- Strong execution and operational performance driven by the
power of the Fortive Business System (FBS), delivering 2023 results
above prior expectations
- Q4 total and core revenue growth of 4% and 3% respectively,
with record margin performance
- Q4 GAAP diluted EPS of $0.75, up 17%; adjusted diluted EPS
of $0.98, up 11%; reported operating cash flow of $447 million and
free cash flow of $413 million, up 56% over the last two
years
- Expect full-year 2024 revenue of $6.4 to $6.5 billion, up 6%
to 8% percent; GAAP diluted EPS of $2.58 to $2.70, up 6% to 11%;
full-year 2024 adjusted diluted EPS of $3.73 to $3.85, up 9% to
12%
Fortive Corporation (“Fortive”) (NYSE: FTV) today announced
financial results for the fourth quarter and full year 2023.
For the fourth quarter, net earnings were $265 million. For the
same period, adjusted net earnings were $349 million. Diluted net
earnings per share for the fourth quarter was $0.75. For the same
period, adjusted diluted net earnings per share was $0.98.
For the fourth quarter, revenues increased 4% year-over-year to
$1.58 billion, which included core revenue growth of 3%.
For the full year, net earnings were $866 million. For the same
period, adjusted net earnings were $1.2 billion. Diluted net
earnings per share for the full year was $2.43. For the same
period, adjusted diluted net earnings per share was $3.43.
For the full year, revenues increased 4% year-over-year to $6.07
billion, which included core revenue growth of 5%.
James A. Lico, President and Chief Executive Officer, stated,
“Fortive generated outstanding operating performance in the fourth
quarter and 2023. Our transformed portfolio of businesses is
delivering more consistent and profitable through-cycle growth.
Throughout 2023, we focused on unleashing the power of the Fortive
Business System, helping to drive operational and commercial
success, record margins, and accelerated returns on organic and
inorganic investments.”
For the first quarter of 2024, Fortive anticipates revenue of
approximately $1.5 billion, diluted net earnings per share of $0.44
to $0.47 and adjusted diluted net earnings per share of $0.77 to
$0.80.
For the full year 2024, Fortive anticipates revenue of
approximately $6.4 billion to $6.5 billion, diluted net earnings
per share of $2.58 to $2.70, and adjusted diluted net earnings per
share of $3.73 to $3.85.
Mr. Lico continued, “We remain committed to our strategy and its
success is evident given the breadth of our results that are
compounding over time. We are confident in our 2024 outlook,
sustaining our multi-year track record of mid-single-digit core
growth and mid-teens compounded earnings and free cash flow
annually since 2019. Our acceleration of disciplined capital
deployment, as demonstrated in 2023, further positions Fortive as a
premier company delivering higher growth cash compounding and
fueling our value creation flywheel.”
Recent Developments
On January 3, 2024, we completed the acquisition of EA
Elektro-Automatik (EA) Holding GmbH, enhancing our position in
electronic test and measurement solutions within the Precision
Technologies segment. EA's expected financial performance has been
included in the full-year 2024 outlook.
In 2023, we entered into an agreement to optimize our real
estate footprint within our Precision Technologies Segment for
proceeds of approximately $90 million. We expect the transaction to
be completed in the first half of 2024, with a gain from the
transaction recognized at the time of closing.
We recently discovered that Gems Setra, one of our subsidiaries,
made certain incorrect representations regarding its status as a
small business concern as defined by the Small Business Act for
certain contracts that it was awarded by the Defense Logistics
Agency ("DLA"). As a result, on January 26, 2024, we voluntarily
notified the Department of Defense Office of Inspector General
(“OIG”) and the DLA of this matter. While we are continuing to
investigate, we currently do not expect this matter to have a
material adverse effect on our financial condition or results of
operations.
CONFERENCE CALL DETAILS
Fortive will discuss results and outlook during its quarterly
investor conference call today starting at 12:00 p.m. ET. The call
and an accompanying slide presentation will be webcast on the
“Investors” section of Fortive’s website, www.fortive.com, under
“Events & Presentations.” A replay of the webcast will be
available at the same location shortly after the conclusion of the
presentation.
The conference call can be accessed by dialing 888-440-6928
within the U.S. or by dialing 646-960-0328 outside the U.S. a few
minutes before 12:00 p.m. ET and notifying the operator that you
are dialing in for Fortive’s earnings conference call (access code
6922572). A digital recording of the conference call will be
available two hours after the completion of the call until
Wednesday, February 14, 2024. Once available, you can access the
conference call replay by dialing 800-770-2030 within the U.S. or
647-362-9199 outside the U.S. (access code 6922572) or visit the
“Investors” section of the website under “Events &
Presentations.”
ABOUT FORTIVE
Fortive is a provider of essential technologies for connected
workflow solutions across a range of attractive end-markets.
Fortive’s strategic segments - Intelligent Operating Solutions,
Precision Technologies, and Advanced Healthcare Solutions - include
well-known brands with leading positions in their markets. The
company’s businesses design, develop, service, manufacture, and
market professional and engineered products, software, and
services, building upon leading brand names, innovative
technologies, and significant market positions. Fortive is
headquartered in Everett, Washington and employs a team of more
than 18,000 research and development, manufacturing, sales,
distribution, service and administrative employees in more than 50
countries around the world. With a culture rooted in continuous
improvement, the core of our company’s operating model is the
Fortive Business System. For more information please visit:
www.fortive.com.
NON-GAAP FINANCIAL MEASURES
In addition to the financial measures prepared in accordance
with generally accepted accounting principles (GAAP), this earnings
release also references “adjusted net earnings,” “adjusted diluted
net earnings per share,” “free cash flow,” and “core revenue
growth,” which are non-GAAP financial measures. The reasons why we
believe these measures, when used in conjunction with the GAAP
financial measures, provide useful information to investors, how
management uses such non-GAAP financial measures, a reconciliation
of these measures to the most directly comparable GAAP measures and
other information relating to these measures are included in the
supplemental reconciliation schedule attached. The non-GAAP
financial measures should not be considered in isolation or as a
substitute for the GAAP financial measures, but should instead be
read in conjunction with the GAAP financial measures. The non-GAAP
financial measures used by Fortive in this release may be different
from similarly-titled non-GAAP measures used by other
companies.
FORWARD-LOOKING STATEMENTS
Statements in this release that are not strictly historical,
including statements regarding anticipated financial results,
business and acquisition opportunities, economic conditions,
industry trends, future prospects, shareholder value, and any other
statements identified by their use of words like “anticipate,”
“expect,” “believe,” “outlook,” “guidance,” “target,” or “will” or
other words of similar meaning are “forward-looking” statements
within the meaning of the federal securities laws. These factors
include, among other things: deterioration of or instability in the
economy, the markets we serve, international trade policies, the
condition of the financial markets and the banking systems,
security breaches or other disruptions of our information
technology systems, the spread of, and the future resurgence of
COVID-19, our ability to adjust purchases, supply chain management,
and manufacturing capacity to reflect market conditions and
customer demand, reliance on sole sources of supply, changes in
relations with China, contractions or lower growth rates and
cyclicality of markets we serve, competition, changes in industry
standards and governmental regulations, our ability to recruit and
retain key employees, our ability to successfully identify,
consummate, integrate and realize the anticipated value of
appropriate acquisitions and successfully complete divestitures and
other dispositions, our ability to develop and successfully market
new products, software, and services and expand into new markets,
the potential for improper conduct by our employees, agents or
business partners, contingent liabilities relating to acquisitions
and divestitures, impact of changes to tax laws, our compliance
with applicable laws and regulations and changes in applicable laws
and regulations, risks relating to international economic,
geopolitical, including war and sanctions, legal, compliance and
business factors, risks relating to potential impairment of
goodwill and other intangible assets, currency exchange rates, tax
audits and changes in our tax rate and income tax liabilities, the
impact of our debt obligations, including our cost of debt, on our
operations, litigation and other contingent liabilities including
intellectual property and environmental, health and safety matters,
our ability to adequately protect our intellectual property rights,
risks relating to product, service or software defects, product
liability and recalls, risks relating to product manufacturing, our
relationships with and the performance of our channel partners,
commodity costs and surcharges, adverse effects of restructuring
activities, risk related to tax treatment of the separation of
Vontier, impact of our indemnification obligation to Vontier,
impact of changes to U.S. GAAP, labor matters, and disruptions
relating to man-made and natural disasters and climate change.
Additional information regarding the factors that may cause actual
results to differ materially from these forward-looking statements
is available in our SEC filings, including our Annual Report on
Form 10-K for the year ended December 31, 2022. These
forward-looking statements speak only as of the date of this
release, and Fortive does not assume any obligation to update or
revise any forward-looking statement, whether as a result of new
information, future events and developments or otherwise.
FORTIVE CORPORATION AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
EARNINGS
($ and shares in millions,
except per share amounts)
Three Months Ended
Year Ended
December 31, 2023
December 31, 2022
December 31, 2023
December 31, 2022
(unaudited)
(unaudited)
(unaudited)
Sales
$
1,583.7
$
1,529.9
$
6,065.3
$
5,825.7
Cost of sales
(636.2
)
(637.4
)
(2,471.2
)
(2,462.3
)
Gross profit
947.5
892.5
3,594.1
3,363.4
Operating costs:
Selling, general and administrative
expenses
(537.4
)
(499.8
)
(2,062.6
)
(1,956.6
)
Research and development expenses
(99.2
)
(101.2
)
(397.8
)
(401.5
)
Russia exit and wind down costs
—
(0.6
)
—
(17.9
)
Operating profit
310.9
290.9
1,133.7
987.4
Non-operating income (expense), net:
Interest expense, net
(28.5
)
(32.1
)
(123.5
)
(98.3
)
Other non-operating expense, net
(4.9
)
(1.8
)
(19.4
)
(15.6
)
Earnings before income taxes
277.5
257.0
990.8
873.5
Income taxes
(12.3
)
(29.8
)
(125.0
)
(118.3
)
Net earnings
$
265.2
$
227.2
$
865.8
$
755.2
Net earnings per share:
Basic
$
0.75
$
0.64
$
2.46
$
2.12
Diluted
$
0.75
$
0.64
$
2.43
$
2.10
Average common stock and common equivalent
shares outstanding:
Basic
351.3
353.8
352.5
356.4
Diluted
354.5
356.7
355.6
360.8
This information is presented for reference only. Final audited
statements will include footnotes, which should be referenced when
available, to more fully understand the contents of this
information.
FORTIVE CORPORATION AND
SUBSIDIARIES
SEGMENT INFORMATION
($ in millions)
Three Months Ended
Year Ended
December 31, 2023
December 31, 2022
December 31, 2023
December 31, 2022
(unaudited)
(unaudited)
(unaudited)
Sales:
Intelligent Operating Solutions
$
682.7
$
634.7
$
2,612.2
$
2,466.1
Precision Technologies
549.3
553.0
2,132.8
2,038.2
Advanced Healthcare Solutions
351.7
342.2
1,320.3
1,321.4
Total
$
1,583.7
$
1,529.9
$
6,065.3
$
5,825.7
Operating Profit:
Intelligent Operating Solutions
$
176.8
$
150.4
$
628.8
$
519.4
Precision Technologies
142.0
142.8
540.3
491.3
Advanced Healthcare Solutions
36.7
34.5
105.5
107.9
Other (a)
(44.6
)
(36.2
)
(140.9
)
(113.3
)
Russia exit and wind down costs
—
(0.6
)
—
(17.9
)
Total
$
310.9
$
290.9
$
1,133.7
$
987.4
Operating Margins:
Intelligent Operating Solutions
25.9
%
23.7
%
24.1
%
21.1
%
Precision Technologies
25.9
%
25.8
%
25.3
%
24.1
%
Advanced Healthcare Solutions
10.4
%
10.1
%
8.0
%
8.2
%
Total
19.6
%
19.0
%
18.7
%
16.9
%
(a) Operating profit amounts in the Other
category consist of unallocated corporate costs and other costs not
considered part of our evaluation of reportable segment operating
performance.
This information is presented for reference only. Final audited
statements will include footnotes, which should be referenced when
available, to more fully understand the contents of this
information.
FORTIVE CORPORATION AND
SUBSIDIARIES
CONSOLIDATED BALANCE
SHEETS
($ and shares in millions,
except per share amounts)
As of December 31
2023
2022
(unaudited)
ASSETS
Current assets:
Cash and equivalents
$
1,888.8
$
709.2
Accounts receivable less allowance for
doubtful accounts of $39.2 and $43.9, respectively
960.8
958.5
Inventories
536.9
536.7
Prepaid expenses and other current
assets
285.1
272.6
Total current assets
3,671.6
2,477.0
Property, plant and equipment, net
439.8
421.9
Other assets
518.9
455.8
Goodwill
9,121.7
9,048.5
Other intangible assets, net
3,159.8
3,487.4
Total assets
$
16,911.8
$
15,890.6
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt
$
549.3
$
999.7
Trade accounts payable
608.6
623.0
Accrued expenses and other current
liabilities
1,182.7
1,104.4
Total current liabilities
2,340.6
2,727.1
Other long-term liabilities
1,149.0
1,223.3
Long-term debt
3,096.9
2,251.6
Commitments and Contingencies (Note
14)
Equity:
Common stock: $0.01 par value, 2.0 billion
shares authorized; 363.7 and 361.5 issued; 350.7 and 352.9
outstanding; respectively
3.6
3.6
Additional paid-in capital
3,851.3
3,706.3
Treasury shares, at cost
(715.8
)
(442.9
)
Retained earnings
7,505.9
6,742.1
Accumulated other comprehensive loss
(326.1
)
(325.7
)
Total Fortive stockholders’ equity
10,318.9
9,683.4
Noncontrolling interests
6.4
5.2
Total stockholders’ equity
10,325.3
9,688.6
Total liabilities and equity
$
16,911.8
$
15,890.6
This information is presented for reference only. Final audited
statements will include footnotes, which should be referenced when
available, to more fully understand the contents of this
information.
FORTIVE CORPORATION AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
CASH FLOWS
($ in millions)
Year Ended December 31
2023
2022
(unaudited)
Cash flows from operating activities:
Net earnings
$
865.8
$
755.2
Noncash items:
Amortization
370.4
382.1
Depreciation
86.4
83.5
Stock-based compensation expense
113.3
93.8
Russia exit and wind down costs
—
9.2
Change in deferred income taxes
(104.1
)
(62.1
)
Change in accounts receivable, net
9.8
(52.1
)
Change in inventories
(1.7
)
(40.3
)
Change in trade accounts payable
(16.8
)
81.3
Change in prepaid expenses and other
assets
(69.0
)
10.7
Change in accrued expenses and other
liabilities
99.5
41.9
Net cash provided by operating
activities
1,353.6
1,303.2
Cash flows from investing activities:
Cash paid for acquisitions, net of cash
received
(95.8
)
(12.8
)
Payments for additions to property, plant
and equipment
(107.8
)
(95.8
)
Proceeds from sale of property
7.4
—
Proceeds from sale of business
—
9.6
All other investing activities
0.8
(3.5
)
Net cash used in investing
activities
(195.4
)
(102.5
)
Cash flows from financing activities:
Proceeds from borrowings (maturities
greater than 90 days), net of issuance costs
549.3
1,394.1
Net proceeds from commercial paper
borrowings
839.9
38.5
Payment of 0.875% convertible senior notes
due 2022
—
(1,156.5
)
Repayment of borrowings (maturities
greater than 90 days)
(1,000.0
)
(1,000.0
)
Repurchase of common shares
(272.9
)
(442.9
)
Payment of common stock cash dividend to
shareholders
(102.0
)
(99.5
)
All other financing activities
18.0
(6.7
)
Net cash provided by (used in)
financing activities
32.3
(1,273.0
)
Effect of exchange rate changes on cash
and equivalents
(10.9
)
(37.8
)
Net change in cash and equivalents
1,179.6
(110.1
)
Beginning balance of cash and
equivalents
709.2
819.3
Ending balance of cash and equivalents
$
1,888.8
$
709.2
This information is presented for reference only. Final audited
statements will include footnotes, which should be referenced when
available, to more fully understand the contents of this
information.
FORTIVE CORPORATION AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES AND
OTHER INFORMATION
Management believes that each of the non-GAAP financial measures
described below provide useful information to investors by
reflecting additional ways of viewing aspects of our operations
that, when reconciled to the corresponding GAAP measure, help our
investors to understand the long-term profitability trends of our
business, and facilitate comparisons of our operational performance
and profitability to prior and future periods and to our peers.
These non-GAAP measures should be considered in addition to, and
not as a replacement for or superior to, the comparable GAAP
measures, and may not be comparable to similarly titled measures
reported by other companies.
Adjusted Net Earnings and Adjusted Diluted
Net Earnings per Share
We disclose the non-GAAP measures of historical adjusted net
earnings and historical and forecasted adjusted diluted net
earnings per share, which to the extent applicable, make the
following adjustments to GAAP net earnings and GAAP diluted net
earnings per share:
- Excluding on a pretax basis amortization of acquisition related
intangible assets and non-cash impairments;
- Excluding on a pretax basis acquisition and divestiture related
items;
- Excluding on a pretax basis the costs incurred pursuant to
discrete restructuring plans that are fundamentally different from
ongoing productivity improvements in terms of the size, strategic
nature, planning requirements and the inconsistent frequency of
such plans as well as the associated macroeconomic drivers which
underlie such plans (the “Discrete Restructuring Charges”);
and
- Excluding on a pretax basis the effect of gains and losses from
our equity investments;
- Excluding on a pretax basis Russia exit and wind down
costs;
- Excluding on a pretax basis the gain on sale of business;
- Including the actual cash interest expense on our 0.875%
Convertible Senior Notes due 2022 (“Convertible Notes”) that was
not included under the if-converted methodology mandated in 2022
and, with respect to the adjusted diluted net earnings per share,
excluding the outstanding shares of common stock imputed under the
in-converted methodology for the Convertible Notes that, in fact,
were repaid and settled without issuance of any shares of common
stock. Since we settled the Convertible Notes in cash on February
15, 2022 and no common share conversion occurred, we have reversed
the impacts of applying the if-converted method and included the
actual cash interest expense in calculating the adjusted net
earnings per share;
- Excluding the tax effect (to the extent tax deductible) of the
pretax adjustments noted above. The tax effect of such adjustments
was calculated by applying our overall estimated effective tax rate
to the pretax amount of each adjustment (unless the nature of the
item and/or the tax jurisdiction in which the item has been
recorded requires application of a specific tax rate or tax
treatment, in which case the tax effect of such item is estimated
by applying such specific tax rate or tax treatment). We expect to
apply our overall estimated effective tax rate to each adjustment
going forward; and
- Excluding discrete non-cash tax benefit.
Amortization of Acquisition Related Intangible Assets and
Non-cash Impairments
As a result of our acquisition activity, we have significant
amortization expense associated with definite-lived intangible
assets. We adjust for amortization expense of acquisition related
intangible assets incurred in each period, and impairment charges
incurred, if any. During the three and twelve month periods ended
December 31, 2023, we recognized $2.3 million and $5.2 million,
respectively, related to impairment charges. We believe that this
adjustment provides our investors with additional insight into our
operational performance and profitability as such impacts are not
related to our core business performance.
Acquisition and Divestiture Related Items
While we have a history of acquisition and divestiture activity,
we do not acquire and divest businesses or assets on a predictable
cycle. The amount of an acquisition’s purchase price allocated to
inventory fair value adjustments are unique to each acquisition and
can vary significantly from acquisition to acquisition. In
addition, transaction costs, which include acquisition,
divestiture, integration and restructuring costs related to
completed or announced transactions, and the non-recurring gains on
divestitures of businesses or assets are unique to each transaction
and are impacted from period to period depending on the number of
acquisitions or divestitures evaluated, pending, or completed
during such period, and the complexity of such transactions.
We adjust for transaction costs, acquisition related fair value
adjustments to inventory, integration costs and corresponding
restructuring charges primarily related to acquisitions, in each
case, incurred in a given period. We believe, however, that it is
important for investors to understand that such inventory fair
value adjustments related to past acquisitions will recur in future
periods until such inventory fair value adjustments, as applicable,
have been fully amortized.
