What changed in this filing

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Item 1. Financial Statements

2023-04-26 compared with 2022-10-26 · 135 added, 388 removed, 331 unchanged (61% of the section changed)

2 unchanged sentences

CONSOLIDATED CONDENSED BALANCE SHEETS

($ in millions, except per share amounts)

September 30, 2022 December 31, 2021

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

March 31, 2023 December 31, 2022

Current assets:

Cash and equivalents $ 672.8 $ 709.2

Trade accounts receivable, net 901.0 930.2

Trade accounts receivable less allowance for doubtful accounts of $ 41.2 at March 31, 2023 and $ 43.9 at December 31, 2022

Finished goods 234.8 215.3

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Total current assets 2,455.3 2,477.0

Property, plant and equipment, net of accumulated depreciation of $ 740.6 and $ 679.0 at September 30, 2022 and December 31, 2021, respectively

Property, plant and equipment, net of accumulated depreciation of $ 772.7 at March 31, 2023 and $ 754.5 at December 31, 2022

Other assets 470.0 455.8

10 unchanged sentences

Long-term debt 2,094.6 2,251.6

Commitments and Contingencies

Preferred stock:

$ 0.01 par value, 15.0 million shares authorized and no shares issued or outstanding at September 30, 2022 and December 31, 2021

Commitments and Contingencies (Note 8)

Common stock:

$ 0.01 par value, 2.0 billion shares authorized;

361.4 and 360.4 million issued;

353.8 and 359.1 million outstanding at September 30, 2022 and December 31, 2021, respectively

362.2 million issued and 353.5 million outstanding at March 31, 2023;

361.5 million issued and 352.9 million outstanding at December 31, 2022

Additional paid-in capital 3,730.5 3,706.3

10 unchanged sentences

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

Three Months Ended Nine Months Ended

September 30, 2022 October 1, 2021 September 30, 2022 October 1, 2021

Three Months Ended

March 31, 2023 April 1, 2022

Sales of products and software $ 1,236.6 $ 1,152.7

8 unchanged sentences

Research and development expenses ( 100.1 ) ( 99.1 )

Russia exit and wind down costs ( 1.1 ) — ( 17.3 ) —

Operating profit 240.4 212.3

1 unchanged sentence

Interest expense, net ( 32.1 ) ( 18.8 )

Loss on extinguishment of debt — — — ( 104.9 )

Gain on investment in Vontier Corporation — — — 57.0

Gain on litigation resolution — — — 26.0

Other non-operating expense, net ( 2.5 ) ( 2.7 )

Earnings from continuing operations before income taxes 217.5 175.6 616.5 501.8

Earnings before income taxes 205.8 190.8

Income taxes ( 32.2 ) ( 25.7 )

Net earnings from continuing operations 189.9 152.6 528.0 446.3

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

Net earnings $ 173.6 $ 165.1

Mandatory convertible preferred dividends — — — ( 34.5 )

Net earnings attributable to common stockholders $ 189.9 $ 152.3 $ 528.0 $ 408.9

Net earnings per common share from continuing operations:

Basic $ 0.53 $ 0.42 $ 1.48 $ 1.19

Diluted $ 0.53 $ 0.42 $ 1.46 $ 1.18

Net earnings (loss) per share from discontinued operations:

Basic $ — $ — $ — $ ( 0.01 )

Diluted $ — $ — $ — $ ( 0.01 )

Net earnings per share:

4 unchanged sentences

Diluted 356.5 368.4

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

See the accompanying Notes to Consolidated Condensed Financial Statements.

2 unchanged sentences

($ in millions)

Three Months Ended Nine Months Ended

September 30, 2022 October 1, 2021 September 30, 2022 October 1, 2021

Three Months Ended

March 31, 2023 April 1, 2022

Net earnings $ 173.6 $ 165.1

8 unchanged sentences

($ and shares in millions)

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

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

Comprehensive

Loss Noncontrolling

Shares Amount Shares Outstanding Amount

Shares Outstanding Amount

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

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 — — — — 173.6 — —

Dividends to common shareholders — — — — ( 24.7 ) — —

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

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

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

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

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

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

Net earnings for the period — — — — — — 173.0 $ — $ —

Dividends to common shareholders — — — — — — ( 24.9 ) — —

Other comprehensive income (loss) — — — — — — — ( 118.2 ) —

Common stock-based award activity — — 0.2 — 32.7 — — — —

Common stock repurchases — — ( 3.0 ) — — ( 179.1 ) — — —

Shares withheld for taxes — — — — ( 0.6 ) — — — —

Change in noncontrolling interests — — — — — — — — ( 0.2 )

Balance, July 1, 2022 — $ — 355.6 $ 3.6 $ 3,651.2 $ ( 242.9 ) $ 6,374.5 $ ( 342.1 ) $ 5.1

Net earnings for the period — — — — — — 189.9 $ — $ —

Dividends to common shareholders — — — — — — ( 24.8 ) — —

Other comprehensive income (loss) — — — — — — — ( 111.6 ) —

Other comprehensive income — — — — — 13.4 —

Common stock-based award activity 0.8 — 36.3 — — — —

Common stock repurchases — — ( 2.0 ) — — ( 133.2 ) — — —

Shares withheld for taxes ( 0.2 ) — ( 12.1 ) — — — —

Change in noncontrolling interests — — — — — — 0.6

Balance, September 30, 2022 — $ — 353.8 $ 3.6 $ 3,677.4 $ ( 376.1 ) $ 6,539.6 $ ( 453.7 ) $ 4.9

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

Balance, March 31, 2023 353.5 $ 3.6 $ 3,730.5 $ ( 442.9 ) $ 6,891.0 $ ( 312.3 ) $ 5.8

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

Comprehensive

Loss Noncontrolling

Shares Amount Shares Outstanding Amount

Shares Outstanding Amount

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

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

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

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

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

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

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

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

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

Early extinguishment of 0.875 % convertible senior notes due 2022

— — — — ( 11.6 ) — — — —

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

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

Change in noncontrolling interest — — — — — — 0.5

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

Net earnings for the period — — — — — — 180.9 — —

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

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

Other comprehensive income — — — — — — — 17.5 —

Common stock-based award activity — — 0.6 — 35.9 — — — —

Shares withheld for tax — — ( 0.1 ) — ( 0.6 ) — — — —

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

Change in noncontrolling interests — — — — 3.0 — — — ( 3.0 )

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

Net earnings for the period — — — — — — 152.3 — —

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

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

Common stock-based award activity — — 0.2 — 27.6 — — — —

Shares withheld for tax — — — — ( 1.6 ) — — — —

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

Balance, October 1, 2021 — $ — 358.6 $ 3.6 $ 3,624.3 $ — $ 5,883.7 $ ( 192.1 ) $ 4.8

See the accompanying Notes to Consolidated Condensed Financial Statements.

2 unchanged sentences

($ in millions)

Nine Months Ended

September 30, 2022 October 1, 2021

Three Months Ended

March 31, 2023 April 1, 2022

Cash flows from operating activities:

Net earnings from continuing operations $ 528.0 $ 446.3

Net earnings $ 173.6 $ 165.1

Noncash items:

2 unchanged sentences

Stock-based compensation expense 26.7 19.9

Russia exit and wind down costs 9.2 —

Loss on extinguishment of debt — 104.2

Gain on investment in Vontier Corporation — ( 57.0 )

Gain on litigation resolution — ( 26.0 )

Change in trade accounts receivable, net 21.5 ( 1.4 )

3 unchanged sentences

Change in accrued expenses and other liabilities ( 78.0 ) ( 31.2 )

Total operating cash provided by continuing operations 839.0 705.9

Total operating cash used in discontinued operations — ( 19.4 )

Net cash provided by operating activities 174.4 214.8

Cash flows from investing activities:

Cash paid for acquisitions, net of cash received ( 15.2 ) ( 1,156.7 )

Payments for additions to property, plant and equipment ( 24.8 ) ( 18.8 )

Proceeds from sale of business 6.6 —

All other investing activities — 1.1

Cash paid for acquisitions, net of cash received — 0.9

Net cash used in investing activities ( 24.8 ) ( 17.9 )

Cash flows from financing activities:

Proceeds from borrowings (maturities greater than 90 days), net of issuance costs 396.9 —

Net proceeds from commercial paper borrowings 381.3 215.0

Net proceeds from (repayments of) commercial paper borrowings ( 159.3 ) 930.7

Payment of 0.875 % convertible senior notes due 2022

1 unchanged sentence

Repurchase of common shares — ( 63.8 )

Payment of common stock cash dividend to shareholders ( 74.8 ) ( 72.6 )

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

Payment of mandatory convertible preferred stock cash dividend to shareholders — ( 34.5 )

Payment of dividends ( 24.7 ) ( 25.1 )

All other financing activities ( 3.1 ) ( 17.9 )

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

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

In our opinion, the accompanying financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to fairly present our financial position as of September 30, 2022 and December 31, 2021, our results of operations, comprehensive income, and stockholders’ equity for the three and nine month periods ended September 30, 2022 and October 1, 2021, and cash flows for the nine month periods ended September 30, 2022 and October 1, 2021.

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

Additionally, in the fourth quarter of 2021, Fortive adopted ASU No.

2021-08, Business Combinations (Topic 805):

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

The amendments in this update required 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.

The amendments have been applied to all business combinations that occurred on or after January 1, 2021.

The adoption only impacted the ServiceChannel acquisition which occurred in Q3 2021.

Amounts previously reported for the three and nine month periods ended October 1, 2021 were retroactively adjusted to reflect a $ 1.5 million increase in both revenue and earnings as a result of the adoption of this pronouncement.

Vontier Separation and Discontinued Operations

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

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

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

On January 19, 2021, we completed an exchange (the “Debt-for-Equity Exchange”) of 33.5 million shares of common stock of Vontier, representing all of the Retained Vontier Shares, for $ 1.1 billion in aggregate principal amount of indebtedness of the Company held by Goldman Sachs & Co.

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

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 fiscal year ended December 31, 2021.

In the three and nine month periods ended September 30, 2022, the Company recorded pre-tax charges of $ 1.1 million and $ 17.3 million, respectively, 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 Condensed Consolidated Statements of Earnings.

The total costs expected to be incurred in connection with the Russia exit are $ 18.4 million.

Accumulated Other Comprehensive Income (Loss)

The unaudited consolidated condensed financial statements included herein should be read in conjunction with the audited annual consolidated financial statements as of and for the year ended December 31, 2022 and the footnotes (“Notes”) thereto included within our 2022 Annual Report on Form 10-K.

In our opinion, the accompanying financial statements contain all adjustments, which consist of only normal, recurring accruals necessary to fairly present our financial position, results of operations, comprehensive income, stockholders’ equity, and cash flows for the periods presented.

The results of operations for the three months ended March 31, 2023, are not necessarily indicative of the results for the full year.

Accumulated Other Comprehensive Loss

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

subsidiaries.

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.

During the three and nine month periods ended September 30, 2022, we recognized after-tax foreign currency transaction gains of $ 14.6 million and $ 18.3 million, respectively, on the debt that were deferred in the foreign currency translation component of Accumulated other comprehensive income (loss) (“AOCI”) as an offset to the foreign currency translation adjustments on our investments in foreign subsidiaries.

During the second quarter of 2022, our ¥ 14.4 billion Yen-denominated term loan and our € 275 million Euro-denominated term loan were designated as net investment hedges of our investment in applicable foreign operations.

During the three month period ended March 31, 2023, we recognized after-tax foreign currency transaction losses of $ 1.7 million on the debt that was deferred in the foreign currency translation component of Accumulated other comprehensive income (loss) (“AOCI”) as an offset to the foreign currency translation adjustments on our investments in foreign subsidiaries.

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

We recorded no ineffectiveness from our net investment hedges during the three and nine month periods ended September 30, 2022.

We recorded no ineffectiveness from our net investment hedges during the three month period ended March 31, 2023.

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

adjustments Pension adjustments (a)

For the Three Months Ended September 30, 2022:

Balance, July 1, 2022 $ ( 280.7 ) $ ( 61.4 ) $ ( 342.1 )

Other comprehensive income (loss) before reclassifications, net of income taxes ( 112.4 ) — ( 112.4 )

Amounts reclassified from accumulated other comprehensive income (loss):

Increase (decrease) — 1.2 (b)

Income tax impact — ( 0.4 ) ( 0.4 )

Amounts reclassified from accumulated other comprehensive income (loss), net of income taxes — 0.8 0.8

Net current period other comprehensive income (loss), net of income taxes ( 112.4 ) 0.8 ( 111.6 )

Balance, September 30, 2022 $ ( 393.1 ) $ ( 60.6 ) $ ( 453.7 )

For the Three Months Ended October 1, 2021:

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

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

Amounts reclassified from accumulated other comprehensive income (loss):

Increase (decrease) — 1.2 (b)

Income tax impact — ( 0.3 ) ( 0.3 )

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

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

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

adjustments Pension adjustments (a)

For the Nine Months Ended September 30, 2022:

adjustments Pension & post-retirement plan benefit adjustments (a)

For the Three Months Ended March 31, 2023:

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

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

Net current period other comprehensive income (loss) ( 270.4 ) 1.7 ( 268.7 )

Balance, September 30, 2022 $ ( 393.1 ) $ ( 60.6 ) $ ( 453.7 )

For the Nine Months Ended October 1, 2021:

Net current period other comprehensive income (loss), net of income taxes 13.4 — 13.4

Balance, March 31, 2023 $ ( 288.0 ) $ ( 24.3 ) $ ( 312.3 )

For the Three Months Ended April 1, 2022:

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

4 unchanged sentences

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

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

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

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

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

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

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

The following is a roll forward of the aggregated allowance for credit losses related to our trade accounts receivables as of September 30, 2022 ($ in millions):

Balance, December 31, 2021 $ 39.7

Provision 10.9

Write-offs ( 7.7 )

Foreign currency exchange and other ( 1.4 )

Balance, September 30, 2022 $ 41.5

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

Recently Issued Accounting Standard

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

During the three month period ending March 31, 2023, the activity was immaterial.

Restructuring

We initiated a discrete plan in the first quarter of 2023 focused on improvements in our operational efficiency, which is expected to be completed by December 31, 2023.

The nature of these activities were broadly consistent throughout our segments and consist of targeted workforce reductions and facility consolidations or closures in response to overall macroeconomic and other external conditions.

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

The total restructuring charges we expect to recognize under this discrete plan are approximately $ 25 to $ 30 million, with charges of $ 17.6 million incurred in the first quarter, which primarily related to employee severance.

These charges are included in Cost of Sales and Selling, general, and administrative expenses in the Consolidated Condensed Statement of

Accrued restructuring costs were $ 13.4 million as of March 31, 2023 and were included within Accrued expenses and other current liabilities in the Consolidated Condensed Balance Sheets.

Convertible Senior Notes

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

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

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

Upon adopting 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.

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

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

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

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

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

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

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

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

We applied the if-converted method to all convertible instruments when calculating EPS for the nine months ended September 30, 2022.

As of September 30, 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.

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

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

During the three and nine month periods ended September 30, 2022, insignificant adjustments were made to the purchase price allocation of prior year acquisitions, which are shown in Note 3.

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

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

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

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

We recorded $ 977 million of goodwill related to the acquisition, which is not tax deductible.

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

ServiceChannel

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

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

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

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

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

We recorded approximately $ 868 million of goodwill related to the acquisition, which is not tax deductible.

ServiceChannel

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

Revenue and operating losses attributable to the Provation and ServiceChannel acquisitions were $ 198.0 million and $ 38.0 million for the nine month period ended September 30, 2022.

The operating losses include $ 57.9 million of intangible asset amortization and $ 18.8 million of transaction and integration costs, which were primarily comprised of employee compensation and retention costs and amounts paid to third party advisors, and are recorded in Selling, general and administration expenses, respectively.

The following table summarizes the estimated fair value of the assets acquired and liabilities assumed from ServiceChannel and Provation as of September 30, 2022 ($ in millions):

Provation ServiceChannel Total

Accounts receivable $ 41.6 $ 10.1 $ 51.7

Goodwill 976.7 867.6 1,844.3

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

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

Deferred tax liabilities ( 119.4 ) ( 41.9 ) ( 161.3 )

Other assets and liabilities, net ( 30.5 ) ( 10.7 ) ( 41.2 )

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

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 total consideration of $ 9.6 million.

As a result of the sale, in the three and nine month periods ended September 30, 2022, we recorded a net realized pre-tax gain totaling $ 2.3 million, net of transaction costs, which is recorded as “Other non-operating expense, net” in the Consolidated Condensed Statements of Earnings.

The divested business accounted for less than 1.0 % of total revenue and less than 1.0 % of total assets for the fiscal 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.

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), on January 1, 2022, we accounted for the Convertible Notes under the if-converted method in our calculation of diluted EPS, as required under the new guidance.

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

Recently Issued Accounting Standard

The Financial Accounting Standards Board (“FASB”) establishes changes to accounting principles under GAAP in the form of accounting standards updates (“ASUs”) to the Accounting Standards Codification (“ASC”).

We consider the applicability and impact of all ASUs.

Any recently issued ASUs were assessed and determined to be either not applicable or are expected to have an immaterial impact on the Company’s result of operations, financials position or cash flows.

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

1 unchanged sentence

Balance, December 31, 2022 $ 4,074.4 $ 1,810.2 $ 3,163.9 $ 9,048.5

Measurement period adjustments for 2021 acquisitions ( 5.9 ) — 8.4 2.5

Attributable to 2022 acquisitions and divestitures — 0.7 ( 2.6 ) ( 1.9 )

Foreign currency translation and other 6.6 1.4 0.6 8.6

Balance, September 30, 2022 $ 4,041.0 $ 1,783.0 $ 3,153.5 $ 8,977.5

Balance, March 31, 2023 $ 4,081.0 $ 1,811.6 $ 3,164.5 $ 9,057.1

FAIR VALUE MEASUREMENTS

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(Level 3) Total

September 30, 2022

March 31, 2023

Deferred compensation liabilities $ — $ 35.4 $ — $ 35.4

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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.

All amounts deferred under such plans are unfunded, unsecured obligations and are presented as a component of our compensation and benefits accrual included in Other long-term liabilities in the Consolidated Condensed Balance Sheets.

All amounts deferred under such plans are unfunded, unsecured obligations and are included in Other long-term liabilities in the accompanying Consolidated Condensed Balance Sheets.

Participants may choose among alternative earnings rates for the amounts they defer, which are primarily based on investment options within our defined contribution plans for the benefit of U.S.

employees (except that the earnings rates for amounts contributed unilaterally by the Company are entirely based on changes in the value of Fortive common stock).

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.

Changes in the deferred compensation liability under these programs are recognized based on changes in the fair value of the participants’ accounts and are recorded within selling, general and administrative in the Consolidated Condensed Statements of Earnings.

Non-recurring Fair Value Measurements

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

We evaluated events 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, in the three and nine month periods ended September 30, 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 Condensed Statement of Earnings.

We evaluated events or circumstances that may indicate the carrying value of our non-financial assets may not be fully recoverable during the three month period ended March 31, 2023, and recorded no impairments.

Fair Value of Financial Instruments

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

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Carrying Amount Fair Value Carrying Amount Fair Value

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Long-term debt, net of current maturities 2,094.6 1,952.7 2,251.6 2,078.1

As of September 30, 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.

As of March 31, 2023 and December 31, 2022, the current portion of long-term debt and long-term debt, net of current maturities were categorized as Level 1.

The fair values of long-term borrowings were based on quoted market prices.

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

FINANCING AND CAPITAL

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

September 30, 2022 December 31, 2021

The components of our debt were as follows ($ in millions):

March 31, 2023 December 31, 2022

dollar-denominated commercial paper $ 245.0 $ 405.0

Delayed-Draw Term Loan due 2023 1,000.0 1,000.0

Yen Term Loan due 2025 99.5 —

Euro Term Loan due 2025 298.1 294.4

Yen Term Loan due 2025 108.4 109.8

3.15 % senior unsecured notes due 2026

4.30 % senior unsecured notes due 2046

0.875 % senior convertible notes due 2022

Long-term debt 3,558.9 3,959.0

Long-term debt, principal amounts 3,101.5 3,259.2

aggregate unamortized debt discounts, premiums, and issuance costs 7.1 7.9

Long-term debt, carrying value 3,094.4 3,251.3

current portion of long-term debt 999.8 999.7

Long-term debt, net of current maturities $ 2,094.6 $ 2,251.6

Aggregate unamortized debt discounts, premiums, and issuance costs of $ 8.1 million and $ 13.0 million as of September 30, 2022 and December 31, 2021, respectively, are netted against the principal amounts of the components of debt in the table above.

Refer to Note 11 of our 2022 Annual Report on Form 10-K for further details of our debt financing.

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.

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.

Convertible Senior Notes

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

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

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

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

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

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

In 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.

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

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

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

We recognized $ 2.1 million in interest expense during the nine month period ended September 30, 2022, of which $ 1.3 million was related to the contractual coupon rate of 0.875 % and $ 0.8 million was attributable to the amortization of debt issuance costs for each respective period.

We recognized $ 11.1 million and $ 34.5 million in interest expense during the three and nine month period ended October 1, 2021, of which $ 2.5 million and $ 7.9 million was related to the contractual coupon rate of 0.875 %, $ 1.5 million and $ 4.7 million was attributable to the amortization of debt issuance costs, and $ 7.1 million and $ 21.9 million was attributable to the amortization of the discount for each respective period.

Other Liquidity Sources

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

The details of our outstanding Commercial Paper Programs as of September 30, 2022 were as follows ($ in millions):

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

The details of our outstanding Commercial Paper Programs as of March 31, 2023 were as follows ($ in millions):

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

dollar-denominated commercial paper $ 244.9 4.98 % 30

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

As of September 30, 2022, no borrowings were outstanding under the Revolving Credit Facility.

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”) which, to the extent not otherwise providing credit support for our commercial paper programs, can also be used for working capital and other general corporate purposes.

As of March 31, 2023, no borrowings were outstanding under the Revolving Credit Facility.

We classified our borrowings outstanding under the Commercial Paper Programs as Long-term debt in the accompanying Consolidated Condensed Balance Sheets as we had the intent and ability, as supported by availability under the Revolving Credit Facility, to refinance these borrowings for at least one year from the balance sheet date.

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.

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

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

Subsequent Events

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.

On October 18, 2022, we entered into a $ 1.0 billion delayed-draw senior unsecured term facility (“Delayed-Draw Term Loan Due 2023”).

We intend to use proceeds of the Delayed-Draw Term Loan Due 2023 to repay the outstanding principal balance of the Delayed-Draw Term Loan Due 2022, which matures in December 2022.

The Delayed-Draw Term Loan Due 2023 bears interest at a variable rate equal to Term SOFR plus a CSA of 10 basis points plus a spread of 82.5 basis points at our current credit rating.

Borrowing under the 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.

Credit support for the Commercial Paper Program will continue to be provided by the Amended and Restated Credit Agreement.

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

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

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

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

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

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

Contract assets were $ 84 million as of September 30, 2022 and $ 71 million as of December 31, 2021.

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

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

As of September 30, 2022 and December 31, 2021, we had $ 37 million and $ 27 million, respectively, in net revenue-related contract costs primarily related to certain software contracts.

Contract assets were $ 96 million as of March 31, 2023 and $ 82 million as of December 31, 2022.

Contract assets are recorded in Prepaid expenses and other current assets in our Consolidated Condensed Balance Sheets.

Contract Costs — We incur and capitalize incremental costs to obtain certain contracts, typically sales-related commissions where the amortization period is greater than one year and costs associated with assets used by our customers in certain service arrangements.

As of March 31, 2023 and December 31, 2022, we had $ 44 million and $ 42 million, respectively, in net revenue-related contract costs primarily related to certain software contracts.

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

These assets have estimated useful lives between three and eight years .

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

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

These assets have estimated useful lives between three and five years .

Contract Liabilities — Our contract liabilities consist of deferred revenue generally related to subscription-based software contracts, PCS and extended warranty sales, where we generally receive up-front payment and recognize revenue over the service or support term.

We classify deferred revenue as current or noncurrent based on the timing of when we expect to recognize revenue.

The current portion of deferred revenue is included in Accrued expenses and other current liabilities and the noncurrent portion of deferred revenue is included in Other long-term liabilities in our Consolidated Condensed Balance Sheets.

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

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Deferred revenue - current $ 497.2 $ 509.6

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Total contract liabilities $ 536.1 $ 547.6

During the three and nine month period ended September 30, 2022, we recognized revenue related to our contract liabilities at December 31, 2021 of $ 63 million and $ 319 million, respectively.

The change in our contract liabilities from December 31, 2021 to September 30, 2022 was primarily due to the timing of billings and recognition as revenue of subscription-based software contracts, PCS and extended warranty services.

During the three month period ended March 31, 2023, we recognized revenue related to our contract liabilities at December 31, 2022 of $ 175 million.

The change in our contract liabilities from December 31, 2022 to March 31, 2023 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, non-cancelable orders and the average contract value for software contracts, for which work has not been performed.

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

September 30, 2022

March 31, 2023

Intelligent Operating Solutions $ 576.2

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

Disaggregation of revenue for the three month period ended September 30, 2022 is presented as follows ($ in millions):

Total Intelligent Operating Solutions Precision Technologies Advanced Healthcare Solutions

Sales of products and software $ 1,227.7 $ 519.2 $ 467.3 $ 241.2

Sales of services 228.3 94.5 56.4 77.4

Total $ 1,456.0 $ 613.7 $ 523.7 $ 318.6

United States $ 799.0 $ 342.0 $ 267.8 $ 189.2

China 186.0 56.6 102.6 26.8

All other (each country individually less than 5% of total sales) 471.0 215.1 153.3 102.6

Total $ 1,456.0 $ 613.7 $ 523.7 $ 318.6

Direct sales:

Healthcare $ 354.1 $ 11.1 $ 42.1 $ 300.9

Industrial & Manufacturing 334.5 217.6 111.3 5.6

Utilities & Power 93.1 45.5 47.6 —

Government 122.7 65.5 48.7 8.5

Communications, Electronics & Semiconductor 111.3 24.5 86.4 0.4

Aerospace & Defense 66.9 0.1 66.8 —

Oil & Gas 66.4 65.3 1.1 —

Retail & Consumer 83.9 61.7 22.2 —

Other 166.3 91.2 75.1 —

Total direct sales 1,399.2 582.5 501.3 315.4

Distributors 56.8 31.2 22.4 3.2

Total $ 1,456.0 $ 613.7 $ 523.7 $ 318.6

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

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

Total Intelligent Operating Solutions Precision Technologies Advanced Healthcare Solutions

Sales of products and software $ 1,107.1 $ 464.2 $ 401.0 $ 241.9

Sales of services 193.9 72.7 54.7 66.5

Total $ 1,301.0 $ 536.9 $ 455.7 $ 308.4

United States $ 685.2 $ 285.3 $ 234.6 $ 165.3

China 154.8 48.8 75.8 30.2

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

Total $ 1,301.0 $ 536.9 $ 455.7 $ 308.4

Direct sales:

Healthcare $ 327.6 $ 10.5 $ 30.7 $ 286.4

Industrial & Manufacturing 313.5 204.4 103.2 5.9

Utilities & Power 97.3 55.3 42.0 —

Government 100.1 54.6 33.4 12.1

Communications, Electronics & Semiconductor 103.4 30.6 72.3 0.5

Aerospace & Defense 60.6 — 60.6 —

Oil & Gas 64.6 62.4 2.2 —

Retail & Consumer 53.6 33.0 20.6 —

Other 117.7 56.5 61.1 0.1

Total direct sales 1,238.4 507.3 426.1 305.0

Distributors 62.6 29.6 29.6 3.4

Total $ 1,301.0 $ 536.9 $ 455.7 $ 308.4

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

Disaggregation of revenue for the nine month period ended September 30, 2022 is presented as follows ($ in millions):

Disaggregation of revenue for the three month periods ended March 31, 2023 is presented as follows ($ in millions):

Total Intelligent Operating Solutions Precision Technologies Advanced Healthcare Solutions

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

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

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

Total Intelligent Operating Solutions Precision Technologies Advanced Healthcare Solutions

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

Our effective tax rates for the three and nine month periods ended September 30, 2022 were 12.7 % and 14.4 %, respectively, as compared to 13.1 % and 11.1 %, respectively, for the three and nine month periods ended October 1, 2021.

The year-over-year decrease in the effective tax rate for the three month period ended September 30, 2022 was relatively consistent as compared to the three month period ended October 1, 2021.

The year-over-year increase in the effective tax rate for the nine month period ended September 30, 2022 as compared to the nine month period ended October 1, 2021 was primarily due to a non-recurring permanent difference on the Q1 2021 gain on our Retained Vontier Shares as a result of the tax-free treatment of our disposition of the shares through the Debt-for-Equity Exchange and the effect of Russia exit including wind down costs for which no tax benefit was recognized.

Our effective tax rate for the three and nine month periods ended September 30, 2022 differs from the U.S.

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

federal permanent differences, the impacts of credits and deductions provided by law, 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 rates for the three month period ended March 31, 2023 was 15.7 %, as compared to 13.5 %, for the three month period ended April 1, 2022.

The year-over-year increase in the effective tax rate for the three month period ended March 31, 2023 as compared to the three month period ended April 1, 2022 was primarily due to uncertain tax position reserves released during the three month period ending April 1, 2022.

Our effective tax rates for the three month periods ended March 31, 2023 and April 1, 2022, differ from the U.S.

federal statutory rate of 21% due primarily to the impact of credits and deductions provided by law and changes in our uncertain tax position reserves.

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, a 1% excise tax on net stock repurchases, and several tax incentives to promote clean energy.

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

Based on our current analysis of the provisions, we do not believe this legislation will have a material impact on our consolidated financial statements.

Based upon our analysis of the Inflation Reduction Act of 2022 and subsequently released guidance, we believe that the corporate alternative minimum tax will not have a material impact on our financial statements in 2023 .

STOCK-BASED COMPENSATION

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

As of September 30, 2022, approximately 16 million shares of our common stock were available for subsequent issuance under the Stock Plan.

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

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

As of March 31, 2023, approximately 14 million shares of our common stock were available for subsequent issuance under the Stock Plan.

For a full description of our Stock Plan refer to Note 17 of our 2022 Annual Report on Form 10-K.

Stock-based Compensation Expense

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

Three Months Ended Nine Months Ended

September 30, 2022 October 1, 2021 September 30, 2022 October 1, 2021

Three Months Ended

March 31, 2023 April 1, 2022

Stock Awards:

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Total stock-based compensation expense, net of income taxes $ 22.9 $ 17.2

The following summarizes the unrecognized compensation cost for the Stock Plan awards as of September 30, 2022.

The following summarizes the unrecognized compensation cost for the Stock Plan awards as of March 31, 2023.

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

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

The following is a roll forward of our accrued warranty liability ($ in millions):

Balance, December 31, 2021 $ 25.2

Accruals for warranties issued during the period 12.3

Settlements made ( 14.1 )

Effect of foreign currency translation and other ( 0.4 )

Balance, September 30, 2022 $ 23.0

Operating lease cost for the three month periods ended September 30, 2022 and October 1, 2021 was $ 13 million and $ 15 million, respectively.

Operating lease cost for the nine month periods ended September 30, 2022 and October 1, 2021 was $ 42 million and $ 45 million, respectively.

During the nine month periods ended September 30, 2022 and October 1, 2021, cash paid for operating leases included in operating cash flows was $ 38 million and $ 40 million, respectively.

Right-of-use assets obtained in exchange for operating lease obligations were $ 18 million and $ 24 million during the nine month periods ended September 30, 2022 and October 1, 2021, respectively.

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

During the three month period ending March 31, 2023, warranty related activity was immaterial.

Operating lease cost for the three month periods ended March 31, 2023 and April 1, 2022 was $ 12 million and $ 15 million, respectively.

During the three month periods ended March 31, 2023 and April 1, 2022, cash paid for operating leases included in operating cash flows was $ 12 million and $ 14 million, respectively.

Right-of-use (“ROU”) assets obtained in exchange for operating lease obligations were $ 4 million and $ 2 million during the three month periods ended March 31, 2023 and April 1, 2022, respectively.

Operating lease ROU assets were $ 155 million and $ 162 million as of March 31, 2023 and December 31, 2022, respectively.

Operating lease liabilities were $ 162 million and $ 169 million as of March 31, 2023 and December 31, 2022, respectively.

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

NET EARNINGS PER SHARE

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

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

Anti-dilutive options excluded from the diluted EPS calculation for the three and nine month periods ended September 30, 2022 were both 7.3 million, and were 0.2 million and 0.3 million for the three and nine month periods ended October 1, 2021, respectively.

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

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

Because the fair value of our common stock was below the conversion price, the Convertible Notes had no impact on our earnings per share for the nine month period ended October 1, 2021.

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

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

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

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

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

Diluted EPS is similarly calculated, except that the calculation includes the dilutive effect of the assumed conversion of 0.875 % Convertible Notes and associated issuance of shares under the if-converted method, while outstanding in 2022, and the assumed issuance of shares under stock-based compensation plans under the treasury stock method, except where the inclusion of such shares would have an anti-dilutive impact.

Anti-dilutive options excluded from the diluted EPS calculation for the three month periods ended March 31, 2023 and April 1, 2022 were 2.9 million and 3.1 million, respectively.

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

Three Months Ended Nine Months Ended

September 30, 2022 October 1, 2021 September 30, 2022 October 1, 2021

Net earnings from continuing operations $ 189.9 $ 152.6 $ 528.0 $ 446.3

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

Three Months Ended

March 31, 2023 April 1, 2022

Net earnings $ 173.6 $ 165.1

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

Diluted Net Earnings from Continuing Operations $ 189.9 $ 152.6 $ 529.8 $ 411.8

Diluted Net Earnings $ 173.6 $ 166.9

Weighted average common shares outstanding used in basic earnings per share 353.6 359.3

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Weighted average common shares outstanding used in diluted earnings per share 356.5 368.4

Net earnings from continuing operations per common share - Basic $ 0.53 $ 0.42 $ 1.48 $ 1.19

Net earnings from continuing operations per common share - Diluted $ 0.53 $ 0.42 $ 1.46 $ 1.18

Net earnings per common share - Basic $ 0.49 $ 0.46

Net earnings per common share - Diluted $ 0.49 $ 0.45

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

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

Common Share Amount

($ in millions) Dividend per MCPS Amount

($ in millions)

First quarter $ 0.07 $ 24.7

Second quarter 0.07 24.9 — —

Third quarter 0.07 24.8 — —

Total $ 0.07 $ 24.7

First quarter $ 0.07 $ 25.1

Second quarter 0.07 23.7 12.5 17.2

Third quarter 0.07 25.2 — —

Total $ 0.07 $ 25.1

4 unchanged sentences

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

As of September 30, 2022, there were 14.0 million shares remaining for repurchase under the program.

During the three month period ended March 31, 2023, the Company made no repurchases under the plan.

During the three month period ended April 1, 2022, the Company purchased 1 million shares of its common stock at an average share price of $ 63.74 .

As of March 31, 2023, there were 13 million shares remaining for repurchase under the program.

SEGMENT INFORMATION

We report our results in three separate business segments consisting of Intelligent Operating Solutions, Precision Technologies, and Advanced Healthcare Solutions.

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

We provide differentiated instrumentation and sensors, software and services to address our customers’ toughest workflow challenges.

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

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

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

We provide hardware, consumables, software and services that optimize our customers’ most critical workflows, including instrument sterilization and device reprocessing, instrument tracking, cell therapy equipment design and manufacturing, biomedical test tools, radiation safety monitoring, end-to-end clinical productivity solutions and asset management.

Our chief operating decision maker (“CODM”) assesses performance and allocates resources based on our operating segments, which are also our reportable segments.

Operating profit amounts in the Other category and Russia exit and wind down costs consist of unallocated corporate costs and other costs not utilized or reviewed by our CODM at a segment level in evaluating segment operating performance.

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.

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

Three Months Ended Nine Months Ended

September 30, 2022 October 1, 2021 September 30, 2022 October 1, 2021

Three Months Ended

March 31, 2023 April 1, 2022

Intelligent Operating Solutions $ 632.1 $ 587.6

7 unchanged sentences

Other ( 32.1 ) ( 24.1 )

Russia exit and wind down costs ( 1.1 ) — ( 17.3 ) —

Total Operating Profit 240.4 212.3

Interest expense, net ( 32.1 ) ( 18.8 )

Loss on extinguishment of debt — — — ( 104.9 )

Gain on investment in Vontier Corporation — — — 57.0

Gain on litigation resolution — — — 26.0

Other non-operating expense, net ( 2.5 ) ( 2.7 )

Earnings from continuing operations before income taxes $ 217.5 $ 175.6 $ 616.5 $ 501.8

Earnings before income taxes $ 205.8 $ 190.8

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

What changed 10-Q

Item 1. Financial Statements