What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-02-28 compared with 2022-03-01 · 296 added, 471 removed, 1265 unchanged (38% of the section changed)

6 unchanged sentences

Based on this assessment, management concluded that, as of December 31, 2022, 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, 2023 appears on page 54 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, 2022, 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.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2022 and 2021, the related consolidated statements of earnings, comprehensive income, changes in equity and cash flows for each of the three years in the period ended December 31, 2022, and the related notes and financial statement schedule listed in the Index at Item 15(a)(2) and our report dated February 28, 2023 expressed an unqualified opinion thereon.

Basis for Opinion

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February 28, 2023

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Report of Independent Registered Public Accounting Firm

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

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

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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, 2023

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FORTIVE CORPORATION AND SUBSIDIARIES

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Prepaid expenses and other current assets 272.6 252.7

Investment in Vontier Corporation — 1,119.2

Current assets, discontinued operations — 30.4

Total current assets 2,477.0 2,514.9

Property, plant and equipment, net 421.9 395.5

Operating lease right-of-use assets 175.6 188.7

Other assets 455.8 512.9

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Trade accounts payable 623.0 557.9

Current operating lease liabilities 44.6 47.0

Accrued expenses and other current liabilities 1,104.4 1,005.3

Current liabilities, discontinued operations — 33.3

Total current liabilities 2,727.1 3,714.9

Operating lease liabilities 139.9 154.3

Other long-term liabilities 1,223.3 1,426.3

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Preferred stock:

$ 0.01 par value, 15.0 million shares authorized;

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.

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

Common stock:

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Additional paid-in capital 3,706.3 3,670.0

Treasury shares, at cost ( 442.9 ) —

Retained earnings 6,742.1 6,023.6

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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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2022 2021 2020

Sales of products $ 4,496.1 $ 3,956.7 $ 3,922.5

Sales of products and software $ 4,920.1 $ 4,496.1 $ 3,956.7

Sales of services 905.6 758.6 677.7

Total sales 5,825.7 5,254.7 4,634.4

Cost of product sales ( 1,833.4 ) ( 1,643.4 ) ( 1,733.3 )

Cost of product and software sales ( 1,994.8 ) ( 1,833.4 ) ( 1,643.4 )

Cost of service sales ( 467.5 ) ( 414.2 ) ( 382.5 )

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Research and development expenses ( 401.5 ) ( 354.8 ) ( 320.7 )

Russia exit and wind down costs ( 17.9 ) — —

Operating profit 987.4 812.8 539.4

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Interest expense, net ( 98.3 ) ( 103.2 ) ( 148.5 )

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

Gain on litigation resolution — 29.9 —

Other non-operating expenses, net ( 15.6 ) ( 14.1 ) ( 2.4 )

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Net earnings from continuing operations 755.2 614.2 1,452.2

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

Earnings (loss) from discontinued operations, net of income taxes — ( 5.8 ) 161.1

Net earnings 755.2 608.4 1,613.3

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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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Foreign currency translation adjustments ( 178.7 ) ( 68.7 ) 63.5

Pension adjustments 24.8 ( 12.7 ) ( 20.2 )

Pension and post-retirement plan benefit adjustments 38.0 24.8 ( 12.7 )

Total other comprehensive income (loss), net of income taxes ( 140.7 ) ( 43.9 ) 50.8

1 unchanged sentence

See the accompanying Notes to the Consolidated Financial Statements.

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FORTIVE CORPORATION AND SUBSIDIARIES

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($ and shares in millions)

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

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

Comprehensive

Loss Noncontrolling

Shares Amount Shares Amount

Balance, January 1, 2019 334.5 $ 3.4 1.4 $ — $ 3,126.0 $ 3,552.7 $ ( 86.6 ) $ 17.4

Net earnings for the period — — — — — 738.9 — —

Dividends to common shareholders — — — — — ( 93.8 ) — —

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

Other comprehensive income — — — — — — 30.3 —

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

Issuance of 0.875 % senior convertible notes due 2022

— — — — 100.4 — — —

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

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

Shares Amount Shares Outstanding Amount

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

Adoption of accounting standards ( 31.3 )

Adoption of ASU 2016-13 — — — — — — ( 31.3 ) — —

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

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

Other comprehensive loss — — — — — — 50.8 —

Other comprehensive income — — — — — — — 50.8 —

Common stock-based award activity — — 3.0 — 129.2 — — — —

Shares withheld for taxes — — — — ( 16.3 ) — — — —

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

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Common stock-based award activity — — 0.7 — 134.5 — — — —

Shares withheld for taxes — — — — ( 16.8 ) — — — —

Early extinguishment of 0.875 % senior convertible notes due 2022

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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 — — — — — — 755.2 — —

Dividends to common shareholders — — — — — — ( 99.5 ) — —

Other comprehensive income — — — — — — — ( 140.7 ) —

Common stock-based award activity — — 1.0 — 115.2 — — — —

Common stock repurchases — — ( 7.0 ) — — ( 442.9 ) — — —

Shares withheld for taxes — — ( 0.2 ) — ( 13.2 ) — — — —

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

Balance, December 31, 2022 — $ — 352.9 $ 3.6 $ 3,706.3 $ ( 442.9 ) $ 6,742.1 $ ( 325.7 ) $ 5.2

See the accompanying Notes to the Consolidated Financial Statements.

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FORTIVE CORPORATION AND SUBSIDIARIES

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Stock-based compensation expense 93.8 77.4 62.6

Russia exit and wind down costs 9.2 — —

Loss on extinguishment of debt — 104.2 —

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

Gain from combination of business — — ( 40.8 )

Gain on sale of property — ( 5.3 ) —

Gain on investment in Vontier Corporation — ( 57.0 ) —

Gain on litigation resolution — ( 29.9 ) —

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

Gain on sale of property — — ( 5.3 )

Change in deferred income taxes ( 62.1 ) ( 41.0 ) ( 97.6 )

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Payments for additions to property, plant and equipment ( 95.8 ) ( 50.0 ) ( 75.7 )

Proceeds from sale of property 4.5 5.3 —

Proceeds from sale of business and property 9.6 4.5 5.3

All other investing activities ( 3.5 ) — —

Total investing cash used in continuing operations ( 102.5 ) ( 2,615.6 ) ( 110.8 )

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Cash flows from financing activities:

Proceeds from borrowings (maturities greater than 90 days), net of issuance costs 1,394.1 999.8 741.7

Net proceeds from (repayments of) commercial paper borrowings 38.5 364.9 ( 1,141.9 )

Proceeds from borrowings (maturities greater than 90 days), net of $ 0.3 million and $ 8 million of issuance costs in 2021 and 2020, respectively

Payment of 0.875 % convertible senior notes due 2022

( 1,156.5 ) — —

Repurchase of common shares ( 442.9 ) — —

Repayment of borrowings (maturities greater than 90 days) ( 1,000.0 ) ( 611.1 ) ( 1,730.8 )

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See the accompanying Notes to the Consolidated Financial Statements.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

BUSINESS OVERVIEW AND BASIS FOR PRESENTATION

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.

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

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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.

Russia Ukraine Conflict

In February 2022, Russian forces invaded Ukraine (“Russia Ukraine Conflict”) resulting in broad economic sanctions being imposed on Russia.

In the second quarter of 2022, the Company exited business operations in Russia, other than for ASP’s sterilization products, which are exempt from international sanctions as humanitarian products.

Our business in Russia and Ukraine accounted for less than 1 % of total revenue and less than 0.2 % of total assets for the year ended December 31, 2021.

During the year ended December 31, 2022, the Company recorded pre-tax charges of $ 17.9 million, primarily relating to the write-off of net assets, the write-off of the cumulative translation adjustment in earnings for legal entities deemed substantially liquidated, and to record provisions for employee severance and legal contingencies.

These costs are identified as the “Russia exit and wind down costs” in the Consolidated Statements of Earnings.

Substantially all related liabilities were paid and settled during the year ended December 31, 2022.

Segment Presentation

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 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.

Our Intelligent Operating Solutions segment provides advanced instrumentation, software and services to tens of thousands of customers enabling their mission-critical workflows.

These offerings include electrical test & measurement, facility and asset lifecycle software applications, connected worker safety and compliance solutions across a range of vertical end markets, including manufacturing, process industries, healthcare, utilities and power, communications and electronics, among others.

Our Precision Technologies segment helps solve tough technical challenges to speed breakthroughs in a wide range of applications, from food and beverage production and manufacturing to next-generation electric vehicles and clean energy, as our customers seek new test solutions to enable the electrification and connectivity of everything.

Our expertise in materials, methods and measurements are reflected in our electrical test & measurement, sensing and material technologies offered to a broad set of customers and vertical end markets, including industrial, power and energy, automotive, medical equipment, food and beverage, aerospace and defense, semiconductor, and other general industries.

Our Advanced Healthcare Solutions segment supplies critical workflow solutions enabling healthcare providers to deliver exceptional patient care more efficiently.

Our offerings include instrument sterilization solutions, instrument tracking, cell therapy equipment design and manufacturing, biomedical test tools, radiation detection and safety monitoring, and end-to-end clinical productivity software and solutions.

Our healthcare offerings help ensure critical safety standards are met, instruments and operating rooms are working at peak performance, and complex procedures are followed accurately in these mission-critical healthcare environments.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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We regularly perform detailed reviews of our portfolios to evaluate the collectability of receivables based on a combination of past, current, and future financial and qualitative factors that may affect customers’ ability to pay, including customers’ financial condition, collateral, debt-servicing ability, payment experience, credit bureau information, and economic conditions.

In circumstances where we are aware of a specific customer’s inability to meet its financial obligations, a specific reserve is recorded against amounts due to reduce the recognized receivable to the amount reasonably expected to be collected.

reasonably expected to be collected.

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.

Volatility and uncertainty in overall global economic conditions and worldwide capital markets as a result of the COVID-19 pandemic may negatively impact our customers’ ability to pay and, as a result, may increase the difficulty in collecting trade accounts and unbilled receivables.

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.

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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, 2022 ($ in millions):

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Write-offs ( 9.1 )

FX and Other 1.3

Foreign currency exchange ( 0.7 )

Balance, December 31, 2022 $ 43.9

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Leased assets and leasehold improvements Amortized over the lesser of the economic life of the asset or the term of the lease

Machinery and equipment 3 – 10 years

Machinery, equipment and other 3 – 10 years

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

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We record our interest in the net earnings of our equity method investees within Other non-operating expenses, net in the Consolidated Statements of Earnings and review our equity method investments for impairment whenever factors indicate that the carrying amount of the investment might not be recoverable.

We account for investments that we have neither significant influence over nor a controlling financial interest in at fair value, and record any changes in fair value of these investments in net earnings.

In certain circumstances, a readily determinable fair value is not available for our investments, and we recognize those investments at cost, less any subsequent impairment, and adjust the investment balance to fair value when observable price changes in identical or similar investments occur.

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

Other Assets —Other assets principally include operating lease right-of-use assets, 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, nonqualified deferred compensation plans, obligations under trade accounts payable, and short and long-term debt.

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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.

In accordance with accounting standards related to business combinations, goodwill and indefinite-lived intangible assets are not amortized;

In accordance with accounting standards related to business combinations, goodwill and indefinite-lived intangible assets are

not amortized;

however, certain finite-lived identifiable intangible assets, primarily customer relationships and acquired technology, are amortized over their estimated useful lives.

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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.

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.

For revenue related to a product or service to qualify for recognition, we must have an enforceable contract with a customer that defines the goods or services to be transferred and the payment terms related to those goods or services.

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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 customer support (“PCS”).

Certain customer arrangements include multiple performance obligations, typically hardware, installation, training, consulting, other services, and/or PCS.

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

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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.

Costs associated with restructuring actions can include one-time termination benefits and related charges, in addition to facility closure, contract termination, and other related activities.

Costs associated with restructuring actions can include one-time termination benefits and related charges, in addition to facility closure, contract

termination, and other related activities.

We record the cost of the restructuring activities when the associated liability is incurred.

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dollars using year-end exchange rates and income statement accounts are translated at weighted average exchange rates.

Net foreign currency transaction gains or losses were not material in any of the years presented.

Net foreign currency transaction losses were $ 18.2 million for the year ended December 31, 2022.

Net foreign currency transaction gains or losses were no t material for the years ended December 31, 2021 or 2020.

Accounting for Stock-Based Compensation —We account for stock-based compensation by measuring the cost of employee services received in exchange for all equity awards granted, including stock options, restricted stock units (“RSUs”), and performance stock units (“PSUs”), based on the fair value of the award as of the grant date.

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subsidiaries.

While outstanding, we designated our Euro-denominated commercial paper and ¥ 13.8 billion senior unsecured term facility loan as net investment hedges of our investment in certain foreign operations.

During the second quarter of 2022, we designated our ¥ 14.4 billion Yen-denominated variable interest rate term loan and our € 275 million Euro-denominated variable interest rate term loan outstanding as net investment hedges of our investment in certain foreign operations.

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 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

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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.

In 2022, we recognized after-tax losses of $ 5.1 million in Other comprehensive income (loss) related to the net investment hedges.

While outstanding, we designated our previous Euro-denominated commercial paper and ¥ 13.8 billion senior unsecured term facility loan 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.

In 2020, we recognized gains of $ 1.9 million in Other comprehensive income (loss) related to our previous designated net investment hedges.

We recorded no ineffectiveness from our net investment hedges during the years ended December 31, 2022 and 2020.

We did not designate any net investment hedges during the year ended December 31, 2021.

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

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

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

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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 )

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Balance, December 31, 2022 $ ( 301.4 ) $ ( 24.3 ) $ ( 325.7 )

(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.

(a) This component of AOCI is included in the computation of net periodic pension cost (refer to Note 12).

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

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Changes in the funded status of the pension plans are recognized in the year in which the changes occur and are reported in Other comprehensive income (loss).

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

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

Refer to Note 12 for additional information on our pension plans including a discussion of actuarial assumptions, our policy for recognizing associated gains and losses, and the method used to estimate service and interest cost components.

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 accompanying Consolidated Statements of Earnings.

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

New Accounting Standards

In August 2020, the FASB issued ASU No.

Recently Issued Accounting Standard

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):

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.

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.

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), 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.

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 were settled on February 15, 2022.

We applied the if-converted method to all convertible instruments when calculating EPS for the year ended December 31, 2022.

As of December 31, 2022, we had no convertible instruments outstanding subject to the guidance in ASU 2020-06.

ACQUISITIONS AND DIVESTITURES

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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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.

Table of Conten t s

The following describes our significant acquisition activity for the years ended December 31, 2022, 2021, and 2020.

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

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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.

We recorded $ 972 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.

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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.

We recorded approximately $ 868 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.

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The operating loss includes $ 77.2 million of intangible asset amortization and $ 20.8 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):

The following table summarizes the estimated acquisition date fair values of the assets acquired and liabilities assumed from acquisitions discussed above as of December 31, 2022 ($ in millions):

Provation ServiceChannel Total

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Net cash consideration $ 1,404.7 $ 1,166.3 $ 2,571.0

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.

ASP generated annual revenues of approximately $ 800 million in 2018.

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 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, 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.

Table of Conten t s

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.

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 sale.

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

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.

We incurred approximately $ 11 million , $ 70 million, and $ 86 million of pretax transaction and integration costs related to the ASP Transaction for the years ended December 31, 2021, 2020, and 2019, respectively.

These costs are recorded in Selling, general, and administrative expenses and were primarily for banking fees, legal fees, and amounts paid to other third party advisors.

The following table summarizes the combined final fair values and provisional fair value estimates of the assets acquired and liabilities assumed of Principal and Non-Principal Countries that have been transferred to ASP as of December 31, 2021;

we did not acquire accounts receivable or accounts payable from Johnson & Johnson ($ in millions):

Advanced Sterilization Products

Inventories $ 211.1

Property, plant and equipment 51.7

Goodwill 1,450.2

Other intangible assets, primarily customer relationships, trade names and technology 1,123.5

Other assets and liabilities, net ( 94.5 )

Net cash consideration $ 2,742.0

Completed Acquisitions in 2019

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.

We incurred approximately $ 17 million of pretax transaction-related costs recorded in Selling, general, and administrative expenses for the year ended December 31, 2019, which were primarily for banking fees, legal fees, and amounts paid to other third-party advisers.

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.

Table of Conten t s

Acquisitions Summary

The following summarizes the estimated fair values of the assets acquired and liabilities assumed for all acquisitions consummated during the years ended December 31.

Balances presented for 2020 and 2019 reflect final measurement period adjustments ($ in millions):

2021 2020 2019

Balances presented below reflect final measurement period adjustments ($ in millions):

Accounts receivable $ 51.8 $ 0.1

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Other intangible assets, primarily customer relationships, trade names and technology 929.4 9.5

Prepaid acquisition asset related to ASP Non-Principal Countries $ — — 34.7

Trade accounts payable ( 10.6 ) ( 1.1 )

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Net cash consideration $ 2,568.8 $ 29.5

Other Acquisition-related Matters

On April 1, 2019 (the “Principal Closing Date”), we acquired the advanced sterilization products business (“ASP”) of Johnson & Johnson, a New Jersey corporation.

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 as 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.

During 2019, we acquired Censis Technologies (“Censis”).

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

Therapy Physics Divestiture

On September 30, 2022, we completed the sale of our Therapy Physics product line, which was reported in our Advanced Healthcare Solutions segment, to an unrelated third party for cash consideration of $ 9.6 million.

As a result of the sale, during the year ended December 31, 2022, we recorded a net realized pre-tax gain totaling $ 0.5 million, net of transaction costs, which is recorded as “Other non-operating expense, net” in the Consolidated Statements of Earnings.

The divested business accounted for less than 1.0 % of total revenue and less than 0.3 % of total assets for the year ended December 31, 2021.

The divestiture of this product line did not represent a strategic shift with a major effect on the Company’s operations and financial results and therefore the divested product line is not reported as a discontinued operation.

DISCONTINUED OPERATIONS AND DISPOSITIONS

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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.

We retained 19.9 % of the shares of Vontier common stock immediately following the Separation.

We did not retain a controlling interest in Vontier and therefore the fair value of our retained shares and subsequent fair value changes are included in our assets of and results from continuing operations, respectively.

At December 31, 2020, our investment in Vontier common stock was remeasured at fair value based on Vontier’s closing stock price, with unrealized gains of $ 1.1 billion recorded in the Consolidated Statement of Earnings.

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

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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.

Additionally, 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.

In preparation for and executing the Separation, the Company incurred $ 84 million in Vontier stand-up and separation-related transaction costs during the years ended December 31, 2020, 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.

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

Divestiture of A&S Business

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.

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

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Goodwill impairment — — ( 85.3 )

Gain (loss) on disposition of discontinued operations before income taxes — — ( 2.1 )

Interest expense and other — 0.1 ( 31.0 )

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

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):

Accounts receivable, net $ — $ —

Inventories — —

Other current assets — 30.4

Total current assets, discontinued operations — 30.4

Property, plant and equipment, net — —

Other intangible assets, net — —

Other non-current assets — —

Total other assets, discontinued operations — —

Total assets, discontinued operations $ — $ 30.4

Current liabilities:

Trade accounts payable $ — $ —

Accrued expenses and other current liabilities — ( 33.3 )

Total current liabilities, discontinued operations — ( 33.3 )

Other long-term liabilities — —

Total liabilities, discontinued operations $ — $ ( 33.3 )

Combination of the Tektronix Video Business with Telestream

On July 20, 2019, we completed the combination of the Tektronix Video test and monitoring equipment business (“Tektronix Video Business”) with Telestream, LLC (the “Combined Business”), a portfolio company of Genstar Capital LLC.

We recognized a pretax gain of $ 41 million upon the combination, and hold a 33 % equity stake in the Combined Business.

This transaction did not meet the criteria for discontinued operations reporting, and therefore the operating results of the Tektronix Video Business prior to the combination with Telestream are included in continuing operations for all periods presented.

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, 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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Buildings and leasehold improvements 312.3 312.9

Machinery and equipment 706.7 717.8

Machinery, equipment and other 809.8 706.7

Gross property, plant and equipment 1,176.4 1,074.5

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Property, plant and equipment, net $ 421.9 $ 395.5

No interest was capitalized related to capitalized expenditures in any period.

GOODWILL AND OTHER INTANGIBLE ASSETS

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We assess the goodwill of each of our reporting units for impairment at least annually as of the first day of the fourth quarter and as “triggering” events occur that indicate that it is more likely than not that an impairment exists.

We elected to bypass the optional qualitative goodwill assessment allowed by applicable accounting standards and performed a quantitative impairment test for all reporting units as this was determined to be the most effective method to assess impairment across a large spectrum of reporting units.

We performed both qualitative and quantitative impairment tests for reporting units, as determined to be appropriate.

We estimate the fair value of our reporting units primarily using a market approach, based on multiples of earnings before interest, taxes, depreciation, and amortization (“EBITDA”) determined by current trading market multiples of earnings for companies operating in businesses similar to each of our reporting units, in addition to recent market available sale transactions of comparable businesses.

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If the estimated fair value of the reporting unit is less than its carrying value, we will impair the goodwill for the amount of the carrying value in excess of the fair value.

In 2021, we had five continuing operations reporting units for goodwill impairment testing.

We performed goodwill impairment testing for our reporting units.

As of the date of the 2022 annual impairment test, the carrying value of goodwill in each reporting unit ranged from $ 171.3 million to approximately $ 4.0 billion.

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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):

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Measurement period adjustments for 2021 acquisitions ( 5.9 ) — 3.7 ( 2.2 )

Attributable to 2021 acquisitions 873.4 — 969.6 1,843.0

Attributable to 2022 acquisitions and divestitures — 0.9 ( 3.2 ) ( 2.3 )

Foreign currency translation and other ( 45.7 ) ( 30.7 ) ( 22.6 ) ( 99.0 )

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Total intangibles $ 5,397.5 $ ( 1,910.1 ) $ 5,434.6 $ ( 1,544.4 )

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.

