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Item 7. Management’s Discussion and Analysis

2025-02-25 compared with 2024-02-27 · 189 added, 209 removed, 315 unchanged (56% of the section changed)

4 unchanged sentences

Fortive is a provider of essential technologies for connected workflow solutions across a range of attractive end-markets.

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

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

Our strategic segments - Intelligent Operating Solutions (“IOS”), Precision Technologies (“PT”), and Advanced Healthcare Solutions (“AHS”) - include well-known brands with leading positions in their markets.

Our businesses design, develop,

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

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

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Fortive is a multinational business with global operations with approximately 46% of our sales derived from customers outside the United States in 2024.

As a company with global operations, our businesses are affected by worldwide, regional, and industry-specific economic and political factors.

As a company with global operations, our businesses are affected by worldwide, regional, and industry-specific economic, regulatory, and political factors.

Our geographic and industry diversity, as well as the range of products, software, and services we offer, typically help limit the impact of any one industry or the economy of any single country (except for the United States) on our operating results.

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Non-GAAP Measures

In this report, references to sales from existing businesses refer to sales from operations calculated according to generally accepted accounting principles in the United States (“GAAP”) but excluding (1) the impact from acquired and divested businesses and (2) the impact of currency translation.

References to sales attributable to acquisitions or acquired businesses refer to GAAP sales from acquired businesses recorded prior to the first anniversary of the acquisition less the amount of sales attributable to certain divested businesses or product lines not considered discontinued operations prior to the first anniversary of the divestiture.

The portion of sales attributable to the impact of currency translation is calculated as the difference between (a) the period-to-period change in sales (excluding sales impact from acquired businesses) and (b) the period-to-period change in sales (excluding sales impact from acquired businesses) after applying the current period foreign exchange rates to the prior year period.

Sales from existing businesses should be considered in addition to, and not as a replacement for or superior to, sales, and may not be comparable to similarly titled measures reported by other companies.

Management believes that reporting the non-GAAP financial measure of sales from existing businesses provides useful information to investors by helping identify underlying growth trends in our business and facilitating comparisons of our sales performance with our performance in prior and future periods and to our peers.

In this report, references to sales from existing businesses (“core revenue”) refer to sales from operations calculated according to generally accepted accounting principles in the United States (“GAAP”) but excluding (1) the impact from acquired and divested businesses and (2) the impact of foreign currency translation.

References to sales attributable to acquisitions or acquired businesses refer to GAAP sales from acquired businesses recorded prior to the first anniversary of the acquisition, less the amount of sales attributable to certain businesses or product lines that have been divested, or, at the time of reporting, are pending divestiture, but are not, and will not be, considered discontinued operations prior to the first anniversary of the divestiture.

Core revenue should be considered in addition to, and not as a replacement for or superior to, sales, and may not be comparable to similarly titled measures reported by other companies.

Management believes that reporting the non-GAAP financial measure of core revenue provides useful information to investors by helping identify underlying growth trends in our business and facilitating comparisons of our sales performance with our performance in prior and future periods and to our peers.

We exclude the effect of acquisition and divestiture related items because the nature, size, and number of such transactions can vary dramatically from period to period and between us and our peers.

We exclude the effect of currency translation from sales from existing businesses because the impact of currency translation is not under management’s control and is subject to volatility.

We exclude the effect of currency translation from core revenue because the impact of currency translation is not under management’s control and is subject to volatility.

Management believes the exclusion of the effect of acquisitions and divestitures and currency translation may facilitate the assessment of underlying business trends and may assist in comparisons of long-term performance.

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

Business Performance and Outlook

Business Performance

During 2023, aggregate year-over-year sales increased 4.1%, primarily due to an increase in sales from existing businesses which increased year over year by 4.8% comprised of favorable pricing of 4.5% and increased volume of 0.3%.

Geographically, year-over-year sales from existing businesses in developed markets increased by mid-single-digits, driven by mid-single-digit growth in North America, low single-digit growth in Western Europe, and low double-digit growth in Japan.

Year-over-year sales from existing businesses in high growth markets increased mid-single-digits, driven by low single-digit growth in Asia, which includes low single-digit growth in China, and high single-digit growth in Latin America.

The strengthening of the U.S.

dollar relative to other currencies reduced our sales by 0.6% during 2023, as compared to 2022 and may continue to impact our results in future periods.

Sales from divested business, offset by revenue from acquisitions reduced sales by 0.1% as compared to 2022.

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.

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 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.

Restructuring

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.

Other Matters

We experienced cybersecurity incidents in the fourth quarter of fiscal 2023.

To date, the disruptions from the cybersecurity incidents did not materially impact business continuity or operations.

We continue to actively investigate the incidents with the assistance of leading cybersecurity experts, including the nature of the data that was impacted, and continue to implement robust containment and remedial measures.

Update on Pending Separation of the Precision Technologies Segment

On September 4, 2024, we announced our intention to separate our PT segment business into an independent publicly-traded company (the “Separation”), which will be named Ralliant.

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 and safety to customers, and (ii) a global technology company consisting of our brands currently operating under the PT segment with a focus on precision instruments and highly engineered products essential for breakthrough innovation and aligned to powerful secular trends.

The Separation is intended to qualify as a tax-free spin-off for Fortive shareholders for U.S.

federal income tax purposes.

The Company is targeting completion of the Separation early in the third 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 Ralliant are included in the consolidated results of the Company in the accompanying consolidated financial statements.

Segment Realignment and Divestiture

In January 2024, we realigned Invetech from the AHS segment to the PT segment (the “Segment Realignment”) based on our strategic decision to divest the equipment design and manufacturing businesses of Invetech, while retaining the motion solution businesses (the “Motion Solution Business”) that are more closely aligned with the PT segment than the AHS segment.

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 year ended December 31, 2024, we recorded a net realized loss of $25.6 million, which is identified as “Loss from divestiture” in the Consolidated 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.

