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Item 8. Financial Statements and Supplementary Data

2024-02-27 compared with 2023-02-28 · 266 added, 397 removed, 1164 unchanged (36% of the section changed)

6 unchanged sentences

Based on this assessment, management concluded that, as of December 31, 2023, the Company’s internal control over financial reporting is effective.

The Company completed four acquisitions in the IOS Segment during the year ended December 31, 2023, collectively “the IOS Acquisitions”.

The Company has not yet fully incorporated the internal controls and procedures of the IOS Acquisitions into the Company’s internal control over financial reporting, and as such, management excluded the IOS Acquisitions from its assessment.

The assets and revenues of the IOS Acquisitions excluded from management’s assessment of internal controls constituted less than 1% of the Company’s total assets as of December 31, 2023 and less than 1% of the Company’s total revenues for the year ended December 31, 2023, 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.

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We believe that our audit provides a reasonable basis for our opinion.

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 the IOS acquisitions which is included in the 2023 consolidated financial statements of the Company and constituted less than 1% of total and assets, respectively, as of December 31, 2023 and less than 1% of 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 IOS Acquisitions.

Definition and Limitations of Internal Control Over Financial Reporting

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(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Description of the Matter Valuation of Goodwill

22 unchanged sentences

Cash and equivalents $ 1,888.8 $ 709.2

Accounts receivable less allowance for doubtful accounts of $ 43.9 million and $ 39.7 million, respectively

Accounts receivable less allowance for doubtful accounts of $ 39.2 and $ 43.9 , respectively

Inventories 536.9 536.7

14 unchanged sentences

Long-term debt 3,646.2 2,251.6

Commitments and Contingencies

Preferred stock:

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

Commitments and Contingencies (Note 14)

Common stock:

$ 0.01 par value, 2.0 billion shares authorized;

361.5 million and 360.4 million issued;

352.9 million and 359.1 million outstanding at December 31, 2022 and December 31, 2021, respectively

363.7 and 361.5 issued;

350.7 and 352.9 outstanding;

Additional paid-in capital 3,851.3 3,706.3

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Diluted 355.6 360.8 352.3

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

See the accompanying Notes to the Consolidated Financial Statements.

19 unchanged sentences

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

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

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

1 unchanged sentence

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

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

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

Other comprehensive income (loss)

— — — — — — — ( 43.9 ) —

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

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

Early extinguishment of 0.00875 senior convertible notes due 2022

Vontier Separation and other — — — — 8.6 — — — —

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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 ) — —

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

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

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

Other comprehensive income (loss)

— — — — — — — ( 140.7 ) —

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

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

Early extinguishment of 0.875 % senior convertible notes due 2022

Common stock repurchases

— — ( 7.0 ) — — ( 442.9 ) — — —

Vontier Separation and other — — — — 8.6 — — — —

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

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 — — — — — — 865.8 — —

Dividends to common shareholders — — — — — — ( 102.0 ) — —

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

Other comprehensive income (loss)

— — — — — — — ( 0.4 ) —

Common stock-based award activity — — 2.3 — 176.8 — — — —

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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 ( 104.1 ) ( 62.1 ) ( 41.0 )

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Payments for additions to property, plant and equipment ( 107.8 ) ( 95.8 ) ( 50.0 )

Proceeds from sale of business and property 9.6 4.5 5.3

Proceeds from sale of property

Proceeds from sale of business

All other investing activities 0.8 ( 3.5 ) —

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

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

Net cash used in investing activities ( 195.4 ) ( 102.5 ) ( 2,615.6 )

1 unchanged sentence

Proceeds from borrowings (maturities greater than 90 days), net of issuance costs 549.3 1,394.1 999.8

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

Net proceeds from commercial paper borrowings

839.9 38.5 364.9

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 ) ( 1,000.0 ) ( 611.1 )

Repurchase of common shares ( 272.9 ) ( 442.9 ) —

Payment of common stock cash dividend to shareholders ( 102.0 ) ( 99.5 ) ( 97.7 )

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

Net cash consideration received from Vontier Separation — — 1,598.0

All other financing activities 18.0 ( 6.7 ) 30.6

Total financing cash (used in) provided by continuing operations ( 1,273.0 ) 652.0 ( 675.7 )

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

Net cash (used in) provided by financing activities ( 1,273.0 ) 652.0 ( 696.1 )

Net cash provided by (used in) financing activities

32.3 ( 1,273.0 ) 652.0

Effect of exchange rate changes on cash and equivalents ( 10.9 ) ( 37.8 ) ( 3.0 )

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Ending balance of cash and equivalents $ 1,888.8 $ 709.2 $ 819.3

Supplemental disclosure:

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

See the accompanying Notes to the Consolidated Financial Statements.

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

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

Basis of Presentation

The accompanying consolidated financial statements present our historical financial position, results of operations, changes in equity and cash flows in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

Certain reclassifications have been made to prior year financial information to conform to the current period presentation.

Unless otherwise indicated, all amounts in the notes to the consolidated financial statements refer to continuing operations.

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Net earnings attributable to noncontrolling interests have been reflected in Selling, general, and administrative expenses and were insignificant in all periods presented.

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”).

Discontinued Operations

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

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

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

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”).

Russia Ukraine Conflict

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

Russian Invasion of Ukraine

In February 2022, Russian forces invaded Ukraine 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.

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 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.

The exit activities were completed in 2022.

Segment Presentation

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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 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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Cash and Equivalents —We consider all highly liquid investments with a maturity of three months or less at the date of purchase to be cash equivalents.

Accounts Receivable and Allowances for Doubtful Accounts —In June 2016, the FASB issued ASU No.

2016-13, Financial Instruments-Credit Losses (Topic 326):

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

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

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

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

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

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

• historical, current, and forecasted delinquency and write-off trends;

• historical, current, and forecasted economic conditions;

• historical, current, and forecasted credit risk.

Expected credit losses of the assets originated during the year ended December 31, 2022, as well as changes to expected losses during the same periods, are recognized in earnings for the year ended December 31, 2022.

All trade accounts and unbilled receivables are reported in the Consolidated Balance Sheet adjusted for any write-offs and net of allowances for credit losses.

The allowances for credit losses represent management’s best estimate of the credit losses expected from our unbilled and trade accounts receivable portfolios over the life of the underlying assets.

Determination of the allowances requires us to exercise judgment about the severity of credit losses, which includes judgments regarding the risk profile of each underlying receivable and expectations regarding the impact of current and future economic conditions on the creditworthiness of our customers.

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.

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

The following is a rollforward of the aggregated allowance for credit losses related to our trade accounts receivables as of December 31, 2022 ($ in millions):

Balance, December 31, 2021 $ 39.7

Provision 14.0

Write-offs ( 9.1 )

Foreign currency exchange ( 0.7 )

Balance, December 31, 2022 $ 43.9

The allowance for unbilled receivables was immaterial for all periods.

Accounts Receivable and Allowances for Doubtful Accounts —We measure our allowance to reflect expected credit losses over the remaining contractual life of the asset.

Expected credit losses for the pooled assets are estimated based on historical loss experience, credit quality, the durations of outstanding account receivables, and expectations of the future economic environment.

Expected credit losses of the assets originating during the year and changes to expected losses in the same period are recognized in earnings.

All trade accounts and unbilled receivables are recorded within the Consolidated Balance Sheet, adjusted for any write-offs, and net of allowances for credit losses.

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

The allowance for doubtful accounts as well as the provision for credit losses, write-off activity and recoveries for the periods presented were immaterial.

We do not believe that accounts receivable represent significant concentrations of credit risk because of the diversified portfolio of individual customers and geographical areas.

We recorded $ 14 million, $ 7 million and $ 7 million of expense associated with doubtful accounts for the years ended December 31, 2022, 2021, and 2020, respectively.

The allowance for unbilled receivables was immaterial for all periods.

Inventory Valuation —Inventories include the costs of material, labor, and overhead.

Domestic inventories are stated at the lower of cost or net realizable value primarily using the first-in, first-out (“FIFO”) method with certain businesses applying the last-in, first-out method (“LIFO”) to value inventory.

Inventories held outside the United States are stated at the lower of cost or net realizable value primarily using the FIFO method.

Substantially all inventories are stated at the lower of cost or net realizable value using the first-in, first-out (“FIFO”) method.

Property, Plant, and Equipment —Property, plant, and equipment are carried at cost.

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

Amortization of finance lease assets is included in depreciation expense as a component of Selling, general, and administrative expenses in the Consolidated Statements of Earnings.

Investments —We account for investments we have significant influence over but do not have a controlling financial interest in under the equity method, which requires us to record investments at cost and subsequently adjust the investment balance each period for our share of the investee’s income or loss and dividends received from the investee.

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.

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 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.

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

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

Investments —We account for our equity investments using either the measurement alternative approach when the fair value of the investment is not readily determinable and we do not have the ability to exercise significant influence, or the equity method of accounting when it is determined that we have significant influence over but do not have a controlling financial interest.

Investments accounted for using the measurement alternative approach are initially recorded at cost and adjusted for changes in the fair value from observable transactions.

For investments accounted for using the equity method of accounting, we record the investments at cost and subsequently adjust the investment balance each period for our share of the investee’s income or loss and dividends received from the investee.

These investments are subject to a periodic impairment review.

There were no changes in fair value or impairment losses during the years ended December 31, 2023 or 2021.

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 within “Other non-operating expense, net” in our Consolidated Statement of Earnings.

Other Assets —Other assets principally include operating lease right-of-use assets, contract assets, deferred tax assets, and other investments.

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

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

While outstanding in 2021, we remeasured our investment in Vontier common stock at fair value based on Vontier's closing stock price on the measurement date, with unrealized gains recorded in the Consolidated Statement of Earnings during the year ended December 31, 2021.

Refer to Note 7 for the fair values of our other obligations.

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;

Goodwill and Other Intangible Assets —Goodwill and other intangible assets result from our business acquisitions.

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 (“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 PCS.

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

We allocate the contract transaction price to each performance obligation using the observable price that the good or service sells for separately in similar circumstances and to similar customers, and/or a residual approach when the observable selling price of a good or service is not known and is either highly variable or uncertain.

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

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

We allocate the contract transaction price to each performance obligation on a relative standalone selling price basis.

We estimate standalone selling price using the observable price that the good or service sells for separately in similar circumstances and to similar customers or, if observable price is not available, other methods.

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

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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.

Refer to Note 15 for additional information.

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

We initiated a discrete plan in the first quarter of 2023 that was completed during the fourth quarter of 2023.

The nature of these activities were broadly consistent throughout our segments and consist primarily of targeted workforce reductions 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.

We incurred charges of $ 58.6 million during the year ended December 31, 2023.

These charges are recorded within Cost of sales and Selling, general, and administrative expenses in the Consolidated Statements of Earnings.

Accrued restructuring costs were $ 26 million as of December 31, 2023 and are recorded within Accrued expenses and other current liabilities in the Consolidated Balance Sheets.

Foreign Currency Transaction and Translation —Exchange rate adjustments resulting from foreign currency transactions are recognized in Net earnings.

Net foreign currency transaction losses were $ 5.5 million and $ 18.2 million for the years ended December 31, 2023 and 2022, respectively.

Net foreign currency transaction losses were immaterial for the year ended December 31, 2021.

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

1 unchanged sentence

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

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.

These foreign currency translation impacts are reflected as a component of accumulated other comprehensive income (loss) (“AOCI”) within Stockholders’ equity.

As discussed below, the Company uses its foreign currency-denominated debt to partially hedge its net investments in foreign operations against adverse movements in exchange rates.

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

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

After evaluation of these factors, if the deferred income

tax assets are expected to be realized within the tax carryforward period allowed for that specific country, we would conclude that no valuation allowance would be required.

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

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Refer to Note 13 for additional information.

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.

Accumulated Other Comprehensive Income (Loss) —AOCI refers to certain gains and losses that under U.S.

GAAP are included in comprehensive income (loss) but are excluded from net earnings as these amounts are initially recorded as an adjustment to stockholders’ equity.

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.

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.

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.

Accordingly, foreign currency transaction gains or losses on the debt were deferred in the foreign currency translation component of AOCI as an offset to the foreign currency translation adjustments on our investments in foreign subsidiaries.

For the years ended December 31, 2023 and 2022, we recognized after-tax losses of $ 1.2 million and $ 5.1 million within Other comprehensive income (loss) related to the net investment hedges, respectively.

We recorded no ineffectiveness from our net investment hedges during the years ended December 31, 2023 and 2022.

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adjustments (b)

Balance, January 1, 2020 $ 21.2 $ ( 77.5 ) $ ( 56.3 )

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

Other comprehensive income (loss) before reclassifications:

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Other comprehensive income (loss) before reclassifications, net of income taxes ( 68.7 ) 21.5 ( 47.2 )

Amounts reclassified from accumulated other comprehensive income (loss):

Increase — 4.7 (a)

Amounts reclassified from AOCI into income:

Increase (decrease)

Income tax impact — ( 1.0 ) ( 1.0 )

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

Amounts reclassified from AOCI into income, net of income taxes:

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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Other comprehensive income (loss) before reclassifications, net of income taxes ( 181.4 ) 37.3 ( 144.1 )

Amounts reclassified from accumulated other comprehensive income (loss):

Increase — 4.3 (a)

Amounts reclassified from AOCI into income:

Increase (decrease)

Income tax impact — ( 0.2 ) ( 0.2 )

Amounts reclassified from accumulated other comprehensive income (loss), net of income taxes — 3.3 3.3

Amounts reclassified from AOCI into income, net of income taxes

Net current period other comprehensive income (loss) ( 178.7 ) 38.0 ( 140.7 )

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Other comprehensive income (loss) before reclassifications, net of income taxes 9.7 ( 10.1 ) ( 0.4 )

Amounts reclassified from accumulated other comprehensive income (loss):

Increase 2.7 0.9 (a)

Amounts reclassified from AOCI into income:

Increase (decrease)

Income tax impact — ( 0.1 ) ( 0.1 )

Amounts reclassified from accumulated other comprehensive income (loss), net of income taxes 2.7 0.7 3.4

Amounts reclassified from AOCI into income, net of income taxes

Net current period other comprehensive income (loss) 9.7 ( 10.1 ) ( 0.4 )

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

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 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.

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

We record 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 recorded within Cost of sales and Selling, general and administrative expenses in the Consolidated Statements of Earnings according to the classification of the participant’s compensation.

Refer to Note 11 for additional information on our pension plans including a discussion of actuarial assumptions.

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 (“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.

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2023-07, Segment Reporting (Topic 280)—Improvements to Reportable Segment Disclosures , which amends the disclosure requirements for reportable segments on the interim and annual basis.

This standard is effective for fiscal year ending December 31, 2024 and interim periods within fiscal year ending December 31, 2025, with early adoption permitted.

The adoption of the standard will not impact our consolidated financial statements.

Upon adoption, we will update the applicable interim and annual disclosures to align with the new standard.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) —Improvements to Income Tax Disclosures , which amends certain disclosure requirements related to income taxes on an annual basis.

This standard is effective for fiscal year ending December 31, 2025, with early adoption permitted.

The adoption of the standard will not impact our consolidated financial statements.

Upon adoption, we will update the applicable annual disclosures to align with the new standard.

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 continually evaluate potential mergers and acquisitions that align with our business portfolio strategy.

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 complimentary 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 complimentary acquisitions to the acquired business, the scarce or unique nature of the business in its markets, competition to acquire the business, the valuation of similar businesses in the marketplace (as reflected in a multiple of revenues, earnings, or cash flows), and the avoidance of the time and costs which would be required (and the associated risks that would be encountered) to enhance our existing offerings to key target markets and develop new and profitable businesses.

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

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

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

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

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 significant acquisition activity for the years ended December 31, 2022, 2021, and 2020.

This goodwill arises when the purchase price for an acquired business exceeds its identifiable assets, net of liabilities.

The purchase price for acquired businesses reflect a number of factors, including the future earnings and cash flow potential of the business, the strategic fit and resulting synergies from the complementary portfolio of the acquired business to our existing operations, industry expertise, and market access.

The following describes our significant acquisition activities for the years ended December 31, 2023, 2022, and 2021.

During the year ended December 31, 2023, we made four acquisitions (“the 2023 acquisitions”) in our Intelligent Operating Solutions segment for an aggregate cash consideration of $ 101.4 million, which includes an immaterial deferred payment, net of acquired cash.

The 2023 acquisitions are intended to accelerate our strategy and strengthen our product portfolio, providing world-class solutions to our customers.

We recorded approximately $ 56.7 million of goodwill related to the acquisitions, which is not tax deductible, as well as $ 41.5 million of intangible assets, primarily consisting of customer relationships, technology, and trade names.