Discrete Restructuring Costs
We will exclude costs incurred pursuant to discrete
restructuring plans that are fundamentally different in terms of
the size, strategic nature and planning requirements, as well as
the inconsistent frequency, of such plans originating from
significant macroeconomic trends or material disruptions to
operations, economy or capital markets from the ongoing
productivity improvements that result from application of the
Fortive Business System or from execution of general cost saving
strategies. Because these restructuring plans will be incremental
to the fundamental activities that arise in the ordinary course of
our business and we believe are not indicative of our ongoing
operating costs in a given period, we exclude these costs to
facilitate a more consistent comparison of operating results over
time. Restructuring costs related primarily to an acquisition are
not included in this adjustment but are instead included in
acquisition and divestiture related items.
Gains and Losses from Equity Investments
We adjust for the effect of earnings and losses from our equity
method investments over which we do not exercise control over the
operations or the resulting earnings or losses. We believe that
this adjustment provides our investors with additional insight into
our operational performance. However, it should be noted that
earnings and losses from our equity method investments will recur
in future periods while we maintain such investments.
In addition, we adjust for remeasurement gains and losses,
including impairment loss, on equity investments. We believe such
adjustments facilitate comparison of our performance with prior and
future periods and provides our investors with additional insight
into our operational performance.
Russia Ukraine Conflict
In connection with the invasion of Ukraine by Russian forces,
the Company exited business operations in Russia in the second
quarter of 2022, other than for ASP’s sterilization products, which
are exempt from international sanctions as humanitarian products.
Our business in Russia and Ukraine accounted for less than 1.0% of
total revenue and less than 0.2% of total assets for the fiscal
year ended December 31, 2021.
As a result of the exit of our business operations in Russia,
the Company recorded a pre-tax charge totaling $0.6 million and
$17.9 million during the three and twelve month periods ended
December 31, 2022 to reflect the write-off of net assets, the
write-off of the cumulative translation adjustment in earnings for
legal entities deemed substantially liquidated, and to record
provisions for employee severance and legal contingencies. These
costs are identified as the “Russia exit and wind down costs” in
the Consolidated Condensed Statements of Earnings. We adjust for
the non-recurring Russia exit and wind down costs because we
believe that this adjustment facilitates comparison of our
performance with prior and future periods and provides our
investors with additional insight into our operational
performance.
Gain on sale of business
On September 30, 2022, we completed the sale of our Therapy
Physics product line, which was reported in our Advanced Healthcare
Solutions segment, to an unrelated third party for total
consideration of $9.6 million. As a result of the sale, during the
three and twelve month periods ended December 31, 2022, we recorded
a net realized pre-tax loss totaling $1.8 million and a net
realized pre-tax gain totaling $0.5 million, respectively, net of
transaction costs, which is recorded as “Other non-operating
expense, net” in the Consolidated Condensed Statements of Earnings.
We adjust for gain on the sale of our Therapy Physics product line
because we believe that this adjustment facilitates comparison of
our operational performance with prior and future periods.
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”). The Notes matured on February 15, 2022
and were settled in cash.
On January 1, 2022, we adopted ASU 2020-06, which amends the
accounting for certain financial instruments with characteristics
of liabilities and equity, including convertible instruments and
contracts in an entity’s own equity. Although the Convertible Notes
were, pursuant to the terms of the corresponding indenture, repaid
in cash only and retired without issuance of additional shares of
common stock, we assumed share settlement of our outstanding
Convertible Notes under the if-converted method when calculating
GAAP diluted net earnings per share. Since we settled the
Convertible Notes in cash on February 15, 2022 and no common share
conversion occurred, we have reversed the share impacts of applying
the if-converted method for purposes of calculating Adjusted
average common stock and common equivalent shares outstanding. In
addition, although the Company paid interest accrued on the
Convertible Notes in cash, the interest expense is not included in
the GAAP diluted net earnings and from GAAP diluted net earnings
per share under the if-converted methodology. Because we paid the
interest expense in cash and because the interest expense was
included in the prior year’s results, we have added the cash
interest expense on the Convertible Notes during the three months
ended April 1, 2022 in calculating the adjusted net earnings for
the same period.
Discrete non-cash tax benefit
As a result of revaluation of deferred tax assets required due
to changes in tax rates in Switzerland, we recognized a non-cash
tax benefit during the three and twelve month period ended December
31, 2023. We adjust for this non-cash tax benefit because we
believe such benefit occurs with inconsistent frequency and for
reasons that are unrelated to our commercial performance. We
believe such adjustment facilitates comparison with prior and
future periods and provides our investors with additional insight
into our ongoing tax expenses.
