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Year-over-year tone shift - average net-tone change across Risk Factors and MD&A vs the prior 10-K. This filing is -0.04pp more bearish than last year's.
Why YoY instead of absolute: the LM lexicon has ~6.6× more negative words than positive (legal/risk-disclosure language is heavy on hedging), so every 10-K reads bearish on raw tone. Year-over-year change strips that bias and surfaces the actual shift in management's framing.
Tone shift by section
The two components the gauge averages: how Risk Factors and MD&A each shifted in net tone versus last year's 10-K. The headline above is their average, so a green needle over a soft section just means the other section carried it.
Risk Factors
-0.21pp
Flat
Net-tone change vs last year's 10-K.
MD&A
+0.13pp
Flat
Net-tone change vs last year's 10-K.
Per-snippet highlights
Sentence-level sentiment highlighting with category and subcategory filters is coming once the snippet-scoring pipeline lands. For now, dig into the actual section text on the Sections tab.
Language change vs prior 10-K
Risk Factors (Item 1A) - words with the biggest YoY frequency increase
Negative rising
invalidated+2
volatile+2
conflicting+2
opposing+2
adverse+1
Positive rising
successfully+2
leadership+2
Risk Factors (Item 1A)
10,528 words
ITEM 1A. RISK FACTORS
You should carefully consider the risks and uncertainties described below, together with the information included elsewhere in this Annual Report on Form 10-K and other documents we file with the SEC. The risks and uncertainties described below are those that we have identified as material, but are not the only risks and uncertainties facing us. Our business is also subject to general risks and uncertainties that affect many other companies, such as market conditions, economic conditions, geopolitical events, changes in laws, regulations, or accounting rules, fluctuations in interest rates, terrorism, wars or conflicts, major health concerns, natural disasters, or other disruptions of expected business conditions. 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 results.
Our business is impacted by general economic conditions, and economic conditions arising from any global economic growth, reduced demand or consumer confidence, energy, manufacturing or component supply constraints arising from international , high inflation rates and the corresponding interest rate policies, in currency and credit markets, actual or anticipated on sovereign debt, changes in global trade policies, and underemployment rates, immigration policies, reduced levels of capital expenditures, changes in government fiscal and monetary policies, political initiatives targeted at reducing government funding, government reduction and budget negotiation dynamics, sequestration, other austerity measures, political and social , other geopolitical , sanctions, natural , public health , terrorist attacks, and other affect us and our distributors, customers, and suppliers, including having the effect of:
Language change vs prior 10-K
MD&A (Item 7) - words with the biggest YoY frequency increase
Negative rising
declines+4
discontinued+3
countermeasures+3
restructuring+2
invalidated+2
Positive rising
favorable+3
gains+3
achieved+2
positively+2
greater+1
MD&A (Item 7)
8,798 words
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of Fortive’s financial condition and results of operations for the fiscal years ended December 31, 2025, December 31, 2024, and December 31, 2023 should be read in conjunction with our audited consolidated financial statements and accompanying notes included in Part II, Item 8 of this Form 10-K. This Item generally discusses 2025, 2024, and 2023 items and year-to-year comparisons between 2025 and 2024, and 2024 and 2023.
Fortive Corporation (“Fortive,” “the Company,” “we,” “us,” or “our”) innovates essential technologies to keep our world safe and productive. Our strategic segments - Intelligent Operating Solutions and Advanced Healthcare Solutions - include iconic inventor brands with leading positions in their markets. Our businesses design, develop, manufacture, and market products, software, and services, building upon leading brand names, innovative technologies, and strong market positions. Our research and development, manufacturing, sales, distribution, service, and administrative facilities are located in approximately 50 countries around the world.
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Precision Technologies Separation
On June 28, 2025 (the “Distribution Date”), the Company completed the separation (the “Separation” or the “PT Separation”) of its former Precision Technologies segment by distributing to Fortive shareholders on a pro rata basis all of the issued and outstanding common stock of Ralliant Corporation (“Ralliant”), the entity incorporated to hold the PT businesses. The accounting requirements for reporting Ralliant as a operation were met when the Separation was completed. Accordingly, the accompanying consolidated financial statements for all periods presented reflect this business as a operation. Unless otherwise indicated, all references in this Annual Report refer to continuing operations. Refer to Note 3 of the consolidated financial statements for additional information.
• 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;
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• 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.
In addition, adverse general economic conditions may lead to instability in U.S. and global capital and credit markets, including market disruptions, limited liquidity, and interest rate volatility. If we are unable to access capital and credit markets on terms that are acceptable to us or our lenders are unable to provide financing in accordance with their contractual obligations, we may not be able to make certain investments or acquisitions or fully execute our business plans and strategies. Furthermore, our suppliers and customers are also dependent upon the capital and credit markets. Limitations on the ability of customers, suppliers, or financial counterparties to access credit at interest rates and on terms that are acceptable to them could lead to insolvencies of key suppliers and customers, limit or prevent customers from obtaining credit to finance purchases of our products and services, and cause delays in the delivery of key products from suppliers.
If growth in the global economy or in any of the markets we serve slows for a significant period, if there is significant deterioration in the global economy or such markets, if there is instability in global capital and credit markets, or if improvements in the global economy do not benefit the markets we serve, our business and financial results would be adversely affected.
If we cannot adjust our manufacturing capacity, supply chain management or the purchases required for our manufacturing activities to reflect changes in market conditions, international trade policies, customer demand and supply chain disruptions, our profitability may suffer. In addition, our reliance upon sole or limited sources of supply for certain materials, components, and services could cause production interruptions, delays and inefficiencies.
We purchase materials, components, and equipment from third parties for use in our manufacturing operations. 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. During a market upturn or general supply chain disruptions, suppliers have extended lead times, limited supplies, or increased prices. If we cannot purchase sufficient products at competitive prices and quality and on a timely enough basis to meet demand for our products, we may not be able to satisfy market demand, product shipments may be delayed, our costs may increase, or we may breach our contractual commitments and incur liabilities.
Conversely, in order to secure supplies for the production of products, we sometimes enter into noncancelable purchase commitments with vendors, which could impact our ability to adjust our inventory to reflect declining market demands. 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 these or other suppliers encounter financial, operating, quality, or other difficulties or if our relationship with them changes, including as a result of contractual disputes, we might not be able to quickly establish or qualify replacement sources of supply. The supply chains for our businesses could also be disrupted by supplier capacity constraints, operational or quality issues, bankruptcy or exiting of the business for other reasons, decreased availability of key raw materials or commodities, and external events such as natural disasters, severe weather events that are occurring more frequently or with more intense effects as a result of global climate change, public health crises, war, terrorist actions, governmental actions, and legislative or regulatory changes, among others. Any of these factors could result in production interruptions, delays, extended lead times, and inefficiencies.
Because we cannot always immediately adapt our production capacity and related cost structures to changing market conditions, our manufacturing capacity may at times exceed or fall short of our production requirements. Any or all of these problems could result in the loss of customers, provide an opportunity for competing products to gain market acceptance, and otherwise adversely affect our profitability.
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Our financial results are subject to fluctuations in the cost and availability of commodities or components that we use in our operations.
As discussed in the section entitled “Business—Materials,” our manufacturing and other operations employ a wide variety of components, raw materials, and other commodities. Prices for and availability of these components, raw materials, and other commodities have fluctuated significantly in the past. In particular, the widespread supply chain challenges due to labor, raw material, and component shortages, as well as widespread logistics issues, affected multiple industries, raised material and shipping costs, limited the quantities available, and extended the lead time required for supplies and deliveries. 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, due to the highly competitive nature of the industries that we serve, the cost-containment efforts of our customers, and the terms of certain contracts we are party to, if commodity or component prices rise we may be unable to pass along cost increases through higher prices. If we are unable to fully recover higher commodity or component costs through price increases or offset these increases through cost reductions, or if there is a time delay between the increase in costs and our ability to recover or offset these costs, we could experience lower margins and profitability and our financial results could be adversely affected.
Our growth could suffer if the markets into which we sell our products and services decline, do not grow as anticipated, or experience cyclicality.
Our growth depends in part on the growth of the markets which we serve, and visibility into our markets is limited (particularly for markets into which we sell through distribution). Our quarterly sales and profits depend substantially on the volume and timing of orders received during the fiscal quarter, which are difficult to forecast. Any decline or lower than expected growth in our served markets could diminish demand for our products and services, which could adversely affect our financial results. Certain of our businesses operate in industries that may experience periodic, cyclical downturns. In addition, in certain of our businesses, demand depends on customers’ capital spending budgets, and product and economic cycles can affect the spending decisions of these entities. Demand for our products and services is also sensitive to changes in customer order patterns, which may be affected by announced price changes, changes in incentive programs, new product introductions, and customer inventory levels. Any of these factors could adversely affect our growth and results of operations in any given period.
We face intense competition and if we are unable to compete effectively, we may experience decreased demand and decreased market share. Even if we compete effectively, we may be required to reduce prices for our products and services.
Many of our businesses operate in industries that are intensely competitive and have been subject to consolidation. Because of the range of the products and services we sell and the variety of markets we serve, we encounter a wide variety of competitors. See “Business—Competition.” In order to compete effectively, we must retain longstanding relationships with major customers and continue to grow our business by establishing relationships with new customers, continually developing new or enhanced products and services to maintain and expand our brand recognition and leadership position in various product and service categories, and penetrating new markets, including high-growth markets. Our failure to compete effectively and/or pricing pressures resulting from competition may adversely impact our financial results, and our expansion into new markets may result in greater-than-expected risks, liabilities and expenses.
Our growth depends in part on the timely development, commercialization and customer acceptance of new and enhanced products and services based on technological innovation.
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 results will suffer. 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.
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In addition, if we fail to accurately predict future customer needs and preferences or fail to produce viable technologies, we may invest heavily in research and development of products and services that do not lead to significant revenue, which would adversely affect our profitability. Even if we successfullyinnovate and develop new and enhanced products and services, we may incur substantial costs in doing so, and our profitability may suffer.
Our ability to successfully manage our leadership transition in connection with the completed Separation and attract, develop, and retain senior leaders and other key employees is critical to our success.
In connection with the Separation and as part of our long-term succession planning, we transitioned each of our Chief Executive Officer, Chief Financial Officer, and Chief People Officer roles in 2025 and early 2026. Our future performance is dependent upon our ability to manage successfully the leadership transitions and continue to attract, motivate and retain key leaders and other key employees. Unplannedloss of services of executives and other key employees or the failure to attract, motivate and develop new executives or other key employees could prevent us from successfully implementing and executing business strategies, and therefore adversely affect our financial results.
Our success also depends on our ability to attract, develop and retain a talented employee base. 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. If we are not competitive or successful in our recruiting efforts, if we cannot attract or retain key employees, if we do not adequately ensure effective succession planning or transfer of knowledge for our key employees, or if some of our key employees are unable to enter, or choose to leave, the United States given uncertainties relating to immigration laws or immigration enforcement actions, our ability to deliver and execute on our operational, development, or portfolio strategies would be adversely affected.
Disruptions in, or breaches in security of, our information technology systems, exfiltration of confidential or sensitive data, and other cyberattacks have adversely affected, and in the future could adversely affect, our business.
We collect, store, have access to and otherwise process certain confidential or sensitive data, including proprietary business information, customer data, personal data, and other information that is subject to privacy and security laws, regulations and/or customer-imposed controls. We rely on information technology systems, some of which are managed by third parties and some of which are managed on a decentralized, independent basis by our operating companies, to process, transmit, and store electronic information (including sensitive data such as confidential business information and personally identifiable data relating to employees, customers, and other business partners), and to manage or support a variety of critical business processes and activities. These systems can be, and in the past have been, damaged, disrupted, accessed, or shut down due to attacks by computer hackers, nation states, cyber-criminals, computer viruses, error or malfeasance by employee or former employees, power outages, hardware failures, telecommunication or utility failures, catastrophes, or other similar events, and in any such circumstances our system redundancy and other disaster recovery planning may be ineffective or inadequate. 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, and have resulted, 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. 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. 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. Any of the attacks, breaches, or other disruptions or damage described above, as well as corresponding investigation, containment, and remediation efforts, can disrupt our operations, delay production and shipments, result in theft of our and our customers’ intellectual property and trade secrets, disclosure of personal data, 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 results.
Defects and unanticipated use or inadequate disclosure with respect to our products (including software) or services could adversely affect our business, reputation, and financial results.
Manufacturing or design defects impacting safety, cybersecurity, or quality issues (or the perception of such issues) for our products and services can lead to personal injury, death, property damage, data loss, or other damages. These events could lead to recalls or safety or other public alerts, result in product or service downtime or the temporary or permanent removal of a product or service from the market and result in product liability or similar claims being brought against us. Recalls, downtime, removals, and product liability and similar claims (regardless of their validity or ultimate outcome) can result in significant costs, as well as negative publicity and damage to our reputation that could reduce demand for our products and services.
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Adverse changes in our relationships with, or the financial condition, performance, purchasing patterns, or inventory levels of, key distributors and other channel partners could adversely affect our financial results.
Certain of our businesses sell a significant amount of their products to key distributors and other channel partners that have valuable relationships with customers and end-users. Some of these distributors and other partners also sell our competitors’ products or compete with us directly, and if they favor competing products for any reason they may fail to market our products effectively. 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 results. 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.
Work stoppages, works council campaigns, and other labor disputes could adversely impact our productivity and results of operations.
We have various non-U.S. collective labor arrangements. We are subject to potential work stoppages, works council campaigns, and other labor disputes, any of which could adversely impact our productivity, results of operations, and reputation.
If we sufferloss to our facilities, supply chains, distribution systems, or information technology systems due to catastrophe or other events, our operations could be seriouslyharmed.
Our facilities, supply chains, distribution systems, and information technology systems are subject to catastrophicloss due to fire, flood, earthquake, hurricane, public health crises, war, terrorism, or other natural or man-made disasters, including those caused by climate change and other climate-related causes. If any of these facilities, supply chains, or systems were to experience a catastrophicloss, it could disrupt our operations, delay production and shipments, result in defective products or services, damage customer relationships and our reputation, and result in legal exposure and large repair or replacement expenses. The third-party insurance coverage that we maintain will vary from time to time in both type and amount depending on cost, availability, and our decisions regarding risk retention, and may be unavailable or insufficient to protect us againstlosses.
If we do not or cannot adequately protect our intellectual property, or if third parties infringe our intellectual property rights, we may suffer competitive injury or expend significant resources enforcing our rights.
We own numerous patents, trademarks, copyrights, trade secrets, and other intellectual property and have licenses to intellectual property owned by others, which in aggregate are important to our business. The intellectual property rights that we obtain, however, may not be sufficiently broad or otherwise may not provide us a significant competitive advantage, and patents may not be issued for pending or future patent applications owned by or licensed to us. In addition, the steps that we and our licensors have taken to maintain and protect our intellectual property may not prevent it from being challenged, invalidated, circumvented, designed-around, or becoming subject to compulsory licensing, particularly in countries where intellectual property rights are not highly developed or protected. In some circumstances, enforcement may not be available to us because an infringer has a dominant intellectual property position or for other business reasons, or countries may require compulsory licensing of our intellectual property. We also rely on nondisclosure and noncompetition agreements with employees, consultants, and other parties to protect, in part, trade secrets and other proprietary rights. There can be no assurance that these agreements will adequately protect our trade secrets and other proprietary rights and will not be breached, that we will have adequate remedies for any breach, that others will not independently develop substantially equivalent proprietary information, or that third parties will not otherwise gain access to our trade secrets or other proprietary rights. Our failure to obtain or maintain intellectual property rights that convey competitive advantage, adequately protect our intellectual property or detect or prevent circumvention or unauthorized use of such property, and the cost of enforcing our intellectual property rights could adversely impact our business, including our competitive position, and financial results.
Third parties may claim that we are infringing or misappropriating their intellectual property rights and we could suffer significant litigation expenses, losses, or licensing expenses or be prevented from selling products or services.
From time to time, we receive notices from third parties alleging intellectual property infringement or misappropriation. Any dispute or litigation regarding intellectual property could be costly and time-consuming due to the complexity of many of our technologies and the uncertainty of intellectual property litigation. Our intellectual property portfolio may not be useful in asserting a counterclaim, or negotiating a license, in response to a claim of infringement or misappropriation. 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, be required to license technology or other intellectual property rights from others, be required to cease marketing, manufacturing, or using certain products, or be required to redesign, re-engineer, or re-brand our products at
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substantial cost, any of which could adversely impact our competitive position and financial results. Third-party intellectual property rights may also make it more difficult or expensive for us to meet market demand for particular product or design innovations. If we are required to seek licenses under patents or other intellectual property rights of others, we may not be able to acquire these licenses on acceptable terms, if at all. Even if we successfullydefendagainstclaims of infringement or misappropriation, we may incur significant costs and diversion of management attention and resources, which could adversely affect our business and financial results.
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, including restructuring activities relating to our recent separation of Ralliant. These significant restructuring activities as well as our regular ongoing cost reduction activities (including in connection with the integration of acquired businesses) reduce our available talent, assets, and other resources and could slowimprovements in our products and services, adversely affect our ability to respond to customers and limit our ability to increase production quickly if demand for our products increases. In addition, delays in implementing planned restructuring activities or other productivity improvements, unexpected costs, or failure to meet targeted improvements may diminish the operational or financial benefits we realize from such actions. Any of the circumstances described above could adversely impact our business and financial results.
We are subject to a variety of litigation and other legal and regulatory proceedings in the course of our business that could adversely affect our financial results.
We are subject to a variety of litigation and other legal and regulatory proceedings incidental to our business (or the business operations of previously owned entities), including claims for damages arising out of the use of products or services and claims relating to intellectual property matters, employment matters, tax matters, commercial disputes, disputes with our suppliers or vendors, competition and sales and trading practices, environmental matters, personal injury, insurance coverage, and acquisition or divestiture-related matters, as well as regulatory investigations or enforcement. We may also become subject to lawsuits as a result of past or future acquisitions or as a result of liabilities retained from, or representations, warranties, or indemnities provided in connection with, divested businesses. These lawsuits may include claims for compensatory damages, punitive and consequential damages, and/or injunctive relief. The defense of these lawsuits may divert our management’s attention, we may incur significant expenses in defending these lawsuits, we may experience disruption in supply or sales, and we may be required to pay damage awards or settlements or become subject to equitable remedies that could adversely affect our operations and financial results. Moreover, any insurance or indemnification rights that we may have may be insufficient or unavailable to protect us against such losses. In addition, developments in proceedings in any given period may require us to adjust the loss contingency estimates that we have recorded in our financial results, record estimates for liabilities or assets that we were previously unable to estimate, or pay cash settlements or judgments. Any of these developments could adversely affect our financial results in any particular period. 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 results and reputation.
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. Physical risk resulting from acute changes (such as hurricane, tornado, wildfire or flooding) or chronic changes (such as droughts, heat waves or sea level changes) in climate patterns can adversely impact our facilities and operations and disrupt our supply chains and distribution systems. Concern over climate change can also result in new or additional legal or regulatory requirements designed to reduce greenhouse gas emissions and/or mitigate the effects of climate change on the environment (such as taxation of, or caps on the use of, carbon-based energy). 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 results. In addition, any failure to adequately address stakeholder expectations with respect to environmental, social and governance matters may result in the loss of business, adverse reputational impacts, diluted market valuations and challenges in attracting and retaining customers and talented employees.
We use artificial intelligence in our business and in certain of 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.
We incorporate artificial intelligence (“AI”) solutions into certain of our products, services and features, and we have leveraged AI, including generative AI, in our product development, our operations, and our software programming. 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.
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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. 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. 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. 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 unintendedharmful impacts.
Risk Related to our International Operations
International economic, political, legal, compliance, and business factors could negatively affect our financial results.
In 2025, approximately 44% 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. Since our growth strategy depends in part on our ability to further penetrate markets outside the United States and increase the localization of our products and services, we expect to continue to increase our sales and presence outside the United States, particularly in high-growth markets, such as Eastern Europe, the Middle East, Africa, Latin America, and Asia. Regional conflicts, including the Russian invasion of Ukraine, conflict in the Middle East, tension between China and Taiwan, could result in sanctions, regional market instability, increased energy and transportation costs, and other adverse regional financial and economic conditions, any of which can impact the demand for, or our ability to sell, our products and services in the impacted regions. Furthermore, our international business, including our business in high-growth markets outside the United States, is subject to additional 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;
• 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;
• 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 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.
Any of these risks could negatively affect our financial results and growth rate.
Trade relations between the United States and other countries have been volatile and could have a material adverse effect on our business and financial results.
We participate in various end markets outside the United States. During 2025, sales outside the United States accounted for approximately 44% of our total sales for the year. In addition, we have several facilities outside the United States, many of which serve multiple Fortive operating companies in manufacturing, distribution, product design, and selling, general and administrative functions.
Recent economic, foreign and political policies and enforcement actions, including trade restrictions, withdrawal from global trade agreements, uncertainty relating to the future rate or enforceability of tariffs and reciprocal tariffs, including as a result of the recent ruling by the Supreme Court of the United States invalidating certain tariffs previously imposed under the
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International Emergency Economic Powers Act (“the IEEPA Ruling”), changes to immigration laws or enforcement, uncertainty relating to availability of refunds on tariffs that have been invalidated, expectations or actions of customers, suppliers and other distribution or supply chain partners on pricing or costs as a result of the IEEPA Ruling, uncertainty relating to the status of prior trade agreements between the United States and other countries that had been adopted in response to tariffs that have subsequently been invalidated by the IEEPA Ruling, and other similar actions may result in increased transaction and operating costs, adverse regional and global economic conditions, reduced ability to attract talent, supply chain constraints, responsive economic and nationalism outside the United States, and volatile regulatory environment, any of which may adversely affect our business or demand for our products and services.
As a result, there continues to be significant uncertainty about, and volatility in, the future relationship between the United States and other countries, especially with respect to trade policies, treaties, government regulations, sanctions and tariffs. In particular, there continues to be uncertainty about U.S. foreign trade policy with respect to China, including any changes to the trade policies that have been adopted, and that may result from the IEEPA Ruling, including any alternative legislative or executive actions that may be adopted to reimpose similar tariffs. Any increased sanctions, tariffs, other trade barriers or restrictions or uncertainty on global trade adopted by or against the United States could adversely impact our business and financial results.
Foreign currency exchange rates, including the volatility thereof, may adversely affect our financial results.
Sales and purchases in currencies other than the U.S. dollar expose us to fluctuations in foreign currencies relative to the U.S. dollar and may adversely affect our financial results. Overall strengthening of the U.S. dollar during most of fiscal year 2025 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. 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. In addition, certain of our businesses transact in a currency other than the business’s functional currency, and movements in the transaction currency relative to the functional currency could also result in unfavorable exchange rate effects. We also face exchange rate risk from our investments in subsidiaries owned and operated in foreign countries and borrowings denominated in foreign currencies.
Risk Related to Our Investments and Dispositions
Our strategy requires us to execute and deliver disciplined capital allocation.
Our Fortive Accelerated strategy requires us to execute and deliver disciplined capital allocation, including investments in organic growth, identifying and successfully acquiring businesses at appropriate prices, and to make other appropriate investments that support our long-term strategy. In particular, acquisitions and investments that align with our portfolio strategy may be difficult to identify and execute for a number of reasons, including high valuations, competition among prospective buyers, the availability of affordable funding in the capital markets and the need to satisfy applicable closing conditions and obtain antitrust and other regulatory approvals on acceptable terms. Changes in accounting or regulatory requirements or instability in the credit markets could also adversely impact our ability to consummate acquisitions and investments.
Our acquisition of businesses, investments, joint ventures, and other strategic relationships could negatively impact our financial results.
As part of our business strategy we acquire businesses, make investments, and enter into joint ventures and other strategic relationships in the ordinary course, some of which may be material; please refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for additional details. These acquisitions, investments, joint ventures, 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 results:
• any business, technology, service, or product that we acquire or invest in could under-perform relative to our expectations and the price that we paid for it, or not perform in accordance with our anticipated timetable, or we could fail to operate any such business profitably;
• we may incur or assume significant debt in connection with our acquisitions, investments, joint ventures, or strategic relationships, which could also cause a deterioration of our credit ratings, result in increased borrowing costs and interest expense, and diminish our future access to the capital markets;
• acquisitions, investments, joint ventures, 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;
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• acquisitions, investments, joint ventures, 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, investment, joint venture, 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 or investee’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 and joint ventures, 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 and investments, 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 our joint venture partners or other strategic partners and we may not be able to direct the management and operations of the joint venture or other strategic relationship in the manner we believe is most appropriate, exposing us to additional risk.
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. 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 results.
Divestitures or other dispositions could negatively impact our business, and contingent liabilities from businesses that we have sold could adversely affect our financial results.
We continually assess the strategic fit of our existing businesses and may divest or otherwise dispose of businesses that are deemed not to fit with our strategic plan or are not achieving the desired return on investment. For example, in 2018, we split-off most of our automation and specialty platform in a Reverse Morris Trust transaction with Altra Industrial Motion Corp. and, in 2020 and 2025, we spun-off our former Industrial Technologies segment and our former Precision Technologies segment, respectively. These transactions pose risks and challenges that could negatively impact our business. For example, when we decide to sell or otherwise dispose of a business or assets, we may be unable to do so on satisfactory terms within our anticipated timeframe or at all, and even after reaching a definitive agreement to sell or dispose a business the sale is typically subject to satisfaction of pre-closing conditions which may not become satisfied. In addition, divestitures or other dispositions may dilute our earnings per share, have other adverse financial and accounting impacts and distract management, and disputes may arise with buyers. In addition, we have retained responsibility for and/or have agreed to indemnify buyers against some known and unknown contingent liabilities related to a number of businesses we have sold or disposed of. The resolution of these contingencies has not had a material effect on our financial results but we cannot be certain that this favorable pattern will continue.
Potential indemnification liabilities to Ralliant and Vontier pursuant to the respective separation agreements could materially and adversely affect our businesses, financial condition, results of operations, and cash flows.
We entered into a separation and distribution agreement and related agreements with Vontier and with Ralliant to govern the separation and distribution of Vontier and Ralliant, respectively, and the relationship between each of the two companies and Fortive going forward. These agreements provide for specific indemnity and liability obligations of each party and could lead to disputes between us. If we are required to indemnify Vontier or Ralliant under the circumstances set forth in these agreements, we may be subject to substantial liabilities. In addition, with respect to the liabilities for which Vontier or Ralliant has agreed to indemnify us under these agreements, there can be no assurance that the indemnity rights we have against Vontier or Ralliant, as applicable, will be sufficient to protect us against the full amount of the liabilities, or that Vontier and Ralliant will be able to fully satisfy its indemnification obligations. Each of these risks could negatively affect our businesses, financial condition, results of operations, and cash flows.
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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.
We compete in markets in which we and our customers must comply with supranational, federal, state, local, and other jurisdictional regulations, such as regulations governing health and safety, the environment, and electronic communications, and market standardizations. We develop, configure, and market our products and services to meet customer needs created by these regulations and standards. These regulations and standards are complex, change frequently, have tended to become more stringent over time, and may be inconsistent across jurisdictions. Any significant change or delay in implementation in any of these regulations or standards (or in the interpretation, application, or enforcement thereof) could reduce or delay demand for our products and services, increase our costs of producing or delay the introduction of new or modified products and services, or restrict our existing activities, products, and services. In addition, in certain of our markets our growth depends in part upon the introduction of new regulations or implementation of industry standards on the timeline we expect. In these markets, the delay or failure of governmental and other entities to adopt or enforce new regulations or industry standards, or the adoption of new regulations or industry standards which our products and services are not positioned to address, could adversely affect demand. In addition, regulatory deadlines or industry standard implementation timelines may result in substantially different levels of demand for our products and services from period to period.
Our reputation, ability to do business, and financial results may be impaired by improper conduct by any of our employees, agents, or business partners.
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 falseclaims, sales and marketing practices, conflicts of interest, competition, export and import compliance, and data privacy. In particular, the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act, and similar anti-bribery laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments to government officials for the purpose of obtaining or retaining business, and we operate in many parts of the world that have experienced governmental corruption to some degree. Any such improper actions or allegations of such acts could damage our reputation and subject us to civil or criminalinvestigations in the United States and in other jurisdictions and related shareholder lawsuits, could lead to substantial civil and criminal, monetary and non-monetary penalties and could cause us to incur significant legal and investigatory fees. In addition, though we rely on the third parties with whom we do business to adhere to the law and to our high standards of conduct, material violations of such standards of conduct could occur that could have a material effect on our financial results.
Our operations, products, and services expose us to the risk of environmental, health, and safety liabilities, costs, and violations that could adversely affect our reputation and financial results.
Our operations, products and services are subject to environmental laws and regulations, which impose limitations on the discharge of pollutants into the environment and establish standards for the use, generation, treatment, storage, and disposal of hazardous and non-hazardous wastes. We must also comply with various health and safety regulations in the United States and abroad in connection with our operations. In addition, some of our operations require the controlled use of hazardous or energetic materials in the development, manufacturing, or servicing of our products. We cannot assure you that our environmental, health, and safety compliance program has been or will at all times be effective. Failure to comply with any of these laws could result in civil and criminal, monetary and non-monetary penalties and damage to our reputation. In addition, we cannot provide assurance that our costs of complying with current or future environmental protection and health and safety laws will not exceed our estimates or adversely affect our financial results. Moreover, any accident that results in significant personal injury or property damage, whether occurring during development, manufacturing, servicing, use, or storage of our products, may result in significant production interruption, delays, or claims for substantial damages caused by personal injuries or property damage, harm to our reputation, and reduction in morale among our employees, any of which may adversely and materially affect our results of operations.
In addition, we may incur costs related to remedial efforts or alleged environmental damage associated with past or current waste disposal practices or other hazardous materials handling practices. We are also from time to time party to personal injury or other claims brought by private parties alleginginjury due to the presence of or exposure to hazardous substances. We may also become subject to additional remedial, compliance or personal injury costs due to future events such as changes in existing laws or regulations, changes in agency direction or enforcement policies, developments in remediation technologies, changes in the conduct of our operations and changes in accounting rules. For additional information regarding these risks, please refer to Note 12 to the consolidated financial results. 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 results or that
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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.
Our businesses are subject to extensive regulation, including healthcare regulations; failure to comply with those regulations could adversely affect our financial results and our business, including our reputation.
In addition to the environmental, health, safety, anticorruption, data privacy, and other regulations noted elsewhere in this Annual Report, our businesses are subject to extensive regulation by U.S. and non-U.S. governmental and self-regulatory entities at the supranational, federal, state, local, and other jurisdictional levels, including the following:
• we are required to comply with various import laws and export control and economic sanctions laws, which may affect our transactions with certain customers, business partners, and other persons and dealings between our employees and between our subsidiaries. In certain circumstances, export control and economic sanctions regulations may prohibit the export of certain products, services, and technologies. In other circumstances, we may be required to obtain an export license before exporting the controlled item. Compliance with the various import laws that apply to our businesses can restrict our access to, and increase the cost of obtaining, certain products and at times can interrupt our supply of imported inventory. We may also face audits or investigations by one or more domestic or foreign government agencies relating to our compliance with these regulations. An adverse outcome in any such audit or investigation could subject us to fines or other penalties;
• we also have agreements to sell products and services to government entities and are subject to various statutes, regulations and other requirements that apply to companies doing business with government entities (approximately $417 million of our 2025 sales were made to the U.S. federal government). The laws governing government contracts differ from the laws governing private contracts. For example, many government contracts contain pricing and other terms and conditions that are not applicable to private contracts. Our agreements with government entities may be subject to termination, reduction, or modification at the convenience of the government or in the event of changes in government requirements, reductions in federal spending and other factors, and we may underestimate our costs of performing under the contract. In certain cases, a governmental entity may require us to pay back amounts it has paid to us. Government contracts that have been awarded to us following a bid process could become the subject of a bid protest by a losing bidder, which could result in loss of the contract. We are also subject to investigation and audit for compliance with the requirements governing government contracts. An adverse outcome in any such investigation or audit could subject us to fines or other penalties;
• we are also required to comply with increasingly complex and changing data privacy regulations in multiple jurisdictions that regulate the collection, use, protection, and transfer of personal data, including the transfer of personal data between or among countries. In particular, the General Data Protection Regulation became effective in the European Union in May 2018 and the California Consumer Privacy Act became effective in January 2020. We may also face audits or investigations by one or more domestic or foreign government agencies relating to our compliance with these regulations. An adverse outcome in any such audit or investigation could subject us to fines or other penalties. That or other circumstances related to our collection, use, and transfer of personal data could cause a loss of reputation in the market and/or adversely affect our business and financial position;
• certain of our products are medical devices that are subject to regulation by the U.S. FDA, by other federal and state governmental agencies, by comparable agencies of other countries and regions, and by certain accrediting bodies. To varying degrees, these regulators require us to comply with laws and regulations governing the development, testing, manufacturing, labeling, marketing, distribution, and post-marketing surveillance of our products. Government authorities may conclude that our business practices do not comply with current or future statutes, regulations, agency guidance or case law. Failure to obtain required regulatory clearances or approvals before marketing our products (or before implementing modifications to or promoting additional indications or uses of our products), other violations of laws or regulations, failure to remediate inspectional observations to the satisfaction of these regulatory authorities, and real or perceived efficacy or safety concerns or trends of adverse events with respect to our products (even after obtaining clearance for distribution) can lead to warning letters, notices to customers, declining sales, loss of customers, loss of market share, remediation and increased compliance costs, recalls, seizures, fines, expenses, injunctions, civil penalties, criminalpenalties, consent decrees, administrative detentions, refusals to permit importations, partial or total shutdown of production facilities or the implementation of operating restrictions, narrowing of permitted uses for a product, refusal of the government to grant clearance, and suspension or withdrawal of approvals. Further, defendingagainst any such actions can be costly and time-consuming and may require significant personnel resources. Therefore, even if we are successful in defendingagainst any such actions brought against us, our business may be impaired;
• we are also subject to the federal FalseClaims Act (the “FCA”), which imposes civil and criminal liability on individuals or entities that knowingly submit false or fraudulentclaims 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
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suits. 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 fraudulentclaims;
• regulators in Europe and certain states in the U.S. have focused efforts on increasing disclosures by companies related to climate change and mitigation efforts that impose increasing compliance burdens and associated regulator costs. At the same time, conflicting and opposing views on environmental topics, including commitments addressing climate issues, are becoming increasing political, subject to scrutiny from private sectors and government authorities, with such conflicting and opposing views potentially exposing us to environmental or political activist campaigns; and
• we are also required to comply with ever changing labor and employment laws and regulations in multiple jurisdictions. These changes could negatively impact our business or financial position.
These are not the only regulations that our businesses must comply with. Generally, regulations we are subject to have tended to become more stringent over time and may be inconsistent across jurisdictions. We, our representatives, and the industries in which we operate may at times be under review and/or investigation by regulatory authorities. 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 allegedfailure (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. Compliance with these and other regulations may also affect our returns on investment, require us to incur significant expenses, or modify our business model or impair our flexibility in modifying product, marketing, pricing, or other strategies for growing our business. Our products and operations are also often subject to the rules of industrial standards bodies such as the International Standards Organization, and failure to comply with these rules could result in withdrawal of certifications needed to sell our products and services and otherwise adversely impact our financial results.
For additional information regarding these risks, please refer to the section entitled “Business—Regulatory Matters.”
Risk Related to Our Tax and Accounting Matters
Changes in our effective tax rates or exposure to additional tax liabilities or assessments could affect our profitability. In addition, audits by tax authorities could result in additional tax payments for prior periods.
We are subject to income, transaction and other taxes in the United States and in multiple foreign jurisdictions. Our future income tax rates could be volatile and difficult to predict due to changes in business profit by jurisdiction, changes in the amount and recognition of deferred tax assets and liabilities, or by changes in tax laws, regulations, or accounting principles. For example, the Organisation for Economic Co-operation and Development continues to advance proposals for modernizing international tax rules, including the introduction of global minimum tax standards. We closely monitor changes to tax laws, regulations, accounting principles, and global tax standards; and at the time of a change, the related expense or benefit recorded may be material to the quarter and year of change. Furthermore, certain tax laws are inherently ambiguous requiring subjective interpretation on the application thereof. Our interpretation and the corresponding amount of taxes we pay is, and may in the future continue to be, subject to audits by U.S. federal, state, and local tax authorities and by non-U.S. tax authorities. If these audits result in payments or assessments different from our reserves, our future results may include unfavorable adjustments to our tax liabilities and our financial results could be adversely affected.
We could incur significant liability if our separation from Danaher, our separation of Vontier or our separation of Ralliant (together, the “Separation Transactions”) are determined to be a taxable transaction.
We have received opinions from outside tax counsel to the effect that each of the Separation Transactions qualifies as a transaction that is described in Sections 355(a) and 368(a)(1)(D) of the Internal Revenue Code. The opinions rely 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. If any of these facts, assumptions, representations, or undertakings are incorrect or not satisfied, our stockholders and we may not be able to rely on the applicable opinions of tax counsel and could be subject to significant tax liabilities. Notwithstanding the opinions of tax counsel we have received, the IRS could determine on audit that any of the Separation Transactions is taxable if it determines that any of the corresponding facts, assumptions, representations, or undertakings are not correct or have been violated or if it disagrees with the conclusions in any of the applicable opinions. If any of the Separation Transactions is determined to be taxable for U.S. federal income tax purposes, we, as well as our stockholders that are subject to U.S. federal income tax, would incur significant U.S. federal income tax liabilities.
Changes in U.S. GAAP could adversely affect our reported financial results and may require significant changes to our internal accounting systems and processes.
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We prepare our consolidated financial results in conformity with generally accepted accounting principles in the United States of America (“GAAP”). These principles are subject to interpretation by the Financial Accounting Standards Board (“FASB”), the SEC, and various bodies formed to interpret and create appropriate accounting principles and guidance. Any new or amended standards may result in different accounting principles, which may significantly impact our reported results or could result in volatility of our financial results.
We may be required to recognize impairment charges for our goodwill and other intangible assets.
As of December 31, 2025, the net carrying value of our goodwill and other intangible assets totaled approximately $9.5 billion. In accordance with GAAP, we periodically assess these assets to determine if they are impaired. Significant negative industry or economic trends, disruptions to our business, inability to effectively integrate acquired businesses, unexpected significant changes or planned changes in use of our assets, changes in the structure of our business, divestitures, market capitalization declines, or increases in associated discount rates may impair our goodwill and other intangible assets. Any charges relating to such impairments would adversely affect our results of operations in the periods recognized. Refer to Note 2 and Note 4 to the consolidated financial results for a description of our policies relating to goodwill and acquired intangibles.
Risk Related to Our Financing Activities
We have incurred a significant amount of debt, and our debt obligations, including the cost of such debt, will increase further if we incur additional debt and do not retire existing debt, our credit rating declines, or if the applicable interest rates rise.
As of December 31, 2025, we had approximately $3.2 billion of long-term debt, including the current portion of long-term debt, on a consolidated basis. We may also obtain additional long-term debt and lines of credit to meet future financing needs. 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.
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. 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.
Additionally, the agreements governing our debt require that we maintain certain financial ratios, and contain affirmative and negative covenants that restrict our activities by, among other limitations, limiting our ability to incur additional indebtedness, make investments, create liens, sell assets, and enter into transactions with affiliates. The covenants in our credit agreement include a debt-to-EBITDA ratio. Please refer to Note 8 to the consolidated financial results for additional details.
Our ability to comply with these restrictions and covenants may be affected by events beyond our control. Our failure to comply with any of these restrictions or covenants may result in an event of default under the applicable debt instrument, which could permit acceleration of the debt under that instrument and require us to prepay that debt before its scheduled due date. Also, an acceleration of the debt under one of our debt instruments would trigger an event of default under other of our debt instruments.
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This MD&A is designed to provide a reader of our financial statements with a narrative from the perspective of management. Our MD&A is divided into seven sections:
• Basis of Presentation
• Overview
• Results of Operations
• Financial Instruments and Risk Management
• Liquidity and Capital Resources
• Critical Accounting Estimates
• New Accounting Standards
OVERVIEW
General
Fortive is a multinational business with global operations with approximately 44% of our sales derived from customers outside the United States in 2025. As a company with global operations, our businesses are affected by worldwide, regional, and industry-specific economic, trade policies, fiscal policies, regulatory, and political factors. Our geographic and industry diversity, as well as the range of products, software, and services we offer, typically help limit the impact of any one industry or the economy of any single country, except for the United States, on our operating results. Given the broad range of products manufactured, software and services provided, and geographies served, we do not use any indices other than general economic trends to predict the overall outlook for the Company. Our individual businesses monitor key competitors and customers, including their sales, to the extent possible, to gauge relative performance and the outlook for the future.
As a result of our geographic and industry diversity, we face a variety of opportunities and challenges, including technological development in most of the markets we serve, the expansion and evolution of opportunities in growing markets, trends and costs associated with a global labor force, trade policies, and consolidation of our competitors. We operate in a highly competitive business environment in most markets, and our long-term growth and profitability will depend, in particular, on our ability to expand our business across geographies and market segments, identify, consummate, and integrate appropriate acquisitions, develop innovative and differentiated new products, services, and software, expand and improve the effectiveness of our sales force, continue to reduce costs and improve operating efficiency and quality, attract relevant talent and retain, grow, and empower our talented workforce, and effectively address the demands of an increasingly regulated environment. We are making significant investments, organically and through acquisitions, to address technological change in the markets we serve and to improve our manufacturing, research and development, and customer-facing resources in order to be responsive to our customers throughout the world.
Non-GAAP Measures
In this report, references to sales from existing businesses (“core revenue”) 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 foreign currency translation. References to sales attributable to acquisitions or acquired businesses refer to GAAP sales from acquired businesses recorded prior to the first anniversary of the acquisition, less the amount of sales attributable to certain businesses or product lines that have been divested, or, at the time of reporting, are pending divestiture, but are not, and will not be, considered discontinued operations prior to the first anniversary of the divestiture. The portion of sales attributable to the impact of currency translation is calculated as the difference between (a) the period-to-period change in sales (excluding sales impact from acquired businesses) and (b) the period-to-period change in sales
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(excluding sales impact from acquired businesses) after applying the current period foreign exchange rates to the prior year period. Core revenue should be considered in addition to, and not as a replacement for or superior to, sales, and may not be comparable to similarly titled measures reported by other companies.
Management believes that reporting the non-GAAP financial measure of core revenue provides useful information to investors by helping identify underlying growth trends in our business and facilitating comparisons of our sales performance with our performance in prior and future periods and to our peers. We exclude the effect of acquisition and divestiture related items because the nature, size, and number of such transactions can vary dramatically from period to period and between us and our peers. We exclude the effect of currency translation from core revenue because the impact of currency translation is not under management’s control and is subject to volatility. Management believes the exclusion of the effect of acquisitions and divestitures and currency translation may facilitate the assessment of underlying business trends and may assist in comparisons of long-term performance. References to core sales growth refer to the impact of both price and unit sales.
Business Trends
Our financial outlook is subject to various assumptions and risks, including but not limited to: ongoing geopolitical events; global economic and consumer trends and sentiments; monetary policies; inflationary pressures on expenses and pricing; uncertainties in governmental policies on international trade, regulations, sanctions, and healthcare; operational challenges from existing, new, or increased tariffs, in some cases, subsequent rollbacks or suspensions; foreign exchange rate volatility, including the impact of unhedged foreign currency debts; reduction in U.S. government spending due to H.R.1, also known as the One Big Beautiful Bill Act (“OBBBA”); and overall fiscal policies, including investment and taxation policy initiatives being considered in the U.S.; the incremental impacts of the Pillar Two initiative from the Organization for Economic Co-operation and Development (“OECD”); and the impact from the Separation.
In addition, our financial outlook is subject to the impact of the recent ruling by the Supreme Court of the United States invalidating certain tariffs previously imposed under the International Emergency Economic Powers Act ("the IEEPA Ruling"), including the impact on operational and transaction costs, any responsive legislative or executive action seeking to reimpose similar tariffs, our ability to seek and obtain refunds for previously paid tariffs that have been subsequently invalidated, expectations or actions of customers, suppliers and other distribution or supply chain partners on pricing or costs as a result of the IEEPA Ruling, and responsive actions from other countries, including with respect to counter tariffs that had been imposed or trade agreements that had been adopted in response to tariffs that have been subsequently invalidated by the IEEPA Ruling.
We continue to monitor the conditions above and deploy the Fortive Business System (“FBS”), including tools and processes to leverage existing sourcing strategies and optimize production and logistics to actively manage these challenges and utilize pricing, cost and productivity actions and other countermeasures designed to offset the aforementioned dynamics.
RESULTS OF OPERATIONS
Components of Sales Growth
Total revenue growth (GAAP)
Excluding impact of:
Acquisitions and Divestitures
Currency exchange rates
Core revenue growth (Non-GAAP)
Sales growth in 2025 was driven by favorable pricing of 2.2%, partially offset by a volume decline of 0.6%. Sales growth in 2024 was driven by favorable pricing of 2.9% and a volume increase of 1.4%.
Geographically, core revenue growth in 2025 was driven primarily by strengthening demand in North America, led by the IOS segment, partially offset by modest declines in Europe. Core revenue growth in 2024 was driven by modest to moderate growth across all regions, including North America, Europe, the Middle East, and Africa (“EMEA”), Latin America (“LATAM”), and Asia-Pacific (“APAC”).
For further detail, refer to the Intelligent Operating Solutions and Advanced Healthcare Solutions sections below.
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Operating Profit Margins
Operating profit margin was 17.3% in 2025, compared to 17.6% in 2024, resulting in a decrease of 30 basis points due to:
• The year-over-year increase from favorable pricing across the segments and benefits from productivity measures and FBS initiatives, partially offset by volume decline and higher employee compensation in both segments; additionally, within the year, the unfavorable impact from tariffs was mitigated by countermeasures — favorable 105 basis points
• The year-over-year effect of all other items, including -100 basis points primarily from incremental stock-based compensation costs related to the Separation , -55 basis points in discrete restructuring charges, partially offset by +20 basis points from amortization expense for existing businesses — unfavorable 135 basis points
Operating profit margin was 17.6% 2024, compared to 14.7% in 2023, resulting in an increase of 290 basis points due to:
• The year-over-year increase in price and volume from existing businesses and benefits from productivity measures were partially offset by higher employee compensation, growth investments and the impact of unfavorable changes in foreign exchange rates — favorable 170 basis points
• The year-over-year effect of all other items, including +70 basis points in discrete restructuring charges, +55 basis points from amortization expense associated with existing businesses and impairment of intangible assets in 2023, offset by -5 basis points from net effects of acquired businesses — favorable 120 basis points
INTELLIGENT OPERATING SOLUTIONS
Selected Financial Data
For the Year Ended December 31
($ in millions)
Sales
Operating profit
Depreciation
Amortization
Operating profit as a % of sales
Depreciation as a % of sales
Amortization as a % of sales
Components of Sales Growth
Total revenue growth (GAAP)
Excluding impact of:
Acquisitions and Divestitures
Currency exchange rates
Core revenue growth (Non-GAAP)
Sales growth in 2025 was driven by favorable pricing of 2.2%, including actions taken to mitigate unfavorable tariff impacts. Volume declined slightly, primarily in professional instrumentation during the first half of the year, partially offset by increases in gas detection products and facilities and asset lifecycle (“FAL”) software and services. Sales growth in 2024 was driven primarily by favorable pricing of 2.7% and volume gains with FAL software and services and gas detection products.
Geographically, core revenue growth in 2025 was driven primarily by moderate growth in North America, partially offset by modest declines in Europe. Core revenue growth in 2024 was driven by modest growth across all regions.
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Operating Profit Margins
Operating profit margin increased 50 basis points during 2025 as compared to 2024 resulting from:
• The year-over-year increase in price and gainsachieved from FBS and productivity initiatives which were partially offset by slight volume decline and higher employee compensation; additionally, within the year, the unfavorable impact from tariffs was mitigated by countermeasures — favorable 85 basis points
• The year-over-year effect of all other items, including -60 basis points in discrete restructuring charges, offset by +20 basis points from amortization expense for existing businesses, and +5 basis points from lower net acquisition and divestiture-related costs — unfavorable 35 basis points
Operating profit margin increased 180 basis points during 2024 as compared to 2023 resulting from:
• The year-over-year increase in price and volume from existing businesses, partially offset by higher employee compensation, customer acquisition costs and marketing costs to support growth initiatives — favorable 95 basis points
• The year-over-year effect of all other items, including +50 basis points from lower discrete restructuring charges than in the prior year, +50 basis points from amortization expense for existing businesses and impairment of intangible assets incurred in 2023, offset by -15 basis points from net effects of acquired businesses — favorable 85 basis points
ADVANCED HEALTHCARE SOLUTIONS
Advanced Healthcare Solutions Selected Financial Data
For the Year Ended December 31
($ in millions)
Sales
Operating profit
Depreciation
Amortization
Operating profit as a % of sales
Depreciation as a % of sales
Amortization as a % of sales
Components of Sales Growth
Total revenue growth (GAAP)
Excluding impact of:
Currency exchange rates
Core revenue growth (Non-GAAP)
Sales growth in 2025 was driven by favorable pricing of 2.2%. Volume declined modestly on reduced demand for sterilization equipment and biomedical test products due to the impact of recent changes in healthcare policy, partially offset by growth in healthcare software and dosimetry services. Sales growth in 2024 was driven primarily by favorable pricing of 3.4% and volume increases primarily in sterilization and dosimetry products.
Geographically, core revenue growth in 2025 was relatively stable with modest increases in North America mostly offset by modest declines in EMEA. Core revenue growth in 2024 was driven by modest to moderate growth across all regions.
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Operating Profit Margins
Operating profit margin decreased 20 basis points during 2025 as compared to 2024 resulting from:
• Year-over-year increases due to favorable pricing and gainsachieved from FBS and from productivity initiatives, partially offset by modest volume decline and higher employee compensation — unfavorable 20 basis points
• The year-over-year effect of all other items, including +20 basis points from amortization expense for existing businesses, -20 basis points in discrete restructuring charges — relatively flat
Operating profit margin increased 400 basis points during 2024 as compared to 2023 resulting from:
• Year-over-year increases due to favorable pricing and higher volume, and benefits from productivity measures, partially offset by higher employee compensation and unfavorable changes in foreign currency exchange rates — favorable 215 basis points
• The year-over-year effect of all other items, including +115 basis points in discrete restructuring charges and +70 basis points from amortization expense for existing businesses — favorable 185 basis points
COST OF SALES AND GROSS PROFIT
For the Year Ended December 31
($ in millions)
Sales
Cost of sales
Gross profit
Gross profit margin
Gross profit increased during 2025 as compared to 2024, primarily due to favorable pricing, gains from FBS and productivity measures all partially offset by volume declines, higher employee compensation, and discrete restructuring charges. Within the year, the unfavorable impact of tariffs were mitigated by the countermeasures deployed.
Gross profit increased during 2024 as compared to 2023, primarily due to favorable pricing and increased volume from existing businesses, benefits from productivity measures and FBS initiatives, partially offset by higher employee compensation, and unfavorable changes in foreign currency exchange rates.
OPERATING EXPENSES
For the Year Ended December 31
($ in millions)
Sales
Selling, general, and administrative (“SG&A”)
Research and development (“R&D”)
SG&A as a % of sales
R&D as a % of sales
SG&A increased in 2025 as compared to 2024, primarily due to incremental stock-based compensation related to the Separation, higher employee compensation costs, discrete restructuring charges, and innovation and commercial investments to support strategic growth initiatives, all partially offset by reductions of excess costs subsequent to the Separation and benefits from productivity measures and FBS initiatives.
SG&A expenses decreased during 2024 as compared to 2023, primarily due to benefits from productivity measures and lower discrete restructuring costs, partially offset by higher employee compensation.
R&D, consisting principally of internal and contract engineering personnel costs, increased year over year during both 2025 and 2024 due to ongoing investments in innovation.
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NON-OPERATING INCOME (EXPENSE), NET
Interest costs
Net interest expense was $120.5 million during 2025, compared to $152.8 million during 2024. The year-over-year decrease was primarily due to a decrease in outstanding debt and lower interest rates associated with floating rate debt instruments.
Net interest expense was $152.8 million during 2024, compared to $123.5 million during 2023. The year-over-year increase was primarily due to higher overall debt balances.
For a discussion of our outstanding indebtedness, refer to Note 8 to the accompanying consolidated financial statements.
Other non-operating expense, net
Other non-operating expense was $2.5 million, $57.2 million, and $17.4 million during 2025, 2024, and 2023, respectively. The year over year changes were primarily due to losses from equity investments incurred in 2024 and 2023, and a charitable contribution of $20.0 million made to the Fortive Foundation, a related party, without any donor imposed conditions or restrictions, in the first quarter of 2024.
INCOME TAXES
General
Income tax expense and deferred tax assets and liabilities reflect management’s assessment of future taxes expected to be paid on items reflected in our financial statements. We record the tax effect of discrete items and items that are reported net of their tax effects in the period in which they occur.
Our effective tax rate can be affected by, among others, changes in the mix of earnings in countries with differing statutory tax rates (including as a result of business acquisitions and dispositions), changes in the valuation of deferred tax assets and liabilities, accruals related to contingent tax liabilities and period-to-period changes in such accruals, the results of audits and examinations of previously filed tax returns (as discussed below), the expiration of statutes of limitations, the implementation of tax planning strategies, tax rulings, court decisions, settlements with tax authorities, and changes in tax laws.
We are subject to income, transaction and other taxes in the United States and in multiple foreign jurisdictions. Our future income tax rates could be volatile and difficult to predict due to changes in business profit by jurisdiction, changes in the amount and recognition of deferred tax assets and liabilities, or by changes in tax laws, regulations, or accounting principles. For example, the OECD continues to advance proposals for modernizing international tax rules, including the introduction of global minimum tax standards and the more recent Side-by-Side System. We closely monitor changes to tax laws, regulations, accounting principles, and global tax standards; and at the time of a change, the related expense or benefit recorded may be material to the quarter and year of change. Furthermore, certain tax laws are inherently ambiguous requiring subjective interpretation on the application thereof. Our interpretation and the corresponding amount of taxes we pay is, and may in the future continue to be, subject to audits by U.S. federal, state, and local tax authorities and by non-U.S. tax authorities. If these audits result in payments or assessments different from our reserves, our future results may include unfavorable adjustments to our tax liabilities and our financial statements could be adversely affected.
We are subject to examination in the United States, various states and foreign jurisdiction for the tax years 2011 to 2024. These examinations include filings of tax returns prior to our separation from Danaher, tax returns of enterprises no longer in our portfolio, and tax returns for pre-acquisition periods of enterprises added to our portfolio. In addition, significant obligations are detailed in our tax matters agreements in connection with the separation of Fortive from Danaher on July 1, 2016, the split-off of the Automation and Specialty business on October 1, 2018, the Vontier separation on October 9, 2020, and the PT Separation on June 28, 2025. We review our global tax positions on a quarterly basis, considering many factors including 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.
For a discussion of risks related to these and other tax matters, please refer to “Item 1A. Risk Factors.”
Effective Tax Rate
Our effective tax rate was 11.5%, 4.7%, 5.7% during 2025, 2024, and 2023, respectively.
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Our effective tax rate for 2025, 2024 and 2023 differs from the U.S. federal statutory rate of 21% due primarily to the positive and negative effects of foreign income taxed at a different rate, the U.S. federal permanent differences, the impacts of credits and deductions provided by law, including those associated with state income taxes, decreases in our uncertain tax positions and the effect of changes in tax rates enacted.
Repatriation
Foreign cumulative earnings remain subject to foreign remittance taxes. We have made an election regarding the amount of earnings that we do not intend to repatriate due to local working capital needs, local law restrictions, high foreign remittance costs, previous investments in physical assets and acquisitions, or future growth needs. 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. Estimating the amount of potential tax is not practicable because of the complexity and variety of assumptions necessary to compute the tax.
COMPREHENSIVE INCOME
Comprehensive income increased by $60 million in 2025 as compared to 2024, primarily due to favorable changes in foreign currency translation of $314 million, and a $50 million increase in net earnings from continuing operations. Additionally, there was a $304 million decrease in net earnings from discontinued operations.
Comprehensive income decreased by $172 million in 2024 as compared to 2023, primarily due to an unfavorable change in foreign currency translation adjustments of $149 million, partially offset by a $74 million increase in net earnings from continuing operations and a favorable change in pension benefit adjustments of $11 million. Additionally, there was a $107 million decrease in net earnings from discontinued operations.
FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
We are exposed to market risk from changes in interest rates, foreign currency exchange rates, credit risk and commodity prices, each of which could impact our financial statements. 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 utilize a mixture of fixed-rate and variable-rate debt. A change in interest rates impacts the fair value of our fixed-rate debt but not our earnings or cash flows because the interest on such debt is fixed. As of December 31, 2025, an increase of 100 basis points in interest rates would have decreased the fair value of our fixed-rate debt by approximately $86 million.
As of December 31, 2025, our variable-rate debt obligations consist of U.S. dollar-denominated commercial paper (refer to Note 8 to the consolidated financial statements for information regarding our outstanding indebtedness). 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 obligations during the year was approximately 4.1% with interest expense of $36 million. As of December 31, 2025, on an annualized basis, the impact to our interest expense in 2025 from a hypothetical 10 basis points increase in market interest rates on our variable-rate debt obligations would be immaterial.
Foreign Currency Exchange Rate Risk
We face transactional exchange rate risk from transactions with customers in countries outside of the United States and from intercompany transactions between affiliates. Transactional exchange rate risk arises from the purchase and sale of goods and services in currencies other than our functional currency or the functional currency of an applicable subsidiary. We also face translational exchange rate risk related to the translation of financial statements of our foreign operations into U.S. dollars (“USD”), our functional currency. Costs incurred and sales recorded by subsidiaries operating outside of the United States with functional currencies other than the USD, are translated into USD using exchange rates effective during the respective period. As a result, we are exposed to movements in the exchange rates of various currencies against the USD. 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. A 10% depreciation in major currencies relative to the USD as of December 31, 2025 would have resulted in a reduction of foreign currency-denominated net assets and stockholders’ equity of approximately $179 million.
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As of December 31, 2025, a portion of the €700 million Euro-denominated senior unsecured notes due 2029 remained designated as a net investment hedge on our investment in applicable foreign operations. We recognized after-tax foreign currency transaction losses of $161.1 million, gains of $60.4 million, and losses of $1.2 million during the years ended December 31, 2025, 2024, and 2023, respectively, on the debt that was deferred in the foreign currency translation component of AOCI as an offset to the foreign currency translation adjustments on our investments in foreign subsidiaries.
Currency exchange rates favorably impacted 2025 reported sales by 0.4% as compared to 2024, as the USD was, on average, weakeragainst most major currencies during 2025 as compared to exchange rate levels during 2024. If the exchange rates in effect as of December 31, 2025 were to prevail throughout 2026, currency exchange rates would positively impact 2026 estimated sales by approximately 0.8% relative to our performance in 2025. In general, strengthening of the USD against other major currencies negatively impacts our sales and results of operations, while weakening of the USD positively impacts our sales and results of operations.
We have generally accepted the exposure to exchange rate movements without using derivative financial instruments to manage this risk. Both positive and negative movements in currency exchange rates against the U.S. dollar will therefore continue to affect the reported amount of sales, profit, and assets and liabilities in our consolidated financial statements.
Credit Risk
We are exposed to potential credit losses in the event of nonperformance by counterparties to our financial instruments. Financial instruments that potentially subject us to credit risk consist of cash and highly-liquid investment grade cash equivalents and receivables from customers. We place cash and cash equivalents with various high-quality financial institutions throughout the world and exposure is limited at any one institution. Although we typically do not obtain collateral or other security to secure these obligations, we regularly monitor the third party depository institutions that hold our cash and cash equivalents. 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.
Commodity Price Risk
For a discussion of risks relating to commodity prices, refer to “Item 1A. Risk Factors.”
LIQUIDITY AND CAPITAL RESOURCES
We assess our liquidity in terms of our ability to generate cash to fund our operating, investing, and financing activities. 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, execute strategic separations, repurchase common stock, 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.
We have generally satisfied any short-term liquidity needs that are not met through operating cash flows and available cash through issuances of commercial paper under our U.S. dollar and Euro-denominated commercial paper programs (“Commercial Paper Programs”). Credit support for these 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. As of December 31, 2025, no borrowings were outstanding under the Revolving Credit Facility. We also may from time to time access the capital markets, including to take advantage of favorable interest rate environments or other market conditions.
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 our U.S. dollar-denominated commercial paper program when we have outstanding borrowings. We expect to limit any future borrowings under the Revolving Credit Facility to amounts that would leave sufficient credit available under the facility to allow us to borrow, if needed, and repay any outstanding commercial paper as it matures.
Our ability to access the commercial paper market, and the related costs of these borrowings, is affected by the strength of our credit rating and market conditions. Any downgrade in our credit rating would increase the cost of borrowing under our commercial paper programs and the Credit Agreement, and could limit or preclude our ability to issue commercial paper. If our access to the commercial paper market is adversely affected due to a downgrade, change in market conditions, or otherwise, we would expect to rely on a combination of available cash, operating cash flow, and the Revolving Credit Facility to provide
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short-term funding. In such event, the cost of borrowings under the Revolving Credit Facility could be higher than the historic cost of commercial paper borrowings.
On June 7, 2023, we filed with the SEC an “automatic shelf” registration statement (the “Shelf Registration Statement”). Under the Shelf Registration Statement, we may from time to time sell shares of common stock, preferred stock, debt securities, depository shares, purchase contracts, purchase units, warrants and subscription rights in one or more offerings.
We continue to monitor the financial markets, the stability of U.S. and international banks and general global economic conditions. In addition, our access to the capital markets and other financing sources is impacted by any change in our credit rating. If changes in financial markets or other areas of the economy or downgrade in our credit rating 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.
Overview of Cash Flows and Liquidity
Following is an overview of our cash flows and liquidity ($ in millions):
Year Ended December 31,
Total operating cash provided by continuing operations
Purchases of property, plant and equipment
Cash paid for acquisitions, net of cash received
All other investing activities
Total investing cash used in continuing operations
Net proceeds from (repayments of) commercial paper borrowings
Repurchase of common shares
Payment of dividends
Proceeds from borrowings (maturities greater than 90 days), net of issuance costs
Repayment of borrowings (maturities greater than 90 days)
Proceeds from Ralliant Dividend
All other financing activities
Total financing cash provided by (used in) continuing operations
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.
Operating cash flows from continuing operations were approximately $1.036 billion in 2025, $1.029 billion in 2024, and $833 million in 2023, representing a year over year increase of $7 million, or 1% in 2025, and $195 million, or 23.4% in 2024, primarily attributable to the following factors:
• Year-over-year increase of $44 million and $97 million in 2025 and 2024, respectively, in Operating cash flow from net earnings, net of non-cash items (Amortization, Depreciation, Stock-based compensation, and Loss from equity investments).
• The aggregate changes in accounts receivable, inventories, and trade accounts payable generated $1.1 million, $28 million, and $9 million of cash during 2025, 2024, and 2023, respectively. The amount of cash flow generated from or used in a period depends upon how effectively we manage the cash conversion cycle, which can be impacted by timing of revenue and collection from customers, vendor cash disbursement, and purchases of materials and components for certain businesses.
• The aggregate change in prepaid expenses and other assets, accrued expenses and other liabilities, and changes in deferred income taxes used $53 million, $42 million, and $122 million of cash in 2025, 2024, and 2023, respectively. The year-over-year changes were driven by timing differences related to contract assets, contract liabilities, payments of income taxes and interest, employee compensation and benefits, and restructuring activities.
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Investing Activities
Investing cash outflows from continuing operations increased by $31 million in 2025 due to higher capital expenditures and net cash flows related to acquisitions and divestitures. Investing cash outflows from continuing operations decreased by $84 million in 2024 on less acquisition activity than in 2023, partially offset by higher capital expenditures.
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 that is used in revenue arrangements with customers.
Financing Activities and Indebtedness
Financing cash flows from continuing operations consist primarily of the issuance and repayments of debt including commercial paper, payments of cash dividends to shareholders and share repurchases. Financing activities used cash of $1.23 billion in 2025, used cash of $793 million in 2024, and generated cash of $32 million in 2023.
Financing activities during 2025 reflected the following transactions:
• We received a cash dividend of $1.15 billion from Ralliant in connection with the Separation (the “Ralliant Dividend”).
• We borrowed $1 million in net commercial paper activities.
• We repurchased 30 million shares of our common stock for approximately $1.61 billion, with $483 million funded by the Ralliant Dividend and Ralliant Cash Proceeds.
• We made dividend payments to common shareholders totaling $92 million.
• On July 15, 2025, we used approximately $294 million of the Ralliant Dividend to redeem €252 million of the outstanding principal of the 3.7% Euro-denominated senior unsecured notes due 2026.
• On July 24, 2025 and July 25, 2025, we used approximately $421 million of the Ralliant Dividend to repay the outstanding principal of the Euro Term Loan and Yen Term Loan.
• All other financing activities primarily include activities related to the stock incentive plan.
Financing activities during 2024 reflected the following transactions:
• We repaid 597 million in net commercial paper activities.
• We repurchased 12 million shares of our common stock for approximately $890 million.
• We made dividend payments to common shareholders totaling $111 million.
• On January 2, 2024, we drew down an additional $450 million of the Delayed-Draw Term Loan due 2024.
• On February 13, 2024, we completed the sale of our registered offering of the 2026 Notes and the 2029 Notes, yielding net proceeds of approximately $1.3 billion.
• On February 13 2024, we repaid $1.0 billion in outstanding principal of the Delayed-Draw Term Loan due 2024, using net proceeds from the 2026 Notes and 2029 Notes.
• All other financing activities primarily include activities related to the stock incentive plan.
Financing activities during 2023 reflected the following transactions:
• We borrowed $840 million in net commercial paper activities.
• We repurchased 4 million shares of our common stock for approximately $273 million under our share repurchase program.
• We made dividend payments to common shareholders totaling $102 million.
• On December 14, 2023, we drew down $550 million of the $1.3 billion Delayed-Draw Term Loan due 2024.
• On August 24, 2023 and December 14, 2023, we repaid $250 million and $750 million in outstanding principal of the Delayed-Draw Term Loan due 2023, respectively, using the proceeds from the Delayed-Draw Term Loan due 2024 and available cash.
Refer to Note 8 to the consolidated financial statements for additional information regarding the Company’s financing activities and indebtedness and access to additional capital. Refer to Note 14 to the consolidated financial statements for a description of the Company’s share repurchase program.
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Cash and Cash Requirements
Cash
As of December 31, 2025, we held approximately $376 million of cash and cash equivalents that were invested in highly liquid investment-grade instruments with a maturity of 90 days or less, of which approximately 80% was held outside of the United States.
We have cash requirements to support working capital needs, capital expenditures and acquisitions, pay interest and service debt, pay taxes and any related interest or penalties, fund our pension plans as required, pay dividends to shareholders, and support other business needs or objectives. With respect to our cash requirements, we generally intend to use available cash and internally generated funds to meet these cash requirements, but in the event that additional liquidity is required, particularly in connection with acquisitions and repayment of maturing debt, we may also borrow under our commercial paper programs or credit facilities or enter into new credit facilities and either borrow directly thereunder or use such credit facilities to backstop additional borrowing capacity under our commercial paper programs. We also may from time to time access the capital markets, including to take advantage of favorable interest rate environments or other market conditions.
Cash Requirements
The following table sets forth a summary of our short-term and long-term cash requirements as of December 31, 2025 under (1) long-term debt principal and interest obligations, (2) leases, (3) purchase obligations and (4) other long-term liabilities reflected on our consolidated balance sheet.
($ in millions)
Total
Due within one year of December 31, 2025
Due later than one year from December 31, 2025
Debt and leases:
Long-term debt principal payments (a)
Interest payments on long-term debt (b)
Operating lease obligations (c)
Other:
Purchase obligations (d)
Other liabilities reflected on the balance sheet under GAAP (e)(f)
Total
(a) The amount due within one year of December 31, 2025 is related to the 3.7% Euro-denominated senior unsecured notes due 2026 and 3.15% senior unsecured notes due 2026. The amount due later than one year from December 31, 2025 includes $650 million outstanding borrowings under the Commercial Paper Programs. Refer to Note 8 to the consolidated financial statements for additional information regarding the Company’s indebtedness as of December 31, 2025.
(b) Interest payments on long-term debt are projected for future periods using the interest rates in effect as of December 31, 2025. 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.
(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.
(e) Primarily consist of obligations under contract liabilities, post-retirement benefits, pension benefit obligations, net tax liabilities, and deferred compensation obligations. 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. Refer to Note 6 to the consolidated financial statements for additional information.
(f) Includes non-contractual obligations of $159 million of noncurrent gross unrecognized tax benefits, including interest and penalties. However, the timing of these liabilities is uncertain, and therefore, they have been included in the “due later than one year from December 31, 2025” column. Refer to Note 11 to the consolidated financial statements for additional information on unrecognized tax benefits.
In addition to the obligations noted above, we have issued guarantees, consisting primarily of outstanding standby letters of credit, bank guarantees, and performance and bid bonds, in connection with certain arrangements with vendors, customers, financing counterparties, and governmental entities to secure our obligations and/or performance requirements related to specific transactions. These guarantees are not recorded on our balance sheet and $17 million in commitments expire within one year of December 31, 2025 and $13 million later than one year from December 31, 2025.
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As of December 31, 2025 we expect to have sufficient liquidity to satisfy our cash needs for the foreseeable future.
CRITICAL ACCOUNTING ESTIMATES
Management’s discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. 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. Estimates are considered to be critical if they meet both of the following criteria: (1) the estimate requires assumptions about material matters that are uncertain at the time the estimate is made, and (2) material changes in the estimate are reasonably likely from period to period. 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. Refer to Notes 2 and 4 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. We estimate fair value based on multiples of earnings before interest, taxes, depreciation, and amortization (“EBITDA”) determined by current trading market multiples of earnings for companies operating in businesses similar to each of our reporting units, in addition to recent market available sale transactions of comparable businesses. In evaluating the estimates derived by the market based approach, we make judgments about the relevance and reliability of the multiples by considering factors unique to our reporting units, including operating results, business plans, economic projections, anticipated future cash flows, and transactions and marketplace data as well as judgments about the comparability of the market proxies selected. In certain circumstances we also evaluate other factors including results of the estimated fair value utilizing a discounted cash flow analysis (i.e., an income approach), market positions of the businesses, comparability of market sales transactions, and financial and operating performance in order to validate the results of the market approach. 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 2025, we performed goodwill impairment testing for our reporting units. Our annual goodwill impairment analysis in 2025 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.
The excess of the estimated fair value over carrying value (expressed as a multiple of the carrying value for the respective reporting unit) for each of our reporting units as of the annual testing date ranged from approximately 1.5x to approximately 4.7x. In order to evaluate the sensitivity of the fair value calculations used in the goodwill impairment test, we applied a hypothetical 10% decrease to the fair values of each reporting unit and compared those hypothetical values to the reporting unit carrying values. Based on this hypothetical 10% decrease, the excess of the estimated fair value over carrying value (expressed as a multiple of the carrying value for the respective reporting unit) for each of our reporting units ranged from approximately 1.3x to approximately 4.3x. We evaluated other factors relating to the fair value of the reporting units, including, as applicable, results of the estimated fair value using an income approach, market positions of the businesses, comparability of market sales transactions and financial and operating performance, and concluded no impairment charges were required.
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 impairmentloss 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. We also test intangible assets with indefinite lives at least annually for impairment. These analyses require management to make judgments and estimates about future revenues, expenses, market conditions, and discount rates related to these assets. We evaluated events or circumstances that may indicate the carrying value of our intangible assets may not be fully recoverable during the year ended December 31, 2025, and recorded no impairments.
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.
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Revenue Recognition : We derive revenue from the sale of products and services. Revenue is recognized when control over the promised products or services is transferred to the customer in an amount that reflects the consideration that we expect to receive in exchange for those goods or services. 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. 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.
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.
Income Taxes : For a description of our income tax accounting policies, refer to Note 2 and Note 11 to the consolidated financial statements.
In accordance with GAAP, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted rates expected to be in effect during the year in which the differences reverse. Deferred tax assets generally represent items that can be used as a tax deduction or credit in our tax return in future years for which the tax benefit has already been reflected in our Consolidated Statements of Earnings. Deferred tax liabilities generally represent items that have already been taken as a deduction on our tax return but have not yet been recognized as an expense in our Consolidated Statements of Earnings. The effect on deferred tax assets and liabilities due to a change in tax rates is recognized in income tax expense in the period that includes the enactment date.
Our deferred tax assets are reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not (a likelihood of more than 50 percent) that some portion or all of the deferred tax assets will not be realized. We evaluate the realizability of deferred income tax assets for each of the jurisdictions in which we operate. If we experience cumulative pretax income in a particular jurisdiction in the three-year period including the current and prior two years, we normally conclude that the deferred income tax assets will more likely than not be realizable and no valuation allowance is recognized, unless known or planned operating developments would lead management to conclude otherwise. However, if we experience cumulative pretax losses in a particular jurisdiction in the three-year period including the current and prior two years, we then consider a series of factors in the determination of whether the deferred income tax assets can be realized. These factors include historical operating results, known or planned operating developments, the period of time over which certain temporary differences will reverse, consideration of the utilization of certain deferred income tax liabilities, tax law carryback capability in the particular country, and prudent and feasible tax planning strategies. After evaluation of these factors, if the deferred income tax assets are expected to be realized within the tax carryforward period allowed for that specific country, we would conclude that no valuation allowance would be required. To the extent that the deferred income tax assets exceed the amount that is expected to be realized within the tax carryforward period for a particular jurisdiction, we establish a valuation allowance.
We recognize tax benefits from uncertain tax positions only if, in our assessment, it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. 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. We re-evaluate the technical merits of our tax positions and may recognize an uncertain tax benefit in certain circumstances, including when: (i) a tax audit is completed; (ii) applicable tax laws change, including a tax case ruling or legislative guidance; or (iii) the applicable statute of limitations expires. We recognize potential accrued interest and penalties with unrecognized tax positions in income tax expense.
In addition, we are routinely examined by various domestic and international taxing authorities. 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 11 to the consolidated financial statements). We review our global tax positions on a quarterly basis. 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.
An increase in our 2025 effective tax rate of 1.0% would have resulted in an additional income tax provision for the year ended December 31, 2025 of approximately $6 million.
NEW ACCOUNTING STANDARDS
For a discussion of new accounting standards relevant to our businesses, refer to Note 2 to the consolidated financial statements.
