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Item 7. Management’s Discussion and Analysis

2026-02-26 compared with 2025-02-20 · 95 added, 88 removed, 251 unchanged (42% of the section changed)

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Life Sciences Solutions, Analytical Instruments, Specialty Diagnostics, and Laboratory Products and Biopharma Services.

THERMO FISHER SCIENTIFIC INC.

Consolidated Results

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22.7 % 22.6 % 0.1 pt

GAAP diluted earnings per share attributable to Thermo Fisher Scientific Inc.

GAAP diluted earnings per share (EPS) attributable to Thermo Fisher Scientific Inc.

$ 17.74 $ 16.53 7 %

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$ 22.87 $ 21.86 5 %

THERMO FISHER SCIENTIFIC INC.

Organic Revenue Growth

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Organic revenue growth (non-GAAP measure)

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.

Since the company’s acquisition of PPD in December 2021, the clinical research business has continued to play a leading role in supporting the clinical trials for COVID-19 vaccines and therapies.

These positive impacts continued at much lower levels in 2024 as customer testing as well as therapy and vaccine demand declined.

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

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.

During 2025, revenues grew in the pharma and biotech market due to increased demand from customers, partially offset by reduced demand for COVID-19 vaccine and therapy related products and services.

Revenues in the academic and government market declined, driven by customer hesitancy in a more uncertain environment in the U.S.

and macro conditions in China.

Revenue to customers in the industrial and applied market grew.

Revenues to customers in the diagnostics and healthcare market were flat.

During 2025, sales grew in North America, Europe and Asia-Pacific, but declined in China.

Contributions to organic revenue during 2025 were led by the Laboratory Products and Biopharma Services and Life Sciences Solutions segments.

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

• High-impact innovation;

• Our trusted partner status with customers, and

• Our trusted partner status with customers;

• Our unparalleled commercial engine.

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.

GAAP operating income margin and adjusted operating income margin increased in 2025 due primarily to very strong productivity improvements, partially offset by unfavorable business mix and strategic investments.

GAAP operating income margin in 2025 also benefited from lower amortization expense when compared to 2024;

however, this was partially offset by higher transaction-related costs.

We estimate that charges for restructuring and related actions incurred for headcount reductions and facility consolidations, which were approximately $0.3 billion in 2025 and $0.3 billion in 2024, will realize annual cost savings of approximately $0.5 billion and $0.2 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.

The company’s references throughout this discussion to productivity improvements generally refer to the impact of its Practical Process Improvement (PPI) Business System to address inflation, drive cost efficiencies and improve profitability.

The benefits of PPI include optimized price realization, 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

On January 3, 2023, the company acquired, within the Specialty Diagnostics segment, The Binding Site Group, a U.K.-based provider of specialty diagnostic assays and instruments to improve the diagnosis and management of blood cancers and immune system disorders.

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

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

It also complements the existing life sciences and mass spectrometry offerings, accelerating protein biomarker discovery and providing strong synergy opportunities.

On September 1, 2025, the company acquired, within the Life Sciences Solutions segment, our filtration and separation business, a leading provider of purification and filtration technologies used in the production of biologics as well as in medical technologies and industrial applications, from Solventum Corporation.

The business strengthens the segment’s bioproduction offerings with advanced filtration technologies that improve quality and efficiency across upstream and downstream workflows.

In addition, its industrial filtration and membrane solutions will expand our reach into industries including battery, semiconductor and medical device manufacturing.

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

Segment Results

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Segment income margin 36.3 % 36.4 % (0.1) pt

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

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

The increase in organic revenues in 2025 was driven by the bioproduction business.

On a reported basis, the bioproduction business grew $548 million, driven by higher demand from pharma and biotech customers, as well as the impact from the 2025 acquisition of the filtration and separation business.

Genetic sciences grew $82 million, driven by the 2024 acquisition of Olink.

The decrease in segment income margin resulted primarily from the impact from acquisitions, unfavorable business mix, and strategic investments, partially offset by very strong productivity improvements.

Analytical Instruments

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Segment income margin 23.0 % 26.2 % (3.2) pt

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)

Organic revenues were flat in 2025 primarily due to growth in the electron microscopy and chromatography and mass spectrometry businesses, largely offset by declines in the chemical analysis business.

On a reported basis, the electron microscopy business and chromatography and mass spectrometry business grew $87 million and $83 million, respectively, partially offset by a decline of $78 million in the chemical analysis business.

The decrease in segment income margin resulted primarily from the impacts of tariffs and related foreign exchange, strategic investments, and unfavorable business mix, partially offset by strong productivity improvements.

Specialty Diagnostics

Organic (non-GAAP measure)

(Dollars in millions) 2025 2024 Total

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Segment income margin 26.9 % 25.7 % 1.2 pt

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.

The increase in organic revenues in 2025 was led by growth in the healthcare market channel and the transplant diagnostics business.

On a reported basis, the clinical diagnostic business grew $52 million, the immunodiagnostics business grew $48 million, and the transplant diagnostics business grew $37 million, which were the principal drivers of reported revenue growth in the segment.

The increase in segment income margin was due to strong productivity improvements.

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Laboratory Products and Biopharma Services Organic (non-GAAP measure)

Laboratory Products and Biopharma Services

Organic (non-GAAP measure)

(Dollars in millions) 2025 2024 Total

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Segment income margin 14.0 % 13.3 % 0.7 pt

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.

The increase in organic revenues in 2025 primarily due to growth in the research and safety market channel and the pharma services business, partially offset by moderation in COVID-19 vaccines and therapies-related activity.

On a reported basis, the pharma services business and research and safety market channel grew $457 million and $422 million, respectively.

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

Non-operating Items

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Weighted average diluted shares 378 383

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.

Net interest expense (interest expense less interest income) increased due primarily to lower cash, and cash equivalents and short-term investments balances, as well as lower interest rates on these balances when compared to 2024.

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

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GAAP other income/(expense) in 2025 and 2024 also includes $14 million and $20 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.

The company’s GAAP and adjusted tax rates in 2023 were also impacted by tax planning initiatives, including a tax benefit of $127 million for U.S.

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.

GAAP other income/(expense) in 2025 also includes $8 million of settlement charges for pension plans.

The company’s GAAP and adjusted tax rates in 2025 were impacted by a $269 million deferred tax benefit resulting from the recognition of tax attributes related to domestication transactions, a deferred tax benefit of $153 million related to capital losses generated as part of intra-entity transactions, a $158 million benefit in jurisdictions where the deferred tax assets are now expected to be realized due to forecasted income, and a $93 million tax benefit from tax return reassessments.

The company’s GAAP rate was also impacted by $51 million of tax expense related to tax legislation enacted during the third quarter of 2025 (Note 7).

The company’s 2024 GAAP and adjusted tax rates were 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 company’s GAAP tax rate in 2024 was also impacted by $176 million of expense, net, for a provision associated with a tax audit.

The effective tax rates in both 2025 and 2024 were also affected by relatively significant earnings in lower tax jurisdictions.

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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.

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

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

Weighted average diluted shares decreased in 2025 compared to 2024 due to share repurchases.

Liquidity and Capital Resources

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Total debt 39,384 31,275

Approximately half of the company’s cash balances and cash flows from operations are from outside the U.S.

Approximately half of the company’s cash balances and cash flows from operations are generated outside the U.S.

The company uses its non-U.S.

cash for needs outside of the U.S.

including acquisitions, capacity expansion, and repayment of third-party foreign debt by foreign subsidiaries.

cash for needs outside of the U.S., including acquisitions, capacity expansion, and repayment of third-party foreign debt by foreign subsidiaries.

In addition, the company also transfers cash to the U.S.

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(4,047) (5,841)

Net cash used in financing activities

Net cash provided by (used in) financing activities

1,801 (6,792)

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Operating Activities

During 2025, cash provided by income was offset in part by investments in working capital.

Increases in accounts receivable used cash of $0.43 billion and changes in contract assets/liabilities used cash of $0.38 billion.

An increase in accounts payable provided cash of $0.42 billion.

Changes in other assets and liabilities used cash of $1.31 billion primarily due to the timing of payments for income taxes.

Cash payments for income taxes were $1.78 billion during 2025.

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

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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.

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.

The company is contingently liable with respect to certain legal proceedings and related matters.

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.

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.

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During 2025, acquisitions used cash of $4.04 billion.

The company’s investing activities also included $1.52 billion for the purchase of property, plant and equipment for capacity and capability investments, as well as $1.18 billion of proceeds from net sales of investments.

During 2024, acquisitions 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 for the purchase of property, plant and equipment for capacity and capability investments.

The company expects that for all of 2026, expenditures for property, plant and equipment, net of disposals, will be between $1.8 billion and $2.0 billion.

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Financing Activities

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The company’s financing activities also included the repurchase of $3.00 billion of the company’s common stock (5.8 million shares) and the payment of $0.64 billion in cash dividends.

On November 15, 2024, the Board of Directors announced that it replaced the existing authorization to repurchase the company’s common stock, of which $1.00 billion was remaining, with a new authorization to repurchase up to $4.00 billion of the company’s common stock.

On November 6, 2025, the Board of Directors authorized the repurchase of up to $5.00 billion of the company’s common stock.

Early in the first quarter of 2026, the company repurchased $3.00 billion (4.9 million shares) of the company's common stock.

At February 26, 2026, $2.00 billion was available for future repurchases of the company’s common stock under this authorization.

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

In the first quarter of 2026, the company issued $3.80 billion of senior notes (Note 3).

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

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

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.

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).

The company is contingently liable with respect to certain legal proceedings and related matters.

In addition to the obligations on the balance sheet at December 31, 2025, which include, but are not limited to the agreement to acquire Clario Holdings, Inc.

(Note 12), 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

In addition to the financial measures prepared in accordance with generally accepted accounting principles (GAAP), we use certain non-GAAP financial measures such as organic revenue growth, which is reported revenue growth, excluding the impacts of revenues from acquired/divested businesses and the effects of currency translation.

In addition to the financial measures prepared in accordance with GAAP, we use certain non-GAAP financial measures such as organic revenue growth, which is reported revenue growth, excluding the impacts of revenues from acquired/divested businesses and the effects of currency translation.

We report organic revenue growth because Thermo Fisher management believes that in order to understand the company’s short-term and long-term financial trends, investors may wish to consider the impact of acquisitions/divestitures and foreign currency translation on revenues.

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

We report adjusted operating income, adjusted operating income 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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To calculate these measures we exclude, as applicable:

• Certain acquisition-related costs, including charges for the sale of inventories revalued at the date of acquisition, significant transaction/acquisition-related costs, including changes in estimates of contingent acquisition-related consideration, and other costs associated with obtaining short-term financing commitments for pending/recent acquisitions.

• Certain transaction-related costs, including charges for the sale of inventories revalued at the date of acquisition, significant transaction-related third-party costs, changes in estimates of contingent acquisition-related consideration, and other costs associated with obtaining short-term financing commitments for pending/recent acquisitions.

We exclude these costs because we do not believe they are indicative of our normal operating costs.

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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.

We report free cash flow, which is operating cash flow excluding net capital expenditures, to provide a view of the continuing operations’ ability to generate cash for use in acquisitions and other investing and financing activities.

We report free cash flow, which is operating cash flow less net capital expenditures, to provide a view of the continuing operations’ ability to generate cash for use in acquisitions and other investing and financing activities.

The company also uses this measure as an indication of the strength of the company.

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Other income/expense adjustments (d) (0.02) (0.05)

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

Income taxes adjustments (e) (1.21) (0.86)

Equity in earnings/losses of unconsolidated entities 0.11 0.11

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$ 6,337 $ 7,324

(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.

(a) Adjusted results exclude 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.

Adjusted results in 2025 exclude $4 million of transaction-related costs.

Adjusted results in 2024 also exclude $13 million of charges for inventory write-downs associated with large-scale abandonment of product lines.

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(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.

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.

(b) Adjusted results exclude certain third-party expenses, principally transaction/integration costs, charges/credits for changes in estimates of contingent acquisition consideration, charges associated with product liability litigation, and accelerated depreciation on fixed assets to be abandoned due to facility consolidations.

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

Adjusted results in 2025 also exclude $51 million of charges for disposition of a consolidated joint venture.

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

(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.

Adjusted results in 2025 also exclude $8 million of settlement charges for pension plans.

(e) Adjusted results 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.

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

Goodwill and Indefinite-lived Intangible Assets

The company evaluates goodwill and indefinite-lived intangible assets for impairment annually and when events occur or circumstances change that would more likely than not reduce the fair value of an asset below its carrying amount.

The company evaluates goodwill for impairment annually and when events occur or circumstances change that would more likely than not reduce the fair value of an asset below its carrying amount.

Events or circumstances that might require an interim evaluation include unexpected adverse business conditions, economic factors, unanticipated technological changes or competitive activities, loss of key personnel and acts by governments and courts, among others.

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).

Goodwill totaled $49.36 billion at December 31, 2025 (Note 2).

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.

Different assumptions from those made in the company’s analysis could materially affect projected cash flows and the company’s evaluation of goodwill and indefinite-lived intangible assets for impairment.

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

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.

Different assumptions from those made in the company’s analysis could materially affect projected cash flows and the company’s evaluation of goodwill for impairment.

The company performed the quantitative goodwill impairment test for all of its reporting units, except as discussed below.

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 were generally consistent with the prior year, were sufficient to conclude that no impairments of goodwill existed at the end of the tenth fiscal month of 2025, the date of the company’s annual impairment testing.

There were no interim impairments of goodwill in 2025.

There can be no assurance, however, that adverse events or conditions will not cause the fair values of these

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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.

There can be no assurance, however, that adverse events or conditions will not cause the fair values of these assets to decline.

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.

assets to decline.

Should the fair values of the company’s reporting units 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.

With the completion of the filtration and separation business acquisition in September 2025, the company established a new reporting unit that solely consists of the legacy business, the book carrying value of which equaled its fair value as of the acquisition date.

During its annual 2025 goodwill impairment assessment, the company performed a qualitative assessment of this reporting unit and determined that no events had occurred and no circumstances had changed that would more-likely-than-not reduce the fair value of the reporting unit below its carrying amount.

As a result, the company did not perform the quantitative goodwill impairment test for this reporting unit.

Given that the fair value of the reporting unit was not substantially in excess of its carrying value as of the annual 2025 assessment date, relatively small decreases in future cash flows versus anticipated results, decreases in peer trading multiples and/or increases in the weighted average cost of capital could result in impairment of goodwill.

The reporting unit consisting of the filtration and separation business had $2.10 billion of goodwill, and an overall carrying value of $4.01 billion as of December 31, 2025.

Definite-lived Intangible Assets

Definite-lived intangible assets totaled $14.30 billion at December 31, 2024 (see Note 2 for additional information).

Definite-lived intangible assets totaled $14.60 billion at December 31, 2025 (Note 2).

Certain definite-lived intangible assets have largely independent cash flows.

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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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Recent Accounting Pronouncements

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