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Item 7. Management’s Discussion and Analysis

2025-02-25 compared with 2024-02-26 · 144 added, 198 removed, 186 unchanged (65% of the section changed)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (all amounts in millions, except per share amounts or as otherwise noted)

During the year ended December 31, 2023, the Company's revenues from continuing operations were $12.2 billion, an increase of 2.5% from $11.9 billion in 2022.

The 2.5% increase in revenues for the year ended December 31, 2023, as compared to the corresponding period in 2022 was due to acquisitions, net of divestitures of 1.7%, organic revenue of 0.6%, and favorable foreign currency translation of 0.2%.

The 0.6% increase in organic revenue was due to an 8.7% increase in the

Company's organic Base Business (Base Business includes the Company's business operations except for COVID-19 PCR and antibody testing (COVID-19 Testing)), partially offset by an 8.1% decrease in COVID-19 Testing.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GENERAL (dollars in millions)

For the year ended December 31, 2024, the Company’s revenues were $13,008.9, an increase of 7.0% from $12,161.6 for the corresponding period in 2023.

The 7.0% increase in revenues for the year ended December 31, 2024, as compared to the corresponding period in 2023, was primarily due to organic revenue of 3.9%, acquisitions, net of divestitures of 2.8%, and favorable foreign currency translation of 0.2%.

The 3.9% increase in organic revenue was due to a 4.9% increase in the Company’s organic Base Business (Base Business includes the Company’s business operations except for COVID-19 Testing), partially offset by a 1.0% decrease in COVID-19 Testing.

The Company defines organic growth as the increase in revenue excluding the year over year impact of acquisitions, divestitures, and currency.

Acquisition and divestiture impact is considered for a twelve-month period following the close of each transaction.

On June 30, 2023, the Company completed the previously announced spin-off of Fortrea from the Company.

The spin-off of Fortrea was achieved through the Company’s pro-rata distribution of 100% of the outstanding shares of Fortrea Common Stock to holders of record of Labcorp Common Stock.

Each holder of record of Labcorp Common Stock received one share of Fortrea Common Stock for every share of Labcorp Common Stock held at 5:00 p.m., Burlington, North Carolina time on June 20, 2023, the record date for the distribution.

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

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

The Company does not guarantee the Fortrea Notes following the spin-off.

Also in June 2023, Fortrea Holdings Inc.

entered into three floating secured overnight financing rate (SOFR) credit facilities totaling $1,520.0.

These are comprised of $450.0 Revolver maturing June 30, 2028;

$500.0 Term Loan A maturing June 30, 2028;

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

Upon closing of the spin-off 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 used these proceeds toward a 1000.0 accelerated share repurchase program and paying down $300.0 of debt that matured in 2023, with the remaining funds to be returned to shareholders through additional future share repurchases and/or cash dividends.

All current and historical operating results of Fortrea are presented as Discontinued Operations, net of tax, in the consolidated statement of operations.

Separation of Fortrea Holdings Inc.

On June 30, 2023, Labcorp completed the previously announced separation (Spin-off) of its former Clinical Development and Commercialization Services (CDCS) business into Fortrea.

All historical operating results of Fortrea are presented as Earnings from discontinued operations, net of tax, in the Company’s Consolidated Statements of Operations.

The spin-off is expected to be treated as tax-free for the Company and its shareholders for U.S.

federal income tax purposes.

As a result of the spin-off of Fortrea, the Company recast 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.

Following the spin-off, the Company believes that it is positioned to:

• invest in R&D and innovation to develop and launch diagnostic advancements globally in key clinical areas including oncology, women's health, autoimmune disease and neurology through organic and inorganic opportunities;

• utilize its worldwide laboratory network to serve a broad, growing and global customer base including pharmaceutical and biotechnology companies, physicians, health systems, consumers, and other start-ups and laboratories that require lab services or diagnostic testing;

• launch innovative tests globally, providing patients, physicians, health systems and pharmaceutical companies with access to its advanced science, technology and diagnostic capabilities.

Results of Operations

As a result of the separation of Fortrea, the Company recast 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 have been renamed the Biopharma Laboratory Services (BLS) segment.

RESULTS OF OPERATIONS (dollars in millions)

The following tables present the financial measures that management considers to be the most significant indicators of the Company ’ s performance.

Years ended December 31, 2023, 2022, and 2021

Years Ended December 31, Change

2023 2022 2021 2023 2022

For discussion of 2023 results and comparison with 2022 results refer to “ Management ’ s Discussion and Analysis of Financial Conditions and Results of Operations ” in the Company ’ s Annual Report on Form 10-K for the year ended December 31, 2023 .

Year Ended December 31,

2024 2023 Change

Dx $ 10,144.3 $ 9,415.1 7.7 %

BLS 2,922.6 2,774.2 5.3 %

Intercompany eliminations (27.7) (36.9) (88.2) (24.9) % (58.2) %

Intercompany eliminations and other (58.0) (27.7) 109.4 %

Total $ 13,008.9 $ 12,161.6 7.0 %

The 0.6% increase in organic revenue was due to an 8.7% increase in the Company's organic Base Business, partially offset by an 8.1% decrease in COVID-19 Testing.

Dx revenues for the year ended December 31, 2024, were $10,144.3, an increase of 7.7% compared to revenues of $9,415.1 in the corresponding period in 2023.

The increase was due to acquisitions of 2.3% and higher organic revenue of 0.2%, partially offset by unfavorable foreign currency translation of 0.2%.

The increase was due to organic revenue of 4.1% and acquisitions, net of divestitures of 3.7%.

The 4.1% increase in organic revenue was due to a 5.4% contribution from organic Base Business, partially offset by a 1.3% decrease in COVID-19 Testing.

Total Base Business growth compared to the Base Business in the prior year was 9.2%.

Total volume, measured by requisitions, increased by 0.6% as acquisition volume contributed growth of 2.5% and organic volume decreased by 1.9%.

Organic volume was impacted by a 6.6% decrease in COVID-19 Testing, partially offset by a 4.8% increase in Base Business.

Price/mix increased by 1.7% due to higher Base Business of 5.9%, partially offset by lower COVID-19 Testing of 3.8%, unfavorable foreign currency translation of 0.2%, and acquisitions of (0.2%).

Total volume, measured by requisitions, increased by 5.3% as acquisitions, net of divestitures, volume contributed growth of 2.7%, and organic volume increased by 2.6%.

Organic volume was impacted by a 3.3% increase in the Base Business, partially offset by a 0.8% decrease in COVID-19 Testing.

Price/mix increased by 2.5% due to organic Base Business growth of 2.1% and acquisitions, net of divestitures, of 1.0%, partially offset by a decrease in COVID-19 Testing of 0.5%.

BLS revenues for the year ended December 31, 2024, were $2,922.6, an increase of 5.3% over revenues of $2,774.2 in the corresponding period in 2023.

The increase in revenues was primarily due to organic Base Business growth of 1.6% and favorable foreign currency translation of 1.5%, partially offset by divestitures, net of acquisitions of (0.3%).

BLS backlog expected to convert to revenue in the next 12 months is $2,470.0 or 30.0%.

The 9.7% decrease in revenues for the year ended December 31, 2022, as compared to the corresponding period in 2021 was due to lower organic revenue of 10.0% and unfavorable foreign currency translation of 0.7%, partially offset by acquisitions net of divestitures of 1.0%.

The 10.0% decrease in organic revenue was due to a 12.3% decrease in COVID-19 Testing, partially offset by a 2.3% increase in the Company's organic Base Business.

Dx revenues for the year ended December 31, 2022, were $9,203.5, a decrease of 11.2% compared to revenues of $10,363.6 in the corresponding period in 2021.

The decrease was primarily due to lower organic revenue of 12.1% and unfavorable foreign currency translation of 0.1%, partially offset by acquisitions of 1.1%.

The 12.1% decrease in organic revenue was due to a 15.6% decrease in COVID-19 Testing, partially offset by a 3.4% increase in organic Base Business.

Total volume, measured by requisitions, decreased by 7.5% as organic volume decreased by 8.4% and acquisition volume contributed growth of 0.8%.

Organic volume was impacted by a 10.4% decrease in COVID-19 Testing, partially offset by a 2.0% increase in Base Business.

Price/mix decreased by 3.7% due to lower COVID-19 Testing of 5.2% and unfavorable foreign currency translation of 0.1%, partially offset by higher Base Business of 1.4% and acquisitions of 0.2%.

BLS revenues for the year ended December 31, 2022, were $2,697.3, a decrease of 5.7% over revenues of $2,860.7 in the corresponding period in 2021.

The decrease in revenues was primarily due to unfavorable foreign currency translation of 2.8%, lower organic base business growth of 2.3%, lower COVID-19 Testing of 1.3%, partially offset by acquisitions net of divestitures of 0.7%.

The increase in revenues was primarily due to organic growth of 4.3% and favorable foreign currency translation of 1.1%.

Cost of Revenues

Years Ended December 31, Change

2023 2022 2021 2023 2022

Year Ended December 31,

2024 2023 Change

Cost of revenues $ 9,384.5 $ 8,796.7 6.7 %

Cost of revenues as a % of revenues 72.1 % 72.3 %

72.3 % 68.7 % 62.0 %

Cost of revenues increased 7.9% in 2023 as compared with 2022 and increased as a percentage of revenues to 72.3% in 2023 as compared to 68.7% in 2022.

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

Cost of revenues were flat in 2022 as compared with 2021 and increased as a percentage of revenues to 68.7% in 2022 as compared to 62.0% in 2021.

This increase in cost of revenues as a percentage of revenues was primarily due to a reduction in higher margin COVID-19 Testing, higher personnel expenses, and other inflationary costs, partially offset by organic Base Business growth and LaunchPad savings.

Cost of revenues increased 6.7% for the year ended December 31, 2024, as compared with corresponding period in 2023, and decreased as a percentage of revenues to 72.1% for the year ended December 31, 2024, as compared to 72.3% for corresponding period in 2023.

This decrease in cost of revenues as a percentage of revenues was primarily due to higher organic demand and LaunchPad savings, partially offset by higher personnel costs and lower COVID-19 Testing.

Selling, General and Administrative Expenses

Years Ended December 31, Change

2023 2022 2021 2023 2022

Year Ended December 31,

2024 2023 Change

Selling, general and administrative expenses $ 2,230.0 $ 2,021.4 10.3 %

SG&A as a % of revenues 17.1 % 16.6 %

Selling, general and administrative expenses as a percentage of revenues increased to 16.6% in 2023 compared to 14.9% in 2022.

The increase in selling, general and administrative expenses as a percentage of revenues is primarily due to a reduction in

COVID-19 Testing revenues, spin-off-related costs and higher personnel expenses, partially offset by the impact of the Ascension Management Services Agreement.

Selling, general and administrative expenses as a percentage of revenues increased to 14.9% in 2022 compared to 12.9% in 2021.

The increase in selling, general and administrative expenses as a percentage of revenues is primarily due to a decrease in higher margin COVID-19 Testing and higher personnel costs, partially offset by LaunchPad savings.

Selling, general and administrative expenses as a percentage of revenues increased to 17.1% for the year ended December 31, 2024, as compared to 16.6% for the corresponding period in 2023.

The increase in selling, general and administrative expenses as a percentage of revenues is primarily due to higher personnel costs, a reduction in COVID-19 Testing revenues, and the impact from the Invitae transaction, partially offset by LaunchPad savings and demand.

Goodwill and Other Asset Impairments

Years Ended December 31, Change

2023 2022 2021 2023 2022

Years Ended December 31,

2024 2023 Change

Goodwill and other asset impairments $ 5.3 $ 349.0 (98.5) %

The 2023 impairment charges were primarily comprised of $333.6 of goodwill impairment for the Early Development reporting unit, which is part of the BLS segment.

Impairment charges for the year ended December 31, 2022 included $260.0 of goodwill impairment for the Early Development reporting unit and the impairment of a technology intangible asset.

There were no goodwill and other asset impairments for the year ended December 31, 2021.

The impairment charges for the year ended December 31, 2024, were primarily due to the decommissioning of an information system and a robotic asset.

The impairment charges for the year ended December 31, 2023, were primarily comprised of $333.6 of goodwill impairment for the ED reporting unit, which is part of the BLS segment.

Amortization of Intangibles and Other Assets

Years Ended December 31, Change

2023 2022 2021 2023 2022

Year Ended December 31,

2024 2023 Change

Amortization of intangibles and other assets $ 256.4 $ 219.8 16.7 %

The increase in amortization of intangibles and other assets for the year ended December 31, 2023 is primarily due to the impact of acquisitions.

The decrease in amortization of intangibles and other assets for the year ended December 31, 2022 is primarily due to $88.4 in amortization acceleration of certain intangible assets related to trade names as a result of the Company's rebranding initiative recognized during 2021, partially offset by the impact of acquisitions.

The increase in amortization of intangibles and other assets primarily reflects additional amortization for assets acquired subsequent to December 31, 2023.

Restructuring and Other Charges

Years Ended December 31, Change

2023 2022 2021 2023 2022

Year Ended December 31,

2024 2023 Change

Restructuring and other charges $ 46.0 $ 49.1 (6.3) %

During 2023, the Company recorded net restructuring charges of $49.1.

The charges were comprised of $33.4 in severance and other personnel costs, $22.3 in facility-related costs primarily associated with general integration activities.

The charges were adjusted by the reversal of previously established liability of $1.7 in unused severance and $4.9 in unused facility-related costs.

During 2022, the Company recorded net restructuring charges of $54.0.

For the year ended December 31, 2024, the Company recorded net restructuring charges of $46.0.

The charges were comprised of $43.0 in severance and other personnel costs, and $5.9 in facility-related costs primarily associated with general integration activities.

The charges were adjusted by the reversal of previously established liability of $2.5 in unused severance and $0.4 in unused facility-related costs.

During 2021, the Company recorded net restructuring charges of $24.0.

The charges were comprised of $12.4 in severance and other personnel costs, $12.0 in facility-related costs primarily associated with general integration activities.

For the year ended December 31, 2023, the Company recorded net restructuring charges of $49.1.

The charges were comprised of $33.4 in severance and other personnel costs and $22.3 in facility-related costs primarily associated with general integration activities.

The charges were adjusted by the reversal of previously established liability of $1.7 in unused severance and $4.9 in unused facility-related costs.

Interest Expense

Years Ended December 31, Change

2023 2022 2021 2023 2022

Year Ended December 31,

2024 2023 Change

Interest expense $ 208.3 $ 199.6 4.4 %

The increase in interest expense for 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 decrease in interest expense for 2022 as compared with the corresponding period in 2021 is primarily due to the costs of redeeming the outstanding 3.20% senior notes due February 1, 2022 and the 3.75% notes due August 23, 2022 and issuing the new senior notes in 2021 and lower outstanding debt partially offset by a higher average cost of debt in 2022.

The increase in interest expense for the year ended December 31, 2024, as compared with the corresponding period in 2023 is primarily due to higher borrowings under its revolving credit facility, senior notes, and the new accounts receivable securitization facility.

Equity Method Income, Net

Years Ended December 31, Change

2023 2022 2021 2023 2022

Year Ended December 31,

2024 2023 Change

Equity method income, net $ (1.4) $ (1.4) — %

Equity method income, net 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 2023 as compared with the corresponding period in 2022 was partially due to the sale of the Company's interest in one joint venture and the acquisition of the remaining interest in another joint venture during 2023.

Equity method income, net 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 2022 as compared with the corresponding period in 2021 was primarily due to the decreased profitability of the Company's joint ventures in 2022.

Years Ended December 31, Change

2023 2022 2021 2023 2022

Equity method income, net represents the Company’s ownership share in joint venture partnerships along with equity investments in other companies in the health care industry, which remained flat in the year ended December 31, 2024, as compared with the corresponding period in 2023.

Year Ended December 31,

2024 2023 Change

Other, net $ 60.2 $ 15.5 288.4 %

The change in Other, net for the year ended December 31, 2023, as compared to the year ended December 31, 2022, was primarily due to $46.1 of transition services fees charged to Fortrea related to administrative and information technology systems support.

The change in Other, net for the year ended December 31, 2022, as compared to the year ended December 31, 2021, was primarily due to investment losses of $19.6 compared to $61.8 of investment gains in the corresponding period of 2021.

Income Tax Expense

Years Ended December 31,

2023 2022 2021

Other, net for the year ended December 31, 2024, was primarily due to $80.0 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 a $6.4 gain related to the divestiture of Beacon Laboratory Benefit Solutions, Inc.

This income was partially offset by foreign currency transaction losses of $15.3 and an $11.4 loss on investments.

Other, net for the year ended December 31, 2023, was primarily due to $46.1 of transition services fees charged to Fortrea related to administrative and IT systems support, partially offset by pension plan settlement charges of $10.9 and a $4.8 loss on investments.

Provision for Income Taxes

Year Ended December 31,

Income tax expense $ 212.4 $ 188.5

Income tax expense as a % of income before tax 22.1 % 33.1 %

The increase in effective tax rate as compared with the prior year is primarily attributable to the unfavorable impact of current year goodwill impairment of the early development reporting unit.

In contrast, the 2022 goodwill impairment of the early development reporting unit was more than offset by favorable adjustments attributable to research and development tax credits, changes in effective state income tax rates, and deferred tax adjustments.

The 2022 effective tax rate was favorably impacted by the Company's research and development tax credits, changes in effective state income tax rates, and deferred tax adjustments.

During the third quarter of 2022, the Company completed a detailed domestic research and development tax credit analysis for the 2019, 2020, and 2021 tax years that resulted in an incremental income tax benefit.

The 2021 effective tax rate was favorably impacted by stock-based compensation arrangements that was offset by the deferred revaluation related to the U.K.

The decrease in effective tax rate as compared with the prior year is primarily attributable to the unfavorable impact of the prior year goodwill impairment of the ED reporting unit, while no goodwill impairment was recognized during the year ended December 31, 2024.

Operating Results by Segment

During the fourth quarter of 2022, the Company modified the segment performance measure to exclude the amortization of intangibles and other assets, restructuring and other charges, goodwill and other asset impairments, and certain corporate charges for items such as transaction costs, COVID-19 costs, and other special items.

These changes align with how the chief operating decision maker now evaluates segment performance and allocates resources.

Prior periods have been conformed for

comparability.

Years Ended December 31, Change

2023 2022 2021 2023 2022

Year Ended December 31,

2024 2023 Change

Dx segment operating income $ 1,606.3 $ 1,591.3 0.9 %

8 unchanged sentences

Total operating income $ 1,086.7 $ 725.6 49.8 %

Dx operating income was $1,591.3 for the year ended December 31, 2023, a decrease of 21.4% over operating income of $2,025.5 in the corresponding period of 2022, and Dx operating margin decreased 510 basis points year-over-year.

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

BLS operating income was $396.3 for the year ended December 31, 2023, an increase of 1.8% from operating income of $389.1 in the corresponding period of 2022, and BLS operating margin decreased 10 basis points year over year.

The change was primarily due to demand growth and LaunchPad savings, partially offset by higher personnel expense and non-human primate (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 $644.1 for the year ended December 31, 2023, an increase of 37.4% over corporate expenses of $468.8 in the corresponding period of 2022, primarily due to spin-off transaction costs, personnel costs, bonus allocation, and research and development costs.

Dx operating income was $2,025.5 for the year ended December 31, 2022, a decrease of 36.8% over operating income of $3,205.6 in the corresponding period of 2021, and Dx operating margin decreased 890 basis points year over year.

The decrease in operating income and margin were primarily due to a reduction in COVID-19 Testing, higher personnel expense, the mix impact from the integration of Ascension's laboratory business, partially offset by organic Base Business growth.

BLS operating income was $389.1 for the year ended December 31, 2022, a decrease of 22.3% from operating income of $501.0 in the corresponding period of 2021, and BLS operating margin decreased 310 basis points year over year.

The decrease was primarily due to a reduction in COVID-19 Testing, a reduction in COVID-19 related work, and other inflationary costs.

These impacts were partially offset by Base Business growth and LaunchPad savings.

Dx operating income was $1,606.3 for the year ended December 31, 2024, an increase of 0.9% over operating income of $1,591.3 in the corresponding period of 2023, and Dx operating margin decreased 110 basis points year-over-year.

The decrease in operating margin was primarily due to higher personnel costs, partially offset by organic demand.

BLS operating income was $458.9 for the year ended December 31, 2024, an increase of 15.8% from operating income of $396.3 in the corresponding period of 2023, and BLS operating margin increased 140 basis points year over year.

The increase was primarily due to organic growth and LaunchPad savings, partially offset by higher personnel costs.

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 $468.8 for the year ended December 31, 2022, an increase of 15.9% over corporate expenses of $404.5 in the corresponding period of 2021, primarily due to higher personnel costs, bonus allocation, research and development costs, and other costs.

Liquidity, Capital Resources and Financial Position

Corporate expenses were $670.8 for the year ended December 31, 2024, an increase of 4.1% over corporate expenses of $644.1 in the corresponding period of 2023, primarily due to higher costs related to acquisitions and personnel.

LIQUIDITY AND CAPITAL RESOURCES (dollars and shares in millions)

The Company’s strong cash-generating capability and financial condition typically have provided ready access to capital markets.

2 unchanged sentences

In summary the Company’s cash flows were as follows:

For the Year Ended December 31,

2023 2022 2021

Year Ended December 31,

Net cash provided by continuing operating activities $ 1,585.8 $ 1,202.3

Net cash used for continuing investing activities (1,366.8) (1,146.8)

Net cash used for continuing financing activities (1,559.0) (1,322.2) (2,065.8)

Net cash provided by (used for) continuing financing activities 779.9 (1,559.0)

Effect of exchange rate on changes in cash and cash equivalents (17.0) 9.9

5 unchanged sentences

Cash Flows from Operating Activities

During the year ended December 31, 2023, the Company's continuing operations provided $1,202.3 of cash as compared to $1,764.8 in 2022 and $2,846.3 in 2021.

The $562.5 decrease in cash provided from operations in 2023 as compared with the corresponding 2022 period was primarily due to l ower COVID-19 Testing earnings, spin-off related items and higher working capital, partially offset by increased Base Business earnings.

The $1,081.5 decrease in cash provided from operations in 2022 as compared with the corresponding 2021 period was primarily due to l ower COVID-19 Testing.

During the year ended December 31, 2024, the Company’s continuing operations provided $1,585.8 of cash as compared to $1,202.3 in 2023.

The $383.5 increase in cash provided from operations in 2024, as compared with the corresponding 2023 period, was primarily due to higher cash earnings and favorable working capital requirements.

Cash Flows from Investing Activities

Net cash used by continuing investing activities for the year ended December 31, 2023 was $1,146.8 as compared to net cash used by continuing investing activities of $1,599.6 for the year ended December 31, 2022 and $845.7 for the year ended December 31, 2021.

The $452.8 decrease in net cash used by investing activities for the year ended December 31, 2023 as compared to the year ended December 31, 2022, was primarily due to a year over year decrease of $492.5 in cash paid for acquisitions.

The $753.9 increase in net cash used by investing activities for the year ended December 31, 2022 as compared to the year ended December 31, 2021, was primarily due to a year over year increase of $667.1 in cash paid for acquisitions and a year over year decrease in proceeds from sale of $85.9.

Net cash used for continuing investing activities for the year ended December 31, 2024, was $1,366.8 as compared to $1,146.8 for the year ended December 31, 2023.

The increase in net cash used for investing activities for the year ended December 31, 2024 as compared to the year ended December 31, 2023, was primarily due to an increase in business acquisitions and higher capital expenditures.

Capital expenditures were $489.9 and $453.6 for the years ended December 31, 2024, and 2023, respectively.

Capital expenditures in 2024 were 3.8% of revenues, primarily in connection with projects to support growth in the Company’s core businesses.

The Company intends to continue to pursue acquisitions to drive growth, to make important investments in its business, including in information technology, and to improve efficiency and enable the execution of the Company's mission.

Such expenditures are expected to be funded by cash flow from operations or, as needed, through borrowings under debt facilities, including the Company's revolving credit facility or any successor facility.

The Company expects capital expenditures in 2024 to be approximately 3.5% of revenues, primarily in connection with projects to support growth in the Company's core businesses, facility updates, projects related to LaunchPad, and further acquisition integration initiatives.

The Company expects this level of spending to remain consistent in 2025, primarily in connection with projects to support growth in the Company’s core businesses, facility expansion and updates, projects related to its LaunchPad initiative, and further acquisition integration initiatives.

Cash Flows from Financing Activities

Net cash used in continuing financing activities for the year ended December 31, 2023 was $1,559.0 compared to cash used in continuing financing activities of $1,322.2 for the year ended December 31, 2022.

This movement in cash within financing activities for 2023, as compared to 2022, was primarily a result of $1,000.0 of share repurchases and $300.0 in senior note repayments in 2023 compared to $1,100.0 of share repurchases in 2022 and the commencement of quarterly dividend payments in the second quarter of 2022.

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.

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 to redeem, prior to maturity, the Company's outstanding 3.20% senior notes due 2022 and 3.75% senior notes due 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 (changed to SOFR in 2023) plus 1.0706%.

These instruments are designated as hedges against changes in the fair value of a portion of the Company's long-term debt.

The aggregate fair value of $69.6 at December 31, 2023, was included as a

component of other long-term liabilities and deducted from the reported value of the senior notes.

On April 30, 2021, the Company amended and restated its revolving credit facility.

Net cash provided by continuing financing activities for the year ended December 31, 2024, was $779.9 compared to cash used in continuing financing activities of $1,559.0 for the year ended December 31, 2023.

This movement in cash within financing activities for 2024, as compared to 2023, was primarily due to $2,000.0 of proceeds from new debt securities and $300.0 of proceeds from the new accounts receivable facility described below, partially offset by $1,000.0 of payments towards the Company’s senior notes, $250.1 of share repurchases, and $243.1 of dividends paid, compared to $1,000.0 of share repurchases and $300.0 of payments towards the Company’s senior notes, and $254.0 of dividends paid in 2023.

On September 23, 2024, LCAH (the Issuer) entered into a base indenture with U.S.

Bank Trust Company, National Association, as trustee (the Trustee) (the 2024 Indenture).

On September 23, 2024, the Company, the Issuer and the Trustee entered into supplemental indentures to the 2024 Indenture under which the Issuer issued, and the Company guaranteed, $2,000.0 in debt securities, consisting of $650.0 aggregate principal amount of 4.35% senior notes due 2030, $500.0 aggregate principal amount of 4.55% senior notes due 2032, and $850.0 aggregate principal amount of 4.80% senior notes due 2034, with interest payable semi-annually on April 1 and October 1 of each year, commencing April 1, 2025.

Net proceeds from these offerings were approximately $1,983.0 after deducting underwriting discounts and other estimated expenses of the offering.

The net proceeds were used to redeem or repay indebtedness and, to the extent not used for such purpose, for other general corporate purposes.

Indebtedness redeemed or repaid or to be redeemed or repaid at or prior to maturity were the Company’s 2.30% senior notes due December 2024, its 3.60% senior notes due February 2025, and $500.0 of borrowings under its revolving credit facility.

On January 13, 2023, LCAH amended and restated its revolving credit facility.

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

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Borrowings under the revolving credit facility will accrue interest at a per annum rate equal to, at the Company’s election, either (x) a LIBOR (changed to SOFR in 2023) rate plus a margin ranging from 0.775% to 1.275% or (y) a base rate plus a margin ranging from 0% to 0.275%, in each case, depending on the Company’s debt ratings.

The Company continues to evaluate its outstanding debt portfolio to take advantage of market conditions that would allow the Company to reduce its interest rate or financing risk and provide a lower long-term borrowing cost.

The Company anticipates that it will refinance the $1,000.0 in debt coming due during 2024.

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 December 31, 2023, and expects that it will remain in compliance with its existing debt covenants for the next twelve months.

During 2023, the Company repurchased 4.8 shares of its Common Stock at an average price per share of $206.85 for a total cost of $1,000.0.

The Company has accrued $9.0 of excise tax related to this accelerated share repurchase which will be paid in April 2024.

At the end of 2023, the Company had outstanding authorization from the Board to purchase $530.4 of Company Common Stock.

On August 23, 2024, the Company and a bankruptcy-remote special purpose vehicle entered into a $300.0 three-year accounts receivable securitization facility with PNC Bank, National Association (PNC) as administrative agent (AR Facility).

The AR Facility provides for purchases of accounts receivable by PNC in an amount of up to $300.0 through August of 2027 and may increase to up to $700.0, subject to the satisfaction of certain conditions.

On January 31, 2025, the Company amended its AR Facility (AR Facility Amendment).

The AR Facility Amendment increased the amount the Company can borrow from PNC from $300.0 to $700.0 through August of 2027.

In addition, pursuant to the terms of the AR Facility Amendment (i) the Toronto-Dominion Bank became a party to the underlying receivables purchase agreement as a committed purchaser through January 2026 and (ii) MUFG Bank Ltd.

and certain of its related conduit purchasers became parties to the underlying receivables purchase agreement as purchasers and the loans or investments of such conduit purchasers may accrue interest as specified in the AR Facility Amendment and receivables purchase agreement.

On February 18, 2025, the Company borrowed an additional $225.0 under the AR Facility Amendment, bringing the amount outstanding under the AR Facility Amendment to $525.0.

At December 31, 2024, the Company had $1,518.7 of Cash and cash equivalents and $1,000.0 of available borrowings under its revolving credit facility, which does not mature until 2026.

Under the Company’s credit facilities and indentures relating to the Company’s senior notes, the Company is subject to negative covenants limiting subsidiary indebtedness and certain other covenants typical for investment grade-rated borrowers, and with respect to the credit facilities, the Company is required to maintain certain leverage ratios.

The Company was in compliance with all covenants under the credit facilities and the indentures related to the Company’s outstanding senior notes as of December 31, 2024.

The Company expects that it will remain in compliance with all covenants associated with its existing debt obligations for the next twelve months.

On July 24, 2024, the Board adopted a new share repurchase plan authorizing the repurchase of up to $1,000.0 maximum value of the Company’s shares in addition to the remaining amount outstanding under the previous plan.

At December 31, 2024, the Company had outstanding authorization from its Board to purchase up to $1,280.4 maximum value of Company Common Stock.

The repurchase authorization has no expiration date.

During the year ended December 31, 2022, the Company purchased 4.7 shares of its Common Stock at an average price per share of $233.48 per share for a total cost of $1,100.0.

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.

For the year ended December 31, 2024, the Company paid $243.1 in Common Stock dividends.

On January 8, 2025, the Company announced a cash dividend of $0.72 per share of Common Stock for the first quarter, or approximately $61.0 in the aggregate.

The dividend will be payable on March 13, 2024, to stockholders of record of all issued and outstanding shares of Common Stock as of the close of business on February 27, 2024.

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

The dividend will be payable on March 12, 2025, to stockholders of record of all issued and outstanding shares of Common Stock at the close of business on February 27, 2025.

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

Guarantor Information

In connection with the Reorganization, the Company, LCAH and the Trustee entered into a seventeenth supplemental indenture (the Seventeenth Supplemental Indenture) to the indenture, dated as of November 19, 2010, between LCAH and the Trustee (the 2010 Indenture).

In addition, the Company, LCAH and the Trustee entered into the 2024 Indenture (the 2010 Indenture, together with the 2024 Indenture, the Indentures).

The Seventeenth Supplemental Indenture, among other things, provides for the full and unconditional guarantee by the Company of LCAH’s obligations under the 2010 Indenture and each

series of senior unsecured notes issued and outstanding thereunder, and the 2024 Indenture provides for the full and unconditional guarantee by the Company of LCAH’s obligations and each series of senior unsecured notes issued and outstanding, thereunder (collectively, the Labcorp Holdings Guarantees).

Also, the Indentures permit the Company to satisfy LCAH’s reporting obligations so long as the Labcorp Holdings Guarantees remain in place and the Company’s financial statements and other information comply with the requirements of Rule 3-10 of Regulation S-X.

At December 31, 2024, there was $4,073.2 and $2,000.0 aggregate principal amount of issued and outstanding senior notes of LCAH, issued under the 2010 Indenture and the 2024 Indenture, respectively, that are fully and unconditionally guaranteed by the Company.

Accordingly, pursuant to Rule 3-10 of Regulation S-X, separate consolidated financial statements of LCAH have not been presented.

As permitted under Rule 13-01(a)(4)(vi) of Regulation S-X, we have excluded the summarized financial infor mation for LCAH because the assets, liabilities and results of operations of LCAH are not materially different than the corresponding amounts in the Company’s Consolidated Financial Statements and management believes such summarized financial information would be repetitive and would not provide incremental value to investors.

Credit Ratings

The Company’s investment grade debt ratings from Moody’s and Standard & Poor's (S&P) contribute to its ability to access capital markets.

The investment grade debt ratings from Moody’s and S&P contribute to the Company’s ability to access capital markets.

Off-balance Sheet Arrangements

The Company does not have transactions or relationships with “special purpose” entities, and the Company does not have any off-balance sheet financing other than normal operating leases and letters of credit.

The Company does not have any variable interest entities or special purpose entities whose financial results are not included in the Company’s Consolidated Financial Statements and the Company does not have any off-balance sheet financing other than normal, short-term leases and letters of credit.

Other Commercial Commitments

As of December 31, 2023, the Company provided letters of credit aggregating approximately $91.3, primarily in connection with certain insurance programs which are renewed annually.

The contractual value of the noncontrolling interest put in the Company's Ontario subsidiary totaled $15.5 and $15.0 at December 31, 2023, and 2022, respectively, and has been classified as mezzanine equity in the Company's consolidated balance sheet.

The Company has debt instruments outstanding.

At December 31, 2024, the Company had total future payments of $6,373.9, with $1,000.4 payable within 12 months.

The Company has leases for patient service centers, laboratories and testing facilities, clinical facilities, general office spaces, vehicles, and office and laboratory equipment.

At December 31, 2024, the Company had total future lease payments of $1,140.3, with $190.7 payable within 12 months.

At December 31, 2024, the Company had provided letters of credit aggregating approximately $102.7, primarily in connection with certain insurance programs which are renewed annually.

The contractual value of the noncontrolling interest put in the Company’s Ontario subsidiary totaled $14.3 and $15.5 at December 31, 2024, and 2023, respectively, and has been classified as mezzanine equity in the Company’s Consolidated Balance Sheets.

Based on current and projected levels of cash flows from operations, coupled with availability under its revolving credit facility, the Company believes it has sufficient liquidity to meet both its anticipated short-term and long-term cash needs for the next 12 months and the reasonably foreseeable future;

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CRITICAL ACCOUNTING ESTIMATES

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported periods.

The preparation of financial statements in conformity with generally accepted accounting principles in the U.S., requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported periods.

While the Company believes these estimates are reasonable and consistent, they are by their very nature estimates of amounts that will depend on future events.

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Revenue Recognition

Within the Dx segment, a revenue transaction is initiated when Dx receives a requisition order to perform a diagnostic test.

Within the Dx segment, a revenue transaction is initiated when Dx receives a requisition form to perform a diagnostic test.

The information provided on the requisition form is used to determine the party that will be billed for the testing performed and the expected reimbursement.

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Generally, client revenues are recorded on a fee-for-service basis at Dx’s client list price, less any negotiated discount.

A portion of client billing is for laboratory management services, collection kits and other non-testing services or products.

A portion of client billing is for laboratory management services, collection kits and other non-testing offerings.

In these cases, revenue is recognized when services are rendered or delivered.

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The majority of Dx’s MCO revenues are recorded based upon contractually negotiated fee schedules with revenues for non-contracted MCOs recorded based on historical reimbursement experience.

Third-party reimbursement is also received through capitation agreements with MCOs and independent physician associations (IPAs).

Third-party reimbursement is also received through capitation agreements with MCOs and IPAs.

Under capitated agreements, revenue is recognized based on a negotiated per-member, per-month payment for an agreed upon menu of tests, or based upon the proportionate share earned by Dx from a capitation pool.

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The majority of Dx’s collection risk is related to accounts receivable from both insured and uninsured patients who are unwilling or unable to pay.

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

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

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

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BLS revenue is generally recognized over time, as the services are delivered to the customer, based on the extent of progress towards completion of the performance obligation.

The selection of the method to measure progress towards completion requires judgment and is based on the nature of the products or services to be provided.

The majority of BLS's contracts contain a single performance obligation, as BLS provides a significant service of integrating all promises in the contract and the promises are highly interdependent and interrelated with one another.

The selection of the method to measure progress towards completion requires judgment and is based on the nature of the services to be provided.

The majority of BLS’s contracts contain a single

performance obligation, as BLS provides a significant service of integrating all promises in the contract and the promises are highly interdependent and interrelated with one another.

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

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

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

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

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

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

For businesses that enter primarily short-term contracts, BLS 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.

For businesses that enter into primarily short-term contracts, BLS 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.

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

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

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

This period typically ranges from 2 to 5 years.

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

Business Combinations

The Company accounts for business combination transactions under the acquisition method of accounting and reported the results of operations of the acquired entities from its respective date of acquisition.

Assets acquired were recorded at their

estimated fair values as of the acquisition date.

Estimated fair values were based on various valuation methodologies, including an income approach using primarily discounted cash flow techniques for the customer relationships intangible assets.

The Company accounts for business combination transactions under the acquisition method of accounting and reports the results of operations of the acquired entities from its respective date of acquisition.

Assets acquired are recorded at their estimated fair values as of the acquisition date.

Estimated fair values are based on various valuation methodologies, including an income approach using primarily discounted cash flow techniques for the customer relationships intangible assets.

The aforementioned income methods utilize management’s estimates of future operating results and cash flows discounted using a weighted-average cost of capital that reflects market participant assumptions.

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

The goodwill reflects management's expectations of the ability to gain access to and penetrate the acquired entities' historical patient base and the benefits of being able to leverage operational efficiencies with favorable growth opportunities based on positive demographic trends in the market.

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

The goodwill reflects management’s expectations of the ability to gain access to the acquired entities’ historical patient base and the benefits of being able to leverage operational efficiencies with favorable growth opportunities based on positive industry and market conditions.

The Company accounts for income taxes utilizing the asset and liability method.

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The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

The Company does not recognize a tax benefit, unless the Company 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.

The Company does not recognize a tax benefit, unless the Company 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 the Company believes is greater than 50% likely to be realized.

The Company records interest and penalties in income tax expense.

Goodwill and Indefinite-Lived Assets

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

The Company records interest and penalties in Provision for income taxes in the Consolidated Statements of Operations.

Goodwill and Indefinite-Lived Intangible Assets

The Company assesses goodwill and indefinite-lived intangible assets 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 annual impairment test for goodwill includes an option to perform a qualitative assessment of whether it is more likely than not that a reporting unit’s fair value is less than its carrying value.

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

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

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

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Forecasts of individual reporting unit cash flows involve management’s estimates and assumptions regarding:

• Annual cash flows, on a debt-free basis, arising from future revenues and profitability, changes in working capital, capital spending and income taxes for at least a five-year forecast period.

• Annual cash flows, on a debt-free basis, arising from future revenues and profitability, working capital changes, capital spending and income taxes for at least a five-year forecast period.

• A terminal growth rate for years beyond the forecast period.

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Management believes that the assumptions used for its impairment tests are representative of those that would be used by market participants performing similar valuations of the reporting units.

Management performed its annual goodwill and intangible asset impairment testing as of the beginning of the fourth quarter of 2023.

The Company elected to perform the qualitative assessment for goodwill and intangible assets for the domestic Dx and clinical trials testing solutions (CTTS) BLS reporting units and a quantitative assessment for the early development (ED) BLS reporting unit and the Canadian reporting unit, which includes indefinite-lived assets consisting of acquired Canadian licenses.

Based upon the results of the qualitative and quantitative assessments, the Company concluded that the fair values of its domestic Dx, CTTS and Canadian reporting units, as of October 1, 2023, were greater than the carrying values.

However, due to lower demand in the ED reporting unit in late 2023 which the Company anticipates will continue into early 2024, there is an expectation of lower near term revenue and profitability.

Therefore, the Company concluded that the fair value of the ED reporting unit was less than carrying value and recorded a goodwill impairment of $333.6 in the BLS segment.

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

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

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

Management performed its annual goodwill and indefinite-lived intangible asset impairment testing as of the beginning of the fourth quarter of 2024.

The Company elected to perform a quantitative assessment for goodwill and indefinite-lived intangible assets for each of its reporting units.

Based upon the results of the quantitative assessments, the Company concluded that the fair values of each of its reporting units, as of October 1, 2024, were greater than the carrying values.

by unfavorable or unforeseen changes which could impact the existing assumptions used in the impairment analysis.

Various factors could reasonably be expected to unfavorably impact existing assumptions primarily delays in new customer bookings and the related delay in revenue from new customers, increases in customer termination activity, or increases in operating costs.

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.

It is possible that the Company's conclusions regarding impairment or recoverability of goodwill or intangible assets in any reporting unit could change in future periods.

There can be no assurance that the estimates and assumptions used in the Company's goodwill and intangible asset impairment testing performed as of the beginning of the fourth quarter of 2023 will prove to be accurate predictions of the future, if, for example, (i) the businesses do not perform as projected, (ii) overall economic conditions in 2023 or future years vary from current assumptions (including changes in discount rates), (iii) business conditions or strategies for a specific reporting unit change from current assumptions, including loss of major customers, (iv) investors require higher rates of return on equity investments in the marketplace or (v) enterprise values of comparable publicly traded companies, or actual sales transactions of comparable companies, were to decline, resulting in lower multiples of revenues and EBITDA.

It is possible that the Company’s conclusions regarding impairment or recoverability of goodwill or indefinite-lived intangible assets in any reporting unit could change in future periods.

There can be no assurance that the estimates and assumptions used in the Company’s goodwill and indefinite-lived intangible asset impairment testing performed as of the beginning of the fourth quarter of 2024 will prove to be accurate predictions of the future, if, for example, (i) the businesses do not perform as projected, (ii) overall economic conditions in 2024 or future years vary from current assumptions (including changes in discount rates), (iii) business conditions or strategies for a specific reporting unit change from current assumptions, including loss of major customers, (iv) investors require higher rates of return on equity investments in the marketplace, or (v) enterprise values of comparable publicly traded companies, or actual sales transactions of comparable companies, were to decline, resulting in lower multiples of revenues and earnings before interest, taxes, depreciation, and amortization.

Legal Contingencies

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

Potential sanctions for violation of these

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

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

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

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

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

If the reasonable estimate of a known or probable loss is a range, and no amount within the range is a better estimate than any other, the minimum amount of the range is accrued.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis