What changed in this filing

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Item 1. Financial Statements

2022-11-01 compared with 2022-08-01 · 168 added, 127 removed, 633 unchanged (32% of the section changed)

3 unchanged sentences

(in millions)

September 30,

2022 December 31,

31 unchanged sentences

Shareholders’ equity:

Common stock, 91.0 and 93.1 shares outstanding at June 30, 2022, and December 31, 2021, respectively 8.3 8.5

Common stock, 89.6 and 93.1 shares outstanding at September 30, 2022, and December 31, 2021, respectively 8.2 8.5

Additional paid-in capital — —

7 unchanged sentences

(in millions, except per share data)

Three Months Ended June 30, Six Months Ended June 30,

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

2022 2021 2022 2021

23 unchanged sentences

(in millions, except per share data)

Three Months Ended June 30, Six Months Ended June 30,

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

2022 2021 2022 2021

2 unchanged sentences

Net benefit plan adjustments 1.3 2.6 4.2 7.7

Other comprehensive earnings before tax ( 240.4 ) 45.9 ( 312.8 ) ( 17.9 )

Other comprehensive earnings (loss) before tax ( 255.2 ) ( 89.0 ) ( 568.0 ) ( 106.9 )

Provision (benefit) for income tax related to items of comprehensive earnings ( 0.3 ) ( 0.7 ) ( 1.1 ) ( 2.1 )

9 unchanged sentences

Stock Additional

Capital Retained

Earnings Accumulated

Capital Retained Earnings Accumulated

Comprehensive

2 unchanged sentences

BALANCE AT DECEMBER 31, 2020 1

$ 9.0 $ 110.3 $ 9,479.2 $ ( 161.9 ) $ 9,436.6

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

5 unchanged sentences

BALANCE AT MARCH 31, 2021 1

$ 9.0 $ 67.1 $ 10,248.8 $ ( 226.5 ) $ 10,098.4

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

5 unchanged sentences

BALANCE AT JUNE 30, 2021 1

$ 8.9 $ — $ 10,494.3 $ ( 181.2 ) $ 10,322.0

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 1

$ 8.8 $ — $ 10,863.5 $ ( 270.9 ) $ 10,601.4

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

13 unchanged sentences

BALANCE AT JUNE 30, 2022 $ 8.3 $ — $ 10,897.9 $ ( 505.5 ) $ 10,400.7

Net earnings attributable to Laboratory Corporation of America Holdings — — 352.8 — 352.8

Other comprehensive earnings (loss), net of tax — — — ( 255.5 ) ( 255.5 )

Dividends declared — — ( 66.4 ) — ( 66.4 )

Issuance of common stock under employee stock plans — 31.5 — — 31.5

Net share settlement tax payments from issuance of stock to employees — ( 7.2 ) — — ( 7.2 )

Stock compensation — 36.3 — — 36.3

Purchase of common stock ( 0.1 ) ( 60.6 ) ( 339.3 ) — ( 400.0 )

BALANCE AT SEPTEMBER 30, 2022 $ 8.2 $ — $ 10,845.0 $ ( 761.0 ) $ 10,092.2

1 Retained earnings and total shareholders’ equity as of March 31, 2021, June 30, 2021 and September 30, 2021, have been revised for the correction previously reported in the 2021 Annual Report on Form 10-K, and retained earnings and total equity as of December 31, 2020, March 31, 2021 and June 30, 2021 have been corrected from amounts previously reported in the Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2022.

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

2 unchanged sentences

(in millions)

Six Months Ended June 30,

Nine Months Ended September 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

12 unchanged sentences

Increase in prepaid expenses and other ( 67.8 ) ( 72.4 )

Increase (decrease) in accounts payable 131.9 ( 44.3 )

Increase in accounts payable 135.1 34.6

Increase (decrease) in unearned revenue ( 10.7 ) 83.8

33 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 June 30, 2022, Dx and DD contributed approximately 61 % and 39 %, respectively, of revenues to the Company.

During the six months ended June 30, 2022, Dx and DD contributed approximately 62 % and 38 %, respectively, of revenues to the Company.

During the three months ended September 30, 2022, Dx and DD contributed approximately 61 % and 39 %, respectively, of revenues to the Company.

During the nine months ended September 30, 2022, Dx and DD contributed approximately 61 % and 39 %, respectively, of revenues to the Company.

On July 28, 2022, the Company announced that its board of directors authorized the Company to pursue a spin-off of its wholly owned Clinical Development business, which includes parts of its DD segment focused on providing Phase I-IV clinical trial management, market access, and technology solutions to pharmaceutical and biotechnology organizations.

The planned spin-off will result in two independent, publicly traded companies.

The spin-off is intended to be a tax-free transaction to the Company and its stockholders for United States (U.S.) federal income tax purposes and is expected to be effected through a dividend of the Clinical Development business’ shares to the Company's shareholders.

The Company anticipates that, consistent with any applicable legal and tax requirements, there will be ongoing transitional and commercial arrangements to provide for a seamless delivery of services to the customers and other stakeholders of the independent companies following the spin-off.

The Company is targeting completion of the spin-off with an accelerated timeframe of mid-2023.

The spin-off will be subject to the satisfaction of certain customary conditions, including, among others, the receipt of final approval by the Company's board of directors, the receipt of appropriate assurances regarding the tax-free nature of the separation, and the effectiveness of any required filings with the U.S.

Securities and Exchange Commission (SEC).

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

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The year-end condensed consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by generally accepted accounting principles.

The condensed consolidated financial statements and notes are presented in accordance with the rules and regulations of the United States (U.S.) Securities and Exchange Commission (SEC) and do not contain certain information included in the Company’s fiscal year 2021 Annual Report on Form 10-K (Annual Report).

The condensed consolidated financial statements and notes are presented in accordance with the rules and regulations of the SEC and do not contain certain information included in the Company’s fiscal year 2021 Annual Report on Form 10-K (Annual Report).

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

6 unchanged sentences

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

The Company's revenues by segment and by payers/customer groups for the three and six months ended June 30, 2022, and 2021, were as follows:

For the Three Months Ended June 30, 2022 For the Three Months Ended June 30, 2021

The Company's revenues by segment and by payers/customer groups for the three and nine months ended September 30, 2022, and 2021, were as follows:

For the Three Months Ended September 30, 2022 For the Three Months Ended September 30, 2021

North America Europe Other Total North America Europe Other Total

7 unchanged sentences

Total revenues 80 % 12 % 8 % 100 % 86 % 10 % 4 % 100 %

For the Six Months Ended June 30, 2022 For the Six Months Ended June 30, 2021

For the Nine Months Ended September 30, 2022 For the Nine Months Ended September 30, 2021

North America Europe Other Total North America Europe Other Total

8 unchanged sentences

Revenues in the U.S.

were $ 2,856.9 ( 77.3 %) and $ 3,091.3 ( 80.5 %) for the three months ended June 30, 2022, and 2021, respectively, and for the six months ended June 30, 2022, and 2021, were $ 5,857.5 ( 77.1 %) and $ 6,537.4 ( 81.7 %), respectively.

were $ 2,791.8 ( 77.4 %) and $ 3,352.7 ( 82.5 %) for the three months ended September 30, 2022, and 2021, respectively, and for the nine months ended September 30, 2022, and 2021, were $ 8,649.3 ( 77.2 %) and $ 9,926.7 ( 82.3 %), respectively.

DD Contract costs

1 unchanged sentence

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

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Sales commission assets $ 38.9 $ 36.2

1 unchanged sentence

Total $ 54.6 $ 50.6

Amortization related to sales commission assets and associated payroll taxes for the three months ended June 30, 2022, and 2021, was $ 8.7 and $ 6.4 , respectively, and for the six months ended June 30, 2022, and 2021, was $ 15.9 and $ 13.3 , respectively.

Amortization related to deferred contract fulfillment costs for the three months ended June 30, 2022, and 2021, was $ 2.9 and $ 3.0 , respectively, and was $ 6.0 and $ 6.5 , respectively, for the six months ended June 30, 2022, and 2021.

Amortization related to sales commission assets and associated payroll taxes for the three months ended September 30, 2022, and 2021, was $ 9.3 and $ 7.1 , respectively, and for the nine months ended September 30, 2022, and 2021, was $ 25.3 and $ 20.4 , respectively.

Amortization related to deferred contract fulfillment costs for the three months ended September 30, 2022, and 2021, was $ 3.1 and $ 3.5 , respectively, and was $ 9.1 and $ 10.0 , respectively, for the nine months ended September 30, 2022, and 2021.

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

3 unchanged sentences

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

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Dx accounts receivable $ 1,051.1 $ 1,193.8

6 unchanged sentences

Unearned revenue $ 530.9 $ 558.5

Revenues recognized during the period that were included in the unearned revenue balance at the beginning of the period were $ 233.6 and $ 233.0 for the six months ended June 30, 2022, and 2021, respectively.

Revenues recognized during the period that were included in the unearned revenue balance at the beginning of the period were $ 277.9 and $ 267.6 for the nine months ended September 30, 2022, and 2021, respectively.

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 six months ended June 30, 2022, is as follows:

The rollforward for the allowance for credit losses for the nine months ended September 30, 2022, is as follows:

Accounts Receivable Unbilled Services Note and Other Receivables Total

2 unchanged sentences

Less, write offs ( 5.0 ) ( 3.0 ) ( 0.7 ) ( 8.7 )

Balance as of June 30, 2022 $ 21.3 $ 11.4 $ 0.7 $ 33.4

Balance as of September 30, 2022 $ 20.5 $ 10.9 $ — $ 31.4

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 unsatisfied under such long-term contracts were $ 6,132.6 and $ 5,616.6 as of June 30, 2022, and 2021, respectively.

The amount of existing performance obligations unsatisfied under such long-term contracts were $ 6,005.7 and $ 5,412.8 as of September 30, 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 $ 37.4 and $ 12.2 were recognized during the three months ended June 30, 2022 and 2021, respectively, and revenues of $ 69.1 and $ 28.7 were recognized during the six months ended June 30, 2022 and 2021, respectively, from performance obligations that were satisfied in previous periods.

Within DD, revenues of $ 6.6 and $ 10.1 were recognized during the three months ended September 30, 2022 and 2021, respectively, and revenues of $ 75.8 and $ 38.9 were recognized during the nine months ended September 30, 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

During the six months ended June 30, 2022, the Company acquired several businesses and related assets for approximately $ 554.9 in cash.

During the nine months ended September 30, 2022, the Company acquired several businesses and related assets for approximately $ 1,013.6 in cash.

The purchase consideration for these acquisitions has been allocated under the acquisition method of accounting to the estimated fair market value of the net assets acquired, including approximately $ 407.4 in identifiable intangible assets and a residual amount of non-tax deductible goodwill of approximately $ 571.3 .

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

These acquisitions were made primarily to complement and accelerate the Company’s existing liquid biopsy capabilities and enhance the Company's diagnostic footprint and capabilities.

The amortization periods for intangible assets acquired from the businesses range from 5 to 23 years for customer relationships, non-compete agreements, technology, and trade names.

These acquisitions were made primarily to complement and accelerate the Company’s existing liquid biopsy capabilities and expand the Company’s clinical laboratory services.

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

2 unchanged sentences

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

Amounts Acquired During Six Months Ended June 30, 2022

Preliminary Personal Genome Diagnostics Inc.

Preliminary Ascension Healthcare Other Acquisitions Measurement Period Adjustments Amounts Acquired During Nine Months Ended September 30, 2022

Accounts receivable $ 4.1 $ — $ — $ — $ 4.1

3 unchanged sentences

Property, plant and equipment 9.9 43.5 0.1 — 53.5

Deferred income taxes — — — 17.7 17.7

Goodwill 285.6 161.2 62.2 62.3 571.3

6 unchanged sentences

Deferred income taxes 17.1 — — ( 17.1 ) —

Lease liabilities — 2.9 — — 2.9

Other liabilities 76.2 — — ( 70.0 ) 6.2

5 unchanged sentences

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

During the six months ended June 30, 2021, the Company acquired a business and related assets for approximately $ 34.1 in cash.

The purchase consideration for the acquisition in the six months ended June 30, 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.

During the nine months ended September 30, 2021, the Company acquired a business and related assets for approximately $ 326.0 in cash.

The purchase consideration for the acquisition in the nine months ended September 30, 2021, has 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 the business range from 5 to 15 years for customer relationships, non-compete agreements, technology and trade names.

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

1 unchanged sentence

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.

Pro Forma Information

Had the Company's total 2021 and 2022 acquisitions been completed as of January 1, 2021, the Company's pro forma results would have been as follows:

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

2022 2021 2022 2021

Revenues $ 3,754.1 $ 4,071.5 $ 11,663.8 $ 12,104.1

Net earnings attributable to Laboratory Corporation of America Holdings $ 352.0 $ 584.6 $ 1,201.8 $ 1,811.1

EARNINGS PER SHARE

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

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

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

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

1 unchanged sentence

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

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

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

Three Months Ended June 30, Six Months Ended June 30,

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

2022 2021 2022 2021

7 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 June 30, Six Months Ended June 30,

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

2022 2021 2022 2021

1 unchanged sentence

GOODWILL AND INTANGIBLE ASSETS

The changes in the carrying amount of goodwill for the six months ended June 30, 2022, are as follows:

The changes in the carrying amount of goodwill for the nine months ended September 30, 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 ( 70.2 ) ( 242.4 ) ( 312.6 )

Balance as of June 30, 2022 $ 4,185.2 $ 3,928.8 $ 8,114.0

Balance as of September 30, 2022 $ 4,429.5 $ 3,788.1 $ 8,217.6

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.

The components of identifiable intangible assets are as follows:

June 30, 2022 December 31, 2021

Although the Company believes that the current assumptions and estimates used in its goodwill analysis are reasonable, supportable, and appropriate, the Company's business could be impacted by unfavorable changes, including those that impact the existing assumptions used in the impairment analysis.

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

primarily a worsening economic environment and protracted economic downturn and related impacts, including delays in revenue from new customers;

increases in customer termination activity, or increases in operating costs.

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

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

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

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

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

T he components of identifiable intangible assets are as follows:

September 30, 2022 December 31, 2021

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

7 unchanged sentences

5,627.0 ( 1,819.2 ) 3,807.8 5,423.6 ( 1,688.1 ) 3,735.5

Amortization of intangible assets for the three and six months ended June 30, 2022, and 2021, was $ 66.4 and $ 92.4 and $ 133.5 and $ 184.5 , respectively.

Amortization of intangible assets for the three and nine months ended September 30, 2022, and 2021, was $ 65.2 and $ 92.2 and $ 198.7 and $ 276.7 , respectively.

The amortization expense for the net carrying amount of intangible assets is estimated to be $ 58.6 for the remainder of fiscal 2022, $ 264.4 in fiscal 2023, $ 258.9 in fiscal 2024, $ 244.2 in fiscal 2025, $ 234.5 in fiscal 2026, and $ 2,194.2 thereafter.

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Short-term borrowings and the current portion of long-term debt at June 30, 2022, and December 31, 2021, consisted of the following:

June 30, 2022 December 31, 2021

Short-term borrowings and the current portion of long-term debt at September 30, 2022, and December 31, 2021, consisted of the following:

September 30, 2022 December 31, 2021

Current portion of note payable 1.7 1.5

Total short-term borrowings and current portion of long-term debt $ 1.7 $ 1.5

Long-term debt at June 30, 2022, and December 31, 2021, consisted of the following:

June 30, 2022 December 31, 2021

Long-term debt at September 30, 2022, and December 31, 2021, consisted of the following:

September 30, 2022 December 31, 2021

4.00% senior notes due 2023 300.0 300.0

15 unchanged sentences

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 $ 55.4 at June 30, 2022.

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 $ 82.5 at September 30, 2022.

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Credit Facilities

5 unchanged sentences

The revolving credit facility also provides for the issuance of letters of credit without a reduction of the availability of borrowings under the facility.

There were no balances outstanding on the Company's current revolving credit facility as of June 30, 2022 and December 31, 2021.

As of June 30, 2022, the effective interest rate on the revolving credit facility was 2.79 %.

There were no balances outstanding on the Company's current revolving credit facility as of September 30, 2022 and December 31, 2021.

As of September 30, 2022, the effective interest rate on the revolving credit facility was 4.14 %.

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 June 30, 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 June 30, 2022, under its revolving credit facility is not encumbered by any of the Company's outstanding letters of credit.

There were $ 76.4 in outstanding letters of credit as of June 30, 2022.

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

The Company was in compliance with all covenants in the revolving credit facility at September 30, 2022, and expects that it will remain in compliance with its existing debt covenants for the next twelve months.

There were $ 79.8 in outstanding letters of credit as of September 30, 2022.

PREFERRED STOCK AND COMMON SHAREHOLDERS’ EQUITY

1 unchanged sentence

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 June 30, 2022, and December 31, 2021.

There were no preferred shares outstanding as of September 30, 2022, and December 31, 2021.

The changes in common shares issued are summarized below:

3 unchanged sentences

Shares repurchased ( 4.1 )

Common shares at June 30, 2022 91.0

Common shares at September 30, 2022 89.6

Share Repurchase Program

4 unchanged sentences

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 .

During the second quarter of 2022, the Company purchased 1.7 shares of its common stock at an average price of $ 237.85 for a total cost of $ 400.0 .

As of June 30, 2022, the Company had outstanding authorization from the board of directors to purchase up to $ 1,231.5 of the Company's common stock.

In April 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 .

Additionally, during the nine months ended September 30, 2022, the Company purchased 3.3 shares of its common stock at an average price of $ 240.57 for a total cost of $ 800.0 .

As of September 30, 2022, the Company had outstanding authorization from the board of directors to purchase up to $ 831.5 of the Company's common stock.

The repurchase authorization has no expiration.

For the three months ended June 30, 2022, the Company paid $ 66.7 in common stock dividends or $ 0.72 per share of common stock.

On July 14, 2022 , the Company announced a cash dividend of $ 0.72 per share of common stock for the third quarter, or approximately $ 66.1 in the aggregate.

The dividend will be payable on September 9, 2022 , to stockholders of record of all issued and outstanding shares of common stock as of the close of business on August 18, 2022 .

For the nine months ended September 30, 2022, the Company paid $ 131.6 in common stock dividends.

On October 12, 2022 , the Company announced a cash dividend of $ 0.72 per share of common stock for the fourth quarter, or approximately $ 64.9 in the aggregate.

The dividend will be payable on December 9, 2022 , to stockholders of record of all issued and outstanding shares of common stock as of the close of business on November 17, 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

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Accumulated Other Comprehensive Earnings (Loss)

3 unchanged sentences

Current year adjustments ( 571.3 ) 11.7 ( 559.6 )

Pension settlement charge — ( 4.0 ) ( 4.0 )

Amounts reclassified from accumulated other comprehensive income ( 0.9 ) ( 3.5 ) ( 4.4 )

Tax effect of adjustments — ( 1.1 ) ( 1.1 )

Balance as of June 30, 2022 $ ( 441.6 ) $ ( 63.9 ) $ ( 505.5 )

Balance as of September 30, 2022 $ ( 698.1 ) $ ( 62.9 ) $ ( 761.0 )

COMMITMENTS AND CONTINGENCIES

12 unchanged sentences

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

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED 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.

15 unchanged sentences

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

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

For these proceedings, however, the Company does not believe, based on currently available information, that the adverse outcomes are probable and estimable, and it does not believe they will have a material adverse effect on the Company's financial statements.

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

3 unchanged sentences

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.

10 unchanged sentences

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

The Company will vigorously defend the lawsuit.

On August 29, 2022, the Court entered an order granting the Motion to Dismiss and declining to exercise supplemental jurisdiction over the state law claims.

Should the Plaintiff seek an appeal, the Company will vigorously defend the lawsuit.

In addition, the Company has received various other subpoenas since 2007 related to Medicaid billing.

7 unchanged sentences

On April 14, 2021, the Petition was unsealed.

The Petition alleges that the Company submitted claims for

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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 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.

On August 1, 2022, the District Court entered an order granting the Company's Motion for Partial Summary Judgment with respect to the claim that the Company submitted claims for reimbursement to Texas Medicaid that were higher than permitted under Texas Medicaid's alleged “best price” regulations.

The Company will vigorously defend the lawsuit.

9 unchanged sentences

The Court held oral arguments on December 9, 2020.

On May 26, 2022, the Florida Supreme Court issued an opinion approving the result of the Florida Second District Court of Appeal.

On May 26, 2022, the Florida Supreme Court issued an opinion approving the result of the Florida Second District Court of Appeal in favor of the Plaintiff.

The Company will vigorously defend the lawsuit.

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government nor any state government has intervened in the lawsuit.

The Company filed a Motion to Dismiss seeking the dismissal of the claims asserted under the California and Illinois insurance fraud prevention statutes, the conspiracy claim, the reverse False Claims Act claim, and all claims based on the theory that the Company performed medically unnecessary testing.

The Company filed a Motion to

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

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

Dismiss seeking the dismissal of the claims asserted under the California and Illinois insurance fraud prevention statutes, the conspiracy claim, the reverse False Claims Act claim, and all claims based on the theory that the Company performed medically unnecessary testing.

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

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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

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

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alleged class, and attorney's fees and expenses.

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

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

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 consolidated Complaint generally alleged that the Company did not adequately protect its

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

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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.

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District Court for the Central District of California.

The lawsuit alleges that visually impaired patients are unable to use the Company's touchscreen kiosks at Company patient service centers

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in violation of the Americans with Disabilities Act and similar California statutes.

The lawsuit alleges that visually impaired patients are unable to use the Company's touchscreen kiosks at Company patient service centers in violation of the Americans with Disabilities Act and similar California statutes.

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

4 unchanged sentences

On June 6, 2022, the Company filed a Petition for Permission to Appeal the Order Granting Class Certification with the Ninth Circuit Court of Appeals.

On June 16, 2022, the Plaintiffs filed a Motion to Refine the Class Definitions regarding the certified class.

On September 22, 2022, the Ninth Circuit Court of Appeals granted the Company's Petition for Permission to Appeal the Order Granting Class Certification.

The Company will vigorously defend the lawsuit.

4 unchanged sentences

The lawsuit seeks monetary damages, enhancement of those damages for willfulness, and recovery of attorney’s fees and costs.

The lawsuit is scheduled for trial on September 19, 2022.

The Company will vigorously defend the lawsuit.

The Company has instituted proceedings before the Patent Trial and Appeal Board of the U.S.

Patent and Trademark Office challenging the validity of the Ravgen patents, with decisions on validity expected in November and December 2022.

On September 28, 2022, a jury rendered a verdict in favor of the Plaintiff on the remaining patent at issue, finding that the Company willfully infringed Ravgen's patent, and awarded damages of $272 million.

Plaintiff has filed post-trial motions seeking enhanced damages of up to $817 million based on the finding of willfulness, as well as attorney's fees and costs.

The Company strongly disagrees with the verdict, based on a number of legal factors, and will vigorously defend the lawsuit through the appeal process.

The Company has also instituted proceedings before the Patent Trial and Appeal Board of the U.S.

Patent and Trademark Office challenging the validity of the Ravgen patent at issue in the trial, with a decision on validity expected in November 2022.

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

5 unchanged sentences

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

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

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failure to maintain accurate pay records, and non-reimbursement of business expenses.

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

21 unchanged sentences

District Court for the Central District of California.

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

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.

The parties entered into a settlement agreement dated September 9, 2022, which is pending court approval.

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.

3 unchanged sentences

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.

While it is not feasible to predict the outcome of such proceedings, in the opinion of the Company, 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.

2 unchanged sentences

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

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FAIR VALUE MEASUREMENTS

The Company’s population of financial assets and liabilities subject to fair value measurements as of June 30, 2022, and December 31, 2021, is as follows:

The Company’s population of financial assets and liabilities subject to fair value measurements as of September 30, 2022, and December 31, 2021, is as follows:

Fair Value Measurements as of

June 30, 2022

September 30, 2022

Balance Sheet Fair Value as of Using Fair Value Hierarchy

Classification June 30, 2022 Level 1 Level 2 Level 3

Classification September 30, 2022 Level 1 Level 2 Level 3

Noncontrolling interest put Noncontrolling interest $ 15.0 $ — $ 15.0 $ —

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Noncontrolling interest put Noncontrolling interest $ 16.3 $ — $ 16.3 $ —

Cross currency swaps Other liabilities 32.8 — 32.8 —

Cross currency swaps Other liabilities, net 32.8 — 32.8 —

Interest rate swaps Other assets, net 2.9 — 2.9 —

8 unchanged sentences

Additions 52.9

Balance as of June 30, 2022 $ 99.2

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Balance as of September 30, 2022 $ 62.0

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.

11 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 $ 5,103.1 and $ 5,841.1 as of June 30, 2022, and December 31, 2021, respectively.

The fair market value of the senior notes, based on market pricing, was approximately $ 4,921.2 and $ 5,841.1 as of September 30, 2022, and December 31, 2021,

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respectively.

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

3 unchanged sentences

During the second quarter of 2022, the Company terminated $ 300.0 of those cross-currency swap agreements and entered into new USD to Swiss Franc cross-currency swap agreements with an aggregate notional value of $ 300.0 that mature in 2024.

In May 2022, the Company reclassified a gain of $ 0.9 to the Consolidated Statement of Operations within other, net, due to the exit of $ 300.0 of the cross-currency swap agreements.

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

These cross currency swaps are included in other long-term liabilities as appropriate with an aggregate fair value of $ 18.3 and $ 32.8 as of June 30, 2022 and December 31, 2021, respectively.

These cross currency swaps are included in other long-term liabilities as appropriate with an aggregate fair value of $ 8.1 and $ 32.8 as of September 30, 2022 and December 31, 2021, respectively.

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

The cumulative amount of the fair value hedging adjustments are recognized as currency translation within the Consolidated Statement of Comprehensive Earnings.

In May 2022, the Company reclassified a gain of $ 0.9 to the Consolidated Statement of Operations within other, net, due to the exit of $ 300.0 of the cross-currency swap agreements.

SUPPLEMENTAL CASH FLOW INFORMATION

Six Months Ended June 30,

Nine Months Ended September 30,

Cash paid during period for:

4 unchanged sentences

BUSINESS SEGMENT INFORMATION

The following table is a summary of segment information for the three and six months ended June 30, 2022, and 2021.

The following table is a summary of segment information for the three and nine months ended September 30, 2022, and 2021.

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

2 unchanged sentences

The Company’s chief executive officer has been identified as the CODM.

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

1 unchanged sentence

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

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2022 2021 2022 2021

8 unchanged sentences

Total operating income $ 469.4 $ 766.9 $ 1,683.2 $ 2,528.9

SUBSEQUENT EVENT

On July 28, 2022, the Company announced that its board of directors authorized the Company to pursue a spin-off of its wholly owned Clinical Development business, which includes parts of its DD segment focused on providing Phase I-IV clinical trial management, market access and technology solutions to pharmaceutical and biotechnology organizations.

The planned spin-off will result in two independent, publicly traded companies.

The spin-off is intended to be a tax-free transaction to the Company and its stockholders for U.S.

federal income tax purposes and is expected to be effected through a dividend of the Clinical Development business’ shares to the Company's shareholders.

The Company is targeting completion of the spin-off in the second half of 2023.

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