What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-10-30 compared with 2024-07-24 · 128 added, 113 removed, 323 unchanged (43% of the section changed)

17 unchanged sentences

growth, declines and other trends in markets we sell into, including the expected impact of trade and tariff policies;

our plans to separate into two independent, publicly traded companies;

new or modified laws, regulations and accounting pronouncements;

4 unchanged sentences

general economic and capital markets conditions, including expected impact of inflation or interest rate changes;

impact of geopolitical events, including the anticipated impact of the Ukraine/Russia conflict, conflict in the Middle East, and other hostilities;

impact of geopolitical developments and events, including the anticipated impact of the Ukraine/Russia conflict, conflict in the Middle East, and other hostilities;

the timing of any of the foregoing;

33 unchanged sentences

Risk Related to Our Acquisitions, Investments, and Dispositions

• Our plans to separate into two independent, publicly traded companies may not be completed on the currently contemplated timeline or at all and may not achieve the intended benefits, including the anticipated tax treatment.

• Any inability to consummate acquisitions at our anticipated rate and at appropriate prices could negatively impact our growth rate and stock price.

36 unchanged sentences

In June 2024, we divested and transferred ownership of Invetech, excluding the Motion Solution Business, to its management team (the “Invetech Divestiture”).

As a result of the divestiture, in the three and six-month periods ended June 28, 2024, we recorded a net realized loss of $25.6 million, which is identified as “Loss from divestiture” in the Consolidated Condensed Statements of Earnings.

As a result of the divestiture, in the nine-month period ended September 27, 2024, we recorded a net realized loss of $25.6 million, which is identified as “Loss from divestiture” in the Consolidated Condensed Statements of Earnings.

The divested businesses accounted for less than 1.0% of total revenue and less than 1.0% of total assets for the fiscal year ended December 31, 2023.

20 unchanged sentences

References to sales volume from existing businesses refer to the impact of both price and unit sales.

Pending Separation Into Two Independent, Publicly Traded Companies

On September 4, 2024, we announced our intention to separate into two independent, publicly traded companies (the “Separation”).

The Separation will create (i) a technology solutions company, retaining the Fortive name, with a portfolio of the brands currently operating under Fortive’s IOS and AHS business segments, focused on resilient, high-quality recurring growth by delivering productivity, safety, and reliability value to customers, and (ii) a global industrial company (“NewCo”) consisting of our brands currently operating under the PT segment with a focus on powerful secular growth trends by leveraging mission critical technologies in test and measurement, specialty sensors, and aerospace and defense subsystems.

The Separation is expected to be structured in a tax-free manner for Fortive shareholders.

The Company is targeting to complete the Separation by the fourth quarter of 2025, subject to the satisfaction of certain conditions, including, among others, final approval of Fortive’s Board of Directors, satisfactory completion of financing, receipt of a favorable opinion of legal counsel and/or a private letter ruling from the U.S.

Internal Revenue Service with respect to the tax treatment of the transaction for U.S.

federal income tax purposes, the effectiveness of a Form 10 registration statement filed with the SEC, and other regulatory approvals.

All assets, liabilities, revenues and expenses of NewCo are included in the consolidated results of the Company in the accompanying consolidated condensed financial statements.

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.

1 unchanged sentence

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

We recorded approximately $1.17 billion of goodwill related to the EA acquisition, which is not tax deductible.

We recorded approximately $1.17 billion of goodwill within the PT segment related to the EA acquisition, which is not tax deductible.

We also anticipate future tax benefits as a result of the transaction.

Other Matters

2 unchanged sentences

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.

During the three and six-month periods ended June 30, 2023, we incurred charges of $10.7 million and $28.3 million, respectively.

During the three and nine-month periods ended September 29, 2023, we incurred charges of $0.9 million and $29.2 million, respectively.

Business Performance and Outlook

Business Performance for the Period Ended June 28, 2024

During the three and six-month periods ended June 28, 2024 (the “quarter” or the “second quarter” and “year-to-date period,” respectively), our sales increased by 1.7% and 3.0%, respectively.

The year-over-year increase in sales in the second quarter was driven by a 2.7% increase from acquisitions, net of divestitures partially offset by a 1.0% decrease due to unfavorable currency translation.

Core revenue growth was essentially flat in the second quarter, where favorable pricing of 2.6% and volume gains in IOS and AHS were offset by volume declines in PT.

Year-over-year increases in the year-to-date period were driven by a 1.2% increase in our core revenue and a 2.6% increase from acquisitions, net of divestitures, partially offset by a decline of 0.8% due to unfavorable currency translation.

The core revenue growth performance in the year-to-date period of 1.2% was comprised of favorable pricing of 2.4% and volume gains in IOS and AHS offset by volume declines in PT.

Geographically, in the second quarter, year-over-year core revenue in developed markets was essentially flat, driven by slight growth in North America, a mid-single-digits growth in Japan, offset by a mid-single-digit decline in Western Europe.

Core revenue in high growth markets was up slightly year-over-year in the second quarter, driven by low-twenties growth in Latin America, offset by a mid-single-digit decline in China.

Geographically, in the year-to-date period, year-over-year sales from existing businesses in developed markets increased slightly, driven by low single-digit growth in North America while Western Europe and Japan were essentially flat.

Sales from existing businesses in high growth markets increased year-over-year in the year-to-date period by low single-digits, driven by high-teens growth in Latin America, partially offset by a mid-single-digit decline in China.

We anticipate revenue growth to be between 3% and 4.5% for the third quarter of 2024, and approximately 3% and 4% for the full year.

We anticipate core revenue growth to be between 2% and 3.5% for the third quarter and approximately 2% and 3% for the full year.

We expect foreign exchange rates to remain volatile throughout the year, which could continue to adversely impact our financial results.

Additionally, our financial outlook is subject to various assumptions and risks, including but not limited to, macroeconomic conditions in the United States, China and other critical regions, ongoing geopolitical developments and events, the impact of inflationary dynamics on our expenses or our ability to realize price increases in our sales, interest rates, market conditions in key product segments, and elective surgery rates.

We will continue to deploy FBS to actively manage these challenges, collaborate with customers and suppliers to minimize disruptions and utilize pricing and other countermeasures to offset the aforementioned dynamics.

Business Performance for the Period Ended September 27, 2024

During the three and nine-month periods ended September 27, 2024 (the “quarter” or the “third quarter” and “year-to-date period,” respectively), our sales increased by 2.7% and 2.9%, respectively.

The year-over-year increase in sales in the third quarter was primarily driven by a 1.1% increase in our core revenue and a 1.6% increase from acquisitions, net of divestitures.

Core revenue growth in the third quarter included favorable pricing of 2.9%, partially offset by volume decline of 1.8%.

Year-over-year increases in the year-to-date period were consistent with those in the third quarter, and were driven by a 1.2% increase in our core revenue and a 2.3% increase from acquisitions, net of divestitures, partially offset by a decline of 0.6% due to unfavorable currency translation.

Core revenue growth during the year-to-date period included favorable pricing of 2.6%, partially offset by volume decline of 1.4%.

Geographically, in the third quarter, year-over-year core revenue in developed markets increased slightly, driven by low single-digit growth in North America, partially offset by a low single-digit decline in Western Europe.

Core revenue in high growth markets was up low single-digits year-over-year in the third quarter, driven by high-teens growth in Latin America, partially offset by a slight decline in Asia where China declined by high single-digits.

Geographically, in the year-to-date period, year-over-year core revenue in developed markets increased slightly, driven by a low single-digit growth in North America, partially offset by a slight decline in Western Europe.

Core revenue in high growth markets increased year-over-year in the year-to-date period by low single-digits, driven by high-teens growth in Latin America, partially offset by a low single-digit decline in Asia where China declined by mid-single-digits.

We anticipate revenue growth to be approximately 3% for the fourth quarter of 2024 and the full year.

We anticipate core revenue growth to be approximately 1% for the fourth quarter and the full year.

We expect foreign exchange rates to remain volatile throughout the year, which could continue to impact our financial results.

Additionally, our financial outlook is subject to various assumptions and risks, including but not limited to, ongoing geopolitical developments and events, including the U.S.

presidential and other elections, macroeconomic conditions in the United States, China and other critical regions, impact from our pending separation into two independent publicly traded companies, and the the impact of inflationary dynamics on our expenses or our ability to realize price increases in our sales, interest rates, market conditions in key product segments, and elective surgery rates.

We will continue to deploy FBS to actively manage these challenges and utilize pricing and other countermeasures to offset the aforementioned dynamics.

We continue to monitor these conditions which may continue to impact our business, as well as potential adverse global economic trends and sentiments, monetary and fiscal policies, international trade and relations between the U.S., China and other nations, and investment and taxation policy initiatives being considered in the United States and by the Organization for Economic Co-operation and Development (“OECD”), including the potential impact of the Pillar Two initiative.

In addition, we expect to execute a discrete restructuring plan related to the Separation beginning in the fourth quarter of 2024.

RESULTS OF OPERATIONS

The following table summarizes total aggregate year-over-year sales growth and the components thereof for the second quarter as compared to the comparable period of 2023:

The following table summarizes total aggregate year-over-year sales growth and the components thereof for the third quarter as compared to the comparable period of 2023:

Components of Sales Growth

% Change Three Months Ended June 28, 2024 vs.

% Change Three Months Ended September 27, 2024 vs.

Comparable 2023 Period

% Change Six Months Ended June 28, 2024 vs.

% Change Nine Months Ended September 27, 2024 vs.

Comparable 2023 Period

4 unchanged sentences

Operating Profit Margins

Operating profit margin was 19.4% for the second quarter, yielding an increase of 30 basis points as compared to 19.1% in the comparable period of 2023.

Operating profit margin was 19.3% for the third quarter, representing a decrease of 20 basis points as compared to 19.5% in the comparable period of 2023.

Year-over-year changes in operating profit margin were comprised of the following:

• Year-over-year increase in price from existing businesses, volume gains in IOS and AHS, and gains from productivity measures, partially offset by a volume decline in certain businesses and end markets within our PT segment, higher employee compensation, customer acquisition and marketing costs, as well as unfavorable changes in foreign currency exchange rates — favorable 65 basis points

• Year-over-year increase in price from existing businesses, volume gains in AHS, and gains from productivity measures, partially offset by a volume decline in certain businesses and end markets within our IOS and PT segments, and higher employee compensation — favorable 70 basis points

• The year-over-year effect of amortization from existing businesses and impairment of intangible assets incurred in 2023 — favorable 25 basis points

• The year-over-year net effect of acquisition and divestiture-related transaction costs incurred in the second quarter of 2024 — unfavorable 15 basis points

• The year-over-year net effect of acquisition and divestiture-related transaction costs incurred in the third quarter of 2024 — unfavorable 10 basis points

• The year-over-year net effect of acquired and divested businesses, including amortization, and acquisition-related fair value adjustments — unfavorable 110 basis points

• The year-over-year effect of costs relating to the discrete restructuring plan initiated and completed in 2023 — favorable 5 basis points

Operating profit margin was 19.6% for the year-to-date period ended June 28, 2024, an increase of 180 basis points as compared to 17.8% in the comparable period of 2023.

Operating profit margin was 19.5% for the year-to-date period, yielding an increase of 110 basis points as compared to 18.4% in the comparable period of 2023.

Year-over-year changes in operating profit margin were comprised of the following:

• Year-over-year fluctuations were consistent with those in the second quarter.

Namely price from existing businesses, volume gains in IOS and AHS, and gains from productivity measures, partially offset by volume decline in certain businesses and end markets within our PT segment, higher employee compensation, customer acquisition and marketing costs, as well as unfavorable foreign exchange rates — favorable 85 basis points

• Year-over-year increase in price from existing businesses, volume growth in IOS and AHS, and gains from productivity measures were partially offset by a volume decline in certain businesses and end markets within our PT segment, higher employee compensation and investment in growth initiatives.

Additionally, there were unfavorable foreign exchange rates — favorable 80 basis points

• The year-over-year effect of amortization from existing businesses, and impairment of intangible assets incurred in 2023 — favorable 25 basis points

5 unchanged sentences

Sales by business segment for each of the periods indicated were as follows ($ in millions):

Three Months Ended Six Months Ended

June 28, 2024 June 30, 2023 June 28, 2024 June 30, 2023

Three Months Ended Nine Months Ended

September 27, 2024 September 29, 2023 September 27, 2024 September 29, 2023

Intelligent Operating Solutions $ 661.2 $ 644.3 $ 2,003.9 $ 1,929.5

6 unchanged sentences

Intelligent Operating Solutions Selected Financial Data

Three Months Ended Six Months Ended

($ in millions) June 28, 2024 June 30, 2023 June 28, 2024 June 30, 2023

Three Months Ended Nine Months Ended

($ in millions) September 27, 2024 September 29, 2023 September 27, 2024 September 29, 2023

Sales $ 661.2 $ 644.3 $ 2,003.9 $ 1,929.5

6 unchanged sentences

Components of Sales Growth

% Change Three Months Ended June 28, 2024 vs.

% Change Three Months Ended September 27, 2024 vs.

Comparable 2023 Period

% Change Six Months Ended June 28, 2024 vs.

% Change Nine Months Ended September 27, 2024 vs.

Comparable 2023 Period

3 unchanged sentences

Currency exchange rates (Non-GAAP) 0.3 % (0.3) %

The sales results for both the second quarter and year-to-date period were driven primarily by growth in our existing businesses due to price increases and increased volume in our test and measurement instrumentation and gas detection products, as well as software and service offerings in both EHS and facility and asset lifecycle applications.

Geographically, core revenue in developed markets increased in the second quarter by low single-digits, driven by a mid-single-digit growth in North America and a low single-digit growth in Western Europe.

Core revenue in high growth markets was low single-digits, driven by mid-teens growth in Latin America, partially offset by a mid-single-digit decline in China.

Geographically, on a year-to-date basis, sales from existing businesses in developed markets increased by low single-digits, driven by low single-digit growth in North America and mid-single-digit growth in Western Europe.

Sales from existing businesses in high growth markets increased year-over-year in the year-to-date period by mid-single-digits, driven by mid-single-digit growth in Asia, where China contributed a low single-digit growth, and mid-teens growth in Latin America.

Year-over-year price increases in our IOS segment contributed 2.4% and 2.6% to sales growth during the second quarter and year-to-date period, respectively, and is reflected as a component of the change in sales from existing businesses.

Operating profit margin increased 80 basis points during the second quarter as compared to the comparable period of 2023.

The sales growth in the third quarter and year-to-date period was driven primarily by favorable pricing across the segment and increased volume in our gas detection products, as well as software and service offerings, including software as a service (“SaaS”), partially offset by volume decline in test and measurement instrumentation.

The acquisitions in 2023 also contributed 0.8% and 1.1% to revenue growth during the third quarter and year-to-date period, respectively.

Geographically, core revenue in developed markets increased in the third quarter by low single-digits, driven by a low single-digit growth in North America, partially offset by a low single-digit decline in Western Europe.

Core revenue in high growth markets increased in the third quarter by low single-digits, driven by high-teens growth in Latin America, partially offset by a a mid-single-digit decline in China.

Geographically, core revenue in developed markets increased in the year-to-date period by low single-digits, driven by a low single-digit growth in North America and Western Europe.

Core revenue in high growth markets in the year-to-date period increased by mid-single-digits, driven by high-teens growth in Latin America and a low single-digit growth in Asia.

Year-over-year price increases in our IOS segment contributed 2.6% to sales growth during both the third quarter and year-to-date period, and is reflected as a component of the change in core revenue.

Operating profit margin increased 110 basis points during the third quarter as compared to the comparable period of 2023.

Year-over-year changes in operating profit margin were comprised of the following:

• Year-over-year increase in price and sales volumes from existing businesses, offset by higher employee compensation and customer acquisition and marketing costs, as well as unfavorable changes in foreign currency exchange rates — relatively flat

• The year-over-year effect of amortization from existing businesses, and impairment of intangible assets incurred in 2023 — favorable 65 basis points

• The year-over-year net effect of acquisition-related transaction costs incurred in the second quarter of 2024 — unfavorable 25 basis points

• The year-over-year net effect of acquired business, including amortization — unfavorable 30 basis points

• Year-over-year increase in price from existing businesses, and higher sales volume from gas detection products, as well as software and service offerings, offset by decline in sales volume from test and measurement instrumentation, and higher employee compensation — favorable 35 basis points

• The year-over-year effect of amortization from existing businesses — favorable 30 basis points

• The year-over-year net effect of acquisition-related transaction costs incurred in the third quarter of 2023 — favorable 25 basis points

• The year-over-year net effect of acquired business, including amortization — relatively flat

• The year-over-year effect of costs relating to the discrete restructuring plan initiated and completed in 2023 — favorable 20 basis points

1 unchanged sentence

Year-over-year changes in operating profit margin comparisons were comprised of the following:

• Year-over-year increases in price and sales volume from existing businesses and gains from productivity measures, partially offset by higher employee compensation and customer acquisition and marketing costs, as well as unfavorable changes in foreign currency exchange rates — favorable 85 basis points

• Year-over-year increase from favorable pricing and higher sales volume from existing businesses, partially offset by higher employee compensation and customer acquisition and marketing costs to support growth initiatives — favorable 70 basis points

• The year-over-year effect of amortization from existing businesses, and impairment of intangible assets incurred in 2023 — favorable 45 basis points

• The year-over-year net effect of acquisition-related transaction costs incurred in the year-to-date period — unfavorable 15 basis points

• The year-over-year net effect of acquisition-related transaction costs incurred in the year-to-date period — relatively flat

• The year-over-year net effect of acquired business, including amortization, and acquisition-related fair value adjustments — unfavorable 25 basis points

4 unchanged sentences

Precision Technologies Selected Financial Data

Three Months Ended Six Months Ended

($ in millions) June 28, 2024 June 30, 2023 June 28, 2024 June 30, 2023

Three Months Ended Nine Months Ended

($ in millions) September 27, 2024 September 29, 2023 September 27, 2024 September 29, 2023

Sales $ 550.9 $ 552.5 $ 1,661.7 $ 1,653.9

6 unchanged sentences

C omponents of Sales Growth

% Change Three Months Ended June 28, 2024 vs.

% Change Three Months Ended September 27, 2024 vs.

Comparable 2023 Period

% Change Six Months Ended June 28, 2024 vs.

% Change Nine Months Ended September 27, 2024 vs.

Comparable 2023 period

4 unchanged sentences

Currency exchange rates (Non-GAAP) 0.1 % (0.5) %

The sales results for both the second quarter and year-to-date periods were impacted by price increases across the segment and volume increases in energetic materials, which were offset by volume reductions in test and measurement and sensing technology products.

The acquisition of EA, partially offset by the Invetech Divestiture, contributed 6.0% and 5.8% to revenue growth during the second quarter and year-to-date period, respectively.

Geographically, core revenue in developed markets decreased by mid-single-digits in the second quarter, driven by a mid-single-digit decline in North America, a mid-teens decline in Western Europe, and a mid-single-digit growth in Japan.

Core revenue in high growth markets decreased by high single-digits in the second quarter, driven by a high single-digit decline in Asia where China decreased by high single-digits.

Geographically, on a year-to-date basis, sales from existing businesses in developed markets decreased by mid-single-digits, driven by a low single-digit decline in North America, a high single-digit decline in Western Europe, and a low double-digit decline in Japan.

Sales from existing businesses in high growth markets decreased year-over-year in the year-to-date period by mid-single-digits, driven by low double-digits decline in China.

Year-over-year price increases in our PT segment contributed 2.3% and 1.8% to sales growth for the second quarter and year-to-date period, respectively, and is reflected as a component of the change in sales from existing businesses.

Operating profit margin decreased 350 basis points for the second quarter as compared to the comparable period of 2023.

The sales results for both the third quarter and year-to-date periods were impacted by price increases across the segment and volume increases in energetic materials, offset by volume reductions in test and measurement and certain sensing technology products.

The acquisition of EA, partially offset by the Invetech Divestiture, contributed 3.3% and 5.0% to revenue growth during the third quarter and year-to-date period, respectively.

Geographically, core revenue in developed markets decreased by mid-single-digits in the third quarter, driven by a mid-single-digit decline in North America and Western Europe.

Core revenue in high growth markets increased by low single-digits in the third quarter, driven by low-twenties growth in Latin America, partially offset by a low single-digit decline in Asia.

