What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-08-12 compared with 2024-05-24 · 306 added, 630 removed, 728 unchanged (56% of the section changed)

3 unchanged sentences

(in millions)

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Current assets:

23 unchanged sentences

Deferred income taxes and other tax liabilities 136.1 147.7

Long-term liabilities of discontinued operations 31.5 31.6

Other liabilities 29.6 32.1

Long-term liabilities of discontinued operations — 31.6

Total liabilities $ 2,104.3 $ 2,618.5

Commitments and contingent liabilities (Note 9)

Common stock, 89.4 and 88.8 shares outstanding at March 31, 2024 and December 31, 2023, respectively

Common stock, 89.5 and 88.8 shares outstanding at June 30, 2024 and December 31, 2023, respectively

Additional paid-in capital 2,017.9 1,998.0

7 unchanged sentences

(in millions, except per share data)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Revenues $ 662.4 $ 725.1 $ 1,324.5 $ 1,419.0

Costs and expenses:

Direct costs, exclusive of depreciation and amortization (including costs incurred from related parties of $ 0.0 and $ 21.7 during the three months ended March 31, 2024 and 2023, respectively)

Direct costs, exclusive of depreciation and amortization (including costs incurred from related parties of $ — and $ — during the three and six months ended June 30, 2024 and $ 27.0 and $ 48.8 during the three and six months ended June 30, 2023, respectively)

525.3 568.7 1,079.5 1,110.2

Selling, general and administrative expenses, exclusive of depreciation and amortization 156.2 97.8 276.3 214.6

4 unchanged sentences

Other income (expense):

Interest income (expense) ( 34.3 ) 0.1

Interest expense ( 45.2 ) ( 0.7 ) ( 79.5 ) ( 0.6 )

Foreign exchange gain (loss) ( 1.5 ) 5.2 ( 6.8 ) —

6 unchanged sentences

Earnings (loss) per common share

Basic earnings (loss) per share continuing operations $ ( 0.89 ) $ 0.09

Basic earnings (loss) per share discontinued operations $ ( 0.24 ) $ 0.05

Basic earnings (loss) per share from continuing operations $ ( 1.11 ) $ 0.28 $ ( 2.01 ) $ 0.37

Basic earnings (loss) per share from discontinued operations ( 0.44 ) 0.07 ( 0.68 ) 0.12

Basic earnings (loss) per share $ ( 1.55 ) $ 0.35 $ ( 2.69 ) $ 0.49

Diluted earnings (loss) per share continuing operations $ ( 0.89 ) $ 0.09

Diluted earnings (loss) per share discontinued operations $ ( 0.24 ) $ 0.05

Diluted earnings (loss) per share from continuing operations $ ( 1.11 ) $ 0.28 $ ( 2.01 ) $ 0.37

Diluted earnings (loss) per share from discontinued operations ( 0.44 ) 0.07 ( 0.68 ) 0.12

Diluted earnings (loss) per share $ ( 1.55 ) $ 0.35 $ ( 2.69 ) $ 0.49

3 unchanged sentences

(in millions, except per share data)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Net income (loss) $ ( 138.4 ) $ 30.8 $ ( 239.4 ) $ 43.3

1 unchanged sentence

Net benefit plan adjustments — 2.1 — 2.1

Unrealized gain on derivative instruments

Unrealized gain (loss) on derivative instruments 0.4 — 2.5 —

Other comprehensive income (loss) before tax ( 7.3 ) 32.0 ( 32.9 ) 51.1

19 unchanged sentences

Balance at March 31, 2024 89.4 $ 0.1 $ 2,002.9 $ — $ ( 169.5 ) $ ( 241.6 ) $ 1,591.9

Net loss — — — — ( 138.4 ) — ( 138.4 )

Other comprehensive loss, net of tax — — — — — ( 7.4 ) ( 7.4 )

Stock compensation — — 15.0 — — — 15.0

Issuance of common stock 0.1 — — — — — —

Balance at June 30, 2024 89.5 $ 0.1 $ 2,017.9 $ — $ ( 307.9 ) $ ( 249.0 ) $ 1,461.1

FORTREA HOLDINGS INC.

CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF CHANGES IN EQUITY

(in millions)

Shares Amounts Additional Paid-in Capital Former Parent Investment Accumulated Deficit Accumulated

6 unchanged sentences

Balance at March 31, 2023 — $ — $ — $ 3,658.5 $ — $ ( 255.7 ) $ 3,402.8

— — — 30.8 — — 30.8

Other comprehensive income, net of tax — — — — — 32.0 32.0

Special payment to Former Parent — — — ( 1,595.0 ) — — ( 1,595.0 )

Net transfers to Former Parent

— — — ( 122.9 ) — — ( 122.9 )

Reclassification of Former Parent investment to additional paid-in capital — — 1,971.4 ( 1,971.4 ) — — —

Issuance of common stock 88.8 0.1 — — — — 0.1

Balance at June 30, 2023 88.8 $ 0.1 $ 1,971.4 $ — $ — $ ( 223.7 ) $ 1,747.8

The accompanying notes are an integral part of these unaudited condensed consolidated and combined financial statements.

1 unchanged sentence

CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS

(in millions)

Three Months Ended March 31,

(in millions) (unaudited)

Six Months Ended June 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income $ ( 101.0 ) $ 12.5

Adjustments to reconcile net income to net cash provided by (used for) operating activities:

Net income (loss) $ ( 239.4 ) $ 43.3

Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities:

Depreciation and amortization 44.9 48.6

3 unchanged sentences

Deferred income taxes ( 11.6 ) ( 4.5 )

Loss on sale of business 23.2 —

Write-off of debt issuance costs 12.2 —

Other, net ( 7.8 ) 6.5

3 unchanged sentences

( 11.7 ) ( 17.2 )

Increase (decrease) in accounts payable

Increase (decrease) in unearned revenue

26.4 ( 12.9 )

Decrease in accrued expenses and other ( 26.0 ) ( 65.1 )

Net cash used for operating activities ( 25.6 ) ( 2.0 )

Increase in accounts payable

Increase (decrease) in deferred revenue

(Decrease) increase in accrued expenses and other ( 34.3 ) 15.2

Net cash provided by operating activities 248.1 148.1

CASH FLOWS FROM INVESTING ACTIVITIES:

Capital expenditures ( 20.5 ) ( 25.8 )

Proceeds from sale of business, net 276.6 —

Proceeds from sale of assets 0.1 0.3

Net cash used for investing activities ( 9.2 ) ( 16.2 )

Net cash provided by (used for) investing activities 256.2 ( 25.5 )

CASH FLOWS FROM FINANCING ACTIVITIES:

1 unchanged sentence

Payments on revolving credit facilities ( 474.5 ) —

Proceeds from term loans — 1,061.4

Proceeds from issuance of senior notes — 570.0

Debt issuance costs — ( 26.4 )

Principal payments of long-term debt ( 482.7 ) —

Special payment to Former Parent — ( 1,595.0 )

Net transfers to Former Parent — ( 135.4 )

Net cash provided by financing activities 21.3 24.5

Net cash used for financing activities ( 482.7 ) ( 125.4 )

Effect of exchange rate changes on cash and cash equivalents ( 4.0 ) 1.3

19 unchanged sentences

Reportable Segment

On March 9, 2024, the Company, together with its wholly-owned subsidiary, Fortrea Inc., entered into an Asset Purchase Agreement with Endeavor Buyer LLC to sell the operations of Fortrea Patient Access Inc.

On March 9, 2024, the Company, together with its wholly-owned subsidiary, Fortrea Inc., entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Endeavor Buyer LLC, an affiliate of Arsenal Capital Partners, to sell the operations of Fortrea Patient Access Inc.

and its subsidiaries and Endpoint Clinical, Inc.

2 unchanged sentences

Refer to Note 2 - Discontinued Operations for further discussion .

As of March 31, 2024, all of the Company's consolidated revenues from continuing operations were generated from the Clinical Services segment, which provides phase I-IV clinical trials, including clinical pharmacology and comprehensive clinical development capabilities.

As of June 30, 2024, all of the Company's consolidated revenues from continuing operations were generated from the Clinical Services segment, which provides phase I-IV clinical trials, including clinical pharmacology and comprehensive clinical development capabilities.

The Company’s chief operating decision maker allocates resources and assesses performance for the Clinical Services segment.

1 unchanged sentence

In accordance with the definition of discontinued operations, the Company's decision to sell the assets relating to the Enabling Services Segment represented a strategic shift that had a major effect on the Company's results of operations and assets and liabilities for the periods presented.

As a result, the Company has classified the assets and liabilities related to the Enabling Services segment as assets of discontinued operations and liabilities of discontinued operations on the condensed consolidated and combined balance sheets as of March 31, 2024 and December 31, 2023.

As a result, the Company has classified the assets and liabilities related to the Enabling Services Segment as assets of discontinued operations and liabilities of discontinued operations on the condensed consolidated balance sheet as of December 31, 2023.

The operations of the Enabling Services Segment have been classified as income (loss) from discontinued operations on the condensed consolidated and combined statements of operations for all periods presented.

2 unchanged sentences

On June 30, 2023, the Company completed the Spin from Labcorp.

The Company has entered into several agreements with Labcorp that govern the relationship of the parties following the Separation, including the Separation and Distribution Agreement, the Tax Matters Agreement, the Employee Matters Agreement, and the Transition Services Agreement, which are described in the Company’s Registration Statement on Form 10, as amended (“Form 10”), as filed with the Securities and Exchange Commission (the “SEC”).

Under the terms of the Transition Services Agreement, the Company and Labcorp agreed to provide each other certain transitional services.

The services and assets to be provided to Fortrea by Labcorp support the Company’s enterprise functions, most

The Company has entered into several agreements with Labcorp that govern the relationship of the parties following the Separation, including the Separation and Distribution Agreement, the Tax Matters Agreement, the Employee Matters Agreement, and the Transition Services Agreement with Labcorp, which are described in the Company’s Registration Statement on Form 10, as amended (“Form 10”), as filed with the Securities and Exchange Commission (the “SEC”).

Under the terms of the Transition Services Agreement, the Company and Labcorp agreed to provide each other certain

FORTREA HOLDINGS INC.

1 unchanged sentence

(dollars and shares in millions, except per share data)

notably IT applications, network and security support and hosting, as well as finance, human resources, marketing and other administrative support.

transitional services.

The services and assets to be provided to Fortrea by Labcorp support the Company’s enterprise functions, most notably IT applications, network and security support and hosting, as well as finance, human resources, marketing and other administrative support.

Basis of Financial Statement Presentation

1 unchanged sentence

The Company’s financial statements for periods through the Spin reflect the historical financial position, results of operations and cash flows of the Company, for the periods presented, prepared on a “carve-out” basis and have been derived from the condensed consolidated financial statements and accounting records of Labcorp using the historical results of operations and historical basis of assets and liabilities of the Company, and reflect Labcorp’s net investment in the Company.

The Company’s balance sheet as of March 31, 2024 is a consolidated balance sheet based on the financial position of Fortrea as a standalone company.

The three months ended March 31, 2024 includes condensed consolidated financial statements, whereas all prior periods included combined financial statements.

The Company’s balance sheet as of June 30, 2024 is a consolidated balance sheet based on the financial position of Fortrea as a standalone company.

The three and six months ended June 30, 2024 includes condensed consolidated financial statements, whereas all prior periods included consolidated and combined financial statements.

The Company’s unaudited condensed consolidated and combined financial statements for all periods presented are referred to throughout this document as “financial statements.”

1 unchanged sentence

GAAP”) for interim financial information.

Accordingly, they do not include all of the information and notes required by U.S.GAAP for complete financial statements.

Accordingly, they do not include all of the information and notes required by U.S.

GAAP for complete financial statements.

In the opinion of management, all adjustments necessary for a fair statement of results of operations, cash flows, and financial position have been made.

2 unchanged sentences

As such, the information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Company’s audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

The condensed combined statements of operations include all revenues and costs directly attributable to Fortrea’s business.

The condensed consolidated and combined statements of operations include all revenues and costs directly attributable to Fortrea’s business.

The combined statements of operations for prior periods also include costs for certain centralized functions and programs provided and administered by Labcorp that were allocated to Fortrea.

These centralized functions and programs include, but are not limited to legal, tax, treasury, risk management, sales expenses, information technology, human resources, finance, supply chain, executive leadership and stock-based compensation.

These expenses were allocated to Fortrea 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 Fortrea 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.

Fortrea considers the basis on which the expenses have been allocated to reasonably reflect the utilization of services provided to, or the benefit received by, Fortrea during the prior periods presented.

However, the allocations may not reflect the expenses Fortrea would have incurred as an independent company for the prior periods presented.

However, the allocations may not reflect the expenses Fortrea would have incurred as an independent company for the prior periods presented and may not be representative of future expenses that may be incurred.

Actual costs that may have been incurred if Fortrea had been a standalone company would depend on a number of factors, including, but not limited to, the organizational structure, whether functions were outsourced or performed by employees, and strategic decisions made in areas such as information technology and infrastructure.

1 unchanged sentence

As of December 31, 2022, a Former Parent investment is shown in lieu of common stock and retained earnings accounts in the condensed combined financial statements.

The total net effect of the settlement of the transactions between the Company and Labcorp, exclusive of those historically settled in cash, is reflected in the condensed combined statements of cash flows in cash flows from financing activities as net transfers (to) from Former Parent and in the condensed consolidated and combined balance sheets as Former Parent investment.

All intercompany transactions within the Company have been eliminated.

All transactions between the Company and Former Parent have been included in these condensed consolidated and combined financial statements.

For those transactions between the Company and Former Parent that were historically settled in cash, the Company has reflected such balances in the condensed consolidated and combined balance sheets as due from

All transactions between the Company and Former Parent have been included in these condensed consolidated and combined financial

FORTREA HOLDINGS INC.

1 unchanged sentence

(dollars and shares in millions, except per share data)

related parties or due to related parties.

The Former Parent investment and all due from or due to Former Parent were settled at the time of the Spin.

6 unchanged sentences

Substantially all the Company’s accounts receivable and unbilled services are with companies in the pharmaceutical, biotechnology and medical device industries.

As of March 31, 2024, two customers accounted for 19.3 % and 11.0 % of the Company's combined gross accounts receivable and unbilled services.

As of June 30, 2024, one customer accounted for 15.4 % of the Company's combined gross accounts receivable and unbilled services.

As of December 31, 2023, two pharmaceutical companies accounted for approximately 17.0 % and 11.2 % of the Company's combined gross accounts receivable and unbilled services.

Additionally, for the three months ended March 31, 2024, two customers accounted for approximately 14.0 % and 13.0 % of revenues.

For the three months ended March 31, 2023, one customer accounted for 10.0 % of revenues.

Additionally, for the three months ended June 30, 2024, one customer accounted for approximately 13.2 % of revenues, and for the six months ended June 30, 2024, two customers accounted for approximately 13.6 % and 11.3 % of revenues.

For the three months ended June 30, 2023, one customer accounted for 10.2 % of revenues, and for the six months ended June 30, 2023, one customer accounted for 10.1 % of revenues.

Concentrations of credit risk are mitigated due to the number of the Company’s customers as well as their dispersion across many different geographic regions.

3 unchanged sentences

During the quarter ended March 31, 2024, a change in basis of presentation, to include information technology costs and certain facility costs in Selling, general and administrative expenses was made to improve comparability of costs against peer companies in the clinical research industry.

As a result, the Company reclassified $ 45.3 from Direct costs, exclusive of depreciation and amortization, to Selling, general and administrative expenses, exclusive of depreciation and amortization in the condensed consolidated and combined statement of operations for the period ending March 31, 2023 relating to information technology costs and certain facility charges.

There is no impact on total operating expenses, operating income or net income during the period ended March 31, 2023.

Direct costs include payroll and related benefits for project-related employees, pass through costs, transition servi ces agreement direct costs, facility costs related to phase I clinics and other direct costs.

As a result, the Company reclassified $ 33.1 and $ 78.3 from Direct costs, exclusive of depreciation and amortization, to Selling, general and administrative expenses, exclusive of depreciation and amortization in the condensed consolidated and combined statement of operations for the three and six months ended June 30, 2023 , respectively, relating to information technology costs and certain facility charges.

There is no impact on total operating expenses, operating income or net income during the period ended June 30, 2023.

Direct costs include payroll and related benefits for project-related employees, pass through costs, facility costs related to phase I clinics and other direct costs from the Transition Services Agreement with Labcorp.

Selling, general and administrative expenses consist primarily of administrative payroll and related benefit charges, information technology costs, other facility charges, advertising and promotional expenses, administrative travel and credit loss provisions.

Additionally, the Company reclassified $ 0.1 from Other, net to Interest expense in the condensed consolidated and combined statement of operations for the period ending March 31, 2023.

Additionally, the Company reclassified $ 0.1 from Other, net to Interest expense in the condensed consolidated and combined statement of operations for the six months ended June 30, 2023 .

Restatement of Prior Period Financial Statements

1 unchanged sentence

The errors consisted primarily of a goodwill impairment charge as a result of an incorrect carrying value used in the Company’s impairment calculation, a reduction in revenue due to the misstatement in the amount of the ultimate resolution of a customer matter, an understatement of expense accruals allocated from Former Parent prior to spin, and an understatement of depreciation expense associated with certain projects that were not depreciated in a timely manner.

Management assessed the materiality of the errors, including the presentation on prior period consolidated financial statements, on a qualitative and quantitative basis in accordance with SEC Staff Accounting Bulletin No.

99, Materiality , codified in Accounting Standards Codification Topic 250, Accounting Changes and Error Corrections .

Based on this assessment, the Company concluded that these errors and the related impacts did not result in a

FORTREA HOLDINGS INC.

1 unchanged sentence

(dollars and shares in millions, except per share data)

material misstatement of the previously issued consolidated financial statements as of and for the fiscal years ended December 31, 2022 and 2023, and the previously issued unaudited condensed consolidated interim financial statements for the quarters ended March 31, June 30, and September 30, 2023.

Management assessed the materiality of the errors, including the presentation of prior period consolidated financial statements, on a qualitative and quantitative basis in accordance with SEC Staff Accounting Bulletin No.

99, Materiality , codified in Accounting Standards Codification (“ASC”) Topic 250, Accounting Changes and Error Corrections .

Based on this assessment, the Company concluded that these errors and the related impacts did not result in a material misstatement of the previously issued consolidated and combined financial statements as of and for the fiscal years ended December 31, 2022 and 2023, and the previously issued unaudited condensed consolidated and combined interim financial statements for the quarters ended March 31, June 30, and September 30, 2023.

However, correcting the cumulative effect of these errors in the first quarter of 2024 would have had a significant effect on the results of operations for that period.

Therefore, the relevant prior periods’ financial statements and related footnotes, for these and other immaterial errors for comparative purposes, have been corrected.

Previously reported financial information for such immaterial errors will be corrected in future filings, as applicable.

Previously reported financial information for such immaterial errors will continue to be corrected in future filings, as applicable.

A summary of the corrections to the impacted financial statement line items from the previously issued financial statements are presented in Note 15 - Immaterial Financial Restatement and Reclassifications to Prior Period Financial Statements .

Recently Issued and Adopted Accounting Standards

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures, to improve reportable segment disclosure requirements.

9 unchanged sentences

DISCONTINUED OPERATIONS

On March 9, 2024, the Company 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, and to cause its affiliates to sell, net assets relating to its Enabling Services segment (the “Transaction”), specifically its Patient Access and Endpoint businesses, including the sale of equity interests of Fortrea Patient Access Inc.

On March 9, 2024, the Company entered into the Purchase Agreement with Endeavor Buyer LLC, an affiliate of Arsenal Capital Partners, pursuant to which Fortrea, Inc.

agreed to sell, and to cause its affiliates to sell, net assets relating to its Enabling Services Segment (the “Transaction”), specifically its Patient Access and Endpoint businesses, including the sale of equity interests of Fortrea Patient Access Inc.

and its subsidiaries and Endpoint Clinical, Inc.

and its subsidiaries.

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 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.

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.

The Transaction closed during the second quarter of 2024 with estimated proceeds of $ 281.6 , subject to further adjustment based on customary purchase price adjustments.

FORTREA HOLDINGS INC.

2 unchanged sentences

Financial Information of Discontinued Operations

The following table summarizes the significant line items included in earnings from discontinued operations, net of income tax in the condensed consolidated and combined statements of operations for the three months ended March 31, 2024 and 2023:

Three Months Ended March 31,

The following table summarizes the significant line items included in earnings (loss) from discontinued operations, net of income tax in the condensed consolidated and combined statements of operations for the three and six months ended June 30, 2024 and 2023:

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Revenues $ 40.7 $ 64.8 $ 106.4 $ 134.6

9 unchanged sentences

Foreign exchange gain (loss) 0.1 — 0.1 ( 0.3 )

Loss on sale of a business ( 23.2 ) — ( 23.2 ) —

Other, net 0.1 ( 0.1 ) 0.1 ( 0.1 )

Income (loss) from discontinued operations before income taxes ( 17.1 ) 5.2 ( 34.5 ) 10.8

1 unchanged sentence

Income (loss) from discontinued operations, net of tax $ ( 39.1 ) $ 5.8 $ ( 60.3 ) $ 10.3

In the first quarter of 2024, as a result of the final negotiated sale price of the Patient Access and Endpoint businesses, the Company evaluated the Enabling Services segment for impairment and determined that it was more likely than not that the carrying value of the assets exceeded its fair value.

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Gain (loss) from operations of discontinued component $ ( 15.9 ) $ 5.8 $ ( 37.1 ) $ 10.3

Loss on disposal of discontinued operations ( 23.2 ) — ( 23.2 ) —

Gain (loss) on discontinued operations $ ( 39.1 ) $ 5.8 $ ( 60.3 ) $ 10.3

In the first quarter of 2024, as a result of the negotiated sale price of the Patient Access and Endpoint businesses, the Company evaluated the Enabling Services Segment for impairment and determined that it was more likely than not that the carrying value of the assets exceeded its fair value.

Accordingly, an impairment analysis was performed, which resulted in a goodwill impairment charge of $ 24.0 .

During the second quarter of 2024, a loss on disposal of $ 23.2 was recognized primarily due to changes in working capital and a final sales price.

FORTREA HOLDINGS INC.

1 unchanged sentence

(dollars and shares in millions, except per share data)

The following table summarizes the carrying value of the significant classes of assets and liabilities classified as discontinued operations as of March 31, 2024 and December 31, 2023:

2024 December 31,

The following table summarizes the carrying value of the significant classes of assets and liabilities classified as discontinued operations as of December 31, 2023:

Current assets:

18 unchanged sentences

The cash flows related to discontinued operations have not been segregated and are included in the condensed consolidated and combined statements of cash flows.

The following table summarizes depreciation and amortization, capital expenditures and the significant operating noncash items from discontinued operations for the three months ended March 31, 2024 and 2023:

Three Months Ended March 31,

The following table summarizes depreciation and amortization, capital expenditures and the significant cash flow and noncash items from discontinued operations for the six months ended June 30, 2024 and 2023:

Six months ended June 30,

Depreciation and amortization $ 1.6 $ 4.3

Goodwill impairment 24.0 —

Loss on sale of business 23.2 —

Capital expenditures 7.4 7.9

There are no significant operating or investing noncash items related to discontinued operations for the three months ended March 31, 2024 and 2023.

The Company’s revenues by geography for the three months ended March 31, 2024 and 2023 are as follows:

Three Months Ended March 31, 2024 Three Months Ended March 31, 2023

North America Europe Other Total North America Europe Other Total

$ 305.9 $ 208.3 $ 147.9 $ 662.1 $ 353.7 $ 196.0 $ 144.2 $ 693.9

There are no significant operating or investing noncash items related to discontinued operations for the six months ended June 30, 2024 and 2023.

FORTREA HOLDINGS INC.

1 unchanged sentence

(dollars and shares in millions, except per share data)

The Company’s revenues by geography for the three and six months ended June 30, 2024 and 2023 are as follows:

Three Months Ended June 30, 2024 Three Months Ended June 30, 2023

North America Europe Other Total North America Europe Other Total

$ 317.9 $ 195.9 $ 148.6 $ 662.4 $ 370.3 $ 200.4 $ 154.4 $ 725.1

Six Months Ended June 30, 2024 Six Months Ended June 30, 2023

North America Europe Other Total North America Europe Other Total

$ 624.6 $ 403.4 $ 296.5 $ 1,324.5 $ 724.1 $ 396.4 $ 298.5 $ 1,419.0

Revenue from the United States comprises substantially all revenue in North America.

1 unchanged sentence

The following table provides information about contract asset balances:

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Sales commission assets $ 20.2 $ 15.8

1 unchanged sentence

Total $ 21.9 $ 17.8

Amortization related to sales commission assets for the three months ended March 31, 2024 and 2023 was $ 2.6 and $ 4.1 , respectively.

Amortization related to deferred contract costs for the three months ended March 31, 2024 and 2023 was $ 0.4 and $ 0.6 , respectively.

Amortization related to sales commission assets for the three months ended June 30, 2024 and 2023 was $ 2.9 and $ 3.2 , respectively, and for the six months ended June 30, 2024 and 2023 was $ 5.5 and $ 7.4 , respectively.

Amortization related to deferred contract costs for the three months ended June 30, 2024 and 2023 was $ 0.5 and $ 0.5 , respectively, and for the six months ended June 30, 2024 and 2023 was $ 0.9 and $ 1.1 , respectively.

Th e Company applies the practical expedient to not recognize the effect of financing in its contracts with customers, when the difference in timing of payment and performance is one year or less.

1 unchanged sentence

The following table provides information about accounts receivable, unbilled services and unearned revenue from contracts with customers:

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Accounts receivable $ 88.2 $ 420.2

3 unchanged sentences

Unearned revenue $ 248.0 $ 214.2

Revenue recognized during the period that was included in the unearned revenue balance at the beginning of the period was $ 92.4 and $ 103.2 for the three months ended March 31, 2024 and 2023, respectively.

Revenue recognized during the period that was included in the unearned revenue balance at the beginning of the period was $ 125.5 and $ 139.4 for the six months ended June 30, 2024 and 2023, respectively.

Additionally, during the quarter ended June 30, 2024, the Company sold $ 300.0 of receivables as described in the Receivables Securitization Program section below.

FORTREA HOLDINGS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED AND COMBI NED FINANCIAL STATEMENTS

(dollars and shares in millions, except per share data)

Credit Loss Rollforward

The Company estimates future expected losses on accounts receivable and unbilled services over the remaining collection period of the instrument.

The rollforward for the allowance for credit losses for the three months ended March 31, 2024 is as follows:

The rollforward for the allowance for credit losses for the six months ended June 30, 2024 is as follows:

Accounts Receivable

2 unchanged sentences

Write-offs ( 11.5 )

Allowance for credit losses as of March 31, 2024 $ 36.0

Allowance for credit losses as of June 30, 2024 $ 32.7

Performance Obligations Under Long-Term Contracts

As of March 31, 2024, approximately $ 4,302 of revenues are expected to be recognized from remaining long-term performance obligations.

The Company expects to recognize approximately 30 % of the existing performance

FORTREA HOLDINGS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED AND COMBI NED FINANCIAL STATEMENTS

(dollars and shares in millions, except per share data)

obligations as of March 31, 2024 as revenue over the next 12 months and the remaining balance thereafter.

As of June 30, 2024, approximately $ 4,357 of revenues are expected to be recognized from remaining long-term performance obligations.

The Company expects to recognize approximately 28 % of the existing performance obligations as of June 30, 2024 as revenue over the next 12 months and the remaining balance thereafter.

The Company’s long-term contracts generally range from one to eight years .

During the three months ended March 31, 2024, there were reductions of approximately $ 34 in revenue related to performance obligations partially satisfied in previous periods.

Of this reduction, approximately half was associated with changes in scope or price, and approximately half was related to changes in estimated effort to complete customer contract obligations.

The change in estimate resulted in an estimated reduction to revenue of $ 17 , and an increase in loss from continuing operations of $ 16 and in loss per share of $ 0.18 .

During the three months ended March 31, 2023, there were reductions of approximately $ 11 from performance obligations which were partially satisfied in previous periods;

such amounts were primarily related to changes in estimate and to a much lesser extent, changes in scope.

The change in estimate resulted in an estimated reduction to revenue of $ 10 , and a decrease in income from continuing operations of $ 8 and in income per share of $ 0.09 .

During the three and six months ended June 30, 2024, there were reductions of approximately $ 18 and $ 52 , respectively, in revenue related to performance obligations partially satisfied in previous periods.

For the reduction, for the three months ended June 30, 2024, the majority of the change was associated with changes in scope or price, and a smaller portion related to changes in estimated effort to complete customer contract obligations.

For the three months ended June 30, 2024, the change in estimate resulted in an estimated reduction to revenue of $ 4 , and an increase in loss from continuing operations of $ 3 and in loss per share of $ 0.03 .

For the six months ended June 30, 2024, the change in estimate resulted in an estimated reduction to revenue of $ 21 , and an increase in loss from continuing operations of $ 19 and in loss per share of $ 0.21 .

During the three and six months ended June 30, 2023, there were reductions of approximately $ 22 and $ 33 , respectively, in revenue related to performance obligations partially satisfied in previous periods.

For the three months ended June 30, 2023, the majority of the change was associated with changes in scope and price, and a smaller portion related to changes in estimated effort to complete customer contract obligations.

For the three months ended June 30, 2023, the change in estimate resulted in an estimated reduction to revenue of $ 5 , and an increase in loss from continuing operations of $ 3 and in loss per share of $ 0.03 .

For the six months ended June 30, 2023, the change in estimate resulted in an estimated reduction to revenue of $ 15 , and a decrease in income from continuing operations of $ 11 and in income per share of $ 0.12 .

Accounts Receivable Purchase Program

On June 23, 2023, Fortrea entered into an accounts receivable purchase program (“ARPP”) with a financial institution (the “Financial Institution”).

The ARPP establishes a receivables factoring facility whereby the Company may sell up to $ 80.0 in customer receivables based on the availability of certain eligible receivables and the satisfaction of certain conditions.

Under the facility, the Company may sell eligible receivables and retains no interest in the transferred receivables other than collection and administrative functions for the Financial Institution.

The Company accounts for these receivable transfers as sales and derecognizes the sold receivables from its balance sheets.

The ARPP established a receivables factoring facility whereby the Company could sell up to $ 80.0 in customer receivables based on the availability of certain eligible receivables and the satisfaction of certain conditions.

Under the facility, the Company could sell eligible receivables and retain no interest in the transferred receivables other than collection and administrative functions for the Financial Institution.

The Company accounted for these receivable transfers as sales and derecognized the sold receivables from its balance sheets.

The fair value of the sold receivables approximated their book value due to their short-term nature.

The Company continues to service, administer and collect the receivables on behalf of the Financial Institution and does not receive a servicing fee as part of the arrangement.

As of March 31, 2024, the Company had no outstanding factored customer receivables, and the ARPP was terminated in May 2024.

The Company continued to service, administer and collect the receivables on behalf of the Financial Institution and did not receive a servicing fee as part of the arrangement.

On June 28, 2023, $ 17.5 of receivables were sold with net proceeds of $ 17.3 .

The ARPP was terminated in May 2024, and there were no receivables outstanding as of the date of termination.

FORTREA HOLDINGS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED AND COMBI NED FINANCIAL STATEMENTS

(dollars and shares in millions, except per share data)

Receivables Securitization Program

On May 6, 2024, the Company entered into a three-year $ 300.0 accounts receivable securitization program (the “Receivables Facility”).

Under this program, Fortrea Inc.

conveys receivable balances to a wholly-owned, bankruptcy-remote special purpose entity (“SPE”), who in turn, may sell receivables to a third-party financial institution in exchange for cash.

The facility is without recourse to the Company or any subsidiaries of the Company, other than with respect to limited indemnity obligations of Fortrea Inc., in respect to the character of the receivables sold and as to the performance of its duties as servicer and a limited performance guaranty by the Company.

All unsold accounts receivables held by the SPE are pledged as collateral to secure the collectability of the sold receivables.

The Receivables Facility is scheduled to terminate on May 6, 2027, unless terminated earlier pursuant to its terms.

As of June 30, 2024, the Company sold $ 300.0 of receivables, which were derecognized from the Company’s consolidated balance sheet, with net proceeds of $ 297.9 , as described in the Accounts Receivable, Unbilled Services and Unearned Revenue section above.

Total fees of $ 2.1 represent the cost associated with the sale for the three months ended June 30, 2024 and are included within Selling, general and administrative costs, exclusive of depreciation and amortization in the condensed consolidated and combined statement of operations for the three and six months ended June 30, 2024.

Continuous cash activity related to the Receivables Facility is reflected in cash from operating activities in the consolidated statement of cash flows.

RESTRUCTURING AND OTHER CHARGES

During 2023, the Company took actions to reduce overcapacity, align resources, and restructure certain operations.

These actions included eliminating redundant positions and aligning resources for cost improvement and to meet customer requirements.

These actions included eliminating redundant positions and aligning resources for cost improvements and to meet customer requirements.

These restructuring actions are expected to continue throughout 2024.

5 unchanged sentences

Cash payments and other adjustments ( 8.7 ) ( 0.6 ) ( 9.3 )

Balance as of March 31, 2024 $ 2.9 $ 0.3 $ 3.2

Balance as of June 30, 2024 $ 5.2 $ 0.1 $ 5.3

Severance and Other Employee Costs Facility Costs Total

2 unchanged sentences

Cash payments and other adjustments ( 2.3 ) ( 2.6 ) ( 4.9 )

Balance as of March 31, 2023 $ 2.1 $ 5.1 $ 7.2

The current portion of the restructuring liabilities is included in the condensed consolidated and combined balance sheets in accrued expenses and other current liabilities.

The non-current portion of the restructuring

FORTREA HOLDINGS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED AND COMBI NED FINANCIAL STATEMENTS

(dollars and shares in millions, except per share data)

liabilities is included in the condensed consolidated and combined balance sheets in other liabilities.

Balance as of June 30, 2023 $ 1.5 $ 4.1 $ 5.6

The current portion of the restructuring liabilities is included in the condensed consolidated balance sheets in accrued expenses and other current liabilities.

The non-current portion of the restructuring liabilities is included in the condensed consolidated balance sheets in other liabilities.

The non-current portion of the restructuring liabilities is expected to be paid out over 12 months.

2 unchanged sentences

As a result, on June 30, 2023, the Company had 88.8 shares of common stock outstanding.

This share amount is being utilized for the calculation of basic earnings per share for all periods presented through the Separation date.

FORTREA HOLDINGS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED AND COMBI NED FINANCIAL STATEMENTS

(dollars and shares in millions, except per share data)

share amount is being utilized for the calculation of basic earnings per share for all periods presented through the Separation date.

As of the Separation date, actual outstanding shares are used to calculate basic weighted average common shares outstanding.

1 unchanged sentence

Diluted earnings per share is computed by dividing net earnings including the impact of dilutive adjustments by the weighted average number of common shares outstanding plus potentially dilutive shares, as if they had been issued at the earlier of the date of issuance or the beginning of the period presented.

Potentially dilutive common shares result primarily from the Company’s outstanding stock options, restricted stock awards, restricted stock units, and performance share awards.

Potentially dilutive common shares result primarily from the Company’s outstanding stock options, restricted stock awards, restricted stock units (“RSUs”), and performance share awards.

The following represents a reconciliation of basic earnings (loss) per share to diluted earnings (loss) from continuing operations per share.

Three Months Ended March 31,

Three Months Ended June 30,

Per Share Amount

6 unchanged sentences

$ ( 99.3 ) 89.4 $ ( 1.11 ) $ 25.0 88.8 $ 0.28

Six Months Ended June 30,

Earnings Shares Per Share Amount Earnings Shares Per Share Amount

Basic earnings (loss) from continuing operations per share:

Net earnings (loss)

$ ( 179.1 ) 89.3 $ ( 2.01 ) $ 33.0 88.8 $ 0.37

Dilutive effect of employee stock options and awards — — — — — —

Net earnings (loss) from continuing operations including impact of dilutive adjustments $ ( 179.1 ) 89.3 $ ( 2.01 ) $ 33.0 88.8 $ 0.37

FORTREA HOLDINGS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED AND COMBI NED FINANCIAL STATEMENTS

(dollars and shares in millions, except per share data)

The following represents a reconciliation of basic earnings (loss) per share to diluted earnings (loss) from discontinued operations per share.

Three Months Ended March 31,

Three Months Ended June 30,

Per Share Amount

6 unchanged sentences

$ ( 39.1 ) 89.4 $ ( 0.44 ) $ 5.8 88.8 $ 0.07

Six Months Ended June 30,

Earnings Shares Per Share Amount Earnings Shares Per Share Amount

Basic earnings (loss) from discontinued operations per share:

Net earnings (loss)

$ ( 60.3 ) 89.3 $ ( 0.68 ) $ 10.3 88.8 $ 0.12

Dilutive effect of employee stock options and awards

Net earnings (loss) from discontinued operations including impact of dilutive adjustments

$ ( 60.3 ) 89.3 $ ( 0.68 ) $ 10.3 88.8 $ 0.12

Diluted earnings per share represent the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock.

1 unchanged sentence

Potential common shares are also considered antidilutive in the event of a net loss from operations.

FORTREA HOLDINGS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED AND COMBI NED FINANCIAL STATEMENTS

(dollars and shares in millions, except per share data)

The following table summarizes the potential common shares not included in the computation of diluted earnings per share because their impact would have been antidilutive:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Employee stock options and awards 1.9 — 1.6 —

4 unchanged sentences

Subsequent acquisitions of businesses were allocated to Fortrea based on the inclusion of the business activities using valuations at the time of acquisition.

The changes in the carrying amount of goodwill for the three months ended March 31, 2024 and 2023 are as follows:

March 31, 2024 March 31, 2023

FORTREA HOLDINGS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED AND COMBI NED FINANCIAL STATEMENTS

(dollars and shares in millions, except per share data)

The changes in the carrying amount of goodwill for the six months ended June 30, 2024 and 2023 are as follows:

June 30, 2024 June 30, 2023

Balance as of December 31 $ 1,739.4 $ 1,707.4

Foreign currency impact and other adjustments to goodwill ( 11.8 ) 12.5

Balance as of March 31 $ 1,727.6 $ 1,719.9

Foreign currency impact ( 13.7 ) 27.9

Balance as of June 30 $ 1,725.7 $ 1,735.3

The Company assesses goodwill for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of goodwill may not be recoverable.

7 unchanged sentences

A future impairment charge for goodwill or intangible assets could have a material effect on the Company’s consolidated financial position and results of operations.

FORTREA HOLDINGS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED AND COMBI NED FINANCIAL STATEMENTS

(dollars and shares in millions, except per share data)

The components of identifiable intangible assets are as follows:

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount

3 unchanged sentences

Total $ 1,174.4 $ ( 482.5 ) $ 691.9 $ 1,183.7 $ ( 455.6 ) $ 728.1

Amortization of intangible assets for the three months ended March 31, 2024 and 2023 was $ 15.3 and $ 15.0 , respectively.

Amortization of intangible assets for the three and six months ended June 30, 2024 was $ 15.1 and $ 30.4 , respectively, and for the three and six months ended June 30, 2023 was $ 15.4 and $ 30.4 , respectively.

Amortization expense of intangible assets is estimated to be $ 30.4 for the remainder of 2024, $ 58.1 in 2025, $ 57.3 in 2026, $ 57.3 in 2027, $ 49.6 in 2028 and $ 439.2 thereafter.

1 unchanged sentence

Fortrea also entered into a $ 450.0 senior secured revolving credit facility.

Fortrea used the proceeds from these debt transactions to make a cash distribution to Labcorp as consideration for the assets that were contributed to the Company in connection with the Spin.

The current portion of long-term debt at March 31, 2024 and December 31, 2023 consisted of the following:

March 31, 2024 December 31, 2023

Fortrea used the proceeds from

FORTREA HOLDINGS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED AND COMBI NED FINANCIAL STATEMENTS

(dollars and shares in millions, except per share data)

these debt transactions to make a cash distribution to Labcorp as consideration for the assets that were contributed to the Company in connection with the Spin.

The current portion of long-term debt at June 30, 2024 and December 31, 2023 consisted of the following:

June 30, 2024 December 31, 2023

Current portion of senior secured term loan A facility due 2028 $ — $ 25.0

Current portion of senior secured term loan B facility due 2030 — 5.7

Revolving credit facility

Debt issuance discount and fees — ( 4.6 )

Total short-term borrowings and current portion of long-term debt $ — $ 26.1

Long-term debt at March 31, 2024 and December 31, 2023 consisted of the following:

March 31, 2024 December 31, 2023

Long-term debt at June 30, 2024 and December 31, 2023 consisted of the following:

June 30, 2024 December 31, 2023

7.5 % senior notes due 2030

4 unchanged sentences

Total long-term debt $ 1,123.8 $ 1,565.9

During the three and six months ended June 30, 2024, the Company paid down $ 64.0 and $ 70.2 , respectively, on term loan A and $ 411.0 and $ 412.5 , respectively, on term loan B.

Additionally, the Company wrote off $ 12.2 of unamortized debt issuance costs associated with the pay down of debt, which were recorded in Interest expense in the condensed consolidated and combined statements of operations, during the three and six months ended June 30, 2024.

On June 27, 2023, the Company issued $ 570.0 aggregate principal amount of 7.50 % senior notes due 2030 (the “Notes”).

1 unchanged sentence

Net proceeds from the offering of the Notes were $ 560.2 after deducting expenses of the offering.

FORTREA HOLDINGS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED AND COMBI NED FINANCIAL STATEMENTS

(dollars and shares in millions, except per share data)

Credit Facilities

On June 30, 2023, Fortrea entered into a credit agreement (the “Credit Agreement”) providing for (i) a senior secured revolving credit facility in the principal amount of up to $ 450.0 ;

On June 30, 2023, Fortrea entered into a credit agreement (as amended, the “Credit Agreement”) providing for (i) a senior secured revolving credit facility in the principal amount of up to $ 450.0 ;

(ii) a five-year $ 500.0 first lien senior secured term A loan facility;

5 unchanged sentences

The term loans accrue interest at a per annum rate equal to the sum of, at the option of the Company, a Base Rate or a Term SOFR Rate and the Applicable Margin as defined by the Credit Agreement.

As of March 31, 2024, the effective interest rate on the term A loan and term B loan was 7.58 % and 9.08 %, respectively.

As of June 30, 2024, the effective interest rate on the term A loan and term B loan was 7.59 % and 9.09 %, respectively.

The revolving credit facility is permitted, subject to certain covenant restrictions, to be used for general corporate purposes, including working capital and capital expenditures.

There was $ 29.0 outstanding on the Company’s current revolving credit facility as of March 31, 2024 and no balances outstanding as of December 31, 2023.

As of March 31, 2024, the effective interest rate on the revolving credit facility was 9.75 %.

There were no balances outstanding on the Company’s current revolving credit facility as of June 30, 2024, and $ 450.0 was available for borrowing as of June 30, 2024.

No balances were outstanding as of December 31, 2023.

As of June 30, 2024, the effective interest rate on the revolving credit facility was 7.59 %, assuming one-month interest election.

There is a commitment fee associated with the revolving credit facility of 0.35 % (per annum and paid quarterly) and an annual $ 0.1 agency fee (paid in quarterly installments).

The credit facility matures on June 30, 2028.

FORTREA HOLDINGS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED AND COMBI NED FINANCIAL STATEMENTS

(dollars and shares in millions, except per share data)

Under the Credit Agreement, the Company is subject to negative covenants limiting subsidiary indebtedness and certain other covenants typical for similarly rated borrowers, and the Company is required to maintain certain net leverage and interest coverage ratios.

The Company is permitted to make adjustments, such as excluding certain costs, from the calculation of leverage and interest coverage ratios for compliance purposes.

The Company was in compliance with all covenants in the Credit Agreement at March 31, 2024 and believes it will be in compliance with all covenants for a period at least 12 months from the date these financial statements are issued.

The covenants were modified subsequent to March 31, 2024, as described in Note 16 - Subsequent Events.

There were no outstanding letters of credit under the Credit Agreement as of March 31, 2024.

On May 3, 2024, the Company entered into an amendment to modify certain financial covenants for additional flexibility under the Company’s Credit Agreement.

The Company was in compliance with all covenants in the Credit Agreement at June 30, 2024 and believes it will be in compliance with all covenants for a period of at least 12 months from the date these financial statements are issued.

There were no outstanding letters of credit under the Credit Agreement as of June 30, 2024.

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

4 unchanged sentences

The Company does not believe that its exposure to market risk is material to the Company’s financial position or results of operations.

FORTREA HOLDINGS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED AND COMBI NED FINANCIAL STATEMENTS

(dollars and shares in millions, except per share data)

The fair value of the Company’s interest rate swaps and foreign currency forward contracts are determined based on observable market inputs (Level 2).

1 unchanged sentence

Fair Value of Derivatives At

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Balance Sheet Classification Asset Liability Notional

8 unchanged sentences

Pre-Tax Gain (Loss) Included in Other Comprehensive Income

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Interest rate swaps $ 0.8 $ — $ 3.3 $ —

The following table presents amounts reclassified out of accumulated other comprehensive loss and recognized in condensed consolidated and combined statements of operations:

FORTREA HOLDINGS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED AND COMBI NED FINANCIAL STATEMENTS

(dollars and shares in millions, except per share data)

Amounts Reclassified from Other Comprehensive Loss into Earnings

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

Statement of Operations Classification 2024 2023 2024 2023

Deferred gain (loss) reclassified into earnings Interest expense $ ( 0.4 ) $ — $ ( 0.8 ) $ —

The estimated amount of pre-tax net losses included in other comprehensive loss that is expected to be reclassified into earnings over the twelve months following March 31, 2024, is $ 1.1 .

The estimated amount of pre-tax net losses included in other comprehensive loss that is expected to be reclassified into earnings over the twelve months following June 30, 2024, is $ 1.1 .

Refer to Note 10 - Preferred Stock and Common Shareholders' Equity for the impact of the Company’s derivative instruments included in accumulated other comprehensive loss.

1 unchanged sentence

Gain (Loss) on Derivatives Recognized in Earnings

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

Statement of Operations Classification 2024 2023 2024 2023

Foreign currency forward contracts Foreign exchange gain (loss) $ 0.4 $ — $ ( 0.4 ) $ —

FORTREA HOLDINGS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED AND COMBI NED FINANCIAL STATEMENTS

(dollars and shares in millions, except per share data)

COMMITMENTS AND CONTINGENT LIABILITIES

12 unchanged sentences

Provisions for losses expected under these programs are recorded based upon the Company’s estimates of the aggregated liability of claims incurred.

It was previously disclosed that there were dosing sequence errors in a customer’s trial by a third-party vendor not associated with the Company.

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 as part of a multi-party solution to facilitate the ongoing trials, of which $ 1.7 was recorded as a reduction of revenue during the three months ended March 31, 2024.

It was previously disclosed that there was an issue in a customer’s trial caused by a third-party vendor not affiliated with the Company.

As part of working with this customer, the Company agreed to make concessions and provide discounts and other consideration to the customer in the amount of $ 12.5 as part of a multi-party solution to facilitate the ongoing trials, of which $ 0.4 and $ 2.1 was recorded as a reduction of revenue during the three and six months ended June 30, 2024, respectively, and $ 8.7 was recorded as a reduction in revenue in the fourth quarter of 2023.

FORTREA HOLDINGS INC.

4 unchanged sentences

The Company is authorized to issue up to 30.0 shares of preferred stock, par value $ 0.001 per share.

There were no preferred shares outstanding as of March 31, 2024 and December 31, 2023.

There were no preferred shares outstanding as of June 30, 2024 and December 31, 2023.

Accumulated Other Comprehensive Income (Loss)

The components of accumulated other comprehensive income (loss) are as follows:

Three months ended March 31, 2024

Foreign Currency Translation Adjustments Net Benefit Plan Adjustments Unrealized Gain (Loss) on Derivative Instruments Accumulated Other Comprehensive Income (Loss)

5 unchanged sentences

Balance at March 31, 2024 $ ( 234.4 ) $ ( 7.4 ) $ 0.2 $ ( 241.6 )

Three months ended March 31, 2023

Current quarter foreign exchange adjustments $ ( 7.7 ) $ — $ — $ ( 7.7 )

Unrealized gain on derivative instrument $ — $ — $ 0.8 $ 0.8

Amounts reclassified from other accumulated income (loss) $ — $ — $ ( 0.4 ) $ ( 0.4 )

Tax effect of adjustments $ — $ — $ ( 0.1 ) $ ( 0.1 )

Balance at June 30, 2024 $ ( 242.1 ) $ ( 7.4 ) $ 0.5 $ ( 249.0 )

Foreign Currency Translation Adjustments Net Benefit Plan Adjustments Unrealized Gain (Loss) on Derivative Instruments Accumulated Other Comprehensive Income (Loss)

1 unchanged sentence

Current quarter foreign exchange adjustments 19.1 — — 19.1

Tax effect of adjustments — — — —

Balance at March 31, 2023 ( 246.9 ) ( 8.8 ) — ( 255.7 )

For the three months ended March 31, 2024, the Company’s effective tax rate was 5.4 % compared to 15.8 % for the three months ended March 31, 2023.

The effective tax rate for the three months ended March 31, 2024 was lower than the Company’s statutory tax rate primarily due to a change in valuation allowance, the geographic mix of earnings, and non-deductible compensation expenses.

The effective tax rate for the three months ended March 31, 2023 was lower than the Company’s statutory tax rate primarily due to the geographic mix of earnings partially offset by U.S.

Current quarter foreign exchange adjustments 29.9 — — 29.9

Net benefit plan adjustments — 2.1 — 2.1

Tax effect of adjustments — — — —

Balance at June 30, 2023 $ ( 217.0 ) $ ( 6.7 ) $ — $ ( 223.7 )

For the three months ended June 30, 2024, the Company’s effective tax rate was ( 12.1 )% compared to 31.7 % for the three months ended June 30, 2023.

The effective tax rate for the three months ended June 30, 2024 was lower than the Company’s statutory tax rate primarily due to a change in the valuation allowance, earnings mix, and non-deductible compensation expenses.

The effective tax rate for the three months ended June 30, 2023 was higher than the Company’s statutory tax rate primarily due to the geographic mix of earnings partially offset by U.S.

taxes on foreign earnings.

More specifically, for the quarter ended March 31, 2024, the Company included income tax expense of approximately $ 4.1 in continuing operations primarily due to a forecasted valuation allowance on the deferred tax asset for the carryforward of disallowed interest expense.

This deferred tax asset exists due to limitations imposed under the Internal Revenue Code on the annual deductibility of business interest expense.

This amount resulted in a significant impact to the effective tax rate from continuing operations.

During the three months ended March 31, 2024, the amount of net unrecognized tax positions increased by $ 0.1 million.

More specifically, for the quarter ended June 30, 2024, the Company included income tax expense of approximately $ 10.7 primarily due to a forecasted valuation allowance on the deferred tax asset for the carryforward of disallowed interest expense.

This deferred tax asset exists due to limitations imposed under the Internal Revenue

FORTREA HOLDINGS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED AND COMBI NED FINANCIAL STATEMENTS

(dollars and shares in millions, except per share data)

Code on the annual deductibility of business interest expense.

This amount resulted in a significant impact to the effective tax rate.

For the six months ended June 30, 2024, the Company’s effective tax rate was ( 9.0 )% compared to 28.4 % for the six months ended June 30, 2023.

The effective tax rate for the six months ended June 30, 2024 was lower than the Company’s statutory tax rate primarily due to a change in the valuation allowance, earnings mix, and non-deductible compensation expenses.

The effective tax rate for the six months ended June 30, 2023 was higher than the Company’s statutory tax rate primarily due to the geographic mix of earnings partially offset by U.S.

taxes on foreign earnings.

During the six months ended June 30, 2024, the amount of net unrecognized tax positions increased by $ 0.1 .

Management believes it is likely that none of the unrecognized income tax benefits and interest will decrease during the next 12 months.

2 unchanged sentences

Prior to the Separation, certain Company employees were covered by the Former Parent-sponsored stock compensation arrangements.

The stock compensation expense for the period prior to the Separation has been derived from the equity awards granted by Labcorp to the Company’s employees who are specifically identified in the plans,

FORTREA HOLDINGS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED AND COMBI NED FINANCIAL STATEMENTS

(dollars and shares in millions, except per share data)

as well as an allocation of expense related to corporate employees of Labcorp.

The Former Parent-sponsored stock compensation arrangements are approved under the Laboratory Corporation of America Holdings 2016 Omnibus Incentive Plan (the “Labcorp Plan”).

In June of 2023, Fortrea’s Board of Directors approved Fortrea’s Omnibus Incentive Plan and Employee Stock Purchase Plan (the “Plans”) and the current Board of Directors of Fortrea ratified the Plans by a unanimous written consent dated July 3, 2023.

Under the Plans, the Company may grant incentive stock options, restricted stock units, and performance shares, as well as other forms of stock-based compensation to the Company’s employees, officers, and non-employee directors.

On July 18, 2023, all Labcorp equity incentive awards held by Fortrea employees that were outstanding on the distribution date were converted to 2.5 shares of Fortrea restricted stock units and 0.1 shares of Fortrea performance shares from continuing operations.

Additionally, during the three months ended March 31, 2024, the Company granted awards under the Plans, including restricted stock units and performance stock units, as indicated below.

As of March 31, 2024, 11.0 and 1.8 shares were authorized for future grants under Fortrea’s Omnibus Incentive Plan and Employee Stock Purchase Plan, respectively.

The Former Parent-sponsored stock compensation arrangements are approved under the Laboratory Corporation of America Holdings 2016 Omnibus Incentive Plan.

In June of 2023, Fortrea’s pre-Spin Board of Directors approved Fortrea’s Omnibus Incentive Plan and Employee Stock Purchase Plan (the “Plans”) and the post-Spin Board of Directors of Fortrea ratified the Plans by a unanimous written consent dated July 3, 2023.

Under the Plans, the Company may grant incentive stock options, RSUs, and performance shares, as well as other forms of stock-based compensation to the Company’s employees, officers, and non-employee directors.

On July 18, 2023, all Labcorp equity incentive awards held by Fortrea employees that were outstanding on the distribution date were converted to 2.5 shares of Fortrea RSUs and 0.1 shares of Fortrea performance shares.

Additionally, during the three and six months ended June 30, 2024, the Company granted awards under the Plans, including RSUs and performance stock units, as indicated below.

As of June 30, 2024, 11.0 and 1.8 shares were authorized for future grants under Fortrea’s Omnibus Incentive Plan and Employee Stock Purchase Plan, respectively.

The Company measures stock compensation cost for all equity awards at fair value on the date of grant and recognizes compensation expense over the service period for awards expected to vest.

The fair value of restricted stock units (“RSUs”) is determined based on the number of shares granted and the quoted price of Fortrea’s common stock on the grant date.

The fair value of RSUs is determined based on the number of shares granted and the quoted price of Fortrea’s common stock on the grant date.

The grant date fair value of performance awards is based on a Monte Carlo simulated fair value for the relative (as compared to the peer companies) total shareholder return component of the performance awards.

6 unchanged sentences

Options vest ratably over a period of 3 years on the anniversaries of the grant date and have a contractual exercise period of 10 years subject to their earlier expiration or termination.

Changes in options outstanding under the plans for the three months ended March 31, 2024, were as follows:

FORTREA HOLDINGS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED AND COMBI NED FINANCIAL STATEMENTS

(dollars and shares in millions, except per share data)

Changes in options outstanding under the plans for the three and six months ended June 30, 2024, were as follows:

Number of Options Weighted-Average Exercise Price per Option Weighted-Average Remaining Contractual Term Aggregate Intrinsic Value

3 unchanged sentences

Outstanding at March 31, 2024 0.8 $ 26.52 9.4 years $ 10.9

Exercisable at March 31, 2024

— $ — 0.0 years $ —

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the Company’s closing stock price on the last trading day of the period and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on March 31, 2024.

FORTREA HOLDINGS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED AND COMBI NED FINANCIAL STATEMENTS

(dollars and shares in millions, except per share data)

Granted — $ —

Cancelled — $ —

Outstanding at June 30, 2024 0.8 $ 26.52 9.1 years $ —

Exercisable at June 30, 2024 — $ — 0.0 years $ —

The Company uses the Black-Scholes model to calculate the fair value of stock options.

The following table shows the weighted average grant-date fair values of options issued during the period and the weighted average assumptions that the Company used to develop the fair value estimates:

Three Months Ended March 31, 2024

The following table shows the weighted average grant-date fair values of options outstanding during the period and the weighted average assumptions that the Company used to develop the fair value estimates:

Six Months Ended June 30, 2024

Weighted-average grant date fair value per option $ 12.51

6 unchanged sentences

The Company grants RSUs to officers, key employees, and non-employee directors.

RSUs typically vest annually in equal one-third increments beginning on the first anniversary of the grant (e.g., a share grant in 2024 represents a three-year award opportunity for the period of 2024-2026 and, if earned, vests fully (to the extent earned) in the first quarter of 2027).

RSUs typically vest annually in equal one-third increments beginning on the first anniversary of the grant (e.g., a share grant in the first quarter of 2024 represents a three-year award opportunity for the period of 2024-2026 and, if earned, vests fully (to the extent earned) in the first quarter of 2027).

The Company grants performance shares (non-vested shares) to officers and key employees.

1 unchanged sentence

Unearned RSU and performance share compensation is amortized to expense, when probable, over the applicable vesting periods.

The following table shows a summary of non-vested shares for the three months ended March 31, 2024:

FORTREA HOLDINGS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED AND COMBI NED FINANCIAL STATEMENTS

(dollars and shares in millions, except per share data)

The following table shows a summary of non-vested shares for the three and six months ended June 30, 2024:

Number of Shares Weighted-Average Grant Date Fair Value

8 unchanged sentences

3.9 0.1 $ 29.62 $ 41.58

Converted — — — —

Granted — — — —

Vested ( 0.1 ) — 30.53 —

Cancelled ( 0.1 ) — 34.05 —

Non-vested at June 30, 2024 3.7 0.1 $ 32.75 $ 41.58

Total stock-based compensation expense and the associated income tax benefits recognized by the Company in the condensed consolidated and combined statements of operations were as follows:

Three Months Ended March 31, 2024 Three Months Ended March 31, 2023

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Direct costs $ 12.4 $ 5.2 $ 21.3 $ 8.8

2 unchanged sentences

Income tax benefits $ 2.3 $ 1.6 $ 4.3 $ 2.7

FORTREA HOLDINGS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED AND COMBI NED FINANCIAL STATEMENTS

(dollars and shares in millions, except per share data)

Unrecognized Compensation Cost

As of March 31, 2024, there was $ 119.3 of total unrecognized compensation cost related to non-vested stock options, restricted stock units and performance share-based compensation arrangements granted under the Plans.

That cost is expected to be recognized over a weighted average period of 2.0 years and will be included in cost of revenues and selling, general and administrative expenses.

As of June 30, 2024, there was $ 102.0 of total unrecognized compensation cost related to non-vested stock options, RSUs and performance share-based compensation arrangements granted under the Plans.

That cost is expected to be recognized over a weighted average period of 1.7 years and will be included in cost of revenues and Selling, general and administrative expenses, exclusive of depreciation and amortization.

TRANSACTIONS WITH FORMER PARENT

1 unchanged sentence

The following discussion summarizes activity between the Company and Labcorp.

This activity, which occurred prior to the Separation, is included in the condensed combined financial statements.

This activity, which occurred prior to the Separation, is included in the condensed combined financial statements in 2023.

Allocation of General Corporate and Other Expenses

1 unchanged sentence

In addition, for purposes of preparing these condensed consolidated and combined financial statements on a carve-out basis, a portion of Labcorp’s total corporate expenses were allocated to the Company.

See Note 1 - Basis of Financial Statement Presentation for a discussion of the methodology used to allocate corporate-related costs for purposes of preparing these financial statements on a carve-out basis.

Some of these services continue to be provided by Labcorp to the Company on a temporary basis under the Transition Services Agreement.

The following table is a summary of corporate and other allocations for the three months ended March 31, 2023:

Three Months Ended March 31, 2023

See Note 1 - Basis of Financial Statement Presentation for a discussion of the methodology used to

FORTREA HOLDINGS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED AND COMBI NED FINANCIAL STATEMENTS

(dollars and shares in millions, except per share data)

allocate corporate-related costs for purposes of preparing these financial statements on a carve-out basis.

Some of these services continue to be provided by Labcorp to the Company on a temporary basis under the Transition Services Agreement with Labcorp.

The following table is a summary of corporate and other allocations for the three and six months ended June 30, 2023:

Three Months Ended June 30, 2023 Six Months Ended

June 30, 2023

Direct costs $ 45.4 $ 86.6

3 unchanged sentences

Corporate and other allocations $ 98.6 $ 194.0

Included in the aforementioned amou nts are $ 73.4 related to costs for certain centralized functions and programs provided and administered by Labcorp that are charged directly to the Company for the three months ended March 31, 2023 .

Included in the aforementioned amou nts are $ 74.2 and $ 147.6 related to costs for certain centralized functions and programs provided and administered by Labcorp that were charged directly to the Company for the three and six months ended June 30, 2023, respectively .

In addition, a portion of Labcorp’s total corporate expenses were allocated to the Company for services from Labcorp.

These costs were $ 22.0 for the three months ended March 31, 2023 .

These costs were $ 24.4 and $ 46.4 for the three and six months ended June 30, 2023, respectively .

The allocations of foreign exchange gain (loss) represent the allocation of the results of hedging activities performed by Labcorp on behalf of the Company prior to the Separation.

The Company had arrangements with third parties where the services are subcontracted to Labcorp (and its affiliates that were not part of the transaction).

The Company’s direct costs include services purchased from Labcorp for commercial contracts totaling $ 21.7 for the three months ended March 31, 2023.

Management believes that the expense and cost allocations have been determined on a basis that is a reasonable reflection of the utilization of services provided or the benefit received by the Company during the three months ended March 31, 2023.

The amounts that have been or will be incurred post-Separation on a stand-alone basis, could materially differ from the amounts allocated due to economies of scale, difference in management judgment, a requirement for more or fewer employees, or other factors.

FORTREA HOLDINGS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED AND COMBI NED FINANCIAL STATEMENTS

(dollars and shares in millions, except per share data)

The Company’s direct costs include services purchased from Labcorp for commercial contracts totaling $ 27.0 and $ 48.8 for the three and six months ended June 30, 2023, respectively.

Hedging Activities

6 unchanged sentences

Net transfers to and from Labcorp are included within Former Parent company investment on the condensed consolidated and combined statements of changes in equity.

The components of the transfers to and from Labcorp during the three months ended March 31, 2023 were as follows:

Three Months Ended March 31, 2023

The components of the transfers to and from Labcorp during the three and six months ended June 30, 2023 were as follows:

Three Months Ended June 30, 2023 Six Months Ended

June 30, 2023

Special Payment to Former Parent $ ( 1,595.0 ) $ ( 1,595.0 )

General financing activities $ ( 223.4 ) $ ( 286.8 )

2 unchanged sentences

Total net transfers (to) from Former Parent $ ( 1,717.9 ) $ ( 1,686.7 )

FORTREA HOLDINGS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED AND COMBI NED FINANCIAL STATEMENTS

(dollars and shares in millions, except per share data)

SUPPLEMENTAL CASH FLOW INFORMATION

Three Months Ended March 31,

Six Months Ended June 30,

Supplemental schedule of cash flow information:

4 unchanged sentences

Change in accrued property, plant and equipment ( 0.5 ) ( 0.2 )

Disclosure of non-cash transfers to (from) Parent:

Change in right-of-use lease assets — 13.9

Change in property, plant and equipment, net — ( 27.7 )

FORTREA HOLDINGS INC.

2 unchanged sentences

IMMATERIAL FINANCIAL RESTATEMENT AND RECLASSIFICATIONS TO PRIOR PERIOD FINANCIAL STATEMENTS

As discussed in Note 1 - Basis of Financial Statement Presentation the Company identified errors in the consolidated and combined financial statements of prior periods.

A summary of the corrections to the impacted financial statement line items in the previously issued Consolidated Balance Sheet as of December 31, 2023, and the Consolidated and Combined Statements of Operations, Comprehensive Income, Changes in Stockholders’ Equity, and Cash Flows as of and for the years ended December 31, 2023 and 2022, included in the previously filed Annual Report on Form 10-K, is provided below.

A summary of the corrections to the impacted financial statement line items in the Company’s previously issued Condensed Consolidated and Combined Statements of Operations, Comprehensive Income, Changes in Stockholders’ Equity, and Cash Flows for the quarterly periods ended March 31, June 30 and September 30 of 2023, which were previously filed in 2023, are also provided below.

As discussed in Note 1 - Basis of Financial Statement Presentation the Company identified errors in the consolidated and combined financial statements of prior periods during the preparation of the condensed consolidated and combined financials for the first quarter of 2024.

A summary of the corrections to the impacted financial statement line items in the previously issued Consolidated Balance Sheet as of December 31, 2023, is provided below.

A summary of the corrections to the impacted financial statement line items in the previously issued Consolidated and Combined Statements of Operations, Comprehensive Income, Changes in Stockholders’ Equity, and Cash Flows as of and for the years ended December 31, 2023 and 2022, included in the previously filed Annual Report on Form 10-K, was provided in the previously filed Quarterly Report on Form 10-Q for the three months ended, March 31, 2024.

A summary of the corrections to the impacted financial statement line items in the Company’s previously issued Condensed Consolidated and Combined Statements of Operations, Comprehensive Income, Changes in Stockholders’ Equity, and Cash Flows for the three and six month periods ended June 30, 2023 and Consolidated Balance Sheet as of December 31, 2023, which were previously filed in 2023, are provided below.

FORTREA HOLDINGS INC.

43 unchanged sentences

(dollars and shares in millions, except per share data)

CONDENSED COMBINED STATEMENT OF OPERATIONS

Three Months Ended March 31, 2023

As Previously Reported Adjustments As Restated Discontinued Operations Reclassifications Change in Basis of Presentation As Restated and Reclassified

Revenues $ 764.2 $ ( 0.5 ) $ 763.7 $ ( 69.8 ) $ — $ 693.9

Costs and expenses:

Direct costs, exclusive of depreciation and amortization 636.2 — 636.2 ( 46.1 ) ( 48.6 ) 541.5

Selling, general and administrative expenses, exclusive of depreciation and amortization 78.0 5.2 83.2 ( 15.0 ) 48.6 116.8

Depreciation and amortization 22.8 0.3 23.1 ( 2.2 ) — 20.9

Restructuring and other charges 1.2 — 1.2 ( 0.6 ) — 0.6

Total costs and expenses 738.2 5.5 743.7 ( 63.9 ) — 679.8

Operating income (loss) 26.0 ( 6.0 ) 20.0 ( 5.9 ) — 14.1

Other income (expense):

Interest income — — — — 0.1 0.1

Foreign exchange gain (loss) ( 5.5 ) — ( 5.5 ) 0.3 — ( 5.2 )

Other, net 0.6 — 0.6 — ( 0.1 ) 0.5

Income (loss) before income taxes 21.1 ( 6.0 ) 15.1 ( 5.6 ) — 9.5

Provision for (benefit from) income taxes 3.7 ( 1.1 ) 2.6 ( 1.1 ) — 1.5

Net income $ 17.4 $ ( 4.9 ) $ 12.5 $ ( 4.5 ) $ — $ 8.0

Earnings per common share

Basic - continuing operations $ 0.20 $ 0.14 $ 0.09

Basic - discontinued operations $ — $ — $ 0.05

Basic $ 0.20 $ 0.14 $ 0.14

Diluted - continuing operations $ 0.20 $ 0.14 $ 0.09

Diluted - discontinued operations $ — $ — $ 0.05

Diluted $ 0.20 $ 0.14 $ 0.14

FORTREA HOLDINGS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED AND COMBI NED FINANCIAL STATEMENTS

(dollars and shares in millions, except per share data)

CONDENSED CONSOLIDATED AND COMBINED STATEMENT OF OPERATIONS

54 unchanged sentences

(dollars and shares in millions, except per share data)

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

Three Months Ended September 30, 2023

As Previously Reported Adjustments As Restated Discontinued Operations Reclassifications Change in Basis of Presentation As Restated and Reclassified

Revenues $ 776.4 $ 0.8 $ 777.2 $ ( 63.4 ) $ — $ 713.8

Costs and expenses:

Direct costs, exclusive of depreciation and amortization 647.3 1.4 648.7 ( 44.8 ) ( 40.1 ) 563.8

Selling, general and administrative expenses, exclusive of depreciation and amortization 78.9 ( 0.1 ) 78.8 ( 12.1 ) 40.1 106.8

Depreciation and amortization 24.6 0.4 25.0 ( 2.2 ) — 22.8

Restructuring and other charges 11.6 — 11.6 ( 1.5 ) — 10.1

Total costs and expenses 762.4 1.7 764.1 ( 60.6 ) — 703.5

Operating income (loss) 14.0 ( 0.9 ) 13.1 ( 2.8 ) — 10.3

Other income (expense):

Interest expense ( 34.6 ) — ( 34.6 ) — — ( 34.6 )

Foreign exchange gain (loss) ( 0.9 ) ( 0.2 ) ( 1.1 ) ( 0.1 ) — ( 1.2 )

Other, net 3.6 — 3.6 — — 3.6

Income (loss) before income taxes ( 17.9 ) ( 1.1 ) ( 19.0 ) ( 2.9 ) — ( 21.9 )

Provision for (benefit from) income taxes ( 4.8 ) ( 0.2 ) ( 5.0 ) ( 0.8 ) — ( 5.8 )

Net loss $ ( 13.1 ) $ ( 0.9 ) $ ( 14.0 ) $ ( 2.1 ) $ — $ ( 16.1 )

Earnings (loss) per common share:

Basic - continuing operations $ ( 0.15 ) $ ( 0.16 ) $ ( 0.18 )

Basic - discontinued operations $ — $ — $ 0.02

Basic $ ( 0.15 ) $ ( 0.16 ) $ ( 0.16 )

Diluted - continuing operations $ ( 0.15 ) $ ( 0.16 ) $ ( 0.18 )

Diluted - discontinued operations $ — $ — $ 0.02

Diluted $ ( 0.15 ) $ ( 0.16 ) $ ( 0.16 )

FORTREA HOLDINGS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED AND COMBI NED FINANCIAL STATEMENTS

(dollars and shares in millions, except per share data)

CONDENSED CONSOLIDATED AND COMBINED STATEMENT OF OPERATIONS

Nine Months Ended September 30, 2023

As Previously Reported Adjustments As Restated Discontinued Operations Reclassifications Change in Basis of Presentation As Restated and Reclassified

Revenues $ 2,333.6 $ ( 2.8 ) $ 2,330.8 $ ( 198.0 ) $ — $ 2,132.8

Costs and expenses:

Direct costs, exclusive of depreciation and amortization 1,932.9 0.2 1,933.1 ( 135.2 ) ( 123.9 ) 1,674.0

Selling, general and administrative expenses, exclusive of depreciation and amortization 237.7 ( 0.3 ) 237.4 ( 39.9 ) 123.9 321.4

Depreciation and amortization 72.5 1.1 73.6 ( 6.5 ) — 67.1

Restructuring and other charges 16.7 — 16.7 ( 2.4 ) — 14.3

Total costs and expenses 2,259.8 1.0 2,260.8 ( 184.0 ) — 2,076.8

Operating income (loss) 73.8 ( 3.8 ) 70.0 ( 14.0 ) — 56.0

Other income (expense):

Interest expense ( 35.3 ) — ( 35.3 ) — 0.1 ( 35.2 )

Foreign exchange gain (loss) ( 1.0 ) ( 0.4 ) ( 1.4 ) 0.2 — ( 1.2 )

Other, net 4.6 — 4.6 0.1 ( 0.1 ) 4.6

Income (loss) before income taxes 42.1 ( 4.2 ) 37.9 ( 13.7 ) — 24.2

Provision for (benefit from) income taxes 9.5 ( 0.9 ) 8.6 ( 1.3 ) — 7.3

Net income $ 32.6 $ ( 3.3 ) $ 29.3 $ ( 12.4 ) $ — $ 16.9

Earnings per common share:

Basic - continuing operations $ 0.37 $ 0.33 $ 0.19

Basic - discontinued operations $ — $ — $ 0.14

Basic $ 0.37 $ 0.33 $ 0.33

Diluted - continuing operations $ 0.37 $ 0.33 $ 0.19

Diluted - discontinued operations $ — $ — $ 0.14

Diluted $ 0.37 $ 0.33 $ 0.33

FORTREA HOLDINGS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED AND COMBI NED FINANCIAL STATEMENTS

(dollars and shares in millions, except per share data)

CONSOLIDATED AND COMBINED STATEMENT OF OPERATIONS

Year Ended December 31, 2023

As Previously Reported Adjustments As Restated Discontinued Operations Reclassifications Change in Basis of Presentation As Restated and Reclassified

Revenues $ 3,109.0 $ ( 3.2 ) $ 3,105.8 $ ( 263.3 ) $ — $ 2,842.5

Costs and expenses:

Direct costs, exclusive of depreciation and amortization 2,588.6 0.9 2,589.5 ( 176.8 ) ( 160.8 ) 2,251.9

Selling, general and administrative expenses, exclusive of depreciation and amortization 336.6 3.6 340.2 ( 52.9 ) 160.8 448.1

Depreciation and amortization 96.4 1.6 98.0 ( 8.7 ) — 89.3

Long-lived and goodwill asset impairments — 13.4 13.4 ( 13.4 ) — —

Restructuring and other charges 24.3 — 24.3 ( 3.1 ) — 21.2

Total costs and expenses 3,045.9 19.5 3,065.4 ( 254.9 ) — 2,810.5

Operating income (loss) 63.1 ( 22.7 ) 40.4 ( 8.4 ) — 32.0

Other income (expense):

Interest expense ( 69.8 ) — ( 69.8 ) — 0.1 ( 69.7 )

Foreign exchange gain (loss) 0.9 ( 0.8 ) 0.1 0.2 — 0.3

Other, net 6.9 — 6.9 0.1 ( 0.1 ) 6.9

Income (loss) before income taxes 1.1 ( 23.5 ) ( 22.4 ) ( 8.1 ) — ( 30.5 )

Provision for (benefit from) income taxes 4.5 ( 1.7 ) 2.8 ( 1.6 ) — 1.2

Net loss $ ( 3.4 ) $ ( 21.8 ) $ ( 25.2 ) $ ( 6.5 ) $ — $ ( 31.7 )

Earnings (loss) per common share:

Basic - continuing operations $ ( 0.04 ) $ ( 0.29 ) $ ( 0.36 )

Basic - discontinued operations $ — $ — $ 0.07

Basic $ ( 0.04 ) $ ( 0.29 ) $ ( 0.29 )

Diluted - continuing operations $ ( 0.04 ) $ ( 0.29 ) $ ( 0.36 )

Diluted - discontinued operations $ — $ — $ 0.07

Diluted $ ( 0.04 ) $ ( 0.29 ) $ ( 0.29 )

FORTREA HOLDINGS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED AND COMBI NED FINANCIAL STATEMENTS

(dollars and shares in millions, except per share data)

COMBINED STATEMENT OF OPERATIONS

Year-Ended December 31, 2022

As Previously Reported Adjustments As Restated Discontinued Operations Reclassifications Change in Basis of Presentation As Restated and Reclassified

Revenues $ 3,096.1 $ — $ 3,096.1 $ ( 259.1 ) $ — $ 2,837.0

Costs and expenses:

Direct costs, exclusive of depreciation and amortization 2,447.4 5.0 2,452.4 ( 155.5 ) ( 184.3 ) 2,112.6

Selling, general and administrative expenses, exclusive of depreciation and amortization 279.8 2.2 282.0 ( 50.2 ) 184.3 416.1

Depreciation and amortization 92.7 0.9 93.6 ( 8.1 ) — 85.5

Long-lived and goodwill asset impairments 9.8 — 9.8 — — 9.8

Restructuring and other charges 30.5 — 30.5 ( 4.6 ) — 25.9

Total costs and expenses 2,860.2 8.1 2,868.3 ( 218.4 ) — 2,649.9

Operating income (loss) 235.9 ( 8.1 ) 227.8 ( 40.7 ) — 187.1

Other income (expense):

Interest expense ( 0.2 ) — ( 0.2 ) — — ( 0.2 )

Foreign exchange gain (loss) ( 0.9 ) ( 0.7 ) ( 1.6 ) ( 0.4 ) — ( 2.0 )

Other, net 2.2 — 2.2 ( 0.1 ) — 2.1

Income (loss) before income taxes 237.0 ( 8.8 ) 228.2 ( 41.2 ) — 187.0

Provision for (benefit from) income taxes 44.1 ( 2.1 ) 42.0 ( 0.9 ) — 41.1

Net income $ 192.9 $ ( 6.7 ) $ 186.2 $ ( 40.3 ) $ — $ 145.9

Earnings per common share

Basic - continuing operations $ 2.17 $ 2.09 $ 1.64

Basic - discontinued operations $ — $ — $ 0.45

Basic $ 2.17 $ 2.09 $ 2.09

Diluted - continuing operations $ 2.17 $ 2.09 $ 1.64

Diluted - discontinued operations $ — $ — $ 0.45

Diluted $ 2.17 $ 2.09 $ 2.09

FORTREA HOLDINGS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED AND COMBI NED FINANCIAL STATEMENTS

(dollars and shares in millions, except per share data)

CONDENSED COMBINED STATEMENT OF COMPREHENSIVE INCOME (LOSS)

Three Months Ended March 31, 2023

As Previously Reported Adjustments As Restated

Net income $ 17.4 $ ( 4.9 ) $ 12.5

Foreign currency translation adjustments 18.9 0.2 19.1

Other comprehensive income (loss) before tax 18.9 0.2 19.1

Provision for income tax related to items of comprehensive income — — —

Other comprehensive income, net of tax 18.9 0.2 19.1

Comprehensive income $ 36.3 $ ( 4.7 ) $ 31.6

CONDENSED CONSOLIDATED AND COMBINED STATEMENT OF COMPREHENSIVE INCOME (LOSS)

18 unchanged sentences

Comprehensive income $ 96.2 $ ( 1.8 ) $ 94.4

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)

Three Months Ended September 30, 2023

As Previously Reported Adjustments As Restated

Net loss $ ( 13.1 ) $ ( 0.9 ) $ ( 14.0 )

Foreign currency translation adjustments ( 56.0 ) 0.4 ( 55.6 )

Unrealized gain on derivative instruments 1.6 — 1.6

Other comprehensive loss, before tax ( 54.4 ) 0.4 ( 54.0 )

Provision for income tax related to items of comprehensive loss ( 0.4 ) — ( 0.4 )

Other comprehensive loss, net of tax ( 54.8 ) 0.4 ( 54.4 )

Comprehensive loss $ ( 67.9 ) $ ( 0.5 ) $ ( 68.4 )

FORTREA HOLDINGS INC.

1 unchanged sentence

(dollars and shares in millions, except per share data)

CONDENSED CONSOLIDATED AND COMBINED STATEMENT OF COMPREHENSIVE INCOME (LOSS)

Nine Months Ended September 30, 2023

As Previously Reported Adjustments As Restated

Net income $ 32.6 $ ( 3.3 ) $ 29.3

Foreign currency translation adjustments ( 7.6 ) 1.0 ( 6.6 )

Net benefit plan adjustments 2.1 — 2.1

Unrealized gain on derivative instruments 1.6 — 1.6

Other comprehensive loss, before tax ( 3.9 ) 1.0 ( 2.9 )

Provision for income tax related to items of comprehensive loss ( 0.4 ) — ( 0.4 )

Other comprehensive loss, net of tax ( 4.3 ) 1.0 ( 3.3 )

Comprehensive income $ 28.3 $ ( 2.3 ) $ 26.0

CONSOLIDATED AND COMBINED STATEMENT OF COMPREHENSIVE INCOME (LOSS)

Year Ended December 31, 2023

As Previously Reported Adjustments As Restated

Net loss $ ( 3.4 ) $ ( 21.8 ) $ ( 25.2 )

Foreign currency translation adjustments 57.6 1.7 59.3

Net benefit plan adjustments 1.2 — 1.2

Unrealized gain on derivative instruments ( 1.9 ) — ( 1.9 )

Other comprehensive income, before tax 56.9 1.7 58.6

Provision (benefit) for income tax related to items of comprehensive income 0.7 — 0.7

Other comprehensive income, net of tax 57.6 1.7 59.3

Comprehensive income $ 54.2 $ ( 20.1 ) $ 34.1

COMBINED STATEMENT OF COMPREHENSIVE INCOME (LOSS)

Year Ended December 31, 2022

As Previously Reported Adjustments As Restated

Net income $ 192.9 $ ( 6.7 ) $ 186.2

Foreign currency translation adjustments ( 127.0 ) 0.9 ( 126.1 )

Net benefit plan adjustments ( 0.6 ) — ( 0.6 )

Other comprehensive loss, before tax ( 127.6 ) 0.9 ( 126.7 )

Provision for income tax related to items of comprehensive loss — — —

Other comprehensive loss, net of tax ( 127.6 ) 0.9 ( 126.7 )

Comprehensive income $ 65.3 ( 5.8 ) 59.5

FORTREA HOLDINGS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED AND COMBI NED FINANCIAL STATEMENTS

(dollars and shares in millions, except per share data)

CONDENSED CONSOLIDATED AND COMBINED STATEMENT OF CHANGES IN EQUITY

14 unchanged sentences

Balance at June 30, 2023 88.8 0.1 1,976.5 — — ( 225.5 ) 1,751.1

Net loss — — — — ( 13.1 ) — ( 13.1 )

Other comprehensive loss, net of tax — — — — — ( 54.8 ) ( 54.8 )

Stock compensation — — 11.1 — — — 11.1

Balance at September 30, 2023 88.8 $ 0.1 $ 1,987.6 $ — $ ( 13.1 ) $ ( 280.3 ) $ 1,694.3

Balance at December 31, 2022 — $ — $ — $ ( 3.8 ) $ — $ 1.2 $ ( 2.6 )

8 unchanged sentences

Balance at June 30, 2023 — — ( 5.1 ) — — 1.8 ( 3.3 )

Net loss — — — — ( 0.9 ) — ( 0.9 )

Other comprehensive loss, net of tax — — — — — 0.4 0.4

Balance at September 30, 2023 — $ — $ ( 5.1 ) $ — $ ( 0.9 ) $ 2.2 $ ( 3.8 )

FORTREA HOLDINGS INC.

15 unchanged sentences

Balance at June 30, 2023 88.8 0.1 1,971.4 — — ( 223.7 ) 1,747.8

Net loss — — — — ( 14.0 ) — ( 14.0 )

Other comprehensive loss, net of tax — — — — — ( 54.4 ) ( 54.4 )

Stock compensation — — 11.1 — — — 11.1

Balance at September 30, 2023 88.8 $ 0.1 $ 1,982.5 $ — $ ( 14.0 ) $ ( 278.1 ) $ 1,690.5

FORTREA HOLDINGS INC.

1 unchanged sentence

(dollars and shares in millions, except per share data)

CONSOLIDATED AND COMBINED STATEMENT OF CHANGES IN EQUITY

Shares Amounts Additional Paid-in Capital Former Parent Investment Accumulated Deficit Accumulated

Comprehensive

Previously reported

Balance at December 31, 2022 — $ — $ — $ 3,618.6 $ — $ ( 276.0 ) $ 3,342.6

Net loss — — — 45.7 ( 49.1 ) — ( 3.4 )

Other comprehensive income, net of tax — — — — — 57.6 57.6

Special payment to Former Parent — — — ( 1,595.0 ) — — ( 1,595.0 )

Net transfers to Former Parent — — — ( 89.7 ) — — ( 89.7 )

Reclassification of Former Parent investment to additional paid-in capital — — 1,979.6 ( 1,979.6 ) — — —

Issuance of common stock 88.8 0.1 — — — — 0.1

Stock compensation — — 26.6 — — — 26.6

Balance at December 31, 2023 88.8 $ 0.1 $ 2,006.2 $ — $ ( 49.1 ) $ ( 218.4 ) $ 1,738.8

Balance at December 31, 2022 — — — ( 3.8 ) — 1.2 ( 2.6 )

Net loss — — — ( 2.4 ) ( 19.4 ) — ( 21.8 )

Other comprehensive income, net of tax — — — — — 1.7 1.7

Net transfers to Former Parent — — — ( 2.0 ) — — ( 2.0 )

Reclassification of Former Parent investment to additional paid-in capital — — ( 8.2 ) 8.2 — — —

Balance at December 31, 2023 — $ — $ ( 8.2 ) $ — $ ( 19.4 ) $ 2.9 $ ( 24.7 )

Balance at December 31, 2022 — — — 3,614.8 — ( 274.8 ) 3,340.0

Net loss — — — 43.3 ( 68.5 ) — ( 25.2 )

Other comprehensive income, net of tax — — — — — 59.3 59.3

Special payment to Former Parent — — — ( 1,595.0 ) — — ( 1,595.0 )

Net transfers to Former Parent — — — ( 91.7 ) — — ( 91.7 )

Reclassification of Former Parent investment to additional paid-in capital — — 1,971.4 ( 1,971.4 ) — — —

Issuance of common stock 88.8 0.1 — — — — 0.1

Stock compensation — — 26.6 — — — 26.6

Balance at December 31, 2023 88.8 $ 0.1 $ 1,998.0 $ — $ ( 68.5 ) $ ( 215.5 ) $ 1,714.1

FORTREA HOLDINGS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED AND COMBI NED FINANCIAL STATEMENTS

(dollars and shares in millions, except per share data)

COMBINED STATEMENT OF CHANGES IN EQUITY

Shares Amounts Additional Paid-in Capital Former Parent Investment Accumulated Deficit Accumulated

Comprehensive

Previously reported

Balance at December 31, 2021 — $ — $ — $ 3,409.0 $ — $ ( 148.4 ) $ 3,260.6

Net income — — — 192.9 — — 192.9

Other comprehensive loss, net of tax — — — — — ( 127.6 ) ( 127.6 )

Net transfers to Former Parent — — — 16.7 — — 16.7

Balance at December 31, 2022 — — — 3,618.6 — ( 276.0 ) 3,342.6

Balance at December 31, 2021 — — — 0.5 — 0.3 0.8

Net income — — — ( 6.7 ) — — ( 6.7 )

Other comprehensive loss, net of tax — — — — — 0.9 0.9

Net transfers to Former Parent — — — 2.4 — — 2.4

Balance at December 31, 2022 — — — ( 3.8 ) — 1.2 ( 2.6 )

Balance at December 31, 2021 — — — 3,409.5 — ( 148.1 ) 3,261.4

Net income — — — 186.2 — — 186.2

Other comprehensive loss, net of tax — — — — — ( 126.7 ) ( 126.7 )

Net transfers to Former Parent — — — 19.1 — — 19.1

Balance at December 31, 2022 — $ — $ — $ 3,614.8 $ — $ ( 274.8 ) $ 3,340.0

FORTREA HOLDINGS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED AND COMBI NED FINANCIAL STATEMENTS

(dollars and shares in millions, except per share data)

CONDENSED COMBINED STATEMENT OF CASH FLOWS

Three Months Ended March 31, 2023

As Previously Reported Adjustments As Restated

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income $ 17.4 $ ( 4.9 ) $ 12.5

Adjustments to reconcile net earnings to net cash provided by operating activities:

Depreciation and amortization 22.8 0.3 23.1

Stock compensation 6.7 — 6.7

Operating lease right-of-use asset expense 7.8 — 7.8

Goodwill and other asset impairments — — —

Deferred income taxes ( 3.7 ) 0.1 ( 3.6 )

Other, net 0.8 0.1 0.9

Change in assets and liabilities (net of effects of acquisitions):

Decrease in accounts receivable and unbilled services, net 26.8 0.5 27.3

Increase in prepaid expenses and other ( 18.6 ) ( 0.5 ) ( 19.1 )

Increase in accounts payable 20.9 ( 0.5 ) 20.4

Decrease in deferred revenue ( 13.9 ) 1.0 ( 12.9 )

Decrease in accrued expenses and other ( 63.6 ) ( 1.5 ) ( 65.1 )

Net cash provided by (used for) operating activities 3.4 ( 5.4 ) ( 2.0 )

CASH FLOWS FROM INVESTING ACTIVITIES:

Capital expenditures ( 16.2 ) — ( 16.2 )

Proceeds from sale of assets — — —

Net cash used for investing activities ( 16.2 ) — ( 16.2 )

CASH FLOWS FROM FINANCING ACTIVITIES:

Net transfers from Parent 19.9 4.6 24.5

Net cash provided by financing activities 19.9 4.6 24.5

Effect of exchange rate changes on cash and cash equivalents 1.1 0.4 1.5

Net change in cash and cash equivalents 8.2 ( 0.4 ) 7.8

Cash and cash equivalents at beginning of period 112.0 ( 1.6 ) 110.4

Cash and cash equivalents at end of period $ 120.2 $ ( 2.0 ) $ 118.2

The cash flows related to discontinued operations have not been segregated and are included in the adjusted and restated statements of cash flows included above.

FORTREA HOLDINGS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED AND COMBI NED FINANCIAL STATEMENTS

(dollars and shares in millions, except per share data)

CONDENSED CONSOLIDATED AND COMBINED STATEMENT OF CASH FLOWS

35 unchanged sentences

The cash flows related to discontinued operations have not been segregated and are included in the adjusted and restated statements of cash flows included above.

FORTREA HOLDINGS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED AND COMBI NED FINANCIAL STATEMENTS

(dollars and shares in millions, except per share data)

CONDENSED CONSOLIDATED AND COMBINED STATEMENT OF CASH FLOWS

Nine Months Ended September 30, 2023

As Previously Reported Adjustments As Restated

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income $ 32.6 $ ( 3.3 ) $ 29.3

Adjustments to reconcile net earnings to net cash provided by operating activities:

Depreciation and amortization 72.5 1.1 73.6

Stock compensation 27.2 — 27.2

Operating lease right-of-use asset expense 20.9 — 20.9

Goodwill and other asset impairments — — —

Deferred income taxes ( 12.7 ) ( 0.6 ) ( 13.3 )

Other, net 3.5 — 3.5

Change in assets and liabilities (net of effects of acquisitions):

Increase in accounts receivable and unbilled services, net ( 26.6 ) 3.5 ( 23.1 )

Increase in prepaid expenses and other ( 3.1 ) 3.7 0.6

Increase in accounts payable 47.3 ( 1.4 ) 45.9

Decrease in deferred revenue ( 6.5 ) 0.5 ( 6.0 )

Decrease in accrued expenses and other ( 0.1 ) ( 8.5 ) ( 8.6 )

Net cash provided by operating activities 155.0 ( 5.0 ) 150.0

CASH FLOWS FROM INVESTING ACTIVITIES:

Capital expenditures ( 30.9 ) — ( 30.9 )

Proceeds from sale of assets 8.1 — 8.1

Net cash used for investing activities ( 22.8 ) — ( 22.8 )

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from revolving credit facilities 24.0 — 24.0

Payments on revolving credit facilities ( 24.0 ) — ( 24.0 )

Proceeds from term loans 1,061.4 — 1,061.4

Proceeds from issuance of senior notes 570.0 — 570.0

Debt issuance costs ( 26.4 ) — ( 26.4 )

Principal payments of long-term debt ( 7.7 ) — ( 7.7 )

Special payment to Former Parent ( 1,595.0 ) — ( 1,595.0 )

Net transfers from Parent ( 136.7 ) 1.3 ( 135.4 )

Net cash used for financing activities ( 134.4 ) 1.3 ( 133.1 )

Effect of exchange rate changes on cash and cash equivalents ( 2.3 ) 1.6 ( 0.7 )

Net change in cash and cash equivalents ( 4.5 ) ( 2.1 ) ( 6.6 )

Cash and cash equivalents at beginning of period 112.0 ( 1.6 ) 110.4

Cash and cash equivalents at end of period $ 107.5 $ ( 3.7 ) $ 103.8

The cash flows related to discontinued operations have not been segregated and are included in the adjusted and restated statements of cash flows included above.

FORTREA HOLDINGS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED AND COMBI NED FINANCIAL STATEMENTS

(dollars and shares in millions, except per share data)

CONSOLIDATED AND COMBINED STATEMENT OF CASH FLOWS

Year Ended December 31, 2023

As Previously Reported Adjustments As Restated

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss $ ( 3.4 ) $ ( 21.8 ) $ ( 25.2 )

Adjustments to reconcile net earnings to net cash provided by operating activities:

Depreciation and amortization 96.4 1.6 98.0

Stock compensation 42.7 — 42.7

Operating lease right-of-use asset expense 27.4 — 27.4

Goodwill and other asset impairments — 13.4 13.4

Deferred income taxes ( 40.5 ) ( 1.1 ) ( 41.6 )

Other, net ( 1.0 ) — ( 1.0 )

Change in assets and liabilities (net of effects of acquisitions):

Increase in accounts receivable and unbilled services, net ( 28.8 ) 3.2 ( 25.6 )

Increase in prepaid expenses and other ( 2.0 ) ( 1.4 ) ( 3.4 )

Increase in accounts payable 51.1 4.2 55.3

Decrease in deferred revenue ( 3.4 ) 1.2 ( 2.2 )

Increase in accrued expenses and other 28.9 1.7 30.6

Net cash provided by operating activities 167.4 1.0 168.4

CASH FLOWS FROM INVESTING ACTIVITIES:

Capital expenditures ( 40.3 ) — ( 40.3 )

Proceeds from sale of assets 8.5 — 8.5

Net cash used for investing activities ( 31.8 ) — ( 31.8 )

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from revolving credit facilities 164.0 — 164.0

Payments on revolving credit facilities ( 164.0 ) — ( 164.0 )

Proceeds from term loans 1,061.4 — 1,061.4

Proceeds from issuance of senior notes 570.0 — 570.0

Debt issuance costs ( 26.4 ) — ( 26.4 )

Principal payments of long-term debt ( 15.4 ) — ( 15.4 )

Special payment to Former Parent ( 1,595.0 ) — ( 1,595.0 )

Net transfers from Parent ( 133.6 ) ( 1.8 ) ( 135.4 )

Net cash used for financing activities ( 139.0 ) ( 1.8 ) ( 140.8 )

Effect of exchange rate changes on cash and cash equivalents — 2.4 2.4

Net change in cash and cash equivalents ( 3.4 ) 1.6 ( 1.8 )

Cash and cash equivalents at beginning of period 112.0 ( 1.6 ) 110.4

Cash and cash equivalents at end of period $ 108.6 $ — $ 108.6

The cash flows related to discontinued operations have not been segregated and are included in the adjusted and restated statements of cash flows included above.

FORTREA HOLDINGS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED AND COMBI NED FINANCIAL STATEMENTS

(dollars and shares in millions, except per share data)

COMBINED STATEMENT OF CASH FLOWS

Year Ended December 31, 2022

As Previously Reported Adjustments As Restated

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income $ 192.9 $ ( 6.7 ) $ 186.2

Adjustments to reconcile net earnings to net cash provided by operating activities:

Depreciation and amortization 92.7 0.9 93.6

Stock compensation 25.4 — 25.4

Operating lease right-of-use asset expense 24.9 — 24.9

Goodwill and other asset impairments 9.8 — 9.8

Deferred income taxes ( 16.5 ) — ( 16.5 )

Other, net 4.1 — 4.1

Change in assets and liabilities (net of effects of acquisitions):

Increase in accounts receivable and unbilled services, net ( 105.0 ) — ( 105.0 )

(Increase) decrease in prepaid expenses and other ( 12.2 ) 3.1 ( 9.1 )

Increase (decrease) in accounts payable 22.4 2.4 24.8

Increase (decrease) in deferred revenue ( 32.5 ) 2.4 ( 30.1 )

Increase (decrease) in accrued expenses and other ( 118.5 ) ( 6.9 ) ( 125.4 )

Net cash (used for) provided by operating activities 87.5 ( 4.8 ) 82.7

CASH FLOWS FROM INVESTING ACTIVITIES:

Capital expenditures ( 54.4 ) — ( 54.4 )

Proceeds from sale of assets 0.4 — 0.4

Net cash used for investing activities ( 54.0 ) — ( 54.0 )

CASH FLOWS FROM FINANCING ACTIVITIES:

Net transfers to Former Parent ( 8.7 ) 2.4 ( 6.3 )

Net cash used for financing activities ( 8.7 ) 2.4 ( 6.3 )

Effect of exchange rate changes on cash and cash equivalents ( 7.4 ) 0.8 ( 6.6 )

Net change in cash and cash equivalents 17.4 ( 1.6 ) 15.8

Cash and cash equivalents at beginning of period 94.6 — 94.6

Cash and cash equivalents at end of period $ 112.0 $ ( 1.6 ) $ 110.4

The cash flows related to discontinued operations have not been segregated and are included in the adjusted and restated statements of cash flows included above.

FORTREA HOLDINGS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED AND COMBI NED FINANCIAL STATEMENTS

(dollars and shares in millions, except per share data)

SUBSEQUENT EVENTS

Receivables Securitization Program

On May 6, 2024, the Company entered into a three-year $ 300 account receivable securitization program (the “Receivables Facility”).

Under this program, Fortrea Inc.

conveys accounts receivable and unbilled services (including contract assets) balances to a wholly-owned, bankruptcy-remote special purpose entity (“SPE”), who in turn, may sell receivables to PNC Bank, National Association.

The facility is without recourse to the Company or any subsidiaries of the Company other than with respect to limited indemnity obligations of Fortrea Inc.

in respect to the character of the receivables sold and as to the performance of its duties as servicer and a limited performance guaranty by the Company

The Receivables Facility is scheduled to terminate on May 6, 2027, unless terminated earlier pursuant to its terms.

Credit Agreement Amendment

On May 3, 2024, the Company entered into an amendment (the “Credit Amendment”) to modify certain financial covenants for additional flexibility under the Company’s credit agreement dated as of June 30, 2023 (the “Existing Credit Agreement”), among the Company, certain subsidiaries of the Company and Goldman Sachs Bank USA, as administrative agent and collateral agent,) governing the Company’s existing senior credit facility.

The Credit Amendment amended (i) the Company’s maximum quarterly Total Leverage Ratio (as defined in the Existing Credit Agreement) from 5.30 :1.00 to 6.00 :1.00 for the fiscal quarters ending on June 30 and September 30, 2024, decreasing to 5.75 :1.00 for the fiscal quarters ending on December 31, 2024, and March 31, 2025, further decreasing to 5.50 :1.00 for the fiscal quarter ending on June 30, 2025, and reverting to 5.30 :1.00 thereafter, and (ii) adjusted the Company’s minimum quarterly Interest Coverage Ratio (as defined in the Existing Credit Agreement) from 2.00 :1.00 to 1.70 :1.00 for the fiscal quarters ending on June 30 and September 30, 2024, increasing to 1.80 :1.00 for the fiscal quarters ending on December 31, 2024, and March 31, 2025, further increasing to 1.90 :1.00 for the fiscal quarter ending on June 30, 2025, and reverting to 2.00 :1.00 thereafter.

In consideration of these adjustments, the Company has agreed during the covenant adjustment period to certain additional limitations with respect to investments and restricted payments, and to apply net cash proceeds of the Company’s previously announced divestiture of its Fortrea Patient Access and Endpoint businesses to the repayment of senior indebtedness.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements