Labcorp Holdings 10-Q 2022-09-30

Filed 2022-11-01. 8 sections, 191K characters. Original on sec.gov · Markdown · JSON

Cover and table of contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to ______

Commission File Number 1-11353

LABORATORY CORPORATION OF AMERICA HOLDINGS

(Exact name of registrant as specified in its charter)

Delaware13-3757370
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
358 South Main Street
Burlington,North Carolina27215
(Address of principal executive offices)(Zip Code)

(Registrant's telephone number, including area code) 336-229-1127

Securities registered pursuant to Section 12(b) of the Exchange Act.

Title of Each Class Trading Symbol Name of exchange on which registered

Common Stock, $0.10 par value LH New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer☒Accelerated filer☐
Non-accelerated filer☐Smaller reporting company☐
Emerging growth company☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒.

The number of shares outstanding of the issuer's common stock is 88.6 million shares as of October 31, 2022.

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PART I. FINANCIAL INFORMATION

Item 1.Financial Statements (unaudited)
Condensed Consolidated Balance Sheets2
September 30, 2022 and December 31, 2021
Condensed Consolidated Statements of Operations3
Three and nine months ended September 30, 2022 and 2021
Condensed Consolidated Statements of Comprehensive Earnings4
Three and nine months ended September 30, 2022 and 2021
Condensed Consolidated Statements of Changes in Shareholders’ Equity5
Three and nine months ended September 30, 2022 and 2021
Condensed Consolidated Statements of Cash Flows6
Nine months ended September 30, 2022 and 2021
Notes to Unaudited Condensed Consolidated Financial Statements7
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations21
Item 3.Quantitative and Qualitative Disclosures about Market Risk30
Item 4.Controls and Procedures31

PART II. OTHER INFORMATION

Item 1.Legal Proceedings32
Item 1A.Risk Factors32
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds33
Item 5.Other Information33
Item 6.Exhibits33

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited)

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions)

(unaudited)

September 30, 2022December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents$409.9$1,472.7
Accounts receivable, net2,164.22,261.5
Unbilled services818.5716.8
Supplies inventory467.7401.4
Prepaid expenses and other511.5478.1
Total current assets4,371.85,330.5
Property, plant and equipment, net2,884.72,815.4
Goodwill, net8,217.67,958.9
Intangible assets, net3,807.83,735.5
Joint venture partnerships and equity method investments63.760.9
Deferred income taxes29.421.6
Other assets, net451.0462.6
Total assets$19,826.0$20,385.4
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable$765.5$621.3
Accrued expenses and other1,040.81,404.1
Unearned revenue530.9558.5
Short-term operating lease liabilities178.1187.0
Short-term finance lease liabilities5.310.5
Short-term borrowings and current portion of long-term debt1.71.5
Total current liabilities2,522.32,782.9
Long-term debt, less current portion5,334.35,416.5
Operating lease liabilities665.9642.5
Financing lease liabilities85.884.6
Deferred income taxes and other tax liabilities672.7762.9
Other liabilities433.9402.0
Total liabilities9,714.910,091.4
Commitments and contingent liabilities
Noncontrolling interest18.920.6
Shareholders’ equity:
Common stock, 89.6 and 93.1 shares outstanding at September 30, 2022, and December 31, 2021, respectively8.28.5
Additional paid-in capital——
Retained earnings10,845.010,456.8
Accumulated other comprehensive loss(761.0)(191.9)
Total shareholders’ equity10,092.210,273.4
Total liabilities and shareholders’ equity$19,826.0$20,385.4

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

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LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per share data)

(unaudited)

Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Revenues$3,606.1$4,062.6$11,202.6$12,064.8
Cost of revenues2,546.42,677.17,787.37,815.5
Gross profit1,059.71,385.53,415.34,249.3
Selling, general and administrative expenses510.0519.91,460.11,408.4
Amortization of intangibles and other assets65.292.2198.7276.7
Goodwill and other asset impairments——1.2—
Restructuring and other charges15.16.572.135.3
Operating income469.4766.91,683.22,528.9
Other income (expense):
Interest expense(46.3)(42.2)(131.0)(169.0)
Equity method income, net1.78.46.520.9
Investment income4.13.27.28.3
Other, net(7.3)31.9(27.8)51.5
Earnings before income taxes421.6768.21,538.12,440.6
Provision for income taxes68.4180.4333.9614.7
Net earnings353.2587.81,204.21,825.9
Less: Net earnings attributable to the noncontrolling interest(0.4)(0.5)(1.2)(1.6)
Net earnings attributable to Laboratory Corporation of America Holdings$352.8$587.3$1,203.0$1,824.3
Basic earnings per common share$3.91$6.10$13.09$18.79
Diluted earnings per common share$3.90$6.05$13.02$18.63

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

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LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS

(in millions, except per share data)

(unaudited)

Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Net earnings$353.2$587.8$1,204.2$1,825.9
Foreign currency translation adjustments(256.5)

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

The Company has made in this report, and from time to time may otherwise make in its public filings, press releases, and discussions by Company management, forward-looking statements concerning the Company’s operations, performance, and financial condition, as well as its strategic objectives. Some of these forward-looking statements relate to future events and expectations and can be identified by the use of forward-looking words such as “believes”, “expects”, “may”, “will”, “should”, “seeks”, “approximately”, “intends”, “plans”, “estimates”, or “anticipates” or the negative of those words or other comparable terminology. Such forward-looking statements speak only as of the time they are made and are subject to various risks and uncertainties and the Company claims the protection afforded by the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from those currently anticipated due to a number of factors in addition to those discussed elsewhere herein, including in the “Summary of Material Risks” and “Risk Factors” section of the Annual Report on Form 10-K, and in the Company’s other public filings, press releases, and discussions with Company management, including:

  1. changes in government and third-party payer regulations, reimbursement, or coverage policies or other future reforms in the U.S. healthcare system (or in the interpretation of current regulations), new insurance or payment systems, including state, regional or private insurance cooperatives (e.g., health insurance exchanges) affecting governmental and third-party coverage or reimbursement for commercial laboratory testing, including the impact of the U.S. Protecting Access to Medicare Act of 2014 (PAMA);

  2. significant monetary damages, fines, penalties, assessments, refunds, repayments, damage to the Company’s reputation, unanticipated compliance expenditures, and/or exclusion or debarment from or ineligibility to participate in government programs, among other adverse consequences, arising from enforcement of anti-fraud and abuse laws and other laws applicable to the Company in jurisdictions in which the Company conducts business;

  3. significant fines, penalties, costs, unanticipated compliance expenditures and/or damage to the Company’s reputation arising from the failure to comply with applicable privacy and security laws and regulations, including the U.S. Health Insurance Portability and Accountability Act of 1996, the U.S. Health Information Technology for Economic and Clinical Health Act, the European Union's General Data Protection Regulation and similar laws and regulations in jurisdictions in which the Company conducts business;

  4. loss or suspension of a license or imposition of fines or penalties under, or future changes in, or interpretations of applicable licensing laws or regulations regarding the operation of clinical laboratories and the delivery of clinical laboratory test results, including, but not limited to, the U.S. Clinical Laboratory Improvement Act of 1967 and the U.S. Clinical Laboratory Improvement Amendments of 1988 and similar laws and regulations in jurisdictions in which the Company conducts business;

  5. penalties or loss of license arising from the failure to comply with applicable occupational and workplace safety laws and regulations, including the U.S. Occupational Safety and Health Administration requirements, the U.S. Needlestick Safety and Prevention Act, and similar laws and regulations in jurisdictions in which the Company conducts business;

  6. fines, unanticipated compliance expenditures, suspension of manufacturing, enforcement actions, damage to the Company’s reputation, injunctions, or criminal prosecution arising from failure to maintain compliance with current good manufacturing practice regulations and similar requirements of various regulatory agencies in jurisdictions in which the Company conducts business;

  7. sanctions or other remedies, including fines, unanticipated compliance expenditures, enforcement actions, injunctions or criminal prosecution arising from failure to comply with the Animal Welfare Act or applicable national, state and local laws and regulations in jurisdictions in which the Company conducts business;

  8. changes in testing guidelines or recommendations by government agencies, medical specialty societies and other authoritative bodies affecting the utilization of laboratory tests;

  9. changes in applicable government regulations or policies affecting the approval, availability of, and the selling and marketing of diagnostic tests, drug development, or the conduct of drug development and medical device and diagnostic studies and trials, including regulations and policies of the U.S. Food and Drug Administration, the U.S. Department of Agriculture, the Medicine and Healthcare products Regulatory Agency in the United Kingdom (U.K.), the National Medical Products Administration in China, the Pharmaceutical and Medical Devices Agency in Japan, the European Medicines Agency, the European Union and similar regulations and policies of agencies in other jurisdictions in which the Company conducts business;

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  1. changes in government regulations or reimbursement pertaining to the pharmaceutical, biotechnology and medical device and diagnostic industries, changes in reimbursement of pharmaceutical products, or reduced spending on research and development by pharmaceutical, biotechnology and medical device and diagnostic customers;

  2. liabilities that result from the failure to comply with corporate governance requirements;

  3. increased competition, including price competition, potential reduction in rates in response to price transparency initiatives and consumerism, competitive bidding and/or changes or reductions to fee schedules, and competition from companies that do not comply with existing laws or regulations or otherwise disregard compliance standards in the industry;

  4. changes in payer mix or payment structure or process, including insurance carrier participation in health insurance exchanges, an increase in capitated reimbursement mechanisms, the impact of clearinghouses on the claims reimbursement process, the impact of a shift to consumer-driven health plans or plans carrying an increased level of member cost-sharing, and adverse changes in payer reimbursement or payer coverage policies (implemented directly or through a third-party utilization management organization) related to specific diagnostic tests, categories of testing or testing methodologies;

  5. failure to retain or attract MCO business as a result of changes in business models, including risk based or network approaches, out-sourced laboratory network management or utilization management companies, or other changes in strategy or business models by MCOs;

  6. failure to obtain and retain new customers, an unfavorable change in the mix of testing or other services ordered, or a reduction in tests ordered, specimens submitted, or services requested by existing customers, and reductions and delays in payments from Dx and DD customers;

  7. consolidation and convergence of customers, competitors, and suppliers, potentially causing material shifts in insourcing, utilization, pricing, reimbursement and supply chain access;

  8. failure to effectively develop and deploy new systems, system modifications or enhancements required in response to evolving market and business needs;

  9. customers choosing to insource services that are or could be purchased from the Company;

  10. failure to identify, successfully close, and effectively integrate and/or manage acquisitions of new businesses or failure to maintain key customers and/or employees as a result of uncertainty surrounding the integration of acquisitions;

  11. inability to achieve the expected benefits and synergies of newly-acquired businesses, including due to items not discovered in the due diligence process, and the impact on the Company's cash position, levels of indebtedness and stock price;

  12. termination, loss, delay, reduction in scope or increased costs of contracts, including large contracts and multiple contracts;

  13. liability arising from errors or omissions in the performance of testing services, contract research services or other contractual arrangements;

  14. changes or disruption in the provision or transportation of services or supplies provided by third parties; or their termination for failure to follow the Company's performance standards and requirements;

  15. damage or disruption to the Company's facilities;

  16. damage to the Company's reputation, loss of business, or other harm from increased regulations and restrictions on the import of research animals, limitations of supply of research animals, and acts of animal rights activists, or potential harm and/or liability arising from animal research activities;

  17. adverse results in litigation matters;

  18. inability to attract and retain experienced and qualified personnel or the loss of significant personnel as a result of illness, increased competition for talent, wage growth, or other market factors;

  19. failure to develop or acquire licenses for new or improved technologies, such as point-of-care testing, mobile health technologies, and digital pathology, or potential use of new technologies by customers and/or consumers to perform their own tests;

  20. substantial costs arising from the inability to commercialize newly licensed tests or technologies or to obtain appropriate coverage or reimbursement for such tests;

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  1. failure to obtain, maintain, and enforce intellectual property rights for protection of the Company's products and services and defend against challenges to those rights;

  2. scope, validity, and enforceability of patents and other proprietary rights held by third parties that may impact the Company's ability to develop, perform, or market the Company's products or services or operate its business;

  3. business interruption, receivables impairment, delays in cash collection impacting days sales outstanding, supply chain disruptions or inventory obsolescence, increases in material cost or other operating costs, inflationary increases, or other impacts on the business due to natural disasters, including adverse weather, fires and earthquakes; geopolitical events, including terrorism and war; public health crises and disease epidemics and pandemics; changes in the global economy; and other events outside of the Company's control;

  4. discontinuation or recalls of existing testing products;

  5. a failure in the Company's information technology systems, including with respect to testing turnaround time and billing processes, or the failure of the Company or its third-party suppliers and vendors to maintain the security of business information or systems or to protect against cybersecurity attacks such as denial of service attacks, malware, ransomware, and computer viruses, or delays or failures in the development and implementation of the Company’s automation platforms, any of which could result in a negative effect on the Company’s performance of services, a loss of business or increased costs, damages to the Company’s reputation, significant litigation exposure, an inability to meet required financial reporting deadlines, or the failure to meet future regulatory or customer information technology, data security and connectivity requirements;

  6. business interruption, increased costs, and other adverse effects on the Company's operations due to the unionization of employees, union strikes, work stoppages, general labor unrest or failure to comply with labor or employment laws;

  7. failure to maintain the Company's days sales outstanding levels, cash collections (in light of increasing levels of patient responsibility), profitability and/or reimbursement arising from unfavorable changes in third-party payer policies, payment delays introduced by third-party utilization management organizations, and increasing levels of patient payment responsibility;

  8. impact on the Company's revenues, cash collections and the availability of credit for general liquidity or other financing needs arising from a significant deterioration in the economy or financial markets or in the Company's credit ratings by Standard & Poor's and/or Moody's;

  9. failure to maintain the expected capital structure for the Company, including failure to maintain the Company's investment grade rating, or leverage ratio covenants under its revolving credit facility;

  10. changes in reimbursement by foreign governments and foreign currency fluctuations;

  11. inability to obtain certain billing information from physicians, resulting in increased costs and complexity, a temporary disruption in receipts, and ongoing reductions in reimbursements and revenues;

  12. expenses and risks associated with international operations, including, but not limited to, compliance with the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act, other applicable anti-corruption laws and regulations, trade sanction laws and regulations, and economic, political, legal and other operational risks associated with foreign jurisdictions;

  13. failure to achieve expected efficiencies and savings in connection with the Company's business process improvement initiatives;

  14. changes in tax laws and regulations or changes in their interpretation;

  15. global economic conditions and government and regulatory changes; and

  16. effects, duration, and severity of the ongoing COVID-19 pandemic, including the impact on operations, personnel, supplies, liquidity, and collections, as well as the impact of past or future actions or omissions by the Company or governments in response to the COVID-19 pandemic including, but not limited to, evolving government vaccine and testing mandates and policies, and damage to the Company's reputation or loss of business resulting from the perception of the Company's response to the COVID-19 pandemic, including the availability and accuracy and timeliness of delivery of any tests that the Company develops, collaborates on or provides for the detection of COVID-19, and the availability and timeliness of its drug development services; and

  17. risks associated with the impact, timing, expected benefits and costs, or terms of the planned spin-off of the Company’s Clinical Development business, which includes the parts of its DD segment focused on providing Phase I-IV clinical trial management, market access, and technology solutions to pharmaceutical and biotechnology organizations, including but not limited to (i) uncertainties as to the completion and timing of the transaction; (ii) the

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failure to obtain appropriate assurances regarding the tax-free nature of the spin-off; (iii) the receipt of regulatory approvals; (iv) the effect of the announcement or pendency of the transaction on the Company’s business relationships, operating results, and business generally; (v) unexpected issues that arise in the continued planning for the transaction; (vi) the failure to have the Form 10 registration statement that will be filed with the SEC declared effective on a timely basis, or at all; (vii) risks that the proposed transaction disrupts current plans and operations of Labcorp or Clinical Development; (viii) potential difficulties attracting or retaining Company or Clinical Development employees as a result of the spin-off announcement, pendency or completion of the spin-off; (ix) risks related to diverting management’s attention from the Company and Clinical Development’s ongoing business operations; (x) the ability of the Company to successfully separate Clinical Development operations from the Company’s ongoing operations; (xi) market receptiveness to effect transactions in the capital markets; and (xii) market reaction to the announcement and planning for the transaction.

Except as may be required by applicable law, the Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Given these uncertainties, one should not put undue reliance on any forward-looking statements.

GENERAL (dollars in millions, except per share data)

Revenues for the nine months ended September 30, 2022, were $11,202.6, a decrease of 7.1% from $12,064.8 during the nine months ended September 30, 2021. The decrease was due to lower organic revenue of 6.9% and unfavorable foreign currency translation of 0.9%, partially offset by acquisitions net of divestitures of 0.6%. The 6.9% decline in organic revenue includes a 8.9% decrease in COVID-19 PCR and antibody testing (COVID-19 Testing), partially offset by a 2.0% increase in the Company's organic Base Business. Base Business includes the Company's business operations except for 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.

Proposed Spin-Off of Clinical Development Business

On July 28, 2022, the Company announced that its board of directors authorized the Company to pursue a spin-off of its wholly owned Clinical Development business, which includes the parts of its DD segment focused on providing Phase I-IV clinical trials, market access, and technology solutions to pharmaceutical and biotechnology organizations. The planned spin-off would result in two independent, publicly traded companies. The spin-off is intended to be a tax-free transaction to the Company and its stockholders for U.S. federal income tax purposes and is expected to be effected through a dividend of the Clinical Development business' shares to the Company's shareholders. The Company anticipates that, consistent with any applicable legal and tax requirements, there will be ongoing transitional and commercial arrangements to provide for a seamless delivery of services to the customers and other stakeholders of the independent companies following the spin-off. The Company is targeting completion of the spin-off with an accelerated timeframe of mid-2023, subject to the satisfaction of certain customary conditions, including receipt of final approval by the Company's board of directors, receipt of appropriate assurances regarding the tax-free nature of the transaction, and the effectiveness of any required filings with the SEC. There can be no assurances regarding the ultimate timing of the transaction or that the spin-off will be completed.

RESULTS OF OPERATIONS (dollars in millions)

Three months ended September 30, 2022, compared with three months ended September 30, 2021

Revenues

Three Months Ended September 30,
20222021Change
Dx$2,207.6$2,617.5(15.7)%
DD1,405.81,459.5(3.7)%
Intercompany eliminations and other(7.3)(14.4)49.3%
Total$3,606.1$4,062.6(11.2%)

Total revenues for the three months ended September 30, 2022, were $3,606.1, a decrease of 11.2% over $4,062.6 in the third quarter of 2021. The decrease was due to lower organic revenue of 10.7% and unfavorable foreign currency translation of 1.3%, partially offset by acquisitions of 0.8%. The 10.7% decrease in organic revenue was driven by a 11.8% decrease in COVID-19 Testing, partially offset by a 1.1% increase in the Company's organic Base Business.

Dx revenues for the three months ended September 30, 2022, were $2,207.6, a decrease of 15.7% over $2,617.5 in the third quarter of 2021. The decrease was primarily due to organic revenue of 16.4% and unfavorable foreign currency translation of

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0.1%, partially offset by acquisitions of 0.9%. The 16.4% decrease in organic revenue was due to a 18.4% decrease in COVID-19 Testing, partially offset by a 1.9% increase in the Base Business. Total Base Business growth compared to the Base Business in the prior year was 3.7%.

Dx total volume (measured by requisitions) for the three months ended September 30, 2022, decreased by 10.3% as organic volume decreased by 10.9% and acquisition volume contributed 0.6%. Organic volume was impacted by an 12.8% decrease in COVID-19 Testing, partially offset by a 1.9% increase in Base Business. Price/mix decreased by 5.4% due to a decrease in COVID-19 Testing of 5.5%. Base Business volume was up 3.1% compared to the Base Business last year, while price/mix was up 0.6%.

DD revenues for the three months ended September 30, 2022, were $1,405.8, a decrease of 3.7% over $1,459.5 in the third quarter of 2021. The decrease was primarily due to unfavorable foreign currency translation of 3.4%. The benefit of acquisitions of 0.5% was offset by a 0.7% decline in Base Business organic growth, which was negatively impacted by approximately 5.0% due to reduced COVID-19 related work and the Ukraine/Russia crisis. COVID-19 related work includes lower COVID-19 vaccine and therapeutic studies as well as reduced clinical development kits shipped and returned due to supply chain issues and labor constraints.

Cost of Revenues

Three Months Ended September 30,
20222021Change
Cost of revenues$2,546.4$2,677.1(4.9)%
Cost of revenues as a % of revenues70.6%65.9%

Cost of revenues decreased 4.9% during the three months ended September 30, 2022, as compared with the corresponding period in 2021. Cost of revenues as a percentage of revenues during the three months ended September 30, 2022, increased to 70.6% as compared to 65.9% in the corresponding period in 2021. This increase in cost of revenues as a percent of revenues was primarily due to a reduction in COVID-19 Testing revenues, higher personnel expenses, and other inflationary costs, partially offset by organic Base Business growth and LaunchPad savings.

Selling, General and Administrative Expenses

Three Months Ended September 30,
20222021Change
Selling, general and administrative expenses$510.0$519.9(1.9)%
Selling, general and administrative expenses as a % of revenues14.1%12.8%

Selling, general and administrative expenses as a percentage of revenues were 14.1% and 12.8% during the three months ended September 30, 2022, and 2021, respectively. The increase is primarily due to a reduction in COVID-19 Testing revenues, partially offset by LaunchPad savings.

Amortization of Intangibles and Other Assets

Three Months Ended September 30,
20222021Change
Dx$32.5$29.311.1%
DD32.762.9(48.1)%
Total amortization of intangibles and other assets$65.2$92.2(29.3)%

The decrease in amortization of intangibles and other assets primarily reflects the completion of the accelerated amortization related to the Covance trade name as a result of a rebranding initiative that resulted in $30.2 of expense in the three months ended September 30, 2021, offset by additional amortization for assets acquired subsequent to September 30, 2021.

Restructuring and Other Charges

Three Months Ended September 30,
20222021Change
Restructuring and other charges$15.1$6.5133.8%

During the three months ended September 30, 2022, the Company recorded net restructuring and other charges of $15.1: $3.6 within Dx, $11.3 within DD, and $0.2 allocated to general corporate. The charges were comprised of $2.5 related to severance and other personnel costs and $11.4 in facility closures, lease terminations, and general integration activities. The charges were adjusted by the increase of $1.5 of previously established severance liabilities and the reversal of previously established liability of $0.3 in unused facility-related costs.

During the three months ended September 30, 2021, the Company recorded net restructuring and other charges of $6.5: $3.3 within Dx and $3.2 within DD. The charges were comprised of $3.3 related to severance and other personnel costs and

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$3.7 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 facility-related costs.

Interest Expense

Three Months Ended September 30,
20222021Change
Interest expense$(46.3)$(42.2)9.9%

The increase in interest expense for the three months ended September 30, 2022, as compared with the corresponding period in 2021, is primarily due to the increased interest rates on variable rate debt, and lower benefit from cross currency swaps, partly offset by the impact of higher interest rates on cash.

Equity Method Income

Three Months Ended September 30,
20222021Change
Equity method income, net$1.7$8.4(79.3)%

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 September 30, 2022, as compared with the corresponding period in 2021, was primarily due to the decreased profitability of the Company's joint ventures in 2022.

Other, net

Three Months Ended September 30,
20222021Change
Other, net$(7.3)$31.9(123.0)%

The change in Other, net for the three months ended September 30, 2022, as compared to the three months ended September 30, 2021, is primarily due to investment losses of $5.2 for the three months ended September 30, 2022 compared to investment gains of $36.9 for the corresponding period of 2021. In addition, foreign currency transaction gains of $1.9 were recognized for the three months ended September 30, 2022 as compared to gains of $0.4 for the corresponding period of 2021.

Income Tax Expense

Three Months Ended September 30,
20222021Change
Income tax expense$68.4$180.4(62.1)%
Income tax expense as a % of earnings before income taxes16.2%23.5%

The current year effective tax rate was favorably impacted by the Company's foreign income inclusion and research and development tax credits. During the quarter, the Company completed a detailed research and development tax credit analysis for the 2019, 2020, and 2021 tax years that resulted in an incremental income tax benefit. The prior year effective tax rate was favorably impacted by stock-based compensation arrangements that was offset by the deferred revaluation related to the United Kingdom rate change.

Operating Income by Segment

Three Months Ended September 30,
20222021Change
Dx operating income$378.7$722.7(47.6)%
Dx operating margin17.2%27.6%(10.4)%
DD operating income156.7141.610.7%
DD operating margin11.1%9.7%1.4%
General corporate expenses(66.0)(97.4)(32.2)%
Total operating income$469.4$766.9(38.8)%

Dx operating income was $378.7 for the three months ended September 30, 2022, a decrease of $344.0 over operating income of $722.7 in the corresponding period of 2021, and Dx operating margin decreased 1,040 basis points year-over-year. The decrease in adjusted operating income and adjusted operating margin was primarily due to a reduction in COVID-19 Testing, higher personnel expense, and other inflationary costs, partially offset by organic Base Business growth and LaunchPad savings.

DD operating income was $156.7 for the three months ended September 30, 2022, an increase of $15.2 over operating income of $141.6 in the corresponding period of 2021. The increase was primarily due to less amortization expense in 2022 as a

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result of the completion of the accelerated amortization related to the Covance trade name, organic Base Business growth, and LaunchPad savings, partially offset by a reduction in COVID-19 related work, the Ukraine/Russia crisis, inflationary costs, and the mix impact of acquisitions.

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 $66.0 for the three months ended September 30, 2022, a decrease of $31.4 over corporate expenses of $97.4 in the corresponding period of 2021, primarily due to lower 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.

Nine months ended September 30, 2022, compared with nine months ended September 30, 2021

Revenues

Nine Months Ended September 30,
20222021Change
Dx$6,917.1$7,740.8(10.6)%
DD4,317.04,392.9(1.7)%
Intercompany eliminations and other(31.5)(68.9)54.3%
Total$11,202.6$12,064.8(7.1)%

The decrease in revenues for the nine months ended September 30, 2022, as compared with the corresponding period in 2021 was 7.1%. The decrease was due to lower organic revenue of 6.9% and unfavorable foreign currency translation of 0.9%, partially offset by acquisitions net of divestitures of 0.6%. The 6.9% decrease in organic revenue includes an 8.9% decrease from COVID-19 Testing and a 2.0% increase in the Company's organic Base Business.

Dx revenues for the nine months ended September 30, 2022 were $6,917.1, a decrease of 10.6% compared to revenues of $7,740.8 during the nine months ended September 30, 2021. The decrease was primarily due to lower organic revenue of 11.4%, partially offset by acquisitions of 0.8%. The 11.4% decrease in organic revenue was due to a 13.8% decrease in COVID-19 Testing, partially offset by a 2.4% increase in the Base Business.

Total volume, measured by requisitions, decreased by 6.1% as organic volume decreased by 6.5% and acquisition volume contributed 0.4%. COVID-19 Testing decreased organic volume growth by 9.1%. Price/mix decreased by 4.6% due to lower COVID-19 Testing of 4.8%, lower organic Base Business of 0.1%, and unfavorable foreign currency translation of 0.1%, partially offset by acquisitions of 0.4%.

DD revenues for the nine months ended September 30, 2022 were $4,317.0, a decrease of 1.7% over revenues of $4,392.9 during the nine months ended September 30, 2021. The decrease in revenues was primarily due to unfavorable foreign currency translation of 2.4%, lower COVID-19 Testing performed through its Central Laboratories business of 0.8%, partially offset by an increase in organic Base Business revenue of 1.2% and acquisitions net of divestitures of 0.3%.

Cost of Revenues

Nine Months Ended September 30,
20222021Change
Cost of revenues$7,787.3$7,815.5(0.4)%
Cost of revenues as a % of revenues69.5%64.8%

Cost of revenues decreased 0.4% during the nine months ended September 30, 2022, as compared with the corresponding period in 2021. Cost of revenues as a percentage of revenues during the nine months ended September 30, 2022, increased to 69.5% as compared to 64.8% in the corresponding period in 2021. 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 other inflationary costs, partially offset by organic Base Business growth and LaunchPad savings.

Selling, General and Administrative Expenses

Nine Months Ended September 30,
20222021Change
Selling, general and administrative expenses$1,460.1$1,408.43.7%
Selling, general and administrative expenses as a % of revenues13.0%11.7%

Selling, general and administrative expenses as a percentage of revenues were 13.0% and 11.7% during the nine months ended September 30, 2022, and 2021, respectively. The increase is primarily due to a reduction in COVID-19 Testing revenues and higher personnel expenses, partially offset by LaunchPad savings.

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Amortization of Intangibles and Other Assets

Nine Months Ended September 30,
20222021Change
Dx$99.2$85.815.7%
DD99.5190.9(47.9)%
Total amortization of intangibles and other assets$198.7$276.7(28.2)%

The decrease in amortization of intangibles and other assets primarily reflects the completion of the accelerated amortization related to the Covance trade name as a result of a rebranding initiative that resulted in $87.4 of expense in the nine months ended September 30, 2021, offset by additional amortization for assets acquired subsequent to September 30, 2021.

Goodwill and Other Asset Impairments

Nine Months Ended September 30,
20222021Change
Goodwill and other asset impairments$1.2$—100.0%

The Company recorded impairment charges of $1.2 in other assets in Ukraine and Russia during the nine months ended September 30, 2022. There were no goodwill and other asset impairments for the nine months ended September 30, 2021.

Restructuring and Other Special Charges

Nine Months Ended September 30,
20222021Change
Restructuring and other charges$72.1$35.3104.6%

During the nine months ended September 30, 2022, the Company recorded net restructuring and other charges of $72.1: $23.9 within Dx, $42.7 within DD, and $5.5 allocated to general corporate. The charges were comprised of $31.9 related to severance and other personnel costs and $38.6 in facility closures, lease terminations, and general integration activities. The charges were adjusted by an increase of $2.0 of previously established severance liabilities and the reversal of previously established liability of $0.4 in unused facility-related costs.

During the nine months ended September 30, 2021, the Company recorded net restructuring and other special charges of $35.3: $16.8 within Dx and $18.5 within DD. The charges were comprised of $13.6 related to severance and other personnel costs and $22.4 in facility closures, lease terminations, and general integration initiatives. The charges were adjusted by a decrease of $0.1 of previously established severance liabilities and the reversal of previously established liability of $0.7 in unused facility-related costs.

Interest Expense

Nine Months Ended September 30,
20222021Change
Interest expense$(131.0)$(169.0)(22.4)%

The decrease in interest expense for the nine months ended September 30, 2022, as compared with the corresponding period in 2021, is primarily due to the costs of redeeming the 3.20% and 3.75% notes and issuing the new senior notes in 2021, lower outstanding debt and a lower average cost of debt in 2022.

Equity Method Income

Nine Months Ended September 30,
20222021Change
Equity method income, net$6.5$20.9(68.8)%

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 nine months ended September 30, 2022, as compared with the corresponding period in 2021, was primarily due to the decreased profitability of the Company's joint ventures in 2022.

Other, net

Nine Months Ended September 30,
20222021Change
Other, net$(27.8)$51.5(153.9)%

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The change in Other, net for the nine months ended September 30, 2022, as compared to the nine months ended September 30, 2021, is primarily due to investment losses of $19.4 compared to $67.4 of investment gains in the corresponding period of 2021. In addition, foreign currency transaction losses of $5.1 were recognized for the nine months ended September 30, 2022, and losses of $2.4 were recognized in the corresponding period of 2021.

Income Tax Expense

Nine Months Ended September 30,
20222021Change
Income tax expense$333.9$614.7(45.7)%
Income tax expense as a % of earnings before income taxes21.7%25.2%

The current year effective tax rate was favorably impacted by the Company's foreign income inclusion and research and development tax credits. During the quarter, the Company completed a detailed research and development tax credit analysis for the 2019, 2020, and 2021 tax years that resulted in an incremental income tax benefit. The prior year effective tax rate was favorably impacted by stock-based compensation arrangements that was offset by the deferred revaluation related to the United Kingdom rate change.

Operating Income by Segment

Nine Months Ended September 30,
20222021Change
Dx operating income$1,457.5$2,275.4$(817.9)
Dx operating margin21.1%29.4%(8.3)%
DD operating income431.8445.3(13.4)
DD operating margin10.0%10.1%(0.1)%
General corporate expenses(206.1)(191.8)(14.3)
Total operating income$1,683.2$2,528.9$(845.7)

Dx operating income was $1,457.5 for the nine months ended September 30, 2022, a decrease of $817.9 from operating income of $2,275.4 in the corresponding period of 2021, and Dx operating margin decreased 830 basis points year-over-year. The decrease in adjusted operating income and adjusted operating margin was primarily due to a reduction in COVID-19 Testing, higher personnel expense, and other inflationary costs, partially offset by organic Base Business growth and LaunchPad savings.

DD operating income was $431.8 for the nine months ended September 30, 2022, a decrease of $13.4 from operating income of $445.3 in the corresponding period of 2021. The decrease was primarily due to a reduction in COVID-19 Testing, a reduction in COVID-19 related work, the interruption of some clinical trial activity due to the conflict in Ukraine, higher personnel expense, and other inflationary costs. These impacts were partially offset by less amortization expense as a result of the completion of the accelerated amortization related to the Covance trade name, organic Base Business 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 $206.1 for the nine months ended September 30, 2022, an increase of $14.3 over corporate expenses of $191.8 in the corresponding period of 2021, primarily due to higher personnel costs, bonus allocation, research and development costs, and other 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.

LIQUIDITY AND CAPITAL RESOURCES (dollars and shares in millions)

The Company's cash-generating ability and financial condition typically have provided ready access to capital markets. The Company's principal source of liquidity is operating cash flow, supplemented by proceeds from debt offerings. The Company's senior unsecured revolving credit facility is further discussed in Note 6 (Debt) to the Company's condensed consolidated financial statements.

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In summary, the Company's cash flows were as follows for the nine months ended September 30, 2022, and 2021, respectively:

Nine Months Ended September 30,
20222021
Net cash provided by operating activities$1,302.3$2,412.1
Net cash used for investing activities(1,378.9)(630.1)
Net cash used for financing activities(949.6)(1,057.2)
Effect of exchange rate changes on cash and cash equivalents(36.6)(9.1)
Net increase (decrease) in cash and cash equivalents$(1,062.8)$715.7

Cash and Cash Equivalents

Cash and cash equivalents at September 30, 2022, and 2021, totaled $409.9 and $2,036.5, 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 nine months ended September 30, 2022, the Company's operations provided $1,302.3 of cash as compared to $2,412.1 during the same period in 2021. The $1,109.8 decrease in cash provided from operations in 2022 as compared with the corresponding 2021 period is primarily due to lower cash earnings and unfavorable working capital requirements.

Cash Flows from Investing Activities

Net cash used for investing activities for the nine months ended September 30, 2022, was $1,378.9 as compared to $630.1 for the nine months ended September 30, 2021. The change in cash used for investing activities was primarily due to an increase in business acquisitions and higher capital expenditures during the nine months ended September 30, 2022. Capital expenditures were $364.0 and $310.4 for the nine months ended September 30, 2022, and 2021, respectively.

Cash Flows from Financing Activities

Net cash used by financing activities for the nine months ended September 30, 2022, was $949.6 as compared to $1,057.2 for the nine months ended September 30, 2021. The change in cash flows from financing activities for the nine months ended September 30, 2022, as compared to the nine months ended September 30, 2021, was primarily due to the repayment of the 2019 Term Loan in 2021, the payment of dividends of $131.6 in 2022, and an increase of $131.5 in share repurchases.

At September 30, 2022, the Company had $409.9 of cash and $1,000.0 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 September 30, 2022, and expects that it will remain in compliance with its existing debt covenants for the next twelve months.

For the nine months ended September 30, 2022, the Company purchased 3.3 shares of its common stock at a total cost of $800.0. As of September 30, 2022, the Company had an outstanding authorization from the board of directors to purchase up to $831.5 more of the Company's common stock with no expiration date.

For the nine months ended September 30, 2022, the Company paid $131.6 in common stock dividends. On October 12, 2022, the Company announced a cash dividend of $0.72 per share of common stock for the fourth quarter, or approximately $64.9 in the aggregate. The dividend will be payable on December 9, 2022, to stockholders of record of all issued and outstanding shares of common stock as of the close of business on November 17, 2022. The declaration and payment of any future dividends will be at the discretion of the Company's board of directors.

Credit Ratings

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

Item 3. Quantitative and Qualitative Disclosures about Market Risk (dollars in millions)

Market risk is the potential loss arising from adverse changes in market rates and prices, such as foreign currency exchange rates, interest rates, and other relevant market rate or price changes. In the ordinary course of business, the Company is exposed to various market risks, including changes in foreign currency exchange and interest rates, and the Company regularly evaluates its exposure to such changes. The Company addresses its exposure to market risks, principally the market risks associated with changes in foreign currency exchange rates and interest rates, through a controlled program of risk management that includes,

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from time to time, the use of derivative financial instruments such as foreign currency forward contracts, and interest rate and cross currency swap agreements.

Foreign Currency Exchange Rates

Approximately 15.1% of the Company's revenues for the nine months ended September 30, 2022, and approximately 15.2% of the Company's revenue for the nine months ended September 30, 2021, were denominated in currencies other than the U.S. Dollar (USD). The Company's financial statements are reported in USD and, accordingly, fluctuations in exchange rates will affect the translation of revenues and expenses denominated in foreign currencies into USD for purposes of reporting the Company's consolidated financial results. In the third quarter of 2022 and the year ended December 31, 2021, the most significant currency exchange rate exposures were to the Canadian dollar, Swiss Franc, Euro and British Pound. Excluding the impacts from any outstanding or future hedging transactions, a hypothetical change of 10% in average exchange rates used to translate all foreign currencies to USD would have impacted income before income taxes for the nine months ended September 30, 2022, by approximately $20.6. Gross accumulated currency translation adjustments recorded as a separate component of shareholders’ equity were $(572.2) and $(114.6) at September 30, 2022 and 2021, respectively. The Company does not have significant operations in countries in which the economy is considered to be highly inflationary.

The Company earns revenue from service contracts over a period of time, ranging from months to years. Accordingly, exchange rate fluctuations during this period may affect the Company's profitability with respect to such contracts. The Company is also subject to foreign currency transaction risk for fluctuations in exchange rates during the period of time between the consummation and cash settlement of transactions. The Company limits its foreign currency transaction risk through exchange rate fluctuation provisions stated in some of its contracts with customers, or it may hedge transaction risk with foreign currency forward contracts. At September 30, 2022, the Company had 24 open foreign exchange forward contracts relating to service contracts with various amounts maturing monthly through October 2022 with a notional value totaling approximately $670.3. At December 31, 2021, the Company had 28 open foreign exchange forward contracts relating to service contracts with various amounts maturing monthly through January 2022 with a notional value totaling approximately $600.7.

The Company is party to U.S. to Swiss Franc cross-currency swap agreements with an aggregate notional amount of $600.0, $300.0 maturing in 2024 and $300.0 maturing in 2025, as a hedge against the impact of foreign exchange movements on its net investment in a Swiss Franc functional currency subsidiary.

Interest Rates

Some of the Company's debt from time to time is subject to interest at variable rates. As a result, fluctuations in interest rates can affect the business. The Company attempts to manage interest rate risk and overall borrowing costs through an appropriate mix of fixed and variable rate debt including by the utilization of derivative financial instruments, primarily interest rate swaps.

Borrowings under the Company's term loan credit facility, now repaid, and revolving credit facility are subject to variable interest rates, unless fixed through interest rate swaps or other agreements.

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

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Quarterly Report on Form 10-Q, the Company carried out, under the supervision and with the participation of the Company’s management, including the Company’s principal executive officer and principal financial officer, an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rules13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended). Based upon this evaluation, the Company’s principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures were effective as of September 30, 2022.

Changes in Internal Control Over Financial Reporting

There were no changes in the Company’s internal control over financial reporting (as defined in Rules13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended) that occurred during the quarter ended September 30, 2022, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

See Note 8 (Commitments and Contingencies) to the Company’s condensed consolidated financial statements, above, which is incorporated herein by reference.

Item 1A. Risk Factors

The risk factors set forth below revise and supplement the corresponding risk factors set forth in the Company's Annual Report on Form 10-K for the year ended December 31, 2021. With the exception of the following, there have been no material changes in the risk factors that appear in the Company's Annual Report on Form 10-K for the year ended December 31, 2021.

The planned spin-off of the Company’s Clinical Development business may not be completed on the terms or timeline currently contemplated, if at all, and may not achieve the intended results.

The Company intends to pursue a spin-off of its wholly owned Clinical Development business, which includes the parts of its DD segment focused on providing Phase I-IV clinical trial management, market access, and technology solutions to pharmaceutical and biotechnology organizations, which would result in two independent, publicly traded companies. Unanticipated issues including, but not limited to, the failure to obtain regulatory approval, obtain appropriate assurances regarding the tax-free nature of the spin-off, or have the Form 10 registration statement that will be filed with the SEC declared effective on a timely basis or at all, could delay, prevent, or otherwise adversely affect the planned spin-off. There can be no assurance that the conditions of the spin-off will be satisfied or that Company will be able to complete the spin-off on the terms or on the anticipated timeline, or at all.

The Company expects that pursuing and implementing the spin-off will continue to require significant expenses and management time and effort, may divert management’s attention from the Company and Clinical Development's ongoing business operations and may adversely impact relationships with customers, suppliers, employees, and other business counterparties. The Company may experience delays, business disruption, increased costs, including from lost synergies or from restructuring transactions, negative market reaction to the announcement and planning for the transaction, change in market receptiveness to effect transactions in the capital markets, and other challenges during or following the spin-off, which could adversely affect the Company’s business, financial condition, and results of operations. The Company may also experience increased challenges in attracting, retaining, and motivating key personnel during the pendency of the spin-off and following its completion, which could harm the Company’s business. The Company anticipates that, consistent with any applicable legal and tax requirements, there will be ongoing transitional and commercial arrangements to provide for a seamless delivery of services to the customers and other stakeholders of the independent companies following the spin-off, but those arrangements may not meet the intended objectives, which could negatively impact the Company’s and Clinical Development’s business, including relationships with customers and other business counterparties.

Further, if the planned spin-off is completed, the anticipated benefits of the transaction may not be realized within the expected time periods or at all. Failure to implement the planned spin-off effectively or the negative reaction of customers, the Company’s employees, and other stakeholders could also result in a decline in value of one or both of the companies.

Increased regulations and restrictions on the import of research animals, limitations of supply of research animals, and actions of animal rights activists may have an adverse effect on the Company.

DD's preclinical services utilize animals in preclinical testing of the safety and efficacy of drugs and devices. Such activities are required for the development of new medicines and medical devices under regulatory regimes in the U.S., Europe, Japan, and other countries. Increased regulations and restrictions on the import of research animals into various countries, as well as limitations of supply, could impact DD’s ability to conduct preclinical research and could have an adverse effect on DD’s financial condition, results of operations, and cash flows. In addition, acts of vandalism and other acts by animal rights activists who object to the use of animals in drug development could have an adverse effect on the Company.

U.S. Food and Drug Administration (FDA) regulation of diagnostic products, increased FDA regulation of laboratory-developed tests (LDTs), and regulation by other countries of diagnostic products could result in increased costs and the imposition of fines or penalties, and could have a material adverse effect upon the Company’s business.

The FDA has regulatory responsibility for instruments, test kits, reagents, and other devices used by clinical laboratories. The FDA enforces laws and regulations that govern the development, testing, manufacturing, performance, labeling, advertising, marketing, distribution, and surveillance of diagnostic products, and it regularly inspects and reviews the manufacturing processes and product performance of diagnostic products. Dx’s point-of-care testing devices are subject to regulation by the FDA.

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Since the 1990s, the FDA has asserted that it has authority to regulate LDTs as medical devices, but has exercised enforcement discretion to refrain from systematic regulation of LDTs. In 2014, the FDA issued draft guidance describing how it intended to discontinue its enforcement discretion policy and begin regulating LDTs as medical devices; however, that draft guidance has not been finalized, and the FDA has instead continued its enforcement discretion policy and has indicated that it intends to work with Congress to enact comprehensive legislative reform of diagnostics oversight. As such, LDTs developed by high complexity clinical laboratories are currently generally offered as services to health care providers under the Clinical Laboratory Improvement Amendments of 1988 (CLIA) regulatory framework administered by the Centers for Medicare and Medicaid Services (CMS), without the requirement for FDA clearance or approval. There are other regulatory and legislative proposals that would increase general FDA oversight of clinical laboratories and LDTs. The outcome and ultimate impact of such proposals on the business is difficult to predict at this time. On February 20, 2020, the FDA issued a statement with a table of pharmacogenetic associations setting forth certain gene-drug interactions that the agency has determined are supported by the scientific literature to help ensure that claims being made for pharmacogenetic tests are grounded in sound science, thereby reducing the risk of enforcement actions with respect to LDTs offering claims consistent with the table. The FDA noted that while it is committed to work with Congress on new comprehensive diagnostic oversight reform legislation, it could still take enforcement actions under the current medical device framework regarding diagnostic claims the agency determines not to be sufficiently supported. Even without issuance of a finalized LDT oversight framework, in light of the April 4, 2019, FDA warning letter issued to Inova Genomics Laboratory related to certain LDTs that Inova offered, as well as the February 2020 pharmacogenetics statement, there may be an increased risk of FDA enforcement actions for laboratory tests offered by companies without FDA clearance or approval.

Current FDA regulation of the Company’s diagnostic products and the potential for future increased regulation of the Company’s LDTs in the future could result in increased costs and administrative and legal actions for noncompliance, including warning letters, fines, penalties, product suspensions, product recalls, injunctions, and other civil and criminal sanctions, which could have a material adverse effect upon the Company.

Regulation of diagnostics products in jurisdictions outside the U.S. in which the Company operates may impact laboratory testing offered by the Company in both Dx and DD. For example, the European Union In Vitro Diagnostics Regulation (Regulation (EU) 2017/746 (EU IVDR)), which became applicable on May 26, 2022, establishes a new legislative framework for in vitro diagnostic devices that are used in certain circumstances, and includes a rule-based classification and quality and safety standards. The EU IVDR, where applicable to DD's services, could impact DD's ability to support trials, and could result in increased costs and administrative and legal actions, and have an adverse effect on DD's financial condition, results of operations, and cash flows.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds (dollars and shares in millions, except per share data)

The following table sets forth information with respect to purchases of shares of the Company’s common stock based on settled trades made during the three months ended September 30, 2022, by or on behalf of the Company:

Total Number of Shares RepurchasedAverage Price Paid Per ShareTotal Number of Shares Repurchased as Part of Publicly Announced ProgramMaximum Dollar Value of Shares that May Yet Be Repurchased Under the Program
July 1 - July 310.7243.490.71,051.5
August 1 - August 310.4256.170.4931.5
September 1 - September 300.4229.320.4831.5
1.5$243.351.5$831.5

As of September 30, 2022, the Company had outstanding authorization from the board of directors to purchase up to $831.5 of the Company's common stock. The repurchase authorization has no expiration date.

Item 5. Other Information

None.

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Item 6. Exhibits

(a)Exhibits
31.1*Certification by the Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a)
31.2*Certification by the Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a)
32**Written Statement of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350)
101.INS*Inline XBRL Instance Document - The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH*Inline XBRL Taxonomy Extension Schema
101.CAL*Inline XBRL Taxonomy Extension Calculation Linkbase
101.DEF*Inline XBRL Taxonomy Extension Definition Linkbase
101.LAB*Inline XBRL Taxonomy Extension Label Linkbase
101.PRE*Inline XBRL Taxonomy Extension Presentation Linkbase
104Cover Page Interactive Data File (embedded within the Inline XBRL document and included in Exhibit 101)
*filed herewith
**furnished herewith

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

LABORATORY CORPORATION OF AMERICA HOLDINGS

Registrant

By:/s/ ADAM H. SCHECHTER
Adam H. Schechter
Chief Executive Officer
By:/s/ GLENN A. EISENBERG
Glenn A. Eisenberg
Executive Vice President and
Chief Financial Officer

November 1, 2022