EVERETT, Wash.--(BUSINESS WIRE)--Fortive Corporation (“Fortive”) (NYSE: FTV) today announced results for
the third quarter 2018.
For the third quarter ended September 28, 2018, net earnings
attributable to common stockholders were $227.9 million. For the same
period, adjusted net earnings were $321.1 million. Diluted net earnings
per share for the third quarter ended September 28, 2018 were $0.64. For
the same period, adjusted diluted net earnings per share were $0.86.
For the third quarter of 2018, revenues increased 9.2% year-over-year to
$1.8 billion, with core revenue growth of 3.2%.
James A. Lico, President and Chief Executive Officer, stated, “Today we
reported third quarter high-teens earnings growth and a 23% increase in
free cash flow, reflecting the underlying strength of our core
portfolio, the power of the Fortive Business System, and the increasing
momentum of our M&A flywheel. Given our strong free cash flow generation
and a healthy balance sheet, we are in an advantaged position to
accelerate our growth strategy through continued organic and inorganic
investments.”
On October 1, 2018, Fortive completed the previously announced split-off
of its Automation & Specialty platform (excluding Fortive’s Hengstler
and Dynapar businesses) (the “A&S Business”). Because the split-off of
the A&S Business was consummated in the fourth quarter of 2018,
Fortive’s results for both the fourth quarter and full year 2018 will
reflect the classification of the A&S Business as a discontinued
operation. As a result, Fortive’s guidance for the full year 2018 has
been updated to present adjusted diluted net earnings per share only
from continuing operations to reflect a full year $0.52 dilutive impact
from the split-off.
For the fourth quarter of 2018, Fortive anticipates diluted net earnings
per share from continuing operations to be in the range of $0.58 to
$0.62 and adjusted diluted net earnings per share from continuing
operations to be in the range of $0.83 to $0.87. For the full year 2018,
Fortive expects diluted net earnings per share from continuing
operations to be in the range of $2.43 to $2.47. For the full year 2018,
Fortive expects adjusted diluted net earnings per share from continuing
operations to be in the range of $2.98 to $3.02.
Mr. Lico added, “2018 has been a transformational year. We completed the
split-off of the A&S Business, the acquisitions of Gordian and Accruent,
and our Mandatory Convertible Preferred Stock offering, and made
substantial progress towards the expected closing of the Advanced
Sterilization Products acquisition in early 2019. These transactions
significantly advance our portfolio enhancement efforts aimed at
increasing growth and reducing cyclicality across Fortive. We are well
positioned to deliver another year of double-digit adjusted earnings
growth in 2019 and compelling shareholder returns over the long term.”
Fortive will discuss results and outlook during its quarterly investor
conference call today starting at 5:30 p.m. ET. The call and an
accompanying slide presentation will be webcast on the “Investors”
section of the website, www.fortive.com,
under “Events & Presentations.” A replay of the webcast will be
available at the same location shortly after the conclusion of the
presentation and will remain available until the next quarterly earnings
call.
The conference call can be accessed by dialing 844-443-2871 within the
U.S. or by dialing 213-660-0916 outside the U.S. a few minutes before
5:30 p.m. ET and notifying the operator that you are dialing in for
Fortive’s earnings conference call (access code 5484599). A replay of
the conference call will be available two hours after the completion of
the call until Friday, November 9, 2018. Once available, you can access
the conference call replay by dialing 800-585-8367 within the U.S. or
404-537-3406 outside the U.S. (access code 5484599) or visit the
“Investors” section of the website under “Events & Presentations.”
ABOUT FORTIVE
Fortive is a diversified industrial growth company comprised of
Professional Instrumentation and Industrial Technologies businesses that
are recognized leaders in attractive markets. With 2017 revenues of $6.7
billion, Fortive’s well-known brands hold leading positions in field
instrumentation, transportation, sensing, product realization,
automation and specialty, and franchise distribution. Fortive is
headquartered in Everett, Washington and employs a team of more than
26,000 research and development, manufacturing, sales, distribution,
service and administrative employees in more than 50 countries around
the world. With a culture rooted in continuous improvement, the core of
our company’s operating model is the Fortive Business System. For more
information please visit: www.fortive.com.
NON-GAAP FINANCIAL MEASURES
In addition to the financial measures prepared in accordance with
generally accepted accounting principles (GAAP), this earnings release
also references “adjusted net earnings,” “adjusted diluted net earnings
per share,” and “core revenue,” which are non-GAAP financial measures.
Furthermore, in connection with the recent split-off transaction of our
A&S Business, we are including in an attached schedule certain adjusted
financial data, which are non-GAAP financial measures, for the fiscal
year ended December 31, 2017 and each of the three-month periods ended
December 31, 2017, March 30, 2018, June 29, 2018 and September 28, 2018
to give effect to the split-off transaction. The reasons why we believe
these measures, when used in conjunction with the GAAP financial
measures, provide useful information to investors, how management uses
such non-GAAP financial measures, a reconciliation of these measures to
the most directly comparable GAAP measures and other information
relating to these measures are included in the supplemental
reconciliation schedule attached. The non-GAAP financial measures should
not be considered in isolation or as a substitute for the GAAP financial
measures, but should instead be read in conjunction with the GAAP
financial measures. The non-GAAP financial measures used by Fortive in
this release may be different from similarly-titled non-GAAP measures
used by other companies.
FORWARD-LOOKING STATEMENTS
Statements in this release that are not strictly historical, statements
regarding Fortive’s anticipated earnings, business and acquisition
opportunities, timing of acquisitions and dispositions, anticipated
revenue growth, anticipated operating margin expansion, anticipated cash
flow, economic conditions, future prospects, shareholder value, and any
other statements identified by their use of words like “anticipate,”
“expect,” “believe,” “outlook,” “guidance,” or “will” or other words of
similar meaning are “forward-looking” statements within the meaning of
the federal securities laws. There are a number of important factors
that could cause actual results, developments and business decisions to
differ materially from those suggested or indicated by such
forward-looking statements and you should not place undue reliance on
any such forward-looking statements. These factors include, among other
things: deterioration of or instability in the economy, the markets we
serve, international trade policies and the financial markets, changes
in trade relations with China, contractions or lower growth rates and
cyclicality of markets we serve, competition, changes in industry
standards and governmental regulations, our ability to successfully
identify, consummate, integrate and realize the anticipated value of
appropriate acquisitions and successfully complete divestitures and
other dispositions, our ability to develop and successfully market new
products, software, and services and expand into new markets, the
potential for improper conduct by our employees, agents or business
partners, contingent liabilities relating to acquisitions and
divestitures, impact of changes to tax laws, our compliance with
applicable laws and regulations and changes in applicable laws and
regulations, risks relating to international economic, political, legal,
compliance and business factors, risks relating to potential impairment
of goodwill and other intangible assets, currency exchange rates, tax
audits and changes in our tax rate and income tax liabilities, the
impact of our debt obligations on our operations, litigation and other
contingent liabilities including intellectual property and
environmental, health and safety matters, our ability to adequately
protect our intellectual property rights, risks relating to product,
service or software defects, product liability and recalls, risks
relating to product manufacturing, our relationships with and the
performance of our channel partners, commodity costs and surcharges, our
ability to adjust purchases and manufacturing capacity to reflect market
conditions, reliance on sole sources of supply, security breaches or
other disruptions of our information technology systems, adverse effects
of restructuring activities, labor matters, and disruptions relating to
man-made and natural disasters. Additional information regarding the
factors that may cause actual results to differ materially from these
forward-looking statements is available in our SEC filings, including
our Annual Report on Form 10-K for the year ended December 31, 2017 and
our Quarterly Report on Form 10-Q for the quarters ended March 30, 2018
and June 29, 2018. These forward-looking statements speak only as of the
date of this release, and Fortive does 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.
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FORTIVE CORPORATION AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF EARNINGS
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($ and shares in millions, except per share amounts)
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(unaudited)
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Three Months Ended
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Nine Months Ended
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September 28,
2018
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September 29,
2017
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September 28,
2018
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September 29,
2017
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Sales
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$
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1,840.1
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$
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1,685.3
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$
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5,436.8
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$
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4,849.3
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Cost of sales
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(915.8
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)
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(845.9
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)
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(2,702.8
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)
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(2,460.8
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)
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Gross profit
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924.3
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839.4
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2,734.0
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2,388.5
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Operating costs:
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Selling, general and administrative expenses
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(490.4
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)
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(380.7
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)
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(1,359.5
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)
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(1,089.8
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Research and development expenses
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(112.5
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)
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(102.0
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)
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(332.4
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(297.3
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)
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Operating profit
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321.4
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356.7
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1,042.1
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1,001.4
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Non-operating expenses:
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Gain from acquisition
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—
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15.3
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—
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15.3
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Interest expense, net
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(24.4
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)
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(22.9
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(74.3
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)
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(68.2
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)
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Other non-operating expenses
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(0.8
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)
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(0.8
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)
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(2.6
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)
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(2.3
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Earnings before income taxes
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296.2
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348.3
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965.2
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946.2
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Income taxes
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(50.9
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)
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(80.5
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(163.7
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)
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(238.6
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Net earnings
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245.3
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267.8
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801.5
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707.6
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Mandatory convertible preferred stock cumulative dividends
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(17.4
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)
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—
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(17.6
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—
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Net earnings attributable to common stockholders
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$
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227.9
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$
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267.8
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$
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783.9
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$
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707.6
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Net earnings per common share:
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Basic
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$
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0.65
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$
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0.77
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$
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2.24
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$
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2.04
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Diluted
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$
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0.64
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$
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0.76
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$
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2.21
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$
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2.01
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Average common stock and common equivalent shares outstanding:
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Basic
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349.9
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347.7
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349.2
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347.3
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Diluted
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355.3
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352.9
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354.8
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352.2
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This information is for reference only. A complete copy of
Fortive’s Form 10-Q financial statements is available on the
Company’s website (www.fortive.com).
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FORTIVE CORPORATION AND SUBSIDIARIES
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SEGMENT INFORMATION
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($ in millions)
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(unaudited)
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Three Months Ended
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Nine Months Ended
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September 28,
2018
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September 29,
2017
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September 28,
2018
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September 29,
2017
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Sales:
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Professional Instrumentation
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$
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894.1
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$
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786.8
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$
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2,654.8
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$
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2,261.9
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Industrial Technologies
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946.0
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898.5
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2,782.0
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2,587.4
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Total
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$
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1,840.1
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$
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1,685.3
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$
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5,436.8
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$
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4,849.3
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Operating Profit:
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Professional Instrumentation
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$
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180.0
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$
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179.2
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$
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605.8
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$
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523.2
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Industrial Technologies
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199.7
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196.4
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558.9
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530.9
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Other (a)
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(58.3
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(18.9
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(122.6
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(52.7
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Total
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$
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321.4
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$
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356.7
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$
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1,042.1
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$
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1,001.4
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Operating Margins:
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Professional Instrumentation
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20.1
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%
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22.8
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%
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22.8
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%
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23.1
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%
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Industrial Technologies
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21.1
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%
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21.9
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%
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20.1
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%
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20.5
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%
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Total
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17.5
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%
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21.2
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%
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19.2
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%
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20.7
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%
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(a) 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.
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This information is for reference only. A complete copy of
Fortive’s Form 10-Q financial statements is available on the
Company’s website (www.fortive.com).
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FORTIVE CORPORATION AND SUBSIDIARIES
RECONCILIATION OF
GAAP TO NON-GAAP FINANCIAL MEASURES
AND OTHER INFORMATION
Adjusted Net Earnings and Adjusted Diluted Net Earnings per Share
We disclose the non-GAAP measures of historical adjusted net earnings
and historical and forecasted adjusted diluted net earnings per share,
which make the following adjustments to GAAP net earnings and GAAP
diluted net earnings per share:
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Excluding on a pretax basis amortization of acquisition-related
intangible assets;
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Excluding on a pretax basis both acquisition and divestiture-related
costs deemed significant (“Transaction Costs”);
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Excluding on a pretax basis the effect of deferred revenue fair value
adjustments related to significant acquisitions;
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Excluding the tax effect of the adjustments noted above. The tax
effect of such adjustments was calculated by applying our overall
estimated effective tax rate to the pretax amount of each adjustment
(unless the nature of the item and/or the tax jurisdiction in which
the item has been recorded requires application of a specific tax rate
or tax treatment, in which case the tax effect of such item is
estimated by applying such specific tax rate or tax treatment). We
expect to apply our overall estimated effective tax rate to each
adjustment going forward, and, as such, we are applying the estimated
effective tax rate to each adjustment for the forecasted periods to
facilitate comparisons in future periods;
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Excluding a non-recurring gain on a prior investment as a result of a
corresponding acquisition (“Gain from Acquisition”);
-
Excluding adjustments made to the 2017 provisional amount estimated in
connection with the Tax Cut and Jobs Act (the “TCJA Adjustments”); and
-
Including the impact of the assumed conversion of our Mandatory
Convertible Preferred Stock.
If any additional subsequent TCJA Adjustments are made in 2018, such
adjustments will be reflected in the applicable GAAP financial measures
corresponding to the reporting period during which such adjustments are
determined. In the event of such subsequent TCJA Adjustments, we will
also exclude such adjustments in the non-GAAP historical adjusted net
earnings and historical adjusted diluted net earnings per share we
disclose for the corresponding period.
While we have a history of acquisition activity, we do not acquire
businesses on a predictable cycle, and the amount of an acquisition’s
purchase price allocated to intangible assets and related amortization
term and the deferred revenue fair value adjustments are unique to each
acquisition and can vary significantly from acquisition to acquisition.
In addition, the Transaction Costs are unique to each transaction, are
impacted from period to period depending on the number of acquisitions
or divestitures evaluated, pending or completed during such period, and
the complexity of such transactions. We believe, however, that it is
important for investors to understand that such intangible assets
contribute to revenue generation and that intangible assets and deferred
revenue fair value adjustments related to past acquisitions will recur
in future periods until such intangible assets and deferred revenue fair
value adjustments, as applicable, have been fully amortized.
In June 2018, we issued $1.38 billion in aggregate liquidation
preference of shares of our 5.00% Mandatory Convertible Preferred Stock
(“MCPS”). Dividends on the MCPS are payable on a cumulative basis at an
annual rate of 5.00% on the liquidation preference of $1,000 per share.
Unless earlier converted, each share of the MCPS will automatically
convert on July 1, 2021 into between, after giving effect to the prior
anti-dilution adjustment, 10.9041 and 13.3575 shares of our common
stock, subject to further anti-dilution adjustments. The number of
shares of our common stock issuable on conversion of the Mandatory
Convertible Preferred Stock will be determined based on the average
volume weighted average price (“VWAP”) per share of our common stock
over the 20 consecutive trading day period beginning on and including
the 22nd scheduled trading day immediately preceding July 1, 2021. For
the purposes of calculating adjusted earnings and adjusted earnings per
share, we have excluded the MCPS dividend and, for the purposes of
adjusted earnings per share, assumed the “if-converted” method of share
dilution (the incremental shares of common stock deemed outstanding
applying the “if-converted” method of share dilution, the “Converted
Shares”). We believe that using the “if-converted” method provides
additional insight to investors on the potential impact of the MCPS once
they are converted into common stock no later than July 1, 2021.
The forecasted adjusted diluted net earnings per share does not reflect
certain adjustments that are inherently difficult to predict or estimate
due to their unknown timing, effect and/or significance.
The TCJA Adjustments identified above have been excluded from the GAAP
measures identified above because items of this nature and/or size occur
with inconsistent frequency or occur for reasons that may be unrelated
to our commercial performance during the period and/or because we
believe the corresponding adjustments are useful in assessing our
potential ongoing operating costs or gains in a given period. We will
adjust for, and identify as significant, acquisition and
divestiture-related transaction costs, acquisition related fair value
adjustments to inventory and deferred revenue, and corresponding
restructuring charges primarily related to acquisitions, in each case,
incurred in a given period, if we determine that such costs and
adjustments exceed the range of our typical transaction costs and
adjustments, respectively, in a given period.
Management believes that these non-GAAP financial measures provide
useful information to investors by reflecting additional ways of viewing
aspects of our operations that, when reconciled to the corresponding
GAAP measure, help our investors to understand the long-term
profitability trends of our business, and facilitate comparisons of our
profitability to prior and future periods and to our peers.
These non-GAAP measures should be considered in addition to, and not as
a replacement for or superior to, the comparable GAAP measures, and may
not be comparable to similarly titled measures reported by other
companies.
Core Revenue
We use the term “core revenue” when referring to a corresponding GAAP
revenue measure, 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. This non-GAAP measure should be considered in addition to, and
not as a replacement for or superior to, the comparable GAAP measure,
and may not be comparable to similarly titled measures reported by other
companies.
Management believes that this non-GAAP measure provides useful
information to investors by helping identify underlying growth trends in
our business and facilitating comparisons of our revenue performance
with 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 measures because currency translation is not
under management’s control and is subject to volatility. We believe that
such exclusions, when presented with the corresponding GAAP measures,
may assist in assessing the business trends and making comparisons of
long-term performance.
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Adjusted Net Earnings
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Three Months Ended
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Nine Months Ended
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($ in millions)
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September 28,
2018
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September 29,
2017
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September 28,
2018
|
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September 29,
2017
|
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Net Earnings Attributable to Common Stockholders (GAAP)
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$
|
227.9
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$
|
267.8
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$
|
783.9
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$
|
707.6
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Dividends on the mandatory convertible preferred stock
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17.4
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|
|
—
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17.6
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|
—
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Net Earnings (GAAP)
|
|
245.3
|
|
|
|
267.8
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|
|
801.5
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|
707.6
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Pretax amortization of acquisition-related intangible assets in the
three months ($32 million pretax, $27 million after tax) and nine
months ($82 million pretax, $68 million after tax) ended September
28, 2018, and in the three months ($15 million pretax, $11 million
after tax) and nine months ($41 million pretax, $30 million after
tax) ended September 29, 2017
|
|
32.4
|
|
|
|
14.7
|
|
|
|
81.5
|
|
|
|
41.3
|
|
|
Acquisition and divestiture-related transaction costs in the three
months ($56 million pretax, $45 million after tax) and nine months
($71 million pretax, $58 million after tax) ended September 28, 2018
and in the three months ($11 million pretax, $8 million after tax)
and nine months ($11 million pretax, $8 million after tax) ended
September 29, 2017
|
|
56.0
|
|
|
|
11.2
|
|
|
|
70.8
|
|
|
|
11.2
|
|
|
Pretax acquisition-related fair value adjustments to deferred
revenue related to completed significant acquisitions in the three
and nine months ended September 28, 2018 ($3 million pretax, $2
million after tax)
|
|
3.0
|
|
|
|
—
|
|
|
|
3.0
|
|
|
|
—
|
|
|
Tax effect of the adjustments reflected above (a)
|
|
(16.8
|
)
|
|
|
(6.9
|
)
|
|
|
(28.4
|
)
|
|
|
(14.0
|
)
|
|
Gain from acquisition in the three and nine months ended September
29, 2017 ($15 million after tax)
|
|
—
|
|
|
|
(15.3
|
)
|
|
|
—
|
|
|
|
(15.3
|
)
|
|
TCJA Adjustments
|
|
1.2
|
|
|
|
—
|
|
|
|
(4.9
|
)
|
|
|
—
|
|
|
Adjusted Net Earnings (Non-GAAP)
|
|
$
|
321.1
|
|
|
|
$
|
271.5
|
|
|
|
$
|
923.5
|
|
|
|
$
|
730.8
|
|
|
(a) The MCPS are not tax deductible and therefore the tax effect of
the adjustments includes only the amortization of
acquisition-related intangible assets, acquisition and
divestiture-related transaction costs, and acquisition related fair
value adjustments to deferred revenue.
|
|
|
|
|
|
|
|
|
|
|
Adjusted Diluted Net Earnings Per Share
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
(a)
|
|
|
Nine Months Ended
(a)
|
|
|
|
September 28,
2018
|
|
|
September 29,
2017
|
|
|
September 28,
2018
|
|
|
September 29,
2017
|
|
Diluted Net Earnings Per Share Attributable to Common
Stockholders (GAAP)
|
|
$
|
0.64
|
|
|
|
$
|
0.76
|
|
|
|
$
|
2.21
|
|
|
|
$
|
2.01
|
|
|
Dividends on the mandatory convertible preferred stock
|
|
0.05
|
|
|
|
—
|
|
|
|
0.05
|
|
|
|
—
|
|
|
Assumed dilutive impact on the Diluted Net Earnings Per Share
Attributable to Common Stockholders if the Converted Shares had been
outstanding
|
|
(0.03
|
)
|
|
|
—
|
|
|
|
(0.04
|
)
|
|
|
—
|
|
|
Pretax amortization of acquisition-related intangible assets in the
three months ($32 million pretax, $27 million after tax) and nine
months ($82 million pretax, $68 million after tax) ended September
28, 2018, and in the three months ($15 million pretax, $11 million
after tax) and nine months ($41 million pretax, $30 million after
tax) ended September 29, 2017
|
|
0.09
|
|
|
|
0.04
|
|
|
|
0.23
|
|
|
|
0.12
|
|
|
Acquisition and divestiture-related transaction costs in the three
months ($56 million pretax, $45 million after tax) and nine months
($71 million pretax, $58 million after tax) ended September 28, 2018
and in the three months ($11 million pretax, $8 million after tax)
and nine months ($11 million pretax, $8 million after tax) ended
September 29, 2017
|
|
0.15
|
|
|
|
0.03
|
|
|
|
0.20
|
|
|
|
0.03
|
|
|
Pretax acquisition-related fair value adjustments to deferred
revenue related to completed significant acquisitions in the three
and nine months ended September 28, 2018 ($3 million pretax, $2
million after tax)
|
|
0.01
|
|
|
|
—
|
|
|
|
0.01
|
|
|
|
—
|
|
|
Tax effect of the adjustments reflected above (b)
|
|
(0.05
|
)
|
|
|
(0.02
|
)
|
|
|
(0.08
|
)
|
|
|
(0.04
|
)
|
|
Gain from acquisition in the three and nine months ended September
29, 2017 ($15 million after tax)
|
|
—
|
|
|
|
(0.04
|
)
|
|
|
—
|
|
|
|
(0.04
|
)
|
|
TCJA Adjustments
|
|
—
|
|
|
|
—
|
|
|
|
(0.02
|
)
|
|
|
—
|
|
|
Adjusted Diluted Net Earnings Per Share (Non-GAAP)
|
|
$
|
0.86
|
|
|
|
$
|
0.77
|
|
|
|
$
|
2.56
|
|
|
|
$
|
2.08
|
|
|
(a) Each of the per share adjustments below was calculated assuming
the Converted Shares had been outstanding.
|
|
(b) The MCPS are not tax deductible and therefore the tax effect of
the adjustments includes only the amortization of
acquisition-related intangible assets, acquisition and
divestiture-related transaction costs, and acquisition related fair
value adjustments to deferred revenue.
|
|
|
|
The sum of the components of adjusted diluted net earnings per share
may not equal due to rounding.
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Diluted Shares Outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
(shares in millions)
|
|
September 28,
2018
|
|
|
September 29,
2017
|
|
|
September 28,
2018
|
|
|
September 29,
2017
|
|
Average common diluted stock outstanding
|
|
355.3
|
|
|
352.9
|
|
|
354.8
|
|
|
352.2
|
|
Converted Shares (a)
|
|
16.1
|
|
|
—
|
|
|
5.4
|
|
|
—
|
|
Adjusted average common stock and common equivalent shares
outstanding
|
|
371.4
|
|
|
352.9
|
|
|
360.2
|
|
|
352.2
|
|
(a) The number of Converted Shares assumes the conversion of all
1.38 million shares applying the “if-converted” method and using an
average 20-day VWAP of $85.52 as of September 28, 2018.
|
|
|
|
|
|
|
|
|
|
|
Core Revenue Growth
|
|
|
|
|
|
|
|
|
|
|
% Change
Three Months Ended
September
28, 2018 vs.
Comparable 2017
Period
|
|
|
% Change
Nine Months Ended
September 28,
2018 vs.
Comparable 2017
Period
|
|
Total Revenue Growth (GAAP)
|
|
9.2 %
|
|
|
12.1 %
|
|
Core (Non-GAAP)
|
|
3.2 %
|
|
|
3.7 %
|
|
Acquisitions (Non-GAAP)
|
|
7.2 %
|
|
|
7.2 %
|
|
Impact of currency translation (Non-GAAP)
|
|
(1.2)%
|
|
|
1.2 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forecasted Adjusted Diluted Net Earnings Per Share from
Continuing Operations
|
|
|
|
|
|
|
|
|
|
|
Three Months Ending
December 31, 2018
|
|
|
Year Ending
December 31, 2018
|
|
|
|
Low End
|
|
|
High End
|
|
|
Low End
|
|
|
High End
|
|
Forecasted Diluted Net Earnings Per Share from Continuing
Operations Attributable to Common Stockholders
|
|
$
|
0.58
|
|
|
|
$
|
0.62
|
|
|
|
$
|
2.43
|
|
|
|
$
|
2.47
|
|
|
Anticipated dividends on mandatory convertible preferred stock in
the three months ending ($17 million) and year ending December 31,
2018 ($35 million)
|
|
0.05
|
|
|
|
0.05
|
|
|
|
0.10
|
|
|
|
0.10
|
|
|
Assumed dilutive impact on the Forecasted Diluted Net Earnings Per
Share from Continuing Operations if the Converted Shares (16.1
million shares in the three months ending and 8.1 million shares in
the year ending December 31, 2018) had been outstanding
|
|
(0.03
|
)
|
|
|
(0.03
|
)
|
|
|
(0.06
|
)
|
|
|
(0.06
|
)
|
|
Anticipated pretax amortization of acquisition-related intangible
assets in the three months ending December 31, 2018 ($51 million
pretax (or $0.14 per share), $42 million after tax (or $0.12 per
share)) and year ending December 31, 2018 ($132 million pretax (or
$0.37 per share), $110 million after tax (or $0.31 per share))
|
|
0.14
|
|
|
|
0.14
|
|
|
|
0.37
|
|
|
|
0.37
|
|
|
Anticipated pretax acquisition and divestiture-related transaction
costs in the three months ending ($37 million pretax (or $0.10 per
share), $30 million after tax (or $0.08 per share)) and the year
ending December 31, 2018 ($78 million pretax (or $0.22 per share),
$62 million after tax (or $0.18 per share))
|
|
0.10
|
|
|
|
0.10
|
|
|
|
0.22
|
|
|
|
0.22
|
|
|
Anticipated pretax fair value adjustments to deferred revenue
related to completed significant acquisition in the three months
ending ($13 million pretax (or $0.04 per share), $10 million after
tax (or $0.03 per share)) and year ending December 31, 2018 ($16
million pretax (or $0.04 per share), $13 million after tax (or $0.03
per share))
|
|
0.04
|
|
|
|
0.04
|
|
|
|
0.04
|
|
|
|
0.04
|
|
|
Tax effect of the adjustments reflected above (a)
|
|
(0.05
|
)
|
|
|
(0.05
|
)
|
|
|
(0.11
|
)
|
|
|
(0.11
|
)
|
|
TCJA Adjustments
|
|
—
|
|
|
|
—
|
|
|
|
(0.01
|
)
|
|
|
(0.01
|
)
|
|
Forecasted Adjusted Diluted Net Earnings Per Share from
Continuing Operations
|
|
$
|
0.83
|
|
|
|
$
|
0.87
|
|
|
|
$
|
2.98
|
|
|
|
$
|
3.02
|
|
|
(a) The MCPS are not tax deductible and therefore the tax effect of
the adjustments includes only the amortization of
acquisition-related intangible assets, acquisition and
divestiture-related transaction costs, and acquisition related fair
value adjustments to deferred revenue.
|
|
|
|
The sum of the components of forecasted adjusted diluted net
earnings per share from continuing operations may not equal due to
rounding.
|
|
|
FORTIVE CORPORATION
SUPPLEMENTAL ADJUSTED FINANCIAL DATA
Fortive is providing the following unaudited adjusted supplemental
financial information to reflect the split-off transaction of our
Automation & Specialty platform (excluding Fortive’s Hengstler and
Dynapar businesses) (the “A&S Business”) that we completed on October 1,
2018 ("Supplemental Information"). The A&S Business includes the
market-leading brands of Kollmorgen, Thomson, Portescap and Jacobs
Vehicle Systems.
The Supplemental Information has been provided for the year ended
December 31, 2017 and three months ended December 31, 2017, March 30,
2018, June 29, 2018 and September 28, 2018, and management believes this
non-GAAP supplemental information helps investors understand the
long-term profitability trends of our business operations giving effect
after the split-off of the A&S Business and facilitates comparisons of
our profitability to prior and future periods and to our peers. The
Supplemental Information should be considered in addition to, and not as
a replacement for or superior to, the comparable GAAP financial
measures, and may not be comparable to similarly titled measures
reported by other companies. The split-off the A&S Business will be
retrospectively classified as discontinued operations beginning in the
fourth quarter of 2018.
|
|
|
|
|
|
|
|
Segment data
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
Three Months Ended
|
|
($ in millions)
|
|
December 31,
2017
|
|
|
December 31,
2017
|
|
|
March 30,
2018
|
|
|
June 29,
2018
|
|
|
September 28,
2018
|
|
Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Professional Instrumentation (GAAP)
|
|
$
|
3,139.1
|
|
|
|
$
|
877.2
|
|
|
|
$
|
871.7
|
|
|
|
$
|
889.0
|
|
|
|
$
|
894.1
|
|
|
Industrial Technologies (GAAP)
|
|
3,516.9
|
|
|
|
929.5
|
|
|
|
869.0
|
|
|
|
967.0
|
|
|
|
946.0
|
|
|
Adjustment to remove sales of the A&S Business from the Industrial
Technologies segment (Non-GAAP)
|
|
(899.9
|
)
|
|
|
(228.8
|
)
|
|
|
(248.5
|
)
|
|
|
(254.2
|
)
|
|
|
(238.9
|
)
|
|
Total supplemental sales (Non-GAAP)
|
|
$
|
5,756.1
|
|
|
|
$
|
1,577.9
|
|
|
|
$
|
1,492.2
|
|
|
|
$
|
1,601.8
|
|
|
|
$
|
1,601.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP adjusted operating profit
|
|
Professional Instrumentation (GAAP)
|
|
$
|
712.9
|
|
|
|
$
|
189.7
|
|
|
|
$
|
206.4
|
|
|
|
$
|
219.4
|
|
|
|
$
|
180.0
|
|
|
Industrial Technologies (GAAP)
|
|
719.5
|
|
|
|
188.6
|
|
|
|
158.3
|
|
|
|
200.9
|
|
|
|
199.7
|
|
|
Adjustment to remove the contribution of the A&S Business from the
Industrial Technologies segment (Non-GAAP)
|
|
(216.7
|
)
|
|
|
(53.7
|
)
|
|
|
(64.1
|
)
|
|
|
(66.3
|
)
|
|
|
(58.0
|
)
|
|
Adjusted supplemental Industrial Technologies operating profit
(Non-GAAP)
|
|
502.8
|
|
|
|
134.9
|
|
|
|
94.2
|
|
|
|
134.6
|
|
|
|
141.7
|
|
|
Other (GAAP)
|
|
(73.5
|
)
|
|
|
(20.8
|
)
|
|
|
(26.5
|
)
|
|
|
(37.9
|
)
|
|
|
(58.3
|
)
|
|
Adjustment to Other for the A&S Business split-off (Non-GAAP)
|
|
1.2
|
|
|
|
1.2
|
|
|
|
3.8
|
|
|
|
8.3
|
|
|
|
18.2
|
|
|
Total supplemental operating profit (Non-GAAP)
|
|
$
|
1,143.4
|
|
|
|
$
|
305.0
|
|
|
|
$
|
277.9
|
|
|
|
$
|
324.4
|
|
|
|
$
|
281.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Adjusted Net Earnings
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
Three Months Ended
|
|
($ in millions)
|
|
December 31,
2017
|
|
|
December 31,
2017
|
|
|
March 30,
2018
|
|
|
June 29,
2018
|
|
|
September 28,
2018
|
|
Net Earnings Available to Common Shareholders (GAAP)
|
|
$
|
1,044.5
|
|
|
|
$
|
336.9
|
|
|
|
$
|
261.2
|
|
|
|
$
|
294.8
|
|
|
|
$
|
227.9
|
|
|
Dividends on the mandatory convertible preferred stock included in
earnings available to common shareholders
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
0.2
|
|
|
|
17.4
|
|
|
Net Earnings (GAAP)
|
|
1,044.5
|
|
|
|
336.9
|
|
|
|
261.2
|
|
|
|
295.0
|
|
|
|
245.3
|
|
|
A&S separation impact
|
|
(154.4
|
)
|
|
|
(33.2
|
)
|
|
|
(49.2
|
)
|
|
|
(51.5
|
)
|
|
|
(46.0
|
)
|
|
Pretax amortization of acquisition-related intangible assets
|
|
65.3
|
|
|
|
24.0
|
|
|
|
25.0
|
|
|
|
24.1
|
|
|
|
32.4
|
|
|
Acquisition and divestiture-related transaction costs
|
|
21.8
|
|
|
|
10.6
|
|
|
|
3.8
|
|
|
|
11.0
|
|
|
|
56.0
|
|
|
Gain on sale of real property
|
|
(8.0
|
)
|
|
|
(8.0
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Pretax acquisition-related fair value adjustments to deferred
revenue related to the Accruent acquisition
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3.0
|
|
|
Gain from acquisition
|
|
(15.3
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Estimated tax effect of the adjustments reflected above
|
|
(18.8
|
)
|
|
|
(4.6
|
)
|
|
|
(5.1
|
)
|
|
|
(6.5
|
)
|
|
|
(16.8
|
)
|
|
Estimated provisional TCJA Adjustments
|
|
(70.3
|
)
|
|
|
(70.3
|
)
|
|
|
(4.2
|
)
|
|
|
(1.9
|
)
|
|
|
1.2
|
|
|
Supplemental Adjusted Net Earnings (non-GAAP)
|
|
$
|
864.8
|
|
|
|
$
|
255.4
|
|
|
|
$
|
231.5
|
|
|
|
$
|
270.2
|
|
|
|
$
|
275.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Adjusted Diluted Net Earnings Per Share
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
Three Months Ended
|
|
|
|
December 31,
2017
|
|
|
December 31,
2017
|
|
|
March 30,
2018
|
|
|
June 29,
2018
|
|
|
September 28,
2018
|
|
Diluted Net Earnings Per Share Available to Common Shareholders
(GAAP)
|
|
$
|
2.96
|
|
|
|
$
|
0.95
|
|
|
|
$
|
0.74
|
|
|
|
$
|
0.83
|
|
|
|
$
|
0.64
|
|
|
Dividends on the mandatory convertible preferred stock
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
0.05
|
|
|
Assumed dilutive impact on the Adjusted Diluted Net Earnings Per
Share Attributable to Common Stockholders if the Converted shares
had been outstanding
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(0.03
|
)
|
|
A&S separation impact
|
|
(0.44
|
)
|
|
|
(0.09
|
)
|
|
|
(0.14
|
)
|
|
|
(0.15
|
)
|
|
|
(0.12
|
)
|
|
Pretax amortization of acquisition-related intangible assets.
|
|
0.19
|
|
|
|
0.07
|
|
|
|
0.07
|
|
|
|
0.07
|
|
|
|
0.09
|
|
|
Acquisition and divestiture-related transaction costs
|
|
0.06
|
|
|
|
0.03
|
|
|
|
0.01
|
|
|
|
0.03
|
|
|
|
0.15
|
|
|
Gain on sale of real property
|
|
(0.02
|
)
|
|
|
(0.02
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Pretax acquisition-related fair value adjustments to deferred
revenue related to the Accruent acquisition
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
0.01
|
|
|
Gain from acquisition
|
|
(0.04
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Estimated tax effect of the adjustments reflected above
|
|
(0.05
|
)
|
|
|
(0.01
|
)
|
|
|
(0.01
|
)
|
|
|
(0.02
|
)
|
|
|
(0.05
|
)
|
|
Estimated provisional TCJA Adjustments
|
|
(0.20
|
)
|
|
|
(0.20
|
)
|
|
|
(0.01
|
)
|
|
|
(0.01
|
)
|
|
|
—
|
|
|
Supplemental Adjusted Diluted Net Earnings Per Share (non-GAAP)
|
|
$
|
2.45
|
|
|
|
$
|
0.72
|
|
|
|
$
|
0.65
|
|
|
|
$
|
0.76
|
|
|
|
$
|
0.74
|
|
|
The sum of the components of supplemental adjusted diluted net
earnings per share may not equal due to rounding.
|
|
|
|
|
|
|
|
|
|
|
Adjusted Diluted Shares Outstanding
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
Three Months Ended
|
|
(shares in millions)
|
|
December 31,
2017
|
|
|
December 31,
2017
|
|
|
March 30,
2018
|
|
|
June 29,
2018
|
|
|
September 28,
2018
|
|
Average common diluted stock outstanding
|
|
352.6
|
|
|
|
353.9
|
|
|
|
354.4
|
|
|
|
355.0
|
|
|
|
355.3
|
|
Converted Shares (a)
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
16.1
|
|
Adjusted average common stock and common equivalent shares
outstanding
|
|
352.6
|
|
|
|
353.9
|
|
|
|
354.4
|
|
|
|
355.0
|
|
|
|
371.4
|
|
(a) The number of Converted Shares assumes the conversion of all
1.38 million shares applying the “if-converted” method and using an
average 20-day VWAP of $85.52 as of September 28, 2018.
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Supplemental Sales from Existing Businesses (Core
Growth) Reconciliation to Total Supplemental Sales Growth
(a)
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
Three Months Ended
|
|
|
|
December 31,
2017
|
|
|
December 31,
2017
|
|
|
March 30,
2018
|
|
|
June 29,
2018
|
|
|
September 28,
2018
|
|
Professional Instrumentation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue Growth (GAAP)
|
|
8.6 %
|
|
|
17.5 %
|
|
|
21.7 %
|
|
|
17.1 %
|
|
|
13.6 %
|
|
Adjustment for A&S Business revenue growth (Non-GAAP)
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Adjusted supplemental revenue growth (Non-GAAP)
|
|
8.6 %
|
|
|
17.5 %
|
|
|
21.7 %
|
|
|
17.1 %
|
|
|
13.6 %
|
|
Existing businesses (non-GAAP)
|
|
5.5 %
|
|
|
5.6 %
|
|
|
5.5 %
|
|
|
3.4 %
|
|
|
1.4 %
|
|
Acquisitions (non-GAAP)
|
|
3.0 %
|
|
|
9.6 %
|
|
|
12.2 %
|
|
|
11.9 %
|
|
|
13.2 %
|
|
Currency exchange rates (non-GAAP)
|
|
0.1 %
|
|
|
2.3 %
|
|
|
4.0 %
|
|
|
1.8 %
|
|
|
(1.0)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industrial Technologies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue Growth (GAAP)
|
|
5.5 %
|
|
|
5.6 %
|
|
|
6.1 %
|
|
|
11.2 %
|
|
|
5.3 %
|
|
Adjustment for A&S Business revenue growth (Non-GAAP)
|
|
(0.3)%
|
|
|
(1.5)%
|
|
|
(3.1)%
|
|
|
0.1 %
|
|
|
(0.4)%
|
|
Adjusted supplemental revenue growth (Non-GAAP)
|
|
5.2 %
|
|
|
4.1 %
|
|
|
3.0 %
|
|
|
11.3 %
|
|
|
4.9 %
|
|
Existing businesses (non-GAAP)
|
|
2.7 %
|
|
|
(1.4)%
|
|
|
(4.0)%
|
|
|
6.1 %
|
|
|
3.9 %
|
|
Acquisitions (non-GAAP)
|
|
2.0 %
|
|
|
3.6 %
|
|
|
4.3 %
|
|
|
3.9 %
|
|
|
2.6 %
|
|
Currency exchange rates (non-GAAP)
|
|
0.5 %
|
|
|
1.9 %
|
|
|
2.7 %
|
|
|
1.3 %
|
|
|
(1.6)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fortive Corporation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue Growth (GAAP)
|
|
6.9 %
|
|
|
11.0 %
|
|
|
13.4 %
|
|
|
13.9 %
|
|
|
9.2 %
|
|
Adjustment for A&S Business revenue growth (Non-GAAP)
|
|
0.1 %
|
|
|
0.2 %
|
|
|
(0.3)%
|
|
|
0.5 %
|
|
|
0.5 %
|
|
Adjusted supplemental revenue growth (Non-GAAP)
|
|
7.0 %
|
|
|
11.2 %
|
|
|
13.1 %
|
|
|
14.4 %
|
|
|
9.7 %
|
|
Existing businesses (non-GAAP)
|
|
4.2 %
|
|
|
2.3 %
|
|
|
1.2 %
|
|
|
4.6 %
|
|
|
2.6 %
|
|
Acquisitions (non-GAAP)
|
|
2.5 %
|
|
|
6.8 %
|
|
|
8.5 %
|
|
|
8.3 %
|
|
|
8.3 %
|
|
Currency exchange rates (non-GAAP)
|
|
0.3 %
|
|
|
2.1 %
|
|
|
3.4 %
|
|
|
1.5 %
|
|
|
(1.2)%
|
|
(a) Non-GAAP sales from existing businesses (core growth) refers to
sales from operations excluding (1) sales impact from acquired
businesses and (2) the impact of currency translation. References to
sales impacts from 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 from acquired businesses) and (b)
the period-to-period change in sales (excluding sales from acquired
businesses) after applying current period foreign exchange rates to
the prior year period.
|
|
|
|
|
|
|
|
|
|
|
Adjusted Estimated Effective Tax Rate
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
Three Months Ended
|
|
($ in millions)
|
|
December 31,
2017
|
|
|
December 31,
2017
|
|
|
March 30,
2018
|
|
|
June 29,
2018
|
|
|
September 28,
2018
|
|
Earnings before income taxes
|
|
$
|
1,284.2
|
|
|
|
$
|
338.0
|
|
|
|
$
|
312.9
|
|
|
|
$
|
356.0
|
|
|
|
$
|
296.2
|
|
|
Income tax expense
|
|
$
|
(239.7
|
)
|
|
|
$
|
(1.1
|
)
|
|
|
$
|
(51.7
|
)
|
|
|
$
|
(61.0
|
)
|
|
|
$
|
(50.9
|
)
|
|
Estimated effective tax rate (GAAP)
|
|
18.7
|
%
|
|
|
0.3
|
%
|
|
|
16.5
|
%
|
|
|
17.1
|
%
|
|
|
17.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A&S separation impact
|
|
$
|
(211.8
|
)
|
|
|
$
|
(52.5
|
)
|
|
|
$
|
(62.8
|
)
|
|
|
$
|
(65.0
|
)
|
|
|
$
|
(56.6
|
)
|
|
Amortization of acquisition-related intangible assets
|
|
65.3
|
|
|
|
24.0
|
|
|
|
25.0
|
|
|
|
24.1
|
|
|
|
32.4
|
|
|
Acquisition and divestiture-related transaction costs
|
|
21.8
|
|
|
|
10.6
|
|
|
|
3.8
|
|
|
|
11.0
|
|
|
|
56.0
|
|
|
Fair value adjustments to deferred revenue related to the Accruent
acquisition
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3.0
|
|
|
Gain from acquisition
|
|
(15.3
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Gain on sale of real property
|
|
(8.0
|
)
|
|
|
(8.0
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Pretax Adjusted Supplemental Net Earnings (Non-GAAP)
|
|
$
|
1,136.2
|
|
|
|
$
|
312.1
|
|
|
|
$
|
278.9
|
|
|
|
$
|
326.1
|
|
|
|
$
|
331.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax attributable to the A&S Business
|
|
$
|
57.4
|
|
|
|
$
|
19.3
|
|
|
|
$
|
13.7
|
|
|
|
$
|
13.6
|
|
|
|
$
|
10.6
|
|
|
Tax effect of the adjustments reflected above
|
|
(18.8
|
)
|
|
|
(4.6
|
)
|
|
|
(5.1
|
)
|
|
|
(6.5
|
)
|
|
|
(16.8
|
)
|
|
TCJA Adjustments
|
|
(70.3
|
)
|
|
|
(70.3
|
)
|
|
|
(4.2
|
)
|
|
|
(1.9
|
)
|
|
|
1.2
|
|
|
Adjusted income tax expense
|
|
$
|
(271.4
|
)
|
|
|
$
|
(56.7
|
)
|
|
|
$
|
(47.3
|
)
|
|
|
$
|
(55.8
|
)
|
|
|
$
|
(55.9
|
)
|
|
Adjusted estimated effective tax rate (Non-GAAP)
|
|
23.9
|
%
|
|
|
18.2
|
%
|
|
|
17.0
|
%
|
|
|
17.1
|
%
|
|
|
16.9
|
%
|
Fortive Corporation
Lisa Curran, 425-446-5000
Vice President, Investor Relations
6920 Seaway Boulevard
Everett, WA 98203