ESSENTIAL TECHNOLOGY FOR THE PEOPLE WHO ACCELERATE PROGRESS 2016 Annual Report g ensin S gies hnolo Tec 4% Tra 1 ns po rt % at 37 io n n o T ti e a c % z h li n 6 a 8 o e l s R o n t % g c 6 i o 4 e i u t n I s u d o n l i 5 o t d o r a u 3 S P t s % n t r d e i a n TOTAL SALES m l a u T r e n t c o s i h t n I n a l t $6.2 o a n l o n e BILLION* g o i i m e s s u s % r e 5 f t 9 4 o s A r 4 % P n u C I s t n o o d o m m e i t c p a u l n o t o i a n o S v e n d n d l a t A e s i n F 2 d 9 S % p e * Sales increased 3.0% in the six months c i a l t ended December 31, 2016. Core revenues y D I s t r i b % increased 3.1% over the same period. 8 u 1 t i o n F r a n c h e s i Financial Highlights for Fiscal Year Ended December 31, 2016 FULL YEAR ENDED SIX MONTHS ENDED FULL YEAR ENDED SIX MONTHS ENDED DECEMBER 31, 2016 DECEMBER 31, 2016 DECEMBER 31, 2016 DECEMBER 31, 2016 OPERATING CASH Operating profit margin increased 10 basis points PROFIT DIVIDEND RATE Fortive initiated a regular quarterly cash dividend in the six months ended December 31, 2016. MARGIN PER SHARE of $0.07 per share or an indicated annual payout Core adjusted operating margin expanded of $0.28 per share. 20% 90 basis points over the same period. $0.28 FREE NET EARNINGS g Net earnings for the six months ended Decemberensi n CASH FLOW Free cash flow increased 4.4% in the six months S ies 31, 2016 increased 4.3% over the same period inno log ended December 31, 2016, reflecting a Free Cash ech Tra the prior year. Adjusted net earnings increasedT % ns Flow to Net Earnings Ratio of 129% for the $872 13 po 12.0% over the same period. $1,007rta same period. MILLION tio % n 7 MILLION 3 Te n c o h ti n a o z l li o DILUTED NET a g Diluted net earnings pere share for the six months i e R % EARNINGS 6 SHARE PRICE s ended December 31,t 2016 increased 3.2% over During the second half of 2016, our stock price 4 5 PER SHARE c n I the same period inu the prior year. Adjustedo diluted n increased3 10.0% compared to a 7.0% increase i d % d t net earnings per share increased 10.7% over the u by the S&P 500 index. o a r t s $53.63t n same period. P r e i $2.51 a m l u T r e t c s h n I n l o a l o A n g o u i i C t e s o s s o e m 5 f m 4 o a r % p P t o i o n n e % a n 9 n t s d 4 2 s S 9 n p % o i e t c u l i a o l t S y d l D e i I F s t r i b u t i o n F 1 8 r % a n c h i s e FORTIVE SALES BY REGION Fortive is a diversified industrial growth company comprised of 58% 16% 21% 5% Professional Instrumentation and Industrial Technologies businesses that are recognized leaders in attractive markets. Fortive’s well-known brands hold leading positions in field solutions, transportation SALES BY END MARKET technologies, sensing, product realization, automation and specialty, 25% 15% 10% 5% 10% 5% 5% 5% 5% 15% and franchise distribution markets. With a culture rooted in continuous improvement, the core of our company’s operating model is the Fortive Business System. PROFESSIONAL INSTRUMENTATION 50% 16% 29% 5% Measurement and monitoring that yields actionable intelligence. * Part of Advanced Instrumentation and Solutions 25% 20% 10% 5% 10% 15% 5% 5% 5% FIELD SOLUTIONS* 43% 20% 34% 3% Our field solutions businesses deliver offline and connected hardware and software solutions that keep critical industrial, power and health 35% 35% 5% 10% 15% infrastructure running smoothly, without interruption. PRODUCT REALIZATION* 53% 12% 27% 8% When it’s time to convert breakthrough concepts into advanced finished products, our product realization businesses supply engineers 15% 25% 5% 20% 15% 10% 10% with the tools, modules, software and services to get it done. SENSING TECHNOLOGIES 71% 12% 16% 1% Our sensing technologies businesses make precise operational measurements possible by combining material science with innovative 15% 5% 5% 5% 40% 5% 15% 10% hardware and software. INDUSTRIAL TECHNOLOGIES 64% 16% 15% 5% Technical equipment, components, software and services for global manufacturing, repair and transportation markets. 45% 5% 20% 5% 5% 5% 15% TRANSPORTATION TECHNOLOGIES 59% 15% 19% 7% From fleet operations and remote fuel management to safe dispensing and secure payments, our industry-leading transportation 90% 10% technologies keep the world moving. AUTOMATION & SPECIALTY COMPONENTS 51% 28% 17% 4% Our automation and specialty businesses supply mission-critical components and equipment for industrial automation, robotics, 20% 25% 5% 10% 35% 5% medical devices and other precision control applications. FRANCHISE DISTRIBUTION 99% 1% Our franchise distribution businesses offer mobile distribution of high-end tools and diagnostic equipment, as well as wheel service 100% equipment for the automotive aftermarket. SALES BY REGION SALES BY END MARKET Sales by end market, presented above in increments of five percentage points, are estimates by management based on assumed participation by Fortive in the selected industries. Logistics North America Retail Fueling Utilites & Power O&G / Mining & Supply Chain Industrial Western Europe A&D Other Consumer & Manufacturing High Growth Markets Vehicle Repair Medical Semiconductor Food & Beverage Communications Rest of World Automotive Government Facilities & Electronics 2016 Fortive Annual Report 1 A message to our shareholders Dear Fellow Shareholders, In July of 2016, we began a new chapter in our company with a strong grounding in our roots, a deeply energizing sense of focus and a future full of possibility. We became Fortive. OUR STRONG START When we announced our intention to launch Fortive, we told you, our investors, about a tremendous opportunity to create shareholder value. We said that two companies, built on a foundation of continuous improvement and James A. Lico President and Chief Executive Officer committed to investing in their people, technologies, and high-impact organic and inorganic growth opportunities, would be more prosperous than one. We are very pleased with our progress to date, but we are just getting started. As we look ahead to 2017 and The pace and volume of work was relentless, but our beyond, our focus is on building an enduring company extraordinary team used decades of Fortive Business that can deliver continued growth, innovation and strong System (FBS) knowledge to seamlessly launch a $6 billion performance year after year. company—24,000 people strong—in just 14 months. By working hand in hand with our Danaher colleagues, we OUR PATH FORWARD established the right leadership, strategic, operational and ESSENTIAL TECHNOLOGY FOR THE financial foundations on which to build an outstanding PEOPLE WHO ACCELERATE PROGRESS company. We did this without disrupting “business as usual.” This powerful Shared Purpose unites us. It drives us to We won customers, improved quality and bolstered employee advance critical technology that helps our customers engagement while delivering strong financial performance. In fulfill their missions. It motivates every one of us—in every short, our separation demonstrated our culture and our ability function and at every level—on our quest to ensure to deliver results while building for the future. I could not be tomorrow is better than today. prouder of the teamwork that created Fortive. Our continued success will be driven by our commitment OUR 2016 RESULTS to continuous improvement as we use FBS and apply the Through the strength and diversity of our Fortive brands knowledge we gain around the world, every single day. and the quality of our portfolio, we delivered strong, FBS, of course, stretches beyond a set of tools. It’s the above-market performance. In six short months, we: foundation of our culture and our roadmap to achieving our Shared Purpose. • Grew core revenue by 3.1%, outperforming our peers and competitors and driving share gains across our portfolio FBS is also the source of the innovation that is critical to • Expanded core adjusted operating margin by 90 basis our customers’ success. Fortive innovation surrounds points through the continued application of FBS each of us daily in the form of essential technology. It • Generated strong free cash flow, our currency for growth, keeps power grids and factories running, supports the for a free cash flow to net income conversion ratio of 129% largest data centers, advances robotics through precision motion and automation technology, and drives the • Delivered adjusted net earnings growth of 12% global economy by ensuring safe, efficient transport • Successfully deployed $200 million of capital towards of goods. strategic acquisitions OUR VALUES Dear Fellow Shareholders, We are driving toward a future of continued progress and growth by aligning our strategic priorities with our Values, On July 2nd, we launched Fortive as an independent company with big ambitions and a commitment to create the four building blocks of our Shared Purpose.