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What changed in Fortive's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Fortive's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+266 added−376 removedSource: 10-K (2024-02-27) vs 10-K (2023-02-28)

Top changes in Fortive's 2023 10-K

266 paragraphs added · 376 removed · 205 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeWe also continued to expand the impact of our Employee Friends and Resources Groups (“EFRG’s”) to increase inclusion and belonging within and for our underrepresented communities. To drive FBS, continuous improvement and IDE accountability at all levels of our organization, our VP, Inclusion, Diversity, and Equity works closely with our senior management, our IDE Council, and our IDE practitioners.
Biggest changeTo drive FBS, continuous improvement, and IDE accountability at all levels, our VP, Inclusion, Diversity, and Equity works closely with our senior management, IDE Council, and IDE practitioners across our businesses. Our Board of Directors, along with the Compensation Committee, oversee our IDE efforts as part of our people strategy and measurement actions.
Customers for these products and services include design engineers for advanced electronic devices and equipment, process and quality engineers focused on improved 5 Table of Contents process capability and productivity, facility maintenance managers driving increased uptime, and other customers for whom precise measurement, reliability, and compliance are critical in their applications.
Customers for these products and services 5 Table of Contents include design engineers for advanced electronic devices and equipment, process and quality engineers focused on improved process capability and productivity, facility maintenance managers driving increased uptime, and other customers for whom precise measurement, reliability, and compliance are critical in their applications.
Key competitive factors vary among our businesses and product and service lines, but include the specific factors noted above with respect to each particular business and typically also include price, quality, performance, delivery speed, applications expertise, distribution channel 6 Table of Contents access, service and support, technology and innovation, breadth of product, service and software offerings, and brand name recognition.
Key competitive factors vary among our businesses and product and service lines, but include the specific factors noted above with respect to each particular 6 Table of Contents business and typically also include price, quality, performance, delivery speed, applications expertise, distribution channel access, service and support, technology and innovation, breadth of product, service and software offerings, and brand name recognition.
Purpose and Values We are guided by our shared purpose to deliver essential technology for the people who accelerate progress. Driven by our shared purpose, we strive to accelerate transformation in high-impact fields, such as workplace safety, engineering, and healthcare, delivering high-tech solutions and high impact for engineers, scientists, frontline workers, and patients around the world.
Purpose and Values We are guided by our shared purpose to deliver essential technology for the people who accelerate progress. We strive to accelerate transformation in high-impact fields, such as workplace safety, engineering, and healthcare, delivering high-tech solutions and high impact for engineers, scientists, frontline workers, and patients around the world.
For a discussion of the environmental laws and regulations that our operations, products, and services are subject to and other environmental contingencies, please refer to Note 16 to the consolidated financial statements included in this Annual Report.
For a discussion of the environmental laws and regulations that our operations, products, and services are subject to and other environmental contingencies, please refer to Note 14 to the consolidated financial statements included in this Annual Report.
We are committed to continued transparency by publicly sharing our workforce representation and inclusion results and aspirational goals through our Proxy, EEO-1 report, website, and annual Sustainability Report. Business, Talent, and Reward Systems Our culture of continuous improvement inspires us to keep experimenting, growing, and learning.
We are committed to continued transparency by publicly sharing our workforce representation and inclusion results and aspirational goals through our Proxy Statement, EEO-1 report, website, and annual Sustainability Report. Business, Career Development, and Reward Systems Our culture of continuous improvement inspires us to keep experimenting, growing, and learning.
Our businesses design, develop, manufacture, and service professional and engineered products, software, and services, building upon leading brand names, innovative technologies, and significant market positions. We are headquartered in Everett, Washington and employ 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.
Our businesses design, develop, manufacture, and service professional and engineered products, software, and services, building upon leading brand names, innovative technologies, and significant market positions. We are headquartered in Everett, Washington and have a workforce of more than 18,000 research and development, manufacturing, sales, distribution, service, and administrative professionals in more than 50 countries around the world.
We believe our most important breakthroughs are the ones that help our customers succeed, and we strive to break down barriers and forge new paths to world-changing innovations to move our customers forward. Kaizen is our way of life .
We believe our most important breakthroughs are the ones that help our customers succeed, and we strive to break down barriers and forge new paths to world-changing innovations to move our customers forward. Kaizen is our way of life . We know we can always do and be better.
For a description of the risks related to the regulations that our businesses are subject to, please refer to “Item 1A.
These are not the only regulations that our businesses must comply with. For a description of the risks related to the regulations that our businesses are subject to, please refer to “Item 1A.
Our People strategy is defined by our inclusive growth culture, advanced through FBS, our talent and reward systems, and measured by our employee experience processes. These key elements enable us to accelerate progress for our customers, our teams, and the world around us. Inclusive Growth Culture We believe we are more together.
For us. For growth. Our people strategy is defined by our inclusive growth culture and is advanced through FBS and our career development and reward systems. We continually measure, review, and refine our strategy through measured employee experience processes. These key elements enable us to accelerate progress for our customers, our teams, and the world.
Any medical devices we manufacture and distribute are subject to pervasive and continuing regulation by the FDA and certain state and certain other comparable foreign authorities. As a medical device manufacturer, our manufacturing facilities are subject to inspection on a routine basis by the FDA and other comparable foreign authorities as well as audits by our notified body.
As a medical device manufacturer, our manufacturing facilities are subject to inspection on a routine basis by the FDA and other comparable foreign authorities as well as audits by our notified body.
We believe we are more together, and we all have something unique to offer as we come together to solve problems no one could solve alone, committed to a strong and inclusive culture. Customer success inspires our innovation .
Our values guide how we deliver every day for our stakeholders: We build extraordinary teams for extraordinary results. We believe we are more together, and we all have something unique to offer as we come together to solve problems no one could solve alone, committed to a strong and inclusive culture. Customer success inspires our innovation .
We also invest in our people at every level through our growth and development experiences. These experiences range from leadership learning and FBS immersion, to hands-on skill building in each of our three FBS pillars - growth, lean, and leadership.
These experiences range from leadership learning and FBS immersion to hands-on skill building in each of our three FBS pillars—growth, lean, and leadership.
For example, sales of capital equipment and sterilization consumables are often stronger in the fourth calendar quarter and sales to OEMs are often stronger immediately preceding and following the launch of new products. However, as a whole, we are not subject to material seasonality. Human Capital Management Fortive is a global team, approximately 18,000 strong, energized by a shared purpose.
For example, sales of capital equipment and sterilization consumables are often stronger in the fourth calendar quarter and sales to OEMs are often stronger immediately preceding and following the launch of new products. However, as a whole, we are not subject to material seasonality.
We believe the next time can always be better, and our commitment to continuous improvement inspires us to keep growing and learning. We compete for our shareholders . We believe in prioritizing trust, sustainability, and positive impact to create long-term value for all of our stakeholders, including our shareholders, our employees, our customers and our communities.
Our commitment to continuous improvement, grounded in our FBS inspires us to approach our work with curiosity. We are always growing and learning. We compete for our shareholders . We believe in prioritizing trust, sustainability, and positive impact to create long-term value for all of our stakeholders, including our shareholders, our employees, our customers and our communities.
Risk Factors.” Regulatory Matters We face extensive government regulation both within and outside the United States relating to the development, manufacture, marketing, sale, and distribution of our products, software, and services. The following sections describe certain significant regulations that we are subject to. These are not the only regulations that our businesses must comply with.
For a discussion of risks related to government contracting requirements, please refer to “Item 1A. Risk Factors.” Regulatory Matters We face extensive government regulation both within and outside the United States relating to the development, manufacture, marketing, sale, and distribution of our products, software, and services. The following sections describe certain significant regulations that we are subject to.
Our FBS and robust talent and reward systems advance our people strategies by attracting, growing, and retaining the talent we need now and in the future. Together, these business and talent systems strengthen our employee value proposition and build our employer brand while delivering new experiences to our employees and results for our customers.
Our FBS and robust career development and reward systems advance our people strategy by attracting, growing, and retaining the exceptional people we need now and in the future. These business and career development systems strengthen our employee value proposition, build our employer brand, drive professional growth for our employees and results for our customers.
Our People strategy centers on empowering strong, inclusive teams working together to solve problems no one could solve alone. We intentionally seek out different skills, backgrounds, and voices to deliver results for our customers and fulfill our employee promise – For you. For us. For growth.
People Strategy (Human Capital Management) Fortive is a global team, over 18,000 strong, energized by a powerful purpose. Our people strategy centers on empowering inclusive teams working together to solve problems no one could solve alone. We intentionally seek out different skills, backgrounds, and voices to deliver results for our customers and fulfill our employee promise – For you.
Our Performance and Development for Growth processes drive results and career growth for our global teams. Performance for Growth rigorously deploys our strategies into cascaded goals throughout the organization, while Development for Growth translates our beliefs and values into desired leader competencies. Together, these processes provide a roadmap for the way we work, deliver results, and build high performing teams.
Our Performance and Development for Growth processes drive results and career growth for our global teams. Performance for Growth rigorously deploys our strategies into cascaded goals throughout the organization, while Development for Growth translates our beliefs and values into desired leader competencies, at all levels of the organization.
Our employee experience surveys are one of the many ways we actively solicit input. Our employee experience survey approach continues to mature through quarterly touchpoints and leader accountability.
For growth. To achieve this promise, our leaders at all levels of the organization actively seek feedback from our employees and other stakeholders to strengthen our culture. Our employee experience surveys are one of the many ways we actively solicit input. Our employee experience survey approach continues to mature through quarterly touchpoints and leader accountability.
In the fourth quarter of 2022, over 80% of our global team completed our biannual, full census survey, delivering steady gains in both overall engagement and in inclusion and belonging that resulted in historically high ratings of 78% and 82%, respectively.
In our last comprehensive census survey in 2023, over 80% of our global team responded, delivering steady gains in both overall engagement and in inclusion and belonging that resulted in historically high ratings of 78% and 82%, respectively. Our results continue to inform both management and our Board of Directors on appropriate actions to enhance our employee experience.
Fortive Business System Our teams across our operating companies are united by our culture of continuous improvement and bias for action that is embodied in the Fortive Business System (“FBS”).
Fortive Business System Our teams across our operating companies are united by our culture of continuous improvement – characterized by the high expectations, inclusion, humility, and transparency embodied in the Fortive Business System (“FBS”). This cultural foundation 4 Table of Contents is reinforced by the rigor of our disciplined operating cadence.
Similar requirements apply in the UK. For access to the UK market, manufacturers must obtain a UKCA Certificate and affix a UKCA mark to their medical devices. However, the EEA’s CE mark will be accepted in the UK until July 1, 2023.
Similar requirements apply in the UK. For access to the UK market, manufacturers must obtain a UKCA Certificate and affix a UKCA mark to their medical devices. Any medical devices we manufacture and distribute are subject to pervasive and continuing regulation by the FDA and certain state and certain other comparable foreign authorities.
Additionally, we design our Total Rewards programs to attract and retain talented, curious people with a growth mindset and a passion for innovation, collaboration, and continuous improvement. We offer leading programs that inspire and reward superior performance, are equitable, and foster an inclusive, diverse, and healthy global workforce.
Together, these processes provide a roadmap for the way we work, deliver results, and build high-performing teams. Additionally, we design our Total Rewards programs to attract and retain talented, curious people with a growth mindset and a passion for innovation, collaboration, and continuous improvement.
Collectively, these experiences build skills, strengthen performance, and prepare our employees for challenging opportunities. 7 Table of Contents Employee Experience and Communication Our promise to employees is ‒ For you. For us. For growth. To achieve this promise, our leaders at all levels of the organization actively seek feedback from our employees and other stakeholders to strengthen our culture.
Collectively, these experiences build skills, strengthen performance, and prepare our employees for challenging opportunities. 7 Table of Contents With our strong and evolving portfolio, employees have the opportunity to accelerate their career across multiple industries, meaningfully contributing to customer success and impact in the world. Employee Experience and Communication Our promise to employees is ‒ For you. For us.
Consistent with prior years, our results continue to inform both management and our Board of Directors on appropriate actions to enhance our employee experience. Government Contracts Although the substantial majority of our revenue in 2022 was from customers other than governmental entities, each of our segments has agreements relating to the sale of products to government entities.
Government Contracts Although the substantial majority of our revenue in 2023 was from customers other than governmental entities, each of our segments has agreements relating to the sale of products to government entities. As a result, we are subject to various statutes and regulations that apply to companies doing business with governments and government-owned entities.
Risk Factors.” International Operations Our products and services are available in markets worldwide, and our principal markets outside the United States are in Europe and Asia.
In addition, the False Claims Act permits whistleblowers to bring a lawsuit on behalf of the government and share in any monetary recovery, even if the government decides not to intervene in the case. International Operations Our products and services are available in markets worldwide, and our principal markets outside the United States are in Europe and Asia.
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On October 9, 2020, we completed the separation of Vontier Corporation (“Vontier”), the entity we created to hold our former Industrial Technologies segment (the “Separation”). The accounting requirements for reporting the Vontier business as a discontinued operation were met when the Separation was completed.
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FBS enables us to operate our businesses with a focus on relentless execution, powered by our mindset and a set of tools and best practices consistently applied across our portfolio.
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Accordingly, the consolidated financial statements reflect the results of the Vontier business as a discontinued operation for all periods presented.
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We are committed to delivering on our financial commitments and engaging our leaders and teams to accelerate and sustain progress in every aspect of the business, including new product development and commercialization, finance, human capital management, and sustainability.
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Through rigorous application of the proprietary set of growth, lean, and leadership tools and processes that comprise FBS, we continuously improve business performance in the critical areas of innovation, product development and commercialization, global supply chain, sales and marketing, corporate development, 4 Table of Contents human capital management, sustainability efforts, and leadership development.
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We are continually evolving FBS to meet the changing needs of our portfolio and incorporating new technology enablers, like artificial intelligence and machine learning, to drive faster growth, more productivity, and greater impact. The execution of our disciplined acquisition strategy is strengthened by the value FBS creates and is a critical component of how we achieve sustained results over time.
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Our commitment to FBS has enabled us to drive customer satisfaction and profitability, and generate significant improvements in innovation, growth, and core operating margins. Additionally, FBS has helped us execute a disciplined acquisition strategy and expand our portfolio into new and attractive markets while creating long-term shareholder value.
Added
Inclusive Growth Culture We are more together. Our culture sets the tone for Fortive’s people strategy and drives Fortive’s success. Along with FBS, Inclusion, Diversity, and Equity (“IDE”) are core enablers of our strategy and culture. We know that an inclusive, diverse, and equitable workforce creates extraordinary long-term value for our employees and shareholders.
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With our shared purpose defining what we do, the following core values guide how we deliver every day for our stakeholders: We build extraordinary teams for extraordinary results.
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We are committed to IDE in all its forms. We are focused on recruiting from a wide variety of diverse candidate sources, cultivating an inclusive environment where everyone can succeed, providing training on inclusion and unconscious bias, and monitoring policies and practices to ensure that no group is inadvertently disadvantaged.
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Our culture sets the tone for Fortive’s People strategy and drives Fortive’s success.
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Another part of Fortive’s commitment to IDE is our adherence to EEO (equal employment opportunity) principles. All people are evaluated through a neutral merit-based process. We do not consider race, ethnicity, gender, or any other protected trait in our hiring, promotional, or other processes.
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Inclusion, Diversity, and Equity (“IDE”) are core pillars of our strategy and culture. – 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.
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We offer leading programs that inspire and reward superior performance, are equitable, align compensation structure with delivering long-term shareholder value, and foster an inclusive, diverse, and healthy global workforce. We also invest in our people at every level through our growth and development experiences.
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We accelerated the impact of IDE in 2022 by introducing our new inclusive leader experience to our senior leaders across the organization. This development experience provides the tools and support to build an inclusive culture and prepares leaders to lead diverse high-performing teams.
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Risk Factors.” Competition Laws Our global operations are subject to complex and changing antitrust and competition laws and regulations, including conflicting laws and regulations in different jurisdictions that have increased the cost of conducting our global operations.
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We also cascade annual IDE goals into executive and senior leader performance measures. Additionally, our Board of Directors and our Compensation Committee oversee our IDE efforts as part of our People strategy and measurement actions.
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We have implemented policies and procedures designed to ensure compliance with applicable global laws and regulations, but there can be no assurance of complete and consistent compliance with all laws and regulations given the complex and evolving policies implemented by governments around the world.
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As a result, we are subject to various statutes and regulations that apply to companies doing business with governments and government-owned entities. For a discussion of risks related to government contracting requirements, please refer to “Item 1A.
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If we are found to have violated laws and regulations, it could materially adversely affect our business, reputation, results of operations and financial condition. Whistleblower Laws We operate in jurisdictions, such as the U.S. and Europe, with significant legal whistleblower protection compliance reports for potential violations internally and to government authorities.
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In the European Union, the Whistleblower Directive has been implemented that affords significant protections to internal and external whistleblowers. Non-compliance with the Whistleblower Directive can result in fines and other penalties against entities. In the U.S., the Securities and Exchange Commission can provide monetary awards to whistleblowers that report securities law violations to the Commission.
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U.S. laws, such as the False Claims Act, also include strong financial incentives for whistleblowers to bring lawsuits against companies with healthcare products and services such as Fortive.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

49 edited+14 added−9 removed140 unchanged
Biggest changeOur amended and restated certificate of incorporation designates the state courts in the State of Delaware or, if no state court located within the State of Delaware has jurisdiction, the federal court for the District of Delaware, as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our shareholders, which could discourage lawsuits against us and our directors and officers. 23 Table of Contents Our amended and restated certificate of incorporation provides that unless the Board otherwise determines, the state courts in the State of Delaware or, if no state court located within the State of Delaware has jurisdiction, the federal court for the District of Delaware, will be the sole and exclusive forum for any derivative action or proceeding brought on behalf of our company, any action asserting a claim of breach of a fiduciary duty owed by any of our directors or officers to our company or our shareholders, any action asserting a claim against our company or any of our directors or officers arising pursuant to any provision of the DGCL or our amended and restated certificate of incorporation or bylaws, or any action asserting a claim against our company or any of our directors or officers governed by the internal affairs doctrine.
Biggest changeOur amended and restated certificate of incorporation provides that unless the Board otherwise determines, the state courts in the State of Delaware or, if no state court located within the State of Delaware has jurisdiction, the federal court for the District of Delaware, will be the sole and exclusive forum for any derivative action or proceeding brought on behalf of our company, any action asserting a claim of breach of a fiduciary duty owed by any of our directors or officers to our company or our shareholders, any action asserting a claim against our company or any of our directors or officers arising pursuant to any provision of the DGCL or our amended and restated certificate of incorporation or bylaws, or any action asserting a claim against our company or any of our directors or officers governed by the internal affairs doctrine.
For example, the TCJA eliminated the deduction of certain domestic and foreign research and development expenditures beginning on January 1, 2022 and requires capitalization and amortization of such expenditures over a specified a period; any revision, regulation, or new guidance to this rule may impact our future income tax provision, cash taxes paid, and effective tax rate.
For example, the TCJA eliminated the deduction of certain domestic and foreign research and development expenditures beginning on January 1, 2022 and requires capitalization and amortization of such expenditures over a specified period; any revision, regulation, or new guidance to this rule may impact our future income tax provision, cash taxes paid, and effective tax rate.
Our success will depend on several factors, including our ability to: • 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; 13 Table of Contents • 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.
Our success will depend on several factors, including our ability to: • 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.
Overall strengthening of the U.S. dollar during most of fiscal year 2022 has increased the effective price of our products sold in U.S. dollars into other countries, which may require us to lower our prices or adversely affect sales to the extent we do not increase local currency prices.
Overall strengthening of the U.S. dollar during most of fiscal year 2023 has increased the effective price of our products sold in U.S. dollars into other countries, which may require us to lower our prices or adversely affect sales to the extent we do not increase local currency prices.
We cannot provide assurance that our internal controls and compliance systems will always protect us from acts committed by employees, agents, or business partners of ours (or of businesses we acquire or partner with) that would violate U.S. and/or non-U.S. laws, including the laws governing payments to government officials, bribery, fraud, kickbacks, and false claims, sales and marketing practices, conflicts of interest, competition, export and import compliance, money laundering, and data privacy.
We cannot provide assurance that our internal controls and compliance systems will always protect us from acts committed by employees, agents, or business partners of ours (or of businesses we acquire or partner with) that would violate U.S. and/or non-U.S. laws, including the laws governing payments to government officials, bribery, fraud, kickbacks, and false claims, sales and 19 Table of Contents marketing practices, conflicts of interest, competition, export and import compliance, money laundering, and data privacy.
Failure to comply (or any alleged or perceived failure to comply) with the regulations referenced above or any other regulations could result in civil and criminal, monetary and non-monetary penalties, and any such failure or alleged failure (or becoming subject to a regulatory enforcement 20 Table of Contents investigation) could also damage our reputation, disrupt our business, limit our ability to manufacture, import, export, and sell products and services, result in loss of customers and disbarment from selling to certain federal agencies and cause us to incur significant legal and investigatory fees.
Failure to comply (or any alleged or perceived failure to comply) with the regulations referenced above or any other regulations could result in civil and criminal, monetary and non-monetary penalties, and any such failure or alleged failure (or becoming subject to a regulatory enforcement investigation) could also damage our reputation, disrupt our business, limit our ability to manufacture, import, export, and sell products and services, result in loss of customers and disbarment from selling to certain federal agencies and cause us to incur significant legal and investigatory fees.
These acquisitions and strategic relationships involve a number of financial, accounting, managerial, operational, legal, compliance, and other risks and challenges, including the following, any of which could adversely affect our financial statements: • 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; 17 Table of Contents • 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.
These acquisitions and strategic relationships involve a number of financial, accounting, managerial, operational, legal, compliance, and other risks and challenges, including the following, any of which could adversely affect our financial statements: • 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. 18 Table of Contents 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.
If demand for our products is less than we expect, we may experience additional excess and obsolete inventories and be forced to incur additional charges and our profitability may suffer. In addition, some of our businesses purchase certain requirements from sole or limited source suppliers for reasons of quality assurance, cost effectiveness, availability, contractual obligations or uniqueness of design.
If demand for our products is less than we expect, we may experience additional excess and obsolete inventories and be forced to incur additional charges and our profitability may suffer. 12 Table of Contents In addition, some of our businesses purchase certain requirements from sole or limited source suppliers for reasons of quality assurance, cost effectiveness, availability, contractual obligations or uniqueness of design.
Any charges relating to such impairments would adversely affect our results of operations in the periods recognized. Refer to Note 2 and Note 7 to the consolidated financial statements for a description of our policies relating to goodwill and acquired intangibles.
Any charges relating to such impairments would adversely affect our results of operations in the periods recognized. Refer to Note 2 and Note 6 to the consolidated financial statements for a description of our policies relating to goodwill and acquired intangibles.
In addition, as a 15 Table of Contents result of such claims of infringement or misappropriation, we could lose our rights to critical technology, be unable to license critical technology or sell critical products and services, be required to pay substantial damages or license fees with respect to the infringed rights, or be required to redesign our products at substantial cost, any of which could adversely impact our competitive position and financial statements.
In addition, as a result of such claims of infringement or misappropriation, we could lose our rights to critical technology, be unable to license critical technology or sell critical products and services, be required to pay substantial damages or license fees with respect to the infringed rights, or be required to redesign our products at substantial cost, any of which could adversely impact our competitive position and financial statements.
We cannot assure you that our liabilities arising from past or future releases of, or exposures to, hazardous substances will not exceed our estimates or adversely affect our reputation and financial statements 19 Table of Contents or that we will not be subject to additional claims for personal injury or remediation in the future based on our past, present or future business activities.
We cannot assure you that our liabilities arising from past or future releases of, or exposures to, hazardous substances will not exceed our estimates or adversely affect our reputation and financial statements or that we will not be subject to additional claims for personal injury or remediation in the future based on our past, present or future business activities.
For additional information regarding these risks, please refer to the section entitled “Business-Regulatory Matters.” Climate change, or legal or regulatory measures to address climate change, may negatively affect us. Climate change resulting from increased concentrations of carbon dioxide and other greenhouse gases in the atmosphere could present risks to our operations.
For additional information regarding these risks, please refer to the section entitled “Business-Regulatory Matters.” 21 Table of Contents Climate change, or legal or regulatory measures to address climate change, may negatively affect us. Climate change resulting from increased concentrations of carbon dioxide and other greenhouse gases in the atmosphere could present risks to our operations.
Risk Related to Our Financing Activities We have incurred a significant amount of debt, and our debt will increase further if we incur additional debt and do not retire existing debt. As of December 31, 2022, we had approximately $3.3 billion of long-term debt, including the current portion of long-term debt, on a consolidated basis.
Risk Related to Our Financing Activities We have incurred a significant amount of debt, and our debt will increase further if we incur additional debt and do not retire existing debt. As of December 31, 2023, we had approximately $3.7 billion of long-term debt, including the current portion of long-term debt, on a consolidated basis.
In 2022, approximately 46% of our sales were derived from customers outside the United States. Our principal markets outside the United States are in Europe and Asia. In addition, many of our manufacturing operations, suppliers, and employees are located outside the United States.
In 2023, approximately 46% of our sales were derived from customers outside the United States. Our principal markets outside the United States are in Europe and Asia. In addition, many of our manufacturing operations, suppliers, and employees are located outside the United States.
Additional risks and uncertainties not currently known to us or that we currently believe are immaterial also may impair our business, including our results of operations, liquidity, and financial condition. Risk Related to Our Business Operations Conditions in the global economy, the markets we serve and the financial markets may adversely affect our business and financial statements.
Additional risks and uncertainties not currently known to us or that we currently believe are immaterial also may impair our business, including our results of operations, liquidity, and financial condition. 11 Table of Contents Risk Related to Our Business Operations Conditions in the global economy, the markets we serve and the financial markets may adversely affect our business and financial statements.
Decreased strength of the U.S. dollar could adversely affect the cost of materials, products and services we purchase overseas. Sales and expenses of our non-U.S. businesses are also translated into U.S. dollars for reporting purposes and the strengthening or weakening of the U.S. dollar could result in unfavorable translation effects.
Decreased strength of the U.S. dollar could adversely affect the cost of materials, products and services we purchase overseas. Sales and expenses of our non-U.S. 17 Table of Contents businesses are also translated into U.S. dollars for reporting purposes and the strengthening or weakening of the U.S. dollar could result in unfavorable translation effects.
Each of these risks could negatively affect our businesses, financial condition, results of operations, and cash flows. 18 Table of Contents Risk Related to Regulatory and Compliance Matters Changes in industry standards and governmental regulations may reduce demand for our products or services or increase our expenses.
Each of these risks could negatively affect our businesses, financial condition, results of operations, and cash flows. Risk Related to Regulatory and Compliance Matters Changes in industry standards and governmental regulations may reduce demand for our products or services or increase our expenses.
Much of our future success and our ability to realize the benefit of our acquisitions and execute our portfolio strategy depends on our ability to attract and retain key employees, including our senior management. In particular, the markets for highly skilled employees and leaders in the technology and healthcare industries are extremely competitive.
Much of our future success and our ability to realize the benefit of our acquisitions and execute our portfolio strategy depends on our ability to attract and retain key employees, including our senior management. In particular, the markets for highly skilled employees and leaders in the technology and healthcare industries remain competitive.
We generally sell our products and services in industries that are characterized by rapid technological changes, frequent new product introductions and changing industry standards. If we do not develop innovative new and enhanced products and services on a timely basis, our offerings will become obsolete over time and our competitive position and financial statements will suffer.
We generally sell our products and services in industries that are characterized by rapid technological changes, frequent new product introductions and changing industry standards. If we do not develop innovative new and enhanced products and 13 Table of Contents services on a timely basis, our offerings will become obsolete over time and our competitive position and financial statements will suffer.
In addition, because we have not chosen to be exempt from Section 203 of the Delaware General Corporation Law (the “DGCL”), this provision could also delay or prevent a change of control that you may favor.
In addition, because we have not chosen to be exempt from Section 203 of the Delaware General Corporation Law (the “DGCL”), this provision could also delay or prevent a change of control that our shareholders may favor.
This exclusive forum provision may limit the ability of our shareholders to bring a claim in a judicial forum that such shareholders find favorable for disputes with our company or our directors or officers, which may discourage such lawsuits against our company and our directors and officers.
This exclusive forum provision may limit the ability of our shareholders to bring a claim in a judicial forum that such shareholders find favorable for disputes with our company or our directors or officers, which may discourage such lawsuits against our company and our directors and 24 Table of Contents officers.
Any sustained 12 Table of Contents interruption in the supply of these items, including as a result of general supply chain constraints, increasing demand outpacing supplies, or contractual disputes with suppliers or vendors, could adversely affect our business.
Any sustained interruption in the supply of these items, including as a result of general supply chain constraints, increasing demand outpacing supplies, or contractual disputes with suppliers or vendors, could adversely affect our business.
In addition, security breaches of our systems or lack of sufficient control in our systems (or the systems of our customers, suppliers or other business partners) could result in the misappropriation, changes, destruction, or unauthorized disclosure of confidential information or personal data belonging to us or to our employees, partners, customers, or suppliers.
In addition, security breaches of our systems or lack of sufficient control in our systems (or the systems of our customers, suppliers or other business partners) could result in the misappropriation, change, destruction, exfiltration or unauthorized disclosure of confidential information or personal data belonging to us or to our employees, partners, customers, or suppliers.
Our business is impacted by general economic conditions, and adverse economic conditions arising from any slower global economic growth, reduced demand or consumer confidence, energy, manufacturing or component supply constraints arising from the Ukraine/Russia conflict or COVID-19 infection rates and remediation efforts, high inflation rates and the corresponding interest rate policies, volatility in currency and credit markets, actual or anticipated default on sovereign debt, changes in global trade policies, unemployment and underemployment rates, reduced levels of capital expenditures, changes in government fiscal and monetary policies, government deficit reduction and budget negotiation dynamics, sequestration, other austerity measures, political and social instability, other geopolitical conflict, sanctions, natural disasters, terrorist attacks, and other challenges affect us and our distributors, customers, and suppliers, including having the effect of: • 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 11 Table of Contents • 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.
Our business is impacted by general economic conditions, and adverse economic conditions arising from any slower global economic growth, reduced demand or consumer confidence, energy, manufacturing or component supply constraints arising from the international conflicts, including Russian invasion of Ukraine and the Israel-Hamas war, high inflation rates and the corresponding interest rate policies, volatility in currency and credit markets, actual or anticipated default on sovereign debt, changes in global trade policies, unemployment and underemployment rates, reduced levels of capital expenditures, changes in government fiscal and monetary policies, government deficit reduction and budget negotiation dynamics, sequestration, other austerity measures, political and social instability, other geopolitical conflict, sanctions, natural disasters, terrorist attacks, and other challenges affect us and our distributors, customers, and suppliers, including having the effect of: • 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.
Any of these risks could negatively affect our financial statements and growth. Trade relations between China and the United States could have a material adverse effect on our business and financial statements. We have experienced growth in various end markets in China. During 2022, sales in China accounted for approximately 12% of our total sales for the year.
Any of these risks could negatively affect our financial statements and growth. Trade relations between China and the United States could have a material adverse effect on our business and financial statements. We have experienced growth in various end markets in China. During 2023, sales in China accounted for approximately 11% of our total sales for the year.
We may be required to recognize impairment charges for our goodwill and other intangible assets. As of December 31, 2022, the net carrying value of our goodwill and other intangible assets totaled approximately $12.5 billion. In accordance with GAAP, we periodically assess these assets to determine if they are impaired.
We may be required to recognize impairment charges for our goodwill and other intangible assets. As of December 31, 2023, the net carrying value of our goodwill and other intangible assets totaled approximately $12.3 billion. In accordance with GAAP, we periodically assess these assets to determine if they are impaired.
Our facilities, supply chains, distribution systems, and information technology systems are subject to catastrophic loss due to fire, flood, earthquake, hurricane, public health crisis, war, terrorism, or other natural or man-made disasters, including those caused by climate change and other climate-related causes.
Our facilities, supply chains, distribution systems, and information technology systems are subject to catastrophic loss due to fire, flood, earthquake, hurricane, public health crisis, war, terrorism, or other natural or man-made disasters, including those 15 Table of Contents caused by climate change and other climate-related causes.
We cannot assure you that our liabilities in connection with litigation and other legal and regulatory proceedings will not exceed our estimates or adversely affect our financial statements and reputation. Risk Related to our International Operations International economic, political, legal, compliance, and business factors could negatively affect our financial statements.
We cannot assure you that our liabilities 16 Table of Contents in connection with litigation and other legal and regulatory proceedings will not exceed our estimates or adversely affect our financial statements and reputation. Risk Related to our International Operations International economic, political, legal, compliance, and business factors could negatively affect our financial statements.
Our debt level and related debt service obligations could have negative consequences, including: • 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. 22 Table of Contents Our ability to satisfy our obligations depends on our future operating performance and on economic, financial, competitive, and other factors beyond our control.
Our debt level and related debt service obligations could have negative consequences, including: • 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.
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.
Government contracts that have been awarded to us following a bid process 20 Table of Contents could become the subject of a bid protest by a losing bidder, which could result in loss of the contract.
The opinion relies on certain facts, assumptions, representations, and undertakings from the applicable parties regarding the past and future conduct of the companies’ respective businesses and other matters.
The opinion relies on certain facts, assumptions, representations, and undertakings from the applicable parties regarding the past and future conduct of the 22 Table of Contents companies’ respective businesses and other matters.
For additional information regarding these risks, please refer to Note 16 to the consolidated financial statements.
For additional information regarding these risks, please refer to Note 14 to the consolidated financial statements.
Our brand, our culture, our ability to provide competitive compensation, our locations of operations, and our reputation are important to our ability to recruit and retain key employees in these competitive markets and during periods of workforce shortages.
Our brand, our culture, our ability to provide competitive compensation, our locations of operations, and our reputation are important to our ability to recruit and retain key employees in these competitive markets.
Please refer to Note 11 to the consolidated financial statements for additional details. Our ability to comply with these restrictions and covenants may be affected by events beyond our control.
Please refer to Note 10 to the consolidated financial statements for additional details. 23 Table of Contents Our ability to comply with these restrictions and covenants may be affected by events beyond our control.
Our business may not generate sufficient cash flow to meet these obligations. If we are unable to service our debt or obtain additional financing, we may be forced to delay strategic acquisitions, capital expenditures, or research and development expenditures. We may not be able to obtain additional financing on terms acceptable to us or at all.
If we are unable to service our debt or obtain additional financing, we may be forced to delay strategic acquisitions, capital expenditures, or research and development expenditures. We may not be able to obtain additional financing on terms acceptable to us or at all.
Our income could be adversely impacted if we are unable to adjust our purchases and supply chain management to reflect any supply chain or transportation disruptions or changes in customer demand and market fluctuations, including those caused by the COVID-19 pandemic, geopolitical disruptions, including the Ukraine/Russia conflict, severe weather events, increases in demand outpacing supply capabilities, labor shortages, seasonality or cyclicality.
Our income could be adversely impacted if we are unable to adjust our purchases and supply chain management to reflect any supply chain or transportation disruptions or changes in customer demand and market fluctuations, geopolitical disruptions, severe weather events, increases in demand outpacing supply capabilities, labor shortages, seasonality or cyclicality.
Any such new or additional legal or regulatory requirements may increase the costs associated with, or disrupt, sourcing, manufacturing and distribution of our products, which may adversely affect our business and financial statements.
Any such new or additional legal or regulatory requirements, including extensive disclosure requirements in various jurisdictions, including in the E.U. and domestically, may increase the costs associated with, or disrupt, sourcing, manufacturing and distribution of our products, which may adversely affect our business and financial statements.
Any of the attacks, breaches, or other disruptions or damage described above, as well as corresponding remediation efforts, can interrupt our operations, delay production and shipments, result in theft of our and our customers’ intellectual property and trade secrets, damage customer and business partner relationships and our reputation, or result in defective products or services, legal claims and proceedings, liability and penalties under privacy laws, and increased costs for security and remediation, each of which could adversely affect our business and financial statements.
Any of the attacks, breaches, or other disruptions or damage described above, as well as corresponding remediation efforts, can disrupt our operations, delay production and shipments, result in theft of our and our customers’ intellectual property and trade secrets, damage customer and business partner relationships and our reputation, or result in defective products or services, legal claims and proceedings, liability and penalties under privacy laws, and increased costs for security and remediation, each of which could adversely affect our business and financial statements. 14 Table of Contents We may use artificial intelligence in our business and in our products, and challenges with properly managing its use could result in reputational harm, competitive harm, and legal liability, and adversely affect our results of operations.
Our international business, including our business in high-growth markets outside the United States, is subject to risks that are customarily encountered in non-U.S. operations, as well as increased risks due to significant uncertainties related to political and economic changes, including: • 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.
Our international business, including our business in high-growth markets outside the United States, is subject to risks that are customarily encountered in non-U.S. operations, as well as increased risks due to significant uncertainties related to political and economic changes, including: • interruption in the transportation of materials to us and finished goods to our customers; • impact of geopolitical conflict, including the Russian invasion of Ukraine and the Israel-Hamas war; • 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; • 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.
Our restructuring activities could have long-term adverse effects on our business. We have implemented, and may continue to implement significant restructuring activities across our businesses to adjust our cost structure.
In addition, the consolidation of distributors and customers in certain of the industries in which we operate could adversely impact our profitability. Our restructuring activities could have long-term adverse effects on our business. We have implemented, and may continue to implement significant restructuring activities across our businesses to adjust our cost structure.
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.
A global minimum corporate tax rate and any other implemented changes could significantly increase tax uncertainty due to differing interpretations and increased audit scrutiny. 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.
These changes could negatively impact our business or financial position. These are not the only regulations that our businesses must comply with. The regulations we are subject to have tended to become more stringent over time and may be inconsistent across jurisdictions.
However, resolution of this matter could subject us to fines or penalties, and we cannot assure you of the timing or outcome of such resolution. These are not the only regulations that our businesses must comply with. The regulations we are subject to have tended to become more stringent over time and may be inconsistent across jurisdictions.
A significant disruption in, or breach in security of, our information technology systems could adversely affect our business.
Significant disruptions in, or breaches in security of, our information technology systems have adversely affected, and in the future could adversely affect, our business.
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. Certain of the acquisition agreements by which we have acquired companies require the former owners to indemnify us against certain liabilities related to the operation of the company before we acquired it.
Certain of the acquisition agreements by which we have acquired companies require the former owners to indemnify us against certain liabilities related to the operation of the company before we acquired it. In most of these agreements, however, the liability of the former owners is limited and certain former owners may be unable to meet their indemnification responsibilities.
Adverse changes in our relationships with these distributors and other partners, or adverse developments in their 14 Table of Contents financial condition, performance, or purchasing patterns, could adversely affect our financial statements.
Adverse changes in our relationships with these distributors and other partners, or adverse developments in their financial condition, performance, or purchasing patterns, could adversely affect our financial statements. The levels of inventory maintained by our distributors and other channel partners, and changes in those levels, can also significantly impact our results of operations in any given period.
Divestitures or other dispositions could negatively impact our business, and contingent liabilities from businesses that we have sold could adversely affect our financial statements.
We cannot assure you that these indemnification provisions will protect us fully or at all, and as a result we may face unexpected liabilities that adversely affect our financial statements. Divestitures or other dispositions could negatively impact our business, and contingent liabilities from businesses that we have sold could adversely affect our financial statements.
In December 2021, OECD published detailed model rules for a global minimum corporate tax rate of fifteen percent which will require multilateral agreement(s) and/or country-specific legislative action to be effective. A global minimum corporate tax rate and any other implemented changes could significantly increase tax uncertainty due to differing interpretations and increased audit scrutiny.
For example, in October 2021, OECD announced an agreed framework for an expansion of the taxing rights of market countries and to establish a global minimum corporate tax rate. In December 2021, OECD published detailed model rules for a global minimum corporate tax rate of fifteen percent which will require multilateral agreement(s) and/or country-specific legislative action to be effective.
Like many multinational corporations, our information technology systems have been subject to computer viruses, malicious codes, unauthorized access, and other cyber-attacks and, although, as of December 31, 2022, such attacks have not had a material impact on our operations or financial results, we expect to be subject to similar incidents in the future as such attacks become more sophisticated and frequent, any of which may have a material adverse impact on our business continuity, operations or financial results.
Furthermore, we expect to be subject to similar incidents in the future as such attacks become more sophisticated and frequent, any of which may have a material adverse impact on our business continuity, operations or financial results. Increasing use of artificial intelligence may increase these risks.
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.
Further, defending against any such actions can be costly and time-consuming and may require significant personnel resources.
Removed
The spread of, and the remediation efforts related to, COVID-19 in certain key jurisdictions on supply chain, labor force, and the operations of our customers, suppliers, and vendors are continuing to have an adverse impact on our business and results of operations.
Added
Like many multinational corporations, our information technology systems have been subject to computer viruses, malicious codes, and other cyber-attacks that have resulted in disruption of our operations, unauthorized access to confidential information and increased the cost of operations through containment, investigation and remediation efforts, including cybersecurity incidents in the fourth quarter of 2023.
Removed
Continued spread of, and efforts to mitigate COVID-19 in certain key countries, including China, have caused us, our suppliers, and customers to alter commercial activities and utilization of facilities and manufacturing sites, adversely impacting our ability to manufacture, sell, transport and service our products from the impacted countries.
Added
We may incorporate artificial intelligence (“AI”) solutions into our products, services and features, and we may leverage AI, including generative AI, in our product development, our operations, and our software programming.
Removed
In addition, residual impact to global supply chain and transportation from the prior remediation efforts continue to impact the sourcing of raw materials, components and transportation for our products.
Added
Our competitors or other third parties may incorporate AI into their products or operational processes more quickly or more successfully than us, which could impair our ability to compete effectively and adversely affect our results of operations.
Removed
While the remediation efforts in response to the COVID-19 pandemic have subsided in most countries, including the United States, we continue to experience adverse impacts to our business as a result of residual supply chain disruptions, inflation, and reduced in-person collaboration efforts.
Added
In addition, there are significant risks involved in developing and deploying AI and there can be no assurance that the usage of AI will enhance our products or services or be beneficial to our business, including our efficiency or profitability.
Removed
Furthermore, the workforce shortage in the United States and in other jurisdictions has increased the overall competitiveness and cost of retaining and attracting qualified employees.
Added
For example, our AI-related efforts, particularly those related to generative AI, subject us to risks related to accuracy, intellectual property infringement or misappropriation, data privacy, and cybersecurity, among others. It is also uncertain how various laws related to online services, intermediary liability, and other issues will apply to content generated by AI.
Removed
The levels of inventory maintained by our distributors and other channel partners, and changes in those levels, can also significantly impact our results of operations in any given period. In addition, the consolidation of distributors and customers in certain of the industries in which we operate could adversely impact our profitability.
Added
AI also presents emerging ethical issues, and if our use of AI becomes controversial, we may experience brand or reputational harm, competitive harm, or legal liability.
Removed
(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; 16 Table of Contents • 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.
Added
The rapid evolution of AI, including the regulation of AI by government or other regulatory agencies, will require significant resources to develop, test and maintain our platforms, offerings, services, and features to implement AI ethically and minimize any unintended harmful impacts.
Removed
In most of these agreements, however, the liability of the former owners is limited and certain former owners may be unable to meet their indemnification responsibilities. We cannot assure you that these indemnification provisions will protect us fully or at all, and as a result we may face unexpected liabilities that adversely affect our financial statements.
Added
Therefore, even if we are successful in defending against any such actions brought against us, our business may be impaired; • we are also subject to the federal False Claims Act (the “FCA”), which imposes civil and criminal liability on individuals or entities that knowingly submit false or fraudulent claims for payment to the government or knowingly make, or cause to be made, a false statement in order to have a false claim paid, including qui tam or whistleblower suits.
Removed
For example, in October 2021, OECD announced an agreed framework for an expansion of the taxing rights of market countries 21 Table of Contents and to establish a global minimum corporate tax rate.
Added
There are many potential bases for liability under the FCA. In addition, we could be held liable under the FCA if we are deemed to “cause” the submission of false or fraudulent claims; and • we are also required to comply with ever changing labor and employment laws and regulations in multiple jurisdictions.
Added
These changes could negatively impact our business or financial position.
Added
For example, we recently discovered that Gems Sensors, Inc., an entity that has been merged into Setra Systems, Inc. and now operates as Gems Setra, 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").
Added
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.
Added
Our ability to satisfy our obligations depends on our future operating performance and on economic, financial, competitive, and other factors beyond our control. Our business may not generate sufficient cash flow to meet these obligations.
Added
Our amended and restated certificate of incorporation designates the state courts in the State of Delaware or, if no state court located within the State of Delaware has jurisdiction, the federal court for the District of Delaware, as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our shareholders, which could discourage lawsuits against us and our directors and officers.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThese facilities cover approximately 5 million square feet, of which approximately 3 million square feet are owned and approximately 2 million square feet are leased. Particularly outside the United States, facilities may serve more than one business segment and may be used for multiple purposes, such as administration, sales, manufacturing, warehousing, and/or distribution.
Biggest changeParticularly outside the United States, facilities may serve more than one business segment and may be used for multiple purposes, such as administration, sales, manufacturing, warehousing, and/or distribution. The approximate number of significant facilities by business segment is: Intelligent Operating Solutions 25, Precision Technologies 25, and Advanced Healthcare Solutions 10.
ITEM 2. PROPERTIES Our corporate headquarters is located in Everett, Washington in a facility that we own. As of December 31, 2022, our facilities included approximately 60 significant facilities, which are used for manufacturing, distribution, warehousing, research and development, general administrative, and/or sales functions.
ITEM 2. PROPERTIES Our corporate headquarters is located in Everett, Washington in a facility that we own. As of December 31, 2023, our facilities included approximately 60 significant facilities, which are used for manufacturing, distribution, warehousing, research and development, general administrative, and/or sales functions.
We believe our properties and equipment have been well-maintained. Please refer to Note 10 to the consolidated financial statements for additional information with respect to our lease commitments.
We consider our facilities suitable and adequate for the purposes for which they are used and do not anticipate difficulty in renewing existing leases as they expire or in finding alternative facilities. We believe our properties and equipment have been well-maintained. Please refer to Note 9 to the consolidated financial statements for additional information with respect to our lease commitments.
Removed
The approximate number of significant facilities by business segment is: Intelligent Operating Solutions 25, Precision Technologies 25, and Advanced Healthcare Solutions 10. We consider our facilities suitable and adequate for the purposes for which they are used and do not anticipate difficulty in renewing existing leases as they expire or in finding alternative facilities.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Added
Please refer to Note 14 to the consolidated financial statements for information regarding legal proceedings and contingencies, and for a discussion of risks related to legal proceedings and contingencies, refer to "Item 1A. Risk Factors."

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeNewcombe was Vice President of Sales at Cisco Systems, Inc. from November 2009 to February 2017. Jonathan L. Schwarz has served as Senior Vice President, Corporate Development since February 2021 and as Vice President, Strategy and Corporate Development from April 2019 to February 2021 and as Vice President, Corporate Development from July 2016 to April 2019.
Biggest changeNewcombe was Group President from May 27 Table of Contents 2021 to December 2021, President of Tektronix from April 2019 to December 2021, and Commercial President of Tektronix from February 2017 to April 2019. Prior to joining Tektronix, Ms. Newcombe was Vice President of Sales at Cisco Systems, Inc. from November 2009 to February 2017. Jonathan L.
Walker served as Vice President-Talent Management of Danaher from January 2014 to July 2016 after serving as Vice President-Talent Planning from December 2012 to December 2013 and as Vice President-Human Resources for Danaher’s Chemtreat business from 2008 to November 2012. 25 Table of Contents PART II
Walker served as Vice President-Talent Management of Danaher from January 2014 to July 2016 after serving as Vice President-Talent Planning from December 2012 to December 2013 and as Vice President-Human Resources for Danaher’s Chemtreat business from 2008 to November 2012. PART II
McLaughlin has served as Senior Vice President, Chief Financial Officer since July 2016. Prior to July 2016, Mr. McLaughlin served as Senior Vice President-Diagnostics Group CFO for Danaher’s Diagnostics business from May 2012 to July 2016, and as Senior Vice President-Chief Financial Officer of Danaher’s Beckman Coulter business from July 2011 to July 2016. Patrick K.
McLaughlin has served as Senior Vice President, Chief Financial Officer since July 2016. Prior to July 2016, Mr. McLaughlin served as Senior Vice President-Diagnostics Group CFO for Danaher’s Diagnostics business from May 2012 to July 2016, and as Senior Vice President-Chief Financial Officer of Danaher’s Beckman Coulter business from July 2011 to July 2016. Tamara S.
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 James A.
Simmons 50 Senior Vice President – Strategy 2021 Olumide Soroye 51 President and CEO of Intelligent Operating Solutions 2021 Peter C. Underwood 54 Senior Vice President – General Counsel 2016 Stacey A. Walker 53 Senior Vice President – Human Resources 2016 James A.
ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 24 Table of Contents INFORMATION ABOUT OUR EXECUTIVE OFFICERS 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.
ITEM 4. MINE SAFETY DISCLOSURES Not applicable. INFORMATION ABOUT OUR EXECUTIVE OFFICERS Set forth below are the names, ages, positions, and experience of our executive officers as of February 27, 2024. 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.
Lico 58 President and Chief Executive Officer 2016 Charles E. McLaughlin 62 Senior Vice President – Chief Financial Officer 2016 Tamara S. Newcombe 58 President and CEO of Precision Technologies and Advanced Healthcare Solutions 2022 Jonathan L. Schwarz 52 Senior Vice President – Corporate Development 2016 Edward R.
Prior to July 2016, Mr. Schwarz served as Vice President-Corporate Development of Danaher from 2010 to July 2016. Edward R. Simmons has served as Senior Vice President, Strategy of Fortive since February 2021. From June 2018 to December 2020, Mr.
Schwarz has served as Senior Vice President, Corporate Development since February 2021 and as Vice President, Strategy and Corporate Development from April 2019 to February 2021 and as Vice President, Corporate Development from July 2016 to April 2019. Prior to July 2016, Mr. Schwarz served as Vice President-Corporate Development of Danaher from 2010 to July 2016. Edward R.
Simmons was the President of Vista Consulting Group for Vista Equity Partners, a leading private investment firm focused on software, data, and technology-enabled businesses. In addition, from September 1999 through May 2018, Mr.
Simmons has served as Senior Vice President, Strategy of Fortive since February 2021. From June 2018 to December 2020, Mr. Simmons was the President of Vista Consulting Group for Vista Equity Partners, a leading private investment firm focused on software, data, and technology-enabled businesses. In addition, from September 1999 through May 2018, Mr.
Murphy has served as President and CEO of Advanced Healthcare Solutions since January 2022, as President and CEO of Precision Technologies from July 2021 to December 2021, and as a Senior Vice President from July 2016 to July 2021. Prior to July 2016, Mr.
Newcombe has served as President and CEO of Precision Technologies since January 2022 and President and CEO and Advanced Healthcare Solutions since June 2023. Prior to January 2022, Ms.
Removed
Murphy served as a Group President of Danaher after joining Danaher in March 2014 until July 2016. Prior to joining Danaher, he served as CEO of Nidec Motor Corporation and President of the ACIM (Appliance, Commercial, and Industrial Motor) Business Unit of Nidec Corporation, a manufacturer of commercial, industrial, and appliance motors and controls, from 2010 until October 2013.
Removed
Tamara S. Newcombe has served as President and CEO of Precision Technologies since January 2022. Prior to January 2022, Ms. Newcombe was Group President from May 2021 to December 2021, President of Tektronix from April 2019 to December 2021, and Commercial President of Tektronix from February 2017 to April 2019. Prior to joining Tektronix, Ms.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changePeriod Total number of shares (or units) purchased Average price paid per share (or unit) Total number of shares (or units) purchased as part of publicly announced plans or programs Maximum number (or approximate dollar value) of shares (or units) that may yet be purchased under the plans or programs Oct 1 - Oct 31 — $ — N/A N/A Nov 1 - Nov 30 1,000,000 66.74 1,000,000 13,000,000 Dec 1 - Dec 31 — — N/A N/A Total 1,000,000 $ 66.74 1,000,000 13,000,000 Recent Issuances of Unregistered Securities None.
Biggest changePeriod Total number of shares (or units) purchased Average price paid per share (or unit) Total number of shares (or units) purchased as part of publicly announced plans or programs Maximum number (or approximate dollar value) of shares (or units) that may yet be purchased under the plans or programs Oct 1 - Oct 31 250,000 $ 65.04 250,000 9,750,000 Nov 1 - Nov 30 750,000 64.97 750,000 9,000,000 Dec 1 - Dec 31 — — N/A N/A Total 1,000,000 $ 64.99 1,000,000 9,000,000 * *Does not reflect the 11 million additional shares the Company’s Board of Directors authorized under the share repurchase program on January 23, 2024.
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock has been traded on the New York Stock Exchange under the symbol FTV since July 2, 2016. As of February 24, 2023, there were approximately 1800 holders of record of our common stock.
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock has been traded on the New York Stock Exchange under the symbol FTV since July 2, 2016. As of February 22, 2024, there were approximately 1700 holders of record of our common stock.
There is no expiration date for the repurchase program, and the timing and amount of repurchases under the program are determined by the Company's management based on market conditions and other factors. The repurchase program may be suspended or discontinued at any time by the Board of Directors.
There is no expiration date for the repurchase program, and the timing and amount of repurchases under the program are determined by the Company's management based on market conditions and other factors.
We have historically paid a quarterly dividend of $0.07 per share of our common stock. Any future payments of dividends on our common stock will be determined by our Board of Directors and will depend on our business conditions, financial results and other factors our Board deems relevant.
Any future declaration and payments of dividends, including any change in the amount of quarterly dividend, on our common stock will be determined by our Board of Directors and will depend on our business conditions, financial results and other factors our Board deems relevant.
During the fiscal year ended December 31, 2022, the Company purchased 7,000,000 shares of its common stock at an average share price of $63.25, including 1,000,000 shares at an average share price of $66.74 during the fourth quarter of 2022, leaving 13 million shares authorized for repurchase under the share repurchase program as of December 31, 2022.
The repurchase program may be suspended or discontinued at any time by the Board of Directors. 28 Table of Contents During the fiscal year ended December 31, 2023, the Company purchased 4 million shares of its common stock at an average share price of $68.20, including 1 million shares at an average share price of $64.99 during the fourth quarter of 2023, leaving 9 million shares authorized for repurchase under the share repurchase program as of December 31, 2023.
The following table provides details about our share repurchases during the fiscal quarter ended December 31, 2022.
On January 23, 2024, the Company’s Board of Directors increased the number of shares authorized under the share repurchase program by an additional 11 million shares. The following table provides details about our share repurchases during the fiscal quarter ended December 31, 2023.
Added
We have historically paid a quarterly dividend on our common stock. In November 2023, our Board of Directors increased the quarterly dividend paid December 29, 2023 to $0.08 per share from $0.07 per share, an increase of 14%.
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Recent Issuances of Unregistered Securities None. ITEM 6. [RESERVED] Not applicable.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeRESULTS OF OPERATIONS 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 % Refer to Intelligent Operating Solutions, Precision Technologies and Advanced Healthcare Solutions sections below for further discussion of year-over-year sales growth. 30 Table of Contents Operating Profit Margins 2022 vs. 2021 Operating profit margins were 16.9% for the year ended December 31, 2022, an increase of 140 basis points as compared to 15.5% in 2021 with year-over-year operating profit margin comparisons impacted by: • Year-over-year increase in price and sales volumes from existing businesses and gains from productivity measures, which were partially offset by higher year-over-year employee compensation, freight, logistics and material costs and unfavorable foreign exchange rates — favorable 120 basis points • The year-over-year effect of amortization from existing businesses — favorable 65 basis points • The year-over-year net effect of acquisition-related transaction costs which were lower during 2022 — favorable 65 basis points • The year-over-year net effect of acquired businesses, including amortization, and acquisition-related fair value adjustments — unfavorable 100 basis points • The year-over-year effect of significant restructuring costs which were lower during 2022 — favorable 20 basis points • Russia exit and wind down costs that were incurred during 2022 — unfavorable 30 basis points 2021 vs. 2020 Operating profit margins were 15.5% for the year ended December 31, 2021, an increase of 390 basis points as compared to 11.6% in 2020 with year-over-year operating profit margin comparisons impacted by: • Higher year-over-year sales volumes and price increases from existing businesses, incremental year-over-year cost savings associated with restructuring and productivity improvement initiatives and favorable sales mix, which were partially offset by higher year-over-year freight and logistics costs, employee compensation and SG&A costs, which were reduced in 2020 to better align costs with demand in response to the pandemic — favorable 240 basis points • The year-over-year net effect of acquisition-related transaction costs which were less in the year ended December 31, 2021 than those recognized in the comparable period in 2020 — favorable 40 basis points • The year-over-year effect of amortization from existing businesses — favorable 85 basis points • The year-over-year effects of restructuring costs which were less in 2021 than those recognized in 2020 — favorable 35 basis points • The year-over-year effect of acquired businesses, including amortization, and acquisition-related fair value adjustments to deferred revenue and inventory which were higher in 2021 than those recognized in 2020 — unfavorable 10 basis points 31 Table of Contents Business Segments and Geographic Area Results Sales by business segment and geographic area for the year ended December 31 are as follows ($ in millions): 2022 2021 2020 Segments Intelligent Operating Solutions $ 2,466.1 $ 2,169.4 $ 1,883.7 Precision Technologies 2,038.2 1,848.9 1,651.3 Advanced Healthcare Solutions 1,321.4 1,236.4 1,099.4 Total $ 5,825.7 $ 5,254.7 $ 4,634.4 Geographic area United States $ 3,136.8 $ 2,683.0 $ 2,436.6 China 702.1 650.7 534.1 All other (each country individually less than 5% of total sales) 1,986.8 1,921.0 1,663.7 Total $ 5,825.7 $ 5,254.7 $ 4,634.4 INTELLIGENT OPERATING SOLUTIONS Our Intelligent Operating Solutions segment provides advanced instrumentation, software and services to tens of thousands of customers enabling their mission-critical workflows.
Biggest changeOperating Profit Margins 2023 vs. 2022 Operating profit margins were 18.7% for the year ended December 31, 2023, an increase of 180 basis points as compared to 16.9% in 2022 with year-over-year operating profit margin comparisons impacted by: • Year-over-year increase in price and volume from existing businesses and gains from productivity measures, which were partially offset by higher employee compensation, unfavorable product mix and foreign exchange rates — favorable 160 basis points • The year-over-year effect of amortization from existing businesses offset by impairment of intangible assets — favorable 40 basis points • The year-over-year net effect of acquisition-related transaction costs which were lower in 2023 — favorable 40 basis points • The year-over-year net effect of acquired and divested businesses, including amortization, and acquisition-related fair value adjustments — favorable 5 basis points • The year-over-year effect of costs relating to the discrete restructuring plan in 2023 — unfavorable 95 basis points • Russia exit and wind down costs that were incurred during 2022 — favorable 30 basis points 32 Table of Contents Business Segments and Geographic Area Results Sales by business segment and geographic area for the year ended December 31 are as follows ($ in millions): 2023 2022 Segments Intelligent Operating Solutions $ 2,612.2 $ 2,466.1 Precision Technologies 2,132.8 2,038.2 Advanced Healthcare Solutions 1,320.3 1,321.4 Total $ 6,065.3 $ 5,825.7 Geographic area United States $ 3,288.4 $ 3,136.8 China 694.9 702.1 All other (each country individually less than 5% of total sales) 2,082.0 1,986.8 Total $ 6,065.3 $ 5,825.7 INTELLIGENT OPERATING SOLUTIONS Our Intelligent Operating Solutions segment provides advanced instrumentation, software and services to tens of thousands of customers enabling their mission-critical workflows.
During the year ended December 31, 2022, the Company recorded pre-tax charges of $17.9 million, primarily relating to 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.
During the year ended December 31, 2022, the Company recorded pre-tax charges of $17.9 million, primarily relating to the write-off of net assets, the cumulative translation adjustment in earnings for legal entities deemed substantially liquidated, and to record provisions for employee severance and legal contingencies.
Based on these reviews, the results of discussions and resolutions of matters with certain tax authorities, tax rulings, and court decisions and the expiration of statutes of limitations reserves for contingent tax liabilities are accrued or adjusted as necessary.
Based on these reviews, the results of discussions and resolutions of matters with certain tax authorities, tax rulings, and court decisions and the expiration of statutes of limitations reserves for contingent tax liabilities are accrued or adjusted as necessary.
As a result, we are exposed to movements in the exchange rates of various currencies against the U.S. dollar. The effect of a change in currency exchange rates on our net investment in international subsidiaries is reflected in the accumulated other comprehensive income (loss) component of equity.
As a result, we are exposed to movements in the exchange rates of various currencies against the U.S. dollar. The effect of a change in currency exchange rates on our net investment in international subsidiaries is reflected in the accumulated other comprehensive income (loss) (“AOCI”) component of equity.
Non-GAAP Measures In this report, references to sales from existing businesses refer to sales from operations calculated according to generally accepted accounting principles in the United States (“GAAP”) but excluding (1) the impact from acquired businesses and (2) the impact of currency translation.
Non-GAAP Measures In this report, references to sales from existing businesses refer to sales from operations calculated according to generally accepted accounting principles in the United States (“GAAP”) but excluding (1) the impact from acquired and divested businesses and (2) the impact of currency translation.
However, the timing of these liabilities is uncertain, and therefore, they have been included in the “due later than one year from December 31, 2022” column. The amounts also include our obligation under the TCJA for the transition tax on cumulative foreign earnings and profits, which we expect to pay over eight years.
However, the timing of these liabilities is uncertain, and therefore, they have been included in the “due later than one year from December 31, 2023” column. The amounts also include our obligation under the TCJA for the transition tax on cumulative foreign earnings and profits, which we expect to pay over eight years.
The discounted cash flow model requires judgmental assumptions about projected revenue growth, future operating margins, discount rates, and terminal values. There are inherent uncertainties related to these assumptions and management’s judgment in applying them to the analysis of goodwill impairment. In 2022, we performed goodwill impairment testing for our reporting units.
The discounted cash flow model requires judgmental assumptions about projected revenue growth, future operating margins, discount rates, and terminal values. There are inherent uncertainties related to these assumptions and management’s judgment in applying them to the analysis of goodwill impairment. In 2023, we performed goodwill impairment testing for our reporting units.
Refer to Notes 2, 3 and 7 to the consolidated financial statements for a description of our policies relating to goodwill, acquired intangibles, and acquisitions. In performing our goodwill impairment testing, we estimate the fair value of our reporting units primarily using a market based approach.
Refer to Notes 2, 3 and 6 to the consolidated financial statements for a description of our policies relating to goodwill, acquired intangibles, and acquisitions. In performing our goodwill impairment testing, we estimate the fair value of our reporting units primarily using a market based approach.
The amount of cash flow generated from or used by the aggregate of accounts receivable, inventories, and trade accounts payable depends upon how effectively we manage the cash conversion cycle, which generally represents the number of days that elapse from the day we pay for the purchase of raw materials and components to the collection of cash from our customers, and can be significantly impacted by the timing of collections and payments in a period. • The aggregate change in prepaid expenses and other assets, accrued expenses and other liabilities, and changes in deferred income taxes used $10 million of cash in 2022 as compared to using $47 million in 2021.
The amount of cash flow generated from or used by the aggregate of accounts receivable, inventories, and trade accounts payable depends upon how effectively we manage the cash conversion cycle, which generally represents the number of days that elapse from the day we pay for the purchase of raw materials and components to the collection of cash from our customers, and can be significantly impacted by the timing of collections and payments in a period. • The aggregate change in prepaid expenses and other assets, accrued expenses and other liabilities, and changes in deferred income taxes used $74 million of cash in 2023 as compared to using $10 million in 2022.
(c) Consist of agreements to purchase goods or services that are enforceable and legally binding on us and that specify all significant terms, including fixed or minimum quantities to be purchased, fixed, minimum or variable price provisions, and the approximate timing of the transaction.
(d) Consist of agreements to purchase goods or services that are enforceable and legally binding on us and that specify all significant terms, including fixed or minimum quantities to be purchased, fixed, minimum or variable price provisions, and the approximate timing of the transaction.
We generally expect to satisfy any short-term liquidity needs that are not met through operating cash flows and available cash primarily through term loans or issuances of commercial paper under the Commercial Paper Programs, with credit support provided by the Revolving Credit Facility. The carrying value of total debt outstanding as of December 31, 2022 was approximately $3.3 billion.
We generally expect to satisfy any short-term liquidity needs that are not met through operating cash flows and available cash primarily through term loans or issuances of commercial paper under the Commercial Paper Programs, with credit support provided by the Revolving Credit Facility. The carrying value of total debt outstanding as of December 31, 2023 was approximately $3.6 billion.
We emphasize safety and liquidity of principal over yield on those funds. In addition, concentrations of credit risk arising from receivables from customers are limited due to the diversity of our customers. Our businesses perform credit evaluations of their customers’ financial conditions as appropriate and also obtain collateral or other security when appropriate.
We emphasize safety and liquidity of principal over yield on those funds. In addition, concentrations of credit risk 38 Table of Contents arising from receivables from customers are limited due to the diversity of our customers. Our businesses perform credit evaluations of their customers’ financial conditions as appropriate and also obtain collateral or other security when appropriate.
Certain of these projected interest payments may differ in the future based on changes in market interest rates. (b) Includes future lease payments for operating leases having initial noncancelable lease terms in excess of one year.
Certain of these projected interest payments may differ in the future based on changes in market interest rates. (c) Includes future lease payments for operating leases having initial noncancelable lease terms in excess of one year.
We review identified intangible assets for impairment whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable. Determining whether an impairment loss occurred requires a comparison of the carrying amount to the sum of undiscounted cash flows expected to be generated by the asset.
We review identified intangible assets for impairment whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable. Determining whether an impairment loss occurred for intangible assets with definite lives requires a comparison of the carrying amount to the sum of undiscounted cash flows expected to be generated by the asset.
To determine the consideration that the customer owes us, we make judgments regarding the amount of customer allowances and rebates, consisting primarily of 50 Table of Contents volume discounts and other short-term incentive programs. Refer to Note 2 to the consolidated financial statements for a description of our revenue recognition policies.
To determine the consideration that the customer owes us, we make judgments regarding the amount of customer allowances and rebates, consisting primarily of volume discounts and other short-term incentive programs. Refer to Note 2 to the consolidated financial statements for a description of our revenue recognition policies.
The tax benefits 51 Table of Contents recognized in the financial statements from such positions are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. Judgment is required in evaluating tax positions and determining income tax provisions.
The tax benefits recognized in the financial statements from such positions are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. Judgment is required in evaluating tax positions and determining income tax provisions.
As a result of the sale, during the year ended December 31, 2022, we recorded a net realized pre-tax gain totaling $0.5 million, net of transaction costs, which is recorded as “Other non-operating expense, net” in the Consolidated Statements of Earnings.
As a result of the sale, during the year ended December 31, 2022, we recorded a net realized pre-tax gain totaling $0.5 million, net of transaction costs, which was recorded within “Other non-operating expense, net” in the Consolidated Statements of Earnings.
During 2023, our cash contribution requirements for our U.S. and non-U.S. defined benefit pension plans are expected to be approximately $1 million and $11 million, respectively.
During 2023, our cash contribution requirements for our U.S. and non-U.S. defined benefit pension plans are expected to be approximately $1 million and $9 million, respectively.
In determining if control has transferred, we consider whether certain indicators of the transfer of control are present, such as the transfer of title, present right to payment, significant risks and rewards of ownership, and customer acceptance when acceptance is not a formality.
In determining if control has transferred, we consider whether certain indicators of the transfer of control are present, such as the transfer of title, present right to payment, significant risks and 44 Table of Contents rewards of ownership, and customer acceptance when acceptance is not a formality.
As of December 31, 2022, our variable-rate debt obligations consist of U.S. dollar denominated commercial paper, U.S. dollar denominated delay-draw term loan, and senior unsecured term facilities denominated in either Euros or Japanese Yen (refer to Note 11 to the consolidated financial statements for information regarding our outstanding indebtedness as of December 31, 2022).
As of December 31, 2023, our variable-rate debt obligations consist of U.S. dollar denominated commercial paper, U.S. dollar denominated delay-draw term loan, and senior unsecured term facilities denominated in either Euros or Japanese Yen (refer to Note 10 to the consolidated financial statements for information regarding our outstanding indebtedness as of December 31, 2023).
An increase in our 2022 effective tax rate of 1.0% would have resulted in an additional income tax provision for the year ended December 31, 2022 of approximately $9 million. NEW ACCOUNTING STANDARDS For a discussion of new accounting standards relevant to our businesses, refer to Note 2 to the consolidated financial statements.
An increase in our 2023 effective tax rate of 1.0% would have resulted in an additional income tax provision for the year ended December 31, 2023 of approximately $10 million. NEW ACCOUNTING STANDARDS For a discussion of new accounting standards relevant to our businesses, refer to Note 2 to the consolidated financial statements.
We concurrently repaid the $1.0 billion in outstanding principal of the Delayed-Draw Term Loan due 2022 and accrued interest thereon. 46 Table of Contents • During 2022, we increased borrowings by $39 million in net commercial paper under the U.S. dollar-denominated commercial paper program.
We concurrently repaid the $1.0 billion in outstanding principal of the Delayed-Draw Term Loan due 2022 and accrued interest thereon. • We increased borrowings by $39 million in net commercial paper under the U.S. dollar-denominated commercial paper program.
A 50 basis point reduction in the discount rates used for the plans during 2022 would have increased the net obligation by $30 million from the amounts recorded in the financial statements as of December 31, 2022. Our plan assets consist of various insurance contracts, equity and debt securities as determined by the administrator of each plan.
A 50 basis point reduction in the discount rates used for the plans during 2023 would have increased the net obligation by approximately $16 million from the amounts recorded in the financial statements as of December 31, 2023. Our plan assets consist of various insurance contracts, equity and debt securities as determined by the administrator of each plan.
With respect to our cash requirements, we generally intend to use available cash and internally generated funds to meet these cash requirements, but in the event that additional liquidity is required, particularly in connection with acquisitions, we may also borrow under our commercial paper programs or credit facilities or enter into new credit facilities and either borrow directly thereunder or use such credit facilities to backstop additional borrowing capacity 47 Table of Contents under our commercial paper programs.
With respect to our cash requirements, we generally intend to use available cash and internally generated funds to meet these cash requirements, but in the event that additional liquidity is required, particularly in connection with acquisitions and repayment of maturing debt, we may also borrow under our commercial paper programs or credit facilities or enter into new credit facilities and either borrow directly thereunder or use such credit facilities to backstop additional borrowing capacity under our commercial paper programs.
The amount of income taxes we pay is subject to audit by federal, state, and foreign tax authorities, which may result in proposed assessments (see “-Results of Operations - Income Taxes” and Note 14 to the consolidated financial statements). We review our global tax positions on a quarterly basis.
The amount of income taxes we pay is subject to audit by federal, state, and foreign tax authorities, which may result in proposed assessments (see “-Results of Operations - Income Taxes” and Note 13 to the consolidated financial statements). We review our global tax positions on a 45 Table of Contents quarterly basis.
The amount of income taxes we pay is subject to audit by federal, state, and foreign tax authorities, which may result in proposed assessments. The Company is subject to examination in the United States, various states and foreign jurisdiction for the tax years 2010 to 2022.
The amount of income taxes we pay is subject to audit by federal, state, and foreign tax authorities, which may result in proposed assessments. The Company is subject to examination in the United States, various states and foreign jurisdiction for the tax years 2015 to 2023.
A 10% depreciation in major currencies relative to the U.S. dollar as of December 31, 2022 would have resulted in a reduction of foreign currency-denominated net assets and stockholders’ equity of approximately $181 million.
A 10% depreciation in major currencies relative to the U.S. dollar as of December 31, 2023 would have resulted in a reduction of foreign currency-denominated net assets and stockholders’ equity of approximately $186 million.
The timing of cash flows associated with these obligations is based upon management’s estimates over the terms of these arrangements and is largely based upon historical experience. (e) Includes non-contractual obligations of $205 million of noncurrent gross unrecognized tax benefits.
The timing of cash flows associated with these obligations is based upon management’s estimates over the terms of these arrangements and is largely based upon historical experience. (f) Includes non-contractual obligations of $207 million of noncurrent gross unrecognized tax benefits.
Reporting units resulting from recent acquisitions generally present the highest risk of impairment. We believe the impairment risk associated with these reporting units generally decreases as we integrate these businesses and better position them for potential future earnings growth.
Reporting units that include recent acquisitions generally present the highest risk of impairment. We believe the impairment risk associated with these reporting units generally decreases as we integrate these businesses and better position them for potential future earnings growth.
Based on this hypothetical 10% decrease, the excess of the estimated fair value over carrying value (expressed as a percentage of carrying value for the respective reporting unit) for each of our reporting units ranged from approximately 12% to approximately 680%.
Based on this hypothetical 10% decrease, the excess of the estimated fair value over carrying value (expressed as a percentage of carrying value for the respective reporting unit) for each of our reporting units ranged from approximately 44% to approximately 711%.
Credit support for the Commercial Paper Programs is provided by a five-year $2.0 billion senior unsecured revolving credit facility that expires on November 30, 2023 (the “Revolving Credit Facility”) which, to the extent not otherwise providing credit support for the commercial paper programs, can also be used for working capital and other general corporate purposes.
Credit support for the Commercial Paper Programs is provided by a five-year $2.0 billion senior unsecured revolving credit facility that expires on October 18, 2027 (the “Revolving Credit Facility”) which, to the extent not otherwise providing credit support for the commercial paper programs, can also be used for working capital and other general corporate purposes.
Refer to Note 14 to the consolidated financial statements for additional information on unrecognized tax benefits.
Refer to Note 13 to the consolidated financial statements for additional information on unrecognized tax benefits.
As of December 31, 2022, an increase of 100 basis points in interest rates would have decreased the fair value of our fixed-rate long-term debt by approximately $79 million.
As of December 31, 2023, an increase of 100 basis points in interest rates would have decreased the fair value of our fixed-rate long-term debt by approximately $78 million.
If the exchange rates in effect as of December 31, 2022 were to prevail throughout 2023, currency exchange rates would negatively impact 2023 estimated sales by approximately 0.3% relative to our performance in 2022.
If the exchange rates in effect as of December 31, 2023 were to prevail throughout 2024, currency exchange rates would positively impact 2024 estimated sales by approximately 0.3% relative to our performance in 2023.
The excess of the estimated fair value over carrying value (expressed as a percentage of carrying value for the respective reporting unit) for each of our reporting units as of the annual testing date ranged from approximately 25% to approximately 775%.
The excess of the estimated fair value over carrying value (expressed as a percentage of carrying value for the respective reporting unit) for each of our reporting units as of the annual testing date ranged from approximately 60% to approximately 801%.
If the expected long-term rate of return on plan assets during 2022 was reduced by 50 basis points, pension expense in 2022 would have increased by $1.1 million ($1.0 million on an after-tax basis). Income Taxes : For a description of our income tax accounting policies, refer to Note 2 and Note 14 to the consolidated financial statements.
If the expected long-term rate of return on plan assets during 2023 was reduced by 50 basis points, pension expense in 2023 would have increased by approximately $0.9 million ($0.8 million on an after-tax basis). Income Taxes : For a description of our income tax accounting policies, refer to Note 2 and Note 13 to the consolidated financial statements.
As of the date of the 2022 annual impairment test, the carrying value of goodwill in each reporting unit ranged from $171 million to $4.0 billion. Our annual goodwill impairment analysis in 2022 indicated that, in all instances, the fair values of our reporting units exceeded their carrying values and consequently did not result in an impairment charge.
As of the date of the 2023 annual impairment test, the carrying value of goodwill in each reporting unit ranged from $180.0 million to $5.6 billion. Our annual goodwill impairment analysis in 2023 indicated that, in all instances, the fair values of our reporting units exceeded their carrying values and consequently did not result in an impairment charge.
These guarantees are not recorded on our balance sheet and $41 million in commitments expire within one year of December 31, 2022 and $17 million later than one year from December 31, 2022. During 2022, we contributed $2 million and $11 million to our U.S. and non-U.S. defined benefit pension plans, respectively.
These guarantees are not recorded on our balance sheet and $46 million in commitments expire within one year of December 31, 2023 and $11 million later than one year from December 31, 2023. During 2023, we contributed $1 million and $11 million to our U.S. and non-U.S. defined benefit pension plans, respectively.
We generally address our exposure to these risks through our normal operating and financing activities. In addition, our broad-based business activities help to reduce the impact that volatility in any particular area or related areas may have on our operating profit as a whole. Interest Rate Risk We manage interest cost using a mixture of fixed-rate and variable-rate debt.
In addition, our broad-based business activities help to reduce the impact that volatility in any particular area or related areas may have on our operating profit as a whole. Interest Rate Risk We manage interest cost using a mixture of fixed-rate and variable-rate debt.
Capital expenditures are made primarily for increasing capacity, replacing aged equipment, supporting product development initiatives for hardware and software offerings, improving information technology systems, and purchasing equipment used in revenue arrangements with customers. Capital expenditures totaled $96 million in 2022, $50 million in 2021, and $76 million in 2020.
Capital expenditures are made primarily for increasing production capacity, replacing aged equipment, supporting product development initiatives for hardware and software offerings, improving information technology systems, and purchasing equipment used in revenue arrangements with customers. Capital expenditures totaled $108 million in 2023 and $96 million in 2022.
The availability of the Revolving Credit Facility as a standby liquidity facility to repay maturing commercial paper is an important factor in maintaining the existing credit ratings of the Commercial Paper Programs when we have outstanding borrowings.
As of December 31, 2023, no borrowings were outstanding under the Revolving Credit Facility. The availability of the Revolving Credit Facility as a standby liquidity facility to repay maturing commercial paper is an important factor in maintaining the existing credit ratings of the Commercial Paper Programs when we have outstanding borrowings.
For a discussion of risks related to these and other tax matters, please refer to “Item 1A. Risk Factors.” Comparison of the Years Ended December 31, 2022, 2021, and 2020 Our effective tax rate for the years ended December 31, 2022, 2021, and 2020 was 13.5%, 9.3% and 3.7%, respectively.
For a discussion of risks related to these and other tax matters, please refer to “Item 1A. Risk Factors.” Comparison of the Years Ended December 31, 2023 and 2022 Our effective tax rate for the years ended December 31, 2023 and 2022 was 12.6% and 13.5%, respectively.
(d) Primarily consist of obligations under product service and warranty policies and allowances, performance and operating cost guarantees, estimated environmental remediation costs, self-insurance and litigation claims, post-retirement benefits, pension benefit obligations, net tax liabilities, and deferred compensation obligations.
(e) Primarily consist of obligations under product service and warranty policies and allowances, performance and operating cost guarantees, estimated environmental remediation costs, self-insurance and litigation claims, post-retirement benefits, pension benefit obligations, net tax liabilities, deferred compensation obligations, and the deferred payment related to the 2023 acquisitions.
The estimated long-term rate of return for the plans was determined on a plan by plan basis based on the nature of the plan assets and ranged from 1.25% to 5.20%.
The estimated long-term rate of return for the plans was determined on a plan by plan basis based on the nature of the plan assets and ranged from 1.50% to 6.47%.
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 27 Table of Contents 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.
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.
Furthermore, changes in multilateral agreements and the tax laws of foreign jurisdictions could arise as a result of the base erosion and profit shifting project undertaken by the OECD and could significantly increase our tax provision, cash taxes paid, and effective tax rate.
Furthermore, changes in multilateral agreements and the tax laws of foreign jurisdictions could arise as a result of the base erosion and profit shifting project undertaken by the Organization for Economic Co-Operation and Development (the “OECD”) and could significantly increase our tax provision, cash taxes paid, and effective tax rate in future years.
If actual results are not consistent with management’s estimates and assumptions, goodwill and other intangible assets may be overstated and a charge would need to be taken against net earnings which would adversely affect our financial statements.
If actual results are not consistent with management’s estimates and assumptions, goodwill and other intangible assets may be overstated and a charge would need to be taken against net earnings which would adversely affect our financial statements. Revenue Recognition : We derive revenue from the sale of products and services.
On June 28, 2022, we drew and converted the entire available balance under the facility, which yielded net proceeds of $290 million. • On February 15, 2022, the maturity date of the Convertible Notes, we repaid, in cash, $1.2 billion in outstanding principal and accrued interest thereon. • On October 18, 2022, we entered into a term loan credit agreement, which provides for a 364-day delayed draw term loan facility up to an aggregate principal amount of $1.0 billion.
On June 28, 2022, we drew and converted the entire available balance under the facility, which yielded net proceeds of $290 million. • On October 18, 2022, we entered into a term loan credit agreement, which provides for a 364-day delayed draw term loan facility up to an aggregate principal amount of $1.0 billion.
Acquisitions and Divestitures 2022 Therapy Physics Divestiture 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 cash consideration of $9.6 million.
We recorded approximately $56.7 million of goodwill related to the acquisitions, which is not tax deductible. Divestitures 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 cash consideration of $9.6 million.
On the same day, we drew and converted the entire available balance under the facility, which yielded net proceeds of $107 million. • On June 21, 2022, we entered into a three-year €275 million Euro Term Loan.
Financing activities during 2022 reflected the following transactions: • On June 17, 2022, we entered into a three-year, ¥14.4 billion Yen Term Loan. On the same day, we drew and converted the entire available balance under the facility, which yielded net proceeds of $107 million. • On June 21, 2022, we entered into a three-year €275 million Euro Term Loan.
We will continue to deploy FBS to actively manage production challenges, collaborate with customers and suppliers to minimize disruptions and utilize price increases and other countermeasures to offset inflationary pressures.
We will continue to deploy FBS to actively manage production challenges, collaborate with customers and suppliers to minimize disruptions and utilize pricing and other countermeasures to offset the aforementioned dynamics.
As of December 31, 2022 and December 31, 2021, we had $405 million and $365 million borrowings outstanding under our Commercial Paper Program, respectively.
As of December 31, 2023 and 2022, we had $1.3 billion and $405.0 million borrowings outstanding under our Commercial Paper Program, respectively.
As of December 31, 2022, the commercial paper borrowings had a weighted average annual effective rate of 4.80% and a weighted average maturity of approximately 32 days. • During 2022, we repurchased 7 million shares of our outstanding common stock for approximately $443 million under our publicly-announced share repurchase program. • During 2022, we made dividend payments to common shareholders totaling $99.5 million.
As of December 31, 2023, the commercial paper borrowings had a weighted average annual effective rate of 4.80% and a weighted average maturity of approximately 32 days. • On February 15, 2022, the maturity date of the Convertible Notes, we repaid, in cash, $1.2 billion in outstanding principal and accrued interest thereon. • We repurchased 7 million shares of our outstanding common stock for approximately $443 million under our publicly-announced share repurchase program. • Dividend payments to common shareholders totaling $99.5 million.
Currency exchange rates unfavorably impacted 2022 reported sales by 3.1% as compared to 2021, as the U.S. dollar was, on average, stronger against most major currencies during 2022 as compared to exchange rate levels during 2021.
Currency exchange rates unfavorably impacted 2023 reported sales by 0.6% as compared to 2022, as the U.S. dollar was, on average, stronger against most major currencies during 2023 as compared to exchange rate levels during 2022. In the fourth quarter of 2023, the U.S. dollar was, on average, weaker against most major currencies.
Operating cash flows from continuing operations were approximately $1.3 billion in 2022, representing an increase of $310 million, or approximately 31%, as compared to 2021, and primarily attributable to the following factors: • Year-over-year increase of $219 million in Operating cash flow from net earnings from continuing operations, net of non-cash items (Amortization, Depreciation, Stock-based compensation, Loss on extinguishment of debt, Gain on investment in Vontier Corporation, Gain on litigation resolution, and Russia exit and wind down costs). • The aggregate changes in accounts receivable, inventories, and trade accounts payable used $11 million of cash during 2022 compared to using $64 million of cash during 2021.
Operating cash flows were approximately $1.4 billion in 2023, representing an increase of $50 million, or approximately 3.9%, as compared to 2022, and primarily attributable to the following factors: • Year-over-year increases of $112 million in Operating cash flow from net earnings, net of non-cash items (Amortization, Depreciation, Stock-based compensation, and Russia exit and wind down costs incurred in 2022). • The aggregate changes in accounts receivable, inventories, and trade accounts payable used $9 million of cash during 2023 compared to using $11 million of cash during 2022.
Year-over-year price increases in our Advanced Healthcare Solutions segment contributed 1.2% to sales growth during 2021, as compared to 2020, and is reflected as a component of the change in sales from existing businesses.
Year-over-year price increases in our Advanced Healthcare Solutions segment contributed 3.1% to sales growth during 2023, as compared to 2022, and is reflected as a component of the change in sales from existing businesses. Operating profit margin decreased 20 basis points during 2023 as compared to 2022.
For most of our foreign operations, we make an assertion regarding the amount of earnings in excess of intended repatriation that are expected to be held for indefinite reinvestment.
For most of our foreign operations, we make an assertion regarding the amount of earnings in excess of intended repatriation that are expected to be held for indefinite reinvestment. No provisions for foreign remittance taxes have been made with respect to earnings that are planned to be reinvested indefinitely.
If our judgments regarding revenue recognition prove incorrect, our reported revenues in particular periods may be adversely affected. Historically, our estimates of revenue have been materially correct. Stock-Based Compensation : For a description of our stock-based compensation accounting practices, refer to Note 17 to the consolidated financial statements.
If our judgments regarding revenue recognition prove incorrect, our reported revenues in particular periods may be adversely affected. Historically, our estimates of revenue have been materially correct. Pension : For a description of our pension accounting practices, refer to Note 11 to the consolidated financial statements. Certain of our U.S. and non-U.S. employees participate in noncontributory defined benefit pension plans.
We believe that a change in the statutory tax rate of any individual foreign country would not typically have a material effect on our financial statements given the geographic dispersion of our taxable income.
We conduct business globally, and, as part of our global business, we file numerous income tax returns in the U.S. federal, state, and foreign jurisdictions. We believe that a change in the statutory tax rate of any individual foreign country would not typically have a material effect on our financial statements given the geographic dispersion of our taxable income.
The annual effective rate associated with our outstanding variable-rate obligation was approximately 2.04% with interest expense of $44.9 million. On an annualized basis, a hypothetical 10 basis points increase in market interest rates as of December 31, 2022 on our variable-rate debt obligations as of December 31, 2022 would have increased our interest expense by $1.8 million in 2022.
On an annualized basis, a hypothetical 10 basis points increase in market interest rates as of December 31, 2023 on our variable-rate debt obligations as of December 31, 2023 would have increased our interest expense by approximately $2.2 million in 2023.
Refer to Note 5 to the consolidated financial statements for detailed information regarding our inventory balances as of December 31, 2022. 49 Table of Contents Acquired Intangibles and Goodwill : Our business acquisitions typically result in the recognition of goodwill, developed technology, and other intangible assets, which affect the amount of future period amortization expense and possible impairment charges that we may incur.
For a detailed discussion on the application of these and other accounting estimates, refer to Note 2 to the consolidated financial statements. Acquired Intangibles and Goodwill : Our business acquisitions typically result in the recognition of goodwill, developed technology, and other intangible assets, which affect the amount of future period amortization expense and possible impairment charges that we may incur.
As a result, our primary interest rate exposure results from changes in short-term interest rates. As these shorter duration 39 Table of Contents obligations mature, we anticipate issuing additional short-term commercial paper obligations and/or term loans to refinance all or part of these borrowings.
As a result, our primary interest rate exposure results from changes in short-term interest rates. As these shorter duration obligations mature, we anticipate issuing additional short-term commercial paper obligations and/or term loans to refinance all or part of these borrowings. The annual effective rate associated with our outstanding variable-rate obligation was approximately 5.15% with interest expense of $83 million.
The table below does not reflect any such obligations, as the timing and amounts of any such payments are uncertain.
Certain of our acquisitions may involve the potential payment of contingent consideration. The table below does not reflect any such obligations, as the timing and amounts of any such payments are uncertain.
COMPREHENSIVE INCOME Comprehensive income increased by $50 million in 2022 as compared to 2021, primarily due to an increase in net income of $147 million and favorable changes in pension benefit adjustments of $13 million, partially offset by unfavorable changes in foreign currency translation adjustments of $110 million.
COMPREHENSIVE INCOME Comprehensive income increased by $251 million in 2023 as compared to 2022, primarily due to a favorable change in foreign currency translation adjustments of $188 million, an increase in net income of $111 million, and unfavorable changes in pension benefit adjustments of $48 million.
Geographically, sales from existing businesses in developed markets increased by low single-digits during 2022 driven by low single-digit growth in North America and a slight increase in Western Europe.
Geographically, year-over-year sales from existing businesses in developed markets increased by high single-digits during 2023, driven by high single-digit growth in both North America, low single-digit growth in Western Europe, and mid-teens growth in Japan.
Russia Ukraine Conflict In February 2022, Russian forces invaded Ukraine (“Russia Ukraine Conflict”) resulting in broad economic sanctions being imposed on Russia. In the second quarter of 2022, the Company exited business operations in Russia, other than for ASP’s sterilization products, which are exempt from international sanctions as humanitarian products.
In the second quarter of 2022, the Company exited business operations in Russia, other than for ASP’s sterilization products, which are exempt from international sanctions as humanitarian products.
Year-over-year price increases in our Intelligent Operating Solutions segment contributed 2.0% to sales growth in 2021, as compared to 2020, and is reflected as a component of the change in sales from existing businesses.
Year-over-year price increases in our Intelligent Operating Solutions segment contributed 4.2% to sales growth in 2023, as compared to 2022, and is reflected as a component of the change in sales from existing businesses. 33 Table of Contents Operating profit margin increased 300 basis points during 2023 as compared to 2022.
OPERATING EXPENSES For the Year Ended December 31 ($ in millions) 2022 2021 2020 Sales $ 5,825.7 $ 5,254.7 $ 4,634.4 Selling, general, and administrative (“SG&A”) expenses 1,956.6 1,839.5 1,748.4 Research and development (“R&D”) expenses 401.5 354.8 320.7 Russia exit and wind down costs 17.9 — — SG&A as a % of sales 33.6 % 35.0 % 37.7 % R&D as a % of sales 6.9 % 6.8 % 6.9 % SG&A increased during 2022 as compared to 2021 due to higher intangible amortization and incremental expenses from our recent acquisitions and increased employee compensation expenses, customer acquisition and marketing costs, partially offset by the impact of changes in currency exchange rates.
OPERATING EXPENSES For the Year Ended December 31 ($ in millions) 2023 2022 Sales $ 6,065.3 $ 5,825.7 Selling, general, and administrative (“SG&A”) expenses 2,062.6 1,956.6 Research and development (“R&D”) expenses 397.8 401.5 Russia exit and wind down costs — 17.9 SG&A as a % of sales 34.0 % 33.6 % R&D as a % of sales 6.6 % 6.9 % SG&A expenses increased during 2023 as compared to 2022 due to increased employee compensation expenses, customer acquisition and marketing costs, and restructuring costs, partially offset by savings from productivity measures.
Sales in high growth markets increased by high teens during 2022 driven by low twenties growth in China. Year-over-year price increases in our Precision Technologies segment contributed 7.0% to sales growth during 2022 as compared to 2021, and is reflected as a component of the change in sales from existing businesses.
Year-over-year price increases in our Precision Technologies segment contributed 5.7% to sales growth during 2023 as compared to 2022, and is reflected as a component of the change in sales from existing businesses. Operating profit margin increased 120 basis points during 2023 as compared to 2022.
Advanced Healthcare Solutions Selected Financial Data For the Year Ended December 31 ($ in millions) 2022 2021 2020 Sales $ 1,321.4 $ 1,236.4 $ 1,099.4 Operating profit 107.9 101.9 2.1 Depreciation 21.6 20.5 18.1 Amortization 184.2 141.2 141.6 Operating profit as a % of sales 8.2 % 8.2 % 0.2 % Depreciation as a % of sales 1.6 % 1.7 % 1.6 % Amortization as a % of sales 13.9 % 11.4 % 12.9 % Components of Sales Growth 2022 vs. 2021 2021 vs. 2020 Total revenue growth (GAAP) 6.9 % 12.5 % Existing businesses (Non-GAAP) 2.1 % 6.0 % Acquisitions (Non-GAAP) 8.4 % 5.3 % Currency exchange rates (Non-GAAP) (3.6) % 1.2 % 2022 COMPARED TO 2021 Year-over-year sales from existing businesses increased 2.1% during 2022, primarily driven by price increases and a slight increase in volume on increased demand for sterilization products and radiation monitoring, partially offset by declines in design services, hardware offerings and quality assurance equipment.
Advanced Healthcare Solutions Selected Financial Data For the Year Ended December 31 ($ in millions) 2023 2022 Sales $ 1,320.3 $ 1,321.4 Operating profit 105.5 107.9 Depreciation 22.2 21.6 Amortization 181.4 184.2 Operating profit as a % of sales 8.0 % 8.2 % Depreciation as a % of sales 1.7 % 1.6 % Amortization as a % of sales 13.7 % 13.9 % Components of Sales Growth 2023 vs. 2022 Total revenue growth (GAAP) (0.1) % Existing businesses (Non-GAAP) 2.2 % Acquisitions and divestitures (Non-GAAP) (1.1) % Currency exchange rates (Non-GAAP) (1.2) % 2023 COMPARED TO 2022 The sales results for 2023 was primarily driven by price increases across the segment and demand increases for software and related services, partially offset by a reduction in volume in system design services.
In addition, we expect to execute discrete restructuring plans as well as our general, cost-saving measures to prepare for, and respond to, any material adverse global economic trends that may develop. 28 Table of Contents We continue to monitor the macroeconomic and geopolitical conditions which may impact our business, including spread of the COVID-19 virus, continued geopolitical conflict, global inflation, potential adverse global economic trends and sentiments, monetary and fiscal policies, international trade and relations between the U.S., China and other nations, and investment and taxation policy initiatives being considered in the United States and by the Organization for Economic Co-operation and Development (“OECD”).
We continue to monitor these conditions which may continue to impact our business, as well as potential adverse global economic trends and sentiments, monetary and fiscal policies, international trade and relations between the U.S., China and other nations, and investment and taxation policy initiatives being considered in the United States and by the Organization for Economic Co-operation and Development (“OECD”), including the potential impact of the Pillar Two initiative.
Actual results may differ materially from these estimates and judgments. We believe the following accounting estimates are most critical to an understanding of our financial statements.
We base these estimates and judgments on historical experience, the current economic environment, and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ materially from these estimates and judgments. We believe the following accounting estimates are most critical to an understanding of our financial statements.
Our effective tax rate for 2022 differs from the U.S. federal statutory rate of 21% due primarily to the positive and negative effects of the TCJA, U.S. federal permanent differences, the impacts of credits and deductions provided by law, including those associated with state income taxes, an increase to in our uncertain tax positions relating to higher interest rates, and the effect of Russia exit and wind down costs for which no tax benefit was recognized.
Our effective tax rate for 2023 differs from the U.S. federal statutory rate of 21% due primarily to the positive and negative effects of the Tax Cuts and Jobs Act (“TCJA”), U.S. federal permanent differences, the impacts of credits and deductions provided by law, including those associated with state income taxes, a decrease in our uncertain tax positions, and the effect of changes in tax rates enacted in the current period.
The amount of foreign remittance taxes that may be applicable to such earnings is not readily determinable given local law restrictions that may apply to a portion of such earnings, unknown changes in foreign tax law that may occur during the applicable restriction periods caused by applicable local corporate law for cash repatriation, and the various tax planning alternatives we could employ if we repatriated these earnings.
The amount of foreign remittance taxes that may be applicable to such earnings is not readily determinable given local law restrictions that may apply to a portion of such earnings, unknown changes in foreign tax law that may occur during the applicable restriction periods caused by applicable local corporate law for cash repatriation, and the various tax planning alternatives we could employ if we repatriated these earnings. 42 Table of Contents Cash Requirements The following table sets forth a summary of our short-term and long-term cash requirements as of December 31, 2023 under (1) long-term debt principal and interest obligations, (2) leases, (3) purchase obligations and (4) other long-term liabilities reflected on our balance sheet under GAAP.
The ultimate amounts we will contribute depend upon, among other things, legal requirements, underlying asset returns, the plan’s funded status, the anticipated tax deductibility of the contribution, local practices, market conditions, interest rates, and other factors. 48 Table of Contents As of December 31, 2022 we expect to have sufficient liquidity to satisfy our cash needs for the foreseeable future, including our cash needs in the United States.
The ultimate amounts we will contribute depend upon, among other things, legal requirements, underlying asset returns, the plan’s funded status, the anticipated tax deductibility of the contribution, local practices, market conditions, interest rates, and other factors.
In connection with the transaction, we wrote-off the remaining unamortized deferred financing costs of $0.7 million and recorded a loss on extinguishment of $8 million. 44 Table of Contents Overview of Cash Flows and Liquidity Following is an overview of our cash flows and liquidity: Year Ended December 31, ($ in millions) 2022 2021 2020 Total operating cash provided by continuing operations $ 1,303.2 $ 992.9 $ 977.7 Cash paid for acquisitions, net of cash received $ (12.8) $ (2,570.1) $ (40.4) Payments for additions to property, plant and equipment (95.8) (50.0) (75.7) Proceeds from sale of business and property 9.6 4.5 5.3 All other investing activities (3.5) — — Total investing cash used in continuing operations $ (102.5) $ (2,615.6) $ (110.8) Proceeds from borrowings (maturities longer than 90 days), net of issuance costs $ 1,394.1 $ 999.8 $ 741.7 Net proceeds from (repayments of) commercial paper borrowings 38.5 364.9 (1,141.9) Payment of 0.875% convertible senior notes due 2022 (1,156.5) — — Repurchase of common shares (442.9) — — Repayment of borrowings (maturities greater than 90 days) (1,000.0) (611.1) (1,730.8) Payment of common stock cash dividend to shareholders (99.5) (97.7) (94.4) Payment of mandatory convertible preferred stock cash dividend to shareholders — (34.5) (69.0) Net cash consideration received from Vontier Separation — — 1,598.0 All other financing activities (6.7) 30.6 20.7 Total financing cash (used in) provided by continuing operations $ (1,273.0) $ 652.0 $ (675.7) Operating Activities Operating cash flows from continuing operations can fluctuate significantly from period-to-period as working capital needs and the timing of payments for income taxes, interest, pension funding, and other items impact reported cash flows.
If changes in financial markets or other areas of the economy adversely affect our access to the capital markets and other financing sources, we would expect to rely on a combination of available cash and existing available capacity under our credit facilities to provide short-term funding. 39 Table of Contents Overview of Cash Flows and Liquidity Following is an overview of our cash flows and liquidity: Year Ended December 31, ($ in millions) 2023 2022 Net cash provided by operating activities $ 1,353.6 $ 1,303.2 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) Proceeds from borrowings (maturities longer 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) Repurchase of common shares (272.9) (442.9) Repayment of borrowings (maturities greater than 90 days) (1,000.0) (1,000.0) 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) Operating Activities Operating cash flows can fluctuate significantly from period-to-period as working capital needs and the timing of payments for income taxes, interest, pension funding, and other items impact reported cash flows.
We generate substantial cash from operating activities and believe that our operating cash flow and other sources of liquidity, which consist of access to term loans, commercial paper, and our revolving credit facility, in addition to short-term liquidity benefits provided by cash repatriation will be sufficient to allow us to continue funding and investing in our existing businesses, consummate strategic acquisitions, make interest and principal payments on our outstanding indebtedness, fulfill our contractual obligations, and manage our capital structure on a short and long-term basis. 40 Table of Contents On March 27, 2020, the U.S. federal government enacted the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), an emergency economic stimulus package in response to the COVID-19 outbreak which, among other things, contains numerous income tax provisions and short-term liquidity assistance measures.
We generate substantial cash from operating activities and believe that our operating cash flow and other sources of liquidity, which consist of available cash, our revolving credit facility, and access to commercial paper, bank loans, and capital markets, will be sufficient to allow us to continue funding and investing in our existing businesses, consummate strategic acquisitions, make interest and principal payments on our outstanding indebtedness, fulfill our contractual obligations, and manage our capital structure on a short and long-term basis.
During 2022, price increases exceeded inflationary increases that we experienced on purchased materials. The strengthening of the U.S. dollar relative to other currencies reduced our sales by 3.1% during 2022, as compared to 2021 and may continue to impact our results in future periods.
The strengthening of the U.S. dollar relative to other currencies reduced our sales by 0.6% during 2023, as compared to 2022 and may continue to impact our results in future periods. Sales from divested business, offset by revenue from acquisitions reduced sales by 0.1% as compared to 2022.
Cash and Cash Requirements Cash As of December 31, 2022, we held approximately $0.7 billion of cash and cash equivalents that were invested in highly liquid investment-grade instruments with a maturity of 90 days or less. The annual effective rate was immaterial. Approximately 16% of our cash at December 31, 2022 was held in the U.S.
Cash and Cash Requirements Cash As of December 31, 2023, we held approximately $1.9 billion of cash and cash equivalents that were invested in highly liquid investment-grade instruments with a maturity of 90 days or less and yielded insignificant interest income during 2023.
Accordingly, foreign currency transaction gains or losses on the debt were deferred in the foreign currency translation component of Accumulated other comprehensive income (loss) (“AOCI”) as an offset to the foreign currency translation adjustments on our investments in foreign subsidiaries. In 2022, we recognized after-tax losses of $5.1 million in Other comprehensive income (loss) related to the net investment hedges.
Accordingly, foreign currency transaction gains or losses on the debt were deferred in the foreign currency translation component of AOCI as an offset to the foreign currency translation adjustments on our investments in foreign subsidiaries.

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