Refer to Note 3 for additional information on the intangible assets acquired.

Total intangible amortization expense in 2022, 2021, and 2020 was $ 382 million, $ 321 million and $ 310 million, respectively.

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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

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

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.

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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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.

Non-recurring Fair Value Measurements

Certain non-financial assets are required to be assessed for impairment whenever events or circumstances indicate that their carrying value may not be fully recoverable.

We evaluated events and circumstances that, as of September 30, 2022, indicated the carrying value of an equity investment in a third-party entity held by our Intelligent Operating Solutions segment was no longer recoverable.

As a result, during the year ended December 31, 2022, we recorded a pre-tax impairment loss of $ 8.1 million to write down the investment to fair value.

The loss was recorded in “Other non-operating expense, net” in our Consolidated Statement of Earnings.

Fair Value of Other Financial Instruments

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Long-term debt, net of current maturities 2,251.6 2,078.1 1,807.3 1,978.9

As of December 31, 2021 and December 31, 2020, long-term borrowings were categorized as Level 1.

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

As of December 31, 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 value of the long-term borrowings 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 borrowing.

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

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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Current Long-term Current Long-term

Deferred revenue $ 509.6 $ 38.0 $ 457.6 $ 33.8

Compensation and other post-retirement benefits 241.7 48.3 253.2 58.2

Claims, including self-insurance and litigation 5.6 13.9 13.8 14.3

Pension obligations 4.5 133.9 4.5 167.1

Taxes, income and other 132.5 893.5 53.0 1,011.2

Deferred revenue 457.6 33.8 376.4 34.2

Operating lease liabilities 38.4 131.0 44.6 139.9

Sales and product allowances 20.1 — 21.6 —

Warranty 20.0 1.6 23.0 2.2

Claims, including self-insurance and litigation 5.2 14.8 5.6 13.9

Pension obligations 4.4 77.9 4.5 133.9

Other 132.5 18.2 142.2 33.2

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Settlements made ( 18.7 ) ( 17.6 )

Additions due to acquisitions 1.2

Effect of foreign currency translation ( 2.2 ) 0.4

Balance, December 31 $ 21.6 $ 25.2

Accruals for warranties issued during the year 17.5

Settlements made ( 17.6 )

Additions due to acquisitions —

Effect of foreign currency translation 0.4

Balance, December 31, 2021 $ 25.2

We determine if an arrangement is or contains a lease at inception and recognize a right-of-use (“ROU”) asset and a lease liability for all leases with terms greater than 12 months.

We have operating leases for office space, warehouses, distribution centers, research and development facilities, manufacturing locations, and certain equipment, primarily automobiles.

Many leases include optional terms, ranging from options to terminate the lease in less than one year to options to extend the lease for up to 23 years.

Many leases include optional terms, ranging from options to terminate the lease in less than one year to options to extend the lease for up t o 20 y ears.

We include optional periods as part of the lease term when we determine that we are reasonably certain to exercise the renewal option or we will not early terminate the lease.

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We have lease agreements with lease and non-lease components, and we have elected the practical expedient for all underlying asset classes to account for the lease and related non-lease component(s) as a single lease component.

Our finance lease and lessor arrangements are immaterial.

Lease-related balances are presented in the following three line items on the Consolidated Balance Sheet:

(i) operating lease right-of-use assets;

(ii) current operating lease liabilities;

and (iii) operating lease liabilities.

Table of Conten t s

(i) Other assets ;

(ii) Accrued expenses and Other current liabilities ;

and (iii) Other long-term liabilities .

Operating lease cost was $ 56 million, $ 60 million, and $ 60 million for the years ended December 31, 2022, 2021, and 2020, respectively.

Short-term and variable lease cost was immaterial for the years ended December 31, 2021, 2020, and 2019.

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 $ 34 million and $ 55 million for the years ended December 31, 2021 and 2020, respectively.

During the years ended December 31, 2022 and 2021, cash paid for operating leases included in operating cash flows was $ 50 million and $ 53 million, respectively.

Operating lease ROU assets obtained in exchange for operating lease liabilities w ere $ 32

million a nd $ 34 million for the years ended December 31, 2022 and 2021, respectively.

Operating lease ROU assets were $ 162.0 million and $ 175.6 million as of December 31, 2022 and 2021, respectively.

The following table presents the maturities of our operating lease liabilities as of December 31, 2022 ($ in millions):

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imputed interest ( 17.8 )

Total lease liabilities $ 184.5

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.

Total operating lease liabilities $ 169.4

As of December 31, 2022 and 2021, the weighted average lease term of our opera ting leas es was 7 ye ars and 8 years, respectively, and the weighted average discount rate of our operating leases was 3.0 % an d 2.6 %, 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.

As of December 31, 2022, we did not enter into 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 $ 405.0 $ 365.0

Delayed-Draw Term Loan due 2023 1,000.0 —

Euro Term Loan due 2025 294.4 —

Yen Term Loan due 2025 109.8 —

3.15 % senior unsecured notes due 2026

4.30 % senior unsecured notes due 2046

Delayed-Draw Term Loan due 2022 — 1,000.0

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

Long-term debt, principal amounts 3,259.2 3,971.5

aggregate unamortized debt discounts, premiums, and issuance costs 7.9 12.5

Long-term debt, carrying value 3,251.3 3,959.0

current portion of long-term debt 999.7 2,151.7

Long-term debt, net of current maturities $ 2,251.6 $ 1,807.3

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

Commercial Paper Programs

We periodically issue commercial paper under our U.S.

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.

Credit support for the Commercial Paper Programs is provided by a five-year $ 2.0 billion senior unsecured revolving credit facility that expires on October 18, 2027 (the “Revolving Credit Facility”).

As of December 31, 2022, no borrowings were outstanding under the Revolving Credit Facility.

Refer to the section below for further discussion on the Revolving Credit Facility.

The details of our Commercial Paper Programs as of December 31, 2022 were as follows ($ in millions):

Carrying value Weighted average annual effective rate Weighted average maturity (in days)

dollar-denominated commercial paper $ 404.4 4.8 % 32

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.

We expect to limit any future borrowings under the Revolving Credit Facility to amounts that would leave sufficient credit available under the facility to allow us to borrow, if needed, to repay any outstanding commercial paper as it matures.

Our ability to access the commercial paper market, and the related costs of these borrowings, is affected by the strength of our credit rating and market conditions.

Any downgrade in our credit rating would increase the cost of borrowing under our commercial paper programs and the Credit Agreement, and could limit or preclude our ability to issue commercial paper.

If our access to the commercial paper market is adversely affected due to a downgrade, change in market conditions, or otherwise, we would expect to rely on a combination of available cash, operating cash flow, and the Revolving Credit Facility to provide short-term funding.

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, 2022 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.

Credit Facilities

Revolving Credit Facility

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 extending the availability period of the Revolving Credit Facility to November 30, 2023 and increased the facility to $ 2.0 billion.

On October 18, 2022, we entered into a second amended and restated credit agreement (the “Amended and Restated Credit Agreement”) extending the availability period of the Revolving Credit Facility to October 18, 2027 with an additional two one year extension options at our request and with the consent of the lenders.

The Amended and Restated Credit Agreement also contains an option permitting us to request an increase in the amounts available under the Revolving Credit Facility of up to an aggregate additional $ 1.0 billion.

We are obligated to pay an annual facility fee for the Revolving Credit Facility of between 6.5 and 15 basis points varying according to our long-term debt credit rating.

Borrowings under the new Revolving Credit Facility in U.S Dollars bear interest at a rate equal, at our option, to either (1) Term Secured Overnight Financing Rate (“Term SOFR”), plus a 10 basis points Credit Spread Adjustment (“CSA”) plus a margin of between 68.5 and 110.0 basis points, depending on our long-term debt credit rating or (2) the highest of (a) the Federal funds rate plus 50 basis points, (b) the prime rate, (c) Term SOFR plus 100 basis points and (d) 1.0 %, plus in each case a margin between zero and 10 basis points depending on our long-term debt credit rating.

In addition, beginning with our 2023 performance relative to our annual greenhouse gas reduction targets, the interest rate on any borrowings can increase or decrease by 4.0 basis points and the facility fee can increase or decrease by 1.0 basis points, for a maximum impact of an increase or decrease of 5.0 basis points.

The Amended and Restated Credit Agreement requires us to maintain a consolidated net leverage ratio of debt to consolidated EBITDA (as defined in the Credit Agreement) of less than 3.5 to 1.0.

The maximum consolidated net leverage ratio will be increased to 4.0 to 1.0 for the four consecutive full fiscal quarters immediately following the consummation of any acquisition by us in which the purchase price exceeds $ 250 million.

The Amended and Restated Credit Agreement also contains customary representations, warranties, conditions precedent, events of default, indemnities, and affirmative and negative covenants.

As of December 31, 2022 and December 31, 2021, we were in compliance with all covenants under the Amended and Restated Credit Agreement.

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.

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

The Delayed-Draw Term Loan Due 2022 bore 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 were prepayable at the Company’s option in whole or in part without premium or penalty and amounts borrowed may not be reborrowed once repaid.

On October 18, 2022, 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, Term Secured Overnight Financing Rate (“Term SOFR”) Loans, or SOFR Daily Floating Rate Loans and bears interest as follows:

(1) Term SOFR Loans bear interest at a variable rate equal to Term SOFR plus a Credit Spread Adjustment of 10 basis point plus a spread of between 82.5 and 107.5 basis point, depending on the Company’s long-term credit rating;

(2) SOFR Daily Floating Rate Loans, like Term SOFR Loans, bear interest at a variable rate equal to Term SOFR with a one month period plus a Credit Spread Adjustment of 10 basis point plus a spread of between 82.5 and 107.5 basis point, depending on the Company’s long-term credit rating;

and (3) Base Rate Loans bear interest at the highest of (a) the Federal funds rate plus 50 basis points, (b) the prime rate, (c) Term SOFR with a one month period plus 100 basis points and (d) 1.0 %, plus in each case a margin between zero and 7.5 basis points depending on our long-term debt credit rating.

On December 15, 2022, we drew down the full $ 1.0 billion delayed-draw senior unsecured term facility (“Delayed-Draw Term Loan Due 2023”) as a Term SOFR Loan.

The repayment of the principal is due on December 14, 2023.

Fortive concurrently repaid the $ 1.0 billion in outstanding principal of the Delayed-Draw Term Loan due 2022 and accrued interest thereon.

Borrowings under the Delayed-Draw Term Loan Due 2023 are prepayable at our option in whole or in part without premium or penalty and amounts borrowed may not be reborrowed once repaid.

Euro Term Loan

On June 21, 2022, we entered into a three-year € 275 million senior unsecured term facility (“Euro Term Loan”).

On June 28, 2022, we drew and converted the entire available balance under the facility, which yielded net proceeds of $ 290 million.

The Euro Term Loan is due on June 23, 2025 and is pre-payable at our option.

The Euro Term Loan bears interest at a rate of Euro Interbank Offered Rate (“Euribor”), plus 55 basis points;

provided, however that the Euribor may not be less than zero for the Euro Term Loan.

Yen Term Loan

On June 17, 2022, we entered into a three-year , ¥ 14.4 billion senior unsecured term facility (“Yen Term Loan”).

On the same day, we drew and converted the entire available balance under the facility, which yielded net proceeds of $ 107 million.

The Yen Term Loan is due on June 17, 2025 and is pre-payable at our option.

The Yen Term Loan bears interest at a rate of Tokyo Term Risk Free Rate (“TORF”), plus 65 basis points;

provided, however, that the TORF may not be less than zero for the Yen Term Loan.

Term Loan due May 2021

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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.

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.

Convertible Senior Notes

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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.

On January 1, 2022, we adopted ASU 2020-06, as further detailed in Note 2.

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 year ended December 31, 2022, of which $ 1.3 million related to the contractual coupon rate of 0.875 %, $ 0.8 million was attributable to the amortization of debt issuance costs.

The discount at issuance was $ 102 million and is being amortized over a three-year period.

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

The Revolving Credit Facility is subject to a one year extension option at our request and with the consent of the lenders.

The Credit Agreement also contains an option permitting us to request an increase in the amounts available under the Credit Agreement of up to an aggregate additional $ 1.0 billion.

On April 24, 2020, we amended the $ 2.0 billion Revolving Credit Facility as described above.

The Credit Agreement contains customary representations, warranties, conditions precedent, events of default, indemnities, and affirmative and negative covenants.

As of December 31, 2021 and December 31, 2020, we were in compliance with all covenants under the Credit Agreement and had no borrowings outstanding under the Revolving Credit Facility.

Commercial Paper Programs

We periodically issue commercial paper under our U.S.

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.

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.

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”).

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

Our ability to access the commercial paper market, and the related costs of these borrowings, is affected by the strength of our credit rating and market conditions.

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.

Registered Notes

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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.

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None of these covenants are considered restrictive to our operations and as of December 31, 2022, we were in compliance with all of our covenants.

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.

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

We had no interest payments from discontinued operations during 2022 or 2021.

There are $ 1.0 billion of minimum principal payments due under our total long-term debt during 2023.

The future minimum principal payments due are presented in the following table:

Loans Convertible and Registered Notes Total

Loans Registered Notes Total

2023 $ 1,000.0 $ — $ 1,000.0

2025 404.2 — 404.2

2026 — 900 900.0

Thereafter — 550.0 550.0

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$ 1,404.2 $ 1,450.0 $ 2,854.2

(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.

(a) Not included in the table above are discounts, net of premiums and issuance costs associated with the Registered Notes and Commercial Paper, which totaled $ 8 million as of December 31, 2022, 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, 2022.

In addition, the table above does not include principal balance of $ 405 million under the Commercial Paper Program.

PENSION PLANS

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pension plans.

Table of Conten t s

The following describes our significant pension plans as of December 31, 2022 and 2021.

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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Other long-term liabilities ( 6.6 ) ( 13.9 ) ( 71.3 ) ( 120.0 )

Net amount recorded $ ( 14.5 ) $ ( 17.9 ) $ ( 117.7 ) $ ( 147.4 )

Net amount $ ( 7.2 ) $ ( 14.5 ) $ ( 68.0 ) $ ( 117.7 )

Pension Benefits Non-U.S.

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Prior service cost $ — $ — $ ( 2.0 ) $ ( 2.4 )

Actuarial loss ( 3.5 ) 6.8 77.1 99.6

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

Table of Conten t s

Net gain (loss) 1.6 ( 3.5 ) ( 34.2 ) ( 77.1 )

Total pre-tax amount $ 1.6 $ ( 3.5 ) $ ( 36.2 ) $ ( 79.5 )

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 4.32 % i n 2021, 1.25 % to 4.86 % in 2020, and 1.50 % to 5.75 % in 2019.

