SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

________________________________________________



(Mark One)
☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: September ~~27, 2019~~25, 2020



Or
☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to

Commission file number 1-37654

________________________________________________

Fortive Corporation

(Exact name of registrant as specified in its charter)

________________________________________________



Delaware						47-5654583
(State or other jurisdiction of incorporation or organization)						(I.R.S. employer identification number)

6920 Seaway Blvd

Everett,

98203

~~6920 Seaway Blvd~~

~~Everett,~~

~~98203~~

(Address of principal executive offices)

(Zip code)

Registrant’s telephone number, including area code: ((425) 446-5000

~~425~~) ~~446-5000~~

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading symbols	Name of each exchange on which registered
Common stock, par value $0.01 per share	FTV	New York Stock Exchange
5% Mandatory convertible preferred stock, Series A, par value $0.01 per share	FTV. PRA	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

~~Large accelerated filer~~

☒

~~Accelerated filer~~

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares of common stock outstanding at October ~~17, 2019~~20, 2020 was ~~335,804,183.~~337,195,814.

FORTIVE CORPORATION

INDEX

FORM 10-Q

Table of Contents

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

FORTIVE CORPORATION AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEETS

($ in millions, except per share amounts)


	As of
	September 25, 2020		December 31, 2019
	(unaudited)
ASSETS
Current assets:
Cash and equivalents	$	1,489.1	$	1,205.2
Accounts receivable, net	1,207.6		1,384.5
Inventories:
Finished goods	296.6		285.6
Work in process	98.3		100.4
Raw materials	266.9		254.3
Inventories	661.8		640.3
Prepaid expenses and other current assets	414.1		455.6
Current assets, discontinued operations	2.1		3.2
Total current assets	3,774.7		3,688.8
Property, plant and equipment, net of accumulated depreciation of $889.7 and $838.7 at September 25, 2020 and December 31, 2019, respectively	513.6		519.5
Operating lease right-of-use assets	215.1		206.8
Other assets	759.7		779.6
Goodwill	8,341.0		8,399.3
Other intangible assets, net	3,595.6		3,845.0

Total assets	$	17,199.7	$	17,439.0
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt	$	999.2	$	1,500.0
Trade accounts payable	777.1		765.5
Current operating lease liabilities	54.7		54.9
Accrued expenses and other current liabilities	1,210.0		1,146.8

Total current liabilities	3,041.0		3,467.2
Operating lease liabilities	171.0		159.0
Other long-term liabilities	1,600.4		1,584.2
Long-term debt	4,699.2		4,828.4

Commitments and Contingencies
Equity:
Preferred stock: $0.01 par value, 15.0 million shares authorized; 5.0% Mandatory convertible preferred stock, series A, 1.4 million shares designated, issued and outstanding at September 25, 2020 and December 31, 2019	0		0
Common stock: $0.01 par value, 2.0 billion shares authorized; 338.3 and 336.9 million issued; 337.2 and 336.0 million outstanding at September 25, 2020 and December 31, 2019, respectively	3.4		3.4
Additional paid-in capital	3,391.7		3,311.1
Retained earnings	4,372.7		4,128.8
Accumulated other comprehensive income (loss)	(91.7)		(56.3)
Total Fortive stockholders’ equity	7,676.1		7,387.0
Noncontrolling interests	12.0		13.2
Total stockholders’ equity	7,688.1		7,400.2
Total liabilities and equity	$	17,199.7	$	17,439.0

As of
September 27, 2019 December 31, 2018
(unaudited)
ASSETS
Current assets:
Cash and equivalents $ 1,060.5
$ 1,178.4
Accounts receivable, net 1,332.0
1,195.1
Inventories:
Finished goods 311.7
219.5
Work in process 102.3
103.1
Raw materials 266.7
251.9
Total inventories 680.7
574.5
Prepaid expenses and other current assets 374.9
193.2
Current assets, discontinued operations 17.8
30.0
Total current assets 3,465.9
3,171.2
Property, plant and equipment, net of accumulated depreciation of $825.7 and $889.8 at September 27, 2019 and December 31, 2018, respectively 519.8
576.1
Operating lease right-of-use assets 210.2
—
Other assets 808.4
548.9
Goodwill 7,995.5
6,133.1
Other intangible assets, net 3,660.6
2,476.3
Total assets $ 16,660.4
$ 12,905.6
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt $ 1,000.0
$ 455.6
Trade accounts payable 693.8
706.5
Current operating lease liabilities 52.2
—
Accrued expenses and other current liabilities 1,154.6
999.3
Current liabilities, discontinued operations 15.7
30.7
Total current liabilities 2,916.3
2,192.1
Operating lease liabilities 165.3
—
Other long-term liabilities 1,399.6
1,125.9
Long-term debt 5,015.6
2,974.7
Equity:
Preferred stock: $0.01 par value, 15.0 million shares authorized; 5.0% Mandatory convertible preferred stock, series A, 1.4 million shares designated, issued and outstanding at September 27, 2019 and December 31, 2018 —
—
Common stock: $0.01 par value, 2.0 billion shares authorized; 336.6 and 335.1 million issued; 335.7 and 334.5 million outstanding at September 27, 2019 and December 31, 2018, respectively 3.4
3.4
Additional paid-in capital 3,291.2
3,126.0
Retained earnings 3,976.7
3,552.7
Accumulated other comprehensive income (loss) (119.6 ) (86.6 )
Total Fortive stockholders’ equity 7,151.7
6,595.5
Noncontrolling interests 11.9
17.4
Total stockholders’ equity 7,163.6
6,612.9
Total liabilities and equity $ 16,660.4
$ 12,905.6

See the accompanying Notes to Consolidated Condensed Financial Statements.

Table of Contents

FORTIVE CORPORATION AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS

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

(unaudited)


														Three Months Ended						Nine Months Ended
	Three Months Ended						Nine Months Ended							September 25, 2020		September 27, 2019		September 25, 2020		September 27, 2019
	September 27, 2019			September 28, 2018			September 27, 2019			September 28, 2018
Sales of products	$	1,624.6		$	1,430.1		$	4,652.7		$	4,202.0
Sales of products and software													Sales of products and software	$	1,671.3	$	1,624.6	$	4,526.8	$	4,652.7
Sales of services	235.4			171.1			664.9			493.2			Sales of services	231.0		235.4		660.2		664.9
Total sales	1,860.0			1,601.2			5,317.6			4,695.2			Total sales	1,902.3		1,860.0		5,187.0		5,317.6
Cost of product sales	(781.2		)	(659.4		)	(2,237.1		)	(1,930.9		)
Cost of product and software sales													Cost of product and software sales	(774.6)		(781.2)		(2,102.0)		(2,237.1)
Cost of service sales	(151.1		)	(115.9		)	(436.1		)	(341.3		)	Cost of service sales	(144.3)		(151.1)		(411.5)		(436.1)
Total cost of sales	(932.3		)	(775.3		)	(2,673.2		)	(2,272.2		)	Total cost of sales	(918.9)		(932.3)		(2,513.5)		(2,673.2)
Gross profit	927.7			825.9			2,644.4			2,423.0			Gross profit	983.4		927.7		2,673.5		2,644.4
Operating costs:													Operating costs:
Selling, general and administrative expenses	(566.5		)	(440.6		)	(1,590.0		)	(1,233.6		)	Selling, general and administrative expenses	(562.3)		(566.5)		(1,636.1)		(1,590.0)
Research and development expenses	(119.1		)	(103.7		)	(345.5		)	(305.5		)	Research and development expenses	(110.7)		(119.1)		(331.0)		(345.5)
Impairment of goodwill													Impairment of goodwill	0		0		(85.3)		—
Operating profit	242.1			281.6			708.9			883.9			Operating profit	310.4		242.1		621.1		708.9
Non-operating expenses, net:													Non-operating expenses, net:
Gain from combination of business	41.2			—			41.2			—			Gain from combination of business	0		41.2		0		41.2
Interest expense, net	(47.0		)	(23.1		)	(116.7		)	(70.3		)	Interest expense, net	(43.9)		(47.0)		(130.7)		(116.7)
Other non-operating expenses, net	(1.2		)	(0.8		)	(1.6		)	(2.6		)
Other non-operating income (expense), net													Other non-operating income (expense), net	(1.4)		(1.2)		(0.7)		(1.6)
Earnings from continuing operations before income taxes	235.1			257.7			631.8			811.0			Earnings from continuing operations before income taxes	265.1		235.1		489.7		631.8
Income taxes	(27.8		)	(43.7		)	(85.2		)	(132.8		)	Income taxes	(39.3)		(27.8)		(91.3)		(85.2)
Net earnings from continuing operations	207.3			214.0			546.6			678.2			Net earnings from continuing operations	225.8		207.3		398.4		546.6
Earnings from discontinued operations, net of income taxes	(0.2		)	31.3			(0.5		)	123.3
Loss from discontinued operations, net of income taxes													Loss from discontinued operations, net of income taxes	0		(0.2)		(0.7)		(0.5)
Net earnings	207.1			245.3			546.1			801.5			Net earnings	225.8		207.1		397.7		546.1
Mandatory convertible preferred dividends	(17.3		)	(17.4		)	(51.8		)	(17.6		)	Mandatory convertible preferred dividends	(17.3)		(17.3)		(51.8)		(51.8)
Net earnings attributable to common stockholders	$	189.8		$	227.9		$	494.3		$	783.9		Net earnings attributable to common stockholders	$	208.5	$	189.8	$	345.9	$	494.3

Net earnings per common share from continuing operations:													Net earnings per common share from continuing operations:
Basic	$	0.57		$	0.56		$	1.47		$	1.89		Basic	$	0.62	$	0.57	$	1.03	$	1.47
Diluted	$	0.56		$	0.55		$	1.46		$	1.86		Diluted	$	0.61	$	0.56	$	1.02	$	1.46
Net earnings per share from discontinued operations:													Net earnings per share from discontinued operations:
Basic	$	—		$	0.09		$	—		$	0.35		Basic	$	0	$	0	$	0	$	0
Diluted	$	—		$	0.09		$	—		$	0.35		Diluted	$	0	$	0	$	0	$	0
Net earnings per share:													Net earnings per share:
Basic	$	0.56		$	0.65		$	1.47		$	2.24		Basic	$	0.62	$	0.56	$	1.03	$	1.47
Diluted	$	0.56		$	0.64		$	1.46		$	2.21		Diluted	$	0.61	$	0.56	$	1.02	$	1.46
Average common stock and common equivalent shares outstanding:													Average common stock and common equivalent shares outstanding:
Basic	336.1			349.9			335.6			349.2			Basic	337.6		336.1		337.3		335.6
Diluted	339.9			355.3			339.7			354.8			Diluted	340.8		339.9		340.2		339.7
The sum of net earnings per share may not add due to rounding

See the accompanying Notes to Consolidated Condensed Financial Statements.

Table of Contents

FORTIVE CORPORATION AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME

($ in millions)

(unaudited)


	Three Months Ended						Nine Months Ended							Three Months Ended						Nine Months Ended
	September 27, 2019			September 28, 2018			September 27, 2019			September 28, 2018				September 25, 2020		September 27, 2019		September 25, 2020		September 27, 2019
Net earnings	$	207.1		$	245.3		$	546.1		$	801.5		Net earnings	$	225.8	$	207.1	$	397.7	$	546.1
Other comprehensive income, net of income taxes:													Other comprehensive income, net of income taxes:
Foreign currency translation adjustments	(52.5		)	(23.9		)	(34.5		)	(87.3		)	Foreign currency translation adjustments	63.9		(52.5)		(36.4)		(34.5)
Pension adjustments	0.5			0.7			1.5			2.1			Pension adjustments	1.0		0.5		1.0		1.5
Total other comprehensive income (loss), net of income taxes	(52.0		)	(23.2		)	(33.0		)	(85.2		)	Total other comprehensive income (loss), net of income taxes	64.9		(52.0)		(35.4)		(33.0)
Comprehensive income	$	155.1		$	222.1		$	513.1		$	716.3
Comprehensive income (loss)													Comprehensive income (loss)	$	290.7	$	155.1	$	362.3	$	513.1

See the accompanying Notes to Consolidated Condensed Financial Statements.

FORTIVE CORPORATION AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CHANGES IN EQUITY

($ and shares in millions)


	Common Stock				Preferred Stock							Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)	Noncontrolling Interests
	Shares	Amount		Shares			Amount
Balance, December 31, 2019	336.0	$	3.4	1.4	$	0		$	3,311.1	$	4,128.8	$	(56.3)	$	13.2
Adoption of accounting standard	—	—		—	—			—		(31.3)		—		—
Balance, January 1, 2020	336.0	$	3.4	1.4	$	0		$	3,311.1	$	4,097.5	$	(56.3)	$	13.2
Net earnings for the period	—	—		—	—			—		41.9		—		—
Dividends to common shareholders	—	—		—	—			—		(23.5)		—		—
Mandatory convertible preferred stock cumulative dividends	—	—		—	—			—		(17.3)		—		—
Other comprehensive income (loss)	—	—		—	—			—		—		(137.3)		—
Common stock-based award activity	0.8	—		—	—			22.6		—		—		—

Change in noncontrolling interests	—	—		—	—			—		—		—		(2.0)
Balance, March 27, 2020	336.8	$	3.4	1.4	$	0		$	3,333.7	$	4,098.6	$	(193.6)	$	11.2
Net earnings for the period	—	—		—	—			—		130.0		—		—
Dividends to common shareholders	—	—		—	—			—		(23.6)		—		—
Mandatory convertible preferred stock cumulative dividends	—	—		—	—			—		(17.2)		—		—
Other comprehensive income	—	—		—	—			—		—		37.0		—
Common stock-based award activity	0.2	—		—	—			27.0		—		—		—
Change in noncontrolling interests	—	—		—	—			—		—		—		0.4
Balance, June 26, 2020	337.0	$	3.4	1.4	$	0		$	3,360.7	$	4,187.8	$	(156.6)	$	11.6
Net earnings for the period	—	—		—	—			—		225.8		—		—
Dividends to common shareholders	—	—		—	—			—		(23.6)		—		—
Mandatory convertible preferred stock cumulative dividends	—	—		—	—			—		(17.3)		—		—
Other comprehensive income	—	—		—	—			—		—		64.9		—
Common stock-based award activity	0.2	—		—	—			31.0		—		—		—
Change in noncontrolling interests	—	—		—	—			—		—		—		0.4
Balance, September 25, 2020	337.2	$	3.4	1.4	$	0		$	3,391.7	$	4,372.7	$	(91.7)	$	12.0

See the accompanying Notes to Consolidated Condensed Financial Statements.

~~FORTIVE CORPORATION AND SUBSIDIARIES~~

~~CONSOLIDATED CONDENSED STATEMENTS OF CHANGES IN EQUITY~~

~~($ and shares in millions)~~

Common Stock Preferred Stock Additional Paid-In Capital Retained Earnings
Accumulated
Other
Comprehensive
Income (Loss)

Noncontrolling
Interests
Shares Amount Shares Amount
Balance, December 31, 2017 347.8
$ 3.5
—
$ —
$ 2,444.1
$ 1,350.3
$ (7.6 ) $ 17.9
Adoption of accounting standards —
—
—
—
—
(3.9 ) —
—
Balance, January 1, 2018 347.8
3.5
—
$ —
2,444.1
1,346.4
(7.6 ) 17.9
Net earnings for the period —
—
—
—
—
261.2
—
—
Dividends to common shareholders —
—
—
—
—
(24.3 ) —
—
Separation related adjustments —
—
—
—
13.3
—
—
—
Other comprehensive income —
—
—
—
—
—
37.1
—
Common stock-based award activity 0.7
—
—
—
18.7
—
—
—
Change in noncontrolling interests —
—
—
—
—
—
—
(0.6 )
Balance, March 30, 2018 348.5
3.5
—
$ —
2,476.1
1,583.3
29.5
17.3
Net earnings for the period —
—
—
—
—
295.0
—
—
Dividends to common shareholders —
—
—
—
—
(24.4 ) —
—
Separation related adjustments —
—
—
—
(2.4 ) —
—
—
Other comprehensive income —
—
—
—
—
—
(99.1 ) —
Common stock-based award activity 0.5
—
—
—
26.1
—
—
—
Issuance of mandatory convertible preferred stock —
—
1.4
—
1,337.0
—
—
—
Changes in noncontrolling interests —
—
—
—
—
—
—
—
Balance, June 29, 2018 349.0
3.5
1.4
—
3,836.8
1,853.9
(69.6 ) 17.3
Net earnings for the period —
—
—
—
—
245.3
—
—
Dividends to common shareholders —
—
—
—
—
(24.5 ) —
—
Mandatory convertible cumulative stock dividends —
—
—
—
—
(17.6 ) —
—
Separation related adjustments —
—
—
—
(1.8 ) —
—
—
Other comprehensive income —
—
—
—
—
—
(23.2 )
Common stock-based award activity 0.8
—
—
—
27.5
—
—
—
Change in noncontrolling interests —
—
—
—
—
—
—
1.5
Balance, September 28, 2018 349.8
$ 3.5
1.4
$ —
$ 3,862.5
$ 2,057.1
$ (92.8 ) $ 18.8

~~See the accompanying Notes to Consolidated Condensed Financial Statements.~~

Table of Contents

FORTIVE CORPORATION AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

($ in millions)

(unaudited)


	Nine Months Ended							Nine Months Ended
	September 27, 2019			September 28, 2018				September 25, 2020		September 27, 2019
Cash flows from operating activities:							Cash flows from operating activities:
Net earnings from continuing operations	$	546.6		$	678.2		Net earnings from continuing operations	$	398.4	$	546.6
Noncash items:							Noncash items:
Depreciation	97.7			91.2			Depreciation	98.1		97.7
Amortization	211.4			81.3			Amortization	254.5		211.4
Stock-based compensation expense	45.5			37.4			Stock-based compensation expense	60.2		45.5
Impairment of goodwill							Impairment of goodwill	85.3		0
Gain from combination of business	(41.2		)	—			Gain from combination of business	0		(41.2)
Gain on sale of assets							Gain on sale of assets	(5.3)		0

Change in trade accounts receivable, net	(133.5		)	(71.8		)	Change in trade accounts receivable, net	147.8		(133.5)
Change in inventories	69.4			(73.4		)	Change in inventories	(10.2)		69.4
Change in trade accounts payable	(7.9		)	27.6			Change in trade accounts payable	13.4		(7.9)
Change in prepaid expenses and other assets	(115.1		)	(29.2		)	Change in prepaid expenses and other assets	54.0		(115.1)
Change in accrued expenses and other liabilities	127.5			37.6			Change in accrued expenses and other liabilities	56.5		127.5
Total operating cash provided by continuing operations	800.4			778.9			Total operating cash provided by continuing operations	1,152.7		800.4
Total operating cash provided by (used in) discontinued operations	(4.4		)	120.7
Total operating cash used in discontinued operations							Total operating cash used in discontinued operations	(0.8)		(4.4)
Net cash provided by operating activities	796.0			899.6			Net cash provided by operating activities	1,151.9		796.0
Cash flows from investing activities:							Cash flows from investing activities:
Payments for additions to property, plant and equipment							Payments for additions to property, plant and equipment	(86.2)		(79.6)
Proceeds from sale of assets							Proceeds from sale of assets	5.3		0
Cash paid for acquisitions, net of cash received	(3,387.7		)	(2,825.2		)	Cash paid for acquisitions, net of cash received	(24.7)		(3,387.7)
Payments for additions to property, plant and equipment	(79.6		)	(76.8		)
All other investing activities	—			4.0			All other investing activities	0.5		0
Total investing cash used in continuing operations	(3,467.3		)	(2,898.0		)
Total investing cash used in discontinued operations	—			(16.8		)

Net cash used in investing activities	(3,467.3		)	(2,914.8		)	Net cash used in investing activities	(105.1)		(3,467.3)
Cash flows from financing activities:							Cash flows from financing activities:

Net proceeds from (repayments of) commercial paper borrowings	695.5			(64.3		)	Net proceeds from (repayments of) commercial paper borrowings	(1,141.9)		695.5
Proceeds from borrowings (maturities longer than 90 days), net of issuance costs of $24.3 million for the nine months ended September 27, 2019	2,413.2			1,750.0
Proceeds from issuance of mandatory convertible preferred stock net of $43.0 million of issuance costs	—			1,337.4
Proceeds from borrowings (maturities longer than 90 days), net of issuance costs of $8 million and $24 million in 2020 and 2019, respectively							Proceeds from borrowings (maturities longer than 90 days), net of issuance costs of $8 million and $24 million in 2020 and 2019, respectively	741.7		2,413.2

Repayment of borrowings (maturities greater than 90 days)	(455.3		)	(725.0		)	Repayment of borrowings (maturities greater than 90 days)	(250.0)		(455.3)

Payment of common stock cash dividend to shareholders	(70.3		)	(73.2		)	Payment of common stock cash dividend to shareholders	(70.7)		(70.3)
Payment of mandatory convertible preferred stock cash dividend to shareholders	(34.5		)	(17.6		)	Payment of mandatory convertible preferred stock cash dividend to shareholders	(34.5)		(34.5)

All other financing activities	16.4			27.2			All other financing activities	(4.8)		16.4
Total financing cash provided by continuing operations	2,565.0			2,234.5
Net cash provided by financing activities	2,565.0			2,234.5

Net cash (used in) provided by financing activities							Net cash (used in) provided by financing activities	(760.2)		2,565.0
Effect of exchange rate changes on cash and equivalents	(11.6		)	(36.3		)	Effect of exchange rate changes on cash and equivalents	(2.7)		(11.6)
Net change in cash and equivalents	(117.9		)	183.0			Net change in cash and equivalents	283.9		(117.9)
Beginning balance of cash and equivalents	1,178.4			962.1			Beginning balance of cash and equivalents	1,205.2		1,178.4
Ending balance of cash and equivalents	$	1,060.5		$	1,145.1		Ending balance of cash and equivalents	$	1,489.1	$	1,060.5

See the accompanying Notes to Consolidated Condensed Financial Statements.

FORTIVE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

NOTE 1. BUSINESS OVERVIEW

Fortive Corporation (“Fortive,” the “Company,” “we,” “us,” or “our”) is a diversified industrial technology growth company encompassing businesses that are recognized leaders in attractive markets. Our well-known brands hold leading positions in ~~advanced instrumentation and~~field solutions, product realization, sensing technologies, health, transportation ~~technology,~~technologies, and franchise ~~distribution markets.~~distribution. Our businesses design, develop, service, manufacture, and market professional and engineered products, software, and services for a variety of end markets, building upon leading brand names, innovative technology, and significant market positions.

We prepared the unaudited consolidated condensed financial statements included herein in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) applicable for interim periods. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations; however, we believe the disclosures are adequate to make the information presented not misleading. The consolidated condensed financial statements included herein should be read in conjunction with the audited annual consolidated financial statements as of and for the year ended December 31, ~~2018~~2019 and the footnotes (“Notes”) thereto included within our ~~2018~~2019 Annual Report on Form 10-K.

In our opinion, the accompanying financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to fairly present our financial position as of September ~~27, 2019~~25, 2020 and December 31, ~~2018,~~2019, our results of operations for the three and nine ~~months~~month periods ended September ~~27, 2019~~25, 2020 and September ~~28, 2018,~~27, 2019, and cash flows for the nine ~~months~~month periods ended September ~~27, 2019~~25, 2020 and September ~~28, 2018. Reclassification of certain prior year amounts have been made to conform to current year presentation.~~27, 2019.

Vontier Separation and Discontinued Operations

On October 9, 2020 (the “Distribution Date”), the Company completed the separation of its Industrial Technologies segment by distributing 80.1% of the outstanding shares of Vontier Corporation (“Vontier”), the entity incorporated to hold such businesses, to Fortive stockholders (the “Separation”) on a pro rata basis. To effect the Separation, the Company distributed to its stockholders two shares of Vontier common stock for every five shares of the Company’s common stock outstanding held on September ~~4, 2019, we announced our intention~~25, 2020, the record date for the distribution, with the Company retaining 19.9% of the shares of Vontier common stock immediately following the Separation. The Company currently plans to ~~separate into two independent, publicly traded companies, subject to~~divest its 19.9% retained shares in Vontier after the satisfaction of certain conditions, including obtaining final approval from our Board of Directors. The separation will create (i) an industrial technology company, retaining the Fortive name, with a differentiated portfolio of growth-oriented businesses and (ii) a global industrial company (“NewCo”) focused on the growth opportunities in the rapidly evolving transportation and mobility markets. The separation is expected to be structuredspin-off in a tax-efficient manner ~~and completed~~no later than twelve months after the Distribution Date. As the disposition occurred during the fourth fiscal quarter of 2020, the Company will classify Vontier as a discontinued operation in its financial statements beginning in the ~~second half~~fourth quarter of 2020. ~~All assets, liabilities, revenues and expenses of NewCo are included in continuing operations of the Company in the accompanying consolidated condensed financial statements.~~

On July 20, 2019, we completed the combination of the Tektronix Video test and monitoring equipment business (“Tektronix Video Business”) with Telestream, LLC (the “Combined Business”), a portfolio company of Genstar Capital LLC. We recognized a pre-tax gain of $41.2 million upon the combination, and hold a 33% equity stake in the Combined Business. This transaction did not meet the criteria for discontinued operations reporting, and therefore the operatingThe results of ~~the Tektronix Video Business prior to the combination with Telestream~~our Industrial Technologies segment are included in continuing operations for ~~all~~the periods ~~presented. Additionally, the equity earnings from our stake in the Combined Business are included in other non-operating expenses, net in the accompanying Consolidated Condensed Statement of Earnings.~~ended September 25, 2020. Refer to Note 2 for additional information.

On October 1, 2018, we completed the split-off of businesses in our automation and specialty platform ~~(excluding our Hengstler and Dynapar businesses)~~ (the “A&S Business”) and have reported the A&S Business as discontinued operations in our Consolidated Condensed Statements of Earnings, Consolidated Condensed Balance Sheets, and Consolidated Condensed Statements of Cash Flows for all periods presented. ~~Unless otherwise noted,~~The impact of discontinued operations in our consolidated condensed financial statements was immaterial for all periods presented, and therefore, discussion within these notes to the consolidated condensed financial statements relates to continuing operations.

Segment Presentation

Beginning January 1, 2020, our Hengstler and Dynapar businesses are reported within our Professional Instrumentation segment. Previously, these businesses were reported within our Industrial Technologies segment. Reclassification of certain prior year amounts have been made to conform to current year presentation.

In light of the recently completed Separation, we changed our internal reporting structure on the first day of the fourth quarter, September 26, 2020, to reflect organizational and leadership changes to better assess the operational performance of and allocate resources to our businesses. Presentation within the notes to the unaudited consolidated condensed financial statements for the three and nine month periods ended September 25, 2020 has not be reclassified to reflect this segment change. Refer to Note 312 for additional ~~information on discontinued operations.~~information.

Accumulated Other Comprehensive Income (Loss)—

Foreign currency translation adjustments are generally not adjusted for income taxes as they relate to indefinite investments in non-U.S. subsidiaries. We ~~have~~ designated our ~~Euro-denominated commercial paper and~~ ¥13.8 billion senior unsecured term facility loan and our Euro-denominated commercial paper outstanding during the nine months ended September 25, 2020 as net investment hedges of our investment in certain foreign ~~operations.~~operations; we exited our Euro-denominated commercial paper positions during the second quarter of 2020. Accordingly, foreign currency transaction gains or losses on the debt are deferred in the foreign currency translation component of ~~accumulated~~Accumulated other comprehensive income (loss) (“~~accumulated OCI”~~AOCI”) as an offset to the foreign currency translation adjustments on our investments in foreign subsidiaries. We recognized losses of $2.0 million and gains $2.0 million for the three and nine month periods ended September 25, 2020, respectively, in other comprehensive income (loss) related to the net investment hedges. We recognized gains of $10.3 million and $10.4 million for the three and nine ~~months~~month periods ended September 27, 2019, respectively, in other comprehensive income (loss) related to the net investment ~~hedge. We recognized gains of $5.1 million and $10.6 million for the three and nine months ended September 28, 2018, respectively, in other comprehensive income related to the net investment hedge.~~hedges. Any amounts deferred in ~~accumulated OCI~~AOCI will remain until the hedged investment is sold or substantially liquidated. We recorded no ineffectiveness from our net investment hedges during the three and nine month periods ended September ~~27, 2019~~25, 2020 and September ~~28, 2018.~~27, 2019.

The changes in ~~accumulated other comprehensive income (loss)~~AOCI by component are summarized below ($ in millions):


	Foreign currency translation adjustments		Pension adjustments ^(b)			Total
For the Three Months Ended September 25, 2020:
Balance, June 26, 2020	$	(79.1)	$	(77.5)		$	(156.6)
Other comprehensive income (loss) before reclassifications, net of income taxes	63.9		0			63.9
Amounts reclassified from accumulated other comprehensive income (loss):
Increase	0		1.2		^(a)	1.2
Income tax impact	0		(0.2)			(0.2)
Amounts reclassified from accumulated other comprehensive income (loss), net of income taxes	0		1.0			1.0
Net current period other comprehensive income (loss), net of income taxes	63.9		1.0			64.9
Balance, September 25, 2020	$	(15.2)	$	(76.5)		$	(91.7)

For the Three Months Ended September 27, 2019:
Balance, June 28, 2019	$	(11.3)	$	(56.3)		$	(67.6)
Other comprehensive income (loss) before reclassifications, net of income taxes	(52.5)		0			(52.5)
Amounts reclassified from accumulated other comprehensive income (loss):
Increase	0		0.7		^(a)	0.7
Income tax impact	0		(0.2)			(0.2)
Amounts reclassified from accumulated other comprehensive income (loss), net of income taxes	0		0.5			0.5
Net current period other comprehensive income (loss), net of income taxes	(52.5)		0.5			(52.0)
Balance, September 27, 2019	$	(63.8)	$	(55.8)		$	(119.6)











^(a) This component of AOCI is included in the computation of net periodic pension cost (refer to Note 7 for additional details).
^(b) Includes balances relating to defined benefit plans, supplemental executive retirement plans, and other postretirement employee benefit plans.

Foreign
currency
translation
adjustments

Pension
adjustments ^(b)
Total
For the Three Months Ended September 27, 2019:
Balance, June 28, 2019 $ (11.3 ) $ (56.3 ) $ (67.6 )
Other comprehensive income (loss) before reclassifications, net of income taxes (52.5 ) —
(52.5 )
Amounts reclassified from accumulated other comprehensive income (loss):
Increase —
0.7
^(a)
0.7
Income tax impact —
(0.2 )
^(c)
(0.2 )
Amounts reclassified from accumulated other comprehensive income (loss), net of income taxes —
0.5
0.5
Net current period other comprehensive income (loss), net of income taxes (52.5 ) 0.5
(52.0 )
Balance, September 27, 2019 $ (63.8 ) $ (55.8 ) $ (119.6 )

For the Three Months Ended September 28, 2018:
Balance, June 29, 2018 $ 0.6
$ (70.2 ) $ (69.6 )
Other comprehensive income (loss) before reclassifications, net of income taxes (23.9 ) —
(23.9 )
Amounts reclassified from accumulated other comprehensive income (loss):
Increase —
0.9
^(a)
0.9
Income tax impact —
(0.2 )
^(c)
(0.2 )
Amounts reclassified from accumulated other comprehensive income (loss), net of income taxes —
0.7
0.7
Net current period other comprehensive income (loss), net of income taxes (23.9 ) 0.7
(23.2 )
Balance, September 28, 2018 $ (23.3 ) $ (69.5 ) $ (92.8 )

^(a) This accumulated other comprehensive income (loss) component is included in the computation of net periodic pension cost (refer to Note 9 for additional details).
^(b) Includes balances relating to defined benefit plans, supplemental executive retirement plans and other postretirement employee benefit plans.
^(c) We did not elect to reclassify the income tax effects of the Tax Cuts and Jobs Act from accumulated other comprehensive income to retained earnings.

Foreign
currency
translation
adjustments

Pension
adjustments ^(b)
Total
For the Nine Months Ended September 27, 2019:
Balance, December 31, 2018 $ (29.3 ) $ (57.3 ) $ (86.6 )
Other comprehensive income (loss) before reclassifications, net of income taxes (34.5 ) —
(34.5 )
Amounts reclassified from accumulated other comprehensive income (loss):
Increase —
2.1
^(a)
2.1
Income tax impact —
(0.6 )
^(c)
(0.6 )
Amounts reclassified from accumulated other comprehensive income (loss), net of income taxes —
1.5
1.5
Net current period other comprehensive income (loss), net of income taxes (34.5 ) 1.5
(33.0 )
Balance, September 27, 2019 $ (63.8 ) $ (55.8 ) $ (119.6 )

For the Nine Months Ended September 28, 2018:
Balance, December 31, 2017 $ 64.0
$ (71.6 ) $ (7.6 )
Other comprehensive income (loss) before reclassifications, net of income taxes (87.3 ) —
(87.3 )
Amounts reclassified from accumulated other comprehensive income (loss):
Increase —
2.7
^(a)
2.7
Income tax impact —
(0.6 )
^(c)
(0.6 )
Amounts reclassified from accumulated other comprehensive income (loss), net of income taxes —
2.1
2.1
Net current period other comprehensive income (loss) (87.3 ) 2.1
(85.2 )
Balance, September 28, 2018 $ (23.3 ) $ (69.5 ) $ (92.8 )

^(a) This accumulated other comprehensive income (loss) component is included in the computation of net periodic pension cost (refer to Note 9 for additional details).
^(b) Includes balances relating to defined benefit plans, supplemental executive retirement plans and other postretirement employee benefit plans.
^(c) We did not elect to reclassify the income tax effects of the Tax Cuts and Jobs Act from accumulated other comprehensive income to retained earnings.


	Foreign currency translation adjustments		Pension adjustments ^(b)			Total
For the Nine Months Ended September 25, 2020:
Balance, December 31, 2019	$	21.2	$	(77.5)		$	(56.3)
Other comprehensive income (loss) before reclassifications, net of income taxes	(36.4)		0			(36.4)
Amounts reclassified from accumulated other comprehensive income (loss):
Increase	0		1.2		^(a)	1.2
Income tax impact	0		(0.2)			(0.2)
Amounts reclassified from accumulated other comprehensive income (loss), net of income taxes	0		1.0			1.0
Net current period other comprehensive income (loss), net of income taxes	(36.4)		1.0			(35.4)
Balance, September 25, 2020	$	(15.2)	$	(76.5)		$	(91.7)

For the Nine Months Ended September 27, 2019:
Balance, December 31, 2018	$	(29.3)	$	(57.3)		$	(86.6)
Other comprehensive income (loss) before reclassifications, net of income taxes	(34.5)		0			(34.5)
Amounts reclassified from accumulated other comprehensive income (loss):
Increase	0		2.1		^(a)	2.1
Income tax impact	0		(0.6)			(0.6)
Amounts reclassified from accumulated other comprehensive income (loss), net of income taxes	0		1.5			1.5
Net current period other comprehensive income (loss), net of income taxes	(34.5)		1.5			(33.0)
Balance, September 27, 2019	$	(63.8)	$	(55.8)		$	(119.6)










^(a) This component of AOCI is included in the computation of net periodic pension cost (refer to Note 7 for additional details).
^(b) Includes balances relating to defined benefit plans, supplemental executive retirement plans, and other postretirement employee benefit plans.

Recently Issued Accounting ~~Standards~~Standard

In August 2020, the FASB issued ASU No. 2020-06,— Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which amends the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity. This standard is effective for us beginning January 1, 2022, with early adoption permitted. We are currently evaluating the impact of this standard on our financial statements.

Recently Adopted Accounting Standard

In June 2016, the ~~Financial Accounting Standards Board (the “FASB”)~~FASB issued ~~Accounting Standards Update (“ASU”)~~ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which amends the impairment model by requiring entities to use a forward-looking approach, based on expected losses, to estimate credit losses on certain types of financial instruments, including financing, trade accounts, and unbilled receivables. ~~This standard is effective~~On January 1, 2020, we adopted ASU 2016-13 and recognized in our Consolidated Condensed Balance Sheet as of January 1, 2020 an increase in the allowance for ustrade accounts, unbilled, and financing receivables of $40.0 million, with a corresponding net of tax adjustment to beginning retained earnings of $31.3 million.

Results for reporting periods beginning January 1, ~~2020.~~2020 reflect the adoption of ASU 2016-13, while prior period amounts were not adjusted and continue to be reported in accordance with our historical accounting practices.

Prior to the adoption of ASU 2016-13 on January 1, 2020, we recognized an allowance for incurred losses when they were probable based on many quantitative and qualitative factors, including delinquency.After the adoption of ASU 2016-13, we measure our allowance to reflect expected credit losses over the remaining contractual life of the asset. We pool assets with

similar risk characteristics for this measurement based on attributes that may include asset type, duration, and/or credit risk rating. The future expected losses of each pool are ~~currently evaluating~~estimated based on numerous quantitative and qualitative factors reflecting management’s estimate of collectibility over the remaining contractual life of the pooled assets, including:

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

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

•historical, current, and forecasted economic conditions; and

•historical, current, and forecasted credit risk.

Expected credit losses of the assets originated during the three and nine month periods ended September 25, 2020, as well as changes to expected losses during the same periods, are recognized in earnings for the three and nine month periods ended September 25, 2020.

As a result of the adoption of ASU 2016-13, we have updated our significant accounting policy related to unbilled, trade accounts, and financing receivables and allowances for credit losses from what was previously disclosed in our audited financial statements for the year ended December 31, 2019 as follows:

All trade accounts, financing, and unbilled receivables are reported in the accompanying Consolidated Condensed Balance Sheet adjusted for any write-offs and net of allowances for credit losses. The allowances for credit losses represent management’s best estimate of the credit losses expected from our unbilled, trade accounts, and financing receivable portfolios over the life of the underlying assets. Determination of the allowances requires management to exercise judgment about the severity of credit losses, which includes judgments regarding the risk profile of each underlying receivable and expectations regarding the impact of ~~this standard~~current and future economic conditions on the creditworthiness of its customers. We regularly perform detailed reviews of our portfolios to evaluate the collectability of receivables based on a combination of past, current, and future financial and qualitative factors that may affect customers’ ability to pay, including customers’ financial condition, collateral, debt-servicing ability, payment experience, credit bureau information, and economic conditions. In circumstances where we are aware of a specific customer’s inability to meet its financial obligations, a specific reserve is recorded against amounts due to reduce the recognized receivable to the amount reasonably expected to be collected. Additions to the allowances are charged to current period earnings, amounts determined to be uncollectible are charged directly against the allowances, while amounts recovered on previously written-off accounts increase the allowances.

Volatility and uncertainty in overall global economic conditions and worldwide capital markets as a result of the COVID-19 pandemic may negatively impact our customers’ ability to pay and, as a result, may increase the difficulty in collecting trade accounts, financing, and unbilled receivables. We did not realize notable increases in loss rates and delinquencies during the three and nine month periods ended September 25, 2020, and given the nature of our portfolio of receivables, our historical experience during times of challenging economic conditions, and our forecasted future impact of COVID-19 on our customer’s ability to pay, we did not record material provisions for credit losses as a result of the COVID-19 pandemic during the three and nine month periods ended September 25, 2020. If the financial ~~statements.~~condition of our customers were to deteriorate beyond our current estimates, resulting in an impairment of their ability to make payments, we would be required to write-off additional receivable balances, which would adversely impact our net earnings and financial condition.

The following is a rollforward of the aggregated allowance for credit losses related to our trade accounts, unbilled, and financing receivables as of September 25, 2020 ($ in millions):


Balance, December 31, 2019	$	82.1
Transition Adjustment	40.0
Provision	42.7
Write-offs	(37.1)
FX and Other	(1.4)
Balance, September 25, 2020	$	126.3

NOTE 2. ACQUISITIONS AND DIVESTITURES

For a description of our material acquisition activity refer to Note 3 of our ~~2018~~2019 Annual Report on Form 10-K.

