FORM 10-K

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

For the fiscal year ended December 31, 2021

OR
☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from            to

 

Title of each class			Trading symbols			Name of each exchange on which registered
Common stock, par value $0.01 per share			FTV			New York Stock Exchange

Yes x No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

x

Accelerated filer

¨

Non-accelerated filer

¨

(Do not check if a smaller reporting company)

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

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

 

									Page
Information Relating to Forward-looking Statements									2
Part I.
			Item 1.			Business			2
			Item 1A.			Risk Factors			9
			Item 1B.			Unresolved Staff Comments			22
			Item 2.			Properties			22
			Item 3.			Legal Proceedings			22
			Item 4.			Mine Safety Disclosures			22
						Information about our Executive Officers			23
Part II.
			Item 5.			Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities			24
			Item 6.			[Reserved]			24
			Item 7.			Management's Discussion and Analysis of Financial Condition and Results of Operations			24
			Item 7A.			Quantitative and Qualitative Disclosures About Market Risk			49
			Item 8.			Financial Statements and Supplementary Data			50
			Item 9.			Changes in and Disagreements with Accountants on Accounting and Financial Disclosure			105
			Item 9A.			Controls and Procedures			105
			Item 9B.			Other Information			105
			Item 9C.			Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Part III.
			Item 10.			Directors, Executive Officers and Corporate Governance			105
			Item 11.			Executive Compensation			106
			Item 12.			Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters			106
			Item 13.			Certain Relationships and Related Transactions, and Director Independence			106
			Item 14.			Principal Accountant Fees and Services			106
Part IV.
			Item 15.			Exhibits and Financial Schedules			106
			Item 16.			Form 10-K Summary			106
						Signatures

Intellectual Property

•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.

•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.

•accurately 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;

•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.

•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, including the effects of the Trade and Cooperation Agreement between the European Union, the European Atomic Energy Community, and the United Kingdom signed on December 30, 2020;

•limitations on ownership and on repatriation of earnings and cash;

•the potential for nationalization of enterprises;

•limitations on legal rights and our ability to enforce such rights;

•difficulty in staffing and managing widespread operations;

•differing labor regulations;

•difficulties in implementing restructuring actions on a timely or comprehensive basis; and

•differing protection of intellectual property.

•any 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 increase our expenses, adversely affect our financial position, or cause us to fail to meet our public financial reporting obligations;

•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.

•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;

•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;

•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

•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 could negatively impact our business or financial position.

We could incur significant liability if any of our separation from Danaher, our separation of our Automation and Specialty business or our separation of Vontier (collectively, the “Separation Transactions”) is determined to be a taxable transaction.

•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.

•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.

Set forth below are the names, ages, positions, and experience of our executive officers as of February 25, 2022. All of our executive officers hold office at the pleasure of our Board.

Name						Age						Position						Officer Since
James A. Lico						56						President and Chief Executive Officer						2016
Charles E. McLaughlin						60						Senior Vice President – Chief Financial Officer						2016
Patrick K. Murphy						60						President and CEO of Advanced Healthcare Solutions						2016
Tamara S. Newcombe						56						President and CEO of Precision Technologies						2022
Jonathan L. Schwarz						50						Senior Vice President – Corporate Development						2016
Edward R. Simmons						48						Senior Vice President – Strategy						2021
Olumide Soroye						49						President and CEO of Intelligent Operating Solutions						2021
Peter C. Underwood						52						Senior Vice President – General Counsel						2016
Stacey A. Walker						51						Senior Vice President – Human Resources						2016

•Basis of Presentation

•Overview

•Results of Operations

•Financial Instruments and Risk Management

•Liquidity and Capital Resources

•Critical Accounting Estimates

•New Accounting Standards

Overall demand for our products and services accelerated during 2021, with aggregate year-over-year sales increasing by 13.4%. The increase was largely driven by demand from our existing businesses, which increased by 9.5% on broad-based momentum and focused execution across our portfolio, most notably within our short-cycle industrial and software as a service (“SaaS”) businesses.

Geographically, year-over-year sales from existing businesses in developed markets increased at a high single digit rate driven by high single digit increases in North America and Western Europe. Year-over-year sales from existing businesses in high

growth markets increased at a mid-teens rate driven by mid-twenties increases in Latin America and mid-teens increases in China.

During 2021, widespread supply chain challenges emerged due to labor, raw material, and component shortages, as well as logistics issues, across multiple industries, resulting in increased material and shipping costs. We worked to mitigate the impact of the supply chain challenges by implementing solutions to support near-term operations, executing on countermeasures for material shortages, and managing production, all of which contributed to year-over-year revenue growth and margin expansion in 2021. However, due to the magnitude of the supply chain and logistics issues impacting the economy broadly and those related to electronic components in particular, demand for our products outpaced our ability to supply, and our backlog grew in the second half of 2021.

We anticipate the strong demand for our products and services will continue into 2022 with year-over-year revenue expected to increase between 9.0% and 12.0% for the full year, including growth from existing businesses of between 5.5% and 8.5% on anticipated strong demand in key end markets and continued deployment of FBS to drive share gains and innovation. This outlook is subject to various assumptions and risks, including but not limited to, the magnitude of the impact of the COVID-19 pandemic on macroeconomic conditions, continued strength of key end markets, elective surgery rates, the availability of electronic components, our ability to convert backlog, sustain our workforce levels and maintain manufacturing capacity.

Components of Sales Growth

			2021  vs. 2020						2020 vs. 2019
Total revenue growth (GAAP)			13.4		%				1.5		%
Existing businesses (Non-GAAP)			9.5		%				(5.9)		%
Acquisitions (Non-GAAP)			2.4		%				7.3		%
Currency exchange rates (Non-GAAP)			1.5		%				0.1		%

•Higher year-over-year sales volumes and price increases from existing businesses, incremental year-over-year cost savings associated with restructuring and productivity improvement initiatives and favorable sales mix, which were partially offset by higher year-over-year freight and logistics costs, employee compensation and SG&A costs, which were reduced in 2020 to better align costs with demand in response to the pandemic — favorable 240 basis points

•The year-over-year net effect of acquisition-related transaction costs which were less in the year ended December 31, 2021 than those recognized in the comparable period in 2020 — favorable 40 basis points

•The year-over-year effect of amortization from existing businesses — favorable 85 basis points

•The year-over-year effects of restructuring costs which were less in 2021 than those recognized in 2020 — favorable 35 basis points

•The year-over-year effect of acquired businesses, including amortization, and acquisition-related fair value adjustments to deferred revenue and inventory which were higher in 2021 than those recognized in 2020 — unfavorable 10 basis points

•Operating expense savings from broad cost reduction efforts and price increases, and to a lesser extent, lower year-over-year material costs and incremental year-over-year cost savings associated with productivity improvement initiatives, which were partially offset by lower year-over-year sales volumes from existing businesses — favorable 50 basis points

•The year-over-year effect of acquired businesses, including amortization, and acquisition-related fair value adjustments to deferred revenue and inventory which were less in 2020 than the fair value adjustments recognized in 2019 — favorable 30 basis points

•The year-over-year effect of acquisition-related transaction costs, as the costs related to our acquisition and integration of ASP in 2019 were greater than the costs recognized in the comparable period in 2020 — favorable 90 basis points

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

•The incremental year-over-year effect of restructuring actions — favorable 10 basis points

Sales by business segment and geographic area for the year ended December 31 are as follows ($ in millions):

			2021						2020						2019
Segments
Intelligent Operating Solutions			$	2,169.4					$	1,883.7					$	1,898.9
Precision Technologies			1,848.9						1,651.3						1,808.4
Advanced Healthcare Solutions			1,236.4						1,099.4						856.6
Total			$	5,254.7					$	4,634.4					$	4,563.9
Geographic area
United States			$	2,683.0					$	2,436.6					$	2,394.2
China			650.7						534.1						501.2
All other (each country individually less than 5% of total sales)			1,921.0						1,663.7						1,668.5
Total			$	5,254.7					$	4,634.4					$	4,563.9

Intelligent Operating Solutions Selected Financial Data

			For the Year Ended December 31
($ in millions)			2021						2020						2019
Sales			$	2,169.4					$	1,883.7					$	1,898.9
Operating profit			408.5						317.8						289.0
Depreciation			24.5						28.0						40.8
Amortization			163.3						151.1						141.7
Operating profit as a % of sales			18.8		%				16.9		%				15.2		%
Depreciation as a % of sales			1.1		%				1.5		%				2.1		%
Amortization as a % of sales			7.5		%				8.0		%				7.5		%

Components of Sales Growth

			2021  vs. 2020						2020 vs. 2019
Total revenue growth (GAAP)			15.2		%				(0.8)		%
Existing businesses (Non-GAAP)			10.7		%				(7.2)		%
Acquisitions (Non-GAAP)			2.8		%				6.4		%
Currency exchange rates (Non-GAAP)			1.7		%				—		%

Year-over-year sales of products and services from existing businesses of Intelligent Operating Solutions increased 10.7% in 2021, as compared to 2020. The year-over-year increase was driven by broad-based increases in demand, particularly from our industrial channel partners, critical safety, facilities, and maintenance SaaS product offerings, and portable gas detection instruments, which were partially offset by a decrease in demand for our industrial imaging products, as demand for those products was elevated during the comparable period in 2020 for COVID-19 monitoring.

•Higher year-over-year sales volumes from existing businesses, price increases, a favorable sales mix, cost savings associated with restructuring and productivity improvement initiatives, which were partially offset by higher year-over-year employee compensation and SG&A costs due to broad cost reduction efforts in 2020 that reduced expenses to better align with reductions in demand, and increased investment in key growth and innovation initiatives — favorable 290 basis points

•The year-over-year effect of amortization from existing businesses — favorable 105 basis points

•The year-over-year effect of restructuring actions which were less in 2021 than those recognized in 2020 — favorable 45 basis points

•The year-over-year effect of acquisition-related transaction costs which were higher in 2021 than those recognized in 2020 — unfavorable 135 basis points

•The year-over-year effect of acquired businesses, including amortization, and acquisition-related fair value adjustments to deferred revenue — unfavorable 110 basis points

•Operating expense savings from broad cost reduction efforts, price increases, lower year-over-year material costs and incremental year-over-year cost savings associated with productivity improvement initiatives, which were partially offset by lower year-over-year sales volumes from existing businesses — favorable 40 basis points