The expected rates of return reflect the asset allocation of the plans and ranged fro m 1.25 % to 5.20 % in 2022, 1.25 % to 4.32 % in 2021, and 1.25 % to 4.86 % in 2020.

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, 2022, by asset category were as follows ($ in millions):

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Mutual funds 98.6

Real estate funds 18.7

Other private investments 46.0

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Common stock, corporate bonds, and mutual funds that are not traded on an active market are valued at quoted prices reported by investment brokers and dealers based on the underlying terms of the security and comparison to similar securities traded on an active market.

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.

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.

Valuation adjustments reflect changes in operating results, financial condition, or prospects of the applicable portfolio company.

The methods described above may produce a fair value estimate that may not be indicative of net realizable value or reflective of future fair values.

Furthermore, while we believe the valuation methods are appropriate and consistent with the methods used by other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

Certain mutual funds, real estate 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.

Expected Contributions

Table of Conten t s

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

During 2022, we contribute d $ 2 million and $ 11 million to our U.S.

defined benefit pension plans, respectively.

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Contract assets were $ 82 million as of December 31, 2022 and $ 71 million as of December 31, 2021.

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 service arrangements.

Contract Costs — We incur incremental costs to obtain certain contracts, typically sales-related commissions and costs associated with assets used by our customers in certain service 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 December 31, 2022, we had $ 42 million in net revenue-related contract assets primarily related to certain software contracts recorded in Prepaid expenses and other current assets and Other assets in our Consolidated Balance Sheet.

Our revenue-related contract assets at December 31, 2020 were $ 31 million.

Our net revenue-related contract assets at December 31, 2021 were $ 27 million.

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

Impairment losses recognized on our contract-related assets were immaterial during both the years ended December 31, 2021 and December 31, 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.

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In the year ended December 31, 2022, we recognized $ 363 million of revenue related to our contract liabilities at January 1, 2022.

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

The change in our contract liabilities from December 31, 2021 to December 31, 2022 was primarily due to the timing of billings and recognition as revenue of subscription-based software contracts, 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 as of December 31, 2021 is as follows ($ in millions):

The aggregate remaining performance obligations attributable to each of our segments as of December 31, 2022 is as follows ($ in millions):

Intelligent Operating Solutions $ 576.4

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Total remaining performance obligations $ 706.0

The majority of remaining performance obligations are related to service and support contracts, which we expect to fulfill approximately 80 percent within the next two years , approximately 90 percent within the next three years , and substantially all within four years .

The majority of remaining performance obligations are related to subscription-based software contracts, and service and support contracts, which we expect to fulfill approximately 80 percent within the next two years , approximately 90 percent within the next three years , and substantially all within four years .

Disaggregation of Revenue

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, 2022 is presented as follows ($ in millions):

Total Intelligent Operating Solutions Precision Technologies Advanced Healthcare Solutions

Sales of products $ 4,496.1 $ 1,899.8 $ 1,630.6 $ 965.7

Sales of products and software $ 4,920.1 $ 2,097.2 $ 1,820.8 $ 1,002.1

Sales of services 905.6 368.9 217.4 319.3

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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, 2021 is presented as follows ($ in millions):

Total Intelligent Operating Solutions Precision Technologies Advanced Healthcare Solutions

Sales of products $ 3,956.7 $ 1,677.2 $ 1,445.7 $ 833.8

Sales of products and software $ 4,496.1 $ 1,899.8 $ 1,630.6 $ 965.7

Sales of services 758.6 269.6 218.3 270.7

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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):

Total Intelligent Operating Solutions Precision Technologies Advanced Healthcare Solutions

Sales of products $ 3,922.5 $ 1,677.6 $ 1,587.0 $ 657.9

Sales of products and software $ 3,956.7 $ 1,677.2 $ 1,445.7 $ 833.8

Sales of services 677.7 206.5 205.6 265.6

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

Table of Conten t s

Earnings and Income Taxes

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Our effective tax rate for 2022 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 statutory rate of 21% due primarily to the positive and negative effects of the Tax Cuts and Jobs Act (“TCJA”), U.S.

federal permanent differences, the impacts of credits and deductions provided by law, including those associated with state income taxes, an increase to in our uncertain tax positions relating to higher interest rates, and the effect of Russia exit and wind down costs for which no tax benefit was recognized.

Our effective tax rate for 2021 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.

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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

Table of Conten t s

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 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.

Our effective tax rate for 2019 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, and earnings outside the United States that are indefinitely reinvested and taxed at rates lower than the U.S.

federal statutory rate.

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 typically 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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We made income tax payments related to continuing operations of $ 148 million, $ 103 million, and $ 95 million during the years ended December 31, 2022, December 31, 2021 and December 31, 2020, respectively.

Table of Conten t s

On August 16, 2022, the U.S.

enacted the Inflation Reduction Act of 2022, which, among other provisions, implements a 15% corporate alternative minimum tax on book income on corporations whose average annual adjusted financial statement income during the most recently-completed three-year period exceeds $1.0 billion.

This provision is effective for tax years beginning after December 31, 2022.

Based upon our analysis of the Inflation Reduction Act of 2022 and subsequently released guidance, we do not believe the corporate alternative minimum tax will have a material impact on our financial statements.

Deferred Tax Assets and Liabilities

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Deferred Tax Assets:

Allowance for doubtful accounts $ 7.5 $ 8.4

Operating lease liabilities $ 39.1 $ 45.6

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Pension benefits 24.4 36.9

Environmental and regulatory compliance 2.2 4.1

Other accruals and prepayments 30.6 16.5

Deferred service income 5.2 4.6

Warranty services 5.4 3.9

Stock-based compensation expense 34.2 29.0

Capitalized expenses 190.7 77.5

Tax credit and loss carryforwards 168.5 214.8

Accruals, prepayments, and other 39.4 59.2

Valuation allowances ( 74.6 ) ( 73.7 )

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Insurance, including self-insurance ( 205.0 ) ( 157.3 )

Goodwill and other intangibles ( 765.1 ) ( 554.4 )

Other ( 4.0 ) ( 27.6 )

Goodwill, other intangibles, and other ( 779.7 ) ( 854.9 )

Total deferred tax liabilities ( 1,064.4 ) ( 1,098.6 )

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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.

Table of Conten t s

Deferred taxes associated with U.S.

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As of December 31, 2022, our 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 totaled $ 1.5 billion, of which $ 113 million is related to federal net operating loss carryforwards, $ 752 million is related to state net operating loss carryforwards, and $ 585 million is related to non-U.S.

net operating loss carryforwards.

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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.

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.

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.

Table of Conten t s

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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RESTRUCTURING AND OTHER RELATED CHARGES

The nature of our material restructuring and related activities initiated in 2021 and 2020 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 the impact of the separation of Vontier and the broad economic uncertainties, including those created by the COVID-19 pandemic.

All planned restructuring activities initiated in the 2021 and 2020 plans have been completed by December 31, 2022.

We did not initiate material restructuring activities in 2022.

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

2021 2020 2019

Employee severance related $ 12.8 $ 21.1

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Total restructuring and other related charges $ 18.7 $ 26.8

Substantially all restructuring activities initiated in 2021 were completed by December 31, 2021.

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.

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, including those created by the COVID-19 pandemic.

