What changed in this filing

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Item 9A. Controls and Procedures

2022-02-25 compared with 2021-02-25 · 481 added, 517 removed, 1515 unchanged (40% of the section changed)

15 unchanged sentences

The Company's management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2021.

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

Treadway Commission (COSO).

Based on this assessment, the Company's management determined that, as of December 31, 2021, the Company maintained effective internal control over financial reporting.

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

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

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

Deloitte and Touche LLP, an independent registered public accounting firm, who audited and reported on the consolidated financial statements of the Company included in this Annual Report, also audited the effectiveness of the Company’s internal control over financial reporting as of December 31, 2021, as stated in its report, which is included herein immediately preceding the Company’s audited financial statements.

OTHER INFORMATION

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

7 unchanged sentences

See Note 13 Stock Compensation Plans to the Consolidated Financial Statements for a discussion of the Company’s Stock Compensation Plans.

Except for the above referenced footnote, the information called for by this item is incorporated by reference to information in the 2021 Proxy Statement under the captions “Security Ownership of Certain Beneficial Holders and Management,” “Compensation Discussion and Analysis” and “Executive Compensation.”

Except for the above referenced footnote, the information called for by this item is incorporated by reference to information in the 2022 Proxy Statement under the captions “Security Ownership of Certain Beneficial Holders and Management,” “Compensation Discussion & Analysis” and “Executive Compensation.”

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

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

4.16 Fifteenth Supplemental Indenture, dated as of May 26, 2021, between the Company and U.S.

Bank National Association, as trustee, including the form of the 2026 Notes (incorporated herein by reference to Exhibit 4.2 to the Company's Current Report on Form 8-K filed on May 26, 2021 ).

4.17 Sixteenth Supplemental Indenture, dated as of May 26, 2021, between the Company and U.S.

Bank National Association, as trustee, including the form of the 2031 Notes (incorporated herein by reference to Exhibit 4.

3 to the Company's Current Report on Form 8-K filed on May 26, 2021).

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

18 unchanged sentences

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

10.16 Third Amended and Restated Credit Agreement, dated as of April 30, 2021, among the Company, Bank of America N.A., as administrative agent, and the lenders party thereto (incorporated herein by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q filed on May 4, 2021).

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

9 unchanged sentences

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

16.2 L etter of Pricewaterhouse Coopers LLP , dated March 3, 2021 (inco rporated by reference to Exhibit 1 6.1 to the Company's Current Report on Form 8-K/A filed on M arch 3, 2021).

21* List of Subsidiaries of the Company

23.1* Consent of Deloitte & Touche LLP, an independent registered public accounting firm

23.2* Consent of PricewaterhouseCoopers LLP, an independent registered public accounting firm

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24.7* Power of Attorney of Richelle P.

24.8* Power of Attorney of Kathryn E.

24.9* Power of Attorney of R.

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm Deloitte & Touche LLP

Report of Independent Registered Public Accounting Firm PricewaterhouseCoopers LLP

Consolidated Financial Statements:

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Laboratory Corporation of America Holdings

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Laboratory Corporation of America Holdings and its subsidiaries (the “Company”) as of December 31, 2020 and 2019, and the related consolidated statements of operations, comprehensive earnings, changes in shareholders' equity and cash flows for each of the three years in the period ended December 31, 2020, including the related notes (collectively referred to as the “consolidated financial statements”).

We also have audited the Company's internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020 in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Change in Accounting Principle

As discussed in Note 1 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in 2019.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the Report of Management on Internal Control over Financial Reporting appearing under Item 9A.

Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

To the shareholders and Board of Directors of Laboratory Corporation of America Holdings

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of Laboratory Corporation of America Holdings and subsidiaries (the “Company”) as of December 31, 2021, the related consolidated statements of operations, comprehensive earnings, changes in shareholders’ equity, and cash flows for the year ended December 31, 2021, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021, and the results of its operations and its cash flows for the year ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 25, 2022, expressed an unqualified opinion on the Company’s internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audits also included performing such other procedures as we considered necessary in the circumstances.

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

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

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

Revenue Recognition for Full-Service Clinical Trial Contracts— Refer to Note 2 to the financial statements

Critical Audit Matter Description

Within the Drug Development segment, the Company provides clinical development and commercialization services through the performance of clinical trial services for which revenue is recognized as services are performed.

Most of the contracts associated with these services are long term in nature and constitute a single performance obligation (e.g., management of a clinical trial), as the Company provides a significant service of integrating all promises in the contract and the promises are highly interdependent and interrelated with one another.

Revenue recognition is measured on a proportional-performance basis using costs as the input measure of progress, meaning revenue is recognized based on the proportion of actual costs incurred to total costs expected to complete the contract.

The Company reviews and revises estimated total costs to satisfy the performance obligation throughout the life of the contract, with adjustments to revenue resulting from such revisions being recorded in the period in which the change in estimate is determined.

Given the judgments necessary to estimate total expected contract costs for purposes of revenue recognition for full-service clinical trial contracts which use the cost-to-cost method, auditing such estimates required extensive audit effort due to the complexity of these contracts and a high degree of auditor judgment when performing audit procedures and evaluating the results of those procedures.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to management’s estimates of total contract costs for purposes of revenue recognition for full-service clinical trial contracts which use the proportional-performance method included the following, among others:

• We tested the effectiveness of controls over long-term contract revenue, including those over the estimates of total contract costs related to the performance obligation.

• We selected a sample of long-term contracts and performed the following:

◦ Evaluated whether the contracts were properly included in management’s calculation of long-term contract revenue based on the terms and conditions of each contract, including whether continuous transfer of control to the customer occurred as progress was made toward fulfilling the performance obligation.

◦ Compared the transaction prices to the consideration expected to be received based on current rights and obligations under the contracts and any contract modifications that were agreed upon with the customers.

◦ Evaluated management’s identification of distinct performance obligations by assessing whether the underlying services were highly interdependent and interrelated.

◦ Tested the accuracy and completeness of the total contract costs incurred to date for the performance obligation.

◦ Evaluated the estimates of total contract cost for the performance obligation by:

– Comparing costs incurred to date to the costs management estimated to be incurred to date.

– Assessing management’s ability to achieve the estimates of total contract cost by performing corroborating inquiries with the Company’s project managers and project financial analysts and comparing the estimates to management’s work plans and cost estimates.

– Comparing management’s estimates for the selected contracts to historical experience and original budgets, when applicable.

◦ Tested the mathematical accuracy of management’s calculation of revenue for the performance obligation.

• We evaluated management’s ability to accurately estimate total contract costs and revenue by comparing actual costs to management’s historical estimates for performance obligations that have been fulfilled.

Valuation of Labcorp Diagnostics Segment (Dx) Net Accounts Receivable— Refer to Note 2 to the financial statements

Critical Audit Matter Description

The Company recognizes Dx revenue and accounts receivable net of negotiated discounts and anticipated adjustments, including historical collection experience for each of its four payer portfolios (clients, patients, Medicare & Medicaid, and third party).

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

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

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

Given the significant judgment and estimates necessary to determine the net realizable value of accounts receivable related to the Dx segment, auditing such estimates required extensive audit effort and a high degree of auditor judgment when performing audit procedures and evaluating the results of those procedures.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to Dx Net Accounts Receivable included the following, among others:

• We tested the effectiveness of controls over the valuation of net accounts receivable.

• We evaluated management’s methodology for recording Dx net accounts receivable by performing a retrospective comparison of actual cash collected to the prior year estimate of net accounts receivable.

• We developed an independent estimate of net accounts receivable by taking into consideration historical collections, write-offs, and other relevant internal and external factors.

• We tested the completeness and accuracy of underlying historical data used as an input to management’s methodology and our independent estimate.

/s/ DELOITTE & TOUCHE LLP

Raleigh, North Carolina

February 25, 2022

We have served as the Company’s auditor since 2021.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of Laboratory Corporation of America Holdings

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of Laboratory Corporation of America Holdings and subsidiaries (the “Company”) as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2021, of the Company and our report dated February 25, 2022, expressed an unqualified opinion on those financial statements.

Basis for Opinion

The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Report of Management on Internal Control over Financial Reporting.

Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

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

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and

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

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

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

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

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

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

Valuation of Labcorp Diagnostics Segment (Dx) Net Accounts Receivable

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

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

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

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

Anticipated write-offs are recorded as an adjustment to revenue and at an amount considered necessary to record the revenue at its net realizable value.

