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Item 9A. Controls and Procedures

2021-02-25 compared with 2020-02-28 · 788 added, 889 removed, 1244 unchanged (57% of the section changed)

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Disclosure Controls and Procedures

As of the end of the period covered by this report, the Company carried out under the supervision and with the participation of the Company’s management, including the Company’s principal executive officer and principal financial officer, an evaluation of the effectiveness of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended).

Based upon this evaluation, the Company’s principal executive officer and principal

financial officer concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this annual report.

As of the end of the period covered by this Annual Report, the Company carried out under the supervision and with the participation of the Company’s management, including the Company’s principal executive officer and principal financial officer, an evaluation of the effectiveness of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended).

Based upon this evaluation, the Company’s principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this Annual Report.

Changes in Internal Control over Financial Reporting

On June 3, 2019 , the Company completed the acquisition of Envigo's nonclinical contract research services business.

The Company’s management has extended its oversight and monitoring processes that support internal control over financial reporting to include the acquired Envigo operations.

The Company’s management is continuing to integrate the acquired operations of Envigo's nonclinical contract research services business into the Company’s overall internal control over financial reporting process.

However, management has excluded these operations from its annual assessment of internal controls over financial reporting for the year ending December 31, 2019 .

There have been no changes in the Company’s internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) during the quarter ended December 31, 2020, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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The Company's management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2020.

Management based this assessment on criteria for effective internal control over financial reporting described in “Internal Control - Integrated Framework 2013” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Treadway Commission (COSO).

Based on this assessment, the Company's management determined that, as of December 31, 2020, the Company maintained effective internal control over financial reporting.

Management reviewed the results of its assessment with the Audit Committee of the Company’s board of directors.

On June 3, 2019 , the Company completed the acquisition of Envigo's nonclinical contract research services business.

As a result, management has excluded Envigo from its assessment of internal control over financial reporting.

Envigo is a wholly-owned subsidiary whose total assets and total revenues, excluded from management's assessment, represent 1.3% and 1.1%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2019 .

PricewaterhouseCoopers LLP, an independent registered public accounting firm, who audited and reported on the consolidated financial statements of the Company included in this Annual Report, also audited the effectiveness of the Company’s internal control over financial reporting as of December 31, 2020, as stated in its report, which is included herein immediately preceding the Company’s audited financial statements.

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Information regarding executive officers is incorporated by reference to the Company’s 2021 Proxy Statement under the caption Executive Officers.

Information concerning the Company’s Audit Committee, including the designation of audit committee financial experts and information regarding compliance with Section 16(a) of the Exchange Act responsive to this item is incorporated by reference to the Company’s 2020 Proxy Statement under the captions Corporate Governance and Section 16(a) Beneficial Ownership Reporting Compliance respectively.

Information concerning the Company’s Audit Committee, including the designation of audit committee financial experts and information regarding compliance with Section 16(a) of the Exchange Act responsive to this item is incorporated by reference to the Company’s 2021 Proxy Statement under the captions Corporate Governance and Delinquent Section 16(a) Reports, respectively.

Information concerning the Company's code of ethics is incorporated by reference to the Company's 2021 Proxy Statement under the caption Corporate Governance Policies and Procedures.

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EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) List of documents filed as part of this report:

(a) List of documents filed as part of this Annual Report:

(1) Consolidated Financial Statements and Report of Independent Registered Public Accounting Firm included herein:

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3.1 Amended and Restated Certificate of Incorporation of the Company dated May 24, 2001 (incorporated herein by reference to Exhibit 3.1 to the Company’s Registration Statement on Form S-3, filed with the Commission on October 19, 2001, File No.

Amended and Restated By-Laws of the Company, as amended dated February 5, 2020*

3.2 Amended and Restated By-Laws of the Company, adopted and effective July 7, 2020 (incorporated by reference herein to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2020.

and Restated By-Laws of the Company.

4.1 Specimen of the Company’s Common Stock Certificate (incorporated herein by reference to Exhibit 4.1 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001).

Registration Rights Agreement, dated as of January 28, 2003, between the Company and the Initial Purchasers (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the Commission on February 3, 2003).

4.2 Indenture, dated as of November 19, 2010, between the Company and U.S.

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Bank National Association, as trustee, including the form of the 2029 Notes (incorporated herein by reference to Exhibit 4.3 to the Company's Current Report on Form 8-K filed on November 25, 2019).

Description of Securities*

4.16* Description of the Registrant's securities registered pursuant to Section 12 of the Securities Exchange Act of 1934.

National Health Laboratories Incorporated Pension Equalization Plan (incorporated herein by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1992).

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First Amendment to the Laboratory Corporation of America Holdings Amended and Restated New Pension Equalization Plan (incorporated herein by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2004).

Second Amendment to the Laboratory Corporation of America Holdings amended and restated new Pension Equalization Plan.

(incorporated herein by reference to Exhibit 10.4 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004).

Laboratory Corporation of America Holdings Senior Executive Transition Policy (incorporated herein by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2004).

Second Amendment to the Laboratory Corporation of America Holdings Amended and Restated New Pension Equalization Plan (incorporated herein by reference to Exhibit 10.4 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004).

Laboratory Corporation of America Holdings Deferred Compensation Plan (incorporated herein by reference to Exhibit 10.22 the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004).

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Amendment to Laboratory Corporation of America Holdings 2008 Stock Incentive Plan (incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on May 7, 2008).

Laboratory Corporation of America Holdings Amended and Restated Master Senior Executive Severance Plan (incorporated herein by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2009).

Laboratory Corporation of America Holdings Master Senior Executive Change in Control Severance Plan (incorporated herein by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2009).

First Amendment to the Laboratory Corporation of America Holdings Master Senior Executive Change in Control Severance Plan (incorporated herein by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2010).

Second Amendment to the Laboratory Corporation of America Holdings Master Senior Executive Change in Control Severance Plan (incorporated herein by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2010).

Laboratory Corporation of America Holdings 2012 Omnibus Incentive Plan (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on May 2, 2012).

10.14 Second Amended and Restated Credit Agreement, dated as of September 15, 2017, (originally dated as of December 21, 2011), among the Company, Bank of America, N.A.

as Administrative Agent, Swing Line Lender and L/C Issuer, Wells Fargo Bank, National Association as Syndication Agent and L/C Issuer, Credit Suisse AG, Caymen Islands Branch as Documentation Agent and L/C Issuer, the Bank of Tokyo-Mitsubishi UFJ, LTD., Barclays Bank PLC, Credit Suisse AG, Cayman Islands Branch, KeyBank National Association, PNC Bank, National Association, TD Bank, N.A., and U.S.

as Administrative Agent, Swing Line Lender and L/C Issuer, Wells Fargo Bank, National Association as Syndication Agent and L/C Issuer, Credit Suisse AG, Cayman Islands Branch as Documentation Agent and L/C Issuer, the Bank of Tokyo-Mitsubishi UFJ, LTD., Barclays Bank PLC, Credit Suisse AG, Cayman Islands Branch, KeyBank National Association, PNC Bank, National Association, TD Bank, N.A., and U.S.

Bank National Association, as Documentation Agents, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Wells Fargo Securities, LLC and Credit Suisse Securities (USA) LL as Joint Lead Arrangers and Joint Book Managers, and the lenders named therein (incorporated herein by reference to Exhibit 10.3 to the Company’s Annual Report on Form 10-Q filed on November 2, 2017).

10.15 Amendment No.

1, dated as of May 7, 2020, to the Second Amended and Restated Credit Agreement, dated September 15, 2017 (originally dated as of December 21, 2011), among the Company, Bank of America, N.A.

as administrative agent, and the lenders party thereto (incorporated herein by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed on May 8, 2020).

Laboratory Corporation of America Holdings 2016 Omnibus Incentive Plan (incorporated by reference herein to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on May 16, 2016).

Laboratory Corporation of America Holdings 2016 Employee Stock Purchase Plan (incorporated by reference herein to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on May 16, 2016).

Retirement Agreement, dated February 8, 2019, by and between the Company and F.

Samuel Eberts III (incorporated by reference herein to Exhibit 10.1 to the Company’s Quarterly report on Form 10-Q filed on May 3, 2019).

10.18 Term Loan Credit Agreement, dated June 3, 2019, by and among Laboratory Corporation of America Holdings, Bank of America, N.A., as administrative agent, and the lenders party thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on June 3, 2019).

10.19 Amendment No.

1, dated as of May 7, 2020, to the Term Loan Credit Agreement, dated June 3, 2019, among the Company, Bank of America, N.A.

as administrative agent, and the lenders party thereto.

(incorporated herein by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on May 8, 2020) .

Executive Employment Agreement, dated June 4, 2019, by and between Laboratory Corporation of America Holdings and Adam H.

Schechter (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on June 5, 2019).

Transition Agreement dated August 6, 2019 between the Company and David P.

King (incorporated by reference herein to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on August 8, 2019).

Amended and Restated Master Senior Executive Severance Plan.

16.1 Letter of PricewaterhouseCoopers LLP, dated November 5, 2020 (incorporated by reference to Exhibit 16.1 to the Company’s Current Report on Form 8-K filed on November 5, 2020).

21* List of Subsidiaries of the Company

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Gary Gilliland, M.D., Ph.D.

Power of Attorney of David P.

24.5* Power of Attorney of Garheng Kong, M.D., Ph.D.

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Section 1350)

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Filed herewith

* Filed or furnished herewith, as required

+ Management contracts or compensatory plans or arrangements

FORM 10-K SUMMARY

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized.

LABORATORY CORPORATION OF AMERICA HOLDINGS

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February 25, 2021

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant on February 28, 2020 in the capacities indicated.

President and Chief Executive Officer

(Principal Executive Officer)

Executive Vice President, Chief Financial Officer

(Principal Financial Officer)

Senior Vice President and Chief Accounting Officer

(Principal Accounting Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report has been signed below by the following persons on behalf of the registrant on February 25, 2021 in the capacities indicated.

Signature Title

SCHECHTER President and Chief Executive Officer

Schechter (Principal Executive Officer)

EISENBERG Executive Vice President, Chief Financial Officer

Eisenberg (Principal Financial Officer)

WILKINSON Senior Vice President and Chief Accounting Officer

Wilkinson (Principal Accounting Officer)

Jean-Luc Bélingard

Gary Gilliland, M.D., Ph.D.

Executive Chairman of the Board, Director

Garheng Kong, M.D., Ph.D.

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Sanders Williams, M.D.

* Sandra van der Vaart, by her signing her name hereto, does hereby sign this report on behalf of the directors of the Registrant after whose typed names asterisks appear, pursuant to powers of attorney duly executed by such directors and filed with the Securities and Exchange Commission.

* Sandra van der Vaart, by her signing her name hereto, does hereby sign this Annual Report on behalf of the directors of the Registrant after whose typed names asterisks appear, pursuant to powers of attorney duly executed by such directors and filed with the Securities and Exchange Commission.

/s/ Sandra van der Vaart

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We believe that our audits provide a reasonable basis for our opinions.

As described in the Report of Management on Internal Control over Financial Reporting, management has excluded Envigo's nonclincial contract research services business (Envigo) from its assessment of internal control over financial reporting as of December 31, 2019, because it was acquired by the Company in a purchase business combination during 2019.

We have also excluded Envigo from our audit of internal control over financial reporting.

Envigo is a wholly-owned subsidiary whose total assets and total revenues excluded from management’s assessment and our audit of internal control over financial reporting represent 1.3% and 1.1%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2019.

Definition and Limitations of Internal Control over Financial Reporting

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A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

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The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Valuation of LabCorp Diagnostics Segment (LCD) Net Accounts Receivable

As described in Notes 2 and 7 to the consolidated financial statements, the LCD business’s revenues are distributed among four payer portfolios - clients, patients, Medicare and Medicaid, and third-party.

LCD accounts receivable due from these payer portfolios was $798.1 million as of December 31, 2019.

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

The Company considers negotiated discounts and anticipated adjustments, including historical collection experience for each of the payer portfolios, when revenues and accounts receivable are recorded.

Valuation of Labcorp Diagnostics Segment (Dx) Net Accounts Receivable

As described in Notes 2 and 7 to the consolidated financial statements, the Dx business’s revenues are distributed among four payer portfolios - clients, patients, Medicare and Medicaid, and third-party.

Dx accounts receivable due from these payer portfolios was $1,515.5 million as of December 31, 2020.

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

Management considers negotiated discounts and anticipated adjustments, including historical collection experience for each of the payer portfolios, when revenues and accounts receivable are recorded.

Anticipated write-offs are recorded as an adjustment to revenue and at an amount considered necessary to record the 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 amounts.

The principal considerations for our determination that performing procedures relating to the valuation of LCD net accounts receivable is a critical audit matter are there was significant judgment and estimation by management to determine net accounts receivable related to the LCD segment.

This in turn led to a high degree of auditor judgment, subjectivity and effort to evaluate the audit evidence obtained related to the valuation of net LCD accounts receivable.

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

The principal considerations for our determination that performing procedures relating to the valuation of Dx net accounts receivable is a critical audit matter are the significant judgment and estimation by management to determine net accounts receivable related to the Dx segment, which led to a high degree of auditor judgment, subjectivity and effort in performing procedures and in evaluating the audit evidence related to the valuation of net Dx accounts receivable.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to the valuation of LCD net accounts receivable, including controls over management’s valuation analysis, data, and assumptions used to estimate amounts due from payers.

These procedures included testing the effectiveness of controls relating to the valuation of Dx net accounts receivable.

These procedures also included, among others, testing management's process for developing the estimate of net accounts receivable, and the relevance of historical billing and collection data as an input to the analysis;

testing the accuracy of a sample of revenue transactions and a sample of cash collections from the historical billing data and the historical collection which is used in management’s analysis;

testing the accuracy of a sample of revenue transactions and a sample of cash collections from the historical billing and collection data which is used in management’s analysis;

and performing a retrospective comparison of actual cash collected to the prior year estimate of net accounts receivable.

Revenue Recognition - Estimating Costs to Complete for Clinical Research Services

As described in Note 21 to the consolidated financial statements, Covance Drug Development (CDD) revenue was $4,578.1 million for the year ended December 31, 2019.

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

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

As described in Note 21 to the consolidated financial statements, Labcorp Drug Development (DD) revenue was $ 4,877.7 million for the year ended December 31, 2020.

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

The majority of clinical development and commercialization service long-term contracts within the DD segment 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 service contracts on an ongoing basis.

This led to a high degree of auditor judgment, subjectivity and effort in evaluating evidence related to the cost estimates made by management.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to the revenue recognition process, including controls over the determination of estimated costs to complete.

These procedures also included, among others, testing, for a sample of contracts, actual costs incurred and evaluating the reasonableness of management’s estimation of costs to complete projects, including labor and third party costs to complete service contracts, based upon current scope, as well as evaluating whether the assumptions used were reasonable by performing a retrospective comparison of current year project costs to historical cost estimates made by management.

Acquisition of Nonclinical Contract Research Services Business of Envigo

As described in Note 3 to the consolidated financial statements, the Company acquired the nonclinical contract research services business of Envigo for consideration of $601.0 million in 2019, which resulted in $141.4 million of identifiable intangible assets.

As disclosed, 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.

The principal considerations for our determination that performing procedures relating to the acquisition of the nonclinical contract research services business of Envigo is a critical audit matter are there was significant judgment and estimation by management to determine the identifiable intangible assets.

This in turn led to a high degree of auditor judgment, subjectivity and effort to evaluate the significant assumptions relating to the estimate, such as the customer attrition rates and the discount rate and to evaluate the audit evidence obtained related to the valuation of identifiable intangible assets acquired.

In addition, the audit effort involved the use of professionals with specialized skill and knowledge to assist in performing these procedures and evaluating the evidence obtained from these procedures.

The principal considerations for our determination that performing procedures relating to estimating costs to complete for clinical research services is a critical audit matter are the significant judgment and estimation by management when developing the costs to complete, including the labor and third party costs to complete the service contracts, which led to a high degree of auditor judgment, subjectivity and effort in performing procedures and in evaluating evidence related to the cost estimates made by management.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to the acquisition accounting, including controls over management’s valuation of the identifiable intangible assets and controls over development of the assumptions related to the valuation of the identifiable intangible assets, including customer attrition rates and the discount rate.

These procedures also included, among others, reading the purchase agreement, testing management’s process for estimating the fair value of identifiable intangible assets, and testing management’s significant assumptions used to estimate the fair value of the identifiable intangible assets.

Testing management’s process included evaluating the appropriateness of the valuation methods and the reasonableness of significant assumptions including customer attrition rates, and the discount rate for identifiable intangible assets.

Evaluating the reasonableness of customer attrition rates involved considering past performance of the acquired business as well as economics and industry forecasts.

The discount rate was evaluated by considering the costs of capital of comparable businesses and other industry factors.

Professionals with specialized skill and knowledge were used to assist in testing the discount rate.

Goodwill Impairment Assessment - Reporting Unit within the Covance Drug Development Segment

As described in Notes 1 and 9 to the consolidated financial statements, the Company’s consolidated goodwill balance was $7.9 billion as of December 31, 2019, and the goodwill associated with one of its reporting units within the Company’s Covance Drug Development (CDD) segment was $2.2 billion.

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

Potential impairment is identified by comparing the fair value of a reporting unit to its carrying value, including goodwill.

These procedures included testing the effectiveness of controls relating to the revenue recognition process, including controls over the estimated costs to complete.

These procedures also included, among others, testing management's process for estimating cost to complete the service contracts, testing, for certain contracts, actual costs incurred and evaluating the reasonableness of management’s estimation of costs to complete projects, including labor and third party costs to complete service contracts;

and evaluating whether the assumptions used were reasonable by performing a retrospective comparison of current year project costs to historical cost estimates made by management.

Goodwill Impairment Assessment - Two Reporting Units within the DD Segment

As described in Notes 1 and 9 to the consolidated financial statements, the Company’s consolidated goodwill balance was $7,751.5 million as of December 31, 2020, and the goodwill associated with the Company’s DD segment was $3,951.3 million.

For the year ended December 31, 2020, the Company recorded goodwill impairment of $418.7 million for one of its reporting units within the DD segment.

Management assesses goodwill for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable.

The Company recognizes an impairment charge for the amount by which the reporting unit's carrying amount exceeds its fair value.

Fair value of a reporting unit is estimated using both income-based and market-based valuation methods.

In particular, 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 rates, projected operating margin, and the discount rate.

The principal considerations for our determination that performing procedures relating to the goodwill impairment assessment of the reporting unit within the CDD segment is a critical audit matter are there was significant judgment by management when developing the fair value estimate of the reporting unit.

This in turn led to a high degree of auditor judgment, subjectivity, and audit effort in performing procedures to evaluate management’s market comparable method analysis and cash flow projections, including significant assumptions for the selected market multiples, revenue and terminal growth rates, projected operating margin,

and the discount rate.

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 rates, projected operating margin, and the discount rate.

The principal considerations for our determination that performing procedures relating to the goodwill impairment assessment of the two reporting units within the DD segment is a critical audit matter are the significant judgment by management when developing the fair value estimate of the reporting units, which led to a high degree of auditor judgment, subjectivity, and audit effort in performing procedures to evaluate management’s market comparable method analysis and cash flow projections, including significant assumptions for the selected market multiples, revenue and terminal growth rates, projected operating margin, and the discount rate.

Also, the audit effort involved the use of professionals with specialized skill and knowledge to assist in performing these procedures and evaluating the audit evidence obtained from these procedures.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to management’s goodwill impairment assessment, including controls over the significant assumptions used in the valuation of the reporting unit.

These procedures also included, among others, testing management's process for estimating the fair value of the reporting unit which involved evaluating the appropriateness of the valuation methods and the reasonableness of significant assumptions used in the market comparable method analysis and cash flow projections, including the revenue and terminal growth rates, projected operating margin, discount rate and selected market multiples.

These procedures also included, among others, testing management's process for estimating the fair value of the reporting units which involved evaluating the appropriateness of the valuation methods and the reasonableness of significant assumptions used in the market comparable method analysis and cash flow projections, including the selected market multiples, revenue and terminal growth rates, projected operating margin, and the discount rate.

Evaluating the reasonableness of the revenue and terminal growth rates and projected operating margin involved considering the past performance of the reporting unit and considering whether these assumptions were consistent with evidence obtained in other areas of the audit.

Professionals with specialized skill and knowledge were used to assist in the evaluation of the appropriateness of the Company’s valuation methods and the reasonableness of the significant assumptions, including (i) the terminal growth rates impacting the reporting unit’s future cash flows, (ii) the selected market multiple applied to the reporting unit’s financial information and (iii) the discount rate.

Professionals with specialized skill and knowledge were used to assist in the evaluation of the appropriateness of the Company’s valuation methods and the reasonableness of (i) the terminal growth rates impacting the reporting units' future cash flows, (ii) the selected market multiple applied to the reporting units' financial information and (iii) the discount rate.

/s/ PricewaterhouseCoopers LLP

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(In Millions)

2020 December 31,

Current assets:

Cash and cash equivalents $ 1,320.8 $ 337.5

Accounts receivable

Accounts receivable, net of allowance for doubtful accounts of $22.1 and $19.0 as of December 31, 2020 and 2019, respectively 2,479.8 1,543.9

Unbilled services 536.8 481.4

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Other assets, net 410.0 435.4

Total assets $ 20,071.7 $ 18,046.4

LIABILITIES AND SHAREHOLDERS’ EQUITY

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Retained earnings 9,402.3 7,903.6

Less common stock held in treasury

Accumulated other comprehensive loss ( 161.9 ) ( 372.4 )

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Years Ended December 31,

2020 2019 2018

Revenues $ 13,978.5 $ 11,554.8 $ 11,333.4

Cost of revenues 9,025.7 8,302.3 8,157.0

Gross profit 4,952.8 3,252.5 3,176.4

Selling, general and administrative expenses 1,729.3 1,624.5 1,570.9

Amortization of intangibles and other assets 275.4 243.2 231.7

Goodwill and other asset impairments 462.1 — —

Restructuring and other charges 40.6 54.6 48.1

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Investment income 10.3 8.8 7.5

Other, net ( 32.1 ) ( 3.2 ) 167.7

Earnings before income taxes 2,219.1 1,104.9 1,268.3

Provision (benefit) for income taxes

Provision for income taxes 662.1 280.0 384.4

Net earnings 1,557.0 824.9 883.9

Net earnings attributable to the noncontrolling interest ( 0.9 ) ( 1.1 ) ( 0.2 )

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Years Ended December 31,

2020 2019 2018

Net earnings $ 1,557.0 $ 824.9 $ 883.9

Foreign currency translation adjustments 264.1 104.4 ( 176.6 )

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Other comprehensive earnings (loss) before tax 198.4 87.0 ( 147.3 )

Provision (benefit) for income tax related to items of comprehensive earnings

Provision for income tax related to items of comprehensive earnings 12.1 3.7 17.9

Other comprehensive earnings (loss), net of tax 210.5 90.7 ( 129.4 )

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(In Millions)

Stock Additional

Capital Retained

Earnings Treasury

Stock Accumulated

Comprehensive

Earnings (Loss)

Earnings (Loss) Total

Shareholders’

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Net earnings attributable to Laboratory Corporation of America Holdings — — 883.7 — — 883.7

Other comprehensive earnings, net of tax

Other comprehensive loss, net of tax — — — — ( 129.4 ) ( 129.4 )

Issuance of common stock under employee stock plans — 69.1 — — — 69.1

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Net earnings attributable to Laboratory Corporation of America Holdings — — 823.8 — — 823.8

Other comprehensive loss, net of tax

Other comprehensive earnings, net of tax — — — — 90.7 90.7

Issuance of common stock under employee stock plans — 64.7 — — — 64.7

Net share settlement tax payments from issuance of stock to employees — ( 0.5 ) — ( 40.1 ) — ( 40.6 )

Conversion of zero-coupon convertible debt

Stock compensation — 107.0 — — — 107.0

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

Purchase of common stock ( 0.3 ) ( 449.7 ) — — — ( 450.0 )

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

Adoption of credit loss accounting standard — — ( 7.0 ) — — ( 7.0 )

Net earnings attributable to Laboratory Corporation of America Holdings — — 1,556.1 — — 1,556.1

Other comprehensive earnings, net of tax

— — — — 210.5 210.5

Issuance of common stock under employee stock plans 55.9 — — — 55.9

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Stock compensation — 111.7 — — — 111.7

Retirement of treasury stock

Purchase of common stock — ( 49.6 ) ( 50.4 ) — — ( 100.0 )

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Years Ended December 31,

2020 2019 2018

CASH FLOWS FROM OPERATING ACTIVITIES:

Net earnings $ 1,557.0 $ 824.9 $ 883.9

Adjustments to reconcile net earnings to net cash provided by operating activities:

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Operating lease right-of-use asset expense 200.3 194.1 —

Goodwill and other asset impairments 462.1 — —

Deferred income taxes ( 47.0 ) 29.2 22.2

Other, net 83.4 ( 6.5 ) 10.8

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

(Increase) decrease in accounts receivable ( 913.4 ) ( 64.1 ) 50.2

(Increase) decrease in unbilled services

Increase in unbilled services ( 42.5 ) ( 59.0 ) ( 81.0 )

Increase in inventory ( 196.6 ) ( 21.9 ) ( 18.9 )

(Increase) decrease in prepaid expenses and other

Increase in prepaid expenses and other ( 5.4 ) ( 42.6 ) ( 57.9 )

Increase (decrease) in accounts payable ( 5.3 ) ( 12.8 ) 43.3

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Proceeds from exit of swaps 3.1 1.7 18.3

Acquisition of licensing technology

Acquisition of businesses, net of cash acquired ( 267.6 ) ( 876.0 ) ( 117.8 )

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Purchase of common stock ( 100.0 ) ( 450.0 ) ( 700.0 )

Net cash (used for) provided by financing activities

Other ( 26.6 ) ( 25.3 ) ( 16.0 )

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

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

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Cash and cash equivalents at beginning of period 337.5 426.8 316.6

Cash and cash equivalents included in assets held for sale

Cash and cash equivalents at end of period $ 1,320.8 $ 337.5 $ 426.8

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Basis of Financial Statement Presentation

Laboratory Corporation of America Holdings ® together with its subsidiaries (the Company), is a leading global life sciences company that is deeply integrated in guiding patient care, providing comprehensive clinical laboratory and end-to-end drug development services.

The Company’s mission is to improve health and improve lives by delivering world-class diagnostic solutions, bringing innovative medicines to patients faster and using technology to provide better care.

The Company serves a broad range of customers, including managed care organizations (MCOs), biopharmaceutical companies, governmental agencies, physicians and other healthcare providers (e.g.

physician assistants and nurse practitioners, generally referred to herein as physicians), hospitals and health systems, employers, patients and consumers, contract research organizations (CROs) and independent clinical laboratories.

During 2018, the Company sold its Covance Food Solutions (CFS) business, which provided food testing and integrity services, as well as its domestic and international forensic analysis businesses.

During 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 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 reports its business in two segments, LabCorp Diagnostics (LCD) and Covance Drug Development (CDD).

Laboratory Corporation of America ® Holdings (Labcorp ® or the Company) is a leading global life sciences company that provides vital information to help doctors, hospitals, pharmaceutical companies, researchers, and patients make clear and confident decisions.

By leveraging its strong diagnostics and drug development capabilities, the Company provides insights and accelerates innovations to improve health and improve lives.

With over 72,400 employees, the Company serves clients in more than 100 countries.

The Company reports its business in two segments, Labcorp Diagnostics (Dx) and Labcorp Drug Development (DD).

As part of the Company's rebranding initiative announced in December 2020, the Company changed the names of its segments, which were previously referred to as LabCorp Diagnostics and Covance Drug Development.

For further financial information about these segments, including information for each of the last three fiscal years regarding revenue, operating income, and other important information, see Note 21 Business Segment Information to the Consolidated Financial Statements.

In 2019 , LCD and CDD contributed 60 % and 40 % , respectively, of revenues to the Company, and in 2018 contributed 62 % and 38 % , respectively.

In 2020, Dx and DD contributed 65 % and 35 %, respectively, of revenues to the Company, and in 2019 contributed 60 % and 40 %, respectively.

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

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Recently Adopted Guidance

In February 2016, the Financial Accounting Standards Board (FASB) issued a new accounting standard that sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors).

The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee.

This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease.

A lessee is also required to record a right-of-use (ROU) asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification.

The Company has elected to utilize the short-term lease exemption and not record leases with initial terms of 12 months or less on the balance sheet.

The new standard requires lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases and direct financing leases.

The Company adopted the standard on January 1, 2019, using the modified retrospective method.

Comparative periods were not adjusted and are presented in accordance with lease guidance in effect for that period.

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.

Leases with an initial term of 12 months or less are not recorded on the Consolidated Balance Sheets.

Operating lease expense is recognized on a straight-line basis over the lease term.

In June 2016, the FASB issued a new accounting standard intended to provide financial statement users with more decision-useful information about expected credit losses and other commitments to extend credit held by the reporting entity.

The standard replaces the incurred loss impairment methodology in current generally accepted accounting principles (GAAP) with one that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.

The Company recorded an opening retained earnings adjustment of $ 7.0 with the adoption of this standard on January 1, 2020.

In August 2018, the FASB issued a new accounting standard to reduce, modify, and add to the disclosure requirements on fair value measurements.

The Company adopted this standard effective January 1, 2020.

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

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

The Company adopted this standard effective January 1, 2020.

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

In August 2018, the FASB issued a new accounting standard to modify the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans.

The Company adopted this standard effective January 1, 2020.

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

Novel Coronavirus (COVID-19) Financial Statement Impact

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.

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

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

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

Operating lease assets and liabilities are recognized at the commencement date, based on the present value of the future lease payments over the lease term.

A certain number of these leases contain rent escalation clauses either fixed or adjusted periodically for inflation or market rates that are factored into the Company's determination of lease payments.

The Company also has variable lease payments that do not depend on a rate or index, for items such as volume purchase commitments, which are recorded as variable cost when incurred.

As most of the Company's leases do not provide an implicit rate, the Company estimates an incremental borrowing rate based on the credit quality of the Company and by comparing interest rates available in the market for similar borrowings, and adjusting this amount based on the impact of collateral over the term of each lease.

The Company uses this rate to discount payments to present value.

Some operating leases contain renewal options, some of which also include options to early terminate the leases.

The exercise of these options is at the Company's discretion.

The Company determined that all renewal options within leases for main laboratories, rapid response (STAT) laboratories, branches or combination sites were reasonably possible to be exercised and therefore are included in the accounting lease term.

The standard had a material impact in the consolidated balance sheets, but no material impact in the consolidated income statements.

The most significant impact was the recognition of right-of-use (ROU) assets and lease liabilities for operating leases.

See Note 5 Leases to the Consolidated Financial Statements.

In July 2017, the FASB issued a new accounting standard intended to reduce the complexity associated with the issuer's accounting for certain financial instruments with characteristics of liabilities and equity.

Specifically, a down round feature would no longer cause a free-standing equity-linked financial instrument (or embedded conversion option) to be accounted for as a derivative liability at fair value with changes in fair value recognized in current earnings.

The Company adopted this standard effective January 1, 2019.

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

In February 2018, the FASB issued a new accounting standard update that gives entities the option to reclassify to retained earnings tax effects related to items in accumulated other comprehensive income that the FASB refers to as having been stranded in accumulated other comprehensive income as a result of tax reform.

The Company's adoption of this standard effective January 1, 2019, did not have a material impact on the Company's consolidated financial statements.

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.

The Company also impaired certain of the Company's investments by a total of $ 25.4 during 2020 due to the impact of COVID-19;

$ 7.1 was included in Equity method earnings (loss), net and $ 18.3 was included in Other, net.

In April 2020, the Company received cash payments of approximately $ 55.9 from the Public Health and Social Services Emergency Fund for provider relief that was appropriated by Congress to the U.S.

Department of Health and Human Services (HHS) in the Coronavirus Aid, Relief, and Economic Security Act (CARES Act Provider Relief Funds).

In August 2020, the Company received an additional $ 76.2 in CARES Act Provider Relief Funds.

As the Company's Diagnostic business demonstrated recovery and demand for COVID-19 testing increased, the Company determined that the negative financial impact of COVID-19 which the CARES Act Provider Relief Funds were designed to address no longer applied to the Company.

As a result, the Company returned the CARES Act Provider Relief Funds, to the government in the fourth quarter of 2020.

There was no impact to the Company's consolidated financial statements as of December 31, 2020 and for the year then ended.

Reimbursable Out-of-Pocket Expenses

CDD pays on behalf of its customers certain out-of-pocket costs for which the Company is reimbursed at cost, without mark-up or profit.

Out-of-pocket costs paid by CDD are reflected in operating expenses, while the reimbursements received are reflected in revenues in the consolidated statements of operations.

DD pays on behalf of its customers certain out-of-pocket costs for which the Company is reimbursed at cost, without mark-up or profit.

Out-of-pocket costs paid by DD are reflected in operating expenses, while the reimbursements received are reflected in revenues in the consolidated statements of operations.

Cost of Revenues

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The preparation of financial statements in conformity with generally accepted accounting principles requires the Company 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.

Significant estimates include implicit price concessions, revenue estimates, the allowances for doubtful accounts, deferred tax assets, fair values of acquired assets and assumed liabilities in business combinations, amortization lives for acquired intangible assets, and accruals for self-insurance reserves, litigation reserves and pensions.

Significant estimates include implicit price concessions, revenue estimates, the allowances for doubtful accounts, deferred tax assets, fair values of acquired assets and assumed liabilities in business combinations, fair value of goodwill and indefinite-lived intangible assets, amortization lives for acquired intangible assets, and accruals for self-insurance reserves, litigation reserves and pensions.

The allowance for doubtful accounts is determined based on historical collections trends, the aging of accounts, current economic conditions and regulatory changes.

Actual results could differ from those estimates.

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

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

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

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

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

Concentration of Credit Risk

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The total cash and cash equivalent balances that exceeded the balances insured by the Federal Deposit Insurance Commission, were approximately $ 1,319.4 and $ 335.0 at December 31, 2020, and 2019, respectively.

Substantially all of the Company’s accounts receivable are with companies in the healthcare or biopharmaceutical industry and individuals.

However, concentrations of credit risk are mitigated due to the number of the Company’s customers as well as their dispersion across many different geographic regions.

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

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

Substantially all of the Company’s accounts receivable are with companies in the healthcare or biopharmaceutical industry and individuals.

However, concentrations of credit risk are mitigated due to the number of the Company’s customers as well as their dispersion across many different geographic regions.

Although LCD has receivables due from U.S.

Although Dx has receivables due from U.S.

and state governmental agencies, the Company does not believe that such receivables represent a credit risk since the related healthcare programs are funded by U.S.

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At December 31, 2020, and 2019, receivables due from patients represented approximately 13.9 % and 21.1 % of the Company's consolidated gross accounts receivable, respectively.

The Company applies assumptions and judgments including historical collection experience for assessing collectability and determining allowances for doubtful accounts for accounts receivable from patients.

The Company applies assumptions and judgments including historical collection experience and reasonable and supportable forecasts for assessing collectability and determining allowances for doubtful accounts for accounts receivable from patients.

Earnings per Share

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

2020 2019 2018

Income Shares Per Share

Amount Income Shares Per Share

Basic earnings per share $ 1,556.1 97.3 $ 15.99 $ 823.8 97.9 $ 8.42 $ 883.7 101.4 $ 8.71

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Years Ended December 31,

2020 2019 2018

Stock options 0.2 0.2 0.1

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The grant date fair value of performance awards is based on a Monte Carlo simulated fair value for the relative (as compared to the peer companies) total shareholder return component of the performance awards.

Such value is recognized as expense over the service period, net of estimated forfeitures and the Company's determination of whether it is probable that the performance targets will be achieved.

Such value is recognized as an expense over the service period, net of estimated forfeitures and the Company's determination of whether it is probable that the performance targets will be achieved.

At the end of each reporting period, the Company reassesses the probability of achieving performance targets.

The estimation of equity awards that will ultimately vest requires judgment and the Company considers many factors when estimating expected forfeitures,

The estimation of equity awards that will ultimately vest requires judgment and the Company considers many factors when estimating expected forfeitures, including types of awards, employee class, and historical experience.

Forfeitures are recognized as a reduction of compensation expense in earnings in the period in which they occur.

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

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

including types of awards, employee class, and historical experience.

Forfeitures are recognized as a reduction of compensation expense in earnings in the period in which they occur.

See Note 15 Stock Compensation Plans for assumptions used in calculating compensation expense for the Company’s stock compensation plans.

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Supplies accounted for $ 403.6 and $ 228.3 and finished goods accounted for $ 19.6 and $ 16.4 of total inventory at December 31, 2020, and 2019, respectively.

The Company's inventory reserve balance was $ 20.2 and $ 0.0 , as of December 31, 2020 and 2019, respectively.

Once recorded, the reserves are considered permanent adjustments to the carrying value of inventory.

Property, Plant and Equipment

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Furniture and fixtures 5 - 10

Software 3 - 10

Leasehold improvements are amortized over the shorter of their estimated useful lives or the term of the related leases.

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Capitalized Software Costs

The Company capitalizes purchased software which is ready for service and capitalizes software development costs incurred on significant projects starting from the time that the preliminary project stage is completed and the Company commits to funding a project until the project is substantially complete and the software is ready for its intended use.

The Company capitalizes purchased software that is ready for service and capitalizes software development costs incurred on significant projects starting from the time that the preliminary project stage is completed and the Company commits to funding a project until the project is substantially complete and the software is ready for its intended use.

Capitalized costs include direct material and service costs and payroll and payroll-related costs.

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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.

The Company recognizes an impairment charge for the amount by which the reporting unit's carrying amount exceeds its fair value.

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 reporting units and Dx reporting units.

Based on the quantitative impairment assessment performed in the same manner as our annual quantitative assessment, the Company concluded that the fair value was less than carrying value for two of its reporting unit and recorded a goodwill impairment of $ 418.7 for DD and $ 3.7 for Dx.

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.

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.

If applicable, performance in recent years was compared to forecasts included in prior valuations.

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 income and market approaches to determine the fair value of the CDD reporting units and an 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.

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

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

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

The Company will continue to monitor the financial performance of and assumptions for one of the CDD reporting units for which a combination of income and market approaches 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 rates, projected operating margin,and the discount rate.

If applicable, performance in recent years was compared to forecasts included in prior valuations.

In the annual 2020 quantitative impairment assessment performed at the beginning of the fourth quarter, the Company utilized a combination of income and market approaches to determine the fair value of two DD reporting units and an income approach to determine the fair value of the Canadian reporting unit and its indefinite-lived assets consisting of acquired Canadian licenses.

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

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

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

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

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

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 rates, projected operating margin, and the discount rate.

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

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 % .

Long-lived assets, other than goodwill and indefinite-lived assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable.

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Non-compete agreements 3 5

Trade names 1 - 15

Debt Issuance Costs

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The liability is based on assumptions and factors for known and incurred but not reported claims, including the frequency and payment trends of historical claims.

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

On January 1, 2019 the Company adopted the new lease accounting standard using the modified retrospective method.

Comparative periods were not adjusted and are presented in accordance with the lease guidance in effect for that period.

The classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease.

A lessee is also required to record a right-of-use (ROU) asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification.

The Company elected to utilize the short-term lease exemption and not record leases with initial terms of 12 months or less on the balance sheet.

Leases with an initial term of 12 months or less are not recorded on the Consolidated Balance Sheets.

Operating lease expense is recognized on a straight-line basis over the lease term.

Operating lease assets and liabilities are recognized at the commencement date, based on the present value of the future lease payments over the lease term.

The Company also has variable lease payments that do not depend on a rate or index, for items such as volume purchase commitments, which are recorded as variable cost when incurred.

The Company uses this rate to discount payments to present value.

Some operating leases contain renewal options, some of which also include options to early terminate the leases.

The exercise of these options is at the Company's discretion.

See Note 5 Leases to the Consolidated Financial Statements.

The Company accounts for income taxes utilizing the asset and liability method.

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Interest rate swap agreements, which have been used by the Company from time to time in the management of interest rate exposure, are accounted for at fair value.

The Company’s zero-coupon subordinated notes contained two features that were considered to be embedded derivative instruments under authoritative guidance in connection with accounting for derivative instruments and hedging activities.

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

The Company believes these embedded derivatives had no fair value at December 31, 2018 .

Cross currency swap agreements, which have been used by the Company to hedge exposure of its net investment in a foreign subsidiary denominated in non-U.S.

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A three-tiered fair value hierarchy draws distinctions between market participant assumptions based on (i) observable inputs such as quoted prices in active markets (Level 1), (ii) inputs other than quoted prices in active markets that are observable either directly or indirectly (Level 2) and (iii) unobservable inputs that require the Company to use present value and other valuation techniques in the determination of fair value (Level 3).

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Research and Development

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New Accounting Pronouncements

The standard replaces the incurred loss impairment methodology in current Generally Accepted Accounting Principles (GAAP) with one that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.

The update is effective on January 1, 2020.

The Company does not expect the adoption of this standard to have a material impact on the consolidated financial statements.

In August 2018, the FASB issued a new accounting standard to remove, modify, and add to the disclosure requirements on fair value measurements.

The standard is effective on January 1, 2020.

The Company does not expect the adoption of this new standard to have a material impact on the consolidated financial statements.

In August 2018, the FASB issued a new accounting standard to remove, modify, and add to the disclosure requirements on defined benefit pension and other postretirement plans.

In August 2018, the FASB issued a new accounting standard to reduce, modify, and add to the disclosure requirements on defined benefit pension and other postretirement plans.

The standard is effective on January 1, 2021, with early adoption permitted.

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

The standard is effective on January 1, 2020.

The Company does not expect the adoption of this standard to have a material impact on the consolidated financial statements.

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

In December 2019, the FASB issued a new accounting standard to simplify accounting for income taxes and remove, modify, and add to the disclosure requirements of income taxes.

The standard is effective January 1, 2021, with early adoption permitted.

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

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

In January 2020, the FASB issued a new accounting standard to clarify the interaction of the accounting for equity securities and investments accounted for under the equity method of accounting and the accounting for certain forward contracts and purchased options.

This standard is effective January 1, 2021.

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

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Reclassifications and Revisions

In conjunction with the adoption of the new lease standard, the Company reclassified the capital lease asset balance of $ 44.4 at December 31, 2018 from Property, plant and equipment, net to Other assets.

The standard is effective January 1, 2021.

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

In March 2020, the FASB issued a new accounting standard to provide optional expedients and exceptions if certain conditions are met for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform.

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

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

In August 2020, the FASB issued a new accounting standard to address issues identified as a result of the complexity associated with applying generally accepted accounting principles for convertible instruments and contracts in an entity's own equity.

The standard is effective January 1, 2022, with early adoption permitted.

The Company is evaluating the impact this new standard will have on the consolidated financial statements.

Description of Revenues

Dx attributes revenues to a geographical region based upon where the diagnostic test is performed, while DD attributes revenues to a geographical region based upon where the services are performed.

The Company's revenue by segment payers/customer groups for the years ended December 31, 2020, 2019 and 2018 is as follows:

For the Year Ended December 31, 2019

United Kingdom

Payer/Customer

Medicare and Medicaid

Total LCD revenues by payer

Biopharmaceutical and medical

device companies

Total revenues

For the Year Ended December 31, 2018

United Kingdom

Payer/Customer

Medicare and Medicaid

Total LCD revenues by payer

Biopharmaceutical and medical

device companies

Total revenues

For the Year Ended December 31, 2017

United Kingdom

For the Year Ended

December 31, 2020 For the Year Ended

December 31, 2019 For the Year Ended

December 31, 2018

North America Europe Other Total North America Europe Other Total North America Europe Other Total

Payer/Customer

Clients 20 % — % — % 20 % 17 % — % — % 17 % 18 % — % — % 18 %

Patients 6 % — % — % 6 % 8 % — % — % 8 % 8 % — % — % 8 %

Medicare and Medicaid 7 % — % — % 7 % 8 % — % — % 8 % 9 % — % — % 9 %

Total LCD revenues by payer

Biopharmaceutical and medical

device companies

Third-party 32 % — % — % 32 % 27 % — % — % 27 % 27 % — % — % 27 %

Total Dx revenues by payer 65 % — % — % 65 % 60 % — % — % 60 % 62 % — % — % 62 %

Biopharmaceutical and medical device companies 17 % 11 % 7 % 35 % 21 % 12 % 7 % 40 % 19 % 12 % 7 % 38 %

Total revenues 82 % 11 % 7 % 100 % 81 % 12 % 7 % 100 % 81 % 12 % 7 % 100 %

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

Revenues in the U.S.

were $ 11,192.3 ( 80.1 %), $ 8,981.3 ( 77.7 %) and $ 8,843.5 ( 78.0 %) for the years ended December 31, 2020, 2019 and 2018.

The following is a description of the current revenue recognition policies of the Company:

LCD is an independent clinical laboratory business.

Dx is an independent clinical laboratory business.

It offers a comprehensive menu of frequently requested and specialty diagnostic tests through an integrated network of primary and specialty laboratories across the U.S.

In addition to diagnostic testing along with occupational and wellness testing for employers and forensic DNA analysis, LCD also offered a range of other testing services.

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

In addition to diagnostic testing along with occupational and wellness testing for employers and forensic DNA analysis, Dx also offered a range of other testing services.

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.

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

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

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 sales 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 sales 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 list 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 list 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 sales are recorded based upon contractually negotiated fee schedules with sales 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 sales are recorded based upon contractually negotiated fee schedules with sales for non-contracted MCOs recorded based on historical reimbursement experience.

In addition to contractual discounts, other adjustments including anticipated payer denials are considered when determining revenue.

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 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.

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.

CDD is a CRO business that provides end-to-end drug development services from early-stage research to clinical trial management and beyond.

CDD provides these services predominantly to biopharmaceutical and medical device companies worldwide.

Because CDD's client base generally consumes these drug development services across the entire portfolio of CDD pre-clinical and clinical services offerings, there is little variability in the customer base of any particular CDD service offering.

The nature of CDD’s

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

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

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

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.

DD is a CRO business that provides end-to-end drug development services from early-stage research to clinical trial management and beyond.

DD provides these services predominantly to biopharmaceutical and medical device companies worldwide.

Because DD's client base generally consumes these drug development services across the entire portfolio of DD pre-clinical and clinical services offerings, there is little variability in the customer base of any particular DD service offering.

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.

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

All contract assets are billable to customers within one year from the respective balance sheet date.

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

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

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

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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.

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.

All contract assets are billable to customers within one year from the respective balance sheet date.

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

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 full range of 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.

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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.

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Contract costs

CDD incurs sales commissions in the process of obtaining contracts with customers, which are recoverable through the service fees in the contract.

DD incurs sales commissions in the process of obtaining contracts with customers, which are recoverable through the service fees in the contract.

Sales commissions that are payable upon contract award are recognized as assets and amortized over the expected contract term, along with related payroll tax expense.

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Amortization of assets from sales commissions is included in selling, general, and administrative expense.

CDD incurs costs to fulfill contracts with customers, which are recoverable through the service fees in the contract.

DD incurs costs to fulfill contracts with customers, which are recoverable through the service fees in the contract.

Contract fulfillment costs include software implementation costs and setup costs for certain market access solutions.

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

December 31, 2019

December 31, 2018

December 31, 2020 December 31, 2019

Sales commission assets $ 32.6 $ 28.6

Deferred contract fulfillment costs 12.6 14.9

Total $ 45.2 $ 43.5

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Amortization related to sales commission assets and associated payroll taxes for the year ended December 31, 2020, 2019, and 2018 was $ 23.2 , $ 21.2 and $ 16.9 , respectively.

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Unbilled services are comprised primarily of unbilled receivables, but also include contract assets.

A contract asset is recorded when a right to payment has been earned for work performed, but billing and payment for that work is determined by certain

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

contractual milestones, whereas unbilled receivables are billable upon the passage of time.

While CDD attempts to negotiate terms that provide for billing and payment of services prior or in close proximity to the provision of services, this is not always possible and there are fluctuations in the level of unbilled services and unearned revenue from period to period.

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

December 31, 2019

December 31, 2018

A contract asset is recorded when a right to payment has been earned for work performed, but billing and payment for that work is determined by certain contractual milestones, whereas unbilled receivables are billable upon the passage of time.

While DD attempts to negotiate terms that provide for billing and payment of services prior or in close proximity to the provision of services, this is not always possible and there are fluctuations in the level of unbilled services and unearned revenue from period to period.

The following table provides information about receivables, unbilled services, and unearned revenue (contract liabilities) from contracts with customers for the DD segment:

December 31, 2020 December 31, 2019

Receivables, which are included in Accounts Receivable $ 1,001.5 $ 771.1

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Revenue recognized during the period, that was included in the unearned revenue balance at the beginning of the period, for the year ended December 31, 2020, and 2019, was $ 262.6 and $ 250.2 , respectively.

Bad debt expense on receivables, for the year ended December 31, 2019 was immaterial to the Company’s consolidated statement of operations.

Credit Loss Rollforward

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

The rollforward for the allowance for credit losses for the year ended December 31, 2020, is as follows:

Year Ended December 31, 2020

Accounts Receivable Unbilled Services Note and Other Receivables Total

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

Current expected credit losses opening balance impact on retained earnings 1.8 0.2 5.0 7.0

Credit loss expense 7.0 9.0 0.7 16.7

Write offs ( 5.7 ) ( 0.2 ) — ( 5.9 )

Ending allowance for credit losses $ 22.1 $ 11.3 $ 5.7 $ 39.1

Notes and other receivables includes the $ 70.0 due 2022 from the Envigo transaction which is recorded in Other assets, net.

Performance Obligations Under Long-Term Contracts

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

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

The amount of existing performance obligations under such long-term contracts unsatisfied as of December 31, 2020, and 2019, was $ 5,128.4 and $ 4,520.8 , respectively.

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The Company also did not disclose information about remaining performance obligations when the variable consideration was related to a wholly unsatisfied performance obligation within a series of obligations.

Within CDD, revenue of $ 88.9 and $ 21.0 was recognized during the year ended December 31, 2019 , and December 31, 2018 , respectively, from performance obligations that were satisfied in previous periods.

Within DD, revenue of $ 80.9 and $ 88.9 was recognized during the year ended December 31, 2020, and December 31, 2019, respectively, from performance obligations that were satisfied in previous periods.

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

BUSINESS ACQUISITIONS AND DISPOSITIONS

On June 3, 2019, the Company's CDD segment acquired 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 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.

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

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

BUSINESS ACQUISITIONS AND DISPOSITIONS

During the year ended December 31, 2020, the Company acquired various businesses and related assets for approximately $ 267.6 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 $ 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.

A summary of the net assets acquired in 2020 for these businesses is included below:

Amounts Acquired During Year Ended December 31, 2020

Accounts receivable $ 4.9

Unbilled services 2.4

Property, plant and equipment 1.3

Goodwill 166.2

Intangible assets 121.3

Total assets acquired 296.1

Accounts payable 0.9

Accrued expenses and other 22.4

Unearned revenue 1.1

Other liabilities 4.1

Total liabilities acquired 28.5

Net assets acquired $ 267.6

Unaudited Pro Forma Information for 2020 Acquisitions

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

Years Ended December 31,

Revenues $ 14,032.7 $ 11,717.5

Net earnings attributable to Laboratory Corporation of America Holdings 1,564.6 837.6

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

Additionally, the Company divested the CRP business, which was a part of the DD segment, to Envigo.

As part of this sale, DD 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 the new term loan facility entered into in 2019 concurrently with the transaction.

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

Consideration Transferred

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Fair value of CRP $ 110.0

Measurement Period Adjustments

Preliminary December 31, 2019

Total $ 711.0

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Net Assets Acquired

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Unbilled services 25.6

Inventories 4.5

Prepaid expenses and other 10.8

Property, plant and equipment (including ROU operating lease assets)

Property, plant and equipment 128.4

Deferred income taxes 25.2

Goodwill 376.6

Customer relationships 140.8

Trade name and trademarks 0.6

Other assets 9.9

Total assets acquired 745.8

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Unearned revenue 49.9

Operating lease liabilities

Other liabilities 69.3

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Floating rate secured note receivable due 2022 $ 110.0

The preliminary purchase consideration for Envigo has been allocated to the estimated fair market value of the net assets acquired, including approximately $ 141.4 in identifiable intangible assets and a residual amount of non-tax-deductible goodwill of approximately $ 379.3 .

Total $ 711.0

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

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

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The divested CRP business contributed operating income of $ 5.5 and $ 13.2 for the years ended December 31, 2019 and 2018, respectively.

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

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

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

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

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

During the 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 amortization periods for intangible assets acquired from these businesses range from 12 to 15 years for customer relationships.

During the year ended December 31, 2019, in addition to the Envigo transaction, the Company acquired various businesses and related assets for approximately $ 286.4 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 $ 184.3 in identifiable intangible assets and a residual amount of non-tax-deductible goodwill of approximately $ 115.1 .

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A summary of the net assets acquired in 2019 for these businesses is included below:

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Amounts Acquired During Year Ended December 31, 2019 (excluding Envigo)

Accounts receivable

Unbilled services

Prepaid expenses and other

Property, plant and equipment (including ROU operating lease assets)

Intangible assets

Total assets acquired

Accounts payable

Accrued expenses and other

Unearned revenue

Other liabilities

Total liabilies acquired

Net assets acquired

Unaudited Pro Forma Information

The Company completed the Envigo acquisition on June 3, 2019.

Had the Envigo acquisition as well as the aggregate of the Company's other 2019 acquisitions been completed as of January 1, 2017, the Company's pro forma results would have been as follows:

Unaudited Pro Forma Information for 2019 Acquisitions

Had the aggregate of the Company's 2019 acquisitions been completed as of January 1, 2018, the Company's pro forma results would have been as follows:

Years Ended December 31,

Revenues $ 11,742.5 $ 11,738.5

Net earnings attributable to Laboratory Corporation of America Holdings 831.4 906.6

During the year ended December 31, 2018 , the Company acquired various businesses and related assets for approximately $ 117.8 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 $ 67.8 in identifiable intangible assets and a residual amount of non-tax-deductible goodwill of approximately $ 70.5 .

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

On April 30, 2018, the Company entered into a definitive agreement to sell the CFS business, a global provider of innovative product design and product integrity services for end-user segments that span the global food supply chain, for an all-cash purchase price of $ 670.0 .

The transaction closed on August 1, 2018, and a net gain of $ 258.3 was recorded in Other, net in the consolidated statement of operations.

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

The Company also divested its forensic testing services business in the U.K.

on August 7, 2018, and December 31, 2018, respectively, resulting in losses of $ 48.9 and $ 24.5 , respectively, recorded in Other, net in the consolidated statement of operations.

Operating income for the Company's businesses divested in 2018 was $ 7.6 and $ 12.9 , for the years ended December 31, 2018, (which includes divested operations through their respective disposal dates) and December 31, 2017, respectively.

Operating income for the Company's businesses divested in 2018 was $ 7.6 for the year ended December 31, 2018, (which includes divested operations through their respective disposal dates).

RESTRUCTURING AND OTHER CHARGES

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

$ 26.7 within LCD and $ 27.9 within CDD.

$ 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 ;

$ 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.

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During 2018, the Company recorded net restructuring charges of $ 48.1 ;

$ 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

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

integration activities.

$ 20.5 within Dx and $ 27.6 within DD.

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

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

The Company also recorded $ 2.3 in impairment to land held for sale which is included in amortization expense.

During 2017 , the Company recorded net restructuring charges of $ 70.9 ;

$ 16.8 within LCD and $ 54.1 within CDD.

The charges were comprised of $ 36.1 in severance and other personnel costs, $ 18.8 in facility-related costs primarily associated with general integration activities, and an asset impairment loss of $ 20.9 related to the termination of a software development project within the CDD segment and the forgiveness of indebtedness for LCD customers in areas heavily impacted by hurricanes experienced during the third quarter of 2017.

The charges were offset by the reversal of previously established liability of $ 0.5 in unused severance and $ 4.4 in unused facility-related costs.

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

Severance and Other

Employee Costs

Lease and Other

Facility Costs

Severance and Other

Employee Costs

Lease and Other

Employee Costs Lease and Other

Facility Costs Severance and Other

Employee Costs Lease and Other

Facility Costs

Balance as of December 31, 2018 $ 2.1 $ 7.4 $ 6.5 $ 27.6 $ 43.6

Reclassification for ASC 842 adoption — ( 5.7 ) — ( 27.1 ) ( 32.8 )

Restructuring charges 17.3 ( 1.8 ) 15.6 2.0 33.1

Impairment of facility related assets — 11.8 — 12.9 24.7

Reduction of prior restructure accruals ( 0.2 ) ( 0.4 ) ( 1.5 ) ( 1.1 ) ( 3.2 )

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

Reclassification for ASC 842 adoption

Restructuring charges 5.2 5.5 8.9 13.4 33.0

Impairment of operating lease ROU asset

Impairment of facility related assets — 7.5 — 9.9 17.4

Reduction of prior restructuring accruals ( 0.1 ) ( 2.8 ) ( 0.5 ) ( 6.4 ) ( 9.8 )

1 unchanged sentence

Balance as of December 31, 2020 $ 0.3 $ 0.4 $ 2.4 $ 4.7 $ 7.8

Current $ 5.7

Non-current 2.1

The non-current portion of the restructuring liabilities is expected to be paid out over 4.9 years.

2 unchanged sentences

Leases have remaining lease terms of less than a year to 13 years, some of which include options to extend the leases for up to 15 years.

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

The components of lease expense were as follows:

For the Year Ended

December 31, 2019

December 31, 2020 December 31, 2019

Operating lease cost $ 215.4 $ 224.0

3 unchanged sentences

Total finance lease cost $ 15.9 $ 17.8

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Supplemental cash flow information related to leases was as follows:

For the Year Ended

December 31, 2019

December 31, 2020 December 31, 2019

Cash paid for amounts included in the measurement of lease liabilities:

6 unchanged sentences

Supplemental balance sheet information related to leases was as follows:

December 31, 2019

December 31, 2020 December 31, 2019

Operating Leases

3 unchanged sentences

Total operating lease liabilities $ 869.6 $ 803.1

December 31, 2019

Finance Leases

10 unchanged sentences

Maturities of lease liabilities are as follows:

Year Ended December 31, 2019

Operating Leases

Finance Leases

Year Ended December 31, 2020 Operating Leases Finance Leases

2021 $ 206.1 $ 12.7

2022 162.9 11.6

2023 119.8 11.4

2024 85.8 10.5

2025 71.5 7.7

Thereafter 354.8 89.2

Total lease payments $ 1,000.9 $ 143.1

2 unchanged sentences

Total maturities, due beyond one year $ 677.6 $ 84.4

Rental expense for short term leases with a term less than one year for the year ended December 31, 2019 , amounted to $ 10.6 .

The Company has variable lease payments that do not depend on a rate or index, primarily for purchase volume commitments, which are recorded as variable cost when incurred.

Total variable payments for the year ended December 31, 2019 , were $ 20.8 .

As of December 31, 2019 , the Company has entered into approximately 3 additional operating leases, for patient service centers, that have not yet commenced and are not significant to the overall lease portfolio.

These operating leases will commence in 2020 with lease terms ranging from 5 to 9 years.

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

1 unchanged sentence

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

The Company leases various facilities and equipment under non-cancelable lease arrangements.

Future minimum rental commitments for leases with non-cancelable terms of one year or more at December 31, 2018 under Accounting Standard Codification 840 are as follows:

Operating Leases

Finance Leases

Rental expense, which includes rent for real estate, equipment and automobiles under operating leases,under ASC 842 amounted to $ 393.1 for the year ended December 31, 2019 .

Rent expense, which includes rent for real estate, equipment and automobiles under operating leases under ASC 840 amounted to $ 358.7 and $ 313.8 for the years ended December 31, 2018 and 2017 , respectively.

Rent expense for short term leases with a term less than one year for the years ended December 31, 2020 and 2019 amounted to $ 6.8 and $ 10.6 , respectively.

The Company has variable lease payments that do not depend on a rate index, primarily for purchase volume commitments, which are recorded as variable cost when incurred.

Total variable payments for the year ended December 31, 2020 and 2019 were $ 26.7 and $ 20.8 .

As of December 31, 2020, the Company has entered into two additional operating leases, for patient service centers that have not yet commenced and are not significant to the overall lease portfolio.

These operating leases will commence in 2021 with lease terms of three years.

Rent expense, which includes rent for real estate, equipment and automobiles under operating leases under ASC 840 amounted to $ 358.7 for the year ended December 31, 2018.

JOINT VENTURE PARTNERSHIPS AND EQUITY METHOD INVESTMENTS

At December 31, 2020, the Company had investments in the following unconsolidated joint venture partnerships and equity method investments:

Net Investment

Interest Owned

Locations Net Investment Interest Owned

Joint Venture Partnerships :

3 unchanged sentences

Equity Method Investments :

Various 7.2 various

The joint venture partnerships are governed by agreements that mandate unanimous agreement between partners on all major business decisions as well as providing other participating rights to each partner.

12 unchanged sentences

ACCOUNTS RECEIVABLE

December 31, 2019

LCD accounts receivable

CDD accounts receivable

Less CDD allowance for doubtful accounts

December 31, 2020 December 31,

Dx accounts receivable $ 1,515.5 $ 798.1

DD accounts receivable 986.4 764.8

Less DD allowance for doubtful accounts ( 22.1 ) ( 19.0 )

Accounts receivable $ 2,479.8 $ 1,543.9

3 unchanged sentences

PROPERTY, PLANT AND EQUIPMENT, NET

December 31, 2019

December 31, 2018

December 31, 2020 December 31, 2019

Land $ 99.4 $ 90.9

Buildings and building improvements 879.9 781.8

Machinery and equipment 1,522.3 1,345.1

Software 857.5 794.9

Leasehold improvements 440.0 411.7

2 unchanged sentences

Operating lease ROU assets 789.8 732.8

4,932.7 4,565.3

Less accumulated depreciation ( 2,203.1 ) ( 1,928.7 )

$ 2,729.6 $ 2,636.6

Depreciation expense and amortization of property, plant and equipment was $ 349.3 , $ 321.5 and $ 311.5 for 2020, 2019 and 2018, respectively, including software depreciation of $ 84.7 , $ 90.4 , and $ 92.7 for 2020, 2019 and 2018, respectively.

1 unchanged sentence

The changes in the carrying amount of goodwill (net of accumulated amortization) for the years ended December 31, 2020 and 2019 are as follows:

December 31, 2019

December 31, 2018

December 31, 2019

December 31, 2018

December 31, 2019

December 31, 2018

December 31, 2020 December 31, 2019 December 31, 2020 December 31, 2019 December 31, 2020 December 31, 2019

Balance as of January 1 $ 3,721.5 $ 3,638.8 $ 4,143.5 $ 3,721.5 $ 7,865.0 $ 7,360.3

Goodwill acquired during the year 75.8 80.2 90.4 414.3 166.2 494.5

Dispositions — — — ( 12.6 ) — ( 12.6 )

Impairment ( 3.7 ) — ( 418.7 ) — ( 422.4 ) —

Foreign currency impact and other adjustments to goodwill 6.6 2.5 136.1 20.3 142.7 22.8

1 unchanged sentence

The components of identifiable intangible assets are as follows:

December 31, 2019

December 31, 2018

December 31, 2020 December 31, 2019

Amount Accumulated

Amortization Net

Amount Accumulated

Amortization Net

Customer relationships $ 4,643.3 $ ( 1,534.9 ) $ 3,108.4 $ 4,441.7 $ ( 1,329.5 ) $ 3,112.2

1 unchanged sentence

Non-compete agreements 109.6 ( 70.7 ) 38.9 90.9 ( 60.5 ) 30.4

Trade names 401.8 ( 263.9 ) 137.9 408.2 ( 219.9 ) 188.3

Land use rights 10.9 ( 6.9 ) 4.0 10.9 ( 5.5 ) 5.4

Canadian licenses 489.8 — 489.8 480.3 — 480.3

$ 6,090.1 $ ( 2,129.0 ) $ 3,961.1 $ 5,885.6 $ ( 1,851.1 ) $ 4,034.5

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 the carrying value for two of its reporting units and recorded goodwill impairment of $ 418.7 and $ 3.7 for DD and Dx, respectively.

As part of the rebranding initiative, the Company reduced the estimated useful life of its trade name assets to reflect their anticipated use through December 2021.

This change in estimated useful life resulted in accelerated amortization of $ 27.5 in 2020.

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

A summary of amortizable intangible assets acquired during 2020, and their respective weighted average amortization periods are as follows:

Weighted Average

Amount Weighted Average

Amortization Period

Customer relationships $ 102.4 14.1

Land use rights

Trade name 0.2 2.4

Non-compete agreements 18.7 5.0

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Amortization of intangible assets, including amortization of the Canadian license recorded in other assets, was $ 275.4 , $ 243.2 and $ 231.7 in 2020, 2019 and 2018, respectively.

2 unchanged sentences

ACCRUED EXPENSES AND OTHER

December 31, 2019

December 31, 2018

December 31, 2020 December 31, 2019

Employee compensation and benefits $ 623.2 $ 474.6

Accrued taxes payable 374.8 156.7

Other 359.7 311.1

$ 1,357.7 $ 942.4

OTHER LIABILITIES

December 31, 2019

December 31, 2018

December 31, 2020 December 31, 2019

Defined-benefit plan obligation $ 220.5 $ 188.4

Deferred compensation plan obligation 89.2 76.7

Other 216.7 118.1

$ 526.4 $ 383.2

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

December 31, 2019

December 31, 2018

Zero-coupon convertible subordinated notes

December 31, 2020 December 31, 2019

4.625% senior notes due 2020 — 413.7

2019 term loan 375.0 —

Debt issuance costs ( 0.4 ) ( 0.7 )

2 unchanged sentences

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

December 31, 2019

December 31, 2018

4.625% senior notes due 2020

2.625% senior notes due 2020

December 31, 2020 December 31, 2019

3.75% senior notes due 2022 500.0 500.0

8 unchanged sentences

2019 term loan — 375.0

2017 term loan

Debt issuance costs ( 37.1 ) ( 42.2 )

Note payable 6.1 7.0

Total long-term debt $ 5,419.0 $ 5,789.8

Credit Facilities

On June 3, 2019, the Company entered into a new $ 850.0 term loan (the 2019 Term Loan).

The 2019 Term Loan will mature

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

1 unchanged sentence

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

on June 3, 2021.

Credit Facilities

On June 3, 2019, the Company entered into a new $ 850.0 term loan (the 2019 Term Loan).

The 2019 Term Loan will mature on June 3, 2021.

Proceeds of the 2019 Term Loan were used to repay approximately $ 250.0 of the 2017 Term Loan and to fund the acquisition of Envigo's nonclinical research services business.

1 unchanged sentence

As of December 31, 2020, the effective interest rate on the 2019 Term Loan was 0.95 %.

On September 15, 2017, the Company entered into a new $ 750.0 term loan (the 2017 Term Loan).

On September 15, 2017, the Company entered into a $ 750.0 term loan (the 2017 Term Loan).

The 2017 Term Loan accrued interest at a per annum rate equal to, at the Company's election, either a LIBOR rate plus a margin ranging from 0.875% to 1.50 %, or a base rate determined according to a prime rate or federal funds rate plus a margin ranging from 0.0% to 0.50% .

9 unchanged sentences

The Company was in compliance with all covenants in its term loans and the revolving credit facility at December 31, 2020, and December 31, 2019.

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

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

The amendments also provide that during any period in which the Company's leverage ratio exceeds 4.5 x debt to last twelve months EBITDA (i) the Company will be prohibited from consummating share repurchases, subject to limited exceptions, (ii) borrowings under the revolving credit facility will accrue interest at a per annum rate equal to, at the Company's election, either a LIBOR rate plus a margin of 1.25 % or a base rate plus a margin of 0.25 %, (iii) the facility fee that the Company is required to pay on the 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 4.5 x debt to last twelve months EBITDA as of December 31, 2020.

The Company’s availability of $ 997.0 at December 31, 2020, under its revolving credit facility is reduced by the amount of the Company's outstanding letters of credit.

Zero-Coupon Convertible Subordinated Notes

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 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.

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

The Company had $ 8.6 aggregate principal amount at maturity of zero-coupon convertible subordinated notes due 2021 outstanding at December 31, 2018 .

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 of 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 Company recorded a loss of $ 4.0 on the extinguishment of the 2.625 % Senior Notes and part of the outstanding 4.625 % Senior Notes.

During the first quarter of 2018, the Company entered into six U.S.

dollar (USD) to Swiss Franc cross-currency swap agreements with an aggregate notional value of $ 600.0 and which were accounted for as a hedge against its net investment in a Swiss subsidiary.

Of the notional value, $ 300.0 was due to mature in 2022 and $ 300.0 was due to mature in 2025.

These cross currency swaps maturing in 2022 and 2025 were settled on December 10, 2018 in cash.

During the fourth quarter of 2018, the Company entered into six new USD to Swiss Franc cross-currency swap agreements with an aggregate notional value of $ 600.0 and which are accounted for as a hedge against its net investment in a Swiss subsidiary.

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

These cross currency swaps maturing in 2022 and 2025 are included in other long-term assets with an aggregate fair value of $ 0.2 and $ 3.0 , respectively, as of December 31, 2019 .

Changes in the fair value of the cross-currency swaps are charged or credited through accumulated other comprehensive income in the Consolidated Balance Sheet until the hedged item is recognized in earnings.

During 2019, the Company settled notices to convert $ 8.6 aggregate principal amount at maturity of its zero-coupon subordinated 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 all remaining outstanding zero-coupon notes that had not previously converted.

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.

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

1 unchanged sentence

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

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 of 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 Company recorded a loss of $ 4.0 on the extinguishment of the 2.625 % Senior Notes and part of the outstanding 4.625 % Senior Notes.

The scheduled payments of long-term debt at the end of 2020 are summarized as follows:

Thereafter 2,156.1

Total scheduled payments 5,832.8

Less total debt issuance costs

Less long-term debt issuance costs ( 37.1 )

Total long-term debt 5,795.7

3 unchanged sentences

The Company is authorized to issue up to 265.0 shares of common stock, par value $ 0.10 per share.

Common shares issued and outstanding are summarized in the following table:

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

2 unchanged sentences

Common Shares Issued

2020 2019 2018

Common stock issued at January 1 97.2 122.4 125.1

5 unchanged sentences

Common Shares Held in Treasury

2020 2019 2018

Common shares held in treasury at January 1 — 23.5 23.2

5 unchanged sentences

Share Repurchase Program

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 $ 1,250.0 of the Company’s shares.

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 its board of directors to purchase $ 900.0 of Company common stock.

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

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

Remaining amounts are recognized as a reduction in retained earnings.

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

The repurchase authorization has no expiration date.

The Company reinstated its share repurchase program in October 2020 following the temporary suspension of stock repurchases beginning in March 2020 due to the COVID-19 pandemic.

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

3 unchanged sentences

The components of accumulated other comprehensive earnings are as follows:

Adjustments Net

Adjustments Accumulated

Comprehensive

1 unchanged sentence

Current year adjustments

Amounts reclassified from accumulated other comprehensive income for settlement charge

Amounts reclassified from accumulated other comprehensive income (a)

104.4 ( 22.5 ) 81.9

Amounts reclassified from accumulated other comprehensive earnings (a) — 5.1 5.1

Tax effect of adjustments

1 unchanged sentence

Current year adjustments

Amounts reclassified from accumulated other comprehensive income (a)

264.1 ( 72.9 ) 191.2

Amounts reclassified from accumulated other comprehensive earnings (a) — 7.2 7.2

Tax effect of adjustments

3 unchanged sentences

The sources of income before taxes, classified between domestic and foreign entities are as follows:

2020 2019 2018

Domestic $ 1,846.5 $ 784.4 $ 937.7

Foreign 372.5 320.5 330.6

Total pre-tax income $ 2,219.1 $ 1,104.9 $ 1,268.3

1 unchanged sentence

Years Ended December 31,

A net benefit of $ 1.6 , $ 10.2 and $ 16.9 in excess stock-based compensation was recorded directly to income tax expense in the years ended December 31, 2019 , 2018 and 2017 respectively.

The gross benefit was reduced by the Internal Revenue Code Section 162(m) disallowance for non-deductible stock compensation of $ 30.0 , $ 5.9 and $ 2.0 for the years ended December 31, 2019 , 2018 , and 2017 , respectively.

The 2019 Section 162(m) disallowance includes the accelerated expensing of stock-based compensation for executive retirement.

2020 2019 2018

Federal $ 455.3 $ 126.7 $ 225.8

State 172.8 40.2 61.2

Foreign 81.0 83.9 64.3

$ 709.1 $ 250.8 $ 351.3

Federal $ ( 6.7 ) $ 38.2 $ ( 2.5 )

State ( 28.1 ) 2.5 30.0

Foreign ( 12.2 ) ( 11.5 ) 5.6

( 47.0 ) 29.2 33.1

$ 662.1 $ 280.0 $ 384.4

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

4 unchanged sentences

Years Ended December 31,

2020 2019 2018

Statutory U.S.

rate 21.0 % 21.0 % 21.0 %

State and local income taxes, net of U.S.

1 unchanged sentence

Foreign earnings taxed at lower rates than the statutory U.S.

rate ( 0.4 ) ( 0.1 ) ( 0.3 )

Restructuring and acquisition items — 0.7 1.9

Share-based compensation

Re-measurement of deferred taxes — — 2.4

Deferred taxes on unremitted foreign earnings

Repatriation tax — — 1.2

Impairment of assets 4.0 — —

GILTI ( 0.1 ) 1.1 1.0

Other — ( 0.6 ) ( 0.3 )

Effective rate 29.8 % 25.3 % 30.3 %

In December 2017, the U.S.

enacted the Tax Cuts and Jobs Act (TCJA), which made widespread changes to the Internal Revenue Code.

The TCJA, among other things, reduced the U.S.

federal corporate tax rate from 35.0 % to 21.0 % beginning January 1, 2018, requires companies to pay a repatriation tax on earnings of certain foreign subsidiaries that were previously not subject to U.S.

tax, and created new income taxes on certain foreign sourced earnings.

Also on December 22, 2017, the U.S.

On December 22, 2017, the U.S.

Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin No.

118 (SAB 118), which provided companies with additional guidance on how to account for the TCJA in its financial statements, allowing companies utilize a one year measurement period.

At December 31, 2017, the Company had not completed the accounting for the tax effects of enactment of the TCJA;

however, a reasonable estimate on the re-measurement of the Company's existing deferred tax balances, the deferred tax revaluation for unremitted foreign earnings, and the one-time repatriation tax was made.

For these items, in accordance with SAB 118, a provisional net benefit was recognized, totaling $ 519.0 , which is included as a component of income tax expense from continuing operations.

The Company continued to assess the impact of TCJA throughout the 2018 calendar year and finalized the SAB 118 provisional estimate in the fourth quarter of 2018.

For 2018, the Company recorded a total tax expense of $ 45.0 , $ 14.8 related to the repatriation tax and $ 30.1 for the remeasurement of deferred taxes.

Overall a net benefit of $ 474.0 was recorded for TCJA tax provisions effective as of the end of 2018.

As additional regulations or guidance in relation to the TCJA are issued, the Company will analyze and record the necessary impacts during the quarter in which this occurs.

118 (SAB 118), which allowed companies one year to finalize the tax accounting for the 2017 enacted Tax Cuts and Jobs Act (TCJA) in its financial statements.

Under SAB 118, in 2018 the Company recorded a total tax expense of $ 45.0 , $ 14.8 related to the TCJA repatriation tax and $ 30.1 for the remeasurement of deferred taxes.

The TCJA includes provisions relating to global low-taxed intangible income (GILTI).

1 unchanged sentence

The Company will account for GILTI as a periodic charge in the period it arises.

The Company recorded $ 11.8 and $ 13.0 in 2019 and 2018 for GILTI, which is included as a component of income tax expense from continuing operations.

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are as follows:

December 31, 2019

December 31, 2018

December 31, 2020 December 31, 2019

Deferred tax assets:

4 unchanged sentences

Tax loss carryforwards 206.8 207.1

Other 126.8 62.9

valuation allowance ( 167.6 ) ( 145.4 )

4 unchanged sentences

Property, plant and equipment ( 203.9 ) ( 194.6 )

Other ( 46.3 ) ( 57.4 )

Total gross deferred tax liabilities ( 1,342.2 ) ( 1,339.8 )

1 unchanged sentence

The table below provides a rollforward of the valuation allowance.

December 31, 2019

December 31, 2018

December 31, 2017

December 31, 2020 December 31, 2019 December 31, 2018

Beginning balance $ 145.4 $ 156.9 $ 153.5

6 unchanged sentences

however, at this time, the Company expects to fully utilize substantially all U.S.

federal tax loss carryforwards with the exception of approximately $ 3.9 for which a full valuation allowance has been provided.

federal tax loss carryforwards with the exception of approximately $ 3.9 for which a full valuation

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

allowance has been provided.

The Company has U.S.

state tax loss carryforwards of $ 540.3 , which also expire periodically through 2038, and on which a valuation allowance of $ 340.0 has been provided.

In addition to federal and state tax loss carryforwards, the Company has other federal and state attribute carryforwards of $ 252.5 .

In addition to federal and state tax loss carryforwards, the Company has other federal and state attribute carry forwards of $ 288.6 .

These attribute carryforwards have indefinite lives and a valuation allowance of $ 229.6 .

The Company has foreign tax loss carryforwards of $ 116.9 which have an indefinite life and on which a valuation allowance of $ 26.7 has been provided, as well as foreign tax loss carryforwards of $ 443.8 which expire in 2034 that have a full valuation allowance.

The Company has foreign tax loss carryforwards of $ 59.1 which have an indefinite life and on which a valuation allowance of $ 25.9 has been provided, as well as foreign tax loss carryforwards of $ 502.9 which expire periodically through 2034 that have a full valuation allowance.

In addition to the foreign net operating losses, the Company has a foreign capital loss carryforward of $ 6.9 .

The foreign capital loss carryforward has an indefinite life and has a full valuation allowance.

The valuation allowance decreased from $ 156.9 in 2018 to $ 145.4 in 2019 primarily due to issuance of final guidance for tax laws affecting anticipated utilization of state NOLs.

The valuation allowance increased from $ 145.4 in 2019 to $ 167.6 in 2020 primarily due to capital loss disallowances during the year that are not expected to be realized for tax purposes and for Swiss net operating losses not expected to be realized as a result of the finalization of the Envigo acquisition.

Unrecognized income tax benefits were $ 48.8 and $ 31.7 at December 31, 2020, and 2019, respectively.

4 unchanged sentences

During the years ended December 31, 2020, 2019 and 2018, the Company recognized $ 4.4 , $ 2.0 and $ 1.8 , respectively, in interest and penalties expense, which was offset by a benefit from reversing previous accruals for interest and penalties of $ 3.0 , $ 5.8 and $ 0.5 , respectively.

During 2019, the Company paid interest of $ 0.2 , and $ 0.8 was added to the accrued interest from the opening balance sheet of an acquisition.

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

As of December 31, 2020 and 2019 interest expense of $ 1.4 , and $0.8, respectively, was added to accrued interest from the opening balance sheet of an acquisition.

The following table shows a reconciliation of the unrecognized income tax benefits, excluding interest and penalties, from uncertain tax positions for the years ended December 31, 2020, 2019 and 2018:

2020 2019 2018

Balance as of January 1 $ 31.7 $ 18.0 $ 19.5

4 unchanged sentences

Balance as of December 31 $ 48.8 $ 31.7 $ 18.0

As of December 31, 2019 , and 2018 , $ 31.7 and $ 18.0 , respectively, are the approximate amounts of unrecognized income tax benefits that, if recognized, would favorably affect the effective income tax rate in any future periods.

Also included in the balance of unrecognized tax benefits as of December 31, 2020, 2019 and 2018, are $ 2.1 , $ 0.0 and $ 0.0 , respectively, of tax benefits that, if recognized, would result in adjustments to other tax accounts, primarily deferred taxes.

As of December 31, 2020, 2019 and 2018 there are $ 46.7 , $ 31.7 and $ 18.0 , respectively, of tax benefits that, if recognized would favorably affect the effective income tax rate.

The Company has substantially concluded all U.S.

1 unchanged sentence

Substantially all material state and local and foreign income tax matters have been concluded through 2014 and 2010, respectively.

The Internal Revenue Service concluded the examination of Covance Inc.'s 2013 federal consolidated income tax return in the third quarter of 2018.

There were no material changes as a result of the audit.

The Company is appealing a Canada Revenue Agency assessment related to the 2014 income tax return.

5 unchanged sentences

The Company still considers the earnings of its foreign subsidiaries to be permanently reinvested, but if repatriation were to occur the Company would be required to accrue U.S.

taxes, if any, and applicable withholding taxes as appropriate.

taxes, if any, and remit applicable withholding taxes as appropriate.

The Company has unremitted earnings and profits of $ 702.4 and $ 601.4 that are permanently reinvested in its foreign subsidiaries as of December 31, 2020, and 2019, respectively.

A determination of the amount of the unrecognized deferred tax liability related to these undistributed earnings is not practicable due to the complexity and variety of assumptions necessary based on the manner in which the undistributed earnings would be repatriated.

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

STOCK COMPENSATION PLANS

Stock Incentive Plans

There are currently 9.8 shares authorized for issuance under the Laboratory Corporation of America Holdings 2016 Omnibus Incentive Plan (the Plan), and at December 31, 2019 there were 6.3 additional shares available for grant under the Plan.

The Plan was approved by shareholders at the 2016 annual meeting.

In 2016, the shareholders approved the Laboratory Corporation of America Holdings 2016 Omnibus Incentive Plan (the Plan).

Under the Plan, as of December 31, 2020, there are 9.4 shares authorized for issuance and 5.4 shares available for grant.

Stock Options

1 unchanged sentence

Stock options are generally granted at an exercise price equal to or greater than the fair market price per share on the date of grant.

Also, for each grant, options vest ratably over a period of three years on the anniversaries of the grant date, subject to their earlier expiration or termination.

Also, for each grant, options vest ratably over a period of three years on the anniversaries of the grant date, and have a contractual exercise period of 10 years subject to their earlier expiration or termination.

Changes in options outstanding under the plans for the period indicated were as follows:

Weighted-Average

Options Weighted-Average

Exercise Price

Weighted-Average

Contractual Term

per Option Weighted-Average

Contractual Term Aggregate

Outstanding at December 31, 2019 0.6 125.26

Granted 0.1 182.71

Exercised ( 0.2 ) 93.55

Outstanding at December 31, 2020 0.5 148.39 6.5 $ 27.5

Vested and expected to vest at December 31, 2019

Exercisable at December 31, 2020 0.3 126.55 4.9 $ 20.5

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

would have been received by the option holders had all option holders exercised their options on December 31, 2019 .

The amount of intrinsic value will change based on the fair market value of the Company’s stock.

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the Company’s closing stock price on the last trading day of 2020 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on December 31, 2020.

Cash received by the Company from option exercises, the actual tax benefit realized for the tax deductions and the aggregate intrinsic value of options exercised from option exercises under all share-based payment arrangements during the years ended December 31, 2020, 2019, and 2018 were as follows:

2020 2019 2018

Cash received by the Company $ 17.5 $ 27.6 $ 37.5

2 unchanged sentences

The following table shows the weighted average grant-date fair values of options issued during the respective year and the weighted average assumptions that the Company used to develop the fair value estimates:

2019 Grant Dates

Fair value per option $ 40.06 $ 33.70

Valuation assumptions

Weighted average expected life (in years) 6.0 6.0

1 unchanged sentence

Expected volatility 20.3 % 20.4 %

Expected dividend yield

Expected dividend yield N/A N/A

The Black Scholes model incorporates assumptions to value stock-based awards.

5 unchanged sentences

For 2020, 2019 and 2018, expense related to the Company’s stock option plan totaled $3.4, $5.9 and $3.5, respectively, and is included in selling, general and administrative expenses.

The Company did not grant any options to employees during 2017 .

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Restricted Stock, Restricted Stock Units and Performance Shares

8 unchanged sentences

The following table shows a summary of non-vested shares for the year ended December 31, 2020:

Weighted-Average

Shares Weighted-Average

Grant Date Fair Value

Non-vested at January 1, 2020 1.3 $ 152.70

Granted 0.7 182.88

Vested ( 0.6 ) 144.55

Canceled ( 0.1 ) 167.56

Non-vested at December 31, 2019 1.3 $ 170.04

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

As of December 31, 2020, there was $ 115.5 of total unrecognized compensation cost related to non-vested stock options, restricted stock, restricted stock unit and performance share-based compensation arrangements granted under the Company's stock incentive plans.

2 unchanged sentences

Under the 2016 Employee Stock Purchase Plan, the Company is authorized to issue 1.8 shares of common stock.

The plan permits substantially all employees to purchase a limited number of shares of Company stock at 85 % of market value.

The plan permits substantially all U.S.

employees to purchase a limited number of shares of Company stock at 85 % of market value.

The Company issues shares to participating employees semi-annually in January and July of each year.

Approximately 0.2 shares were purchased by eligible employees in each of 2019 , 2018 and 2017 , respectively, under either the 2016 Employee Stock Purchase Plan or the prior plan, which began in 1997 and was amended in 1999, 2004, 2008 and 2012.

Approximately 0.3 , 0.2 and 0.2 shares were purchased by eligible employees in 2020, 2019 and 2018, respectively.

For 2020, 2019 and 2018, expense related to the Company’s employee stock purchase plan was $ 10.3 , $ 9.9 and $ 8.0 , respectively.

1 unchanged sentence

The fair value of the employee’s purchase right and the assumptions used in its calculation are as follows:

2020 2019 2018

Fair value of the employee’s purchase right $ 35.49 $ 31.84 $ 34.43

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The Company works cooperatively to respond to appropriate requests for information.

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

The Company also is named from time to time in suits brought under the qui tam provisions of the False Claims Act and comparable state laws.

11 unchanged sentences

When loss contingencies are not both probable and estimable, the Company does not establish separate reserves.

The Company is unable to estimate a range of reasonably probable loss for the proceedings described in more detail below in which damages either have not been specified or, in the Company's judgment, are unsupported and/or exaggerated and (i) the

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

proceedings are in early stages;

(ii) there is uncertainty as to the outcome of pending appeals or motions;

1 unchanged sentence

and/or (iv) there are novel legal issues to be presented.

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

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

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

19 unchanged sentences

On October 5, 2018, the Company received a second Civil Investigative Demand from the State of Texas Office of the Attorney General requesting documents related to its billing to Texas Medicaid.

The Company is cooperating with this request.

The Company cooperated with this request.

On January 26, 2021, the Company was notified that a qui tam Petition was pending under seal in the District Court, 250 th Judicial District, Travis County, Texas, and that the State of Texas has intervened.

The petition remains under seal.

If the petition is unsealed and served upon the Company, the Company will vigorously defend the lawsuit.

On August 31, 2015, the Company was served with a putative class action lawsuit, Patty Davis v.

2 unchanged sentences

The lawsuit seeks injunctive relief and actual and statutory damages, as well as recovery of attorney's fees and legal expenses.

In April 2017, the Circuit Court granted the Company's Motion for Judgment on the Pleadings.

In April 2017, the Circuit Court granted the Company’s Motion for

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Judgment on the Pleadings.

The Plaintiff appealed the Circuit Court’s ruling to the Florida Second District Court of Appeal.

1 unchanged sentence

On February 17, 2020, the Florida Supreme Court accepted jurisdiction of the lawsuit.

The Court held oral arguments on December 9, 2020.

The Company will vigorously defend the lawsuit.

19 unchanged sentences

(Sequenom) between August 15, 2016 and August 24, 2016, six putative class-action lawsuits were filed on behalf of purported Sequenom stockholders (captioned Malkoff v.

Sequenom, Inc., et al.

Sequenom, Inc., et al., No.

16-cv-02054- JAH-BLM , Gupta v.

Sequenom, Inc., et al.

Sequenom, Inc., et al ., No.

16-cv-02084-JAH-KSC, Fruchter v.

Sequenom, Inc., et al.

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Sequenom, Inc., et al ., No.

16-cv-02101- WQH-KSC, Asiatrade Development Ltd.

10 unchanged sentences

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

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

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

The actions sought, among other things, injunctive relief enjoining the merger.

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Supreme Court's anticipated decision in Emulex Corp.

Varjabedian .

On April 23, 2019, however, the U.S.

11 unchanged sentences

Laboratory Corporation of America Holdings , was filed in the U.S.

District Court for the Middle District of North Carolina.

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Court for the Middle District of North Carolina.

The complaint contained similar allegations and sought similar relief to the Bouffard complaint, and added additional counts regarding state consumer protection laws.

3 unchanged sentences

The Company will vigorously defend the lawsuit.

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

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

The complaint alleges that Covance Inc.

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

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

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

District Court for the Central District of California.

The Company will vigorously defend the lawsuit.

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

The Company is cooperating with the DOJ.

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

Laboratory Corporation of America Holdings, et al.

, filed in the U.S.

District Court for the Middle District of Florida.

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

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

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

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

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

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

In January 2020, the parties settled the lawsuit.

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

20 unchanged sentences

The Company will vigorously defend the multi-district litigation.

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

Lance Berberian, et al.

, filed in the Court of Chancery of the State of Delaware on April 23, 2020.

The complaint asserts derivative claims on the Company’s behalf against the Company’s board of directors and certain executive officers.

The complaint generally alleges that the defendants failed to ensure that the Company utilized proper cybersecurity safeguards and failed to implement a sufficient response to data security incidents, including the AMCA Incident.

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

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

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

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

The lawsuit will be vigorously defended.

Certain governmental entities have requested information from the Company related to the AMCA Incident.

The Company has received requests for information from the Office of Civil Rights of the Department of Health and Human Services, and from a multi-state group of state Attorneys General.

The Company is cooperating with these requests for information.

The Company received a request for information from the Office for Civil Rights (OCR) of the Department of Health and Human Services.

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

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

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

On September 21, 2018, the Company was served with a putative class action lawsuit, Alma Haro v.

Laboratory Corporation of America, et al.

, filed in the Superior Court of California, County of Los Angeles.

Laboratory Corporation of

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

America, et al ., filed in the Superior Court of California, County of Los Angeles.

On June 10, 2019, the Company was served with a putative class action lawsuit, Ignacio v.

2 unchanged sentences

Laboratory Corporation of America , filed in the Superior Court of California, County of Sacramento.

All three cases were subsequently removed to the U.S.

All three lawsuits were subsequently removed to the U.S.

District Court for the Central District of California, and then consolidated for all pre-trial proceedings.

In the lawsuits, Plaintiffs allege that employees were not properly paid overtime compensation, minimum wages, meal and rest break premiums, did not receive compliant wage statements, and were not properly paid wages upon termination of employment.

In the lawsuits, the Plaintiffs allege that employees were not properly paid overtime compensation, minimum wages, meal and rest break premiums, did not receive compliant wage statements, and were not properly paid wages upon termination of employment.

The Plaintiffs assert these actions violate various California Labor Code provisions and constitute an unfair competition practice under California law.

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

The Company will vigorously defend the lawsuits.

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

Covance, Inc.

, filed in the U.S.

District Court for the Eastern District of Pennsylvania.

Plaintiff alleges that certain individuals employed by Covance Inc.

and Chiltern International Inc.

were misclassified as exempt employees under the Fair Labor Standards Act and the Pennsylvania Minimum Wage Act and were thereby not properly paid overtime compensation.

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

On February 3, 2020, the Court denied without prejudice the Plaintiff's motion to conditionally certify a class action.

The Company will vigorously defend the lawsuit.

On July 22, 2020, the Court issued an order granting preliminary approval of a settlement resolving all three lawsuits.

On November 18, 2020, the Court granted final approval of the settlement and settlement proceeds have been distributed.

On January 31, 2020, the Company was served with a putative class action lawsuit, Luke Davis and Julian Vargas, et al.

3 unchanged sentences

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

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

In August 2020, the Plaintiffs filed an Amended Complaint.

The Company will vigorously defend the lawsuit.

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

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

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

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

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

District Court for the Central District of California.

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

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

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

On October 28, 2020, the court issued an order staying proceedings in Bermejo II pending resolution of Bermejo I .

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

The Company will vigorously defend both lawsuits.

On August 14, 2020, the Company was served with a Subpoena Duces Tecum issued by the State of Colorado Office of the Attorney General requiring the production of documents related to urine drug testing in all states.

The Company is cooperating with this request.

On October 2, 2020, the Company was served with a putative class action lawsuit, Peterson v.

Laboratory Corporation of America Holdings , filed in the U.S.

District Court for the Northern District of New York, alleging claims for a failure to properly pay service representatives compensation for all hours worked and overtime under the Fair Labor Standards Act, as well as notice and recordkeeping claims under the New York Labor Code.

The lawsuit seeks monetary damages, liquidated damages, equitable and injunctive relief, and recovery of attorney's fees and costs.

The Company will vigorously defend the lawsuit.

On October 5, 2020, the Company was served with a putative class action lawsuit, Williams v.

Labcorp Employer Services, Inc.

et al., filed in the Superior Court of California, County of Los Angeles, alleging that certain non-exempt California-based employees were not properly compensated for work and overtime hours, not properly paid meal and rest break premiums, not reimbursed for certain business-related expenses, not properly paid for driving or wait times, and received inaccurate wage statements.

The Plaintiff also asserts claims for unfair competition under Section 17200 of the Business and Professional Code.

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

The Company will vigorously defend the lawsuit.

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

The Company is responsible for the uninsured portion of losses related primarily to general, professional and vehicle liability, certain medical costs and workers' compensation.

The self-insured retentions are on a per-

The self-insured retentions are on a

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

1 unchanged sentence

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

occurrence basis without any aggregate annual limit.

per-occurrence basis without any aggregate annual limit.

Provisions for losses expected under these programs are recorded based upon the Company's estimates of the aggregated liability of claims incurred.

PENSION AND POSTRETIREMENT PLANS

Retirement Plans

All employees eligible for the LCD defined-contribution retirement plan (401K Plan) receive a minimum 3 % non-elective contribution (NEC) concurrent with each payroll period.

Employees are not required to make a contribution to the LCD 401K Plan to receive the NEC.

The NEC is non-forfeitable and vests immediately.

The LCD 401K Plan also permits discretionary contributions by the Company of 1 % and 3 % of pay for eligible employees based on service.

In 2019 , 2018 , and 2017 , non-elective and discretionary contributions were $ 52.3 , $ 65.0 and $ 58.1 , while total expense was $ 65.6 , $ 63.6 and $ 59.1 , respectively.

All of the CDD U.S.

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

Chiltern employees were previously eligible to participate in the Chiltern 401K plan, which featured a maximum 3 % Company match, based upon a percentage of the employee's contributions.

The Chiltern 401K plan merged into the CDD 401K plan effective January 7, 2019.

The Company incurred expense of $ 73.9 , $ 66.3 , and $ 58.4 for the CDD 401K Plan in 2019 , 2018 and 2017 , respectively.

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

Pension Plans

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

Both plans have been closed to new participants since December 31, 2009.

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 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 Company made contributions to the Company Plan of $ 0.0 , $ 28.9 and $ 16.0 in 2019 , 2018 and 2017 , respectively.

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.

Projected pension expense for the Company Plan and the PEP is expected to decrease to $ 11.8 in 2020 .

This amount excludes any accelerated recognition of pension cost due to the total lump-sum payouts exceeding certain components of net periodic pension cost in a fiscal year.

If such levels were to be met in 2020 , the Company projects that it would result in additional pension expense of several million dollars.

The actual amount would be determined in the fiscal quarter when the lump-sum payments cross the threshold and would be based upon the plan's funded status and actuarial assumptions in effect at that time.

The Company plans to make contributions of $ 2.2 to the Company Plan and the PEP during 2020 .

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

Defined Contribution Retirement Plans

The Company has various defined contribution retirement plans (401K Plans).

Under these 401K Plans, employees can contribute a portion of their salary to the plan and the Company makes minimum non-elective contributions, discretionary contributions, and matching contributions, depending on the terms of the specific plan.

On January 1, 2021, all of the 401K Plans were modified to provide for 100% match of employee contributions up to 5% of their salary.

Total expense, for the years ended December 31, 2020, 2019, and 2018, was $ 141.8 , $ 139.5 and $ 129.9 , respectively.

Defined Benefit Pension Plans

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.

Net Periodic Benefit Costs

The components of the net periodic benefit costs for the defined benefit pension plans are as follows:

Plans Non-U.S.

Year ended December 31,

2020 2019 2018 2020 2019 2018

Service cost for benefits earned $ 5.1 $ 4.1 $ 5.2 2.1 5.7 6.0

2 unchanged sentences

Net amortization and deferral 9.7 10.9 11.7 0.4 — —

Defined-benefit plan costs

Amounts included in accumulated other comprehensive earnings consist of unamortized net loss of $ 111.2 .

The accumulated other comprehensive earnings that are expected to be recognized as components of the defined-benefit plan costs during 2020 are $ 10.2 related to amortization of the net loss.

For the year ended December 31, 2018 , the Company recorded a pension settlement charge of $ 7.5 recorded in Other, net on the Consolidated Statement of Operations as a result of lump sum distributions exceeding $ 16.5 threshold level for 2018.

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

A summary of the changes in the projected benefit obligations of the Company Plan and the PEP are summarized as follows:

Balance at January 1

Interest cost

Actuarial (gain) loss

Benefits and administrative expenses paid

Merger of Covance SERP

Balance at December 31

The Accumulated Benefit Obligation was $ 355.5 and $ 334.6 at December 31, 2019 and 2018 , respectively.

A summary of the changes in the fair value of plan assets follows:

Fair value of plan assets at beginning of year

Actual return on plan assets

Employer contributions

Benefits and administrative expenses paid

Fair value of plan assets at end of year

T he net funded status of the Company Plan and the PEP at December 31:

Funded status

Accrued expenses and other

Other liabilities

Weighted average assumptions used in the accounting for the Company Plan and the PEP are summarized as follows:

Discount rate for the Company Plan

Discount rate for the PEP

Expected long term rate of return for the Company Plan

The Company used the RP-2014 Mortality Tables to estimate life expectancy.

The weighted average expected long-term rate of return on assets of the Company Plan and PEP is based on the target asset allocation and the average rate of growth expected for the asset classes invested.

The rate of expected growth is derived from a combination of historic returns, current market indicators, the expected risk premium for each asset class over the risk-free rate, and the opinion of professional advisors.

The Company maintains an investment policy for the management of the Company Plan’s assets.

The objective of this policy is to build a portfolio designed to achieve a balance between investment return and asset protection by investing in indexed funds that are comprised of equities of high quality companies and in high quality fixed income securities which are broadly balanced and represent all market sectors.

The target allocations for plan assets are 50 % equity securities, 43 % fixed income securities and 7 % in other assets.

Equity securities primarily include investments in large-cap, mid-cap and small-cap companies located in the U.S.

and to a lesser extent international equities in developed and emerging countries.

Fixed income securities primarily include U.S.

Treasury securities, mortgage-backed bonds and corporate bonds of companies from diversified industries.

Other assets include investments in real estate.

The weighted average expected long-term rate of return for the Company Plan’s assets is as follows:

Weighted Average Expected

Long-Term Rate of Return

Equity securities

Fixed income securities

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

The fair values of the Company Plan’s assets at December 31, 2019 , and 2018 , by asset category are as follows:

Fair Value Measurements as of

December 31, 2019

Fair Value as of December 31, 2019

Using Fair Value Hierarchy

Asset Category

Equity securities:

large cap - blend (a)

mid cap - blend (b)

small cap - blend (c)

International equity - blend (d)

Real estate (e)

Fixed income securities:

fixed income (f)

U.S inflation protection income (g)

Total fair value of the Company Plan’s assets

Fair Value Measurements as of

December 31, 2018

Fair Value as of December 31, 2018

Using Fair Value Hierarchy

Asset Category

Equity securities:

large cap - blend (a)

mid cap - blend (b)

small cap - blend (c)

International equity - blend (d)

Commodities index (h)

Fixed income securities:

fixed income (f)

U.S inflation protection income (g)

Total fair value of the Company Plan’s assets

This category represents an equity index fund not actively managed that tracks the S&P 500 Index.

This category represents an equity index fund not actively managed that tracks the S&P mid-cap 400 Index.

This category represents an equity index fund not actively managed that tracks the Russell 2000 Index.

This category represents an equity index fund not actively managed that tracks the MSCI ACWI ex USA Index.

This category represents a real estate index fund not actively managed that tracks the Vanguard REIT Index.

This category primarily represents bond index funds not actively managed that track the Northern Trust U.S.

Aggregate Index a s well as an actively managed strategy which utilizes the Metropolitan West Total Return Bond Index as its primary prospectus benchmark.

This category primarily represents a bond index fund not actively managed that tracks the Northern Trust U.S.

This category represents a commodities index fund not actively managed that tracks the Dow Jones - UBS Commodity Index.

The following estimated benefit payments under the Company Plan and PEP, which were used in the calculation of projected benefit obligations, are expected to be paid as follows:

Years 2025 and thereafter

In addition to the PEP, as a result of the Covance acquisition, the Company also has a frozen non-qualified Supplemental Executive Retirement Plan (SERP).

The SERP, which is not funded, is intended to provide retirement benefits for certain employees

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

who were executive officers of Covance prior to the acquisition.

Benefit amounts are based upon years of service and compensation of the participating employees.

As of December 31, 2018, the SERP was combined with the PEP.

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.

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 has been to contribute annually a fixed percentage of the eligible employee's salary, and additional amounts, at least equal to the local statutory funding requirements.

All plans have a measurement date of December 31.

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 related net pension obligation of $ 46.6 , based on the preliminary valuation of acquired assets and assumed liabilities, is reported under Other liabilities in the Consolidated Balance Sheet as of December 31, 2019.

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

The Envigo plan has a measurement date of December 31.

Plans disclosures below are inclusive of the Envigo plan for 2019.

The components of the defined-benefit plan costs for these plans for 2019 and 2018 are as follows:

Year Ended December 31, 2019

Year Ended December 31, 2018

Interest cost

Expected return on plan assets

Expected participant contributions — — — ( 0.1 ) ( 1.2 ) ( 1.3 )

Settlements — — 7.5 — — —

Defined-benefit plan costs $ 11.0 $ 13.8 $ 20.9 ( 3.3 ) 0.4 0.1

Assumptions used to determine defined-benefit plan cost (Excluding Envigo Plan):

Discount rate

Expected return on assets

Salary increases

Assumptions used to determine defined-benefit plan cost (Envigo Plan):

Discount rate

Expected return on assets

Year Ended December 31, 2019

Net periodic benefit costs are recorded as a component of Operating income.

For the year ended December 31, 2018, the Company recognized a partial plan settlement charge of $ 7.5 as a component of Other, net.

The amounts recognized in accumulated other comprehensive earnings are as follows:

Plans Non-U.S.

Year ended December 31,

Interest cost

Defined-benefit plan costs

Assumptions used to determine defined-benefit plan cost:

Discount rate

Expected return on assets

Salary increases

The weighted average expected long-term rate of return on assets of the U.K Plans is based on the target asset allocation and the average rate of growth expected for the asset classes invested.

2020 2019 2020 2019

Net actuarial loss in accumulated other comprehensive earnings $ 108.8 $ 111.2 $ 99.7 $ 31.5

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

1 unchanged sentence

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

The change in the projected benefit obligation and plan assets, the funded status of the plan and a reconciliation of such funded status to the amounts reported in the consolidated balance sheet as of December 31, 2019 , and December 31, 2018 , is as follows:

Change in Projected Benefit Obligation

Balance at beginning of year

The change in the projected benefit obligation as of December 31, 2020, and December 31, 2019, is as follows:

Plans Non-U.S.

Year Ended December 31,

2020 2019 2020 2019

Balance at beginning of the year $ 355.5 $ 334.6 $ 590.7 $ 294.1

Balance of acquired subsidiary at acquisition date — — — 215.4

Service cost 5.1 4.1 2.1 5.7

Interest cost 11.1 13.9 10.9 10.9

Actuarial (gain) loss 24.7 33.3 80.5 72.3

Benefits paid

Plan amendments

Foreign currency exchange rate changes

Benefits and administrative expenses paid ( 26.6 ) ( 30.4 ) ( 20.0 ) ( 11.6 )

Plan curtailment — — — ( 16.1 )

Balance at end of year

Change in Projected Benefit Obligation:

Balance at beginning of year

Interest cost

Actuarial (gain) loss

Benefits paid

Foreign currency exchange rate changes — — 25.9 20.0

Balance at end of year

Change in Fair Value of Assets:

Balance at beginning of year

Balance at end of the year $ 369.8 $ 355.5 $ 690.1 $ 590.7

The accumulated benefit obligation as of December 31, 2020 and 2019 was $ 369.8 and $ 355.5 , respectively for the U.S.

Plans and $ 683.3 and $ 585.8 , respectively for the Non-U.S.

The increase in the projected benefit obligation for the U.S.

Plans from December 31, 2019 to December 31, 2020 is primarily due to an increase of $ 30.8 as a result of discount rate and mortality rate changes partially offset by the net of normal plan progression and experience gains of $ 16.5 .

The increase in the projected benefit obligation for the Non-U.S.

Plans from December 31, 2019 to December 31, 2020 is primarily due to an increase of $ 83.2 as a result of discount rate changes and an increase of $ 25.9 due to foreign currency exchange rate changes, partially offset by the net of normal plan progress and experience gains of $ 9.8 .

Change in Fair Value of Plan Assets

The change in plan assets as of December 31, 2020, and December 31, 2019, is as follows:

Plans Non-U.S.

Year Ended December 31,

2020 2019 2020 2019

Balances at beginning of the year $ 262.1 $ 246.9 $ 491.7 $ 254.6

Plan assets of acquired subsidiary at acquisition date — — — 168.3

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Participant contributions — — 0.1 1.3

Actual return on assets

Benefits paid

Actual return on plan assets 32.3 43.4 32.8 48.8

Benefits and administrative expenses paid ( 26.6 ) ( 30.4 ) ( 19.6 ) ( 11.3 )

Foreign currency exchange rate changes — — 17.1 18.6

Fair value of plan assets at end of year $ 300.9 $ 262.1 $ 535.6 $ 491.7

Funded status

Other liabilities

Change in Funded Status and Reconciliation of Amounts Recorded in the Balance Sheet

The change in the funded status of the plan and a reconciliation of such funded status to the amounts reported in the consolidated balance sheet as of December 31, 2020, and December 31, 2019, is as follows:

Plans Non-U.S.

Year Ended December 31,

2020 2019 2020 2019

Funded status $ 68.9 $ 93.4 $ 154.5 $ 99.1

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Other liabilities 66.6 91.2 153.9 98.6

On December 31, 2019, the U.K.

plans were closed to future accrual, which resulted in an estimated reduction in the projected benefit obligation of the plans of $ 16.1 .

The reduction in the projected benefit obligation due to the plan revisions resulted in a

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

1 unchanged sentence

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

curtailment gain, which was recorded as a reduction to the unrecognized actuarial losses present in accumulated other comprehensive income as of December 31, 2019.

The Company contributed $ 11.4 in 2019 to the U.K.

Plans and expects to contribute $ 13.8 in 2020 .

No contributions were made to the German plan during 2019 , nor are any contributions expected to be made in 2020 , as the plan is unfunded.

The accumulated benefit obligation for the U.K.

Plans and the German Plan was $ 547.9 and $ 37.8 at December 31, 2019 , respectively.

The accumulated benefit obligation for the U.K.

Plans and the German Plan was $ 223.8 and $ 30.1 at December 31, 2018 , respectively.

The amounts recognized in accumulated other comprehensive income for the year ended December 31, 2019 , and December 31, 2018 , is as follows:

Net actuarial loss

Tax benefit (deferred tax asset)

Accumulated other comprehensive income impact

Assumptions used to determine benefit obligations:

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

Plans Non-U.S.

Year ended December 31,

2020 2019 2018 2020 2019 2018

Discount rate 3.3 % 4.3 % 3.6 % 1.7 % 2.2 % 2.1 %

Salary increases (excludes Envigo plan at 0%)

Net actuarial loss/(gain)

Tax expense (deferred tax liability)

Accumulated other comprehensive income impact

Assumptions used to determine benefit obligations:

Salary increases N/A N/A N/A 3.1 % 2.7 % 2.7 %

Expected long term rate of return 6.0 % 6.5 % 6.5 % 3.5 % 4.2 % 4.5 %

Cash balance interest credit rate 4.0 % 4.0 % 4.0 % N/A N/A N/A

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

Plans Non-U.S.

Year ended December 31,

2020 2019 2020 2019

Discount rate 2.3 % 3.3 % 1.2 % 1.9 %

Salary increases

The net actuarial loss for the U.K and German pension plans required to be amortized from accumulated other comprehensive income into net periodic pension cost in 2020 is expected to be $ 0.1 and $ 0.3 , respectively.

The investment policies for the U.K.

Plans are set by the plan trustees, based upon the guidance of professional advisors and after consultation with the Company, taking into consideration the plans’ liabilities and future funding levels.

The trustees have set the long-term investment policy largely in accordance with the asset allocation of a broadly diversified investment portfolio.

Assets for the U.K.

Plans are generally invested within the target ranges as follows:

Equity securities

Debt securities

The weighted average asset allocation of the U.K.

Pension Plans as of December 31, 2019 , by asset category is as follows:

December 31, 2019

Equity securities

Debt securities

Salary increases N/A N/A 2.0 % 3.3 %

The discount rate is determined using the weighted-average yields on high-quality fixed income securities that have maturities consistent with the timing of benefit payments.

Lower discount rates increase the size of the benefit obligation and generally increase pension expense in the following year;

higher discount rates reduce the size of the benefit obligation and generally reduce subsequent-year pension expense.

The expected return on plan assets is the estimated long-term rate of return that will be earned on the investments used to fund the pension obligations.

To determine this rate, the Company considers the composition of plan investments, historical returns earned, and expectations about the future.

The salary increase assumptions are used to estimate the annual rate at which pay of plan participants will grow.

If the rate of growth assumed increases, the size of the pension obligations will increase, as will the amount recorded in Accumulated other comprehensive income (loss) in our consolidated Statement of Financial Position and amortized into earnings in subsequent periods.

The Company evaluates other assumptions periodically, such as retirement age, mortality and turnover, and updates them as necessary to reflect our actual experience and expectations for the future.

Differences between actual results and assumptions utilized are recorded in Accumulated other comprehensive income each period.

These differences are amortized into earnings over the remaining average future service of active participating employees or the expected life of inactive participants, as applicable.

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

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

Investments are made in pooled investment funds.

Pooled investment fund managers are regulated by the Financial Conduct Authority in the U.K.

and operate under terms which contain restrictions on the way in which the portfolios are managed and require the managers to ensure that suitable internal operating procedures are in place.

The trustees have set performance objectives for each fund manager and routinely monitor and assess the managers’ performance against such objectives.

Annuities represent annuity buy-in insurance policies purchased by the plan trustees from large, financially sound insurers.

The cash flows from the annuities are intended to match the plan’s obligations to specific groups of participants, typically those participants currently receiving benefits.

The fair value of the Company’s U.K.

Plans' assets as of December 31, 2019 , and December 31, 2018 , by asset category, are as follows:

Fair Value Measurements as of

December 31, 2019

Using Fair Value Hierarchy

Asset Category

Mutual funds (a)

Annuities (b)

Total fair value of the Company Plan’s assets

Fair Value Measurements as of

December 31, 2018

Using Fair Value Hierarchy

Asset Category

Mutual funds (a)

Annuities (b)

Total fair value of the Company Plan’s assets

Mutual funds represent pooled investment vehicles offered by investment managers, which are generally comprised of investments in equities, bonds, property and cash.

The plans’ trustees hold units in these funds, the value of which is determined by the number of units held multiplied by the unit price calculated by the investment managers.

That unit price is derived based on the market value of the securities that comprise the fund, which are determined by quoted prices in active markets.

No element of the valuation is based on inputs made by the plans’ trustees.

Annuities represent annuity buy-in insurance policies, whereby the insurer pays the pension payments for the lifetime of the members covered.

The annuities are assets of the plan and payments from the insurer are made to the plans’ trustees, who then use those proceeds to pay the pensioners.

The cash flows from the annuities are intended to effectively match the payments to the pensioners covered by the policy.

As such, these assets are valued actuarially based upon the value of the liabilities with which they are associated.

As the valuation of these assets is judgmental, and there are no observable inputs associated with the valuation, these assets are classified as Level 3 in the fair value hierarchy.

Fair Value Measurement of Level 3 Pension Assets

The fair values of the assets at December 31, 2020, and 2019, by asset category are as follows:

Asset Category Level of Valuation Input Fair Value Investments valued using NAV per share Total

Cash and cash equivalents Level 1 $ 13.0 $ — $ 13.0

equity index funds — 105.5 105.5

International equity index funds — 45.7 45.7

Real estate — 15.0 15.0

General bond index funds — 121.7 121.7

Total fair value $ 13.0 $ 287.9 $ 300.9

Cash and cash equivalents Level 1 $ 6.8 $ — $ 6.8

Annuities Level 3 58.7 — 58.7

Pooled investment funds — 470.1 470.1

Total fair value $ 65.5 $ 470.1 $ 535.6

Asset Category Level of Valuation Input Fair Value Investments valued using NAV per share Total

Cash and cash equivalents Level 1 $ 4.3 $ — $ 4.3

equity index funds — 93.4 93.4

International equity index funds — 40.6 40.6

Real estate index fund — 12.7 12.7

General bond index funds — 111.1 111.1

Total fair value $ 4.3 $ 257.8 $ 262.1

Cash and cash equivalents Level 1 $ 2.6 $ — $ 2.6

Annuities Level 3 30.6 — 30.6

Pooled investment funds — 458.5 458.5

Total fair value $ 33.2 $ 458.5 $ 491.7

The fair market value of index funds and pooled investment funds are valued using the net asset value (NAV) unit price provided by the fund administrator.

The NAV is based on the value of the underlying assets owned by the fund.

The fair value of annuity investments are based on discounted cash flow techniques using unobservable valuation inputs such as discount rates and actuarial mortality tables.

Fair Value Measurement of Level 3 Pension Assets Annuities

Balance at January 1, 2019 $ 27.3

3 unchanged sentences

Balance at December 31, 2020 $ 58.7

Expected future benefit payments are as follows:

Years 2025 and thereafter

Investment Policies

Plan fiduciaries of various plans set investment policies and strategies, based on consultation with professional advisors, and oversee investment allocation, which includes selecting investment managers and setting long-term strategic targets.

The primary strategic investment objectives are balancing investment risk and return and monitoring the plan’s liquidity position in order to meet the near-term benefit payment and other cash needs.

Target allocation percentages are established at an asset class level by plan fiduciaries.

Target allocation ranges are guidelines, not limitations, and occasionally plan fiduciaries will approve allocations above or below a target range.

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

1 unchanged sentence

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

The weighted average asset allocation of the plan assets as of December 31, 2020, by asset category is as follows:

December 31, 2020

Plans Non-U.S.

Equity securities 50.3 % 47.2 %

Debt securities 40.4 % 34.6 %

Annuities — % 11.3 %

Real estate 5.0 % 4.0 %

Other 4.3 % 1.0 %

The weighted average target asset allocation of the plan assets is as follows:

U.S Plans Non U.S Plans

Equity securities 33.0 % to 62.0 % 45.0 % to 55.0 %

Debt securities 35.0 % to 52.0 % 29.0 % to 39.0 %

Annuities — % to — % 6.0 % to 13.0 %

Real estate 2.0 % to 8.0 % 2.0 % to 12.0 %

Other — % to 4.0 % — % to 5.0 %

Pension Funding and Cash Flows

The Company expects to make approximately $ 16.5 in required contributions to its defined benefit pension plans during 2021.

The Company targets funding the minimum required contributions but may make additional contributions into the pension plans in 2021, depending upon factors such as how the funded status of those plans change or to reduce the administrative costs of the plan.

The estimated benefit payments, which were used in the calculation of projected benefit obligations, are expected to be paid as follows:

2021 $ 26.8 $ 15.4

2022 27.0 16.4

2023 26.3 17.3

2024 25.7 18.7

2025 25.4 18.4

Years 2026 to 2035 116.0 102.8

Post-employment Retiree Health and Welfare Plan

As a result of the Covance acquisition, the Company sponsors a post-employment retiree health and welfare plan for the benefit of eligible employees at certain U.S.

The Company sponsors a post-employment retiree health and welfare plan for the benefit of eligible employees at certain U.S.

subsidiaries who retire after satisfying service and age requirements.

6 unchanged sentences

Year ended December 31,

2020 2019 2018

Service cost for benefits earned $ — $ — $ —

2 unchanged sentences

Post-retirement medical plan costs $ 0.6 $ 0.7 $ ( 1.0 )

Amounts included in accumulated other comprehensive earnings consist of unamortized net loss of $ 2.0 .

The accumulated other comprehensive earnings that are expected to be recognized as components of the post-retirement medical plan costs during 2020 are $ 0.3 related to amortization of the net gain resulting from the shift of Medicare-eligible participants to private exchanges.

Amounts included in accumulated other comprehensive earnings consist of unamortized net loss of $ 1.6 and $ 2.0 .

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

A summary of the changes in the accumulated post-retirement benefit obligation follows:

11 unchanged sentences

Deferred Compensation Plan

The Company has a Deferred Compensation Plan (DCP) under which certain of its executives may elect to defer up to 100.0 % of their annual cash incentive pay and/or up to 50.0 % of their annual base salary and/or eligible commissions subject to annual limits established by the U.S.

The Company has Deferred Compensation Plans (DCP) under which certain of its executives may elect to defer up to 100.0 % of their annual cash incentive pay and/or up to 50.0 % of their annual base salary and/or eligible commissions subject to annual limits established by the U.S.

The DCP provides executives a tax efficient strategy for retirement savings and capital accumulation without significant cost to the Company.

1 unchanged sentence

Amounts deferred by a participant are credited to a bookkeeping account maintained on behalf of each participant, which is used for measurement and determination of amounts to be paid to a participant, or his or her designated beneficiary, pursuant to the terms of the DCP.

The amounts accrued under this plan were $ 76.7 and $ 64.2 at December 31, 2019 , and 2018 , respectively.

Deferred amounts are the

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Company's general unsecured obligations and are subject to claims by the Company's creditors.

The amounts accrued under these plans were $ 89.2 and $ 76.7 at December 31, 2020, and 2019, respectively.

Deferred amounts are the Company's general unsecured obligations and are subject to claims by the Company's creditors.

The Company's general assets may be used to fund obligations and pay DCP benefits.

3 unchanged sentences

December 31, 2020

Balance Sheet Classification

Fair Value as of December 31, 2019

Using Fair Value Hierarchy

Noncontrolling interest put

Noncontrolling interest

Interest rate swaps

Other assets, net

Cross currency swaps

Other assets, net

Cash surrender value of life insurance policies

Other assets, net

Deferred compensation liability

Other liabilities

Investment in equity securities

Other current assets

Contingent consideration

Other liabilities

Balance Sheet Classification Fair Value as of December 31, 2020 Using Fair Value Hierarchy

Level 1 Level 2 Level 3

Noncontrolling interest put Noncontrolling interest $ 16.2 $ — $ 16.2 $ —

Cross currency swaps Other liabilities, net 40.4 — 40.4 —

Cash surrender value of life insurance policies Other assets, net 90.6 — 90.6 —

Deferred compensation liability Other liabilities 89.2 — 89.2 —

Contingent consideration Other liabilities 13.9 — — 13.9

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Fair Value Measurements as of

December 31, 2019

Balance Sheet Classification

Fair Value as of December 31, 2018

Using Fair Value Hierarchy

Noncontrolling interest put

Noncontrolling interest

Interest rate swap

Other liabilities

Cross currency swaps liability

Other liabilities

Cash surrender value of life insurance policies

Other assets, net

Deferred compensation liability

Other liabilities

Contingent consideration

Other liabilities

Fair Value Measurement of Level 3 Liabilities

Contingent Consideration

Balance Sheet Classification Fair Value as of December 31, 2019 Using Fair Value Hierarchy

Level 1 Level 2 Level 3

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

Interest rate swap Other liabilities 1.5 — 1.5 —

Cross currency swaps liability Other liabilities 3.2 — 3.2 —

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

Deferred compensation liability Other liabilities 76.7 — 76.7 —

Investment in equity securities Other current assets 9.1 9.1 — —

Contingent consideration Other liabilities 9.9 — — 9.9

Fair Value Measurement of Level 3 Liabilities Contingent Consideration

Balance at January 1, 2019 $ 18.6

Cash payments and adjustments ( 12.0 )

Balance at December 31, 2019 9.9

Addition 10.8

Cash payments and adjustments ( 6.8 )

Balance at December 31, 2020 $ 13.9

10 unchanged sentences

These contingent consideration liabilities were recorded at fair value on the acquisition date and are remeasured quarterly based on the then assessed fair value and adjusted if necessary.

The increases or decreases in the fair value of contingent

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

consideration payable can result from changes in anticipated revenue levels and changes in assumed discount periods and rates.

The increases or decreases in the fair value of contingent consideration payable can result from changes in anticipated revenue levels and changes in assumed discount periods and rates.

As the fair value measure is based on significant inputs that are not observable in the market, they are categorized as Level 3.

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

The fair market value of the zero-coupon subordinated notes, based on market pricing, was approximately $ 0.0 and $ 16.9 as of December 31, 2019 , and 2018 , respectively.

The fair market value of the Senior Notes, based on market pricing, was approximately $ 6,121.8 and $ 6,140.6 as of December 31, 2020, and 2019, respectively.

4 unchanged sentences

The Company does not believe that its exposure to market risk is material to the Company’s financial position or results of operations.

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Interest Rate Swap

1 unchanged sentence

The Company exited one of these swap arrangements in December 2019 in connection with the redemption of $ 187.9 of the 4.625 % Senior Notes due 2020.

These derivative financial instruments are accounted for as fair value hedges of the Senior Notes due 2020.

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

As the specific terms and notional amounts of the derivative financial instruments match those of the fixed-rate debt being hedged, the derivative instruments are assumed to be perfectly effective hedges and accordingly, there is no impact to the Company's consolidated statements of operations.

The Company exited the remaining fixed-to-variable interest rate swap agreement in August 2020, in connection with the redemption of the remaining $ 412.2 of its 4.625 % Senior Notes due November 15, 2020, and recorded a gain of $ 1.6 on the extinguishment.

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

These derivative financial instruments were accounted for as fair value hedges which increased or decreased the value of the Senior Notes with the offset being recorded as a component of other long-term assets or liabilities, as applicable.

As the specific terms and notional amounts of the derivative financial instruments match those of the fixed-rate debt being hedged, the derivative instruments were assumed to be perfectly effective hedges and accordingly, there is no impact to the Company's consolidated statements of operations.

Cash flows from the interest rate swaps are including in operating activities.

Carrying amount of hedged liabilities as of December 31,

Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Liabilities as of December 31,

Carrying amount of hedged liabilities as of December 31, Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Liabilities as of December 31,

2020 2019 2020 2019

Balance Sheet Line Item in which Hedged Items are Included

Current portion, long term debt

Long-term debt, less current portion — $ 301.5 — $ 1.5

5 unchanged sentences

Cross Currency Swaps

During the first quarter of 2018, the Company entered into six USD to Swiss Franc cross-currency swap agreements with an aggregate notional value of $ 600.0 and which were accounted for as a hedge against its net investment in a Swiss subsidiary.

Of the notional value, $ 300.0 were due to mature in 2022 and $ 300.0 were due to mature in 2025.

These cross currency swaps maturing in 2022 and 2025 were settled on December 10, 2018 in cash.

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

These cross currency swaps maturing in 2022 and 2025 are included in other long-term assets as of December 31, 2019 .

These cross currency swaps maturing in 2022 and 2025 with an aggregate fair value of $ 26.0 and $ 14.4 as of December 31, 2020, respectively, are included in other long-term liabilities.

These cross currency swaps maturing in 2022 and 2025 with an aggregate fair value of $ 0.2 and $ 3.0 as of December 31, 2019, respectively, are included in other long-term assets.

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

The cumulative amount of the fair value hedging adjustment included in the current value of the cross currency swaps is $ 6.0 for the year ended December 31, 2019 , and was recognized as currency translation within the Consolidated Statement of

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Comprehensive Earnings.

The cumulative amount of the fair value hedging adjustment included in the current value of the cross currency swaps is $( 40.4 ) for the year ended December 31, 2020, and was recognized as currency translation within the Consolidated Statement of Comprehensive Earnings.

There were no amounts reclassified from the Consolidated Statement of Comprehensive Earnings to the Consolidated Statement of Operations during the year ended December 31, 2020.

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

December 31, 2019

December 31, 2018

Fair Value of Derivative

Balance Sheet Caption

Dollar Notional

December 31, 2020 December 31, 2019

Fair Value of Derivative Fair Value of Derivative

Balance Sheet Caption Asset Liability U.S.

Dollar Notional Asset Liability U.S.

Dollar Notional

Derivatives Designated as Hedging Instruments

Interest rate swap

Prepaid expenses and other/Other liabilities

Cross currency swaps

Other assets, net/Other liabilities

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

Cross currency swaps Other assets, net/Other liabilities — 40.4 600.0 3.2 — 600.0

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

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

Amounts reclassified to the

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

Statement of Operations

Year Ended December 31,

Year Ended December 31, Year Ended December 31,

2020 2019 2018 2020 2019 2018

Interest rate swap contracts $ 0.8 $ 6.7 $ ( 7.2 ) $ 1.6 $ 1.6 $ —

Cross currency swaps $ ( 43.6 ) $ 6.0 $ 21.6 $ — $ — $ —

The Company recognized a $ 1.6 gain on the exit one of these swap arrangements in December 2019 in connection with the redemption of $ 187.9 of the 4.625 % Senior Notes due 2020.

No gains or losses from derivative instruments classified as hedging instruments have been recognized into income for the years ended December 31, 2018 or 2017 .

The Company recognized a gain of $ 1.6 and $ 1.6 on the extinguishment of its interest rate swap agreement in the years ended December 31, 2020 and December 31, 2019, respectively, in connection with the redemption of the 4.625 % Senior Notes due 2020.

No gains or losses from derivative instruments classified as hedging instruments have been recognized into income for the year ended December 31, 2018.

SUPPLEMENTAL CASH FLOW INFORMATION

Years Ended December 31,

2020 2019 2018

Supplemental schedule of cash flow information:

Cash paid during period for:

Interest $ 216.6 $ 248.9 $ 296.2

Income taxes, net of refunds 500.0 216.8 349.7

2 unchanged sentences

Assets acquired under finance leases — 48.7 0.6

Accrued property, plant and equipment

Change in accrued property, plant and equipment ( 1.2 ) 2.7 22.1

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

11 unchanged sentences

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

Intercompany eliminations

2020 2019 2018

Dx $ 9,253.4 $ 7,000.1 $ 7,030.8

DD 4,877.7 4,578.1 4,313.1

Intercompany eliminations and other ( 152.6 ) ( 23.4 ) ( 10.5 )

Total revenues $ 13,978.5 $ 11,554.8 $ 11,333.4

Operating Earnings (Loss):

Operating Earnings:

Dx $ 2,634.9 $ 1,086.0 $ 1,166.7

DD 37.3 411.5 303.6

General corporate expenses ( 226.8 ) ( 167.3 ) ( 144.6 )

3 unchanged sentences

Provision for income taxes 662.1 280.0 384.4

Net earnings 1,557.0 824.9 883.9

Net income attributable to noncontrolling interests ( 0.9 ) ( 1.1 ) ( 0.2 )

Net income attributable to Laboratory Corporation of America Holdings $ 1,556.1 $ 823.8 $ 883.7

2020 2019 2018

Depreciation and Amortization

Dx $ 327.5 $ 301.0 $ 293.3

DD 295.2 261.1 247.3

General corporate 2 2.6 2.6

Total depreciation and amortization $ 624.7 $ 564.7 $ 543.2

Intercompany Eliminations

Dx DD Intercompany Eliminations and Other Total

Geographic distribution of revenues

United Kingdom

North America $ 9,253.4 $ 2,424.5 $ ( 152.6 ) $ 11,525.3

Europe — 1,512.2 — 1,512.2

Other — 941.0 — 941.0

Total revenues $ 9,253.4 $ 4,877.7 $ ( 152.6 ) $ 13,978.5

Geographic distribution of property, plant and equipment, net

North America $ 1,515.3 $ 665.3 $ 2,180.6

Europe — 425.5 425.5

Other — 123.5 123.5

Total property, plant and equipment, net $ 1,515.3 $ 1,214.3 $ 2,729.6

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

QUARTERLY DATA (UNAUDITED)

The following is a summary of unaudited quarterly data:

Year Ended December 31, 2019

Operating income

Net earnings attributable to Laboratory Corporation of America Holdings

Basic earnings per common share

Diluted earnings per common share

Year Ended December 31, 2018

Operating income

Net earnings attributable to Laboratory Corporation of America Holdings

Basic earnings per common share

Diluted earnings per common share

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 9A. Controls and Procedures