Solutions, Precision Technologies, and Advanced Healthcare Solutions.

All prior period segment information has been restated to reflect our new reportable segments.

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.

We 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 supplies critical workflow solutions to hospitals and other healthcare customers, enabling safer, more efficient, and higher quality healthcare.

We provide hardware, consumables, software and services that optimize our customers’ most critical workflows, including instrument 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.

Accumulated Other Comprehensive Income (Loss)

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subsidiaries.

We designated our ¥ 13.8 billion senior unsecured term facility loan and our Euro-denominated commercial paper outstanding during the nine month period ended September 25, 2020 as net investment hedges of our investment in certain foreign operations;

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 quarter of 2020.

As of October 1, 2021 and December 31, 2020, we had no designated net investment hedges.

During the three and nine month periods ended September 25, 2020, we recognized foreign currency transaction losses of $ 2.0 million and gains of $ 2.0 million, respectively, on the debt that 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.

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

We recorded no ineffectiveness from our net investment hedges during the three and nine month periods ended September 25, 2020.

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

The changes in Accumulated Other Comprehensive Income (“AOCI”) by component are summarized below ($ in millions):

adjustments Pension

adjustments (a)

For the Three Months Ended October 1, 2021:

Balance, July 2, 2021 $ ( 72.1 ) $ ( 85.2 ) $ ( 157.3 )

Other comprehensive income (loss) before reclassifications, net of income taxes ( 35.7 ) — ( 35.7 )

Amounts reclassified from accumulated other comprehensive income (loss):

Increase (decrease) — 1.2 (b)

Income tax impact — ( 0.3 ) ( 0.3 )

Amounts reclassified from accumulated other comprehensive income (loss), net of income taxes — 0.9 0.9

Net current period other comprehensive income (loss), net of income taxes ( 35.7 ) 0.9 ( 34.8 )

Balance, October 1, 2021 $ ( 107.8 ) $ ( 84.3 ) $ ( 192.1 )

For the Three Months Ended September 25, 2020:

Balance, June 26, 2020 $ ( 79.1 ) $ ( 77.5 ) $ ( 156.6 )

Other comprehensive income (loss) before reclassifications, net of income taxes 63.9 — 63.9

Amounts reclassified from accumulated other comprehensive income (loss):

Increase (decrease) — 1.2 (b)

Income tax impact — ( 0.2 ) ( 0.2 )

Amounts reclassified from accumulated other comprehensive income (loss), net of income taxes — 1.0 1.0

Net current period other comprehensive income (loss), net of income taxes 63.9 1.0 64.9

Balance, September 25, 2020 $ ( 15.2 ) $ ( 76.5 ) $ ( 91.7 )

adjustments Pension adjustments (a)

For the Nine Months Ended October 1, 2021:

For the Three Months Ended April 1, 2022:

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

4 unchanged sentences

Amounts reclassified from accumulated other comprehensive income (loss), net of income taxes — 0.5 0.5

Net current period other comprehensive income (loss) ( 53.8 ) 2.8 ( 51.0 )

Balance, October 1, 2021 $ ( 107.8 ) $ ( 84.3 ) $ ( 192.1 )

For the Nine Months Ended September 25, 2020:

Net current period other comprehensive income (loss), net of income taxes ( 39.4 ) 0.5 ( 38.9 )

Balance, April 1, 2022 $ ( 162.1 ) $ ( 61.8 ) $ ( 223.9 )

For the Three Months Ended April 2, 2021:

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

4 unchanged sentences

Amounts reclassified from accumulated other comprehensive income (loss), net of income taxes — 1.0 1.0

Net current period other comprehensive income (loss) ( 36.4 ) 1.0 ( 35.4 )

Balance, September 25, 2020 $ ( 15.2 ) $ ( 76.5 ) $ ( 91.7 )

Net current period other comprehensive income (loss), net of income taxes ( 34.7 ) 1.0 ( 33.7 )

Balance, April 2, 2021 $ ( 88.7 ) $ ( 86.1 ) $ ( 174.8 )

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

(b) This component of AOCI is included in the computation of net periodic pension cost (refer to Note 8 for additional details).

(b) This component of AOCI is included in the computation of net periodic pension cost (refer to Note 12 in our most recently filed Form 10-K for additional details).

Allowances for Doubtful Accounts

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Additions to the allowances are charged to current period earnings, amounts determined to be uncollectible are charged directly against the allowances, while amounts recovered on previously written-off accounts increase the allowances.

The following is a rollforward of the aggregated allowance for credit losses related to our trade accounts receivables as of October 1, 2021 ($ in millions):

The following is a rollforward of the aggregated allowance for credit losses related to our trade accounts receivables as of April 1, 2022 ($ in millions):

Balance, December 31, 2021 $ 39.7

2 unchanged sentences

Foreign currency exchange and other ( 0.1 )

Balance, October 1, 2021 $ 36.3

Balance, April 1, 2022 $ 39.4

The allowance for unbilled receivables was immaterial for all periods presented.

1 unchanged sentence

In August 2020, the Financial Accounting Standards Board issued Accounting Standards Update No.

2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity

(Subtopic 815-40):

2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40):

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.

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

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 markets.

We have completed a number of acquisitions that have been accounted for as business combinations and resulted in the recognition of goodwill in our financial statements.

On January 1, 2022, we adopted ASU 2020-06 using a modified retrospective approach and recognized in our balance sheet, as of January 1, 2022, a net of tax adjustment to reduce Additional Paid-in Capital by $ 65.7 million and increase debt by $ 3.7 million, with a corresponding net of tax adjustment to beginning retained earnings of $ 62.8 million.

