UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

________________________________________________



(Mark One)
☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: ~~June 28, 2019~~March 27, 2020



Or
☐			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,

98203

~~6920 Seaway Blvd~~

~~Everett,~~

~~98203~~

(Address of principal executive offices)

(Zip code)

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

~~425~~) ~~446-5000~~

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading symbols	Name of each exchange on which registered
Common stock, par value $0.01 per share	FTV	New York Stock Exchange
5% Mandatory convertible preferred stock, Series A, par value $0.01 per share	FTV. PRA	New York Stock Exchange

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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.

Large accelerated filer

☒

Accelerated filer

☐

~~Large accelerated filer~~

☒

~~Accelerated filer~~

☐

Non-accelerated filer

☐

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. ☐

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

The number of shares of common stock outstanding at ~~July 18, 2019~~April 23, 2020 was ~~335,533,242.~~336,856,117.

FORTIVE CORPORATION

INDEX

FORM 10-Q

Table of Contents

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

FORTIVE CORPORATION AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEETS

($ in millions, except per share amounts)


	As of
	March 27, 2020		December 31, 2019
	(unaudited)
ASSETS
Current assets:
Cash and equivalents	$	1,040.5	$	1,205.2
Accounts receivable, net	1,317.6		1,384.5
Inventories:
Finished goods	282.7		285.6
Work in process	103.1		100.4
Raw materials	264.6		254.3
Inventories	650.4		640.3
Prepaid expenses and other current assets	433.8		455.6
Current assets, discontinued operations	3.3		3.2
Total current assets	3,445.6		3,688.8
Property, plant and equipment, net of accumulated depreciation of $843.2 and $838.7 at March 27, 2020 and December 31, 2019, respectively	520.0		519.5
Operating lease right-of-use assets	200.0		206.8
Other assets	744.0		779.6
Goodwill	8,271.1		8,399.3
Other intangible assets, net	3,751.0		3,845.0

Total assets	$	16,931.7	$	17,439.0
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt	$	250.0	$	1,500.0
Trade accounts payable	745.4		765.5
Current operating lease liabilities	53.3		54.9
Accrued expenses and other current liabilities	1,072.4		1,146.8

Total current liabilities	2,121.1		3,467.2
Operating lease liabilities	154.5		159.0
Other long-term liabilities	1,576.7		1,584.2
Long-term debt	5,826.1		4,828.4

Commitments and Contingencies
Equity:
Preferred stock: $0.01 par value, 15.0 million shares authorized; 5.0% Mandatory convertible preferred stock, series A, 1.4 million shares designated, issued and outstanding at March 27, 2020 and December 31, 2019	—		—
Common stock: $0.01 par value, 2.0 billion shares authorized; 337.7 and 336.9 million issued; 336.8 and 336.0 million outstanding at March 27, 2020 and December 31, 2019, respectively	3.4		3.4
Additional paid-in capital	3,333.7		3,311.1
Retained earnings	4,098.6		4,128.8
Accumulated other comprehensive income (loss)	(193.6)		(56.3)
Total Fortive stockholders’ equity	7,242.1		7,387.0
Noncontrolling interests	11.2		13.2
Total stockholders’ equity	7,253.3		7,400.2
Total liabilities and equity	$	16,931.7	$	17,439.0

As of
June 28, 2019 December 31, 2018
(unaudited)
ASSETS
Current assets:
Cash and equivalents $ 1,092.1
$ 1,178.4
Accounts receivable, net 1,315.2
1,195.1
Inventories:
Finished goods 336.3
219.5
Work in process 97.0
103.1
Raw materials 260.4
251.9
Total inventories 693.7
574.5
Prepaid expenses and other current assets 313.9
193.2
Current assets, discontinued operations 21.4
30.0
Total current assets 3,436.3
3,171.2
Property, plant and equipment, net of accumulated depreciation of $821.4 and $889.8 at June 28, 2019 and December 31, 2018, respectively 514.7
576.1
Operating lease right-of-use assets 197.6
—
Other assets 755.4
548.9
Goodwill 7,750.9
6,133.1
Other intangible assets, net 3,813.2
2,476.3
Total assets $ 16,468.1
$ 12,905.6
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt $ 1,000.0
$ 455.6
Trade accounts payable 697.9
706.5
Current operating lease liabilities 51.3
—
Accrued expenses and other current liabilities 1,024.9
999.3
Current liabilities, discontinued operations 17.1
30.7
Total current liabilities 2,791.2
2,192.1
Operating lease liabilities 151.0
—
Other long-term liabilities 1,306.5
1,125.9
Long-term debt 5,196.5
2,974.7
Equity:
Preferred stock: $0.01 par value, 15.0 million shares authorized; 5.0% Mandatory convertible preferred stock, series A, 1.4 million shares designated, issued and outstanding at June 28, 2019 and December 31, 2018 —
—
Common stock: $0.01 par value, 2.0 billion shares authorized; 336.2 and 335.1 million issued; 335.4 and 334.5 million outstanding at June 28, 2019 and December 31, 2018, respectively 3.4
3.4
Additional paid-in capital 3,265.4
3,126.0
Retained earnings 3,810.4
3,552.7
Accumulated other comprehensive income (loss) (67.6 ) (86.6 )
Total Fortive stockholders’ equity 7,011.6
6,595.5
Noncontrolling interests 11.3
17.4
Total stockholders’ equity 7,022.9
6,612.9
Total liabilities and equity $ 16,468.1
$ 12,905.6

See the accompanying Notes to Consolidated Condensed Financial Statements.

Table of Contents

FORTIVE CORPORATION AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS

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

(unaudited)


														Three Months Ended
	Three Months Ended						Six Months Ended							March 27, 2020		March 29, 2019
	June 28, 2019			June 29, 2018			June 28, 2019			June 29, 2018
Sales of products	$	1,623.0		$	1,439.5		$	3,028.1		$	2,771.9
Sales of products and software													Sales of products and software	$	1,487.8	$	1,405.1
Sales of services	241.7			162.3			429.5			322.1			Sales of services	225.7		187.8
Total sales	1,864.7			1,601.8			3,457.6			3,094.0			Total sales	1,713.5		1,592.9
Cost of product sales	(808.0		)	(656.7		)	(1,455.9		)	(1,271.5		)
Cost of product and software sales													Cost of product and software sales	(692.5)		(647.9)
Cost of service sales	(152.7		)	(114.3		)	(285.0		)	(225.4		)	Cost of service sales	(145.2)		(132.3)
Total cost of sales	(960.7		)	(771.0		)	(1,740.9		)	(1,496.9		)	Total cost of sales	(837.7)		(780.2)
Gross profit	904.0			830.8			1,716.7			1,597.1			Gross profit	875.8		812.7
Operating costs:													Operating costs:
Selling, general and administrative expenses	(537.1		)	(404.5		)	(1,023.5		)	(793.0		)	Selling, general and administrative expenses	(557.2)		(486.4)
Research and development expenses	(117.4		)	(101.9		)	(226.4		)	(201.8		)	Research and development expenses	(113.7)		(109.0)
Impairment of goodwill													Impairment of goodwill	(85.3)		—
Operating profit	249.5			324.4			466.8			602.3			Operating profit	119.6		217.3
Non-operating expenses, net:													Non-operating expenses, net:

Interest expense, net	(44.4		)	(23.9		)	(69.7		)	(47.2		)	Interest expense, net	(43.6)		(25.3)
Other non-operating expenses, net	(0.8		)	(1.1		)	(0.4		)	(1.8		)	Other non-operating expenses, net	(4.6)		0.4
Earnings from continuing operations before income taxes	204.3			299.4			396.7			553.3			Earnings from continuing operations before income taxes	71.4		192.4
Income taxes	(29.0		)	(49.2		)	(57.4		)	(89.1		)	Income taxes	(29.1)		(28.4)
Net earnings from continuing operations	175.3			250.2			339.3			464.2			Net earnings from continuing operations	42.3		164.0
Earnings from discontinued operations, net of income taxes	(0.7		)	44.8			(0.3		)	92.0
Earnings (loss) from discontinued operations, net of income taxes													Earnings (loss) from discontinued operations, net of income taxes	(0.4)		0.4
Net earnings	174.6			295.0			339.0			556.2			Net earnings	41.9		164.4
Mandatory convertible preferred dividends	(17.2		)	(0.2		)	(34.5		)	(0.2		)	Mandatory convertible preferred dividends	(17.3)		(17.3)
Net earnings attributable to common stockholders	$	157.4		$	294.8		$	304.5		$	556.0		Net earnings attributable to common stockholders	$	24.6	$	147.1

Net earnings per common share from continuing operations:													Net earnings per common share from continuing operations:
Basic	$	0.47		$	0.72		$	0.91		$	1.33		Basic	$	0.07	$	0.44
Diluted	$	0.47		$	0.70		$	0.90		$	1.31		Diluted	$	0.07	$	0.43
Net earnings per share from discontinued operations:													Net earnings per share from discontinued operations:
Basic	$	—		$	0.13		$	—		$	0.26		Basic	$	—	$	—
Diluted	$	—		$	0.13		$	—		$	0.26		Diluted	$	—	$	—
Net earnings per share:													Net earnings per share:
Basic	$	0.47		$	0.84		$	0.91		$	1.59		Basic	$	0.07	$	0.44
Diluted	$	0.46		$	0.83		$	0.90		$	1.57		Diluted	$	0.07	$	0.43
Average common stock and common equivalent shares outstanding:													Average common stock and common equivalent shares outstanding:
Basic	335.6			349.2			335.4			348.9			Basic	336.8		335.1
Diluted	339.7			355.0			339.8			354.7			Diluted	340.0		339.5
The sum of net earnings per share may not add due to rounding

See the accompanying Notes to Consolidated Condensed Financial Statements.

Table of Contents

FORTIVE CORPORATION AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME

($ in millions)

(unaudited)


	Three Months Ended					Six Months Ended						Three Months Ended
	June 28, 2019		June 29, 2018			June 28, 2019		June 29, 2018				March 27, 2020		March 29, 2019
Net earnings	$	174.6	$	295.0		$	339.0	$	556.2		Net earnings	$	41.9	$	164.4
Other comprehensive income, net of income taxes:											Other comprehensive income, net of income taxes:
Foreign currency translation adjustments	1.3		(99.8		)	18.0		(63.4		)	Foreign currency translation adjustments	(136.3)		16.7
Pension adjustments	0.5		0.7			1.0		1.4			Pension adjustments	(1.0)		0.5
Total other comprehensive income (loss), net of income taxes	1.8		(99.1		)	19.0		(62.0		)	Total other comprehensive income (loss), net of income taxes	(137.3)		17.2
Comprehensive income	$	176.4	$	195.9		$	358.0	$	494.2
Comprehensive income (loss)											Comprehensive income (loss)	$	(95.4)	$	181.6

See the accompanying Notes to Consolidated Condensed Financial Statements.

Table of Contents

FORTIVE CORPORATION AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CHANGES IN EQUITY

($ and shares in millions)

(unaudited)


	Common Stock				Preferred Stock							Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)	Noncontrolling Interests
	Shares	Amount		Shares			Amount
Balance, December 31, 2019	336.0	$	3.4	1.4	$	—		$	3,311.1	$	4,128.8	$	(56.3)	$	13.2
Adoption of accounting standard	—	—		—	—			—		(31.3)		—		—
Balance, January 1, 2020	336.0	$	3.4	1.4	$	—		$	3,311.1	$	4,097.5	$	(56.3)	$	13.2
Net earnings for the period	—	—		—	—			—		41.9		—		—
Dividends to common shareholders	—	—		—	—			—		(23.5)		—		—
Mandatory convertible preferred stock cumulative dividends	—	—		—	—			—		(17.3)		—		—
Other comprehensive income (loss)	—	—		—	—			—		—		(137.3)		—
Common stock-based award activity	0.8	—		—	—			22.6		—		—		—

Change in noncontrolling interests	—	—		—	—			—		—		—		(2.0)
Balance, March 27, 2020	336.8	$	3.4	1.4	$	—		$	3,333.7	$	4,098.6	$	(193.6)	$	11.2

Common Stock Preferred Stock Additional Paid-In Capital Retained Earnings
Accumulated
Other
Comprehensive
Income (Loss)

Noncontrolling
Interests
Shares Amount Shares Amount
Balance, December 31, 2018 334.5
$ 3.4
1.4
$ —
$ 3,126.0
$ 3,552.7
$ (86.6 ) $ 17.4
Net earnings for the period —
—
—
—
—
164.4
—
—
Dividends to common shareholders —
—
—
—
—
(23.4 ) —
—
Mandatory convertible preferred stock cumulative dividends —
—
—
—
—
(17.3 ) —
—
Other comprehensive income —
—
—
—
—
—
17.2
—
Common stock-based award activity 0.5
—
—
—
13.9
—
—
—
Issuance of 0.875% senior convertible notes due 2022 —
—
—
—
100.4
—
—
—
Change in noncontrolling interests —
—
—
—
—
—
—
(5.4 )
Balance, March 29, 2019 335.0
3.4
1.4
—
3,240.3
3,676.4
(69.4 ) 12.0
Net earnings for the period —
—
—
—
—
174.6
—
—
Dividends to common shareholders —
—
—
—
—
(23.4 ) —
—
Mandatory convertible preferred stock cumulative dividends —
—
—
—
—
(17.2 ) —
—
Other comprehensive income —
—
—
—
—
—
1.8
—
Common stock-based award activity 0.4
—
—
—
25.1
—
—
—
Change in noncontrolling interests —
—
—
—
—
—
—
(0.7 )
Balance, June 28, 2019 335.4
$ 3.4
1.4
$ —
$ 3,265.4
$ 3,810.4
$ (67.6 ) $ 11.3


	Common Stock				Preferred Stock							Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)	Noncontrolling Interests
	Shares	Amount		Shares			Amount
Balance, December 31, 2018	334.5	$	3.4	1.4	$	—		$	3,126.0	$	3,552.7	$	(86.6)	$	17.4
Net earnings for the period	—	—		—	—			—		164.4		—		—
Dividends to common shareholders	—	—		—	—			—		(23.4)		—		—
Mandatory convertible preferred stock cumulative dividends	—	—		—	—			—		(17.3)		—		—
Other comprehensive income	—	—		—	—			—		—		17.2		—
Common stock-based award activity	0.5	—		—	—			13.9		—		—		—
Issuance of 0.875% senior convertible notes due 2022	—	—		—	—			100.4				—		—
Change in noncontrolling interests	—	—		—	—			—		—		—		(5.4)
Balance, March 29, 2019	335.0	$	3.4	1.4	$	—		$	3,240.3	$	3,676.4	$	(69.4)	$	12.0

See the accompanying Notes to Consolidated Condensed Financial Statements.

~~FORTIVE CORPORATION AND SUBSIDIARIES~~

~~CONSOLIDATED CONDENSED STATEMENTS OF CHANGES IN EQUITY~~

~~($ and shares in millions)~~

~~(unaudited)~~

Common Stock Preferred Stock Additional Paid-In Capital Retained Earnings
Accumulated
Other
Comprehensive
Income (Loss)

Noncontrolling
Interests
Shares Amount Shares Amount
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 —
—
—
—
—
261.2
—
—
Dividends to common shareholders —
—
—
—
—
(24.3 ) —
—
Separation related adjustments —
—
—
—
13.3
—
—
—
Other comprehensive income —
—
—
—
—
—
37.1
—
Common stock-based award activity 0.7
—
—
—
18.7
—
—
—
Change in noncontrolling interests —
—
—
—
—
—
—
(0.6 )
Balance, March 30, 2018 348.5
$ 3.5
—
$ —
$ 2,476.1
$ 1,583.3
$ 29.5
$ 17.3
Net earnings for the period —
—
—
—
—
295.0
—
—
Dividends to common shareholders —
—
—
—
—
(24.4 ) —
—
Separation related adjustments —
—
—
—
(2.4 ) —
—
—
Other comprehensive income —
—
—
—
—
—
(99.1 ) —
Common stock-based award activity 0.5
—
—
—
26.1
—
—
—
Issuance of mandatory convertible preferred stock —
—
1.4
—
1,337.0
—
—
—
Changes in noncontrolling interests —
—
—
—
—
—
—
—
Balance, June 29, 2018 349.0
$ 3.5
1.4
$ —
$ 3,836.8
$ 1,853.9
$ (69.6 ) $ 17.3

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

Table of Contents

FORTIVE CORPORATION AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

($ in millions)

(unaudited)


	Six Months Ended							Three Months Ended
	June 28, 2019			June 29, 2018				March 27, 2020		March 29, 2019
Cash flows from operating activities:							Cash flows from operating activities:
Net earnings from continuing operations	$	339.3		$	464.2		Net earnings from continuing operations	$	42.3	$	164.0
Noncash items:							Noncash items:
Depreciation	62.7			61.1			Depreciation	32.1		29.7
Amortization	129.6			49.0			Amortization	85.5		52.2
Stock-based compensation expense	28.8			24.4			Stock-based compensation expense	16.1		12.9
Impairment of goodwill							Impairment of goodwill	85.3		—

Change in trade accounts receivable, net	(102.3		)	(35.6		)	Change in trade accounts receivable, net	22.8		49.9
Change in inventories	45.8			(62.8		)	Change in inventories	(16.6)		(33.3)
Change in trade accounts payable	(11.7		)	30.5			Change in trade accounts payable	(6.7)		(40.6)
Change in prepaid expenses and other assets	(67.2		)	(40.9		)	Change in prepaid expenses and other assets	30.2		(60.4)
Change in accrued expenses and other liabilities	(3.6		)	(66.8		)	Change in accrued expenses and other liabilities	(99.6)		(13.2)
Total operating cash provided by continuing operations	421.4			423.1			Total operating cash provided by continuing operations	191.4		161.2
Total operating cash provided by (used in) discontinued operations	(6.4		)	89.8
Total operating cash used in discontinued operations							Total operating cash used in discontinued operations	(0.4)		(5.0)
Net cash provided by operating activities	415.0			512.9			Net cash provided by operating activities	191.0		156.2
Cash flows from investing activities:							Cash flows from investing activities:
Payments for additions to property, plant and equipment							Payments for additions to property, plant and equipment	(33.8)		(24.0)

Cash paid for acquisitions, net of cash received	(3,237.1		)	(9.3		)	Cash paid for acquisitions, net of cash received	(10.6)		—
Payments for additions to property, plant and equipment	(48.5		)	(47.7		)
All other investing activities	—			3.8			All other investing activities	0.2		—
Total investing cash used in continuing operations	(3,285.6		)	(53.2		)
Total investing cash used in discontinued operations	—			(11.0		)

Net cash used in investing activities	(3,285.6		)	(64.2		)	Net cash used in investing activities	(44.2)		(24.0)
Cash flows from financing activities:							Cash flows from financing activities:

Net proceeds from (repayments of) commercial paper borrowings	892.3			(325.9		)	Net proceeds from (repayments of) commercial paper borrowings	(382.8)		443.8
Proceeds from issuance of mandatory convertible preferred stock net of $43.0 million of issuance costs	—			1,338.2
Proceeds from borrowings (maturities greater than 90 days), net of $24.3 million of issuance costs	2,413.2			—
Proceeds from borrowings (maturities longer than 90 days), net of issuance costs of $1 million and $24 million in 2020 and 2019, respectively							Proceeds from borrowings (maturities longer than 90 days), net of issuance costs of $1 million and $24 million in 2020 and 2019, respectively	373.8		2,417.8

Repayment of borrowings (maturities greater than 90 days)	(455.3		)	—			Repayment of borrowings (maturities greater than 90 days)	(250.0)		(402.9)

Payment of common stock cash dividend to shareholders	(46.8		)	(48.7		)	Payment of common stock cash dividend to shareholders	(23.5)		(23.4)
Payment of mandatory convertible preferred stock cash dividend to shareholders	(34.5		)	—			Payment of mandatory convertible preferred stock cash dividend to shareholders	—		(17.3)

All other financing activities	7.5			15.3			All other financing activities	(0.7)		(6.8)
Total financing cash provided by continuing operations	2,776.4			978.9
Total financing cash provided used in discontinued operations	—			(0.1		)
Net cash provided by financing activities	2,776.4			978.8

Net cash (used in) provided by financing activities							Net cash (used in) provided by financing activities	(283.2)		2,411.2
Effect of exchange rate changes on cash and equivalents	7.9			(21.4		)	Effect of exchange rate changes on cash and equivalents	(28.3)		7.1
Net change in cash and equivalents	(86.3		)	1,406.1			Net change in cash and equivalents	(164.7)		2,550.5
Beginning balance of cash and equivalents	1,178.4			962.1			Beginning balance of cash and equivalents	1,205.2		1,178.4
Ending balance of cash and equivalents	$	1,092.1		$	2,368.2		Ending balance of cash and equivalents	$	1,040.5	$	3,728.9

See the accompanying Notes to Consolidated Condensed Financial Statements.

Table of Contents

FORTIVE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

NOTE 1. BUSINESS OVERVIEW

Fortive Corporation (“Fortive,” the “Company,” “we,” “us,” or “our”) is a diversified industrial technology growth company encompassing businesses that are recognized leaders in attractive markets. Our well-known brands hold leading positions in ~~advanced instrumentation and~~field solutions, product realization, sensing technologies, health, transportation ~~technology,~~technologies, and franchise ~~distribution markets.~~distribution. 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.

We prepared the unaudited consolidated condensed financial statements included herein in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) applicable for interim periods. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been 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 condensed financial statements included herein should be read in conjunction with the audited annual consolidated financial statements as of and for the year ended December 31, ~~2018~~2019 and the footnotes (“Notes”) thereto included within our ~~2018~~2019 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 ~~June 28, 2019~~March 27, 2020 and December 31, ~~2018, and~~2019, our results of operations for the three months ended March 27, 2020 and March 29, 2019, and cash flows for the three ~~and six~~ months ended ~~June 28, 2019~~March 27, 2020 and ~~June~~March 29, ~~2018.~~2019.

Beginning January 1, 2020, our Hengstler and Dynapar businesses are reported within our Professional Instrumentation segment. Previously, these businesses were reported within our Industrial Technologies segment. Reclassification of certain prior year amounts have been made to conform to current year presentation.

On September 4, 2019, we announced our intention to separate into two independent, publicly traded companies, subject to the satisfaction of certain conditions. The separation will create (i) an industrial technology company, retaining the Fortive name, with a differentiated portfolio of growth-oriented businesses focused on connected workflow solutions that incorporate advanced sensors, instrumentation, software, data, and analytics, and (ii) a global industrial company (“Vontier”) consisting of our Transportation Technologies and Franchise Distribution platforms with a focus on growth opportunities in the rapidly evolving transportation and mobility markets. The proposed separation is expected to be structured in a tax-efficient manner. The timing and structure of the separation will depend, in part, on the state of the capital market environment over time as affected by the future evolution of the COVID-19 pandemic and its impact on the global economy. All assets, liabilities, revenues, and expenses of the businesses comprising Vontier are included in continuing operations in the accompanying consolidated condensed financial statements.

Table of Contents

On October 1, 2018, we completed the split-off of businesses in our automation and specialty platform ~~(excluding our Hengstler and Dynapar businesses)~~ (the “A&S Business”) and have reported the A&S Business as discontinued operations in our Consolidated Condensed Statements of ~~Income,~~Earnings, Consolidated Condensed Balance Sheets, and Consolidated Condensed Statements of Cash Flows for all periods presented. ~~Unless otherwise noted,~~The impact of discontinued operations in our consolidated condensed financial statements was immaterial for both periods presented, and therefore, discussion within these notes to the consolidated condensed financial statements relates to continuing operations. ~~Refer to Note 3 for additional information on discontinued operations.~~

Accumulated Other Comprehensive Income (Loss)—Foreign currency translation adjustments are generally not adjusted for income taxes as they relate to indefinite investments in non-U.S. subsidiaries. We have designated our Euro-denominated commercial paper and ¥13.8 billion senior unsecured term facility loan as net investment hedges of our investment in certain foreign operations. Accordingly, foreign currency transaction gains or losses on the debt are deferred in the foreign currency translation component of ~~accumulated~~Accumulated other comprehensive income (loss) (“~~accumulated OCI”~~AOCI”) as an offset to the foreign currency translation adjustments on our investments in foreign subsidiaries. We recognized ~~losses~~gains of ~~$7.1~~$0.9 million and ~~gains of $0.1~~$7.2 million for the three ~~and six~~ months ended ~~June 28,~~March 27, 2020 and March 29, 2019, respectively, in other comprehensive income related to the net investment ~~hedge. We recognized gains of $20.3 million and $5.5 million for the three and six months ended June 29, 2018, respectively, in other comprehensive income related to the net investment hedge.~~hedges. Any amounts deferred in ~~accumulated OCI~~AOCI will remain until the hedged investment is sold or substantially liquidated. We recorded no ineffectiveness from our net investment hedges during the ~~three and six month~~three-month periods ended ~~June 28, 2019~~March 27, 2020 and ~~June~~March 29, ~~2018.~~2019.

The changes in ~~accumulated other comprehensive income (loss)~~AOCI by component are summarized below ($ in millions):


	Foreign currency translation adjustments		Pension adjustments ^(b)			Total
For the Three Months Ended March 27, 2020:
Balance, December 31, 2019	$	21.2	$	(77.5)		$	(56.3)
Other comprehensive income (loss) before reclassifications, net of income taxes	(136.3)		—			(136.3)
Amounts reclassified from accumulated other comprehensive income (loss):
Decrease	—		(1.2)		^(a)	(1.2)
Income tax impact	—		0.2			0.2
Amounts reclassified from accumulated other comprehensive income (loss), net of income taxes	—		(1.0)			(1.0)
Net current period other comprehensive income (loss), net of income taxes	(136.3)		(1.0)			(137.3)
Balance, March 27, 2020	$	(115.1)	$	(78.5)		$	(193.6)

For the Three Months Ended March 29, 2019:
Balance, December 31, 2018	$	(29.3)	$	(57.3)		$	(86.6)
Other comprehensive income (loss) before reclassifications, net of income taxes	16.7		—			16.7
Amounts reclassified from accumulated other comprehensive income (loss):
Increase	—		0.7		^(a)	0.7
Income tax impact	—		(0.2)			(0.2)
Amounts reclassified from accumulated other comprehensive income (loss), net of income taxes	—		0.5			0.5
Net current period other comprehensive income (loss), net of income taxes	16.7		0.5			17.2
Balance, March 29, 2019	$	(12.6)	$	(56.8)		$	(69.4)











^(a) This component of AOCI is included in the computation of net periodic pension cost (refer to Note 7 for additional details).
^(b) Includes balances relating to defined benefit plans, supplemental executive retirement plans, and other postretirement employee benefit plans.

Foreign
currency
translation
adjustments

Pension
adjustments ^(b)
Total
For the Three Months Ended June 28, 2019:
Balance, March 29, 2019 $ (12.6 ) $ (56.8 ) $ (69.4 )
Other comprehensive income (loss) before reclassifications, net of income taxes 1.3
—
1.3
Amounts reclassified from accumulated other comprehensive income (loss):
Increase (decrease) —
0.7
^(a)
0.7
Income tax impact —
(0.2 )
^(c)
(0.2 )
Amounts reclassified from accumulated other comprehensive income (loss), net of income taxes —
0.5
0.5
Net current period other comprehensive income (loss), net of income taxes 1.3
0.5
1.8
Balance, June 28, 2019 $ (11.3 ) $ (56.3 ) $ (67.6 )

For the Three Months Ended June 29, 2018:
Balance, March 30, 2018 $ 100.4
$ (70.9 ) $ 29.5
Other comprehensive income (loss) before reclassifications, net of income taxes (99.8 ) —
(99.8 )
Amounts reclassified from accumulated other comprehensive income (loss):
Increase (decrease) —
0.9
^(a)
0.9
Income tax impact —
(0.2 )
^(c)
(0.2 )
Amounts reclassified from accumulated other comprehensive income (loss), net of income taxes —
0.7
0.7
Net current period other comprehensive income (loss), net of income taxes (99.8 ) 0.7
(99.1 )
Balance, June 29, 2018 $ 0.6
$ (70.2 ) $ (69.6 )

^(a) This accumulated other comprehensive income (loss) component is included in the computation of net periodic pension cost (refer to Note 9 for additional details).
^(b) Includes balances relating to defined benefit plans, supplemental executive retirement plans and other postretirement employee benefit plans.
^(c) We did not elect to reclassify the income tax effects of the Tax Cuts and Jobs Act from accumulated other comprehensive income to retained earnings.

Foreign
currency
translation
adjustments

Pension
adjustments ^(b)
Total
For the Six Months Ended June 28, 2019:
Balance, December 31, 2018 $ (29.3 ) $ (57.3 ) $ (86.6 )
Other comprehensive income (loss) before reclassifications, net of income taxes 18.0
—
18.0
Amounts reclassified from accumulated other comprehensive income (loss):
Increase (decrease) —
1.4
^(a)
1.4
Income tax impact —
(0.4 )
^(c)
(0.4 )
Amounts reclassified from accumulated other comprehensive income (loss), net of income taxes —
1.0
1.0
Net current period other comprehensive income (loss), net of income taxes 18.0
1.0
19.0
Balance, June 28, 2019 $ (11.3 ) $ (56.3 ) $ (67.6 )

For the Six Months Ended June 29, 2018:
Balance, December 31, 2017 $ 64.0
$ (71.6 ) $ (7.6 )
Other comprehensive income (loss) before reclassifications, net of income taxes (63.4 ) —
(63.4 )
Amounts reclassified from accumulated other comprehensive income (loss):
Increase (decrease) —
1.8
^(a)
1.8
Income tax impact —
(0.4 )
^(c)
(0.4 )
Amounts reclassified from accumulated other comprehensive income (loss), net of income taxes —
1.4
1.4
Net current period other comprehensive income (loss) (63.4 ) 1.4
(62.0 )
Balance, June 29, 2018 $ 0.6
$ (70.2 ) $ (69.6 )

^(a) This accumulated other comprehensive income (loss) component is included in the computation of net periodic pension cost (refer to Note 9 for additional details).
^(b) Includes balances relating to defined benefit plans, supplemental executive retirement plans and other postretirement employee benefit plans.
^(c) We did not elect to reclassify the income tax effects of the Tax Cuts and Jobs Act from accumulated other comprehensive income to retained earnings.

Recently ~~Issued~~Adopted Accounting ~~Standards~~Standard—In June 2016, the ~~Financial Accounting Standards Board (the “FASB”)~~FASB issued ~~Accounting Standards Update (“ASU”)~~ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), 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 financing, trade accounts, and unbilled receivables. ~~This standard is effective~~On January 1, 2020, we adopted

Table of Contents

ASU 2016-13 and recognized in our Consolidated Condensed Balance Sheet as of January 1, 2020 an increase in the allowance for ustrade accounts, unbilled, and financing receivables of $40.0 million, with a corresponding net of tax adjustment to beginning retained earnings of $31.3 million.

Results for reporting periods beginning January 1, 2020 reflect the adoption of ASU 2016-13, while prior period amounts were not adjusted and continue to be reported in accordance with ~~early~~our historical accounting practices.

Prior to the adoption ~~permitted.~~of ASU 2016-13 on January 1, 2020, we recognized an allowance for incurred losses when they were probable based on many quantitative and qualitative factors, including delinquency.After the adoption of ASU 2016-13, we measure our allowance to reflect expected credit losses over the remaining contractual life of the asset. We pool assets with similar risk characteristics for this measurement based on attributes that may include asset type, duration, and/or credit risk rating. The future expected losses of each pool are ~~currently evaluating~~estimated based on numerous quantitative and qualitative factors reflecting management’s estimate of collectibility over the remaining contractual life of the pooled assets, including:

•duration;

•historical, current, and forecasted future loss experience by asset type;

•historical, current, and forecasted delinquency and write-off trends;

•historical, current, and forecasted economic conditions; and

•historical, current, and forecasted credit risk.

Expected credit losses of the assets originated during the quarter ended March 27, 2020, as well as changes to expected losses during the same period, are recognized in earnings for the period ended March 27, 2020.

As a result of the adoption of ASU 2016-13, we have updated our significant accounting policy related to unbilled, trade accounts, and financing receivables and allowances for credit losses as of March 27, 2020 from what was previously disclosed in our audited financial statements for the year ended December 31, 2019 as follows:

All trade accounts, financing, and unbilled receivables are reported in the accompanying Consolidated Condensed Balance Sheet adjusted for any write-offs and net of allowances for credit losses. The allowances for credit losses represent management’s best estimate of the credit losses expected from our unbilled, trade accounts, and financing receivable portfolios over the life of the underlying assets. Determination of the allowances requires management to exercise judgment about the severity of credit losses, which includes judgments regarding the risk profile of each underlying receivable and expectations regarding the impact of ~~this standard~~current and future economic conditions on the creditworthiness of its customers. We regularly perform detailed reviews of our portfolios to evaluate the collectability of receivables based on a combination of past, current, and future financial and qualitative factors that may affect customers’ ability to pay, including customers’ financial condition, collateral, debt-servicing ability, payment experience, credit bureau information, and economic conditions. In circumstances where we are aware of a specific customer’s inability to meet its financial obligations, a specific reserve is recorded against amounts due to reduce the recognized receivable to the amount reasonably expected to be collected. Additions to the allowances are charged to current period earnings, amounts determined to be uncollectible are charged directly against the allowances, while amounts recovered on previously written-off accounts increase the allowances.

Recent deterioration in overall global economic conditions and worldwide capital markets as a result of the COVID-19 pandemic may negatively impact our customers’ ability to pay and, as a result, may increase the difficulty in collecting trade accounts, financing, and unbilled receivables. We did not realize notable increases in loss rates and delinquencies during the first quarter ended March 27, 2020, and given the nature of our portfolio of receivables, our historical experience during times of challenging economic conditions, and our forecasted future impact of COVID-19 on our customer’s ability to pay, we did not record material provisions for credit losses as a result of the COVID-19 pandemic during the first quarter ended March 27, 2020. If the financial ~~statements.~~condition of our customers were to deteriorate beyond our current estimates, resulting in an impairment of their ability to make payments, we would be required to write-off additional receivable balances, which would adversely impact our net earnings and financial condition.

Table of Contents

The following is a rollforward of the aggregated allowance for credit losses related to our trade accounts, unbilled, and financing receivables as of March 27, 2020 ($ in millions):


Balance, December 31, 2019	$	82.1
Transition Adjustment	40.0
Provision	12.0
Write-offs	(13.2)
FX and Other	(5.1)
Balance, March 27, 2020	$	115.8

NOTE 2. ACQUISITIONS

For a description of our material acquisition activity refer to Note 3 of our ~~2018~~2019 Annual Report on Form 10-K.

We continually evaluate potential mergers, acquisitions, and divestitures that align with our strategy and expedite the evolution of our portfolio of businesses into new and attractive areas. We have completed a number of acquisitions that have been accounted for as purchases and resulted in the recognition of goodwill in our financial statements. This goodwill arises because the purchase price for each acquired business reflects a number of factors including the complimentary fit, acceleration of our strategy and synergies the business brings with respect to our existing operations, the future earnings and cash flow potential of the business, the potential to add other strategically complimentary acquisitions to the acquired business, the scarce or unique nature of the business in its markets, competition to acquire the business, the valuation of similar businesses in the marketplace (as reflected in a multiple of revenues, earnings or cash flows), and the avoidance of the time and costs which would be required (and the associated risks that would be encountered) to enhance our existing offerings to key target markets and develop new and profitable businesses.

We make an initial allocation of the purchase price at the date of acquisition based on our understanding of the fair value of the acquired assets and assumed liabilities. We obtain this information during due diligence and through other sources. In the months after closing, as we obtain additional information about these assets and liabilities, including through tangible and intangible asset appraisals, and learn more about the newly acquired business, we are able to refine the estimates of fair value and more accurately allocate the purchase price. Only items identified as of the acquisition date are considered for subsequent adjustment. We are in the process of obtaining valuations of certain acquired assets and evaluating the tax impact of certain acquisitions. We make appropriate adjustments to purchase price allocations prior to completion of the applicable measurement period, as required.

During the ~~six~~three months ended ~~June 28, 2019,~~March 27, 2020, we recorded ~~certain~~ adjustments to the preliminary purchase price allocation of acquisitions that closed during ~~2018 resulting~~2019 that resulted in a net increase to goodwill of ~~$40.4 million.~~

~~Completed Acquisitions in 2019~~$13.2 million, prior to foreign currency translation impacts.

Advanced Sterilization Products

On April 1, 2019 (the “Principal Closing Date”), we acquired the advanced sterilization products business (“ASP”) of Johnson & Johnson, a New Jersey corporation (“Johnson & Johnson”) for an aggregate purchase price of $2.7 billion (the “Transaction”), subject to certain post-closing adjustments set forth in a Stock and Asset Purchase Agreement, dated effective as of June 6, 2018 (the “Purchase Agreement”), between the Company and Ethicon, Inc., a New Jersey corporation (“Ethicon”) and a wholly owned subsidiary of Johnson & Johnson. ASP engages in the research, development, manufacture, marketing, distribution, and sale of low-temperature terminal sterilization and high-level disinfection products. ASP generated annual revenues of approximately $800 million in 2018.

On the Principal Closing Date, we paid $2.7 billion in cash and obtained the transferred assets and assumed liabilities in 20 countries (“Principal Countries”), general patent and trademark assignments, and all transferred equity interests in ASP. ASP has operations in an additional 39 countries (“Non-Principal Countries”). The transferred assets and liabilities associated with these operations will close when requirements of country-specific agreements or regulatory approvals are satisfied.

The $2.7 billion purchase price was paid in exchange for ASP’s businesses in both Principal and Non-Principal Countries. As of ~~June 28, 2019,~~March 27, 2020, we have closed 20 Principal Countries and 36 Non-Principal Countries that, in aggregate, accounted for approximately ~~96%~~99% of the preliminary valuation of ASP. The remaining Non-Principal Countries represent approximately 4%1% of the preliminary valuation of ASP, or ~~$105.1~~$31.1 million, which is included as a prepaid asset in Other assets in the Condensed Consolidated Balance Sheet. As each Non-Principal Country closes, we ~~will~~ reduce the prepaid asset and record the fair value of the

Table of Contents

assets acquired and liabilities assumed. All of the provisional goodwill associated with the Transaction is included in goodwill at ~~June 28, 2019;~~March 27, 2020, and the majority of the provisional goodwill is tax deductible.

In addition, the Company entered into a transition services agreement with Johnson & Johnson for certain administrative and operational services, and distribution agreements in the Non-Principal Countries. Under the distribution agreements, ASP ~~will sell~~sells finished goods to Ethicon at prices agreed by the parties. ASP ~~will recognize~~recognizes these sales as revenue when the conditions for revenue recognition are met. Following the sale of finished goods by ASP, Ethicon obtains title of the finished goods, has full authority to sell and market the finished goods to end customers as it sees fit, and retains any revenue and profit from sale. As of March 27, 2020, no further services are being provided under the transition services agreement in the U.S., Canada, Mexico, Australia, and New Zealand.

The following table summarizes the provisional fair value estimates of the assets acquired and liabilities assumed of Principal and Non-Principal Countries that have been transferred to ASP as of ~~June 28, 2019;~~March 27, 2020, prior to foreign currency impacts; we did not acquire accounts receivable or accounts payable from Johnson & Johnson:

Advanced Sterilization Products
Inventory $ 164.2
Property, plant and equipment 45.2
Goodwill 1,299.9
Other intangible assets, primarily customer relationships, trade names and technology 1,149.0
Other assets and liabilities, net (63.4 )
Total consideration allocated to Principal Countries 2,594.9
Prepaid acquisition asset related to Non-Principal Countries 105.1
Net cash consideration $ 2,700.0


	Advanced Sterilization Products
Inventories	$	176.4
Property, plant and equipment	47.5
Goodwill	1,437.2
Other intangible assets, primarily customer relationships, trade names and technology	1,123.5
Other assets and liabilities, net	(79.7)
Total consideration allocated to Principal Countries and closed Non-Principal Countries	2,704.9
Prepaid acquisition asset related to remaining Non-Principal Countries	31.1
Net cash consideration	$	2,736.0

Revenue and operating loss attributable to ASP for the three months ended ~~June 28, 2019~~March 27, 2020 were ~~$164.9~~ $159 million and ~~$63.9~~$26 million, respectively, and are included in our Professional Instrumentation segment. Operating ~~losses include amortization~~loss includes a combined $52 million of amortization of intangible assets, acquisition-related fair value adjustments, and post-close transaction and integration costs associated with the ~~Transaction. We incurred~~Transaction of for the three months ended March 27, 2020.

Post-close transaction and integration costs associated with the Transaction were approximately ~~$25~~$20 million and ~~$51 million of pretax transaction-related costs~~are recorded in selling, general, and administrative expenses for the three ~~and six~~ months ended ~~June 28, 2019, respectively, which~~March 27, 2020, and were primarily ~~for banking fees, legal fees and~~ amounts paid to ~~other~~ third-party advisers.

~~Other Acquisition~~

In addition to the ASP acquisition, we acquired one business during 2019, in the second quarter, for $537.1 million in cash, net of cash acquired. The business acquired complements an existing unit of our Professional Instrumentation segment. The aggregate annual sales of this business in 2018 were approximately $63 million. We incurred approximately $2.9 million of pretax transaction-related costs recorded in selling, general, and administrative expenses for the three and six months ended June 28, 2019, which were primarily for banking fees, legal fees, and amounts paid to other third-party advisers. The goodwill associated with this acquisition is not tax deductible. The revenue and operating profit from this acquisition included in our results during the three and six months ended June 28, 2019 was immaterial.

~~The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition:~~

Accounts receivable $ 14.7
Property, plant and equipment 1.8
Goodwill 265.8
Other intangible assets 304.3
Other assets and liabilities, net (49.5 )
Net cash consideration $ 537.1

~~Pro Forma Financial Information~~

The pro forma information for the periods set forth below gives effect to the acquisitions made in 2019 and 2018 as if they had occurred on January 1, 2018. The pro forma information is presented for informational purposes only and is not indicative of the results of operations that actually would have been achieved had the acquisitions been consummated as of that time ($ in millions except per share amounts):

Three Months Ended Six Months Ended
June 28, 2019 June 29, 2018 June 28, 2019 June 29, 2018
Sales $ 1,894.5
$ 1,907.6
$ 3,737.1
$ 3,699.2
Net earnings $ 226.1
$ 151.7
$ 388.7
$ 287.3
Diluted net earnings per share $ 0.67
$ 0.43
$ 1.14
$ 0.81

NOTE 3. ~~DISCONTINUED OPERATIONS~~

~~Divestiture of A&S Business~~

On October 1, 2018, we completed the split-off of four of our operating companies (the “A&S Business”) in a tax efficient Reverse Morris Trust transaction with Altra Industrial Motion Corp. (“Altra”). The total consideration received was $2.7 billion and consisted of (i) $1.3 billion through a fully-subscribed exchange offer, in which we accepted and subsequently retired 15,824,931 shares of our own common stock from our stockholders in exchange for the 35,000,000 shares of common stock of Stevens Holding Company, Inc., an entity created to hold the A&S Business; (ii) $1.0 billion in cash paid to us for the direct sales of certain assets and liabilities of the A&S Business; (iii) $250 million as part of a debt-for-debt exchange that reduced outstanding indebtedness of Fortive; and (iv) $150 million in cash paid to us by Stevens Holding Company, Inc. as a dividend. We recognized an after-tax gain on the transaction of $1.9 billion.

The accounting requirements for reporting the disposition of the A&S Business as a discontinued operation were met when the separation and merger were completed in the fourth quarter of 2018. Accordingly, the accompanying consolidated condensed financial statements reflect the A&S Business as discontinued operations for all periods presented.

We continue to provide certain support services to Altra under transition services agreements. The impact of these services on our consolidated condensed financial statements was immaterial during the three and six month periods ended June 28, 2019.

~~The key components of income from discontinued operations for the three and six month periods ended June 28, 2019 and June 29, 2018 were as follows ($ in millions):~~

Three Months Ended Six Months Ended
June 28, 2019 June 29, 2018 June 28, 2019 June 29, 2018
Sales $ 0.4
$ 254.2
$ 6.1
$ 502.7
Cost of sales (0.3 ) (146.1 ) (6.1 ) (290.1 )
Selling, general and administrative expenses (0.5 ) (40.9 ) (0.5 ) (76.1 )
Research and development expenses —
(9.2 ) —
(18.2 )
Gain (loss) on disposition of discontinued operations before income taxes (0.3 ) —
0.2
—
Interest expense and other —
(1.4 ) —
(2.7 )
Earnings before income taxes (0.7 ) 56.6
(0.3 ) 115.6
Income taxes —
(11.8 ) —
(23.6 )
Net earnings from discontinued operations $ (0.7 ) $ 44.8
$ (0.3 ) $ 92.0

~~Interest expense related to the debt retired as part of the debt-for-debt exchange was allocated to discontinued operations for all periods prior to the disposition.~~

The following table summarizes the major classes of assets and liabilities of discontinued operations that were included in our accompanying Consolidated Condensed Balance Sheets as of June 28, 2019 and December 31, 2018 ($ in millions):

June 28, 2019 December 31, 2018
ASSETS
Trade accounts receivable, net $ 0.3
$ 4.2
Inventories —
4.4
Other current assets 21.1
21.4
Total current assets, discontinued operations $ 21.4
$ 30.0
LIABILITIES
Current liabilities:
Trade accounts payable $ 5.2
$ 9.2
Accrued expenses and other current liabilities 11.9
21.5
Total current liabilities, discontinued operations $ 17.1
$ 30.7

~~NOTE 4.~~ GOODWILL ~~AND OTHER INTANGIBLE ASSETS~~

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

Balance, December 31, 2018 $ 6,133.1
Adjustments to preliminary purchase price allocations for acquisitions completed in 2018 40.4
Attributable to 2019 acquisitions 1,565.7
Foreign currency translation & other 11.7
Balance, June 28, 2019 $ 7,750.9

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


	Professional Instrumentation ^(a)		Industrial Technologies ^(a)		Total Goodwill
Balance, December 31, 2019	$	7,242.6	$	1,156.7	$	8,399.3
Acquisitions	13.2		—		13.2
Impairment charge	—		(85.3)		(85.3)
Foreign currency translation and other	(26.9)		(29.2)		(56.1)
Balance, March 27, 2020	$	7,228.9	$	1,042.2	$	8,271.1
(a) Beginning January 1, 2020, our Hengstler and Dynapar businesses are reported within our Professional Instrumentation segment. Previously, these businesses were reported within our Industrial Technologies segment. Prior year balances have been reclassified to reflect current year presentation.

June 28, 2019 December 31, 2018
Professional Instrumentation $ 6,508.8
$ 4,894.6
Industrial Technologies 1,242.1
1,238.5
Total goodwill $ 7,750.9
$ 6,133.1

Table of Contents

We test goodwill for impairment annually in the fourth quarter of each year and may review goodwill in interim periods if certain events occur or circumstances change. Based on our most annual impairment assessment, we concluded that the goodwill for our twelve reporting units was not impaired as of December 31, 2019.

The results of our fourth quarter 2019 goodwill impairment testing indicated the excess of the estimated fair value over the carrying value (expressed as a percentage of carrying value) of our Telematics reporting unit was approximately 5%, and as such, management continued to monitor the performance of Telematics during the first quarter of 2020. In connection with management’s updated forecast for the Telematics reporting unit that indicated a decline in sales and operating profit to levels lower than previously forecasted, due in large part to the impacts of the COVID-19 pandemic, we performed a quantitative impairment assessment over the Telematics reporting unit on March 27, 2020.

We estimated the fair value of the Telematics reporting unit by considering an income approach, using the discounted cash flow method. The income approach was based on projected future (debt-free) cash flows that were discounted to present value and assumed a terminal growth value. The discount rate was based on the reporting unit’s weighted average cost of capital, taking into account market participant assumptions. Management’s revenue and profitability forecasts used in the valuation considered recent and historical performance of the reporting unit, strategic initiatives, industry trends, and the current and future expectations of the macroeconomic environment. Assumptions used in the valuation were similar to those that would be used by market participants performing independent valuations of this reporting unit.

~~We have not identified any triggering events which would have indicated a potential impairment of goodwill during~~Key assumptions developed by management and used in the ~~six months ended June 28, 2019.~~quantitative analysis included the following:

~~Finite-lived intangible assets are amortized~~

•Near-term revenue declines in 2020 with later-term improvements over the ~~shorter~~projection period;

•Improved profitability over the projection period, trending consistent with revenues; and

•Market-based discount rates.

We did not consider the market approach in our fair value calculation given the near term uncertainty in the market data and forecasts of ~~their legal or~~the guideline companies upon which the approach relies.

As a result of the interim impairment testing performed, we concluded that the estimated ~~useful lives. The following summarizes the gross~~fair value of our Telematics reporting unit was less than our carrying value ~~and accumulated amortization for each major category of intangible asset~~ as of ~~June 28, 2019~~March 27, 2020, and ~~December 31, 2018 ($ in millions):~~

June 28, 2019 December 31, 2018
Gross Carrying Amount Accumulated Amortization Gross Carrying Amount Accumulated Amortization
Finite-lived intangibles:
Patents and technology $ 988.7
$ (313.4 ) $ 614.0
$ (280.8 )
Customer relationships and other intangibles 3,113.1
(686.3 ) 2,204.2
(589.9 )
Total finite-lived intangibles 4,101.8
(999.7 ) 2,818.2
(870.7 )
Indefinite-lived intangibles:
Trademarks and trade names 711.1
—
528.8
—
Total intangibles $ 4,812.9
$ (999.7 ) $ 3,347.0
$ (870.7 )

~~During~~recorded a non-cash goodwill impairment charge of $85.3 million during the three months ended ~~June 28,~~March 27, 2020 to reduce the carrying value of goodwill to $235.9 million. The charge is included in the operating results of our Industrial Technologies segment.

The impairment testing of goodwill utilized significant unobservable inputs (Level 3 in the fair value hierarchy) to determine the estimated fair value. The factors used in our impairment analysis are inherently subject to uncertainty, particularly in light of the recent deterioration in overall global economic conditions and capital markets due to COVID-19. While we believe we made reasonable estimates and assumptions to calculate the fair value of the Telematics reporting unit, alternative interpretations of the qualitative inputs considered may have resulted in different conclusions regarding the size of the impairment, and it is possible our conclusions could change in future periods.

The results of our 2019 ~~we acquired finite lived intangible assets, consisting primarily~~impairment testing indicated our eleven other reporting units had fair values that were significantly in excess of ~~customer relationships~~their carrying values. We evaluated the impact of the deterioration in overall global economic conditions as a result of the COVID-19 pandemic, including the change in our market capitalization and ~~developed technology, with~~changes in forecasts for each reporting unit, and determined no triggering events had occurred. There can be no assurance the estimates and assumptions used in our goodwill impairment testing performed in the first quarter of 2020 will prove to be accurate predictions of the future. Specifically, variations in our assumptions related to business performance and execution of planned growth strategies and the discount rate could impact future conclusions. A future impairment charge for goodwill could have a ~~weighted average life~~material effect on our consolidated financial position and results of ~~10 years. Refer to Note 2 for additional information on the intangible assets acquired.~~operations.

NOTE 5.4. FAIR VALUE MEASUREMENTS

Accounting standards define fair value based on an exit price model, establish a framework for measuring fair value where our assets and liabilities are required to be carried at fair value and provide for certain disclosures related to the valuation methods used within a valuation hierarchy as established within the accounting standards. This hierarchy prioritizes the inputs into three broad levels as follows:

•Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.

•Level 2 inputs are quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets in markets that are not active, or other observable characteristics for the asset or liability, including interest rates, yield curves and credit risks, or inputs that are derived principally from, or corroborated by, observable market data through correlation.

Table of Contents

•Level 3 inputs are unobservable inputs based on our assumptions. The classification of a financial asset or liability within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

Below is a summary of financial liabilities that are measured at fair value on a recurring basis ($ in millions):

Quoted Prices
in Active
Market
(Level 1)

Significant Other
Observable Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)
Total
June 28, 2019
Deferred compensation liabilities $ —
$ 25.7
$ —
$ 25.7
December 31, 2018
Deferred compensation liabilities $ —
$ 20.8
$ —
$ 20.8


	Quoted Prices in Active Market (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
March 27, 2020
Deferred compensation liabilities	$	—	$	27.3	$	—	$	27.3
December 31, 2019
Deferred compensation liabilities	$	—	$	29.6	$	—	$	29.6

Certain management employees participate in our nonqualified deferred compensation programs that permit such employees to defer a portion of their compensation, on a pretax basis, until after their termination of employment. All amounts deferred under such plans are unfunded, unsecured obligations and are presented as a component of our compensation and benefits accrual included in ~~other~~Other long-term liabilities in the accompanying Consolidated Condensed Balance Sheets. Participants may choose among alternative ~~earning~~earnings 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.

Nonrecurring Fair Value Measurements

Certain non-financial assets, primarily property, plant, and equipment, goodwill, and intangible assets, are not required to be measured at fair value on a recurring basis and are reported at their carrying value. However, these assets are required to be assessed for impairment whenever events or circumstances indicate that their carrying value may not be fully recoverable, and at least annually for goodwill and indefinite-lived intangible assets.

On March 27, 2020, we evaluated our Telematics reporting unit for impairment and recorded an impairment of goodwill of $85.3 million to adjust the carrying value of the reporting unit to the estimated fair value. Refer to Note 3 for additional information regarding the inputs and methodology used to estimate the fair value.

We evaluated our other non-financial assets as of March 27, 2020 and determined no impairment was necessary.

Fair Value of Financial Instruments

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

June 28, 2019 December 31, 2018
Carrying Amount Fair Value Carrying Amount Fair Value
Current portion of long-term debt $ 1,000.0
$ 1,000.0
$ 455.6
$ 454.9
Long-term debt, net of current maturities $ 5,196.5
$ 5,376.9
$ 2,974.7
$ 2,867.5


	March 27, 2020						December 31, 2019
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Current portion of long-term debt	$	250.0	$	250.0	$	1,500.0	$	1,500.0
Long-term debt, net of current maturities	$	5,826.1	$	5,755.9	$	4,828.4	$	4,992.3

As of ~~June 28, 2019~~March 27, 2020 and December 31, ~~2018,~~2019, the current portion of long-term debt and long-term debt, net of current maturities were categorized as Level 1.

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

Table of Contents

NOTE 6.5. FINANCING AND CAPITAL

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

June 28, 2019 December 31, 2018
U.S. dollar-denominated commercial paper $ 1,283.0
$ 390.1
Euro-denominated commercial paper 267.9
270.1
Delayed-draw term loan due 2019 —
400.0
Delayed-draw term loan due 2020 1,000.0
—
Yen variable interest rate term loan due 2022 127.9
125.7
1.80% senior unsecured notes due 2019 —
55.6
2.35% senior unsecured notes due 2021 747.6
747.0
3.15% senior unsecured notes due 2026 892.5
891.9
4.30% senior unsecured notes due 2046 546.9
546.9
0.875% senior convertible notes due 2022 1,327.0
—
Other 3.7
3.0
Long-term debt 6,196.5
3,430.3
Less: current portion of long-term debt 1,000.0
455.6
Long-term debt, net of current maturities $ 5,196.5
$ 2,974.7


	March 27, 2020		December 31, 2019
U.S. dollar-denominated commercial paper	$	501.2	$	884.4
Euro-denominated commercial paper	262.4		264.1

Delayed-draw term loan due 2020	1,000.0		1,000.0
Term Loan due 2020	250.0		500.0
Term Loan due 2021	373.9		—
Yen variable interest rate term loan due 2022	127.8		127.1

2.35% senior unsecured notes due 2021	748.6		748.2
3.15% senior unsecured notes due 2026	893.3		893.0
4.30% senior unsecured notes due 2046	547.0		547.0
0.875% senior convertible notes due 2022	1,357.7		1,347.3
Other	14.2		17.3
Long-term debt	6,076.1		6,328.4
Less: current portion of long-term debt	250.0		1,500.0
Long-term debt, net of current maturities	$	5,826.1	$	4,828.4

~~Unamortized~~Aggregate unamortized debt discounts, premiums and issuance costs of ~~$125.4~~$93 million and ~~$17.0~~$102 million as of ~~June 28, 2019~~March 27, 2020 and December 31, ~~2018,~~2019, respectively, are netted against the ~~aggregate~~ principal amounts of the components of debt in the table above. Refer to Note 10 of our ~~2018~~2019 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”). Due to recent volatility and disruption in the commercial paper market, we have temporarily reduced our reliance on this source of funding, and consequently refinanced approximately $365 million and $420 million of our outstanding commercial paper during the three months ended March 27, 2020 and in April 2020, respectively, largely with a 364 day delayed-draw term loan, as detailed in the 2021 Term Loan section below. Credit support for the Commercial Paper Programs is provided by a ~~five-year~~five-year $2.0 billion senior unsecured revolving credit facility that expires on November 30, 2023 (the “Revolving Credit Facility”) which, to the extent not otherwise providing credit support for the commercial paper programs, can also be used for working capital and other general corporate purposes. As of ~~June 28, 2019, no~~March 27, 2020, 0 borrowings were outstanding under the Revolving Credit Facility.

Our credit facility agreements require, among others, that we maintain certain financial covenants and we were in compliance with all of our financial covenants on March 27, 2020.

In addition, on April 24, 2020, we amended (the “Amendments”) the credit agreement for each of our (i) $500 million delayed draw term loan facility, with $250 million in principal amount outstanding as of March 27, 2020 (“2020 Term Loan”), (ii) $1.0 billion delayed draw term loan facility, with $1.0 billion in principal amount outstanding as of March 27, 2020 (the “2020 Delayed-Draw Term Loan”), (iii) $750 million delayed draw term loan facility, with $375 million in principal amount outstanding as of March 27, 2020 (“2021 Term Loan”), and (iv) $2.0 billion Revolving Credit Facility, with 0 borrowings thereunder as of March 27, 2020 as follows:

•For any four fiscal quarters ending in the periods noted below (each an “Adjusted Four Quarters”) that end prior to the maturity date of the applicable facility, the maximum permitted consolidated net leverage ratio of consolidated net funded indebtedness to consolidated EBITDA was increased from 3.50 to 1.00 to, (i) with respect to the four fiscal quarters ending June 26, 2020, September 25, 2020, December 31, 2020, or April 2, 2021, 4.75 to 1.00, (ii) with respect to the four fiscal quarters ending July 2, 2021, 4.5 to 1.0, (iii) with respect to the four fiscal quarters ending October 1, 2021, 4.25 to 1.0 and (iv) with respect to the four fiscal quarters ending December 31, 2021, 3.75 to 1.0; provided however, that for any four fiscal quarters that are not an Adjusted Four Quarters, the maximum permitted consolidated net leverage ratio remains at 3.5 to 1.0, as may be increased to 4.0 to 1.0 following a material acquisition (the “Unadjusted Maximum Ratio”).

•The maturity date for the 2020 Delayed-Draw Term Loan was extended from August 28, 2020 to May 30, 2021.

Table of Contents

•From April 24, 2020 to December 31, 2021, the minimum London inter-bank offered rate (“LIBOR”) for each of the facilities will increase from 0% to 0.25%, and the minimum base rate for each of the facilities will increase from 1.00% to 1.25%. In addition, with respect to the Revolving Credit Facility and for any Adjusted Four Quarters in which the consolidated net leverage ratio is greater than the Unadjusted Maximum Ratio, the applicable margin (as determined based on our long-term debt credit rating) for any LIBOR rate loans will increase from a range of 80.5 and 117.5 basis points to a range of 118.0 and 155.0 basis points and for any base rate loans from a range of 0.0 and 17.5 basis points to a range of 18.0 and 55.0 basis points. Furthermore, with respect to the 2020 Delayed-Draw Term Loan, the applicable margin (as determined based on our long-term debt credit rating) for any LIBOR rate loans will increase from a range of 75.0 and 97.5 basis points to a range of 155.0 and 180.0 basis points and for any base rate loans from 0.0 to a range of 55.0 and 80.0 basis points.

•From April 24, 2020 to December 31, 2021, the maximum principal amount of secured indebtedness, other than certain types of secured indebtedness expressly permitted under each credit agreement, is decreased from 15% of our consolidated net assets (when added together with indebtedness incurred or guaranteed by any of our subsidiaries) to 11.25% of our consolidated net assets (when added together with indebtedness incurred or guaranteed by any of our subsidiaries).

In connection with the Amendments, we incurred approximately $6.5 million of fees.

Convertible Senior Notes

On February 22, 2019, we issued $1.4 billion in aggregate principal amount of our 0.875% Convertible Senior Notes due 2022 (the “Convertible Notes”), including $187.5 million in aggregate principal amount resulting from an exercise in full of an over-allotment option. The Convertible Notes were ~~sold~~issued in a private placement to certain initial purchasers for resale to qualified institutional buyers pursuant to Rule 144A under the Securities Act.

The Convertible Notes are fully and unconditionally guaranteed, jointly and severally, on an unsecured basis, by four of our wholly-owned domestic subsidiaries (the “Guarantees”). Under the Indenture, the Convertible Notes are our senior unsecured obligations, and the Convertible Notes and the Guarantees rank equally in right of payment with all of our and the guarantors’ existing and future liabilities that are not subordinated, but effectively rank junior to any of our and the guarantors secured indebtedness to the extent of the value of the assets securing such indebtedness. In addition, the Convertible Notes are structurally subordinated to all of the existing and future obligations, including trade payables, of our subsidiaries that do not guarantee the Convertible Notes.

The Convertible Notes bear interest at a rate of 0.875% per year, payable semiannually in arrears on February 15 and August 15 of each year, beginning on August 15, 2019. The Convertible Notes mature on February 15, 2022, unless earlier repurchased or converted in accordance with their terms prior to such date.

The Convertible Notes are convertible into shares of our common stock at an initial conversion rate of 9.3777 shares per $1,000 principal amount of Convertible Notes (which is equivalent to an initial conversion price of $106.64 per share), subject to adjustment upon the occurrence of certain events. The initial conversion price represents a premium of approximately 32.5% to the $80.48 per share closing price of our common stock on February 19, 2019. Upon conversion of the Convertible Notes, holders will receive cash, shares of our common stock, or a combination thereof, at Fortive’s election. Our current intention is to settle such conversions through cash up to the principal amount of the converted Convertible Notes and ~~if applicable,~~

through shares of our common stock for conversion value, if any, in excess of the principal amount of the converted Convertible Notes.

Of the $1.4 billion in ~~proceeds received~~principal amount from the issuance of the Convertible Notes, $1.3 billion was classified as debt and $102.2 million was classified as equity, using an assumed effective interest rate of 3.38%. Debt issuance costs of $24.3 million were proportionately allocated to debt and equity. We recognized ~~$13.2~~$13.4 million in interest expense during the three months ended ~~June 28, 2019,~~March 27, 2020, of which $3.1 million related to the contractual coupon rate of 0.875% and $1.9 million was attributable to the amortization of debt issuance costs. We recognized $18.7 million in interest expense during the six months ended June 28, 2019, of which $4.4 million related to the contractual coupon rate and $2.8 million was attributable to the amortization of debt issuance costs. The discount at issuance was $102.2 million and is being amortized over a ~~three-year~~three-year period. The unamortized discount at ~~June 28, 2019~~March 27, 2020 was ~~$90.8~~$65.7 million.

Prior to November 15, 2021, the Convertible Notes will be convertible only upon the occurrence of certain events and will be convertible thereafter at any time until the close of business on the business day immediately preceding the maturity date of the Convertible Notes.

2020 Term Loan

The conversion rate is subject to customary anti-dilution adjustments. If certain corporate events described in the Indenture occur prior to the maturity date, the conversion rate will be increased forOn October 25, 2019, we entered into a ~~holder~~credit facility agreement that ~~elects to convert its Convertible Notes in connection with such corporate event in certain circumstances.~~

~~The Convertible Notes are not redeemable prior to maturity, and no sinking fund is provided~~provides for the ~~Convertible Notes. If we undergo a “fundamental change,” as defined~~2020 Term Loan in the Indenture, subject to certain conditions, holders may require us to repurchase for cash all or any portion of their Convertible Notes. The fundamental change purchase price will be 100% of the principal amount of the Convertible Notes to be repurchased plus any accrued and unpaid additional interest up to but excluding the fundamental change repurchase date.

~~The Indenture contains customary terms and covenants, including that upon certain events of default occurring and continuing, either the Trustee or the holders of at least 25% in~~an aggregate principal amount of $300 million. On October 25, 2019, we drew down the full $300 million available under the 2020 Term Loan in order to fund, in part, the Censis acquisition. We subsequently increased the size of this facility by $200 million on November 8, 2019 and drew the additional amount on the same day resulting in an outstanding ~~Convertible Notes may declare 100%~~amount of $500 million. The 2020 Term Loan bears interest at a variable rate equal to LIBOR plus a ratings-based margin currently at 75 basis points. As of March 27, 2020, borrowings under this facility bore an interest rate of 1.55% per annum. The 2020 Term Loan is due on October 23, 2020 and prepayable at our option. We are not permitted to re-borrow once the term loan is repaid. The terms and conditions, including covenants, applicable to the 2020 Term Loan are substantially similar to those applicable to our Revolving Credit Facility.

Table of Contents

On February 26, 2020, we prepaid $250 million of the ~~principal of, and accrued and unpaid interest, if any, on all the Convertible Notes to be due and payable.~~

~~We used the net proceeds from the offering to fund a portion of the cash consideration payable for, and certain costs~~2020 Term Loan. The prepayment fees associated with ~~our acquisition of ASP.~~this payment were immaterial.

In connection with this offering of the Convertible Notes, on February 21, 2019, we entered into an amendment to the credit facility agreement associated with our Credit Agreement, dated as of November 30, 2018, to exclude the Guarantee from the limitations on subsidiary indebtedness under the Agreement.

2020 Delayed-Draw Term Loan ~~Due 2020~~

On March 1, 2019, we entered into a credit facility agreement that provides for ~~a 364-day delayed-draw term loan facility (“~~the 2020 Delayed-Draw Term ~~Loan”)~~Loan in an aggregate principal amount of $1.0 billion. On March 20, 2019, we drew down the full $1.0 billion available under the 2020 Delayed-Draw Term Loan in order to fund, in part, the ASP ~~Acquisition.~~acquisition. The 2020 Delayed-Draw Term Loan bears interest at a variable rate equal to ~~the London inter-bank offered rate~~LIBOR plus a ratings based margin, ~~currently~~prior to the Amendments, at 75 basis points and, following the Amendments, at 155 basis points. As of ~~June 28, 2019,~~March 27, 2020 and prior to the Amendments noted above, borrowings under this facility bore an interest rate of ~~3.16%~~1.52% per annum. The 2020 Delayed-Draw Term Loan is prepayable at our option, and we are not permitted to re-borrow once the term loan is repaid. The terms and conditions, including covenants, applicable to the 2020 Delayed-Draw Term Loan are substantially similar to those applicable to our Revolving Credit Facility.

On February 25, 2020, we extended the maturity of the 2020 Delayed-Draw Term Loan to August 28, 2020. Additionally, on April 24, 2020 we further extended the maturity to May 30, 2021 and therefore, have classified the outstanding amount as long-term debt in our Consolidated Condensed Balance Sheet as of March 27, 2020. We were in compliance with our covenants both before and after the extension. The 2020 Delayed-Draw Term Loan is not callable and remains prepayable at our option.

2021 Term Loan

On March 23, 2020, we entered into a credit facility agreement that provides for the 2021 Term Loan in an aggregate principal amount of $425 million. On the same day, we drew down $375 million available under the 2021 Term Loan. We subsequently increased the size of this facility by $325 million on April 3, 2020, and drew the additional $375 million in April 2020, resulting in an outstanding amount of $750 million. We paid approximately $2.0 million in debt issuance costs associated with the 2021 Term Loan. The borrowings from this credit facility were used for settlement of outstanding commercial paper other than as described below. The 2021 Term Loan bears interest at a variable rate equal to LIBOR plus a ratings-based margin currently at 155 basis points. As of March 27, 2020, borrowings under this facility bore an interest rate of 2.51% per annum. The 2021 Term Loan is due on March 19, 2021 and prepayable at our option. We are not permitted to re-borrow once the term loan is repaid. The terms and conditions, including covenants, applicable to the 2021 Term Loan, are substantially similar to those applicable to our Revolving Credit Facility.

We classified our borrowings outstanding under the 2021 Term Loan as long-term debt in the accompanying Consolidated Condensed Balance Sheet as of March 27, 2020, as we have the intent and ability, as supported by availability under the Revolving Credit ~~Facility.~~Facility, to refinance these borrowings for at least one year from the balance sheet date. As our short-term credit facilities and commercial paper obligations mature, we may issue additional short-term commercial paper and other short-term debt to refinance all or part of these borrowings.

Commercial Paper

The details of our Commercial Paper Programs as of ~~June 28, 2019~~March 27, 2020 are as follows ($ in millions):

Carrying value Annual effective rate Weighted average remaining maturity (in days)
U.S. dollar-denominated commercial paper $ 1,283.0
2.71 % 22
Euro-denominated commercial paper $ 267.9
(0.10 )% 71


	Carrying value		Annual effective rate		Weighted average remaining maturity (in days)
U.S. dollar-denominated commercial paper	$	501.2	2.67	%	37
Euro-denominated commercial paper	$	262.4	(0.11)	%	34

We classified our borrowings outstanding under the Commercial Paper Programs as ~~long-term~~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 June 28, 2019, we were in compliance with all of our covenants.~~

~~Repayments~~

On February 28, 2019, we prepaid the remaining $400.0 million outstanding principal and accrued interest under the delayed-draw term loan due 2019. The prepayment penalties associated with this payment were immaterial. Additionally, on June 15, 2019 we repaid the remaining outstanding principal of $55.3 million of our 1.80% senior unsecured notes.

NOTE ~~7. LEASES~~

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842), which requires lessees to recognize a right-of-use (“ROU”) asset and a lease liability for all leases with terms greater than 12 months and also requires disclosures by lessees and lessors about the amount, timing and uncertainty of cash flows arising from leases. Subsequent to the issuance of Topic 842, the FASB clarified the guidance through several ASUs; hereinafter the collection of lease guidance is referred to as “ASC 842”.

On January 1, 2019, we adopted ASC 842 using the modified retrospective transition method for all lease arrangements at the beginning of the period of adoption. Results for reporting periods beginning January 1, 2019 are presented under ASC 842, while prior period amounts were not adjusted and continue to be reported in accordance with our historic accounting under Topic 840, ~~Leases~~. The standard had a material impact on our Consolidated Condensed Balance Sheet but had no impact on our consolidated net earnings and cash flows. The most significant impact of adopting ASC 842 was the recognition of the ROU asset and lease liabilities for operating leases, which are presented in the following three line items on the Consolidated Condensed Balance Sheet: (i) operating lease right-of-use asset; (ii) current operating lease liabilities; and (iii) operating lease liabilities.

We elected the package of practical expedients for leases that commenced before the effective date of ASC 842 whereby we elected to not reassess the following: (i) whether any expired or existing contracts contain leases; (ii) the lease classification for any expired or existing leases; and (iii) initial direct costs for any existing leases. In addition, we have lease agreements with lease and non-lease components and we have elected the practical expedient for all underlying asset classes and account for them as a single lease component. Our finance lease and lessor arrangements are immaterial.

We determine if an arrangement is a lease at inception. We have operating leases for office space, warehouses, distribution centers, research and development facilities, manufacturing locations, and certain equipment, primarily automobiles. Many leases include one or more options to renew, some of which include options to extend the leases for up to 15 years, and some of which include options to terminate the leases in less than one year. We considered options to renew in our lease terms and measurement of right-of-use assets and lease liabilities if we determined they were reasonably certain to be exercised.

For the three and six months ended June 28, 2019, operating lease cost was $20.2 million and $38.0 million. Short-term and variable lease cost, and cost for finance leases were immaterial for the three and six months ended June 28, 2019. During the six-month period ended June 28, 2019, cash paid for operating leases included in operating cash flows was $32.1 million. ROU assets obtained in exchange for operating lease obligations were $39.4 million and $43.9 million for the three and six months ended June 28, 2019. Of those ROU assets exchanged for operating lease obligations, $29.8 million were related to operating leases acquired with ASP.

~~The following table presents the maturity of our operating lease liabilities as of June 28, 2019 ($ in millions):~~

Remainder of 2019 $ 33.3
2020 49.1
2021 36.0
2022 25.9
2023 17.6
Thereafter 70.4
Total lease payments 232.3
Less: imputed interest (30.0 )
Total lease liabilities $ 202.3

As previously disclosed in our 2018 Annual Report on Form 10-K and under Topic 840, future minimum lease payments for operating leases having initial or remaining non-cancelable lease terms in excess of one year were as follows ($ in millions):

2019 $ 54.2
2020 41.2
2021 32.4
2022 24.0
2023 13.5
Thereafter 16.1
Total lease payments $ 181.4

As of June 28, 2019, the weighted average lease term of our operating leases was 7.4 years and the weighted average discount rate of our operating leases was 3.4%. We primarily use our incremental borrowing rate as the discount rate for our operating leases, as we are generally unable to determine the interest rate implicit in the lease.

As of June 28, 2019, we had entered into operating leases for which the lease term has not yet commenced. These operating leases will commence in 2019 with lease terms between 3 and 5 years and have aggregate fixed payments over the non-cancelable lease terms of $1.0 million.

~~NOTE 8.~~6. SALES

We derive revenues primarily from the sale of Professional Instrumentation and Industrial Technologies products and software and services. Revenue is recognized when control of promised products and software or services is transferred to customers in an amount that reflects the consideration we expect to be entitled to in exchange for those products and software or services.

~~Product~~ Sales ~~include~~of products and software includes revenues from the sale of products and equipment, ~~which includes our~~ software as a service product offerings, and equipment rentals.

~~Service~~ Sales of services includes revenues from extended warranties, post-contract customer support (“PCS”), maintenance contracts or services, contract labor to perform ongoing service at a customer location, and services related to previously sold products.

Table of Contents

Contract Assets — In certain circumstances, we record contract assets which include unbilled amounts typically resulting from sales under contracts when revenue recognized exceeds the amount billed to the customer, and right to payment is not only subject to the passage of time. Contract assets were ~~$71.1~~$76 million as of ~~June 28, 2019~~March 27, 2020 and ~~immaterial~~$79 million as of December 31, ~~2018.~~2019.

Contract Costs — We incur direct incremental costs to obtain certain contracts, typically sales-related commissions and costs associated with assets used by our customers in certain service arrangements. Deferred sales-related commissions are generally not capitalized as the amortization period is 1one year or less, and we elected to use the practical expedient to expense these sales commissions as incurred. As of ~~June 28,~~March 27, 2020 and December 31, 2019, we had ~~$159.9~~$119 million and $147 million, respectively, in net revenue-related contract assets primarily related to certain software ~~contracts~~contracts. Revenue-related contract assets are recorded in the ~~prepaid~~Prepaid expenses and other current assets and ~~other~~Other assets line items in our Condensed Consolidated Balance ~~Sheet. Our revenue-related contract assets at December 31, 2018 were $144.4 million, the majority of which were recorded in property, plant and equipment on the Consolidated Condensed Balance Sheet.~~Sheets. These assets have estimated useful lives between 3 and 8 years.

Impairment losses recognized on our revenue-related contract assets were immaterial induring the three ~~and six~~ months ended ~~June 28, 2019.~~March 27, 2020.

Contract Liabilities — Our contract liabilities consist of deferred revenue generally related to PCS and extended warranty sales, where in most cases we receive up-front payment and recognize revenue over the support term. We classify deferred revenue as current or noncurrent based on the timing of when we expect to recognize revenue. The noncurrent portion of deferred revenue is included in ~~other~~Other long-term liabilities in the accompanying Consolidated Condensed Balance Sheets.

Our contract liabilities consisted of the following ($ in millions):

June 28, 2019 December 31, 2018
Deferred revenue - current $ 372.1
$ 288.1
Deferred revenue - noncurrent 97.3
92.6
Total contract liabilities $ 469.4
$ 380.7


	March 27, 2020		December 31, 2019
Deferred revenue - current	$	423.5	$	410.1
Deferred revenue - noncurrent	95.1		99.2
Total contract liabilities	$	518.6	$	509.3

InDuring the three ~~and six~~ months ended ~~June 28, 2019,~~March 27, 2020, we recognized ~~$63.8 million and $178.1~~$126 million of revenue related to our contract liabilities at December 31, ~~2018.~~2019. The change in our contract liabilities from December 31, ~~2018~~2019 to ~~June 28, 2019~~March 27, 2020 was primarily due to ~~the addition of contract liabilities from our recently acquired businesses and~~ 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 ~~June 28, 2019,~~March 27, 2020, 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):

June 28, 2019
Professional Instrumentation $ 158.9
Industrial Technologies 402.2
Total remaining performance obligations $ 561.1


	March 27, 2020
Professional Instrumentation	$	145.2
Industrial Technologies	379.4
Total remaining performance obligations	$	524.6

The majority of remaining performance obligations are related to service and support contracts, which we expect to fulfill approximately 4540 percent within the next two years, approximately 7570 percent within the next three years and substantially all within four years.

Table of Contents

Disaggregation of Revenue

We disaggregate revenue from contracts with customers by sales of products and software and services, 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 ~~June 28,~~March 27, 2020 is presented as follows ($ in millions):


	Total		Professional Instrumentation		Industrial Technologies
Sales:
Sales of products and software	$	1,487.8	$	940.5	$	547.3
Sales of services	225.7		163.9		61.8
Total	$	1,713.5	$	1,104.4	$	609.1

Geographic:
United States	$	1,019.8	$	594.9	$	424.9
China	127.5		119.0		8.5

All other (each country individually less than 5% of total sales)	566.2		390.5		175.7
Total	$	1,713.5	$	1,104.4	$	609.1

Major Products Group:
Professional tools and equipment	$	1,107.3	$	658.6	$	448.7
Industrial automation, controls and sensors	109.6		109.6		—
Franchise distribution	160.4		—		160.4
Medical technologies	280.0		280.0		—
All other	56.2		56.2		—
Total	$	1,713.5	$	1,104.4	$	609.1

End markets:
Direct sales:
Retail fueling^(a)	$	396.5	$	—	$	396.5
Industrial & Manufacturing	109.0		109.0		—
Vehicle repair^(a)	143.2		—		143.2
Utilities & Power	43.9		43.9		—
Medical ^(a)	280.0		280.0		—
Other	355.8		290.8		65.0
Total direct sales	1,328.4		723.7		604.7
Distributors^(a)	385.1		380.7		4.4
Total	$	1,713.5	$	1,104.4	$	609.1

(a) Retail fueling, vehicle repair and medical include sales to these end markets made through third-party distributors. Total distributor sales for the three months ended March 27, 2020 was $739.0 million.

Table of Contents

Disaggregation of revenue for the three months ended March 29, 2019 is presented as follows ($ in millions):


	Total		Professional Instrumentation ^(a)		Industrial Technologies ^(a)
Sales:
Sales of products and software	$	1,405.1	$	856.2	$	548.9
Sales of services	187.8		121.5		66.3
Total	$	1,592.9	$	977.7	$	615.2

Geographic:
United States	$	887.6	$	496.1	$	391.5
China	150.0		131.2		18.8

All other (each country individually less than 5% of total sales)	555.3		350.4		204.9
Total	$	1,592.9	$	977.7	$	615.2

Major Products Group:
Professional tools and equipment	$	1,151.8	$	705.6	$	446.2
Industrial automation, controls and sensors	120.1		120.1		—
Franchise distribution	169.0		—		169.0
Medical technologies ^(d)	99.0		99.0		—
All other	53.0		53.0		—
Total	$	1,592.9	$	977.7	$	615.2

End markets:
Direct sales:
Retail fueling^(c)	$	388.2	$	—	$	388.2
Industrial & Manufacturing	109.6		109.6		—
Vehicle repair^(c)	153.8		—		153.8
Utilities & Power	49.6		49.6		—
Medical ^{(c) (b)}	99.0		99.0		—
Other	377.7		309.9		67.8
Total direct sales	1,177.9		568.1		609.8
Distributors^(c)	415.0		409.6		5.4
Total	$	1,592.9	$	977.7	$	615.2

(a) Beginning January 1, 2020, our Hengstler and Dynapar businesses are reported within our Professional Instrumentation segment. Previously, these businesses were reported within our Industrial Technologies segment. Prior year balances have been reclassified to reflect current year presentation.
(b) Sales were previously disclosed in Other.
(c) Retail fueling, vehicle repair and medical include sales to these end markets made through third-party distributors. Total distributor sales for the three months ended March 29, 2019 was $745.2 million.
(d) Sales were previously disclosed in Professional tools and equipment, Industrial automation, controls and sensors, and All other.

Total Professional Instrumentation Industrial Technologies
Sales:
Sales of products $ 1,623.0
$ 966.5
$ 656.5
Sales of services 241.7
166.8
74.9
Total $ 1,864.7
$ 1,133.3
$ 731.4

Geographic:
United States $ 1,077.7
$ 615.6
$ 462.1
China 154.3
126.4
27.9
All other (each country individually less than 5% of total sales) 632.7
391.3
241.4
Total $ 1,864.7
$ 1,133.3
$ 731.4

Major Products Group:
Professional tools and equipment $ 1,255.7
$ 711.2
$ 544.5
Industrial automation, controls and sensors 127.6
96.8
30.8
Franchise distribution 154.2
—
154.2
Medical technologies ^(b)
265.3
263.4
1.9
All other 61.9
61.9
—
Total $ 1,864.7
$ 1,133.3
$ 731.4

End markets:
Direct sales:
  Retail fueling^(a)
$ 486.3
$ —
$ 486.3
  Industrial & Manufacturing 114.1
97.4
16.7
  Vehicle repair^(a)
139.5
—
139.5
  Utilities & Power 49.1
49.1
—
Medical ^{(a) (b)}
265.3
263.4
1.9
  Other 391.5
323.5
68.0
     Total direct sales 1,445.8
733.4
712.4
Distributors^(a)
418.9
399.9
19.0
Total $ 1,864.7
$ 1,133.3
$ 731.4

(a) Retail fueling, vehicle repair and medical include sales to these end markets made through third-party distributors. Total distributor sales for the three months ended June 28, 2019 was $773.1 million.

~~Disaggregation of revenue for the three months ended June 29, 2018 is presented as follows ($ in millions):~~

Total Professional Instrumentation Industrial Technologies
Sales:
Sales of products $ 1,439.5
$ 791.0
$ 648.5
Sales of services 162.3
98.0
64.3
Total $ 1,601.8
$ 889.0
$ 712.8

Geographic:
United States $ 861.0
$ 434.0
$ 427.0
China 146.6
116.6
30.0
All other (each country individually less than 5% of total sales) 594.2
338.4
255.8
Total $ 1,601.8
$ 889.0
$ 712.8

Major Products Group:
Professional tools and equipment $ 1,169.5
$ 643.4
$ 526.1
Industrial automation, controls and sensors 131.6
98.5
33.1
Franchise distribution 152.2
—
152.2
Medical technologies ^(c)
98.1
96.7
1.4
All other 50.4
50.4
—
Total $ 1,601.8
$ 889.0
$ 712.8

End markets:
Direct sales:
  Retail fueling^(a)
$ 460.9
$ —
$ 460.9
  Industrial & Manufacturing 115.7
97.2
18.5
  Vehicle repair^(a)
137.7
—
137.7
  Utilities & Power 46.0
46.0
—
Medical ^{(a) (b)}
98.1
96.7
1.4
  Other 324.4
247.6
76.8
     Total direct sales 1,182.8
487.5
695.3
Distributors^(a)
419.0
401.5
17.5
Total $ 1,601.8
$ 889.0
$ 712.8

(a) Retail fueling, vehicle repair and medical include sales to these end markets made through third-party distributors. Total distributor sales for the three months ended June 29, 2018 was $796.7 million.
(b) Sales were previously disclosed in Other.
(c) Sales were previously disclosed in Professional tools and equipment, Industrial automation, controls and sensors and All other.

Table of Contents

~~Disaggregation of revenue for the six months ended June 28, 2019 is presented as follows ($ in millions):~~

Total Professional Instrumentation Industrial Technologies
Sales:
Sales of products $ 3,028.1
1,792.3
1,235.8
Sales of services 429.5
288.3
141.2
Total $ 3,457.6
$ 2,080.6
$ 1,377.0

Geographic:
United States $ 1,965.3
$ 1,101.6
$ 863.7
China 304.3
254.8
49.5
All other (each country individually less than 5% of total sales) 1,188.0
724.2
463.8
Total $ 3,457.6
$ 2,080.6
$ 1,377.0

Major Products Group:
Professional tools and equipment $ 2,407.9
$ 1,416.8
$ 991.1
Industrial automation, controls and sensors 247.3
188.9
58.4
Franchise distribution 323.2
—
323.2
Medical technologies ^(c)
364.3
360.0
4.3
All other 114.9
114.9
—
Total $ 3,457.6
$ 2,080.6
$ 1,377.0

End markets:
Direct sales:
  Retail fueling^(a)
$ 874.5
$ —
$ 874.5
  Industrial & Manufacturing 223.7
194.2
29.5
  Vehicle repair^(a)
293.3
—
293.3
  Utilities & Power 98.7
98.7
—
Medical ^{(a) (b)}
364.3
360.0
4.3
  Other 769.2
630.8
138.4
     Total direct sales 2,623.7
1,283.7
1,340.0
Distributors^(a)
833.9
796.9
37.0
Total $ 3,457.6
$ 2,080.6
$ 1,377.0

(a) Retail fueling, vehicle repair and medical include sales to these end markets made through third-party distributors. Total distributor sales for the six months ended June 28, 2019 was $1,518.3 million.
(b) Certain sales were previously disclosed in Other.
(c) Certain sales were previously disclosed in Professional tools and equipment, Industrial automation, controls and sensors and All other.

~~Disaggregation of revenue for the six months ended June 29, 2018 is presented as follows ($ in millions):~~

Total Professional Instrumentation Industrial Technologies
Sales:
Sales of products $ 2,771.9
$ 1,567.6
$ 1,204.3
Sales of services 322.1
193.1
129.0
Total $ 3,094.0
$ 1,760.7
$ 1,333.3

Geographic:
United States $ 1,649.7
$ 840.4
$ 809.3
China 290.2
241.7
48.5
All other (each country individually less than 5% of total sales) 1,154.1
678.6
475.5
Total $ 3,094.0
$ 1,760.7
$ 1,333.3

Major Products Group:
Professional tools and equipment $ 2,214.9
$ 1,274.3
$ 940.6
Industrial automation, controls and sensors 261.3
197.1
64.2
Franchise distribution 325.2
—
325.2
Medical technologies ^(c)
194.8
191.5
3.3
All other 97.8
97.8
—
Total $ 3,094.0
$ 1,760.7
$ 1,333.3

End markets:
Direct sales:
  Retail fueling^(a)
$ 809.2
$ —
$ 809.2
  Industrial & Manufacturing 221.2
187.6
33.6
  Vehicle repair^(a)
296.5
—
296.5
  Utilities & Power 101.4
101.4
—
Medical ^(b)
194.8
191.5

3.3
  Other 623.4
467.1
156.3
     Total direct sales 2,246.5
947.6
1,298.9
Distributors^(a)
847.5
813.1
34.4
Total $ 3,094.0
$ 1,760.7
$ 1,333.3

(a) Retail fueling, vehicle repair and medical include sales to these end markets made through third-party distributors. Total distributor sales for the six months ended June 29, 2018 was $1,524.8 million.
(b) Sales were previously disclosed in Other.
(c) Sales were previously disclosed in Professional tools and equipment, Industrial automation, controls and sensors and All other.

NOTE 9.7. PENSION PLANS

For a full description of our noncontributory defined benefit pension plans refer to Note 1112 of our ~~2018~~2019 Annual Report on Form 10-K.

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


	Three Months Ended
	March 27, 2020		March 29, 2019
U.S. Pension Benefits:
Interest cost	$	0.3	$	0.4
Expected return on plan assets	(0.3)		(0.3)
Amortization of net loss	0.1		—

Net periodic pension cost	$	0.1	$	0.1

Non-U.S. Pension Benefits:
Service cost	$	1.1	$	0.3
Interest cost	1.0		1.4
Expected return on plan assets	(1.4)		(1.4)
Amortization of net loss	1.1		0.7
Amortization of prior service cost	0.1		—

Net periodic pension cost	$	1.9	$	1.0

Three Months Ended Six Months Ended
June 28, 2019 June 29, 2018 June 28, 2019 June 29, 2018
U.S. Pension Benefits:
Interest cost 0.4
$ 0.3
$ 0.8
$ 0.6
Expected return on plan assets $ (0.3 ) (0.3 ) (0.7 ) (0.7 )
Net periodic pension cost $ 0.1
$ —
$ 0.1
$ (0.1 )

Non-U.S. Pension Benefits:
Service cost $ 0.7
$ 0.3
$ 1.0
$ 0.6
Interest cost 1.4
1.4
2.9
2.8
Expected return on plan assets (1.5 ) (1.5 ) (2.9 ) (3.0 )
Amortization of net loss 0.7
0.7
1.4
1.4
Net curtailment and settlement loss recognized —
0.2
—
0.4
Net periodic pension cost $ 1.3
$ 1.1
$ 2.4
$ 2.2

We report all components of net periodic pension costs, with the exception of service costs, in other non-operating expenses as a component of non-operating income in the accompanying Consolidated Condensed Statements of Earnings. Service costs are reported in cost of sales and selling, general and administrative expenses in the accompanying Consolidated Condensed Statements of Earnings according to the classification of the participant’s compensation.

Employer Contributions

During ~~2019,~~2020, our cash contribution requirements for our non-U.S. and U.S. defined benefit ~~pension~~ plans are expected to be approximately ~~$11.0 million. We do not expect to make contributions to the U.S. plan during 2019.~~$10.7 million and $0.8 million, respectively. The 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. In response to the COVID-19 pandemic, certain countries have enacted or proposed legislation to enable employers to defer minimum contributions to qualified defined benefit plans during all or part of 2020. We are actively assessing the available reliefs and will continue to monitor and utilize relevant legislative reliefs as we deem prudent. This may reduce our cash contribution requirements under our defined benefit plans in 2020.

NOTE ~~10.~~8. INCOME TAXES

Our effective tax ~~rates~~rate for the three ~~and six~~ months ended ~~June 28, 2019 were 14.2% and 14.5%, respectively,~~March 27, 2020 was 40.8% as compared to ~~16.4% and 16.1%~~14.8% for the three ~~and six~~ months ended ~~June~~March 29, ~~2018, respectively.~~2019. The year-over-year ~~decrease~~increase was due primarily to ~~increases in~~a non-deductible goodwill impairment and tax costs associated with repatriating a portion of our previously reinvested earnings outside of the United States. These factors were partially offset by favorable impacts of ~~certain federal and international tax benefits, offset in part by unfavorable impacts of lower~~a higher mix of income in jurisdictions with lower tax rates than the U.S. federal statutory rate of 21%. and increases in favorable impacts of certain federal and international tax benefits.

Our effective tax rate for ~~2019~~2020 and ~~2018~~2019 differs from the U.S. federal statutory rate of 21% due primarily to the positive and negative effects of the Tax Cuts and Jobs Act (“TCJA”), U.S. federal permanent differences, the impact of credits and deductions provided by law, and current year earnings outside the United States that are indefinitely reinvested and taxed at rates lower than the U.S. federal statutory rate. Specific to 2020, our effective tax rate also differs from the U.S. federal statutory rate of 21% due to a non-deductible goodwill impairment and the tax costs associated with repatriating a portion of our previously reinvested earnings outside of the United States.

Table of Contents

On March 27, 2020, the US federal government enacted the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The CARES Act is an emergency economic stimulus package in response to the COVID-19 outbreak which, among other things, contains numerous income tax provisions. Some of these tax provisions are expected to be effective retroactively for years ending before the date of enactment. We anticipate the provisions of the CARES Act will impact income tax in 2020, however we have not identified material impacts to the quarterly provision as of March 27, 2020. We will continue to evaluate the impact of the CARES Act as new clarifying guidance is issued throughout 2020.

NOTE ~~11.~~9. STOCK-BASED COMPENSATION

Our stock-based compensation program (the “Stock Plan”) provides for the grant of stock appreciation rights, performance stock units, restricted stock units, restricted stock awards and performance stock awards (collectively, “Stock Awards”), stock options or any other stock-based award. As of ~~June 28, 2019,~~March 27, 2020, approximately 2017 million shares of our common stock were available for subsequent issuance under the Stock Plan. For a full description of our stock-based compensation program refer to Note 17 of our ~~2018~~2019 Annual Report on Form 10-K.

Stock-based Compensation Expense

Stock-based compensation has been recognized as a component of ~~selling,~~Selling, general &and administrative expenses in the accompanying Consolidated Condensed Statements of Earnings based on the portion of the awards that are ultimately expected to vest.

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


	Three Months Ended
	March 27, 2020		March 29, 2019
Stock Awards:
Pretax compensation expense	$	10.1	$	7.8
Income tax benefit	(1.9)		(1.7)
Stock Award expense, net of income taxes	8.2		6.1
Stock options:
Pretax compensation expense	6.0		5.1
Income tax benefit	(0.8)		(1.1)
Stock option expense, net of income taxes	5.2		4.0
Total stock-based compensation:
Pretax compensation expense	16.1		12.9
Income tax benefit	(2.7)		(2.8)
Total stock-based compensation expense, net of income taxes	$	13.4	$	10.1

Three Months Ended Six Months Ended
June 28, 2019 June 29, 2018 June 28, 2019 June 29, 2018
Stock Awards:
Pretax compensation expense $ 10.1
$ 7.9
$ 17.9
$ 14.4
Income tax benefit (2.1 ) (1.6 ) (3.8 ) (3.0 )
Stock Award expense, net of income taxes 8.0
6.3
14.1
11.4
Stock options:
Pretax compensation expense 5.8
5.5
10.9
10.0
Income tax benefit (1.2 ) (1.2 ) (2.3 ) (2.1 )
Stock option expense, net of income taxes 4.6
4.3
8.6
7.9
Total stock-based compensation:
Pretax compensation expense 15.9
13.4
28.8
24.4
Income tax benefit (3.3 ) (2.8 ) (6.1 ) (5.1 )
Total stock-based compensation expense, net of income taxes $ 12.6
$ 10.6
$ 22.7
$ 19.3

On February 20, 2020 the Board of Directors granted 2.3 million stock options and 0.8 million stock awards at market value to employees.

The following summarizes the unrecognized compensation cost for the Stock Plan awards as of ~~June 28, 2019.~~March 27, 2020. 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	$	88.3
Stock options	115.9
Total unrecognized compensation cost	$	204.2

Stock Awards $ 74.9
Stock options 62.8
Total unrecognized compensation cost $ 137.7

Table of Contents

NOTE ~~12.~~10. COMMITMENTS AND CONTINGENCIES

For a description of our litigation and contingencies and additional information about our leases, refer to ~~Notes 15~~Note 16 and ~~16 of~~Note 10, respectively in our ~~2018~~2019 Annual Report on Form 10-K.

Warranty

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, 2019	$	79.0
Accruals for warranties issued during the period	15.9
Settlements made	(16.2)

Effect of foreign currency translation	(0.6)
Balance, March 27, 2020	$	78.1

Balance, December 31, 2018 $ 72.1
Accruals for warranties issued during the period 32.1
Settlements made (35.7 )
Additions due to acquisitions 3.4
Effect of foreign currency translation 0.3
Balance, June 28, 2019 $ 72.2

Leases

For the three months ended March 27, 2020 and March 29, 2019, operating lease cost was $21 million and $18 million, respectively. During the three-month periods ended March 27, 2020 and March 29, 2019, cash paid for operating leases included in operating cash flows was $19 million and $16 million, respectively. Right-of-use assets obtained in exchange for operating lease obligations were $7 million during the three months ended March 27, 2020 and immaterial during the three months ended March 29, 2019.

As of March 27, 2020, we had entered into operating leases for which the lease had not yet commenced. These operating leases will commence in 2020 with lease terms between 2 and 15 years and have aggregate fixed payments of the non-cancelable lease terms of $23 million.

NOTE ~~13.~~11. NET EARNINGS PER SHARE

Basic net earnings per share (“EPS”) is calculated by dividing net earnings attributable to common stockholders by the weighted average number of shares of common stock outstanding for the applicable period. Diluted EPS is similarly calculated, except that the calculation includes the dilutive effect of the assumed issuance of shares under stock-based compensation plans under the treasury stock method, except where the inclusion of such shares would have an anti-dilutive impact. There were ~~an insignificant amount of options excluded from the diluted EPS calculation for the three months ended June 28, 2019 and 1.5~~5.7 million anti-dilutive options excluded from the diluted EPS calculation for the three months ended ~~June 29, 2018. There were~~March 27, 2020 and 1.7 ~~million and 1.5~~ million anti-dilutive options excluded from the diluted EPS calculation for the ~~six~~three months ended ~~June 28, 2019 and June~~March 29, ~~2018, respectively.~~2019.

As described in Note 6,5, upon conversion of the Convertible Notes, holders will receive cash, shares of our common stock, or a combination thereof, at our election. Our intention is to settle such conversions through cash up to the principal amount of the Convertible Notes and, if applicable, through shares of our common stock for conversion value, if any, in excess of the principal amount of the Convertible Notes. We believe we have the ability to settle these obligations as intended, and therefore we have accounted for the conversion features under the treasury stock method in our calculation of EPS. Because the fair value of our common stock is below the conversion price, the Convertible Notes had no impact on our earnings per share for the three ~~and six~~ months ended ~~June 28,~~March 27, 2020 and March 29, 2019.

The impact of our ~~MCPS~~Mandatory Convertible Preferred Stock (“MCPS”) calculated under the if-converted method was anti-dilutive for both the three month periods ended March 27, 2020 and ~~as such 17.5~~March 29, 2019, and 18.4 million and 16.7 million shares were excluded from the diluted EPS calculation for ~~the three and six months ended June 28, 2019.~~each respective period.

Table of Contents

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):

Three Months Ended Six Months Ended
June 28, 2019 June 29, 2018 June 28, 2019 June 29, 2018
Numerator
Net earnings from continuing operations $ 175.3
$ 250.2
$ 339.3
$ 464.2
Mandatory convertible preferred stock cumulative dividends (17.2 ) (0.2 ) (34.5 ) (0.2 )
Net earnings attributable to common stockholders from continuing operations $ 158.1
$ 250.0
$ 304.8
$ 464.0

Denominator
Weighted average common shares outstanding used in basic earnings per share 335.6
349.2
335.4
348.9
Incremental common shares from:
Assumed exercise of dilutive options and vesting of dilutive Stock Awards 4.1
5.6
4.4
5.7
Assumed conversion of outstanding mandatory convertible preferred stock —
0.2
—
0.1
Weighted average common shares outstanding used in diluted earnings per share 339.7
355.0
339.8
354.7

Net earnings from continuing operations per common share - Basic $ 0.47
$ 0.72
$ 0.91
$ 1.33
Net earnings from continuing operations per common share - Diluted $ 0.47
$ 0.70
$ 0.90
$ 1.31


	Three Months Ended
	March 27, 2020		March 29, 2019
Numerator
Net earnings from continuing operations	$	42.3	$	164.0
Mandatory convertible preferred stock cumulative dividends	(17.3)		(17.3)
Net earnings attributable to common stockholders from continuing operations	$	25.0	$	146.7

Denominator
Weighted average common shares outstanding used in basic earnings per share	336.8		335.1
Incremental common shares from:
Assumed exercise of dilutive options and vesting of dilutive Stock Awards	3.2		4.4

Weighted average common shares outstanding used in diluted earnings per share	340.0		339.5

Net earnings from continuing operations per common share - Basic	$	0.07	$	0.44
Net earnings from continuing operations per common share - Diluted	$	0.07	$	0.43

We declared and paid cash dividends per common share for both periods as presented below. We declared and ~~per~~paid the MCPS ~~during~~dividend in the ~~periods presented~~first quarter of 2019, while the MCPS dividend in the first quarter of 2020 was declared and accrued as follows:


	Dividend Per Common Share		Amount ($ in millions)		Dividend per MCPS		Amount ($ in millions)
2020:
First quarter	$	0.07	$	23.5	$	12.50	$	17.3





2019:
First quarter	$	0.07	$	23.4	$	12.50	$	17.3

Dividend Per
Common Share

Amount
($ in millions)
Dividend per MCPS
Amount
($ in millions)
2019:
First quarter $ 0.07
$ 23.4
$ 12.50
$ 17.3
Second quarter 0.07
23.4
12.50
17.2
Total $ 0.14
$ 46.8
$ 25.00
$ 34.5

2018:
First quarter $ 0.07
$ 24.3
$ —
$ —
Second quarter 0.07
24.4
—
—
Total $ 0.14
$ 48.7
$ —
$ —

The first quarter 2020 MCPS dividends were paid on April 1, 2020.

Table of Contents

NOTE ~~14.~~12. SEGMENT INFORMATION

We report our results in ~~two~~2 separate business segments consisting of Professional Instrumentation and Industrial 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. Our segment results are as follows ($ in millions):


	Three Months Ended
	March 27, 2020		March 29, 2019
Sales: ^(a)
Professional Instrumentation	$	1,104.4	$	977.7
Industrial Technologies	609.1		615.2
Total	$	1,713.5	$	1,592.9
Operating Profit: ^(a)
Professional Instrumentation	$	144.5	$	142.7
Industrial Technologies	(1.5)		98.8
Other	(23.4)		(24.2)
Total Operating Profit	119.6		217.3

Interest expense, net	(43.6)		(25.3)
Other non-operating expenses, net	(4.6)		0.4
Earnings from continuing operations before income taxes	$	71.4	$	192.4

(a) Beginning January 1, 2020, our Hengstler and Dynapar businesses are reported within our Professional Instrumentation segment. Previously, these businesses were reported within our Industrial Technologies segment. Prior year balances have been reclassified to reflect current year presentation.

Three Months Ended Six Months Ended
June 28, 2019 June 29, 2018 June 28, 2019 June 29, 2018
Sales:
Professional Instrumentation $ 1,133.3
$ 889.0
$ 2,080.6
$ 1,760.7
Industrial Technologies 731.4
712.8
1,377.0
1,333.3
Total $ 1,864.7
$ 1,601.8
$ 3,457.6
$ 3,094.0
Operating Profit:
Professional Instrumentation $ 122.0
$ 216.7
$ 258.2
$ 423.1
Industrial Technologies 152.9
134.6
258.2
228.8
Other (25.4 ) (26.9 ) (49.6 ) (49.6 )
Total Operating Profit 249.5
324.4
466.8
602.3
Interest expense, net (44.4 ) (23.9 ) (69.7 ) (47.2 )
Other non-operating income (expenses), net (0.8 ) (1.1 ) (0.4 ) (1.8 )
Earnings from continuing operations before income taxes $ 204.3
$ 299.4
$ 396.7
$ 553.3

As of June 28, 2019, the material changes in total assets by segment since December 31, 2018 were due primarily to the acquisition of ASP discussed in Note 2. Our identifiable assets by segment are as follows ($ in millions):

June 28, 2019 December 31, 2018
Professional Instrumentation $ 12,178.4
$ 8,592.6
Industrial Technologies 3,010.5
3,011.2
Other 1,257.8
1,271.8
Assets of Discontinued Operations 21.4
30.0
Total $ 16,468.1
$ 12,905.6

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 technology 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~~field solutions, product realization, sensing technologies, health, transportation ~~technology,~~technologies, and franchise ~~distribution markets.~~distribution. 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 ~~2018~~2019 Annual Report on Form 10-K. Our MD&A is divided into five sections:

•Information Relating to Forward-Looking Statements

•Overview

•Results of Operations

•Liquidity and Capital Resources

•Critical Accounting Estimates

Table of Contents

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 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, separation into two independent, publicly traded companies, 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. 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:

•The duration and severity of the COVID-19 pandemic and its effect on our global operations and the operations of our customers, suppliers, and vendors.

•Conditions in the global economy, the markets we serve and the financial markets may adversely affect our business and financial statements.

•Our plans to separate into two independent, publicly traded companies may not be completed on the currently contemplated timeline or at all and may not achieve the intended benefits.

•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 and services.

•Changes in industry standards and governmental regulations may reduce demand for our products or services or increase our expenses.

•Trade relations between China and the United States could have a material adverse effect on our business and financial statements.

•Any inability to consummate acquisitions at our anticipated 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 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.

Table of Contents

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

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

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

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

•International economic, 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.

•The interest rates on our credit facilities may be impacted by the phase out of the London Interbank Offered Rate (“LIBOR”).

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

•We 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 or services.

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

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

•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.

•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.

Table of Contents

•Changes in U.S. GAAP could adversely affect our reported financial results and may require significant changes to our internal accounting systems and processes.

•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.

~~Certain of our executive officers and directors may have actual or potential conflicts of interest because of their equity interest in Danaher.~~

~~Potential liabilities may arise due to fraudulent transfer considerations, which would adversely affect our financial condition and our results of operations.~~

See “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2018~~2019 and ~~“Part II -~~ Item ~~1A.~~1.A. Risk Factors” in this ~~Form 10-Q~~Report 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.

OVERVIEW

General

Fortive is a diversified, multinational industrial technology 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.

On April 1, 2019, we acquired the advanced sterilization products business (“ASP”) of Johnson & Johnson, a New Jersey corporation (“Johnson & Johnson”) for an aggregate purchase price of $2.7 billion (the “Transaction”), subject to certain post-closing adjustments set forth in a Stock and Asset Purchase Agreement, dated effective as of June 6, 2018 (the “Purchase Agreement”), between the Company and Ethicon, Inc., a New Jersey corporation (“Ethicon”) and a wholly owned subsidiary of Johnson & Johnson. ASP engages in the research, development, manufacture, marketing, distribution, and sale of ~~low-temperature~~low-

Table of Contents

temperature terminal sterilization and high-level disinfection products. ~~ASP generated annual revenues of approximately $800 million in 2018.~~ Refer to Note 2 to the accompanying consolidated condensed financial statements for additional information regarding the Transaction.

On October 1, 2018, we completed the split-off of four of our operating companies (the “A&S Business”), and have reported the A&S Business as discontinued operations in our Consolidated Condensed Statements of ~~Income,~~Earnings, Consolidated Condensed Balance Sheets, and Consolidated Condensed Statements of Cash Flows for all periods presented. ~~Unless otherwise noted discussion~~Discussion within this MD&A relates to continuing operations.

In this report, references to sales from existing businesses refers to sales from operations calculated according to generally accepted accounting principles in the United States (“GAAP”) but excluding (1) the impact from acquired businesses and (2) the impact of currency translation. References to sales attributable to acquisitions or acquired businesses refer to GAAP sales from acquired businesses recorded prior to the first anniversary of the acquisition less the amount of sales attributable to certain divested businesses or product lines not considered discontinued operations prior to the first anniversary of the divestiture. The portion of sales attributable to the impact of currency translation is calculated as the difference between (a) the period-to-period change in sales (excluding sales impact from acquired businesses) and (b) the period-to-period change in sales (excluding sales impact from acquired businesses) after applying the current period foreign exchange rates to the prior year period. Sales from existing businesses should be considered in addition to, and not as a replacement for or superior to, sales, and may not be comparable to similarly titled measures reported by other companies.

Management believes that reporting the non-GAAP financial measure of sales from existing businesses provides useful information to investors by helping identify underlying growth trends in our business and facilitating comparisons of our sales performance with our performance in prior and future periods and to our peers. We exclude the effect of 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. We exclude the effect of currency translation from sales from existing businesses because the impact of currency translation is not under management’s control and is subject to volatility. Management believes the exclusion of the effect of acquisitions and divestitures and currency translation may facilitate the assessment of underlying business trends and may assist in comparisons of long-term performance. References to sales volume refer to the impact of both price and unit sales.

Business Performance and Outlook

~~While differences exist~~Business Performance

A novel strain of coronavirus was first identified in Wuhan, China in December 2019, and subsequently declared a pandemic by the World Health Organization in March 2020 (“COVID-19”). This outbreak has surfaced in nearly all regions around the world, resulting in governments implementing increasingly strict measures to help contain or mitigate the spread of the virus, including quarantines, “shelter in place” and “stay at home” orders, travel restrictions, school and commercial facility closures, among others (collectively “virus control measures”). Further, on March 19, 2020, the Department of Homeland Security’s Cybersecurity and Infrastructure Security Agency issued a Guidance document for use by businesses and states defining “critical-infrastructure” industries that may continue to operate despite the virus control measures implemented. These virus control measures have led to slowdowns or shutdowns for businesses deemed both “essential” and “non-essential” in affected areas, causing significant disruption in the financial markets both globally and in the United States.

Given our businesses ~~on an overall basis, demand for~~operate globally, have diverse customers, and serve multiple end-markets, COVID-19 impacted our ~~products, software~~businesses and ~~services increased~~operating results during the three months ended ~~June 28, 2019~~March 27, 2020 directly with reduced demand from customers operating in non-essential end-markets and indirectly with reduced demand created by macroeconomic disruption or disruption in adjacent end-markets. Further, COVID-19 impacted our businesses and operating results during the three months ended March 27, 2020 more severely within certain geographies, most notably Asia, as virus control measures were deployed in that region in advance of the United States and Europe.

For the three months ended March 27, 2020, we recognized aggregate year-over-year total sales growth of 7.6%, which was driven by our recently acquired businesses. Demand from existing businesses decreased 3.8% as compared to the comparable period of ~~2018 resulting~~2019, with the direct and indirect impacts of COVID-19 contributing to the majority of the decrease.

Geographically, sales from existing businesses decreased slightly in ~~aggregate~~developed markets and declined at a mid-teen rate in high-growth markets during the three months ended March 27, 2020 as compared to the comparable 2019 period. During the three months ended March 27, 2020, year-over-year ~~total~~ sales ~~growth~~from existing businesses grew at a high-single digit rate in Latin America and at a low-single digit rate in North America, which was more than offset by a high-single digit decline in Western Europe and over 20% decline in Asia, reflecting the impact of ~~16.4% and~~the COVID-19 pandemic.

Table of Contents

On a year-over-year basis, our Industrial Technologies segment reported sales growth from existing businesses of ~~2.0%. Our continued application and deployment of the Fortive Business System including investments~~1.6%, while our Professional Instrumentation segment reported a decline in sales ~~growth initiatives and new product introductions, as well as increased demand 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~~7.2% for the three months ended ~~June 28, 2019, both segments experienced sales growth from existing businesses with Professional Instrumentation growing 0.1% and Industrial Technologies growing 4.4%.~~March 27, 2020. In our Industrial Technologies segment, the liability shift related to enhanced credit card security requirements for outdoor payment systems that is expected to occur in October 2020 in the United States based on the Europay, Mastercard, and Visa (“EMV”) global standards is continuing to drive demand within our transportation technologies platform. The increase in EMV-related demand was tempered by declines in demand in Asia resulting from the COVID-19 pandemic.

~~Geographically, sales~~The decline in our Professional Instrumentation segment reflects both direct and indirect declines in demand resulting from ~~existing businesses grew at~~COVID-19 virus pandemic.

Operating profit margin was 7.0% for the three months ended March 27, 2020, a ~~low-single digit rate~~decrease of 660 basis points as compared to 13.6% in ~~developed markets~~the comparable period of 2019. Strong operational execution, the application and ~~declined at a low-single digit rate~~deployment of the Fortive Business System, and other cost reduction actions limited the impacts of COVID-19, and resulted in ~~high-growth markets~~an increase of 150 basis points during the three months ended ~~June 28, 2019 as compared~~March 27, 2020. These factors were more than offset by the detrimental impacts of the goodwill impairment charge from the Telematics business, transaction and stand-up costs related to the ~~comparable 2018 period. Year-over-year sales from existing~~proposed Vontier separation, and our recently acquired businesses ~~grew~~which reduced year-over-year operating profit margin by 810 basis points.

Outlook

During the first quarter of 2020, the worldwide capital markets and overall global economic conditions deteriorated significantly as a result of COVID-19. In addition, the economic uncertainties that continue to exist as a result of COVID-19 suggest that global demand for our products and services will continue to contract, at ~~a high-single digit rate~~least in the ~~Middle East~~first half of 2020. Despite our critical infrastructure businesses continuing to operate, we expect this pandemic to materially reduce our revenues and ~~Africa~~net income in the second quarter of 2020, due largely to the virus control measures and atweak market conditions reducing customer demand.

Given the diverse nature of our businesses and the end-markets they serve, we believe certain of our businesses will be relatively more resilient against the broad COVID-19 impacts in the second quarter of 2020, while we believe others will be relatively more sensitive, with varied rates of recovery once the virus control measures are lifted. The businesses we believe will be relatively more resilient include our businesses with a ~~mid-single digit rate~~greater proportion of recurring revenue, including our software as a service businesses, and those with longer business cycles. We believe that our businesses that are more dependent on the industrial cycle and production dynamics will experience relatively greater declines in demand in the second quarter of 2020 and will take longer to recover once the virus control measures are lifted. Geographically, we expect COVID-19 to have more of a detrimental year-over-year impact in North America ~~while sales in~~and Europe ~~declined at a low-single digit rate~~ during the ~~three months ended June 28, 2019.~~second quarter of 2020 than we experienced during the first quarter of 2020, while we expect the COVID-19 impacts on our results in Asia in the second quarter of 2020 to be relatively consistent with the impact realized in the first quarter of 2020.

We ~~expect overall sales from existing businesses to~~ continue to ~~grow~~execute broad cost reduction efforts while emphasizing cash flow generation. These cost reduction efforts include reducing labor expenses to better align with reductions in demand, primarily through the use of furloughs and reductions in salaried compensation costs, as well as other reductions in discretionary spending. We are also pursuing cost reductions throughout our supply chain by targeting reductions in both direct and indirect spending and reducing our facility expenses through temporary closures. In total, we believe we will be able to deliver incremental savings for the year ended December 31, 2020 of at least $300 million through these various cost actions.

In addition, we are closely monitoring the health of our employees as well as the employees of our suppliers and customers, and their ability to maintain production capacity and meet our operational requirements. Individuals contracting or being exposed to COVID-19, or who are unable to report to work due to virus control measures, may significantly disrupt production throughout our supply chain and negatively impact our sales channels. Further, our customers may be directly impacted by business curtailments or weak market conditions, and may not be willing or able to accept shipments of products, may cancel orders, and may not be able to pay us on a ~~year-over-year basis~~timely basis.

Despite the virus control measures implemented in geographies critical to our supply chain, we have successfully implemented solutions to support our operations and have not experienced material shortages, supply chain constraints, or distribution limitations significantly impacting our operations as of the date of this Report; however, in light of the uncertainty of the COVID-19 severity and duration, we are continuing to evaluate and monitor the condition of our supply chain, including the financial health of our suppliers and their ability to access raw materials and other key inputs and may experience shortages, constraints, or disruptions during the remainder of ~~2019. We~~2020.

Table of Contents

To minimize the impact of the recessionary economic conditions, we will continue applying and deploying the Fortive Business System to actively manage our supply chain and drive operating efficiencies, and continue to ~~monitor macro-economic developments~~collaborate with our customers and suppliers to minimize disruption to their businesses. Additionally, we will continue to actively manage our working capital with a focus on maximizing cash flows and cost efficiency, and will continue to assess market conditions and take actions as we deem necessary to appropriately position our businesses in light of the ~~corresponding~~economic environment.

Although recent distress in the financial markets has not had a significant impact on our ~~businesses. In addition,~~financial position, liquidity, and ability to meet our debt covenants as of the filing date of this Report, we continue to monitor ~~geopolitical uncertainties,~~the financial markets and general global economic conditions. Further, we plan to utilize certain provisions of The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) enacted by the U.S. Government to provide additional short-term liquidity, including ~~Brexit~~relief from employer payroll tax remittance, and ~~global uncertainties related~~we are evaluating other potential income tax impacts of the CARES Act. If further changes in financial markets or other areas of the economy adversely affect our access to ~~governmental policies toward international trade, monetary~~the capital markets, we would expect to rely on a combination of available cash and ~~fiscal policies;~~existing available capacity under our credit facilities to provide short-term funding. Refer to the “Liquidity and ~~the current uncertainty surrounding the relationship between the United~~Capital Resources” section for additional discussion.

States and China with respect to trade policies, treaties, government regulations, and tariffs. We will also continue to monitor other factors identified above in “—Information Relating to Forward-Looking 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 six~~ months ended ~~June 28, 2019~~March 27, 2020 as compared to the comparable ~~periods~~period of ~~2018:~~2019:

Components of Sales Growth

% Change
Three Months Ended
June 28, 2019 vs.
Comparable 2018
Period % Change
Six Months Ended
June 28, 2019 vs.
Comparable 2018
Period
Total revenue growth (GAAP) 16.4 % 11.8 %
Existing businesses (Non-GAAP) 2.0 % 2.8 %
Acquisitions(Non-GAAP)
16.5 % 11.5 %
Currency exchange rates (Non-GAAP) (2.1 )% (2.5 )%


	% Change Three Months Ended March 27, 2020 vs. Comparable 2019 Period
Total revenue growth (GAAP)	7.6	%
Existing businesses (Non-GAAP)	(3.8)	%
Acquisitions(Non-GAAP)	13.0	%
Currency exchange rates (Non-GAAP)	(1.6)	%

Operating Profit Margins

Operating profit margin was ~~13.4%~~7.0% for the three months ended ~~June 28, 2019,~~March 27, 2020, a decrease of ~~690~~660 basis points as compared to ~~20.3%~~13.6% in the comparable period of ~~2018.~~2019. Year-over-year operating profit margin comparisons were favorably impacted by:

~~Higher 2019~~•Price increases, a favorable sales ~~volumes from existing businesses, price increases,~~mix, lower year-over-year material costs, and incremental year-over-year cost savings associated with restructuring and productivity improvement initiatives ~~which were partially~~more than offset ~~by unfavorable~~lower year-over-year sales ~~mix, increased material costs associated primarily with inflationary pressures and recently enacted tariffs, and changes in foreign currency exchange rates~~volumes from existing businesses — favorable 30150 basis points

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

•The incremental year-over-year net dilutive effect of acquired businesses — unfavorable ~~540~~120 basis points

•The incremental year-over-year net dilutive effect of ~~acquisition and divestiture-related~~acquisition-related transaction costs and transaction and stand-up costs related to the proposed Vontier separation — unfavorable ~~180~~120 basis points

~~Operating profit margin was 13.5% for~~•The impact of the ~~six months ended June 28, 2019, a decrease~~goodwill impairment of ~~600~~our Telematics business — unfavorable 570 basis points ~~as compared to 19.5% in the comparable period of 2018. Year-over-year operating profit margin comparisons were unfavorably impacted by:~~

Higher 2019 sales volumes from existing businesses, price increases, incremental year-over-year cost savings associated with restructuring and productivity improvement initiatives which were more than offset by unfavorable sales mix, increased material costs associated primarily with inflationary pressures and recently enacted tariffs, and changes in foreign currency exchange rates — unfavorable 20 basis points

~~The incremental year-over-year net dilutive effect of acquired businesses — unfavorable 390 basis points~~

~~The incremental year-over-year net dilutive effect of acquisition and divestiture-related transaction costs —unfavorable 190 basis points~~

Business Segments

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


	Three Months Ended
	March 27, 2020		March 29, 2019
Professional Instrumentation	$	1,104.4	$	977.7
Industrial Technologies	609.1		615.2
Total	$	1,713.5	$	1,592.9

Table of Contents

Three Months Ended Six Months Ended
June 28, 2019 June 29, 2018 June 28, 2019 June 29, 2018
Professional Instrumentation $ 1,133.3
$ 889.0
$ 2,080.6
$ 1,760.7
Industrial Technologies 731.4
712.8
1,377.0
1,333.3
Total $ 1,864.7
$ 1,601.8
$ 3,457.6
$ 3,094.0

PROFESSIONAL INSTRUMENTATION

Our Professional Instrumentation segment consists of our Advanced Instrumentation & Solutions, ~~and~~ Sensing Technologies, and Advanced Sterilization Products and Censis businesses.

Our Advanced Instrumentation & Solutions businesses provide product realization and field solutions services and products. ~~Field~~Our field solutions products 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, environmental, health and safety (EHS) quality management and compliance monitoring; subscription-based technical, analytical, and compliance services to determine occupational and environmental radiation exposure; and software, data analytics and services for critical infrastructure in utility, industrial, energy, construction, facilities management, public safety, mining, EHS, and healthcare applications. ~~Product~~Our product realization services and products help developers and engineers across the end-to-end product creation cycle from concepts to finished products. Our test, measurement and monitoring products are used in the design, manufacturing and ~~also include highly-engineered energetic materials components in specialized vertical applications.~~ development of electronics, industrial, and other advanced technologies.

Our Sensing Technologies business offers devices that sense, monitor and control operational or manufacturing variables, such as temperature, pressure, level, flow, turbidity, and conductivity. ~~On April 1, 2019, we acquired the ASP~~Users of these products span a wide variety of industrial and manufacturing markets, including medical equipment, food and beverage, marine, industrial, off-highway vehicles, building automation, and semiconductors.

Our Advanced Sterilization Products (“ASP”) business ~~from Johnson & Johnson. ASP~~ provides critical sterilization and disinfection solutions, including low-temperature hydrogen peroxide sterilization solutions for temperature-sensitive equipment, to ~~health care~~advance infection prevention and patient safety in healthcare facilities. Our Censis business provides subscription-based surgical inventory management systems to healthcare facilities ~~used in the fields of low-temperature terminal sterilization~~to facilitate inventory management and ~~high-level disinfection.~~regulatory compliance.

Professional Instrumentation Selected Financial Data


	Three Months Ended						Six Months Ended							Three Months Ended
($ in millions)	June 28, 2019			June 29, 2018			June 28, 2019			June 29, 2018			($ in millions)	March 27, 2020			March 29, 2019
Sales	$	1,133.3		$	889.0		$	2,080.6		$	1,760.7		Sales	$	1,104.4		$	977.7
Operating profit	122.0			216.7			258.2			423.1			Operating profit	144.5			142.7
Depreciation	19.7			15.5			35.9			32.5			Depreciation	19.5			16.8
Amortization	69.3			16.4			113.4			33.6			Amortization	78.2			44.1
Operating profit as a % of sales	10.8		%	24.4		%	12.4		%	24.0		%	Operating profit as a % of sales	13.1		%	14.6		%
Depreciation as a % of sales	1.7		%	1.7		%	1.7		%	1.8		%	Depreciation as a % of sales	1.8		%	1.7		%
Amortization as a % of sales	6.1		%	1.8		%	5.5		%	1.9		%	Amortization as a % of sales	7.1		%	4.5		%

Components of Sales Growth

% Change
Three Months Ended
June 28, 2019 vs.
Comparable 2018
Period % Change
Six Months Ended
June 28, 2019 vs.
Comparable 2018
Period
Total revenue growth (GAAP) 27.5 % 18.2 %
Existing businesses (Non-GAAP) 0.1 % 1.0 %
Acquisitions (Non-GAAP) 29.3 % 19.4 %
Currency exchange rates (Non-GAAP) (1.9 )% (2.2 )%


	% Change Three Months Ended March 27, 2020 vs. Comparable 2019 Period
Total revenue growth (GAAP)	13.0	%
Existing businesses (Non-GAAP)	(7.2)	%
Acquisitions (Non-GAAP)	21.3	%
Currency exchange rates (Non-GAAP)	(1.1)	%

Sales from existing businesses in our Professional Instrumentation segment’s Advanced Instrumentation & Solutions businesses ~~were relatively flat~~decreased at a high-single digit rate during the three months ended ~~June 28, 2019 and grew at a low-single digit rate during the six months ended June 28, 2019~~March 27, 2020 as compared to the comparable ~~periods~~period of ~~2018.~~2019.

Year-over-year sales from existing businesses of field solutions products and services declined ~~slightly~~at a mid-single digit rate during the three months ended ~~June 28, 2019, as strong~~March 27, 2020. The results were driven by increased demand for ~~portable gas detection~~our thermography tools in response to COVID-19 monitoring and growth in ~~industrial test equipment, SaaS~~facilities maintenance and asset management offerings, ~~and calibration tools was~~which were more than offset by declines in demand for electrical grid condition-based monitoring equipment, portable gas detection instruments, and demand

Table of Contents

from our industrial channel ~~partners. Year-over-year sales from existing businesses grew low-single digits during the six months ended June 28, 2019, as strong demand for portable gas detection~~partners all of which were impacted by COVID-19. Demand in both direct and ~~growth in industrial test equipment, SaaS offerings and calibration tools~~adjacent end-markets was ~~partially offset~~impacted by ~~declines in demand for electrical grid condition-based monitoring equipment and from our industrial channel partners.~~COVID-19.

Year-over-year sales from existing businesses of product realization ~~solutions were relatively flat~~products and services declined at a high-single digit rate during the three months ended ~~June 28, 2019,~~March 27, 2020, as compared to the comparable period of ~~2018. Increased~~2019 due to decreased demand for ~~oscilloscopes and strong growth in our~~ energetic materials ~~business was tempered~~and test and measurement equipment driven, in part, by a decrease in demand for our Keithley products. During the six months ended June 28, 2019, year-over-year sales from existing businesses of product realization solutions grew at a low-single digit rate

driven by increased demand for oscilloscopes, growth in industrial and manufacturing end markets, and strong growth in our energetic materials business, somewhat offset by declines in demand for our 3D sensing and Keithley products.COVID-19.

Geographically, demand from existing businesses in Advanced Instrumentation & Solutions ~~increased on a year-over-year basis during the three months ended June 28, 2019~~decreased in ~~North America, which was mostly offset by~~most of our significant regions, with more significant declines in Western Europe. Demand from existing businesses increased on a year-over-year basis during the six months ended June 28, 2019 in North America and China, which was partially offset by declines in Western Europe.Asia.

Sales from existing businesses in our segment’s Sensing Technologies businesses ~~grew~~declined at a ~~low-single~~high-single digit rate during the three months ended ~~June 28, 2019 and declined at a low-single digit rate during the six months ended June 28, 2019~~March 27, 2020 as compared to the comparable ~~periods~~period of ~~2018. The growth in sales during the three month period was attributable to an increase in~~2019, as increased demand in ~~the medical market, which~~critical environments supporting COVID-19 patient treatment efforts was ~~partially~~more than offset by declines in industrial end markets. ~~The decline in sales during the six month period was largely due to a decline in industrial~~Industrial end ~~markets.~~markets were impacted both directly and indirectly by COVID-19. Geographically, demand ~~from existing businesses increased~~decreased in ~~China on a year-over-year basis~~most of our significant regions during the three ~~and six~~ months ended ~~June 28, 2019,~~March 27, 2020, with sharper declines in Asia and Western Europe.

Sales from recently acquired businesses in our Professional Instrumentation segment, including ASP, contributed 21.3% to overall sales growth for the three months ended March 27, 2020. ASP sales for the three months ended March 27, 2020, as compared to the comparable period prior to Fortive ownership, decreased at a low-single digit rate as growth in Europe and Mexico was more than offset by declines in demand in China and North ~~America and Western Europe for both periods.~~America. ASP’s results reflect declines in elective surgical procedure volumes which were impacted by COVID-19.

Year-over-year price increases in our Professional Instrumentation segment contributed ~~1.3% and 1.0%~~1.2% to sales growth during the three ~~and six~~ months ended ~~June 28, 2019~~March 27, 2020 as compared to the comparable ~~periods~~period of ~~2018,~~2019, and are reflected as a component of the change in sales from existing businesses.

Operating profit margin decreased ~~1,360~~150 basis points during the three months ended ~~June 28, 2019~~March 27, 2020 as compared to the comparable period of ~~2018.~~2019. Year-over-year operating profit margin comparisons were ~~unfavorably~~favorably impacted by:

~~Higher 2019~~•Price increases, a favorable sales ~~volumes from existing businesses, price increases~~mix, lower year-over-year material costs, and incremental year-over-year cost savings associated with restructuring and productivity improvement initiatives that were ~~more than~~partially offset by ~~incremental~~a year-over-year decline in sales volumes from existing businesses — favorable 130 basis points

•Acquisition-related transaction costs, as the costs related to our acquisition and integration of ASP in 2020 were less than the costs associated ~~with various product development investments, unfavorable sales mix, increased material costs associated primarily with inflationary pressures and recently enacted tariffs, and changes~~ in ~~currency exchange rates~~2019 — ~~unfavorable 140~~favorable 70 basis points

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

•The incremental year-over-year net dilutive effect of acquired businesses, including amortization and acquisition-related fair value adjustments to deferred revenue and inventory — unfavorable ~~890~~350 basis points

~~Acquisition and disposition-related transaction costs, including costs related to our acquisition~~

Table of ~~ASP, and acquisition-related restructuring — unfavorable 330 basis points~~Contents

Operating profit margin decreased 1,160 basis points during the six months ended June 28, 2019 as compared to the comparable period of 2018. Year-over-year operating profit margin comparisons were unfavorably impacted by:

Higher 2019 sales volumes from existing businesses, price increases and incremental year-over-year cost savings associated with restructuring and productivity improvement initiatives that were more than offset by incremental year-over-year costs associated with various product development investments, unfavorable sales mix, increased material costs associated primarily with inflationary pressures and recently enacted tariffs, and changes in currency exchange rates — unfavorable 160 basis points

~~The incremental year-over-year net dilutive effect of acquired businesses, including amortization and acquisition-related fair value adjustments to deferred revenue — unfavorable 670 basis points~~

~~Acquisition and divestiture-related transaction costs, including costs related to our acquisition of ASP, and acquisition-related restructuring — unfavorable 330 basis points~~

INDUSTRIAL TECHNOLOGIES

Our Industrial Technologies segment consists of our Transportation Technologies and Franchise Distribution businesses. Our Transportation Technologies business is a leading worldwide 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. Our Franchise Distribution business manufactures and distributes professional tools and a full-line of wheel service equipment.

Industrial Technologies Selected Financial Data


	Three Months Ended						Six Months Ended							Three Months Ended
($ in millions)	June 28, 2019			June 29, 2018			June 28, 2019			June 29, 2018			($ in millions)	March 27, 2020			March 29, 2019
Sales	$	731.4		$	712.8		$	1,377.0		$	1,333.3		Sales	$	609.1		$	615.2
Operating profit	152.9			134.6			258.2			228.8			Operating profit	(1.5)			98.8
Depreciation	13.0			14.4			26.1			26.8			Depreciation	12.0			12.5
Amortization	8.1			7.7			16.2			15.4			Amortization	7.3			8.1
Goodwill impairment charge													Goodwill impairment charge	85.3			—
Operating profit as a % of sales	20.9		%	18.9		%	18.8		%	17.2		%	Operating profit as a % of sales	(0.2)		%	16.1		%
Depreciation as a % of sales	1.8		%	2.0		%	1.9		%	2.0		%	Depreciation as a % of sales	2.0		%	2.0		%
Amortization as a % of sales	1.1		%	1.1		%	1.2		%	1.2		%	Amortization as a % of sales	1.2		%	1.3		%

Components of Sales Growth

% Change
Three Months Ended
June 28, 2019 vs.
Comparable 2018
Period % Change
Six Months Ended
June 28, 2019 vs.
Comparable 2018
Period
Total revenue growth (GAAP) 2.6 % 3.3 %
Existing businesses (Non-GAAP) 4.4 % 5.3 %
Acquisitions(Non-GAAP)
0.5 % 0.7 %
Currency exchange rates (Non-GAAP) (2.3 )% (2.7 )%


	% Change Three Months Ended March 27, 2020 vs. Comparable 2019 Period
Total revenue growth (GAAP)	(1.0)	%
Existing businesses (Non-GAAP)	1.6	%
Acquisitions(Non-GAAP)	(0.3)	%
Currency exchange rates (Non-GAAP)	(2.3)	%

Sales from existing businesses in our ~~segment’s~~ Transportation Technologies businesses grew at a ~~mid-single~~low-single digit ~~and a high-single digit~~ rate ~~and across all geographies~~ during the three ~~and six~~ months ended ~~June 28, 2019, respectively,~~March 27, 2020 as compared to the comparable ~~periods~~period of ~~2018.~~2019. Geographically, demand from existing businesses increased in North America and Latin America and was partially offset by declines in Asia and Western Europe during the three months ended March 27, 2020. The ~~results in both periods were~~sales growth from existing businesses was largely attributable to ~~broad based~~ demand for fuel management systems, specifically in North America and ~~Europe~~Latin America, as well as demand for payment solutions. ~~In addition, demand for fuel management systems in China contributed to growth during the six months ended June 28, 2019. Results~~Sales from existing businesses in North America were favorably impacted ~~in both periods~~ by the approaching deadline of the liability shift related to the outdoor EMV global ~~standards.~~standards, which was tempered by year-over-year declines in demand in China and India and the direct and indirect impacts of COVID-19 across most geographies.

Sales from existing businesses in our ~~segment’s~~ Franchise Distribution businesses ~~increased~~declined at a low-single digit rate during the three months ended ~~June 28, 2019, and declined slightly during the six months ended June 28, 2019,~~March 27, 2020 as compared to the comparable ~~periods~~period of ~~2018. Increases~~2019 due to decreased demand across most product categories in ~~demand for hardline, specialty and diagnostic tools~~the later part of March 2020, which was driven by COVID-19 virus control measures.

Year-over-year price decreases in our Industrial Technologies segment negatively impacted sales growth by 0.1% during the three months ended June 28, 2019 were partially offset by declines in wheel service equipment. Increases in demand for hardline, specialty and diagnostic tools during the six months ended June 28, 2019 were more than offset by declines in wheel service equipment during the six months ended June 28, 2019.

~~Year-over-year price increases in our Industrial Technologies segment contributed 2.0% and 2.3% to sales growth during the three and six months ended June 28, 2019, respectively,~~March 27, 2020 as compared to the comparable ~~periods~~period of ~~2018,~~2019, and are reflected as a component of the change in sales from existing businesses.

Operating profit margin ~~increased 200~~decreased 1,630 basis points during the three months ended ~~June 28, 2019~~March 27, 2020 as compared to the comparable period of ~~2018.~~2019. Year-over-year operating profit margin comparisons were favorably impacted by:

•Higher ~~2019~~2020 sales volumes from existing businesses, ~~price increases~~lower year-over-year material costs and costs associated with product development initiatives, a favorable sales mix, and incremental year-over-year cost savings associated with restructuring and productivity improvement initiatives that were partially offset by ~~increased material costs associated primarily with inflationary pressures and recently enacted tariffs and changes in foreign currency exchange rates~~lower year-over-year pricing — favorable ~~210~~190 basis points

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

~~The incremental year-over-year net dilutive effect of acquired businesses~~•Transaction and stand-up costs related to the proposed Vontier separation — unfavorable 10420 basis points

~~Operating profit margin increased 160~~

Table of Contents

•The impact of the goodwill impairment of our Telematics business — unfavorable 1,400 basis points ~~during the six months ended June 28, 2019 as compared to the comparable period of 2018. Year-over-year operating profit margin comparisons were favorably impacted by:~~

Higher 2019 sales volumes from existing businesses, price increases and incremental year-over-year cost savings associated with restructuring and productivity improvement initiatives that were partially offset by increased material costs associated primarily with inflationary pressures and recently enacted tariffs and changes in foreign currency exchange rates — favorable 180 basis points

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

~~The incremental year-over-year net dilutive effect of acquired businesses — unfavorable 20 basis points~~

COST OF SALES AND GROSS PROFIT


	Three Months Ended						Six Months Ended							Three Months Ended
($ in millions)	June 28, 2019			June 29, 2018			June 28, 2019			June 29, 2018			($ in millions)	March 27, 2020			March 29, 2019
Sales	$	1,864.7		$	1,601.8		$	3,457.6		$	3,094.0		Sales	$	1,713.5		$	1,592.9
Cost of sales	(960.7		)	(771.0		)	(1,740.9		)	(1,496.9		)	Cost of sales	(837.7)			(780.2)
Gross profit	$	904.0		$	830.8		$	1,716.7		$	1,597.1		Gross profit	$	875.8		$	812.7
Gross profit margin	48.5		%	51.9		%	49.7		%	51.6		%	Gross profit margin	51.1		%	51.0		%

The year-over-year increase in cost of sales during the three ~~and six~~ months ended ~~June 28, 2019~~March 27, 2020, as compared to the comparable ~~periods~~period in ~~2018~~2019, is due primarily to the impact of ~~higher year-over-year sales volumes from existing businesses,~~ incremental cost of sales from our recently acquired businesses, ~~increased~~partially offset by lower year-over-year sales volumes from existing businesses, lower year-over-year material costs, ~~associated primarily with inflationary pressures and recently enacted tariffs, partly offset by incremental~~ cost savings associated with restructuring and productivity improvement initiatives, and ~~material cost and supply chain improvement actions. Changes~~changes in currency exchange ~~rates decreased cost of sales during the three and six months ended June 28, 2019.~~rates.

The year-over-year increase in gross profit and the related 10 basis point increase in gross profit margin for the three ~~and six~~ months ended ~~June 28,~~March 27, 2020, as compared to the comparable period in 2019, is due primarily to higher year-over-year sales volumes, including sales volumes from our recently acquired businesses, the favorable impact of pricing improvements ~~and higher year-over-year sales volumes~~ from existing businesses, incremental year-over-year cost savings associated with restructuring and productivity improvement initiatives, and material cost and supply chain improvement ~~actions, and the impact of recently acquired businesses.~~actions. These factors were partially offset by ~~increased material costs associated primarily with inflationary pressures and recently enacted tariffs and~~ changes in currency exchange rates. The respective 340 basis point and 190 basis point decrease in gross profit margins for the three and six months ended June 28, 2019, as compared to the comparable periods in 2018, is due primarily to acquisition-related fair value adjustments to deferred revenue and inventory related to our recent acquisitions, unfavorable sales mix, and increased material costs associated primarily with inflationary pressures and recently enacted tariffs. We expect the acquisition-related fair value adjustments to deferred revenue and inventory to continue to impact margins during the remainder of 2019.

OPERATING EXPENSES


	Three Months Ended						Six Months Ended							Three Months Ended
($ in millions)	June 28, 2019			June 29, 2018			June 28, 2019			June 29, 2018			($ in millions)	March 27, 2020			March 29, 2019
Sales	$	1,864.7		$	1,601.8		$	3,457.6		$	3,094.0		Sales	$	1,713.5		$	1,592.9
Selling, general and administrative (“SG&A”) expenses	537.1			404.5			1,023.5			793.0			Selling, general and administrative (“SG&A”) expenses	557.2			486.4
Research and development (“R&D”) expenses	117.4			101.9			226.4			201.8			Research and development (“R&D”) expenses	113.7			109.0
Impairment of goodwill													Impairment of goodwill	85.3			—
SG&A as a % of sales	28.8		%	25.3		%	29.6		%	25.6		%	SG&A as a % of sales	32.5		%	30.5		%
R&D as a % of sales	6.3		%	6.4		%	6.5		%	6.5		%	R&D as a % of sales	6.6		%	6.8		%
Impairment of goodwill as a % of sales													Impairment of goodwill as a % of sales	5.0		%	—

SG&A expenses increased during the three ~~and six~~ months ended ~~June 28, 2019,~~March 27, 2020 as compared to the comparable ~~periods~~period of ~~2018,~~2019, due ~~primarily~~ to ~~costs associated with the ASP acquisition,~~ higher amortization ~~expense due primarily to our recently acquired businesses,~~ and incremental expenses from our recently acquired ~~businesses. These increases were partly~~businesses and costs associated with the proposed Vontier separation, partially offset by ~~incremental~~ year-over-year cost savings associated with restructuring and productivity improvement initiatives and changes in currency exchange rates.

On a year-over-year basis, SG&A expenses as a percentage of sales increased ~~350 basis points and~~

~~400~~200 basis points in the three ~~and six~~ months ended ~~June 28, 2019, respectively,~~March 27, 2020 due ~~primarily~~ to ~~costs associated with the ASP acquisition,~~ higher amortization ~~from~~and relative spending levels at our recently acquired businesses and ~~higher relative~~costs associated with the proposed Vontier separation, partially offset by lower spending ~~levels~~on sales and marketing growth ~~investments at our recently acquired businesses.~~initiatives.

R&D expenses (consisting principally of internal and contract engineering personnel costs) increased during the three ~~and six~~ months ended ~~June 28, 2019,~~March 27, 2020 as compared to the comparable ~~periods~~period of ~~2018,~~2019 due to ~~incremental year-over-year investments in our product development initiatives and~~ incremental expenses from our recently acquired businesses. On a year-over-year basis, R&D expenses as a percentage of sales ~~were relatively flat~~decreased during the three ~~and six~~ months ended ~~June 28, 2019.~~March 27, 2020 due to reduced spending on product development initiatives from our existing businesses.

In connection with our updated forecast for our Telematics business that indicated a decline in sales and operating profit to levels lower than previously forecasted, due in large part to the impacts of the COVID-19 pandemic, management determined the change in forecast indicated the related carrying value of goodwill may not be recoverable and performed a quantitative impairment assessment over the Telematics reporting unit on March 27, 2020. This analysis resulted in an impairment of $85.3 million.

INTEREST COSTS

For a discussion of our outstanding indebtedness, refer to Note 65 to the accompanying consolidated condensed financial statements.

Table of Contents

Net interest expense for the three ~~and six~~ months ended ~~June 28, 2019~~March 27, 2020 was $44 ~~million and $70 million, respectively.~~million. Net interest expense for the three ~~and six~~ months ended ~~June~~March 29, ~~2018~~2019 was ~~$24 millionand $47 million, respectively.~~$25 million. The increase in interest expense ~~for both periods~~ was due to higher year-over-year average debt balances used to fund the ASP, Intelex, and Censis acquisitions.

INCOME TAXES

COMPREHENSIVE INCOME

Comprehensive income decreased by ~~$20~~$277 million during the three months ended ~~June 28, 2019~~March 27, 2020 as compared to the comparable period in ~~2018~~2019 due primarily to ~~net earnings that were lower by $120 million, partially offset by favorable~~unfavorable changes in foreign currency translation adjustments of ~~$101 million.~~

~~Comprehensive income decreased by $136~~$153 million ~~during the six months ended June 28, 2019 as compared to the comparable period in 2018 due primarily to~~and net earnings that were lower by ~~$217 million, partially offset by favorable changes in foreign currency translation adjustments of $81~~$123 million.

INFLATION

The effect of inflation on our sales and net earnings was not significant in the three ~~and six~~ month ~~periods~~period ended ~~June 28, 2019.~~March 27, 2020.

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 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.

Although recent distress in the financial markets has not had a significant impact on our financial position, liquidity, and ability to meet our debt covenants as of the filing date of this Report, we continue to monitor the capital markets and general global economic conditions. The financial markets worldwide, including the United States, have been impacted by COVID-19 and this volatility and disruption has adversely impacted broad access to the capital markets and pricing on new indebtedness. Our credit facilities, including our revolving credit facility, are predominately with institutions that, to date, appear to be relatively unaffected by the disruption. However, the recent distress in the financial markets has resulted in volatility and disruption in the commercial paper market, which negatively impacted our ability to refinance maturing commercial paper with new commercial paper. As a result of the volatility and disruption in the commercial paper market, we refinanced approximately $365 million and $420 million of outstanding commercial paper during the three months ended March 27, 2020 and April 2020, respectively, largely with borrowings under our $750 million delayed-draw term loan facility, as detailed in the 2021 Term Loan section below.

Our credit facility agreements require, among others, that we maintain certain financial covenants, and we were in compliance with all of our financial covenants on March 27, 2020. While we believe that we will remain in compliance with our covenants in effect on March 27, 2020, in light of the unpredictable nature of the COVID-19 pandemic, on April 24, 2020, we amended (the “Amendments”) the credit agreement for each of our (i) $500 million delayed draw term loan facility, with $250 million in principal amount outstanding as of March 27, 2020 (“2020 Term Loan”), (ii) $1.0 billion delayed draw term loan facility, with

Table of Contents

$1.0 billion in principal amount outstanding as of March 27, 2020 (the “2020 Delayed-Draw Term Loan”), (iii) $750 million delayed draw term loan facility, with $375 million in principal amount outstanding as of March 27, 2020 (“2021 Term Loan”), and (iv) $2.0 billion Revolving Credit Facility, with no borrowings thereunder as of March 27, 2020 as follows:

•For any four fiscal quarters ending in the periods noted below (each an “Adjusted Four Quarters”) that end prior to the maturity date of the applicable facility, the maximum permitted consolidated net leverage ratio of consolidated net funded indebtedness to consolidated EBITDA was increased from 3.50 to 1.00 to, (i) with respect to the four fiscal quarters ending June 26, 2020, September 25, 2020, December 31, 2020, or April 2, 2021, 4.75 to 1.00, (ii) with respect to the four fiscal quarters ending July 2, 2021, 4.5 to 1.0, (iii) with respect to the four fiscal quarters ending October 1, 2021, 4.25 to 1.0 and (iv) with respect to the four fiscal quarters ending December 31, 2021, 3.75 to 1.0; provided however, that for any four fiscal quarters that is not an Adjusted Four Quarters, the maximum permitted consolidated net leverage ratio remains at 3.5 to 1.0, as may be increased to 4.0 to 1.0 following a material acquisition (the “Unadjusted Maximum Ratio”).

•The maturity date for the 2020 Delayed-Draw Term Loan was extended from August 28, 2020 to May 30, 2021.

•From April 24, 2020 to December 31, 2021, the minimum London inter-bank offered rate (“LIBOR”) for each of the facilities will increase from 0% to 0.25%, and the minimum base rate for each of the facilities will increase from 1.00% to 1.25%. In addition, with respect to the Revolving Credit Facility and for any Adjusted Four Quarters in which the consolidated net leverage ratio is greater the Unadjusted Maximum Ratio, the applicable margin (as determined based on our long-term debt credit rating) for any LIBOR rate loans will increase from a range of 80.5 and 117.5 basis points to a range of 118.0 and 155.0 basis points and for any base rate loans from a range of 0.0 and 17.5 basis points to a range of 18.0 and 55.0 basis points. Furthermore, with respect to the 2020 Delayed-Draw Term Loan, the applicable margin (as determined based on our long-term debt credit rating) for any LIBOR rate loans will increase from a range of 75.0 and 97.5 basis points to a range of 155.0 and 180.0 basis points and for any base rate loans from 0.0 to a range of 55.0 and 80.0 basis points.

In connection with the Amendments, we incurred approximately $6.5 million of fees.

We continue to generate cash from operating activities and believe our cash flow and other sources of liquidity, which consists of access to short-term loans and our revolving credit facility currently, in addition to short-term liquidity benefits provided by cash repatriation and certain provisions of the CARES Act, including relief from employer payroll tax remittance and other tax impacts we are evaluating, will be sufficient to allow us to continue investing in existing businesses and maintain our capital structure on both a short and long-term basis. Further, while the recent distress in the financial markets has resulted in volatility and disruption in the commercial paper market, we intend to utilize our commercial paper programs as a source of liquidity if and when the commercial paper markets are attractive.

Table of Contents

Overview of Cash Flows and Liquidity

Following is an overview of our cash flows and liquidity for the ~~six~~three months ended ~~June 28, 2019:~~March 27, 2020:


	Six Months Ended							Three Months Ended
($ in millions)	June 28, 2019			June 29, 2018			($ in millions)	March 27, 2020		March 29, 2019
Total operating cash provided by continuing operations	$	421.4		$	423.1		Total operating cash provided by continuing operations	$	191.4	$	161.2

Payments for additions to property, plant and equipment							Payments for additions to property, plant and equipment	(33.8)		(24.0)
Cash paid for acquisitions, net of cash received	$	(3,237.1	)	$	(9.3	)	Cash paid for acquisitions, net of cash received	(10.6)		—
Payments for additions to property, plant and equipment	(48.5		)	(47.7		)
All other investing activities	—			3.8			All other investing activities	0.2		—
Total investing cash used in continuing operations	$	(3,285.6	)	$	(53.2	)	Total investing cash used in continuing operations	$	(44.2)	$	(24.0)

Net proceeds from (repayments of) commercial paper borrowings	$	892.3		$	(325.9	)	Net proceeds from (repayments of) commercial paper borrowings	$	(382.8)	$	443.8
Proceeds from borrowings (maturities greater than 90 days), net of $24.3 million of issuance costs	2,413.2			—
Repayment of borrowings (greater than 90 days)	(455.3		)	—
Proceeds from issuance of mandatory convertible preferred stock net of $43.0 million of issuance costs	—			1,338.2
Proceeds from borrowings (maturities longer than 90 days), net of issuance costs of $1 million and $24 million in 2020 and 2019, respectively							Proceeds from borrowings (maturities longer than 90 days), net of issuance costs of $1 million and $24 million in 2020 and 2019, respectively	373.8		2,417.8
Repayment of borrowings (maturities greater than 90 days)							Repayment of borrowings (maturities greater than 90 days)	(250.0)		(402.9)

Payment of common stock cash dividend to shareholders	(46.8		)	(48.7		)	Payment of common stock cash dividend to shareholders	(23.5)		(23.4)
Payment of mandatory convertible preferred stock cash dividend to shareholders	(34.5		)	—			Payment of mandatory convertible preferred stock cash dividend to shareholders	—		(17.3)
All other financing activities	7.5			15.3			All other financing activities	(0.7)		(6.8)
Total financing cash provided by (used in) financing activities from continuing operations	$	2,776.4		$	978.9
Total financing cash (used in) provided by continuing operations							Total financing cash (used in) provided by continuing operations	$	(283.2)	$	2,411.2

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.

Cash flows from operating activities were approximately ~~$421~~$191 million during the first ~~six~~three months of ~~2019, a decrease~~2020, an increase of $2$30 million, as compared to the comparable period of ~~2018.~~2019. The year-over-year change in operating cash flows was primarily attributable to the following factors:

~~2019~~•2020 operating cash flows were impacted by lower net earnings for the first ~~six~~three months of ~~2019~~2020 as compared to the comparable period in ~~2018.~~2019. Net earnings for the ~~six~~three months ended ~~June 28, 2019~~March 27, 2020 were impacted by a year-over-year decrease in operating profits of ~~$136~~$98 million and an increase in net interest expense of ~~$23~~$18 million associated with our financing activities ~~that supported our acquisition activity.~~related to recent acquisitions. The year-over-year decrease in operating profit ~~includes~~was impacted by the non-cash goodwill impairment charge of $85.3 million, and also impacted by costs associated with the ~~ASP acquisition~~proposed Vontier separation and a net year-over-year increase in depreciation and amortization expenses of ~~$82~~$36 million largely attributable to recently acquired businesses. Depreciation and amortization and goodwill impairment charges 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 ~~$68~~$1 million ~~of cash during both the first six months of 2019 and the comparable period of 2018. The use~~ of cash during the first ~~six~~three months of ~~2019 was largely due~~2020 as compared to ~~our acquisition~~using $24 million in the comparable period of ~~ASP, as we did not acquire accounts receivable and accounts payable from Johnson & Johnson.~~2019. The amount of cash flow generated from or used by the aggregate of accounts receivable, inventories, and trade accounts payable depends upon how effectively we manage the cash conversion cycle, which effectively represents the number of days that elapse from the day we pay for the purchase of raw materials and components to the collection of cash from our customers, and can be significantly impacted by the timing of collections and payments in a period. ~~We expect ASP to continue to invest in working capital throughout 2019.~~

•The aggregate of prepaid expenses and other assets and accrued expenses and other liabilities used ~~$71~~$69 million of cash during the first ~~six~~three months of ~~2019~~2020 as compared to using ~~$108~~$74 million of cash in the comparable period of ~~2018.~~2019. The year over year change was largely driven by the timing of ~~net~~ tax payments and various employee benefit accruals.

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 ~~$3.2 billion~~$20 million during the ~~six~~three months ended ~~June 28, 2019~~March 27, 2020 as compared to the comparable period of ~~2018,~~2019, due ~~primarily~~ to ~~business acquisitions completed~~an increase in ~~2019.~~capital expenditures and cash paid for investments.

Capital expenditures are made primarily for increasing capacity, replacing equipment, supporting product development initiatives, improving information technology systems, and purchasing equipment that is used in revenue arrangements with customers. For the ~~full~~ year ~~2019,~~ended December 31, 2020, we expect capital spending to be between approximately ~~$150~~$80 million and ~~$160~~

Table of Contents

$90 million, which includes approximately ~~$35~~$20 million of one-time capital expenditures related to the integration of the ASP acquisition. 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 of equity, ~~and~~the issuance and repayments of debt and commercial paper, and payments of quarterly cash dividends to shareholders. Financing activities ~~generated~~used cash of ~~$2.8 billion~~$283 million during the ~~six~~three months ended ~~June 28, 2019, of which $1.4 billion was due to the issuance of~~March 27, 2020, reflecting borrowings from our ~~0.875% senior convertible notes and $1.0 billion was related to the issuance of our 364-day delayed-draw term loan facility due in 2020 (“2020 Delayed-Draw~~2021 Term ~~Loan”),~~Loan, which was ~~partially~~more than offset by ~~the repayment~~repayments of ~~$400~~commercial paper of $383 million and $250 million of our ~~2019 delayed draw term loan and $55 million of our 1.80% senior unsecured notes.~~2020 Term Loan. In the comparable ~~2018~~2019 period, financing activities generated cash of approximately ~~$979 million. In~~$2.4 billion, largely due to the ~~six~~issuance of our Convertible Senior Notes and borrowings under our2020 Delayed-Draw Term Loan. During the three months ended ~~June 28, 2019,~~March 27, 2020, we ~~made net borrowings of commercial paper under the U.S. and Euro commercial paper programs (“Commercial Paper Programs”) of $892 million and~~ paid ~~$81~~$24 million of cash dividends to shareholders of our common ~~stock and MCPS.~~stock.

~~Convertible Senior Notes~~2021 Term Loan

On ~~February 22, 2019,~~March 23, 2020, we ~~issued $1.4 billion~~entered into a credit facility agreement that provides for the 2021 Term Loan in an aggregate principal amount of ~~our 0.875% Convertible Senior Notes due 2022 (the “Convertible Notes”), including $187.5~~$425 million. On the same day, we drew down $375 million available under the 2021 Term Loan. We subsequently increased the size of this facility by $325 million on April 3, 2020, and drew the additional $375 million in ~~aggregate principal~~April 2020, resulting in an outstanding amount ~~resulting~~of $750 million. We paid approximately $2.0 million in debt issuance costs associated with the 2021 Term Loan. The borrowings from ~~an exercise in full~~this credit facility were used for settlement of ~~an over-allotment option, to fund, in part, the ASP acquisition.~~outstanding commercial paper. The ~~Convertible Notes bear~~2021 Term Loan bears interest at a variable rate equal to LIBOR plus a ratings-based margin currently at 155 basis points. As of March 27, 2020, borrowings under this facility bore an interest rate of ~~0.875%~~2.51% per ~~year, payable semiannually in arrears~~annum. The 2021 Term Loan is due on ~~February 15~~March 19, 2021 and ~~August 15 of each year, beginning on August 15, 2019.~~prepayable at our option. We are not permitted to re-borrow once the term loan is repaid. The ~~Convertible Notes mature on February 15, 2022, unless earlier repurchased or converted in accordance with their~~ terms ~~prior to such date.~~

The Convertible Notes are convertible into shares of our common stock at an initial conversion rate of 9.3777 shares per $1,000 principal amount of Convertible Notes (which is equivalent to an initial conversion price of $106.64 per share), subject to adjustment upon the occurrence of certain events. The initial conversion price represents a premium of approximately 32.5%and conditions, including covenants, applicable to the ~~$80.48 per share closing price of~~2021 Term Loan, are substantially similar to those applicable to our common stock on February 19, 2019. Upon conversion of the Convertible Notes, holders will receive cash, shares of our common stock, or a combination thereof, at our election. Our current intention is to settle such conversions through cash up to the principal amount of the converted Convertible Notes and, if applicable, through shares of our common stock for conversion value, if any, in excess of the principal amount of the converted Convertible Notes.Revolving Credit Facility.

2020 Delayed-Draw Term Loan ~~Due 2020~~

On March 1, 2019, we entered into ~~the~~a credit facility agreement that provides for ~~a 364-day delayed-draw term loan facility~~the 2020 Delayed-Draw Term Loan in an aggregate principal amount of $1.0 billion. On March 20, 2019, we drew down the full $1.0 billion available under the 2020 Delayed-Draw Term Loan in order to fund, in part, the ASP ~~Acquisition.~~acquisition. The 2020 Delayed-Draw Term Loan bears interest at a variable rate equal to ~~the London inter-bank offered rate~~LIBOR plus a ratings based margin, ~~currently~~prior to the Amendments, at 75 basis points and, following the Amendments, at 155 basis points. As of ~~June 28, 2019,~~March 27, 2020 and prior to the Amendments noted above, borrowings under this facility bore an interest rate of ~~3.16%~~1.52% per annum. The 2020 Delayed-Draw Term Loan is prepayable at our option, and we are not permitted to re-borrow once the term loan is repaid. The terms and conditions, including covenants, applicable to the 2020 Delayed-Draw Term Loan are substantially similar to those applicable to ~~the~~our Revolving Credit Facility.

On February 25, 2020, we extended the maturity of the 2020 Delayed-Draw Term Loan to August 28, 2020. Additionally, on April 24, 2020 we further extended the maturity to May 30, 2021 and therefore, have classified the outstanding amount as long-term debt in our Consolidated Condensed Balance Sheet as of March 27, 2020. We ~~generally expect~~were in compliance with our covenants both before and after the extension. The 2020 Delayed-Draw Term Loan is not callable and remains prepayable at our option.

2020 Term Loan

On October 25, 2019, we entered into a credit facility agreement that provides for the 2020 Term Loan in an aggregate principal amount of $300 million. On October 25, 2019, we drew down the full $300 million available under the 2020 Term Loan in order to fund, in part, the Censis acquisition. We subsequently increased the size of this facility by $200 million on November 8, 2019 and drew the additional amount on the same day resulting in an outstanding amount of $500 million. The 2020 Term Loan bears interest at a variable rate equal to LIBOR plus a ratings-based margin currently at 75 basis points. As of March 27, 2020, borrowings under this facility bore an interest rate of 1.55% per annum. The 2020 Term Loan is due on October 23, 2020 and prepayable at our option. We are not permitted to re-borrow once the term loan is repaid. The terms and conditions, including covenants, applicable to the 2020 Term Loan are substantially similar to those applicable to our Revolving Credit Facility.

On February 26, 2020, we prepaid $250 million of the 2020 Term Loan. The prepayment fees associated with this payment were immaterial.

Table of Contents

When market conditions allow, we also have the ability 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, $2.0 billion senior unsecured revolving credit facility that expires on November 30, 2023 (“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 ~~June 28, 2019,~~March 27, 2020, 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 or utilize term loans to refinance all or part of these borrowings.

We had $2.0 billion available under the Revolving Credit Facility as of ~~June 28, 2019.~~March 27, 2020. Of this amount, approximately ~~$1.6 billion~~$764 million was being used to backstop outstanding U.S. and Euro commercial paper balances. Accordingly, we had the ability to incur an additional ~~$449 million~~$1.2 billion of indebtedness under the Revolving Credit Facility as of ~~June 28, 2019.~~March 27, 2020. Refer to Note 65 of the consolidated 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 ~~June 28, 2019,~~March 27, 2020, commercial paper outstanding under the U.S. dollar-denominated commercial paper program had an annual effective rate of ~~2.71%~~2.67% and a weighted average remaining maturity of approximately 2237 days. As of ~~June 28, 2019,~~March 27, 2020, commercial paper outstanding under the Euro-denominated commercial paper program had an annual effective rate of ~~(0.10)~~(0.11)% and a weighted average remaining maturity of approximately 7134 days.

Pursuant to our term loan agreement, ~~$1.0 billion~~$250 million of our ~~long-term debt~~2020 Term Loan is scheduled for maturity and repayment within 12 months. Accordingly, we have ~~classified~~recorded this ~~as current~~in the Current portion of long-term debt online item in the accompanying Consolidated Condensed Balance Sheet.

Dividends

~~Aggregate cash~~Cash payments for ~~the~~common stock dividends paid to shareholders during the ~~six~~three months ended ~~June 28, 2019~~March 27, 2020 were ~~$81~~$24 million and ~~were~~are recorded as dividends to common shareholders in the Consolidated Condensed Statement of Changes in Equity and the Consolidated Condensed Statement of Cash Flows. On January 28, 2020, dividends of $17.3 million were declared on our preferred shares and paid on April 1, 2020. As such, our preferred dividends were accrued and recorded as Mandatory convertible preferred stock cumulative dividends in the Consolidated Condensed Statement of Changes in Equity and in Accrued expenses and other current liabilities in the Consolidated Condensed Balance Sheet as of March 27, 2020.

Cash and Cash Requirements

As of ~~June 28, 2019,~~March 27, 2020, we held approximately ~~$1.1~~$1.0 billion of cash and cash equivalents that were invested in highly liquid investment-grade instruments with a maturity of 90 days or less with an annual effective interest rate that approximated ~~0.74%~~1.0% during the three months ended ~~June 28, 2019.~~March 27, 2020. Approximately ~~85%~~90% of the ~~$1.1~~$1.0 billion of cash and cash equivalents we held as of ~~June 28, 2019~~March 27, 2020 was held outside of 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, fund our restructuring activities and 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.

Additionally, we anticipate the provisions of the CARES Act will provide us short-term liquidity benefits, specifically the deferral of employer payroll tax payments until December 31, 2021 and December 31, 2022 of approximately $40 million to $50 million, in addition to other potential income tax impacts that we are continuing to evaluate.

Given the impact of the COVID-19 pandemic and current market conditions in the U.S., we have updated our assertion for previously unremitted earnings from 2019 and prior periods due to new facts and circumstances that we did not face in prior periods. The TCJA eliminated the U.S. tax cost for qualified repatriation beginning in ~~2018. Foreign~~2018 but foreign cumulative earnings

Table of Contents

remain subject to foreign remittance taxes. During the three months ended March 27, 2020, we have provided foreign remittance taxes of $13 million on the planned repatriation of $300 million of previously unremitted earnings from 2019 and prior periods.

We have made an election regarding the amount of current earnings that we do not intend to repatriate due to local working capital needs, local law restrictions, high foreign remittance costs, previous investments in physical assets and acquisitions, or future growth needs. For most of our foreign operations, we make an assertion regarding the amount of earnings in excess of intended repatriation that are expected to be held for indefinite reinvestment. ~~No provisions for foreign remittance taxes have been made with respect to earnings that are planned to be reinvested indefinitely.~~ The amount of foreign remittance taxes that may be applicable to ~~such~~our permanently reinvested earnings is not readily determinable given local law restrictions that may apply to a portion of such earnings, unknown changes in foreign tax law that may occur during the applicable restriction periods caused by applicable local corporate law for cash repatriation, and the various tax planning alternatives we could employ if we repatriated these earnings.

As of ~~June 28, 2019,~~March 27, 2020, 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~~Other than noted below, there were no material changes during the three ~~and six~~ month periods ended ~~June 28, 2019~~March 27, 2020 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 ~~2018~~2019 Annual Report on Form 10-K.

On January 1, 2020, we adopted ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). Concurrent with our adoption of ASU 2016-13, we updated our methodology for estimating the allowance for credit losses as provided below:

Trade Accounts, Financing, and Unbilled Receivables: We maintain allowances for credit losses to reflect expected credit losses inherent in our portfolio of receivables. Determination of the allowances requires us to exercise judgment about the timing, frequency, and severity of credit losses that could materially affect the allowances and, therefore, net earnings. The allowances for credit losses represent management’s best estimate of the credit losses expected from our trade accounts, financing, and unbilled receivable portfolios over the remaining contractual life. We pool assets with similar risk characteristics for this measurement based on attributes that may include asset type, duration, and/or credit risk rating. The future expected losses of each pool are estimated based on numerous quantitative and qualitative factors reflecting management’s estimate of collectibility over the remaining contractual life of the pooled assets, including:

•duration;

•historical, current, and forecasted future loss experience by asset type;

•historical, current, and forecasted delinquency and write-off trends;

•historical, current, and forecasted economic conditions; and

•historical, current, and forecasted credit risk.

We regularly perform detailed reviews of our trade accounts, financing, and unbilled receivable portfolios to determine if changes in the aforementioned qualitative and quantitative factors have impacted the adequacy of the allowances.

Recent deterioration in overall global economic conditions and worldwide capital markets as a result of the COVID-19 pandemic may negatively impact our customers’ ability to pay and, as a result, may increase the difficulty in collecting trade accounts, financing, and unbilled receivables. We did not realize notable increases in loss rates and delinquencies during the first quarter ended March 27, 2020, and given the nature of our portfolio of receivables, our historical experience during times of challenging economic conditions, and our forecasted future impact of COVID-19 on our customer’s ability to pay, we did not record material provisions for credit losses as a result of the COVID-19 pandemic during the first quarter ended March 27, 2020. If the financial condition of our customers were to deteriorate beyond our current estimates, resulting in an impairment of their ability to make payments, we would be required to write-off additional receivable balances, which would adversely impact our net earnings and financial condition.

Acquired Intangibles: Our business acquisitions typically result in the recognition of goodwill, in-process R&D and other intangible assets, which affect the amount of future period amortization expense and possible impairment charges that we may incur. We review identified intangible assets for impairment whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable.

In connection with management’s updated forecast for the Telematics business that indicated a decline in sales and operating profit to levels lower than previously forecasted, due in large part to the impacts of the COVID-19 pandemic, management

Table of Contents

determined the change in forecast indicated the related carrying value of goodwill may not be recoverable and performed a quantitative impairment assessment over the Telematics reporting unit on March 27, 2020. This analysis resulted in an impairment of $85.3 million. Refer to Note 3 for information regarding management’s assumptions used in determining the fair value of the reporting unit.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our concentrations of credit risk arising from receivables from customers are limited due to the diversity of our customers. Our businesses perform credit evaluations of their customers’ financial conditions as appropriate and also obtain collateral or other security when appropriate. Notwithstanding these efforts, the current distress in the global economy resulting from COVID-19 may increase the difficulty in collecting receivables.

Additional 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 ~~2018~~2019 Annual Report on Form 10-K. There were no material changes during the three months ended ~~June 28, 2019~~March 27, 2020 to the information reported in our ~~2018~~2019 Annual Report on Form ~~10-K.~~10-K relating to our evaluation of interest rate, foreign currency exchange, and commodity price risk.

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~~Relating to Forward-Looking Statements,” in Part I - Item 2 of this Form 10-Q and in the “Risk Factors” section of our ~~2018~~2019 Annual Report on Form ~~10-K. Other than as provided below, there~~10-K and such information should be read in conjunction with the new risk factor relating to COVID-19 that is presented below. The developments described in this additional risk factor have heightened, or in some cases manifested, certain of the risks disclosed in the other risk factor identified in the “Risk Factors” section of our 2019 Annual Report Form 10-K, and such risk factors are further qualified by the information relating to COVID-19 that is described in this Report. There were no other material changes during the quarter ended ~~June 28, 2019~~March 27, 2020 to the risk factors reported in the “Risk Factors” section of our ~~2018~~2019 Annual Report on Form 10-K.

~~International economic, political, legal, compliance~~

The effect of the COVID-19 pandemic on our global operations and ~~business factors could negatively affect our financial statements.~~

~~In 2018, approximately 45%~~the operations 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,vendors is ~~subject to risks that are customarily encountered in non-U.S. operations, as well as increased risks due to significant uncertainties related to political and economic changes, including:~~

~~interruption in the transportation of materials to us and finished goods to our customers;~~

~~differences in terms of sale, including payment terms;~~

~~local product preferences and product requirements;~~

~~changes in a country’s or region’s political or economic conditions, including changes in relationship with the United States, particularly with 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;~~

~~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.~~

~~The interest rates on our credit facilities may be impacted by the phase out of the London Interbank Offered Rate (“LIBOR”)~~

Pursuant to the terms of our credit facilities, the interest rate on our credit facilities may be based on LIBOR. In July 2017, the head of the United Kingdom Financial Conduct Authority announced the desire to phase out the use of LIBOR by the end of 2021. At this time, there is no definitive information regarding the future utilization of LIBOR or of any particular replacement rate. The phase out of LIBOR may havehaving a material, adverse impact on our financial condition and results of operations.

Our global operations expose us broadly to the COVID-19 pandemic, which has spread worldwide. In particular, continued efforts to mitigate the spread of the virus have caused us, our suppliers, and customers to reduce commercial activities and utilization of facilities and manufacturing sites, resulting in reduction in demand for our products and services, our ability to source required materials and components, and our ability to manufacture, sell, and service our products. In addition, implementation of measures to help control the spread of the virus, including internal work-from-home policies to protect the health of our employees and community, “shelter in place” and “stay at home” orders, travel restrictions, and school closures have negatively impacted our collaboration efforts with our global colleagues, customers, vendors, and service providers, and our ability to retain our workforce without implementing targeted furloughs. Furthermore, the volatility and disruption in the capital markets from the COVID-19 pandemic and its impact on the global economy has adversely effected the cost of, and access to capital, including financing from commercial paper markets, and the timing of the proposed separation of Vontier. While we have implemented global and local response teams, implemented incremental cost reduction efforts, and implemented

Table of Contents

business continuity efforts internally and with our ~~borrowings~~customers, suppliers, and vendors, the duration and extent of the operational and financial impact of the COVID-19 pandemic remains highly uncertain.

The degree to which COVID-19 impacts us going forward will depend on future developments that are highly uncertain and therefore cannot be predicted, including, but not limited to, the duration and spread of the pandemic, its severity, or the actions taken to contain the spread and impact of COVID-19, and how quickly and to what extent normal economic, market, and operating conditions resume. Even after the COVID-19 pandemic has subsided as a public health matter, we may experience material adverse impacts to our business as a result of its adverse impact on the global economy and consumer confidence.

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

During the fiscal quarter ended March 27, 2020, we issued an aggregate of 39,611 shares of the Company’s common stock to certain employees of a recently acquired operating company in a private placement pursuant to Rule 506 of Regulation D promulgated under the Securities Act of 1933, as amended, for total consideration of $2.9 million.

During the fiscal quarter ended March 27, 2020, we acquired the following shares of the Company’s common stock in settlement of the withholding obligations pertaining to vesting of our ~~credit facilities.~~Performance Stock Awards and Performance-Based Restricted 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 - January 31

—

N/A

February 1 - February 29

34,242

75.07

N/A

March 1 - March 27

—

N/A

Total

34,242

75.07

N/A

⁽¹⁾In connection with the vesting of the Company’s Performance Stock Awards (“PSAs”) and Performance-Based Restricted Stock Awards (“RSAs”) previously granted to the respective executive officers of the Company and in accordance with the terms of the Company’s 2016 Stock Incentive Plan, the Company withheld 34,242 shares of the Company’s common stock based on the corresponding closing price to offset tax withholding obligations that arose upon vesting of the PSAs and RSAs as applicable.

Table of Contents

ITEM 6. EXHIBITS



Exhibit Number			Description
~~Exhibit~~ ~~Number~~ 3.1		~~Description~~
~~3.1~~	Amended and Restated Certificate of Incorporation of Fortive Corporation (incorporated by reference to Exhibit 3.1 to Fortive Corporation’s Current Report on Form 8-K filed on June 9, 2017, File No. 1-37654).

3.2			Amended and Restated Bylaws of Fortive Corporation (incorporated by reference to Exhibit 3.2 to Fortive Corporation’s Current Report on Form 8-K filed on June 9, 2017, File No 1-37654).

3.3			Certificate of Designations of the 5.00% Mandatory Convertible Preferred Stock, Series A (incorporated by reference to Exhibit 3.1 to Fortive Corporation’s Current Report on Form 8-K filed on June 29, 2018, File No 1-37654).

10.1			~~Description~~Amendment No. 2 to the Revolving Credit Agreement, dated as of Compensation Arrangements for Non-Management Directors.*February 25, 2020, by and among Fortive Corporation and certain of its subsidiaries from time to time party thereto, Bank of America, N.A., as Administrative Agent and a Swing Line Lender, and the lenders referred to therein (incorporated by reference to Exhibit 10.1 to Fortive Corporation’s Current Report on Form 8-K filed on February 28, 2020, File No 1-37654).

~~31.1~~10.2			Amendment No. 1 to Term Loan Credit Agreement, dated as of February 25, 2020, by and among Fortive Corporation, Bank of America, N.A., as Administrative Agent, and the lenders referred to therein (incorporated by reference to Exhibit 10.2 to Fortive Corporation’s Current Report on Form 8-K filed on February 28, 2020, File No 1-37654).

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 (1) - the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.

101.SCH			Inline XBRL Taxonomy Extension Schema Document (1)

101.CAL			Inline XBRL Taxonomy Extension Calculation Linkbase Document (1)

101.DEF			Inline XBRL Taxonomy Extension Definition Linkbase Document (1)

101.LAB			Inline XBRL Taxonomy Extension Label Linkbase Document (1)

101.PRE			Inline XBRL Taxonomy Extension Presentation Linkbase Document (1)


*104		~~Indicates management contract or compensatory plan, contract or arrangement~~


~~(1)~~	~~Exhibit 101 to~~The cover page from this ~~report includes~~Quarterly Report on Form 10-Q for the ~~following documents~~quarter ended March 27, 2020, formatted in Inline XBRL ~~(Extensible Business Reporting Language): (i) Consolidated Condensed Balance Sheets as of June 28, 2019~~ and December 31, 2018, (ii) Consolidated Condensed Statements of Earnings for the three and six months ended June 28, 2019 and June 29, 2018, (iii) Consolidated Condensed Statements of Comprehensive Income for the three and six months ended June 28, 2019 and June 29, 2018, (iv) Consolidated Condensed Statement of Changescontained in Equity for the three and six months ended June 28, 2019 and June 29, 2018, (v) Consolidated Condensed Statements of Cash Flows for the six months ended June 28, 2019 and June 29, 2018, and (vi) Notes to Consolidated Condensed Financial Statements.Exhibit 101

(1) Exhibit 101 to this report includes the following documents formatted in Inline XBRL (Extensible Business Reporting Language): (i) Consolidated Condensed Balance Sheets as of March 27, 2020 and December 31, 2019, (ii) Consolidated Condensed Statements of Earnings for the three months ended March 27, 2020 and March 29, 2019, (iii) Consolidated Condensed Statements of Comprehensive Income for the three months ended March 27, 2020 and March 29, 2019, (iv) Consolidated Condensed Statement of Changes in Equity for the three months ended March 27, 2020 and March 29, 2019,

Table of Contents

(v) Consolidated Condensed Statements of Cash Flows for the three months ended March 27, 2020 and March 29, 2019, and (vi) Notes to Consolidated Condensed Financial Statements.

Table of Contents

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: April 30, 2020			~~FORTIVE CORPORATION:~~
By:
~~Date: July 25, 2019~~	~~By:~~	/s/ Charles E. McLaughlin
				Charles E. McLaughlin
				Senior Vice President and Chief Financial Officer

Date: ~~July 25, 2019~~April 30, 2020			By:	/s/ ~~Emily A. Weaver~~Christopher M. Mulhall
				~~Emily A. Weaver~~Christopher M. Mulhall
				Chief Accounting Officer



PART I -	FINANCIAL INFORMATION	Page
Item 1.	Financial Statements
	Consolidated Condensed Balance Sheets	4
	Consolidated Condensed Statements of Earnings	5
	Consolidated Condensed Statements of Comprehensive Income	6
	Consolidated Condensed Statement s of Changes in Equity	7
	Consolidated Condensed Statements of Cash Flows	98
	Notes to Consolidated Condensed Financial Statements	109
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	3126
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4443
Item 4.	Controls and Procedures	4443
PART II -	OTHER INFORMATION
Item 1A.	Risk Factors	4543
Item 6.2.	~~Exhibits~~Unregistered Sales of Equity Securities and Use of Proceeds	4644
Item 6.	~~Signatures~~Exhibits	45
	Signatures	47



	As of
	June 28, 2019			December 31, 2018
	(unaudited)
ASSETS
Current assets:
Cash and equivalents	$	1,092.1		$	1,178.4
Accounts receivable, net	1,315.2			1,195.1
Inventories:
Finished goods	336.3			219.5
Work in process	97.0			103.1
Raw materials	260.4			251.9
Total inventories	693.7			574.5
Prepaid expenses and other current assets	313.9			193.2
Current assets, discontinued operations	21.4			30.0
Total current assets	3,436.3			3,171.2
Property, plant and equipment, net of accumulated depreciation of $821.4 and $889.8 at June 28, 2019 and December 31, 2018, respectively	514.7			576.1
Operating lease right-of-use assets	197.6			—
Other assets	755.4			548.9
Goodwill	7,750.9			6,133.1
Other intangible assets, net	3,813.2			2,476.3
Total assets	$	16,468.1		$	12,905.6
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt	$	1,000.0		$	455.6
Trade accounts payable	697.9			706.5
Current operating lease liabilities	51.3			—
Accrued expenses and other current liabilities	1,024.9			999.3
Current liabilities, discontinued operations	17.1			30.7
Total current liabilities	2,791.2			2,192.1
Operating lease liabilities	151.0			—
Other long-term liabilities	1,306.5			1,125.9
Long-term debt	5,196.5			2,974.7
Equity:
Preferred stock: $0.01 par value, 15.0 million shares authorized; 5.0% Mandatory convertible preferred stock, series A, 1.4 million shares designated, issued and outstanding at June 28, 2019 and December 31, 2018	—			—
Common stock: $0.01 par value, 2.0 billion shares authorized; 336.2 and 335.1 million issued; 335.4 and 334.5 million outstanding at June 28, 2019 and December 31, 2018, respectively	3.4			3.4
Additional paid-in capital	3,265.4			3,126.0
Retained earnings	3,810.4			3,552.7
Accumulated other comprehensive income (loss)	(67.6		)	(86.6		)
Total Fortive stockholders’ equity	7,011.6			6,595.5
Noncontrolling interests	11.3			17.4
Total stockholders’ equity	7,022.9			6,612.9
Total liabilities and equity	$	16,468.1		$	12,905.6



	Advanced Sterilization Products
Inventory	$	164.2
Property, plant and equipment	45.2
Goodwill	1,299.9
Other intangible assets, primarily customer relationships, trade names and technology	1,149.0
Other assets and liabilities, net	(63.4		)
Total consideration allocated to Principal Countries	2,594.9
Prepaid acquisition asset related to Non-Principal Countries	105.1
Net cash consideration	$	2,700.0



Accounts receivable	$	14.7
Property, plant and equipment	1.8
Goodwill	265.8
Other intangible assets	304.3
Other assets and liabilities, net	(49.5		)
Net cash consideration	$	537.1



Balance, December 31, 2018	$	6,133.1
Adjustments to preliminary purchase price allocations for acquisitions completed in 2018	40.4
Attributable to 2019 acquisitions	1,565.7
Foreign currency translation & other	11.7
Balance, June 28, 2019	$	7,750.9



	June 28, 2019					December 31, 2018
	Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization
Finite-lived intangibles:
Patents and technology	$	988.7	$	(313.4	)	$	614.0	$	(280.8	)
Customer relationships and other intangibles	3,113.1		(686.3		)	2,204.2		(589.9		)
Total finite-lived intangibles	4,101.8		(999.7		)	2,818.2		(870.7		)
Indefinite-lived intangibles:
Trademarks and trade names	711.1		—			528.8		—
Total intangibles	$	4,812.9	$	(999.7	)	$	3,347.0	$	(870.7	)



Remainder of 2019	$	33.3
2020	49.1
2021	36.0
2022	25.9
2023	17.6
Thereafter	70.4
Total lease payments	232.3
Less: imputed interest	(30.0		)
Total lease liabilities	$	202.3



2019	$	54.2
2020	41.2
2021	32.4
2022	24.0
2023	13.5
Thereafter	16.1
Total lease payments	$	181.4



	June 28, 2019
Professional Instrumentation	$	158.9
Industrial Technologies	402.2
Total remaining performance obligations	$	561.1



Stock Awards	$	74.9
Stock options	62.8
Total unrecognized compensation cost	$	137.7



Balance, December 31, 2018	$	72.1
Accruals for warranties issued during the period	32.1
Settlements made	(35.7		)
Additions due to acquisitions	3.4
Effect of foreign currency translation	0.3
Balance, June 28, 2019	$	72.2



	% Change Three Months Ended June 28, 2019 vs. Comparable 2018 Period		% Change Six Months Ended June 28, 2019 vs. Comparable 2018 Period
Total revenue growth (GAAP)	16.4	%	11.8	%
Existing businesses (Non-GAAP)	2.0	%	2.8	%
Acquisitions(Non-GAAP)	16.5	%	11.5	%
Currency exchange rates (Non-GAAP)	(2.1	)%	(2.5	)%