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Part III incorporates certain information by reference from the Registrant’s proxy statement for its 2020 annual meeting of stockholders to be filed pursuant to Regulation 14A within 120 days after Registrant’s fiscal year-end. With the exception of the sections of the 2020 Proxy Statement specifically incorporated herein by reference, the 2020 Proxy Statement is not deemed to be filed as part of this Form 10-K.

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•	the International Traffic in Arms Regulations administered by the U.S. Department of State, Directorate of Defense Trade Controls, which, among other things, impose license requirements on the export from the United States of defense articles and defense services listed on the United States Munitions List;

•	the Export Administration Regulations administered by the U.S. Department of Commerce, Bureau of Industry and Security, which, among other things, impose licensing requirements on the export, in-country transfer and re-export of certain dual-use goods, technology and software (which are items that have both commercial and military or proliferation applications);

•	the regulations administered by the U.S. Department of Treasury, Office of Foreign Assets Control, which implement economic sanctions imposed against designated countries, governments and persons based on United States foreign policy and national security considerations; and

•	the import regulations administered by U.S. Customs and Border Protection.

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•	reducing demand for our products, software and services, limiting the financing available to our customers and suppliers, increasing order cancellations and resulting in longer sales cycles and slower adoption of new technologies;

•	increasing the difficulty in collecting accounts receivable and the risk of excess and obsolete inventories;

•	increasing price competition in our served markets;

•	supply interruptions, which could disrupt our ability to produce our products;

•	increasing the risk of impairment of goodwill and other long-lived assets, and the risk that we may not be able to fully recover the value of other assets such as real estate and tax assets; and

•	increasing the risk that counterparties to our contractual arrangements will become insolvent or otherwise unable to fulfill their contractual obligations which, in addition to increasing the risks identified above, could result in preference actions against us.

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•	correctly identify customer needs and preferences and predict future needs and preferences;

•	allocate our research and development funding to products and services with higher growth prospects;

•	anticipate and respond to our competitors’ development of new products and services and technological innovations;

•	differentiate our offerings from our competitors’ offerings and avoid commoditization;

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•	innovate and develop new technologies and applications, and acquire or obtain rights to third-party technologies that may have valuable applications in our served markets;

•	obtain adequate intellectual property rights with respect to key technologies before our competitors do;

•	successfully commercialize new technologies in a timely manner, price them competitively and cost-effectively manufacture and deliver sufficient volumes of new products of appropriate quality on time; and

•	stimulate customer demand for and convince customers to adopt new technologies.

•	any acquired business, technology, service or product could under-perform relative to our expectations and the price that we paid for it, or not perform in accordance with our anticipated timetable;

•	we may incur or assume significant debt in connection with our acquisitions or strategic relationships;

•	acquisitions or strategic relationships could cause our financial results to differ from our own or the investment community’s expectations in any given period, or over the long-term;

•	pre-closing and post-closing earnings charges could adversely impact operating results in any given period, and the impact may be substantially different from period to period;

•	acquisitions or strategic relationships could create demands on our management, operational resources and financial and internal control systems that we are unable to effectively address;

•	we could experience difficulty in integrating personnel, operations and financial and other controls and systems and retaining key employees and customers;

•	we may be unable to achieve cost savings or other synergies anticipated in connection with an acquisition or strategic relationship;

•	we may assume by acquisition or strategic relationship unknown liabilities, known contingent liabilities that become realized, known liabilities that prove greater than anticipated, internal control deficiencies or exposure to regulatory sanctions resulting from the acquired company’s activities and the realization of any of these liabilities or deficiencies may

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•	in connection with acquisitions, we may enter into post-closing financial arrangements such as purchase price adjustments, earn-out obligations and indemnification obligations, which may have unpredictable financial results;

•	in connection with acquisitions, we have recorded significant goodwill and other intangible assets on our balance sheet and if we are not able to realize the value of these assets, we may be required to incur charges relating to the impairment of these assets; and

•	we may have interests that diverge from those of strategic partners and we may not be able to direct the management and operations of the strategic relationship in the manner we believe is most appropriate, exposing us to additional risk.

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we are required to comply with various import laws and export control and economic sanctions laws, which may affect our transactions with certain customers, business partners and other persons and dealings between our employees and subsidiaries. In certain circumstances, export control and economic sanctions regulations may prohibit the export of certain products, services and technologies. In other circumstances, we may be required to obtain an export license before exporting the controlled item. Compliance with the various import laws that apply to our businesses can restrict our access to, and increase the cost of obtaining, certain products and at times can interrupt our supply of imported inventory;

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we also have agreements to sell products and services to government entities and are subject to various statutes and regulations that apply to companies doing business with government entities. The laws governing government contracts differ from the laws governing private contracts. For example, many government contracts contain pricing and other terms and conditions that are not applicable to private contracts. Our agreements with government entities may be subject to termination, reduction or modification at the convenience of the government or in the event of changes in government requirements, reductions in federal spending and other factors, and we may underestimate our costs of performing under the contract. Government contracts that have been awarded to us following a bid process could become the subject of a bid protest by a losing bidder, which could result in loss of the contract. We are also subject to investigation and audit for compliance with the requirements governing government contracts;

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we are also required to comply with increasingly complex and changing data privacy regulations in multiple jurisdictions that regulate the collection, use, protection and transfer of personal data, including the transfer of personal data between or among countries. In particular, the General Data Protection Regulation became effective in the European Union in May 2018 and the California Consumer Privacy Act became effective in January 2020. We may also face audits or investigations by one or more domestic or foreign government agencies relating to our compliance with these regulations. An adverse outcome under any such investigation or audit could subject us to fines or other penalties. That or other circumstances related to our collection, use and transfer of personal data could cause a loss of reputation in the market and/or adversely affect our business and financial position;

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certain of our products are medical devices that are subject to regulation by the U.S. FDA, by other federal and state governmental agencies, by comparable agencies of other countries and regions, and by certain accrediting bodies. To varying degrees, these regulators require us to comply with laws and regulations governing the development, testing, manufacturing, labeling, marketing, distribution and post-marketing surveillance of our products; and

•	we are also required to comply with ever changing labor and employment laws and regulations in multiple jurisdictions. These changes, including the California legislature’s recent passage of Assembly Bill 5 codifying a new independent contractor test, could negatively impact our business or financial position.

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

•	differences in terms of sale, including payment terms;

•	local product preferences and product requirements;

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

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

•	new conditions to, and possible restrictions of, existing free trade agreements;

•	epidemics, such as the coronavirus outbreak, that adversely impact travel, production or demand;

•	unexpected changes in laws or regulatory requirements, including negative changes in tax laws in the U.S. and in the countries in which we manufacture or sell our products;

•	the impact of the U.K.’s exit from the E.U. (Brexit) on the Company’s business operations in the U.K. and Europe, which will vary depending on the final terms of the transition;

•	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.

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•	requiring us to dedicate significant cash flow from operations to the payment of principal and interest on our debt, which would reduce the funds we have available for other purposes, such as acquisitions;

•	making it more difficult for us to satisfy our obligations with respect to our debt;

•	placing us at a competitive disadvantage compared to our competitors that are not as highly leveraged;

•	limiting our ability to borrow additional funds;

•	reducing our flexibility in planning for or reacting to changes in our business and market conditions;

•	exposing us to interest rate risk since a portion of our debt obligations are at variable rates; and

•	resulting in an event of default if we fail to satisfy our obligations under our debt or fail to comply with the financial or restrictive covenants contained in our debt instruments, which event of default could result in all of our debt becoming immediately due and payable and could permit certain of our lenders to foreclose on our assets securing such debt.

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•	the inability of our shareholders to call a special meeting;

•	the inability of our shareholders to act by written consent;

•	rules regarding how shareholders may present proposals or nominate directors for election at shareholder meetings;

•	the right of the Board to issue preferred stock without shareholder approval;

•	the ability of our directors, and not shareholders, to fill vacancies (including those resulting from an enlargement of the Board) on the Board; and

•	the requirement that the affirmative vote of shareholders holding at least 80% of our voting stock is required to amend our amended and restated bylaws and certain provisions in our amended and restated certificate of incorporation.

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•	Basis of Presentation

•	Overview

•	Results of Operations

•	Financial Instruments and Risk Management

•	Liquidity and Capital Resources

•	Critical Accounting Estimates

•	New Accounting Standards

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•	Higher 2019 sales volumes from existing businesses, price increases, and incremental year-over-year cost savings associated with productivity improvement initiatives, which were partially offset by an unfavorable sales mix, increased material costs associated primarily with inflationary pressures and recently enacted tariffs, and changes in currency exchange rates — favorable 30 basis points

•	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 310 basis points

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•	The incremental year-over-year net dilutive effect of restructuring actions — unfavorable 60 basis points

•	The incremental year-over-year net dilutive effect of acquisition-related transaction costs and transaction costs related to the planned separation of Fortive into two independent, publicly traded companies — unfavorable 120 basis points

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•	Price increases and incremental year-over-year cost savings associated with productivity improvement initiatives, which were more than offset by an unfavorable sales mix and lower sales volumes from existing businesses, increased material costs associated primarily with inflationary pressures and recently enacted tariffs, and changes in currency exchange rates — unfavorable 85 basis points

•	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 505 basis points

•	The incremental year-over-year net dilutive effect of restructuring actions — unfavorable 85 basis points

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•	Acquisition-related transaction costs, as the costs related to our acquisition and integration of ASP in 2019 were greater than the costs associated with the ASP, Gordian, and Accruent acquisitions in 2018 — unfavorable 125 basis points

•	Higher 2019 sales volumes from existing businesses, price increases, and incremental year-over-year cost savings associated with productivity improvement initiatives, which were partially offset by increased material costs associated primarily with inflationary pressures and recently enacted tariffs and changes in currency exchange rates — favorable 195 basis points

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•	Transaction costs related to the planned separation of Fortive into two independent, publicly traded companies — unfavorable 120 basis points

•	The incremental year-over-year net dilutive effect of restructuring actions — unfavorable 30 basis points

•	The incremental year-over-year net dilutive effect of acquired businesses — unfavorable 5 basis points

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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 in a private placement to certain initial purchasers for resale to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933.

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•	On February 28, 2019, we prepaid the remaining $400.0 million outstanding principal and accrued interest under the Delayed-Draw Term Loan due 2019. The prepayment fees associated with this payment were immaterial.

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On March 1, 2019, we entered into a credit facility agreement that provides for a 364-day delayed-draw term loan facility (“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. 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 at 75 basis points. As of December 31, 2019, borrowings under this facility bore an interest rate of 2.49% per annum. The original maturity date of the 2020 Delayed-Draw Term Loan was February 28, 2020; however on February 25, 2020, we extended the maturity date to August 28, 2020. The 2020 Delayed-Draw Term Loan remains 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 Delayed-Draw Term Loan are substantially similar to those applicable to the Revolving Credit Facility.

•	On June 15, 2019 we repaid the remaining outstanding principal of $55.3 million of our 1.80% senior unsecured notes.

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On October 25, 2019, we entered into a credit facility agreement that provides for a 364-day term loan facility (“2020 Term Loan”) in an aggregate principal amount of $300 million. On October 25, 2019, we drew down the full $300 million available under the 2020 Term Loan in order to fund, in part, the Censis acquisition.  We subsequently increased the size of this facility by $200 million on November 8, 2019 and drew the additional amount on the same day resulting in an outstanding amount of $500 million. The 2020 Term Loan bears interest at a variable rate equal to the LIBOR plus a ratings-based margin currently at 75 basis points. As of December 31, 2019, borrowings under this facility bore an interest rate of 2.49% 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 the Revolving Credit Facility. On February 26, 2020, we prepaid $250 million of the 2020 Term Loan. The prepayment fees associated with this payment are expected to be immaterial.

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On June 29, 2018, we issued 1,380,000 shares of 5.0% Mandatory Convertible Preferred Stock, Series A (“MCPS”) with a par value of $0.01 per share and liquidation preference of $1,000 per share, which included the exercise of an over-allotment option in full to purchase 180,000 shares. We received net $1.34 billion in proceeds from the issuance of the MCPS, excluding $43 million of issuance costs. We used the net proceeds from the issuance of MCPS to fund our acquisition activities and for general corporate purposes, including repayment of debt, working capital and capital expenditures. Each then outstanding share of MCPS will convert automatically on July 1, 2021 into between 10.9041 and 13.3575 common shares, subject to further anti-dilution adjustments.

•	On July 20, 2018, we prepaid $325 million of our outstanding U.S dollar variable interest rate term loan due in 2019, and on October 5, 2018, we prepaid the remaining $175 million of the outstanding balance. The prepayment fees associated with these payments were immaterial.

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On August 22, 2018, we entered into a credit facility agreement that provides for a 364-day delayed-draw term loan facility (“Delayed-Draw Term Loan”) with an aggregate principal amount of $1.75 billion. On September 5, 2018, we drew down the full $1.75 billion available under the Delayed-Draw Term Loan in order to fund, in part, the Accruent Acquisition. The Delayed-Draw Term Loan bears interest at a variable rate equal to the LIBOR plus a ratings-based margin currently at 75 basis points. During 2019, the annual effective rate was approximately 3.24% per annum. The Delayed-Draw Term Loan is prepayable at our option, and we are not permitted to re-borrow once the term loan is repaid. On September 26, 2018 and November 21, 2018, we repaid $400 million of and $950 million of this loan, respectively.

•	On October 1, 2018, in connection with the debt exchange in the split-off of the A&S Business, we retired $244.7 million of our 1.80% senior unsecured notes due in 2019.

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On November 30, 2018 we entered into an amended and restated agreement (“the Credit Agreement”) extending the availability period of the Revolving Credit Facility to November 30, 2023 and increased the facility to $2.0 billion. The Revolving Credit Facility is subject to a one year extension option at our request and with the consent of the lenders. The Credit Agreement also contains an option permitting us to request an increase in the amounts available under the Credit Agreement of up to an aggregate additional $1.0 billion.

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2019 operating cash flows were impacted by lower net earnings from continuing operations as compared to 2018. Net earnings for 2019 were impacted by a year-over-year decrease in operating profits of $174 million and a year-over-year increase in interest expense of $67 million primarily associated with our financing activities, which was partially offset by a $41 million non-cash gain on the combination of the Tektronix Video Business with Telestream. The year-over-year decrease in operating profit was attributable to an increase in depreciation and amortization expenses of $165 million largely attributable to our recently acquired businesses. Depreciation and amortization are noncash expenses that decrease earnings without a corresponding impact to operating cash flows.

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The aggregate of accounts receivable, inventories, and trade accounts payable provided $6 million of operating cash flows during 2019 compared to using $103 million of cash during 2018. The amount of cash flow generated from or used by the aggregate of accounts receivable, inventories, and trade accounts payable depends upon how effectively we manage the cash conversion cycle, which effectively represents the number of days that elapse from the day we pay for the purchase of raw materials and components to the collection of cash from our customers and can be significantly impacted by the timing of collections and payments in a period.

•	The aggregate of prepaid expenses and other assets and accrued expenses and other liabilities provided $93 million of cash in 2019 as compared to providing $66 million in 2018. The timing of cash tax payments and refunds drove the majority of this change.

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NOTE 1. BUSINESS OVERVIEW AND BASIS FOR PRESENTATION

Fortive Corporation (“Fortive” or “the Company”) is a diversified industrial technology growth company encompassing businesses that are recognized leaders in attractive markets. Our well-known brands hold leading positions in field solutions, product realization, sensing technologies, health, transportation technologies, and franchise 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. Fortive separated from Danaher Corporation (“Danaher”) on July 2, 2016 (the “Separation”).

Our research and development, manufacturing, sales, distribution, service and administrative facilities are located in 50 countries.

We report our results in two separate business segments consisting of Professional Instrumentation and Industrial Technologies. Our Professional Instrumentation segment consists of our Advanced Instrumentation & Solutions, Sensing Technologies, and Advanced Sterilization Products and Censis businesses.

The Advanced Instrumentation & Solutions businesses provide product realization and field solutions services and products. 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. 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 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. 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 provides critical sterilization and disinfection solutions, including low-temperature hydrogen peroxide sterilization solutions for temperature-sensitive equipment, to advance infection prevention and patient safety in healthcare facilities. Our Censis business provides subscription-based surgical inventory management systems to healthcare facilities to facilitate inventory management and regulatory compliance.

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.

On September 4, 2019, we announced our intention to separate into two independent, publicly traded companies subject to the satisfaction of certain conditions, including obtaining final approval from our Board of Directors. 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 separation is expected to be structured in a tax-efficient manner and completed in the second half of 2020. All assets, liabilities, revenues and expenses of the businesses comprising Vontier are included in continuing operations in the accompanying consolidated financial statements.

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”) to our shareholders who elected to exchange shares of our common stock for all issued and outstanding shares of Stevens Holding Company, Inc. (“Stevens”), the entity we incorporated to hold the A&S Business. The split-off was immediately followed by the merger of Stevens with a subsidiary of Altra Industrial Motion Corp. (“Altra”). Our shareholders who participated in the exchange offer tendered approximately 15.8 million shares of our common stock in exchange for 35.0 million shares of Altra. Concurrently with such split-off, we sold directly to Altra the

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remainder of the assets and liabilities of A&S Business that were not otherwise contributed to Stevens. Accordingly, the A&S Business has been reported as discontinued operations in our Consolidated Statements of Earnings, and the related assets and liabilities have been presented as assets and liabilities of discontinued operations in the Consolidated Balance Sheets for all periods presented. Unless otherwise noted, discussion within these notes to the consolidated financial statements relates to continuing operations. Refer to Note 4 for additional information on discontinued operations.

The accompanying consolidated financial statements present our historical financial position, results of operations, changes in equity and cash flows in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Certain reclassifications have been made to prior year financial information to conform to the current period presentation. Unless otherwise indicated, all amounts in the notes to the consolidated financial statements refer to continuing operations.

The financial statements include our accounts and the accounts of our subsidiaries. All intercompany balances and transactions have been eliminated upon consolidation. The consolidated financial statements also reflect the impact of noncontrolling interests. Noncontrolling interests do not have a significant impact on our consolidated results of operations; therefore, net earnings and net earnings per share attributable to noncontrolling interests are not presented separately in our Consolidated Statements of Earnings. Net earnings attributable to noncontrolling interests have been reflected in Selling, general, and administrative expenses and were insignificant in all periods presented.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates—The preparation of financial statements in conformity with GAAP requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We base these estimates on historical experience, the current economic environment and on various other assumptions that are believed to be reasonable under the circumstances. However, uncertainties associated with these estimates exist and actual results may differ from these estimates.

Cash and Equivalents—We consider all highly liquid investments with a maturity of three months or less at the date of purchase to be cash equivalents.

Accounts Receivable and Allowances for Doubtful Accounts—Accounts receivable is reported in the accompanying Consolidated Balance Sheets adjusted for any write-offs and net of allowances for doubtful accounts. The allowances for doubtful accounts represent management’s best estimate of the credit losses expected from our trade accounts, contract and financing receivable portfolios. Determination of the allowances requires management to exercise judgment about the timing, frequency and severity of credit losses that could materially affect the provision for credit losses and, therefore, net earnings. We regularly perform detailed reviews of our portfolios to determine if an impairment has occurred and evaluate the collectability of receivables based on a combination of financial and qualitative factors that may affect customers’ ability to pay, including customers’ financial condition, collateral, debt-servicing ability, past payment experience and credit bureau information. 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 for doubtful accounts 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. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional reserves would be required. We do not believe that accounts receivable represent significant concentrations of credit risk because of the diversified portfolio of individual customers and geographical areas. We recorded $64 million, $49 million and $38 million of expense associated with doubtful accounts for the years ended December 31, 2019, 2018, and 2017, respectively.

Included in other assets on the Consolidated Balance Sheets as of December 31, 2019 and 2018 are $278 million and $263 million of net aggregate financing receivables, respectively. Financing receivables are evaluated for impairment collectively in broad groupings that represent homogeneous portfolios based on the underlying nature and risks.

Inventory Valuation—Inventories include the costs of material, labor and overhead. Domestic inventories are stated at the lower of cost or net realizable value primarily using the first-in, first-out (“FIFO”) method with certain businesses applying the last-in, first-out method (“LIFO”) to value inventory. Inventories held outside the United States are stated at the lower of cost or net realizable value primarily using the FIFO method.

Property, Plant and Equipment—Property, plant and equipment are carried at cost. The provision for depreciation has been computed principally by the straight-line method based on the estimated useful lives of the depreciable assets as follows:

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Category		Useful Life
Buildings		30 years
Leased assets and leasehold improvements		Amortized over the lesser of the economic life of the asset or the term of the lease
Machinery and equipment		3 – 10 years

Estimated useful lives are periodically reviewed and, when appropriate, changes to estimates are made prospectively. Amortization of capital lease assets is included in depreciation expense as a component of Selling, general, and administrative expenses in the Consolidated Statements of Earnings.

Equity Method Investments—Investments and ownership interests are accounted for under equity method accounting if we have the ability to exercise significant influence, but don’t have a controlling financial interest. We record our interest in the net earnings of our equity method investees within Other non-operating expenses, net in the Consolidated Statements of Earnings. We record our interest in the net earnings of our equity method investments based on the most recently available financial statements of the investees.

The carrying amount of the investment in equity interests is adjusted to reflect our interest in net earnings and dividends received. We review the investments for impairment whenever factors indicate that the carrying amount of the investment might not be recoverable. In such a case, the decrease in value is recognized in the period the impairment occurs in the Consolidated Statement of Earnings.

Other Assets—Other assets principally include noncurrent financing receivables, contract assets, deferred tax assets, and other investments.

Fair Value of Financial Instruments—Our financial instruments consist primarily of accounts receivable and obligations under trade accounts payable and short and long-term debt. Due to their short-term nature, the carrying values for accounts receivable, trade accounts payable, and short-term debt approximate fair value. Refer to Note 8 for the fair values of our other obligations.

Goodwill and Other Intangible Assets—Goodwill and other intangible assets result from our acquisition of existing businesses. In accordance with accounting standards related to business combinations, goodwill and indefinite-lived intangible assets are not amortized; however, certain definite-lived identifiable intangible assets, primarily customer relationships and acquired technology, are amortized over their estimated useful lives. In-process research and development (“IPR&D”) is initially capitalized at fair value and when the IPR&D project is complete, the asset is considered a finite-lived intangible asset and amortized over its estimated useful life. If an IPR&D project is abandoned, an impairment loss equal to the value of the intangible asset is recorded in the period of abandonment. We review identified intangible assets for impairment whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable. We also test intangible assets with indefinite lives and goodwill at least annually for impairment. Refer to Note 3 and Note 7 for additional information about our goodwill and other intangible assets.

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

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

Service Sales include revenues from extended warranties, post-contract customer support, maintenance contracts or services, contract labor to perform ongoing service at a customer location, and services related to previously sold products.

For revenue related to a product or service to qualify for recognition, we must have an enforceable contract with a customer that defines the goods or services to be transferred and the payment terms related to those goods or services. Further, collection of substantially all consideration for the goods or services transferred must be probable based on the customer’s intent and ability to pay the promised consideration. We apply judgment in determining the customer’s ability and intention to pay, which is based on a combination of financial and qualitative factors, including the customer’s financial condition, collateral, debt-servicing ability, past payment experience, and credit bureau information.

Customer allowances and rebates, consisting primarily of volume discounts and other short-term incentive programs, are considered in determining the transaction price for the contract; these allowances and rebates are reflected as a reduction in the

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contract transaction price. Significant judgment is exercised in determining product returns, customer allowances, and rebates, and are estimated based on historical experience and known trends.

Most of our sales contracts contain standard terms and conditions. We evaluate contracts to identify distinct goods and services promised in the contract (performance obligations). Sometimes this evaluation involves judgment to determine whether the goods or services are highly dependent on or highly interrelated with one another, or whether such goods or services significantly modify or customize one another. Certain customer arrangements include multiple performance obligations, typically hardware, installation, training, consulting, services and/or post contract support (“PCS”). Generally, these elements are delivered within the same reporting period, except PCS or other services. We allocate the contract transaction price to each performance obligation using the observable price that the good or service sells for separately in similar circumstances and to similar customers, and/or a residual approach when the observable selling price of a good or service is not known and is either highly variable or uncertain. Allocating the transaction price to each performance obligation sometimes requires significant judgment.

Our principal terms of sale are FOB Shipping Point, or equivalent, and, as such, we primarily record revenue upon shipment as we have transferred control to the customer at that point and our performance obligations are satisfied. We evaluate contracts with delivery terms other than FOB Shipping Point and recognize revenue when we have transferred control and satisfied our performance obligations. If any significant obligation to the customer with respect to a sales transaction remains to be fulfilled following shipment (typically installation, other services noted above, or acceptance by the customer), revenue recognition is deferred until such obligations have been fulfilled. Further, revenue related to separately priced extended warranty and product maintenance agreements is deferred when appropriate and recognized as revenue over the term of the agreement.

Shipping and Handling—Shipping and handling costs are included as a component of Cost of sales in the Consolidated Statements of Earnings. Revenue derived from shipping and handling costs billed to customers is included in Sales in the Consolidated Statements of Earnings.

Advertising—Advertising costs are expensed as incurred.

Research and Development—We conduct research and development activities for the purpose of developing new products, enhancing the functionality, effectiveness, ease of use, and reliability of our existing products and expanding the applications for which uses of our products are appropriate. Research and development costs are expensed as incurred.

Restructuring—We periodically initiate restructuring activities to appropriately position our cost base relative to prevailing economic conditions and associated customer demand, as well as in connection with certain acquisitions. Costs associated with restructuring actions can include one-time termination benefits and related charges in addition to facility closure, contract termination and other related activities. We record the cost of the restructuring activities when the associated liability is incurred. Refer to Note 15 for additional information.

Foreign Currency Translation and Transactions—Exchange rate adjustments resulting from foreign currency transactions are recognized in Net earnings, whereas effects resulting from the translation of financial statements are reflected as a component of Accumulated other comprehensive income (loss) within Stockholders’ equity. Assets and liabilities of subsidiaries operating outside the United States with a functional currency other than U.S. dollars are translated into U.S. dollars using year end exchange rates and income statement accounts are translated at weighted average exchange rates. Net foreign currency transaction gains or losses were not material in any of the years presented.

Accounting for Stock-Based Compensation—We account for stock-based compensation by measuring the cost of employee services received in exchange for all equity awards granted, including stock options, restricted stock units (“RSUs”), and performance stock units (“PSUs”), based on the fair value of the award as of the grant date. Equity-based compensation expense is recognized net of an estimated forfeiture rate on a straight-line basis over the requisite service period of the award, except that in the case of RSUs, compensation expense is recognized using an accelerated attribution method. Refer to Note 17 for additional information on the stock-based compensation plans.

Income Taxes—In accordance with GAAP, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted rates expected to be in effect during the year in which the differences reverse. Deferred tax assets generally represent items that can be used as a tax deduction or credit in our tax return in future years for which the tax benefit has already been reflected on our Consolidated Statements of Earnings. Deferred tax liabilities generally represent items that have already been taken as a deduction on our tax return but have not yet been recognized as an expense in our Consolidated Statements of Earnings. The effect on deferred tax assets and liabilities due to a change in tax rates is recognized in income tax expense in the period that includes the enactment date.

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Our deferred tax assets are reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not (a likelihood of more than 50 percent) that some portion or all of the deferred tax assets will not be realized. We evaluate the realizability of deferred income tax assets for each of the jurisdictions in which we operate. If we experience cumulative pretax income in a particular jurisdiction in the three-year period including the current and prior two years, we normally conclude that the deferred income tax assets will more likely than not be realizable and no valuation allowance is recognized, unless known or planned operating developments would lead management to conclude otherwise. However, if we experience cumulative pretax losses in a particular jurisdiction in the three-year period including the current and prior two years, we then consider a series of factors in the determination of whether the deferred income tax assets can be realized. These factors include historical operating results, known or planned operating developments, the period of time over which certain temporary differences will reverse, consideration of the utilization of certain deferred income tax liabilities, tax law carryback capability in the particular country, and prudent and feasible tax planning strategies. After evaluation of these factors, if the deferred income tax assets are expected to be realized within the tax carryforward period allowed for that specific country, we would conclude that no valuation allowance would be required. To the extent that the deferred income tax assets exceed the amount that is expected to be realized within the tax carryforward period for a particular jurisdiction, we establish a valuation allowance.

We recognize tax benefit from uncertain tax positions only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such positions are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. Judgment is required in evaluating tax positions and determining income tax provisions. We reevaluate the technical merits of our tax positions and may recognize an uncertain tax benefit in certain circumstances, including when: (1) a tax audit is completed; (2) applicable tax laws change, including a tax case ruling or legislative guidance; or (3) the applicable statute of limitations expires. We recognize potential accrued interest and penalties associated with unrecognized tax positions in income tax expense. Refer to Note 14 for additional information.

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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 other comprehensive income (loss) (“AOCI”) as an offset to the foreign currency translation adjustments on our investments in foreign subsidiaries. We recognized gains of $5.7 million and $9.4 million for the years ended December 31, 2019 and December 31, 2018, respectively, and losses of $18.8 million for the year ended December 31, 2017 in Other comprehensive income (loss) related to the net investment hedges. Any amounts deferred in AOCI will remain until the hedged investment is sold or substantially liquidated. The Company recorded no ineffectiveness from its net investment hedges during the years ended December 31, 2019, 2018, and 2017.

The changes in AOCI by component are summarized below ($ in millions):

	Foreign currency translation adjustments				Pension & post- retirement plan benefit adjustments (b)				Total
Balance, January 1, 2017	$	(72.6	)		$	(73.2	)		$	(145.8	)
Other comprehensive income (loss) before reclassifications:
Increase (decrease)	136.6				(3.5		)		133.1
Income tax impact	—				0.9				0.9
Other comprehensive income (loss) before reclassifications, net of income taxes	136.6				(2.6		)		134.0
Amounts reclassified from accumulated other comprehensive income (loss):
Increase	—				5.5			(a)	5.5
Income tax impact	—				(1.3		)		(1.3		)
Amounts reclassified from accumulated other comprehensive income (loss), net of income taxes:	—				4.2				4.2
Net current period other comprehensive income (loss):	136.6				1.6				138.2
Balance, December 31, 2017	$	64.0			$	(71.6	)		$	(7.6	)
Other comprehensive income (loss) before reclassifications:
Increase (decrease)	(127.3		)		0.3				(127.0		)
Income tax impact	—				(0.2		)		(0.2		)
Other comprehensive income (loss) before reclassifications, net of income taxes	(127.3		)		0.1				(127.2		)
Amounts reclassified from accumulated other comprehensive income (loss):
Increase	—				4.3			(a)	4.3
Income tax impact	—				(0.8		)		(0.8		)
Amounts reclassified from accumulated other comprehensive income (loss), net of income taxes	—				3.5				3.5
Net current period other comprehensive income (loss)	(127.3		)		3.6				(123.7		)
Divestiture of A&S Business	34.0				10.7				44.7
Balance, December 31, 2018	$	(29.3	)		$	(57.3	)		$	(86.6	)
Other comprehensive income (loss) before reclassifications:
Increase (decrease)	50.5				(29.8		)		20.7
Income tax impact	—				7.3				7.3
Other comprehensive income (loss) before reclassifications, net of income taxes	50.5				(22.5		)		28.0
Amounts reclassified from accumulated other comprehensive income (loss):
Increase	—				3.1			(a)	3.1
Income tax impact	—				(0.8		)		(0.8		)
Amounts reclassified from accumulated other comprehensive income (loss), net of income taxes:	—				2.3				2.3
Net current period other comprehensive income (loss)	50.5				(20.2		)		30.3
Balance, December 31, 2019	$	21.2			$	(77.5	)		$	(56.3	)
(a) This component of AOCI is included in the computation of net periodic pension cost (refer to Note 12 for additional details) and also includes activity related to the divestiture of the A&S Business.
(b) Includes balances relating to employee defined benefit plans, supplemental executive retirement plans, and other postretirement employee benefit plans.

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Pension—We measure our pension assets and obligations to determine the funded status as of December 31st each year, and recognize an asset for an overfunded status or a liability for an underfunded status in our Consolidated Balance Sheets. Changes in the funded status of the pension plans are recognized in the year in which the changes occur and are reported in Other comprehensive income (loss). Refer to Note 12 for additional information on our pension plans including a discussion of actuarial assumptions, our policy for recognizing associated gains and losses, and the method used to estimate service and interest cost components.

New Accounting Standards

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which amends the impairment model by requiring entities to use a forward-looking approach, based on expected losses, to estimate credit losses on certain types of financial instruments, including trade receivables. This standard was effective for us beginning January 1, 2020. Upon adoption of this standard, we expect to record an adjustment to beginning retained earnings that largely represents expected losses on our trade accounts receivables, financing receivables, and unbilled receivables in contract assets that have not aged to a date that could indicate an incurred loss. We do not expect this standard to have material impacts on our future results of operations.

NOTE 3. ACQUISITIONS

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

We make an initial allocation of the purchase price at the date of acquisition based on our understanding of the fair value of the acquired assets and assumed liabilities. We obtain this information during due diligence and through other sources. In the months after closing, as we obtain additional information about these assets and liabilities, including through tangible and intangible asset appraisals, and learn more about the newly acquired business, we are able to refine the estimates of fair value and more accurately allocate the purchase price. Only 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.

The following describes our acquisition activity for the years ended December 31, 2019, 2018, and 2017.

Completed Acquisitions in 2019

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, 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 close when requirements of country-specific agreements or regulatory approvals are satisfied.

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The $2.7 billion purchase price was paid in exchange for ASP’s businesses in both Principal and Non-Principal Countries. As of December 31, 2019, we have closed 20 Principal Countries and four Non-Principal Countries that, in aggregate, accounted for approximately 98% of the preliminary valuation of ASP. The remaining Non-Principal Countries represent approximately 2% of the preliminary valuation of ASP, or $50 million, which is included as a prepaid asset in Other assets in the Consolidated Balance Sheet. As each Non-Principal Country closes, we will reduce the prepaid asset and record the fair value of the assets acquired and liabilities assumed. All of the provisional goodwill associated with the Transaction is included in goodwill at December 31, 2019; 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 that have not been closed. Under the distribution agreements, ASP will sell finished goods to Ethicon at prices agreed by the parties. ASP will recognize 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.

Revenue and operating loss attributable to ASP for the year ended December 31, 2019 were $525 million and $111 million, respectively, and are included in our Professional Instrumentation segment beginning April 1, 2019. Operating loss includes amortization of intangible assets, acquisition-related fair value adjustments, and post-close transaction and integration costs associated with the Transaction of $230 million during the year ended December 31, 2019. We incurred approximately $86 million of pretax transaction and integration related costs recorded in Selling, general, and administrative expenses during the year ended December 31, 2019 which were primarily for banking fees, legal fees, and amounts paid to other third-party advisers. During the year ended December 31, 2018, we incurred $42 million of pretax transaction and integration costs related to the ASP Transaction.

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 December 31, 2019; we did not acquire accounts receivable or accounts payable from Johnson & Johnson ($ in millions):

	Advanced Sterilization Products
Inventories	$	173.8
Property, plant and equipment	45.7
Goodwill	1,420.3
Other intangible assets, primarily customer relationships, trade names and technology	1,120.0
Other assets and liabilities, net	(73.4		)
Total consideration allocated to closed Principal and Non-Principal Countries	2,686.4
Prepaid acquisition asset related to remaining Non-Principal Countries	50.1
Net cash consideration	$	2,736.5

Other Acquisitions and Investments

In addition to the acquisition of ASP, during 2019, we acquired four businesses including Intelex Technologies, Pruftechnik, and Censis Technologies, for total consideration of $1.2 billion in cash, net of cash acquired. The businesses acquired complement existing units of our Professional Instrumentation segment. We preliminarily recorded an aggregate of $773 million of goodwill related to these acquisitions. Approximately $21 million of goodwill associated with these acquisitions is tax deductible. Additionally, we made an additional equity investment of $4 million during 2019.

The aggregate annual sales of these businesses in 2018 were approximately $191 million. We incurred approximately $17 million of pretax transaction-related costs recorded in Selling, general, and administrative expenses for the year ended December 31, 2019, which were primarily for banking fees, legal fees, and amounts paid to other third-party advisers. The revenue and operating loss from these acquisitions included in our results were approximately $76 million and $53 million, respectively, during the year ended December 31, 2019.

The following summarizes the estimated fair values of the assets acquired and liabilities assumed as of December 31, 2019 for ASP in 2019, and all of the other 2019 acquisitions as a group ($ in millions):

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	ASP				Other				Total
Accounts receivable	$	—			$	46.4			$	46.4
Inventories	173.8				16.1				189.9
Property, plant and equipment	45.7				10.7				56.4
Goodwill	1,420.3				772.6				2,192.9
Other intangible assets, primarily customer relationships, trade names and technology	1,120.0				531.8				1,651.8
Other assets and liabilities, net	(73.4		)		(170.2		)		(243.6		)
Prepaid acquisition asset related to Non-Principal Countries	50.1				—				50.1
Net cash consideration	$	2,736.5			$	1,207.4			$	3,943.9

Completed Acquisitions in 2018

Accruent

On September 6, 2018, we acquired Athena SuperHoldCo, Inc., including Accruent, LLC (“Accruent”), a privately-held, leading provider of facilities asset management software, for a total purchase price of approximately $2.0 billion net of acquired cash (the “Accruent Acquisition”). Accruent is a recognized leader in the facilities asset management industry, combining deep domain and industry capabilities with an integrated, cloud-based framework that provides insights spanning the full lifecycle of real estate, facilities and asset management. Accruent serves over 10,000 global customers, and helps assure clients fulfill the mission of their organization by extending the lifecycle of assets, monitoring full compliance, and reducing safety risks. Accruent is headquartered in Austin, Texas, and is included in our Professional Instrumentation Segment. Accruent generated annual revenues of approximately $200 million in 2017. We financed the Accruent Acquisition with available cash and proceeds from our financing activities. We recorded $1.2 billion of goodwill related to the Accruent Acquisition which is not tax deductible.

Gordian

On July 27, 2018, we acquired TGG Ultimate Holdings, Inc. and its subsidiaries, including The Gordian Group, Inc. (“Gordian”), a privately-held, leading provider of construction cost data, software, and service, for a total purchase price of $778 million net of cash acquired (the “Gordian Acquisition”). Gordian’s comprehensive offerings serve the entire building lifecycle and provide workflow solutions designed to optimize every stage of an asset owner’s construction and maintenance needs, including connecting the owner and contractors in the same exchange and providing access to cost and facility metrics databases via a subscription-based model. Gordian is headquartered in Greenville, South Carolina, and is included in our Professional Instrumentation segment. Gordian generated annual revenues of approximately $110 million in 2017. We financed the Gordian Acquisition with available cash. We recorded $435 million of goodwill related to the Gordian Acquisition which is not tax deductible.

Revenue and operating losses attributable to these acquisitions were $115 million and $51 million for the year ended December 31, 2018, respectively.

Other Acquisitions

In addition to the acquisitions of Accruent and Gordian, during 2018, we acquired two businesses for total consideration of $44 million in cash, net of cash acquired. The businesses acquired complement existing units of both our segments. The aggregate annual sales of these businesses at the time of their respective acquisitions, in each case based on the acquired company’s revenues for its last completed fiscal year prior to the acquisition, were approximately $35 million. We recorded $31 million of goodwill related to these acquisitions.

We recorded certain adjustments during 2019 to the preliminary purchase price allocation of acquisitions that closed during 2018 that resulted in a net increase of $75 million to goodwill.

Completed Acquisitions in 2017

During 2017, we acquired three businesses for total consideration of $1.6 billion in cash, net of cash acquired. The businesses acquired complement existing units of both our segments. The aggregate annual sales of these businesses at the time of their respective acquisitions, in each case based on the acquired company’s revenues for its last completed fiscal year prior to the acquisition, were approximately $389 million. We recorded $1.0 billion of goodwill related to these acquisitions.

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Acquisitions Summary

The following summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition for all acquisitions consummated during the years ended December 31 ($ in millions):

	2019				2018				2017
Accounts receivable	$	46.4			$	86.7			$	103.7
Inventories	189.9				3.9				37.3
Property, plant and equipment	56.4				7.1				137.1
Goodwill	2,192.9				1,601.2				1,035.2
Other intangible assets, primarily customer relationships, trade names and technology	1,651.8				1,345.8				587.8
Trade accounts payable	—				(9.9		)		(18.7		)
Other assets and liabilities, net	(243.6		)		(219.7		)		(289.0		)
Previously held investment	—				—				(36.8		)
Prepaid acquisition asset related to Non-Principal Countries	50.1				—				—
Net cash consideration	$	3,943.9			$	2,815.1			$	1,556.6

We incurred approximately $102 million of pretax transaction-related costs related to the five acquisitions in 2019, approximately $25 million of pretax transaction-related costs related to the four acquisitions in 2018, and approximately $19 million of pretax transaction-related costs in 2017, which were primarily for banking fees, legal fees, amounts paid to other third-party advisers, and other change in control costs. Transaction-related costs are recorded in Selling, general, and administrative expenses in the Consolidated Statements of Earnings.

Pro Forma Financial Information (Unaudited)

The unaudited pro forma information for the periods set forth below gives effect to the 2019 and 2018 acquisitions as if they had occurred as of January 1, 2018. The pro forma information is presented for informational purposes only and is not necessarily 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):

	2019				2018
Sales	$	7,659.9			$	7,625.3
Net earnings from continuing operations	$	805.0			$	898.7
Diluted net earnings per share from continuing operations	$	2.37			$	2.56

NOTE 4. DISCONTINUED OPERATIONS AND DISPOSITIONS

Divestiture of A&S Business

On March 7, 2018, we entered into a definitive agreement to combine four of our operating companies from our Automation & Specialty platform (the “A&S Business”) with Altra Industrial Motion Corp. (“Altra”) in a tax-efficient Reverse Morris Trust transaction. The A&S Business includes the market-leading brands of Kollmorgen, Thomson, Portescap and Jacobs Vehicle Systems that were previously reported within our Industrial Technologies segment. On October 1, 2018, we completed the split-off of the A&S Business. 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.; (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 non-cash debt-for-debt exchange that reduced outstanding indebtedness of Fortive, which was inclusive of accrued interest and related fees; 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. Accordingly, the accompanying consolidated financial statements for all periods presented reflect this business as discontinued operations.

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We incurred approximately $77 million of pretax transaction-related costs associated with the divestiture during the year ended December 31, 2018, which was primarily for professional fees. These amounts are recorded in the Gain (loss) on disposition of discontinued operations before income taxes component of Earnings from discontinued operations, net of income taxes.

We are providing certain support services under transition services agreements, and the impact of these services on our consolidated financial statements was immaterial.

The key components of income from discontinued operations for the years ended December 31 were as follows ($ in millions):

	2019				2018				2017
Sales	$	6.1			$	750.5			$	900.0
Cost of sales	(6.2		)		(438.9		)		(522.9		)
Selling, general, and administrative expenses	—				(92.3		)		(124.5		)
Research and development expenses	—				(26.9		)		(36.7		)
Gain (loss) on disposition of discontinued operations before income taxes	(2.1		)		1,909.9				—
Interest expense and other	—				(4.6		)		(5.3		)
Earnings (loss) before income taxes	(2.2		)		2,097.7				210.6
Income taxes	15.7				(102.2		)		(50.4		)
Earnings from discontinued operations, net of income taxes	$	13.5			$	1,995.5			$	160.2

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

The following table summarizes the major classes of assets and liabilities of discontinued operations that were included in the Company’s accompanying Consolidated Balance Sheets as of December 31 ($ in millions):

	2019				2018
ASSETS
Accounts receivable, net	$	—			$	4.2
Inventories	—				4.4
Other current assets	3.2				21.4
Total current assets, discontinued operations	3.2				30.0
Total assets, discontinued operations	$	3.2			$	30.0
LIABILITIES
Current liabilities:
Trade accounts payable	$	—			$	9.2
Accrued expenses and other current liabilities	—				21.5
Total current liabilities, discontinued operations	—				30.7
Total liabilities, discontinued operations	$	—			$	30.7

Combination of the Tektronix Video Business with Telestream

On July 20, 2019, we completed the combination of the Tektronix Video test and monitoring equipment business (“Tektronix Video Business”) with Telestream, LLC (the “Combined Business”), a portfolio company of Genstar Capital LLC. We recognized a pretax gain of $41 million upon the combination, and hold a 33% equity stake in the Combined Business. This transaction did not meet the criteria for discontinued operations reporting, and therefore the operating results of the Tektronix Video Business prior to the combination with Telestream are included in continuing operations for all periods presented. At December 31, 2019, the carrying amount of the investment in the Combined Business, included in other assets in the accompanying Consolidated Balance Sheet, was $82 million. For the year ended December 31, 2019, the loss from our equity investment in the Combined Business recorded in Other non-operating expenses, net in the accompanying Consolidated Statements of Earnings was $4 million.

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NOTE 5. INVENTORIES

The classes of inventory as of December 31 are summarized as follows ($ in millions):

	2019				2018
Finished goods	$	285.6			$	219.5
Work in process	100.4				103.1
Raw materials	254.3				251.9
Total	$	640.3			$	574.5

As of December 31, 2019 and 2018, the difference between inventories valued at LIFO and the value of that same inventory if the FIFO method had been used was not significant. The liquidation of LIFO inventory did not have a significant impact on our results of operations in any period presented.

NOTE 6. PROPERTY, PLANT AND EQUIPMENT

The classes of property, plant and equipment as of December 31 are summarized as follows ($ in millions):

	2019				2018
Land and improvements	$	63.4			$	63.1
Buildings and leasehold improvements	363.8				343.6
Machinery and equipment	931.0				1,059.2
Gross property, plant and equipment	1,358.2				1,465.9
Less: accumulated depreciation	(838.7		)		(889.8		)
Property, plant and equipment, net	$	519.5			$	576.1

No interest was capitalized related to capitalized expenditures in any period.

NOTE 7. GOODWILL AND OTHER INTANGIBLE ASSETS

As discussed in Note 3, goodwill arises from the purchase price for acquired businesses exceeding the fair value of tangible and intangible assets acquired less assumed liabilities. We assess the goodwill of each of our reporting units for impairment at least annually as of the first day of the fourth quarter and as “triggering” events occur that indicate that it is more likely than not that an impairment exists. We elected to bypass the optional qualitative goodwill assessment allowed by applicable accounting standards and performed a quantitative impairment test for all reporting units as this was determined to be the most effective method to assess impairment across a large spectrum of reporting units.

We estimate the fair value of our reporting units primarily using a market approach, based on multiples of earnings before interest, taxes, depreciation and amortization (“EBITDA”) determined by current trading market multiples of earnings for companies operating in businesses similar to each of our reporting units, in addition to recent market available sale transactions of comparable businesses. In certain circumstances we also evaluate other factors including results of the estimated fair value utilizing a discounted cash flow analysis (i.e., an income approach), market positions of the businesses, comparability of market sales transactions, and financial and operating performance in order to validate the results of the market approach. If the estimated fair value of the reporting unit is less than its carrying value, we will impair the goodwill for the amount of the carrying value in excess of the fair value.

In 2019, we had twelve reporting units for goodwill impairment testing. The carrying value of the goodwill included in each individual reporting unit ranges from $15 million to approximately $3.8 billion. No goodwill impairment charges were recorded for the years ended December 31, 2019, 2018, and 2017, and no “triggering” events have occurred subsequent to the performance of the 2019 annual impairment test. The factors used by management in its impairment analysis are inherently subject to uncertainty. If actual results are not consistent with management’s estimates and assumptions, goodwill and other intangible assets may be overstated and a charge would need to be taken against net earnings.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which aims to simplify the subsequent measurement of goodwill by removing Step 2 of the current goodwill impairment test, which requires a hypothetical purchase price allocation. Under the new standard, an impairment loss will be recognized in the amount by which a reporting unit's carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. We adopted this standard on September 28, 2019 (the date of our annual goodwill impairment testing)

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with no impact to our financial statements for the year ended December 31, 2019. The adoption of this standard will only impact future goodwill impairment calculations, as applicable.

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

	Professional Instrumentation				Industrial Technologies				Total
Balance, January 1, 2018	$	3,331.0			$	1,229.3			$	4,560.3
Attributable to 2018 acquisitions	1,571.8				29.4				1,601.2
Foreign currency translation & other	(8.2		)		(20.2		)		(28.4		)
Balance, December 31, 2018	4,894.6				1,238.5				6,133.1
Attributable to adjustments to preliminary purchase price allocations for acquisitions completed in 2018	75.9				(1.2		)		74.7
Attributable to 2019 acquisitions	2,192.9				—				2,192.9
Attributable to the Tektronix Video Business Combination	(40.2		)		—				(40.2		)
Foreign currency translation & other	3.1				35.7				38.8
Balance, December 31, 2019	$	7,126.3			$	1,273.0			$	8,399.3

Finite-lived intangible assets are amortized over the shorter of their legal or estimated useful lives. The following summarizes the gross carrying value and accumulated amortization for each major category of intangible asset as of December 31 ($ in millions):

	2019								2018
	Gross Carrying Amount				Accumulated Amortization				Gross Carrying Amount				Accumulated Amortization
Finite-lived intangibles:
Patents and technology	$	1,041.4			$	(357.0	)		$	614.0			$	(280.8	)
Customer relationships and other intangibles	3,206.8				(792.5		)		2,204.2				(589.9		)
Trademarks and trade names	18.0				(0.2		)		—				—
Total finite-lived intangibles	4,266.2				(1,149.7		)		2,818.2				(870.7		)
Indefinite-lived intangibles:
Trademarks and trade names	728.5				—				528.8				—
Total intangibles	$	4,994.7			$	(1,149.7	)		$	3,347.0			$	(870.7	)

During 2019 we acquired finite-lived intangible assets, consisting primarily of customer relationships and developed technology, with a weighted average life of 11 years. During 2018, we acquired finite-lived intangible assets, consisting primarily of customer relationships and developed technology, with a weighted average life of 12 years. Refer to Note 3 for additional information on the intangible assets acquired.

Total intangible amortization expense in 2019, 2018, and 2017 was $293 million, $135 million and $65 million, respectively. Based on the intangible assets recorded as of December 31, 2019, amortization expense is estimated to be $336 million during 2020, $330 million during 2021, $315 million during 2022, $308 million during 2023, and $306 million during 2024.

NOTE 8. FAIR VALUE MEASUREMENTS

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

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

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

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

Financial liabilities that are measured at fair value on a recurring basis were as follows ($ in millions):

	Quoted Prices in Active Market (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)				Total
December 31, 2019
Deferred compensation liabilities	$	—			$	29.6			$	—			$	29.6
December 31, 2018
Deferred compensation liabilities	$	—			$	20.8			$	—			$	20.8

Certain management employees participate in our nonqualified deferred compensation programs that permit such employees to defer a portion of their compensation, on a pretax basis, until after their termination of employment. All amounts deferred under such plans are unfunded, unsecured obligations and are presented as a component of our compensation and other post-retirement benefits accruals included in Other long-term liabilities in the accompanying Consolidated Balance Sheets. Participants may choose among alternative earning rates for the amounts they defer, which are primarily based on investment options within our defined contribution plans for the benefit of U.S. employees (“401(k) Programs”) (except that the earnings rates for amounts contributed unilaterally by the Company are entirely based on changes in the value of Fortive common stock). Changes in the deferred compensation liability under these programs are recognized based on changes in the fair value of the participants’ accounts, which are based on the applicable earnings rates.

Fair Value of Financial Instruments

The carrying amounts and fair values of financial instruments as of December 31 were as follows ($ in millions):

	2019								2018
	Carrying Amount				Fair Value				Carrying Amount				Fair Value
Current portion of long-term debt	$	1,500.0			$	1,500.0			$	455.6			$	454.9
Long-term debt, net of current maturities	$	4,828.4			$	4,992.3			$	2,974.7			$	2,867.5

As of December 31, 2019 and December 31, 2018, long-term borrowings were categorized as Level 1.

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

Refer to Note 12 for information related to the fair value of the Company-sponsored defined benefit pension plan assets.

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NOTE 9. ACCRUED EXPENSES AND OTHER LIABILITIES

Accrued expenses and other liabilities as of December 31 were as follows ($ in millions):

	2019								2018
	Current				Long-term				Current				Long-term
Compensation and other post-retirement benefits	$	264.5			$	68.0			$	244.5			$	60.2
Claims, including self-insurance and litigation	15.2				75.3				10.9				74.4
Pension obligations	4.0				146.6				7.8				117.6
Taxes, income and other	99.0				1,124.7				174.7				728.3
Deferred revenue	410.1				99.2				288.1				92.6
Sales and product allowances	52.2				—				49.8				—
Warranty	77.1				1.9				71.0				1.1
Other	224.7				68.5				152.5				51.7
Total	$	1,146.8			$	1,584.2			$	999.3			$	1,125.9

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, January 1, 2018	$	65.3
Accruals for warranties issued during the year	81.7
Settlements made	(77.2		)
Additions due to acquisitions	2.6
Effect of foreign currency translation	(0.3		)
Balance, December 31, 2018	$	72.1
Accruals for warranties issued during the year	80.3
Settlements made	(75.9		)
Additions due to acquisitions	2.0
Effect of foreign currency translation	0.5
Balance, December 31, 2019	$	79.0

NOTE 10. LEASES

In February 2016, the FASB issued 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 adoption of ASC 842 resulted in an increase in both assets and liabilities of $175 million as of January 1, 2019. These balances are presented in the following three line items on the Consolidated Balance Sheet: (i) operating lease right-of-use assets; (ii) current operating lease liabilities; and (iii) operating lease liabilities. The adoption of ASC 842 had no impact on our retained earnings, consolidated net earnings, or cash flows.

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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 to account for the lease and related non-lease component(s) as a single lease component. Our finance lease and lessor arrangements are immaterial.

We determine if an arrangement is or contains 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 optional terms, ranging from options to terminate the lease in less than one year to options to extend the lease for up to 15 years. We include optional periods as part of the lease term when we determine that we are reasonably certain to exercise the renewal option or we will not early terminate the lease. Reasonably certain is based on economic incentives and represents a high threshold.

Operating lease cost was $80 million, $64 million, and $46 million for the years ended December 31, 2019, 2018, and 2017, respectively.

Short-term and variable lease cost, and cost for finance leases were immaterial for the year ended December 31, 2019. During the year ended December 31, 2019, cash paid for operating leases was $65 million and is included in operating cash flows. ROU assets obtained in exchange for operating lease liabilities were $80 million for the year ended December 31, 2019, and of those ROU assets exchanged for operating lease obligations, $31 million were related to operating leases acquired with ASP.

The following table presents the maturities of our operating lease liabilities as of December 31, 2019 ($ in millions):

2020	$	57.4
2021	45.8
2022	34.1
2023	22.8
2024	16.2
Thereafter	63.2
Total lease payments	239.5
Less: imputed interest	(25.6		)
Total lease liabilities	$	213.9

Future minimum lease payments as of December 31, 2018 for operating leases having initial or remaining non-cancelable lease terms in excess of one year under Topic 840 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 December 31, 2019, the weighted average lease term of our operating leases was 7.1 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 December 31, 2019, we entered into operating leases for which the lease term had not yet commenced. These leases will commence in 2020 with lease terms between 1 and 15 years and fixed payments over the non-cancelable lease terms of $22 million.

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NOTE 11. FINANCING

The carrying value of the components of our debt as of December 31 were as follows ($ in millions):

	2019				2018
U.S. dollar-denominated commercial paper	$	884.4			$	390.1
Euro-denominated commercial paper	264.1				270.1
Delayed-draw term loan due 2019	—				400.0
Delayed-draw term loan due 2020	1,000.0				—
Term loan due 2020	500.0				—
Yen variable interest rate term loan due 2022	127.1				125.7
1.80% senior unsecured notes due 2019	—				55.6
2.35% senior unsecured notes due 2021	748.2				747.0
3.15% senior unsecured notes due 2026	893.0				891.9
4.30% senior unsecured notes due 2046	547.0				546.9
0.875% senior convertible notes due 2022	1,347.3				—
Other	17.3				3.0
Long-term debt	6,328.4				3,430.3
Less: Current portion of long-term debt	1,500.0				455.6
Long-term debt, net of current maturities	$	4,828.4			$	2,974.7

Unamortized debt discounts, net of premiums and issuance costs of $102 million and $17 million as of December 31, 2019 and December 31, 2018, respectively, have been netted against the aggregate principal amounts of the components of debt table above.

Credit Facilities

Convertible 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 in a private placement to certain initial purchasers for resale to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933.

The Convertible Notes are fully and unconditionally guaranteed, jointly and severally, on an unsecured basis, by four of our wholly-owned domestic subsidiaries (the “Guarantees”). 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.

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Of the $1.4 billion in proceeds received from the issuance of the Convertible Notes, $1.3 billion was classified as debt and $102 million was classified as equity, using an assumed effective interest rate of 3.38%. Debt issuance costs of $24 million were proportionately allocated to debt and equity. We recognized $45 million in interest expense during the year ended December 31, 2019, of which $11 million related to the contractual coupon rate of 0.875% and $7 million was attributable to the amortization of debt issuance costs. The discount at issuance was $102 million and is being amortized over a three-year period. The unamortized discount at December 31, 2019 was $74 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.

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 for a holder 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 for the Convertible Notes. If we undergo a “fundamental change,” as defined 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 aggregate principal amount of the outstanding Convertible Notes may declare 100% 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 associated with, our acquisition of ASP.

In connection with this offering of the Convertible Notes, on February 21, 2019, we entered into amendments to our credit facilities to exclude the Guarantees from the limitations on subsidiary indebtedness under our credit facilities.

Term Loan Due 2020

On October 25, 2019, we entered into a credit facility agreement that provides for a 364-day term loan facility (“2020 Term Loan”) in an aggregate principal amount of $300 million. On October 25, 2019, we drew down the full $300 million available under the 2020 Term Loan in order to fund, in part, the Censis acquisition. We subsequently increased the size of this facility by $200 million on November 8, 2019 and drew the additional amount on the same day resulting in an outstanding amount of $500 million. The 2020 Term Loan bears interest at a variable rate equal to the London inter-bank offered rate (“LIBOR”) plus a ratings-based margin currently at 75 basis points. As of December 31, 2019, borrowings under this facility bore an interest rate of 2.49% 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 the Revolving Credit Facility as defined below.

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

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 (“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. The 2020 Delayed-Draw Term Loan bears interest at a variable rate equal to the LIBOR plus a ratings-based margin currently at 75 basis points. As of December 31, 2019, borrowings under this facility bore an interest rate of 2.49% per annum. The terms and conditions, including covenants, applicable to the 2020 Delayed-Draw Term Loan are substantially similar to those applicable to the Revolving Credit Facility.

The original maturity date of the 2020 Delayed-Draw Term Loan was February 28, 2020; however on February 25, 2020, we extended the maturity date to August 28, 2020. The 2020 Delayed-Draw Term Loan remains prepayable at our option.

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Delayed-Draw Term Loan Due 2019

On August 22, 2018, we entered into a credit facility agreement that provided for a 364-day delayed-draw term loan facility (“Delayed-Draw Term Loan”) with an aggregate principal amount of $1.75 billion. On September 5, 2018, we drew down the full $1.75 billion available under the Delayed-Draw Term Loan in order to fund, in part, the Accruent Acquisition. The Delayed-Draw Term Loan bore interest at a variable rate equal to the LIBOR plus a ratings-based margin currently at 75 basis points. During 2019, the annual effective rate was approximately 3.24% per annum. The Delayed-Draw Term Loan was prepayable at our option, and we were not permitted to re-borrow once the term loan was repaid. The terms and conditions, including covenants, applicable to the Delayed-Draw Term Loan were substantially similar to those applicable to the Revolving Credit Facility. On September 26, 2018 and on November 21, 2018, we repaid $400 million and $950 million of this loan, respectively. On February 28, 2019, we prepaid the remaining $400 million outstanding principal and accrued interest under the delayed-draw term loan due 2019. The prepayment fees associated with this prepayment were immaterial.

Yen Variable Interest Rate Term Loan

On August 24, 2017, we entered into a term loan agreement that provides for a five-year ¥13.8 billion senior unsecured term facility (“Yen Term Loan”) that matures on August 24, 2022. We borrowed the entire ¥13.8 billion available under this facility on August 28, 2017, which yielded net proceeds of approximately $126 million. The Yen Term Loan bears interest at a rate equal to LIBOR plus 50 basis points, provided however that LIBOR may not be less than zero for the purposes of the Yen Term Loan. The annual effective interest rate was approximately 0.50% per annum as of and for the year ended December 31, 2019. The Yen Term Loan is pre-payable at our option, and re-borrowing is not permitted once the term loan is repaid.

The terms and conditions, including covenants, applicable to the Yen Term Loan are substantially similar to those applicable to the senior unsecured revolving credit facility established in 2016 (the “Revolving Credit Facility”) as described below.

Revolving Credit Facility

On June 16, 2016, we entered into a five-year $1.5 billion Revolving Credit Facility that expires on June 16, 2021. On November 30, 2018 we entered into an amended and restated agreement (the “Credit Agreement”) extending the availability period of the Revolving Credit Facility to November 30, 2023 and increased the facility to $2.0 billion. The Revolving Credit Facility is subject to a one year extension option at our request and with the consent of the lenders. The Credit Agreement also contains an option permitting us to request an increase in the amounts available under the Credit Agreement of up to an aggregate additional $1.0 billion.

Borrowings under the Revolving Credit Facility bear interest at a rate equal (at our option) to either (1) a LIBOR-based rate (the “LIBOR-Based Rate”) plus a margin of between 80.5 and 117.5 basis points, depending on our long-term debt credit rating, or (2) the highest of (a) the Federal funds rate plus 1/2 of 1%, (b) the prime rate, and (c) the LIBOR-Based Rate plus 17.5 basis points, plus in each case a margin that varies according to our long-term debt credit rating. We are obligated to pay an annual facility fee for the Revolving Credit Facility of between 7.0 and 20.0 basis points varying according to our long-term debt credit rating.

The Credit Agreement requires us to maintain a consolidated net leverage ratio of debt to consolidated EBITDA (as defined in the Credit Agreement) of less than 3.50 to 1.00; provided that the maximum consolidated net leverage ratio will be increased to 4.00 to 1.00 for the four consecutive full fiscal quarters immediately following the consummation of any acquisition by us in which the purchase price exceeds $250 million. The Credit Agreement also requires us to maintain a consolidated interest coverage ratio (as defined in the Credit Agreement) of at least 3.50 to 1.00 as of the end of any fiscal quarter. The Credit Agreement also contains customary representations, warranties, conditions precedent, events of default, indemnities, and affirmative and negative covenants. As of December 31, 2019 and December 31, 2018, we were in compliance with all covenants under the Credit Agreement and had no borrowings outstanding under the Revolving Credit Facility.

Commercial Paper Programs

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”). Under these programs, we may issue unsecured promissory notes with maturities not exceeding 397 and 183 days, respectively. Interest expense on the notes is paid at maturity and is generally based on our credit ratings at the time of issuance and prevailing short-term interest rates.

The details of our Commercial Paper Programs as of December 31, 2019 were as follows ($ in millions):

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	Carrying Value				Annual effective rate			Weighted average remaining maturity (in days)
U.S. dollar-denominated	$	884.4			2.14	%		13
Euro-denominated	$	264.1			(0.10	)%		33

Credit support for the Commercial Paper Programs is provided by the Revolving Credit Facility. The availability of the Revolving Credit Facility as a standby liquidity facility to repay maturing commercial paper is an important factor in maintaining the Commercial Paper Programs’ existing credit ratings. 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.

Our ability to access the commercial paper market, and the related costs of these borrowings, is affected by the strength of our credit rating and market conditions. Any downgrade in our credit rating would increase the cost of borrowing under our commercial paper programs and the Credit Agreement, and could limit or preclude our ability to issue commercial paper. If our access to the commercial paper market is adversely affected due to a downgrade, change in market conditions or otherwise, we would expect to rely on a combination of available cash, operating cash flow, and the Revolving Credit Facility to provide short-term funding. In such event, the cost of borrowings under the Revolving Credit Facility could be higher than the historic cost of commercial paper borrowings.

We classified our borrowings outstanding under the Commercial Paper Programs as of December 31, 2019 as long-term debt in the accompanying Consolidated Balance Sheets as we have the intent and ability, as supported by availability under the Revolving Credit Facility referenced above, to refinance these borrowings for at least one year from the balance sheet date.

Proceeds from borrowings under the commercial paper programs are typically available for general corporate purposes, including acquisitions.

Registered Notes

As of December 31, 2019, we had outstanding the following senior notes, collectively the “Registered Notes”:

•	$750 million aggregate principal amount of senior notes due June 15, 2021 issued at 99.977% of their principal amount and bearing interest at the rate of 2.35% per year.

•	$900 million aggregate principal amount of senior notes due June 15, 2026 issued at 99.644% of their principal amount and bearing interest at the rate of 3.15% per year.

•	$350 million and $200 million aggregate principal amounts of senior notes due June 15, 2046 issued at 99.783% and 101.564%, respectively, of their principal amounts and bearing interest at the rate of 4.30% per year.

Interest on the Registered Notes is payable semi-annually in arrears on June 15 and December 15 of each year.

We previously had outstanding $300 million aggregate principal amount of senior notes due June 15, 2019 (the “2019 Notes”) issued at 99.893% of their principal amount and bearing interest at the rate of 1.80% per year. In connection with the debt exchange in the split-off of the A&S Business on October 1, 2018, we retired $244.7 million of these 2019 notes. On June 15, 2019, we repaid the remaining outstanding principal of $55.3 million of the 2019 Notes.

Covenants and Redemption Provisions Applicable to Registered Notes

We may redeem the Registered Notes of the applicable series, in whole or in part, at any time prior to the dates specified in the Registered Notes indenture (the “Call Dates”) by paying the principal amount and the “make-whole” premium specified in the Registered Notes indenture, plus accrued and unpaid interest. Additionally, we may redeem all or any part of the Registered Notes of the applicable series on or after the Call Dates without paying the “make-whole” premium specified in the Registered Notes indenture.

Registered Notes Series	Call Dates
2.35% senior unsecured notes due 2021	May 15, 2021
3.15% senior unsecured notes due 2026	March 15, 2026
4.30% senior unsecured notes due 2046	December 15, 2045

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If a change of control triggering event occurs, we will, in certain circumstances, be required to make an offer to repurchase the Registered Notes at a purchase price equal to 101% of the principal amount, plus accrued and unpaid interest. A change of control triggering event is defined as the occurrence of both a change of control and a rating event, each as defined in the Registered Notes indenture. Except in connection with a change of control triggering event, the Registered Notes do not have any credit rating downgrade triggers that would accelerate the maturity of the Registered Notes.

The Registered Notes contain customary covenants, including limits on the incurrence of certain secured debt and sale/leaseback transactions. None of these covenants are considered restrictive to our operations and as of December 31, 2019, we were in compliance with all of our covenants.

Other

We made interest payments of $127 million during 2019, $102 million during 2018, and $87 million during 2017.

There are $1.5 billion of minimum principal payments due under our total long-term debt during 2020. The future minimum principal payments due are presented in the following table:

	Term Loans				Convertible and Registered Notes				Total
2020	$	1,500.0			$	—			$	1,500.0
2021	—				750.0				750.0
2022	127.1				1,437.5				1,564.6
2023	—				—				—
2024	—				—				—
Thereafter	—				1,450.0				1,450.0
Total principal payments (a)	$	1,627.1			$	3,637.5			$	5,264.6
(a) Not included in the table above are discounts, net of premiums and issuance costs associated with the Registered Notes and the Commercial Paper Programs, which totaled $102 million as of December 31, 2019, and have been recorded as an offset to the carrying amount of the related debt in the accompanying Consolidated Balance Sheet as of December 31, 2019. In addition, the table above does not include principal balances of $1.1 billion under the Commercial Paper Programs and other financing balances of $17 million.

Shelf Registration Statement

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

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NOTE 12. PENSION PLANS

Certain employees participate in noncontributory defined benefit pension plans. In general, our policy is to fund these plans based on considerations relating to legal requirements, underlying asset returns, the plan’s funded status, the anticipated deductibility of the contribution, local practices, market conditions, interest rates, and other factors. Our U.S. pension plans are frozen, and, as such, there are no ongoing benefit accruals associated with the U.S. pension plans.

The following sets forth the funded status of our plans as of the most recent actuarial valuations using measurement dates of December 31 ($ in millions):

	U.S. Pension Benefits								Non-U.S. Pension Benefits
	2019				2018				2019				2018
Change in pension benefit obligation:
Benefit obligation at beginning of year	$	30.9			$	33.7			$	274.3			$	300.8
Service cost	—				—				2.3				1.3
Interest cost	1.3				1.2				5.7				5.7
Employee contributions	—				—				0.9				0.2
Benefits paid and other	(1.2		)		(1.3		)		(8.7		)		(9.5		)
Plan acquisitions	—				—				25.1				—
Actuarial loss (gain)	4.2				(2.7		)		39.3				(7.0		)
Amendments, settlements and curtailments	—				—				(0.6		)		(3.0		)
Foreign exchange rate impact	—				—				1.2				(14.2		)
Benefit obligation at end of year	35.2				30.9				339.5				274.3
Change in plan assets:
Fair value of plan assets at beginning of year	23.3				25.8				156.5				172.2
Actual return on plan assets	3.9				(1.2		)		20.5				(3.1		)
Employer contributions	0.5				—				10.9				9.8
Employee contributions	—				—				0.9				0.2
Amendments and settlements	—				—				(2.7		)		(4.4		)
Benefits paid and other	(1.2		)		(1.3		)		(8.7		)		(9.5		)
Plan acquisitions	—				—				17.8				—
Foreign exchange rate impact	—				—				2.4				(8.7		)
Fair value of plan assets at end of year	26.5				23.3				197.6				156.5
Funded status	$	(8.7	)		$	(7.6	)		$	(141.9	)		$	(117.8	)

The difference between the accumulated benefit obligation and the projected benefit obligation as of December 31, 2019 and 2018 is immaterial.

Weighted average assumptions used to determine benefit obligations at date of measurement

	U.S. Pension Plans						Non-U.S. Pension Plans
	2019			2018			2019			2018
Discount rate	3.37	%		4.40	%		1.41	%		2.30	%
Rate of compensation increase	N/A			N/A			2.47	%		2.63	%

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Components of net periodic pension cost

The following sets forth the components of net periodic pension cost for our plans for the years ended December 31 ($ in millions):

	U.S. Pension Benefits												Non-U.S. Pension Benefits
	2019				2018				2017				2019				2018				2017
Service cost	$	—			$	—			$	—			$	2.3			$	1.3			$	3.5
Interest cost	1.3				1.2				0.3				5.7				5.7				5.8
Expected return on plan assets	(1.3		)		(1.4		)		(0.3		)		(5.9		)		(5.8		)		(6.2		)
Amortization of net loss	—				—				—				2.9				2.6				3.8
Net curtailment and settlement loss recognized	—				—				—				0.2				1.0				0.9
Net periodic pension cost	$	—			$	(0.2	)		$	—			$	5.2			$	4.8			$	7.8

Included in AOCI as of December 31, 2019 are the following amounts that have not yet been recognized in net periodic pension cost: unrecognized prior service cost of $3 million ($3 million, net of tax) and unrecognized actuarial losses of approximately $97 million ($74 million, net of tax). The unrecognized prior service cost included in AOCI and expected to be recognized in net periodic pension cost during the year ending December 31, 2020 is immaterial. The actuarial losses included in Accumulated other comprehensive income (loss) and expected to be recognized in net periodic pension cost during the year ending December 31, 2020 is $4 million ($3 million, net of tax). The unrecognized losses are calculated as the difference between the actuarially determined projected benefit obligation, the value of the plan assets, and the accumulated contributions in excess of net periodic pension cost as of December 31, 2019. No plan assets are expected to be returned to us during the year ending December 31, 2020.

Weighted average assumptions used to determine net periodic pension cost at date of measurement

	U.S. Pension Plans									Non-U.S. Pension Plans
	2019			2018			2017			2019			2018			2017
Discount rate	4.40	%		3.73	%		3.83	%		2.30	%		2.16	%		2.12	%
Expected return on plan assets	5.75	%		5.75	%		5.75	%		3.50	%		3.48	%		3.54	%
Rate of compensation increase	N/A			N/A			N/A			2.63	%		2.39	%		3.03	%

The discount rates reflect the market rate on December 31 for high-quality fixed-income investments with maturities corresponding to our benefit obligations and are subject to change each year. For non-U.S. plans, rates appropriate for each plan are determined based on investment grade instruments with maturities approximately equal to the average expected benefit payout under the plan.

The expected rates of return reflect the asset allocation of the plans and ranged from 1.50% to 6.00% in 2019 and 1.75% to 6.00% in both 2018 and 2017. The domestic plan rate is based primarily on broad publicly-traded-equity and fixed-income indices and forward-looking estimates of active portfolio and investment management. The expected rates of return on asset assumptions for the non-U.S. plans were determined on a plan-by-plan basis based on the composition of assets.

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

Plan Assets

Plan assets are invested in various insurance contracts and equity and debt securities as determined by the administrator of each plan. Some of these investments, consisting of mutual funds and other private investments, are valued using the net asset value (“NAV”) method as a practical expedient. The investments valued using the NAV method are allocated across a broad array of funds and diversify the portfolio. The value of the plan assets directly affects the funded status of our pension plans recorded in the financial statements.

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The fair values of our pension plan assets as of December 31, 2019, by asset category were as follows ($ in millions): 

	Quoted Prices in Active Market (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)				Total
Cash and equivalents	$	3.4			$	—			$	—			$	3.4
Equity securities:
Common stock	7.3				—				—				7.3
Preferred stock	1.7				—				—				1.7
Fixed income securities:
Corporate bonds	—				8.5				—				8.5
Government issued	—				2.7				—				2.7
Mutual funds	—				30.7				—				30.7
Insurance contracts	—				1.9				—				1.9
Total	$	12.4			$	43.8			$	—			$	56.2
Investments measured at NAV(a):
Mutual funds													155.9
Other private investments													12.0
Total assets at fair value													$	224.1
(a) The fair value amounts presented in the table above are intended to permit reconciliation of the fair value hierarchy to the total fair value of plan assets.

The fair values of our pension plan assets as of December 31, 2018, by asset category were as follows ($ in millions):

	Quoted Prices in Active Market (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)				Total
Cash and equivalents	$	2.7			$	—			$	—			$	2.7
Fixed income securities:
Corporate bonds	—				0.4				—				0.4
Mutual funds	—				8.1				—				8.1
Insurance contracts	—				1.8				—				1.8
Total	$	2.7			$	10.3			$	—			$	13.0
Investments measured at NAV(a):
Mutual funds													165.6
Other private investments													1.2
Total assets at fair value													$	179.8
(a) The fair value amounts presented in the table above are intended to permit reconciliation of the fair value hierarchy to the total fair value of plan assets.

Certain mutual funds are valued at the quoted closing price reported on the active market on which the individual securities are traded. Common stock, corporate bonds, and mutual funds that are not traded on an active market are valued at quoted prices reported by investment brokers and dealers based on the underlying terms of the security and comparison to similar securities traded on an active market.

Certain mutual funds and other private investments are valued using NAV based on the information provided by the asset fund managers, which reflects the plan’s share of the fair value of the net assets of the investment. Depending on the nature of the assets, the underlying investments are valued using a combination of either discounted cash flows, earnings and market multiples, third party appraisals, or through reference to the quoted market prices of the underlying investments held by the venture, partnership or private entity where available. In addition, some of these investments have limits on their redemption to

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monthly, quarterly, semiannually or annually and may require up to 90 days prior written notice. Valuation adjustments reflect changes in operating results, financial condition or prospects of the applicable portfolio company.

The methods described above may produce a fair value estimate that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while we believe the valuation methods are appropriate and consistent with the methods used by other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

Expected Contributions

During 2019, we contributed $11 million to our non-U.S. defined benefit pension plans. During 2020, our cash contribution requirements for our U.S. and non-U.S. defined benefit pension plans are expected to be approximately $1 million and $10 million, respectively.

The following sets forth benefit payments to participants, which reflect expected future service, as appropriate, expected to be paid by the plans in the periods indicated ($ in millions):

	U.S. Pension Plans				Non-U.S. Pension Plans				All Pension Plans
2020	$	1.5			$	11.4			$	12.9
2021	1.5				11.9				13.4
2022	1.6				13.2				14.8
2023	1.7				12.2				13.9
2024	1.8				12.8				14.6
2025-2029	9.5				66.4				75.9

Defined Contribution Plans

We administer and maintain 401(k) programs and contributions to the 401(k) programs are determined based on a percentage of compensation. We recognized compensation expense for our participating U.S. employees in the 401(k) programs totaling $63 million in 2019, $53 million in 2018, and $45 million in 2017.

NOTE 13. SALES

On January 1, 2018, we adopted ASU 2014-09, Revenue from Contracts with Customers (“Topic 606”), using the modified retrospective method applied to those contracts which were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting policy under ASC Topic 605, Revenue Recognition. We recorded an immaterial transition adjustment to opening retained earnings as of January 1, 2018 due to the cumulative impact of adopting Topic 606. The impact to sales as a result of applying Topic 606 was immaterial for the year ended December 31, 2018.

Revenue is recognized when control of promised products or services is transferred to customers in an amount that reflects the consideration we expect to be entitled to in exchange for those products or services.

Contract Assets — In certain circumstances, we record contract assets which include unbilled amounts typically resulting from sales under contracts when revenue recognized exceeds the amount billed to the customer, and right to payment is not only subject to the passage of time. Contract assets were $79 million as of December 31, 2019 and $32 million as of December 31, 2018.

Contract Costs — We incur direct incremental costs to obtain certain contracts, typically sales-related commissions and costs associated with assets used by our customers in certain service arrangements. Deferred sales-related commissions are generally not capitalized as the amortization period is one year or less, and we elected to use the practical expedient to expense these sales commissions as incurred. As of December 31, 2019, we had $147 million in net revenue-related contract assets primarily related to certain software contracts recorded in Prepaid expenses and other current assets and Other assets in our Consolidated Balance Sheet. Our revenue-related contract assets at December 31, 2018 were $144 million, the majority of which were recorded in Property, plant and equipment, net in the Consolidated Balance Sheet. These assets have estimated useful lives between 3 and 8 years.

Impairment losses recognized on our contract-related assets were immaterial during both the years ended December 31, 2019 and December 31, 2018.

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

Our contract liabilities as of December 31 consisted of the following ($ in millions):

	2019				2018
Deferred revenue - current	$	410.1			$	288.1
Deferred revenue - noncurrent	99.2				92.6
Total contract liabilities	$	509.3			$	380.7

Acquisitions that closed in 2019 added $92 million of additional contract liabilities as of December 31, 2019. In the year ended December 31, 2019, we recognized $226 million of revenue related to our contract liabilities at January 1, 2019. The change in our contract liabilities from December 31, 2018 to December 31, 2019 was primarily due to the timing of cash receipts and sales of PCS and extended warranty services.

Remaining Performance Obligations — Our remaining performance obligations represent the transaction price of firm, noncancelable orders and the average contract value for software contracts, with expected delivery dates to customers greater than one year from December 31, 2019, for which work has not been performed. We have excluded performance obligations with an original expected duration of one year or less from the amounts below.

The aggregate performance obligations attributable to each of our segments as of December 31, 2019 is as follows ($ in millions):

	2019
Professional Instrumentation	$	136.1
Industrial Technologies	419.1
Total remaining performance obligations	$	555.2

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

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Disaggregation of Revenue

We disaggregate revenue from contracts with customers by sales of product 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 year ended December 31, 2019 is presented as follows ($ in millions):

	Total				Professional Instrumentation				Industrial Technologies
Sales:
Sales of products	$	6,396.9			$	3,792.8			$	2,604.1
Sales of services	923.1				635.0				288.1
Total	$	7,320.0			$	4,427.8			$	2,892.2
Geographic:
United States	$	4,206.5			$	2,354.9			$	1,851.6
China	592.0				487.3				104.7
All other (each country individually less than 5% of total sales)	2,521.5				1,585.6				935.9
Total	$	7,320.0			$	4,427.8			$	2,892.2
Major Products Group:
Professional tools and equipment	$	5,014.7			$	2,880.8			$	2,133.9
Industrial automation, controls and sensors	484.1				370.5				113.6
Franchise distribution	637.9				—				637.9
Medical technologies	934.2				927.4				6.8
All other	249.1				249.1				—
Total	$	7,320.0			$	4,427.8			$	2,892.2
End markets:
Direct sales:
Retail fueling (a)	$	1,903.6			$	—			$	1,903.6
Industrial & Manufacturing	448.1				390.8				57.3
Vehicle repair (a)	574.7				—				574.7
Utilities & Power	199.6				199.6				—
Medical (a)	934.2				927.4				6.8
Other	1,586.9				1,312.5				274.4
Total direct sales	5,647.1				2,830.3				2,816.8
Distributors(a)	1,672.9				1,597.5				75.4
Total	$	7,320.0			$	4,427.8			$	2,892.2
(a) Retail fueling, Vehicle repair, and Medical include sales to these end markets made through third-party distributors. Total distributor sales for the year ended December 31, 2019 was $3,158.4 million.

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Disaggregation of revenue for the year ended December 31, 2018 is presented as follows ($ in millions):

	Total				Professional Instrumentation				Industrial Technologies
Sales:
Sales of products	$	5,755.0			$	3,215.2			$	2,539.8
Sales of services	697.7				439.9				257.8
Total	$	6,452.7			$	3,655.1			$	2,797.6
Geographic:
United States	$	3,539.6			$	1,829.6			$	1,710.0
China	569.0				459.5				109.5
All other (each country individually less than 5% of total sales)	2,344.1				1,366.0				978.1
Total	$	6,452.7			$	3,655.1			$	2,797.6
Major Products Group:
Professional tools and equipment	$	4,690.7			$	2,663.1			$	2,027.6
Industrial automation, controls and sensors	504.0				381.4				122.6
Franchise distribution	640.0				—				640.0
Medical technologies (c)	393.7				386.3				7.4
All other	224.3				224.3				—
Total	$	6,452.7			$	3,655.1			$	2,797.6
End markets:
Direct sales:
Retail fueling (a)	$	1,777.5			$	—			$	1,777.5
Industrial & Manufacturing	445.1				384.5				60.6
Vehicle repair (a)	581.5				—				581.5
Utilities & Power	172.3				171.0				1.3
Medical (b)	393.7				386.3				7.4
Other	1,379.3				1,074.9				304.4
Total direct sales	4,749.4				2,016.7				2,732.7
Distributors(a)	1,703.3				1,638.4				64.9
Total	$	6,452.7			$	3,655.1			$	2,797.6
(a) Retail fueling and Vehicle repair include sales to these end markets made through third-party distributors. Total distributor sales for the year ended December 31, 2018 was $3,136.8 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.

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Disaggregation of revenue for the year ended December 31, 2017 is presented as follows ($ in millions):

	Total				Professional Instrumentation				Industrial Technologies
Sales:
Sales of products	$	5,173.3			$	2,813.2			$	2,360.1
Sales of services	582.8				325.9				256.9
Total	$	5,756.1			$	3,139.1			$	2,617.0
Geographic:
United States	$	3,148.7			$	1,486.0			$	1,662.7
China	498.4				416.7				81.7
All other (each country individually less than 5% of total sales)	2,109.0				1,236.4				872.6
Total	$	5,756.1			$	3,139.1			$	2,617.0
Major Products Group:
Professional tools and equipment	$	4,211.3			$	2,338.7			$	1,872.6
Industrial automation, controls and sensors	481.5				368.3				113.2
Franchise distribution	626.2				—				626.2
Medical technologies (c)	233.9				228.9				5.0
All other	203.2				203.2				—
Total	$	5,756.1			$	3,139.1			$	2,617.0
End markets:
Direct sales:
Retail fueling (a)	$	1,637.8			$	—			$	1,637.8
Industrial & Manufacturing	314.9				265.8				49.1
Vehicle repair (a)	569.3				—				569.3
Utilities & Power	228.2				227.3				0.9
Medical (b)	233.9				228.9				5.0
Other	1,261.3				965.3				296.0
Total direct sales	4,245.4				1,687.3				2,558.1
Distributors (a)	1,510.7				1,451.8				58.9
Total	$	5,756.1			$	3,139.1			$	2,617.0
(a) Retail fueling and Vehicle repair include sales to these end markets made through third-party distributors. Total distributor sales for the year ended December 31, 2017 was $2,877.8 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 14. INCOME TAXES

Tax Cuts and Jobs Act

On December 22, 2017, the U.S. enacted comprehensive tax reform commonly referred to as the Tax Cuts and Jobs Act (the “TCJA”). The U.S. Government continues to issue significant amounts of TCJA guidance and we expect that to continue for the foreseeable future. The Company is actively monitoring the impact of new Treasury Regulations. Any future adjustments resulting from retrospective guidance issued after December 31, 2019 will be considered as discrete income tax expense or benefit in the interim period the guidance is issued.

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During 2018, the Company made the election on the 2017 Federal Income Tax Return to pay the one-time TCJA Transition Tax liability over an eight-year period without interest, as allowed by TCJA. The IRS has issued guidance that requires offset of 2017 and 2018 tax return refunds against the long-term liability subject to the eight-year payment election.

Separation from Danaher and Disposition of the A&S Business

In connection with the Separation, we entered into the Agreements with Danaher, including a tax matters agreement. The tax matters agreement distinguishes between the treatment of tax matters for “joint” filings compared to “separate” filings prior to the Separation. “Joint” filings involve legal entities, such as those in the United States, that include operations from both Danaher and the Company. By contrast, “separate” filings involve certain entities (primarily outside of the United States), that exclusively include either Danaher’s or the Company’s operations, respectively. In accordance with the tax matters agreement, the Company is liable for and has indemnified Danaher against all income tax liabilities involving “separate” filings for periods prior to the Separation.

During 2018, the Company entered into a Tax Matters Agreement in connection with the split-off of the A&S Business. The Company remains liable for pre-disposition income tax liabilities related to the A&S Business.

Earnings and Income Taxes

Earnings before income taxes for the years ended December 31 were as follows ($ in millions):

	2019				2018				2017
United States	$	572.4			$	687.7			$	679.6
International	302.1				390.7				394.0
Total	$	874.5			$	1,078.4			$	1,073.6

The provision for income taxes for the years ended December 31 were as follows ($ in millions):

	2019				2018				2017
Current:
Federal U.S.	$	38.9			$	48.3			$	170.0
Non-U.S.	84.6				96.3				69.8
State and local	11.7				7.8				10.5
Deferred:
Federal U.S.	43.0				27.3				(62.0		)
Non-U.S.	(21.1		)		(19.6		)		(1.7		)
State and local	(8.0		)		—				2.7
Income tax provision	$	149.1			$	160.1			$	189.3

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Effective Income Tax Rate

The effective income tax rate for the years ended December 31 varies from the U.S. statutory federal income tax rate as follows:

	Percentage of Pretax Earnings
	2019			2018			2017
Statutory federal income tax rate	21.0	%		21.0	%		35.0	%
Increase (decrease) in tax rate resulting from:
State income taxes (net of federal income tax benefit)	(0.3	)%		1.0	%		0.7	%
Foreign income taxed at different rates than U.S. statutory rate	(0.7	)%		0.8	%		(5.3	)%
U.S. federal permanent differences related to the TCJA	(6.2	)%		(4.8	)%		(2.9	)%
Compensation related	(1.0	)%		(1.5	)%		(1.7	)%
Other	0.5	%		(0.5	)%		(1.6	)%
Effective income tax rate before adjustments related to the 2017 TCJA provisional estimates	13.3	%		16.0	%		24.2	%
Deferred tax revaluation	—	%		(1.3	)%		(19.2	)%
Transition tax	—	%		0.1	%		12.6	%
Vontier transaction tax costs	3.7	%		—	%		—	%
Total Vontier transaction tax costs and adjustments to 2017 TCJA provisional estimates	3.7	%		(1.2	)%		(6.6	)%
Effective income tax rate after adjustments related to the Vontier transaction tax costs and 2017 TCJA provisional estimates	17.0	%		14.8	%		17.6	%

Our effective tax rate for 2019 differs from the U.S. federal statutory rate of 21% due primarily to the effect of the TCJA U.S. federal permanent differences, the impact of credits and deductions provided by law, and earnings outside the United States that are indefinitely reinvested and taxed at rates lower than the U.S. federal statutory rate, offset by tax costs related to transactions completed in 2019 in anticipation of our separation into two independent, publicly traded companies.

Our effective tax rate for 2018 differs from the U.S. federal statutory rate of 21% due primarily to the effect of the TCJA U.S. federal permanent differences, the impact of credits and deductions provided by law, earnings outside the United States that are taxed at rates lower than the U.S. federal statutory rate, and the effect of adjustments to the provision estimates recorded in 2017 related to the TCJA as permitted under the SEC Staff Accounting Bulletin No. 118 (“SAB 118”) issued on December 22, 2017.

Our effective tax rate for 2017, including provisional estimates of the TCJA, differs from the U.S. federal statutory rate of 35.0% due primarily to net favorable impacts associated with the TCJA, our earnings outside the United States that are indefinitely reinvested and taxed at rates lower than the U.S. federal statutory rate, the impact of credits and deductions provided by law, state tax impacts, and favorable adjustments related to differences between estimates included in the 2016 provision and amounts calculated on the 2016 U.S. income tax return filed in October 2017.

SAB 118 provides guidance on the financial statement implications of the TCJA. Pursuant to SAB 118, the Company recorded cumulatively $83 million of net favorable adjustments, which is made up of net favorable adjustments of $13 million and $70 million recorded during the years ended December 31, 2018 and 2017, respectively. The 2018 effective tax rate included the true-up to the 2017 provisional estimates as a discrete adjustment. The 2017 provisional estimates for the one-time TCJA Transition Tax resulted in additional tax expense of $1 million and $135 million during the years ended December 31, 2018 and 2017, respectively. The provisional estimated tax benefit for the deferred tax revaluation resulted in additional tax benefit of $14 million and $205 million during the years ended December 31, 2018 and 2017, respectively.

We conduct business globally, and, as part of our global business, we file numerous income tax returns in the U.S. federal, state and foreign jurisdictions. After the TCJA, our ability to obtain a tax benefit in certain countries that continue to have lower statutory tax rates than the United States is dependent on our levels of taxable income in such foreign countries. We believe that a change in the statutory tax rate of any individual foreign country would not have a material effect on our financial statements given the geographic dispersion of our taxable income.

We are routinely examined by various domestic and international taxing authorities. The amount of income taxes we pay is subject to audit by federal, state, and foreign tax authorities, which may result in proposed assessments. The Company is

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subject to examination in the United States, various states, and foreign jurisdictions for the tax years 2010 to 2019. We review our global tax positions on a quarterly basis. Based on these reviews, the results of discussions and resolutions of matters with certain tax authorities, tax rulings and court decisions, and the expiration of statutes of limitations reserves for contingent tax liabilities are accrued or adjusted as necessary.

We made income tax payments of $145 million, $89 million, and $196 million during the years ended December 31, 2019, December 31, 2018 and December 31, 2017, respectively.

Deferred Tax Assets and Liabilities

All deferred tax assets and liabilities have been classified as noncurrent and are included in Other assets and Other long-term liabilities in the accompanying Consolidated Balance Sheets. Deferred income tax assets and liabilities as of December 31 were as follows ($ in millions):

	2019				2018
Deferred Tax Assets:
Allowance for doubtful accounts	$	16.7			$	17.4
Operating lease liabilities	44.4				—
Inventories	16.6				17.9
Pension benefits	30.3				27.3
Environmental and regulatory compliance	10.4				10.1
Other accruals and prepayments	35.2				50.5
Deferred service income	15.1				7.1
Warranty services	16.0				19.7
Stock-based compensation expense	27.8				14.2
Tax credit and loss carryforwards	171.4				131.4
Valuation allowances	(58.4		)		(40.3		)
Total deferred tax assets	$	325.5			$	255.3
Deferred Tax Liabilities:
Property, plant and equipment	$	(47.3	)		$	(11.7	)
Operating lease right-of-use assets	(43.7		)		—
Insurance, including self-insurance	(200.5		)		(155.2		)
Goodwill and other intangibles	(722.0		)		(597.1		)
Other	(26.7		)		(14.7		)
Total deferred tax liabilities	(1,040.2		)		(778.7		)
Net deferred tax liability	$	(714.7	)		$	(523.4	)

In accordance with GAAP, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted rates expected to be in effect during the year in which the differences reverse. Deferred tax assets generally represent items that can be used as a tax deduction or credit in our tax return in future years for which the tax benefit has already been reflected in our Consolidated Statements of Earnings. Deferred tax liabilities generally represent items that have already been taken as a deduction on our tax return but have not yet been recognized as an expense in our Consolidated Statements of Earnings. The effect on deferred tax assets and liabilities due to a change in tax rates is recognized in income tax expense in the period that includes the enactment date.

Our deferred tax assets are reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not (a likelihood of more than 50 percent) that some portion or all of the deferred tax assets will not be realized. We evaluate the realizability of deferred income tax assets for each of the jurisdictions in which we operate. If we experience cumulative pretax income in a particular jurisdiction in the three-year period including the current and prior two years, we normally conclude that the deferred income tax assets will more likely than not be realizable and no valuation allowance is recognized, unless known or planned operating developments would lead management to conclude otherwise. However, if we experience cumulative pretax losses in a particular jurisdiction in the three-year period including the current and prior two years, we then consider a series of factors in the determination of whether the deferred income tax assets can be realized. These factors include historical operating results, known or planned operating developments, the period of time over which certain temporary

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differences will reverse, consideration of the utilization of certain deferred income tax liabilities, tax law carryback capability in the particular country, and prudent and feasible tax planning strategies. After evaluation of these factors, if the deferred income tax assets are expected to be realized within the tax carryforward period allowed for that specific country, we would conclude that no valuation allowance would be required. To the extent that the deferred income tax assets exceed the amount that is expected to be realized within the tax carryforward period for a particular jurisdiction, we establish a valuation allowance.

Applying the above methodology, valuation allowances have been established for certain deferred income tax assets to the extent they are not expected to be realized within the particular tax carryforward period.

Deferred taxes associated with U.S. entities consist of net deferred tax liabilities of approximately $659 million and $559 million inclusive of valuation allowances of $22 million and $13 million as of December 31, 2019 and December 31, 2018, respectively. Deferred taxes associated with non-U.S. entities consist of net deferred tax liabilities of $56 million and net deferred tax assets of $36 million, inclusive of valuation allowances of $36 million and $27 million, as of December 31, 2019 and December 31, 2018, respectively. Our valuation allowance increased by $18 million and by $14 million during the years ended December 31, 2019 and December 31, 2018, respectively, due primarily to foreign net operating losses in both years and state operating losses in 2019.

As of December 31, 2019, our U.S. and non-U.S. net operating loss carryforwards totaled $886 million, of which $225 million is related to federal net operating loss carryforwards, $347 million is related to state net operating loss carryforwards, and $314 million is related to non-U.S. net operating loss carryforwards. Included in deferred tax assets as of December 31, 2019 are tax benefits for U.S. and non-U.S. net operating loss carryforwards totaling $130 million, before applicable valuation allowances of $42 million. Certain of these losses can be carried forward indefinitely and others can be carried forward to various dates from 2020 through 2037. Recognition of some of these loss carryforwards is subject to an annual limit, which may cause them to expire before they are used.

As of December 31, 2019, our U.S. and non-U.S. tax credit carryforwards totaled $41 million, which is primarily related to U.S. tax credit carryforwards. Certain of these credits can be carried forward indefinitely and other can be carried forward to various dates from 2020 through 2037. As of December 31, 2019, we maintain a $13 million valuation allowance related to certain tax credit carryforwards from the Separation.

Unrecognized Tax Benefits

We recognize tax benefits from uncertain tax positions only if, in our assessment, it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. Judgment is required in evaluating tax positions and determining income tax provisions. We re-evaluate the technical merits of our tax positions and may recognize an uncertain tax benefit in certain in certain circumstances, including when: (i) a tax audit is completed; (ii) applicable tax laws change, including a tax case ruling or legislative guidance; or (iii) the applicable statute of limitations expires. We recognize potential accrued interest and penalties associated with unrecognized tax positions in income tax expense.

As of December 31, 2019, gross unrecognized tax benefits for continuing and discontinued operations were $215 million ($231 million total, including $23 million associated with interest and penalties, and net of the impact of $7 million of indirect tax benefits). As of December 31, 2018, gross unrecognized tax benefits for continuing and discontinued operations were $133 million ($144 million total, including $16 million associated with interest and penalties, and net of the impact of $5 million of indirect tax benefits). We recognized approximately $8 million and $4 million in potential interest and penalties associated with uncertain tax positions during 2019 and 2018, respectively. This amount was not significant during 2017. To the extent taxes are not assessed with respect to uncertain tax positions, substantially all amounts accrued (including interest and penalties and net of indirect offsets) will be reduced and reflected as a reduction of the overall income tax provision. Unrecognized tax benefits and associated accrued interest and penalties are included in our income tax provision.

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A reconciliation of the beginning and ending amount of unrecognized tax benefits, excluding amounts accrued for potential interest and penalties, is as follows ($ in millions):

	2019				2018				2017
Unrecognized tax benefits, beginning of year	$	133.4			$	59.0			$	28.6
Additions based on tax positions related to the current year	17.8				40.8				25.3
Additions for tax positions of prior years	79.7				39.0				7.8
Reductions for tax positions of prior years	(13.0		)		(3.8		)		(1.9		)
Lapse of statute of limitations	(2.3		)		(3.5		)		(3.3		)
Settlements	(0.3		)		(6.4		)		(0.6		)
Effect of foreign currency translation	(0.4		)		(0.9		)		1.9
Separation related adjustments (a)	—				9.2				1.2
Unrecognized tax benefits, end of year	$	214.9			$	133.4			$	59.0
(a) Unrecognized tax benefit reserves increased by $9 million and $1 million during the year ended December 31, 2018 and December 31, 2017, respectively, due primarily to unrecognized tax benefits from pre-Separation periods.

Repatriation and Unremitted Earnings

The TCJA eliminated the U.S. tax cost for qualified repatriation beginning in 2018. Foreign cumulative earnings remain subject to foreign remittance taxes. As a result of the TCJA, during 2018, we repatriated an estimated $275 million subject to no foreign remittance taxes. The remittance excluded foreign earnings: 1) required as working capital for local operating needs, 2) subject to local law restrictions, 3) subject to high foreign remittance tax costs, 4) previously invested in physical assets or acquisitions, or 5) intended for future acquisitions/growth. 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 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.

The TCJA imposed a final U.S. tax on cumulative earnings from our foreign operations that we have previously made an assertion regarding the amount of such earnings intended for indefinite reinvestment. As of December 31, 2019, the earnings we plan to reinvest indefinitely outside of the United States for which foreign deferred taxes have not been provided was estimated at $2.4 billion.

NOTE 15. RESTRUCTURING AND OTHER RELATED CHARGES

Restructuring and other related charges for the years ended December 31 were as follows ($ in millions):

	2019				2018				2017
Employee severance related	$	53.0			$	5.0			$	13.8
Facility exit and other related	3.6				0.9				2.5
Impairment charges	—				1.1				2.3
Total restructuring and other related charges	$	56.6			$	7.0			$	18.6

Substantially all restructuring activities initiated in 2019 were completed by December 31, 2019. We expect substantially all cash payments associated with remaining termination benefits recorded in 2019 will be paid during 2020 and all planned restructuring activities related to the 2018 and 2017 plans have been completed. Impairment charges relate to certain intangible assets.

The nature of our restructuring and related activities initiated in 2019, 2018, and 2017 were broadly consistent throughout our segments and focused on improvements in operational efficiency through targeted workforce reductions and facility consolidations and closures. We incurred these costs to position ourselves to provide superior products and services to our customers in a cost-efficient manner, and taking into consideration broad economic uncertainties.

Restructuring and other related charges recorded for the years ended December 31 by segment were as follows ($ in millions):

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	2019				2018				2017
Professional Instrumentation	$	47.8			$	4.5			$	12.8
Industrial Technologies	8.8				2.5				5.8
Total	$	56.6			$	7.0			$	18.6

The table below summarizes the accrual balance and utilization by type of restructuring cost associated with our 2019 and 2018 restructuring actions ($ in millions): 

	Balance as of January 1, 2018				Costs Incurred				Paid/ Settled				Balance  as of December 31, 2018				Costs Incurred				Paid/ Settled				Balance as of December 31, 2019
Employee severance and related	$	9.5			$	5.0			$	(9.6	)		$	4.9			$	53.0			$	(21.0	)		$	36.9
Facility exit and other related	0.8				2.0				(2.3		)		0.5				3.6				(3.7		)		0.4
Total	$	10.3			$	7.0			$	(11.9	)		$	5.4			$	56.6			$	(24.7	)		$	37.3

The restructuring and other related charges incurred during 2019 were substantially all cash charges. The restructuring and other related charges incurred during 2018 included cash charges of $6 million and $1 million of noncash charges. The restructuring and other related charges incurred during 2017 included cash charges of $16 million and $2 million of noncash charges. These charges are reflected in the following captions in the accompanying Consolidated Statements of Earnings ($ in millions):

	2019				2018				2017
Cost of sales	$	15.8			$	2.0			$	2.0
Selling, general, and administrative expenses	40.8				5.0				16.6
Total	$	56.6			$	7.0			$	18.6

NOTE 16. LITIGATION AND CONTINGENCIES

We are, from time to time, subject to a variety of litigation and other proceedings incidental to our business, including lawsuits involving claims for damages arising out of the use of our products, software and services, claims relating to intellectual property matters, employment matters, commercial disputes, and personal injury as well as regulatory investigations or enforcement. We may also become subject to lawsuits as a result of past or future acquisitions or as a result of liabilities retained from, or representations, warranties, or indemnities provided in connection with divested businesses. Some of these lawsuits may include claims for punitive and consequential as well as compensatory damages. Based upon our experience, current information and applicable law, we do not believe that these proceedings and claims will have a material adverse effect on our financial position, results of operations or cash flows.

While we maintain workers compensation, property, cargo, automobile, crime, fiduciary, product, general, and directors’ and officers’ liability insurance (and have acquired rights under similar policies in connection with certain acquisitions) that cover a portion of these claims, this insurance may be insufficient or unavailable to cover such losses. In addition, while we believe we are entitled to indemnification from third parties for some of these claims, these rights may also be insufficient or unavailable to cover such losses. We maintain third party insurance policies up to certain limits to cover certain liability costs in excess of predetermined retained amounts. For most insured risks, we purchase outside insurance coverage only for severe losses (stop loss insurance) and reserves must be established and maintained with respect to amounts within the self-insured retention.

In accordance with accounting guidance, we record a liability in our consolidated financial statements for loss contingencies when a loss is known or considered probable and the amount can be reasonably estimated. If the reasonable estimate of a known or probable loss is a range, and no amount within the range is a better estimate than any other, the minimum amount of the range is accrued. If a loss does not meet the known or probable level but is reasonably possible and a loss or range of loss can be reasonably estimated, the estimated loss or range of loss is disclosed. These reserves consist of specific reserves for individual claims and additional amounts for anticipated developments of these claims as well as for incurred but not yet reported claims. The specific reserves for individual known claims are quantified with the assistance of legal counsel and outside risk insurance professionals where appropriate. In addition, outside risk insurance professionals may assist in the determination of reserves for incurred but not yet reported claims through evaluation of our specific loss history, actual claims reported, and industry trends among statistical and other factors. Reserve estimates are adjusted as additional information regarding a claim becomes known. While we actively pursue financial recoveries from insurance providers, we do not recognize any recoveries until realized or until such time as a sustained pattern of collections is established related to historical

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matters of a similar nature and magnitude. If risk insurance reserves we have established are inadequate, we would be required to incur an expense equal to the amount of the loss incurred in excess of the reserves, which would adversely affect our net earnings. Refer to Note 9 for information about the amount of our accruals for self-insurance and litigation liability.

In addition, our operations, products, and services are subject to environmental laws and regulations in various jurisdictions, which impose limitations on the discharge of pollutants into the environment and establish standards for the generation, use, treatment, storage, and disposal of hazardous and non-hazardous wastes. A number of our operations involve the handling, manufacturing, use, or sale of substances that are or could be classified as hazardous materials within the meaning of applicable laws. We must also comply with various health and safety regulations in both the United States and abroad in connection with our operations. Compliance with these laws and regulations has not had and, based on current information and the applicable laws and regulations currently in effect, is not expected to have a material effect on our capital expenditures, earnings, or competitive position, and we do not anticipate material capital expenditures for environmental control facilities.

In addition to environmental compliance costs, from time to time, we incur costs related to alleged damages associated with past or current waste disposal practices or other hazardous materials handling practices. For example, generators of hazardous substances found in disposal sites at which environmental problems are alleged to exist, as well as the current and former owners of those sites and certain other classes of persons, are subject to claims brought by state and federal regulatory agencies pursuant to statutory authority. We have received notification from the United States Environmental Protection Agency, and from state and non-U.S. environmental agencies, that conditions at certain sites where we and others previously disposed of hazardous wastes and/or are or were property owners require clean-up and other possible remedial action, including sites where we have been identified as a potentially responsible party under United States federal and state environmental laws. We have projects underway at a number of current and former facilities, in both the United States and abroad, to investigate and remediate environmental contamination resulting from past operations. Remediation activities generally relate to soil and/or groundwater contamination and may include pre-remedial activities such as fact-finding and investigation, risk assessment, feasibility study and/or design, as well as remediation actions such as contaminant removal, monitoring and/or installation, operation and maintenance of longer-term remediation systems. From time to time we are also party to personal injury or other claims brought by private parties alleging injury due to the presence of, or exposure to, hazardous substances.

We have recorded a provision for environmental investigation and remediation and environmental-related claims with respect to sites we and our subsidiaries owned or formerly owned and third party sites where we have been determined to be a potentially responsible party. We generally make an assessment of the costs involved for our remediation efforts based on environmental studies, as well as our prior experience with similar sites. The ultimate cost of site cleanup is difficult to predict given the uncertainties of our involvement in certain sites, uncertainties regarding the extent of the required cleanup, the availability of alternative cleanup methods, variations in the interpretation of applicable laws and regulations, the possibility of insurance recoveries with respect to certain sites and the fact that imposition of joint and several liability with right of contribution is possible under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 and other environmental laws and regulations. If we determine that potential liability for a particular site or with respect to a personal injury claim is known or considered probable and reasonably estimable, we accrue the total estimated loss, including investigation and remediation costs, associated with the site or claim. As of December 31, 2019, we had a reserve of $13 million included in Accrued expenses and Other liabilities in the Consolidated Balance Sheets for environmental matters that are known or considered probable and reasonably estimable, which reflects our best estimate of the costs to be incurred with respect to such matters on an undiscounted basis.

All reserves for environmental liabilities have been recorded without giving effect to any possible future third party recoveries. While we actively pursue insurance recoveries, as well as recoveries from other potentially responsible parties, we do not recognize any insurance recoveries for environmental liability claims until realized or until such time as a sustained pattern of collections is established related to historical matters of a similar nature and magnitude.

As of December 31, 2019 and 2018, we had approximately $121 million and $138 million, respectively, of guarantees consisting primarily of outstanding standby letters of credit, bank guarantees, and performance and bid bonds. These guarantees have been provided in connection with certain arrangements with vendors, customers, financing counterparties and governmental entities to secure our obligations and/or performance requirements related to specific transactions. We believe that if the obligations under these instruments were triggered, they would not have a material effect on our consolidated financial statements.

NOTE 17. STOCK BASED COMPENSATION

The 2016 Stock Incentive Plan (the “Stock Plan”) provides for the grant of stock appreciation rights, restricted stock units (“RSUs”), performance stock units (“PSUs”), performance-based restricted stock awards (“RSAs”), and performance stock awards (“PSAs”) (collectively, “Stock Awards”), stock options, or any other stock-based award. A total of 40 million shares of

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our common stock have been authorized for issuance under the Stock Plan. As of December 31, 2019, approximately 20 million shares of our common stock remain available for issuance under the Stock Plan. Stock options under the Stock Plan generally vest pro rata over a five-year period and terminate 10 years from the grant date, though the specific terms of each grant are determined by the Compensation Committee of our Board of Directors. Our executive officers and certain other employees may be awarded stock options with different vesting criteria and stock options granted to non-employee directors are fully vested as of the grant date. Exercise prices for stock options granted under the Stock Plan were equal to the closing price of Fortive’s common stock on the NYSE on the date of grant, while stock options issued as conversion awards in connection with the Separation from Danaher were priced to maintain the economic value before and after the Separation.

RSUs and RSAs issued under the Stock Plan provide for the issuance of common stock at no cost to the holder. RSUs granted to employees under the Stock Plan generally provide for time-based vesting over five years, although certain employees may be awarded RSUs with different time-based vesting criteria, and RSAs granted to members of our senior management are also subject to performance-based vesting criteria. RSUs granted to non-employee directors under the Stock Plan vest on the earlier of the first anniversary of the grant date or the date of, and immediately prior to, the next annual meeting of our shareholders following the grant date. However, the underlying shares are not issued until the earlier of the director’s death or the first day of the seventh month following the director’s retirement from the Board of Directors (the “Board”). Prior to vesting, RSUs granted under the Stock Plan do not have dividend equivalent rights, do not have voting rights, and the shares underlying the RSUs are not considered issued or outstanding. RSAs granted under the Stock Plan have all of the same dividend, voting, and other rights corresponding to all other common stock, provided, however, that the dividends payable on the RSAs will accrue and be delivered at the time of delivery of the shares upon vesting of the RSA.

During 2019, 2018, and 2017 PSAs and PSUs were granted under the Stock Plan. These awards vest based on our total shareholder return ranking relative to the S&P 500 Index.

Stock awards generally vest only if the employee is employed by us (or in the case of directors, the director continues to serve on the Board) on the vesting date. To cover the exercise of stock options, vesting of RSUs and PSUs, and issuances of RSAs and PSAs, we generally issue shares authorized but previously unissued, although we may instead issue treasury shares; provided, however, that, either type of issuance would equally reduce the number of shares available under our Stock Plan.

We account for stock-based compensation by measuring the cost of employee services received in exchange for all equity awards granted based on the fair value of the award as of the grant date. We recognize the compensation expense over the requisite service period (which is generally the vesting period but may be shorter than the vesting period, for example, if the employee becomes retirement eligible before the end of the vesting period).

The fair value of RSUs is calculated using the closing price of Fortive common stock on the date of grant, adjusted for the impact of RSUs not having dividend rights prior to vesting. The fair value of RSAs is calculated using the closing price of Fortive common stock on the date of grant. The fair value of the PSUs and PSAs is calculated using a Monte Carlo pricing model. The fair value of the stock options granted is calculated using a Black-Scholes Merton (“Black-Scholes”) option pricing model.

In connection with the exercise of certain stock options and the vesting of Stock Awards issued under the Stock Plan, a number of our shares sufficient to fund statutory minimum tax withholding requirements have been withheld from the total shares issued or released to the award holder (though under the terms of the Stock Plan, the shares are considered to have been issued and are not added back to the pool of shares available for grant). During the year ended December 31, 2019, approximately 193 thousand shares of Fortive common stock with an aggregate value of approximately $15 million, were withheld to satisfy this requirement. The tax withholding is treated as a reduction in Additional paid-in capital in the accompanying Consolidated Statement of Changes in Equity.

Stock-based Compensation Expense

Stock-based compensation has been recognized as a component of Selling, general, and administrative expenses in the accompanying Consolidated Statements of Earnings. The amount of stock-based compensation expense recognized during a period is based on the portion of the awards that are ultimately expected to vest. We estimate pre-vesting forfeitures at the time of grant by analyzing historical data and revise those estimates in subsequent periods if actual forfeitures differ from those estimates. Ultimately, the total expense recognized over the vesting period will equal the fair value of awards that actually vest.

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The following summarizes the components of our stock-based compensation expense under the Stock Plan for the years ended December 31 ($ in millions):

	2019				2018				2017
Stock Awards:
Pretax compensation expense	$	39.5			$	30.5			$	26.9
Income tax benefit	(7.5		)		(6.3		)		(8.7		)
Stock Award expense, net of income taxes	32.0				24.2				18.2
Stock options:
Pretax compensation expense	21.9				20.3				17.3
Income tax benefit	(3.3		)		(4.2		)		(5.7		)
Stock option expense, net of income taxes	18.6				16.1				11.6
Total stock-based compensation:
Pretax compensation expense	61.4				50.8				44.2
Income tax benefit	(10.8		)		(10.5		)		(14.4		)
Total stock-based compensation expense, net of income taxes	$	50.6			$	40.3			$	29.8

When stock options are exercised by the employee or Stock Awards vest, we derive a tax deduction measured by the excess of the market value on such date over the grant date price. Accordingly, we record the excess of the tax benefit related to the exercise of stock options and vesting of Stock Awards over the expense recorded for financial statement reporting purposes (the “Excess Tax Benefit”) as a component of Income tax expense and as an operating cash inflow in the accompanying consolidated financial statements. During the years ended December 31, 2019, 2018, and 2017 we realized an Excess Tax Benefit of $13 million, $17 million, and $17 million, respectively, related to stock options that were exercised and Stock Awards that vested.

The following summarizes the unrecognized compensation cost for the Stock Plan awards as of December 31, 2019. This compensation cost is expected to be recognized over a weighted average period of approximately three 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	$	61.2
Stock options	55.4
Total unrecognized compensation cost	$	116.6

Stock Options

The following summarizes the assumptions used in the Black-Scholes model to value stock options granted under the Stock Plan during the years ended December 31:

	2019				2018				2017
Risk-free interest rate	1.43% - 2.6%				2.71% - 2.96%				1.9% - 2.26%
Volatility (a)	19.9		%		18.8		%		20.9		%
Dividend yield (b)	0.4		%		0.4		%		0.5		%
Expected years until exercise	5.5 - 8.0				5.5 - 8.0				5.5 - 8.0
Weighted average fair value at date of grant	$	19.38			$	18.67			$	13.43
(a) Beginning August 2018, expected volatility was based on a weighted average blend of the company’s historical stock price volatility from July 2, 2016 (the date of Separation) through the stock option grant date and the average historical stock price volatility of a group of peer companies for the expected term of the options. The weighted average volatility from July 2, 2016 to July 2018 was estimated based on an average historical stock price volatility of a group of peer companies given our limited trading history.
(b) The dividend yield is calculated by dividing our annual dividend, based on the most recent quarterly dividend rate, by Fortive’s closing stock price on the grant date.

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The following summarizes option activity under the Stock Plan for the years ended December 31, 2019, 2018, and 2017 (in millions, except price per share and numbers of years):

	Options			Weighted Average Exercise Price				Weighted  Average Remaining Contractual Term (years)		Aggregate Intrinsic Value
Outstanding as of January 1, 2017	9.4			$	33.23
Granted	1.7			58.07
Exercised	(1.0	)		24.77
Canceled/forfeited	(0.4	)		45.12
Outstanding as of December 31, 2017	9.7			38.09
Granted	1.7			76.67
Exercised	(1.4	)		28.99
Canceled/forfeited	(0.3	)		54.13
Outstanding as of December 31, 2018	9.7			46.25
Granted	2.2			79.61
Exercised	(1.2	)		33.84
Canceled/forfeited	(0.5	)		66.16
Outstanding as of December 31, 2019	10.2			$	53.64			6.2		$	242.0
Vested and expected to vest as of December 31, 2019 (a)	10.0			$	53.12			6.1		$	240.5
Vested as of December 31, 2019	4.8			$	38.14			4.2		$	184.5
(a) The “expected to vest” options are the net unvested options that remain after applying the forfeiture rate assumption to total unvested options.

The aggregate intrinsic values in the table above represent the total pretax intrinsic value (the difference between the closing stock price of Fortive common stock on the last trading day of 2019 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on December 31, 2019. The amount of aggregate intrinsic value will change based on the price of Fortive’s common stock.

Options outstanding as of December 31, 2019 are summarized below (in millions; except price per share and number of years):

	Outstanding									Vested
Exercise Price	Shares			Average Exercise Price				Average Remaining Life (in years)		Shares			Average Exercise Price
$18.21 - $26.10	1.3			$	23.27			1		1.3			$	23.27
$26.11 - $40.12	1.5			34.45				4		1.5			34.45
$40.13 - $45.64	2.1			42.69				6		1.2			42.74
$45.65 - $54.12	0.4			49.83				7		0.2			50.06
$54.13 - $76.05	2.0			63.23				8		0.4			61.74
$76.06 - $86.03	2.9			79.47				9		0.2			76.97
Total shares	10.2									4.8

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The following summarizes aggregate intrinsic value and cash receipts related to stock option exercise activity under the Stock Plans for the years ended December 31 ($ in millions):

	2019				2018				2017
Aggregate intrinsic value of stock options exercised	$	52.5			$	68.7			$	42.3
Cash receipts from stock options exercised	$	40.0			$	39.3			$	26.0

Stock Awards

The following summarizes information related to Stock Award activity under the Stock Plan for the years ended December 31, 2019, 2018, and 2017 (in millions; except price per share):

	Number of Stock Awards (a)			Weighted Average Grant-Date Fair Value
Unvested as of January 1, 2017	2.1			$	39.20
Granted	0.5			57.79
Vested	(0.6	)		35.96
Forfeited	(0.1	)		43.94
Unvested as of December 31, 2017	1.9			45.92
Granted	0.6			77.78
Vested	(0.6	)		41.28
Forfeited	(0.1	)		53.23
Unvested as of December 31, 2018	1.8			57.63
Granted	0.9			80.44
Vested	(0.5	)		48.90
Forfeited	(0.2	)		66.64
Unvested as of December 31, 2019	2.0			69.37
(a) For the year ended December 31, 2017, the table excludes the stock award activity for employees of the A&S Business that was divested on October 1, 2018.

NOTE 18. CAPITAL STOCK AND EARNINGS PER SHARE

Common Stock

Under our amended and restated certificate of incorporation, as of July 1, 2016, our authorized capital stock consists of 2.0 billion common shares with a par value of $0.01 per share and 15 million preferred shares with a par value of $0.01 per share.

Each share of our common stock entitles the holder to one vote on all matters to be voted upon by common stockholders. Our Board is authorized to issue shares of preferred stock in one or more series and has discretion to determine the rights, preferences, privileges, and restrictions, including voting rights, dividend rights, conversion rights, redemption privileges, and liquidation preferences, of each series of preferred stock. The Board’s authority to issue preferred stock with voting rights or conversion rights that, if exercised, could adversely affect the voting power of the holders of common stock, could potentially discourage attempts by third parties to obtain control of the Company through certain types of takeover practices.

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We declared and paid cash dividends per common share during the periods presented as follows:

	Dividend Per Common Share				Amount ($ in millions)
2019:
First quarter	$	0.07			$	23.4
Second quarter	0.07				23.4
Third quarter	0.07				23.5
Fourth quarter	0.07				23.5
Total	$	0.28			$	93.8
2018:
First quarter	$	0.07			$	24.3
Second quarter	0.07				24.4
Third quarter	0.07				24.5
Fourth quarter	0.07				23.4
Total	$	0.28			$	96.6
The sum of the components of total dividends paid may not equal the total amount due to rounding.

Aggregate cash payments for the dividends paid to shareholders are recorded as dividends to shareholders in our Consolidated Statements of Changes in Equity and Consolidated Statements of Cash Flows.

On January 28, 2020 we declared a regular quarterly cash dividend of $0.07 per share payable on March 27, 2020 to common stockholders of record on February 28, 2020.

Mandatory Convertible Preferred Stock

On June 29, 2018, we issued 1,380,000 shares of 5.0% Mandatory Convertible Preferred Stock, Series A (“MCPS”) with a par value of $0.01 per share and liquidation preference of $1,000 per share, which included the exercise of an over-allotment option in full to purchase 180,000 shares. We received net $1.34 billion in proceeds from the issuance of the MCPS, excluding $43 million of issuance costs. We used the net proceeds from the issuance of MCPS to fund our acquisition activities and for general corporate purposes, including repayment of debt, working capital, and capital expenditures.

In connection with the split-off of the A&S Business, on September 26, 2018, we triggered an anti-dilution adjustment pursuant to the terms of the MCPS, and after giving affect to this adjustment, each then outstanding share of MCPS will convert automatically on July 1, 2021 (“Mandatory Conversion Date”) into between 10.9041 and 13.3575 common shares, subject to further anti-dilution adjustments. The number of shares of our common stock issuable on conversion will be determined based on the average volume weighted average price per share of our common stock over the 20 consecutive trading day period beginning on the 22nd scheduled trading day preceding the Mandatory Conversion Date. At any time prior to July 1, 2021, holders may elect to convert each share of the MCPS into shares of common stock at the rate of 10.9041, subject to further anti-dilution adjustments. In the event of a fundamental change, the MCPS will convert at the fundamental change rates specified in the certificate of designations, as adjusted, and the holders of MCPS would be entitled to a fundamental change make-whole dividend.

We may pay declared dividends in cash or, subject to certain limitations, in shares of our common stock, or in any combination of cash and shares of our common stock in January, April, July, and October of each year, commencing on October 1, 2018 and ending on July 1, 2021. Dividends that are declared will be payable on the dividend payment dates to holders of record on the immediately preceding March 15, June 15, September 15, and December 15 (each a “record date”), whether or not such holders convert their shares, or such shares are automatically converted, after the corresponding record date.

Dividends on our MCPS are payable on a cumulative basis when, as, and if declared by our Board, at an annual rate of 5.0% of the liquidation preference of $1,000 per share (equivalent to $50.00 annually per share).

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We declared and paid cash dividends on our MCPS during the periods presented as follows:

	Dividend Per Preferred Share				Amount ($ in millions)
2019:
First quarter	$	12.50			$	17.3
Second quarter	12.50				17.2
Third quarter	12.50				17.3
Fourth quarter	12.50				17.2
Total	$	50.00			$	69.0
2018:
Third quarter	$	12.78			$	17.6
Fourth quarter	12.50				17.3
Total	$	25.28			$	34.9

On January 28, 2020 we declared a regular quarterly cash dividend of $12.50 per share on our MCPS payable on April 1, 2020 to preferred stockholders of record on March 15, 2020.

Net earnings per share

Basic net earnings per share (“EPS”) from continuing operations is calculated by dividing net earnings from continuing operations by the weighted average number of shares of common stock outstanding for the applicable period. Diluted EPS from continuing operations is similarly calculated, except that the calculation includes the dilutive effect of the assumed issuance of shares under stock-based compensation plans except where the inclusion of such shares would have an anti-dilutive impact.

For the year ended December 31, 2019, the anti-dilutive options to purchase shares excluded from the diluted EPS calculation were 3.0 million shares. For the years ended December 31, 2018 and 2017, the anti-dilutive options to purchase shares excluded from the diluted EPS calculation were immaterial. The impact of our MCPS calculated under the if-converted method were anti-dilutive, and as such, 18.3 million and 18.4 million shares were excluded from the dilutive EPS calculation for the years ended December 31, 2019 and December 31, 2018, respectively.

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

	Year Ended December 31,
	2019				2018				2017
Numerator
Net earnings from continuing operations	$	725.4			$	918.3			$	884.3
Mandatory convertible preferred stock cumulative dividends	(69.0		)		(34.9		)		—
Net earnings attributable to common stockholders from continuing operations	$	656.4			$	883.4			$	884.3
Denominator
Weighted average common shares outstanding used in basic earnings per share	335.8				345.5				347.5
Incremental common shares from:
Assumed exercise of dilutive options and vesting of dilutive Stock Awards	4.2				5.2				5.1
Weighted average common shares outstanding used in diluted earnings per share	340.0				350.7				352.6
Net earnings from continuing operations per common share - Basic	$	1.95			$	2.56			$	2.54
Net earnings from continuing operations per common share - Diluted	$	1.93			$	2.52			$	2.51

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NOTE 19. SEGMENT INFORMATION

We report our results in two 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 represents total revenues less operating expenses, excluding other income/expense, interest, and income taxes. The identifiable assets by segment are those used in each segment’s operations. Inter-segment amounts are not significant and are eliminated in the combined totals. 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.

Segment results are shown below ($ in millions):

	Year Ended December 31
	2019				2018				2017
Sales:
Professional Instrumentation	$	4,427.8			$	3,655.1			$	3,139.1
Industrial Technologies	2,892.2				2,797.6				2,617.0
Total	$	7,320.0			$	6,452.7			$	5,756.1
Operating Profit:
Professional Instrumentation	$	547.9			$	744.6			$	712.9
Industrial Technologies	553.9				525.6				503.6
Other	(97.7		)		(91.8		)		(73.5		)
Total	$	1,004.1			$	1,178.4			$	1,143.0
Segment assets:
Professional Instrumentation	$	13,005.5			$	8,592.6			$	5,588.1
Industrial Technologies	2,950.2				3,011.2				2,902.7
Total segment assets	15,955.7				11,603.8				8,490.8
Other	1,480.1				1,271.8				1,138.8
Assets of Discontinued Operations	3.2				30.0				871.0
Total assets	$	17,439.0			$	12,905.6			$	10,500.6
Depreciation and amortization:
Professional Instrumentation	$	337.5			$	168.7			$	82.0
Industrial Technologies	87.0				88.7				70.3
Other	1.7				3.4				6.0
Total	$	426.2			$	260.8			$	158.3
Capital expenditures, gross:
Professional Instrumentation	$	65.0			$	58.4			$	37.0
Industrial Technologies	40.7				44.8				71.8
Other	6.8				9.1				2.3
Total	$	112.5			$	112.3			$	111.1

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Operations in Geographic Areas:

	Year Ended December 31
($ in millions)	2019				2018				2017
Sales:
United States	$	4,206.5			$	3,539.6			$	3,148.7
China	592.0				569.0				498.4
All other (each country individually less than 5% of total sales)	2,521.5				2,344.1				2,109.0
Total	$	7,320.0			$	6,452.7			$	5,756.1
Property, plant and equipment, net
United States	$	414.8			$	464.9			$	483.0
All other (each country individually less than 5% of total property, plant and equipment, net)	104.7				111.2				127.4
Total	$	519.5			$	576.1			$	610.4

NOTE 20. RELATED-PARTY TRANSACTIONS WITH DANAHER

Our transactions with Danaher are considered related party transactions. In connection with the Separation, we entered into the Agreements with Danaher, which governed the Separation and provided a framework for the relationship between the parties going forward. Refer to Note 14 for additional discussion of the tax matters agreement.

Following the Separation, we continue to enter into arms-length revenue arrangements in the ordinary course of business with Danaher and its affiliates, although certain agreements were entered into or terminated as a result of the Separation. We recorded sales of approximately $12 million, $16 million, and $16 million to Danaher and its subsidiaries during the years ended December 31, 2019, 2018,and 2017, respectively. Purchases from Danaher and its subsidiaries were approximately $13 million, $14 million, and $13 million during the years ended December 31, 2019, 2018, and 2017, respectively.

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NOTE 21. QUARTERLY DATA - UNAUDITED

($ in millions, except per share data)	1st Quarter				2nd Quarter				3rd Quarter				4th Quarter
2019:
Sales	$	1,592.9			$	1,864.7			$	1,860.0			$	2,002.4
Gross profit	812.7				904.0				927.7				1,035.9
Operating profit	217.3				249.5				242.1				295.2
Earnings from continuing operations, net of income taxes	164.0				175.3				207.3				178.8
Earnings (loss) from discontinued operations, net of income taxes	0.4				(0.7		)		(0.2		)		14.0
Net earnings	$	164.4			$	174.6			$	207.1			$	192.8
Earnings per common share - basic:
Continuing operations	$	0.44			$	0.47			$	0.57			$	0.48
Discontinued operations	—				—				—				0.04
Total earnings per common share - basic	$	0.44			$	0.47			$	0.56			$	0.52
Earnings per common share - diluted:
Continuing operations	$	0.43			$	0.47			$	0.56			$	0.48
Discontinued operations	—				—				—				0.04
Total earnings per common share - diluted	$	0.43			$	0.46			$	0.56			$	0.52
2018:
Sales	$	1,492.2			$	1,601.8			$	1,601.2			$	1,757.5
Gross profit	766.3				830.8				825.9				898.3
Operating profit	277.9				324.4				281.6				294.5
Earnings from continuing operations, net of income taxes	214.0				250.2				214.0				240.1
Earnings from discontinued operations, net of income taxes	47.2				44.8				31.3				1,872.2
Net earnings	$	261.2			$	295.0			$	245.3			$	2,112.3
Earnings per common share - basic:
Continuing operations	$	0.61			$	0.72			$	0.56			$	0.67
Discontinued operations	0.14				0.13				0.09				5.60
Total earnings per common share - basic	$	0.75			$	0.84			$	0.65			$	6.26
Earnings per common share - diluted:
Continuing operations	$	0.61			$	0.70			$	0.55			$	0.66
Discontinued operations	0.13				0.13				0.09				5.52
Total earnings per common share - diluted	$	0.74			$	0.83			$	0.64			$	6.17
The sum of net earnings per share amount may not add due to rounding.

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a)	The following documents are filed as part of this report.

(1)	Financial Statements. The financial statements are set forth under “Item 8. Financial Statements and Supplementary Data” of this Annual Report on Form 10-K.

(2)	Schedules. An index of Exhibits and Schedules is on page 103 of this report. Schedules other than those listed below have been omitted from this Annual Report on Form 10-K because they are not required, are not applicable or the required information is included in the financial statements or the notes thereto.

(3)	Exhibits. The exhibits listed in the accompanying Exhibit Index are filed or incorporated by reference as part of this Annual Report on Form 10-K.

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SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS

($ in millions)

 

Classification	Balance at Beginning of Period(a)				Charged to Costs & Expenses				Impact of Currency				Charged to Other Accounts(b)				Write Offs, Write Downs & Deductions				Balance at End of Period(a)
Year Ended December 31, 2019:
Allowances deducted from asset accounts
Allowance for doubtful accounts	$	78.5			$	63.7			$	(0.3	)		$	1.5			$	(61.3	)		$	82.1
Year Ended December 31, 2018:
Allowances deducted from asset accounts
Allowance for doubtful accounts	$	66.5			$	48.5			$	(0.8	)		$	2.5			$	(38.2	)		$	78.5
Year Ended December 31, 2017:
Allowances deducted from asset accounts
Allowance for doubtful accounts	$	80.7			$	37.5			$	1.0			$	2.1			$	(54.8	)		$	66.5
(a) Amounts include allowance for doubtful accounts classified as current and noncurrent.
(b) Amounts are related to businesses acquired.