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

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

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

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

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

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

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

Revenue Recognition - Estimating Costs to Complete for Clinical Research Services

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

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

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

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

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

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

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

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

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

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

Goodwill Impairment Assessment - Two Reporting Units within the DD Segment

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

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

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

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

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

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

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

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

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

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

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

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

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

/s/ PricewaterhouseCoopers LLP

/s/ DELOITTE & TOUCHE LLP

Raleigh, North Carolina

February 25, 2022

We have served as the Company’s auditor since 1997.

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Laboratory Corporation of America Holdings

Opinion on the Financial Statements

We have audited the consolidated balance sheet of Laboratory Corporation of America Holdings and its subsidiaries (the “Company”) as of December 31, 2020, and the related consolidated statements of operations, comprehensive earnings, changes in shareholders' equity and cash flows for each of the two years in the period ended December 31, 2020, including the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2020 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

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

/s/ PricewaterhouseCoopers LLP

Raleigh, North Carolina

February 25, 2021, except for the effects of the revision discussed in Note 1 to the consolidated financial statements, as to which the date is February 25, 2022

We served as the Company's auditor from 1997 to 2021.

PART I – FINANCIAL INFORMATION

6 unchanged sentences

Cash and cash equivalents $ 1,472.7 $ 1,320.8

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

Accounts receivable, net 2,261.5 2,479.8

Unbilled services 716.8 536.8

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Other comprehensive earnings (loss) before tax ( 12.9 ) 198.4 87.0

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

Provision (benefit) for income tax related to items of comprehensive earnings ( 17.1 ) 12.1 3.7

Other comprehensive earnings (loss), net of tax ( 30.0 ) 210.5 90.7

15 unchanged sentences

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

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

Other comprehensive earnings (loss), net of tax — — — — 90.7 90.7

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

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

Conversion of zero-coupon convertible debt — 0.3 — — — 0.3

Stock compensation — 107.0 — — — 107.0

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

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

BALANCE AT DECEMBER 31, 2019 9.0 26.8 7,980.5 — ( 372.4 ) 7,643.9

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

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

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

Other comprehensive earnings (loss), net of tax — — — — 210.5 210.5

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

1 unchanged sentence

Stock compensation — 111.7 — — — 111.7

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

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

BALANCE AT DECEMBER 31, 2020 9.0 110.3 9,479.2 — ( 161.9 ) 9,436.6

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

Net earnings attributable to Laboratory Corporation of America Holdings — — 2,377.3 — — 2,377.3

Other comprehensive earnings, net of tax

— — — — 210.5 210.5

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

Other comprehensive earnings (loss), net of tax — — — — ( 30.0 ) ( 30.0 )

Issuance of common stock under employee stock plan — 51.7 — — — 51.7

Net share settlement tax payments from issuance of stock to employees — ( 47.4 ) — — — ( 47.4 )

13 unchanged sentences

Stock compensation 153.7 111.7 107.0

Loss (gain) on sale of business — 13.2 ( 184.9 )

Loss on sale of business — — 13.2

Operating lease right-of-use asset expense 194.9 200.3 194.1

5 unchanged sentences

Increase in unbilled services ( 179.2 ) ( 42.5 ) ( 59.0 )

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

(Increase) decrease in inventory 2.8 ( 196.6 ) ( 21.9 )

Increase in prepaid expenses and other ( 68.2 ) ( 5.4 ) ( 42.6 )

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

Increase (decrease) in deferred revenue 48.4 38.1 ( 33.8 )

Decrease in accounts payable ( 10.2 ) ( 5.3 ) ( 12.8 )

Increase in deferred revenue 45.0 48.4 38.1

Increase (decrease) in accrued expenses and other ( 275.9 ) 257.9 ( 132.1 )

2 unchanged sentences

Capital expenditures ( 460.4 ) ( 381.7 ) ( 400.2 )

Purchases of investments ( 40.1 ) ( 27.5 ) ( 22.3 )

Purchase of investments ( 27.8 ) ( 40.1 ) ( 27.5 )

Proceeds from sale of assets 87.3 42.1 7.7

Proceeds from sale or distributions of investments 1.0 11.2 —

Proceeds from sale or distribution of investments 13.2 1.0 11.2

Proceeds from exit from swaps — 3.1 —

Proceeds from sale of business — — 1.7

Proceeds from exit of swaps 3.1 1.7 18.3

Acquisition of businesses, net of cash acquired ( 496.9 ) ( 267.6 ) ( 876.0 )

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

Net cash used for investing activities ( 884.6 ) ( 643.2 ) ( 1,283.1 )

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from Senior Notes offerings 1,000.0 — 1,050.0

Payments on Senior Notes ( 1,000.0 ) ( 412.2 ) ( 687.9 )

Proceeds from term loan — — 850.0

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Payments on revolving credit facilities — ( 151.7 ) ( 495.0 )

Payments on Senior Notes ( 412.2 ) ( 687.9 ) ( 400.0 )

Payment of debt issuance costs — ( 11.6 ) —

Net share settlement tax payments from issuance of stock to employees ( 47.4 ) ( 34.5 ) ( 40.6 )

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Resulting translation adjustments are included in “Accumulated other comprehensive income.”

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.

The Company adopted this standard effective January 1, 2020.

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

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

The Company adopted this standard effective January 1, 2020.

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

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

The Company adopted this standard effective January 1, 2020.

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

Novel Coronavirus (COVID-19) Financial Statement Impact

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

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

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

The Company concluded that the fair

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

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

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

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

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

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

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

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

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

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

Reimbursable Out-of-Pocket Expenses

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

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

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

Cost of Revenues

Cost of revenue includes direct labor and related benefit charges, other direct costs, shipping and handling fees, and an allocation of facility charges and information technology costs.

Cost of revenue includes direct labor and related benefit charges, reimbursable expenses, other direct costs, shipping and handling fees, and an allocation of facility charges and information technology costs.

Selling, general and administrative expenses consist primarily of administrative payroll and related benefit charges, advertising and promotional expenses, administrative travel and an allocation of facility charges and information technology costs.

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

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

Actual results could differ from those estimates.

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

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

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

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

The Company assessed certain

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

accounting matters that generally require consideration of forecasted financial information in context with the information reasonably available to the Company and the unknown future impacts of COVID-19 as of December 31, 2021, and through the date of this Annual Report.

The accounting matters assessed included, but were not limited to, the Company’s implicit price concessions and credit losses, equity investments, 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 impact the Company’s consolidated financial statements in future reporting periods.

Concentration of Credit Risk

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The total cash and cash equivalent balances that exceeded the balances insured by the Federal Deposit Insurance Commission, were approximately $ 1,471.0 and $ 1,319.4 at December 31, 2021, and 2020, respectively.

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

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

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

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Although Dx has receivables due from U.S.

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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.

Potentially dilutive common shares result primarily from the Company’s outstanding stock options, restricted stock awards, performance share awards, and shares issuable upon conversion of zero-coupon subordinated notes.

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

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

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Stock options and stock awards — 0.8 — 0.7 — 0.7

Effect of convertible debt, net of tax — — — — — —

Diluted earnings per share $ 2,377.3 97.5 $ 24.39 $ 1,556.1 98.0 $ 15.88 $ 823.8 98.6 $ 8.35

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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:

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

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

See Note 13 Stock Compensation Plans for assumptions used in calculating compensation expense for the Company’s stock compensation plans.

Cash Equivalents

Cash and cash equivalents consist of highly liquid instruments, such as commercial paper, time deposits, and other money market instruments, substantially all of which have maturities when purchased of three months or less.

Cash and cash equivalents consist of highly liquid instruments, such as commercial paper, time deposits, and other money market instruments, which have maturities when purchased of three months or less.

Supplies Inventory

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The Company's inventory reserve balance was $ 40.1 and $ 20.2 , as of December 31, 2021 and 2020, respectively.

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

Property, Plant and Equipment

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Research and development (R&D) costs and other computer software maintenance costs related to software development are expensed as incurred.

Capitalized software costs are amortized using the straight-line method over the estimated useful life of the underlying system ranging from three to ten years, generally five years.

Capitalized software costs are amortized using the straight-line method over the estimated useful life of the underlying system ranging from three to fifteen years, generally five years.

Amortization begins once the underlying system is substantially complete and ready for its intended use.

Long-Lived Assets

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

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

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

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

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

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

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

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

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

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

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

Based upon the results of the quantitative assessments, the Company concluded that the fair values of the goodwill and intangible assets, including the indefinite-lived Canadian licenses, as of October 1, 2020, were greater than the carrying values.

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

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

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

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

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

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

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

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

Long-Lived Assets

The annual impairment test for goodwill includes an option to perform a qualitative assessment of whether it is more likely than not that a reporting unit's fair value is less than its carrying value.

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

If the Company determines that it is more likely than not that the fair value of a reporting unit is less than its carrying value, then the Company performs the quantitative goodwill impairment test.

The Company may also chose to bypass the qualitative assessment for any reporting unit in its goodwill assessment and proceed directly to performing the quantitative assessment.

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

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

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

Based on the results of the qualitative assessment, if the Company concludes that it is not more likely than not that the fair value of the reporting unit is less than its carrying values of the reporting unit, then no quantitative assessment is performed.

The quantitative assessment includes the estimation of the fair value of each reporting unit as compared to the carrying value of the reporting unit.

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

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

For the market-based approach, the Company utilizes a number of factors such as publicly available information regarding the market capitalization of the Company as well as operating results, business plans, market multiples, and present value techniques.

Based upon the range of estimated values developed from the income and market-based methods, the Company determines the estimated fair value for the reporting unit.

If the estimated fair value of the reporting unit exceeds the carrying value, the goodwill is not impaired and no further review is required.

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

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

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

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

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

All leases with a lease term greater than 12 months, regardless of lease type classification, are recorded as an obligation on the balance sheet with a corresponding right-of-use asset.

Both finance and operating leases are reflected as liabilities on the commencement date of the lease based on the present value of the lease payments to be made over the lease term.

Right-of-use assets are valued at the initial measurement of the lease liability, plus any initial direct costs or rent prepayments, minus lease incentives and any deferred lease payments.

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

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

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

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

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

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

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

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

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

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

The exercise of these options is at the Company's discretion and the Company evaluates each renewal option to determine if it is reasonably possible to be exercised and should be included in the accounting lease term.

See Note 5 Leases to the Consolidated Financial Statements.

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

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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Research and Development

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dollars at the monthly average rates of exchange prevailing during the period, assets and liabilities are translated at period-end exchange rates and equity accounts are translated at historical exchange rates.

Translation adjustments are accumulated in a separate component of shareholders’ equity in the consolidated balance sheets and are included in the determination of comprehensive income in the consolidated statements of comprehensive earnings and consolidated statements of changes in shareholders’ equity.

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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shareholders’ equity.

Transaction gains and losses are included in the determination of net income in the consolidated statements of operations.

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 December 31, 2020, and is currently evaluating the impact this new standard will have on the consolidated financial statements.

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

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

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

Revision to Prior Period Financial Statements

During the fourth quarter of the year ended December 31, 2021, the Company identified an immaterial error in its previously issued financial statements related to the recording of a deferred tax liability on unremitted foreign earnings that should have been released in 2015.

The correction of the error resulted in a decrease in Deferred income taxes and other tax liabilities of $ 76.9 and an increase to Retained earnings of $ 76.9 for all prior periods presented in the accompanying consolidated financial statements.

The misstatement had no impact on net earnings, comprehensive earnings, or cash flows from operating, investing, or financing activities in any of the periods presented herein.

Management determined that the impact of this error is not quantitatively or qualitatively material to the previously issued annual and interim financial statements using the guidance of SEC Staff Accounting Bulletin (SAB) No.

99, Materiality, and SAB No.

108, Considering the Effect of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements .

Previously reported balances, including those on the statement of changes in shareholders' equity and in the notes to the consolidated financial statements have been revised for the adjustment.

Description of Revenues

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The Company's revenue by segment payers/customer groups for the years ended December 31, 2021, 2020 and 2019 is as follows:

For the Year Ended

December 31, 2021 For the Year Ended

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Total Dx revenues by payer 64 % — % — % 64 % 65 % — % — % 65 % 60 % — % — % 60 %

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

Pharmaceutical, biotechnology and medical device companies 17 % 13 % 6 % 36 % 17 % 11 % 7 % 35 % 21 % 12 % 7 % 40 %

Total revenues 81 % 13 % 6 % 100 % 82 % 11 % 7 % 100 % 81 % 12 % 7 % 100 %

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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Revenues in the U.S.

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

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

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

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

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

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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The following are descriptions of the Dx payer portfolios:

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

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

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

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

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

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

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

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

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

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

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

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

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

Service contracts generally take the form of fee-for-service or fixed-price arrangements subject to pricing adjustments based on changes in scope.

In cases where performance spans multiple accounting periods, revenue is recognized as services are performed, measured on a proportional-performance basis, using either input or output methods that are specific to the service provided.

In an output method, revenue is determined by dividing the actual units of output achieved by the total units of output required under the contract and multiplying that percentage by the total contract value.

The total contract value, or total contractual payments, represents the aggregate contracted price for each of the agreed upon services to be provided.

When using an input method, revenue is recognized by dividing the actual units of input incurred by the total units of input budgeted in the contract, and multiplying that percentage by the total contract value.

In each situation, the Company believes that the methods used most accurately depict the progress of the Company towards completing its obligations.

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

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

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

The term “billing milestone” relates only to a billing trigger in a contract whereby amounts become billable and payable in accordance with a negotiated predetermined billing schedule throughout the term of a project.

These billing milestones are generally not performance-based (i.e., there is no potential additional consideration tied to specific deliverables or performance).

In other cases, billing and payment terms are tied to the passage of time (e.g., monthly billings).

In either case, the total contract value and aggregate amounts billed to the customer would be the same at the end of the project.

Proportional performance contracts typically contain a single service (e.g., management of a clinical study) and therefore no allocation of the contract price is required.

Fee-for-service contracts are typically priced based on transaction volume.

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

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

DD is a CRO business that provides end-to-end drug development services.

DD provides these services predominantly to pharmaceutical, biotechnology and medical device companies worldwide.

A majority of DD’s revenues are earned under contracts that range in duration from a few months to several years.

These contracts generally take the form of fee-for-service or fixed-price arrangements subject to pricing adjustments based on changes in scope.

The total contract value is estimated at the beginning of the contract, and is equal to the amount expected to be billed to the customer.

Other payments and billing adjustments may also factor into the calculation of the total contract value, such as the reimbursement of out-of-pocket costs and volume-based rebates.

The majority of DD's contracts contain a single performance obligation.

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

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

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

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

In some cases, payments received are in excess of revenue recognized.

For example, a contract invoicing schedule may provide for an upfront payment of 10% of the full contract value upon contract signing, but at the time of signing performance of services has not yet begun.

Payments received in advance of services being provided are deferred as contract liabilities on the balance sheet.

As the contracted services are subsequently performed and the associated revenue is recognized, the contract liability balance is reduced by the amount of revenue recognized during the period.

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

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

Fee-for-service contracts are typically priced based on transaction volume or time and materials.

For volume based contracts the contract value is entirely variable and revenue is recognized as the specific product or service is completed.

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

Fixed-price contracts are typically recognized as revenue over time based on a proportional-performance basis, using either input or output methods that are specific to the service provided.

In an output method, revenue is determined by dividing the actual units of output achieved by the total units of output required under the contract and multiplying that percentage by the

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

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currently not billable to the customer pursuant to contractual terms.

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

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

total contract value.

The estimate of total units of input at completion requires significant judgment and the estimates are based on various assumptions of events that often span several years.

These estimates are reviewed periodically and any adjustments are recognized on a cumulative catch-up basis in the period they become known.

Contracts are often modified to account for changes in contract specifications and requirements.

Generally, when contract modifications create new performance obligations, the modification is considered to be a separate contract and revenue is recognized prospectively.

When contract modifications change existing performance obligations, the impact on the existing transaction price and measure of progress for the performance obligation to which it relates is generally recognized as an adjustment to revenue (either as an increase in or a reduction of revenue) on a cumulative catch-up basis.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Revenue for full service clinical studies is recognized using an input-based measure of progress based on costs incurred (including pass-through costs such as investigator grants and reimbursable out-of-pocket expenses).

Revenue for market access solutions is recognized using various methods.

Revenue for fee-for-service arrangements, such as reimbursement consulting hotlines and patient assistance programs, is recognized using an output method based on transaction volume which corresponds to the amount charged to the customer.

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

Contract costs

DD Contract costs

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

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

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

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

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

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

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

Contract fulfillment costs include software implementation costs and setup costs for certain services.

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

This period typically ranges from 24 - 60 months.

This period typically ranges from 2 - 5 years.

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

3 unchanged sentences

Total $ 50.6 $ 45.2

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

Amortization related to sales commission assets and associated payroll taxes for the years ended December 31, 2021, 2020, and 2019 was $ 27.5 , $ 23.2 and $ 21.2 , respectively.

Amortization related to deferred contract fulfillment costs for the years ended December 31, 2021, 2020 and 2019 was $ 14.2 , $ 10.1 and $ 8.7 , respectively.

1 unchanged sentence

The Company applies the practical expedient to not recognize the effect of financing in its contracts with customers, when the difference in timing of payment and performance is one year or less.

Receivables, Unbilled Services and Unearned Revenue

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

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

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

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

Accounts Receivable, Unbilled Services and Unearned Revenue

Differences in the timing of revenue recognition and associated billing and cash collections result in recording accounts receivable, unbilled services and unearned revenue in the consolidated balance sheet.

Payments received in advance of services being provided are contract liabilities recognized as unearned revenue.

Revenue recognized in advance of billing are recognized as unbilled services and the majority of our unbilled services represent unbilled receivables.

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

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

The following table provides information about accounts receivables, unbilled services, and unearned revenue from contracts with customers:

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

December 31, 2021 December 31, 2020

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

Dx accounts receivable $ 1,193.8 $ 1,515.5

DD accounts receivable 1,089.2 986.4

Less DD allowance for doubtful accounts ( 21.5 ) ( 22.1 )

Accounts receivable $ 2,261.5 $ 2,479.8

Gross unbilled services $ 730.8 $ 548.1

Less reserve for unbilled services ( 14.0 ) ( 11.3 )

Unbilled services $ 716.8 $ 536.8

Unearned revenue $ 558.5 $ 506.5

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

Revenue recognized during the period, that was included in the unearned revenue balance at the beginning of the period, for the years ended December 31, 2021, 2020, and 2019 was $ 319.4 , $ 262.6 , and 250.2 , respectively.

Credit Loss Rollforward

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The rollforward for the allowance for credit losses for the year ended December 31, 2021, is as follows:

Year Ended December 31, 2020

Accounts Receivable Unbilled Services Note and Other Receivables Total

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Write offs ( 5.7 ) ( 0.2 ) — ( 5.9 )

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

Credit loss expense 3.8 2.7 ( 5.0 ) 1.5

Write offs ( 4.4 ) ( 0.1 ) — ( 4.5 )

Ending allowance for credit losses $ 21.5 $ 13.9 $ 0.7 $ 36.1

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

Performance Obligations Under Long-Term Contracts

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Within DD, revenue of $ 69.8 and $ 80.9 was recognized during the year ended December 31, 2021, and December 31, 2020, 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.

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

BUSINESS ACQUISITIONS AND DISPOSITIONS

During the year ended December 31, 2021, the Company acquired various businesses and related assets for approximately $ 496.9 in cash (net of cash acquired).

The purchase consideration for all acquisitions year to date has been allocated to the estimated fair market value of the net assets acquired, including approximately $ 198.5 in identifiable intangible assets and a residual amount of non-tax-deductible goodwill of approximately $ 298.4 .

The amortization periods for intangible assets acquired from these transactions range from 11 to 15 years for customer relationships, 5 to 10 years for patents and technology, 5 years for non-compete agreements, and 5 years for trade names.

These acquisitions were made primarily to extend the Company's geographic reach in important market areas and enhance the Company's scientific differentiation.

The excess of the

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

1 unchanged sentence

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

BUSINESS ACQUISITIONS AND DISPOSITIONS

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

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

A summary of the net assets acquired in 2021 for these businesses is included below:

Amounts Acquired During Year Ended December 31, 2021

Accounts receivable $ 10.8

Unbilled services 3.2

Inventories 1.6

Prepaid expenses and other 3.0

Property, plant and equipment 56.6

Goodwill 298.4

Intangible assets 198.5

Total assets acquired 572.1

Accounts payable 2.5

Accrued expenses and other 3.9

Unearned revenue 6.6

Other liabilities 62.2

Total liabilities acquired 75.2

Net assets acquired $ 496.9

The purchase price allocation for several transactions are still preliminary and subject to change.

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

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

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

Unaudited Pro Forma Information for 2021 Acquisitions

Had the aggregate of the Company's 2021 acquisitions been completed as of January 1, 2020, the Company's pro forma results would have been as follows:

Years Ended December 31,

Revenues $ 16,216.6 $ 14,112.8

Net earnings attributable to Laboratory Corporation of America Holdings 2,378.3 1,554.5

During the year ended December 31, 2020, the Company acquired various businesses and related assets for approximately $ 267.6 in cash (net of cash acquired).

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

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

These acquisitions were made primarily to extend the Company's geographic reach in important market areas and enhance the Company's scientific differentiation.

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

1 unchanged sentence

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

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Amounts Acquired During Year Ended December 31, 2020

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The Company funded the transaction through the new term loan facility entered into in 2019 concurrently with the transaction.

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

Consideration Transferred

Cash consideration $ 601.0

Fair value of CRP $ 110.0

Total $ 711.0

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Purchase Price Allocation for Envigo

Net Assets Acquired

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Total $ 711.0

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

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

Years Ended December 31,

Year Ended December 31, 2019

Revenues $ 11,742.5

Net earnings attributable to Laboratory Corporation of America Holdings 831.4

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

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

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

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

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

RESTRUCTURING AND OTHER CHARGES

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$ 18.6 within Dx and $ 24.5 within DD.

The charges were comprised of $ 16.3 in severance and other personnel costs and $ 28.0 in facility-related costs primarily associated with general integration activities.

The charges were offset by the reversal of previously established liability of $ 0.4 in unused severance and $ 0.8 in unused facility-related costs.

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

$ 15.3 within Dx and $ 25.3 within DD.

The charges were comprised of $ 14.1 in severance and other personnel costs $ 17.4 for facility, operating lease right-of-use and equipment impairments, and $ 18.9 in facility closures and general integration activities.

4 unchanged sentences

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

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

$ 20.5 within Dx and $ 27.6 within DD.

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

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

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

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

5 unchanged sentences

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

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

Restructuring charges 5.2 5.5 8.9 13.4 33.0

Impairment of facility related assets — 7.5 — 9.9 17.4

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

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

Cash payments and other adjustments ( 5.3 ) ( 12.5 ) ( 11.5 ) ( 16.9 ) ( 46.2 )

1 unchanged sentence

Restructuring charges 7.8 11.0 8.5 17.0 44.3

Impairment of facility related assets — 7.5 — 9.9 17.4

Reduction of prior restructuring accruals — ( 0.2 ) ( 0.4 ) ( 0.6 ) ( 1.2 )

7 unchanged sentences

Leases have remaining lease terms of less than a year to 12 years, some of which include options to extend the leases for up to 15 years.

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

The components of lease expense were as follows:

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Finance leases — —

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Supplemental balance sheet information related to leases was as follows:

28 unchanged sentences

Total maturities, due beyond one year $ 642.5 $ 84.6

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

Rent expense for short term leases with a term less than one year for the years ended December 31, 2021, 2020, and 2019 amounted to $ 19.5 , $ 6.8 , $ 10.6 , respectively.

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

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

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

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

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

JOINT VENTURE PARTNERSHIPS AND EQUITY METHOD INVESTMENTS

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

Locations Net Investment Interest Owned

Joint Venture Partnerships :

Alberta, Canada (2) $ 34.6 43.37 %

Florence, South Carolina 10.2 49.00 %

Buffalo, New York 13.4 48.18 %

Equity Method Investments :

Various 7.2 various

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

The equity method investments represent the Company’s purchase of ownership interests in clinical diagnostic companies.

The investments are accounted for under the equity method of accounting as the Company does not have control of these investments.

The Company has no material obligations or guarantees to, or in support of, these unconsolidated investments and their operations.

The Company’s investment in one of its Alberta joint venture partnerships at December 31, 2020, includes $ 22.4 of value assigned to that partnership’s Canadian license to conduct diagnostic testing services in the province.

Substantially all of the joint venture's revenue is received as reimbursement from the Alberta government's healthcare programs (AHS).

While the Canadian license provides the joint venture the ability to conduct diagnostic testing in Alberta, it does not guarantee that the provincial government will continue to reimburse diagnostic laboratory testing in future years at current levels.

A decision by the provincial government to limit or reduce its reimbursement of laboratory diagnostic services would have a negative impact on the profits and cash flows the Company derives from the joint venture.

In August 2016, AHS and the Canadian partnership reached an agreement to extend the contract for five additional years through March 2022, with the intent to have the services provided pursuant to the contract transferred to AHS at the end of the five-year period.

In consideration of AHS acquiring the assets and assuming liabilities in accordance with the parties’ agreement, AHS will pay CAD 50.0 to the partnership when the transfer is effective, subject to a working capital adjustment.

The Company is amortizing the value of the partnership's Canadian license to its residual value over the remaining term of the agreement.

In December 2019, AHS issued a Request for Expression of Interest, that seeks to gauge market interest from private third parties for the provision of community lab services in Alberta.

The Canadian partnership submitted a response indicating its interest in providing lab services.

ACCOUNTS RECEIVABLE

December 31, 2020 December 31,

Dx accounts receivable $ 1,515.5 $ 798.1

DD accounts receivable 986.4 764.8

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

Accounts receivable $ 2,479.8 $ 1,543.9

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Total variable payments for the year ended December 31, 2021, 2020 and 2019 were $ 28.4 , $ 26.7 , and $ 20.8 , respectively.

PROPERTY, PLANT AND EQUIPMENT, NET

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$ 2,815.4 $ 2,729.6

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

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Depreciation expense and amortization of property, plant and equipment was $ 375.6 , $ 349.3 and $ 321.5 for 2021, 2020 and 2019, respectively, including software amortization of $ 82.4 , $ 84.7 , and $ 90.4 for 2021, 2020 and 2019, respectively.

GOODWILL AND INTANGIBLE ASSETS

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

The changes in the carrying amount of goodwill (net of impairment) for the years ended December 31, 2021 and 2020 are as follows:

December 31, 2021 December 31, 2020 December 31, 2021 December 31, 2020 December 31, 2021 December 31, 2020

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Canadian licenses 493.5 — 493.5 489.8 — 489.8

In process research and development 9.1 — 9.1 — — —

$ 5,423.6 $ ( 1,688.1 ) $ 3,735.5 $ 6,090.1 $ ( 2,129.0 ) $ 3,961.1

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

This is the cumulative goodwill impairment for the Company through December 31, 2021.

Additional impairment of identifiable intangible and tangible assets of $ 31.8 and $ 7.9 was recorded for DD and Dx, respectively, in 2020, for impairment of a tradename, software, customer relationships, and technology assets.

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

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

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

This change in estimated useful life resulted in accelerated amortization of $ 88.4 and $ 27.5 in 2021 and 2020.

Fully amortized intangible assets were written off during 2021.

A summary of amortizable intangible assets acquired during 2021, and their respective weighted average amortization periods are as follows:

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Customer relationships $ 142.9 14.1

Trade name 0.2 2.4

Patents, licenses and technology 36.1 5.0

Non-compete agreements 5.8 5.0

Trade name 4.6 5.0

In process research and development 9.1 N/A

Amortization of intangible assets, including amortization of the Canadian license recorded in other assets, was $ 369.6 , $ 275.4 and $ 243.2 in 2021, 2020 and 2019, respectively.

The Company recorded purchase accounting adjustments and impairment losses through amortization expense of $ 0.0 , $ 0.4 , and $ 4.5 in 2020, 2019 and 2018, respectively.

The Company recorded purchase accounting adjustments and impairment

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

losses through amortization expense of $ 0.4 in 2019.

Amortization expense of intangible assets is estimated to be $ 237.9 in fiscal 2022, $ 234.6 in fiscal 2023, $ 230.0 in fiscal 2024, $ 217.8 in fiscal 2025, $ 208.5 in fiscal 2026, and $ 2,021.9 thereafter.

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Accrued taxes payable 239.6 374.8

Accrued pass through expenses 149.1 96.0

Other 279.9 263.7

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December 31, 2021 December 31, 2020

4.625% senior notes due 2020 — 413.7

2019 term loan — 375.0

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4.70% senior notes due 2045 900.0 900.0

2019 term loan — 375.0

2.30% senior notes due 2024 400.0 400.0

2.95% senior notes due 2029 650.0 650.0

Debt issuance costs ( 41.0 ) ( 37.1 )

1 unchanged sentence

Total long-term debt $ 5,416.5 $ 5,419.0

Credit Facilities

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

The Company fully repaid the remaining 2019 Term Loan balance during the first quarter of 2021.

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

It consists of a five-year revolving facility in the principal amount of up to $ 1,000.0 , with the option of increasing the facility by up to an additional $ 500.0 , 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 0.10% to 0.25% , depending

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

1 unchanged sentence

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

Credit Facilities

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

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

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

The 2019 Term Loan 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% .

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

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

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

The 2017 Term Loan was fully repaid in 2019.

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

The revolving credit facility also provides for a subfacility of up to $ 100.0 for swing line borrowings and a subfacility of up to $ 80.0 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 0.10% to 0.25% .

on the Company's debt ratings.

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.

1 unchanged sentence

As of December 31, 2021, the effective interest rate on the revolving credit facility was 1.10 %.

The credit facility expires on September 15, 2022.

The credit facility expires on April 30, 2026.

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

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

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

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

The amendments also provide that during any period in which the Company's leverage ratio exceeds 4.5 x debt to last twelve months EBITDA (i) the Company will be prohibited from consummating share repurchases, subject to limited exceptions, (ii) borrowings under the revolving credit facility will accrue interest at a per annum rate equal to, at the Company's election, either a LIBOR rate plus a margin of 1.25 % or a base rate plus a margin of 0.25 %, (iii) the facility fee that the Company is required to pay on the aggregate commitments under the revolving credit facility will be 0.25 % per annum, and (iv) borrowings under the term loan facility will accrue interest at a per annum rate equal to, at the Company's election, either a LIBOR rate plus a margin of 1.175 % or a base rate plus a margin of 0.175 %.

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

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

Zero-Coupon Convertible Subordinated Notes

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

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

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

On December 19, 2019, the Company redeemed all remaining outstanding zero-coupon notes that had not previously converted.

The Company was in compliance with all covenants in its term loans and the revolving credit facility at December 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 December 31, 2021, under its revolving credit facility is not encumbered by any of the Company's outstanding letters of credit.

There were $ 79.8 in outstanding letters of credit as of December 31, 2021.

On May 26, 2021, the Company issued new senior notes representing $ 1,000.0 in debt securities consisting of $ 500.0 aggregate principal amount of 1.55 % senior notes due 2026 and $ 500.0 aggregate principal amount of 2.70 % senior notes due 2031.

Interest on these notes is payable semi-annually in arrears on June 1 and December 1 of each year, commencing on December 1, 2021.

Net proceeds from the offering of these notes were $ 989.4 after deducting underwriting discounts and other expenses of the offering.

The net proceeds were used, along with cash on hand, to redeem, prior to maturity, the Company's outstanding 3.20 % senior notes due February 1, 2022 and 3.75 % senior notes due August 23, 2022.

During the second quarter of 2021, the Company entered into fixed-to-variable interest rate swap agreements for its 2.70 % senior notes due 2031 with an aggregate notional amount of $ 500.0 and variable interest rates based on three-month LIBOR plus 1.0706 % to hedge against changes in the fair value of a portion of the Company's long-term debt.

These interest rate swaps are included in other long-term assets and added to the value of the senior notes with an aggregate fair value of $ 2.9 at December 31, 2021.

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.

1 unchanged sentence

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

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

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

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

The scheduled payments of long-term debt at the end of 2021 are summarized as follows:

9 unchanged sentences

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

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

The changes in common shares issued and held in treasury are summarized below:

7 unchanged sentences

Common stock issued at December 31 93.1 97.5 97.2

Common Shares Held in Treasury

2020 2019 2018

Common shares held in treasury at January 1 — 23.5 23.2

Surrender of restricted stock and performance share awards — 0.1 0.3

Retirement of treasury shares — ( 23.6 ) —

Common shares held in treasury at December 31 — — 23.5

The Company’s treasury shares are recorded at aggregate cost.

1 unchanged sentence

Share Repurchase Program

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

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

On December 8, 2021, the board of directors adopted a new share repurchase plan authorizing up to $ 2,500.0 of the Company's shares in addition to the remaining amount outstanding under the previous plan.

On December 13, 2021, the Company entered into accelerated share repurchase agreements (collectively, the ASR Agreements) with two different banks, Goldman Sachs & Co.

LLC and Barclays Bank PLC (collectively, the Financial Institutions), to repurchase $ 1,000.0 in the aggregate of the Company’s common stock (Common Stock), as part of the Company’s Common Stock repurchase program.

The remaining repurchase authorization has no expiration date.

During 2021, the Company repurchased 5.2 shares of its common stock at an average price of $ 282.05 for a total cost of $ 1,668.5 , which included $ 1,000.0 paid in respect of an ASR for which the Company received 80% of the shares calculated at the price at the inception of the Agreements.

At final settlement, the Company may be entitled to receive additional shares of its common stock from the Financial Institutions or it may be required to make a payment.

If the Company are obligated to make a payment, it may elect to satisfy such obligation in cash or shares of its common stock.

The specific number of shares that the Company ultimately will repurchase under the ASR Agreements will be based generally on the average of the daily volume-weighted average price per share of the Common Stock during a repurchase period, less a discount and subject to adjustments pursuant to the terms and conditions of the ASR Agreements.

The ASR Agreements contain provisions customary for agreements of this type, including provisions for adjustments to the transaction terms, the circumstances generally under which the ASR Agreements may be accelerated, extended or terminated early by the Financial Institutions and various acknowledgments, representations and warranties made by the parties to one another.

The initial shares received under the ASR have been removed from the outstanding share count and the final settlement is expected to be completed by the end of April 2022.

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.

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

At the end of 2021, the Company had outstanding authorization from the board of directors to purchase up to $ 1,631.5 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 due to the COVID-19 pandemic.

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

13 unchanged sentences

Current year adjustments ( 104.6 ) 101.7 ( 2.9 )

264.1 ( 72.9 ) 191.2

Pension settlement charge — ( 3.7 ) ( 3.7 )

Amounts reclassified from accumulated other comprehensive earnings (a) — ( 6.3 ) ( 6.3 )

34 unchanged sentences

Restructuring and acquisition items — — 0.7

Re-measurement of deferred taxes — — 2.4

Repatriation tax — — 1.2

Impairment of assets — 4.0 —

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Effective rate 23.9 % 29.8 % 25.3 %

On December 22, 2017, the U.S.

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

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

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

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

The Company finalized its decision on accounting policy during the fourth quarter of 2018.

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

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

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

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

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

allowance has been provided.

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

The Company has U.S.

5 unchanged sentences

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

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

The valuation allowance decreased from $ 167.6 in 2020 to $ 149.2 in 2021 primarily due to utilization of state tax attributes and foreign net operating losses.

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Unrecognized income tax benefits were $ 52.4 and $ 48.8 at December 31, 2021, and 2020, respectively.

18 unchanged sentences

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

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

The Company believes adequate reserves have been established for the assessment.

The Company has various state and foreign income tax examinations ongoing throughout the year.

6 unchanged sentences

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

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

STOCK COMPENSATION PLANS

6 unchanged sentences

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

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

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

Options Weighted-Average

14 unchanged sentences

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

2021 2020 2019

Fair value per option $ 62.18 $ 40.06 $ 33.70

2 unchanged sentences

Expected volatility 28.6 % 20.3 % 20.4 %

Expected dividend yield N/A N/A

Expected dividend yield N/A N/A N/A

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

5 unchanged sentences

For 2021, 2020 and 2019, expense related to the Company’s stock option plan totaled $ 3.6 , $ 3.4 and $ 5.9 , respectively, and is included in selling, general and administrative expenses.

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Restricted Stock, Restricted Stock Units and Performance Shares

6 unchanged sentences

Unearned restricted stock and performance share compensation is amortized to expense, when probable, over the applicable vesting periods.

For 2020, 2019, and 2018, total restricted stock, restricted stock unit, and performance share compensation expense was $ 98.1 , $ 91.2 and $ 80.1 , respectively, and is included in selling, general and administrative expenses.

For 2021, 2020, and 2019, total restricted stock, restricted stock unit, and performance share compensation expense was $ 135.4 , $ 98.1 and $ 91.2 , respectively.

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

The following table shows a summary of non-vested shares for the year ended December 31, 2021:

6 unchanged sentences

Non-vested at December 31, 2021 1.2 $ 212.83

Unrecognized Compensation Cost

As of December 31, 2021, there was $ 155.2 of total unrecognized compensation cost related to non-vested stock options, restricted stock, restricted stock unit and performance share-based compensation arrangements granted under the Company's stock incentive plans.

That cost is expected to be recognized over a weighted average period of 1.8 years and will be included in selling, general and administrative expenses.

That cost is expected to be recognized over a weighted average period of 2.0 years and will be included in cost of revenues and selling, general and administrative expenses.

Employee Stock Purchase Plan

24 unchanged sentences

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

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

6 unchanged sentences

Therefore, the applicable statutes and regulations could be interpreted or applied by a prosecutorial, regulatory, or judicial authority in a manner that would adversely affect the Company.

Potential sanctions for violation of these statutes and regulations include significant civil and criminal penalties, fines, the loss of various licenses, certificates and authorizations, additional liabilities from third-party claims, and/or exclusion from participation in government programs.

Potential sanctions for violation of these

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

statutes and regulations include significant civil and criminal penalties, fines, the loss of various licenses, certificates and authorizations, additional liabilities from third-party claims, and/or exclusion from participation in government programs.

Many of the current claims and legal actions against the Company are in preliminary stages, and many of these cases seek an indeterminate amount of damages.

15 unchanged sentences

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.

Neither the U.S.

government nor any state government has intervened in the lawsuit.

The Company's Motion to Dismiss was granted in October 2014 and Plaintiff was granted the right to replead.

On January 11, 2016, Plaintiff filed a motion requesting leave to file an amended complaint under seal and to vacate the briefing schedule for the Company's Motion to Dismiss, while the government reviews the amended complaint.

The Court granted the motion and vacated the briefing dates.

Plaintiff then filed the Amended Complaint under seal.

On August 24, 2021, the U.S.

government filed a notice indicating that it did not intend to intervene in the matter.

On October 27, 2021, the Fourth Amended Complaint was unsealed.

The Fourth Amended Complaint is similar to the Third Amended Complaint in that it alleges that the Company offered UnitedHealthcare kickbacks in the form of discounts in return for Medicare and Medicaid business, and it further alleges that the Company unlawfully charged Medicare amounts substantially in excess of its alleged usual charges.

Similar to the Third Amended Complaint, the Fourth Amended Complaint alleges violations of the federal False Claims Act and the False Claims Act of 14 states and the District of Columbia.

The Company will vigorously defend the lawsuit.

7 unchanged sentences

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

The petition remains under seal.

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

On 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.

Laboratory Corporation of America, et al., filed in the Circuit Court of the Thirteenth Judicial Circuit for Hillsborough County, Florida.

Laboratory Corporation of America, et al.

, filed in the Circuit Court of the Thirteenth Judicial Circuit for Hillsborough County, Florida.

The complaint alleges that the Company violated the Florida Consumer Collection Practices Act by billing patients who were collecting benefits under the Workers' Compensation Statutes.

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

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

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

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

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

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

Judgment on the Pleadings.

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

On October 16, 2019, the Court of Appeal reversed the Circuit Court’s dismissal, but certified a controlling issue of Florida law to the Florida Supreme Court.

October 16, 2019, the Court of Appeal reversed the Circuit Court’s dismissal, but certified a controlling issue of Florida law to the Florida Supreme Court.

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

18 unchanged sentences

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.

On June 16, 2021, the Court denied the Company’s Motion for Summary Judgment.

The Company will vigorously defend the lawsuit.

55 unchanged sentences

On August 16, 2019, the Court entered an order granting in part and denying in part the Motion to Dismiss the Amended Complaint, and denying the Motion to Strike the Class Allegations.

The Company will vigorously defend the lawsuit.

On August 26, 2021, Plaintiffs filed a Motion for Class Certification.

On December 29, 2021, a related lawsuit, Nathaniel J.

Nolan, et al.

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

District Court for the Middle District of North Carolina.

The complaint alleges that the Company's patient acknowledgement of estimated financial responsibility form is misleading.

The lawsuit seeks a declaratory judgement under the consumer protection laws of Nevada and Florida that the form is materially misleading and deceptive, an injunction barring the use of the form, damages on behalf of an alleged class, and attorney's fees and expenses.

The Company will vigorously defend the lawsuits.

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

10 unchanged sentences

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

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

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

Twenty-three putative class action lawsuits were filed against the Company related to the AMCA Incident in various U.S.

8 unchanged sentences

The Complaint seeks damages on behalf of a class of all affected Company customers.

The Company will vigorously defend the multi-district litigation.

On December 16, 2021, the Court granted in part and denied in part the Company's Motion to Dismiss.

The Company will vigorously defend the remaining claims in the multi-district litigation.

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

9 unchanged sentences

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

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

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

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

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

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

Laboratory Corporation of

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

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

1 unchanged sentence

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

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

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

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.

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

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

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

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

5 unchanged sentences

In August 2020, the Plaintiffs filed an Amended Complaint.

On April 26, 2021, the Plaintiffs and the Company each filed Motions for Summary Judgment and the Plaintiffs filed a Motion for Class Certification.

The Company will vigorously defend the lawsuit.

16 unchanged sentences

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

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

The Company will vigorously defend the lawsuit.

On 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 sought monetary damages, liquidated damages, equitable and injunctive relief, and recovery of attorney's fees and costs.

On December 17, 2021, the Court approved settlement of the lawsuit and entered its dismissal.

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

2 unchanged sentences

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.

On June 24, 2021, the District Court remanded the case to the Superior Court of California, County of Los Angeles on the grounds that potential damages did not meet the Class Action Fairness Act (CAFA), 28 U.S.C.

§ 1332(d), jurisdictional threshold.

The Company will vigorously defend the lawsuit.

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

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

The self-insured retentions are on a

On June 14, 2021, a single plaintiff filed a Private Attorney General Act lawsuit, Becker v.

Laboratory Corporation of America , in the Superior Court of California, County of Orange, alleging various violations of the California Labor Code, including that the Plaintiff was not properly compensated for work and overtime hours, not properly paid meal and rest break premiums, not reimbursed for certain business-related expenses, and received inaccurate wage statements.

The lawsuit seeks monetary 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

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

1 unchanged sentence

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

per-occurrence basis without any aggregate annual limit.

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 sought monetary damages, liquidated damages, equitable and injunctive relief, and recovery of attorney’s fees and costs.

The lawsuit was dismissed without prejudice in June 2021, but the Plaintiff is a named party in the Tabacchino lawsuit.

On October 14, 2021, a putative class action lawsuit, Tabacchino v.

Laboratory Corporation of America Holdings , was filed in the Supreme Court of New York, Nassau County, alleging claims for a failure to properly pay service representatives compensation for all hours worked and overtime under the Fair Labor Standards Act and the New York Labor Code, as well as notice and recordkeeping claims under the New York Labor Code.

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

On December 16, 2021, the Court issued an order approving the parties' settlement.

A stipulation of discontinuance with prejudice will be filed upon the conclusion of the settlement claims process.

On November 23, 2021, the Company was served with a single plaintiff Private Attorney General Act lawsuit, Poole v.

Laboratory Corporation of America , filed in the Superior Court of California, County of Kern, alleging various violations of the California Labor Code, including that Plaintiff was not properly paid wages owed, not properly paid meal and rest break premiums, not reimbursed for certain business related expenses, and other allegations including the untimely payment of wages and receipt of inaccurate wage statements.

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

The case was removed to the U.S.

District Court for the Eastern District of California.

The Company will vigorously defend the lawsuit.

On February 7, 2022, the Company was served with a Subpoena Duces Tecum issued by the DOJ in Camden, New Jersey requiring the production of documents related to non-invasive prenatal screening tests.

The Company will cooperate with the DOJ.

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

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

The self-insured retentions are on a per-occurrence basis without any aggregate annual limit.

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

1 unchanged sentence

Defined Contribution Retirement Plans

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

The Company has various U.S.

defined contribution retirement plans (401K Plans).

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

7 unchanged sentences

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

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

The German plan was closed to new entrants on December 31, 2009 but participants continue to accrue service credits.

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

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Net Periodic Benefit Costs

10 unchanged sentences

Defined-benefit plan costs $ 8.6 $ 11.0 $ 13.8 ( 3.7 ) ( 3.3 ) 0.4

Net periodic benefit costs are recorded as a component of Operating income.

Service costs are the only component of net periodic benefit costs recorded within Operating income.

For the year ended December 31, 2021, the Company recognized a partial plan settlement charge of $ 3.7 as a component of Other, net.

4 unchanged sentences

Net actuarial loss in accumulated other comprehensive earnings $ 66.9 $ 108.8 $ 58.8 $ 99.7

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Change in Projected Benefit Obligation

4 unchanged sentences

Balance at beginning of the year $ 369.8 $ 355.5 $ 690.1 $ 590.7

Balance of acquired subsidiary at acquisition date — — — 215.4

Service cost 3.9 5.1 2.4 2.1

2 unchanged sentences

Benefits and administrative expenses paid ( 30.7 ) ( 26.6 ) ( 22.2 ) ( 20.0 )

Plan curtailment — — — ( 16.1 )

Foreign currency exchange rate changes — — ( 9.9 ) 25.9

2 unchanged sentences

Plans and $ 633.8 and $ 690.1 , respectively for the Non-U.S.

The increase in the projected benefit obligation for the U.S.

Plans from December 31, 2019 to December 31, 2020 is primarily due to an increase of $ 30.8 as a result of discount rate and mortality rate changes partially offset by the net of normal plan progression and experience gains of $ 16.5 .

The increase in the projected benefit obligation for the Non-U.S.

Plans from December 31, 2019 to December 31, 2020 is primarily due to an increase of $ 83.2 as a result of discount rate changes and an increase of $ 25.9 due to foreign currency exchange rate changes, partially offset by the net of normal plan progress and experience gains of $ 9.8 .

Change in Fair Value of Plan Assets

4 unchanged sentences

Balances at beginning of the year $ 300.9 $ 262.1 $ 535.6 $ 491.7

Plan assets of acquired subsidiary at acquisition date — — — 168.3

Company contributions — 33.1 14.3 13.5

4 unchanged sentences

Fair value of plan assets at end of year $ 299.9 $ 300.9 $ 544.6 $ 535.6

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Change in Funded Status and Reconciliation of Amounts Recorded in the Balance Sheet

4 unchanged sentences

Funded status $ 33.4 $ 68.9 $ 89.2 $ 154.5

Other assets $ 13.4 $ —

Accrued expenses and other $ 2.4 $ 2.3 $ 0.6 $ 0.6

Other liabilities 44.4 66.6 88.6 153.9

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

6 unchanged sentences

Cash balance interest credit rate 4.0 % 4.0 % 4.0 % N/A N/A N/A

A one percentage point decrease or increase in the discount rate would have resulted in a respective increase or decrease in 2021 retirement plan expense of $ 1.7 for the U.S.

A one percentage point decrease or increase in the discount rate would have resulted in a respective increase or decrease in 2021 retirement plan expense of $ 2.4 for the Non-U.S.

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

9 unchanged sentences

To determine this rate, the Company considers the composition of plan investments, historical returns earned, and expectations about the future.

Actual asset over/under performance compared to expected returns will respectively decrease/increase unrecognized loss.

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

A one percentage point increase or decrease in the expected return on plan assets would have resulted in a corresponding change in 2021 pension expense of $ 2.9 for the U.S.

A one percentage point increase or decrease in the expected return on plan assets would have resulted in a corresponding change in 2021 pension expense of $ 5.4 for the Non-U.S.

The salary increase assumptions are used to estimate the annual rate at which pay of plan participants will grow.

If the rate of growth assumed increases, the size of the pension obligations will increase, as will the amount recorded in Accumulated other comprehensive income (loss) in our consolidated Statement of Financial Position and amortized into earnings in subsequent periods.

The Company evaluates other assumptions periodically, such as retirement age, mortality and turnover, and updates them as necessary to reflect our actual experience and expectations for the future.

Differences between actual results and assumptions utilized are recorded in Accumulated other comprehensive income each period.

These differences are amortized into earnings over the remaining average future service of active participating employees or the expected life of inactive participants, as applicable.

If the rate of growth assumed increases, the size of the pension obligations will increase, as will the amount recorded in Accumulated other comprehensive income (loss) in the Company's Consolidated Statement of Financial Position and amortized into earnings in subsequent periods.

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

1 unchanged sentence

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

The Company evaluates other assumptions periodically, such as retirement age, mortality and turnover, and updates them as necessary to reflect the Company's actual experience and expectations for the future.

Differences between actual results and assumptions utilized are recorded in Accumulated other comprehensive income each period.

These differences are amortized into earnings over the remaining average future service of active participating employees or the expected life of inactive participants, as applicable.

The fair values of the assets at December 31, 2021, and 2020, by asset category are as follows:

32 unchanged sentences

Plan fiduciaries of various plans set investment policies and strategies, based on consultation with professional advisors, and oversee investment allocation, which includes selecting investment managers and setting long-term strategic targets.

The primary strategic investment objectives are balancing investment risk and return and monitoring the plan’s liquidity position in order to meet the near-term benefit payment and other cash needs.

Target allocation percentages are established at an asset class level by plan fiduciaries.

Target allocation ranges are guidelines, not limitations, and occasionally plan fiduciaries will approve allocations above or below a target range.

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

1 unchanged sentence

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

primary strategic investment objectives are balancing investment risk and return and monitoring the plan’s liquidity position in order to meet the near-term benefit payment and other cash needs.

Target allocation percentages are established at an asset class level by plan fiduciaries.

Target allocation ranges are guidelines, not limitations, and occasionally plan fiduciaries will approve allocations above or below a target range.

The weighted average asset allocation of the plan assets as of December 31, 2021, by asset category is as follows:

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The weighted average target asset allocation of the plan assets is as follows:

U.S Plans Non U.S Plans

Plans Non U.S.

Equity securities 17.0 % to 32.5 % 30.0 % to 40.0 %

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Post-retirement medical plan costs $ 0.4 $ 0.6 $ 0.7

Amounts included in accumulated other comprehensive earnings consist of unamortized net loss of $ 1.6 and $ 2.0 .

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

1 unchanged sentence

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

Amounts included in accumulated other comprehensive earnings consist of unamortized net loss of $ 0.8 and $ 1.6 .

A summary of the changes in the accumulated post-retirement benefit obligation follows:

26 unchanged sentences

Cross currency swaps Other liabilities, net 32.8 — 32.8 —

Interest rate swaps Other assets, net 2.9 — 2.9 —

Cash surrender value of life insurance policies Other assets, net 106.4 — 106.4 —

Deferred compensation liability Other liabilities 104.4 — 104.4 —

Investment in equity securities Other current assets 10.9 10.9 — —

Contingent consideration Other liabilities 21.9 — — 21.9

7 unchanged sentences

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

Interest rate swap Other liabilities 1.5 — 1.5 —

Cross currency swaps liability Other liabilities 40.4 — 40.4 —

1 unchanged sentence

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 January 1, 2020 $ 9.9

Addition 10.8

Cash payments and adjustments ( 6.8 )

Balance at December 31, 2020 13.9

Addition 10.8

Cash payments and adjustments ( 1.1 )

2 unchanged sentences

The noncontrolling interest put is valued at its contractually determined value, which approximates fair value.

During the year ended December 31, 2020, the carrying value of the noncontrolling interest put increased by $ 0.4 for foreign currency translation.

During the year ended December 31, 2021, the carrying value of the noncontrolling interest put decreased by $ 0.2 for foreign currency translation.

The Company offers certain employees the opportunity to participate in a DCP.

13 unchanged sentences

The Company addresses its exposure to market risks, principally the market risk associated with changes in interest rates and currency exchange rates, through a controlled program of risk management that includes, from time to time, the use of derivative financial instruments.

Although the Company’s zero-coupon subordinated notes contained features that were considered to be embedded derivative instruments, the Company does not hold or issue derivative financial instruments for trading purposes.

The Company does not hold or issue derivative financial instruments for trading purposes.

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

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

1 unchanged sentence

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

Interest Rate Swap

plus 1.0706 %.

These agreements were designated as hedges against changes in the fair value of a portion of the Company's long-term debt.

The aggregate fair value of $ 2.9 at December 31, 2021, was included as a component of other long-term assets and added to the reported value of the senior notes.

During the third quarter of 2013, the Company entered into two fixed-to-variable interest rate swap agreements for the 4.625 % Senior Notes due 2020 with an aggregate notional amount of $ 600.0 and variable interest rates based on one-month LIBOR plus 2.298 % to hedge against changes in the fair value of a portion of the Company's long-term debt.

2 unchanged sentences

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

These derivative financial instruments were accounted for as fair value hedges which increased or decreased the value of the Senior Notes with the offset being recorded as a component of other long-term assets or liabilities, as applicable.

As the specific terms and notional amounts of the derivative financial instruments match those of the fixed-rate debt being hedged, the derivative instruments were assumed to be perfectly effective hedges and accordingly, there is no impact to the Company's consolidated statements of operations.

These derivative financial instruments are accounted for as fair value hedges which increased or decreased the value of the Senior Notes with the offset being recorded as a component of other long-term assets or liabilities, as applicable.

As the specific terms and notional amounts of the derivative financial instruments match those of the fixed-rate debt being hedged, the derivative instruments are assumed to be perfectly effective hedges and accordingly, there is no impact to the Company's consolidated statements of operations.

Cash flows from the interest rate swaps are including in operating activities.

Carrying amount of hedged liabilities as of December 31, Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Liabilities as of December 31,

2020 2019 2020 2019

Balance Sheet Line Item in which Hedged Items are Included

Long-term debt, less current portion — $ 301.5 — $ 1.5

Foreign Currency Forward Contracts

4 unchanged sentences

Cross Currency Swaps

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

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

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

These cross currency swaps maturing in 2022 and 2025 with an aggregate fair value of $ 20.6 and $ 12.2 as of December 31, 2021, respectively, are included in other long-term liabilities.

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

These cross currency swaps maturing in 2022 and 2025 with an aggregate fair value of $ 26.0 and $ 14.4 as of December 31, 2020, respectively, are included in other long-term liabilities.

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

8 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/Other liabilities — 40.4 600.0 3.2 — 600.0

Interest rate swap Other assets, net/Other liabilities 2.9 — 500.0 — — —

Cross currency swaps Other liabilities — 32.8 600.0 — 40.4 600.0

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

2 unchanged sentences

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

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

Amount included in other comprehensive income Amounts reclassified to the

Statement of Operations

26 unchanged sentences

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

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

2021 2020 2019

8 unchanged sentences

Total operating income $ 3,259.5 $ 2,445.4 $ 1,330.2

Non-operating expenses, net ( 226.3 ) ( 225.3 ) ( 57.4 )

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

Provision for income taxes 662.1 280.0 384.4

Net earnings 1,557.0 824.9 883.9

Net income attributable to noncontrolling interests ( 0.9 ) ( 1.1 ) ( 0.2 )

Net income attributable to Laboratory Corporation of America Holdings $ 1,556.1 $ 823.8 $ 883.7

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

2021 2020 2019

15 unchanged sentences

Total property, plant and equipment, net $ 1,507.3 $ 1,308.1 $ 2,815.4

SUBSEQUENT EVENTS

On February 9, 2022, the Company entered into agreements to create a comprehensive strategic relationship with Ascension, a Catholic, non-profit health system.

Through the expansive strategic collaboration, the Company will manage Ascension’s hospital-based laboratories in 10 states and purchase select assets of the health system’s outreach laboratory business.

This long-term relationship will expand the Company’s clinical laboratory services in several states across the country while creating opportunities to enhance care across all clinical areas.

The arrangement includes acquisition of certain outreach laboratory assets with a purchase price of $ 400.0 .

On February 18, 2022, the Company closed its acquisition of Personal Genome Diagnostics Inc.

(PGDx), a cancer genomics company with a portfolio of comprehensive liquid biopsy and tissue-based products.

The addition of PGDx and its technology complements and accelerates Labcorp’s existing liquid biopsy capabilities and expands Labcorp’s oncology portfolio of next-generation sequencing (NGS)-based genomic profiling capabilities.

Under the terms of the agreement, Labcorp paid $ 450.0 in cash at closing and up to an additional $ 125.0 on achieving future performance milestones.

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

What changed 10-K

Item 9A. Controls and Procedures