Fortive AR 2018.Pdf

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Fortive AR 2018.Pdf ACCELERATING PROGRESS ANNUAL REPORT 2018 “ We have made tremendous strides toward creating the company we first envisioned through the execution of our portfolio transformation strategy.” James A. Lico President and Chief Executive Officer About FORTIVE Fortive is a diversified industrial technology growth company comprised of well-known brands that hold leading market positions in field solutions, product realization, sensing, transportation technology, and franchise distribution. Fortive is headquartered in Everett, Washington and employs a team of more than 24,000 research and development, manufacturing, sales, distribution, service, and administrative employees in more than 50 countries around the world. With a culture rooted in continuous improvement, the core of our company’s operating model is the Fortive Business System. All financial metrics are presented on a continuing operations basis. of World Rest 5% A&S** e 5% % his 3 nc 23% 2 ra ion ts F ut e ib k tr r is a D M h F t ie A l d w d v o S a r o n G lu c t e i h % o d g 3 P n i 4 ro I f s n H % s e e 5 s 2 i s t s 6 r 7 g i u o o % s l m n e o i a e n TOTAL SALES g l n h o I t l n c a o t e s N i n t T o o r * Sales increased 12.1% h $6.5 l n u r c a t * m i a in the year ended h e r BILLION n t T e A s December 31, 2018. d n n u m t S o a d Core revenues i t e n o t i I o r a l n u t i increased 4.1% over 5 c r 7 % P t a i o r the same period. o o p 5 n d s s 8 u n c a % 8 % AUTOMATION AND r ** t 9 T R 4 % e 1 SPECIALTY COMPONENTS a l i e z a p t Fortive split off four i o n o 3 r 3 % operating companies u E (excluding Hengstler n r % 1 1 e t and Dynapar) from s e s i g o l e o n h c e T W its Automation and g n i s n e Specialty Components S platform, combining them with Altra Industrial Motion in a tax-efficient transaction which closed in October 2018. FINANCIAL HIGHLIGHTS FOR FISCAL YEAR ENDED DECEMBER 31, 2018 For the year ended For the year ended OPERATING For the year ended DILUTED NET December 31, 2018, December 31, 2018, NET EARNINGS PROFIT December 31, 2018, EARNINGS diluted net earnings per operating profit margin MARGIN net earnings increased PER SHARE share increased 0.4% decreased 160 bps and $918.3 3.8% and adjusted net and adjusted diluted core operating margin MILLION earnings increased 28.1%. net earnings per share expanded 35 bps. $2.52 18.3% increased 25.4%. Free cash flow increased CASH Fortive declared regular FREE SHARE PRICE During 2018, our stock 20% in the year ended DIVIDEND RATE quarterly cash dividends CASH FLOW price decreased 6.5% December 31, 2018, PER SHARE of $0.07 per share or an compared to a 6.6% reflecting a free cash flow $6 7.6 6 annual payout of $0.28 per decrease for the $1,089 conversion ratio of 120% AS OF 12/31/2018 share of common stock. S&P 500 index. $0.28 MILLION for the year. CLOSE Professional Instrumentation Our sensors, workflow software, proprietary data, and cloud-based analytical tools enable advanced measurement, monitoring and management to maximize our customers’ safety, reliability, and efficiency. Our essential technologies create actionable intelligence by detecting and tracking physical parameters–electrical current, radio frequencies, radiation, and hazardous gases–and seamlessly integrate them into our bundled workflow software that help our customers understand problems, generate solutions, and manage corrective/preventative actions. of World Rest OUR OPPORTUNITIES 5% % In % er 10 dus 7 th tria 2 O l & s M t a e % n k 5 u r fa a c t M u r REVENUE i h % n t 5 g N w 2 MOBILE SMART IoT SENSOR SAFETY AND o 5 o r % r $3.7 t WORKER FACTORY PROLIFERATION COMPLIANCE G % h 5 h A g BILLION m i U H e t r % i l i 5 i c t i a OPERATING PROFIT MARGIN e s 5 & OUR COMPANIES 3 P % % o 5 w e 20.5% r 1 5 % % 5 % 5 M 1 e d e % i c 0 a 1 p l 1 D 0 & % A o r u E n r e t s e W • Oil & Gas • Communications & Electronics • Semiconductor • Facilities Maintenance • Government • Consumer Goods Industrial Technologies Our technology, sensors, and software serve retail fueling businesses, auto-repair shops, fleet operators, and public safety organizations worldwide. Our essential technologies help make fueling convenient for consumers and retailers, track the efficiency of global fleets, improve environmental compliance, improve emergency response times, and keep vehicles operating safely on the road. of World Rest OUR OPPORTUNITIES 5% % 19 s et % rk 5 a M % h 0 t 1 w o r REVENUE G h % g i 0 AUTONOMOUS AND SMART CITIES SUPPLY CHAIN RETAIL FUEL H 2 $2.8 r i ELECTRIC VEHICLES AND URBANIZATION AND LOGISTICS AND PAYMENT a BILLION p R e % e R 2 N t 1 a e o l i e OPERATING PROFIT MARGIN l r c i t p F h h u o r e e A OUR COMPANIES u V l m i E n g e n 18.8% r r 6 i e c 5 t a % s e 6 4 W % • Logistics & Supply Chain • Industrial/Manufacturing Fellow Shareholders, In just under three years, we have turned our core strengths–an extraordinary team, the Fortive Business System (FBS), and significant free cash flow–into a growth model with proven success. We have made tremendous strides toward creating the company we first envisioned through the execution of our portfolio transformation strategy. Our shared purpose–Essential technology for the people who accelerate progress–defines why we do what we do for our customers, shareholders, and communities. We have achieved tangible progress through groundbreaking innovations that have yielded strong growth and performance. I am incredibly excited about our evolution. Our 2018 Results* James A. Lico Our team delivered another year of double-digit President and Chief Executive Officer earnings growth while posting impressive results across our key metrics: • Core revenue growth of 4.1% and reported revenue to Altra, in a tax-efficient transaction. This move enabled growth of 12.1%, including mid-single-digit growth Altra to become one of the largest, pure-play power across both developed and high-growth markets transmission and motion control companies in the world • Adjusted diluted net earnings per share and to pursue broader growth opportunities. growth of 25.4% • Gross margin at 51.5% To support these transactions, we issued $1.38 billion in 5.0% Mandatory Convertible Preferred Stock. The • Core operating margin expansion of successful placement of these equity securities 35 basis points demonstrates the effective management of our capital • Free cash flow conversion ratio of 120% structure, augmenting our ability to evolve our portfolio Our strong free cash flow continues to be instrumental while maintaining our strong investment grade profile. in accelerating our growth through investments in innovation and market share expansion, using the Driven by the strategically important powerful commercial tools of FBS. It also fuels our transactions completed over the past mergers and acquisitions efforts and has kept few years, we have made excellent our balance sheet strong throughout this period of transformation. progress in improving the growth orientation and recurring revenue After the successful additions of Landauer and Industrial profile of our portfolio. We are Scientific Corporation in 2017, which fortified our confident that our portfolio evolution positions in healthcare compliance and worker safety, we deployed $5.5 billion of capital toward acquisitions strategy, which positions us to to advance the evolution of our portfolio toward leverage powerful secular growth higher growth, less cyclical businesses in 2018. The drivers in attractive markets, will acquisitions of Accruent and Gordian also expanded accelerate our organic growth and our capabilities in software-enabled workflows and predictive analytics. During the year, we divested four of have a compounding effect on our our businesses in our Automation & Specialty platform performance for years to come. Innovating for Customer Success organization that enables our continued transformation. This portfolio transformation aligns with our team’s “The Fort,” our innovation and incubation hub, became a vision for a better world. From smart cities and reality this year, and I am excited to see the breakthrough energy-efficient factories to food safety systems and solutions this effort will deliver for our customers. autonomous vehicles, we dream, develop, and deliver Because diverse perspectives are the lifeblood of innovations to improve our customers’ lives. As the innovation and vital to our future success, we will deepen technology that drives our world advances, we will our focus on personal and career development for our continue to be there for our customers in the moments team and inclusion and diversity from the inside out. when precision and expertise are essential. Because we are proud to measure our success on our customers’ Building on our strong start, we will terms, this year’s report highlights our value Customer accelerate our progress toward a Success Inspires Our Innovation, which lies at the heart of our organic growth story.
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