Table of Conten t s

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

2021 2020 2019

Intelligent Operating Solutions $ 7.4 $ 12.5

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Total $ 18.7 $ 26.8

The table below summarizes the accrual balance and utilization by type of restructuring cost associated with our 2021 and 2020 restructuring actions ($ in millions):

The table below summarizes the accrual balance and utilization by type of restructuring cost associated with our 2021 restructuring actions ($ in millions):

January 1, 2021 Costs

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Settled Balance

31, 2020 Costs

Incurred Paid/

31, 2021 Paid/

Settled Balance as of December 31, 2022

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These charges are reflected in the following captions in the Consolidated Statements of Earnings ($ in millions):

2021 2020 2019

Cost of sales $ 2.8 $ 8.2

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In addition, while we believe we are entitled to indemnification from third parties for some of these claims, these rights may also be insufficient or unavailable to cover such losses.

We maintain third party insurance policies up to certain limits to cover certain liability costs in excess of predetermined retained amounts.

We maintain third party insurance policies up to certain limits to cover certain liability costs in excess of

predetermined retained amounts.

For most insured risks, we purchase outside insurance coverage only for severe losses (stop loss insurance) and reserves must be established and maintained with respect to amounts within the self-insured retention.

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While we actively pursue financial recoveries from insurance providers, we do not recognize any recoveries until realized or until such time as a sustained pattern of collections is established related to historical matters of a similar nature and magnitude.

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.

If risk insurance reserves we have established are inadequate, we would be required to incur an expense equal to the amount of the loss incurred in excess of the reserves, which would adversely affect our net earnings.

Refer to Note 9 for information about the amount of our accruals for self-insurance and litigation liability.

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If we determine that potential liability for a particular site or with respect to a personal injury claim is known or considered probable and reasonably estimable, we accrue the total estimated loss, including investigation and remediation costs, associated with the site or claim.

As of December 31, 2021 and 2020 we had reserves of $ 6 million and $ 15 million, respectively, included in Accrued expenses and Other liabilities in the Consolidated Balance Sheets for environmental matters that are known or considered probable and reasonably estimable, which reflects our best estimate of the costs to be incurred with respect to such matters on an undiscounted basis.

As of both December 31, 2022 and 2021, we had reserves of $ 6 million, included in Accrued expenses and Other liabilities in the Consolidated Balance Sheets for environmental matters that are known or considered probable and reasonably estimable, which reflects our best estimate of the costs to be incurred with respect to such matters on an undiscounted basis.

All reserves for environmental liabilities have been recorded without giving effect to any possible future third party recoveries.

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 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.

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, 2022 and 2021, we had approximately $ 58 million and $ 64 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, 2022, the aggregate amount of our purchase obligations totaled $ 615 million, of which $ 497 million are expected to be settled within one year of December 31, 2022.

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STOCK-BASED COMPENSATION

The 2016 Stock Incentive Plan (the “Stock Plan”) provides for the grant of stock appreciation rights, restricted stock units (“RSUs”), performance stock units (“PSUs”), and restricted stock awards (“RSAs”) (collectively, “Stock Awards”), stock options, or any other stock-based award.

The 2016 Stock Incentive Plan (the “Stock Plan”) provides for the grant of stock appreciation rights, restricted stock units (“RSUs”) and performance stock units (“PSUs”) (collectively, “Stock Awards”), stock options, or any other stock-based award.

A total of 43 million shares of our common stock have been authorized for issuance under the Stock Plan.

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Exercise prices for stock options granted under the Stock Plan were equal to the closing price of Fortive’s common stock on the NYSE on the date of grant, while stock options issued as conversion awards in connection with the separation from Danaher were priced to maintain the economic value before and after the separation.

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 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.

RSUs granted to non-employee directors under the Stock Plan vest on the earlier of the first anniversary of the grant date or the date of, and immediately prior to, the next annual meeting of our shareholders following the grant date.

However, the underlying shares are not issued until the earlier of the director’s death or the first day of the seventh month following the director’s retirement from the Board of Directors (the “Board”).

Prior to vesting, RSUs granted under the Stock Plan do not have dividend equivalent rights, do not have voting rights, and the shares underlying the RSUs are not considered issued or outstanding.

RSAs granted under the Stock Plan generally provide for time-based vesting over five years and have all of the same dividend, voting, and other rights corresponding to all other common stock, provided, however, that the dividends payable on the RSAs will accrue and be delivered at the time of delivery of the shares upon vesting of the RSA.

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.

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

RSUs granted to employees generally vest over four or five years , although certain other employees and non-employee directors may be awarded RSUs with different time-based vesting criteria.

Certain members of our senior management are also awarded incremental RSUs subject to performance-based vesting criteria.

Prior to vesting, RSUs do not have dividend equivalent rights, do not have voting rights, and the shares underlying the RSUs are not considered issued or outstanding.

PSUs granted under the Stock Plan provide for the issuance of a share of the Company’s common stock at no cost to the holder and will vest at 0 % to 200 % of the target share amount based on achievement of performance targets.

Grants made prior to 2022 are earned based on the Company’s total shareholder return ranking relative to the S&P 500 Index over a performance period of approximately three years .

For grants made in 2022, the performance target is based on a mix of both achievement of an internal growth metric and the Company’s total shareholder return ranking, both over a performance period of approximately three years .

PSUs issued are subject to an additional holding period of up to two years 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 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.

These adjustments to the Company’s equity compensation awards did not result in additional compensation expense.

Stock based compensation awards that were held by Vontier employees were terminated and replaced with awards issued under the Vontier stock compensation plan.

Stock-based compensation expense through the Separation date for Vontier is included in results from discontinued operations.

The equity compensation awards granted by the Company generally vest only if the employee is employed by us (or in the case of directors, the director continues to serve on the Board) on the vesting date.

Other than pursuant to any retirement benefits provided under our Stock Plan, the equity compensation awards granted by the Company generally vest only if the employee is employed by us (or in the case of directors, the director continues to serve on the Board) on the vesting date.

To cover the exercise of stock options, vesting of RSUs and PSUs, and issuances of RSAs, we generally issue shares authorized but previously unissued, although we may instead issue treasury shares;

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We recognize the compensation expense over the requisite service period (which is generally the vesting period but may be shorter than the vesting period, for example, if the employee becomes retirement eligible before the end of the vesting period).

The fair value of RSUs is calculated using the closing price of Fortive common stock on the date of grant, adjusted for the impact of RSUs not having dividend rights prior to vesting.

The fair value of RSAs is calculated using the closing price of Fortive common stock on the date of grant.

The fair value of PSUs is calculated using a Monte Carlo pricing model.

The fair value of RSUs and performance based PSUs is calculated using the closing price of Fortive common stock on the date of grant.

RSU’s are further adjusted for the impact of RSUs not having dividend rights prior to vesting.

The fair value of market-based PSUs is calculated using a Monte Carlo pricing model.

The fair value of the stock options granted is calculated using a Black-Scholes Merton (“Black-Scholes”) option pricing model.

In connection with the exercise of certain stock options and the vesting of Stock Awards issued under the Stock Plan, a number of our shares sufficient to fund statutory minimum tax withholding requirements have been withheld from the total shares issued or released to the award holder (though under the terms of the Stock Plan, the shares are considered to have been issued and are not added back to the pool of shares available for grant).

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.

The tax withholding is treated as a reduction in Additional paid-in capital in the Consolidated Statement of Changes in Equity.

Stock-based Compensation Expense

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Total unrecognized compensation cost $ 135.0

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Stock Options

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The following summarizes option activity under the Stock Plan (in millions, except price per share and numbers of years):

Options Weighted

Price Weighted

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(years) Aggregate

Outstanding as of January 1, 2019 (a)

Granted 2.7 57.28

Exercised ( 1.4 ) 28.14

Canceled/forfeited ( 0.9 ) 55.01

Outstanding as of December 31, 2019 (a)

Outstanding as of January 1, 2021 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

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Outstanding as of December 31, 2022 11.3 56.70 6 $ 99.5

Vested and expected to vest as of December 31, 2021 (c)

Vested and expected to vest as of December 31, 2022 (a)

11.1 56.57 6 $ 99.4

Vested as of December 31, 2022 5.7 47.67 4 $ 97.1

(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.

(c) The “expected to vest” options are the net unvested options that remain after applying the forfeiture rate assumption to total unvested options.

(a) The “expected to vest” options are the net unvested options that remain after applying the forfeiture rate assumption to total unvested options.

The aggregate intrinsic values in the table above represent the total pretax intrinsic value (the difference between the closing stock price of Fortive common stock on the last trading day of 2022 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on December 31, 2022.

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, 2022 are summarized below (in millions;

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except price per share):

Stock Awards (a)

Weighted Average

Stock Awards Weighted Average

Unvested as of January 1, 2021 2.3 $ 63.04

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Forfeited ( 0.4 ) 64.01

Adjustment due to Vontier Separation (b)

( 0.2 ) 60.40

Unvested as of December 31, 2022 3.1 66.00

Granted 1.1 68.90

Vested ( 0.5 ) 55.78

Forfeited ( 0.3 ) 65.28

Unvested as of December 31, 2021 2.6 66.43

(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.

CAPITAL STOCK AND EARNINGS PER SHARE

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Our Board is authorized to issue shares of preferred stock in one or more series and has discretion to determine the rights, preferences, privileges, and restrictions, including voting rights, dividend rights, conversion rights, redemption privileges, and liquidation preferences, of each series of preferred stock.

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.

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

We declared and paid cash dividends per common share during the periods presented as follows:

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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.

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.

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

During the year ended December 31, 2022, the Company purchased 7 million shares of its common stock at an average share price of $ 63.25 .

As of December 31, 2022, there were 13 million shares remaining for repurchase under the program.

Subsequent Events

On January 24, 2023 we declared a regular quarterly cash dividend of $ 0.07 per share payable on March 31, 2023 to common stockholders of record on February 24, 2023.

Mandatory Convertible Preferred Stock

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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 $ 25.00 $ 34.5

First quarter $ 12.50 $ 17.3

Second quarter 12.50 17.2

Third quarter 12.50 17.3

Fourth quarter 12.50 17.2

Total $ 50.00 $ 69.0

Net Earnings Per Share

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For the years ended December 31, 2022, 2021, and 2020, the anti-dilutive options to purchase shares excluded from the diluted EPS calculation were 7.3 million shares, 0.3 million shares, and 4.9 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.

As described in Note 11, 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.

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 years ended December 31, 2021 and 2020.

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As described in Note 11, 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 2, 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 year ended December 31, 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.

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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Mandatory convertible preferred stock cumulative dividends (“if-converted” method) — — 69.0

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

Net earnings attributable to common stockholders from continuing operations and assumed conversions used in diluted earnings per share $ 757.0 $ 579.7 $ 1,452.2

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Assumed exercise of dilutive options and vesting of dilutive Stock Awards 2.8 3.3 1.7

Conversion of convertible notes (if converted method) 1.6 — —

Assumed conversion of outstanding mandatory convertible preferred stock — — 19.9

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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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Other ( 113.3 ) ( 105.6 ) ( 102.2 )

Russia exit and wind down costs (a)

Total $ 987.4 $ 812.8 $ 539.4

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Total $ 95.8 $ 50.0 $ 75.7

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(a) Refer to Note 1 for further detail on Russia exit and wind down costs.

Operations in Geographic Areas:

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Total $ 421.9 $ 395.5 $ 422.0

RELATED-PARTY TRANSACTIONS WITH DANAHER

In connection with the separation from Danaher in 2016, we entered into certain agreements with Danaher, which governed the separation and provided a framework for the relationship between the parties going forward.

Refer to Note 14 for additional discussion of the tax matters agreement.

We continue to enter into arms-length revenue arrangements in the ordinary course of business with Danaher and its affiliates and these transactions are considered related party transactions.

We recorded sales of approximately $ 13 million, $ 13 million, and $ 12 million to Danaher and its subsidiaries during the years ended December 31, 2021, 2020, and 2019, respectively.

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

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

Gross profit 711.9 755.5 745.7 794.0

Operating profit 197.6 211.3 202.3 201.6

Earnings from continuing operations, net of income taxes 111.7 182.0 152.6 167.9

Earnings (loss) from discontinued operations, net of income taxes ( 1.5 ) ( 1.1 ) ( 0.3 ) ( 2.9 )

Net earnings $ 110.2 $ 180.9 $ 152.3 $ 165.0

Earnings per common share - basic:

Continuing operations $ 0.28 $ 0.49 $ 0.42 $ 0.47

Discontinued operations — — — ( 0.01 )

Total earnings per common share - basic $ 0.27 $ 0.48 $ 0.42 $ 0.46

Earnings per common share - diluted:

Continuing operations $ 0.28 $ 0.48 $ 0.42 $ 0.46

Discontinued operations — — — ( 0.01 )

Total earnings per common share - diluted $ 0.27 $ 0.48 $ 0.42 $ 0.44

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

Gross profit 612.0 582.8 651.6 762.1

Operating profit 115.4 102.6 137.5 183.9

Earnings from continuing operations, net of income taxes 54.8 59.8 86.0 1,251.6

Earnings from discontinued operations, net of income taxes ( 12.9 ) 70.2 139.8 ( 36.0 )

Net earnings $ 41.9 $ 130.0 $ 225.8 $ 1,215.6

Earnings per common share - basic:

Continuing operations $ 0.11 $ 0.13 $ 0.20 $ 3.65

Discontinued operations ( 0.04 ) 0.20 0.42 ( 0.11 )

Total earnings per common share - basic $ 0.07 $ 0.33 $ 0.62 $ 3.55

Earnings per common share - diluted:

Continuing operations $ 0.11 $ 0.13 $ 0.20 $ 3.47

Discontinued operations ( 0.04 ) 0.20 0.41 ( 0.10 )

Total earnings per common share - diluted $ 0.07 $ 0.33 $ 0.61 $ 3.37

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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RELATED-PARTY TRANSACTIONS

All transactions with related parties are executed in the ordinary course of business.

Beginning during the third quarter of 2022, CommonSpirit Health met the criteria for recognition as a related party due to CommonSpirit’s chief executive officer’s participation on Fortive’s Board of Directors.

We entered into transactions in the ordinary course of business with CommonSpirit Health and made sales of approximately $ 10.6 million in 2022.

We enter into transactions in the ordinary course of business with Danaher.

During 2021 and 2020, we had two board members on both our Board of Directors and Danaher’s Board of Directors, which resulted in Danaher meeting the criteria for recognition as a related party.

During 2022, Danaher no longer met the criteria for recognition of a related party.

In the period in which Danaher met the criteria as a related party, we made sales of approximately $ 13 million and $ 13 million to Danaher in 2021 and 2020, respectively and purchases of approximately $ 14 million and $ 12 million in 2021 and 2020, respectively.

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