(Mark One) | |
ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. |
For the quarterly period ended: September 29, 2017 | |
Or | |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to | |
Commission file number 1-37654 |
Delaware | 47-5654583 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. employer identification number) | |
6920 Seaway Blvd Everett, WA | 98203 | |
(Address of principal executive offices) | (Zip code) |
Large accelerated filer ¨ | Accelerated filer ¨ | |||
Non-accelerated filer x | (Do not check if a smaller reporting company) | Smaller reporting company ¨ | ||
Emerging growth company ¨ |
PART I - | FINANCIAL INFORMATION | Page |
Item 1. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
PART II - | OTHER INFORMATION | |
Item 1A. | ||
Item 6. | ||
As of | |||||||
September 29, 2017 | December 31, 2016 | ||||||
(unaudited) | |||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and equivalents | $ | 910.9 | $ | 803.2 | |||
Accounts receivable, net | 1,075.1 | 945.4 | |||||
Inventories: | |||||||
Finished goods | 209.5 | 198.3 | |||||
Work in process | 86.1 | 79.3 | |||||
Raw materials | 280.6 | 267.0 | |||||
Total inventories | 576.2 | 544.6 | |||||
Prepaid expenses and other current assets | 133.1 | 195.5 | |||||
Total current assets | 2,695.3 | 2,488.7 | |||||
Property, plant and equipment, net of accumulated depreciation of $1,072.6 and $1,004.2 at September 29, 2017 and December 31, 2016, respectively | 673.2 | 547.6 | |||||
Other assets | 440.1 | 427.2 | |||||
Goodwill | 4,632.3 | 3,979.0 | |||||
Other intangible assets, net | 886.1 | 747.3 | |||||
Total assets | $ | 9,327.0 | $ | 8,189.8 | |||
LIABILITIES AND EQUITY | |||||||
Current liabilities: | |||||||
Trade accounts payable | $ | 646.1 | $ | 666.2 | |||
Accrued expenses and other current liabilities | 733.2 | 800.3 | |||||
Total current liabilities | 1,379.3 | 1,466.5 | |||||
Other long-term liabilities | 797.5 | 674.3 | |||||
Long-term debt | 3,671.9 | 3,358.0 | |||||
Equity: | |||||||
Preferred stock: $0.01 par value, 15 million shares authorized; no shares issued or outstanding | — | — | |||||
Common stock: $0.01 par value, 2.0 billion shares authorized; 347.9 million and 346.0 million issued; 347.5 million and 345.9 million outstanding at September 29, 2017 and December 31,2016, respectively | 3.5 | 3.5 | |||||
Additional paid-in capital | 2,449.2 | 2,427.2 | |||||
Retained earnings | 1,037.8 | 403.0 | |||||
Accumulated other comprehensive income (loss) | (16.3 | ) | (145.8 | ) | |||
Total Fortive stockholders’ equity | 3,474.2 | 2,687.9 | |||||
Noncontrolling interests | 4.1 | 3.1 | |||||
Total stockholders’ equity | 3,478.3 | 2,691.0 | |||||
Total liabilities and equity | $ | 9,327.0 | $ | 8,189.8 |
Three Months Ended | Nine Months Ended | ||||||||||||||
September 29, 2017 | September 30, 2016 | September 29, 2017 | September 30, 2016 | ||||||||||||
Sales | $ | 1,685.3 | $ | 1,567.4 | $ | 4,849.3 | $ | 4,597.2 | |||||||
Cost of sales | (845.9 | ) | (794.5 | ) | (2,460.8 | ) | (2,361.0 | ) | |||||||
Gross profit | 839.4 | 772.9 | 2,388.5 | 2,236.2 | |||||||||||
Operating costs: | |||||||||||||||
Selling, general and administrative expenses | (381.5 | ) | (354.5 | ) | (1,092.1 | ) | (1,042.3 | ) | |||||||
Research and development expenses | (102.0 | ) | (95.2 | ) | (297.3 | ) | (285.6 | ) | |||||||
Operating profit | 355.9 | 323.2 | 999.1 | 908.3 | |||||||||||
Non-operating expense: | |||||||||||||||
Gain from acquisition | 15.3 | — | 15.3 | — | |||||||||||
Interest expense | (22.9 | ) | (23.4 | ) | (68.2 | ) | (26.1 | ) | |||||||
Earnings before income taxes | 348.3 | 299.8 | 946.2 | 882.2 | |||||||||||
Income taxes | (80.5 | ) | (72.9 | ) | (238.6 | ) | (234.4 | ) | |||||||
Net earnings | $ | 267.8 | $ | 226.9 | $ | 707.6 | $ | 647.8 | |||||||
Net earnings per share: | |||||||||||||||
Basic | $ | 0.77 | $ | 0.66 | $ | 2.04 | $ | 1.87 | |||||||
Diluted | $ | 0.76 | $ | 0.65 | $ | 2.01 | $ | 1.87 | |||||||
Average common stock and common equivalent shares outstanding: | |||||||||||||||
Basic | 347.7 | 346.0 | 347.3 | 345.5 | |||||||||||
Diluted | 352.9 | 349.2 | 352.2 | 346.6 |
Three Months Ended | Nine Months Ended | ||||||||||||||
September 29, 2017 | September 30, 2016 | September 29, 2017 | September 30, 2016 | ||||||||||||
Net earnings | $ | 267.8 | $ | 226.9 | $ | 707.6 | $ | 647.8 | |||||||
Other comprehensive income (loss), net of income taxes: | |||||||||||||||
Foreign currency translation adjustments | 38.1 | (25.7 | ) | 126.9 | (14.2 | ) | |||||||||
Pension adjustments | 0.9 | 1.0 | 2.6 | 3.1 | |||||||||||
Total other comprehensive income (loss), net of income taxes | 39.0 | (24.7 | ) | 129.5 | (11.1 | ) | |||||||||
Comprehensive income | $ | 306.8 | $ | 202.2 | $ | 837.1 | $ | 636.7 |
Common Stock | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Noncontrolling Interests | ||||||||||||||||||
Shares | Amount | |||||||||||||||||||||
Balance, December 31, 2016 | 345.9 | $ | 3.5 | $ | 2,427.2 | $ | 403.0 | $ | (145.8 | ) | $ | 3.1 | ||||||||||
Net earnings for the period | — | — | — | 707.6 | — | — | ||||||||||||||||
Dividends to shareholders | — | — | — | (72.8 | ) | — | — | |||||||||||||||
Separation related adjustments | — | — | (29.3 | ) | — | — | — | |||||||||||||||
Other comprehensive income | — | — | — | — | 129.5 | — | ||||||||||||||||
Common stock-based award activity | 1.6 | — | 51.3 | — | — | — | ||||||||||||||||
Change in noncontrolling interests | — | — | — | — | — | 1.0 | ||||||||||||||||
Balance, September 29, 2017 | 347.5 | $ | 3.5 | $ | 2,449.2 | $ | 1,037.8 | $ | (16.3 | ) | $ | 4.1 |
Nine Months Ended | |||||||
September 29, 2017 | September 30, 2016 | ||||||
Cash flows from operating activities: | |||||||
Net earnings | $ | 707.6 | $ | 647.8 | |||
Noncash items: | |||||||
Depreciation | 72.4 | 66.7 | |||||
Amortization | 41.3 | 67.2 | |||||
Stock-based compensation expense | 37.2 | 34.4 | |||||
Gain from acquisition | (15.3 | ) | — | ||||
Impairment charge on intangible assets | — | 3.5 | |||||
Change in accounts receivable, net | (30.8 | ) | 9.9 | ||||
Change in inventories | 8.2 | (34.9 | ) | ||||
Change in trade accounts payable | (51.2 | ) | (37.4 | ) | |||
Change in prepaid expenses and other assets | (17.9 | ) | (13.3 | ) | |||
Change in accrued expenses and other liabilities | (38.5 | ) | 75.5 | ||||
Net cash provided by operating activities | 713.0 | 819.4 | |||||
Cash flows from investing activities: | |||||||
Cash paid for acquisitions | (802.1 | ) | (190.6 | ) | |||
Payments for additions to property, plant and equipment | (87.7 | ) | (90.0 | ) | |||
All other investing activities | 1.5 | 4.3 | |||||
Net cash used in investing activities | (888.3 | ) | (276.3 | ) | |||
Cash flows from financing activities: | |||||||
Net proceeds from borrowings (maturities of 90 days or less) | 176.8 | 525.6 | |||||
Proceeds from borrowings (maturities longer than 90 days) | 125.9 | 2,983.0 | |||||
Payment of dividends | (72.8 | ) | (24.2 | ) | |||
Cash dividend paid to Former Parent | — | (3,000.0 | ) | ||||
Net transfers to Former Parent | — | (301.4 | ) | ||||
All other financing activities | 10.9 | (2.2 | ) | ||||
Net cash provided by financing activities | 240.8 | 180.8 | |||||
Effect of exchange rate changes on cash and equivalents | 42.2 | 0.9 | |||||
Net change in cash and equivalents | 107.7 | 724.8 | |||||
Beginning balance of cash and equivalents | 803.2 | — | |||||
Ending balance of cash and equivalents | $ | 910.9 | $ | 724.8 |
• | The Consolidated Condensed Balance Sheets at September 29, 2017 and December 31, 2016 consist of our consolidated balances. |
• | The Consolidated Condensed Statements of Earnings and Statements of Comprehensive Income for the three and nine months ended September 29, 2017 and the three months ended September 30, 2016 consist of our consolidated results. |
• | The Consolidated Condensed Statement of Changes in Equity and Statement of Cash Flows for the nine months ended September 29, 2017 consist of our consolidated results. |
• | The Consolidated and Combined Condensed Statement of Earnings, Statement of Comprehensive Income and Statement of Cash Flows for the nine months ended September 30, 2016 consist of our consolidated activity for the three months ended September 30, 2016 and the combined results of the Fortive Businesses for the six months ended July 1, 2016. |
Foreign currency translation adjustments | Pension & post- retirement plan benefit adjustments (b) | Total | |||||||||
For the Three Months Ended September 29, 2017: | |||||||||||
Balance, June 30, 2017 | $ | 16.2 | $ | (71.5 | ) | $ | (55.3 | ) | |||
Other comprehensive income (loss) before reclassifications, net of income taxes | 38.1 | — | 38.1 | ||||||||
Amounts reclassified from accumulated other comprehensive income (loss): | |||||||||||
Increase (decrease) | — | 1.2 | (a) | 1.2 | |||||||
Income tax impact | — | (0.3 | ) | (0.3 | ) | ||||||
Amounts reclassified from accumulated other comprehensive income (loss), net of income taxes | — | 0.9 | 0.9 | ||||||||
Net current period other comprehensive income (loss), net of income taxes | 38.1 | 0.9 | 39.0 | ||||||||
Balance, September 29, 2017 | $ | 54.3 | $ | (70.6 | ) | $ | (16.3 | ) | |||
For the Three Months Ended September 30, 2016: | |||||||||||
Balance, July 1, 2016 | $ | 62.7 | $ | (63.5 | ) | $ | (0.8 | ) | |||
Other comprehensive income (loss) before reclassifications, net of income taxes | (25.7 | ) | — | (25.7 | ) | ||||||
Amounts reclassified from accumulated other comprehensive income (loss): | |||||||||||
Increase (decrease) | — | 1.3 | (a) | 1.3 | |||||||
Income tax impact | — | (0.3 | ) | (0.3 | ) | ||||||
Amounts reclassified from accumulated other comprehensive income (loss), net of income taxes | — | 1.0 | 1.0 | ||||||||
Net current period other comprehensive income (loss), net of income taxes | (25.7 | ) | 1.0 | (24.7 | ) | ||||||
Balance, September 30, 2016 | $ | 37.0 | $ | (62.5 | ) | $ | (25.5 | ) | |||
For the Nine Months Ended September 29, 2017: | |||||||||||
Balance, December 31, 2016 | $ | (72.6 | ) | $ | (73.2 | ) | $ | (145.8 | ) | ||
Other comprehensive income (loss) before reclassifications, net of income taxes | 126.9 | — | 126.9 | ||||||||
Amounts reclassified from accumulated other comprehensive income (loss): | |||||||||||
Increase (decrease) | — | 3.4 | (a) | 3.4 | |||||||
Income tax impact | — | (0.8 | ) | (0.8 | ) | ||||||
Amounts reclassified from accumulated other comprehensive income (loss), net of income taxes | — | 2.6 | 2.6 | ||||||||
Net current period other comprehensive income (loss) | 126.9 | 2.6 | 129.5 | ||||||||
Balance, September 29, 2017 | $ | 54.3 | $ | (70.6 | ) | $ | (16.3 | ) |
Foreign currency translation adjustments | Pension & post- retirement plan benefit adjustments (b) | Total | |||||||||
For the Nine Months Ended September 30, 2016: | |||||||||||
Balance, December 31, 2015 | $ | 51.2 | $ | (65.6 | ) | $ | (14.4 | ) | |||
Other comprehensive income (loss) before reclassifications, net of income taxes | (14.2 | ) | — | (14.2 | ) | ||||||
Amounts reclassified from accumulated other comprehensive income (loss): | |||||||||||
Increase | — | 4.1 | (a) | 4.1 | |||||||
Income tax impact | — | (1.0 | ) | (1.0 | ) | ||||||
Amounts reclassified from accumulated other comprehensive income (loss), net of income taxes | — | 3.1 | 3.1 | ||||||||
Net current period other comprehensive income (loss) | (14.2 | ) | 3.1 | (11.1 | ) | ||||||
Balance, September 30, 2016 | $ | 37.0 | $ | (62.5 | ) | $ | (25.5 | ) | |||
(a) This accumulated other comprehensive income (loss) component is included in the computation of net periodic pension cost (refer to Note 6 for additional details). | |||||||||||
(b) Includes balances relating to non-U.S. employee defined benefit plans, supplemental executive retirement plans and other postretirement employee benefit plans. |
Accounts receivable | $ | 73.3 | |
Inventories | 27.8 | ||
Property, plant and equipment | 99.7 | ||
Goodwill | 576.3 | ||
Other intangible assets, primarily customer relationships, trade names and technology | 172.4 | ||
Trade accounts payable | (15.6 | ) | |
Other assets and liabilities, net | (95.0 | ) | |
Previously held investment | (36.8 | ) | |
Net cash consideration | $ | 802.1 |
Balance, December 31, 2016 | $ | 3,979.0 | |
Attributable to 2017 acquisitions | 576.3 | ||
Foreign currency translation & other | 77.0 | ||
Balance, September 29, 2017 | $ | 4,632.3 |
September 29, 2017 | December 31, 2016 | ||||||
Professional Instrumentation | $ | 2,863.8 | $ | 2,423.7 | |||
Industrial Technologies | 1,768.5 | 1,555.3 | |||||
Total goodwill | $ | 4,632.3 | $ | 3,979.0 |
Quoted Prices in Active Market (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | ||||||||||||
September 29, 2017 | |||||||||||||||
Deferred compensation liabilities | $ | — | $ | 19.7 | $ | — | $ | 19.7 | |||||||
December 31, 2016 | |||||||||||||||
Deferred compensation liabilities | $ | — | $ | 14.8 | $ | — | $ | 14.8 |
September 29, 2017 | December 31, 2016 | ||||||||||||||
Carrying Amount | Fair Value | Carrying Amount | Fair Value | ||||||||||||
Long-term borrowings | $ | 3,671.9 | $ | 3,680.4 | $ | 3,358.0 | $ | 3,321.4 |
September 29, 2017 | December 31, 2016 | ||||||
U.S. dollar-denominated commercial paper | $ | 285.8 | $ | 347.9 | |||
Euro-denominated commercial paper | 278.3 | 26.8 | |||||
U.S. dollar variable interest rate term loan due 2019 | 500.0 | 500.0 | |||||
Yen variable interest rate term loan due 2022 | 122.5 | — | |||||
1.80% senior unsecured notes due 2019 | 298.8 | 298.3 | |||||
2.35% senior unsecured notes due 2021 | 745.6 | 744.8 | |||||
3.15% senior unsecured notes due 2026 | 890.7 | 890.1 | |||||
4.30% senior unsecured notes due 2046 | 546.7 | 546.8 | |||||
Other | 3.5 | 3.3 | |||||
Long-term debt | $ | 3,671.9 | $ | 3,358.0 |
Carrying Value | Weighted average annual interest rate | Weighted average remaining maturity (in days) | ||||||
U.S. dollar-denominated | $ | 285.8 | 1.44 | % | 11 | |||
Euro-denominated | $ | 278.3 | (0.08 | )% | 72 |
Three Months Ended | Nine Months Ended | ||||||||||||||
September 29, 2017 | September 30, 2016 | September 29, 2017 | September 30, 2016 | ||||||||||||
Service cost | $ | 1.1 | $ | 0.9 | $ | 3.1 | $ | 2.6 | |||||||
Interest cost | 1.5 | 1.8 | 4.4 | 5.6 | |||||||||||
Expected return on plan assets | (1.9 | ) | (2.0 | ) | (5.5 | ) | (6.1 | ) | |||||||
Amortization of net loss | 1.2 | 1.3 | 3.4 | 4.1 | |||||||||||
Net periodic pension cost | $ | 1.9 | $ | 2.0 | $ | 5.4 | $ | 6.2 |
Three Months Ended | Nine Months Ended | ||||||||||||||
September 29, 2017 | September 30, 2016 | September 29, 2017 | September 30, 2016 | ||||||||||||
Stock Awards: | |||||||||||||||
Pretax compensation expense | $ | 7.2 | $ | 7.3 | $ | 22.6 | $ | 21.5 | |||||||
Income tax benefit | (2.4 | ) | (2.3 | ) | (8.0 | ) | (7.1 | ) | |||||||
Stock Award expense, net of income taxes | 4.8 | 5.0 | 14.6 | 14.4 | |||||||||||
Stock options: | |||||||||||||||
Pretax compensation expense | 4.7 | 4.7 | 14.6 | 12.9 | |||||||||||
Income tax benefit | (1.6 | ) | (1.6 | ) | (5.0 | ) | (4.4 | ) | |||||||
Stock option expense, net of income taxes | 3.1 | 3.1 | 9.6 | 8.5 | |||||||||||
Total stock-based compensation: | |||||||||||||||
Pretax compensation expense | 11.9 | 12.0 | 37.2 | 34.4 | |||||||||||
Income tax benefit | (4.0 | ) | (3.9 | ) | (13.0 | ) | (11.5 | ) | |||||||
Total stock-based compensation expense, net of income taxes | $ | 7.9 | $ | 8.1 | $ | 24.2 | $ | 22.9 |
Stock Awards | $ | 45.2 | |
Stock options | 44.8 | ||
Total unrecognized compensation cost | $ | 90.0 |
Risk-free interest rate | 1.90% - 2.26% | |
Weighted average volatility (a) | 21.0 | % |
Dividend yield | 0.5 | % |
Expected years until exercise | 5.5 - 8.0 | |
(a) Weighted average volatility was estimated based on an average historical stock price volatility of a group of peer companies, given our limited trading history. |
Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (in years) | Aggregate Intrinsic Value | |||||||||
Outstanding as of December 31, 2016 | 10.7 | $ | 33.23 | |||||||||
Granted | 1.8 | 57.55 | ||||||||||
Exercised | (1.0 | ) | 25.09 | |||||||||
Canceled/forfeited | (0.3 | ) | 44.87 | |||||||||
Outstanding as of September 29, 2017 | 11.2 | $ | 37.65 | 6.5 | $ | 370.9 | ||||||
Vested and expected to vest as of September 29, 2017 (a) | 10.8 | $ | 37.23 | 6.5 | $ | 362.6 | ||||||
Vested as of September 29, 2017 | 5.4 | $ | 28.23 | 4.7 | $ | 229.3 | ||||||
(a) The “expected to vest” options are the net unvested options that remain after applying the forfeiture rate assumption to total unvested options. |
Number of Stock Awards | Weighted Average Grant-Date Fair Value | |||||
Unvested as of December 31, 2016 | 2.2 | $ | 39.20 | |||
Granted | 0.6 | 57.04 | ||||
Vested | (0.6 | ) | 35.70 | |||
Forfeited | (0.1 | ) | 43.65 | |||
Unvested as of September 29, 2017 | 2.1 | $ | 45.32 |
Balance, December 31, 2016 | $ | 65.0 | |
Accruals for warranties issued during the period | 56.3 | ||
Settlements made | (54.8 | ) | |
Additions due to acquisitions | 1.6 | ||
Effect of foreign currency translation | 0.2 | ||
Balance, September 29, 2017 | $ | 68.3 |
Net Earnings (Numerator) | Shares (Denominator) | Per Share Amount | ||||||||
For the Three Months Ended September 29, 2017: | ||||||||||
Basic EPS | $ | 267.8 | 347.7 | $ | 0.77 | |||||
Incremental shares from assumed exercise of dilutive options and vesting of dilutive Stock Awards | — | 5.2 | ||||||||
Diluted EPS | $ | 267.8 | 352.9 | $ | 0.76 | |||||
For the Three Months Ended September 30, 2016: | ||||||||||
Basic EPS | $ | 226.9 | 346.0 | $ | 0.66 | |||||
Incremental shares from assumed issuance of shares under stock-based compensation plans | — | 3.2 | ||||||||
Diluted EPS | $ | 226.9 | 349.2 | $ | 0.65 | |||||
For the Nine Months Ended September 29, 2017: | ||||||||||
Basic EPS | $ | 707.6 | 347.3 | $ | 2.04 | |||||
Incremental shares from assumed exercise of dilutive options and vesting of dilutive Stock Awards | — | 4.9 | ||||||||
Diluted EPS | $ | 707.6 | 352.2 | $ | 2.01 | |||||
For the Nine Months Ended September 30, 2016: | ||||||||||
Basic EPS | $ | 647.8 | 345.5 | $ | 1.87 | |||||
Incremental shares from assumed issuance of shares under stock-based compensation plans | — | 1.1 | ||||||||
Diluted EPS | $ | 647.8 | 346.6 | $ | 1.87 |
Three Months Ended | Nine Months Ended | ||||||||||||||
September 29, 2017 | September 30, 2016 | September 29, 2017 | September 30, 2016 | ||||||||||||
Sales: | |||||||||||||||
Professional Instrumentation | $ | 786.8 | $ | 723.5 | $ | 2,261.9 | $ | 2,145.1 | |||||||
Industrial Technologies | 898.5 | 843.9 | 2,587.4 | 2,452.1 | |||||||||||
Total | $ | 1,685.3 | $ | 1,567.4 | $ | 4,849.3 | $ | 4,597.2 | |||||||
Operating Profit: | |||||||||||||||
Professional Instrumentation | $ | 178.6 | $ | 161.5 | $ | 521.5 | $ | 469.9 | |||||||
Industrial Technologies | 196.2 | 180.6 | 530.3 | 484.7 | |||||||||||
Other | (18.9 | ) | (18.9 | ) | (52.7 | ) | (46.3 | ) | |||||||
Total | $ | 355.9 | $ | 323.2 | $ | 999.1 | $ | 908.3 |
September 29, 2017 | December 31, 2016 | ||||||
Professional Instrumentation | $ | 4,661.7 | $ | 3,905.2 | |||
Industrial Technologies | 3,735.1 | 3,294.8 | |||||
Other | 930.2 | 989.8 | |||||
Total | $ | 9,327.0 | $ | 8,189.8 |
• | Information Relating to Forward-Looking Statements |
• | Basis of Presentation |
• | Overview |
• | Results of Operations |
• | Liquidity and Capital Resources |
• | Critical Accounting Estimates |
• | Conditions in the global economy, the markets we serve and the financial markets may adversely affect our business and financial statements. |
• | Our growth could suffer if the markets into which we sell our products, software and services decline, do not grow as anticipated or experience cyclicality. |
• | We face intense competition and if we are unable to compete effectively, we may experience decreased demand and decreased market share. Even if we compete effectively, we may be required to reduce prices for our products, software and services. |
• | Changes in industry standards, governmental regulations and applicable laws may reduce demand for our products, software or services or increase our expenses. |
• | Any inability to consummate acquisitions at our historical rate and at appropriate prices could negatively impact our growth rate and stock price. |
• | Our growth depends in part on the timely development and commercialization, and customer acceptance, of new and enhanced products, software and services based on technological innovation. |
• | Our reputation, ability to do business and financial statements may be impaired by improper conduct by any of our employees, agents or business partners. |
• | Our acquisition of businesses, joint ventures and strategic relationships could negatively impact our financial statements. |
• | The indemnification provisions of acquisition agreements by which we have acquired companies may not fully protect us and as a result we may face unexpected liabilities. |
• | Divestitures or other dispositions could negatively impact our business, and contingent liabilities from businesses that we have sold could adversely affect our financial statements. |
• | Our operations, products and services expose us to the risk of environmental, health and safety liabilities, costs and violations that could adversely affect our reputation, business and financial statements. |
• | Our businesses are subject to extensive regulation; failure to comply with those regulations could adversely affect our business, financial statements and reputation. |
• | International economic, trade, political, legal, compliance and business factors could negatively affect our business and financial statements. |
• | We may be required to recognize impairment charges for our goodwill and other intangible assets. |
• | Foreign currency exchange rates may adversely affect our financial statements. |
• | Changes in our tax rates or exposure to additional income tax liabilities or assessments could affect our profitability. In addition, audits by tax authorities could result in additional tax payments for prior periods. |
• | We have incurred a significant amount of debt, and our debt will increase further if we incur additional debt and do not retire existing debt. |
• | We are subject to a variety of litigation and other legal and regulatory proceedings in the course of our business that could adversely affect our financial statements. |
• | If we do not or cannot adequately protect our intellectual property, or if third parties infringe our intellectual property rights, we may suffer competitive injury or expend significant resources enforcing our rights. |
• | Third parties may claim that we are infringing or misappropriating their intellectual property rights and we could suffer significant litigation expenses, losses or licensing expenses or be prevented from selling products, software or services. |
• | Defects and unanticipated use or inadequate disclosure with respect to our products, software or services could adversely affect our business, reputation and financial statements. |
• | Adverse changes in our relationships with, or the financial condition, performance, purchasing patterns or inventory levels of, key distributors and other channel partners could adversely affect our financial statements. |
• | Our financial results are subject to fluctuations in the cost and availability of commodities that we use in our operations. |
• | If we cannot adjust our manufacturing capacity or the purchases required for our manufacturing activities to reflect changes in market conditions and customer demand, our profitability may suffer. In addition, our reliance upon sole or limited sources of supply for certain materials, components and services could cause production interruptions, delays and inefficiencies. |
• | A significant disruption in, or breach in security of, information technology systems we use could adversely affect our business. |
• | Our restructuring actions could have long-term adverse effects on our business. |
• | Work stoppages, union and works council campaigns and other labor disputes could adversely impact our productivity and results of operations. |
• | If we suffer loss to our facilities, supply chains, distribution systems or information technology systems due to catastrophe or other events, our operations could be seriously harmed. |
• | Certain provisions in our amended and restated certificate of incorporation and bylaws, and of Delaware law, may prevent or delay an acquisition of our company, which could decrease the trading price of our common stock. |
• | Our amended and restated certificate of incorporation designates the state courts in the State of Delaware or, if no state court located within the State of Delaware has jurisdiction, the federal court for the District of Delaware, as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our shareholders which could discourage lawsuits against us and our directors and officers. |
• | As an independent, publicly traded company, we may not enjoy the same benefits that we did as a part of Danaher Corporation (“Danaher” or “Former Parent”). |
• | Potential indemnification liabilities to Danaher pursuant to our separation agreement with Danaher could materially and adversely affect our businesses, financial condition, results of operations and cash flows. |
• | In connection with our separation from Danaher, Danaher has indemnified us for certain liabilities. However, there can be no assurance that the indemnity will be sufficient to insure us against the full amount of such liabilities, or that Danaher’s ability to satisfy its indemnification obligation will not be impaired in the future. |
• | There could be significant liability if the separation from Danaher fails to qualify as a tax-free transaction for U.S. federal income tax purposes. |
• | We may not be able to engage in certain corporate transactions for a two-year period after the separation from Danaher on July 2, 2016. |
% Change Three Months Ended September 29, 2017 vs. Comparable 2016 Period | % Change Nine Months Ended September 29, 2017 vs. Comparable 2016 Period | ||||
Total revenue growth (GAAP) | 7.5 | % | 5.5 | % | |
Existing businesses (Non-GAAP) | 4.8 | % | 5.1 | % | |
Acquisitions (a) (Non-GAAP) | 1.8 | % | 0.8 | % | |
Currency exchange rates (Non-GAAP) | 0.9 | % | (0.4 | )% | |
(a) This includes the impact from both acquisitions and the Separation |
• | Higher 2017 sales volumes, incremental year-over-year cost savings associated with restructuring and productivity improvement initiatives, lower year-over-year intangible asset amortization due to certain intangible assets, primarily in our Professional Instrumentation segment, being fully amortized and changes in currency exchange rates, net of the incremental year-over-year costs associated with various product development and sales and marketing growth investments — 150 basis points |
• | Acquisition related transaction costs — 70 basis points |
• | The incremental year-over-year net dilutive effect of acquired businesses — 30 basis points |
• | Higher 2017 sales volumes, incremental year-over-year cost savings associated with restructuring and productivity improvement initiatives, lower year-over-year intangible asset amortization due to certain intangible assets, primarily in our Professional Instrumentation segment, being fully amortized and costs associated with various growth investments made in 2016, net of the incremental year-over-year costs associated with various product development and sales and marketing growth investments, increased general and administrative costs required to operate as a stand-alone public company and changes in currency exchange rates — 130 basis points |
• | Acquisition related transaction costs — 20 basis points |
• | The incremental year-over-year net dilutive effect of acquired businesses — 30 basis points |
Three Months Ended | Nine Months Ended | ||||||||||||||
September 29, 2017 | September 30, 2016 | September 29, 2017 | September 30, 2016 | ||||||||||||
Professional Instrumentation | $ | 786.8 | $ | 723.5 | $ | 2,261.9 | $ | 2,145.1 | |||||||
Industrial Technologies | 898.5 | 843.9 | 2,587.4 | 2,452.1 | |||||||||||
Total | $ | 1,685.3 | $ | 1,567.4 | $ | 4,849.3 | $ | 4,597.2 |
Three Months Ended | Nine Months Ended | ||||||||||||||
($ in millions) | September 29, 2017 | September 30, 2016 | September 29, 2017 | September 30, 2016 | |||||||||||
Sales | $ | 786.8 | $ | 723.5 | $ | 2,261.9 | $ | 2,145.1 | |||||||
Operating profit | 178.6 | 161.5 | 521.5 | 469.9 | |||||||||||
Depreciation | 10.0 | 8.7 | 27.5 | 26.6 | |||||||||||
Amortization | 8.4 | 17.0 | 23.9 | 50.9 | |||||||||||
Operating profit as a % of sales | 22.7 | % | 22.3 | % | 23.1 | % | 21.9 | % | |||||||
Depreciation as a % of sales | 1.3 | % | 1.2 | % | 1.2 | % | 1.2 | % | |||||||
Amortization as a % of sales | 1.1 | % | 2.3 | % | 1.1 | % | 2.4 | % |
% Change Three Months Ended September 29, 2017 vs. Comparable 2016 Period | % Change Nine Months Ended September 29, 2017 vs. Comparable 2016 Period | ||||
Total revenue growth (GAAP) | 8.7 | % | 5.4 | % | |
Existing businesses (Non-GAAP) | 5.3 | % | 5.5 | % | |
Acquisitions (a) (Non-GAAP) | 2.7 | % | 0.5 | % | |
Currency exchange rates (Non-GAAP) | 0.7 | % | (0.6 | )% | |
(a) This includes the impact from both acquisitions and the Separation |
• | Higher 2017 sales volumes, incremental year-over-year cost savings associated with restructuring and productivity improvement initiatives, lower year-over-year intangible asset amortization due to certain intangible assets being fully amortized and changes in currency exchange rates net of incremental year-over-year costs associated with various product development and sales and marketing growth investments — 240 basis points |
• | Acquisition related transaction costs — 140 basis points |
• | The incremental year-over-year net dilutive effect of acquired businesses — 60 basis points |
• | Higher 2017 sales volumes, incremental year-over-year cost savings associated with restructuring and productivity improvement initiatives, and lower year-over-year intangible asset amortization due to certain intangible assets being fully amortized, net of incremental year-over-year costs associated with various product development and sales and marketing growth investments, the positive impact in 2016 of a transition services agreement related to a disposition made by Danaher prior to the Separation, incremental year-over-year bad debt charges and changes in currency exchange rates — 220 basis points |
• | Acquisition related transaction costs — 50 basis points |
• | The incremental year-over-year net dilutive effect of acquired businesses — 50 basis points |
Three Months Ended | Nine Months Ended | ||||||||||||||
($ in millions) | September 29, 2017 | September 30, 2016 | September 29, 2017 | September 30, 2016 | |||||||||||
Sales | $ | 898.5 | $ | 843.9 | $ | 2,587.4 | $ | 2,452.1 | |||||||
Operating profit | 196.2 | 180.6 | 530.3 | 484.7 | |||||||||||
Depreciation | 14.5 | 13.2 | 43.0 | 39.4 | |||||||||||
Amortization | 6.3 | 5.5 | 17.4 | 16.3 | |||||||||||
Operating profit as a % of sales | 21.8 | % | 21.4 | % | 20.5 | % | 19.8 | % | |||||||
Depreciation as a % of sales | 1.6 | % | 1.6 | % | 1.7 | % | 1.6 | % | |||||||
Amortization as a % of sales | 0.7 | % | 0.7 | % | 0.7 | % | 0.7 | % |
% Change Three Months Ended September 29, 2017 vs. Comparable 2016 Period | % Change Nine Months Ended September 29, 2017 vs. Comparable 2016 Period | ||||
Total revenue growth (GAAP) | 6.5 | % | 5.5 | % | |
Existing businesses (Non-GAAP) | 4.4 | % | 4.6 | % | |
Acquisitions (a) (Non-GAAP) | 1.0 | % | 1.1 | % | |
Currency exchange rates (Non-GAAP) | 1.1 | % | (0.2 | )% | |
(a) This includes the impact from both acquisitions and the Separation |
Three Months Ended | Nine Months Ended | ||||||||||||||
($ in millions) | September 29, 2017 | September 30, 2016 | September 29, 2017 | September 30, 2016 | |||||||||||
Sales | $ | 1,685.3 | $ | 1,567.4 | $ | 4,849.3 | $ | 4,597.2 | |||||||
Cost of sales | (845.9 | ) | (794.5 | ) | (2,460.8 | ) | (2,361.0 | ) | |||||||
Gross profit | $ | 839.4 | $ | 772.9 | $ | 2,388.5 | $ | 2,236.2 | |||||||
Gross profit margin | 49.8 | % | 49.3 | % | 49.3 | % | 48.6 | % |
Three Months Ended | Nine Months Ended | ||||||||||||||
($ in millions) | September 29, 2017 | September 30, 2016 | September 29, 2017 | September 30, 2016 | |||||||||||
Sales | $ | 1,685.3 | $ | 1,567.4 | $ | 4,849.3 | $ | 4,597.2 | |||||||
Selling, general and administrative (“SG&A”) expenses | 381.5 | 354.5 | 1,092.1 | 1,042.3 | |||||||||||
Research and development (“R&D”) expenses | 102.0 | 95.2 | 297.3 | 285.6 | |||||||||||
SG&A as a % of sales | 22.6 | % | 22.6 | % | 22.5 | % | 22.7 | % | |||||||
R&D as a % of sales | 6.1 | % | 6.1 | % | 6.1 | % | 6.2 | % |
Nine Months Ended | |||||||
($ in millions) | September 29, 2017 | September 30, 2016 | |||||
Net cash provided by operating activities | $ | 713.0 | $ | 819.4 | |||
Cash paid for acquisitions | $ | (802.1 | ) | $ | (190.6 | ) | |
Payments for additions to property, plant and equipment | (87.7 | ) | (90.0 | ) | |||
All other investing activities | 1.5 | 4.3 | |||||
Net cash used in investing activities | $ | (888.3 | ) | $ | (276.3 | ) | |
Net proceeds from borrowings (maturities of 90 days or less) | $ | 176.8 | $ | 525.6 | |||
Proceeds from borrowings (maturities longer than 90 days) | 125.9 | 2,983.0 | |||||
Payment of dividends | (72.8 | ) | (24.2 | ) | |||
Cash dividend paid to Former Parent | — | (3,000.0 | ) | ||||
Net transfers to Former Parent | — | (301.4 | ) | ||||
All other financing activities | 10.9 | (2.2 | ) | ||||
Net cash provided by financing activities | $ | 240.8 | $ | 180.8 |
• | 2017 operating cash flows benefited from higher net earnings for the first nine months of 2017 as compared to the comparable period in 2016. Net earnings for the nine months ended September 29, 2017 benefited from a year-over-year increase in operating profits of $91 million and a $15 million non-cash gain from acquisition partially offset by a year-over-year increase in interest expense of $42 million associated with debt issued in June 2016 in connection with the Separation. The year-over-year increase in operating profit includes a year-over-year decrease in depreciation and amortization expense of $20 million due primarily to certain intangible assets, primarily in our Professional Instrumentation segment, being fully amortized. Depreciation and amortization are noncash expenses that decrease earnings without a corresponding impact to operating cash flows. |
• | The aggregate of accounts receivable, inventories and trade accounts payable used $74 million of cash during the first nine months of 2017 as compared to providing $62 million of cash in the comparable period of 2016. The amount of cash flow generated from or used by the aggregate of accounts receivable, inventories and trade accounts payable depends upon how effectively we manage the cash conversion cycle, which effectively represents the number of days that elapse from the day we pay for the purchase of raw materials and components to the collection of cash from our customers and can be significantly impacted by the timing of collections and payments in a period. |
• | The aggregate of prepaid expenses and other assets and accrued expenses and other liabilities used $56 million of cash during the first nine months of 2017 as compared to using $62 million of cash in the comparable period of 2016. The timing of cash payments for income taxes and various employee related liabilities drove the majority of this change. For periods prior to the Separation our combined financial statements accounted for income taxes under the separate return method; accordingly our taxes payable during this period was recorded as an adjustment to equity as it did not represent a liability with the relevant taxing authorities as we were a part of Danaher’s tax returns. |
Exhibit Number | Description | |
3.1 | ||
3.2 | ||
10.1 | ||
10.2 | ||
10.3 | ||
11.1 | ||
12.1 | ||
31.1 | ||
31.2 | ||
32.1 | ||
32.2 | ||
101.INS | XBRL Instance Document* - the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. | |
101.SCH | XBRL Taxonomy Extension Schema Document* | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document* | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document* | |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document* | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document* |
* | Attached as Exhibit 101 to this report are the following documents formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Condensed Balance Sheets as of September 29, 2017 and December 31, 2016, (ii) Consolidated and Combined Condensed Statements of Earnings for the three and nine months ended September 29, 2017 and September 30, 2016, (iii) Consolidated and Combined Condensed Statements of Comprehensive Income for the three and nine months ended September 29, 2017 and September 30, 2016, (iv) Consolidated Condensed Statement of Changes in Equity for the nine months ended September 29, 2017, (v) Consolidated and Combined Condensed Statements of Cash Flows for the nine months ended September 29, 2017 and September 30, 2016, and (vi) Notes to Consolidated and Combined Condensed Financial Statements. |
FORTIVE CORPORATION: | ||
Date: October 26, 2017 | By: | /s/ Charles E. McLaughlin |
Charles E. McLaughlin | ||
Senior Vice President and Chief Financial Officer | ||
Date: October 26, 2017 | By: | /s/ Emily A. Weaver |
Emily A. Weaver | ||
Chief Accounting Officer | ||
• | An annual retainer of $100,000 (the “Annual Base Retainer”), payable, based upon election (the “Payment Election”) of such director under the terms of the Fortive Corporation Non-Employee Director’s Deferred Compensation Plan, as may be amended from time to time (“DCP”), in cash (the “Cash Base Retainer”) equal to the Annual Base Retainer amount, in a RSU grant (the “Equity Base Retainer”) with a target award value of the Annual Base Retainer amount, or in a combination of Cash Base Retainer and Equity Base Retainer, with the allocation between Cash Base Retainer and Equity Base Retainer determined based on the Payment Election. |
• | If a director attends more than twenty (20) Board and Board committee meetings in aggregate during a calendar year, a cash meeting fee of $2,000 for each Board and committee meeting attended during such year in excess of such threshold, paid in aggregate following completion of such year. |
• | In addition to any Equity Retainer (as defined below), an annual equity award with a target award value of $175,000 (the “Annual Equity Grant”), divided equally between options and RSUs; provided, however, that, at the sole discretion of the Compensation Committee or the Board of Directors, such Annual Equity Grant may be comprised solely of RSUs. The options, if any, are fully vested as of the grant date. The RSU component of the Annual Equity Grant shall vest upon the earlier of (1) the first anniversary of the grant date, or (2) the date of, and immediately prior to, the next annual meeting of Fortive shareholders following the grant date, but the underlying shares will not be issued until the earlier of the director's death or the first day of the seventh month following the director's retirement from the Board. |
• | Reimbursement for Fortive-related out-of-pocket expenses, including travel expenses. |
• | An annual retainer of $92,500 (the “Annual Board Chair Retainer”), payable, based upon the Payment Election, in cash (“Cash Board Chair Retainer”) equal to the Annual Board Chair Retainer amount, in an annual RSU grant (the “Equity Board Chair Retainer”) with a target award value of the Annual Board Chair Retainer amount, or in a combination of Cash Board Chair Retainer and Equity Board Chair Retainer, with the allocation between Cash Board Chair Retainer and Equity Board Chair Retainer determined based on the Payment Election. |
• | An annual equity award with a target value of $92,500 (divided equally between options and RSUs or comprised solely of RSUs, in each case, as described above for the Annual Equity Grant). |
(a) | “Administrator” means the Administrator as defined in the Stock Incentive Plan and shall include any Employee to whom the Administrator has delegated certain administrative functions related to the operation and maintenance of the Sub-Plan. |
(b) | “Annual Equity Grant” shall have the meaning ascribed to it in the Director Compensation Policy. |
(c) | “Annual Board Chair Retainer” shall have the meaning ascribed to it in the Director Compensation Policy. |
(d) | “Annual Committee Chair Retainers” shall have the meaning ascribed to it in the Director Compensation Policy. |
(e) | “Annual Retainer” shall have the meaning ascribed to it in the Director Compensation Policy. |
(f) | “Cash Retainer” shall have the meaning ascribed to it in the Director Compensation Policy. |
(g) | “Deferral Year” means the period beginning on July 1st of a calendar year and ending on June 30th of the following calendar year. |
(h) | “Director” means each member of the Board who (i) is not an employee of the Company or any Subsidiary, and (ii) receives any portion of the Annual Retainer for service on the Board. |
(i) | “Director Compensation Policy” means the Fortive Corporation Director Compensation Policy, as it may be amended from time to time. |
(j) | “Effective Date” means January 1, 2018, except that elections under the Sub-Plan are permitted prior to such date. |
(k) | “Equity Retainer” shall have the meaning ascribed to it in the Director Compensation Policy. |
(l) | “Stock Incentive Plan” means, as of the Effective Date, the Fortive Corporation 2016 Stock Incentive Plan, as it may be amended from time to time. The term “Stock Incentive Plan” shall also automatically apply to any successor plan to the Fortive Corporation 2016 Stock Incentive Plan and to any new stock plan adopted by the Company under which Directors are eligible to be granted restricted stock units. |
(a) | During the election window provided by the Company each year (which must end no later than December 31), a Director may elect to receive his or her Annual Retainer payable to the Director with respect to the Deferral Year that commences in the following calendar year in one of the following forms: (i) a Cash Retainer, paid in four, equal installments following each quarter of service during the Deferral Year, (ii) an Equity Retainer granted concurrently with the corresponding Annual Equity Grant made during the calendar year in which the Deferral Year commences and with the number of RSUs subject to such Equity Retainer determined based on the amount of his or her Annual Retainer in the same manner that the number of RSUs subject to the Annual Equity Awards is determined based on the target value for the Annual Equity Awards set forth in the Director Compensation Policy, or (iii) a combination of Cash Retainer and Equity Retainer, with allocation between the Equity Retainer and the Cash Retainer determined by the director and with the number of RSUs subject to the portion of the director’s Annual Retainer that the director has allocated to the Equity Retainer being determined in the same manner that the number of RSUs subject to the Annual Equity Awards is determined under the Director Compensation Policy, taking into account the applicable percentage of the target value that the director has allocated to the Equity Retainer . In the event that a Director does not make an affirmative and timely election on the form of payment of the Annual Retainer in a Deferral Year, such Director shall be deemed to have elected the Cash Retainer for such Deferral Year. Further, any Annual Board Chair Retainer and/or Annual Committee Chair Retainers that become determined as to a director after the time of an Annual Equity Grant to such director shall be payable in cash notwithstanding any contrary election by such director. Any election made under this Sub-Plan shall be irrevocable as of the end of the election window, or such December 31, as specified by the Company. |
(b) | If an individual is elected or appointed as a Director other than at an annual shareholders meeting of the Company, then such individual may elect, prior to the effective date of such election or appointment, to receive his or her Annual Retainer in one of the following forms: |
(c) | All elections shall be made on the form, in the manner and within the time period prescribed by the Company. A Director may make a separate election with respect to each Deferral Year. Unless a new election is made for a Deferral Year, a Director’s election shall carry over from Deferral Year to Deferral Year. |
¨ | 100% in Cash Retainer; |
¨ | 100% in Equity Retainer; or |
¨ | _____% in Equity Retainer, with the remainder in Cash Retainer; |
¨ | First day of the seventh month following Separation from Service |
¨ | First anniversary of Separation from Service |
¨ | Third anniversary of Separation from Service |
¨ | Fifth anniversary of Separation from Service |
By: | ||||||||||
Participant | Name: | |||||||||
Title: |
Nine Months Ended | Year Ended December 31 | ||||||||||||||||||||||
September 29, 2017 | 2016 | 2015 | 2014 | 2013 | 2012 | ||||||||||||||||||
Fixed Charges: | |||||||||||||||||||||||
Gross Interest Expense | $ | 68.2 | $ | 49.0 | $ | — | $ | — | $ | — | $ | — | |||||||||||
Interest Element of Rental Expense | 2.3 | 3.6 | 3.6 | 3.1 | 3.3 | 3.1 | |||||||||||||||||
Interest on Unrecognized Tax Benefits | — | — | — | — | — | — | |||||||||||||||||
Total Fixed Charges | $ | 70.5 | $ | 52.6 | $ | 3.6 | $ | 3.1 | $ | 3.3 | $ | 3.1 | |||||||||||
Earnings Available for Fixed Charges: | |||||||||||||||||||||||
Earnings Before Income Taxes | $ | 946.2 | $ | 1,197.0 | $ | 1,269.7 | $ | 1,279.2 | $ | 1,143.2 | $ | 1,127.8 | |||||||||||
Add Fixed Charges | 70.5 | 52.6 | 3.6 | 3.1 | 3.3 | 3.1 | |||||||||||||||||
Interest on Unrecognized Tax Benefits | — | — | — | — | — | — | |||||||||||||||||
Total Earnings Available for Fixed Charges | $ | 1,016.7 | $ | 1,249.6 | $ | 1,273.3 | $ | 1,282.3 | $ | 1,146.5 | $ | 1,130.9 | |||||||||||
Ratio of Earnings to Fixed Charges (1) | 14.4 | 23.8 | 353.7 | 413.6 | 347.4 | 364.8 | |||||||||||||||||
(1) The ratios of earnings to fixed charges were computed by dividing earnings by fixed charges for the periods indicated, where (1) “earnings” consist of earnings before income taxes plus fixed charges, and (2) “fixed charges” consist of (A) interest, whether expensed or capitalized, on all indebtedness, (B) amortization of premiums, discounts and capitalized expenses related to indebtedness, and (C) an interest component representing the estimated portion of rental expense that management believes is attributable to interest. Interest on unrecognized tax benefits is included in the tax provision and is excluded from the computation of fixed charges. |
1. | I have reviewed this Quarterly Report on Form 10-Q of Fortive Corporation; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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; |
c. | evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a. | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b. | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: | October 26, 2017 | By: | /s/ James A. Lico |
James A. Lico | |||
President and Chief Executive Officer |
1. | I have reviewed this Quarterly Report on Form 10-Q of Fortive Corporation; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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; |
c. | evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a. | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b. | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: | October 26, 2017 | By: | /s/ Charles E. McLaughlin |
Charles E. McLaughlin | |||
Senior Vice President and Chief Financial Officer |
Date: | October 26, 2017 | By: | /s/ James A. Lico |
James A. Lico | |||
President and Chief Executive Officer |
Date: | October 26, 2017 | By: | /s/ Charles E. McLaughlin |
Charles E. McLaughlin | |||
Senior Vice President and Chief Financial Officer |
Document and Entity Information - shares |
9 Months Ended | |
---|---|---|
Sep. 29, 2017 |
Oct. 20, 2017 |
|
Document and Entity Information [Abstract] | ||
Document type | 10-Q | |
Amendment flag | false | |
Document period end date | Sep. 29, 2017 | |
Document fiscal year focus | 2017 | |
Document fiscal period focus | Q3 | |
Trading symbol | FTV | |
Entity registrant name | Fortive Corp | |
Entity central index key | 0001659166 | |
Current fiscal year end date | --12-31 | |
Entity filer category | Non-accelerated Filer | |
Entity common stock, shares outstanding | 347,558,977 |
Consolidated Condensed Balance Sheets (Parenthetical) - USD ($) $ in Millions |
Sep. 29, 2017 |
Dec. 31, 2016 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Accumulated depreciation | $ 1,072.6 | $ 1,004.2 |
Preferred stock par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock authorized (in shares) | 15,000,000 | 15,000,000 |
Preferred stock issued (in shares) | 0 | 0 |
Preferred stock outstanding (in shares) | 0 | 0 |
Common stock par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock authorized (in shares) | 2,000,000,000 | 2,000,000,000 |
Common stock issued (in shares) | 347,900,000 | 346,000,000 |
Common stock outstanding (in shares) | 347,500,000 | 345,900,000 |
Consolidated and Combined Condensed Statements of Earnings - USD ($) shares in Millions, $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 29, 2017 |
Sep. 30, 2016 |
Sep. 29, 2017 |
Sep. 30, 2016 |
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Income Statement [Abstract] | ||||
Sales | $ 1,685.3 | $ 1,567.4 | $ 4,849.3 | $ 4,597.2 |
Cost of sales | (845.9) | (794.5) | (2,460.8) | (2,361.0) |
Gross profit | 839.4 | 772.9 | 2,388.5 | 2,236.2 |
Operating costs: | ||||
Selling, general and administrative expenses | (381.5) | (354.5) | (1,092.1) | (1,042.3) |
Research and development expenses | (102.0) | (95.2) | (297.3) | (285.6) |
Operating profit | 355.9 | 323.2 | 999.1 | 908.3 |
Non-operating expense: | ||||
Gain from acquisition | 15.3 | 0.0 | 15.3 | 0.0 |
Interest expense | (22.9) | (23.4) | (68.2) | (26.1) |
Earnings before income taxes | 348.3 | 299.8 | 946.2 | 882.2 |
Income taxes | (80.5) | (72.9) | (238.6) | (234.4) |
Net earnings | $ 267.8 | $ 226.9 | $ 707.6 | $ 647.8 |
Net earnings per share: | ||||
Basic (in dollars per share) | $ 0.77 | $ 0.66 | $ 2.04 | $ 1.87 |
Diluted (in dollars per share) | $ 0.76 | $ 0.65 | $ 2.01 | $ 1.87 |
Average common stock and common equivalent shares outstanding: | ||||
Basic (in shares) | 347.7 | 346.0 | 347.3 | 345.5 |
Diluted (in shares) | 352.9 | 349.2 | 352.2 | 346.6 |
Consolidated and Combined Condensed Statements of Comprehensive Income - USD ($) $ in Millions |
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Sep. 30, 2016 |
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Statement of Comprehensive Income [Abstract] | ||||
Net earnings | $ 267.8 | $ 226.9 | $ 707.6 | $ 647.8 |
Other comprehensive income (loss), net of income taxes: | ||||
Foreign currency translation adjustments | 38.1 | (25.7) | 126.9 | (14.2) |
Pension adjustments | 0.9 | 1.0 | 2.6 | 3.1 |
Total other comprehensive income (loss), net of income taxes | 39.0 | (24.7) | 129.5 | (11.1) |
Comprehensive income | $ 306.8 | $ 202.2 | $ 837.1 | $ 636.7 |
Consolidated Condensed Statement of Changes in Equity - 9 months ended Sep. 29, 2017 - USD ($) $ in Millions |
Total |
Common Stock |
Additional Paid-in Capital |
Retained Earnings |
Accumulated Other Comprehensive Income (Loss) |
Noncontrolling Interest |
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Common stock outstanding (in shares) at Dec. 31, 2016 | 345,900,000 | 345,900,000 | ||||
Equity, beginning of period at Dec. 31, 2016 | $ 2,691.0 | $ 3.5 | $ 2,427.2 | $ 403.0 | $ (145.8) | $ 3.1 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Net earnings for the period | 707.6 | 707.6 | ||||
Dividends to shareholders | (72.8) | |||||
Separation related adjustments | (29.3) | |||||
Other comprehensive income | $ 129.5 | 129.5 | ||||
Common stock-based award activity (in shares) | 1,600,000 | |||||
Common stock-based award activity | 51.3 | |||||
Change in noncontrolling interests | 1.0 | |||||
Common stock outstanding (in shares) at Sep. 29, 2017 | 347,500,000 | 347,500,000 | ||||
Equity, end of period at Sep. 29, 2017 | $ 3,478.3 | $ 3.5 | $ 2,449.2 | $ 1,037.8 | $ (16.3) | $ 4.1 |
Business Overview and Basis of Presentation |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Overview and Basis of Presentation | NOTE 1. BUSINESS OVERVIEW AND BASIS OF PRESENTATION Fortive Corporation (“Fortive” or the “Company”) is a diversified industrial growth company encompassing businesses that are recognized leaders in attractive markets. Our well-known brands hold leading positions in advanced instrumentation and solutions, transportation technology, sensing, automation and specialty, and franchise distribution markets. Our businesses design, develop, service, manufacture and market professional and engineered products, software and services for a variety of end markets, building upon leading brand names, innovative technology and significant market positions. Basis of Presentation—We prepared the unaudited consolidated and combined condensed financial statements included herein in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) applicable for interim periods. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations; however, we believe the disclosures are adequate to make the information presented not misleading. The consolidated and combined condensed financial statements included herein should be read in conjunction with the audited annual consolidated and combined financial statements as of and for the year ended December 31, 2016 and the Notes thereto included within our 2016 Annual Report on Form 10-K. In our opinion, the accompanying financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to fairly present our financial position as of September 29, 2017 and December 31, 2016, and our results of operations and cash flows for the three and nine months ended September 29, 2017 and September 30, 2016. Prior to our separation from Danaher Corporation (“Danaher” or “Former Parent”) on July 2, 2016 (the “Separation”), our businesses were comprised of certain Danaher operating units (the “Fortive Businesses”). The combined condensed financial statements for periods prior to the Separation were derived from Danaher’s consolidated financial statements and accounting records and prepared in accordance with GAAP for the preparation of carved-out combined financial statements. Prior to the Separation, all revenues and costs as well as assets and liabilities directly associated with Fortive have been included in the combined condensed financial statements. Additionally, the combined condensed financial statements for periods prior to the Separation included allocations of certain general, administrative, sales and marketing expenses and cost of sales from Danaher’s corporate office and from other Danaher businesses to Fortive, and allocations of related assets, and liabilities, as applicable. The allocations were determined on a reasonable basis; however, the amounts are not necessarily representative of the amounts that would have been reflected in the financial statements had we been operating independently of Danaher during the applicable periods. Accordingly, our combined condensed financial statements may not be indicative of our results had we been a separate, stand-alone entity throughout the periods presented. For further discussion of related party allocations prior to the Separation, including the method for such allocation, refer to Note 19 of our 2016 Annual Report on Form 10-K. Following the Separation, the consolidated financial statements include the accounts of Fortive and those of our wholly-owned subsidiaries and no longer include any allocations from Danaher. Accordingly:
Accumulated Other Comprehensive Income (Loss)—The changes in accumulated other comprehensive income (loss) by component are summarized below ($ in millions). Foreign currency translation adjustments are generally not adjusted for income taxes as they relate to indefinite investments in non-U.S. subsidiaries.
New Accounting Standards—In May 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2017-09, Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting, which provided clarity on which changes to the terms or conditions of share-based payment awards require an entity to apply the modification accounting provisions required in Topic 718. This standard is effective for us beginning January 1, 2018 (with early adoption permitted, including adoption in any interim period for which financial statements have not yet been issued). We do not expect the adoption of this standard will have a material impact on our financial statements. In March 2017, the FASB issued ASU No. 2017-07, Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which aims to improve the presentation of net periodic pension cost. Under current accounting standards, all components of net periodic pension costs are aggregated and reported in cost of sales or selling, general and administrative expenses in the financial statements. Under the new standard we will be required to report only the service cost component in cost of sales or selling, general and administrative expenses; and the other components of net periodic pension costs (which include interest costs, expected return on plan assets and amortization of net loss) will be required to be presented in non-operating expenses. The presentation requirement of this standard is effective for us beginning January 1, 2018 (with early adoption permitted) using a retrospective transition approach and provides for certain practical expedients. We do not expect the adoption of this standard will have a material impact to our financial statements. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which amends the impairment model by requiring entities to use a forward-looking approach, based on expected losses, to estimate credit losses on certain types of financial instruments, including trade receivables. This standard is effective for us beginning January 1, 2020, with early adoption permitted. We are currently evaluating the impact of this standard on our financial statements. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which will require, among other items, lessees to recognize a right-of-use asset and a lease liability for most leases. The standard also requires disclosures by lessees and lessors about the amount, timing and uncertainty of cash flows arising from leases. The accounting applied by a lessor is largely unchanged from that applied under the current standard. This standard is effective for us beginning January 1, 2019 (with early adoption permitted) using a modified retrospective transition approach and provides for certain practical expedients. In September 2017, the FASB issued ASU No. 2017-13, Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842), which provided additional implementation guidance on the previously issued ASU. We are currently evaluating the impact of this standard on our financial statements. In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which impacts virtually all aspects of an entity’s revenue recognition. The core principle of the new standard is that revenue should be recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. During 2016 and 2017, the FASB issued several amendments to the standard, including clarification to the guidance on reporting revenues as a principal versus an agent, identifying performance obligations, accounting for intellectual property licenses, assessing collectability, presentation of sales taxes, impairment testing for contract costs, disclosure of performance obligations and provided additional implementation guidance. The new standard will also require additional disclosures intended to provide users of financial statements comprehensive information about the nature, amount, timing and uncertainty of revenue and cash flows from customer contracts. The two permitted transition methods under the new standard are the full retrospective method, in which case the standard would be applied to each prior reporting period presented and the cumulative effect of applying the standard would be recognized at the earliest period shown, or the modified retrospective method, in which case the cumulative effect of applying the standard would be recognized at the date of initial application. We currently anticipate adopting this standard beginning January 1, 2018 using the modified retrospective method. We are currently completing our assessment and quantifying the impact of the new revenue standard on our financial statements and related disclosures. We expect recognition of revenue for a majority of customer contracts to remain substantially unchanged. However, we are continuing to assess all potential impacts of the standard and we currently believe the more significant impacts relate to certain customer contracts that will be recognized over time, accounting for any required deferral of commissions and changes to the timing of recognition of revenue and costs related to certain warranty arrangements. We have identified, and are in the process of implementing, appropriate changes to our processes, systems and controls to support recognition and disclosure under the new standard. Furthermore, we anticipate that our disclosures will be expanded to meet the new standard’s disclosure objectives. Separation from Danaher Corporation—The Separation from Danaher, effectuated on July 2, 2016, was completed in the form of a pro rata distribution to Danaher stockholders of record on June 15, 2016 of 100 percent of the outstanding shares of Fortive Corporation held by Danaher. |
Acquisitions Acquisitions |
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Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||
Acquisitions | NOTE 2. ACQUISITIONS For a full description of our acquisition activity, reference is made to Note 3 of our 2016 Annual Report on Form 10-K. We continually evaluate potential acquisitions that either strategically fit with our existing portfolio or expand our portfolio into a new and attractive business area. We have completed a number of acquisitions that have been accounted for as purchases and have resulted in the recognition of goodwill in our financial statements. This goodwill arises because the purchase prices for these businesses reflect a number of factors including the future earnings and cash flow potential of these businesses, the multiple to earnings, cash flow and other factors at which similar businesses have been purchased by other acquirers, the competitive nature of the processes by which we acquired the businesses, the avoidance of the time and costs which would be required (and the associated risks that would be encountered) to enhance our existing offerings to key target markets and develop new and profitable businesses, and the complementary strategic fit and resulting synergies these businesses bring to existing operations. We make an initial allocation of the purchase price at the date of acquisition based upon our understanding of the fair value of the acquired assets and assumed liabilities. We obtain this information during due diligence and through other sources. In the months after closing, as we obtain additional information about these assets and liabilities, including through tangible and intangible asset appraisals, and learn more about the newly acquired business, we are able to refine the estimates of fair value and more accurately allocate the purchase price. Only items identified as of the acquisition date are considered for subsequent adjustment. We are in the process of obtaining valuations of certain acquired intangible assets in connection with certain acquisitions. We make appropriate adjustments to purchase price allocations prior to completion of the applicable measurement period, as required. During the third quarter of 2017, we acquired two businesses for total consideration of $802 million in cash, net of cash acquired, including the acquisition of the remaining 80% of a business in which we previously had an ownership interest. The acquisition of the remaining 80% interest also resulted in the revaluation of our prior interest, and we recorded a gain from acquisition of $15.3 million. The businesses acquired complement existing units of the Industrial Technology and Professional Instrumentation segments. The aggregate annual sales of these businesses at the time of their respective acquisitions, in each case based on the company’s revenues for its last completed fiscal year prior to the acquisition, were approximately $246 million. We preliminarily recorded an aggregate of $576 million of goodwill related to these acquisitions. The following summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition for all acquisitions consummated during the nine months ended September 29, 2017 ($ in millions):
Pro forma financial information for these acquisitions has not been presented because the impact is not material. Subsequent Event On October 19, 2017, we completed the acquisition of Landauer Inc., a leading global provider of subscription-based technical and analytical services to determine occupational and environmental radiation exposure, as well as a leading domestic provider of outsourced medical physics services, at a purchase price of $67.25 per share. Landauer Inc. will be integrated into our Professional Instrumentation segment. |
Goodwill |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill | NOTE 3. GOODWILL The following is a rollforward of our goodwill ($ in millions):
The carrying value of goodwill by segment is summarized as follows ($ in millions):
We have not identified any “triggering” events which would have indicated a potential impairment of goodwill in the nine months ended September 29, 2017. |
Fair Value Measurements |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements | NOTE 4. FAIR VALUE MEASUREMENTS Accounting standards define fair value based on an exit price model, establish a framework for measuring fair value where our assets and liabilities are required to be carried at fair value and provide for certain disclosures related to the valuation methods used within a valuation hierarchy as established within the accounting standards. This hierarchy prioritizes the inputs into three broad levels as follows. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. 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. A summary of financial liabilities that are measured at fair value on a recurring basis were as follows ($ in millions):
Certain of our management employees participate in our nonqualified deferred compensation programs that permit such employees to defer a portion of their compensation, on a pretax basis, until after their termination of employment. All amounts deferred under such plans are unfunded, unsecured obligations and are presented as a component of our compensation and benefits accrual included in other long-term liabilities in the accompanying Consolidated Condensed Balance Sheets. Participants may choose among alternative earning rates for the amounts they defer, which are primarily based on investment options within our defined contribution plans for the benefit of U.S. employees (except that the earnings rates for amounts contributed unilaterally by the Company are entirely based on changes in the value of Fortive common stock). Changes in the deferred compensation liability under these programs are recognized based on changes in the fair value of the participants’ accounts, which are based on the applicable earnings rates. Fair Value of Financial Instruments The carrying amounts and fair values of financial instruments were as follows ($ in millions):
As of September 29, 2017 and December 31, 2016, the long-term borrowings were categorized as Level 1. The fair value of long-term borrowings was based on quoted market prices. The difference between the fair value and the carrying amounts of long-term borrowings may be attributable to changes in market interest rates and/or our credit ratings subsequent to the incurrence of the borrowing. The fair values of cash and cash equivalents, accounts receivable, net and trade accounts payable approximate their carrying amounts due to the short-term maturities of these instruments. |
Financing |
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Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financing | NOTE 5. FINANCING The carrying value of the components of our long-term debt were as follows ($ in millions):
Net discounts, premiums and issuance costs of $18.3 million and $20.1 million as of September 29, 2017 and December 31, 2016, respectively, and have been netted against the aggregate principal amounts of the components of debt table above. Refer to Note 10 of our 2016 Annual Report on Form 10-K for further details of our debt financing. We generally satisfy any short-term liquidity needs that are not met through operating cash flows and available cash primarily through issuances of commercial paper under our U.S. dollar and Euro-denominated commercial paper programs (“Commercial Paper Programs”). Credit support for the Commercial Paper Programs is provided by a five-year $1.5 billion senior unsecured revolving credit facility that expires on June 16, 2021 (the “Revolving Credit Facility”) which can also be used for working capital and other general corporate purposes. As of September 29, 2017, no borrowings were outstanding under the Revolving Credit Facility. The details of our Commercial Paper Programs as of September 29, 2017 were as follows ($ in millions):
We classified our borrowings outstanding under the Commercial Paper Programs as long-term debt in the accompanying Consolidated Condensed Balance Sheets as we had the intent and ability, as supported by availability under the Revolving Credit Facility referenced above, to refinance these borrowings for at least one year from the balance sheet date. As of September 29, 2017, we were in compliance with all of our covenants. Yen Variable Interest Rate Term Loan On August 24, 2017, we entered into a new term loan agreement that provides for a five-year ¥13.8 billion senior unsecured term facility (“Yen Term Loan”) that expires on August 24, 2022. We borrowed the entire ¥13.8 billion available under this facility on August 28, 2017, which yielded net proceeds of approximately $126 million. The Yen Term Loan bears interest at a rate equal to LIBOR plus 50 basis points, provided however that LIBOR may not be less than zero for the purposes of the Yen Term Loan. As of September 29, 2017, borrowings under the Yen Term Loan bear an interest rate of 0.50% per annum. During the period of 2017 in which the Yen Term Loan was outstanding, the annual effective rate was 0.50%. The Yen Term Loan is pre-payable at our option, and re-borrowing is not permitted once the term loan is repaid. The terms and conditions, including covenants, applicable to the the Yen Term Loan are substantially similar to those applicable to the Revolving Credit Facility. Registration Rights Agreement During 2016, we issued in a private placement $2.5 billion of senior unsecured notes in multiple series with maturity dates ranging from June 15, 2019 to June 15, 2046 (collectively, the “Private Notes”). In connection with the issuance of the Private Notes, we entered into a registration rights agreement, pursuant to which we were obligated to use commercially reasonable efforts to file with the SEC, and cause to be declared effective, a registration statement with respect to an offer to exchange each series of Private Notes for registered notes (“Registered Notes”) with substantially identical terms (“Exchange Offer”). Accordingly, on May 5, 2017 we filed a Form S-4 with the SEC (the “Registration Statement”), which Registration Statement was declared effective on May 17, 2017. On May 17, 2017, we launched the Exchange Offer, which expired on June 14, 2017. All Private Notes were tendered and exchanged for Registered Notes in the Exchange Offer. |
Pension Plans |
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Compensation and Retirement Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Pension Plans | NOTE 6. PENSION PLANS We have noncontributory defined benefit pension plans outside of the United States. The following sets forth the components of our net periodic pension costs associated with these plans ($ in millions):
Net periodic pension costs are included in cost of sales and selling, general and administrative expenses in the accompanying Consolidated and Combined Condensed Statements of Earnings. Employer Contributions During 2017, our cash contribution requirements for our defined benefit pension plans are expected to be approximately $10 million. The ultimate amounts to be contributed depend upon, among other things, legal requirements, underlying asset returns, the plan’s funded status, the anticipated tax deductibility of the contribution, local practices, market conditions, interest rates and other factors. |
Income Taxes |
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Sep. 29, 2017 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | NOTE 7. INCOME TAXES Our effective tax rates for the three and nine months ended September 29, 2017, were 23.1% and 25.2%, respectively, as compared to 24.3% and 26.6% for the three and nine months ended September 30, 2016, respectively. Our effective tax rates for 2017 and 2016 differ from the U.S. federal statutory rate of 35% due principally to our earnings outside the United States that are indefinitely reinvested and taxed at rates lower than the U.S. federal statutory rate and the impact of credits and deductions provided by law. |
Stock-Based Compensation |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-Based Compensation | NOTE 8. STOCK-BASED COMPENSATION In connection with the Separation, the Company adopted the 2016 Stock Incentive Plan (the “Stock Plan”). Outstanding equity awards of Danaher held by our employees at the Separation date were converted into or replaced with Fortive equity awards under the Stock Plan. The Stock Plan provides for the grant of stock appreciation rights, performance stock units (“PSUs”), restricted stock units (“RSUs”), restricted stock awards and performance stock awards (collectively, “Stock Awards”), stock options or any other stock-based award. As of September 29, 2017, approximately 7 million shares of our common stock were reserved for issuance under the Stock Plan. For a full description of our stock-based compensation program refer to Note 16 of our 2016 Annual Report on Form 10-K. 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. During the three and nine months ended September 29, 2017, we realized a tax benefit of $9.7 million and $26.2 million, respectively, related to employee stock options that were exercised and Stock Awards that vested. As of January 1, 2017, we prospectively adopted ASU No. 2016-09, Compensation—Stock Compensation (Topic 718). Accordingly, we recorded 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 accompanying consolidated and combined condensed financial statements. Such Excess Tax Benefit was $5.9 million and $16.1 million during the three and nine months ended September 29, 2017, respectively. We had no stock-based compensation plans prior to the Separation; however certain of our employees had participated in Danaher’s stock-based compensation plans (“Danaher Plans”), which provided for the grants of stock options, PSUs and RSUs among other types of awards. Stock-based Compensation Expense Stock-based compensation has been recognized as a component of selling, general & administrative expenses in the accompanying Consolidated and Combined Condensed Statements of Earnings. Under ASU 2016-09, we will continue to recognize stock-based compensation expense based on the portion of the awards that are ultimately expected to vest. Prior to the Separation, Danaher allocated stock-based compensation expense to the Company based on Fortive employees participating in the Danaher Plans. These allocations are reflected in the accompanying Combined Condensed Statement of Earnings for the nine months ended September 30, 2016. The following summarizes the components of our stock-based compensation expense under the Stock Plan and the Danaher Plans ($ in millions):
The following summarizes the unrecognized compensation cost for the Stock Plan awards as of September 29, 2017. This compensation cost is expected to be recognized over a weighted average period of approximately two years, representing the remaining service period related to the awards. Future compensation amounts will be adjusted for any changes in estimated forfeitures ($ in millions):
In connection with the exercise of certain stock options and the vesting of Stock Awards issued under the Stock Plan, a number of shares of Fortive common stock sufficient to fund statutory minimum tax withholding requirements has been withheld from the total shares issued or released to the award holder (though under the terms of the Stock Plan, the shares are considered to have been issued and are not added back to the pool of shares available for grant). During the nine months ended September 29, 2017, approximately 223 thousand shares of Fortive common stock with an aggregate value of $13.5 million were withheld to satisfy this requirement. This withholding is treated as a reduction in additional paid-in capital in the accompanying Consolidated Condensed Statement of Changes in Equity. Stock Options The following summarizes the assumptions used in the Black-Scholes Merton option pricing model to value stock options granted under the Stock Plan during the nine months ended September 29, 2017:
The following summarizes option activity under the Stock Plan for the nine months ended September 29, 2017 (in millions, except price per share and numbers of years):
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 the third quarter of 2017 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 September 29, 2017. The amount of aggregate intrinsic value will change based on the price of Fortive’s common stock. The aggregate intrinsic value of options exercised during the nine months ended September 29, 2017 was $38 million. Exercise of options during the first nine months of 2017 resulted in cash receipts of $25 million. Stock Awards The following summarizes information related to unvested Stock Award activity under the Stock Plan for the nine months ended September 29, 2017 (in millions; except price per share):
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Commitments and Contingencies |
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Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||
Commitments and Contingencies | NOTE 9. COMMITMENTS AND CONTINGENCIES For a description of our litigation and contingencies, reference is made to Notes 14 and 15 of our 2016 Annual Report on Form 10-K. We generally accrue estimated warranty costs at the time of sale. In general, manufactured products are warranted against defects in material and workmanship when properly used for their intended purpose, installed correctly, and appropriately maintained. Warranty period terms depend on the nature of the product and range from 90 days up to the life of the product. The amount of the accrued warranty liability is determined based on historical information such as past experience, product failure rates or number of units repaired, estimated cost of material and labor, and in certain instances estimated property damage. The accrued warranty liability is reviewed on a quarterly basis and may be adjusted as additional information regarding expected warranty costs becomes known. The following is a rollforward of our accrued warranty liability ($ in millions):
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Net Earnings Per Share |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Earnings Per Share | NOTE 10. 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 issuance of shares under stock-based compensation plans except where the inclusion of such shares would have an anti-dilutive impact. For both the three and nine months ended September 29, 2017 the anti-dilutive options to purchase shares excluded from the diluted EPS calculation were immaterial. We were incorporated on November 10, 2015, accordingly, we had no shares or common equivalent shares outstanding prior to that date. The total number of shares outstanding on July 1, 2016, immediately before the Separation, was 345.2 million and is utilized for the calculation of both basic and diluted EPS for all periods prior to the Separation. 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):
On August 3, 2017, we declared a regular quarterly dividend of $0.07 per share paid on September 29, 2017 to holders of record on August 25, 2017. For the nine months ended September 29, 2017, cash dividend payments of $72.8 million were recorded as dividends to shareholders in the Consolidated Condensed Statement of Changes in Equity. |
Segment Information |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Information | NOTE 11. SEGMENT INFORMATION We operate and report our results in two business segments consisting of the Professional Instrumentation and Industrial Technologies segments. As of September 29, 2017, there have been no material changes in total assets or liabilities by segment since December 31, 2016, except for the addition of the assets from acquisitions as detailed in Note 2. Segment results are shown below ($ in millions):
As of September 29, 2017, the material changes in total assets by segment since December 31, 2016 were due primarily to the acquisitions detailed in Note 2. Segment identifiable assets are shown below ($ in millions):
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Related-Party Transactions |
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Related Party Transactions [Abstract] | |
Related Party Transactions Disclosure [Text Block] | NOTE 12. RELATED-PARTY TRANSACTIONS Revenue and Other Transactions Entered Into In the Ordinary Course of Business Prior to the Separation, we operated as part of Danaher and not as a stand-alone company and certain of our revenue arrangements related to contracts entered into in the ordinary course of business with Danaher and its affiliates. Following the Separation, we continue to enter into arms-length arrangements in the ordinary course of business with Danaher and its affiliates, although certain agreements were entered into or terminated as a result of the Separation. Sales and purchases from these arrangements with Danaher were not material during the three and nine months ended September 29, 2017 and September 30, 2016. |
Business Overview and Basis of Presentation (Policies) |
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Sep. 29, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
New Accounting Standards | New Accounting Standards—In May 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2017-09, Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting, which provided clarity on which changes to the terms or conditions of share-based payment awards require an entity to apply the modification accounting provisions required in Topic 718. This standard is effective for us beginning January 1, 2018 (with early adoption permitted, including adoption in any interim period for which financial statements have not yet been issued). We do not expect the adoption of this standard will have a material impact on our financial statements. In March 2017, the FASB issued ASU No. 2017-07, Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which aims to improve the presentation of net periodic pension cost. Under current accounting standards, all components of net periodic pension costs are aggregated and reported in cost of sales or selling, general and administrative expenses in the financial statements. Under the new standard we will be required to report only the service cost component in cost of sales or selling, general and administrative expenses; and the other components of net periodic pension costs (which include interest costs, expected return on plan assets and amortization of net loss) will be required to be presented in non-operating expenses. The presentation requirement of this standard is effective for us beginning January 1, 2018 (with early adoption permitted) using a retrospective transition approach and provides for certain practical expedients. We do not expect the adoption of this standard will have a material impact to our financial statements. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which amends the impairment model by requiring entities to use a forward-looking approach, based on expected losses, to estimate credit losses on certain types of financial instruments, including trade receivables. This standard is effective for us beginning January 1, 2020, with early adoption permitted. We are currently evaluating the impact of this standard on our financial statements. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which will require, among other items, lessees to recognize a right-of-use asset and a lease liability for most leases. The standard also requires disclosures by lessees and lessors about the amount, timing and uncertainty of cash flows arising from leases. The accounting applied by a lessor is largely unchanged from that applied under the current standard. This standard is effective for us beginning January 1, 2019 (with early adoption permitted) using a modified retrospective transition approach and provides for certain practical expedients. In September 2017, the FASB issued ASU No. 2017-13, Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842), which provided additional implementation guidance on the previously issued ASU. We are currently evaluating the impact of this standard on our financial statements. In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which impacts virtually all aspects of an entity’s revenue recognition. The core principle of the new standard is that revenue should be recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. During 2016 and 2017, the FASB issued several amendments to the standard, including clarification to the guidance on reporting revenues as a principal versus an agent, identifying performance obligations, accounting for intellectual property licenses, assessing collectability, presentation of sales taxes, impairment testing for contract costs, disclosure of performance obligations and provided additional implementation guidance. The new standard will also require additional disclosures intended to provide users of financial statements comprehensive information about the nature, amount, timing and uncertainty of revenue and cash flows from customer contracts. The two permitted transition methods under the new standard are the full retrospective method, in which case the standard would be applied to each prior reporting period presented and the cumulative effect of applying the standard would be recognized at the earliest period shown, or the modified retrospective method, in which case the cumulative effect of applying the standard would be recognized at the date of initial application. We currently anticipate adopting this standard beginning January 1, 2018 using the modified retrospective method. We are currently completing our assessment and quantifying the impact of the new revenue standard on our financial statements and related disclosures. We expect recognition of revenue for a majority of customer contracts to remain substantially unchanged. However, we are continuing to assess all potential impacts of the standard and we currently believe the more significant impacts relate to certain customer contracts that will be recognized over time, accounting for any required deferral of commissions and changes to the timing of recognition of revenue and costs related to certain warranty arrangements. We have identified, and are in the process of implementing, appropriate changes to our processes, systems and controls to support recognition and disclosure under the new standard. Furthermore, we anticipate that our disclosures will be expanded to meet the new standard’s disclosure objectives. |
Business Overview and Basis of Presentation (Tables) |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reclassification of Accumulated Other Comprehensive Income | Accumulated Other Comprehensive Income (Loss)—The changes in accumulated other comprehensive income (loss) by component are summarized below ($ in millions). Foreign currency translation adjustments are generally not adjusted for income taxes as they relate to indefinite investments in non-U.S. subsidiaries.
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Acquisitions Business Combinations (Tables) |
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Sep. 29, 2017 | |||||||||||||||||||||||||||||||||||||||||||||
Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||
Schedule of Business Acquisitions, by Acquisition [Table Text Block] | The following summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition for all acquisitions consummated during the nine months ended September 29, 2017 ($ in millions):
|
Goodwill (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 29, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Goodwill | The following is a rollforward of our goodwill ($ in millions):
The carrying value of goodwill by segment is summarized as follows ($ in millions):
|
Fair Value Measurements (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 29, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value, Liabilities Measured on Recurring Basis | A summary of financial liabilities that are measured at fair value on a recurring basis were as follows ($ in millions):
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Carrying Amounts and Fair Values of Financial Instruments | The carrying amounts and fair values of financial instruments were as follows ($ in millions):
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Financing (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 29, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Carry Value of Debt | The details of our Commercial Paper Programs as of September 29, 2017 were as follows ($ in millions):
The carrying value of the components of our long-term debt were as follows ($ in millions):
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Pension Plans (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 29, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Compensation and Retirement Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Net Periodic Pension Costs | The following sets forth the components of our net periodic pension costs associated with these plans ($ in millions):
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Stock-Based Compensation (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 29, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Stock-Based Compensation Costs | The following summarizes the components of our stock-based compensation expense under the Stock Plan and the Danaher Plans ($ in millions):
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Schedule of Future Compensation | Future compensation amounts will be adjusted for any changes in estimated forfeitures ($ in millions):
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Schedule of Assumptions Used | The following summarizes the assumptions used in the Black-Scholes Merton option pricing model to value stock options granted under the Stock Plan during the nine months ended September 29, 2017:
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Schedule of Stock Option Activity | The following summarizes option activity under the Stock Plan for the nine months ended September 29, 2017 (in millions, except price per share and numbers of years):
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Schedule of Stock Unit Activity | The following summarizes information related to unvested Stock Award activity under the Stock Plan for the nine months ended September 29, 2017 (in millions; except price per share):
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Commitments and Contingencies (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||
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Sep. 29, 2017 | |||||||||||||||||||||||||||||||||
Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||
Schedule of Accrued Warranty Liability | The following is a rollforward of our accrued warranty liability ($ in millions):
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Net Earnings Per Share (Tables) |
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Sep. 29, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Earnings Per Share | 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):
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Segment Information (Tables) |
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Sep. 29, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Segment Reporting Information | Segment results are shown below ($ in millions):
Segment identifiable assets are shown below ($ in millions):
|
Business Overview and Basis of Presentation Narrative (Details) |
Jun. 15, 2016 |
---|---|
Debt Instrument [Line Items] | |
Common stock, distribution percentage | 100.00% |
Acquisitions Business Combinations (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 29, 2017 |
Sep. 29, 2017 |
Sep. 30, 2016 |
Dec. 31, 2016 |
|
Business Acquisition [Line Items] | ||||
Goodwill | $ 4,632.3 | $ 4,632.3 | $ 3,979.0 | |
Net cash consideration | 802.1 | $ 190.6 | ||
Acquisitions, 2017 [Member] | ||||
Business Acquisition [Line Items] | ||||
Accounts receivable | 73.3 | 73.3 | ||
Inventories | 27.8 | 27.8 | ||
Property, plant and equipment | 99.7 | 99.7 | ||
Goodwill | 576.3 | 576.3 | ||
Other intangible assets, primarily customer relationships, trade names and technology | 172.4 | 172.4 | ||
Trade accounts payable | (15.6) | (15.6) | ||
Other assets and liabilities, net | (95.0) | (95.0) | ||
Previously held investment | (36.8) | |||
Net cash consideration | $ (802.1) | $ 802.1 |
Acquisitions Narrative (Details) $ in Millions |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Sep. 29, 2017
USD ($)
business
|
Sep. 30, 2016
USD ($)
|
Sep. 29, 2017
USD ($)
|
Sep. 30, 2016
USD ($)
|
Dec. 31, 2016
USD ($)
|
|
Business Acquisition [Line Items] | |||||
Net cash consideration | $ 802.1 | $ 190.6 | |||
Gain from acquisition | $ 15.3 | $ 0.0 | 15.3 | $ 0.0 | |
Goodwill | $ 4,632.3 | 4,632.3 | $ 3,979.0 | ||
Acquisitions, 2017 [Member] | |||||
Business Acquisition [Line Items] | |||||
Number of Businesses Acquired | business | 2 | ||||
Net cash consideration | $ (802.1) | $ 802.1 | |||
Business Acquisition, Percentage of Voting Interests Acquired | 80.00% | 80.00% | |||
Gain from acquisition | $ 15.3 | ||||
Revenue of prior fiscal year | 246.0 | ||||
Goodwill | $ 576.3 | $ 576.3 |
Acquisitions Subsequent Event (Details) |
Oct. 19, 2017
$ / shares
|
---|---|
Acquisitions, 2017 [Member] | Subsequent Event [Member] | |
Subsequent Event [Line Items] | |
Business Acquisition, Share Price | $ 67.25 |
Goodwill Rollforward of Goodwill (Details) $ in Millions |
9 Months Ended |
---|---|
Sep. 29, 2017
USD ($)
| |
Goodwill [Roll Forward] | |
Goodwill Balance, December 31, 2016 | $ 3,979.0 |
Attributable to 2017 acquisitions | 576.3 |
Foreign currency translation & other | 77.0 |
Goodwill Balance, June 30, 2017 | $ 4,632.3 |
Goodwill Goodwill by Segment (Details) - USD ($) $ in Millions |
Sep. 29, 2017 |
Dec. 31, 2016 |
---|---|---|
Goodwill [Line Items] | ||
Goodwill | $ 4,632.3 | $ 3,979.0 |
Professional Instrumentation | ||
Goodwill [Line Items] | ||
Goodwill | 2,863.8 | 2,423.7 |
Industrial Technologies | ||
Goodwill [Line Items] | ||
Goodwill | $ 1,768.5 | $ 1,555.3 |
Fair Value Measurements Narrative (Details) - USD ($) $ in Millions |
Sep. 29, 2017 |
Dec. 31, 2016 |
---|---|---|
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Deferred Compensation Liability, Classified, Noncurrent | $ 19.7 | $ 14.8 |
Long-term borrowings, carrying value | 3,671.9 | 3,358.0 |
Long-term borrowings, fair value | 3,680.4 | 3,321.4 |
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Deferred Compensation Liability, Classified, Noncurrent | 0.0 | 0.0 |
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Deferred Compensation Liability, Classified, Noncurrent | 19.7 | 14.8 |
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Deferred Compensation Liability, Classified, Noncurrent | $ 0.0 | $ 0.0 |
Financing Components of Debt (Details) - USD ($) $ in Millions |
9 Months Ended | ||
---|---|---|---|
Aug. 24, 2017 |
Sep. 29, 2017 |
Dec. 31, 2016 |
|
Debt Instrument [Line Items] | |||
Amount outstanding | $ 3,671.9 | $ 3,358.0 | |
US Dollar-Denominated Commercial Paper [Member] | Commercial Paper [Member] | |||
Debt Instrument [Line Items] | |||
Amount outstanding | $ 285.8 | 347.9 | |
Weighted average annual interest rate | 1.44% | ||
Weighted average remaining maturity | 11 days | ||
Euro Denominated Commercial Paper [Member] | Commercial Paper [Member] | |||
Debt Instrument [Line Items] | |||
Amount outstanding | $ 278.3 | 26.8 | |
Weighted average annual interest rate | (0.08%) | ||
Weighted average remaining maturity | 72 days | ||
1.80% Senior Unsecured Notes due 2019 [Member] | Senior Notes [Member] | |||
Debt Instrument [Line Items] | |||
Amount outstanding | $ 298.8 | 298.3 | |
Debt Instrument, Interest Rate, Stated Percentage | 1.80% | ||
2.35% Senior Unsecured Notes due 2021 [Member] | Senior Notes [Member] | |||
Debt Instrument [Line Items] | |||
Amount outstanding | $ 745.6 | 744.8 | |
Debt Instrument, Interest Rate, Stated Percentage | 2.35% | ||
3.15% Senior Unsecured Notes due 2026 [Member] | Senior Notes [Member] | |||
Debt Instrument [Line Items] | |||
Amount outstanding | $ 890.7 | 890.1 | |
Debt Instrument, Interest Rate, Stated Percentage | 3.15% | ||
4.30% Senior Unsecured Notes due 2046 [Member] | Senior Notes [Member] | |||
Debt Instrument [Line Items] | |||
Amount outstanding | $ 546.7 | 546.8 | |
Debt Instrument, Interest Rate, Stated Percentage | 4.30% | ||
Other Debt [Member] | |||
Debt Instrument [Line Items] | |||
Amount outstanding | $ 3.5 | 3.3 | |
Term Loan [Member] | |||
Debt Instrument [Line Items] | |||
Amount outstanding | 500.0 | 500.0 | |
Yen Term Loan [Member] | |||
Debt Instrument [Line Items] | |||
Amount outstanding | $ 122.5 | $ 0.0 | |
Weighted average remaining maturity | 5 years |
Financing Narrative (Details) $ in Millions, ¥ in Billions |
9 Months Ended | ||||||
---|---|---|---|---|---|---|---|
Aug. 24, 2017
JPY (¥)
|
Jun. 15, 2016
USD ($)
|
Sep. 29, 2017
USD ($)
|
Sep. 30, 2016
USD ($)
|
Aug. 28, 2017
JPY (¥)
|
Dec. 31, 2016
USD ($)
|
Jun. 16, 2016
USD ($)
|
|
Debt Instrument [Line Items] | |||||||
Debt discounts, premiums and issuance costs | $ 18.3 | $ 20.1 | |||||
Proceeds from borrowings (maturities longer than 90 days) | 125.9 | $ 2,983.0 | |||||
Revolving Credit Facility [Member] | |||||||
Debt Instrument [Line Items] | |||||||
Debt Instrument, Term | 5 years | ||||||
Line of Credit Facility, Current Borrowing Capacity | $ 1,500.0 | ||||||
Yen Term Loan [Member] | |||||||
Debt Instrument [Line Items] | |||||||
Debt Instrument, Term | 5 years | ||||||
Long-term Debt | ¥ | ¥ 13.8 | ||||||
Proceeds from borrowings (maturities longer than 90 days) | $ 126.0 | ||||||
Yen Term Loan Total Available | ¥ | ¥ 13.8 | ||||||
Yen Term Loan Interest Rate at Period End | 0.50% | ||||||
Yen Term Loan Interest Rate During Period Outstanding | 0.50% | ||||||
Senior Notes [Member] | |||||||
Debt Instrument [Line Items] | |||||||
Debt Instrument, Face Amount | $ 2,500.0 |
Pension Plans Narrative (Details) - Foreign Pension Plan [Member] - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | 12 Months Ended | ||
---|---|---|---|---|---|
Sep. 29, 2017 |
Sep. 30, 2016 |
Sep. 29, 2017 |
Sep. 30, 2016 |
Dec. 31, 2017 |
|
Defined Benefit Plan Disclosure [Line Items] | |||||
Service cost | $ 1.1 | $ 0.9 | $ 3.1 | $ 2.6 | |
Interest cost | 1.5 | 1.8 | 4.4 | 5.6 | |
Expected return on plan assets | (1.9) | (2.0) | (5.5) | (6.1) | |
Amortization of net loss | 1.2 | 1.3 | 3.4 | 4.1 | |
Net periodic pension cost | $ 1.9 | $ 2.0 | $ 5.4 | $ 6.2 | |
Scenario, Forecast [Member] | |||||
Defined Benefit Plan Disclosure [Line Items] | |||||
Expected contributions | $ 10.0 |
Income Taxes Narrative (Details) |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 29, 2017 |
Sep. 30, 2016 |
Sep. 29, 2017 |
Sep. 30, 2016 |
|
Income Tax Disclosure [Abstract] | ||||
Effective tax rate | 23.10% | 24.30% | 25.20% | 26.60% |
U.S. federal statutory rate | 35.00% | 35.00% |
Stock-Based Compensation Stock-Based Compensation Expense (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 29, 2017 |
Sep. 30, 2016 |
Sep. 29, 2017 |
Sep. 30, 2016 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Pretax compensation expense | $ 11.9 | $ 12.0 | $ 37.2 | $ 34.4 |
Income tax benefit | (4.0) | (3.9) | (13.0) | (11.5) |
Total stock-based compensation expense | 7.9 | 8.1 | 24.2 | 22.9 |
Stock Awards | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Pretax compensation expense | 7.2 | 7.3 | 22.6 | 21.5 |
Income tax benefit | (2.4) | (2.3) | (8.0) | (7.1) |
Total stock-based compensation expense | 4.8 | 5.0 | 14.6 | 14.4 |
Stock Options | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Pretax compensation expense | 4.7 | 4.7 | 14.6 | 12.9 |
Income tax benefit | (1.6) | (1.6) | (5.0) | (4.4) |
Total stock-based compensation expense | $ 3.1 | $ 3.1 | $ 9.6 | $ 8.5 |
Stock-Based Compensation Unrecognized Compensation Cost (Details) $ in Millions |
Sep. 29, 2017
USD ($)
|
---|---|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Unrecognized compensation cost | $ 90.0 |
Stock Awards | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Unrecognized compensation cost | 45.2 |
Stock Options | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Unrecognized compensation cost | $ 44.8 |
Stock-Based Compensation Assumptions Used (Details) - Stock Options |
9 Months Ended | |||
---|---|---|---|---|
Sep. 29, 2017 | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Weighted average volatility | 21.00% | [1] | ||
Dividend yield | 0.50% | |||
Minimum [Member] | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Risk-free interest rate | 1.90% | |||
Expected years until exercise | 5 years 6 months | |||
Maximum [Member] | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Risk-free interest rate | 2.26% | |||
Expected years until exercise | 8 years | |||
|
Stock-Based Compensation Option Activity (Details) $ / shares in Units, shares in Millions, $ in Millions |
9 Months Ended | |||
---|---|---|---|---|
Sep. 29, 2017
USD ($)
$ / shares
shares
| ||||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward] | ||||
Options outstanding, beginning of period (in shares) | shares | 10.7 | |||
Options granted (in shares) | shares | 1.8 | |||
Options exercised (in shares) | shares | (1.0) | |||
Options canceled/forfeited (in shares) | shares | (0.3) | |||
Options outstanding, end of period (in shares) | shares | 11.2 | |||
Options vested and expected to vest (in shares) | shares | 10.8 | [1] | ||
Options vested (in shares) | shares | 5.4 | |||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Abstract] | ||||
Options outstanding, beginning of period (in dollars per share) | $ / shares | $ 33.23 | |||
Options granted (in dollars per share) | $ / shares | 57.55 | |||
Options exercised (in dollars per share) | $ / shares | 25.09 | |||
Options canceled/forfeited (in dollars per share) | $ / shares | 44.87 | |||
Options outstanding, end of period (in dollars per share) | $ / shares | 37.65 | |||
Options vested and expected to vest (in dollars per share) | $ / shares | 37.23 | [1] | ||
Options vested (in dollars per share) | $ / shares | $ 28.23 | |||
Weighted average remaining contractual term, outstanding | 6 years 6 months | |||
Weighted average remaining contractual term, vested and expected to vest | 6 years 6 months | [1] | ||
Weighted average remaining contractual term, vested | 4 years 8 months | |||
Aggregate intrinsic value, outstanding | $ | $ 370.9 | |||
Aggregate intrinsic value, vested and expected to vest | $ | 362.6 | [1] | ||
Aggregate intrinsic value, vested | $ | $ 229.3 | |||
|
Stock-Based Compensation Stock Unit Activity (Details) - Stock Compensation Plan shares in Millions |
9 Months Ended |
---|---|
Sep. 29, 2017
$ / shares
shares
| |
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward] | |
Unvested units, beginning of period (in shares) | shares | 2.2 |
Units granted (in shares) | shares | 0.6 |
Units vested (in shares) | shares | (0.6) |
Units forfeited (in shares) | shares | (0.1) |
Unvested units, end of period (in shares) | shares | 2.1 |
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value [Abstract] | |
Unvested units, beginning of period (in dollars per share) | $ / shares | $ 39.20 |
Units granted (in dollars per share) | $ / shares | 57.04 |
Units vested (in dollars per share) | $ / shares | 35.70 |
Units forfeited (in dollars per share) | $ / shares | 43.65 |
Unvested units, end of period (in dollars per share) | $ / shares | $ 45.32 |
Stock-Based Compensation Narrative (Details) $ in Millions |
3 Months Ended | 9 Months Ended | |
---|---|---|---|
Sep. 29, 2017
USD ($)
shares
|
Sep. 29, 2017
USD ($)
shares
|
Sep. 30, 2016
shares
|
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Shares of common stock reserved for issuance under the Stock Plan | shares | 7,000,000 | 7,000,000 | |
Income tax benefit, stock awards | $ 9.7 | $ 26.2 | |
Number of stock-based compensation plans | shares | 0 | ||
Remaining service period related to the awards | 2 years | ||
Shares withheld to satisfy tax requirement | shares | 223,000 | ||
Aggregate value of shares withheld to satisfy tax requirement | $ 13.5 | ||
Aggregate intrinsic value of options exercised | 38.0 | ||
Cash receipts for options exercised | 25.0 | ||
Accounting Standards Update 2016-09 [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Excess Tax Benefit under ASU 2016-09 | $ 5.9 | $ 16.1 |
Commitments and Contingencies Narrative (Details) $ in Millions |
9 Months Ended |
---|---|
Sep. 29, 2017
USD ($)
| |
Movement in Standard Product Warranty Accrual [Roll Forward] | |
Accrued warranty liability, beginning of period | $ 65.0 |
Accruals for warranties issued during the period | 56.3 |
Settlements made | (54.8) |
Standard and Extended Product Warranty Accrual, Additions from Business Acquisition | 1.6 |
Effect of foreign currency translation | 0.2 |
Accrued warranty liability, end of period | $ 68.3 |
Minimum [Member] | |
Loss Contingencies [Line Items] | |
Warranty Period | 90 days |
Net Earnings Per Share Earnings per Share (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 29, 2017 |
Sep. 30, 2016 |
Sep. 29, 2017 |
Sep. 30, 2016 |
|
Earnings Per Share [Abstract] | ||||
Basic EPS | $ 267.8 | $ 226.9 | $ 707.6 | $ 647.8 |
Incremental shares from assumed exercise of dilutive options and vesting of dilutive Stock Awards | 0.0 | 0.0 | 0.0 | 0.0 |
Diluted EPS | $ 267.8 | $ 226.9 | $ 707.6 | $ 647.8 |
Basic EPS (in shares) | 347.7 | 346.0 | 347.3 | 345.5 |
Incremental shares from assumed exercise of dilutive options and vesting of dilutive RSUs and PSUs (in shares) | 5.2 | 3.2 | 4.9 | 1.1 |
Diluted EPS (in shares) | 352.9 | 349.2 | 352.2 | 346.6 |
Basic EPS (in dollars per share) | $ 0.77 | $ 0.66 | $ 2.04 | $ 1.87 |
Diluted EPS (in dollars per share) | $ 0.76 | $ 0.65 | $ 2.01 | $ 1.87 |
Net Earnings Per Share Narrative (Details) - USD ($) $ / shares in Units, $ in Millions |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Sep. 29, 2017 |
Sep. 29, 2017 |
Dec. 31, 2016 |
Jul. 02, 2016 |
Nov. 10, 2015 |
|
Common stock outstanding (in shares) | 347,500,000 | 347,500,000 | 345,900,000 | 345,200,000 | 0 |
Common Stock, Dividends, Per Share, Cash Paid | $ 0.07 | ||||
Retained Earnings | |||||
Dividends, Common Stock, Cash | $ 72.8 |
Segment Information Detailed Segment Data (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Sep. 29, 2017 |
Sep. 30, 2016 |
Sep. 29, 2017 |
Sep. 30, 2016 |
Dec. 31, 2016 |
|
Segment Reporting Information [Line Items] | |||||
Sales | $ 1,685.3 | $ 1,567.4 | $ 4,849.3 | $ 4,597.2 | |
Operating Profit | 355.9 | 323.2 | 999.1 | 908.3 | |
Assets | 9,327.0 | 9,327.0 | $ 8,189.8 | ||
Operating Segments | Professional Instrumentation | |||||
Segment Reporting Information [Line Items] | |||||
Sales | 786.8 | 723.5 | 2,261.9 | 2,145.1 | |
Operating Profit | 178.6 | 161.5 | 521.5 | 469.9 | |
Assets | 4,661.7 | 4,661.7 | 3,905.2 | ||
Operating Segments | Industrial Technologies | |||||
Segment Reporting Information [Line Items] | |||||
Sales | 898.5 | 843.9 | 2,587.4 | 2,452.1 | |
Operating Profit | 196.2 | 180.6 | 530.3 | 484.7 | |
Assets | 3,735.1 | 3,735.1 | 3,294.8 | ||
Corporate, Non-Segment [Member] | |||||
Segment Reporting Information [Line Items] | |||||
Operating Profit | (18.9) | $ (18.9) | (52.7) | $ (46.3) | |
Assets | $ 930.2 | $ 930.2 | $ 989.8 |
Segment Information Narrative (Details) |
9 Months Ended |
---|---|
Sep. 29, 2017
segment
| |
Segment Reporting [Abstract] | |
Number of Operating Segments | 2 |
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