UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

________________________________________________


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

For the quarterly period ended: ~~July 1, 2022~~March 31, 2023


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,	WA	98203

(Address of principal executive offices)		(Zip code)

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

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


Title of each class	Trading symbol	Name of each exchange on which registered
Common stock, par value $0.01 per share	FTV	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~~“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

☐

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 ~~July 25, 2022~~April 21, 2023 was ~~355,697,032.~~353,549,934.

FORTIVE CORPORATION

INDEX

FORM 10-Q


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 Statements of Changes in Equity	7
	Consolidated Condensed Statements of Cash Flows	8
	Notes to Consolidated Condensed Financial Statements	9
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2621
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4133
Item 4.	Controls and Procedures	4133
PART II -	OTHER INFORMATION
Item 1A.	Risk Factors	4133
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4134
~~Item 5.~~	~~Other Information~~	42
Item 6.	Exhibits	4334
	Signatures	4436

Table of Contents

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

FORTIVE CORPORATION AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEETS

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


		As of					As of
		July 1, 2022		December 31, 2021			March 31, 2023		December 31, 2022
		(unaudited)					(unaudited)
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and equivalents	Cash and equivalents	$	682.9	$	819.3	Cash and equivalents	$	672.8	$	709.2
Trade accounts receivable, net		940.9		930.2
Trade accounts receivable less allowance for doubtful accounts of $41.2 at March 31, 2023 and $43.9 at December 31, 2022						Trade accounts receivable less allowance for doubtful accounts of $41.2 at March 31, 2023 and $43.9 at December 31, 2022	940.7		958.5
Inventories:	Inventories:					Inventories:
Finished goods	Finished goods	224.8		215.4		Finished goods	234.8		215.3
Work in process	Work in process	104.0		94.0		Work in process	103.6		96.4
Raw materials	Raw materials	218.9		203.3		Raw materials	231.8		225.0
Inventories	Inventories	547.7		512.7		Inventories	570.2		536.7
Prepaid expenses and other current assets	Prepaid expenses and other current assets	273.8		252.7		Prepaid expenses and other current assets	271.6		272.6

Total current assets	Total current assets	2,445.3		2,514.9		Total current assets	2,455.3		2,477.0

Property, plant and equipment, net of accumulated depreciation of $733.1 and $679.0 at July 1, 2022 and December 31, 2021, respectively		407.6		395.5

Property, plant and equipment, net of accumulated depreciation of $772.7 at March 31, 2023 and $754.5 at December 31, 2022						Property, plant and equipment, net of accumulated depreciation of $772.7 at March 31, 2023 and $754.5 at December 31, 2022	425.6		421.9
Other assets	Other assets	481.3		512.9		Other assets	470.0		455.8
Goodwill	Goodwill	9,058.2		9,152.0		Goodwill	9,057.1		9,048.5
Other intangible assets, net	Other intangible assets, net	3,678.5		3,890.2		Other intangible assets, net	3,396.8		3,487.4

Total assets	Total assets	$	16,070.9	$	16,465.5	Total assets	$	15,804.8	$	15,890.6

LIABILITIES AND EQUITY	LIABILITIES AND EQUITY					LIABILITIES AND EQUITY
Current liabilities:	Current liabilities:					Current liabilities:

Current portion of long-term debt	Current portion of long-term debt	999.9		2,151.7		Current portion of long-term debt	$	999.8	$	999.7
Trade accounts payable	Trade accounts payable	581.7		557.9		Trade accounts payable	593.0		623.0
Accrued expenses and other current liabilities	Accrued expenses and other current liabilities	1,029.7		1,005.3		Accrued expenses and other current liabilities	1,037.3		1,104.4

Total current liabilities	Total current liabilities	2,611.3		3,714.9		Total current liabilities	2,630.1		2,727.1

Other long-term liabilities	Other long-term liabilities	1,328.0		1,426.3		Other long-term liabilities	1,204.4		1,223.3
Long-term debt	Long-term debt	2,682.2		1,807.3		Long-term debt	2,094.6		2,251.6

Commitments and Contingencies		0		0
Commitments and Contingencies (Note 8)						Commitments and Contingencies (Note 8)

Equity:	Equity:					Equity:
Preferred stock: $0.01 par value, 15.0 million shares authorized and no shares issued or outstanding at July 1, 2022 and December 31, 2021		—		—
Common stock: $0.01 par value, 2.0 billion shares authorized; 361.2 and 360.4 million issued; 355.6 and 359.1 million outstanding at July 1, 2022 and December 31, 2021, respectively		3.6		3.6

Common stock: $0.01 par value, 2.0 billion shares authorized; 362.2 million issued and 353.5 million outstanding at March 31, 2023; 361.5 million issued and 352.9 million outstanding at December 31, 2022						Common stock: $0.01 par value, 2.0 billion shares authorized; 362.2 million issued and 353.5 million outstanding at March 31, 2023; 361.5 million issued and 352.9 million outstanding at December 31, 2022	3.6		3.6
Additional paid-in capital	Additional paid-in capital	3,651.2		3,670.0		Additional paid-in capital	3,730.5		3,706.3
Treasury shares, at cost	Treasury shares, at cost	(242.9)		—		Treasury shares, at cost	(442.9)		(442.9)
Retained earnings	Retained earnings	6,374.5		6,023.6		Retained earnings	6,891.0		6,742.1
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(342.1)		(185.0)		Accumulated other comprehensive loss	(312.3)		(325.7)
Total Fortive stockholders’ equity	Total Fortive stockholders’ equity	9,444.3		9,512.2		Total Fortive stockholders’ equity	9,869.9		9,683.4
Noncontrolling interests	Noncontrolling interests	5.1		4.8		Noncontrolling interests	5.8		5.2
Total stockholders’ equity	Total stockholders’ equity	9,449.4		9,517.0		Total stockholders’ equity	9,875.7		9,688.6
Total liabilities and equity	Total liabilities and equity	$	16,070.9	$	16,465.5	Total liabilities and equity	$	15,804.8	$	15,890.6

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				Six Months Ended					Three Months Ended
		July 1, 2022		July 2, 2021		July 1, 2022		July 2, 2021			March 31, 2023		April 1, 2022
Sales of products and software	Sales of products and software	$	1,229.4	$	1,136.0	$	2,382.1	$	2,213.2	Sales of products and software	$	1,236.6	$	1,152.7
Sales of services	Sales of services	233.9		183.7		457.7		365.7		Sales of services	224.1		223.8
Total sales	Total sales	1,463.3		1,319.7		2,839.8		2,578.9		Total sales	1,460.7		1,376.5

Cost of product and software sales	Cost of product and software sales	(508.3)		(464.0)		(973.4)		(908.3)		Cost of product and software sales	(488.1)		(465.1)
Cost of service sales	Cost of service sales	(121.5)		(100.2)		(240.9)		(203.2)		Cost of service sales	(124.4)		(119.4)
Total cost of sales	Total cost of sales	(629.8)		(564.2)		(1,214.3)		(1,111.5)		Total cost of sales	(612.5)		(584.5)

Gross profit	Gross profit	833.5		755.5		1,625.5		1,467.4		Gross profit	848.2		792.0
Operating costs:	Operating costs:									Operating costs:
Selling, general and administrative expenses	Selling, general and administrative expenses	(484.9)		(456.4)		(965.5)		(884.5)		Selling, general and administrative expenses	(507.7)		(480.6)
Research and development expenses	Research and development expenses	(100.1)		(87.8)		(199.2)		(174.0)		Research and development expenses	(100.1)		(99.1)

Russia exit and wind down costs		(16.2)		—		(16.2)		—
Operating profit	Operating profit	232.3		211.3		444.6		408.9		Operating profit	240.4		212.3
Non-operating income (expense), net:	Non-operating income (expense), net:									Non-operating income (expense), net:
Interest expense, net										Interest expense, net	(32.1)		(18.8)

Interest expense, net		(21.0)		(25.2)		(39.8)		(52.9)
Loss on extinguishment of debt		—		—		—		(104.9)
Gain on investment in Vontier Corporation		—		—		—		57.0
Gain on litigation resolution		—		26.0		—		26.0

Other non-operating expense, net	Other non-operating expense, net	(3.1)		(4.6)		(5.8)		(7.9)		Other non-operating expense, net	(2.5)		(2.7)
Earnings from continuing operations before income taxes		208.2		207.5		399.0		326.2
Earnings before income taxes										Earnings before income taxes	205.8		190.8
Income taxes	Income taxes	(35.2)		(25.5)		(60.9)		(32.5)		Income taxes	(32.2)		(25.7)
Net earnings from continuing operations		173.0		182.0		338.1		293.7
Earnings (loss) from discontinued operations, net of income taxes		—		(1.1)		—		(2.6)
Net earnings	Net earnings	173.0		180.9		338.1		291.1		Net earnings	$	173.6	$	165.1
Mandatory convertible preferred dividends		—		(17.2)		—		(34.5)
Net earnings attributable to common stockholders		$	173.0	$	163.7	$	338.1	$	256.6

Net earnings per common share from continuing operations:
Basic		$	0.48	$	0.49	$	0.94	$	0.76
Diluted		$	0.48	$	0.48	$	0.93	$	0.76
Net earnings (loss) per share from discontinued operations:
Basic		$	—	$	—	$	—	$	(0.01)
Diluted		$	—	$	—	$	—	$	(0.01)
Net earnings per share:	Net earnings per share:									Net earnings per share:
Basic	Basic	$	0.48	$	0.48	$	0.94	$	0.76	Basic	$	0.49	$	0.46
Diluted	Diluted	$	0.48	$	0.48	$	0.93	$	0.75	Diluted	$	0.49	$	0.45
Average common stock and common equivalent shares outstanding:	Average common stock and common equivalent shares outstanding:									Average common stock and common equivalent shares outstanding:
Basic	Basic	357.4		339.4		358.3		339.0		Basic	353.6		359.3
Diluted	Diluted	359.8		342.4		364.2		342.1		Diluted	356.5		368.4
The sum of net earnings per share amounts may not add due to rounding.

See the accompanying Notes to Consolidated Condensed Financial Statements.

Table of Contents

FORTIVE CORPORATION AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

($ in millions)

(unaudited)


		Three Months Ended				Six Months Ended					Three Months Ended
		July 1, 2022		July 2, 2021		July 1, 2022		July 2, 2021			March 31, 2023		April 1, 2022
Net earnings	Net earnings	$	173.0	$	180.9	$	338.1	$	291.1	Net earnings	$	173.6	$	165.1
Other comprehensive income (loss), net of income taxes:	Other comprehensive income (loss), net of income taxes:									Other comprehensive income (loss), net of income taxes:
Foreign currency translation adjustments	Foreign currency translation adjustments	(118.6)		16.6		(158.0)		(18.1)		Foreign currency translation adjustments	13.4		(39.4)
Pension adjustments	Pension adjustments	0.4		0.9		0.9		1.9		Pension adjustments	—		0.5
Total other comprehensive income (loss), net of income taxes	Total other comprehensive income (loss), net of income taxes	(118.2)		17.5		(157.1)		(16.2)		Total other comprehensive income (loss), net of income taxes	13.4		(38.9)
Comprehensive income	Comprehensive income	$	54.8	$	198.4	$	181.0	$	274.9	Comprehensive income	$	187.0	$	126.2

See the accompanying Notes to Consolidated Condensed Financial Statements.

Table of Contents

FORTIVE CORPORATION AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CHANGES IN EQUITY

($ and shares in millions)

(unaudited)


		Common Stock			Preferred Stock				Treasury Stock				Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)				Noncontrolling Interests						Common Stock				Additional Paid-In Capital		Treasury Shares		Retained Earnings		Accumulated Other Comprehensive Loss		Noncontrolling Interests
		Shares Outstanding	Amount		Shares		Amount																	Shares Outstanding		Amount
Balance, December 31, 2021		359.1	$	3.6	—		$	—			$	—							$	3,670.0			$	6,023.6	$	(185.0)		$	4.8
Adoption of ASU 2020-06		—	—		—		—		—				(65.7)		62.8		—				—
Balance, January 1, 2022		359.1	3.6		—		—		—				3,604.3		6,086.4		(185.0)				4.8
Balance, December 31, 2022																								Balance, December 31, 2022						352.9	$	3.6	$	3,706.3	$	(442.9)	$	6,742.1	$	(325.7)	$	5.2

Net earnings for the period	Net earnings for the period	—	—		—		—		—				—		165.1		—				—			Net earnings for the period						—	—		—		—		173.6		—		—
Dividends to common shareholders	Dividends to common shareholders	—	—		—		—		—				—		(25.1)		—				—			Dividends to common shareholders						—	—		—		—		(24.7)		—		—
Other comprehensive income (loss)		—	—		—		—		—				—		—		(38.9)				—
Other comprehensive income																								Other comprehensive income						—	—		—		—		—		13.4		—
Common stock-based award activity	Common stock-based award activity	0.5	—		—		—		—				23.8		—		—				—			Common stock-based award activity						0.8	—		36.3		—		—		—		—
Common stock repurchases		(1.0)	—		—		—		(63.8)				—		—		—				—

Shares withheld for taxes	Shares withheld for taxes	(0.2)	—		—		—		—				(9.0)		—		—				—			Shares withheld for taxes						(0.2)	—		(12.1)		—		—		—		—
Change in noncontrolling interests	Change in noncontrolling interests	—	—		—		—		—				—		—		—				0.5			Change in noncontrolling interests						—	—		—		—		—		—		0.6
Balance, April 1, 2022		358.4	$	3.6	—		$	—	$	(63.8)			$	3,619.1	$	6,226.4	$	(223.9)			$	5.3
Net earnings for the period		—	—		—		—		—				—		173.0		$	—			$	—
Dividends to common shareholders		—	—		—		—		—				—		(24.9)		—				—
Other comprehensive income (loss)		—	—		—		—		—				—		—		(118.2)				—
Common stock-based award activity		0.2	—		—		—		—				32.7		—		—				—
Common stock repurchases		(3.0)	—		—		—		(179.1)				—		—		—				—
Shares withheld for taxes		—	—		—		—		—				(0.6)		—		—				—
Change in noncontrolling interests		—	—		—		—		—				—		—		—				(0.2)
Balance, July 1, 2022		355.6	$	3.6	$	—	$	—	$	(242.9)			$	3,651.2	$	6,374.5	$	(342.1)			$	5.1
Balance, March 31, 2023																								Balance, March 31, 2023						353.5	$	3.6	$	3,730.5	$	(442.9)	$	6,891.0	$	(312.3)	$	5.8

Common Stock Preferred Stock Treasury Stock Additional Paid-In Capital Retained Earnings Accumulated
Other
Comprehensive
Income (Loss) Noncontrolling
Interests
Shares Outstanding Amount Shares Amount
Balance, December 31, 2020 339.0 $ 3.4 1.4 $ — $ — $ 3,554.5 $ 5,547.4 $ (141.1) $ 8.5
Net earnings for the period — — — — — — 110.2
Dividends to common shareholders — — — — — — (23.7) — —
Mandatory convertible preferred stock cumulative dividends — — — — — — (17.3) — —
Other comprehensive income (loss) — — — — — — — (33.7) —
Common stock-based award activity (0.4) — — — — 34.1 — — —
Shares withheld for tax (0.1) — — — — (13.2) — — —
Early extinguishment of 0.875% convertible senior notes due 2022 — — — — — (11.6) — — —
Change in noncontrolling interest — — — — — — — — (0.8)
Balance, April 2, 2021 338.5 $ 3.4 1.4 $ — $ — $ 3,563.8 $ 5,616.6 $ (174.8) $ 7.7
Net earnings for the period — — — — — — 180.9
Dividends to common shareholders — — — — — — (23.7) — —
Mandatory convertible preferred stock cumulative dividends — — — — — — (17.2) — —
Other comprehensive income — — — — — — — 17.5 —
Common stock-based award activity 0.6 — — — — 35.9 — — —
Shares withheld for tax (0.1) — — — — (0.6) — — —
Conversion of Mandatory convertible preferred stock to common stock 19.4 0.2 (1.4) — — — — — —
Change in noncontrolling interests — — — — — 3.0 — — (3.0)
Balance, July 2, 2021 358.4 $ 3.6 $ — $ — $ — $ 3,602.1 $ 5,756.6 $ (157.3) $ 4.7


	Common Stock		Additional Paid-In Capital		Treasury Shares		Retained Earnings		Accumulated Other Comprehensive Loss		Noncontrolling Interests
		Shares Outstanding											Amount
Balance, December 31, 2021		359.1	$	3.6	$	3,670.0	$	—	$	6,023.6	$	(185.0)	$	4.8
Adoption of ASU 2020-06		—	—		(65.7)		—		62.8		—		—
Balance, January 1, 2022		359.1	3.6		3,604.3		—		6,086.4		(185.0)		4.8
Net earnings for the period		—	—		—		—		165.1		—		—
Dividends to common shareholders		—	—		—		—		(25.1)		—		—
Other comprehensive income (loss)		—	—		—		—		—		(38.9)		—
Common stock-based award activity		0.5	—		23.8		—		—		—		—
Common stock repurchases		(1.0)	—		—		(63.8)		—		—		—
Shares withheld for taxes		(0.2)	—		(9.0)		—		—		—		—
Change in noncontrolling interest		—	—		—		—		—		—		0.5
Balance, April 1, 2022		358.4	$	3.6	$	3,619.1	$	(63.8)	$	6,226.4	$	(223.9)	$	5.3

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)


		Six Months Ended					Three Months Ended
		July 1, 2022		July 2, 2021			March 31, 2023		April 1, 2022
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net earnings from continuing operations		$	338.1	$	293.7
Net earnings						Net earnings	$	173.6	$	165.1
Noncash items:	Noncash items:					Noncash items:
Amortization	Amortization	192.1		155.0		Amortization	92.4		96.3
Depreciation	Depreciation	41.9		37.7		Depreciation	20.4		21.5
Stock-based compensation expense	Stock-based compensation expense	45.0		36.8		Stock-based compensation expense	26.7		19.9
Loss on extinguishment of debt		—		104.2
Gain on investment in Vontier Corporation		—		(57.0)
Gain on litigation resolution		—		(26.0)
Russia exit and wind down costs		9.2		—

Change in trade accounts receivable, net	Change in trade accounts receivable, net	(37.7)		(11.8)		Change in trade accounts receivable, net	21.5		(1.4)
Change in inventories	Change in inventories	(50.7)		(24.0)		Change in inventories	(33.6)		(43.2)
Change in trade accounts payable	Change in trade accounts payable	40.1		9.1		Change in trade accounts payable	(32.3)		19.2
Change in prepaid expenses and other assets	Change in prepaid expenses and other assets	(39.2)		(21.4)		Change in prepaid expenses and other assets	(16.3)		(31.4)
Change in accrued expenses and other liabilities	Change in accrued expenses and other liabilities	(29.6)		(53.3)		Change in accrued expenses and other liabilities	(78.0)		(31.2)
Total operating cash provided by continuing operations		509.2		443.0
Total operating cash used in discontinued operations		—		(18.7)

Net cash provided by operating activities	Net cash provided by operating activities	509.2		424.3		Net cash provided by operating activities	174.4		214.8

Cash flows from investing activities:	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	(24.8)		(18.8)
Cash paid for acquisitions, net of cash received	Cash paid for acquisitions, net of cash received	(1.6)		0.9		Cash paid for acquisitions, net of cash received	—		0.9
Payments for additions to property, plant and equipment		(37.1)		(17.1)

All other investing activities		—		1.1

Net cash used in investing activities	Net cash used in investing activities	(38.7)		(15.1)		Net cash used in investing activities	(24.8)		(17.9)

Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:

Net proceeds from (repayments of) commercial paper borrowings						Net proceeds from (repayments of) commercial paper borrowings	(159.3)		930.7
Payment of 0.875% convertible senior notes due 2022	Payment of 0.875% convertible senior notes due 2022	(1,156.5)		—		Payment of 0.875% convertible senior notes due 2022	—		(1,156.5)
Net proceeds from commercial paper borrowings		481.3		—
Proceeds from borrowings (maturities greater than 90 days), net of issuance costs of $0.6 million in 2022		397.0		—
Repurchase of common shares						Repurchase of common shares	—		(63.8)
Payment of dividends						Payment of dividends	(24.7)		(25.1)

Repayment of borrowings (maturities greater than 90 days)		—		(611.1)
Payment of common stock cash dividend to shareholders		(50.0)		(47.4)
Payment of mandatory convertible preferred stock cash dividend to shareholders		—		(34.5)
Repurchase of common shares		(242.9)		—

All other financing activities	All other financing activities	(11.8)		25.2		All other financing activities	(3.1)		(17.9)

Net cash used in financing activities	Net cash used in financing activities	(582.9)		(667.8)		Net cash used in financing activities	(187.1)		(332.6)

Effect of exchange rate changes on cash and equivalents	Effect of exchange rate changes on cash and equivalents	(24.0)		(0.4)		Effect of exchange rate changes on cash and equivalents	1.1		0.7
Net change in cash and equivalents	Net change in cash and equivalents	(136.4)		(259.0)		Net change in cash and equivalents	(36.4)		(135.0)
Beginning balance of cash and equivalents	Beginning balance of cash and equivalents	819.3		1,824.8		Beginning balance of cash and equivalents	709.2		819.3
Ending balance of cash and equivalents	Ending balance of cash and equivalents	$	682.9	$	1,565.8	Ending balance of cash and equivalents	$	672.8	$	684.3

See the accompanying Notes to Consolidated Condensed Financial Statements.

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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 provider of essential technologies for connected workflow solutions across a range of attractive end-markets. Our strategic segments - Intelligent Operating Solutions, Precision Technologies, and Advanced Healthcare Solutions - include well-known brands with leading positions in their markets. Our businesses design, develop, manufacture, and service professional and engineered products, software, and services, building upon leading brand names, innovative technologies, and significant market positions. Our research and development, manufacturing, sales, distribution, service, and administrative facilities are located in more than 50 countries around the world.

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 omitted pursuant to such rules and regulations; however, we believe the disclosures are adequate to make the information presented not misleading. The unaudited consolidated condensed financial statements included herein should be read in conjunction with the audited annual consolidated financial statements as of and for the year ended December 31, ~~2021~~2022 and the footnotes (“Notes”) thereto included within our ~~2021~~2022 Annual Report on Form 10-K.

In our opinion, the accompanying financial statements contain all adjustments, ~~(consisting~~which consist of only normal, recurring ~~accruals)~~accruals necessary to fairly present our financial position, asresults of ~~July 1, 2022~~operations, comprehensive income, stockholders’ equity, and ~~December 31, 2021, our~~cash flows for the periods presented. The results of operations for the three ~~and six month periods~~months ended ~~July 1, 2022 and July 2, 2021, and cash flows~~March 31, 2023, are not necessarily indicative of the results for the ~~six month periods ended July 1, 2022 and July 2, 2021. Reclassification of certain prior year amounts have been made to conform to current year presentation.~~

~~Vontier Separation and Discontinued Operations~~

On October 9, 2020, we completed the separation of Vontier Corporation (“Vontier”), the entity we created to hold our former Industrial Technologies segment (the “Separation”). The accounting requirements for reporting the Vontier business as a discontinued operation were met when the Separation was completed. Accordingly, the consolidated condensed financial statements reflect the results of separation activities associated with the prior Vontier business as a discontinued operation, which was immaterial for all periods presented.

On January 19, 2021, we completed an exchange (the “Debt-for-Equity Exchange”) of 33.5 million shares of common stock of Vontier, representing all of the Retained Vontier Shares, for $1.1 billion in aggregate principal amount of indebtedness of the Company held by Goldman Sachs & Co. Interest expense and extinguishment costs related to the Debt-for-Equity Exchange during the first quarter of 2021 are included in continuing operations.

~~Russia Ukraine Conflict~~

In February 2022, Russian forces invaded Ukraine (“Russia Ukraine Conflict”) resulting in broad economic sanctions being imposed on Russia. In the second quarter of 2022, the Company exited business operations in Russia, other than for ASP’s sterilization products, which are exempt from international sanctions as humanitarian products. Our business in Russia and Ukraine accounted for less than 1% of total revenue and less than 0.2% of total assets for the fiscal year ended December 31, 2021.

In the three and six month periods ended July 1, 2022, the Company recorded a pre-tax charge totaling $16.2 million primarily relating to the write-off of net assets, the write-off of the cumulative translation adjustment in earnings for legal entities deemed substantially liquidated, and to record provisions for employee severance and legal contingencies. These costs are identified as the “Russia exit and wind down costs” in the Condensed Consolidated Statements of Earnings. The total costs expected to be incurred in connection with the Russia exit are $18.4 million.full year.

Accumulated Other Comprehensive ~~Income (Loss)~~Loss

Foreign currency translation adjustments are generally not adjusted for income taxes as they relate to indefinite investments in non-U.S. subsidiaries. During the ~~three and six month periods ended July 1,~~second quarter of 2022, ~~we designated~~ our ¥14.4 billion Yen-denominated ~~variable interest rate~~ term loan and our €275 million Euro-denominated ~~variable interest rate~~ term loan ~~outstanding~~were designated as net investment hedges of our investment in ~~certain~~applicable foreign operations.

During the three ~~and six~~ month ~~periods~~period ended ~~July 1, 2022,~~March 31, 2023, we recognized after-tax foreign currency transaction ~~gains~~losses of ~~$3.6~~$1.7 million on the debt that ~~were~~was deferred in the foreign currency translation component of Accumulated other comprehensive

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income (loss) (“AOCI”) as an offset to the foreign currency translation adjustments on our investments in foreign subsidiaries. Any amounts deferred in AOCI will remain until the hedged investment is sold or substantially liquidated. We recorded no ineffectiveness from our net investment hedges during the three ~~and six~~ month ~~periods~~period ended ~~July 1, 2022.~~March 31, 2023.

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The changes in AOCI by component are summarized below ($ in millions):
Foreign
currency
translation
adjustments
Pension
adjustments (a)
Total
For the Three Months Ended July 1, 2022:
Balance, April 1, 2022 $ (162.1) $ (61.8) $ (223.9)
Other comprehensive income (loss) before reclassifications, net of income taxes (121.3) — (121.3)
Amounts reclassified from accumulated other comprehensive income (loss):
Increase (decrease) 2.7 0.5 (b) 3.2
Income tax impact — (0.1) (0.1)
Amounts reclassified from accumulated other comprehensive income (loss), net of income taxes 2.7 0.4 3.1
Net current period other comprehensive income (loss), net of income taxes (118.6) 0.4 (118.2)
Balance, July 1, 2022 $ (280.7) $ (61.4) $ (342.1)
For the Three Months Ended July 2, 2021:
Balance, April 2, 2021 $ (88.7) $ (86.1) $ (174.8)
Other comprehensive income (loss) before reclassifications, net of income taxes 16.6 — 16.6
Amounts reclassified from accumulated other comprehensive income (loss):
Increase (decrease) — 1.2 (b) 1.2
Income tax impact — (0.3) (0.3)
Amounts reclassified from accumulated other comprehensive income (loss), net of income taxes — 0.9 0.9
Net current period other comprehensive income (loss), net of income taxes 16.6 0.9 17.5
Balance, July 2, 2021 $ (72.1) $ (85.2) $ (157.3)

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		Foreign currency translation adjustments		Pension adjustments (a)			Total			Foreign currency translation adjustments		Pension & post-retirement plan benefit adjustments (a)			Total
For the Six Months Ended July 1, 2022:
For the Three Months Ended March 31, 2023:									For the Three Months Ended March 31, 2023:
Balance, December 31, 2022									Balance, December 31, 2022	$	(301.4)	$	(24.3)		$	(325.7)
Other comprehensive income (loss) before reclassifications, net of income taxes									Other comprehensive income (loss) before reclassifications, net of income taxes	13.4		—			13.4
Amounts reclassified from accumulated other comprehensive income (loss):									Amounts reclassified from accumulated other comprehensive income (loss):
Increase (decrease)									Increase (decrease)	—		0.1		(b)	0.1
Income tax impact									Income tax impact	—		(0.1)			(0.1)
Amounts reclassified from accumulated other comprehensive income (loss), net of income taxes									Amounts reclassified from accumulated other comprehensive income (loss), net of income taxes	—		—			—
Net current period other comprehensive income (loss), net of income taxes									Net current period other comprehensive income (loss), net of income taxes	13.4		—			13.4
Balance, March 31, 2023									Balance, March 31, 2023	$	(288.0)	$	(24.3)		$	(312.3)

For the Three Months Ended April 1, 2022:									For the Three Months Ended April 1, 2022:
Balance, December 31, 2021	Balance, December 31, 2021	$	(122.7)	$	(62.3)		$	(185.0)	Balance, December 31, 2021	$	(122.7)	$	(62.3)		$	(185.0)
Other comprehensive income (loss) before reclassifications, net of income taxes	Other comprehensive income (loss) before reclassifications, net of income taxes	(160.7)		—			(160.7)		Other comprehensive income (loss) before reclassifications, net of income taxes	(39.4)		—			(39.4)
Amounts reclassified from accumulated other comprehensive income (loss):	Amounts reclassified from accumulated other comprehensive income (loss):								Amounts reclassified from accumulated other comprehensive income (loss):
Increase (decrease)	Increase (decrease)	2.7		1.1		(b)	3.8		Increase (decrease)	—		0.6		(b)	0.6
Income tax impact	Income tax impact	—		(0.2)			(0.2)		Income tax impact	—		(0.1)			(0.1)
Amounts reclassified from accumulated other comprehensive income (loss), net of income taxes	Amounts reclassified from accumulated other comprehensive income (loss), net of income taxes	2.7		0.9			3.6		Amounts reclassified from accumulated other comprehensive income (loss), net of income taxes	—		0.5			0.5
Net current period other comprehensive income (loss)		(158.0)		0.9			(157.1)
Balance, July 1, 2022		$	(280.7)	$	(61.4)		$	(342.1)
Net current period other comprehensive income (loss), net of income taxes									Net current period other comprehensive income (loss), net of income taxes	(39.4)		0.5			(38.9)
Balance, April 1, 2022									Balance, April 1, 2022	$	(162.1)	$	(61.8)		$	(223.9)

For the Six Months Ended July 2, 2021:
Balance, December 31, 2020		$	(54.0)	$	(87.1)		$	(141.1)
Other comprehensive income (loss) before reclassifications, net of income taxes		(18.1)		—			(18.1)
Amounts reclassified from accumulated other comprehensive income (loss):
Increase (decrease)		—		2.5		(b)	2.5
Income tax impact		—		(0.6)			(0.6)
Amounts reclassified from accumulated other comprehensive income (loss), net of income taxes		—		1.9			1.9
Net current period other comprehensive income (loss)		(18.1)		1.9			(16.2)
Balance, July 2, 2021		$	(72.1)	$	(85.2)		$	(157.3)

(a) Includes balances relating to defined benefit plans, supplemental executive retirement plans, and other postretirement employee benefit plans.	(a) Includes balances relating to defined benefit plans, supplemental executive retirement plans, and other postretirement employee benefit plans.								(a) Includes balances relating to defined benefit plans, supplemental executive retirement plans, and other postretirement employee benefit plans.
(b) This component of AOCI is included in the computation of net periodic pension cost (refer to Note 12 in our most recently filed Form 10-K for additional details).	(b) This component of AOCI is included in the computation of net periodic pension cost (refer to Note 12 in our most recently filed Form 10-K for additional details).								(b) This component of AOCI is included in the computation of net periodic pension cost (refer to Note 12 in our most recently filed Form 10-K for additional details).

Allowances for Doubtful Accounts

All trade accounts and unbilled receivables are reported in the 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 and trade accounts receivable portfolios over the life of the underlying assets. 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. During the three month period ending March 31, 2023, the activity was immaterial.

Restructuring

We initiated a discrete plan in the first quarter of 2023 focused on improvements in our operational efficiency, which is expected to be completed by December 31, 2023. The nature of these activities were broadly consistent throughout our segments and consist of targeted workforce reductions and facility consolidations or closures in response to overall macroeconomic and other external conditions. We incurred these costs to position ourselves to provide superior products and services to customers in a cost-efficient manner, while taking into consideration the impact of broad economic uncertainties. The total restructuring charges we expect to recognize under this discrete plan are approximately $25 to $30 million, with charges of $17.6 million incurred in the first quarter, which primarily related to employee severance. These charges are included in Cost of Sales and Selling, general, and administrative expenses in the Consolidated Condensed Statement of

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

Convertible Senior Notes

On February 22, 2019, we issued $1.4 billion in aggregate principal amount of our 0.875% Convertible Senior Notes due 2022 (“Convertible Notes”), including $187.5 million in aggregate principal amount resulting from an exercise in full of an over-allotment option. The ~~following is~~Convertible Notes were issued in a ~~roll forward~~private placement to certain initial purchasers for resale to qualified institutional buyers pursuant to Rule 144A under the Securities Act. Upon conversion of the ~~aggregated allowance for credit losses related~~Convertible Notes, holders were entitled to receive cash, shares of our ~~trade accounts receivables as of July 1, 2022 ($ in millions):~~


~~Balance, December 31, 2021~~	$	~~39.7~~
~~Provision~~	~~4.2~~
~~Write-offs~~	~~(5.4)~~
~~Foreign currency exchange and other~~	~~(0.6)~~
~~Balance, July 1, 2022~~	$	~~37.9~~

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

~~Recently Issued Accounting Standard~~

~~In August 2020, the Financial Accounting Standards Board issued~~common stock, or a combination thereof, at our election. Upon adopting Accounting Standards Update No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity ~~(Subtopic~~

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(Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity which amends the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity. On January 1, 2022, we adopted (“ASU 2020-06 using a modified retrospective approach and recognized in our balance sheet, as of January 1, 2022, a net of tax adjustment to reduce Additional Paid-in Capital by $65.7 million and increase debt by $3.7 million, with a corresponding net of tax adjustment to beginning retained earnings of $62.8 million. These adjustments are related to our 0.875% Convertible Senior Notes (the “Convertible Notes”2020-06”), ~~which were the only outstanding instruments impacted by the new standard at the time of adoption.~~

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

~~Prior to our adoption of ASU 2020-06~~ on January 1, 2022, we ~~recognized~~accounted for the ~~fair value of the nonconvertible debt component of our~~ Convertible Notes subject to the cash conversion guidance as debt and attributed the residual value to the conversion feature which was recognized in APIC. Subsequent to the issuance of our Convertible Notes in February 2019, we accreted the debt discount as non-cash interest expense in our Statements of Earnings. Further, we applied the treasury stock method to our Convertible Notes when calculating earnings per share (“EPS”) in all periods prior to our adoption of ASU 2020-06. After our adoption of ASU 2020-06, we account for convertible debt instruments wholly as debt, unless a convertible instrument contains features that require bifurcation as a derivative under ~~ASC 815 or a convertible debt instrument is issued at a substantial premium.~~

~~On January 1, 2022, we reclassified the unamortized cost basis of our outstanding Convertible Notes wholly as debt, which subsequently matured and was settled on February 15, 2022. We applied~~ the if-converted method in our calculation of diluted EPS, as required under the new guidance.

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

Recently Issued Accounting Standard

The Financial Accounting Standards Board (“FASB”) establishes changes to ~~all convertible instruments when calculating EPS for~~accounting principles under GAAP in the ~~six months ended July 1, 2022. As~~form of ~~July 1, 2022, we had no convertible instruments outstanding subject~~accounting standards updates (“ASUs”) to the ~~guidance in ASU 2020-06.~~Accounting Standards Codification (“ASC”). We consider the applicability and impact of all ASUs. Any recently issued ASUs were assessed and determined to be either not applicable or are expected to have an immaterial impact on the Company’s result of operations, financials position or cash flows.

NOTE 2. ~~ACQUISITIONS~~

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

~~During the three and six month periods ended July 1, 2022, insignificant adjustments were made to the purchase price allocation of prior year acquisitions, which are shown in Note 3.~~

~~Provation~~

On December 27, 2021, we acquired Provation Software, Inc. (“Provation”), a leading provider of clinical workflow software solutions used in hospitals and ambulatory surgery centers. The acquisition of Provation extends our digital offering and software capabilities in the healthcare space. The total consideration paid was approximately $1.4 billion, net of acquired cash and was primarily financed with proceeds from our financing activities and available cash. We recorded $978 million of goodwill related to the acquisition, which is not tax deductible. Provation had revenue in 2020 of approximately $90 million and is an operating company within our Advanced Healthcare Solutions segment.

~~ServiceChannel~~

On August 24, 2021, we acquired ServiceChannel Holdings, Inc. (“ServiceChannel”), a privately held, global provider of Software as a Service (“SaaS”) based multi-site facilities maintenance service solutions with an integrated service-provider network. The acquisition of ServiceChannel broadens our offering of software-enabled solutions for the facility and asset lifecycle workflow. The total consideration paid was approximately $1.2 billion, net of acquired cash, and included approximately $28 million of deferred compensation consideration that is being recognized ratably over a twelve month service period. The ServiceChannel acquisition was primarily financed with available cash and proceeds from our financing activities. We recorded approximately $874 million of goodwill related to the acquisition, which is not tax deductible. ServiceChannel had revenue in 2020 of approximately $70 million and is an operating company within our Intelligent Operating Solutions segment.

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For the six months ended July 1, 2022, revenue and operating losses attributable to the Provation and ServiceChannel acquisitions were $132.8 million and $21.7 million, respectively. The operating losses include $38.7 million of intangible asset amortization and $12.9 million of transaction and integration costs, which were primarily comprised of employee compensation and retention costs and amounts paid to third party advisors, and are recorded in Selling, general and administration expenses.

~~The following table summarizes the estimated fair value of the assets acquired and liabilities assumed from ServiceChannel and Provation as of July 1, 2022 ($ in millions):~~
Provation ServiceChannel Total
Accounts receivable $ 41.3 $ 10.1 $ 51.4
Goodwill 978.0 874.2 1,852.2
Other intangible assets, primarily customer relationships, technology, database, and trade names 586.5 342.9 929.4
Deferred revenue, current (50.3) (1.7) (52.0)
Deferred tax liabilities (119.4) (50.8) (170.2)
Other assets and liabilities, net (30.5) (8.4) (38.9)
Net cash consideration $ 1,405.6 $ 1,166.3 $ 2,571.9

~~NOTE 3.~~ GOODWILL

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

Intelligent Operating Solutions Precision Technologies Advanced Healthcare Solutions Total Goodwill
Balance, December 31, 2021 $ 4,126.0 $ 1,840.0 $ 3,186.0 $ 9,152.0
Measurement period adjustments for 2021 acquisitions 0.8 — 9.6 10.4
Foreign currency translation and other (44.3) (37.3) (22.6) (104.2)
Balance, July 1, 2022 $ 4,082.5 $ 1,802.7 $ 3,173.0 $ 9,058.2


	Intelligent Operating Solutions		Precision Technologies		Advanced Healthcare Solutions		Total Goodwill
Balance, December 31, 2022	$	4,074.4	$	1,810.2	$	3,163.9	$	9,048.5


Foreign currency translation and other	6.6		1.4		0.6		8.6
Balance, March 31, 2023	$	4,081.0	$	1,811.6	$	3,164.5	$	9,057.1

NOTE 4.3. 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) for identical assets or liabilities in active markets.

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

•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.

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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			Quoted Prices in Active Market (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
July 1, 2022
March 31, 2023										March 31, 2023
Deferred compensation liabilities	Deferred compensation liabilities	$	—	$	31.4	$	—	$	31.4	Deferred compensation liabilities	$	—	$	35.4	$	—	$	35.4
December 31, 2021

December 31, 2022										December 31, 2022
Deferred compensation liabilities	Deferred compensation liabilities	—		36.0		—		36.0		Deferred compensation liabilities	—		31.5		—		31.5

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 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~~and are ~~based on~~recorded within selling, general and administrative in the ~~applicable earnings rates.~~Consolidated Condensed Statements of Earnings.

~~Nonrecurring~~Non-recurring 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.

We evaluated events or circumstances that may indicate the carrying value of our non-financial assets may not be fully recoverable during the ~~six~~three month period ended ~~July 1, 2022,~~March 31, 2023, and recorded no impairments.

Fair Value of Financial Instruments

The carrying amount and fair value of financial instruments are as follows ($ in millions):
July 1, 2022 December 31, 2021
Carrying Amount Fair Value Carrying Amount Fair Value
Current portion of long-term debt $ 999.9 $ 1,000.0 $ 2,151.7 $ 2,158.3
Long-term debt, net of current maturities $ 2,682.2 $ 2,584.8 $ 1,807.3 $ 1,978.9


	March 31, 2023				December 31, 2022
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Current portion of long-term debt	$	999.8	$	1,000.0	$	999.7	$	1,000.0
Long-term debt, net of current maturities	2,094.6		1,952.7		2,251.6		2,078.1

As of ~~July 1, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, the current portion of long-term debt and long-term debt, net of current maturities were categorized as Level 1.

The fair values of long-term borrowings were based on quoted market prices. 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 borrowing. The fair value of cash and cash equivalents, trade accounts receivable, net, trade accounts payable, and commercial paper approximates their carrying value due to the short-term maturities of these instruments.

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NOTE 5.4. FINANCING ~~AND CAPITAL~~

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


		July 1, 2022		December 31, 2021
							March 31, 2023		December 31, 2022
U.S. dollar-denominated commercial paper	U.S. dollar-denominated commercial paper	$	847.0	$	364.9	U.S. dollar-denominated commercial paper	$	245.0	$	405.0

Delayed-Draw Term Loan due 2022		999.9		999.7
Delayed-Draw Term Loan due 2023						Delayed-Draw Term Loan due 2023	1,000.0		1,000.0
Euro Term Loan due 2025						Euro Term Loan due 2025	298.1		294.4
Yen Term Loan due 2025	Yen Term Loan due 2025	106.4		—		Yen Term Loan due 2025	108.4		109.8
Euro Term Loan due 2025		285.8		—
3.15% senior unsecured notes due 2026	3.15% senior unsecured notes due 2026	895.7		895.1		3.15% senior unsecured notes due 2026	900.0		900.0
4.30% senior unsecured notes due 2046	4.30% senior unsecured notes due 2046	547.3		547.3		4.30% senior unsecured notes due 2046	550.0		550.0
0.875% senior convertible notes due 2022		—		1,152.0

Long-term debt		3,682.1		3,959.0
Long-term debt, principal amounts						Long-term debt, principal amounts	3,101.5		3,259.2
Less: aggregate unamortized debt discounts, premiums, and issuance costs						Less: aggregate unamortized debt discounts, premiums, and issuance costs	7.1		7.9
Long-term debt, carrying value						Long-term debt, carrying value	3,094.4		3,251.3
Less: current portion of long-term debt	Less: current portion of long-term debt	999.9		2,151.7		Less: current portion of long-term debt	999.8		999.7
Long-term debt, net of current maturities	Long-term debt, net of current maturities	$	2,682.2	$	1,807.3	Long-term debt, net of current maturities	$	2,094.6	$	2,251.6

Aggregate unamortized debt discounts, premiums, and issuance costs of $8 million and $13 million as of July 1, 2022 and December 31, 2021, respectively, are netted against the principal amounts of the components of debt in the table above. Refer to Note 11 of our ~~2021~~2022 Annual Report on Form 10-K for further details of our debt financing.

~~Yen Term Loan~~

On June 17, 2022, we entered into a three-year, ¥14.4 billion senior unsecured term facility (“Yen Term Loan”). On the same day, we drew down the entire available balance under the facility, which yielded net proceeds of $107 million. The Yen Term Loan is due on June 17, 2025 and is pre-payable at our option. The Yen Term Loan bears interest at a rate of Tokyo Term Risk Free Rate (“TORF”), plus 65 basis points; provided, however, that the TOFR may not be less than zero for the Yen Term Loan.

~~Euro Term Loan~~

On June 21, 2022, we entered into a three-year €275 million senior unsecured term facility (“Euro Term Loan”). On June 28, 2022, we drew down the entire available balance under the facility, which yielded net proceeds of $290 million. The Euro Term Loan is due on June 23, 2025 and is pre-payable at our option. The Euro Term Loan bears interest at a rate of Euro Interbank Offered Rate (“Euribor”), plus 55 basis points; provided, however that the Euribor may not be less than zero for the Euro Term Loan.

~~Convertible Senior Notes~~

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

Of the $1.4 billion in principal amount from the issuance of the Convertible Notes, $1.3 billion was classified as debt and $102.2 million was classified as equity, using an assumed effective interest rate of 3.38%. Debt issuance costs of $24.3 million were proportionately allocated to debt and equity.

On February 9, 2021, we repurchased $281 million of the Convertible Notes at fair value using the remaining cash proceeds received from Vontier in the Vontier Separation and other cash on hand. In connection with the repurchase, we recorded a loss on debt extinguishment during the six month period ended July 2, 2021 of $10.5 million. In addition, upon repurchase we recorded $11.6 million as a reduction to additional paid-in capital related to the equity component of the repurchased Convertible Notes.

On January 1, 2022, we adopted ASU 2020-06, as further detailed in Note 1. We reclassified the carrying value of the instrument wholly to debt, eliminating the value formerly attributable to the conversion feature and the associated debt issuance costs that were previously classified as equity.

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

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We recognized $2.1 million in interest expense during the six month period ended July 1, 2022, of which $1.3 million was related to the contractual coupon rate of 0.875% and $0.8 million was attributable to the amortization of debt issuance costs. We recognized $11.1 million and $23.3 million in interest expense during the three and six month period ended July 2, 2021, of which $2.5 million and $5.3 million was related to the contractual coupon rate of 0.875%, $1.5 million and $3.2 million was attributable to the amortization of debt issuance costs, and $7.1 million and $14.8 million was attributable to the amortization of the discount for each respective period.

Other Liquidity Sources

We generally satisfy 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”). Under these programs, we may issue unsecured promissory notes with maturities not exceeding 397 and 183 days, respectively.

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

The details of our outstanding Commercial Paper Programs as of ~~July 1, 2022~~March 31, 2023 were as follows ($ in millions):

Carrying value Annual effective rate Weighted average remaining maturity (in days)
U.S. dollar-denominated commercial paper $ 847.0 1.84 % 32


	Carrying value		Annual effective rate		Weighted average maturity (in days)
U.S. dollar-denominated commercial paper	$	244.9	4.98	%	30

Credit support for the Commercial Paper Programs is provided by a five-year $2.0 billion senior unsecured revolving credit facility that expires on ~~November 30, 2023~~October 18, 2027 (the “Revolving Credit Facility”) which, to the extent not otherwise providing credit support for our commercial paper programs, can also be used for working capital and other general corporate purposes. As of ~~July 1, 2022,~~March 31, 2023, no borrowings were outstanding under the Revolving Credit Facility.

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

~~Debt-for-Equity Exchange~~

On January 19, 2021, we completed the Debt-for-Equity Exchange of 33.5 million shares of common stock of Vontier, representing all of the Retained Vontier Shares, for $1.1 billion in aggregate principal amount of indebtedness of the Company. During the first quarter of 2021 we recognized a gain of $57.0 million related to the subsequent change in the fair value of the Retained Vontier Shares. We recorded a loss on extinguishment of the debt included in the Debt-for-Equity Exchange of $94.4 million in the six month period ended July 2, 2021.

NOTE 6.5. SALES

We derive revenue primarily from the sale of products, ~~and~~including software, and services. Revenue is recognized when control of promised products or services is transferred to customers in an amount that reflects the consideration we expect to be entitled to in exchange for those products, software, or services.

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

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

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 ~~$83~~$96 million as of ~~July 1, 2022~~March 31, 2023 and ~~$71~~$82 million as of December 31, ~~2021.~~2022. Contract assets are recorded in Prepaid expenses and other current assets in our Consolidated Condensed Balance Sheets.

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Contract Costs — We incur and capitalize ~~direct~~ incremental costs to obtain certain contracts, typically sales-related commissions where the amortization period is greater than one year and costs associated with assets used by our customers in certain ~~software~~service arrangements. ~~Deferred sales-related commissions are not capitalized when the amortization period is one year or less, as we elected to use the practical expedient to expense these sales commissions as incurred.~~ As of ~~July 1, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, we had ~~$33~~$44 million and ~~$27~~$42 million, respectively, in net revenue-related contract costs primarily related to certain software contracts. Revenue-related contract costs

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are recorded in the Prepaid expenses and other current assets and Other assets line items in our Consolidated Condensed Balance Sheets. These assets have estimated useful lives between three and ~~eight~~.five years.

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

Our contract liabilities consisted of the following ($ in millions):
July 1, 2022 December 31, 2021
Deferred revenue - current $ 479.8 $ 457.6
Deferred revenue - noncurrent 35.1 33.8
Total contract liabilities $ 514.9 $ 491.4


	March 31, 2023		December 31, 2022
Deferred revenue - current	$	497.2	$	509.6
Deferred revenue - noncurrent	38.9		38.0
Total contract liabilities	$	536.1	$	547.6

During the three ~~and six~~ month period ended ~~July 1, 2022,~~March 31, 2023, we recognized revenue related to our contract liabilities at December 31, ~~2021~~2022 of ~~$102 million and $256 million, respectively.~~$175 million. The change in our contract liabilities from December 31, ~~2021~~2022 to ~~July 1, 2022~~March 31, 2023 was primarily due to the timing of billings and recognition as revenue of subscription-based software contracts, PCS and extended warranty services.

Remaining Performance Obligations — Our remaining performance obligations represent the transaction price of firm, non-cancelable orders and the average contract value for software contracts, for which work has not been performed. We have excluded performance obligations with an original expected duration of one year or less from the amounts below.

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


	~~July 1, 2022~~March 31, 2023
Intelligent Operating Solutions	$	~~585.9~~576.2
Precision Technologies	~~47.2~~55.9
Advanced Healthcare Solutions	~~76.1~~67.0
Total remaining performance obligations	$	~~709.2~~699.1

The majority of remaining performance obligations are related to service and support contracts, which we expect to fulfill approximately 80 percent within the next two years, approximately 9095 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, and end market for each of our segments, as we believe it best depicts how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors.

Disaggregation of revenue for the three month ~~period~~periods ended ~~July 1, 2022~~March 31, 2023 is presented as follows ($ in millions):


		Total		Intelligent Operating Solutions		Precision Technologies		Advanced Healthcare Solutions			Total		Intelligent Operating Solutions		Precision Technologies		Advanced Healthcare Solutions
Sales:	Sales:									Sales:
Sales of products and software	Sales of products and software	$	1,229.4	$	534.2	$	444.7	$	250.5	Sales of products and software	$	1,236.6	$	537.4	$	460.3	$	238.9
Sales of services	Sales of services	233.9		95.9		54.4		83.6		Sales of services	224.1		94.7		55.2		74.2
Total	Total	$	1,463.3	$	630.1	$	499.1	$	334.1	Total	$	1,460.7	$	632.1	$	515.5	$	313.1

Geographic:	Geographic:									Geographic:
United States	United States	$	779.0	$	341.1	$	249.6	$	188.3	United States	$	771.5	$	340.1	$	251.3	$	180.1
China	China	182.7		56.1		101.6		25.0		China	181.4		64.9		92.2		24.3

All other (each country individually less than 5% of total sales)	All other (each country individually less than 5% of total sales)	501.6		232.9		147.9		120.8		All other (each country individually less than 5% of total sales)	507.8		227.1		172.0		108.7
Total	Total	$	1,463.3	$	630.1	$	499.1	$	334.1	Total	$	1,460.7	$	632.1	$	515.5	$	313.1

End markets:(a)	End markets:(a)									End markets:(a)
Direct sales:	Direct sales:									Direct sales:
Healthcare	Healthcare	$	369.8	$	13.2	$	41.3	$	315.3	Healthcare	$	339.4	$	10.9	$	34.5	$	294.0
Industrial & Manufacturing	Industrial & Manufacturing	341.9		227.4		107.7		6.8		Industrial & Manufacturing	353.2		228.3		118.2		6.7
Utilities & Power	Utilities & Power	94.0		47.9		46.1		—		Utilities & Power	98.9		47.3		51.6		—
Government	Government	110.1		60.5		41.4		8.2		Government	111.1		61.8		40.9		8.4
Communications, Electronics & Semiconductor	Communications, Electronics & Semiconductor	102.1		26.3		75.4		0.4		Communications, Electronics & Semiconductor	105.9		25.6		79.6		0.7
Aerospace & Defense	Aerospace & Defense	64.7		0.2		64.5		—		Aerospace & Defense	67.6		0.1		67.5		—
Oil & Gas	Oil & Gas	68.6		65.8		2.8		—		Oil & Gas	70.3		65.9		4.4		—
Retail & Consumer	Retail & Consumer	84.4		60.6		23.8		—		Retail & Consumer	82.9		62.3		20.6		—
Other	Other	158.5		90.1		68.4		—		Other	170.1		95.0		75.1		—
Total direct sales	Total direct sales	1,394.1		592.0		471.4		330.7		Total direct sales	1,399.4		597.2		492.4		309.8
Distributors	Distributors	69.2		38.1		27.7		3.4		Distributors	61.3		34.9		23.1		3.3
Total	Total	$	1,463.3	$	630.1	$	499.1	$	334.1	Total	$	1,460.7	$	632.1	$	515.5	$	313.1

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

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~~Disaggregation of revenue for the three month period ended July 2, 2021 is presented as follows ($ in millions):~~
Total Intelligent Operating Solutions Precision Technologies Advanced Healthcare Solutions
Sales:
Sales of products and software $ 1,136.0 $ 478.4 $ 417.5 $ 240.1
Sales of services 183.7 63.4 54.4 65.9
Total $ 1,319.7 $ 541.8 $ 471.9 $ 306.0
Geographic:
United States $ 671.6 $ 276.7 $ 236.3 $ 158.6
China 163.5 53.7 81.7 28.1
All other (each country individually less than 5% of total sales) 484.6 211.4 153.9 119.3
Total $ 1,319.7 $ 541.8 $ 471.9 $ 306.0
End markets:(a)
Direct sales:
  Healthcare $ 328.6 $ 8.4 $ 33.9 $ 286.3
  Industrial & Manufacturing 312.1 200.7 105.4 6.0
  Utilities & Power 97.8 57.2 40.6 —
  Government 99.0 51.3 37.9 9.8
  Communications, Electronics & Semiconductor 97.6 32.8 64.3 0.5
  Aerospace & Defense 65.7 — 65.7 —
  Oil & Gas 66.7 64.0 2.7 —
  Retail & Consumer 44.6 18.7 25.9 —
  Other 137.3 71.7 65.6 —
     Total direct sales 1,249.4 504.8 442.0 302.6
Distributors 70.3 37.0 29.9 3.4
Total $ 1,319.7 $ 541.8 $ 471.9 $ 306.0
(a) Direct sales by end market include sales made through third-party distributors where we have visibility into the end customer.

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

Total Intelligent Operating Solutions Precision Technologies Advanced Healthcare Solutions
Sales:
Sales of products and software $ 2,382.1 $ 1,034.7 $ 855.3 $ 492.1
Sales of services 457.7 183.0 106.2 168.5
Total $ 2,839.8 $ 1,217.7 $ 961.5 $ 660.6
Geographic:
United States $ 1,518.9 $ 663.0 $ 483.6 $ 372.3
China 328.1 104.0 170.9 53.2
All other (each country individually less than 5% of total sales) 992.8 450.7 307.0 235.1
Total $ 2,839.8 $ 1,217.7 $ 961.5 $ 660.6
End markets:(a)
Direct sales:
  Healthcare $ 723.1 $ 23.5 $ 78.4 $ 621.2
  Industrial & Manufacturing 663.8 438.5 211.4 13.9
  Utilities & Power 180.3 90.9 89.4 —
  Government 215.8 112.1 86.1 17.6
  Communications, Electronics & Semiconductor 189.9 50.1 138.8 1.0
  Aerospace & Defense 120.1 0.3 119.8 —
  Oil & Gas 133.4 128.1 5.3 —
  Retail & Consumer 165.6 124.3 41.3 —
  Other 312.4 177.6 134.7 0.1
     Total direct sales 2,704.4 1,145.4 905.2 653.8
Distributors 135.4 72.3 56.3 6.8
Total $ 2,839.8 $ 1,217.7 $ 961.5 $ 660.6
(a) Direct sales by end market include sales made through third-party distributors where we have visibility into the end customer.

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~~Disaggregation of revenue for the six month period ended July 2, 2021 is presented as follows ($ in millions):~~


		Total		Intelligent Operating Solutions		Precision Technologies		Advanced Healthcare Solutions			Total		Intelligent Operating Solutions		Precision Technologies		Advanced Healthcare Solutions
Sales:	Sales:									Sales:
Sales of products and software	Sales of products and software	$	2,213.2	$	931.4	$	810.6	$	471.2	Sales of products and software	$	1,152.7	$	500.5	$	410.6	$	241.6
Sales of services	Sales of services	365.7		121.3		108.7		135.7		Sales of services	223.8		87.1		51.8		84.9
Total	Total	$	2,578.9	$	1,052.7	$	919.3	$	606.9	Total	$	1,376.5	$	587.6	$	462.4	$	326.5

Geographic:	Geographic:									Geographic:
United States	United States	$	1,292.4	$	524.9	$	455.4	$	312.1	United States	$	739.9	$	321.9	$	234.0	$	184.0
China	China	327.8		113.2		158.5		56.1		China	145.4		47.9		69.3		28.2

All other (each country individually less than 5% of total sales)	All other (each country individually less than 5% of total sales)	958.7		414.6		305.4		238.7		All other (each country individually less than 5% of total sales)	491.2		217.8		159.1		114.3
Total	Total	$	2,578.9	$	1,052.7	$	919.3	$	606.9	Total	$	1,376.5	$	587.6	$	462.4	$	326.5

End markets:(a)	End markets:(a)									End markets:(a)
Direct sales:	Direct sales:									Direct sales:
Healthcare	Healthcare	$	655.4	$	17.8	$	68.9	$	568.7	Healthcare	$	353.3	$	10.3	$	37.1	$	305.9
Industrial & Manufacturing	Industrial & Manufacturing	614.4		397.2		205.4		11.8		Industrial & Manufacturing	321.9		211.1		103.7		7.1
Utilities & Power	Utilities & Power	192.7		111.5		81.2		—		Utilities & Power	86.3		43.0		43.3		—
Government	Government	186.9		96.1		72.3		18.5		Government	105.7		51.6		44.7		9.4
Communications, Electronics & Semiconductor	Communications, Electronics & Semiconductor	185.4		60.3		123.9		1.2		Communications, Electronics & Semiconductor	87.8		23.8		63.4		0.6
Aerospace & Defense	Aerospace & Defense	121.1		—		121.1		—		Aerospace & Defense	55.4		0.1		55.3		—
Oil & Gas	Oil & Gas	130.0		124.5		5.5		—		Oil & Gas	64.8		62.3		2.5		—
Retail & Consumer	Retail & Consumer	90.1		42.2		47.9		—		Retail & Consumer	81.2		63.7		17.5		—
Other	Other	262.2		127.8		134.4		—		Other	153.9		87.5		66.3		0.1
Total direct sales	Total direct sales	2,438.2		977.4		860.6		600.2		Total direct sales	1,310.3		553.4		433.8		323.1
Distributors	Distributors	140.7		75.3		58.7		6.7		Distributors	66.2		34.2		28.6		3.4
Total	Total	$	2,578.9	$	1,052.7	$	919.3	$	606.9	Total	$	1,376.5	$	587.6	$	462.4	$	326.5

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

NOTE 7.6. INCOME TAXES

Our effective tax rates for the three ~~and six~~ month ~~periods~~period ended ~~July 1, 2022 were 16.9% and 15.3%~~March 31, 2023 was 15.7%, ~~respectively,~~ as compared to ~~12.3% and 10.0%~~13.5%, ~~respectively,~~ for the three ~~and six~~ month ~~periods~~period ended ~~July 2, 2021.~~April 1, 2022. The year-over-year increase in the effective tax rate for the three month period ended ~~July 1, 2022~~March 31, 2023 as compared to the three month period ended ~~July 2, 2021~~April 1, 2022 was primarily due ~~primarily~~ to ~~a reduction in our~~ uncertain tax ~~positions~~position reserves released during the three month period ended July 2, 2021 and the effect of Russia exit and wind down costs for which no tax benefit was recognized in the three month period ended July 2, 2021 . The year-over-year increase in the effective tax rate for the six month period ended Julyending April 1, 2022 as compared to the six month period ended July 2, 2021 was primarily due to a non-recurring permanent difference on the Q1 2021 gain on our Retained Vontier Shares as a result of the tax-free treatment of our disposition of the shares through the Debt-for-Equity Exchange and increases in certain federal tax benefits for the six month period ended July 2, 2021.2022.

Our effective tax ~~rate~~rates for the three ~~and six~~ month periods ended ~~July~~March 31, 2023 and April 1, 2022, ~~differs~~differ from the U.S. federal statutory rate of 21% due primarily to the ~~positive and negative effects of the Tax Cuts and Jobs Act (“TCJA”), U.S. federal permanent differences, the impacts~~impact of credits and deductions provided by law and ~~a reduction~~changes in our uncertain tax ~~positions,~~position reserves.

On August 16, 2022, the U.S. enacted the Inflation Reduction Act of 2022, which, among other provisions, implements a 15% corporate alternative minimum tax on book income on corporations whose average annual adjusted financial statement income during the most recently-completed three-year period exceeds $1.0 billion. This provision is effective for tax years beginning after December 31, 2022. Based upon our analysis of the Inflation Reduction Act of 2022 and subsequently released guidance, we believe that the ~~effect of Russia exit and wind down costs for which no~~corporate alternative minimum tax ~~benefit was recognized.~~

will not have a material impact on our financial statements in 2023
.

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NOTE 8.7. STOCK-BASED COMPENSATION

~~Our stock-based compensation program~~The 2016 Stock Incentive Plan (the “Stock Plan”), provides for the grant of stock appreciation rights, ~~performance stock units,~~ restricted stock units, ~~restricted stock awards,~~ and performance stock ~~awards~~units (collectively, “Stock Awards”), stock options, or any other stock-based award. As of ~~July 1, 2022,~~March 31, 2023, approximately 1614 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~~Stock Plan refer to Note 17 of our ~~2021~~2022 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 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				Six Months Ended					Three Months Ended
		July 1, 2022		July 2, 2021		July 1, 2022		July 2, 2021			March 31, 2023		April 1, 2022
Stock Awards:	Stock Awards:									Stock Awards:
Pretax compensation expense	Pretax compensation expense	$	16.0	$	12.2	$	28.7	$	22.7	Pretax compensation expense	$	18.1	$	12.7
Income tax benefit	Income tax benefit	(3.0)		(1.9)		(4.7)		(3.8)		Income tax benefit	(2.6)		(1.7)
Stock Award expense, net of income taxes	Stock Award expense, net of income taxes	13.0		10.3		24.0		18.9		Stock Award expense, net of income taxes	15.5		11.0
Stock options:	Stock options:									Stock options:
Pretax compensation expense	Pretax compensation expense	9.1		8.0		16.3		14.1		Pretax compensation expense	8.6		7.2
Income tax benefit	Income tax benefit	(1.4)		(1.3)		(2.4)		(2.5)		Income tax benefit	(1.2)		(1.0)
Stock option expense, net of income taxes	Stock option expense, net of income taxes	7.7		6.7		13.9		11.6		Stock option expense, net of income taxes	7.4		6.2
Total stock-based compensation:	Total stock-based compensation:									Total stock-based compensation:
Pretax compensation expense	Pretax compensation expense	25.1		20.2		45.0		36.8		Pretax compensation expense	26.7		19.9
Income tax benefit	Income tax benefit	(4.4)		(3.2)		(7.1)		(6.3)		Income tax benefit	(3.8)		(2.7)
Total stock-based compensation expense, net of income taxes	Total stock-based compensation expense, net of income taxes	$	20.7	$	17.0	$	37.9	$	30.5	Total stock-based compensation expense, net of income taxes	$	22.9	$	17.2

The following summarizes the unrecognized compensation cost for the Stock Plan awards as of ~~July 1, 2022.~~March 31, 2023. This compensation cost is expected to be recognized over a weighted average period of approximately two years, representing the remaining service period related to the awards. Future compensation amounts will be adjusted for any changes in estimated forfeitures ($ in millions):


Stock Awards	$	~~109.8~~142.6
Stock options	~~61.9~~64.2
Total unrecognized compensation cost	$	~~171.7~~206.8

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NOTE 9.8. COMMITMENTS AND CONTINGENCIES

For a description of our litigation and contingencies and additional information about our leases, refer to Note 16 and Note 10, respectively, in our ~~2021~~2022 Annual Report on Form 10-K.

Warranty

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 roll forward of our accrued~~ During the three month period ending March 31, 2023, warranty ~~liability ($ in millions):~~


~~Balance, December 31, 2021~~	$	~~25.2~~
~~Accruals for warranties issued during the period~~	~~6.8~~
~~Settlements made~~	~~(9.2)~~

~~Effect of foreign currency translation and other~~	~~(0.2)~~
~~Balance, July 1, 2022~~	$	~~22.6~~

related activity was immaterial.

Leases

Operating lease cost for the three month periods ended ~~July~~March 31, 2023 and April 1, 2022 ~~and July 2, 2021~~ was ~~$14~~$12 million and $15 million, respectively. ~~Operating lease cost for~~During the ~~six~~three month periods ended ~~July~~March 31, 2023 and April 1, 2022, ~~and July 2, 2021 was $29 million and $30 million, respectively. During the six month periods ended July 1, 2022 and July 2, 2021,~~ cash paid for operating leases included in operating cash flows was ~~$26~~$12 million and ~~$28~~$14 million, respectively. Right-of-use (“ROU”) assets obtained in exchange for operating lease obligations were $6$4 million and ~~$13~~$2 million during the ~~six~~three month periods ended ~~July~~March 31, 2023 and April 1, 2022, ~~and July 2, 2021,~~ respectively. Operating lease ~~right-of-use~~ROU assets were $155 million and $162 million as of March 31, 2023 and December 31, 2022, respectively. Operating lease liabilities were $162 million and $169 million as of March 31, 2023 and December 31, 2022, respectively. Operating lease ROU assets and operating lease liabilities are reported on the Consolidated Condensed Balance Sheets within Other assets, Accrued expenses and ~~other~~Other current liabilities and Other long-term liabilities, respectively.

NOTE ~~10.~~9. NET EARNINGS PER SHARE

Basic net EPS is calculated by dividing net earnings attributable to common stockholders by the weighted average number of shares of common stock outstanding for the applicable period. Diluted EPS is similarly calculated, except that the calculation includes the dilutive effect of the assumed conversion of 0.875% Convertible Notes and associated issuance of shares under the if-converted method, while outstanding in 2022, and the assumed issuance of shares under stock-based compensation plans under the treasury stock method, except where the inclusion of such shares would have an anti-dilutive impact. Anti-dilutive options excluded from the diluted EPS calculation for the three ~~and six~~ month periods ended ~~July~~March 31, 2023 and April 1, 2022 were ~~7.7~~2.9 million and ~~7.5~~3.1 million, ~~and were immaterial and 0.2 million for the three and six month periods ended July 2, 2021,~~ respectively.

As described in Note 5, upon conversion of the Convertible Notes, holders were entitled to receive cash, shares of our common stock, or a combination thereof, at our election. As described in Note 1, prior to our adoption of ASU 2020-06 on January 1, 2022, we accounted for the conversion feature under the treasury stock method in our calculation of EPS since we intended and had the ability to settle such conversions through cash up to the principal amount of the Convertible Notes and, if applicable, through shares of our common stock for conversion value, if any, in excess of the principal amount of the Convertible Notes. Because the fair value of our common stock was below the conversion price, the Convertible Notes had no impact on our earnings per share for the six month period ended July 2, 2021. Upon adopting ASU 2020-06 on January 1, 2022, we accounted for the Convertible Notes under the if-converted method in our calculation of diluted EPS, as required under the new guidance.

On July 1, 2021, all outstanding shares of our 5.0% Mandatory Convertible Preferred Stock (“MCPS”) converted at a rate of 14.0978 common shares per share of preferred stock into an aggregate of approximately 19.4 million shares (net of fractional shares) of the Company’s common stock, pursuant to the terms of the Certificate of Designation governing the Series A Preferred Stock. Fortive issued cash in lieu of fractional shares of common stock in the conversion. These payments were recorded as a reduction to additional paid-in capital. The impact of the MCPS calculated under the if-converted method was anti-dilutive for the periods in 2021 prior to conversion.

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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				Six Months Ended					Three Months Ended
		July 1, 2022		July 2, 2021		July 1, 2022		July 2, 2021			March 31, 2023		April 1, 2022
Numerator	Numerator									Numerator
Net earnings from continuing operations		$	173.0	$	182.0	$	338.1	$	293.7
Mandatory convertible preferred stock cumulative dividends		—		(17.2)		—		(34.5)

Net earnings										Net earnings	$	173.6	$	165.1
Convertible note interest add-back (if converted method)	Convertible note interest add-back (if converted method)	—		—		1.8		—		Convertible note interest add-back (if converted method)	—		1.8
Diluted Net Earnings from Continuing Operations		$	173.0	$	164.8	$	339.9	$	259.2
Diluted Net Earnings										Diluted Net Earnings	$	173.6	$	166.9

Denominator	Denominator									Denominator
Weighted average common shares outstanding used in basic earnings per share	Weighted average common shares outstanding used in basic earnings per share	357.4		339.4		358.3		339.0		Weighted average common shares outstanding used in basic earnings per share	353.6		359.3
Incremental common shares from:	Incremental common shares from:									Incremental common shares from:
Assumed exercise of dilutive options and vesting of dilutive Stock Awards	Assumed exercise of dilutive options and vesting of dilutive Stock Awards	2.4		3.0		2.7		3.1		Assumed exercise of dilutive options and vesting of dilutive Stock Awards	2.9		2.7
Conversion of convertible notes (if converted method)	Conversion of convertible notes (if converted method)	—		—		3.2		—		Conversion of convertible notes (if converted method)	—		6.4
Weighted average common shares outstanding used in diluted earnings per share	Weighted average common shares outstanding used in diluted earnings per share	359.8		342.4		364.2		342.1		Weighted average common shares outstanding used in diluted earnings per share	356.5		368.4

Net earnings from continuing operations per common share - Basic		$	0.48	$	0.49	$	0.94	$	0.76
Net earnings from continuing operations per common share - Diluted		$	0.48	$	0.48	$	0.93	$	0.76
Net earnings per common share - Basic										Net earnings per common share - Basic	$	0.49	$	0.46
Net earnings per common share - Diluted										Net earnings per common share - Diluted	$	0.49	$	0.45

We declared and paid cash dividends per common share for the periods as presented below. ~~We declared and paid the MCPS dividend in the first quarter of 2021, and declared and paid the final dividend in the second quarter of 2021.~~


		Dividend Per Common Share		Amount ($ in millions)		Dividend per MCPS			Amount ($ in millions)			Dividend Per Common Share		Amount ($ in millions)
2022:
2023:											2023:
First quarter	First quarter	$	0.07	$	25.1	$	—		$	—	First quarter	$	0.07	$	24.7
Second quarter		0.07		24.9		—			—

Total	Total	$	0.14	$	50.0	$	—		$	—	Total	$	0.07	$	24.7

2021:
2022:											2022:
First quarter	First quarter	$	0.07	$	23.7	$	12.5		$	17.3	First quarter	$	0.07	$	25.1
Second quarter		0.07		23.7		12.5		$—	17.2

Total	Total	$	0.14	$	47.4	$	25.0		$	34.5	Total	$	0.07	$	25.1

* The sum of the components of total dividends paid may not equal the total amount due to rounding.	* The sum of the components of total dividends paid may not equal the total amount due to rounding.										* The sum of the components of total dividends paid may not equal the total amount due to rounding.

Share Repurchase Program

On February 17, 2022, the Company's Board of Directors approved a share repurchase program authorizing the Company to repurchase up to 20 million shares of the Company's outstanding common stock from time to time on the open market or in privately negotiated transactions. There is no expiration date for the repurchase program, and the timing and amount of repurchases under the program are determined by the Company's management based on market conditions and other factors. The repurchase program may be suspended or discontinued at any time by the Board of Directors. During the three month period ended March 31, 2023, the Company made no repurchases under the plan. During the three month period ended April 1, 2022, the Company purchased 1 million shares of its common stock at an average share price of $63.74. As of ~~July 1, 2022,~~March 31, 2023, there were ~~16.0~~13 million shares remaining for repurchase under the program.

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NOTE ~~11.~~10. SEGMENT INFORMATION

We report our results in 3three separate business segments consisting of Intelligent Operating Solutions, Precision Technologies, and Advanced Healthcare Solutions.

Our Intelligent Operating Solutions segment provides leading workflow solutions to accelerate industrial and facility reliability and performance, as well as compliance and safety across a range of vertical end markets, including manufacturing, process industries, healthcare, utilities and power, communications and electronics, among others. We provide differentiated instrumentation and sensors, software and services to address our customers’ toughest workflow challenges.

Our Precision Technologies segment supplies instrumentation and sensing technologies to a broad set of vertical end markets, enabling our customers to accelerate the development, manufacture and launch of innovative products and solutions. We provide our customers with electrical test and measurement instruments and services, energetic material devices, and a broad portfolio of sensor and control system solutions.

Our Advanced Healthcare Solutions segment supplies critical workflow solutions to hospitals and other healthcare customers, enabling safer, more efficient, and higher quality healthcare. We provide hardware, consumables, software and services that optimize our customers’ most critical workflows, including instrument sterilization and device reprocessing, instrument tracking, cell therapy equipment design and manufacturing, biomedical test tools, radiation safety monitoring, end-to-end clinical productivity solutions and asset management.

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

Our Intelligent Operating ~~profit amounts~~Solutions segment provides advanced instrumentation, software and services to tens of thousands of customers enabling their mission-critical workflows. These offerings include electrical test & measurement, facility and asset

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lifecycle software applications, connected worker safety and compliance solutions across a range of vertical end markets, including manufacturing, process industries, healthcare, utilities and power, communications and electronics, among others.

Our Precision Technologies segment helps solve tough technical challenges to speed breakthroughs in a wide range of applications, from food and beverage production and manufacturing to next-generation electric vehicles and clean energy, as our customers seek new test solutions to enable the ~~Other category~~electrification and ~~Russia exit~~connectivity of everything. Our expertise in materials, methods and ~~wind down costs consist~~measurements are reflected in our electrical test & measurement, sensing and material technologies offered to a broad set of ~~unallocated corporate costs~~customers and vertical end markets, including industrial, power and energy, automotive, medical equipment, food and beverage, aerospace and defense, semiconductor, and other ~~costs not utilized or reviewed by our CODM~~general industries.

Our Advanced Healthcare Solutions segment supplies critical workflow solutions enabling healthcare providers to deliver exceptional patient care more efficiently. Our offerings include instrument sterilization solutions, instrument tracking, cell therapy equipment design and manufacturing, biomedical test tools, radiation detection and safety monitoring, and end-to-end clinical productivity software and solutions. Our healthcare offerings help ensure critical safety standards are met, instruments and operating rooms are working at ~~a segment level~~peak performance, and complex procedures are followed accurately in ~~evaluating segment operating performance.~~ these mission-critical healthcare environments.

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


		Three Months Ended				Six Months Ended					Three Months Ended
		July 1, 2022		July 2, 2021		July 1, 2022		July 2, 2021			March 31, 2023		April 1, 2022
Sales:	Sales:									Sales:
Intelligent Operating Solutions	Intelligent Operating Solutions	$	630.1	$	541.8	$	1,217.7	$	1,052.7	Intelligent Operating Solutions	$	632.1	$	587.6
Precision Technologies	Precision Technologies	499.1		471.9		961.5		919.3		Precision Technologies	515.5		462.4
Advanced Healthcare Solutions	Advanced Healthcare Solutions	334.1		306.0		660.6		606.9		Advanced Healthcare Solutions	313.1		326.5
Total	Total	$	1,463.3	$	1,319.7	$	2,839.8	$	2,578.9	Total	$	1,460.7	$	1,376.5
Operating Profit:	Operating Profit:									Operating Profit:
Intelligent Operating Solutions	Intelligent Operating Solutions	$	129.9	$	115.3	$	236.9	$	223.4	Intelligent Operating Solutions	$	133.5	$	107.0
Precision Technologies	Precision Technologies	115.3		104.1		216.7		200.0		Precision Technologies	122.7		101.4
Advanced Healthcare Solutions	Advanced Healthcare Solutions	28.1		22.5		56.1		41.4		Advanced Healthcare Solutions	16.3		28.0
Other	Other	(24.8)		(30.6)		(48.9)		(55.9)		Other	(32.1)		(24.1)
Russia exit and wind down costs		(16.2)		—		(16.2)		—

Total Operating Profit	Total Operating Profit	232.3		211.3		444.6		408.9		Total Operating Profit	240.4		212.3
Interest expense, net										Interest expense, net	(32.1)		(18.8)

Interest expense, net		(21.0)		(25.2)		(39.8)		(52.9)
Loss on extinguishment of debt		—		—		—		(104.9)
Gain on investment in Vontier Corporation		—		—		—		57.0
Gain on litigation resolution		—		26.0		—		26.0

Other non-operating expense, net	Other non-operating expense, net	(3.1)		(4.6)		(5.8)		(7.9)		Other non-operating expense, net	(2.5)		(2.7)
Earnings from continuing operations before income taxes		$	208.2	$	207.5	$	399.0	$	326.2
Earnings before income taxes										Earnings before income taxes	$	205.8	$	190.8

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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 provider of essential technologies for connected workflow solutions across a range of attractive end-markets. Our strategic segments - Intelligent Operating Solutions, Precision Technologies, and Advanced Healthcare Solutions - include well-known brands with leading positions in their markets. Our businesses design, develop, manufacture, and service professional and engineered products, software, and services, building upon leading brand names, innovative technologies, and significant market positions. We are headquartered in Everett, Washington and employ a team of more than 18,000 research and development, manufacturing, sales, distribution, service, and administrative employees in more than 50 countries around the world.

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 financial statements included in our ~~2021~~2022 Annual Report on Form 10-K. Our MD&A is divided into five sections:

•Information Relating to Forward-Looking Statements

•Overview

•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, strategic opportunities, securities offerings, stock repurchases, dividends and executive compensation; growth, declines and other trends in markets we sell into, including the expected impact of trade and tariff policies; new or modified laws, regulations and accounting pronouncements; impact of climate-related events or transition activities; outstanding claims, legal proceedings, tax audits and assessments and other contingent liabilities; foreign currency exchange rates and fluctuations in those rates; impact of changes to tax laws; general economic and capital markets ~~conditions;~~conditions, including impact of inflation or interest rate changes; impact of geopolitical events, including the impact of Ukraine/Russia conflict and other hostilities; 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 they believe to be appropriate. Forward-looking statements are not guarantees of future performance and actual results may differ materially from

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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, among others, the following:

Risk Related to Our Business Operations

•~~The effect of~~Conditions in the ~~COVID-19 pandemic, including~~global economy, the ~~corresponding government-mandated mitigation efforts, on our global operations~~markets we serve, and the ~~operations of our customers, suppliers,~~financial markets and ~~vendors is continuing to have a material, adverse impact on~~banking systems may adversely affect our business and ~~results~~financial statements.

Table of ~~operations.~~Contents

•If we cannot adjust our manufacturing capacity, supply chain management or the purchases required for our manufacturing activities to reflect changes in market conditions, customer demand and supply chain or transportation disruptions, 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 financial results are subject to fluctuations in the cost and availability of commodities or components that we use in our operations.

•~~Conditions in the global economy, the markets we serve~~The spread of, and the ~~financial markets may adversely affect~~remedial efforts related to, COVID-19 in certain key jurisdictions on supply chain, labor force, and the operations of our customers, suppliers, and vendors are continuing to have an adverse impact on our business and ~~financial statements.~~results of operations.

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

•We face intense competition and if we are unable to compete effectively, we may experience decreased demand and decreased market share. Even if we compete effectively, we may be required to reduce prices for our products and services.

•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.

•If we are unable to recruit and retain key employees, our business may be harmed.

•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.

•Adverse changes in our relationships with, or the financial condition, performance, purchasing patterns, or inventory levels of, key distributors and other channel partners could adversely affect our financial statements.

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

•Work stoppages, 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.

•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.

•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.

Risk Related to our International Operations

•International economic, political, legal, compliance, and business factors ~~including, but not limited to, the impact of the invasion of Ukraine by Russia and the corresponding sanctions and supply chain disruptions,~~ could negatively affect our financial statements.

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

•Foreign currency exchange rates, including the volatility thereof, may adversely affect our financial statements.

Risk Related to Our Acquisitions, Investments, and Dispositions

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

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

•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.

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

Risk Related to Regulatory and Compliance Matters

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

•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 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.

•Climate change, or related governmental initiatives, including legal or regulatory measures, may negatively affect us.

Risk Related to Our Tax and Accounting Matters

•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 could incur significant liability if ~~any of~~ our separation from Danaher, our separation of our Automation and Specialty business or our separation of Vontier (collectively, the “Separation Transactions”) isare determined to be a taxable ~~transaction~~.transaction.

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

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

Risk Related to Our Financing Activities

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

~~Risk Related to Shareholder Rights~~

•~~Certain provisions in~~debt, 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.~~

•~~Our amended and restated certificate of incorporation designates the state courts in the State of Delaware~~credit rating declines, 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.applicable interest rates rise.

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See “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021~~2022 for 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 (or such earlier date as may be specified in such statement). 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.

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OVERVIEW

General

Fortive is a multinational business with global operations with approximately ~~49%~~46% of our sales derived from customers outside of the United States in ~~2021.~~2022. As a company with global operations, 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 products, software, and services we offer, typically help limit the impact of any one industry or the economy of any single country (except for the United States) on our operating results. 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 their sales, to the extent possible, 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, continue to reduce costs and improve operating efficiency and quality, attract relevant talent and retain, grow, and empower our talented workforce, 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.

~~Provation Acquisition~~

On December 27, 2021, we acquired Provation Software, Inc. (“Provation”), a privately held, leading provider of clinical workflow software solutions used in hospitals and ambulatory surgery centers. The acquisition of Provation extends our digital offering and software capabilities in the healthcare space. The total consideration paid was approximately $1.4 billion, net of acquired cash and was primarily financed with proceeds from our financing activities and available cash. We preliminarily recorded $978 million of goodwill related to the acquisition, which is not tax deductible. Provation had revenue in 2020 of approximately $90 million and is an operating company within our Advanced Healthcare Solutions segment.

~~ServiceChannel Acquisition~~

On August 24, 2021, we acquired ServiceChannel Holdings, Inc. (“ServiceChannel”), a privately held, global provider of Software as a Service (“SaaS”) based multi-site facilities maintenance service solutions with an integrated service-provider network. The acquisition of ServiceChannel broadens our offering of software-enabled solutions for the facility and asset lifecycle workflow. The total consideration paid was approximately $1.2 billion, net of acquired cash, and included approximately $28 million of deferred compensation consideration that is being recognized ratably over a twelve month service period. The ServiceChannel acquisition was primarily financed with available cash and proceeds from our financing activities. We preliminarily recorded approximately $874 million of goodwill related to the acquisition, which is not tax deductible. ServiceChannel had revenue in 2020 of approximately $70 million and is an operating company within our Intelligent Operating Solutions segment.

~~Vontier Separation~~

On October 9, 2020, we completed the Separation. The accounting requirements for reporting the Vontier business as a discontinued operation were met when the Separation was completed. Accordingly, the consolidated condensed financial

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

On January 19, 2021, we completed the Debt-for-Equity Exchange of 33.5 million shares of common stock of Vontier, representing all of the Vontier common stock retained by the Company immediately following the Separation (the “Retained Vontier Shares”), for $1.1 billion in aggregate principal amount of indebtedness of the Company held by Goldman Sachs & Co. Interest expense and extinguishment costs related to the Debt-for-Equity Exchange during the first quarter of 2021 are included in continuing operations.

~~Russia Ukraine Conflict~~

Segment Presentation

We operate and report our results in three segments, Intelligent Operating Solutions, Precision Technologies, and Advanced Healthcare Solutions, each of which is further described below.

Our Intelligent Operating Solutions segment provides ~~leading workflow~~advanced instrumentation, software and services to tens of thousands of customers enabling their mission-critical workflows. These offerings include electrical test & measurement, facility and asset lifecycle software applications, connected worker safety and compliance solutions ~~to accelerate industrial and facility reliability and performance, as well as compliance and safety~~ across a range of vertical end markets, including manufacturing, process industries, healthcare, utilities and power, communications and electronics, among others. ~~We provide differentiated instrumentation~~Typical users of these safety, productivity and ~~sensors, software~~sustainability solutions include electrical engineers, electricians, electronic technicians, EHS professionals, network technicians, facility managers, first-responders, and ~~services to address our customers’ toughest workflow challenges.~~ maintenance professionals.

Our Precision Technologies segment ~~supplies instrumentation~~helps solve tough technical challenges to speed breakthroughs in a wide range of applications, from food and beverage production and manufacturing to next-generation electric vehicles and clean energy, as our customers seek new test solutions to enable the electrification and connectivity of everything. Our expertise in materials, methods and measurements are reflected in our electrical test & measurement, sensing and material technologies offered to a broad set of customers and vertical end markets, ~~enabling our customers to accelerate the development, manufacture~~including industrial, power and ~~launch of innovative~~energy, automotive, medical equipment, food and beverage, aerospace and defense, semiconductor, and other general industries. Customers for these products and ~~solutions. We provide our customers with electrical test and measurement instruments and~~ services ~~energetic material~~include design engineers for advanced electronic devices and ~~a broad portfolio of sensor~~equipment, process and ~~control system solutions.~~quality engineers focused on improved process capability and productivity, facility maintenance managers driving increased uptime, and other customers for whom precise measurement, reliability, and compliance are critical in their applications.

Our Advanced Healthcare Solutions segment supplies critical workflow solutions enabling healthcare providers to ~~hospitals and other healthcare customers, enabling safer,~~deliver exceptional patient care more ~~efficient, and higher quality healthcare. We provide hardware, consumables, software and services that optimize our customers’ most critical workflows, including~~efficiently. Our offerings include instrument sterilization ~~and device reprocessing,~~solutions, instrument tracking, cell therapy equipment design and manufacturing, biomedical test tools, radiation detection and safety monitoring, and end-to-end clinical productivity ~~solutions~~software and ~~asset management.~~solutions. Our healthcare offerings help ensure critical safety standards are met, instruments and operating rooms are working at peak performance, and complex procedures are followed accurately in these mission-critical healthcare environments.

Non-GAAP Measures

In this report, references to sales from existing businesses refer to sales from operations calculated according to generally accepted accounting principles in the United States (“GAAP”) but excluding (1) the impact from acquired and divested businesses and (2) the impact of currency translation. References to sales attributable to acquisitions or acquired businesses refer to GAAP sales from acquired businesses recorded prior to the first anniversary of the acquisition and the effect of purchase accounting adjustments, less the amount of sales attributable to certain divested businesses or product lines not

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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 acquisition and divestiture related items because the nature, size, and number of such transactions can vary dramatically from period to period and between us and our peers. We exclude the effect of currency translation from sales from existing businesses because the impact of currency translation is not under management’s control and is subject to volatility. Management believes the exclusion of the effect of acquisitions and divestitures and currency translation may facilitate the assessment of underlying business trends and may assist in comparisons of long-term performance. References to sales volume from existing businesses refer to the impact of both price and unit sales.

Restructuring

~~Table~~We initiated a discrete plan in the first quarter of ~~Contents~~

2023 focused on improvements in our operational efficiency, which is expected to be completed by December 31, 2023. The nature of these activities were broadly consistent throughout our segments and consist of targeted workforce reductions and facility consolidations or closures in response to overall macroeconomic and other external conditions. We incurred these costs to position ourselves to provide superior products and services to customers in a cost-efficient manner, while taking into consideration the impact of broad economic uncertainties. The total restructuring charges we expect to recognize under this discrete plan are approximately $25 to $30 million, with charges of $17.6 million incurred in the first quarter, which primarily related to employee severance. These charges are included in Cost of Sales and Selling, general, and administrative expenses in the Consolidated Condensed Statement of Earnings. Accrued restructuring costs were $13.4 million as of March 31, 2023 and were included within Accrued expenses and other current liabilities in the Consolidated Condensed Balance Sheets.

Business Performance and Outlook

Business Performance For the Period Ended ~~July 1, 2022~~March 31, 2023

~~We experienced robust demand for our products and services during~~During the three ~~and six~~ month ~~periods~~period ended ~~July 1, 2022~~March 31, 2023 (“the quarter” or the ~~“second~~“first quarter” ~~and “year-to-date period”, respectively). During the second quarter and year-to-date period, and despite ongoing COVID-19 and supply chain challenges, year-over-year~~) our sales increased ~~10.9% and 10.1%, respectively, with contributions~~by 6.1% from ~~both~~ existing ~~and newly acquired~~ businesses, ~~all~~ partially offset primarily by unfavorable ~~changes~~movements in foreign exchange rates. ~~Sales~~Year-over-year sales from existing businesses increased ~~8.9% and 7.1% during the second quarter and year-to-date periods, respectively, as compared to the comparable periods in 2021,~~8.8%, reflecting continued strong ~~end-market~~ demand across ~~the product portfolio~~end markets, favorable pricing and focused execution on ~~product~~service and ~~service~~ delivery.

Geographically, in the ~~second~~first quarter, year-over-year sales from existing businesses in developed markets increased ~~high single-digits,~~mid-single-digit, with growth driven by mid-single-digit growth in North America and high single-digit growth in ~~North America, mid-teens~~Western Europe. Sales from existing businesses in high growth markets increased year-over-year in ~~Western Europe and mid-teens~~the first quarter at a high-teens rate, driven by low thirties growth in China which includes shipments that were delayed from the first quarter of 2022 as a result of COVID-19 containment measures adopted in China. In the year-to-date period, year-over-year sales from existing businesses also increased high single digits with high single digitand low double-digit growth in ~~both North America and Western Europe, as well as a slight increase in China.~~Latin America.

~~Year-over-year~~In addition to increased volumes, year-over-year price increases contributed ~~5.0% and 4.1%~~4.6% to sales growth during the ~~second~~ quarter, ~~and year-to-date period,~~ as compared to the comparable ~~periods~~period in ~~2021~~2022 and is reflected as a component of the change in sales from existing businesses. In ~~both~~ the ~~second~~first quarter, ~~and year-to-date period,~~ price increases exceeded ~~inflationary increases that we experienced~~inflation impacts on purchased materials.

The strengthening of the US dollar relative to other currencies reduced our sales by 3.0% and 2.3% in the second quarter and year-to-date periods, respectively when compared to the comparable periods of 2021 and may continue to impact our results in future periods.

~~Widespread supply~~Supply chain ~~and logistics challenges~~issues persisted in the ~~second~~ quarter, ~~impacting the availability of key materials, including electronic components, and~~ resulting in ~~higher production~~lingering challenges with logistics, material availability and ~~logistics costs.~~absenteeism. We continue to apply the Fortive Business System (“FBS”) to help mitigate the impact of these challenges ~~but demand for~~and to serve our ~~products continued to outpace our shipments in the second quarter and our backlog increased sequentially from the first quarter of 2022.~~

COVID-19 continues to impact our results and creates operating challenges with logistics, material availability and absenteeism. In the first and second quarters of 2022, government mandated COVID-19 containment measures in China directly impacted production, shipments and cash flow. Operating conditions began to normalize late in the second quarter with the resumption of shipments to customers, including for orders that were delayed in the first quarter due to the lockdowns.customers. We anticipate that the ~~uncertainty and disruption caused by~~disruptions which began with the pandemic will continue to impact future periods.

Outlook

~~Despite uncertainty in the macro environment, we~~We anticipate ~~increasing demand for our offerings will continue~~revenue growth to be between 1.5% and ~~are projecting sales to grow on a year-over-year basis between 10.0% and 12.0%~~3.5% for the ~~third~~second fiscal quarter of ~~2022,~~2023, and ~~10.0%~~3.0% and ~~11.0%~~4.5% for the full 2023 fiscal year. We anticipate ~~sales~~ growth ~~on a year-over-year basis~~ from existing businesses ~~will~~to be between ~~9.0%~~2.5% and ~~11.5%~~4.5% for the ~~third~~second quarter ~~of 2022~~ and ~~8.0%~~4.0% and ~~9.5%~~5.5% for the full year.

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We expect that foreign ~~exchanges~~exchange rates will remain volatile throughout the year and could create unfavorable results relative to ~~us when compared with the~~foreign exchange rates in ~~effect in the comparable periods of 2021 and relative to assumptions at the start of~~ 2022. Additionally, this outlook is subject to various assumptions and risks, including but not limited to the resilience and durability of the economies of the United States and other critical regions, ongoing challenges with global logistics and supply ~~chain~~chains including the availability of electronic components, ~~the impact of the COVID-19 pandemic,~~inflationary pressures, the impact of the Russia Ukraine Conflict, market conditions in key ~~end~~ product segments and elective surgery rates.

~~We anticipate that supply chain and inflationary pressures will persist throughout 2022 and that our backlog may remain elevated compared to historical levels.~~ We will continue to deploy FBS to actively manage production challenges, collaborate with customers and suppliers to minimize disruptions and utilize price increases and other countermeasures to offset inflationary pressures.

We ~~are monitoring~~continue to monitor the ~~ongoing~~macroeconomic and geopolitical conditions which may impact ~~of COVID-19 on the global economy and~~ our business, including ~~government mandated containment measures, which may occur with little notice~~the lingering societal impact of the pandemic, continued geopolitical conflict, global inflation, potential adverse global economic trends and ~~could have a material adverse impact on our future results.~~

~~We are monitoring developments in international trade,~~sentiments, monetary and fiscal policies, including impact on our cost of capital, the stability of U.S. and international banking systems, international trade and relations between the U.S., China and ~~China, as well as evaluating proposed~~other nations, and investment and taxation policy initiatives being considered in the United States and by the Organization for Economic Co-operation and Development (“OECD”).

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RESULTS OF OPERATIONS

Sales Growth

The following table summarizes total aggregate year-over-year sales growth and the components ~~of aggregate year-over-year sales growth during~~thereof for the ~~second~~first quarter ~~and year-to-date periods ended July 1, 2022~~ as compared to the comparable ~~periods~~period of ~~2021:~~2022:

Components of Sales Growth
% Change Three Months Ended July 1, 2022 vs. Comparable 2021 Period % Change Six Months Ended July 1, 2022 vs. Comparable 2021 Period
Total revenue growth (GAAP) 10.9 % 10.1 %
Existing businesses (Non-GAAP) 8.9 % 7.1 %
Acquisitions (Non-GAAP)
5.0 % 5.3 %
Currency exchange rates (Non-GAAP) (3.0) % (2.3) %


	% Change Three Months Ended March 31, 2023 vs. Comparable 2022 Period
Total revenue growth (GAAP)	6.1	%
Existing businesses (Non-GAAP)	8.8	%
Acquisitions and divestitures (Non-GAAP)	(0.4)	%
Currency exchange rates (Non-GAAP)	(2.3)	%

Operating Profit Margins

Operating profit margin was ~~15.9%~~16.5% for the ~~second~~ quarter, ~~ended July 1, 2022 , a decrease~~yielding an increase of 10110 basis points as compared to ~~16.0%~~15.4% in the comparable period of ~~2021.~~2022. Year-over-year changes in operating profit margin were comprised of the following:

•Year-over-year increase in price and sales volumes from existing businesses, which were partially offset by higher ~~year-over-year~~ employee compensation, ~~freight, logistics~~investments in R&D, sales and ~~material~~marketing and unfavorable foreign exchange rates — favorable 90 basis points

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

•The year-over-year net effect of acquisition-related transaction costs which were lower in the first quarter than those recognized during the comparable period in 2022 — favorable 60 basis points

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

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

Business Segments

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


	Three Months Ended
	March 31, 2023		April 1, 2022
Intelligent Operating Solutions	$	632.1	$	587.6
Precision Technologies	515.5		462.4
Advanced Healthcare Solutions	313.1		326.5
Total	$	1,460.7	$	1,376.5

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INTELLIGENT OPERATING SOLUTIONS

Our Intelligent Operating Solutions segment provides advanced instrumentation, software and services to tens of thousands of customers enabling their mission-critical workflows. These offerings include electrical test & measurement, facility and asset lifecycle software applications, connected worker safety and compliance solutions across a range of vertical end markets, including manufacturing, process industries, healthcare, utilities and power, communications and electronics, among others.

Intelligent Operating Solutions Selected Financial Data


	Three Months Ended
($ in millions)	March 31, 2023			April 1, 2022
Sales	$	632.1		$	587.6
Operating profit	133.5			107.0
Depreciation	8.4			9.5
Amortization	46.0			46.2
Operating profit as a % of sales	21.1		%	18.2		%
Depreciation as a % of sales	1.3		%	1.6		%
Amortization as a % of sales	7.3		%	7.9		%

Components of Sales Growth


	% Change Three Months Ended March 31, 2023 vs. Comparable 2022 Period
Total revenue growth (GAAP)	7.6	%
Existing businesses (Non-GAAP)	9.7	%

Currency exchange rates (Non-GAAP)	(2.1)	%

Year-over-year sales from existing businesses increased 9.7% during the quarter, as compared to the comparable period of 2022. The year-over-year results were driven by price increases and strong demand for test and measurement instrumentation, gas detection offerings and software and service offerings in facility and asset lifecycle applications.

Geographically, sales from existing businesses in developed markets increased in the quarter by mid-single-digits, driven by mid-single-digit growth in North America and mid-single-digit growth in Western Europe. Sales in high growth markets increased by mid-twenties, driven by mid-forties growth in China, as well as high single-digit growth in Latin America, and mid-teens growth in Other Asia.

Year-over-year price increases in our Intelligent Operating Solutions segment contributed 5.6% to sales growth during the quarter, as compared to the comparable period of 2022, and is reflected as a component of the change in sales from existing businesses.

Operating profit margin increased 290 basis points during the quarter as compared to the comparable period of 2022. Year-over-year changes in operating profit margin were comprised of the following:

•Year-over-year increase in price and sales volume from existing businesses and gains from productivity measures were partially offset by higher employee compensation costs, unfavorable foreign exchange rates and growth investments in R&D, sales and ~~marketing —~~marketing— favorable ~~220~~300 basis points

•The year-over-year effect of amortization from existing businesses — favorable 60 basis points

•The year-over-year net effect of acquisition-related transaction costs, which were ~~higher in the second quarter~~lower than those recognized during the comparable period in ~~2021~~2022 — ~~unfavorable 30 basis points~~

•~~Russia exit and wind down costs which were incurred during the second quarter — unfavorable~~favorable 110 basis points

•The year-over-year ~~net~~ effect of ~~acquired businesses, including amortization, and acquisition-related fair value adjustments~~costs relating to the formal restructuring plan in 2023 — unfavorable ~~150~~180 basis points

~~Operating profit margin was 15.7% for~~

PRECISION TECHNOLOGIES

Our Precision Technologies segment helps solve tough technical challenges to speed breakthroughs in a wide range of applications, from food and beverage production and manufacturing to next-generation electric vehicles and clean energy, as our customers seek new test solutions to enable the ~~year-to-date period ended July 1, 2022, a decrease~~electrification and connectivity of ~~20 basis points as compared to 15.9%~~everything. Our expertise in ~~the comparable period of 2021. Year-over-year changes~~materials, methods and measurements are reflected in ~~operating profit margin were comprised of the following:~~

◦~~Year-over-year increase in price and sales volumes from existing businesses, which were partially offset by higher year-over-year employee compensation, freight, logistics~~our electrical test & measurement, sensing and material ~~costs, unfavorable foreign exchange rates and growth investments in R&D, sales and marketing — favorable 130 basis points~~

◦~~The year-over-year effect of amortization from existing businesses — favorable 60 basis points~~

◦The year-over-year net effect of acquisition-related transaction costs which were higher during the first quarter than those recognized during the comparable period in 2021 — unfavorable 20 basis points

◦~~Russia exit and wind down costs which were incurred during the year-to-date period — unfavorable 60 basis points~~

◦~~The year-over-year net effect of acquired businesses, including amortization, and acquisition-related fair value adjustments — unfavorable 130 basis point~~technologies offered to a

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~~Business Segments~~

~~Sales by business segment for each~~broad set of ~~the periods indicated were as follows ($ in millions):~~
Three Months Ended Six Months Ended
July 1, 2022 July 2, 2021 July 1, 2022 July 2, 2021
Intelligent Operating Solutions $ 630.1 $ 541.8 $ 1,217.7 $ 1,052.7
Precision Technologies 499.1 471.9 961.5 919.3
Advanced Healthcare Solutions 334.1 306.0 660.6 606.9
Total $ 1,463.3 $ 1,319.7 $ 2,839.8 $ 2,578.9

~~INTELLIGENT OPERATING SOLUTIONS~~

~~Our Intelligent Operating Solutions segment provides leading solutions to accelerate industrial~~customers and ~~facility reliability and performance, as well as compliance and safety across a range of~~ vertical end markets, including ~~manufacturing, process industries, healthcare, utilities~~industrial, power and ~~power, communications~~energy, automotive, medical equipment, food and ~~electronics, among others. We provide a broad~~beverage, aerospace and ~~differentiated offering of instrumentation, sensors, software,~~defense, semiconductor, and ~~services to address these critical workflows for our customers.~~other general industries.

~~Intelligent Operating Solutions~~Precision Technologies Selected Financial Data


		Three Months Ended						Six Months Ended							Three Months Ended
($ in millions)	($ in millions)	July 1, 2022			July 2, 2021			July 1, 2022			July 2, 2021			($ in millions)	March 31, 2023			April 1, 2022
Sales	Sales	$	630.1		$	541.8		$	1,217.7		$	1,052.7		Sales	$	515.5		$	462.4
Operating profit	Operating profit	129.9			115.3			236.9			223.4			Operating profit	122.7			101.4
Depreciation	Depreciation	9.1			5.6			18.6			12.2			Depreciation	6.0			6.0
Amortization	Amortization	46.1			38.0			92.3			75.9			Amortization	1.1			3.6
Operating profit as a % of sales	Operating profit as a % of sales	20.6		%	21.3		%	19.5		%	21.2		%	Operating profit as a % of sales	23.8		%	21.9		%
Depreciation as a % of sales	Depreciation as a % of sales	1.4		%	1.0		%	1.5		%	1.2		%	Depreciation as a % of sales	1.2		%	1.3		%
Amortization as a % of sales	Amortization as a % of sales	7.3		%	7.0		%	7.6		%	7.2		%	Amortization as a % of sales	0.2		%	0.8		%

Components of Sales Growth
% Change Three Months Ended July 1, 2022 vs. Comparable 2021 Period % Change Six Months Ended
July 1, 2022 vs. Comparable 2021 Period
Total revenue growth (GAAP) 16.3 % 15.7 %
Existing businesses (Non-GAAP) 12.3 % 10.6 %
Acquisitions (Non-GAAP) 7.0 % 7.3 %
Currency exchange rates (Non-GAAP) (3.0) % (2.2) %


	% Change Three Months Ended March 31, 2023 vs. Comparable 2022 Period
Total revenue growth (GAAP)	11.5	%
Existing businesses (Non-GAAP)	13.7	%

Currency exchange rates (Non-GAAP)	(2.2)	%

Year-over-year sales from existing businesses of increased ~~12.3% and 10.6%~~13.7% during the ~~second~~ quarter, ~~and year-to-date period, respectively,~~ as compared to the comparable ~~periods~~period of ~~2021.~~2022. The year-over-year results ~~for both respective periods~~ were driven by ~~higher pricing, continued~~price increases, strong ~~demand for~~performance in our test and measurement ~~instrumentation products, software~~business, and ~~related services and gas detection offerings as well as~~ improved ~~factory throughput on gains from supply chain and logistics countermeasures.~~production execution with our energetic materials product line.

Geographically, sales from existing businesses in developed markets increased by high single-digits in the ~~second~~ quarter, ~~by low double-digits,~~ driven by ~~low double-digits~~high single-digit growth in North America ~~high teens~~and low double-digit growth in Western Europe. Sales in high growth markets increased by ~~mid-teens,~~high twenties in the first quarter driven by high ~~single-digits~~thirties growth in China as well as ~~high-teens~~mid-single-digit growth in ~~other regions, which included Latin America,~~ Other ~~Asia and Middle East. On a year-to-date basis, sales from existing businesses in developed markets increased by low double-digits and high growth markets increased by mid-single digits.~~

Year-over-year price increases in our Intelligent Operating Solutions segment contributed 6.0% and 4.6% to sales growth during the second quarter and year-to-date period, as compared to the comparable periods of 2021, and is reflected as a component of the change in sales from existing businesses.

~~Operating profit margin decreased 70 basis points during the quarter as compared to the comparable period of 2021. Year-over-year changes in operating profit margin were comprised of the following:~~

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•Year-over-year increase in price and sales volume from existing businesses were partially offset by higher year-over-year freight, logistics and material costs and employee compensation costs, unfavorable foreign exchange rates and growth investments in R&D, sales and marketing— favorable 205 basis points

•~~The year-over-year effect of amortization from existing businesses — favorable 100 basis~~

•~~The year-over-year net effect of acquisition-related transaction costs, which were higher than those recognized during the comparable period in 2021 — unfavorable 65 basis points~~

•~~The year-over-year effect of acquired businesses, including amortization — unfavorable 310 basis points~~

~~Operating profit margin decreased 170 basis points during the year-to-date period, as compared to the comparable period of 2021. Year-over-year operating profit margin comparisons were impacted by:~~

•Year-over-year increase in price and sales volume from existing businesses, partially offset by higher year- over-year freight, logistics and material costs and employee compensation costs — favorable 105 basis points

•~~The year-over-year effect of amortization from existing businesses — favorable 100 basis points~~

•~~The year-over-year net effect of acquisition-related transaction costs, which were higher than those recognized during the comparable period in 2021 — unfavorable 85 basis points~~

•~~The year-over-year effect of acquired businesses, including amortization — unfavorable 290 basis points~~

~~PRECISION TECHNOLOGIES~~

Our Precision Technologies segment supplies technologies to a broad set of vertical end markets, enabling our customers to accelerate the development of innovative products and solutions. We provide our customers with electrical test and measurement instruments and services, energetic material devices, and a broad portfolio of sensor and control system solutions.

~~Precision Technologies Selected Financial Data~~
Three Months Ended Six Months Ended
($ in millions) July 1, 2022 July 2, 2021 July 1, 2022 July 2, 2021
Sales $ 499.1 $ 471.9 $ 961.5 $ 919.3
Operating profit 115.3 104.1 216.7 200.0
Depreciation 6.2 6.3 12.2 12.6
Amortization 3.6 4.2 7.2 8.5
Operating profit as a % of sales 23.1 % 22.1 % 22.5 % 21.8 %
Depreciation as a % of sales 1.2 % 1.3 % 1.3 % 1.4 %
Amortization as a % of sales 0.7 % 0.9 % 0.7 % 0.9 %

~~Components of Sales Growth~~
% Change Three Months Ended July 1, 2022 vs. Comparable 2021 Period % Change Six Months Ended
July 1, 2022 vs. Comparable 2021 Period
Total revenue growth (GAAP) 5.8 % 4.6 %
Existing businesses (Non-GAAP) 8.6 % 6.7 %
Acquisitions (Non-GAAP)
— % — %
Currency exchange rates (Non-GAAP) (2.8) % (2.1) %

Year-over-year sales from existing businesses increased 8.6% and 6.7% during the second quarter and the year-to-date period compared to the comparable periods of 2021. The year-over-year results for both respective periods were driven by price increases, market growth and share gains in key verticals.

Geographically, sales from existing businesses in developed markets increased by mid-single digits in the second quarter driven by mid-single digit growth in North America and high single digit growth in Western Europe. Sales in high growth markets increased by mid-teens in the second quarter on mid-twenties growth in China, which included recovery of shipments expected

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in the first quarter that were delayed until the second quarter as a result of government mandated COVID-10 containment measures. On a year-to-date basis, sales from existing businesses in developed markets increased by mid-single digits and high growth markets increased by high-single digits, respectively.Asia.

Year-over-year price increases in our Precision Technologies segment contributed ~~6.3% and 5.4%~~4.9% to sales growth for the ~~second~~ quarter, ~~and year-to-date period, respectively,~~ as compared to the comparable ~~periods~~period of ~~2021,~~2022, and is reflected as a component of the change in sales from existing businesses.

Operating profit margin increased ~~100~~190 basis points for the ~~second~~ quarter as compared to the comparable period of ~~2021.~~2022. Year-over-year changes in operating profit margin were comprised of the following:

•Higher year-over-year increases in price and volume, partially offset by higher ~~material, freight and~~ employee compensation costs and unfavorable exchange rates — favorable 90190 basis points

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

~~Operating profit margin increased 70 basis points during the year-to-date period as compared to the comparable period of 2021. Year over year operating profit margins were comprised of the following~~

•~~Higher year-over-year increases in price and volume, partially offset by higher material, freight and employee compensation costs and unfavorable exchange rates — favorable~~ 60 basis points

•The year-over-year effect of ~~amortization from existing businesses~~costs relating to the formal restructuring plan in 2023 — ~~favorable 10~~unfavorable 60 basis points

ADVANCED HEALTHCARE SOLUTIONS

Our Advanced Healthcare Solutions segment ~~serves~~supplies critical workflow solutions enabling healthcare ~~customers with enabling products and services for critical activities that help ensure safe, efficient, and timely healthcare. We provide broad hardware and software portfolio~~providers to deliver exceptional patient care more efficiently. Our offerings ~~optimized around our end-users’ most critical workflows, including~~include instrument ~~and device reprocessing,~~sterilization solutions, instrument tracking, cell therapy equipment design and manufacturing, biomedical test tools, radiation detection and safety monitoring, and ~~asset management.~~

~~Advanced Healthcare Solutions Financial Data~~
Three Months Ended Six Months Ended
($ in millions) July 1, 2022 July 2, 2021 July 1, 2022 July 2, 2021
Sales $ 334.1 $ 306.0 $ 660.6 $ 606.9
Operating profit 28.1 22.5 56.1 41.4
Depreciation 4.7 5.2 9.4 10.7
Amortization 46.1 35.3 92.6 70.6
Operating profit as a % of sales 8.4 % 7.4 % 8.5 % 6.8 %
Depreciation as a % of sales 1.4 % 1.7 % 1.4 % 1.8 %
Amortization as a % of sales 13.8 % 11.5 % 14.0 % 11.6 %

~~Components of Sales Growth~~
% Change Three Months Ended
July 1, 2022 vs. Comparable 2021 Period % Change Six Months Ended
July 1, 2022 vs. Comparable 2021 Period
Total revenue growth (GAAP) 9.2 % 8.9 %
Existing businesses (Non-GAAP) 3.3 % 2.0 %
Acquisitions (Non-GAAP)
9.3 % 9.7 %
Currency exchange rates (Non-GAAP) (3.4) % (2.8) %

~~Year-over-year sales from existing businesses increased 3.3%~~end-to-end clinical productivity software and ~~2.0% during the second quarter~~solutions. Our healthcare offerings help ensure critical safety standards are met, instruments and ~~year-to-date period, respectively, as compared to the comparable periods of 2021. The year-over-year results~~operating rooms are working at peak performance, and complex procedures are followed accurately in ~~the second quarter and the year-to-date period were driven by higher prices and increased demand for sterilization consumables, radiation management, quality assurance and diagnostic products.~~these mission-critical healthcare environments.

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~~Geographically,~~Advanced Healthcare Solutions Financial Data


	Three Months Ended
($ in millions)	March 31, 2023			April 1, 2022
Sales	$	313.1		$	326.5
Operating profit	16.3			28.0
Depreciation	5.1			4.7
Amortization	45.3			46.5
Operating profit as a % of sales	5.2		%	8.6		%
Depreciation as a % of sales	1.6		%	1.4		%
Amortization as a % of sales	14.5		%	14.2		%

Components of Sales Growth


	% Change Three Months Ended March 31, 2023 vs. Comparable 2022 period
Total revenue growth (GAAP)	(4.1)	%
Existing businesses (Non-GAAP)	0.1	%
Acquisitions and divestitures(Non-GAAP)	(1.7)	%
Currency exchange rates (Non-GAAP)	(2.5)	%

Year-over-year sales from existing businesses increased 0.1% during the quarter, as compared to the comparable period of 2022. The year-over-year results in the quarter were driven by price increases and higher software revenue, which were mostly offset by reduced volume for sterilization products in North America and China, supply issues with quality assurance equipment and reduced demand for system design and related services.

Geographically in the quarter, sales from existing businesses increased by low single-digit in developed markets ~~increased by mid-single digits in the second quarter~~ driven by ~~low-single digit~~slight growth in North America and ~~low double digit~~mid-single-digit growth in Western Europe. ~~Sales in~~In high growth markets, ~~declined by low single digits in the second quarter on high single digit declines in China, partially offset by mid-teens growth in Latin America. On a year-to-date basis,~~ sales from existing businesses ~~in developed markets increased by low-single digits and high growth markets~~ declined by ~~low-single digits.~~mid-single-digit, driven by a high single-digit decline China.

Year-over-year price increases in our Advanced Healthcare Solutions segment contributed ~~1.4%~~2.2% to sales growth during ~~both~~ the ~~second~~ quarter, ~~and year-to-date periods,~~ as compared to the comparable ~~periods~~period of ~~2021,~~2022, and is reflected as a component of the change in sales from existing businesses.

Operating profit margin ~~increased 100~~decreased 340 basis points during the ~~second~~ quarter, as compared to the comparable period of ~~2021.~~2022. Year-over-year changes in operating profit margin were comprised of the following:

•Year-over-year ~~sales~~ increase in price ~~and volume~~ from existing businesses ~~and gains from productivity measures were partially~~was offset by reductions in volume, unfavorable product mix, higher ~~year-over-year~~ employee compensation and material costs, sales and marketing costs and unfavorable changes in foreign exchange rates — ~~favorable 150~~unfavorable 300 basis points

•The year-over-year effect of amortization from existing businesses — ~~favorable 90 basis points~~

•~~The year-over-year effect of acquired businesses, including amortization, and acquisition-related fair value adjustments to inventory —~~ unfavorable ~~140 basis points~~

Operating profit margin increased 170 basis points during the year-to-date period as compared to the comparable period of 2021. Year-over-year changes in operating profit margin were comprised of the following:

•Year-over-year sales increase in price and volume from existing businesses and gains from productivity measures were partially offset offset by higher year-over-year employee compensation costs and unfavorable foreign exchange rates — favorable 50 basis points

•~~The year-over-year effect of amortization from existing businesses — favorable 90~~25 basis points

•The year-over-year net effect of acquisition-related transaction costs which were ~~less~~lower in the quarter than those recognized in the comparable period in ~~2021~~2022 — favorable 8040 basis points

•The year-over-year effect of acquired and divested businesses, including amortization, and acquisition-related fair value adjustments to inventory — ~~unfavorable 50~~favorable 45 basis points

~~COST OF SALES AND GROSS PROFIT~~•
Three Months Ended Six Months Ended
($ in millions) July 1, 2022 July 2, 2021 July 1, 2022 July 2, 2021
Sales $ 1,463.3 $ 1,319.7 $ 2,839.8 $ 2,578.9
Cost of sales (629.8) (564.2) (1,214.3) (1,111.5)
Gross profit $ 833.5 $ 755.5 $ 1,625.5 $ 1,467.4
Gross profit margin 57.0 % 57.2 % 57.2 % 56.9 %

The year-over-year ~~increase in gross profit during the second quarter and the year-to-date period as compared~~effect of costs relating to the ~~comparable periods~~formal restructuring plan in 2021, is due primarily to year-over-year increases in sales volumes and price increases from existing and newly acquired businesses, which were partially offset by higher material, freight and employee compensation costs and the2023 — unfavorable ~~impact of foreign currency exchange rates.~~

100 basis points

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COST OF SALES AND GROSS PROFIT


	Three Months Ended
($ in millions)	March 31, 2023			April 1, 2022
Sales	$	1,460.7		$	1,376.5
Cost of sales	(612.5)			(584.5)
Gross profit	$	848.2		$	792.0
Gross profit margin	58.1		%	57.5		%

The year-over-year increase in gross profit during the quarter, as compared to the comparable period of 2022, is due primarily to year-over-year increases in price and sales volumes, and productivity gains from FBS, partially offset by higher employee compensation costs, the unfavorable impact of changes in foreign currency exchange rates, unfavorable product mix and restructuring charges.

OPERATING EXPENSES


		Three Months Ended						Six Months Ended							Three Months Ended
($ in millions)	($ in millions)	July 1, 2022			July 2, 2021			July 1, 2022			July 2, 2021			($ in millions)	March 31, 2023			April 1, 2022
Sales	Sales	$	1,463.3		$	1,319.7		$	2,839.8		$	2,578.9		Sales	$	1,460.7		$	1,376.5
Selling, general and administrative (“SG&A”) expenses		484.9			456.4			965.5			884.5
Selling, general and administrative (“SG&A”)														Selling, general and administrative (“SG&A”)	507.7			480.6
Research and development (“R&D”)	Research and development (“R&D”)	100.1			87.8			199.2			174.0			Research and development (“R&D”)	100.1			99.1
Russia exit and wind down costs		16.2			—			16.2			—

SG&A as a % of sales	SG&A as a % of sales	33.1		%	34.6		%	34.0		%	34.3		%	SG&A as a % of sales	34.8		%	34.9		%
R&D as a % of sales	R&D as a % of sales	6.8		%	6.7		%	7.0		%	6.7		%	R&D as a % of sales	6.9		%	7.2		%

SG&A increased during the ~~second~~ quarter, ~~and year-to-date period, respectively~~ as compared to the comparable ~~periods~~period of ~~2021~~2022 due to ~~higher intangible amortization and incremental expenses from our recent acquisitions and~~ increased employee compensation expenses, customer acquisition and marketing ~~costs.~~costs and restructuring costs, partially offset by the impact of changes in currency exchange rates.

On a year-over-year basis, SG&A represented as a percentage of sales, decreased ~~150 basis points and 30~~10 basis points during the ~~second~~first quarter ~~and year-to-date period, respectively, with higher amortization expenses from our recent acquisitions more than offset by~~due to leverage on SG&A costs, which grew at a slower rate than our ~~sales growth.~~sales.

R&D, consisting principally of internal and contract engineering personnel costs, increased slightly during the ~~second~~first quarter, ~~and year-to-date period~~as compared to the comparable ~~periods~~period of ~~2021~~2022 due to ~~incremental costs from our recent acquisitions, investments~~ongoing investment in innovation and key initiatives and higher employee compensation costs. On a year-over-year basis, R&D expenses represented as a percentage of sales ~~increased~~decreased by ~~10 basis points in the second quarter and~~ 30 basis points in the ~~year-to-date period mainly on~~first quarter given R&D grew at a slower rate than our ~~recent acquisitions, where R&D spending is higher as a percentage of sales than in existing businesses.~~

~~RUSSIA EXIT AND WIND DOWN COSTS~~

We incurred pre-tax costs totaling $16.2 million in the second quarter primarily relating to the write-off of net assets, the write-off of the cumulative translation adjustment in earnings for legal entities deemed substantially liquidated, and to record provisions for employee severance and legal contingencies. Of the $16.2 million incurred, approximately $9.2 million represents non-cash charges and is reflected as such in the Consolidated Condensed Statement of Cash Flows. The costs were primarily related to our segments, as follows: Intelligent Operating Solutions $13.3 million, Precision Technologies $2.1 million and Advanced Healthcare Solutions $0.8 million.sales.

INTEREST COSTS

For a discussion of our outstanding indebtedness, refer to Note 54 to the consolidated condensed financial statements.

Net interest expense for the ~~second~~ quarter ~~and year-to-date period~~ was ~~$21 million and $40~~$32 million as compared to ~~$25 million and $53~~$19 million in the comparable ~~periods~~period in ~~2021.~~2022. The year-over-year ~~decrease~~increase in interest expense was due to ~~lower year-over-year effective~~higher interest rates incurred on floating rate debt instruments, ~~in both the second quarter and year-to-date period,~~ despite overall ~~higher~~lower debt balances.

INCOME TAXES

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COMPREHENSIVE INCOME

Comprehensive income ~~decreased~~increased by ~~$144~~$61 million during the ~~second~~first quarter as compared to the comparable period in ~~2021~~2022 due primarily to ~~unfavorable~~favorable changes in foreign currency translation adjustments of ~~$135 million.~~

~~Comprehensive income decreased by $94~~$53 million, ~~during the year-to-date period as compared to the comparable period in 2021 due primarily to unfavorable changes in foreign currency translation adjustments of $140 million, partially offset by~~and an increase in net income.

LIQUIDITY AND CAPITAL RESOURCES

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

We have generally satisfied any short-term liquidity needs that are not met through operating cash flows and available cash through issuances of commercial paper under our U.S. dollar and Euro-denominated commercial paper programs (“Commercial Paper Programs”).

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~~October 18, 2027 (the “Revolving Credit Facility”) which, to the extent not otherwise providing credit support for the commercial paper programs, can also be used for working capital and other general corporate purposes. As of ~~July 1, 2022,~~March 31, 2023, no borrowings were outstanding under the Revolving Credit Facility.

The availability of the Revolving Credit Facility as a standby liquidity facility to repay maturing commercial paper is an important factor in maintaining the existing credit ratings of the Commercial Paper Programs when we have outstanding borrowings. We expect to limit any future borrowings under the Revolving Credit Facility to amounts that would leave sufficient credit available under the facility to allow us to borrow, if needed, and repay any outstanding commercial paper as it matures.

We continue to monitor the financial markets, the stability of U.S and international banks and general global economic conditions. If changes in financial markets or other areas of the economy adversely affect our access to the capital markets and other financing sources, we would expect to rely on a combination of available cash and existing available capacity under our credit facilities to provide short-term funding.

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Overview of Cash Flows and Liquidity

Following is an overview of our cash flows and liquidity ~~for the six month period ended July 1, 2022:~~($ in millions):
Six Months Ended
($ in millions) July 1, 2022 July 2, 2021
Total operating cash provided by continuing operations $ 509.2 $ 443.0
Cash paid for acquisitions, net of cash received $ (1.6) $ 0.9
Payments for additions to property, plant and equipment (37.1) (17.1)
All other investing activities — 1.1
Total investing cash used in continuing operations $ (38.7) $ (15.1)
Payment of 0.875% convertible senior notes due 2022 $ (1,156.5) $ —
Net proceeds from commercial paper borrowings 481.3 —
Proceeds from borrowings (maturities greater than 90 days), net of issuance costs of $0.6 million in 2022 397.0 —
Repayment of borrowings (maturities greater than 90 days) — (611.1)
Payment of common stock cash dividend to shareholders (50.0) (47.4)
Payment of mandatory convertible preferred stock cash dividend to shareholders — (34.5)
Repurchase of common shares (242.9) —
All other financing activities (11.8) 25.2
Total financing cash used in continuing operations $ (582.9) $ (667.8)


	Three Months Ended
($ in millions)	March 31, 2023		April 1, 2022
Net cash provided by operating activities	$	174.4	$	214.8

Payments for additions to property, plant and equipment	$	(24.8)	$	(18.8)
Cash paid for acquisitions, net of cash received	—		0.9


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


Net proceeds from (repayments of) commercial paper borrowings	$	(159.3)	$	930.7
Payment of 0.875% convertible senior notes due 2022	—		(1,156.5)
Repurchase of common shares	—		(63.8)
Payment of dividends	(24.7)		(25.1)


All other financing activities	(3.1)		(17.9)
Net cash used in financing activities	$	(187.1)	$	(332.6)

Operating Activities

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

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Operating cash flows ~~from continuing operations~~ were ~~$509~~$174 million during the ~~first six months~~quarter, representing a decrease of ~~2022, an increase of $66~~40 million, or ~~15%~~19%, as compared to the comparable period of ~~2021.~~2022. The year-over-year change in operating cash flows ~~from continuing operations~~ was primarily attributable to the following factors:

•Year-over-year increases of ~~$82~~$10 million in Operating cash flows from net earnings, ~~from continuing operations,~~ net of non-cash ~~expenses (Depreciation, Amortization,~~items (Amortization, Depreciation, and Stock-based ~~compensation, Loss on extinguishment of debt, Russia exit and wind down costs and Gain on investment in Vontier Corporation)~~compensation).

•The aggregate changes in trade accounts receivable, inventories, and trade accounts payable used ~~$48~~$44 million of cash during the ~~year-to-date period~~quarter as compared to using ~~$27~~$25 million in the comparable period of ~~2021.~~2022. The amount of cash flow generated from or used by the aggregate of trade accounts receivable, inventories, and trade accounts payable depends upon how effectively we manage the cash conversion cycle, which generally represents the number of days that elapse from the day we pay for the purchase of raw materials and components to the collection of cash from our customers, and can be significantly impacted by the timing of collections and payments in a period.

•The aggregate changes in prepaid expenses, other assets, accrued expenses and other liabilities used ~~$69~~$94 million of cash in the year-to-date period as compared to using ~~$75~~$63 million of cash in the comparable period of ~~2021.~~ 2022. The year-over-year changes were driven byby timing differences inrelated to contract liabilities, tax payments, ~~deferred revenue~~ and employee compensation and benefits.

Investing Activities

~~Investing cash~~Cash flows from ~~continuing operations consist~~investing activities, consisting primarily of capital expenditures and cash paid for acquisitions, ~~and capital expenditures, and increased $23.6~~decreased $7 million during the ~~year-to-date period~~first quarter, as compared to the comparable period of ~~2021.~~2022. The ~~change~~increase in investing cash flows was primarily due to ~~increased~~a year-over-year increase in capital expenditures ~~which increased by~~of approximately ~~$20~~$6 million.

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

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equipment that is used in revenue arrangements with customers. For the current year, we expect capital spending to be approximately ~~$80-100~~$90-110 million, although actual expenditures will ultimately depend on business conditions.

Financing Activities and Indebtedness

~~Financing cash~~Cash flows from ~~continuing operations~~financing activities consist primarily of cash flows associated with the issuance ~~of equity, the issuance~~ and ~~repayments~~repayment of debt and commercial paper, ~~and~~ payments of ~~quarterly~~ cash dividends to ~~shareholders.~~shareholders and share repurchases.

~~Financing~~In the first quarter of 2023, financing activities ~~from continuing operations~~ used cash of ~~$583~~$187 million, ~~during the year-to-date period,~~ reflecting the following transactions:

•~~On June 17, 2022, we entered into~~Incurred $159 million in net commercial paper repayments under the U.S. dollar-denominated commercial paper program, which had a ~~three-year ¥14.4 billion senior unsecured facility yielding net proceeds~~weighted annual effective rate of 4.98% and a weighted average maturity of approximately ~~$107 million.~~30 days.

•~~On June 21,~~Dividend payments to common shareholders totaling $25 million.

In the comparable 2022 ~~we entered into~~period, financing activities used cash of $333 million, reflecting the following transaction:

•Incurred $931 million in net commercial paper borrowings under the U.S. dollar-denominated commercial paper program, which had a ~~three-year €275 million senior unsecured facility yielding net proceeds~~weighted annual effective rate of 0.91% and a weighted average remaining maturity of approximately ~~$290~~39 days.

•Repurchased 1,000,000 shares for approximately $64 million under our share repurchase program.

•Made dividend payments to common shareholders totaling $25 million.

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

•During 2022, we incurred $481 million in net commercial paper borrowings under the U.S. dollar-denominated commercial paper program, which had a weighted annual effective rate of 1.84% and a weighted average remaining maturity of approximately 32 days.

•~~During 2022, we repurchased 4,000,000 shares for approximately $243 million under our publicly-announced share repurchase program.~~

•Aggregate cash payments for common stock dividends paid to shareholders during were $50 million and were recorded as dividends to shareholders in the Consolidated Condensed Statement of Changes in Equity and the Consolidated Condensed Statement of Cash Flows.

In the comparable 2021 period, financing activities from continuing operations used cash of $668 million, which included payments of $317 million on the Delayed-Draw Term loan due in April 2020 and repurchases of $281 million in Convertible Notes.

On January 19, 2021, we completed the non-cash Debt-for-Equity Exchange of 33.5 million shares of common stock of Vontier, representing all of the Retained Vontier Shares, for $1.1 billion in aggregate principal amount of indebtedness of the Company held by Goldman Sachs & Co. We recorded a loss on extinguishment of the debt included in the Debt-for-Equity Exchange of $94.4 million in the six month period ended July 2, 2021.

Refer to Note 54 of the consolidated condensed financial statements for additional information regarding our financing activities and indebtedness.

Cash and Cash Requirements

As of ~~July 1, 2022,~~March 31, 2023, we held approximately ~~$683~~$673 million of cash and equivalents that were invested in highly liquid investment-grade instruments with a maturity of 90 days or less and yielded insignificant interest income during the ~~year-to-date period.~~first quarter. Approximately ~~85%~~90% of the ~~$683~~$673 million in cash and equivalents was held outside of the United States.

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

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support other business needs or objectives. With respect to our cash requirements, we generally intend to use available cash and internally generated funds to meet these cash requirements, but in the event that additional liquidity is required, particularly in connection with acquisitions and repayment of maturing debt, we may also borrow under our commercial paper programs or credit facilities or enter into new credit facilities and either borrow directly thereunder or use such credit facilities to backstop additional borrowing capacity under our commercial paper programs. We also may from time to time access the capital markets, including to take advantage of favorable interest rate environments or other market conditions.

Foreign cumulative earnings remain subject to foreign remittance taxes. We have made an election regarding the amount of earnings that we do not intend to repatriate due to local working capital needs, local law restrictions, high foreign remittance costs, previous investments in physical assets and acquisitions, or future growth needs. For most of our foreign operations, we make an assertion regarding the amount of earnings in excess of intended repatriation that are expected to be held for indefinite reinvestment. No provisions for foreign remittance taxes have been made with respect to earnings that are planned to be reinvested indefinitely. The amount of foreign remittance taxes that may be applicable to such earnings is not readily determinable given local law restrictions that may apply to a portion of such earnings, unknown changes in foreign tax law that

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may occur during the applicable restriction periods caused by applicable local corporate law for cash repatriation, and the various tax planning alternatives we could employ if we repatriated these earnings.

As of ~~July 1, 2022,~~March 31, 2023, we expect to have sufficient liquidity to satisfy our cash needs for the foreseeable future.

CRITICAL ACCOUNTING ESTIMATES

There were no material changes during the ~~three and six month period ended July 1, 2022~~first quarter to the items we disclosed as our critical accounting estimates in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our ~~2021~~2022 Annual Report on Form 10-K.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our concentrations of credit risk arising from trade receivables is limited due to the diversity of our customers. Our businesses perform credit evaluations of their customers’ financial conditions as appropriate and also obtain collateral or other security when appropriate.

Additional quantitative and qualitative disclosures about market risk appear in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Financial Instruments and Risk Management,” in our ~~2021~~2022 Annual Report on Form 10-K. There were no material changes during the three ~~and six~~ month ~~periods~~period ended ~~July 1, 2022~~March 31, 2023 to the information reported in our ~~2021~~2022 Annual Report on Form 10-K relating to our evaluation of interest rate, foreign currency exchange, and commodity price risk. Refer to Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations for discussion around the impact of these items in the ~~second quarter and year-to-date period.~~first quarter.

ITEM 4. CONTROLS AND PROCEDURES

Our management, with the participation of the President and Chief Executive Officer, and the Senior Vice President and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on such evaluation, the President and Chief Executive Officer, and the Senior Vice President and Chief Financial Officer, have concluded that, as of the end of such period, these disclosure controls and procedures were effective.

There have been no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the most recent completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1A. RISK FACTORS

Information regarding risk factors appears in “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Information Relating to Forward-Looking Statements,” in Part I - Item 2 of this Form 10-Q and in the “Risk Factors” section of our ~~2021~~2022 Annual Report on Form 10-K. There were no material changes during the quarter ~~and year~~ ended ~~July 1, 2022~~March 31, 2023 to the risk factors reported in the “Risk Factors” section of our ~~2021~~2022 Annual Report on Form 10-K.

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On February 17, 2022, the Company's Board of Directors approved a share repurchase program authorizing the Company to repurchase up to 20 million shares of the Company's outstanding common stock from time to time on the open market or in privately negotiated ~~transactions.~~transactions, with 13 million shares remaining authorized under the share repurchase program as of March 31, 2023. There is no expiration date for the repurchase program, and the timing and amount of repurchases under the program are determined by the Company's management based on market conditions and other factors. The repurchase program may be suspended or discontinued at any time by the Board of Directors. During the ~~year-to-date period~~quarter ended ~~July 1, 2022,~~March 31, 2023, the Company ~~purchased 4,000,000 shares~~did not repurchase any of its common ~~stock at an average share price of $60.71,~~

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including 3,000,000 shares at an average share price of $59.71 during the second quarter of 2022, leaving 16 million shares authorized for repurchase under the share repurchase program as of July 1, 2022.

~~The following table provides details about our share repurchases during the fiscal quarter ended July 1, 2022.~~

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
Apr 2 - April 30 — $ — N/A N/A
May 1 - May 31 3,000,000 59.71 3,000,000 16,000,000
June 1- July 1 — — N/A N/A
Total 3,000,000 $ 59.71 3,000,000 16,000,000
stock.

~~ITEM 5. OTHER INFORMATION~~

~~Disclosure Pursuant to Section 13(r) of the Securities Exchange Act of 1934~~

Section 13(r) of the Exchange Act requires an issuer to disclose certain information in its periodic reports if it or any of its affiliates knowingly engaged in certain activities, transactions or dealings with individuals or entities subject to specific U.S. economic sanctions during the reporting period, even when the activities, transactions, or dealings are conducted in compliance with applicable law.

On March 2, 2021, the U.S. government designated the Russian Federal Security Service (the “FSB”) as a blocked party under Executive Order 13382. On the same day, the U.S. Department of the Treasury’s Office of Foreign Assets Control issued General License No. 1B (the “OFAC General License”), which generally authorizes U.S. companies to engage in certain transactions and dealings with the FSB necessary and ordinarily incident to requesting or obtaining licenses, permits, certifications or notifications issued or registered by the FSB for the importation, distribution or use of information technology products in Russia. As a result, Section 13(r) of the Exchange Act now requires disclosure of dealings with FSB, even where the activities were conducted in compliance with applicable laws and regulations.

As permitted and authorized by the OFAC General License with respect to ASP's sterilization products that are exempt from international sanctions as humanitarian products, certain of the Company's subsidiaries for the ASP operations may file notifications with, or apply for import licenses and permits from, the FSB as required pursuant to Russian encryption product import controls for the purpose of enabling such subsidiaries or their channel partners to import and distribute ASP's sterilization products in the Russian Federation. There are no gross revenues or net profits directly associated with these activities with the FSB, and neither the Company nor any of its subsidiaries distribute or sell products or provide services to the FSB.

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ITEM 6. EXHIBITS



Exhibit Number						Description

3.1						Restated Certificate of Incorporation of Fortive Corporation (incorporated by reference to Exhibit 3.1 to Fortive Corporation’s Quarterly Report on Form 10-Q for the fiscal quarter ended July 1, 2022, File No. 1-37654)..

3.2						Amended and Restated Bylaws of Fortive Corporation (incorporated by reference tofrom Exhibit ~~3.2~~3.1 to Fortive Corporation’s Current Report on Form ~~10-K for the fiscal year ended December 31, 2021,~~8-K, filed on November 8, 2022 (Commission File NoNo. 1-37654).

10.1						Fortive Corporate Executive Officer Cash Severance Policy (incorporated by reference from Exhibit 10.1 to Fortive Corporation’s Current Report on Form 8-K, filed on March 2, 2023 (Commission File No. 1-37654)

31.1						Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2						Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1						Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2						Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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 ~~July 1, 2022,~~March 31, 2023, formatted in Inline XBRL and contained in Exhibit 101

*Indicates management contract or compensatory plan, contract or arrangement

(1) Exhibit 101 to this report includes the following documents formatted in Inline XBRL (Extensible Business Reporting Language): (i) Consolidated Condensed Balance Sheets as of ~~July 1, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, (ii) Consolidated Condensed Statements of Earnings for the three ~~and six~~ month periods ended ~~July~~March 31, 2023 and April 1, 2022, ~~and July 2, 2021,~~ (iii) Consolidated Condensed Statements of Comprehensive Income for the three ~~and six~~ month periods ended ~~July~~March 31, 2023 and April 1, 2022, ~~and July 2, 2021,~~ (iv) Consolidated Condensed Statement of Changes in Equity for the three ~~and six~~ month periods ended ~~July~~March 31,

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2023 and April 1, 2022, ~~and July 2, 2021,~~ (v) Consolidated Condensed Statements of Cash Flows for the ~~six~~three month periods ended ~~July~~March 31, 2023 and April 1, 2022, ~~and July 2, 2021,~~ and (vi) Notes to Consolidated Condensed Financial Statements.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	FORTIVE CORPORATION:

Date: ~~July 28, 2022~~April 26, 2023	By:	/s/ Charles E. McLaughlin
		Charles E. McLaughlin
		Senior Vice President and Chief Financial Officer

Date: ~~July 28, 2022~~April 26, 2023	By:	/s/ Christopher M. Mulhall
		Christopher M. Mulhall
		Chief Accounting Officer

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	Foreign currency translation adjustments		Pension adjustments (a)			Total
For the Three Months Ended July 1, 2022:
Balance, April 1, 2022	$	(162.1)	$	(61.8)		$	(223.9)
Other comprehensive income (loss) before reclassifications, net of income taxes	(121.3)		—			(121.3)
Amounts reclassified from accumulated other comprehensive income (loss):
Increase (decrease)	2.7		0.5		(b)	3.2
Income tax impact	—		(0.1)			(0.1)
Amounts reclassified from accumulated other comprehensive income (loss), net of income taxes	2.7		0.4			3.1
Net current period other comprehensive income (loss), net of income taxes	(118.6)		0.4			(118.2)
Balance, July 1, 2022	$	(280.7)	$	(61.4)		$	(342.1)

For the Three Months Ended July 2, 2021:
Balance, April 2, 2021	$	(88.7)	$	(86.1)		$	(174.8)
Other comprehensive income (loss) before reclassifications, net of income taxes	16.6		—			16.6
Amounts reclassified from accumulated other comprehensive income (loss):
Increase (decrease)	—		1.2		(b)	1.2
Income tax impact	—		(0.3)			(0.3)
Amounts reclassified from accumulated other comprehensive income (loss), net of income taxes	—		0.9			0.9
Net current period other comprehensive income (loss), net of income taxes	16.6		0.9			17.5
Balance, July 2, 2021	$	(72.1)	$	(85.2)		$	(157.3)


	Provation		ServiceChannel		Total
Accounts receivable	$	41.3	$	10.1	$	51.4
Goodwill	978.0		874.2		1,852.2
Other intangible assets, primarily customer relationships, technology, database, and trade names	586.5		342.9		929.4
Deferred revenue, current	(50.3)		(1.7)		(52.0)
Deferred tax liabilities	(119.4)		(50.8)		(170.2)
Other assets and liabilities, net	(30.5)		(8.4)		(38.9)
Net cash consideration	$	1,405.6	$	1,166.3	$	2,571.9


	Carrying value		Annual effective rate		Weighted average remaining maturity (in days)
U.S. dollar-denominated commercial paper	$	847.0	1.84	%	32


	% Change Three Months Ended July 1, 2022 vs. Comparable 2021 Period		% Change Six Months Ended July 1, 2022 vs. Comparable 2021 Period
Total revenue growth (GAAP)	10.9	%	10.1	%
Existing businesses (Non-GAAP)	8.9	%	7.1	%
Acquisitions (Non-GAAP)	5.0	%	5.3	%
Currency exchange rates (Non-GAAP)	(3.0)	%	(2.3)	%


	% Change Three Months Ended July 1, 2022 vs. Comparable 2021 Period		% Change Six Months Ended July 1, 2022 vs. Comparable 2021 Period
Total revenue growth (GAAP)	16.3	%	15.7	%
Existing businesses (Non-GAAP)	12.3	%	10.6	%
Acquisitions (Non-GAAP)	7.0	%	7.3	%
Currency exchange rates (Non-GAAP)	(3.0)	%	(2.2)	%


	% Change Three Months Ended July 1, 2022 vs. Comparable 2021 Period		% Change Six Months Ended July 1, 2022 vs. Comparable 2021 Period
Total revenue growth (GAAP)	9.2	%	8.9	%
Existing businesses (Non-GAAP)	3.3	%	2.0	%
Acquisitions (Non-GAAP)	9.3	%	9.7	%
Currency exchange rates (Non-GAAP)	(3.4)	%	(2.8)	%


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
Apr 2 - April 30	—	$	—	N/A	N/A
May 1 - May 31	3,000,000	59.71		3,000,000	16,000,000
June 1- July 1	—	—		N/A	N/A
Total	3,000,000	$	59.71	3,000,000	16,000,000