Business Wire | Jul 29, 2021 04:16PM EDT

Fortive Reports Strong Second Quarter 2021 Results; Raises 2021 Revenue, Operating Profit Margin and EPS Guidance

Jul. 29, 2021

EVERETT, Wash.--(BUSINESS WIRE)--Jul. 29, 2021--Fortive Corporation ("Fortive") (NYSE: FTV) today announced results for the second quarter 2021.

For the second quarter ended July 2, 2021, net earnings from continuing operations were $182.0 million. For the same period, adjusted net earnings from continuing operations were $238.8 million. Diluted net earnings per share from continuing operations for the second quarter ended July 2, 2021 were $0.48. For the same period, adjusted diluted net earnings per share from continuing operations were $0.66.

For the second quarter of 2021, revenues from continuing operations increased 26.7% year-over-year to $1.3 billion, which reflected core revenue growth of 21.3%.

James A. Lico, President and Chief Executive Officer, stated, "Our results in the second quarter continued to demonstrate the success of our strategy, as highlighted at our investor conference in May, to build connected workflow solutions to meet the evolving needs of our customers. In the second quarter, we delivered core revenue growth and adjusted operating profit margin above the high-end of our guidance, and a 53% year-over-year increase in adjusted earnings per share. As the global economy continues to improve, we are successfully deploying the Fortive Business System to manage our supply chains to deliver for our customers and generate outstanding free cash flow."

For the third quarter of 2021, Fortive anticipates diluted net earnings per share from continuing operations to be in the range of $0.41 to $0.45 and adjusted diluted net earnings per share from continuing operations to be in the range of $0.62 to $0.66. For the full year 2021, Fortive anticipates diluted net earnings per share from continuing operations to be in the range of $1.70 to $1.80 and adjusted diluted net earnings per share from continuing operations to be in the range of $2.65 to $2.75.

Mr. Lico added, "We are excited about our recently announced acquisition of ServiceChannel. The transaction adds another differentiated, high-growth SaaS asset with an attractive runway to drive increasing profitability and free cash flow, and generate strong returns over the next five years. As we look ahead, we have significant capacity and opportunity for additional capital allocation which will continue to strengthen the portfolio and drive double-digit earnings and free cash flow growth over the long-term."

Fortive will discuss results and outlook during its quarterly investor conference call today starting at 5:30 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 and will remain available until the next quarterly earnings call.

The conference call can be accessed by dialing 833-900-2302 within the U.S. or by dialing 236-714-2716 outside the U.S. a few minutes before 5:30 p.m. ET and notifying the operator that you are dialing in for Fortive's earnings conference call (access code 3975045). A replay of the conference call will be available two hours after the completion of the call until Thursday, August 12, 2021. Once available, you can access the conference call replay by dialing 800-585-8367 within the U.S. or 416-621-4642 outside the U.S. (access code 3975045) 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 17,000 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.

VONTIER SEPARATION

On October 9, 2020 (the "Distribution Date"), Fortive completed the separation of its prior Industrial Technologies segment by distributing 80.1% of the outstanding shares of Vontier Corporation ("Vontier"), the entity incorporated to hold such businesses, to Fortive stockholders (the "Separation") on a pro rata basis.

As the Separation occurred during the fourth fiscal quarter of 2020, Fortive has classified Vontier as a discontinued operation in its financial statements for all periods.

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 the impact of COVID-19 pandemic, business and acquisition opportunities, impact of acquisitions and dispositions, anticipated financial results, economic conditions, future prospects, shareholder value, and any other statements identified by their use of words like "anticipate," "expect," "believe," "outlook," "guidance," 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: the duration and impact of the COVID-19 pandemic, deterioration of or instability in the economy, the markets we serve, international trade policies and the financial markets, changes in trade 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 realize the intended benefits of our separation of Vontier, 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 the phase out of LIBOR, 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, political, 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 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, our ability to adjust purchases and manufacturing capacity to reflect market conditions, reliance on sole sources of supply, security breaches or other disruptions of our information technology systems, adverse effects of restructuring activities, risk related to tax treatment of our 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. 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, 2020. 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

(unaudited)

($ and shares inmillions, except Three Months Ended Six Months Endedper shareamounts)

July 2, 2021 June 26, 2020 July 2, 2021 June 26, 2020

Sales $ 1,319.7 $ 1,041.6 $ 2,578.9 $ 2,149.7

Cost of sales (564.2 ) (458.8 ) (1,111.5 ) (954.9 )

Gross profit 755.5 582.8 1,467.4 1,194.8

Operating costs:

Selling, general,and (456.4 ) (402.8 ) (884.5 ) (818.6 ) administrativeexpenses

Research anddevelopment (87.8 ) (77.4 ) (174.0 ) (158.2 ) expenses

Operating profit 211.3 102.6 408.9 218.0

Non-operatingincome (expense), net:

Interest expense, (25.2 ) (36.2 ) (52.9 ) (74.8 ) net

Loss onextinguishment of - - (104.9 ) - debt

Gain oninvestment in - - 57.0 - VontierCorporation

Gain onlitigation 26.0 - 26.0 - dismissal

Othernon-operating (4.6 ) 5.6 (7.9 ) 1.1 expense, net

Earnings fromcontinuing 207.5 72.0 326.2 144.3 operations beforeincome taxes

Income taxes (25.5 ) (12.2 ) (32.5 ) (29.7 )

Net earnings fromcontinuing 182.0 59.8 293.7 114.6 operations

Earnings (loss)from discontinued (1.1 ) 70.2 (2.6 ) 57.3 operations, netof income taxes

Net earnings 180.9 130.0 291.1 171.9

Mandatoryconvertible (17.2 ) (17.2 ) (34.5 ) (34.5 ) preferreddividends

Net earningsattributable to $ 163.7 $ 112.8 $ 256.6 $ 137.4 commonstockholders



Net earnings pershare from continuingoperations:

Basic $ 0.49 $ 0.13 $ 0.76 $ 0.24

Diluted $ 0.48 $ 0.13 $ 0.76 $ 0.24

Net earnings(loss) per share from discontinuedoperations:

Basic $ - $ 0.21 $ (0.01 ) $ 0.17

Diluted $ - $ 0.21 $ (0.01 ) $ 0.17

Net earnings per share:

Basic $ 0.48 $ 0.33 $ 0.76 $ 0.41

Diluted $ 0.48 $ 0.33 $ 0.75 $ 0.40

Average commonstock and common equivalent sharesoutstanding:

Basic 339.4 337.3 339.0 337.1

Diluted 342.4 339.7 342.1 339.9

The sum of net earnings per share amounts may not add due to rounding.

This information is presented for reference only. A complete copy of Fortive's Form 10-Q financial statements is available on the Company's website (www.fortive.com).

FORTIVE CORPORATION AND SUBSIDIARIES

SEGMENT INFORMATION

(unaudited)

($ in millions) Three Months Ended Six Months Ended

July 2, 2021 June 26, 2020 July 2, 2021 June 26, 2020

Sales:

IntelligentOperating $ 541.8 $ 413.0 $ 1,052.7 $ 879.7 Solutions

Precision 471.9 377.3 919.3 768.6 Technologies

AdvancedHealthcare 306.0 251.3 606.9 501.4 Solutions

Total $ 1,319.7 $ 1,041.6 $ 2,578.9 $ 2,149.7



Operating Profit:

IntelligentOperating $ 115.3 $ 54.4 $ 223.4 $ 135.5 Solutions

Precision 104.1 77.1 200.0 150.6 Technologies

AdvancedHealthcare 22.5 (1.9 ) 41.4 (17.7 ) Solutions

Other ^(a) (30.6 ) (27.0 ) (55.9 ) (50.4 )

Total $ 211.3 $ 102.6 $ 408.9 $ 218.0



Operating Margins:

IntelligentOperating 21.3 % 13.2 % 21.2 % 15.4 %Solutions

Precision 22.1 % 20.4 % 21.8 % 19.6 %Technologies

AdvancedHealthcare 7.4 % (0.8 ) % 6.8 % (3.5 ) %Solutions

Total 16.0 % 9.9 % 15.9 % 10.1 %



^(a) Operating profit amounts in the Other category consist of unallocatedcorporate costs and other costs not considered part of our evaluation ofreportable segment operating performance.

This information is presented for reference only. A complete copy of Fortive's Form 10-Q financial statements is available on the Company's website (www.fortive.com).

FORTIVE CORPORATION AND SUBSIDIARIES RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES AND OTHER INFORMATION

Adjusted Net Earnings from Continuing Operations and Adjusted Diluted Net Earnings per Share from Continuing Operations

We disclose the non-GAAP measures of historical adjusted net earnings from continuing operations and historical and forecasted adjusted diluted net earnings per share from continuing operations, which to the extent applicable, make the following adjustments to GAAP net earnings from continuing operations and GAAP diluted net earnings per share from continuing operations:

* Excluding on a pretax basis amortization of acquisition-related intangible assets; * Excluding on a pretax basis acquisition and other transaction costs deemed significant ("Transaction Costs"); * Excluding on a pretax basis the effect of deferred revenue and inventory fair value adjustments related to significant acquisitions; * Excluding on a pretax basis the effect of earnings or loss from our equity method investments; * Excluding the pretax loss on debt extinguishment, net of non-recurring gain on our investment in Vontier common stock; * Excluding on a pretax basis the non-cash interest expense associated with our 0.875% convertible senior notes; * Excluding on a pretax basis the non-recurring gain on the disposition of assets; * Excluding on a pretax basis the gain on litigation dismissal; * Excluding the tax effect (to the extent tax deductible) of the 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; * Excluding the non-cash discrete tax expense resulting from the Separation of Vontier; and * Including the impact of the assumed conversion of our Mandatory Convertible Preferred Stock at the beginning of the period.

Acquisition and Divestiture Related Items

While we have a history of acquisition and divestiture activity, we do not acquire and divest of businesses and assets on a predictable cycle. The amount of an acquisition's purchase price allocated to intangible assets and related amortization term and the deferred revenue and inventory fair value adjustments are unique to each acquisition and can vary significantly from acquisition to acquisition. In addition, the Transaction Costs and non-recurring gain on disposition of assets are unique to each transaction, 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, and identify as significant, Transaction Costs, acquisition related fair value adjustments to deferred revenue and inventory, and corresponding restructuring charges primarily related to acquisitions, in each case, incurred in a given period, if we determine that such costs and adjustments exceed the range of our typical transaction costs and adjustments, respectively, in a given period. We believe, however, that it is important for investors to understand that such intangible assets contribute to revenue generation and that intangible assets and deferred revenue and inventory fair value adjustments related to past acquisitions will recur in future periods until such intangible assets and deferred revenue and inventory fair value adjustments, as applicable, have been fully amortized.

Equity Method Investments

We adjust for the effect of earnings from our equity method investments over which we do not exercise control over the operations or the resulting earnings. We believe that this adjustment provides our investors with additional insight into our operational performance. However, it should be noted that earnings from our equity method investments will recur in future periods while we maintain such investments.

Gain on Retained Investment in Vontier and Loss on Extinguishment of Debt

On October 9, 2020, we completed the Vontier separation and retained 19.9% of the shares of Vontier common stock immediately following the Separation ("Retained Vontier Shares"). We did not retain a controlling interest in Vontier and therefore the fair value of our Retained Vontier Shares was included in our assets of continuing operations as of December 31, 2020, and subsequent fair value changes are included in our results from continuing operations for the six month period ended July 2, 2021.

On January 19, 2021, we completed the Debt-for-Equity Exchange of 33.5 million shares of common stock of Vontier, representing all of the Retained Vontier Shares, for $1.1 billion in aggregate principal amount of indebtedness of the Company held by Goldman Sachs & Co., including (i) all $400.0 million of the 364-day delayed-draw term loan due March 22, 2021 and (ii) $683.2 million of the delayed-draw term loan due May 30, 2021. The change in fair value of the Retained Vontier Shares and the resulting gain of $57.0 million was recorded in the six month period ended July 2, 2021. We recorded a loss on extinguishment of the debt included in the Debt-for-Equity Exchange of $94.4 million in the six month period ended July 2, 2021.

Additionally, on February 9, 2021 we repurchased $281 million of the Convertible Notes at fair value using the remaining cash proceeds received from Vontier in the Separation and other cash on hand. In connection with the repurchase, we recorded a loss on debt extinguishment during the six month period ended July 2, 2021 of $10.5 million.

We adjust for the non-recurring effect of the gain on our investment in the Retained Vontier Shares and the corresponding loss on debt extinguishment 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.

Mandatory Convertible Preferred Stock

In June 2018, we issued $1.38 billion in aggregate liquidation preference of shares of our 5.00% Mandatory Convertible Preferred Stock ("MCPS"). Dividends on the MCPS are payable on a cumulative basis at an annual rate of 5.00% on the liquidation preference of $1,000 per share. On July 1, 2021 each share of the MCPS then outstanding automatically converted into 14.0978 shares of the Company's common stock. The number of shares of our common stock issuable on conversion of the Mandatory Convertible Preferred Stock was determined based on the average volume weighted average price ("VWAP") per share of our common stock over the 20 consecutive trading day period beginning on and including the 22nd scheduled trading day immediately preceding July 1, 2021.

For the purposes of calculating adjusted earnings and adjusted earnings per share in periods when the MCPS are anti-dilutive, we have excluded the MCPS dividend and, for the purposes of calculating adjusted earnings per share, assumed the "if-converted" method of share dilution and assumed the shares were converted at the beginning of the period (the incremental shares of common stock deemed outstanding applying the "if-converted" method of share dilution, the "MCPS Converted Shares"). We believe that using the "if-converted" method provides additional insight to investors on the potential impact of the MCPS had they been converted at the beginning of the period. For periods where the MCPS are dilutive, no such adjustment is made, as the "if-converted" method is applied and the assumed conversion is already included.

Non-cash Interest Expense

On February 22, 2019, we issued $1.4 billion in aggregate principal amount of our 0.875% Convertible Senior Notes due 2022 (the "Convertible Notes"), including $187.5 million in aggregate principal amount resulting from an exercise in full of an over-allotment option. The Convertible Notes bear interest at a rate of 0.875% per year, payable semiannually in arrears on February 15 and August 15 of each year, beginning on August 15, 2019. The Notes mature on February 15, 2022, unless earlier repurchased or converted in accordance with their terms prior to such date.

Of the proceeds received from the issuance of the Convertible Notes, $1.3 billion was classified as debt and $102.2 million was classified as equity, using an assumed effective interest rate of 3.38%. We recognize interest expense using the 3.38% assumed rate, and pay interest to holders of the notes at a coupon rate of 0.875%. We believe that adjusting for the non-cash imputed interest expense between the assumed rate and coupon rate provides additional insight into our cash interest expense.

Gain on Litigation Dismissal

Prior to our acquisition of ASP, Johnson & Johnson received a Civil Investigative Demand ("CID") from the United States Department of Justice ("DOJ") regarding a False Claims Act investigation arising from a whistleblower lawsuit pertaining to the pricing, quality, marketing, and promotion of certain of ASP's products. Based on the totality of available information on April 1, 2019, the principal closing date of the acquisition, and throughout the applicable measurement period, management allocated $26 million of the $2.7 billion purchase price to a potential liability related to the aforementioned litigation.

Management has continually evaluated the likelihood and magnitude of the asserted claims based on new information that became available. In the second quarter of 2021, following the unsealing of the whistleblower lawsuit and DOJ's declination to intervene in the litigation, the plaintiff dismissed the lawsuit. Based on these developments, management derecognized the litigation liability from our Consolidated Condensed Balance Sheet and recorded the gain on litigation dismissal of $26 million within Non-operating income (expense), net in our Consolidated Condensed Statements of Earnings for the three and six month periods ended July 2, 2021.

We adjust for the non-recurring effect of the gain on litigation dismissal 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.

Non-cash Discrete Tax Adjustments Resulting from the Separation of Vontier

We adjust for non-cash discrete tax expense items that resulted from the Separation of Vontier. These discrete items are non-recurring, non-cash expenses that resulted from the GAAP calculation of income taxes from continuing operations and do not reflect our current or future cash tax obligations.

Management believes that these non-GAAP financial measures 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 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 and the effect of purchase accounting adjustments, 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 additions to property, plant, and equipment.

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 From Continuing Operations

Three Months Ended Six Months Ended

($ in millions) July 2, June 26, July 2, June 26, 2021 2020 2021 2020

Net Earnings Attributableto Common Stockholders $ 164.8 $ 42.6 $ 259.2 $ 80.1 from ContinuingOperations (GAAP) ^(a)

Dividends on themandatory convertible 17.2 17.2 34.5 34.5 preferred stock to applyif-converted method ^(a)

Net Earnings fromContinuing Operations $ 182.0 $ 59.8 $ 293.7 $ 114.6 (GAAP)

Pretax amortization ofacquisition-relatedintangible assets in thethree months ($78 millionpretax, $65 million aftertax) and six months ($155million pretax, $130million after tax) ended 77.5 77.4 155.0 155.6 July 2, 2021, and in thethree months ($77 millionpretax, $66 million aftertax) and six months ($156million pretax, $132million after tax) endedJune 26, 2020

Pretax acquisition andother transaction costsin the three months ($4million pretax, $3million after tax) andsix months ($9 millionpretax, $8 million after 3.6 22.3 9.4 43.0 tax) ended July 2, 2021,and in the three months($22 million pretax, $18million after tax) andsix months ($43 millionpretax, $37 million aftertax) ended June 26, 2020

Pretaxacquisition-related fairvalue adjustments todeferred revenue andinventory related tosignificant acquisitionsin the three months ($1million pretax, $1million after tax) and 1.2 5.7 6.7 19.7 six months ($7 millionpretax, $6 million aftertax) ended July 2, 2021,and in the three months($6 million pretax, $5million after tax) andsix months ($20 millionpretax, $17 million aftertax) ended June 26, 2020

Pretax (gains) lossesfrom equity methodinvestments in the threemonths ($4 millionpretax, $3 million aftertax) and six months ($7million pretax, $6million after tax) ended 4.0 (0.9 ) 6.6 2.8 July 2, 2021, and in thethree months ($-1 millionpretax, $-1 million aftertax) and six months ($3million pretax, $2million after tax) endedJune 26, 2020

Pretax loss on debtextinguishment, net ofgain on Vontier commonstock in the six months - - 47.9 - ($48 million pretax, $34million after tax) endedJuly 2, 2021

Pretax non-cash interestexpense associated withour 0.875% convertiblenotes in the three months($7 million pretax, $6million after tax) andsix months ($15 millionpretax, $12 million after 7.1 8.5 14.8 16.9 tax) ended July 2, 2021,and in the three months($9 million pretax, $7million after tax) andsix months ($17 millionpretax, $14 million aftertax) ended June 26, 2020

Pretax gain on thedisposition of assets inthe three months ($5million pretax, $5 - (5.3 ) - (5.3 ) million after tax) andsix months ($5 millionpretax, $5 million aftertax) ended June 26, 2020

Pretax gain on litigationdismissal in the threemonths ($26 millionpretax, $22 million after (26.0 ) - (26.0 ) - tax) and six months ($26million pretax, $22million after tax) endedJuly 2, 2021

Tax effect of theadjustments reflected (10.6 ) (16.3 ) (40.2 ) (35.1 ) above ^(b)

Non-cash discrete taxexpense adjustment - 3.7 - 7.5 resulting from theSeparation of Vontier

Adjusted Net Earningsfrom Continuing $ 238.8 $ 154.9 $ 467.9 $ 319.7 Operations (Non-GAAP)



(a) On July 1, 2021, all outstanding shares of our MCPS converted at a rate of14.0978 common shares per share of preferred stock into an aggregate ofapproximately 19.4 million shares (net of fractional shares) of the Company'scommon stock. The MCPS were anti-dilutive prior to conversion for the three andsix month periods ended July 2, 2021 and June 26, 2020, and as such GAAP netearnings per share was calculated using net earnings from continuing operationsattributable to common stockholders.

(b) The dividend on the MCPS is not tax deductible and therefore the tax effectof the adjustments includes only the amortization of acquisition-relatedintangible assets, acquisition and other transaction costs, acquisition-relatedfair value adjustments to deferred revenue and inventory, gains and losses fromequity method investments, the gain on disposition of assets, the loss onextinguishment of debt, the gain on litigation dismissal, and the non-cashinterest expense associated with the 0.875% convertible notes. The gain on thefair value change in Vontier common stock had no tax effect.

Adjusted Diluted Net Earnings Per Share from Continuing Operations

Three Months Ended^(a) Six Months Ended^(a)

July 2, June 26, July 2, June 26, 2021 2020 2021 2020

Diluted Net Earnings PerShare from Continuing $ 0.48 $ 0.13 $ 0.76 $ 0.24 Operations (GAAP) ^(b)

Dividends on the mandatoryconvertible preferred stock 0.05 0.05 0.10 0.10 to apply if-converted method^(b)

Assumed dilutive impact onthe Diluted Net Earnings PerShare Attributable to Common (0.03 ) (0.01 ) (0.05 ) (0.02 ) Stockholders if the MCPSConverted Shares had beenoutstanding ^(b)

Pretax amortization ofacquisition-relatedintangible assets in thethree months ($78 millionpretax, $65 million aftertax) and six months ($155million pretax, $130 million 0.21 0.22 0.43 0.43 after tax) ended July 2,2021, and in the three months($77 million pretax, $66million after tax) and sixmonths ($156 million pretax,$132 million after tax) endedJune 26, 2020

Pretax acquisition and othertransaction costs in thethree months ($4 millionpretax, $3 million after tax)and six months ($9 millionpretax, $8 million after tax)ended July 2, 2021, and in 0.01 0.06 0.03 0.12 the three months ($22 millionpretax, $18 million aftertax) and six months ($43million pretax, $37 millionafter tax) ended June 26,2020

Pretax acquisition-relatedfair value adjustments todeferred revenue andinventory related tosignificant acquisitions inthe three months ($1 millionpretax, $1 million after tax)and six months ($7 million - 0.02 0.02 0.05 pretax, $6 million after tax)ended July 2, 2021, and inthe three months ($6 millionpretax, $5 million after tax)and six months ($20 millionpretax, $17 million aftertax) ended June 26, 2020

Pretax (gains) losses fromequity method investments inthe three months ($4 millionpretax, $3 million after tax)and six months ($7 millionpretax, $6 million after tax)ended July 2, 2021, and in 0.01 - 0.02 0.01 the three months ($-1 millionpretax, $-1 million aftertax) and six months ($3million pretax, $2 millionafter tax) ended June 26,2020

Pretax loss on debtextinguishment, net of gainon Vontier common stock in - - 0.13 - the six months ($48 millionpretax, $34 million aftertax) ended July 2, 2021

Pretax non-cash interestexpense associated with our0.875% convertible notes inthe three months ($7 millionpretax, $6 million after tax)and six months ($15 millionpretax, $12 million after 0.02 0.02 0.04 0.05 tax) ended July 2, 2021, andin the three months ($9million pretax, $7 millionafter tax) and six months($17 million pretax, $14million after tax) ended June26, 2020

Pretax gain on thedisposition of assets in thethree months ($5 millionpretax, $5 million after tax) - (0.01 ) - (0.01 ) and six months ($5 millionpretax, $5 million after tax)ended June 26, 2020

Pretax gain on litigationdismissal in the three months($26 million pretax, $22million after tax) and six (0.07 ) - (0.07 ) - months ($26 million pretax,$22 million after tax) endedJuly 2, 2021

Tax effect of the adjustments (0.03 ) (0.05 ) (0.11 ) (0.10 ) reflected above ^(c)

Non-cash discrete tax expenseadjustment resulting from the - 0.01 - 0.02 Separation of Vontier

Adjusted Diluted Net EarningsPer Share from Continuing $ 0.66 $ 0.43 $ 1.30 $ 0.89 Operations (Non-GAAP)



(a) Each of the per share adjustments below was calculated assuming the MCPSConverted Shares had converted at the beginning of the period. The 0.875%convertible notes did not have an impact on the adjusted diluted sharesoutstanding.

(b) The MCPS were anti-dilutive for the three and six month periods ended July2, 2021 and June 26, 2020, and as such GAAP net earnings per share wascalculated using net earnings from continuing operations attributable to commonstockholders.

(c) The dividend on the MCPS is not tax deductible and therefore the tax effectof the adjustments includes only the amortization of acquisition-relatedintangible assets, acquisition and other transaction costs, acquisition-relatedfair value adjustments to deferred revenue and inventory, gains and losses fromequity method investments, the gain on the disposition of assets, the loss onextinguishment of debt, the gain on litigation dismissal, and the non-cashinterest expense associated with the 0.875% convertible notes. The gain on thefair value change in Vontier common stock had no tax effect.

The sum of the components of adjusted diluted net earnings per share fromcontinuing operations may not equal due to rounding.

Adjusted Diluted Shares Outstanding

Three Months Ended Six Months Ended

(shares in millions) July 2, June 26, July 2, June 26, 2021 2020 2021 2020

Average common diluted stock 342.4 339.7 342.1 339.9 outstanding

MCPS Converted Shares ^(a) 19.2 18.4 19.2 18.4

Adjusted average common stock and 361.6 358.1 361.3 358.3 common equivalent shares outstanding



(a) The MCPS were anti-dilutive during the three and six month periods endedJuly 2, 2021 prior to their conversion on July 1, 2021 and were anti-dilutiveduring the three and six month periods ended June 26, 2020. The number of MCPSConverted Shares for the three and six month periods ended July 2, 2021assumes the conversion of all 1.38 million shares at the conversion rate of14.0978 at the beginning of the period. The number of MCPS Converted Sharesfor the three and six month periods ended June 26, 2020 was calculated byapplying the "if-converted" method and using an average 20-day VWAP of $66.88as of June 26, 2020. The 0.875% convertible notes did not have an impact onthe adjusted diluted shares outstanding.

Core Revenue Growth

% Change Three Months % Change Six Months Ended Ended July 2, 2021 vs. July 2, 2021 vs. Comparable 2020 Period Comparable 2020 Period

Total Revenue Growth 26.7 % 20.0 %(GAAP)

Core (Non-GAAP) 21.3 % 15.0 %

Acquisitions (Non-GAAP) 2.1 % 2.1 %

Impact of currency 3.3 % 2.9 %translation (Non-GAAP)

Forecasted Adjusted Diluted Net Earnings Per Share from Continuing Operations

Three Months Ending Year Ending October 1, 2021 ^(a) December 31, 2021 ^(a)

Low End High End Low End High End

Forecasted Diluted NetEarnings Per Share fromContinuing Operations $ 0.41 $ 0.45 $ 1.70 $ 1.80 Attributable to CommonStockholders

Anticipated dividends onmandatory convertiblepreferred stock in the year - - 0.10 0.10 ending December 31, 2021 ($35million)

Anticipated dilutive impacton Forecasted Diluted NetEarnings Per Share fromContinuing Operations of the - - (0.05 ) (0.05 ) MCPS Converted Shares (9.6million shares in the yearending December 31, 2021)

Anticipated pretaxamortization ofacquisition-relatedintangible assets in thethree months ending October1, 2021 ($77 million pretax(or $0.21 per share), $65 0.21 0.21 0.86 0.86 million after tax (or $0.18per share)) and year endingDecember 31, 2021 ($310million pretax (or $0.86 pershare), $261 million aftertax (or $0.72 per share))

Anticipated pretaxsignificant acquisition andother transaction costs inthe three months endingOctober 1, 2021 ($3 millionpretax (or $0.01 per share), 0.01 0.01 0.04 0.04 $3 million after tax (or$0.01 per share)) and yearending December 31, 2021 ($15million pretax (or $0.04 pershare), $13 million after tax(or $0.03 per share))

Anticipated pretax fair valueadjustments to deferredrevenue and inventory relatedto significant acquisitionsin the three months endingOctober 1, 2021 ($0 millionpretax (or $0.00 per share), - - 0.02 0.02 $0 million after tax (or$0.00 per share)) and yearending December 31, 2021 ($7million pretax (or $0.02 pershare), $6 million after tax(or $0.02 per share))

Anticipated pretax lossesfrom equity methodinvestments in the threemonths ending October 1, 2021($2 million pretax (or $0.01per share), $2 million after 0.01 0.01 0.03 0.03 tax (or $0.01 per share)) andyear ending December 31, 2021($11 million pretax (or $0.03per share), $9 million aftertax (or $0.03 share))

Anticipated pretax non-cashinterest from 0.875%convertible notes in thethree months ending October1, 2021 ($7 million pretax(or $0.02 per share), $6 0.02 0.02 0.08 0.08 million after tax (or $0.02per share)) and the yearending December 31, 2021 ($29million pretax (or $0.08 pershare), $24 million after tax(or $0.07 per share))

Anticipated pretax loss ondebt extinguishment, net ofgain on Vontier common stockin the year ending December - - 0.13 0.13 31, 2021 ($48 million pretax(or $0.13 per share), $35million after tax (or $0.10per share))

Anticipated pretax gain onlitigation dismissal in theyear ending December 31, 2021 - - (0.07 ) (0.07 ) ($26 million pretax (or $0.07per share), $22 million aftertax (or $0.06 per share))

Tax effect of the adjustments (0.04 ) (0.04 ) (0.19 ) (0.19 ) reflected above ^(b)

Forecasted Adjusted DilutedNet Earnings Per Share from $ 0.62 $ 0.66 $ 2.65 $ 2.75 Continuing Operations



(a) Each of the per share adjustments for the three month period ending October1, 2021 reflect the conversion of the MCPS on July 1, 2021. Each of the pershare adjustments for the year ending December 31, 2021 assume the conversionof all 1.38 million MCPS shares at the conversion rate of 14.0978 at thebeginning of the period.

(b) The MCPS are not tax deductible and therefore the tax effect of theadjustments includes only the amortization of acquisition-related intangibleassets, acquisition and other transaction costs, acquisition-related fair valueadjustments to deferred revenue and inventory, losses from equity methodinvestments, non-cash interest from 0.875% convertible notes, the loss on debtextinguishment and the gain on litigation dismissal. The gain on the fair valuechange in Vontier common stock had no tax effect.

The sum of the components of forecasted adjusted diluted net earnings per sharefrom continuing operations may not equal due to rounding.

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