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What changed in Fortrea Holdings Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Fortrea Holdings Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+447 added−419 removedSource: 10-K (2025-03-03) vs 10-K (2024-03-13)

Top changes in Fortrea Holdings Inc.'s 2024 10-K

447 paragraphs added · 419 removed · 333 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

104 edited+23 added−28 removed71 unchanged
Biggest changeOur top 20 customers have consistently represented approximately 58% of total revenue for 2023, and 60% for 2022, and 2021. Additionally, most of our customers use us for more than one service. On average, our customers leverage three or more of our services. We believe that our global capabilities and expertise are considered a differentiator by our top customers.
Biggest changeGlobal and Stable Customer Relationships Our scale and expertise are key competitive advantages that make us a multi-dimensional partner for our customers. Our top 20 customers have consistently represented approximately 64% of total revenue for 2024, 61% for 2023, and 55% for 2022. Additionally, most of our customers use us for more than one service.
Fortrea has strategic relationships with a number of top technology vendors in the industry, including Veeva, Advarra, Medidata, and Cognizant among others.
Fortrea has strategic relationships with a number of top technology vendors in the industry, including Advarra, Cognizant, Medidata and Veeva among others.
Become the Partner of Choice for Pharmaceutical, Biotechnology and Medical Device Companies Fortrea partners with pharmaceutical, biotechnology and medical device companies of all sizes, from small/emerging, mid-size, to large. Our customers are looking for flexible and agile solutions to support their strategies, competencies and geographic priorities.
Become the Partner of Choice for Pharmaceutical, Biotechnology and Medical Device Companies Fortrea partners with pharmaceutical, biotechnology and medical device companies of all sizes, from small/emerging, mid-size, and large. Our customers are looking for flexible and agile solutions to support their strategies, competencies and geographic priorities.
This allows us to cater to diverse learning styles and be more flexible in our delivery methods. We leverage the latest technology to find innovative ways to enhance accessibility and effectiveness of our learning programs. We seek feedback from our employees to ensure our methods are creating a supportive environment focused on their development needs.
This allows us to cater to diverse learning styles and be more flexible in our delivery methods. We leverage the latest technology to find innovative ways to enhance the accessibility and effectiveness of our learning programs. We seek feedback from our employees to ensure our methods are creating a supportive environment focused on their development needs.
For example, violations could result, depending on the nature of the violation and the type of product involved, in the issuance of a warning or untitled letter, suspension or termination of a clinical study, refusal of the FDA to approve clinical trial or marketing applications or withdrawal of such applications, injunction, seizure of investigational products, civil penalties, criminal prosecutions, or debarment from assisting in the submission of NDAs.
For example, violations could result, depending on the nature of the violation and the type of product involved, in the issuance of a warning or untitled letter, suspension or termination of a clinical study, refusal to approve clinical trial or marketing applications or withdrawal of such applications, injunction, seizure of investigational products, civil penalties, criminal prosecutions, or debarment from assisting in the submission of NDAs.
In order to comply with GCP and other regulations, sponsors of clinical trials must, among other things: • comply with specific requirements governing the selection of qualified investigators; • obtain specific written commitments from the investigators; 17 Table of Contents • obtain IRB/IEC review and approval of the clinical trial; • verify that appropriate patient informed consent is obtained before the patient participates in a clinical trial; • ensure adverse drug reactions resulting from the administration of a drug or biologic during a clinical trial are medically evaluated and reported in a timely manner; • monitor the validity and accuracy of data; • maintain records regarding drug or biologic dispensing and disposition; • instruct investigators and study staff to maintain records and reports; and • permit appropriate governmental authorities access to data for review.
In order to comply with GCP and other regulations, sponsors of clinical trials must, among other things: • comply with specific requirements governing the selection of qualified investigators; • obtain specific written commitments from the investigators; • obtain IRB/IEC review and approval of the clinical trial; • verify that appropriate patient informed consent is obtained before the patient participates in a clinical trial; • ensure adverse drug reactions resulting from the administration of a drug or biologic during a clinical trial are medically evaluated and reported in a timely manner; • monitor the validity and accuracy of data; • maintain records regarding drug or biologic dispensing and disposition; • instruct investigators and study staff to maintain records and reports; and • permit appropriate governmental authorities access to data for review.
Expertise Across Therapeutic Areas We believe that our focus and expertise across rapidly growing scientific areas provide us with advantages over our competitors. Fortrea’s expertise spans oncology, CNS and neurodegenerative disease, cardiovascular, renal, MASH, rare disease, cell and gene therapy, and many more. These scientific areas represent the majority of the industry’s drug development pipelines.
Expertise Across Therapeutic Areas We believe that our focus and expertise across rapidly growing scientific areas provide us with advantages over our competitors. Fortrea’s expertise spans oncology, CNS and neurodegenerative disease, cardiovascular, renal, MASH, rare disease, cell and gene therapy, and many more. These scientific areas represent the majority of the life sciences industry’s drug development pipelines.
These laws and regulations include the safe handling, use, transportation and disposal of potentially infectious and hazardous materials; the assessment of potential work-related risks and establishment of work practice and engineering controls, and providing protective clothing and equipment, training, and medical surveillance; designed to minimize risk to employee health and safety and the environment.
These laws and regulations include the safe handling, use, transportation and disposal of potentially infectious and hazardous materials; the assessment of potential work-related risks and establishment of work practice and engineering controls, and providing protective clothing and equipment, training, and medical surveillance; they are designed to minimize risk to employee health and safety and the environment.
As a result, bringing a new biopharmaceutical product or medical device to market can take up to 12 years and costs $2.5 billion or more on average. 1 The biopharmaceutical product development process consists of three stages: preclinical, clinical, and commercialization.
As a result, bringing a new biopharmaceutical product or medical device to market can take up to 12 years 1 and costs $2.3 billion or more on average. 2 The biopharmaceutical product development process consists of three stages: preclinical, clinical, and commercialization.
Within the time period required by the SEC and Nasdaq, we will post on our website any amendment to the Code of Conduct or any waiver of such policy applicable to any of our senior financial officers, executive officers or directors. 20 Table of Contents
Within the time period required by the SEC and Nasdaq, we will post on our website any amendment to the Code of Conduct or any waiver of such policy applicable to any of our senior financial officers, executive officers or directors. 21 Table of Contents
Our main competition consists of these small and large CROs, as well as in-house departments of pharmaceutical, biotechnology, and medical device companies and, to a lesser extent, select universities and teaching hospitals and site management organizations. We believe our success with customers has been rooted in transparent partnerships that offer agile solutions and support speed to market.
Our main competition consists of these small and large CROs, as well as in-house departments of pharmaceutical, biotechnology, and medical device companies and, to a lesser extent, select universities and teaching hospitals and site management organizations. 12 Table of Contents We believe our success with customers has been rooted in transparent partnerships that offer agile solutions and support speed to market.
We will continue to invest in our capabilities, our ability to generate insights through data and analytics, reduce cost, and increase the speed and efficiency of clinical trial execution to enhance the quality of our offerings for our customers.
We plan to continue to invest in our capabilities, our ability to generate insights through data and analytics, reduce cost, and increase the speed and efficiency of clinical trial execution to enhance the quality of our offerings for our customers.
We are committed to increasing the diversity of patient populations within clinical trials, and we developed a holistic strategy focused on partnering with customers, sites, investigators, and communities to address this commitment.
We are committed to increasing the representation of patient populations within clinical trials, and we developed a holistic strategy focused on partnering with customers, sites, investigators, and communities to address this commitment.
The trials are generally conducted in three phases (phases I, II and III), which may overlap or be combined, although the FDA may require, or sponsors may voluntarily conduct, a fourth phase of clinical trials (phase IV) as a condition of approval or to obtain additional data on the product under investigation, respectively.
The trials are generally conducted in three phases (phases I, II and III), which may overlap or be combined. For applications to the FDA, the FDA may require, or sponsors may voluntarily conduct, a fourth phase of clinical trials (phase IV) as a condition of approval or to obtain additional data on the product under investigation, respectively.
These regulations apply to our customers and are generally applicable to us when we are providing services to our customers, either as a result of their direct applicability, through a transfer of 16 Table of Contents regulatory obligations from our customers, or as a consequence of acting as local legal representative on behalf of our customers in a particular country or countries.
These regulations apply to our customers and are generally applicable to us when we are providing services to our customers, either as a result of their direct applicability, through a transfer of regulatory obligations from our customers, or as a consequence of acting as local legal representative on behalf of our customers in a particular country or countries.
We are also subject to 18 Table of Contents privacy and security obligations as part of our contractual commitments with our customers and affiliates. If we fail to perform our services in accordance with these processes, frameworks and contractual commitments, we could be subject to monetary fines, civil penalties or criminal sanctions as are described in Part I. Item 1A.
We are also subject to privacy and security obligations as part of our contractual commitments with our customers and affiliates. If we fail to perform our services in accordance with these processes, frameworks and contractual commitments, we could be subject to monetary fines, civil penalties or criminal sanctions as are described in Part I, Item 1A.
Fortrea’s strategy includes the following elements: Lead with Scientific and Therapeutic Expertise, Expand in Existing and Novel Therapeutic Areas We believe our therapeutic expertise across phase I through phase IV of drug development is critical to early engagement with customers, and to optimizing the design and management of clinical trials.
Fortrea’s strategy includes the following elements: 9 Table of Contents Lead with Scientific and Therapeutic Expertise, Expand in Existing and Novel Therapeutic Areas We believe our therapeutic expertise across phase I through phase IV of drug development is critical to early engagement with customers and to optimizing the design and management of clinical trials.
Our competitive strengths include: Extensive History as a Market Leader Across Clinical Development We have more than 30 years of experience providing clinical development services to the pharmaceutical, biotechnology, and medical device industries. We have an extensive history as a leading organization with a differentiated service offering.
Our competitive strengths include: 8 Table of Contents Extensive History as a Market Leader Across Clinical Development We have more than 30 years of experience providing clinical development services to the pharmaceutical, biotechnology, and medical device industries. We have an extensive history as a leading organization with a differentiated service offering.
Fortrea supports many small and mid-size customers through contributing scientific, therapeutic, regulatory and operational expertise and insights to help shape their R&D strategy and protocol design to achieve their goals. We provide expert full-service teams, data-driven site selection and patient centric recruitment approaches to deliver their studies with agility and flexibility, underpinned by quality.
Fortrea supports many small and mid-size customers through contributing scientific, therapeutic, regulatory and operational expertise and insights to help shape their clinical development strategy and protocol design to achieve their goals. We provide expert full-service teams, data-driven site selection and patient-centric recruitment approaches to deliver their studies with agility and flexibility, underpinned by quality.
The information contained in, or accessible through, our website does not constitute a part of this Annual Report on Form 10-K. Available Information Our website address is www.fortrea.com, and our investor relations website is located at http://ir.fortrea.com.
The information contained in, or accessible through, our website does not constitute a part of this Annual Report on Form 10-K. 20 Table of Contents Available Information Our website address is www.fortrea.com, and our investor relations website is located at http://ir.fortrea.com.
We are also focused on optimizing delivery in more complex hybrid study designs that include both healthy volunteers and patients through the utilization of our own clinics in combination with an expanded global site network, to expand our service offerings into phase 1B studies in patients, and serve as sites for phase 2 studies and vaccine studies.
We are also focused on optimizing delivery in more complex hybrid study designs that include both healthy volunteers and patients through the utilization of our own clinics in combination with a global site network, to expand our service offerings into phase 1B studies in patients and serve as investigator sites for phase 2 studies and vaccine studies.
At the same time, geopolitical events and uncertainties have impacted the locations where clinical trials can be conducted. In certain countries, such as the U.S., the need for inclusion of underrepresented minorities and other related goals has become paramount. Fortrea has the scale and expertise to advise, design and deliver our customers’ programs, projects and programs globally.
At the same time, geopolitical events and uncertainties have impacted the locations where clinical trials can be conducted. In certain countries the need for inclusion of underrepresented minorities and other related goals has become paramount. Fortrea has the scale and expertise to advise, design and deliver our customers’ programs, projects and programs globally.
Fortrea offers a range of site augmentation services to support sites with selecting trials, identifying and enrolling patients, conduct and close out of studies. These services include administrative and clinical support, tools, data and analysis to enable sites to be more productive, help to overcome challenges with disparate technologies, complex protocols and their resource constraints.
Fortrea offers a range of site augmentation services to support sites with selecting trials, identifying and enrolling patients, conducting and closing out of studies. These services include administrative and clinical support, tools, data and analysis to enable sites to be more productive and help to overcome challenges with disparate technologies, complex protocols and their resource constraints.
They remain embedded 12 Table of Contents through the development of the opportunity and throughout the life of the project, program or partnership. This strategy allows us to consult collaboratively with our customers throughout the lifecycle of our engagement.
They remain embedded through the development of the opportunity and throughout the life of the project, program or partnership. This strategy allows us to consult collaboratively with our customers throughout the lifecycle of our engagement.
The clinical development market is a large, attractive and growing market. Clinical development spend by the pharmaceutical and biotechnology industry was estimated to be $100 billion in 2022 2 . Of this, we estimate the current addressable market for Fortrea to be $35 billion.
The clinical development market is a large, attractive and growing market. Clinical development spend by the pharmaceutical and biotechnology industry was estimated to be $100 billion in 2024 3 . Of this, we estimate the current addressable market for Fortrea to be $35 billion.
Our FOUR culture beliefs underpinning how we care and deliver are: • Forward Together - I partner with my customers to understand their needs and achieve results together • Own It - I hold myself accountable and work across perceived boundaries to find solutions and deliver • Uphold Integrity - I do the right things in the right way, with the safety of patients and research volunteers always coming first • Respect People - I am inclusive, seek feedback and create positive experiences for all In addition, we will continue our investments with global early talent development academies; career paths; a broad range of learning and development opportunities; our Diversity, Equity & Inclusion (“DEI”) People Advisory Committee to operationalize DEI throughout the organization; and Employee Resource Groups.
Our FOUR cultural beliefs underpinning how we care and deliver are: • Forward Together - I partner with my customers to understand their needs and achieve results together • Own It - I hold myself accountable and work across perceived boundaries to find solutions and deliver • Uphold Integrity - I do the right things in the right way, with the safety of patients and research volunteers always coming first • Respect People - I am inclusive, seek feedback and create positive experiences for all In addition, we will continue our investments with global early talent development academies; career paths; a broad range of learning and development opportunities; our Responsible People Practices Advisory Committee to operationalize people initiatives throughout the organization; and Employee Resource Groups (“ERG”).
Our team of approximately 18,000 employees conducts operations in about 90 countries and stands behind our vision of powering customers to achieve their aspirations with innovation that combines the best people, science and technology. Workforce Demographics Our success is rooted in our sustained ability to attract, develop, and retain a highly specialized and skilled global workforce.
Our team of approximately 15,500 employees conducts operations in about 100 countries and stands behind our vision of powering customers to achieve their aspirations with innovation that combines the best people, science and technology. Workforce Demographics Our success is rooted in our sustained ability to attract, develop, and retain a highly specialized and skilled global workforce.
Oncology makes up a large portion of our business and continues to grow. Over the previous five years, we have completed over 1,200 oncology clinical trials involving approximately 250,000 patients and more than 30,000 investigator sites. In 2023, 46% of our therapeutic based revenue related to oncology studies.
Oncology makes up a large portion of our business and continues to grow. Over the previous five years, we have completed over 1,200 oncology clinical trials involving approximately 250,000 patients and more than 30,000 investigator sites. In 2024, 47% of our full service therapeutic-based revenue related to oncology studies.
Fortrea Holdings Inc. was formed through a spin-off of the CRO business, which we refer to as the “Spin” or the “Separation,” from Laboratory Corporation of America Holdings, which we refer to herein as “Labcorp” or “Former Parent”.
Fortrea Holdings Inc. was formed through a spin-off of the CRO business, which we refer to as the “Spin” or the “Separation,” from Labcorp Holdings Inc., which we refer to herein as “Labcorp” or “Former Parent”.
Health and Safety The health and safety of our employees is of primary importance. As such, we have established numerous employee health and safety protocols, including engineering and administrative controls, policies, procedures, processes and training to minimize the potential for, and the severity of, work-related injuries and illnesses.
As such, we have established numerous employee health and safety protocols, including engineering and administrative controls, policies, procedures, processes and training to minimize the potential for, and the severity of, work-related injuries and illnesses.
We believe we are well positioned to leverage our global scale, access to clinical data-driven insights, industry network, and decades of experience to bring customers distinctive, expert solutions. Our team of approximately 18,000 employees provides services in about 90 countries. Our solutions streamline the biopharmaceutical product and medical device development process.
We believe we are well positioned to leverage our global scale, scientific and therapeutic expertise, access to clinical data-driven insights, industry network, and decades of experience to bring customers distinctive, expert solutions. Our team of approximately 15,500 employees provides services in approximately 100 countries. Our solutions streamline the biopharmaceutical product and medical device development process.
Government Regulation Regulation of Drugs and Biologics The development, testing, manufacturing, labeling, storage, approval, promotion, marketing, distribution and post-approval monitoring and reporting of pharmaceutical, biological and medical device products are subject to rigorous regulation by numerous governmental authorities in the U.S. at the federal, state and local level, including the Food and Drug Administration (“FDA”), as well as those of other countries, such as the European Medicines Agency (“EMA”) in the European Union, the Medicines and Healthcare products Regulatory Agency (“MHRA”) in the U.K., the National Medical Products Administration (“NMPA”) in China and the Pharmaceuticals and Medical Devices Agency (“PMDA”) in Japan.
The coverage provided by such insurance may not be adequate for all claims made and such claims may be contested by applicable insurance carriers. 16 Table of Contents Government Regulation Regulation of Drugs and Biologics The development, testing, manufacturing, labeling, storage, approval, promotion, marketing, distribution and post-approval monitoring and reporting of pharmaceutical, biological and medical device products are subject to rigorous regulation by numerous governmental authorities in the U.S. at the federal, state and local level, including the Food and Drug Administration (“FDA”), as well as those of other countries, such as the European Medicines Agency (“EMA”) in the European Union, the Medicines and Healthcare products Regulatory Agency (“MHRA”) in the U.K., the National Medical Products Administration (“NMPA”) in China and the Pharmaceuticals and Medical Devices Agency (“PMDA”) in Japan.
REMS may be required by the FDA for a product where serious safety concerns exist in order to help ensure the benefits of the product outweigh its risks. All marketed products require post-marketing safety surveillance.
REMS may be required by the FDA for a product where serious safety concerns exist in order to help ensure the benefits of the product outweigh its risks.
Fortrea offers this flexibility at a global scale and we expect to position our team as a partner of choice for customers that require a tailored approach. • Consulting Services . We provide comprehensive consulting services from product development and regulatory strategy to market access and health economics and outcomes research (“HEOR”), including real-world evidence (“RWE”) services.
Fortrea offers this flexibility at a global scale, and we are positioned as a partner of choice for customers that require a tailored approach. • Consulting Services . We provide comprehensive consulting services from product development and regulatory strategy to market access and health economics and outcomes research (“HEOR”), including RWE services.
The oncology market remains an area of unmet medical need that receives significant investment in R&D. As part of our mission to drive value for customers, we will continue to try to capitalize on the expansion of opportunities in such key areas as oncology, CNS and neurodegenerative, MASH, and autoimmune.
The oncology market remains an area of unmet medical need that receives significant investment in R&D. As part of our mission to drive value for customers, we will continue to try to capitalize on the expansion of opportunities in these important, growing therapeutic areas.
We are able to conduct trials in over 90 countries including all of the major pharmaceutical and biotechnology markets. Fortrea’s approximately 18,000 employees are strategically balanced throughout the world, with employee breakdown by region of: 33% in the Americas, 27% in EMEA, and 40% in Asia-Pacific.
We are able to conduct trials in over 100 countries including all of the major pharmaceutical and biotechnology markets. Fortrea’s approximately 15,500 employees are strategically balanced throughout the world, with employee breakdown by region of: 28% in the Americas, 28% in EMEA, and 44% in Asia-Pacific.
Regulation of Personal Information We hold personal and health information relating to individuals who sponsor, support and participate in clinical trials, the possession, retention, use and disclosure of which is highly regulated, both in the U.S. and in other jurisdictions to which we are subject.
All marketed products require post-marketing safety surveillance. 18 Table of Contents Regulation of Personal Information We hold personal and health information relating to individuals who sponsor, support and participate in clinical trials, the possession, retention, use and disclosure of which is highly regulated, both in the U.S. and in other jurisdictions to which we are subject.
Properties As of December 31, 2023, we had 73 operating facilities located in 39 countries. Our corporate headquarters and principal executive offices are at 8 Moore Drive, Durham, NC 27709, and our telephone number is (877) 495-0816. Our website address is www.fortrea.com.
Violations of these rules may result in criminal and civil fines and penalties. Properties As of December 31, 2024, we had 73 operating facilities located in 41 countries. Our corporate headquarters and principal executive offices are at 8 Moore Drive, Durham, NC 27709, and our telephone number is (877) 495-0816. Our website address is www.fortrea.com.
Additionally, we successfully utilize enabling technologies to optimize processes and evolve with a dynamic marketplace. Fortrea combines decades of domain expertise with the nimbleness required to meet market demand for flexible engagements with large and small customers, delivering solutions that bring life-changing treatments to patients faster and creating value for all stakeholders.
Fortrea combines decades of domain expertise with the nimbleness required to meet market demand for flexible engagements with large and small customers, delivering solutions that bring life-changing treatments to patients faster and creating value for all stakeholders.
Our teams provide expertise, innovation and support for all product development stages (nonclinical and clinical phases I-IV), for small and large molecules, cell and gene therapies and biosimilars, across multiple therapeutic areas, including rare diseases to help customers define the most appropriate stakeholder strategy and development pathway to optimize equitable and affordable access to life science innovation. 6 Table of Contents Enabling Services Segment: • Patient Access .
Our teams provide expertise, innovation and support for all product development stages (nonclinical and clinical phases I-IV), for small and large molecules, cell and gene therapies and biosimilars, across multiple therapeutic areas, including rare diseases to help customers define the most appropriate stakeholder strategy, evidence generation, and development pathway to optimize productivity, value and outcomes for life science innovation.
Create an Inclusive Culture for Careers with Meaning as a Competitive Advantage Fortrea’s employees are motivated by our purpose of delivering solutions that bring life-changing medicines to patients faster, and we are committed to making Fortrea an engaging place where talented professionals can grow and advance their careers. 11 Table of Contents Since our spin-off, Fortrea has collected input from employees and other stakeholders to develop and activate a culture to support our strategy.
Create an Inclusive Culture for Careers with Meaning as a Competitive Advantage Fortrea’s employees are motivated by our purpose of delivering solutions that bring life-changing medicines to patients faster, and we are committed to making Fortrea an engaging place where talented professionals can grow and advance their careers.
Copies of our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and our proxy statement for our annual meetings of stockholders, and any amendments to those reports, as well as Section 16 reports filed by our insiders, are available free of charge on our website as soon as reasonably practicable after we file the reports with, or furnish the reports to, the Securities and Exchange Commission (“SEC”.) In addition, the SEC maintains an Internet site (http://www.sec.gov) containing reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.
Copies of our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and our proxy statement for our annual meetings of stockholders, and any amendments to those reports, as well as Section 16 reports filed by our insiders, are available free of charge on our website as soon as reasonably practicable after we file the reports with, or furnish the reports to, the Securities and Exchange Commission (“SEC”).
Our Business Clinical Services Segment: • Clinical Pharmacology . We are a recognized leader in clinical pharmacology, known for exploratory clinical pharmacology and biopharma label support. We offer an integrated clinical pharmacology solution that delivers precision, quality and safety.
We are a recognized leader in clinical pharmacology, known for first-in-human and exploratory clinical pharmacology studies as well as biopharma label support studies. We offer an integrated clinical pharmacology solution that delivers precision, quality and safety.
Our expertise in the biopharmaceutical product and medical device development process has enabled us to design service offerings to better meet the needs of customers. We manage our business in two reporting segments — Clinical Services and Enabling Services. Our Clinical Services segment brings solutions to market that include clinical pharmacology and comprehensive clinical development capabilities.
Our expertise in the biopharmaceutical product and medical device development process has enabled us to design service offerings to better meet the needs of customers. We manage our business in one reporting segment — Clinical Services.
The use of controlled substances in testing for drugs of abuse is regulated by the U.S. Drug Enforcement Administration and similar agencies in other countries. We seek to conduct our business in compliance with these regulations as applicable. Violations of these rules may result in criminal and civil fines and penalties.
Controlled Substances We handle controlled substances as part of the services we provide in clinical trials. The use of controlled substances in testing for drugs of abuse is regulated by the U.S. Drug Enforcement Administration and similar agencies in other countries. We seek to conduct our business in compliance with these regulations as applicable.
For example, there is wider availability of electronic medical record data; the proliferation of digital health and trial solutions with remote 10 Table of Contents consent, eCOA, ePRO, connective devices, telemedicine; the use of natural language processing; use of artificial intelligence, machine learning and robotic process automation (“AI/ML/RPA”); and the integration of genetic, pathology and other data into key decision processes.
For example, there is wider availability of electronic medical record data; the proliferation of digital health and trial solutions with remote consent, electronic Clinical Outcomes Assessments, electronic Patient Reported Outcomes, connected devices, and telemedicine; the use of natural language processing; use of artificial intelligence (“AI”), machine learning (“ML”) and robotic process automation (“RPA”); and the integration of genetic, pathology and other data into key decision processes.
These regulations collectively are termed GCP by industry, and the GCP guidelines issued by the International Council for Harmonisation of Technical Requirements for Pharmaceuticals for Human Use (“ICH”) have been agreed upon by industry and regulatory representatives from the U.S., the European Union and Japan. GCP requirements address, among other things, IRBs, qualified investigators, informed consent, recordkeeping and reporting.
These regulations collectively are termed GCP by industry, and the Good Clinical Practice (“GCP”) guidelines issued by the International Council for Harmonisation of Technical Requirements for Pharmaceuticals for Human Use (“ICH”) have been agreed upon by industry and regulatory representatives from the U.S., the European Union and Japan.
Align with Innovators Through Selective Investment in Technology, Data and Application of Artificial Intelligence (AI) for Speed and Simplification The last decade has seen an explosion in technology supporting clinical research, creating a crowded digital and technology landscape, as well as an increase in both access to and analysis of relevant data.
We believe our size also offers advantages in more efficient decision making and increased accessibility to key leaders. 10 Table of Contents Align with Innovators Through Selective Investment in Technology, Data and Application of Artificial Intelligence (AI) for Speed and Simplification The last decade has seen an explosion in technology supporting clinical research, creating a crowded digital and technology landscape, as well as an increase in both access to and analysis of relevant data.
Employees are globally dispersed, with 33% in the Americas, 27% in EMEA, and 40% in Asia-Pacific. Of our global workforce, 97% of employees are full time, and 3% are part time.
Employees are globally dispersed, with 28% in the Americas, 28% in EMEA, and 44% in Asia-Pacific. Of our global workforce, 96% of our employees are full time, and 4% are part time.
Our mix of base and variable pay, long-term incentives and special recognition rewards is compelling and designed to not only attract the best but also engage and reward those who contribute significantly to our mission. Our objectives are clear: to incentivize high performance, foster long-term commitment to our vision, and align our employees’ success with our corporate ambition.
Our mix of base and variable pay, long-term incentives and special recognition rewards is compelling and designed to not only attract the best but also engage and reward those who contribute significantly to our mission.
Our focus on DEI is core and fundamental to our purpose and strategy. With our code of conduct forming the foundation of who we are and how we work together, our company ethos is to promote the voice of all our employees.
We believe in cultivating a workplace where all employees can thrive. 13 Table of Contents Our focus on responsible people practices is core and fundamental to our purpose and strategy. With our code of conduct forming the foundation of who we are and how we work together, our company ethos is to promote the voice of all our employees.
These laws and regulations might not be similar to the laws and regulations administered by the FDA and other laws and regulations regarding the protections of patient safety and privacy and the control of study pharmaceuticals, medical devices or other materials.
GCP requirements address, among other things, IRBs, qualified investigators, informed consent, recordkeeping and reporting. These laws and regulations might not be similar to the laws and regulations administered by the FDA, and other laws and regulations regarding the protections of patient safety and privacy and the control of study pharmaceuticals, medical devices or other materials may apply.
Violations of these anti-corruption laws or export controls and economic sanctions laws and regulations, or even allegations of such violations, could disrupt our business and result in a material adverse effect on our reputation, business, results of operations, financial condition and/or cash flows.
Department of Commerce, the United Nations Security Council, the European Union, His Majesty’s Treasury and other relevant sanctions authorities. 19 Table of Contents Violations of these anti-corruption laws or export controls and economic sanctions laws and regulations, or even allegations of such violations, could disrupt our business and result in a material adverse effect on our reputation, business, results of operations, financial condition and/or cash flows.
Developing new biopharmaceutical products and medical devices for the treatment of human disease is a complex, costly, and lengthy process. Prior to commercialization, a biopharmaceutical product or medical device must undergo extensive preclinical and clinical testing as well as regulatory review to demonstrate an acceptable benefit-risk profile by regulatory authorities.
Prior to commercialization, a biopharmaceutical product or medical device must undergo extensive preclinical and clinical testing as well as regulatory review to demonstrate an acceptable benefit-risk profile by regulatory authorities.
All employees are responsible for upholding the our Code of Conduct, which forms the foundation of our personnel and ethics policies and practices. Our diversity and inclusion efforts include a top-down element with our CEO signing the CEO Action Pledge committing to collaborate with the business community to drive change in advancing DEI in the workplace.
All employees are responsible for upholding our Code of Conduct, which forms the foundation of our personnel and ethics policies and practices. Building on our CEO's signing of the CEO Action Pledge, we continue to collaborate with the broader business community to drive meaningful change in advancing responsible people practices in the workplace.
According to multiple industry investment sources, the CRO market is expected to grow more slowly for the next two years, at approximately 3-5%, and return to a growth rate of 6-9% in the longer term.
According to multiple industry investment sources, the CRO market is expected to grow more slowly in the short term, and return to a higher growth rate in the longer term.
Over the past decade, we have seen the biopharma industry leverage science, technology, and AI to advance the level of understanding of the pathogenesis of human disease, and to identify new therapeutic targets and treatments.
Over the past decade, we have seen the biopharma industry leverage science, technology, and AI to advance the level of understanding of the pathogenesis of human disease, and to identify new therapeutic targets and treatments. R&D spend of large biopharmaceutical companies is forecast to grow at approximately 3% CAGR over the period 2024-2027.
We ensure learning solutions are deployed and evaluated using technology, tools, and strategies that promote an audit ready, learning culture. Talent Acquisition Our success is rooted in our sustained ability to attract, develop, and retain a highly specialized and competent global workforce.
We ensure our learning solutions and development programs are deployed and evaluated using technology, tools, and strategies that promote a user-friendly learning culture that is compliant with the expectations of regulatory authorities and our customers. Talent Acquisition Our success is anchored in our ability to attract, develop, and retain a highly specialized global workforce.
These investments include AI, ML and RPA, data visualization, a full suite of biometric services and clinical data management globally across all phases and delivery models, RTSM, and digital health and DCT capabilities, among others.
These investments include AI, ML and RPA, data visualization, a full suite of biometric services and clinical data management globally across all phases and delivery models, and digital health and DCT capabilities, among others. In 2024, we continued to develop and deploy AI and ML technologies that drive speed, agility, quality and enhanced patient safety in clinical research.
ITEM 1. BUSINESS Overview Fortrea Holdings Inc. is a leading global contract research organization (“CRO”), providing clinical development, patient access solutions and consulting to the life sciences industry. We provide phase I through IV clinical trial management, clinical pharmacology, differentiated technology-enabled trial solutions and post-approval services.
ITEM 1. BUSINESS Overview Fortrea Holdings Inc. is a leading global contract research organization (“CRO”), providing biopharmaceutical product and medical device development solutions to pharmaceutical, biotechnology and medical device customers. We provide phase I through IV clinical trial management, clinical pharmacology, and consulting services for our customers.
We balance this with the importance of managing labor costs while fostering an environment where our employees can thrive and add lasting value to the industry we serve. We prioritize skills development, facilitating career transitions and retaining talent with a commitment to inclusion and learning opportunities.
We work to manage labor costs effectively while fostering an environment where employees thrive and add lasting value. We prioritize skills development, career transitions, and talent retention with a strong commitment to inclusion and learning opportunities.
We support customers from early to late phase, both locally with country-level regulatory and operational capabilities, and regionally/globally as they seek to broaden their strategy to key global markets. We will continue to expand our small and mid-size customer base and to build long-tenured partnerships with these customers, enhancing our offerings to meet their needs.
We support customers from early to late phase, both locally with country-level regulatory and operational capabilities, and regionally/globally as they seek to broaden their strategy to key global markets.
Our FSP team can provide dedicated offerings in clinical operations, clinical data management, biostatistics, statistical programming, pharmacovigilance, mobile clinical services, and medical writing, among other customized solutions. ◦ Hybrid .
Our service offering delivers comprehensive, strategic solutions designed to adapt to the level of customer control and infrastructure. Our FSP team can provide dedicated offerings in clinical operations, clinical data management, biostatistics, statistical programming, pharmacovigilance, mobile clinical services, and medical writing, among other customized solutions. 6 Table of Contents ◦ Hybrid .
FDA laws and regulations may apply to clinical studies conducted outside the U.S. if, for example, such studies are conducted under an investigational new drug application (“IND”) or offered as support for an IND. However, some regions and countries do not allow for clinical trials to be conducted under foreign country legislation.
FDA laws and regulations may apply to clinical studies conducted outside the U.S. if, for example, such studies are conducted under an investigational new drug application (“IND”) or offered as support for an NDA. Prior to commencing human clinical trials in the U.S., a company developing a new drug must file an IND with the FDA.
We are built to handle the increased complexity and global demand that underpin these industry tailwinds. • Elevated Outsourcing Levels . As large biopharmaceutical companies seek to reduce the cost and time to develop biopharmaceutical products, they have increasingly relied on CROs for services to preserve flexibility and reduce costs associated with clinical trials and improve time to market.
As large biopharmaceutical companies seek to reduce the cost and time to develop biopharmaceutical products, and periodically reprioritize their pipeline investments, they have increasingly relied on CROs for services to preserve flexibility and reduce costs associated with clinical trials and improve time to market.
Over the previous five years, we have conducted more than 5,850 phase I through IV clinical trial projects involving more than 1,000,000 subjects. Clinical Development is enhanced by our pharmacology learnings, which we apply to future clinical programs. We also have a medical device and diagnostics offering, which has conducted more than 600 studies in the previous five years.
Clinical Development is enhanced by our pharmacology learnings, which we apply to future clinical programs. We also have a medical device and diagnostics offering, which has conducted more than 500 studies in the previous five years. We believe Fortrea is poised to capture additional market share in the large and expanding development market.
The study protocol must also be reviewed and approved by an IRB/IEC for each principal investigator’s site in which a study is proposed to be conducted and each IRB/IEC may impose additional requirements on the conduct of the study in its institution.
These differences can impact regulatory processes for all aspects of product development and management, including preclinical tests, clinical studies, manufacturing and control data as well as adverse event reporting. 17 Table of Contents The study protocol must also be reviewed and approved by an IRB/IEC for each principal investigator’s site in which a study is proposed to be conducted, and each IRB/IEC may impose additional requirements on the conduct of the study in its institution.
IRB/IECs have the authority to review, approve and monitor clinical trials, and clinical trials are subject to oversight by IRB/IECs. The industry standard for the conduct of clinical trials is embodied in the FDA’s regulations for IRB/IECs, investigators and sponsor/monitors.
IRB/IECs have the authority to review, approve and monitor clinical trials, and clinical trials are subject to oversight by IRB/IECs.
Our global standard operating procedures are written in accordance with all applicable FDA, EMA, MHRA, NMPA, PMDA, ICH, GCP, and cGMP requirements. This enables our work to be conducted locally, regionally and globally to standards that meet all currently applicable regulatory requirements.
Our global standard operating procedures are written in accordance with all applicable global regulations, including ICH. This enables our work to be conducted locally, regionally and globally to standards that meet all currently applicable regulatory requirements. We must also maintain records and documentation in compliance with applicable regulatory requirements for each study for auditing by the customer and regulatory authorities.
Fortrea establishes high-value site relationships to support scientific engagement and reduce the time and cost for our customers to develop products. The third-party clinical sites we work with include healthcare systems, dedicated research networks, large group practices, consortiums, and governmental coordinating bodies that represent multiple research partners around the globe.
The third-party clinical sites we work with include healthcare systems, dedicated research networks, large group practices, consortiums, and governmental coordinating bodies that represent multiple research partners around the globe. Our Global Site Advisory Board now includes more than 440 unique sites and includes representatives from customers.
The FDA will make a determination based on the prior mode of action as to which FDA center will take the lead on the review. Nonetheless, due to the nature of combination products, there can still be differences in regulatory pathways for each component.
Nonetheless, due to the nature of combination products, there can still be differences in regulatory pathways for each component.
We believe Fortrea is poised to capture additional market share in the large and expanding development market. We offer our customers a tailored approach to clinical trial solutions through the use of three delivery models: Full Service, Functional Service Provider, and Hybrid. ◦ Full Service .
We offer our customers a tailored approach to clinical trial solutions through the use of three delivery models: Full Service, Functional Service Provider, and Hybrid. ◦ Full Service . Integrates multiple disciplines from our service offerings to comprehensively support our customers in their development programs across key geographies.
While Fortrea has significant expertise and experience in these scientific areas, we believe that there is ample opportunity for future growth. 9 Table of Contents Support Sites to Solve the “Last Mile” Problems of Patient Recruitment and Trial Starts Investigator sites have traditionally been a challenging part of the predictability and speed associated with clinical research.
While Fortrea has significant expertise and experience in these scientific areas, we believe that there is ample opportunity for future growth. Support Sites to Solve the “Last Mile” Problems of Patient Recruitment and Trial Starts Fortrea establishes high-value site relationships to support scientific engagement and reduce the time and cost for our customers to develop products.
We continue to expand our site network collaborations, which currently includes over 180 partnerships across 35 countries. We leverage data-driven approaches to target sites that align with our customers’ protocols, with a focus on accelerating patient recruitment, efficiently executing trials with high quality, and enhancing the site experience.
In 2024, we established the China Chapter of the Board and created therapeutically focused site networks, starting with the Early Phase Oncology Network. We leverage data-driven approaches to target sites that align with our customers’ protocols, with a focus on accelerating patient recruitment, efficiently executing trials with high quality, and enhancing the site experience.
We believe that our commitment to continuous services and technology innovations combined with Fortrea’s customizable approach and experience across more than 20 therapeutic areas will enable us to continue to differentiate ourselves from peers in the CRO industry. 8 Table of Contents Large and Diversified Customer Base We have a balanced and diverse customer mix serving large and emerging pharmaceutical, biotechnology, and medical device organizations.
We believe that our commitment to continuous service and technology innovations combined with Fortrea’s tailored approach to serve both biotechnology and large biopharmaceutical companies and experience across more than 20 therapeutic areas enables us to continue to differentiate ourselves from peers in the CRO industry.
Fortrea also supports leading large pharmaceutical customers as a preferred provider for services across our range of offerings, including Clinical Pharmacology, Phase I-IV Full Service, Clinical/Biometrics/Safety FSP, Hybrid models that combine full service and FSP, Patient Access and Technology Solutions (e.g. RTSM).
We will continue to expand our small and mid-size customer base and to build long-tenured partnerships with these customers, enhancing our offerings to meet their needs. 11 Table of Contents Fortrea also supports leading large pharmaceutical customers as a preferred provider for services across our range of offerings, including Clinical Pharmacology, Phase I-IV Full Service, Consulting Services, Clinical/Biometrics/Safety FSP, and Hybrid models that combine Full Service and FSP.
Consequently, we must comply with all relevant laws and regulations in the conduct of our services. The following discussion describes the role of the FDA in the clinical drug development process in the U.S. Clinical trials conducted outside the U.S. are subject to the laws and regulations of the country where the trials are conducted.
Consequently, we must comply with all relevant laws and regulations in the conduct of our services. Clinical trials are subject to the laws and regulations of the country where the trials are conducted. The industry standard for the conduct of clinical trials is embodied in the FDA’s regulations for IRB/IECs, investigators and sponsors/monitors.
We believe our customer base positions us at the forefront of innovation in healthcare and allows us to help our customers efficiently bring the best therapeutic solutions to patients. Global and Stable Customer Relationships Our scale and expertise are key competitive advantages that make us a multi-dimensional partner for our customers.
We seek to be the partner of choice for leading pharmaceutical companies as well as innovative biotechnology companies. We believe our broad customer base positions us at the forefront of innovation in healthcare and allows us to help our customers efficiently bring the best therapeutic solutions to patients.
Integrates multiple disciplines from our service offerings to comprehensively support our customers in their development programs across key geographies. Our service offering integrates protocol design and operational planning, site start-up and patient recruitment, project and program management, comprehensive site monitoring, centralized monitoring and medical data review, clinical and biometrics services, medical writing, and mobile clinical services.
Our service offering integrates protocol design and operational planning, site start-up and patient recruitment, project and program management, comprehensive site and medical monitoring, centralized monitoring and medical data review, clinical and biometrics services, medical writing, and mobile clinical services. Our project-centric approach utilizes dynamic team resourcing with agile role-based structures.
Our project-centric approach utilizes dynamic team resourcing with agile role-based structures. This approach allows for more adaptability to trial types with customer-tailored designs. ◦ Functional Service Provider . Offers customers experienced personnel to perform targeted activities throughout their development programs.
This approach allows for more adaptability to trial types with customer-tailored designs. ◦ Functional Service Provider . Offers customers experienced personnel to perform targeted activities throughout their development programs. This approach reduces our customers’ need to recruit and train dedicated internal resources which saves on cost and time and enables flexibility.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeWe are subject to a number of risks associated with this transaction, including risks associated with: • the failure to satisfy, on a timely basis or at all, the closing conditions set forth in the Purchase Agreement; • the separation of these businesses from the businesses we are retaining and the operation of our retained business without these businesses and transitioned employees; • the need to commit substantial resources to or wind down these businesses if the transaction isn’t completed; • issues, delays or complications in agreeing upon and completing required transition activities to allow the divested businesses to operate under Buyer after the closing, including incurring unanticipated costs or delays to complete such activities, which could delay or prevent payment of the transition payment called for under the Purchase Agreement; • unfavorable reaction to the sale by customers, competitors, and employees; • potential disruption to and uncertainty in our business and our relationships with our customers; • difficulties in hiring, retaining and motivating key personnel during this process or as a result of uncertainties generated by this process or any developments or actions relating to it; • the diversion of our management’s attention away from the operation of the business we are retaining; • the incurrence of significant transaction costs in connection with the transaction, regardless of whether it is completed; • the need to provide transition services in connection with the transaction, which may result in the diversion of resources and focus from our retained businesses and exiting from the transition service agreements with Former Parent; and • our failure to realize the full purchase price anticipated under the Purchase Agreement.
Biggest changeWe are subject to a number of risks associated with this transaction, including risks associated with: • the separation of the Enabling Service businesses from the businesses we retained and the operation of our retained business without the Enabling Service businesses and transitioned employees; • issues, delays or complications in agreeing upon and completing required transition activities to allow the divested businesses to operate under Buyer after the closing, including incurring unanticipated costs or delays to complete such activities, which could delay or prevent payment of the transition payment called for under the Purchase Agreement; • unfavorable reaction to the sale by customers, competitors, and employees; • potential disruption to and uncertainty in our business and our relationships with our customers; • the need to provide transition services in connection with the transaction, which may result in the diversion of resources and focus from our retained businesses and exiting from the transition service agreements with Former Parent; and • our failure to realize the full purchase price anticipated under the Purchase Agreement.
Investors’ percentage of ownership of us may be diluted in the future. An investor’s percentage ownership of Fortrea common stock may be diluted because of equity issuances for acquisitions, capital market transactions or otherwise, including any equity awards that we will grant to our directors, officers and employees.
Investors’ percentage of ownership of us may be diluted in the future. An investor’s percentage ownership of Fortrea common stock may be diluted because of future equity issuances for acquisitions, capital market transactions or otherwise, including any equity awards that we will grant to our directors, officers and employees.
For example, our Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws: • authorize the issuance of “blank check” preferred stock that could be issued by our board of directors to thwart a takeover attempt; 43 Table of Contents • until the annual meeting of stockholders to be held in 2028, provide for the division of our board of directors into three classes serving staggered three-year terms, with one class being elected each year, which may tend to discourage a third party from making a tender offer or otherwise attempting to obtain control of us because it generally makes it more difficult for stockholders to replace a majority of our board of directors; • not permit cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; • provide that vacancies on our board of directors, including newly-created directorships, may be filled only by a majority vote of directors then in office; • prohibit stockholders from nominating director candidates for inclusion in proxy material; • prohibit stockholders from calling special meetings of stockholders; • prohibit stockholder action by written consent, thereby requiring all actions to be taken at a meeting of the stockholders; • establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings; and • until the annual meeting of stockholders to be held in 2028, require the approval of holders of at least seventy-five percent (75%) of the outstanding shares of our common stock, voting together as a single class, to amend certain provisions of our Amended and Restated Bylaws and certain provisions of our Amended and Restated Certificate of Incorporation.
For example, our Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws: • authorize the issuance of “blank check” preferred stock that could be issued by our board of directors to thwart a takeover attempt; • until the annual meeting of stockholders to be held in 2028, provide for the division of our board of directors into three classes serving staggered three-year terms, with one class being elected each year, which may tend to discourage a third party from making a tender offer or otherwise attempting to obtain control of us because it generally makes it more difficult for stockholders to replace a majority of our board of directors; • not permit cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; • provide that vacancies on our board of directors, including newly-created directorships, may be filled only by a majority vote of directors then in office; • prohibit stockholders from nominating director candidates for inclusion in proxy material; • prohibit stockholders from calling special meetings of stockholders; • prohibit stockholder action by written consent, thereby requiring all actions to be taken at a meeting of the stockholders; • establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings; and 47 Table of Contents • until the annual meeting of stockholders to be held in 2028, require the approval of holders of at least seventy-five percent (75%) of the outstanding shares of our common stock, voting together as a single class, to amend certain provisions of our Amended and Restated Bylaws and certain provisions of our Amended and Restated Certificate of Incorporation.
This is primarily a result of the following factors: • our historical combined financial results reflect allocations of expenses for services historically provided by Labcorp, and may not fully reflect the increased costs associated with being an independent public company, including significant changes to our cost structure, management, financing arrangements, and business operations as a result of our Spin from Labcorp; • our working capital and capital expenditure requirements historically have been satisfied as part of Labcorp’s corporate-wide capital access, capital allocation, and cash management programs; our debt structure and cost of debt and other capital may be significantly different from that reflected in our historical combined financial statements; and 40 Table of Contents • the historical combined financial information may not fully reflect the effects of certain liabilities that have been incurred or assumed by us and may not fully reflect the effects of the assets that have been transferred to, and liabilities that have been assumed by Labcorp.
This is primarily a result of the following factors: • our historical combined financial results reflect allocations of expenses for services historically provided by Labcorp, and may not fully reflect the increased costs associated with being an independent public company, including significant changes to our cost structure, management, financing arrangements, and business operations as a result of our Spin from Labcorp; 44 Table of Contents • our working capital and capital expenditure requirements historically have been satisfied as part of Labcorp’s corporate-wide capital access, capital allocation, and cash management programs; our debt structure and cost of debt and other capital may be significantly different from that reflected in our historical combined financial statements; and • the historical combined financial information may not fully reflect the effects of certain liabilities that have been incurred or assumed by us and may not fully reflect the effects of the assets that have been transferred to, and liabilities that have been assumed by, Labcorp.
However, because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently and often are not recognized until launched against a target, we may be unable to anticipate all of these techniques or to implement adequate preventive measures.
Because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently and often are not recognized until launched against a target, we may be unable to anticipate all of these techniques or to implement adequate preventive measures.
Furthermore, the successful closing and integration of a strategic acquisition entails numerous risks, including, among others: • failure to obtain regulatory clearance, including due to antitrust concerns; • loss of key customers or employees; • difficulty in consolidating redundant facilities and infrastructure and in standardizing information and other systems; • unidentified regulatory problems; • failure to maintain the quality of services that such companies have historically provided; • unanticipated costs and other liabilities; • potential liabilities related to litigation including the acquired companies; 32 Table of Contents • potential periodic impairment of goodwill and intangible assets acquired; • coordination of geographically separated facilities and workforces; and • the potential disruption of the ongoing business and diversion of management's resources.
Furthermore, the successful closing and integration of a strategic acquisition entails numerous risks, including, among others: • failure to obtain regulatory clearance, including due to antitrust concerns; • loss of key customers or employees; • difficulty in consolidating redundant facilities and infrastructure and in standardizing information and other systems; • unidentified regulatory problems; • failure to maintain the quality of services that such companies have historically provided; • unanticipated costs and other liabilities; 35 Table of Contents • potential liabilities related to litigation including the acquired companies; • potential periodic impairment of goodwill and intangible assets acquired; • coordination of geographically separated facilities and workforces; and • the potential disruption of the ongoing business and diversion of management's resources.
Data Protection Act 2018, which include a range of compliance obligations for subject companies and imposes penalties for noncompliance of up to the greater of €20 million or 4% of worldwide revenue. We have established processes and frameworks to manage compliance with the GDPR.
Data Protection Act 2018, respectively, which include a range of compliance obligations for subject companies and imposes penalties for noncompliance of up to the greater of €20 million or 4% of worldwide revenue. We have established processes and frameworks to manage compliance with the GDPR.
Any further deterioration in the macro-economic economy or financial services industry could lead to losses or defaults by our partners or vendors, which in turn, could have a material adverse effect on our current and/or projected business operations and results of operations and financial condition.
Any deterioration in the macro-economic economy or financial services industry could lead to losses or defaults by our partners or vendors, which in turn, could have a material adverse effect on our current and/or projected business operations and results of operations and financial condition.
The possibility of pandemics, including the spread of COVID-19 variants, could continue to adversely impact our business and results of operations in a number of ways, including, but not limited to: • delays or difficulties in commencing new and operating ongoing clinical trials, including intermittent challenges accessing investigative sites, delays in enrolling patients, delays in obtaining approvals from regulatory authorities, and difficulty obtaining necessary pharmaceutical and other products and supplies; • restrictions on the ability of our field teams to visit healthcare providers and difficulty securing appropriate personal protective equipment and testing and other tools required for client-facing engagements and visits to sites/healthcare providers; • diversion of healthcare resources away from the conduct of clinical trials, including the diversion of hospitals serving as our clinical trial sites and hospital staff supporting the conduct of our clinical trials, as well as the reduction of our customers’ operating budgets; • interruption of key clinical trial activities, such as clinical trial site data monitoring, due to social distancing requirements, quarantine and isolation protocols or interruption of clinical trial subject visits and study procedures, which may impact the collection and integrity of study data and ability to measure clinical trial endpoints; 28 Table of Contents • business disruptions at our customers; • limitations on our employee resources, including because of quarantine and isolation protocols, sickness of employees or their families or the desire of employees to avoid contact with large groups of people; • continued disruptions to our supply chain; • diversion of management resources to focus on mitigating the impacts of pandemics; • increased cybersecurity risks due to the number of employees that are working remotely in regions impacted by stay-at-home orders, increased levels of remote access creating additional opportunities for cybercriminals to exploit vulnerabilities and employees that may be more susceptible to phishing and social engineering attempts; • increased cyber-attacks, such as phishing attacks by threat actors using the attention placed on a pandemic as a method for targeting our personnel; and • strained technological resources due to the number of remote users.
The possibility of epidemics or pandemics, including the spread of variants, could continue to adversely impact our business and results of operations in a number of ways, including, but not limited to: • delays or difficulties in commencing new and operating ongoing clinical trials, including intermittent challenges accessing investigative sites, delays in enrolling patients, delays in obtaining approvals from regulatory authorities, and difficulty obtaining necessary pharmaceutical and other products and supplies; • restrictions on the ability of our field teams to visit healthcare providers and difficulty securing appropriate personal protective equipment and testing and other tools required for client-facing engagements and visits to sites/healthcare providers; • diversion of healthcare resources away from the conduct of clinical trials, including the diversion of hospitals serving as our clinical trial sites and hospital staff supporting the conduct of our clinical trials, as well as the reduction of our customers’ operating budgets; 30 Table of Contents • interruption of key clinical trial activities, such as clinical trial site data monitoring, due to social distancing requirements, quarantine and isolation protocols or interruption of clinical trial subject visits and study procedures, which may impact the collection and integrity of study data and ability to measure clinical trial endpoints; • business disruptions at our customers; • limitations on our employee resources, including because of quarantine and isolation protocols, sickness of employees or their families or the desire of employees to avoid contact with large groups of people; • continued disruptions to our supply chain; • diversion of management resources to focus on mitigating the impacts of pandemics; • increased cybersecurity risks due to the number of employees that are working remotely in regions impacted by stay-at-home orders, increased levels of remote access creating additional opportunities for cybercriminals to exploit vulnerabilities and employees that may be more susceptible to phishing and social engineering attempts; • increased cyber-attacks, such as phishing attacks by threat actors using the attention placed on a pandemic as a method for targeting our personnel; and • strained technological resources due to the number of remote users.
However, we may not be able to identify acquisition targets that are attractive to us or that will have a meaningful impact on our operating results or to conduct other strategic transactions on terms that are acceptable to Fortrea, or at all.
However, we may not be able to identify acquisition targets or other strategic arrangements that are attractive to us or that will have a meaningful impact on our operating results or to conduct other strategic transactions on terms that are acceptable to Fortrea, or at all.
Natural disasters, such as adverse weather, fires, floods and earthquakes; power shortages and outages; geopolitical events, such as terrorism, war, political instability, political unrest, including the current conflicts in Ukraine and the Middle East or other conflicts; criminal activities; public health crises; and other disruptions or events outside of our control or the escalation or expansion of any of the same, could delay or disrupt our ability to conduct clinical trials or other business, endanger our personnel, or cause other project delays or loss of clinical trial materials or results.
Natural disasters, such as adverse weather, fires, floods and earthquakes; power shortages and outages; geopolitical events, such as terrorism, war, political instability, political unrest, including the current conflicts in Ukraine and the Middle East or other conflicts; criminal activities; public health crises; and other disruptions or events outside of our control or the escalation or expansion of any of the same, could delay or disrupt our ability to conduct clinical trials or other business, endanger our personnel, damage our facilities or cause other project delays or loss of clinical trial materials or results.
Risks Relating to Legal Matters • Failure to comply with the contractual requirements of our agreements with customers or third-party service providers could result in claims and/or remedies against us and have a material adverse effect on us and our reputation could be harmed. • Contract research services create liability risk. • Failure to obtain, maintain and enforce intellectual property rights could adversely affect us. • Changes in tax rates, laws or regulations or exposure to additional tax liabilities may adversely impact our financial results. • We are subject to continuing contingent liabilities as a result of the Spin which could materially and adversely affect our business, financial condition, results of operations, and cash flows. • Labcorp has indemnified us for certain liabilities, which may be insufficient to insure us against the full amount of such liabilities, or Labcorp's ability to satisfy its indemnification obligations could be impaired in the future.
Risks Relating to Legal Matters • Failure to comply with the contractual requirements of our agreements with customers or third-party service providers could result in claims and/or remedies against us and have a material adverse effect on us and our reputation could be harmed. • Contract research services create liability risk. • We face risks arising from the restructuring of our operations. • Failure to obtain, maintain and enforce intellectual property rights could adversely affect us. • Changes in tax rates, laws or regulations or exposure to additional tax liabilities may adversely impact our financial results. • We are subject to continuing contingent liabilities as a result of the Spin which could materially and adversely affect our business, financial condition, results of operations, and cash flows. • Labcorp has indemnified us for certain liabilities, which may be insufficient to insure us against the full amount of such liabilities, or Labcorp's ability to satisfy its indemnification obligations could be impaired in the future.
Risks Relating to Financial Matters • We bear financial risk for contracts that, including for reasons beyond our control, may be underpriced, subject to cost overruns, delayed or terminated or reduced in scope. • Our revenues depend on the pharmaceutical, biotechnology, and medical device industries. • Foreign currency fluctuations could have an adverse effect on our business. • Our debt and debt covenants may limit cash flow available to invest in our business. • We may not be able to access the capital and credit markets on terms that are favorable or at all.
Risks Relating to Financial Matters • We bear financial risk for contracts that, including for reasons beyond our control, may be underpriced, subject to cost overruns, delayed or terminated or reduced in scope. • Our revenues depend on the pharmaceutical, biotechnology, and medical device industries. • Foreign currency fluctuations could have an adverse effect on our business. • Costs associated with our debt and debt covenants may limit cash flow available to invest in our business. • We may not be able to access the capital and credit markets on terms that are favorable or at all.
The ultimate impact depends on the severity and duration of a pandemic, including the emergence and spread of COVID-19 variants, the continued availability and effectiveness of vaccines and treatments, and actions taken by governmental authorities and other third parties in response to the pandemic, each of which is uncertain, rapidly changing and difficult to predict.
The ultimate impact depends on the severity and duration of a pandemic, including the emergence and spread of variants, the continued availability and effectiveness of vaccines and treatments, and actions taken by governmental authorities and other third parties in response to the pandemic, each of which is uncertain, rapidly changing and difficult to predict.
Bribery Act 2010, or the Bribery Act, and similar laws in other jurisdictions, prohibit companies and their intermediaries from engaging in bribery including improperly offering, promising, paying or authorizing the giving of anything of value to individuals or entities for the purpose of corruptly obtaining or retaining business.
Bribery Act 2010 (the “Bribery Act”), and similar laws in other jurisdictions, prohibit companies and their intermediaries from engaging in bribery including improperly offering, promising, paying or authorizing the giving of anything of value to individuals or entities for the purpose of corruptly obtaining or retaining business.
In the U.S., we may obtain health information from third parties (e.g., healthcare providers who sponsor trials) that are subject to privacy and security requirements under the Health Insurance Portability and Accountability Act of 1996, 30 Table of Contents the Health Information Technology for Economic and Clinical Health Act, and their implementing regulations, collectively referred to as “HIPAA”.
In the U.S., we may obtain health information from third parties (e.g., healthcare providers who sponsor trials) that are subject to privacy and security requirements under the Health Insurance Portability and Accountability Act of 1996, the Health Information Technology for Economic and Clinical Health Act, and their implementing regulations, collectively referred to as “HIPAA”.
Any of these disruptions or breaches of security could have a material adverse effect on our business, regulatory compliance, financial condition and results of operations. 34 Table of Contents We use internally developed and licensed technology systems to manage various aspects of clinical trials and failures of these systems, including errors in design, programming or validation, could adversely affect our business.
Any of these disruptions or breaches of security could have a material adverse effect on our business, regulatory compliance, financial condition and results of operations. We use internally developed and licensed technology systems to manage various aspects of clinical trials and failures of these systems, including errors in design, programming or validation, could adversely affect our business.
Each of these factors results in less visibility to future revenues and may result in high volatility in future revenues. Contract terminations, delays and modifications are a regular part of our business. For example, our full-service projects have been, and may continue to be, negatively impacted by project delays, which impact near term revenue disproportionately.
Each of these factors could lead to less visibility to future revenues and may result in high volatility in future revenues. Contract terminations, delays and modifications are a regular part of our business. For example, our full-service projects have been, and may continue to be, negatively impacted by project delays, which impact near term revenue disproportionately.
We may not be able to enhance our current technology or obtain new technology 26 Table of Contents that will enable our systems to keep pace with industry developments and the sophisticated needs of our customers. The nature and pace of our growth introduces risks associated with quality control and customer dissatisfaction due to delays in performance or other problems.
We may not be able to enhance our current technology or obtain new technology that will enable our systems to keep pace with industry developments and the sophisticated needs of our customers. The nature and pace of our growth introduces risks associated with quality control and customer dissatisfaction due to delays in performance or other problems.
We have information security procedures and other safeguards in place, which we update in response to threat information from public and private sector sources and public announcements of attempted or successful breaches at other companies.
To that end, we have information security procedures and other safeguards in place which we update in response to threat information from public and private sector sources and public announcements of attempted or successful breaches at other companies.
In addition, we might not realize the full benefits of our backlog. In the event of termination, our contracts often provide for fees for winding down projects, which include both fees incurred and actual and non-cancellable expenditures and may include a fee to cover a percentage of the remaining professional fees on the project.
In addition, we might not realize the full benefits of our backlog. 24 Table of Contents In the event of termination, our contracts often provide for fees for winding down projects, which include both fees incurred and actual and non-cancellable expenditures and may include a fee to cover a percentage of the remaining professional fees on the project.
The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach litigation. While the majority of provision went into effect on January 1, 2023, the enforcement of the California Privacy Rights Act, or the CPRA, began as of July 1, 2023, in California.
The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach litigation. While the majority of provision went into effect on January 1, 2023, the enforcement of the California Privacy Rights Act (the “CPRA”) began as of July 1, 2023, in California.
If these companies were to reduce the number of R&D projects they conduct or 38 Table of Contents outsource, whether through the inability to raise capital, reductions in reimbursement from governmental programs or commercial payers, industry trends, economic conditions or otherwise, we could be materially adversely affected.
If these companies were to reduce the number of R&D projects they conduct or outsource, whether through the inability to raise capital, reductions in reimbursement from governmental programs or commercial payers, industry trends, economic conditions or otherwise, we could be materially adversely affected.
In addition, our failure to perform, or failure of our third party-service providers to perform, could raise concerns 35 Table of Contents among customers about the quality of services provided and our ability to deliver services, which could harm our reputation and impact our ability to acquire new business or result in termination of existing contracts.
In addition, our failure to perform, or failure of our third party-service providers to perform, could raise concerns among customers about the quality of services provided and our ability to deliver services, which could harm our reputation and impact our ability to acquire new business or result in termination of existing contracts.
Our backlog as of December 31, 2023 was $7.4 billion. Although an increase in backlog will generally result in an increase in revenues over time, an increase in backlog at a particular point in time does not necessarily correspond directly to an increase in revenues during any particular period, or at all.
Our backlog as of December 31, 2024 was $7.7 billion. Although an increase in backlog will generally result in an increase in revenues over time, an increase in backlog at a particular point in time does not necessarily correspond directly to an increase in revenues during any particular period, or at all.
The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business. If one or more of these securities analysts downgrades our stock or publishes unfavorable research about our business, our stock price would likely decline.
The trading market for our common stock depends in part on the research and reports that securities or industry analysts publish about us or our business. If one or more of these securities analysts downgrades our stock or publishes unfavorable research about our business, our stock price would likely decline.
We have policies and guidelines in 24 Table of Contents place to reduce our exposure to such risks, but if we fail to follow these policies and guidelines we may suffer reputational damage, loss of customer relationships and business, monetary damages, fines, and other governmental actions.
We have policies and guidelines in place to reduce our exposure to such risks, but if we fail to follow these policies and guidelines we may suffer reputational damage, loss of customer relationships and business, monetary damages, fines, and other governmental actions.
These competitive pressures may affect the attractiveness or profitability of our services, and could adversely affect our financial results. An inability to attract and retain experienced and qualified personnel, including key management personnel, and increased personnel costs, could adversely affect our business.
These competitive pressures may affect the attractiveness or profitability of our services and could adversely affect our financial results. 27 Table of Contents An inability to attract and retain experienced and qualified personnel, including key management personnel, and increased personnel costs, could adversely affect our business.
We may become subject in the ordinary course of business to material legal actions related to, among other things, commercial and contract disputes, data and privacy issues, professional liability, employee-related matters, 36 Table of Contents and intellectual property disputes.
We may become subject in the ordinary course of business to material legal actions related to, among other things, commercial and contract disputes, data and privacy issues, professional liability, employee-related matters, and intellectual property disputes.
The market price of Fortrea common stock could fluctuate significantly due to a number of factors, many of which are beyond our control, including: • fluctuations in our quarterly or annual earnings results or those of other companies in our industry; • failures of our results of operations to meet the estimates of securities analysts or the expectations of our stockholders, or changes by securities analysts in their estimates of our future earnings; • announcements by us or our customers, suppliers, or competitors; • changes in laws or regulations which adversely affect our industry or us; • general economic, industry, and stock market conditions; • future sales of our common stock by our stockholders; • future issuances of our common stock by us; • our ability or willingness to pay dividends in the future; and • the other factors described in these “Risk Factors” and other parts of this Annual Report on Form 10-K.
The market price of Fortrea common stock could fluctuate significantly due to a number of factors, many of which are beyond our control, including: • fluctuations in our quarterly or annual earnings results or those of other companies in our industry; • the financial projections we may provide to the public, any changes in those projections, or our failure to meet those projections; • failures of our results of operations to meet the estimates of securities analysts or the expectations of our stockholders, or changes by securities analysts in their estimates of our future earnings; • announcements by us or our customers, suppliers, or competitors; • changes in laws or regulations which adversely affect our industry or us; • general economic, industry, and stock market conditions; • future sales of our common stock by our stockholders; • future issuances of our common stock by us; • our ability or willingness to pay dividends in the future; and • the other factors described in these “Risk Factors” and other parts of this Annual Report on Form 10-K.
International operations may increase our exposure to liabilities under the anti-corruption laws. Anti-corruption laws in the countries where we conduct business, including the U.S. Foreign Corrupt Practices Act, or the FCPA, U.K.
International operations may increase our exposure to liabilities under the anti-corruption laws. Anti-corruption laws in the countries where we conduct business, including the U.S. Foreign Corrupt Practices Act (the “FCPA”), U.K.
The revenue recognition on larger, more global projects could be slower than on smaller, more regional projects for a variety of reasons, including, but not limited to, an extended period of negotiation between the time the project is awarded to us and the actual execution of the contract, as well as an increased timeframe for obtaining the necessary regulatory approvals.
The revenue recognition on larger, more global projects could be slower than on smaller, more regional projects for a variety of reasons, including, but not limited to, an extended period of coordination from the time the project is awarded and the actual execution of the contract, as well as an increased timeframe for obtaining the necessary regulatory approvals.
(“Seller”), entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Endeavor Buyer, LLC (“Buyer”), an affiliate of Arsenal Capital Partners, with respect to the sale of certain assets relating to our Enabling Services segment, including the sale of equity interests of Fortrea Patient Access Inc. and its subsidiaries and Endpoint Clinical, Inc. and its subsidiaries.
(“Seller”), entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Endeavor Buyer, LLC (“Buyer”), an affiliate of Arsenal Capital Partners, with respect to the sale of certain assets relating to a segment of our business we referred to as our Enabling Services segment, including the sale of equity interests of Fortrea Patient Access Inc. and its subsidiaries and Endpoint Clinical, Inc. and its subsidiaries.
Our contracts may be delayed or terminated by our customers or reduced in scope for a variety of reasons beyond our control, including, but not limited to: • decisions to forego or terminate a particular trial; • budgetary limits or changing priorities; • actions by regulatory authorities; • production problems resulting in shortages of the candidate drug being tested; • failure of products being tested to satisfy safety requirements or efficacy criteria; • unexpected or undesired clinical results for products; • insufficient patient enrollment in a trial; • insufficient principal investigator recruitment; • the customer’s decision to terminate or scale back the development or commercialization of a product or to end a particular project; • shift of business to a competitor or internal resources; • perceptions in the marketplace or other general trends; or • product withdrawal following market launch.
Our contracts may be delayed or terminated by our customers or reduced in scope for a variety of reasons beyond our control, including, but not limited to: • decisions to forego or terminate a particular trial; • budgetary limits, unanticipated trial costs or changing priorities; • actions by regulatory authorities; • production problems resulting in shortages of the candidate drug being tested; • failure of products being tested to satisfy safety requirements or efficacy criteria; • unexpected or undesired clinical results for products; • insufficient patient enrollment in a trial, competition for patients and/or insufficient principal investigator recruitment; • the customer’s decision to terminate or scale back the development or commercialization of a product or to end a particular project; • shift of business to a competitor or internal resources; or • product withdrawal following market launch.
Recent changes in the U.S. include the Inflation Reduction Act of 2022 (the “IRA”), enacted August 16, 2022, which, among other items, imposes a 15% alternative minimum tax on corporations with three-year average annual adjusted financial statement income exceeding $1 billion and introduces or extends a number of tax credits to promote clean energy development.
The Inflation Reduction Act of 2022 (the “IRA”), enacted August 16, 2022, which, among other items, imposes a 15% alternative minimum tax on corporations with three-year average annual adjusted financial statement income exceeding $1 billion and introduces or extends a number of tax credits to promote clean energy development.
Our processes for the protection of this information include the utilization of third- 33 Table of Contents party service providers and vendors as well as secure data transmission and storage.
Our processes for the protection of this information include the utilization of third-party service providers and vendors as well as secure data transmission and storage.
Risks Relating to Our Common Stock • As a public company, we will incur additional expenses. • Anti-takeover provisions in our charter documents and Delaware law could discourage, delay or prevent a change in control or impact the trading price of our common stock. 22 Table of Contents Risks Relating to Our Business If we do not generate a large number of net new business awards, or if net new business awards are delayed, terminated, reduced in scope, or fail to go to contract, our business, financial condition, results of operations, or cash flows may be materially adversely affected.
Risks Relating to Our Common Stock • Anti-takeover provisions in our charter documents and Delaware law could discourage, delay or prevent a change in control or impact the trading price of our common stock. 23 Table of Contents Risks Relating to Our Business If we do not generate a large number of net new business awards, or if net new business awards are delayed, terminated, reduced in scope, or fail to go to contract, our business, financial condition, results of operations, or cash flows may be materially adversely affected.
Risks Relating to Regulatory and Compliance Matters • Failure to comply with the regulations of pharmaceutical and medical device regulatory agencies could result in sanctions and/or remedies against us and have a material adverse effect on us. • Changes in government regulation or in practices relating to the pharmaceutical, biotechnology, or medical device industries could decrease the need for certain services that we provide. • Failure to comply with privacy and security laws and regulations could result in fines, penalties and damage to our reputation with customers and have a material adverse effect upon our business. • Failure to comply with federal, state, and foreign laws and regulations could result in substantial penalties and our business, financial condition, results of operations, cash flows, and prospects could be adversely affected.
Risks Relating to Regulatory and Compliance Matters • Failure to comply with the regulations of pharmaceutical and medical device regulatory agencies could result in sanctions and/or remedies against us and have a material adverse effect on us. • Changes in government regulation or in practices relating to the pharmaceutical, biotechnology, or medical device industries could decrease the need for certain services that we provide. • Failure to comply with privacy and security laws and regulations could result in fines, penalties and damage to our reputation with customers and have a material adverse effect upon our business. • Failure to comply with federal, state, and foreign laws and regulations could result in substantial penalties and our business, financial condition, results of operations, cash flows, and prospects could be adversely affected. 22 Table of Contents Risks Relating to Strategic Transactions • A failure to identify and successfully close strategic transactions could have a material adverse effect on our business objectives and our revenues and profitability.
In contracting to work on drug development trials and studies, we face a range of potential liabilities, including: • Errors or omissions that create harm to clinical trial participants during a trial or to consumers of a drug after the trial is completed and regulatory approval of the drug has been granted; • General risks associated with clinical pharmacology facilities and mobile clinical services, including negative consequences from specimen collection and processing, the administration of drugs to clinical trial participants, or the professional malpractice of clinical pharmacology physicians, clinical pharmacology staff or mobile clinical services staff; and • Errors and omissions during a trial or study that may undermine the usefulness of a trial or study, or data from the trial or study or that may delay the entry of a drug to the market.
In contracting to work on drug development trials and studies, we face a range of potential liabilities, including: • Errors or omissions that create harm to clinical trial participants during a trial or to consumers of a drug after the trial is completed and regulatory approval of the drug has been granted; • General risks associated with clinical pharmacology facilities and mobile clinical services, including negative consequences from specimen collection and processing, the administration of drugs to clinical trial participants, or the professional malpractice of clinical pharmacology physicians, clinical pharmacology staff or mobile clinical services staff; and • Errors and omissions during a trial or study that may undermine the usefulness of a trial or study, or data from the trial or study or that may delay the entry of a drug to the market. 39 Table of Contents We contract with investigators to conduct, and in our clinical research units we directly conduct, the clinical trials to test new drugs on clinical trial participants.
Risks Relating to Our Business • Our business, financial condition, results of operations, or cash flows may be materially adversely affected if we do not generate a large number of net new business awards, or if net new business awards are delayed, terminated, reduced in scope, or fail to go to contract. • If we are unable to contract with suitable investigators and recruit and enroll patients for clinical trials, our business might suffer. • Our international operations could subject us to additional risks and expenses that could adversely impact our business or results of operations. • Our customer or therapeutic area concentration may have a material adverse effect on our business, financial condition, results of operations or cash flows. • Our customers may experience insufficient funding to complete their clinical trials. • Our backlog might not be indicative of our future revenues, and we might not realize all of the anticipated future revenue reflected in our backlog. • An inability to attract and retain experienced and qualified personnel, including key management personnel and increased personnel costs, could adversely affect our business. • We depend on third parties to provide services critical to our business. • Our business is dependent upon access to data and an inability to access the necessary data from our data partners on commercially reasonable terms or at all could adversely affect our business. • Our accounting, enterprise resource planning, and other management systems and resources may not be adequately prepared to meet financial reporting and other requirements. • Our effective income tax rate may fluctuate, which could adversely affect our operations.
Risks Relating to Our Business • Our business, financial condition, results of operations, or cash flows may be materially adversely affected if we do not generate a large number of net new business awards, or if net new business awards are delayed, terminated, reduced in scope, or fail to go to contract. • If we are unable to contract with suitable investigators and recruit and enroll patients for clinical trials, our business might suffer. • Our international operations could subject us to additional risks and expenses that could adversely impact our business or results of operations. • Our customer or therapeutic area concentrations may have a material adverse effect on our business, financial condition, results of operations or cash flows. • Our customers may experience insufficient funding to complete their clinical trials. • Our backlog might not be indicative of our future revenues, and we might not realize all of the anticipated future revenue reflected in our backlog. • We operate in a highly competitive industry. • An inability to attract and retain experienced and qualified personnel, including key management personnel and increased personnel costs, could adversely affect our business. • We depend on third parties to provide services critical to our business. • Our business is dependent upon access to data and an inability to access the necessary data from our data partners on commercially reasonable terms or at all could adversely affect our business. • If we are unable to achieve and maintain effective internal controls, our business, financial condition, results of operations, and cash flows could be materially adversely affected. • Our effective income tax rate may fluctuate, which could adversely affect our operations.
For example, it could: • require us to dedicate a substantial portion of our cash flow from operations to the payment of debt service, reducing the availability of our cash flow to fund working capital, capital expenditures, acquisitions, and other general corporate purposes; • increase our vulnerability to adverse economic or industry conditions; 39 Table of Contents • limit our ability to access debt markets and obtain additional financing in the future to enable us to react to changes in our business; or • place us at a competitive disadvantage compared to businesses in our industry that have less debt.
For example, it could: • require us to dedicate a substantial portion of our cash flow from operations to the payment of debt service, reducing the availability of our cash flow to fund working capital, capital expenditures, acquisitions, and other general corporate purposes; • increase our vulnerability to adverse economic or industry conditions; • limit our ability to access debt markets and obtain additional financing in the future to enable us to react to changes in our business; or • place us at a competitive disadvantage compared to businesses in our industry that have less debt. 43 Table of Contents As a result of the debt we have incurred, it may be difficult for the Company to incur additional debt should the business require it.
Certain tax legislation within those foreign jurisdictions could potentially have a material income on our income tax expense.
Certain tax legislation with those foreign jurisdictions could potentially have a material impact on our income tax expense.
Consequently, if Labcorp is unable to pay the consolidated U.S. federal income tax liability for a pre-Spin period, we could be required to pay the amount of such tax, which could be substantial and in excess of the amount allocated to us under the tax matters agreement.
Consequently, if Labcorp is unable to pay the consolidated U.S. federal income tax liability for a pre-Spin period, we could be required to pay the amount of such tax, which could be substantial and in excess of the amount allocated to us under the tax matters agreement. Similar rules may apply for state, local, and non-U.S. tax purposes.
Historically, cancellations and delays have negatively 23 Table of Contents impacted our operating results, and they might impact them in the future.
Historically, cancellations and delays have negatively impacted our operating results, and they might impact them in the future.
Such a transfer could result in delays in the ability to deliver products and services to customers. Additionally, significant delays in the planned delivery of system enhancements or improvements, and inadequate performance of the systems once they are completed could damage our reputation. Failure of our IT systems could adversely affect our business, profitability and financial condition.
Such a transfer could result in delays in the ability to deliver products and services to customers. Additionally, significant delays in the planned delivery of system deployments, enhancements or improvements, and inadequate performance of the systems once they are completed could damage our reputation.
A compromise in our processes or systems, or those processes and systems provided to us by third-party service providers and vendors, could adversely affect our reputation with our customers and others, as well as our results of operations, financial condition and liquidity. Such a compromise could also result in litigation against us and the imposition of fines and penalties.
A compromise in our processes or systems, or those processes and systems provided to us by third-party service providers and vendors, could adversely affect our reputation with our customers and others, as well as our results of operations, financial condition and liquidity.
Our revenues depend greatly on the expenditures made by the pharmaceutical, biotechnology and medical device industries in R&D. In some instances, these companies are reliant on their ability to raise capital in order to fund their R&D projects. These companies are also reliant on reimbursement for their products from government programs and commercial payers.
Our revenues depend on the pharmaceutical, biotechnology and medical device industries. Our revenues depend greatly on the expenditures made by the pharmaceutical, biotechnology and medical device industries in R&D. In some instances, these companies are reliant on their ability to raise capital in order to fund their R&D projects.
The enactment of such laws could have potentially conflicting requirements that would make compliance challenging. In the event that we are subject to or affected by the CCPA, the CPRA, or other domestic privacy and data protection laws, any liability from failure to comply with the requirements of these laws could adversely affect our financial condition.
In the event that we are subject to or affected by the CCPA, the CPRA, or other domestic comprehensive privacy and data protection laws, any liability from failure to comply with the requirements of these laws could adversely affect our financial condition.
If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, demand for our common stock could decrease, which could cause our common stock price or trading volume to decline. 44 Table of Contents ITEM 1B. UNRESOLVED STAFF COMMENTS None.
If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, demand for our common stock could decrease, which could cause our common stock price or trading volume to decline.
This could also impact the cost and availability of cyber insurance to us. Breaches of our or third parties' security measures and the unauthorized dissemination of personal, proprietary or confidential information about us or our customers or other third parties could expose customers’ private information.
Breaches of our or third parties' security measures and the unauthorized dissemination of personal, proprietary or confidential information about us or our customers or other third parties could expose customers’ private information.
While these attempts have not resulted in any material breaches, such attempts, if successful, could result in the misappropriation or compromise of personal information or proprietary or confidential information stored within our systems or within the systems of third parties, create system disruptions or cause shutdowns.
Nonetheless, such attempts, if successful, could result in the misappropriation or compromise of personal information or proprietary or confidential information stored within our systems or within the systems of third parties, create system disruptions or cause shutdowns.
If competitors acquire or introduce superior technologies or services and we cannot procure or develop these technologies or services or enhance ours in a timely manner to remain competitive, our competitive position, and in turn our business, results of operations, financial condition and/or cash flows may be materially adversely affected.
If competitors acquire or introduce superior technologies or services and we cannot procure or develop these technologies or services or enhance ours in a timely manner to remain competitive, our competitive position, and in turn our business, results of operations, financial condition and/or cash flows may be materially adversely affected. 38 Table of Contents Issues in the development and/or use of AI may result in reputational harm, liability or adversely affect our business, financial condition or results of operations.
Failure to comply with these laws and regulations could subject us to denial of the right to conduct business, fines, criminal penalties and/or other enforcement actions that could have a material adverse effect on our business. In addition, compliance with future legislation could impose additional requirements on us that may be costly.
Failure to comply with these laws and regulations could subject us to denial of the right to conduct business, fines, criminal penalties and/or other enforcement actions that could have a material adverse effect on our business.
Any failure to meet required payments on our debt, or failure to comply with any covenants in the instruments governing our debt, could result in an event of default under the terms of those instruments and a downgrade to our credit ratings. A downgrade in our credit ratings could increase our borrowing costs for incremental debt.
This will increase the riskiness of our business and of an investment in our common stock. Any failure to meet required payments on our debt, or failure to comply with any covenants in the instruments governing our debt, could result in an event of default under the terms of those instruments and a downgrade to our credit ratings.
We also are subject to the California Consumer Privacy Act, or the CCPA, which became effective as of January 2020, and creates individual privacy rights for California consumers and increases the privacy and security obligations of entities handling certain personal information.
For example, the California Consumer Privacy Act (“CCPA”), which became effective as of January 2020, creates individual privacy rights for California consumers and increases the privacy and security obligations of entities handling certain personal information.
Current or future acquisitions, if any, or any related integration efforts may not be successful, and we cannot provide assurance that our business will not be adversely affected by any future acquisitions, including with respect to revenues and profitability. Similarly, any potential gains from other strategic transactions, such as cost savings or other operational efficiencies may also not be realized.
Current or future acquisitions or other strategic transactions, if any, or any related integration efforts may not be successful, and we cannot provide assurance that our business will not be adversely affected by any future strategic transactions, including with respect to revenues and profitability.
Cancellations may occur for a variety of reasons, including: • failure of products to satisfy safety requirements; • unexpected or undesired results of the products; • insufficient clinical trial subject enrollment; • insufficient investigator recruitment; • a customer's decision to terminate the development of a product or to end a particular study; and • our failure to perform our duties properly under the contract.
Cancellations may occur for a variety of reasons, including: • failure of products to satisfy safety requirements; • unexpected or undesired results of the products; • insufficient clinical trial subject enrollment; • insufficient investigator recruitment; • a customer's decision to terminate the development of a product or to end a particular study; and • our failure to perform our duties properly under the contract. 42 Table of Contents We bear the financial risk if these contracts are underpriced or if contract costs exceed estimates.
A number of factors may affect the backlog, including: • the size, complexity, and duration of projects or strategic relationships; • the cancellation or delay of projects; • the failure of one or more business awards to go to contract; and • changes in the scope of work during the course of projects. 25 Table of Contents The rate at which our backlog converts to revenue may vary over time.
A number of factors may affect the backlog, including: • the size, complexity, and duration of projects or strategic relationships; • the cancellation or delay of projects; • the failure of one or more business awards to go to contract; and • changes in the scope of work during the course of projects.
In addition, if a customer terminates a contract, we typically would be entitled to receive payment for all services performed up to the termination date and subsequent customer authorized services related to terminating the canceled project.
To the extent projects are delayed, the timing of our revenue could be adversely affected. In addition, if a customer terminates a contract, we typically would be entitled to receive payment for all services performed up to the termination date and subsequent customer-authorized services related to terminating the canceled project.
Similar rules may apply for state, local, and 37 Table of Contents non-U.S. tax purposes. Other provisions of law establish similar liability for other matters, including U.S. federal laws governing tax-qualified pension plans, as well as other contingent liabilities. Labcorp has indemnified us for certain liabilities.
Other provisions of law establish similar liability for other matters, including U.S. federal laws governing tax-qualified pension plans, as well as other contingent liabilities. Labcorp has indemnified us for certain liabilities.
We also have borrowing capacity in the form of a $450 million senior secured revolving credit facility, from which we have borrowed and repaid $164.0 million during the year ended December 31, 2023 and an accounts receivable purchase program, or ARPP, from which $17.5 million of receivables were sold with net proceeds of $17.3 million during the year ended December 31, 2023.
We also have borrowing capacity in the form of a $450.0 million senior secured revolving credit facility, from which we have borrowed and repaid $826.5 million during the year ended December 31, 2024, and an accounts receivable securitization program from which $300.0 million of receivables were sold for net proceeds of $297.9 million during the year ended December 31, 2024.
Our international operations expose us to risks from potential failure to comply with foreign laws and regulations that differ from those under which we operate in the U.S.
Due to a strategic footprint of primary office locations in five countries with field operations worldwide, our international operations expose us to risks from potential failure to comply with foreign laws and regulations that differ from those under which we operate in the U.S.
Beginning with our second required Annual Report on Form 10-K, which will be filed in 2025, 41 Table of Contents we intend to comply with the applicable sections of Section 404 of the Sarbanes-Oxley Act, which will require annual management assessments of the effectiveness of our internal control over financial reporting and a report by our independent registered public accounting firm on the effectiveness of internal control over financial reporting.
Beginning with this Annual Report on Form 10-K, the applicable sections of Section 404 of the Sarbanes-Oxley Act require annual management assessments of the effectiveness of our internal control over financial reporting and a report by our independent registered public accounting firm on the effectiveness of internal control over financial reporting.
We currently do not expect the Framework to have a material impact on our effective tax rate or our consolidated results of operation, financial position, and cash flows. 29 Table of Contents Risks Relating to Regulatory and Compliance Matters Failure to comply with the regulations of pharmaceutical and medical device regulatory agencies, such as the FDA, the MHRA in the U.K., the EMA in the European Union, the NMPA in China, and the PMDA in Japan, could result in sanctions and/or remedies against us and have a material adverse effect on us.
Risks Relating to Regulatory and Compliance Matters Failure to comply with the regulations of pharmaceutical and medical device regulatory agencies, such as the FDA, the MHRA in the U.K., the EMA in the European Union, the NMPA in China, and the PMDA in Japan, could result in sanctions and/or remedies against us and have a material adverse effect on us.
New laws or regulations may create a risk of liability, increase our costs or limit our service offerings. Failure to comply with privacy and security laws and regulations could result in fines, penalties and damage to our reputation with customers and have a material adverse effect upon our business.
Failure to comply with privacy and security laws and regulations could result in fines, penalties and damage to our reputation with customers and have a material adverse effect upon our business.
Once work begins on a project, revenue is recognized over the duration of the project, provided the award has gone to contract. Projects may be canceled or delayed by the customer or delayed by regulatory authorities for reasons beyond our control. To the extent projects are delayed, the timing of our revenue could be adversely affected.
Our backlog consists of anticipated revenue awarded from contract and pre-contract commitments that are supported by written communications. Once work begins on a project, revenue is recognized over the duration of the project, provided the award has gone to contract. Projects may be canceled or delayed by the customer or delayed by regulatory authorities for reasons beyond our control.
For the year ended December 31, 2023, our top ten customers based on revenue accounted for approximately 47% of our consolidated revenue and our top ten customers based on backlog accounted for approximately 53% of our total backlog. For the year ended December 31, 2023, one customer accounted for approximately 10.6% of revenue.
For the year ended December 31, 2024, our top ten customers based on revenue accounted for approximately 53% of our consolidated revenue and our top ten customers based on backlog accounted for approximately 51% of our total backlog. For the year ended December 31, 2024, two customers accounted for approximately 14.3% and 10.5% of revenue.
We continue to monitor the effects of the IRA and other regulatory developments on our financial condition, operating results, and income tax rate. We have not accrued for income taxes on the undistributed earnings of most non-U.S. subsidiaries, because those earnings are intended to be indefinitely reinvested in the operations of those subsidiaries.
We continue to monitor the effects of the IRA and other regulatory developments on our financial condition, operating results, and income tax rate. We have cumulatively accrued $3.6 million for income taxes on a portion of the undistributed earnings of our non-U.S. subsidiaries that are not considered permanently reinvested.
As a result, factors associated with international operations, including changes in foreign currency exchange rates and our hedging activities, could significantly affect our results of operations, financial condition and cash flows. Our quarterly operating results may vary.
As a result, factors associated with international operations, including changes in foreign currency exchange rates and our hedging activities, could significantly affect our results of operations, financial condition and cash flows. Our debt and debt covenant requirements may limit cash flow available to invest in the ongoing needs of our business.
We may determine to not pay dividends on our common stock and, consequently, investors’ ability to achieve a return on an investment in Fortrea common stock will depend on appreciation in the price of our common stock. We do not currently expect to declare or pay dividends on our common stock for the foreseeable future.
We have not paid any dividends on our common stock and we do not have any current plans to pay dividends, consequently, investors’ ability to achieve a return on an investment in Fortrea common stock will depend on appreciation in the price of our common stock.
In addition, we also rely on third-party CROs and other contract clinical personnel for clinical services either in regions where we have limited resources, or in cases where demand cannot be met by our internal staff.
In addition, we also rely on third-party CROs and other contract clinical personnel for clinical services either in regions where we have limited resources, or in cases where demand cannot be met by our internal staff. In some circumstances, our customers require that we oversee responsibility for the performance of these third parties as part of our overall service delivery.
We cannot provide assurance that our internal control over financial reporting will be effective in the future or that a material weakness will not be discovered with respect to a prior period for which we had previously believed that internal controls were effective.
We cannot provide assurance that our internal control over financial reporting will be effective in the future or that a material weakness will not be discovered with respect to a prior period for which we had previously believed that internal controls were effective, and in the past (as discussed in Item 9A to this Annual Report on Form 10-K), we have identified material weaknesses in our internal controls, which have since been remediated.
In the absence of a dividend, the success of an investment in shares of our common stock would depend upon any future appreciation in their value. There is no guarantee that shares of our common stock will appreciate in value. Securities or industry analysts may not publish favorable research about our business, our stock price and trading volume could decline.
There is no guarantee that shares of our common stock will appreciate in value. 48 Table of Contents Securities or industry analysts may not publish favorable research about our business and our stock price and trading volume could decline.
Changes in government regulation or in practices relating to the pharmaceutical, biotechnology, or medical device industries could decrease the need for certain services that we provide. We assist pharmaceutical, biotechnology and medical device companies in navigating the regulatory approval process.
In addition, compliance with future legislation could impose additional requirements on us that may be costly. 32 Table of Contents Changes in government regulation or in practices relating to the pharmaceutical, biotechnology, or medical device industries could decrease the need for certain services that we provide. We assist pharmaceutical, biotechnology and medical device companies in navigating the regulatory approval process.
We bear the financial risk if these contracts are underpriced or if contract costs exceed estimates. Such underpricing or significant cost overruns could have an adverse effect on our business, results of operations, financial condition and cash flows.
Such underpricing or significant cost overruns could have an adverse effect on our business, results of operations, financial condition and cash flows.
Our accounting, enterprise resource planning, and other management systems and resources may not be adequately prepared to meet financial reporting and other requirements. If we are unable to achieve and maintain effective internal controls, our business, financial condition, results of operations, and cash flows could be materially adversely affected.
If we are unable to achieve and maintain effective internal controls, our business, financial condition, results of operations, and cash flows could be materially adversely affected.
Even if we are able to successfully integrate the operations of businesses that we may acquire in the future, we may not be able to realize the benefits that we expect from such acquisitions.
Similarly, any potential gains from strategic transactions, such as cost savings or other operational efficiencies may also not be realized. Even if we are able to successfully integrate the operations of businesses that we may acquire in the future, we may not be able to realize the benefits that we expect from such acquisitions.
Also, we may incur substantial additional costs and become subject to litigation and enforcement actions if we fail to comply with legal requirements affecting our workforce and labor practices, including laws and regulations related to wage and hour practices, Office of Federal Contract Compliance Programs compliance, and unlawful workplace harassment and discrimination.
Also, we may incur substantial additional costs and become subject to litigation and enforcement actions if we fail to comply with legal requirements affecting our workforce and labor practices, including laws and regulations related to wage and hour practices, Office of Federal Contract Compliance Programs compliance, and unlawful workplace harassment and discrimination. 45 Table of Contents Failure to establish and maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act could materially and adversely affect us.
In some countries, our success will depend in part on our ability to form relationships with local partners. Our inability to identify appropriate partners or reach mutually satisfactory arrangements could adversely affect the business and operations. Our embedded and functional outsourcing services could subject us to employment liability, which may cause adverse effects on our business.
Our inability to identify appropriate partners or reach mutually satisfactory arrangements could adversely affect our business and operations. 25 Table of Contents Embedded and functional outsourcing services associated with our FSP delivery models could subject us to employment liability, which may cause adverse effects on our business.
However, if we fail to establish, maintain and/or enhance brand recognition associated with the “Fortrea” name, it may affect our relations with investigator sites or customers, which may adversely affect our ability to generate revenues and could impede our business. Additionally, the costs and the dedication of time and effort associated with the rebranding may negatively impact our profitability.
If we fail to maintain and/or enhance brand recognition associated with the “Fortrea” name, it may affect our relationships with investigator sites or customers, which may adversely affect our ability to generate revenues and could impede our business in a highly competitive industry.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeCybersecurity risks deemed material are then formally agreed upon as items to be reported by the Chief Information Security Officer (“CISO”) to the Audit Committee. 45 Table of Contents Recognizing the cybersecurity and risk management programs are newly formed, we have established plans to conduct regular reviews and tabletop exercises to test processes for preparedness in case of a critical event as well as integrate cybersecurity risk with the Enterprise Risk Management Framework.
Biggest changeCybersecurity risks deemed material are then formally agreed upon as items to be reported by the Chief Information Security Officer (“CISO”) to the Audit Committee.
The underlying controls utilized by these programs are based on industry recognized best practices and standards for cybersecurity and information technology which include the National Institute of Standards and Technology (NIST) Cybersecurity Framework (CSF) and the International Organization for Standardization (ISO) 27001:2022 Information Security Management Systems Requirements The Cybersecurity Risk Management Program is administered through two primary channels: (i) Fortrea led cybersecurity services and capabilities, and (ii) trusted third-party partners delivering cybersecurity services overseen by our Cybersecurity leadership team.
The underlying controls utilized by these programs are based on industry recognized best practices and standards for cybersecurity and information technology which include the National Institute of Standards and Technology (NIST) Cybersecurity Framework (CSF) and the International Organization for Standardization (ISO) 27001:2022 Information Security Management Systems Requirements. 49 Table of Contents The Cybersecurity Risk Management Program is administered through two primary channels: (i) Fortrea led cybersecurity services and capabilities, and (ii) trusted third-party partners delivering cybersecurity services overseen by our Cybersecurity leadership team.
Both channels combined deliver the entire Cybersecurity Program, which includes key items such as: Cybersecurity risk management program, including, but not limited to, the following: • Risk assessment activities/analyses • Risk Committee oversight, documentation, escalation • Reporting of risk issues deemed material to our Audit Committee of the Board of Directors Cybersecurity services, including, but not limited to, the following: • 24x7 Security services and Operations across (3) countries, including an Incident Response Plan and process. • Identity Access Management support and governance • Security Architecture oversight and guidance • Governance, Risk and Compliance (“GRC”) functions such as third-party risk management, cybersecurity policies, training, and awareness • Annual and independent penetration testing and vulnerability scanning activities conducted by trusted third parties • Transition services provided by our Former Parent, as part of the Spin, effective June 2023 and through the exit of the transition service agreement Third party risk management, including, but not limited to, the following: • Periodic third party reviews and assessments measuring cybersecurity services capability and maturity.
Both channels combined deliver the entire Cybersecurity Program, which includes key items such as: Cybersecurity risk management program, including, but not limited to, the following: • Risk assessment activities/analyses • Risk Committee oversight, documentation, escalation • Reporting of risk issues deemed material to our Audit Committee of the Board of Directors Global Cybersecurity services, including, but not limited to, the following: • 24x7 Security Operations and Incident Response • Identity Access Management support and governance • Security Architecture oversight and guidance • Governance, Risk and Compliance (“GRC”) functions such as third-party risk management, cybersecurity policies, training, and awareness • Annual and independent penetration testing and vulnerability scanning activities conducted by trusted third parties Third party risk management, including, but not limited to, the following: • Periodic third-party reviews and assessments measuring cybersecurity services capability and maturity.
Our CISO has more than 25 years of experience building and leading cybersecurity programs for global healthcare and retail companies. The cybersecurity leadership team reporting to the CISO is comprised of leaders with skills in cybersecurity risk management, cybersecurity architecture, identity and access management, and cybersecurity operations and engineering. Their experience and certifications are commensurate with their roles.
The cybersecurity leadership team reporting to the CISO is comprised of leaders with skills in cybersecurity risk management, cybersecurity architecture, identity and access management, and cybersecurity operations and engineering. Their experience and certifications are commensurate with their roles.
The Risk Committee is comprised of cross-functional executive leaders who can assess materiality impact and are accountable for materiality disclosure. The CISO is responsible for reporting on the state of cybersecurity to the Audit Committee on a quarterly basis, including those risks deemed material by the Risk Committee.
We have established a Risk Committee chaired by the CISO and chartered to determine and execute the processes for the identification and management of material cybersecurity risks. The Risk Committee is comprised of cross-functional executive leaders who can assess materiality impact and are accountable for materiality disclosure.
Although unknown cybersecurity risks could materialize as a result of risk factors identified during the Spin, we are not aware of any disclosures at this time which would be considered material risks and associated with cybersecurity threats or incidents. Refer to “Item 1A. Risk Factors” of this Annual Report on Form 10-K for further discussion of cybersecurity risks.
Although unknown cybersecurity risks could materialize, including in connection with the implementation of independent systems following the Spin, we are not aware of any disclosures at this time which would be considered material risks and associated with cybersecurity threats or incidents. Refer to Part I, Item 1A.
Governance of Cybersecurity The Fortrea Audit Committee has been authorized by the Board of Directors to oversee risks from cybersecurity threats. We have established a Risk Committee chaired by the CISO and chartered to determine and execute the processes for the identification, and management of material cybersecurity risks.
“Risk Factors” of this Annual Report on Form 10-K for further discussion of cybersecurity risks. Governance of Cybersecurity The Fortrea Audit Committee has been authorized by the Board of Directors to oversee risks from cybersecurity threats.
As part of our risk management strategy, we have secured comprehensive cyber insurance coverage. We regularly review and update our cyber insurance coverage to align with the evolving nature of cyber threats and industry standards. Because we are a newly formed company, there are no historical internal or external assessment processes.
We regularly review and update our cybersecurity insurance coverage to align with the evolving nature of cyber threats and industry standards. Fortrea will continue to leverage our internal audit department to provide independent reviews and recommendations to enhance Fortrea’s ability to manage risks effectively, as well as pursue external certifications.
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Currently, the Cybersecurity Risk Management Program includes cybersecurity services provided by our Former Parent through 2024 as part a transition service agreement entered in connection with the Spin.
Added
We have established plans to conduct periodic reviews and tabletop exercises to test various processes for preparedness in the event of a critical cybersecurity incident as well as include cybersecurity risk within our Enterprise Risk Management Framework. As part of our overall risk management strategy, we have secured comprehensive cyber insurance coverage.
Removed
Going forward, however, the Fortrea Internal Audit team will conduct internal assurance reviews as part of their 2024 annual audit plan. Additionally, as we continue to execute our risk management processes, we plan to engage external cybersecurity partners for the evaluation and assessment of our cybersecurity program and its capabilities.
Added
The CISO is responsible for reporting on the state of cybersecurity to the Audit Committee on a quarterly basis, including those risks deemed material by the Risk Committee. 50 Table of Contents Our CISO has more than 25 years of experience building and leading cybersecurity programs for global healthcare and retail companies.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe table below summarizes certain information as to principal operating and administrative facilities as of December 31, 2023. 46 Table of Contents Location Square Footage Nature of Occupancy Leeds, United Kingdom 68,285 Owned Bangalore, India 160,294 Leased Dallas, United States 58,806 Leased Daytona Beach, United States 163,410 Leased Durham, United States 39,822 Leased Lake Mary, United States 39,259 Leased Madison, United States 48,609 Leased Tokyo, Japan 25,327 Leased Pune, India 41,229 Leased Shanghai, China 28,000 Leased All of our primary facilities have been built or improved for the purpose of providing clinical development services.
Biggest changeLocation Square Footage Nature of Occupancy Leeds, United Kingdom 71,577 Leased Bangalore, India 160,295 Leased Dallas, United States 58,806 Leased Daytona Beach, United States 163,410 Leased Durham, United States 39,822 Leased Madison, United States 48,609 Leased Tokyo, Japan 15,275 Leased Pune, India 41,229 Leased Shanghai, China 27,988 Leased All of our primary facilities have been built or improved for the purpose of providing clinical development services.
We believe that these existing facilities and plans for expansion are suitable and adequate and will provide sufficient capacity for our currently foreseeable level of operations.
We believe that these existing facilities are suitable and adequate and will provide sufficient capacity for our currently foreseeable level of operations.
We believe that if it were unable to renew a lease or if a lease were to be terminated on any of the facilities it presently leases, we could find alternate space at competitive market rates and readily relocate its operations to such new locations without material disruption to its operations.
We believe that if we were unable to renew a lease or if a lease were to be terminated on any of the facilities we presently lease, we could find alternate space at competitive market rates and readily relocate our operations to such new locations without material disruption to our operations.
ITEM 2. PROPERTIES Our Company's corporate headquarters are located in Durham, North Carolina, and include facilities that are both owned and leased. As of December 31, 2023, we had 73 operating facilities located in 39 countries.
ITEM 2. PROPERTIES Our Company's corporate headquarters are located in Durham, North Carolina. As of December 31, 2024, all of our facilities are leased, and include 73 operating facilities located in 41 countries. Most of our facilities consist solely of office space.
Removed
Other than the facility located in Leeds, U.K. used by the clinical pharmacology business within our Clinical Service segment, which we own, we lease all of our facilities. Most of our facilities consist solely of office space. We lease approximately 1,100,000 square feet of general office and pharmacology clinic space with lease expirations through 2030.
Added
We lease approximately 900,000 square feet of general office and pharmacology clinic space with leases generally expiring through 2030. Our most significant leases are located in India, the United States, China, Japan, and the United Kingdom. The table below summarizes certain information as to principal operating and administrative facilities as of December 31, 2024.
Removed
Our most significant leases are located in India, the United States, Germany, Spain, and the United Kingdom.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

4 edited+4 added−1 removed4 unchanged
Biggest changeWe believe that we are in compliance in all material respects with all statutes, regulations, and other requirements applicable to our clinical development services. The clinical development industry is, however, subject to extensive regulation, and the courts have not interpreted many of the applicable statutes and regulations.
Biggest changeWhen loss contingencies are not both probable and estimable, we do not establish reserves. 51 Table of Contents We believe that we are in compliance in all material respects with all statutes, regulations, and other requirements applicable to our clinical development services.
In accordance with FASB Accounting Standards Codification Topic 450 “Contingencies,” we establish reserves for claims and legal actions when those matters present loss contingencies that are both probable and estimable. When loss contingencies are not both probable and estimable, we do not establish reserves.
In accordance with FASB Accounting Standards Codification Topic 450 “Contingencies,” we establish reserves for claims and legal actions when those matters present loss contingencies that are both probable and estimable.
As part of working with this customer, the Company has agreed to make concessions and provide discounts and other consideration to the customer of an estimated amount of $12.5 million as part of a multi-party solution to facilitate the ongoing trials, of which $5.5 million was recorded as a reduction of revenue in 2023. ITEM 4.
As part of working with this customer, the Company made concessions and provided discounts and other consideration to the customer in the amount of approximately $12.5 million as part of a multi-party solution to facilitate the trials, of which $3.8 million and $8.7 million was recorded as a reduction of revenue for the years ended December 31, 2024 and 2023, respectively.
Therefore, the applicable statutes and regulations could be interpreted or applied by a prosecutorial, regulatory, or judicial authority in a manner that would adversely affect us. Potential sanctions for violation of these statutes and regulations include significant civil and criminal penalties, fines, the loss of various licenses, certificates and authorizations, and additional liabilities from third-party claims.
Potential sanctions for violation of these statutes and regulations include significant civil and criminal penalties, fines, the loss of various licenses, certificates and authorizations, and additional liabilities from third-party claims.
Removed
MINE SAFETY DISCLOSURES Not applicable. 47 Table of Contents PART II
Added
The outcomes of such proceedings are inherently unpredictable and subject to significant uncertainties.
Added
When we determine that we have meritorious defenses to any claims asserted, we defend ourselves vigorously; however we also consider and enter into discussions regarding settlement of disputes, and may enter into settlement agreements, if in management’s judgment, it is in the best interests of our Company to do so.
Added
The clinical development industry is, however, subject to extensive regulation, and the courts have not interpreted many of the applicable statutes and regulations. Therefore, the applicable statutes and regulations could be interpreted or applied by a prosecutorial, regulatory, or judicial authority in a manner that would adversely affect us.
Added
For the year ended December 31, 2024, the Company recorded legal expenses of $2.2 million related to the settlement of legal matters initiated prior to the spin. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 52 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe graph assumes that $100.00 was invested on July 1, 2023 (first day of trading activity) and all dividends and other distributions were reinvested through the last trading day of fiscal 2023. Past performance is not necessarily indicative of future performance. ITEM 6. [ RESERVED ] 48 Table of Contents
Biggest changeMany of these companies are also used by our compensation committee for purposes of compensation benchmarking. The graph assumes that $100.00 was invested on July 1, 2023 (first day of trading activity) and all dividends and other distributions were reinvested through the last trading day of fiscal 2024. Past performance is not necessarily indicative of future performance.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information The Company's common stock, par value $0.001 per share, or Common Stock, trades on the Nasdaq Stock Market LLC (“Nasdaq”) under the symbol “FTRE.” Holders On March 11, 2024, there were approximately 1,748 stockholders of record as reported by our transfer agent.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information The Company's common stock, par value $0.001 per share, or Common Stock, trades on the Nasdaq Stock Market LLC (“Nasdaq”) under the symbol “FTRE.” Holders On February 27, 2025, there were approximately 1,628 stockholders of record as reported by our transfer agent.
Common Stock Performance The following graph compares the cumulative total shareholder return of Fortrea’s Common Stock with that of the Nasdaq Composite Index and the Nasdaq Health Care Index for the period from July 1, 2023 (the effective date of the registration of FTRE Common Stock) to December 31, 2023.
Common Stock Performance The following graph compares the cumulative total stockholder return of Fortrea’s Common Stock with that of the Nasdaq Health Care Index, the S&P 1500 Health Care Index and our peer group (“Peer Group”) as set forth below, for the period from July 1, 2023 (the effective date of the registration of FTRE Common Stock) to December 31, 2024.
Added
The Peer Group consists of Charles River Laboratories Inc., ICON plc, Medpace Holdings, Inc., IQVIA Holdings Inc. and Thermo Fisher Scientific Inc. The companies in our Peer Group are publicly traded companies that share similar business model characteristics to Fortrea, or provide services to similar customers as Fortrea.
Added
The Nasdaq Health Care Index, the S&P 1500 Healthcare index and our Peer Group are included for comparative purposes only.
Added
They do not necessarily reflect management’s opinion that these indices and our Peer Group are an appropriate measure of the relative performance of the stock involved, and they are not intended to forecast or be indicative of possible future performance of our common stock. 53 Table of Contents ITEM 6. [ RESERVED ]

Item 7. Management's Discussion & Analysis

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

82 edited+29 added−22 removed38 unchanged
Biggest changeAmortization Expense Years Ended December 31, 2023 2022 2021 2023/2022 change 2022/2021 change Amortization of intangibles and other assets $ 63.8 $ 65.7 $ 140.0 (2.9) % (53.1 %) The decrease in amortization of intangibles and other assets in 2023, as compared to 2022, is primarily the result of the impairment of technology assets that occurred in the fourth quarter of 2022. 52 Table of Contents The decrease in amortization of intangibles and other assets in 2022, as compared to 2021, is primarily the result of a $67.3 decrease in amortization expense related to trade names.
Biggest changeThe decrease in amortization of intangibles and other assets in 2023, as compared to 2022, is primarily the result of the impairment of technology assets that occurred in the fourth quarter of 2022.
Liquidity, Capital Resources and Financial Position The Company manages cash flow to fund and invest in operational growth, capital expenditures, and credit facility repayments. In connection with the Spin, we have incurred indebtedness in an aggregate principal amount of $1,640.0, which consists of borrowings under senior secured term loan facilities and senior secured notes.
Liquidity, Capital Resources and Financial Position The Company manages cash flow to fund and invest in operational growth, capital expenditures, and credit facility repayments. In connection with the Spin, we incurred indebtedness in an aggregate principal amount of $1,640.0, which consists of borrowings under senior secured term loan facilities and senior secured notes.
For more information about risks related to our backlog see “Risk Factors—Risks Relating to Our Business—Our backlog might not be indicative of our future revenues, and we might not realize all of the anticipated future revenue reflected in our backlog.” The following Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to help you understand our results of operations for the years ended December 31, 2023, 2022 and 2021.
For more information about risks related to our backlog see “Risk Factors—Risks Relating to Our Business—Our backlog might not be indicative of our future revenues, and we might not realize all of the anticipated future revenue reflected in our backlog.” The following Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to help you understand our results of operations for the years ended December 31, 2024, 2023 and 2022.
These contracts generally take the form of 56 Table of Contents fixed-price, fee-for-service or software-as-a-service arrangements subject to pricing adjustments based on changes in scope. Fixed-price contracts are typically recognized as revenue over time based on a proportional-performance basis, using either input or output methods that are specific to the service provided.
These contracts generally take the form of fixed-price, fee-for-service or software-as-a-service arrangements subject to pricing adjustments based on changes in scope. 62 Table of Contents Fixed-price contracts are typically recognized as revenue over time based on a proportional-performance basis, using either input or output methods that are specific to the service provided.
The analysis requires the Company to make significant estimates and, as such, changes in facts and circumstances could result in material changes in the allowance for credit losses. 57 Table of Contents Income Taxes Prior to the Spin, the Company was included in the combined U.S. federal, state, and foreign income tax returns of Labcorp, where eligible.
The analysis requires the Company to make significant estimates and, as such, changes in facts and circumstances could result in material changes in the allowance for credit losses. 63 Table of Contents Income Taxes Prior to the Spin, the Company was included in the combined U.S. federal, state, and foreign income tax returns of Labcorp, where eligible.
The Company offers customers highly flexible delivery models that include Full Service, Functional Service Provider (“FSP”), and Hybrid Service structures. We have a rich history of providing clinical development services for over 30 years across more than 20 therapeutic areas, first as Covance and later as Labcorp Drug Development. On June 30, 2023, we completed the Spin from Labcorp.
We offer customers highly flexible delivery models that include Full Service, Functional Service Provider (“FSP”), and Hybrid Service structures. We have a rich history of providing clinical development services for over 30 years across more than 20 therapeutic areas, first as Covance and later as Labcorp Drug Development. On June 30, 2023, we completed the Spin from Labcorp.
We may also access capital markets through the issuance of debt or equity, which we may use in connection with the acquisition of complimentary businesses or other significant assets, or for other strategic opportunities, or general corporate purposes.
We may also access capital markets through the issuance of debt or equity, which we may use in connection with the acquisition of complementary businesses or other significant assets, or for other strategic opportunities, or general corporate purposes.
These expenses were allocated to us based on direct usage when identifiable or, when not directly identifiable, on the basis of proportional net revenues or headcount or other reasonable driver, as applicable.
These expenses were allocated to us based on direct usage when identifiable or, when not directly identifiable, on the basis of proportional net revenues or headcount or another reasonable driver, as applicable.
We elected to not consider the estimated impact of potential future Corporate Alternative Minimum Tax liabilities for purposes of assessing valuation allowances on the Company’s deferred tax balances. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
We elected to not consider the estimated impact of potential future Corporate Alternative Minimum Tax liabilities for purposes of assessing valuation allowances on the Company’s deferred tax balances. The effect on deferred tax assets and liabilities of an enacted change in tax rates is recognized in income in the period that includes the enactment date.
Goodwill and Other Asset Impairments Years Ended December 31, 2023 2022 2021 2023/2022 change 2022/2021 change Goodwill and other asset impairments $ — $ 9.8 $ — (100.0 %) 100.0 % During 2022, the Company recorded intangible asset impairment charges of $9.8.
Goodwill and Other Asset Impairments Years Ended December 31, 2024 2023 2022 2024/2023 change 2023/2022 change Goodwill and other asset impairments $ — $ — $ 9.8 — % (100.0) % During 2022, the Company recorded intangible asset impairment charges of $9.8.
While we believe we have adequately provided for all tax positions, amounts assessed by taxing authorities could be greater than what we have accrued for in our financial statements.
While we believe we have adequately accrued for all tax positions, amounts assessed by taxing authorities could be greater than what we have recorded in our financial statements.
Prior to the spin-off (the “Spin” or “the Separation”), Fortrea existed and functioned as part of Laboratory Corporation of America Holdings, which we refer to in this discussion and analysis as “Labcorp” or “Former Parent.” The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our audited consolidated and combined financial statements and corresponding notes and other financial information included elsewhere in this Annual Report on Form 10-K.
Prior to the spin-off (the “Spin” or “the Separation”), Fortrea existed and functioned as part of Labcorp Holdings Inc., which we refer to in this discussion and analysis as “Labcorp” or “Former Parent.” The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our audited consolidated and combined financial statements and corresponding notes and other financial information included elsewhere in this Annual Report on Form 10-K.
(“Seller”), entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Endeavor Buyer LLC, an affiliate of Arsenal Capital Partners, pursuant to which the Seller has agreed to sell assets relating to its Enabling Services Segment (the “Transaction”), including the sale of equity interests of Fortrea Patient Access Inc. and its subsidiaries and Endpoint Clinical, Inc. and its subsidiaries.
(the “Seller”), entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Endeavor Buyer LLC, an affiliate of Arsenal Capital Partners, pursuant to which the Seller agreed to sell, and to cause its affiliates to sell, certain assets relating to its Enabling Services Segment (the “Transaction”), including the sale of equity interests of Fortrea Patient Access Inc. and its subsidiaries and Endpoint Clinical, Inc. and its subsidiaries.
“Risk Factors.” Actual results may differ materially from these expectations. See “Cautionary Statement Concerning Forward-Looking Statements.” Company Overview Fortrea, a Delaware corporation incorporated on January 31, 2023, is a leading global contract research organization (“CRO”) providing biopharmaceutical product and medical device development services, patient access solutions and other enabling services to pharmaceutical, biotechnology and medical device customers.
“Risk Factors.” Actual results may differ materially from these expectations. See “Cautionary Statement Concerning Forward-Looking Statements.” Company Overview Fortrea, a Delaware corporation incorporated on January 31, 2023, is a leading global contract research organization (“CRO”) providing biopharmaceutical product and medical device development solutions to pharmaceutical, biotechnology and medical device customers.
Results of Operations for the years ended December 31, 2023, 2022 and 2021 The following tables present the financial measures that management considers to be the most significant indicators of the Company's performance.
Results of Continuing Operations for the years ended December 31, 2024, 2023 and 2022 The following tables present the financial measures that management considers to be the most significant indicators of the Company's performance.
The Company may also choose to bypass the qualitative assessment for any reporting unit in its goodwill assessment and proceed directly to performing the quantitative 58 Table of Contents assessment. The Company recognizes an impairment charge for the amount by which the reporting unit's carrying amount exceeds its fair value.
The Company may also choose to bypass the qualitative assessment for any reporting unit in its goodwill assessment and proceed directly to performing the quantitative assessment. The Company recognizes an impairment charge for the amount by which the reporting unit's carrying amount exceeds its fair value.
The Company does not recognize a tax benefit, unless the Company concludes that it is more likely than not that the benefit will be sustained on audit by the taxing authority based solely on the technical merits of the associated tax position.
The Company does not recognize a tax benefit for any uncertain tax positions, unless the Company concludes that it is more likely than not that the benefit will be sustained on audit by the taxing authority based solely on the technical merits of the associated tax position.
Selling, general and administrative expenses increased 20.3% in 2023 compared to 2022. The change in selling, general and administrative expenses was primarily due to an increase in personnel costs, credit loss provisions, transition service agreement costs and professional fees partially offset by elimination of prior year Former Parent corporate allocations and carve-out adjustments Fortrea received prior to the Spin.
The change in selling, general and administrative expenses was primarily due to an increase in personnel costs, credit loss provisions, transition service agreement costs and professional fees partially offset by elimination of prior year Former Parent corporate allocations and carve-out adjustments Fortrea received prior to the Spin.
Capital expenditures in 2023 were 1.3% of revenues, primarily in connection with projects to support growth in the Company's core businesses. The Company intends to continue to pursue selective investments in key therapeutic areas, business areas and geographies to drive growth and to improve efficiency of the Company's operations.
Capital expenditures in 2024 were 0.9% of revenues, primarily in connection with projects to support growth in the Company's core businesses. The Company intends to continue to pursue selective investments in key therapeutic areas, business areas and geographies to drive growth and to improve efficiency of the Company's operations.
The increase in direct costs was primarily due to higher pass through costs, transition services agreement costs and personnel costs partially offset by the removal of Former Parent corporate allocations and carve-out adjustments Fortrea received prior to the Spin. Pass through costs are paid by the customer resulting in revenue fully offset by these direct costs.
The increase in direct costs was primarily due to higher pass through costs, transition services agreement costs and personnel costs partially offset by the removal of Former Parent corporate allocations and carve-out adjustments Fortrea received prior to the Spin.
The 0.3% increase in organic revenues was primarily driven by an increase in pass through revenues offset by lower service revenues driven by the mix and quantity of new business wins during the year prior to the Spin and by the impact of a prior year FSP cancellation.
The increase in organic revenues was primarily driven by an increase in pass through costs offset by the mix and quantity of new business wins prior to the Spin and by the impact of a prior year FSP cancellation.
Such expenditures are expected to be funded by cash flow from operations. 55 Table of Contents Net cash used for investing activities for the year ended December 31, 2022 was $54.0 as compared to net cash used for investing activities of $26.2 for the year ended December 31, 2021.
Such expenditures are expected to be funded by cash flow from operations. 61 Table of Contents Net cash used for investing activities for the year ended December 31, 2023 was $(31.8) as compared to net cash used for investing activities of $(54.0) for the year ended December 31, 2022.
We adjust backlog for foreign currency fluctuations and exclude from backlog revenue that has been recognized as revenue in our statements of operations. Our backlog was $7.4 billion as of December 31, 2023.
We adjust backlog for foreign currency fluctuations and exclude from backlog amounts that have been recognized as revenue in our statements of operations. Our backlog was $7.7 billion as of December 31, 2024.
During the year ended December 31, 2023, reductions of approximately $60.1 in the Company’s revenues related to performance obligations partially satisfied in previous periods. During the years ended December 31, 2022 and 2021, revenue of $72.3 and $80.3, respectively, was recognized from performance obligations that were partially satisfied in a previous period.
During the years ended December 31, 2024 and 2023, reductions of approximately $61 and $60, respectively, in revenue related to performance obligations partially satisfied in previous periods. During the year ended December 31, 2022, revenue of approximately $72 was recognized from performance obligations that were partially satisfied in a previous period.
Cash and cash equivalents consist of highly liquid instruments, such as commercial paper, time deposits, and other money market instruments, which have maturities when purchased of three months or less. Cash Flows from Operating Activities During the year ended December 31, 2023, the Company's operations provided $167.4 of cash as compared to $87.5 in 2022.
Cash and cash equivalents consist of highly liquid instruments, such as commercial paper, time deposits, and other money market instruments, which have maturities when purchased of three months or less. Cash Flows from Operating Activities During the year ended December 31, 2024, the Company's operations provided $262.8 of cash as compared to $168.4 in 2023, an increase of $94.4.
The average duration of our contracts will fluctuate from period to period based on the contracts comprising our backlog at any given time. The majority of our contracts contain early termination provisions that typically require notice periods ranging from 30 to 90 days.
Our backlog also reflects any cancellation or adjustment activity related to these awards. The average duration of our contracts will fluctuate from period to period based on the contracts comprising our backlog at any given time. The majority of our contracts contain early termination provisions that typically require notice periods ranging from 30 to 90 days.
Under the market-based fair value methodology, judgment is required in evaluating market multiples and recent transactions. Management believes that the assumptions used for its impairment tests are representative of those that would be used by market participants performing similar valuations of the reporting units.
Under the market-based fair value methodology, judgment is required in evaluating market multiples and recent transactions. Management believes that the assumptions used for its impairment tests are representative of those that would be used by market participants performing similar valuations of the reporting units. 65 Table of Contents Management performed its annual goodwill impairment testing as of October 1, 2024.
Interest Expense Years Ended December 31, 2023 2022 2021 2023/2022 change 2022/2021 change Interest expense $ 69.8 $ 0.2 $ 0.2 34,800.0 % — % The increase in interest expense for year ended December 31, 2023, as compared with the corresponding period in 2022, is primarily due to the incurrence of indebtedness, consisting of borrowings under senior secured term loan facilities and senior secured notes.
The increase in interest expense for year ended December 31, 2023, as compared with the corresponding period in 2022, is primarily due to the incurrence of indebtedness in June 2023, consisting of borrowings under the senior secured term loan facilities and the senior secured notes.
Various factors could reasonably be expected to unfavorably impact existing assumptions: primarily delays in new customer bookings and the related delay in revenue from new customers, increases in customer termination activity or increases in operating costs.
Various factors could reasonably be expected to unfavorably impact existing assumptions: primarily delays or lower demand resulting in lower contract bookings and the related delay or reduction in revenue, increases in customer termination activity or increases in operating costs.
The $22.2 decrease in net cash used for investing activities for the year ended December 31, 2023, was primarily due to a year over year decrease in capital expenditures. Capital expenditures were $40.3 and $54.4 for the years ended December 31, 2023 and 2022, respectively.
The $22.2 decrease in net cash used for investing activities was primarily due to a year over year decrease in capital expenditures. Capital expenditures were $40.3 and $54.4 for the years ended December 31, 2023 and 2022, respectively. Capital expenditures in 2023 were 1.4% of revenues, primarily in connection with projects to support growth in the Company's core businesses.
Direct costs decreased 0.2% in 2022 as compared with 2021 and decreased as a percentage of revenues to 79.0% in 2022 as compared to 80.2% in 2021.
Direct costs decreased 4.0% in 2024 as compared with 2023 and increased as a percentage of revenues to 80.2% in 2024 as compared to 79.2% in 2023.
The effective tax rate for the year ended December 31, 2023 was higher than the Company’s statutory tax rate primarily due to U.S. tax on foreign income inclusions, the base erosion and anti-abuse tax (“BEAT”) and non-deductible compensation expenses, partially offset by the U.S. R&D credit and certain state tax benefits.
The effective tax rate for the year ended December 31, 2023 was lower than the Company’s statutory tax rate primarily due to foreign earnings taxed at rates higher than the U.S. statutory rate, U.S. tax on foreign income inclusions, the base erosion and anti-abuse tax (“BEAT”) and non-deductible employee benefits, partially offset by the U.S.
The increase in depreciation expense for 2022, as compared to 2021, was primarily due to purchases of property, plant and equipment.
The increase in depreciation expense for 2023, as compared to 2022, was primarily due to the increase in of property, plant and equipment, primarily IT assets, as part of the Spin.
Direct Costs, Exclusive of Depreciation and Amortization Years Ended December 31, 2023 2022 2021 2023/2022 change 2022/2021 change Direct costs $ 2,588.6 $ 2,447.4 $ 2,453.1 5.8 % (0.2 %) Direct costs as a % of revenues 83.3 % 79.0 % 80.2 % Direct costs consist primarily of payroll and related benefits for project-related employees, pass through costs, transition services agreement direct costs, information technology costs, and other direct costs.
Direct Costs, Exclusive of Depreciation and Amortization Years Ended December 31, 2024 2023 2022 2024/2023 change 2023/2022 change Direct costs $ 2,162.2 $ 2,251.9 $ 2,112.6 (4.0) % 6.6 % Direct costs as a % of revenues 80.2 % 79.2 % 74.5 % Direct costs consist primarily of payroll and related benefits for project-related employees, reimbursable expenses (pass through costs), transition services agreement costs, information technology costs, and other direct costs.
Cash Flows from Investing Activities Net cash used for investing activities for the year ended December 31, 2023 was $31.8 as compared to net cash used for investing activities of $54.0 for the year ended December 31, 2022.
Cash Flows from Investing Activities Net cash provided by investing activities for the year ended December 31, 2024 was $251.6 as compared to net cash used for investing activities of $(31.8) for the year ended December 31, 2023.
Accordingly, there can be no assurance 59 Table of Contents that the estimates and assumptions made for the purposes of the goodwill impairment and intangible asset analysis will prove to be accurate predictions of future performance. 60 Table of Contents
Accordingly, there can be no assurance that the estimates and assumptions made for the purposes of the goodwill impairment and intangible asset analysis will prove to be accurate predictions of future performance. The Company will continue to monitor the financial performance of and assumptions for its reporting units.
Direct costs increased 5.8% in 2023 as compared with 2022 and increased as a percentage of revenues to 83.3% in 2023 as compared to 79.0% in 2022.
Direct costs increased 6.6% in 2023 as compared with 2022 and increased as a percentage of revenues to 79.2% in 2023 as compared to 74.5% in 2022.
We consider the basis on which the expenses have been allocated to reasonably reflect the utilization of services provided to, or the benefit received by, us during the periods presented. However, the allocations may not reflect the expenses we would have incurred as an independent company for the periods presented.
We consider the basis on which the expenses have been allocated to reasonably reflect the utilization of services provided to, or the benefit received by, us during the periods presented.
The increase in revenues was due to organic growth of 0.3% and favorable foreign currency translation of 0.1%. The Company defines organic growth as the increase in revenue excluding the year over year impact of acquisitions, divestitures, and currency.
The change in revenues was due to a decrease in organic revenues of 5.2%, partially offset by favorable foreign currency translation of 0.1%. The Company defines organic growth as the change in revenues excluding the year over year impact of acquisitions, divestitures and currency.
The total contract value is estimated at the beginning of the contract, and is equal to the amount expected to be billed to the customer. Other payments and billing adjustments may also factor into the calculation of total contract value, such as the reimbursement of out-of-pocket costs and volume-based rebates.
Other payments and billing adjustments may also factor into the calculation of total contract value, such as the reimbursement of out-of-pocket costs and volume-based rebates.
If the Company determines that it is more likely than not that the fair value of a reporting unit is less than its carrying value, then the Company performs the quantitative goodwill impairment test.
Reporting units are businesses with discrete financial information that is available and reviewed by management. If the Company determines that it is more likely than not that the fair value of a reporting unit is less than its carrying value, then the Company performs the quantitative goodwill impairment test.
Cash Flows for the Year Ended December 31, 2023, 2022 and 2021 In summary the Company's cash flows were as follows: For the Year ended December 31, 2023 2022 2021 Net cash provided by operating activities $ 167.4 $ 87.5 $ 169.8 Net cash used for investing activities (31.8) (54.0) (26.2) Net cash used for financing activities (139.0) (8.7) (128.5) Effect of exchange rate on changes in cash and cash equivalents — (7.4) (0.8) Net change in cash and cash equivalents $ (3.4) $ 17.4 $ 14.3 Cash and Cash Equivalents Cash and cash equivalents at December 31, 2023, 2022 and 2021 totaled $108.6, $112.0 and $94.6, respectively.
In summary the Company’s cash flows were as follows: Years ended December 31, 2024 2023 2022 Net cash provided by operating activities $ 262.8 $ 168.4 $ 82.7 Net cash provided by (used for) investing activities 251.6 (31.8) (54.0) Net cash used for financing activities (497.8) (140.8) (6.3) Effect of exchange rate on changes in cash and cash equivalents (6.7) 2.4 (6.6) Net change in cash and cash equivalents $ 9.9 $ (1.8) $ 15.8 Cash and Cash Equivalents Cash and cash equivalents at December 31, 2024, 2023 and 2022 totaled $118.5, $108.6 and $110.4, respectively.
We leverage our global scale, clinical data insights, technology innovation, industry network and decades of experience as a standalone company and as a business unit prior to the Spin to deliver tailored solutions to our customers. With what we believe is a distinctive market offering, Fortrea meets growing global demand for clinical development services.
We leverage our global scale, scientific and therapeutic expertise, clinical data insights, technology innovation, industry network and decades of experience as a standalone company and as a business unit prior to the Spin to deliver tailored solutions to our customers.
The Company is not currently subject to U.S. federal income tax audits by the Internal Revenue Service (“IRS”) as it has not filed a U.S. federal income tax return yet. We are no longer subject to U.S. state income tax audits prior to 2017. There are no ongoing foreign income tax audits.
The Company is not currently under tax examination by the Internal Revenue Service (“IRS”) as a separate taxpayer. We are no longer subject to U.S. state income tax audits prior to 2018. There are ongoing foreign income tax audits in various jurisdictions ranging from 2018 - 2022.
Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Tax effects are released from Accumulated Other Comprehensive Income using either the specific identification approach or the portfolio approach based on the nature of the underlying item.
Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
Restructuring and Other Charges Years Ended December 31, 2023 2022 2021 2023/2022 change 2022/2021 change Restructuring and other charges $ 24.3 $ 30.5 $ 20.7 (20.3 %) 47.3 % During the years ended December 31, 2023, 2022 and 2021, the Company recorded net restructuring charges of $24.3, $30.5, and $20.7, respectively, which are reflected within Restructuring and other charges in the consolidated and combined statements of operations.
Restructuring and Other Charges Years Ended December 31, 2024 2023 2022 2024/2023 change 2023/2022 change Restructuring and other charges $ 50.1 $ 21.2 $ 25.9 136.3 % (18.1 %) 58 Table of Contents During the years ended December 31, 2024, 2023 and 2022, the Company recorded net restructuring charges of $50.1, $21.2, and $25.9, respectively, which are reflected within Restructuring and other charges in the consolidated and combined statements of operations.
Cash flows from operating activities benefited from moderation in growth of unbilled services and deferred revenue, along with lower cash used for accrued expenses, including lower incentive payouts earlier in the year, partially offset by a decrease in net income. During the year ended December 31, 2022, the Company's operations provided $87.5 of cash as compared to $169.8 in 2021.
Cash flows from operating activities benefited from moderation in growth of unbilled services and deferred revenue, along with lower cash used for accrued expenses, including lower incentive compensation payments, partially offset by a decrease in net income.
The Company’s revenues for the year ended December 31, 2022, were $3,096.1, an increase of 1.3% over revenues of $3,057.5 in the corresponding period in 2021. The increase in revenues was due to organic growth of 3.9% and unfavorable foreign currency translation of 2.6%.
The decrease was partially offset by an increase in revenue from clinical pharmacology services. The Company’s revenues for the year ended December 31, 2023, were $2,842.5, an increase of 0.2% over revenues of $2,837.0 in the corresponding period in 2022. The increase in revenues was due to organic growth of 0.1% and favorable foreign currency translation of 0.1%.
The Transaction is targeted to close in the second quarter of 2024, subject to customary closing conditions and government approvals, as well as the parties entering into certain services and operating agreements. 49 Table of Contents Incremental Independent Public Company Expenses The consolidated and combined statements of operations include costs for certain centralized functions and programs provided and administered by Labcorp that were allocated to us in the periods presented prior to the Spin.
Incremental Independent Public Company Expenses The consolidated and combined statements of operations include costs for certain centralized functions and programs provided and administered by Labcorp that were allocated to us in the periods presented prior to the Spin.
Cash provided by financing activities related to proceeds from term loans and senior note offerings was offset primarily by the net transfers to Former Parent in connection with the Spin.
Financing activities for year ended December 31, 2023 included proceeds from term loans and senior note offerings which were more than offset by the net transfers to Former Parent in connection with the Spin.
Depreciation Expense Years Ended December 31, 2023 2022 2021 2023/2022 change 2022/2021 change Depreciation expense $ 32.6 $ 27.0 $ 26.3 20.7 % 2.7 % The increase in depreciation expense for 2023, as compared to 2022, was due to the increase of property, plant and equipment, primarily IT assets, as part of the Spin.
Depreciation Expense Years Ended December 31, 2024 2023 2022 2024/2023 change 2023/2022 change Depreciation expense $ 24.5 $ 28.6 $ 23.0 (14.3 %) 24.3 % The decrease in depreciation expense for 2024, as compared to 2023, was due to a decrease in depreciable property, plant and equipment, primarily IT assets.
Net cash used for financing activities for the year ended December 31, 2022 was $8.7 compared to cash used for financing activities of $128.5 for the year ended December 31, 2021. The cash used for financing activities primarily related to the net transfers to Former Parent.
Net cash used for financing activities for the year ended December 31, 2023 was $140.8 compared to cash used for financing activities of $6.3 for the year ended December 31, 2022.
Revenue Recognition The Company provides comprehensive phase I through phase IV services to global pharmaceutical, biotechnology, and medical device companies worldwide. A majority of the Company’s revenues are earned under contracts that are long term in nature, ranging in duration from a few months to many years.
A majority of the Company’s revenues are earned under contracts that are long term in nature, ranging in duration from a few months to many years.
The purchase price for the Transaction is $345.0, subject to customary purchase price adjustments, with $295.0 to be paid at closing and $50.0 to be paid upon achievement of certain transition-related milestones.
The final adjusted purchase price for the Transaction was $340.0, subject to customary purchase price adjustments, with $295.0 paid at closing and $45.0 to be paid upon achievement of certain transition-related milestones, which includes certain services provided through a Transition Services Agreement. The Transaction closed during the second quarter of 2024.
For periods after the Spin, the Company will be filing income tax returns as a separate company. The income tax provisions, and related deferred tax assets and liabilities reflected in our consolidated and combined financial statements have been calculated based on the go-forward status of the Company as separate from Labcorp.
For the periods after Spin, the Company files income tax returns as a separate company. The income tax provisions, and related deferred tax assets and liabilities reflected in our financial statements represent the Company as separate from Labcorp. The Company accounts for income taxes utilizing the asset and liability method.
The effective tax rate for the twelve months ended December 31, 2022 was lower than the Company’s statutory tax rate primarily due to U.S. taxes on foreign earnings and domestic tax credits, partially offset by state taxes and additional tax deductions.
The effective tax rate for the year ended December 31, 2022 was higher than the Company’s statutory tax rate primarily due to foreign earnings taxed at rates higher than the U.S. statutory rate, U.S. taxes on foreign income inclusions and state taxes, partially offset by benefits for permanently non-deductible items, employee benefits, the U.S. R&D credit and certain state benefits.
The $27.8 increase in net cash used for investing activities for the year ended December 31, 2021 was primarily due to a year over year increase in capital expenditures. Capital expenditures were $54.4 and $26.5 for the years ended December 31, 2022 and 2021, respectively.
The $283.4 increase in net cash provided by (used for) investing activities for the year ended December 31, 2024, was primarily due to $276.6 of net proceeds from the sale of the Enabling Services Segment and a year over year decrease in capital expenditures. Capital expenditures were $25.5 and $40.3 for the years ended December 31, 2024 and 2023, respectively.
As of December 31, 2023, the Company had no outstanding factored customer receivables. We believe our existing cash and cash flows generated from operations, plus existing credit facilities, will be sufficient to cover the needs of our current and planned operations for at least the next 12 months.
We believe our existing cash and cash flows generated from operations, plus existing credit facilities, will be sufficient to cover the needs of our current and planned operations for at least the next 12 months. From time to time, we routinely evaluate strategic opportunities, including potential acquisitions, joint ventures or investments in complementary businesses.
For contracts that include multiple performance obligations, the Company allocates the contract value to the goods and services based on a customer price list, if available. If a price list is not available, the Company will estimate the transaction price using either market prices or an “expected cost plus margin” approach.
If a price list is not available, the Company will estimate the stand-alone price using either market prices or an “expected cost plus margin” approach. The total contract value is estimated at the beginning of the contract, and is equal to the amount expected to be billed to the customer.
We have also entered into a senior secured revolving credit facility, which consists of a five-year facility in the principal amount of up to $450.0 as further discussed in Note 10, Debt to the consolidated and combined financial statements. 54 Table of Contents We have also entered into an accounts receivable purchase program (“ARPP”), which establishes a receivables factoring facility that permits the Company to sell up to $80.0 in customer receivables to a financial institution based on the availability of certain eligible receivables and the satisfaction of certain conditions.
We have also entered into a senior secured revolving credit facility, which consists of a five-year facility in the principal amount of up to $450.0 as further discussed in Note 11, “Debt” to our consolidated and combined financial statements.
These charges are associated with Company actions to reduce overcapacity, align resources, and restructure certain operations and included eliminating redundant positions and aligning resources for cost improvement and to meet customer requirements.
These charges are associated with Company actions to align resources and restructure certain operations which includes eliminating redundant positions and aligning resources and facilities for cost improvements and to meet customer requirements. In addition, in the fourth quarter of 2024, the Company approved a restructuring plan to streamline its operations and eliminate redundant positions.
Revenues Years Ended December 31, 2023 2022 2021 2023/2022 change 2022/2021 change Clinical Services $ 2,839.5 $ 2,825.4 $ 2,763.5 0.5 % 2.2 % Enabling Services 269.5 270.7 294.0 (0.4) % (7.9) % Total $ 3,109.0 $ 3,096.1 $ 3,057.5 0.4 % 1.3 % 50 Table of Contents The Company’s revenues for the year ended December 31, 2023, were $3,109.0, an increase of 0.4% over revenues of $3,096.1 in the corresponding period in 2022.
Revenues Years Ended December 31, 2024 2023 2022 2024/2023 change 2023/2022 change Revenues $ 2,696.4 $ 2,842.5 $ 2,837.0 (5.1) % 0.2 % 56 Table of Contents The Company’s revenues for the year ended December 31, 2024, were $2,696.4, a decrease of 5.1% over revenues of $2,842.5 in the corresponding period in 2023.
The annual impairment test for goodwill includes an option to perform a qualitative assessment of whether it is more likely than not that a reporting unit's fair value is less than its carrying value. Reporting units are businesses with discrete financial information that is available and reviewed by management.
The Company assesses goodwill for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. 64 Table of Contents The annual impairment test for goodwill includes an option to perform a qualitative assessment of whether it is more likely than not that a reporting unit's fair value is less than its carrying value.
The change in foreign exchange gain (loss) for the year ended December 31, 2022, as compared to the year ended December 31, 2021, was primarily due to the relative strengthening of the US Dollar against most major foreign currencies resulting in $5.9 in foreign exchange gains offset by $6.8 in allocated hedging losses from the Former Parent hedging program for 2022.
Dollar against the British Pound and the Euro. The change in foreign exchange gain (loss) for the year ended December 31, 2023, as compared to the year ended December 31, 2022, was primarily due to the relative strengthening of the U.S.
Information regarding the net transfer is provided in Note 2, “Summary of Significant Accounting Policies ” and Note 18, “Related Party Transactions ” to the audited consolidated and combined financial statements.
Information regarding the net transfer is provided in Note 2, “Summary of Significant Accounting Policies ” and Note 19, “Transactions with Former Parent ” to the audited consolidated and combined financial statements. Off-Balance Sheet Arrangements The Company does not have any off-balance sheet financing other than short term operating leases and letters of credit.
Foreign Exchange Gain (Loss) Years Ended December 31, 2023 2022 2021 2023/2022 change 2022/2021 change Foreign exchange gain (loss) $ 0.9 $ (0.9) $ 20.2 200.0 % 104.5 % The change in foreign exchange gain (loss) for the year ended December 31, 2023, as compared to the year ended December 31, 2022, was primarily due to $3.6 in hedging gains from the Company’s hedging program offset by the relative weakening of the US Dollar against most major foreign currencies resulting in $0.5 in foreign exchange losses and by $2.2 of allocated hedging losses from the Former Parent hedging program for 2023.
Foreign Exchange Gain (Loss) Years Ended December 31, 2024 2023 2022 2024/2023 change 2023/2022 change Foreign exchange gain (loss) $ (10.6) $ 0.3 $ (2.0) nm 115.0% The change in foreign exchange gain (loss) for the year ended December 31, 2024, as compared to the year ended December 31, 2023, changed primarily due to the relative weakening of the U.S.
The increase in revenues was driven by an increase in pass through revenues offset by lower service revenues resulting from by the mix and quantity of new business wins during the year prior to the Spin and by the impact of a prior year FSP cancellation.
The 5.2% decrease in organic revenues was driven by decreased pass through costs and lower service revenues resulting from the lower quantity of new business wins prior to the Spin, along with the slower backlog burn rate and the mix of mature and longer duration studies in our portfolio.
For the year ended December 31, 2021, foreign exchange gains were $26.1 offset by $5.9 of allocated hedging losses from the Former Parent hedging program. 53 Table of Contents Income Tax Expense Years Ended December 31, 2023 2022 2021 Income tax expense $ 4.5 $ 44.1 $ 38.4 Income tax expense as a % of income before tax 406.3 % 18.6 % 28.2 % For the year ended December 31, 2023, the Company’s effective tax rate was 406.3% compared to 18.6% for the year ended December 31, 2022.
Income Tax Expense Years Ended December 31, 2024 2023 2022 Income tax (benefit) expense $ (3.5) $ 1.2 $ 41.1 Income tax (benefit) expense as a % of income before tax 1.3 % (3.8 %) 22.0 % For the year ended December 31, 2024, the Company’s effective tax rate was 1.3% compared to (3.8)% for the year ended December 31, 2023.
Management performed its annual goodwill impairment testing as of the beginning of the fourth quarter of 2023. Based upon the results of the qualitative and quantitative assessments, the Company concluded that the fair values of each of its reporting units, as of October 1, 2023, were greater than the carrying values.
The Company elected to perform a quantitative assessment on its two reporting units, Clinical Development and Clinical Pharmacology. Based upon the results of the quantitative assessment, the Company concluded that the fair values of each of its reporting units were greater than the carrying values.
For a period following the Separation, however, some of these functions will be provided by Labcorp under transition services agreements. The actual costs of services represented by these allocations may vary significantly from the amounts allocated to us in the accompanying financial statements.
For a period following the Separation, however, some of these functions have been provided by Labcorp under the Transition Services Agreement.
Backlog and Net New Business Our backlog consists of anticipated future revenue from business awards that either have not started, or that are in process and have not been completed. Our backlog also reflects any cancellation or adjustment activity related to these awards.
The operations of the Enabling Services Segment have been classified as income or loss from discontinued operations on the consolidated and combined statements of operations for all periods presented. Backlog Our backlog consists of anticipated future revenue from business awards that either have not started, or that are in process and have not been completed.
Additionally, we utilize enabling technologies to optimize processes and evolve with a dynamic marketplace. Industry Outlook For information about the industry outlook and markets that we operate in, refer to Part I, Item I, “Market Opportunity”.
Our offering is scaled to deliver focused and agile solutions to customers globally, streamlining the biopharmaceutical product, and medical device development process. Industry Outlook For information about the industry outlook and markets that we operate in, refer to Part I, Item I. “Market Opportunity”.
While the Company believes these estimates are reasonable and consistent, they are by their very nature estimates of amounts that will depend on future events. Accordingly, actual results could differ from these estimates. The Company’s critical accounting policies arise in conjunction with revenue recognition, business combinations, income taxes, and goodwill and indefinite-lived assets.
Critical Accounting Policies and Estimates We have chosen accounting policies that management believes are appropriate to accurately and fairly report our operating results and financial position in conformity with U.S. GAAP. We apply these accounting policies in a consistent manner. The Company’s critical accounting policies arise in conjunction with revenue recognition, business combinations, income taxes, and goodwill and indefinite-lived assets.
Capital expenditures in 2022 were 1.8% of revenues, primarily in connection with projects to support growth in the Company's core businesses. Cash Flows from Financing Activities Net cash used for financing activities for the year ended December 31, 2023 was $139.0 compared to cash used for financing activities of $8.7 for the year ended December 31, 2022.
Cash Flows from Financing Activities Net cash used for financing activities for the year ended December 31, 2024 was $497.8 compared to cash used for financing activities of $140.8 for the year ended December 31, 2023. Cash used for financing activities for December 31, 2024 was primarily related to principal payments on the term loan A and term loan B.
Cash flows from operating activities benefited from higher net income due to the growth of the business offset by a decrease in amortization of trade name intangibles, decreases in the accrued expenses and other due primarily to the decrease in incentive compensation accruals from lower business performance.
This increase in cash flows from operating activities was primarily due to cash from accounts receivable, including the sale of receivables under the Receivables Facility, offset by the decrease in net income and higher use of cash for prepaid expenses.
The Clinical Services segment’s revenues for the year ended December 31, 2023 were $2,839.5, an increase of 0.5% compared to revenues of $2,825.4 in the corresponding period in 2022.
During the year ended December 31, 2023, the Company's operations provided $168.4 of cash as compared to $82.7 in 2022, an increase of $85.7.
Our team of approximately 18,000 employees conducts operations in about 90 countries and delivers comprehensive phase I – IV clinical trial management, clinical pharmacology, differentiated technology enabled trial solutions and post-approval services for our customers. Our offering is scaled to deliver focused and agile solutions to customers globally, streamlining the biopharmaceutical product, and medical device development process.
With what we believe is a distinctive market offering, Fortrea meets growing global demand for clinical development services. 54 Table of Contents Our team of approximately 15,500 employees conducts operations in approximately 100 countries and delivers comprehensive phase I – IV clinical trial management, clinical pharmacology, and consulting services for our customers.
We have designated the undistributed earnings of our foreign subsidiaries as indefinitely reinvested with exception to certain withholding taxes accrued that are associated with potential maturity of intercompany notes related to the Separation. Our foreign earnings are computed under U.S. federal tax earnings and profits (“E&P”) principles.
With limited exception, the Company has considered the earnings of its foreign subsidiaries prior to 2024 to be indefinitely invested outside the United States on the basis of limited foreign cash reserves and plans for the reinvestment of those subsidiary earnings. Our foreign undistributed earnings are computed under the U.S. federal tax earning and profits (“E&P”) principles.
For the year ended December 31, 2022, the Company's effective tax rate was 18.6% compared to 28.2% for the year ended December 31, 2021. This fluctuation was primarily related to changes in tax rates during 2021, the geographic mix of earnings and the additional R&D tax credits realized during 2022.
R&D credit and certain state tax benefits. For the year ended December 31, 2023, the Company's effective tax rate was (3.8)% compared to 22.0% for the year ended December 31, 2022.
Under this method, the Company has recognized $3.2 of deferred tax assets and $148.8 of liabilities as of December 31, 2023, for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and for tax loss carryforwards.
Under this method, deferred income taxes represent the expected future tax consequences of temporary differences between the financial statements carrying amount and the respective tax basis of assets and liabilities.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeEarnings related to these contracts were included in the combined statements of operations as part of corporate allocations. Interest Rate Risk We face the market risks associated with interest rate movements on our variable rate debt. We are significantly leveraged and incurred approximately $1,640 of long-term debt in connection with the Spin.
Biggest changePrior to the Spin, these changes in fair value were included in the combined statements of operations as part of corporate allocations. Interest Rate Risk The level of our interest rate risk is dependent on our debt exposure and is sensitive to changes in the general level of interest rates.
We address our exposure to market risks, principally the market risks associated with changes in foreign currency exchange rates and interest rates, through a controlled program of risk management that may include, from time to time, the use of derivative financial instruments such as foreign currency forward contracts, cross currency swaps and interest rate swap agreements in an effort to manage or hedge some of our risk.
We address our exposure to market risks, principally associated with changes in foreign currency exchange rates and interest rates, through a program of risk management that may include, from time to time, the use of derivative financial instruments such as foreign currency forward contracts, cross currency swaps and interest rate swap agreements in an effort to manage or hedge some of our risk.
We entered into foreign currency forward contracts with external counterparties to hedge certain foreign currency transactions with exposure predominantly to the Euro and British Pound. These contracts do not qualify for hedge accounting and the changes in fair value are recorded directly to earnings.
We enter into foreign currency forward contracts with external counterparties to hedge certain foreign currency transactions with exposure predominantly to the Euro and British Pound. These contracts do not qualify for hedge accounting under U.S. GAAP and the changes in fair value are recorded directly to earnings.
We expect to regularly assess market risks and to establish policies and business practices to protect against the adverse effects of these exposures. See Note 10, Debt to the consolidated and combined financial statements. 61 Table of Contents
We expect to regularly assess market risks and to establish policies and business practices to protect against the adverse effects of these exposures. See Note 11, “Debt” to the consolidated and combined financial statements. 67 Table of Contents
Gross accumulated currency translation adjustments recorded as a separate component of stockholders’ equity were $57.6, $(127.0) and $(32.3) at December 31, 2023, 2022 and 2021, respectively. We do not have significant operations in countries in which the economy is considered to be highly inflationary. We earn revenue from service contracts over a period of several months to many years.
Gross accumulated currency translation adjustments recorded as a separate component of stockholders’ equity were $(69.3), $59.3 and $(126.1) at December 31, 2024, 2023 and 2022, respectively. We do not have significant operations in countries in which the economy is considered to be highly inflationary. We earn revenue from service contracts over a period of several months to many years.
Excluding the impacts from any outstanding or future floating-to-fixed interest rate swap transactions, a hypothetical 1.00% increase in interest rates would result in increased interest expenses of $10.5. We expect to manage our interest rate risk but expect to be exposed to an element of market risk from changes to interest rates, including on any refinancing of debt.
Excluding the impacts from any outstanding or future variable-to-fixed interest rate swap transactions, a hypothetical 1% increase in interest rates would result in increased interest expenses of $5.7. We expect to continue to be exposed to an element of market risk from changes to interest rates, including on any refinancing of debt.
Excluding the impacts from any outstanding or future hedging transactions, a hypothetical change of 10% in average exchange rates used to translate all foreign currencies to USD would have impacted income before income taxes for the years ended 2023 and 2022 by approximately $1.2 and $4.3, respectively.
Excluding the impacts from any outstanding or future hedging transactions, a hypothetical change of 10% in average exchange rates used to translate all foreign currencies to USD would have impacted operating income (loss) for the years ended 2024, 2023 and 2022 by approximately $2.7, $(0.6) and $(3.6), respectively.
Foreign Currency Exchange Rates Approximately 16.8%, 18.4% and 20.2% of our revenues for the years ended December 31, 2023, 2022 and 2021, respectively, were denominated in currencies other than the U.S. dollar (“USD”).
Foreign Currency Exchange Rates Approximately 16.6%, 18.0% and 19.4% of our revenues for the years ended December 31, 2024, 2023 and 2022, respectively, were denominated in currencies other than the U.S. dollar (“USD”).
Our financial statements are reported in USD and, accordingly, fluctuations in exchange rates will affect the translation of revenues and expenses denominated in foreign currencies into USD for purposes of reporting our consolidated and combined financial results. In the years 2023, 2022 and 2021, our most significant currency exchange rate exposures were to the Euro and British pound.
Our financial statements are reported in USD and, accordingly, fluctuations in exchange rates will affect the translation of revenues and expenses denominated in foreign currencies into USD for purposes of reporting our consolidated and combined financial results. In the years ended December 31, 2024, 2023 and 2022, the most significant currency exchange rate exposure was the Euro.
A majority of this debt bears interest at a variable rate, and we entered into a floating-to-fixed interest rate swap with respect to some of our floating rate debt. At December 31, 2023, we had $1,054.7 outstanding related to our variable rate debt.
We entered into a variable-to-fixed interest rate swap with respect to some of our floating rate debt in August 2023. At December 31, 2024, we had $572.0 outstanding related to our variable rate debt.
We do not hold or issue derivative financial instruments for trading purposes. Refer to Note 11, Derivative Instruments and Hedging Activities to the consolidated and combined financial statements above for information on how the Company utilizes derivative financial instruments.
We do not hold or issue derivative financial instruments for trading purposes. Refer to Note 12, “Derivative Instruments and Hedging Activities” to the audited consolidated and combined financial statements in Part II, Item 8 of this Annual Report on Form 10-K for information on how the Company utilizes derivative financial instruments.
Removed
Prior to the Spin, the Former Parent entered into foreign currency forward contracts with external counterparties to hedge certain foreign currency transactions with exposure predominantly to the Euro and British Pound. These contracts did not qualify for hedge accounting and the changes in fair value were recorded directly to earnings.
Added
Historical fluctuations in interest rates have not been significant for us; however, this may vary in the future as we have incurred certain indebtedness concurrent with the Spin and may incur additional indebtedness in the future. In particular, we face the market risks associated with interest rate movements on our variable rate debt.

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