Deslande v. Fortrea Holdings Inc. — Entry #65

Case 1:25-cv-04630-KPF   Document 65-1   Filed 01/28/26   Page 1 of 6


                Exhibit A


             Case 1:25-cv-04630-KPF                         Document 65-1                 Filed 01/28/26              Page 2 of 6


                                      UNITED STATES
                          SECURITIES AND EXCHANGE COMMISSION
                                                         WASHINGTON, D.C. 20549

                                                               FORM 8-K
                                                             CURRENT REPORT

                              PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

                                                                    June 29, 2023
                                                           (Date of earliest event reported)


                                                       Fortrea Holdings Inc.
                                                 (Exact Name of Registrant as Specified in its Charter)


                        Delaware                                      001-41704                                       92-2796441
      (State or other jurisdiction of Incorporation)             (Commission File Number)                  (I.R.S. Employer Identification No.)


                                      8 Moore Drive
                      Durham,                                    North Carolina                                  27709
                          (Address of principal executive offices)                                             (Zip Code)


                                         (Registrant’s telephone number including area code) 877-495-0816

 Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the
                                                               following provisions:

 ☐    Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 ☐    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 ☐    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 ☐    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))


Securities registered pursuant to Section 12(b) of the Exchange Act.
Title of Each Class Trading Symbol Name of exchange on which registered
Common Stock, $0.001 par value FTRE The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this
chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with
any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐


              Case 1:25-cv-04630-KPF                         Document 65-1                 Filed 01/28/26               Page 3 of 6

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Competition

     Our operations in the drug development services industry involve high levels of competition, consisting of hundreds of small, limited-scope
service providers and a smaller number of large full-service drug development companies. While the industry has seen an increasing level of
consolidation over the past several years, primarily driven by the larger full-service providers, it remains highly fragmented.

     Our main competition consists of these small and large CROs, as well as in-house departments of pharmaceutical, biotechnology, and medical
device companies and, to a lesser extent, select universities and teaching hospitals and site management organizations. Our services have
periodically experienced heightened competition, including competition among CROs for both customers and potential acquisitions. We believe
that our significant therapeutic expertise, global reach, integrated model, customer service strategies, access to data, and operational strengths
differentiate us from our competitors across all of our segments.

    Our major competitors include IQVIA, ICON, Parexel, PPD, a subsidiary of Thermo Fisher Scientific Inc., Medpace Holdings, and Syneos
Health. We believe our success with customers has been rooted in transparent partnerships that offer agile solutions and support speed to market.
We believe we are positioned to be more flexible and customer focused than our larger competition while offering the global scale that our smaller
competition lacks.

Backlog and Net New Business

     Our backlog represents anticipated revenue for work not yet completed or performed under executed contracts and other forms of written
confirmation, where there is sufficient or reasonable certainty about the customer’s ability and intent to fund and commence the services within
twelve months. We adjust backlog for foreign currency fluctuations and exclude from backlog revenue that has been recognized as revenue in our
statements of operations. Our backlog was $8.6 billion, $8.1 billion, and $8.9 billion at December 31, 2022 and 2021 and March 31, 2023, respectively.

     We add net new business to backlog based on the aforementioned criteria. Additionally, each period we evaluate previously awarded projects
to adjust for modifications, cancellations, foreign currency fluctuations, and other items. Net new business varies from period to period depending
on numerous factors, including customer award volume, sales performance, and overall health of the biopharmaceutical industry, among others.
While customers with whom we have had long-standing relationships have continued to award new orders to us, we have experienced some
fluctuations in our net new business award levels over the last few quarters driven, we believe, by recent macroeconomic factors affecting the
industry and customer hesitation ahead of the spinoff. Some clients have indicated that they are waiting until after the spinoff is complete to award
new business. Our net new business awards were $3.7 billion, $3.4 billion and $3.7 billion for the years ended December 31, 2022, 2021 and 2020,
respectively, and $3.8 billion and $3.4 billion for the trailing twelve months ended March 31, 2023 and 2022, respectively.

     We do not believe that, as a sole measure, our backlog and net new business are consistent indicators of future revenue because they have
been, and likely will continue to be, affected by a number of factors, including the variable size and duration of projects, many of which are
performed over several years, and changes to the scope of work during the course of projects. Additionally, projects may be canceled or delayed
by the customer or regulatory authorities. We generally do not have a contractual right to the full amount of the contract award reflected in our
backlog. If a customer cancels a contract, we generally will be reimbursed for the costs we have incurred. For more information about risks related to
our backlog see “Risk Factors-Risks Relating to Our Business-Our backlog might not be indicative of our future revenues, and we might not realize
all of the anticipated future revenue reflected in our backlog.”

Sales, Customer Service, and Marketing

    Our global sales and customer service organization provides dedicated customer coverage across pharmaceutical, biotechnology, and medical
devices industries. This includes a range of solutions such as, but not limited to, clinical trials, biomarkers, technology services, and other services.
Our total staff base of approximately 21,000 includes a highly focused, experienced, and trained team of professional business development and
customer


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              Case 1:25-cv-04630-KPF                         Document 65-1                  Filed 01/28/26               Page 4 of 6

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                                                                    RISK FACTORS

     The following are certain risk factors that could affect our business, financial condition, results of operations, and cash flows. The risks that
are highlighted below are not the only risks that we face. You should carefully consider each of the following risks and all of the other
information contained in this information statement. Some of these risks relate principally to our spinoff from Labcorp, while others relate
principally to our business and the industry in which we operate or to the securities markets generally and ownership of our common stock. If
any of the following risks actually occur, our business, financial condition, results of operations, or cash flows could be negatively affected.

                                                             Risks Relating to the Spinoff

We may not realize the potential benefits from the spinoff.

     We may not realize the potential benefits that we expect from our spinoff from Labcorp. We have described those anticipated benefits
elsewhere in this information statement. See “The Spinoff-Reasons for the Spinoff.” In addition, as described elsewhere in this information
statement, we will incur additional costs related to our separation from Labcorp. We also expect to incur additional ongoing costs related to
operating as an independent public company and replacing the services previously provided by Labcorp. The costs associated with performing or
outsourcing these functions may exceed our expectations. A significant increase in the costs of performing or outsourcing these functions could
materially and adversely affect our business, financial condition, results of operations, and cash flows.
We have no history operating as an independent public company. We will incur additional expenses to create or supplement the corporate
infrastructure necessary to operate as an independent public company and we will experience increased ongoing costs in connection with
being an independent public company.

     Our business has historically used Labcorp's corporate infrastructure and services to support our business functions. A portion of the
expenses related to establishing and maintaining this infrastructure has been charged to us on a cost-allocation basis. Except as described under
the caption “Relationship with Labcorp After the Spinoff,” after the distribution date we will no longer have access to Labcorp's infrastructure or
services and we will need to establish or supplement our own. We may experience increased pricing in our supplier relationships for similar services
due to lower volume requirements when we separate from Labcorp. The operational, financial, information system, and logistical separation from
Labcorp is complex and involves numerous systems and jurisdictions. Following the spinoff, Labcorp will continue to provide some services to us
on a transitional basis pursuant to a transition services agreement. For more information regarding the transition services agreement, see
“Relationship with Labcorp After the Spinoff-Agreements Between Labcorp and Us-Transition Services Agreement.” However, we cannot assure
you that all such functions will be successfully executed by Labcorp during the transition period. Also, we will have to expend significant efforts
and costs (including potentially materially in excess of those estimated in the transition services agreement) to (i) replace or otherwise upgrade our
systems, including our IT and enterprise resource planning systems, (ii) implement additional financial, IT, and management controls, (iii) implement
reporting systems and procedures, (iv) hire additional management, IT, accounting, finance, legal, human resources, and other administrative staff
and third-party service providers, (v) establish employee benefit programs, (vi) create a board of directors and corporate governance programs, (vii)
carry out audit, tax and legal functions, and (vii) establish banking and credit facility arrangements. Any interruption in these services could have a
material adverse effect on our business, financial condition, results of operations, and cash flows. In addition, at the end of this transition period, to
the extent we are unable to perform particular functions ourselves, we will need to hire third parties to perform these functions on our behalf.
Our historical combined and pro forma financial information are not necessarily indicative of our future financial condition, results of
operations, or cash flows nor do they reflect what our financial condition, results of operations, or cash flows would have been as an
independent public company during the periods presented.

    The historical combined financial information we have included in this information statement does not necessarily reflect what our financial
condition, results of operations, or cash flows would have been as an


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               Case 1:25-cv-04630-KPF                             Document 65-1                    Filed 01/28/26                 Page 5 of 6

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Year ended December 31, 2022

                                                                                                                                                  Pro forma net
In millions except per share amounts                                                                                                                 income
Pro forma as shown above                                                                                                                      $                  58.4
Management adjustments
   Synergies (1)                                                                                                                                                 15.0
   Dis-synergies
     Operational dis-synergies(2)                                                                                                                               (8.2)
     Incremental stock compensation(3)                                                                                                                         (24.6)
     TSA inefficiencies (4)                                                                                                                                    (15.0)
Total Management adjustments                                                                                                                  $                (32.8)
Tax effect of Management adjustments                                                                                                                              8.0
Pro forma net income after Management adjustments                                                                                             $                  33.6
Weighted average number of basic and diluted common shares outstanding                                                                                           91.1
Pro forma basic and diluted earnings per share                                                                                                $                  0.37
__________________
(1) The synergies represent lower expected cost in certain areas such as, HR support and procurement services and technology, than the amounts historically allocated
    from Labcorp to the CDCS business and included in our historical financial results and non-GAAP information. This adjustment reflects management’s estimate of
    the future effect of the spin on our standalone operating costs.
(2) The operational dis-synergies represent cost in certain areas such as marketing, management, and public company related finance services that the company
    expects to exceed the amount of CDCS business cost previously allocated from Labcorp and included in our historical financial results and non-GAAP information.
    This adjustment reflects management’s estimate of the future effect of the spin on our standalone operating costs.
(3) CDCS is expected to incur additional stock compensation expense related to the incremental personnel and adjustments to compensation levels to reflect the
    responsibilities of employees in a standalone entity.
(4) TSA inefficiencies reflect the impact of the incremental costs of obtaining services under the transition services agreement compared to the estimated cost of
    performing those functions internally. It is anticipated that the TSA arrangements will be phased out over a 24 month period as CDCS develops the necessary
    infrastructure and capabilities to perform these functions internally.


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              Case 1:25-cv-04630-KPF                         Document 65-1                  Filed 01/28/26               Page 6 of 6

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     These expenses were allocated to the Company based on direct usage when identifiable or, when not directly identifiable, on the basis of
proportional net revenues or headcount or other reasonable driver, as applicable. The Company considers the basis on which the expenses have
been allocated to reasonably reflect the utilization of services provided to, or the benefit received by, the Company during the periods presented.
However, the allocations may not reflect the expenses the Company would have incurred as an independent company for the periods presented.
Actual costs that may have been incurred if the Company had been a standalone company would depend on a number of factors, including the
organizational structure, whether functions were outsourced or performed by employees, and strategic decisions made in areas such as IT and
infrastructure. For a period following the spinoff, however, some of these functions will continue to be provided by Labcorp under a planned
transition services agreement.

    The actual costs of services represented by these allocations may vary significantly from the amounts allocated to the Company in the
accompanying financial statements.

    Ukraine/Russia Conflict

    As a result of the ongoing conflict between Russia and Ukraine, we determined that all receivables from companies located in Russia and all
long-lived assets related to our Russia and Ukraine operations were impaired. Furthermore, we incurred additional costs in an effort to support our
employees impacted by the conflict.

    Seasonality

     Our business is seasonal. Revenue tends to be lowest in the first half, and especially the first quarter, of each year. Because of this seasonality,
our results of operations for the first half of the year, and the first quarter, in particular, may not be indicative of the results of operations that may
be achieved for subsequent quarters or the full year. We believe that first quarter 2023 revenue and margins were especially impacted by (i) a large
FSP contract loss (as discussed further below); (ii) the provision for credit losses on certain biotech receivables; (iii) slower backlog conversion
rates impacted by (a) continued staffing challenges, including increased times to fill recruitment in certain therapeutic areas (primarily respiratory)
and select geographies and (b) customer hesitation ahead of our spinoff and (iv) recent macroeconomic factors affecting the industry, in addition to
the seasonal nature of our business.

Backlog and Net New Business

     Our backlog represents anticipated revenue for work not yet completed or performed under executed contracts and other forms of written
confirmation, where there is sufficient or reasonable certainty about the customer’s ability and intent to fund and commence the services within
twelve months. We adjust backlog for foreign currency fluctuations and exclude from backlog revenue that has been recognized as revenue in our
statements of operations. Our backlog was $8.6 billion, $8.1 billion and $8.9 billion at December 31, 2022, and 2021 and March 31, 2023, respectively.

     We add net new business to backlog based on the aforementioned criteria. Additionally, each period we evaluate previously awarded projects
to adjust for modifications, cancellations, foreign currency fluctuations, and other items. Net new business varies from period to period depending
on numerous factors, including customer award volume, sales performance, and overall health of the biopharmaceutical industry, among others.
While customers with whom we have had long-standing relationships have continued to award new orders to us, we have experienced some
fluctuations in our net new business award levels over the last few quarters driven, we believe, by recent macroeconomic factors affecting the
industry and customer hesitation ahead of the spinoff. Some clients have indicated that they are waiting until after the spinoff is complete to award
new business. Our net new business awards were $3.7 billion, $3.4 billion and $3.7 billion for the years ended December 31, 2022, 2021 and 2020,
respectively and $3.8 billion and $3.4 billion for the trailing twelve months ended March 31, 2023 and 2022, respectively.

    We do not believe that, as a sole measure, our backlog and net new business are consistent indicators of future revenue because they have
been, and likely will continue to be, affected by a number of factors, including the variable size and duration of projects, many of which are
performed over several years, and changes to the scope of


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