filings.toolsItem 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
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Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Report of Management on Fortive Corporation’s Internal Control Over Financial Reporting
The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Securities Exchange Act of 1934.
The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2024. In making this assessment, the Company’s management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in “Internal Control-Integrated Framework” (2013 framework). Based on this assessment, management concluded that, as of December 31, 2024, the Company’s internal control over financial reporting is effective.
The Company acquired EA Elektro-Automatik Holding GmbH (“EA”) during the year ended December 31, 2024. The Company has not yet fully incorporated the internal controls and procedures of the EA acquisition into the Company’s internal control over financial reporting, and as such, management excluded the EA acquisition from its assessment. The assets and revenues of the EA acquisition excluded from management’s assessment of internal controls constituted approximately 12% of the Company’s total assets as of December 31, 2024 and less than 2% of the Company’s total revenues for the year ended December 31, 2024, respectively.
The Company’s independent registered public accounting firm has issued an audit report on the effectiveness of the Company’s internal control over financial reporting. This report dated February 25, 2025 appears on page 48 of this Form 10-K.
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Fortive Corporation
Opinion on Internal Control Over Financial Reporting
We have audited Fortive Corporation and subsidiaries’ internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), (the COSO criteria). In our opinion, Fortive Corporation and subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2024 and 2023, the related consolidated statements of earnings, comprehensive income, changes in equity and cash flows for each of the three years in the period ended December 31, 2024, and the related notes and financial statement schedule listed in the Index at Item 15(a)(2) and our report dated February 25, 2025 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Report of Management on Fortive Corporation’s Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
As indicated in the accompanying Report of Management on Fortive Corporation’s Internal Control Over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of the EA Elektro-Automatik Holding GmbH which is included in the 2024 consolidated financial statements of the Company and constituted less than 12% of total assets, respectively, as of December 31, 2024 and less than 2% of revenues, for the year then ended. Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of the EA Elektro-Automatik Holding GmbH.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Seattle, Washington
February 25, 2025
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Fortive Corporation
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Fortive Corporation and subsidiaries (the Company) as of December 31, 2024 and 2023, the related consolidated statements of earnings, comprehensive income, changes in equity and cash flows for each of the three years in the period ended December 31, 2024, and the related notes and financial statement schedule listed in the Index at Item 15(a)(2) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 25, 2025 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
| Description of the Matter | Accounting for the acquisition of EA Elektro-Automatik Holding GmbH As discussed in Note 3 to the consolidated financial statements, on January 3, 2024, the Company acquired EA Elektro-Automatik Holding GmbH (“EA”), for a purchase price of $1.72 billion. The transaction was accounted for as a business combination. As part of the allocation of the purchase price, the Company estimated the fair value of finite-lived intangible assets to be $681.2 million, comprised of product trade names, developed technology and customer relationships. Auditing the Company's accounting for its acquisition of EA was complex due to the estimation uncertainty in determining the fair value of finite-lived intangible assets related to customer relationships. The significant assumption used to estimate the value of this asset was the attrition rate. This assumption is forward looking and could be affected by future economic and market conditions. | ||||
| How We Addressed the Matter in Our Audit | We tested the Company's controls over its accounting for acquisitions, including controls over management’s review of the significant assumption described above. To test the estimated fair value of customer relationship asset, we performed audit procedures that included, among others, evaluating the Company's use of the selected valuation model, testing the significant assumption used in the model and testing the completeness and accuracy of the underlying data. For example, we compared the attrition rate selected by management to the historical results of the acquired business and to assumptions used by guideline companies within the industry. Our valuation specialists assisted with the evaluation of the valuation model selected, including the attrition rate. | ||||
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2015.
Seattle, Washington
February 25, 2025
FORTIVE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
($ and shares in millions, except per share amounts)
| As of December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and equivalents | $ | 813.3 | $ | 1,888.8 | |||||||
| Accounts receivable less allowance for doubtful accounts of $30.7 and $39.2, respectively | 945.4 | 960.8 | |||||||||
| Inventories: | |||||||||||
| Finished goods | 220.1 | 214.1 | |||||||||
| Work in process | 105.4 | 108.9 | |||||||||
| Raw materials | 219.3 | 213.9 | |||||||||
| Inventories | 544.8 | 536.9 | |||||||||
| Prepaid expenses and other current assets | 288.8 | 285.1 | |||||||||
| Total current assets | 2,592.3 | 3,671.6 | |||||||||
| Property, plant and equipment, net | 433.1 | 439.8 | |||||||||
| Other assets | 494.7 | 518.9 | |||||||||
| Goodwill | 10,156.0 | 9,121.7 | |||||||||
| Other intangible assets, net | 3,340.0 | 3,159.8 | |||||||||
| Total assets | $ | 17,016.1 | $ | 16,911.8 | |||||||
| LIABILITIES AND EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Current portion of long-term debt | $ | 376.2 | $ | — | |||||||
| Trade accounts payable | 677.4 | 608.6 | |||||||||
| Accrued expenses and other current liabilities | 1,184.8 | 1,182.7 | |||||||||
| Total current liabilities | 2,238.4 | 1,791.3 | |||||||||
| Other long-term liabilities | 1,251.0 | 1,149.0 | |||||||||
| Long-term debt | 3,331.1 | 3,646.2 | |||||||||
| Commitments and Contingencies (Note 13) | |||||||||||
| Equity: | |||||||||||
| Common stock: $0.01 par value, 2,000.0 shares authorized; 366.6 and 363.7 issued; 341.2 and 350.7 outstanding; respectively | 3.7 | 3.6 | |||||||||
| Additional paid-in capital | 4,035.0 | 3,851.3 | |||||||||
| Treasury shares, at cost | (1,612.3) | (715.8) | |||||||||
| Retained earnings | 8,227.6 | 7,505.9 | |||||||||
| Accumulated other comprehensive loss | (465.4) | (326.1) | |||||||||
| Total Fortive stockholders’ equity | 10,188.6 | 10,318.9 | |||||||||
| Noncontrolling interests | 7.0 | 6.4 | |||||||||
| Total stockholders’ equity | 10,195.6 | 10,325.3 | |||||||||
| Total liabilities and equity | $ | 17,016.1 | $ | 16,911.8 |
See the accompanying Notes to the Consolidated Financial Statements.
FORTIVE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
($ and shares in millions, except per share amounts)
| Year Ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| Sales of products and software | $ | 5,282.3 | $ | 5,137.7 | $ | 4,920.1 | |||||||||||
| Sales of services | 949.5 | 927.6 | 905.6 | ||||||||||||||
| Total sales | 6,231.8 | 6,065.3 | 5,825.7 | ||||||||||||||
| Cost of product and software sales | (1,994.7) | (1,981.8) | (1,994.8) | ||||||||||||||
| Cost of service sales | (506.1) | (489.4) | (467.5) | ||||||||||||||
| Total cost of sales | (2,500.8) | (2,471.2) | (2,462.3) | ||||||||||||||
| Gross profit | 3,731.0 | 3,594.1 | 3,363.4 | ||||||||||||||
| Operating costs: | |||||||||||||||||
| Selling, general, and administrative | (2,173.5) | (2,062.6) | (1,956.6) | ||||||||||||||
| Research and development | (414.0) | (397.8) | (401.5) | ||||||||||||||
| Gain on sale of property | 63.1 | — | — | ||||||||||||||
| Russia exit and wind down costs | — | — | (17.9) | ||||||||||||||
| Operating profit | 1,206.6 | 1,133.7 | 987.4 | ||||||||||||||
| Non-operating income (expense), net: | |||||||||||||||||
| Interest expense, net | (152.8) | (123.5) | (98.3) | ||||||||||||||
| Loss from divestiture | (25.6) | — | — | ||||||||||||||
| Other non-operating expenses, net | (58.6) | (19.4) | (15.6) | ||||||||||||||
| Earnings before income taxes | 969.6 | 990.8 | 873.5 | ||||||||||||||
| Income taxes | (136.7) | (125.0) | (118.3) | ||||||||||||||
| Net earnings | $ | 832.9 | $ | 865.8 | $ | 755.2 | |||||||||||
| Net earnings per common share: | |||||||||||||||||
| Basic | $ | 2.39 | $ | 2.46 | $ | 2.12 | |||||||||||
| Diluted | $ | 2.36 | $ | 2.43 | $ | 2.10 | |||||||||||
| Average common stock and common equivalent shares outstanding: | |||||||||||||||||
| Basic | 349.2 | 352.5 | 356.4 | ||||||||||||||
| Diluted | 352.8 | 355.6 | 360.8 | ||||||||||||||
See the accompanying Notes to the Consolidated Financial Statements.
FORTIVE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
($ in millions)
| Year Ended December 31 | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| Net earnings | $ | 832.9 | $ | 865.8 | $ | 755.2 | |||||||||||
| Other comprehensive income (loss), net of income taxes: | |||||||||||||||||
| Foreign currency translation adjustments | (139.7) | 9.7 | (178.7) | ||||||||||||||
| Pension and post-retirement plan benefit adjustments | 0.4 | (10.1) | 38.0 | ||||||||||||||
| Total other comprehensive income (loss), net of income taxes | (139.3) | (0.4) | (140.7) | ||||||||||||||
| Comprehensive income | $ | 693.6 | $ | 865.4 | $ | 614.5 |
See the accompanying Notes to the Consolidated Financial Statements.
FORTIVE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
($ and shares in millions)
| 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 | — | — | — | — | 755.2 | — | — | ||||||||||||||||||||||||||||||||||
| Dividends to common stockholders | — | — | — | — | (99.5) | — | — | ||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss) | — | — | — | — | — | (140.7) | — | ||||||||||||||||||||||||||||||||||
| Common stock-based award activity | 1.0 | — | 115.2 | — | — | — | — | ||||||||||||||||||||||||||||||||||
| Common stock repurchases | (7.0) | — | — | (442.9) | — | — | — | ||||||||||||||||||||||||||||||||||
| Shares withheld for taxes | (0.2) | — | (13.2) | — | — | — | — | ||||||||||||||||||||||||||||||||||
| Change in noncontrolling interests | — | — | — | — | — | — | 0.4 | ||||||||||||||||||||||||||||||||||
| Balance, December 31, 2022 | 352.9 | $ | 3.6 | $ | 3,706.3 | $ | (442.9) | $ | 6,742.1 | $ | (325.7) | $ | 5.2 | ||||||||||||||||||||||||||||
| Net earnings for the period | — | — | — | — | 865.8 | — | — | ||||||||||||||||||||||||||||||||||
| Dividends to common stockholders | — | — | — | — | (102.0) | — | — | ||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss) | — | — | — | — | — | (0.4) | — | ||||||||||||||||||||||||||||||||||
| Common stock-based award activity | 2.3 | — | 176.8 | — | — | — | — | ||||||||||||||||||||||||||||||||||
| Common stock repurchases | (4.0) | — | — | (272.9) | — | — | — | ||||||||||||||||||||||||||||||||||
| Shares withheld for taxes | (0.5) | — | (31.8) | — | — | — | — | ||||||||||||||||||||||||||||||||||
| Change in noncontrolling interests | — | — | — | — | — | — | 1.2 | ||||||||||||||||||||||||||||||||||
| Balance, December 31, 2023 | 350.7 | $ | 3.6 | $ | 3,851.3 | $ | (715.8) | $ | 7,505.9 | $ | (326.1) | $ | 6.4 | ||||||||||||||||||||||||||||
| Net earnings for the period | — | — | — | — | 832.9 | — | — | ||||||||||||||||||||||||||||||||||
| Dividends to common stockholders | — | — | — | — | (111.2) | — | — | ||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss) | — | — | — | — | — | (139.3) | — | ||||||||||||||||||||||||||||||||||
| Common stock-based award activity | 3.0 | 0.1 | 212.7 | — | — | — | — | ||||||||||||||||||||||||||||||||||
| Common stock repurchases | (12.0) | — | — | (896.5) | — | — | — | ||||||||||||||||||||||||||||||||||
| Shares withheld for taxes | (0.5) | — | (29.0) | — | — | — | — | ||||||||||||||||||||||||||||||||||
| Change in noncontrolling interests | — | — | — | — | — | — | 0.6 | ||||||||||||||||||||||||||||||||||
| Balance, December 31, 2024 | 341.2 | $ | 3.7 | $ | 4,035.0 | $ | (1,612.3) | $ | 8,227.6 | $ | (465.4) | $ | 7.0 |
See the accompanying Notes to the Consolidated Financial Statements.
FORTIVE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in millions)
| Year Ended December 31 | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| Cash flows from operating activities: | |||||||||||||||||
| Net earnings | $ | 832.9 | $ | 865.8 | $ | 755.2 | |||||||||||
| Adjustments to reconcile net earnings to net cash provided by operating activities: | |||||||||||||||||
| Amortization | 453.3 | 370.4 | 382.1 | ||||||||||||||
| Depreciation | 90.6 | 86.4 | 83.5 | ||||||||||||||
| Stock-based compensation | 109.2 | 113.3 | 93.8 | ||||||||||||||
| Gain on sale of property | (63.1) | — | — | ||||||||||||||
| Loss from divestiture | 25.6 | — | — | ||||||||||||||
| Loss from equity investments | 39.4 | 17.3 | 17.3 | ||||||||||||||
| Russia exit and wind down costs | — | — | 9.2 | ||||||||||||||
| Change in certain assets and liabilities: | |||||||||||||||||
| Change in deferred income taxes | (65.0) | (104.1) | (62.1) | ||||||||||||||
| Change in accounts receivable, net | (4.5) | 9.8 | (52.1) | ||||||||||||||
| Change in inventories | 8.8 | (1.7) | (40.3) | ||||||||||||||
| Change in trade accounts payable | 74.3 | (16.8) | 81.3 | ||||||||||||||
| Change in prepaid expenses and other assets | 8.5 | (86.3) | (6.6) | ||||||||||||||
| Change in accrued expenses and other liabilities | 16.8 | 99.5 | 41.9 | ||||||||||||||
| Net cash provided by operating activities | 1,526.8 | 1,353.6 | 1,303.2 | ||||||||||||||
| Cash flows from investing activities: | |||||||||||||||||
| Cash paid for acquisitions, net of cash received | (1,721.8) | (95.8) | (12.8) | ||||||||||||||
| Purchases of property, plant and equipment | (120.4) | (107.8) | (95.8) | ||||||||||||||
| Proceeds from sale of property | 61.2 | 7.4 | — | ||||||||||||||
| Cash infusion into divestiture | (14.0) | — | — | ||||||||||||||
| Proceeds from sale of business | — | — | 9.6 | ||||||||||||||
| All other investing activities | (1.0) | 0.8 | (3.5) | ||||||||||||||
| Net cash used in investing activities | (1,796.0) | (195.4) | (102.5) | ||||||||||||||
| Cash flows from financing activities: | |||||||||||||||||
| Net proceeds from (repayments of) commercial paper borrowings | (596.5) | 839.9 | 38.5 | ||||||||||||||
| Proceeds from borrowings (maturities greater than 90 days), net of issuance costs | 1,733.5 | 549.3 | 1,394.1 | ||||||||||||||
| Repayment of borrowings (maturities greater than 90 days) | (1,000.0) | (1,000.0) | (1,000.0) | ||||||||||||||
| Payment of 0.875% convertible senior notes due 2022 | — | — | (1,156.5) | ||||||||||||||
| Repurchase of common shares | (889.6) | (272.9) | (442.9) | ||||||||||||||
| Payment of dividends | (111.2) | (102.0) | (99.5) | ||||||||||||||
| All other financing activities | 71.1 | 18.0 | (6.7) | ||||||||||||||
| Net cash provided by (used in) financing activities | (792.7) | 32.3 | (1,273.0) | ||||||||||||||
| Effect of exchange rate changes on cash and equivalents | (13.6) | (10.9) | (37.8) | ||||||||||||||
| Net change in cash and equivalents | (1,075.5) | 1,179.6 | (110.1) | ||||||||||||||
| Beginning balance of cash and equivalents | 1,888.8 | 709.2 | 819.3 | ||||||||||||||
| Ending balance of cash and equivalents | $ | 813.3 | $ | 1,888.8 | $ | 709.2 |
See the accompanying Notes to the Consolidated Financial Statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BUSINESS OVERVIEW AND BASIS FOR PRESENTATION
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 (“IOS”), Precision Technologies (“PT”), and Advanced Healthcare Solutions (“AHS”) - include well-known brands with leading positions in their markets. Our businesses design, develop, manufacture, and service professional and engineered products, software, and services, building upon leading brand names, innovative technologies, and significant market positions.
Basis of Presentation
The accompanying consolidated financial statements present our historical financial position, results of operations, changes in equity and cash flows in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
The financial statements include our accounts and the accounts of our subsidiaries. All intercompany balances and transactions have been eliminated upon consolidation. The consolidated financial statements also reflect the impact of noncontrolling interests. Noncontrolling interests do not have a significant impact on our consolidated results of operations; therefore, net earnings and net earnings per share attributable to noncontrolling interests are not presented separately in our Consolidated Statements of Earnings. Net earnings attributable to noncontrolling interests have been reflected in Selling, general, and administrative expenses and were insignificant in all periods presented. Reclassification of certain prior year amounts in the Consolidated Statements of Cash Flows have been made to conform to current year presentation.
Update on Pending Separation of the Precision Technologies Segment
On September 4, 2024, we announced our intention to separate our PT segment business into an independent publicly-traded company (the “Separation”), which will be named Ralliant. The Separation will create (i) a technology solutions company, retaining the Fortive name, with a portfolio of the brands currently operating under Fortive’s IOS and AHS business segments, focused on resilient, high-quality recurring growth by delivering productivity and safety to customers, and (ii) a global technology company consisting of our brands currently operating under the PT segment with a focus on precision instruments and highly engineered products essential for breakthrough innovation and aligned to powerful secular trends. The Separation is intended to qualify as a tax-free spin-off for Fortive shareholders for U.S. federal income tax purposes. The Company is targeting completion of the Separation early in the third quarter of 2025, subject to the satisfaction of certain conditions, including, among others, final approval of Fortive’s Board of Directors, satisfactory completion of financing, receipt of a favorable opinion of legal counsel and/or a private letter ruling from the U.S. Internal Revenue Service with respect to the tax treatment of the transaction for U.S. federal income tax purposes, the effectiveness of a Form 10 registration statement filed with the SEC, and other regulatory approvals. All assets, liabilities, revenues and expenses of Ralliant are included in the consolidated results of the Company in the accompanying consolidated financial statements.
Segment 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 IOS segment provides advanced instrumentation, software and services to tens of thousands of customers enabling their mission-critical workflows. These offerings include electrical test & measurement, facility and asset lifecycle software applications, connected worker safety and compliance solutions across a range of vertical end markets, including manufacturing, process industries, healthcare, utilities and power, communications and electronics, among others.
Our PT segment helps solve tough technical challenges to speed breakthroughs in a wide range of applications, from food and beverage production and manufacturing to next-generation electric vehicles and clean energy, as our customers seek new test solutions to enable the electrification and connectivity of everything. Our expertise in materials, methods and measurements are reflected in our electrical test & measurement and sensing and material technologies offered to a broad set of customers and vertical end markets, including industrial, power and energy, automotive, medical equipment, food and beverage, aerospace and defense, semiconductor, and other general industries.
Our AHS segment supplies critical workflow solutions enabling healthcare providers to deliver exceptional patient care more efficiently. Our offerings include instrument sterilization solutions, instrument tracking, biomedical test tools, radiation detection and safety monitoring, and end-to-end clinical productivity software and solutions. Our healthcare offerings help ensure critical safety standards are met, instruments and operating rooms are working at peak performance, and complex procedures are followed accurately in these mission-critical healthcare environments.
Segment Realignment
In January 2024, we realigned Invetech from the AHS segment to the PT segment (the “Segment Realignment”) based on our strategic decision to divest the equipment design and manufacturing businesses of Invetech, while retaining the motion solution businesses (the “Motion Solution Business”) that are more closely aligned with the PT segment than the AHS segment. Prior period segment amounts in Note 5, 11, and 16 have been recast to conform to the revised segment presentation. Refer to Note 3 for further detail on the divestiture.
Russian Invasion of Ukraine
In February 2022, Russian forces invaded Ukraine resulting in broad economic sanctions being imposed on Russia. In the second quarter of 2022, the Company exited business operations in Russia, other than for ASP’s sterilization products, which are exempt from international sanctions as humanitarian products.
During the year ended December 31, 2022, the Company recorded pre-tax charges of $17.9 million, primarily relating to the write-off of net assets, the cumulative translation adjustment in earnings for legal entities deemed substantially liquidated, and to record provisions for employee severance and legal contingencies. These costs are identified as the “Russia exit and wind down costs” in the Consolidated Statements of Earnings. The exit activities were completed in 2022.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates—The preparation of financial statements in conformity with GAAP requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We base these estimates on historical experience, the current economic environment, and on various other assumptions that are believed to be reasonable under the circumstances. However, uncertainties associated with these estimates exist and actual results may differ from these estimates.
Cash and Equivalents—We consider all highly liquid investments with a maturity of three months or less at the date of purchase to be cash equivalents.
Accounts Receivable and Allowances for Doubtful Accounts—We measure our allowance to reflect expected credit losses over the remaining contractual life of the asset. Expected credit losses for the pooled assets are estimated based on historical loss experience, credit quality, the durations of outstanding account receivables, and expectations of the future economic environment. Expected credit losses of the assets originating during the year and changes to expected losses in the same period are recognized in earnings.
All trade accounts and unbilled receivables are recorded within the Consolidated Balance Sheet, adjusted for any write-offs, and net of allowances for credit losses. We regularly perform detailed reviews of our portfolios to evaluate the collectability of receivables based on a combination of past, current, and future financial and qualitative factors that may affect customers’ ability to pay. In circumstances where we are aware of a specific customer’s inability to meet its financial obligations, a specific reserve is recorded against amounts due to reduce the recognized receivable to the amount reasonably expected to be collected. Amounts determined to be uncollectible are charged directly against the allowances, while amounts recovered on previously written-off accounts increase the allowances.
The allowance for doubtful accounts as well as the provision for credit losses, write-off activity and recoveries for the periods presented were immaterial. We do not believe that accounts receivable represent significant concentrations of credit risk because of the diversified portfolio of individual customers and geographical areas.
The allowance for unbilled receivables was immaterial for all periods.
Inventory Valuation—Inventories include the costs of material, labor, and overhead. Substantially all inventories are stated at the lower of cost or net realizable value using the first-in, first-out (“FIFO”) method.
Property, Plant, and Equipment—Property, plant, and equipment are carried at cost. The provision for depreciation has been computed principally by the straight-line method based on the estimated useful lives of the depreciable assets as follows:
| Category | Useful Life | |||||||
| Buildings | 30 years | |||||||
| Leased assets and leasehold improvements | Amortized over the lesser of the economic life of the asset or the term of the lease | |||||||
| Machinery, equipment and other | 3 – 10 years |
Estimated useful lives are periodically reviewed and, when appropriate, changes to estimates are made prospectively.
Investments—We account for our equity investments using either the measurement alternative approach when the fair value of the investment is not readily determinable and we do not have the ability to exercise significant influence, or the equity method of accounting when it is determined that we have significant influence over but do not have a controlling financial interest. Investments accounted for using the measurement alternative approach are initially recorded at cost and adjusted for changes in the fair value from observable transactions. For investments accounted for using the equity method of accounting, we record the investments at cost and subsequently adjust the investment balance each period for our share of the investee’s income or loss and dividends received from the investee. These investments are subject to a periodic impairment review. There were no material impairment losses during the years ended December 31, 2024 or 2023.
We recorded a loss from equity investments of $39.4 million during the year ended December 31, 2024, and $17.3 million during both the years ended December 31, 2023 and 2022. The loss was recorded within Other non-operating expense, net in our Consolidated Statement of Earnings.
During the year ended December 31, 2022, we recorded a pre-tax impairment loss of $8.1 million to write down an equity investment in a third party held by our IOS segment to fair value. The loss was recorded within “Other non-operating expense, net” in our Consolidated Statement of Earnings.
Other Assets—Other assets principally include operating lease right-of-use assets, contract assets, deferred tax assets, and other investments.
Fair Value of Financial Instruments—Our financial instruments consist primarily of cash and cash equivalents, accounts receivable, nonqualified deferred compensation plans, obligations under trade accounts payable, and short and long-term debt. Due to their short-term nature, the carrying values for accounts receivable, trade accounts payable, and short-term debt approximate fair value. Refer to Note 6 for the fair values of our other obligations.
Goodwill and Other Intangible Assets—Goodwill and other intangible assets result from our business acquisitions. In accordance with accounting standards related to business combinations, goodwill and indefinite-lived intangible assets are not amortized; however, certain finite-lived identifiable intangible assets, primarily customer relationships and acquired technology, are amortized over their estimated useful lives. In-process research and development (“IPR&D”) is initially capitalized at fair value and when the IPR&D project is complete, the asset is considered a finite-lived intangible asset and amortized over its estimated useful life. If an IPR&D project is abandoned, an impairment loss equal to the value of the intangible asset is recorded in the period of abandonment. We review identified intangible assets for impairment whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable. We also test intangible assets with indefinite lives and goodwill at least annually for impairment. Refer to Note 5 for additional information about our goodwill and other intangible assets.
Revenue Recognition—We derive revenue from the sale of products 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 or services.
Product sales include revenue from the sale of products and equipment, which includes our software and software as a service (“SaaS”) product offerings and equipment rentals.
Service sales include revenues from extended warranties, post-contract customer support (“PCS”), maintenance contracts or services, contract labor to perform ongoing service at a customer location, services related to previously sold products, and software implementation services.
For revenue related to a product or service to qualify for recognition, we must have an enforceable contract with a customer that defines the goods or services to be transferred and the payment terms related to those goods or services. Further, collection of substantially all consideration for the goods or services transferred must be probable based on the customer’s intent and ability to pay the promised consideration. We apply judgment in determining the customer’s ability and intention to pay, which is based on a combination of financial and qualitative factors, including the customer’s financial condition, collateral, debt-servicing ability, past payment experience, and credit bureau information.
Customer allowances and rebates, consisting primarily of volume discounts and other short-term incentive programs, are considered in determining the transaction price for the contract. These allowances and rebates are reflected as a reduction in the contract transaction price. Judgment is exercised in determining product returns, customer allowances, and rebates, and are estimated based on historical experience and known trends.
Most of our sales contracts contain standard terms and conditions. We evaluate contracts to identify distinct goods and services promised in the contract (performance obligations). Sometimes this evaluation involves judgment to determine whether the goods or services are highly dependent on or highly interrelated with one another, or whether such goods or services significantly modify or customize one another. Certain customer arrangements include multiple performance obligations, typically hardware, software, SaaS, implementation/installation, training, consulting, other services, and/or PCS. Generally, these elements are delivered within the same reporting period, except SaaS, PCS, and other services. We allocate the contract transaction price to each performance obligation on a relative standalone selling price basis. We estimate standalone selling price using the observable price that the good or service sells for separately in similar circumstances and to similar customers or, if observable price is not available, other methods. Allocating the transaction price to each performance obligation sometimes requires significant judgment.
Revenue from sales of hardware is recognized when control transfers to the customer, which is generally when the product is shipped. If any significant obligation to the customer with respect to a sales transaction remains to be fulfilled following shipment (typically installation, other services noted above, or acceptance by the customer), revenue recognition is deferred until such obligations have been fulfilled. Further, revenue related to separately priced extended warranty and product maintenance agreements is deferred when appropriate and recognized as revenue over the term of the agreement.
Shipping and Handling—Shipping and handling costs are included as a component of Cost of sales in the Consolidated Statements of Earnings. Revenue derived from shipping and handling costs billed to customers is included in Sales of products in the Consolidated Statements of Earnings.
Advertising—Advertising costs are expensed as incurred.
Research and Development—We conduct research and development activities for the purpose of developing new products, enhancing the functionality, effectiveness, ease of use, and reliability of our existing products, and expanding the applications for which uses of our products are appropriate. Research and development costs are expensed as incurred.
Restructuring—We periodically initiate restructuring activities to appropriately position our cost base relative to prevailing economic conditions and associated customer demand, as well as in connection with certain acquisitions. Costs associated with restructuring actions can include one-time termination benefits and related charges, in addition to facility closure, contract termination, and other related activities. We record the cost of the restructuring activities when the associated liability is incurred.
In the fourth quarter of 2024, we initiated a discrete restructuring plan that is expected to be completed by December 31, 2025. The nature of the plan initiated in 2024 was related to the Separation and consisted primarily of targeted workforce reductions to realign the cost structures between the two companies. In the first quarter of 2023, we initiated a separate discrete restructuring plan that was completed by the end of 2023. The nature of the activities in 2023 was broadly consistent throughout our segments and consisted primarily of targeted workforce reductions in response to overall macroeconomic and other external conditions. We incurred these costs to position ourselves to provide superior products and services to customers in a cost-efficient manner, while taking into consideration the impact of broad economic uncertainties.
We incurred charges of $19.7 million and $58.6 million during the years ended December 31, 2024 and 2023, respectively. These charges are recorded within Cost of sales and Selling, general, and administrative expenses in the Consolidated Statements of Earnings. Accrued restructuring costs were approximately $13 million and $26 million as of December 31, 2024 and 2023, respectively, and are recorded within Accrued expenses and other current liabilities in the Consolidated Balance Sheets.
Foreign Currency Transaction and Translation—Exchange rate adjustments resulting from foreign currency transactions are recognized in Net earnings. Net foreign currency transaction losses were $13.2 million, $5.5 million and $18.2 million for the years ended December 31, 2024, 2023, and 2022, respectively. Assets and liabilities of subsidiaries operating outside the United States with a functional currency other than U.S. dollars are translated into U.S. dollars using year-end exchange rates and income statement accounts are translated at weighted average exchange rates. These foreign currency translation impacts are reflected as a component of accumulated other comprehensive income (loss) (“AOCI”) within Stockholders’ equity. As discussed below, the Company uses its foreign currency-denominated debt to partially hedge its net investments in foreign operations against adverse movements in exchange rates.
Accounting for Stock-Based Compensation—We account for stock-based compensation by measuring the cost of employee services received in exchange for all equity awards granted, including stock options, restricted stock units (“RSUs”), and performance stock units (“PSUs”), based on the fair value of the award as of the grant date. Equity-based compensation expense is recognized net of an estimated forfeiture rate over the requisite service period. Generally, equity awards are subject
to graded vesting and compensation expense is recognized separately over each vesting tranche of the award, resulting in an accelerated expense recognition pattern. Refer to Note 14 for additional information.
Income Taxes—In accordance with GAAP, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted rates expected to be in effect during the year in which the differences reverse. Deferred tax assets generally represent items that can be used as a tax deduction or credit in our tax return in future years for which the tax benefit has already been reflected on our Consolidated Statements of Earnings. Deferred tax liabilities generally represent items that have already been taken as a deduction on our tax return but have not yet been recognized as an expense in our Consolidated Statements of Earnings. The effect on deferred tax assets and liabilities due to a change in tax rates is recognized in income tax expense in the period that includes the enactment date.
Our deferred tax assets are reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not (a likelihood of more than 50 percent) that some portion or all of the deferred tax assets will not be realized. We evaluate the realizability of deferred income tax assets for each of the jurisdictions in which we operate. If we experience cumulative pretax income in a particular jurisdiction in the three-year period including the current and prior two years, we normally conclude that the deferred income tax assets will more likely than not be realizable and no valuation allowance is recognized, unless known or planned operating developments would lead management to conclude otherwise. However, if we experience cumulative pretax losses in a particular jurisdiction in the three-year period including the current and prior two years, we then consider a series of factors in the determination of whether the deferred income tax assets can be realized. These factors include historical operating results, known or planned operating developments, the period of time over which certain temporary differences will reverse, consideration of the utilization of certain deferred income tax liabilities, tax law carryback capability in the particular country, and prudent and feasible tax planning strategies. After evaluation of these factors, if the deferred income tax assets are expected to be realized within the tax carryforward period allowed for that specific country, we would conclude that no valuation allowance would be required. To the extent that the deferred income tax assets exceed the amount that is expected to be realized within the tax carryforward period for a particular jurisdiction, we establish a valuation allowance.
We recognize tax benefits from uncertain tax positions only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such positions are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. Judgment is required in evaluating tax positions and determining income tax provisions. We reevaluate the technical merits of our tax positions and may recognize an uncertain tax benefit in certain circumstances, including when: (1) a tax audit is completed; (2) applicable tax laws change, including a tax case ruling or legislative guidance; or (3) the applicable statute of limitations expires. We recognize potential accrued interest and penalties associated with unrecognized tax positions in income tax expense. Refer to Note 12 for additional information.
Accumulated Other Comprehensive Income (Loss)—AOCI refers to certain gains and losses that under U.S. GAAP are included in comprehensive income (loss) but are excluded from net earnings as these amounts are initially recorded as an adjustment to stockholders’ equity. Foreign currency translation adjustments are generally not adjusted for income taxes as they relate to indefinite investments in non-U.S. subsidiaries. As of December 31, 2024, our outstanding €500 million Euro-denominated senior unsecured notes due 2026, €700 million Euro-denominated senior unsecured notes due 2029, ¥14.4 billion Yen-denominated variable interest rate term loan, and €275 million Euro-denominated variable interest rate term loan were designated as net investment hedges of our investment in applicable foreign operations. Accordingly, foreign currency transaction gains or losses on the debt were deferred in the foreign currency translation component of AOCI as an offset to the foreign currency translation adjustments on our investments in foreign subsidiaries. For the years ended December 31, 2024, 2023, and 2022, we recognized after-tax gains of $60.4 million, losses of $1.2 million, and losses of $5.1 million within Other comprehensive income (loss) related to the net investment hedges, respectively.
We recorded no ineffectiveness from our net investment hedges during the years ended December 31, 2024, 2023, and 2022. Any amounts deferred in AOCI will remain until the hedged investment is sold or substantially liquidated.
The changes in AOCI by component are summarized below ($ in millions):
| Foreign currency translation adjustments | Pension & post- retirement plan benefit adjustments (b) | Total | |||||||||||||||
| Balance, December 31, 2021 | $ | (122.7) | $ | (62.3) | $ | (185.0) | |||||||||||
| Other comprehensive income (loss) before reclassifications: | |||||||||||||||||
| Increase (decrease) | (181.4) | 47.6 | (133.8) | ||||||||||||||
| Income tax impact | — | (10.3) | (10.3) | ||||||||||||||
| Other comprehensive income (loss) before reclassifications, net of income taxes | (181.4) | 37.3 | (144.1) | ||||||||||||||
| Amounts reclassified from AOCI into income: | |||||||||||||||||
| Increase (decrease) | 2.7 | 0.9 | (a) | 3.6 | |||||||||||||
| Income tax impact | — | (0.2) | (0.2) | ||||||||||||||
| Amounts reclassified from AOCI into income, net of income taxes: | 2.7 | 0.7 | 3.4 | ||||||||||||||
| Net current period other comprehensive income (loss): | (178.7) | 38.0 | (140.7) | ||||||||||||||
| Balance, December 31, 2022 | $ | (301.4) | $ | (24.3) | $ | (325.7) | |||||||||||
| Other comprehensive income (loss) before reclassifications: | |||||||||||||||||
| Increase (decrease) | 9.7 | (13.9) | (4.2) | ||||||||||||||
| Income tax impact | — | 3.8 | 3.8 | ||||||||||||||
| Other comprehensive income (loss) before reclassifications, net of income taxes | 9.7 | (10.1) | (0.4) | ||||||||||||||
| Amounts reclassified from AOCI into income: | |||||||||||||||||
| Increase (decrease) | — | 0.1 | (a) | 0.1 | |||||||||||||
| Income tax impact | — | (0.1) | (0.1) | ||||||||||||||
| Amounts reclassified from AOCI into income, net of income taxes | — | — | — | ||||||||||||||
| Net current period other comprehensive income (loss) | 9.7 | (10.1) | (0.4) | ||||||||||||||
| Balance, December 31, 2023 | $ | (291.7) | $ | (34.4) | $ | (326.1) | |||||||||||
| Other comprehensive income (loss) before reclassifications: | |||||||||||||||||
| Increase (decrease) | (152.9) | 0.8 | (152.1) | ||||||||||||||
| Income tax impact | 6.2 | (0.6) | 5.6 | ||||||||||||||
| Other comprehensive income (loss) before reclassifications, net of income taxes | (146.7) | 0.2 | (146.5) | ||||||||||||||
| Amounts reclassified from AOCI into income: | |||||||||||||||||
| Increase (decrease) | 7.0 | (c) | 0.3 | (a) | 7.3 | ||||||||||||
| Income tax impact | — | (0.1) | (0.1) | ||||||||||||||
| Amounts reclassified from AOCI into income, net of income taxes | 7.0 | 0.2 | 7.2 | ||||||||||||||
| Net current period other comprehensive income (loss) | (139.7) | 0.4 | (139.3) | ||||||||||||||
| Balance, December 31, 2024 | $ | (431.4) | $ | (34.0) | $ | (465.4) | |||||||||||
| (a) This component of AOCI is included in the computation of net periodic pension cost (refer to Note 10). | |||||||||||||||||
| (b) Includes balances relating to defined benefit plans, supplemental executive retirement plans, and other postretirement employee benefit plans. | |||||||||||||||||
| (c) This amount relates to the cumulative translation adjustment recognized in earnings upon the Invetech Divestiture. Refer to Note 3 for additional details. |
Pension—We measure our pension assets and obligations to determine the funded status as of December 31st each year, and recognize an asset for an overfunded status or a liability for an underfunded status in our Consolidated Balance Sheets. Changes in the funded status of the pension plans are recognized in the year in which the changes occur and are recorded within Other comprehensive income (loss). We record all components of net periodic pension costs, with the exception of service costs, in other non-operating expenses as a component of non-operating income in the accompanying Consolidated Statements of Earnings. Service costs are recorded within Cost of sales and Selling, general and administrative expenses in the Consolidated
Statements of Earnings according to the classification of the participant’s compensation. Refer to Note 10 for additional information on our pension plans including a discussion of actuarial assumptions.
Recently Issued Accounting Standard
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, Segment Reporting (Topic 280)—Improvements to Reportable Segment Disclosures, which amends the disclosure requirements for reportable segments on the interim and annual basis. This standard is effective for fiscal year ending December 31, 2024 and interim periods within fiscal year ending December 31, 2025. The adoption of the standard did not impact our consolidated financial statements and we updated the applicable annual disclosures to align with the new standard. In the first quarter of 2025, we will update the applicable interim disclosures to align with the new standard.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740)—Improvements to Income Tax Disclosures, which amends certain disclosure requirements related to income taxes on an annual basis. This standard is effective for fiscal year ending December 31, 2025. This standard should be applied on a prospective basis, with retrospective application permitted. The adoption of the standard will not impact our consolidated financial statements; however, we are currently evaluating the impact of the new disclosure requirements on the notes to the financial statements. We will update the applicable annual disclosures to align with the new standard.
In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40) — Disaggregation of Income Statement Expenses, which amends the disclosure requirements related to certain costs and expenses on an interim and annual basis. This standard is effective for fiscal year ending December 31, 2027, and interim periods within fiscal year ending December 31, 2028. This standard should be applied either on a prospective basis or retrospective basis. The adoption of the standard will not impact our combined financial statements; however, we are currently evaluating the impact of the new disclosure requirements on the notes to the financial statements. Upon adoption, we will update the applicable interim and annual disclosures to align with the new standard.
NOTE 3. ACQUISITIONS AND DIVESTITURES
We continually evaluate potential mergers and acquisitions that align with our business portfolio strategy. We have completed a number of acquisitions that have been accounted for as purchases of businesses and resulted in the recognition of goodwill in our financial statements. This goodwill arises when the purchase price for an acquired business exceeds its identifiable assets, net of liabilities. The purchase price for acquired businesses reflect a number of factors, including the future earnings and cash flow potential of the business, the strategic fit and resulting synergies from the complementary portfolio of the acquired business to our existing operations, industry expertise, and market access.
During the year ended December 31, 2024, immaterial adjustments were made to the purchase price allocation of current and prior year acquisitions.
Acquisitions
The following describes our significant acquisition activities for the years ended December 31, 2024 and 2023.
2024
On January 3, 2024, we acquired EA Elektro-Automatik Holding GmbH (“EA”), a leading supplier of high-power electronic test solutions for energy storage, mobility, hydrogen, and renewable energy applications. The acquisition of EA will bolster the PT segment’s innovative portfolio of products and services for engineers with complementary test and measurement solutions enabling the global energy transition. The total consideration paid was approximately $1.72 billion, net of acquired cash. We funded this transaction with financing activities and available cash. We recorded approximately $1.18 billion of goodwill within our PT segment related to the EA acquisition, which is not tax deductible.
For the year ended December 31, 2024, we incurred approximately $33.2 million of pretax transaction-related costs related to the EA acquisition, which were primarily for banking fees, legal fees, and amounts paid to other third-party advisers. These costs were recorded within Selling, general, and administrative expenses in the Consolidated Statement of Earnings.
The fair value of the net assets acquired was based on estimates and assumptions. Significant assumptions include the discount rates and certain assumptions that form the basis of the forecasted cash flows of the acquired business including earnings before interest, taxes, depreciation and amortization (“EBITDA”), revenue, revenue growth rates, royalty rates, customer attrition rates, and technology obsolescence rates.
The following table summarizes the estimated acquisition date fair values of the assets acquired and liabilities assumed as of December 31, 2024 ($ in millions):
| Total | ||||||||
| Accounts receivable | $ | 18.1 | ||||||
| Inventories | 34.4 | |||||||
| Property, plant and equipment | 19.7 | |||||||
| Goodwill | 1,175.0 | |||||||
| Other intangible assets (customer relationships, technology, and trade names) | 681.2 | |||||||
| Deferred tax liabilities | (191.8) | |||||||
| Other assets and liabilities, net | (18.4) | |||||||
| Net cash consideration | $ | 1,718.2 |
2023
During the year ended December 31, 2023, we made four acquisitions (“the 2023 acquisitions”) in our Intelligent Operating Solutions segment for an aggregate cash consideration of $101.4 million, which includes an immaterial deferred payment, net of acquired cash. The 2023 acquisitions are intended to accelerate our strategy and strengthen our product portfolio, providing world-class solutions to our customers. We recorded approximately $57.3 million of goodwill related to the acquisitions, which is not tax deductible, as well as $43.2 million of intangible assets, primarily consisting of customer relationships, technology, and trade names. All other acquired assets and assumed liabilities are immaterial.
Divestitures
In June 2024, we divested and transferred ownership of Invetech, excluding the Motion Solution Business, to its management team (the “Invetech Divestiture”). As a result of the divestiture, in the year ended December 31, 2024, we recorded a net realized loss of $25.6 million, which is identified as “Loss from divestiture” in the Consolidated Statements of Earnings. The divested businesses accounted for less than 1.0% of total revenue and less than 1.0% of total assets for the fiscal year ended December 31, 2023. The Invetech Divestiture did not represent a strategic shift with a major effect on the Company’s operations and financial results, and therefore the divested businesses are not reported as discontinued operations.
On September 30, 2022, we completed the sale of our Therapy Physics product line, which was reported in our Advanced Healthcare Solutions segment, to an unrelated third party for cash consideration of $9.6 million. As a result of the sale, during the year ended December 31, 2022, we recorded a net realized pre-tax gain totaling $0.5 million, net of transaction costs, which was recorded within “Other non-operating expense, net” in the Consolidated Statements of Earnings. The divestiture of this product line did not represent a strategic shift with a significant effect on the Company’s operations and financial results and therefore the divested product line is not reported as a discontinued operation.
NOTE 4. PROPERTY, PLANT AND EQUIPMENT
The classes of property, plant and equipment as of December 31 are summarized as follows ($ in millions):
| 2024 | 2023 | ||||||||||
| Land and improvements | $ | 45.1 | $ | 54.4 | |||||||
| Buildings and leasehold improvements | 284.0 | 317.2 | |||||||||
| Machinery, equipment and other | 932.6 | 877.2 | |||||||||
| Gross property, plant and equipment | 1,261.7 | 1,248.8 | |||||||||
| Less: accumulated depreciation | (828.6) | (809.0) | |||||||||
| Property, plant and equipment, net | $ | 433.1 | $ | 439.8 |
Property Sale
On March 14, 2024, we sold land and certain office buildings in our PT segment for $90 million, for which we received $20 million in cash proceeds and a $70 million promissory note secured by a letter of credit. We received $10 million of principal in August and the remaining in November 2024. During the year ended December 31, 2024, we recorded a gain on sale of property of $63.1 million in the Consolidated Statements of Earnings.
Concurrently, using a portion of the proceeds from the property sale, we pledged a charitable contribution of $20 million to the Fortive Foundation (the “Foundation”), which had no donor imposed conditions or restrictions. The Foundation, a not-for-profit entity established to expand our philanthropic efforts, is a related party due to certain Fortive executives serving as members of the entity’s board of directors. The charitable contribution is recorded within the “Other non-operating expense, net” line in the Consolidated Statements of Earnings. In the third quarter of 2024, $20 million of the promissory note due in November 2024 was reassigned to the Foundation.
NOTE 5. GOODWILL AND OTHER INTANGIBLE ASSETS
As discussed in Note 3, goodwill arises from the purchase price for acquired businesses exceeding the fair value of tangible and intangible assets acquired, less assumed liabilities. We assess the goodwill of each of our reporting units for impairment at least annually as of the first day of the fourth quarter and as “triggering” events occur that indicate that it is more likely than not that an impairment exists. We performed both qualitative and quantitative impairment tests for reporting units, as determined to be appropriate.
We estimate the fair value of our reporting units primarily using a market approach, based on multiples of earnings before interest, taxes, depreciation, and amortization (“EBITDA”) determined by current trading market multiples of earnings for companies operating in businesses similar to each of our reporting units, in addition to recent market available sale transactions of comparable businesses. In certain circumstances we also evaluate other factors including results of the estimated fair value utilizing a discounted cash flow analysis (i.e., an income approach), market positions of the businesses, comparability of market sales transactions, and financial and operating performance in order to validate the results of the market approach. If the estimated fair value of the reporting unit is less than its carrying value, we will impair the goodwill for the amount of the carrying value in excess of the fair value.
We performed goodwill impairment testing for our reporting units, and no goodwill impairment charges were recorded for the years ended December 31, 2024, 2023, and 2022. We assessed all “triggering” events subsequent to the performance of the 2024 annual impairment test and, as a result, have not identified any impacts to goodwill. The factors used by management in its impairment analysis are inherently subject to uncertainty. If actual results are not consistent with management’s estimates and assumptions, goodwill and other intangible assets may be overstated and a charge would need to be taken against net earnings.
The following is a rollforward of our goodwill by segment ($ in millions):
| Intelligent Operating Solutions | Precision Technologies | Advanced Healthcare Solutions | Total | ||||||||||||||||||||
| Balance, December 31, 2022 | $ | 4,074.4 | $ | 1,857.1 | $ | 3,117.0 | $ | 9,048.5 | |||||||||||||||
| Attributable to current year acquisitions | 56.7 | — | — | 56.7 | |||||||||||||||||||
| Foreign currency translation and other | 17.8 | (0.6) | (0.7) | 16.5 | |||||||||||||||||||
| Balance, December 31, 2023 | 4,148.9 | 1,856.5 | 3,116.3 | 9,121.7 | |||||||||||||||||||
| Measurement period adjustments for prior year acquisitions | 0.6 | — | — | 0.6 | |||||||||||||||||||
| Attributable to current year acquisitions | — | 1,175.0 | — | 1,175.0 | |||||||||||||||||||
| Foreign currency translation | (27.8) | (91.5) | (22.0) | (141.3) | |||||||||||||||||||
| Balance, December 31, 2024 | $ | 4,121.7 | $ | 2,940.0 | $ | 3,094.3 | $ | 10,156.0 |
Due to the Segment Realignment, the beginning goodwill balances for PT and AHS have been recast to conform to the revised segment presentation. Refer to Note 1 for further information on the realignment. Refer to Note 3 for more information related to goodwill attributable to acquisitions.
Finite-lived intangible assets are amortized over the shorter of their legal or estimated useful lives. The following summarizes the gross carrying value and accumulated amortization for each major category of intangible asset as of December 31 ($ in millions):
| 2024 | 2023 | ||||||||||||||||||||||
| Gross Carrying Amount | Accumulated Amortization | Gross Carrying Amount | Accumulated Amortization | ||||||||||||||||||||
| Finite-lived intangibles: | |||||||||||||||||||||||
| Patents and technology | $ | 1,268.4 | $ | (816.5) | $ | 1,139.6 | $ | (687.1) | |||||||||||||||
| Customer relationships and other intangibles | 4,003.7 | (1,862.5) | 3,568.0 | (1,573.2) | |||||||||||||||||||
| Trademarks and trade names | 172.5 | (34.4) | 117.7 | (19.8) | |||||||||||||||||||
| Total finite-lived intangibles | 5,444.6 | (2,713.4) | 4,825.3 | (2,280.1) | |||||||||||||||||||
| Indefinite-lived intangibles: | |||||||||||||||||||||||
| Trademarks and trade names | 608.8 | — | 614.6 | — | |||||||||||||||||||
| Total intangibles | $ | 6,053.4 | $ | (2,713.4) | $ | 5,439.9 | $ | (2,280.1) |
During the year ended December 31, 2024, we acquired finite-lived intangible assets, consisting of customer relationships, developed technology, and trade names, with a weighted average life of approximately nine years as a result of the EA acquisition.
Total intangible amortization expense in 2024, 2023, and 2022 was $453 million, $370 million and $382 million, respectively. Based on the intangible assets recorded as of December 31, 2024, amortization expense is estimated to be $447 million during 2025, $429 million during 2026, $398 million during 2027, $372 million during 2028, and $268 million during 2029.
We evaluated events or circumstances that may indicate the carrying value of our intangible assets may not be fully recoverable during the year ended December 31, 2024, and recorded no material impairments.
NOTE 6. FAIR VALUE MEASUREMENTS
Accounting standards define fair value based on an exit price model, establish a framework for measuring fair value for assets and liabilities required to be carried at fair value, and provide for certain disclosures related to the valuation methods used within the valuation hierarchy as established within the accounting standards. This hierarchy prioritizes the inputs into three broad levels as follows:
-
Level 1 inputs are quoted prices (unadjusted) for identical assets or liabilities in active markets.
-
Level 2 inputs are quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets in markets that are not active, or other observable characteristics for the asset or liability, including interest rates, yield curves and credit risks, or inputs that are derived principally from, or corroborated by, observable market data through correlation.
- Level 3 inputs are unobservable inputs based on our assumptions. A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement in its entirety.
Financial assets and liabilities that are measured at fair value on a recurring basis were as follows ($ in millions):
| Quoted Prices in Active Market (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | ||||||||||||||||||||
| December 31, 2024 | |||||||||||||||||||||||
| Deferred compensation liabilities | $ | — | $ | 46.7 | $ | — | $ | 46.7 | |||||||||||||||
| December 31, 2023 | |||||||||||||||||||||||
| Deferred compensation liabilities | $ | — | $ | 39.9 | $ | — | $ | 39.9 |
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 recorded as a component of our compensation and other post-retirement benefits accruals within Other long-term liabilities in the accompanying Consolidated Balance Sheets. Participants may choose among alternative earning rates for the amounts they defer, which are primarily based on investment options within our defined contribution plans for the benefit of U.S. employees (“401(k) Programs”) (except that the earnings rates for amounts contributed unilaterally by the Company are entirely based on changes in the value of Fortive common stock). Changes in the deferred compensation liability under these programs are recognized based on changes in the fair value of the participants’ accounts and are recorded within Selling, general and administrative expenses in the Consolidated Statements of Earnings.
Non-recurring Fair Value Measurements
Certain non-financial and financial assets that are not required to be measured at fair value on a recurring basis and are reported at carrying value. However, these assets are required to be assessed for impairment whenever events or circumstances indicate that their carrying value may not be fully recoverable. Refer to Note 2 for additional information about these assets.
Fair Value of Other Financial Instruments
The carrying amounts and fair values of financial instruments as of December 31 were as follows ($ in millions):
| 2024 | 2023 | ||||||||||||||||||||||
| Carrying Amount | Fair Value | Carrying Amount | Fair Value | ||||||||||||||||||||
| Current portion of long-term debt | $ | 376.2 | $ | 376.3 | $ | — | $ | — | |||||||||||||||
| Long-term debt, net of current maturities | 3,331.1 | 3,243.8 | 3,646.2 | 3,539.4 |
As of December 31, 2024 and 2023, the current portion of long-term debt and long-term debt, net of current maturities were categorized as Level 1.
The fair value of the long-term borrowings were based on quoted market prices. 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 equivalents, trade accounts receivable, net, trade accounts payable, and commercial paper approximates their carrying amount due to the short-term maturities of these instruments.
Refer to Note 10 for information related to the fair value of the assets related to the significant Company-sponsored noncontributory defined benefit pension plans.
NOTE 7. ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities as of December 31 were as follows ($ in millions):
| 2024 | 2023 | ||||||||||||||||||||||
| Current | Long-term | Current | Long-term | ||||||||||||||||||||
| Deferred revenue | $ | 553.2 | $ | 58.9 | $ | 544.6 | $ | 45.8 | |||||||||||||||
| Compensation and other post-retirement benefits | 244.5 | 56.5 | 278.9 | 53.7 | |||||||||||||||||||
| Taxes, income and other | 145.8 | 894.4 | 129.8 | 809.0 | |||||||||||||||||||
| Operating lease liabilities | 36.8 | 132.8 | 37.6 | 126.3 | |||||||||||||||||||
| Sales and product allowances | 16.8 | 0.1 | 17.6 | — | |||||||||||||||||||
| Warranty | 19.6 | 0.8 | 19.4 | 1.4 | |||||||||||||||||||
| Claims, including self-insurance and litigation | 5.2 | 14.7 | 6.4 | 14.4 | |||||||||||||||||||
| Pension obligations | 4.5 | 80.7 | 4.6 | 88.7 | |||||||||||||||||||
| Other | 158.4 | 12.1 | 143.8 | 9.7 | |||||||||||||||||||
| Total | $ | 1,184.8 | $ | 1,251.0 | $ | 1,182.7 | $ | 1,149.0 |
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. Warranty related activity for the periods presented was immaterial.
NOTE 8. LEASES
We determine if an arrangement is or contains a lease at inception and recognize a right-of-use (“ROU”) asset and a lease liability for all leases with terms greater than 12 months. We have operating leases for office space, warehouses, distribution centers, research and development facilities, manufacturing locations, and certain equipment, primarily automobiles. Many leases include optional terms, ranging from options to terminate the lease in less than one year to options to extend the lease for up to 15 years. We include optional periods as part of the lease term when we determine that we are reasonably certain to exercise the renewal option or we will not early terminate the lease. Reasonably certain is based on economic incentives and represents a high threshold. We have lease agreements with lease and non-lease components, and we have elected the practical expedient for all underlying asset classes to account for the lease and related non-lease component(s) as a single lease component.
Lease-related balances are recorded within the following three line items on the Consolidated Balance Sheet: (i) Other assets; (ii) Accrued expenses and Other current liabilities; and (iii) Other long-term liabilities.
Operating lease cost was $51 million, $49 million, and $56 million for the years ended December 31, 2024, 2023, and 2022, respectively.
During the years ended December 31, 2024, 2023, and 2022, cash paid for operating leases included in operating cash flows was $49 million, $47 million, and $50 million, respectively. Operating lease ROU assets obtained in exchange for operating lease liabilities were $33 million and $31 million for the years ended December 31, 2024 and 2023, respectively. Operating lease ROU assets were $164 million and $155 million as of December 31, 2024 and 2023, respectively. Operating lease liabilities were $170 million and $164 million as of December 31, 2024 and 2023, respectively.
The following table presents the maturities of our operating lease liabilities as of December 31, 2024 ($ in millions):
| 2025 | $ | 38.4 | |||
| 2026 | 37.3 | ||||
| 2027 | 30.1 | ||||
| 2028 | 22.4 | ||||
| 2029 | 17.3 | ||||
| Thereafter | 51.8 | ||||
| Total lease payments | 197.3 | ||||
| Less: imputed interest | (27.7) | ||||
| Total operating lease liabilities | $ | 169.6 |
As of December 31, 2024 and 2023, the weighted average lease term of our operating leases was 7.2 years and 9 years, respectively, and the weighted average discount rate of our operating leases was 3.9% and 3.6%, respectively. We primarily use our incremental borrowing rate as the discount rate for our operating leases, as we are generally unable to determine the interest rate implicit in the lease.
As of December 31, 2024, we did not enter into operating leases for which the lease term had not yet commenced.
NOTE 9. FINANCING
The components of our debt as of December 31 were as follows ($ in millions):
| 2024 | 2023 | ||||||||||
| U.S. dollar-denominated commercial paper | $ | 650.0 | $ | 1,251.2 | |||||||
| 3.7% Euro-denominated senior unsecured notes due 2026 | 517.7 | — | |||||||||
| 3.7% Euro-denominated senior unsecured notes due 2029 | 724.8 | — | |||||||||
| Euro Term Loan due 2025 | 284.7 | 303.6 | |||||||||
| Yen Term Loan due 2025 | 91.6 | 102.1 | |||||||||
| 3.15% senior unsecured notes due 2026 | 900.0 | 900.0 | |||||||||
| 4.30% senior unsecured notes due 2046 | 550.0 | 550.0 | |||||||||
| Delayed-Draw Term Loan due 2024 | — | 550.0 | |||||||||
| Long-term debt, principal amounts | 3,718.8 | 3,656.9 | |||||||||
| Less: aggregate unamortized debt discounts, premiums, and issuance costs | 11.5 | 10.7 | |||||||||
| Long-term debt, carrying value | 3,707.3 | 3,646.2 | |||||||||
| Less: current portion of long-term debt | 376.2 | — | |||||||||
| Long-term debt, net of current maturities | $ | 3,331.1 | $ | 3,646.2 |
Commercial Paper Programs
We periodically issue 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.
Credit support for the Commercial Paper Programs is provided by a five-year $2.0 billion senior unsecured revolving credit facility that expires on October 18, 2027 (the “Revolving Credit Facility”). As of December 31, 2024, no borrowings were outstanding under the Revolving Credit Facility. Refer to the section below for further discussion on the Revolving Credit Facility.
The details of our Commercial Paper Programs as of December 31, 2024 were as follows ($ in millions):
| Carrying value (a) | Weighted average annual effective rate | Weighted average maturity (in days) | |||||||||||||||
| U.S. dollar-denominated commercial paper | $ | 648.9 | 4.7 | % | 39 | ||||||||||||
| (a) Net of unamortized debt discount. |
The availability of the Revolving Credit Facility as a standby liquidity facility to repay maturing commercial paper is an important factor in maintaining the Commercial Paper Programs’ credit ratings. We expect to limit any future borrowings under the Revolving Credit Facility to amounts that would leave sufficient credit available under the facility to allow us to borrow, if needed, to repay any outstanding commercial paper as it matures.
We classified our borrowings outstanding under the Commercial Paper Programs as of December 31, 2024 as long-term debt in the accompanying Consolidated Balance Sheets as we have the intent and ability, as supported by availability under the Revolving Credit Facility referenced above, to refinance these borrowings for at least one year from the balance sheet date.
Proceeds from borrowings under the commercial paper programs are typically available for general corporate purposes, including acquisitions.
Credit Facilities
Revolving Credit Facility
We have a five-year $2.0 billion Revolving Credit Facility that was last amended on October 18, 2022 (the “Amended and Restated Credit Agreement”), which extended the availability period of the Revolving Credit Facility to October 18, 2027 with an additional two one year extension options at our request and with the consent of the lenders. The Amended and Restated Credit Agreement also contains an option permitting us to request an increase in the amounts available under the Revolving Credit Facility of up to an aggregate additional $1.0 billion.
We are obligated to pay an annual facility fee for the Revolving Credit Facility of between 6.5 and 15 basis points varying according to our long-term debt credit rating. Borrowings under the new Revolving Credit Facility in U.S Dollars bear interest at a rate equal, at our option, to either (1) Term Secured Overnight Financing Rate (“Term SOFR”), plus a 10 basis points Credit Spread Adjustment (“CSA”) plus a margin of between 68.5 and 110.0 basis points, depending on our long-term debt credit rating or (2) the highest of (a) the Federal funds rate plus 50 basis points, (b) the prime rate, (c) Term SOFR plus 100 basis points and (d) 1.0%, plus in each case a margin between zero and 10 basis points depending on our long-term debt credit rating.
In addition, beginning with our 2023 performance relative to our annual greenhouse gas reduction targets, the interest rate on any borrowings can increase or decrease by 4.0 basis points and the facility fee can increase or decrease by 1.0 basis points, for a maximum impact of an increase or decrease of 5.0 basis points.
The Amended and Restated Credit Agreement requires us to maintain a consolidated net leverage ratio of debt to consolidated EBITDA (as defined in the Credit Agreement) of less than 3.5 to 1.0. The maximum consolidated net leverage ratio will be increased to 4.0 to 1.0 for the four consecutive full fiscal quarters immediately following the consummation of any acquisition by us in which the purchase price exceeds $250 million. The Amended and Restated Credit Agreement also contains customary representations, warranties, conditions precedent, events of default, indemnities, and affirmative and negative covenants.
As of December 31, 2024 and 2023, we were in compliance with all covenants under the Amended and Restated Credit Agreement.
Euro-denominated Senior Unsecured Notes Due 2026 and 2029
On February 13, 2024, we completed the registered offering of the following Euro-denominated senior unsecured notes:
-
€500 million in aggregate principal amount of our 3.7% Euro-denominated senior unsecured notes due 2026 (the “2026 Notes”) issued at 99.928% of their principal amount and bearing interest at 3.7% per annum. The 2026 Notes mature on February 13, 2026 with interest payable in arrears on February 13 of each year, beginning in 2025.
-
€700 million in aggregate principal amount of our 3.7% Euro-denominated senior unsecured notes due 2029 (the “2029 Notes”) issued at 99.943% of their principal amount and bearing interest at 3.7% per annum. The 2029 Notes mature on August 15, 2029 with interest payable in arrears on August 15 of each year, beginning in 2024.
The net proceeds from the offering, after underwriting discounts and commissions and offering expenses, were approximately $1.3 billion based on the currency exchange rates at which the Euro denominated proceeds were converted into U.S. dollars. We used the net proceeds to refinance the $1.0 billion outstanding principal of the Delayed-Draw Term Loan Due 2024, refinance borrowings under the U.S. dollar-denominated commercial paper, and for general corporate purposes.
Redemption Provisions and Covenants Applicable to 2026 and 2029 Notes
Prior to July 15, 2029 for the 2029 Notes, and prior to maturity for the 2026 Notes, we may redeem the applicable series of notes at our option, in whole or in part, at any time and from time to time, at the applicable make-whole redemption price
specified in the indentures. On or after July 15, 2029, we may redeem the 2029 Notes, in whole or in part, at any time and from time to time, at a redemption price equal to 100% of the principal amount of the 2029 Notes being redeemed plus accrued and unpaid interest thereon to, but not including, the redemption date.
We may, at our option, redeem the applicable series of notes, in whole but not in part, at a redemption price equal to 100% of the principal amount of such series of notes to be redeemed, together with any accrued and unpaid interest thereon to, but not including, the redemption date, at any time, if as a result of any change in, or amendment to, the laws, regulations, treaties, or rulings of the United States or any political subdivision of or in the United States or any taxing authority thereof or therein affecting taxation, or any change in, or amendment to, the application, official interpretation, administration or enforcement of such laws, regulations, treaties or rulings (including a holding by a court of competent jurisdiction in the United States), which change or amendment is enacted, adopted, announced or become effective, we become or, based upon a written opinion of independent counsel selected by us, will become obligated to pay additional amounts with respect to the applicable series of notes.
If a change of control triggering event occurs, we will, in certain circumstances, be required to make an offer to repurchase the notes from each holder at a purchase price equal to 101% of the principal amount of the notes being repurchased, plus accrued and unpaid interest to, but not including the repurchase date. A change of control triggering event is defined as the occurrence of both a change of control and a rating event, each as defined in the indentures. Except in connection with a change of control triggering event, the 2026 Notes and 2029 Notes do not have any credit rating downgrade triggers that would accelerate the maturity of the notes.
The 2026 Notes and 2029 Notes contain customary covenants. None of these covenants are considered restrictive to our operations and as of December 31, 2024, we were in compliance with all of our covenants.
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 and converted 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.
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 and converted 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 TORF may not be less than zero for the Yen Term Loan.
Registered Notes
As of December 31, 2024, we had outstanding the following senior notes, collectively the “Registered Notes”:
-
$900 million aggregate principal amount of senior notes due June 15, 2026 issued at 99.644% of their principal amount and bearing interest at the rate of 3.15% per year.
-
$350 million and $200 million aggregate principal amounts of senior notes due June 15, 2046 issued at 99.783% and 101.564%, respectively, of their principal amounts and bearing interest at the rate of 4.30% per year.
Interest on the Registered Notes is payable semi-annually in arrears on June 15 and December 15 of each year.
Covenants and Redemption Provisions Applicable to Registered Notes
We may redeem the Registered Notes of the applicable series, in whole or in part, at any time prior to the dates specified in the Registered Notes indenture (the “Call Dates”) by paying the principal amount and the “make-whole” premium specified in the Registered Notes indenture, plus accrued and unpaid interest. Additionally, we may redeem all or any part of the Registered Notes of the applicable series on or after the Call Dates without paying the “make-whole” premium specified in the Registered
Notes indenture.
| Registered Notes Series | Call Dates | ||||
| 3.15% senior unsecured notes due 2026 | March 15, 2026 | ||||
| 4.30% senior unsecured notes due 2046 | December 15, 2045 |
If a change of control triggering event occurs, we will, in certain circumstances, be required to make an offer to repurchase the Registered Notes at a purchase price equal to 101% of the principal amount, plus accrued and unpaid interest. A change of control triggering event is defined as the occurrence of both a change of control and a rating event, each as defined in the Registered Notes indenture. Except in connection with a change of control triggering event, the Registered Notes do not have any credit rating downgrade triggers that would accelerate the maturity of the Registered Notes.
The Registered Notes contain customary covenants, including limits on the incurrence of certain secured debt and sale/leaseback transactions. None of these covenants are considered restrictive to our operations and as of December 31, 2024, we were in compliance with all of our covenants.
Delayed-Draw Term Loan due 2024
On December 7, 2023, we entered into a term loan credit agreement, which provides for a delayed-draw term loan facility up to an aggregate principal amount of $1.3 billion (the “Term Loan Credit Agreement”). On December 14, 2023 and January 2, 2024, we drew down $550 million and $450 million of the $1.3 billion available under the delayed-draw senior unsecured term facility (“Delayed-Draw Term Loan Due 2024”) as a Term SOFR Loan, as part of the funding for the acquisition of EA, with $1.0 billion outstanding immediately following such additional draw. Refer to Note 3 for additional information regarding the EA acquisition. The Delayed-Draw Term Loan Due 2024 bore interest at a variable rate equal to Term SOFR plus a margin of between 75 and 125 basis point, depending on the Company’s long-term credit rating. On February 13, 2024, we used the net proceeds from the 2026 Notes and 2029 Notes to refinance the entire $1.0 billion outstanding principal and accrued interest thereon.
Delayed-Draw Term Loan due 2023
On August 24, 2023, we repaid $250 million of the Delayed-Draw Term Loan Due 2023. On December 14, 2023, we repaid the remaining $750 million in outstanding principal and accrued interest thereon using the proceeds from the Delayed-Draw Term Loan Due 2024 and available cash.
Convertible Senior Notes
On February 22, 2019, we issued $1.4 billion in aggregate principal amount of our 0.875% Convertible Senior Notes due 2022 (the “Convertible Notes”). Upon adopting ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, on January 1, 2022, we reclassified the carrying value of the instrument wholly to debt, eliminating the value formerly attributable to the conversion feature and the associated debt issuance costs that were previously classified as equity.
On February 15, 2022, the maturity date of the Convertible Notes, Fortive repaid, in cash, $1.2 billion in outstanding principal and accrued interest thereon.
The Company’s future minimum principal payments due are presented in the following table:
| 2025 | $ | 376.3 | |||||||||||||||||||||
| 2026 | 1,417.7 | ||||||||||||||||||||||
| 2027 | — | ||||||||||||||||||||||
| 2028 | — | ||||||||||||||||||||||
| 2029 | 724.8 | ||||||||||||||||||||||
| Thereafter | 550.0 | ||||||||||||||||||||||
| Total principal payments (a) | $ | 3,068.8 | |||||||||||||||||||||
| (a) The table above does not include principal balance of $650 million under the Commercial Paper Program. |
We made interest payments of $136 million, $131 million, and $92 million during the years ended December 31, 2024, 2023 and 2022, respectively.
NOTE 10. RETIREMENT BENEFIT PLANS
Certain employees participate in noncontributory defined benefit pension plans. In general, our policy is to fund these plans based on considerations relating to legal requirements, underlying asset returns, the plan’s funded status, the anticipated deductibility of the contribution, local practices, market conditions, interest rates, and other factors. Our U.S. pension plans are frozen, and as such, there are no ongoing benefit accruals associated with the U.S. pension plans. The following describes our significant pension plans as of December 31, 2024 and 2023.
The following sets forth the funded status of our plans and amounts recorded in Accumulated other comprehensive income (loss) as of the most recent actuarial valuations using measurement dates of December 31 ($ in millions):
| U.S. Pension Benefits | Non-U.S. Pension Benefits | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Change in pension benefit obligation: | |||||||||||||||||||||||
| Benefit obligation at beginning of year | $ | 33.2 | $ | 33.1 | $ | 253.4 | $ | 230.7 | |||||||||||||||
| Service cost | — | — | 2.8 | 2.6 | |||||||||||||||||||
| Interest cost | 1.6 | 1.7 | 7.9 | 8.8 | |||||||||||||||||||
| Employee contributions | — | — | 1.4 | 1.4 | |||||||||||||||||||
| Benefits paid and other plan costs | (2.2) | (2.1) | (12.2) | (11.4) | |||||||||||||||||||
| Actuarial loss (gain) | (0.7) | 0.5 | (1.3) | 12.5 | |||||||||||||||||||
| Amendments, settlements and curtailments | — | — | (5.5) | (1.8) | |||||||||||||||||||
| Plan acquisitions and other | — | — | 1.6 | (0.4) | |||||||||||||||||||
| Foreign exchange rate impact | — | — | (13.3) | 11.0 | |||||||||||||||||||
| Benefit obligation at end of year | 31.9 | 33.2 | 234.8 | 253.4 | |||||||||||||||||||
| Change in plan assets: | |||||||||||||||||||||||
| Fair value of plan assets at beginning of year | 27.6 | 25.9 | 176.8 | 162.7 | |||||||||||||||||||
| Actual return on plan assets | 2.4 | 2.3 | 0.9 | 6.4 | |||||||||||||||||||
| Employer contributions | 1.2 | 1.4 | 8.0 | 10.9 | |||||||||||||||||||
| Employee contributions | — | — | 1.4 | 1.4 | |||||||||||||||||||
| Amendments and settlements | — | — | (4.3) | (1.2) | |||||||||||||||||||
| Benefits paid and other plan costs | (2.2) | (2.0) | (12.1) | (11.4) | |||||||||||||||||||
| Plan acquisitions and other | — | — | 1.5 | (0.3) | |||||||||||||||||||
| Foreign exchange rate impact | — | — | (8.0) | 8.3 | |||||||||||||||||||
| Fair value of plan assets at end of year | 29.0 | 27.6 | 164.2 | 176.8 | |||||||||||||||||||
| Funded status | $ | (2.9) | $ | (5.6) | $ | (70.6) | $ | (76.6) | |||||||||||||||
The difference between the accumulated benefit obligation and the projected benefit obligation as of December 31, 2024 and 2023 is immaterial.
| U.S. Pension Benefits | Non-U.S. Pension Benefits | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Amounts recorded in the Consolidated Balance Sheets as of December 31 | |||||||||||||||||||||||
| Other assets | $ | 2.2 | $ | — | $ | 9.5 | $ | 11.1 | |||||||||||||||
| Accrued expenses and other current liabilities | (0.6) | (0.6) | (3.9) | (4.0) | |||||||||||||||||||
| Other long-term liabilities | (4.5) | (5.0) | (76.2) | (83.7) | |||||||||||||||||||
| Net amount | $ | (2.9) | $ | (5.6) | $ | (70.6) | $ | (76.6) |
| U.S. Pension Benefits | Non-U.S. Pension Benefits | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Amounts recorded in AOCI as of December 31 | |||||||||||||||||||||||
| Prior service cost | $ | — | $ | — | $ | (0.6) | $ | (1.2) | |||||||||||||||
| Net gain (loss) | 3.7 | 2.1 | (50.4) | (48.3) | |||||||||||||||||||
| Total pre-tax amount | $ | 3.7 | $ | 2.1 | $ | (51.0) | $ | (49.5) |
Weighted average assumptions used to determine benefit obligations at date of measurement
| U.S. Pension Plans | Non-U.S. Pension Plans | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Discount rate | 5.62 | % | 5.14 | % | 3.38 | % | 3.33 | % | |||||||||||||||
| Rate of compensation increase (a) | N/A | N/A | 2.66 | % | 2.65 | % | |||||||||||||||||
| (a) The frozen U.S. pension plans do not use the rate of compensation increase as an input in determining the benefit obligations at date of measurement. |
Components of net periodic pension cost
The following sets forth the components of net periodic pension cost for our plans for the years ended December 31 ($ in millions):
| U.S. Pension Benefits | Non-U.S. Pension Benefits | ||||||||||||||||||||||||||||||||||
| 2024 | 2023 | 2022 | 2024 | 2023 | 2022 | ||||||||||||||||||||||||||||||
| Service cost | $ | — | $ | — | $ | — | $ | 2.8 | $ | 2.6 | $ | 3.5 | |||||||||||||||||||||||
| Interest cost | 1.6 | 1.7 | 1.1 | 7.9 | 8.8 | 3.4 | |||||||||||||||||||||||||||||
| Expected return on plan assets | (1.6) | (1.4) | (1.4) | (7.7) | (7.1) | (5.2) | |||||||||||||||||||||||||||||
| Amortization of net loss | 0.1 | 0.1 | 0.1 | 0.9 | 0.7 | 2.6 | |||||||||||||||||||||||||||||
| Amortization of prior service cost | — | — | — | 0.2 | 0.2 | 0.2 | |||||||||||||||||||||||||||||
| Net curtailment and settlement loss recognized | — | — | — | (0.8) | (0.1) | (1.2) | |||||||||||||||||||||||||||||
| Net periodic pension cost | $ | 0.1 | $ | 0.4 | $ | (0.2) | $ | 3.3 | $ | 5.1 | $ | 3.3 |
Weighted average assumptions used to determine net periodic pension cost at date of measurement
| U.S. Pension Plans | Non-U.S. Pension Plans | ||||||||||||||||||||||||||||||||||
| 2024 | 2023 | 2022 | 2024 | 2023 | 2022 | ||||||||||||||||||||||||||||||
| Discount rate | 5.14 | % | 5.42 | % | 2.82 | % | 3.33 | % | 3.94 | % | 1.31 | % | |||||||||||||||||||||||
| Expected return on plan assets | 6.48 | % | 6.47 | % | 5.20 | % | 4.51 | % | 4.36 | % | 2.58 | % | |||||||||||||||||||||||
| Rate of compensation increase (a) | N/A | N/A | N/A | 2.77 | % | 2.73 | % | 2.43 | % | ||||||||||||||||||||||||||
| (a) The frozen U.S. pension plans do not use the rate of compensation increase as an input in determining the net periodic pension cost at date of measurement. |
The discount rates reflect the market rate on December 31 for high-quality fixed-income investments with maturities corresponding to our benefit obligations and are subject to change each year. Rates appropriate for each plan are determined based on investment grade instruments with maturities approximately equal to the average expected benefit payout under the plan.
The expected rates of return reflect the asset allocation of the plans and ranged from 1.75% to 6.48% in 2024, 1.50% to 6.47% in 2023, and 1.25% to 5.20% in 2022. The domestic plan rate is based primarily on broad publicly-traded-equity and fixed-income indices and forward-looking estimates of active portfolio and investment management. The expected rates of return on asset assumptions for the non-U.S. plans were determined on a plan-by-plan basis based on the composition of assets.
Plan Assets
Plan assets are invested in various mutual funds, insurance contracts, and other private investments as determined by the administrator of each plan. Certain mutual funds and other private investments, are valued using the net asset value (“NAV”) method as a practical expedient. The investments valued using the NAV method are allocated across a broad array of funds and diversify the portfolio. The value of the plan assets directly affects the funded status of our pension plans recorded in the financial statements.
The fair values of our pension plan assets as of December 31, 2024, by asset category were as follows ($ in millions):
| Quoted Prices in Active Market (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | ||||||||||||||||||||
| Cash and equivalents | $ | 43.6 | $ | — | $ | — | $ | 43.6 | |||||||||||||||
| Mutual funds | — | 41.9 | — | 41.9 | |||||||||||||||||||
| Insurance contracts | — | 26.3 | — | 26.3 | |||||||||||||||||||
| Total | $ | 43.6 | $ | 68.2 | $ | — | $ | 111.8 | |||||||||||||||
| Investments measured at NAV(a): | |||||||||||||||||||||||
| Mutual funds | 61.3 | ||||||||||||||||||||||
| Other private investments | 20.1 | ||||||||||||||||||||||
| Total assets at fair value | $ | 193.2 | |||||||||||||||||||||
| (a) The fair value amounts presented in the table above are intended to permit reconciliation of the fair value hierarchy to the total fair value of plan assets. |
The fair values of our pension plan assets as of December 31, 2023, by asset category were as follows ($ in millions):
| Quoted Prices in Active Market (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | ||||||||||||||||||||
| Cash and equivalents | $ | 8.4 | $ | — | $ | — | $ | 8.4 | |||||||||||||||
| Mutual funds | — | 19.4 | — | 19.4 | |||||||||||||||||||
| Insurance contracts | — | 25.3 | — | 25.3 | |||||||||||||||||||
| Total | $ | 8.4 | $ | 44.7 | $ | — | $ | 53.1 | |||||||||||||||
| Investments measured at NAV(a): | |||||||||||||||||||||||
| Mutual funds | 111.8 | ||||||||||||||||||||||
| Other private investments | 39.5 | ||||||||||||||||||||||
| Total assets at fair value | $ | 204.4 | |||||||||||||||||||||
| (a) The fair value amounts presented in the table above are intended to permit reconciliation of the fair value hierarchy to the total fair value of plan assets. |
Certain mutual funds are valued at the quoted closing price reported on the active market on which the individual securities are traded. Common stock, corporate bonds, and mutual funds that are not traded on an active market are valued at quoted prices reported by investment brokers and dealers based on the underlying terms of the security and comparison to similar securities traded on an active market.
Certain mutual funds and other private investments are valued using NAV based on the information provided by the asset fund managers, which reflects the plan’s share of the fair value of the net assets of the investment.
Expected Contributions
During 2024, we contributed $1 million and $8 million to our U.S. and non-U.S. defined benefit pension plans, respectively. During 2025, our cash contribution requirements for our U.S. and non-U.S. defined benefit pension plans are expected to be approximately $1 million and $8 million, respectively.
The following sets forth benefit payments to participants, which reflect expected future service, as appropriate, expected to be paid by the plans in the periods indicated ($ in millions):
| U.S. Pension Plans | Non-U.S. Pension Plans | All Pension Plans | |||||||||||||||
| 2025 | $ | 2.5 | $ | 13.2 | $ | 15.7 | |||||||||||
| 2026 | 2.5 | 13.0 | 15.5 | ||||||||||||||
| 2027 | 2.6 | 13.3 | 15.9 | ||||||||||||||
| 2028 | 2.6 | 14.2 | 16.8 | ||||||||||||||
| 2029 | 2.6 | 13.6 | 16.2 | ||||||||||||||
| 2030-2034 | 12.5 | 66.8 | 79.3 |
Defined Contribution Plans
We administer and maintain 401(k) programs and contributions to the 401(k) programs are determined based on a percentage of compensation. We recognized compensation expense for our participating U.S. employees in the 401(k) programs totaling $63 million in 2024, $61 million in 2023, and $60 million in 2022.
NOTE 11. SALES
We derive revenue primarily from the sales of products, 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.
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 $118 million as of December 31, 2024 and $108 million as of December 31, 2023. Contract assets are recorded within Prepaid expenses and other current assets in our Consolidated Balance Sheets.
Contract Costs — We incur and capitalize incremental costs to obtain certain contracts, typically sales-related commissions where the amortization period is greater than one year, and costs associated with assets used by our customers in certain service arrangements. As of December 31, 2024 and 2023, we had $59 million and $51 million, respectively, in net revenue-related contract cost assets primarily related to certain software contracts. Revenue-related contract costs are recorded within Other assets in our Consolidated Balance Sheets. These assets have estimated useful lives between three and five years.
Contract Liabilities — Our contract liabilities consist of deferred revenue generally related to subscription-based software contracts, PCS, and extended warranty sales, where we generally receive up-front payment and recognize revenue over the service or support term. We classify deferred revenue as current or noncurrent based on the timing of when we expect to recognize revenue. The current portion of deferred revenue is recorded within Accrued expenses and other current liabilities and the non-current portion of deferred revenue is recorded within Other long-term liabilities in our Consolidated Balance Sheets.
Our contract liabilities as of December 31 consisted of the following ($ in millions):
| 2024 | 2023 | ||||||||||
| Deferred revenue - current | $ | 553.2 | $ | 544.6 | |||||||
| Deferred revenue - noncurrent | 58.9 | 45.8 | |||||||||
| Total contract liabilities | $ | 612.1 | $ | 590.4 |
In the year ended December 31, 2024, we recognized $470 million of revenue related to our contract liabilities at January 1, 2024. The change in our contract liabilities from December 31, 2023 to December 31, 2024 was primarily due to the timing of billings and recognition as revenue of subscription-based software contracts, PCS and extended warranty services.
Remaining Performance Obligations — Our remaining performance obligations represent the transaction price of firm, non-cancelable orders and the average contract value for software contracts, for which work has not been performed. We have excluded performance obligations with an original expected duration of one year or less from the amounts below.
The aggregate remaining performance obligations attributable to each of our segments as of December 31, 2024 is as follows ($ in millions):
| 2024 | |||||
| Intelligent Operating Solutions | $ | 610.4 | |||
| Precision Technologies | 57.8 | ||||
| Advanced Healthcare Solutions | 93.9 | ||||
| Total remaining performance obligations | $ | 762.1 |
The majority of remaining performance obligations are related to subscription-based software contracts, and service and support contracts, which we expect to fulfill approximately 80 percent within the next two years, approximately 90 percent within the next three years, and substantially all within four years.
Disaggregation of Revenue
We disaggregate revenue from contracts with customers by sales of product 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 year ended December 31, 2024 is presented as follows ($ in millions):
| Total | Intelligent Operating Solutions | Precision Technologies | Advanced Healthcare Solutions | ||||||||||||||||||||
| Sales: | |||||||||||||||||||||||
| Sales of products and software | $ | 5,282.3 | $ | 2,281.3 | $ | 1,988.6 | $ | 1,012.4 | |||||||||||||||
| Sales of services | 949.5 | 433.4 | 240.8 | 275.3 | |||||||||||||||||||
| Total | $ | 6,231.8 | $ | 2,714.7 | $ | 2,229.4 | $ | 1,287.7 | |||||||||||||||
| Geographic: | |||||||||||||||||||||||
| United States | $ | 3,372.0 | $ | 1,514.2 | $ | 1,136.3 | $ | 721.5 | |||||||||||||||
| China | 648.2 | 219.8 | 325.0 | 103.4 | |||||||||||||||||||
| All other | 2,211.6 | 980.7 | 768.1 | 462.8 | |||||||||||||||||||
| Total | $ | 6,231.8 | $ | 2,714.7 | $ | 2,229.4 | $ | 1,287.7 | |||||||||||||||
| End markets: (a) | |||||||||||||||||||||||
| Direct sales: | |||||||||||||||||||||||
| Healthcare | $ | 1,451.8 | $ | 46.6 | $ | 188.0 | $ | 1,217.2 | |||||||||||||||
| Industrial & Manufacturing | 1,336.2 | 947.1 | 370.8 | 18.3 | |||||||||||||||||||
| Government | 590.2 | 310.2 | 241.4 | 38.6 | |||||||||||||||||||
| Utilities & Power | 427.4 | 198.6 | 228.8 | — | |||||||||||||||||||
| Communication, Electronics & Semiconductor | 368.1 | 112.4 | 255.7 | — | |||||||||||||||||||
| Aerospace & Defense | 331.2 | 0.5 | 330.7 | — | |||||||||||||||||||
| Retail & Consumer | 335.1 | 270.8 | 64.3 | — | |||||||||||||||||||
| Oil & Gas | 293.7 | 281.8 | 11.9 | — | |||||||||||||||||||
| Other | 717.9 | 392.5 | 325.4 | — | |||||||||||||||||||
| Total direct sales | 5,851.6 | 2,560.5 | 2,017.0 | 1,274.1 | |||||||||||||||||||
| Distributors | 380.2 | 154.2 | 212.4 | 13.6 | |||||||||||||||||||
| Total | $ | 6,231.8 | $ | 2,714.7 | $ | 2,229.4 | $ | 1,287.7 | |||||||||||||||
| (a) Direct sales by end market include sales made through third-party distributors where we have visibility into the end customer. |
Disaggregation of revenue for the year ended December 31, 2023 is presented as follows ($ in millions):
| Total | Intelligent Operating Solutions | Precision Technologies | Advanced Healthcare Solutions | ||||||||||||||||||||
| Sales: | |||||||||||||||||||||||
| Sales of products and software | $ | 5,137.7 | $ | 2,202.5 | $ | 1,979.0 | $ | 956.2 | |||||||||||||||
| Sales of services | 927.6 | 409.7 | 244.7 | 273.2 | |||||||||||||||||||
| Total | $ | 6,065.3 | $ | 2,612.2 | $ | 2,223.7 | $ | 1,229.4 | |||||||||||||||
| Geographic: | |||||||||||||||||||||||
| United States | $ | 3,288.4 | $ | 1,441.6 | $ | 1,165.1 | $ | 681.7 | |||||||||||||||
| China | 694.9 | 228.6 | 361.8 | 104.5 | |||||||||||||||||||
| All other | 2,082.0 | 942.0 | 696.8 | 443.2 | |||||||||||||||||||
| Total | $ | 6,065.3 | $ | 2,612.2 | $ | 2,223.7 | $ | 1,229.4 | |||||||||||||||
| End markets:****(a) | |||||||||||||||||||||||
| Direct sales: | |||||||||||||||||||||||
| Healthcare | $ | 1,431.7 | $ | 47.6 | $ | 221.7 | $ | 1,162.4 | |||||||||||||||
| Industrial & Manufacturing | 1,410.1 | 931.4 | 461.3 | 17.4 | |||||||||||||||||||
| Government | 555.0 | 288.5 | 229.8 | 36.7 | |||||||||||||||||||
| Utilities & Power | 400.2 | 189.3 | 210.9 | — | |||||||||||||||||||
| Communication, Electronics & Semiconductor | 398.3 | 100.4 | 297.9 | — | |||||||||||||||||||
| Aerospace & Defense | 303.7 | 0.6 | 303.1 | — | |||||||||||||||||||
| Retail & Consumer | 338.6 | 258.2 | 80.4 | — | |||||||||||||||||||
| Oil & Gas | 281.7 | 271.6 | 10.1 | — | |||||||||||||||||||
| Other | 689.0 | 384.7 | 304.3 | — | |||||||||||||||||||
| Total direct sales | 5,808.3 | 2,472.3 | 2,119.5 | 1,216.5 | |||||||||||||||||||
| Distributors | 257.0 | 139.9 | 104.2 | 12.9 | |||||||||||||||||||
| Total | $ | 6,065.3 | $ | 2,612.2 | $ | 2,223.7 | $ | 1,229.4 | |||||||||||||||
| (a) Direct sales by end market include sales made through third-party distributors where we have visibility into the end customer. | |||||||||||||||||||||||
Disaggregation of revenue for the year ended December 31, 2022 is presented as follows ($ in millions):
| Total | Intelligent Operating Solutions | Precision Technologies | Advanced Healthcare Solutions | ||||||||||||||||||||
| Sales: | |||||||||||||||||||||||
| Sales of products and software | $ | 4,920.1 | $ | 2,097.2 | $ | 1,900.8 | $ | 922.1 | |||||||||||||||
| Sales of services | 905.6 | 368.9 | 251.5 | 285.2 | |||||||||||||||||||
| Total | $ | 5,825.7 | $ | 2,466.1 | $ | 2,152.3 | $ | 1,207.3 | |||||||||||||||
| Geographic: | |||||||||||||||||||||||
| United States | $ | 3,136.8 | $ | 1,356.0 | $ | 1,107.9 | $ | 672.9 | |||||||||||||||
| China | 702.1 | 217.9 | 378.7 | 105.5 | |||||||||||||||||||
| All other | 1,986.8 | 892.2 | 665.7 | 428.9 | |||||||||||||||||||
| Total | $ | 5,825.7 | $ | 2,466.1 | $ | 2,152.3 | $ | 1,207.3 | |||||||||||||||
| End markets:****(a) | |||||||||||||||||||||||
| Direct sales: | |||||||||||||||||||||||
| Healthcare | $ | 1,458.0 | $ | 46.5 | $ | 270.4 | $ | 1,141.1 | |||||||||||||||
| Industrial & Manufacturing | 1,352.0 | 887.9 | 446.2 | 17.9 | |||||||||||||||||||
| Government | 471.0 | 241.3 | 194.8 | 34.9 | |||||||||||||||||||
| Utilities & Power | 368.9 | 183.1 | 185.8 | — | |||||||||||||||||||
| Communication, Electronics & Semiconductor | 399.8 | 96.3 | 303.5 | — | |||||||||||||||||||
| Aerospace & Defense | 259.7 | 0.6 | 259.1 | — | |||||||||||||||||||
| Retail & Consumer | 335.7 | 248.9 | 86.8 | — | |||||||||||||||||||
| Oil & Gas | 271.1 | 262.1 | 9.0 | — | |||||||||||||||||||
| Other | 657.9 | 367.8 | 289.9 | 0.2 | |||||||||||||||||||
| Total direct sales | 5,574.1 | 2,334.5 | 2,045.5 | 1,194.1 | |||||||||||||||||||
| Distributors | 251.6 | 131.6 | 106.8 | 13.2 | |||||||||||||||||||
| Total | $ | 5,825.7 | $ | 2,466.1 | $ | 2,152.3 | $ | 1,207.3 | |||||||||||||||
| (a) Direct sales by end market include sales made through third-party distributors where we have visibility into the end customer. | |||||||||||||||||||||||
NOTE 12. INCOME TAXES
Earnings and Income Taxes
Earnings before income taxes for the years ended December 31 were as follows ($ in millions):
| 2024 | 2023 | 2022 | |||||||||||||||
| United States | $ | 705.1 | $ | 698.2 | $ | 587.7 | |||||||||||
| International | 264.5 | 292.6 | 285.8 | ||||||||||||||
| Total | $ | 969.6 | $ | 990.8 | $ | 873.5 |
The provision for income taxes for the years ended December 31 were as follows ($ in millions):
| 2024 | 2023 | 2022 | |||||||||||||||
| Current: | |||||||||||||||||
| Federal U.S. | $ | 51.9 | $ | 108.8 | $ | 75.4 | |||||||||||
| Non-U.S. | 138.3 | 97.3 | 85.3 | ||||||||||||||
| State and local | 11.5 | 23.0 | 19.7 | ||||||||||||||
| Deferred: | |||||||||||||||||
| Federal U.S. | (32.0) | (72.0) | (32.8) | ||||||||||||||
| Non-U.S. | (12.0) | (23.3) | 8.6 | ||||||||||||||
| State and local | (21.0) | (8.8) | (37.9) | ||||||||||||||
| Income tax provision | $ | 136.7 | $ | 125.0 | $ | 118.3 |
Effective Income Tax Rate
The effective income tax rate for the years ended December 31 varies from the U.S. statutory federal income tax rate as follows:
| Percentage of Pretax Earnings | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| Statutory federal income tax rate | 21.0 | % | 21.0 | % | 21.0 | % | |||||||||||
| Increase (decrease) in tax rate resulting from: | |||||||||||||||||
| State income taxes (net of federal income tax benefit) | (1.1) | % | 0.9 | % | (1.8) | % | |||||||||||
| Foreign income taxed at different rates than U.S. statutory rate | 2.6 | % | (0.1) | % | 0.1 | % | |||||||||||
| U.S. federal permanent differences related to the TCJA | (7.8) | % | (7.7) | % | (7.0) | % | |||||||||||
| Separation transaction tax costs | 3.3 | % | — | % | — | % | |||||||||||
| Effect of change in tax rates enacted in the current period | (0.2) | % | (2.6) | % | 0.3 | % | |||||||||||
| Changes in valuation allowances | (2.8) | % | 1.7 | % | 1.8 | % | |||||||||||
| Uncertain tax positions | (2.2) | % | (1.2) | % | (1.5) | % | |||||||||||
| Other | 1.3 | % | 0.6 | % | 0.6 | % | |||||||||||
| Effective income tax rate | 14.1 | % | 12.6 | % | 13.5 | % |
Our effective tax rate for 2024 differs from the U.S. federal statutory rate of 21% due primarily to the positive and negative effects of the Tax Cuts and Jobs Act (“TCJA”), U.S. federal permanent differences, the impacts of credits and deductions provided by law, including those associated with state income taxes, a decrease in our uncertain tax positions, non-deductible transaction costs related to the Separation and the effect of changes in tax rates enacted in the current period.
We made income tax payments of $220 million, $225 million, and $148 million during the years ended December 31, 2024, 2023 and 2022, respectively.
Deferred Tax Assets and Liabilities
All deferred tax assets and liabilities have been classified as noncurrent and are included in Other assets and Other long-term liabilities in the Consolidated Balance Sheets. Deferred income tax assets and liabilities as of December 31 were as follows ($ in millions):
| 2024 | 2023 | ||||||||||
| Deferred Tax Assets: | |||||||||||
| Operating lease liabilities | $ | 41.1 | $ | 38.7 | |||||||
| Inventories | 20.0 | 14.8 | |||||||||
| Pension benefits | 27.8 | 27.2 | |||||||||
| Stock-based compensation expense | 38.4 | 36.2 | |||||||||
| Capitalized expenses | 228.5 | 233.3 | |||||||||
| Tax credit and loss carryforwards | 432.9 | 377.7 | |||||||||
| Accruals, prepayments, and other | 35.6 | 79.1 | |||||||||
| Valuation allowances | (311.8) | (282.4) | |||||||||
| Total deferred tax assets | $ | 512.5 | $ | 524.6 | |||||||
| Deferred Tax Liabilities: | |||||||||||
| Property, plant and equipment | $ | (8.7) | $ | (36.8) | |||||||
| Operating lease right-of-use assets | (39.3) | (36.0) | |||||||||
| Insurance, including self-insurance | (221.9) | (211.9) | |||||||||
| Goodwill, other intangibles, and other | (886.1) | (748.7) | |||||||||
| Total deferred tax liabilities | (1,156.0) | (1,033.4) | |||||||||
| Net deferred tax liability | $ | (643.5) | $ | (508.8) |
In accordance with GAAP, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted rates expected to be in effect during the year in which the differences reverse. Deferred tax assets generally represent items that can be used as a tax deduction or credit in our tax return in future years for which the tax benefit has already been reflected in our Consolidated Statements of Earnings. Deferred tax liabilities generally represent items that have already been taken as a deduction on our tax return but have not yet been recognized as an expense in our Consolidated Statements of Earnings. The effect on deferred tax assets and liabilities due to a change in tax rates is recognized in income tax expense in the period that includes the enactment date.
Our deferred tax assets are reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not (a likelihood of more than 50 percent) that some portion or all of the deferred tax assets will not be realized. We evaluate the realizability of deferred income tax assets for each of the jurisdictions in which we operate. If we experience cumulative pretax income in a particular jurisdiction in the three-year period including the current and prior two years, we normally conclude that the deferred income tax assets will more likely than not be realizable and no valuation allowance is recognized, unless known or planned operating developments would lead management to conclude otherwise. However, if we experience cumulative pretax losses in a particular jurisdiction in the three-year period including the current and prior two years, we then consider a series of factors in the determination of whether the deferred income tax assets can be realized. These factors include historical operating results, known or planned operating developments, the period of time over which certain temporary differences will reverse, consideration of the utilization of certain deferred income tax liabilities, tax law carryback capability in the particular country, and prudent and feasible tax planning strategies. After evaluation of these factors, if the deferred income tax assets are expected to be realized within the tax carryforward period allowed for that specific country, we would conclude that no valuation allowance would be required. To the extent that the deferred income tax assets exceed the amount that is expected to be realized within the tax carryforward period for a particular jurisdiction, we establish a valuation allowance.
Applying the above methodology, valuation allowances have been established for certain deferred income tax assets to the extent they are not expected to be realized within the particular tax carryforward period.
Deferred taxes associated with U.S. entities consist of net deferred tax liabilities of approximately $485 million and $519 million inclusive of valuation allowances of $30 million and $38 million as of December 31, 2024 and 2023, respectively. Deferred taxes associated with non-U.S. entities consist of net deferred tax liabilities of $159 million and net deferred tax assets of $10 million, inclusive of valuation allowances of $282 million and $245 million, as of December 31, 2024 and 2023,
respectively. Our valuation allowance increased by $29 million and by $208 million during the years ended December 31, 2024 and 2023, respectively, due primarily to foreign credits and net operating losses in both years.
As of December 31, 2024, our U.S. and non-U.S. net operating loss carryforwards totaled $1.9 billion, of which $52 million is related to federal net operating loss carryforwards, $740 million is related to state net operating loss carryforwards, and $1.1 billion is related to non-U.S. net operating loss carryforwards. Included in deferred tax assets as of December 31, 2024 are tax benefits for U.S. and non-U.S. net operating loss carryforwards totaling $203 million, before applicable valuation allowances of $98 million. Certain of these losses can be carried forward indefinitely and others can be carried forward to various dates from 2025 through 2043. Recognition of some of these loss carryforwards is subject to an annual limit, which may cause them to expire before they are used.
As of December 31, 2024, our U.S. and non-U.S. tax credit carryforwards totaled $230 million, which is primarily related to non-U.S. tax credit carryforwards. Certain of these credits can be carried forward indefinitely and other can be carried forward to various dates from 2025 through 2043. As of December 31, 2024, we maintain a $186 million valuation allowance related to certain tax credit carryforwards.
Unrecognized Tax Benefits
We recognize tax benefits from uncertain tax positions only if, in our assessment, it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. Judgment is required in evaluating tax positions and determining income tax provisions. We re-evaluate the technical merits of our tax positions and may recognize an uncertain tax benefit in certain circumstances, including when: (i) a tax audit is completed; (ii) applicable tax laws change, including a tax case ruling or legislative guidance; or (iii) the applicable statute of limitations expires. We recognize potential accrued interest and penalties associated with unrecognized tax positions in income tax expense.
As of December 31, 2024, gross unrecognized tax benefits were $145 million ($155 million total, including $28 million associated with interest and penalties, and net of the impact of $18 million of indirect tax benefits). As of December 31, 2023, gross unrecognized tax benefits were $176 million ($189 million total, including $31 million associated with interest and penalties, and net of the impact of $18 million of indirect tax benefits). We recognized approximately $13 million, $11 million and $10 million in potential interest and penalties associated with uncertain tax positions during 2024, 2023, and 2022, respectively. To the extent taxes are not assessed with respect to uncertain tax positions, substantially all amounts accrued (including interest and penalties and net of indirect offsets) will be reduced and reflected as a reduction of the overall income tax provision. Unrecognized tax benefits and associated accrued interest and penalties are included in our income tax provision.
The Company is subject to examination in the United States, various states, and foreign jurisdictions for the tax years 2014 to 2024. These examinations include filings of tax returns prior to our separation from Danaher, tax returns of enterprises no longer in our portfolio, and tax returns for pre-acquisition periods of enterprises added to our portfolio. Significant obligations are detailed in the tax matters agreements in connection with the separation of Fortive from Danaher on July 1, 2016, the split-off of the A&S business on October 1, 2018, and the Vontier separation on October 9, 2020. Some examinations may conclude in the next twelve months and the unrecognized tax benefits recorded in relation to the audits may differ from actual settlement amounts. It is not practical to estimate the effect, if any, of any amount of such change during the next twelve months to previously recorded uncertain tax positions in connection with the audits. It is reasonably possible that $55 million in unrecognized tax benefits may be resolved in the next twelve months, due to statute of limitations expiration.
A reconciliation of the beginning and ending amount of unrecognized tax benefits, excluding amounts accrued for potential interest and penalties, is as follows ($ in millions):
| 2024 | 2023 | 2022 | |||||||||||||||
| Unrecognized tax benefits, beginning of year | $ | 176.1 | $ | 178.2 | $ | 193.0 | |||||||||||
| Additions based on tax positions related to the current year | 16.3 | 21.6 | 6.2 | ||||||||||||||
| Additions for tax positions of prior years | 4.5 | 13.5 | 11.2 | ||||||||||||||
| Reductions for tax positions of prior years | (1.8) | (3.0) | (6.3) | ||||||||||||||
| Lapse of statute of limitations | (39.7) | (33.0) | (24.4) | ||||||||||||||
| Settlements | (8.9) | (2.2) | — | ||||||||||||||
| Effect of foreign currency translation | (2.6) | — | (1.5) | ||||||||||||||
| Acquisition related adjustments | 1.2 | 1.0 | — | ||||||||||||||
| Unrecognized tax benefits, end of year | $ | 145.1 | $ | 176.1 | $ | 178.2 | |||||||||||
Repatriation and Unremitted Earnings
As of December 31, 2024, we recorded estimated incremental foreign remittance taxes of $5 million on the planned 2025 repatriation of $52 million of previously unremitted earnings from 2024 and prior periods.
As of December 31, 2024, the earnings we plan to reinvest indefinitely outside of the United States for which foreign deferred taxes have not been provided was estimated at $1.9 billion. 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 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.
NOTE 13. LITIGATION AND CONTINGENCIES
We are, from time to time, subject to a variety of litigation and other proceedings incidental to our business, including lawsuits involving claims for damages arising out of the use of our products, software, and services, claims relating to intellectual property matters, employment matters, commercial disputes, and personal injury as well as regulatory investigations or enforcement. We may also become subject to lawsuits as a result of past or future acquisitions or as a result of liabilities retained from, or representations, warranties, or indemnities provided in connection with divested businesses. Some of these lawsuits may include claims for punitive and consequential as well as compensatory damages. Based upon our experience, current information and applicable law, we do not believe that these proceedings and claims will have a material adverse effect on our financial position, results of operations, or cash flows.
While we maintain workers’ compensation, property, cargo, automobile, crime, fiduciary, product, general, and directors’ and officers’ liability insurance (and have acquired rights under similar policies in connection with certain acquisitions) that cover a portion of these claims, this insurance may be insufficient or unavailable to cover such losses. In addition, while we believe we are entitled to indemnification from third parties for some of these claims, these rights may also be insufficient or unavailable to cover such losses. We maintain third party insurance policies up to certain limits to cover certain liability costs in excess of predetermined retained amounts. For most insured risks, we purchase outside insurance coverage only for severe losses (stop loss insurance) and reserves must be established and maintained with respect to amounts within the self-insured retention.
In accordance with accounting guidance, we record a liability in our consolidated financial statements for loss contingencies when a loss is known or considered probable and the amount can be reasonably estimated. If the reasonable estimate of a known or probable loss is a range, and no amount within the range is a better estimate than any other, the minimum amount of the range is accrued. If a loss does not meet the known or probable level but is reasonably possible and a loss or range of loss can be reasonably estimated, the estimated loss or range of loss is disclosed. These reserves consist of specific reserves for individual claims and additional amounts for anticipated developments of these claims as well as for incurred but not yet reported claims. The specific reserves for individual known claims are quantified with the assistance of legal counsel and outside risk insurance professionals where appropriate. In addition, outside risk insurance professionals may assist in the determination of reserves for incurred but not yet reported claims through evaluation of our specific loss history, actual claims reported, and industry trends among statistical and other factors. Reserve estimates are adjusted as additional information regarding a claim becomes known. While we actively pursue financial recoveries from insurance providers, we do not recognize any recoveries until realized or until such time as a sustained pattern of collections is established related to historical matters of a similar nature and magnitude. If risk insurance reserves we have established are inadequate, we would be required
to incur an expense equal to the amount of the loss incurred in excess of the reserves, which would adversely affect our net earnings. Refer to Note 7 for information about the amount of our accruals for self-insurance and litigation liability.
In addition, our operations, products, and services are subject to environmental laws and regulations in various jurisdictions, which impose limitations on the discharge of pollutants into the environment and establish standards for the generation, use, treatment, storage, and disposal of hazardous and non-hazardous wastes. A number of our operations involve the handling, manufacturing, use, or sale of substances that are or could be classified as hazardous materials within the meaning of applicable laws. We must also comply with various health and safety regulations in both the United States and abroad in connection with our operations. Compliance with these laws and regulations has not had and, based on current information and the applicable laws and regulations currently in effect, is not expected to have a material effect on our capital expenditures, earnings, or competitive position, and we do not anticipate material capital expenditures for environmental control facilities.
In addition to environmental compliance costs, from time to time, we incur costs related to alleged damages associated with past or current waste disposal practices or other hazardous materials handling practices. For example, generators of hazardous substances found in disposal sites at which environmental problems are alleged to exist, as well as the current and former owners of those sites and certain other classes of persons, are subject to claims brought by state and federal regulatory agencies pursuant to statutory authority. We have received notification from the United States Environmental Protection Agency, and from state and non-U.S. environmental agencies, that conditions at certain sites where we and others previously disposed of hazardous wastes and/or of which we are or were property owners require clean-up and other possible remedial action, including sites where we have been identified as a potentially responsible party under United States federal and state environmental laws. We have projects underway at a number of current and former facilities, in both the United States and abroad, to investigate and remediate environmental contamination resulting from past operations. Remediation activities generally relate to soil and/or groundwater contamination and may include pre-remedial activities such as fact-finding and investigation, risk assessment, feasibility study and/or design, as well as remediation actions such as contaminant removal, monitoring and/or installation, operation and maintenance of longer-term remediation systems. From time to time we are also party to personal injury or other claims brought by private parties alleging injury due to the presence of, or exposure to, hazardous substances.
We have recorded a provision for environmental investigation and remediation and environmental-related claims with respect to sites we and our subsidiaries owned or formerly owned and third party sites where we have been determined to be a potentially responsible party. We generally make an assessment of the costs involved for our remediation efforts based on environmental studies, as well as our prior experience with similar sites. The ultimate cost of site cleanup is difficult to predict given the uncertainties of our involvement in certain sites, uncertainties regarding the extent of the required cleanup, the availability of alternative cleanup methods, variations in the interpretation of applicable laws and regulations, the possibility of insurance recoveries with respect to certain sites and the fact that imposition of joint and several liability with right of contribution is possible under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 and other environmental laws and regulations. If we determine that potential liability for a particular site or with respect to a personal injury claim is known or considered probable and reasonably estimable, we accrue the total estimated loss, including investigation and remediation costs, associated with the site or claim. As of both December 31, 2024 and 2023, we had reserves of $7 million and $6 million, respectively, recorded within Accrued expenses and Other liabilities in the Consolidated Balance Sheets for environmental matters that are known or considered probable and reasonably estimable, which reflects our best estimate of the costs to be incurred with respect to such matters on an undiscounted basis.
All reserves for environmental liabilities have been recorded without giving effect to any possible future third party recoveries. While we actively pursue insurance recoveries, as well as recoveries from other potentially responsible parties, we do not recognize any insurance recoveries for environmental liability claims until realized or until such time as a sustained pattern of collections is established related to historical matters of a similar nature and magnitude.
As of December 31, 2024 and 2023, we had approximately $61 million and $57 million, respectively, of guarantees consisting primarily of outstanding standby letters of credit, bank guarantees, and performance and bid bonds. These guarantees have been provided in connection with certain arrangements with vendors, customers, financing counterparties, and governmental entities to secure our obligations and/or performance requirements related to specific transactions. We believe that if the obligations under these instruments were triggered, they would not have a material effect on our consolidated financial statements.
We have entered into agreements to purchase goods or services that are enforceable and legally binding on us and that specify all significant terms, including fixed or minimum quantities to be purchased, fixed, minimum or variable price provisions and the approximate timing of the transaction. Purchase obligations exclude agreements that are cancellable at any time without penalty. As of December 31, 2024, the aggregate amount of our purchase obligations totaled $446 million, of which $366 million are expected to be settled within one year of December 31, 2024.
NOTE 14. STOCK-BASED COMPENSATION
The 2016 Stock Incentive Plan (the “Stock Plan”) provides for the grant of stock appreciation rights, restricted stock units (“RSUs”) and performance stock units (“PSUs”) (collectively, “Stock Awards”), stock options, or any other stock-based award. A total of 43 million shares of our common stock have been authorized for issuance under the Stock Plan. As of December 31, 2024, approximately 12.1 million shares of our common stock remain available for issuance under the Stock Plan.
Stock options under the Stock Plan generally vest pro rata over a four-year period and terminate 10 years from the grant date, though the specific terms of each grant are determined by the Compensation Committee of our Board of Directors. Our executive officers and certain other employees may be awarded stock options with different vesting criteria and stock options granted to non-employee directors are fully vested as of the grant date. Exercise prices for stock options granted under the Stock Plan were equal to the closing price of Fortive’s common stock on the NYSE on the date of grant, while stock options issued as conversion awards in connection with the separation from Danaher were priced to maintain the economic value before and after the separation.
RSUs granted under the Stock Plan provide for the issuance of common stock at no cost to the holder. RSUs granted to employees generally vest over four years, although certain other employees and non-employee directors may be awarded RSUs with different time-based vesting criteria. Certain members of our senior management are also awarded incremental RSUs subject to performance-based vesting criteria. Prior to vesting, RSUs do not have dividend equivalent rights, do not have voting rights, and the shares underlying the RSUs are not considered issued or outstanding.
PSUs granted under the Stock Plan provide for the issuance of a share of the Company’s common stock at no cost to the holder and will vest at 0% to 200% of the target share amount based on achievement of performance targets. Grants made prior to 2022 are earned based on the Company’s total shareholder return ranking relative to the S&P 500 Index over a performance period of approximately three years. For grants made subsequent to 2022, the performance target is based on a mix of both achievement of an internal growth metric and the Company’s total shareholder return ranking, both over a performance period of approximately three years. PSUs issued are subject to an additional holding period of up to two years and are entitled to dividend equivalent rights. The PSU dividend equivalent rights are subject to the same vesting and payment restrictions as the related shares, but do not have voting rights and the shares underlying the PSUs are not considered issued and outstanding.
Other than pursuant to any retirement benefits provided under our Stock Plan, the equity compensation awards granted by the Company generally vest only if the employee is employed by us (or in the case of directors, the director continues to serve on the Board) on the vesting date. To cover the exercise of stock options and vesting of RSUs and PSUs, we generally issue shares authorized but previously unissued, although we may instead issue treasury shares; provided, however, that either type of issuance would equally reduce the number of shares available under our Stock Plan.
We account for stock-based compensation by measuring the cost of employee services received in exchange for all equity awards granted based on the fair value of the award as of the grant date. We recognize the compensation expense over the requisite service period (which is generally the vesting period but may be shorter than the vesting period, for example, if the employee becomes retirement eligible before the end of the vesting period).
The fair value of RSUs and performance based PSUs is calculated using the closing price of Fortive common stock on the date of grant. RSU’s are further adjusted for the impact of RSUs not having dividend rights prior to vesting. The fair value of market-based PSUs is calculated using a Monte Carlo pricing model. The fair value of the stock options granted is calculated using a Black-Scholes Merton (“Black-Scholes”) option pricing model.
Stock-based Compensation Expense
Stock-based compensation has been recognized as a component of Selling, general, and administrative expenses in the Consolidated Statements of Earnings. The amount of stock-based compensation expense recognized during a period is based on the portion of the awards that are ultimately expected to vest. We estimate pre-vesting forfeitures at the time of grant by analyzing historical data and revise those estimates in subsequent periods if actual forfeitures differ from those estimates. Ultimately, the total expense recognized over the vesting period will equal the fair value of awards that actually vest.
The following summarizes the components of our stock-based compensation expense under the Stock Plan for the years ended December 31 ($ in millions):
| 2024 | 2023 | 2022 | |||||||||||||||
| Stock Awards: | |||||||||||||||||
| Pretax compensation expense | $ | 77.4 | $ | 78.4 | $ | 60.1 | |||||||||||
| Income tax benefit | (11.8) | (11.0) | (8.7) | ||||||||||||||
| Stock Award expense, net of income taxes | 65.6 | 67.4 | 51.4 | ||||||||||||||
| Stock options: | |||||||||||||||||
| Pretax compensation expense | 31.8 | 34.9 | 33.7 | ||||||||||||||
| Income tax benefit | (4.7) | (4.6) | (5.1) | ||||||||||||||
| Stock option expense, net of income taxes | 27.1 | 30.3 | 28.6 | ||||||||||||||
| Total stock-based compensation: | |||||||||||||||||
| Pretax compensation expense | 109.2 | 113.3 | 93.8 | ||||||||||||||
| Income tax benefit | (16.5) | (15.6) | (13.8) | ||||||||||||||
| Total stock-based compensation, net of income taxes | $ | 92.7 | $ | 97.7 | $ | 80.0 |
When stock options are exercised by the employee or Stock Awards vest, we derive a tax deduction measured by the excess of the market value on such date over the grant date price. Accordingly, we record the excess of the tax benefit related to the exercise of stock options and vesting of Stock Awards over the expense recorded for financial statement reporting purposes (the “Excess Tax Benefit”) as a component of Income tax expense and as an operating cash inflow in the consolidated financial statements. During the years ended December 31, 2024, 2023, and 2022 we realized an Excess Tax Benefit of $8.2 million, $3.8 million, and $1 million, respectively, related to stock options that were exercised and Stock Awards that vested.
The following summarizes the unrecognized compensation cost for the Stock Plan awards as of December 31, 2024. This compensation cost is expected to be recognized over a weighted average period of approximately 1.5 years, representing the remaining service period related to the awards. Future compensation amounts will be adjusted for any changes in estimated forfeitures ($ in millions):
| Stock Awards | $ | 100.9 | |||
| Stock options | 39.1 | ||||
| Total unrecognized compensation cost | $ | 140.0 |
Stock Options
The following summarizes the assumptions used in the Black-Scholes model to value stock options granted under the Stock Plan during the years ended December 31:
| 2024 | 2023 | 2022 | |||||||||||||||
| Risk-free interest rate | 3.8% - 4.4% | 3.5% - 4.5% | 1.7% - 3.9% | ||||||||||||||
| Volatility (a) | 28.8 | % | 28.6 | % | 29.3 | % | |||||||||||
| Dividend yield (b) | 0.4 | % | 0.4 | % | 0.4 | % | |||||||||||
| Expected years until exercise | 5.5 - 8.0 | 5.5 - 8.0 | 5.5 - 8.0 | ||||||||||||||
| (a) Expected volatility is based on a weighted average blend of the company’s historical stock price volatility from July 2, 2016 (the date of separation from Danaher) through the stock option grant date and the average historical stock price volatility of a group of peer companies for the expected term of the options. | |||||||||||||||||
| (b) The dividend yield is calculated by dividing our annual dividend, based on the most recent quarterly dividend rate, by Fortive’s closing stock price on the grant date. |
The following summarizes option activity under the Stock Plan (in millions, except price per share and numbers of years):
| Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (years) | Aggregate Intrinsic Value | ||||||||||||||||||||
| Outstanding as of December 31, 2022 | 11.3 | $ | 56.70 | ||||||||||||||||||||
| Granted | 1.5 | 66.78 | |||||||||||||||||||||
| Exercised | (1.4) | 45.21 | |||||||||||||||||||||
| Canceled/forfeited | (0.5) | 66.21 | |||||||||||||||||||||
| Outstanding as of December 31, 2023 | 10.9 | 59.06 | |||||||||||||||||||||
| Granted | 1.5 | 82.59 | |||||||||||||||||||||
| Exercised | (2.0) | 50.54 | |||||||||||||||||||||
| Canceled/forfeited | (0.4) | 71.01 | |||||||||||||||||||||
| Outstanding as of December 31, 2024 | 10.0 | 63.80 | 6 | $ | 123.6 | ||||||||||||||||||
| Vested and expected to vest as of December 31, 2024 (a) | 9.9 | 63.63 | 5 | $ | 123.0 | ||||||||||||||||||
| Exercisable as of December 31, 2024 | 5.8 | 58.25 | 4 | $ | 97.7 | ||||||||||||||||||
| (a) The “expected to vest” options are the net unvested options that remain after applying the forfeiture rate assumption to total unvested options. |
The aggregate intrinsic values in the table above represent the total pretax intrinsic value (the difference between the closing stock price of Fortive common stock on the last trading day of 2024 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on December 31, 2024. The amount of aggregate intrinsic value will change based on the price of Fortive’s common stock.
The following summarizes aggregate intrinsic value and cash receipts related to stock options that were exercised under the Stock Plan for the years ended December 31 ($ in millions):
| 2024 | 2023 | 2022 | |||||||||||||||
| Aggregate intrinsic value of stock options exercised | $ | 56.6 | $ | 35.9 | $ | 12.4 | |||||||||||
| Cash receipts from stock options exercised | $ | 96.9 | $ | 51.5 | $ | 17.6 |
Stock Awards
The following summarizes information related to Stock Award activity under the Stock Plan for the years ended December 31, 2024 and 2023 (in millions; except price per share):
| Number of Stock Awards | Weighted Average Grant-Date Fair Value | ||||||||||
| Unvested as of December 31, 2022 | 3.1 | $ | 66.00 | ||||||||
| Granted | 1.3 | 67.32 | |||||||||
| Vested | (0.8) | 67.09 | |||||||||
| Forfeited | (0.3) | 66.12 | |||||||||
| Unvested as of December 31, 2023 | 3.3 | 66.30 | |||||||||
| Granted | 1.3 | 81.81 | |||||||||
| Vested | (0.9) | 66.29 | |||||||||
| Forfeited | (0.3) | 71.16 | |||||||||
| Unvested as of December 31, 2024 | 3.4 | 72.06 |
NOTE 15. CAPITAL STOCK AND EARNINGS PER SHARE
Common Stock
Under our amended and restated certificate of incorporation, as of July 1, 2016, our authorized capital stock consists of 2.0 billion common shares with a par value of $0.01 per share and 15 million preferred shares with a par value of $0.01 per share.
Each share of our common stock entitles the holder to one vote on all matters to be voted upon by common stockholders. Our Board is authorized to issue shares of preferred stock in one or more series and has discretion to determine the rights, preferences, privileges, and restrictions, including voting rights, dividend rights, conversion rights, redemption privileges, and liquidation preferences, of each series of preferred stock. The Board’s authority to issue preferred stock with voting rights or conversion rights that, if exercised, could adversely affect the voting power of the holders of common stock, could potentially discourage attempts by third parties to obtain control of the Company through certain types of takeover practices. Beginning in the fourth quarter of 2023, we increased the quarterly dividend paid on our common stock from $0.07 per share to $0.08 per share.
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. On January 23, 2024, the Company’s Board of Directors increased the number of shares authorized under the share repurchase program by an additional 11 million shares, with 8 million remaining authorized under the share repurchase program as of December 31, 2024. 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 years ended December 31, 2024, 2023, and 2022, respectively, the Company purchased 12 million, 4 million, and 7 million shares of its common stock at an average share price of $73.93 and $68.20, and $63.25. Our common stock repurchases in excess of issuances are subject to a 1% excise tax enacted by the Inflation Reduction Act. Any excise tax incurred is recorded as part of the cost basis of the shares acquired within Common stock repurchases in the consolidated statement of equity. The payment of the excise tax is recorded within Repurchase of common shares in the consolidated statement of cash flows.
Net Earnings Per Share
Basic net earnings per share (“EPS”) is calculated by dividing net earnings by the weighted average number of shares of common stock outstanding for the applicable period. Diluted EPS is similarly calculated, except that the calculation includes the dilutive effect of the assumed conversion of 0.875% Convertible Notes and associated issuance of shares under the if-converted method, while outstanding in 2022, and the assumed issuance of shares under stock-based compensation plans under the treasury stock method, except where the inclusion of such shares would have an anti-dilutive impact.
For the years ended December 31, 2024, 2023, and 2022, the anti-dilutive options to purchase shares excluded from the diluted EPS calculation were 1.2 million shares, 0.5 million shares, and 7.3 million shares, respectively.
Information related to the calculation of net earnings per share of common stock is summarized as follows ($ and shares in millions, except per share amounts):
| Year Ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| Numerator | |||||||||||||||||
| Net earnings | $ | 832.9 | $ | 865.8 | $ | 755.2 | |||||||||||
| Add-back: Convertible note interest add-back (“if-converted” method) | — | — | 1.8 | ||||||||||||||
| Diluted Net earnings | $ | 832.9 | $ | 865.8 | $ | 757.0 | |||||||||||
| Denominator | |||||||||||||||||
| Weighted average common shares outstanding used in basic earnings per share | 349.2 | 352.5 | 356.4 | ||||||||||||||
| Incremental common shares from: | |||||||||||||||||
| Assumed exercise of dilutive options and vesting of dilutive Stock Awards | 3.6 | 3.1 | 2.8 | ||||||||||||||
| Conversion of convertible notes (if converted method) | — | — | 1.6 | ||||||||||||||
| Weighted average common shares outstanding used in diluted earnings per share | 352.8 | 355.6 | 360.8 | ||||||||||||||
| Net earnings per common share - Basic | $ | 2.39 | $ | 2.46 | $ | 2.12 | |||||||||||
| Net earnings per common share - Diluted | $ | 2.36 | $ | 2.43 | $ | 2.10 |
NOTE 16. SEGMENT INFORMATION
We report our results in three separate business segments consisting of Intelligent Operating Solutions, Precision Technologies, and Advanced Healthcare Solutions. We determine our business segments based on the identification of segment managers and similarities in products, end markets, economic characteristics, technologies, and services, as well as the financial data utilized by the Company's chief executive officer. The Company's chief operating decision maker ("CODM") is the chief executive officer.
The CODM uses gross profit and operating profit at the segment level to assess performance and allocate resources, including merger and acquisition targets. The CODM also compares the actual results to expectations in assessing the performance of the segments. Gross profit represents total revenue less total cost of sales. Operating expenses generally include selling, general and administrative expenses, and research and development expenses. Depreciation expense is allocated between Cost of sales and Selling, general, and administrative expenses. Amortization expense is recorded within Selling, general, and administrative expenses. Operating profit represents gross profit less operating expenses. The identifiable assets by segment are those used in each segment’s operations. Inter-segment amounts are not significant and are eliminated in the combined totals. Unallocated costs and other costs are not considered part of our evaluation of reportable segment operating performance.
On January 1, 2024, we realigned Invetech from the AHS segment to the PT segment. Prior period segment amounts have been recast to conform to the revised segment presentation. Refer to Note 1 for further information on the realignment.
Segment results for the year ended December 31, 2024 are shown below ($ in millions):
| Total | Intelligent Operating Solutions | Precision Technologies | Advanced Healthcare Solutions | Unallocated Corporate Costs and Other | |||||||||||||||||||||||||
| Sales | $ | 6,231.8 | $ | 2,714.7 | $ | 2,229.4 | $ | 1,287.7 | $ | — | |||||||||||||||||||
| Cost of sales | (2,500.8) | (888.6) | (1,073.3) | (538.9) | — | ||||||||||||||||||||||||
| Gross profit | 3,731.0 | 1,826.1 | 1,156.1 | 748.8 | — | ||||||||||||||||||||||||
| Operating expenses | (2,587.5) | (1,121.5) | (719.2) | (593.2) | (153.6) | ||||||||||||||||||||||||
| Gain on sale of property (a) | 63.1 | — | 63.1 | — | — | ||||||||||||||||||||||||
| Operating profit (loss) | 1,206.6 | 704.6 | 500.0 | 155.6 | (153.6) | ||||||||||||||||||||||||
| Non-operating income (expense), net | |||||||||||||||||||||||||||||
| Interest expense, net | (152.8) | — | — | — | (152.8) | ||||||||||||||||||||||||
| Loss from divestiture (a) | (25.6) | — | — | — | (25.6) | ||||||||||||||||||||||||
| Other non-operating expense, net | (58.6) | — | — | — | (58.6) | ||||||||||||||||||||||||
| Earnings before income taxes | $ | 969.6 | $ | 704.6 | $ | 500.0 | $ | 155.6 | $ | (390.6) | |||||||||||||||||||
| Depreciation and amortization expenses | $ | (543.9) | $ | (228.8) | $ | (113.0) | $ | (201.2) | $ | (0.9) | |||||||||||||||||||
| Capital expenditure | $ | (120.4) | $ | (67.6) | $ | (34.3) | $ | (15.6) | $ | (2.9) | |||||||||||||||||||
| (a) Refer to Note 4 and Note 3, respectively, for further detail on Gain on sale of property, and Loss from divestiture. |
Segment results for the year ended December 31, 2023 are shown below ($ in millions):
| Total | Intelligent Operating Solutions | Precision Technologies | Advanced Healthcare Solutions | Unallocated Corporate Costs and Other | |||||||||||||||||||||||||
| Sales | $ | 6,065.3 | $ | 2,612.2 | $ | 2,223.7 | $ | 1,229.4 | $ | — | |||||||||||||||||||
| Cost of sales | (2,471.2) | (875.1) | (1,064.7) | (531.4) | — | ||||||||||||||||||||||||
| Gross profit | 3,594.1 | 1,737.1 | 1,159.0 | 698.0 | — | ||||||||||||||||||||||||
| Operating expenses | (2,460.4) | (1,108.3) | (614.8) | (596.4) | (140.9) | ||||||||||||||||||||||||
| Operating profit (loss) | 1,133.7 | 628.8 | 544.2 | 101.6 | (140.9) | ||||||||||||||||||||||||
| Non-operating income (expense), net | |||||||||||||||||||||||||||||
| Interest expense, net | (123.5) | — | — | — | (123.5) | ||||||||||||||||||||||||
| Other non-operating expense, net | (19.4) | — | — | — | (19.4) | ||||||||||||||||||||||||
| Earnings before income taxes | $ | 990.8 | $ | 628.8 | $ | 544.2 | $ | 101.6 | $ | (283.8) | |||||||||||||||||||
| Depreciation and amortization expenses | $ | (456.8) | $ | (219.4) | $ | (30.8) | $ | (202.6) | $ | (4.0) | |||||||||||||||||||
| Capital expenditure | $ | (107.8) | $ | (55.7) | $ | (29.1) | $ | (17.7) | $ | (5.3) |
Segment results for the year ended December 31, 2022 are shown below ($ in millions):
| Total | Intelligent Operating Solutions | Precision Technologies | Advanced Healthcare Solutions | Unallocated Corporate Costs and Other | |||||||||||||||||||||||||
| Sales | $ | 5,825.7 | $ | 2,466.1 | $ | 2,152.3 | $ | 1,207.3 | $ | — | |||||||||||||||||||
| Cost of sales | (2,462.3) | (863.5) | (1,066.9) | (531.9) | — | ||||||||||||||||||||||||
| Gross profit | 3,363.4 | 1,602.6 | 1,085.4 | 675.4 | — | ||||||||||||||||||||||||
| Operating expenses | (2,358.1) | (1,083.2) | (581.8) | (579.8) | (113.3) | ||||||||||||||||||||||||
| Russia exit and wind down costs (a) | (17.9) | — | — | — | (17.9) | ||||||||||||||||||||||||
| Operating profit (loss) | 987.4 | 519.4 | 503.6 | 95.6 | (131.2) | ||||||||||||||||||||||||
| Non-operating income (expense), net | |||||||||||||||||||||||||||||
| Interest expense, net | (98.3) | — | — | — | (98.3) | ||||||||||||||||||||||||
| Other non-operating expense, net | (15.6) | — | — | — | (15.6) | ||||||||||||||||||||||||
| Earnings before income taxes | $ | 873.5 | $ | 519.4 | $ | 503.6 | $ | 95.6 | $ | (245.1) | |||||||||||||||||||
| Depreciation and amortization expenses | $ | (465.6) | $ | (218.3) | $ | (38.3) | $ | (205.2) | $ | (3.8) | |||||||||||||||||||
| Capital expenditure | $ | (95.8) | $ | (36.7) | $ | (30.8) | $ | (15.8) | $ | (12.5) | |||||||||||||||||||
| (a) Refer to Note 1 for further detail on Russia exit and wind down costs. |
Segment Assets:
| As of December 31, | |||||||||||||||||
| ($ in millions) | 2024 | 2023 | |||||||||||||||
| Intelligent Operating Solutions | $ | 6,320.1 | $ | 6,550.0 | |||||||||||||
| Precision Technologies | 4,691.9 | 3,064.3 | |||||||||||||||
| Advanced Healthcare Solutions | 5,008.6 | 5,211.7 | |||||||||||||||
| Total segment assets | 16,020.6 | 14,826.0 | |||||||||||||||
| Other (a) | 995.5 | 2,085.8 | |||||||||||||||
| Total assets | $ | 17,016.1 | $ | 16,911.8 | |||||||||||||
| (a) Other represents corporate assets which consist primarily of cash, property, plant, and equipment, and net deferred income tax assets. |
Operations in Geographic Areas:
| As of December 31, | |||||||||||||||||
| ($ in millions) | 2024 | 2023 | |||||||||||||||
| Property, plant and equipment, net: | |||||||||||||||||
| United States | $ | 338.8 | $ | 369.0 | |||||||||||||
| All other | 94.3 | 70.8 | |||||||||||||||
| Total | $ | 433.1 | $ | 439.8 |
Previous: Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK · Next: Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE