BUSINESS OVERVIEW

3 Months Ended

Mar. 29, 2024

Organization, Consolidation and Presentation of Financial Statements [Abstract]

BUSINESS OVERVIEW

NOTE 1. BUSINESS OVERVIEW

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

We prepared the unaudited consolidated condensed financial statements included herein in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) applicable for interim periods. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted pursuant to such rules and regulations; however, we believe the disclosures are adequate to make the information presented not misleading. The unaudited consolidated condensed financial statements included herein should be read in conjunction with the audited annual consolidated financial statements as of and for the year ended December 31, 2023 and the footnotes (“Notes”) thereto included within our 2023 Annual Report on Form 10-K.

In our opinion, the accompanying financial statements contain all adjustments, which consist of only normal, recurring accruals necessary to fairly present our financial position, results of operations, comprehensive income, stockholders’ equity, and cash flows for the periods presented. The results of operations for the three months ended March 29, 2024, are not necessarily indicative of the results for the full year.

Segment Realignment

In January 2024, we realigned Invetech from the AHS segment to the PT segment, as we explored strategic alternatives for certain products and services of Invetech (the “Segment Realignment”). In March 2024, we entered into a non-binding memorandum of understanding with the management of Invetech, pursuant to which we will transfer ownership of certain product lines of Invetech to its current management team. The products and operations of Invetech that we will retain following such transfer of ownership are more closely aligned with the PT segment than the AHS segment. Prior period segment amounts in Note 3, 6, and 11 have been recast to conform to the revised segment presentation.

Accumulated Other Comprehensive Loss

Foreign currency translation adjustments are generally not adjusted for income taxes as they relate to indefinite investments in non-U.S. subsidiaries. As of March 29, 2024, our outstanding €500 million Euro-denominated senior unsecured notes due 2026, €700 million Euro-denominated senior unsecured notes due 2029, €275 million Euro-denominated term loan, and ¥14.4 billion Yen-denominated term loan were designated as net investment hedges of our investment in applicable foreign operations.

We recognized after-tax foreign currency transaction gains of $8.4 million and losses of $1.7 million during the three-month periods ended March 29, 2024 and March 31, 2023, respectively, on the debt that was deferred in the foreign currency translation component of Accumulated Other Comprehensive Income (Loss) (“AOCI”) as an offset to the foreign currency translation adjustments on our investments in foreign subsidiaries. Any amounts deferred in AOCI will remain until the hedged investment is sold or substantially liquidated. We recorded no ineffectiveness from our net investment hedges during the three-month periods ended March 29, 2024 and March 31, 2023.

The changes in AOCI by component are summarized below ($ in millions):

	Foreign currency translation adjustments		Pension & post-retirement plan benefit adjustments (a)			Total
For the Three Months Ended March 29, 2024:
Balance, December 31,2023	$	(291.7)	$	(34.4)		$	(326.1)
Other comprehensive income (loss) before reclassifications, net of income taxes	(76.5)		—			(76.5)
Amounts reclassified from AOCI into income:
Increase (decrease)	—		0.1		(b)	0.1
Income tax impact	—		—		(c)	—
Amounts reclassified from AOCI into income, net of income taxes	—		0.1			0.1
Net current period other comprehensive income (loss), net of income taxes	(76.5)		0.1			(76.4)
Balance, March 29, 2024	$	(368.2)	$	(34.3)		$	(402.5)
For the Three Months Ended March 31, 2023:
Balance, December 31, 2022	$	(301.4)	$	(24.3)		$	(325.7)
Other comprehensive income (loss) before reclassifications, net of income taxes	13.4		—			13.4
Amounts reclassified from AOCI into income:
Increase (decrease)	—		0.1		(b)	0.1
Income tax impact	—		(0.1)			(0.1)
Amounts reclassified from AOCI into income, net of income taxes	—		—			—
Net current period other comprehensive income (loss), net of income taxes	13.4		—			13.4
Balance, March 31, 2023	$	(288.0)	$	(24.3)		$	(312.3)
(a) Includes balances relating to defined benefit plans, supplemental executive retirement plans, and other postretirement employee benefit plans.
(b) This component of AOCI is included in the computation of net periodic pension cost (refer to Note 11 in our most recently filed Form 10-K for additional details).
(c) The income tax impact amount was rounded to zero.

Allowances for Doubtful Accounts

All trade accounts and unbilled receivables are recorded in the Consolidated Condensed Balance Sheets adjusted for any write-offs and net of allowances for credit losses. The allowances for credit losses represent management’s best estimate of the credit losses expected from our unbilled and trade accounts receivable portfolios over the life of the underlying assets. Additions to the allowances are charged to current period earnings, amounts determined to be uncollectible are charged directly against the allowances, while amounts recovered on previously written-off accounts increase the allowances. During the three-month periods ending March 29, 2024 and March 31, 2023, the activity was immaterial.

Property Sale

On March 14, 2024, we sold land and certain office buildings in our PT segment for $90 million, for which we received $20 million in cash proceeds and a $70 million promissory note secured by a letter of credit, with principal due in August and November 2024. The promissory note is recorded within Prepaid expenses and other current assets. During the three-month period ended March 29, 2024, we recorded a gain on sale of property of $63.1 million in the Consolidated Condensed Statements of Earnings.

Concurrently, using a portion of the proceeds from the property sale, we entered into an arm’s length transaction with the Fortive Foundation (the “Foundation”), pledging a charitable contribution of $20 million, which had no donor imposed conditions or restrictions. The Foundation, a not-for-profit entity, is a related party due to certain Fortive executives serving as members of the entity’s board of directors. The charitable contribution is recorded within the “Other non-operating expense, net” line in the Consolidated Condensed Statements of Earnings and the liability related to the pledged donation is recorded within Accrued expenses and other current liabilities in the Consolidated Condensed Balance Sheets.

Restructuring

We initiated a discrete plan in the first quarter of 2023 that was completed during the fourth quarter of 2023. The nature of these activities were broadly consistent throughout our segments and consist primarily of targeted workforce reductions in response to overall macroeconomic and other external conditions. We incurred these costs to position ourselves to provide superior products and services to customers in a cost-efficient manner, while taking into consideration the impact of broad economic uncertainties. During the three-month period ended March 31, 2023, we incurred charges of $17.6 million. These charges are recorded within Cost of sales and Selling, general, and administrative expenses in the Consolidated Condensed Statements of Earnings. Accrued restructuring costs were $13 million and $26 million as of March 29, 2024 and December 31, 2023 and are recorded within Accrued expenses and other current liabilities in the Consolidated Condensed Balance Sheets.

Recently Issued Accounting Standard

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, Segment Reporting (Topic 280)—Improvements to Reportable Segment Disclosures, which amends the disclosure requirements for reportable segments on the interim and annual basis. This standard is effective for fiscal year ending December 31, 2024 and interim periods within fiscal year ending December 31, 2025, with early adoption permitted. The adoption of the standard will not impact our consolidated financial statements. Upon adoption, we will update the applicable interim and annual disclosures to align with the new standard.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740)—Improvements to Income Tax Disclosures, which amends certain disclosure requirements related to income taxes on an annual basis. This standard is effective for fiscal year ending December 31, 2025, with early adoption permitted. The adoption of the standard will not impact our consolidated financial statements. Upon adoption, we will update the applicable annual disclosures to align with the new standard.