Geographically, core revenue in developed markets decreased by mid-single-digits in the year-to-date period, driven by a low single-digit decline in North America, a high single-digit decline in Western Europe, and a low double-digit decline in Japan.

Core revenue in high growth markets decreased by low single-digits in the year-to-date period, driven by a low double-digit growth in Latin America, offset by a mid-single-digit decline in Asia, where China decreased by low double-digits.

Year-over-year price increases in our PT segment contributed 2.9% and 2.2% to sales growth for the third quarter and year-to-date period, respectively, and is reflected as a component of the change in core revenue.

Operating profit margin decreased 340 basis points for the third quarter as compared to the comparable period of 2023.

Year-over-year changes in operating profit margin were comprised of the following:

• Year-over-year increase in price from existing businesses and gains from productivity measures, offset by net volume reductions in the segment and unfavorable changes in foreign currency exchange rates — unfavorable 100 basis points

• The year-over-year effect of amortization from existing businesses — unfavorable 10 basis points

• The year-over-year net effect of acquisition and divestiture-related transaction costs, which were incurred in the second quarter of 2024, primarily related to the EA acquisition — unfavorable 10 basis points

• Year-over-year increase in price from existing businesses and gains from productivity measures, offset by net volume reductions in the segment — favorable 5 basis points

• The year-over-year effect of amortization from existing businesses — favorable 5 basis points

• The year-over-year net effect of acquisition and divestiture-related transaction costs, which were incurred in the third quarter of 2024, primarily related to the EA acquisition — unfavorable 35 basis points

• The year-over-year net effect of acquired and divested businesses, including amortization, and acquisition-related fair value adjustments — unfavorable 315 basis points

• The year-over-year effect of costs relating to the discrete restructuring plan initiated and completed in 2023 — favorable 40 basis points

Operating profit margin increased 20 basis points during the year-to-date period as compared to the comparable period of 2023.

Operating profit margin decreased 100 basis points during the year-to-date period as compared to the comparable period of 2023.

Year-over-year changes in operating profit margins were comprised of the following:

• Year-over-year increase in price from existing businesses and gains from productivity measures, offset by net volume reduction in the segment, higher employee compensation costs, and unfavorable changes in foreign currency exchange rates — unfavorable 15 basis points

• The year-over-year effect of amortization from existing businesses — flat

• Year-over-year increase in price from existing businesses and gains from productivity measures were offset by net volume reduction in the segment and unfavorable changes in foreign currency exchange rates — unfavorable 10 basis points

• The year-over-year effect of amortization from existing businesses — relatively flat

• The year-over-year net effect of acquisition and divestiture-related transaction costs incurred in the year-to-date period primarily related to the EA acquisition — unfavorable 180 basis points

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Advanced Healthcare Solutions Financial Data

Three Months Ended Six Months Ended

($ in millions) June 28, 2024 June 30, 2023 June 28, 2024 June 30, 2023

Three Months Ended Nine Months Ended

($ in millions) September 27, 2024 September 29, 2023 September 27, 2024 September 29, 2023

Sales $ 322.5 $ 297.7 $ 945.9 $ 898.2

6 unchanged sentences

Components of Sales Growth

% Change Three Months Ended June 28, 2024 vs.

% Change Three Months Ended September 27, 2024 vs.

Comparable 2023 period

% Change Six Months Ended June 28, 2024 vs.

% Change Nine Months Ended September 27, 2024 vs.

Comparable 2023 Period

2 unchanged sentences

Currency exchange rates (Non-GAAP) (0.9) % (1.3) %

The sales results for both the second quarter and year-to-date period were driven by growth in our existing businesses due to price increases across the segment and volume increases in our sterilization products.

Geographically, core revenue in developed markets increased low single-digits in the second quarter, driven by a low single-digit growth in North America and a low double-digit growth in Western Europe.

In high growth markets, core revenue increased by low double-digits in the second quarter, driven by mid-thirties growth in Latin America, while China was essentially flat.

Geographically, on a year-to-date basis, sales from existing businesses in developed markets increased by mid-single-digits, driven by a low single-digit growth in North America, high single-digit growth in Western Europe, and high single-digit growth in Japan.

Sales from existing businesses in high growth markets increased by low double-digits, driven by high twenties growth in Latin America and mid-single-digit growth in China.

Year-over-year price increases in our AHS segment contributed 3.5% and 3.2% to sales growth during the second quarter and year-to-date period, respectively, and is reflected as a component of the change in sales from existing businesses.

Operating profit margin increased 430 basis points during the second quarter, as compared to the comparable period of 2023.

The sales results for both the third quarter and year-to-date period were driven by growth in our existing businesses due to price increases across the segment and volume increases in our sterilization and dosimetry products.

Geographically, core revenue in developed markets increased by low double-digits in the third quarter, driven by a low double-digit growth in North America and a high single-digit growth in Western Europe.

In high growth markets, core revenue increased by mid-single-digits in the third quarter, driven by mid-teens growth in Latin America.

Geographically, core revenue in developed markets increased by mid-single-digits in the year-to-date period, driven by a mid-single-digit growth in North America and a high single-digit growth in Western Europe.

