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Item 7. Management’s Discussion and Analysis

2025-02-20 compared with 2024-02-22 · 77 added, 87 removed, 262 unchanged (38% of the section changed)

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These non-GAAP measures are further described and reconciled to their most directly comparable amount or measure under the section “ Non-GAAP Measures ” later in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Amounts and percentages reported within this Annual Report on Form 10-K are presented and calculated based on underlying unrounded amounts.

As a result, the sum of components may not equal corresponding totals due to rounding.

Thermo Fisher Scientific Inc.

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Organic revenue growth (non-GAAP measure)

* Results may not sum due to rounding.

Since 2020, the Life Sciences Solutions and Specialty Diagnostics segments as well as the laboratory products business have supported COVID-19 diagnostic testing, scaling and evolving their molecular diagnostics solutions and plastic consumables businesses to respond to the COVID-19 pandemic.

The biosciences and bioproduction businesses have expanded their capacity to meet the needs of pharma and biotech customers as they have expanded their own production volumes to meet global vaccine manufacturing requirements.

Since 2020, the Life Sciences Solutions and Specialty Diagnostics segments as well as the laboratory products business have supported COVID-19 diagnostic testing.

Additionally, our pharma services business has provided our pharma and biotech customers with the services they needed to develop and produce vaccines and therapies globally.

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Sales of products related to COVID-19 testing were $0.10 billion and $0.33 billion in 2024 and 2023, respectively.

During 2023, growth from pharma and biotech customers slightly declined.

Over the past few years, the company has played a meaningful role in the production of COVID-19 vaccines and therapies.

In 2023, reduced demand for our products and services that support COVID-19 vaccines and therapies was partially offset through strong commercial execution as a result of our trusted partner status with customers in this market.

We saw broad based strength across the academic and government market as we saw the benefits of our accelerated investments into high impact innovation with great customer adoption and strong demand globally.

The industrial and applied market was strong, driven by the relevance of our analytical instrument technologies serving our semiconductor and materials science customers.

The diagnostics and healthcare market declined due to decreased demand for COVID-19 testing products.

During 2023, sales growth in all major regions declined due to decreased demand for COVID-19 related products, as well as a challenging macroeconomic environment and low economic activity in China.

Contributions to organic revenue during 2023 from the Analytical Instruments and Laboratory Products and Biopharma Services segments were more than offset by declines in the Life Sciences Solutions and Specialty Diagnostics segments.

During 2024, all of our end markets were negatively impacted by a more muted macroeconomic environment and low economic activity in China.

Revenues from pharma and biotech and diagnostics and healthcare customers were also negatively impacted by reduced demand for COVID-19 related products and services.

As a result, revenues in these end markets declined slightly in the year.

Revenues in the academic and government and industrial and applied markets increased slightly as we saw the benefits of our investments into high-impact innovation.

During 2024, all geographies were negatively impacted by the more muted macroeconomic environment.

Sales grew slightly in Asia-Pacific, including China.

Sales growth in Europe was flat and sales in North America declined slightly due to decreased demand for COVID-19 related products.

Contributions to organic revenue during 2024 from the Analytical Instruments, Specialty Diagnostics, and Laboratory Products and Biopharma Services segments were offset by declines in the Life Sciences Solutions segment.

The company continues to execute its proven growth strategy which consists of three pillars:

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• Our unparalleled commercial engine.

GAAP operating income margin and adjusted operating income margin decreased in 2023 due primarily to lower COVID-19 related revenue.

This was partially offset by strong productivity improvements and strong pricing realization to address higher inflation.

GAAP operating income margin in 2023 was also impacted by restructuring and other charges incurred for headcount reductions and facility consolidations in an effort to streamline operations and limit the impact of expected lower revenue (Note 16).

We estimate that restructuring actions resulting in charges of approximately $0.2 billion in 2023 will realize annual cost savings of approximately $0.5 billion, primarily due to reduced employee expenses.

The company’s references to strategic growth investments generally refer to targeted spending for enhancing commercial capabilities, including expansion of geographic sales reach and e-commerce platforms, marketing initiatives, expanded service and operational infrastructure, research and development projects and other expenditures to enhance the customer experience, as well as incentive compensation and recognition for employees.

The company’s references throughout this discussion to productivity improvements generally refer to improved cost efficiencies from its Practical Process Improvement (PPI) business system including reduced costs resulting from implementing continuous improvement methodologies, global sourcing initiatives, a lower cost structure following restructuring actions including headcount reductions and consolidation of facilities, and low cost region manufacturing.

GAAP operating income margin and adjusted operating income margin decreased in 2024 due primarily to unfavorable business mix and strategic investments, partially offset by productivity improvements.

The decreases in GAAP operating income margin during 2024 were more than offset by lower levels of amortization expense.

We estimate that charges for restructuring and related actions incurred for headcount reductions and facility consolidations, which resulted in charges of approximately $0.3 billion in 2024 and $0.3 billion in 2023, will realize annual cost savings of approximately $0.2 billion and $0.6 billion, respectively, primarily due to reduced employee and facility expenses.

The company’s references to strategic investments generally refer to targeted spending for enhancing commercial capabilities, including expansion of geographic sales reach and e-commerce platforms, marketing initiatives, expanded service and operational infrastructure, research and development projects and other expenditures to enhance the customer experience, as well as incentive compensation and recognition for employees.

The company’s references throughout this discussion to productivity improvements generally refer to improved cost efficiencies from its Practical Process Improvement (PPI) business system to address inflation, including reduced costs resulting from implementing continuous improvement methodologies, global sourcing initiatives, a lower cost structure following restructuring actions including headcount reductions and consolidation of facilities, and low cost region manufacturing.

Notable Recent Acquisitions

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The acquisition expands the segment’s portfolio with the addition of pioneering innovation in diagnostics and monitoring for multiple myeloma.

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On August 14, 2023, the company acquired, within the Laboratory Products and Biopharma Services segment, CorEvitas, LLC, a U.S.-based provider of regulatory-grade, real-world evidence for approved medical treatments and therapies.

The acquisition expands the segment’s portfolio with the addition of highly complementary real-world evidence solutions to enhance decision-making as well as the time and cost of drug development.

On July 10, 2024, the company acquired, within the Life Sciences Solutions segment, Olink Holding AB (publ), a Swedish-based provider of next-generation proteomics solutions.

The acquisition enhances the segment’s capabilities in the high-growth proteomics market with the addition of highly differentiated solutions.

It also complements the existing life sciences and mass

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spectrometry offerings, accelerating protein biomarker discovery and providing strong synergy opportunities.

Segment Results

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(Dollars in millions) 2024 2023 Total

Change Currency

Translation Acquisitions/ Divestitures

Change Acquisitions/ Divestitures Currency

Revenues $ 9,631 $ 9,977 (3) % 1 % 0 % (4) %

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The decrease in organic revenues in 2024 was primarily due to moderation in COVID-19 related revenue.

The decrease in segment income margin resulted primarily from significantly lower COVID-19 related revenue and unfavorable volume pull-through, partially offset by exceptionally strong productivity improvements and favorable price realization.

The increase in segment income margin resulted primarily from exceptionally strong productivity improvements, partially offset by unfavorable volume mix and strategic investments.

Analytical Instruments

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(Dollars in millions) 2024 2023 Total

Change Currency

Translation Acquisitions/ Divestitures

Change Acquisitions/ Divestitures Currency

Revenues $ 7,463 $ 7,263 3 % 0 % (1) % 3 %

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Segment income margin 26.2 % 26.3 % (0.1) pt

The increase in organic revenues in 2023 was due to increased demand across all the segment’s businesses, with particular strength in the electron microscopy and chromatography and mass spectrometry businesses.

The increase in segment income margin resulted primarily from strong productivity, strong pricing realization to address higher inflation and strong volume pull-through, offset in part by the effects of currency translation and strategic growth investments.

The increase in organic revenues in 2024 was due to very strong growth in the electron microscopy business, partially offset by declines in the other instrumentation businesses.

The decrease in segment income margin resulted primarily from unfavorable business mix and strategic investments, largely offset by strong productivity improvements.

Specialty Diagnostics Organic (non-GAAP measure)

(Dollars in millions) 2024 2023 Total

Change Currency

Translation Acquisitions/ Divestitures

Change Acquisitions/ Divestitures Currency

Revenues $ 4,512 $ 4,405 2 % 0 % 0 % 3 %

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Segment income margin 25.7 % 25.5 % 0.2 pt

The decrease in organic revenues in 2023 was due to decreased demand, primarily driven by products addressing diagnosis of COVID-19, partially offset by underlying growth in the immunodiagnostics, microbiology, and transplant diagnostics businesses.

The increase in segment income margin was due to favorable business mix, strong pricing realization to address higher inflation, and strong productivity improvements, partially offset by the impact of lower COVID-19 testing volume.

The increase in organic revenues in 2024 was driven by growth in the immunodiagnostics and transplant diagnostics businesses, as well as in the healthcare market channel, partially offset by decreased demand for products addressing diagnosis of COVID-19.

The increase in segment income margin was due to productivity improvements, partially offset by strategic investments.

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(Dollars in millions) 2024 2023 Total

Change Currency

Translation Acquisitions/ Divestitures

Change Acquisitions/ Divestitures Currency

Revenues $ 23,157 $ 23,041 1 % 0 % 0 % 0 %

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Segment income margin 13.3 % 14.6 % (1.3) pt

The increase in organic revenues in 2023 was primarily due to higher sales in the clinical research and pharma services businesses.

The increase in segment income margin was primarily due to very strong productivity improvements and strong pricing realization to address higher inflation.

* Results may not sum due to rounding

Organic revenues were flat in 2024 due to growth in the research and safety channel and clinical research business, offset by decreased demand in COVID-19 vaccines and therapies-related activity.

The decrease in segment income margin was primarily due to unfavorable business mix and strategic investments, partially offset by productivity improvements.

Non-operating Items

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Weighted average diluted shares 383 388

Net interest expense (interest expense less interest income) increased due primarily to the increase in debt for general corporate purposes and the company’s capital deployment initiatives, which included financing stock buybacks, paying dividends and acquiring The Binding Site Group and CorEvitas, LLC (Note 2).

These increases were partially offset by higher cash and cash equivalents balances as well as higher interest rates on these balances when compared to 2022.

Net interest expense (interest expense less interest income) decreased due primarily to higher cash, and cash equivalents and short-term investments balances, as well as higher interest rates on these balances when compared to 2023.

See additional discussion under the caption “Liquidity and Capital Resources” below.

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GAAP other income/(expense) and adjusted other income/(expense) includes currency transaction gains/losses on non-operating monetary assets and liabilities, and net periodic pension benefit cost/(income), excluding the service cost component.

GAAP other income/(expense) in 2023 also includes $45 million of net losses on investments.

GAAP other income/(expense) in 2022 also includes $160 million of net losses on investments and $26 million of losses on the early extinguishment of debt (Note 10), partially offset by $67 million of net gains on derivative instruments to address certain foreign currency risks.

GAAP other income/(expense) in 2024 and 2023 also includes $20 million and $(45) million, respectively, of net gains/(losses) on investments.

The GAAP tax rate in 2024 was impacted by $176 million of expense, net, for a provision associated with a tax audit.

The company’s 2024 GAAP and adjusted tax rates were also impacted by tax benefits of $459 million, primarily in jurisdictions where the deferred tax assets are now expected to be realized due to forecasted income.

The GAAP and adjusted tax rates in 2023 were impacted by changes in valuation allowances, including a $183 million release in a jurisdiction where the deferred tax assets are now expected to be realized, and, to a lesser extent, by a decrease in pre-tax earnings compared to 2022.

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tax credits and the revaluation of net operating loss carryforwards due to higher tax rates as a result of its tax return resubmissions, a tax benefit of $91 million, net of related tax expenses, from a foreign exchange loss on an intercompany debt refinancing transaction, and $233 million of tax benefits resulting from intra-entity transactions.

The company’s GAAP and adjusted tax rates in 2022 were impacted by releases of valuation allowances of $189 million in jurisdictions where the deferred tax assets are now expected to be realized.

The company’s 2022 GAAP tax rate was also impacted by a net benefit of $208 million resulting from tax audit settlements (Note 8).

The effective tax rates in both 2024 and 2023 were also affected by relatively significant earnings in lower tax jurisdictions.

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and on the statutory tax rates in those countries.

Based on the dispersion of the company’s non-U.S.

Equity in earnings/losses of unconsolidated entities was impacted by an $88 million impairment of an equity method investment in 2024.

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dispersion of the company’s non-U.S.

income tax provision among many countries, the company believes that a change in the statutory tax rate in any individual country is not likely to materially affect the company’s income tax provision or net income, aside from any resulting one-time adjustment to the company’s deferred tax balances to reflect a new rate.

Weighted average diluted shares decreased in 2024 compared to 2023 due to share repurchases, net of option dilution.

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Cash and cash equivalents $ 4,009 $ 8,077

Short-term investments 1,561 3

Total debt 31,275 34,917

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The company believes that its existing cash and cash equivalents and its future cash flow from operations together with available borrowing capacity under its revolving credit agreement will be sufficient to meet the cash requirements of its existing businesses for the foreseeable future, including at least the next 24 months.

As of December 31, 2023, the company’s short-term debt totaled $3.61 billion.

As of December 31, 2024, the company’s short-term obligations and current maturities of long-term obligations totaled $2.21 billion.

The company has a revolving credit facility with a bank group that provides up to $5.00 billion of unsecured multi-currency revolving credit (Note 3).

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Operating Activities

During 2023, cash provided by income was offset in part by investments in working capital.

A decrease in inventories provided cash of $0.60 billion.

A decrease in accounts payable used cash of $0.50 billion, and changes in other assets and other liabilities used cash of $0.80 billion primarily due to the timing of payments for compensation and income taxes.

During 2024, net income provided substantially all cash from operating activities.

Changes in working capital were not significant.

Cash payments for income taxes were $1.83 billion during 2024.

During 2023, cash provided by income was offset in part by investments in working capital.

Increases in accounts receivable and inventories used cash of $0.43 billion and $0.83 billion, respectively, primarily to support growth in sales.

An increase in accounts payable provided cash of $0.65 billion.

A decrease in inventories provided cash of $0.60 billion.

A decrease in accounts payable used cash of $0.50 billion, and changes in other assets and liabilities used cash of $0.80 billion primarily due to the timing of payments for compensation and income taxes.

Cash payments for income taxes were $1.48 billion during 2023.

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An unfavorable outcome that differs materially from current accrual estimates, if any, for one or more of the matters described under the heading “Product Liability, Workers Compensation and Other Personal Injury Matters” in Note 5 could have a material adverse effect on the company’s financial position as well as its results of operations and cash flows.

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Investing Activities

During 2024, the acquisition of Olink Holding AB (publ) used cash of $3.13 billion.

The company’s investing activities also included net purchases of investments of $1.63 billion, primarily to provide additional interest income, as well as $1.40 billion of property, plant and equipment for capacity and capability investments.

During 2023, acquisitions of The Binding Site Group and CorEvitas, LLC used cash of $2.70 billion and $0.91 billion, respectively.

The company’s investing activities also included purchases of $1.48 billion of property, plant and equipment for capacity and capability investments.

During 2022 the company’s investing activities were principally for the purchase of property, plant and equipment for capacity and capability investments.

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The company expects that for all of 2025, expenditures for property, plant and equipment, net of disposals, will be between $1.4 billion and $1.7 billion.

Financing Activities

During 2023, issuance of senior notes provided $5.94 billion of cash.

Repayment of senior notes and net commercial paper activity used cash of $5.78 billion and $0.32 billion, respectively.

During 2024, issuance of debt provided $1.20 billion of cash.

Repayment of debt used cash of $3.61 billion.

The company’s financing activities also included the repurchase of $4.00 billion of the company’s common stock (7.4 million shares) and the payment of $0.58 billion in cash dividends.

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At February 20, 2025, $1.00 billion was available for future repurchases of the company’s common stock under this authorization.

During 2022, issuance of senior notes provided $3.19 billion of cash.

Repayment of senior notes and net commercial paper activity used cash of $0.38 billion and $2.16 billion, respectively.

In the first quarter of 2025, the company issued Fr.1.15 billion of Swiss franc-denominated debt (Note 3).

During 2023, issuance of debt provided $5.94 billion of cash.

Repayment of debt and net commercial paper activity used cash of $5.78 billion and $0.32 billion, respectively.

The company’s financing activities also included the repurchase of $3.00 billion of the company's common stock (5.2 million shares) and the payment of $0.52 billion in cash dividends.

In addition to the obligations on the balance sheet at December 31, 2023, which include, but are not limited to pension obligations (Note 7), unrecognized tax benefits (Note 8), debt (Note 10), operating leases (Note 11), and contingent consideration (Note 14), the company has also entered into an agreement to acquire Olink (Note 2).

The company also has unconditional purchase obligations in the ordinary course of business that include agreements to purchase goods, services or fixed assets, pay royalties, and fund capital commitments pursuant to investments held by the company (Note 12).

In addition to the obligations on the balance sheet at December 31, 2024, which include, but are not limited to pension obligations (Note 14), unrecognized tax benefits (Note 7), debt (Note 3), operating leases (Note 13), and contingent consideration (Note 4), the company also has unconditional purchase obligations in the ordinary course of business that include agreements to purchase goods, services or fixed assets, pay royalties, and fund capital commitments pursuant to investments held by the company (Note 5).

Non-GAAP Measures

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Thermo Fisher management uses organic revenue growth to forecast and evaluate the operational performance of the company as well as to compare revenues of current periods to prior periods.

We report adjusted operating income, adjusted operating income margin, adjusted other income/(expense), adjusted tax rate, and adjusted EPS.

We report adjusted operating income, adjusted operating margin, adjusted other income/(expense), adjusted tax rate, and adjusted EPS.

We believe that the use of these non-GAAP financial measures, in addition to GAAP financial measures, helps investors to gain a better understanding of our core operating results and future prospects, consistent with how management measures and forecasts the company’s core operating performance, especially when comparing such results to previous periods, forecasts, and to the performance of our competitors.

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impairments of long-lived assets;

and certain other gains and losses that are either isolated or cannot be expected to occur again with any predictability, including gains/losses on

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investments, the sale of businesses, product lines, and real estate, significant litigation-related matters, curtailments/settlements of pension plans, and the early retirement of debt.

and certain other gains and losses that are either isolated or cannot be expected to occur again with any predictability, including gains/losses on investments, the sale of businesses, product lines, and real estate, significant litigation-related matters, curtailments/settlements of pension plans, and the early retirement of debt.

We exclude these items because they are outside of our normal operations and/or, in certain cases, are difficult to forecast accurately for future periods.

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Exclusion of the amortization expense allows comparisons of operating results that are consistent over time for both our newly acquired and long-held businesses and with both acquisitive and non-acquisitive peer companies.

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• The noncontrolling interest and tax impacts of the above items and the impact of significant tax audits or events (such as changes in deferred taxes from enacted tax rate/law changes), the latter of which we exclude because they are outside of our normal operations and difficult to forecast accurately for future periods.

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Other income/expense adjustments (d) (0.05) 0.13

Provision for income taxes adjustments (e) (1.66) (1.70)

Benefit from/(provision for) income taxes adjustments (e) (0.86) (1.66)

Equity in earnings/losses of unconsolidated entities 0.11 0.15

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$ 21.86 $ 21.55

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(Dollars in millions except per share amounts) 2023 2022

Reconciliation of free cash flow

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$ 7,324 $ 7,014

(a) Adjusted results in 2023 and in 2022 exclude charges for the sale of inventories revalued at the date of acquisition and charges for inventory write-downs associated with large-scale abandonment of product lines.

Adjusted results in 2023 also exclude $13 million of accelerated depreciation on manufacturing assets to be abandoned due to facility consolidations.

(a) Adjusted results in 2024 and 2023 exclude charges for inventory write-downs associated with large-scale abandonment of product lines, accelerated depreciation on manufacturing assets to be abandoned due to facility consolidations, and charges for the sale of inventory revalued at the date of acquisition.

THERMO FISHER SCIENTIFIC INC.

(b) Adjusted results in 2024 and 2023 exclude certain third-party expenses, principally transaction/integration costs related to recent acquisitions, charges/credits for changes in estimates of contingent acquisition consideration, and charges associated with product liability litigation.

(c) Adjusted results in 2023 and 2022 exclude restructuring and other costs consisting principally of severance, impairments of long-lived assets, charges for environmental-related matters, abandoned facility and other expenses of headcount reductions and real estate consolidations.

Adjusted results in 2023 also exclude $26 million of contract termination costs associated with facility closures, $19 million of net charges for pre-acquisition litigation and other matters, and $11 million of gains on the sale of real estate.

Adjusted results in 2022 also exclude $14 million of gain on the sale of intellectual property.

Adjusted results in 2024 also exclude $7 million of accelerated depreciation on fixed assets to be abandoned due to facility consolidations.

(c) Adjusted results in 2024 and 2023 exclude restructuring and other costs consisting principally of severance, impairments of long-lived assets, charges for environmental-related matters, net charges for pre-acquisition litigation and other matters, net gains/losses on the sale of real estate, and abandoned facility and other expenses of headcount reductions and real estate consolidations.

Adjusted results in 2023 also exclude $26 million of contract termination costs associated with facility closures.

(d) Adjusted results exclude net gains/losses on investments.

Adjusted results in 2022 also exclude $67 million of net gains on derivative instruments to address certain foreign currency risks and $26 million of losses on the early extinguishment of debt.

(e) Adjusted results in 2023 and 2022 exclude incremental tax impacts for the reconciling items between GAAP and adjusted net income, incremental tax impacts as a result of tax rate/law changes and the tax impacts from audit settlements (including a $658 million benefit from an audit settlement in 2022).

Adjusted results in 2023 also exclude $14 million of charges for pre-acquisition matters.

Adjusted results in 2022 also exclude a $423 million charge for the impact of deferred tax realizability assessments as a result of audit settlements.

(e) Adjusted results in 2024 and 2023 exclude incremental tax impacts for the reconciling items between GAAP and adjusted net income, incremental tax impacts as a result of tax rate/law changes and the tax impacts from audit settlements.

Adjusted results in 2023 also exclude $14 million of net charges for pre-acquisition matters.

(f) Adjusted results exclude the incremental impacts for the reconciling items between GAAP and adjusted net income attributable to noncontrolling interests.

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Business Combinations

The company uses assumptions and estimates in determining the fair value of assets acquired and liabilities assumed in a business combination.

The determination of the fair value of intangible assets, which represent a significant portion of the purchase price in many of the company’s acquisitions, requires the use of significant judgment with regard to (i) the fair value and (ii) whether such intangibles are amortizable or non-amortizable and, if the former, the period and the method by which the intangible asset will be amortized.

The company estimates the fair value of acquisition-related intangible assets principally based on projections of cash flows that will arise from identifiable intangible assets of acquired businesses, which include estimates of customer attrition and technology obsolescence rates.

The company uses assumptions and estimates in determining the fair value of assets acquired and liabilities assumed in business combinations.

The determinations of the fair value of intangible assets, which represent a significant portion of the purchase price in many of the company’s acquisitions, require the use of significant judgment with regard to (i) the fair value and (ii) whether such intangibles are amortizable or non-amortizable and, if the former, the period and the method by which the intangible asset will be amortized.

The projected cash flows are discounted to determine the present value of the assets at the dates of acquisition.

See Note 12 for additional information about our recent business combinations.

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Goodwill and Indefinite-lived Intangible Assets

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Goodwill and indefinite-lived intangible assets totaled $45.85 billion and $1.24 billion, respectively, at December 31, 2024 (see Note 2 for additional information).

Estimates of discounted future cash flows require assumptions related to revenue and operating income growth rates, discount rates and other factors.

Estimates of discounted future cash flows require assumptions related to revenue and operating income margin growth rates, discount rates and other factors.

For the goodwill impairment tests, the company also considers (i) peer revenues and earnings trading multiples from companies that have operational and financial characteristics that are similar to the respective reporting units and (ii) estimated weighted average costs of capital.

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The company performed the quantitative goodwill impairment test for all of its reporting units and indefinite-lived intangible assets.

Determinations of fair value based on projections of discounted cash flows, which decreased from the prior year projections primarily due to higher discount rates, and based on peer revenues and earnings trading multiples, which also decreased from the prior year, were sufficient to conclude that no impairments of goodwill or indefinite-lived intangible assets existed at the end of the tenth fiscal month of 2023, the date of the company’s annual impairment testing.

Determinations of fair value based on projections of discounted cash flows, which generally increased from the prior year projections primarily due to lower discount rates, and based on peer revenues and earnings trading multiples, which also

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generally increased from the prior year, were sufficient to conclude that no impairments of goodwill or indefinite-lived intangible assets existed at the end of the tenth fiscal month of 2024, the date of the company’s annual impairment testing.

There were no interim impairments of goodwill or indefinite-lived intangible assets in 2024.

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Should the fair values of the company’s reporting units or indefinite-lived intangible assets decline because of reduced operating performance, market declines, or other indicators of impairment, or as a result of changes in the discount rates, charges for impairment may be necessary.

During its annual 2023 goodwill impairment assessments, the company determined that the excess of fair value over carrying value for one of the clinical research business’s reporting units had increased to 4%.

Despite this favorable increase, given that the fair value of the reporting unit was not substantially in excess of its carrying value as of the annual 2023 assessment date, relatively small decreases in future cash flows versus anticipated results, decreases in peer trading multiples and/or increases in weighted average costs of capital could result in impairment of goodwill.

The reporting unit had $3.95 billion of goodwill, and an overall carrying value of $5.54 billion as of December 31, 2023.

Definite-lived Intangible Assets

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In these situations, the company considers the asset groups to be the units of account for impairment testing.

The company recorded definite-lived intangible asset impairments of $0.01 billion and $0.12 billion in 2023 and 2021, respectively (Note 16).

The company recorded definite-lived intangible asset impairments of $0.01 billion in 2023.

Unrecognized Tax Benefits

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Should tax return positions that the company expects are sustainable not be sustained upon audit, the company could be required to record an incremental tax provision for such taxes.

The company’s liability for these unrecognized tax benefits totaled $0.54 billion at December 31, 2023, compared to $0.57 billion at December 31, 2022, primarily as a result of an audit settlement (Note 8).

The company’s liability for these unrecognized tax benefits totaled $0.52 billion at December 31, 2024, compared to $0.54 billion at December 31, 2023, primarily as a result of audit settlements and reductions of prior year tax positions (Note 7).

The company operates in numerous countries under many legal forms and, as a result, is subject to the jurisdiction of numerous domestic and non-U.S.

tax authorities, as well as to tax agreements and treaties among these governments.

Determination of taxable income in any jurisdiction requires the company to interpret the related tax laws and regulations and the use of estimates and assumptions regarding significant future events, such as the amount, timing and character of deductions, permissible

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revenue recognition methods under the tax law and the sources and character of income and tax credits.

Changes in tax laws, regulations, agreements and treaties, currency exchange restrictions or the company’s level of operations or profitability in each taxing jurisdiction could have an impact upon the amount of current and deferred tax balances and hence the company’s net income.

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Any such reversals are recorded as a reduction of the company’s tax provision.

The company’s tax valuation allowance totaled $1.32 billion at both December 31, 2023 and December 31, 2022 (Note 8).

The company’s tax valuation allowance totaled $1.04 billion and $1.32 billion at December 31, 2024 and December 31, 2023, respectively (Note 7).

Should the company’s actual future taxable income by tax jurisdiction vary from estimates, additional allowances or reversals thereof may be necessary.

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A description of recently issued accounting standards is included under the heading “Recent Accounting Pronouncements” in Note 1.

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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 7. Management’s Discussion and Analysis