What changed in this filing

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Item 7. Management’s Discussion and Analysis

2021-02-25 compared with 2020-02-28 · 227 added, 288 removed, 229 unchanged (69% of the section changed)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (in millions)

During the year ended December 31, 2019 , the Company's revenue grew by 2.0% , driven by growth from acquisitions of 2.3% and organic growth of 1.6% (which includes the negative impact from PAMA of 0.9% ), partially offset by the disposition of businesses of 1.4% and negative foreign currency translation of 0.5% .

During the year ended December 31, 2020, the Company's revenues grew by 21.0%, due to organic growth of 19.0%, acquisitions of 1.8% and favorable foreign currency translation of 0.4%, partially offset by the disposition of a business of 0.2%.

The 19.0% increase in organic revenues includes the 24.1% contribution from PCR and antibody COVID-19 testing (COVID-19 Testing), partially offset by the 5.1% reduction in the Company's organic Base Business due to the pandemic.

Base Business includes the Company's business operations except for COVID-19 Testing.

The decline in the organic Base Business includes the negative impact of the U.S.

Protecting Access to Medicare Act of 2014 (PAMA) of 0.6%.

The Company defines organic growth as the increase in revenue excluding revenue from acquisitions for the first twelve months after the close of each acquisition.

On June 3, 2019, the Company's CDD segment completed the acquisition of Envigo's nonclinical contract research services business, expanding CDD's global nonclinical drug development capabilities with additional locations and resources.

Additionally, the Company divested the Covance Research Products (CRP) business, which was a part of the CDD segment, to Envigo.

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.

During the year ended December 31, 2019 , the Company also acquired various other businesses and related assets for approximately $286.4 in cash (net of cash acquired).

The Company remains on track to deliver $150.0 of net savings from CDD's three-year LaunchPad initiative by the end of 2020.

The Company expects phase II of LCD’s LaunchPad initiative to deliver approximately $200.0 in net savings by the end of 2021, while incurring approximately $40.0 in one-time implementation costs.

Approximately one-third of the total savings are expected to be realized each year.

The Company is also exposed to risks related to information security arising from the information technology systems and operations of third parites, including thosse of the Company's vendors and partners.

For example, on May 14, 2019, Retrieval-Masters Credit Bureau, Inc.

d/b/a/ American Medical Collections Agency (AMCA), an external collection agency, notified the Company about a security incident AMCA experienced that may have involved certain personal information about some of the Company's patients (the AMCA Incident).

The Company referred patient balances to AMCA only when direct collection efforts were unsuccessful.

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

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 on behalf of 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.

Information on AMCA's affected system from the Company may have included name, address, and balance information for the patient and person responsible for payment, along with the patient's phone number, date of birth, referring physician, and date of service.

The Company was later informed by AMCA that health insurance information may have been included for some individuals, and because some insurance carriers utilize the Social Security Number as a subscriber identification number, the Social Security Number for some individuals may also have been affected.

No ordered tests, laboratory test results, or diagnostic infonnation from the Company were in the AMCA affected system.

The Company notified individuals for whom it had a valid mailing address.

For the individuals whose Social Security Number was affected, the notice included an offer to enroll in credit monitoring and identity protection services that will be provided free of charge for 24 months.

The Company has incurred, and expects to continue to incur, costs related to the AMCA Incident.

In addition, the Company is involved in pending and threatened litigation related to the AMCA Incident, as well as various government and regulatory inquiries and processes.

For additional information about the AMCA Incident, see Note 16 Commitments and Contingencies to the Consolidated Financial Statements.

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 environments.

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 2021.

Throughout 2020, the Company's COVID-19 Testing has helped to offset the pressure experienced in the Base Business.

To date, the Company has performed more than 18 million PCR and 3.0 million antibody COVID-19 tests and as of February 25, 2021, has the capacity to perform 275,000 PCR and 300,000 antibody tests per day, subject to the availability of equipment and testing supplies and key personnel.

During 2020, the Company recorded goodwill and other asset impairment charges of $462.1, $450.5 within DD and $11.6 within Dx, as a result of the COVID-19 pandemic.

The Company concluded that the fair value was less than carrying value for two of its reporting units and recorded goodwill impairment of $418.7 and $3.7 for DD and Dx, respectively.

Additional impairment of identifiable intangible and tangible assets of $31.5 and $7.9 was recorded for DD and Dx, respectively, for impairment of a tradename, software, customer relationships, technology assets, and a note receivable.

There remains significant uncertainty regarding the duration and severity of the pandemic and its impact on the Company’s business, results of operations and financial position for 2021.

For more information regarding the risks associated with COVID-19 and its impact on the Company’s business, see Risk Factors in Part I - Item 1A.

The Company expects Phase II of Dx’s LaunchPad initiative to deliver approximately $200.0 in net savings by the end of 2021, while incurring approximately $40.0 in one-time implementation costs.

Approximately one-third of the total savings are expected to be realized in 2021, and one-third of the total savings have been realized in each of 2019 and 2020.

PAMA, which went into effect on January 1, 2018, resulted in a net reduction of revenue of approximately $72.0 and $107.0 in 2020 and 2019, respectively from all payers affected by the Clinical Lab Fee Schedule.

Unless further implementation of PAMA is delayed or changed, an additional reduction of approximately $90.0 is expected for 2020.

Effective January 1, 2019, the Company adopted Accounting Standards Codification (ASC) 842 Leases using the modified retrospective method.

The Company elected the package of practical expedients, which includes not reassessing whether existing contracts contain leases under the new definition of a lease, reassessing the classification of existing leases, and reassessing whether previously capitalized initial direct costs qualify for capitalization under the new standard.

The Company also elected not to separate lease and non-lease components.

The adoption of this standard resulted in the recording of $778.1 of additional operating lease liabilities as of December 31, 2019.

Results of Operations

The following tables present the financial measures that management considers to be the most significant indicators of the Company's performance.

For discussion of 2018 results and comparison with 2017 results refer to “ Management's Discussion and Analysis of Financial Conditions and Results of Operations ” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018 .

For discussion of 2019 results and comparison with 2018 results refer to “ Management's Discussion and Analysis of Financial Conditions and Results of Operations ” in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2019.

Years ended December 31, 2020 and 2019

Years Ended December 31,

2020 2019 Change

Dx $ 9,253.4 $ 7,000.1 32.2 %

DD 4,877.7 4,578.1 6.5 %

Intercompany eliminations (152.6) (23.4) 552.1 %

The 2.0% increase in revenues for the year ended December 31, 2019 , as compared with the corresponding period in 2018 was primarily due to growth from acquisitions of 2.3% , organic growth of 1.6% (which includes the negative impact from PAMA of 0.9% ), partially offset by the disposition of businesses of 1.4% and negative foreign currency translation of 0.5% .

LCD revenues for the year ended December 31, 2019 , were $7,000.1 , a decrease of 0.4% over revenues of $7,030.8 in the corresponding period in 2018 .

The decline in revenues was due to the negative impact from the disposition of businesses of 1.9% and negative currency translation of 0.1% , partially offset by acquisitions of 1.2% and organic revenue growth of 0.4% which includes the negative impact of lower reimbursement from PAMA of 1.5% .

CDD revenues for the year ended December 31, 2019 , were $4,578.1 , an increase of 6.1% over revenues of $4,313.1 in the corresponding period in 2018 .

The increase in revenues was due to acquisitions, which contributed growth of 4.1% , an increase in organic growth of 3.8% , partially offset by negative foreign currency translation of approximately 1.2% and a business disposition of 0.6% .

Excluding pass-throughs, organic revenue grew mid-to-high single digits.

Total $ 13,978.5 $ 11,554.8 21.0 %

The 21.0% increase in revenues for the year ended December 31, 2020, as compared with the corresponding period in 2019 was primarily due to organic growth of 19.0%, acquisitions of 1.8% and favorable foreign currency translation of 0.4%, partially offset by the disposition of a business of 0.2%.

The 19.0% increase in organic revenues includes the 24.1% contribution from COVID-19 Testing, partially offset by the 5.1% reduction in the Company's organic Base Business, which the Company believes was due to the pandemic.

The decline in the organic Base Business includes the negative impact of PAMA of 0.6%.

Dx revenues for the year ended December 31, 2020, were $9,253.4, an increase of 32.2% over revenues of $7,000.1 in the corresponding period in 2019.

The increase in revenues was due to organic growth of 30.9% and acquisitions of 1.3%.

The 30.9% increase in organic revenue was due to a 39.8% contribution from COVID-19 Testing, partially offset by an 8.9% decline of the organic Base Business which includes a 1.0% negative impact from PAMA.

Total volume, measured by requisitions, increased by 7.8% as organic volume increased by 6.5% and acquisition volume contributed growth of 1.3%.

The organic volume growth is due to demand for COVID-19 Testing of 21.2%, partially offset by a 14.7% reduction of organic Base Business.

Price/mix increased by 24.4% due to COVID-19 Testing of 18.6% and Base Business of 5.8%.

The Base Business price includes the negative impact from PAMA of 1.0%.

DD revenues for the year ended December 31, 2020, were $4,877.7, an increase of 6.5% over revenues of $4,578.1 in the corresponding period in 2019.

The increase in revenues was due to the benefit of acquisitions of 2.6%, favorable foreign currency translation of 0.9% and organic growth of 3.5%, partially offset by a business disposition of 0.5%.

The increase in organic revenue was primarily driven by COVID-19 PCR testing through its Central Laboratories unit along with broad based demand including COVID-19 vaccine and therapeutic work, partially offset by the negative impact from the pandemic.

The pandemic continues to cause delays in clinical trial progression and associated testing, reductions in investigator site access, as well as interruptions to the supply chain.

Cost of Revenues

Years Ended December 31,

2020 2019 Change

Cost of revenues $ 9,025.7 $ 8,302.3 8.7 %

Cost of revenues as a % of revenues

Cost of revenues (primarily laboratory, labor and distribution costs) increased 1.8% in 2019 as compared with 2018 primarily due to acquisitions and organic volume growth.

Cost of revenues as a percentage of revenues remained consistent in 2019 as compared to 2018 at approximately 72.0% .

Labor and testing supplies for the year ended December 31, 2019 , comprise over 71.3% of the Company’s cost of revenues.

Cost of revenues has increased over the two-year period ended December 31, 2019 , primarily due to the impact of acquisitions, overall growth in the Company's volume, and increases in merit-based labor costs.

64.6 % 71.9 %

Cost of revenues (primarily laboratory, labor and distribution costs) increased 8.7% in 2020 as compared with 2019 primarily due to organic growth and acquisitions.

Cost of revenues as a percentage of revenues decreased to 64.6% in 2020 as compared to 71.9% in 2019.

This decrease was primarily due to the impact of COVID-19 Testing on revenues and LaunchPad savings, partially offset by PAMA and higher personnel costs (primarily driven by merit increases and one additional payroll day that predominantly impacted Dx).

During 2020, the Company incurred special charges of $1.9 of acquisition and divestiture related costs, $36.5 in COVID-related costs, and $1.1 related to miscellaneous other items.

Additionally, the Company recorded COVID-19 related accounts receivable reserves of $17.0, which are recorded as a reduction of revenues.

Excluding these charges, cost of revenues as a percentage of revenues were 64.2% for the year ended December 31, 2020.

Labor and testing supplies for the year ended December 31, 2020, comprise approximately 73.0% of the Company’s cost of revenues.

Cost of revenues has increased over the two-year period ended December 31, 2020, primarily due to the impact of acquisitions, overall growth in the Company's volume, including COVID-19 Testing, and increases in merit-based labor costs.

Selling, General and Administrative Expenses

Years Ended December 31,

2020 2019 Change

Selling, general and administrative expenses $ 1,729.3 $ 1,624.5 6.5 %

SG&A as a % of revenues 12.4 % 14.1 %

Selling, general and administrative expenses as a percentage of revenues increased to 14.1% in 2019 compared to 13.9% in 2018 .

The increase in selling, general and administrative expenses as a percentage of revenues is primarily due to acquisitions and cybersecurity investments.

During 2019, the Company incurred $69.2 of acquisition and divestiture related costs, $15.2 in management transition costs, $11.5 in costs related to the Retrieval-Masters Credit Bureau, Inc.

d/b/a/ American Medical Collection Agency (AMCA) data breach, and $10.1 of non-capitalized costs associated with the implementation of a major system as part of its LaunchPad business process improvement initiative, partially offset by $9.1 in reimbursements related to the 2018 ransomware attack and a $14.1 gain related to the settlement of a contingent purchase price related to a 2016 acquisition.

Selling, general and administrative expenses as a percentage of revenues decreased to 12.4% in 2020 compared to 14.1% in 2019.

The decrease in selling, general and administrative expenses as a percentage of revenues is primarily due to the contribution of COVID-19 Testing on revenues and less acquisition activity.

During 2020, the Company incurred special charges of $28.3 of acquisition and divestiture related costs, $10.4 in COVID-related costs, $14.6 in management transition costs, and $1.3 of non-capitalized costs associated with the implementation of a major system as part of its LaunchPad business process improvement initiative, partially offset by $2.7 related to miscellaneous other items.

These items increased selling, general and administrative expenses by $51.9.

Excluding these charges, selling, general and administrative expenses as a percentage of revenues were 12.0% for the year ended December 31, 2020.

During 2018 , the Company incurred integration and other costs of $54.7 primarily relating to the Chiltern acquisition and the sale of the Covance Food Solutions business.

On July 16, 2018, the Company reported that it had detected suspicious activity on its information technology network and was taking steps to respond to and contain the activity.

The activity was subsequently determined to be a new variant of ransomware affecting certain LCD information technology systems.

As a direct result of the ransomware attack experienced during July, the Company incurred $12.6 in consulting fees and employee overtime during the recovery period following the attack.

The Company also recorded $9.6 in consulting expenses relating to the Chiltern integration and management integration costs along with a special one-time bonus of $31.1 ($6.3 of which was recorded in selling, general and administrative expenses) to its non-bonus eligible employees in recognition of the benefits the Company received from the passage of the TCJA.

In addition, the Company incurred $9.8 of non-capitalized costs associated with the implementation of a major system as part of its LaunchPad business process improvement initiative.

The decrease in selling, general and administrative expenses as a percentage of revenues is primarily due to leveraging the Company's infrastructure on higher revenue, partially offset by a $15.0 initial contribution to establish the Labcorp Charitable Foundation which supports the Company's strategic mission to improve health and improve lives with contributions focused on health and welfare, education and community.

During 2019, the Company incurred special charges of $69.2 of acquisition and divestiture related costs, $15.2 in management transition costs, and $10.1 of non-capitalized costs associated with the implementation of a major system as part of its LaunchPad business process improvement initiative, partially offset by $11.7 in other miscellaneous items.

These items increased selling, general and administrative expenses by $82.9.

Excluding these charges, selling, general and administrative expenses as a percentage of revenues were 13.3% for the year ended December 31, 2019.

Goodwill and Other Asset Impairments

Years Ended December 31,

2020 2019 Change

Goodwill and other asset impairments $ 462.1 $ — N/A

During 2020, the Company recorded goodwill and other asset impairment charges of $462.1, $450.5 within DD and $11.6 within Dx.

The Company concluded that the fair value was less than carrying value for two of its reporting units and recorded goodwill impairment of $418.7 and $3.7 for DD and Dx, respectively.

Additional impairment of identifiable intangible and tangible assets of $31.8 and $7.9 was recorded for DD and Dx, respectively, for impairment of a tradename, software, customer relationships, technology assets and a note receivable.

Amortization Expense

Years Ended December 31,

2020 2019 Change

Dx $ 104.9 $ 102.0 2.8 %

DD 170.5 141.2 20.8 %

Amortization of intangibles and other assets $ 275.4 $ 243.2 13.2 %

The increase in amortization of intangibles and other assets from 2018 through 2019 primarily reflects the impact of acquisitions offset by the impact of business dispositions and working capital and earnout adjustments.

The increase in amortization of intangibles and other assets from 2019 through 2020 primarily reflects the impact of acquisitions partially offset by impairment of intangible assets recorded in fiscal 2020, and includes $27.5 of amortization acceleration of certain intangible assets related to the Covance trade name as a result of the Company's rebranding initiative.

Restructuring and Other Charges

Years Ended December 31,

2020 2019 Change

Restructuring and other charges $ 40.6 $ 54.6 (25.6) %

During 2020, the Company recorded net restructuring charges of $40.6;

$26.7 within LCD and $27.9 within CDD.

The charges were comprised of $32.9 in severance and other personnel costs and $24.9 in facility-related costs primarily associated with general integration activities.

The charges were offset by the reversal of previously established reserves of $1.7 in unused severance and $1.5 in unused facility-related costs.

$15.3 within Dx and $25.3 within DD.

The charges were comprised of $14.1 in severance and other personnel costs $17.4 for facility, operating lease right-of-use and equipment

impairments, and $18.9 in facility closures and general integration activities.

The charges were offset by the reversal of previously established liability of $0.6 and $9.2 in unused severance costs and facility-related costs, respectively.

During 2019, the Company recorded net restructuring charges of $54.6;

$20.5 within LCD and $27.6 within CDD.

The charges were comprised of $40.3 in severance and other personnel costs and $11.8 in facility-related costs primarily associated with general

integration activities.

The charges were offset by the reversal of previously established reserves of $2.0 in unused severance and $2.0 in unused facility-related costs.

$26.7 within Dx and $27.9 within DD.

The charges were comprised of $32.9 in severance and other personnel costs and $24.9 in facility-related costs primarily associated with general integration activities.

The charges were offset by the reversal of previously established liability of $1.7 in unused severance and $1.5 in unused facility-related costs.

Interest Expense

Years Ended December 31,

2020 2019 Change

Interest expense $ 207.4 $ 240.7 (13.8) %

The decrease in interest expense for 2019 as compared with the corresponding period in 2018 is primarily due to lower average debt balances, partially offset by $5.0 of accelerated deferred financing fees and make-whole premiums associated with the debt refinancing in the fourth quarter of 2019 .

The decrease in interest expense for 2020 as compared with the corresponding period in 2019 is primarily due to the repayment of debt and lower interest rates.

Equity Method Income, Net

Years Ended December 31,

2020 2019 Change

Equity method income, net $ 2.9 $ 9.8 (70.4) %

Equity method income, net represents the Company's ownership share in joint venture partnerships along with equity investments in other companies in the healthcare industry.

All of these partnerships and investments reside within the LCD segment.

The decrease in income for 2019 as compared with the corresponding period in 2018 was primarily due to the decreased profitability of the Company's joint ventures combined with the consolidation of a joint venture during the second quarter of 2018 related to the acquisition of Pathology Associates Medical Laboratories (PAML).

All of these partnerships and investments reside within the Dx segment.

The decrease in income for 2020 as compared with the corresponding period in 2019 was primarily due to the impairment of an equity method investment and the decreased profitability of the Company's joint ventures.

Years Ended December 31,

For the year ended December 31, 2019 , Other, net included a loss of $13.3 , primarily related to the sale of its CRP business, offset by $20.9 in net gains on venture fund investments.

For the year ended December 31, 2018 , Other, net included a gain of $258.3 recognized on the sale of the Covance Food Solutions (CFS) business offset by losses on the dispositions of the Company's forensic testing services businesses in the U.K.

of $48.9 and $24.5 , respectively, the impairment of a venture fund investment of $5.2 and a $7.5 pension settlement charge.

In addition, foreign currency transaction losses were $11.1 and $3.6, respectively, for the 2019 and 2018 periods presented.

2020 2019 Change

Other, net $ (32.1) $ (3.2) (903.1) %

The change in Other, net for the year ended December 31, 2020, as compared to the year ended December 31, 2019, was primarily due to an increase in the write-off or write down of certain of the Company's investments due to the negative impact of the COVID-19 global pandemic partially offset by lower foreign currency transaction losses.

Foreign currency transaction losses of $10.1 and $11.1 were recognized for the years ended December 31, 2020 and 2019, respectively.

Income Tax Expense

2 unchanged sentences

Income tax expense as a % of income before tax 29.8 % 25.3 %

In 2019 , the Company's effective tax rate was 25.3% .

The 2019 rate was favorable compared to the 2018 rate as a result of the favorable revaluation of deferred taxes resulting from tax law changes and clarifications.

The Company's share-based compensation benefit was unfavorable compared to 2018.

In 2018 , the Company's effective tax rate was 30.3% .

The 2018 rate was unfavorable as a result of the re-measurement of deferred taxes primarily due to the Company's state rate mix and state income tax law changes.

In 2018, the Company recorded additional tax for TCJA under SAB 118.

Additionally, the 2018 rate was higher due to increased income taxes paid on divestitures where next tax basis was lower than net book basis.

Both 2019 and 2018 were negatively impacted by the global intangible low taxed income tax.

In 2020, the Company's effective tax rate of 29.8% was unfavorable as compared to 2019 due to impairment charges which were not deductible and or generated tax assets which require a valuation allowance, and the geographic mix of earnings.

The Company considers substantially all of its foreign earnings to be permanently reinvested overseas.

1 unchanged sentence

Years Ended December 31,

LCD operating income

LCD operating margin

CDD operating income

CDD operating margin

2020 2019 Change

Dx operating income $ 2,634.9 $ 1,086.0 142.6 %

Dx operating margin 28.5 % 15.5 % 13.0 %

DD operating income $ 37.3 $ 411.5 (90.9) %

DD operating margin 0.8 % 9.0 % (8.2) %

General corporate expenses $ (226.8) $ (167.3) 35.6 %

Total operating income $ 2,445.4 $ 1,330.2 83.8 %

LCD operating income was $1,086.0 for the year ended December 31, 2019 , a decrease of 6.9% over operating income of $1,166.7 in the corresponding period of 2018 and a decrease of 110 basis points in operating margin year-over-year.

The decrease in operating income and margin was primarily due to lower reimbursement as a result of PAMA, higher personnel costs, disposition of businesses, and cybersecurity expenses, partially offset by the Company’s LaunchPad initiatives, and acquisitions.

The Company remains on track to deliver approximately $200.0 of net savings from its three-year, phase II of LabCorp Diagnostics’ LaunchPad initiative by the end of 2021.

CDD operating income was $411.5 for the year ended December 31, 2019 , an increase of 35.5% over operating income of $303.6 in the corresponding period of 2018 and an increase of 200 basis points in operating margin year-over-year.

The increase in operating income and margin were primarily due to organic demand, LaunchPad savings, acquisitions and currency translation, partially offset by personnel costs, and cybersecurity investments.

The Company is on track to deliver $150.0 of net savings from its three-year CDD LaunchPad initiative by the end of 2020.

Dx operating income was $2,634.9 for the year ended December 31, 2020, an increase of 142.6% over operating income of $1,086.0 in the corresponding period of 2019 and an increase of 1,300 basis points in operating margin year-over-year.

The increase in operating income and margin were primarily due to the increase in COVID-19 Testing and LaunchPad savings, partially offset by a reduction in Base Business (primarily due to the pandemic), higher personnel costs and PAMA.

The Company remains on track to deliver approximately $200.0 of net savings from its three-year, Phase II of Dx’s LaunchPad initiative by the end of 2021.

DD operating income was $37.3 for the year ended December 31, 2020, a decrease of 90.9% from operating income of $411.5 in the corresponding period of 2019 and a decrease of 820 basis points in operating margin year-over-year.

The decrease in operating income and margin were primarily due to the negative impact of COVID-19, specifically goodwill and other asset impairment of $450.5, and higher personnel costs, partially offset by organic demand, acquisitions, and LaunchPad savings.

The Company achieved its goal to deliver $150.0 of net savings from its three-year DD LaunchPad initiative by the end of 2020.

General corporate expenses are comprised primarily of administrative services such as executive management, human resources, legal, finance, corporate affairs, and information technology.

Corporate expenses were $226.8 for the year ended December 31, 2020, an increase of 35.6% over corporate expenses of $167.3 in the corresponding period of 2019.

The increase in corporate expenses in 2019 is primarily due to higher personnel costs, including executive transition costs and increases in merit based labor costs, as well as the benefit of a favorable legal settlement in 2018 .

The increase in corporate expenses in 2020 is primarily due to higher personnel costs, including executive transition costs, COVID-19 related expenses and funding of the Labcorp Charitable Foundation.

Liquidity, Capital Resources and Financial Position

2 unchanged sentences

The Company's senior unsecured revolving credit facility is further discussed in Note 12 Debt to the Company's Consolidated Financial Statements.

Management’s discussion and analysis of cash flows for the year ended December 31, 2018 compared to the year ended December 31, 2017 may be found in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations Liquidity, Capital Resources and Financial Position” section of our Annual Report on Form 10-K for the fiscal year ended December 31, 2018 .

Management’s discussion and analysis of cash flows for the year ended December 31, 2019 compared to the year ended December 31, 2018 may be found in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations, Liquidity, Capital Resources and Financial Position” section of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2019.

In summary the Company's cash flows were as follows:

For the Year Ended December 31,

2020 2019 2018

Net cash provided by operating activities $ 2,135.3 $ 1,444.7 $ 1,305.4

Net cash (used in) provided by investing activities

Net cash (used in) provided by financing activities

Net cash (used for) provided by investing activities (643.2) (1,283.1) 206.7

Net cash used for financing activities (517.4) (252.7) (1,389.9)

Effect of exchange rate on changes in cash and cash equivalents 8.6 1.8 (12.0)

6 unchanged sentences

The $690.6 increase in cash provided from operations in 2020 as compared with the corresponding 2019 period was primarily due to higher cash earnings, partially offset by increased working capital to support growth.

In addition, the Company had a net tax payment of approximately $105.0 related to the divestiture of its food and forensic testing service businesses in 2018, the

proceeds from which are recorded in net cash provided by investing activities.

The Company’s 2019 earnings were impacted by $54.6 of restructuring and other charges compared to an impact of $48.1 during the same period in 2018 .

Working capital increased primarily due to the increase in accounts receivable and supplies inventory as a result of the revenue growth, offset by increases in income tax payable as a result of a significant increase in taxable income during the fourth quarter and an increase in accrued payroll tax balances due to the deferral of 2020 U.S.

payroll taxes as part of the CARES Act stimulus.

Cash Flows from Investing Activities

Net cash used by investing activities for the year ended December 31, 2019 , was $1,283.1 as compared to net cash provided by investing activities of $206.7 for the year ended December 31, 2018 .

The $1,489.8 increase in cash used by investing activities for the year ended December 31, 2019 , was primarily due to a year over year increase of $758.2 in cash paid for acquisitions.

In addition, the Company had proceeds of $708.3 from the sale of assets and disposition of businesses during 2018 in comparison to $7.7 during 2019 .

Net cash used by investing activities for the year ended December 31, 2020 was $643.2 as compared to net cash used by investing activities of $1,283.1 for the year ended December 31, 2019.

The $639.9 decrease in net cash used by investing activities for the year ended December 31, 2020, was primarily due to a year over year decrease of $608.4 in cash paid for acquisitions.

The Company had proceeds of $7.7 from the sale of assets and disposition of businesses during 2019 in

comparison to $42.1 during 2020.

Capital expenditures were $381.7 and $400.2 for the years ended December 31, 2020 and 2019, respectively.

Capital expenditures in 2019 were 3.5% of revenues primarily in connection with projects to support growth in the Company's core businesses, projects related to LaunchPad and further Covance integration initiatives.

The Company intends to continue to pursue acquisitions to fund growth, to make important investments in its business, including in information technology, and to improve efficiency and enable the execution of the Company's mission.

Capital expenditures in 2020 were 2.7% of revenues, primarily in connection with projects to support growth in the Company's core businesses, projects related to LaunchPad, and further DD acquisition integration initiatives.

The Company intends to continue to pursue acquisitions to drive growth, to make important investments in its business, including in information technology, and to improve efficiency and enable the execution of the Company's mission.

Such expenditures are expected to be funded by cash flow from operations or, as needed, through borrowings under debt facilities, including the Company's revolving credit facility or any successor facility.

The Company expects capital expenditures in 2020 to be approximately 3.5% to 4.0% of revenues, primarily in connection with projects to support growth in the Company's core businesses, facility updates, ongoing projects related to LaunchPad within the LCD business, LaunchPad's expansion within the CDD business, and further acquisition integration initiatives.

The Company expects capital expenditures in 2021 to be approximately 4.0% of revenues, primarily in connection with projects to support growth in the Company's core businesses, facility updates, ongoing projects related to LaunchPad within the Dx business, LaunchPad's expansion within the DD business, and further acquisition integration initiatives.

Cash Flows from Financing Activities

Net cash used in financing activities for the year ended December 31, 2020 was $517.4 compared to cash used in financing activities of $252.7 for the year ended December 31, 2019.

This movement in cash within financing activities for 2019 , as compared to 2018 , was primarily a result of $198.5 net financing proceeds offset by $450.0 in share repurchases in 2019 compared to $695.0 in net financing payments and $700.0 in share repurchases in 2018 .

On June 3, 2019, the Company entered into a new $850.0 term loan facility in addition to its $750.0 2017 term loan facility.

This movement in cash within financing activities for 2020, as compared to 2019, was primarily a result of $412.2 net financing payments and $100.0 in share repurchases in 2020 compared to $198.5 in net financing receipts more than offset by $450.0 in share repurchases in 2019.

On August 17, 2020 the Company redeemed the remaining $412.2 of its 4.625% Senior Notes due November 15, 2020, using available cash on hand.

The Company exited the remaining fixed-to-variable interest rate swap agreement in August 2020, in connection with this redemption and recorded a gain of $1.6 on the extinguishment.

The gain was included in Other, net on the Consolidated Statement of Operations.

On June 3, 2019, the Company entered into a new $850.0 term loan facility in addition to the $577.0 balance then outstanding on its existing $750.0 2017 term loan facility.

The 2019 term loan facility will mature on June 3, 2021.

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On November 25, 2019, the Company issued $1,050.0 in debt securities, consisting of $400.0 aggregate principal amount of 2.300% Senior Notes due 2024 and $650.0 aggregate principal amount of 2.950% Senior Notes due 2029.

The net proceeds from the new Senior Notes were used to redeem all of the outstanding $500.0 principal amount of its 2.625% Senior Notes due February 1, 2020 , redeem $187.9 of the outstanding 4.625% Senior Notes due November 15, 2020 in a tender offer, and to repay $348.3 outstanding under the Company's term loan credit facilities.

The net proceeds from the new Senior Notes were used to redeem all of the outstanding $500.0 principal amount of its 2.625% Senior Notes due February 1, 2020, redeem $187.9 of the outstanding 4.625% Senior Notes due November 15, 2020, and to repay $348.3 outstanding under the 2017 term loan credit facility.

In total, during 2019, the Company redeemed or repaid $687.9 million of its Senior Notes and $1,002.0 million of its term loans.

In addition, the Company borrowed and repaid a total of $495.0 million of debt through its revolving credit facility within 2019.

The Company will continue to evaluate all opportunities for strategic deployment of capital in light of market conditions.

In addition, the Company borrowed and repaid a total of $495.0 million of debt through its revolving credit facility within 2019 and $151.7 within 2020.

The Company continues to evaluate its outstanding debt portfolio to take advantage of market conditions that would allow the Company to reduce its interest rate or financing risk and provide a lower long-term borrowing cost.

The Company's revolving credit facility consists of a five year revolving 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.

Under the Company's term loan credit facilities 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 under the term loan credit facilities and the revolving credit facility at December 31, 2019 .

As of December 31, 2019 , the ratio of total debt to consolidated pro forma trailing 12 month earnings before interest, tax, depreciation, and amortization (EBITDA) was 3.1 to 1.0.

The Company was in compliance with all covenants under the term loan credit facility and the revolving credit facility at December 31, 2020.

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 5.0x debt to last twelve months EBITDA for the three month periods ending June 30, September 30 and December 31, 2020, and 4.5x for the period ended March 31, 2021.

From and including the period ending June 30, 2021, the maximum leverage ratio reverts back to 4.0x.

The amendments also provide that during any period in which the Company's leverage ratio exceeds 4.5x 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%.

The Company's leverage ratio did not exceed 4.5x debt to last twelve months EBITDA as of December 31, 2020.

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

On February 6, 2019 , the board of directors replaced the Company’s existing share repurchase plan with a new plan authorizing repurchase of up to $1.25 billion of the Company’s shares.

During 2020, the Company repurchased 0.6 shares of its common stock at an average price of $178.85 for a total cost of $100.0.

At the end of 2020, the Company had outstanding authorization from the board of directors to purchase $800.0 of Company common stock.

The repurchase authorization has no expiration date.

During 2019 , the Company purchased 2.9 shares of its common stock at an average price of $154.94 for a total cost of $450.0 , of which $100.0 was repurchased prior to the new plan in February 2019.

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

During 2019 and 2018 , the Company settled notices to convert $ 8.6 and $0.3 aggregate principal amount at maturity of its zero-coupon subordinated notes due 2021 (the zero-coupon notes) with a conversion value of $ 16.6 and $ 0.7 , respectively.

The total cash used for these settlements was $ 8.2 and $ 0.3 and the Company also issued 0.1 and 0.0 additional shares of common stock, respectively.

As a result of these conversions in 2019 and 2018 , the Company also reversed approximately $ 2.0 and $ 0.2 , respectively,

of deferred tax liability to reflect the tax benefit realized upon issuance of the shares.

During 2019, the Company settled notices to convert $8.6 aggregate principal amount at maturity of its zero-coupon subordinated notes due 2021 (the zero-coupon notes) with a conversion value of $16.6.

The total cash used for these settlements was $8.2 and the Company also issued 0.1 additional shares of common stock.

As a result of these conversions in 2019, the Company also reversed approximately $2.0 of deferred tax liability to reflect the tax benefit realized upon issuance of the shares.

On December 19, 2019, the Company redeemed any remaining outstanding zero-coupon notes that did not convert.

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Payments Due by Period

Total Short-term Long-term

Operating lease obligations $ 869.6 $ 192.0 $ 677.6

Contingent future licensing payments (a) 21.6 3.5 18.1

Minimum royalty payments

Purchase obligations 60.1 45.5 14.6

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Total contractual cash obligations (b) (c) $ 4,455.0 $ 820.4 $ 3,634.6

Contingent future licensing payments will be made if certain events take place, such as the launch of a specific test, the transfer of certain technology, and the achievement of specified revenue milestones.

The table does not include obligations under the Company’s pension and postretirement benefit plans, which are included in Note 17 Pension and Postretirement Plans to Consolidated Financial Statements.

Benefits under the Company's postretirement medical plan are made when claims are submitted for payment, the timing of which is not practicable to estimate.

The table does not include the Company’s reserve for unrecognized tax benefits.

(a) Contingent future licensing payments will be made if certain events take place, such as the launch of a specific test, the transfer of certain technology, and the achievement of specified revenue milestones.

(b) The table does not include obligations under the Company’s pension and postretirement benefit plans, which are included in Note 17 Pension and Postretirement Plans to Consolidated Financial Statements.

Benefits under the Company's postretirement medical plan are paid when claims are submitted for payment, the timing of which is not practicable to estimate.

The Company had a $57.1 and $37.2 reserve for unrecognized tax benefits, including interest and penalties, at December 31, 2020, and 2019, respectively, which is included in Note 14 Income Taxes to Consolidated Financial Statements.

For the year ended December 31, 2019 , approximately $6.1 of the tax reserve is classified in accrued expenses and other in the Company's Consolidated Balance Sheet while the remaining $31.1 is classified in deferred income taxes and other tax liabilities.

For the year ended December 31, 2018 , approximately $6.0 of the tax reserve is classified in accrued expenses and other in the Company's Consolidated Balance Sheet while the remaining $20.7 is classified in deferred income taxes and other tax liabilities.

Interest payments due by period for the Company's debt subject to variable interest rates are calculated based on rates in place as of December 31, 2019 .

Excludes amount of debt issuance costs included in the long-term debt balance.

(d) Interest payments due by period for the Company's debt subject to variable interest rates are calculated based on rates in place as of December 31, 2020.

(e) Excludes amount of debt issuance costs included in the long-term debt balance.

Off-Balance Sheet Arrangements

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Other Commercial Commitments

As of December 31, 2019 , the Company provided letters of credit aggregating approximately $76.3 , primarily in connection with certain insurance programs.

Letters of credit provided by the Company are secured by the Company’s revolving credit facility and are renewed annually.

As of December 31, 2020, the Company provided letters of credit aggregating approximately $77.4, primarily in connection with certain insurance program which are renewed annually.

The contractual value of the noncontrolling interest put in the Company's Ontario subsidiary totaled $16.2 and $15.8 at December 31, 2020, and 2019, respectively, and has been classified as mezzanine equity in the Company's consolidated balance sheet.

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Critical Accounting Policies

liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported periods.

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported periods.

While the Company believes these estimates are reasonable and consistent, they are by their very nature estimates of amounts that will depend on future events.

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Revenue Recognition

Within the LCD segment, a revenue transaction is initiated when LCD receives a requisition order to perform a diagnostic test.

Within the Dx segment, a revenue transaction is initiated when Dx receives a requisition order to perform a diagnostic test.

The information provided on the requisition form is used to determine the party that will be billed for the testing performed and the expected reimbursement.

LCD recognizes revenue and satisfies its performance obligation for services rendered when the testing process is complete and the associated results are reported.

Dx recognizes revenue and satisfies its performance obligation for services rendered when the testing process is complete and the associated results are reported.

Revenues are distributed among four payer portfolios - clients, patients, Medicare and Medicaid and third-party.

The following are descriptions of the LCD payer portfolios:

Client payers represent the portion of LCD’s revenue related to physicians, hospitals, health systems, accountable care organizations (ACOs), employers and other entities where payment is received exclusively from the entity ordering the testing service.

Generally, client revenues are recorded on a fee-for-service basis at LCD’s client list price, less any negotiated discount.

Dx considers negotiated discounts and anticipated adjustments, including historical collection experience for the payer portfolio, when sales are recorded.

The following are descriptions of the Dx payer portfolios:

Client payers represent the portion of Dx’s revenue related to physicians, hospitals, health systems, accountable care organizations (ACOs), employers and other entities where payment is received exclusively from the entity ordering the testing service.

Generally, client revenues are recorded on a fee-for-service basis at Dx’s client list price, less any negotiated discount.

A portion of client billing is for laboratory management services, collection kits and other non-testing services or products.

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This portfolio includes revenue from uninsured patients and member cost-share for insured patients (e.g., coinsurance, deductibles and non-covered services).

Uninsured patients are billed based upon LCD’s patient fee schedules, net of any discounts negotiated with physicians on behalf of their patients.

LCD bills insured patients as directed by their health plan and after consideration of the fees and terms associated with an established health plan contract.

Uninsured patients are billed based upon Dx’s patient fee schedules, net of any discounts negotiated with physicians on behalf of their patients.

Dx bills insured patients as directed by their health plan and after consideration of the fees and terms associated with an established health plan contract.

Medicare and Medicaid

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Any remaining adjustments to revenue are recorded at the time of final collection and settlement.

These adjustments are not material to LCD’s results of operations in any period presented .

These adjustments are not material to Dx’s results of operations in any period presented .

Third-party includes revenue related to MCOs.

The majority of LCD's third-party revenue is reimbursed on a fee-for-service basis.

These payers are billed at LCD's established list price and revenue is recorded net of contractual discounts.

The majority of LCD’s MCO revenues are recorded based upon contractually negotiated fee schedules with revenues for non-contracted MCOs recorded based on historical reimbursement experience.

The majority of Dx's third-party revenue is reimbursed on a fee-for-service basis.

These payers are billed at Dx's established list price and revenue is recorded net of contractual discounts.

The majority of Dx’s MCO revenues are recorded based upon contractually negotiated fee schedules with revenues for non-contracted MCOs recorded based on historical reimbursement experience.

Third-party reimbursement is also received through capitation agreements with MCOs and independent physician associations (IPAs).

Under capitated agreements, revenue is recognized based on a negotiated per-member, per-month payment for an agreed upon menu of tests, or based upon the proportionate share earned by LCD from a capitation pool.

When the agreed upon reimbursement is based solely on an established rate per member, revenue is not impacted by the volume of testing performed.

When the agreed upon reimbursement is based solely on an established rate per member, revenue is not impacted by the volume of testing

Under a capitation pool arrangement, the aggregate value of an established rate per member is distributed based on the volume and complexity of the procedures performed by laboratories participating in the agreement.

LCD recognizes revenue monthly, based upon the established capitation rate or anticipated distribution from a capitated pool.

LCD has a formal process to estimate implicit price concessions for uncollectable accounts.

The majority of LCD's collection risk is related to accounts receivable from both insured and uninsured patients who are unwilling or unable to pay.

write-offs are recorded as adjustments to revenue an at an amount considered necessary to record the segment's revenue at its net realizable value.

In addition to contractual discounts, other adjustments including anticipated payer denials and other external factors that could affect the collectablity of its receivables are considered when determining revenue and the net receivable amount.

Dx recognizes revenue monthly, based upon the established capitation rate or anticipated distribution from a capitated pool.

Dx has a formal process to estimate implicit price concessions for uncollectable accounts.

The majority of Dx's collection risk is related to accounts receivable from both insured and uninsured patients who are unwilling or unable to pay.

Anticipated write-offs are recorded as adjustments to revenue at an amount considered necessary to record the segment's revenue at its net realizable value.

In addition to contractual discounts, other adjustments including anticipated payer denials and other external factors that could affect the collectability of its receivables are considered when determining revenue and the net receivable amount.

Any remaining adjustments to revenue are recorded at the time of final collection and settlement.

These adjustments are not material to LCD's results of operations in any period presented.

The nature of CDD’s obligations include agreements to provide preclinical services, to manage a full clinical trial, provide services for a specific phase of a trial, or provide research products to the customer.

These adjustments are not material to Dx's results of operations in any period presented.

The nature of DD’s obligations includes agreements to provide preclinical services, to manage a full clinical trial, provide services for a specific phase of a trial, or provide research products to the customer.

Generally, the amount of the transaction price estimated at the beginning of the contract is equal to the amount expected to be billed to the customer.

Other payments may also factor into the calculation of transaction price, such as volume-based rebates that are retroactively applied to prior transactions in the period.

Historically a majority of CDD's revenues have been earned under contracts that range in duration from a few months to a few years, but can extend in duration up to five years or longer.

Occasionally, CDD also has entered into minimum volume arrangements with certain customers.

Under these types of arrangements, if the annual minimum dollar value of a service commitment is not reached, the customer is required to pay CDD for the shortfall.

Historically a majority of DD's revenues have been earned under contracts that range in duration from a few months to a few years, but can extend in duration up to five years or longer.

Occasionally, DD also has entered into minimum volume arrangements with certain customers.

Under these types of arrangements, if the annual minimum dollar value of a service commitment is not reached, the customer is required to pay DD for the shortfall.

Annual minimum commitment shortfalls are not recognized until the end of the period when the amount has been determined and agreed to by the customer.

CDD recognizes revenue either as services are performed or as products are delivered, depending on the nature of the work contracted.

DD recognizes revenue either as services are performed or as products are delivered, depending on the nature of the work contracted.

If performance is completed at a specific point in time, the Company evaluates the nature of the agreement to determine when the good or service is transferred into the customer’s control.

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Billing schedules and payment terms are generally negotiated on a contract-by-contract basis.

In some cases, CDD bills the customer for the total contract value in progress-based installments as certain non-contingent billing milestones are reached over the contract duration.

In some cases, DD bills the customer for the total contract value in progress-based installments as certain non-contingent billing milestones are reached over the contract duration.

These milestones include, but are not limited to, contract signing, initial dosing, investigator site initiation, patient enrollment and/or database lock.

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Since the volume of activities in a fee-for-service contract is unspecified, the contract price is entirely variable and is allocated to the time period in which it is earned.

For contracts that include multiple distinct goods and services, CDD allocates the contract price to the goods and services based on a customer price list, if available.

If a price list is not available, CDD will estimate the transaction price using either market prices or an “expected cost plus margin” approach.

While CDD attempts to negotiate terms that provide for billing and payment of services prior or within close proximity to the provision of services, this is not always possible.

For contracts that include multiple distinct goods and services, DD allocates the contract price to the goods and services based on a customer price list, if available.

If a price list is not available, DD will estimate the transaction price using either market prices or an “expected cost plus margin” approach.

While DD attempts to negotiate terms that provide for billing and payment of services prior or within close proximity to the provision of services, this is not always possible.

While a project is ongoing, cash payments are not necessarily representative of aggregate revenue earned at any particular point in time, as revenues are recognized when services are provided, while amounts billed and paid are in accordance with the negotiated billing and payment terms.

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In other cases, services may be provided and revenue recognized before the customer is invoiced.

In these cases, revenue recognized will exceed amounts billed, and the difference, representing a contract asset, is recorded for the amount that is currently

not billable to the customer pursuant to contractual terms.

In these cases, revenue recognized will exceed amounts billed, and the difference, representing a contract asset, is recorded for the amount that is currently not billable to the customer pursuant to contractual terms.

Once the customer is invoiced, the contract asset is reduced for the amount billed, and a corresponding account receivable is recorded.

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Most contracts are terminable with or without cause by the customer, either immediately or upon notice.

These contracts often require payment to CDD of expenses to wind down the study or project, fees earned to date and, in some cases, a termination fee or a payment to CDD of some portion of the fees or profits that could have been earned by CDD under the contract if it had not been terminated early.

These contracts often require payment to DD of expenses to wind down the study or project, fees earned to date and, in some cases, a termination fee or a payment to DD of some portion of the fees or profits that could have been earned by DD under the contract if it had not been terminated early.

Termination fees are included in revenues when services are performed and realization is assured.

The following are descriptions of the full range of drug development services provided by CDD:

The following are descriptions of the revenue recognition models of the drug development services provided by DD:

Preclinical services include fee-for-service activities such as bioanalytical testing services, and proportional performance activities such as toxicology studies.

Until June 3, 2019, preclinical services also included the sale of research models.

See Note 3 Business Acquisitions and Dispositions to the Consolidated Financial Statements for more information.

Revenue for sale of research models was recognized at a point in time, typically upon shipment, when control transferred to the customer.

Revenue for sale of research models is recognized at a point in time, typically upon shipment, when control transferred to the customer.

Revenue for bioanalytical testing services is recognized at a point in time upon communication of results to the customer.

Revenue for proportional performance activities, including toxicology studies, is recognized using an input-based measure of progress in which revenue is recognized as expenses are incurred for the research models, labor hours, and other costs attributable to the study.

Through its central laboratory, CDD produces and supplies specimen collection kits that are utilized in clinical studies, and provides transportation, project management, data management, and laboratory testing services on an as-needed basis throughout the duration of its customers’ clinical studies.

Through its central laboratory, DD produces and supplies specimen collection kits that are utilized in clinical studies, and provides transportation, project management, data management, and laboratory testing services on an as-needed basis throughout the duration of its customers’ clinical studies.

Revenue for central laboratory services is recognized using an output-based measure of progress based on volume of activities in each period.

CDD also provides long-term specimen storage services, for which revenue is recognized using an input-based measure of progress based on costs incurred.

CDD provides clinical development and commercialization services, including clinical pharmacology services, full management of Phase II through IV clinical studies, and market access solutions.

DD also provides long-term specimen storage services, for which revenue is recognized using an input-based measure of progress based on costs incurred.

DD provides clinical development and commercialization services, including clinical pharmacology services, full management of Phase II through IV clinical studies, and market access solutions.

Revenue for clinical pharmacology services, which includes first-in-human trials, is recognized using an output-based measure of progress based on bed nights.

The majority of clinical development and commercialization service long-term contracts are service contracts for clinical research that represent a single performance obligation (e.g., management of a clinical study).

Revenue for these service contracts is recognized over time based on the progress of the performance obligation which was measured by the proportion of the actual costs incurred to the total costs expected to complete the contract (including labor and pass-through costs such as investigator grants and reimbursable out-of-pocket expenses).

This cost-based method of revenue recognition required management to estimate the costs to complete these services on an ongoing basis.

Clinical services utilizing the input-based measure of progress account for approximately 50% of CDD revenue.

Revenue for these service contracts is recognized over time based on the progress of the performance obligation which is measured by the proportion of the actual costs incurred to the total costs expected to complete the contract (including labor and pass-through costs such as investigator grants and reimbursable out-of-pocket expenses).

This cost-based method of revenue recognition requires management to estimate the costs to complete these services on an ongoing basis.

Clinical services utilizing the input-based measure of progress account for approximately 50% of DD revenue.

Revenue for market access solutions is recognized using various methods.

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For consulting services billed based on time and materials, revenue is recognized using the right to invoice practical expedient.

CDD endeavors to assess and monitor the creditworthiness of its customers to which it grants credit terms in the ordinary course of business.

CDD maintains a provision for doubtful accounts relating to amounts due that may not be collected.

DD endeavors to assess and monitor the creditworthiness of its customers to which it grants credit terms in the ordinary course of business.

DD maintains a provision for doubtful accounts relating to amounts due that may not be collected.

This bad debt provision is monitored on a monthly basis and adjusted as circumstances warrant.

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Business Combinations

The Company accounted for business combination transactions under the acquisition method of accounting and reported the results of operations of the acquired entities from its respective date of acquisition.

The Company accounts for business combination transactions under the acquisition method of accounting and reported the results of operations of the acquired entities from its respective date of acquisition.

Assets acquired were recorded at their estimated fair values as of the acquisition date.

Estimated fair values were based on various valuation methodologies including:

an income approach using primarily discounted cash flow techniques for the customer relationships intangible assets.

Estimated fair values were based on various valuation methodologies, including an income approach using primarily discounted cash flow techniques for the customer relationships intangible assets.

The aforementioned income methods utilize management's estimates of future operating results and cash flows discounted using a weighted-average cost of capital that reflects market participant assumptions.

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

The goodwill reflects management's expectations of the ability to gain access to and penetrate the acquired entities' historical patient base and the benefits of being able to leverage operational efficiencies with favorable growth opportunities based on positive demographic trends in the market.

None of the goodwill recorded as a result from these transactions is deductible for federal income tax purposes.

As described in Note 3 Business Acquisitions and Dispositions to the consolidated financial statements, the Company acquired the nonclinical contract research services business of Envigo for consideration of $601.0 in 2019, which resulted in $141.4 of identifiable intangible assets and $379.3 of goodwill being recorded.

Management applied significant judgment in estimating the fair value of identifiable intangible assets, which involved the use of significant estimates and assumptions with respect to the

customer attrition rates and the discount rate.

During the year ended December 31, 2019 , the Company also acquired various businesses and related assets for approximately $286.4 in cash (net of cash acquired).

The purchase consideration for all acquisitions year to date has been allocated to the estimated fair market value of the net assets acquired, including approximately $184.3 in identifiable intangible assets and a residual amount of non-tax-deductible goodwill of approximately $115.1 .

The goodwill reflects management's expectations

of the ability to gain access to and penetrate the acquired entities' historical patient base and the benefits of being able to leverage operational efficiencies with favorable growth opportunities based on positive demographic trends in the market.

None of the goodwill recorded as a result of the current year transactions is deductible for federal income tax purposes.

As described in Note 3 Business Acquisitions and Dispositions to the consolidated financial statements, the Company acquired various businesses and related assets for approximately $267.6 in cash (net of cash acquired).

The purchase consideration for all acquisitions has been allocated to the estimated fair market value of the net assets acquired, including approximately $121.3 in identifiable intangible assets and a residual amount of non-tax-deductible goodwill of approximately $166.2.

The amortization periods for intangible assets acquired from these businesses range from 12 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.

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.

Pension Expense

The Company has a defined-benefit retirement plan (Company Plan) and a non-qualified supplemental retirement plan (PEP).

In October 2009, the Company received approval from its board of directors to freeze any additional service-based credits for any years of service after December 31, 2009, on the Company Plan and the PEP.

Both plans have been closed to new participants.

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

The Company Plan covers substantially all employees employed by the Company 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.

The Company's policy is to fund the Company Plan with at least the minimum amount required by applicable regulations.

The PEP covers a portion of the Company's senior management group.

Prior to 2010, the PEP provided for the payment of the difference, if any, between the amount of any maximum limitation on annual benefit payments under the Employee Retirement Income Security Act of 1974 and the annual benefit that would be payable under the Company Plan but for such limitation.

Effective January 1, 2010, employees participating in the PEP no longer earn service-based credits.

The PEP is an unfunded plan.

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.

subsidiaries (U.K.

Plans) and one defined-benefit pension plan for the benefit of its employees at a German subsidiary (German Plan), all of which are legacy plans of previously acquired companies and are closed to new entrants.

Benefit amounts for all three plans are based upon years of service and compensation.

The German Plan is unfunded while the U.K.

Plans are funded.

The Company’s funding policy for the U.K.

Plans has been to contribute annually amounts at least equal to the local statutory funding requirements.

As a result of the Envigo acquisition, the Company assumed a defined benefit pension plan for the benefit of Envigo's U.K.

employees (the Envigo plan), which is a legacy plan of a company previously acquired by Envigo.

The Envigo plan is a funded plan that is closed to future accrual.

The Company’s funding policy has been to contribute amounts at least equal to the local statutory funding requirements.

The Company sponsors both funded and unfunded defined benefit pension plans which provide benefits based on various criteria such as years of service and salary.

The Company maintained two plans in the United States, three plans in the United Kingdom and one in Germany.

The two plans in the United States (U.S.

Plans) were closed to new entrants and the accrual of service credits at the end of 2009.

pension plans were closed to new entrants and the accrual of service credits for one plan as of December 31, 2002 and the accrual of service credits for the other two plans as of December 31, 2019.

The German plan is closed to new entrants but participants continue to accrue service credits.

and German plans are aggregated for disclosure as the Non-U.S.

The Company's net pension cost is developed from actuarial valuations.

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Changes in pension costs may occur in the future due to changes in these assumptions.

The key assumptions used in accounting for the defined-benefit retirement plans were a 3.3% discount rate and a 6.5% expected long-term rate of return on plan assets for the Company Plan, a 3.4% discount rate for the PEP, a 1.9% discount rate and a 2.0% expected salary increase for the German plan and a 2.9% discount rate, a 3.6% expected salary increase for the U.K.

Plans and a 2.3% discount rate and 3.9% expected return on assets for the Envigo plan as of December 31, 2019 .

The key assumptions used in accounting for the defined-benefit retirement plans are summarized below:

Weighted average assumptions used to determine net periodic benefit costs are as follows:

Plans Non-U.S.

Year ended December 31, 2020

Discount rate 3.3 % 1.7 %

Salary increases N/A 3.1 %

Expected long term rate of return 6.0 % 3.5

Cash balance interest credit rate 4.0 % N/A

Weighted average assumptions used to determine net periodic benefit obligations are as follows:

Plans Non-U.S.

Year Ended December 31, 2020

Discount rate 2.3 % 1.2 %

Salary increases N/A 2.0 %

Discount Rate

The Company evaluates several approaches toward setting the discount rate assumption that is used to value the benefit obligations of its retirement plans.

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The weighted-average yield on the modeled bond portfolio is then used to form the discount rate assumption used for each retirement plan.

A one percentage point decrease or increase in the discount rate would have resulted in a respective increase or decrease in 2019 retirement plan expense of $2.0 for the Company Plan and PEP.

A one percentage point decrease or increase in the discount rate would have resulted in a respective increase or decrease in 2019 retirement plan expense of $0.4 for the U.K.

A one percentage point decrease or increase in the discount rate would have resulted in a respective increase or decrease in 2020 retirement plan expense of $1.9 for the U.S Plans.

A one percentage point decrease or increase in the discount rate would have resulted in a respective increase or decrease in 2020 retirement plan expense of $2.1 for the Non-U.S.

Return on Plan Assets

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The change in the unrecognized loss will change amortization cost in upcoming periods.

A one percentage point increase or decrease in the expected return on plan assets would have resulted in a corresponding change in 2019 pension expense of $2.4 for the Company Plan.

A one percentage point increase or decrease in the expected return on plan assets would have resulted in a corresponding change in 2019 pension expense of $3.5 for the U.K.

Net pension cost for 2019 was $13.8 as compared with $20.9 in 2018 and $14.6 in 2017 .

The decrease in pension expense was due to decreases in the amount of net amortization and deferral as a result of higher discount rates.

In addition, a $7.5 settlement charge was incurred in 2018.

Pension expense for the Company Plan and the PEP is expected to decreas e to $11.8 in 2020 primarily due to the impact of strong asset returns in 2019 for the Company Plan offset by lower discount rates impacting the PEP.

Pension expense for the Germany Plan and the U.K.

Plans is expected to decrease to a credit of $3.5 in 2020 , primarily due to the impact of freezing the legacy U.K.

Plans as of December 31, 2019 , leading to a lower service cost in 2020 .

A one percentage point increase or decrease in the expected return on plan assets would have resulted in a corresponding change in 2020 pension expense of $2.5 for the U.S.

A one percentage point increase or decrease in the expected return on plan assets would have resulted in a corresponding change in 2020 pension expense of $4.8 for the Non-U.S.

Net pension cost for 2020 was $11.0 as compared with $13.8 in 2019.

The decrease in pension expense was due to market performance partially offset by lower discount rates.

Pension expense for the U.S.

Plans is expected to decreas e to $6.5 in 2021 primarily due to the impact of strong asset returns in 2020, and the $30.0 contribution made in December 2020, offset by lower discount rates in certain plans.

Pension expense for the Non-U.S.

Plans is expected to decrease by approximately $0.2 in 2021, primarily due to lower service cost partially offset by a lower discount rate in 2021.

Further information on the Company’s defined-benefit retirement plans is provided in Note 17 Pension and Postretirement Plans to the Consolidated Financial Statements.

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Reporting units are businesses with discrete financial information that is available and reviewed by management.

The Company estimates the fair value of a reporting unit using both income-based and market-based valuation methods.

The Company estimates the fair value of a reporting unit using both income-based and market-based

valuation methods.

The income-based approach is based on the reporting unit's forecasted future cash flows that are discounted to the present value using the reporting unit's weighted average cost of capital.

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Management believes that the assumptions used for its impairment tests are representative of those that would be used by market participants performing similar valuations of the reporting units.

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 certain of its DD and Dx reporting units.

Based on the quantitative impairment assessment performed in the same manner as the Company's annual quantitative assessment, the Company concluded that the fair value was less than carrying value for two of its reporting units, including one where the 2019 fair value exceeded carrying value by approximately 10.0%, and recorded a goodwill impairment of $418.7 for the DD segment and $3.7 for the Dx segment.

Management performed its annual goodwill and intangible asset impairment testing as of the beginning of the fourth quarter of 2020.

The Company elected to perform the qualitative assessment for goodwill and intangible assets for the domestic LCD reporting units, a quantitative assessment for the CDD reporting units and a quantitative assessment for the Canadian reporting unit and its indefinite-lived assets consisting of acquired Canadian licenses.

The Company elected to perform the qualitative assessment for goodwill and intangible assets for the domestic Dx reporting units and certain DD reporting units, a quantitative assessment for two of the DD reporting units, and a quantitative assessment for the Canadian reporting unit and its indefinite-lived assets consisting of acquired Canadian licenses.

In the qualitative assessment, the Company considered relevant events and circumstances for each reporting unit, including (i) current year results, (ii) financial performance versus management’s annual and five-year strategic plans, (iii) changes in the reporting unit carrying value since prior year, (iv) industry and market conditions in which the reporting unit operates, (v) macroeconomic conditions, including discount rate changes, and (vi) changes in products or services offered by the reporting unit.

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Based on the results of the qualitative assessment, the Company concluded that it was not more likely than not that the carrying values of the goodwill and intangible assets were greater than their fair values, and that further quantitative testing was not necessary.

In 2019 , the Company utilized a combination of the market and income approaches to determine the fair value of the CDD reporting units and the income approach to determine the fair value of the Canadian reporting unit and its indefinite-lived assets consisting of acquired Canadian licenses.

In 2020, the Company utilized a combination of the market and income approaches to determine the fair value of the DD reporting units and the income approach to determine the fair value of the Canadian reporting unit and its indefinite-lived assets consisting of acquired Canadian licenses.

Based upon the results of the quantitative assessments, the Company concluded that the fair values of the goodwill and intangible assets, including the indefinite-lived Canadian licenses, was greater than the carrying value.

It is possible that the Company's conclusions regarding impairment or recoverability of goodwill or intangible assets in any reporting unit could change in future periods.

There can be no assurance that the estimates and assumptions used in the Company's goodwill and intangible asset impairment testing performed as of the beginning of the fourth quarter of 2019 will prove to be accurate predictions of the future, if, for example, (i) the businesses do not perform as projected, (ii) overall economic conditions in 2019 or future years vary from current assumptions (including changes in discount rates), (iii) business conditions or strategies for a specific reporting unit change from current assumptions, including loss of major customers, (iv) investors require higher rates of return on equity investments in the marketplace or (v) enterprise values of comparable publicly traded companies, or actual sales transactions of comparable companies, were to decline, resulting in lower multiples of revenues and EBITDA.

The Company will continue to monitor the financial performance of and assumptions for one of the CDD reporting units for which an income approach was performed in 2019 and where the fair value exceeded carrying value by approximately 10%.

Goodwill for this reporting unit as of December 31, 2019 , was $2.2 billion.

Management's impairment analysis for this reporting unit utilized significant judgments and assumptions related to the market comparable method analysis, such as selected market multiples, and related to cash flow projections, such as revenue and terminal growth rate, projected operating income, and the discount rate.

A significant increase in the discount rate, decrease in the revenue and terminal growth rate, decreased operation margin or substantial reductions in end markets and volume assumptions could have a negative impact on the estimated fair value of this reporting unit.

There can be no assurance that the estimates and assumptions used in the Company's goodwill and intangible asset impairment testing performed as of the beginning of the fourth quarter of 2020 will

prove to be accurate predictions of the future, if, for example, (i) the businesses do not perform as projected, (ii) overall economic conditions in 2020 or future years vary from current assumptions (including changes in discount rates), (iii) business conditions or strategies for a specific reporting unit change from current assumptions, including loss of major customers, (iv) investors require higher rates of return on equity investments in the marketplace or (v) enterprise values of comparable publicly traded companies, or actual sales transactions of comparable companies, were to decline, resulting in lower multiples of revenues and EBITDA.

Management's impairment analysis for certain reporting units utilized significant judgments and assumptions related to the market comparable method analysis, such as selected market multiples, and related to cash flow projections, such as revenue and terminal growth rate, projected operating income, and the discount rate.

A future impairment charge for goodwill or intangible assets could have a material effect on the Company's consolidated financial position and results of operations.

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

FORWARD-LOOKING STATEMENTS

Laboratory Corporation of America® Holdings together with its subsidiaries (the Company) has made in this report, and from time to time may otherwise make in its public filings, press releases and discussions by Company management, forward-looking statements concerning the Company’s operations, performance and financial condition, as well as its strategic objectives.

Some of these forward-looking statements relate to future events and expectations and can be identified by the use of forward-looking words such as “believes”, “expects”, “may”, “will”, “should”, “seeks”, “approximately”, “intends”, “plans”, “estimates”, or “anticipates” or the negative of those words or other comparable terminology.

Such forward-looking statements are subject to various risks and uncertainties and the Company claims the protection afforded by the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

Actual results could differ materially from those currently anticipated due to a number of factors in addition to those discussed elsewhere herein, including in the “Risk Factors” section of this Annual Report on Form 10-K, and in the Company’s other public filings, press releases, and discussions with Company management, including:

changes in government and third-party payer regulations, reimbursement, or coverage policies or other future reforms in the healthcare system (or in the interpretation of current regulations), new insurance or payment systems, including state, regional or private insurance cooperatives (e.g., health insurance exchanges) affecting governmental and third-party coverage or reimbursement for commercial laboratory testing, including the impact of the U.S.

Protecting Access to Medicare Act of 2014 (PAMA);

significant monetary damages, fines, penalties, assessments, refunds, repayments, damage to the Company's reputation, unanticipated compliance expenditures and/or exclusion or debarment from or ineligibility to participate in government programs, among other adverse consequences, arising from enforcement of anti-fraud and abuse laws and other laws applicable to the Company in jurisdictions in which the Company conducts business;

significant fines, penalties, costs, unanticipated compliance expenditures and/or damage to the Company’s reputation arising from the failure to comply with applicable privacy and security laws and regulations, including the U.S.

Health Insurance Portability and Accountability Act of 1996, the U.S.

Health Information Technology for Economic and Clinical Health Act, the European Union's General Data Protection Regulation and similar laws and regulations in jurisdictions in which the Company conducts business;

loss or suspension of a license or imposition of a fine or penalties under, or future changes in, or interpretations of applicable licensing laws or regulations regarding the operation of clinical laboratories and the delivery of clinical laboratory test results, including, but not limited to, the U.S.

Clinical Laboratory Improvement Act of 1967 and the U.S.

Clinical Laboratory Improvement Amendments of 1988 and similar laws and regulations in jurisdictions in which the Company conducts business;

penalties or loss of license arising from the failure to comply with applicable occupational and workplace safety laws and regulations, including the U.S.

Occupational Safety and Health Administration requirements and the U.S.

Needlestick Safety and Prevention Act and similar laws and regulations in jurisdictions in which the Company conducts business;

fines, unanticipated compliance expenditures, suspension of manufacturing, enforcement actions, damage to the Company's reputation, injunctions, or criminal prosecution arising from failure to maintain compliance with current good manufacturing practice regulations and similar requirements of various regulatory agencies in jurisdictions in which the Company conducts business;

sanctions or other remedies, including fines, unanticipated compliance expenditures, enforcement actions, injunctions or criminal prosecution arising from failure to comply with the Animal Welfare Act or applicable national, state and local laws and regulations in jurisdictions in which the Company conducts business;

changes in testing guidelines or recommendations by government agencies, medical specialty societies and other authoritative bodies affecting the utilization of laboratory tests;

changes in applicable government regulations or policies affecting the approval, availability of, and the selling and marketing of diagnostic tests, drug development, or the conduct of drug development and medical device and diagnostic studies and trials, including regulations and policies of the U.S.

Food and Drug Administration, the U.S.

Department of Agriculture, the Medicine and Healthcare products Regulatory Agency in the United Kingdom (U.K.), the National Medical Products Administration in China, the Pharmaceutical and Medical Devices Agency in Japan, the European Medicines Agency and similar regulations and policies of agencies in other jurisdictions in which the Company conducts business;

changes in government regulations or reimbursement pertaining to the biopharmaceutical and medical device and diagnostic industries, changes in reimbursement of biopharmaceutical products or reduced spending on research and development by biopharmaceutical customers;

liabilities that result from the failure to comply with corporate governance requirements;

increased competition, including price competition, potential reduction in rates in response to price transparency and consumerism, competitive bidding and/or changes or reductions to fee schedules and competition from companies that do not comply with existing laws or regulations or otherwise disregard compliance standards in the industry;

changes in payer mix or payment structure, including insurance carrier participation in health insurance exchanges, an increase in capitated reimbursement mechanisms, the impact of a shift to consumer-driven health plans or plans carrying an increased level of member cost-sharing, and adverse changes in payer reimbursement or payer coverage policies (implemented directly or through a third-party utilization management organization) related to specific diagnostic tests, categories of testing or testing methodologies;

failure to retain or attract managed care organization (MCO) business as a result of changes in business models, including new risk-based or network approaches, out-sourced laboratory network management or utilization management companies, or other changes in strategy or business models by MCOs;

failure to obtain and retain new customers, an unfavorable change in the mix of testing services ordered, or a reduction in tests ordered, specimens submitted or services requested by existing customers;

difficulty in maintaining relationships with customers or retaining key employees as a result of uncertainty surrounding the integration of acquisitions and the resulting negative effects on the business of the Company;

consolidation and convergence of MCOs, biopharmaceutical companies, health systems, large physician organizations and other customers, potentially causing material shifts in insourcing, utilization, pricing and reimbursement, including full and partial risk-based models;

failure to effectively develop and deploy new systems, system modifications or enhancements required in response to evolving market and business needs;

customers choosing to insource services that are or could be purchased from the Company;

failure to identify, successfully close and effectively integrate and/or manage acquisitions of new businesses;

inability to achieve the expected benefits and synergies of newly-acquired businesses, including due to items not discovered in the due diligence process, and the impact on the Company's cash position, levels of indebtedness and stock price;

termination, loss, delay, reduction in scope or increased costs of contracts, including large contracts and multiple contracts;

liability arising from errors or omissions in the performance of testing services, contract research services or other contractual arrangements;

changes or disruption in the provision or transportation of services or supplies provided by third parties;

or their termination for failure to follow the Company's performance standards and requirements;

damage or disruption to the Company's facilities;

damage to the Company's reputation, loss of business, or other harm from acts of animal rights activists or potential harm and/or liability arising from animal research activities;

adverse results in litigation matters;

inability to attract and retain experienced and qualified personnel;

failure to develop or acquire licenses for new or improved technologies, such as point-of-care testing, mobile health technologies, and digital pathology, or potential use of new technologies by customers and/or consumers to perform their own tests;

substantial costs arising from the inability to commercialize newly licensed tests or technologies or to obtain appropriate coverage or reimbursement for such tests;

failure to obtain, maintain and enforce intellectual property rights for protection of the Company's products and services and defend against challenges to those rights;

scope, validity and enforceability of patents and other proprietary rights held by third parties that may impact the Company's ability to develop, perform, or market the Company's products or services or operate its business;

business interruption or other impact on the business due to natural disasters, including adverse weather, fires and earthquakes, political crises, including terrorism and war, public health crises and disease epidemics and pandemics, and other events outside of the Company's control;

discontinuation or recalls of existing testing products;

a failure in the Company's information technology systems, including with respect to testing turnaround time and billing processes, or the failure of the Company or its third-party suppliers and vendors to maintain the security of business information or systems or to protect against cybersecurity attacks such as denial of service attacks, malware, ransomware and computer viruses, or delays or failures in the development and implementation of the Company’s automation platforms, any of which could result in a negative effect on the Company’s performance of services, a loss of business or increased costs, damages to the Company’s reputation, significant litigation exposure, an inability to meet required financial reporting deadlines, or the failure to meet future regulatory or customer information technology, data security and connectivity requirements;

business interruption, increased costs, and other adverse effects on the Company's operations due to the unionization of employees, union strikes, work stoppages, general labor unrest or failure to comply with labor or employment laws;

failure to maintain the Company's days sales outstanding levels, cash collections (in light of increasing levels of patient responsibility), profitability and/or reimbursement arising from unfavorable changes in third-party payer policies, payment delays introduced by third party utilization management organizations and increasing levels of patient payment responsibility;

impact on the Company's revenues, cash collections and the availability of credit for general liquidity or other financing needs arising from a significant deterioration in the economy or financial markets or in the Company's credit ratings by Standard & Poor's and/or Moody's;

failure to maintain the expected capital structure for the Company, including failure to maintain the Company's investment grade rating;

changes in reimbursement by foreign governments and foreign currency fluctuations;

inability to obtain certain billing information from physicians, resulting in increased costs and complexity, a temporary disruption in receipts and ongoing reductions in reimbursements and revenues;

expenses and risks associated with international operations, including, but not limited to, compliance with the U.S.

Foreign Corrupt Practices Act, the U.K.

Bribery Act, other applicable anti-corruption laws and regulations, trade sanction laws and regulations, and economic, political, legal and other operational risks associated with foreign jurisdictions;

failure to achieve expected efficiencies and savings in connection with the Company's business process improvement initiatives;

changes in tax laws and regulations or changes in their interpretation, including the U.S.

Tax Cuts and Jobs Act (TCJA);

global economic conditions and government and regulatory changes, including, but not limited to the U.K.'s exit from the European Union.

Except as may be required by applicable law, the Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Given these uncertainties, one should not put undue reliance on any forward-looking statements.

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-K

Item 7. Management’s Discussion and Analysis