Management believes that each of the non-GAAP financial measures
noted above provide useful information to investors by reflecting
additional ways of viewing aspects of our operations that, when
reconciled to the corresponding GAAP measure, help our investors to
understand the long-term profitability trends of our business, and
facilitate comparisons of our operational performance and
profitability to prior and future periods and to our peers.
These non-GAAP measures should be considered in addition to, and
not as a replacement for or superior to, the comparable GAAP
measures, and may not be comparable to similarly titled measures
reported by other companies.
Core Revenue Growth
We use the term “core revenue growth” when referring to a
corresponding year-over-year GAAP revenue measure, excluding (1)
the impact from acquired or divested businesses and (2) the impact
of currency translation. References to sales attributable to
acquisitions or acquired businesses refer to GAAP sales from
acquired businesses recorded prior to the first anniversary of the
acquisition less the amount of sales attributable to certain
divested businesses or product lines not considered discontinued
operations prior to the first anniversary of the divestiture. The
portion of sales attributable to the impact of currency translation
is calculated as the difference between (a) the period-to-period
change in sales (excluding sales impact from acquired businesses)
and (b) the period-to-period change in sales (excluding sales
impact from acquired businesses) after applying the current period
foreign exchange rates to the prior year period. This non-GAAP
measure should be considered in addition to, and not as a
replacement for or superior to, the comparable GAAP measure, and
may not be comparable to similarly titled measures reported by
other companies.
Management believes that this non-GAAP measure provides useful
information to investors by helping identify underlying growth
trends in our business and facilitating comparisons of our revenue
performance with prior and future periods and to our peers. We
exclude the effect of acquisition and divestiture-related items
because the nature, size and number of such transactions can vary
dramatically from period to period and between us and our peers. We
exclude the effect of currency translation from sales measures
because currency translation is not under management’s control and
is subject to volatility. We believe that such exclusions, when
presented with the corresponding GAAP measures, may assist in
assessing the business trends and making comparisons of long-term
performance.
Free Cash Flow
We use the term “free cash flow” when referring to cash provided
by operating activities calculated according to GAAP less payments
for capital expenditures.
Management believes that such non-GAAP measure provides useful
information to investors in assessing our ability to generate cash
without external financing, fund acquisitions and other investments
and, in the absence of refinancing, repay our debt obligations.
However, it should be noted that free cash flow as a liquidity
measure has material limitations because it excludes certain
expenditures that are required or that we have committed to, such
as debt service requirements and other non-discretionary
expenditures. Such non-GAAP measure should be considered in
addition to, and not as a replacement for or superior to, the
comparable GAAP measure, and may not be comparable to similarly
titled measures reported by other companies.
Adjusted Net Earnings and Adjusted
Diluted Net Earnings Per Share (unaudited)
Three Months Ended
Year Ended
($ in millions, except per share
amounts)
December 31, 2023
December 31, 2022
December 31, 2023
December 31, 2022
Per share values
Per share values
Per share values
Per share values
Net Earnings and Net Earnings Per Share
(GAAP)
$
265.2
$
0.75
$
227.2
$
0.64
$
865.8
$
2.43
$
755.2
$
2.10
Interest on the Convertible Notes to apply
if-converted method (a)
—
—
—
—
—
—
2.1
—
Tax effect of the Convertible Notes to
apply if-converted method
—
—
—
—
—
—
(0.3
)
—
Diluted Net Earnings and Diluted Net
Earnings Per Share (GAAP)
265.2
0.75
227.2
0.64
865.8
2.43
757.0
2.10
Pretax amortization of acquisition related
intangible assets and non-cash impairments
95.5
0.27
94.8
0.27
375.6
1.06
382.2
1.06
Pretax acquisition and divestiture related
items (b)
2.7
0.01
3.7
0.01
4.4
0.01
27.1
0.08
Pretax discrete restructuring charges
29.4
0.08
—
—
58.6
0.16
—
—
Pretax losses from equity investments
(c)
4.4
0.01
2.1
0.01
17.3
0.05
17.3
0.05
Pretax Russia exit and wind down costs
—
—
0.6
—
—
—
17.9
0.05
Pretax (gain) loss on sale of business
—
—
1.8
0.01
—
—
(0.5
)
—
Pretax interest expense on Convertible
Notes to reverse if-converted method (a)
—
—
—
—
—
—
(2.1
)
—
Tax effect of the adjustments reflected
above
(23.0
)
(0.07
)
(17.2
)
(0.05
)
(76.1
)
(0.21
)
(65.9
)
(0.19
)
Discrete non-cash tax benefit
(25.5
)
(0.07
)
—
—
(25.5
)
(0.07
)
—
—
Adjusted Net Earnings and Adjusted Net
Earnings Per Share (Non-GAAP)
$
348.7
$
0.98
$
313.0
$
0.88
$
1,220.1
$
3.43
$
1,133.0
$
3.15
Adjusted Diluted Shares
(Non-GAAP)
(shares in millions)
Average common diluted stock
outstanding
354.5
356.7
355.6
360.8
Convertible Notes - if converted shares
(a)
—
—
—
(1.6
)
Adjusted average common stock and
common equivalent shares outstanding
354.5
356.7
355.6
359.2
(a) Beginning with our adoption of ASU
2020-06 on January 1, 2022 we assumed share settlement of our
outstanding Convertible Notes under the if-converted method when
calculating GAAP diluted net earnings per share. Since we settled
the Convertible Notes in cash on February 15, 2022 and no common
share conversion occurred, we have reversed the impacts of applying
the if-converted method and included the actual cash interest
expense in calculating the adjusted net earnings per share, as well
as excluded the assumed share settlement.
(b) Includes pretax transaction costs and
acquisition-related fair value adjustments to inventory related to
acquisitions.
(c) Includes pretax losses from equity
method investments. The year ended December 31, 2022 also includes
an $8.1 pretax impairment loss on an equity investment.
The sum of the components of adjusted
diluted net earnings per share may not equal due to rounding.
Core Revenue Growth (unaudited)
% Change Three Months
Ended December 31, 2023 vs. Comparable 2022 Period
% Change Year Ended
December 31, 2023 vs. Comparable 2022 Period
Total Revenue Growth (GAAP)
3.5%
4.1%
Core (Non-GAAP)
2.7%
4.8%
Acquisitions and divestitures
(Non-GAAP)
0.4%
(0.1)%
Impact of currency translation
(Non-GAAP)
0.4%
(0.6)%
Free Cash Flow (unaudited)
($ in millions)
Three Months Ended
Year Ended
December 31, 2023
December 31, 2022
December 31, 2021
2023 vs. 2022 % Change
2023 vs. 2021 % Change
December 31, 2023
December 31, 2022
2023 vs. 2022 % Change
Operating Cash Flows (GAAP)
$
446.8
$
464.2
$
287.0
(3.7
)%
55.7
%
$
1,353.6
$
1,303.2
3.9
%
Less: purchases of property, plant &
equipment (capital expenditures) (GAAP)
(34.1
)
(36.1
)
(22.0
)
(107.8
)
(95.8
)
Free Cash Flow (Non-GAAP)
$
412.7
$
428.1
$
265.0
(3.6
)%
55.7
%
$
1,245.8
$
1,207.4
3.2
%
Forecasted Adjusted Diluted Net
Earnings Per Share (unaudited)
Three Months Ending
March 29, 2024
Twelve Months Ending
December 31, 2024
Low
High
Low
High
Forecasted Diluted Net Earnings Per
Share (GAAP)
$
0.44
$
0.47
$
2.58
$
2.70
Anticipated pretax amortization of
acquisition related intangible assets
0.31
0.31
1.25
1.25
Anticipated pretax acquisition-related
items
0.07
0.07
0.08
0.08
Anticipated pretax losses from equity
investments
0.02
0.02
0.05
0.05
Tax effect of the adjustments reflected
above
(0.07
)
(0.07
)
(0.23
)
(0.23
)
Forecasted Adjusted Diluted Net
Earnings Per Share (Non-GAAP)
$
0.77
$
0.80
$
3.73
$
3.85
The sum of the components of forecasted
adjusted diluted net earnings per share may not equal due to
rounding.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240131804316/en/
Elena Rosman Investor Relations Fortive Corporation 6920 Seaway
Boulevard Everett, WA 98203 Telephone: (425) 446-5000
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