The Invetech Divestiture did not represent a strategic shift with a major effect on the Company’s operations and financial results, and therefore the divested businesses are not reported as discontinued operations.

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 acquisition of EA will bolster the PT segment’s innovative portfolio of products and services for engineers with complementary test and measurement solutions enabling the global energy transition.

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

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

On January 1, 2024, we realigned Invetech from the Advanced Healthcare Solutions segment to the Precision Technologies segment as we consider strategic alternatives for certain products and services of Invetech.

The remaining products and operations of Invetech are more closely aligned with the Precision Technologies segment.

In 2023, we entered into an agreement to optimize our real estate footprint within our Precision Technologies segment for proceeds of approximately $90 million.

We expect the transaction to be completed in the first half of 2024, with a gain from the transaction recognized at the time of closing.

We anticipate full year sales to grow on a year-over-year basis by approximately 6% and 8% with year-over-year growth from existing businesses of approximately 2% and 4%.

We expect foreign exchange rates to remain volatile throughout the year which could 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 and other critical regions, ongoing challenges with global logistics and supply chains, disruption in supply or transportation resulting from severe weather or other events, 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 production challenges, collaborate with customers and suppliers to minimize disruptions and utilize pricing and other countermeasures to offset the aforementioned dynamics.

We recorded approximately $1.18 billion of goodwill within our 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

In the fourth quarter of 2024, we initiated a discrete restructuring plan that is expected to be completed by December 31, 2025.

The nature of the plan initiated in 2024 was related to the Separation and consisted primarily of targeted workforce reductions to realign the cost structures between the two companies.

In the first quarter of 2023, we initiated a separate discrete restructuring plan that was completed by the end of 2023.

The nature of the activities in 2023 was broadly consistent throughout our segments and consisted primarily of targeted workforce reductions in response to overall macroeconomic and other external conditions.

We incurred charges of $19.7 million and $58.6 million during the years ended December 31, 2024 and 2023, respectively.

Business Performance and Outlook

Business Performance

During 2024, aggregate year-over-year sales increased 2.7%, driven by a 1.3% increase in our core revenue and a 2.0% increase from acquisitions, net of divestiture, partially offset by a decline of 0.6% due to unfavorable foreign currency translation.

Core revenue growth included favorable pricing of 2.7%, partially offset by volume decline of 1.4%.

Geographically, core revenue in developed markets increased by low single-digits during 2024, driven by low single-digit growth in North America, while Western Europe decreased slightly.

Core revenue in high growth markets increased slightly, driven by low double-digit growth in Latin America, partially offset by a low single-digit decline in Asia, where China declined by high single-digits.

We anticipate full year sales growth to be between approximately flat and 2.0% with year-over-year growth from existing businesses of approximately 1.5% and 3.5%.

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, global uncertainties related to governmental policies toward international trade, monetary and fiscal policies, including the current uncertainty about the future relationship between the United States and other major regions with respect to trade policies, treaties, government regulations, sanctions and tariffs, macroeconomic conditions in the United States, China, and other critical regions, impact from our pending separation into two independent publicly traded companies, and 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.

2 unchanged sentences

Total revenue growth (GAAP) 2.7 %

Existing businesses (Non-GAAP) 4.8 %

Acquisitions and divestitures (Non-GAAP)

Currency exchange rates (Non-GAAP) (0.6) %

Refer to Intelligent Operating Solutions, Precision Technologies, and Advanced Healthcare Solutions sections below for further discussion of year-over-year sales growth.

Acquisitions and divestitures

Currency exchange rates

Core revenue growth (Non-GAAP)

Operating Profit Margins

Operating profit margins were 18.7% for the year ended December 31, 2023, an increase of 180 basis points as compared to 16.9% in 2022 with year-over-year operating profit margin comparisons impacted by:

• Year-over-year increase in price and volume from existing businesses and gains from productivity measures, which were partially offset by higher employee compensation, unfavorable product mix and foreign exchange rates — favorable 160 basis points

• The year-over-year effect of amortization from existing businesses offset by impairment of intangible assets — favorable 40 basis points

• The year-over-year net effect of acquisition-related transaction costs which were lower in 2023 — favorable 40 basis points

• The year-over-year net effect of acquired and divested businesses, including amortization, and acquisition-related fair value adjustments — favorable 5 basis points

• The year-over-year effect of costs relating to the discrete restructuring plan in 2023 — unfavorable 95 basis points

• Russia exit and wind down costs that were incurred during 2022 — favorable 30 basis points

Operating profit margins were 19.4% in 2024, an increase of 70 basis points as compared to 18.7% in 2023.

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

• Year-over-year increase in price from existing businesses, volume growth in IOS and AHS, and benefits 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 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 30 basis points

• The year-over-year net effect of acquisition, divestiture and separation related transaction costs incurred in the year — unfavorable 85 basis points

• The year-over-year net effect of acquired and divested businesses, including amortization and acquisition-related fair value adjustments — unfavorable 120 basis points

• The year-over-year effect of costs relating to discrete restructuring plans — favorable 65 basis points

• The year-over-year effect of the gain on sale of land and certain office buildings in the PT segment during the year - favorable 100 basis points

Business Segments and Geographic Area Results

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China 648.2 694.9

All other (each country individually less than 5% of total sales) 2,082.0 1,986.8

2,211.6 2,082.0

Total $ 6,231.8 $ 6,065.3

INTELLIGENT OPERATING SOLUTIONS

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

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

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

11 unchanged sentences

Total revenue growth (GAAP) 3.9 %

Existing businesses (Non-GAAP) 5.9 %

Acquisitions and divestitures (Non-GAAP)

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

Acquisitions and divestitures (0.8) %

Currency exchange rates 0.3 %

Core revenue growth (Non-GAAP)

2024 COMPARED TO 2023

The sales result for 2023 was driven by price increases across the segment and demand in software and service offering in EHS and facility and asset lifecycle applications, partially offset by volume reductions in certain products in our test and measurement instrumentation business.

Geographically, year-over-year sales from existing businesses in developed markets increased by mid-single-digits during 2023, driven by mid-single-digit growth in North America and low single-digit growth in Western Europe.

Sales in high growth markets increased by low double-digits during 2023, driven by low double-digit growth in Asia, including low double-digit growth in China.

Year-over-year price increases in our Intelligent Operating Solutions segment contributed 4.2% to sales growth in 2023, as compared to 2022, and is reflected as a component of the change in sales from existing businesses.

The sales growth in 2024 was driven primarily by favorable pricing across the segment and increased volume in our gas detection products, as well as software and service offerings in facility and assets lifecycle applications, including software as a service (“SaaS”).

The acquisitions in 2023 also contributed 0.8% to revenue growth during the year.

Geographically, core revenue in developed markets increased by mid-single-digits during 2024, driven by a mid-single-digit growth in North America and low single-digit growth in Western Europe.

Core revenue in high growth markets increased by low single-digits during 2024, driven by a high single-digit growth in Latin America and low single-digit growth in Asia, despite a low single-digit decline in China.

Year-over-year price increases in our IOS segment contributed 2.8% to sales growth in 2024, as compared to 2023, and is reflected as a component of the change in core revenue.

Operating profit margin increased 190 basis points during 2024 as compared to 2023.

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

• Year-over-year increase in price and sales volume from existing businesses and gains from productivity measures, partially offset by higher employee compensation — favorable 315 basis points

• The year-over-year effect of amortization from existing businesses offset by impairment of intangible assets — favorable 20 basis points

• The year-over-year effect of acquisition-related transaction costs which were lower in 2023 — favorable 65 basis points

• The year-over-year effect of acquired businesses, including amortization, and acquisition-related fair value adjustments — unfavorable 10 basis points

• The year-over-year effect of costs relating to the d iscrete restructuring plan in 2023 — unfavorable 90 basis points

• Year-over-year increase from favorable pricing and higher sales volume from existing businesses, partially offset by higher employee compensation, customer acquisition costs and marketing costs to support growth initiatives — favorable 100 basis points

• The year-over-year effect of amortization from existing businesses, and impairment of intangible assets incurred in 2023— favorable 50 basis points

• The year-over-year net effect of acquired businesses, including amortization, and acquisition-related fair value adjustments — unfavorable 15 basis points

• The year-over-year effect of costs relating to d iscrete restructuring plans — favorable 55 basis points

PRECISION TECHNOLOGIES

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

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

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

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

Precision Technologies Selected Financial Data

10 unchanged sentences

Total revenue growth (GAAP) 0.3 %

Existing businesses (Non-GAAP) 5.1 %

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

Acquisitions and divestitures (4.4) %

Currency exchange rates 0.4 %

Core revenue growth (Non-GAAP)

2024 COMPARED TO 2023

The sales result for 2023 was driven by price increases across the segment and volume increases with test and measurement products, power and energy equipment and energetic materials, partially offset by volume reductions in certain end markets for sensing technologies.

Geographically, year-over-year sales from existing businesses in developed markets increased by high single-digits during 2023, driven by high single-digit growth in both North America, low single-digit growth in Western Europe, and mid-teens growth in Japan.

Sales in high growth markets increased by low single-digits during 2023, where we saw low-forties growth in the Middle East and a low single-digit decline in Asia, which includes a low single-digit decline in China.

Year-over-year price increases in our Precision Technologies segment contributed 5.7% to sales growth during 2023 as compared to 2022, and is reflected as a component of the change in sales from existing businesses.

Operating profit margin increased 120 basis points during 2023 as compared to 2022.

The sales result for 2024 was driven by price increases across the segment and volume increases in energetic materials and utility sensing and solutions, offset by volume reductions in test and measurement and industrial sensing products.

The acquisition of EA, partially offset by the Invetech Divestiture, contributed 4.4% to revenue growth during the year.

Geographically, core revenue in developed markets decreased by mid-single-digits during 2024, driven by a low single-digit decline in North America, a mid-single-digit decline in Western Europe, and a low double-digit decline in Japan.

Core revenue in high growth markets decreased by mid-single-digits during 2024, driven by high-teens 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 2.4% to sales growth during 2024 as compared to 2023, and is reflected as a component of the change in core revenue.

Operating profit margin decreased 210 basis points during 2024 as compared to 2023.

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

• Year-over-year increases in price from existing businesses and gains from productivity measures, all partially offset by higher employee compensation, unfavorable product mix, and reductions in volume — favorable 170 basis points

• The year-over-year effect of amortization from existing businesses — favorable 50 basis points

• The year-over-year effects of acquisition-related transaction expenses incurred in 2023 - unfavorable 10 basis points

• The year-over-year effect of costs relating to the discrete restructuring plan in 2023 — unfavorable 90 basis points

• Year-over-year increases in price from existing businesses and benefits from productivity measures were offset by net volume reductions in the segment, and higher employee compensation — unfavorable 80 basis points

• The year-over-year net effects of acquisition and divestiture-related transaction costs incurred in the year primarily related to the EA acquisition — unfavorable 145 basis points

• The year-over-year net effects of acquired and divested businesses, including amortization, and acquisition-related fair value adjustments — unfavorable 320 basis points

• The year-over-year effect of costs relating to discrete restructuring plans — favorable 50 basis points

• The year-over-year effect of the gain on sale of land and certain office buildings in 2024 — favorable 285 basis points

ADVANCED HEALTHCARE SOLUTIONS

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

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

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

Our offerings include instrument sterilization solutions, instrument tracking, 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.

11 unchanged sentences

Total revenue growth (GAAP) 4.7 %

Existing businesses (Non-GAAP) 2.2 %

Acquisitions and divestitures (Non-GAAP)

Currency exchange rates (Non-GAAP) (1.2) %

Currency exchange rates 1.4 %

Core revenue growth (Non-GAAP)

2024 COMPARED TO 2023

The sales results for 2023 was primarily driven by price increases across the segment and demand increases for software and related services, partially offset by a reduction in volume in system design services.

Geographically, year-over-year sales from existing businesses in developed markets increased by low single-digits during 2023, driven by low single-digit growth in both North America and Western Europe, as well as high single-digit growth in Japan.

Sales in high growth markets increased low single-digits during 2023, with mid-teens growth in Latin America and mid-single-digit growth in China, partially offset by mid-single-digit decline in the rest of Asia and a mid-twenties decline in Eastern Europe driven by the exit from Russia in 2022.

Year-over-year price increases in our Advanced Healthcare Solutions segment contributed 3.1% to sales growth during 2023, as compared to 2022, and is reflected as a component of the change in sales from existing businesses.

Operating profit margin decreased 20 basis points during 2023 as compared to 2022.

The sales results for 2024 were driven by growth in our existing businesses due to price increases across the segment and volume increases primarily in our sterilization and dosimetry products.

Geographically, core revenue in developed markets increased by mid-single-digits during 2024, driven by mid-single-digit growth in North America and Western Europe, and high single-digit growth in Japan.

Core revenue in high growth markets increased by high single-digits during 2024, with mid-teens growth in Latin America and low single-digit growth in Asia.

Year-over-year price increases in our Advanced Healthcare Solutions segment contributed 3.4% to sales growth during 2024, as compared to 2023, and is reflected as a component of the change in core revenue.

Operating profit margin increased 380 basis points during 2024 as compared to 2023.

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

• Year-over-year sales increases in price from existing businesses and gains from productivity measures were offset by unfavorable product mix, reductions in volume, higher employee compensation, and other operating expenses — unfavorable 5 basis points

• Year-over-year sales increases due to favorable pricing and higher volume from existing businesses, and benefits from productivity measures, partially offset by higher employee compensation, and unfavorable changes in foreign currency exchange rates — favorable 200 basis points

• The year-over-year effect of amortization from existing businesses — favorable 70 basis points

• The year-over-year net effect of acquisition-related transaction costs which were incurred in 2022 — favorable 65 basis points

• The year-over-year effect of divested businesses, including amortization, and acquisition-related fair value adjustments to inventory — favorable 20 basis points

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

• The year-over-year effect of costs relating to discrete restructuring plans — favorable 110 basis points

COST OF SALES AND GROSS PROFIT

5 unchanged sentences

Gross profit margin 59.9 % 59.3 %

The year-over-year increase in gross profit during 2023 as compared to 2022 is due to year-over-year increases in price and volume, productivity measures and FBS initiatives, all partially offset by higher employee compensation costs, restructuring charges and foreign exchange rates.

Gross profit increased during 2024 as compared to 2023, primarily due to favorable pricing from existing businesses, contributions from our acquired businesses, increased volume from the IOS and AHS segments, benefits 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

4 unchanged sentences

Research and development (“R&D”) expenses 414.0 397.8

Russia exit and wind down costs — 17.9

SG&A as a % of sales 34.9 % 34.0 %

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

SG&A expenses increased during 2023 as compared to 2022 due to increased employee compensation expenses, customer acquisition and marketing costs, and restructuring costs, partially offset by savings from productivity measures.

R&D expenses, consisting principally of internal and contract engineering personnel costs, decreased slightly during 2023 as compared to 2022 due to favorable timing of project expenditures, partially offset by higher compensation costs.

RUSSIA EXIT AND WIND DOWN COSTS

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.

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.

The exit activities were completed in 2022.

SG&A expenses increased during 2024 as compared to 2023, primarily due to higher intangible amortization and incremental operating costs from our recent acquisitions, transaction and separation costs, and employee compensation, partially offset by benefits from productivity measures and lower discrete restructuring costs.

R&D expenses, consisting principally of internal and contract engineering personnel costs, increased slightly during 2024 as compared to 2023 due to the incremental costs from our recent acquisitions and ongoing investments in innovation.

NON-OPERATING INCOME (EXPENSE), NET

Interest costs

For a discussion of our outstanding indebtedness, refer to Note 10 to the accompanying consolidated financial statements.

Net interest expense was $152.8 million during 2024, compared to $123.5 million during 2023.

The year-over-year interest expense increase was due to higher interest rates incurred on floating rate debt instruments, despite overall lower debt balance levels carried during the year.

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

For a discussion of our outstanding indebtedness, refer to Note 9 to the accompanying consolidated financial statements.

Loss from 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 3 to the consolidated financial statements.

Other non-operating expense, net

Other non-operating expense was $58.6 million during 2024, compared to $19.4 million during 2023.

The year-over-year increase was primarily due to an increase in losses from equity investments of $22.1 million and a charitable contribution of $20.0 million made in the first quarter of 2024.

For further discussion of these transactions, refer to Note 6 and Note 1 to the consolidated financial statements, respectively.

Income tax expense and deferred tax assets and liabilities reflect management’s assessment of future taxes expected to be paid on items reflected in our financial statements.

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Our effective tax rate can be affected by, among others, changes in the mix of earnings in countries with differing statutory tax rates (including as a result of business acquisitions and dispositions), changes in the valuation of deferred tax assets and liabilities, accruals related to contingent tax liabilities and period-to-period changes in such accruals, the results of audits and examinations of previously filed tax returns (as discussed below), the expiration of statutes of limitations, the implementation of tax planning strategies, tax rulings, court decisions, settlements with tax authorities, and changes in tax laws.

The amount of income taxes we pay is subject to audit by federal, state, and foreign tax authorities, which may result in proposed assessments.

We are subject to income, transaction and other taxes in the United States and in multiple foreign jurisdictions.

Our future income tax rates could be volatile and difficult to predict due to changes in business profit by jurisdiction, changes in the amount and recognition of deferred tax assets and liabilities, or by changes in tax laws, regulations, or accounting principles.

For example, the Organisation for Economic Co-operation and Development continues to advance proposals for modernizing international tax rules, including the introduction of global minimum tax standards.

We closely monitor changes to tax laws, regulations, accounting principles, and global tax standards;

and at the time of a change, the related expense or benefit recorded may be material to the quarter and year of change.

Furthermore, certain tax laws are inherently ambiguous requiring subjective interpretation on the application thereof.

Our interpretation and the corresponding amount of taxes we pay is, and may in the future continue to be, subject to audits by U.S.

federal, state, and local tax authorities and by non-U.S.

tax authorities.

If these audits result in payments or assessments different from our reserves, our future results may include unfavorable adjustments to our tax liabilities and our financial statements could be adversely affected.

The Company is subject to examination in the United States, various states and foreign jurisdiction for the tax years 2014 to 2024.

These examinations include filings of tax returns prior to our separation from Danaher, tax returns of enterprises no longer in our portfolio, and tax returns for pre-acquisition periods of enterprises added to our portfolio.

Significant obligations are detailed in our tax matters agreements in connection with the separation of Fortive from Danaher on July 1, 2016, the split-off of the Automation and Specialty business on October 1, 2018, and the Vontier separation on October 9, 2020.

We review our global tax positions on a quarterly basis.

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 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.

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.

Changes by the U.S.

in relation to international tax reform could increase uncertainty and may adversely affect our income tax provision, cash taxes paid, and effective tax rate.

Any future adjustments resulting from retrospective regulations and guidance issued will be considered as discrete income tax expense or benefit in the interim period the guidance is issued.

Furthermore, changes in multilateral agreements and the tax laws of foreign jurisdictions could arise as a result of the base erosion and profit shifting project undertaken by the Organization for Economic Co-Operation and Development (the “OECD”) and could significantly increase our tax provision, cash taxes paid, and effective tax rate in future years.

The OECD has issued significant global tax policy changes that include both expanded reporting as well as technical global tax policy changes.

During 2021, an agreed framework and model rules for a global minimum corporate tax rate of fifteen percent (15%) was released by the OECD.

Many countries in which we operate have implemented legislation to align with model rules and with effective dates spanning from 2024 through 2025.

The Company will continue to monitor and evaluate the impact of OECD policy changes as foreign jurisdictions continue to adopt OECD guidance.

In addition, significant obligations are detailed in our tax matters agreements in connection with the separation of Fortive from Danaher on July 1, 2016, the split-off of the Automation and Specialty business on October 1, 2018, and the Vontier separation on October 9, 2020.

We review our global tax positions on a quarterly basis, considering many factors including 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.

For a discussion of risks related to these and other tax matters, please refer to “Item 1A.

Risk Factors.”

Comparison of the Years Ended December 31, 2023 and 2022

Our effective tax rate for the years ended December 31, 2023 and 2022 was 12.6% and 13.5%, respectively.

Effective Tax Rate

Our effective tax rate was 14.1% during 2024 and 12.6% during 2023, respectively.

Our effective tax rate for 2024 differs from the U.S.

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

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.

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, non-deductible transaction costs related to the Separation and the effect of changes in tax rates enacted in the current period.

COMPREHENSIVE INCOME

Comprehensive income increased by $251 million in 2023 as compared to 2022, primarily due to a favorable change in foreign currency translation adjustments of $188 million, an increase in net income of $111 million, and unfavorable changes in pension benefit adjustments of $48 million.

Comprehensive income decreased by $172 million in 2024 as compared to 2023, primarily due to an unfavorable change in foreign currency translation adjustments of $149 million, offset by an increase in net income of $33 million and a favorable change in pension benefit adjustments of $11 million.

FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

We are exposed to market risk from changes in interest rates, foreign currency exchange rates, credit risk and commodity prices, each of which could impact our financial statements.

We generally address our exposure to these risks through our

normal operating and financing activities.

We generally address our exposure to these risks through our normal operating and financing activities.

In addition, our broad-based business activities help to reduce the impact that volatility in any particular area or related areas may have on our operating profit as a whole.

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As of December 31, 2024, our variable-rate debt obligations consist of U.S.

dollar denominated commercial paper, U.S.

dollar denominated delay-draw term loan, and senior unsecured term facilities denominated in either Euros or Japanese Yen (refer to Note 10 to the consolidated financial statements for information regarding our outstanding indebtedness as of December 31, 2023).

dollar denominated commercial paper and senior unsecured term facilities denominated in either Euros or Japanese Yen (refer to Note 9 to the consolidated financial statements for information regarding our outstanding indebtedness as of December 31, 2024).

As a result, our primary interest rate exposure results from changes in short-term interest rates.

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The annual effective rate associated with our outstanding variable-rate obligation was approximately 4.85% with interest expense of $59 million.

On an annualized basis, a hypothetical 10 basis points increase in market interest rates as of December 31, 2023 on our variable-rate debt obligations as of December 31, 2023 would have increased our interest expense by approximately $2.2 million in 2023.

As of December 31, 2024, on an annualized basis, a hypothetical 10 basis points increase in market interest rates on our variable-rate debt obligations would have increased our interest expense by approximately $1.0 million in 2024.

Foreign Currency Exchange Rate Risk

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dollar as of December 31, 2024 would have resulted in a reduction of foreign currency-denominated net assets and stockholders’ equity of approximately $326 million.

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.

As of December 31, 2024, our outstanding €500 million Euro-denominated senior unsecured notes due 2026, €700 million Euro-denominated senior unsecured notes due 2029, ¥14.4 billion Yen-denominated variable interest rate term loan, and €275 million Euro-denominated variable interest rate term loan were designated as net investment hedges of our investment in applicable foreign operations.

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, respectively, in Other comprehensive income (loss) related to the net investment hedges.

For the years ended December 31, 2024, 2023, and 2022, we recognized after-tax gains of $60.4 million, losses of $1.2 million, and losses of $5.1 million within Other comprehensive income (loss) related to the net investment hedges, respectively.

Currency exchange rates unfavorably impacted 2024 reported sales by 0.6% as compared to 2023, as the U.S.

dollar was, on average, stronger against most major currencies during 2024 as compared to exchange rate levels during 2023.

In the fourth quarter of 2023, the U.S.

dollar was, on average, weaker against most major currencies.

If the exchange rates in effect as of December 31, 2023 were to prevail throughout 2024, currency exchange rates would positively impact 2024 estimated sales by approximately 0.3% relative to our performance in 2023.

If the exchange rates in effect as of December 31, 2024 were to prevail throughout 2025, currency exchange rates would negatively impact 2025 estimated sales by approximately 1.4% relative to our performance in 2024.

In general, additional strengthening of the U.S.

dollar against other major currencies would further negatively impact our sales and results of operations on an overall basis and any strengthening of the U.S.

dollar against other major currencies would adversely impact our sales and results of operations.

dollar against other major currencies would further negatively impact our sales and results of operations on an overall basis.

We have generally accepted the exposure to exchange rate movements without using derivative financial instruments to manage this risk.

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We are exposed to potential credit losses in the event of nonperformance by counterparties to our financial instruments.

Financial instruments that potentially subject us to credit risk consist of cash and highly-liquid investment grade cash equivalents and receivables from customers.

Financial instruments that potentially subject us to credit risk consist of cash and highly-liquid investment grade cash

equivalents and receivables from customers.

We place cash and cash equivalents with various high-quality financial institutions throughout the world and exposure is limited at any one institution.

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We emphasize safety and liquidity of principal over yield on those funds.

In addition, concentrations of credit risk

arising from receivables from customers are limited due to the diversity of our customers.

In addition, concentrations of credit risk arising from receivables from customers are limited due to the diversity of our customers.

Our businesses perform credit evaluations of their customers’ financial conditions as appropriate and also obtain collateral or other security when appropriate.

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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 stock 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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Under the Shelf Registration Statement, we may from time to time sell shares of common stock, preferred stock, debt securities, depositary shares, purchase contracts, purchase units, warrants and subscription rights in one or more offerings.

For additional information regarding the Company’s recent registered offering of €500 million aggregate principal amount of our 3.7% Euro-denominated senior unsecured notes due 2026 and €700 million aggregate principal amount of our 3.7% Euro-denominated senior unsecured notes due 2029, refer to Note 10 to the Consolidated Financial Statements.

For example, in February 2024, we completed our 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”) under the Shelf Registration Statement.

We continue to monitor the financial markets, the stability of U.S and international banks and general global economic conditions.

If changes in financial markets or other areas of the economy adversely affect our access to the capital markets and other financing sources, we would expect to rely on a combination of available cash and existing available capacity under our credit facilities to provide short-term funding.

In addition, our access to the capital markets and other financing sources is impacted by any change in our credit rating.

If changes in financial markets or other areas of the economy or downgrade in our credit rating adversely affect our access to the capital markets and other financing sources, we would expect to rely on a combination of available cash and existing available capacity under our credit facilities to provide short-term funding.

Overview of Cash Flows and Liquidity

Following is an overview of our cash flows and liquidity:

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

Year Ended December 31,

($ in millions) 2023 2022

Net cash provided by operating activities

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Cash paid for acquisitions, net of cash received $ (1,721.8) $ (95.8)

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

Purchases of property, plant and equipment

(120.4) (107.8)

Proceeds from sale of property

Proceeds from sale of business

Cash infusion into divestiture

All other investing activities (1.0) 0.8

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$ (1,796.0) $ (195.4)

Net proceeds from (repayments of) commercial paper borrowings

$ (596.5) $ 839.9

Proceeds from borrowings (maturities longer than 90 days), net of issuance costs 1,733.5 549.3

Net proceeds from commercial paper borrowings

Payment of 0.875% convertible senior notes due 2022 — (1,156.5)

Repurchase of common shares (272.9) (442.9)

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

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

Repurchase of common shares (889.6) (272.9)

Payment of dividends

(111.2) (102.0)

All other financing activities 71.1 18.0

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Operating Activities

Operating cash flows 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 approximately $1.4 billion in 2023, representing an increase of $50 million, or approximately 3.9%, as compared to 2022, and primarily attributable to the following factors:

• Year-over-year increases of $112 million in Operating cash flow from net earnings, net of non-cash items (Amortization, Depreciation, Stock-based compensation, and Russia exit and wind down costs incurred in 2022).

• The aggregate changes in accounts receivable, inventories, and trade accounts payable used $9 million of cash during 2023 compared to using $11 million of cash during 2022.

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 $1.5 billion in 2024, representing an increase of $173 million, or 12.8%, as compared to 2023, primarily attributable to the following factors:

• Year-over-year increases of $35 million in Operating cash flow 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 accounts receivable, inventories, and trade accounts payable generated $79 million of cash during 2024 compared to using $9 million of cash during 2023.

The amount of cash flow generated from or used by the aggregate of accounts receivable, inventories, and trade accounts payable depends upon how effectively we manage the cash conversion cycle, which generally represents the number of days that elapse from the day we pay for the purchase of raw materials and components to the collection of cash from our customers, and can be significantly impacted by the timing of collections and payments in a period.

• The aggregate change in prepaid expenses and other assets, accrued expenses and other liabilities, and changes in deferred income taxes used $40 million of cash in 2024 as compared to using $91 million in 2023.

The year-over-year changes were driven by timing differences in tax payments and employee compensation and benefits.

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

Investing Activities

Investing cash outflows consist primarily of cash paid for acquisitions and capital expenditures.

Net cash used in investing activities was approximately $195 million during 2023 compared to approximately $103 million of net cash used in 2022, respectively.

The increase in investing cash outflow during 2023 as compared to 2022 was primarily due to a year-over-year increase of $83 million in cash used for acquisitions, net of cash acquired and a $12 million increase in capital expenditures.

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 equipment used in revenue arrangements with customers.

Capital expenditures totaled $108 million in 2023 and $96 million in 2022.

Cash outflows from investing activities increased by $1.6 billion in 2024 as compared to 2023 with the increase primarily due to a year-over year increase in cash used for acquisitions, net of cash acquired, of approximately $1.6 billion, an increase in capital expenditures of approximately $13 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 and business of approximately $54 million.

We expect capital spending to be between approximately $120 million and $150 million in 2025, though actual expenditures will ultimately depend on business conditions.

Financing Activities and Indebtedness

Financing cash flows consist primarily of cash flows associated with the issuance and repayments of debt and commercial paper, payments of cash dividends to shareholders.

Financing activities from continuing operations generated cash of $32 million in 2023, and used cash of $1.3 billion in 2022.

Financing cash flows consist primarily of cash flows associated with the issuance and repayments of debt and commercial paper, payments of cash dividends to shareholders and share repurchases.

Financing activities used cash of $793 million in 2024, and generated cash of $32 million in 2023.

Financing activities during 2024 reflected the following transactions:

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

• 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, 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 $597 million in net commercial paper repayments under the U.S.

dollar-denominated commercial paper program.

• We repurchased 12 million shares of our common stock for approximately $890 million, including excise tax payments, under our share repurchase program.

• We made dividend payments to common shareholders totaling $111 million.

• All other financing activities primarily include activities related to the stock incentive plan.

Financing activities during 2023 reflected the following transactions:

• On December 7, 2023, we entered into a term loan credit agreement, which provides for a 364-days delayed draw term loan facility up to an aggregate principal amount of $1.3 billion.

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• Dividend payments to common shareholders totaling $102 million.

Financing activities during 2022 reflected the following transactions:

• On June 17, 2022, we entered into a three-year, ¥14.4 billion Yen Term Loan.

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

• On June 21, 2022, we entered into a three-year €275 million Euro Term Loan.

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

• 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.

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

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

• We increased borrowings by $39 million in net commercial paper under the U.S.

dollar-denominated commercial paper program.

As of December 31, 2023, the commercial paper borrowings had a weighted average annual effective rate of 4.80% and a weighted average maturity of approximately 32 days.

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

• We repurchased 7 million shares of our outstanding common stock for approximately $443 million under our publicly-announced share repurchase program.

• Dividend payments to common shareholders totaling $99.5 million.

We generally expect to satisfy any short-term liquidity needs that are not met through operating cash flows and available cash primarily through term loans or issuances of commercial paper under the Commercial Paper Programs, with credit support provided by the Revolving Credit Facility.

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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.

As of December 31, 2023 and 2022, we had $1.3 billion and $405.0 million borrowings outstanding under our Commercial Paper Program, respectively.

As of December 31, 2024 and 2023, we had $650 million and $1.3 billion borrowings outstanding under our Commercial Paper Program, respectively.

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.

Refer to Note 10 to the Consolidated Financial Statements for additional information regarding the Company’s financing activities and indebtedness, including the Company’s outstanding debt as of December 31, 2023, financing activities subsequent to December 31, 2023, the Company’s commercial paper program, and the Revolving Credit Facility.

Refer to Note 9 to the consolidated financial statements for additional information regarding the Company’s financing activities and indebtedness, including the Company’s outstanding debt as of December 31, 2024, the Company’s commercial paper program, and the Revolving Credit Facility.

Refer to Note 15 to the consolidated financial statements for a description of the Company’s share repurchase program.

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Cash and Cash Requirements

As of December 31, 2023, we held approximately $1.9 billion of cash and cash equivalents that were invested in highly liquid investment-grade instruments with a maturity of 90 days or less and yielded insignificant interest income during 2023.

Approximately 35.0% of the $1.9 billion in cash and cash equivalents was held outside of the United States.

Subsequent to December 31, 2023 we used available cash to fund our acquisition of EA Elektro-Automatik Holding GmbH (“EA”) which closed on January 3, 2024.

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

As of December 31, 2024, we held approximately $813 million of cash and cash equivalents, of which approximately 88% was held outside of the United States.

Our cash and cash equivalents were invested in highly liquid investment-grade instruments with a maturity of 90 days or less.

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 following table sets forth a summary of our short-term and long-term cash requirements as of December 31, 2024 under (1) long-term debt principal and interest obligations, (2) leases, (3) purchase obligations and (4) other long-term liabilities reflected on our balance sheet under GAAP.

Certain of our acquisitions may involve the potential payment of contingent consideration.

The table below does not reflect any such obligations, as the timing and amounts of any such payments are uncertain.

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Total $ 7,387.4 $ 2,062.8 $ 5,324.6

(a) The amount due within one year of December 31, 2023 is related to the Delayed Draw Term Loan due 2024.

(a) The amount due within one year of December 31, 2024 is related to the Euro Term Loan due 2025 and Yen Term Loan due 2025.

Refer to Note 9 to the consolidated financial statements for additional information regarding the Company’s indebtedness as of December 31, 2024.

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(d) Consist of agreements to purchase goods or services that are enforceable and legally binding on us and that specify all significant terms, including fixed or minimum quantities to be purchased, fixed, minimum or variable price provisions, and the approximate timing of the transaction.

(e) Primarily consist of obligations under product service and warranty policies and allowances, performance and operating cost guarantees, estimated environmental remediation costs, self-insurance and litigation claims, post-retirement benefits, pension benefit obligations, net tax liabilities, deferred compensation obligations, and the deferred payment related to the 2023 acquisitions.

The timing of cash flows associated with these obligations is based upon management’s estimates over the terms of these arrangements and is largely based upon historical experience.

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

As of December 31, 2023 we expect to have sufficient liquidity to satisfy our cash needs for the foreseeable future, including our cash needs in the United States.

As of December 31, 2024 we expect to have sufficient liquidity to satisfy our cash needs for the foreseeable future.

CRITICAL ACCOUNTING ESTIMATES

Management’s discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with GAAP.

The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and

expenses, and related disclosure of contingent assets and liabilities.

We base these estimates and judgments on historical experience, the current economic environment, and on various other assumptions that are believed to be reasonable under the circumstances.

The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.

We base these estimates and judgments on historical

experience, the current economic environment, and on various other assumptions that are believed to be reasonable under the circumstances.

Actual results may differ materially from these estimates and judgments.

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Acquired Intangibles and Goodwill :

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

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

The fair value of acquired intangible assets are determined using information available near the acquisition date based on estimates and assumptions that are deemed reasonable by us.

Significant assumptions include the discount rates and certain assumptions that form the basis of the forecasted cash flows of the acquired business including earnings before interest, taxes, depreciation and amortization (“EBITDA”), revenue, revenue growth rates, royalty rates, customer attrition rates, and technology obsolescence rates.

These assumptions are forward looking and could be affected by future economic and market conditions.

We engage third-party valuation specialists who review our critical assumptions and calculations of the fair value of acquired intangible assets in connection with material acquisitions.

In connection with the EA acquisition in the first quarter of 2024, we recorded approximately $1.18 billion of goodwill and approximately $681 million of intangible assets.

Refer to Notes 2, 3 and 5 to the consolidated financial statements for a description of our policies relating to goodwill, acquired intangibles, and acquisitions.

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We believe the impairment risk associated with these reporting units generally decreases as we integrate these businesses and better position them for potential future earnings growth.

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 $5.6 billion.

Our annual goodwill impairment analysis in 2024 indicated that, in all instances, the fair values of our reporting units exceeded their carrying values and consequently did not result in an impairment charge.

The excess of the estimated fair value over carrying value (expressed as a percentage of carrying value for the respective reporting unit) for each of our reporting units as of the annual testing date ranged from approximately 60% to approximately 801%.

The excess of the estimated fair value over carrying value (expressed as a multiple of the carrying value for the respective reporting unit) for each of our reporting units as of the annual testing date ranged from approximately 1.6x to approximately 13.1x.

In order to evaluate the sensitivity of the fair value calculations used in the goodwill impairment test, we applied a hypothetical 10% decrease to the fair values of each reporting unit and compared those hypothetical values to the reporting unit carrying values.

Based on this hypothetical 10% decrease, the excess of the estimated fair value over carrying value (expressed as a percentage of carrying value for the respective reporting unit) for each of our reporting units ranged from approximately 44% to approximately 711%.

Based on this hypothetical 10% decrease, the excess of the estimated fair value over carrying value (expressed as a multiple of the carrying value for the respective reporting unit) for each of our reporting units ranged from approximately 1.5x to approximately 11.8x.

We evaluated other factors relating to the fair value of the reporting units, including, as applicable, results of the estimated fair value using an income approach, market positions of the businesses, comparability of market sales transactions and financial and operating performance, and concluded no impairment charges were required.

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These analyses require management to make judgments and estimates about future revenues, expenses, market conditions, and discount rates related to these assets.

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.

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, 2024, and recorded no impairments.

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 which would adversely affect our financial statements.

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Revenue is recognized when control over the promised products or services is transferred to the customer in an amount that reflects the consideration that we expect to receive in exchange for those goods or services.

In determining if control has transferred, we consider whether certain indicators of the transfer of control are present, such as the transfer of title, present right to payment, significant risks and

rewards of ownership, and customer acceptance when acceptance is not a formality.

To determine the consideration that the customer owes us, we make judgments regarding the amount of customer allowances and rebates, consisting primarily of volume discounts and other short-term incentive programs.

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Historically, our estimates of revenue have been materially correct.

For a description of our pension accounting practices, refer to Note 11 to the consolidated financial statements.

Certain of our U.S.

employees participate in noncontributory defined benefit pension plans.

Calculations of the amount of pension costs and obligations depend on the assumptions used in the actuarial valuations, including assumptions regarding discount rates, expected return on plan assets, rates of salary increases, health care cost trend rates, mortality rates, and other factors.

If the assumptions used in calculating pension and other post-retirement benefits costs and obligations are incorrect or if the factors underlying the assumptions change (as a result of differences in actual experience, changes in key economic indicators, or other factors), our financial statements could be materially affected.

A 50 basis point reduction in the discount rates used for the plans during 2023 would have increased the net obligation by approximately $16 million from the amounts recorded in the financial statements as of December 31, 2023.

Our plan assets consist of various insurance contracts, equity and debt securities as determined by the administrator of each plan.

The estimated long-term rate of return for the plans was determined on a plan by plan basis based on the nature of the plan assets and ranged from 1.50% to 6.47%.

If the expected long-term rate of return on plan assets during 2023 was reduced by 50 basis points, pension expense in 2023 would have increased by approximately $0.9 million ($0.8 million on an after-tax basis).

Income Taxes :

21 unchanged sentences

The amount of income taxes we pay is subject to audit by federal, state, and foreign tax authorities, which may result in proposed assessments (see “-Results of Operations - Income Taxes” and Note 12 to the consolidated financial statements).

We review our global tax positions on a

quarterly basis.

We review our global tax positions on a quarterly basis.

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.

6 unchanged sentences

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 7. Management’s Discussion and Analysis