Core revenue in high growth markets increased by high single-digits in the year-to-date period, driven by low-twenties growth in Latin America and a low single-digit growth in Asia.

Year-over-year price increases in our AHS segment contributed 3.6% and 3.3% to sales growth during the third quarter and year-to-date period, respectively, and is reflected as a component of the change in core revenue.

Operating profit margin increased 430 basis points during the third quarter, as compared to the comparable period of 2023.

Year-over-year changes in operating profit margin were comprised of the following:

• Year-over-year increases in price and volume from existing businesses and gains from productivity measures, partially offset by higher employee compensation costs — favorable 260 basis points

• Year-over-year increases due to favorable price and higher volume from existing businesses and gains from productivity measures, partially offset by higher employee compensation — favorable 310 basis points

• The year-over-year effect of amortization from existing businesses — favorable 120 basis points

• The year-over-year effect of costs relating to the discrete restructuring plan initiated and completed in 2023 — favorable 120 basis points

Operating profit margin increased 420 basis points during the year-to-date period as compared to the comparable period of 2023.

Year-over-year changes in operating profit margin were comprised of the following:

• Year-over-year increases in price and volume from existing businesses and gains from productivity measures, partially offset by higher employee compensation and customer acquisition and marketing costs — favorable 235 basis points

• Year-over-year increase due to favorable pricing and higher volume from existing businesses, and gains from productivity measures, partially offset by higher employee compensation, and unfavorable changes in foreign currency exchange rates — favorable 260 basis points

• The year-over-year effect of amortization from existing businesses — favorable 80 basis points

1 unchanged sentence

COST OF SALES AND GROSS PROFIT

Three Months Ended Six Months Ended

($ in millions) June 28, 2024 June 30, 2023 June 28, 2024 June 30, 2023

Three Months Ended Nine Months Ended

($ in millions) September 27, 2024 September 29, 2023 September 27, 2024 September 29, 2023

Sales $ 1,534.6 $ 1,494.5 $ 4,611.5 $ 4,481.6

2 unchanged sentences

Gross profit margin 60.0 % 59.8 % 59.7 % 59.1 %

The year-over-year increase in gross profit during the second quarter and year-to-date period was due to contributions from our acquired businesses, price increases from existing businesses, increased volume with IOS and AHS, productivity measures and FBS initiatives.

The volume decline in our PT segment, higher employee compensation costs, and unfavorable changes in foreign currency exchange rates partially offset the year-over-year increase.

The year-over-year increase in gross profit during the third quarter was primarily due to contributions from our acquired businesses, favorable pricing from existing businesses, increased volume from the AHS segment, gains from productivity measures and FBS initiatives, partially offset by net volume reductions in the IOS and PT segments, and higher employee compensation.

The year-over-year increase in gross profit during the year-to-date period was primarily due to contributions from our acquired businesses, favorable pricing from existing businesses, increased volume from the IOS and AHS segments, gains from productivity measures and FBS initiatives, partially offset by net volume reductions in the PT segment, higher employee compensation, and unfavorable changes in foreign currency exchange rates.

OPERATING EXPENSES

Three Months Ended Six Months Ended

Three Months Ended Nine Months Ended

($ in millions)

June 28, 2024 June 30, 2023 June 28, 2024 June 30, 2023

September 27, 2024 September 29, 2023 September 27, 2024 September 29, 2023

Sales $ 1,534.6 $ 1,494.5 $ 4,611.5 $ 4,481.6

3 unchanged sentences

R&D as a % of sales 6.6 % 6.6 % 6.7 % 6.7 %

The year-over-year increase in SG&A during the second quarter and year-to-date period was due to higher intangible amortization, incremental operating costs and transaction expenses from our recent acquisitions, employee compensation costs, and customer acquisition and marketing costs, partially offset by productivity measures.

R&D, consisting principally of internal and contract engineering personnel costs, increased during the second quarter and year-to-date period, as compared to the comparable period of 2023 due to the incremental costs from our recent acquisitions and ongoing investments in innovation.

The year-over-year increase in SG&A during the third quarter and year-to-date period was due to higher intangible amortization, incremental operating costs from recent acquisitions and higher employee compensation, partially offset by productivity measures.

In addition, there were higher transaction expenses from our EA acquisition during the year-to-date period.

R&D, consisting principally of internal and contract engineering personnel costs, increased during the third quarter and year-to-date period, as compared to the comparable period of 2023 due to the incremental costs from our recent acquisitions and ongoing investments in innovation.

NON-OPERATING INCOME (EXPENSE), NET

Interest costs

Net interest expense for the second quarter and year-to-date period was $38.7 million and $82.7 million as compared to $33.1 million and $65.2 million in the comparable periods in 2023.

The year-over-year increase in net interest expense was due to higher overall debt balances and higher interest rates incurred on floating rate debt instruments.

Net interest expense for the third quarter and year-to-date period was $37.0 million and $119.7 million as compared to $29.8 million and $95.0 million in the comparable periods in 2023.

The year-over-year increase in net interest expense was primarily due to higher overall debt balances.

For discussion of our outstanding indebtedness, refer to Note 5 to the consolidated condensed financial statements.

Loss from divestiture

During the second quarter and year-to-date period, we recognized a net realized loss of $25.6 million related to the Invetech Divestiture.

During the year-to-date period, we recognized a net realized loss of $25.6 million related to the Invetech Divestiture.

For further discussion of this transaction, refer to Note 1 to the consolidated condensed financial statements.

Other non-operating expense, net

Other non-operating expense for the second quarter and year-to-date period was $8.8 million and $33.0 million, respectively, as compared to $7.8 million and $10.3 million, respectively, in the comparable period in 2023.

The year-over-year increase during the year-to-date period was primarily due to a charitable contribution made in the first quarter of 2024.

For further discussion of this transaction, refer to Note 1 to the consolidated condensed financial statements.

Our effective tax rates for the three and six-month periods ended June 28, 2024 were 14.7% and 13.0%, respectively, as compared to 16.5% and 16.1%, respectively, for the three and six-month periods ended June 30, 2023.

The decrease in the effective tax rate for the three-month period ended June 28, 2024 as compared to the three-month period ended June 30, 2023 was primarily related to change in valuation allowances, resulting in a benefit in the three-month period ended June 28, 2024.

The decrease in the effective tax rate for the six-month period ended June 28, 2024 as compared to the six-month period ended June 30, 2023 was primarily related to cash repatriation, resulting in a discrete tax credit, and changes in valuation allowances in the six-month period ended June 28, 2024.

Our effective tax rates for the three and six-month periods ended June 28 2024, differ from the U.S.

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

Other non-operating expense for the third quarter and year-to-date period was $26.3 million and $59.3 million, respectively, as compared to $4.2 million and $14.5 million, respectively, in the comparable period in 2023.

The year-over-year increase as compared to the comparable periods in 2023 was due to a loss from our equity investments.

The year-over-year increase during the year-to-date period also included a charitable contribution made in the first quarter of 2024.

For further discussion of the charitable contribution and loss from equity investment, refer to Note 1 and Note 4 to the consolidated condensed financial statements, respectively.

Our effective tax rates for the three and nine-month periods ended September 27, 2024 were 4.6% and 10.2%, respectively, as compared to 15.2% and 15.8%, respectively, for the three and nine-month periods ended September 29, 2023.

The decrease in the effective tax rate for the three-month period ended September 27, 2024 as compared to the three-month period ended September 29, 2023 was primarily related to changes in applicable statutory tax rates, resulting in a benefit in the three-month period ended September 27, 2024.

The decrease in the effective tax rate for the nine-month period ended September 27, 2024 as compared to the nine-month period ended September 29, 2023 was primarily related to cash repatriation resulting in a discrete tax credit, changes in applicable statutory tax rates, and changes in valuation allowances in the nine-month period ended September 27, 2024.

Our effective tax rates for the three and nine-month periods ended September 27, 2024, differ from the U.S.

federal statutory rate of 21% due primarily to the impact of credits and deductions provided by law, including those associated with state income taxes, and changes in our uncertain tax position reserves.

The OECD has published the framework for a “Pillar Two” global minimum corporate income tax rate of fifteen percent (15%).

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COMPREHENSIVE INCOME

Comprehensive income decreased by $27 million during the second quarter as compared to the comparable period in 2023 due to a decrease in net income and unfavorable changes in foreign currency translation adjustments of $14 million.

Comprehensive income decreased by $83 million during the year-to-date period as compared to the comparable period in 2023 due primarily to unfavorable changes in foreign currency translation adjustments of $104 million, offsetting the increase in net income.

Comprehensive income increased by $139 million during the third quarter as compared to the comparable period in 2023 due to favorable changes in foreign currency translation of $135 million and an increase in net income.

Comprehensive income increased by $56 million during the year-to-date period as compared to the comparable period in 2023 due primarily to favorable changes in foreign currency translation adjustments of $32 million and an increase in net income.

LIQUIDITY AND CAPITAL RESOURCES

We assess our liquidity in terms of our ability to generate cash to fund our operating, investing, and financing activities.

We generate substantial cash from operating activities and believe that our operating cash flow and other sources of liquidity, which consist of available cash, our revolving credit facility, and access to commercial paper, bank loans, and capital markets, will be sufficient to allow us to continue funding and investing in our existing businesses, consummate strategic acquisitions, make interest and principal payments on our outstanding indebtedness, fulfill our contractual obligations, and manage our capital structure on a short and long-term basis.

We generate substantial cash from operating activities and believe that our operating cash flow and other sources of liquidity, which consist of available cash, our revolving credit facility, and access to commercial paper, bank loans, and capital markets, will be sufficient to allow us to continue funding and investing in our existing businesses, consummate strategic acquisitions, execute strategic separations, repurchase common stocks on the open market or in privately negotiated transactions, make interest and principal payments on our outstanding indebtedness, fulfill our contractual obligations, and manage our capital structure on a short and long-term basis.

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

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Credit support for the Commercial Paper Programs is provided by a five-year $2.0 billion senior unsecured revolving credit facility that expires on October 18, 2027 (the “Revolving Credit Facility”) which, to the extent not otherwise providing credit support for the commercial paper programs, can also be used for working capital and other general corporate purposes.

As of June 28, 2024, no borrowings were outstanding under the Revolving Credit Facility.

As of September 27, 2024, no borrowings were outstanding under the Revolving Credit Facility.

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

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Following is an overview of our cash flows and liquidity ($ in millions):

Six Months Ended

($ in millions) June 28, 2024 June 30, 2023

Nine Months Ended

September 27, 2024 September 29, 2023

Net cash provided by operating activities $ 1,024.6 $ 906.8

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Cash flows from operating activities can fluctuate significantly from period-to-period as working capital needs and the timing of payments for income taxes, interest, pension funding, and other items impact reported cash flows.

Operating cash flows were $566 million during the year-to-date period, representing an increase of $70 million, or 14.2%, as compared to the comparable period of 2023.

Operating cash flows were $1.02 billion during the year-to-date period, representing an increase of $118 million, or 13.0%, as compared to the comparable period of 2023.

The year-over-year change in operating cash flows was primarily attributable to the following factors:

• Year-over-year increases of $27 million in Operating cash flows from net earnings, net of non-cash items (Amortization, Depreciation, Stock-based compensation, Gain on sale of property, and Loss from divestiture).

• Year-over-year increases of $76 million in Operating cash flows from net earnings, net of non-cash items (Amortization, Depreciation, Stock-based compensation, Gain on sale of property, Loss from divestiture, and Loss from equity investments).

• The aggregate changes in trade accounts receivable, inventories, and trade accounts payable generated $80 million of cash during the year-to-date period as compared to using $42 million in the comparable period of 2023.

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• The aggregate changes in prepaid expenses, other assets, accrued expenses, and other liabilities used $171 million of cash in the year-to-date period as compared to using $91 million of cash in the comparable period of 2023.

The year-over-year changes were driven by timing differences related to tax and interest payments, employee compensation and benefits, and restructuring activities in the prior year.

The year-over-year changes were driven by timing differences related to contract assets, contract liabilities, and payments of income taxes, interest, and prior year restructuring.

Investing Activities

Cash outflows from investing activities increased by $1.74 billion during the year-to-date period, as compared to the comparable period of 2023 with the increase primarily due to cash used for acquisitions, net of cash acquired, totaling $1.72 billion and a year-over-year increase in capital expenditures of approximately $10 million, and the cash infusion into the Invetech Divestiture entity totaling $14 million, partially offset by the year-over-year increase in proceeds from sale of property of approximately $6 million.

Cash outflows from investing activities increased by $1.68 billion during the year-to-date period, as compared to the comparable period of 2023 with the increase primarily due to cash used for acquisitions, net of cash acquired, totaling $1.72 billion in 2024 and a year-over-year increase in capital expenditures of approximately $10 million, and the cash infusion into the Invetech Divestiture entity totaling $14 million, partially offset by the year-over-year increase in proceeds from sale of property of approximately $14 million.

Capital expenditures are made primarily for increasing production capacity, replacing aged equipment, supporting product development initiatives for hardware and software offerings, improving information technology systems, and purchasing

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• On February 13, 2024, we completed the sale of our registered offering of the 2026 Notes and the 2029 Notes, yielding net proceeds of approximately $1.3 billion.

• On February 13 2024, Fortive repaid $1.0 billion in outstanding principal of the Delayed-Draw Term Loan due 2024, using net proceeds from the 2026 Notes and 2029 Notes.

• On February 13 2024, we repaid $1.0 billion in outstanding principal of the Delayed-Draw Term Loan due 2024, using net proceeds from the 2026 Notes and 2029 Notes.

• We repaid $571 million in net commercial paper repayments under the U.S.

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In the comparable 2023 period, financing activities used cash of $766 million, reflecting the following transaction:

• On August 24, 2023, we repaid $250 million in outstanding principal of the Delayed-Draw Term Loan due 2023.

• We repaid $253 million in net commercial paper borrowings under the U.S.

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Cash and Cash Requirements

As of June 28, 2024, we held approximately $644 million of cash and equivalents that were invested in highly liquid investment-grade instruments with a maturity of 90 days or less, of which approximately 95% was held outside of the United States.

As of September 27, 2024, we held approximately $811 million of cash and equivalents that were invested in highly liquid investment-grade instruments with a maturity of 90 days or less, of which approximately 91% was held outside of the United States.

We have cash requirements to support working capital needs, capital expenditures and acquisitions, pay interest and service debt, pay taxes and any related interest or penalties, fund our pension plans as required, pay dividends to shareholders, and support other business needs or objectives.

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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.

As of June 28, 2024, we expect to have sufficient liquidity to satisfy our cash needs for the foreseeable future.

As of September 27, 2024, we expect to have sufficient liquidity to satisfy our cash needs for the foreseeable future.

CRITICAL ACCOUNTING ESTIMATES

There were no material changes during the three and six-month periods ended June 28, 2024 to the items we disclosed as our critical accounting estimates in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2023 Annual Report on Form 10-K, except as noted below.

There were no material changes during the three and nine-month periods ended September 27, 2024 to the items we disclosed as our critical accounting estimates in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2023 Annual Report on Form 10-K, except as noted below.

Our business acquisitions, including EA, typically result in the recognition of goodwill, customer relationships, developed technology, and other intangible assets, which affect the amount of future period amortization expense and possible impairment charges that we may incur.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis