Fortrea Holdings Inc

Previous wording

The following discussion and analysis is intended to provide a summary of significant factors relevant to the financial performance and condition of Fortrea Holdings Inc., which we refer to in this discussion and analysis as “Fortrea,” the “Company,” “our” and “we”. Prior to the spin-off (the “Spin” or “the Separation”), Fortrea existed and functioned as part of Laboratory Corporation of America Holdings, which we refer to in this discussion and analysis as “Labcorp” or “Former Parent.” The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our audited combined financial statements and corresponding notes included in our Annual Report on Form 10-K (the “Form 10-K”) and our unaudited condensed consolidated and combined financial statements and corresponding notes in Item 1. “Financial Statements.” Unless otherwise noted, the following information and discussion relates to our continuing operations.

Current wording

The following discussion and analysis is intended to provide a summary of significant factors relevant to the financial performance and condition of Fortrea Holdings Inc., which we refer to in this discussion and analysis as “Fortrea,” the “Company,” “our” and “we”. Prior to the spin-off (the “Spin” or “the Separation”), Fortrea existed and functioned as part of Laboratory Corporation of America Holdings, which we refer to in this discussion and analysis as “Labcorp” or “Former Parent.” The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our audited combined financial statements and corresponding notes included in our Annual Report on Form 10-K for the year ended December 31, 2023 (the “Form 10-K”) and our unaudited condensed consolidated and combined financial statements and corresponding notes in Item 1. “Financial Statements.” Unless otherwise noted, the following information and discussion relates to our continuing operations.

Previous wording

Forward-looking statements are subject to known and unknown risks and uncertainties, many of which are beyond our control. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and industry development may differ materially from those made in or suggested by the forward-looking statements contained in this Form 10-Q. In addition, even if our results of operations, financial condition and liquidity, and industry development are consistent with the forward-looking statements contained in this Form 10-Q, those results or developments may not be indicative of results or developments in subsequent periods. A number of important factors could cause actual results to differ materially from those contained in or implied by the forward-looking statements, including the risks and uncertainties discussed in the “Risk Factors” Section of our Form 10-K, as filed with the SEC. Factors that could cause actual results to differ from those reflected in forward-looking statements relating to our operations and business include, among other things: the risk that we may not realize some or all of the benefits expected to result from the Spin, or that such benefits are delayed; risks and consequences that are a result of the Spin; the impacts of becoming an independent public company; our reliance on Labcorp to provide financial reporting and other financial and accounting information for periods prior to the Spin through the end of the relevant transition agreements, as well as IT, accounting, finance, legal, human resources, and other services critical to our businesses; our dependence on third parties generally to provide services critical to our businesses throughout the transition period and beyond; the risk that establishment of our accounting, enterprise resource planning, and other management systems post the transition period could cost more or take longer than anticipated; our identification of existing material weaknesses in our internal control over financial reporting; the impact of the rebranding of the Company; our ability to successfully implement our business strategies and execute our long-term value creation strategy; risks and expenses associated with our international operations and currency fluctuations; our customer or therapeutic area concentrations; any further deterioration in the macroeconomic environment, which could lead to defaults or cancellations by our customers; the risk that our backlog and net new business may not grow to the extent we anticipate or the time period we anticipate, that such measures may not be indicative of our future revenues and that we might not realize all of the anticipated future revenue reflected in our backlog; our ability to generate sufficient net new business awards, or the risk that net new business awards are delayed, terminated, reduced in scope, or fail to go to contract; the risk that we ma…

Excerpt shortened here; the source contains the full paragraph.

Current wording

Forward-looking statements are subject to known and unknown risks and uncertainties, many of which are beyond our control. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and industry development may differ materially from those made in or suggested by the forward-looking statements contained in this Form 10-Q. In addition, even if our results of operations, financial condition and liquidity, and industry development are consistent with the forward-looking statements contained in this Form 10-Q, those results or developments may not be indicative of results or developments in subsequent periods. A number of important factors could cause actual results to differ materially from those contained in or implied by the forward-looking statements, including the risks and uncertainties discussed in the “Risk Factors” Section of our Form 10-K, as filed with the SEC. Factors that could cause actual results to differ from those reflected in forward-looking statements relating to our operations and business include, among other things: the risk that we may not realize some or all of the benefits expected to result from the Spin, or that such benefits are delayed; risks and consequences that are a result of the Spin; the impacts of becoming an independent public company; our reliance on Labcorp to provide financial reporting and other financial and accounting information for periods prior to the Spin through the end of the relevant transition agreements, as well as IT, accounting, finance, legal, human resources, and other services critical to our businesses; our dependence on third parties generally to provide services critical to our businesses throughout the transition period and beyond; the risk that establishment of our accounting, enterprise resource planning, and other management systems post the transition period could cost more or take longer than anticipated; our identification of existing material weaknesses in our internal control over financial reporting; the impact of our rebranding; our ability to successfully implement our business strategies and execute our long-term value creation strategy; risks and expenses associated with our international operations and currency fluctuations; our customer or therapeutic area concentrations; any further deterioration in the macroeconomic environment, which could lead to defaults or cancellations by our customers; the risk that our backlog and net new business may not grow to the extent we anticipate or over the time period we anticipate, that such measures may not be indicative of our future revenues and that we might not realize all of the anticipated future revenue reflected in our backlog; our ability to generate sufficient net new business awards, or the risk that net new business awards are delayed, terminated, reduced in scope, or fail to go to contract; the risk that we may underpri…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

Our team of approximately 16,000 employees conducts operations in approximately 100 countries and delivers comprehensive phase I – IV clinical trial management, clinical pharmacology and consulting services for our customers. Our offering is scaled to deliver focused and agile solutions to customers globally, streamlining the biopharmaceutical product and medical device development process.

Current wording

Our team of approximately 15,500 employees conducts operations in approximately 100 countries and delivers comprehensive phase I – IV clinical trial management, clinical pharmacology and consulting services for our customers. Our offering is scaled to deliver focused and agile solutions to customers globally, streamlining the biopharmaceutical product and medical device development process.

Previous wording

Capital Partners, pursuant to which the Seller agreed to sell, and to cause its affiliates to sell, certain assets relating to its Enabling Services Segment (the “Transaction”), including the sale of equity interests of Fortrea Patient Access Inc. and its subsidiaries and Endpoint Clinical, Inc. and its subsidiaries. The final adjusted purchase price for the Transaction was $340.0, subject to customary purchase price adjustments, with $295.0 paid at closing and $45.0 to be paid upon achievement of certain transition-related milestones, which includes certain services provided through a Transition Services Agreement. The Transaction closed during the second quarter of 2024. The decision to sell such assets relating to the Enabling Services Segment represented a strategic shift that had a significant effect on the Company's results and operations and assets and liabilities for the periods presented. As a result, the Company has classified the assets related to the Enabling Services Segment as assets from discontinued operations and liabilities from discontinued operations on the condensed consolidated balance sheets as of June 30, 2024 and December 31, 2023. The operations of the Enabling Services Segment have been classified as income or loss from discontinued operations on the condensed consolidated and combined statements of operations for all periods presented.

Current wording

On March 9, 2024, the Company, together with its wholly-owned subsidiary, Fortrea Inc. (the “Seller”), entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Endeavor Buyer LLC, an affiliate of Arsenal Capital Partners, pursuant to which the Seller agreed to sell, and to cause its affiliates to sell, certain assets relating to its Enabling Services Segment (the “Transaction”), including the sale of equity interests of Fortrea Patient Access Inc. and its subsidiaries and Endpoint Clinical, Inc. and its subsidiaries. The final adjusted purchase price for the Transaction was $340.0, subject to customary purchase price adjustments, with $295.0 paid at closing and $45.0 to be paid upon achievement of certain transition-related milestones, which includes certain services provided through a Transition Services Agreement. The Transaction closed during the second quarter of 2024. The decision to sell such assets relating to the Enabling Services Segment represented a strategic shift that had a significant effect on the Company's results and operations and assets and liabilities for the periods presented. As a result, the Company has classified the assets related to the Enabling Services Segment as assets from discontinued operations and liabilities from discontinued operations on the condensed consolidated balance sheet as of December 31, 2023. The operations of the Enabling Services Segment have been classified as income or loss from discontinued operations on the condensed consolidated and combined statements of operations for all periods presented.

Previous wording

Our backlog consists of anticipated future revenue from business awards that either have not started, or that are in process and have not been completed. Our backlog also reflects any cancellation or adjustment activity related to these awards. The average duration of our contracts will fluctuate from period to period based on the contracts comprising our backlog at any given time. The majority of our contracts contain early termination provisions that typically require notice periods ranging from 30 to 90 days. We adjust backlog for foreign currency fluctuations and exclude from backlog revenue that has been recognized as revenue in our statements of operations. Our backlog was $7.4 billion as of June 30, 2024.

Current wording

Our backlog consists of anticipated future revenue from business awards that either have not started, or that are in process and have not been completed. Our backlog also reflects any cancellation or adjustment activity related to these awards. The average duration of our contracts will fluctuate from period to period based on the contracts comprising our backlog at any given time. The majority of our contracts contain early termination provisions that typically require notice periods ranging from 30 to 90 days. We adjust backlog for foreign currency fluctuations and exclude from backlog amounts that have been recognized as revenue in our statements of operations. Our backlog was $7.6 billion as of September 30, 2024.

Previous wording

Three and Six Months Ended June 30, 2024 compared with Three and Six Months Ended June 30, 2023

Current wording

Three and Nine Months Ended September 30, 2024 compared with Three and Nine Months Ended September 30, 2023

Previous wording

The Company’s revenues for the three months ended June 30, 2024 were $662.4, a decrease of 8.6% from revenues of $725.1 in the corresponding period in 2023. The change in revenues was due to a decrease in organic revenues of 8.3% and unfavorable foreign currency translation of 0.3%. The Company defines organic growth as the change in revenues excluding the year over year impact of acquisitions, divestitures and currency. The 8.3% decrease in organic revenues was primarily driven by decreased pass through revenues and lower service revenues resulting from the quantity and burn rate of new business wins pre-Spin, and the challenges of mix.

Current wording

The Company’s revenues for the three months ended September 30, 2024 were $674.9, a decrease of 5.4% from revenues of $713.8 in the corresponding period in 2023. The change in revenues was due to a decrease in organic revenues of 5.7%, partially offset by favorable foreign currency translation of 0.2%. The Company defines organic growth as the change in revenues excluding the year over year impact of acquisitions, divestitures and currency. The 5.7% decrease in organic revenues was primarily driven by decreased pass through costs and lower service revenues resulting from the quantity and burn rate of new business wins pre-Spin, along with the mix of later stage and longer duration studies in our portfolio.

Previous wording

The Company’s revenues for the six months ended June 30, 2024 were $1,324.5, a decrease of 6.7% from revenues of $1,419.0 in the corresponding period in 2023. The change in revenues was due to a decrease in organic revenues of 6.6% and unfavorable foreign currency translation of 0.1%. The 6.6% decrease in organic revenues was primarily driven by lower service revenues resulting from the quantity and burn rate of new business wins pre-Spin, and the challenges of mix and decreased pass through revenues.

Current wording

The Company’s revenues for the nine months ended September 30, 2024 were $1,999.4, a decrease of 6.3% from revenues of $2,132.8 in the corresponding period in 2023. The change in revenues was due to a decrease in organic revenues. The 6.3% decrease in organic revenues was primarily driven by lower service revenues resulting from the quantity and burn rate of new business wins pre-Spin, the mix of later stage and longer duration studies and decreased pass through costs.

Previous wording

Direct costs decreased 7.6% during the three months ended June 30, 2024 as compared with the corresponding period in 2023. Direct costs increased as a percentage of revenues to 79.3% during the three months ended June 30, 2024 as compared to 78.4% in the corresponding period in 2023. The decrease in direct costs was primarily due to lower pass through costs. Pass through costs are paid by the customer resulting in revenue fully offset by these direct costs.

Current wording

Direct costs decreased 6.6% during the three months ended September 30, 2024 as compared with the corresponding period in 2023. Direct costs decreased as a percentage of revenues to 78.0% during the three months ended September 30, 2024 as compared to 79.0% in the corresponding period in 2023. The decrease in direct costs was primarily due to lower headcount as well as lower pass through costs, partially offset by an increase in stock compensation and professional fees.

Previous wording

Direct costs decreased 2.8% during the six months ended June 30, 2024 as compared with the corresponding period in 2023. Direct costs increased as a percentage of revenues to 81.5% during the six months ended June 30, 2024 as compared to 78.2% in the corresponding period in 2023. The decrease in direct costs was primarily due to lower pass through costs.

Current wording

Direct costs decreased 4.1% during the nine months ended September 30, 2024 as compared with the corresponding period in 2023. Direct costs increased as a percentage of revenues to 80.3% during the nine months ended September 30, 2024 as compared to 78.5% in the corresponding period in 2023. The decrease in direct costs was primarily due to lower headcount as well as lower pass through costs, partially offset by an increase in stock compensation and professional fees.

Previous wording

Selling, general and administrative expenses consist primarily of administrative payroll and related benefit charges, information technology costs, other facility charges, advertising and promotional expenses, administrative travel and credit loss provisions. Selling, general and administrative expenses increased by 59.7% during the three months ended June 30, 2024 as compared with the corresponding period in 2023. The increase was primarily due to incremental costs incurred to exit the Transition Services Agreement with Labcorp.

Current wording

Selling, general and administrative expenses consist primarily of administrative payroll and related benefit charges, information technology costs, other facility charges, advertising and promotional expenses, administrative travel and credit loss provisions. Selling, general and administrative expenses increased by 27.6% during the three months ended September 30, 2024 as compared with the corresponding period in 2023. The increase was primarily due to an increase in professional fees and other costs to support the exit of the Transition Services Agreement with Labcorp and personnel and information technology costs as a stand-alone company.

Previous wording

Selling, general and administrative expenses increased by 28.8% during the six months ended June 30, 2024 as compared with the corresponding period in 2023. The increase was primarily due to an increase in professional fees and other costs to support the exit of the Transition Services Agreement with Labcorp, and personnel and information technology costs as a stand-alone company, partially offset by the removal of Former Parent corporate allocations.

Current wording

Selling, general and administrative expenses increased by 28.4% during the nine months ended September 30, 2024 as compared with the corresponding period in 2023. The increase was primarily due to an increase in professional fees and other costs to support the exit of the Transition Services Agreement with Labcorp and personnel and information technology costs as a stand-alone company, partially offset by the removal of Former Parent corporate allocations.

Previous wording

The decrease in depreciation expense for the three and six months ended June 30, 2024, as compared to the corresponding periods in 2023, was due to the decrease in depreciable property, plant and equipment, primarily IT assets.

Current wording

The decrease in depreciation expense for the three and nine months ended September 30, 2024, as compared to the corresponding periods in 2023, was due to a decrease in depreciable property, plant and equipment, primarily IT assets.

Previous wording

The change in amortization of intangibles and other assets during the three andsix months ended June 30, 2024, as compared to the corresponding period in 2023, was not significant.

Current wording

The change in amortization of intangibles and other assets during the three andnine months ended September 30, 2024, as compared to the corresponding periods in 2023, was not significant.

Previous wording

During the three and six months ended June 30, 2024, the Company recorded net restructuring charges of $10.4 and $13.7, respectively, which are reflected within restructuring and other charges in the condensed consolidated and combined statements of operations. These charges are associated with Company actions to align resources, and restructure certain operations and include eliminating redundant positions and aligning resources for cost improvements and to meet customer requirements.

Current wording

During the three and nine months ended September 30, 2024, the Company recorded net restructuring charges of $8.8 and $22.5, respectively, which are reflected within restructuring and other charges in the condensed consolidated and combined statements of operations. These charges are associated with Company actions to align resources, and restructure certain operations and include eliminating redundant positions and aligning resources and facilities for cost improvements and to meet customer requirements.

Previous wording

During the three and six months ended June 30, 2023, the Company recorded net restructuring charges of $3.6 and $4.2, respectively. These costs were associated with general cost improvements, eliminating redundant positions and aligning resources for cost improvements and to meet our customer requirements.

Current wording

During the three and nine months ended September 30, 2023, the Company recorded net restructuring charges of $10.1 and $14.3, respectively. These costs were associated with general cost improvements, eliminating redundant positions and aligning resources and facilities for cost improvements and to meet our customer requirements.

Previous wording

The increase in interest expense for the three and six months ended June 30, 2024, as compared with the corresponding period in 2023, is primarily due to the incurrence of indebtedness, consisting of borrowings under senior secured term loan facilities and senior secured notes, and the write-off of $12.2 of debt issuance costs associated with the pay down of debt in the quarter ended June 30, 2024.

Current wording

The increase in interest expense for the nine months ended September 30, 2024, as compared with the corresponding period in 2023, is primarily due to the incurrence of indebtedness, consisting of borrowings under senior secured term loan facilities and senior secured notes, and the write-off of $12.2 of debt issuance costs associated with the pay down of debt in the quarter ended June 30, 2024.

Previous wording

The foreign exchange loss for the three and six months ended June 30, 2024 compared to the foreign exchange gain (loss) for three and six months ended June 30, 2023 changed primarily due to the relative weakening of the U.S. Dollar against the British Pound and the Euro.

Current wording

The foreign exchange loss for the three and nine months ended September 30, 2024 compared to the foreign exchange gain (loss) for three and nine months ended September 30, 2023 changed primarily due to the relative weakening of the U.S. Dollar against the British Pound and the Euro.

Previous wording

The increase in Other, net for the three and six months ended June 30, 2024, as compared with the corresponding periods in 2023, is primarily related to the recognition of a contingent consideration payment on a sale of a facility to a third party that is no longer in use by the Company and income related to services provided under Transition Services Agreements.

Current wording

The increase in Other, net for the three and nine months ended September 30, 2024, as compared with the corresponding periods in 2023, is primarily related to the recognition of a contingent consideration payment on a sale of a facility to a third party that is no longer in use by the Company and income related to services provided under Transition Services Agreements.

Previous wording

For the three months ended June 30, 2024, the Company's effective tax rate was (12.1)% compared to the 2023 tax rate of 31.7%. The fluctuations in the quarter-to-date period were primarily due to a change in valuation allowance, earnings mix, and non-deductible compensation expenses.

Current wording

For the three months ended September 30, 2024, the Company's effective tax rate was 48.3% compared to the 2023 tax rate of 26.5%. For the nine months ended September 30, 2024, the Company's effective tax rate was 1.2% compared to the 2023 tax rate of 30.2%. The fluctuations in the quarter-to-date and year-to-date periods were primarily due to valuation allowance, employee benefits, and a foreign rate differential impact.

Previous wording

The Company manages cash flow to fund and invest in operational growth, capital expenditures, and credit facility repayments. In connection with the Spin, we incurred indebtedness in an aggregate principal amount of $1,640.0, which consists of borrowings under senior secured term loan facilities and senior secured notes. We have also entered into a senior secured revolving credit facility, which consists of a five-year facility in the principal amount of up to $450.0 as further discussed in Note 7 - Debt to our condensed consolidated and combined financial statements above. During the three and six months ended June 30, 2024, we paid down $64.0 and $70.2, respectively, on term loan A and $411.0 and $412.5, respectively, on term loan B.

Current wording

The Company manages cash flow to fund and invest in operational growth, capital expenditures, and credit facility repayments. In connection with the Spin, we incurred indebtedness in an aggregate principal amount of $1,640.0, which consists of borrowings under senior secured term loan facilities and senior secured notes. We have also entered into a senior secured revolving credit facility, which consists of a five-year facility in the principal amount of up to $450.0 as further discussed in Note 6 - Debt to our condensed consolidated and combined financial statements. During the nine months ended September 30, 2024, we paid down $70.2, on term loan A and $412.5, on term loan B, respectively.

Previous wording

On May 6, 2024, we entered into a three-year $300.0 accounts receivable securitization program (the “Receivables Facility”). Under this program, Fortrea Inc. conveys receivable balances to a wholly-owned, bankruptcy-remote special purpose entity (“SPE”), which in turn, may sell receivables to a third-party financial institution in exchange for cash. As of June 30, 2024, we sold $300.0 of receivables with net proceeds of $297.9.

Current wording

On May 6, 2024, we entered into a three-year $300.0 accounts receivable securitization program (the “Receivables Facility”). Under this program, Fortrea Inc. conveys receivable balances to a wholly-owned, bankruptcy-remote special purpose entity, which in turn, may sell receivables to a third-party financial institution in exchange for cash. As of September 30, 2024, we had sold $300.0 of receivables with net proceeds of $297.9.

Previous wording

Cash Flows for the six months ended June 30, 2024 and 2023

Current wording

Cash Flows for the nine months ended September 30, 2024 and 2023

Previous wording

Cash and cash equivalents at June 30, 2024 and 2023 totaled $126.2 and $108.9, respectively. Cash and cash equivalents consist of highly liquid instruments, such as commercial paper, time deposits and other money market instruments, which have maturities when purchased of three months or less.

Current wording

Cash and cash equivalents at September 30, 2024 and 2023 totaled $105.3 and $103.8, respectively. Cash and cash equivalents consist of highly liquid instruments, such as commercial paper, time deposits and other money market instruments, which have maturities when purchased of three months or less.

Previous wording

During the six months ended June 30, 2024, the Company’s operations provided $248.1 of cash as compared to $148.1 of cash provided by operations during the six months ended June 30, 2023. The increase of $100.0 from the six months ended June 30, 2024 was primarily due to the sale of receivables under the Receivables Facility off-set by a decrease in net income.

Current wording

During the nine months ended September 30, 2024, the Company’s operations provided $245.7 of cash as compared to $150.0 of cash provided by operations during the nine months ended September 30, 2023. The increase of $95.7 for the nine months ended September 30, 2024 was primarily due to cash from accounts receivable, including the sale of receivables under the Receivables Facility, offset by higher use of cash for interest and income taxes and the decrease in net income.

Previous wording

Net cash provided by investing activities for the six months ended June 30, 2024 was $256.2 as compared to net cash used for investing activities of $25.5 for the six months ended June 30, 2023. The $281.7 increase in net cash provided by investing activities for the six months ended June 30, 2024 was primarily due to $276.6 of net proceeds from the sale of the Enabling Services Segment and a year over year decrease in capital expenditures. Capital expenditures were $20.5 and $25.8 for the six months ended June 30, 2024 and 2023, respectively. Capital expenditures in 2024 were 1.5% of revenues, primarily in connection with projects to support growth in the Company's core businesses. The Company intends to continue to pursue selective investments in key therapeutic areas and geographies to drive growth and to improve efficiency of the Company’s operations. Such expenditures are expected to be funded primarily by cash flow from operations.

Current wording

Net cash provided by investing activities for the nine months ended September 30, 2024 was $248.1 as compared to net cash used for investing activities of $22.8 for the nine months ended September 30, 2023. The $270.9 increase in net cash provided by investing activities for the nine months ended September 30, 2024 was primarily due to $276.6 of net proceeds from the sale of the Enabling Services Segment and a year over year decrease in capital expenditures. Capital expenditures were $28.7 and $30.9 for the nine months ended September 30, 2024 and 2023, respectively. Capital expenditures in 2024 were 1.4% of revenues, primarily in connection with projects to support growth in the Company's core businesses. The Company intends to continue to pursue selective investments in key therapeutic areas and geographies to drive growth and to improve efficiency of the Company’s operations. Such expenditures are expected to be funded primarily by cash flow from operations.

Previous wording

Net cash used for financing activities for the six months ended June 30, 2024 was $482.7 compared to cash used for financing activities of $125.4 for the six months ended June 30, 2023. Cash used for financing activities for the six months ended June 30, 2024 was related to principal payments on the term loan A and term loan B and payments on the revolving credit facility.

Current wording

Net cash used for financing activities for the nine months ended September 30, 2024 was $496.7 compared to cash used for financing activities of $133.1 for the nine months ended September 30, 2023. Cash used for financing activities for the nine months ended September 30, 2024 was related to principal payments on the term loan A and term loan B.

Previous wording

We have chosen accounting policies that management believes are appropriate to accurately and fairly report our operating results and financial position in conformity with U.S. GAAP. We apply these accounting policies in a consistent manner. Significant accounting policies are summarized in Note 2 to the consolidated and combined financial statements included in the Annual Report on Form 10-K.

Current wording

We have chosen accounting policies that management believes are appropriate to accurately and fairly report our operating results and financial position in conformity with U.S. GAAP. We apply these accounting policies in a consistent manner. Significant accounting policies are summarized in Note 2 - Summary of Significant Accounting Policies to the consolidated and combined financial statements included in the Annual Report on Form 10-K.