These adjustments are related to our 0.875 % Convertible Senior Notes (the “Convertible Notes”), which were the only outstanding instruments impacted by the new standard at the time of adoption.

Results for reporting periods beginning January 1, 2022 reflect the adoption of ASU 2020-06, while prior period amounts were not adjusted and continue to be reported in accordance with our historical accounting practices.

Prior to our adoption of ASU 2020-06 on January 1, 2022, we recognized the fair value of the nonconvertible debt component of our Convertible Notes subject to the cash conversion guidance as debt and attributed the residual value to the conversion feature which was recognized in APIC.

Subsequent to the issuance of our Convertible Notes in February 2019, we accreted the debt discount as non-cash interest expense in our Statements of Earnings.

Further, we applied the treasury stock method to our Convertible Notes when calculating earnings per share (“EPS”) in all periods prior to our adoption of ASU 2020-06.

After our adoption of ASU 2020-06, we account for convertible debt instruments wholly as debt, unless a convertible instrument contains features that require bifurcation as a derivative under ASC 815 or a convertible debt instrument is issued at a substantial premium.

On January 1, 2022, we reclassified the unamortized cost basis of our outstanding Convertible Notes wholly as debt, which subsequently matured and was settled on February 15, 2022.

We applied the if-converted method to all convertible instruments when calculating EPS for the three months ended April 1, 2022.

As of April 1, 2022, we had no convertible instruments outstanding subject to the guidance in ASU 2020-06.

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.

We have completed a number of acquisitions that have been accounted for as purchases of businesses and resulted in the recognition of goodwill in our financial statements.

This goodwill arises because the purchase price for each acquired business reflects a number of factors, including the complementary fit, acceleration of our strategy and synergies the business brings with respect to our existing operations, the future earnings and cash flow potential of the business, the potential to add other strategically complementary acquisitions to the acquired business, the scarce or unique nature of the business in its markets, competition to acquire the business, the valuation of similar businesses in the marketplace (as reflected in a multiple of revenues, earnings, or cash flows), and the avoidance of the time and costs which would be required (and the associated risks that would be encountered) to enhance our existing offerings to key target markets and develop new and profitable businesses.

We make an initial allocation of the purchase price at the date of acquisition based on our understanding of the fair value of the acquired assets and assumed liabilities.

We obtain this information during due diligence and through other sources.

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.

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

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

During the three and nine month periods ended October 1, 2021, immaterial adjustments were recorded to the preliminary purchase price allocation of acquisitions that closed during 2020.

Advanced Sterilization Products

On April 1, 2019 (the “Principal Closing Date”), we acquired the advanced sterilization products business (“ASP”) of Johnson & Johnson, a New Jersey corporation (“Johnson & Johnson”), for an aggregate purchase price of $ 2.7 billion (the “Transaction”), subject to certain post-closing adjustments set forth in a Stock and Asset Purchase Agreement, dated effective as of June 6, 2018 (the “Purchase Agreement”), between the Company and Ethicon, Inc., a New Jersey corporation (“Ethicon”) and a wholly owned subsidiary of Johnson & Johnson.

ASP engages in the research, development, manufacture, marketing, distribution, and sale of low-temperature terminal sterilization and high-level disinfection products.

On the Principal Closing Date, we paid $ 2.7 billion in cash and obtained the transferred assets and assumed liabilities in 20 countries (“Principal Countries”), general patent and trademark assignments, and all transferred equity interests in ASP.

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

As of October 1, 2021 we have closed 20 Principal Countries and 38 Non-Principal Countries that, in aggregate, accounted for approximately 99 % of the preliminary valuation of ASP.

The remaining Non-Principal Country represents less than 1 % of the preliminary valuation of ASP, or $ 1.0 million, which is included as a prepaid asset in Other assets in the Consolidated Condensed Balance Sheet.

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

All of the provisional goodwill associated with the Transaction is included in goodwill at October 1, 2021, and the majority of the provisional goodwill is tax deductible.

There were no material measurement period adjustments recorded for the Non-Principal Countries during the three and nine month periods ended October 1, 2021.

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

Under the distribution agreements, ASP sells finished goods to Ethicon at prices agreed by the parties.

ASP recognizes these sales as revenue when the conditions for revenue recognition are met.

Following the sale of finished goods by ASP, Ethicon obtains title of the finished goods, has full authority to sell and market the finished goods to end customers as it sees fit, and retains any revenue and profit from the sale.

As of October 1, 2021, ASP had exited the TSAs and substantially all of the distribution agreements.

ASP expects to close the remaining Non-Principal Country in the fourth quarter of 2021.

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 Condensed Balance Sheet and recorded the gain on litigation dismissal of $ 26 million within Non-operating income (expense), net in our Consolidated Condensed Statements of Earnings during the nine month period ended October 1, 2021.

During the three month period ended April 1, 2022, adjustments were made to the preliminary purchase price allocation of prior year acquisitions as described below.

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 $ 978 million of goodwill related to the acquisition, which is not tax deductible.

During the three month period ended April 1, 2022, provisional goodwill increased by $ 8.1 million for measurement period adjustments.

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 software as a service based multi-site facilities maintenance service solutions with an integrated service-provider network.

(“ServiceChannel”), a privately held, global provider of Software as a Service (“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 $ 36 million of deferred compensation consideration that will be recognized ratably over a twelve month service period.

