Organon & Co.

1. Background and Nature of Operations

Organon & Co. (“Organon” or the “Company”) is a global healthcare company with a primary focus on improving the health of women throughout their lives. Organon develops and delivers innovative health solutions through a portfolio of prescription therapies and medical devices within women’s health, biosimilars and established brands (the “Organon Products”). Organon has a portfolio of more than 70 medicines and products across a range of therapeutic areas. The Company sells these products through various channels including drug wholesalers and retailers, hospitals, government agencies and managed health care providers such as health maintenance organizations, pharmacy benefit managers and other institutions. The Company operatessix manufacturing facilities, which are located in Belgium, Brazil, Indonesia, Mexico, the Netherlands and the United Kingdom. Unless otherwise indicated, trademarks appearing in italics throughout this document are trademarks of, or are used under license by, the Organon group of companies.

The Company’s operations include the following product portfolios:

•Women’s Health: Organon’s women’s health portfolio of products are sold by prescription primarily in two therapeutic areas, contraception, with key brands such as Nexplanon® (etonogestrel implant) (sold as Implanon NXT™ in some countries outside the United States) and NuvaRing®(etonogestrel / ethinyl estradiol vaginal ring), and fertility, with key brands such as Follistim AQ® (follitropin beta injection) (marketed in most countries outside the United States as Puregon™). Nexplanon is a long-acting reversible contraceptive, which is a class of contraceptives that is recognized as one of the most effective types of hormonal contraception available to patients with a low long-term average cost. Other women’s health products include the Jada® System, which is intended to provide control and treatment of abnormal postpartum uterine bleeding or hemorrhage when conservative management is warranted, and a license from Daré Biosciences for the global commercial rights to Xaciato® (clindamycin phosphate vaginal gel, 2%), an FDA-approved medication for the treatment of bacterial vaginosis (“BV”) in females 12 years of age and older.

•Biosimilars: Organon’s current biosimilars portfolio spans across immunology and oncology treatments. Organon’s oncology biosimilars, Ontruzant® (trastuzumab-dttb) and Aybintio TM 1 (bevacizumab), have been launched in more than 20 countries, Organon’s immunology biosimilars, Brenzys TM 1 (etanercept), Renflexis® (infliximab-abda) and Hadlima® (adalimumab-bwwd), have been launched infive countries. Allfive biosimilars in Organon’s portfolio have launched in Canada, andthree biosimilars, Ontruzant, Renflexis and Hadlima have launched in the United States.

•Established Brands: Organon has a portfolio of established brands, which includes leading brands in cardiovascular, respiratory, dermatology and non-opioid pain management. Most brands in the established brands portfolio (with the exception of Emgality® 2 (galcanezumab-gnlm), Rayvow™2 (lasmiditan) and Vtama® (tapinarof)) lost exclusivity years ago and have faced generic competition for some time.

2. Summary of Accounting Policies

Revenue Recognition — Recognition of revenue requires evidence of a contract, probable collection of sales proceeds and completion of substantially all performance obligations. The Company acts as the principal in its customer arrangements and therefore records revenue on a gross basis. The majority of the Company’s contracts have a single performance obligation — the promise to transfer goods. Shipping is considered immaterial in the context of the overall customer arrangement and damages or loss of goods in transit are rare. Therefore, shipping is not deemed a separately recognized performance obligation.

Revenues from sales of products, including tenders, are recognized at a point in time when control of the goods is transferred to the customer, which the Company has determined is when title and risks and rewards of ownership transfer to the customer and the Company is entitled to payment.

The nature of the Company’s business gives rise to several types of variable consideration including discounts and returns, which are estimated at the time of sale generally using the expected value method, although the most likely amount method is used for prompt pay discounts.

In the United States, sales discounts are issued to customers at the point-of-sale, through an intermediary wholesaler (known as chargebacks), or in the form of rebates. Additionally, sales are generally made with a limited right of return under certain conditions. Revenues are recorded net of provisions for sales discounts and returns, which are established at the time of sale. In addition, revenues are recorded net of time value of money discounts if collection of accounts receivable is expected to be in excess of one year.

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Chargebacks are discounts that occur when a contracted customer purchases through an intermediary wholesaler. The contracted customer generally purchases product from the wholesaler at its contracted price plus a mark-up. The wholesaler, in turn, charges the Company back for the difference between the price initially paid by the wholesaler and the contract price paid to the wholesaler by the customer. The Company estimates the provision for chargebacks based on expected sell-through levels by the Company’s wholesale customers to contracted customers, as well as estimated wholesaler inventory levels. Rebates are amounts owed based upon definitive contractual agreements or legal requirements with private sector, (Managed Care), and public sector (Medicaid and Medicare Part D) benefit providers, after the final dispensing of the product by a pharmacy to a benefit plan participant. The provision for rebates is based on expected patient usage, as well as inventory levels in the distribution channel to determine the contractual obligation to the benefit providers. The Company uses historical customer segment utilization mix, sales, changes to product mix and price, inventory levels in the distribution channel, government pricing calculations and prior payment history to estimate the expected provision.

The Company continually monitors the provision for aggregate customer discounts. There were no material adjustments to estimates associated with the aggregate customer discount provision in 2024, 2023, or 2022.

Summarized information about changes in the aggregate customer discount accrual related to sales in the United States is as follows:

(1) Includes $48 million of liabilities assumed as part of the Dermavant acquisition.

Amounts accrued for aggregate customer discounts are evaluated on a quarterly basis through comparison of information provided by the wholesalers, health maintenance organizations, pharmacy benefit managers, federal and state agencies, and other customers to the amounts accrued. The accrued balances relative to the provisions for chargebacks and rebates in the United States included in Accounts receivable and Accrued and other current liabilities were $100 million and $380 million, respectively, at December 31, 2024 and $87 million and $417 million, respectively, at December 31, 2023.

Outside of the United States, variable consideration in the form of discounts and rebates is a combination of commercially-driven discounts in highly competitive product classes, discounts required to gain or maintain reimbursement, or legislatively mandated rebates. The accrued balances relative to the provision for chargebacks and rebates, based on the terms and nature of the rebate, are included in Accounts receivable and Accrued and other current liabilities. Rebates may also be required based on specific product sales thresholds. The Company applies an estimated factor against its actual invoiced sales to represent the expected level of future discount or rebate obligations associated with the sale. At December 31, 2024 and 2023, the accrued balances related to the provision for rebates and discounts included in other current liabilities were approximately $155 million and $126 million, respectively.

The Company maintains a returns policy that allows customers in certain countries to return product within a specified period prior to and subsequent to the expiration date (generally, three tosix months before and 12 months after product expiration). The estimate of the provision for returns is based upon historical experience with actual returns and consideration of other relevant factors.

The Company’s payment terms are typically 30 days to 90 days, although certain markets have longer payment terms. See Note 5 “Product and Geographic Information” for disaggregated revenue disclosures.

Cash Equivalents — Cash equivalents are comprised of certain highly liquid investments with original maturities of three months or less.

Inventories —Inventories are valued at the lower of cost or net realizable value. The cost of a substantial majority of U.S. inventories is determined using the last-in, first-out (“LIFO”) method for both financial reporting and tax purposes. The cost of all other inventories is determined using the first-in, first-out (“FIFO”) method.

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Value Added Tax — The Company’s purchases, sales and intercompany transfers of goods are subject to value added tax (“VAT”) and VAT receivables are recognized for amounts that represent credits against future VAT obligations. VAT receivables included in Other current assets were $103 million and $113 million as of December 31, 2024 and 2023, respectively. VAT payables included in Accrued and other current liabilities were $11 million and $18 million as of December 31, 2024 and 2023, respectively. The related expense is included in the Company’s operating expenses.

Depreciation — Depreciation is provided over the estimated useful lives of the assets, principally using the straight-line method. The estimated useful lives primarily range from 25 to 40 years for buildings, and from 3 to 15 years for machinery, equipment and office furnishings. Depreciation expense was $132 million in 2024, $120 million in 2023, and $96 million in 2022. Repairs and maintenance costs are expensed as incurred as they do not extend the economic life of an asset.

Advertising and Promotion Costs — Advertising and promotion costs are expensed as incurred and included in Selling, general and administrative expenses. The Company recorded advertising and promotion expenses of $206 million, $209 million, and $255 million in 2024, 2023 and 2022, respectively.

Goodwill — Goodwill represents the excess of the consideration transferred over the fair value of net assets of businesses acquired. Goodwill is evaluated for impairment as of October 1 each year, or more frequently if impairment indicators exist, by first assessing qualitative factors to determine whether it is more likely than not that fair value is less than carrying value. If the Company concludes it is more likely than not that fair value is less than carrying value, a quantitative fair value test is performed. If carrying value is greater than fair value, a goodwill impairment charge will be recorded for the difference (up to the carrying value of goodwill). The Company completed the annual qualitative goodwill impairment test as of October 1, 2024 and concluded that there was no impairment to goodwill as the fair value of the reporting unit was significantly in excess of the carrying value.

Intangibles — Intangibles include products and product rights and licenses, which are initially recorded at fair value, assigned an estimated useful life, and amortized on a straight-line basis over their estimated useful lives. Licenses include milestone payments made to collaborative partners upon or subsequent to regulatory approval. The estimated useful lives of intangibles range from 5 to 15 years. The Company periodically evaluates whether current facts or circumstances indicate that the carrying values of its intangibles may not be recoverable. If such circumstances are determined to exist, an estimate of the undiscounted future cash flows of these assets, or appropriate asset groupings, is compared to the carrying value to determine whether an impairment exists. If the asset is determined to be impaired, the loss is measured based on the difference between the carrying value of the intangible asset and its fair value, which is determined based on the net present value of estimated future cash flows. See Note 11 “Intangibles” for additional details.

Acquired In-Process Research and Development (“IPR&D”) — IPR&D that the Company acquires in conjunction with the acquisition of a business represents the fair value assigned to incomplete research projects which, at the time of acquisition, have not reached technological feasibility. The amounts are capitalized and are accounted for as indefinite-lived intangible assets, subject to impairment testing until completion or abandonment of the projects. Upon successful completion of each project, Organon will make a determination as to the then-useful life of the intangible asset, generally determined by the period in which the substantial majority of the cash flows are expected to be generated, and begin amortization. The Company evaluates IPR&D for impairment as of October 1 each year, or more frequently if impairment indicators exist, by performing a quantitative test that compares the fair value of the IPR&D intangible asset with its carrying value. If the fair value is less than the carrying amount, an impairment loss is recognized in operating results. See Note 11 “Intangibles” for additional details.

Contingent Consideration — For transactions accounted for as a business combination, contingent consideration liabilities are recognized at the estimated fair value on the acquisition date. Subsequent changes to the fair value of contingent consideration liabilities are recognized in Other expense, net in the Consolidated Statements of Income. Contingent consideration liabilities that are payable prior to regulatory approval are recognized in Research and developmentin the Consolidated Statements of Income when achievement of the milestone is deemed probable. Contingent consideration liabilities that are payable on or after regulatory approval are capitalized as intangible assets when the payments have become probable and amortized to Cost of sales over the remaining useful life of the related intangible assets. Contingent consideration payments made or received soon after the acquisition date are classified as Investing activities in the Consolidated Statements of Cash Flows. Contingent consideration payments not made or received soon after the acquisition date that are related to the acquisition date fair value are reported as Financing activities in the Consolidated Statements of Cash Flows, and amounts paid or received in excess of the original acquisition date fair value are reported as Operating activitiesin the Consolidated Statements of Cash Flows.

Research and Development — Research and development costs associated with clinical development programs that have not yet received regulatory approval are expensed as incurred.

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Acquired in-process research and development and milestones —Acquired IPR&D and milestones includes upfront and milestone payments, related to asset acquisitions, licensing or collaborative arrangements that are not considered an acquisition of a business and involve clinical development programs that have not yet received regulatory approval.

Foreign Currency Translation — The net assets of international operations where the local currencies have been determined to be the functional currencies are translated into U.S. dollars using current exchange rates. The U.S. dollar effects that arise from translating the net assets of these subsidiaries at changing rates are recorded in the foreign currency translation account, which is included in Accumulated other comprehensive loss and reflected as a separate component of equity. For those operations that operate in highly inflationary economies and for those operations where the U.S. dollar has been determined to be the functional currency, non-monetary foreign currency assets and liabilities are translated using historical rates, while monetary assets and liabilities are translated at current rates, with the U.S. dollar effects of rate changes included in Exchange losses.

Organon calculates foreign currency translation on its consolidated assets and liabilities.

Stock-Based Compensation —Effective June 3, 2021, Organon established the 2021 Incentive Stock Plan (the “Plan”). A total of 35 million shares of Common Stock are authorized under the Plan. The plan provides for the grant of various types of awards, including restricted stock unit awards, stock appreciation rights, stock options, performance-based awards and cash awards. Under the Plan, the exercise price of awards, if any, is set on the grant date and may not be less than the fair market value per share on that date. The Company measures stock-based compensation for equity awards at fair value on the date of grant and records stock-based compensation as a charge to earnings net of the estimated impact of forfeited awards. Accordingly, the Company recognizes stock-based compensation cost only for those stock-based awards that are estimated to ultimately vest over their requisite service period, based on the vesting provisions of the individual grants. The cumulative effect on current and prior periods of a change in the estimated forfeiture rate is recognized as compensation cost in earnings in the period of the change. See Note 6 “Stock-Based Compensation Plans” for additional details.

Pension and Other Postretirement Benefit Plans —For certain defined benefit plans, the over funded or underfunded status of the plan was recognized as an asset or liability on the consolidated balance sheet. Organon sponsors certain non-U.S. defined benefit pension plans. See Note 14 “Pension and Other Postretirement Benefit Plans” for additional details.

Restructuring Costs — Costs associated with exit or disposal activities are recognized in the period in which they are incurred. Costs for one-time termination benefits in which the employee is required to render service until termination in order to receive the benefits are recognized ratably over the future service period.

Contingencies and Legal Defense Costs — The Company records accruals for contingencies and legal defense costs expected to be incurred in connection with a loss contingency when it is probable that a liability has been incurred and the amount can be reasonably estimated.

Taxes on Income — Deferred taxes are recognized for the future tax effects of temporary differences between financial and income tax reporting based on enacted tax laws and rates. The Company establishes valuation allowances for its deferred tax assets when the amount of expected future income is not likely to support the use of the deduction or credit. The Company assesses all available evidence to estimate whether a valuation allowance should be recorded against existing deferred tax assets. The amounts of the deferred tax asset considered realizable, however, could be adjusted in future periods if estimates of future income are reduced or increased.

The Company evaluates tax positions to determine whether the benefits of tax positions are more likely than not of being sustained upon audit based on the technical merits of the tax position. For tax positions that are more likely than not of being sustained upon audit, the Company recognizes the largest amount of the benefit that is greater than 50% likely of being realized upon ultimate settlement in the financial statements. For tax positions that are not more likely than not of being sustained upon audit, the Company does not recognize any portion of the benefit in the financial statements.

The Company recognizes interest and penalties associated with uncertain tax positions as a component of Taxes on Income in the Consolidated Statement of Income. The Company accounts for the tax effects of the tax on global intangible low-taxed income (“GILTI”) of certain foreign subsidiaries in the income tax provision in the period the tax arises. The Company and Merck entered into the Tax Matters Agreement in connection with the Separation. See Note 17 “Third-Party Arrangements” for additional details and defined terms.

Leases —The Company has operating leases primarily for real estate. The Company determines if an arrangement is a lease at inception. When evaluating contracts for embedded leases, the Company exercises judgment to determine if there is an explicit or implicit identified asset in the contract and if the Company controls the use of that asset. Embedded leases are immaterial.

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The lease term includes options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. The Company has made an accounting policy election not to record short-term leases (leases with an initial term of 12 months or less) on the balance sheet. Lease expense associated with short term leases is not material for all periods presented.

Lease expense for operating lease payments is recognized on a straight-line basis over the term of the lease. Operating lease assets and liabilities are recognized based on the present value of lease payments over the lease term. Since most of the Company’s leases do not have a readily determinable implicit discount rate, the Company uses its incremental borrowing rate to calculate the present value of lease payments. On a quarterly basis, an updated incremental borrowing rate is determined based on the weighted average remaining lease term of each asset class and the Company’s pretax cost of debt for that same term. The updated rates for each asset class are applied prospectively to new leases. The Company does not separate lease components (e.g. payments for rent) from non-lease components (e.g. common-area maintenance costs) in the event that the agreement contains both. The Company includes both the lease and fixed non-lease components for purposes of calculating the lease liability and the related right-of-use asset. See Note 12 “Long-Term Debt and Leases” for additional details.

Principles of Consolidation —The consolidated financial statements include the accounts of the Company and all of its subsidiaries. All intercompany transactions and accounts have been eliminated.

Use of Estimates — The presentation of these Consolidated Financial Statements and accompanying notes in conformity with U.S. GAAP require management to make estimates and assumptions that affect the amounts reported. Estimates are used in determining such items as provisions for sales discounts and returns, depreciable and amortizable lives, recoverability of inventories, amounts recorded for contingencies, environmental liabilities, pension and other postretirement benefit plan assumptions, stock-based compensation assumptions, restructuring costs, impairments of long-lived assets (including intangible assets and goodwill), investments, and taxes on income. Additionally, estimates are used in acquisitions, including initial fair value determinations of assets and liabilities (primarily IPR&D, intangible assets and contingent consideration), as well as subsequent fair value measurements.

Segments —The Company's operations includes three product portfolios which constituteone operating segment engaged in developing and delivering innovative health solutions through its portfolio of prescription therapies and medical devices within women's health, biosimilars and established brands. The Company’s chief operating decision‑maker (“CODM”) is the Chief Executive Officer. The CODM assesses performance and decides how to allocate resources for ourone operating segment based on consolidated net income that is reported on the consolidated statements of income. The Company has also evaluated the significant segment expenses incurred by our single segment and regularly provided to the CODM. The significant segment expenses provided to the CODM are consistent with those reported on the consolidated statements of income and include cost of sales, selling, general and administrative, research and development, interest expense and income taxes. The CODM uses these metrics to make key operating decisions such as: approving a new product launch strategy, making significant capital expenditures, approving the design of key commercialization strategies, decisions about key personnel, and approving annual operating and capital budgets. Our CODM considers budget-to-actual variances and year over year performance when making decisions supporting capital resource allocation. The Company manages assets on a consolidated basis as reported on the consolidated balance sheets.

Recently Adopted Accounting Standards

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, Improvements to Reportable Segment Disclosures, which improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. In addition, the amendments enhance interim disclosure requirements, clarify circumstances in which an entity can disclose multiple segment measures of profit or loss, provide new segment disclosure requirements for entities with a single reportable segment, and contain other disclosure requirements. The purpose of the amendments is to enable investors to better understand an entity’s overall performance and assess potential future cash flows. The amendments in this ASU are effective for annual periods beginning on January 1, 2024 and interim periods beginning on January 1, 2025, and should be applied on a retrospective basis for all periods presented. The Company adopted this ASU for the fiscal year beginning on January 1, 2024 on a retrospective basis for all periods presented. The adoption of the ASU did not have an impact on the Company’s consolidated financial condition or results of operations, see Note 2 “Summary of Accounting Policies— Segments”.

Recently Issued Accounting Standards Not Yet Adopted

In November 2024, the FASB issued ASU No. 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures, Additionally, in January 2025, the FASB issued ASU 2025-01 to clarify the effective date of ASU

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2024-03. The standard requires entities to disaggregate operating expenses into specific categories to provide enhanced transparency into the nature and function of expenses. This guidance is effective for fiscal years beginning after December 15, 2026, and for interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. This guidance should be applied either prospectively to financial statements issued for reporting periods after the effective date or retrospectively to any or all prior periods presented in the financial statements. This ASU will have no impact on the Company’s consolidated financial condition or results of operations. The Company is currently in the process of evaluating the effects of this guidance on its related disclosures.

In December 2023, the FASB issued ASU No. 2023-09, Improvements to Income Tax Disclosures, which requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. The standard is intended to benefit investors by providing more detailed income tax disclosures that would be useful in making capital allocation decisions. The amendments in this ASU are effective for annual periods beginning on January 1, 2025, and should be applied on a prospective basis with the option to apply the standard retrospectively. Early adoption is permitted. This ASU will have no impact on the Company’s consolidated financial condition or results of operations. The Company is currently evaluating the impact to its income tax disclosures.

3. Acquisitions and Licensing Arrangements

2024 Transactions

Dermavant Sciences Ltd. (“Dermavant”)

On October 28, 2024, Organon acquired Dermavant, a company dedicated to developing and commercializing innovative therapeutics in immuno-dermatology. Dermavant’s novel product, Vtama, for the topical treatment of mild, moderate, and severe plaque psoriasis in adults, was approved by the U.S. Food and Drug Administration (the “FDA”) in May 2022. In December 2024, the FDA approved Vtama for the treatment of atopic dermatitis, also known as eczema, in adults and children two years of age and older. Atopic dermatitis is one of the most common inflammatory dermatological conditions in adults, presenting a higher disease burden for women compared to men. The acquisition allows Organon to further expand its existing portfolio of established brands and biosimilar dermatology treatments.

Consideration for Dermavant consists of the upfront payment of $175 million and a $75 million milestone payment upon regulatory approval, as well as payments of up to $950 million for the achievements of certain commercial milestones, tiered royalties on net sales, and the assumption of liabilities, including certain debt obligations, which were accounted for at fair value on the acquisition date.

The transaction was accounted for as a business combination. The estimated aggregate consideration is calculated as follows:

Contingent consideration included as part of the consideration relates to potential future milestone obligations of up to $1.025 billion, including: (i) up to $75 million in cash payable upon regulatory approval, and (ii) up to $950 million for the achievements of certain commercial milestones. The fair value of the contingent consideration recognized on the acquisition date was estimated by using the inputs disclosed in Note 13. “Financial Instruments.” The Company reassesses its acquisition-related contingent consideration liabilities each quarter for changes in fair value.

The valuation of assets acquired and liabilities assumed has not yet been finalized as of December 31, 2024. As a result, Organon recorded preliminary estimates for the fair value of assets acquired and liabilities assumed as of the acquisition date. Finalization of the valuation during the measurement period could result in a change in the amounts recorded for the acquisition date fair value of intangible assets, goodwill, inventories, debts assumed, contingent considerations and income taxes among other items. The completion of the valuation will occur no later than one year from the acquisition date.

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The following table summarizes the preliminary fair values of the assets acquired and liabilities assumed related to the Dermavant acquisition as of the acquisition date:

The carrying values of cash and cash equivalents, account receivables, raw materials inventory, other assets and other liabilities represented their fair values at the date of acquisition.

The fair value of finished goods inventory was determined based on its net realizable based on the estimated selling price adjusted for cost of the selling effort and a reasonable profit allowance for the selling effort.

The fair value of the identifiable intangible assets was determined primarily using the “income approach,” which requires a forecast of the expected future cash flows (including net revenue, cost of sales, operating expenses) and the appropriate discount rate.

The intangible assets acquired, as well as their fair values and estimated useful life consist of the following:

(1) In December 2024, the FDA approved Vtama for the treatment of atopic dermatitis, also known as eczema, in adults and children two years of age and older. As a result, the Company reclassified the Vtama - Atopic Dermatitis acquired IPR&D intangible asset to product and product rights.

The fair value of the assumed debt was determined using the option-pricing model which is determined using expected payments and timing of payments, and a discount rate.

The fair value measurement of contingent consideration arising from business combinations is determined via a probability-weighted cash flows using a Monte Carlo simulation model which are then discounted to present value. These inputs may include: (i) the estimated amount and timing of projected cash flows, (ii) the probability of the achievement of the factor(s) on which the contingency is based and (iii) the risk-adjusted discount rate used to present value the probability-weighted cash flows.

The excess of the consideration paid over the fair value of the net assets acquired was recorded as goodwill. The goodwill recognized upon acquisition is not deductible for income tax purposes.

In December 2024, the FDA approved Vtama for atopic dermatitis. As a result, the Company transferred the IPR&D amount of $395 million to Currently marketed products – products and product rights and will amortize the asset over 11 years.

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During the fourth quarter of 2024, the regulatory milestone related to Vtama’s atopic dermatitis indication, which was recorded as part of contingent consideration at fair value, was achieved and recorded in Accrued and other current liabilities. In January 2025, the Company paid $75 million related to the milestone.

During the fourth quarter of 2024, Organon recognized an additional intangible asset of $24 million, related to a sales-based milestone that was deemed probable and was related to an assumed licensing agreement. The intangible asset will be amortized over 11 years.

Unaudited Pro forma Information

The unaudited pro forma combined financial information was prepared using the acquisition method of accounting and was based on the historical financial information of Organon and Dermavant. The unaudited pro forma financial information includes adjustments to reflect incremental amortization expense to be incurred based on the current preliminary fair values of the identifiable intangible assets acquired; the incremental cost of sales related to the fair value adjustments associated with acquisition date inventory; and the reclassification of acquisition-related costs incurred during the year ended December 31, 2024 to the year ended December 31, 2023. The unaudited pro forma financial information is not necessarily indicative of what the consolidated results of operations would have been had the acquisition been completed on January 1, 2023. In addition, the unaudited pro forma financial information is not a projection of future results of operations of the combined company nor does it reflect the expected realization of any synergies or cost savings associated with the acquisition.

The following unaudited pro forma summary presents consolidated information as if the business combination had occurred on January 1, 2023:

Transactions Costs

Organon incurred costs associated with the Dermavant transaction of approximately $12 million, comprised of transaction fees and legal costs and were recognized in Selling, general and administrative expenses for the year ended December 31, 2024.

Suzhou Centergene Pharmaceuticals (“Centergene”)

In September 2024, Organon entered into license and supply agreements with Centergene, pursuant to which Organon acquired the exclusive commercialization rights to Centergene’s investigational asset, SJ02, in China. SJ02 is a long-acting recombinant human follicle-stimulating hormone carboxyl-terminal peptide fusion protein (FSH-CTP) designed for controlled ovarian stimulation (“COS”) in combination with a gonadotropin-releasing hormone (“GnRH”) antagonist. It is used to facilitate the development of multiple follicles in women undergoing assisted reproductive technology (“ART”) programs. Under the terms of the agreement, Organon will pay $12 million, of which $6 million was paid in the fourth quarter of 2024. In addition, the remaining $6 million is payable upon Organon obtaining the manufacturing license, which is refundable if thereafter either the regulatory approval is not obtained or marketing authorization cannot be transferred. Organon may owe additional regulatory and sales-based milestones to Centergene of up to $170 million under the terms of the license and supply agreements. Organon will recognize regulatory and sales-based milestones when the achievement is probable.

Eli Lilly (“Lilly”)

In December 2023, Organon announced an agreement with Lilly to become the sole distributor and promoter of the migraine medicines Emgality and Rayvow in Europe. Lilly will remain the marketing authorization holder and will manufacture the products for sale. Under the terms of the agreement, Organon paid an upfront payment of $50 million upon closing of the transaction in January 2024, and will recognize sales-based milestones when the achievement is deemed probable. In the first quarter of 2024, the Company recognized an intangible asset of $220 million, comprised of the $50 million upfront payment and $170 million of sales-based milestones that were deemed probable. The intangible asset will be amortized over 10 years.

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In August of 2024, Organon expanded its agreement with Lilly to become the sole distributor and promoter for Emgality in the following additional markets: Canada, Colombia, Israel, South Korea, Kuwait, Mexico, Qatar, Saudi Arabia, Taiwan, Turkey, and the United Arab Emirates. Organon paid an upfront payment of $23 million for the expansion of territory upon closing of the transaction in August 2024, and will recognize sales-based milestones when the achievement is deemed probable. In the third quarter of 2024, Organon recognized an additional intangible asset of $113 million, comprised of the $23 million upfront payment and $90 million related to the sales-based milestones that were deemed probable. The intangible asset will be amortized over 10 years.

As of December 31, 2024, Organon had accrued $20 million in Accrued and Other current liabilities and $240 million in Other noncurrent liabilities in total related to the probable sales-based milestones. In January 2025, the Company paid $20 million related to the milestones.

Shanghai Henlius Biotech, Inc. (“Henlius”)

For the year ended December 31, 2024 research and development milestones related to the Henlius agreement were determined to be probable of being achieved and the Company expensed $70 million, in Acquired in-process research and development and milestones expense related to the development of HLX11, an investigational biosimilar of Perjeta 2 (pertuzumab), and HLX14, an investigational biosimilar of Prolia 2 and Xgeva 2(denosumab). As of December 31, 2024, $60 million of these milestones have been paid. On May 24, 2024, the European Medicines Agency validated the marketing authorization applications for HLX14. On October 30, 2024, the U.S. Food and Drug Administration accepted the biologic license application for HLX14.

Cirqle Biomedical (“Cirqle”)

For the year ended December 31, 2024, research and development milestones related to the Cirqle agreement were determined to be probable of being achieved and the Company expensed and paid $10 million in Acquired in-process research and development and milestones expense.

Oss Biotech Site

Organon has entered into an agreement with Merck to acquire the Oss Bio-Tech manufacturing facility in the Netherlands. This agreement covers Organon’s fertility drug substance production and associated support functions. Organon will pay aggregate consideration of $25 million, of which $15 million will be paid upon closing in the third quarter of 2025 and the remaining $10 million will be paid in the first half of 2026.

2023 Transactions

Claria Medical, Inc. (“Claria”)

In January 2023, the Company made a strategic investment in Claria, a privately-held company developing an investigational medical device being studied for use during minimally invasive laparoscopic hysterectomy. Under the terms of the agreement, Organon paid $8 million upfront and has the option to acquire Claria for an additional $47 million, payable if and when the option is exercised. The $8 million was expensed as Acquired in-process research and development and milestones in the Consolidated Statement of Income for the year ended December 31, 2023.

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4. Earnings per Share (“EPS”)

The calculations of basic and diluted EPS are as follows:

Diluted EPS was computed using the treasury stock method for stock option awards, performance share units and restricted share units. The computation of diluted EPS excludes the effect of the potential exercise of stock-based awards when the effect of the potential exercise would be anti-dilutive.

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5. Product and Geographic Information

Revenues of the Company’s products were as follows:

Totals may not foot due to rounding. Trademarks appearing above in italics are trademarks of, or are used under license by, the Organon group of companies.

(1) Sales of the authorized generic versions of NuvaRing, Zetia and Nasonex were previously included in other and have been reclassified to their respective brand name product.

(2) Includes sales of products not listed separately.

(3) Includes manufacturing sales to third parties.

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Revenues by geographic area where derived are as follows:

(1) Includes manufacturing sales to third parties.

As of December 31, 2024, approximately 71% of the Company’s long-lived fixed assets are located in Europe and Canada, and 20% are in the United States. The Company does not disaggregate assets on a products and services basis for internal management reporting and, therefore, such information is not presented.

6. Stock-Based Compensation Plans

The Company grants stock option awards, restricted share units (“RSUs”), performance share units (“PSUs”) and cash awards pursuant to the 2021 Incentive Stock Plan.

Employee stock options are granted to purchase shares of Company common stock at the fair market value at the time of grant. Generally, stock options have a contractual term often years and vest one-third each year over athree-year period, subject to limited exceptions.

RSUs are stock awards that are granted to employees and entitle the holder to shares of common stock as the awards vest. RSU awards generally vest one-third each year over athree-year period. The fair value of the stock option and RSU awards is determined and fixed on the grant date based on the Company’s stock price.

The terms of the Company’s PSU awards allow the recipients of such awards to earn a variable number of common shares based on the cumulative results of specified performance factors.

The PSU awards are based on the following performance factors:

•total stockholder return (“TSR”) of the Company relative to an index of peer companies specified in the awards; and

•the results of cumulative free cash flow (“FCF”) and revenue metrics of the Company.

PSUs include awards issued where the service inception date precedes the grant date. The grant date for the performance conditions is the date grantees have a mutual understanding of the key terms and conditions of the award, which will occur when the performance condition is objectively determinable and measurable. Recognition of stock-based compensation occurs at the service inception date. Measurement of stock-based compensation attributed to the PSU’s will be based on the fair value once the grant date is determined.

For FCF and relative TSR awards, the Company recognizes compensation costs ratably over the performance period. The PSU awards will generally vest at the end of thethree year performance period, however, the number of shares delivered will vary based upon the attained level of performance. For PSUs with a performance-based FCF goal, stock-based compensation expense is recognized based on the probability of the achievement of the financial performance metric for the respective vesting period and is assessed at each reporting date. For PSUs with a market-based relative TSR goal, stock-based compensation expense is recognized based on the estimated fair value of the award at the grant date regardless of the actual number of shares earned. PSU awards generally vest after three years. The Company uses the Monte Carlo simulation to determine the fair value of the relative TSR awards as of the grant date.

For RSUs and PSUs, dividends declared during the vesting period are payable to the employees only upon vesting. RSU and PSU distributions will be in shares of Company Common Stock after the end of the vesting or performance period, subject to the terms applicable to such awards.

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Cash awards will be recognized and expensed over their vesting period at the fair market value of the shares on the date they are awarded and will be remeasured on a quarterly basis until the award vests or is otherwise settled.

Stock-based compensation expenses incurred by the Company were as follows:

The Company uses the Black-Scholes model to determine the fair value of the stock options as of the grant date. In applying this model, the Company uses both historical data and current market data to estimate the fair value of its options. The expected dividend yield is based on forecasted patterns of dividend payments. The risk-free interest rate is based on the rate at grant date of zero-coupon U.S. Treasury Notes with a term equal to the expected term of the option. Expected volatility is estimated using historical volatility.

In 2024, the historical component of expected volatility is based on the historical monthly price changes of Organon and implied volatility of Organon. Due to the lack of trading history of Organon’s stock at the time of valuation efforts, the historical component of expected volatility is based on historical monthly price changes of the peer group within the industry. In 2023, the historical component of expected volatility is based on historical monthly price changes of a combination of the peer group within the industry and Organon’s historical monthly price changes. In 2022, the historical component of expected volatility is based only on historical monthly price changes of a combination of the peer group within the industry. Merck’s historical data for Organon employees was used to estimate equity award exercise and employee termination behavior within the valuation model. The expected term represents the amount of time that options granted are expected to be outstanding based on historical and forecasted exercise behavior.

The fair value of options granted was determined using the following assumptions:

A summary of the equity award transactions for the year ended December 31, 2024 is as follows:

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The following table summarizes information about equity awards outstanding that are vested and expected to vest and equity awards outstanding that are exercisable as of December 31, 2024:

The amount of unrecognized compensation costs as of December 31, 2024 was $141 million, which will be recognized in operating expense ratably over the weighted average vesting period of 1.88 years.

7. Restructuring

In the first quarter of 2024, Organon implemented additional restructuring activities related to the ongoing optimization of its internal operations by reducing headcount, primarily in the research and development function. In the fourth quarter of 2023, Organon implemented restructuring activities related to the ongoing optimization of its internal operations by reducing headcount in certain markets and functions. As a result of these combined activities, the Company’s headcount was reduced by approximately 5% by the end of 2024. Organon expects the remaining severance payments associated with the restructuring activities to be within the next twelve months.

The following is a summary of changes in severance liabilities related to the restructuring activities included within Accrued and other current liabilities:

During the first quarter of 2025, we implemented additional restructuring initiatives that will drive operational efficiencies in 2025, and will result in an approximate 5% headcount reduction.

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8. Taxes on Income

A reconciliation between the effective tax rate and the U.S. statutory rate is as follows:

As a result of the Tax Cuts and Jobs Act (“TCJA”), the Company has made a determination it is no longer indefinitely reinvested with respect to a majority of its previously taxed undistributed earnings from foreign subsidiaries and provided for a deferred tax liability for withholding taxes due upon future remittances, net of certain foreign income tax credits. At December 31, 2024 and 2022, the deferred tax balance on undistributed earnings for certain subsidiaries that are deemed indefinitely reinvested was not material. At December 31, 2023 the deferred tax balance was $4 million.

The tax effects of foreign earnings in the tax rate reconciliation above primarily reflect the effects of operations in jurisdictions with different tax rates than the United States thereby yielding a favorable impact on the effective tax rate compared with the U.S. statutory rate of 21%. The favorable impact is primarily attributable to a reduced tax rate arrangement that was agreed to in Switzerland for an active legal entity.

The effective income tax rates were (7.1)%, (52.2)% and 18.3% for 2024, 2023 and 2022, respectively. These effective income tax rates reflect the beneficial impact of foreign earnings, offset by the impact of U.S. inclusions under the Global Intangible Low-Taxed Income regime and a partial valuation allowance recorded against non-deductible U.S. interest expense. In the third quarter of 2024, the Swiss tax authority confirmed to the Company the applicable useful life of an existing tax asset. As a result, the Company has now concluded it is more likely than not it will utilize the entirety of the tax asset. As such, the Company released a $210 million related valuation allowance. In the fourth quarter of 2023, $476 million tax benefit was recorded, comprised of a gross benefit of $686 million, net of a $210 million valuation allowance, resulting from the termination of a tax arrangement in Switzerland.

Income before taxes consisted of:

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Taxes on income consisted of:

Deferred income taxes at December 31 consisted of:

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A reconciliation of the beginning and ending amount of the valuation allowance is as follows:

The Company has recognized $224 million and $35 million of deferred taxes on net operating loss (“NOL”) carryforwards in multiple jurisdictions as of December 31, 2024 and 2023, respectively. Valuation allowances of $261 million have been established on $180 million of foreign deferred tax assets and $82 million of U.S. deferred tax assets. The additions charged to expense are related to the U.S. disallowed interest expense carryforward. The reduction and other adjustments of $211 million is primarily due to the $210 million reversal of a prior year valuation allowance recorded in connection with the future benefit of a Swiss tax asset. The acquisition related valuation allowance activity of $147 million is for the valuation allowance established as part of purchase accounting in connection with the acquisition of Dermavant.

Income taxes paid in 2024, 2023 and 2022, were $293 million, $135 million and $214 million, respectively.

As of December 31, 2024 and 2023, the Company deferred the income tax consequences resulting from intra-entity transfers of inventory totaling $509 million and $396 million, respectively. These amounts are reflected in Other current assets.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

If the Company were to recognize the unrecognized tax benefits of $121 million, at December 31, 2024, the income tax provision would reflect a favorable net impact of $121 million.

In 2024, 2023 and 2022, foreign tax authorities concluded their examinations of certain foreign income tax returns. As a result, the Company reflected a payment of $27 million, $7 million and $12 million in the consolidated financial statements in 2024, 2023 and 2022, respectively. A corresponding reduction in reserves of $27 million, $15 million and $11 million were also reflected in 2024, 2023 and 2022, respectively, for unrecognized tax benefits for tax positions relating to the years that were under examination.

The Company does not anticipate any events in the next 12 months that would result in a material change to the uncertain tax positions. The Company believes that its reserves for uncertain tax positions are adequate to cover existing risks or exposures.

Interest and penalties associated with uncertain tax positions resulted in a benefit of $15 million in 2024, an expense of $3 million in 2023 and were not material in 2022. These amounts reflect the beneficial impacts of various tax settlements. Liabilities for accrued interest and penalties were $20 million and $40 million as of December 31, 2024 and 2023, respectively.

Various foreign tax examinations are in progress and for these jurisdictions, income tax returns are open for examination for the period 2006 through 2024.

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9. Inventories

Inventories consisted of:

As part of the Dermavant acquisition the Company acquired $97 million of inventory, which includes a $63 million purchase accounting inventory fair value adjustment. As of December 31, 2024 $56 million related to the fair value adjustment is included in inventory.

Amounts recognized as Other assets are comprised primarily of raw materials and work in process inventories and are not expected to be converted to finished goods that will be sold within one year. The Company has long-term vendor supply contracts that include certain annual minimum purchase commitments.

As of December 31, 2024, total inventory purchase obligations are $738 million and extend through 2032. Inventory purchase obligations due within the next twelve months amount to $320 million.

10. Property, Plant and Equipment

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11. Intangibles

Intangibles consists of:

As of December 31, 2024, net intangibles include $629 million of Vtama intangibles that will be amortized over 11 years and $61 million of indefinite lived Acquired IPR&D related to Vtama. See Note 3 “Acquisitions and Licensing Arrangements” for further information.

The Company didnot have impairment charges in 2024 and 2023.

Aggregate amortization expense recorded within Cost of sales was $145 million in 2024, $116 million in 2023 and $116 million in 2022.

The estimated aggregate future amortization expense is as follows:

The following table summarizes the changes in goodwill:

(1) Relates to the Dermavant acquisition. See Note 3 “Acquisitions and Licensing Arrangements” for further information.

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12. Long-Term Debt and Leases

The following is a summary of Organon’s total debt:

(1) Prior to entering into Amendment No. 2 to the Senior Credit Agreement on May 17, 2024, the maturity date was 2028.

(2) Prior to entering into Amendment No. 3 to the Senior Credit Agreement on December 20, 2024, the maturity date was 2028.

(3) Recognized at the amortized cost basis. The remaining principal is determined as the initial fair value less principal payments. As of December 31, 2024, the remaining principal of the RIPSA and NovaQuest debt is $156 million and $102 million, respectively.

Term Loan B Facility

On June 2, 2021, Organon entered into a credit agreement with JPMorgan Chase Bank, N.A., as administrative agent and collateral agent (the “Senior Credit Agreement”), providing for:

•a Term Loan B Facility (“Term Loan B Facility”), consisting of (i) a U.S. dollar denominated senior secured “tranche B” term loan (“U.S. Dollar Term Loan Facility”) in the amount of $3.0 billion, and (ii) a euro denominated senior secured “tranche B” term loan (“Euro Term Loan Facility”) in the amount of €750 million, in each case with aseven-year term that matures in 2028; and

•a Revolving Credit Facility (“Revolving Credit Facility” and, together with the Term Loan B Facility, the “Senior Credit Facilities”), in an aggregate principal amount of up to $1 billion, with afive-year term that matures in 2026.

On May 17, 2024, Organon entered into Amendment No. 2 to the Senior Credit Agreement (“Amendment No. 2”) which, among other things, (i) extended the maturity of the U.S. Dollar Term Loan Facility to May 17, 2031, (ii) extended the maturity of the revolving credit loans made under the Revolving Credit Facility to December 2, 2027, (iii) increased the maximum amount of the Revolving Credit Facility by $300 million and decreased the commitment fee payable in respect of the Revolving Credit Facility to 0.375%, (iv) removed the credit spread adjustment applicable to SOFR loans, and (v) reduced the interest rate in respect of the remaining $1.55 billion of loans under the U.S. Dollar Term Loan Facility (the “U.S. Dollar Term Loans”) from Term SOFR plus 3.0% to Term SOFR plus 2.50%.

On December 20, 2024, Organon entered into Amendment No. 3 to the Senior Credit Agreement (“Amendment No. 3”) which, among other things, (i) reduced the interest rate of the outstanding U.S. Dollar Term Loans from Term SOFR plus 2.50% to Term SOFR plus 2.25%, (ii) reduced the interest rate of the loans outstanding under the Euro Term Loan Facility (the “EUR Term Loans” and, together with the U.S. Dollar Term Loans, the “Term Loans”) from EURIBOR plus 3.0% to EURIBOR plus 2.75%, (iii) extended the maturity of the Euro Term Loan Facility to December 20, 2031, (iv) reduced the interest rate under the Revolving Credit Facility from Term SOFR plus 2.00% to Term SOFR plus 1.50%.

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Borrowings made under the Senior Credit Agreement bear interest, in the case of:

•term loans under the Term Loan B Facility (i) denominated in U.S. Dollars, at 2.25% in excess of Term SOFR (subject to a floor of 0.50%), or 1.25% in excess of an alternate base rate (“ABR”), at Organon’s option and (ii) denominated in euros, at 2.75% in excess of EURIBOR (subject to a floor of 0.00%); and

•revolving loans under the Revolving Credit Facility (i) in U.S. Dollars, at 1.50% in excess of Term SOFR (subject to a floor of 0.00%), or 0.50% in excess of ABR, at Organon’s option and (ii) in euros, at 1.50% in excess of EURIBOR.

Interest payments on the Term Loans are due monthly or quarterly, depending on the interest period selected. Principal payments on the Term Loans were based on 0.25% of the original principal amount outstanding on the closing date of the Senior Credit Agreement and due on the last business day of each March, June, September and December, commencing with the last business day of September 2021 (the “Principal Payments”). These Principal Payments are reduced by the amount of any voluntary prepayments. As a result of discretionary prepayments discussed below, the quarterly Principal Payments on the U.S. Dollar Term Loans are no longer required. Effective as of the December 20, 2024 closing date of Amendment No. 3, Principal Payments on the Euro Term Loans are based on the principal amount outstanding on the Amendment No. 3 effective date.

On June 26, 2024, the Company made a discretionary prepayment of $7.5 million on the U.S. Dollar Term Loans. On March 30, 2023, the Company made a discretionary prepayment of $250 million on the U.S. Dollar Term Loans. In the second quarter of 2022, the Company made a discretionary prepayment of $100 million on the U.S. Dollar Term Loans.

During the second quarter of 2024, the Company borrowed $36 million on the Revolving Credit Facility and subsequently repaid the amount on June 17, 2024. The Company borrowed $100 million on the Revolving Credit Facility in October 2024 and an additional $50 million in November 2024 and repaid the amounts in December 2024. There wereno outstanding balances under the Revolving Credit Facility as of December 31, 2024 or December 31, 2023. The Company borrowed $90 million on the Revolving Credit Facility in January 2025.

The Senior Credit Agreement contains customary financial covenants, including a total leverage ratio covenant, which measures the ratio of (i) consolidated total debt to (ii) consolidated earnings before interest, taxes, depreciation and amortization, and subject to other adjustments, that must meet certain defined limits which are tested on a quarterly basis. In addition, the Senior Credit Agreement contains covenants that limit, among other things, Organon’s ability to prepay, redeem or repurchase its subordinated and junior lien debt, incur additional debt, make acquisitions, merge with other entities, pay dividends or distributions, redeem or repurchase equity interests, and create or become subject to liens. As of December 31, 2024, the Company is in compliance with all financial covenants and no default or event of default has occurred.

Notes

In April 2021, Organon Finance 1 LLC (“Organon Finance 1”), a subsidiary of Merck, issued €1.25 billion aggregate principal amount of 2.875% senior secured notes due 2028, $2.1 billion aggregate principal amount of 4.125% senior secured notes due 2028 and $2.0 billion aggregate principal amount of 5.125% senior unsecured notes due 2031 (collectively, the “Notes”). Interest payments are due semiannually on October 30 and April 30. As part of the Separation, on June 2, 2021, Organon and a wholly-owned Dutch subsidiary of Organon, (the “Dutch Co-Issuer”) assumed the obligations under the Notes as co-issuers, Organon Finance 1 was released as an obligor under the Notes, and certain subsidiaries of Organon agreed to guarantee the Notes. Each series of Notes was issued pursuant to an indenture dated April 22, 2021, between Organon and U.S. Bank National Association. Organon and the Dutch Co-Issuer assumed the obligations under the Notes pursuant to a first supplemental indenture to the relevant indenture, and the guarantors agreed to guarantee the Notes pursuant to a second supplemental indenture to the relevant indenture.

During the second quarter of 2024, Organon issued $500 million of 6.750% senior secured notes due 2034 (the “2034 Secured Notes”) and $500 million of 7.875% senior unsecured notes due 2034 (the “2034 Unsecured Notes” and, together with the Secured Notes the “2034 Notes”). Each series of notes is guaranteed by each of the entities that guarantees the Companies’ existing senior secured credit facilities (the “Credit Facilities”). Organon used the net proceeds from the sale of the 2034 Notes to repay a portion of its borrowings under the Credit Facilities’ U.S. dollar-denominated “tranche B” term loan and to pay the fees and expenses incurred in connection with the foregoing.

As of December 31, 2024, the Company recorded approximately $38 million of deferred debt issuance costs and discounts related to the 2034 Notes, Amendment No. 2 and Amendment No. 3. Debt issuance costs and discounts are presented as a reduction of debt on the Condensed Consolidated Balance Sheets and are amortized as a component of interest expense over the term on the related debt using the effective interest method.

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Revenue Interest Purchase and Sale Agreement

In connection with the Dermavant acquisition, Organon assumed a revenue interest purchase and sale agreement (the “RIPSA”) with XYQ Luxco, NovaQuest Co-Investment Fund XVII, L.P., an affiliate of NovaQuest Capital Management, LLC, and MAM Tapir Lender, LLC, an affiliate of Marathon Asset Management, L.P., together with U.S. Bank National Association, as collateral agent. Under the terms of the RIPSA, Organon is obligated to pay quarterly royalties equal to $1.5 million through 2026. After 2026, the royalties are based on a capped single-digit revenue interest in net sales of Vtama for all dermatological indications in the United States, up to a cap of $344 million.

The RIPSA is accounted for as debt and was initially recognized at fair value of $156 million. Over the term of the arrangement, the effective interest rate will be updated prospectively each reporting period based on the carrying amount of the debt, and the estimated timing and remaining cash flows related to the debt. As of December 31, 2024 the effective interest rate of the RIPSA is 7.3%.

Funding Agreement with NovaQuest

In connection with the Dermavant acquisition, Organon assumed the funding agreement with NovaQuest Co-Investment Fund VIII, L.P. (“NovaQuest”). Organon will make quarterly payments due totaling $118 million in aggregate, to be paid through 2028, with payments due totaling $6 million in 2025, $21 million in 2026, $57 million in 2027 and $34 million in 2028. The debt was initially recognized at fair value of $102 million and will be subsequently recognized at the amortized cost basis.

Long-term debtwas recorded at the carrying amount. The estimated fair value oflong-term debt(including current portion) is as follows:

Level 2 was estimated using inputs other than quoted prices in active markets for identical assets and liabilities that are observable either directly or indirectly for substantially the full term of the liability. Level 3 was estimated using unobservable inputs.

The Company made interest payments related to its debt instruments of $487 million for the year ended December 31, 2024. The average maturity of the Company’s long-term debt as of December 31, 2024 is approximately 5.6 years and the weighted-average interest rate on total borrowings as of December 31, 2024 is 5.1%.

The schedule of principal payments required on long-term debt for the next five years, exclusive of $12 million of accrued interest related to the RIPSA and NovaQuest debt, and thereafter are as follows:

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Leases

Operating lease costs were $63 million, $67 million and $61 million for the year ended December 31, 2024, 2023, and 2022, respectively.

None of the Company’s lease agreements contain variable lease payments. Sublease income is immaterial and there are no sale-leaseback transactions. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Cash paid for amounts included in the measurement of operating lease liabilities was $52 million, $56 million and $55 million for the year ended December 31, 2024, 2023 and 2022, respectively. Operating lease assets obtained in exchange for new operating lease liabilities were $25 million, $25 million and $28 million for the year ended December 31, 2024, 2023 and 2022, respectively, and primarily consists of real estate operating leases.

Supplemental balance sheet information related to operating leases is as follows:

Maturities of operating lease liabilities as of December 31, 2024 are as follows ($ in millions):

13. Financial Instruments

The Company measures fair value based on the prices that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements are based on a three-tier hierarchy that prioritizes the inputs used to measure fair value. These tiers include Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions.

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The following financial instruments were recorded at their estimated fair value. The recurring fair value measurement of the assets and liabilities was as follows:

Foreign Currency Risk Management

The Company uses a balance sheet risk management program to partially mitigate the exposure of net monetary assets of its subsidiaries that are denominated in a currency other than a subsidiary’s functional currency from the effects of volatility in foreign exchange. In these instances, Organon principally utilizes forward exchange contracts to partially offset the effects of exchange on exposures denominated in developed country currencies, primarily the euro, Swiss franc, and Japanese yen. For exposures in developing country currencies, the Company enters into forward contracts to partially offset the effects of exchange on exposures when it is deemed economical to do so based on a cost-benefit analysis that considers the magnitude of the exposure, the volatility of the exchange rate and the cost of the hedging instrument.

Forward Contracts

Monetary assets and liabilities denominated in a currency other than the functional currency of a given subsidiary are remeasured at spot rates in effect on the balance sheet date with the effects of changes in spot rates reported in Exchange lossesin the Consolidated Statements of Income. The forward contracts are not designated as hedges and are marked to market through Exchange lossesin the Consolidated Statements of Income. Accordingly, fair value changes in the forward contracts help mitigate the changes in the value of the remeasured assets and liabilities attributable to changes in foreign currency exchange rates, except to the extent of the spot-forward differences. These differences are not significant due to the short-term nature of the contracts, which typically have average maturities at inception of less than one year. The notional amount of forward contracts was $1.4 billion as of December 31, 2024 and December 31, 2023, respectively. The cash flows and the related gains and losses from these contracts are reported as operating activities in the Consolidated Statements of Cash Flows.

Net Investment Hedge

Euro-denominated debt instruments

Foreign exchange risk is also managed through the use of economic hedges on foreign currency balances. €724 million of the euro-denominated term loan and €1.25 billion of the 2.875% euro-denominated secured notes have been designated and are effective as a hedge of the net investment in euro-denominated subsidiaries. See Note 12 “Long-Term Debt and Leases” for additional details.

Cross-Currency Swaps

In conjunction with the issuance of the 2034 Notes, the Company entered into cross-currency swaps that mature in 2029. The Company elected to designate the fixed-for-fixed swaps as a hedge of the net investment in euro-denominated subsidiaries balance and the change in the fair value attributable to the changes in the spot rate is recorded in Other Comprehensive Income (Loss), Net of Taxes. Throughout the term of the swaps, the Company will pay a fixed interest rate of 5.8330% based on the Euro notional amount of €922 million and receive a fixed interest rate of 7.3125% based on the U.S. dollar notional amount of $1 billion. The notional amount based on the Euro leg of the cross-currency swaps has been designated and is effective as a

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Foreign currency gain (loss) due to spot rate fluctuations on the euro-denominated debt instruments and the change in fair value of the cross-currency swaps resulting from hedge designation were included within Cumulative translation adjustment in Other comprehensive income (loss):

The Consolidated Statements of Income include the impact of net (gains) losses of Organon’s derivative financial instruments:

Contingent Consideration

The fair value measurement of contingent consideration arising from business combinations is determined via a probability-weighted cash flows using a Monte Carlo simulation model which are then discounted to present value. These inputs may include: (i) the estimated amount and timing of projected cash flows, (ii) the probability of the achievement of the factor(s) on which the contingency is based and (iii) the risk-adjusted discount rate used to present value the probability-weighted cash flows. Significant increases or decreases in any of those inputs in isolation could result in a significantly higher or lower fair value measurement. At December 31, 2024, the fair value measurements of acquisition-related contingent consideration were determined using discount rates ranging from 6.26% to 8.05%.

The following table presents a reconciliation of contingent consideration measured on a recurring basis using significant unobservable inputs (Level 3):

Concentrations of Credit Risk

Organon has established accounts receivable factoring agreements with financial institutions in certain countries to sell accounts receivable. Under these agreements, Organon factored $186 million and $66 million of accounts receivable as of December 31, 2024 and December 31, 2023, respectively, which reduced outstanding accounts receivable. The cash received from the financial institutions is reported within Operating Activities in the Consolidated Statements of Cash Flows. The cost of factoring such accounts receivable were not material for the year ended December 31, 2024, 2023, and 2022.

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The Company monitors credit exposures through limits that were established to limit concentration with any single issuer or institution. The majority of the Company’s accounts receivable arise from product sales in the United States, Europe and China and are primarily due from drug wholesalers and retailers, hospitals, government agencies, managed health care providers and pharmacy benefit managers. The Company’s customers with the largest accounts receivable balances are McKesson Corporation, Cardinal Health and Cencora, Inc. which represented approximately 12%,7% and 6%, respectively, of total gross account receivable at December 31, 2024. Bad debts have been minimal. The Company does not normally require collateral or other security to support credit sales.

14. Pension and Other Postretirement Benefit Plans

Organon pension plans are primarily comprised of plans in Switzerland, Belgium, Korea, Germany and Italy. The Company uses December 31 as the year-end measurement date for these plans.

Net Periodic Benefit Cost

The net periodic benefit cost for pension plans consisted of the following components:

The components of net periodic benefit cost other than the service cost component are included in Other (income) expense, net.

Obligations and Funded Status

Summarized information about changes in plan assets and benefit obligations, the funded status and the amounts recorded is as follows:

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Information related to the funded status of materially significant pension plans is as follows:

Plan Assets

The fair values of the Company’s pension plan assets at December 31 by asset category are as follows:

The targeted investment portfolio for the Company’s pension plans that are sponsored outside the United States varies based on the duration of pension liabilities and local government rules and regulations. There are no unfunded commitments or redemption restrictions related to these investments.

Expected Contributions

Expected contributions during 2025 are approximately $15 million for the Company’s pension plans.

Expected Benefit Payments

Expected benefit payments are as follows ($ in millions):

Expected benefit payments are based on the same assumptions used to measure the benefit obligations and include estimated future employee service.

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Amounts Recognized in Other Comprehensive Income

Net gain or loss amounts reflect differences between expected and actual returns on plan assets as well as the effects of changes in actuarial assumptions. Net loss amounts in excess of certain thresholds are amortized into net periodic benefit cost over the average remaining service life of employees.

Actuarial Assumptions

The Company reassesses its benefit plan assumptions on a regular basis. The weighted average assumptions used in determining pension plan information are as follows:

The discount rate is evaluated on measurement dates and modified to reflect the prevailing market rate of a portfolio of high-quality, fixed-income debt instruments that would provide the future cash flows needed to pay the benefits included in the benefit obligation as they come due.

The expected rate of return represents the average rate of return to be earned on plan assets over the period the benefits included in the benefit obligation are to be paid and is determined on a plan basis. The expected rate of return for each plan is developed considering long-term historical returns data, current market conditions, and actual returns on the plan assets. Using this reference information, the long-term return expectations for each asset category and a weighted-average expected return for each plan’s target portfolio is developed according to the allocation among those investment categories. The expected portfolio performance reflects the contribution of active management as appropriate.

In accordance with the terms of the Employee Matter Agreement, prior to the Separation, Merck continued to provide service crediting to employees that transferred to Organon under Merck’s U.S. defined benefit pension plan, supplemental executive retirement, and retiree medical plans for purposes of early retirement eligibility and subsidies, as well as for certain service crediting bridges. Although Merck is responsible for providing these benefits, Organon recorded the portion of the aggregate incremental cost of providing early retirement subsidies, service crediting bridges, and retiree health care benefits under these programs that is attributable to future service. Accordingly, upon Separation, the Company recorded a “grow-in” provision granted to employees transferred to Organon of $50 million, which represented the future service earned with Organon for these transferred employees for the pension and other postretirement benefits. The “grow-in” provision was recorded as an asset and will be expensed over the estimated average service period ofeight years since the Separation, in operating expenses. The unamortized balance of the asset is $27 million as of December 31, 2024, of which $21 million is reflected in Other Assets and $6 million is reflected in Other current assets. See Note 17 “Third-Party Arrangements” for additional details and defined terms.

Savings Plan

Organon maintains a defined contribution savings plan in the United States. The Company matches a percentage of employees’ contributions consistent with the provisions of the plan. The Company makes retirement contributions calculated based on a predetermined formula that considers years of service and the employee’s age. Total actual employer contributions to this plan

-89- in 2024, 2023 and 2022 were $36 million and $39 million and $32 million, respectively.

As of December 31, 2024 and 2023, the Company had $187 million and $149 million, respectively, in Accrued and other current liabilitiesof the consolidated Balance Sheets related to annual compensation.

15. Accumulated Other Comprehensive Income (Loss)

Changes in Accumulated other comprehensive income (loss) by component are as follows:

16. Samsung Collaboration

The Company has an agreement with Samsung Bioepis Co., Ltd. (“Samsung Bioepis”) to develop and commercialize multiple pre-specified biosimilar candidates, which have since launched and are part of the Company's product portfolio. Under the agreement, Samsung Bioepis is responsible for preclinical and clinical development, process development and manufacturing, clinical trials and registration of product candidates, and the Company has an exclusive license for worldwide commercialization with certain geographic exceptions specified on a product-by-product basis. The Company's access rights to each product under the agreement last for 10 years from each product's launch date on a market-by-market basis. Gross profits are shared equally in all markets with the exception of certain markets in Brazil where gross profits are shared 65% to Samsung Bioepis and 35% to the Company. Since the Company is the principal on sales transactions with third parties, the Company recognizes sales, cost of sales and selling, general and administrative expenses on a gross basis. Generally, profit sharing adjustments are recorded either to Cost of sales (after commercialization) or Selling, general and administrative expenses (prior to commercialization).

Samsung Bioepis is eligible for additional payments associated with pre-specified clinical and regulatory milestones. As of December 31, 2024, potential future regulatory milestone payments of $25 million remain under the agreement.

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Summarized information related to this collaboration is as follows:

17. Third-Party Arrangements

On June 2, 2021, Organon and Merck & Co., Inc. (“Merck”) entered into a Separation and Distribution Agreement (the “Separation and Distribution Agreement”). Pursuant to the Separation and Distribution Agreement, Merck agreed to spin off the Organon Products into Organon, a new, publicly-traded company (the “Separation”).

The Separation and Distribution Agreement, contains provisions that, among other things, relate to (i) assets, liabilities and contracts to be transferred, assumed and assigned to each of Organon and Merck as part of the Separation, (ii) cross-indemnities principally designed to place financial responsibility for the obligations and liabilities of the Organon business with Organon and financial responsibility for the obligations and liabilities of Merck’s remaining business with Merck, (iii) procedures with respect to claims subject to indemnification and related matters, (iv) the allocation between Organon and Merck of rights and obligations under existing insurance policies with respect to occurrences prior to completion of the Distribution, as well as the right to proceeds and the obligation to incur certain deductibles under certain insurance policies, and (v) procedures governing Organon’s and Merck’s obligations and allocations of liabilities with respect to ongoing litigation matters that may implicate each of Merck’s business and Organon’s business.

Agreements that Organon entered into with Merck that govern aspects of Organon’s relationship with Merck following the Separation include:

•Transition Services Agreements - Under the TSA, (i) Merck and certain of its affiliates provided Organon and certain of its affiliates, on an interim, transitional basis, various services, and (ii) Organon and certain of its affiliates provided Merck and certain of its affiliates, on an interim, transitional basis, various services. The services provided by Merck included, among others, information technology, human resources, finance, quality, regulatory, supply chain management, promotional services, distribution services and certain other services, and were provided on a cost or, where applicable, a cost-plus basis. The services provided by Organon included quality, regulatory, supply chain management, promotional services, distribution services and certain other services and were provided on a cost or, where applicable, a cost-plus basis. The Merck services generally commenced on the date of the Separation and the majority of the services terminated within 25 months following the date of Separation on July 2, 2023, however, certain services were extended to at least 35 months following the Separation. As of December 31, 2024 there were no material TSAs between the two companies.

•Interim Operating Agreements - Merck and Organon entered into a series of interim operating model (“IOM”) agreements, pursuant to which Merck and certain of its affiliates that held licenses, permits and other rights in connection with marketing, import and/or distribution of Organon products in various jurisdictions prior to the Separation, continue to market, import and distribute such products until such time as the relevant licenses and permits are transferred to Organon or its affiliates, while permitting Organon (or Merck, as applicable) to recognize revenue relating to the sale of its respective products, to the extent practicable. Under such IOM agreements and in accordance with the Separation and Distribution Agreement, the relevant Merck entity will continue operations in the affected market on behalf of Organon, with Organon receiving all of the economic benefits and burdens of such activities. Organon began receiving these economic benefits as of June 2, 2021. Based on the terms of the IOM agreements, the Company determined it is the Principal under these arrangements. Organon holds all risks and rewards of ownership inclusive of risk of loss, market risk and benefits related to the inventory. Additionally, Organon has control in pricing, has the ability to direct Merck regarding decisions over inventory, and is responsible for all credit and collections risks and losses associated with the related receivables. As such, Organon recognizes these sales on a gross basis. As of December 31, 2024, only one jurisdiction remains under an IOM agreement.

•Manufacturing and Supply Agreements - Merck and Organon and/or their applicable affiliates entered into a number of manufacturing and supply agreements pursuant to which the relevant Merck entity (a) manufactures and supplies

-91- certain active pharmaceutical ingredients for the relevant Organon entity, (b) toll manufactures and supplies certain formulated pharmaceutical products for such Organon entity, and (c) packages and labels certain finished pharmaceutical products for such Organon entity. Similarly, the relevant Organon entity (a) manufactures and supplies certain formulated pharmaceutical products for the relevant Merck entity, and (b) packages and labels certain finished pharmaceutical products for such Merck entity.

•Tax Matters Agreement - The TMA allocates responsibility for all U.S. federal income, state and foreign income, franchise, capital gain, withholding and similar taxes, as well as all non-income taxes. The TMA also provides for cooperation between Merck and Organon with respect to tax matters, the exchange of information and the retention of records that may affect the tax liabilities of the parties to the TMA. Merck generally is responsible for any income taxes reportable on an originally filed consolidated, combined or unitary return that includes Merck or any of its subsidiaries (and Organon and/or any of its subsidiaries) for any periods or portions thereof ending on or prior to the Distribution. Organon generally is responsible for any income taxes that are reportable on originally filed returns that include only Organon and/or any of its subsidiaries, for all tax periods. Additionally, as a general matter, Merck is responsible for certain income and non-income taxes imposed as the direct result of the Separation or of an internal separation transaction. Organon is responsible for certain taxes that exclusively relate to Organon’s business and for taxes resulting from any breach of certain representations or covenants that Organon made in the TMA. Certain amounts are estimates and subject to possible adjustment in future periods.

•Employee Matters Agreement - The agreement allocated assets, liabilities and responsibilities relating to employee compensation and benefit plans and programs and other related matters in connection with the Separation.

•Other agreements that Organon entered into with Merck include the Intellectual Property License Agreements and Regulatory Agreements.

The amounts due under such agreements were:

Sales and cost of sales resulting from the manufacturing and supply agreements with Merck were:

18. Contingencies

Organon is involved in various claims and legal proceedings of a nature considered normal to its business, including product liability, intellectual property, and commercial litigation, as well as certain additional matters including governmental and environmental matters.

Organon records accruals for contingencies when it is probable that a liability has been incurred and the amount can be reasonably estimated. These accruals are adjusted periodically as assessments change or additional information becomes available. Individually significant contingent losses are accrued when probable and reasonably estimable. Legal defense costs expected to be incurred in connection with a loss contingency are accrued when probable and reasonably estimable.

Given the nature of the litigation discussed in this note and the complexities involved in these matters, Organon is unable to reasonably estimate a possible loss or range of possible loss for such matters until Organon knows, among other factors, (i) what claims, if any, will survive dispositive motion practice, (ii) the extent of the claims, including the size of any potential class, particularly when damages are not specified or are indeterminate, (iii) how the discovery process will affect the litigation, (iv) the settlement posture of the other parties to the litigation, and (v) any other factors that may have a material effect on the litigation.

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Organon’s decision to obtain insurance coverage is dependent on market conditions, including cost and availability, existing at the time such decisions are made. Organon has evaluated its risks and has determined that the cost of obtaining product liability insurance outweighs the likely benefits of the coverage that is available and, as such, has no insurance for most product liabilities.

Reference is made below to certain litigation in which Merck, but not Organon, is named as a defendant. Pursuant to the Separation and Distribution Agreement, Organon is required to indemnify Merck for liabilities relating to, arising from, or resulting from such litigation.

Product Liability Litigation

Fosamax

Merck is a defendant in product liability lawsuits in the United States involving Fosamax® (alendronate sodium) (the “Fosamax Litigation”). As of December 31, 2024, the Fosamax Litigation comprises approximately 975 cases in Federal court, approximately 1,740 cases in New Jersey state court in Middlesex County, and approximately 275 cases in California state court. Plaintiffs in the vast majority of these cases generally allege that they sustained femur fractures and/or other bone injuries (“Femur Fractures”) in association with the use of Fosamax.

All federal cases involving allegations of femur fractures have been transferred to a multidistrict litigation in the District of New Jersey (“Femur Fracture MDL”). In the only bellwether case tried to date in the Femur Fracture MDL, Glynn v. Merck, the jury returned a verdict in Merck’s favor. In addition, in June 2013, the Femur Fracture MDL court granted Merck’s motion for judgment as a matter of law in the Glynn case and held that the plaintiff’s failure to warn claim was preempted by federal law. The Femur Facture MDL court then dismissed with prejudice approximately 650 cases on these same preemption grounds. Following a series of appeals, including a U.S. Supreme Court decision in 2019, the Third Circuit ruled in September 2024 that plaintiffs’ failure-to-warn claims are not preempted by federal law. Consequently,975 cases are now before the Femur Fracture MDL court for further litigation.

In New Jersey state court, the parties selected an initial group of cases to be reviewed through fact discovery, and Merck continues to select additional cases to be reviewed. In California state court, the cases have been consolidated before a single judge in Orange County, California, and discovery is presently stayed.

Nexplanon/Implanon

Merck is a defendant in lawsuits brought by individuals relating to the use of Nexplanon and Implanon™(etonogestrel implant). There aretwo filed product liability actions involving Implanon, both of which are pending in the Northern District of Ohio as well as 56 unfiled cases involving Implanon alleging similar injuries, all of which have been tolled under a written tolling agreement. As of December 31, 2024, Merck had 20 cases pending outside the United States, of which 11 relate to Implanon andnine relate to Nexplanon.

Governmental Proceedings

From time to time, Organon’s subsidiaries may receive inquiries and may be the subject of preliminary investigation activities from competition and/or other governmental authorities, including in markets outside the United States. These authorities may include regulators, administrative authorities, and law enforcement and other similar officials, and these preliminary investigation activities may include site visits, formal or informal requests or demands for documents or materials, inquiries or interviews and similar matters. Certain of these preliminary inquiries or activities may lead to the commencement of formal proceedings. Should those proceedings be determined adversely to Organon, monetary fines and/or remedial undertakings may be required. Subject to certain exceptions specified in the Separation and Distribution Agreement, Organon assumed liability for all pending and threatened legal matters related to products transferred from Merck to Organon in connection with the spinoff, including competition investigations resulting from enforcement activity concerning Merck’s conduct involving Organon’s products. Organon could be obligated to indemnify Merck for fines or penalties, or a portion thereof, resulting from such investigations.

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Patent Litigation

From time to time, generic manufacturers of pharmaceutical products file Abbreviated New Drug Applications with the FDA seeking to market generic forms of Organon’s products prior to the expiration of relevant patents owned by Organon. To protect its patent rights, Organon may file patent infringement lawsuits against such generic companies. Similar lawsuits defending Organon’s patent rights may exist in other countries. Organon intends to vigorously defend its patents, which it believes are valid, against infringement by companies attempting to market products prior to the expiration of such patents. As with any litigation, there can be no assurance of the outcomes, which, if adverse, could result in significantly shortened periods of exclusivity for these products, potential payment of damages and legal fees, and, with respect to products acquired through acquisitions, potentially significant intangible asset impairment charges.

Nexplanon

In June 2017, Microspherix LLC (“Microspherix”) sued Organon in the U.S. District Court for the District of New Jersey asserting that the manufacturing, use, sale and importation of Nexplanon infringed several of Microspherix’s patents that claim radio-opaque, implantable drug delivery devices. Microspherix claimed damages from September 2014 until the patents expired in May 2021. In December 2023, the parties executed a settlement agreement and the district court dismissed the case. Organon made its first payment of $35 million in December 2023, its second payment of $25 million in August 2024, and its final payment of $20 million in January 2025.

Other Matters

On February 24, 2025, Organon received a Paragraph IV Certification Letter notifying the Company that Xiromed Pharma Espana, S.L. filed an abbreviated new drug application to the FDA seeking approval to market a generic version of Nexplanon in the United States prior to the expiration of U.S. Patent Nos. 8,722,037 and 9,757,552, in 2027 and 2030, respectively. Organon is reviewing the matter and intends to defend and enforce its intellectual property rights protecting Nexplanon.

In addition to the matters described above, there are various other pending legal proceedings involving Organon, principally product liability and intellectual property lawsuits. While it is not feasible to predict the outcome of such proceedings, in the opinion of Organon as of December 31, 2024, either the likelihood of loss is remote or any reasonably possible loss associated with the resolution of such proceedings is not expected to be material to Organon’s financial condition, results of operations or cash flows either individually or in the aggregate.

Legal Defense Reserves

Legal defense costs expected to be incurred in connection with a loss contingency are accrued when probable and reasonably estimable. Some of the significant factors considered in the review of these legal defense reserves are as follows: the actual costs incurred by Organon; the development of Organon’s legal defense strategy and structure in light of the scope of its litigation; the number of cases being brought against Organon; and the costs and outcomes of completed trials and the most current information regarding anticipated timing, progression, and related costs of pre-trial activities and trials in the associated litigation. The legal defense reserve as of December 31, 2024 and December 31, 2023 was $7 million and $20 million, respectively, and represented Organon’s best estimate of the minimum amount of defense costs to be incurred in connection with its outstanding litigation; however, events such as additional trials and other events that could arise in the course of its litigation could affect the ultimate amount of legal defense costs to be incurred by Organon. Organon will continue to monitor its legal defense costs and review the adequacy of the associated reserves and may determine to increase the reserves at any time in the future if, based upon the factors set forth, it believes it would be appropriate to do so.

Environmental Matters

In management’s opinion, the liabilities for allenvironmental matters that are probable and reasonably estimable have been accrued and totaled $16 million and $19 million at December 31, 2024 and 2023, respectively. These liabilities are undiscounted, do not consider potential recoveries from other parties and will be paid out over the periods of remediation for the applicable sites, which are expected to occur primarily over the next 13 years. It is not possible to predict with certainty the outcome of these matters, or the ultimate costs of remediation. Management also does not believe that these expenditures should result in a material adverse effect on the Company’s financial condition, results of operations or liquidity for any period presented.

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