Fortive Corp

Previous wording

Certain statements included or incorporated by reference in this quarterly report, in other documents we file with or furnish to the Securities and Exchange Commission (“SEC”), in our press releases, webcasts, conference calls, materials delivered to shareholders and other communications, are “forward-looking statements” within the meaning of the United States federal securities laws. All statements other than historical factual information are forward-looking statements, including without limitation statements regarding: projections of revenue, expenses, profit, profit margins, tax rates, tax provisions, cash flows, pension and benefit obligations and funding requirements, our liquidity position or other financial measures; management’s plans and strategies for future operations, including statements relating to anticipated operating performance, cost reductions, restructuring activities, new product and service developments, competitive strengths or market position, acquisitions, divestitures, strategic opportunities, securities offerings, stock repurchases, dividends and executive compensation; growth, declines and other trends in markets we sell into, including the expected impact of trade and tariff policies; new or modified laws, regulations and accounting pronouncements; impact of climate-related events or transition activities; outstanding claims, legal proceedings, tax audits and assessments and other contingent liabilities; foreign currency exchange rates and fluctuations in those rates; impact of changes to tax laws; general economic and capital markets conditions, including expected impact of inflation or interest rate changes; impact of geopolitical events, including the anticipated impact of the Ukraine/Russia conflict, conflict in the Middle East, and other hostilities; the timing of any of the foregoing; assumptions underlying any of the foregoing; and any other statements that address events or developments that we intend or believe will or may occur in the future. Terminology such as “believe,” “anticipate,” “should,” “could,” “intend,” “will,” “plan,” “expect,” “estimate,” “project,” “target,” “may,” “possible,” “potential,” “forecast” and “positioned” and similar references to future periods are intended to identify forward-looking statements, although not all forward-looking statements are accompanied by such words.

Current wording

Certain statements included or incorporated by reference in this quarterly report, in other documents we file with or furnish to the Securities and Exchange Commission (“SEC”), in our press releases, webcasts, conference calls, materials delivered to shareholders and other communications, are “forward-looking statements” within the meaning of the United States federal securities laws. All statements other than historical factual information are forward-looking statements, including without limitation statements regarding: projections of revenue, expenses, profit, profit margins, tax rates, tax provisions, cash flows, pension and benefit obligations and funding requirements, our liquidity position or other financial measures; management’s plans and strategies for future operations, including statements relating to anticipated operating performance, cost reductions, restructuring activities, new product and service developments, competitive strengths or market position, acquisitions, divestitures, strategic opportunities, securities offerings, stock repurchases, dividends and executive compensation; growth, declines and other trends in markets we sell into, including the expected impact of trade and tariff policies; our plans to separate into two independent, publicly traded companies; new or modified laws, regulations and accounting pronouncements; impact of climate-related events or transition activities; outstanding claims, legal proceedings, tax audits and assessments and other contingent liabilities; foreign currency exchange rates and fluctuations in those rates; impact of changes to tax laws; general economic and capital markets conditions, including expected impact of inflation or interest rate changes; impact of geopolitical developments and events, including the anticipated impact of the Ukraine/Russia conflict, conflict in the Middle East, and other hostilities; the timing of any of the foregoing; assumptions underlying any of the foregoing; and any other statements that address events or developments that we intend or believe will or may occur in the future. Terminology such as “believe,” “anticipate,” “should,” “could,” “intend,” “will,” “plan,” “expect,” “estimate,” “project,” “target,” “may,” “possible,” “potential,” “forecast” and “positioned” and similar references to future periods are intended to identify forward-looking statements, although not all forward-looking statements are accompanied by such words.

Previous wording

In January 2024, we realigned Invetech from the AHS segment to the PT segment (the “Segment Realignment”) based on our strategic decision to divest the equipment design and manufacturing businesses of Invetech, while retaining the motion solution businesses (the “Motion Solution Business”) that are more closely aligned with the PT segment than the AHS segment. Prior period segment amounts below have been recast to conform to the revised segment presentation. In June 2024, we divested and transferred ownership of Invetech, excluding the Motion Solution Business, to its management team (the “Invetech Divestiture”). As a result of the divestiture, in the three and six-month periods ended June 28, 2024, we recorded a net realized loss of $25.6 million, which is identified as “Loss from divestiture” in the Consolidated Condensed Statements of Earnings. The divested businesses accounted for less than 1.0% of total revenue and less than 1.0% of total assets for the fiscal year ended December 31, 2023. The Invetech Divestiture did not represent a strategic shift with a major effect on the Company’s operations and financial results, and therefore the divested businesses are not reported as discontinued operations.

Current wording

In January 2024, we realigned Invetech from the AHS segment to the PT segment (the “Segment Realignment”) based on our strategic decision to divest the equipment design and manufacturing businesses of Invetech, while retaining the motion solution businesses (the “Motion Solution Business”) that are more closely aligned with the PT segment than the AHS segment. Prior period segment amounts below have been recast to conform to the revised segment presentation. In June 2024, we divested and transferred ownership of Invetech, excluding the Motion Solution Business, to its management team (the “Invetech Divestiture”). As a result of the divestiture, in the nine-month period ended September 27, 2024, we recorded a net realized loss of $25.6 million, which is identified as “Loss from divestiture” in the Consolidated Condensed Statements of Earnings. The divested businesses accounted for less than 1.0% of total revenue and less than 1.0% of total assets for the fiscal year ended December 31, 2023. The Invetech Divestiture did not represent a strategic shift with a major effect on the Company’s operations and financial results, and therefore the divested businesses are not reported as discontinued operations.

Previous wording

On January 3, 2024, we acquired EA Elektro-Automatik Holding GmbH (“EA”), a leading supplier of high-power electronic test solutions for energy storage, mobility, hydrogen, and renewable energy applications. The acquisition of EA will bolster our innovative portfolio of products and services for engineers with complementary test and measurement solutions enabling the global energy transition. The total consideration paid was approximately $1.72 billion, net of acquired cash. We recorded approximately $1.17 billion of goodwill related to the EA acquisition, which is not tax deductible.

Current wording

On January 3, 2024, we acquired EA Elektro-Automatik Holding GmbH (“EA”), a leading supplier of high-power electronic test solutions for energy storage, mobility, hydrogen, and renewable energy applications. The acquisition of EA will bolster our innovative portfolio of products and services for engineers with complementary test and measurement solutions enabling the global energy transition. The total consideration paid was approximately $1.72 billion, net of acquired cash. We recorded approximately $1.17 billion of goodwill within the PT segment related to the EA acquisition, which is not tax deductible. We also anticipate future tax benefits as a result of the transaction.

Previous wording

We initiated a discrete restructuring plan in the first quarter of 2023 that was completed during the fourth quarter of 2023. The nature of these activities were broadly consistent throughout our segments and consisted primarily of targeted workforce reductions in response to overall macroeconomic and other external conditions. We incurred these costs to position ourselves to provide superior products and services to customers in a cost-efficient manner, while taking into consideration the impact of broad economic uncertainties. During the three and six-month periods ended June 30, 2023, we incurred charges of $10.7 million and $28.3 million, respectively.

Current wording

We initiated a discrete restructuring plan in the first quarter of 2023 that was completed during the fourth quarter of 2023. The nature of these activities were broadly consistent throughout our segments and consisted primarily of targeted workforce reductions in response to overall macroeconomic and other external conditions. We incurred these costs to position ourselves to provide superior products and services to customers in a cost-efficient manner, while taking into consideration the impact of broad economic uncertainties. During the three and nine-month periods ended September 29, 2023, we incurred charges of $0.9 million and $29.2 million, respectively.

Previous wording

During the three and six-month periods ended June 28, 2024 (the “quarter” or the “second quarter” and “year-to-date period,” respectively), our sales increased by 1.7% and 3.0%, respectively.

Current wording

During the three and nine-month periods ended September 27, 2024 (the “quarter” or the “third quarter” and “year-to-date period,” respectively), our sales increased by 2.7% and 2.9%, respectively.

Previous wording

The year-over-year increase in sales in the second quarter was driven by a 2.7% increase from acquisitions, net of divestitures partially offset by a 1.0% decrease due to unfavorable currency translation. Core revenue growth was essentially flat in the second quarter, where favorable pricing of 2.6% and volume gains in IOS and AHS were offset by volume declines in PT.

Current wording

The year-over-year increase in sales in the third quarter was primarily driven by a 1.1% increase in our core revenue and a 1.6% increase from acquisitions, net of divestitures. Core revenue growth in the third quarter included favorable pricing of 2.9%, partially offset by volume decline of 1.8%.

Previous wording

Year-over-year increases in the year-to-date period were driven by a 1.2% increase in our core revenue and a 2.6% increase from acquisitions, net of divestitures, partially offset by a decline of 0.8% due to unfavorable currency translation. The core revenue growth performance in the year-to-date period of 1.2% was comprised of favorable pricing of 2.4% and volume gains in IOS and AHS offset by volume declines in PT.

Current wording

Year-over-year increases in the year-to-date period were consistent with those in the third quarter, and were driven by a 1.2% increase in our core revenue and a 2.3% increase from acquisitions, net of divestitures, partially offset by a decline of 0.6% due to unfavorable currency translation. Core revenue growth during the year-to-date period included favorable pricing of 2.6%, partially offset by volume decline of 1.4%.

Previous wording

Geographically, in the second quarter, year-over-year core revenue in developed markets was essentially flat, driven by slight growth in North America, a mid-single-digits growth in Japan, offset by a mid-single-digit decline in Western Europe. Core revenue in high growth markets was up slightly year-over-year in the second quarter, driven by low-twenties growth in Latin America, offset by a mid-single-digit decline in China.

Current wording

Geographically, in the third quarter, year-over-year core revenue in developed markets increased slightly, driven by low single-digit growth in North America, partially offset by a low single-digit decline in Western Europe. Core revenue in high growth markets was up low single-digits year-over-year in the third quarter, driven by high-teens growth in Latin America, partially offset by a slight decline in Asia where China declined by high single-digits.

Previous wording

Geographically, in the year-to-date period, year-over-year sales from existing businesses in developed markets increased slightly, driven by low single-digit growth in North America while Western Europe and Japan were essentially flat. Sales from existing businesses in high growth markets increased year-over-year in the year-to-date period by low single-digits, driven by high-teens growth in Latin America, partially offset by a mid-single-digit decline in China.

Current wording

Geographically, in the year-to-date period, year-over-year core revenue in developed markets increased slightly, driven by a low single-digit growth in North America, partially offset by a slight decline in Western Europe. Core revenue in high growth markets increased year-over-year in the year-to-date period by low single-digits, driven by high-teens growth in Latin America, partially offset by a low single-digit decline in Asia where China declined by mid-single-digits.

Previous wording

We anticipate revenue growth to be between 3% and 4.5% for the third quarter of 2024, and approximately 3% and 4% for the full year. We anticipate core revenue growth to be between 2% and 3.5% for the third quarter and approximately 2% and 3% for the full year.

Current wording

We anticipate revenue growth to be approximately 3% for the fourth quarter of 2024 and the full year. We anticipate core revenue growth to be approximately 1% for the fourth quarter and the full year.

Previous wording

We expect foreign exchange rates to remain volatile throughout the year, which could continue to adversely impact our financial results. Additionally, our financial outlook is subject to various assumptions and risks, including but not limited to, macroeconomic conditions in the United States, China and other critical regions, ongoing geopolitical developments and events, the impact of inflationary dynamics on our expenses or our ability to realize price increases in our sales, interest rates, market conditions in key product segments, and elective surgery rates. We will continue to deploy FBS to actively manage these challenges, collaborate with customers and suppliers to minimize disruptions and utilize pricing and other countermeasures to offset the aforementioned dynamics. We continue to monitor these conditions which may continue to impact our business, as well as potential adverse global economic trends and sentiments, monetary and fiscal policies, international trade and relations between the U.S., China and other nations, and investment and taxation policy initiatives being considered in the United States and by the Organization for Economic Co-operation and Development (“OECD”), including the potential impact of the Pillar Two initiative.

Current wording

We expect foreign exchange rates to remain volatile throughout the year, which could continue to impact our financial results. Additionally, our financial outlook is subject to various assumptions and risks, including but not limited to, ongoing geopolitical developments and events, including the U.S. presidential and other elections, macroeconomic conditions in the United States, China and other critical regions, impact from our pending separation into two independent publicly traded companies, and the the impact of inflationary dynamics on our expenses or our ability to realize price increases in our sales, interest rates, market conditions in key product segments, and elective surgery rates. We will continue to deploy FBS to actively manage these challenges and utilize pricing and other countermeasures to offset the aforementioned dynamics. We continue to monitor these conditions which may continue to impact our business, as well as potential adverse global economic trends and sentiments, monetary and fiscal policies, international trade and relations between the U.S., China and other nations, and investment and taxation policy initiatives being considered in the United States and by the Organization for Economic Co-operation and Development (“OECD”), including the potential impact of the Pillar Two initiative. In addition, we expect to execute a discrete restructuring plan related to the Separation beginning in the fourth quarter of 2024.

Previous wording

The following table summarizes total aggregate year-over-year sales growth and the components thereof for the second quarter as compared to the comparable period of 2023:

Current wording

The following table summarizes total aggregate year-over-year sales growth and the components thereof for the third quarter as compared to the comparable period of 2023:

Previous wording

Operating profit margin was 19.4% for the second quarter, yielding an increase of 30 basis points as compared to 19.1% in the comparable period of 2023. Year-over-year changes in operating profit margin were comprised of the following:

Current wording

Operating profit margin was 19.3% for the third quarter, representing a decrease of 20 basis points as compared to 19.5% in the comparable period of 2023. Year-over-year changes in operating profit margin were comprised of the following:

Previous wording

•Year-over-year fluctuations were consistent with those in the second quarter. Namely price from existing businesses, volume gains in IOS and AHS, and gains from productivity measures, partially offset by volume decline in certain businesses and end markets within our PT segment, higher employee compensation, customer acquisition and marketing costs, as well as unfavorable foreign exchange rates — favorable 85 basis points

Current wording

•Year-over-year increase in price from existing businesses, volume gains in AHS, and gains from productivity measures, partially offset by a volume decline in certain businesses and end markets within our IOS and PT segments, and higher employee compensation — favorable 70 basis points

Previous wording

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

Current wording

•The year-over-year net effect of acquisition and divestiture-related transaction costs incurred in the third quarter of 2024 — unfavorable 10 basis points

Previous wording

Operating profit margin was 19.6% for the year-to-date period ended June 28, 2024, an increase of 180 basis points as compared to 17.8% in the comparable period of 2023. Year-over-year changes in operating profit margin were comprised of the following:

Current wording

Operating profit margin was 19.5% for the year-to-date period, yielding an increase of 110 basis points as compared to 18.4% in the comparable period of 2023. Year-over-year changes in operating profit margin were comprised of the following:

Previous wording

•Year-over-year increase in price from existing businesses, volume gains in IOS and AHS, and gains from productivity measures, partially offset by a volume decline in certain businesses and end markets within our PT segment, higher employee compensation, customer acquisition and marketing costs, as well as unfavorable changes in foreign currency exchange rates — favorable 65 basis points

Current wording

•Year-over-year increase in price from existing businesses, volume growth in IOS and AHS, and gains from productivity measures were partially offset by a volume decline in certain businesses and end markets within our PT segment, higher employee compensation and investment in growth initiatives. Additionally, there were unfavorable foreign exchange rates — favorable 80 basis points

Previous wording

•The year-over-year effect of amortization from existing businesses, and impairment of intangible assets incurred in 2023 — favorable 65 basis points

Current wording

•The year-over-year effect of costs relating to the discrete restructuring plan initiated and completed in 2023 — favorable 65 basis points

Previous wording

•The year-over-year effect of the gain on sale of land and certain office buildings in the PT segment in the first quarter of 2024 — favorable 205 basis points

Current wording

•The year-over-year effect of the gain on sale of land and certain office buildings in the PT segment in the first quarter of 2024 — favorable 140 basis points

Previous wording

Geographically, core revenue in developed markets increased in the second quarter by low single-digits, driven by a mid-single-digit growth in North America and a low single-digit growth in Western Europe. Core revenue in high growth markets was low single-digits, driven by mid-teens growth in Latin America, partially offset by a mid-single-digit decline in China.

Current wording

Geographically, core revenue in developed markets increased in the third quarter by low single-digits, driven by a low single-digit growth in North America, partially offset by a low single-digit decline in Western Europe. Core revenue in high growth markets increased in the third quarter by low single-digits, driven by high-teens growth in Latin America, partially offset by a a mid-single-digit decline in China.

Previous wording

Year-over-year price increases in our IOS segment contributed 2.4% and 2.6% to sales growth during the second quarter and year-to-date period, respectively, and is reflected as a component of the change in sales from existing businesses.

Current wording

Year-over-year price increases in our IOS segment contributed 2.6% to sales growth during both the third quarter and year-to-date period, and is reflected as a component of the change in core revenue.

Previous wording

•The year-over-year net effect of acquisition-related transaction costs incurred in the second quarter of 2024 — unfavorable 25 basis points

Current wording

•The year-over-year net effect of acquisition-related transaction costs incurred in the third quarter of 2023 — favorable 25 basis points

Previous wording

•The year-over-year net effect of acquired business, including amortization — unfavorable 30 basis points

Current wording

•The year-over-year net effect of acquired business, including amortization — relatively flat

Previous wording

Operating profit margin increased 210 basis points during the year-to-date period, as compared to the comparable period of 2023. Year-over-year changes in operating profit margin comparisons were comprised of the following:

Current wording

Operating profit margin increased 180 basis points during the year-to-date period, as compared to the comparable period of 2023. Year-over-year changes in operating profit margin comparisons were comprised of the following:

Previous wording

•The year-over-year net effect of acquisition-related transaction costs incurred in the year-to-date period — unfavorable 15 basis points

Current wording

•The year-over-year net effect of acquisition-related transaction costs incurred in the year-to-date period — relatively flat

Previous wording

•The year-over-year net effect of acquired business, including amortization, and acquisition-related fair value adjustments — unfavorable 35 basis points

Current wording

•The year-over-year net effect of acquired business, including amortization, and acquisition-related fair value adjustments — unfavorable 25 basis points

Previous wording

The sales results for both the second quarter and year-to-date periods were impacted by price increases across the segment and volume increases in energetic materials, which were offset by volume reductions in test and measurement and sensing technology products. The acquisition of EA, partially offset by the Invetech Divestiture, contributed 6.0% and 5.8% to revenue growth during the second quarter and year-to-date period, respectively.

Current wording

The sales results for both the third quarter and year-to-date periods were impacted by price increases across the segment and volume increases in energetic materials, offset by volume reductions in test and measurement and certain sensing technology products. The acquisition of EA, partially offset by the Invetech Divestiture, contributed 3.3% and 5.0% to revenue growth during the third quarter and year-to-date period, respectively.

Previous wording

Geographically, on a year-to-date basis, sales from existing businesses in developed markets decreased by mid-single-digits, driven by a low single-digit decline in North America, a high single-digit decline in Western Europe, and a low double-digit decline in Japan. Sales from existing businesses in high growth markets decreased year-over-year in the year-to-date period by mid-single-digits, driven by low double-digits decline in China.

Current wording

Geographically, core revenue in developed markets decreased by mid-single-digits in the third quarter, driven by a mid-single-digit decline in North America and Western Europe. Core revenue in high growth markets increased by low single-digits in the third quarter, driven by low-twenties growth in Latin America, partially offset by a low single-digit decline in Asia.

Previous wording

Geographically, core revenue in developed markets decreased by mid-single-digits in the second quarter, driven by a mid-single-digit decline in North America, a mid-teens decline in Western Europe, and a mid-single-digit growth in Japan. Core revenue in high growth markets decreased by high single-digits in the second quarter, driven by a high single-digit decline in Asia where China decreased by high single-digits.

Current wording

Geographically, core revenue in developed markets decreased by mid-single-digits in the year-to-date period, driven by a low single-digit decline in North America, a high single-digit decline in Western Europe, and a low double-digit decline in Japan. Core revenue in high growth markets decreased by low single-digits in the year-to-date period, driven by a low double-digit growth in Latin America, offset by a mid-single-digit decline in Asia, where China decreased by low double-digits.

Previous wording

Year-over-year price increases in our PT segment contributed 2.3% and 1.8% to sales growth for the second quarter and year-to-date period, respectively, and is reflected as a component of the change in sales from existing businesses.

Current wording

Year-over-year price increases in our PT segment contributed 2.9% and 2.2% to sales growth for the third quarter and year-to-date period, respectively, and is reflected as a component of the change in core revenue.

Previous wording

Operating profit margin decreased 350 basis points for the second quarter as compared to the comparable period of 2023. Year-over-year changes in operating profit margin were comprised of the following:

Current wording

Operating profit margin decreased 340 basis points for the third quarter as compared to the comparable period of 2023. Year-over-year changes in operating profit margin were comprised of the following:

Previous wording

•Year-over-year increase in price from existing businesses and gains from productivity measures, offset by net volume reduction in the segment, higher employee compensation costs, and unfavorable changes in foreign currency exchange rates — unfavorable 15 basis points

Current wording

•Year-over-year increase in price from existing businesses and gains from productivity measures, offset by net volume reductions in the segment — favorable 5 basis points

Previous wording

•The year-over-year net effect of acquisition and divestiture-related transaction costs, which were incurred in the second quarter of 2024, primarily related to the EA acquisition — unfavorable 10 basis points

Current wording

•The year-over-year net effect of acquisition and divestiture-related transaction costs, which were incurred in the third quarter of 2024, primarily related to the EA acquisition — unfavorable 35 basis points

Previous wording

Operating profit margin increased 20 basis points during the year-to-date period as compared to the comparable period of 2023. Year-over-year changes in operating profit margins were comprised of the following:

Current wording

Operating profit margin decreased 100 basis points during the year-to-date period as compared to the comparable period of 2023. Year-over-year changes in operating profit margins were comprised of the following:

Previous wording

•Year-over-year increase in price from existing businesses and gains from productivity measures, offset by net volume reductions in the segment and unfavorable changes in foreign currency exchange rates — unfavorable 100 basis points

Current wording

•Year-over-year increase in price from existing businesses and gains from productivity measures were offset by net volume reduction in the segment and unfavorable changes in foreign currency exchange rates — unfavorable 10 basis points

Previous wording

•The year-over-year net effect of acquisition and divestiture-related transaction costs incurred in the year-to-date period primarily related to the EA acquisition — unfavorable 250 basis points

Current wording

•The year-over-year net effect of acquisition and divestiture-related transaction costs incurred in the year-to-date period primarily related to the EA acquisition — unfavorable 180 basis points

Previous wording

•The year-over-year effect of the gain on sale of land and certain office buildings in the first quarter of 2024 — favorable 570 basis points

Current wording

•The year-over-year effect of the gain on sale of land and certain office buildings in the first quarter of 2024 — favorable 380 basis points

Previous wording

The sales results for both the second quarter and year-to-date period were driven by growth in our existing businesses due to price increases across the segment and volume increases in our sterilization products.

Current wording

The sales results for both the third quarter and year-to-date period were driven by growth in our existing businesses due to price increases across the segment and volume increases in our sterilization and dosimetry products.

Previous wording

Geographically, core revenue in developed markets increased low single-digits in the second quarter, driven by a low single-digit growth in North America and a low double-digit growth in Western Europe. In high growth markets, core revenue increased by low double-digits in the second quarter, driven by mid-thirties growth in Latin America, while China was essentially flat.

Current wording

Geographically, core revenue in developed markets increased by low double-digits in the third quarter, driven by a low double-digit growth in North America and a high single-digit growth in Western Europe. In high growth markets, core revenue increased by mid-single-digits in the third quarter, driven by mid-teens growth in Latin America.

Previous wording

Year-over-year price increases in our AHS segment contributed 3.5% and 3.2% to sales growth during the second quarter and year-to-date period, respectively, and is reflected as a component of the change in sales from existing businesses.

Current wording

Year-over-year price increases in our AHS segment contributed 3.6% and 3.3% to sales growth during the third quarter and year-to-date period, respectively, and is reflected as a component of the change in core revenue.