The total consideration paid was approximately $ 1.2 billion, net of acquired cash, and included 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 $ 897 million of goodwill related to the ServiceChannel acquisition, which is not tax deductible.

We preliminarily recorded approximately $ 873 million of goodwill related to the 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.

The following table summarizes the preliminary estimated fair value of the assets acquired and liabilities assumed from ServiceChannel as of October 1, 2021 ($ in millions):

Revenue and operating loss attributable to the Provation and ServiceChannel acquisitions were $ 67.3 million and $ 23.4 million for the three months ended April 1, 2022.

The operating loss includes $ 19.5 million of intangible asset amortization and $ 20.4 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 preliminary estimated fair value of the assets acquired and liabilities assumed from ServiceChannel and Provation as of April 1, 2022 ($ in millions):

Provation ServiceChannel Total

Accounts receivable $ 41.6 $ 10.1 $ 51.7

Goodwill 977.6 872.9 1,850.5

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 ( 30.5 ) ( 7.5 ) ( 38.0 )

Net cash consideration $ 1,405.6 $ 1,165.9 $ 2,571.5

Revenue and operating loss attributable to ServiceChannel for both the three and nine month periods ended October 1, 2021 were $ 10.1 million and $ 19.5 million, respectively, consistent with our expectations.

The operating loss includes a combined $ 18.2 million of intangible asset amortization, acquisition-related fair value adjustments, and transaction and integration costs for both the three and nine month periods ended October 1, 2021.

Transaction and integration related costs were approximately $ 13.2 million and are recorded in Selling, general and administration expenses, which are primarily comprised of compensation cost for employee retention bonuses and amounts paid to third-party advisors.

DISCONTINUED OPERATIONS

On October 9, 2020, we completed the Vontier Separation.

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.

Vontier Impairment Charge

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.

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

Accordingly, the impairment charge is recorded in Earnings from discontinued operations, net of income taxes in the Consolidated Statement of Earnings.

The key components of income from discontinued operations for the three and nine month periods ended October 1, 2021 and September 25, 2020 were as follows ($ in millions):

Three Months Ended Nine Months Ended

October 1, 2021 September 25, 2020 October 1, 2021 September 25, 2020

Sales $ — $ 746.7 $ — $ 1,889.6

Cost of sales — ( 415.3 ) — ( 1,064.2 )

Selling, general and administrative expenses ( 0.3 ) ( 127.1 ) ( 3.5 ) ( 380.7 )

Research and development expenses — ( 31.6 ) — ( 94.7 )

Goodwill impairment — — — ( 85.3 )

Interest expense and other income, net — ( 7.0 ) 0.1 ( 19.3 )

Earnings before income taxes ( 0.3 ) 165.7 ( 3.4 ) 245.4

Income taxes — ( 25.9 ) 0.5 ( 48.3 )

Net earnings from discontinued operations $ ( 0.3 ) $ 139.8 $ ( 2.9 ) $ 197.1

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

October 1, 2021 December 31, 2020

Other current assets $ — $ 30.4

Total assets, discontinued operations $ — $ 30.4

Current liabilities:

Accrued expenses and other current liabilities $ ( 1.2 ) $ ( 33.3 )

Total liabilities, discontinued operations $ ( 1.2 ) $ ( 33.3 )

GOODWILL AND OTHER INTANGIBLES

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

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Measurement period adjustments for 2021 acquisitions ( 0.6 ) — 9.3 8.7

Attributable to 2021 acquisitions 897.3 — — 897.3

Foreign currency translation and other ( 10.9 ) ( 13.4 ) ( 3.5 ) ( 27.8 )

Balance, October 1, 2021 $ 4,153.3 $ 1,848.2 $ 2,220.0 $ 8,221.5

The increase in the goodwill balance of the Intelligent Operating Solutions segment for the nine month period ended October 1, 2021 is a result of the ServiceChannel acquisition.

Refer to Note 2 for more information.

During the three and nine month periods ended October 1, 2021, we identified no triggering events indicating a potential impairment of goodwill.

The following summarizes the gross carrying value and accumulated amortization for each major category of intangible asset ($ in millions):

October 1, 2021 December 31, 2020

Gross Carrying Amount Accumulated Amortization Gross Carrying Amount Accumulated Amortization

Finite-lived intangibles:

Patents and technology $ 1,051.8 $ ( 449.4 ) $ 983.3 $ ( 401.1 )

Customer relationships and other intangibles 3,106.5 ( 1,008.8 ) 2,958.3 ( 896.8 )

Trademarks and trade names 67.2 ( 2.3 ) 18.0 ( 1.4 )

Total finite-lived intangibles 4,225.5 ( 1,460.5 ) 3,959.6 ( 1,299.3 )

Indefinite-lived intangibles:

Trademarks and trade names 627.0 — 630.3 —

Total intangibles $ 4,852.5 $ ( 1,460.5 ) $ 4,589.9 $ ( 1,299.3 )

Finite-lived intangible assets are amortized over the shorter of their legal or estimated useful lives.

During the three and nine month periods ended October 1, 2021, we acquired finite-lived intangible assets, consisting primarily of customer relationships, developed technology, and trade names, with a weighted average life of approximately 12 years as a result of the ServiceChannel Acquisition .

Refer to Note 2 for additional information on the intangible assets acquired.

Balance, April 1, 2022 $ 4,114.5 $ 1,826.6 $ 3,191.8 $ 9,132.9

During the three month period ended April 1, 2022, we identified no triggering events indicating a potential impairment of goodwill.

FAIR VALUE MEASUREMENTS

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(Level 3) Total

October 1, 2021

April 1, 2022

Deferred compensation liabilities $ — $ 35.8 $ — $ 35.8

December 31, 2021

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

Deferred compensation liabilities — 36.0 — 36.0

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Changes in the deferred compensation liability under these programs are recognized based on changes in the fair value of the participants’ accounts, which are based on the applicable earnings rates.

On October 9, 2020, we completed the Vontier Separation and retained 19.9 % of the shares of Vontier common stock outstanding immediately following the Vontier Separation.

We did not retain a controlling interest in Vontier and therefore the fair value of our Retained Vontier Shares were included in our assets of continuing operations as of December 31, 2020, and subsequent fair value changes are included in our results from continuing operations for the nine month period ended October 1, 2021.

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 364 -day delayed draw term loan due March 22, 2021 (the “Term Loan due March 2021”) and (ii) $ 683.2 million of the delayed-draw term loan due May 30, 2021 (the “Term Loan due May 2021”).

The change in fair value of the Retained Vontier Shares and the resulting gain of $ 57.0 million was recorded in the nine month period ended October 1, 2021.

We recorded a loss on extinguishment of the debt included in the Debt-for-Equity Exchange of $ 94.4 million in the nine month period ended October 1, 2021.

Nonrecurring Fair Value Measurements

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However, these assets are required to be assessed for impairment whenever events or circumstances indicate that their carrying value may not be fully recoverable, and at least annually for goodwill and indefinite-lived intangible assets.

We evaluated events or circumstances that may indicate the carrying value of our non-financial assets may not be fully recoverable during the three and nine month periods ended October 1, 2021, and recorded no impairments.

We evaluated events or circumstances that may indicate the carrying value of our non-financial assets may not be fully recoverable during the three month period ended April 1, 2022, and recorded no impairments.

Fair Value of Financial Instruments

The carrying amount and fair value of financial instruments are as follows ($ in millions):

October 1, 2021 December 31, 2020

April 1, 2022 December 31, 2021

Carrying Amount Fair Value Carrying Amount Fair Value

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Long-term debt, net of current maturities $ 2,738.9 $ 2,767.9 $ 1,807.3 $ 1,978.9

As of October 1, 2021 and December 31, 2020, the current portion of long-term debt and long-term debt, net of current maturities were categorized as Level 1.

As of April 1, 2022 and December 31, 2021, the current portion of long-term debt and long-term debt, net of current maturities were categorized as Level 1.

The fair values of the current portion of long-term debt and long-term debt were based on quoted market prices.

The difference between the fair value and the carrying amounts of long-term borrowings may be attributable to changes in market interest rates and/or our credit ratings subsequent to the incurrence of the borrowing.

The difference between the fair value and the carrying amounts of long-term borrowings may be attributable to changes in market interest rates

and/or our credit ratings subsequent to the incurrence of the borrowing.

The fair value of cash and cash equivalents, accounts receivable, net, and trade accounts payable, and commercial paper approximates their carrying amount due to the short-term maturities of these instruments.

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

October 1, 2021 December 31, 2020

April 1, 2022 December 31, 2021

dollar-denominated commercial paper $ 1,296.2 $ 364.9

Delayed-Draw Term Loan due 2022 999.8 999.7

3.15 % senior unsecured notes due 2026

$ 894.9 $ 894.1

4.30 % senior unsecured notes due 2046

0.875 % senior convertible notes due 2022

1,143.2 1,389.0

Term Loan due May 2021 — 1,000.0

Term Loan due March 2021 — 399.8

Long-term debt 3,738.7 3,959.0

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Long-term debt, net of current maturities $ 2,738.9 $ 1,807.3

Aggregate unamortized debt discounts, premiums, and issuance costs of $ 21 million and $ 57 million as of October 1, 2021 and December 31, 2020, respectively, are netted against the principal amounts of the components of debt in the table above.

Aggregate unamortized debt discounts, premiums, and issuance costs of $ 8 million and $ 13 million as of April 1, 2022 and December 31, 2021, respectively, are netted against the principal amounts of the components of debt in the table above.

Refer to Note 11 of our 2021 Annual Report on Form 10-K for further details of our debt financing.

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 nine month period ended October 1, 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.

Convertible Senior Notes

On February 22, 2019, we issued $ 1.4 billion in aggregate principal amount of our 0.875 % Convertible Senior Notes due 2022 (the “Convertible Notes”), including $ 187.5 million in aggregate principal amount resulting from an exercise in full of an over-allotment option.

On February 22, 2019, we issued $ 1.4 billion in aggregate principal amount of our 0.875 % Convertible Senior Notes due 2022, including $ 187.5 million in aggregate principal amount resulting from an exercise in full of an over-allotment option.

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 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 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.

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

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

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

In connection with the repurchase, we recorded a loss on debt extinguishment during the nine month period ended October 1, 2021 of $ 10.5 million.

In connection with the repurchase, we recorded a loss on debt extinguishment during the three month period ended April 2, 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 $ 11.1 million and $ 34.5 million in interest expense during the three and nine month periods ended October 1, 2021, respectively, of which $ 2.5 million and $ 7.9 million was related to the contractual coupon rate of 0.875 %, $ 1.5 million and $ 4.7 million was attributable to the amortization of debt issuance costs and $ 7.1 million and $ 21.9 million was attributable to the amortization of the discount for each respective period.

We recognized $ 13.6 million and $ 40.6 million in interest expense during the three and nine month periods ended September 25, 2020, respectively, of which $ 3.2 million and $ 9.5 million related to the contractual coupon rate of 0.875 %, $ 1.8 million and $ 5.6 million was attributable to the amortization of debt issuance costs, and $ 8.6 million and $ 25.5 million was attributable to the amortization of the discount for each respective period.

The discount at issuance was $ 102.2 million and is being amortized over a three-year period.

The unamortized discount at October 1, 2021 was $ 11.0 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.

Classification of Debt Due within the Next Twelve Months

Our Convertible Senior Notes are recorded in the Current portion of long-term debt line item in the Consolidated Condensed Balance Sheet as of October 1, 2021.

On January 1, 2022, we adopted ASU 2020-06, as further detailed in Note 1.

We reclassified the carrying value of the instrument wholly to debt, eliminating the value formerly attributable to the conversion feature and the associated debt issuance costs that were previously classified as equity.

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.

We recognized $ 2.1 million in interest expense during the three month period ended April 1, 2022, of which $ 1.3 million was related to the contractual coupon rate of 0.875 % and $ 0.8 million was attributable to the amortization of debt issuance costs.

We recognized $ 12.2 million in interest expense during the three month period ended April 2, 2021, of which $ 2.8 million related to the contractual coupon rate of 0.875 %, $ 1.7 million was attributable to the amortization of debt issuance costs, and $ 7.7 million was attributable to the amortization of the discount.

Other Liquidity Sources

We generally satisfy any short-term liquidity needs that are not met through operating cash flows and available cash primarily through issuances of commercial paper under our U.S.

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

dollar and Euro-denominated commercial paper programs (“Commercial

Paper Programs”).

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

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 the Term Loan due March 2021 that was retired in the Debt-for-Equity Exchange.

In August 2021, we resumed borrowing under our Commercial Paper Program to fund, in part, the ServiceChannel acquisition.

Interest expense on commercial paper is paid at maturity and is generally based on our credit ratings at the time of issuance and prevailing short-term interest rates.

The details of our outstanding Commercial Paper Programs as of October 1, 2021 were as follows ($ in millions):

The details of our outstanding Commercial Paper Programs as of April 1, 2022 were as follows ($ in millions):

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

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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 our commercial paper programs, can also be used for working capital and other general corporate purposes.

As of October 1, 2021, no borrowings were outstanding under the Revolving Credit Facility.

We derive revenues primarily from the sale of products, software, and services.

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

Sales of products and software includes revenues from the sale of products and equipment, software product offerings, and equipment rentals.

Sales of services includes revenues from extended warranties, post-contract customer support (“PCS”), maintenance contracts or services, contract labor to perform ongoing service at a customer location, and services related to previously sold products.

As of April 1, 2022, no borrowings were outstanding under the Revolving Credit Facility.

Debt-for-Equity Exchange

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.

We recorded a loss on extinguishment of the debt included in the Debt-for-Equity Exchange of $ 94.4 million in the three month period ended April 2, 2021.

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

Product sales include revenue from the sale of products and equipment, which includes our software and SaaS product offerings and equipment rentals.

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

Contract Assets — In certain circumstances, we record contract assets which include unbilled amounts typically resulting from sales under contracts when revenue recognized exceeds the amount billed to the customer, and right to payment is not only subject to the passage of time.

Contract assets were $ 77 million as of October 1, 2021 and $ 56 million as of December 31, 2020.

Contract Costs — We incur direct incremental costs to obtain certain contracts, typically sales-related commissions and costs associated with assets used by our customers in certain software arrangements.

Deferred sales-related commissions are generally not capitalized as the amortization period is one year or less, and we elected to use the practical expedient to expense these sales commissions as incurred.

As of October 1, 2021 and December 31, 2020, we had $ 28 million and $ 31 million, respectively, in net revenue-related contract assets primarily related to certain software contracts.

Revenue-related contract assets are recorded in the Prepaid expenses and other current assets and Other assets line items in our Condensed Consolidated Balance Sheets.

Contract assets were $ 72 million as of April 1, 2022 and $ 71 million as of December 31, 2021.

Contract Costs — We incur and capitalize direct incremental costs to obtain certain contracts, typically sales-related commissions and costs associated with assets used by our customers in certain software arrangements.

Deferred sales-related commissions are not capitalized when the amortization period is one year or less, as we elected to use the practical expedient to expense these sales commissions as incurred.

As of April 1, 2022 and December 31, 2021, we had $ 30 million and $ 27 million, respectively, in net revenue-related contract assets primarily related to certain software contracts.

Revenue-related contract assets are recorded in the Prepaid expenses and other current assets and Other assets line items in our Consolidated Condensed Balance Sheets.

These assets have estimated useful lives between 3 and 8 years.

Impairment losses recognized on our revenue-related contract assets were immaterial during the three and nine month periods ended October 1, 2021 and September 25, 2020.

Contract Liabilities — Our contract liabilities consist of deferred revenue generally related to PCS and extended warranty sales, where in most cases we receive up-front payment and recognize revenue over the support term.

We classify deferred revenue as

current or noncurrent based on the timing of when we expect to recognize revenue.

The noncurrent portion of deferred revenue is included in Other long-term liabilities in the Consolidated Condensed Balance Sheets.

Our contract liabilities consisted of the following ($ in millions):

October 1, 2021 December 31, 2020

April 1, 2022 December 31, 2021

Deferred revenue - current $ 491.4 $ 457.6

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Total contract liabilities $ 527.2 $ 491.4

During the three and nine month periods ended October 1, 2021, we recognized revenue related to our contract liabilities at December 31, 2020 of $ 82 million and $ 270 million, respectively.

The change in our contract liabilities from December 31, 2020 to October 1, 2021 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, with expected delivery dates to customers greater than one year from October 1, 2021, for which work has not been performed.

During the three month period ended April 1, 2022, we recognized revenue related to our contract liabilities at December 31, 2021 of $ 154 million.

The change in our contract liabilities from December 31, 2021 to April 1, 2022 was primarily due to the timing of billings and recognition as revenue 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, for which work has not been performed.

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

The aggregate performance obligations attributable to each of our segments is as follows ($ in millions):

October 1, 2021

April 1, 2022

Intelligent Operating Solutions $ 595.3

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We disaggregate revenue from contracts with customers by sales of products and software 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.

Disaggregation of revenue for the three month period ended October 1, 2021 is presented as follows ($ in millions):

Total Intelligent Operating Solutions Precision Technologies Advanced Healthcare Solutions

Sales of products and software $ 1,105.6 $ 462.7 $ 401.0 $ 241.9

Sales of services 193.9 72.7 54.7 66.5

Total $ 1,299.5 $ 535.4 $ 455.7 $ 308.4

United States $ 683.7 $ 283.8 $ 234.6 $ 165.3

China 154.8 48.8 75.8 30.2

All other (each country individually less than 5% of total sales) 461.0 202.8 145.3 112.9

Total $ 1,299.5 $ 535.4 $ 455.7 $ 308.4

Direct sales:

Medical $ 327.6 $ 10.5 $ 30.7 $ 286.4

Industrial & Manufacturing 313.5 204.4 103.2 5.9

Utilities & Power 97.3 55.3 42.0 —

Government 100.1 54.6 33.4 12.1

Communication, Electronics & Semiconductor 103.4 30.6 72.3 0.5

Aerospace & Defense 60.6 — 60.6 —

Oil & Gas 64.6 62.4 2.2 —

Retail & Consumer 52.1 31.5 20.6 —

Other 117.7 56.5 61.1 0.1

Total direct sales 1,236.9 505.8 426.1 305.0

Distributors 62.6 29.6 29.6 3.4

Total $ 1,299.5 $ 535.4 $ 455.7 $ 308.4

(a) Direct sales by end market include sales made through third-party distributors where we have visibility into the end customer.

Disaggregation of revenue for the three month period ended September 25, 2020 is presented as follows ($ in millions):

Total Intelligent Operating Solutions Precision Technologies Advanced Healthcare Solutions

Sales of products and software $ 988.1 $ 409.3 $ 366.2 $ 212.6

Sales of services 171.7 49.8 52.3 69.6

Total $ 1,159.8 $ 459.1 $ 418.5 $ 282.2

United States $ 610.6 $ 241.1 $ 213.9 $ 155.6

China 142.0 43.2 71.0 27.8

All other (each country individually less than 5% of total sales) 407.2 174.8 133.6 98.8

Total $ 1,159.8 $ 459.1 $ 418.5 $ 282.2

Direct sales:

Medical $ 304.7 $ 9.2 $ 29.7 $ 265.8

Industrial & Manufacturing 259.8 168.6 86.1 5.1

Utilities & Power 89.1 51.1 38.0 —

Government 86.2 42.3 36.4 7.5

Communications, Electronics & Semiconductor 73.2 28.8 43.9 0.5

Aerospace & Defense 66.3 8.6 57.7 —

Oil & Gas 54.7 52.5 2.2 —

Retail & Consumer 39.1 20.4 18.7 —

Other 117.6 52.4 65.2 —

Total direct sales 1,090.7 433.9 377.9 278.9

Distributors 69.1 25.2 40.6 3.3

Total $ 1,159.8 $ 459.1 $ 418.5 $ 282.2

(a) Direct sales by end market include sales made through third-party distributors where we have visibility into the end customer.

Disaggregation of revenue for the nine month period ended October 1, 2021 is presented as follows ($ in millions):

Disaggregation of revenue for the three month period ended April 1, 2022 is presented as follows ($ in millions):

Total Intelligent Operating Solutions Precision Technologies Advanced Healthcare Solutions

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(a) Direct sales by end market include sales made through third-party distributors where we have visibility into the end customer.

Disaggregation of revenue for the nine month period ended September 25, 2020 is presented as follows ($ in millions):

Disaggregation of revenue for the three month period ended April 2, 2021 is presented as follows ($ in millions):

Total Intelligent Operating Solutions Precision Technologies Advanced Healthcare Solutions

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(a) Direct sales by end market include sales made through third-party distributors where we have visibility into the end customer.

PENSION PLANS

For a full description of our noncontributory defined benefit pension plans refer to Note 12 of our 2020 Annual Report on Form 10-K.

The following sets forth the components of our net periodic costs associated with our noncontributory defined benefit pension plans ($ in millions):

Three Months Ended Nine Months Ended

October 1, 2021 September 25, 2020 October 1, 2021 September 25, 2020

Pension Benefits:

Interest cost $ 0.3 $ 0.3 $ 0.7 $ 0.9

Expected return on plan assets ( 0.3 ) ( 0.3 ) ( 0.7 ) ( 0.9 )

Net periodic pension cost $ — $ — $ — $ —

Pension Benefits:

Service cost $ 1.0 $ 1.1 $ 3.0 $ 3.3

Interest cost 0.7 1.0 2.3 3.0

Expected return on plan assets ( 1.3 ) ( 1.4 ) ( 3.9 ) ( 4.0 )

Amortization of net loss 1.0 1.1 3.2 3.1

Amortization of prior service cost 0.1 0.1 0.3 0.3

Net periodic pension cost $ 1.5 $ 1.9 $ 4.9 $ 5.7

We report all components of net periodic pension costs, with the exception of service costs, in other non-operating expenses as a component of non-operating income in the Consolidated Condensed Statements of Earnings.

Service costs are reported in cost of sales and selling, general and administrative expenses in the Consolidated Condensed Statements of Earnings according to the classification of the participant’s compensation.

Employer Contributions

During 2021, our cash contribution requirements for our non-U.S.

defined benefit plans for Fortive’s pension plans are expected to be approximately $ 11 million and $ 1 million, respectively.

The actual amounts to be contributed depend upon, among other things, legal requirements, underlying asset returns, the plan’s funded status, the anticipated tax deductibility of the contribution, local practices, market conditions, interest rates, and other factors.

Our effective tax rate for the three and nine month periods ended October 1, 2021 was 13.2 % and 11.1 % as compared to 13.4 % and 17.7 %, respectively, for the three and nine month periods ended September 25, 2020.

The effective tax rate for the three month period ended October 1, 2021 was relatively consistent with the effective tax rate for the three month period ended September 25, 2020.

The year-over-year decrease in the effective tax rate for the nine month period ended October 1, 2021 as compared to the nine month period ended September 25, 2020 was due primarily to a permanent difference on the gain on our Retained Vontier Shares due to the tax-free treatment of our disposition of the shares through the Debt-for-Equity Exchange, a reduction to our uncertain tax positions, and increases in certain federal tax benefits for the nine month period ended October 1, 2021.

Additionally, the tax costs incurred during the nine month period ended September 25, 2020 associated with the repatriation of a portion of our previously reinvested earnings outside of the United States contributed to the year-over year decrease in the effective tax rate for the nine month period ended October 1, 2021.

Our effective tax rate for the three and nine month periods ended October 1, 2021 differs from the U.S.

federal statutory rate of 21% due primarily to the positive and negative effects of the Tax Cuts and Jobs Act, U.S.

Our effective tax rate for the three month period ended April 1, 2022 was 13.5 % as compared to 5.9 % for the three month period ended April 2, 2021.

The year-over-year increase in the effective tax rate for the three month period ended April 1, 2022 as compared to the three month period ended April 2, 2021 was primarily due to a non-recurring permanent difference on the Q1 2021 gain on our Retained Vontier Shares due to the tax-free treatment of our disposition of the shares through the Debt-for-Equity Exchange and increases in certain federal tax benefits during the three months ended April 1, 2022.

Our effective tax rates for the three month periods ended April 1, 2022 and April 2, 2021, differ from the U.S.

federal statutory rate of 21% due primarily to the positive net effects of the Tax Cuts and Jobs Act, U.S.

federal permanent differences, the impact of credits and deductions provided by law, and a reduction in our uncertain tax positions.

Specific to the nine month period ended October 1, 2021, our effective tax rate also differs from the U.S.

federal statutory rate of 21% due to a permanent difference on the gain on our Retained Vontier Shares due to the tax-free treatment of our disposition of the shares through the Debt-for-Equity Exchange.

Specific to the nine month period ended September 25, 2020, our effective tax rate also differs from the U.S.

federal statutory rate of 21% due to the repatriation of a portion of our previously reinvested earnings outside of the United States.

Specific to the three month period ended April 1, 2021, our effective tax rate also differs from the U.S.

federal statutory rate of 21% due to a permanent difference on the gain on our Retained Vontier Shares as a result of the tax-free treatment of our disposition of the shares through the Debt-for-Equity Exchange.

STOCK-BASED COMPENSATION

Our stock-based compensation program (the “Stock Plan”) provides for the grant of stock appreciation rights, performance stock units, restricted stock units, restricted stock awards, and performance stock awards (collectively, “Stock Awards”), stock options, or any other stock-based award.

As of October 1, 2021, approximately 19 million shares of our common stock were available for subsequent issuance under the Stock Plan.

options, or any other stock-based award.

As of April 1, 2022, approximately 17 million shares of our common stock were available for subsequent issuance under the Stock Plan.

For a full description of our stock-based compensation program refer to Note 17 of our 2021 Annual Report on Form 10-K.

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The following summarizes the components of our stock-based compensation expense under the Stock Plan ($ in millions):

Three Months Ended Nine Months Ended

October 1, 2021 September 25, 2020 October 1, 2021 September 25, 2020

Three Months Ended

April 1, 2022 April 2, 2021

Stock Awards:

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Total stock-based compensation expense, net of income taxes $ 17.2 $ 13.5

The following summarizes the unrecognized compensation cost for the Stock Plan awards as of October 1, 2021.

The following summarizes the unrecognized compensation cost for the Stock Plan awards as of April 1, 2022.

This compensation cost is expected to be recognized over a weighted average period of approximately two years , representing the remaining service period related to the awards.

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Settlements made ( 4.3 )

Balance, October 1, 2021 $ 25.8

Operating lease cost for the three month periods ended October 1, 2021 and September 25, 2020 was $ 15 million and $ 14 million, respectively.

Operating lease cost for the nine month periods ended October 1, 2021 and September 25, 2020 was $ 45 million and $ 44 million, respectively.

During the nine month periods ended October 1, 2021 and September 25, 2020, cash paid for operating leases included in operating cash flows was $ 40 million and $ 37 million, respectively.

Right-of-use assets obtained in exchange for operating lease obligations were $ 24 million and $ 34 million during the nine month periods ended October 1, 2021 and September 25, 2020, respectively.

Balance, April 1, 2022 $ 23.2

Operating lease cost for both three month periods ended April 1, 2022 and April 2, 2021 was $ 15 million.

During the three month periods ended April 1, 2022 and April 2, 2021, cash paid for operating leases included in operating cash flows was $ 14 million and $ 16 million, respectively.

Right-of-use assets obtained in exchange for operating lease obligations were $ 2 million and $ 9 million during the three month periods ended April 1, 2022 and April 2, 2021, respectively.

Operating lease right-of-use assets and operating lease liabilities are reported on the Consolidated Condensed Balance Sheets within Other assets, Accrued expenses and other current liabilities and Other long-term liabilities, respectively.

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 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.

Anti-dilutive options excluded from the diluted EPS calculation for the three month periods ended October 1, 2021 and September 25, 2020 were 0.2 million and 5.3 million, respectively.

There were 0.3 million and 5.5 million anti-dilutive options excluded for the nine month periods ended October 1, 2021 and September 25, 2020, respectively.

As described in Note 6, upon conversion of the Convertible Notes, holders will receive cash, shares of our common stock, or a combination thereof, at our election.

We believe we have the ability to settle these obligations as intended, and therefore we have accounted for the conversion features under the treasury stock method in our calculation of EPS.

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 three and nine month periods ended October 1, 2021 and September 25, 2020.

Basic net 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 conversion of Convertible Notes and associated issuance of shares under the if-converted method and 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.

Anti-dilutive options excluded from the diluted EPS calculation for the three month periods ended April 1, 2022 and April 2, 2021 were 3.1 million and 0.1 million, respectively.

As described in Note 5, upon conversion of the Convertible Notes, holders were entitled to receive cash, shares of our common stock, or a combination thereof, at our election.

As described in Note 1, prior to our adoption of ASU 2020-06 on January 1, 2022, we accounted for the conversion feature under the treasury stock method in our calculation of EPS since we intended and had the ability to settle such conversions through cash up to the principal amount of the Convertible Notes and, if applicable, through shares of our common stock for conversion value, if any, in excess of the principal amount of the Convertible Notes.

Because the fair value of our common stock was below the conversion price, the Convertible Notes had no impact on our earnings per share for the three month period ended April 2, 2021.

Upon adopting ASU 2020-06 on January 1, 2022, we accounted for the Convertible Notes under the if-converted method in our calculation of diluted EPS, as required under the new guidance.

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.

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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.

The impact of the MCPS calculated under the if-converted method was anti-dilutive for the three months ended April 2, 2021.

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):

Three Months Ended Nine Months Ended

October 1, 2021 September 25, 2020 October 1, 2021 September 25, 2020

Three Months Ended

April 1, 2022 April 2, 2021

Net earnings from continuing operations $ 165.1 $ 111.7

Mandatory convertible preferred stock cumulative dividends — ( 17.3 )

Net earnings attributable to common stockholders from continuing operations $ 151.1 $ 68.7 $ 410.3 $ 148.8

Convertible note interest add-back (if converted method) 1.8 $ —

Diluted Net Earnings from Continuing Operations $ 166.9 $ 94.4

Weighted average common shares outstanding used in basic earnings per share 359.3 338.6

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Assumed exercise of dilutive options and vesting of dilutive Stock Awards 2.7 3.1

Conversion of convertible notes (if converted method) 6.4 —

Weighted average common shares outstanding used in diluted earnings per share 368.4 341.7

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We declared and paid cash dividends per common share for the periods as presented below.

We declared and paid the MCPS dividend in the first quarter of 2021, and declared and paid the final dividend in the second quarter of 2021, while the MCPS dividends for the first, second and third quarter of 2020 were declared, accrued, and paid as follows:

We declared and paid the MCPS dividend in the first quarter of 2021.

Common Share Amount

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First quarter $ 0.07 $ 25.1 $ — $ —

Second quarter 0.07 23.7 12.5 17.2

Third quarter 0.07 25.2 — —

Total $ 0.07 $ 25.1 $ — $ —

First quarter $ 0.07 $ 23.7 $ 12.5 $ 17.3

Second quarter 0.07 23.6 12.5 17.2

Third quarter 0.07 23.6 12.5 17.3

Total $ 0.07 $ 23.7 $ 12.5 $ 17.3

* The sum of the components of total dividends paid may not equal the total amount due to rounding.

The first quarter 2020 MCPS dividends were paid on April 1, 2020, the second quarter 2020 MCPS dividends were paid on July 1, 2020, and the third quarter 2020 MCPS dividends were paid on October 1, 2020.

On April 7, 2022, we declared a regular quarterly cash dividend of $ 0.07 per share payable on June 24, 2022 to common stockholders of record on May 27, 2022.

Share Repurchase Program

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.

As of April 1, 2022, there were 19.0 million shares remaining for repurchase under the program.

SEGMENT INFORMATION

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Our segment results are as follows ($ in millions):

Three Months Ended Nine Months Ended

October 1, 2021 September 25, 2020 October 1, 2021 September 25, 2020

Three Months Ended

April 1, 2022 April 2, 2021

Intelligent Operating Solutions $ 587.6 $ 510.9

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Gain on investment in Vontier Corporation — 57.0

Gain on litigation dismissal — — 26.0 —

Other non-operating expense, net ( 2.7 ) ( 3.3 )

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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-Q

Item 1. Financial Statements