What changed in this filing

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Item 1A. Risk Factors

2023-02-23 compared with 2022-02-24 · 53 added, 67 removed, 240 unchanged (33% of the section changed)

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Our business is affected by general economic conditions, both inside and outside the U.S.

Both domestic and international markets experienced significant inflationary pressures in 2022 and inflation rates in the U.S., as well as in other countries in which we operate, continue at elevated levels for the near-term.

If the global economy and financial markets, or economic conditions in Europe, the U.S.

or other key markets, continue to be unstable (including as a result of the COVID-19 pandemic), it could adversely affect the business, results of operations and financial condition of the company and its customers, distributors, and suppliers, having the effect of:

or other key markets, continue to be unstable, they could adversely affect the business, results of operations and financial condition of the company and its customers, distributors, and suppliers, having the effect of:

• reducing demand for some of our products;

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• causing supply interruptions, which could disrupt our ability to produce our products;

• creating longer sales cycles and greater difficulty in collecting sales proceeds.

• creating longer sales cycles, and greater difficulty in collecting sales proceeds and slower adoption of new technologies.

Economic, political, foreign currency and other risks associated with international sales and operations could adversely affect our results of operations.

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These fluctuations could also adversely affect the demand for products and services provided by us.

As a multinational corporation, our businesses occasionally invoice third-party customers in currencies other than the one in which they primarily do business (the “functional currency”).

As a multinational corporation, our businesses occasionally invoice third-party customers in currencies other than the one in which they primarily do business (which we refer to as the functional currency).

Movements in the invoiced currency relative to the functional currency could adversely impact our cash flows and our results of operations.

As our international sales grow, exposure to fluctuations in currency exchange rates could have a larger effect on our financial results.

In 2021, currency translation had a favorable effect of $619 million on revenues due to the weakening of the U.S.

In 2022, currency translation had an unfavorable effect of $1.35 billion on revenues due to the strengthening of the U.S.

dollar relative to other currencies in which the company sells products and services.

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• changes in diplomatic and trade relationships, including new tariffs, trade protection measures, import or export licensing requirements, trade embargoes and sanctions and other trade barriers;

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• tariffs imposed by the U.S.

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government on various imports from China and by the Chinese government on certain U.S.

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Risk Factors (continued)

• the impact of public health epidemics/pandemics on the global economy, such as the COVID-19 pandemic;

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• supply interruptions, which could disrupt our ability to produce our products;

• increases in materials, energy, labor or other manufacturing-related costs or higher supply chain logistics costs;

• negative consequences from changes in tax laws;

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• unexpected changes in regulatory requirements;

• the effects of the U.K.'s departure from the E.U., known as Brexit;

• geopolitical uncertainty or turmoil, including terrorism and war.

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An impasse in federal government budget decisions could lead to substantial delays or reductions in federal spending.

We are subject to risks associated with public health crises and epidemics/pandemics, such as the COVID-19 pandemic.

Our global operations expose us to risks associated with public health crises and epidemics/pandemics, such as COVID-19.

The global spread of COVID-19 has created significant volatility, uncertainty and worldwide economic disruption, resulting in an economic slowdown of potentially extended duration.

COVID-19 has had an adverse impact on certain of our operations, supply chains and distribution systems, including as a result of impacts associated with preventive and precautionary measures that we, other businesses and governments are taking.

We are subject to risks associated with public health epidemics and pandemics, such as the ongoing COVID-19 pandemic.

Our global operations expose us to risks associated with public health epidemics and pandemics.

COVID-19 has had an adverse impact on certain of our operations, supply chains and distribution systems, and we may experience unpredictable reductions in supply and demand for certain of our products and services.

National, state and local governments have implemented and may continue to implement safety precautions, including quarantines, border closures, increased border controls, travel restrictions, shelter in place orders and shutdowns and other measures.

These measures may disrupt normal business operations and may have significant negative impacts on businesses and financial markets worldwide.

The company has mobilized to support the COVID-19 response with products and services that help diagnose the virus as well as assisting customers to develop therapeutics and vaccines used to protect from the virus.

Our ability to continue to manufacture products is highly dependent on our ability to maintain the safety and health of our factory employees.

The ability of our employees to work may be significantly impacted by individuals contracting or being exposed to COVID-19.

While we are following the requirements of governmental authorities and taking preventative and protective measures to prioritize the safety of our employees, these measures may not be successful, and we may be required to temporarily close facilities or take other measures.

While we are staying in close communication with our sites, employees, customers and suppliers and acting to mitigate the impact of this dynamic and evolving situation, the duration and extent of the effect of COVID-19 on the company is not determinable.

In addition, several of the company’s businesses have had an increase in revenues due to sales of products addressing diagnosis and treatment of COVID-19.

While these positive impacts are expected to continue into 2022, the duration and extent of future revenues from such sales are uncertain and dependent primarily on customer testing demand.

The ability of our employees to work may be significantly impacted by the COVID-19 pandemic or future epidemics and pandemics.

In addition, the duration and extent of future revenues from sales of products related to the COVID-19 response are uncertain and dependent primarily on customer testing demand as well as therapy and vaccine demand.

Business Risks

We must develop new products, adapt to rapid and significant technological change and respond to introductions of new products by competitors to remain competitive.

We must develop new products, adapt to rapid and significant technological change, respond to introductions of new products by competitors and maintain quality to remain competitive.

Our growth strategy includes significant investment in and expenditures for product development.

We sell our products in several industries that are characterized by rapid and significant technological changes, frequent new product and service introductions and enhancements and evolving industry standards.

Competitive factors include technological innovation, price, service and delivery, breadth of product line, customer support, e-business

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Risk Factors (continued)

capabilities and the ability to meet the special requirements of customers.

Competitive factors include technological innovation, price, service and delivery, breadth of product line, customer support, e-business capabilities and the ability to meet the special requirements of customers.

Our competitors may adapt more quickly to new technologies and changes in customers’ requirements than we can.

Without the timely introduction of new products, services and enhancements, our products and services will likely become technologically obsolete over time, in which case our revenues and operating results would suffer.

Many of our existing products and those under development are technologically innovative and require significant planning, design, development and testing at the technological, product and manufacturing-process levels.

Our customers use many of our products to develop, test and manufacture their own products.

As a result, we must anticipate industry trends and develop products in advance of the commercialization of our customers’ products.

If we fail to adequately predict our customers’ needs and future activities, we may invest heavily in research and development of products and services that do not lead to significant revenues.

If we fail to adequately develop products or predict our customers’ needs and future activities, we may invest heavily in research and development of products and services that do not lead to significant revenues.

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It may be difficult for us to implement our strategies for improving internal growth.

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Our business could be adversely affected in the short term if any of our large third-party suppliers abruptly discontinues selling products to us.

Integrating PPD into our business may be more difficult, costly or time consuming than expected and the anticipated benefits and cost savings of the transaction may not be fully realized.

The success of the PPD acquisition, including the realization of anticipated benefits and cost savings, depends, in part, on our ability to successfully integrate PPD into our business.

The integration is a difficult, costly and time-consuming process.

It is possible that the integration process could result in the loss of key employees or the disruption of our ongoing business or that the alignment of standards, controls, procedures and policies may adversely affect our ability to maintain relationships with clients, customers, suppliers and employees or to fully achieve the anticipated benefits and cost savings of the transaction.

The loss of key employees could adversely affect our ability to successfully conduct our business in the markets in which PPD now operates, which could have an adverse effect on our financial results.

If we experience difficulties with the integration process, the anticipated benefits and cost savings of the PPD acquisition may not be realized fully or at all, or may take longer to realize than expected, and our business may be unable to grow as planned, which could materially impact our business, cash flow, financial condition or results of operations as well as adversely impact our share price.

The integration process may also result in significant expenses and charges, both cash and noncash.

Our inability to complete any pending acquisitions or to successfully integrate any new or previous acquisitions could have a material adverse effect on our business.

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Certain acquisitions may be difficult to complete for a number of reasons, including the need for antitrust and/or other regulatory approvals, as well as disputes or litigation.

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Risk Factors (continued)

acquisition we may complete may be made at a substantial premium over the fair value of the net identifiable assets of the acquired company.

Any acquisition we may complete may be made at a substantial premium over the fair value of the net identifiable assets of the acquired company.

Further, we may not be able to integrate acquired businesses successfully into our existing businesses, make such businesses profitable, or realize anticipated cost savings or synergies, if any, from these acquisitions, which could adversely affect our business.

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If these or other suppliers encounter financial, operating or other difficulties, or if our relationship with them changes, we might not be able to quickly establish or qualify replacement sources of supply.

The supply chains for our businesses could also be disrupted by supplier capacity constraints, bankruptcy or exiting of the business for other reasons, decreased availability of key raw materials or commodities and external events such as natural disasters, pandemic health issues such as COVID-19, war, terrorist actions, governmental actions and legislative or regulatory changes.

The supply chains for our businesses could also be disrupted by supplier capacity constraints, bankruptcy or exiting of the business for other reasons, decreased availability or increased cost of key raw materials or commodities, such as energy, and external events such as global economic downturns and macroeconomic trends, natural disasters, pandemic health issues such as COVID-19, war, terrorist actions, governmental

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actions and legislative or regulatory changes.

Any of these factors could result in production interruptions, delays, extended lead times and inefficiencies.

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If we are unable to maintain reliable information technology systems and appropriate controls with respect to global data privacy and security requirements and prevent data breaches, we may suffer regulatory consequences in addition to business consequences.

As a global organization, we are subject to data privacy and security laws, regulations, and customer-imposed

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Risk Factors (continued)

controls in numerous jurisdictions as a result of having access to and processing confidential, personal and/or sensitive data in the course of our business.

As a global organization, we are subject to data privacy and security laws, regulations, and customer-imposed controls in numerous jurisdictions as a result of having access to and processing confidential, personal and/or sensitive data in the course of our business.

For example, in the U.S., individual states regulate data breach and security requirements and multiple governmental bodies assert authority over aspects of the protection of personal privacy.

European laws require us to have an approved legal mechanism to transfer personal data out of Europe, and the EU General Data Protection Regulation imposes significantly stricter requirements in how we collect and process personal data.

Several countries, such as China and Russia, have passed laws that require personal data relating to their citizens to be maintained on local servers and impose additional data transfer restrictions.

Several countries, such as China, have passed laws that require personal data relating to their citizens to be maintained on local servers and impose additional data transfer restrictions.

Government enforcement actions can be costly and interrupt the regular operation of our business, and data breaches or violations of data privacy laws can result in fines, reputational damage and civil lawsuits, any of which may adversely affect our business, reputation and financial statements.

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Our ability to attract and retain key talent also depends in part on how well we maintain a strong workplace culture that is attractive to employees.

Macroeconomic conditions, specifically increased competition for employees and wage inflation, could have a material impact on our ability to attract and retain talent, our turnover rate and the cost of operating our business.

We cannot ensure that we will be able to hire or retain the personnel necessary for our operations or that the loss of any personnel will not have a material impact on our financial condition and results of operations.

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Our primary commodity exposures are for fuel, petroleum-based resins and steel.

The costs for these commodities, as well as the costs of transportation, construction and services necessary for the production and distribution of our products, continue to increase and be volatile.

While we may seek to minimize the impact of price increases through higher prices to customers and various cost-saving measures, our earnings and cash flows could be adversely affected in the event these measures are insufficient to cover our costs.

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Because we rely heavily on third-party package-delivery services, a significant disruption in these services or significant increases in prices may disrupt our ability to ship products, increase our costs and lower our profitability.

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We have significant operations in California, near major earthquake faults, which make us susceptible to earthquake risk.

An earthquake or other natural disaster such as a fire or hurricane or power shortages or outages could disrupt our operations or impair our critical systems.

An earthquake or other natural disaster (including the effects of climate change such as sea level rise, drought, flooding, wildfires and more intense weather events), could disrupt our operations or impair our critical systems.

Any of these disruptions or other events outside of our control, such as strikes or other labor unrest, could have an adverse effect on our results of operations.

In addition, if any of our facilities, including our manufacturing or warehouse facilities, or the facilities of our suppliers, third-party service providers, or customers, is affected by natural disasters, such as earthquakes, tsunamis, power shortages or outages, floods or monsoons, public health crises, such as pandemics and epidemics, political crises, such as terrorism, war, political instability or other conflict, or other events outside of our control, such as trade protectionism, strikes or other labor unrest, our results of operations could be adversely affected.

In addition, if any of our facilities, including our manufacturing or warehouse facilities, or the facilities of our suppliers, third-party service providers, or customers, is affected by natural disasters, such as earthquakes, tsunamis, power shortages or outages, fires, floods or monsoons, public health crises, such as pandemics and epidemics, political crises, such as terrorism, war, political instability or other conflict, or other events outside of our control, such as trade protectionism, strikes or other labor unrest, our results of operations could be adversely affected.

Moreover, these types of events could negatively impact customer spending in the impacted regions or depending upon the severity, globally, which could also adversely impact our operating results.

Increasing attention to environmental, social and governance matters may impact our business, financial results or stock price.

Companies across all industries are facing increasing scrutiny from stakeholders related to their environmental, social and governance (ESG) practices and disclosures, including practices and disclosures related to climate change, diversity and inclusion and governance standards.

Increasing attention to environmental, social and governance matters may impact our business, financial results, stock price or reputation.

We face increasing scrutiny from stakeholders related to our environmental, social and governance (ESG) practices and disclosures, including practices and disclosures related to climate change, diversity and inclusion and governance standards.

Investor advocacy groups, certain institutional investors, lenders, investment funds and other influential investors are also increasingly focused on ESG practices and disclosures and in recent years have placed increasing importance on the implications and social cost of their investments.

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The heightened stakeholder focus on ESG issues related to our business requires the continuous monitoring of various and evolving laws, regulations, standards and expectations and the associated reporting requirements.

A failure to adequately meet stakeholder expectations may result in noncompliance, the loss of business, reputational impacts, diluted market valuation, an inability to attract customers and an

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Risk Factors (continued)

inability to attract and retain top talent.

A failure to adequately meet evolving stakeholder expectations may result in noncompliance, the loss of business, reputational impacts, diluted market valuation, an inability to attract customers and an inability to attract and retain top talent.

In addition, if legislation or regulations are enacted or promulgated in the U.S.

or in any other jurisdiction in which we do business that impose more stringent restrictions and requirements than our current legal or regulatory obligations, we and companies in our supply chain may experience increased compliance burdens and costs to meet the regulatory obligations, which could cause disruption in the sourcing, manufacturing and distribution of our products and adversely affect our business, financial condition or results of operations.

In addition, our adoption of certain standards or mandated compliance to certain requirements could necessitate additional investments that could impact our profitability.

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The laws governing government contracts differ from the laws governing private contracts and government contracts may contain pricing terms and conditions that are not applicable to private contracts.

We are also subject to investigation for compliance with the regulations governing government contracts.

We are also subject to investigation for compliance with the

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regulations governing government contracts.

A failure to comply with these regulations could result in suspension of these contracts, criminal, civil and administrative penalties or debarment.

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We are subject to product and other liability risks for which we may not have adequate insurance coverage.

We may be named as a defendant in product liability lawsuits, which may allege that products or services we have provided from our pharma services offerings have resulted or could result in an unsafe condition or injury to consumers.

We may be named as a defendant in product liability or errors and omissions lawsuits, which may allege that products or services we have provided have resulted or could result in an unsafe condition, property damage or injury to end users or financial loss for consumers.

Additionally, products currently or previously sold by our environmental and process instruments and radiation measurement and security instruments businesses include fixed and portable instruments used for chemical, radiation and trace explosives detection.

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There are also many other factors beyond our control that could lead to liability claims, such as the reliability and competence of the customers’ operators and the training of such operators.

Any such product liability claims brought against us could be significant and any adverse determination may result in liabilities in excess of our insurance coverage.

Although we carry product liability insurance, we cannot be certain that our current insurance will be sufficient to cover these claims or that it can be maintained on acceptable terms, if at all.

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Risk Factors (continued)

Any such product liability claims brought against us could be significant and any adverse determination may result in liabilities subject to insurance policy exclusions where insurance would not respond or in excess of our insurance coverage.

Although we carry product liability and errors and omissions insurance, we cannot be certain that our current insurance will be sufficient to cover these claims or that it can be maintained on acceptable terms, if at all.

We are required to comply with a wide variety of laws and regulations, and are subject to regulation by various federal, state and foreign agencies.

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In addition, we are subject to inspections by these regulatory authorities.

Failure by us or by our customers to comply with the requirements of these regulatory authorities, including without limitation, remediating any inspectional observations to the satisfaction of these regulatory authorities, could result in warning letters, product recalls or seizures, monetary sanctions, injunctions to halt manufacture and distribution, restrictions on our operations, civil or criminal sanctions, or withdrawal of existing or denial of pending approvals, including those relating to products or facilities.

Failure by us or by our customers to comply with the requirements of these regulatory authorities,

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including without limitation, remediating any inspectional observations to the satisfaction of these regulatory authorities, could result in warning letters, product recalls or seizures, monetary sanctions, injunctions to halt manufacture and distribution, restrictions on our operations, civil or criminal sanctions, or withdrawal of existing or denial of pending approvals, including those relating to products or facilities.

In addition, such a failure could expose us to contractual or product liability claims, contractual claims from our customers, including claims for reimbursement for lost or damaged active pharmaceutical ingredients or personal injury, as well as ongoing remediation and increased compliance costs, any or all of which could be significant.

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Any noncompliance by us with applicable laws and regulations or the failure to maintain, renew or obtain necessary permits and licenses could result in criminal, civil and administrative penalties and could have an adverse effect on our results of operations.

Our reputation, ability to do business and financial statements may be impaired by improper conduct by any of our employees, agents or business partners.

Our reputation, ability to do business and financial statements may be impaired by improper conduct by any of our employees, agents, business partners or other third parties.

We have internal controls and compliance systems to protect the company against acts committed by employees, agents or businesses that we acquire that would violate U.S.

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We also rely on our suppliers to adhere to our supplier standards of conduct, and material violations of such standards of conduct could occur that could have a material effect on our business, reputation and financial statements.

In addition, any allegations of issues resulting from the misuse of our products could, even if untrue, adversely affect our reputation and our customers’ willingness to purchase products from us.

Any such allegations could cause us to lose customers and divert our resources from other tasks, which could materially and adversely affect our business and operating results.

Our inability to protect our intellectual property could have a material adverse effect on our business.

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and foreign patents, and we intend to file additional applications, as appropriate, for patents covering our products.

Patents may not

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Risk Factors (continued)

be issued for any pending or future patent applications owned by or licensed to us, and the claims allowed under any issued patents may not be sufficiently broad to protect our technology.

Patents may not be issued for any pending or future patent applications owned by or licensed to us, and the claims allowed under any issued patents may not be sufficiently broad to protect our technology.

Any issued patents owned by or licensed to us may be challenged, invalidated or circumvented, and the rights under these patents may not provide us with competitive advantages.

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In addition, our trade secrets may otherwise become known or be independently developed by our competitors.

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We also depend in part on our trademarks and the strength of our proprietary brands, which we consider important to our business.

If we are unable to protect or preserve the value of our intellectual property rights for any reason, including our inability to successfully defend against counterfeit, knock offs, grey-market, infringing or otherwise unauthorized products, our brand and reputation could be damaged, and our business may be harmed.

Third parties may assert claims against us to the effect that we are infringing on their intellectual property rights.

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As of December 31, 2022, we had approximately $34.49 billion in outstanding indebtedness.

In addition, we have availability to borrow under a revolving credit facility that provides for up to $5.00 billion (as of January 7.

2022) of unsecured multi-currency revolving credit (the Facility).

In addition, we have availability to borrow under a revolving credit facility that provides for up to $5.00 billion of unsecured multi-currency revolving credit (the Facility).

We may also obtain additional long-term debt and lines of credit to meet future financing needs, which would have the effect of increasing our total leverage.

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The covenants in the Facility include a Consolidated Net Interest Coverage Ratio (Consolidated EBITDA to Consolidated Net Interest Expense), as such terms are defined in the Facility.

Specifically, the company has agreed that, so long as any lender has any commitment under the Facility, any letter of credit is outstanding under the Facility, or any loan or other obligation is outstanding under the Facility, it will maintain a minimum Consolidated Interest Coverage Ratio of 3.5:1.0 as of the last day of any fiscal quarter.

Specifically, the company has agreed that, so long as any lender has any commitment under the Facility, any letter of credit is outstanding under the Facility, or any loan or other obligation is outstanding under the Facility, it will maintain a minimum Consolidated Net Interest Coverage Ratio of 3.5:1.0 as of the last day of any fiscal quarter.

Our ability to comply with these financial restrictions and covenants is dependent on our future performance, which is subject to prevailing economic conditions and other factors, including factors that are beyond our control such as the impact of foreign exchange rates and interest rates.

Our failure to comply with any of these restrictions or covenants may result in an event of default under the applicable debt instrument, which could permit acceleration of the debt under that instrument and

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Risk Factors (continued)

require us to prepay that debt before its scheduled due date.

Also, an acceleration of the debt under certain of our debt instruments would trigger an event of default under other of our debt instruments.

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The company owns and leases office, engineering, laboratory, production and warehouse space throughout the world.

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Legal Proceedings

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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-K

Item 1A. Risk Factors