All other acquired assets and assumed liabilities are immaterial.

The revenues and operating results from the 2023 acquisitions were immaterial.

The purchase price allocation is provisional and is subject to further adjustments as additional information becomes available concerning the fair value of the assets acquired and liabilities assumed.

We make appropriate adjustments to purchase price allocations as soon as practicable but no later than the expiration of the applicable measurement period.

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

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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.

Provation is an operating company within our Advanced Healthcare Solutions segment.

ServiceChannel

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

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

The total consideration paid was approximately $ 1.2 billion, net of acquired cash, and includes 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 ServiceChannel acquisition, which is not tax deductible.

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

Revenue and operating loss attributable to these acquisitions were $ 262.7 million and $ 42.8 million for the year ended December 31, 2022, respectively.

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 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

Accounts receivable $ 41.6 $ 10.1 $ 51.7

Goodwill 972.0 867.5 1,839.5

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

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

Deferred tax liabilities ( 117.0 ) ( 41.9 ) ( 158.9 )

Other assets and liabilities, net ( 28.2 ) ( 10.6 ) ( 38.8 )

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

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

Accounts receivable $ 51.8 $ 0.1

Inventories 11.3 26.9

Property, plant and equipment 3.3 5.0

Goodwill 1,838.6 30.9

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

Trade accounts payable ( 10.6 ) ( 1.1 )

Other assets and liabilities, net ( 255.0 ) ( 41.8 )

Net cash consideration $ 2,568.8 $ 29.5

ServiceChannel is an operating company within our Intelligent Operating Solutions segment.

Other Acquisition-related Matters

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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.

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

Vontier Separation

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

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

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

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

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

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

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

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

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

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.

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

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

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.

Vontier Impairment Charge

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

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

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

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

2022 2021 2020

Sales $ — $ — $ 1,963.4

Cost of sales — — ( 1,107.3 )

Selling, general, and administrative expenses — ( 4.5 ) ( 455.3 )

Research and development expenses — — ( 98.6 )

Goodwill impairment — — ( 85.3 )

Interest expense and other — 0.1 ( 31.0 )

Earnings (loss) before income taxes — ( 4.4 ) 185.9

Income taxes — ( 1.4 ) ( 24.8 )

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

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 was recorded within “Other non-operating expense, net” in the Consolidated Statements of Earnings.

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

Subsequent Event

On January 3, 2024, we acquired EA Elektro-Automatik Holding GmbH (“EA”), a leading supplier of high-power electronic test solutions for energy storage, mobility, hydrogen, and renewable energy applications.

The total consideration paid was approximately $ 1.72 billion, net of acquired cash.

We funded this transaction with financing activities and available cash.

We will record a preliminary purchase price allocation for the assets acquired and liabilities assumed in connection with the acquisition based on their estimated fair values as of the acquisition date.

We expect to allocate a significant portion of the purchase to goodwill and intangible assets.

We will assign the full amount of goodwill to our Precision Technologies segment.

We do not expect the goodwill to be deductible for tax purposes.

We are currently in the process of finalizing the accounting for this transaction.

We have not completed our analysis of identifying and estimating the fair value of identifiable intangible assets acquired.

The measurement period for the valuation of net assets acquired ends as soon as information on the facts and circumstances that existed as of the acquisition date becomes available, but not to exceed 12 months following the acquisition date.

Adjustments in purchase price allocations may require a change in the amounts allocated to net assets acquired during the periods in which the adjustments are determined.

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

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Total $ 536.9 $ 536.7

As of December 31, 2022 and 2021, the difference between inventories valued at LIFO and the value of that same inventory if the FIFO method had been used was not significant.

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

PROPERTY, PLANT AND EQUIPMENT

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As of the date of the 2023 annual impairment test, the carrying value of goodwill in each reporting unit ranged from $ 180.0 million to approximately $ 5.6 billion.

No goodwill impairment charges were recorded for continuing operations for the years ended December 31, 2022, 2021, and 2020, and no “triggering” events have occurred subsequent to the performance of the 2022 annual impairment test.

No goodwill impairment charges were recorded for continuing operations for the years ended December 31, 2023, 2022, and 2021.

We assessed all “triggering” events subsequent to the performance of the 2023 annual impairment test and, as a result, have not identified any impacts to goodwill.

The factors used by management in its impairment analysis are inherently subject to uncertainty.

If actual results are not consistent with management’s estimates and assumptions, goodwill and other intangible assets may be overstated and a charge would need to be taken against net earnings.

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

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

Intelligent Operating Solutions Precision Technologies Advanced Healthcare Solutions Total

Balance, January 1, 2021 $ 3,268.8 $ 1,867.9 $ 2,222.5 $ 7,359.2

Measurement period adjustments for 2020 acquisitions 0.4 — ( 2.7 ) ( 2.3 )

Attributable to 2021 acquisitions 873.4 — 969.6 1,843.0

Balance, December 31, 2021 $ 4,126.0 $ 1,840.0 $ 3,186.0 $ 9,152.0

Measurement period adjustments for prior year acquisitions

( 5.9 ) — 3.7 ( 2.2 )

Attributable to current year acquisitions and divestitures

— 0.9 ( 3.2 ) ( 2.3 )

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

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

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

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

Attributable to current year acquisitions

56.7 — — 56.7

Foreign currency translation and other 17.8 ( 0.6 ) ( 0.7 ) 16.5

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Based on the intangible assets recorded as of December 31, 2023, amortization expense is estimated to be $ 373 million during 2024, $ 369 million during 2025, $ 353 million during 2026, $ 326 million during 2027, and $ 314 million during 2028.

We evaluated events or circumstances that may indicate the carrying value of our intangible assets may not be fully recoverable during the year ended December 31, 2023, and recorded no material impairments.

