What changed in this filing

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Item 1. Financial Statements

2020-07-31 compared with 2020-05-08 · 324 added, 282 removed, 687 unchanged (47% of the section changed)

3 unchanged sentences

(in millions)

2020 December 31,

Current assets:

Cash and cash equivalents $ 557.0 $ 337.5

Accounts receivable, net of allowance for doubtful accounts of $28.9 and $19.0 as of March 31, 2020 and December 31, 2019, respectively

Accounts receivable, net of allowance for doubtful accounts of $29.1 and $19.0 as of June 30, 2020 and December 31, 2019, respectively 1,661.0 1,543.9

Unbilled services 535.4 481.4

8 unchanged sentences

Other assets, net 431.1 435.4

Total assets $ 17,849.1 $ 18,046.4

LIABILITIES AND SHAREHOLDERS’ EQUITY

16 unchanged sentences

Shareholders’ equity:

Common stock, 97.1 and 97.2 shares outstanding at March 31, 2020 and December 31, 2019, respectively

Common stock, 97.3 and 97.2 shares outstanding at June 30, 2020 and December 31, 2019, respectively 9.0 9.0

Additional paid-in capital 32.1 26.8

7 unchanged sentences

(in millions, except per share data)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2020 2019 2020 2019

Revenues $ 2,768.8 $ 2,881.7 $ 5,592.6 $ 5,672.9

Cost of revenues 2,008.3 2,056.9 4,104.1 4,058.4

Gross profit 760.5 824.8 1,488.5 1,614.5

Selling, general and administrative expenses 396.3 415.3 791.8 809.1

2 unchanged sentences

Restructuring and other charges 6.4 13.6 31.8 34.2

Operating income (loss)

Operating income 297.7 335.7 105.1 653.9

Other income (expense):

2 unchanged sentences

Investment income 2.5 1.4 5.1 2.0

Earnings (loss) before income taxes

Other, net 47.7 ( 10.5 ) 31.6 ( 20.9 )

Earnings before income taxes 297.0 270.0 29.3 524.7

Provision for income taxes 65.4 79.3 114.6 148.1

8 unchanged sentences

(in millions, except per share data)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2020 2019 2020 2019

Net earnings (loss) $ 231.6 $ 190.7 $ ( 85.3 ) $ 376.6

12 unchanged sentences

(in millions)

Stock Additional

Capital Retained

Earnings Treasury

Stock Accumulated

Comprehensive

Earnings (Loss)

Earnings (Loss) Total

Shareholders’

7 unchanged sentences

BALANCE AT MARCH 31, 2019 $ 11.6 $ 1,401.3 $ 7,265.4 $ ( 1,127.5 ) $ ( 439.5 ) $ 7,111.3

Net earnings attributable to Laboratory Corporation of America Holdings — — 190.4 — — 190.4

Other comprehensive earnings, net of tax — — — — 27.6 27.6

Issuance of common stock under employee stock plans — 9.2 — — — 9.2

Net share settlement tax payments from issuance of stock to employees — — — ( 20.7 ) — ( 20.7 )

Stock compensation — 26.5 — — — 26.5

Retirement of treasury stock ( 2.4 ) ( 1,145.8 ) — 1,148.2 — —

Purchase of common stock ( 0.1 ) ( 199.8 ) — — — ( 199.9 )

BALANCE AT JUNE 30, 2019 $ 9.1 $ 91.4 $ 7,455.8 $ — $ ( 411.9 ) $ 7,144.4

BALANCE AT DECEMBER 31, 2019 $ 9.0 $ 26.8 $ 7,903.6 $ — $ ( 372.4 ) $ 7,567.0

7 unchanged sentences

BALANCE AT MARCH 31, 2020 $ 9.0 $ — $ 7,529.0 $ — $ ( 517.9 ) $ 7,020.1

Net earnings attributable to Laboratory Corporation of America Holdings — — 231.6 — — 231.6

Other comprehensive earnings, net of tax — — — — 68.9 68.9

Issuance of common stock under employee stock plans — 1.8 — — — 1.8

Net share settlement tax payments from issuance of stock to employees — ( 9.5 ) — — — ( 9.5 )

Stock compensation — 39.8 — — — 39.8

Purchase of common stock — — — — — —

BALANCE AT JUNE 30, 2020 $ 9.0 $ 32.1 $ 7,760.6 $ — $ ( 449.0 ) $ 7,352.7

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

2 unchanged sentences

(in millions)

Three Months Ended March 31,

Six Months Ended June 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

6 unchanged sentences

Deferred income taxes ( 29.4 ) 15.2

Other 55.4 21.3

Change in assets and liabilities (net of effects of acquisitions and divestitures):

Decrease (increase) in accounts receivable

Increase in accounts receivable ( 124.2 ) ( 91.1 )

Increase in unbilled services ( 58.9 ) ( 67.4 )

(Increase) decrease in supplies inventory

Increase in supplies inventory ( 98.4 ) ( 1.7 )

(Increase) decrease in prepaid expenses and other 33.1 16.1

Decrease in accounts payable ( 88.9 ) ( 109.0 )

(Decrease) increase in deferred revenue

Decrease in accrued expenses and other

(Decrease) increase in unearned revenue 28.9 ( 5.0 )

Decrease (increase) in accrued expenses and other 54.7 ( 158.8 )

Net cash provided by operating activities 574.5 419.3

7 unchanged sentences

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from term loan — 850.0

Payments on term loan — ( 250.0 )

Proceeds from revolving credit facilities 151.7 419.5

3 unchanged sentences

Purchase of common stock ( 100.0 ) ( 300.0 )

Other ( 17.0 ) ( 17.1 )

Net cash used for financing activities ( 119.7 ) 311.7

Effect of exchange rate changes on cash and cash equivalents ( 5.3 ) ( 1.1 )

Net decrease in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents 219.5 ( 161.4 )

Cash and cash equivalents at beginning of period 337.5 426.8

10 unchanged sentences

For further financial information about these segments, see Note 16 Business Segment Information to the Condensed Consolidated Financial Statements.

During the three months ended March 31, 2020 , LCD and CDD contributed approximately 60 % and 40 % , respectively, of revenues to the Company.

During the three months ended June 30, 2020, LCD and CDD contributed approximately 61 % and 39 % respectively, of revenues to the Company.

During the six months ended June 30, 2020, LCD and CDD contributed approximately 60 % and 40 %, respectively, of revenues to the Company.

The condensed consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries for which it exercises control.

21 unchanged sentences

The adoption of this standard did not have a material impact on the consolidated financial statements.

In August 2018, the FASB issued a new accounting standard to align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software.

The Company adopted this standard effective January 1, 2020.

The adoption of this standard did not have a material impact on the consolidated financial statements.

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

1 unchanged sentence

(dollars and shares in millions, except per share data)

to develop or obtain internal-use software.

The Company adopted this standard effective January 1, 2020.

The adoption of this standard did not have a material impact on the consolidated financial statements.

New Accounting Pronouncements

10 unchanged sentences

The expedients and exceptions in the standard are effective between March 12, 2020 and December 31, 2022.

The Company did not elect to apply any of the expedients or exceptions for the period ended March 31, 2020 and is currently evaluating the impact this new standard will have on the consolidated financial statements.

The Company did not elect to apply any of the expedients or exceptions for the period ended June 30, 2020 and is currently evaluating the impact this new standard will have on the consolidated financial statements.

Novel Coronavirus (COVID-19) Financial Statement Impact

In March 2020, the novel strain of coronavirus, now known as COVID-19, was declared a pandemic.

The COVID-19 pandemic has and continues to have an extensive impact on the global health and economic environments.

By mid-March 2020, government restrictions, social distancing guidelines, and overall customer caution associated with the COVID-19 pandemic negatively affected LCD’s revenues and CDD's operations.

For LCD, reduction in demand impacted testing volumes broadly but was more heavily weighted towards routine tests.

This reduction in demand impacted testing volumes broadly but was more heavily weighted towards routine tests.

The performance of CDD has also been negatively affected by the COVID-19 pandemic through numerous study site closures around the world as well as customer initiated delays for new patient recruitment for existing clinical trials and start-up of new clinical trials.

As a result of the impact of the COVID-19 pandemic, during the three months ended March 31, 2020 , the Company recorded goodwill and other asset impairment charges of $ 437.4 :

$ 426.4 within CDD and $ 11.0 within LCD.

In March 2020, COVID-19 was declared a pandemic.

COVID-19 has had and continues to have an extensive impact on the global health and economic environment.

Given the continued unpredictability of the COVID-19 pandemic and the corresponding government restrictions and customer behavior, there are a wide-range of feasible financial results for 2020.

While the Company's Base Business continues to be negatively impacted by the COVID-19 pandemic, the Company's outlook has improved across the enterprise.

Base Business includes the Company's business operations except for molecular and serology COVID-19 testing (COVID-19 Testing).

In LCD, demand for its Base Business continues to be below the Company's historical levels;

however, the Company's Base Business has been steadily recovering from its trough in April, while at the same time COVID-19 Testing continues to grow and the Company continues to increase capacity for its COVID-19 molecular and antibody tests.

In CDD, while the pandemic is expected to continue to negatively impact its business, this impact is expected to subside throughout the year as CDD continues to work on projects supporting global vaccine and treatment development, with additional support from COVID-19 Testing.

As a result of the impact of the COVID-19 pandemic, during the six months ended June 30, 2020, the Company recorded goodwill and other asset impairment charges of $ 437.4 :

$ 426.4 within CDD and $ 11.0 within LCD, all of which were recorded in the three months ended March 31, 2020.

See Note 6 Goodwill and Intangible Assets for discussion of goodwill and intangible asset impairment and Note 2 Revenue for the discussion of credit losses and additional price concessions.

The Company also wrote-off or wrote down certain of the Company's investments by $ 20.2 due to the impact of COVID-19, $ 7.1 included in Equity method earnings (loss), net and $ 13.1 included in Other, net.

The Company also wrote-off or wrote down certain of the Company's investments by $ 25.4 due to the impact of COVID-19, $ 7.1 included in Equity method earnings (loss), net (recorded in the three months ended March 31, 2020), and $ 18.3 included in Other, net ($ 13.1 recorded during the three months ended March 31, 2020 and $ 5.2 recorded during the three months ended June 30, 2020).

In April 2020, the Company received cash payments of approximately $ 55.9 from the Public Health and Social Services Emergency Fund for provider relief (Relief Fund) that was appropriated by Congress to the Department of Health and Human Services (HHS) in the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).

Upon receiving and satisfying the terms and conditions associated with the distributed funds, the Company accounted for the transaction by applying the guidance in ASC 450-30 Gain Contingencies, and recorded these funds in Other, net non-operating income in the Consolidated Statement of Operations as of June 30, 2020.

The Company instituted numerous actions to help mitigate the financial impact from the COVID-19 pandemic, which included furloughs, reduced hours, and the suspension of discretionary merit adjustments and 401(k) plan contributions in the

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars and shares in millions, except per share data)

United States (U.S.).

In response to its improved business operations, the Company has been rapidly resuming regular work schedules and is proceeding with merit adjustments and will retroactively reinstate 401(k) plan contributions in the U.S.

Use of Estimates

The extent to which the COVID-19 pandemic impacts the Company’s business and financial results will depend on numerous evolving factors including, but not limited to:

The extent to which the COVID-19 pandemic has and will impact the Company’s business and financial results will depend on numerous evolving factors including, but not limited to:

the magnitude and duration of the COVID-19 pandemic, the extent to which it will impact worldwide macroeconomic conditions including interest rates, employment rates and health insurance coverage, the speed of the anticipated recovery, and governmental and business reactions to the pandemic.

The Company assessed certain accounting matters that generally require consideration of forecasted financial information in context with the information reasonably available to the Company and the unknown future impacts of COVID-19 as of March 31, 2020 and through the date of this report.

The accounting matters assessed included, but were not limited to, the Company’s implicit price concessions and credit losses, equity investments, software, notes receivable and the carrying value of goodwill and other long-lived assets.

The accounting matters assessed included, but were not limited to, the Company’s implicit price concessions and credit losses, equity investments, notes receivable and the carrying value of goodwill and other long-lived assets.

The Company’s future assessment of the magnitude and duration of COVID-19, as well as other factors, could result in additional material impacts to the Company’s consolidated financial statements in future reporting periods.

The Company's revenues by segment payers/customer groups for the three and six months ended June 30, 2020, and 2019, were as follows:

For the Three Months Ended June 30, 2020

Canada United Kingdom Switzerland Other Europe Other Total

Payer/Customer

Clients 20 % 1 % — % — % — % — % 21 %

Patients 7 % — % — % — % — % — % 7 %

Medicare and Medicaid 7 % — % — % — % — % — % 7 %

Third-party 25 % 1 % — % — % — % — % 26 %

Total LCD revenues by payer 59 % 2 % — % — % — % — % 61 %

Biopharmaceutical and medical device companies 18 % — % 5 % 4 % 3 % 9 % 39 %

Total revenues 77 % 2 % 5 % 4 % 3 % 9 % 100 %

For the Three Months Ended June 30, 2019

Canada United Kingdom Switzerland Other Europe Other Total

Payer/Customer

Clients 16 % 1 % — % — % — % — % 17 %

Patients 8 % — % — % — % — % — % 8 %

Medicare and Medicaid 8 % — % — % — % — % — % 8 %

Third-party 26 % 2 % — % — % — % — % 28 %

Total LCD revenues by payer 58 % 3 % — % — % — % — % 61 %

Biopharmaceutical and medical device companies 20 % — % 4 % 5 % 3 % 7 % 39 %

Total revenues 78 % 3 % 4 % 5 % 3 % 7 % 100 %

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

1 unchanged sentence

(dollars and shares in millions, except per share data)

The Company's revenues by segment payers/customer groups for the three months ended March 31, 2020 , and 2019 , are as follows:

For the Three Months Ended March 31, 2020

United Kingdom

For the Six Months Ended June 30, 2020

Canada United Kingdom Switzerland Other Europe Other Total

Payer/Customer

Clients 18 % 1 % — % — % — % — % 19 %

Patients 7 % — % — % — % — % — % 7 %

Medicare and Medicaid 7 % — % — % — % — % — % 7 %

Third-party 25 % 2 % — % — % — % — % 27 %

Total LCD revenues by payer 57 % 3 % — % — % — % — % 60 %

Biopharmaceutical and medical

device companies

Biopharmaceutical and medical device companies 19 % — % 5 % 5 % 3 % 8 % 40 %

Total revenues 76 % 3 % 5 % 5 % 3 % 8 % 100 %

For the Three Months Ended March 31, 2019

United Kingdom

For the Six Months Ended June 30, 2019

Canada United Kingdom Switzerland Other Europe Other Total

Payer/Customer

Clients 16 % 1 % — % — % — % — % 17 %

Patients 8 % — % — % — % — % — % 8 %

Medicare and Medicaid 8 % — % — % — % — % — % 8 %

Third-party 26 % 2 % — % — % — % — % 28 %

Total LCD revenues by payer 58 % 3 % — % — % — % — % 61 %

5 unchanged sentences

The amortization of commission expense is based on the weighted average contract duration for all commissionable awards in the respective business in which the commission expense is paid, which approximates the period over which goods and services are transferred to the customer.

The amortization period of sales commissions ranges from approximately 12 to 57 months, depending on the business.

The amortization period of sales commissions ranges from approximately 1 to 5 years, depending on the business.

For businesses that enter into primarily short-term contracts, the Company applies the practical expedient, which allows costs to obtain a contract to be expensed when incurred if the amortization period of the assets that would otherwise have been recognized is one year or less.

3 unchanged sentences

These costs are recognized as assets and amortized over the expected term of the contract to which the implementation relates, which is the period over which services are expected to be provided to the customer.

This period typically ranges from 24 to 60 months.

This period typically ranges from 2 to 5 years.

Amortization of deferred contract fulfillment costs is included in cost of goods sold.

March 31, 2020

December 31, 2019

June 30, 2020 December 31, 2019

Sales commission assets $ 32.0 $ 28.6

Deferred contract fulfillment costs 13.3 14.9

Total $ 45.3 $ 43.5

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

1 unchanged sentence

(dollars and shares in millions, except per share data)

Amortization related to sales commission assets and associated payroll taxes for the three months ended March 31, 2020 , and 2019 , was $ 5.3 and $ 4.5 , respectively.

Amortization related to deferred contract fulfillment costs for the three months ended March 31, 2020 , and 2019 , was $ 3.0 and $ 1.8 , respectively.

Amortization related to sales commission assets and associated payroll taxes for the three months ended June 30, 2020, and 2019, was $ 5.5 and $ 5.1 , respectively and for the six month periods ended June 30, 2020, and 2019, was $ 10.8 and $ 9.5 , respectively.

Amortization related to deferred contract fulfillment costs for the three months ended June 30, 2020, and 2019, was $ 2.3 and $ 1.9 , respectively, and was $ 5.3 and $ 3.8 , respectively, for the six month periods ended June 30, 2020, and 2019.

Receivables, Unbilled Services and Unearned Revenue

3 unchanged sentences

The following table provides information about receivables, unbilled services, and unearned revenue (contract liabilities) from contracts with customers for CDD.

March 31, 2020

December 31, 2019

June 30, 2020 December 31, 2019

Receivables, which are included in accounts receivable $ 730.5 $ 771.1

1 unchanged sentence

Unearned revenue 471.4 449.2

Revenues recognized during the period, that were included in the unearned revenue balance at the beginning of the period for the three months ended March 31, 2020 and March 31, 2019 was $ 121.8 and $ 103.6 , respectively.

Revenues recognized during the period, that were included in the unearned revenue balance at the beginning of the period for the six months ended June 30, 2020, and June 30, 2019, were $ 102.2 and $ 161.6 , respectively.

Credit Loss Rollforward

With the adoption of current expected credit loss standard in 2020, the Company estimates future expected losses on accounts receivable, unbilled services and notes receivable over the remaining collection period of the instrument.

The rollforward for the allowance for credit losses for the three months ended March 31, 2020 is as follows:

For the Three Months Ended March 31, 2020

Accounts Receivable

Unbilled Services

Note Receivable

The rollforward for the allowance for credit losses for the six months ended June 30, 2020, is as follows:

For the Six Months Ended June 30, 2020

Accounts Receivable Unbilled Services Note Receivable Total

Allowance for credit losses as of December 31, 2019 $ 19.0 $ 2.3 $ — $ 21.3

4 unchanged sentences

The note receivable is the floating note receivable due 2022 from the Envigo transaction which is recorded in Other assets, net.

During the three months ended, March 31, 2020, the Company also recorded $ 17.0 of additional implicit price concessions as a result of anticipated collection challenges from the economic decline.

During the six months ended June 30, 2020, the Company also recorded $ 23.3 of additional implicit price concessions as a result of anticipated collection challenges from the economic decline.

Performance Obligations Under Long-Term Contracts

Long-term contracts at the Company consist primarily of fully managed clinical studies within CDD.

The amount of existing performance obligations under such long-term contracts unsatisfied as of March 31, 2020 , was $ 4,494.9 .

The Company expects to recognize approximately 35 % of the remaining performance obligations as of March 31, 2020 as revenue over the next 12 months, and the balance thereafter.

The amount of existing performance obligations under such long-term contracts unsatisfied as of June 30, 2020, was $ 4,498.8 .

The Company expects to recognize approximately 31 % of the remaining performance obligations as of June 30, 2020, as revenue over the next 12 months, and the balance thereafter.

The Company's long-term contracts generally range from 1 to 8 years.

Within CDD, revenues of $ 9.7 and $ 39.7 were recognized during the three months ended March 31, 2020 , and 2019 , respectively, from performance obligations that were satisfied in previous periods.

Within CDD, revenues of $ 13.7 and $ 48.4 were recognized during the six months ended June 30, 2020, and 2019, respectively, from performance obligations that were satisfied in previous periods.

This revenue comes from adjustments related to changes in scope and estimates in full service clinical studies.

3 unchanged sentences

As part of this sale, CDD entered into a multi-year, renewable supply agreement with Envigo.

The Company paid cash consideration of $ 601.0 , received a floating rate secured note of $ 110.0 , and recorded a loss on the sale of CRP of $ 12.2 .

The Company funded the transaction through a new term loan facility.

The Company paid cash consideration of $ 601.0 , received a floating rate

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

1 unchanged sentence

(dollars and shares in millions, except per share data)

The preliminary valuation of acquired assets and assumed liabilities in the transaction as of June 3, 2019, include the following:

secured note of $ 110.0 , and recorded a loss on the sale of CRP of $ 12.2 .

The Company funded the transaction through a new term loan facility.

The final valuation of acquired assets and assumed liabilities in the transaction as of June 3, 2019, include the following:

Consideration Transferred

1 unchanged sentence

Fair value of CRP 110.0

Preliminary June 30, 2019

Measurement Period Adjustments

Preliminary March 31, 2020

Total $ 711.0

Preliminary June 30, 2019 Measurement Period Adjustments Final

June 30, 2020

Net Assets Acquired

2 unchanged sentences

Unbilled services 26.5 ( 0.9 ) 25.6

Inventories 4.5 — 4.5

Prepaid expenses and other 3.5 7.3 10.8

1 unchanged sentence

Deferred income taxes 25.5 ( 0.3 ) 25.2

Goodwill 432.2 ( 55.6 ) 376.6

Customer relationships 125.8 15.0 140.8

Trade name and trademarks 0.6 — 0.6

Other assets 9.9 — 9.9

Total assets acquired 759.2 ( 13.4 ) 745.8

7 unchanged sentences

Floating rate secured note receivable due 2022 110.0

The preliminary purchase consideration for Envigo has been allocated to the estimated fair market value of the net assets acquired, including approximately $ 141.4 in identifiable intangible assets and a residual amount of non-tax-deductible goodwill of approximately $ 380.8 .

Total $ 711.0

The final purchase consideration for Envigo has been allocated to the estimated fair market value of the net assets acquired, including approximately $ 141.4 in identifiable intangible assets and a residual amount of non-tax-deductible goodwill of approximately $ 376.6 .

The amortization period for intangible assets acquired is 11 years for customer relationships.

The purchase price allocation for the Envigo transaction is still preliminary and subject to change.

The areas of the purchase price allocation that are not yet finalized relate primarily to goodwill and the impact of finalizing deferred taxes.

Accordingly, adjustments may be made as additional information is obtained about the facts and circumstances that existed as of the valuation date.

The Company expects these purchase price allocations to be finalized by the second quarter of 2020.

Any adjustments will be recorded in the period in which they are identified.

During the three months ended March 31, 2020, the Company recorded a $ 5.0 charge for the estimated credit loss related to the CDD floating rate secured note receivable due 2022 from Envigo.

During the three months ended March 31, 2019, the Company acquired various businesses and related assets for approximately $ 47.3 in cash (net of cash acquired).

The purchase consideration for all acquisitions in that period has been allocated to the estimated fair market value of the net assets acquired, including approximately $ 24.8 in identifiable intangible assets and a residual amount of goodwill of approximately $ 22.1 .

During the six months ended June 30, 2020, the Company recorded a $ 5.0 charge for the estimated credit loss related to the CDD floating rate secured note receivable due 2022 from Envigo.

During the six months ended June 30, 2020, the Company acquired a business and related assets for approximately $ 17.3 in cash (including contingent consideration of $ 6.0 and net of cash acquired).

The purchase consideration for this acquisition has been allocated to the estimated fair market value of the net assets acquired, including approximately $ 9.2 in identifiable intangible assets and a residual amount of non-tax deductible goodwill of approximately $ 8.1 .

This acquisition was made primarily to expand its specialty testing.

During the six months ended June 30, 2019, the Company acquired various businesses and related assets for approximately $ 117.7 in cash (net of cash acquired).

The purchase consideration for all acquisitions in the six months ended June 30, 2019, has been allocated to the estimated fair market value of the net assets acquired, including approximately $ 90.7 in identifiable intangible assets and a residual amount of non-tax deductible goodwill for approximately $ 53.8 .

The amortization periods for intangible assets acquired from these businesses range from 11 to 15 years for customer relationships.

These acquisitions were made primarily to extend the Company's geographic reach in important market areas, enhance the Company's scientific differentiation and to expand the breadth and scope of the Company's CRO services.

Unaudited Pro Forma Information

Had the Company's total 2019 acquisitions been completed as of January 1, 2019, the Company's pro forma results would have been as follows:

Three Months Ended March 31, 2019

Net earnings attributable to Laboratory Corporation of America Holdings

The excess of the fair value of the consideration conveyed over the fair value of the net assets acquired was recorded as goodwill.

The goodwill reflects the Company's expectations to utilize the acquired businesses' workforce and established relationships and the benefits of being able to leverage operational efficiencies with favorable growth opportunities in these markets.

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

1 unchanged sentence

(dollars and shares in millions, except per share data)

Unaudited Pro Forma Information

Had the Company's total 2019 and 2020 acquisitions been completed as of January 1, 2019, the Company's pro forma results would have been as follows:

Three Months Ended June 30, Six Months Ended June 30,

2020 2019 2020 2019

Revenues $ 2,770.7 $ 2,941.0 $ 5,596.7 $ 5,775.9

Net earnings attributable to Laboratory Corporation of America Holdings $ 231.8 $ 194.3 $ ( 84.9 ) $ 382.6

EARNINGS (LOSS) PER SHARE

3 unchanged sentences

The following represents a reconciliation of basic earnings (loss) per share to diluted earnings (loss) per share:

Three Months Ended March 31,

Earnings (Loss)

Per Share Amount

Three Months Ended June 30, Six Months Ended June 30,

2020 2019 2020 2019

Earnings Shares Per Share Amount Earnings Shares Per Share Amount Earnings (Loss) Shares Per Share Amount Earnings Shares Per Share Amount

Basic earnings (loss) per share:

2 unchanged sentences

Net earnings (loss) including impact of dilutive adjustments (a)

(a) Due to the Company's net loss for the three months ended March 31, 2020 , diluted earnings (loss) per share is the same as basic earnings (loss) per share.

$ 231.6 97.7 $ 2.37 $ 190.4 98.8 $ 1.93 $ ( 85.6 ) 97.2 $ ( 0.88 ) $ 376.0 99.1 $ 3.79

(a) Due to the Company's net loss for the six months ended June 30, 2020, diluted earnings (loss) per share is the same as basic earnings (loss) per share.

Diluted earnings per share represent the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock.

1 unchanged sentence

The following table summarizes the potential common shares not included in the computation of diluted earnings per share because their impact would have been antidilutive:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2020 2019 2020 2019

Employee stock options and awards 0.8 0.2 1.3 0.2

RESTRUCTURING AND OTHER CHARGES

During the three months ended March 31, 2020 , the Company recorded net restructuring and other charges of $ 25.4 :

During the six months ended June 30, 2020, the Company recorded net restructuring and other charges of $ 31.8 :

$ 11.8 within LCD and $ 20.0 within CDD.

The charges were comprised of $ 5.1 related to severance and other personnel costs, $ 4.7 for a CDD lab facility impairment, and $ 15.8 in facility closures, impairment of operating lease right-of use assets and general integration activities.

The charges were offset by the reversal of previously established liability of $ 0.2 in unused facility-related costs.

During the three months ended March 31, 2019 , the Company recorded net restructuring and other charges of $ 20.6 :

The charges were comprised of $ 10.5 related to severance and other personnel costs, $ 8.0 for a CDD lab facility and equipment impairments, and $ 20.0 in facility closures, impairment of operating lease right-of use assets and general integration activities.

The charges were offset by the reversal of previously established liability of $ 1.0 and $ 5.7 in unused severance costs and facility-related costs, respectively.

During the six months ended June 30, 2019, the Company recorded net restructuring and other charges of $ 34.2 :

$ 16.1 within LCD and $ 18.1 within CDD.

5 unchanged sentences

The following represents the Company’s restructuring reserve activities for the period indicated:

Severance and Other Employee Costs

Facility Costs

Severance and Other Employee Costs

Facility Costs

Severance and Other Employee Costs Facility Costs Severance and Other Employee Costs Facility Costs Total

Balance as of December 31, 2019 $ 0.5 $ 2.7 $ 5.5 $ 4.7 $ 13.4

1 unchanged sentence

Adjustments to prior restructuring accruals ( 0.1 ) ( 0.4 ) ( 0.9 ) ( 5.3 ) ( 6.7 )

Impairment of lab facility

Impairment of lab facility and equipment — — — 8.0 8.0

Impairment of operating lease right-of-use asset — 6.1 — 4.0 10.1

Cash payments and other adjustments ( 3.0 ) ( 9.9 ) ( 3.8 ) ( 15.5 ) ( 32.2 )

Balance as of March 31, 2020

Balance as of June 30, 2020 $ 0.1 $ 2.0 $ 8.6 $ 2.3 $ 13.0

Current $ 9.4

Non-current 3.6

GOODWILL AND INTANGIBLE ASSETS

The changes in the carrying amount of goodwill for the nine months ended March 31, 2020 , are as follows:

The changes in the carrying amount of goodwill for the six months ended June 30, 2020, are as follows:

LCD CDD Total

Balance as of January 1, 2020 $ 3,721.5 $ 4,143.5 $ 7,865.0

Goodwill acquired during the period 8.1 — 8.1

Impairment ( 3.7 ) ( 418.7 ) ( 422.4 )

Foreign currency impact and other adjustments to goodwill 6.4 ( 34.4 ) ( 28.0 )

Balance as of March 31, 2020

Balance as of June 30, 2020 $ 3,732.3 $ 3,690.4 $ 7,422.7

The Company assesses goodwill and indefinite-lived intangibles for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable.

Based upon the revised forecasted revenues and operating income following the declaration of the COVID-19 global pandemic, management concluded there was a triggering event and updated its annual 2019 goodwill impairment testing as of March 31, 2020, for two of its CDD reporting units, including one where the 2019 fair value exceeded carrying value by approximately 10 % , and two of its LCD reporting units.

Based upon the revised forecasted revenues and operating income following the declaration of the COVID-19 global pandemic, management concluded there was a triggering event and updated its annual 2019 goodwill impairment testing as of March 31, 2020, for its CDD reporting units, including one where the 2019 fair value exceeded carrying value by approximately 10 %, and its LCD reporting units.

Based on the quantitative impairment assessment, the Company concluded that the fair value was less than carrying value for two of its reporting units and recorded a goodwill impairment of $ 418.7 for the CDD segment and $ 3.7 for LCD segment.

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The other CDD reporting unit evaluated indicated a fair value that exceeded carrying value by less than 10 %.

Management notes that a 1 % change in the discount rate would reduce the headroom to approximately 2.0 % .

Goodwill for this reporting unit as of March 31, 2020 is $ 631.9 .

Management notes that a 1 % change in the discount rate in the March 31, 2020, analysis would reduce the headroom to approximately 2.0 %.

Goodwill for this reporting unit as of June 30, 2020 is $ 628.5 .

The Company utilized the income approach to determine the fair value of the LCD reporting units.

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The other LCD reporting unit evaluated indicated a fair value that exceeded carrying value by less than 10.0 %.

Management notes that a 1 % change in the discount rate would cause the fair value to be less than carrying value and would result in an impairment of approximately $ 40.0 .

Goodwill and indefinite-lived intangibles of Canadian licenses for this reporting unit as of March 31, 2020 were $ 81.5 and $ 444.1 , respectively.

Management notes that a 1 % change in the discount rate in the March 31, 2020, analysis would cause the fair value to be less than carrying value and would result in an impairment of approximately $ 40.0 .

Goodwill and indefinite-lived intangibles of Canadian licenses for this reporting unit as of June 30, 2020 were $ 84.4 and $ 459.7 , respectively.

Although the Company believes that the current assumptions and estimates used in its goodwill analysis are reasonable, supportable, and appropriate, continued efforts to maintain or improve the performance of this business could be impacted by unfavorable or unforeseen changes which could impact the existing assumptions used in the impairment analysis.

Various factors could reasonably be expected to unfavorably impact existing assumptions:

primarily delays in new customer bookings and the related delay in revenue from new customers, increases in customer termination activity or increases in operating costs.

In addition, given the ongoing and rapidly changing nature of the COVID-19 pandemic, there is significant uncertainty regarding the duration

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

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and severity of the pandemic as well as any future government restrictions, which may unfavorably impact existing assumptions.

factors could reasonably be expected to unfavorably impact existing assumptions:

primarily delays in new customer bookings and the related delay in revenue from new customers, increases in customer termination activity or increases in operating costs.

In addition, given the ongoing and rapidly changing nature of the COVID-19 pandemic, there is significant uncertainty regarding the duration and severity of the pandemic as well as any future government restrictions, which may unfavorably impact existing assumptions.

Accordingly, there can be no assurance that the estimates and assumptions made for the purposes of the goodwill impairment analysis will prove to be accurate predictions of future performance.

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The components of identifiable intangible assets are as follows:

March 31, 2020

December 31, 2019

Gross Carrying Amount

Accumulated Amortization

Gross Carrying Amount

Accumulated Amortization

June 30, 2020 December 31, 2019

Gross Carrying Amount Accumulated Amortization Net Gross Carrying Amount Accumulated Amortization Net

Customer relationships $ 4,424.3 $ ( 1,419.9 ) $ 3,004.4 $ 4,441.7 $ ( 1,329.5 ) $ 3,112.2

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Non-compete agreements 96.2 ( 65.0 ) 31.2 90.9 ( 60.5 ) 30.4

Trade name 408.1 ( 234.3 ) 173.8 408.2 ( 219.9 ) 188.3

Land use right 10.8 ( 6.2 ) 4.6 10.9 ( 5.5 ) 5.4

Canadian licenses 459.7 — 459.7 480.3 — 480.3

The Company recorded a non-cash charge of $ 2.7 for the impairment of a CDD tradename during the three months ended March, 31, 2020.

Amortization of intangible assets for the three months ended March 31, 2020 , and 2019 , was $ 62.3 and $ 57.1 , respectively.

$ 5,848.1 $ ( 1,970.9 ) $ 3,877.2 $ 5,885.6 $ ( 1,851.1 ) $ 4,034.5

The Company recorded a non-cash charge of $ 2.7 for the impairment of a CDD tradename during the six months ended June 30, 2020.

Amortization of intangible assets for the three months ended June 30, 2020 and 2019, was $ 60.1 and $ 60.2 , respectively and for the six months ended June 30, 2020 and 2019 was $ 122.4 and $ 117.3 , respectively.

Amortization expense for the net carrying amount of intangible assets is estimated to be $ 118.2 for the remainder of fiscal 2020, $ 235.6 in fiscal 2021, $ 229.6 in fiscal 2022, $ 224.2 in fiscal 2023, $ 219.2 in fiscal 2024, and $ 2,311.1 thereafter.

Short-term borrowings and the current portion of long-term debt at March 31, 2020 , and December 31, 2019 , consisted of the following:

Short-term borrowings and the current portion of long-term debt at June 30, 2020, and December 31, 2019, consisted of the following:

2020 December 31, 2019

4.625% senior notes due 2020 $ 414.6 $ 413.7

2019 Term Loan 375.0 —

Debt issuance costs ( 1.0 ) ( 0.7 )

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Long-term debt at March 31, 2020 , and December 31, 2019 , consisted of the following:

Long-term debt at June 30, 2020, and December 31, 2019, consisted of the following:

2020 December 31, 2019

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Debt issuance costs ( 39.8 ) ( 42.2 )

Note payable 6.4 7.0

Total long-term debt $ 5,416.6 $ 5,789.8

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The 2019 term loan facility accrues interest at a per annum rate equal to, at the Company's election, either a LIBOR rate plus a margin ranging from 0.55% to 1.175% , or a base rate determined according to a prime rate or federal funds rate plus a margin ranging from 0.0% to 0.175% .

The 2019 term loan balance at March 31, 2020 and December 31, 2019 , was $ 375.0 and $ 375.0 , respectively.

As of March 31, 2020 , the effective interest rate on the 2019 term loan was 1.79 % .

The 2019 term loan balance at June 30, 2020 and December 31, 2019, was $ 375.0 and $ 375.0 , respectively.

As of June 30, 2020, the effective interest rate on the 2019 term loan was 0.98 %.

The Company also maintains a senior revolving credit facility consisting of a five-year facility in the principal amount of up to $ 1,000.0 , with the option of increasing the facility by up to an additional $ 350.0 , subject to the agreement of one or more new or existing lenders to provide such additional amounts and certain other customary conditions.

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The revolving credit facility is permitted to be used for general corporate purposes, including working capital, capital expenditures, funding of share repurchases and certain other payments, acquisitions and other investments.

There were no balances outstanding on the Company's current revolving credit facility at March 31, 2020 , and December 31, 2019 .

As of March 31, 2020 , the effective interest rate on the revolving credit facility was 1.97 % .

There were no balances outstanding on the Company's current revolving credit facility at June 30, 2020, and December 31, 2019.

As of June 30, 2020, the effective interest rate on the revolving credit facility was 1.14 %.

The credit facility expires on September 15, 2022.

Under the term loan facility and the revolving credit facility, the Company is subject to negative covenants limiting subsidiary indebtedness and certain other covenants typical for investment grade-rated borrowers, and the Company is required to maintain certain leverage ratios.

The Company was in compliance with all covenants in the term loan facility and the revolving credit facility at March 31, 2020 and expects that it will remain in compliance with its existing debt covenants for the next twelve months.

The Company's availability of $ 923.7 at March 31, 2020 , under its revolving credit facility reflects a reduction equivalent to the amount of the Company's outstanding letters of credit.

During the fourth quarter of 2020, $ 412.2 of the Company's senior notes will become payable.

The Company maintains investment grade debt ratings, has strong relationships with key banks, and believes that it will be able to repay these notes with available cash on hand, cash generated from operations, borrowings under its revolving credit facility, or by refinancing the notes in the public debt market.

At March 31, 2020, the Company had $ 323.6 of cash and $ 923.7 of available borrowings under its revolving credit facility, which does not mature until 2022, and the Company was in compliance with all of its debt covenants.

In May 2020, in order to obtain increased financial covenant flexibility, the Company and its lenders entered into amendments to the term loan facility and the revolving credit facility to increase the maximum leverage ratio to 5.0 x debt to last twelve months EBITDA for the three month periods ending June 30, September 30 and December 31, 2020 and 4.5 x for the three month period ended March 31, 2021.

The amendments also provide that during any period in which the Company's leverage ratio exceeds 4.5 x debt to last twelve months EBITDA (i) the company will be prohibited from consummating share repurchases, subject to limited exceptions, (ii) borrowings under the revolving credit facility will accrue interest at a per annum rate equal to, at the Company's election, either a LIBOR rate plus a margin of 1.25 % or a base rate plus a margin of 0.25 % , (iii) the facility fee that the Company is required to pay on the

In May 2020, the Company entered into amendments to its term loan facility and its revolving credit facility, in each case to, among other things, increase the maximum leverage ratio covenant to 5.0 x debt to last twelve months EBITDA for each of the three periods ended June 30, September 30, and December 31, 2020, 4.5 x for period ended March 31, 2021 and then reverts back to 4.0 x.

The Company was in compliance with all covenants in the term loan facility and the revolving credit facility at June 30, 2020 and expects that it will remain in compliance with its existing debt covenants for the next twelve months.

The Company's availability of $ 997.0 at June 30, 2020, under its revolving credit facility reflects a reduction equivalent to the amount of the Company's outstanding letters of credit.

During the fourth quarter of 2020, $ 412.2 of the Company's senior notes mature.

The Company has elected to redeem these notes in August 2020 at par using from available cash on hand and borrowings under its revolving credit facility.

At June 30, 2020, the Company had $ 557.0 of cash and $ 997.0 of available borrowings under its revolving credit facility, which does not mature until 2022, and the Company was in compliance with all of its debt covenants.

The amendments also provide that during any period in which the Company's leverage ratio exceeds 4.5 x debt to last twelve months

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

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aggregate commitments under the revolving credit facility will be 0.25 % per annum, and (iv) borrowings under the term loan facility will accrue interest at a per annum rate equal to, at the Company's election, either a LIBOR rate plus a margin of 1.175 % or a base rate plus a margin of 0.175 % .

The Company is closely monitoring the impact of the COVID-19 pandemic on all aspects of its business.

In the second half of March, daily volume for routine tests started to decline and may continue to decline as a result of decreased consumer demand driven by a significant reduction in physician office visits, the cancellation of elective medical procedures, and the negative impacts on discretionary spending resulting from the economic downturn, among other factors.

In addition, the Company has experienced numerous study site closures around the world as well as delays for new patient recruitment for existing clinical trials and start-up of new clinical trials.

The significance of the impact on the Company’s business is not yet certain and depends on numerous evolving factors that the Company may not be able to accurately predict.

As a result of the economic uncertainties caused by the COVID-19 pandemic, the Company is implementing several measures to improve liquidity and operating results, including reduction of hours or furloughs of its employees, hiring freezes, temporarily suspending its share repurchases, increased requirements for acquisition activity, delaying some of its planned capital expenditures, and suspending merit pay increases and U.S.

employee 401K plan contributions for 2020.

Based on these actions and assumptions regarding the impact of COVID-19, the Company expects that it will be able to generate sufficient liquidity to satisfy its obligations.

EBITDA (i) the Company will be prohibited from consummating share repurchases, subject to limited exceptions, (ii) borrowings under the revolving credit facility will accrue interest at a per annum rate equal to, at the Company's election, either a LIBOR rate plus a margin of 1.25 % or a base rate plus a margin of 0.25 %, (iii) the facility fee that the Company is required to pay on the aggregate commitments under the revolving credit facility will be 0.25 % per annum, and (iv) borrowings under the term loan facility will accrue interest at a per annum rate equal to, at the Company's election, either a LIBOR rate plus a margin of 1.175 % or a base rate plus a margin of 0.175 %.

The Company is closely monitoring the impact of the COVID-19 pandemic on all aspects of its business and the effects such impacts will have on the Company's liquidity.The significance of the impact on the Company’s business is not yet certain and depends on numerous evolving factors that the Company may not be able to accurately predict.

PREFERRED STOCK AND COMMON SHAREHOLDERS’ EQUITY

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The Company is authorized to issue up to 30.0 shares of preferred stock, par value $ 0.10 per share.

There were no preferred shares outstanding as of March 31, 2020 and December 31, 2019 .

There were no preferred shares outstanding as of June 30, 2020 and December 31, 2019.

The changes in common shares issued are summarized below:

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Retirement of common stock ( 0.5 )

Common shares at March 31, 2020

Common shares at June 30, 2020 97.3

Share Repurchase Program

At the end of 2019, the Company had outstanding authorization from the board of directors to purchase $ 900.0 of Company common stock.

During three months ended March 31, 2020 , the Company purchased 0.6 shares of its common stock at an average price of $ 178.85 for a total cost of $ 100.0 .

During three months ended March 31, 2020, the Company purchased 0.6 shares of its common stock.

When the Company repurchases shares, the amount paid to repurchase the shares in excess of the par or stated value is allocated to additional paid-in-capital unless subject to limitation or the balance in additional paid-in-capital is exhausted.

Remaining amounts are recognized as a reduction in retained earnings.

As of March 31, 2020 , the Company had outstanding authorization from the board of directors to purchase up to $ 800.0 of the Company's common stock.

The repurchase authorization has no expiration date, however the Company has temporarily suspended stock repurchases due to the impact of the COVID-19 pandemic.

As of June 30, 2020, the Company had outstanding authorization from the board of directors to purchase up to $ 800.0 of the Company's common stock.

The repurchase authorization has no expiration date;

however, the Company temporarily suspended stock repurchases beginning in March 2020 due to the impact of the COVID-19 pandemic.

Accumulated Other Comprehensive Earnings

The components of accumulated other comprehensive earnings (loss) are as follows:

Foreign Currency Translation Adjustments

Net Benefit Plan Adjustments

Accumulated Other Comprehensive Earnings (Loss)

Foreign Currency Translation Adjustments Net Benefit Plan Adjustments Accumulated Other Comprehensive Earnings (Loss)

Balance as of December 31, 2019 $ ( 285.4 ) $ ( 87.0 ) $ ( 372.4 )

Current year adjustments

( 80.5 ) 5.4 ( 75.1 )

Tax effect of adjustments — ( 1.5 ) ( 1.5 )

Balance as of March 31, 2020

Balance as of June 30, 2020 $ ( 365.9 ) $ ( 83.1 ) $ ( 449.0 )

The Company does not recognize a tax benefit unless it concludes that it is more likely than not that the benefit will be sustained on audit by the taxing authority based solely on the technical merits of the associated tax position.

If the recognition threshold is met, the Company recognizes a tax benefit measured at the largest amount of the tax benefit that it believes is greater than 50 % likely to be realized.

The gross unrecognized income tax benefits were $ 40.4 and $ 31.7 at June 30, 2020 and December 31, 2019, respectively.

It is anticipated that the amount of the unrecognized income tax benefits will change within the next 12 months;

however, these changes are not expected to have a significant impact on the results of operations, cash flows or the financial position of the Company.

As of June 30, 2020 and December 31, 2019, $ 40.4 and $ 31.7 , respectively, are the approximate amounts of gross unrecognized income tax benefits that, if recognized, would favorably affect the effective income tax rate in future periods.

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

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The gross unrecognized income tax benefits were $ 32.3 and $ 31.7 at March 31, 2020 and December 31, 2019 , respectively.

It is anticipated that the amount of the unrecognized income tax benefits will change within the next 12 months;

however, these changes are not expected to have a significant impact on the results of operations, cash flows or the financial position of the Company.

As of March 31, 2020 and December 31, 2019 , $ 32.3 and $ 31.7 , respectively, are the approximate amounts of gross unrecognized income tax benefits that, if recognized, would favorably affect the effective income tax rate in future periods.

The Company recognizes interest and penalties related to unrecognized income tax benefits in income tax expense.

Accrued interest and penalties related to uncertain tax positions totaled $ 6.0 and $ 5.5 as of March 31, 2020 and December 31, 2019 , respectively.

Accrued interest and penalties related to uncertain tax positions totaled $ 8.2 and $ 5.5 as of June 30, 2020 and December 31, 2019, respectively.

The Company has substantially concluded all U.S.

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For these proceedings, however, the Company does not believe, based on currently available information, that the outcomes will have a material adverse effect on the Company's financial condition, though the outcomes could be material to the Company's operating results for any particular period, depending, in part, upon the operating results for such period.

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

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As previously reported, the Company responded to an October 2007 subpoena from the U.S.

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The lawsuit seeks actual and treble damages and civil penalties for each alleged false claim, as well as recovery of costs, attorney's fees, and legal expenses.

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Neither the U.S.

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(Savoy), a wholly owned subsidiary of the Company, as defendants.

The complaints alleged that the

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

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defendants violated Sections 14(e), 14(d)(4) and 20 of the Securities Exchange Act of 1934 by failing to disclose certain allegedly material information.

The complaints alleged that the defendants violated Sections 14(e), 14(d)(4) and 20 of the Securities Exchange Act of 1934 by failing to disclose certain allegedly material information.

In addition, the complaints in the Malkoff action, the Asiatrade action, and the Cusumano action alleged that the Individual Defendants breached their fiduciary duties to Sequenom shareholders.

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On September 6, 2016, the Court entered an order consolidating for all pre-trial purposes the six individual actions described above under the caption In re Sequenom, Inc.

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

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Shareholder Litig.

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The Company will vigorously defend the lawsuit.

On December 20, 2018, the Company was served with a putative class action lawsuit, Feckley v.

Covance Inc., et al ., filed in the Superior Court of California, County of Orange.

The complaint alleges that Covance Inc.

violated the California Labor Code and California Business & Professions Code by failing to properly pay commissions to employees under a sales incentive compensation plan upon their termination of employment.

The lawsuit seeks monetary damages, civil penalties, punitive damages, and recovery of attorney’s fees and costs.

On January 22, 2018, the case was removed to the U.S.

District Court for the Central District of California.

On February 27, 2020, the court entered an order dismissing the class action claims, and the parties settled the remaining individual claim.

On April 1, 2019, Covance Research Products was served with a Grand Jury Subpoena issued by the Department of Justice (DOJ) in Miami, Florida requiring the production of documents related to the importation into the United States of live non-human primate shipments originating from or transiting through China, Cambodia, and/or Vietnam from April 1, 2014 through March 28, 2019.

The Company is cooperating with the DOJ.

On April 22, 2019, the Company was served with a putative class action lawsuit, Kawa Orthodontics LLP, et al.

Laboratory Corporation of America Holdings, et al.

, filed in the U.S.

District Court for the Middle District of Florida.

The lawsuit alleges that on or about February 6, 2019, the defendants violated the U.S.

Telephone Consumer Protection Act (TCPA) by sending unsolicited facsimiles to Plaintiff and at least 40 other recipients without the recipients' prior express invitation or permission.

The lawsuit seeks the greater of actual damages or the sum of $ 0.0005 for each violation, subject to trebling under the TCPA, and injunctive relief.

The Company filed a motion to dismiss the case on May 28, 2019.

In response to the Motion to Dismiss, the Plaintiff filed an amended complaint, which contains additional allegations, including allegations related to another facsimile.

On December 16, 2019, the Plaintiff filed a notice withdrawing its Motion for Class Certification and all class allegations in the Amended Complaint.

In January 2020, the parties settled the lawsuit.

On May 14, 2019, Retrieval-Masters Creditors Bureau, Inc.

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The Company’s systems were not impacted by the AMCA Incident.

Upon learning

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of the AMCA Incident, the Company promptly stopped sending new collection requests to AMCA and stopped AMCA from continuing to work on any pending collection requests from the Company.

Upon learning of the AMCA Incident, the Company promptly stopped sending new collection requests to AMCA and stopped AMCA from continuing to work on any pending collection requests from the Company.

AMCA informed the Company that it appeared that an unauthorized user had access to AMCA’s system between August 1, 2018 and March 30, 2019, and that AMCA could not rule out the possibility that personal information on AMCA’s system was at risk during that time period.

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The Company will vigorously defend the multi-district litigation.

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

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The Company was served with a shareholder derivative lawsuit, Raymond Eugenio, Derivatively on Behalf of Nominal Defendant, Laboratory Corporation of America Holdings v.

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The complaint asserts derivative claims for breach of fiduciary duty and seeks relief including damages, certain disclosures, and certain changes to the Company’s internal governance practices.

On June 2, 2020, the Company filed a Motion to Stay the lawsuit due to its overlap with the multi-district litigation referenced above.

On July 2, 2020, the Company filed a Motion to Dismiss.

On July 14, 2020, the court entered an order staying the lawsuit pending the resolution of the multi-district litigation.

The lawsuit will be vigorously defended.

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On April 28, 2020, OCR notified the Company of the closure of its inquiry.

The Company has also received requests from a mutil-state group of state Attorneys General and is cooperating with these requests for information.

The Company has also received requests from a multi-state group of state Attorneys General and is cooperating with these requests for information.

Three putative class action lawsuits related to California wage and hour laws have been served on the Company.

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The lawsuits seek monetary damages, civil penalties, and recovery of attorney's fees and costs.

The Company will vigorously defend the lawsuits.

The parties reached a tentative settlement resolving the claims for all three cases.

The settlement is subject to Court approval.

If the settlement is not approved, the Company will vigorously defend the lawsuits.

On July 30, 2019, the Company was served with a class action lawsuit, Mitchell v.

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District Court for the Central District of California.

The lawsuit alleges that visually impaired patients are unable to use the Company's touchscreen kiosks at Company patient service centers in

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

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violation of the Americans with Disabilities Act and similar California statutes.

The lawsuit alleges that visually impaired patients are unable to use the Company's touchscreen kiosks at Company patient service centers in violation of the Americans with Disabilities Act and similar California statutes.

The lawsuit seeks statutory damages, injunctive relief, and attorney's fees and costs.

On March 20, 2020, the Company filed a Motion to Dismiss Plaintiffs' Complaint and to Strike Class Allegations.

The Company will vigorously defend the lawsuit.

On April 20, 2020, a former employee filed a putative class action lawsuit, Jose Bermejo v.

Laboratory Corporation of America in the Superior Court of California, County of Los Angeles Central District, alleging that certain non-exempt California-based employees were not properly compensated for driving time or properly paid wages upon termination of employment.

On May 14, 2020, the Company was served with a putative class action lawsuit, Jose Bermejo v.

Laboratory Corporation of America filed in the Superior Court of California, County of Los Angeles Central District, alleging that certain non-exempt California-based employees were not properly compensated for driving time or properly paid wages upon termination of employment.

The Plaintiff asserts these actions violate various California Labor Code provisions and Section 17200 of the Business and Professional Code.

The lawsuit seeks monetary damages, civil penalties, and recovery of attorney’s fees and costs.

The Company will vigorously defend the lawsuit.

On June 15, 2020, the lawsuit was removed to the U.S.

District Court for the Central District of California.

On June 16, 2020, the Company was served with a Private Attorney General Act lawsuit by the same plaintiff in Jose Bermejo v.

Laboratory Corporation of America, filed in the Superior Court of California, County of Los Angeles Central District, alleging that certain Company practices violated California Labor Code penalty provisions related to unpaid and minimum wages, unpaid overtime, unpaid mean and rest break premiums, untimely payment of wages following separation of employment, failure to maintain accurate pay records, and non-reimbursement of business expenses.

The second lawsuit seeks to recover civil penalties and recovery of attorney's fees and costs.

The Company will vigorously defend both lawsuits.

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

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Under the Company's present insurance programs, coverage is obtained for catastrophic exposure as well as those risks required to be insured by law or contract.

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The LCD 401(k) Plan also permits discretionary contributions by the Company of 1 % to 3 % of pay for eligible employees based on service.

For the three months ended March 31, 2020 , and 2019 , total expense for the LCD 401K Plan was $ 13.5 and $ 16.0 , respectively.

The Company incurred expense of $ 13.9 and $ 16.2 for the LCD 401(k) Plan during the three months ended June 30, 2020 and 2019 respectively, and $ 27.4 and $ 32.2 during the six months ended June 30, 2020 and 2019, respectively.

All of the CDD U.S.

employees are eligible to participate in the CDD 401(k) Plan, which is available on a voluntary basis and features a maximum 4.5 % Company match, based upon a percentage of the employee’s contributions.

The Company incurred expense of $ 23.4 and $ 19.9 for the Covance 401K plan during the three months ended March 31, 2020 , and 2019 , respectively.

The Company incurred expense of $ 20.3 and $ 17.9 for the Covance 401(k) plan during the three months ended June 30, 2020, and 2019, respectively, and $ 43.8 and $ 37.8 during the six months ended June 30, 2020 and 2019, respectively.

The Company also maintains several other small 401K plans associated with companies acquired over the last several years.

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Employees participating in the Company Plan and PEP no longer earn service-based credits, but continue to earn investment credits.

The Company Plan covers substantially all employees employed prior to December 31, 2009.

The Company Plan covers substantially all LCD employees employed prior to December 31, 2009.

The benefits to be paid under the Company Plan are based on years of credited service through December 31, 2009, interest credits and average compensation.

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The effect on operations for the Company Plan and the PEP is summarized as follows:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2020 2019 2020 2019

Service cost for administrative expenses $ 1.3 $ 1.0 $ 2.6 $ 2.0

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The other components of net benefit cost, including amortization or prior service cost/credit and settlement and curtailment effects are included in other, net non-operating expenses.

During the three months ended March 31, 2020 , the Company made no contributions to the Company Plan.

The related net pension obligation for the Company Plan and PEP was $ 93.1 and $ 93.4 as of March 31, 2020 and December 31, 2019 , respectively.

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During the six months ended June 30, 2020, the Company made no contributions to the Company Plan.

The related net pension obligation for the Company Plan and PEP was $ 92.7 and $ 93.4 as of June 30, 2020 and December 31, 2019, respectively.

As a result of the Covance acquisition, the Company sponsors two defined benefit pension plans for the benefit of its employees at two U.K.

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Plans were based on service and compensation through December 31, 2019.

The German Plan is unfunded while the U.K.

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Plan is unfunded while the U.K.

Plans are funded.

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The related net pension obligation for these plans inclusive of the U.K.

Plans, German Plan, and the Envigo Plan, was $ 88.6 and $ 99.1 as of March 31, 2020 and December 31, 2019 , respectively.

Plans, German Plan, and the Envigo Plan, was $ 86.0 and $ 99.1 as of June 30, 2020 and December 31, 2019, respectively.

FAIR VALUE MEASUREMENTS

The Company’s population of financial assets and liabilities subject to fair value measurements as of March 31, 2020 , and December 31, 2019 , is as follows:

The Company’s population of financial assets and liabilities subject to fair value measurements as of June 30, 2020, and December 31, 2019, is as follows:

Fair Value Measurements as of

March 31, 2020

Balance Sheet

Using Fair Value Hierarchy

Classification

March 31, 2020

Noncontrolling interest put

Noncontrolling interest

Cross currency swaps

Other assets, net

Interest rate swaps

Other assets, net

Cash surrender value of life insurance policies

Other assets, net

Deferred compensation liability

Other liabilities

Contingent consideration

Other liabilities

as of June 30, 2020

Balance Sheet Using Fair Value Hierarchy

Classification June 30, 2020 Level 1 Level 2 Level 3

Noncontrolling interest put Noncontrolling interest $ 15.2 $ — $ 15.2 $ —

Cross currency swaps Other assets, net 14.3 — 14.3 —

Interest rate swaps Other assets, net 2.3 — 2.3 —

Cash surrender value of life insurance policies Other assets, net 78.6 — 78.6 —

Deferred compensation liability Other liabilities 76.8 — 76.8 —

Contingent consideration Other liabilities 9.0 — — 9.0

Fair Value Measurements as of

December 31, 2019

Balance Sheet

Using Fair Value Hierarchy

Classification

December 31, 2019

Noncontrolling interest put

Noncontrolling interest

Cross currency swaps

Other assets, net

Interest rate swaps

Other assets, net

Cash surrender value of life insurance policies

Other assets, net

Deferred compensation liability

Other liabilities

Investment in equity securities

Other current assets

Contingent consideration

Other liabilities

Fair Value Measurement of Level 3 Liabilities

Contingent Consideration

as of December 31, 2019

Balance Sheet Using Fair Value Hierarchy

Classification December 31, 2019 Level 1 Level 2 Level 3

Noncontrolling interest put Noncontrolling interest $ 15.8 $ — $ 15.8 $ —

Cross currency swaps Other assets, net 3.2 — 3.2 —

Interest rate swaps Other assets, net 1.5 — 1.5 —

Cash surrender value of life insurance policies Other assets, net 80.2 — 80.2 —

Deferred compensation liability Other liabilities 76.7 — 76.7 —

Investment in equity securities Other current assets 9.1 9.1 — —

Contingent consideration Other liabilities 9.9 — — 9.9

Fair Value Measurement of Level 3 Liabilities Contingent Consideration

Balance at December 31, 2019 $ 9.9

Balance at March 31, 2020

Payments ( 4.8 )

Adjustments ( 2.1 )

Additions 6.0

Balance at June 30, 2020 $ 9.0

The Company has a noncontrolling interest put related to its Ontario subsidiary that has been classified as mezzanine equity in the Company’s condensed consolidated balance sheets.

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From time to time, to offset the cost of the growth in the participant's investment accounts, the Company purchases life insurance policies, with the Company named as beneficiary of the policies.

Changes in the cash surrender value of

Changes in the cash surrender value of the life insurance policies are based upon earnings and changes in the value of the underlying investments, which are typically invested in a similar manner to the participants' allocations.

Changes in the fair value of the DCP obligation are derived using quoted prices in active markets based on the market price per unit multiplied by the number of units.

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

1 unchanged sentence

(dollars and shares in millions, except per share data)

the life insurance policies are based upon earnings and changes in the value of the underlying investments, which are typically invested in a similar manner to the participants' allocations.

Changes in the fair value of the DCP obligation are derived using quoted prices in active markets based on the market price per unit multiplied by the number of units.

The cash surrender value and the DCP obligations are classified within Level 2 because their inputs are derived principally from observable market data by correlation to the hypothetical investments.

surrender value and the DCP obligations are classified within Level 2 because their inputs are derived principally from observable market data by correlation to the hypothetical investments.

Contingent acquisition consideration liabilities are measured at fair value using Level 3 valuations.

3 unchanged sentences

The carrying amounts of cash and cash equivalents, accounts receivable, income taxes receivable, and accounts payable are considered to be representative of their respective fair values due to their short-term nature.

The fair market value of the Senior Notes, based on market pricing, was approximately $ 6,007.2 and $ 6,140.6 as of March 31, 2020 , and December 31, 2019 , respectively.

The fair market value of the Senior Notes, based on market pricing, was approximately $ 6,433.0 and $ 6,140.6 as of June 30, 2020 and December 31, 2019, respectively.

The Company's note and debt instruments are classified as Level 2 instruments, as the fair market values of these instruments are determined using other observable inputs.

4 unchanged sentences

Interest Rate Swap

The Company is party to a fixed-to-variable interest rate swap agreement for its 4.625 % senior notes due 2020 with a notional amount of $ 300.0 and variable interest rates based on one-month LIBOR plus 2.298 % to hedge against changes in the fair value of a portion of the Company's long term debt.

This derivative financial instrument is accounted for as fair value hedge of the Senior Notes due 2020.

These interest rate swaps are included in other long-term assets or liabilities, as applicable, and added to the value of the Senior Notes.

The Company is party to a fixed-to-variable interest rate swap agreement for its 4.625 % senior notes which mature on November 15, 2020, with a notional amount of $ 300.0 and variable interest rates based on one-month LIBOR plus 2.298 % to hedge against changes in the fair value of a portion of the Company's debt.

On July 17, 2020, notice was given to holders of the notes that the Company had elected to redeem the outstanding securities on August 17, 2020.

The interest rate swap derivative financial instrument is accounted for as fair value hedge of the Senior Notes due 2020.

These interest rate swaps are included in prepaid and other assets or liabilities, as applicable, and added to the value of the Senior Notes.

As the specific terms and notional amount of the derivative financial instrument matches those of the fixed-rate debt being hedged, the derivative instrument is assumed to be a perfectly effective hedge and accordingly, there is no impact to the Company's Condensed Consolidated Statements of Operations.

Cash flows from the interest rate swap are included in operating activities.

Carrying amount of hedged liabilities as of

Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Liabilities as of

March 31, 2020

December 31, 2019

March 31, 2020

December 31, 2019

Carrying amount of hedged liabilities as of Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Liabilities as of

June 30, 2020 December 31, 2019 June 30, 2020 December 31, 2019

Balance Sheet Line Item in which Hedged Items are Included

4 unchanged sentences

Of the notional value, $ 300.0 matures in 2022 and $ 300.0 matures in 2025.

These cross currency swaps maturing in 2022 and 2025 are included in other long-term assets as of March 31, 2020 .

These cross currency swaps maturing in 2022 and 2025 are included in other long-term assets as of June 30, 2020.

Changes in the fair value of the cross-currency swaps are recorded as a component of the foreign currency translation adjustment in accumulated other comprehensive income in the Condensed Consolidated Balance Sheet until the hedged item is recognized in earnings.

The cumulative amount of the fair value hedging adjustment included in the current value of the cross currency swaps is $ 19.9 for the three months ended March 31, 2020 , and was recognized as currency translation within the Condensed Consolidated Statement of Comprehensive Earnings.

There were no amounts reclassified from the Condensed Consolidated Statement of Comprehensive Earnings to the Condensed Consolidated Statement of Operations during the three months ended March 31, 2020 .

The cumulative amount of the fair value hedging adjustment included in the current value of the cross currency swaps is $( 8.8 ) and $ 11.1 for the three and six months ended June 30, 2020, and was recognized as currency translation within the Condensed Consolidated Statement of Comprehensive Earnings.

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

2 unchanged sentences

The table below presents the fair value of derivatives on a gross basis and the balance sheet classification of those instruments:

March 31, 2020

December 31, 2019

Fair Value of Derivative

Balance Sheet Caption

Dollar Notional

June 30, 2020 December 31, 2019

Fair Value of Derivative Fair Value of Derivative

Balance Sheet Caption Asset Liability U.S.

Dollar Notional Asset Liability U.S.

Dollar Notional

Derivatives Designated as Hedging Instruments

Interest rate swap

Prepaid expenses and other/Other liabilities

Cross currency swaps

Other assets, net or Other liabilities

Interest rate swap Prepaid expenses and other/Other liabilities $ 2.3 $ — $ 300.0 $ 1.5 $ — $ 300.0

Cross currency swaps Other assets, net or Other liabilities $ 14.3 $ — $ 600.0 $ 3.2 $ — $ 600.0

The table below provides information regarding the location and amount of pretax (gains) losses of derivatives designated in fair value hedging relationships:

Amount of pre-tax gain/(loss) included in other comprehensive income

Amounts reclassified to the

Amount of pre-tax gain/(loss) included in other comprehensive income Amounts reclassified to the

Statement of Operations Amount of pre-tax gain/(loss) included in other comprehensive income Amounts reclassified to the

Statement of Operations

Three Months Ended March 31,

Three Months Ended June 30, Three Months Ended June 30, Six Months Ended

June 30, Six Months Ended

2020 2019 2020 2019 2020 2019 2020 2019

Interest rate swap contracts $ ( 0.9 ) $ 4.3 $ — $ — $ 0.9 $ 6.8 $ — $ —

Cross currency swaps $ ( 8.8 ) $ ( 7.8 ) $ — $ — $ 11.1 $ 4.0 $ — $ —

No gains or losses from derivative instruments classified as hedging instruments have been recognized into income for the three and three months ended March 31, 2020 and 2019.

No gains or losses from derivative instruments classified as hedging instruments have been recognized into income for the three and six months ended June 30, 2020 and 2019.

SUPPLEMENTAL CASH FLOW INFORMATION

Three Months Ended March 31,

Six Months Ended June 30,

Supplemental schedule of cash flow information:

Cash paid during period for:

Interest $ 111.5 $ 123.8

Income taxes, net of refunds 15.1 119.6

2 unchanged sentences

Change in accrued property, plant and equipment ( 17.1 ) ( 12.5 )

Floating rate secured note receivable due 2022 from the sale of CRP — 110.0

BUSINESS SEGMENT INFORMATION

The following table is a summary of segment information for the three months ended March 31, 2020 , and 2019 .

The following table is a summary of segment information for the three and six months ended June 30, 2020 and 2019.

The management approach has been used to present the following segment information.

8 unchanged sentences

(dollars and shares in millions, except per share data)

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

2020 2019 2020 2019

LCD $ 1,692.7 $ 1,760.9 $ 3,394.7 $ 3,482.9

CDD 1,093.7 1,126.3 2,237.5 2,201.0

Intercompany eliminations and other ( 17.6 ) ( 5.5 ) ( 39.6 ) ( 11.0 )

Revenues 2,768.8 2,881.7 5,592.6 5,672.9

Operating earnings (loss):

LCD 281.3 312.5 486.7 580.8

CDD 65.5 65.8 ( 273.2 ) 153.8

General corporate expenses ( 49.1 ) ( 42.6 ) ( 108.4 ) ( 80.7 )

Total operating income (loss)

Total operating income 297.7 335.7 105.1 653.9

Non-operating expenses, net ( 0.7 ) ( 65.7 ) ( 75.8 ) ( 129.2 )

Earnings (loss) before income taxes

Earnings before income taxes 297.0 270.0 29.3 524.7

Provision for income taxes 65.4 79.3 114.6 148.1

3 unchanged sentences

SUBSEQUENT EVENTS

The COVID-19 Global Pandemic

In order to mitigate the effects of the COVID-19 pandemic on its financial position, the Company has taken a number of actions.

In April 2020, the Company temporarily suspended share repurchases, and is suspending the Company’s contributions to 401K plans in the U.S., effective June 2020, and 2020 merit pay increases.

In April 2020, the Company received cash payments of approximately $ 56.0 from the Public Health and Social Services Emergency Fund that was appropriated by Congress to the Department of Health and Human Services (HHS) in the Coronavirus Aid, Relief, and Economic Security Act.

The HHS distributed the funds to healthcare providers based on their 2019 Medicare fee-for-service reimbursement.

The Company is currently evaluating the impact this transaction will have on the consolidated financial statements.

On May 7, 2020, the Company entered into amendments to its term loan facility and its revolving credit facility to increase the maximum leverage ratio covenant to 5.0 x debt to last twelve months EBITDA for each of the three months periods ending June 30, September 30, and December 31, 2020 and 4.50 x debt to last twelve months EBITDA for the three month period ended March 31, 2021.

The amendments also provide that during any period in which the Company's leverage ratio exceeds 4.50 x debt to last twelve months EBITDA (i) the company will be prohibited from consummating share repurchases, subject to limited exceptions, (ii) borrowings under the revolving credit facility will accrue interest at a per annum rate equal to, at the Company's election, either a LIBOR rate plus a margin of 1.25 % or a base rate plus a margin of 0.25 % , (iii) the facility fee that the Company is required to pay on the aggregate commitments under the revolving credit facility will be 0.25 % per annum, and (iv) borrowings under the term loan facility will accrue interest at a per annum rate equal to, at the Company's election, either a LIBOR rate plus a margin of 1.175 % or a base rate plus a margin of 0.175 % .

In July 2020, the Company acquired two businesses and related assets for approximately $ 200.0 in cash (net of cash acquired).

These acquisitions will be included in both the LCD and CDD segments and were made primarily to extend the Company's geographic reach in important market areas, enhance the Company's scientific differentiation and to expand the breadth and scope of the Company's services.

On July 17, 2020, notice was given to holders of $ 412.2 of the Company’s senior notes, due November 15, 2020, that the Company had elected to redeem the outstanding securities on August 17, 2020 at par.

The Company will repay the notes with available cash on hand and borrowings under its revolving credit facility.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements