Thermo Fisher Scientific Inc.

Company Overview

Business Model: Thermo Fisher Scientific Inc. is the world leader in serving science, with a mission to enable customers to make the world healthier, cleaner, and safer. The company provides innovative technologies, purchasing convenience, and pharmaceutical services. It serves customers in pharmaceutical and biotech companies, hospitals and clinical diagnostic labs, universities, research institutions, government agencies, and environmental, industrial, research and development, quality, and process control settings. Revenue generation mechanisms include organic investments in research and development, capacity and capabilities, and strategic acquisitions to enhance capabilities across its broad portfolio of innovative products and services.

Market Position: Thermo Fisher Scientific Inc. is positioned as the world leader in serving science, leveraging industry-leading brands such as Thermo Scientific, Applied Biosystems, Invitrogen, Fisher Scientific, Unity Lab Services, Patheon, and PPD. The company competes across diverse markets with a broad range of manufacturers, third-party distributors, and service providers. Success factors include technical performance, technological advances (including artificial intelligence), product and service differentiation, availability and reliability, depth of capabilities, reputation for quality, customer service and support, active research and application-development programs, and relative prices.

Recent Strategic Developments:

• Acquisition of Olink Holding AB (publ) (July 10, 2024): Enhanced the Life Sciences Solutions segment's capabilities in the high-growth proteomics market with differentiated solutions, complementing existing life sciences and mass spectrometry offerings.
• Acquisition of filtration and separation business from Solventum Corporation (September 1, 2025): Strengthened the Life Sciences Solutions segment's bioproduction offerings with advanced filtration technologies and expanded reach into industries including battery, semiconductor, and medical device manufacturing.
• Acquisition of a sterile fill finishing and packaging facility (2025): Within the Laboratory Products and Biopharma Services segment, this acquisition addresses growing demand from pharma and biotech customers for U.S. manufacturing capacity.
• Pending Acquisition of Clario Holdings, Inc.: Agreement to acquire Clario Holdings, Inc. for approximately $8.875 billion in cash, with additional deferred and contingent consideration. Clario Holdings, Inc. is a provider of endpoint data solutions for clinical trials and will become part of the Laboratory Products and Biopharma Services segment upon expected completion by mid-2026.
• Ongoing Growth Strategy: Focuses on high-impact innovation, trusted partner status with customers, and an unparalleled commercial engine, supported by organic investments in R&D, capacity, and capabilities.
• Restructuring Actions: Incurred approximately $0.3 billion in restructuring and related actions in 2025, primarily for headcount reductions and facility consolidations, expected to realize annual cost savings of approximately $0.5 billion.

Geographic Footprint: Thermo Fisher Scientific Inc. has a global team and operations, with a significant international presence.

• Primary Operational Regions: Americas, Asia-Pacific, Europe, the Middle East and Africa (EMEA).
• Employee Distribution (as of December 31, 2025): Approximately 59,000 in the Americas, 22,000 in the Asia-Pacific region, and 44,000 in Europe, the Middle East and Africa.
• Revenue Distribution (2025, based on customer location):
  • North America: $22,240 million
  • Europe: $11,826 million
  • Asia-Pacific: $8,101 million
  • Other regions: $1,597 million
• Sales Growth (2025): Grew in North America, Europe, and Asia-Pacific, but declined in China.

Financial Performance

Revenue Analysis

Profitability Metrics (2025):

• Gross Margin: 40.9%
• Operating Margin: 17.4%
• Net Margin: 15.1%

Investment in Growth (2025):

• R&D Expenditure: $1,397 million (3.1% of revenue)
• Capital Expenditures: $1,525 million
• Strategic Investments: Targeted spending for enhancing commercial capabilities (geographic sales reach and e-commerce platforms), marketing initiatives, expanded service and operational infrastructure, research and development projects, and other expenditures to enhance the customer experience, as well as incentive compensation and recognition for employees.

Business Segment Analysis

Life Sciences Solutions

Financial Performance (2025):

• Revenue: $10,374 million (+7.7% YoY)
• Segment Income: $3,768 million (+7.6% YoY)
• Segment Income Margin: 36.3%
• Key Growth Drivers: Increase in organic revenues driven by the bioproduction business, higher demand from pharma and biotech customers, and the impact from the 2025 acquisition of the filtration and separation business. Genetic sciences also grew due to the 2024 acquisition of Olink Holding AB (publ). The decrease in segment income margin resulted primarily from the impact of acquisitions, unfavorable business mix, and strategic investments, partially offset by very strong productivity improvements.

Product Portfolio:

• Extensive portfolio of reagents, instruments, and consumables.
• Major product lines include biosciences, genetic sciences, and bioproduction.
• New product launches or major updates include enhanced capabilities in proteomics through the Olink Holding AB (publ) acquisition and advanced filtration technologies from the Solventum Corporation acquisition.

Market Dynamics:

• Customers in pharmaceutical, biotechnology, agricultural, clinical, healthcare, academic, and government markets. Growth in the high-growth proteomics market.

Sub-segment Breakdown (2025 Revenue):

• Biosciences: $4,168 million revenue
• Genetic Sciences: $2,870 million revenue
• Bioproduction: $3,200 million revenue
• Other: $136 million revenue

Analytical Instruments

Financial Performance (2025):

• Revenue: $7,554 million (+1.2% YoY)
• Segment Income: $1,736 million (-11.3% YoY)
• Segment Income Margin: 23.0%
• Key Growth Drivers: Organic revenues were flat, primarily due to growth in the electron microscopy and chromatography and mass spectrometry businesses, largely offset by declines in the chemical analysis business. The decrease in segment income margin resulted primarily from the impacts of tariffs and related foreign exchange, strategic investments, and unfavorable business mix, partially offset by strong productivity improvements.

Product Portfolio:

• Broad offering of instruments and supporting consumables, software, and services.
• Major product lines include chromatography and mass spectrometry, chemical analysis, and electron microscopy.

Market Dynamics:

• Customers in pharmaceutical, biotechnology, academic, government, environmental and other research and industrial markets, as well as the clinical laboratory.

Sub-segment Breakdown (2025 Revenue):

• Chromatography and Mass Spectrometry: $3,360 million revenue
• Chemical Analysis: $1,237 million revenue
• Electron Microscopy: $2,957 million revenue

Specialty Diagnostics

Financial Performance (2025):

• Revenue: $4,676 million (+3.6% YoY)
• Segment Income: $1,256 million (+8.4% YoY)
• Segment Income Margin: 26.9%
• Key Growth Drivers: Increase in organic revenues led by growth in the healthcare market channel and the transplant diagnostics business. Clinical diagnostics and immunodiagnostics businesses also contributed to reported revenue growth. The increase in segment income margin was due to strong productivity improvements.

Product Portfolio:

• Wide range of diagnostic test kits, reagents, culture media, instruments, and associated products.
• Major product lines include clinical diagnostics, immunodiagnostics, microbiology, transplant diagnostics, and the healthcare market channel.

Market Dynamics:

• Customers in healthcare, clinical, pharmaceutical, industrial, and food safety laboratories. Products are used to increase the speed and accuracy of diagnoses, improving patient care in a more cost-efficient manner.

Sub-segment Breakdown (2025 Revenue):

• Clinical Diagnostics: $1,115 million revenue
• ImmunoDiagnostics: $912 million revenue
• Microbiology: $645 million revenue
• Transplant Diagnostics: $492 million revenue
• Healthcare Market Channel: $1,788 million revenue

Laboratory Products and Biopharma Services

Financial Performance (2025):

• Revenue: $23,984 million (+3.6% YoY)
• Segment Income: $3,350 million (+8.4% YoY)
• Segment Income Margin: 14.0%
• Key Growth Drivers: Increase in organic revenues primarily due to growth in the research and safety market channel and the pharma services business, partially offset by moderation in COVID-19 vaccines and therapies-related activity. The increase in segment income margin was primarily due to exceptionally strong productivity improvements, partially offset by unfavorable business mix and strategic investments.

Product Portfolio:

• Offers lab consumables, equipment, and chemicals, as well as outsourced services for drug development, clinical research, clinical trials, and commercial drug manufacturing.
• Major product lines include laboratory products, research and safety market channel, pharma services, and clinical research.

Market Dynamics:

• Serves the pharmaceutical, biotechnology, academic, government, and other research and industrial markets, as well as the clinical laboratory market.

Sub-segment Breakdown (2025 Revenue):

• Laboratory Products: $2,407 million revenue
• Research and Safety Market Channel: $7,440 million revenue
• Pharma Services: $7,142 million revenue
• Clinical Research: $7,915 million revenue

Capital Allocation Strategy

Shareholder Returns:

• Share Repurchases: $3,000 million (5.8 million shares) in 2025.
• Dividend Payments: $636 million in 2025 ($1.72 per share declared).
• Future Capital Return Commitments: On November 6, 2025, the Board of Directors authorized the repurchase of up to $5.00 billion of the company’s common stock. Early in the first quarter of 2026, the company repurchased an additional $3.00 billion (4.9 million shares), leaving $2.00 billion available under this authorization as of February 26, 2026.

Balance Sheet Position (as of December 31, 2025):

• Cash and Equivalents: $9,852 million
• Short-term investments: $253 million
• Total Debt: $39,384 million
• Net Cash Position: ($29,279 million)
• Debt Maturity Profile (as of December 31, 2025, for borrowings excluding finance lease liabilities):
  • 2026: $3,254 million
  • 2027: $3,057 million
  • 2028: $3,150 million
  • 2029: $3,105 million
  • 2030: $2,905 million
  • 2031 and thereafter: $23,366 million

Cash Flow Generation (2025):

• Operating Cash Flow: $7,818 million
• Free Cash Flow: $6,337 million

Operational Excellence

Production & Service Model: Thermo Fisher Scientific Inc. delivers products and services through a global team, emphasizing innovative technologies, purchasing convenience, and pharmaceutical services. The company's operational philosophy is driven by its Practical Process Improvement (PPI) Business System, which aims to address inflation, drive cost efficiencies, and improve profitability through optimized price realization, continuous improvement methodologies, global sourcing initiatives, a lower cost structure (following restructuring actions including headcount reductions and facility consolidations), and low-cost region manufacturing.

Supply Chain Architecture: Key Suppliers & Partners:

• Raw Materials: Readily available supply from various sources. No single supplier is material, though certain materials/components may be sourced from single or limited suppliers for quality assurance, regulatory requirements, cost effectiveness, availability, or uniqueness of design.
• Package Delivery Services: Relies heavily on third-party package delivery companies such as Federal Express in the U.S. and DHL in Europe. Also maintains a small fleet of vehicles and uses other carriers, including national and regional trucking firms, overnight carrier services, and the U.S. Postal Service.

Facility Network:

• Manufacturing: Owns and leases production space throughout the world.
• Research & Development: Owns and leases laboratory space throughout the world.
• Distribution: Owns and leases warehouse space throughout the world.

Market Access & Customer Relationships

Go-to-Market Strategy: Distribution Channels:

• Direct Sales: Utilizes a direct sales force, including approximately 14,000 sales personnel and highly trained technical specialists.
• Customer-Service Professionals: Supports customer engagement.
• Digital Platforms: Leverages electronic commerce for sales.
• Third-Party Distributors: Engages distributors for market reach.

Customer Portfolio: Enterprise Customers:

• Serves pharmaceutical and biotech companies, hospitals and clinical diagnostic labs, universities, research institutions, government agencies, and environmental, industrial, research and development, quality, and process control settings.

Geographic Revenue Distribution (2025):

• North America: $22,240 million
• Europe: $11,826 million
• Asia-Pacific: $8,101 million
• Other regions: $1,597 million
• Growth Markets: Sales grew in North America, Europe, and Asia-Pacific in 2025, but declined in China.

Competitive Intelligence

Market Structure & Dynamics

Industry Characteristics: The markets Thermo Fisher Scientific Inc. serves are characterized by aggressive and able competition, changing technology, and evolving customer demands that require continuous research and development.

Competitive Positioning Matrix:

Direct Competitors

Primary Competitors: A broad range of manufacturers, third-party distributors, and service providers. Specific company names are not listed in the filing.

Emerging Competitive Threats: New entrants, disruptive technologies, and alternative solutions. The company specifically notes the rapid developments in artificial intelligence technologies and the potential adverse effect on its competitive position if it fails to keep pace.

Competitive Response Strategy: Significant investment in and expenditures for product and service development, strengthening presence in selected geographic markets, allocating R&D funding to higher growth prospects, developing new applications, expanding service offerings, continuing key customer initiatives, combining sales and marketing operations, finding new markets, and developing commercial tools for cross-selling.

Risk Assessment Framework

Strategic & Market Risks

Market Dynamics:

• Market Decline/Cyclicality: Growth would be impacted if served markets decline, do not grow as anticipated, or experience periodic, cyclical downturns, diminishing demand for products and services.
• General Economic Conditions: Business is affected by general economic conditions, both inside and outside the U.S., including inflationary pressures (experienced in 2025), which could reduce demand, increase order cancellations, increase inventory risk, pressure prices, cause supply interruptions, and lengthen sales cycles.
• Capital Spending & Government Funding: Demand for some products depends on capital spending policies of customers (pharmaceutical, biotechnology, academic, government, healthcare) and government funding policies, which fluctuate based on budget allocations and the timely passage of annual federal budgets (e.g., federal government shutdown in October 2025).
• Technology Disruption: Risk of products becoming technologically obsolete without timely introduction of new products, services, and enhancements. Failure to keep pace with rapid developments in artificial intelligence technologies could adversely affect competitive position.
• Customer Concentration: Risk of adverse effects if competitive relationships with certain large customers or product suppliers result in abrupt discontinuation or significant modification of their relationship.

Operational & Execution Risks

Supply Chain Vulnerabilities:

• Supplier Dependency: Reliance on sole or limited sources for certain materials/components could cause production interruptions, delays, and inefficiencies if these suppliers encounter difficulties or relationships change.
• Geographic Concentration: Supply chains could be disrupted by global economic downturns, sanctions, trade restrictions, natural disasters, pandemic health issues, geopolitical developments, war, terrorist actions, cybersecurity incidents, governmental actions, and legislative or regulatory changes.
• Public Health Emergencies: Global operations expose the company to risks from public health emergencies, epidemics, pandemics, or other health outbreaks, which can disrupt operations, supply chains, distribution, and impact employee ability to work.
• Cybersecurity Incidents: A significant cyber-attack or other disruption in, or breach in security of, information technology systems could adversely harm operating results and financial condition, damage reputation, or otherwise materially harm business, including theft of intellectual property, production delays, and legal claims. Misuse of artificial intelligence could create additional risks.
• Talent Attraction & Retention: Difficulty attracting and retaining a highly qualified workforce, comprised of scientific, technical, clinical, and management talent, due to a highly competitive market, sought-after skills, and wage inflation.
• Increased Costs: Unexpected costs from increases in fuel and raw material prices, as well as the costs of transportation, construction, and services, could reduce earnings and cash flows if measures to minimize impact are insufficient.
• Natural Disasters & Catastrophic Events: Operations in earthquake-prone areas (e.g., California) and other facilities globally are susceptible to natural disasters (including effects of climate change), public health crises, political crises, or other events outside of control, which could disrupt operations or impact customer spending.

Financial & Regulatory Risks

Market & Financial Risks:

• Foreign Exchange: Fluctuations in currency exchange rates (international revenues and costs, invoiced currencies) could adversely affect reported revenues, profitability, and demand for products and services. In 2025, currency translation had a favorable effect of $0.37 billion on revenues due to the weakening of the U.S. dollar.
• Credit & Liquidity: Existing and future indebtedness ($39.38 billion outstanding as of December 31, 2025) may restrict investment opportunities, limit activities, and negatively impact credit ratings. Failure to generate sufficient cash flow could force delays in strategic acquisitions, capital expenditures, or research and development.
• Goodwill and Intangible Asset Impairment: Significant goodwill ($49.36 billion) and intangible assets ($15.84 billion definite-lived, $1.23 billion indefinite-lived) are subject to annual impairment testing. Inability to realize their value could result in material charges.
• Product and Other Liability: Exposure to product liability or errors and omissions lawsuits, including for products used in detection of explosives/radiation, or personal injury claims from clinical trials. Insurance coverage may be inadequate.

Regulatory & Compliance Risks:

• Industry Regulation: Subject to federal, state, local, and international regulations (environmental, health and safety, food and drug). Any significant change in regulations, such as the Inflation Reduction Act of 2022 drug price negotiation provisions, or changes in interpretation of existing regulations, could reduce demand for products or increase expenses.
• Government Contracts: Subject to specific laws and regulations for government contracts; failure to comply could lead to reduced revenues, penalties, or debarment.
• Pharma Services Quality: Pharma services offerings are highly exacting and complex, due to strict quality and regulatory requirements. Failures in quality control systems, timely delivery, or meeting required quality standards could lead to increased costs, lost revenues, customer claims, adverse regulatory actions (product recalls, seizures, injunctions), and litigation.
• Data Privacy & Cybersecurity: Subject to a broad and evolving set of global requirements related to data privacy, cybersecurity, and responsible use of emerging technologies like generative artificial intelligence. This includes GDPR, EU AI Act, HIPAA, U.S. federal and state privacy/security laws, and data-localization/cross-border transfer restrictions. Non-compliance could result in significant fines, regulatory inquiries, reputational damage, and litigation.
• Improper Conduct: Reputation, ability to do business, and financial statements may be impaired by improper conduct by employees, agents, business partners, or other third parties (e.g., violations of anti-bribery laws, fraud, kickbacks, false claims, misuse of artificial intelligence).
• Intellectual Property: Inability to protect patents, trade secrets, and trademarks could have a material adverse effect on business. Risk of third parties claiming infringement of their intellectual property, leading to significant litigation or licensing expense. Integration of artificial intelligence may expose the company to increased risks of intellectual property infringement or misappropriation.

Geopolitical & External Risks

Geopolitical Exposure:

• International Operations: Exposure to economic, political, foreign currency, and other risks associated with international sales and operations, including tariffs, trade protection measures, import or export licensing requirements, trade embargoes and sanctions, and geopolitical uncertainty or turmoil (terrorism, war).
• Emerging Markets: Strategy to grow in emerging markets may not be successful due to vulnerability to global and local political, legal, regulatory, and financial instability, including issues of geopolitical relations, international sanctions, and sovereign debt issues.
• Chinese Regulations: Chinese regulations requiring the use of local suppliers, compelling partnerships with local companies, and providing incentives to government-backed local customers to buy from local suppliers could adversely affect business in China.

Innovation & Technology Leadership

Research & Development Focus: Core Technology Areas:

• Developing new technologies.
• Enhancing the performance and usability of existing offerings.
• Expanding the applications for which products are used.
• Incorporating artificial intelligence and machine learning technologies into products, services, and internal processes.
• Investment Level: Significant expenditures for research and development are anticipated to maintain and improve competitive position.
• Strategic Importance: R&D programs are aligned with the needs of each major business and are critical to maintaining competitive position and supporting long-term growth strategy.

Innovation Pipeline:

• Internal development programs.
• Initiatives leveraging licensed or acquired technologies.
• Collaborations with leading research institutions around the world.

Intellectual Property Portfolio:

• Patent Strategy: Places considerable emphasis on obtaining patent and trade secret protection for significant new technologies, products, and processes in the U.S. and other countries. Files additional applications as appropriate.
• Licensing Programs: Enters into license agreements with others to grant and/or receive rights to intellectual property.
• IP Litigation: Incurs substantial costs to defend against suits brought against it or in suits where patent rights are asserted against others.

Technology Partnerships:

• Collaborations with leading research institutions around the world.

Leadership & Governance

Executive Leadership Team (as of February 26, 2026)

Leadership Continuity: The company is dedicated to talent development to meet evolving business needs and provide colleagues with opportunities for long and fulfilling careers. Executives and leaders participate in frequent talent discussions and formal reviews, leveraging workforce data and predictive analytics for talent requirements.

Board Composition: The Board of Directors has delegated the oversight of cybersecurity risks to the Audit Committee. The Audit Committee and the full Board of Directors receive an annual overview of the cybersecurity program, cybersecurity threat landscape, investments, and opportunities to enhance the company’s systems and security of products and operations.

Human Capital Strategy

Workforce Composition:

• Total Employees: Approximately 125,000 colleagues globally as of December 31, 2025.
• Geographic Distribution:
  • Americas: 59,000
  • Asia-Pacific: 22,000
  • Europe, the Middle East and Africa (EMEA): 44,000
• Skill Mix: The company focuses on attracting and retaining a highly qualified workforce comprised of scientific, technical, clinical, and management talent.

Talent Management: Acquisition & Retention:

• Hiring Strategy: Builds strong internal and external talent channels through a colleague referral program, summer internships, university relations, and a Graduate Leadership Development Program.
• Employee Value Proposition: Regularly evaluated total rewards package, including competitive base pay, incentive and equity programs that directly link colleague contributions to company success, and comprehensive health and wellness programs (medical, dental, vision, wellness program with health incentive opportunities, tax-advantaged savings and spending accounts, commuter support, employee assistance programs, optional group legal coverage, company-paid disability, accident and life insurance, and the Impact Program for cancer care). Investments in financial health to grow and protect savings and plan for the future.

Diversity & Development:

• Development Programs: Multi-faceted approach including formal and self-paced training, networking opportunities, on-the-job stretch learning, coaching, mentoring, and manager training utilizing contemporary technology solutions. Programs are available at all career levels, from online learning through Thermo Fisher University to focused trainings for managers and the Global Leadership Program for executives. Supports career advancement through a tuition reimbursement program.
• Culture & Engagement: Culture rooted in 4i Values (Integrity, Intensity, Innovation, and Involvement). Conducts an annual Employee Involvement Survey to solicit direct feedback and measure progress using Leadership, Involvement, and Inclusion indices.

Environmental & Social Impact

Environmental Commitments: Environmental Regulations: Subject to various laws and governmental regulations concerning environmental matters and employee safety and health in the United States and other countries (e.g., Toxic Substances Control Act, Resource Conservation and Recovery Act, Clean Air Act, Clean Water Act, Safe Drinking Water Act, Comprehensive Environmental Response Compensation and Liability Act (CERCLA), Occupational Safety and Health Administration (OSHA)).

• Remediation Obligations: Involved in various stages of investigation and remediation related to environmental matters. This includes maintaining groundwater-remediation activities at Fair Lawn and Somerville, New Jersey facilities, and completing required remediation work at the Fair Lawn Wellfields Superfund Site (construction of a groundwater treatment plant completed in 2025, with the Borough of Fair Lawn taking ownership and O&M in January 2026, while the company continues to finance O&M and groundwater monitoring). Also involved in implementing a groundwater remedy at the former Davis Landfill Superfund site in Smithfield, Rhode Island (pre-design work approved in 2025, remedial action expected to commence in 2026).
• Environmental Liabilities: Accrued liabilities for environmental matters totaled approximately $86 million at December 31, 2025.

Social Impact Initiatives:

• Sustainability Scrutiny: Faces increasing scrutiny from stakeholders related to sustainability practices and disclosures, including investor advocacy groups, institutional investors, lenders, investment funds, and government organizations. Failure to adequately meet evolving stakeholder expectations may result in noncompliance, loss of business, reputational impacts, diluted market valuation, and an inability to attract customers and talent.

Business Cyclicality & Seasonality

Demand Patterns:

• Seasonal Trends: Revenues in the fourth quarter are historically stronger than in other quarters due to the capital spending patterns of industrial, pharmaceutical, and government customers. Sales of seasonal products, such as allergy and flu tests and related diagnostic products, vary quarter to quarter and year to year.
• Economic Sensitivity: The business is affected by general economic conditions and related uncertainties affecting markets in which it operates, including inflationary pressures and instability in the global economy and financial markets.
• Industry Cycles: Certain of the company’s businesses operate in industries that may experience periodic, cyclical downturns.

Regulatory Environment & Compliance

Regulatory Framework: Industry-Specific Regulations:

• Chemicals, Drugs, Medical Devices: Operations and some products/services are subject to complex and stringent laws and regulations governing the development, testing, approval, production, handling, transportation, and distribution of chemicals, drugs, and other similar products. This includes operating and security standards of the Food and Drug Administration (FDA), Drug Enforcement Administration (DEA), Bureau of Alcohol, Tobacco, Firearms and Explosives, various state boards of pharmacy, U.S. Department of Health and Human Services (DHHS), European Medicines Agency (EMA), EU member states, and other comparable agencies.
• Government Contracts: Subject to various statutes and regulations that apply to companies doing business with the government; failure to comply could result in suspension of contracts, criminal, civil, and administrative penalties, or debarment.
• Data Privacy & Cybersecurity: Subject to a broad and evolving set of global requirements related to data privacy, cybersecurity, and the responsible use of emerging technologies such as generative artificial intelligence (AI). These include comprehensive frameworks such as the EU’s General Data Protection Regulation (GDPR), the EU’s AI Act, U.S. federal and state privacy and security laws (including HIPAA for certain operations), and data-localization or cross-border transfer restrictions in various international markets.
• Environmental Regulations: Subject to various U.S. federal environmental legislation (e.g., Toxic Substances Control Act, Resource Conservation and Recovery Act, Clean Air Act, Clean Water Act, Safe Drinking Water Act, CERCLA) and state/local laws, as well as regulation by the Occupational Safety and Health Administration (OSHA).

International Compliance:

• Export/Import Activities: Subject to pertinent laws enforced by the U.S. Departments of Commerce, State, and Treasury. Logistics activities must comply with the rules and regulations of the Department of Transportation, the Federal Aviation Administration, and similar foreign agencies.
• Trade & Export Controls: Export control and economic sanctions regulations may prohibit the export of certain products, services, and technologies, or require obtaining an export license. Compliance with import laws can restrict access to, and increase the cost of obtaining, certain products and at times can interrupt the supply of imported inventory.

Legal Proceedings:

• The company is involved in various disputes, governmental and/or regulatory inspections, inquiries, investigations, and litigation matters that arise from time to time in the ordinary course of business. These include product liability, intellectual property, employment, and commercial issues. The range of probable loss for product liability, workers compensation, and other personal injury matters of the company’s continuing operations at December 31, 2025, was approximately $218 million to $376 million. The company’s accrual for these matters totaled $223 million at December 31, 2025.

Tax Strategy & Considerations

Tax Profile:

• Effective Tax Rate (GAAP): 7.5% in 2025.
• Adjusted Tax Rate (non-GAAP): 10.4% in 2025.
• Rate Drivers (2025): Impacted by a $269 million deferred tax benefit resulting from the recognition of tax attributes related to domestication transactions, a deferred tax benefit of $153 million related to capital losses generated as part of intra-entity transactions, a $158 million benefit in jurisdictions where deferred tax assets are now expected to be realized due to forecasted income, and a $93 million tax benefit from tax return reassessments. The GAAP rate was also impacted by $51 million of tax expense related to tax legislation enacted during the third quarter of 2025.
• Geographic Tax Planning: The company has operations and a taxable presence in approximately 70 countries outside the U.S. The effective tax rate is affected by relatively significant earnings in lower tax jurisdictions. Undistributed foreign earnings are intended to be reinvested outside of the U.S. indefinitely, with future distributions from non-U.S. subsidiaries planned when they can be made at no net tax cost.
• Tax Reform Impact: The company is closely monitoring developments of the Organization for Economic Cooperation and Development’s Pillar Two global minimum tax rule and currently does not expect it to have a material impact on its effective tax rate. The One Big Beautiful Bill Act (OBBBA) enacted on July 4, 2025, had no material impact on the company’s effective tax rate in 2025.

Insurance & Risk Transfer

Risk Management Framework:

• Insurance Coverage: Carries product liability and errors and omissions insurance.
• Risk Transfer Mechanisms: Uses short-term forward and option contracts primarily to hedge certain balance sheet and operational exposures resulting from changes in currency exchange rates (principally euro, Canadian dollars, British pounds sterling, Swiss franc, Swedish krona, Singapore dollars, and Hong Kong dollars). Uses foreign currency-denominated debt and cross-currency interest rate swaps to partially hedge its net investments in foreign operations against adverse movements in exchange rates. Periodically hedges interest rate risks of fixed-rate instruments with offsetting interest rate swaps. The company does not enter into speculative derivative agreements.
• Guarantees: The company is a guarantor of pension plan obligations of a divested business, with a guarantee amount of $24 million at December 31, 2025. It has also guaranteed the residual value of three leased operating facilities, with an aggregate maximum guarantee of $147 million at December 31, 2025. In conjunction with certain transactions, primarily divestitures, the company has agreed to indemnify other parties for certain liabilities (e.g., environmental, tax, employee, and product liabilities). In connection with product sales, the company often makes representations affirming non-infringement of intellectual property rights and agrees to indemnify customers against third-party claims.