FAIR VALUE MEASUREMENTS

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This hierarchy prioritizes the inputs into three broad levels as follows:

• Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.

• Level 1 inputs are quoted prices (unadjusted) for identical assets or liabilities in active markets.

• Level 2 inputs are quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets in markets that are not active, or other observable characteristics for the asset or liability, including interest rates, yield curves and credit risks, or inputs that are derived principally from, or corroborated by, observable market data through correlation.

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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 other post-retirement benefits accruals included in Other long-term liabilities in the accompanying Consolidated Balance Sheets.

All amounts deferred under such plans are unfunded, unsecured obligations and are recorded as a component of our compensation and other post-retirement benefits accruals within Other long-term liabilities in the accompanying Consolidated Balance Sheets.

Participants may choose among alternative earning 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 (“401(k) Programs”) (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 expenses in the Consolidated Statements of Earnings.

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.

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.

Certain non-financial and financial assets that are not required to be measured at fair value on a recurring basis and are reported at carrying value.

However, these assets are required to be assessed for impairment whenever events or circumstances indicate that their carrying value may not be fully recoverable.

Refer to Note 2 for additional information about these assets.

Fair Value of Other Financial Instruments

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Long-term debt, net of current maturities 3,646.2 3,539.4 2,251.6 2,078.1

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.

As of December 31, 2023 and 2022, 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.

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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 rollforward of our accrued warranty liability ($ in millions):

Balance, January 1 $ 25.2 $ 24.9

Accruals for warranties issued during the year 17.3 17.5

Settlements made ( 18.7 ) ( 17.6 )

Effect of foreign currency translation ( 2.2 ) 0.4

Balance, December 31 $ 21.6 $ 25.2

Warranty activity and settlements for the periods presented were immaterial.

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 t o 20 y ears.

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 20 years.

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.

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

Lease-related balances are recorded within the following three line items on the Consolidated Balance Sheet:

(i) Other assets ;

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During the years ended December 31, 2023 and 2022, cash paid for operating leases included in operating cash flows was $ 47 million and $ 50 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 obtained in exchange for operating lease liabilities were $ 31 million and $ 32 million for the years ended December 31, 2023 and 2022, respectively.

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

Operating lease liabilities were $ 164 million and $ 169 million as of December 31, 2023 and 2022.

The following table presents the maturities of our operating lease liabilities as of December 31, 2023 ($ in millions):

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Total operating lease liabilities $ 163.9

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.

As of December 31, 2023 and 2022, the weighted average lease term of our opera ting leas es was 9 year s and 7 years, respectively, and the weighted average discount rate of our operating leases was 3.6 % an d 3.0 %, respectively.

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

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Delayed-Draw Term Loan due 2023 — 1,000.0

0.875 % senior convertible notes due 2022

Long-term debt, principal amounts 3,656.9 3,259.2

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

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

Carrying value (a)

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

dollar-denominated commercial paper $ 1,246.8 5.7 % 40

(a) Net of unamortized debt discount.

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, 2023 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.

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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.

We have a five-year $ 2.0 billion Revolving Credit Facility that was last amended on October 18, 2022 (the “Amended and Restated Credit Agreement”), which extended 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.

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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.

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.

As of December 31, 2023 and 2022, we were in compliance with all covenants under the Amended and Restated Credit Agreement.

Delayed-Draw Term Loan due 2024

On December 7, 2023, we entered into a term loan credit agreement, which provides for a delayed-draw term loan facility up to an aggregate principal amount of $ 1.3 billion (the “Term Loan Credit Agreement”).

The Company may draw on the funds under the Term Loan Credit Agreement, in up to three advances, which may be made on or prior to March 31, 2024.

Borrowings under the Delayed-Draw Term Loan facility may be Base Rate Loans or Term SOFR Loans, and bears interest as follows:

(1) Term SOFR Loans bear interest at a variable rate equal to Term SOFR plus a margin of between 75 and 125 basis point, depending on the Company’s long-term credit rating;

and (2) 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 plus 100 basis points and (d) 1.0 %, plus in each case a margin between zero and 25 basis points depending on our long-term debt credit rating.

In addition, the Company will pay to each lender under the Term Loan Credit Agreement a ticking fee at a rate per annum equal to an amount between 6.5 and 15 basis points, depending on the Company’s long-term debt credit rating, of such lender’s daily maximum aggregate amount of commitments under the Term Loan Credit Agreement, ending on the earlier of March 31, 2024 or termination of the commitments under the Term Loan Credit Agreement.

The ticking fee begins to accrue on February 5, 2024.

On December 14, 2023, we drew down $ 550 million of the $ 1.3 billion available under the delayed-draw senior unsecured term facility (“Delayed-Draw Term Loan Due 2024”) as a Term SOFR Loan.

The repayment of the principal is due on December 12, 2024.

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 2024 are prepayable at our option in whole or in part without premium or penalty and amounts borrowed may not be reborrowed once repaid.

Financing Transactions Subsequent to December 31, 2023

On January 2, 2024, we drew down an additional $ 450 million of the $ 1.3 billion Delayed-Draw Term Loan due 2024 as part of the funding for the acquisition of EA.

Refer to Note 3 for additional information regarding the EA acquisition.

On February 13, 2024, we completed the sale of our registered offering of € 500 million aggregate principal amount of our 3.7 % Euro-denominated senior unsecured notes due 2026 (the “2026 Notes”) and € 700 million aggregate principal amount of our 3.7 % Euro-denominated senior unsecured notes due 2029 (the “2029 Notes”).

The 2026 Notes bear interest at 3.7 % per annum and mature on February 13, 2026, and the 2029 Notes also bear interest at 3.7 % per annum and mature on August 15, 2029.

