Fortive(US:FTV)2023-02-27 16:00Risks and Liabilities - The company faces risks from acquisitions and strategic relationships that could negatively impact financial statements due to various challenges, including legal rights limitations and operational management difficulties [116]. - Acquired businesses or technologies may underperform relative to expectations, potentially leading to significant debt and financial results that differ from projections [117]. - Indemnification provisions in acquisition agreements may not fully protect the company, leading to unexpected liabilities that could adversely affect financial statements [119]. - Divestitures may dilute earnings per share and have adverse financial impacts, with retained responsibilities for contingent liabilities from sold businesses [120]. - Potential indemnification liabilities to Vontier could materially affect the company's financial condition and results of operations [121]. - Compliance with complex and changing regulations may increase costs and reduce demand for products, impacting financial performance [122]. - Improper conduct by employees or partners could damage the company's reputation and lead to significant legal and financial penalties [123]. - Environmental, health, and safety liabilities could result in substantial costs and negatively impact the company's financial statements [124]. - The company is subject to extensive regulations, and failure to comply could result in penalties and disrupt business operations [127]. - Climate change and related regulatory measures may increase operational costs and disrupt supply chains, adversely affecting financial statements [130]. Financial Performance - Fortive Corporation reported total sales of $5,825.7 million for the year ended December 31, 2022, representing an increase of 10.8% compared to $5,254.7 million in 2021 [367]. - The company's net earnings from continuing operations for 2022 were $755.2 million, up 23.1% from $614.2 million in 2021 [367]. - Gross profit for 2022 was $3,363.4 million, reflecting a gross margin of approximately 57.7%, compared to a gross profit of $3,007.1 million in 2021 [367]. - Fortive's total assets decreased to $15,890.6 million as of December 31, 2022, down from $16,465.5 million in 2021 [365]. - The company's goodwill balance was $9.0 billion as of December 31, 2022, slightly down from $9.15 billion in 2021 [363]. - Research and development expenses increased to $401.5 million in 2022, compared to $354.8 million in 2021, indicating a focus on innovation [367]. - Fortive's retained earnings rose to $6,742.1 million in 2022, up from $6,023.6 million in 2021, indicating strong profitability retention [365]. - The company reported a comprehensive income of $614.5 million for 2022, compared to $564.5 million in 2021, showing overall financial health [369]. - Fortive's diluted earnings per common share from continuing operations increased to $2.10 in 2022, up from $1.65 in 2021, reflecting improved profitability [367]. - Total operating cash provided by continuing operations was $1,303.2 million in 2022, compared to $992.9 million in 2021 [375]. Debt and Financing - The company had approximately $3.3 billion of long-term debt as of December 31, 2022, which includes the current portion of long-term debt [139]. - The current portion of long-term debt decreased significantly to $999.7 million in 2022 from $2,151.7 million in 2021, reflecting improved financial management [365]. - Fortive's cash flows from financing activities resulted in a net cash outflow of $1,273.0 million in 2022, compared to a net cash inflow of $652.0 million in 2021 [375]. - The company has a five-year $2.0 billion senior unsecured revolving credit facility expiring on October 18, 2027, with no borrowings outstanding as of December 31, 2022 [471]. - The company drew down $1.0 billion under a delayed-draw term loan due December 14, 2023, with interest rates based on Term SOFR plus a spread of 82.5 to 107.5 basis points [482]. - The Euro Term Loan of €275 million (approximately $290 million) is due on June 23, 2025, and bears interest at Euribor plus 55 basis points [483]. - The Yen Term Loan of ¥14.4 billion (approximately $107 million) is due on June 17, 2025, with interest at Tokyo Term Risk Free Rate plus 65 basis points [484]. - The company repaid $1.2 billion in outstanding principal of its 0.875% Convertible Senior Notes on February 15, 2022, with interest expense recognized of $2.1 million for the year ended December 31, 2022 [491]. - The total long-term debt principal payments due in 2023 amount to $1.0 billion, with future payments totaling $2.854 billion [496]. Taxation - Changes in U.S. tax laws, including the Tax Cuts and Jobs Act of 2017, could materially affect the company's tax provision, cash taxes paid, and effective tax rate [133]. - The OECD's global minimum corporate tax rate of 15% could significantly increase tax uncertainty and affect the company's financial results [135]. - The company may incur significant tax liabilities if any of its separation transactions are determined to be taxable [136]. - Changes in multilateral agreements and foreign tax laws could increase the company's tax provision and effective tax rate [134]. - The company is subject to audits by tax authorities, which could result in additional tax payments and affect future financial results [132]. - The company recognizes tax benefits from uncertain tax positions only if it is more likely than not that the tax position will be sustained [417]. - Deferred tax assets are reduced by a valuation allowance if it is more likely than not that some portion will not be realized [416]. Acquisitions and Divestitures - The company evaluates potential mergers, acquisitions, and divestitures to align with its strategy and expedite portfolio evolution [427]. - ServiceChannel acquisition completed for approximately $1.2 billion, with $868 million recorded as goodwill [431]. - Revenue from acquisitions for the year ended December 31, 2022, was $262.7 million, with an operating loss of $42.8 million [432]. - Total net cash consideration for acquisitions in 2021 was $2.57 billion, with goodwill totaling $1.84 billion [434]. - The Therapy Physics product line was divested for $9.6 million, resulting in a net realized pre-tax gain of $0.5 million [438]. - The Vontier Separation involved distributing 80.1% of shares to stockholders, retaining 19.9% of shares [439]. - The investment in Vontier common stock was remeasured at fair value, resulting in unrealized gains of $1.1 billion [441]. - Goodwill impairment charge of $85.3 million recorded for the Telematics reporting unit during the interim testing [445]. Pension and Employee Benefits - The U.S. pension benefit obligation decreased from $46.4 million in 2021 to $33.1 million in 2022, while non-U.S. pension benefits decreased from $340.8 million to $230.7 million [499]. - The funded status of U.S. pension benefits improved from a deficit of $14.5 million in 2021 to a deficit of $7.2 million in 2022, while the non-U.S. pension benefits deficit decreased from $117.7 million to $68.0 million [500]. - The discount rate for U.S. pension plans increased from 2.82% in 2021 to 5.42% in 2022, reflecting changes in market conditions [501]. - The net periodic pension cost for U.S. pension benefits was $(0.2) million in 2022, compared to $(0.1) million in 2021, while non-U.S. pension benefits cost was $3.3 million in 2022, down from $6.3 million in 2021 [502]. - The company contributed $2 million to its U.S. defined benefit pension plan and $11 million to its non-U.S. defined benefit pension plans in 2022 [509]. - The company recognized compensation expense for 401(k) programs totaling $60 million in 2022, up from $57 million in 2021 and $51 million in 2020 [511].