We continually evaluate potential mergers, acquisitions, and divestitures that align with our strategy and expedite the evolution of our portfolio of businesses into new and attractive areas. We have completed a number of acquisitions that have been

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

We make an initial allocation of the purchase price at the date of acquisition based on our understanding of the fair value of the acquired assets and assumed liabilities. We obtain this information during due diligence and through other sources. In the months after closing, as we obtain additional information about these assets and liabilities, including through tangible and intangible asset appraisals, and learn more about the newly acquired business, we are able to refine the estimates of fair value and more accurately allocate the purchase price. Only items identified as of the acquisition date are considered for subsequent adjustment. We are in the process of obtaining valuations of certain acquired assets and evaluating the tax impact of certain acquisitions. We make appropriate adjustments to purchase price allocations prior to completion of the applicable measurement period, as required.

During the nine ~~months~~month period ended September ~~27, 2019,~~25, 2020, we recorded adjustments to the preliminary purchase price allocation of acquisitions that closed during ~~2018~~2019 that resulted in a net increase to goodwill of ~~$72 million. These adjustments were attributable~~ $31.6 million, prior to ~~the finalization of certain asset and liability fair values.~~

~~Completed Acquisitions in 2019~~foreign currency translation impacts.

Advanced Sterilization Products

On April 1, 2019 (the “Principal Closing Date”), we acquired the advanced sterilization products business (“ASP”) of Johnson & Johnson, a New Jersey corporation (“Johnson & Johnson”) for an aggregate purchase price of $2.7 billion (the “Transaction”), subject to certain post-closing adjustments set forth in a Stock and Asset Purchase Agreement, dated effective as of June 6, 2018 (the “Purchase Agreement”), between the Company and Ethicon, Inc., a New Jersey corporation (“Ethicon”) and a wholly owned subsidiary of Johnson & Johnson. ASP engages in the research, development, manufacture, marketing, distribution, and sale of low-temperature terminal sterilization and high-level disinfection products. ~~ASP generated annual revenues of approximately $800 million in 2018.~~

On the Principal Closing Date, we paid $2.7 billion in cash and obtained the transferred assets and assumed liabilities in 20 countries (“Principal Countries”), general patent and trademark assignments, and all transferred equity interests in ASP. ASP has operations in an additional 39 countries (“Non-Principal Countries”). The transferred assets and liabilities associated with these operations will close when requirements of country-specific agreements or regulatory approvals are satisfied.

The $2.7 billion purchase price was paid in exchange for ASP’s businesses in both Principal and Non-Principal Countries. As of September ~~27, 2019,~~25, 2020 we have closed 20 Principal Countries and 320 Non-Principal Countries that, in aggregate, accounted for approximately ~~98%~~99% of the preliminary valuation of ASP. The remaining Non-Principal Countries represent approximately 2%1% of the preliminary valuation of ASP, or ~~$64.6~~$22.3 million, which is included as a prepaid asset in Other assets in the Condensed Consolidated Balance Sheet. As each Non-Principal Country closes, we ~~will~~ reduce the prepaid asset and record the fair value of the assets acquired and liabilities assumed. All of the provisional goodwill associated with the Transaction is included in goodwill at September ~~27, 2019;~~25, 2020, and the majority of the provisional goodwill is tax deductible.

In addition, the Company entered into a transition services agreement with Johnson & Johnson for certain administrative and operational services (“TSA”), and distribution agreements in the Non-Principal Countries. Under the distribution agreements, ASP ~~will sell~~sells finished goods to Ethicon at prices agreed by the parties. ASP ~~will recognize~~recognizes these sales as revenue when the conditions for revenue recognition are met. Following the sale of finished goods by ASP, Ethicon obtains title of the finished goods, has full authority to sell and market the finished goods to end customers as it sees fit, and retains any revenue and profit from sale. As of September 25, 2020, ASP had exited the TSA in the U.S., Canada, Mexico, Australia, New Zealand and EMEA.

The following table summarizes the provisional fair value estimates of the assets acquired and liabilities assumed of Principal and Non-Principal Countries that have been transferred to ASP as of September ~~27, 2019;~~25, 2020, prior to foreign currency impacts; we did not acquire accounts receivable or accounts payable from Johnson & ~~Johnson:~~

Advanced Sterilization Products
Inventories $ 168.8
Property, plant and equipment 45.2
Goodwill 1,385.2
Other intangible assets, primarily customer relationships, trade names and technology 1,126.5
Other assets and liabilities, net (90.3 )
Total consideration allocated to Principal Countries 2,635.4
Prepaid acquisition asset related to Non-Principal Countries 64.6
Net cash consideration $ 2,700.0

Johnson ($ in millions):

~~Revenue attributable to ASP for the three and nine months ended September 27, 2019 were~~ ~~$169.5 million~~ and $334.4 million, respectively, and are included in our Professional Instrumentation segment beginning April 1, 2019. Operating losses attributable to ASP for the three and nine months ended September 27, 2019 were $26.6 million and $90.5 million, respectively, and include amortization of intangible assets, acquisition-related fair value adjustments, and post-close


	Advanced Sterilization Products
Inventories	$	189.6
Property, plant and equipment	48.2
Goodwill	1,437.1
Other intangible assets, primarily customer relationships, trade names and technology	1,123.5
Other assets and liabilities, net	(78.0)
Total consideration allocated to Principal Countries and closed Non-Principal Countries	2,720.4
Prepaid acquisition asset related to remaining Non-Principal Countries	22.3
Net cash consideration	$	2,742.7

Post-close transaction and integration costs associated with the Transaction ~~of $64.8~~were approximately $14 million and ~~$166.6~~$56 million for the three and nine ~~months~~month periods ended September ~~27, 2019, respectively. We incurred approximately $20 million~~25, 2020, respectively, and ~~$71 million of pretax transaction and integration related costs recorded in selling, general, and administrative expenses for the three and nine months ended September 27, 2019, respectively, which~~ were primarily ~~for banking fees, legal fees and~~ amounts paid to ~~other~~ third-party ~~advisers.~~advisors.

~~Other Acquisitions~~Vontier Separation - Subsequent Event

On the Distribution Date, the Company completed the separation of its Industrial Technologies segment by distributing 80.1% of the outstanding shares of Vontier to Fortive stockholders on a pro rata basis. To effect the Separation, the Company distributed to its stockholders two shares of Vontier common stock for every five shares of the Company’s common stock outstanding held on September 25, 2020, the record date for the distribution, with the Company retaining 19.9% of the shares of Vontier common stock immediately following the Separation. The Company currently plans to divest its 19.9% retained shares in Vontier after the spin-off in a tax-efficient manner no later than twelve months after the distribution date.

~~In addition~~together with the Three-Year Term Loans, the “Term Loans”) and a three-year, $750 million senior unsecured multi-currency revolving credit facility (the “Revolving Credit Facility” and, together with the Term Loans, the “Credit Facilities”). On the Distribution Date, Vontier drew down the full $1.8 billion available under the Term Loans. Vontier used the proceeds from the Term Loans to make payments to the ~~ASP acquisition, we acquired 3 businesses for $683.6 million in cash, net~~Company, with $1.6 billion used as part of ~~cash acquired and made additional equity investments of $4.1 million during~~ the ~~nine months ended September 27, 2019.~~

The businesses acquired complement existing units of our Professional Instrumentation segment. The aggregate annual sales of these business in 2018 were approximately $149 million. We incurred approximately $1 million and $4 million of pretax transaction-related costs recorded in selling, general, and administrative expensesconsideration for the three and nine months ended September 27, 2019, respectively, which were primarily for banking fees, legal fees, and amounts paid to other third-party advisers. Approximately $17 million of goodwill associated with these acquisitions is tax deductible. The revenue and operating profit from these acquisitions included in our results during the three and nine months ended September 27, 2019 was immaterial for both periods, respectively.

~~The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition:~~

Accounts receivable $ 39.8
Inventories 16.2
Property, plant and equipment 9.5
Goodwill 454.6
Other intangible assets 252.2
Other assets and liabilities, net (88.7 )
Net cash consideration $ 683.6

~~Pro Forma Financial Information~~

The pro forma information for the periods set forth below gives effect to the acquisitions made in 2019 and 2018 as if they had occurred on January 1, 2018. The pro forma information is presented for informational purposes only and is not indicative of the results of operations that actually would have been achieved had the acquisitions been consummated as of that time ($ in millions except per share amounts):

Three Months Ended Nine Months Ended
September 27, 2019 September 28, 2018 September 27, 2019 September 28, 2018
Sales $ 1,877.6
$ 1,856.8
$ 5,614.7
$ 5,558.9
Net earnings $ 240.3
$ 141.9
$ 626.1
$ 447.0
Diluted net earnings per share $ 0.71
$ 0.40
$ 1.84
$ 1.26

~~NOTE 3. DISCONTINUED OPERATIONS~~

~~Divestiture of A&S Business~~

On October 1, 2018, we completed the split-off of 4 of our operating companies (the “A&S Business”) in a tax efficient Reverse Morris Trust transaction with Altra Industrial Motion Corp. (“Altra”). The total consideration received was $2.7 billion and consisted of (i) $1.3 billion through a fully-subscribed exchange offer, in which we accepted and subsequently retired 15,824,931 shares of our own common stock from our stockholders in exchange for the 35,000,000 shares of common stock of Stevens Holding Company, Inc., an entity created to hold the A&S Business; (ii) $1.0 billion in cash paid to us for the direct salescontribution of certain assets and liabilities to Vontier by the Company in connection with the Separation and $200 million used as a preliminary adjustment for excess cash balances remaining with Vontier (collectively, the “Cash Consideration”). The Company intends to apply the Cash Consideration to repay certain outstanding indebtedness, interest on certain debt instruments, and to pay certain of the ~~A&S Business; (iii) $250 million as part~~Company’s regular, quarterly cash dividends. Refer to Note 5 for the description of ~~a debt-for-debt exchange that reduced outstanding indebtedness of Fortive;~~the debt repayments made subsequent to September 25, 2020 and ~~(iv) $150 million in cash paid to us by Stevens Holding Company, Inc. as a dividend. We recognized an after-tax gain on the transaction of $1.9 billion.~~other anticipated repayments.

~~The accounting requirements for reporting~~As the disposition occurred during the fourth fiscal quarter of 2020, the ~~A&S Business~~Company will classify Vontier as a discontinued operation ~~were met when the separation and merger were completed~~in its financial statements beginning in the fourth quarter of ~~2018. Accordingly,~~2020; the ~~accompanying consolidated condensed financial statements reflect the A&S Business as discontinued~~results of our Industrial Technologies segment are included in continuing operations for ~~all~~the periods ~~presented.~~ended September 25, 2020. For the year ended December 31, 2019, Vontier had revenues of approximately $2.8 billion.

~~We continue to provide certain support services to Altra under transition services agreements. The impact~~As a result of ~~these services on our consolidated condensed financial statements was immaterial~~planning for the Separation, the Company incurred $21 million and $62 million in Vontier stand-up and separation-related costs during the three and nine month periods ended September ~~27, 2019.~~

~~The key components~~25, 2020, respectively, which were recorded in selling, general and administrative expenses on the Consolidated Condensed Statements of ~~income from~~Earnings. These stand-up and separation-related costs primarily relate to professional fees associated with preparation of regulatory filings and separation activities within finance, tax, legal, and information system functions and will be reclassified into discontinued operations ~~for the three and nine month periods ended September 27, 2019 and September 28, 2018 were as follows ($~~ in ~~millions):~~future filings.

Three Months Ended Nine Months Ended
September 27, 2019 September 28, 2018 September 27, 2019 September 28, 2018
Sales $ —
$ 238.9
$ 6.1
$ 741.6
Cost of sales (0.1 ) (140.5 ) (6.2 ) (430.6 )
Selling, general and administrative expenses —
(49.8 ) (0.5 ) (125.9 )
Research and development expenses —
(8.7 ) —
(27.0 )
Gain (loss) on disposition of discontinued operations before income taxes (0.6 ) —
(0.4 ) —
Interest expense and other income, net 0.5
(1.3 ) 0.5
(4.0 )
Earnings before income taxes (0.2 ) 38.6
(0.5 ) 154.1
Income taxes —
(7.3 ) —
(30.8 )
Net earnings from discontinued operations $ (0.2 ) $ 31.3
$ (0.5 ) $ 123.3

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~~Interest expense related~~In connection with the Separation, Fortive and Vontier entered into various agreements to effect the ~~debt retired as part~~Separation and provide a framework for Vontier’s relationship with Fortive after the Separation, including a transition services agreement, an employee matters agreement, a tax matters agreement, an intellectual property matters agreement, a Fortive Business System (“FBS”) license agreement, and a stockholder’s and registration rights agreement. These agreements govern the separation between Fortive and Vontier of the ~~debt-for-debt exchange was reclassified~~assets, employees, liabilities and obligations (including its investments, property and employee benefits and tax-related assets and liabilities) of Fortive and its subsidiaries attributable to ~~discontinued operations for all~~ periods prior to, at and after Vontier’s separation and also govern certain relationships between Fortive and Vontier after the ~~disposition.~~Separation.

The following table summarizes the major classes of assets and liabilities of discontinued operations that were included in our accompanying Consolidated Condensed Balance Sheets as of September 27, 2019 and December 31, 2018 ($ in millions):

September 27, 2019 December 31, 2018
ASSETS
Accounts receivable, net $ 0.1
$ 4.2
Inventories —
4.4
Prepaid expenses and other current assets 17.7
21.4
Total current assets, discontinued operations $ 17.8
$ 30.0
LIABILITIES
Current liabilities:
Trade accounts payable $ 5.3
$ 9.2
Accrued expenses and other current liabilities 10.4
21.5
Total current liabilities, discontinued operations $ 15.7
$ 30.7

NOTE 4.3. GOODWILL ~~AND OTHER INTANGIBLE ASSETS~~

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

Balance, December 31, 2018 $ 6,133.1
Adjustments to preliminary purchase price allocations for acquisitions completed in 2018 72.0
Attributable to 2019 acquisitions 1,839.8
Attributable to the Tektronix Video Business Combination (40.2 )
Foreign currency translation and other (9.2 )
Balance, September 27, 2019 $ 7,995.5

~~The~~ carrying value of goodwill by segment ~~is summarized as follows~~ ($ in millions):


	Professional Instrumentation ^(a)		Industrial Technologies ^(a)		Total Goodwill
Balance, December 31, 2019	$	7,242.6	$	1,156.7	$	8,399.3
Acquisitions	31.6		0		31.6
Impairment charge	0		(85.3)		(85.3)
Foreign currency translation and other	9.2		(13.8)		(4.6)
Balance, September 25, 2020	$	7,283.4	$	1,057.6	$	8,341.0
^(a) Beginning January 1, 2020, our Hengstler and Dynapar businesses are reported within our Professional Instrumentation segment. Previously, these businesses were reported within our Industrial Technologies segment. Prior year balances have been reclassified to reflect current year presentation.

September 27, 2019 December 31, 2018
Professional Instrumentation $ 6,759.2
$ 4,894.6
Industrial Technologies 1,236.3
1,238.5
Total goodwill $ 7,995.5
$ 6,133.1
Impairment Charge

We test goodwill for impairment annually in the fourth quarter of each year and may review goodwill in interim periods if certain events occur or circumstances change. Based on our most recent annual impairment assessment, we concluded that the goodwill for our 12 reporting units was not impaired as of December 31, 2019.

The results of our fourth quarter 2019 goodwill impairment testing indicated the excess of the estimated fair value over the carrying value (expressed as a percentage of carrying value) of our Telematics reporting unit was approximately 5%, and as such, management continued to monitor the performance of Telematics during the first quarter of 2020. In connection with management’s updated forecast for the Telematics reporting unit that indicated a decline in sales and operating profit to levels lower than previously forecasted, due in large part to the impacts of the COVID-19 pandemic, we performed a quantitative impairment assessment over the Telematics reporting unit on March 27, 2020.

We estimated the fair value of the Telematics reporting unit by considering an income approach, using the discounted cash flow method. The income approach was based on projected future (debt-free) cash flows that were discounted to present value and assumed a terminal growth value. The discount rate was based on the reporting unit’s weighted average cost of capital, taking into account market participant assumptions. Management’s revenue and profitability forecasts used in the valuation considered recent and historical performance of the reporting unit, strategic initiatives, industry trends, and the current and future expectations of the macroeconomic environment. Assumptions used in the valuation were similar to those that would be used by market participants performing independent valuations of this reporting unit.

Key assumptions developed by management and used in the quantitative analysis included the following:

•Near-term revenue declines in 2020 with later-term improvements over the projection period;

•Improved profitability over the projection period, trending consistent with revenues; and

•Market-based discount rates.

We ~~have~~did not ~~identified any triggering events~~consider the market approach in our fair value calculation given the near term uncertainty in the market data and forecasts of the guideline companies upon which ~~would have indicated~~the approach relies.

As a ~~potential~~result of the interim impairment testing performed, we concluded that the estimated fair value of our Telematics reporting unit was less than our carrying value as of March 27, 2020, and recorded a non-cash goodwill impairment charge of $85.3 million during the three month period ended March 27, 2020 to reduce the carrying value of goodwill ~~during~~to $235.9 million. The charge is included in the ~~nine months ended September 27, 2019.~~

~~Finite-lived intangible assets are amortized over the shorter~~operating results of their legal or estimated useful lives. The following summarizes the gross carrying value and accumulated amortization for each major category of intangible asset as of September 27, 2019 and December 31, 2018 ($ in millions):our Industrial Technologies segment.

September 27, 2019 December 31, 2018
Gross Carrying Amount Accumulated Amortization Gross Carrying Amount Accumulated Amortization
Finite-lived intangibles:
Patents and technology $ 935.7
$ (333.6 ) $ 614.0
$ (280.8 )
Customer relationships and other intangibles 3,067.2
(729.8 ) 2,204.2
(589.9 )
Total finite-lived intangibles 4,002.9
(1,063.4 ) 2,818.2
(870.7 )
Indefinite-lived intangibles:
Trademarks and trade names 721.1
—
528.8
—
Total intangibles $ 4,724.0
$ (1,063.4 ) $ 3,347.0
$ (870.7 )

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The impairment testing of goodwill utilized significant unobservable inputs (Level 3 in the fair value hierarchy) to determine the estimated fair value. The factors used in our impairment analysis are inherently subject to uncertainty, particularly in light of the recent deterioration in overall global economic conditions and capital markets due to COVID-19. While we believe we made reasonable estimates and assumptions to calculate the fair value of the Telematics reporting unit, alternative interpretations of the qualitative inputs considered may have resulted in different conclusions regarding the size of the impairment, and it is possible our conclusions could change in future periods. There can be no assurance the estimates and assumptions used in our goodwill impairment testing performed in the first quarter of 2020 will prove to be accurate predictions of the future. Specifically, variations in our assumptions related to business performance and execution of planned growth strategies and the discount rate could impact future conclusions. A future impairment charge for goodwill could have a material effect on our consolidated financial position and results of operations.

Impairment Testing

During the ~~nine months~~second quarter ended June 26, 2020 and the third quarter ended September ~~27,~~25, 2020, we evaluated the impact of the deterioration in overall global economic conditions as a result of the COVID-19 pandemic, including the change in our market capitalization and changes in forecasts for the Telematics reporting unit, and determined no triggering events had occurred.

The results of our 2019 ~~we acquired finite lived intangible assets, consisting primarily~~impairment testing indicated our 11 other reporting units had fair values that were significantly in excess of ~~customer relationships~~their carrying values. We evaluated the impact of the deterioration in overall global economic conditions as a result of the COVID-19 pandemic, including the change in our market capitalization and ~~developed technology, with a weighted average life of 10 years. Refer to Note 2~~changes in forecasts for ~~additional information on the intangible assets acquired.~~each reporting unit, and determined no triggering events had occurred.

NOTE 5.4. FAIR VALUE MEASUREMENTS

Accounting standards define fair value based on an exit price model, establish a framework for measuring fair value where our assets and liabilities are required to be carried at fair value, and provide for certain disclosures related to the valuation methods used within a valuation hierarchy as established within the accounting standards. This hierarchy prioritizes the inputs into three broad levels as follows:

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

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

•Level 3 inputs are unobservable inputs based on our assumptions. The classification of a financial asset or liability within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

Below is a summary of financial liabilities that are measured at fair value on a recurring basis ($ in millions):

Quoted Prices
in Active
Market
(Level 1)

Significant Other
Observable Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)
Total
September 27, 2019
Deferred compensation liabilities $ —
$ 26.7
$ —
$ 26.7
December 31, 2018
Deferred compensation liabilities $ —
$ 20.8
$ —
$ 20.8


	Quoted Prices in Active Market (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
September 25, 2020
Deferred compensation liabilities	$	0	$	33.9	$	0	$	33.9
December 31, 2019
Deferred compensation liabilities	$	0	$	29.6	$	0	$	29.6

Certain management employees participate in our nonqualified deferred compensation programs that permit such employees to defer a portion of their compensation, on a pretax basis, until after their termination of employment. All amounts deferred under such plans are unfunded, unsecured obligations and are presented as a component of our compensation and benefits accrual included in Other long-term liabilities in the accompanying Consolidated Condensed Balance Sheets. Participants may choose among alternative ~~earning~~earnings rates for the amounts they defer, which are primarily based on investment options within our defined contribution plans for the benefit of U.S. employees (except that the earnings rates for amounts contributed unilaterally by the Company are entirely based on changes in the value of Fortive common stock). Changes in the deferred compensation liability under these programs are recognized based on changes in the fair value of the participants’ accounts, which are based on the applicable earnings rates.

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Nonrecurring Fair Value Measurements

Certain non-financial assets, primarily property, plant, and equipment, goodwill, and intangible assets, are not required to be measured at fair value on a recurring basis and are reported at their carrying value. However, these assets are required to be assessed for impairment whenever events or circumstances indicate that their carrying value may not be fully recoverable, and at least annually for goodwill and indefinite-lived intangible assets.

On March 27, 2020, we evaluated our Telematics reporting unit for impairment and recorded an impairment of goodwill of $85.3 million to adjust the carrying value of the reporting unit to the estimated fair value. Refer to Note 3 for additional information regarding the inputs and methodology used to estimate the fair value. During the second quarter ended June 26, 2020 and the third quarter ended September 25, 2020, we evaluated the impact of the deterioration in overall global economic conditions as a result of the COVID-19 pandemic, including the change in our market capitalization and changes in forecasts for the Telematics reporting unit, and determined no triggering events had occurred. In addition, we evaluated our other long-lived non-financial assets as of September 25, 2020 and determined no triggering events were identified.

Fair Value of Financial Instruments

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

September 27, 2019 December 31, 2018
Carrying Amount Fair Value Carrying Amount Fair Value
Current portion of long-term debt $ 1,000.0
$ 1,000.0
$ 455.6
$ 454.9
Long-term debt, net of current maturities $ 5,015.6
$ 5,168.8
$ 2,974.7
$ 2,867.5


	September 25, 2020						December 31, 2019
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Current portion of long-term debt	$	999.2	$	1,008.5	$	1,500.0	$	1,500.0
Long-term debt, net of current maturities	$	4,699.2	$	4,988.1	$	4,828.4	$	4,992.3

As of September ~~27, 2019~~25, 2020 and December 31, ~~2018,~~2019, the current portion of long-term debt and long-term debt, net of current maturities were categorized as Level 1.

The fair values of the current portion of long-term debt and long-term debt were based on quoted market prices. The difference between the fair value and the carrying amounts of long-term borrowings may be attributable to changes in market interest rates and/or our credit ratings subsequent to the incurrence of the borrowing. The fair value of cash and cash equivalents, accounts receivable, net and trade accounts payable approximates their carrying amount due to the short-term maturities of these instruments.

NOTE 6.5. FINANCING AND CAPITAL

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

September 27, 2019 December 31, 2018
U.S. dollar-denominated commercial paper $ 1,086.0
$ 390.1
Euro-denominated commercial paper 257.7
270.1
Delayed-draw term loan due 2019 —
400.0
Delayed-draw term loan due 2020 1,000.0
—
Yen variable interest rate term loan due 2022 127.9
125.7
1.80% senior unsecured notes due 2019 —
55.6
2.35% senior unsecured notes due 2021 747.9
747.0
3.15% senior unsecured notes due 2026 892.8
891.9
4.30% senior unsecured notes due 2046 547.0
546.9
0.875% senior convertible notes due 2022 1,337.1
—
Other 19.2
3.0
Long-term debt 6,015.6
3,430.3
Less: current portion of long-term debt 1,000.0
455.6
Long-term debt, net of current maturities $ 5,015.6
$ 2,974.7


	September 25, 2020		December 31, 2019
U.S. dollar-denominated commercial paper	$	0	$	884.4
Euro-denominated commercial paper	0		264.1

Delayed-draw term loan due 2020	1,000.0		1,000.0
Term Loan due 2020	250.0		500.0
Term Loan due 2021	749.1		0
Yen variable interest rate term loan due 2022	130.7		127.1

2.35% senior unsecured notes due 2021	749.2		748.2
3.15% senior unsecured notes due 2026	893.8		893.0
4.30% senior unsecured notes due 2046	547.1		547.0
0.875% senior convertible notes due 2022	1,378.5		1,347.3
Other	0		17.3
Long-term debt	5,698.4		6,328.4
Less: current portion of long-term debt	999.2		1,500.0
Long-term debt, net of current maturities	$	4,699.2	$	4,828.4

Aggregate unamortized debt discounts, premiums and issuance costs of ~~$113.7~~$70 million and ~~$17.0~~$102 million as of September ~~27, 2019~~25, 2020 and December 31, ~~2018,~~2019, respectively, are netted against the principal amounts of the components of debt in the table above. Refer to Note 1011 of our ~~2018~~2019 Annual Report on Form 10-K for further details of our debt financing.

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In prior periods, we generally ~~satisfy~~satisfied any short-term liquidity needs that are not met through operating cash flows and available cash ~~primarily~~ through issuances of commercial paper under our U.S. dollar and Euro-denominated commercial paper programs (“Commercial Paper Programs”). Due to the volatility and disruption in the commercial paper markets during the first six months of 2020, we temporarily reduced our reliance on this source of funding, and consequently paid down and refinanced our outstanding commercial paper with a 364-day delayed-draw term loan, as detailed in the 2021 Term Loan section below. Credit support for the Commercial Paper Programs is provided by a five-year $2.0 billion senior unsecured revolving credit facility that expires on November 30, 2023 (the “Revolving Credit Facility”) which, to the extent not otherwise providing credit support for the commercial paper programs, can also be used for working capital and other general corporate purposes. As of September ~~27, 2019,~~25, 2020, 0 borrowings were outstanding under the Revolving Credit Facility.

On April 24, 2020, we amended (the “Amendments”) the credit agreement for each of our (i) $500 million delayed draw term loan facility, with $250 million in principal amount outstanding as of September 25, 2020 (“2020 Term Loan”), (ii) $1.0 billion delayed draw term loan facility, with $1.0 billion in principal amount outstanding as of September 25, 2020 (the “2020 Delayed-Draw Term Loan”), (iii) $750 million delayed draw term loan facility, with $750 million in principal amount outstanding as of September 25, 2020 (“2021 Term Loan”), and (iv) $2.0 billion Revolving Credit Facility, with 0 borrowings thereunder as of September 25, 2020 as follows:

•For any four fiscal quarters ending in the periods noted below (each an “Adjusted Four Quarters”) that end prior to the maturity date of the applicable facility, the maximum permitted consolidated net leverage ratio of consolidated net funded indebtedness to consolidated EBITDA was increased from 3.50 to 1.00 to, (i) with respect to the four fiscal quarters ending June 26, 2020, September 25, 2020, December 31, 2020, or April 2, 2021, 4.75 to 1.00, (ii) with respect to the four fiscal quarters ending July 2, 2021, 4.5 to 1.0, (iii) with respect to the four fiscal quarters ending October 1, 2021, 4.25 to 1.0 and (iv) with respect to the four fiscal quarters ending December 31, 2021, 3.75 to 1.0; provided however, that for any four fiscal quarters that are not an Adjusted Four Quarters, the maximum permitted consolidated net leverage ratio remains at 3.5 to 1.0, as may be increased to 4.0 to 1.0 following a material acquisition (the “Unadjusted Maximum Ratio”).

•The maturity date for the 2020 Delayed-Draw Term Loan was extended from August 28, 2020 to May 30, 2021.

•From April 24, 2020 to December 31, 2021, the minimum London inter-bank offered rate (“LIBOR”) for each of the facilities will increase from 0% to 0.25%, and the minimum base rate for each of the facilities will increase from 1.00% to 1.25%. In addition, with respect to the Revolving Credit Facility and for any Adjusted Four Quarters in which the consolidated net leverage ratio is greater than the Unadjusted Maximum Ratio, the applicable margin (as determined based on our long-term debt credit rating) for any LIBOR rate loans will increase from a range of 80.5 and 117.5 basis points to a range of 118.0 and 155.0 basis points and for any base rate loans from a range of 0.0 and 17.5 basis points to a range of 18.0 and 55.0 basis points. Furthermore, with respect to the 2020 Delayed-Draw Term Loan, the applicable margin (as determined based on our long-term debt credit rating) for any LIBOR rate loans will increase from a range of 75.0 and 97.5 basis points to a range of 155.0 and 180.0 basis points and for any base rate loans from 0.0 to a range of 55.0 and 80.0 basis points.

•From April 24, 2020 to December 31, 2021, the maximum principal amount of secured indebtedness, other than certain types of secured indebtedness expressly permitted under each credit agreement, is decreased from 15% of our consolidated net assets (when added together with indebtedness incurred or guaranteed by any of our subsidiaries) to 11.25% of our consolidated net assets (when added together with indebtedness incurred or guaranteed by any of our subsidiaries).

In connection with the Amendments, we incurred approximately $6.5 million of fees. Our credit facility agreements require, among others, that we maintain certain financial covenants and we were in compliance with all of our financial covenants on September 25, 2020.

Convertible Senior Notes

On February 22, 2019, we issued $1.4 billion in aggregate principal amount of our 0.875% Convertible Senior Notes due 2022 (the “Convertible Notes”), including $187.5 million in aggregate principal amount resulting from an exercise in full of an over-allotment option. The Convertible Notes were ~~sold~~issued in a private placement to certain initial purchasers for resale to qualified institutional buyers pursuant to Rule 144A under the Securities Act.

The Convertible Notes are fully and unconditionally guaranteed, jointly and severally, on an unsecured basis, by four of our wholly-owned domestic subsidiaries (the “Guarantees”). Under the Indenture, the Convertible Notes are our senior unsecured obligations, and the Convertible Notes and the Guarantees rank equally in right of payment with all of our and the guarantors’ existing and future liabilities that are not subordinated, but effectively rank junior to any of our and the guarantors secured indebtedness to the extent of the value of the assets securing such indebtedness. In addition, the Convertible Notes are structurally subordinated to all of the existing and future obligations, including trade payables, of our subsidiaries that do not guarantee the Convertible Notes.

The Convertible Notes bear interest at a rate of 0.875% per year, payable semiannually in arrears on February 15 and August 15 of each year, beginning on August 15, 2019. The Convertible Notes mature on February 15, 2022, unless earlier repurchased or converted in accordance with their terms prior to such date.

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The Convertible Notes are convertible into shares of our common stock at an initial conversion rate of 9.3777 shares per $1,000 principal amount of Convertible Notes (which is equivalent to an initial conversion price of $106.64 per share), subject to adjustment upon the occurrence of certain events. The initial conversion price represents a premium of approximately 32.5% to the $80.48 per share closing price of our common stock on February 19, 2019. Upon conversion of the Convertible Notes, holders will receive cash, shares of our common stock, or a combination thereof, at Fortive’s election. Our current intention is to settle such conversions through cash up to the principal amount of the converted Convertible Notes and ~~if applicable,~~ through shares of our common stock for conversion value, if any, in excess of the principal amount of the converted Convertible Notes.

Of the $1.4 billion in ~~proceeds received~~principal amount from the issuance of the Convertible Notes, $1.3 billion was classified as debt and $102.2 million was classified as equity, using an assumed effective interest rate of 3.38%. Debt issuance costs of $24.3 million were proportionately allocated to debt and equity. We recognized ~~$13.3~~$13.6 million in interest expense during the three ~~months~~month period ended September ~~27, 2019,~~25, 2020, of which ~~$3.1~~$3.2 million was related to the contractual coupon rate of 0.875% and ~~$1.9~~$1.8 million was attributable to the amortization of debt issuance costs. We recognized ~~$32.0~~$40.6 million in interest expense during the nine ~~months~~month period ended September ~~27, 2019,~~25, 2020, of which ~~$7.6~~$9.5 million was related to the contractual coupon rate of 0.875% and ~~$4.7~~$5.6 million was attributable to the amortization of debt issuance costs. The discount at issuance was $102.2 million and is being amortized over a three-year period. The unamortized discount at September ~~27, 2019~~25, 2020 was ~~$82.5~~$48.6 million.

Prior to November 15, 2021, the Convertible Notes will be convertible only upon the occurrence of certain events and will be convertible thereafter at any time until the close of business on the business day immediately preceding the maturity date of the Convertible Notes.

2020 Term Loan

The conversion rate is subject to customary anti-dilution adjustments. If certain corporate events described in the Indenture occur prior to the maturity date, the conversion rate will be increased forOn October 25, 2019, we entered into a ~~holder~~credit facility agreement that ~~elects to convert its Convertible Notes in connection with such corporate event in certain circumstances.~~

~~The Convertible Notes are not redeemable prior to maturity, and no sinking fund is provided~~provides for the ~~Convertible Notes. If we undergo a “fundamental change,” as defined~~2020 Term Loan in the Indenture, subject to certain conditions, holders may require us to repurchase for cash all or any portion of their Convertible Notes. The fundamental change purchase price will be 100% of the principal amount of the Convertible Notes to be repurchased plus any accrued and unpaid additional interest up to but excluding the fundamental change repurchase date.

~~The Indenture contains customary terms and covenants, including that upon certain events of default occurring and continuing, either the Trustee or the holders of at least 25% in~~an aggregate principal amount of $300 million. On October 25, 2019, we drew down the full $300 million available under the 2020 Term Loan in order to fund, in part, the Censis acquisition. We subsequently increased the size of this facility by $200 million on November 8, 2019 and drew the additional amount on the same day resulting in an outstanding ~~Convertible Notes may declare 100%~~amount of $500 million. The 2020 Term Loan bears interest at a variable rate equal to LIBOR plus a ratings-based margin currently at 75 basis points. As of September 25, 2020, borrowings under this facility bore an interest rate of 1.00% per annum. The 2020 Term Loan is due on October 23, 2020 and prepayable at our option. We are not permitted to re-borrow once the term loan is repaid. The terms and conditions, including covenants, applicable to the 2020 Term Loan are substantially similar to those applicable to our Revolving Credit Facility.

On February 26, 2020, we prepaid $250 million and on October 9, 2020, we repaid the remaining $250 million of the ~~principal of, and accrued and unpaid interest, if any, on all the Convertible Notes to be due and payable.~~

~~We used the net proceeds from the offering to fund a portion of the cash consideration payable for, and certain costs~~2020 Term Loan. The fees associated with ~~our acquisition of ASP.~~both prepayments were immaterial.

In connection with this offering of the Convertible Notes, on February 21, 2019, we entered into an amendment to the credit facility agreement associated with our Credit Agreement, dated as of November 30, 2018, to exclude the Guarantee from the limitations on subsidiary indebtedness under the Agreement.

2020 Delayed-Draw Term Loan ~~Due 2020~~

On March 1, 2019, we entered into a credit facility agreement that provides for ~~a 364-day delayed-draw term loan facility (“~~the 2020 Delayed-Draw Term ~~Loan”)~~Loan in an aggregate principal amount of $1.0 billion. On March 20, 2019, we drew down the full $1.0 billion available under the 2020 Delayed-Draw Term Loan in order to fund, in part, the ASP acquisition. The 2020

Delayed-Draw Term Loan bears interest at a variable rate equal to ~~the London inter-bank offered rate~~LIBOR plus a ratings based margin, ~~currently~~prior to the Amendments, at 75 basis points and, following the Amendments, at 155 basis points. As of September ~~27, 2019,~~25, 2020, borrowings under this facility bore an interest rate of ~~2.78%~~1.80% per annum. The 2020 Delayed-Draw Term Loan is prepayable at our option, and we are not permitted to re-borrow once the term loan is repaid. The terms and conditions, including covenants, applicable to the 2020 Delayed-Draw Term Loan are substantially similar to those applicable to ~~the~~our Revolving Credit Facility.

~~Commercial Paper~~On February 25, 2020, we extended the maturity of the 2020 Delayed-Draw Term Loan to August 28, 2020. Additionally, on April 24, 2020 we further extended the maturity to May 30, 2021. We were in compliance with our covenants both before and after the extension. The 2020 Delayed-Draw Term Loan is not callable and remains prepayable at our option.

2021 Term Loan

On March 23, 2020, we entered into a credit facility agreement that provides for the 2021 Term Loan in an aggregate principal amount of $425 million. On the same day, we drew down $375 million available under the 2021 Term Loan. We subsequently increased the size of this facility by $325 million on April 3, 2020, and drew the additional $375 million in April 2020, resulting in an outstanding amount of $750 million. We paid approximately $2.0 million in debt issuance costs associated with the 2021 Term Loan. The ~~details~~borrowings from this credit facility were used for settlement of ~~our Commercial Paper Programs as~~outstanding commercial paper. The 2021 Term Loan bears interest at a variable rate equal to LIBOR plus a ratings-based margin currently at 155 basis points. As of September ~~27, 2019~~25, 2020, borrowings under this facility bore an interest rate of 1.80% per annum. The 2021 Term Loan is due on March 19, 2021 and prepayable at our option. We are ~~as follows ($ in millions):~~not permitted to re-borrow once the term loan is repaid. The terms and

Carrying value Annual effective rate Weighted average remaining maturity (in days)
U.S. dollar-denominated commercial paper $ 1,086.0
2.34 % 15
Euro-denominated commercial paper $ 257.7
(0.10 )% 39

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conditions, including covenants, applicable to the 2021 Term Loan, are substantially similar to those applicable to our Revolving Credit Facility.

Classification of Debt Due within the Next Twelve Months

We classified our borrowings outstanding under the ~~Commercial Paper Programs~~2020 Delayed-Draw Term Loan and the 2021 Term Loan as long-term debt in the accompanying Consolidated Condensed Balance ~~Sheets~~Sheet as of September 25, 2020, as we had the intent and ability, as supported by availability under the Revolving Credit Facility, ~~referenced above,~~ to refinance these borrowings for at least one year from the balance sheet date.

As Our intent with respect to the refinancing of ~~September 27, 2019, we were in compliance with all~~these outstanding borrowings was subject to change following the Vontier Separation, as described below. In addition, these loans may be further repaid using the cash flows received from the Separation or as part of the divestiture of our ~~covenants.~~

~~Repayments~~

~~On February 28, 2019, we prepaid the~~ remaining $400.0 million outstanding principal and accrued interest under the delayed-draw term loan due 2019. The prepayment penalties associated with this payment were immaterial. Additionally, on June 15, 2019 we repaid the remaining outstanding principal of $55.3 million of our 1.80% senior unsecured notes.

19.9% investment in Vontier.

~~NOTE 7. LEASES~~

~~In February 2016,~~Our 2020 Term Loan and 2.35% Senior unsecured notes due 2021 are recorded in the FASB issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842), which requires lessees to recognize a right-of-use (“ROU”) asset and a lease liability for all leases with terms greater than 12 months and also requires disclosures by lessees and lessors aboutCurrent portion of long-term debt line item in the amount, timing and uncertainty of cash flows arising from leases. Subsequent to the issuance of Topic 842, the FASB clarified the guidance through several ASUs; hereinafter the collection of lease guidance is referred to as “ASC 842”.

On January 1, 2019, we adopted ASC 842 using the modified retrospective transition method for all lease arrangements at the beginning of the period of adoption. Results for reporting periods beginning January 1, 2019 are presented under ASC 842, while prior period amounts were not adjusted and continue to be reported in accordance with our historic accounting under Topic 840, ~~Leases. The standard had a material impact on our~~accompanying Consolidated Condensed Balance Sheet but had no impact on our consolidated net earnings and cash flows. The most significant impact of adopting ASC 842 was the recognition of the ROU asset and lease liabilities for operating leases, which are presented in the following three line items on the Consolidated Condensed Balance Sheet: (i) operating lease right-of-use assets; (ii) current operating lease liabilities; and (iii) operating lease liabilities.

We elected the package of practical expedients for leases that commenced before the effective date of ASC 842 whereby we elected to not reassess the following: (i) whether any expired or existing contracts contain leases; (ii) the lease classification for any expired or existing leases; and (iii) initial direct costs for any existing leases. In addition, we have lease agreements with lease and non-lease components, and we have elected the practical expedient for all underlying asset classes and account for them as a single lease component. Our finance lease and lessor arrangements are immaterial.

We determine if an arrangement is a lease at inception. We have operating leases for office space, warehouses, distribution centers, research and development facilities, manufacturing locations, and certain equipment, primarily automobiles. Many leases include one or more options to renew, some of which include options to extend the leases for up to 15 years, and some of which include options to terminate the leases in less than one year. We considered options to renew in our lease terms and measurement of right-of-use assets and lease liabilities if we determined they were reasonably certain to be exercised.

~~For the three and nine months ended September 27, 2019, operating lease cost was $23.2 million and $61.2 million, respectively.~~

Short-term and variable lease cost, and cost for finance leases were immaterial for the three and nine months ended September 27, 2019. During the nine-month period ended September 27, 2019, cash paid for operating leases was $53.4 million and included in operating cash flows. ROU assets obtained in exchange for operating lease obligations were $13.5 million and $57.4 million for the three and nine months ended September 27, 2019, respectively. Of those ROU assets exchanged for operating lease obligations during the nine months ended September 27, 2019, $29.8 million were related to operating leases acquired with ASP.

~~The following table presents the maturity of our operating lease liabilities~~ as of September ~~27, 2019 ($~~25, 2020.

Vontier Separation - Subsequent Events

Using the Cash Consideration from the Separation, we repaid, or delivered a notice of redemption of, the following indebtedness as of the date of this Report:

•On October 9, 2020, we repaid $350 million of the outstanding $750 million of the 2021 Term Loan. The fees associated with the prepayment were immaterial.

•On October 15, 2020, we repaid the outstanding ¥13.8 billion balance of the Yen variable interest rate term loan due 2022 which approximated $131 million.

•On October 14, 2020, we provided a notice that we will redeem for cash all of our outstanding 2.35% Senior Notes due 2021 (the “Notes”) in ~~millions):~~accordance with the terms of the indenture governing the Notes.

Remainder of 2019 $ 20.7
2020 51.9
2021 39.7
2022 29.9
2023 20.4
Thereafter 85.2
Total lease payments 247.8
Less: imputed interest (30.3 )
Total lease liabilities $ 217.5

The redemption date for the outstanding Notes to be redeemed will be November 13, 2020 (the “Redemption Date”) and the redemption price will be equal to the greater of: (a) 100% of the principal amount of the Notes, and (b) the sum of the present values of the remaining scheduled payments of principal and interest on the Notes to be redeemed (not including any portion of such payments of interest that will be accrued and unpaid as of the Redemption Date), discounted to the Redemption Date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the applicable treasury rate plus 20 basis points, plus accrued and unpaid interest up to (but not including) the Redemption Date. As ~~previously disclosed~~of October 14, 2020, approximately $750 million aggregate principal amount of the Notes were outstanding.We will write-off the remaining unamortized deferred financing costs and record a make-whole provisions charge for the loss on extinguishment of the debt represented by the Notes in ~~our 2018 Annual Report on Form 10-K and under Topic 840, future minimum lease payments for operating leases having initial or remaining non-cancelable lease terms in excess~~the fourth quarter of ~~one year were as follows ($ in millions):~~

2019 $ 54.2
2020 41.2
2021 32.4
2022 24.0
2023 13.5
Thereafter 16.1
Total lease payments $ 181.4

2020.

As a result of ~~September 27, 2019,~~ the ~~weighted average lease term~~Separation and in accordance with the anti-dilution provisions of the Convertible Notes, effective October 9, 2020, the Convertible Notes are convertible into shares of our ~~operating leases was 8.4 years and the weighted average discount~~common stock at an adjusted conversion rate of ~~our operating leases was 3.2%. We primarily use our incremental borrowing rate as~~10.9568 shares per $1,000 principal amount of Convertible Notes (which is equivalent to an initial conversion price of $91.27 per share), subject to future adjustment upon the ~~discount rate for our operating leases, as we are generally unable to determine the interest rate implicit in the lease.~~occurrence of certain events.

NOTE 8.6. SALES

We derive revenues primarily from the sale of Professional Instrumentation and Industrial Technologies products and software and services. Revenue is recognized when control of promised products and software or services is transferred to customers in an amount that reflects the consideration we expect to be entitled to in exchange for those products and software or services.

~~Product~~ Sales ~~include~~of products and software includes revenues from the sale of products and equipment, ~~which includes our~~ software ~~as a service~~ product offerings, and equipment rentals.

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

Contract Assets — In certain circumstances, we record contract assets which include unbilled amounts typically resulting from sales under contracts when revenue recognized exceeds the amount billed to the customer, and right to payment is not only subject to the passage of time. Contract assets were ~~$81.9~~$81 million as of September ~~27, 2019~~25, 2020 and ~~immaterial~~$79 million as of December 31, ~~2018.~~2019.

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

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generally not capitalized as the amortization period is one year or less, and we elected to use the practical expedient to expense these sales commissions as incurred. As of September ~~27,~~25, 2020 and December 31, 2019, we had ~~$151.6~~$115 million and $147 million, respectively, in net revenue-related contract assets primarily related to certain software ~~contracts~~contracts. Revenue-related contract assets are recorded in the ~~prepaid~~Prepaid expenses and other current assets and ~~other~~Other assets line items in our Condensed Consolidated Balance ~~Sheet. Our revenue-related contract assets at December 31, 2018 were $144.4 million, the majority of which were recorded in property, plant and equipment on the Consolidated Condensed Balance Sheet.~~Sheets. These assets have estimated useful lives between 3 and 8 years.

Impairment losses recognized on our revenue-related contract assets were immaterial induring the three and nine ~~months~~month periods ended September ~~27, 2019.~~25, 2020.

Contract Liabilities — Our contract liabilities consist of deferred revenue generally related to PCS and extended warranty sales, where in most cases we receive up-front payment and recognize revenue over the support term. We classify deferred revenue as current or noncurrent based on the timing of when we expect to recognize revenue. The noncurrent portion of deferred revenue is included in ~~other~~Other long-term liabilities in the accompanying Consolidated Condensed Balance Sheets.

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

September 27, 2019 December 31, 2018
Deferred revenue - current $ 384.7
$ 288.1
Deferred revenue - noncurrent 97.0
92.6
Total contract liabilities $ 481.7
$ 380.7


	September 25, 2020		December 31, 2019
Deferred revenue - current	$	456.7	$	410.1
Deferred revenue - noncurrent	90.5		99.2
Total contract liabilities	$	547.2	$	509.3

InDuring the three and nine ~~months~~month periods ended September ~~27, 2019,~~25, 2020, we recognized ~~$41.0 million and $219.1 million of~~ revenue related to our contract liabilities at December 31, ~~2018.~~2019 of $104 million and $314 million, respectively. The change in our contract liabilities from December 31, ~~2018~~2019 to September ~~27, 2019~~25, 2020 was primarily due to ~~the addition of contract liabilities from our recently acquired businesses and~~ the timing of cash receipts and sales of PCS and extended warranty services.

Remaining Performance Obligations — Our remaining performance obligations represent the transaction price of firm, noncancelable orders, with expected delivery dates to customers greater than one year from September ~~27, 2019,~~25, 2020, for which work has not been performed. We have excluded performance obligations with an original expected duration of one year or less from the amounts below.

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

September 27, 2019
Professional Instrumentation $ 144.4
Industrial Technologies 395.9
Total remaining performance obligations $ 540.3


	September 25, 2020
Professional Instrumentation	$	137.1
Industrial Technologies	386.0
Total remaining performance obligations	$	523.1

The majority of remaining performance obligations are related to service and support contracts, which we expect to fulfill approximately 40 percent within the next two years, approximately 7570 percent within the next three years and substantially all within four years.

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Disaggregation of Revenue

We disaggregate revenue from contracts with customers by sales of products and software and services, geographic location, major product group and end market for each of our segments, as we believe it best depicts how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors. Disaggregation of revenue for the three ~~months~~month period ended September 25, 2020 is presented as follows ($ in millions):


	Total		Professional Instrumentation		Industrial Technologies
Sales:
Sales of products and software	$	1,671.3	$	985.3	$	686.0
Sales of services	231.0		170.4		60.6
Total	$	1,902.3	$	1,155.7	$	746.6

Geographic:
United States	$	1,130.9	$	605.5	$	525.4
China	159.2		143.0		16.2

All other (each country individually less than 5% of total sales)	612.2		407.2		205.0
Total	$	1,902.3	$	1,155.7	$	746.6

Major Products Group:
Professional tools and equipment	$	1,255.5	$	677.0	$	578.5
Industrial automation, controls and sensors	110.7		110.7		0
Franchise distribution	168.1		0		168.1
Medical technologies	308.1		308.1		0
All other	59.9		59.9		0
Total	$	1,902.3	$	1,155.7	$	746.6

End markets:
Direct sales:
Retail fueling^(a)	$	526.1	$	0	$	526.1
Industrial & Manufacturing	113.1		113.1		0
Vehicle repair^(a)	150.9		0		150.9
Utilities & Power	44.3		44.3		0
Medical ^(a)	308.3		308.3		0
Other	371.0		307.2		63.8
Total direct sales	1,513.7		772.9		740.8
Distributors^(a)	388.6		382.8		5.8
Total	$	1,902.3	$	1,155.7	$	746.6

^(a) Retail fueling, vehicle repair, and medical include sales to these end markets made through third-party distributors. Total distributor sales for the three month period ended September 25, 2020 was $815.3 million.

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Disaggregation of revenue for the three month period ended September 27, 2019 is presented as follows ($ in millions):


	Total		Professional Instrumentation ^(a)		Industrial Technologies ^(a)
Sales:
Sales of products and software	$	1,624.6	$	984.8	$	639.8
Sales of services	235.4		160.8		74.6
Total	$	1,860.0	$	1,145.6	$	714.4

Geographic:
United States	$	1,088.6	$	611.2	$	477.4
China	142.0		119.5		22.5

All other (each country individually less than 5% of total sales)	629.4		414.9		214.5
Total	$	1,860.0	$	1,145.6	$	714.4

Major Products Group:
Professional tools and equipment	$	1,240.1	$	688.5	$	551.6
Industrial automation, controls and sensors	116.3		116.3		0
Franchise distribution	162.8		0		162.8
Medical technologies	274.1		274.1		0
All other	66.7		66.7		0
Total	$	1,860.0	$	1,145.6	$	714.4

End markets:
Direct sales:
Retail fueling^(b)	$	495.7	$	0	$	495.7
Industrial & Manufacturing	108.2		108.2		0
Vehicle repair^(b)	147.5		0		147.5
Utilities & Power	48.3		48.3		0
Medical ^(b)	274.1		274.1		0
Other	406.7		341.7		65.0
Total direct sales	1,480.5		772.3		708.2
Distributors^(b)	379.5		373.3		6.2
Total	$	1,860.0	$	1,145.6	$	714.4

^(a) Beginning January 1, 2020, our Hengstler and Dynapar businesses are reported within our Professional Instrumentation segment. Previously, these businesses were reported within our Industrial Technologies segment. Prior year balances have been reclassified to reflect current year presentation.
^(b) Retail fueling, vehicle repair, and medical include sales to these end markets made through third-party distributors. Total distributor sales for the three month period ended September 27, 2019 was $778.6 million.

Total Professional Instrumentation Industrial Technologies
Sales:
Sales of products $ 1,624.6
$ 955.4
$ 669.2
Sales of services 235.4
160.8
74.6
Total $ 1,860.0
$ 1,116.2
$ 743.8

Geographic:
United States $ 1,088.6
$ 601.7
$ 486.9
China 142.0
115.9
26.1
All other (each country individually less than 5% of total sales) 629.4
398.6
230.8
Total $ 1,860.0
$ 1,116.2
$ 743.8

Major Products Group:
Professional tools and equipment $ 1,240.1
$ 688.5
$ 551.6
Industrial automation, controls and sensors 116.3
87.9
28.4
Franchise distribution 162.8
—
162.8
Medical technologies 274.1
273.1
1.0
All other 66.7
66.7
—
Total $ 1,860.0
$ 1,116.2
$ 743.8

End markets:
Direct sales:
  Retail fueling^(a)
$ 495.7
$ —
$ 495.7
  Industrial & Manufacturing 108.2
93.5
14.7
  Vehicle repair^(a)
147.5
—
147.5
  Utilities & Power 48.3
48.3
—
Medical ^(a)
274.1
273.1
1.0
  Other 406.7
341.0
65.7
     Total direct sales 1,480.5
755.9
724.6
Distributors^(a)
379.5
360.3
19.2
Total $ 1,860.0
$ 1,116.2
$ 743.8

(a) Retail fueling, vehicle repair and medical include sales to these end markets made through third-party distributors. Total distributor sales for the three months ended September 27, 2019 was $778.6 million.

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Disaggregation of revenue for the ~~three months~~nine month period ended September ~~28, 2018~~25, 2020 is presented as follows ($ in millions):


	Total		Professional Instrumentation		Industrial Technologies
Sales:
Sales of products and software	$	4,526.8	$	2,813.1	$	1,713.7
Sales of services	660.2		484.5		175.7
Total	$	5,187.0	$	3,297.6	$	1,889.4

Geographic:
United States	$	3,058.7	$	1,749.7	$	1,309.0
China	432.1		393.6		38.5

All other (each country individually less than 5% of total sales)	1,696.2		1,154.3		541.9
Total	$	5,187.0	$	3,297.6	$	1,889.4

Major Products Group:
Professional tools and equipment	$	3,366.7	$	1,925.5	$	1,441.2
Industrial automation, controls and sensors	327.7		327.7		0
Franchise distribution	448.2		0		448.2
Medical technologies	872.5		872.5		0
All other	171.9		171.9		0
Total	$	5,187.0	$	3,297.6	$	1,889.4

End markets:
Direct sales:
Retail fueling^(a)	$	1,288.3	$	0	$	1,288.3
Industrial & Manufacturing	324.9		324.9		0
Vehicle repair^(a)	397.3		0		397.3
Utilities & Power	127.0		127.0		0
Medical ^(a)	872.7		872.7		0
Other	1,100.2		910.1		190.1
Total direct sales	4,110.4		2,234.7		1,875.7
Distributors^(a)	1,076.6		1,062.9		13.7
Total	$	5,187.0	$	3,297.6	$	1,889.4

^(a)Retail fueling, vehicle repair, and medical include sales to these end markets made through third-party distributors. Total distributor sales for the nine month period ended September 25, 2020 was $2,151.5 million.

Total Professional Instrumentation Industrial Technologies
Sales:
Sales of products $ 1,430.1
$ 785.2
$ 644.9
Sales of services 171.1
108.9
62.2
Total $ 1,601.2
$ 894.1
$ 707.1

Geographic:
United States $ 909.4
$ 473.1
$ 436.3
China 133.1
105.1
28.0
All other (each country individually less than 5% of total sales) 558.7
315.9
242.8
Total $ 1,601.2
$ 894.1
$ 707.1

Major Products Group:
Professional tools and equipment $ 1,162.6
$ 648.5
$ 514.1
Industrial automation, controls and sensors 122.4
92.2
30.2
Franchise distribution 161.0
—
161.0
Medical technologies ^(c)
96.1
94.3
1.8
All other 59.1
59.1
—
Total $ 1,601.2
$ 894.1
$ 707.1

End markets:
Direct sales:
  Retail fueling^(a)
$ 447.0
$ —
$ 447.0
  Industrial & Manufacturing 111.5
91.6
19.9
  Vehicle repair^(a)
146.4
—
146.4
  Utilities & Power 31.2
31.2
—
Medical ^{(a) (b)}
96.1
94.3
1.8
  Other 349.6
273.5
76.1
     Total direct sales 1,181.8
490.6
691.2
Distributors^(a)
419.4
403.5
15.9
Total $ 1,601.2
$ 894.1
$ 707.1

(a) Retail fueling, vehicle repair and medical include sales to these end markets made through third-party distributors. Total distributor sales for the three months ended September 28, 2018 was $779.3 million.
(b) Sales were previously disclosed in Other.
(c) Sales were previously disclosed in Professional tools and equipment, Industrial automation, controls and sensors and All other.

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Disaggregation of revenue for the nine ~~months~~month period ended September 27, 2019 is presented as follows ($ in millions):


	Total		Professional Instrumentation^(a)		Industrial Technologies^(a)
Sales:
Sales of products and software	$	4,652.7	$	2,839.8	$	1,812.9
Sales of services	664.9		449.1		215.8
Total	$	5,317.6	$	3,288.9	$	2,028.7

Geographic:
United States	$	3,053.9	$	1,732.8	$	1,321.1
China	446.3		381.1		65.2
All other (each country individually less than 5% of total sales)	1,817.4		1,175.0		642.4
Total	$	5,317.6	$	3,288.9	$	2,028.7

Major Products Group:
Professional tools and equipment	$	3,648.0	$	2,105.3	$	1,542.7
Industrial automation, controls and sensors	363.6		363.6		0
Franchise distribution	486.0		0		486.0
Medical technologies	638.4		638.4		0
All other	181.6		181.6		0
Total	$	5,317.6	$	3,288.9	$	2,028.7

End markets:
Direct sales:
Retail fueling^(b)	$	1,370.2	$	0	$	1,370.2
Industrial & Manufacturing	331.9		331.9		0
Vehicle repair^(b)	440.8		0		440.8
Utilities & Power	147.0		147.0		0
Medical ^(b)	638.4		638.4		0
Other	1,175.9		976.1		199.8
Total direct sales	4,104.2		2,093.4		2,010.8
Distributors^(b)	1,213.4		1,195.5		17.9
Total	$	5,317.6	$	3,288.9	$	2,028.7

^(a) Beginning January 1, 2020, our Hengstler and Dynapar businesses are reported within our Professional Instrumentation segment. Previously, these businesses were reported within our Industrial Technologies segment. Prior year balances have been reclassified to reflect current year presentation.
^(b) Retail fueling, vehicle repair, and medical include sales to these end markets made through third-party distributors. Total distributor sales for the nine month period ended September 27, 2019 was $2,296.9 million.

Total Professional Instrumentation Industrial Technologies
Sales:
Sales of products $ 4,652.7
$ 2,747.7
$ 1,905.0
Sales of services 664.9
449.1
215.8
Total $ 5,317.6
$ 3,196.8
$ 2,120.8

Geographic:
United States $ 3,053.9
$ 1,703.3
$ 1,350.6
China 446.3
370.7
75.6
All other (each country individually less than 5% of total sales) 1,817.4
1,122.8
694.6
Total $ 5,317.6
$ 3,196.8
$ 2,120.8

Major Products Group:
Professional tools and equipment $ 3,648.0
$ 2,105.3
$ 1,542.7
Industrial automation, controls and sensors 363.6
276.8
86.8
Franchise distribution 486.0
—
486.0
Medical technologies ^(c)
638.4
633.1
5.3
All other 181.6
181.6
—
Total $ 5,317.6
$ 3,196.8
$ 2,120.8

End markets:
Direct sales:
  Retail fueling^(a)
$ 1,370.2
$ —
$ 1,370.2
  Industrial & Manufacturing 331.9
287.7
44.2
  Vehicle repair^(a)
440.8
—
440.8
  Utilities & Power 147.0
147.0
—
Medical ^{(a) (b)}
638.4
633.1
5.3
  Other 1,175.9
971.8
204.1
     Total direct sales 4,104.2
2,039.6
2,064.6
Distributors^(a)
1,213.4
1,157.2
56.2
Total $ 5,317.6
$ 3,196.8
$ 2,120.8

(a) Retail fueling, vehicle repair and medical include sales to these end markets made through third-party distributors. Total distributor sales for the nine months ended September 27, 2019 was $2,296.9 million.
(b) Certain sales were previously disclosed in Other.
(c) Certain sales were previously disclosed in Professional tools and equipment, Industrial automation, controls and sensors and All other.

