Equity Investor Meeting Presentation June 21, 2016

Transcription

1 Equity Investor Meeting Presentation June 21, 2016

2 Forward-Looking Statements Statements in this presentation that are not strictly historical, including the expected separation date, statements regarding the Company's business and acquisition opportunities, anticipated revenue growth, anticipated operating margin expansion, anticipated cash flow, and anticipated earnings growth, and any other statements identified by their use of words like anticipate, expect, believe, outlook, guidance, or will or other words of similar meaning are "forward-looking" statements within the meaning of the federal securities laws. There are a number of important factors that could cause actual results, developments and business decisions to differ materially from those suggested or indicated by such forward-looking statements and you should not place undue reliance on any such forward-looking statements. These factors include, among other things, deterioration of or instability in the economy, the markets we serve and the financial markets, contractions or lower growth rates and cyclicality of markets we serve, competition, our ability to develop and successfully market new products and technologies and expand into new markets, the potential for improper conduct by our employees, agents or business partners, our ability to successfully identify, consummate, integrate and realize the anticipated value of appropriate acquisitions and successfully complete divestitures and other dispositions, contingent liabilities relating to acquisitions and divestitures, our compliance with applicable laws and regulations and changes in applicable laws and regulations, risks relating to potential impairment of goodwill and other intangible assets, currency exchange rates, tax audits and changes in our tax rate and income tax liabilities, litigation and other contingent liabilities including intellectual property and environmental, health and safety matters, risks relating to product, service or software defects, product liability and recalls, risks relating to product manufacturing, the impact of our debt obligations on our operations and liquidity, our relationships with and the performance of our channel partners, commodity costs and surcharges, our ability to adjust purchases and manufacturing capacity to reflect market conditions, reliance on sole sources of supply, labor matters, international economic, political, legal, compliance and business factors, adverse effects of restructuring activities, disruptions relating to man-made and natural disasters, security breaches or other disruptions of our information technology systems and pension plan costs. Additional information regarding the factors that may cause actual results to differ materially from these forward-looking statements is available in our SEC filings, including our Information Statement furnished with the Current Report on Form 8-K filed by us on June 15, These forward-looking statements speak only as of the date of this presentation and Fortive does not assume any obligation to update or revise any forward-looking statement, whether as a result of new information, future events and developments or otherwise.

3 Non-GAAP Financial Measures This presentation contains references to core revenue growth, core operating margin expansion (core OMX), free cash flow, adjusted net earnings, and non-gaap adjusted pro forma financial measures which are, in each case, not presented in accordance with generally accepted accounting principles ( GAAP ). Core revenue refers to sales from operations and operating margin, respectively, calculated according to GAAP but excluding (1) sales from acquired businesses and (2) the impact of currency translation. References to sales attributable to acquisitions or acquired businesses refer to GAAP sales or operating margin, as applicable, from acquired businesses recorded prior to the first anniversary of the acquisition. Core operating margin expansion (core OMX) refers to operating margin calculated according to GAAP but excluding operating margin from acquired businesses. References to core operating margin from acquisitions or acquired businesses refer to GAAP operating margin from acquired businesses recorded prior to the first anniversary of the acquisition. Free cash flow refers to cash flow from operations calculated according to GAAP but excluding capital expenditures. Adjusted net earnings refers to net earnings calculated in accordance with GAAP, but excluding amortization of acquisition-related intangible assets and applying the Company's overall estimated effective tax rate to the pretax amount of the adjustment, unless the nature of the adjustment and/or the tax jurisdiction in which the adjustment has been recorded requires application of a specific tax rate or tax treatment, in which case the tax effect of such adjustment is estimated by applying such specific tax rate or tax treatment. The non-gaap adjusted pro forma financial data presented in the appendix to this presentation reflect such adjustments to the corresponding GAAP measures identified in the reconciliation schedules provided therewith. The Company has not reconciled the forward-looking statements regarding core revenue growth, core operating margin expansion, and the growth rate of adjusted net earnings because both the corresponding GAAP measures and the reconciliation thereto would require the Company to make estimates or assumptions about unknown currency impact, unidentified acquisitions and similar adjustments during the relevant period. The historical non-gaap financial measures should not be considered in isolation or as a substitute for the GAAP financial measures but should instead be read in conjunction with the corresponding GAAP financial measures. Further information with respect to and reconciliations of such non-gaap adjusted pro forma financial measures to the nearest GAAP financial measure can be found attached to this presentation. The historical non-gaap financial measures should not be considered in isolation or as a substitute for the GAAP financial measures but should instead be read in conjunction with the corresponding GAAP financial measures. Further information with respect to and reconciliations of such non-gaap adjusted pro forma financial measures to the nearest GAAP financial measures can be found attached to this appendix.

4 Separation Update Tax-free pro rata distribution to Danaher shareholders of Fortive, a new publicly-traded company Exchange Ticker Distribution Ratio Declaration Date When-Issued Trading Commenced Record Date Distribution Date Regular-Way Trading Begins NYSE FTV (FTV.WI) 1 share of FTV for every 2 shares of DHR 01-Jun Jun Jun Jul Jul-2016 Fiscal Year End December 31

5 Danaher Today Life Sciences & Diagnostics Dental Environmental Industrial Technologies Test & Measurement Diagnostics $4.9B Dental $2.7B Water Quality $2.0B Product ID $1.6B Instruments $2.1B Life Sciences $2.4B Automation $0.8B Transportation Technologies $1.6B Sensors & Controls $0.6B Franchise Distribution $0.6B Pall $2.8B Specialty Industrial $0.4B Source: FY 2015 Sales per Danaher 2015 Investor Day Presentation; 2015 Sales have been adjusted to include Pall Sales for Pall s full fiscal year ended July 31, 2015 Outstanding portfolio of businesses

6 Agenda Diversified industrial growth company of scale with a portfolio of market-leading brands united by a common culture Fortive Business System will be the foundation of organic initiatives to enhance our growth profile, expand margins Focus on deploying capital through strategic and financially-disciplined M&A Focused, growth-oriented strategy to unlock shareholder value

7 Overview 2015 Revenue Gross Margin $6.2B High 40%s High teens By Business Operating Margin ~50 bps core OMX* Free Cash Flow FCF >NI* Professional Instrumentation 48% Industrial Technologies 52% By Geography 1 ROW 4% HGM 22% EU 16% NA 58% Growth Drivers Changing environmental regulations Energy efficiency, safety and security requirements Growing industrial base in high growth markets Global trend toward connected devices, software and digital service Business Characteristics Anticipate core revenue growth GDP/GDP+ Investment grade credit rating Strong capital allocation bias toward M&A Experienced leadership team and Board of Directors 1 NA is North America (55% in the U.S.), EU is Europe, HGM is High Growth Markets, ROW is Rest of World. Strong margin and FCF profiles. Secular growth drivers. M&A bias. All financial metrics based on 2015 unless otherwise indicated. * Anticipated annual performance.

8 Experienced Team Current Board of Directors Jim Lico President & CEO Feroz Dewan Kate Mitchell Mitch Rales Steve Rales Israel Ruiz Alan Spoon Fortive Senior Leadership Team Chuck McLaughlin SVP & CFO Martin Gafinowitz SVP Pat Byrne SVP Pat Murphy SVP Wes Pringle SVP Raj Ratnakar VP, Strat Dev Jon Schwarz VP, Corp Dev Barbara Hulit SVP, FBS & HGMs Stacey Walker SVP, HR Peter Underwood SVP, General Counsel 24,000 global associates united by a common culture 4,000 engineers and technologists 6,500 customer-facing associates Senior leaders with combined >200 acquisitions, >95 years of Danaher service

9 Our Businesses Professional Instrumentation Revenue $3.0B GM% >50% OP Margin >20% Industrial Technologies Revenue $3.2B GM% ~40% OP Margin High teens Field Solutions* Product Realization* Sensing Technologies Transportation Technologies Automation & Specialty Franchise Distribution All financial metrics based on *Advanced Instrumentation & Solutions Strong brands, leading market positions in attractive industrial verticals

10 Professional Instrumentation Helping our customers measure and monitor physical parameters to create actionable intelligence Field Solutions Product Realization Sensing Technologies Revenue $1.5B Market Size ~$7B Market Growth +LSD/MSD Revenue $1.1B Market Size ~$5B Market Growth +LSD Revenue $0.4B Market Size ~$6B Market Growth +LSD Providing offline & connected monitoring hardware/software solutions for uninterrupted, optimized operations of critical industrial, power and biomedical assets Tools, reusable modules/ip, software and services to help product developers and R&D engineers convert concepts into advanced finished products Combining material science, hardware and software to deliver precise operational measurements in variety of end markets All financial metrics based on Strong brands, leading market positions in attractive industrial verticals

11 Field Solutions Revenue 2015 Financials ~$1.5B Revenue Breakdown Geographic 4% Market Size ~$7B Market Details Growth Drivers Growth Rate +LSD/MSD Machine Data, Online monitoring of critical assets Infrastructure build-out, High growth market urbanization Regulation; Medical safety, Network verification 35% 19% 42% NA EU HGM ROW Customers Manufacturing & Process Facilities Power Generation and Distribution Hospitals & Clinics Public and private calibration labs Leading positions in test applications and connected equipment monitoring

12 Product Realization Revenue 2015 Financials ~$1.1B Revenue Breakdown 26% Geographic 12% 7% 56% 55% NA EU HGM ROW Market Size ~$5B Market Details Growth Drivers Customers Growth Rate +LSD Bandwidth in wireless, optical, and data center applications Connected device development for Internet of Things US Military/Government technology deployments Diagnostic therapy development Electronics developers in industrial, automotive, semiconductor, and data communications US Military/Government Medical and Industrial Equipment manufacturers Education and Research Enabling customers to bring next generation solutions to market

13 Sensing Technologies Revenue 2015 Financials ~$0.4B Revenue Breakdown 12% Geographic 15% 2% 56% 71% NA EU HGM ROW Market Size ~$6B Market Details Growth Drivers Customers Growth Rate +LSD Equipment productivity / remote monitoring / remote diagnostics Nuclear power expansion in China Food safety regulations Critical care HVAC applications in hospitals and labs OEMS (industrial, medical, HVAC, food & beverage, nuclear, bio pharm, O&G) Aerospace & Defense Fluid food and beverage industry Market leader in critical sensing technologies across variety of verticals

14 Industrial Technologies Technical equipment, components, software and services for manufacturing, repair and transportation markets worldwide Transportation Technologies Automation & Specialty Franchise Distribution Revenue $1.6B Market Size ~$7B Market Growth MSD+ Revenue $1.0B Market Size ~$10B Market Growth +LSD Revenue $0.6B Market Size ~$3B Market Growth +LSD/MSD Industry-leading hardware and software assets that serve fleet and retail petroleum owners for fuel dispensing, remote fuel management, point-of-sale, payments, fleet operations Critical components and equipment serving customers in a variety of applications and end markets requiring industrial automation, robotics, medical devices or other precision control solutions Franchise for mobile distribution of high-end tools and diagnostic equipment, and a provider of wheel service equipment to the automotive aftermarket All financial metrics based on Strong brands, leading market positions in attractive industrial verticals

15 Transportation Technologies Revenue 2015 Financials ~$1.6B Market Size ~$7B Market Details Growth Rate MSD+ Revenue Breakdown Geographic 21% 16% 7% 56% 56% NA EU HGM ROW Growth Drivers Regulation environmental, safety, security and payment Increasing sophistication of convenience store format Larger fueling networks requiring control and automation Fleet manager looking to improve costs and efficiencies Customers Major and regional oil companies Hypermarkets and convenience store owners ( C-store ) Local and long-haul trucking fleets Market leader evolving from retail fueling to smart transportation

16 Automation and Specialty Components Revenue 2015 Financials ~$1.0B Revenue Breakdown Geographic 3% 15% 27% 56% 55% NA EU HGM ROW Market Size ~$10B Market Details Growth Drivers Automation / engineered solutions High growth markets Customers Growth Rate +LSD Medical diagnostic equipment, infusion systems, surgical power Collaborative robotics OEMS (food & beverage, packaging, metal forming, medical, robotics, ag/construction) Machine builders/system integrators Truck/truck engine providers Critical components & equipment serving common, attractive market verticals

17 Franchise Distribution Revenue 2015 Financials ~$0.6B Revenue Breakdown Geographic 1% NA 56% 99% HGM Market Size ~$3B Franchise expansion Professional mechanics Automotive aftermarket Market Details Growth Drivers Customers Growth Rate +LSD/MSD Shift to open platforms, lowers cost of ownership for diagnostic scanners New car model growth -> demand for tool storage productivity Car model sophistication expands aftermarket diagnostics Professional tools and wheel service equipment for professional mechanics

18 Historical Financial Performance Total Sales Operating Profit and Margin % $5,962 $6,337 $6,179 $1,143 $1,245 $1, % 19.7% 19.2% Revenue Growth Core Revenue Growth 0.0% +4.0% +2.5% Acquisitions +3.5% +3.0% 0.0% Currency Translation (0.5)% (0.5)% (5.0)% Total +3.0% +6.5% (2.5)% Total sales and operating profit are in millions of dollars. Source: 2013, 2014 and 2015 per audited financials included in the Information Statement furnished in our Form 8-K filed on June 15, 2016 Delivering Growth Through the Cycle

19 Key Investment Highlights Market leader in niche markets with unique portfolio of marketleading brands and strong secular growth trends Deep experience in Fortive Business System drives sales growth and margin expansion Robust free cash flow allows for reinvestment in the business via M&A 4 Strong capital structure; Disciplined focus on returns 5 Highly experienced and energized management team Focused, growth-oriented strategy to unlock shareholder value

20 Agenda Diversified industrial growth company of scale with a portfolio of market-leading brands united by a common culture Fortive Business System will be the foundation of organic initiatives to enhance our growth profile, expand margins Focus on deploying capital through strategic and financially-disciplined M&A Focused, growth-oriented strategy to unlock shareholder value

21 Fortive Business System ( FBS ) FBS is the cornerstone of our culture and competitive advantage

22 Core Organic Growth Opportunities Growing installed base and strong market positions create additional opportunities Gain share globally, expand in high growth markets Regulatory drivers around safety, security and the environment Harness our instruments data output to extend our offering and customer interaction Accelerate expanded applications in sensing, condition monitoring, robotics Deliver even greater value via software, service Continue to develop connected instruments, software/saas across the portfolio Fluke Connect, Insite360, Matco MaxME Organic initiatives support acceleration around macro growth drivers

23 FBS Drives Margin Expansion Using FBS to drive OMX >250 bps OMX over last 3 years at Fluke, Matco, EMC, Portescap Combination of lean tools, direct/indirect material spend, pricing Strong execution bolsters our competitive advantage Meaningful operating margin runway in existing portfolio Combination of Navman and Teletrac in Telematics Nearly half of the portfolio below company average Healthy cadence of bolt-on acquisitions expected to create additional opportunities FBS implementation at GVR Coimbatore drove >1500bps OMX since 2011 acquisition Solid margin expansion in the past, with meaningful opportunities still ahead

24 Technology Leadership Through Innovation MaxME Vehicle Diagnostics Features the industry s only patented, pay-as-you-go software subscription service Allowing mechanics to scale their businesses as they grow Custom Motors for Surgical Hand Tools Fast turnaround time for precise, highly-durable autoclave motors for arthroscopic, ENT and orthopedic Enabling the most precise surgical techniques to keep patients safe DPO70000SX Real- Time Oscilloscope World's first 70 GHz real-time oscilloscope with Tek s patented signal-tonoise ratio preserving technology Supporting the highest-speed bandwidth for data centers, cloud computing and wireless 279 FC Thermal Multimeter World s first test tool to integrate a full-featured true RMS digital multimeter with a thermal camera Streamlining workflows and keeping engineers safe on the job Creating the world s essential technology for the customers we serve

25 Agenda Diversified industrial growth company of scale with a portfolio of market-leading brands united by a common culture Fortive Business System will be the foundation of organic initiatives to enhance our growth profile, expand margins Focus on deploying capital through strategic and financially-disciplined M&A Focused, growth-oriented strategy to unlock shareholder value

26 Strong Financial Position Total debt 1 of $3.25B financed at weighted average annual interest rate of < 3% Flexibility in current investment grade credit rating (BBB / Baa1) Net Debt/EBITDA 2 ~2X Approximately $3B expected to be available to deploy towards M&A over the next 2-3 years 1 Total debt includes $2.50B of senior notes and $500M of term loan with the remaining funded via commercial paper immediately prior to spin-off. 2 Net debt is determined by assumed total debt of $3.25B less assumed cash and cash equivalents of $250M immediately prior to spin-off. EBITDA refers to net earnings before interest, tax, depreciation and amortization for fiscal year Strong investment grade and cash generation yield healthy M&A capacity

27 Our Approach to M&A M&A Considerations What We Look For MARKET COMPANY VALUATION Attractive Markets Secular/structural growth drivers Fragmented (consolidation opportunities) Company Profile Competitive market position with potential to increase share, become leading player Strong brand and/or channel Higher margin businesses Value Creation Significant FBS opportunities, sustainability Synergies with existing OpCos Combination of value and growth deals Seeking value creation opportunities in attractive markets

28 M&A Opportunities Where We Focus Large Value Creating Opportunities Using FBS and operational strengths to improve businesses Gilbarco 2002 Fluke 1998 Platform Extensions with Synergies Leveraging strong brand and/or channel Technology Additions to Platforms Enabling new growth vectors built on evolving market trends High Growth Markets Extend our reach to gain share globally Fluke Raytek GVR AFS ANGI Tek Keithley GVR Telematics Qualitrol Iris Fluke Raysafe GVR L&T Stratema Kollmorgen Elsim MCS Enginharia Fluke TTL Fluke Korea Focused on building a better and stronger portfolio

29 M&A in Action Fluke Financial Evolution AT ACQUISITION GROWTH/ IMPROVEMENT + + = ACQUISITIONS TODAY Revenue $340M Revenue ~$520M Revenue ~$350M Revenue >$1.2B OP Margin ~10% OP Margin DD OP ~$200M OP Margin >25% Investment $550M ROIC ~5% 32 Acquisitions Since 1998: 1 st Year Contribution Investment >$1.4B ROIC ~20% Organic growth initiatives and M&A driving ~20% ROIC still additional runway

30 Fortive s Opportunity CORE REVENUE GROWTH GDP/GDP+ AND Investment grade credit rating FBS at the core of what we do Top Quartile Earnings Growth MARGIN EXPANSION ~50 bps core OMX ACQUISITION GROWTH ~$1B FCF annually to start, spent primarily on M&A Value creation model targeting top quartile earnings growth All financial metrics reflect anticipated annual performance unless otherwise indicated.

31 2016 Second Half Guidance Fortive Financials* Revenue Operating Margin Adjusted net earnings excluding acquisitionrelated amortization Cash Flow 2H16 Outlook LSD Core Growth bps Core OMX MSD+ FCF > NI Outperforming markets Fortive Business System and innovation drives OMX Strong cash flow generation * This guidance should be read in conjunction with the historical financial data presented in the appendix, as well as the discussion on forward looking statements and non-gaap financial measures in the forefront of this presentation. Value creation model targeting top quartile earnings growth

32 Summary Fortive will be a high-quality, diversified industrial growth company FBS will be our foundation to enhance our growth profile and expand margins Capital deployment will be focused on strategic and financially-disciplined M&A Focused, growth-oriented strategy to unlock shareholder value

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