UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

________________________________________________



(Mark One)
ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended: ~~September 29, 2017~~March 30, 2018
Or
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-37654

________________________________________________

Fortive Corporation

(Exact name of registrant as specified in its charter)

________________________________________________



Delaware		47-5654583
(State or other jurisdiction of incorporation or organization)		(I.R.S. employer identification number)

6920 Seaway Blvd Everett, WA		98203
(Address of principal executive offices)		(Zip code)

Registrant’s telephone number, including area code: (425) 446-5000

Indicate 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 (the “Exchange Act”) 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 ý No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes ý No o

Indicate 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. (Check one):



Large accelerated filer ¨x		Accelerated filer ¨

Non-accelerated filer x¨	(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. o

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes o No ý

The number of shares of common stock outstanding at ~~October 20, 2017~~April 19, 2018 was ~~347,558,977.~~348,560,770.

FORTIVE CORPORATION

INDEX

FORM 10-Q

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

FORTIVE CORPORATION AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEETS

($ in millions, except per share amounts)


	As of						As of
	September 29, 2017			December 31, 2016			March 30, 2018		December 31, 2017
	(unaudited)						(unaudited)
ASSETS
Current assets:
Cash and equivalents	$	910.9		$	803.2		$	1,015.7	$	962.1
Accounts receivable, net	1,075.1			945.4			1,172.1		1,143.6
Inventories:
Finished goods	209.5			198.3			216.6		217.2
Work in process	86.1			79.3			96.7		78.9
Raw materials	280.6			267.0			302.6		284.5
Total inventories	576.2			544.6			615.9		580.6
Prepaid expenses and other current assets	133.1			195.5			276.0		250.5
Total current assets	2,695.3			2,488.7			3,079.7		2,936.8
Property, plant and equipment, net of accumulated depreciation of $1,072.6 and $1,004.2 at September 29, 2017 and December 31, 2016, respectively	673.2			547.6
Property, plant and equipment, net of accumulated depreciation of $1,117.3 and $1,086.8 at March 30, 2018 and December 31, 2017, respectively							709.8		712.5
Other assets	440.1			427.2			480.5		476.8
Goodwill	4,632.3			3,979.0			5,126.2		5,098.5
Other intangible assets, net	886.1			747.3			1,259.2		1,276.0
Total assets	$	9,327.0		$	8,189.8		$	10,655.4	$	10,500.6
LIABILITIES AND EQUITY
Current liabilities:
Trade accounts payable	$	646.1		$	666.2		$	711.7	$	727.5
Accrued expenses and other current liabilities	733.2			800.3			749.7		874.8
Total current liabilities	1,379.3			1,466.5			1,461.4		1,602.3
Other long-term liabilities	797.5			674.3			1,087.4		1,033.9
Long-term debt	3,671.9			3,358.0			3,996.9		4,056.2
Equity:
Preferred stock: $0.01 par value, 15 million shares authorized; no shares issued or outstanding	—			—			—		—
Common stock: $0.01 par value, 2.0 billion shares authorized; 347.9 million and 346.0 million issued; 347.5 million and 345.9 million outstanding at September 29, 2017 and December 31,2016, respectively	3.5			3.5
Common stock: $0.01 par value, 2.0 billion shares authorized; 349.0 and 348.2 million issued; 348.5 and 347.8 million outstanding at March 30, 2018 and December 31, 2017, respectively							3.5		3.5
Additional paid-in capital	2,449.2			2,427.2			2,476.1		2,444.1
Retained earnings	1,037.8			403.0			1,583.3		1,350.3
Accumulated other comprehensive income (loss)	(16.3		)	(145.8		)	29.5		(7.6		)
Total Fortive stockholders’ equity	3,474.2			2,687.9			4,092.4		3,790.3
Noncontrolling interests	4.1			3.1			17.3		17.9
Total stockholders’ equity	3,478.3			2,691.0			4,109.7		3,808.2
Total liabilities and equity	$	9,327.0		$	8,189.8		$	10,655.4	$	10,500.6

See the accompanying Notes to the Consolidated ~~and Combined~~ Condensed Financial Statements.

FORTIVE CORPORATION AND SUBSIDIARIES

CONSOLIDATED ~~AND COMBINED~~ CONDENSED STATEMENTS OF EARNINGS

($ and shares in millions, except per share amounts)

(unaudited)


	Three Months Ended						Nine Months Ended						Three Months Ended
	September 29, 2017			September 30, 2016			September 29, 2017			September 30, 2016			March 30, 2018			March 31, 2017
Sales	$	1,685.3		$	1,567.4		$	4,849.3		$	4,597.2		$	1,740.7		$	1,535.2
Cost of sales	(845.9		)	(794.5		)	(2,460.8		)	(2,361.0		)	(869.9		)	(791.2		)
Gross profit	839.4			772.9			2,388.5			2,236.2			870.8			744.0
Operating costs:
Selling, general and administrative expenses	(381.5		)	(354.5		)	(1,092.1		)	(1,042.3		)	(423.7		)	(352.2		)
Research and development expenses	(102.0		)	(95.2		)	(297.3		)	(285.6		)	(108.9		)	(96.2		)
Operating profit	355.9			323.2			999.1			908.3			338.2			295.6
Non-operating expense:
Gain from acquisition	15.3			—			15.3			—
Interest expense	(22.9		)	(23.4		)	(68.2		)	(26.1		)
Non-operating expenses:
Interest expense, net													(24.6		)	(22.6		)
Other non-operating expenses													(0.7		)	(0.7		)
Earnings before income taxes	348.3			299.8			946.2			882.2			312.9			272.3
Income taxes	(80.5		)	(72.9		)	(238.6		)	(234.4		)	(51.7		)	(72.6		)
Net earnings	$	267.8		$	226.9		$	707.6		$	647.8		$	261.2		$	199.7
Net earnings per share:
Basic	$	0.77		$	0.66		$	2.04		$	1.87		$	0.75		$	0.58
Diluted	$	0.76		$	0.65		$	2.01		$	1.87		$	0.74		$	0.57
Average common stock and common equivalent shares outstanding:
Basic	347.7			346.0			347.3			345.5			348.6			347.0
Diluted	352.9			349.2			352.2			346.6			354.4			351.5

See the accompanying Notes to the Consolidated ~~and Combined~~ Condensed Financial Statements.

FORTIVE CORPORATION AND SUBSIDIARIES

CONSOLIDATED ~~AND COMBINED~~ CONDENSED STATEMENTS OF COMPREHENSIVE INCOME

($ in millions)

(unaudited)


	Three Months Ended					Nine Months Ended					Three Months Ended
	September 29, 2017		September 30, 2016			September 29, 2017		September 30, 2016			March 30, 2018		March 31, 2017
Net earnings	$	267.8	$	226.9		$	707.6	$	647.8		$	261.2	$	199.7
Other comprehensive income (loss), net of income taxes:
Other comprehensive income, net of income taxes:
Foreign currency translation adjustments	38.1		(25.7		)	126.9		(14.2		)	36.4		43.6
Pension adjustments	0.9		1.0			2.6		3.1			0.7		0.8
Total other comprehensive income (loss), net of income taxes	39.0		(24.7		)	129.5		(11.1		)
Total other comprehensive income, net of income taxes											37.1		44.4
Comprehensive income	$	306.8	$	202.2		$	837.1	$	636.7		$	298.3	$	244.1

See the accompanying Notes to the Consolidated ~~and Combined~~ Condensed Financial Statements.

FORTIVE CORPORATION AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENT OF CHANGES IN EQUITY

($ and shares in millions)

(unaudited)


	Common Stock			Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Noncontrolling Interests		Common Stock			Additional Paid-In Capital		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Noncontrolling Interests
	Shares	Amount		Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Noncontrolling Interests		Shares	Amount		Additional Paid-In Capital		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Noncontrolling Interests
Balance, December 31, 2016	345.9	$	3.5	$	2,427.2		$	403.0		$	(145.8	)	$	3.1
Balance, December 31, 2017															347.8	$	3.5	$	2,444.1	$	1,350.3		$	(7.6	)	$	17.9
Adoption of accounting standards															—	—		—		(3.9		)	—			—
Balance, January 1, 2018															347.8	3.5		2,444.1		1,346.4			(7.6		)	17.9
Net earnings for the period	—	—		—			707.6			—			—		—	—		—		261.2			—			—
Dividends to shareholders	—	—		—			(72.8		)	—			—		—	—		—		(24.3		)	—			—
Separation related adjustments	—	—		(29.3		)	—			—			—		—	—		13.3		—			—			—
Other comprehensive income	—	—		—			—			129.5			—		—	—		—		—			37.1			—
Common stock-based award activity	1.6	—		51.3			—			—			—		0.7	—		18.7		—			—			—
Change in noncontrolling interests	—	—		—			—			—			1.0		—	—		—		—			—			(0.6		)
Balance, September 29, 2017	347.5	$	3.5	$	2,449.2		$	1,037.8		$	(16.3	)	$	4.1
Balance, March 30, 2018															348.5	$	3.5	$	2,476.1	$	1,583.3		$	29.5		$	17.3

See the accompanying Notes to the Consolidated ~~and Combined~~ Condensed Financial Statements.

FORTIVE CORPORATION AND SUBSIDIARIES

CONSOLIDATED ~~AND COMBINED~~ CONDENSED STATEMENTS OF CASH FLOWS

($ in millions)

(unaudited)


	Nine Months Ended						Three Months Ended
	September 29, 2017			September 30, 2016			March 30, 2018			March 31, 2017
Cash flows from operating activities:
Net earnings	$	707.6		$	647.8		$	261.2		$	199.7
Noncash items:
Depreciation	72.4			66.7			35.0			23.4
Amortization	41.3			67.2			25.0			13.3
Stock-based compensation expense	37.2			34.4			11.9			12.0
Gain from acquisition	(15.3		)	—
Impairment charge on intangible assets	—			3.5
Change in accounts receivable, net	(30.8		)	9.9			(20.1		)	10.0
Change in inventories	8.2			(34.9		)	(31.9		)	(24.2		)
Change in trade accounts payable	(51.2		)	(37.4		)	(22.2		)	(47.5		)
Change in prepaid expenses and other assets	(17.9		)	(13.3		)	(5.9		)	(0.6		)
Change in accrued expenses and other liabilities	(38.5		)	75.5			(82.0		)	(37.8		)
Net cash provided by operating activities	713.0			819.4			171.0			148.3
Cash flows from investing activities:
Cash paid for acquisitions	(802.1		)	(190.6		)	(7.7		)	—
Payments for additions to property, plant and equipment	(87.7		)	(90.0		)	(31.4		)	(26.8		)
All other investing activities	1.5			4.3			0.1			(0.6		)
Net cash used in investing activities	(888.3		)	(276.3		)	(39.0		)	(27.4		)
Cash flows from financing activities:
Net proceeds from borrowings (maturities of 90 days or less)	176.8			525.6
Proceeds from borrowings (maturities longer than 90 days)	125.9			2,983.0
Net repayments of borrowings (maturities of 90 days or less)							(74.3		)	(95.5		)
Payment of dividends	(72.8		)	(24.2		)	(24.3		)	(24.2		)
Cash dividend paid to Former Parent	—			(3,000.0		)
Net transfers to Former Parent	—			(301.4		)
All other financing activities	10.9			(2.2		)	4.4			0.3
Net cash provided by financing activities	240.8			180.8
Net cash used by financing activities							(94.2		)	(119.4		)
Effect of exchange rate changes on cash and equivalents	42.2			0.9			15.8			12.9
Net change in cash and equivalents	107.7			724.8			53.6			14.4
Beginning balance of cash and equivalents	803.2			—			962.1			803.2
Ending balance of cash and equivalents	$	910.9		$	724.8		$	1,015.7		$	817.6

See the accompanying Notes to the Consolidated ~~and Combined~~ Condensed Financial Statements.

FORTIVE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED ~~AND COMBINED~~ CONDENSED FINANCIAL STATEMENTS

NOTE 1. BUSINESS OVERVIEW ~~AND BASIS OF PRESENTATION~~

Fortive Corporation (“Fortive”, the “Company,” “we,” “us,” or ~~the “Company”~~“our”) is a diversified industrial growth company encompassing businesses that are recognized leaders in attractive markets. Our well-known brands hold leading positions in advanced instrumentation and solutions, transportation technology, sensing, automation and specialty, and franchise distribution markets. Our businesses design, develop, service, manufacture and market professional and engineered products, software and services for a variety of end markets, building upon leading brand names, innovative technology and significant market positions.

~~Basis of Presentation~~—We prepared the unaudited consolidated ~~and combined~~ condensed financial statements included herein in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) applicable for interim periods. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations; however, we believe the disclosures are adequate to make the information presented not misleading. The consolidated ~~and combined~~ condensed financial statements included herein should be read in conjunction with the audited annual consolidated and combined financial statements as of and for the year ended December 31, ~~2016~~2017 and the ~~Notes~~footnotes (“Notes”) thereto included within our ~~2016~~2017 Annual Report on Form 10-K.

In our opinion, the accompanying financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to fairly present our financial position as of ~~September 29, 2017~~March 30, 2018 and December 31, ~~2016,~~2017, and our results of operations and cash flows for the three ~~and nine~~ months ended ~~September 29, 2017~~March 30, 2018 and ~~September 30, 2016.~~

Prior to our separation from Danaher Corporation (“Danaher” or “Former Parent”) on July 2, 2016 (the “Separation”), our businesses were comprised of certain Danaher operating units (the “Fortive Businesses”). The combined condensed financial statements for periods prior to the Separation were derived from Danaher’s consolidated financial statements and accounting records and prepared in accordance with GAAP for the preparation of carved-out combined financial statements. Prior to the Separation, all revenues and costs as well as assets and liabilities directly associated with Fortive have been included in the combined condensed financial statements. Additionally, the combined condensed financial statements for periods prior to the Separation included allocations of certain general, administrative, sales and marketing expenses and cost of sales from Danaher’s corporate office and from other Danaher businesses to Fortive, and allocations of related assets, and liabilities, as applicable. The allocations were determined on a reasonable basis; however, the amounts are not necessarily representative of the amounts that would have been reflected in the financial statements had we been operating independently of Danaher during the applicable periods. Accordingly, our combined condensed financial statements may not be indicative of our results had we been a separate, stand-alone entity throughout the periods presented. For further discussion of related party allocations prior to the Separation, including the method for such allocation, refer to Note 19 of our 2016 Annual Report on Form 10-K.

Following the Separation, the consolidated financial statements include the accounts of Fortive and those of our wholly-owned subsidiaries and no longer include any allocations from Danaher. Accordingly:

~~The Consolidated Condensed Balance Sheets at September 29, 2017 and December~~March 31, ~~2016 consist of our consolidated balances.~~

The Consolidated Condensed Statements of Earnings and Statements of Comprehensive Income for the three and nine months ended September 29, 2017 and the three months ended September 30, 2016 consist of our consolidated results.

~~The Consolidated Condensed Statement of Changes in Equity and Statement of Cash Flows for the nine months ended September 29, 2017 consist of our consolidated results.~~

The Consolidated and Combined Condensed Statement of Earnings, Statement of Comprehensive Income and Statement of Cash Flows for the nine months ended September 30, 2016 consist of our consolidated activity for the three months ended September 30, 2016 and the combined results of the Fortive Businesses for the six months ended July 1, 2016.

2017.

Accumulated Other Comprehensive Income (Loss)—~~The changes in accumulated other comprehensive income (loss) by component are summarized below ($ in millions).~~ Foreign currency translation adjustments are generally not adjusted for income taxes as they relate to indefinite investments in non-U.S. subsidiaries. The changes in accumulated other comprehensive income (loss) by component are summarized below ($ in millions):


	Foreign currency translation adjustments			Pension & post- retirement plan benefit adjustments ^(b)				Total			Foreign currency translation adjustments			Pension adjustments				Total
For the Three Months Ended September 29, 2017:
Balance, June 30, 2017	$	16.2		$	(71.5	)		$	(55.3	)
For the Three Months Ended March 30, 2018:
Balance, December 31, 2017											$	64.0		$	(71.6	)		$	(7.6	)
Other comprehensive income (loss) before reclassifications, net of income taxes	38.1			—				38.1			36.4			—				36.4
Amounts reclassified from accumulated other comprehensive income (loss):
Increase (decrease)	—			1.2			^(a)	1.2			—			0.9			^(a)	0.9
Income tax impact	—			(0.3		)		(0.3		)	—			(0.2		)		(0.2		)
Amounts reclassified from accumulated other comprehensive income (loss), net of income taxes	—			0.9				0.9			—			0.7				0.7
Net current period other comprehensive income (loss), net of income taxes	38.1			0.9				39.0			36.4			0.7				37.1
Balance, September 29, 2017	$	54.3		$	(70.6	)		$	(16.3	)
Balance, March 30, 2018											$	100.4		$	(70.9	)		$	29.5

For the Three Months Ended September 30, 2016:
Balance, July 1, 2016	$	62.7		$	(63.5	)		$	(0.8	)
For the Three Months Ended March 31, 2017:
Balance, December 31, 2016											$	(72.6	)	$	(73.2	)		$	(145.8	)
Other comprehensive income (loss) before reclassifications, net of income taxes	(25.7		)	—				(25.7		)	43.6			—				43.6
Amounts reclassified from accumulated other comprehensive income (loss):
Increase (decrease)	—			1.3			^(a)	1.3			—			1.1			^(a)	1.1
Income tax impact	—			(0.3		)		(0.3		)	—			(0.3		)		(0.3		)
Amounts reclassified from accumulated other comprehensive income (loss), net of income taxes	—			1.0				1.0			—			0.8				0.8
Net current period other comprehensive income (loss), net of income taxes	(25.7		)	1.0				(24.7		)	43.6			0.8				44.4
Balance, September 30, 2016	$	37.0		$	(62.5	)		$	(25.5	)

For the Nine Months Ended September 29, 2017:
Balance, December 31, 2016	$	(72.6	)	$	(73.2	)		$	(145.8	)
Other comprehensive income (loss) before reclassifications, net of income taxes	126.9			—				126.9
Amounts reclassified from accumulated other comprehensive income (loss):
Increase (decrease)	—			3.4			^(a)	3.4
Income tax impact	—			(0.8		)		(0.8		)
Amounts reclassified from accumulated other comprehensive income (loss), net of income taxes	—			2.6				2.6
Net current period other comprehensive income (loss)	126.9			2.6				129.5
Balance, September 29, 2017	$	54.3		$	(70.6	)		$	(16.3	)
Balance, March 31, 2017											$	(29.0	)	$	(72.4	)		$	(101.4	)
^(a) This accumulated other comprehensive income (loss) component is included in the computation of net periodic pension cost (refer to Note 7 for additional details).											^(a) This accumulated other comprehensive income (loss) component is included in the computation of net periodic pension cost (refer to Note 7 for additional details).

Foreign
currency
translation
adjustments

Pension &
post-
retirement
plan benefit
adjustments ^(b)
Total
For the Nine Months Ended September 30, 2016:
Balance, December 31, 2015 $ 51.2
$ (65.6 ) $ (14.4 )
Other comprehensive income (loss) before reclassifications, net of income taxes (14.2 ) —
(14.2 )
Amounts reclassified from accumulated other comprehensive income (loss):
Increase —
4.1
^(a)
4.1
Income tax impact —
(1.0 ) (1.0 )
Amounts reclassified from accumulated other comprehensive income (loss), net of income taxes —
3.1
3.1
Net current period other comprehensive income (loss) (14.2 ) 3.1
(11.1 )
Balance, September 30, 2016 $ 37.0
$ (62.5 ) $ (25.5 )

^(a) This accumulated other comprehensive income (loss) component is included in the computation of net periodic pension cost (refer to Note 6 for additional details).
^(b) Includes balances relating to non-U.S. employee defined benefit plans, supplemental executive retirement plans and other postretirement employee benefit plans.

~~New~~Recently Issued Accounting Standards—In ~~May 2017,~~June 2016, the Financial Accounting Standards Board ~~(“FASB”~~(the “FASB”) issued Accounting Standards Update (“ASU”) ~~No. 2017-09,~~ ~~Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting~~, which provided clarity on which changes to the terms or conditions of share-based payment awards require an entity to apply the modification accounting provisions required in Topic 718. This standard is effective for us beginning January 1, 2018 (with early adoption permitted, including adoption in any interim period for which financial statements have not yet been issued). We do not expect the adoption of this standard will have a material impact on our financial statements.

~~In March 2017, the FASB issued ASU No. 2017-07,~~ ~~Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost~~, which aims to improve the presentation of net periodic pension cost. Under current accounting standards, all components of net periodic pension costs are aggregated and reported in cost of sales or selling, general and administrative expenses in the financial statements. Under the new standard we will be required to report only the service cost component in cost of sales or selling, general and administrative expenses; and the other components of net periodic pension costs (which include interest costs, expected return on plan assets and amortization of net loss) will be required to be presented in non-operating expenses. The presentation requirement of this standard is effective for us beginning January 1, 2018 (with early adoption permitted) using a retrospective transition approach and provides for certain practical expedients. We do not expect the adoption of this standard will have a material impact to our financial statements.

~~In June 2016, the FASB issued ASU~~ No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which amends the impairment model by requiring entities to use a forward-looking approach, based on expected losses, to estimate credit losses on certain types of financial instruments, including trade receivables. This standard is effective for us beginning January 1, 2020, with early adoption permitted. We are currently evaluating the impact of this standard on our financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which will require, among other items, lessees to recognize a right-of-use asset and a lease liability for most leases. The standard also requires ~~disclosures by~~ lessees and lessors ~~about~~to disclose the amount, timing and uncertainty of cash flows arising from leases. The accounting applied by a lessor is largely unchanged from ~~that applied under~~ the current standard. This standard is effective for us beginning January 1, 2019 (with early adoption permitted) using a modified retrospective transition approach and provides for certain practical expedients. In September 2017, the FASB issued ASU No. 2017-13, Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842), which provided additional implementation guidance on the previously issued ASU. We are currently evaluating the impact of this standard on our financial statements.

~~In May 2014, the FASB issued ASU No. 2014-09,~~ ~~Revenue from Contracts with Customers (Topic 606)~~, which impacts virtually all aspects of an entity’s revenue recognition. The core principle of the new standard is that revenue should be recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to

which the entity expects to be entitled in exchange for those goods or services. During 2016 and 2017, the FASB issued several amendments to the standard, including clarification to the guidance on reporting revenues as a principal versus an agent, identifying performance obligations, accounting for intellectual property licenses, assessing collectability, presentation of sales taxes, impairment testing for contract costs, disclosure of performance obligations and provided additional implementation guidance. The new standard will also require additional disclosures intended to provide users of financial statements comprehensive information about the nature, amount, timing and uncertainty of revenue and cash flows from customer contracts. The two permitted transition methods under the new standard are the full retrospective method, in which case the standard would be applied to each prior reporting period presented and the cumulative effect of applying the standard would be recognized at the earliest period shown, or the modified retrospective method, in which case the cumulative effect of applying the standard would be recognized at the date of initial application. We currently anticipate adopting this standard beginning January 1, 2018 using the modified retrospective method.

We are currently completing our assessment and quantifying the impact of the new revenue standard on our financial statements and related disclosures. We expect recognition of revenue for a majority of customer contracts to remain substantially unchanged. However, we are continuing to assess all potential impacts of the standard and we currently believe the more significant impacts relate to certain customer contracts that will be recognized over time, accounting for any required deferral of commissions and changes to the timing of recognition of revenue and costs related to certain warranty arrangements. We have identified, and are in the process of implementing, appropriate changes to our processes, systems and controls to support recognition and disclosure under the new standard. Furthermore, we anticipate that our disclosures will be expanded to meet the new standard’s disclosure objectives.

~~Separation from Danaher Corporation~~—The Separation from Danaher, effectuated on July 2, 2016, was completed in the form of a pro rata distribution to Danaher stockholders of record on June 15, 2016 of 100 percent of the outstanding shares of Fortive Corporation held by Danaher.

NOTE 2. ACQUISITIONS AND DIVESTITURES

For a ~~full~~ description of our material acquisition activity, ~~reference is made~~refer to Note 3 of our ~~2016~~2017 Annual Report on Form 10-K.

We continually evaluate potential acquisitions and divestitures that ~~either strategically fit~~align with our ~~existing~~ portfolio ~~or expand~~strategy and expedite the evolution of our portfolio into a new and attractive business ~~area.~~areas. We have completed a number of acquisitions that have been accounted for as purchases and have resulted in the recognition of goodwill in our financial statements. This goodwill arises because the purchase ~~prices~~price for ~~these businesses reflect~~each business reflects a number of factors including the future earnings and cash flow potential of ~~these businesses,~~the business, the multiple to earnings, cash flow and other factors at which similar businesses have been purchased by other acquirers, the competitive nature of the processes by which we acquired the ~~businesses,~~business, the avoidance of the time and costs which would be required (and the associated risks that would be encountered) to enhance our existing offerings to key target markets and develop new and profitable businesses, and the complementary strategic fit and resulting synergies ~~these businesses bring~~the business brings to existing operations.

We make an initial allocation of the purchase price at the date of acquisition based ~~upon~~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 items identified as of the acquisition date are considered for subsequent adjustment. We are in the process of obtaining valuations of certain acquired ~~intangible~~ assets and evaluating the tax impact in connection with certain acquisitions. We make appropriate adjustments to purchase price allocations prior to completion of the applicable measurement period, as required.

~~During~~Planned Divestiture of A&S Business

On March 7, 2018, we entered into a definitive agreement to combine four of our operating companies from our Automation & Specialty platform (the “A&S Business”) with Altra Industrial Motion Corp (“Altra”) in a tax-efficient Reverse Morris Trust transaction. In the ~~third quarter~~transaction, we will receive approximately $1.4 billion in cash and debt retirement, and our shareholders will receive in the aggregate 35 million shares of ~~2017, we acquired two businesses for total consideration~~Altra, representing approximately 54% of ~~$802~~outstanding shares of Altra common stock immediately following the transaction. The A&S Business includes the market-leading brands of Kollmorgen, Thomson, Portescap and Jacobs Vehicle Systems, and generated approximately $907 million in ~~cash, net~~revenue for the year ended December 31, 2017. The transaction is expected to close by the end of ~~cash acquired,~~2018, subject to customary closing conditions, including ~~the acquisition~~receipt of certain regulatory approvals, Altra shareholder approval, and our receipt of confirmation of the ~~remaining 80%~~tax treatment of ~~a business in which we previously had an ownership interest. The acquisition~~certain matters. Upon closing of the ~~remaining 80% interest also resulted in~~transaction, we will classify the ~~revaluation of our prior interest, and we recorded a gain from acquisition of $15.3 million. The businesses acquired complement existing units~~historical results of the ~~Industrial Technology and Professional Instrumentation segments. The aggregate annual sales of these businesses at the time of their respective acquisitions,~~A&S Business as discontinued operations in each case based on the company’s revenues for its last completed fiscal year prior to the acquisition, were approximately $246 million. We preliminarily recorded an aggregate of $576 million of goodwill related to these acquisitions.our financial statements.

The following summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition for all acquisitions consummated during the nine months ended September 29, 2017 ($ in millions):

Accounts receivable $ 73.3
Inventories 27.8
Property, plant and equipment 99.7
Goodwill 576.3
Other intangible assets, primarily customer relationships, trade names and technology 172.4
Trade accounts payable (15.6 )
Other assets and liabilities, net (95.0 )
Previously held investment (36.8 )
Net cash consideration $ 802.1

~~Pro forma financial information for these acquisitions has not been presented because the impact is not material.~~

~~Subsequent Event~~

On October 19, 2017, we completed the acquisition of Landauer Inc., a leading global provider of subscription-based technical and analytical services to determine occupational and environmental radiation exposure, as well as a leading domestic provider of outsourced medical physics services, at a purchase price of $67.25 per share. Landauer Inc. will be integrated into our Professional Instrumentation segment.

NOTE 3. GOODWILL

The following is a rollforward of our goodwill ($ in millions):

Balance, December 31, 2016 $ 3,979.0
Attributable to 2017 acquisitions 576.3
Foreign currency translation & other 77.0
Balance, September 29, 2017 $ 4,632.3



Balance, December 31, 2017	$	5,098.5
Attributable to 2018 acquisitions	1.8
Foreign currency translation & other	25.9
Balance, March 30, 2018	$	5,126.2

The carrying value of goodwill by segment is summarized as follows ($ in millions):


	September 29, 2017		December 31, 2016		March 30, 2018		December 31, 2017
Professional Instrumentation	$	2,863.8	$	2,423.7	$	3,349.1	$	3,331.0
Industrial Technologies	1,768.5		1,555.3		1,777.1		1,767.5
Total goodwill	$	4,632.3	$	3,979.0	$	5,126.2	$	5,098.5

We have not identified any “triggering” events which would have indicated a potential impairment of goodwill in the ~~nine~~three months ended ~~September 29, 2017.~~March 30, 2018.

NOTE 4. FAIR VALUE MEASUREMENTS

Accounting standards define fair value based on an exit price model, establish a framework for measuring fair value where our assets and liabilities are required to be carried at fair value and provide for certain disclosures related to the valuation methods used within a valuation hierarchy as established within the accounting standards. This hierarchy prioritizes the inputs into three broad levels as ~~follows.~~ 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. AThe classification of a financial asset or ~~liability’s classification~~liability within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

ABelow is a summary of financial liabilities that are measured at fair value on a recurring basis ~~were as follows~~ ($ in millions):


	Quoted Prices in Active Market (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total		Quoted Prices in Active Market (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
September 29, 2017
March 30, 2018
Deferred compensation liabilities	$	—	$	19.7	$	—	$	19.7	$	—	$	20.3	$	—	$	20.3
December 31, 2016
December 31, 2017
Deferred compensation liabilities	$	—	$	14.8	$	—	$	14.8	$	—	$	20.9	$	—	$	20.9

Certain ~~of our~~ management employees participate in our nonqualified deferred compensation programs that permit such employees to defer a portion of their compensation, on a pretax basis, until after their termination of employment. All amounts deferred under such plans are unfunded, unsecured obligations and are presented as a component of our compensation and benefits accrual included in other long-term liabilities in the accompanying Consolidated Condensed Balance Sheets. Participants may choose among alternative earning rates for the amounts they defer, which are primarily based on investment options within our defined contribution plans for the benefit of U.S. employees (except that the earnings rates for amounts contributed unilaterally by the Company are entirely based on changes in the value of Fortive common stock). Changes in the deferred compensation liability under these programs are recognized based on changes in the fair value of the participants’ accounts, which are based on the applicable earnings rates.

Fair Value of Financial Instruments

The carrying ~~amounts~~amount and fair ~~values~~value of financial instruments ~~were~~are as follows ($ in millions):

September 29, 2017 December 31, 2016
Carrying Amount Fair Value Carrying Amount Fair Value
Long-term borrowings $ 3,671.9
$ 3,680.4
$ 3,358.0
$ 3,321.4



	March 30, 2018				December 31, 2017
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Long-term borrowings	$	3,996.9	$	3,932.9	$	4,056.2	$	4,051.8

As of ~~September 29, 2017~~March 30, 2018 and December 31, ~~2016, the~~2017, long-term borrowings were categorized as Level 1.

The fair value of long-term borrowings was based on quoted market prices. The difference between the fair value and the carrying amounts of long-term borrowings may be attributable to changes in market interest rates and/or our credit ratings subsequent to the incurrence of the borrowing. The fair ~~values~~value of cash and cash equivalents, accounts receivable, net and trade accounts payable ~~approximate~~approximates their carrying ~~amounts~~amount due to the short-term maturities of these instruments.

NOTE 5. FINANCING

The carrying value of the components of our long-term debt were as follows ($ in millions):


	September 29, 2017		December 31, 2016		March 30, 2018		December 31, 2017
U.S. dollar-denominated commercial paper	$	285.8	$	347.9	$	590.3	$	665.1
Euro-denominated commercial paper	278.3		26.8		290.3		282.7
U.S. dollar variable interest rate term loan due 2019	500.0		500.0		500.0		500.0
Yen variable interest rate term loan due 2022	122.5		—		129.7		122.4
1.80% senior unsecured notes due 2019	298.8		298.3		299.1		298.9
2.35% senior unsecured notes due 2021	745.6		744.8		746.2		745.9
3.15% senior unsecured notes due 2026	890.7		890.1		891.2		891.0
4.30% senior unsecured notes due 2046	546.7		546.8		546.8		546.8
Other	3.5		3.3		3.3		3.4
Long-term debt	$	3,671.9	$	3,358.0	$	3,996.9	$	4,056.2

~~Net~~Unamortized debt discounts, premiums and issuance costs of ~~$18.3~~$18.0 million and ~~$20.1~~$18.2 million as of ~~September 29, 2017~~March 30, 2018 and December 31, ~~2016,~~2017, respectively, and have been netted against the aggregate principal amounts of the components of debt table above. Refer to Note 109 of our ~~2016~~2017 Annual Report on Form 10-K for further details of our debt financing.

We generally satisfy any short-term liquidity needs that are not met through operating cash flows and available cash primarily through issuances of commercial paper under our U.S. dollar and Euro-denominated commercial paper programs (“Commercial Paper Programs”). Credit support for the Commercial Paper Programs is provided by a five-year $1.5 billion senior unsecured

revolving credit facility that expires on June 16, 2021 (the “Revolving Credit Facility”) which can also be used for working capital and other general corporate purposes. As of ~~September 29, 2017,~~March 30, 2018, no borrowings were outstanding under the Revolving Credit Facility.

The details of our Commercial Paper Programs as of ~~September 29, 2017 were~~March 30, 2018 are as follows ($ in millions):

Carrying Value Weighted average annual interest rate Weighted average remaining maturity (in days)
U.S. dollar-denominated $ 285.8
1.44 % 11
Euro-denominated $ 278.3
(0.08 )% 72



	Carrying Value		Annual effective rate		Weighted average remaining maturity (in days)
U.S. dollar-denominated commercial paper	$	590.3	2.48	%	34
Euro-denominated commercial paper	$	290.3	(0.11	)%	58

We classified our borrowings outstanding under the Commercial Paper Programs as long-term debt in the accompanying Consolidated Condensed Balance Sheets as we had the intent and ability, as supported by availability under the Revolving Credit Facility referenced above, to refinance these borrowings for at least one year from the balance sheet date.

As of ~~September 29, 2017,~~March 30, 2018, we were in compliance with all of our covenants.

~~Yen Variable Interest Rate Term Loan~~

NOTE 6. REVENUE

On ~~August 24, 2017,~~January 1, 2018, we ~~entered into~~adopted ASU 2014-09 Revenue from Contracts with Customers (“Topic 606”)using the modified retrospective method applied to those contracts which were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting policy under ASC Topic 605 Revenue Recognition. We recorded an immaterial transition adjustment to opening retained earnings as of January 1, 2018 due to the cumulative impact of adopting Topic 606. The impact to revenues as a new term loan agreement that provides for a five-year ¥13.8 billion senior unsecured term facility (“Yen Term Loan”) that expires on August 24, 2022. We borrowed the entire ¥13.8 billion available under this facility on August 28, 2017, which yielded net proceedsresult of ~~approximately $126 million. The Yen Term Loan bears interest at a rate equal to LIBOR plus 50 basis points, provided however that LIBOR may not be less than zero~~applying Topic 606 for the ~~purposes~~quarter ended March 30, 2018 was immaterial.

Our significant accounting policies are detailed in Note 2 of our 2017 Annual Report on Form 10-K. Significant changes to our accounting policies as a result of adopting Topic 606 are discussed below:

Revenue Recognition—We derive revenues primarily from the ~~Yen Term Loan. As~~sale of ~~September 29, 2017, borrowings under~~Professional Instrumentation and Industrial Technologies products and services. Revenue is recognized when control of promised products or services is transferred to customers in an amount that reflects the ~~Yen Term Loan bear~~consideration we expect to be entitled to in exchange for those products or services.

For revenue related to a product or service to qualify for recognition, we must have an ~~interest rate~~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 ~~0.50% per annum. During~~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 customers’ 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, services and/or post contract support (“PCS”). Generally, these elements are delivered within the same reporting period, except PCS or 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 ~~2017 in which the Yen Term Loan was outstanding, the annual effective rate was 0.50%. The Yen Term Loan is pre-payable at our option, and re-borrowing~~a good or service is not ~~permitted once~~known and is either highly variable or uncertain. Allocating the ~~term loan is repaid.~~transaction price to each performance obligation sometimes requires significant judgment.

~~The~~Our principal terms of sale are FOB Shipping Point, or equivalent, and, ~~conditions, including covenants, applicable~~as such, we primarily record revenue upon shipment as we have transferred control to the ~~the Yen Term Loan~~customer at that point and our performance obligations are ~~substantially similar to those applicable~~satisfied. We evaluate contracts with delivery terms other than FOB Shipping Point and recognize revenue when we have transfered control and satisfied our performance obligations. If any significant obligation to the ~~Revolving Credit Facility.~~

~~Registration Rights Agreement~~

During 2016, we issued in a private placement $2.5 billion of senior unsecured notes in multiple series with maturity dates ranging from June 15, 2019 to June 15, 2046 (collectively, the “Private Notes”). In connection with the issuance of the Private Notes, we entered into a registration rights agreement, pursuant to which we were obligated to use commercially reasonable efforts to file with the SEC, and cause to be declared effective, a registration statementcustomer with respect to ~~an offer~~a sales transaction remains to ~~exchange each series~~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 ~~Private Notes for registered notes (“Registered Notes”) with substantially identical terms (“Exchange Offer”). Accordingly,~~the agreement.

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 immaterial as of March 30, 2018.

Contract Costs — We incur direct incremental costs to obtain certain contracts, typically sales-related commissions. 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.

Impairment losses recognized on May 5, 2017 we filed a Form S-4 with the SEC (the “Registration Statement”), which Registration Statement was declared effective on May 17, 2017. On May 17, 2017, we launched the Exchange Offer, which expired on June 14, 2017. All Private Notesour contract-related assets were ~~tendered and exchanged for Registered Notes~~immaterial in the ~~Exchange Offer.~~first three months of 2018.

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 accompanying Consolidated Condensed Balance Sheets.

Our contract liabilities consisted of the following:



	March 30, 2018		December 31, 2017
Deferred revenue - current	$	210.3	$	213.4
Deferred revenue - noncurrent	88.6		86.9
Total contract liabilities	$	298.9	$	300.3

In the first three months of 2018, we recognized $43 million of revenue related to our contract liabilities at January 1, 2018. The decrease in our contract liabilities from December 31, 2017 to March 30, 2018 was primarily due to the timing of cash receipts and sales of PCS and extended warranty services.

Remaining Performance Obligations — Our remaining performance obligations represent the transaction price of firm, noncancelable orders, with expected delivery dates to customers greater than one year from March 30, 2018, 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 is as follows ($ in millions):



	March 30, 2018
Professional Instrumentation	$	115
Industrial Technologies	543
Total	$	658

The majority of remaining performance obligations are related to service and support contracts, which we expect to fulfill approximately 40 percent within the next two years, approximately 70 percent within the next three years and substantially all within four years.

Disaggregation of Revenue

We disaggregate revenue from contracts with customers by geographic location, major product group and end market for each of our segments, as we believe it best depicts how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors. Disaggregation of revenue for the three months ended March 30, 2018 is presented as follows ($ in millions):



	Total		Professional Instrumentation		Industrial Technologies
Geographic:
United States	$	916.9	$	408.4	$	508.5
China	156.4		108.3		48.1
Germany	86.5		35.9		50.6
All other (each country individually less than 5% of total sales)	580.9		319.1		261.8
Total	$	1,740.7	$	871.7	$	869.0

Major Products Group:
Professional tools and equipment	$	1,120.1	$	706.5	$	413.6
Industrial automation, controls and sensors	327.8		104.6		223.2
Franchise distribution	172.9		—		172.9
All other	119.9		60.6		59.3
Total	$	1,740.7	$	871.7	$	869.0

End markets:
Direct sales
Retail fueling^(a)	$	348.3	$	—	$	348.3
Industrial & Manufacturing	156.1		90.4		65.7
Vehicle repair^(a)	158.8		—		158.8
Utilities & Power	56.0		55.4		0.6
Other	518.5		301.2		217.3
Total direct sales	1,237.7		447.0		790.7
Distributors^(a)	503.0		424.7		78.3
Total	$	1,740.7	$	871.7	$	869.0

(a) Retail fueling and vehicle repair includes sales to these end markets made through third party distributors. Total distributor sales for the three months ended March 30, 2018 was $789.7 million.

Disaggregation of revenue for the three months ended March 31, 2017 is presented as follows ($ in millions):



	Total		Professional Instrumentation		Industrial Technologies
Geographic:
United States	$	846.8	$	330.4	$	516.4
China	129.9		90.5		39.4
Germany	69.6		28.7		40.9
All other (each country individually less than 5% of total sales)	488.9		266.5		222.4
Total	$	1,535.2	$	716.1	$	819.1

Major Products Group:
Professional tools and equipment	$	961.6	$	558.6	$	403.0
Industrial automation, controls and sensors	290.7		96.1		194.6
Franchise distribution	171.7		—		171.7
All other	111.2		61.4		49.8
Total	$	1,535.2	$	716.1	$	819.1

End markets:
Direct sales
Retail fueling^(a)	$	346.5	$	—	$	346.5
Industrial & Manufacturing	109.9		65.1		44.8
Vehicle repair^(a)	157.9		—		157.9
Utilities & Power	52.6		51.7		0.9
Other	460.5		261.7		198.8
Total direct sales	1,127.4		378.5		748.9
Distributors^(a)	407.8		337.6		70.2
Total	$	1,535.2	$	716.1	$	819.1

(a) Retail fueling and vehicle repair includes sales to these end markets made through third party distributors. Total distributor sales for the three months ended March 31, 2017 was $746.9 million.

NOTE 6.7. PENSION PLANS

~~We have~~For a full description of our noncontributory defined benefit pension plans, ~~outside~~including the U.S. plan acquired in 2017, refer to Note 10 of ~~the United States.~~ our 2017 Annual Report on Form 10-K.

The following sets forth the components of our net periodic pension costs associated with ~~these~~our noncontributory defined benefit pension plans ($ in millions):


	Three Months Ended						Nine Months Ended						Three Months Ended
	September 29, 2017			September 30, 2016			September 29, 2017			September 30, 2016			March 30, 2018			March 31, 2017
U.S. Pension Benefits:
Interest cost													$	0.3		$	—
Expected return on plan assets													(0.4		)	—
Net periodic pension cost													$	(0.1	)	$	—

Non-U.S. Pension Benefits:
Service cost	$	1.1		$	0.9		$	3.1		$	2.6		$	0.5		$	1.0
Interest cost	1.5			1.8			4.4			5.6			1.5			1.4
Expected return on plan assets	(1.9		)	(2.0		)	(5.5		)	(6.1		)	(1.9		)	(1.8		)
Amortization of net loss	1.2			1.3			3.4			4.1			0.9			1.1
Net periodic pension cost	$	1.9		$	2.0		$	5.4		$	6.2		$	1.0		$	1.7

~~Net~~On January 1, 2018, we retrospectively adopted ASU No. 2017-07, Compensation–Retirement Benefits (Topic 715). Accordingly, we have included all components of net periodic pension costs, ~~are~~with the exception of service costs, in other non-operating expenses as a component of non-operating income in the accompanying Consolidated Condensed Statements of Earnings. Service costs continue to be included in cost of sales and selling, general and administrative expenses in the accompanying Consolidated ~~and Combined~~ Condensed Statements of ~~Earnings.~~

Earnings according to the classification of the participant’s compensation. This reclassification of prior year pension cost increased operating income by $0.7 million for the three months ended March 31, 2017.

Employer Contributions

During ~~2017,~~2018, our cash contribution requirements for our non-U.S. defined benefit pension plans are expected to be approximately $10 million. We do not expect to make contributions to the U.S. plan during 2018. The ~~ultimate~~actual amounts to be contributed depend upon, among other things, legal requirements, underlying asset returns, the plan’s funded status, the anticipated tax deductibility of the contribution, local practices, market conditions, interest rates and other factors.

NOTE 7.8. INCOME TAXES

Our effective tax ~~rates~~rate for the three ~~and nine~~ months ended ~~September 29, 2017, were 23.1% and 25.2%, respectively,~~March 30, 2018, was 16.5% as compared to ~~24.3% and 26.6%~~26.7% for the three ~~and nine~~ months ended ~~September 30, 2016, respectively.~~ March 31, 2017. The year-over-year decrease was due primarily to favorable impacts in 2018 resulting from a lower statutory tax rate in the United States as a result of the Tax Cuts and Jobs Act (“TCJA”) as well as other federal and international tax benefits.

Our effective tax rates for ~~2017~~2018 and ~~2016~~2017 differ from the U.S. federal statutory rate of 21% and 35%, respectively, due ~~principally~~primarily to our earnings outside the United States that are indefinitely reinvested and taxed at rates lower than the U.S. federal statutory rate, ~~and~~ the impact of credits and deductions provided by ~~law.~~law, and the effect of favorable adjustments to the provisional estimates recorded in 2017 related to the TCJA as permitted under SEC Staff Accounting Bulletin No. 118 (“SAB 118”). The adjustments recorded to our provisional estimates decreased income tax expense by $4.2 million during the three months ended March 30, 2018. We will continue to evaluate the effects of the TCJA on the 2017 provisional estimates through the end of the SAB 118 allowable measurement period. Refer to Note 11 of our 2017 Annual Report on Form 10-K for further details including disclosures pursuant to SAB 118 interpretive guidance, including provisional estimates for all TCJA effects.

On January 1, 2018, we adopted ASU No. 2016-16, Income Taxes (Topic 715): Intra-entity Transfers of Assets Other Than Inventory using the modified retrospective method, and recorded an immaterial adjustment to opening retained earnings as of January 1, 2018.

NOTE 8.9. STOCK-BASED COMPENSATION

~~In connection with the Separation, the Company adopted the 2016 Stock Incentive Plan~~Our stock-based compensation program (the “Stock Plan”)~~. Outstanding equity awards of Danaher held by our employees at the Separation date were converted into or replaced with Fortive equity awards under the Stock Plan. The Stock Plan~~ provides for the grant of stock appreciation rights, performance stock units, ~~(“PSUs”),~~ restricted stock units, ~~(“RSUs”),~~ restricted stock awards and performance stock awards (collectively, “Stock Awards”), stock options or any other stock-based award. As of ~~September 29, 2017,~~March 30, 2018, approximately 76 million shares of our common stock were ~~reserved~~available for subsequent issuance under the Stock Plan. For a full description of our stock-based compensation program refer to Note 1615 of our ~~2016~~2017 Annual Report on Form 10-K.

When stock options are exercised by the employee or Stock Awards vest, we derive a tax deduction measured by the excess of the market value on such date over the grant date price. During the three and nine months ended September 29, 2017, we realized a tax benefit of $9.7 million and $26.2 million, respectively, related to employee stock options that were exercised and Stock Awards that vested. As of January 1, 2017, we prospectively adopted ASU No. 2016-09, ~~Compensation—Stock Compensation (Topic 718).~~ Accordingly, we recorded the excess of the tax benefit related to the exercise of stock options and vesting of Stock Awards over the expense recorded for financial statement reporting purposes (the “Excess Tax Benefit”) as a component of income tax expense and as an operating cash inflow in the accompanying consolidated and combined condensed financial statements. Such Excess Tax Benefit was $5.9 million and $16.1 million during the three and nine months ended September 29, 2017, respectively.

We had no stock-based compensation plans prior to the Separation; however certain of our employees had participated in Danaher’s stock-based compensation plans (“Danaher Plans”), which provided for the grants of stock options, PSUs and RSUs among other types of awards.

Stock-based Compensation Expense

Stock-based compensation has been recognized as a component of selling, general & administrative expenses in the accompanying Consolidated ~~and Combined~~ Condensed Statements of ~~Earnings. Under ASU 2016-09, we will continue to recognize stock-based compensation expense~~Earnings based on the portion of the awards that are ultimately expected to vest. Prior to the Separation, Danaher allocated stock-based compensation expense to the Company based on Fortive employees participating in the Danaher Plans. These allocations are reflected in the accompanying Combined Condensed Statement of Earnings for the nine months ended September 30, 2016.

The following summarizes the components of our stock-based compensation expense under the Stock Plan ~~and the Danaher Plans~~ ($ in millions):


	Three Months Ended						Nine Months Ended						Three Months Ended
	September 29, 2017			September 30, 2016			September 29, 2017			September 30, 2016			March 30, 2018			March 31, 2017
Stock Awards:
Pretax compensation expense	$	7.2		$	7.3		$	22.6		$	21.5		$	7.1		$	7.4
Income tax benefit	(2.4		)	(2.3		)	(8.0		)	(7.1		)	(1.5		)	(2.5		)
Stock Award expense, net of income taxes	4.8			5.0			14.6			14.4			5.6			4.9
Stock options:
Pretax compensation expense	4.7			4.7			14.6			12.9			4.8			4.6
Income tax benefit	(1.6		)	(1.6		)	(5.0		)	(4.4		)	(1.0		)	(1.6		)
Stock option expense, net of income taxes	3.1			3.1			9.6			8.5			3.8			3.0
Total stock-based compensation:
Pretax compensation expense	11.9			12.0			37.2			34.4			11.9			12.0
Income tax benefit	(4.0		)	(3.9		)	(13.0		)	(11.5		)	(2.5		)	(4.1		)
Total stock-based compensation expense, net of income taxes	$	7.9		$	8.1		$	24.2		$	22.9		$	9.4		$	7.9

The following summarizes the unrecognized compensation cost for the Stock Plan awards as of ~~September 29, 2017.~~March 30, 2018. 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 $ 45.2
Stock options 44.8
Total unrecognized compensation cost $ 90.0

In connection with the exercise of certain stock options and the vesting of Stock Awards issued under the Stock Plan, a number of shares of Fortive common stock sufficient to fund statutory minimum tax withholding requirements has been withheld from the total shares issued or released to the award holder (though under the terms of the Stock Plan, the shares are considered to have been issued and are not added back to the pool of shares available for grant). During the nine months ended September 29, 2017, approximately 223 thousand shares of Fortive common stock with an aggregate value of $13.5 million were withheld to satisfy this requirement. This withholding is treated as a reduction in additional paid-in capital in the accompanying Consolidated Condensed Statement of Changes in Equity.

~~Stock Options~~

~~The following summarizes the assumptions used in the Black-Scholes Merton option pricing model to value stock options granted under the Stock Plan during the nine months ended September 29, 2017:~~



~~Risk-free interest rate~~	~~1.90% - 2.26%~~
~~Weighted average volatility~~^(a)	~~21.0~~	%
~~Dividend yield~~	~~0.5~~	%
~~Expected years until exercise~~	~~5.5 - 8.0~~

^(a) ~~Weighted average volatility was estimated based on an average historical stock price volatility of a group of peer companies, given our limited trading history.~~

~~The following summarizes option activity under the Stock Plan for the nine months ended September 29, 2017 (in millions, except price per share and numbers of years):~~

Options
Weighted
Average
Exercise
Price

Weighted Average
Remaining
Contractual Term
(in years)

Aggregate
Intrinsic
Value
Outstanding as of December 31, 2016 10.7
$ 33.23

Granted 1.8
57.55

Exercised (1.0 ) 25.09

Canceled/forfeited (0.3 ) 44.87

Outstanding as of September 29, 2017 11.2
$ 37.65
6.5 $ 370.9
Vested and expected to vest as of September 29, 2017 ^(a)
10.8
$ 37.23
6.5 $ 362.6
Vested as of September 29, 2017 5.4
$ 28.23
4.7 $ 229.3

^(a) The “expected to vest” options are the net unvested options that remain after applying the forfeiture rate assumption to total unvested options.

The aggregate intrinsic values in the table above represent the total pretax intrinsic value (the difference between the closing stock price of Fortive common stock on the last trading day of the third quarter of 2017 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on September 29, 2017. The amount of aggregate intrinsic value will change based on the price of Fortive’s common stock. The aggregate intrinsic value of options exercised during the nine months ended September 29, 2017 was $38 million. Exercise of options during the first nine months of 2017 resulted in cash receipts of $25 million.

~~Stock Awards~~

~~The following summarizes information related to unvested Stock Award activity under the Stock Plan for the nine months ended September 29, 2017 (in millions; except price per share):~~

Number of
Stock Awards

Weighted Average
Grant-Date
Fair Value
Unvested as of December 31, 2016 2.2
$ 39.20
Granted 0.6
57.04
Vested (0.6 ) 35.70
Forfeited (0.1 ) 43.65
Unvested as of September 29, 2017 2.1
$ 45.32



Stock Awards	$	66.8
Stock options	61.6
Total unrecognized compensation cost	$	128.4

NOTE 9.10. COMMITMENTS AND CONTINGENCIES

For a description of our litigation and contingencies, ~~reference is made~~refer to Notes 1413 and 1514 of our ~~2016~~2017 Annual Report on Form 10-K.

Our operating leases extend for varying periods of time up to twenty years and, in some cases, contain renewal options that would extend existing terms beyond twenty years. Minimum rental payments for all operating leases having initial or remaining noncancelable lease terms in excess of one year for 2018 through 2022 and thereafter are: $48 million in 2018, $42 million in 2019, $31 million in 2020, $20 million in 2021, $16 million in 2022 and $20 million thereafter.

We generally accrue estimated warranty costs at the time of sale. In general, manufactured products are warranted against defects in material and workmanship when properly used for their intended purpose, installed correctly, and appropriately maintained. Warranty period terms depend on the nature of the product and range from 90 days up to the life of the product. The amount of the accrued warranty liability is determined based on historical information such as past experience, product

failure rates or number of units repaired, estimated cost of material and labor, and in certain instances estimated property damage. The accrued warranty liability is reviewed on a quarterly basis and may be adjusted as additional information regarding expected warranty costs becomes known.

The following is a rollforward of our accrued warranty liability ($ in millions):


Balance, December 31, 2016	$	65.0
Balance, December 31, 2017				$	69.4
Accruals for warranties issued during the period	56.3			15.1
Settlements made	(54.8		)	(19.1		)
Additions due to acquisitions	1.6
Effect of foreign currency translation	0.2			0.3
Balance, September 29, 2017	$	68.3
Balance, March 30, 2018				$	65.7

NOTE ~~10.~~11. NET EARNINGS PER SHARE

Basic net earnings per share (“EPS”) is calculated by dividing net earnings by the weighted average number of shares of common stock outstanding for the applicable period. Diluted EPS is similarly calculated, except that the calculation includes the dilutive effect of the assumed issuance of shares under stock-based compensation plans except where the inclusion of such shares would have an anti-dilutive impact. ~~For both the three~~There were 1.5 million and ~~nine months ended September 29, 2017 the~~1.8 million anti-dilutive options to purchase shares excluded from the diluted EPS calculation ~~were immaterial.~~

We were incorporated on November 10, 2015, accordingly, we had no shares or common equivalent shares outstanding prior to that date. The total number of shares outstanding on July 1, 2016, immediately before the Separation, was 345.2 million and is utilized for the ~~calculation of both basic~~three months ended March 30, 2018 and ~~diluted EPS for all periods prior to the Separation.~~March 31, 2017, respectively.

Information related to the calculation of net earnings per share of common stock is summarized as follows ($ and shares in millions, except per share amounts):


	Net Earnings (Numerator)		Shares (Denominator)	Per Share Amount		Net Earnings (Numerator)		Shares (Denominator)	Per Share Amount
For the Three Months Ended September 29, 2017:
For the Three Months Ended March 30, 2018:
Basic EPS	$	267.8	347.7	$	0.77	$	261.2	348.6	$	0.75
Incremental shares from assumed exercise of dilutive options and vesting of dilutive Stock Awards	—		5.2			—		5.8
Diluted EPS	$	267.8	352.9	$	0.76	$	261.2	354.4	$	0.74

For the Three Months Ended September 30, 2016:
For the Three Months Ended March 31, 2017:
Basic EPS	$	226.9	346.0	$	0.66	$	199.7	347.0	$	0.58
Incremental shares from assumed issuance of shares under stock-based compensation plans	—		3.2			—		4.5
Diluted EPS	$	226.9	349.2	$	0.65	$	199.7	351.5	$	0.57

For the Nine Months Ended September 29, 2017:
Basic EPS	$	707.6	347.3	$	2.04
Incremental shares from assumed exercise of dilutive options and vesting of dilutive Stock Awards	—		4.9
Diluted EPS	$	707.6	352.2	$	2.01

For the Nine Months Ended September 30, 2016:
Basic EPS	$	647.8	345.5	$	1.87
Incremental shares from assumed issuance of shares under stock-based compensation plans	—		1.1
Diluted EPS	$	647.8	346.6	$	1.87

On ~~August 3,~~January 23, 2018, we declared a regular quarterly dividend of $0.07 per share paid on March 29, 2018 to holders of record on February 23, 2018. On January 24, 2017, we declared a regular quarterly dividend of $0.07 per share paid on ~~September 29,~~March 31, 2017 to holders of record on ~~August 25,~~February 24, 2017.

For the ~~nine~~three months ended ~~September 29, 2017,~~March 30, 2018, cash dividend payments of ~~$72.8~~$24.3 million were recorded as dividends to shareholders in the accompanying Consolidated Condensed Statement of Changes in Equity.

On April 12, 2018, we declared a regular quarterly dividend of $0.07 per share payable on June 29, 2018 to holders of record on May 25, 2018.

NOTE ~~11.~~12. SEGMENT INFORMATION

We ~~operate and~~ report our results in two separate business segments consisting of ~~the~~ Professional Instrumentation and Industrial ~~Technologies segments.~~Technologies. When determining the reportable segments, we aggregated operating segments based on their similar economic and operating characteristics. Operating profit amounts in the Other category consist of unallocated corporate costs and other costs not considered part of our evaluation of reportable segment operating performance. As of ~~September 29, 2017,~~March 30, 2018, there have been no material changes in total assets or liabilities by segment since December 31, ~~2016, except for the addition of the assets from acquisitions as detailed in Note 2.~~2017. Segment results are shown below ($ in millions):

Three Months Ended Nine Months Ended
September 29, 2017 September 30, 2016 September 29, 2017 September 30, 2016
Sales:
Professional Instrumentation $ 786.8
$ 723.5
$ 2,261.9
$ 2,145.1
Industrial Technologies 898.5
843.9
2,587.4
2,452.1
Total $ 1,685.3
$ 1,567.4
$ 4,849.3
$ 4,597.2
Operating Profit:
Professional Instrumentation $ 178.6
$ 161.5
$ 521.5
$ 469.9
Industrial Technologies 196.2
180.6
530.3
484.7
Other (18.9 ) (18.9 ) (52.7 ) (46.3 )
Total $ 355.9
$ 323.2
$ 999.1
$ 908.3

As of September 29, 2017, the material changes in total assets by segment since December 31, 2016 were due primarily to the acquisitions detailed in Note 2. Segment identifiable assets are shown below ($ in millions):


	September 29, 2017		December 31, 2016		Three Months Ended
					March 30, 2018			March 31, 2017
Sales:
Professional Instrumentation					$	871.7		$	716.1
Industrial Technologies					869.0			819.1
Total					$	1,740.7		$	1,535.2
Operating Profit:
Professional Instrumentation	$	4,661.7	$	3,905.2	$	206.4		$	158.5
Industrial Technologies	3,735.1		3,294.8		158.3			152.8
Other	930.2		989.8		(26.5		)	(15.7		)
Total	$	9,327.0	$	8,189.8	$	338.2		$	295.6

~~NOTE 12. RELATED-PARTY TRANSACTIONS~~

~~Revenue and Other Transactions Entered Into In the Ordinary Course of Business~~

Prior to the Separation, we operated as part of Danaher and not as a stand-alone company and certain of our revenue arrangements related to contracts entered into in the ordinary course of business with Danaher and its affiliates. Following the Separation, we continue to enter into arms-length arrangements in the ordinary course of business with Danaher and its affiliates, although certain agreements were entered into or terminated as a result of the Separation. Sales and purchases from these arrangements with Danaher were not material during the three and nine months ended September 29, 2017 and September 30, 2016.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Fortive Corporation (“Fortive”, the “Company,” “we,” “us,” or “our”) is a diversified industrial growth company comprised of Professional Instrumentation and Industrial Technologies segments and encompassing businesses that are recognized leaders in attractive markets. Our well-known brands hold leading positions in advanced instrumentation and solutions, transportation technology, sensing, automation and specialty, and franchise distribution markets. Our businesses design, develop, service, manufacture and market professional and engineered products, software and services for a variety of end markets, building upon leading brand names, innovative technology and significant market positions.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is designed to provide a reader of our financial statements with a narrative from the perspective of management. The following discussion should be read in conjunction with the MD&A and consolidated and combined financial statements included in our ~~2016~~2017 Annual Report on Form 10-K. Our MD&A is divided into ~~six~~five sections:

Information Relating to Forward-Looking Statements

~~Basis of Presentation~~

Overview

Results of Operations

Liquidity and Capital Resources

Critical Accounting Estimates

INFORMATION RELATING TO FORWARD-LOOKING STATEMENTS

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 ~~projected~~ 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; 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 on 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.~~factors. 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. Important factors that could cause actual results to differ materially from those envisaged in the forward-looking statements include the following:

Conditions in the global economy, the markets we serve and the financial markets may adversely affect our business and financial statements. Furthermore, significant uncertainties related to changes in governmental policies toward international trade currently exist, and depending on how such uncertainties are resolved, could have a material adverse effect on our financial results.

Our growth could suffer if the markets into which we sell our products, software and services decline, do not grow as anticipated or experience cyclicality.

We face intense competition and if we are unable to compete effectively, we may experience decreased demand and decreased market share. Even if we compete effectively, we may be required to reduce prices for our products, software and services.

Changes in industry standards, governmental regulations and applicable laws may reduce demand for our products, software or services or increase our expenses.

Any inability to consummate acquisitions at our historical rate and at appropriate prices could negatively impact our growth rate and stock price.

Our growth depends in part on the timely development and commercialization, and customer acceptance, of new and enhanced products, software and services based on technological innovation.

Our reputation, ability to do business and financial statements may be impaired by improper conduct by any of our employees, agents or business partners.

Our acquisition of businesses, joint ventures and strategic relationships could negatively impact our financial statements.

The indemnification provisions of acquisition agreements by which we have acquired companies may not fully protect us and as a result we may face unexpected liabilities.

Divestitures or other dispositions could negatively impact our business, and contingent liabilities from businesses that we have sold could adversely affect our financial statements.

transaction. The proposed transaction may not be completed on the currently contemplated timeline or at all and may not achieve the intended benefits.

Our operations, products and services expose us to the risk of environmental, health and safety liabilities, costs and violations that could adversely affect our reputation, business and financial statements.

Our businesses are subject to extensive regulation; failure to comply with those regulations could adversely affect our business, financial statements and reputation.

International economic, trade, political, legal, compliance and business factors could negatively affect our business and financial statements.

We may be required to recognize impairment charges for our goodwill and other intangible assets.

Foreign currency exchange rates may adversely affect our financial statements.

Changes in our tax rates or exposure to additional income tax liabilities or assessments could affect our profitability. In addition, audits by tax authorities could result in additional tax payments for prior periods.

We have incurred a significant amount of debt, and our debt will increase further if we incur additional debt and do not retire existing debt.

We are subject to a variety of litigation and other legal and regulatory proceedings in the course of our business that could adversely affect our financial statements.

If we do not or cannot adequately protect our intellectual property, or if third parties infringe our intellectual property rights, we may suffer competitive injury or expend significant resources enforcing our rights.

Third parties may claim that we are infringing or misappropriating their intellectual property rights and we could suffer significant litigation expenses, losses or licensing expenses or be prevented from selling products, software or services.

Defects and unanticipated use or inadequate disclosure with respect to our products, software or services could adversely affect our business, reputation and financial statements.

Adverse changes in our relationships with, or the financial condition, performance, purchasing patterns or inventory levels of, key distributors and other channel partners could adversely affect our financial statements.

Our financial results are subject to fluctuations in the cost and availability of commodities that we use in our operations.

If we cannot adjust our manufacturing capacity or the purchases required for our manufacturing activities to reflect changes in market conditions and customer demand, our profitability may suffer. In addition, our reliance upon sole or limited sources of supply for certain materials, components and services could cause production interruptions, delays and inefficiencies.

A significant disruption in, or breach in security of, information technology systems we use could adversely affect our business.

Our restructuring actions could have long-term adverse effects on our business.

Work stoppages, union and works council campaigns and other labor disputes could adversely impact our productivity and results of operations.

If we suffer loss to our facilities, supply chains, distribution systems or information technology systems due to catastrophe or other events, our operations could be seriously harmed.

Certain provisions in our amended and restated certificate of incorporation and bylaws, and of Delaware law, may prevent or delay an acquisition of our company, which could decrease the trading price of our common stock.

Our amended and restated certificate of incorporation designates the state courts in the State of Delaware or, if no state court located within the State of Delaware has jurisdiction, the federal court for the District of Delaware, as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our shareholders which could discourage lawsuits against us and our directors and officers.

As an independent, publicly traded company, we may not enjoy the same benefits that we did as a part of Danaher Corporation (“Danaher” or “Former Parent”).

Potential indemnification liabilities to Danaher pursuant to our separation agreement with Danaher could materially and adversely affect our businesses, financial condition, results of operations and cash flows.

In connection with our separation from Danaher, Danaher has indemnified us for certain liabilities. However, there can be no assurance that the indemnity will be sufficient to insure us against the full amount of such liabilities, or that Danaher’s ability to satisfy its indemnification obligation will not be impaired in the future.

There could be significant liability if the separation from Danaher fails to qualify as a tax-free transaction for U.S. federal income tax purposes.

We may not be able to engage in certain corporate transactions for a two-year period after the separation from Danaher on July 2, 2016.

See “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016~~2017 and “Part II – Item 1A. Risk Factors” in this Form 10-Q for a further discussion regarding reasons that actual results may differ materially from the results, developments and business decisions contemplated by our 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. 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.

~~BASIS OF PRESENTATION~~

The accompanying consolidated and combined condensed 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”). Prior to our separation from Danaher on July 2, 2016 (the “Separation”), our businesses were comprised of certain Danaher operating units. Fortive Corporation and the Fortive businesses (including for the periods prior to the Separation) are collectively referred to as “Fortive” or “the Company” herein.

The combined condensed financial statements for periods prior to the Separation were derived from Danaher’s consolidated financial statements and accounting records and prepared in accordance with GAAP for the preparation of carved-out combined financial statements. Prior to the Separation, all revenues and costs as well as assets and liabilities directly associated with Fortive have been included in the combined condensed financial statements. Additionally, the combined condensed financial statements for periods prior to the Separation included allocations of certain general, administrative, sales and marketing expenses and cost of sales from Danaher’s corporate office and from other Danaher businesses to Fortive, and allocations of related assets, and liabilities, as applicable. The allocations were determined on a reasonable basis; however, the amounts are not necessarily representative of the amounts that would have been reflected in the financial statements had we been operating independently of Danaher during the applicable periods. Accordingly, our combined condensed financial statements may not be indicative of our results had we been a separate, stand-alone entity throughout the periods presented. For further discussion of related party allocations prior to the Separation, including the method for such allocation, refer to Note 19 of our 2016 Annual Report on Form 10-K.

~~Following the Separation, the consolidated financial statements include the accounts of Fortive and those of our wholly-owned subsidiaries and no longer include any allocations from Danaher.~~

OVERVIEW

General

Fortive is a diversified, multinational industrial growth company with global operations and 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 our products, software and services, 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 to the extent possible their sales, 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 and continue to reduce costs and improve operating efficiency and quality, 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 refers to sales from operations calculated according to ~~GAAP~~generally accepted accounting principles in the United States (“GAAP”) but excluding (1) the impact from acquired businesses ~~(2) for the nine months ended September 29, 2017, the impact from the Separation,~~ and ~~(3)~~(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 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 impact from the Separation refers to the impact from sales to or from Danaher made under agreements entered into, or terminated, in connection with the Separation prior to the first anniversary of the Separation. 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 or the Separation)~~businesses) and (b) the period-to-period change in sales (excluding sales impact from acquired ~~businesses or the Separation)~~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 acquisitions 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. In addition, we exclude the impact of agreements that were terminated, or entered into, in connection with the Separation because we believe that excluding such impact may be useful to investors in assessing our

~~operational performance independent of the impact on sales to or from Danaher resulting primarily from the Separation.~~ 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 ~~(including Separation-related items)~~ 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 Outlook

While differences exist among our businesses, on an overall basis, demand for our products, software and services increased during the three months ended ~~September 29, 2017~~March 30, 2018 as compared to the comparable period of ~~2016~~2017 resulting in aggregate year-over-year total sales growth of ~~7.5%~~13.4% and sales growth from existing businesses of ~~4.8%~~2.6%. Our continued investments in sales growth initiatives and new product introductions, as well as increased demand in high-growth ~~markets~~ and ~~stabilization of market conditions in~~ developed markets and other business-specific factors discussed below, contributed to overall sales growth from existing businesses across the majority of our businesses in the period. On a year-over-year basis, sales growth from existing businesses in the Professional Instrumentation segment was broad based, driven by strong demand across the segment. On a year-over-year basis, sales from existing businesses were flat in ~~the businesses within both Advanced Instrumentation & Solutions and Sensing Technologies. Year-over-year~~our Industrial Technologies segment. Strong growth in sales ~~growth~~ from existing businesses in the ~~Industrial Technologies segment was led by increased demand in~~ Automation & Specialty Components ~~and~~platform was offset by decreased demand in the Transportation Technologies businesses ~~driven by demand for industrial automation solutions and demand for dispensers and payment systems~~due to the extension of the liability shift related to the enhanced credit card security requirements in the United States ~~and Europe. The~~based on the Europay, Mastercard and Visa (“EMV”) global standards are expected to continue to drive demand for dispensers and payment systems over the next several years, however, we do not expect it to be a significant component of year-over-year growth for the next several quarters.standards.

Geographically, sales from existing businesses grew at a low-single digit rate in developed markets and at a ~~low-double~~mid-single digit rate in high-growth markets during the three months ended ~~September 29, 2017~~March 30, 2018 as compared to the comparable ~~2016~~2017 period. Year-over-year sales from existing businesses grew at a high single-digit rate in ~~the mid-teens in~~ China ~~at a high-single digit rate in Western Europe~~ and at a low-single digit rate in Western Europe and North America during the three months ended ~~September 29, 2017.~~ March 30, 2018.

We expect overall sales from existing businesses to continue to grow on a year-over-year basis during the remainder of ~~2017 although~~2018; however, we continue to monitor developments from macro-economic and geopolitical uncertainties, including global uncertainties related to governmental policies toward international trade, monetary and fiscal policies, as well as other factors identified above in “—Information Relating to Forward-Looking Statements.”

~~Acquisitions~~Planned Divestiture of A&S Business

~~During~~On March 7, 2018, we entered into a definitive agreement to combine four of our operating companies from our Automation & Specialty platform (the “A&S Business”) with Altra Industrial Motion Corp (“Altra”) in a tax-efficient Reverse Morris Trust transaction. In the ~~third quarter~~transaction, we will receive approximately $1.4 billion in cash and debt retirement, and our shareholders will receive in the aggregate 35 million shares of ~~2017, we acquired two businesses for total consideration~~Altra, representing approximately 54% of ~~$802~~outstanding shares of Altra common stock immediately following the transaction. The A&S Business includes the market-leading brands of Kollmorgen, Thomson, Portescap and Jacobs Vehicle Systems, and generated approximately $907 million in ~~cash, net~~revenue for the year ended December 31, 2017. The transaction is expected to close by the end of ~~cash acquired,~~2018, subject to customary closing conditions, including ~~the acquisition~~receipt of certain regulatory approvals, Altra shareholder approval and our receipt of confirmation of the ~~remaining 80%~~tax treatment of ~~a business in which we previously had an ownership interest. The acquisition~~certain matters. Upon closing of the ~~remaining 80% interest also resulted~~transaction, we will classify the A&S Business as discontinued operations in ~~the revaluation of~~ our prior interest, and we recorded a gain from acquisition of $15.3 million. The businesses acquired complement existing units of the Industrial Technology and Professional Instrumentation segments. The aggregate annual sales of these businesses at the time of their respective acquisitions, in each case based on the company’s revenues for its last completed fiscal year prior to the acquisition, were approximately $246 million. We preliminarily recorded an aggregate of $576 million of goodwill related to these acquisitions.financial statements.

RESULTS OF OPERATIONS

Sales Growth

The following tables summarize total aggregate year-over-year sales growth and the components of aggregate year-over-year sales growth during the three ~~and nine~~ months ended ~~September 29, 2017~~March 30, 2018 as compared to the comparable ~~periods~~period of ~~2016:~~2017:

Components of Sales Growth

% Change
Three Months Ended
September 29, 2017 vs.
Comparable 2016
Period % Change
Nine Months Ended
September 29, 2017 vs.
Comparable 2016
Period
Total revenue growth (GAAP) 7.5 % 5.5 %
Existing businesses (Non-GAAP) 4.8 % 5.1 %
Acquisitions ^(a)(Non-GAAP)
1.8 % 0.8 %
Currency exchange rates (Non-GAAP) 0.9 % (0.4 )%

^(a) This includes the impact from both acquisitions and the Separation



	% Change Three Months Ended March 30, 2018 vs. Comparable 2017 Period
Total revenue growth (GAAP)	13.4	%
Existing businesses (Non-GAAP)	2.6	%
Acquisitions(Non-GAAP)	7.3	%
Currency exchange rates (Non-GAAP)	3.5	%

Operating Profit Margins

Operating profit margin was ~~21.1%~~19.4% for the three months ended ~~September 29, 2017,~~March 30, 2018, an increase of 5010 basis points as compared to ~~20.6%~~19.3% in the comparable period of ~~2016.~~2017. Year-over-year operating profit margin comparisons were favorably impacted by:

Higher ~~2017~~2018 sales volumes, incremental year-over-year cost savings associated with restructuring and productivity improvement initiatives ~~lower year-over-year intangible asset amortization due to certain intangible assets, primarily in our Professional Instrumentation segment, being fully amortized~~ and changes in currency exchange rates, net of the incremental year-over-year costs associated with various product development and sales and marketing growth investments — ~~150~~100 basis points

Year-over-year operating profit margin comparisons were unfavorably impacted by:

~~Acquisition related transaction costs — 70 basis points~~

The incremental year-over-year net dilutive effect of acquired businesses — ~~30 basis points~~

Operating profit margin was 20.6% for the nine months ended September 29, 2017, an increase of 80 basis points as compared to 19.8% in the comparable period of 2016. Year-over-year operating profit margin comparisons were favorably impacted by:

Higher 2017 sales volumes, incremental year-over-year cost savings associated with restructuring and productivity improvement initiatives, lower year-over-year intangible asset amortization due to certain intangible assets, primarily in our Professional Instrumentation segment, being fully amortized and costs associated with various growth investments made in 2016, net of the incremental year-over-year costs associated with various product development and sales and marketing growth investments, increased general and administrative costs required to operate as a stand-alone public company and changes in currency exchange rates — 130 basis points

~~Year-over-year operating profit margin comparisons were unfavorably impacted by:~~

~~Acquisition related transaction costs — 20 basis points~~

~~The incremental year-over-year net dilutive effect of acquired businesses — 30~~90 basis points

Business Segments

Sales by business segment for each of the periods indicated were as follows ($ in millions):


	Three Months Ended				Nine Months Ended				Three Months Ended
	September 29, 2017		September 30, 2016		September 29, 2017		September 30, 2016		March 30, 2018		March 31, 2017
Professional Instrumentation	$	786.8	$	723.5	$	2,261.9	$	2,145.1	$	871.7	$	716.1
Industrial Technologies	898.5		843.9		2,587.4		2,452.1		869.0		819.1
Total	$	1,685.3	$	1,567.4	$	4,849.3	$	4,597.2	$	1,740.7	$	1,535.2

PROFESSIONAL INSTRUMENTATION

The Professional Instrumentation segment consists of our Advanced Instrumentation & Solutions and Sensing Technologies businesses. The Advanced Instrumentation & Solutions businesses provide product realization and field solutions services and products. Field solutions include a variety of compact professional test tools, thermal imaging and calibration equipment for electrical, industrial, electronic and calibration applications, online condition-based monitoring equipment; portable gas detection equipment, consumables, and software as a service (SaaS) offerings including safety/user behavior, asset management, and compliance monitoring; subscription-based technical, analytical, and compliance services to determine occupational and environmental radiation exposure; and computerized maintenance management software for critical infrastructure in ~~electrical~~ utility, industrial, energy, construction, public safety, mining, and ~~industrial~~healthcare applications. Product realization ~~provides solutions including hardware, software~~services and ~~services to~~products help developers and engineers ~~convert~~across the end-to-end product creation cycle from concepts ~~into~~to finished ~~products. Product realization~~products and also ~~includes~~include highly-engineered energetic materials components in specialized vertical ~~applications and design, engineering and manufacturing services. The businesses comprising~~applications. Our Sensing Technologies ~~offer~~business offers devices that sense, monitor and control operational or manufacturing variables, such as temperature, pressure, level, flow, turbidity and conductivity.

Professional Instrumentation Selected Financial Data


	Three Months Ended						Nine Months Ended						Three Months Ended
($ in millions)	September 29, 2017			September 30, 2016			September 29, 2017			September 30, 2016			March 30, 2018			March 31, 2017
Sales	$	786.8		$	723.5		$	2,261.9		$	2,145.1		$	871.7		$	716.1
Operating profit	178.6			161.5			521.5			469.9			206.4			158.5
Depreciation	10.0			8.7			27.5			26.6			17.0			8.8
Amortization	8.4			17.0			23.9			50.9			17.2			7.8
Operating profit as a % of sales	22.7		%	22.3		%	23.1		%	21.9		%	23.7		%	22.1		%
Depreciation as a % of sales	1.3		%	1.2		%	1.2		%	1.2		%	2.0		%	1.2		%
Amortization as a % of sales	1.1		%	2.3		%	1.1		%	2.4		%	2.0		%	1.1		%

Components of Sales Growth

% Change
Three Months Ended
September 29, 2017 vs.
Comparable 2016
Period % Change
Nine Months Ended
September 29, 2017 vs.
Comparable 2016
Period
Total revenue growth (GAAP) 8.7 % 5.4 %
Existing businesses (Non-GAAP) 5.3 % 5.5 %
Acquisitions ^(a)(Non-GAAP)
2.7 % 0.5 %
Currency exchange rates (Non-GAAP) 0.7 % (0.6 )%

^(a) This includes the impact from both acquisitions and the Separation



	% Change Three Months Ended March 30, 2018 vs. Comparable 2017 Period
Total revenue growth (GAAP)	21.7	%
Existing businesses (Non-GAAP)	5.5	%
Acquisitions (Non-GAAP)	12.2	%
Currency exchange rates (Non-GAAP)	4.0	%

Sales from existing businesses in the segment’s Advanced Instrumentation & Solutions businesses grew at a mid-single digit rate during ~~both~~ the three ~~and nine~~ months ended ~~September 29, 2017~~March 30, 2018 as compared to the comparable ~~periods~~period of ~~2016.~~2017. Year-over-year sales from existing businesses of field solutions products and services grew at a ~~mid-single~~high-single digit rate during ~~both~~ the three ~~and nine~~ months ended ~~September 29, 2017~~March 30, 2018 due to ~~increased~~continued strong demand for industrial test equipment, network tools and ~~online condition-based monitoring equipment.~~SaaS offerings. Year-over-year sales from existing businesses of product realization solutions grew at a mid-single digit rate during the three months ended ~~September 29, 2017~~March 30, 2018 driven primarily by continued growth in the ~~semiconductor and~~ consumer electronics end ~~markets~~market as well as increased demand for oscilloscopes and new product introductions. ~~During the nine months ended September 29, 2017, these same factors contributed to high-single digit year-over-year growth but~~These increases were partly offset by a decline in demand for design, engineering and manufacturing ~~services. Sales~~services as well as in the segment’s energetic materials business ~~grew during the nine months ended September 29, 2017 despite a slight decline in demand~~ during the three months ended ~~September 29, 2017.~~March 30, 2018. Geographically, demand from existing businesses increased on a year-over-year basis in Asia, ~~driving strong growth in high-growth markets, as well as in~~ Western Europe and North America during ~~both~~ the three ~~and nine~~ months ended ~~September 29, 2017.~~March 30, 2018.

Sales from existing businesses in the segment’s Sensing Technologies businesses grew at a high-single digit rate ~~and at a mid-single digit rate~~ during the three ~~and nine~~ months ended ~~September 29, 2017, respectively,~~March 30, 2018 as compared to the comparable ~~periods~~period of ~~2016.~~2017. Increased year-over-year demand in the industrial end market was partly offset by lower demand in the ~~medical~~food and beverage end market. Geographically, increases in sales from existing businesses ~~increased~~ on a year-over-year basis during ~~both~~ the three ~~and nine~~ months ended ~~September 29, 2017, due primarily to~~March 30, 2018 were driven by strong growth in Asia ~~and North America.~~as well as growth in Western Europe.

Year-over-year price increases in the segment contributed ~~0.6% and 0.4%~~0.9% during the three ~~and nine~~ months ended ~~September 29, 2017, respectively,~~March 30, 2018 as compared to the comparable periods of ~~2016~~2017 and are reflected as a component of the change in sales from existing businesses.

Operating profit margin increased 40160 basis points during the three months ended ~~September 29, 2017~~March 30, 2018 as compared to the comparable period of ~~2016.~~2017. Year-over-year operating profit margin comparisons were favorably impacted by:

Higher ~~2017~~2018 sales volumes, incremental year-over-year cost savings associated with restructuring and productivity improvement initiatives ~~lower year-over-year intangible asset amortization due to certain intangible assets being fully amortized~~ and changes in currency exchange rates net of incremental year-over-year costs associated with various product development and sales and marketing growth investments — ~~240 basis points~~

~~Year-over-year operating profit margin comparisons were unfavorably impacted by:~~

~~Acquisition related transaction costs — 140 basis points~~

~~The incremental year-over-year net dilutive effect of acquired businesses — 60 basis points~~

Operating profit margin increased 120 basis points during the nine months ended September 29, 2017 as compared to the comparable period of 2016. Year-over-year operating profit margin comparisons were favorably impacted by:

Higher 2017 sales volumes, incremental year-over-year cost savings associated with restructuring and productivity improvement initiatives, and lower year-over-year intangible asset amortization due to certain intangible assets being fully amortized, net of incremental year-over-year costs associated with various product development and sales and marketing growth investments, the positive impact in 2016 of a transition services agreement related to a disposition made by Danaher prior to the Separation, incremental year-over-year bad debt charges and changes in currency exchange rates — 220310 basis points

Year-over-year operating profit margin comparisons were unfavorably impacted by:

~~Acquisition related transaction costs — 50 basis points~~

The incremental year-over-year net dilutive effect of acquired businesses — 50150 basis points

INDUSTRIAL TECHNOLOGIES

The Industrial Technologies segment consists of our Transportation Technologies, Automation & Specialty Components and Franchise Distribution businesses. Our Transportation Technologies ~~businesses are~~business is a leading worldwide ~~providers~~provider of solutions and services focused on fuel dispensing, remote fuel management, point-of-sale and payment systems, environmental compliance, vehicle tracking and fleet management, and traffic management. The Automation & Specialty Components ~~businesses provide~~business provides a wide range of electromechanical and electronic motion control products and mechanical components, as well as supplemental braking systems for commercial vehicles. Our Franchise Distribution ~~businesses manufacture~~business manufactures and ~~distribute~~distributes professional tools and a ~~full line~~full-line of wheel service equipment.

Industrial Technologies Selected Financial Data


	Three Months Ended						Nine Months Ended						Three Months Ended
($ in millions)	September 29, 2017			September 30, 2016			September 29, 2017			September 30, 2016			March 30, 2018			March 31, 2017
Sales	$	898.5		$	843.9		$	2,587.4		$	2,452.1		$	869.0		$	819.1
Operating profit	196.2			180.6			530.3			484.7			158.3			152.8
Depreciation	14.5			13.2			43.0			39.4			16.4			14.1
Amortization	6.3			5.5			17.4			16.3			7.8			5.5
Operating profit as a % of sales	21.8		%	21.4		%	20.5		%	19.8		%	18.2		%	18.7		%
Depreciation as a % of sales	1.6		%	1.6		%	1.7		%	1.6		%	1.9		%	1.7		%
Amortization as a % of sales	0.7		%	0.7		%	0.7		%	0.7		%	0.9		%	0.7		%

Components of Sales Growth

% Change
Three Months Ended
September 29, 2017 vs.
Comparable 2016
Period % Change
Nine Months Ended
September 29, 2017 vs.
Comparable 2016
Period
Total revenue growth (GAAP) 6.5 % 5.5 %
Existing businesses (Non-GAAP) 4.4 % 4.6 %
Acquisitions ^(a)(Non-GAAP)
1.0 % 1.1 %
Currency exchange rates (Non-GAAP) 1.1 % (0.2 )%

^(a) This includes the impact from both acquisitions and the Separation



	% Change Three Months Ended March 30, 2018 vs. Comparable 2017 Period
Total revenue growth (GAAP)	6.1	%
Existing businesses (Non-GAAP)	—	%
Acquisitions(Non-GAAP)	3.0	%
Currency exchange rates (Non-GAAP)	3.1	%

Sales from existing businesses in the segment’s Transportation Technologies businesses ~~grew~~declined at a ~~low-single~~high-single digit rate during the three months ended ~~September 29, 2017 and at a mid-single digit rate during the nine months ended September 29, 2017,~~March 30, 2018 as

compared to the comparable ~~periods~~period of ~~2016,~~2017, due primarily to strong demand for dispensers and payment systems in both the United States and Europe. In addition for the nine months ended September 29, 2017, sales growth was impacted by decreased year-over-year EMV-related demand for indoor point-of-sale systems in the United States as customers had largely upgraded to products that support indoor EMV requirements in the prior year in response to the indoor liability shift. The rate of increase in demand for dispensers and payment systems softened in the United States on a year-over-year basis during the three months ended September 29, 2017 as customers began to delay upgrades in response to the extension of the liability shift ~~deadlines for outdoor payment systems. We expect~~related to the enhanced credit card security requirements in the United States based on the EMV ~~deadlines to continue to drive demand for the next several years, however, we do not expect it to be a significant component of year-over-year growth for the next several quarters.~~global standards. Geographically, sales from existing businesses ~~increased~~decreased on a year-over-year basis in ~~Europe and Latin America,~~the United States, partially offset by ~~declines~~strong demand in the Asia-Pacific region during both the three and nine months ended September 29, 2017. Sales in the United States grew during the nine months ended September 29, 2017 despite declining slightly during the three months ended September 29, 2017.China.

Sales from existing businesses in the segment’s Automation & Specialty Components businesses grew at a ~~high-single digit~~low double-digit rate during the three months ended ~~September 29, 2017 and at a mid-single digit rate during the nine months ended September 29, 2017~~March 30, 2018 as compared to the comparable ~~periods~~period of ~~2016,~~2017, due primarily to increased year-over-year demand in industrial and robotics end ~~markets. During the three~~markets in Western Europe, United States and ~~nine months ended September 29, 2017, year-over-year~~China, and strong demand for engine retarder products ~~was strong in China. Geographically, year-over-year sales from existing businesses~~ in the ~~segment’s Automation and Specialty Components business increased during both the three and nine months ended September 29, 2017 in China and Europe.~~United States from improved heavy-duty truck production.

Sales from existing businesses in the segment’s Franchise Distribution businesses were up slightly during the three months ended ~~September 29, 2017 and grew at a low-single digit rate during the nine months ended September 29, 2017~~March 30, 2018 as compared to the comparable ~~periods~~period of 2016. During the three months ended September 29, 2017, increased year-over-year demand for professional and diagnostic tools was offset by declines in demand for hardline, powered and tool storage products. During the nine months ended September 29, 2017, increased2017. Increased year-over-year demand for hardline and diagnostic tools was partially offset by a decline in demand for powered and tool storage products.

Year-over-year price increases in the segment contributed ~~0.5% and 0.2%~~0.4% during the three ~~and nine~~ months ended ~~September 29, 2017, respectively,~~March 30, 2018 as compared to the comparable ~~periods~~period of ~~2016~~2017 and are reflected as a component of the change in sales from existing businesses.

Operating profit margin ~~increased 40~~decreased 50 basis points during the three months ended ~~September 29, 2017~~March 30, 2018 as compared to the comparable period of ~~2016 due to higher 2017~~2017. Year-over-year operating profit margin comparisons were unfavorably impacted by:

The incremental year-over-year net dilutive effect of acquired businesses — 70 basis points

Year-over-year operating profit margin comparisons were favorably impacted by:

Higher 2018 sales volumes, incremental year-over-year cost savings associated with restructuring and productivity improvement initiatives and changes in currency exchange rates, partially offset by incremental year-over-year costs associated with various product development and sales and marketing growth ~~investments. Included in the 40~~investments — 20 basis points ~~increase in operating profit margin is the incremental year-over-year net dilutive effect of acquired businesses of 10 basis points.~~

Operating profit margin increased 70 basis points during the nine months ended September 29, 2017 as compared to the comparable period of 2016 due primarily to higher 2017 sales volumes, incremental year-over-year cost savings associated with restructuring and productivity improvement initiatives and costs associated with various growth investments made in 2016, partially offset by incremental year-over-year costs associated with various product development and sales and marketing growth investments and changes in currency exchange rates.

COST OF SALES AND GROSS PROFIT


	Three Months Ended						Nine Months Ended						Three Months Ended
($ in millions)	September 29, 2017			September 30, 2016			September 29, 2017			September 30, 2016			March 30, 2018			March 31, 2017
Sales	$	1,685.3		$	1,567.4		$	4,849.3		$	4,597.2		$	1,740.7		$	1,535.2
Cost of sales	(845.9		)	(794.5		)	(2,460.8		)	(2,361.0		)	(869.9		)	(791.2		)
Gross profit	$	839.4		$	772.9		$	2,388.5		$	2,236.2		$	870.8		$	744.0
Gross profit margin	49.8		%	49.3		%	49.3		%	48.6		%	50.0		%	48.5		%

The year-over-year increase in cost of sales during the three months ended ~~September 29, 2017~~March 30, 2018 as compared to the comparable period in ~~2016~~2017 is due primarily to the impact of higher year-over-year sales volumes, incremental year-over-year cost of sales from our recently acquired businesses and changes in currency exchange rates partly offset by incremental year-over-year cost savings associated with restructuring and productivity improvement initiatives, and material cost and supply chain improvement actions.

The year-over-year increase in cost of sales during the nine months ended September 29, 2017 as compared to the comparable period in 2016 is due primarily to the impact of higher year-over-year sales volumes partly offset by incremental year-over-year cost savings associated with restructuring and productivity improvement initiatives, material cost and supply chain improvement actions, costs associated with various growth investments made in 2016 and changes in currency exchange rates.

The year-over-year increase in gross profit (and the related 50150 basis point increase in gross profit margin) during the three months ended ~~September 29, 2017~~March 30, 2018 as compared to the comparable period in ~~2016~~2017 is due primarily to the favorable impact of pricing improvements and higher year-over-year sales volumes, incremental year-over-year cost savings associated with restructuring and productivity improvement initiatives, material cost and supply chain improvement actions and changes in currency exchange rates.

~~The year-over-year increase in gross profit (and the related 70 basis point increase in gross profit margin)~~

OPERATING EXPENSES



	Three Months Ended
($ in millions)	March 30, 2018			March 31, 2017
Sales	$	1,740.7		$	1,535.2
Selling, general and administrative (“SG&A”) expenses	423.7			352.2
Research and development (“R&D”) expenses	108.9			96.2
SG&A as a % of sales	24.3		%	22.9		%
R&D as a % of sales	6.3		%	6.3		%

SG&A expenses increased during the ~~nine~~three months ended ~~September 29, 2017~~March 30, 2018 as compared to the comparable period ~~in 2016 is due primarily to the favorable impact~~ of higher year-over-year sales volumes, incremental year-over-year cost savings associated with restructuring and productivity improvement initiatives, material cost and supply chain improvement actions and costs associated with various growth investments made in 2016, partly offset by changes in currency exchange rates.

~~OPERATING EXPENSES~~

Three Months Ended Nine Months Ended
($ in millions) September 29, 2017 September 30, 2016 September 29, 2017 September 30, 2016
Sales $ 1,685.3
$ 1,567.4
$ 4,849.3
$ 4,597.2
Selling, general and administrative (“SG&A”) expenses 381.5
354.5
1,092.1
1,042.3
Research and development (“R&D”) expenses 102.0
95.2
297.3
285.6
SG&A as a % of sales 22.6 % 22.6 % 22.5 % 22.7 %
R&D as a % of sales 6.1 % 6.1 % 6.1 % 6.2 %

~~SG&A expenses increased during the three and nine months ended September 29,~~ 2017 ~~as compared to the comparable periods of 2016~~ due primarily to continued investments in our sales and marketing growth initiatives, ~~increased acquisition-related transaction costs and increased~~incremental year-over-year general and administrative ~~costs required~~expenses and increased depreciation and amortization expense due primarily to operate as a stand-alone public company as compared to the allocations derived from Danaher in periods prior to the Separation, which primarily impacted the first half of 2017 as compared to the first half of 2016.our recently acquired businesses. These increases were partly offsetby incremental year-over-year cost savings associated with restructuring and productivity improvement ~~initiatives and lower year-over-year intangible asset amortization due to certain intangible assets, primarily in our Professional Instrumentation segment, being fully amortized.~~initiatives. On a year-over-year basis, SG&A expenses as a percentage of sales ~~were flat and decreased 20~~increased 140 basis points in the three ~~and nine~~ months ended ~~September 29, 2017, respectively. The decrease in the nine months ended September 29, 2017 was~~March 30, 2018 due primarily to ~~the impact of~~continued investments in our sales ~~growing at a faster rate than SG&A expenses~~and marketing growth initiatives which outpaced our sales growth during the ~~period.~~three months ended March 30, 2018, and higher relative spending levels at our recently acquired businesses.

R&D expenses (consisting principally of internal and contract engineering personnel costs) increased during ~~both~~ the three ~~and nine~~ months ended ~~September 29, 2017~~March 30, 2018 as compared to the comparable ~~periods~~period of ~~2016~~2017 due to incremental year-over-year investments in our product development initiatives. On a year-over-year basis, R&D expenses as a percentage of sales ~~were~~was flat ~~and decreased 10 basis points~~ in the three ~~and nine~~ months ended ~~September 29, 2017, respectively. The decrease in the nine months ended September 29, 2017 was due primarily to the impact of sales growing at a faster rate than R&D expenses during the period.~~March 30, 2018.

INTEREST COSTS

For a discussion of our outstanding indebtedness, refer to Note 5 to the accompanying Consolidated ~~and Combined~~ Condensed Financial Statements.

~~Interest~~Net interest expense of ~~$23 million and $68~~$25 million was recorded for the three ~~and nine~~ months ended ~~September 29, 2017, respectively,~~March 30, 2018 compared to $23 million ~~and $26 million~~ for the three ~~and nine~~ months ended September 30, 2016, respectively. Before the Separation, we depended on Danaher for all of our working capital and financing requirements under Danaher’s centralized approach to cash management and financing of operations of its subsidiaries. As a result, with the exception of cash, cash equivalents and borrowings clearly associated with Fortive and related to the Separation, we recorded no interest expense in our combined condensed financial statements for periods prior to the Separation.March 31, 2017.

INCOME TAXES

Our effective tax rate for the three ~~and nine~~ months ended ~~September 29, 2017,~~March 30, 2018, was ~~23.1% and 25.2%, respectively,~~16.5% as compared to ~~24.3% and 26.6%~~26.7% for the three ~~and nine~~ months ended ~~September 30, 2016, respectively.~~March 31, 2017. The year-over-year decrease was due primarily to favorable impacts in ~~2017~~2018 resulting from a lower statutory tax rate in the United States as a result of the Tax Cuts and Jobs Act (“TCJA”) as well as other federal and international tax benefits.

Our effective tax ~~rate~~rates for 2018 and 2017 ~~and 2016 differs~~differ from the U.S. federal statutory rate of 21% and 35%, respectively, due primarily to our earnings outside the United States that are indefinitely reinvested and taxed at rates lower than the U.S. federal statutory rate, ~~and~~ the impact of credits and deductions provided by ~~law.~~law, and the effect of favorable adjustments to the provisional estimates recorded in 2017 related to the TCJA as permitted under SEC Staff Accounting Bulletin No. 118 (“SAB 118”). The adjustments recorded to our provisional estimates decreased income tax expense by $4.2 million during the three months ended March 30, 2018. We will continue to evaluate the effects of the TCJA on the 2017 provisional estimates through the end of the SAB 118 allowable measurement period.

COMPREHENSIVE INCOME

Comprehensive income increased ~~$105~~by $54 million ~~during the three months ended September 29,~~in 2018 as compared to 2017, due primarily to ~~favorable~~net earnings that were higher by $61 million partially offset by unfavorable changes in foreign currency translation adjustments of ~~$64 million due to changes in currency exchange rates and net earnings that were higher by $41 million.~~

Comprehensive income increased $201 million during the nine months ended September 29, 2017, due primarily to favorable changes in foreign currency translation adjustments of $141 million due to changes in currency exchange rates and net earnings that were higher by $60$7 million.

INFLATION

The effect of inflation on our sales and net earnings was not significant in the ~~nine~~three month period ended ~~September 29, 2017.~~March 30, 2018.

LIQUIDITY AND CAPITAL RESOURCES

We 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~~expect that our operating cash flow and other sources of liquidity will be sufficient to allow us to continue to invest in existing businesses, consummate strategic acquisitions, make interest payments on our outstanding indebtedness, and manage our capital structure on a short and long-term basis.

Overview of Cash Flows and Liquidity

Following is an overview of our cash flows and liquidity for the ~~nine~~three months ended ~~September 29, 2017:~~March 30, 2018:


	Nine Months Ended						Three Months Ended
($ in millions)	September 29, 2017			September 30, 2016			March 30, 2018			March 31, 2017
Net cash provided by operating activities	$	713.0		$	819.4		$	171.0		$	148.3

Cash paid for acquisitions	$	(802.1	)	$	(190.6	)	$	(7.7	)	$	—
Payments for additions to property, plant and equipment	(87.7		)	(90.0		)	(31.4		)	(26.8		)
All other investing activities	1.5			4.3			0.1			(0.6		)
Net cash used in investing activities	$	(888.3	)	$	(276.3	)	$	(39.0	)	$	(27.4	)

Net proceeds from borrowings (maturities of 90 days or less)	$	176.8		$	525.6
Proceeds from borrowings (maturities longer than 90 days)	125.9			2,983.0
Net repayments of borrowings (maturities of 90 days or less)							$	(74.3	)	$	(95.5	)
Payment of dividends	(72.8		)	(24.2		)	(24.3		)	(24.2		)
Cash dividend paid to Former Parent	—			(3,000.0		)
Net transfers to Former Parent	—			(301.4		)
All other financing activities	10.9			(2.2		)	4.4			0.3
Net cash provided by financing activities	$	240.8		$	180.8
Net cash used by financing activities							$	(94.2	)	$	(119.4	)

Operating Activities

Cash flows from operating activities can fluctuate significantly from period-to-period as working capital needs and the timing of payments for income taxes, various employee liabilities, restructuring activities and other items impact reported cash flows.

Operating cash flows were approximately ~~$713~~$171 million for the first ~~nine~~three months of ~~2017, a decrease~~2018, an increase of ~~$106~~$23 million, or approximately ~~13%~~15%, as compared to the comparable period of ~~2016.~~2017. The year-over-year change in operating cash flows was primarily attributable to the following factors:

~~2017~~2018 operating cash flows benefited from higher net earnings for the first ~~nine~~three months of ~~2017~~2018 as compared to the comparable period in ~~2016.~~2017. Net earnings for the ~~nine~~three months ended ~~September 29, 2017~~March 30, 2018 benefited from a year-over-year increase in operating profits of ~~$91~~$43 million, ~~and a $15 million non-cash gain from acquisition~~ partially offset by a year-over-year increase in net interest expense of ~~$42~~$2 million associated with ~~debt issued in June 2016 in connection with the Separation.~~our Commercial Paper Programs. The year-over-year increase in operating profit also includes a year-over-year ~~decrease~~increase in depreciation and amortization ~~expense~~expenses of ~~$20 million due primarily to certain intangible assets, primarily in our Professional Instrumentation segment, being fully amortized.~~$23 million. Depreciation and amortization are noncash expenses that decrease earnings without a corresponding impact to operating cash flows.

The aggregate of accounts receivable, inventories and trade accounts payable used $74 million of cash during the first ~~nine~~three months of ~~2017 as~~2018 compared to ~~providing~~using $62 million of cash in the comparable period of ~~2016.~~2017. The amount of cash flow generated from or used by the aggregate of accounts receivable, inventories and trade accounts payable depends upon how effectively we manage the cash conversion cycle, which effectively represents the number of days that elapse from the day we pay for the purchase of raw materials and components to the collection of cash from our customers, and can be significantly impacted by the timing of collections and payments in a period.

The aggregate of prepaid expenses and other assets and accrued expenses and other liabilities used ~~$56~~$88 million of cash during the first ~~nine~~three months of ~~2017~~2018 as compared to using ~~$62~~$38 million of cash in the comparable period of ~~2016.~~2017. The timing of ~~cash payments for income taxes and~~ various employee related liabilities and the impact of recently acquired businesses drove the majority of this change. For periods prior to the Separation our combined financial statements accounted for income taxes under the separate return method; accordingly our taxes payable during this period was recorded as an adjustment to equity as it did not represent a liability with the relevant taxing authorities as we were a part of Danaher’s tax returns.

Investing Activities

Cash flows relating to investing activities consist primarily of cash used for acquisitions and capital expenditures. Net cash used in investing activities increased ~~$612~~$12 million during the ~~nine~~three months ended ~~September 29, 2017~~March 30, 2018 as compared to the comparable period of ~~2016,~~2017, due primarily to ~~the~~a business ~~acquisitions~~acquisition completed during the ~~nine~~three months ended ~~September 29, 2017.~~March 30, 2018.

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 operating-type lease arrangements with customers. ~~Capital expenditures decreased $2 million during the nine months ended September 29, 2017 as compared to the comparable period of 2016 due primarily to timing of these investments within the year.~~ For the full year ~~2017,~~2018, we expect capital spending to be between approximately $125 million and $135 million, though actual expenditures will ultimately depend on business conditions.

Financing Activities and Indebtedness

Cash flows from financing activities consist primarily of cash flows associated with the issuance and repayments of commercial paper and other debt and payments of quarterly cash dividends to ~~shareholders and, prior to the Separation, net payments and transfers to Former Parent.~~shareholders. Financing activities ~~generated~~used cash of ~~$241~~$94 million during the ~~nine~~three months ended ~~September 29, 2017~~March 30, 2018 as compared to using approximately ~~$181~~$119 million of cash ~~provided~~ in the comparable period in ~~2016.~~2017. In the ~~nine~~three months ended ~~September 29, 2017,~~March 30, 2018, we ~~received~~made net ~~proceeds from the issuance~~repayments of commercial paper under the U.S. and Euro commercial paper programs (“Commercial Paper Programs”) of ~~$177 million, received proceeds from borrowings of $126~~$74 million and paid ~~$73~~$24 million of cash dividends to shareholders. In the nine months ended September 30, 2016, we incurred approximately $3.5 billion of indebtedness offset by $3.3 billion of payments and net transfers to Former Parent. We no longer make any net transfers to Former Parent as a result of the Separation.

We generally expect to satisfy any short-term liquidity needs that are not met through operating cash flows and available cash primarily through issuances of commercial paper under the Commercial Paper Programs. Credit support for the Commercial Paper Programs is provided by our five-year, $1.5 billion senior unsecured revolving credit facility that expires on June 16, 2021 (“Revolving Credit Facility”). We classified our borrowings outstanding under the Commercial Paper Programs as long-term debt in the accompanying Consolidated Condensed Balance Sheet as of ~~September 29, 2017,~~March 30, 2018, as we have the intent and ability, as supported by availability under the Revolving Credit Facility, to refinance these borrowings for at least one year from the balance sheet date. As commercial paper obligations mature, we may issue additional short-term commercial paper obligations to refinance all or part of these borrowings.

We had $1.5 billion available under the Revolving Credit Facility as of ~~September 29, 2017.~~March 30, 2018. Of this amount, approximately ~~$564~~$881 million was being used to backstop outstanding U.S. and Euro commercial paper balances. Accordingly, we had the ability to incur an additional ~~$0.9~~$0.6 billion of indebtedness under the Revolving Credit Facility as of ~~September 29, 2017.~~March 30, 2018. Refer to Note 5 of the Consolidated ~~and Combined~~ Condensed 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. We expect to limit any 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 all of the outstanding commercial paper as it matures.

As of ~~September 29, 2017,~~March 30, 2018, commercial paper outstanding under the U.S. dollar-denominated commercial paper program had ~~a weighted average~~an annual ~~interest~~effective rate of ~~1.44%~~2.48% and a weighted average remaining maturity of approximately 1134 days. As of ~~September 29, 2017,~~March 30, 2018, commercial paper outstanding under the Euro-denominated commercial paper program had ~~a weighted average~~an annual ~~interest~~effective rate of ~~(0.08)~~(0.11)% and a weighted average remaining maturity of approximately 7258 days.

~~Yen Variable Interest Rate Term Loan~~

On August 24, 2017, we entered into a new term loan agreement that provides for a five-year ¥13.8 billion senior unsecured term facility (“Yen Term Loan”) that expires on August 24, 2022. We borrowed the entire ¥13.8 billion available under this facility on August 28, 2017, which yielded net proceeds of approximately $126 million. The Yen Term Loan bears interest at a rate equal to LIBOR plus 50 basis points, provided however that LIBOR may not be less than zero for the purposes of the Yen Term Loan. As of September 29, 2017, borrowings under the Yen Term Loan bear an interest rate of 0.50% per annum. During the period of 2017 in which the Yen Term Loan was outstanding, the annual effective rate was 0.50%. The Yen Term Loan is pre-payable at our option, and re-borrowing is not permitted once the term loan is repaid.

~~The terms and conditions, including covenants, applicable to the the Yen Term Loan are substantially similar to those applicable to the Revolving Credit Facility.~~

~~Registration Rights Agreement~~

During 2016, we issued in a private placement $2.5 billion of senior unsecured notes in multiple series with maturity dates ranging from June 15, 2019 to June 15, 2046 (collectively, the “Private Notes”). In connection with the issuance of the Private Notes, we entered into a registration rights agreement, pursuant to which we were obligated to use commercially reasonable efforts to file with the SEC, and cause to be declared effective, a registration statement with respect to an offer to exchange each series of Private Notes for registered notes (“Registered Notes”) with substantially identical terms (“Exchange Offer”). Accordingly, on May 5, 2017 we filed a Form S-4 with the SEC (the “Registration Statement”), which Registration Statement was declared effective on May 17, 2017. On May 17, 2017, we launched the Exchange Offer, which expired on June 14, 2017. All Private Notes were tendered and exchanged for Registered Notes in the Exchange Offer.

~~Shelf Registration Statement~~

On June 12, 2017, we filed a shelf registration statement on Form S-3 with the SEC (the “Shelf Registration Statement”) that registers an indeterminate amount of debt securities, common stock, preferred stock, warrants, depositary shares, purchase contracts and units that may be issued in the future in one or more offerings. Unless otherwise specified in the corresponding prospectus supplement, we expect to use net proceeds realized from future securities issuances off the Shelf Registration Statement for general corporate purposes, including without limitation repayment or refinancing of debt or other corporate obligations, acquisitions, capital expenditures and dividends, and working capital.

Dividends

On ~~August 3, 2017,~~January 23, 2018, we declared a regular quarterly dividend of $0.07 per share paid on ~~September~~March 29, ~~2017~~2018 to holders of record on ~~August 25, 2017.~~February 23, 2018. For the ~~nine~~three months ended ~~September 29, 2017,~~March 30, 2018, cash ~~dividends~~dividend payments of ~~$73~~$24.3 million were ~~paid~~recorded as dividends to ~~shareholders.~~shareholders in the Consolidated Condensed Statement of Changes in Equity.

On April 12, 2018, we declared a regular quarterly dividend of $0.07 per share payable on June 29, 2018 to holders of record on May 25, 2018.

Cash and Cash Requirements

As of ~~September 29, 2017,~~March 30, 2018, we held ~~$911~~approximately $1,015.7 million of cash and cash equivalents that were invested in highly liquid investment-grade instruments with a maturity of 90 days or less with ~~a negligible weighted average~~an annual ~~interest rate.~~effective rate of less than 1.0%. Substantially all of the cash was held outside of ~~the United States.~~

While repatriation of some cash held outside the United States may be restricted by local laws, most of our foreign cash balances could be repatriated to the United States but, under current law, would be subject to U.S. federal income taxes, less applicable foreign tax credits. For most of our foreign subsidiaries, we make an assertion regarding the amount of earnings intended for indefinite reinvestment, with the balance available to be repatriated to the United States. We record a current tax liability for the funds when we plan to repatriate cash to the United States. No provisions for U.S. income taxes have been made with respect to earnings that are planned to be reinvested indefinitely outside the United States, and the amount of U.S. income taxes that may be applicable to such earnings is not readily determinable given the various alternatives we could employ if we repatriated these earnings. The cash that our foreign subsidiaries hold for indefinite reinvestment is generally used to finance foreign operations and investments, including acquisitions. As of September 29, 2017, we believe that we have sufficient liquidity to satisfy our cash needs, including our cash needs in the United States.

We 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, ~~pay dividends to shareholders,~~ fund our restructuring activities and ~~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, 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 and/or access the capital markets. We also may from time to time access the capital markets, including to take advantage of favorable interest rate environments or other market conditions.

The TCJA that was enacted in December 2017 is materially improving our U.S. liquidity through lower corporate tax rates and enhanced cash repatriation. During the first three months of 2018, we repatriated $75 million and expect to repatriate an additional $200 million during 2018. These repatriations are subject to an estimated $6 million in foreign remittance taxes.

As of March 30, 2018, we recorded a current liability for the funds we have or intend to repatriate under the TCJA final transition tax. Conversely, we have made an election regarding the amount of 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. Such earnings are intended for indefinite foreign reinvestment and no provision for non-U.S. income taxes has been made. The amount of income taxes that may be applicable to such earnings is not readily determinable given the unknown duration of local law restrictions as applicable to such earnings, unknown changes in foreign tax law that may occur during the restriction periods, and the various alternatives we could employ if we repatriated these earnings. The cash that our foreign subsidiaries hold for indefinite reinvestment is generally used to finance foreign operations and investments, including acquisitions. We expect the TCJA to have a favorable impact in our future ability to engage in acquisition activities.

As of March 30, 2018, we expect to have sufficient liquidity to satisfy our cash needs for the foreseeable future, including our cash needs in the United States.

CRITICAL ACCOUNTING ESTIMATES

There were no material changes during the three months ended ~~September 29, 2017~~March 30, 2018 to the items we disclosed as our critical accounting estimates in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our ~~2016~~2017 Annual Report on Form 10-K. Changes to our accounting policy for revenue recognition as a result of adopting ASU 2014-09 Revenue from Contracts with Customers (“Topic 606”)are discussed in Note 6 to the consolidated condensed financial statements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Quantitative and qualitative disclosures about market risk appear in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Financial Instruments and Risk Management,” in our ~~2016~~2017 Annual Report on Form 10-K. There were no material changes during the three months ended ~~September 29, 2017~~March 30, 2018 to the information reported in our ~~2016~~2017 Annual Report on Form 10-K.

ITEM 4. 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.

There have been no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) 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.

PART II - OTHER INFORMATION

ITEM 1A. RISK FACTORS

Information regarding risk factors appears in “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Information Related to Forward-Looking Statements,” in Part I - Item 2 of this Form 10-Q and in the “Risk Factors” section of our ~~2016~~2017 Annual Report on Form 10-K. ~~There~~Other than as provided below, there were no material changes during the quarter ended ~~September 29, 2017~~March 30, 2018 to the risk factors reported in the ~~��Risk~~“Risk Factors” section of our ~~2016~~2017 Annual Report on Form 10-K.

We are pursuing a plan to combine four operating companies from our Automation & Specialty platform into a new company and to merge that new company into a subsidiary of Altra Industrial Motion Corp. in a tax-efficient transaction. The proposed transaction may not be completed on the currently contemplated timeline or at all and may not achieve the intended benefits.

We have announced plans to combine four operating companies from our Automation & Specialty platform (the A&S Businesses) into a new company that we will distribute to our stockholders by means of an exchange offer or a pro rata dividend, after which the A&S Businesses will merge with a subsidiary of Altra Industrial Motion Corp (Altra). Both the distribution and merger are expected to qualify as tax-efficient to our stockholders, except to the extent that cash is paid in lieu of fractional shares of Altra common stock. Our stockholders would receive shares representing approximately 54% of the issued and outstanding shares of Altra after giving effect to the transaction. The actual value of the shares of Altra to be received by our stockholders in the transaction will depend on the value of such shares at the time of closing of the transaction, and our stockholders may receive more or less than any value estimated prior to the completion of the transaction. Unanticipated developments, including delays in obtaining or satisfying (or failure to obtain or satisfy) tax rulings, regulatory approvals (including domestic and foreign anti-trust approvals), Altra stockholder approval and other conditions to closing, and challenges in establishing infrastructure or processes, could delay or prevent the proposed transaction from occurring at all, or cause the proposed transaction to occur on terms or conditions that are less favorable than expected. Even if the transaction is completed, some or all of the anticipated value and benefits may not be achieved. Expenses incurred to accomplish the proposed transaction may be significantly higher than what we currently anticipate. Executing the proposed transaction also requires significant time and attention from management, which could distract them from other tasks in operating our business. Following the proposed distribution and merger, the combined value of the common stock of Fortive and the shares of common stock of Altra issued as consideration for the A&S Businesses may not be equal to or greater than what the value of Fortive’s common stock would have been had the proposed transaction not occurred.

International economic, political, legal, compliance and business factors could negatively affect our financial statements. Furthermore, significant uncertainties related to changes in governmental policies toward international trade currently exist, and, depending on how such uncertainties are resolved, could have a material adverse effect on our financial results.

In 2017, approximately 45% 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 continued participation and growth in 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 recent 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 regard to China;

trade protection measures, increased trade barriers, imposition of significant tariffs on imports and or exports, embargoes and import or export restrictions and requirements;

new conditions to and possible restriction of existing free trade agreements;

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;

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;

negative sentiments towards the U.S. among non-U.S. customers and among non-U.S. employees or prospective employees;

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.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

During the fiscal quarter ended March 30, 2018, we acquired the following shares in settlement of the withholding obligations pertaining to vesting of our Performance Stock Awards:



Period	Total number of shares (or units) purchased ⁽¹⁾	Average price paid per share (or unit)⁽¹⁾	Total number of shares (or units) purchased as part of publicly announced plans or programs	Maximum number (or approximate dollar value) of shares (or units) that may yet be purchased under the plans or programs
January 1-31	0	0	N/A	N/A
February 1-28	14,542	$76.68	N/A	N/A
March 1-30	0	0	N/A	N/A
Total	14,542	$76.68	N/A	N/A
⁽¹⁾In connection with our separation from Danaher Corporation ("Danaher"), Performance Stock Units issued by Danaher on February 24, 2015 to James A. Lico that remained unvested as of July 2, 2016 were cancelled and replaced with our Performance Stock Awards ("2015 PSAs"). On February 22, 2018 and in accordance with the terms of our 2016 Stock Incentive Plan, we withheld 14,542 shares of our common stock based on the corresponding closing price of $76.68 per share to offset tax withholding obligations that arose upon vesting of the 2015 PSAs.

ITEM 6. EXHIBITS




Exhibit Number		Description
~~3.1~~2.1		~~Amended~~Separation and ~~Restated Certificate~~Distribution Agreement, dated as of ~~Incorporation of~~March 7, 2018, among Fortive Corporation, Stevens Holding Company, Inc. and Altra Industrial Motion Corp. (incorporated by reference to Exhibit ~~3.1~~10.1 to ~~Fortive Corporation’s~~Altra Industrial Motion Corp.’s Current Report on Form 8-K filed on ~~June~~March 9, 2018, File No. 1-33209).

2.2		Agreement 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 to Exhibit 2.1 to Altra Industrial Motion Corp.’s Current Report on Form 8-K filed on March 9, 2018, File No. 1-33209).

10.1		Form of Fortive Corporation Performance Stock Unit Agreement (incorporated by reference to Exhibit 10.8 to Fortive Corporation’s Annual Report on Form 10-K for the year ended December 31, 2017, File No. 1-37654).

10.2		Form of Fortive Corporation Non-Employee Directors Restricted Stock Unit Agreement (incorporated by reference to Exhibit 10.9 to Fortive Corporation’s Annual Report on Form 10-K for the year ended December 31, 2017, File No. 1-37654).

~~3.2~~10.3		~~Amended and Restated Bylaws~~Form of Fortive Corporation Restricted Stock Unit Agreement (incorporated by reference to Exhibit ~~3.2~~10.11 to Fortive Corporation’s ~~Current~~Annual Report on Form ~~8-K filed on June 9,~~10-K for the year ended December 31, 2017, File NoNo. 1-37654).

~~10.1~~10.4		~~Fortive Corporation Director Compensation Policy.~~

~~10.2~~		Form of Fortive Corporation Non-Employee ~~Directors’ Deferred Compensation Plan.~~Directors Stock Option Agreement (incorporated by reference to Exhibit 10.12 to Fortive Corporation’s Annual Report on Form 10-K for the year ended December 31, 2017, File No. 1-37654).

~~10.3~~10.5		Form of Fortive Corporation ~~Non-Employee Directors’ Deferred Compensation Plan Election Form.~~Stock Option Agreement (incorporated by reference to Exhibit 10.13 to Fortive Corporation’s Annual Report on Form 10-K for the year ended December 31, 2017, File No. 1-37654).

~~11.1~~10.6		~~Computation of per-share earnings (See Note 10, “Earnings Per Share”,~~Aircraft Time Sharing Agreement between Fortive Corporation and James Lico (incorporated by reference to ~~our Consolidated~~Exhibit 10.18 to Fortive Corporation’s Annual Report on Form 10-K for the year ended December 31, 2017, File No. 1-37654).

10.7		Aircraft Time Sharing Agreement, dated July 18, 2016, between Fortive Corporation and ~~Combined Condensed Financial Statements)~~Charles McLaughlin (incorporated by reference to Exhibit 10.19 to Fortive Corporation’s Annual Report on Form 10-K for the year ended December 31, 2017, File No. 1-37654).

12.1		Computation of earnings to fixed charges.

31.1		Certification 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 2002.

31.2		Certification 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 2002.

32.1		Certification of Chief Executive Officer, Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification of Chief Financial Officer, Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS		XBRL Instance Document* - the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.



101.SCH		XBRL Taxonomy Extension Schema Document*

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document*

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document*

101.LAB		XBRL Taxonomy Extension Label Linkbase Document*

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document*

Attached as Exhibit 101 to this report are the following documents formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Condensed Balance Sheets as of ~~September 29, 2017~~March 30, 2018 and December 31, ~~2016,~~2017, (ii) Consolidated ~~and Combined~~ Condensed Statements of Earnings for the three ~~and nine~~ months ended ~~September 29,~~March 30, 2018 and March 31, 2017, ~~and September 30, 2016,~~ (iii) Consolidated ~~and Combined~~ Condensed Statements of Comprehensive Income for the three ~~and nine~~ months ended ~~September 29,~~March 30, 2018 and March 31, 2017, ~~and September 30, 2016,~~ (iv) Consolidated Condensed Statement of Changes in Equity for the ~~nine~~three months ended ~~September 29, 2017,~~March 30, 2018, (v) Consolidated ~~and Combined~~ Condensed Statements of Cash Flows for the ~~nine~~three months ended ~~September 29,~~March 30, 2018 and March 31, 2017, ~~and September 30, 2016,~~ and (vi) Notes to Consolidated ~~and Combined~~ Condensed Financial Statements.

The registrant agrees to furnish to the Commission supplementally upon request a copy of schedules or exhibits omitted pursuant to Item 601(b)(2) of Regulation S-K of any material plan or acquisition, disposition or reorganization set forth above.

SIGNATURES

Pursuant to the requirements 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 CORPORATION:

Date: ~~October~~April 26, ~~2017~~2018	By:	/s/ Charles E. McLaughlin
		Charles E. McLaughlin
		Senior Vice President and Chief Financial Officer

Date: ~~October~~April 26, ~~2017~~2018	By:	/s/ Emily A. Weaver
		Emily A. Weaver
		Chief Accounting Officer

3736



PART I -	FINANCIAL INFORMATION	Page
Item 1.	Financial Statements
	Consolidated Condensed Balance Sheets	3
	Consolidated ~~and Combined~~ Condensed Statements of Earnings	4
	Consolidated ~~and Combined~~ Condensed Statements of Comprehensive Income	5
	Consolidated Condensed Statement of Changes in Equity	6
	Consolidated ~~and Combined~~ Condensed Statements of Cash Flows	7
	Notes to Consolidated ~~and Combined~~ Condensed Financial Statements	8
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2019
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3330
Item 4.	Controls and Procedures	3331
PART II -	OTHER INFORMATION
Item 1A.	Risk Factors	3432
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	33
Item 6.	Exhibits	3534
	Signatures	3736



Accounts receivable	$	73.3
Inventories	27.8
Property, plant and equipment	99.7
Goodwill	576.3
Other intangible assets, primarily customer relationships, trade names and technology	172.4
Trade accounts payable	(15.6		)
Other assets and liabilities, net	(95.0		)
Previously held investment	(36.8		)
Net cash consideration	$	802.1



Balance, December 31, 2016	$	3,979.0
Attributable to 2017 acquisitions	576.3
Foreign currency translation & other	77.0
Balance, September 29, 2017	$	4,632.3



	Carrying Value		Weighted average annual interest rate		Weighted average remaining maturity (in days)
U.S. dollar-denominated	$	285.8	1.44	%	11
Euro-denominated	$	278.3	(0.08	)%	72



Stock Awards	$	45.2
Stock options	44.8
Total unrecognized compensation cost	$	90.0



	Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value
Outstanding as of December 31, 2016	10.7		$	33.23
Granted	1.8		57.55
Exercised	(1.0	)	25.09
Canceled/forfeited	(0.3	)	44.87
Outstanding as of September 29, 2017	11.2		$	37.65	6.5	$	370.9
Vested and expected to vest as of September 29, 2017 ^(a)	10.8		$	37.23	6.5	$	362.6
Vested as of September 29, 2017	5.4		$	28.23	4.7	$	229.3

^(a) The “expected to vest” options are the net unvested options that remain after applying the forfeiture rate assumption to total unvested options.



	Number of Stock Awards		Weighted Average Grant-Date Fair Value
Unvested as of December 31, 2016	2.2		$	39.20
Granted	0.6		57.04
Vested	(0.6	)	35.70
Forfeited	(0.1	)	43.65
Unvested as of September 29, 2017	2.1		$	45.32



	% Change Three Months Ended September 29, 2017 vs. Comparable 2016 Period		% Change Nine Months Ended September 29, 2017 vs. Comparable 2016 Period
Total revenue growth (GAAP)	7.5	%	5.5	%
Existing businesses (Non-GAAP)	4.8	%	5.1	%
Acquisitions ^(a)(Non-GAAP)	1.8	%	0.8	%
Currency exchange rates (Non-GAAP)	0.9	%	(0.4	)%

^(a) This includes the impact from both acquisitions and the Separation