What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-10-30 compared with 2023-08-04 · 123 added, 113 removed, 244 unchanged (49% of the section changed)

72 unchanged sentences

GENERAL (dollars in millions, except per share data)

Revenues for the six months ended June 30, 2023, were $6,071.5, an increase of 0.1% from $6,067.5 during the six months ended June 30, 2022.

The increase was due to acquisitions, net of divestitures, of 1.6%, partially offset by lower organic revenue of 1.3% and unfavorable foreign currency translation of 0.2%.

The 1.3% decrease in organic revenue was driven by an 11.2% decrease in COVID-19 PCR and antibody testing (COVID-19 Testing), partially offset by a 9.9% increase in the company's organic Base Business.

Revenues for the nine months ended September 30, 2023, were $9,128.3, an increase of 2.2% from $8,934.2 during the nine months ended September 30, 2022.

The increase was due to acquisitions, net of divestitures, of 1.8%, organic revenue of 0.3% and favorable foreign currency translation of 0.1%.

The 0.3% increase in organic revenue was driven by a 10.0% increase in the company's organic Base Business, partially offset by a 9.6% decrease COVID-19 Testing.

Base Business includes Labcorp's operations except for COVID-19 Testing.

6 unchanged sentences

In June 2023, Fortrea, prior to the Separation and while a subsidiary of the Company, issued $570.0 of 7.500% senior secured notes due 2030 (the Fortrea Notes).

As of June 30, 2023, the initial proceeds were held in escrow for release to Fortrea upon satisfaction of certain conditions, including completion of the Separation.

The proceeds from the Fortrea Notes were used to fund cash payments of approximately $1,600.0 to the Company in connection with the Separation.

5 unchanged sentences

and $570.0 Term Loan B maturing June 30, 2030.

Upon closing of the spin transaction, Fortrea made a cash distribution to the Company of approximately $1,600.0 as consideration for the assets that the Company contributed to Fortrea in connection with the spin-off.

Upon closing of the spin transaction, Fortrea made a cash distribution to the Company of approximately $1,600.0 as partial consideration for the assets that the Company contributed to Fortrea in connection with the spin-off.

The Company intends to use these proceeds toward a $1,000.0 accelerated share repurchase program and paying down $300.0 of debt maturing this year, with the remaining funds to be returned to shareholders through additional future share repurchases and/or cash dividends.

5 unchanged sentences

RESULTS OF OPERATIONS (dollars in millions)

Three months ended June 30, 2023, compared with three months ended June 30, 2022

Three Months Ended June 30,

Three months ended September 30, 2023, compared with three months ended September 30, 2022

Three Months Ended September 30,

2023 2022 Change

3 unchanged sentences

Total $ 3,056.8 $ 2,866.8 6.6 %

Total revenues for the three months ended June 30, 2023, were $3,033.7, an increase of 3.8% over $2,923.0 in the second quarter of 2022.

The increase was due to organic growth of 2.0%, acquisitions, net of divestitures, of 1.6% and favorable foreign currency translation of 0.2%.

The 2.0% increase in organic revenue was driven by a 9.8% increase in the Company's organic Base Business, partially offset by a 7.8% decrease in COVID-19 Testing.

Dx revenues for the three months ended June 30, 2023, were $2,340.8, an increase of 3.8% over $2,255.4 in the second quarter of 2022.

Total revenues for the three months ended September 30, 2023, were $3,056.8, an increase of 6.6% over $2,866.8 in the third quarter of 2022.

The increase was due to an increase in organic revenu e of 3.7%, acquisitions, net of divestitures, of 2.2%, and favorable foreign currency translation of 0.7%.

The 3.7% increase in organic revenue was driven by a 10.1% increase in the company's organic Base Business, partially offset by a 6.3% decrease in COVID-19 PCR and antibody testing (COVID-19 Testing).

Base Business includes Labcorp's operations except for COVID-19 Testing.

Dx revenues for the three months ended September 30, 2023, were $2,344.7, an increase of 6.2% over $2,207.6 in the third quarter of 2022.

The increase was due to organic revenue of 3.4% and acquisitions of 3.0%, partially offset by unfavorable foreign currency translation of 0.1%.

The 1.8% increase in organic revenue was due to an 11.9% increase in the Base Business, partially offset by a 10.1% decrease in COVID-19 Testing.

Total Base Business growth compared to the Base Business in the

prior year was 15.7%.

The increase was due to the Ascension lab management agreement of approximately 7% as well as continued volume recovery compared to last year, which was negatively impacted by COVID-19.

Dx total volume (measured by requisitions) for the three months ended June 30, 2023, increased by 1.4% as acquisition volume contributed 2.5%, while organic volume decreased by 1.1%.

The 3.4% increase in organic growth was due to an 11.6% increase in the Base Business,

partially offset by a 8.2% decrease in COVID-19 Testing.

Total Base Business growth compared to the Base Business in the prior year was 15.9%.

The Ascension lab management agreement contributed approximately 6.0% of the Base Business growth.

Dx total volume (measured by requisitions) for the three months ended September 30, 2023, increased by 2.3% as acquisition volume contributed 3.4%, while organic volume decreased by 1.1%.

Organic volume was impacted by a 4.5% decrease in COVID-19 Testing, partially offset by a 3.4% increase in the Base Business.

Price/mix increased by 2.4% due to organic Base Business growth of 6.8%, partially offset by a decrease in COVID-19 Testing of 3.9%, lower acquisitions of 0.3%, and unfavorable foreign currency translation of 0.2%.

Price/mix increased by 3.9% due to organic Base Business growth of 8.2%, partially offset by a decrease in COVID-19 Testing of 3.7%, lower acquisitions of 0.4%, and an unfavorable currency translation of 0.1%.

Base Business volume increased 7.2% compared to the Base Business last year.

Price/mix was up 8.8% in the Base Business compared to the Base Business last year, which includes the benefit of the Ascension lab management agreement.

BLS revenues for the three months ended June 30, 2023, were $699.0, an increase of 3.1% over $677.9 in the second quarter of 2022.

The increase was primarily due to organic growth of 2.1% and favorable foreign currency translation of 1.5%, partially offset by divestitures of 0.4%.

The increase in organic revenue was negatively impacted by approximately 5.0% due to non-human primate (NHP) related constraints in its Early Development business.

BLS revenues for the three months ended September 30, 2023, were $719.1, an increase of 7.9% over $666.4 in the third quarter of 2022.

The increase was primarily due to organic growth of 4.9% and favorable foreign currency translation of 3.3%, partially offset by an unfavorable impact of divestitures of 0.2%.

Cost of Revenues

Three Months Ended June 30,

Three Months Ended September 30,

2023 2022 Change

1 unchanged sentence

Cost of revenues as a % of revenues 72.2 % 69.1 %

Cost of revenues increased 10.7% during the three months ended June 30, 2023, as compared with the corresponding period in 2022.

Cost of revenues as a percentage of revenues during the three months ended June 30, 2023, increased to 72.2% as compared to 67.8% in the corresponding period in 2022.

This increase in cost of revenues as a percent of revenues was primarily due to a reduction in COVID-19 Testing revenues and higher personnel costs, partially offset by a recovery in the organic Base Business.

Cost of revenues increased 11.4% during the three months ended September 30, 2023, as compared with the corresponding period in 2022.

Cost of revenues as a percentage of revenues during the three months ended September 30, 2023, increased to 72.2% as compared to 69.1% in the corresponding period in 2022.

This increase in cost of revenues as a percent of revenues was primarily due to a reduction in COVID-19 Testing revenues, partially offset by the impact of the Ascension lab management agreement.

Selling, General and Administrative Expenses

Three Months Ended June 30,

Three Months Ended September 30,

2023 2022 Change

1 unchanged sentence

Selling, general and administrative expenses as a % of revenues 17.2 % 15.8 %

Selling, general and administrative expenses as a percentage of revenues were 16.7% and 14.8% during the three months ended June 30, 2023, and 2022, respectively.

The increase is primarily due to a reduction in COVID-19 Testing revenues and spin-off transaction costs, partially offset by the impact of the Ascension lab management agreement.

Selling, general and administrative expenses as a percentage of revenues was 17.2% and 15.8% during the three months ended September 30, 2023, and 2022, respectively.

The increase is primarily due to a reduction in COVID-19 Testing revenues and spin-related costs, partially offset by the impact of the Ascension lab management agreement.

Amortization of Intangibles and Other Assets

Three Months Ended June 30,

Three Months Ended September 30,

2023 2022 Change

Amortization of intangibles and other assets $ 55.7 $ 49.0 13.6 %

The increase in amortization of intangibles and other assets primarily reflects additional amortization for assets acquired subsequent to June 30, 2022.

The increase in amortization of intangibles and other assets primarily reflects additional amortization for assets acquired subsequent to September 30, 2022.

Goodwill and Other Asset Impairments

Three Months Ended June 30,

Three Months Ended September 30,

2023 2022 Change

Goodwill and other asset impairments $ 10.2 $ — 100.0 %

The Company recorded impairment charges of $2.8 in intangible assets during the three months ended June 30, 2023.

The Company recorded no impairment charges during the three months ended June 30, 2022.

The Company recorded impairment charges of $10.2 in intangible assets during the three months ended September 30, 2023 primarily due to a license impairment related to the divestiture of a joint venture.

The Company recorded no impairment charges during the three months ended September 30, 2022.

Restructuring and Other Charges

Three Months Ended June 30,

Three Months Ended September 30,

2023 2022 Change

Restructuring and other charges $ 7.5 $ 10.0 (24.7) %

During the three months ended June 30, 2023, the Company recorded net restructuring and other charges of $15.8.

During the three months ended September 30, 2023, the Company recorded net restructuring and other charges of $7.5.

The charges were comprised of $11.2 related to severance and other personnel costs and $0.9 in facility closures, lease terminations,

and general integration activities.

The charges were adjusted by the reversal of a previously established liability of $0.6 in unused severance liabilities and the increase of a previously established liability of $2.3 in unused facility-related costs.

During the three months ended June 30, 2022, the Company recorded net restructuring and other charges of $31.5.

The charges were adjusted by the reversal of a previously established liability of $0.1 in unused severance liabilities and the reversal of a previously established liability of $4.5 in unused facility-related costs.

During the three months ended September 30, 2022, the Company recorded net restructuring and other charges of $10.0.

The charges were comprised of $2.8 related to severance and other personnel costs and $7.5 in facility closures, lease terminations, and general integration activities.

The charges were adjusted by the reversal of a previously established liability of $0.5 in unused severance costs.

The charges were adjusted by the reversal of a previously established liability of $0.3 in unused facility-related costs.

Interest Expense

Three Months Ended June 30,

Three Months Ended September 30,

2023 2022 Change

Interest expense $ (50.3) $ (46.3) 8.7 %

The increase in interest expense for the three months ended June 30, 2023, as compared with the corresponding period in 2022, is primarily due to the increased interest rates on variable rate debt and higher borrowings under the Credit Facility.

The increase in interest expense for the three months ended September 30, 2023, as compared with the corresponding period in 2022, is primarily due to the increased interest rates on variable rate debt and higher borrowings under the Credit Facility.

Equity Method Income

Three Months Ended June 30,

Three Months Ended September 30,

2023 2022 Change

1 unchanged sentence

Equity method income represents the Company's ownership share in joint venture partnerships along with equity investments in other companies in the health care industry.

The decrease in income for the three months ended June 30, 2023, as compared with the corresponding period in 2022, was primarily due to the decreased profitability of the Company's joint ventures in 2023.

Three Months Ended June 30,

The decrease in income for the three months ended September 30, 2023, as compared with the corresponding period in 2022, was primarily due to the decreased profitability of the Company's joint ventures in 2023.

Three Months Ended September 30,

2023 2022 Change

Other, net $ 21.1 $ (17.6) (219.3) %

The change in Other, net for the three months ended June 30, 2023, as compared to the three months ended June 30, 2022, is primarily due to investment losses of $4.1 for the three months ended June 30, 2023 compared to investment losses of $6.2 for the corresponding period of 2022.

In addition, foreign currency transaction losses of $11.2 were recognized for the three months ended June 30, 2023 as compared to losses of $23.5 for the corresponding period of 2022.

The change in Other, net for the three months ended September 30, 2023, as compared to the three months ended September 30, 2022, is primarily due to $22.7 of transition services fees charged to Fortrea related to administrative and IT systems support.

The costs to provide these services are included in operating income but the service fees are included in other income.

In addition, the Company recorded investment gains of $4.0 for the three months ended September 30, 2023 compared to investment losses of $5.2 for the corresponding period of 2022.

Foreign currency transaction losses of $2.8 were recognized for the three months ended September 30, 2023, as compared to losses of $8.2 for the corresponding period of 2022.

Income Tax Expense

Three Months Ended June 30,

Three Months Ended September 30,

2023 2022 Change

7 unchanged sentences

As a result of the spin-off of Fortrea, which was completed on June 30, 2023, the Company recast the segment results to exclude the historical results of the CDCS business for all periods presented.

The remaining operations of the previously reported Drug Development segment has been renamed the Biopharma Laboratory Services segment.

Three Months Ended June 30,

The remaining operations of the previously reported Drug Development segment have been renamed the Biopharma Laboratory Services segment.

Three Months Ended September 30,

2023 2022 Change

9 unchanged sentences

Total operating income $ 252.3 $ 374.0 (32.5) %

Dx operating income was $409.7 for the three months ended June 30, 2023, a decrease of $105.9 over operating income of $515.6 in the corresponding period of 2022, and Dx operating margin decreased 540 basis points year-over-year.

The decrease was due to a reduction in COVID-19 Testing.

Excluding the mix impact from Ascension, Base Business margin increased due to the benefit of organic growth and LaunchPad savings, which was partially offset by higher personnel expense.

BLS operating income was $104.6 for the three months ended June 30, 2023, an increase of $11.6 over operating income of $93.0 in the corresponding period of 2022.

Dx operating income was $386.3 for the three months ended September 30, 2023, a decrease of $53.5 over operating income of $439.8 in the corresponding period of 2022, and Dx operating margin decreased 340 basis points year-over-year.

The decrease in adjusted operating income was due to a reduction in COVID-19 Testing, while the margin was also affected by the mix impact from Ascension.

Excluding the mix impact from Ascension, Base Business margin was up as the benefit of organic growth and Launchpad savings were partially offset by higher personnel expense.

BLS operating income was $109.0 for the three months ended September 30, 2023, an increase of $4.0 over operating income of $105.0 in the corresponding period of 2022.

The increase was due to demand growth and LaunchPad savings, partially offset by higher personnel expense.

The improvement in operating income and margin was impacted by NHP-related constraints.

The improvement in operating income and margin was impacted by the NHP-related constraints..

General corporate expenses are comprised primarily of administrative services such as executive management, human resources, legal, finance, corporate affairs, and information technology.

Corporate expenses were $177.9 for the three months ended June 30, 2023, an increase of $79.4 over corporate expenses of $98.5 in the corresponding period of 2022, primarily due to spin-off transaction costs, personnel costs, bonus allocation, and research and development costs.

Corporate expenses were $169.6 for the three months ended September 30, 2023, an increase of $57.8 over corporate expenses of $111.8 in the corresponding period of 2022, primarily due to spin-off transaction costs, personnel costs, bonus allocation, and research and development costs.

The Company remains on track to deliver approximately $350.0 of net savings from its three-year LaunchPad initiative by the end of 2024.

Six Months Ended June 30, 2023, compared with six months ended June 30, 2022

Six Months Ended June 30,

Nine Months Ended September 30, 2023, compared with nine months ended September 30, 2022

Nine Months Ended September 30,

2023 2022 Change

3 unchanged sentences

Total $ 9,128.3 $ 8,934.2 2.2 %

The increase in revenues for the six months ended June 30, 2023, as compared with the corresponding period in 2022 was 0.1%.

The increase was due to acquisitions net of divestitures of 1.6%, partially offset by lower organic revenue of 1.3% and unfavorable foreign currency translation of 0.2%.

The 1.3% decrease in organic revenue was driven by an 11.2% decrease in COVID-19 Testing, partially offset by a 9.9% increase in the Company's organic Base Business.

Dx revenues for the six months ended June 30, 2023, were $4,723.6, an increase of 0.3% over $4,709.5 during the six months ended June 30, 2022.

The increase was due to acquisitions of 2.1%, partially offset by lower organic revenue of 1.6% and unfavorable foreign currency translation of 0.2%.

The 1.6% decrease in organic revenue was due to a 14.4% decrease in COVID-19 Testing, partially offset by a 12.8% increase in the Base Business.

The increase in revenues for the nine months ended September 30, 2023, as compared with the corresponding period in 2022 was 2.2%.

The increase was due to acquisitions, net of divestitures, of 1.8%, organic revenue of 0.3% and favorable foreign currency translation of 0.1%.

The 0.3% increase in organic revenue was driven by a 10.0% increase in the Company's organic Base Business, partially offset by a 9.6% decrease in COVID-19 Testing.

Dx revenues for the nine months ended September 30, 2023, were $7,068.3, an increase of 2.2% over $6,917.1 during the nine months ended September 30, 2022.

The increase was due to acquisitions of 2.4%, partially offset by unfavorable foreign currency translation of 0.2%.

Organic revenue was flat due to a 12.4% decrease in COVID-19 Testing, offset by a 12.4% increase in the Base Business.

Total Base Business growth compared to the Base Business in the prior year was 17.1%, which includes the benefit from the Ascension lab management agreement of approximately 7%.

Dx total volume (measured by requisitions) for the six months ended June 30, 2023, decreased by 1.0% as organic volume decreased by 3.4% and acquisition volume contributed 2.4%.

Dx total volume (measured by requisitions) for the nine months ended September 30, 2023 was flat as organic volume decreased by 2.6% and acquisition volume contributed 2.7%.

Organic volume was impacted by a 7.9% decrease in COVID-19 Testing, partially offset by a 5.2% increase in Base Business.

2 unchanged sentences

Price/mix was up 8.4% in the Base Business compared to the Base Business last year, which includes the benefit of the Ascension lab management agreement.

BLS revenues for the six months ended June 30, 2023, were $1,360.3, a decrease of 1.6% over $1,382.1 during the six months ended June 30, 2022.

The decrease was primarily due to an organic decline of 1.1%, unfavorable foreign currency

translation of 0.1%, and divestitures net of acquisitions of 0.3%.

BLS revenues for the nine months ended September 30, 2023, were $2,079.4, an increase of 1.5% over $2,048.5 during the nine months ended September 30, 2022.

The increase was primarily due to an organic growth of 0.8%, favorable foreign currency translation of 1.0%, and divestitures, net of acquisitions, of 0.3%.

The decrease in organic revenue was negatively impacted by approximately 4.0% due to NHP related constraints.

1 unchanged sentence

Cost of Revenues

Six Months Ended June 30,

Nine Months Ended September 30,

2023 2022 Change

1 unchanged sentence

Cost of revenues as a % of revenues 72.1 % 67.4 %

Cost of revenues increased 8.3% during the six months ended June 30, 2023, as compared with the corresponding period in 2022.

Cost of revenues as a percentage of revenues during the six months ended June 30, 2023, increased to 72.1% as compared to 66.6% in the corresponding period in 2022.

Cost of revenues increased 9.3% during the nine months ended September 30, 2023, as compared with the corresponding period in 2022.

Cost of revenues as a percentage of revenues during the nine months ended September 30, 2023, increased to 72.1% as compared to 67.4% in the corresponding period in 2022.

This increase in cost of revenues as a percent of revenues was primarily due to a reduction in COVID-19 Testing revenues, the impact of the Ascension Management Service Agreement, and higher personnel expenses, partially offset by organic Base Business growth and LaunchPad savings.

Selling, General and Administrative Expenses

Six Months Ended June 30,

Nine Months Ended September 30,

2023 2022 Change

1 unchanged sentence

Selling, general and administrative expenses as a % of revenues 16.3 % 14.6 %

Selling, general and administrative expenses as a percentage of revenues were 15.9% and 14.1% during the six months ended June 30, 2023, and 2022, respectively.

The increase is primarily due to a reduction in COVID-19 Testing revenues and spin-off transaction costs, partially offset by the impact of the Ascension lab management agreement.

Selling, general and administrative expenses as a percentage of revenues were 16.3% and 14.6% during the nine months ended September 30, 2023, and 2022, respectively.

The increase is primarily due to a reduction in COVID-19 Testing revenues and spin-related costs, partially offset by the impact of the Ascension lab management agreement.

Amortization of Intangibles and Other Assets

Six Months Ended June 30,

Nine Months Ended September 30,

2023 2022 Change

Amortization of intangibles and other assets $ 160.6 $ 149.0 7.8 %

The increase in amortization of intangibles and other assets primarily reflects additional amortization for assets acquired subsequent to June 30, 2022.

The increase in amortization of intangibles and other assets primarily reflects additional amortization for assets acquired subsequent to September 30, 2022.

Goodwill and Other Asset Impairments

Six Months Ended June 30,

Nine Months Ended September 30,

2023 2022 Change

Goodwill and other asset impairments $ 15.2 $ 1.2 1,158.5 %

The Company recorded impairment charges of $ 5.0 in capitalized software costs and other intangible assets during the six months ended June 30, 2023.

The Company recorded impairment charges of $ 1.2 in other assets in Ukraine and Russia during the six months ended June 30, 2022.

The Company recorded impairment charges of $ 15.2 in licenses, capitalized software costs and other intangible assets during the nine months ended September 30, 2023.

The Company recorded impairment charges of $ 1.2 in other assets in Ukraine and Russia during the nine months ended September 30, 2022.

Restructuring and Other Charges

Six Months Ended June 30,

Nine Months Ended September 30,

2023 2022 Change

Restructuring and other charges $ 30.8 $ 45.0 (31.7) %

During the six months ended June 30, 2023, the Company recorded net restructuring and other charges of $ 23.3 .

During the nine months ended September 30, 2023, the Company recorded net restructuring and other charges of $ 30.8 .

The charges were comprised of $20.4 related to severance and other personnel costs and $14.0 in facility closures, lease terminations, and general integration activities.

The charges were adjusted by the reversal of $1.1 of previously established severance liabilities and the increase of a previously established liability of $2.5 in unused facility-related costs.

During the six months ended June 30, 2022, the Company recorded net restructuring and other charges of $ 35.0 .

During the nine months ended September 30, 2022, the Company recorded net restructuring and other charges of $ 45.0 .

The charges were comprised of $21.2 related to severance and other personnel costs and $25.1 in facility closures, lease terminations, and general integration activities.

1 unchanged sentence

Interest Expense

Six Months Ended June 30,

Nine Months Ended September 30,

2023 2022 Change

Interest expense $ ( 150.8 ) $ ( 130.7 ) 15.4 %

The increase in interest expense for the six months ended June 30, 2023, as compared with the corresponding period in 2022, is primarily due to the increased interest rates on variable rate debt and higher borrowings under the Credit Facility.

The increase in interest expense for the nine months ended September 30, 2023, as compared with the corresponding period in 2022, is primarily due to the increased interest rates on variable rate debt and higher borrowings under the Credit Facility.

Equity Method Income

Six Months Ended June 30,

Nine Months Ended September 30,

2023 2022 Change

1 unchanged sentence

Equity method income represents the Company's ownership share in joint venture partnerships along with equity investments in other companies in the health care industry.

The decrease in income for the six months ended June 30, 2023, as compared with the corresponding period in 2022, was primarily due to the decreased profitability of the Company's joint ventures in 2023.

Six Months Ended June 30,

The decrease in income for the nine months ended September 30, 2023, as compared with the corresponding period in 2022, was primarily due to the decreased profitability of the Company's joint ventures in 2023.

Nine Months Ended September 30,

2023 2022 Change

Other, net $ ( 2.7 ) $ ( 62.8 ) (95.6) %

The change in Other, net for the six months ended June 30, 2023, as compared to the six months ended June 30, 2022, is primarily due to investment losses of $5.6 for the three months ended June 30, 2023 compared to investment losses of $14.2 for the corresponding period of 2022.

In addition, foreign currency transaction losses of $18.0 were recognized for the six months ended June 30, 2023 as compared to losses of $31.7 for the corresponding period of 2022.

The change in Other, net for the nine months ended September 30, 2023, as compared to the nine months ended September 30, 2022, is primarily due to $22.7 of transition services fees charged to Fortrea related to administrative and IT systems support.

The costs to provide these services are included in operating income but the service fees are included in other income.

In addition, investment losses of $1.6 for the three months ended September 30, 2023 compared to investment losses of $19.4 for the corresponding period of 2022.

Foreign currency transaction losses of $15.0 were recognized for the nine months ended September 30, 2023, as compared to losses of $39.3 for the corresponding period of 2022.

Income Tax Expense

Six Months Ended June 30,

Nine Months Ended September 30,

2023 2022 Change

9 unchanged sentences

Prior periods have been conformed for comparability.

Six Months Ended June 30,

Nine Months Ended September 30,

2023 2022 Change

9 unchanged sentences

Total operating income $ 848.4 $ 1,408.0 (39.7) %

Dx operating income was $ 851.2 for the six months ended June 30, 2023, a decrease of $347.5 over operating income of $1,198.7 in the corresponding period of 2022, and Dx operating margin decreased 740 basis points year-over-year.

The decrease was due to a reduction in COVID-19 Testing and higher personnel costs, partially offset by a recovery in the Base Business.

BLS operating income was $178.2 for the six months ended June 30, 2023, a decrease of $10.7 over operating income of $188.9 in the corresponding period of 2022.

The decrease was due to NHP-related constraints and higher personnel costs, partially offset by demand growth and LaunchPad savings.

Dx operating income was $ 1,237.5 for the nine months ended September 30, 2023, a decrease of $401.0 over operating income of $1,638.5 in the corresponding period of 2022, and Dx operating margin decreased 620 basis points year-over-year.

The decrease was due to a reduction in COVID-19 Testing, the impact of the Ascension lab management agreement and higher personnel costs, partially offset by a recovery in the Base Business.

BLS operating income was $287.2 for the nine months ended September 30, 2023, a decrease of $6.7 over operating income of $293.9 in the corresponding period of 2022.

The decrease was due to NHP-related constraints and higher personnel costs, and stranded costs as a result of the Fortrea spin, partially offset by demand growth and LaunchPad savings.

General corporate expenses are comprised primarily of administrative services such as executive management, human resources, legal, finance, corporate affairs, and information technology.

Corporate expenses were $ 300.1 for the six months ended June 30, 2023, a increase of $82.7 over corporate expenses of $ 217.4 in the corresponding period of 2022, primarily due to spin-off transaction costs, personnel costs, bonus allocation, and research and development costs.

Corporate expenses were $ 469.7 for the nine months ended September 30, 2023, an increase of $140.5 over corporate expenses of $ 329.2 in the corresponding period of 2022, primarily due to spin-off transaction costs, personnel costs, bonus allocation, and research and development costs.

The Company remains on track to deliver approximately $350.0 of net savings from its three-year LaunchPad initiative by the end of 2024.

2 unchanged sentences

The Company's principal source of liquidity is operating cash flow, supplemented by proceeds from debt offerings.

The Company believes that its balances of cash and cash equivalents and borrowing capacity, along with cash generated from operations, will be sufficient to satisfy its cash requirements, cash dividends, and share repurchases over the next twelve months.

The Company's senior unsecured revolving credit facility is further discussed in Note 7 (Debt) to the Company's condensed consolidated financial statements.

In summary, the Company's cash flows from continuing operations were as follows for the six months ended June 30, 2023, and 2022, respectively:

Six Months Ended June 30,

In summary, the Company's cash flows from continuing operations were as follows for the nine months ended September 30, 2023, and 2022, respectively:

Nine Months Ended September 30,

Net cash provided by operating activities from continuing operations $ 622.7 $ 1,157.6

4 unchanged sentences

Cash and Cash Equivalents

Cash and cash equivalents at June 30, 2023, and 2022, totaled $1,930.6 and $978.3, respectively.

Cash and cash equivalents at September 30, 2023, and 2022, totaled $727.9 and $304.9, respectively.

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

Cash Flows from Operating Activities

During the six months ended June 30, 2023, the Company's continuing operations provided $347.2 of cash as compared to $904.6 during the same period in 2022.

The $557.4 decrease in cash provided from operations in 2023 as compared with the corresponding 2022 period is primarily due to lower cash earnings.

During the nine months ended September 30, 2023, the Company's continuing operations provided $622.7 of cash as compared to $1,157.6 during the same period in 2022.

The $534.9 decrease in cash provided from operations in 2023 as compared with the corresponding 2022 period is primarily due to lower COVID-19 Testing earnings, spin-related items, and higher working capital, partially offset by increased Base Business earnings.

Cash Flows from Investing Activities

Net cash used for investing activities for the six months ended June 30, 2023, was $328.6 as compared to $802.5 for the six months ended June 30, 2022.

The change in cash used for investing activities was primarily due to a decrease in business acquisitions and lower capital expenditures during the six months ended June 30, 2023.

Capital expenditures were $181.5 and $247.4 for the six months ended June 30, 2023, and 2022, respectively.

Net cash used for investing activities from continuing operations for the nine months ended September 30, 2023, was $816.2 as compared to $1,345.1 for the nine months ended September 30, 2022.

The change in cash used for investing activities was primarily due to a decrease in business acquisitions and lower capital expenditures during the nine months ended September 30, 2023.

Capital expenditures were $286.4 and $330.2 for the nine months ended September 30, 2023, and 2022, respectively.

Cash Flows from Financing Activities

Net cash used by financing activities for the six months ended June 30, 2023, was $124.7 as compared to $497.4 for the six months ended June 30, 2022.

The change in cash flows from financing activities for the six months ended June 30, 2023, as compared to the six months ended June 30, 2022, was primarily due to no share repurchase activity during the six months ended June 30, 2023 as compared to $400.0 during the corresponding period in 2022.

Net cash used by financing activities from continuing operations for the nine months ended September 30, 2023, was $1,112.5 as compared to $949.6 for the nine months ended September 30, 2022.

The change in cash flows from financing activities from continuing operations for the nine months ended September 30, 2023, as compared to the nine months ended September 30, 2022, was primarily due to an increase in share repurchase activity during the nine months ended September 30, 2023, due to the ASR, as compared to $800.0 during the corresponding period in 2022.

The Company intends to use approximately $1.0 billion of the proceeds toward an accelerated share repurchase program and $300.0 to pay down debt maturing this year.

At June 30, 2023, the Company had $1,930.6 of cash and $1,000.0 of available borrowings under its revolving credit

facility, which does not mature until 2026.

The Company used $1000.0 of the proceeds to make an aggregate payment under two accelerated share repurchase agreements (as described in more detail below) and intends to use additional proceeds to pay down debt of approximately $300.0 maturing this year.

At September 30, 2023, the Company had $727.9 of cash and $910.0 of available borrowings under its revolving credit facility, which does not mature until 2026.

Under the Company's 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 under the revolving credit facility at June 30, 2023, and expects that it will remain in compliance with its existing debt covenants for the next twelve months.

For the six months ended June 30, 2023, the Company did not repurchase any of the Company's common stock.

As of June 30, 2023, t he Company had an outstanding authorization from the board of directors to purchase up to $1,531.5 more of the Company's common stock with no expiration date.

For the six months ended June 30, 2023, the Company paid $129.0 in common stock dividends.

On July 13, 2023, the Company announced a cash dividend of $0.72 per share of common stock for the second quarter, or approximately $64.8 in the aggregate.

The dividend will be payable on September 8, 2023, to stockholders of record of all issued and outstanding shares of common stock as of the close of business on August 8, 2023.

The Company was in compliance with all covenants under the revolving credit facility at September 30, 2023, and expects that it will remain in compliance with its existing debt covenants for the next twelve months.

On August 8, 2023, the Company entered into accelerated share repurchase agreements (collectively, the ASR Agreements) with two different banks, Goldman Sachs & Co.

LLC and Morgan Stanley & Co.

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

The remaining repurchase authorization has no expiration date.

Under the ASR Agreements, the Company made an aggregate payment of $1,000.0 to the Financial Institutions and received an aggregate initial number of approximately 3.7 shares of Common Stock from the Financial Institutions, which were removed from the outstanding share count in connection with entering into the ASR Agreements.

The 3.7 shares reflects the 80% of the shares that would ultimately be repurchased under the ASR Agreements if the price of the Common Stock established in the ASR Agreement as the inception of the ASR Agreements remains constant.

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

At settlement, under certain circumstances, the Financial Institutions may be required to deliver additional shares of Common Stock to the Company, or the Company may be required, at its election, either to make cash payments or deliver shares of Common Stock to the Financial Institutions.

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

Repurchases and settlements under the ASR Agreements are expected to be completed by the end of December 2023.

As of September 30, 2023, the Company had outstanding authorization from the board of directors to purchase up to $531.5 of the Company's common stock.

For the nine months ended September 30, 2023, the Company paid $192.9 in common stock dividends.

On October 12, 2023, the Company announced a cash dividend of $0.72 per share of common stock for the third quarter, or approximately $62.1 in the aggregate.

The dividend will be payable on December 12, 2023, to stockholders of record of all issued and outstanding shares of common stock as of the close of business on November 8, 2023.

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

2 unchanged sentences

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 2. Management’s Discussion and Analysis