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, 2022

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

¨

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. ý

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to § 240.10D-1(b). ☐

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 and Risk Factor Summary									2
Part I.
			Item 1.			Business			4
			Item 1A.			Risk Factors			11
			Item 1B.			Unresolved Staff Comments			24
			Item 2.			Properties			24
			Item 3.			Legal Proceedings			24
			Item 4.			Mine Safety Disclosures			24
						Information about our Executive Officers			25
Part II.
			Item 5.			Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities			26
			Item 6.			[Reserved]			26
			Item 7.			Management's Discussion and Analysis of Financial Condition and Results of Operations			26
			Item 7A.			Quantitative and Qualitative Disclosures About Market Risk			52
			Item 8.			Financial Statements and Supplementary Data			53
			Item 9.			Changes in and Disagreements with Accountants on Accounting and Financial Disclosure			104
			Item 9A.			Controls and Procedures			104
			Item 9B.			Other Information			104
			Item 9C.			Disclosure Regarding Foreign Jurisdictions that Prevent Inspections			104
Part III.
			Item 10.			Directors, Executive Officers and Corporate Governance			104
			Item 11.			Executive Compensation			105
			Item 12.			Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters			105
			Item 13.			Certain Relationships and Related Transactions, and Director Independence			105
			Item 14.			Principal Accountant Fees and Services			105
Part IV.
			Item 15.			Exhibits and Financial Schedules			105
			Item 16.			Form 10-K Summary			105
						Signatures

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

•If we cannot adjust our manufacturing capacity, supply chain management or the purchases required for our manufacturing activities to reflect changes in market conditions, customer demand and supply chain or transportation disruptions, our profitability may suffer.

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

•The spread of, and the remedial efforts related to, COVID-19 in certain foreign jurisdictions are continuing to have an adverse impact on our business and results of operations.

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

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

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

•If we are unable to recruit and retain key employees, our business may be harmed.

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

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

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

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

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

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

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

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

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

•Climate change, or legal or regulatory measure to address climate change, may negatively affect us.

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

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

•Foreign currency exchange rates, including the volatility thereof, may adversely affect our financial statements.

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

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

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

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

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

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

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

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

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

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

•We 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.

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

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

•We have incurred a significant amount of debt, and our debt obligations, including the cost of such debt, will increase further if we incur additional debt and do not retire existing debt, or if the applicable interest rates continue to rise.

Customer success inspires our innovation.

Kaizen is our way of life.

We compete for our shareholders.

Intellectual Property

–Inclusion - Develop our teams to build a Fortive where you can be yourself and do your best work.

–Diversity - Build a diverse Fortive through hiring, developing, and retaining a strong and diverse team.

–Equity - Build a culture of equity that enables greater innovation and performance for customers and for the world.

•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;

•increasing the impact of currency translation; 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;

•impact of geopolitical conflict, including the Ukraine/Russia conflict;

•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, sanctions, 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 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;

•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. Government authorities may conclude that our business practices do not comply with current or future statutes, regulations, agency guidance or case law. Failure to obtain required regulatory clearances or approvals before marketing our products (or before implementing modifications to or promoting additional indications or uses of our products), other violations of laws or regulations, failure to remediate inspectional observations to the satisfaction of these regulatory authorities, and real or perceived efficacy or safety concerns or trends of adverse events with respect to our products (even after obtaining clearance for distribution) can lead to warning letters, notices to customers, declining sales, loss of customers, loss of market share, remediation and increased compliance costs, recalls, seizures, fines, expenses, injunctions, civil penalties, criminal penalties, consent decrees, administrative detentions, refusals to permit importations, partial or total shutdown of production facilities or the implementation of operating restrictions, narrowing of permitted uses for a product, refusal of the government to grant clearance, and suspension or withdrawal of approvals. Further, defending against any such actions can be costly and time-consuming and may require significant personnel resources. Therefore, even if we are successful in defending against any such actions brought against us, our business may be impaired; 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.

Climate change, or legal or regulatory measures to address climate change, may negatively affect us.

•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; and

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

Set forth below are the names, ages, positions, and experience of our executive officers as of February 28, 2023. All of our executive officers hold office at the pleasure of our Board.

Name						Age						Position						Officer Since
James A. Lico						57						President and Chief Executive Officer						2016
Charles E. McLaughlin						61						Senior Vice President – Chief Financial Officer						2016
Patrick K. Murphy						61						President and CEO of Advanced Healthcare Solutions						2016
Tamara S. Newcombe						57						President and CEO of Precision Technologies						2022
Jonathan L. Schwarz						51						Senior Vice President – Corporate Development						2016
Edward R. Simmons						49						Senior Vice President – Strategy						2021
Olumide Soroye						50						President and CEO of Intelligent Operating Solutions						2021
Peter C. Underwood						53						Senior Vice President – General Counsel						2016
Stacey A. Walker						52						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

Geographically, year-over-year sales from existing businesses in developed markets increased low double-digits, with low double-digit growth in both North America and Western Europe, respectively. Year-over-year sales from existing businesses in high growth markets increased low double-digits driven by low twenties growth in Latin America and low double-digit growth in China.

During 2019, we acquired Censis Technologies (“Censis”). At the closing date of the purchase of Censis, a contractual liability existed which management allocated to the purchase price and was recorded in our Consolidated Balance Sheet. During the fourth quarter of 2021, that liability was discharged for an amount less than the amount allocated, and the excess was recorded as a Gain on litigation resolution of $3.9 million within Non-operating income (expense), net in our Consolidated Statements of Earnings during the year ended December 31, 2021.

Components of Sales Growth

			2022 vs. 2021						2021 vs. 2020
Total revenue growth (GAAP)			10.9		%				13.4		%
Existing businesses (Non-GAAP)			10.1		%				9.5		%
Acquisitions (Non-GAAP)			3.9		%				2.4		%
Currency exchange rates (Non-GAAP)			(3.1)		%				1.5		%