Fortive Annual Report 2021

Plain-text annual report

2021 ANNUAL REPORTANNUAL REPORT2021Essential technology for the people who accelerate progress. Fortive’s essential technology makes the world stronger, safer, and smarter. We accelerate progress in high-impact fields like industrial manufacturing, workplace safety, product development, and healthcare. “Five years ago, we set a comprehensive portfolio strategy to reach higher growth markets aligned to strong secular trends. Our teams’ focus and execution have yielded a more resilient business, with industry-leading profitability and free cash flow.” James A. Lico President and Chief Executive Officer r l d 1 7 % % Rest o f W o % 1 8 % 2% 6 % 2 1 0 1 a n i h C % 7 1 e p % o r u E 9% 5 n r e st e W IOS 3 8 % N o r t h A m e r ic a 5 6 % 10% r l d 1 7 % 7% Rest o f W o 2 1 % % 7 1 a n i h C % 5 % 1 % 3 1 % 4 1 e p uro 14% 8% Western E 2 2 % 9 % N o r t h A m e ric a 5 2 % % 7 2 % 3 % 1% st of W orld 2 e R % 9 a n i h C % 0 e 1 p Western Euro 9 4 % N o r t h A m e r ic a 5 3 % Precision Tech Advanced Health Financial Highlights for Fiscal Year Ended December 31, 2021 o rl d 1 9 % Rest of W 5 % % 1 % 4 5 % 2 1 a n i h C % 5 % 7 2 5 % FY 2021 TOTAL SALES $5,255 ($ IN MILLIONS) 24% % 4 1 e p o r u % 8% 7 Western E 57.4% $996 MILLION ADJUSTED GROSS PROFIT MARGIN ADJUSTED NET EARNINGS N o r t h A m e r ic a 5 4 % 23.1% ADJUSTED OPERATING PROFIT MARGIN $0.28 ANNUAL CASH DIVIDEND 31.6% ADJUSTED EARNINGS PER SHARE GROWTH $943 MILLION FREE CASH FLOW ■ Medical ■ Industrial & Manufacturing ■ Utilities & Power ■ Government ■ Communication, Electronics TOTAL FORTIVE & Semiconductor ■ Aerospace & Defense ■ Oil & Gas ■ Retail & Consumer ■ Other End Markets Financial Performance Over Three Years* Revenue (GAAP) Fortive FTV REVENUE FTV REVENUE FTV REVENUE IOS REVENUE IOS REVENUE Intelligent Operating IOS REVENUE Solutions PT REVENUE PT REVENUE Precision Technologies PT REVENUE 5400 5400 5400 5200 5200 5200 5000 5000 5000 4800 4800 4800 4600 4600 4600 4400 4400 4200 4200 4400 4 6 5 4 4200 2200 2200 2200 2150 2150 2150 2100 2100 2100 2050 2000 2050 2000 2050 2000 1950 1950 1950 1900 1900 1900 1850 1850 1850 1800 1800 1750 1750 1700 1700 1800 9 9 8 1 1750 1700 9 9 8 1 4 8 8 1 9 9 8 1 4 8 8 1 9 6 1 2 4 8 8 1 9 6 1 2 9 6 1 2 1900 1900 1900 1850 1850 1850 1800 1800 1800 1750 1750 1750 1700 1700 1700 1650 1650 1650 1600 1600 1550 1550 8 1600 0 8 1 1550 4 6 5 4 4 3 6 4 4 6 5 4 4 3 6 4 5 5 2 5 4 3 6 4 5 5 2 5 5 5 2 5 AHS REVENUE AHS REVENUE Advanced Healthcare AHS REVENUE Solutions 1400 1400 1400 1200 1200 1200 1000 1000 1000 800 800 800 600 600 600 400 400 400 8 0 8 1 1 5 6 1 8 0 8 1 1 5 6 1 9 4 8 1 1 5 6 1 9 4 8 1 9 4 8 1 200 200 0 0 200 7 5 8 0 9 9 0 1 7 5 8 9 9 0 1 7 5 8 6 3 2 1 9 9 0 1 6 3 2 1 6 3 2 1 2019 2019 2019 2020 2020 2020 2021 2021 2021 2019 2019 2020 2019 2020 2021 2020 2021 Adjusted Operating Profit Margin FTV AOP MARGIN FTV AOP MARGIN FTV AOP MARGIN IOS AOP MARGIN IOS AOP MARGIN IOS AOP MARGIN 2021 2019 2019 2020 2019 2020 2021 2020 2021 2021 2019 2019 2020 2019 2020 2021 2020 2021 2021 PT AOP MARGIN PT AOP MARGIN PT AOP MARGIN AHS AOP MARGIN AHS AOP MARGIN AHS AOP MARGIN Fortive 23.5% 23.5% 23.5% 23.0% 23.0% 23.0% 22.5% 22.5% 22.5% 22.0% 22.0% 22.0% 21.5% 21.5% 21.5% 21.0% 21.0% 21.0% 20.5% 20.5% 20.5% 20.0% 20.0% 19.5% 19.5% % 0 20.0% . 1 2 19.5% Intelligent Operating Solutions Precision Technologies Advanced Healthcare Solutions 28.5% 28.5% 28.5% 28.0% 28.0% 28.0% 27.5% 27.5% 27.5% 27.0% 27.0% 27.0% 26.5% 26.5% 26.5% 26.0% 26.0% 26.0% 25.5% 25.5% 25.0% 25.0% 24.5% 24.5% . 25.5% % 9 25.0% 5 2 24.5% % 0 . 1 2 % 0 . 1 2 % 0 . 1 2 % 0 . 1 2 % 1 . 3 2 % 0 . 1 2 % 1 . 3 2 % 1 . 3 2 Fortive 23.5% 23.5% 23.5% 23.0% 23.0% 23.0% 22.5% 22.5% 22.5% 22.0% 22.0% 22.0% 21.5% 21.5% 21.5% 21.0% 21.0% 21.0% 20.5% 20.5% 20.5% % 9 5 2 . % 0 6 2 . % 9 5 2 . % 0 6 2 . % 0 8 2 . % 0 6 2 . % 0 8 2 . % 0 8 2 . 20.0% 20.0% 19.5% 19.5% 19.0% 19.0% . 20.0% % 4 19.5% 0 2 19.0% % 4 0 2 . % 1 . 1 2 % 4 0 2 . % 1 . 1 2 % 1 . 3 2 % 1 . 1 2 % 1 . 3 2 % 1 . 3 2 23.5% 23.5% 23.5% 23.0% 23.0% 23.0% 22.5% 22.5% 22.5% 22.0% 22.0% 22.0% 21.5% 21.5% 21.5% 21.0% 21.0% 20.5% 20.5% . % 21.0% 5 2 2 20.5% % 5 . 2 2 % 5 . 1 2 % 5 . 2 2 % 5 . 1 2 % 9 2 2 . % 5 . 1 2 % 9 2 2 . % 9 2 2 . 2019 2019 2019 2020 2020 2020 2021 2021 2021 2019 2019 2020 2019 2020 2021 2020 2021 2021 2019 2019 2020 2019 2020 2021 2020 2021 2021 2019 2019 2020 2019 2020 2021 2020 2021 2021 FTV EPS Adjusted Earnings FTV EPS FTV EPS Per Share FTV FREE CASH FLOW Free Cash Flow FTV FREE CASH FLOW FTV FREE CASH FLOW FCF MARGIN RATIO Free Cash Flow Margin FCF MARGIN RATIO FCF MARGIN RATIO 3.00 3.00 3.00 1000 1000 1000 25% 25% 25% 2.50 2.50 2.50 2.00 2.00 2.00 1.50 1.50 1.50 1.00 1.00 1.00 0.50 0.50 0.50 800 800 800 20% 20% 20% 600 600 600 15% 15% 15% 400 400 400 10% 10% 10% 200 200 200 5% 5% 5% 2.03 2.03 2.03 2.09 2.09 2.09 2.75 2.75 2.75 628 628 628 902 902 902 943 943 943 14% 14% 14% 19% 19% 19% 18% 18% 18% 0.00 0.00 0.00 0 0 0 0% 0% 0% 2019 2019 2019 2020 2020 2020 2021 2021 2021 2019 2019 2019 2020 2020 2020 2021 2021 2021 2019 2019 2019 2020 2020 2020 2021 2021 2021 * The financial results are presented on a continuing operations basis. All figures are shown in millions. About Fortive Fortive Corporation delivers essential technologies and connected workflow solutions across a range of attractive end markets. The company’s businesses and strategic segments—Intelligent Operating Solutions, Precision Technologies, and Advanced Healthcare Solutions—are built on leading brand names, innovative technologies, and established market positions. Fortive is based in Everett, Washington, with research and development, manufacturing, sales, distribution, service, and administrative operations in more than 50 countries. Fortive’s global team of 18,000 employees is united by a powerful shared purpose, essential technologies for the people who accelerate progress. FTV EPSFTV FREE CASH FLOWFCF MARGIN RATIO0.000.501.001.502.002.503.002019202020212.032.092.7502004006008001000201920202021628902943IOS AOP MARGINPT AOP MARGINAHS AOP MARGIN24.5%25.0%25.5%26.0%26.5%27.0%27.5%28.0%28.5%19.0%19.5%20.0%20.5%21.0%21.5%22.0%22.5%23.0%23.5%20.5%21.0%21.5%22.0%22.5%23.0%23.5%20192020202120192020202120192020202125.9%26.0%28.0%20.4%21.1%23.1%22.5%21.5%22.9%FTV AOP MARGIN19.5%20.0%20.5%21.0%21.5%22.0%22.5%23.0%23.5%20192020202121.0%21.0%23.1%IOS REVENUEPT REVENUEAHS REVENUE1700175018001850190019502000205021002150220015501600165017001750180018501900020040060080010001200140020192020202120192020202120192020202118991884216918081651184985710991236FTV REVENUE42004400460048005000520054002019202020214564463452552019202020210%5%10%15%20%25%14%19%18%FTV EPSFTV FREE CASH FLOWFCF MARGIN RATIO0.000.501.001.502.002.503.002019202020212.032.092.7502004006008001000201920202021628902943IOS AOP MARGINPT AOP MARGINAHS AOP MARGIN24.5%25.0%25.5%26.0%26.5%27.0%27.5%28.0%28.5%19.0%19.5%20.0%20.5%21.0%21.5%22.0%22.5%23.0%23.5%20.5%21.0%21.5%22.0%22.5%23.0%23.5%20192020202120192020202120192020202125.9%26.0%28.0%20.4%21.1%23.1%22.5%21.5%22.9%FTV AOP MARGIN19.5%20.0%20.5%21.0%21.5%22.0%22.5%23.0%23.5%20192020202121.0%21.0%23.1%IOS REVENUEPT REVENUEAHS REVENUE1700175018001850190019502000205021002150220015501600165017001750180018501900020040060080010001200140020192020202120192020202120192020202118991884216918081651184985710991236FTV REVENUE42004400460048005000520054002019202020214564463452552019202020210%5%10%15%20%25%14%19%18%2021 Fellow Shareholders, 2021 marked Fortive’s fifth anniversary as a public company, and I’m incredibly proud of what we have accomplished. Five years ago, we set a comprehensive portfolio strategy to reach higher growth markets aligned to strong secular trends. Our teams’ focus and execution have yielded a more resilient business, with industry-leading profitability and free cash flow. We have built a strong foundation from which we can outperform and create long-term shareholder value in any environment. Our strong free cash flow is a currency for accelerating our strategy, unlocking substantial opportunities for organic and inorganic growth across our portfolio. In addition to applying FBS across our business to drive growth and expand margins, we invested in breakthrough innovation through our partnership with Pioneer Square Labs, our innovation incubator. Our data science hub, The Fort, delivered 47 machine learning and data analytics projects across our segments to help our customers solve their biggest challenges, and those valuable learnings will benefit all our businesses. We also accelerated our segment strategies through disciplined M&A. In August, we acquired ServiceChannel, a leading global provider of facilities maintenance service solutions. ServiceChannel enriches our Intelligent Operating Solutions segment with a high-growth SaaS platform, a deep contractor network, valuable data assets, and a global footprint. In December, we welcomed Provation, a leading provider of clinical workflow software, to our Advanced Healthcare Solutions segment, expanding our ability to address the most critical needs of hospitals, ambulatory surgery centers, and clinicians. These two world-class software offerings are already creating compelling value for our customers, and as our new operating companies fully embrace the power of FBS, there’s significant runway for even faster and more profitable growth. Despite the lingering impacts of the COVID-19 pandemic and ongoing supply chain constraints, we delivered double-digit earnings growth, record recurring revenue, and differentiated operating margin expansion in 2021. We broadened our offerings and expanded core growth across all three of our business segments—Intelligent Operating Solutions, Precision Technologies, and Advanced Healthcare Solutions. Our portfolio position is stronger than ever before, with significant growth drivers in attractive end markets. These outstanding results are made possible by our operational discipline and strong culture of continuous improvement, rooted in the Fortive Business System (FBS). FBS empowers us to overcome obstacles, turn challenges into opportunities, and unlock breakthrough growth and innovation across our businesses in the spirit of our shared purpose, essential technology for the people who accelerate progress. 2021 Highlights For the year, we achieved strong results across a range of financial metrics:  Record orders and backlog growth in our hardware businesses  Core revenue growth of 9.5%  Double-digit software growth  Adjusted operating margin expansion of 210 basis points  Adjusted diluted net earnings per share of $2.75, a year-over-year increase of approximately 32%  Free cash flow of $943 million, a year-over-year increase of 4.5% and an increase of 50% over the past two years Creating Value through Continuous Evolution Across our businesses, we turn to FBS to understand our customers more deeply, speed up innovation, expand market share profitably, improve operations, and forge the leadership skills we need for the future. One of the best things about FBS, our engine for continuous improvement, is that we never stop improving it. As our portfolio evolves, we’re expanding our toolset and capabilities to amplify impact across hardware, software, and data analytics. One of our newest FBS tools, Lean Portfolio Management (LPM), is proving to be particularly powerful for clarifying our highest growth opportunities and freeing up resources for early-stage innovation. LPM is driving value throughout our product development cycle, giving us the tools to improve on-time program delivery by 24%, decrease sustaining engineering resources by 22%, and improve software quality by 45%. You’ll see even more examples in the pages that follow. As we dive deeper into the workflows that make buildings, plants, and hospitals safer, more reliable, and more efficient, we’re unlocking incredible value for our customers. Compelling secular growth drivers like AI-driven automation, climate-friendly energy transformation, and “everywhere” connectivity will only strengthen our strategic segments and expand the competitive advantage we’ve built. Building a More Sustainable Future Our sustainability efforts are focused on creating lasting impact and value in the areas that matter most to our stakeholders. Our businesses contribute directly to sustainability by ensuring patient and worker safety, improving energy efficiency at scale, and maximizing the lifespan and efficiency of assets and facilities. Through our world-shaping products and services, we help our customers meet their own sustainability goals while driving long-term value. I’m particularly proud of how we accelerated our inclusion and diversity in 2021 through intentional action and transparency. We know that diverse teams produce better outcomes, and our commitment to diversity starts at the very top with 63% ethnic or gender diversity on our board of directors. We published clear goals to increase our diverse supplier spend, gender representation, BIPOC representation, and senior leader diversity by 2025. We see our progress in the hundreds of team members building community and connections through employee and friends resource groups and the rising inclusion and belonging score in our quarterly employee pulse surveys, which recently topped 80%. We know that climate change poses risks to people, ecosystems, and communities worldwide, and we’re equally committed to protecting the planet and reducing the impact of our own operations. We have made substantial progress toward our target, having achieved our goal to reduce GHG emissions intensity by 50%, and will be announcing new goals in our upcoming 2022 Sustainability Report. We also recently completed our Task Force on Climate-Related Financial Disclosures (TCFD) reporting gap analysis, and we’re taking steps to align with the TCFD framework for even greater transparency. In June we became a signatory of the UN Global Compact, a public commitment to leading global change by embedding sustainability even more deeply into our strategy, culture, and day-to-day operations. As recognition for our efforts, we are all proud to appear on Newsweek’s list of America’s Most Responsible Companies for the third year in a row. Accelerating Progress At Fortive, the future we’re creating is full of opportunity. We’ve added transformative new leaders with the critical skills we need to accelerate our strategy across our segments. FBS is more robust than ever, with powerful new capabilities to catalyze remote collaboration and bring breakthrough innovations for our customers, faster than ever before. Our compelling outlook continues to set Fortive apart. We are well positioned to create long-term, sustainable value and capitalize on high-return opportunities for years to come. We’re a learning organization at heart, and it’s an exciting time to be at Fortive. Even in the era of the Great Resignation, we are encouraged that more than 70% of our employees agree that they can fulfill their career goals at Fortive. We remain committed to prioritizing employee learning and growth to keep our pipeline of future Fortive leaders strong. In 2021, we filled 72% of our most senior positions with internal talent, and we invested in the career progression of nearly 900 future leaders through intensive development programs that offer unmatched opportunities for professional development and growth. We’re also fueling our next decade of success, building on our expertise in hardware and operations with the talent and skills that are critical for our future, from data science and software engineering to digital product management. We’re continuing to foster a diverse and inclusive environment where people can do their best work and feel meaning and purpose in their contributions, as we make the world stronger, safer, and smarter. We know that as we do more for our customers, we’re having an incredibly positive impact in the world. We’re accelerating progress together. Thank you for joining us on this bold journey, and for putting your trust in us. James A. Lico President and Chief Executive Officer Accruent capitalized on strong demand for its suite of return to workplace solutions, deploying FBS tools to increase monthly on-time renewals by 15+ points and total bookings by almost 50% for the year. Intelligent Operating Solutions From smart office buildings and universities to tech-enabled construction sites and factories, Fortive’s Intelligent Operating Solutions use advanced instrumentation to ensure safety and compliance, improve energy efficiency, and optimize performance. Connected workflows, real-time data, and powerful analytics transform the maintenance and management of buildings and other mission-critical physical assets to supercharge productivity and minimize downtime. 2021 2% 7% r l d 1 7 % % Rest o f W o % 1 8 % 6 0 1 a n i h C % 2 1 % 7 1 e p % 9% 5 o r u E n r e st e W TOTAL SALES $2,169 3 8 % N o r t h A m e r ic a 5 6 % 10% r l d 1 7 % Rest o f W o 2 1 % % 7 1 % 5 a n i h C % 1 % 3 % 4 1 e p 1 14% Western E uro 2 2 % 9 % N o r t h A m e ric a 5 2 % 8% % 7 2 % 3 % 1% st of W orld 2 R e % 9 a n i h C % 0 e 1 p Western Euro 9 4 % N o r t h A m e r ic a 5 3 % o rl d 1 9 % 5 % % 1 Rest of W % 4 % 2 1 a n i h C 5 % 5 % 7 % 4 1 e p o r u % 8% 7 Western E 2 5 % N o r t h A m e r ic a 5 4 % 24% ■ Medical ■ Industrial & Manufacturing IOS ■ Utilities & Power ■ Government ■ Communication, Electronics & Semiconductor ■ Aerospace & Defense ■ Oil & Gas ■ Retail & Consumer ■ Other End Markets Precision Tech Advanced Health TOTAL FORTIVE Fluke’s eMaint Paves the Way to Predictive Maintenance At Fluke Digital Systems, the eMaint computerized maintenance management system (CMMS) powers the shift to predictive maintenance by continuously monitoring equipment data and trends. This award-winning software solution helps companies eliminate unplanned downtime, boost efficiency, and lower maintenance costs. eMaint finished the year strong with more than 30% growth in ARR bookings in Q4.2021 The Setra FLEX Environmental Monitor drove impressive growth in the life science and healthcare industries. The FLEX, an advanced monitoring, control, and alarming system for temperature, pressure, humidity, and other critical parameters, helps hospitals, pharmacies, laboratories, manufacturing facilities, and data centers ensure safe conditions for patients, staff, and sensitive equipment. Precision Technologies Turning the spark of an idea into a world-changing product requires bold vision, a rigorously customer-centric approach, and specialized expertise in materials, methods, and measurement. Fortive’s Precision Technologies help solve tough technical challenges to speed breakthroughs in a wide range of applications, from food and beverage production and manufacturing to next-generation communications and clean energy. From deep sea to deep space, engineers and product developers depend on Fortive’s advanced technologies for safety, precision, and reliability, even in the most demanding and dynamic conditions. 2021 r l d 1 7 % % Rest o f W o % 1 8 % 2% 6 % 2 1 0 1 a n i h C % 7 1 e p % o r u E 9% 5 n r e st e W IOS 3 8 % N o r t h A m e r ic a 5 6 % 10% r l d 1 7 % 7% TOTAL SALES $1,849 Rest o f W o 2 1 % % 7 1 % 5 a n i h C % 1 % 3 % 4 1 e p 1 14% Western E uro 8% 7 % 2 % 3 % 1% st of W orld 2 R e % 9 a n i h C % 9 4 % N o r t h A m e r ic a 5 3 % 2 2 % 9 % N o r t h A m e ric a 5 2 % 0 e 1 p Western Euro o rl d 1 9 % 5 % Rest of W % 1 % 2 1 a n i h C % 4 5 % 5 % 7 % 4 1 e p o r u % 8% 7 Western E 2 5 % N o r t h A m e r ic a 5 4 % 24% Precision Tech ■ Aerospace & Defense ■ Oil & Gas ■ Retail & Consumer ■ Other End Markets ■ Medical ■ Industrial & Manufacturing ■ Utilities & Power ■ Government ■ Communication, Electronics & Semiconductor Advanced Health TOTAL FORTIVE New Parametric Test System Decreases Test Time to Accelerate Manufacturing Tektronix, a leading worldwide provider of test and measurement solutions, exceeded 2021 revenue targets by 180% with its Keithley Parametric Test System and KTE V7.1 software, which helps bring new technologies to life and accelerate chip manufacturing when the world needs it most. 2021 Fluke Health Solutions demonstrated the return on growth investments made throughout the year, delivering impressive revenue and margin improvements as well as strong double-digit growth in its biomedical test equipment business. FHS also entered the patient radiation dose management market with OPTIMIZE, a disruptive new hybrid- SaaS service that uses AI and on-demand imaging physics support to improve real-time patient care and compliance. Advanced Healthcare Solutions Fortive’s Advanced Healthcare Solutions help raise the standard of care globally and ensure that providers can focus on the best possible care for their patients. At hospitals, healthcare facilities, and laboratories, delivering exceptional care efficiently while navigating rapid change is more important than ever. They need intelligent technologies to ensure that critical safety standards are met, instruments are operating at peak performance, and complex procedures are followed accurately in a dynamic environment. 2021 r l d 1 7 % % Rest o f W o % 1 8 % 2% 6 % 2 1 0 1 a n i h C % 7 1 e p % o r u E 9% 5 n r e st e W 3 8 % N o r t h A m e r ic a 5 6 % 10% r l d 1 7 % 7% Rest o f W o 2 1 % % 7 1 a n i h C % 5 % 1 % 3 1 % 4 1 e p uro 14% 8% Western E 2 2 % 9 % N o r t h A m e ric a 5 2 % IOS Precision Tech 7 % 2 % 3 % 1% TOTAL SALES $1,236 9 4 % N o r t h A m e r ic a 5 3 % st of W orld 2 R e % 9 a n i h C % 0 e 1 p Western Euro Advanced Health ■ Medical ■ Industrial & Manufacturing ■ Utilities & Power ■ Government ■ Communication, Electronics ■ Aerospace & Defense ■ Oil & Gas ■ Retail & Consumer ■ Other End Markets & Semiconductor o rl d 1 9 % Rest of W 5 % % 1 % 4 5 % 2 1 a n i h C % 5 % 7 % 4 1 e p o r u % 8% 7 Western E 2 5 % N o r t h A m e r ic a 5 4 % 24% TOTAL FORTIVE ASP Introduces 15-Minute Read Time for Fast, Compliant Biologic Instrument Processing ASP, a global leader in infection prevention solutions for healthcare, launched its STERRAD VELOCITY® System with 15-minute time to read1, which quickly guides users through compliant biologic instrument processing and automatically generates audit- ready records. The STERRAD VELOCITY® System offers the industry’s fastest time to read, shortening training with step-by-step instructions. cycle times by up to nine minutes to deliver sterilized instruments to busy operating rooms with unmatched speed and accuracy. An intuitive touchscreen streamlines workflows and simplifies STERRAD® Sterilization Systems2021 1 15 or 30 minutes dependent on software version. Refer to the IFU for actual time to results. Fastest BI/PCD currently marketed for Increasing Our Impact by Living Our Values We build extraordinary teams for extraordinary results. We are more together, and we all have something unique to offer. We come together to solve problems no one could solve alone. We are fully committed to a strong and inclusive culture. 100% 300 1500+ score on the Human Rights Campaign Foundation’s Corporate Equality Index (CEI) for the fifth consecutive year team members across 24 countries completed our People Leader Experience training employee and friends resource group members engaged across more than 30 global communities Customer success inspires our innovation. We believe our most important breakthroughs are the ones that help our customers succeed and move the world forward. We break down barriers and forge new paths to world-changing innovations. 59 24% 47 innovation teams using our Growth Accelerator framework improvement in on-time delivery to bring innovations to market faster projects delivered through The Fort, using data science to help our customers solve their biggest challenges Kaizen is our way of life. We believe the next time can always be better. Our commitment to kaizen—continuous improvement—inspires us to keep growing and learning. 200 basis points in software net dollar retention 210 basis points of margin expansion $2B+ in market opportunity discovered through new early-stage innovation efforts We compete for shareholders. We are a force for good. We believe that prioritizing trust, sustainability, and positive impact creates long-term value for all our stakeholders—our customers, our shareholders, and our communities. 2X 50% accelerated annual core growth rate last 5 years* increase in free cash flow over the past 2 years * Based on 2022 projections 63% Board of Director diversity 2021 FORM 10-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549________________________________________________ FORM 10-K (Mark One)☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2021 OR☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from to Commission File Number 1-37654 ____________FORTIVE CORPORATION (Exact name of registrant as specified in its charter) Delaware 47-5654583(State or other jurisdiction ofincorporation or organization) (I.R.S. employeridentification number)6920 Seaway BlvdEverett,WA98203(Address of principal executive offices)(Zip code)Registrant’s telephone number, including area code: (425) 446 - 5000 Securities Registered Pursuant to Section 12(b) of the Act: Title of each classTrading symbolsName of each exchange on which registeredCommon stock, par value $0.01 per shareFTVNew York Stock ExchangeSecurities registered pursuant to Section 12(g) of the Act: NONE (Title of Class)Indicate by check mark if the registrant is a well-known seasoned issuer as defined in Rule 405 of the Securities Act.Yes x No oIndicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No xIndicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes x No o83012IMPO.B (PDF_D_SWOP).indd 183012IMPO.B (PDF_D_SWOP).indd 13/7/22 8:31 PM3/7/22 8:31 PMIndicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No oIndicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.Large accelerated filerx Accelerated filer ¨Non-accelerated filer ¨(Do not check if a smaller reporting company)Smaller reporting company ☐Emerging growth company ☐If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. oIndicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ýAs of February 24, 2022 there were 359,066,396 shares of Registrant’s common stock outstanding. The aggregate market value of common stock held by non-affiliates of the Registrant as of July 2, 2021 was $25.3 billion, based upon the closing price of the Registrant’s common stock on the New York Stock Exchange. ____________________________________DOCUMENTS INCORPORATED BY REFERENCEPart III incorporates certain information by reference from the Registrant’s proxy statement for its 2022 annual meeting of stockholders (the “2022 Proxy Statement”) to be filed pursuant to Regulation 14A within 120 days after Registrant’s fiscal year-end. With the exception of the sections of the 2022 Proxy Statement specifically incorporated herein by reference, the 2022 Proxy Statement is not deemed to be filed as part of this Form 10-K.83012IMPO.B (PDF_D_SWOP).indd 283012IMPO.B (PDF_D_SWOP).indd 23/7/22 8:31 PM3/7/22 8:31 PMTABLE OF CONTENTS PageInformation Relating to Forward-looking Statements2Part I. Item 1. Business2Item 1A.Risk Factors9Item 1B.Unresolved Staff Comments22Item 2.Properties22Item 3. Legal Proceedings22Item 4.Mine Safety Disclosures22Information about our Executive Officers23Part II.Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities24Item 6.[Reserved]24Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations24Item 7A. Quantitative and Qualitative Disclosures About Market Risk49Item 8. Financial Statements and Supplementary Data50Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure105Item 9A. Controls and Procedures105Item 9B.Other Information105Item 9C.Disclosure Regarding Foreign Jurisdictions that Prevent InspectionsPart III.Item 10.Directors, Executive Officers and Corporate Governance105Item 11. Executive Compensation106Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters106Item 13. Certain Relationships and Related Transactions, and Director Independence106Item 14.Principal Accountant Fees and Services106Part IV.Item 15. Exhibits and Financial Schedules106Item 16. Form 10-K Summary106Signatures183012IMPO.B (PDF_D_SWOP).indd 383012IMPO.B (PDF_D_SWOP).indd 33/7/22 8:31 PM3/7/22 8:31 PM83012IMPO.B (PDF_D_SWOP).indd 483012IMPO.B (PDF_D_SWOP).indd 43/7/22 8:31 PM3/7/22 8:31 PMINFORMATION RELATING TO FORWARD-LOOKING STATEMENTSCertain statements included or incorporated by reference in this Annual Report on Form 10-K, in other documents we file with or furnish to the Securities and Exchange Commission (“SEC”), in our press releases, webcasts, conference calls, materials delivered to shareholders and other communications, are “forward-looking statements” within the meaning of the United States federal securities laws. All statements other than historical factual information are forward-looking statements, including without limitation statements regarding: projections of revenue, expenses, profit, profit margins, tax rates, tax provisions, cash flows, pension and benefit obligations and funding requirements, our liquidity position or other financial measures; management’s plans and strategies for future operations, including statements relating to anticipated operating performance, cost reductions, restructuring activities, new product and service developments, competitive strengths or market position, acquisitions, divestitures, strategic opportunities, securities offerings, stock repurchases, dividends and executive compensation; growth, declines and other trends in markets we sell into, including the expected impact of trade and tariff policies; new or modified laws, regulations and accounting pronouncements; outstanding claims, legal proceedings, tax audits and assessments and other contingent liabilities; foreign currency exchange rates and fluctuations in those rates; impact of changes to tax laws; general economic and capital markets conditions; the timing of any of the foregoing; assumptions underlying any of the foregoing; and any other statements that address events or developments that we intend or believe will or may occur in the future. Terminology such as “believe,” “anticipate,” “should,” “could,” “intend,” “will,” “plan,” “expect,” “estimate,” “project,” “target,” “may,” “possible,” “potential,” “forecast” and “positioned” and similar references to future periods are intended to identify forward-looking statements, although not all forward-looking statements are accompanied by such words. Forward-looking statements are based on assumptions and assessments made by our management in light of their experience and perceptions of historical trends, current conditions, expected future developments and other factors they believe to be appropriate. These forward-looking statements are subject to a number of risks and uncertainties, including but not limited to the risks and uncertainties set forth under “Item 1A. Risk Factors” in this Annual Report.Forward-looking statements are not guarantees of future performance and actual results may differ materially from the results, developments, and business decisions contemplated by our forward-looking statements. Accordingly, you should not place undue reliance on any such forward-looking statements. Forward-looking statements speak only as of the date of the report, document, press release, webcast, call, materials or other communication in which they are made (or such earlier date as may be specified in such statement). We do not assume any obligation to update or revise any forward-looking statement, whether as a result of new information, future events and developments or otherwise.PART IITEM 1. BUSINESSGeneralFortive Corporation is a provider of essential technologies for connected workflow solutions across a range of attractive end-markets. Our strategic segments - Intelligent Operating Solutions, Precision Technologies, and Advanced Healthcare Solutions - include well-known brands with leading positions in their markets. Our businesses design, develop, manufacture, and service professional and engineered products, software, and services, building upon leading brand names, innovative technologies, and significant market positions. We are headquartered in Everett, Washington and employ a team of more than 18,000 research and development, manufacturing, sales, distribution, service, and administrative employees in more than 50 countries around the world.We are guided by our shared purpose to deliver essential technology for the people who accelerate progress in buildings, factories, and hospitals, and we are united by our culture of continuous improvement and bias for action that embody the Fortive Business System (“FBS”). Through rigorous application of the proprietary set of growth, lean, and leadership tools and processes that comprise FBS, we continuously improve business performance in the critical areas of innovation, product development and commercialization, global supply chain, sales and marketing, and leadership development. Our commitment to FBS has enabled us to drive higher customer satisfaction and profitability, and generate significant improvements in innovation, growth, and core operating margins. Additionally, our FBS tools have enabled us to execute a disciplined acquisition strategy and expand our portfolio into new and attractive markets, evolving to further our goal of creating long-term shareholder value.On October 9, 2020, we completed the separation of Vontier Corporation (“Vontier”), the entity we created to hold our former Industrial Technologies segment (the “Separation”). The accounting requirements for reporting the Vontier business as a discontinued operation were met when the Separation was completed. Accordingly, the consolidated financial statements reflect the results of the Vontier business as a discontinued operation for all periods presented.283012IMPO.B (PDF_D_SWOP).indd 583012IMPO.B (PDF_D_SWOP).indd 53/7/22 8:31 PM3/7/22 8:31 PMFortive Corporation is a Delaware corporation and was incorporated in 2015 in connection with the separation of Fortive from Danaher Corporation (“Danaher” or “Former Parent”) on July 2, 2016 as an independent, publicly-traded company, listed on the New York Stock Exchange.In this Annual Report, the terms “Fortive” or the “Company” refer to either Fortive Corporation or to Fortive Corporation and its consolidated subsidiaries, as the context requires. Unless otherwise indicated, all amounts in this Annual Report refer to continuing operations.Reportable SegmentsWe operate and report our results in three segments, Intelligent Operating Solutions, Precision Technologies, and Advanced Healthcare Solutions, each of which is further described below. Intelligent Operating SolutionsOur Intelligent Operating Solutions segment provides leading workflow solutions to accelerate industrial and facility reliability and performance, as well as compliance and safety across a range of vertical end markets, including manufacturing, process industries, healthcare, utilities and power, communications and electronics, among others. The businesses in our Intelligent Operating Solutions segment provide differentiated instrumentation and sensors, software and services to address our customers’ toughest workflow challenges. These offerings include connected reliability tools, environment, health, and safety (EHS) enterprise software products, work order and service provider management database and software, facility and asset lifecycle software, and pre-construction planning and construction procurement solutions. We offer a series of leading hardware offerings, including ruggedized handheld professional test tools, electric, pressure, and temperature calibration tools for high-end government and industrial labs, as well as portable gas detection tools which keep workers safe in industries where air quality and safety cannot be taken for granted. Typical users of these offerings include electrical engineers, electricians, electronic technicians, EHS professionals, network technicians, facility managers, first-responders, and maintenance professionals. Products and services within our Intelligent Operating Solutions segment are marketed under a variety of leading brands, including ACCRUENT, FLUKE, GORDIAN, INDUSTRIAL SCIENTIFIC, INTELEX, PRUFTECHNIK, and SERVICECHANNEL.Precision TechnologiesOur Precision Technologies segment supplies instrumentation and sensing technologies to a broad set of vertical end markets, enabling our customers to accelerate the development, manufacture and launch of innovative products and solutions. We provide our customers with electrical test and measurement instruments and services, energetic material devices, and a broad portfolio of sensor and control system solutions. In our sensing business, we provide solutions that sense, monitor, and control operational or manufacturing variables, such as temperature, pressure, level, and flow. Our sensing products serve a wide variety of vertical markets, including power and energy, medical equipment, food and beverage, aerospace and defense, off-highway vehicles, electronics, semiconductors, and other general industrial markets. In our energetic materials business, we design, manufacture, and market highly-engineered energetic material solutions for commercial, defense, and space markets. At Tektronix, we provide our customers with a leading portfolio of test and measurement instruments serving a variety of end markets including communication, consumer electronics, semiconductor, defense, automotive, and industrial. Customers for these products and services include design engineers for advanced electronic devices and equipment, process and quality engineers focused on improved process capability and productivity, facility maintenance managers driving increased uptime, and other customers for whom precise measurement, reliability, and compliance are critical in their applications.Products and services in our Precision Technologies segment are marketed under a variety of brands, including ANDERSON-NEGELE, GEMS, SETRA, HENGSTLER-DYNAPAR, QUALITROL, PACIFIC SCIENTIFIC, KEITHLEY and TEKTRONIX. Advanced Healthcare SolutionsOur Advanced Healthcare Solutions segment supplies critical workflow solutions to hospitals and other healthcare customers, enabling safer, more efficient, and higher quality healthcare. Through the Advanced Healthcare Solutions segment, we provide hardware, consumables, software and services that optimize our customers’ most critical workflows, including instrument sterilization and device reprocessing, instrument tracking, cell therapy equipment design and manufacturing, biomedical test tools, radiation safety monitoring, end-to-end clinical productivity solutions and asset management. Our offerings provide critical sterilization and disinfection solutions, including low-temperature hydrogen peroxide sterilization solutions and advanced infection prevention and patient safety in healthcare facilities. In addition, we provide subscription-based surgical inventory management systems to healthcare facilities to facilitate inventory management and regulatory compliance as well as 383012IMPO.B (PDF_D_SWOP).indd 683012IMPO.B (PDF_D_SWOP).indd 63/7/22 8:31 PM3/7/22 8:31 PMsubscription-based technical, analytical, and compliance services to determine radiation exposure. We also serve gastroenterology and other clinical specialties with solutions that span the entire patient procedure, from pre-op through post-op recovery and follow-up, enhancing physician efficiency and effectiveness. Furthermore, through our solutions and services, we enable developers and engineers in healthcare and other critical industries across the end-to-end product creation cycle from concepts to finished products. Products and services in our Advanced Healthcare Solutions segment are marketed under a variety of brands, including ASP, CENSIS, CENSITRAC, EVOTECH, FLUKE BIOMEDICAL, INVETECH, LANDAUER, PROVATION, RAYSAFE, and STERRAD. ************************************The following discussion includes information common to all of our segments.Materials Our manufacturing operations employ a wide variety of raw materials, including electronic components, steel, plastics and other petroleum-based products, aluminum, and copper. Prices of oil and gas affect our costs for freight and utilities. We purchase raw materials from a large number of independent sources around the world. Tariffs affect our costs for impacted materials or components we import into the United States. Based on allocation of annual spend among our various suppliers, no single supplier is material. However, some components that require particular specifications or qualifications are dependent on a single supplier or a limited number of suppliers that can readily provide such components. We utilize a number of techniques to address potential disruption in and other risks relating to our supply chain, including in certain cases the use of safety stock, alternative materials, and qualification of multiple supply sources. While the COVID-19 pandemic and the widespread supply chain challenges due to labor, raw material, and component shortages, as well as widespread logistics issues had affected multiple industries and raised material and shipping costs, our supply chain was responsive to these dynamics, and we implemented solutions, including through FBS, to effectively support our near-term operations, and help countermeasure production material shortages and distribution limitations. For a further discussion of risks related to the materials and components required for our operations, please refer to “Item 1A. Risk Factors.”Intellectual Property We own numerous patents, trademarks, copyrights, and trade secrets and hold licenses to use intellectual property owned by others. Although in aggregate our intellectual property is important to our operations, we do not consider any single patent, trademark, copyright, trade secret, or license to be of material importance to any segment or to the business as a whole. From time to time we engage in litigation to protect our intellectual property rights. For a discussion of risks related to our intellectual property, please refer to “Item 1A. Risk Factors.” All capitalized brands and product names throughout this document are trademarks owned by, or licensed to, Fortive.Competition We believe that we are a leader in many of our served markets. Although our businesses generally operate in highly competitive markets, our competitive position cannot be determined accurately in the aggregate or by segment, since none of our competitors offer all of the same product and service lines or serve all of the same markets as we do. Because of the range of the products and services we sell and the variety of markets we serve, we encounter a wide variety of competitors, including larger companies or divisions of larger companies with substantial sales, marketing, research, and financial capabilities, as well as well-established regional competitors who are more specialized than we are in particular markets. We face increased competition in a number of our served markets as a result of the entry of competitors based in low-cost manufacturing locations, and increasing consolidation in particular markets. The number of competitors varies by product and service line. Our management believes that we have a market leadership position in most of the markets we serve. Key competitive factors vary among our businesses and product and service lines, but include the specific factors noted above with respect to each particular business and typically also include price, quality, performance, delivery speed, applications expertise, distribution channel access, service and support, technology and innovation, breadth of product, service and software offerings, and brand name recognition. For a discussion of risks related to competition, please refer to “Item 1A. Risk Factors.”Seasonal Nature of BusinessGeneral economic conditions impact our business and financial results, and certain of our businesses experience seasonal and other trends related to the industries and end markets that they serve. For example, sales of capital equipment and sterilization consumables are often stronger in the fourth calendar quarter and sales to OEMs are often stronger immediately preceding and following the launch of new products. However, as a whole, we are not subject to material seasonality.483012IMPO.B (PDF_D_SWOP).indd 783012IMPO.B (PDF_D_SWOP).indd 73/7/22 8:31 PM3/7/22 8:31 PMHuman Capital ManagementBuilding a strong culture and employer brand is critical to activating our shared purpose through our approximately18,000 employees around the world. We are focused on attracting, retaining, and developing the world’s best talent to drive our business strategy. We do this by offering challenging career opportunities that enable growth and an inclusive, winning culture strengthen by high expectations. Empowering our talented, global team to contribute in meaningful ways drives our success and builds the organization for the future. To realize our promise to make a difference for our customers, teams and the world around us, we are accelerating our work to strengthen our inclusion, diversity, and equity through deliberate action and transparency about our progress.Growth and DevelopmentTo support our teams’ learning and advancement and our company’s success, we invest in our people at every level. We are committed to creating a challenging and collaborative culture and an environment in which our employees can grow, develop, and do their best work. We provide numerous, valuable growth and development opportunities for our employees through experiences such as:The Fortive9The Fortive9 is our leadership behavior framework that guides the development of our employees. It is a roadmap for the way we aspire to work, deliver value, and build strong teams. Examples of the Fortive9 include Deliver Results, Customer Obsessed, Innovate for Impact, and Adaptability.People Leader ExperienceDeep, experiential learning for both new and experienced leaders, harnessing the best of interactive learning, and providing critical tools as our employees assume greater people leadership responsibilities.Accelerated Leadership Experience (ALE)Designed for high performing employees in preparation for leading Fortive businesses or functions. We use immersive and experiential learning, where leaders develop personal skill and insight to fulfill their potential.FBS Office and UniversityThe Fortive Business System Office is dedicated to strategically embedding the mindset and toolset in everything we do. FBS University, our proprietary virtual and hands-on learning environment, develops and reinforces learning for hundreds of FBS Champions across our company each year to deliver value for our customers and shareholders.FBS IgniteSupported with intensive development in the FBS toolset, active mentoring from the FBS Office, and executive career coaching, participants advance and share their expertise across different businesses.Growth AcceleratorA key development experience that enables our team to solve challenges in new, inspiring ways through three key innovation tools: Deep Customer Insight, Solution Generation, and Experimentation -- each designed to enable our employees to develop critical, breakthrough solutions for customers. Each one of these investments in our team delivers value to both our people and our customers. Inclusion and DiversityCreating inclusive places to work and promoting diverse points of view are the lifeblood of our success. In the spirit of continuous improvement, we continued to make significant strides in 2021 to reflect the priorities, and experiences of our global team and strengthen our culture of inclusion. Our Board of Directors and our Compensation Committee oversee our Human Capital Management strategies, including our inclusion and diversity efforts. Our VP, Inclusion & Diversity works closely with our senior management and our Inclusion & Diversity Council, involving employees at every level in advancing our work to build and nurture and strong and diverse global team.583012IMPO.B (PDF_D_SWOP).indd 883012IMPO.B (PDF_D_SWOP).indd 83/7/22 8:31 PM3/7/22 8:31 PMStrategic PillarInclusion and Diversity Matters:Build a diverse Fortive through hiring, developing, and retaining a strong and diverse teamEveryone Owns Inclusion:Invest in development of our teams to build a Fortive where you can be yourself and do your best workI&D in Our DNA:Build a culture of equity that enables greater innovation and performance for customers and the worldIn 2021, we continued to strengthen our culture of inclusion and diversity by introducing a new development experience, providing our leaders tools and support to become more inclusive leaders. We also expanded our employee resource communities, and operationalized equitable talent processes. Reinforcing our I&D priorities, annual I&D goals are imbedded into performance measures for both executives and other senior leader roles across Fortive. Employee Experience and CommunicationA key focus of our human capital management strategy is creating exceptional employee experiences through active listening and communication throughout the organization. Our senior leaders are committed to actively searching out and listening to our employees and other stakeholders to build our culture. As part of this effort, we have continued to conduct our annual employee experience survey, but also, beginning in 2021, we moved to a shorter feedback loop, introducing quarterly pulse surveys. This cadence has enabled us to be more responsive to feedback while enhancing our ability to understand trends over time. With over 80% of our team participating throughout 2021, our overall employee engagement score averaged 77%, and our inclusion and belonging score averaged 81%. As in prior years, the 2021 results informed both management and the Board of Directors on appropriate actions to continuously enhance our employees’ experience.Government Contracts Although the substantial majority of our revenue in 2021 was from customers other than governmental entities, each of our segments has agreements relating to the sale of products to government entities. As a result, we are subject to various statutes and regulations that apply to companies doing business with governments and government-owned entities. For a discussion of risks related to government contracting requirements, please refer to “Item 1A. Risk Factors.”Regulatory Matters We face extensive government regulation both within and outside the United States relating to the development, manufacture, marketing, sale, and distribution of our products, software, and services. The following sections describe certain significant regulations that we are subject to. These are not the only regulations that our businesses must comply with. For a description of the risks related to the regulations that our businesses are subject to, please refer to “Item 1A. Risk Factors.”Medical Device RegulationsMany of our products in the Advanced Healthcare Solutions segment are classified as medical devices and are subject to restrictions under domestic and foreign laws, rules, regulations, self-regulatory codes, circulars, and orders, including, but not limited to, the U.S. Food, Drug, and Cosmetic Act (the “FDCA”). The FDCA requires these products, when sold in the United States, to be safe and effective for their intended uses and to comply with the regulations administered by the U.S. Food and Drug Administration (“FDA”). The FDA regulates the design, development, research, preclinical and clinical testing, introduction, manufacture, advertising, labeling, packaging, marketing, distribution, import and export, and record keeping for such products. Medical devices can be marketed only for the indications for which they are cleared or approved. After a device has received 510(k) clearance for a specific intended use, any change or modification that significantly affects its safety or effectiveness, such as a significant change in the design, materials, method of manufacture, or intended use, may require a new 510(k) clearance and payment of an FDA user fee. 683012IMPO.B (PDF_D_SWOP).indd 983012IMPO.B (PDF_D_SWOP).indd 93/7/22 8:31 PM3/7/22 8:31 PMMarket access, sales, and marketing of medical devices in non-U.S. countries are subject to foreign regulatory requirements that vary widely from country to country. For example in the European Economic Area (“EEA”), a medical device must meet the Medical Devices Directive’s (“MDD”) Essential Requirements or, for new devices placed on the market after May 26, 2021, the Medical Devices Regulation’s (“MDR”) General Safety and Performance Requirements as well as other requirements set out in the MDD/MDR, depending on the device’s risk class. Before placing a medical device on the EEA market, the manufacturer must prepare a declaration of conformity, certifying that the device complies with the MDD/MDR, and must then affix the CE mark. The notified body typically audits and examines the device’s technical documentation, and the quality system for the manufacture, design, and final inspection of the relevant device before issuing a CE certificate. Following the issuance of this CE certificate, manufacturers may prepare the declaration of conformity and affix the CE mark to the devices covered by this CE certificate. Similar requirements apply in the UK. For access to the UK market, manufacturers must obtain a UKCA Certificate and affix a UKCA mark to their medical devices. However, the EEA’s CE mark will be accepted in the UK until July 1, 2023.Any medical devices we manufacture and distribute are subject to pervasive and continuing regulation by the FDA and certain state and certain other comparable foreign authorities. As a medical device manufacturer, our manufacturing facilities are subject to inspection on a routine basis by the FDA and other comparable foreign authorities as well as audits by our notified body. We are required to adhere to the Current Good Manufacturing Practices requirements, as set forth in the Quality Systems Regulation, as well as other applicable standards which require manufacturers, including third-party manufacturers, to follow stringent design, testing, control, documentation, and other quality assurance procedures during all phases of the design and manufacturing process.We must also comply with global post-market surveillance regulations, including adverse event reporting requirements, which require that we review and report to the FDA and other comparable foreign authorities any incident in which our products may have caused or contributed to a death or serious injury. We must also report any incident in which our product has malfunctioned if that malfunction would likely cause or contribute to a death or serious injury if it were to recur.Labeling and promotional activities are subject to scrutiny by the FDA and other comparable foreign authorities and, in certain circumstances, by the Federal Trade Commission and other comparable foreign regulators. Medical devices approved or cleared by the FDA, foreign regulators, or our notified body may not be promoted for undocumented, unapproved, or uncleared uses, otherwise known as “off-label” promotion. The FDA, other U.S. agencies, and other comparable foreign authorities actively enforce the laws and regulations prohibiting the promotion of off-label uses.Other Healthcare LawsWe are subject to various healthcare related laws regulating fraud and abuse, research and development, pricing and sales and marketing practices, and the privacy and security of health information. In particular, the U.S. Federal Anti-Kickback Statute prohibits persons from knowingly and willfully soliciting, offering, receiving, or providing remuneration (including any kickback or bribe), directly or indirectly, in exchange for or to induce either the referral of an individual, or the furnishing or arranging for a good or service, for which payment may be made in whole or in part under a federal healthcare program, such as Medicare or Medicaid. A person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation. Similar laws and regulations apply in many foreign countries.The Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) prohibits knowingly and willfully (1) executing, or attempting to execute, a scheme to defraud any healthcare benefit program, including private payors, or (2) falsifying, concealing, or covering up a material fact or making any materially false, fictitious, or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items, or services. In addition, HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, also restricts the use and disclosure of patient identifiable health information, mandates the adoption of standards relating to the privacy and security of patient identifiable health information, and requires the reporting of certain security breaches with respect to such information. Similar to the U.S. Federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the healthcare fraud statute implemented under HIPAA or specific intent to violate it in order to have committed a violation. Similar laws and regulations apply in many foreign countries.The False Claims Act imposes liability on any person or entity that, among other things, knowingly presents, or causes to be presented, a false or fraudulent claim for payment by a federal healthcare program, knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim, or knowingly makes a false statement to avoid, decrease, or conceal an obligation to pay money to the U.S. federal government. The qui tam provisions of the False Claims Act allow a private individual to bring actions on behalf of the federal government alleging that the defendant has submitted a false claim to the federal government, and to share in any monetary recovery. In addition, the government may assert that a claim 783012IMPO.B (PDF_D_SWOP).indd 1083012IMPO.B (PDF_D_SWOP).indd 103/7/22 8:31 PM3/7/22 8:31 PMincluding items and services resulting from a violation of the U.S. Federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the civil False Claims Act. Similar laws and regulations apply in many foreign countries.Federal consumer protection and unfair competition laws broadly regulate marketplace activities and activities that potentially harm consumers. Analogous U.S. state laws and regulations, such as state anti-kickback and false claims laws, also may apply to our business practices, including but not limited to, research, distribution, sales and marketing arrangements, and claims involving healthcare items or services reimbursed by any third-party payor, including private insurers. Further, there are state laws that require medical device manufacturers to comply with the voluntary compliance guidelines and the relevant compliance guidance promulgated by the U.S. federal government, or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; state laws and regulations that require manufacturers to file reports relating to pricing and marketing information, which requires tracking gifts and other remuneration and items of value provided to healthcare professionals and entities; state and local laws requiring the registration of sales representatives; and state laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA. Similar laws and regulations apply in many non-U.S. countries.Anti-Bribery and Anti-Corruption LawsGiven the international scope of operation, we are subject to various U.S. and non-U.S. laws outlawing bribes, kickbacks, payoffs, and other improper payments. In particular, the U.S. Foreign Corrupt Practices Act (“FCPA”), the UK Bribery Act, and other similar laws in other jurisdictions prohibit companies, their officers and employees, and their intermediaries from making improper payments to public officials to influence those officials or secure an improper advantage in order to obtain or retain business. In the past several years, there has been a substantial increase in the enforcement of these global anti-bribery and anti-corruption laws. Our operations throughout the world, including in developing countries with heightened risks of corruption, and interactions with individuals who are considered public officials under these laws, such as healthcare professionals in countries with state-run healthcare systems, expose us to the risk of violating these laws. Violations of these laws or even allegations of violations of these laws could pose reputational risks, subject us to investigations and related litigation, cause disruptions to our business, and result in monetary fines and damages and other sanctions.Data Privacy and Security LawsAs a global organization, we are subject to data privacy and security laws, regulations, and customer-imposed controls in numerous jurisdictions as a result of having access to and processing confidential, personal, and/or sensitive data in the course of our business. Data privacy and security laws are rapidly evolving. In particular, a broad privacy law in California, the California Consumer Privacy Act (“CCPA”), came into effect in January 2020. The CCPA has some of the same features as the GDPR (discussed below), and has already prompted several other states to consider similar legislation. The CCPA has already been amended several times, including through a November 2020 ballot initiative (called the California Privacy Rights Act) (“CPRA”), which will go into effect in January 2023. Across the European Union, the General Data Protection Regulation (“GDPR”) imposes strict requirements in how we collect, transmit, process, and retain personal data, including, among other things, in certain circumstances a requirement for prompt notification of data breaches to supervisory authorities and/or to data subjects, with the risk of significant fines for non-compliance. Additionally, after a July 2020 decision from the Court of Justice of the European Union, European regulators are requiring additional safeguards to facilitate the transfer of personal information from the European Union to the United States and other certain jurisdictions. Several other countries such as China, Russia, and Brazil have passed, and other countries are considering passing, laws that meaningfully expand the compliance requirements around confidential, personal, and/or sensitive data that we may have access to or process in the course of our business. In China and Russia, privacy and security laws may require a copy of personal data relating to citizens to be maintained on local servers and impose additional data transfer restrictions. Brazil’s Lei Geral de Proteção de Dados (“LGPD”) increases compliance requirements related to privacy, data protection, and information security for businesses that are located or do business within Brazil. Although the LGPD shares similarities with the GDPR, it also contains a number of unique features, including specific legal bases not found in the GDPR that allow an organization to process personal data and requirements for the role of a data protection officer. In these countries and elsewhere, the laws applicable to data privacy and security may require changes to business practices or additional investment for compliance purposes.883012IMPO.B (PDF_D_SWOP).indd 1183012IMPO.B (PDF_D_SWOP).indd 113/7/22 8:31 PM3/7/22 8:31 PMEnvironmental Laws and RegulationsOur operations and properties are subject to laws and regulations relating to environmental protection, including those governing air emissions, water discharges and waste management, and workplace health and safety. For a discussion of the environmental laws and regulations that our operations, products, and services are subject to and other environmental contingencies, please refer to Note 16 to the consolidated financial statements included in this Annual Report. For a discussion of risks related to compliance with environmental and health and safety laws and risks related to past or future releases of, or exposures to, hazardous substances, please refer to “Item 1A. Risk Factors.”Export/Import ComplianceWe are required to comply with various U.S. export/import control and economic sanctions laws, such as:•the International Traffic in Arms Regulations administered by the U.S. Department of State, Directorate of Defense Trade Controls, which, among other things, impose license requirements on the export from the United States of defense articles and defense services listed on the United States Munitions List;•the Export Administration Regulations administered by the U.S. Department of Commerce, Bureau of Industry and Security, which, among other things, impose licensing requirements on the export, in-country transfer, and re-export of certain dual-use goods, technology, and software (which are items that have both commercial and military or proliferation applications);•the regulations administered by the U.S. Department of Treasury, Office of Foreign Assets Control, which implement economic sanctions imposed against designated countries, governments, and persons based on United States foreign policy and national security considerations; and•the import regulations administered by U.S. Customs and Border Protection.Other nations’ governments have implemented similar export/import control and economic sanction regulations, which may affect our operations or transactions subject to their jurisdictions. For a discussion of risks related to export/import control and economic sanctions laws, please refer to “Item 1A. Risk Factors.”International OperationsOur products and services are available in markets worldwide, and our principal markets outside the United States are in Europe and Asia. We also have operations around the world, and this geographic diversity allows us to draw on the skills of a worldwide workforce, provides greater stability to our operations, allows us to drive economies of scale, provides revenue streams that may help offset economic trends that are specific to individual economies, and offers us an opportunity to access new markets for products. In addition, we believe that our future growth depends in part on our ability to continue developing products and sales models that successfully target high-growth markets.The manner in which our products and services are sold outside the United States differs by business and by region. Most of our sales in non-U.S. markets are made by our subsidiaries located outside the United States, though we also sell directly from the United States into non-U.S. markets through various representatives and distributors and, in some cases, directly. In countries with low sales volumes, we generally sell through representatives and distributors.Available InformationWe maintain an internet website at www.fortive.com where we make available free of charge our annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K and amendments to those reports, filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after filing such material with, or furnishing such material to, the SEC. Our internet website and the information contained on, or linked from, that website are not incorporated by reference into this Form 10-K.ITEM 1A. RISK FACTORSYou should carefully consider the risks and uncertainties described below, together with the information included elsewhere in this Annual Report on Form 10-K and other documents we file with the SEC. The risks and uncertainties described below are those that we have identified as material, but are not the only risks and uncertainties facing us. Our business is also subject to general risks and uncertainties that affect many other companies, such as market conditions, economic conditions, geopolitical events, changes in laws, regulations, or accounting rules, fluctuations in interest rates, terrorism, wars or conflicts, major health concerns, natural disasters, or other disruptions of expected business conditions. Additional risks and uncertainties not currently known to us or that we currently believe are immaterial also may impair our business, including our results of operations, liquidity, and financial condition.983012IMPO.B (PDF_D_SWOP).indd 1283012IMPO.B (PDF_D_SWOP).indd 123/7/22 8:31 PM3/7/22 8:31 PMRisk Related to Our Business OperationsThe effect of the COVID-19 pandemic on our global operations and the operations of our customers, suppliers, and vendors is continuing to have a material, adverse impact on our business and results of operations.Our global operations expose us broadly to the COVID-19 pandemic. In particular, continued efforts to mitigate the spread of the virus, including new variants of the virus, have caused us, our suppliers, and customers to alter commercial activities and utilization of facilities and manufacturing sites, adversely impacting our ability to manufacture, sell, transport and service our products. In addition, implementation of measures to help control the spread of the virus, including vaccine mandates, remote work policies, travel restrictions, and social distancing measures have negatively impacted our collaboration efforts with our global colleagues, customers, vendors, and service providers, and increased the risk and cost of workforce retention, protecting against cyber attacks and adequately sourcing raw materials, components and transportation for our products. While we continue to implement global and local response teams, supply chain management and business continuity efforts internally and with our customers, suppliers, and vendors, the duration and extent of the operational and financial impact of the COVID-19 pandemic remains highly uncertain.The degree to which COVID-19 continues to impact us going forward will depend on future developments that are highly uncertain and therefore cannot be predicted, including, but not limited to, the duration and spread of the pandemic, new variants, its severity, or the actions taken to contain the spread and impact of COVID-19, the broad acceptance, effectiveness, and distribution of vaccines, the overall vaccination rate in the relevant jurisdictions, continued impact on supply chain and transportation, and how quickly and to what extent normal economic, market, and operating conditions resume. Even after the COVID-19 pandemic has subsided as a public health matter, we may experience material adverse impacts to our business as a result of its adverse impact on the global economy, supply chain disruptions, inflation, in-person collaboration efforts, workforce dynamic, and consumer confidence.If we cannot adjust our manufacturing capacity, supply chain management or the purchases required for our manufacturing activities to reflect changes in market conditions, customer demand and supply chain or transportation disruptions, our profitability may suffer. In addition, our reliance upon sole or limited sources of supply for certain materials, components, and services could cause production interruptions, delays, and inefficiencies.We purchase materials, components, and equipment from third parties for use in our manufacturing operations. Our income could be adversely impacted if we are unable to adjust our purchases and supply chain management to reflect any supply chain or transportation disruptions or changes in customer demand and market fluctuations, including those caused by the COVID-19 pandemic, increases in demand outpacing supply capabilities, labor shortages, seasonality or cyclicality. During a market upturn or general supply chain disruptions, suppliers have extended lead times, limited supplies, or increased prices. If we cannot purchase sufficient products at competitive prices and quality and on a timely enough basis to meet demand for our products, we may not be able to satisfy market demand, product shipments may be delayed, our costs may increase, or we may breach our contractual commitments and incur liabilities. Conversely, in order to secure supplies for the production of products, we sometimes enter into noncancelable purchase commitments with vendors, which could impact our ability to adjust our inventory to reflect declining market demands. If demand for our products is less than we expect, we may experience additional excess and obsolete inventories and be forced to incur additional charges and our profitability may suffer.In addition, some of our businesses purchase certain requirements from sole or limited source suppliers for reasons of quality assurance, cost effectiveness, availability, contractual obligations or uniqueness of design. If these or other suppliers encounter financial, operating, quality, or other difficulties or if our relationship with them changes, including as a result of contractual disputes, we might not be able to quickly establish or qualify replacement sources of supply. The supply chains for our businesses could also be disrupted by supplier capacity constraints, operational or quality issues, bankruptcy or exiting of the business for other reasons, decreased availability of key raw materials or commodities, and external events such as natural disasters, pandemic health issues, war, terrorist actions, governmental actions, and legislative or regulatory changes, among others. Any of these factors could result in production interruptions, delays, extended lead times, and inefficiencies. Because we cannot always immediately adapt our production capacity and related cost structures to changing market conditions, our manufacturing capacity may at times exceed or fall short of our production requirements. Any or all of these problems could result in the loss of customers, provide an opportunity for competing products to gain market acceptance, and otherwise adversely affect our profitability.1083012IMPO.B (PDF_D_SWOP).indd 1383012IMPO.B (PDF_D_SWOP).indd 133/7/22 8:31 PM3/7/22 8:31 PMOur financial results are subject to fluctuations in the cost and availability of commodities or components that we use in our operations.As discussed in the section entitled “Business-Materials,” our manufacturing and other operations employ a wide variety of components, raw materials, and other commodities. Prices for and availability of these components, raw materials, and other commodities have fluctuated significantly in the past. In particular, the COVID-19 pandemic and the widespread supply chain challenges due to labor, raw material, and component shortages, as well as widespread logistics issues, affected multiple industries, raised material and shipping costs, limited the quantities available, and extended the lead time required for supplies and deliveries. Any sustained interruption in the supply of these items, including as a result of general supply chain constraints, increasing demand outpacing supplies, or contractual disputes with suppliers or vendors, could adversely affect our business. In addition, due to the highly competitive nature of the industries that we serve, the cost-containment efforts of our customers, and the terms of certain contracts we are party to, if commodity or component prices rise we may be unable to pass along cost increases through higher prices. If we are unable to fully recover higher commodity or component costs through price increases or offset these increases through cost reductions, or if there is a time delay between the increase in costs and our ability to recover or offset these costs, we could experience lower margins and profitability and our financial statements could be adversely affected.Conditions in the global economy, the markets we serve and the financial markets may adversely affect our business and financial statements.Our business is sensitive to general economic conditions. Slower global economic growth, actual or anticipated default on sovereign debt, changes in global trade policies, volatility in the currency and credit markets, high levels of unemployment and underemployment, inflation, reduced levels of capital expenditures, changes in government fiscal and monetary policies, government deficit reduction and budget negotiation dynamics, sequestration, other austerity measures, political and social instability, war, sanctions, natural disasters, terrorist attacks, and other challenges that affect the global economy adversely affect us and our distributors, customers, and suppliers, including having the effect of:•reducing demand for our products, software, and services, limiting the financing available to our customers and suppliers, increasing order cancellations, and resulting in longer sales cycles and slower adoption of new technologies;•increasing the difficulty in collecting accounts receivable and the risk of excess and obsolete inventories;•increasing price competition in our served markets;•supply interruptions, which could disrupt our ability to produce our products;•increasing the risk of impairment of goodwill and other long-lived assets, and the risk that we may not be able to fully recover the value of other assets such as real estate and tax assets; and•increasing the risk that counterparties to our contractual arrangements will become insolvent or otherwise unable to fulfill their contractual obligations which, in addition to increasing the risks identified above, could result in preference actions against us.In addition, adverse general economic conditions may lead to instability in U.S. and global capital and credit markets, including market disruptions, limited liquidity, and interest rate volatility. If we are unable to access capital and credit markets on terms that are acceptable to us or our lenders are unable to provide financing in accordance with their contractual obligations, we may not be able to make certain investments or acquisitions or fully execute our business plans and strategies. Furthermore, our suppliers and customers are also dependent upon the capital and credit markets. Limitations on the ability of customers, suppliers, or financial counterparties to access credit at interest rates and on terms that are acceptable to them could lead to insolvencies of key suppliers and customers, limit or prevent customers from obtaining credit to finance purchases of our products and services, and cause delays in the delivery of key products from suppliers.If growth in the global economy or in any of the markets we serve slows for a significant period, if there is significant deterioration in the global economy or such markets, if there is instability in global capital and credit markets, or if improvements in the global economy do not benefit the markets we serve, our business and financial statements could be adversely affected.Our growth could suffer if the markets into which we sell our products and services decline, do not grow as anticipated, or experience cyclicality.Our growth depends in part on the growth of the markets which we serve, and visibility into our markets is limited (particularly for markets into which we sell through distribution). Our quarterly sales and profits depend substantially on the volume and timing of orders received during the fiscal quarter, which are difficult to forecast. Any decline or lower than expected growth in our served markets could diminish demand for our products and services, which could adversely affect our financial statements. Certain of our businesses operate in industries that may experience periodic, cyclical downturns. In addition, in certain of our 1183012IMPO.B (PDF_D_SWOP).indd 1483012IMPO.B (PDF_D_SWOP).indd 143/7/22 8:31 PM3/7/22 8:31 PMbusinesses, demand depends on customers’ capital spending budgets, and product and economic cycles can affect the spending decisions of these entities. Demand for our products and services is also sensitive to changes in customer order patterns, which may be affected by announced price changes, changes in incentive programs, new product introductions, and customer inventory levels. Any of these factors could adversely affect our growth and results of operations in any given period.We face intense competition and if we are unable to compete effectively, we may experience decreased demand and decreased market share. Even if we compete effectively, we may be required to reduce prices for our products and services.Many of our businesses operate in industries that are intensely competitive and have been subject to consolidation. Because of the range of the products and services we sell and the variety of markets we serve, we encounter a wide variety of competitors; please see the section entitled “Business-Competition” for additional details. In order to compete effectively, we must retain longstanding relationships with major customers and continue to grow our business by establishing relationships with new customers, continually developing new or enhanced products and services to maintain and expand our brand recognition and leadership position in various product and service categories, and penetrating new markets, including high-growth markets. Our failure to compete effectively and/or pricing pressures resulting from competition may adversely impact our financial statements, and our expansion into new markets may result in greater-than-expected risks, liabilities and expenses.Our growth depends in part on the timely development and commercialization and customer acceptance of new and enhanced products and services based on technological innovation.We generally sell our products and services in industries that are characterized by rapid technological changes, frequent new product introductions and changing industry standards. If we do not develop innovative new and enhanced products and services on a timely basis, our offerings will become obsolete over time and our competitive position and financial statements will suffer. Our success will depend on several factors, including our ability to:•accurately identify customer needs and preferences and predict future needs and preferences;•allocate our research and development funding to products and services with higher growth prospects;•anticipate and respond to our competitors’ development of new products and services and technological innovations;•differentiate our offerings from our competitors’ offerings and avoid commoditization;•innovate and develop new technologies and applications, and acquire or obtain rights to third-party technologies that may have valuable applications in our served markets;•obtain adequate intellectual property rights with respect to key technologies before our competitors do;•successfully commercialize new technologies in a timely manner, price them competitively, and cost-effectively manufacture and deliver sufficient volumes of new products of appropriate quality on time; and•stimulate customer demand for and convince customers to adopt new technologies.In addition, if we fail to accurately predict future customer needs and preferences or fail to produce viable technologies, we may invest heavily in research and development of products and services that do not lead to significant revenue, which would adversely affect our profitability. Even if we successfully innovate and develop new and enhanced products and services, we may incur substantial costs in doing so, and our profitability may suffer.If we are unable to recruit and retain key employees, our business may be harmed.Much of our future success and our ability to realize the benefit of our acquisitions and execute our portfolio strategy depends on our ability to attract and retain key employees, including our senior management. In particular, the markets for highly skilled employees and leaders in the technology and healthcare industries are extremely competitive. Furthermore, the workforce shortage in the United States during the COVID-19 pandemic has increased the overall competitiveness and cost ofretaining and attracting qualified employees. Our brand, our culture, our ability to provide competitive compensation, our locations of operations, and our reputation are important to our ability to recruit and retain key employees in these competitive markets and during periods of workforce shortages. If we are not competitive or successful in our recruiting efforts, if we cannot attract or retain key employees, or if we do not adequately ensure effective succession planning or transfer of knowledge for our key employees, our ability to deliver and execute on our operational, development, or portfolio strategies would be adversely affected. A significant disruption in, or breach in security of, our information technology systems could adversely affect our business.We rely on information technology systems, some of which are managed by third parties and some of which are managed on a decentralized, independent basis by our operating companies, to process, transmit, and store electronic information (including sensitive data such as confidential business information and personally identifiable data relating to employees, customers, and other business partners), and to manage or support a variety of critical business processes and activities. These systems may be 1283012IMPO.B (PDF_D_SWOP).indd 1583012IMPO.B (PDF_D_SWOP).indd 153/7/22 8:31 PM3/7/22 8:31 PMdamaged, disrupted, or shut down due to attacks by computer hackers, nation states, cyber-criminals, computer viruses, employee error or malfeasance, power outages, hardware failures, telecommunication or utility failures, catastrophes, or other unforeseen events, and in any such circumstances our system redundancy and other disaster recovery planning may be ineffective or inadequate. In addition, security breaches of our systems (or the systems of our customers, suppliers or other business partners) could result in the misappropriation, destruction, or unauthorized disclosure of confidential information or personal data belonging to us or to our employees, partners, customers, or suppliers. Like many multinational corporations, our information technology systems have been subject to computer viruses, malicious codes, unauthorized access, and other cyber-attacks and, although, as of December 31, 2021, such attacks have not had a material impact on our operations or financial results, we expect to be subject to similar incidents in the future as such attacks become more sophisticated and frequent, any of which may have a material adverse impact on our business continuity, operations or financial results. Any of the attacks, breaches, or other disruptions or damage described above, as well as corresponding remediation efforts, can interrupt our operations, delay production and shipments, result in theft of our and our customers’ intellectual property and trade secrets, damage customer and business partner relationships and our reputation, or result in defective products or services, legal claims and proceedings, liability and penalties under privacy laws, and increased costs for security and remediation, each of which could adversely affect our business and financial statements.Defects and unanticipated use or inadequate disclosure with respect to our products (including software) or services could adversely affect our business, reputation, and financial statements.Manufacturing or design defects impacting safety, cybersecurity, or quality issues (or the perception of such issues) for our products and services can lead to personal injury, death, property damage, data loss, or other damages. These events could lead to recalls or safety or other public alerts, result in product or service downtime or the temporary or permanent removal of a product or service from the market and result in product liability or similar claims being brought against us. Recalls, downtime, removals, and product liability and similar claims (regardless of their validity or ultimate outcome) can result in significant costs, as well as negative publicity and damage to our reputation that could reduce demand for our products and services.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.Certain of our businesses sell a significant amount of their products to key distributors and other channel partners that have valuable relationships with customers and end-users. Some of these distributors and other partners also sell our competitors’ products or compete with us directly, and if they favor competing products for any reason they may fail to market our products effectively. Adverse changes in our relationships with these distributors and other partners, or adverse developments in their financial condition, performance, or purchasing patterns, could adversely affect our financial statements. The levels of inventory maintained by our distributors and other channel partners, and changes in those levels, can also significantly impact our results of operations in any given period. In addition, the consolidation of distributors and customers in certain of the industries in which we operate could adversely impact our profitability.Our restructuring activities could have long-term adverse effects on our business.In recent years, we have implemented multiple, significant restructuring activities across our businesses to adjust our cost structure, and we may engage in similar restructuring activities in the future. These restructuring activities and our regular ongoing cost reduction activities (including in connection with the integration of acquired businesses) reduce our available talent, assets, and other resources and could slow improvements in our products and services, adversely affect our ability to respond to customers and limit our ability to increase production quickly if demand for our products increases. In addition, delays in implementing planned restructuring activities or other productivity improvements, unexpected costs, or failure to meet targeted improvements may diminish the operational or financial benefits we realize from such actions. Any of the circumstances described above could adversely impact our business and financial statements.Work stoppages, works council campaigns, and other labor disputes could adversely impact our productivity and results of operations.We have various non-U.S. collective labor arrangements. We are subject to potential work stoppages, works council campaigns, and other labor disputes, any of which could adversely impact our productivity, results of operations, and reputation.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.Our facilities, supply chains, distribution systems, and information technology systems are subject to catastrophic loss due to fire, flood, earthquake, hurricane, public health crisis, war, terrorism, or other natural or man-made disasters, including those caused by climate change and other climate-related causes. If any of these facilities, supply chains, or systems were to 1383012IMPO.B (PDF_D_SWOP).indd 1683012IMPO.B (PDF_D_SWOP).indd 163/7/22 8:31 PM3/7/22 8:31 PMexperience a catastrophic loss, it could disrupt our operations, delay production and shipments, result in defective products or services, damage customer relationships and our reputation, and result in legal exposure and large repair or replacement expenses. The third-party insurance coverage that we maintain will vary from time to time in both type and amount depending on cost, availability, and our decisions regarding risk retention, and may be unavailable or insufficient to protect us against losses.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.We own numerous patents, trademarks, copyrights, trade secrets, and other intellectual property and licenses to intellectual property owned by others, which in aggregate are important to our business. The intellectual property rights that we obtain, however, may not be sufficiently broad or otherwise may not provide us a significant competitive advantage, and patents may not be issued for pending or future patent applications owned by or licensed to us. In addition, the steps that we and our licensors have taken to maintain and protect our intellectual property may not prevent it from being challenged, invalidated, circumvented, designed-around, or becoming subject to compulsory licensing, particularly in countries where intellectual property rights are not highly developed or protected. In some circumstances, enforcement may not be available to us because an infringer has a dominant intellectual property position or for other business reasons, or countries may require compulsory licensing of our intellectual property. We also rely on nondisclosure and noncompetition agreements with employees, consultants, and other parties to protect, in part, trade secrets and other proprietary rights. There can be no assurance that these agreements will adequately protect our trade secrets and other proprietary rights and will not be breached, that we will have adequate remedies for any breach, that others will not independently develop substantially equivalent proprietary information, or that third parties will not otherwise gain access to our trade secrets or other proprietary rights. Our failure to obtain or maintain intellectual property rights that convey competitive advantage, adequately protect our intellectual property or detect or prevent circumvention or unauthorized use of such property, and the cost of enforcing our intellectual property rights could adversely impact our competitive position and financial statements.Third parties may claim that we are infringing or misappropriating their intellectual property rights and we could suffer significant litigation expenses, losses, or licensing expenses or be prevented from selling products or services.From time to time, we receive notices from third parties alleging intellectual property infringement or misappropriation. Any dispute or litigation regarding intellectual property could be costly and time-consuming due to the complexity of many of our technologies and the uncertainty of intellectual property litigation. Our intellectual property portfolio may not be useful in asserting a counterclaim, or negotiating a license, in response to a claim of infringement or misappropriation. In addition, as a result of such claims of infringement or misappropriation, we could lose our rights to critical technology, be unable to license critical technology or sell critical products and services, be required to pay substantial damages or license fees with respect to the infringed rights, or be required to redesign our products at substantial cost, any of which could adversely impact our competitive position and financial statements. Even if we successfully defend against claims of infringement or misappropriation, we may incur significant costs and diversion of management attention and resources, which could adversely affect our financial statements.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.We are subject to a variety of litigation and other legal and regulatory proceedings incidental to our business (or the business operations of previously owned entities), including claims for damages arising out of the use of products or services and claims relating to intellectual property matters, employment matters, tax matters, commercial disputes, disputes with our supplier or vendors, competition and sales and trading practices, environmental matters, personal injury, insurance coverage, and acquisition or divestiture-related matters, as well as regulatory investigations or enforcement. We may also become subject to lawsuits as a result of past or future acquisitions or as a result of liabilities retained from, or representations, warranties, or indemnities provided in connection with, divested businesses. These lawsuits may include claims for compensatory damages, punitive and consequential damages, and/or injunctive relief. The defense of these lawsuits may divert our management’s attention, we may incur significant expenses in defending these lawsuits, we may experience disruption in supply or sales, and we may be required to pay damage awards or settlements or become subject to equitable remedies that could adversely affect our operations and financial statements. Moreover, any insurance or indemnification rights that we may have may be insufficient or unavailable to protect us against such losses. In addition, developments in proceedings in any given period may require us to adjust the loss contingency estimates that we have recorded in our financial statements, record estimates for liabilities or assets that we were previously unable to estimate, or pay cash settlements or judgments. Any of these developments could adversely affect our financial statements in any particular period. We cannot assure you that our liabilities in connection with litigation and other legal and regulatory proceedings will not exceed our estimates or adversely affect our financial statements and reputation.1483012IMPO.B (PDF_D_SWOP).indd 1783012IMPO.B (PDF_D_SWOP).indd 173/7/22 8:31 PM3/7/22 8:31 PMRisk Related to our International OperationsInternational economic, political, legal, compliance, and business factors could negatively affect our financial statements.In 2021, approximately 49% of our sales were derived from customers outside the United States. Our principal markets outside the United States are in Europe and Asia. In addition, many of our manufacturing operations, suppliers, and employees are located outside the United States. Since our growth strategy depends in part on our ability to further penetrate markets outside the United States and increase the localization of our products and services, we expect to continue to increase our sales and presence outside the United States, particularly in high-growth markets, such as Eastern Europe, the Middle East, Africa, Latin America, and Asia. Our international business, including our business in high-growth markets outside the United States, is subject to risks that are customarily encountered in non-U.S. operations, as well as increased risks due to significant uncertainties related to political and economic changes, including:•interruption in the transportation of materials to us and finished goods to our customers;•differences in terms of sale, including payment terms;•local product preferences and product requirements;•changes in a country’s or region’s political or economic conditions, including changes in relationship with the United States, particularly with respect to China;•trade protection measures, increased trade barriers, imposition of significant tariffs on imports or exports, embargoes, and import or export restrictions and requirements;•new conditions to, and possible restrictions of, existing free trade agreements;•epidemics, such as the coronavirus outbreak, that adversely impact travel, production, or demand;•unexpected changes in laws or regulatory requirements, including negative changes in tax laws in the U.S. and in the countries in which we manufacture or sell our products;•the impact of the U.K.’s exit from the E.U. (Brexit) on the Company’s business operations in the U.K. and Europe, including the effects of the Trade and Cooperation Agreement between the European Union, the European Atomic Energy Community, and the United Kingdom signed on December 30, 2020;•limitations on ownership and on repatriation of earnings and cash;•the potential for nationalization of enterprises;•limitations on legal rights and our ability to enforce such rights;•difficulty in staffing and managing widespread operations;•differing labor regulations;•difficulties in implementing restructuring actions on a timely or comprehensive basis; and•differing protection of intellectual property.Any of these risks could negatively affect our financial statements and growth.Trade relations between China and the United States could have a material adverse effect on our business and financial statements.We have experienced growth in various end markets in China. During 2021, sales in China accounted for approximately 12% of our total sales for the year. In addition, we have numerous facilities in China, many of which serve multiple Fortive operating companies in manufacturing, distribution, product design, and selling, general and administrative functions. There continues to be significant uncertainty about the future relationship between the United States and China, including with respect to trade policies, treaties, government regulations, and tariffs. In particular, there continues to be uncertainty about U.S. foreign trade policy with respect to China, including any changes to the trade policies that may be adopted by the Biden administration. Any increased trade barriers or restrictions on global trade, especially trade with China, could adversely impact our business and financial statements. Foreign currency exchange rates may adversely affect our financial statements.Sales and purchases in currencies other than the U.S. dollar expose us to fluctuations in foreign currencies relative to the U.S. dollar and may adversely affect our financial statements. Increased strength of the U.S. dollar increases the effective price of our products sold in U.S. dollars into other countries, which may require us to lower our prices or adversely affect sales to the extent we do not increase local currency prices. Decreased strength of the U.S. dollar could adversely affect the cost of materials, products and services we purchase overseas. Sales and expenses of our non-U.S. businesses are also translated into U.S. dollars for reporting purposes and the strengthening or weakening of the U.S. dollar could result in unfavorable translation 1583012IMPO.B (PDF_D_SWOP).indd 1883012IMPO.B (PDF_D_SWOP).indd 183/7/22 8:31 PM3/7/22 8:31 PMeffects. In addition, certain of our businesses transact in a currency other than the business’ functional currency, and movements in the transaction currency relative to the functional currency could also result in unfavorable exchange rate effects. We also face exchange rate risk from our investments in subsidiaries owned and operated in foreign countries.Risk Related to Our Acquisitions, Investments, and DispositionsAny inability to consummate acquisitions at our anticipated rate and at appropriate prices could negatively impact our growth rate and stock price.Our ability to grow revenues, earnings, and cash flow at or above our anticipated rates depends in part upon our ability to identify and successfully acquire and integrate businesses at appropriate prices and realize anticipated synergies. We may not be able to consummate acquisitions at rates anticipated, which could adversely impact our growth rate and our stock price. Acquisitions that align with our portfolio strategy may be difficult to identify and execute for a number of reasons, including high valuations, competition among prospective buyers, the availability of affordable funding in the capital markets and the need to satisfy applicable closing conditions and obtain antitrust and other regulatory approvals on acceptable terms. In addition, competition for acquisitions may result in higher purchase prices. Changes in accounting or regulatory requirements or instability in the credit markets could also adversely impact our ability to consummate acquisitions.Our acquisition of businesses, joint ventures, and strategic relationships could negatively impact our financial statements.As part of our business strategy we acquire businesses and enter other strategic relationships in the ordinary course, some of which may be material; please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (“MD&A”) for additional details. These acquisitions and strategic relationships involve a number of financial, accounting, managerial, operational, legal, compliance, and other risks and challenges, including the following, any of which could adversely affect our financial statements:•any acquired business, technology, service, or product could under-perform relative to our expectations and the price that we paid for it, or not perform in accordance with our anticipated timetable;•we may incur or assume significant debt in connection with our acquisitions or strategic relationships;•acquisitions or strategic relationships could cause our financial results to differ from our own or the investment community’s expectations in any given period, or over the long-term;•pre-closing and post-closing earnings charges could adversely impact operating results in any given period, and the impact may be substantially different from period to period;•acquisitions or strategic relationships could create demands on our management, operational resources, and financial and internal control systems that we are unable to effectively address;•we could experience difficulty in integrating personnel, operations, and financial and other controls and systems and retaining key employees and customers;•we may be unable to achieve cost savings or other synergies anticipated in connection with an acquisition or strategic relationship;•we may assume by acquisition or strategic relationship unknown liabilities, known contingent liabilities that become realized, known liabilities that prove greater than anticipated, internal control deficiencies, or exposure to regulatory sanctions resulting from the acquired company’s activities and the realization of any of these liabilities or deficiencies may increase our expenses, adversely affect our financial position, or cause us to fail to meet our public financial reporting obligations;•in connection with acquisitions, we may enter into post-closing financial arrangements such as purchase price adjustments, earn-out obligations, and indemnification obligations, which may have unpredictable financial results;•in connection with acquisitions, we have recorded significant goodwill and other intangible assets on our balance sheet and if we are not able to realize the value of these assets, we may be required to incur charges relating to the impairment of these assets; and•we may have interests that diverge from those of strategic partners and we may not be able to direct the management and operations of the strategic relationship in the manner we believe is most appropriate, exposing us to additional risk.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.Certain of the acquisition agreements by which we have acquired companies require the former owners to indemnify us against certain liabilities related to the operation of the company before we acquired it. In most of these agreements, however, the 1683012IMPO.B (PDF_D_SWOP).indd 1983012IMPO.B (PDF_D_SWOP).indd 193/7/22 8:31 PM3/7/22 8:31 PMliability of the former owners is limited and certain former owners may be unable to meet their indemnification responsibilities. We cannot assure you that these indemnification provisions will protect us fully or at all, and as a result we may face unexpected liabilities that adversely affect our financial statements.Divestitures or other dispositions could negatively impact our business, and contingent liabilities from businesses that we have sold could adversely affect our financial statements.We continually assess the strategic fit of our existing businesses and may divest or otherwise dispose of businesses that are deemed not to fit with our strategic plan or are not achieving the desired return on investment. For example, in 2018, we split-off most of our automation and specialty platform in a Reverse Morris Trust transaction with Altra Industrial Motion Corp. and, in 2020, we spun-off our former Industrial Technologies segment. These transactions pose risks and challenges that could negatively impact our business. For example, when we decide to sell or otherwise dispose of a business or assets, we may be unable to do so on satisfactory terms within our anticipated timeframe or at all, and even after reaching a definitive agreement to sell or dispose a business the sale is typically subject to satisfaction of pre-closing conditions which may not become satisfied. In addition, divestitures or other dispositions may dilute our earnings per share, have other adverse financial and accounting impacts and distract management, and disputes may arise with buyers. In addition, we have retained responsibility for and/or have agreed to indemnify buyers against some known and unknown contingent liabilities related to a number of businesses we have sold or disposed. The resolution of these contingencies has not had a material effect on our financial statements but we cannot be certain that this favorable pattern will continue.Potential indemnification liabilities to Vontier pursuant to the separation agreement could materially and adversely affect our businesses, financial condition, results of operations, and cash flows.We entered into a separation and distribution agreement and related agreements with Vontier to govern the separation and distribution of Vontier and the relationship between the two companies going forward. These agreements provide for specific indemnity and liability obligations of each party and could lead to disputes between us. If we are required to indemnify Vontier under the circumstances set forth in these agreements, we may be subject to substantial liabilities. In addition, with respect to the liabilities for which Vontier has agreed to indemnify us under these agreements, there can be no assurance that the indemnity rights we have against Vontier will be sufficient to protect us against the full amount of the liabilities, or that Vontier will be able to fully satisfy its indemnification obligations. Each of these risks could negatively affect our businesses, financial condition, results of operations, and cash flows.Risk Related to Regulatory and Compliance MattersChanges in industry standards and governmental regulations may reduce demand for our products or services or increase our expenses.We compete in markets in which we and our customers must comply with supranational, federal, state, local, and other jurisdictional regulations, such as regulations governing health and safety, the environment, and electronic communications, and market standardizations. We develop, configure, and market our products and services to meet customer needs created by these regulations and standards. These regulations and standards are complex, change frequently, have tended to become more stringent over time, and may be inconsistent across jurisdictions. Any significant change or delay in implementation in any of these regulations or standards (or in the interpretation, application, or enforcement thereof) could reduce or delay demand for our products and services, increase our costs of producing or delay the introduction of new or modified products and services, or could restrict our existing activities, products, and services. In addition, in certain of our markets our growth depends in part upon the introduction of new regulations or implementation of industry standards on the timeline we expect. In these markets, the delay or failure of governmental and other entities to adopt or enforce new regulations or industry standards, or the adoption of new regulations or industry standards which our products and services are not positioned to address, could adversely affect demand. In addition, regulatory deadlines or industry standard implementation timelines may result in substantially different levels of demand for our products and services from period to period.Our reputation, ability to do business, and financial statements may be impaired by improper conduct by any of our employees, agents, or business partners.We cannot provide assurance that our internal controls and compliance systems will always protect us from acts committed by employees, agents, or business partners of ours (or of businesses we acquire or partner with) that would violate U.S. and/or non-U.S. laws, including the laws governing payments to government officials, bribery, fraud, kickbacks, and false claims, sales and marketing practices, conflicts of interest, competition, export and import compliance, money laundering, and data privacy. In particular, the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act, and similar anti-bribery laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments to government officials for the purpose of obtaining or retaining business, and we operate in many parts of the world that have experienced governmental corruption to 1783012IMPO.B (PDF_D_SWOP).indd 2083012IMPO.B (PDF_D_SWOP).indd 203/7/22 8:31 PM3/7/22 8:31 PMsome degree. Any such improper actions or allegations of such acts could damage our reputation and subject us to civil or criminal investigations in the United States and in other jurisdictions and related shareholder lawsuits, could lead to substantial civil and criminal, monetary and non-monetary penalties and could cause us to incur significant legal and investigatory fees. In addition, though we rely on our suppliers to adhere to our supplier standards of conduct, material violations of such standards of conduct could occur that could have a material effect on our financial statements.Our operations, products, and services expose us to the risk of environmental, health, and safety liabilities, costs, and violations that could adversely affect our reputation and financial statements.Our operations, products and services are subject to environmental laws and regulations, which impose limitations on the discharge of pollutants into the environment and establish standards for the use, generation, treatment, storage, and disposal of hazardous and non-hazardous wastes. We must also comply with various health and safety regulations in the United States and abroad in connection with our operations. In addition, some of our operations require the controlled use of hazardous or energetic materials in the development, manufacturing, or servicing of our products. We cannot assure you that our environmental, health, and safety compliance program has been or will at all times be effective. Failure to comply with any of these laws could result in civil and criminal, monetary and non-monetary penalties and damage to our reputation. In addition, we cannot provide assurance that our costs of complying with current or future environmental protection and health and safety laws will not exceed our estimates or adversely affect our financial statements. Moreover, any accident that results in significant personal injury or property damage, whether occurring during development, manufacturing, servicing, use, or storage of our products, may result in significant production interruption, delays, or claims for substantial damages caused by personal injuries or property damage, harm to our reputation, and reduction in morale among our employees, any of which may adversely and materially affect our results of operations.In addition, we may incur costs related to remedial efforts or alleged environmental damage associated with past or current waste disposal practices or other hazardous materials handling practices. We are also from time to time party to personal injury or other claims brought by private parties alleging injury due to the presence of or exposure to hazardous substances. We may also become subject to additional remedial, compliance or personal injury costs due to future events such as changes in existing laws or regulations, changes in agency direction or enforcement policies, developments in remediation technologies, changes in the conduct of our operations and changes in accounting rules. For additional information regarding these risks, please refer to Note 16 to the consolidated financial statements. We cannot assure you that our liabilities arising from past or future releases of, or exposures to, hazardous substances will not exceed our estimates or adversely affect our reputation and financial statements or that we will not be subject to additional claims for personal injury or remediation in the future based on our past, present or future business activities. Our businesses are subject to extensive regulation; failure to comply with those regulations could adversely affect our financial statements and reputation.In addition to the environmental, health, safety, anti-corruption, and other regulations noted above, our businesses are subject to extensive regulation by U.S. and non-U.S. governmental and self-regulatory entities at the supranational, federal, state, local, and other jurisdictional levels, including the following:•we are required to comply with various import laws and export control and economic sanctions laws, which may affect our transactions with certain customers, business partners, and other persons and dealings between our employees and subsidiaries. In certain circumstances, export control and economic sanctions regulations may prohibit the export of certain products, services, and technologies. In other circumstances, we may be required to obtain an export license before exporting the controlled item. Compliance with the various import laws that apply to our businesses can restrict our access to, and increase the cost of obtaining, certain products and at times can interrupt our supply of imported inventory; •we also have agreements to sell products and services to government entities and are subject to various statutes and regulations that apply to companies doing business with government entities. The laws governing government contracts differ from the laws governing private contracts. For example, many government contracts contain pricing and other terms and conditions that are not applicable to private contracts. Our agreements with government entities may be subject to termination, reduction, or modification at the convenience of the government or in the event of changes in government requirements, reductions in federal spending and other factors, and we may underestimate our costs of performing under the contract. Government contracts that have been awarded to us following a bid process could become the subject of a bid protest by a losing bidder, which could result in loss of the contract. We are also subject to investigation and audit for compliance with the requirements governing government contracts;•we are also required to comply with increasingly complex and changing data privacy regulations in multiple jurisdictions that regulate the collection, use, protection, and transfer of personal data, including the transfer of personal data between or among countries. In particular, the General Data Protection Regulation became effective in 1883012IMPO.B (PDF_D_SWOP).indd 2183012IMPO.B (PDF_D_SWOP).indd 213/7/22 8:31 PM3/7/22 8:31 PMthe European Union in May 2018 and the California Consumer Privacy Act became effective in January 2020. We may also face audits or investigations by one or more domestic or foreign government agencies relating to our compliance with these regulations. An adverse outcome under any such investigation or audit could subject us to fines or other penalties. That or other circumstances related to our collection, use, and transfer of personal data could cause a loss of reputation in the market and/or adversely affect our business and financial position;•certain of our products are medical devices that are subject to regulation by the U.S. FDA, by other federal and state governmental agencies, by comparable agencies of other countries and regions, and by certain accrediting bodies. To varying degrees, these regulators require us to comply with laws and regulations governing the development, testing, manufacturing, labeling, marketing, distribution, and post-marketing surveillance of our products; and•we are also required to comply with ever changing labor and employment laws and regulations in multiple jurisdictions. These changes could negatively impact our business or financial position.These are not the only regulations that our businesses must comply with. The regulations we are subject to have tended to become more stringent over time and may be inconsistent across jurisdictions. We, our representatives, and the industries in which we operate may at times be under review and/or investigation by regulatory authorities. Failure to comply (or any alleged or perceived failure to comply) with the regulations referenced above or any other regulations could result in civil and criminal, monetary and non-monetary penalties, and any such failure or alleged failure (or becoming subject to a regulatory enforcement investigation) could also damage our reputation, disrupt our business, limit our ability to manufacture, import, export, and sell products and services, result in loss of customers and disbarment from selling to certain federal agencies and cause us to incur significant legal and investigatory fees. Compliance with these and other regulations may also affect our returns on investment, require us to incur significant expenses, or modify our business model or impair our flexibility in modifying product, marketing, pricing, or other strategies for growing our business. Our products and operations are also often subject to the rules of industrial standards bodies such as the International Standards Organization, and failure to comply with these rules could result in withdrawal of certifications needed to sell our products and services and otherwise adversely impact our financial statements. For additional information regarding these risks, please refer to the section entitled “Business-Regulatory Matters.”Risk Related to Our Tax and Accounting MattersChanges in our effective tax rates or exposure to additional income tax liabilities or assessments could affect our profitability. In addition, audits by tax authorities could result in additional tax payments for prior periods.We are subject to income and transaction taxes in the United States and in multiple foreign jurisdictions. As such, changes to applicable tax laws or policies, including interpretations or retroactive applications thereof, could result in a material change in our tax provision, cash taxes paid, and effective tax rate. Furthermore, certain tax laws are inherently ambiguous requiring subjective interpretation on the application thereof. Our interpretation and the corresponding amount of income taxes we pay is, and may in the future continue to be, subject to audits by U.S. federal, state, and local tax authorities and by non-U.S. tax authorities. If these audits result in payments or assessments different from our reserves, our future results may include unfavorable adjustments to our tax liabilities and our financial statements could be adversely affected.Foreign remittance taxes have not been provided for on undistributed earnings of certain of our non-U.S. subsidiaries to the extent such earnings are considered to be indefinitely reinvested in the operations of those subsidiaries. If our intentions regarding reinvestment of such earnings change, or we determine to repatriate earnings from foreign jurisdictions that had previously been considered permanently reinvested under existing accounting standards, then our income tax provision, cash taxes paid, and effective tax rate could increase. In addition, changes by the U.S. in relation to international tax reform could increase uncertainty and may adversely affect our income tax provision, cash taxes paid, and effective tax rate. Comprehensive tax reform was enacted through the Tax Cuts and Jobs Act of 2017 (the “TCJA”) which includes numerous provisions that impact U.S. corporate tax rates, business-related exclusions, deductions, and credits. The taxing authorities continue to issue regulations and guidance, some with retrospective application, to the provisions of the TCJA, and we expect this to continue for the foreseeable future. Any future adjustments resulting from retrospective regulations and guidance issued will be considered a discrete income tax expense or benefit in the period guidance is issued. For example, the TCJA eliminated the deduction of certain domestic and foreign research and development expenditures beginning on January 1, 2022 and requires capitalization and amortization of such expenditures over a specified a period; any revision, regulation, or new guidance to this rule may impact our future income tax provision, cash taxes paid, and effective tax rate. Furthermore, changes in multilateral agreements and the tax laws of foreign jurisdictions could arise as a result of the base erosion and profit shifting project undertaken by the Organisation for Economic Co-operation and Development (the “OECD”) 1983012IMPO.B (PDF_D_SWOP).indd 2283012IMPO.B (PDF_D_SWOP).indd 223/7/22 8:31 PM3/7/22 8:31 PMand could significantly increase our tax provision, cash taxes paid, and effective tax rate. The OECD has issued significant global tax policy changes that include both expanded reporting as well as technical global tax policy changes and many countries in which we operate have implemented tax law and administrative changes to align with new OECD policies. For example, in October 2021, OECD announced an agreed framework for an expansion of the taxing rights of market countries and to establish a global minimum corporate tax rate. In December 2021, OECD published detailed model rules for a global minimum corporate tax rate of fifteen percent which will require multilateral agreement(s) and/or country-specific legislative action to be effective. A global minimum corporate tax rate and any other implemented changes could significantly increase tax uncertainty due to differing interpretations and increased audit scrutiny. We could incur significant liability if any of our separation from Danaher, our separation of our Automation and Specialty business or our separation of Vontier (collectively, the “Separation Transactions”) is determined to be a taxable transaction.We have received an opinion from outside tax counsel to the effect that each of the Separation Transactions qualifies as a transaction that is described in Sections 355(a) and 368(a)(1)(D) of the Internal Revenue Code. The opinion relies on certain facts, assumptions, representations, and undertakings from the applicable parties regarding the past and future conduct of the companies’ respective businesses and other matters. If any of these facts, assumptions, representations, or undertakings are incorrect or not satisfied, our stockholders and we may not be able to rely on the applicable opinion of tax counsel and could be subject to significant tax liabilities. Notwithstanding the opinion of tax counsel we have received, the IRS could determine on audit that any of the Separation Transactions is taxable if it determines that any of the corresponding facts, assumptions, representations, or undertakings are not correct or have been violated or if it disagrees with the conclusions in any of the applicable opinions. If any of the Separation Transactions is determined to be taxable for U.S. federal income tax purposes, we, as well as our stockholders that are subject to U.S. federal income tax, would incur significant U.S. federal income tax liabilities.Changes in U.S. GAAP could adversely affect our reported financial results and may require significant changes to our internal accounting systems and processes.We prepare our consolidated financial statements in conformity with generally accepted accounting principles in the United States of America (“GAAP”). These principles are subject to interpretation by the Financial Accounting Standards Board (“FASB”), the SEC, and various bodies formed to interpret and create appropriate accounting principles and guidance. Any new or amended standards may result in different accounting principles, which may significantly impact our reported results or could result in volatility of our financial results.We may be required to recognize impairment charges for our goodwill and other intangible assets.As of December 31, 2021, the net carrying value of our goodwill and other intangible assets totaled approximately $13.0 billion. In accordance with GAAP, we periodically assess these assets to determine if they are impaired. Significant negative industry or economic trends, disruptions to our business, inability to effectively integrate acquired businesses, unexpected significant changes or planned changes in use of our assets, changes in the structure of our business, divestitures, market capitalization declines, or increases in associated discount rates may impair our goodwill and other intangible assets. Any charges relating to such impairments would adversely affect our results of operations in the periods recognized. Refer to Note 2 and Note 7 to the consolidated financial statements for a description of our policies relating to goodwill and acquired intangibles.Risk Related to Our Financing ActivitiesWe have incurred a significant amount of debt, and our debt will increase further if we incur additional debt and do not retire existing debt.As of December 31, 2021, we had approximately $4.0 billion of long-term debt, including the current portion of long-term debt, on a consolidated basis. We may also obtain additional long-term debt and lines of credit to meet future financing needs. Our debt level and related debt service obligations could have negative consequences, including:•requiring us to dedicate significant cash flow from operations to the payment of principal and interest on our debt, which would reduce the funds we have available for other purposes, such as acquisitions;•making it more difficult for us to satisfy our obligations with respect to our debt;•placing us at a competitive disadvantage compared to our competitors that are not as highly leveraged;•limiting our ability to borrow additional funds;•reducing our flexibility in planning for or reacting to changes in our business and market conditions;2083012IMPO.B (PDF_D_SWOP).indd 2383012IMPO.B (PDF_D_SWOP).indd 233/7/22 8:31 PM3/7/22 8:31 PM•exposing us to interest rate risk since a portion of our debt obligations are at variable rates; and•resulting in an event of default if we fail to satisfy our obligations under our debt or fail to comply with the financial or restrictive covenants contained in our debt instruments, which event of default could result in all of our debt becoming immediately due and payable and could permit certain of our lenders to foreclose on our assets securing such debt.Our ability to satisfy our obligations depends on our future operating performance and on economic, financial, competitive, and other factors beyond our control. Our business may not generate sufficient cash flow to meet these obligations. If we are unable to service our debt or obtain additional financing, we may be forced to delay strategic acquisitions, capital expenditures, or research and development expenditures. We may not be able to obtain additional financing on terms acceptable to us or at all.Additionally, the agreements governing our debt require that we maintain certain financial ratios, and contain affirmative and negative covenants that restrict our activities by, among other limitations, limiting our ability to incur additional indebtedness, make investments, create liens, sell assets, and enter into transactions with affiliates. The covenants in our credit agreement include a debt-to-EBITDA ratio. Please refer to Note 11 to the consolidated financial statements for additional details.Our ability to comply with these restrictions and covenants may be affected by events beyond our control. Our failure to comply with any of these restrictions or covenants may result in an event of default under the applicable debt instrument, which could permit acceleration of the debt under that instrument and require us to prepay that debt before its scheduled due date. Also, an acceleration of the debt under one of our debt instruments would trigger an event of default under other of our debt instruments.Risk Related to Shareholder RightsCertain 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 (“Restated Certificate of Incorporation”) and amended and restated bylaws (“Amended and Restated Bylaws”) contain, and Delaware law contains, provisions that are intended to deter coercive takeover practices and inadequate takeover bids and to encourage prospective acquirers to negotiate with the Board of Directors (the “Board”) rather than to attempt an unsolicited takeover not approved by the Board. These provisions include, among others:•the inability of our shareholders to act by written consent;•rules regarding how shareholders may present proposals or nominate directors for election at shareholder meetings;•the right of the Board to issue preferred stock without shareholder approval;•the ability of our directors, and not shareholders, to fill vacancies (including those resulting from an enlargement of the Board) on the Board; and•the requirement that the affirmative vote of shareholders holding at least 80% of our voting stock is required to amend our amended and restated bylaws and certain provisions in our amended and restated certificate of incorporation.In addition, because we have not chosen to be exempt from Section 203 of the Delaware General Corporation Law (the “DGCL”), this provision could also delay or prevent a change of control that you may favor. Section 203 provides that, subject to limited exceptions, persons that acquire, or are affiliated with a person that acquires, more than 15% of the outstanding voting stock of a Delaware corporation (an “interested stockholder”) shall not engage in any business combination with that corporation, including by merger, consolidation, or acquisitions of additional shares, for a three-year period following the date on which the person became an interested stockholder, unless (i) prior to such time, the board of directors of such corporation approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder; (ii) upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of such corporation at the time the transaction commenced (excluding for purposes of determining the voting stock outstanding (but not the outstanding voting stock owned by the interested stockholder) the voting stock owned by directors who are also officers or held in employee benefit plans in which the employees do not have a confidential right to tender or vote stock held by the plan); or (iii) on or subsequent to such time the business combination is approved by the board of directors of such corporation and authorized at a meeting of shareholders by the affirmative vote of at least two-thirds of the outstanding voting stock of such corporation not owned by the interested stockholder.We believe these provisions will protect our shareholders from coercive or otherwise unfair takeover tactics by requiring potential acquirers to negotiate with the Board and by providing the Board with more time to assess any acquisition proposal. These provisions are not intended to make our company immune from takeovers. However, these provisions will apply even if the offer may be considered beneficial by some shareholders and could delay or prevent an acquisition that the Board 2183012IMPO.B (PDF_D_SWOP).indd 2483012IMPO.B (PDF_D_SWOP).indd 243/7/22 8:31 PM3/7/22 8:31 PMdetermines is not in the best interests of our company and our shareholders. These provisions may also prevent or discourage attempts to remove and replace incumbent directors.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.Our amended and restated certificate of incorporation provides that unless the Board otherwise determines, 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, will be the sole and exclusive forum for any derivative action or proceeding brought on behalf of our company, any action asserting a claim of breach of a fiduciary duty owed by any of our directors or officers to our company or our shareholders, any action asserting a claim against our company or any of our directors or officers arising pursuant to any provision of the DGCL or our amended and restated certificate of incorporation or bylaws, or any action asserting a claim against our company or any of our directors or officers governed by the internal affairs doctrine. This exclusive forum provision may limit the ability of our shareholders to bring a claim in a judicial forum that such shareholders find favorable for disputes with our company or our directors or officers, which may discourage such lawsuits against our company and our directors and officers. This exclusive forum provision would not apply to claims brought to enforce a duty or liability created by the Securities Act, the Exchange Act, or any other claim for which the federal courts have exclusive jurisdiction.ITEM 1B. UNRESOLVED STAFF COMMENTS Not applicable. ITEM 2. PROPERTIES Our corporate headquarters is located in Everett, Washington in a facility that we own. As of December 31, 2021, our facilities included approximately 60 significant facilities, which are used for manufacturing, distribution, warehousing, research and development, general administrative, and/or sales functions. Approximately 35 of these facilities are located in the United States in over 20 states and approximately 25 are located outside the United States in over 10 countries, including Canada and countries in Asia Pacific, Europe, and Latin America. These facilities cover approximately 6 million square feet, of which approximately 3 million square feet are owned and approximately 3 million square feet are leased. Particularly outside the United States, facilities may serve more than one business segment and may be used for multiple purposes, such as administration, sales, manufacturing, warehousing, and/or distribution. The approximate number of significant facilities by business segment is: Intelligent Operating Solutions 25, Precision Technologies 25, and Advanced Healthcare Solutions 10.We consider our facilities suitable and adequate for the purposes for which they are used and do not anticipate difficulty in renewing existing leases as they expire or in finding alternative facilities. We believe our properties and equipment have been well-maintained. Please refer to Note 10 to the consolidated financial statements for additional information with respect to our lease commitments. ITEM 3. LEGAL PROCEEDINGSWe are, from time to time, subject to a variety of litigation and other legal and regulatory proceedings and claims incidental to our business. Based upon our experience, current information, and applicable law, we do not believe that these proceedings and claims will have a material effect on our financial position, results of operations, or cash flows.ITEM 4. MINE SAFETY DISCLOSURES Not applicable.2283012IMPO.B (PDF_D_SWOP).indd 2583012IMPO.B (PDF_D_SWOP).indd 253/7/22 8:31 PM3/7/22 8:31 PMINFORMATION ABOUT OUR EXECUTIVE OFFICERSSet forth below are the names, ages, positions, and experience of our executive officers as of February 25, 2022. All of our executive officers hold office at the pleasure of our Board.NameAgePositionOfficer SinceJames A. Lico56President and Chief Executive Officer2016Charles E. McLaughlin60Senior Vice President – Chief Financial Officer2016Patrick K. Murphy60President and CEO of Advanced Healthcare Solutions2016Tamara S. Newcombe56President and CEO of Precision Technologies2022Jonathan L. Schwarz50Senior Vice President – Corporate Development2016Edward R. Simmons48Senior Vice President – Strategy 2021Olumide Soroye49President and CEO of Intelligent Operating Solutions2021Peter C. Underwood52Senior Vice President – General Counsel2016Stacey A. Walker51Senior Vice President – Human Resources2016James A. Lico has served as Chief Executive Officer and President, as well as a member of the Board since July 2016. Prior to July 2016, Mr. Lico served in leadership positions in a variety of different functions and businesses at Danaher after joining Danaher in 1996, including as Executive Vice President from 2005 to 2016.Charles E. McLaughlin has served as Senior Vice President, Chief Financial Officer since July 2016. Prior to July 2016, Mr. McLaughlin served as Senior Vice President-Diagnostics Group CFO for Danaher’s Diagnostics business from May 2012 to July 2016, and as Senior Vice President-Chief Financial Officer of Danaher’s Beckman Coulter business from July 2011 to July 2016. Patrick K. Murphy has served as President and CEO of Advanced Healthcare Solutions since January 2022, as President and CEO of Precision Technologies from July 2021 to December 2021, and as a Senior Vice President from July 2016 to July 2021. Prior to July 2016, Mr. Murphy served as a Group President of Danaher after joining Danaher in March 2014 until July 2016. Prior to joining Danaher, he served as CEO of Nidec Motor Corporation and President of the ACIM (Appliance, Commercial, and Industrial Motor) Business Unit of Nidec Corporation, a manufacturer of commercial, industrial, and appliance motors and controls, from 2010 until October 2013.Tamara S. Newcombe has served as President and CEO of Precision Technologies since January 2022. Prior to January 2022, Ms. Newcombe was Group President from May 2021 to December 2021, President of Tektronix from April 2019 to December 2021, and Commercial President of Tektronix from February 2017 to April 2019. Prior to joining Tektronix, Ms. Newcombe was Vice President of Sales at Cisco Systems, Inc. from November 2009 to February 2017.Jonathan L. Schwarz has served as Senior Vice President, Corporate Development since February 2021 and as Vice President, Strategy and Corporate Development from April 2019 to February 2021 and as Vice President, Corporate Development from July 2016 to April 2019. Prior to July 2016, Mr. Schwarz served as Vice President-Corporate Development of Danaher from 2010 to July 2016.Edward R. Simmons has served as Senior Vice President, Strategy of Fortive since February 2021. From June 2018 to December 2020, Mr. Simmons was the President of Vista Consulting Group for Vista Equity Partners, a leading private investment firm focused on software, data, and technology-enabled businesses. In addition, from September 1999 through May 2018, Mr. Simmons served as a Partner of Bain & Company where he served as a Director in its Private Equity Practice and led its Technology, Media, and Telecommunications practice.Olumide Soroye has served as President and CEO of Intelligent Operating Solutions since August 2021. Prior to joining Fortive, Mr. Soroye was the Managing Director of the Property Intelligence and Risk Management segment of CoreLogic from September 2013 to August 2021.Peter C. Underwood has served as Senior Vice President, General Counsel of Fortive since May 2016. Prior to joining Fortive, Mr. Underwood served as Vice President, General Counsel and Secretary of Regal Beloit Corporation, a manufacturer of electric motors, from 2010 through May 2016.Stacey A. Walker has served as a Senior Vice President, Human Resources of Fortive since July 2016. Prior to July 2016, Ms. Walker served as Vice President-Talent Management of Danaher from January 2014 to July 2016 after serving as Vice President-Talent Planning from December 2012 to December 2013 and as Vice President-Human Resources for Danaher’s Chemtreat business from 2008 to November 2012.2383012IMPO.B (PDF_D_SWOP).indd 2683012IMPO.B (PDF_D_SWOP).indd 263/7/22 8:31 PM3/7/22 8:31 PMPART IIITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock has been traded on the New York Stock Exchange under the symbol FTV since July 2, 2016. As of February 24, 2022, there were approximately 2,000 holders of record of our common stock.Issuer Purchases of Equity SecuritiesOn February 17, 2022, the Company's Board of Directors approved a share repurchase program authorizing the Company to repurchase up to 20 million shares of the Company's outstanding common stock from time to time on the open market or in privately negotiated transactions. There is no expiration date for the repurchase program, and the timing and amount of repurchases under the program are determined by the Company's management based on market conditions and other factors. The repurchase program may be suspended or discontinued at any time by the Board of Directors.Recent Issuances of Unregistered SecuritiesNone.ITEM 6. [RESERVED]Not applicable.ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSFortive Corporation (the “Company,” “Fortive,” “we,” “our,” and “us”) is a provider of essential technologies for connected workflow solutions across a range of attractive end-markets. Our strategic segments - Intelligent Operating Solutions, Precision Technologies, and Advanced Healthcare Solutions - include well-known brands with leading positions in their markets. Our businesses design, develop, manufacture, and service professional and engineered products, software, and services, building upon leading brand names, innovative technologies, and significant market positions. We are headquartered in Everett, Washington and employ a team of more than 18,000 research and development, manufacturing, sales, distribution, service, and administrative employees in more than 50 countries around the world.This MD&A is designed to provide a reader of our financial statements with a narrative from the perspective of management. Our MD&A is divided into seven sections:•Basis of Presentation •Overview•Results of Operations•Financial Instruments and Risk Management•Liquidity and Capital Resources•Critical Accounting Estimates•New Accounting StandardsBASIS OF PRESENTATIONOn October 9, 2020, we completed the separation of Vontier Corporation (“Vontier”), the entity we created to hold our former Industrial Technologies segment (the “Separation”). The accounting requirements for reporting the Vontier business as a discontinued operation were met when the Separation was completed. Accordingly, the consolidated financial statements reflect the results of the Vontier business as a discontinued operation for all periods presented.2483012IMPO.B (PDF_D_SWOP).indd 2783012IMPO.B (PDF_D_SWOP).indd 273/7/22 8:31 PM3/7/22 8:31 PM83012IMPO.B (PDF_D_SWOP).indd 2883012IMPO.B (PDF_D_SWOP).indd 283/7/22 8:31 PM3/7/22 8:31 PMOVERVIEWGeneralFortive is a multinational business with global operations with approximately 49% of our sales derived from customers outside the United States in 2021. As a company with global operations, our businesses are affected by worldwide, regional, and industry-specific economic and political factors. Our geographic and industry diversity, as well as the range of products, software, and services we offer, typically help limit the impact of any one industry or the economy of any single country (except for the United States) on our operating results. Given the broad range of products manufactured, software and services provided, and geographies served, we do not use any indices other than general economic trends to predict the overall outlook for the Company. Our individual businesses monitor key competitors and customers, including their sales, to the extent possible, to gauge relative performance and the outlook for the future.As a result of our geographic and industry diversity, we face a variety of opportunities and challenges, including technological development in most of the markets we serve, the expansion and evolution of opportunities in high-growth markets, trends and costs associated with a global labor force, and consolidation of our competitors. We define high-growth markets as developing markets of the world experiencing extended periods of accelerated growth in gross domestic product and infrastructure which include Eastern Europe, the Middle East, Africa, Latin America, and Asia with the exception of Japan and Australia. We operate in a highly competitive business environment in most markets, and our long-term growth and profitability will depend, in particular, on our ability to expand our business across geographies and market segments, identify, consummate, and integrate appropriate acquisitions, develop innovative and differentiated new products, services, and software, expand and improve the effectiveness of our sales force, continue to reduce costs and improve operating efficiency and quality, attract relevant talent and retain, grow, and empower our talented workforce, and effectively address the demands of an increasingly regulated environment. We are making significant investments, organically and through acquisitions, to address technological change in the markets we serve and to improve our manufacturing, research and development, and customer-facing resources in order to be responsive to our customers throughout the world.In this report, references to sales from existing businesses refer to sales from operations calculated according to generally accepted accounting principles in the United States (“GAAP”) but excluding (1) the impact from acquired businesses and (2) the impact of currency translation. References to sales attributable to acquisitions or acquired businesses refer to GAAP sales from acquired businesses recorded prior to the first anniversary of the acquisition and the effect of purchase accounting adjustments of the acquisition less the amount of sales attributable to certain divested businesses or product lines not considered discontinued operations prior to the first anniversary of the divestiture. The portion of sales attributable to the impact of currency translation is calculated as the difference between (a) the period-to-period change in sales (excluding sales impact from acquired businesses) and (b) the period-to-period change in sales (excluding sales impact from acquired businesses) after applying the current period foreign exchange rates to the prior year period. Sales from existing businesses should be considered in addition to, and not as a replacement for or superior to, sales, and may not be comparable to similarly titled measures reported by other companies.Management believes that reporting the non-GAAP financial measure of sales from existing businesses provides useful information to investors by helping identify underlying growth trends in our business and facilitating comparisons of our sales performance with our performance in prior and future periods and to our peers. We exclude the effect of acquisition and divestiture related items because the nature, size, and number of such transactions can vary dramatically from period to period and between us and our peers. We exclude the effect of currency translation from sales from existing businesses because the impact of currency translation is not under management’s control and is subject to volatility. Management believes the exclusion of the effect of acquisitions and divestitures and currency translation may facilitate the assessment of underlying business trends and may assist in comparisons of long-term performance. References to sales volume refer to the impact of both price and unit sales.Business Performance and OutlookBusiness PerformanceOverall demand for our products and services accelerated during 2021, with aggregate year-over-year sales increasing by 13.4%. The increase was largely driven by demand from our existing businesses, which increased by 9.5% on broad-based momentum and focused execution across our portfolio, most notably within our short-cycle industrial and software as a service (“SaaS”) businesses. Geographically, year-over-year sales from existing businesses in developed markets increased at a high single digit rate driven by high single digit increases in North America and Western Europe. Year-over-year sales from existing businesses in high 2583012IMPO.B (PDF_D_SWOP).indd 2983012IMPO.B (PDF_D_SWOP).indd 293/7/22 8:31 PM3/7/22 8:31 PMgrowth markets increased at a mid-teens rate driven by mid-twenties increases in Latin America and mid-teens increases in China. In addition to increased demand, year-over-year price increases contributed 1.8% to sales growth during 2021, as compared to 2020, and is reflected as a component of the change in sales from existing businesses. During 2021, widespread supply chain challenges emerged due to labor, raw material, and component shortages, as well as logistics issues, across multiple industries, resulting in increased material and shipping costs. We worked to mitigate the impact of the supply chain challenges by implementing solutions to support near-term operations, executing on countermeasures for material shortages, and managing production, all of which contributed to year-over-year revenue growth and margin expansion in 2021. However, due to the magnitude of the supply chain and logistics issues impacting the economy broadly and those related to electronic components in particular, demand for our products outpaced our ability to supply, and our backlog grew in the second half of 2021. COVID-19 continues to have an impact on our business and results. In 2020, we experienced significant declines in demand as a result of broad disruption in the global economy. In 2021, we experienced a rebound of demand but also encountered operating challenges related to logistics, material availability and higher levels of absenteeism. We expect that the pandemic and its impact on global commerce will remain uncertain and we will continue to deploy FBS to countermeasure the challenges we encounter. 2022 OutlookWe anticipate the strong demand for our products and services will continue into 2022 with year-over-year revenue expected to increase between 9.0% and 12.0% for the full year, including growth from existing businesses of between 5.5% and 8.5% on anticipated strong demand in key end markets and continued deployment of FBS to drive share gains and innovation. This outlook is subject to various assumptions and risks, including but not limited to, the magnitude of the impact of the COVID-19 pandemic on macroeconomic conditions, continued strength of key end markets, elective surgery rates, the availability of electronic components, our ability to convert backlog, sustain our workforce levels and maintain manufacturing capacity. We anticipate that supply chain and inflationary pressures will persist throughout 2022 and that although our backlog may decline compared to 2021, it may remain elevated compared to historical levels. We will continue to deploy FBS to actively manage production challenges, collaborate with customers and suppliers to minimize disruptions and utilize price increases and other countermeasures to offset inflationary pressures. We are monitoring the risks of new COVID-19 variants which may be more contagious or severe, or less responsive to treatment and vaccines, and may impact the rate that virus control measures ease or become more restrictive, which could impact our future results. We are monitoring matters of international trade, monetary and fiscal policies, relations between the U.S. and China, as well as evaluating the impacts of proposed legislation and various investment and taxation policy initiatives being debated in the United States and by the Organisation for Economic Co-operation and Development (“OECD”). As of the filing date of this report, we are, however, unable to quantify the anticipated impact of these matters on our financial results.Completed Divestitures, Acquisitions, and Business Combinations2021ServiceChannel AcquisitionOn August 24, 2021, we acquired ServiceChannel Holdings, Inc. (“ServiceChannel”), a privately held, global provider of SaaS based multi-site facilities maintenance service solutions with an integrated service-provider network. The acquisition of ServiceChannel broadens our offering of software-enabled solutions for the facility and asset lifecycle workflow. The total consideration paid was approximately $1.2 billion, net of acquired cash, and includes approximately $28 million of deferred compensation consideration that is being recognized ratably over a twelve month service period. The ServiceChannel acquisition was primarily financed with available cash and proceeds from our financing activities. We preliminarily recorded approximately $873 million of goodwill related to the ServiceChannel acquisition, which is not tax deductible. ServiceChannel had revenue in 2020 of approximately $70 million and is an operating company within our Intelligent Operating Solutions segment.Provation AcquisitionOn December 27, 2021, we acquired Provation Software, Inc. (“Provation”), a leading provider of clinical workflow software solutions used in hospitals and ambulatory surgery centers. The acquisition of Provation extends our digital offering and software capabilities in the healthcare space. The total consideration paid was approximately $1.4 billion, net of acquired cash 2683012IMPO.B (PDF_D_SWOP).indd 3083012IMPO.B (PDF_D_SWOP).indd 303/7/22 8:31 PM3/7/22 8:31 PMand was primarily financed with proceeds from our financing activities and available cash. We preliminarily recorded $970 million of goodwill related to the acquisition, which is not tax deductible. Provation had revenue in 2020 of approximately $90 million and is an operating company within our Advanced Healthcare Solutions segment.2020Vontier SeparationOn October 9, 2020, we completed the Separation by distributing 80.1% of the outstanding shares of Vontier to our stockholders on a pro rata basis. To effect the Separation, we distributed to our stockholders two shares of Vontier common stock for every five shares of Fortive common stock outstanding held on September 25, 2020, the record date for the distribution, and retained 19.9% of the shares of Vontier common stock immediately following the Separation. The accounting requirements for reporting the Separation of Vontier as a discontinued operation were met when the Separation was completed.On September 29, 2020, Vontier entered into a credit agreement (the “Credit Agreement”) with a syndicate of banks, consisting of a three-year, $800 million senior unsecured delayed draw term loan facility (the “Three-Year Term Loans”), a two-year, $1 billion senior unsecured delayed draw term loan facility (the “Two-Year Term Loans” and together with the “Three-Year Term Loans”, the “Term Loans”) and a three-year, $750 million senior unsecured multi-currency revolving credit facility (the “Revolving Credit Facility” and, together with the Term Loans, the “Credit Facilities”). On the Distribution Date, Vontier drew down the full $1.8 billion available under the Term Loans. Vontier used the proceeds from the Term Loans to make payments to the Company, with $1.6 billion used as part of the consideration for the contribution of certain assets and liabilities to Vontier by the Company in connection with the Separation and $202 million used as an adjustment for excess cash balances remaining with Vontier (collectively, the “Cash Consideration”). We applied the Cash Consideration to repay certain outstanding indebtedness, interest on certain debt instruments, and to pay certain of the Company’s regular, quarterly cash dividends. Refer to Note 11 to the consolidated financial statements for the description of the debt repayments made.On January 19, 2021, we completed the Debt-for-Equity Exchange of 33.5 million shares of common stock of Vontier, representing all of the Retained Vontier Shares, for $1.1 billion in aggregate principal amount of indebtedness of the Company held by Goldman Sachs & Co., including (i) all $400.0 million of the Term Loan due March 2021 and (ii) $683.2 million of the Term Loan due May 2021. We recorded a loss on extinguishment of the debt included in the Debt-for-Equity Exchange of $94.4 million in the year ended December 31, 2021. In preparation for and executing the Separation, the Company incurred $84 million and $35 million in Vontier stand-up and separation-related transaction costs during the years ended December 31, 2020 and 2019, respectively, which have been reclassified to discontinued operations in the accompanying consolidated financial statements. These stand-up and separation-related costs primarily relate to professional and advisory fees associated with preparation of regulatory filings and separation activities within finance, tax, legal, and information system functions.In connection with the Separation, Fortive and Vontier entered into various agreements to effect the Separation and provide a framework for Vontier’s relationship with Fortive after the Separation, including a transition services agreement, an employee matters agreement, a tax matters agreement, an intellectual property matters agreement, a FBS license agreement, and a stockholder’s and registration rights agreement. These agreements govern the separation between Fortive and Vontier of the assets, employees, liabilities, and obligations (including its investments, property, and employee benefits and tax-related assets and liabilities) of Fortive and its subsidiaries attributable to periods prior to, at, and after Vontier’s separation, and also govern certain relationships between Fortive and Vontier after the Separation. As of December 31, 2021, all responsibilities and obligations under all agreements have been materially settled.2019Advanced Sterilization Products AcquisitionOn April 1, 2019 (the “Principal Closing Date”), we acquired the Advanced Sterilization Products business (“ASP”) of Johnson & Johnson, a New Jersey corporation (“Johnson & Johnson”) for an aggregate purchase price of $2.7 billion (the “Transaction”), subject to certain post-closing adjustments set forth in a Stock and Asset Purchase Agreement, dated effective as of June 6, 2018, between the Company and Ethicon, Inc., a New Jersey corporation (“Ethicon”) and a wholly owned subsidiary of Johnson & Johnson. ASP engages in the research, development, manufacture, marketing, distribution, and sale of low-temperature terminal sterilization and high-level disinfection products.On the Principal Closing Date, we paid $2.7 billion in cash and obtained the transferred assets and assumed liabilities in 20 countries (“Principal Countries”), general patent and trademark assignments, and all transferred equity interests in ASP. ASP has operations in an additional 39 countries (“Non-Principal Countries”). The transferred assets and liabilities associated with these operations close when requirements of country-specific agreements or regulatory approvals are satisfied.2783012IMPO.B (PDF_D_SWOP).indd 3183012IMPO.B (PDF_D_SWOP).indd 313/7/22 8:31 PM3/7/22 8:31 PMThe $2.7 billion purchase price was paid in exchange for ASP’s businesses in both Principal and Non-Principal Countries. As of December 31, 2021 we have closed all Principal Countries and all Non-Principal Countries. All of the provisional goodwill associated with the Transaction is included in goodwill in our Advanced Healthcare Solutions segment at December 31, 2021, and the majority of the provisional goodwill is tax deductible. In addition, the Company entered into a transition services agreement with Johnson & Johnson for certain administrative and operational services (“TSA”) with Principal Countries and distribution agreements in the Non-Principal Countries. Under the distribution agreements, ASP sells finished goods to Ethicon at prices agreed by the parties. ASP recognizes these sales as revenue when the conditions for revenue recognition are met. Following the sale of finished goods by ASP, Ethicon obtains title of the finished goods, has full authority to sell and market the finished goods to end customers as it sees fit, and retains any revenue and profit from sale. As of December 31, 2021, ASP had exited the TSAs and substantially all of the distribution agreements. Prior to our acquisition of ASP, Johnson & Johnson received a Civil Investigative Demand from the United States Department of Justice (“DOJ”) regarding a False Claims Act investigation arising from a whistleblower lawsuit pertaining to the pricing, quality, marketing, and promotion of certain of ASP’s products. Based on the totality of available information at the Principal Closing Date and throughout the applicable measurement period, management allocated $26 million of the $2.7 billion purchase price to a potential liability related to the aforementioned litigation. Following the Principal Closing Date, management continually evaluated the likelihood and magnitude of the asserted claims based on any new information that became available. In the second quarter of 2021, following the unsealing of the whistleblower lawsuit and DOJ’s declination to intervene in the litigation, the plaintiff dismissed the whistleblower lawsuit. Based on these developments, management derecognized the litigation liability from our Consolidated Balance Sheet and recorded the gain on litigation resolution of $26 million within Non-operating income (expense), net in our Consolidated Statements of Earnings during the year ended December 31, 2021.Other Acquisitions and InvestmentsIn addition to the acquisition of ASP, during 2019, we acquired Intelex Technologies and Pruftechnik, both of which complement existing businesses in our Intelligent Operation Solutions segment, and Censis Technologies within our Advanced Healthcare Solutions segment, for total consideration of $1.2 billion in cash, net of cash acquired. We recorded an aggregate of $781 million of goodwill related to these acquisitions.At the closing date of the purchase of Censis Technologies, a contractual liability existed which management allocated to the purchase price and was recorded in our Consolidated Balance Sheet. During the fourth quarter of 2021, that liability was discharged for an amount less than the amount allocated, and the excess was recorded as a Gain on litigation resolution of $3.9 million within Non-operating income (expense), net in our Consolidated Statements of Earnings during the year ended December 31, 2021.Combination of the Tektronix Video Business with TelestreamOn July 20, 2019, we completed the combination of the Tektronix Video test and monitoring equipment business (“Tektronix Video Business”) with Telestream, LLC (the “Combined Business”), a portfolio company of Genstar Capital LLC. We recognized a pretax gain of $41 million upon the combination, and hold a 33% equity stake in the Combined Business. This transaction did not meet the criteria for discontinued operations reporting, and therefore the operating results of the Tektronix Video Business prior to the combination with Telestream are included in continuing operations for all periods presented. Additionally, the loss from our equity investment in the Combined Business is included in Other non-operating expenses, net in the accompanying Consolidated Statement of Earnings. Refer to Note 4 to our consolidated financial statements for additional information.RESULTS OF OPERATIONSComponents of Sales Growth 2021 vs. 20202020 vs. 2019Total revenue growth (GAAP) 13.4 % 1.5 %Existing businesses (Non-GAAP) 9.5 % (5.9) %Acquisitions (Non-GAAP) 2.4 % 7.3 %Currency exchange rates (Non-GAAP) 1.5 % 0.1 %Refer to Intelligent Operating Solutions, Precision Technologies and Advanced Healthcare Solutions sections below for further discussion of year-over-year sales growth.2883012IMPO.B (PDF_D_SWOP).indd 3283012IMPO.B (PDF_D_SWOP).indd 323/7/22 8:31 PM3/7/22 8:31 PMOperating Profit Margins2021 vs. 2020Operating profit margin was 15.5% for the year ended December 31, 2021, an increase of 390 basis points as compared to 11.6% in 2020, with year-over-year operating profit margin comparisons impacted by: •Higher year-over-year sales volumes and price increases from existing businesses, incremental year-over-year cost savings associated with restructuring and productivity improvement initiatives and favorable sales mix, which were partially offset by higher year-over-year freight and logistics costs, employee compensation and SG&A costs, which were reduced in 2020 to better align costs with demand in response to the pandemic — favorable 240 basis points•The year-over-year net effect of acquisition-related transaction costs which were less in the year ended December 31, 2021 than those recognized in the comparable period in 2020 — favorable 40 basis points•The year-over-year effect of amortization from existing businesses — favorable 85 basis points•The year-over-year effects of restructuring costs which were less in 2021 than those recognized in 2020 — favorable 35 basis points•The year-over-year effect of acquired businesses, including amortization, and acquisition-related fair value adjustments to deferred revenue and inventory which were higher in 2021 than those recognized in 2020 — unfavorable 10 basis points2020 vs. 2019Operating profit margins were 11.6% for the year ended December 31, 2020, an increase of 190 basis points as compared to 9.7% in 2019 with year-over-year operating profit margin comparisons impacted by: •Operating expense savings from broad cost reduction efforts and price increases, and to a lesser extent, lower year-over-year material costs and incremental year-over-year cost savings associated with productivity improvement initiatives, which were partially offset by lower year-over-year sales volumes from existing businesses — favorable 50 basis points•The year-over-year effect of acquired businesses, including amortization, and acquisition-related fair value adjustments to deferred revenue and inventory which were less in 2020 than the fair value adjustments recognized in 2019 — favorable 30 basis points•The year-over-year effect of acquisition-related transaction costs, as the costs related to our acquisition and integration of ASP in 2019 were greater than the costs recognized in the comparable period in 2020 — favorable 90 basis points•The year-over-year effect of amortization from existing businesses — favorable 10 basis points•The incremental year-over-year effect of restructuring actions — favorable 10 basis points2983012IMPO.B (PDF_D_SWOP).indd 3383012IMPO.B (PDF_D_SWOP).indd 333/7/22 8:31 PM3/7/22 8:31 PMBusiness Segments and Geographic Area ResultsSales by business segment and geographic area for the year ended December 31 are as follows ($ in millions):202120202019SegmentsIntelligent Operating Solutions$ 2,169.4 $ 1,883.7 $ 1,898.9 Precision Technologies 1,848.9 1,651.3 1,808.4 Advanced Healthcare Solutions 1,236.4 1,099.4 856.6 Total$ 5,254.7 $ 4,634.4 $ 4,563.9 Geographic areaUnited States$ 2,683.0 $ 2,436.6 $ 2,394.2 China 650.7 534.1 501.2 All other (each country individually less than 5% of total sales) 1,921.0 1,663.7 1,668.5 Total$ 5,254.7 $ 4,634.4 $ 4,563.9 INTELLIGENT OPERATING SOLUTIONSOur Intelligent Operating Solutions segment provides leading workflow solutions to accelerate industrial and facility reliability and performance, as well as compliance and safety across a range of vertical end markets, including manufacturing, process industries, healthcare, utilities and power, communications and electronics, among others. The businesses in our Intelligent Operating Solutions segment provide differentiated instrumentation and sensors, software and services to address our customers’ toughest workflow challenges. Intelligent Operating Solutions Selected Financial Data For the Year Ended December 31($ in millions)202120202019Sales$ 2,169.4 $ 1,883.7 $ 1,898.9 Operating profit 408.5 317.8 289.0 Depreciation 24.5 28.0 40.8 Amortization 163.3 151.1 141.7 Operating profit as a % of sales 18.8 % 16.9 % 15.2 %Depreciation as a % of sales 1.1 % 1.5 % 2.1 %Amortization as a % of sales 7.5 % 8.0 % 7.5 %Components of Sales Growth2021 vs. 20202020 vs. 2019Total revenue growth (GAAP) 15.2 % (0.8) %Existing businesses (Non-GAAP) 10.7 % (7.2) %Acquisitions (Non-GAAP) 2.8 % 6.4 %Currency exchange rates (Non-GAAP) 1.7 % — %2021 COMPARED TO 2020Year-over-year sales of products and services from existing businesses of Intelligent Operating Solutions increased 10.7% in 2021, as compared to 2020. The year-over-year increase was driven by broad-based increases in demand, particularly from our industrial channel partners, critical safety, facilities, and maintenance SaaS product offerings, and portable gas detection instruments, which were partially offset by a decrease in demand for our industrial imaging products, as demand for those products was elevated during the comparable period in 2020 for COVID-19 monitoring. 3083012IMPO.B (PDF_D_SWOP).indd 3483012IMPO.B (PDF_D_SWOP).indd 343/7/22 8:31 PM3/7/22 8:31 PMGeographically, demand from existing businesses in our Intelligent Operating Solutions segment increased in both developed and high growth markets during 2021, driven by growth in every major geography and led by North America, Europe, China and Latin America.Year-over-year price increases in our Intelligent Operating Solutions segment contributed 2.0% to sales growth in 2021, as compared to 2020, and is reflected as a component of the change in sales from existing businesses.Operating profit margin increased 190 basis points during 2021 as compared to 2020, with year-over-year operating profit margin comparisons impacted by:•Higher year-over-year sales volumes from existing businesses, price increases, a favorable sales mix, cost savings associated with restructuring and productivity improvement initiatives, which were partially offset by higher year-over-year employee compensation and SG&A costs due to broad cost reduction efforts in 2020 that reduced expenses to better align with reductions in demand, and increased investment in key growth and innovation initiatives — favorable 290 basis points•The year-over-year effect of amortization from existing businesses — favorable 105 basis points•The year-over-year effect of restructuring actions which were less in 2021 than those recognized in 2020 — favorable 45 basis points•The year-over-year effect of acquisition-related transaction costs which were higher in 2021 than those recognized in 2020 — unfavorable 135 basis points•The year-over-year effect of acquired businesses, including amortization, and acquisition-related fair value adjustments to deferred revenue — unfavorable 110 basis points2020 COMPARED TO 2019Year-over-year sales of products and services from existing businesses of Intelligent Operating Solutions declined 7.2% during the year ended December 31, 2020. The results were driven by declines in demand for portable gas detection instruments, on-premise software license and professional service offerings, and demand from our industrial channel partners, all of which were impacted by COVID-19 in both direct and adjacent end markets. Partially offsetting these declines was increased demand for our industrial imaging products and certain of our critical workflow, safety, and maintenance SaaS product offerings. Despite the year-over-year declines in demand from our industrial channel partners, we realized sequential improvement in both the third and fourth quarters of 2020 from the low point in the second quarter of 2020.Geographically, demand from existing businesses in Intelligent Operating Solutions decreased on a year-over-year basis in both developed and high-growth markets as growth in Asia, led by Japan and China, was more than offset by declines in North America, Western Europe, and Latin America. Price increases are reflected as a component of the change in sales from existing businesses, and year-over-year price increases in the segment contributed 1.1% to sales growth during 2020 as compared to 2019.Operating profit margin increased 170 basis points during 2020 as compared to 2019, with year-over-year operating profit margin comparisons impacted by: •Operating expense savings from broad cost reduction efforts, price increases, lower year-over-year material costs and incremental year-over-year cost savings associated with productivity improvement initiatives, which were partially offset by lower year-over-year sales volumes from existing businesses — favorable 40 basis points•The year-over-year effect of acquired businesses, including amortization, and acquisition-related fair value adjustments to deferred revenue and inventory which were less in 2020 than the fair value adjustments recognized in 2019 — favorable 80 basis points•The year-over-year effect of acquisition-related transaction costs, as the costs related to our acquisitions in 2020 were less than the costs recognized in the comparable period in 2019 — favorable 60 basis points•The year-over-year dilutive effect of amortization from existing businesses — unfavorable 10 basis points3183012IMPO.B (PDF_D_SWOP).indd 3583012IMPO.B (PDF_D_SWOP).indd 353/7/22 8:31 PM3/7/22 8:31 PMPRECISION TECHNOLOGIESOur Precision Technologies segment supplies instrumentation and sensing technologies to a broad set of vertical end markets, enabling our customers to accelerate the development, manufacture and launch of innovative products and solutions. We provide our customers with electrical test and measurement instruments and services, energetic material devices, and a broad portfolio of sensor and control system solutions. Precision Technologies Selected Financial Data For the Year Ended December 31($ in millions)202120202019Sales$ 1,848.9 $ 1,651.3 $ 1,808.4 Operating profit 408.0 321.7 324.6 Depreciation 25.2 25.8 26.7 Amortization 16.4 17.2 20.4 Operating profit as a % of sales 22.1 % 19.5 % 17.9 %Depreciation as a % of sales 1.4 % 1.6 % 1.5 %Amortization as a % of sales 0.9 % 1.0 % 1.1 %Components of Sales Growth2021 vs. 20202020 vs. 2019Total revenue growth (GAAP) 12.0 % (8.7) %Existing businesses (Non-GAAP) 10.6 % (7.7) %Acquisitions (Non-GAAP) — % (1.3) %Currency exchange rates (Non-GAAP) 1.4 % 0.3 %2021 COMPARED TO 2020Year-over-year sales of products and services from existing businesses of Precision Technologies increased 10.6% in 2021. The year-over-year results were driven by broad-based demand for test and measurement instruments, increased demand for sensing technologies in the industrial and semiconductor end markets, and increased demand for energetic materials, which were partially offset by a decrease in demand in the medical end market for sensing devices that supported COVID-19 patient treatment efforts in the comparable periods of 2020.Geographically, demand from existing businesses in our Precision Technologies segment increased during 2021 in both developed and high growth markets, with the results driven by growth in every major geography, led by North America, Asia, and Europe.Year-over-year price increases in our Precision Technologies segment contributed 2.0% to sales growth during 2021, as compared to 2020, and is reflected as a component of the change in sales from existing businesses.Operating profit margin increased 260 basis points during 2021 as compared to 2020, with year-over-year operating profit margin comparisons impacted by: •Higher year-over-year sales volumes from existing businesses, price increases, and incremental year-over-year cost savings associated with restructuring and productivity improvement initiatives which were partially offset by higher year-over-year employee compensation costs and spending levels, which were reduced in 2020 in response to the COVID-19 pandemic, and an unfavorable sales mix — favorable 200 basis points•The year-over-year effect of amortization from existing businesses — favorable 15 basis points•The year-over-year effect of restructuring actions which were less in 2021 than those recognized in 2020 — favorable 45 basis points3283012IMPO.B (PDF_D_SWOP).indd 3683012IMPO.B (PDF_D_SWOP).indd 363/7/22 8:31 PM3/7/22 8:31 PM2020 COMPARED TO 2019Year-over-year sales of products and services from existing businesses of Precision Technologies declined 7.7% during 2020. The year-over-year decline in demand was largely driven by the impacts of COVID-19 in both direct and adjacent end markets, specifically for test and measurement instruments, declines in demand for sensors in the industrial end market, and a decline in shipments of our energetic materials, which was partially offset by increased demand in the medical end market for ventilator components and for critical environments supporting COVID-19 patient treatment efforts. We have realized sequential improvement in demand from the low point in the second quarter of 2020, and returned to sales growth from existing businesses in the fourth quarter of 2020. Geographically, demand from existing businesses in Precision Technologies decreased on a year-over-year basis in both developed and high-growth markets, as growth in Latin America was more than offset by declines in North America, Asia, and Western Europe.Price increases are reflected as a component of the change in sales from existing businesses, and year-over-year price increases contributed 1.8% to sales growth in the segment during 2020 as compared to 2019.Operating profit margin increased 160 basis points during 2020 as compared to 2019 with year-over-year operating profit margin comparisons impacted by: •Operating expense savings from broad cost reduction efforts and price increases, and to a lesser extent lower year-over-year material costs, incremental year-over-year cost savings associated with productivity improvement initiatives, and foreign currency exchange rates, which were partially offset by lower year-over-year sales volumes from existing businesses — favorable 120 basis points•The incremental year-over-year effect of restructuring actions — favorable 50 basis points•The year-over-year effect of amortization from existing businesses — favorable 10 basis points•The year-over-year dilutive effect of the combination of the Tektronix video business with Telestream — unfavorable 20 basis pointsADVANCED HEALTHCARE SOLUTIONSOur Advanced Healthcare Solutions segment supplies critical workflow solutions to hospitals and other healthcare customers, enabling safer, more efficient, and higher quality healthcare. Through the Advanced Healthcare Solutions segment, we provide hardware, consumables, software and services that optimize our customers’ most critical workflows, including instrument sterilization and device reprocessing, instrument tracking, cell therapy equipment design and manufacturing, biomedical test tools, radiation safety monitoring, end-to-end clinical productivity solutions and asset management. Advanced Healthcare Solutions Selected Financial Data For the Year Ended December 31($ in millions)202120202019Sales$ 1,236.4 $ 1,099.4 $ 856.6 Operating profit 101.9 2.1 (72.0) Depreciation 20.5 18.1 11.4 Amortization 141.2 141.6 98.9 Operating profit as a % of sales 8.2 % 0.2 % (8.4) %Depreciation as a % of sales 1.7 % 1.6 % 1.3 %Amortization as a % of sales 11.4 % 12.9 % 11.5 %Components of Sales Growth2021 vs. 20202020 vs. 2019Total revenue growth (GAAP) 12.5 % 28.3 %Existing businesses (Non-GAAP) 6.0 % 0.6 %Acquisitions (Non-GAAP) 5.3 % 27.8 %Currency exchange rates (Non-GAAP) 1.2 % (0.1) %3383012IMPO.B (PDF_D_SWOP).indd 3783012IMPO.B (PDF_D_SWOP).indd 373/7/22 8:31 PM3/7/22 8:31 PM83012IMPO.B (PDF_D_SWOP).indd 3883012IMPO.B (PDF_D_SWOP).indd 383/7/22 8:31 PM3/7/22 8:31 PM2021 COMPARED TO 2020Year-over-year sales of products and services from existing businesses of Advanced Healthcare Solutions increased 6.0% during 2021, driven by increased demand for sterilization capital equipment and consumables, radiation safety monitoring, cell therapy equipment design and manufacturing, and surgical instrument tracking SaaS products. Geographically, demand from existing businesses in Advanced Healthcare Solutions increased in both developed and high growth markets during 2021, driven by growth in North America and Asia, which was partially offset by declines in Europe on non-recurring diagnostic equipment design services performed in 2020 and associated with COVID-19 pandemic response.Year-over-year price increases in our Advanced Healthcare Solutions segment contributed 1.2% to sales growth during 2021, as compared to 2020, and is reflected as a component of the change in sales from existing businesses.Operating profit margin increased 800 basis points during 2021 as compared to 2020 with year-over-year operating profit margin comparisons impacted by: •Higher year-over-year sales volumes from existing businesses, a favorable sales mix and materials performance, price increases, which were partially offset by higher year-over-year freight and logistics costs and higher year-over-year employee compensation costs — favorable 140 basis points•The year-over-year effect of lower acquisition-related transaction and integration costs, including those incurred to establish ASP's organization and enable operating productivity — favorable 400 basis points•The year-over-year effect of amortization from existing businesses — favorable 140 basis points•The year-over-year effect of acquired businesses, including amortization, and acquisition-related fair value adjustments to deferred revenue and inventory which were less in 2021 than those recognized in 2020 — favorable 120 basis points•The year-over-year effect of restructuring actions which were less in 2021 than those recognized in 2020 — favorable 10 basis points2020 COMPARED TO 2019Year-over-year sales of products and services from existing businesses of Advanced Healthcare Solutions increased 0.6% during 2020 as increased demand for cell therapy equipment design and manufacturing, radiation safety monitoring, and surgical instrument tracking SaaS products was mostly offset by a decrease in demand for consumables from our ASP business driven by a decline in elective surgical procedure volumes. Year-over-year demand for sterilization capital equipment increased slightly during 2020 as compared to 2019. Several of our Advanced Healthcare Solutions businesses are impacted by elective surgical procedure volumes, and year-over-year, elective surgical procedure volumes declined at a high-single digit rate across most major geographic markets, at rates that varied throughout the year based on COVID-19 patient hospitalizations and virus control measures in place. Geographically, demand from existing businesses in Advanced Healthcare Solutions increased in developed markets and decreased in high-growth markets, as growth in Western Europe and China was more than offset by declines in North America, the Middle East, and Japan.Price increases are reflected as a component of the change in sales from existing businesses, and year-over-year price increases contributed 0.8% to sales growth during 2020 as compared to 2019.Operating profit margin increased 860 basis points during 2020 as compared to 2019 with year-over-year operating profit margin comparisons impacted by: •Operating expense savings from broad cost reduction efforts and price increases, and to a lesser extent, lower year-over-year material costs, incremental year-over-year cost savings associated with productivity improvement initiatives, and foreign currency exchange rates, that more than offset lower year-over-year sales volumes from existing businesses and an unfavorable sales mix — favorable 40 basis points3483012IMPO.B (PDF_D_SWOP).indd 3983012IMPO.B (PDF_D_SWOP).indd 393/7/22 8:31 PM3/7/22 8:31 PM•The year-over-year effect of amortization from existing businesses – favorable 250 basis points•The incremental year-over-year effect of acquired businesses, including amortization and acquisition-related fair value adjustments to deferred revenue and inventory which were less in 2020 than in 2019 — favorable 160 basis points•Acquisition-related transaction costs, as the costs related to our acquisition and integration of ASP and Censis in 2020 were less than the costs recognized in the comparable period in 2019 — favorable 450 basis points•The incremental year-over-year net dilutive effect of restructuring actions — unfavorable 40 basis pointsCOST OF SALES AND GROSS PROFIT For the Year Ended December 31($ in millions)202120202019Sales$ 5,254.7 $ 4,634.4 $ 4,563.9 Cost of sales (2,247.6) (2,025.9) (2,080.7) Gross profit 3,007.1 2,608.5 2,483.2 Gross profit margin 57.2 % 56.3 % 54.4 %The year-over-year increase in cost of sales during 2021, as compared to 2020, is due primarily to higher year-over-year sales volumes from existing businesses, incremental costs from our recently acquired businesses, increasing material, freight and logistics costs, and the impact of changes in foreign currency exchange rates, all of which were partially offset by lower operating costs and gains from productivity improvement initiatives.The year-over-year increase in gross profit and gross profit margin during 2021 as compared to 2020 is due primarily to higher year-over-year sales volumes from existing businesses, sales volumes from our recent acquisitions, price increases, favorable sales mix, lower operating costs and gains from productivity improvements, all of which were partially offset by changes in foreign currency exchange rates and higher material, freight, and logistics costs.The year-over-year decrease in cost of sales during 2020 as compared to 2019 is due primarily to lower year-over-year sales volumes from existing businesses, lower year-over-year material costs, year-over-year net cost savings associated with restructuring and productivity improvement initiatives, and changes in currency exchange rates, which were partially offset by incremental cost of sales from our recently acquired businesses.The year-over-year increase in gross profit and gross profit margin during 2020 as compared to 2019 is due primarily to the favorable impacts of pricing improvements from existing businesses, incremental year-over-year net cost savings associated with restructuring and productivity improvement initiatives, material cost and supply chain improvement actions, and changes in currency exchange rates, which were partially offset by lower year-over-year sales volumes.OPERATING EXPENSES For the Year Ended December 31($ in millions)202120202019Sales$ 5,254.7 $ 4,634.4 $ 4,563.9 Selling, general, and administrative (“SG&A”) expenses 1,839.5 1,748.4 1,719.0 Research and development (“R&D”) expenses 354.8 320.7 320.3 SG&A as a % of sales 35.0 % 37.7 % 37.7 %R&D as a % of sales 6.8 % 6.9 % 7.0 %SG&A expenses increased during 2021 as compared to 2020 due to higher intangible amortization and incremental expenses from our recent acquisitions, higher employee compensation costs and SG&A expenses at our existing businesses due to broad cost reduction efforts executed in 2020 to better align with reductions in demand, and the impact of changes in foreign currency exchange rates, all of which was partially offset by reductions in net acquisition-related costs and incremental savings associated with restructuring and productivity improvement initiatives. On a year-over-year basis, SG&A expenses declined by 270 basis points, as a percentage of revenue, when compared to 2020, reflecting that demand for our products and services grew at a faster rate than expenses.SG&A expenses increased during 2020 as compared to 2019 due primarily to higher intangible amortization and incremental expenses from our recently acquired businesses that were mostly offset by broad cost reduction efforts that reduced labor expenses to better align with reductions in demand during the second and third quarter of 2020, primarily through the use of furloughs and reductions in salaried compensation costs, as well as other reductions in discretionary spending. To a lesser 3583012IMPO.B (PDF_D_SWOP).indd 4083012IMPO.B (PDF_D_SWOP).indd 403/7/22 8:31 PM3/7/22 8:31 PMextent, year-over-year SG&A expenses were reduced by changes in foreign currency exchange rates and year-over-year net cost savings associated with restructuring and productivity improvement initiatives. SG&A expenses as a percentage of sales were relatively consistent year-over-year.R&D expenses (consisting principally of internal and contract engineering personnel costs) increased during 2021 as compared to 2020 due to targeted investments in key growth initiatives and innovation. On a year-over-year basis, R&D expenses as a percentage of sales decreased 10 basis points in 2021 as compared to 2020, reflecting demand for our products and services that grew at a faster rate than our investments in key growth initiatives and innovation.R&D expenses (consisting principally of internal and contract engineering personnel costs) increased slightly during 2020 as compared to 2019 due to incremental expenses from recently acquired businesses. On a year-over-year basis, R&D expenses as a percentage of sales decreased 10 basis points in 2020 as compared to 2019 as incremental sales from our recently acquired businesses increased at a faster rate than R&D investments.INTEREST COSTSFor a discussion of our outstanding indebtedness, refer to Note 11 to the accompanying consolidated financial statements.Interest expense, net of $103 million was recorded during 2021 compared to $149 million during 2020 and $143 million during 2019. Year-over-year interest expense decreased in 2021 and increased in 2020 due to changes in year-over-year average debt balances. In the event that additional liquidity is required, particularly in connection with acquisitions, we may enter into additional borrowings under our commercial paper programs or credit facilities, and/or access the capital markets. If we enter into such additional financing transactions, the amount of annual interest expense will increase.UNREALIZED GAIN ON INVESTMENT IN VONTIER CORPORATIONOn October 9, 2020, we completed the Vontier separation and retained 19.9% of the shares of Vontier common stock immediately following the Separation. We did not retain a controlling interest in Vontier and therefore the subsequent fair value changes of the Retained Vontier Shares are included in our results from continuing operations. At December 31, 2020, the Retained Vontier Shares were remeasured at fair value based on Vontier’s closing stock price, with unrealized gains of $1.1 billion recorded in the Consolidated Statement of Earnings.On January 19, 2021, we completed an exchange of all of the Retained Vontier Shares as part of a noncash debt-for-equity exchange that reduced outstanding indebtedness of Fortive by $1.1 billion. INCOME TAXESGeneralIncome tax expense and deferred tax assets and liabilities reflect management’s assessment of future taxes expected to be paid on items reflected in our financial statements. We record the tax effect of discrete items and items that are reported net of their tax effects in the period in which they occur.Our effective tax rate can be affected by, among others, changes in the mix of earnings in countries with differing statutory tax rates (including as a result of business acquisitions and dispositions), changes in the valuation of deferred tax assets and liabilities, accruals related to contingent tax liabilities and period-to-period changes in such accruals, the results of audits and examinations of previously filed tax returns (as discussed below), the expiration of statutes of limitations, the implementation of tax planning strategies, tax rulings, court decisions, settlements with tax authorities, and changes in tax laws.The amount of income taxes we pay is subject to audit by federal, state, and foreign tax authorities, which may result in proposed assessments. The Company is subject to examination in the United States, various states and foreign jurisdiction for the tax years 2010 to 2021. These examinations include filings of tax returns prior to our separation from Danaher, tax returns of enterprises no longer in our portfolio, and tax returns for pre-acquisition periods of enterprises added to our portfolio. Significant obligations are detailed in our tax matters agreements in connection with the separation of Fortive from Danaher on July 1, 2016, the split-off of the Automation and Specialty business on October 1, 2018, and the Vontier separation on October 9, 2020. We review our global tax positions on a quarterly basis. Based on these reviews, the results of discussions and resolutions of matters with certain tax authorities, tax rulings and court decisions, and the expiration of statutes of limitations reserves for contingent tax liabilities are accrued or adjusted as necessary. We conduct business globally, and, as part of our global business, we file numerous income tax returns in the U.S. federal, state, and foreign jurisdictions. Our ability to obtain a tax benefit in certain countries that continue to have lower statutory tax 3683012IMPO.B (PDF_D_SWOP).indd 4183012IMPO.B (PDF_D_SWOP).indd 413/7/22 8:31 PM3/7/22 8:31 PMrates than the United States is dependent on our levels of taxable income in such foreign countries. We believe that a change in the statutory tax rate of any individual foreign country would not typically have a material effect on our financial statements given the geographic dispersion of our taxable income.Changes by the U.S. in relation to international tax reform could increase uncertainty and may adversely affect our income tax provision, cash taxes paid, and effective tax rate. Comprehensive tax reform was enacted under the TCJA which includes numerous provisions that affect businesses and introduces changes that impact U.S. corporate tax rates, business-related exclusions, deductions, and credits. The taxing authorities continue to issue regulations and guidance, some with retrospective application, to the provisions of the TCJA and we expect this to continue for the foreseeable future. Any future adjustments resulting from retrospective regulations and guidance issued will be considered as discrete income tax expense or benefit in the interim period the guidance is issued. Furthermore, changes in multilateral agreements and the tax laws of foreign jurisdictions could arise as a result of the base erosion and profit shifting project undertaken by the OECD and could significantly increase our tax provision, cash taxes paid, and effective tax rate. The OECD has issued significant global tax policy changes that include both expanded reporting as well as technical global tax policy changes and many countries in which we operate have implemented tax law and administrative changes to align with new OECD policies. The Company will continue to monitor and evaluate the impact of OECD policy changes. For a discussion of risks related to these and other tax matters, please refer to “Item 1A. Risk Factors.” Comparison of the Years Ended December 31, 2021, 2020, and 2019Our effective tax rate for the years ended December 31, 2021, 2020, and 2019 was 9.3%, 3.7% and 20.4%, respectively.Our effective tax rate for 2021 differs from the U.S. federal statutory rate of 21% due primarily to the effect of the TCJA U.S. federal permanent differences, the impact of credits and deductions provided by law, earnings outside the United States that are indefinitely reinvested and taxed at rates lower than the U.S. federal statutory rate, and a permanent difference on the realized gain on our Retained Vontier Shares due to the tax-free treatment of our disposition of the shares through the Debt-for-Equity Exchange that was completed on January 19, 2021. The Debt-for-Equity Exchange included an exchange of all of our Vontier common stock owned as of December 31, 2020.Our effective tax rate for 2020 differs from the U.S. federal statutory rate of 21% due primarily to the effect of the TCJA U.S. federal permanent differences, the impact of credits and deductions provided by law, earnings outside the United States that are indefinitely reinvested and taxed at rates lower than the U.S. federal statutory rate, offset by tax costs associated with repatriating a portion of our previously reinvested earnings outside of the United States, and a permanent difference on the unrealized gain on our Retained Vontier Shares due to the tax-free treatment of our disposition of the shares through the Debt-for-Equity Exchange that was completed on January 19, 2021. The Debt-for-Equity Exchange included an exchange of all of our Vontier common stock owned as of December 31, 2020.Our effective tax rate for 2019 differs from the U.S. federal statutory rate of 21% due primarily to the effect of the TCJA U.S. federal permanent differences, the impact of credits and deductions provided by law, and earnings outside the United States that are indefinitely reinvested and taxed at rates lower than the U.S. federal statutory rate. COMPREHENSIVE INCOMEComprehensive income decreased by $1.1 billion in 2021 as compared to 2020, due to a decrease in net earnings of $1.0 billion, including both continuing and discontinued operations, unfavorable changes in foreign currency translation adjustments of $132 million, and favorable changes in pension benefit adjustments of $38 million. The decrease in net earnings was due to the recognition of a $1.1 billion unrealized gain on the Retained Vontier Shares in 2020. Comprehensive income increased by $895 million in 2020 as compared to 2019, due to an increase in net earnings of $874 million, including both continuing and discontinued operations, favorable changes in foreign currency translation adjustments of $13 million, and favorable changes in pension benefit adjustments of $8 million. The increase in net earnings from 2019 to 2020 was due to the recognition of a $1.1 billion unrealized gain on the Retained Vontier Shares.FINANCIAL INSTRUMENTS AND RISK MANAGEMENTWe are exposed to market risk from changes in interest rates, foreign currency exchange rates, credit risk and commodity prices, each of which could impact our financial statements. We generally address our exposure to these risks through our 3783012IMPO.B (PDF_D_SWOP).indd 4283012IMPO.B (PDF_D_SWOP).indd 423/7/22 8:31 PM3/7/22 8:31 PMnormal operating and financing activities. In addition, our broad-based business activities help to reduce the impact that volatility in any particular area or related areas may have on our operating profit as a whole.Interest Rate RiskWe manage interest cost using a mixture of fixed-rate and variable-rate debt. A change in interest rates on long-term debt impacts the fair value of our fixed-rate long-term debt but not our earnings or cash flows because the interest on such debt is fixed. Generally, the fair market value of fixed-rate debt will increase as interest rates fall and decrease as interest rates rise. As of December 31, 2021, an increase of 100 basis points in interest rates would have decreased the fair value of our fixed-rate long-term debt by approximately $134 million. As of December 31, 2021, our variable-rate debt obligations consisted primarily of U.S. dollar commercial paper and term loans (refer to Note 11 to the consolidated financial statements for information regarding our outstanding indebtedness as of December 31, 2021). As a result, our primary interest rate exposure results from changes in short-term interest rates. As these shorter duration obligations mature, we anticipate issuing additional short-term commercial paper obligations and/or term loans to refinance all or part of these borrowings. The annual effective rate associated with our outstanding U.S. dollar denominated commercial paper and delayed-draw term loan was approximately 0.32% and 0.70%, respectively, and we recorded interest expense of $0.4 million on these variable-rate obligations. On an annualized basis, a hypothetical 10 basis points increase in market interest rates as of December 31, 2021 on our variable-rate debt obligations as of December 31, 2021 would have increased our interest expense by $1.37 million in 2021. Foreign Currency Exchange Rate RiskWe face transactional exchange rate risk from transactions with customers in countries outside of the United States and from intercompany transactions between affiliates. Transactional exchange rate risk arises from the purchase and sale of goods and services in currencies other than our functional currency or the functional currency of an applicable subsidiary. We also face translational exchange rate risk related to the translation of financial statements of our foreign operations into U.S. dollars, our functional currency. Costs incurred and sales recorded by subsidiaries operating outside of the United States are translated into U.S. dollars using exchange rates effective during the respective period. As a result, we are exposed to movements in the exchange rates of various currencies against the U.S. dollar. The effect of a change in currency exchange rates on our net investment in international subsidiaries is reflected in the accumulated other comprehensive income (loss) component of equity. A 10% depreciation in major currencies relative to the U.S. dollar as of December 31, 2021 would have resulted in a reduction of foreign currency-denominated net assets and stockholders’ equity of approximately $198 million.Currency exchange rates favorably impacted 2021 reported sales by 1.5% as compared to 2020, as the U.S. dollar was, on average, weaker against most major currencies during 2021 as compared to exchange rate levels during 2020. If the exchange rates in effect as of December 31, 2021 were to prevail throughout 2022, currency exchange rates would negatively impact 2022 estimated sales by approximately 1.0% relative to our performance in 2021. In general, additional weakening of the U.S. dollar against other major currencies would further positively impact our sales and results of operations on an overall basis and any strengthening of the U.S. dollar against other major currencies would adversely impact our sales and results of operations.We have generally accepted the exposure to exchange rate movements without using derivative financial instruments to manage this risk. Both positive and negative movements in currency exchange rates against the U.S. dollar will therefore continue to affect the reported amount of sales, profit, and assets and liabilities in our consolidated financial statements.Credit RiskWe are exposed to potential credit losses in the event of nonperformance by counterparties to our financial instruments. Financial instruments that potentially subject us to credit risk consist of cash and highly-liquid investment grade cash equivalents and receivables from customers. We place cash and cash equivalents with various high-quality financial institutions throughout the world and exposure is limited at any one institution. Although we typically do not obtain collateral or other security to secure these obligations, we regularly monitor the third party depository institutions that hold our cash and cash equivalents. We emphasize safety and liquidity of principal over yield on those funds. In addition, concentrations of credit risk arising from receivables from customers are limited due to the diversity of our customers. Our businesses perform credit evaluations of their customers’ financial conditions as appropriate and also obtain collateral or other security when appropriate.Commodity Price RiskFor a discussion of risks relating to commodity prices, refer to “Item 1A. Risk Factors.”3883012IMPO.B (PDF_D_SWOP).indd 4383012IMPO.B (PDF_D_SWOP).indd 433/7/22 8:31 PM3/7/22 8:31 PMLIQUIDITY AND CAPITAL RESOURCESWe assess our liquidity in terms of our ability to generate cash to fund our operating, investing, and financing activities. We generate substantial cash from operating activities and believe that our operating cash flow and other sources of liquidity, which consist of access to term loans, commercial paper, and our revolving credit facility, in addition to short-term liquidity benefits provided by cash repatriation will be sufficient to allow us to continue funding and investing in our existing businesses, consummate strategic acquisitions, make interest and principal payments on our outstanding indebtedness, fulfill our contractual obligations, and manage our capital structure on a short and long-term basis. On March 27, 2020, the U.S. federal government enacted the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), an emergency economic stimulus package in response to the COVID-19 outbreak which, among other things, contains numerous income tax provisions and short-term liquidity assistance measures. During 2020, we deferred remittance of approximately $35 million in payroll tax payments with half subsequently remitted in December of 2021 and the remainder to be remitted in December of 2022. While COVID-19 has created volatility and uncertainty in the financial markets, we have not realized a significant impact on our financial position, liquidity, or ability to meet our debt covenants as of the filing date of this Report; however, we continue to monitor the capital markets and general global economic conditions. The financial markets worldwide, including the United States, have been impacted by COVID-19 and this volatility and disruption during the first half of 2020 impacted broad access to the capital markets and pricing on new indebtedness. Our credit facilities, including our revolving credit facility, are predominately with institutions that we believe, to date, have been relatively unaffected by the disruption. Due to the volatility and disruption in the commercial paper markets during the first six months of 2020, we temporarily reduced our reliance on this source of funding, and consequently paid down and refinanced our outstanding commercial paper with the Term Loan that was initially due March 2021 and was retired in the Debt-for-Equity Exchange. In August 2021, we resumed borrowing under our Commercial Paper Program to fund acquisitions and for general corporate purposes.2021 Financing and Capital TransactionsOn January 19, 2021, we completed a noncash exchange (the “Debt-for-Equity Exchange”) of 33,507,410 shares of common stock of Vontier, representing all of the Retained Vontier Shares, for $1.1 billion in aggregate principal amount of indebtedness of the Company held by Goldman Sachs & Co., including (i) all $400 million in term loan outstanding under the $750 million delayed draw term loan facility (“Term Loan due March 2021”) and (ii) $683.2 million of the $1.0 billion in term loan outstanding under the $1.0 billion delayed draw term loan facility (“Term Loan due May 2021”). On January 21, 2021, we repaid the remaining $316.8 million outstanding of the Term Loan due May 2021 using the cash proceeds received from Vontier in the Separation. The fees associated with the prepayment were immaterial.On February 9, 2021, we repurchased $281 million of the 0.875% Convertible Senior Notes due 2022 (the “Convertible Notes”) using the remaining cash proceeds received from Vontier in the Separation and other cash on hand. In connection with the repurchase, we recorded a loss on extinguishment of $104.9 million in the first quarter of 2021.On July 1, 2021, all outstanding shares of our 5.0% Mandatory Convertible Preferred Stock (“MCPS”) converted at a rate of 14.0978 common shares per share of preferred stock into an aggregate of approximately 19.4 million shares (net of fractional shares) of the Company’s common stock, pursuant to the terms of the Certificate of Designation governing the Series A Preferred Stock. Fortive issued cash in lieu of fractional shares of common stock in the conversion. These payments were recorded as a reduction to additional paid-in capital. The final dividend of $12.50 per share, or $17.2 million in the aggregate, was paid on July 1, 2021. The impact of the MCPS calculated under the if-converted method was anti-dilutive for the periods in 2021 prior to conversion.In August 2021, we resumed borrowing under our Commercial Paper Program to fund, in part, acquisition activities.3983012IMPO.B (PDF_D_SWOP).indd 4483012IMPO.B (PDF_D_SWOP).indd 443/7/22 8:31 PM3/7/22 8:31 PMOn December 16, 2021, we entered into a term loan credit agreement, which provides for a 364-day delayed-draw term loan facility up to an aggregate principal amount of $1.0 billion. Borrowings under the Delayed-Draw Term Loan facility may be Base Rate Loans, Daily Floating London Interbank Offered Rate (“LIBOR”) Loans or Eurodollar Rate Loans and bear interest as follows: (1) Eurodollar Rate Loans bear interest at a variable rate equal to the London inter-bank offered rate plus a margin of between 60.0 and 80.0 basis points, depending on the Company’s long-term debt credit rating; (2) Daily Floating LIBOR Rate Loans, like Eurodollar Rate Loans, bear interest at a variable rate equal to the London inter-bank offered rate plus a margin of between 60.0 and 80.0 basis points, depending on the Company’s long-term debt credit rating; and (3) Base Rate Loans bear interest at a variable rate equal to the highest of (a) the Federal funds rate (as published by the Federal Reserve Bank of New York from time to time) plus 1/2 of 1%, (b) Bank of America’s prime rate as publicly announced from time to time and (c) the Eurodollar Rate (as defined in the Credit Agreement) plus 1%; provided that in no event will the Eurodollar Rate be less than 0.0%.We immediately drew down the full $1.0 billion available under the facility as a daily floating LIBOR rate loan (“Delayed-Draw Term Loan”) with repayment of the principal due December 15, 2022. The Delayed-Draw Term Loan bears interest at a variable rate equal to the daily LIBOR rate plus a spread of 60 basis points, based on Fortive’s current credit rating. Borrowings under the Delayed-Draw Term Loan facility are prepayable at the Company’s option in whole or in part without premium or penalty and amounts borrowed may not be reborrowed once repaid.Subsequent EventOn February 15, 2022, the maturity date of the Convertible Notes, Fortive repaid, in cash, $1.2 billion in outstanding principal and accrued interest thereon.2020 Financing and Capital TransactionsIn prior periods, we generally satisfied any short-term liquidity needs that are not met through operating cash flows and available cash through issuances of commercial paper under our U.S. dollar and Euro-denominated commercial paper programs (“Commercial Paper Programs”). Due to the volatility and disruption in the commercial paper markets during the first six months of 2020, we temporarily reduced our reliance on this source of funding, and consequently paid down and refinanced our outstanding commercial paper with the Term Loan Due March 2021. Credit support for the Commercial Paper Programs is provided by a five-year $2.0 billion senior unsecured revolving credit facility that expires on November 30, 2023 (the “Revolving Credit Facility”) which, to the extent not otherwise providing credit support for the commercial paper programs, can also be used for working capital and other general corporate purposes. As of December 31, 2021, no borrowings were outstanding under the Revolving Credit Facility.On April 24, 2020, we amended (the “Amendments”) the credit agreement for each of our (i) $500 million delayed draw term loan facility, which has been repaid as of December 31, 2020 (“2020 Term Loan”), (ii) Term Loan Due May 2021, with $1.0 billion in principal amount outstanding as of December 31, 2020, (iii) Term Loan due March 2021, with $400 million in principal amount outstanding as of December 31, 2020, and (iv) $2.0 billion Revolving Credit Facility, with no borrowings thereunder as of December 31, 2020 as follows:•For any four fiscal quarters ending in the periods noted below (each an “Adjusted Four Quarters”) that end prior to the maturity date of the applicable facility, the maximum permitted consolidated net leverage ratio of consolidated net funded indebtedness to consolidated EBITDA was increased from 3.50 to 1.00 to, (i) with respect to the four fiscal quarters ending June 26, 2020, September 25, 2020, December 31, 2020, or April 2, 2021, 4.75 to 1.00, (ii) with respect to the four fiscal quarters ending July 2, 2021, 4.5 to 1.0, (iii) with respect to the four fiscal quarters ending October 1, 2021, 4.25 to 1.0 and (iv) with respect to the four fiscal quarters ending December 31, 2021, 3.75 to 1.0; provided however, that for any four fiscal quarters that are not an Adjusted Four Quarters, the maximum permitted consolidated net leverage ratio remains at 3.5 to 1.0, as may be increased to 4.0 to 1.0 following a material acquisition (the “Unadjusted Maximum Ratio”).•The maturity date for the Term Loan Due May 2021 was extended from August 28, 2020 to May 30, 2021.•From April 24, 2020 to December 31, 2021, the minimum London inter-bank offered rate (“LIBOR”) for each of the facilities will increase from 0% to 0.25%, and the minimum base rate for each of the facilities will increase from 1.00% to 1.25%. In addition, with respect to the Revolving Credit Facility and for any Adjusted Four Quarters in which the consolidated net leverage ratio is greater than the Unadjusted Maximum Ratio, the applicable margin (as determined based on our long-term debt credit rating) for any LIBOR rate loans will increase from a range of 80.5 and 117.5 basis points to a range of 118.0 and 155.0 basis points and for any base rate loans from a range of 0.0 and 17.5 basis points to a range of 18.0 and 55.0 basis points. Furthermore, with respect to the Term Loan Due May 2021, the applicable margin (as determined based on our long-term debt credit rating) for any LIBOR rate loans will increase 4083012IMPO.B (PDF_D_SWOP).indd 4583012IMPO.B (PDF_D_SWOP).indd 453/7/22 8:31 PM3/7/22 8:31 PMfrom a range of 75.0 and 97.5 basis points to a range of 155.0 and 180.0 basis points and for any base rate loans from 0.0 to a range of 55.0 and 80.0 basis points.•From April 24, 2020 to December 31, 2021, the maximum principal amount of secured indebtedness, other than certain types of secured indebtedness expressly permitted under each credit agreement, is decreased from 15% of our consolidated net assets (when added together with indebtedness incurred or guaranteed by any of our subsidiaries) to 11.25% of our consolidated net assets (when added together with indebtedness incurred or guaranteed by any of our subsidiaries).In connection with the Amendments, we incurred approximately $6.5 million of fees. Our credit facility agreements require, among others, that we maintain certain financial covenants and we were in compliance with all of our financial covenants on December 31, 2021.During 2020, we completed the following financing and capital transactions:•On February 25, 2020, we extended the maturity of the Term Loan Due May 2021 to August 28, 2020. Additionally, on April 24, 2020 we further extended the maturity to May 30, 2021. We were in compliance with our covenants both before and after the extension. The Term Loan due May 2021 was not callable and remained prepayable at our option.•On February 26, 2020, we prepaid $250 million and on October 9, 2020, we repaid the remaining $250 million of the 2020 Term Loan. The fees associated with both prepayments were immaterial. •On March 23, 2020, we entered into a credit facility agreement that provided for the Term Loan due March 2021 in an aggregate principal amount of $425 million. On the same day, we drew down $375 million available under the Term Loan due March 2021. We subsequently increased the size of this facility by $325 million on April 3, 2020, and drew the additional $375 million in April 2020, resulting in an outstanding amount of $750 million. We paid approximately $2 million in debt issuance costs associated with the Term Loan Due March 2021. The borrowings from this credit facility were used for settlement of outstanding commercial paper. Term Loan due March 2021 bore interest at a variable rate equal to LIBOR plus a ratings-based margin currently at 155 basis points. As of December 31, 2020 borrowings under this facility bore an interest rate of 1.80% per annum. The Term Loan due March 2021 was due on March 19, 2021 and prepayable at our option. We are not permitted to re-borrow once the term loan is repaid. The terms and conditions, including covenants, applicable to the Term Loan due March 2021, are substantially similar to those applicable to our Revolving Credit Facility. •On October 9, 2020, we repaid $350 million of the outstanding $750 million of the Term Loan due March 2021. The fees associated with the prepayment were immaterial.•On October 15, 2020, we repaid the outstanding ¥13.8 billion balance of the Yen variable interest rate term loan due 2022 which approximated $131 million.•On November 13, 2020, we redeemed for cash all $750 million aggregate principal of our outstanding 2.35% Senior Notes due 2021 (the “Notes”) in accordance with the terms of the indenture governing the Notes. In connection with the transaction, we wrote-off the remaining unamortized deferred financing costs of $0.7 million and recorded a loss on extinguishment of $8 million.2019 Financing and Capital TransactionsDuring 2019, we completed the following financing and capital transactions:•On February 22, 2019, we issued $1.4 billion in aggregate principal amount of our Convertible Notes, including $187.5 million in aggregate principal amount resulting from an exercise in full of an over-allotment option. The Convertible Notes were sold in a private placement to certain initial purchasers for resale to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933. The Convertible Notes bear interest at a rate of 0.875% per year, payable semiannually in arrears on February 15 and August 15 of each year, beginning on August 15, 2019. The Convertible Notes mature on February 15, 2022, unless earlier repurchased or converted in accordance with their terms prior to such date. As a result of the Separation and in accordance with the anti-dilution provisions of the Convertible Notes, effective October 9, 2020, the Convertible Notes are convertible into shares of our common stock at an adjusted conversion rate of 10.9568 shares per $1,000 principal amount of Convertible Notes (which is equivalent to an initial conversion price of $91.27 per share), subject to future adjustment upon the occurrence of certain events. Upon conversion of the Convertible Notes, holders will receive cash, shares of our common stock, or a combination thereof, at Fortive’s election. Our current intention is to settle such conversions through cash up to the principal amount of the converted Convertible Notes and, if applicable, through shares of our common stock for conversion value, if any, in excess of the principal amount of the converted Convertible Notes. 4183012IMPO.B (PDF_D_SWOP).indd 4683012IMPO.B (PDF_D_SWOP).indd 463/7/22 8:31 PM3/7/22 8:31 PMOf the $1.4 billion in proceeds received from the issuance of the Convertible Notes, $1.3 billion was classified as debt and $102.2 million was classified as equity, using an assumed effective interest rate of 3.38%. Debt issuance costs of $24.3 million were proportionately allocated to debt and equity. The discount at issuance was $102.2 million and is being amortized over a three-year period. •On February 28, 2019, we prepaid the remaining $400.0 million outstanding principal and accrued interest under the Delayed-Draw Term Loan due 2019. The prepayment fees associated with this payment were immaterial.•On March 1, 2019, we entered into a credit facility agreement that provides for a 364-day delayed-draw term loan facility (“Term Loan due May 2021”) in an aggregate principal amount of $1.0 billion. On March 20, 2019, we drew down the full $1.0 billion available under the Term Loan due May 2021 in order to fund, in part, the ASP acquisition. The original maturity date of the Term Loan due May 2021 was February 28, 2020; however on February 25, 2020, we extended the maturity date to August 28, 2020. The Term Loan due May 2021 was prepayable at our option. We are not permitted to re-borrow once the term loan is repaid. The terms and conditions, including covenants, applicable to the Term Loan due May 2021 are substantially similar to those applicable to the Revolving Credit Facility.•On June 15, 2019 we repaid the remaining outstanding principal of $55.3 million of our 1.80% senior unsecured notes.•On October 25, 2019, we entered into a credit facility agreement that provides for a 364-day term loan facility (“2020 Term Loan”) in an aggregate principal amount of $300 million. On October 25, 2019, we drew down the full $300 million available under the 2020 Term Loan in order to fund, in part, the Censis acquisition. We subsequently increased the size of this facility by $200 million on November 8, 2019 and drew the additional amount on the same day resulting in an outstanding amount of $500 million. The 2020 Term Loan was due on October 23, 2020 and prepayable at our option. On February 26, 2020, we prepaid $250 million of the 2020 Term Loan and on October 9, 2020, we repaid the remaining $250 million of the 2020 Term Loan. The fees associated with both prepayments were immaterial. We are not permitted to re-borrow once the term loan is repaid. The terms and conditions, including covenants, applicable to the 2020 Term Loan are substantially similar to those applicable to the Revolving Credit Facility. Overview of Cash Flows and LiquidityFollowing is an overview of our cash flows and liquidity: Year Ended December 31,($ in millions)202120202019Total operating cash provided by continuing operations$ 992.9 $ 977.7 $ 702.0 Cash paid for acquisitions, net of cash received$ (2,570.1) $ (40.4) $ (3,939.8) Payments for additions to property, plant and equipment (50.0) (75.7) (74.5) Proceeds from sale of property 4.5 5.3 — All other investing activities — — — Total investing cash used in continuing operations$ (2,615.6) $ (110.8) $ (4,014.3) Net proceeds from (repayments of) commercial paper borrowings$ 364.9 $ (1,141.9) $ 494.8 Proceeds from borrowings (maturities greater than 90 days), net of $0.3 million and $8 million of issuance costs in 2021 and 2020, respectively 999.8 741.7 2,913.2 Repayment of borrowings (maturities greater than 90 days) (611.1) (1,730.8) (455.3) Payment of common stock cash dividend to shareholders (97.7) (94.4) (93.8) Payment of mandatory convertible preferred stock cash dividend to shareholders (34.5) (69.0) (69.0) Net cash consideration received from Vontier Separation — 1,598.0 — All other financing activities 30.6 20.7 23.2 Total financing cash (used in) provided by continuing operations $ 652.0 $ (675.7) $ 2,813.1 Operating ActivitiesOperating cash flows from continuing operations can fluctuate significantly from period-to-period as working capital needs and the timing of payments for income taxes, pension funding, and other items impact reported cash flows.4283012IMPO.B (PDF_D_SWOP).indd 4783012IMPO.B (PDF_D_SWOP).indd 473/7/22 8:31 PM3/7/22 8:31 PMOperating cash flows from continuing operations were approximately $993 million in 2021, an increase of $15 million, or approximately 2%, as compared to 2020. This year-over-year change in operating cash flows from continuing operations was primarily attributable to the following factors:•2021 operating cash flows were impacted by lower net earnings from continuing operations as compared to 2020, which were driven by a year-over-year increase in operating profits of $273 million, a decrease in interest expense of $45 million associated with the net repayment of debt, a gain on the Retained Vontier Shares of $57 million and a gain on litigation resolution of $30 million, which were partially offset by the loss on extinguishment of debt of $105 million. The gain on the Retained Vontier Shares and litigation dismissal, and substantially all of the loss on the extinguishment of debt, are noncash items that impact net earnings without a corresponding impact to operating cash flows. •The aggregate of accounts receivable, inventories, and trade accounts payable used $64 million of cash during 2021 compared to providing $93 million of cash during 2020. 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 generally represents the number of days that elapse from the day we pay for the purchase of raw materials and components to the collection of cash from our customers, and can be significantly impacted by the timing of collections and payments in a period. During 2021 we experienced an increase in inventory due, in part, to higher safety stock levels, which were increased to buffer the impact of supply chain and logistics challenges and to fulfill customer demand.•The aggregate of prepaid expenses and other assets and accrued expenses and other liabilities used $6 million of cash in 2021 as compared to providing $208 million in 2020 with year-over-year change largely driven by the funding of a $28 million deferred compensation liability, which was associated with the ServiceChannel acquisition and was paid into escrow upon closing of the transaction, as well as other routine changes in various compensation and benefit payments.Operating cash flows from continuing operations were approximately $978 million in 2020, an increase of $276 million, or approximately 39%, as compared to 2019. This year-over-year change in operating cash flows from continuing operations was primarily attributable to the following factors:•2020 operating cash flows were impacted by higher net earnings from continuing operations as compared to 2019, which were driven by a year-over-year increase in operating profits of $96 million and a year-over-year increase in interest expense of $6 million primarily associated with our financing activities. The year-over-year increase in operating profit was partially offset by an increase in depreciation and amortization expenses of $43 million largely attributable to our recently acquired businesses. Further, the year-over-year increase in net earnings for 2020 was impacted by the recognition of a $1.1 billion unrealized gain on the Retained Vontier Shares. Depreciation, amortization, and the unrealized gain are noncash expenses that impact earnings without a corresponding impact to operating cash flows.•The aggregate of accounts receivable, inventories, and trade accounts payable provided $93 million of operating cash flows during 2020 compared to using $59 million of cash during 2019. 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 provided $208 million of cash in 2020 as compared to providing $148 million in 2019. The year over year change was largely driven by the timing of tax payments and various employee benefit accruals.Investing ActivitiesInvesting cash flows from continuing operations consist primarily of cash paid for acquisitions and capital expenditures. Net cash used in investing activities from continuing operations was approximately $2.6 billion during 2021 compared to approximately $0.1 billion and $4.0 billion of net cash used in 2020 and 2019, respectively. The increase in investing cash flows was driven by the acquisitions of ServiceChannel and Provation, which totaled approximately $2.6 billion, partially offset by a year-over-year decrease in capital expenditures of $26 million. The reduction in capital expenditures was largely due to higher spending in the comparable period in 2020, which was related to the integration of the ASP business. For a discussion of our acquisitions refer to “—Overview.”Capital expenditures are made primarily for increasing capacity, replacing equipment, supporting product development initiatives, improving information technology systems, and purchasing equipment that is used in revenue arrangements with customers. Capital expenditures totaled $50 million in 2021, $76 million in 2020, and $75 million in 2019. We expect capital 4383012IMPO.B (PDF_D_SWOP).indd 4883012IMPO.B (PDF_D_SWOP).indd 483/7/22 8:31 PM3/7/22 8:31 PMspending to be between approximately $80 million and $100 million in 2022, though actual expenditures will ultimately depend on business conditions. Financing Activities and IndebtednessFinancing cash flows from continuing operations consist primarily of cash flows associated with the issuance of equity, the issuance and repayments of debt and commercial paper, payments of quarterly cash dividends to common and preferred shareholders, and cash consideration received from the Vontier Separation. Financing activities from continuing operations generated cash of $652 million in 2021 compared to using $676 million and generating $2.8 billion of cash in 2020 and 2019, respectively. In 2021, we repaid the remaining $317 million outstanding on the Delayed-Draw Term Loan Due 2020, repurchased $281 million of the 0.875% Convertible Senior Notes due 2022, and resumed borrowing under our Commercial Paper Programs, with proceeds being used for acquisitions and general corporate purposes. During the year ended December 31, 2021, we paid $132 million of cash dividends to common shareholders and holders of our MCPS.Refer to “—Liquidity and Capital Resources” section above for a description of our financing activities in 2021, 2020, and 2019.We generally expect to satisfy any short-term liquidity needs that are not met through operating cash flows and available cash primarily through term loans or issuances of commercial paper under the Commercial Paper Programs, with credit support provided by the Revolving Credit Facility.The carrying value of total debt outstanding as of December 31, 2021 was approximately $4.0 billion. We had $2.0 billion available under the Revolving Credit Facility as of December 31, 2021. Refer to Note 11 to the consolidated financial statements for information regarding our financing activities and indebtedness.The availability of the Revolving Credit Facility as a standby liquidity facility to repay maturing commercial paper is an important factor in maintaining the existing credit ratings of the Commercial Paper Programs when we have outstanding borrowings. As of December 31, 2021, we had $0.4 million borrowings outstanding under our Commercial Paper Program. We expect to limit any future borrowings under the Revolving Credit Facility to amounts that would leave sufficient credit available under the facility to allow us to borrow, if needed, to repay any outstanding commercial paper as it matures.In 2020, we repaid $1.1 billion related to the issuance of commercial paper under the Commercial Paper Program, received proceeds from borrowings of $742 million, repaid $1.7 billion of borrowings, and paid $163 million of cash dividends to shareholders. Subsequent EventOn February 17, 2022, the Company's Board of Directors approved a share repurchase program authorizing the Company to repurchase up to 20 million shares of the Company's outstanding common stock from time to time on the open market or in privately negotiated transactions. There is no expiration date for the repurchase program, and the timing and amount of repurchases under the program are determined by the Company's management based on market conditions and other factors. The repurchase program may be suspended or discontinued at any time by the Board of Directors.DividendsOn November 4, 2021, we declared a regular quarterly dividend of $0.07 per common share paid on December 30, 2021 to holders of record on November 26, 2021. Aggregate cash payments for both common and MCPS dividends paid to shareholders during the year ended December 31, 2021 were $132 million and were recorded as dividends to shareholders in the Consolidated Statement of Changes in Equity and the Consolidated Statement of Cash Flows.On January 25, 2022, we declared a regular quarterly cash dividend of $0.07 per share payable on March 25, 2022 to common stockholders of record on February 25, 2022. Cash and Cash RequirementsCashAs of December 31, 2021, we held approximately $819.3 million of cash and cash equivalents that were invested in highly liquid investment-grade instruments with a maturity of 90 days or less. The annual effective rate was immaterial. Approximately 18% of our cash at December 31, 2021 was held in the U.S. 4483012IMPO.B (PDF_D_SWOP).indd 4983012IMPO.B (PDF_D_SWOP).indd 493/7/22 8:31 PM3/7/22 8:31 PMWe have cash requirements to support working capital needs, capital expenditures and acquisitions, pay interest and service debt, pay taxes and any related interest or penalties, fund our pension plans as required, pay dividends to shareholders, and support other business needs or objectives. With respect to our cash requirements, we generally intend to use available cash and internally generated funds to meet these cash requirements, but in the event that additional liquidity is required, particularly in connection with acquisitions, we may also borrow under our commercial paper programs or credit facilities or enter into new credit facilities and either borrow directly thereunder or use such credit facilities to backstop additional borrowing capacity under our commercial paper programs. We also may from time to time access the capital markets, including to take advantage of favorable interest rate environments or other market conditions.We have made an assertion regarding the amount of current earnings that we do not intend to repatriate due to local working capital needs, local law restrictions, high foreign remittance costs, previous investments in physical assets and acquisitions, or future growth needs. For most of our foreign operations, we make an assertion regarding the amount of earnings in excess of intended repatriation that are expected to be held for indefinite reinvestment. The amount of foreign remittance taxes that may be applicable to such earnings is not readily determinable given local law restrictions that may apply to a portion of such earnings, unknown changes in foreign tax law that may occur during the applicable restriction periods caused by applicable local corporate law for cash repatriation, and the various tax planning alternatives we could employ if we repatriated these earnings.Cash RequirementsThe following table sets forth a summary of our short-term and long-term cash requirements as of December 31, 2021 under (1) long-term debt principal and interest obligations, (2) leases, (3) purchase obligations and (4) other long-term liabilities reflected on our balance sheet under GAAP. Certain of our acquisitions may involve the potential payment of contingent consideration. The table below does not reflect any such obligations, as the timing and amounts of any such payments are uncertain.($ in millions)TotalDue within one year of December 31, 2021Due later than one year from December 31, 2021Debt and leases:Long-term debt principal payments$ 3,971.5 $ 2,156.5 $ 1,815.0 Interest payments on long-term debt (a) 720.1 65.1 655.0 Operating lease obligations (b) 203.3 45.6 157.7 Other:Purchase obligations (c) 492.5 368.8 123.7 Other liabilities reflected on the balance sheet under GAAP (d)(e) 2,247.1 960.7 1,286.4 Total$ 7,634.5 $ 3,596.7 $ 4,037.8 (a) Interest payments on long-term debt are projected for future periods using the interest rates in effect as of December 31, 2021. Certain of these projected interest payments may differ in the future based on changes in market interest rates.(b) Includes future lease payments for operating leases having initial noncancelable lease terms in excess of one year. (c) Consist of agreements to purchase goods or services that are enforceable and legally binding on us and that specify all significant terms, including fixed or minimum quantities to be purchased, fixed, minimum or variable price provisions, and the approximate timing of the transaction.(d) Primarily consist of obligations under product service and warranty policies and allowances, performance and operating cost guarantees, estimated environmental remediation costs, self-insurance and litigation claims, post-retirement benefits, pension benefit obligations, net tax liabilities, and deferred compensation obligations. The timing of cash flows associated with these obligations is based upon management’s estimates over the terms of these arrangements and is largely based upon historical experience.(e) Includes non-contractual obligations of $218 million of noncurrent gross unrecognized tax benefits. However, the timing of these liabilities is uncertain, and therefore, they have been included in the “due later than one year from December 31, 2021” column. The amounts also includes our obligation under the TCJA for the transition tax on cumulative foreign earnings and profits, which we expect to pay over eight years. Refer to Note 14 to the consolidated financial statements for additional information on unrecognized tax benefits.In addition to the obligations noted above, we have issued guarantees, consisting primarily of outstanding standby letters of credit, bank guarantees, and performance and bid bonds, in connection with certain arrangements with vendors, customers, financing counterparties, and governmental entities to secure our obligations and/or performance requirements related to specific transactions. These guarantees are not recorded on our balance sheet and $37 million in commitments expire within one year of December 31, 2021 and $27 million later than one year from December 31, 2021.4583012IMPO.B (PDF_D_SWOP).indd 5083012IMPO.B (PDF_D_SWOP).indd 503/7/22 8:31 PM3/7/22 8:31 PMDuring 2021, we contributed $1 million and $10 million to our U.S. and non-U.S. defined benefit pension plans, respectively. During 2022, our cash contribution requirements for our U.S. and non-U.S. defined benefit pension plans are expected to be approximately $2 million and $12 million, respectively. The ultimate amounts we will contribute 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.As of December 31, 2021 we expect to have sufficient liquidity to satisfy our cash needs for the foreseeable future, including our cash needs in the United States.Legal ProceedingsPlease refer to Note 16 to the consolidated financial statements for information regarding legal proceedings and contingencies, and for a discussion of risks related to legal proceedings and contingencies, refer to “Item 1A. Risk Factors.”CRITICAL ACCOUNTING ESTIMATESManagement’s discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We base these estimates and judgments on historical experience, the current economic environment, and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ materially from these estimates and judgments.We believe the following accounting estimates are most critical to an understanding of our financial statements. Estimates are considered to be critical if they meet both of the following criteria: (1) the estimate requires assumptions about material matters that are uncertain at the time the estimate is made, and (2) material changes in the estimate are reasonably likely from period to period. For a detailed discussion on the application of these and other accounting estimates, refer to Note 2 to the consolidated financial statements.Accounts Receivable: We measure our allowance to reflect expected credit losses over the remaining contractual life of the asset in accordance with ASU No. 2016-13 Financial Instruments- Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. We pool assets with similar risk characteristics for this measurement based on attributes that may include asset type, duration, and/or credit risk rating. The future expected losses of each pool are estimated based on numerous quantitative and qualitative factors reflecting management’s estimate of collectability over the remaining contractual life of the pooled assets, including:•duration; •historical, current, and forecasted future loss experience by asset type; •historical, current, and forecasted delinquency and write-off trends; •historical, current, and forecasted economic conditions; and •historical, current, and forecasted credit risk.We regularly perform detailed reviews of our trade accounts and unbilled receivable portfolios to determine if changes in the aforementioned qualitative and quantitative factors have impacted the adequacy of the allowances.Volatility and uncertainty in overall global economic conditions and worldwide capital markets as a result of the COVID-19 pandemic may negatively impact our customers’ ability to pay and, as a result, may increase the difficulty in collecting trade accounts and unbilled receivables. We did not realize notable increases in loss rates and delinquencies during the year ended December 31, 2021, and given the nature of our portfolio of receivables, our historical experience during times of challenging economic conditions, and our forecasted future impact of COVID-19 on our customer’s ability to pay, we did not record material provisions for credit losses as a result of the COVID-19 pandemic during the year ended December 31, 2021. If the financial condition of our customers were to deteriorate beyond our current estimates, resulting in an impairment of their ability to make payments, we would be required to write-off additional receivable balances, which would adversely impact our net earnings and financial condition. In order to evaluate the sensitivity of the estimates used in the calculation of our allowance, we applied a hypothetical 10% decrease in anticipated collectability, noting that our allowance would increase by $4 million with a corresponding charge to SG&A.Expected credit losses of the assets originated during the year ended December 31, 2021, as well as changes to expected losses during the same periods, are recognized in earnings for the year ended December 31, 2021.4683012IMPO.B (PDF_D_SWOP).indd 5183012IMPO.B (PDF_D_SWOP).indd 513/7/22 8:31 PM3/7/22 8:31 PMInventories: We record inventory at the lower of cost or net realizable value, which is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. We estimate the net realizable value of our inventory based on assumptions of future demand and related pricing. Estimating the net realizable value of inventory is inherently uncertain because levels of demand, technological advances, and pricing competition in many of our markets can fluctuate significantly from period to period due to circumstances beyond our control. If actual market conditions are less favorable than those we projected, we could be required to reduce the value of our inventory, which would adversely impact our financial statements. In order to evaluate the sensitivity of the estimates used in the calculation of the net realizable value of our inventory, we applied a hypothetical 10% decrease to the anticipated realization, noting that our inventory would decrease by $7 million with a corresponding charge to Cost of goods sold. Refer to Note 5 to the consolidated financial statements for detailed information regarding our inventory balances as of December 31, 2021.Acquired Intangibles and Goodwill: Our business acquisitions typically result in the recognition of goodwill, in-process R&D, and other intangible assets, which affect the amount of future period amortization expense and possible impairment charges that we may incur. Refer to Notes 2, 3 and 7 to the consolidated financial statements for a description of our policies relating to goodwill, acquired intangibles, and acquisitions.In performing our goodwill impairment testing, we estimate the fair value of our reporting units primarily using a market based approach. We estimate fair value based on multiples of earnings before interest, taxes, depreciation, and amortization (“EBITDA”) determined by current trading market multiples of earnings for companies operating in businesses similar to each of our reporting units, in addition to recent market available sale transactions of comparable businesses. In evaluating the estimates derived by the market based approach, we make judgments about the relevance and reliability of the multiples by considering factors unique to our reporting units, including operating results, business plans, economic projections, anticipated future cash flows, and transactions and marketplace data as well as judgments about the comparability of the market proxies selected. In certain circumstances we also evaluate other factors including results of the estimated fair value utilizing a discounted cash flow analysis (i.e., an income approach), market positions of the businesses, comparability of market sales transactions, and financial and operating performance in order to validate the results of the market approach. The discounted cash flow model requires judgmental assumptions about projected revenue growth, future operating margins, discount rates, and terminal values. There are inherent uncertainties related to these assumptions and management’s judgment in applying them to the analysis of goodwill impairment.In 2021, we had five reporting units for goodwill impairment testing in continuing operations. Reporting units resulting from recent acquisitions generally present the highest risk of impairment. We believe the impairment risk associated with these reporting units generally decreases as we integrate these businesses and better position them for potential future earnings growth. As of the date of the 2021 annual impairment test, the carrying value of goodwill in each reporting unit ranged from $171.3 million to $3.3 billion. Our annual goodwill impairment analysis in 2021 indicated that, in all instances, the fair values of our reporting units exceeded their carrying values and consequently did not result in an impairment charge. The excess of the estimated fair value over carrying value (expressed as a percentage of carrying value for the respective reporting unit) for each of our reporting units as of the annual testing date ranged from approximately 115% to approximately 785%. In order to evaluate the sensitivity of the fair value calculations used in the goodwill impairment test, we applied a hypothetical 10% decrease to the fair values of each reporting unit and compared those hypothetical values to the reporting unit carrying values. Based on this hypothetical 10% decrease, the excess of the estimated fair value over carrying value (expressed as a percentage of carrying value for the respective reporting unit) for each of our reporting units ranged from approximately 90% to approximately 705%. We evaluated other factors relating to the fair value of the reporting units, including, as applicable, results of the estimated fair value using an income approach, market positions of the businesses, comparability of market sales transactions and financial and operating performance, and concluded no impairment charges were required. We review identified intangible assets for impairment whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable. Determining whether an impairment loss occurred requires a comparison of the carrying amount to the sum of undiscounted cash flows expected to be generated by the asset. We also test intangible assets with indefinite lives at least annually for impairment. These analyses require management to make judgments and estimates about future revenues, expenses, market conditions, and discount rates related to these assets.If actual results are not consistent with management’s estimates and assumptions, goodwill and other intangible assets may be overstated and a charge would need to be taken against net earnings which would adversely affect our financial statements.Contingent Liabilities: As discussed in Note 16 to the consolidated financial statements, we are, from time to time, subject to a variety of litigation and similar contingent liabilities incidental to our business (or the business operations of previously owned entities). We recognize a liability for any contingency that is known or probable of occurrence and reasonably estimable. These assessments require judgments concerning matters such as litigation developments and outcomes, the anticipated outcome of 4783012IMPO.B (PDF_D_SWOP).indd 5283012IMPO.B (PDF_D_SWOP).indd 523/7/22 8:31 PM3/7/22 8:31 PMnegotiations, the number of future claims, and the cost of both pending and future claims. In addition, because most contingencies are resolved over long periods of time, liabilities may change in the future due to various factors, including those discussed in Note 16 to the consolidated financial statements. If the reserves we established with respect to these contingent liabilities are inadequate, we would be required to incur an expense equal to the amount of the loss incurred in excess of the reserves, which would adversely affect our financial statements.Revenue Recognition: We derive revenue from the sale of products and services. Revenue is recognized when control over the promised products or services is transferred to the customer in an amount that reflects the consideration that we expect to receive in exchange for those goods or services. In determining if control has transferred, we consider whether certain indicators of the transfer of control are present, such as the transfer of title, present right to payment, significant risks and rewards of ownership, and customer acceptance when acceptance is not a formality. To determine the consideration that the customer owes us, we make judgments regarding the amount of customer allowances and rebates, consisting primarily of volume discounts and other short-term incentive programs. Refer to Note 2 to the consolidated financial statements for a description of our revenue recognition policies. If our judgments regarding revenue recognition prove incorrect, our reported revenues in particular periods may be adversely affected. Historically, our estimates of revenue have been materially correct.Stock-Based Compensation: For a description of our stock-based compensation accounting practices, refer to Note 17 to the consolidated financial statements. Determining the appropriate fair value model and calculating the fair value of certain stock-based payment awards require subjective assumptions, including the expected life of the awards, stock price volatility, and expected forfeiture rate. Given our limited trading history following the separation from Danaher, stock price volatility used to calculate the fair value of stock options in the post-separation period was estimated based on an average historical stock price volatility of a group of peer companies. Expected volatility is based on a weighted average blend of our historical stock price volatility from July 2, 2016 (the date of the Danaher separation) through the stock option grant date and the average historical stock price volatility of a group of peer companies for the expected term of the options. The assumptions used in calculating the fair value of stock-based payment awards represent our best estimates, but these estimates involve inherent uncertainties and the application of judgment. If actual results are not consistent with our assumptions and estimates, our equity-based compensation expense could be materially different in the future. Pension and Other Post Employment Benefits: For a description of our pension accounting practices, refer to Note 12 to the consolidated financial statements. Certain of our U.S. and non-U.S. employees participate in noncontributory defined benefit pension plans. Calculations of the amount of pension costs and obligations depend on the assumptions used in the actuarial valuations, including assumptions regarding discount rates, expected return on plan assets, rates of salary increases, health care cost trend rates, mortality rates, and other factors. If the assumptions used in calculating pension and other post-retirement benefits costs and obligations are incorrect or if the factors underlying the assumptions change (as a result of differences in actual experience, changes in key economic indicators, or other factors), our financial statements could be materially affected. A 50 basis point reduction in the discount rates used for the plans during 2021 would have increased the net obligation by $30 million from the amounts recorded in the financial statements as of December 31, 2021.Our plan assets consist of various insurance contracts, equity and debt securities as determined by the administrator of each plan. The estimated long-term rate of return for the plans was determined on a plan by plan basis based on the nature of the plan assets and ranged from 1.25% to 4.32%. If the expected long-term rate of return on plan assets during 2021 was reduced by 50 basis points, pension expense in 2021 would have increased by $1 million ($1 million on an after-tax basis).Income Taxes: For a description of our income tax accounting policies, refer to Note 2 and Note 14 to the consolidated financial statements. In accordance with GAAP, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted rates expected to be in effect during the year in which the differences reverse. Deferred tax assets generally represent items that can be used as a tax deduction or credit in our tax return in future years for which the tax benefit has already been reflected in our Consolidated Statements of Earnings. Deferred tax liabilities generally represent items that have already been taken as a deduction on our tax return but have not yet been recognized as an expense in our Consolidated Statements of Earnings. The effect on deferred tax assets and liabilities due to a change in tax rates is recognized in income tax expense in the period that includes the enactment date. Our deferred tax assets are reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not (a likelihood of more than 50 percent) that some portion or all of the deferred tax assets will not be realized. We evaluate the realizability of deferred income tax assets for each of the jurisdictions in which we operate. If we experience cumulative pretax income in a particular jurisdiction in the three-year period including the current and prior two years, we normally conclude that the deferred income tax assets will more likely than not be realizable and no valuation allowance is recognized, 4883012IMPO.B (PDF_D_SWOP).indd 5383012IMPO.B (PDF_D_SWOP).indd 533/7/22 8:31 PM3/7/22 8:31 PMunless known or planned operating developments would lead management to conclude otherwise. However, if we experience cumulative pretax losses in a particular jurisdiction in the three-year period including the current and prior two years, we then consider a series of factors in the determination of whether the deferred income tax assets can be realized. These factors include historical operating results, known or planned operating developments, the period of time over which certain temporary differences will reverse, consideration of the utilization of certain deferred income tax liabilities, tax law carryback capability in the particular country, and prudent and feasible tax planning strategies. After evaluation of these factors, if the deferred income tax assets are expected to be realized within the tax carryforward period allowed for that specific country, we would conclude that no valuation allowance would be required. To the extent that the deferred income tax assets exceed the amount that is expected to be realized within the tax carryforward period for a particular jurisdiction, we establish a valuation allowance.We recognize tax benefits from uncertain tax positions only if, in our assessment, it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. Judgment is required in evaluating tax positions and determining income tax provisions. We re-evaluate the technical merits of our tax positions and may recognize an uncertain tax benefit in certain circumstances, including when: (i) a tax audit is completed; (ii) applicable tax laws change, including a tax case ruling or legislative guidance; or (iii) the applicable statute of limitations expires. We recognize potential accrued interest and penalties with unrecognized tax positions in income tax expense.In addition, we are routinely examined by various domestic and international taxing authorities. The amount of income taxes we pay is subject to audit by federal, state, and foreign tax authorities, which may result in proposed assessments (see “-Results of Operations - Income Taxes” and Note 14 to the consolidated financial statements). We review our global tax positions on a quarterly basis. Based on these reviews, the results of discussions and resolutions of matters with certain tax authorities, tax rulings, and court decisions and the expiration of statutes of limitations reserves for contingent tax liabilities are accrued or adjusted as necessary.An increase in our 2021 effective tax rate of 1.0% would have resulted in an additional income tax provision for the fiscal year ended December 31, 2021 of $7 million.NEW ACCOUNTING STANDARDSFor a discussion of new accounting standards relevant to our businesses, refer to Note 2 to the consolidated financial statements.ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The information required by this item is included under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”4983012IMPO.B (PDF_D_SWOP).indd 5483012IMPO.B (PDF_D_SWOP).indd 543/7/22 8:31 PM3/7/22 8:31 PMITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAReport of Management on Fortive Corporation’s Internal Control Over Financial ReportingThe management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Securities Exchange Act of 1934. The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2021. In making this assessment, the Company’s management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in “Internal Control-Integrated Framework” (2013 framework). Based on this assessment, management concluded that, as of December 31, 2021, the Company’s internal control over financial reporting is effective.The Company completed the acquisitions of the ServiceChannel business on August 24, 2021 and Provation on December 27, 2021, collectively the “Acquired Businesses.” The Company has not yet fully incorporated the internal controls and procedures of the Acquired Businesses into the Company’s internal control over financial reporting, and as such, management excluded the Acquired Businesses from its assessment. The Company has included goodwill and other intangible assets of the Acquired Businesses in this assessment. The assets and revenues of the Acquired Businesses excluded from management’s assessment of internal controls constituted 1% of the Company’s total assets as of December 31, 2021 and 1% of the Company’s total revenues for the year ended December 31, 2021, respectively. The Company’s independent registered public accounting firm has issued an audit report on the effectiveness of the Company’s internal control over financial reporting. This report dated February 28, 2022 appears on page 51 of this Form 10-K.5083012IMPO.B (PDF_D_SWOP).indd 5583012IMPO.B (PDF_D_SWOP).indd 553/7/22 8:31 PM3/7/22 8:31 PMReport of Independent Registered Public Accounting FirmTo the Shareholders and the Board of Directors of Fortive CorporationOpinion on Internal Control Over Financial Reporting We have audited Fortive Corporation and subsidiaries’ internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), (the COSO criteria). In our opinion, Fortive Corporation and subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on the COSO criteria.As indicated in the accompanying Report of Management on Fortive Corporation’s Internal Control Over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of ServiceChannel and Provation, collectively the “Acquired Businesses”, which are included in the 2021 consolidated financial statements of the Company. Collectively, the Acquired Businesses constituted 1% of the Company’s total assets as of December 31, 2021 and 1% of the Company’s total revenues for the year then ended. Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of the Acquired Businesses.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of Fortive Corporation and subsidiaries as of December 31, 2021 and 2020, the related consolidated statements of earnings, comprehensive income, changes in equity and cash flows for each of the three years in the period ended December 31, 2021, and the related notes and financial statement schedule listed in the Index at Item 15(a)(2) and our report dated February 28, 2022 expressed an unqualified opinion thereon. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Report of Management on Fortive Corporation’s Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate./s/ Ernst & Young LLPSeattle, WashingtonFebruary 28, 2022 5183012IMPO.B (PDF_D_SWOP).indd 5683012IMPO.B (PDF_D_SWOP).indd 563/7/22 8:31 PM3/7/22 8:31 PMReport of Independent Registered Public Accounting FirmTo the Shareholders and the Board of Directors of Fortive CorporationOpinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of Fortive Corporation and subsidiaries (the Company) as of December 31, 2021 and 2020, the related consolidated statements of earnings, comprehensive income, changes in equity and cash flows for each of the three years in the period ended December 31, 2021, and the related notes and financial statement schedule listed in the Index at Item 15(a)(2) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 28, 2022 expressed an unqualified opinion thereon.Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.Critical Audit MattersThe critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.Description of the MatterValuation of GoodwillThe Company’s evaluation of goodwill for impairment involves the comparison of the fair value of each reporting unit to its carrying value. To estimate the fair value, management uses a market approach based on multiples of earnings before interest, taxes, depreciation and amortization (EBITDA). In certain circumstances, management computes the estimated fair value through a discounted cash flow analysis to validate the results of the market approach. The goodwill evaluation is performed on an annual basis, or more frequently if a triggering event is identified. As described in Note 7, the Company’s goodwill balance is $9.2 billion as of December 31, 2021. Auditing the Company’s annual goodwill impairment assessment is complex and highly judgmental due to the significant estimation required in determining the fair value of the reporting units. In particular, the estimated fair value is sensitive to the significant assumptions related to the selection of market multiples and projected financial information. A high degree of audit judgment and an increased extent of effort including the need to involve our fair value specialists was required. 5283012IMPO.B (PDF_D_SWOP).indd 5783012IMPO.B (PDF_D_SWOP).indd 573/7/22 8:31 PM3/7/22 8:31 PMHow We Addressed the Matter in Our AuditWe tested controls over management’s goodwill impairment assessment. This included controls related to management’s forecasting and selection of market multiples.To test the annual evaluation of goodwill, among other procedures, we evaluated the reasonableness of management’s forecasts, tested the completeness and accuracy of the underlying data used to develop the forecast and tested the carrying value of the reporting units. Our fair value specialists assisted us with our testing of management’s selected EBITDA multiples for the annual goodwill evaluation. We also evaluated the Company’s disclosures included in Note 7 to the consolidated financial statements in relation to these matters.Description of the MatterValuation of acquired intangible assetsAs described in Note 3 to the consolidated financial statements, the Company completed two acquisitions during 2021 for a total consideration of $2.6 billion. Auditing the accounting for the acquisitions was complex and highly judgmental due to the significant estimation required in determining the fair value of customer relationships, technology, database and trade names acquired (collectively, “intangible assets”), which totaled $792 million in aggregate. In particular, the estimated fair values were sensitive to significant assumptions such as the projected financial information, royalty rates and discount rates used in the valuation models, which are affected by expectations about future market and economic conditions. How We Addressed the Matter in Our AuditWe tested controls over the measurement of the acquired intangible assets, including management’s review of the significant assumptions mentioned above and the completeness and accuracy of the data used in the measurements. To test the estimated fair value of the intangible assets, we read the related purchase agreements, evaluated, among other things, whether (1) the valuation methodologies used were appropriate, (2) the significant assumptions, including discount rates, royalty rates, revenue growth rates, and projected free cash flow, used in valuing these intangibles were reasonable, and (3) the underlying data used by the Company in its analyses was appropriate. Specifically, when evaluating the assumptions related to the projected free cash flow, we compared the assumptions to the past performance of the acquired entities, the Company's history related to similar acquisitions, and the Company’s future plans for the acquired entities. We involved our fair value specialists to assist in our completion of our audit procedures. We also evaluated the Company’s disclosures included in Note 3 to the consolidated financial statements in relation to these matters./s/ Ernst & Young LLPWe have served as the Company’s auditor since 2015.Seattle, WashingtonFebruary 28, 2022 5383012IMPO.B (PDF_D_SWOP).indd 5883012IMPO.B (PDF_D_SWOP).indd 583/7/22 8:31 PM3/7/22 8:31 PMFORTIVE CORPORATION AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS($ and shares in millions, except per share amounts) As of December 31 20212020ASSETSCurrent assets:Cash and equivalents$ 819.3 $ 1,824.8 Accounts receivable less allowance for doubtful accounts of $39.7 million and $42.5 million, respectively 930.2 810.3 Inventories 512.7 455.5 Prepaid expenses and other current assets 252.7 206.7 Investment in Vontier Corporation — 1,119.2 Current assets, discontinued operations — 30.4 Total current assets 2,514.9 4,446.9 Property, plant and equipment, net 395.5 422.0 Operating lease right-of-use assets 175.6 188.7 Other assets 337.3 344.1 Goodwill 9,152.0 7,359.2 Other intangible assets, net 3,890.2 3,290.6 Total assets$ 16,465.5 $ 16,051.5 LIABILITIES AND EQUITYCurrent liabilities:Current portion of long-term debt$ 2,151.7 $ 1,399.8 Trade accounts payable 557.9 480.8 Current operating lease liabilities 44.6 47.0 Accrued expenses and other current liabilities 960.7 899.9 Current liabilities, discontinued operations — 33.3 Total current liabilities 3,714.9 2,860.8 Operating lease liabilities 139.9 154.3 Other long-term liabilities 1,286.4 1,233.4 Long-term debt 1,807.3 2,830.3 Commitments and ContingenciesEquity:Preferred stock: $0.01 par value, 15.0 million shares authorized; 5.0% Mandatory convertible preferred stock, series A, zero shares and 1.4 million shares designated, issued and outstanding at December 31, 2021 and December 31, 2020, respectively. — — Common stock: $0.01 par value, 2.0 billion shares authorized; 360.4 million and 339.0 million issued; 359.1 million and 337.9 million outstanding at December 31, 2021 and December 31, 2020, respectively 3.6 3.4 Additional paid-in capital 3,670.0 3,554.5 Retained earnings 6,023.6 5,547.4 Accumulated other comprehensive loss (185.0) (141.1) Total Fortive stockholders’ equity 9,512.2 8,964.2 Noncontrolling interests 4.8 8.5 Total stockholders’ equity 9,517.0 8,972.7 Total liabilities and equity$ 16,465.5 $ 16,051.5 See the accompanying Notes to the Consolidated Financial Statements.5483012IMPO.B (PDF_D_SWOP).indd 5983012IMPO.B (PDF_D_SWOP).indd 593/7/22 8:31 PM3/7/22 8:31 PMFORTIVE CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF EARNINGS($ and shares in millions, except per share amounts) Year Ended December 31 202120202019Sales of products$ 4,496.1 $ 3,956.7 $ 3,922.5 Sales of services 758.6 677.7 641.4 Total sales 5,254.7 4,634.4 4,563.9 Cost of product sales (1,833.4) (1,643.4) (1,733.3) Cost of service sales (414.2) (382.5) (347.4) Total cost of sales (2,247.6) (2,025.9) (2,080.7) Gross profit 3,007.1 2,608.5 2,483.2 Operating costs:Selling, general, and administrative expenses (1,839.5) (1,748.4) (1,719.0) Research and development expenses (354.8) (320.7) (320.3) Operating profit 812.8 539.4 443.9 Non-operating income (expense), net:Interest expense, net (103.2) (148.5) (142.6) Gain from combination of business — — 40.8 Loss on extinguishment of debt (104.9) — — Gain on litigation resolution 29.9 — — Gain on investment in Vontier Corporation 57.0 1,119.2 — Other non-operating expenses, net (14.1) (2.4) (5.4) Earnings from continuing operations before income taxes 677.5 1,507.7 336.7 Income taxes (63.3) (55.5) (68.6) Net earnings from continuing operations 614.2 1,452.2 268.1 Earnings from discontinued operations, net of income taxes (5.8) 161.1 470.8 Net earnings 608.4 1,613.3 738.9 Mandatory convertible preferred dividends (34.5) (69.0) (69.0) Net earnings attributable to common stockholders$ 573.9 $ 1,544.3 $ 669.9 Net earnings per common share from continuing operations:Basic$ 1.66 $ 4.10 $ 0.59 Diluted$ 1.65 $ 4.05 $ 0.59 Net earnings per common share from discontinued operations:Basic$ (0.02) $ 0.48 $ 1.40 Diluted$ (0.02) $ 0.45 $ 1.38 Net earnings per common share:Basic$ 1.64 $ 4.58 $ 1.99 Diluted$ 1.63 $ 4.49 $ 1.97 Average common stock and common equivalent shares outstanding:Basic 349.0 337.4 335.8 Diluted 352.3 359.0 340.0 The sum of net earnings per common share amount may not add due to rounding.See the accompanying Notes to the Consolidated Financial Statements.5583012IMPO.B (PDF_D_SWOP).indd 6083012IMPO.B (PDF_D_SWOP).indd 603/7/22 8:31 PM3/7/22 8:31 PMFORTIVE CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME($ in millions) Year Ended December 31202120202019Net earnings $ 608.4 $ 1,613.3 $ 738.9 Other comprehensive income (loss), net of income taxes:Foreign currency translation adjustments (68.7) 63.5 50.5 Pension adjustments 24.8 (12.7) (20.2) Total other comprehensive income (loss), net of income taxes (43.9) 50.8 30.3 Comprehensive income$ 564.5 $ 1,664.1 $ 769.2 See the accompanying Notes to the Consolidated Financial Statements.5683012IMPO.B (PDF_D_SWOP).indd 6183012IMPO.B (PDF_D_SWOP).indd 613/7/22 8:31 PM3/7/22 8:31 PMFORTIVE CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CHANGES IN EQUITY($ and shares in millions) SharesAmountSharesAmountBalance, January 1, 2019 334.5 $ 3.4 1.4 $ — $ 3,126.0 $ 3,552.7 $ (86.6) $ 17.4 Net earnings for the period — — — — — 738.9 — — Dividends to common shareholders — — — — — (93.8) — — Mandatory convertible preferred dividends — — — — — (69.0) — — Other comprehensive income — — — — — — 30.3 — Common stock-based award activity 1.5 — — — 88.8 — — — Issuance of 0.875% senior convertible notes due 2022 — — — — 100.4 — — — Changes in noncontrolling interests — — — — — — — (4.2) Net transfers to Former Parent — — — — (4.1) — — Balance, December 31, 2019 336.0 3.4 1.4 — 3,311.1 4,128.8 (56.3) 13.2 Adoption of accounting standards (31.3) Balance, January 1, 2020 336.0 3.4 1.4 — 3,311.1 4,097.5 (56.3) 13.2 Net earnings for the period — — — — — 1,613.3 — — Dividends to common shareholders — — — — — (94.4) — — Mandatory convertible preferred dividends — — — — — (69.0) — — Other comprehensive loss — — — — — — 50.8 — Common stock-based award activity 3.0 — — — 112.9 — — — Vontier Separation and other — — — 130.5 — (135.6) — Change in noncontrolling interests — — — — — — — (4.7) Balance, December 31, 2020 339.0 3.4 1.4 — 3,554.5 5,547.4 (141.1) 8.5 Net earnings for the period — — — — — 608.4 — — Dividends to common shareholders — — — — — (97.7) — — Mandatory convertible preferred stock cumulative dividends — — — — — (34.5) — — Conversion of Mandatory convertible preferred stock to common stock 19.4 0.2 (1.4) — — — — — Other comprehensive income — — — — — — (43.9) — Common stock-based award activity 0.7 — — — 117.7 — — — Early extinguishment of 0.875% senior convertible notes due 2022 — — — — (11.6) — — — Vontier Separation and other — — — — 8.6 Change in noncontrolling interests — — — — 0.8 — — (3.7) Balance, December 31, 2021 359.1 $ 3.6 — $ — $ 3,670.0 $ 6,023.6 $ (185.0) $ 4.8 Common StockPreferred StockAdditional Paid-In CapitalRetained EarningsAccumulatedOtherComprehensiveLossNoncontrollingInterestsSee the accompanying Notes to the Consolidated Financial Statements.5783012IMPO.B (PDF_D_SWOP).indd 6283012IMPO.B (PDF_D_SWOP).indd 623/7/22 8:31 PM3/7/22 8:31 PMFORTIVE CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS($ in millions) Year Ended December 31 202120202019Cash flows from operating activities:Net earnings from continuing operations$ 614.2 $ 1,452.2 $ 268.1 Noncash items:Amortization 320.8 309.9 261.0 Depreciation 74.7 74.1 80.5 Stock-based compensation expense 77.4 62.6 52.5 Loss on extinguishment of debt 104.2 — — Unrealized gain on investment in Vontier Corporation — (1,119.2) — Gain from combination of business — — (40.8) Gain on sale of property — (5.3) — Gain on investment in Vontier Corporation (57.0) — — Gain on litigation resolution (29.9) — — Change in deferred income taxes (41.0) (97.6) (8.5) Change in accounts receivable, net (84.1) 82.4 (204.9) Change in inventories (53.6) (7.3) 93.5 Change in trade accounts payable 73.4 18.1 52.4 Change in prepaid expenses and other assets (34.5) 147.9 (71.3) Change in accrued expenses and other liabilities 28.3 59.9 219.5 Total operating cash provided by continuing operations 992.9 977.7 702.0 Total operating cash (used in) provided by discontinued operations (31.8) 459.0 569.4 Net cash provided by operating activities 961.1 1,436.7 1,271.4 Cash flows from investing activities:Cash paid for acquisitions, net of cash received (2,570.1) (40.4) (3,939.8) Payments for additions to property, plant and equipment (50.0) (75.7) (74.5) Proceeds from sale of property 4.5 5.3 — Total investing cash used in continuing operations (2,615.6) (110.8) (4,014.3) Total investing cash used in discontinued operations — (37.6) (40.3) Net cash used in investing activities (2,615.6) (148.4) (4,054.6) Cash flows from financing activities:Net proceeds from (repayments of) commercial paper borrowings 364.9 (1,141.9) 494.8 Proceeds from borrowings (maturities greater than 90 days), net of $0.3 million and $8 million of issuance costs in 2021 and 2020, respectively 999.8 741.7 2,913.2 Repayment of borrowings (maturities greater than 90 days) (611.1) (1,730.8) (455.3) Payment of common stock cash dividend to shareholders (97.7) (94.4) (93.8) Payment of mandatory convertible preferred stock cash dividend to shareholders (34.5) (69.0) (69.0) Net cash consideration received from Vontier Separation — 1,598.0 — All other financing activities 30.6 20.7 23.2 Total financing cash (used in) provided by continuing operations 652.0 (675.7) 2,813.1 Total financing cash used in discontinued operations — (20.4) (10.2) Net cash (used in) provided by financing activities 652.0 (696.1) 2,802.9 Effect of exchange rate changes on cash and equivalents (3.0) 27.4 7.1 Net change in cash and equivalents (1,005.5) 619.6 26.8 Beginning balance of cash and equivalents$ 1,824.8 $ 1,205.2 $ 1,178.4 Ending balance of cash and equivalents$ 819.3 $ 1,824.8 $ 1,205.2 Supplemental disclosure:Transfer of noncash net liabilities to Vontier Corporation$ — $ 147.4 $ — See the accompanying Notes to the Consolidated Financial Statements.5883012IMPO.B (PDF_D_SWOP).indd 6383012IMPO.B (PDF_D_SWOP).indd 633/7/22 8:31 PM3/7/22 8:31 PM83012IMPO.B (PDF_D_SWOP).indd 6483012IMPO.B (PDF_D_SWOP).indd 643/7/22 8:31 PM3/7/22 8:31 PMNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTE 1. BUSINESS OVERVIEW AND BASIS FOR PRESENTATION Fortive Corporation (“Fortive,” “the Company,” “we,” “our,” “us”) is a provider of essential technologies for connected workflow solutions across a range of attractive end-markets. Our strategic segments - Intelligent Operating Solutions, Precision Technologies, and Advanced Healthcare Solutions - include well-known brands with leading positions in their markets. Our businesses design, develop, manufacture, and service professional and engineered products, software, and services, building upon leading brand names, innovative technologies, and significant market positions. We are headquartered in Everett, Washington and employ a team of more than 18,000 research and development, manufacturing, sales, distribution, service, and administrative employees in more than 50 countries around the world.Basis of PresentationThe accompanying consolidated financial statements present our historical financial position, results of operations, changes in equity and cash flows in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Certain reclassifications have been made to prior year financial information to conform to the current period presentation. Unless otherwise indicated, all amounts in the notes to the consolidated financial statements refer to continuing operations.The financial statements include our accounts and the accounts of our subsidiaries. All intercompany balances and transactions have been eliminated upon consolidation. The consolidated financial statements also reflect the impact of noncontrolling interests. Noncontrolling interests do not have a significant impact on our consolidated results of operations; therefore, net earnings and net earnings per share attributable to noncontrolling interests are not presented separately in our Consolidated Statements of Earnings. Net earnings attributable to noncontrolling interests have been reflected in Selling, general, and administrative expenses and were insignificant in all periods presented.Vontier Separation and Discontinued OperationsOn October 9, 2020, we completed the separation of Vontier Corporation (“Vontier”), the entity we created to hold our former Industrial Technologies segment (the “Separation”). The accounting requirements for reporting the Vontier business as a discontinued operation were met when the Separation was completed. Accordingly, the consolidated financial statements reflect the results of the Vontier business as a discontinued operation for all periods presented.On January 19, 2021, we completed an exchange (the “Debt-for-Equity Exchange”) of 33.5 million shares of common stock of Vontier, representing all of the Retained Vontier Shares, for $1.1 billion in aggregate principal amount of indebtedness of the Company held by Goldman Sachs & Co., including (i) all $400 million of the term loan outstanding under the 364-Day Term Loan Credit Agreement, dated as of March 23, 2020 (“Term Loan due March 2021”) and (ii) $683.2 million of the $1.0 billion of term loan outstanding under the Term Loan Credit Agreement, dated as of March 1, 2019 (the “Term Loan Due May 2021”).On October 1, 2018, we completed the split-off of businesses in our automation and specialty platform (the “A&S Business”). Accordingly, the A&S Business has been reported as discontinued operations in our consolidated financial statements for all periods presented.Segment PresentationWe operate and report our results in three segments, Intelligent Operating Solutions, Precision Technologies, and Advanced Healthcare Solutions, each of which is further described below. Our Intelligent Operating Solutions segment provides leading workflow solutions to accelerate industrial and facility reliability and performance, as well as compliance and safety across a range of vertical end markets, including manufacturing, process industries, healthcare, utilities and power, communications and electronics, among others. The businesses in our Intelligent Operating Solutions segment provide differentiated instrumentation and sensors, software and services to address our customers’ toughest workflow challenges. Our Precision Technologies segment supplies instrumentation and sensing technologies to a broad set of vertical end markets, enabling our customers to accelerate the development, manufacture and launch of innovative products and solutions. We provide our customers with electrical test and measurement instruments and services, energetic material devices, and a broad portfolio of sensor and control system solutions.Our Advanced Healthcare Solutions segment supplies critical workflow solutions to hospitals and other healthcare customers, enabling safer, more efficient, and higher quality healthcare. Through the Advanced Healthcare Solutions segment, we provide hardware, consumables, software and services that optimize our customers’ most critical workflows, including instrument 5983012IMPO.B (PDF_D_SWOP).indd 6583012IMPO.B (PDF_D_SWOP).indd 653/7/22 8:31 PM3/7/22 8:31 PMsterilization and device reprocessing, instrument tracking, cell therapy equipment design and manufacturing, biomedical test tools, radiation safety monitoring, end-to-end clinical productivity solutions and asset management. NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Use of Estimates—The preparation of financial statements in conformity with GAAP requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We base these estimates on historical experience, the current economic environment, and on various other assumptions that are believed to be reasonable under the circumstances. However, uncertainties associated with these estimates exist and actual results may differ from these estimates.Cash and Equivalents—We consider all highly liquid investments with a maturity of three months or less at the date of purchase to be cash equivalents.Accounts Receivable and Allowances for Doubtful Accounts— In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which amended the impairment model by requiring entities to use a forward-looking approach, based on expected losses, to estimate credit losses on certain types of financial instruments, including financing, trade accounts, and unbilled receivables. On January 1, 2020, we adopted ASU 2016-13 and recognized in our Consolidated Balance Sheet as of January 1, 2020 an increase in the allowance for trade accounts, unbilled, and financing receivables of $40.0 million, of which $11.5 million related to our continuing operations and was related primarily to trade accounts and unbilled receivables, with a corresponding net of tax adjustment to beginning retained earnings of $31.3 million.After the adoption of ASU 2016-13 on January 1, 2020, we measure our allowance to reflect expected credit losses over the remaining contractual life of the asset. We pool assets with similar risk characteristics for this measurement based on attributes that may include asset type, duration, and/or credit risk rating. The future expected losses of each pool are estimated based on numerous quantitative and qualitative factors reflecting management’s estimate of collectability over the remaining contractual life of the pooled assets, including:•duration; •historical, current, and forecasted future loss experience by asset type; •historical, current, and forecasted delinquency and write-off trends; •historical, current, and forecasted economic conditions; and •historical, current, and forecasted credit risk. Expected credit losses of the assets originated during the year ended December 31, 2021, as well as changes to expected losses during the same periods, are recognized in earnings for the year ended December 31, 2021.All trade accounts and unbilled receivables are reported in the Consolidated Balance Sheet adjusted for any write-offs and net of allowances for credit losses. The allowances for credit losses represent management’s best estimate of the credit losses expected from our unbilled and trade accounts receivable portfolios over the life of the underlying assets. Determination of the allowances requires us to exercise judgment about the severity of credit losses, which includes judgments regarding the risk profile of each underlying receivable and expectations regarding the impact of current and future economic conditions on the creditworthiness of our customers. We regularly perform detailed reviews of our portfolios to evaluate the collectability of receivables based on a combination of past, current, and future financial and qualitative factors that may affect customers’ ability to pay, including customers’ financial condition, collateral, debt-servicing ability, payment experience, credit bureau information, and economic conditions. In circumstances where we are aware of a specific customer’s inability to meet its financial obligations, a specific reserve is recorded against amounts due to reduce the recognized receivable to the amount reasonably expected to be collected. Additions to the allowances are charged to current period earnings, amounts determined to be uncollectible are charged directly against the allowances, while amounts recovered on previously written-off accounts increase the allowances. Volatility and uncertainty in overall global economic conditions and worldwide capital markets as a result of the COVID-19 pandemic may negatively impact our customers’ ability to pay and, as a result, may increase the difficulty in collecting trade accounts and unbilled receivables. We did not realize notable increases in loss rates and delinquencies during the year ended December 31, 2021, and given the nature of our portfolio of receivables, our historical experience during times of challenging economic conditions, and our forecasted future impact of COVID-19 on our customer’s ability to pay, we did not record material provisions for credit losses as a result of the COVID-19 pandemic during the year ended December 31, 2021. If the 6083012IMPO.B (PDF_D_SWOP).indd 6683012IMPO.B (PDF_D_SWOP).indd 663/7/22 8:31 PM3/7/22 8:31 PMfinancial condition of our customers were to deteriorate beyond our current estimates, resulting in an impairment of their ability to make payments, we would be required to write-off additional receivable balances, which would adversely impact our net earnings and financial condition.The following is a rollforward of the aggregated allowance for credit losses related to our trade accounts receivables as of December 31, 2021 ($ in millions):Balance, December 31, 2020$ 42.5 Provision 7.1 Write-offs (11.2) FX and Other 1.3 Balance, December 31, 2021$ 39.7 The allowance for unbilled receivables was immaterial for all periods.We do not believe that accounts receivable represent significant concentrations of credit risk because of the diversified portfolio of individual customers and geographical areas. We recorded $7 million, $7 million and $12 million of expense associated with doubtful accounts for the years ended December 31, 2021, 2020, and 2019, respectively.Inventory Valuation—Inventories include the costs of material, labor, and overhead. Domestic inventories are stated at the lower of cost or net realizable value primarily using the first-in, first-out (“FIFO”) method with certain businesses applying the last-in, first-out method (“LIFO”) to value inventory. Inventories held outside the United States are stated at the lower of cost or net realizable value primarily using the FIFO method.Property, Plant, and Equipment—Property, plant, and equipment are carried at cost. The provision for depreciation has been computed principally by the straight-line method based on the estimated useful lives of the depreciable assets as follows:Category Useful LifeBuildings 30 yearsLeased assets and leasehold improvements Amortized over the lesser of the economic life of the asset or the term of the leaseMachinery and equipment 3 – 10 yearsEstimated useful lives are periodically reviewed and, when appropriate, changes to estimates are made prospectively. Amortization of finance lease assets is included in depreciation expense as a component of Selling, general, and administrative expenses in the Consolidated Statements of Earnings.Investments—We account for investments we have significant influence over but do not have a controlling financial interest in under the equity method, which requires us to record investments at cost and subsequently adjust the investment balance each period for our share of the investee’s income or loss and dividends received from the investee. We record our interest in the net earnings of our equity method investees within Other non-operating expenses, net in the Consolidated Statements of Earnings and review our equity method investments for impairment whenever factors indicate that the carrying amount of the investment might not be recoverable.We account for investments that we have neither significant influence over nor a controlling financial interest in at fair value, and record any changes in fair value of these investments in net earnings. In certain circumstances, a readily determinable fair value is not available for our investments, and we recognize those investments at cost, less any subsequent impairment, and adjust the investment balance to fair value when observable price changes in identical or similar investments occur. Other Assets—Other assets principally include noncurrent contract assets, deferred tax assets, and other investments.Fair Value of Financial Instruments—Our financial instruments consist primarily of cash and cash equivalents, trade accounts receivable, nonqualified deferred compensation plans, obligations under trade accounts payable, and short and long-term debt. Due to their short-term nature, the carrying values for trade accounts receivable, trade accounts payable, and short-term debt approximate fair value. While outstanding, we remeasured our investment in Vontier common stock at fair value based on Vontier's closing stock price on the measurement date, with unrealized gains recorded in the Consolidated Statement of Earnings. Refer to Note 8 for the fair values of our other obligations.6183012IMPO.B (PDF_D_SWOP).indd 6783012IMPO.B (PDF_D_SWOP).indd 673/7/22 8:31 PM3/7/22 8:31 PMGoodwill and Other Intangible Assets—Goodwill and other intangible assets result from our acquisition of existing businesses. In accordance with accounting standards related to business combinations, goodwill and indefinite-lived intangible assets are not amortized; however, certain finite-lived identifiable intangible assets, primarily customer relationships and acquired technology, are amortized over their estimated useful lives. In-process research and development (“IPR&D”) is initially capitalized at fair value and when the IPR&D project is complete, the asset is considered a finite-lived intangible asset and amortized over its estimated useful life. If an IPR&D project is abandoned, an impairment loss equal to the value of the intangible asset is recorded in the period of abandonment. We review identified intangible assets for impairment whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable. We also test intangible assets with indefinite lives and goodwill at least annually for impairment. Refer to Note 3 and Note 7 for additional information about our goodwill and other intangible assets.Revenue Recognition—We derive revenue from the sale of products and services. Revenue is recognized when control of promised products or services is transferred to customers in an amount that reflects the consideration we expect to be entitled to in exchange for those products or services.Product sales include revenue from the sale of products and equipment, which includes our software and software as a service (“SaaS”) product offerings and equipment rentals.Service sales include revenues from extended warranties, post-contract customer support, maintenance contracts or services, contract labor to perform ongoing service at a customer location, and services related to previously sold products.For revenue related to a product or service to qualify for recognition, we must have an enforceable contract with a customer that defines the goods or services to be transferred and the payment terms related to those goods or services. Further, collection of substantially all consideration for the goods or services transferred must be probable based on the customer’s intent and ability to pay the promised consideration. We apply judgment in determining the customer’s ability and intention to pay, which is based on a combination of financial and qualitative factors, including the customer’s financial condition, collateral, debt-servicing ability, past payment experience, and credit bureau information.Customer allowances and rebates, consisting primarily of volume discounts and other short-term incentive programs, are considered in determining the transaction price for the contract. These allowances and rebates are reflected as a reduction in the contract transaction price. Significant judgment is exercised in determining product returns, customer allowances, and rebates, and are estimated based on historical experience and known trends.Most of our sales contracts contain standard terms and conditions. We evaluate contracts to identify distinct goods and services promised in the contract (performance obligations). Sometimes this evaluation involves judgment to determine whether the goods or services are highly dependent on or highly interrelated with one another, or whether such goods or services significantly modify or customize one another. Certain customer arrangements include multiple performance obligations, typically hardware, installation, training, consulting, other services, and/or post-contract customer support (“PCS”). Generally, these elements are delivered within the same reporting period, except PCS and other services. We allocate the contract transaction price to each performance obligation using the observable price that the good or service sells for separately in similar circumstances and to similar customers, and/or a residual approach when the observable selling price of a good or service is not known and is either highly variable or uncertain. Allocating the transaction price to each performance obligation sometimes requires significant judgment.Revenue from sales of hardware is recognized when control transfers to the customer, which is generally when the product is shipped. If any significant obligation to the customer with respect to a sales transaction remains to be fulfilled following shipment (typically installation, other services noted above, or acceptance by the customer), revenue recognition is deferred until such obligations have been fulfilled. Further, revenue related to separately priced extended warranty and product maintenance agreements is deferred when appropriate and recognized as revenue over the term of the agreement.Shipping and Handling—Shipping and handling costs are included as a component of Cost of sales in the Consolidated Statements of Earnings. Revenue derived from shipping and handling costs billed to customers is included in Sales of products in the Consolidated Statements of Earnings.Advertising—Advertising costs are expensed as incurred.Research and Development—We conduct research and development activities for the purpose of developing new products, enhancing the functionality, effectiveness, ease of use, and reliability of our existing products, and expanding the applications for which uses of our products are appropriate. Research and development costs are expensed as incurred.6283012IMPO.B (PDF_D_SWOP).indd 6883012IMPO.B (PDF_D_SWOP).indd 683/7/22 8:31 PM3/7/22 8:31 PMRestructuring—We periodically initiate restructuring activities to appropriately position our cost base relative to prevailing economic conditions and associated customer demand, as well as in connection with certain acquisitions. Costs associated with restructuring actions can include one-time termination benefits and related charges, in addition to facility closure, contract termination, and other related activities. We record the cost of the restructuring activities when the associated liability is incurred. Refer to Note 15 for additional information.Foreign Currency Translation and Transactions—Exchange rate adjustments resulting from foreign currency transactions are recognized in Net earnings, whereas effects resulting from the translation of financial statements are reflected as a component of Accumulated other comprehensive loss within Stockholders’ equity. Assets and liabilities of subsidiaries operating outside the United States with a functional currency other than U.S. dollars are translated into U.S. dollars using year-end exchange rates and income statement accounts are translated at weighted average exchange rates. Net foreign currency transaction gains or losses were not material in any of the years presented.Accounting for Stock-Based Compensation—We account for stock-based compensation by measuring the cost of employee services received in exchange for all equity awards granted, including stock options, restricted stock units (“RSUs”), and performance stock units (“PSUs”), based on the fair value of the award as of the grant date. Equity-based compensation expense is recognized net of an estimated forfeiture rate on a straight-line basis over the requisite service period of the award. For awards subject to graded vesting, compensation expense is recognized separately over each vesting tranche of the award, resulting in an accelerated expense recognition pattern. Refer to Note 17 for additional information. Income Taxes—In accordance with GAAP, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted rates expected to be in effect during the year in which the differences reverse. Deferred tax assets generally represent items that can be used as a tax deduction or credit in our tax return in future years for which the tax benefit has already been reflected on our Consolidated Statements of Earnings. Deferred tax liabilities generally represent items that have already been taken as a deduction on our tax return but have not yet been recognized as an expense in our Consolidated Statements of Earnings. The effect on deferred tax assets and liabilities due to a change in tax rates is recognized in income tax expense in the period that includes the enactment date. Our deferred tax assets are reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not (a likelihood of more than 50 percent) that some portion or all of the deferred tax assets will not be realized. We evaluate the realizability of deferred income tax assets for each of the jurisdictions in which we operate. If we experience cumulative pretax income in a particular jurisdiction in the three-year period including the current and prior two years, we normally conclude that the deferred income tax assets will more likely than not be realizable and no valuation allowance is recognized, unless known or planned operating developments would lead management to conclude otherwise. However, if we experience cumulative pretax losses in a particular jurisdiction in the three-year period including the current and prior two years, we then consider a series of factors in the determination of whether the deferred income tax assets can be realized. These factors include historical operating results, known or planned operating developments, the period of time over which certain temporary differences will reverse, consideration of the utilization of certain deferred income tax liabilities, tax law carryback capability in the particular country, and prudent and feasible tax planning strategies. After evaluation of these factors, if the deferred income tax assets are expected to be realized within the tax carryforward period allowed for that specific country, we would conclude that no valuation allowance would be required. To the extent that the deferred income tax assets exceed the amount that is expected to be realized within the tax carryforward period for a particular jurisdiction, we establish a valuation allowance.We recognize tax benefits from uncertain tax positions only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such positions are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. Judgment is required in evaluating tax positions and determining income tax provisions. We reevaluate the technical merits of our tax positions and may recognize an uncertain tax benefit in certain circumstances, including when: (1) a tax audit is completed; (2) applicable tax laws change, including a tax case ruling or legislative guidance; or (3) the applicable statute of limitations expires. We recognize potential accrued interest and penalties associated with unrecognized tax positions in income tax expense. Refer to Note 14 for additional information.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. While outstanding, we designated our Euro-denominated commercial paper and ¥13.8 billion senior unsecured term facility loan as net investment hedges of our investment in certain foreign operations. Accordingly, foreign currency transaction gains or losses on the debt were 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. We exited our Euro-denominated commercial paper positions during the second quarter of 2020 and repaid our ¥13.8 billion senior unsecured term facility loan during the fourth 6383012IMPO.B (PDF_D_SWOP).indd 6983012IMPO.B (PDF_D_SWOP).indd 693/7/22 8:31 PM3/7/22 8:31 PMquarter of 2020.We did not designate any net investment hedges during the year ended December 31, 2021. In 2020 and 2019 we recognized gains of $1.9 million and $5.7 million, respectively, in Other comprehensive income (loss) related to the net investment hedges. We recorded no ineffectiveness from our net investment hedges during the years ended December 31, 2020 and 2019. Any amounts deferred in AOCI will remain until the hedged investment is sold or substantially liquidated. As of December 31, 2021, we had no designated net investment hedges.6483012IMPO.B (PDF_D_SWOP).indd 7083012IMPO.B (PDF_D_SWOP).indd 703/7/22 8:31 PM3/7/22 8:31 PMThe changes in AOCI by component are summarized below ($ in millions):ForeigncurrencytranslationadjustmentsPension & post-retirementplan benefitadjustments (b)TotalBalance, January 1, 2019$ (29.3) $ (57.3) $ (86.6) Other comprehensive income (loss) before reclassifications:Increase (decrease) 50.5 (29.8) 20.7 Income tax impact 7.3 7.3 Other comprehensive income (loss) before reclassifications, net of income taxes 50.5 (22.5) 28.0 Amounts reclassified from accumulated other comprehensive income (loss):Increase 3.1 (a) 3.1 Income tax impact (0.8) (0.8) Amounts reclassified from accumulated other comprehensive income (loss), net of income taxes: — 2.3 2.3 Net current period other comprehensive income (loss): 50.5 (20.2) 30.3 Balance, December 31, 2019$ 21.2 $ (77.5) $ (56.3) Other comprehensive income (loss) before reclassifications:Increase (decrease) 63.5 (20.7) 42.8 Income tax impact — 4.3 4.3 Other comprehensive income (loss) before reclassifications, net of income taxes 63.5 (16.4) 47.1 Amounts reclassified from accumulated other comprehensive income (loss):Increase — 4.7 (a) 4.7 Income tax impact — (1.0) (1.0) Amounts reclassified from accumulated other comprehensive income (loss), net of income taxes — 3.7 3.7 Net current period other comprehensive income (loss) 63.5 (12.7) 50.8 Vontier Separation (138.7) 3.1 (135.6) Balance, December 31, 2020$ (54.0) $ (87.1) $ (141.1) Other comprehensive income (loss) before reclassifications:Increase (decrease) (68.7) 27.7 (41.0) Income tax impact — (6.2) (6.2) Other comprehensive income (loss) before reclassifications, net of income taxes (68.7) 21.5 (47.2) Amounts reclassified from accumulated other comprehensive income (loss):Increase — 4.3 (a) 4.3 Income tax impact — (1.0) (1.0) Amounts reclassified from accumulated other comprehensive income (loss), net of income taxes — 3.3 3.3 Net current period other comprehensive income (loss) (68.7) 24.8 (43.9) Balance, December 31, 2021$ (122.7) $ (62.3) $ (185.0) (a) This component of AOCI is included in the computation of net periodic pension cost (refer to Note 12) and also includes activity related to the Vontier business prior to the cumulative Vontier Separation adjustment shown above.(b) Includes balances relating to defined benefit plans, supplemental executive retirement plans, and other postretirement employee benefit plans.Pension—We measure our pension assets and obligations to determine the funded status as of December 31st each year, and recognize an asset for an overfunded status or a liability for an underfunded status in our Consolidated Balance Sheets. Changes in the funded status of the pension plans are recognized in the year in which the changes occur and are reported in Other comprehensive income (loss). Refer to Note 12 for additional information on our pension plans including a discussion of 6583012IMPO.B (PDF_D_SWOP).indd 7183012IMPO.B (PDF_D_SWOP).indd 713/7/22 8:31 PM3/7/22 8:31 PMactuarial assumptions, our policy for recognizing associated gains and losses, and the method used to estimate service and interest cost components. We report all components of net periodic pension costs, with the exception of service costs, in other non-operating expenses as a component of non-operating income in the accompanying Consolidated Statements of Earnings. Service costs are reported in cost of sales and selling, general and administrative expenses in the Consolidated Statements of Earnings according to the classification of the participant’s compensation.New Accounting StandardsIn August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which amends the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity. This standard was effective for us beginning January 1, 2022 and impacts the accounting treatment of our Convertible Notes. Upon adoption of the standard using a modified retrospective approach, we expect to record an adjustment to reclassify the remaining value of the conversion feature that was originally recognized as equity to debt, and adjust beginning retained earnings for the amount previously recognized as noncash interest expense. We do not expect this standard to have material impacts on our consolidated financial statements.In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The amendments in this update require that an acquirer recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606, rather than at fair value as previously required under Topic 805. Fortive elected to early adopt ASU No. 2021-08 in the fourth quarter of 2021 and the amendments have been applied to all business combinations that occurred on or after January 1, 2021. Accordingly, during the fourth quarter of 2021, we adjusted the deferred revenue balance recognized in the opening balance sheet for ServiceChannel in accordance with the amendments, resulting in a $1.5 million increase in revenue recognized during the year ended December 31, 2021. Further, we have applied these amendments to our initial recognition of the contract assets and contract liabilities assumed in the Provation acquisition, discussed in Note 3. NOTE 3. ACQUISITIONS We continually evaluate potential mergers, acquisitions, and divestitures that align with our strategy and expedite the evolution of our portfolio of businesses into new and attractive areas. We have completed a number of acquisitions that have been accounted for as purchases of businesses and resulted in the recognition of goodwill in our financial statements. This goodwill arises because the purchase price for each acquired business reflects a number of factors including the complimentary fit, acceleration of our strategy and synergies the business brings with respect to our existing operations, the future earnings and cash flow potential of the business, the potential to add other strategically complimentary acquisitions to the acquired business, the scarce or unique nature of the business in its markets, competition to acquire the business, the valuation of similar businesses in the marketplace (as reflected in a multiple of revenues, earnings, or cash flows), and the avoidance of the time and costs which would be required (and the associated risks that would be encountered) to enhance our existing offerings to key target markets and develop new and profitable businesses.We make an initial allocation of the purchase price at the date of acquisition based on our understanding of the fair value of the acquired assets and assumed liabilities. We obtain this information during due diligence and through other sources. In the months after closing, as we obtain additional information about these assets and liabilities, including through tangible and intangible asset appraisals, and learn more about the newly acquired business, we are able to refine the estimates of fair value and more accurately allocate the purchase price. Only facts and circumstances that existed as of the acquisition date are considered for subsequent adjustment. We are in the process of obtaining valuations of certain acquired assets and evaluating the tax impact of certain acquisitions. The determination of the fair value of the acquired intangible assets involves judgment and is sensitive to significant assumptions, including projected financial information, royalty rates and discount rates used in the valuation models, and are affected by uncertainties about future market and economic conditions. We make appropriate adjustments to purchase price allocations prior to completion of the applicable measurement period, as required.The following describes our acquisition activity for the years ended December 31, 2021, 2020, and 2019.6683012IMPO.B (PDF_D_SWOP).indd 7283012IMPO.B (PDF_D_SWOP).indd 723/7/22 8:31 PM3/7/22 8:31 PMProvationOn December 27, 2021, we acquired Provation Software, Inc. (“Provation”), a leading provider of clinical workflow software solutions used in hospitals and ambulatory surgery centers. The acquisition of Provation extends our digital offering and software capabilities in the healthcare space. The total consideration paid was approximately $1.4 billion, net of acquired cash and was primarily financed with proceeds from our financing activities and available cash. We preliminarily recorded $970 million of goodwill related to the acquisition, which is not tax deductible. Provation had revenue in 2020 of approximately $90 million and is an operating company within our Advanced Healthcare Solutions segment.ServiceChannelOn August 24, 2021, we acquired ServiceChannel Holdings, Inc. (“ServiceChannel”), a privately held, global provider of SaaS based multi-site facilities maintenance service solutions with an integrated service-provider network. The acquisition of ServiceChannel broadens our offering of software-enabled solutions for the facility and asset lifecycle workflow. The total consideration paid was approximately $1.2 billion, net of acquired cash, and includes approximately $28 million of deferred compensation consideration that is being recognized ratably over a twelve month service period. The ServiceChannel acquisition was primarily financed with available cash and proceeds from our financing activities. We preliminarily recorded approximately $873 million of goodwill related to the ServiceChannel acquisition, which is not tax deductible. ServiceChannel had revenue in 2020 of approximately $70 million and is an operating company within our Intelligent Operating Solutions segment. Revenue and operating loss attributable to these acquisitions were $46.4 million and $60.9 million for the year ended December 31, 2021, respectively. The operating loss includes $12.0 million of intangible asset amortization and $47.9 million of transaction and integration costs, primary comprised of compensation cost for employee retention and amounts paid to third party advisors, which are recorded in Selling, general and administration expenses.The following table summarizes the estimated fair values of the assets acquired and liabilities assumed from acquisitions discussed above as of December 31, 2021 ($ in millions):ProvationServiceChannelTotalAccounts receivable$ 39.6 $ 10.0 $ 49.6 Goodwill 969.6 873.4 1,843.0 Other intangible assets, primarily customer relationships, technology, database, and trade names 586.5 342.9 929.4 Deferred revenue, current (50.2) (1.7) (51.9) Deferred tax liabilities (119.4) (50.8) (170.2) Other assets and liabilities, net (20.5) (7.1) (27.6) Net cash consideration$ 1,405.6 $ 1,166.7 $ 2,572.3 Advanced Sterilization ProductsOn April 1, 2019 (the “Principal Closing Date”), we acquired the advanced sterilization products business (“ASP”) of Johnson & Johnson, a New Jersey corporation (“Johnson & Johnson”) for an aggregate purchase price of $2.7 billion (the “Transaction”), subject to certain post-closing adjustments set forth in a Stock and Asset Purchase Agreement, dated effective as of June 6, 2018 (the “Purchase Agreement”), between the Company and Ethicon, Inc., a New Jersey corporation (“Ethicon”) and a wholly owned subsidiary of Johnson & Johnson. ASP engages in the research, development, manufacture, marketing, distribution, and sale of low-temperature terminal sterilization and high-level disinfection products. ASP generated annual revenues of approximately $800 million in 2018.On the Principal Closing Date, we paid $2.7 billion in cash and obtained the transferred assets and assumed liabilities in 20 countries (“Principal Countries”), general patent and trademark assignments, and all transferred equity interests in ASP. ASP has operations in an additional 39 countries (“Non-Principal Countries”). The transferred assets and liabilities associated with these operations closed when requirements of country-specific agreements or regulatory approvals were satisfied.The $2.7 billion purchase price was paid in exchange for ASP’s businesses in both Principal and Non-Principal Countries. As of December 31, 2021 we have closed all Principal Countries and Non-Principal Countries. All of the provisional goodwill associated with the Transaction is included in goodwill in our Advanced Healthcare Solutions segment at December 31, 2021, and the majority of the provisional goodwill is tax deductible. 6783012IMPO.B (PDF_D_SWOP).indd 7383012IMPO.B (PDF_D_SWOP).indd 733/7/22 8:31 PM3/7/22 8:31 PMIn addition, the Company entered into a transition services agreement with Johnson & Johnson for certain administrative and operational services (“TSA”) with Principal Countries and distribution agreements in the Non-Principal Countries. Under the distribution agreements, ASP sells finished goods to Ethicon at prices agreed by the parties. ASP recognizes these sales as revenue when the conditions for revenue recognition are met. Following the sale of finished goods by ASP, Ethicon obtains title of the finished goods, has full authority to sell and market the finished goods to end customers as it sees fit, and retains any revenue and profit from sale. As of December 31, 2021, ASP had exited the TSAs and substantially all of the distribution agreements. Prior to our acquisition of ASP, Johnson & Johnson received a Civil Investigative Demand from the United States Department of Justice (“DOJ”) regarding a False Claims Act investigation arising from a whistleblower lawsuit pertaining to the pricing, quality, marketing, and promotion of certain of ASP’s products. Based on the totality of available information at the Principal Closing Date and throughout the applicable measurement period, management allocated $26 million of the $2.7 billion purchase price to a potential liability related to the aforementioned litigation. Following the Principal Closing Date, management continually evaluated the likelihood and magnitude of the asserted claims based on any new information that became available. In the second quarter of 2021, following the unsealing of the whistleblower lawsuit and DOJ’s declination to intervene in the litigation, the plaintiff dismissed the whistleblower lawsuit. Based on these developments, management derecognized the litigation liability from our Consolidated Balance Sheet and recorded a Gain on litigation resolution of $26 million within Non-operating income (expense), net in our Consolidated Statements of Earnings during the year ended December 31, 2021.Operating loss includes amortization of intangible assets, acquisition-related fair value adjustments, and post-close transaction and integration costs associated with the Transaction of $230 million during the year ended December 31, 2019. We incurred approximately $11 million, $70 million, and $86 million of pretax transaction and integration costs related to the ASP Transaction for the years ended December 31, 2021, 2020, and 2019, respectively. These costs are recorded in Selling, general, and administrative expenses and were primarily for banking fees, legal fees, and amounts paid to other third party advisors. The following table summarizes the combined final fair values and provisional fair value estimates of the assets acquired and liabilities assumed of Principal and Non-Principal Countries that have been transferred to ASP as of December 31, 2021; we did not acquire accounts receivable or accounts payable from Johnson & Johnson ($ in millions):Advanced Sterilization ProductsInventories$ 211.1 Property, plant and equipment 51.7 Goodwill 1,450.2 Other intangible assets, primarily customer relationships, trade names and technology 1,123.5 Other assets and liabilities, net (94.5) Net cash consideration$ 2,742.0 Completed Acquisitions in 2019In addition to the acquisition of ASP, during 2019, we acquired Intelex Technologies and Pruftechnik, both of which complement existing businesses in our Intelligent Operation Solutions segment, and Censis Technologies (“Censis”) within our Advanced Healthcare Solutions segment, for total consideration of $1.2 billion in cash, net of cash acquired. We recorded an aggregate of $781 million of goodwill related to these acquisitions. Approximately $21 million of goodwill associated with these acquisitions is tax deductible. At the closing date of the purchase of Censis Technologies, a contractual liability existed which management allocated to the purchase price and was recorded in our Consolidated Balance Sheet. During the fourth quarter of 2021, that liability was discharged for an amount less than the amount allocated, and the excess was recorded as a Gain on litigation resolution of $3.9 million within Non-operating income (expense), net in our Consolidated Statements of Earnings during the year ended December 31, 2021.The aggregate annual sales of these businesses in 2018 were approximately $191 million. We incurred approximately $17 million of pretax transaction-related costs recorded in Selling, general, and administrative expenses for the year ended December 31, 2019, which were primarily for banking fees, legal fees, and amounts paid to other third-party advisers. The revenue and operating loss from these acquisitions included in our results were approximately $76 million and $53 million, respectively, during the year ended December 31, 2019.6883012IMPO.B (PDF_D_SWOP).indd 7483012IMPO.B (PDF_D_SWOP).indd 743/7/22 8:31 PM3/7/22 8:31 PMAcquisitions SummaryThe following summarizes the estimated fair values of the assets acquired and liabilities assumed for all acquisitions consummated during the years ended December 31. Balances presented for 2020 and 2019 reflect final measurement period adjustments ($ in millions):202120202019Accounts receivable$ 49.8 $ 0.1 $ 44.1 Inventories$ 11.5 26.9 186.9 Property, plant and equipment$ 5.2 5.0 54.3 Goodwill$ 1,840.8 30.9 2,220.3 Other intangible assets, primarily customer relationships, trade names and technology$ 929.4 9.5 1,659.5 Prepaid acquisition asset related to ASP Non-Principal Countries$ — — 34.7 Trade accounts payable$ (10.4) (1.1) (7.5) Other assets and liabilities, net$ (256.2) (41.8) (287.3) Net cash consideration$ 2,570.1 $ 29.5 $ 3,905.0 NOTE 4. DISCONTINUED OPERATIONS AND DISPOSITIONS Vontier SeparationOn October 9, 2020, we completed the Vontier Separation, by distributing 80.1% of the outstanding shares of Vontier to Fortive stockholders on a pro rata basis. To effect the Separation, we distributed to our stockholders two shares of Vontier common stock for every five shares of our common stock outstanding held on September 25, 2020, the record date for the distribution. We retained 19.9% of the shares of Vontier common stock immediately following the Separation (the “Retained Vontier Shares”).On September 29, 2020, Vontier entered into a credit agreement (the “Credit Agreement”) with a syndicate of banks, consisting of a three-year, $800 million senior unsecured delayed draw term loan facility (the “Three-Year Term Loans”), a two-year, $1 billion senior unsecured delayed draw term loan facility (the “Two-Year Term Loans” and together with the Three-Year Term Loans, the “Term Loans”) and a three-year, $750 million senior unsecured multi-currency revolving credit facility (the “Revolving Credit Facility” and, together with the Term Loans, the “Credit Facilities”). On the Distribution Date, Vontier drew down the full $1.8 billion available under the Term Loans. Vontier used the proceeds from the Term Loans to make payments to the Company, with $1.6 billion used as part of the consideration for the contribution of certain assets and liabilities to Vontier by the Company in connection with the Separation and $202 million used as an adjustment for excess cash balances remaining with Vontier (collectively, the “Cash Consideration”). We applied the Cash Consideration to repay certain outstanding indebtedness, interest on certain debt instruments, and to pay certain of the Company’s regular, quarterly cash dividends. Refer to Note 11 for the description of the debt repayments made subsequent to the Distribution Date. Interest expense and extinguishment costs related to the debt retired during the fourth quarter of 2020 using the Cash Consideration was allocated to discontinued operations for all periods presented.The accounting requirements for reporting the Vontier business as a discontinued operation were met when the Vontier Separation was completed. Accordingly, the consolidated financial statements reflect the results of the Vontier business as a discontinued operation for all periods presented.On January 19, 2021, we completed the Debt-for-Equity Exchange of 33.5 million shares of common stock of Vontier, representing all of the Retained Vontier Shares, for $1.1 billion in aggregate principal amount of indebtedness of the Company held by Goldman Sachs & Co., including (i) all $400.0 million of the Term Loan due March 2021 and (ii) $683.2 million of the Term Loan due May 2021. We recorded a loss on extinguishment of the debt included in the Debt-for-Equity Exchange of $94.4 million in the year ended December 31, 2021. 6983012IMPO.B (PDF_D_SWOP).indd 7583012IMPO.B (PDF_D_SWOP).indd 753/7/22 8:31 PM3/7/22 8:31 PMIn preparation for and executing the Separation, the Company incurred $84 million and $35 million in Vontier stand-up and separation-related transaction costs during the years ended December 31, 2020 and 2019, respectively, which were recorded in the Selling, general, and administrative expenses component of Earnings from discontinued operations, net of income taxes in the Consolidated Statements of Earnings. These stand-up and separation-related costs primarily relate to professional fees associated with preparation of regulatory filings and transaction execution and separation activities within finance, tax, legal, and information system functions.Vontier Impairment ChargeAs a result of the 2020 interim impairment testing performed, we concluded that the estimated fair value of the Telematics reporting unit was less than its carrying value as of March 27, 2020, and recorded a noncash goodwill impairment charge of $85.3 million during the three month period ended March 27, 2020. The Telematics reporting unit was included in our former Industrial Technologies segment and part of the Vontier Separation. Accordingly, the impairment charge is recorded in Earnings from discontinued operations, net of income taxes in the Consolidated Statement of Earnings.Divestiture of A&S BusinessOn October 1, 2018, we completed the separation of our A&S Business. The accounting requirements for reporting the disposition of the A&S Business as a discontinued operation were met when the separation and merger were completed. Accordingly, the consolidated financial statements for all periods presented reflect this business as discontinued operations. The key components of income from discontinued operations for the years ended December 31 were as follows ($ in millions): 202120202019Sales$ — $ 1,963.4 $ 2,778.2 Cost of sales — (1,107.3) (1,587.5) Selling, general, and administrative expenses (4.5) (455.3) (494.4) Research and development expenses — (98.6) (136.4) Goodwill impairment — (85.3) — Gain (loss) on disposition of discontinued operations before income taxes — — (2.1) Interest expense and other 0.1 (31.0) (22.2) Earnings (loss) before income taxes (4.4) 185.9 535.6 Income taxes (1.4) (24.8) (64.8) Earnings from discontinued operations, net of income taxes$ (5.8) $ 161.1 $ 470.8 7083012IMPO.B (PDF_D_SWOP).indd 7683012IMPO.B (PDF_D_SWOP).indd 763/7/22 8:31 PM3/7/22 8:31 PMThe following table summarizes the major classes of assets and liabilities of discontinued operations that were included in the Company’s Consolidated Balance Sheets as of December 31 ($ in millions): 20212020ASSETSAccounts receivable, net$ — $ — Inventories — — Other current assets — 30.4 Total current assets, discontinued operations — 30.4 Property, plant and equipment, net — — Goodwill — — Other intangible assets, net — — Other non-current assets — — Total other assets, discontinued operations — — Total assets, discontinued operations$ — $ 30.4 LIABILITIESCurrent liabilities:Trade accounts payable$ — $ — Accrued expenses and other current liabilities — (33.3) Total current liabilities, discontinued operations — (33.3) Other long-term liabilities — — Total liabilities, discontinued operations$ — $ (33.3) Combination of the Tektronix Video Business with TelestreamOn July 20, 2019, we completed the combination of the Tektronix Video test and monitoring equipment business (“Tektronix Video Business”) with Telestream, LLC (the “Combined Business”), a portfolio company of Genstar Capital LLC. We recognized a pretax gain of $41 million upon the combination, and hold a 33% equity stake in the Combined Business. This transaction did not meet the criteria for discontinued operations reporting, and therefore the operating results of the Tektronix Video Business prior to the combination with Telestream are included in continuing operations for all periods presented. At December 31, 2021 and December 31, 2020, the carrying amount of the investment in the Combined Business included in other assets in the Consolidated Balance Sheets was $66 million and $77 million, respectively. For the years ended December 31, 2021 and December 31, 2020, the loss from our equity investment in the Combined Business recorded in Other non-operating expenses, net in the Consolidated Statements of Earnings was $11 million and $4 million, respectively. NOTE 5. INVENTORIESThe classes of inventory as of December 31 are summarized as follows ($ in millions):20212020Finished goods$ 215.4 $ 227.9 Work in process 94.0 75.2 Raw materials 203.3 152.4 Total$ 512.7 $ 455.5 As of December 31, 2021 and 2020, the difference between inventories valued at LIFO and the value of that same inventory if the FIFO method had been used was not significant. The liquidation of LIFO inventory did not have a significant impact on our results of operations in any period presented.7183012IMPO.B (PDF_D_SWOP).indd 7783012IMPO.B (PDF_D_SWOP).indd 773/7/22 8:31 PM3/7/22 8:31 PMNOTE 6. PROPERTY, PLANT AND EQUIPMENT The classes of property, plant and equipment as of December 31 are summarized as follows ($ in millions):20212020Land and improvements$ 54.9 $ 57.1 Buildings and leasehold improvements 312.9 321.6 Machinery and equipment 706.7 717.8 Gross property, plant and equipment 1,074.5 1,096.5 Less: accumulated depreciation (679.0) (674.5) Property, plant and equipment, net$ 395.5 $ 422.0 No interest was capitalized related to capitalized expenditures in any period.NOTE 7. GOODWILL AND OTHER INTANGIBLE ASSETS As discussed in Note 3, goodwill arises from the purchase price for acquired businesses exceeding the fair value of tangible and intangible assets acquired, less assumed liabilities. We assess the goodwill of each of our reporting units for impairment at least annually as of the first day of the fourth quarter and as “triggering” events occur that indicate that it is more likely than not that an impairment exists. We elected to bypass the optional qualitative goodwill assessment allowed by applicable accounting standards and performed a quantitative impairment test for all reporting units as this was determined to be the most effective method to assess impairment across a large spectrum of reporting units.We estimate the fair value of our reporting units primarily using a market approach, based on multiples of earnings before interest, taxes, depreciation, and amortization (“EBITDA”) determined by current trading market multiples of earnings for companies operating in businesses similar to each of our reporting units, in addition to recent market available sale transactions of comparable businesses. In certain circumstances we also evaluate other factors including results of the estimated fair value utilizing a discounted cash flow analysis (i.e., an income approach), market positions of the businesses, comparability of market sales transactions, and financial and operating performance in order to validate the results of the market approach. If the estimated fair value of the reporting unit is less than its carrying value, we will impair the goodwill for the amount of the carrying value in excess of the fair value.In 2021, we had five continuing operations reporting units for goodwill impairment testing. As of the date of the 2021 annual impairment test, the carrying value of goodwill in each reporting unit ranged from $171.3 million to approximately $3.3 billion. No goodwill impairment charges were recorded for continuing operations for the years ended December 31, 2021, 2020, and 2019, and no “triggering” events have occurred subsequent to the performance of the 2021 annual impairment test. The factors used by management in its impairment analysis are inherently subject to uncertainty. If actual results are not consistent with management’s estimates and assumptions, goodwill and other intangible assets may be overstated and a charge would need to be taken against net earnings. Refer to Note 4 for information on goodwill impairment charges for discontinued operations.7283012IMPO.B (PDF_D_SWOP).indd 7883012IMPO.B (PDF_D_SWOP).indd 783/7/22 8:31 PM3/7/22 8:31 PMThe following is a rollforward of our goodwill by segment ($ in millions):Intelligent Operating SolutionsPrecision TechnologiesAdvanced Healthcare SolutionsTotalBalance, January 1, 2020$ 3,208.9 $ 1,842.9 $ 2,189.7 $ 7,241.5 Measurement period adjustments for 2019 acquisitions 14.8 — 20.1 34.9 Attributable to 2020 acquisitions 21.0 — 9.9 30.9 Foreign currency translation and other 24.1 25.0 2.8 51.9 Balance, December 31, 2020 3,268.8 1,867.9 2,222.5 7,359.2 Measurement period adjustments for 2020 acquisitions 0.4 — (2.7) (2.3) Attributable to 2021 acquisitions 873.4 — 969.6 1,843.0 Foreign currency translation and other (16.6) (27.9) (3.4) (47.9) Balance, December 31, 2021$ 4,126.0 $ 1,840.0 $ 3,186.0 $ 9,152.0 Finite-lived intangible assets are amortized over the shorter of their legal or estimated useful lives. The following summarizes the gross carrying value and accumulated amortization for each major category of intangible asset as of December 31 ($ in millions):20212020Gross Carrying AmountAccumulated AmortizationGross Carrying AmountAccumulated AmortizationFinite-lived intangibles:Patents and technology$ 1,130.0 $ (475.8) $ 983.3 $ (401.1) Customer relationships and other intangibles 3,571.9 (1,064.4) 2,958.3 (896.8) Trademarks and trade names 110.5 (4.2) 18.0 (1.4) Total finite-lived intangibles 4,812.4 (1,544.4) 3,959.6 (1,299.3) Indefinite-lived intangibles:Trademarks and trade names 622.2 — 630.3 — Total intangibles$ 5,434.6 $ (1,544.4) $ 4,589.9 $ (1,299.3) ()()During 2021 we acquired finite-lived intangible assets, consisting primarily of customer relationships, trade names and technology, with a weighted average life of 16 years. During 2020, we acquired finite-lived intangible assets, consisting primarily of customer relationships and developed technology, with a weighted average life of 11 years. Refer to Note 3 for additional information on the intangible assets acquired.Total intangible amortization expense in 2021, 2020, and 2019 was $321 million, $310 million and $261 million, respectively. Based on the intangible assets recorded as of December 31, 2021, amortization expense is estimated to be $381 million during 2022, $369 million during 2023, $367 million during 2024, $364 million during 2025, and $362 million during 2026.NOTE 8. FAIR VALUE MEASUREMENTS Accounting standards define fair value based on an exit price model, establish a framework for measuring fair value for assets and liabilities required to be carried at fair value, and provide for certain disclosures related to the valuation methods used within the valuation hierarchy as established within the accounting standards. This hierarchy prioritizes the inputs into three broad levels as follows: •Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. •Level 2 inputs are quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets in markets that are not active, or other observable characteristics for the asset or liability, including interest rates, yield curves and credit risks, or inputs that are derived principally from, or corroborated by, observable market data through correlation. •Level 3 inputs are unobservable inputs based on our assumptions. A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement in its entirety.7383012IMPO.B (PDF_D_SWOP).indd 7983012IMPO.B (PDF_D_SWOP).indd 793/7/22 8:31 PM3/7/22 8:31 PMFinancial assets and liabilities that are measured at fair value on a recurring basis were as follows ($ in millions):Quoted Pricesin ActiveMarket(Level 1)Significant OtherObservable Inputs (Level 2)SignificantUnobservableInputs(Level 3)TotalDecember 31, 2021Deferred compensation liabilities — 36.0 — 36.0 December 31, 2020Investment in Vontier$ 1,119.2 $ — $ — $ 1,119.2 Deferred compensation liabilities$ — $ 34.8 $ — $ 34.8 On October 9, 2020, we completed the Vontier separation and retained 19.9% of the shares of Vontier common stock immediately following the Separation. We did not retain a controlling interest in Vontier and therefore the fair value of our retained shares and subsequent fair value changes are included in our assets of and results from continuing operations, respectively. At December 31, 2020, our investment in Vontier common stock was remeasured at fair value based on Vontier’s closing stock price, with unrealized gains of $1.1 billion recorded in the Consolidated Statement of Earnings.On January 19, 2021, we completed the Debt-for-Equity Exchange of 33.5 million shares of common stock of Vontier, representing all of the Retained Vontier Shares, for $1.1 billion in aggregate principal amount of indebtedness of the Company held by Goldman Sachs & Co., including (i) all $400 million of the 2021 Term Loan and (ii) $683.2 million of the 2020 Delayed-Draw Term Loan. During the first quarter of 2021 we recognized a gain of $57.0 million related to the subsequent change in the fair value of the Retained Vontier Shares.Certain management employees participate in our nonqualified deferred compensation programs that permit such employees to defer a portion of their compensation, on a pretax basis, until after their termination of employment. All amounts deferred under such plans are unfunded, unsecured obligations and are presented as a component of our compensation and other post-retirement benefits accruals included in Other long-term liabilities in the accompanying Consolidated Balance Sheets. Participants may choose among alternative earning rates for the amounts they defer, which are primarily based on investment options within our defined contribution plans for the benefit of U.S. employees (“401(k) Programs”) (except that the earnings rates for amounts contributed unilaterally by the Company are entirely based on changes in the value of Fortive common stock). Changes in the deferred compensation liability under these programs are recognized based on changes in the fair value of the participants’ accounts, which are based on the applicable earnings rates.Fair Value of Other Financial InstrumentsThe carrying amounts and fair values of financial instruments as of December 31 were as follows ($ in millions):20212020Carrying AmountFairValueCarrying AmountFairValueCurrent portion of long-term debt$ 2,151.7 $ 2,158.3 $ 1,399.8 $ 1,400.0 Long-term debt, net of current maturities 1,807.3 1,978.9 2,830.3 3,155.5 As of December 31, 2021 and December 31, 2020, long-term borrowings were categorized as Level 1.The fair value of the current portion of long-term debt and long-term debt were based on quoted market prices. The difference between the fair value and the carrying amounts of long-term borrowings may be attributable to changes in market interest rates and/or our credit ratings subsequent to the incurrence of the borrowing. The fair value of cash and equivalents, accounts receivable, net, and trade accounts payable approximates their carrying amount due to the short-term maturities of these instruments.Refer to Note 12 for information related to the fair value of the Company-sponsored defined benefit pension plan assets.7483012IMPO.B (PDF_D_SWOP).indd 8083012IMPO.B (PDF_D_SWOP).indd 803/7/22 8:31 PM3/7/22 8:31 PMNOTE 9. ACCRUED EXPENSES AND OTHER LIABILITIES Accrued expenses and other liabilities as of December 31 were as follows ($ in millions): 20212020 CurrentLong-termCurrentLong-termCompensation and other post-retirement benefits$ 253.2 $ 58.2 $ 262.1 $ 66.6 Claims, including self-insurance and litigation 5.6 13.9 13.8 14.3 Pension obligations 4.5 133.9 4.5 167.1 Taxes, income and other 53.0 1,011.2 65.5 887.0 Deferred revenue 457.6 33.8 376.4 34.2 Sales and product allowances 21.6 — 20.2 — Warranty 23.0 2.2 22.9 2.0 Other 142.2 33.2 134.5 62.2 Total$ 960.7 $ 1,286.4 $ 899.9 $ 1,233.4 WarrantyWe generally accrue estimated warranty costs at the time of sale. In general, manufactured products are warranted against defects in material and workmanship when properly used for their intended purpose, installed correctly, and appropriately maintained. Warranty period terms depend on the nature of the product and range from 90 days up to the life of the product. The amount of the accrued warranty liability is determined based on historical information such as past experience, product failure rates or number of units repaired, estimated cost of material and labor, and, in certain instances, estimated property damage. The accrued warranty liability is reviewed on a quarterly basis and may be adjusted as additional information regarding expected warranty costs becomes known.The following is a rollforward of our accrued warranty liability ($ in millions):Balance, January 1, 2020$ 21.6 Accruals for warranties issued during the year 13.9 Settlements made (11.5) Additions due to acquisitions 1.2 Effect of foreign currency translation (0.3) Balance, December 31, 2020$ 24.9 Accruals for warranties issued during the year 17.5 Settlements made (17.6) Additions due to acquisitions — Effect of foreign currency translation 0.4 Balance, December 31, 2021$ 25.2 NOTE 10. LEASES We determine if an arrangement is or contains a lease at inception and recognize a right-of-use (“ROU”) asset and a lease liability for all leases with terms greater than 12 months. We have operating leases for office space, warehouses, distribution centers, research and development facilities, manufacturing locations, and certain equipment, primarily automobiles. Many leases include optional terms, ranging from options to terminate the lease in less than one year to options to extend the lease for up to 23 years. We include optional periods as part of the lease term when we determine that we are reasonably certain to exercise the renewal option or we will not early terminate the lease. Reasonably certain is based on economic incentives and represents a high threshold. We have lease agreements with lease and non-lease components, and we have elected the practical expedient for all underlying asset classes to account for the lease and related non-lease component(s) as a single lease component. Our finance lease and lessor arrangements are immaterial. Lease-related balances are presented in the following three line items on the Consolidated Balance Sheet: (i) operating lease right-of-use assets; (ii) current operating lease liabilities; and (iii) operating lease liabilities.7583012IMPO.B (PDF_D_SWOP).indd 8183012IMPO.B (PDF_D_SWOP).indd 813/7/22 8:31 PM3/7/22 8:31 PMOperating lease cost was $60 million, $60 million, and $58 million for the years ended December 31, 2021, 2020, and 2019, respectively. Short-term and variable lease cost was immaterial for the years ended December 31, 2021, 2020, and 2019.During the years ended December 31, 2021 and 2020, cash paid for operating leases included in operating cash flows was $53 million and $52 million, respectively. ROU assets obtained in exchange for operating lease liabilities were $34 million and $55 million for the years ended December 31, 2021 and 2020, respectively.The following table presents the maturities of our operating lease liabilities as of December 31, 2021 ($ in millions):2022$ 45.6 2023 36.7 2024 27.6 2025 19.5 2026 15.6 Thereafter 58.3 Total lease payments 203.3 Less: imputed interest (18.8) Total lease liabilities$ 184.5 As of December 31, 2021 and 2020, the weighted average lease term of our operating leases was 7.85 years and 7.5 years, respectively, and the weighted average discount rate of our operating leases was 2.6% and 2.8%, respectively. We primarily use our incremental borrowing rate as the discount rate for our operating leases, as we are generally unable to determine the interest rate implicit in the lease. As of December 31, 2021, we did not enter into any operating leases for which the lease term had not yet commenced. NOTE 11. FINANCING The carrying value of the components of our long-term debt as of December 31 were as follows ($ in millions):20212020U.S. dollar-denominated commercial paper$ 364.9 $ — 3.15% senior unsecured notes due 2026 895.1 894.1 4.30% senior unsecured notes due 2046 547.3 547.2 0.875% senior convertible notes due 2022 1,152.0 1,389.0 Delayed-Draw Term Loan 999.7 — Term Loan due May 2021 — 1,000.0 Term Loan due March 2021 — 399.8 Long-term debt 3,959.0 4,230.1 Less: current portion of long-term debt 2,151.7 1,399.8 Long-term debt, net of current maturities$ 1,807.3 $ 2,830.3 Aggregate unamortized debt discounts, premiums, and issuance costs of $13 million and $57 million as of December 31, 2021 and December 31, 2020, respectively, are netted against the principal amounts of the components of debt in the table above.7683012IMPO.B (PDF_D_SWOP).indd 8283012IMPO.B (PDF_D_SWOP).indd 823/7/22 8:31 PM3/7/22 8:31 PMCredit FacilitiesDelayed-Draw Term LoanOn December 16, 2021, we entered into a term loan credit agreement, which provides for a 364-day delayed-draw term loan facility up to an aggregate principal amount of $1.0 billion. Borrowings under the Delayed-Draw Term Loan facility may be Base Rate Loans, Daily Floating London Interbank Offered Rate (“LIBOR”) Loans or Eurodollar Rate Loans and bear interest as follows: (1) Eurodollar Rate Loans bear interest at a variable rate equal to the London inter-bank offered rate plus a margin of between 60.0 and 80.0 basis points, depending on the Company’s long-term debt credit rating; (2) Daily Floating LIBOR Rate Loans, like Eurodollar Rate Loans, bear interest at a variable rate equal to the London inter-bank offered rate plus a margin of between 60.0 and 80.0 basis points, depending on the Company’s long-term debt credit rating; and (3) Base Rate Loans bear interest at a variable rate equal to the highest of (a) the Federal funds rate (as published by the Federal Reserve Bank of New York from time to time) plus 1/2 of 1%, (b) Bank of America’s prime rate as publicly announced from time to time and (c) the Eurodollar Rate (as defined in the Credit Agreement) plus 1%; provided that in no event will the Eurodollar Rate be less than 0.0%.We immediately drew down the full $1.0 billion available under the facility as a daily floating LIBOR rate loan (“Delayed-Draw Term Loan”) with repayment of the principal due December 15, 2022. The Delayed-Draw Term Loan bears interest at a variable rate equal to the daily LIBOR rate plus a spread of 60 basis points, based on Fortive’s current credit rating. Borrowings under the Delayed-Draw Term Loan facility are prepayable at the Company’s option in whole or in part without premium or penalty and amounts borrowed may not be reborrowed once repaid.Debt-for-Equity ExchangeOn January 19, 2021, we completed the Debt-for-Equity Exchange of 33.5 million shares of common stock of Vontier, representing all of the Retained Vontier Shares, for $1.1 billion in aggregate principal amount of indebtedness of the Company held by Goldman Sachs & Co., including (i) all $400.0 million of the Term Loan due March 2021 and (ii) $683.2 million of the Term Loan due May 2021. We recorded a loss on extinguishment of the debt included in the Debt-for-Equity Exchange of $94.4 million in the year ended December 31, 2021. Term Loan due May 2021On January 21, 2021, we repaid the remaining $316.8 million outstanding of the Term Loan due May 2021 from the cash proceeds received from Vontier in the Vontier Separation. The fees associated with the prepayment were immaterial. Our credit facility agreements require, among others, that we maintain certain financial covenants and we were in compliance with all of our financial covenants on December 31, 2021.Convertible Senior NotesOn February 22, 2019, we issued $1.4 billion in aggregate principal amount of our 0.875% Convertible Senior Notes due 2022 (the “Convertible Notes”), including $187.5 million in aggregate principal amount resulting from an exercise in full of an over-allotment option. The Convertible Notes were issued in a private placement to certain initial purchasers for resale to qualified institutional buyers pursuant to Rule 144A under the Securities Act. The Convertible Notes bear interest at a rate of 0.875% per year, payable semiannually in arrears on February 15 and August 15 of each year, beginning on August 15, 2019. Of the $1.4 billion in principal amount from the issuance of the Convertible Notes, $1.3 billion was classified as debt and $102.2 million was classified as equity, using an assumed effective interest rate of 3.38%. Debt issuance costs of $24.3 million were proportionately allocated to debt and equity.On February 9, 2021, we repurchased $281 million of the Convertible Notes using the remaining cash proceeds received from Vontier in the Separation and other cash on hand. In connection with the repurchase, we recorded a loss on debt extinguishment during 2021 of $10.5 million. In addition, upon repurchase we recorded $11.6 million as a reduction to additional paid-in capital related to the equity component of the repurchased Convertible Notes. We recognized $45 million in interest expense during the year ended December 31, 2021, of which $10 million related to the contractual coupon rate of 0.875%, $6 million was attributable to the amortization of debt issuance costs, and $29 million was attributable to the amortization of the discount. Additionally, we recognized $0.3 million interest expense related to the Delayed- Draw Term Loan. We recognized $54 million in interest expense during the year ended December 31, 2020, of which $13 million related to the contractual coupon rate of 0.875%, $8 million was attributable to the amortization of debt issuance costs, and $34 million was attributable to the amortization of the discount. The discount at issuance was $102 million and is being amortized over a three-year period. The unamortized discount at December 31, 2021 was $4 million.7783012IMPO.B (PDF_D_SWOP).indd 8383012IMPO.B (PDF_D_SWOP).indd 833/7/22 8:31 PM3/7/22 8:31 PMThe Convertible Notes matured on February 15, 2022, as described in the Subsequent Event section below.Revolving Credit FacilityOn June 16, 2016, we entered into a five-year $1.5 billion Revolving Credit Facility that expired on June 16, 2021. On November 30, 2018, we entered into an amended and restated agreement (the “Credit Agreement”) extending the availability period of the Revolving Credit Facility to November 30, 2023 and increased the facility to $2.0 billion. The Revolving Credit Facility is subject to a one year extension option at our request and with the consent of the lenders. The Credit Agreement also contains an option permitting us to request an increase in the amounts available under the Credit Agreement of up to an aggregate additional $1.0 billion. On April 24, 2020, we amended the $2.0 billion Revolving Credit Facility as described above. The Credit Agreement contains customary representations, warranties, conditions precedent, events of default, indemnities, and affirmative and negative covenants. As of December 31, 2021 and December 31, 2020, we were in compliance with all covenants under the Credit Agreement and had no borrowings outstanding under the Revolving Credit Facility.Commercial Paper ProgramsWe periodically issue commercial paper under our U.S. dollar and Euro-denominated commercial paper programs (“Commercial Paper Programs”). Under these programs, we may issue unsecured promissory notes with maturities not exceeding 397 and 183 days, respectively. During 2020 we paid down and refinanced our outstanding commercial paper with the Term Loan that was initially due March 2021 and was retired in the Debt-for-Equity Exchange. In August 2021, we resumed borrowing under our Commercial Paper Program. Credit support for the Commercial Paper Programs is provided by a five-year $2.0 billion senior unsecured revolving credit facility that expires on November 30, 2023 (the “Revolving Credit Facility”). As of December 31, 2021, no borrowings were outstanding under the Revolving Credit Facility. The details of our Commercial Paper Programs as of December 31, 2021 were as follows ($ in millions):Carrying valueAnnual effective rateWeighted average remaining maturity (in days)U.S. dollar-denominated commercial paper$ 364.9 0.32 %30.3The availability of the Revolving Credit Facility as a standby liquidity facility to repay maturing commercial paper is an important factor in maintaining the Commercial Paper Programs’ credit ratings. We expect to limit any future borrowings under the Revolving Credit Facility to amounts that would leave sufficient credit available under the facility to allow us to borrow, if needed, to repay any outstanding commercial paper as it matures.Our ability to access the commercial paper market, and the related costs of these borrowings, is affected by the strength of our credit rating and market conditions. Any downgrade in our credit rating would increase the cost of borrowing under our commercial paper programs and the Credit Agreement, and could limit or preclude our ability to issue commercial paper. If our access to the commercial paper market is adversely affected due to a downgrade, change in market conditions, or otherwise, we would expect to rely on a combination of available cash, operating cash flow, and the Revolving Credit Facility to provide short-term funding. In such event, the cost of borrowings under the Revolving Credit Facility could be higher than the historic cost of commercial paper borrowings.We classified our borrowings outstanding under the Commercial Paper Programs as of December 31, 2021 as long-term debt in the accompanying Consolidated Balance Sheets as we have the intent and ability, as supported by availability under the Revolving Credit Facility referenced above, to refinance these borrowings for at least one year from the balance sheet date.Proceeds from borrowings under the commercial paper programs are typically available for general corporate purposes, including acquisitions. Registered NotesAs of December 31, 2021, we had outstanding the following senior notes, collectively the “Registered Notes”:•$900 million aggregate principal amount of senior notes due June 15, 2026 issued at 99.644% of their principal amount and bearing interest at the rate of 3.15% per year.•$350 million and $200 million aggregate principal amounts of senior notes due June 15, 2046 issued at 99.783% and 101.564%, respectively, of their principal amounts and bearing interest at the rate of 4.30% per year.7883012IMPO.B (PDF_D_SWOP).indd 8483012IMPO.B (PDF_D_SWOP).indd 843/7/22 8:31 PM3/7/22 8:31 PMInterest on the Registered Notes is payable semi-annually in arrears on June 15 and December 15 of each year. Covenants and Redemption Provisions Applicable to Registered NotesWe may redeem the Registered Notes of the applicable series, in whole or in part, at any time prior to the dates specified in the Registered Notes indenture (the “Call Dates”) by paying the principal amount and the “make-whole” premium specified in the Registered Notes indenture, plus accrued and unpaid interest. Additionally, we may redeem all or any part of the Registered Notes of the applicable series on or after the Call Dates without paying the “make-whole” premium specified in the Registered Notes indenture.Registered Notes SeriesCall Dates3.15% senior unsecured notes due 2026March 15, 20264.30% senior unsecured notes due 2046December 15, 2045If a change of control triggering event occurs, we will, in certain circumstances, be required to make an offer to repurchase the Registered Notes at a purchase price equal to 101% of the principal amount, plus accrued and unpaid interest. A change of control triggering event is defined as the occurrence of both a change of control and a rating event, each as defined in the Registered Notes indenture. Except in connection with a change of control triggering event, the Registered Notes do not have any credit rating downgrade triggers that would accelerate the maturity of the Registered Notes.The Registered Notes contain customary covenants, including limits on the incurrence of certain secured debt and sale/leaseback transactions. None of these covenants are considered restrictive to our operations and as of December 31, 2021, we were in compliance with all of our covenants.OtherWe made interest payments, including amounts allocated to interest expense from discontinued operations during 2020 and 2019 of $123 million and $127 million, respectively. We had no interest payments from discontinued operations during 2021. There are $2.2 billion of minimum principal payments due under our total long-term debt during 2022. The future minimum principal payments due are presented in the following table:TermLoansConvertible and Registered NotesTotal2022$ 1,000.0 $ 1,156.5 $ 2,156.5 2023 — — — 2024 — — — 2025 — — — 2026 — 900.0 900.0 Thereafter — 550.0 550.0 Total principal payments (a)$ 1,000.0 $ 2,606.5 $ 3,606.5 (a) Not included in the table above are discounts, net of premiums and issuance costs associated with the Convertible and Registered Notes and Commercial Paper, which totaled $13 million as of December 31, 2021, and have been recorded as an offset to the carrying amount of the related debt in the accompanying Consolidated Balance Sheet as of December 31, 2021. In addition, the table above does not include principal balance of $365 million under the Commercial Paper Programs.Subsequent EventOn February 15, 2022, the maturity date of the Convertible Notes, Fortive repaid, in cash, $1.2 billion in outstanding principal and accrued interest thereon.NOTE 12. PENSION PLANS Certain employees participate in noncontributory defined benefit pension plans. In general, our policy is to fund these plans based on considerations relating to legal requirements, underlying asset returns, the plan’s funded status, the anticipated deductibility of the contribution, local practices, market conditions, interest rates, and other factors. Our U.S. pension plans are frozen, and as such, there are no ongoing benefit accruals associated with the U.S. pension plans.7983012IMPO.B (PDF_D_SWOP).indd 8583012IMPO.B (PDF_D_SWOP).indd 853/7/22 8:31 PM3/7/22 8:31 PMThe following sets forth the funded status of our plans and amounts recorded in Accumulated other comprehensive income (loss) as of the most recent actuarial valuations using measurement dates of December 31 ($ in millions):U.S. Pension BenefitsNon-U.S. Pension Benefits2021202020212020Change in pension benefit obligation:Benefit obligation at beginning of year$ 47.2 $ 35.2 $ 371.8 $ 328.0 Service cost — — 4.1 4.4 Interest cost 1.0 1.2 2.8 4.0 Employee contributions — — 1.3 1.2 Benefits paid and other plan costs (2.1) (1.9) (9.8) (6.1) Actuarial loss (gain) (1.4) 7.0 (11.7) 17.9 Amendments, settlements and curtailments — — (1.5) (2.3) Plan acquisitions and other 1.7 5.7 1.0 — Foreign exchange rate impact — — (17.2) 24.7 Benefit obligation at end of year 46.4 47.2 340.8 371.8 Change in plan assets:Fair value of plan assets at beginning of year 29.3 26.5 224.4 189.9 Actual return on plan assets 3.4 3.5 6.7 17.3 Employer contributions 1.3 1.2 10.2 10.6 Employee contributions — — 1.4 1.2 Amendments and settlements — — (1.2) (1.8) Benefits paid and other plan costs (2.1) (1.9) (9.7) (6.1) Plan acquisitions and other — — — — Foreign exchange rate impact — — (8.7) 13.3 Fair value of plan assets at end of year 31.9 29.3 223.1 224.4 Funded status$ (14.5) $ (17.9) $ (117.7) $ (147.4) The difference between the accumulated benefit obligation and the projected benefit obligation as of December 31, 2021 and 2020 is immaterial.U.S. Pension BenefitsNon-U.S. Pension Benefits2021202020212020Amounts recorded in the Consolidated Balance Sheets as of December 31Other assets$ — $ — $ 6.2 $ 6.3 Accrued expenses and other current liabilities (0.6) (0.5) (3.9) (4.0) Other long-term liabilities (13.9) (17.4) (120.0) (149.7) Net amount recorded$ (14.5) $ (17.9) $ (117.7) $ (147.4) U.S. Pension BenefitsNon-U.S. Pension Benefits2021202020212020Amounts recorded in AOCI as of December 31Prior service cost$ — $ — $ 2.4 $ 2.9 Actuarial loss (3.5) 6.8 77.1 99.6 Total recorded in AOCI, before tax$ (3.5) $ 6.8 $ 79.5 $ 102.5 8083012IMPO.B (PDF_D_SWOP).indd 8683012IMPO.B (PDF_D_SWOP).indd 863/7/22 8:31 PM3/7/22 8:31 PMWeighted average assumptions used to determine benefit obligations at date of measurementU.S. Pension PlansNon-U.S. Pension Plans2021202020212020Discount rate 2.82 % 2.40 % 1.31 % 0.99 %Rate of compensation increaseN/AN/A 2.43 % 2.36 %Components of net periodic pension costThe following sets forth the components of net periodic pension cost for our plans for the years ended December 31 ($ in millions):U.S. Pension BenefitsNon-U.S. Pension Benefits202120202019202120202019Service cost$ — $ — $ — $ 4.1 $ 4.4 $ 2.2 Interest cost 1.0 1.2 1.3 2.8 4.0 5.3 Expected return on plan assets (1.0) (1.3) (1.3) (5.0) (5.4) (5.5) Amortization of net loss 0.1 — — 3.9 4.1 2.5 Amortization of prior service cost — — — 0.3 0.3 0.2 Net curtailment and settlement loss recognized (0.1) — — 0.2 (0.5) 0.2 Net periodic pension cost$ — $ (0.1) $ — $ 6.3 $ 6.9 $ 4.9 Weighted average assumptions used to determine net periodic pension cost at date of measurementU.S. Pension PlansNon-U.S. Pension Plans202120202019202120202019Discount rate 2.65 % 3.26 % 4.40 % 0.99 % 1.38 % 2.28 %Expected return on plan assets 4.32 % 4.86 % 5.75 % 2.34 % 2.82 % 3.41 %Rate of compensation increaseN/AN/AN/A 2.36 % 2.44 % 2.61 %The discount rates reflect the market rate on December 31 for high-quality fixed-income investments with maturities corresponding to our benefit obligations and are subject to change each year. For non-U.S. plans, rates appropriate for each plan are determined based on investment grade instruments with maturities approximately equal to the average expected benefit payout under the plan. The expected rates of return reflect the asset allocation of the plans and ranged from 1.25% to 4.32% in 2021, 1.25% to 4.86% in 2020, and 1.50% to 5.75% in 2019. The domestic plan rate is based primarily on broad publicly-traded-equity and fixed-income indices and forward-looking estimates of active portfolio and investment management. The expected rates of return on asset assumptions for the non-U.S. plans were determined on a plan-by-plan basis based on the composition of assets.We report all components of net periodic pension costs, with the exception of service costs, in Other non-operating expenses, net in the Consolidated Statements of Earnings for all periods presented. Service costs are reported in Cost of sales and Selling, general, and administrative expenses in the Consolidated Statements of Earnings according to the classification of the participant’s compensation. Plan AssetsPlan assets are invested in various insurance contracts and equity and debt securities as determined by the administrator of each plan. Some of these investments, consisting of mutual funds and other private investments, are valued using the net asset value (“NAV”) method as a practical expedient. The investments valued using the NAV method are allocated across a broad array of funds and diversify the portfolio. The value of the plan assets directly affects the funded status of our pension plans recorded in the financial statements.8183012IMPO.B (PDF_D_SWOP).indd 8783012IMPO.B (PDF_D_SWOP).indd 873/7/22 8:31 PM3/7/22 8:31 PMThe fair values of our pension plan assets as of December 31, 2021, by asset category were as follows ($ in millions): Quoted Prices inActive Market(Level 1)Significant OtherObservable Inputs(Level 2)SignificantUnobservableInputs(Level 3)TotalCash and equivalents$ 3.7 $ — $ — $ 3.7 Mutual funds — 32.6 — 32.6 Insurance contracts — 31.7 — 31.7 Total$ 3.7 $ 64.3 $ — $ 68.0 Investments measured at NAV(a):Mutual funds 125.6 Real estate funds 18.7 Other private investments 42.7 Total assets at fair value$ 255.0 (a) The fair value amounts presented in the table above are intended to permit reconciliation of the fair value hierarchy to the total fair value of plan assets.The fair values of our pension plan assets as of December 31, 2020, by asset category were as follows ($ in millions):Quoted Prices inActive Market(Level 1)Significant OtherObservable Inputs(Level 2)SignificantUnobservableInputs(Level 3)TotalCash and equivalents$ 5.4 $ — $ — $ 5.4 Mutual funds — 30.8 — 30.8 Insurance contracts — 27.8 — 27.8 Total$ 5.4 $ 58.6 $ — $ 64.0 Investments measured at NAV(a):Mutual funds 155.1 Real estate funds 15.2 Other private investments 19.4 Total assets at fair value$ 253.7 (a) The fair value amounts presented in the table above are intended to permit reconciliation of the fair value hierarchy to the total fair value of plan assets.Certain mutual funds are valued at the quoted closing price reported on the active market on which the individual securities are traded. Common stock, corporate bonds, and mutual funds that are not traded on an active market are valued at quoted prices reported by investment brokers and dealers based on the underlying terms of the security and comparison to similar securities traded on an active market.Certain mutual funds and other private investments are valued using NAV based on the information provided by the asset fund managers, which reflects the plan’s share of the fair value of the net assets of the investment. Depending on the nature of the assets, the underlying investments are valued using a combination of either discounted cash flows, earnings and market multiples, third party appraisals, or through reference to the quoted market prices of the underlying investments held by the venture, partnership, or private entity where available. In addition, some of these investments have limits on their redemption to monthly, quarterly, semiannually, or annually and may require up to 90 days prior written notice. Valuation adjustments reflect changes in operating results, financial condition, or prospects of the applicable portfolio company.The methods described above may produce a fair value estimate that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while we believe the valuation methods are appropriate and consistent with the methods used by other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.Expected Contributions8283012IMPO.B (PDF_D_SWOP).indd 8883012IMPO.B (PDF_D_SWOP).indd 883/7/22 8:31 PM3/7/22 8:31 PMDuring 2021, we contributed $1 million and $10 million to our U.S. and non-U.S. defined benefit pension plans, respectively. During 2022, our cash contribution requirements for our U.S. and non-U.S. defined benefit pension plans are expected to be approximately $2 million and $12 million, respectively.The following sets forth benefit payments to participants, which reflect expected future service, as appropriate, expected to be paid by the plans in the periods indicated ($ in millions):U.S. Pension PlansNon-U.S. Pension PlansAll Pension Plans2022$ 2.4 $ 10.2 $ 12.6 2023 2.5 9.9 12.4 2024 2.6 10.1 12.7 2025 2.7 10.1 12.8 2026 2.8 10.0 12.8 2027-2031 14.7 51.0 65.7 Defined Contribution PlansWe administer and maintain 401(k) programs and contributions to the 401(k) programs are determined based on a percentage of compensation. We recognized compensation expense for our participating U.S. employees in the 401(k) programs totaling $57 million in 2021, $51 million in 2020, and $48 million in 2019.NOTE 13. SALES We derive revenue primarily from the sales of products and software, and services. Revenue is recognized when control of promised products or services is transferred to customers in an amount that reflects the consideration we expect to be entitled to in exchange for those products or services. Contract Assets — In certain circumstances, we record contract assets which include unbilled amounts typically resulting from sales under contracts when revenue recognized exceeds the amount billed to the customer, and right to payment is not only subject to the passage of time. Contract assets were $71 million as of December 31, 2021 and $56 million as of December 31, 2020. Contract Costs — We incur direct incremental costs to obtain certain contracts, typically sales-related commissions and costs associated with assets used by our customers in certain service arrangements. Deferred sales-related commissions are generally not capitalized as the amortization period is one year or less, and we elected to use the practical expedient to expense these sales commissions as incurred. As of December 31, 2021, we had $27 million in net revenue-related contract assets primarily related to certain software contracts recorded in Prepaid expenses and other current assets and Other assets in our Consolidated Balance Sheet. Our revenue-related contract assets at December 31, 2020 were $31 million. These assets have estimated useful lives between 3 and 8 years.Impairment losses recognized on our contract-related assets were immaterial during both the years ended December 31, 2021 and December 31, 2020.Contract Liabilities — Our contract liabilities consist of deferred revenue generally related to PCS and extended warranty sales, where in most cases we receive up-front payment and recognize revenue over the support term. We classify deferred revenue as current or noncurrent based on the timing of when we expect to recognize revenue. The noncurrent portion of deferred revenue is included in Other long-term liabilities in the Consolidated Balance Sheets. Our contract liabilities as of December 31 consisted of the following ($ in millions):20212020Deferred revenue - current$ 457.6 $ 376.4 Deferred revenue - noncurrent 33.8 34.2 Total contract liabilities$ 491.4 $ 410.6 In the year ended December 31, 2021, we recognized $307 million of revenue-related to our contract liabilities at January 1, 2021. The change in our contract liabilities from December 31, 2020 to December 31, 2021 was primarily due to an increase of $52.4 million from acquisitions and the timing of cash receipts and sales of PCS and extended warranty services.8383012IMPO.B (PDF_D_SWOP).indd 8983012IMPO.B (PDF_D_SWOP).indd 893/7/22 8:31 PM3/7/22 8:31 PMRemaining Performance Obligations — Our remaining performance obligations represent the transaction price of firm, noncancelable orders and the average contract value for software contracts, for which work has not been performed. We have excluded performance obligations with an original expected duration of one year or less from the amounts below.The aggregate performance obligations attributable to each of our segments as of December 31, 2021 is as follows ($ in millions):2021Intelligent Operating Solutions$ 638.7 Precision Technologies 52.9 Advanced Healthcare Solutions 48.5 Total remaining performance obligations$ 740.1 The majority of remaining performance obligations are related to service and support contracts, which we expect to fulfill approximately 80 percent within the next two years, approximately 90 percent within the next three years, and substantially all within four years.Disaggregation of Revenue We disaggregate revenue from contracts with customers by sales of product and services, geographic location, and end market for each of our segments, as we believe it best depicts how the nature, amount, timing, and uncertainty of our revenue and cash flows are affected by economic factors. 8483012IMPO.B (PDF_D_SWOP).indd 9083012IMPO.B (PDF_D_SWOP).indd 903/7/22 8:31 PM3/7/22 8:31 PMDisaggregation of revenue for the year ended December 31, 2021 is presented as follows ($ in millions):TotalIntelligent Operating SolutionsPrecision TechnologiesAdvanced Healthcare SolutionsSales:Sales of products$ 4,496.1 $ 1,899.8 $ 1,630.6 $ 965.7 Sales of services 758.6 269.6 218.3 270.7 Total$ 5,254.7 $ 2,169.4 $ 1,848.9 $ 1,236.4 Geographic:United States$ 2,683.0 $ 1,118.1 $ 921.2 $ 643.7 China 650.7 212.3 321.1 117.3 All other (each country individually less than 5% of total sales) 1,921.0 839.0 606.6 475.4 Total$ 5,254.7 $ 2,169.4 $ 1,848.9 $ 1,236.4 End markets:Direct sales:(a)Medical$ 1,332.7 $ 37.7 $ 138.4 $ 1,156.6 Industrial & Manufacturing 1,256.9 816.0 416.3 24.6 Utilities & Power 390.2 223.4 166.8 — Government 389.2 203.8 145.8 39.6 Communication, Electronics & Semiconductor 381.4 118.0 261.5 1.9 Aerospace & Defense 239.0 — 239.0 — Oil & Gas 262.2 252.1 10.1 — Retail & Consumer 217.2 129.0 88.2 — Other 506.3 252.3 253.9 0.1 Total direct sales 4,975.1 2,032.3 1,720.0 1,222.8 Distributors 279.6 137.1 128.9 13.6 Total$ 5,254.7 $ 2,169.4 $ 1,848.9 $ 1,236.4 (a) Direct Sales also include sales made through third-party distributors to these end markets. 8583012IMPO.B (PDF_D_SWOP).indd 9183012IMPO.B (PDF_D_SWOP).indd 913/7/22 8:31 PM3/7/22 8:31 PMDisaggregation of revenue for the year ended December 31, 2020 is presented as follows ($ in millions):TotalIntelligent Operating SolutionsPrecision TechnologiesAdvanced Healthcare SolutionsSales:Sales of products$ 3,956.7 $ 1,677.2 $ 1,445.7 $ 833.8 Sales of services 677.7 206.5 205.6 265.6 Total$ 4,634.4 $ 1,883.7 $ 1,651.3 $ 1,099.4 Geographic:United States$ 2,436.6 $ 970.3 $ 856.0 $ 610.3 China 534.1 172.0 265.8 96.3 All other (each country individually less than 5% of total sales) 1,663.7 741.4 529.5 392.8 Total$ 4,634.4 $ 1,883.7 $ 1,651.3 $ 1,099.4 End markets:(a)Direct sales:Medical$ 1,185.2 $ 39.1 $ 114.0 $ 1,032.1 Industrial & Manufacturing 1,057.0 700.2 335.3 21.5 Utilities & Power 357.8 208.3 149.5 — Government 348.0 170.5 146.3 31.2 Communication, Electronics & Semiconductor 290.9 116.3 172.5 2.1 Aerospace & Defense 250.3 20.4 229.9 — Oil & Gas 228.6 217.7 10.9 — Retail & Consumer 171.3 90.4 80.9 — Other 480.4 225.3 255.1 — Total direct sales 4,369.5 1,788.2 1,494.4 1,086.9 Distributors 264.9 95.5 156.9 12.5 Total$ 4,634.4 $ 1,883.7 $ 1,651.3 $ 1,099.4 (a) Direct Sales also include sales made through third-party distributors to these end markets.8683012IMPO.B (PDF_D_SWOP).indd 9283012IMPO.B (PDF_D_SWOP).indd 923/7/22 8:31 PM3/7/22 8:31 PMDisaggregation of revenue for the year ended December 31, 2019 is presented as follows ($ in millions):TotalIntelligent Operating SolutionsPrecision TechnologiesAdvanced Healthcare SolutionsSales:Sales of products$ 3,922.5 $ 1,677.6 $ 1,587.0 $ 657.9 Sales of services 641.4 221.3 221.4 198.7 Total$ 4,563.9 $ 1,898.9 $ 1,808.4 $ 856.6 Geographic:United States$ 2,394.2 $ 1,135.7 $ 917.4 $ 341.1 China 501.2 181.6 279.5 40.1 All other (each country individually less than 5% of total sales) 1,668.5 581.6 611.5 475.4 Total$ 4,563.9 $ 1,898.9 $ 1,808.4 $ 856.6 End markets:(a)Direct sales:Medical$ 925.3 $ 16.2 $ 104.0 $ 805.1 Industrial & Manufacturing 1,050.4 680.2 349.8 20.4 Utilities & Power 396.1 217.2 178.9 — Government 284.3 117.2 148.9 18.2 Communication, Electronics & Semiconductor 363.1 131.4 231.7 — Aerospace & Defense 276.8 22.3 254.5 — Oil & Gas 222.9 207.6 15.3 — Retail & Consumer 219.9 116.0 103.4 0.5 Other 528.4 252.2 275.9 0.3 Total direct sales 4,267.2 1,760.3 1,662.4 844.5 Distributors 296.7 138.6 146.0 12.1 Total$ 4,563.9 $ 1,898.9 $ 1,808.4 $ 856.6 (a) Direct Sales also include sales made through third-party distributors to these end markets.8783012IMPO.B (PDF_D_SWOP).indd 9383012IMPO.B (PDF_D_SWOP).indd 933/7/22 8:31 PM3/7/22 8:31 PMNOTE 14. INCOME TAXES Earnings and Income TaxesEarnings from continuing operations before income taxes for the years ended December 31 were as follows ($ in millions):202120202019United States$ 367.4 $ 1,213.3 $ 91.3 International 310.1 294.4 245.4 Total$ 677.5 $ 1,507.7 $ 336.7 The continuing operations provision for income taxes for the years ended December 31 were as follows ($ in millions):202120202019Current:Federal U.S.$ 21.5 $ 59.4 $ 23.4 Non-U.S. 75.0 74.3 48.7 State and local 7.8 19.4 5.0 Deferred:Federal U.S. (21.9) (44.1) 16.9 Non-U.S. (16.9) (33.0) (17.4) State and local (2.2) (20.5) (8.0) Income tax provision$ 63.3 $ 55.5 $ 68.6 Effective Income Tax RateThe continuing operations effective income tax rate for the years ended December 31 varies from the U.S. statutory federal income tax rate as follows: Percentage of Pretax Earnings 202120202019Statutory federal income tax rate 21.0 % 21.0 % 21.0 %Increase (decrease) in tax rate resulting from:State income taxes (net of federal income tax benefit) 0.9 % 0.4 % (3.3) %Foreign income taxed at different rates than U.S. statutory rate (4.4) % (0.5) % (1.7) %U.S. federal permanent differences related to the TCJA (5.6) % (0.9) % 1.2 %Compensation related (0.3) % (0.5) % (1.7) %Other (0.3) % (0.2) % 4.9 %Effective income tax rate before adjustments related to the unrealized gain on the Retained Vontier Shares 11.3 % 19.3 % 20.4 %Adjustment for the unrealized gain on the Retained Vontier Shares (2.0) % (15.6) % — %Effective income tax rate after adjustments related to the unrealized gain on the Retained Vontier Shares 9.3 % 3.7 % 20.4 %Our effective tax rate for 2021 differs from the U.S. federal statutory rate of 21% due primarily to the effect of the Tax Cuts and Jobs Act of 2017 (the “TCJA”) U.S. federal permanent differences, the impact of credits and deductions provided by law, earnings outside the United States that are indefinitely reinvested and taxed at rates lower than the U.S. federal statutory rate, and a permanent difference on the realized gain on our Retained Vontier Shares due to the tax-free treatment of our disposition of the shares through the Debt-for-Equity Exchange that was completed on January 19, 2021. The Debt-for-Equity Exchange included an exchange of all of our Vontier common stock owned as of December 31, 2020.Our effective tax rate for 2020 differs from the U.S. federal statutory rate of 21% due primarily to the effect of the TCJA U.S. federal permanent differences, the impact of credits and deductions provided by law, earnings outside the United States that are indefinitely reinvested and taxed at rates lower than the U.S. federal statutory rate, offset by tax costs associated with 8883012IMPO.B (PDF_D_SWOP).indd 9483012IMPO.B (PDF_D_SWOP).indd 943/7/22 8:31 PM3/7/22 8:31 PMrepatriating a portion of our previously reinvested earnings outside of the United States, and a permanent difference on the unrealized gain on our Retained Vontier Shares due to the tax-free treatment of our disposition of the shares through the Debt-for-Equity Exchange that was completed on January 19, 2021. The Debt-for-Equity Exchange included an exchange of all of our Vontier common stock owned as of December 31, 2020.Our effective tax rate for 2019 differs from the U.S. federal statutory rate of 21% due primarily to the effect of the TCJA U.S. federal permanent differences, the impact of credits and deductions provided by law, and earnings outside the United States that are indefinitely reinvested and taxed at rates lower than the U.S. federal statutory rate. We conduct business globally, and, as part of our global business, we file numerous income tax returns in the U.S. federal, state and foreign jurisdictions. After the TCJA, our ability to obtain a tax benefit in certain countries that continue to have lower statutory tax rates than the United States is dependent on our levels of taxable income in such foreign countries. We believe that a change in the statutory tax rate of any individual foreign country would not typically have a material effect on our financial statements given the geographic dispersion of our taxable income.We are routinely examined by various domestic and international taxing authorities. The amount of income taxes we pay is subject to audit by federal, state, and foreign tax authorities, which may result in proposed assessments. The Company is subject to examination in the United States, various states, and foreign jurisdictions for the tax years 2010 to 2021. These examinations include filings of tax returns prior to our separation from Danaher, tax returns of enterprises no longer in our portfolio, and tax returns for pre-acquisition periods of enterprises added to our portfolio. Significant obligations are detailed in the tax matters agreements in connection with the separation of Fortive from Danaher on July 1, 2016, the split-off of the A&S business on October 1, 2018, and the Vontier separation on October 9, 2020. We review our global tax positions on a quarterly basis. Based on these reviews, the results of discussions and resolutions of matters with certain tax authorities, tax rulings and court decisions, and the expiration of statutes of limitations reserves for contingent tax liabilities are accrued or adjusted as necessary.We made income tax payments related to continuing operations of $103 million, $95 million, and $79 million during the years ended December 31, 2021, December 31, 2020 and December 31, 2019, respectively.8983012IMPO.B (PDF_D_SWOP).indd 9583012IMPO.B (PDF_D_SWOP).indd 953/7/22 8:31 PM3/7/22 8:31 PMDeferred Tax Assets and LiabilitiesAll deferred tax assets and liabilities have been classified as noncurrent and are included in Other assets and Other long-term liabilities in the Consolidated Balance Sheets. Deferred income tax assets and liabilities from continuing operations as of December 31 were as follows ($ in millions):20212020Deferred Tax Assets:Allowance for doubtful accounts$ 7.5 $ 8.4 Operating lease liabilities 45.6 47.9 Inventories 11.4 12.5 Pension benefits 36.9 32.1 Environmental and regulatory compliance 2.2 4.1 Other accruals and prepayments 30.6 16.5 Deferred service income 5.2 4.6 Warranty services 5.4 3.9 Stock-based compensation expense 29.0 27.9 Tax credit and loss carryforwards 214.8 155.1 Valuation allowances (73.7) (47.1) Total deferred tax assets$ 314.9 $ 265.9 Deferred Tax Liabilities:Property, plant and equipment$ (43.8) $ (46.0) Operating lease right-of-use assets (42.6) (44.3) Insurance, including self-insurance (157.3) (166.8) Goodwill and other intangibles (765.1) (554.4) Other (4.0) (27.6) Total deferred tax liabilities (1,012.8) (839.1) Net deferred tax liability$ (697.9) $ (573.2) In accordance with GAAP, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted rates expected to be in effect during the year in which the differences reverse. Deferred tax assets generally represent items that can be used as a tax deduction or credit in our tax return in future years for which the tax benefit has already been reflected in our Consolidated Statements of Earnings. Deferred tax liabilities generally represent items that have already been taken as a deduction on our tax return but have not yet been recognized as an expense in our Consolidated Statements of Earnings. The effect on deferred tax assets and liabilities due to a change in tax rates is recognized in income tax expense in the period that includes the enactment date.Our deferred tax assets are reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not (a likelihood of more than 50 percent) that some portion or all of the deferred tax assets will not be realized. We evaluate the realizability of deferred income tax assets for each of the jurisdictions in which we operate. If we experience cumulative pretax income in a particular jurisdiction in the three-year period including the current and prior two years, we normally conclude that the deferred income tax assets will more likely than not be realizable and no valuation allowance is recognized, unless known or planned operating developments would lead management to conclude otherwise. However, if we experience cumulative pretax losses in a particular jurisdiction in the three-year period including the current and prior two years, we then consider a series of factors in the determination of whether the deferred income tax assets can be realized. These factors include historical operating results, known or planned operating developments, the period of time over which certain temporary differences will reverse, consideration of the utilization of certain deferred income tax liabilities, tax law carryback capability in the particular country, and prudent and feasible tax planning strategies. After evaluation of these factors, if the deferred income tax assets are expected to be realized within the tax carryforward period allowed for that specific country, we would conclude that no valuation allowance would be required. To the extent that the deferred income tax assets exceed the amount that is expected to be realized within the tax carryforward period for a particular jurisdiction, we establish a valuation allowance.Applying the above methodology, valuation allowances have been established for certain deferred income tax assets to the extent they are not expected to be realized within the particular tax carryforward period.9083012IMPO.B (PDF_D_SWOP).indd 9683012IMPO.B (PDF_D_SWOP).indd 963/7/22 8:31 PM3/7/22 8:31 PMDeferred taxes associated with U.S. entities from continuing operations consist of net deferred tax liabilities of approximately $698 million and $550 million inclusive of valuation allowances of $52 million and $25 million as of December 31, 2021 and December 31, 2020, respectively. Deferred taxes associated with non-U.S. entities from continuing operations consist of net deferred tax liabilities of $0.1 million and $23 million, inclusive of valuation allowances of $21 million and $22 million, as of December 31, 2021 and December 31, 2020, respectively. Our valuation allowance increased by $27 million and by $3 million during the years ended December 31, 2021 and December 31, 2020, respectively, due primarily to foreign net operating losses in both years and acquired domestic tax attributes in 2021.As of December 31, 2021, our U.S. and non-U.S. net operating loss carryforwards totaled $1.8 billion, of which $285 million is related to federal net operating loss carryforwards, $1.0 billion is related to state net operating loss carryforwards, and $483 million is related to non-U.S. net operating loss carryforwards. Included in deferred tax assets as of December 31, 2021 are tax benefits for U.S. and non-U.S. net operating loss carryforwards totaling $182 million, before applicable valuation allowances of $53 million. Certain of these losses can be carried forward indefinitely and others can be carried forward to various dates from 2022 through 2041. Recognition of some of these loss carryforwards is subject to an annual limit, which may cause them to expire before they are used.As of December 31, 2021, our U.S. and non-U.S. tax credit carryforwards totaled $33 million, which is primarily related to U.S. tax credit carryforwards. Certain of these credits can be carried forward indefinitely and other can be carried forward to various dates from 2022 through 2041. As of December 31, 2021, we maintain a $15 million valuation allowance related to certain tax credit carryforwards.Unrecognized Tax BenefitsWe recognize tax benefits from uncertain tax positions only if, in our assessment, it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. Judgment is required in evaluating tax positions and determining income tax provisions. We re-evaluate the technical merits of our tax positions and may recognize an uncertain tax benefit in certain in certain circumstances, including when: (i) a tax audit is completed; (ii) applicable tax laws change, including a tax case ruling or legislative guidance; or (iii) the applicable statute of limitations expires. We recognize potential accrued interest and penalties associated with unrecognized tax positions in income tax expense.As of December 31, 2021, gross unrecognized tax benefits for continuing and discontinued operations were $193 million ($217 million total, including $25 million associated with interest and penalties, and net of the impact of $1 million of indirect tax benefits). As of December 31, 2020, gross unrecognized tax benefits for continuing and discontinued operations were $200 million ($224 million total, including $26 million associated with interest and penalties, and net of the impact of $2 million of indirect tax benefits). We recognized approximately $6 million, $10 million and $8 million in potential interest and penalties associated with uncertain tax positions during 2021, 2020, and 2019, respectively. To the extent taxes are not assessed with respect to uncertain tax positions, substantially all amounts accrued (including interest and penalties and net of indirect offsets) will be reduced and reflected as a reduction of the overall income tax provision. Unrecognized tax benefits and associated accrued interest and penalties are included in our income tax provision.The Company is subject to examination in the United States, various states, and foreign jurisdictions for the tax years 2010 to 2021. These examinations include filings of tax returns prior to our separation from Danaher, tax returns of enterprises no longer in our portfolio, and tax returns for pre-acquisition periods of enterprises added to our portfolio. Significant obligations are detailed in the tax matters agreements in connection with the separation of Fortive from Danaher on July 1, 2016, the split-off of the A&S business on October 1, 2018, and the Vontier separation on October 9, 2020.Some examinations may conclude in the next twelve months and the unrecognized tax benefits recorded in relation to the audits may differ from actual settlement amounts. It is not practical to estimate the effect, if any, of any amount of such change during the next twelve months to previously recorded uncertain tax positions in connection with the audits. The Company does not anticipate that there will be a material increase or decrease in the total amount of unrecognized tax benefits in the next twelve months.9183012IMPO.B (PDF_D_SWOP).indd 9783012IMPO.B (PDF_D_SWOP).indd 973/7/22 8:31 PM3/7/22 8:31 PMA reconciliation of the beginning and ending amount of unrecognized tax benefits, excluding amounts accrued for potential interest and penalties, is as follows ($ in millions):202120202019Unrecognized tax benefits, beginning of year$ 200.1 $ 214.9 $ 133.4 Additions based on tax positions related to the current year 7.9 10.4 17.8 Additions for tax positions of prior years 3.4 16.1 79.7 Reductions for tax positions of prior years (1.4) (26.5) (13.0) Lapse of statute of limitations (15.6) (6.1) (2.3) Settlements (0.2) (0.5) (0.3) Effect of foreign currency translation (1.2) 1.7 (0.4) Separation related adjustments (a) — (9.9) — Unrecognized tax benefits, end of year$ 193.0 $ 200.1 $ 214.9 (a) Unrecognized tax benefit reserves decreased in 2020 by $10 million upon separation from Vontier in accordance with the Agreements. Repatriation and Unremitted EarningsThe TCJA eliminated the U.S. tax cost for qualified repatriation beginning in 2018 but foreign cumulative earnings remain subject to foreign remittance taxes. As of December 31, 2021, we recorded estimated incremental foreign remittance taxes of $1 million on the planned 2022 repatriation of $542 million of previously unremitted earnings from 2021 and prior periods.The TCJA imposed a final U.S. tax on cumulative earnings from our foreign operations that we have previously made an assertion regarding the amount of such earnings intended for indefinite reinvestment. As of December 31, 2021, the earnings we plan to reinvest indefinitely outside of the United States for which foreign deferred taxes have not been provided was estimated at $2.0 billion. No provisions for foreign remittance taxes have been made with respect to earnings that are planned to be reinvested indefinitely. The amount of foreign remittance taxes that may be applicable to such earnings is not readily determinable given local law restrictions that may apply to a portion of such earnings, unknown changes in foreign tax law that may occur during the applicable restriction periods caused by applicable local corporate law for cash repatriation, and the various tax planning alternatives we could employ if we repatriated these earnings.NOTE 15. RESTRUCTURING AND OTHER RELATED CHARGES Restructuring and other related charges for the years ended December 31 were as follows ($ in millions): 202120202019Employee severance related$ 12.8 $ 21.1 $ 46.9 Facility exit and other related 5.9 5.7 3.5 Total restructuring and other related charges$ 18.7 $ 26.8 $ 50.4 Substantially all restructuring activities initiated in 2021 were completed by December 31, 2021. We expect substantially all cash payments associated with remaining termination benefits recorded in 2021 will be paid in 2022, and all planned restructuring activities related to the 2020 and 2019 plans have been completed.The nature of our restructuring and related activities initiated in 2021, 2020 and 2019 were broadly consistent throughout our segments and focused on improvements in operational efficiency through targeted workforce reductions and facility consolidations and closures. We incurred these costs to position ourselves to provide superior products and services to our customers in a cost-efficient manner, while taking into consideration broad economic uncertainties, including those created by the COVID-19 pandemic.9283012IMPO.B (PDF_D_SWOP).indd 9883012IMPO.B (PDF_D_SWOP).indd 983/7/22 8:31 PM3/7/22 8:31 PMRestructuring and other related charges recorded for the years ended December 31 by segment were as follows ($ in millions):202120202019Intelligent Operating Solutions$ 7.4 $ 12.5 $ 23.8 Precision Technologies 6.8 9.8 26.4 Advanced Healthcare Solutions 4.5 4.5 0.2 Total$ 18.7 $ 26.8 $ 50.4 The table below summarizes the accrual balance and utilization by type of restructuring cost associated with our 2021 and 2020 restructuring actions ($ in millions):Balanceas ofJanuary 1, 2020CostsIncurredPaid/SettledBalance as ofDecember31, 2020CostsIncurredPaid/SettledBalance as of December 31, 2021Employee severance and related$ 32.4 $ 21.1 $ (38.7) $ 14.8 $ 12.8 $ (17.5) $ 10.1 Facility exit and other related 0.2 5.7 (5.3) 0.6 5.9 (5.8) 0.7 Total$ 32.6 $ 26.8 $ (44.0) $ 15.4 $ 18.7 $ (23.3) $ 10.8 The restructuring and other related charges incurred during 2021, 2020, and 2019 were substantially all cash charges. These charges are reflected in the following captions in the Consolidated Statements of Earnings ($ in millions):202120202019Cost of sales$ 2.8 $ 8.2 $ 13.8 Selling, general, and administrative expenses 15.9 18.6 36.6 Total$ 18.7 $ 26.8 $ 50.4 NOTE 16. LITIGATION AND CONTINGENCIES We are, from time to time, subject to a variety of litigation and other proceedings incidental to our business, including lawsuits involving claims for damages arising out of the use of our products, software, and services, claims relating to intellectual property matters, employment matters, commercial disputes, and personal injury as well as regulatory investigations or enforcement. We may also become subject to lawsuits as a result of past or future acquisitions or as a result of liabilities retained from, or representations, warranties, or indemnities provided in connection with divested businesses. Some of these lawsuits may include claims for punitive and consequential as well as compensatory damages. Based upon our experience, current information and applicable law, we do not believe that these proceedings and claims will have a material adverse effect on our financial position, results of operations, or cash flows.While we maintain workers compensation, property, cargo, automobile, crime, fiduciary, product, general, and directors’ and officers’ liability insurance (and have acquired rights under similar policies in connection with certain acquisitions) that cover a portion of these claims, this insurance may be insufficient or unavailable to cover such losses. In addition, while we believe we are entitled to indemnification from third parties for some of these claims, these rights may also be insufficient or unavailable to cover such losses. We maintain third party insurance policies up to certain limits to cover certain liability costs in excess of predetermined retained amounts. For most insured risks, we purchase outside insurance coverage only for severe losses (stop loss insurance) and reserves must be established and maintained with respect to amounts within the self-insured retention.In accordance with accounting guidance, we record a liability in our consolidated financial statements for loss contingencies when a loss is known or considered probable and the amount can be reasonably estimated. If the reasonable estimate of a known or probable loss is a range, and no amount within the range is a better estimate than any other, the minimum amount of the range is accrued. If a loss does not meet the known or probable level but is reasonably possible and a loss or range of loss can be reasonably estimated, the estimated loss or range of loss is disclosed. These reserves consist of specific reserves for individual claims and additional amounts for anticipated developments of these claims as well as for incurred but not yet reported claims. The specific reserves for individual known claims are quantified with the assistance of legal counsel and outside risk insurance professionals where appropriate. In addition, outside risk insurance professionals may assist in the determination of reserves for incurred but not yet reported claims through evaluation of our specific loss history, actual claims reported, and industry trends among statistical and other factors. Reserve estimates are adjusted as additional information regarding a claim becomes known. While we actively pursue financial recoveries from insurance providers, we do not recognize any recoveries until realized or until such time as a sustained pattern of collections is established related to historical matters of a similar nature and magnitude. If risk insurance reserves we have established are inadequate, we would be required 9383012IMPO.B (PDF_D_SWOP).indd 9983012IMPO.B (PDF_D_SWOP).indd 993/7/22 8:31 PM3/7/22 8:31 PMto incur an expense equal to the amount of the loss incurred in excess of the reserves, which would adversely affect our net earnings. Refer to Note 9 for information about the amount of our accruals for self-insurance and litigation liability.In addition, our operations, products, and services are subject to environmental laws and regulations in various jurisdictions, which impose limitations on the discharge of pollutants into the environment and establish standards for the generation, use, treatment, storage, and disposal of hazardous and non-hazardous wastes. A number of our operations involve the handling, manufacturing, use, or sale of substances that are or could be classified as hazardous materials within the meaning of applicable laws. We must also comply with various health and safety regulations in both the United States and abroad in connection with our operations. Compliance with these laws and regulations has not had and, based on current information and the applicable laws and regulations currently in effect, is not expected to have a material effect on our capital expenditures, earnings, or competitive position, and we do not anticipate material capital expenditures for environmental control facilities.In addition to environmental compliance costs, from time to time, we incur costs related to alleged damages associated with past or current waste disposal practices or other hazardous materials handling practices. For example, generators of hazardous substances found in disposal sites at which environmental problems are alleged to exist, as well as the current and former owners of those sites and certain other classes of persons, are subject to claims brought by state and federal regulatory agencies pursuant to statutory authority. We have received notification from the United States Environmental Protection Agency, and from state and non-U.S. environmental agencies, that conditions at certain sites where we and others previously disposed of hazardous wastes and/or are or were property owners require clean-up and other possible remedial action, including sites where we have been identified as a potentially responsible party under United States federal and state environmental laws. We have projects underway at a number of current and former facilities, in both the United States and abroad, to investigate and remediate environmental contamination resulting from past operations. Remediation activities generally relate to soil and/or groundwater contamination and may include pre-remedial activities such as fact-finding and investigation, risk assessment, feasibility study and/or design, as well as remediation actions such as contaminant removal, monitoring and/or installation, operation and maintenance of longer-term remediation systems. From time to time we are also party to personal injury or other claims brought by private parties alleging injury due to the presence of, or exposure to, hazardous substances.We have recorded a provision for environmental investigation and remediation and environmental-related claims with respect to sites we and our subsidiaries owned or formerly owned and third party sites where we have been determined to be a potentially responsible party. We generally make an assessment of the costs involved for our remediation efforts based on environmental studies, as well as our prior experience with similar sites. The ultimate cost of site cleanup is difficult to predict given the uncertainties of our involvement in certain sites, uncertainties regarding the extent of the required cleanup, the availability of alternative cleanup methods, variations in the interpretation of applicable laws and regulations, the possibility of insurance recoveries with respect to certain sites and the fact that imposition of joint and several liability with right of contribution is possible under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 and other environmental laws and regulations. If we determine that potential liability for a particular site or with respect to a personal injury claim is known or considered probable and reasonably estimable, we accrue the total estimated loss, including investigation and remediation costs, associated with the site or claim. As of December 31, 2021 and 2020 we had reserves of $6 million and $15 million, respectively, included in Accrued expenses and Other liabilities in the Consolidated Balance Sheets for environmental matters that are known or considered probable and reasonably estimable, which reflects our best estimate of the costs to be incurred with respect to such matters on an undiscounted basis.All reserves for environmental liabilities have been recorded without giving effect to any possible future third party recoveries. While we actively pursue insurance recoveries, as well as recoveries from other potentially responsible parties, we do not recognize any insurance recoveries for environmental liability claims until realized or until such time as a sustained pattern of collections is established related to historical matters of a similar nature and magnitude.As of both December 31, 2021 and 2020, we had approximately $64 million and $68 million, respectively, of guarantees consisting primarily of outstanding standby letters of credit, bank guarantees, and performance and bid bonds. These guarantees have been provided in connection with certain arrangements with vendors, customers, financing counterparties, and governmental entities to secure our obligations and/or performance requirements related to specific transactions. We believe that if the obligations under these instruments were triggered, they would not have a material effect on our consolidated financial statements.We have entered into agreements to purchase goods or services that are enforceable and legally binding on us and that specify all significant terms, including fixed or minimum quantities to be purchased, fixed, minimum or variable price provisions and the approximate timing of the transaction. Purchase obligations exclude agreements that are cancellable at any time without penalty. As of December 31, 2021, the aggregate amount of our purchase obligations totaled $493 million, of which $369 million are expected to be settled within one year of December 31, 2021.9483012IMPO.B (PDF_D_SWOP).indd 10083012IMPO.B (PDF_D_SWOP).indd 1003/7/22 8:31 PM3/7/22 8:31 PMNOTE 17. STOCK BASED COMPENSATIONThe 2016 Stock Incentive Plan (the “Stock Plan”) provides for the grant of stock appreciation rights, restricted stock units (“RSUs”), performance stock units (“PSUs”), and restricted stock awards (“RSAs”) (collectively, “Stock Awards”), stock options, or any other stock-based award. A total of 43 million shares of our common stock have been authorized for issuance under the Stock Plan. As of December 31, 2021, approximately 18.6 million shares of our common stock remain available for issuance under the Stock Plan. Stock options under the Stock Plan generally vest pro rata over a four-year or five-year period and terminate 10 years from the grant date, though the specific terms of each grant are determined by the Compensation Committee of our Board of Directors. Our executive officers and certain other employees may be awarded stock options with different vesting criteria and stock options granted to non-employee directors are fully vested as of the grant date. Exercise prices for stock options granted under the Stock Plan were equal to the closing price of Fortive’s common stock on the NYSE on the date of grant, while stock options issued as conversion awards in connection with the separation from Danaher were priced to maintain the economic value before and after the separation. RSUs and RSAs issued under the Stock Plan provide for the issuance of common stock at no cost to the holder. RSUs granted to employees under the Stock Plan generally provide for time-based vesting over four or five years, although certain employees may be awarded RSUs with different time-based vesting criteria. Time-based vesting RSUs granted to members of our senior management are also accompanied by incremental RSUs subject to performance-based vesting criteria. RSUs granted to non-employee directors under the Stock Plan vest on the earlier of the first anniversary of the grant date or the date of, and immediately prior to, the next annual meeting of our shareholders following the grant date. However, the underlying shares are not 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 of Directors (the “Board”). Prior to vesting, RSUs granted under the Stock Plan do not have dividend equivalent rights, do not have voting rights, and the shares underlying the RSUs are not considered issued or outstanding. RSAs granted under the Stock Plan generally provide for time-based vesting over five years and have all of the same dividend, voting, and other rights corresponding to all other common stock, provided, however, that the dividends payable on the RSAs will accrue and be delivered at the time of delivery of the shares upon vesting of the RSA.PSUs issued under the Stock Plan provide for the issuance of a share of the Company’s common stock at no cost to the holder, vest based on the Company’s total shareholder return ranking relative to the S&P 500 Index over a performance period of approximately three years, are subject to an additional two-year holding period and are entitled to dividend equivalent rights. The PSU dividend equivalent rights are subject to the same vesting and payment restrictions as the related shares, but do not have voting rights and the shares underlying the PSUs are not considered issued and outstanding.In connection with the Vontier separation and pursuant to the anti-dilution provisions of the 2016 Stock Incentive Plan, the number of shares underlying each stock-based award outstanding as of the date of the Separation was multiplied by a factor of 1.20 and the related exercise price for the stock options was divided by a factor of 1.20, which was intended to preserve the intrinsic value of the awards prior to the Separation. These adjustments to the Company’s equity compensation awards did not result in additional compensation expense. Stock based compensation awards that were held by Vontier employees were terminated and replaced with awards issued under the Vontier stock compensation plan. Stock-based compensation expense through the Separation date for Vontier is included in results from discontinued operations.The equity compensation awards granted by the Company generally vest only if the employee is employed by us (or in the case of directors, the director continues to serve on the Board) on the vesting date. To cover the exercise of stock options, vesting of RSUs and PSUs, and issuances of RSAs, we generally issue shares authorized but previously unissued, although we may instead issue treasury shares; provided, however, that, either type of issuance would equally reduce the number of shares available under our Stock Plan.We account for stock-based compensation by measuring the cost of employee services received in exchange for all equity awards granted based on the fair value of the award as of the grant date. We recognize the compensation expense over the requisite service period (which is generally the vesting period but may be shorter than the vesting period, for example, if the employee becomes retirement eligible before the end of the vesting period). The fair value of RSUs is calculated using the closing price of Fortive common stock on the date of grant, adjusted for the impact of RSUs not having dividend rights prior to vesting. The fair value of RSAs is calculated using the closing price of Fortive common stock on the date of grant. The fair value of PSUs is calculated using a Monte Carlo pricing model. The fair value of the stock options granted is calculated using a Black-Scholes Merton (“Black-Scholes”) option pricing model.In connection with the exercise of certain stock options and the vesting of Stock Awards issued under the Stock Plan, a number of our shares sufficient to fund statutory minimum tax withholding requirements have 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 year ended December 31, 2021, approximately 252 9583012IMPO.B (PDF_D_SWOP).indd 10183012IMPO.B (PDF_D_SWOP).indd 1013/7/22 8:31 PM3/7/22 8:31 PMthousand shares of Fortive common stock with an aggregate value of approximately $17 million, were withheld to satisfy this requirement. The tax withholding is treated as a reduction in Additional paid-in capital in the Consolidated Statement of Changes in Equity.Stock-based Compensation ExpenseStock-based compensation has been recognized as a component of Selling, general, and administrative expenses in the Consolidated Statements of Earnings. The amount of stock-based compensation expense recognized during a period is based on the portion of the awards that are ultimately expected to vest. We estimate pre-vesting forfeitures at the time of grant by analyzing historical data and revise those estimates in subsequent periods if actual forfeitures differ from those estimates. Ultimately, the total expense recognized over the vesting period will equal the fair value of awards that actually vest. The following summarizes the components of our stock-based compensation expense under the Stock Plan for the years ended December 31 ($ in millions): 202120202019Stock Awards:Pretax compensation expense$ 48.6 $ 38.6 $ 34.1 Income tax benefit (7.9) (6.0) (6.6) Stock Award expense, net of income taxes 40.7 32.6 27.5 Stock options:Pretax compensation expense 28.8 24.0 18.4 Income tax benefit (5.0) (3.7) (2.8) Stock option expense, net of income taxes 23.8 20.3 15.6 Total stock-based compensation:Pretax compensation expense 77.4 62.6 52.5 Income tax benefit (12.9) (9.7) (9.4) Total stock-based compensation expense, net of income taxes$ 64.5 $ 52.9 $ 43.1 When stock options are exercised by the employee or Stock Awards vest, we derive a tax deduction measured by the excess of the market value on such date over the grant date price. Accordingly, we record the excess of the tax benefit related to the exercise of stock options and vesting of Stock Awards over the expense recorded for financial statement reporting purposes (the “Excess Tax Benefit”) as a component of Income tax expense and as an operating cash inflow in the consolidated financial statements. During the years ended December 31, 2021, 2020, and 2019 we realized an Excess Tax Benefit of $10 million, $13 million, and $10 million, respectively, related to stock options that were exercised and Stock Awards that vested. The following summarizes the unrecognized compensation cost for the Stock Plan awards as of December 31, 2021. This compensation cost is expected to be recognized over a weighted average period of approximately two years, representing the remaining service period related to the awards. Future compensation amounts will be adjusted for any changes in estimated forfeitures ($ in millions):Stock Awards$ 83.6 Stock options 48.4 Total unrecognized compensation cost$ 132.0 9683012IMPO.B (PDF_D_SWOP).indd 10283012IMPO.B (PDF_D_SWOP).indd 1023/7/22 8:31 PM3/7/22 8:31 PMStock OptionsThe following summarizes the assumptions used in the Black-Scholes model to value stock options granted under the Stock Plan during the years ended December 31:202120202019Risk-free interest rate0.8% - 1.3%0.3% - 1.5%1.4% - 2.6%Volatility (a) 27.2 % 21.1 % 19.9 %Dividend yield (b) 0.4 % 0.4 % 0.4 %Expected years until exercise5.5 - 8.05.5 - 8.05.5 - 8.0(a) Expected volatility is based on a weighted average blend of the company’s historical stock price volatility from July 2, 2016 (the date of separation from Danaher) through the stock option grant date and the average historical stock price volatility of a group of peer companies for the expected term of the options. (b) The dividend yield is calculated by dividing our annual dividend, based on the most recent quarterly dividend rate, by Fortive’s closing stock price on the grant date.The following summarizes option activity under the Stock Plan (in millions, except price per share and numbers of years):Options (a)WeightedAverageExercisePriceWeighted AverageRemainingContractual Term(years)AggregateIntrinsicValueOutstanding as of January 1, 2019 (a) 11.9 $ 36.22 Granted 2.7 57.28 Exercised (1.4) 28.14 Canceled/forfeited (0.9) 55.01 Outstanding as of December 31, 2019 (a) 12.3 40.50 Granted 2.3 63.09 Exercised (1.9) 26.32 Canceled/forfeited (0.7) 61.39 Adjustment due to Vontier Separation (b) (1.4) 44.94 Outstanding as of December 31, 2020 10.6 50.07 Granted 2.0 69.07 Exercised (1.5) 36.40 Canceled/forfeited (0.7) 64.28 Outstanding as of December 31, 2021 10.4 54.81 6$ 224.3 Vested and expected to vest as of December 31, 2021 (c) 10.3 54.62 6$ 222.9 Vested as of December 31, 2021 4.8 42.78 4$ 160.9 (a) The outstanding options as of December 31, 2019 have been adjusted by a factor of 1.20, as noted above, due to the Separation. (b) The “Adjustment due to Vontier Separation” reflects the cancellation of outstanding options held by Vontier employees as of October 8, 2020, which were replaced with Vontier options issued by Vontier as part of the Separation.(c) The “expected to vest” options are the net unvested options that remain after applying the forfeiture rate assumption to total unvested options.The aggregate intrinsic values in the table above represent the total pretax intrinsic value (the difference between the closing stock price of Fortive common stock on the last trading day of 2021 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on December 31, 2021. The amount of aggregate intrinsic value will change based on the price of Fortive’s common stock. 9783012IMPO.B (PDF_D_SWOP).indd 10383012IMPO.B (PDF_D_SWOP).indd 1033/7/22 8:31 PM3/7/22 8:31 PMOptions outstanding as of December 31, 2021 are summarized below (in millions; except price per share and number of years):OutstandingVestedExercise PriceSharesAverage Exercise PriceAverage Remaining Life(in years)SharesAverage Exercise Price$10.67 - $29.47 0.5 $ 25.64 1 0.5 $ 25.64 $29.48 - $37.95 2.1 34.37 3 2.1 34.37 $37.96 - $58.78 1.6 46.78 5 1.2 46.05 $58.79 - $67.64 4.5 64.93 8 0.7 63.35 $67.65 - $78.03 1.7 69.69 8 0.3 68.29 Total shares 10.4 4.8 The following summarizes aggregate intrinsic value and cash receipts related to stock options that were exercised under the Stock Plan for the years ended December 31 ($ in millions): 202120202019Aggregate intrinsic value of stock options exercised$ 55.9 $ 65.8 $ 52.5 Cash receipts from stock options exercised$ 52.4 $ 46.7 $ 40.0 Stock AwardsThe following summarizes information related to Stock Award activity under the Stock Plan for the years ended December 31, 2021, 2020, and 2019 (in millions; except price per share):Number ofStock Awards (a)Weighted AverageGrant-DateFair ValueUnvested as of January 1, 2019 2.1 $ 49.04 Granted 1.1 64.72 Vested (0.6) 40.86 Forfeited (0.3) 56.16 Unvested as of December 31, 2019 2.3 57.74 Granted 1.0 64.14 Vested (0.6) 50.82 Forfeited (0.2) 61.00 Adjustment due to Vontier Separation (b) (0.2) 60.40 Unvested as of December 31, 2020 2.3 63.04 Granted 1.1 68.90 Vested (0.5) 55.78 Forfeited (0.3) 65.28 Unvested as of December 31, 2021 2.6 66.43 (a) The outstanding stock awards as of December 31, 2019 have been adjusted by a factor of 1.20, as noted above, due to the Separation. (b) The “Adjustment due to Vontier Separation” reflects the cancellation of unvested awards held by Vontier employees as of October 8, 2020, which were replaced by Vontier equity awards issued by Vontier as part of the Separation.NOTE 18. CAPITAL STOCK AND EARNINGS PER SHARE Common StockUnder our amended and restated certificate of incorporation, as of July 1, 2016, our authorized capital stock consists of 2.0 billion common shares with a par value of $0.01 per share and 15 million preferred shares with a par value of $0.01 per share. Each share of our common stock entitles the holder to one vote on all matters to be voted upon by common stockholders. Our Board is authorized to issue shares of preferred stock in one or more series and has discretion to determine the rights, preferences, privileges, and restrictions, including voting rights, dividend rights, conversion rights, redemption privileges, and liquidation preferences, of each series of preferred stock. The Board’s authority to issue preferred stock with voting rights or 9883012IMPO.B (PDF_D_SWOP).indd 10483012IMPO.B (PDF_D_SWOP).indd 1043/7/22 8:31 PM3/7/22 8:31 PMconversion rights that, if exercised, could adversely affect the voting power of the holders of common stock, could potentially discourage attempts by third parties to obtain control of the Company through certain types of takeover practices.We declared and paid cash dividends per common share during the periods presented as follows:Dividend Per Common ShareAmount($ in millions)2021:First quarter$ 0.07 $ 23.7 Second quarter 0.07 23.7 Third quarter 0.07 25.2 Fourth quarter 0.07 25.1 Total$ 0.28 $ 97.7 2020:First quarter$ 0.07 $ 23.5 Second quarter 0.07 23.6 Third quarter 0.07 23.6 Fourth quarter 0.07 23.7 Total$ 0.28 $ 94.4 The sum of the components of total dividends paid may not equal the total amount due to rounding.Aggregate cash payments for the dividends paid to shareholders are recorded as dividends to shareholders in our Consolidated Statements of Changes in Equity and Consolidated Statements of Cash Flows.Subsequent EventsOn January 25, 2022 we declared a regular quarterly cash dividend of $0.07 per share payable on March 25, 2022 to common stockholders of record on February 25, 2022.On February 17, 2022, the Company's Board of Directors approved a share repurchase program authorizing the Company to repurchase up to 20 million shares of the Company's outstanding common stock from time to time on the open market or in privately negotiated transactions. There is no expiration date for the repurchase program, and the timing and amount of repurchases under the program are determined by the Company's management based on market conditions and other factors. The repurchase program may be suspended or discontinued at any time by the Board of Directors.Mandatory Convertible Preferred StockOn June 29, 2018, we issued 1,380,000 shares of 5.0% Mandatory Convertible Preferred Stock, Series A (“MCPS”) with a par value of $0.01 per share and liquidation preference of $1,000 per share, which included the exercise of an over-allotment option in full to purchase 180,000 shares. We received net $1.34 billion in proceeds from the issuance of the MCPS, excluding $43 million of issuance costs. We used the net proceeds from the issuance of MCPS to fund our acquisition activities and for general corporate purposes, including repayment of debt, working capital, and capital expenditures.On July 1, 2021, all outstanding shares of our 5.0% Mandatory Convertible Preferred Stock (“MCPS”) converted at a rate of 14.0978 common shares per share of preferred stock into an aggregate of approximately 19.4 million shares (net of fractional shares) of the Company’s common stock, pursuant to the terms of the Certificate of Designation governing the Series A Preferred Stock. Fortive issued cash in lieu of fractional shares of common stock in the conversion. These payments were recorded as a reduction to additional paid-in capital. The final dividend of $12.50 per share, or $17.2 million in the aggregate, was paid on July 1, 2021. The impact of the MCPS calculated under the if-converted method was anti-dilutive for the periods in 2021 prior to conversion.9983012IMPO.B (PDF_D_SWOP).indd 10583012IMPO.B (PDF_D_SWOP).indd 1053/7/22 8:31 PM3/7/22 8:31 PMWe declared and paid cash dividends on our MCPS during the periods presented as follows:Dividend Per Preferred ShareAmount($ in millions)2021:First quarter$ 12.50 $ 17.3 Second quarter 12.50 17.2 Third quarter — — Fourth quarter — — Total$ 25.00 $ 34.5 2020:First quarter$ 12.50 $ 17.3 Second quarter 12.50 17.2 Third quarter 12.50 17.3 Fourth quarter 12.50 17.2 Total$ 50.00 $ 69.0 Net Earnings Per ShareBasic net earnings per share (“EPS”) is calculated by dividing net earnings attributable to common stockholders by the weighted average number of shares of common stock outstanding for the applicable period. Diluted EPS is similarly calculated, except that the calculation includes the dilutive effect of the assumed issuance of shares under stock-based compensation plans under the treasury stock method, except where the inclusion of such shares would have an anti-dilutive impact.For the years ended December 31, 2021, 2020, and 2019 the anti-dilutive options to purchase shares excluded from the diluted EPS calculation were 0.3 million shares, 4.9 million shares, and 3.0 million shares respectively. The impact of our MCPS calculated under the if-converted method was anti-dilutive for the year ended December 31, 2019, and as such, 18.3 million shares were excluded from the dilutive EPS calculation. The impact of our MCPS calculated under the if-converted method was dilutive for the year ended December 31, 2020, and therefore the 19.9 million shares were included in the calculation of diluted EPS.As described in Note 11, upon conversion of the Convertible Notes, holders will receive cash, shares of our common stock, or a combination thereof, at our election. Our intention is to settle such conversions through cash up to the principal amount of the Convertible Notes and, if applicable, through shares of our common stock for conversion value, if any, in excess of the principal amount of the Convertible Notes. We believe we have the ability to settle these obligations as intended, and therefore we have accounted for the conversion features under the treasury stock method in our calculation of EPS. Because the fair value of our common stock is below the conversion price, the Convertible Notes had no impact on our earnings per share for the years ended December 31, 2021 and 2020.10083012IMPO.B (PDF_D_SWOP).indd 10683012IMPO.B (PDF_D_SWOP).indd 1063/7/22 8:31 PM3/7/22 8:31 PMInformation related to the calculation of net earnings per share of common stock is summarized as follows ($ and shares in millions, except per share amounts):Year Ended December 31, 202120202019NumeratorNet earnings from continuing operations$ 614.2 $ 1,452.2 $ 268.1 Mandatory convertible preferred stock cumulative dividends (34.5) (69.0) (69.0) Net earnings attributable to common stockholders from continuing operations used in basic earnings per share$ 579.7 $ 1,383.2 $ 199.1 Add-back: Mandatory convertible preferred stock cumulative dividends (“if-converted” method) — 69.0 — Net earnings attributable to common stockholders from continuing operations and assumed conversions used in diluted earnings per share$ 579.7 $ 1,452.2 $ 199.1 DenominatorWeighted average common shares outstanding used in basic earnings per share 349.0 337.4 335.8 Incremental common shares from:Assumed exercise of dilutive options and vesting of dilutive Stock Awards 3.3 1.7 4.2 Assumed conversion of outstanding mandatory convertible preferred stock — 19.9 — Weighted average common shares outstanding used in diluted earnings per share 352.3 359.0 340.0 Net earnings from continuing operations per common share - Basic$ 1.66 $ 4.10 $ 0.59 Net earnings from continuing operations per common share - Diluted$ 1.65 $ 4.05 $ 0.59 NOTE 19. SEGMENT INFORMATION We report our results in three separate business segments consisting of Intelligent Operating Solutions, Precision Technologies, and Advanced Healthcare Solutions. Operating profit represents total revenues less operating expenses, excluding other income/expense, interest, and income taxes. The identifiable assets by segment are those used in each segment’s operations. Inter-segment amounts are not significant and are eliminated in the combined totals. Amounts in the Other category consist of unallocated corporate costs and other costs not considered part of our evaluation of reportable segment operating performance.10183012IMPO.B (PDF_D_SWOP).indd 10783012IMPO.B (PDF_D_SWOP).indd 1073/7/22 8:31 PM3/7/22 8:31 PMSegment results are shown below ($ in millions): Year Ended December 31 202120202019Sales:Intelligent Operating Solutions$ 2,169.4 $ 1,883.7 $ 1,898.9 Precision Technologies 1,848.9 1,651.3 1,808.4 Advanced Healthcare Solutions 1,236.4 1,099.4 856.6 Total$ 5,254.7 $ 4,634.4 $ 4,563.9 Operating Profit:Intelligent Operating Solutions$ 408.5 $ 317.8 $ 289.0 Precision Technologies 408.0 321.7 324.6 Advanced Healthcare Solutions 101.9 2.1 (72.0) Other (105.6) (102.2) (97.7) Total$ 812.8 $ 539.4 $ 443.9 Segment assets:Intelligent Operating Solutions$ 6,769.3 $ 5,662.1 $ 5,748.2 Precision Technologies 2,994.2 2,979.7 2,974.7 Advanced Healthcare Solutions 5,737.4 4,309.8 4,432.9 Total segment assets 15,500.9 12,951.6 13,155.8 Other 964.6 3,069.5 1,436.8 Assets of Discontinued Operations — 30.4 2,846.4 Total assets$ 16,465.5 $ 16,051.5 $ 17,439.0 Depreciation and amortization:Intelligent Operating Solutions$ 187.8 $ 179.1 $ 182.5 Precision Technologies 41.6 43.0 47.1 Advanced Healthcare Solutions 161.7 159.7 110.3 Other 4.4 2.2 1.6 Total$ 395.5 $ 384.0 $ 341.5 Capital expenditures, gross:Intelligent Operating Solutions$ 16.7 $ 26.1 $ 30.4 Precision Technologies 21.4 17.4 21.3 Advanced Healthcare Solutions 6.4 20.1 16.0 Other 5.5 12.1 6.8 Total$ 50.0 $ 75.7 $ 74.5 10283012IMPO.B (PDF_D_SWOP).indd 10883012IMPO.B (PDF_D_SWOP).indd 1083/7/22 8:31 PM3/7/22 8:31 PMOperations in Geographic Areas:Year Ended December 31($ in millions)202120202019Sales:United States$ 2,683.0 $ 2,436.6 $ 2,394.2 China 650.7 534.1 501.2 All other (each country individually less than 5% of total sales) 1,921.0 1,663.7 1,668.5 Total$ 5,254.7 $ 4,634.4 $ 4,563.9 Property, plant and equipment, netUnited States$ 291.3 $ 304.6 $ 328.0 Switzerland 23.1 30.2 17.9 All other (each country individually less than 5% of total property, plant and equipment, net) 81.1 87.2 70.1 Total$ 395.5 $ 422.0 $ 416.0 NOTE 20. RELATED-PARTY TRANSACTIONS WITH DANAHER In connection with the separation from Danaher in 2016, we entered into certain agreements with Danaher, which governed the separation and provided a framework for the relationship between the parties going forward. Refer to Note 14 for additional discussion of the tax matters agreement.We continue to enter into arms-length revenue arrangements in the ordinary course of business with Danaher and its affiliates and these transactions are considered related party transactions. We recorded sales of approximately $13 million, $13 million, and $12 million to Danaher and its subsidiaries during the years ended December 31, 2021, 2020, and 2019, respectively. Purchases from Danaher and its subsidiaries were approximately $14 million, $12 million, and $13 million during the years ended December 31, 2021, 2020, and 2019, respectively.10383012IMPO.B (PDF_D_SWOP).indd 10983012IMPO.B (PDF_D_SWOP).indd 1093/7/22 8:31 PM3/7/22 8:31 PMNOTE 21. QUARTERLY DATA - UNAUDITED ($ in millions, except per share data)1st Quarter2nd Quarter3rd Quarter4th Quarter2021:Sales(a)$ 1,259.2 $ 1,319.7 $ 1,301.0 $ 1,374.8 Gross profit 711.9 755.5 745.7 794.0 Operating profit 197.6 211.3 202.3 201.6 Earnings from continuing operations, net of income taxes 111.7 182.0 152.6 167.9 Earnings (loss) from discontinued operations, net of income taxes (1.5) (1.1) (0.3) (2.9) Net earnings$ 110.2 $ 180.9 $ 152.3 $ 165.0 Earnings per common share - basic:Continuing operations$ 0.28 $ 0.49 $ 0.42 $ 0.47 Discontinued operations — — — (0.01) Total earnings per common share - basic$ 0.27 $ 0.48 $ 0.42 $ 0.46 Earnings per common share - diluted:Continuing operations$ 0.28 $ 0.48 $ 0.42 $ 0.46 Discontinued operations — — — (0.01) Total earnings per common share - diluted$ 0.27 $ 0.48 $ 0.42 $ 0.44 2020:Sales$ 1,108.1 $ 1,041.6 $ 1,159.8 $ 1,324.9 Gross profit 612.0 582.8 651.6 762.1 Operating profit 115.4 102.6 137.5 183.9 Earnings from continuing operations, net of income taxes 54.8 59.8 86.0 1,251.6 Earnings from discontinued operations, net of income taxes (12.9) 70.2 139.8 (36.0) Net earnings$ 41.9 $ 130.0 $ 225.8 $ 1,215.6 Earnings per common share - basic:Continuing operations$ 0.11 $ 0.13 $ 0.20 $ 3.65 Discontinued operations (0.04) 0.20 0.42 (0.11) Total earnings per common share - basic$ 0.07 $ 0.33 $ 0.62 $ 3.55 Earnings per common share - diluted:Continuing operations$ 0.11 $ 0.13 $ 0.20 $ 3.47 Discontinued operations (0.04) 0.20 0.41 (0.10) Total earnings per common share - diluted$ 0.07 $ 0.33 $ 0.61 $ 3.37 The sum of net earnings per share amount may not add due to rounding.(a) Sales in the third quarter of 2021 include an increase of $1.5 million, as a result of our adoption of ASU 2021-08 and the retrospective application to the ServiceChannel acquisition. Refer to Note 2 for details.10483012IMPO.B (PDF_D_SWOP).indd 11083012IMPO.B (PDF_D_SWOP).indd 1103/7/22 8:31 PM3/7/22 8:31 PMITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable.ITEM 9A. CONTROLS AND PROCEDURES Our management, with the participation of the President and Chief Executive Officer, and Senior Vice President and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on such evaluation, the President and Chief Executive Officer, and Senior Vice President and Chief Financial Officer, have concluded that, as of the end of such period, these disclosure controls and procedures were effective.Management’s annual report on its internal control over financial reporting (as such term is defined in Rules 13a-15(f) under the Exchange Act) and the independent registered public accounting firm’s audit report on the effectiveness of the Company’s internal control over financial reporting are included in the Company’s financial statements for the year ended December 31, 2021 included in Item 8 of this Annual Report on Form 10-K, under the headings “Report of Management on Fortive Corporation’s Internal Control Over Financial Reporting” and “Report of Independent Registered Public Accounting Firm,” respectively, and are incorporated herein by reference.The Company completed the acquisitions of the ServiceChannel business on August 24, 2021 and Provation on December 27, 2021, collectively the “Acquired Businesses.” The Company has not yet fully incorporated the internal controls and procedures of the Acquired Businesses into the Company’s internal control over financial reporting, and as such, management excluded the Acquired Businesses from its assessment. The Company has included goodwill and other intangible assets of the Acquired Businesses in this assessment. The assets and revenues of the Acquired Businesses excluded from management’s assessment of internal controls constituted 1% of the Company’s total assets as of December 31, 2021 and 1% of the Company’s total revenues for the year ended December 31, 2021, respectively. There have been no changes in our internal control over financial reporting that occurred during the most recent completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.ITEM 9B. OTHER INFORMATIONNot applicable.ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONSNot applicable.PART IIIITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Other than the information below, the information required by this Item is incorporated by reference from the sections entitled Election of Directors and Corporate Governance in the Proxy Statement for our 2022 annual meeting and to the information under the caption “Information about our Executive Officers” in Part I hereof. No nominee for director was selected pursuant to any arrangement or understanding between the nominee and any person other than the Company pursuant to which such person is or was to be selected as a director or nominee.Code of EthicsWe have adopted a code of business conduct and ethics for directors, officers (including Fortive’s principal executive officer, principal financial officer and principal accounting officer) and employees, known as the Fortive Code. The Fortive Code is available in the “Our Culture-Integrity & Compliance” section of our website at www.fortive.com.We intend to disclose any amendment to the Fortive Code that relates to any element of the code of ethics definition enumerated in Item 406(b) of Regulation S-K, and any waiver from a provision of the Fortive Code granted to any director, principal executive officer, principal financial officer, principal accounting officer, or any of our other executive officers, in the 10583012IMPO.B (PDF_D_SWOP).indd 11183012IMPO.B (PDF_D_SWOP).indd 1113/7/22 8:31 PM3/7/22 8:31 PM“Our Culture-Integrity & Compliance” section of our website, at www.fortive.com, within four business days following the date of such amendment or waiver.ITEM 11. EXECUTIVE COMPENSATION The information required by this Item is incorporated by reference from the sections entitled Compensation Discussion and Analysis, Compensation Committee Report, Executive Compensation Tables, Pay Ratio Disclosure, and Director Compensation in the Proxy Statement for our 2022 annual meeting (other than the Compensation Committee Report, which shall not be deemed to be “filed”).ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSThe information required by this Item is incorporated by reference from the sections entitled Ownership of Our Stock, and Equity Compensation Plan Information in the Proxy Statement for our 2022 annual meeting.ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEThe information required by this Item is incorporated by reference from the sections entitled Corporate Governance and Certain Relationships and Related Transactions in the Proxy Statement for our 2022 annual meeting.ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES The information required by this Item is incorporated by reference from the section entitled Ratification of Independent Registered Public Accounting Firm in the Proxy Statement for our 2022 annual meeting.PART IVITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULESa) The following documents are filed as part of this report.(1)Financial Statements. The financial statements, including the report of independent registered public accounting firm (PCAOB ID: 42), are set forth under “Item 8. Financial Statements and Supplementary Data” of this Annual Report on Form 10-K.(2)Schedules. An index of Exhibits and Schedules is on page 106 of this report. Schedules other than those listed below have been omitted from this Annual Report on Form 10-K because they are not required, are not applicable or the required information is included in the financial statements or the notes thereto.(3)Exhibits. The exhibits listed in the accompanying Exhibit Index are filed or incorporated by reference as part of this Annual Report on Form 10-K.ITEM 16. FORM 10-K SUMMARYNot applicable.FORTIVE CORPORATIONINDEX TO FINANCIAL STATEMENTS, SUPPLEMENTARY DATA AND FINANCIAL STATEMENT SCHEDULEPage Number inForm 10-KSchedule:Valuation and Qualifying Accounts11410683012IMPO.B (PDF_D_SWOP).indd 11283012IMPO.B (PDF_D_SWOP).indd 1123/7/22 8:31 PM3/7/22 8:31 PMEXHIBIT INDEXExhibit NumberDescription2.1Separation and Distribution Agreement, dated as of October 8, 2020, by and between Vontier Corporation and Fortive Corporation Incorporated by reference from Exhibit 2.1 to Fortive Corporation’s Current Report on Form 8-K filed on October 13, 2020 (Commission File Number: 1-37654)2.2Agreement and Plan of Merger and Reorganization, dated as of March 7, 2018, among Fortive Corporation, Stevens Holding Company, Inc., Altra Industrial Motion Corp. and McHale Acquisition Corp.Incorporated by reference from Exhibit 2.1 to Altra Industrial Motion Corp.’s Current Report on Form 8-K filed on March 9, 2018 (Commission File Number: 1-33209)3.1Restated Certificate of Incorporation of Fortive CorporationIncorporated by reference from Exhibit 3.1 to Fortive Corporation’s Quarterly Report on Form10-Q for the quarter ended July 2, 2021 (Commission File Number: 1-37654)3.2Amended and Restated Bylaws of Fortive Corporation4.1Indenture, dated as of June 20, 2016, between Fortive Corporation, as issuer, and The Bank of New York Mellon Trust Company, N.A., as trusteeIncorporated by reference from Exhibit 4.1 to Fortive Corporation’s Current Report on Form 8-K filed on June 21, 2016 (Commission File Number: 1-37654)4.2Indenture, dated as of February 22, 2019, among Fortive Corporation, the guarantors party thereto, and The Bank of New York Mellon Trust Company, N.A., as trusteeIncorporated by reference to Exhibit 4.1 to Fortive Corporation’s Current Report on Form 8-K filed on February 22, 2019 (Commission File Number: 1-37654)4.3Description of Securities10.1Amended and Restated Credit Agreement, dated as of November 30, 2018, among Fortive Corporation and certain of its subsidiaries party thereto, Bank of America, N.A., as Administrative Agent and Swing Line Lender, and the lenders referred to thereinIncorporated by reference from Exhibit 10.1 to Fortive Corporation’s Current Report on Form 8-K filed on December 3, 2018 (Commission File Number: 1-37654)10.2Amendment No. 1 to Revolving Credit Agreement, dated as of February 21, 2019, among Fortive Corporation, Bank of America N.A., as Administrative Agent and a Swing Line Lender, and the lenders referred to thereinIncorporated by reference to Exhibit 10.2 to Fortive Corporation’s Current Report on Form 8-K filed on February 22, 2019 (Commission File Number: 1-37654)10.3Amendment No. 2 to the Revolving Credit Agreement, dated as of February 25, 2020, by and among Fortive Corporation and certain of its subsidiaries from time to time party thereto, Bank of America, N.A., as Administrative Agent and a Swing Line Lender, and the lenders referred to thereinIncorporated by reference to Exhibit 10.1 to Fortive Corporation’s Current Report on Form 8-K filed on February 28, 2020 (Commission File Number: 1-37654)10783012IMPO.B (PDF_D_SWOP).indd 11383012IMPO.B (PDF_D_SWOP).indd 1133/7/22 8:31 PM3/7/22 8:31 PM10.4Amendment No. 3 to Revolving Credit Agreement, dated as of April 24, 2020, by and among Fortive Corporation and certain of its subsidiaries from time to time party thereto, Bank of America, N.A., as Administrative Agent and a Swing Line Lender, and the lenders referred to thereinIncorporated by reference to Exhibit 10.1 to Fortive Corporation’s Current Report on Form 8-K filed on April 30, 2020 (Commission File Number: 1-37654)10.5Amendment No. 4 to Revolving Credit Agreement, dated as of October 5, 2021, by and among Fortive Corporation and certain of its subsidiaries from time to time party thereto, Bank of America, N.A., as Administrative Agent10.6364-Day Term Loan Credit Agreement, dated as of December 16, 2021, among Fortive Corporation, Bank of America, N.A., as Administrative Agent, and the lenders referred to therein.Incorporated by reference to Exhibit 10.1 to Fortive Corporation’s Current Report on Form 8-K filed on December 21, 2021 (Commission File Number: 1-37654)10.7Fortive Corporation 2016 Stock Incentive Plan, as amended and restated*Incorporated by reference from Exhibit 10.15 to Fortive Corporation’s Annual Report on Form 10-K for the year ended December 31, 2020 (Commission File Number: 1-37654)10.8Form of Fortive Corporation Performance Stock Unit Agreement*Incorporated by reference from Exhibit 10.8 to Fortive Corporation’s Annual Report on Form 10-K for the year ended December 31, 2017 (Commission File Number: 1-37654)10.9Form of Fortive Corporation Non-Employee Directors Restricted Stock Unit Agreement *Incorporated by reference from Exhibit 10.9 to Fortive Corporation’s Annual Report on Form 10-K for the year ended December 31, 2017 (Commission File Number: 1-37654)10.10Form of Fortive Corporation Restricted Stock Grant Agreement*Incorporated by reference from Exhibit 10.13 to Amendment No. 2 to Fortive Corporation’s Registration Statement on Form 10, filed on April 7, 2016 (Commission File Number: 1-37654)10.11Form of Fortive Corporation Restricted Stock Unit Agreement*Incorporated by reference from Exhibit 10.11 to Fortive Corporation’s Annual Report on Form 10-K for the year ended December 31, 2017 (Commission File Number: 1-37654)10.12Form of Fortive Corporation Non-Employee Directors Stock Option Agreement*Incorporated by reference from Exhibit 10.12 to Fortive Corporation’s Annual Report on Form 10-K for the year ended December 31, 2017 (Commission File Number: 1-37654)10.13Form of Fortive Corporation Stock Option Agreement*Incorporated by reference from Exhibit 10.13 to Fortive Corporation’s Annual Report on Form 10-K for the year ended December 31, 2017 (Commission File Number: 1-37654)10.14Fortive Corporation Amended and Restated 2016 Executive Incentive Compensation Plan*Incorporated by reference from Exhibit 10.18 to Fortive Corporation’s Annual Report on Form 10-K for the year ended December 31, 2018 (Commission File Number: 1-37654)10883012IMPO.B (PDF_D_SWOP).indd 11483012IMPO.B (PDF_D_SWOP).indd 1143/7/22 8:31 PM3/7/22 8:31 PM10.15Fortive Corporation Severance and Change in Control Plan for Officers*Incorporated by reference from Exhibit 10.1 to Fortive Corporation’s Current Report on Form 8-K, filed on March 31, 2017 (Commission File Number: 1-37654)10.16Fortive Executive Deferred Incentive Program*Incorporated by reference from Exhibit 10.10 to Fortive Corporation’s Current Report on Form 8-K filed on June 1, 2016 (Commission File Number: 1-37654)10.17Form of D&O Indemnification Agreement*Incorporated by reference from Exhibit 10.10 to Amendment No. 2 to Fortive Corporation’s Registration Statement on Form 10, filed on April 7, 2016 (Commission File Number: 1-37654)10.18Aircraft Time Sharing Agreement, dated July 18, 2016, between Fortive Corporation and James Lico*Incorporated by reference from Exhibit 10.18 to Fortive Corporation’s Annual Report on Form 10-K for the year ended December 31, 2017 (Commission File Number: 1-37654)10.19Aircraft Time Sharing Agreement, dated July 18, 2016, between Fortive Corporation and Charles McLaughlin*Incorporated by reference from Exhibit 10.19 to Fortive Corporation’s Annual Report on Form 10-K for the year ended December 31, 2017 (Commission File Number: 1-37654)10.20Description of compensation arrangements for non-management directors*Incorporated by reference from Exhibit 10.1 to Fortive Corporation’s Quarterly Report on Form 10-Q for the quarter ended October 1, 2021 (Commission File Number: 1-3765410.21Fortive Corporation Non-Employee Directors’ Deferred Compensation Plan*Incorporated by reference from Exhibit 10.2 to Fortive Corporation’s Quarterly Report on Form 10-Q for the quarter ended September 29, 2017 (Commission File Number: 1-37654)10.22Fortive Corporation Non-Employee Directors’ Deferred Compensation Plan Election Form*Incorporated by reference from Exhibit 10.3 to Fortive Corporation’s Quarterly Report on Form 10-Q for the quarter ended September 29, 2017 (Commission File Number: 1-37654)10.23Offer of Employment Letter, dated November 16, 2015, between TGA Employment Services LLC and Chuck McLaughlin*Incorporated by reference from Exhibit 10.6 to Amendment No. 1 to Fortive Corporation’s Registration Statement on Form 10, filed on March 3, 2016 (Commission File Number: 1-37654)10.24Offer of Employment Letter, dated February 1, 2016, between TGA Employment Services LLC and Barbara Hulit*Incorporated by reference from Exhibit 10.22 to Fortive Corporation’s Annual Report on Form 10-K for the year ended December 31, 2016 (Commission File Number: 1-37654)10.25Offer of Employment Letter, dated January 25, 2021 between TGA Employment Services LLC and Edward R. Simmons *10.26Offer of Employment Letter, dated July 12, 2021 between TGA Employment Services LLC and Olumide Soroye*10983012IMPO.B (PDF_D_SWOP).indd 11583012IMPO.B (PDF_D_SWOP).indd 1153/7/22 8:31 PM3/7/22 8:31 PM10.27Form of Fortive Corporation and its Affiliated Entities Agreement Regarding Competition and Protection of Proprietary Interests*21.1Subsidiaries of Registrant23.1Consent of Independent Registered Public Accounting Firm31.1Certification of Chief Executive Officer Pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2Certification of Chief Financial Officer Pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1Certification of Chief Executive Officer, Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2Certification of Chief Financial Officer, Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002101.INSXBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document (1)101.SCHInline XBRL Taxonomy Extension Schema Document (1)101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document (1)101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document (1)101.LABInline XBRL Taxonomy Extension Label Linkbase Document (1)101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document (1)11083012IMPO.B (PDF_D_SWOP).indd 11683012IMPO.B (PDF_D_SWOP).indd 1163/7/22 8:31 PM3/7/22 8:31 PM104Inline Cover page formatted as Inline XBRL and contained in Exhibit 101*Indicates management contract or compensatory plan, contract or arrangement.(1)Exhibit 101 to this report includes the following documents formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Balance Sheets as of December 31, 2021 and 2020, (ii) Consolidated Statements of Earnings for the years ended December 31, 2021, 2020, and 2019, (iii) Consolidated Statements of Comprehensive Income for the years ended December 31, 2021, 2020, and 2019, (iv) Consolidated Statements of Changes in Equity for the years ended December 31, 2021, 2020, and 2019, (v) Consolidated Statements of Cash Flows for the years ended December 31, 2021, 2020, and 2019 and (vi) Notes to Consolidated Financial Statements.The registrant agrees to furnish to the Commission supplementally upon request a copy of (i) any instrument with respect to long-term debt not filed herewith as to which the total amount of securities authorized thereunder does not exceed 10% of the total assets of the registrant and its subsidiaries on a consolidated basis and (ii) schedules or similar attachments omitted pursuant to Item 601(a)(5) of Regulation S-K.11183012IMPO.B (PDF_D_SWOP).indd 11783012IMPO.B (PDF_D_SWOP).indd 1173/7/22 8:31 PM3/7/22 8:31 PMSIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. FORTIVE CORPORATIONDate: February 28, 2022By:/s/ JAMES A. LICOJames A. LicoPresident and Chief Executive Officer11283012IMPO.B (PDF_D_SWOP).indd 11883012IMPO.B (PDF_D_SWOP).indd 1183/7/22 8:31 PM3/7/22 8:31 PMPursuant to the requirements of the Securities Exchange Act of 1934, this annual report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated:Name, Title and SignatureDate/s/ ALAN G. SPOONFebruary 28, 2022Alan G. SpoonChairman of the Board/s/ DAN COMASFebruary 28, 2022Dan ComasDirector/s/ SHARMISTHA DUBEYFebruary 28, 2022Sharmistha DubeyDirector/s/ REJJI P. HAYESFebruary 28, 2022Rejji P. HayesDirector/s/ WRIGHT LASSITERFebruary 28, 2022Wright LassiterDirector/s/ JAMES A. LICOFebruary 28, 2022James A. LicoPresident, Chief Executive Officer and Director/s/ KATE D. MITCHELLFebruary 28, 2022Kate D. MitchellDirector/s/ JEANNINE P. SARGENTFebruary 28, 2022Jeannine P. SargentDirector/s/ CHARLES E. MCLAUGHLINFebruary 28, 2022Charles E. McLaughlinSenior Vice President and Chief Financial Officer/s/ CHRISTOPHER M. MULHALLFebruary 28, 2022Christopher M. MulhallChief Accounting Officer11383012IMPO.B (PDF_D_SWOP).indd 11983012IMPO.B (PDF_D_SWOP).indd 1193/7/22 8:31 PM3/7/22 8:31 PMFORTIVE CORPORATION AND SUBSIDIARIESSCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS($ in millions) ClassificationBalance atBeginning ofPeriodCharged toCosts &ExpensesImpact ofCurrencyChargedto OtherAccounts(a)Write Offs,Write Downs &DeductionsBalance atEndof PeriodYear Ended December 31, 2021:Allowances deducted from asset accountsAllowance for credit losses$ 42.5 $ 7.1 $ (0.7) $ 2.0 $ (11.2) $ 39.7 Year Ended December 31, 2020:Allowances deducted from asset accountsAllowance for credit losses$ 26.4 $ 7.1 $ 1.2 $ 11.5 $ (3.7) $ 42.5 Year Ended December 31, 2019:Allowances deducted from asset accountsAllowance for credit losses$ 18.7 $ 12.2 $ (0.3) $ 0.6 $ (4.8) $ 26.4 (a) Amounts are related to businesses acquired. In addition, the year ended December 31, 2020 includes an increase in the allowance for trade accounts receivables of $11.5 million recognized upon the adoption of ASU 2016-13 on January 1, 2020.11483012IMPO.B (PDF_D_SWOP).indd 12083012IMPO.B (PDF_D_SWOP).indd 1203/7/22 8:31 PM3/7/22 8:31 PMComparison of 5-Year Cumulative Total Shareholder Return Assumes Initial Investment of $100 $240 $220 $200 $180 $160 $140 $120 $100 $80 7 1 / 1 0 / 1 0 7 1 / 1 0 / 4 0 7 1 / 1 0 / 7 0 7 1 / 1 0 / 0 1 8 1 / 1 0 / 1 0 8 1 / 1 0 / 4 0 8 1 / 1 0 / 7 0 8 1 / 1 0 / 0 1 9 1 / 1 0 / 1 0 9 1 / 1 0 / 4 0 9 1 / 1 0 / 7 0 9 1 / 1 0 / 0 1 0 2 / 1 0 / 1 0 0 2 / 1 0 / 4 0 0 2 / 1 0 / 7 0 0 2 / 1 0 / 0 1 1 2 / 1 0 / 1 0 1 2 / 1 0 / 4 0 1 2 / 1 0 / 7 0 1 2 / 1 0 / 0 1 1 2 / 1 3 / 2 1 FTV S&P 500 S&P 500 Industrials Fortive Corporation S&P 500 S&P 500 Industrials 12/31/2017 12/31/2018 12/31/2019 12/31/2020 12/31/2021 135.50 121.83 121.03 127.17 116.49 104.95 144.12 153.17 135.77 160.44 181.35 150.79 173.50 233.41 182.63 Reconciliation of Non-GAAP Financial Information of Corresponding Financial Information Presented in Accordance with GAAP on a Continuing Operations Basis Components of Revenue Growth Total Revenue Growth (GAAP) Core (Non-GAAP) Acquisitions (Non-GAAP) Impact of currency translation (Non-GAAP) Adjusted Gross Profit Margin ($ in millions)6 Revenue (GAAP) Acquisition-Related Fair Value Adjustments to Deferred Revenue Adjusted Revenue (Non-GAAP) Adjusted Gross Profit Gross Profit (GAAP) Acquisition-Related Fair Value Adjustments to Deferred Revenue and Inventory Discrete Restructuring Charge Adjusted Gross Profit (Non-GAAP) Adjusted Gross Profit Margin Gross Profit (GAAP) Margin Acquisition-Related Fair Value Adjustments to Deferred Revenue and Inventory Discrete Restructuring Charge Adjusted Gross Profit Margin (Non-GAAP) Year Ended 12/31/2021 13.4% 9.5% 2.4% 1.5% Year Ended 12/31/2021 $5,254.7 — $5,254.7 $3,007.1 6.9 0.7 $3,014.7 57.2 % 0.2 % — 57.4 % Adjusted Operating Profit & Adjusted Operating Profit Margin ($ in millions)6 Revenue (GAAP) Acquisition-Related Fair Value Adjustments to Deferred Revenue Adjusted Revenue (Non-GAAP) Operating Profit (GAAP) Acquisition and Other Transaction Costs Acquisition-Related Fair Value Adjustments to Deferred Revenue and Inventory Amortization of Acquisition- Related Intangible Assets Discrete Restructuring Adjusted Operating Profit (Non-GAAP) Operating Profit Margin (GAAP) Adjusted Operating Profit Margin (Non-GAAP) ($ in millions)6 Revenue (GAAP) Acquisition-Related Fair Value Adjustments to Deferred Revenue Adjusted Revenue (Non-GAAP) Operating Profit (GAAP) Acquisition and Other Transaction Costs Acquisition-Related Fair Value Adjustments to Deferred Revenue and Inventory Amortization of Acquisition- Related Intangible Assets Discrete Restructuring Adjusted Operating Profit (Non-GAAP) Operating Profit Margin (GAAP) Adjusted Operating Profit Margin (Non-GAAP) Year Ended 12/31/2021 Intelligent Operating Solutions $2,169.4 Precision Technologies $1,848.9 Advanced Healthcare Solutions $1,236.4 — — — $2,169.4 $408.5 $1,848.9 $408.0 $1,236.4 $101.9 Corporate — — — (105.6) 30.2 — 163.3 5.9 — — 16.4 2.5 29.7 6.9 141.1 3.8 — — — — Total Fortive $5,254.7 — $5,254.7 $812.8 59.9 6.9 320.8 12.2 $607.9 $426.9 $283.4 (105.6) $1,212.6 18.8% 28.0% 22.1% 23.1% 8.2% 22.9% Year Ended 12/31/2020 Intelligent Operating Solutions $1,883.7 Precision Technologies $1,651.3 Advanced Healthcare Solutions $1,099.4 7.6 — 5.3 $1,891.3 $317.8 $1,651.3 $321.7 $1,104.7 $2.1 Corporate — — — (102.2) 0.9 7.8 151.1 13.7 $491.3 16.9% 26.0% 0.1 — 17.2 9.7 70.6 19.5 141.6 4.2 — — — — $348.7 $238.0 (102.2) $975.8 19.5% 21.1% 0.2% 21.5% 11.6% 21.0% 15.5% 23.1% Total Fortive $4,634.4 12.9 $4,647.3 $539.4 71.6 27.3 309.9 27.6 Adjusted Operating Profit & Adjusted Operating Profit Margin (CONTINUED) ($ in millions)6 Revenue (GAAP) Acquisition-Related Fair Value Adjustments to Deferred Revenue Adjusted Revenue (Non-GAAP) Operating Profit (GAAP) Acquisition and Other Transaction Costs Acquisition-Related Fair Value Adjustments to Deferred Revenue and Inventory Amortization of Acquisition- Related Intangible Assets Discrete Restructuring Adjusted Operating Profit (Non-GAAP) Operating Profit Margin (GAAP) Adjusted Operating Profit Margin (Non-GAAP) Year Ended 12/31/2019 Intelligent Operating Solutions $1,898.9 46.6 $1,945.5 $289.0 Precision Technologies $1,808.4 — $1,808.4 $324.6 Advanced Healthcare Solutions $856.6 7.9 $864.5 $(72.0) Corporate — — — (97.7) 12.0 47.7 141.7 12.9 4.0 — 20.4 19.5 $503.3 $368.5 15.2% 25.9% 17.9% 20.4% 94.5 73.3 98.9 — $194.7 (8.4)% 22.5% Total Fortive $4,563.9 54.5 $4,618.4 $443.9 110.5 121.0 261.0 32.4 — — — — (97.7) $968.8 9.7% 21.0% Free Cash Flow Margin ($ in millions) Continuing Operations Free Cash Flow: Operating Cash Flows from Continuing Operations (GAAP) Less: purchases of property, plant & equipment (capital expenditures) from continuing operations (GAAP) Free Cash Flow from Continuing Operations (Non-GAAP) Adjusted Revenue (Non-GAAP) Adjusted Free Cash Flow Margin (Non-GAAP) Year Ended 12/31/2021 $992.9 Year Ended 12/31/2020 $977.7 Year Ended 12/31/2019 $702.0 (50.0) $942.9 5,254.7 18% (75.7) $902.0 4,647.3 19% (74.5) $627.5 4,618.4 14% Adjusted Net Earnings From Continuing Operations ($ in millions)6 Net Earnings From Continuing Operations Attributable to Common Shareholders (GAAP) (a) Dividends on the mandatory convertible preferred stock to apply if-converted method (a) Net Earnings from Continuing Operations (GAAP) Pretax amortization of acquisition-related intangible assets Pretax acquisition and other transaction costs Pretax acquisition-related fair value adjustments to deferred revenue and inventory related to significant acquisitions Pretax losses from equity method investments Pretax loss on debt extinguishment, net of gain on Vontier common stock Pretax non-cash interest expense associated with our 0.875% convertible notes Pretax discrete restructuring charges Pretax gain on the disposition of assets Pretax gain on litigation resolution Tax effect of the adjustments reflected above (b) Additional income tax adjustment Adjusted Net Earnings from Continuing Operations (Non-GAAP) Year Ended 12/31/2021 $579.7 34.5 $ 614.2 320.8 59.9 6.9 11.6 47.9 29.1 12.2 — (29.9) (76.3) — $996.4 (a) On July 1, 2021, all outstanding shares of our MCPS converted at a rate of 14.0978 common shares per share of preferred stock into an aggregate of approximately 19.4 million shares (net of fractional shares) of the Company’s common stock. Prior to their conversion, the MCPS were anti-dilutive for the year ended December 31, 2021, and as such, GAAP net earnings per share was calculated using net earnings from continuing operations attributable to common stockholders. The MCPS were dilutive for the year ended December 31, 2020 and the “if-converted” method was applied in calculating earnings per share. As such, no additional shares were assumed to be converted and net earnings per share for both respective periods was calculated using net earnings from continuing operations. (b) The dividend on the MCPS is not tax deductible and therefore the tax effect of the adjustments includes only the amortization of acquisition-related intangible assets, acquisition and other transaction costs, acquisition-related fair value adjustments to deferred revenue and inventory, losses from equity method investments, the gain on disposition of assets, the loss on extinguishment of debt, the gain on litigation resolution, and the non-cash interest expense associated with the 0.875% convertible notes. The gain on the fair value change in Vontier common stock had no tax effect. Adjusted Diluted Net Earnings Per Share From Continuing Operations Year Ended 12/31/2021 (a) Year Ended 12/31/2020 (a) Year Ended 12/31/2019 (a) Diluted Net Earnings Per Share from Continuing Operations (GAAP) (b) Dividends on the mandatory convertible preferred stock to apply if-converted method (b) Assumed dilutive impact on the Diluted Net Earnings Per Share Attributable to Common Stockholders if the MCPS Converted Shares had been outstanding (b) Pretax amortization of acquisition-related intangible assets Pretax acquisition and other transaction costs Pretax acquisition-related fair value adjustments to deferred revenue and inventory related to significant acquisitions Pretax losses from equity method investments Pretax loss on debt extinguishment, net of gain on Vontier common stock Pretax (gain) loss on the disposition of the Tektronix Video Business Pretax non-cash interest expense associated with our 0.875% convertible notes Pretax discrete restructuring charges Pretax gain on the disposition of assets Pretax gain on litigation resolution Tax effect of the adjustments reflected above (c) Noncash discrete tax expense adjustment resulting from the Separation of Vontier Adjusted Diluted Net Earnings Per Share from Continuing Operations (Non-GAAP) $1.65 0.10 (0.05) 0.89 0.17 0.02 0.03 0.13 — 0.08 0.03 — (0.08) (0.21) — $2.75 $4.05 $0.59 — — 0.86 0.20 0.08 0.0 1 (3.12) — 0.09 0.08 (0.01) — (0.20) 0.06 0.20 (0.04) 0.73 0.31 0.34 0.0 1 — (0.11) 0.08 0.09 — — (0.23) 0.08 $2.09 $2.03 (a) Each of the per share adjustments below was calculated assuming the MCPS Converted Shares had converted at the beginning of the period prior to their conversion on July 1, 2021. The 0.875% convertible notes did not have an impact on the adjusted diluted shares outstanding. (b) Prior to their conversion on July 1, 2021, the MCPS were anti-dilutive during the year ended December 31, 2021 and were dilutive during the twelve month periods ended December 31, 2020. As such, GAAP net earnings per share for the year ended December 31, 2021 was calculated using net earnings from continuing operations attributable to common stockholders. (c) The dividend on the MCPS is not tax deductible and therefore the tax effect of the adjustments includes only the amortization of acquisition-related intangible assets, acquisition and other transaction costs, acquisition-related fair value adjustments to deferred revenue and inventory, discrete restructuring, losses from equity method investments, the gain on the disposition of assets, the loss on extinguishment of debt, the gain on litigation resolution, and the non-cash interest expense associated with the 0.875% convertible notes. The gain on the fair value change in Vontier common stock had no tax effect. The sum of the components of adjusted diluted net earnings per share from continuing operations may not equal due to rounding. Directors Daniel L. Comas Advisor Danaher Corporation Sharmistha Dubey Chief Executive Officer Match Group, Inc. Rejji P. Hayes Executive Vice President and Chief Financial Officer CMS Energy Corporation Wright L. Lassiter III President and Chief Executive Officer Henry Ford Health System James A. Lico President and Chief Executive Officer Fortive Corporation Kate D. Mitchell Partner and Co-Founder Scale Venture Partners Jeannine P. Sargent Operating Partner Katalyst Ventures Alan G. Spoon Chairman of the Board Fortive Corporation Executive Officers James A. Lico President and Chief Executive Officer Charles E. McLaughlin Senior Vice President Chief Financial Officer Patrick K. Murphy President and Chief Executive Officer, Advanced Healthcare Solutions Tamara S. Newcombe President and Chief Executive Officer, Precision Technologies Jonathan L. Schwarz Senior Vice President Corporate Development Edward R. Simmons Senior Vice President Strategy Olumide O. Soroye President and Chief Executive Officer, Intelligent Operating Solutions Peter C. Underwood Senior Vice President General Counsel Stacey A. Walker Senior Vice President Human Resources 2021 Our Transfer Agent Computershare manages a variety of shareholder services such as: change of address, lost stock certificates, transfer of stock to another person, and other administrative transactions. Computershare can be reached at: P.O. Box 505000 | Louisville, KY 40233-5000 Toll-free: 800.568.3476 | Outside the U.S.: +1.781.575.3120 | www.computershare.com Investor Relations This annual report, along with a variety of other financial materials, can be viewed at www.fortive.com. Additional inquiries can be directed to Fortive’s Investor Relations team: 6920 Seaway Boulevard | Everett, WA 98203 Phone: 425.446.5000 | E-mail: investors@fortive.com Annual Meeting Fortive’s annual shareholder meeting will be held on June 7, 2022, in virtual only meeting format. For more information, contact Fortive’s Investor Relations team by calling 425.446.5000 or emailing investors@fortive.com. Auditors Ernst & Young, LLP | Seattle, WA Stock Listing New York Stock Exchange Symbol: FTV 2021 2021 ANNUAL REPORTANNUAL REPORT2021

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