What changed in this filing

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Item 1. Financial Statements

2022-04-29 compared with 2021-11-02 · 192 added, 354 removed, 502 unchanged (52% of the section changed)

3 unchanged sentences

(in millions)

September 30,

2022 December 31,

31 unchanged sentences

Shareholders’ equity:

Common stock, 95.8 and 97.5 shares outstanding at September 30, 2021, and December 31, 2020, respectively 8.8 9.0

Common stock, 92.9 and 93.1 shares outstanding at March 31, 2022, and December 31, 2021, respectively 8.5 8.5

Additional paid-in capital 29.1 —

7 unchanged sentences

(in millions, except per share data)

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

2021 2020 2021 2020

Three Months Ended March 31,

Revenues $ 3,899.6 $ 4,161.5

8 unchanged sentences

Interest expense ( 42.2 ) ( 48.5 )

Equity method income (loss), net 8.4 3.0 20.9 ( 1.8 )

Equity method income, net 3.4 4.5

Investment income 1.1 2.4

11 unchanged sentences

(in millions, except per share data)

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

2021 2020 2021 2020

Three Months Ended March 31,

Net earnings $ 492.1 $ 770.1

19 unchanged sentences

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

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

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

4 unchanged sentences

BALANCE AT MARCH 31, 2021 $ 9.0 $ 67.1 $ 10,248.8 $ ( 226.5 ) $ 10,098.4

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

Other comprehensive earnings (loss), net of tax — — — 68.9 68.9

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

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

Stock compensation — 39.8 — — 39.8

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

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

Other comprehensive earnings (loss), net of tax — — — 134.4 134.4

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

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

Stock compensation — 27.2 — — 27.2

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

BALANCE AT DECEMBER 31, 2021 $ 8.5 $ — $ 10,456.8 $ ( 191.9 ) $ 10,273.4

4 unchanged sentences

Stock compensation — 38.2 — — 38.2

Purchase of common stock — ( 68.5 ) — — ( 68.5 )

BALANCE AT MARCH 31, 2022 $ 8.5 $ 29.1 $ 10,948.4 $ ( 264.9 ) $ 10,721.1

Net earnings attributable to Laboratory Corporation of America Holdings — — 467.4 — 467.4

Other comprehensive earnings (loss), net of tax — — — 45.3 45.3

Issuance of common stock under employee stock plans — 1.9 — — 1.9

Net share settlement tax payments from issuance of stock to employees — ( 14.9 ) — — ( 14.9 )

Stock compensation — 23.9 — — 23.9

Purchase of common stock ( 0.1 ) ( 78.0 ) ( 221.9 ) — ( 300.0 )

BALANCE AT JUNE 30, 2021 $ 8.9 $ — $ 10,417.4 $ ( 181.2 ) $ 10,245.1

Net earnings attributable to Laboratory Corporation of America Holdings — — 587.3 — 587.3

Other comprehensive earnings (loss), net of tax — — — ( 89.7 ) ( 89.7 )

Issuance of common stock under employee stock plans — 24.2 — — 24.2

Net share settlement tax payments from issuance of stock to employees — ( 1.4 ) — — ( 1.4 )

Stock compensation — 59.0 — — 59.0

Purchase of common stock ( 0.1 ) ( 81.8 ) ( 218.1 ) — ( 300.0 )

BALANCE AT SEPTEMBER 30, 2021 $ 8.8 $ — $ 10,786.6 $ ( 270.9 ) $ 10,524.5

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

2 unchanged sentences

(in millions)

Nine Months Ended September 30,

Three Months Ended March 31,

CASH FLOWS FROM OPERATING ACTIVITIES:

8 unchanged sentences

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

(Increase) decrease in accounts receivable 135.6 ( 546.9 )

Decrease in accounts receivable 20.4 146.7

Increase in unbilled services ( 84.5 ) ( 42.5 )

Increase in supplies inventory ( 37.4 ) ( 4.7 )

(Increase) decrease in prepaid expenses and other ( 72.4 ) 26.1

Increase in accounts payable 34.6 17.3

Increase in unearned revenue 83.8 44.1

Increase in prepaid expenses and other ( 41.1 ) ( 51.9 )

Decrease in accounts payable ( 5.5 ) ( 16.9 )

Increase (decrease) in unearned revenue ( 2.9 ) 31.8

Increase (decrease) in accrued expenses and other ( 212.3 ) 95.1

3 unchanged sentences

Proceeds from sale of assets 1.0 2.6

Proceeds from sale of business 12.4 —

Proceeds from sale or distribution of investments 0.4 —

Proceeds from exit from swaps — 3.1

Investments in equity affiliates ( 2.2 ) ( 5.5 )

2 unchanged sentences

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from senior note offerings 1,000.0 —

Payments on senior notes ( 1,000.0 ) ( 412.2 )

Payments on term loan — ( 375.0 )

Proceeds from revolving credit facilities — 151.7

Payments on revolving credit facilities — ( 151.7 )

Net share settlement tax payments from issuance of stock to employees ( 27.3 ) ( 28.1 )

4 unchanged sentences

Effect of exchange rate changes on cash and cash equivalents ( 4.4 ) ( 5.1 )

Net increase in cash and cash equivalents 715.7 329.7

Net increase (decrease) in cash and cash equivalents ( 239.2 ) 570.0

Cash and cash equivalents at beginning of period 1,472.7 1,320.8

9 unchanged sentences

For further financial information about these segments, see Note 11 (Business Segment Information) to the Condensed Consolidated Financial Statements.

During the three months ended September 30, 2021, Dx and DD contributed approximately 64 % and 36 % respectively, of revenues to the Company.

During the nine months ended September 30, 2021, Dx and DD contributed approximately 64 % and 36 % respectively, of revenues to the Company.

During the three months ended March 31, 2022, Dx and DD contributed approximately 63 % and 37 % respectively, of revenues to the Company.

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

14 unchanged sentences

Therefore, these interim statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report.

Recently Adopted Accounting Guidance

In October 2021, the Financial Accounting Standards Board (FASB) issued a new accounting standard to improve the accounting for acquired revenue contracts with customers in a business combination.

The Company early adopted this standard effective January 1, 2022.

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

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

1 unchanged sentence

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

The Company's revenues by segment and by payers/customer groups for the three and nine months ended September 30, 2021, and 2020, were as follows:

For the Three Months Ended September 30, 2021 For the Three Months Ended September 30, 2020

North America Europe Other Total North America Europe Other Total

Payer/Customer

Clients 17 % — % — % 17 % 22 % — % — % 22 %

Patients 6 % — % — % 6 % 5 % — % — % 5 %

Medicare and Medicaid 6 % — % — % 6 % 7 % — % — % 7 %

Third-party 35 % — % — % 35 % 34 % — % — % 34 %

Total Dx revenues by payer 64 % — % — % 64 % 68 % — % — % 68 %

Biopharmaceutical and medical device companies 22 % 10 % 4 % 36 % 16 % 10 % 6 % 32 %

Total revenues 86 % 10 % 4 % 100 % 84 % 10 % 6 % 100 %

For the Nine Months Ended September 30, 2021 For the Nine Months Ended September 30, 2020

The Company's revenues by segment and by payers/customer groups for the three months ended March 31, 2022, and 2021, were as follows:

For the Three Months Ended March 31, 2022 For the Three Months Ended March 31, 2021

North America Europe Other Total North America Europe Other Total

5 unchanged sentences

Total Dx revenues by payer 63 % — % — % 63 % 65 % — % — % 65 %

Biopharmaceutical and medical device companies 22 % 10 % 4 % 36 % 18 % 12 % 7 % 37 %

Pharmaceutical, biotechnology and medical device companies 17 % 13 % 7 % 37 % 21 % 10 % 4 % 35 %

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

Revenues in the U.S.

were $ 3,352.7 ( 82.5 %) and $ 3,198.8 ( 82.1 %) for the three months ended September 30, 2021, and 2020, respectively, and for the nine months ended September 30, 2021, and 2020, were $ 9,926.7 ( 82.3 %) and $ 7,505.9 ( 79.1 %), respectively.

Contract costs

DD incurs sales commissions in the process of obtaining contracts with customers.

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

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 1 to 5 years, depending on the business.

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

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

were $ 3,000.5 ( 76.9 %) and $ 3,472.5 ( 83.4 %) for the three months ended March 31, 2022, and 2021, respectively.

DD Contract costs

DD incurs costs to fulfill contracts with customers.

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

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 2 to 5 years.

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

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

Sales commission assets $ 38.8 $ 36.2

1 unchanged sentence

Total $ 53.7 $ 50.6

Amortization related to sales commission assets and associated payroll taxes for the three months ended September 30, 2021, and 2020, was $ 7.1 and $ 6.0 , respectively and for the nine months ended September 30, 2021, and 2020, was $ 20.4 and $ 16.8 , respectively.

Amortization related to deferred contract fulfillment costs for the three months ended September 30, 2021, and 2020, was $ 3.5 and $ 2.3 , respectively, and was $ 10.0 and $ 7.6 , respectively, for the nine months ended September 30, 2021, and 2020.

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

The following table provides information about receivables, unbilled services, and unearned revenue (contract liabilities) from contracts with customers which primarily exist within DD.

September 30, 2021 December 31, 2020

Receivables, which are included in accounts receivable $ 1,098.6 $ 1,001.5

Amortization related to sales commission assets and associated payroll taxes for the three months ended March 31, 2022, and 2021, was $ 7.2 and $ 6.9 , respectively.

Amortization related to deferred contract fulfillment costs for the three months ended March 31, 2022, and 2021, was $ 3.1 and $ 3.5 , respectively.

Accounts Receivable, Unbilled Services and Unearned Revenue

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

March 31, 2022 December 31, 2021

Dx accounts receivable $ 1,155.2 $ 1,193.8

DD accounts receivable 1,103.8 1,089.2

Less DD allowance for doubtful accounts ( 19.4 ) ( 21.5 )

Accounts receivable $ 2,239.6 $ 2,261.5

Gross unbilled services $ 813.2 $ 730.8

Less reserve for unbilled services ( 13.2 ) ( 14.0 )

Unbilled services $ 800.0 $ 716.8

Unearned revenue $ 556.0 $ 558.5

Revenues recognized during the period, that were included in the unearned revenue balance at the beginning of the period were $ 267.6 and $ 237.2 for the nine months ended September 30, 2021, and 2020, respectively.

Revenues recognized during the period, that were included in the unearned revenue balance at the beginning of the period were $ 163.8 and $ 152.3 for the three months ended March 31, 2022, and 2021, respectively.

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Credit Loss Rollforward

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

The rollforward for the allowance for credit losses for the nine months ended September 30, 2021 is as follows:

For the Nine Months Ended September 30, 2021

The rollforward for the allowance for credit losses for the three months ended March 31, 2022 is as follows:

Accounts Receivable Unbilled Services Note and Other Receivables Total

2 unchanged sentences

Less, write offs 1.7 0.7 — 2.4

Balance as of September 30, 2021 $ 18.3 $ 11.2 $ 5.7 $ 35.2

Balance as of March 31, 2022 $ 19.4 $ 13.2 $ 0.7 $ 33.3

Performance Obligations Under Long-Term Contracts

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

The amount of existing performance obligations under such long-term contracts unsatisfied as of September 30, 2021, was $ 5,412.8 .

The amount of existing performance obligations under such long-term contracts unsatisfied were $ 6,069.8 and $ 5,563.4 as of March 31, 2022, and 2021, respectively.

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

Within DD, revenues of $ 10.1 and $ 31.1 were recognized during the three months ended September 30, 2021 and 2020, respectively, and revenues of $ 38.9 and $ 44.8 were recognized during the nine months ended September 30, 2021 and 2020, respectively, from performance obligations that were satisfied in previous periods.

Within DD, revenues of $ 31.7 and $ 16.5 were recognized during the three months ended March 31, 2022 and 2021, respectively, from performance obligations that were satisfied in previous periods.

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

BUSINESS ACQUISITIONS AND DISPOSITIONS

During the nine months ended September 30, 2021, the Company acquired several businesses and related assets for approximately $ 326.0 in cash within Dx.

The purchase considerations for these acquisitions in the nine months ended September 30, 2021, have been allocated under the acquisition method of accounting to the estimated fair market value of the net assets acquired, including approximately $ 142.5 in identifiable intangible assets and a residual amount of non-tax deductible goodwill of approximately $ 219.2 .

The amortization periods for intangible assets acquired from these businesses range from 5

BUSINESS ACQUISITIONS

On February 18, 2022, the Company closed its acquisition of Personal Genome Diagnostics Inc.

(PGDx), a leader in cancer genomics with a portfolio of comprehensive liquid biopsy and tissue-based products, for approximately $ 455.1 in cash.

The purchase considerations for this acquisition have been allocated under the acquisition method of accounting to the estimated fair market value of the net assets acquired, including approximately $ 270.0 in identifiable intangible assets and a residual amount of non-tax deductible goodwill of approximately $ 286.2 .

The amortization period for technology intangible assets acquired from this business is 12 years.

The acquisition was made primarily to complement and accelerate the Company’s existing liquid biopsy capabilities and expand the Company’s leading oncology portfolio of next-generation sequencing (NGS)-based genomic profiling capabilities.

The transaction includes two milestone earnout payments, with one based on the successful development of the in-process testing and the other based on revenue.

The Company has recorded an estimate of $90.0 for this contingent consideration.

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

The preliminary valuation of acquired assets and assumed liabilities, include the following:

Amounts Acquired During Quarter Ended March 31, 2022

Accounts receivable $ 4.1

Unbilled services 2.9

Inventories 2.6

Prepaid expenses and other 1.2

Property, plant and equipment 9.9

Goodwill 286.2

Intangible assets 270.0

Other assets 3.0

Total assets acquired $ 579.9

Accounts payable 4.1

Accrued expenses and other 24.1

Unearned revenue 3.3

Deferred income taxes 17.2

Other liabilities 76.1

Total liabilities acquired 124.8

Net assets acquired $ 455.1

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.

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

1 unchanged sentence

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

to 15 years for customer relationships, non-compete agreements, technology and trade names.

These acquisitions were made primarily to expand the Company's services for hospitals and health system laboratories and acquire testing technology.

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

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

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

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

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

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

In addition, during the nine months ended September 30, 2021, the Company sold certain assets within DD with proceeds of $ 12.4 and a loss of $ 6.1 recorded in Other, net on the Condensed Consolidated Statement of Operations.

The purchase price allocation for several third quarter 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.

On February 9, 2022, the Company entered into agreements to create a comprehensive strategic relationship with Ascension, a national health system.

The Company intends to manage Ascension’s hospital-based laboratories and purchase select assets of the health system’s outreach laboratory business.

The transactions are subject to customary closing conditions and applicable regulatory approvals.

On March 9, 2022, the Company announced it has entered into a strategic laboratory relationship with Prisma Health.

The Company will acquire select assets of Prisma Health’s outreach laboratory business.

EARNINGS PER SHARE

3 unchanged sentences

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

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

2021 2020 2021 2020

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

Three Months Ended March 31,

Earnings Shares Per Share Amount Earnings Shares Per Share Amount

Basic earnings per share:

5 unchanged sentences

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

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

2021 2020 2021 2020

Three Months Ended March 31,

Employee stock options and awards 0.3 —

RESTRUCTURING AND OTHER CHARGES

During the three months ended September 30, 2021, the Company recorded net restructuring and other charges of $ 6.5 :

$ 3.3 within Dx and $ 3.2 within DD.

The charges were comprised of $ 3.3 related to severance and other personnel costs and $ 3.7 in facility closures, lease terminations, and general integration activities.

The charges were offset by the reversal of previously established liabilities of $ 0.5 in unused facility-related costs.

During the nine months ended September 30, 2021, the Company recorded net restructuring and other charges of $ 35.3 :

$ 16.8 within Dx and $ 18.5 within DD.

The charges were comprised of $ 13.6 related to severance and other personnel costs and $ 22.4 in facility closures, lease terminations, and general integration activities.

The charges were adjusted by the reversal of previously established liabilities of $ 0.7 in unused facility-related costs.

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

During the three months ended September 30, 2020, the Company recorded net restructuring and other special charges of $ 7.1 :

$ 1.6 within Dx and $ 5.5 within DD.

The charges were comprised of $ 2.3 related to severance and other personnel costs, $ 3.0 for a DD lab facility and equipment impairment, and $ 4.0 in facility closures, impairment of operating lease right-of-use assets, and general integration initiatives.

The charges were offset by the reversal of previously established liabilities of $ 0.1 and $ 2.1 in unused severance and facility-related costs, respectively.

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

$ 13.4 within Dx and $ 25.5 within DD.

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

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

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

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

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

Restructuring charges 6.4 10.4 7.2 12.0 36.0

Adjustments to prior restructuring accruals — — ( 0.1 ) ( 0.6 ) ( 0.7 )

Cash payments and other adjustments ( 5.7 ) ( 10.4 ) ( 5.0 ) ( 12.6 ) ( 33.7 )

Balance as of September 30, 2021 $ 1.0 $ 0.4 $ 4.5 $ 3.5 $ 9.4

Current $ 7.8

Non-current 1.6

GOODWILL AND INTANGIBLE ASSETS

The changes in the carrying amount of goodwill for the nine months ended September 30, 2021, are as follows:

The changes in the carrying amount of goodwill for the three months ended March 31, 2022, are as follows:

Balance as of December 31, 2021 $ 4,046.2 $ 3,912.7 $ 7,958.9

1 unchanged sentence

Foreign currency impact and other adjustments to goodwill ( 47.8 ) ( 31.5 ) ( 79.3 )

Balance as of September 30, 2021 $ 4,023.2 $ 3,883.6 $ 7,906.8

Balance as of March 31, 2022 $ 4,141.5 $ 4,024.3 $ 8,165.8

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

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

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

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

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

The Company reversed the $ 5.0 charge for the estimated loss related to the DD floating rate secured note receivable due 2022.

The Company also recorded an impairment for a note receivable related to an Dx investment of $ 0.7 during the three months ended September 30, 2020.

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

2 unchanged sentences

The components of identifiable intangible assets are as follows:

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

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

5 unchanged sentences

Canadian licenses 498.8 — 498.8 493.5 — 493.5

In process research and development 9.1 ( 0.3 ) 8.8 9.1 — 9.1

Media content 5.1 ( 2.3 ) 2.8 — — —

$ 5,705.1 $ ( 1,732.6 ) $ 3,972.5 $ 5,423.6 $ ( 1,688.1 ) $ 3,735.5

Amortization of intangible assets for the three and nine months ended September 30, 2021, and 2020, was $ 92.2 and $ 62.2 and $ 276.7 and $ 184.6 , respectively.

During the fourth quarter of 2020, as part of a rebranding initiative, the Company reduced the estimated useful life of its trade name assets to reflect their anticipated use through December 2021.

This change in estimated useful life resulted in accelerated amortization of $ 30.2 and $ 87.4 , respectively, during the three and nine months ended September 30, 2021.

Amortization expense for the net carrying amount of intangible assets is estimated to be $ 86.9 for the remainder of fiscal 2021, $ 221.0 in fiscal 2022, $ 218.0 in fiscal 2023, $ 213.4 in fiscal 2024, $ 201.2 in fiscal 2025, and $ 2,144.3 thereafter.

Short-term borrowings and the current portion of long-term debt at September 30, 2021, and December 31, 2020, consisted of the following:

September 30,

Amortization of intangible assets for the three months ended March 31, 2022, and 2021, was $ 67.1 and $ 92.1 , respectively.

The amortization expense for the net carrying amount of intangible assets is estimated to be $ 191.7 for the remainder of fiscal 2022, $ 259.9 in fiscal 2023, $ 255.3 in fiscal 2024, $ 243.1 in fiscal 2025, $ 233.3 in fiscal 2026, and $ 2,707.0 thereafter.

Short-term borrowings and the current portion of long-term debt at March 31, 2022, and December 31, 2021, consisted of the following:

2022 December 31, 2021

2019 Term Loan $ — $ 375.0

Debt issuance costs — ( 0.4 )

Current portion of note payable 1.6 1.5

Total short-term borrowings and current portion of long-term debt $ 1.6 $ 1.5

Long-term debt at September 30, 2021, and December 31, 2020, consisted of the following:

September 30,

Long-term debt at March 31, 2022, and December 31, 2021, consisted of the following:

2022 December 31, 2021

8 unchanged sentences

4.70% senior notes due 2045 900.0 900.0

2.70% senior notes due 2031 504.0 —

4.70% senior notes due 2045 900.0 900.0

Debt issuance costs ( 39.3 ) ( 41.0 )

2 unchanged sentences

On May 26, 2021, the Company issued new senior notes representing $ 1,000.0 in debt securities and 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.

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

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 liabilities and deducted from the value of the senior notes with an aggregate fair value of $ 31.3 at March 31, 2022.

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

1 unchanged sentence

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

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 $ 4.0 at September 30, 2021.

Credit Facilities

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

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

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

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

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

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

There were no balances outstanding on the Company's current revolving credit facility as of September 30, 2021 and December 31, 2020.

As of September 30, 2021, the effective interest rate on the revolving credit facility was 1.08 %.

There were no balances outstanding on the Company's current revolving credit facility as of March 31, 2022 and December 31, 2021.

As of March 31, 2022, the effective interest rate on the revolving credit facility was 1.45 %.

The credit facility expires on April 30, 2026.

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

The Company was in compliance with all covenants in the revolving credit facility at September 30, 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 September 30, 2021, under its revolving credit facility reflects a reduction equivalent to the amount of the Company's outstanding letters of credit, if applicable.

There were no outstanding letters of credit under the facility as of September 30, 2021.

The Company was in compliance with all covenants in the revolving credit facility at March 31, 2022, and expects that it will remain in compliance with its existing debt covenants for the next twelve months.

The Company's availability of $ 1,000.0 at March 31, 2022, 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 March 31, 2022.

PREFERRED STOCK AND COMMON SHAREHOLDERS’ EQUITY

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

There were no preferred shares outstanding as of September 30, 2021, and December 31, 2020.

There were no preferred shares outstanding as of March 31, 2022, and December 31, 2021.

The changes in common shares issued are summarized below:

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Shares repurchased ( 0.6 )

Common shares at September 30, 2021 95.8

Common shares at March 31, 2022 92.9

Share Repurchase Program

During the nine months ended September 30, 2021, the Company purchased 2.5 shares of its common stock at an average price of $ 270.55 .

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

Remaining amounts are recognized as a reduction in retained earnings.

As of September 30, 2021, the Company had outstanding authorization from the board of directors to purchase up to $ 131.5 of the Company's common stock.

During the fourth quarter of 2021, the Company commenced an Accelerated Share Repurchase (ASR) program.

At inception, the Company paid $ 1,000.0 and received 2.7 shares based on a calculation using 80% of the shares calculated at the price at the inception of the ASR agreements with two different banks, Goldman Sachs & Co.

LLC (Goldman Sachs) and Barclays Bank PLC (Barclays).

The initial shares received under the ASR were removed from the outstanding share count in 2021.

In March 2022, the Company received 0.6 shares of its common stock, arising from a partial acceleration with Barclays and a final settlement from Goldman Sachs, based on the average daily volume weighted average price per share of $ 277.40 .

On April 1, 2022, the Company received 0.2 shares of its common stock for final settlement from Barclays based on the average volume-weighted average price per share of $ 275.51 .

As of March 31, 2022, 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.

On December 9, 2021, the Company announced that it was initiating a quarterly dividend in the second quarter of 2022.

On April 7, 2022 , the Company announced a cash dividend of $ 0.72 per share of common stock for the second quarter, or approximately $ 67.6 in the aggregate.

The dividend will be payable on June 9, 2022 , to stockholders of record of all issued and outstanding shares of common stock as of the close of business on May 19, 2022 .

The declaration and payment of any future dividends will be at the discretion of the Company's board of directors.

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

6 unchanged sentences

Current year adjustments ( 74.6 ) 3.8 ( 70.8 )

Amounts reclassified from accumulated other comprehensive income for settlement charge — ( 3.0 ) ( 3.0 )

Amounts reclassified from accumulated other comprehensive income — ( 1.6 ) ( 1.6 )

Tax effect of adjustments — ( 0.6 ) ( 0.6 )

Balance as of September 30, 2021 $ ( 135.9 ) $ ( 135.0 ) $ ( 270.9 )

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

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

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

In addition, the tax rate was favorably impacted when the Company recorded tax benefits related to electing the Global Intangible Low Tax Income (GILTI) high-tax exclusion retroactively for previous tax years.

On July 20, 2020, the U.S.

Treasury issued and enacted final regulations related to GILTI that allows certain U.S.

taxpayers to elect to exclude foreign income that is subject to a high effective tax rate from the GILTI inclusions.

The GILTI high-tax exclusion is an annual election and is retroactively available.

During the quarter, the Company completed a detailed analysis and took the appropriate steps to amend its previous tax filings and to reassess its position on its 2020 and 2021 tax years.

Further, the rate was favorably impacted by foreign derived intangible income (FDII) as the Company finalized a comprehensive study related to previous tax filings and on its 2020 and 2021 tax years.

On July 15, 2020, the U.S.

Treasury issued and enacted final regulations related to FDII that governs the acceptable documentation reliability requirements and acceptable services that qualify as deduction eligible income.

This was partially offset by a new uncertain tax position that was established during this quarter related to a foreign jurisdiction.

The gross unrecognized income tax benefits were $ 55.6 and $ 48.8 at September 30, 2021, and December 31, 2020, respectively.

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

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

As of September 30, 2021, and December 31, 2020, $ 53.4 and $ 46.7 , respectively, are the approximate amounts of gross unrecognized income tax benefits that, if recognized, would favorably affect the effective income tax rate in future periods.

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

Accrued interest and penalties related to uncertain tax positions totaled $ 9.5 and $ 8.3 as of September 30, 2021, and December 31, 2020, respectively.

The Company has substantially concluded all U.S.

federal income tax matters for years through 2017.

Substantially all material state and local and foreign income tax matters have been concluded through 2016 and 2011, respectively.

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

The Company believes adequate provisions have been recorded related to all open tax years.

Balance as of March 31, 2022 $ ( 200.5 ) $ ( 64.4 ) $ ( 264.9 )

COMMITMENTS AND CONTINGENCIES

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Some of these actions involve claims that are substantial in amount.

These matters include, but are not limited to, intellectual property disputes;

These matters include, but are not limited to:

intellectual property disputes;

commercial and contract disputes;

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employee-related matters;

and inquiries, including subpoenas and other civil investigative demands, from governmental agencies, Medicare or Medicaid payers and MCOs

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

reviewing billing practices or requesting comment on allegations of billing irregularities that are brought to their attention through billing audits or third parties.

transaction related disputes;

securities and corporate law matters;

and inquiries, including subpoenas and other civil investigative demands, from governmental agencies, Medicare or Medicaid payers and MCOs reviewing billing practices or requesting comment on allegations of billing irregularities that are brought to their attention through billing audits or third parties.

The Company receives civil investigative demands or other inquiries from various governmental bodies in the ordinary course of its business.

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NPT Associates v.

Laboratory Corporation of America Holdings, which alleges that the Company offered UnitedHealthcare kickbacks in the form of discounts in return for Medicare business.

Laboratory Corporation of America Holdings , which alleges that the Company offered UnitedHealthcare kickbacks in the form

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

of discounts in return for Medicare business.

The Plaintiff's Third Amended Complaint further alleges that the Company's billing practices violated the False Claims Acts of 14 states and the District of Columbia.

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On August 24, 2021, the U.S.

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

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.

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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.

On February 3, 2022, the Company filed a Motion to Dismiss all claims.

The Company will vigorously defend the lawsuit.

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The Company cooperated with this request.

In October 2013, the Company received a Civil Investigative Demand from the State of Texas Office of the Attorney General requesting documents related to its billing to

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Texas Medicaid.

In October 2013, the Company received a Civil Investigative Demand from the State of Texas Office of the Attorney General requesting documents related to its billing to Texas Medicaid.

The Company cooperated with this request.

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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.

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On January 16, 2019, the Court entered an order granting in part and denying in part the Motion to Dismiss.

The Court dismissed the Plaintiffs' claims based on the theory that the Company performed medically unnecessary testing, the claims asserted under the California and Illinois insurance fraud prevention statutes, and the reverse False Claims Act claim.

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.

Prior to the Company's acquisition of Sequenom, Inc.

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

Sequenom, Inc., et al., No.

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

Sequenom, Inc., et al ., No.

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

Sequenom, Inc., et al ., No.

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

Sequenom, Inc., et al.

16-cv-02113-AJB-JMA, Nunes v.

Sequenom, Inc., et al.

16-cv-02128-AJB-MDD, and Cusumano v.

Sequenom, Inc., et al.

16-cv-02134-LAB-JMA) in the U.S.

District Court for the Southern District of California challenging the acquisition transaction.

The complaints asserted claims against Sequenom and members of its board of directors (the Individual Defendants).

The Nunes action also named the Company and Savoy Acquisition Corp.

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

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

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

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

On August 30, 2016, the parties entered into a Memorandum of Understanding (MOU) in each of the above-referenced actions.

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

Shareholder Litig.

, Lead Case No.

16-cv-02054-JAH-BLM, and designating the complaint from the Malkoff action as the

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

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

operative complaint for the consolidated action.

On November 11, 2016, two competing motions were filed by two separate stockholders (James Reilly and Shikha Gupta) seeking appointment as lead plaintiff under the terms of the Private Securities Litigation Reform Act of 1995.

On June 7, 2017, the Court entered an order declaring Mr.

Reilly as the lead plaintiff and approving Mr.

Reilly's selection of lead counsel.

The parties agree that the MOU has been terminated.

The Plaintiffs filed a Consolidated Amended Class Action Complaint on July 24, 2017, and the Defendants filed a Motion to Dismiss, which remains pending.

On March 13, 2019, the Court stayed the action in its entirety pending the U.S.

Supreme Court's anticipated decision in Emulex Corp.

Varjabedian .

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

Supreme Court dismissed the writ of certiorari in Emulex as improvidently granted.

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.

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

The Company will vigorously defend the lawsuit.

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.

On February 28, 2022, the Company filed a Motion to Dismiss all claims.

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.

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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.

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Numerous similar lawsuits have been filed against other health care providers who used AMCA.

These lawsuits have been consolidated into a multidistrict litigation in the District of New Jersey.

These lawsuits were consolidated into a multidistrict litigation in the District of New Jersey.

On November 15, 2019, the Plaintiffs filed a Consolidated Class Action Complaint in the U.S.

1 unchanged sentence

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

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

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

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

The Company will vigorously defend the multi-district litigation.

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

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

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

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

On March 31, 2022, the Plaintiffs filed an Amended Complaint alleging claims for negligence, negligence per se , breach of confidence, invasion of privacy, and various state

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

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

statutory claims, including a claim under the California Confidentiality of Medical Information Act.

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.

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

The Company will vigorously defend both lawsuits.

On February 24, 2022, the parties entered into a Memorandum of Understanding of the terms of a settlement of the Bermejo I and Bermejo II lawsuits, subject to court approval.

If approved, the settlement will also resolve the Becker and Poole lawsuits discussed below.

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.

A settlement of the Bermejo I and Bermejo II lawsuits, if approved by the court, will resolve the Becker lawsuit.

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

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

The case was removed to the U.S.

District Court for the Eastern District of California.

A settlement of the Bermejo I and Bermejo II lawsuits, if approved by the court, will resolve the Poole lawsuit.

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

The Company is cooperating with this request.

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

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

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

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

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

The Company will vigorously defend the lawsuit.

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

LabCorp Employer Services, Inc.

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

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

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

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

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The Company will vigorously defend the lawsuit.

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

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

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

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

The Company will vigorously defend the lawsuit.

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

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

The Company will vigorously defend the 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 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.

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.

There are various other pending legal proceedings involving the Company including, but not limited to, additional employment-related lawsuits, professional liability lawsuits, and intellectual property lawsuits.

While it is not feasible to predict the outcome of such proceedings, in the opinion of the Company, either the likelihood of loss is remote and any reasonably possible loss associated with the resolution of such proceedings is not expected to be material to the Company’s financial condition, results of operations, or cash flows, either individually or in the aggregate.

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

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FAIR VALUE MEASUREMENTS

The Company’s population of financial assets and liabilities subject to fair value measurements as of September 30, 2021, and December 31, 2020, is as follows:

The Company’s population of financial assets and liabilities subject to fair value measurements as of March 31, 2022, and December 31, 2021, is as follows:

Fair Value Measurements as of

September 30, 2021

March 31, 2022

Balance Sheet Fair Value as of Using Fair Value Hierarchy

Classification September 30, 2021 Level 1 Level 2 Level 3

Classification March 31, 2022 Level 1 Level 2 Level 3

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

Cross currency swaps Other liabilities 36.7 — 36.7 —

Interest rate swaps Other assets, net 4.0 — 4.0 —

Interest rate swaps Other liabilities 31.3 — 31.3 —

Cash surrender value of life insurance policies Other assets, net 102.0 — 102.0 —

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Contingent consideration Other liabilities 105.2 — — 105.2

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Fair Value Measurements as of

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Cross currency swaps Other liabilities 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

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Fair Value Measurement of Level 3 Liabilities Contingent Consideration

Balance at December 31, 2021 $ 21.9

Payments ( 4.4 )

Adjustments ( 2.3 )

Balance at September 30, 2021 $ 12.8

Additions 90.0

Balance as of March 31, 2022 $ 105.2

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

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

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

Contingent accrued earn-out business acquisition consideration liabilities are measured at fair value using Level 3 valuations.

These contingent consideration liabilities were recorded at fair value on the acquisition date and are remeasured quarterly based on the then assessed fair value and adjusted if necessary.

2 unchanged sentences

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

The fair market value of the senior notes, based on market pricing, was approximately $ 5,910.7 and $ 6,121.8 as of September 30, 2021, and December 31, 2020, respectively.

The fair market value of the senior notes, based on market pricing, was approximately $ 5,444.5 and $ 5,841.1 as of March 31, 2022, and December 31, 2021, respectively.

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

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

The Company addresses its exposure to market risks, principally the market risk associated with changes in interest rates and foreign currency exchange rates, through a controlled program of risk management that includes, from time to time, the use of derivative financial instruments.

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 Swaps

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 $ 4.0 at September 30, 2021, was included as a component of other long-term assets and added to the reported value of the senior notes.

Cross Currency Swaps

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

Dollar to Swiss Franc cross-currency swap agreements with an aggregate notional value of $ 600.0 .

These instruments are designated as a hedge against the impact of foreign exchange movements on its net investment in a Swiss subsidiary.

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

The cross currency swaps maturing in 2022 and 2025 with an aggregate fair value of $( 11.8 ) and $( 1.0 ) as of September 30, 2021, respectively, are included in other long-term liabilities.

The cross currency swaps had an aggregate fair value of $( 26.0 ) and $( 14.4 ) as of December 31, 2020, respectively, and 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 Condensed Consolidated Balance Sheet until the hedged item is recognized in earnings.

The cumulative change in the fair value of these instruments of $ 3.9 and $ 27.6 for the three and nine months ended September 30, 2021, respectively, was recognized as currency translation within the Condensed Consolidated Statement of

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Comprehensive Earnings.

There were no amounts reclassified from the Condensed Consolidated Statement of Comprehensive Earnings to the Condensed Consolidated Statement of Operations during the three or nine months ended September 30, 2021.

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

September 30, 2021 December 31, 2020

Fair Value of Derivative Fair Value of Derivative

Balance Sheet Caption Asset Liability U.S.

Dollar Notional Asset Liability U.S.

Dollar Notional

Derivatives Designated as Hedging Instruments

Interest rate swap Other assets, net $ 4.0 — $ 500.0 — — —

Cross currency swaps Other assets, net or Other liabilities $ — $ 12.8 $ 600.0 $ — $ 40.4 $ 600.0

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

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

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

Statement of Operations

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

2021 2020 2021 2020 2021 2020 2021 2020

Interest rate swap contracts $ — $ — $ — $ 1.6 $ — $ 0.8 $ — $ 1.6

Cross currency swaps $ 3.9 $ ( 23.1 ) $ — $ — $ 27.6 $ ( 12.0 ) $ — $ —

No gains or losses from derivative instruments have been recognized into income for the three and nine months ended September 30, 2021.

For the three and nine months ended September 30, 2020, t he Company recorded a gain of $1.6 on the extinguishment of the interest rate swap arrangement on the 4.625% Senior Notes due November 15, 2020, which was included in Other, net on the Condensed Consolidated Statement of Operations.

SUPPLEMENTAL CASH FLOW INFORMATION

Nine Months Ended September 30,

Three Months Ended March 31,

Cash paid during period for:

3 unchanged sentences

Change in accrued property, plant and equipment ( 9.2 ) ( 4.8 )

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

BUSINESS SEGMENT INFORMATION

The following table is a summary of segment information for the three and nine months ended September 30, 2021, and 2020.

The following table is a summary of segment information for the three months ended March 31, 2022, and 2021.

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

5 unchanged sentences

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

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

Three Months Ended

Dx $ 2,454.1 $ 2,757.8

7 unchanged sentences

Total operating income $ 687.9 $ 1,057.9

Non-operating expenses, net 1.3 ( 100.0 ) ( 88.3 ) ( 175.7 )

Earnings before income taxes 768.2 947.1 2,440.6 976.4

Provision for income taxes 180.4 243.4 614.7 358.0

Net earnings 587.8 703.7 1,825.9 618.4

Net earnings attributable to the noncontrolling interest ( 0.5 ) ( 0.3 ) ( 1.6 ) ( 0.6 )

Net earnings attributable to Laboratory Corporation of America Holdings $ 587.3 $ 703.4 $ 1,824.3 $ 617.8

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

What changed 10-Q

Item 1. Financial Statements