~~Disaggregation~~

Table of ~~revenue for the nine months ended September 28, 2018 is presented as follows ($ in millions):~~Contents

Total Professional Instrumentation Industrial Technologies
Sales:
Sales of products $ 4,202.0
$ 2,352.8
$ 1,849.2
Sales of services 493.2
302.0
191.2
Total $ 4,695.2
$ 2,654.8
$ 2,040.4

Geographic:
United States $ 2,559.1
$ 1,313.5
$ 1,245.6
China 423.3
346.8
76.5
All other (each country individually less than 5% of total sales) 1,712.8
994.5
718.3
Total $ 4,695.2
$ 2,654.8
$ 2,040.4

Major Products Group:
Professional tools and equipment $ 3,377.5
$ 1,922.8
$ 1,454.7
Industrial automation, controls and sensors 383.7
289.3
94.4
Franchise distribution 486.2
—
486.2
Medical technologies ^(c)
290.9
285.8
5.1
All other 156.9
156.9
—
Total $ 4,695.2
$ 2,654.8
$ 2,040.4

End markets:
Direct sales:
  Retail fueling^(a)
$ 1,256.2
$ —
$ 1,256.2
  Industrial & Manufacturing 332.7
279.2
53.5
  Vehicle repair^(a)
442.9
—
442.9
  Utilities & Power 132.6
132.6
—
Medical ^(b)
290.9
285.8

5.1
  Other 973.0
740.6
232.4
     Total direct sales 3,428.3
1,438.2
1,990.1
Distributors^(a)
1,266.9
1,216.6
50.3
Total $ 4,695.2
$ 2,654.8
$ 2,040.4

(a) Retail fueling, vehicle repair and medical include sales to these end markets made through third-party distributors. Total distributor sales for the nine months ended September 28, 2018 was $2,304.1 million.
(b) Sales were previously disclosed in Other.
(c) Sales were previously disclosed in Professional tools and equipment, Industrial automation, controls and sensors and All other.

NOTE 9.7. PENSION PLANS

For a full description of our noncontributory defined benefit pension plans refer to Note 1112 of our ~~2018~~2019 Annual Report on Form 10-K.

The following sets forth the components of our net periodic ~~pension~~ costs associated with our noncontributory defined benefit pension plans ($ in millions):


	Three Months Ended						Nine Months Ended
	September 25, 2020		September 27, 2019		September 25, 2020		September 27, 2019
U.S. Pension Benefits:
Interest cost	$	0.4	$	0.4	$	1.0	$	1.2
Expected return on plan assets	(0.4)		(0.3)		(1.0)		(1.0)
Amortization of net loss	0		0		0.2		0

Net periodic pension cost	$	0	$	0.1	$	0.2	$	0.2

Non-U.S. Pension Benefits:
Service cost	$	1.2	$	0.7	$	3.4	$	1.7
Interest cost	1.1		1.4		3.1		4.3
Expected return on plan assets	(1.4)		(1.5)		(4.2)		(4.4)
Amortization of net loss	1.1		0.7		3.2		2.1
Amortization of prior service cost	0		0		0.2		0

Net periodic pension cost	$	2.0	$	1.3	$	5.7	$	3.7

Three Months Ended Nine Months Ended
September 27, 2019 September 28, 2018 September 27, 2019 September 28, 2018
U.S. Pension Benefits:
Interest cost $ 0.4
$ 0.3
$ 1.2
$ 0.9
Expected return on plan assets (0.3 ) (0.4 ) (1.0 ) (1.1 )
Net periodic pension cost $ 0.1
$ (0.1 ) $ 0.2
$ (0.2 )

Non-U.S. Pension Benefits:
Service cost $ 0.7
$ 0.3
$ 1.7
$ 0.9
Interest cost 1.4
1.4
4.3
4.2
Expected return on plan assets (1.5 ) (1.5 ) (4.4 ) (4.5 )
Amortization of net loss 0.7
0.7
2.1
2.1
Net curtailment and settlement loss recognized —
0.2
—
0.6
Net periodic pension cost $ 1.3
$ 1.1
$ 3.7
$ 3.3

We report all components of net periodic pension costs, with the exception of service costs, in other non-operating expenses as a component of non-operating income in the accompanying Consolidated Condensed Statements of Earnings. Service costs are reported in cost of sales and selling, general and administrative expenses in the accompanying Consolidated Condensed Statements of Earnings according to the classification of the participant’s compensation.

As a result of the Separation, certain non-U.S. plans were assumed by Vontier on October 9, 2020. These plans had a funded status representing a net obligation of approximately $11.0 million as of September 25, 2020.

Employer Contributions

During ~~2019,~~2020, our cash contribution requirements for our non-U.S. and U.S. defined benefit plans for Fortive’s remaining pension plans (excluding contribution requirements with respect to the businesses assumed by Vontier in the Separation) are expected to be approximately ~~$11.0 million. We do not expect to make contributions to the U.S. plan during 2019.~~$10.4 million and $0.8 million, respectively. The actual amounts to be contributed 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.

NOTE ~~10.~~8. INCOME TAXES

Our effective tax rates for the three and nine ~~months~~month periods ended September ~~27, 2019~~25, 2020 were ~~11.8%~~14.8% and ~~13.5%~~18.6%, respectively, as compared to ~~17.0%~~11.8% and ~~16.4%~~13.5% for the three and nine ~~months~~month periods ended September ~~28, 2018,~~27, 2019, respectively. The year-over-year ~~decrease~~increase in the effective tax rate for the three month period ended September 25, 2020 compared to the three month period ended September 27, 2019 was due primarily to ~~increases~~certain one-time transactional taxes incurred during the three month period ended September 25, 2020, as well as decreases in ~~favorable impacts of~~ certain federal tax benefits. The year-over-year increase in the effective tax rate for the nine month period ended September 25, 2020 compared to the nine month period ended September 27, 2019 was due primarily to a non-deductible goodwill impairment and ~~international~~ tax ~~benefits and~~costs associated with repatriating a portion of our previously reinvested earnings outside of the United States. For the nine month period ended September 25, 2020, these factors were partially offset by favorable impacts of a higher mix of income in jurisdictions with lower tax rates than the U.S. federal statutory rate of 21%. and increases in favorable impacts of certain federal and international tax benefits.

Our effective tax rate for ~~2019~~both periods in 2020 and ~~2018~~2019 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 impact of credits and deductions provided by law, and current year earnings outside the United States that are indefinitely reinvested and taxed at

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rates lower than the U.S. federal statutory rate. Specific to 2020, our effective tax rate also differs from the U.S. federal statutory rate of 21% due to a non-deductible goodwill impairment and the tax costs associated with repatriating a portion of our previously reinvested earnings outside of the United States.

On March 27, 2020, the U.S. federal government enacted the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The CARES Act is an emergency economic stimulus package in response to the COVID-19 outbreak which, among other things, contains numerous income tax provisions. Some of these tax provisions are expected to be effective retroactively for years ending before the date of enactment. We anticipate the provisions of the CARES Act will impact income tax in 2020; however, we have not identified material impacts to the tax provision as of September 25, 2020. We will continue to evaluate the impact of the CARES Act as new clarifying guidance is issued throughout 2020.

NOTE ~~11.~~9. STOCK-BASED COMPENSATION

Our stock-based compensation program (the “Stock Plan”) provides for the grant of stock appreciation rights, performance stock units, restricted stock units, restricted stock awards and performance stock awards (collectively, “Stock Awards”), stock options or any other stock-based award. As of September ~~27, 2019,~~25, 2020, approximately 2017 million shares of our common stock were available for subsequent issuance under the Stock Plan. For a full description of our stock-based compensation program refer to Note 17 of our ~~2018~~2019 Annual Report on Form 10-K.

Stock-based Compensation Expense

Stock-based compensation has been recognized as a component of Selling, general and administrative expenses in the accompanying Consolidated Condensed Statements of Earnings based on the portion of the awards that are ultimately expected to vest.

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

Three Months Ended Nine Months Ended
September 27, 2019 September 28, 2018 September 27, 2019 September 28, 2018
Stock Awards:
Pretax compensation expense $ 11.1
$ 7.9
$ 29.0
$ 22.3
Income tax benefit (2.3 ) (1.7 ) (6.1 ) (4.7 )
Stock Award expense, net of income taxes 8.8
6.2
22.9
17.6
Stock options:
Pretax compensation expense 5.6
5.0
16.5
15.0
Income tax benefit (1.2 ) (1.1 ) (3.5 ) (3.2 )
Stock option expense, net of income taxes 4.4
3.9
13.0
11.8
Total stock-based compensation:
Pretax compensation expense 16.7
12.9
45.5
37.3
Income tax benefit (3.5 ) (2.8 ) (9.6 ) (7.9 )
Total stock-based compensation expense, net of income taxes $ 13.2
$ 10.1
$ 35.9
$ 29.4


	Three Months Ended						Nine Months Ended
	September 25, 2020		September 27, 2019		September 25, 2020		September 27, 2019
Stock Awards:
Pretax compensation expense	$	13.2	$	11.1	$	37.1	$	29.0
Income tax benefit	(2.2)		(2.3)		(6.4)		(6.1)
Stock Award expense, net of income taxes	11.0		8.8		30.7		22.9
Stock options:
Pretax compensation expense	8.2		5.6		23.1		16.5
Income tax benefit	(1.4)		(1.2)		(3.7)		(3.5)
Stock option expense, net of income taxes	6.8		4.4		19.4		13.0
Total stock-based compensation:
Pretax compensation expense	21.4		16.7		60.2		45.5
Income tax benefit	(3.6)		(3.5)		(10.1)		(9.6)
Total stock-based compensation expense, net of income taxes	$	17.8	$	13.2	$	50.1	$	35.9

The following summarizes the unrecognized compensation cost for the Stock Plan awards as of September ~~27, 2019.~~25, 2020. This compensation cost is expected to be recognized over a weighted average period of approximately two years, representing the remaining service period related to the awards. Future compensation amounts will be adjusted for any changes in estimated forfeitures ($ in millions):


Stock Awards	$	71.5
Stock options	90.6
Total unrecognized compensation cost	$	162.1

Stock Awards $ 68.5
Stock options 60.5
Total unrecognized compensation cost $ 129.0

Vontier Separation - Subsequent Event

In connection with the Separation and in accordance with the Employee Matters Agreement, the Company has made certain adjustments to the exercise price and the number of stock-based compensation awards with the intention of preserving the intrinsic value of the awards prior to the Separation. For employees of Vontier, stock-based compensation awards of Fortive were converted into stock-based compensation awards of Vontier, and Vontier assumed such converted awards. The Company expects any corresponding adjustments to stock-based compensation expense to be immaterial in future periods.

NOTE ~~12.~~10. COMMITMENTS AND CONTINGENCIES

For a description of our litigation and contingencies and additional information about our leases, refer to ~~Notes 15~~Note 16 and ~~16 of~~Note 10, respectively, in our ~~2018~~2019 Annual Report on Form 10-K.

We generally accrue estimated warranty costs at the time of sale. In general, manufactured products are warranted against defects in material and workmanship when properly used for their intended purpose, installed correctly, and appropriately maintained. Warranty period terms depend on the nature of the product and range from 90 days up to the life of the product. The amount of the accrued warranty liability is determined based on historical information such as past experience, product failure rates or number of units repaired, estimated cost of material and labor, and, in certain instances, estimated property damage. The accrued warranty liability is reviewed on a quarterly basis and may be adjusted as additional information regarding expected warranty costs becomes known.

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


Balance, December 31, 2019	$	79.0
Accruals for warranties issued during the period	38.5
Settlements made	(41.6)
Additions due to acquisitions	1.0
Effect of foreign currency translation	(0.2)
Balance, September 25, 2020	$	76.7

Balance, December 31, 2018 $ 72.1
Accruals for warranties issued during the period 46.1
Settlements made (49.5 )
Additions due to acquisitions 4.7
Balance, September 27, 2019 $ 73.4

Operating lease cost was $19 million and $23 million for the three month periods ended September 25, 2020 and September 27, 2019, respectively. For the nine month periods ended September 25, 2020 and September 27, 2019, operating lease cost was $60 million and $61 million, respectively. During the nine-month periods ended September 25, 2020 and September 27, 2019, cash paid for operating leases included in operating cash flows was $52 million and $53 million, respectively. Right-of-use assets obtained in exchange for operating lease obligations were $45 million and $57 million during the nine month periods ended September 25, 2020 and September 27, 2019, respectively.

As of September 25, 2020, we had entered into operating leases for which the lease had not yet commenced. These operating leases will commence in 2020 with lease terms between 3 and 15 years and have aggregate fixed payments of the non-cancelable lease terms of $14 million.

NOTE ~~13.~~11. NET EARNINGS PER SHARE

Basic net earnings per share (“EPS”) is calculated by dividing net earnings attributable to common stockholders by the weighted average number of shares of common stock outstanding for the applicable period. Diluted EPS is similarly calculated, except that the calculation includes the dilutive effect of the assumed issuance of shares under stock-based compensation plans under the treasury stock method, except where the inclusion of such shares would have an anti-dilutive impact. There were ~~3.3~~5.3 million anti-dilutive options excluded from the diluted EPS calculation for the three ~~months~~month period ended September ~~27, 2019~~25, 2020 and 03.3 million of anti-dilutive options excluded from the diluted EPS calculation for the three ~~months~~month period ended September ~~28, 2018.~~27, 2019. There were 5.5 million and 1.7 million anti-dilutive options excluded for the nine ~~months~~month periods ended September 25, 2020 and September 27, ~~2019. There were an insignificant amount~~2019, respectively.

As described in Note 6,5, upon conversion of the Convertible Notes, holders will receive cash, shares of our common stock, or a combination thereof, at our election. Our intention is to settle such conversions through cash up to the principal amount of the Convertible Notes and, if applicable, through shares of our common stock for conversion value, if any, in excess of the principal amount of the Convertible Notes. We believe we have the ability to settle these obligations as intended, and therefore we have accounted for the conversion features under the treasury stock method in our calculation of EPS. Because the fair value of our common stock is below the conversion price, the Convertible Notes had no impact on our earnings per share for both the three and nine ~~months~~month periods ended September 25, 2020 and September 27, 2019.

The impact of our Mandatory Convertible Preferred Stock (“MCPS”) calculated under the if-converted method was anti-dilutive for both the three and ~~as such~~nine month periods ended September 25, 2020, and 18.4 million shares were excluded from the diluted EPS calculation for each respective period. The impact of our MCPS calculated under the if-converted method was anti-dilutive for both the three and nine ~~months~~month periods ended September 27, ~~2019.~~2019, and 18.4 million shares were excluded from the diluted EPS calculation for each respective period.

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


	Three Months Ended						Nine Months Ended
	September 25, 2020		September 27, 2019		September 25, 2020		September 27, 2019
Numerator
Net earnings from continuing operations	$	225.8	$	207.3	$	398.4	$	546.6
Mandatory convertible preferred stock cumulative dividends	(17.3)		(17.3)		(51.8)		(51.8)
Net earnings attributable to common stockholders from continuing operations	$	208.5	$	190.0	$	346.6	$	494.8

Denominator
Weighted average common shares outstanding used in basic earnings per share	337.6		336.1		337.3		335.6
Incremental common shares from:
Assumed exercise of dilutive options and vesting of dilutive Stock Awards	3.2		3.8		2.9		4.1

Weighted average common shares outstanding used in diluted earnings per share	340.8		339.9		340.2		339.7

Net earnings from continuing operations per common share - Basic	$	0.62	$	0.57	$	1.03	$	1.47
Net earnings from continuing operations per common share - Diluted	$	0.61	$	0.56	$	1.02	$	1.46

Three Months Ended Nine Months Ended
September 27, 2019 September 28, 2018 September 27, 2019 September 28, 2018
Numerator
Net earnings from continuing operations $ 207.3
$ 214.0
$ 546.6
$ 678.2
Mandatory convertible preferred stock cumulative dividends (17.3 ) (17.4 ) (51.8 ) (17.6 )
Net earnings attributable to common stockholders from continuing operations $ 190.0
$ 196.6
$ 494.8
$ 660.6

Denominator
Weighted average common shares outstanding used in basic earnings per share 336.1
349.9
335.6
349.2
Incremental common shares from:
Assumed exercise of dilutive options and vesting of dilutive Stock Awards 3.8
5.4
4.1
5.6
Weighted average common shares outstanding used in diluted earnings per share 339.9
355.3
339.7
354.8

Net earnings from continuing operations per common share - Basic $ 0.57
$ 0.56
$ 1.47
$ 1.89
Net earnings from continuing operations per common share - Diluted $ 0.56
$ 0.55
$ 1.46
$ 1.86

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~~As of September 27, 2019, we accrued $17.3 million of dividends on our MCPS relating to the third quarter dividend payment that was made on September 30, 2019.~~ We declared and paid cash dividends per common share for both the three and ~~per~~nine month periods ended September 25, 2020 as presented below. We declared and paid the MCPS ~~during~~dividends in the ~~periods presented~~first and second quarter of 2019, and declared and accrued the MCPS dividends in the third quarter of 2019. The MCPS dividends for the first, second, and third quarter of 2020 were declared, accrued, and paid as follows:


	Dividend Per Common Share		Amount ($ in millions)		Dividend per MCPS		Amount ($ in millions)
2020:
First quarter	$	0.07	$	23.5	$	12.5	$	17.3
Second quarter	0.07		23.6		12.5		17.2
Third quarter	0.07		23.6		12.5		17.3

Total	$	0.21	$	70.7	$	37.5	$	51.8

2019:
First quarter	$	0.07	$	23.4	$	12.5	$	17.3
Second quarter	0.07		23.4		12.5		17.2
Third quarter	0.07		23.5		12.5		17.3

Total	$	0.21	$	70.3	$	37.5	$	51.8

Dividend Per
Common Share

Amount
($ in millions)
Dividend per MCPS
Amount
($ in millions)
2019:
First quarter $ 0.07
$ 23.4
$ 12.50
$ 17.3
Second quarter 0.07
23.4
12.50
17.2
Third quarter 0.07
23.5
12.50
17.3
Total $ 0.21
$ 70.3
$ 37.50
$ 51.8

2018:
First quarter $ 0.07
$ 24.3
$ —
$ —
Second quarter 0.07
24.4
—
—
Third quarter 0.07
24.5
12.78
17.6
Total $ 0.21
$ 73.2
$ 12.78
$ 17.6

The first quarter 2020 MCPS dividends were paid on April 1, 2020, the second quarter 2020 MCPS dividends were paid on July 1, 2020, and the third quarter 2020 MCPS dividends were paid on October 1, 2020.

Vontier Separation - Subsequent Event

In connection with the Vontier Separation, we triggered the anti-dilution adjustment pursuant to the terms of the MCPS. Each outstanding share of MCPS will convert automatically on July 1, 2021 into shares of common stock based on a conversion ratio as revised pursuant to such anti-dilution adjustments.

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NOTE ~~14.~~12. SEGMENT INFORMATION

We report our results in 2 separate business segments consisting of Professional Instrumentation and Industrial Technologies. When determining the reportable segments, we ~~aggregated~~aggregate operating segments based on their similar economic and operating characteristics. Operating profit amounts in the Other category consist of unallocated corporate costs and other costs not considered part of our evaluation of reportable segment operating performance. Our segment results are as follows ($ in millions):


	Three Months Ended						Nine Months Ended
	September 25, 2020		September 27, 2019		September 25, 2020		September 27, 2019
Sales: ^(a)
Professional Instrumentation	$	1,155.7	$	1,145.6	$	3,297.6	$	3,288.9
Industrial Technologies	746.6		714.4		1,889.4		2,028.7
Total	$	1,902.3	$	1,860.0	$	5,187.0	$	5,317.6
Operating Profit: ^(a)
Professional Instrumentation	$	168.7	$	126.2	$	448.8	$	398.8
Industrial Technologies	165.5		138.5		246.6		382.3
Other	(23.8)		(22.6)		(74.3)		(72.2)
Total Operating Profit	310.4		242.1		621.1		708.9
Gain from combination of business	0		41.2		0		41.2
Interest expense, net	(43.9)		(47.0)		(130.7)		(116.7)
Other non-operating income (expense), net	(1.4)		(1.2)		(0.7)		(1.6)
Earnings from continuing operations before income taxes	$	265.1	$	235.1	$	489.7	$	631.8

^(a) Beginning January 1, 2020, our Hengstler and Dynapar businesses are reported within our Professional Instrumentation segment. Previously, these businesses were reported within our Industrial Technologies segment. Prior year balances have been reclassified to reflect current year presentation.

Three Months Ended Nine Months Ended
September 27, 2019 September 28, 2018 September 27, 2019 September 28, 2018
Sales:
Professional Instrumentation $ 1,116.2
$ 894.1
$ 3,196.8
$ 2,654.8
Industrial Technologies 743.8
707.1
2,120.8
2,040.4
Total $ 1,860.0
$ 1,601.2
$ 5,317.6
$ 4,695.2
Operating Profit:
Professional Instrumentation $ 118.7
$ 160.2
$ 376.9
$ 583.3
Industrial Technologies 146.0
141.7
404.2
370.5
Other (22.6 ) (20.3 ) (72.2 ) (69.9 )
Total Operating Profit 242.1
281.6
708.9
883.9
Gain from combination of business 41.2
—
41.2
—
Interest expense, net (47.0 ) (23.1 ) (116.7 ) (70.3 )
Other non-operating expenses, net (1.2 ) (0.8 ) (1.6 ) (2.6 )
Earnings from continuing operations before income taxes $ 235.1
$ 257.7
$ 631.8
$ 811.0

Segment Change - Subsequent Event

In light of the recently completed Vontier Separation, we changed our internal reporting structure on the first day of the fourth quarter, September ~~27, 2019,~~26, 2020, to reflect organizational and leadership changes that allow us to better assess the ~~material changes~~operational performance of and allocate resources to our businesses. Our chief operating decision maker assesses performance and allocates resources based on our new operating segments, which are also our new reportable segments. Below is a description of our new reportable segments:


Reportable Segment						Operating Company
Intelligent Operating Solutions						Fluke
						Industrial Scientific, including Intelex
						Accruent
						Gordian

Precision Technologies						Tektronix
						Pacific Scientific Energetic Materials Company
						Qualitrol
						Andersen-Negele
						Gems
						Setra
						Hengstler and Dynapar

Advanced Healthcare Solutions						Advanced Sterilization Products
						Fluke Health Solutions
						Censis
						Invetech

We will begin reporting our results under our new reportable segments beginning in ~~total assets by segment since December 31, 2018 were due primarily to~~ the ~~acquisitions discussed in Note 2. Our identifiable assets by segment are as follows ($ in millions):~~fourth quarter of 2020.

September 27, 2019 December 31, 2018
Professional Instrumentation $ 12,397.0
$ 8,592.6
Industrial Technologies 3,022.7
3,011.2
Other 1,222.9
1,271.8
Assets of Discontinued Operations 17.8
30.0
Total $ 16,660.4
$ 12,905.6

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Fortive Corporation (“Fortive,” the “Company,” “we,” “us,” or “our”) is a diversified industrial technology growth company comprised of Professional Instrumentation and Industrial Technologies segments and encompassing businesses that are recognized leaders in attractive markets. On October 9, 2020, Fortive completed the separation of our Industrial Technologies segment through a spin-off of 80.1% of shares of Vontier Corporation (“Vontier”) to our shareholders (the “Separation”) on a pro-rata basis. Our well-known brands hold leading positions in ~~advanced instrumentation and~~field solutions, product realization, sensing technologies, health, transportation ~~technology,~~technologies, and franchise ~~distribution markets.~~distribution. Our businesses design, develop, service, manufacture, and market professional and engineered products, software, and services for a variety of end markets, building upon leading brand names, innovative technology, and significant market positions.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is designed to provide a reader of our financial statements with a narrative from the perspective of management. The following discussion should be read in conjunction with the MD&A and consolidated and combined financial statements included in our ~~2018~~2019 Annual Report on Form 10-K. Our MD&A is divided into five sections:

•Information Relating to Forward-Looking Statements

•Results of Operations

•Liquidity and Capital Resources

•Critical Accounting Estimates

INFORMATION RELATING TO FORWARD-LOOKING STATEMENTS

Certain statements included or incorporated by reference in this quarterly report, in other documents we file with or furnish to the Securities and Exchange Commission (“SEC”), in our press releases, webcasts, conference calls, materials delivered to shareholders and other communications, are “forward-looking statements” within the meaning of the United States federal securities laws. All statements other than historical factual information are forward-looking statements, including without limitation statements regarding: projections of revenue, expenses, profit, profit margins, tax rates, tax provisions, cash flows, pension and benefit obligations and funding requirements, our liquidity position or other financial measures; management’s plans and strategies for future operations, including statements relating to anticipated operating performance, cost reductions, restructuring activities, new product and service developments, competitive strengths or market position, acquisitions, divestitures, ~~separation into two independent, publicly traded companies,~~ strategic opportunities, debt repayment, securities offerings, stock repurchases, dividends and executive compensation; growth, declines and other trends in markets we sell into; new or modified laws, regulations and accounting pronouncements; outstanding claims, legal proceedings, tax audits and assessments and other contingent liabilities; foreign currency exchange rates and fluctuations in those rates; impact on changes to tax laws; general economic and capital markets conditions; the timing of any of the foregoing; assumptions underlying any of the foregoing; and any other statements that address events or developments that we intend or believe will or may occur in the future. Terminology such as “believe,” “anticipate,” “should,” “could,” “intend,” “will,” “plan,” “expect,” “estimate,” “project,” “target,” “may,” “possible,” “potential,” “forecast” and “positioned” and similar references to future periods are intended to identify forward-looking statements, although not all forward-looking statements are accompanied by such words.

Forward-looking statements are based on assumptions and assessments made by our management in light of their experience and perceptions of historical trends, current conditions, expected future developments, and other factors. Forward-looking statements are not guarantees of future performance and actual results may differ materially from the results, developments and business decisions contemplated by our forward-looking statements. Accordingly, you should not place undue reliance on any such forward-looking statements. Important factors that could cause actual results to differ materially from those envisaged in the forward-looking statements include the following:

•The duration and severity of the COVID-19 pandemic and its effect on our global operations and the operations of our customers, suppliers, and vendors.

•Conditions in the global economy, the markets we serve and the financial markets may adversely affect our business and financial statements.

•Our inability to realize the intended benefits of our recently completed separation of Vontier Corporation.

•Our growth could suffer if the markets into which we sell our products, software and services decline, do not grow as anticipated or experience cyclicality.

•Changes in industry standards and governmental regulations may reduce demand for our products or services or increase our expenses.

•Trade relations between China and the United States could have a material adverse effect on our business and financial statements.

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

•Our growth depends in part on the timely development and commercialization, and customer acceptance, of new and enhanced products and services based on technological innovation.

•Our reputation, ability to do business and financial statements may be impaired by improper conduct by any of our employees, agents or business partners.

•Our acquisition of businesses, joint ventures and strategic relationships could negatively impact our financial statements.

Our plans to separate into two independent, publicly traded companies may encounter unexpected delays and may not be completed on the currently contemplated timeline or at all and may not achieve the intended benefits.

•The indemnification provisions of acquisition agreements by which we have acquired companies may not fully protect us and as a result we may face unexpected liabilities.

•Divestitures or other dispositions could negatively impact our business, and contingent liabilities from businesses that we have sold could adversely affect our financial statements.

•Our operations, products and services expose us to the risk of environmental, health and safety liabilities, costs and violations that could adversely affect our reputation and financial statements.

•Our businesses are subject to extensive regulation; failure to comply with those regulations could adversely affect our financial statements and reputation.

•International economic, political, legal, compliance and business factors could negatively affect our ~~business and~~ financial statements.

•We may be required to recognize impairment charges for our goodwill and other intangible assets.

•Foreign currency exchange rates may adversely affect our financial statements.

•The interest rates on our credit facilities may be impacted by the phase out of the London Interbank Offered Rate (“LIBOR”).

•Changes in our effective tax rates or exposure to additional income tax liabilities or assessments could affect our profitability. In addition, audits by tax authorities could result in additional tax payments for prior periods.

•We have incurred a significant amount of debt, and our debt will increase further if we incur additional debt and do not retire existing debt.

•We are subject to a variety of litigation and other legal and regulatory proceedings in the course of our business that could adversely affect our financial statements.

•If we do not or cannot adequately protect our intellectual property, or if third parties infringe our intellectual property rights, we may suffer competitive injury or expend significant resources enforcing our rights.

•Third parties may claim that we are infringing or misappropriating their intellectual property rights and we could suffer significant litigation expenses, losses or licensing expenses or be prevented from selling products or services.

•A significant disruption in, or breach in security of, our information technology systems could adversely affect our business.

•Defects and unanticipated use or inadequate disclosure with respect to our products (including software) or services could adversely affect our business, reputation and financial statements.

•Our financial results are subject to fluctuations in the cost and availability of commodities that we use in our operations.

•If we cannot adjust our manufacturing capacity or the purchases required for our manufacturing activities to reflect changes in market conditions and customer demand, our profitability may suffer. In addition, our reliance upon sole or limited sources of supply for certain materials, components and services could cause production interruptions, delays and inefficiencies.

•Our restructuring actions could have long-term adverse effects on our business.

•Work stoppages, union and works council campaigns and other labor disputes could adversely impact our productivity and results of operations.

•If we suffer loss to our facilities, supply chains, distribution systems or information technology systems due to catastrophe or other events, our operations could be seriously harmed.

•Certain provisions in our amended and restated certificate of incorporation and bylaws, and of Delaware law, may prevent or delay an acquisition of our company, which could decrease the trading price of our common stock.

•We could incur significant liability if the separation and distribution of Vontier is determined to be a taxable transaction.

•Potential indemnification liabilities to Vontier pursuant to the separation agreement could materially and adversely affect our businesses, financial condition, results of operations and cash flows.

•Changes in U.S. GAAP could adversely affect our reported financial results and may require significant changes to our internal accounting systems and processes.

•Our amended and restated certificate of incorporation designates the state courts in the State of Delaware or, if no state court located within the State of Delaware has jurisdiction, the federal court for the District of Delaware, as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our shareholders, which could discourage lawsuits against us and our directors and officers.

See “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2018 and Form 10-Q for the fiscal quarter ended June 28,~~ 2019 and ~~“Part II -~~ Item ~~1A.~~1.A. Risk Factors” in this ~~Form 10-Q~~Report for a further discussion regarding reasons that actual results may differ materially from the results, developments and business decisions contemplated by our forward-looking statements. Forward-looking statements speak only as of the date of the report, document, press release, webcast, call, materials or other communication in which they are made. We do not assume any obligation to update or revise any forward-looking statement, whether as a result of new information, future events and developments or otherwise.

Fortive is a diversified, multinational industrial technology growth company with global operations and our businesses are affected by worldwide, regional, and industry-specific economic and political factors. Our geographic and industry diversity, as well as the range of our products, software, and services, 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. Given the broad range of products manufactured, software and services provided, and geographies served, we do not use any indices other than general economic trends to predict the overall outlook for the Company. Our individual businesses monitor key competitors and customers, including to the extent possible their sales, to gauge relative performance and the outlook for the future.

As a result of our geographic and industry diversity, we face a variety of opportunities and challenges, including technological development in most of the markets we serve, the expansion and evolution of opportunities in high-growth markets, trends and

costs associated with a global labor force, and consolidation of our competitors. We define high-growth markets as developing markets of the world experiencing extended periods of accelerated growth in gross domestic product and infrastructure which include Eastern Europe, the Middle East, Africa, Latin America, and Asia with the exception of Japan and Australia. We operate in a highly competitive business environment in most markets, and our long-term growth and profitability will depend, in particular, on our ability to expand our business across geographies and market segments, identify, consummate, and integrate appropriate acquisitions, develop innovative and differentiated new products, services, and software, expand and improve the effectiveness of our sales force and continue to reduce costs and improve operating efficiency and quality, and effectively address the demands of an increasingly regulated environment. We are making significant investments, organically and through acquisitions, to address technological change in the markets we serve and to improve our manufacturing, research and development, and customer-facing resources in order to be responsive to our customers throughout the world.

~~On September 4, 2019, we announced our intention to separate into two independent, publicly traded companies subject to the satisfaction~~

On July 20, 2019, we completed the combination of the Tektronix Video test and monitoring equipment business (“Tektronix Video Business”) with Telestream, LLC (the “Combined Business”), a portfolio company of Genstar Capital LLC. We recognized a pre-tax gain of $41.2 million upon the combination, and hold a 33% equity stake in the Combined Business. This transaction did not meet the criteria for discontinued operations reporting, and therefore the operating results of the Tektronix Video Business prior to the combination with Telestream are included in continuing operations for all periods presented. Additionally, the equity earnings from our stake in the Combined Business are included in other non-operating expenses, net in the accompanying Consolidated Condensed Statement of Earnings.ASP Acquisition

On April 1, 2019, we acquired the advanced sterilization products business (“ASP”) of Johnson & Johnson, a New Jersey corporation (“Johnson & Johnson”) for an aggregate purchase price of $2.7 billion (the “Transaction”), subject to certain post-closing adjustments set forth in a Stock and Asset Purchase Agreement, dated effective as of June 6, 2018 (the “Purchase Agreement”), between the Company and Ethicon, Inc., a New Jersey corporation (“Ethicon”) and a wholly owned subsidiary of Johnson & Johnson. ASP engages in the research, development, manufacture, marketing, distribution, and sale of low-temperature terminal sterilization and high-level disinfection products. ~~ASP generated annual revenues of approximately $800 million in 2018.~~ Refer to Note 2 to the accompanying consolidated condensed financial statements for additional information regarding the Transaction.

On the October 9, 2020, we completed the Separation of our Industrial Technologies segment by distributing 80.1% of the outstanding shares of Vontier to Fortive stockholders on a pro rata basis. To effect the Separation, we distributed to our stockholders two shares of Vontier common stock for every five shares of Fortive common stock outstanding held on September 28, 2020, the record date for the distribution, and retained 19.9% of the shares of Vontier common stock immediately following the Separation. We currently plan to divest our 19.9% retained shares in Vontier after the spin-off in a tax-efficient manner no later than twelve months after the distribution date.

On September 29, 2020, Vontier entered into a credit agreement (the “Credit Agreement”) with a syndicate of banks, consisting of a three-year, $800 million senior unsecured delayed draw term loan facility (the “Three-Year Term Loans”), a two-year, $1 billion senior unsecured delayed draw term loan facility (the “Two-Year Term Loans” and together with the Three-Year Term Loans, the “Term Loans”) and a three-year, $750 million senior unsecured multi-currency revolving credit facility (the “Revolving Credit Facility” and, together with the Term Loans, the “Credit Facilities”). On the Distribution Date, Vontier drew down the full $1.8 billion available under the Term Loans. Vontier used the proceeds from the Term Loans to make payments to us, with $1.6 billion used as part of the consideration for the contribution of certain assets and liabilities to Vontier by the Company in connection with the Separation and with $200 million used as a preliminary adjustment for excess cash balances remaining with Vontier (collectively, the “Cash Consideration”). We intend to apply the Cash Consideration to repay certain outstanding indebtedness and to pay certain of our regular, quarterly cash dividends. Refer to Note 5 to the accompanying consolidated condensed financial statements for the description of the debt repayments made subsequent to September 25, 2020 and other anticipated repayments.

As the disposition occurred during the fourth quarter of 2020, we will classify Vontier as a discontinued operation in our financial statements beginning in the fourth quarter of 2020; the results of our Industrial Technologies segment are included in continuing operations for the three and nine month periods ended September 25, 2020. For the year ended December 31, 2019, Vontier had revenues of approximately $2.8 billion.

As a result of planning for the Separation, we incurred $21 million and $62 million in Vontier stand-up and separation-related costs during the three and nine month periods ended September 25, 2020, respectively, which were recorded in selling, general and administrative expenses on the Consolidated Condensed Statements of Earnings. These stand-up and separation-related costs primarily relate to professional fees associated with preparation of regulatory filings and separation activities within finance, tax, legal, and information system functions and will be reclassified into discontinued operations in future filings.

In connection with the Separation, Fortive and Vontier entered into various agreements to effect the Separation and provide a framework for Vontier’s relationship with Fortive after the separation, including a transition services agreement, an employee matters agreement, a tax matters agreement, an intellectual property matters agreement, a Fortive Business System (“FBS”) license agreement and a stockholder’s and registration rights agreement. These agreements govern the separation between Fortive and Vontier of the assets, employees, liabilities and obligations (including its investments, property and employee benefits and tax-related assets and liabilities) of Fortive and its subsidiaries attributable to periods prior to, at and after Vontier’s separation and also govern certain relationships between Fortive and Vontier after the Separation.

On October 1, 2018, we completed the split-off of four of our operating companies (the “A&S Business”), and have reported the A&S Business as discontinued operations in our Consolidated Condensed Statements of Earnings, Consolidated Condensed Balance Sheets, and Consolidated Condensed Statements of Cash Flows for all periods presented. ~~Unless otherwise noted discussion~~Discussion within this MD&A relates to continuing operations.

In light of the recently completed Separation, we changed our internal reporting structure on the first day of the fourth quarter, September 26, 2020, to reflect organizational and leadership changes that allow us to better assess the operational performance of and allocate resources to our businesses. Presentation within the notes to the unaudited consolidated condensed financial statements for the three and nine month periods ended September 25, 2020 has not be reclassified to reflect this segment change. Refer to Note 12 to the accompanying consolidated condensed financial statements for additional information.

In this report, references to sales from existing businesses refers to sales from operations calculated according to generally accepted accounting principles in the United States (“GAAP”) but excluding (1) the impact from acquired 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. We exclude the effect of acquisitions 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. 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 refer to the impact of both price and unit sales.

Business Performance and Outlook

~~While differences exist~~Business Performance

A novel strain of coronavirus was first identified in Wuhan, China in December 2019, and subsequently declared a pandemic by the World Health Organization in March 2020 (“COVID-19”). This outbreak has surfaced in nearly all regions around the world, resulting in governments implementing strict measures to help contain or mitigate the spread of the virus, including quarantines, “shelter in place,” and “stay at home” orders, travel restrictions, school and commercial facility closures, re-opening restrictions, among others (collectively “virus control measures”). Further, the U.S. Department of Homeland Security’s Cybersecurity and Infrastructure Security Agency has issued Guidance documents for use by businesses and states defining “critical-infrastructure” industries that may continue to operate despite the virus control measures implemented. These virus control measures have led to slowdowns or shutdowns for businesses deemed both “essential” and “non-essential” in affected areas, causing significant disruption in the financial markets both globally and in the United States. All of our essential production facilities around the world were open during the third quarter, and as of the date of this Report, all of our locations are open and operating.

Given our businesses ~~on an overall basis, demand for~~operate globally, have diverse customers, and serve multiple end-markets, COVID-19 impacted our ~~products, software~~businesses and ~~services increased~~operating results during the three ~~months~~and nine month periods ended September ~~27, 2019 as compared to~~25, 2020 directly with reduced year-over-year demand from customers operating in non-essential end-markets and indirectly with reduced demand created by macroeconomic disruption or disruption in adjacent end-markets. During the ~~comparable~~three month period ended September 25, 2020, we experienced sequential improvement in demand across all of ~~2018 resulting in~~our businesses and geographies from the second quarter.

For the three month period ended September 25, 2020, aggregate year-over-year total sales ~~growth of 16.2% and sales growth from existing businesses of 2.1%. Our~~increased 2.3%, as our continued application and deployment of the Fortive Business System, ~~including investments in sales growth initiatives and new product introductions,~~ as well as increased demand in ~~developed markets~~our Industrial Technologies segment, incremental sales from our recently acquired companies, and other business-specific factors discussed below, contributed to overall sales growth in the period. For the nine month period ended September 25, 2020, aggregate year-over-year total sales decreased 2.5%, which was driven by reduced demand for our products as a result of the COVID-19 pandemic, particularly in the second quarter.

Sales from existing businesses ~~across~~decreased 0.1% and 7.1% during the ~~majority~~three and nine month periods ended September 25, 2020 as compared to the comparable periods of ~~our businesses~~2019. The year-over-year decrease in the ~~period.~~

~~On a year-over-year basis for the~~ three ~~months~~month period ended September ~~27, 2019,~~25, 2020 reflects reduced year-over-year demand for our ~~Industrial Technologies segment reported sales growth~~products as a result of the COVID-19 pandemic that was largely offset by an increase in demand for fuel management systems in North America resulting from ~~existing businesses of 6.5%, while our Professional Instrumentation segment reported a decline in sales from existing businesses of 1.3%. In our Industrial Technologies segment,~~ the April 2021 liability shift related to the enhanced credit card security requirements for outdoor payment systems ~~that is expected to occur in October 2020 in the United States~~ based on the Europay, Mastercard, and Visa (“EMV”) global standards, ~~is continuing to drive demand within~~vehicle repair offerings, industrial imaging products, and ventilator components used in COVID-19 patient treatment. For the year-to-date period, COVID-19 impacted our ~~transportation technologies platform. The decline~~businesses and operating results broadly across all geographies, as virus control measures were deployed in most regions and particularly impacted our ~~Professional Instrumentation segment reflects slowing macroeconomic conditions across most major markets.~~results in the second quarter.

Geographically, year-over-year sales from existing businesses ~~grew~~for the three month period ended September 25, 2020 declined slightly in developed markets and increased slightly in high-growth markets, as North America increased at a low-single digit rate, ~~in developed markets and declined~~Latin America increased at a low-single digit rate, ~~in high-growth markets during the three months ended September 27, 2019 as compared to the comparable 2018 period. Year-over-year sales from existing businesses grew~~Europe declined at a ~~low-double~~mid-single digit rate, ~~in Latin America~~ and ~~at a low-single digit rate in North America, while sales in~~ Asia declined at a low-single digit rate, which included growth at a mid-single digit rate in China. Year-over-year sales from existing businesses for the nine month period ended September 25, 2020 decreased at a mid-single digit rate in developed markets and decreased at a low-double digit rate in high-growth markets, as North America declined at a mid-single digit rate, Europe declined at a high-single digit rate, and Asia declined at a low-double digit rate, with China declining at a high-single digit rate.

During the first nine months of 2020, overall global economic conditions have been volatile and uncertain as a result of COVID-19. Our results in the third quarter of 2020 indicate positive, broad-based momentum across our portfolio; however, despite the positive demand trends and sequential improvement realized during the ~~three months ended September 27, 2019.~~third quarter, economic uncertainties continue to exist as a result of COVID-19.

~~While~~Given the diverse nature of our businesses and the end-markets they serve, we believe certain of our businesses will continue being resilient against the broad COVID-19 impacts in the fourth quarter of 2020, while we believe others will continue being relatively more sensitive, with varied rates of continued recovery as virus control measures remain in place. The businesses we believe will continue being relatively more resilient include our businesses with a greater proportion of recurring revenue, including our software as a service businesses that provide critical workflow solutions to their customers, our healthcare businesses, and those with longer business cycles with strong backlogs. We believe our businesses that are more dependent on short-cycle industrial demand and production dynamics will continue to sequentially improve but continue experiencing a challenging environment in the fourth quarter of 2020. As such, for our remaining portfolio of businesses following the Vontier Separation, we expect ~~overall sales~~year-over-year global demand for our products and services in the fourth quarter of 2020 to be within a range that is relatively flat to year-over-year growth of 3%.

With the uncertainty that remains with COVID-19, we plan to continue deploying the Fortive Business System to ~~grow~~help drive near-term performance and execute cost reductions in the fourth quarter, where necessary, to align with demand, while emphasizing cash flow generation. These cost actions include reducing labor expenses to better align with demand expectations, reducing discretionary spending, and pursuing cost reductions throughout our supply chain by targeting reductions in both direct and indirect spending and reducing our facility expenses. Additionally, we plan to increase our spending on a ~~year-over-year basis~~range of strategic productivity improvement initiatives by approximately $30 million in the fourth quarter to further align our portfolio with the new business conditions in light of COVID-19 and allow for the continuation of growth and innovation investments.

Despite the virus control measures in place in geographies critical to our supply chain, we have successfully implemented solutions to support our operations and have not experienced significant production material shortages, supply chain constraints, or distribution limitations impacting our operations as of the date of this Report; however, in light of the uncertainty of the COVID-19 pandemic severity and duration, we are continuing to evaluate and monitor the condition of our supply chain, including the financial health of our suppliers and their ability to access raw materials and other key inputs and may experience shortages, constraints, or disruptions during the remainder of ~~2019, we expect sales from existing businesses~~2020 and thereafter.

We are closely monitoring the health of our employees, and are continuing to ~~be relatively flat as we continue~~implement safety protocols at our facilities to ~~monitor macro-economic developments~~help ensure the health and ~~the corresponding impact on~~safety of our ~~businesses.~~employees. In addition, we ~~continue~~are continuing to monitor ~~geopolitical uncertainties, including Brexit~~our suppliers and ~~global~~customers and their ability to maintain production capacity and meet our operational requirements. Individuals contracting or being exposed to COVID-19, or who are unable to report to work due to virus control measures, may significantly disrupt production throughout our supply chain and negatively impact our sales channels. Further, our customers may be directly impacted by business curtailments or weak market conditions, and may not be willing or able to accept shipments of products, may cancel orders, and may not be able to pay us on a timely basis.

To mitigate the impact of the economic conditions from the COVID-19 pandemic as well as any escalation of geopolitical uncertainties related to governmental policies toward international trade, monetary and fiscal ~~policies;~~policies, and ~~the current uncertainty surrounding the relationship~~relations between the ~~United States~~U.S. and China, we will continue applying and deploying the Fortive Business System to actively manage our supply chain and drive operating efficiencies, and continue to collaborate with ~~respect~~our customers and suppliers to ~~trade policies, treaties, government regulations,~~minimize disruption to their businesses. Additionally, we will continue actively managing our working capital with a focus on maximizing cash flows and ~~tariffs. We will also~~cost efficiency and assessing market conditions and taking actions as we deem necessary to appropriately position our businesses in light of the economic environment and geopolitical uncertainties.

While COVID-19 has created volatility and uncertainty in the financial markets, we have not experienced a significant impact on our financial position, liquidity, and ability to meet our debt covenants as of the filing date of this Report; however, we continue to monitor the financial markets and general global economic conditions. Further, we utilized certain provisions of The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) enacted by the U.S. Government to provide additional short-term liquidity, including relief from employer payroll tax remittance, and expect to continue utilizing these benefits in the fourth quarter of 2020. We are also evaluating other ~~factors identified above~~potential income tax impacts of the CARES Act. If further changes in ~~“—Information Relating~~financial markets or other areas of the economy adversely affect our access to ~~Forward-Looking Statements.”~~the capital markets, we would expect to rely on a combination of available cash and existing available capacity under our credit facilities to provide short-term funding. Refer to the “Liquidity and Capital Resources” section for additional discussion.

RESULTS OF OPERATIONS

The following tables summarize total aggregate year-over-year sales growth and the components of aggregate year-over-year sales growth during the three and nine ~~months~~month periods ended September ~~27, 2019~~25, 2020 as compared to the comparable periods of ~~2018:~~2019:

Components of Sales Growth

Acquisitions(Non-GAAP)

Operating Profit Margins

Operating profit margin was ~~13.0%~~16.3% for the three ~~months~~month period ended September ~~27, 2019, a decrease~~25, 2020, an increase of ~~460~~330 basis points as compared to ~~17.6%~~13.0% in the comparable period of ~~2018.~~2019. Year-over-year operating profit margin comparisons were ~~unfavorably~~favorably impacted by:

~~Higher 2019~~•Operating expense savings from broad cost reduction efforts, and to a lesser extent, a favorable sales mix, price increases, lower year-over-year material costs, incremental year-over-year cost savings associated with restructuring and productivity improvement initiatives, and changes in foreign currency exchange rates, which were partially offset by lower year-over-year sales volumes from existing businesses — favorable 160 basis points

•Acquisition-related transaction costs and transaction and stand-up costs related to the Separation, as the aggregate of acquisition costs and Separation costs were less in 2020 than the comparable period in 2019 — favorable 30 basis points

•The year-over-year effect of acquired businesses, including amortization, and acquisition-related fair value adjustments to deferred revenue and inventory which were less in 2020 than the fair value adjustments recognized in the comparable period in 2019 — favorable 120 basis points

•The year-over-year effect of amortization from existing businesses — favorable 20 basis points



PART I -			FINANCIAL INFORMATION	Page
Item 1.			Financial Statements
			Consolidated Condensed Balance Sheets	4
			Consolidated Condensed Statements of Earnings	5
			Consolidated Condensed Statements of Comprehensive Income	6
			Consolidated Condensed ~~Statement~~Statements of Changes in Equity	7
			Consolidated Condensed Statements of Cash Flows	9
			Notes to Consolidated Condensed Financial Statements	10
Item 2.			Management's Discussion and Analysis of Financial Condition and Results of Operations	3133
Item 3.			Quantitative and Qualitative Disclosures About Market Risk	4553
Item 4.			Controls and Procedures	4553
PART II -			OTHER INFORMATION
Item 1A.			Risk Factors	4653

Item 2.6.			~~Unregistered Sales of Equity Securities and Use of Proceeds~~Exhibits	4655
~~Item 6.~~			~~Exhibits~~Signatures	4757
	~~Signatures~~	48



	As of
	September 27, 2019			December 31, 2018
	(unaudited)
ASSETS
Current assets:
Cash and equivalents	$	1,060.5		$	1,178.4
Accounts receivable, net	1,332.0			1,195.1
Inventories:
Finished goods	311.7			219.5
Work in process	102.3			103.1
Raw materials	266.7			251.9
Total inventories	680.7			574.5
Prepaid expenses and other current assets	374.9			193.2
Current assets, discontinued operations	17.8			30.0
Total current assets	3,465.9			3,171.2
Property, plant and equipment, net of accumulated depreciation of $825.7 and $889.8 at September 27, 2019 and December 31, 2018, respectively	519.8			576.1
Operating lease right-of-use assets	210.2			—
Other assets	808.4			548.9
Goodwill	7,995.5			6,133.1
Other intangible assets, net	3,660.6			2,476.3
Total assets	$	16,660.4		$	12,905.6
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt	$	1,000.0		$	455.6
Trade accounts payable	693.8			706.5
Current operating lease liabilities	52.2			—
Accrued expenses and other current liabilities	1,154.6			999.3
Current liabilities, discontinued operations	15.7			30.7
Total current liabilities	2,916.3			2,192.1
Operating lease liabilities	165.3			—
Other long-term liabilities	1,399.6			1,125.9
Long-term debt	5,015.6			2,974.7
Equity:
Preferred stock: $0.01 par value, 15.0 million shares authorized; 5.0% Mandatory convertible preferred stock, series A, 1.4 million shares designated, issued and outstanding at September 27, 2019 and December 31, 2018	—			—
Common stock: $0.01 par value, 2.0 billion shares authorized; 336.6 and 335.1 million issued; 335.7 and 334.5 million outstanding at September 27, 2019 and December 31, 2018, respectively	3.4			3.4
Additional paid-in capital	3,291.2			3,126.0
Retained earnings	3,976.7			3,552.7
Accumulated other comprehensive income (loss)	(119.6		)	(86.6		)
Total Fortive stockholders’ equity	7,151.7			6,595.5
Noncontrolling interests	11.9			17.4
Total stockholders’ equity	7,163.6			6,612.9
Total liabilities and equity	$	16,660.4		$	12,905.6



	Advanced Sterilization Products
Inventories	$	168.8
Property, plant and equipment	45.2
Goodwill	1,385.2
Other intangible assets, primarily customer relationships, trade names and technology	1,126.5
Other assets and liabilities, net	(90.3		)
Total consideration allocated to Principal Countries	2,635.4
Prepaid acquisition asset related to Non-Principal Countries	64.6
Net cash consideration	$	2,700.0



Accounts receivable	$	39.8
Inventories	16.2
Property, plant and equipment	9.5
Goodwill	454.6
Other intangible assets	252.2
Other assets and liabilities, net	(88.7		)
Net cash consideration	$	683.6



Balance, December 31, 2018	$	6,133.1
Adjustments to preliminary purchase price allocations for acquisitions completed in 2018	72.0
Attributable to 2019 acquisitions	1,839.8
Attributable to the Tektronix Video Business Combination	(40.2		)
Foreign currency translation and other	(9.2		)
Balance, September 27, 2019	$	7,995.5



	September 27, 2019					December 31, 2018
	Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization
Finite-lived intangibles:
Patents and technology	$	935.7	$	(333.6	)	$	614.0	$	(280.8	)
Customer relationships and other intangibles	3,067.2		(729.8		)	2,204.2		(589.9		)
Total finite-lived intangibles	4,002.9		(1,063.4		)	2,818.2		(870.7		)
Indefinite-lived intangibles:
Trademarks and trade names	721.1		—			528.8		—
Total intangibles	$	4,724.0	$	(1,063.4	)	$	3,347.0	$	(870.7	)



	Carrying value		Annual effective rate		Weighted average remaining maturity (in days)
U.S. dollar-denominated commercial paper	$	1,086.0	2.34	%	15
Euro-denominated commercial paper	$	257.7	(0.10	)%	39



Remainder of 2019	$	20.7
2020	51.9
2021	39.7
2022	29.9
2023	20.4
Thereafter	85.2
Total lease payments	247.8
Less: imputed interest	(30.3		)
Total lease liabilities	$	217.5



2019	$	54.2
2020	41.2
2021	32.4
2022	24.0
2023	13.5
Thereafter	16.1
Total lease payments	$	181.4



	September 27, 2019
Professional Instrumentation	$	144.4
Industrial Technologies	395.9
Total remaining performance obligations	$	540.3



Stock Awards	$	68.5
Stock options	60.5
Total unrecognized compensation cost	$	129.0



Balance, December 31, 2018	$	72.1
Accruals for warranties issued during the period	46.1
Settlements made	(49.5		)
Additions due to acquisitions	4.7
Balance, September 27, 2019	$	73.4


	% Change Three Months Ended September 27, 2019 vs. Comparable 2018 Period		% Change Nine Months Ended September 27, 2019 vs. Comparable 2018 Period			% Change Three Months Ended September 25, 2020 vs. Comparable 2019 Period		% Change Nine Months Ended September 25, 2020 vs. Comparable 2019 Period
Total revenue growth (GAAP)	16.2	%	13.3	%	Total revenue growth (GAAP)	2.3	%	(2.5)	%
Existing businesses (Non-GAAP)	2.1	%	2.6	%	Existing businesses (Non-GAAP)	(0.1)	%	(7.1)	%
Acquisitions(Non-GAAP)	15.3	%	12.7	%	Acquisitions(Non-GAAP)	2.2	%	5.6	%
Currency exchange rates (Non-GAAP)	(1.2	)%	(2.0	)%	Currency exchange rates (Non-GAAP)	0.2	%	(1.0)	%



Period	Total number of shares (or units) purchased ⁽¹⁾	Average price paid per share (or unit)⁽¹⁾		Total number of shares (or units) purchased as part of publicly announced plans or programs	Maximum number (or approximate dollar value) of shares (or units) that may yet be purchased under the plans or programs
June 29 - July 31	5,081	$	76.05	N/A	N/A
August 1 - August 31	—	—		N/A	N/A
September 1 - September 27	—	—		N/A	N/A
Total	5,081	$	76.05	N/A	N/A

⁽¹⁾In connection with the vesting on July 31, 2019 of Performance Stock Awards (“PSAs”) of the Company granted to James A. Lico on July 4, 2016 and in accordance with the terms of the Company’s 2016 Stock Incentive Plan, the Company withheld 5,081 shares of the Company’s common stock based on the corresponding closing price to offset tax withholding obligations that arose upon vesting of the PSAs.



Exhibit Number						Description
~~Exhibit~~ ~~Number~~						~~Description~~
~~3.1~~2.1						Separation and Distribution Agreement, dated as of October 8, 2020, by and between Vontier Corporation and Fortive Corporation (incorporated by reference to Exhibit 2.1 to Fortive Corporation’s Current Report on Form 8-K filed on October 13, 2020, File No. 1-37654).

3.1						Amended and Restated Certificate of Incorporation of Fortive Corporation (incorporated by reference to Exhibit 3.1 to Fortive Corporation’s Current Report on Form 8-K filed on June 9, 2017, File No. 1-37654).

3.2						Amended and Restated Bylaws of Fortive Corporation (incorporated by reference to Exhibit 3.2 to Fortive Corporation’s Current Report on Form 8-K filed on June 9, 2017, File No 1-37654).

3.3						Certificate of Designations of the 5.00% Mandatory Convertible Preferred Stock, Series A (incorporated by reference to Exhibit 3.1 to Fortive Corporation’s Current Report on Form 8-K filed on June 29, 2018, File No 1-37654).

~~31.1~~10.1						Employee Matters Agreement, dated as of October 8, 2020, by and between Vontier Corporation and Fortive Corporation (incorporated by reference to Exhibit 10.1 to Fortive Corporation’s Current Report on Form 8-K filed on October 13, 2020, File No. 1-37654).

10.2						Tax Matters Agreement, dated as of October 8, 2020, by and between Vontier Corporation and Fortive Corporation (incorporated by reference to Exhibit 10.2 to Fortive Corporation’s Current Report on Form 8-K filed on October 13, 2020, File No. 1-37654).

10.3						Transition Services Agreement, dated as of October 8, 2020, by and between Vontier Corporation and Fortive Corporation (incorporated by reference to Exhibit 10.3 to Fortive Corporation’s Current Report on Form 8-K filed on October 13, 2020, File No. 1-37654).

10.4						Intellectual Property Matters Agreement, dated as of October 8, 2020, by and between Vontier Corporation and Fortive Corporation (incorporated by reference to Exhibit 10.4 to Fortive Corporation’s Current Report on Form 8-K filed on October 13, 2020, File No. 1-37654).

10.5						FBS License Agreement, dated as of October 8, 2020, by and between Vontier Corporation and Fortive Corporation (incorporated by reference to Exhibit 10.5 to Fortive Corporation’s Current Report on Form 8-K filed on October 13, 2020, File No. 1-37654).

10.6						Stockholder’s and Registration Rights Agreement, dated as of October 8, 2020, by and between Vontier Corporation and Fortive Corporation (incorporated by reference to Exhibit 10.6 to Fortive Corporation’s Current Report on Form 8-K filed on October 13, 2020, File No. 1-37654).

10.7						Credit Agreement, dated as of September 29, 2020, by and among Vontier Corporation, Bank of America, N.A., as Administrative Agent, L/C Issuer and Swing Line Lender, and the other Lenders party thereto (incorporated by reference to Exhibit 10.1 to Fortive Corporation’s Current Report on Form 8-K filed on September 30, 2020, File No. 1-37654).

31.1						Certification of Chief Executive Officer Pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2						Certification of Chief Financial Officer Pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1						Certification of Chief Executive Officer, Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2						Certification of Chief Financial Officer, Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


~~101.INS~~
Exhibit Number						Description

101.INS						XBRL Instance Document (1) - the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.

101.SCH						Inline XBRL Taxonomy Extension Schema Document (1)

101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document (1)

101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document (1)

101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document (1)

101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document (1)

104						The cover page from this Quarterly Report on Form 10-Q for the quarter ended September ~~27, 2019,~~25, 2020, formatted in Inline XBRL and contained in Exhibit 101


		FORTIVE CORPORATION:

		~~FORTIVE CORPORATION:~~

Date: October ~~24, 2019~~27, 2020	By:		/s/ Charles E. McLaughlin
				Charles E. McLaughlin
				Senior Vice President and Chief Financial Officer

Date: October ~~24, 2019~~27, 2020		By:		/s/ ~~Emily A. Weaver~~Christopher M. Mulhall
				~~Emily A. Weaver~~Christopher M. Mulhall
				Chief Accounting Officer