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 Table of Contents 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 16 Case 1:25-cv-04630-KPF Document 65-1 Filed 01/28/26 Page 4 of 6 Table of Contents 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 26 Case 1:25-cv-04630-KPF Document 65-1 Filed 01/28/26 Page 5 of 6 Table of Contents 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. 73 Case 1:25-cv-04630-KPF Document 65-1 Filed 01/28/26 Page 6 of 6 Table of Contents 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 75