What changed in this filing

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Item 1. Financial Statements

2021-05-04 compared with 2020-10-29 · 214 added, 489 removed, 550 unchanged (56% of the section changed)

3 unchanged sentences

(in millions)

September 30,

2021 December 31,

1 unchanged sentence

Cash and cash equivalents $ 1,890.8 $ 1,320.8

Accounts receivable, net of allowance for doubtful accounts of $26.6 and $19.0 as of September 30, 2020, and December 31, 2019, respectively 2,095.2 1,543.9

Accounts receivable, net of allowance for doubtful accounts of $21.0 and $22.1 as of March 31, 2021, and December 31, 2020, respectively 2,323.5 2,479.8

Unbilled services 579.5 536.8

27 unchanged sentences

Shareholders’ equity:

Common stock, 97.4 and 97.2 shares outstanding at September 30, 2020, and December 31, 2019, respectively 9.0 9.0

Common stock, 97.8 and 97.5 shares outstanding at March 31, 2021, and December 31, 2020, respectively 9.0 9.0

Additional paid-in capital 67.1 110.3

4 unchanged sentences

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

co LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per share data)

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

Three Months Ended March 31,

Revenues $ 4,161.5 $ 2,823.8

5 unchanged sentences

Restructuring and other charges 19.2 25.4

Operating income 1,047.1 339.9 1,152.2 993.8

Operating income (loss) 1,057.9 ( 192.6 )

Other income (expense):

3 unchanged sentences

Other, net 5.5 ( 16.1 )

Earnings before income taxes 947.1 287.4 976.4 812.0

Earnings (loss) before income taxes 1,021.8 ( 267.7 )

Provision for income taxes 251.7 49.2

Net earnings 703.7 221.0 618.4 597.6

Net earnings (loss) 770.1 ( 316.9 )

Net earnings attributable to the noncontrolling interest ( 0.5 ) ( 0.3 )

Net earnings attributable to Laboratory Corporation of America Holdings $ 703.4 $ 220.7 $ 617.8 $ 596.7

Basic earnings per common share $ 7.22 $ 2.26 $ 6.35 $ 6.08

Diluted earnings per common share $ 7.17 $ 2.25 $ 6.31 $ 6.04

Net earnings (loss) attributable to Laboratory Corporation of America Holdings $ 769.6 $ ( 317.2 )

Basic earnings (loss) per common share $ 7.88 $ ( 3.27 )

Diluted earnings (loss) per common share $ 7.82 $ ( 3.27 )

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

2 unchanged sentences

(in millions, except per share data)

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

Net earnings $ 703.7 $ 221.0 $ 618.4 $ 597.6

Three Months Ended March 31,

Net earnings (loss) $ 770.1 $ ( 316.9 )

Foreign currency translation adjustments ( 66.8 ) ( 147.5 )

Net benefit plan adjustments 3.0 2.7

Other comprehensive earnings (loss) before tax 135.0 ( 89.4 ) 59.9 ( 36.7 )

Other comprehensive loss before tax ( 63.8 ) ( 144.8 )

Benefit for income tax related to items of comprehensive earnings ( 0.8 ) ( 0.7 )

Other comprehensive earnings (loss), net of tax 134.4 ( 90.3 ) 57.8 ( 39.1 )

Comprehensive earnings 838.1 130.7 676.2 558.5

Other comprehensive loss, net of tax ( 64.6 ) ( 145.5 )

Comprehensive earnings (loss) 705.5 ( 462.4 )

Net earnings attributable to the noncontrolling interest ( 0.5 ) ( 0.3 )

Comprehensive earnings attributable to Laboratory Corporation of America Holdings $ 837.8 $ 130.4 $ 675.6 $ 557.6

Comprehensive earnings (loss) attributable to Laboratory Corporation of America Holdings $ 705.0 $ ( 462.7 )

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

5 unchanged sentences

Capital Retained

Earnings Treasury

Stock Accumulated

Earnings Accumulated

Comprehensive

2 unchanged sentences

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

Net earnings attributable to Laboratory Corporation of America Holdings — — 185.6 — — 185.6

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

Net earnings (loss) attributable to Laboratory Corporation of America Holdings — — ( 317.2 ) — ( 317.2 )

Other comprehensive earnings, net of tax — — — ( 145.5 ) ( 145.5 )

4 unchanged sentences

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

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

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

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

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

Stock compensation — 26.5 — — — 26.5

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

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

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

Net earnings attributable to Laboratory Corporation of America Holdings — — 220.7 — — 220.7

Other comprehensive loss, net of tax — — — — ( 90.3 ) ( 90.3 )

Issuance of common stock under employee stock plans — 25.1 — — — 25.1

Net share settlement tax payments from issuance of stock to employees — ( 0.3 ) — — — ( 0.3 )

Stock compensation — 31.5 — — — 31.5

Purchase of common stock ( 0.1 ) ( 99.9 ) — — — ( 100.0 )

BALANCE AT SEPTEMBER 30, 2019 $ 9.0 $ 47.8 $ 7,676.5 $ — $ ( 502.2 ) $ 7,231.1

BALANCE AT DECEMBER 31, 2020 $ 9.0 $ 110.3 $ 9,402.3 $ ( 161.9 ) $ 9,359.7

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

Net earnings (loss) attributable to Laboratory Corporation of America Holdings — — ( 317.2 ) — — ( 317.2 )

Net earnings attributable to Laboratory Corporation of America Holdings — — 769.6 — 769.6

Other comprehensive earnings (loss), net of tax — — — ( 64.6 ) ( 64.6 )

4 unchanged sentences

BALANCE AT MARCH 31, 2021 $ 9.0 $ 67.1 $ 10,171.9 $ ( 226.5 ) $ 10,021.5

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

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

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

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

Stock compensation — 39.8 — — — 39.8

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

Net earnings attributable to Laboratory Corporation of America Holdings $ — $ — $ 703.4 $ — $ — $ 703.4

Other comprehensive earnings, net of tax — — — — 134.4 134.4

Issuance of common stock under employee stock plans — 21.9 — — — 21.9

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

Stock compensation — 27.2 — — — 27.2

BALANCE AT SEPTEMBER 30, 2020 $ 9.0 $ 80.7 $ 8,464.0 $ — $ ( 314.6 ) $ 8,239.1

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

2 unchanged sentences

(in millions)

Nine Months Ended September 30,

Three Months Ended March 31,

CASH FLOWS FROM OPERATING ACTIVITIES:

Net earnings $ 618.4 $ 597.6

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

Net earnings (loss) $ 770.1 $ ( 316.9 )

Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:

Depreciation and amortization 183.9 144.6

5 unchanged sentences

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

Increase in accounts receivable ( 546.9 ) ( 144.3 )

Decrease in accounts receivable 146.7 46.7

Increase in unbilled services ( 42.5 ) ( 1.1 )

Increase in supplies inventory ( 4.7 ) ( 10.6 )

Decrease in prepaid expenses and other 26.1 5.8

(Decrease) increase in accounts payable 17.3 ( 28.2 )

(Decrease) increase in unearned revenue 44.1 ( 1.0 )

(Decrease) increase in accrued expenses and other 323.0 ( 165.8 )

Increase in prepaid expenses and other ( 51.9 ) ( 3.0 )

Decrease in accounts payable ( 16.9 ) ( 56.5 )

Increase (decrease) in unearned revenue 31.8 ( 11.2 )

Increase (decrease) in accrued expenses and other 95.1 ( 149.1 )

Net cash provided by operating activities 1,157.6 203.8

3 unchanged sentences

Proceeds from sale or distribution of investments — 0.9

Proceeds from exit from swaps 3.1 —

Investments in equity affiliates ( 5.5 ) ( 7.9 )

2 unchanged sentences

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from term loan — 850.0

Payments on term loan ( 375.0 ) —

1 unchanged sentence

Payments on revolving credit facilities — ( 151.7 )

Payments on senior notes ( 412.2 ) —

Net share settlement tax payments from issuance of stock to employees ( 28.1 ) ( 22.0 )

2 unchanged sentences

Other ( 3.2 ) ( 7.7 )

Net cash provided by (used for) financing activities ( 516.4 ) 196.7

Net cash used for financing activities ( 450.1 ) ( 102.8 )

Effect of exchange rate changes on cash and cash equivalents ( 5.1 ) ( 8.3 )

Net increase (decrease) in cash and cash equivalents 329.7 ( 65.7 )

Net increase in cash and cash equivalents 570.0 ( 13.9 )

Cash and cash equivalents at beginning of period 1,320.8 337.5

5 unchanged sentences

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 and medical device companies, governmental agencies, physicians and other health care 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.

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.

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

For further financial information about these segments, see Note 15 Business Segment Information to the Condensed Consolidated Financial Statements.

During the three months ended September 30, 2020, LCD and CDD contributed approximately 68 % and 32 % respectively, of revenues to the Company.

During the nine months ended September 30, 2020, LCD and CDD contributed approximately 63 % and 37 %, respectively, of revenues to the Company.

During the three months ended March 31, 2021, Dx and DD contributed approximately 65 % and 35 % respectively, of revenues to the Company.

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

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Recently Adopted Guidance

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.

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

The Company adopted this standard effective January 1, 2021.

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

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

to develop or obtain internal-use software.

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 Company adopted this standard effective January 1, 2021.

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

New Accounting Pronouncements

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 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 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.

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 September 30, 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.

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 the nine months ended September 30, 2020, the Company recorded goodwill and other asset impairment charges of $ 437.4 , as a result of the negative financial impact of COVID-19 during the first quarter of 2020.

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

The Company also impaired certain of the Company's investments by a total of $ 25.4 during the nine months ended September 30, 2020, due to the impact of COVID-19;

$ 7.1 was included in Equity method earnings (loss), net during the three months ended March 31, 2020, and $ 13.1 and $ 5.2 were included in Other, net during the three months ended March 31, 2020, and June 30, 2020, respectively.

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

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

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 derecognized the income associated with the $ 55.9 received during the second quarter as a change in estimate and did not recognize any income related to the cash payment of $ 76.2 received in the third quarter.

The Company plans to return the CARES Act Provider Relief Funds to the government in the fourth quarter of 2020 and has recorded a liability of $ 132.1 in Accrued expenses and other as of September 30, 2020.

Use of Estimates

The extent to which the COVID-19 pandemic has and will 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 September 30, 2020, and through the date of this

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

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

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

For the Three Months Ended September 30, 2020

Canada United Kingdom Switzerland Other Europe Other Total

Payer/Customer

Clients 21 % 1 % — % — % — % — % 22 %

Patients 5 % — % — % — % — % — % 5 %

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

Third-party 33 % 1 % — % — % — % — % 34 %

Total LCD revenues by payer 66 % 2 % — % — % — % — % 68 %

Biopharmaceutical and medical device companies 16 % — % 4 % 4 % 2 % 6 % 32 %

Total revenues 82 % 2 % 4 % 4 % 2 % 6 % 100 %

For the Three Months Ended September 30, 2019

Canada United Kingdom Switzerland Other Europe Other Total

Payer/Customer

Clients 16 % 1 % — % — % — % — % 17 %

Patients 8 % — % — % — % — % — % 8 %

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

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

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

Biopharmaceutical and medical device companies 21 % — % 5 % 4 % 3 % 7 % 40 %

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

The Company adopted this standard effective January 1, 2021.

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

New Accounting Pronouncements

In March 2020, the FASB issued a new accounting standard to provide optional expedients and exceptions if certain conditions are met for applying generally accepted accounting principles (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,

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

1 unchanged sentence

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

For the Nine Months Ended September 30, 2020

Canada United Kingdom Switzerland Other Europe Other Total

Payer/Customer

Clients 19 % 1 % — % — % — % — % 20 %

Patients 6 % — % — % — % — % — % 6 %

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

Third-party 29 % 1 % — % — % — % — % 30 %

Total LCD revenues by payer 61 % 2 % — % — % — % — % 63 %

Biopharmaceutical and medical device companies 18 % — % 5 % 4 % 3 % 7 % 37 %

Total revenues 79 % 2 % 5 % 4 % 3 % 7 % 100 %

For the Nine Months Ended September 30, 2019

Canada United Kingdom Switzerland Other Europe Other Total

2020, and December 31, 2022.

The Company has not elected to apply any of the expedients or exceptions for the period ended March 31, 2021, and is currently evaluating the impact this new standard will have on the consolidated financial statements.

In January 2021, the FASB issued a new accounting standard to clarify that certain optional expedients and exceptions relative to reference rate reform for contract modification and hedge accounting apply to derivatives that are affected by the discounting transition.

An entity may elect to apply the amendment on a full retrospective basis as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or on a prospective basis to new modifications from any date within an interim period that includes or is subsequent to the date of the issuance.

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

The Company's revenues by segment and by payers/customer groups for the three months ended March 31, 2021, and 2020, were as follows:

For the Three Months Ended March 31, 2021 For the Three Months Ended March 31, 2020

North America Europe Other Total North America Europe Other Total

Payer/Customer

3 unchanged sentences

Third-party 34 % — % — % 34 % 28 % — % — % 28 %

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

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

Biopharmaceutical and medical device companies 21 % 10 % 4 % 35 % 20 % 13 % 7 % 40 %

Total revenues 86 % 10 % 4 % 100 % 80 % 13 % 7 % 100 %

Revenues in the U.S.

were $ 3,472.5 ( 83 %) and $ 2,165.3 ( 77 %) for the three months ended March 31, 2021, and 2020.

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.

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.

3 unchanged sentences

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.

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

2 unchanged sentences

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

September 30, 2020 December 31, 2019

March 31, 2021 December 31, 2020

Sales commission assets $ 36.0 $ 32.6

1 unchanged sentence

Total $ 50.3 $ 45.2

Amortization related to sales commission assets and associated payroll taxes for the three months ended September 30, 2020, and 2019, was $ 6.0 and $ 5.8 , respectively, and for the nine months ended September 30, 2020, and 2019, was $ 16.8 and $ 15.3 , respectively.

Amortization related to deferred contract fulfillment costs for the three months ended September 30, 2020,

Amortization related to sales commission assets and associated payroll taxes for the three months ended March 31, 2021, and 2020, was $ 6.9 and $ 5.3 , respectively.

Amortization related to deferred contract fulfillment costs for the three months ended March 31, 2021, and 2020, was $ 3.5 and $ 3.0 , respectively.

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

1 unchanged sentence

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

and 2019, was $ 2.3 and $ 2.3 , respectively, and was $ 7.6 and $ 6.1 , respectively, for the nine months ended September 30, 2020, and 2019.

Receivables, Unbilled Services and Unearned Revenue

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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 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 CDD.

September 30, 2020 December 31, 2019

While the Company 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 which primarily exist within DD.

March 31, 2021 December 31, 2020

Receivables, which are included in accounts receivable $ 1,007.2 $ 1,001.5

1 unchanged sentence

Unearned revenue 522.3 492.2

Revenues recognized during the period, that were included in the unearned revenue balance at the beginning of the period for the nine months ended September 30, 2020, and September 30, 2019, were $ 237.2 and $ 232.8 , respectively.

Revenues recognized during the period, that were included in the unearned revenue balance at the beginning of the period for the three months ended March 31, 2021, and 2020, were $ 152.3 and $ 121.8 , respectively.

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 nine months ended September 30, 2020, is as follows:

For the Nine Months Ended September 30, 2020

The Company estimates future expected losses on accounts receivable, unbilled services and notes receivable over the remaining collection period of the instrument.

The rollforward for the allowance for credit losses for the three months ended March 31, 2021 is as follows:

For the Three Months Ended March 31, 2021

Accounts Receivable Unbilled Services Note and Other Receivables Total

Allowance for credit losses as of December 31, 2020 $ 22.1 $ 11.3 $ 5.7 $ 39.1

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

Plus, credit loss expense 10.0 3.9 0.7 14.6

Plus, credit loss expense (credit) ( 0.5 ) — — ( 0.5 )

Less, write offs 0.6 — — 0.6

Ending allowance for credit losses $ 21.0 $ 11.3 $ 5.7 $ 38.0

Notes and other receivables includes the $ 110.0 due 2022 from the Envigo transaction which is recorded in Other assets, net.

During the three months ended September 30, 2020, the Company recorded an impairment for a note receivable related to an LCD investment of $ 0.7 .

Performance Obligations Under Long-Term Contracts

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

The amount of existing performance obligations under such long-term contracts unsatisfied as of September 30, 2020, was $ 4,795.0 .

The Company expects to recognize approximately 32 % of the remaining performance obligations as of September 30, 2020, as revenue over the next 12 months, and the balance thereafter.

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

Within CDD, revenues of $ 44.8 and $ 67.7 were recognized during the nine months ended September 30, 2020, and 2019, respectively, from performance obligations that were satisfied in previous periods.

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

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

The amount of existing performance obligations under such long-term contracts unsatisfied as of March 31, 2021, was $ 5,563.4 .

The Company expects to recognize revenue over the remaining contract term of the individual projects, with contract terms generally ranging from 1 to 8 years.

Within DD, revenues of $ 16.5 and $ 9.7 were recognized during the three months ended March 31, 2021, and 2020, respectively, from performance obligations that were satisfied in previous periods.

This revenue primarily relates to adjustments related to changes in scope in full service clinical studies, and to a lesser extent, changes in estimates.

BUSINESS ACQUISITIONS AND DISPOSITIONS

During the nine months ended September 30, 2020, the Company acquired various business and related assets for approximately $ 208.8 in cash (including contingent consideration of $ 6.0 and net of cash acquired), $ 113.4 within LCD and $ 95.4 within CDD.

The purchase consideration for all acquisitions in the nine months ended September 30, 2020, has been allocated under the acquisition method of accounting to the estimated fair market value of the net assets acquired, including approximately $ 88.5 in identifiable intangible assets and a residual amount of non-tax deductible goodwill of approximately $ 128.9 .

The amortization periods for intangible assets acquired from these businesses range from 5 to 15 years for customer relationships and non-compete agreements.

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

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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.

These acquisitions contributed $ 13.1 and $ 13.8 of revenue during the three and nine months ended September 30, 2020, respectively.

The acquisitions contributed $ 3.5 and $ 3.6 of operating income, during the three and nine months ended September 30, 2020, respectively.

During the nine months ended September 30, 2019, the Company acquired various businesses and related assets for approximately $ 852.9 in cash (net of cash acquired), $ 647.4 within CDD and $ 205.5 within LCD.

The purchase consideration for all acquisitions in the nine months ended September 30, 2019, has been allocated to the estimated fair market value of the net assets acquired, including approximately $ 324.1 in identifiable intangible assets and a residual amount of non-tax deductible goodwill for approximately $ 512.3 .

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

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

During the three months ended March 31, 2021, the Company acquired a business and related assets for approximately $ 34.1 in cash within Dx.

The purchase consideration for the acquisition in the three months ended March 31, 2021, has been allocated under the acquisition method of accounting to the estimated fair market value of the net assets acquired, including approximately $ 17.6 in identifiable intangible assets and a residual amount of non-tax deductible goodwill of approximately $ 15.6 .

The amortization periods for intangible assets acquired from the business range from 5 to 15 years for customer relationships and non-compete agreements.

The acquisition was made primarily to expand the Company's services for hospitals and health system laboratories.

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

On June 3, 2019, CDD 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 Covance Research Products business (CRP), which was a part of CDD, 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 (which is included in the nine month acquisition numbers above), received a floating rate secured note of $ 110.0 , and recorded a loss on the sale of CRP of $ 12.2 .

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

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

Consideration Transferred

Cash consideration $ 601.0

Fair value of CRP 110.0

Total $ 711.0

June 30, 2020

Net Assets Acquired

Cash and cash equivalents $ 11.3

Accounts receivable 12.1

Unbilled services 25.6

Inventories 4.5

Prepaid expenses and other 10.8

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

Accounts payable 15.2

Accrued expenses and other 10.4

Unearned revenue 49.9

Other liabilities 69.3

Total liabilities acquired 144.8

Net Envigo assets acquired 601.0

Floating rate secured note receivable due 2022 110.0

Total $ 711.0

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

EARNINGS (LOSS) PER SHARE

Basic earnings (loss) per share is computed by dividing net earnings (loss) attributable to Laboratory Corporation of America Holdings by the weighted average number of common shares outstanding.

Diluted earnings (loss) per share is computed by dividing net earnings (loss) including the impact of dilutive adjustments by the weighted average number of common shares outstanding plus potentially dilutive shares, as if they had been issued at the earlier of the date of issuance or

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

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

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

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

Unaudited Pro Forma Information

Had the Company's total 2019 and 2020 acquisitions been completed as of January 1, 2018, or January 1, 2019, respectively, the Company's pro forma results would have been as follows:

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

Revenues $ 3,899.7 $ 2,969.0 $ 9,524.2 $ 8,827.7

Net earnings attributable to Laboratory Corporation of America Holdings $ 744.9 $ 224.3 $ 666.3 $ 612.9

EARNINGS PER SHARE

Basic earnings per share is computed by dividing net earnings attributable to Laboratory Corporation of America Holdings by the weighted average number of common shares outstanding.

Diluted earnings per share is computed by dividing net earnings including the impact of dilutive adjustments by the weighted average number of common shares outstanding plus potentially dilutive shares, as if they had been issued at the earlier of the date of issuance or the beginning of the period presented.

the beginning of the period presented.

Potentially dilutive common shares result primarily from the Company’s outstanding stock options, restricted stock awards, restricted stock units, and performance share awards.

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

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

Earnings Shares Per Share Amount Earnings Shares Per Share Amount Earning Shares Per Share Amount Earnings Shares Per Share Amount

Basic earnings per share:

Net earnings $ 703.4 97.4 $ 7.22 $ 220.7 97.6 $ 2.26 $ 617.8 97.3 $ 6.35 $ 596.7 98.1 $ 6.08

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

Three Months Ended March 31,

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

Basic earnings (loss) per share:

Net earnings (loss) $ 769.6 97.6 $ 7.88 $ ( 317.2 ) 97.2 $ ( 3.27 )

Dilutive effect of employee stock options and awards — 0.9 — —

Net earnings including impact of dilutive adjustments $ 703.4 98.1 $ 7.17 $ 220.7 98.3 $ 2.25 $ 617.8 97.9 $ 6.31 $ 596.7 98.8 $ 6.04

Net earnings (loss) including impact of dilutive adjustments $ 769.6 98.5 $ 7.82 $ ( 317.2 ) 97.2 $ ( 3.27 )

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

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

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

Three Months Ended March 31,

Employee stock options and awards — 1.3

RESTRUCTURING AND OTHER CHARGES

During the nine months ended September 30, 2020, the Company recorded net restructuring and other charges of $ 38.9 :

$ 13.4 within LCD and $ 25.5 within CDD.

The charges were comprised of $ 12.8 related to severance and other personnel costs, $ 11.0 for a CDD leased lab facility and equipment impairments, and $ 24.0 in facility closures, impairment of operating lease right-of use assets and general integration activities.

The charges were offset by the reversal of previously established liability of $ 1.1 and $ 7.8 in unused severance costs and facility-related costs, respectively.

During the nine months ended September 30, 2019, the Company recorded net restructuring and other charges of $ 48.4 :

$ 22.8 within LCD and $ 25.6 within CDD.

The charges were comprised of $ 26.2 related to severance and other personnel costs and $ 22.0 in costs associated with facility closures, impairment of operating lease right-of-use assets and general integration initiatives.

The charges were increased by the adjustment of previously established reserves of $ 0.4 in severance reserves and decreased by a reversal of $ 0.2 in unused facility reserves.

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

During the three months ended March 31, 2021, the Company recorded net restructuring and other charges of $ 19.2 :

$ 7.5 within Dx and $ 11.7 within DD.

The charges were comprised of $ 4.2 related to severance and other personnel costs and $ 15.1 in facility closures, lease terminations, and general integration activities.

The charges were offset by the reversal of previously established liability of $ 0.1 in unused facility-related costs.

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

$ 8.1 within Dx and $ 17.3 within DD.

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

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

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

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Restructuring charges 2.2 5.5 2.0 9.6 19.3

Impairment of lab facility and equipment — 5.8 — 17.3 23.1

Adjustments to prior restructuring accruals ( 0.1 ) ( 0.1 ) 0.1 — ( 0.1 )

Cash payments and other adjustments ( 2.4 ) ( 5.3 ) ( 1.9 ) ( 8.1 ) ( 17.7 )

Balance as of September 30, 2020 $ — $ 1.5 $ 4.0 $ 4.9 $ 10.4

Balance as of March 31, 2021 $ — $ 0.5 $ 2.6 $ 6.2 $ 9.3

Current $ 6.3

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GOODWILL AND INTANGIBLE ASSETS

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

LCD CDD Total

The changes in the carrying amount of goodwill for the three months ended March 31, 2021, are as follows:

Balance as of December 31, 2020 $ 3,800.2 $ 3,951.3 $ 7,751.5

Goodwill acquired during the period 15.6 — 15.6

Impairment ( 3.7 ) ( 418.7 ) ( 422.4 )

Foreign currency impact and other adjustments to goodwill 4.5 ( 51.1 ) ( 46.6 )

Balance as of September 30, 2020 $ 3,781.7 $ 3,832.1 $ 7,613.8

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

Based upon the revised forecasted revenues and operating income following the declaration of the COVID-19 global pandemic, management concluded there was a triggering event and updated its annual 2019 goodwill impairment testing as of March 31, 2020, for its CDD reporting units and its LCD reporting units.

Based on the quantitative impairment assessment, the Company concluded that the fair value was less than carrying value for two of its reporting units, including one where the 2019 fair value exceeded carrying value by approximately 10.0 %, and recorded a goodwill impairment of $ 418.7 for the CDD segment and $ 3.7 for LCD segment.

The Company utilized a combination of income and market approaches to determine the fair value of the CDD reporting units.

Based upon the results of the quantitative assessments, the Company concluded that the fair value was less than its carrying value for one of the CDD reporting units.

A non-cash charge of $ 418.7 was recognized and included in goodwill and other asset impairments on the Consolidated Statement of Operations to reduce the carrying amount of goodwill for the CDD reporting unit to fair value.

Following the impairment charge, the carrying value of goodwill for this reporting unit is $ 1,627.5 as of September 30, 2020.

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

Management notes that a + 1.0 % change in the discount rate in the March 31, 2020 analysis would reduce the headroom to approximately 2.0 %.

Goodwill for this reporting unit as of September 30, 2020 is $ 646.2 .

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

Based upon the results of the quantitative assessments, the Company concluded the fair value of one of the reporting units was less than its carrying value.

A non-cash charge of $ 3.7 was recognized and included in goodwill and other asset impairments on the Consolidated Statement of Operations to reduce the carrying amount of goodwill for this LCD reporting unit to zero.

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

Management notes that a + 1.0 % change in the discount rate in the March 31, 2020 analysis would cause the fair value to be less than carrying value and would result in an impairment of approximately $ 40.0 .

Goodwill and indefinite-lived intangibles of Canadian licenses for this reporting unit as of September 30, 2020, were $ 86.0 and $ 468.4 , respectively.

Although the Company believes that the current assumptions and estimates used in its goodwill analysis are reasonable, supportable, and appropriate, continued efforts to maintain or improve the performance of 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

Balance as of March 31, 2021 $ 3,820.3 $ 3,900.2 $ 7,720.5

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

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

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.

The Company will continue to monitor the financial performance of and assumptions for its reporting units.

Management's impairment analysis utilizes significant judgments and assumptions related to the market comparable method analysis, such as selected market multiples, and those 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 rates, decreased operating margin, or substantial reductions in end markets and volume assumptions, could have a negative impact on the estimated fair value of the reporting units.

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.

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

The components of identifiable intangible assets are as follows:

September 30, 2020 December 31, 2019

March 31, 2021 December 31, 2020

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

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$ 6,041.5 $ ( 2,207.5 ) $ 3,834.0 $ 6,090.1 $ ( 2,129.0 ) $ 3,961.1

The Company recorded non-cash charges of $ 30.5 for the impairment of identifiable intangible assets during the nine months ended September 30, 2020, within CDD.

During the three months ended March 31, 2020, a $ 2.7 impairment charge was recorded for a tradename.

During the three months ended September 30, 2020, additional impairment charges of $ 10.1 and $ 17.7 for customer relationships and technology intangible assets, respectively were recorded due to the loss of a contract from a prior acquisition.

Amortization of intangible assets for the three months ended September 30, 2020, and 2019, was $ 62.2 and $ 61.7 , respectively and for the nine months ended September 30, 2020, and 2019 was $ 184.6 and $ 179.0 , respectively.

Amortization of intangible assets for the three months ended March 31, 2021, and 2020, was $ 92.1 and $ 62.3 , respectively.

During the fourth quarter of 2020, as part of a 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 $ 29.2 during the three months ended March 31, 2021.

Amortization expense for the net carrying amount of intangible assets is estimated to be $ 206.9 for the remainder of fiscal 2021, $ 220.5 in fiscal 2022, $ 217.5 in fiscal 2023, $ 212.9 in fiscal 2024, $ 200.7 in fiscal 2025, and $ 2,137.3 thereafter.

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

September 30,

Short-term borrowings and the current portion of long-term debt at March 31, 2021, and December 31, 2020, consisted of the following:

2021 December 31, 2020

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Total short-term borrowings and current portion of long-term debt $ 501.4 $ 376.7

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

September 30,

Long-term debt at March 31, 2021, and December 31, 2020, consisted of the following:

2021 December 31, 2020

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4.70% senior notes due 2045 900.0 900.0

2019 Term Loan — 375.0

Debt issuance costs ( 34.9 ) ( 37.1 )

1 unchanged sentence

Total long-term debt $ 4,920.9 $ 5,419.0

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 arrangement 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 Condensed Consolidated Statement of Operations.

Credit Facilities

On June 3, 2019, the Company entered into a new $ 850.0 2019 term loan facility that matures on June 3, 2021.

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

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

As of September 30, 2020, the effective interest rate on the 2019 term loan was 0.95 %.

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

The revolving credit facility also provides for a subfacility of up to $ 100.0 for swing line borrowings and a subfacility of up to $ 150.0 for issuances of letters of credit.

The Company is required to pay a facility fee on the aggregate commitments under the revolving credit facility, at a per annum rate ranging from 0.00% to 0.25% .

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

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

As of September 30, 2020, the effective interest rate on the revolving credit facility was 1.12 %.

The credit facility expires on September 15, 2022.

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

In May 2020, the Company entered into amendments to its term loan facility and its revolving credit facility, in each case to, among other things, increase the maximum leverage ratio covenant to 5.0 x debt to last twelve months EBITDA for each of the three periods ended June 30, September 30, and December 31, 2020, and 4.5 x for 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 Company was in compliance with all covenants in the term loan facility and the revolving credit facility at September 30, 2020, and expects that it will remain in compliance with its existing debt covenants for the next twelve months.

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

At September 30, 2020, the Company had $ 667.2 of cash and cash equivalents and $ 997.0 of available borrowings under its revolving credit facility, which does not mature until 2022, and the Company was in compliance with all of its debt covenants.

In May 2020, in order to obtain increased financial covenant flexibility, the Company and its lenders entered into amendments

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

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

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 is closely monitoring the impact of the COVID-19 pandemic on all aspects of its business and the effects such impacts are having and will have on the Company's liquidity.

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

Credit Facilities

On June 3, 2019, the Company entered into an $ 850.0 term loan (the 2019 Term Loan) with a scheduled maturity date of June 3, 2021.

The Company paid off the 2019 Term Loan balance during the first quarter of 2021.

The 2019 Term Loan balance at March 31, 2021, and December 31, 2020, was $ 0.0 and $ 375.0 , respectively.

The Company also maintains a senior revolving credit facility, which was amended and restated on April 30, 2021.

It consists of a five-year facility in the principal amount of up to $ 1,000.0 , with the option of increasing the facility by up to an additional $ 500.0 (which was $ 350.0 prior to the amendment and restatement), subject to the agreement of one or more new or existing lenders to provide such additional amounts and certain other customary conditions.

The revolving credit facility also provides for a subfacility of up to $ 100.0 for swing line borrowings and a subfacility of up to $ 150.0 for issuances of letters of credit.

The Company is required to pay a facility fee on the aggregate commitments under the revolving credit facility, at a per annum rate ranging from 0.100% to 0.225% (which was a per annum rate ranging from 0.100% to 0.25% prior to the amendment and restatement), depending on the Company's debt ratings.

There were no balances outstanding on the Company's current revolving credit facility as of March 31, 2021 and December 31, 2020.

As of March 31, 2021, the effective interest rate on the revolving credit facility was 1.09 %.

The credit facility expires on April 30, 2026.

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

The Company was in compliance with all covenants in the revolving credit facility at March 31, 2021, and expects that it will remain in compliance with its existing debt covenants for the next twelve months.

The Company's availability of $ 1,000.0 at March 31, 2021, under its revolving credit facility reflects a reduction equivalent to the amount of the Company's outstanding letters of credit, if applicable.

There were no outstanding letters of credit as of March 31, 2021.

PREFERRED STOCK AND COMMON SHAREHOLDERS’ EQUITY

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

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

There were no preferred shares outstanding as of March 31, 2021, and December 31, 2020.

The changes in common shares issued are summarized below:

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Retirement of common stock ( 0.3 )

Common shares at September 30, 2020 97.4

Common shares at March 31, 2021 97.8

Share Repurchase Program

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

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

During the three months ended March 31, 2021, the Company purchased 0.3 shares of its common stock at an average price of $218.27.

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

Remaining amounts are recognized as a reduction in retained earnings.

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

As of March 31, 2021, the Company had outstanding authorization from the board of directors to purchase up to $ 731.5 of the Company's 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 as a result of the anticipated impact of the COVID-19 pandemic.

Accumulated Other Comprehensive Earnings

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Tax effect of adjustments — ( 0.8 ) ( 0.8 )

Balance as of September 30, 2020 $ ( 233.0 ) $ ( 81.6 ) $ ( 314.6 )

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

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

The gross unrecognized income tax benefits were $ 41.3 and $ 31.7 at September 30, 2020, and December 31, 2019, respectively.

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

Balance as of March 31, 2021 $ ( 88.1 ) $ ( 138.4 ) $ ( 226.5 )

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

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

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

The 2021 tax rate was favorable to the 2020 tax rate due primarily to the 2020 impairment charges for which either no tax benefit was recorded (as they were not deductible) or the associated tax assets required a full valuation allowance.

The gross unrecognized income tax benefits were $ 48.9 and $ 48.8 at March 31, 2021, and December 31, 2020, respectively.

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

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

As of September 30, 2020, and December 31, 2019, $ 41.3 and $ 31.7 , respectively, are the approximate amounts of gross unrecognized income tax benefits that, if recognized, would favorably affect the effective income tax rate in future periods.

As of March 31, 2021, and December 31, 2020, $ 46.8 and $ 46.7 , respectively, are the approximate amounts of gross unrecognized income tax benefits that, if recognized, would favorably affect the effective income tax rate in future periods.

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

Accrued interest and penalties related to uncertain tax positions totaled $ 9.0 and $ 5.5 as of September 30, 2020, and December 31, 2019, respectively.

Accrued interest and penalties related to uncertain tax positions totaled $ 8.7 and $ 8.3 as of March 31, 2021, and December 31, 2020, respectively.

The Company has substantially concluded all U.S.

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The Company records an aggregate legal reserve, which is determined using calculations based on historical loss rates and assessment of trends experienced in settlements and defense costs.

In accordance with FASB Accounting Standards Codification Topic 450 “Contingencies,” the Company establishes reserves for judicial, regulatory, and arbitration matters outside the aggregate legal reserve if and when those matters present loss contingencies that are both probable and estimable and would exceed the aggregate legal reserve.

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

probable and estimable and would exceed the aggregate legal reserve.

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

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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.

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On August 17, 2011, the U.S.

District Court for the

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Southern District of New York unsealed a False Claims Act lawsuit, United States of America ex rel.

District Court for the Southern District of New York unsealed a False Claims Act lawsuit, United States of America ex rel.

NPT Associates v.

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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.

On April 14, 2021, the Petition was unsealed.

The Petition alleges that the Company submitted claims for reimbursement to Texas Medicaid that were higher than permitted under Texas Medicaid’s alleged “best price” regulations, and that the Company offered remuneration to Texas health care providers in the form of discounted pricing for certain laboratory testing services in exchange for the providers’ referral of Texas Medicaid business to the Company.

The Petition seeks actual and double damages and civil penalties, as well as recovery of costs, attorney's fees, and legal expenses.

The Company will vigorously defend the lawsuit.

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

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

The Court has scheduled oral arguments for December 9, 2020.

The Court held oral arguments on December 9, 2020.

The Company will vigorously defend the lawsuit.

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Laboratory Corporation of America Holdings , which alleges that the Company's financial relationships with referring physicians violate federal and state anti-kickback statutes.

The Plaintiffs' Fourth Amended Complaint further alleges that the Company conspired with HDL and Singulex in violation of the Federal False Claims Act and the California and Illinois insurance fraud prevention acts by facilitating HDL's and Singulex's offers of illegal inducements to physicians and the referral of patients to HDL and Singulex for laboratory testing.

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

illegal inducements to physicians and the referral of patients to HDL and Singulex for laboratory testing.

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

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The Court denied the Motion to Dismiss as to the conspiracy claim.

On March 12, 2021, the Company filed a Motion for Summary Judgment related to all remaining claims.

The Company will vigorously defend the lawsuit.

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

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

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

disclose certain allegedly material information.

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

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

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

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

The Company referred patient balances to

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

AMCA only when direct collection efforts were unsuccessful.

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

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On January 22, 2020, the Company filed Motions to Dismiss all claims.

The consolidated Complaint generally alleges that the Company did not adequately protect its

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

patients’ data and failed to timely notify those patients of the AMCA Incident.

The consolidated Complaint generally alleges that the Company did not adequately protect its patients’ data and failed to timely notify those patients of the AMCA Incident.

The Complaint asserts various causes of action, including but not limited to negligence, breach of implied contract, unjust enrichment, and the violation of state data protection statutes.

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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.

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

Laboratory Corporation of America , filed in Superior Court of California, County of Los Angeles.

On July 1, 2019, the Company was served with a putative class action lawsuit, Jan v.

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

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, 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.

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

If the settlement does not receive final approval, 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 attorneys’ fees and costs.

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

On July 20, 2020, Plaintiff executed a settlement agreement resolving the lawsuit.

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

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

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

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.

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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,

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

1 unchanged sentence

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

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

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.

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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.

On February 21, 2021, Plaintiff filed an amended complaint reiterating allegations of violations of the Fair Labor Standards Act and New York Labor Code, but narrowing the scope of the putative class to only those service representatives employed by the Company within the State of New York.

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

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

On November 4, 2020, the lawsuit was removed to the U.S.

District Court for the Central District of California.

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

The Company will vigorously defend the lawsuit.

On March 1, 2021, the Company was served with a putative class action lawsuit, Foy v.

Laboratory Corporation of America Holdings d/b/a Labcorp Diagnostics , filed in the U.S.

District Court for the Middle District of North Carolina, alleging claims for failure to properly pay service representatives employed outside of California and New York for all hours worked and overtime compensation under the Fair Labor Standards Act.

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.

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

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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 (LCD 401(k) 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 401(k) Plan to receive the NEC.

The NEC is non-forfeitable and vests immediately.

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

The Company incurred expense of $ 14.0 and $ 16.7 for the LCD 401(k) Plan during the three months ended September 30, 2020, and 2019, respectively, and $ 41.4 and $ 48.9 during the nine months ended September 30, 2020, and 2019, respectively.

All of the CDD U.S.

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

The Company incurred expense of $ 21.0 and $ 18.2 for the Covance 401(k) plan during the three months ended September 30, 2020, and 2019, respectively, and $ 64.8 and $ 56.0 during the nine months ended September 30, 2020, and 2019, respectively.

The Company also maintains several other small 401(k) 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 PEP no longer earn service-based credits, but continue to earn investment credits.

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

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

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

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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.

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

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

Service cost for administrative expenses $ 1.3 $ 1.1 $ 3.9 $ 3.1

Interest cost on benefit obligation 2.8 3.4 8.4 10.4

Expected return on plan assets ( 3.7 ) ( 3.7 ) ( 11.2 ) ( 11.3 )

Net amortization and deferral 2.4 3.0 7.2 8.2

Defined benefit plan costs $ 2.8 $ 3.8 $ 8.3 $ 10.4

The service cost component of net periodic pension cost and net periodic post-retirement benefit cost is included in operating expenses with other employee compensation costs.

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

During the nine months ended September 30, 2020, the Company made no contributions to the Company Plan.

The related net pension obligation for the Company Plan and PEP was $ 92.6 and $ 93.4 as of September 30, 2020, and December 31, 2019, respectively.

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

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.

Plans were closed to future accrual as of December 31, 2019.

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

however, the U.K.

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

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.

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

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

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

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

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

Plans, German Plan, and the Envigo Plan, was $ 85.4 and $ 99.1 as of September 30, 2020, and December 31, 2019, respectively.

FAIR VALUE MEASUREMENTS

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

The Company’s population of financial assets and liabilities subject to fair value measurements as of March 31, 2021, and December 31, 2020, is as follows:

Fair Value Measurements as of

as of September 30, 2020

as of March 31, 2021

Balance Sheet Using Fair Value Hierarchy

Classification September 30, 2020 Level 1 Level 2 Level 3

Classification March 31, 2021 Level 1 Level 2 Level 3

Noncontrolling interest put Noncontrolling interest $ 16.4 $ — $ 16.4 $ —

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Noncontrolling interest put Noncontrolling interest $ 16.2 $ — $ 16.2 $ —

Cross currency swaps Other assets, net 3.2 — 3.2 —

Interest rate swaps Other assets, net 1.5 — 1.5 —

Cross currency swaps Other liabilities 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 —

Investment in equity securities Other current assets 9.1 9.1 — —

Contingent consideration Other liabilities 13.9 — — 13.9

1 unchanged sentence

Balance at December 31, 2020 $ 13.9

Payments ( 4.8 )

Adjustments ( 1.1 )

Additions 6.0

Balance at September 30, 2020 $ 9.0

Balance at March 31, 2021 $ 12.8

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

3 unchanged sentences

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

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

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

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

The fair market value of the Senior Notes, based on market pricing, was approximately $ 6,107.9 and $ 6,140.6 as of September 30, 2020, and December 31, 2019, respectively.

The fair market value of the Senior Notes, based on market pricing, was approximately $ 5,844.6 and $ 6,121.8 as of March 31, 2021, and December 31, 2020, respectively.

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

3 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.

Interest Rate Swap

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

The Company exited the remaining fixed-to-variable interest rate swap arrangement in August 2020, in connection with the redemption of the 4.625 % Senior Notes due 2020.

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

September 30, 2020 December 31, 2019 September 30, 2020 December 31, 2019

Balance Sheet Line Item in which Hedged Items are Included

Current portion, long term debt $ — $ 301.5 $ — $ 1.5

Cross Currency Swap

Cross Currency Swaps

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

1 unchanged sentence

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 September 30, 2020.

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

The cumulative amount of the fair value hedging adjustment included in the current value of the cross currency swaps was $( 23.1 ) and $( 12.0 ) for the three and nine months ended September 30, 2020, respectively, and was recognized as currency translation within the Condensed Consolidated Statement of Comprehensive Earnings.

There were no amounts reclassified from the Condensed Consolidated Statement of Comprehensive Earnings to the Condensed Consolidated Statement of Operations during the three months or nine months ended September 30, 2020.

The cross currency swaps maturing in 2022 and 2025 with an aggregate fair value of $( 5.8 ) and $ 2.8 as of March 31, 2021, respectively, are included in other long-term liabilities.

The 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.

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

recognized in earnings.

The cumulative amount of the fair value hedging adjustment included in the current value of the cross currency swaps was $37.4 for the three months ended March 31, 2021, and was recognized as currency translation within the Condensed Consolidated Statement of Comprehensive Earnings.

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

September 30, 2020 December 31, 2019

March 31, 2021 December 31, 2020

Fair Value of Derivative Fair Value of Derivative

3 unchanged sentences

Derivatives Designated as Hedging Instruments

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

Cross currency swaps Other assets, net or Other liabilities $ — $ 3.0 $ 600.0 $ — $ 40.4 $ 600.0

1 unchanged sentence

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

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

Statement of Operations

Three Months Ended September 30, Three Months Ended September 30, Nine Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31, Three Months Ended March 31,

2021 2020 2021 2020

1 unchanged sentence

Cross currency swaps $ 37.4 $ 19.9 $ — $ —

The Company recorded a gain of $ 1.6 on the extinguishment of the interest rate swap arrangement, which was included in Other, net on the Condensed Consolidated Statement of Operations.

No additional gains or losses from derivative instruments have been recognized into income for the three and nine months ended September 30, 2020, and 2019.

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

No gains or losses from derivative instruments have been recognized into income for the three months ended March 31, 2021, and 2020.

SUPPLEMENTAL CASH FLOW INFORMATION

Nine Months Ended September 30,

Three Months Ended March 31,

Supplemental schedule of cash flow information:

3 unchanged sentences

Disclosure of non-cash financing and investing activities:

Conversion of zero-coupon convertible debt — 1.7

Change in accrued property, plant and equipment ( 4.8 ) ( 14.0 )

Floating rate secured note receivable due 2022 — 110.0

BUSINESS SEGMENT INFORMATION

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

The following table is a summary of segment information for the three months March 31, 2021, and 2020.

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

3 unchanged sentences

Segment asset information is not presented because it is not used by the CODM at the segment level.

Operating earnings of each segment represents revenues less directly identifiable expenses to arrive at operating income for the segment.

Operating earnings of each segment represent revenues less directly identifiable expenses to arrive at operating income for the segment.

General management and administrative corporate expenses are included in general corporate expenses below.

Three Months Ended Nine Months Ended

September 30, September 30,

2020 2019 2020 2019

LCD $ 2,704.2 $ 1,759.2 $ 6,098.8 $ 5,242.1

CDD 1,241.9 1,175.4 3,479.4 3,376.4

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Three Months Ended

March 31, 2021

Dx $ 2,757.8 $ 1,702.0

DD 1,438.2 1,143.8

Intercompany eliminations and other ( 34.5 ) ( 22.0 )

1 unchanged sentence

Operating earnings (loss):

LCD 964.9 262.2 1,451.5 843.0

CDD 142.0 123.8 ( 131.2 ) 277.6

Dx 949.1 205.2

DD 156.4 ( 338.7 )

General corporate expenses ( 47.6 ) ( 59.1 )

Total operating income 1,047.1 339.9 1,152.2 993.8

Total operating income (loss) 1,057.9 ( 192.6 )

Non-operating expenses, net ( 36.1 ) ( 75.1 )

Earnings before income taxes 947.1 287.4 976.4 812.0

Earnings (loss) before income taxes 1,021.8 ( 267.7 )

Provision for income taxes 251.7 49.2

Net earnings 703.7 221.0 618.4 597.6

Net earnings (loss) 770.1 ( 316.9 )

Net earnings attributable to the noncontrolling interest ( 0.5 ) ( 0.3 )

Net earnings attributable to Laboratory Corporation of America Holdings $ 703.4 $ 220.7 $ 617.8 $ 596.7

Net earnings (loss) attributable to Laboratory Corporation of America Holdings $ 769.6 $ ( 317.2 )

SUBSEQUENT EVENT

On May 3, 2021, the Company entered into a definitive agreement to acquire select operating assets and intellectual property, from Myriad Genetics' autoimmune business unit, including the Vectra ® rheumatoid arthritis (RA) assay for $ 150.0 .

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

What changed 10-Q

Item 1. Financial Statements