Interest on the 2026 Notes will be paid annually in arrears on February 13 of each year, beginning on February 13, 2025 and interest on the 2029 Notes will be paid annually in arrears on August 15 of each year, beginning on August 15, 2024.

We received net proceeds, after underwriting discounts and commissions and offering expenses, of approximately $ 1.3 billion based on the currency exchange rates at which the proceeds denominated in Euro were converted into U.S.

We used the net proceeds to refinance the $ 1.0 billion outstanding principal of the Delayed-Draw Term Loan Due 2024 and pay accrued interest thereon, refinance borrowings under the U.S.

dollar-denominated commercial paper, and for general corporate purposes.

We also designated both the 2026 Notes and the 2029 Notes as net investment hedges of our investment in certain foreign operations.

Delayed-Draw Term Loan due 2023

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.

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

The Delayed-Draw Term Loan Due 2023 bore 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.

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

On August 24, 2023, we repaid $ 250 million of the Delayed-Draw Term Loan Due 2023.

On December 14, 2023, we repaid the remaining $ 750 million in outstanding principal and accrued interest thereon using the proceeds from the Delayed-Draw Term Loan Due 2024 and available cash.

Euro Term Loan

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

Term Loan due May 2021

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

The fees associated with the prepayment were immaterial.

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.

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.

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.

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.

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 (“ASU 2020-06”), on January 1, 2022, 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.

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Covenants and Redemption Provisions Applicable to Registered Notes

We may redeem the Registered Notes of the applicable series, in whole or in part, at any time prior to the dates specified in the Registered Notes indenture (the “Call Dates”) by paying the principal amount and the “make-whole” premium specified in the Registered Notes indenture, plus accrued and unpaid interest.

Registered Notes indenture, plus accrued and unpaid interest.

Additionally, we may redeem all or any part of the Registered Notes of the applicable series on or after the Call Dates without paying the “make-whole” premium specified in the Registered Notes indenture.

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None of these covenants are considered restrictive to our operations and as of December 31, 2023, we were in compliance with all of our covenants.

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.

There are $ 550 million of minimum principal payments due under our total long-term debt as of December 31, 2023 during 2024.

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

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Thereafter — 550.0 550.0

Total principal payments (a)

Total principal payments (b)

$ 955.7 $ 1,450.0 $ 2,405.7

(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.

(a) This outstanding principal amount is related to the Delayed Draw Term Loan due 2024.

(b) Not included in the table above are discounts, premiums and issuance costs associated with the Registered Notes and Commercial Paper, which totaled $ 6.3 million as of December 31, 2023, 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, 2023.

In addition, the table above does not include principal balance of $ 1,251.2 million under the Commercial Paper Program.

PENSION PLANS

RETIREMENT BENEFIT PLANS

Certain employees participate in noncontributory defined benefit pension plans.

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Discount rate 5.14 % 5.42 % 3.33 % 3.94 %

Rate of compensation increase N/A N/A 2.73 % 2.43 %

Rate of compensation increase (a)

N/A N/A 2.65 % 2.73 %

(a) The frozen U.S.

pension plans do not use the rate of compensation increase as an input in determining the benefit obligations at date of measurement.

Components of net periodic pension cost

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Expected return on plan assets 6.47 % 5.20 % 4.32 % 4.36 % 2.58 % 2.34 %

Rate of compensation increase N/A N/A N/A 2.43 % 2.36 % 2.44 %

Rate of compensation increase (a)

N/A N/A N/A 2.73 % 2.43 % 2.36 %

(a) The frozen U.S.

pension plans do not use the rate of compensation increase as an input in determining the net periodic pension cost at date of measurement.

The discount rates reflect the market rate on December 31 for high-quality fixed-income investments with maturities corresponding to our benefit obligations and are subject to change each year.

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 fro m 1.25 % to 5.20 % in 2022, 1.25 % to 4.32 % in 2021, and 1.25 % to 4.86 % in 2020.

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 1.50 % to 6.47 % in 2023, 1.25 % to 5.20 % in 2022, and 1.25 % to 4.32 % in 2021.

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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plans were determined on a plan-by-plan basis based on the composition of assets.

We report all components of net periodic pension costs, with the exception of service costs, in Other non-operating expenses, net in the Consolidated Statements of Earnings for all periods presented.

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.

Plan assets are invested in various insurance contracts and equity and debt securities as determined by the administrator of each plan.

Some of these investments, consisting of mutual funds and other private investments, are valued using the net asset value (“NAV”) method as a practical expedient.

Plan assets are invested in various mutual funds, insurance contracts, and other private investments as determined by the administrator of each plan.

Certain mutual funds and other private investments, are valued using the net asset value (“NAV”) method as a practical expedient.

The investments valued using the NAV method are allocated across a broad array of funds and diversify the portfolio.

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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, 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.

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.

Expected Contributions

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

During 2023, we contributed $ 1 million and $ 11 million to our U.S.

defined benefit pension plans, respectively.

During 2024, our cash contribution requirements for our U.S.

defined benefit pension plans are expected to be approximately $ 1 million and $ 11 million , respectivel y.

defined benefit pension plans are expected to be approximately $ 1 million and $ 9 million, respectively.

The following sets forth benefit payments to participants, which reflect expected future service, as appropriate, expected to be paid by the plans in the periods indicated ($ in millions):

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Contract assets were $ 108 million as of December 31, 2023 and $ 82 million as of December 31, 2022.

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

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

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.

Contract assets are recorded within Prepaid expenses and other current assets in our Consolidated 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 December 31, 2023 and 2022, we had $ 51 million and $ 42 million, respectively, in net revenue-related contract assets primarily related to certain software contracts.

Revenue-related contract costs are recorded within Prepaid expenses and other current assets and Other assets in our Consolidated Balance Sheet.

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

The current portion of the deferred revenue is recorded within Accrued expenses and other current liabilities and the non-current portion of deferred revenue is recorded within Other long-term liabilities in our Consolidated Balance Sheets.

Our contract liabilities as of December 31 consisted of the following ($ in millions):

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

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.

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

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Total $ 6,065.3 $ 2,612.2 $ 2,132.8 $ 1,320.3

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

(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 year ended December 31, 2022 is presented as follows ($ in millions):

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Total $ 5,825.7 $ 2,466.1 $ 2,038.2 $ 1,321.4

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

(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 year ended December 31, 2021 is presented as follows ($ in millions):

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Total $ 5,254.7 $ 2,169.4 $ 1,848.9 $ 1,236.4

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

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

Earnings and Income Taxes

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federal permanent differences related to the TCJA ( 7.7 ) % ( 7.0 ) % ( 5.6 ) %

Compensation related 0.9 % ( 0.3 ) % ( 0.5 ) %

Effect of change in tax rates enacted in the current period ( 2.6 ) % 0.3 % ( 0.1 ) %

Changes in valuation allowances 1.7 % 1.8 % — %

Other ( 0.6 ) % ( 0.9 ) % ( 0.5 ) %

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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.

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

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

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

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

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

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

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

federal permanent differences, the impacts of credits and deductions provided by law, including those associated with state income taxes, a decrease in our uncertain tax positions, and the effect of changes in tax rates enacted in the current period.

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

federal, state and foreign jurisdictions.

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 are routinely examined by various domestic and international taxing authorities.

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

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

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.

We made income tax payments related to continuing operations of $ 225 million, $ 148 million, and $ 103 million during the years ended December 31, 2023, 2022 and 2021, respectively.

Deferred Tax Assets and Liabilities

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Deferred taxes associated with U.S.

entities from continuing operations consist of net deferred tax liabilities of approximately $ 615 million and $ 698 million inclusive of valuation allowances of $ 39 million and $ 52 million as of December 31, 2022 and December 31, 2021, respectively.

entities from continuing operations consist of net deferred tax liabilities of approximately $ 519 million and $ 615 million inclusive of valuation allowances of $ 38 million and $ 39 million as of December 31, 2023 and 2022, respectively.

Deferred taxes associated with non-U.S.

entities from continuing operations consist of net deferred tax liabilities of $ 17 million and $ 0.1 million, inclusive of valuation allowances of $ 35 million and $ 21 million, as of December 31, 2022 and December 31, 2021, respectively.

Our valuation allowance increased by $ 1 million and by $ 27 million during the years ended December 31, 2022 and December 31, 2021, respectively, due primarily to foreign net operating losses in both years and acquired domestic tax attributes in 2021.

entities from continuing operations consist of net deferred tax assets of $ 10 million and net deferred tax liabilities of $ 17 million, inclusive of valuation allowances of $ 245 million and $ 35 million, as of December 31, 2023 and 2022, respectively.

Our valuation allowance increased by $ 208 million and by $ 1 million

during the years ended December 31, 2023 and 2022, respectively, due primarily to foreign credits and net operating losses in both years.

As of December 31, 2023, our U.S.

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As of December 31, 2023, our U.S.

tax credit carryforwards totaled $ 24 million, which is primarily related to U.S.

tax credit carryforwards totaled $ 199 million, which is primarily related to non-U.S.

tax credit carryforwards.

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Judgment is required in evaluating tax positions and determining income tax provisions.

We re-evaluate the technical merits of our tax positions and may recognize an uncertain tax benefit in certain in certain circumstances, including when:

We re-evaluate the technical merits of our tax positions and may recognize an uncertain tax benefit in certain circumstances, including when:

(i) a tax audit is completed;

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Effect of foreign currency translation — ( 1.5 ) ( 1.2 )

Separation related adjustments (a)

Acquisition related adjustments

Unrecognized tax benefits, end of year $ 176.1 $ 178.2 $ 193.0

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

Repatriation and Unremitted Earnings

The TCJA eliminated the U.S.

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

As of December 31, 2023, we recorded estimated incremental foreign remittance taxes of $ 10 million on the planned 2024 repatriation of $ 179 million of previously unremitted earnings from 2023 and prior periods.

The TCJA imposed a final U.S.

tax on cumulative earnings from our foreign operations that we have previously made an assertion regarding the amount of such earnings intended for indefinite reinvestment.

As of December 31, 2023, the earnings we plan to reinvest indefinitely outside of the United States for which foreign deferred taxes have not been provided was estimated at $ 1.8 billion.

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The amount of foreign remittance taxes that may be applicable to such earnings is not readily determinable given local law restrictions that may apply to a portion of such earnings, unknown changes in foreign tax law that may occur during the applicable restriction periods caused by applicable local corporate law for cash repatriation, and the various tax planning alternatives we could employ if we repatriated these earnings.

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):

Employee severance related $ 12.8 $ 21.1

Facility exit and other related 5.9 5.7

Total restructuring and other related charges $ 18.7 $ 26.8

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

Intelligent Operating Solutions $ 7.4 $ 12.5

Precision Technologies 6.8 9.8

Advanced Healthcare Solutions 4.5 4.5

Total $ 18.7 $ 26.8

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

Incurred Paid/

Settled Balance

31, 2021 Paid/

Settled Balance as of December 31, 2022

Employee severance and related $ 14.8 $ 12.8 $ ( 17.5 ) $ 10.1 $ ( 10.1 ) $ —

Facility exit and other related 0.6 5.9 ( 5.8 ) 0.7 ( 0.7 ) —

Total $ 15.4 $ 18.7 $ ( 23.3 ) $ 10.8 $ ( 10.8 ) $ —

The restructuring and other related charges incurred during 2021 and 2020 were substantially all cash charges.

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

Cost of sales $ 2.8 $ 8.2

Selling, general, and administrative expenses 15.9 18.6

Total $ 18.7 $ 26.8

LITIGATION AND CONTINGENCIES

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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 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 8 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 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.

As of both December 31, 2023 and 2022, we had reserves of $ 6 million, recorded within 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.

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, 2023 and 2022, we had approximately $ 57 million and $ 58 million, respectively, of guarantees consisting primarily of outstanding standby letters of credit, bank guarantees, and performance and bid bonds.

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As of December 31, 2023, the aggregate amount of our purchase obligations totaled $ 488 million, of which $ 355 million are expected to be settled within one year of December 31, 2023.

We recently discovered that Gems Sensors, Inc., an entity that has been merged into Setra Systems, Inc.

and now operates as Gems Setra, made certain incorrect representations regarding its status as a small business concern as defined by the Small Business Act for certain contracts that it was awarded by the Defense Logistics Agency ("DLA").

As a result, on January 26, 2024, we voluntarily notified the Department of Defense Office of Inspector General (“OIG”) and the DLA of this matter.

While we are continuing to investigate, we currently do not expect this matter to have a material adverse effect on our financial condition or results of operations.

However, resolution of this matter could subject us to fines or penalties, and we cannot assure you of the timing or outcome of such resolution.

STOCK-BASED COMPENSATION

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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 .

For grants made subsequent to 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.

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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;

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

provided, however, that either type of issuance would equally reduce the number of shares available under our Stock Plan.

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The following summarizes the unrecognized compensation cost for the Stock Plan awards as of December 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.

This compensation cost is expected to be recognized over a weighted average period of approximately 1.5 years, representing the remaining service period related to the awards.

Future compensation amounts will be adjusted for any changes in estimated forfeitures ($ in millions):

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(years) Aggregate

Outstanding as of January 1, 2021 10.6 50.07

Outstanding as of December 31, 2021 10.4 54.81

Granted 2.2 64.76

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10.7 58.95 6 $ 158.3

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

Exercisable as of December 31, 2023 5.9 53.06 4 $ 122.3

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

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

Options outstanding as of December 31, 2022 are summarized below (in millions;

except price per share and number of years):

Outstanding Vested

Exercise Price Shares Average Exercise Price Average Remaining Life

(in years) Shares Average Exercise Price

$ 10.67 - $ 27.26

0.4 $ 26.72 1 0.4 $ 26.72

$ 27.27 - $ 45.00

2.3 35.29 2 2.3 35.29

$ 45.01 - $ 63.40

1.4 51.52 5 1.2 50.20

$ 63.41 - $ 67.64

5.5 65.07 8 1.2 64.55

$ 67.65 - $ 78.03

1.7 69.60 7 0.6 68.77

Total shares 11.3 5.7

The following summarizes aggregate intrinsic value and cash receipts related to stock options that were exercised under the Stock Plan for the years ended December 31 ($ in millions):

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Stock Awards Weighted Average

Unvested as of January 1, 2021 2.3 $ 63.04

Unvested as of December 31, 2021 2.6 $ 66.43

Granted 1.4 64.01

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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 .

During the years ended December 31, 2023 and 2022, respectively, the Company purchased 4 million and 7 million shares of its common stock at an average share price of $ 68.20 and $ 63.25 .

As of December 31, 2023, there were 9 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.

On January 23, 2024, the Company’s Board of Directors increased the number of shares authorized under the share repurchase program by an additional 11 million shares.

Mandatory Convertible Preferred Stock

On June 29, 2018, we issued 1,380,000 shares of 5.0 % Mandatory Convertible Preferred Stock, Series A (“MCPS”) with a par value of $ 0.01 per share and liquidation preference of $ 1,000 per share, which included the exercise of an over-allotment option in full to purchase 180,000 shares.

We received net $ 1.34 billion in proceeds from the issuance of the MCPS, excluding $ 43 million of issuance costs.

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

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

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

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

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

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

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

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.

For the years ended December 31, 2023, 2022, and 2021, the anti-dilutive options to purchase shares excluded from the diluted EPS calculation were 0.5 million shares, 7.3 million shares, and 0.3 million shares, respectively.

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 10, 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.

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.

Upon adopting ASU 2020-06, 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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Net earnings attributable to common stockholders from continuing operations used in basic earnings per share $ 865.8 $ 755.2 $ 579.7

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

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

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

Assumed conversion of outstanding mandatory convertible preferred stock — — 19.9

Weighted average common shares outstanding used in diluted earnings per share 355.6 360.8 352.3

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Other 2,085.8 825.7 964.6

Assets of Discontinued Operations — — 30.4

Total assets $ 16,911.8 $ 15,890.6 $ 16,465.5

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Operations in Geographic Areas:

Year Ended December 31

As of December 31

($ in millions) 2023 2022

United States $ 3,136.8 $ 2,683.0 $ 2,436.6

China 702.1 650.7 534.1

All other (each country individually less than 5% of total sales) 1,986.8 1,921.0 1,663.7

Total $ 5,825.7 $ 5,254.7 $ 4,634.4

Property, plant and equipment, net:

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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 entered into transactions in the ordinary course of business with CommonSpirit Health and made sales of approximately $ 12.6 million and $ 10.6 million in 2023 and 2022, respectively.

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 2021, 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.

In 2021, we made sales of approximately $ 13 million to Danaher, and purchases of approximately $ 14 million.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

1 unchanged sentence

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