filings.toolsItem 1. Financial Statements (unaudited)
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Item 1. Financial Statements (unaudited)
LABCORP HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions)
(unaudited)
| September 30, 2024 | December 31, 2023 | ||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 1,517.3 | $ | 536.8 | |||||||
| Accounts receivable, net | 2,058.5 | 1,913.3 | |||||||||
| Unbilled services | 166.3 | 185.4 | |||||||||
| Supplies inventory | 483.1 | 474.6 | |||||||||
| Prepaid expenses and other | 684.7 | 655.3 | |||||||||
| Total current assets | 4,909.9 | 3,765.4 | |||||||||
| Property, plant and equipment, net | 3,050.0 | 2,911.8 | |||||||||
| Goodwill, net | 6,482.4 | 6,142.5 | |||||||||
| Intangible assets, net | 3,540.7 | 3,342.0 | |||||||||
| Joint venture partnerships and equity method investments | 16.9 | 26.9 | |||||||||
| Other assets, net | 612.6 | 536.5 | |||||||||
| Total assets | $ | 18,612.5 | $ | 16,725.1 | |||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | 660.9 | $ | 827.5 | |||||||
| Accrued expenses and other | 757.5 | 804.0 | |||||||||
| Unearned revenue | 403.1 | 421.7 | |||||||||
| Short-term operating lease liabilities | 184.3 | 165.8 | |||||||||
| Short-term finance lease liabilities | 6.3 | 6.4 | |||||||||
| Short-term borrowings and current portion of long-term debt | 1,399.9 | 999.8 | |||||||||
| Total current liabilities | 3,412.0 | 3,225.2 | |||||||||
| Long-term debt, less current portion | 5,352.1 | 4,054.7 | |||||||||
| Operating lease liabilities | 701.3 | 648.9 | |||||||||
| Financing lease liabilities | 75.2 | 78.6 | |||||||||
| Deferred income taxes and other tax liabilities | 358.3 | 417.9 | |||||||||
| Other liabilities | 528.2 | 409.3 | |||||||||
| Total liabilities | 10,427.1 | 8,834.6 | |||||||||
| Commitments and contingent liabilities | |||||||||||
| Noncontrolling interest | 15.2 | 15.5 | |||||||||
| Shareholders’ equity: | |||||||||||
| Common stock, $0.10 par value, 83.7 and 83.9 shares outstanding at September 30, 2024, and December 31, 2023, respectively | 7.6 | 7.7 | |||||||||
| Additional paid-in capital | — | 38.4 | |||||||||
| Retained earnings | 8,275.8 | 7,888.2 | |||||||||
| Accumulated other comprehensive loss | (113.2) | (59.3) | |||||||||
| Total shareholders’ equity | 8,170.2 | 7,875.0 | |||||||||
| Total liabilities and shareholders’ equity | $ | 18,612.5 | $ | 16,725.1 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
LABCORP HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share data)
(unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Revenues | $ | 3,282.0 | $ | 3,056.8 | $ | 9,679.5 | $ | 9,128.3 | |||||||||||||||
| Cost of revenues | 2,377.6 | 2,205.6 | 6,951.4 | 6,584.8 | |||||||||||||||||||
| Gross profit | 904.4 | 851.2 | 2,728.1 | 2,543.5 | |||||||||||||||||||
| Selling, general and administrative expenses | 568.6 | 525.5 | 1,634.8 | 1,488.5 | |||||||||||||||||||
| Amortization of intangibles and other assets | 63.7 | 55.7 | 186.0 | 160.6 | |||||||||||||||||||
| Goodwill and other asset impairments | — | 10.2 | 2.5 | 15.2 | |||||||||||||||||||
| Restructuring and other charges | 18.0 | 7.5 | 34.6 | 30.8 | |||||||||||||||||||
| Operating income | 254.1 | 252.3 | 870.2 | 848.4 | |||||||||||||||||||
| Other income (expense): | |||||||||||||||||||||||
| Interest expense | (50.4) | (50.3) | (144.9) | (150.8) | |||||||||||||||||||
| Investment income | 3.1 | 15.9 | 7.3 | 22.6 | |||||||||||||||||||
| Equity method income (expense), net | (0.5) | (0.3) | (0.7) | (1.5) | |||||||||||||||||||
| Other, net | 4.3 | 21.1 | 43.8 | (2.7) | |||||||||||||||||||
| Earnings from continuing operations before income taxes | 210.6 | 238.7 | 775.7 | 716.0 | |||||||||||||||||||
| Provision for income taxes | 41.0 | 55.1 | 172.2 | 168.8 | |||||||||||||||||||
| Earnings from continuing operations | 169.6 | 183.6 | 603.5 | 547.2 | |||||||||||||||||||
| Earnings from discontinued operations, net of tax | — | — | — | 38.8 | |||||||||||||||||||
| Net earnings | 169.6 | 183.6 | 603.5 | 586.0 | |||||||||||||||||||
| Less: Net earnings attributable to the noncontrolling interest | (0.3) | (0.3) | (0.9) | (0.9) | |||||||||||||||||||
| Net earnings attributable to Labcorp Holdings Inc. | $ | 169.3 | $ | 183.3 | $ | 602.6 | $ | 585.1 | |||||||||||||||
| Basic earnings per share: | |||||||||||||||||||||||
| Basic earnings per share continuing operations | $ | 2.02 | $ | 2.12 | $ | 7.17 | $ | 6.22 | |||||||||||||||
| Basic earnings per share discontinued operations | $ | — | $ | — | $ | — | $ | 0.44 | |||||||||||||||
| Basic earnings per share | $ | 2.02 | $ | 2.12 | $ | 7.17 | $ | 6.66 | |||||||||||||||
| Diluted earnings per share: | |||||||||||||||||||||||
| Diluted earnings per share continuing operations | $ | 2.00 | $ | 2.11 | $ | 7.13 | $ | 6.19 | |||||||||||||||
| Diluted earnings per share discontinued operations | $ | — | $ | — | $ | — | $ | 0.44 | |||||||||||||||
| Diluted earnings per share | $ | 2.00 | $ | 2.11 | $ | 7.13 | $ | 6.63 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
LABCORP HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS
(in millions)
(unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Net earnings | $ | 169.6 | $ | 183.6 | $ | 603.5 | $ | 586.0 | |||||||||||||||
| Foreign currency translation adjustments | 78.3 | (56.0) | (53.2) | 43.8 | |||||||||||||||||||
| Net benefit plan adjustments | 1.6 | 1.1 | (0.1) | 3.4 | |||||||||||||||||||
| Other comprehensive earnings (loss) before tax | 79.9 | (54.9) | (53.3) | 47.2 | |||||||||||||||||||
| Provision for income tax related to items of comprehensive earnings | (1.1) | (0.2) | (0.6) | (0.8) | |||||||||||||||||||
| Other comprehensive earnings (loss), net of tax | 78.8 | (55.1) | (53.9) | 46.4 | |||||||||||||||||||
| Comprehensive earnings | 248.4 | 128.5 | 549.6 | 632.4 | |||||||||||||||||||
| Less: Net earnings attributable to the noncontrolling interest | (0.3) | (0.3) | (0.9) | (0.9) | |||||||||||||||||||
| Comprehensive earnings attributable to Labcorp Holdings Inc. | $ | 248.1 | $ | 128.2 | $ | 548.7 | $ | 631.5 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
LABCORP HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN
SHAREHOLDERS’ EQUITY
(in millions)
(unaudited)
| Common Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Earnings (Loss) | Total Shareholders’ Equity | |||||||||||||||||||||||||||||||
| BALANCE AT DECEMBER 31, 2022 | $ | 8.1 | $ | — | $ | 10,581.7 | $ | (493.2) | $ | 10,096.6 | |||||||||||||||||||||||||
| Net earnings attributable to Labcorp Holdings Inc. | — | — | 212.9 | — | 212.9 | ||||||||||||||||||||||||||||||
| Other comprehensive earnings (loss), net of tax | — | — | — | 49.0 | 49.0 | ||||||||||||||||||||||||||||||
| Dividends declared | — | — | (64.7) | — | (64.7) | ||||||||||||||||||||||||||||||
| Issuance of common stock under employee stock plans | — | 27.6 | — | — | 27.6 | ||||||||||||||||||||||||||||||
| Net share settlement tax payments from issuance of stock to employees | — | (20.5) | — | — | (20.5) | ||||||||||||||||||||||||||||||
| Stock compensation | — | 40.6 | — | — | 40.6 | ||||||||||||||||||||||||||||||
| BALANCE AT MARCH 31, 2023 | $ | 8.1 | $ | 47.7 | $ | 10,729.9 | $ | (444.2) | $ | 10,341.5 | |||||||||||||||||||||||||
| Net earnings attributable to Labcorp Holdings Inc. | — | — | 188.9 | — | 188.9 | ||||||||||||||||||||||||||||||
| Other comprehensive earnings (loss), net of tax | — | — | — | 52.5 | 52.5 | ||||||||||||||||||||||||||||||
| Fortrea Holdings Inc. spin-off | — | — | (2,018.1) | 238.0 | (1,780.1) | ||||||||||||||||||||||||||||||
| Dividends declared | — | — | (64.5) | — | (64.5) | ||||||||||||||||||||||||||||||
| Issuance of common stock under employee stock plans | — | 26.8 | — | — | 26.8 | ||||||||||||||||||||||||||||||
| Net share settlement tax payments from issuance of stock to employees | — | (18.2) | — | — | (18.2) | ||||||||||||||||||||||||||||||
| Stock compensation | — | 38.1 | — | — | 38.1 | ||||||||||||||||||||||||||||||
| BALANCE AT JUNE 30, 2023 | $ | 8.1 | $ | 94.4 | $ | 8,836.2 | $ | (153.7) | $ | 8,785.0 | |||||||||||||||||||||||||
| Net earnings attributable to Labcorp Holdings Inc. | — | — | 183.3 | — | 183.3 | ||||||||||||||||||||||||||||||
| Other comprehensive earnings (loss), net of tax | — | — | — | (55.1) | (55.1) | ||||||||||||||||||||||||||||||
| Dividends declared | — | — | (64.6) | — | (64.6) | ||||||||||||||||||||||||||||||
| Net share settlement tax payments from issuance of stock to employees | — | (0.9) | — | — | (0.9) | ||||||||||||||||||||||||||||||
| Stock compensation | — | 34.4 | — | — | 34.4 | ||||||||||||||||||||||||||||||
| Purchase of common stock | (0.4) | (123.2) | (885.4) | — | (1,009.0) | ||||||||||||||||||||||||||||||
| BALANCE AT SEPTEMBER 30, 2023 | $ | 7.7 | $ | 4.7 | $ | 8,069.5 | $ | (208.8) | $ | 7,873.1 | |||||||||||||||||||||||||
| BALANCE AT DECEMBER 31, 2023 | $ | 7.7 | $ | 38.4 | $ | 7,888.2 | $ | (59.3) | $ | 7,875.0 | |||||||||||||||||||||||||
| Net earnings attributable to Labcorp Holdings Inc. | — | — | 228.0 | — | 228.0 | ||||||||||||||||||||||||||||||
| Other comprehensive earnings (loss), net of tax | — | — | — | (126.1) | (126.1) | ||||||||||||||||||||||||||||||
| Dividends declared | — | — | (60.9) | — | (60.9) | ||||||||||||||||||||||||||||||
| Issuance of common stock under employee stock plans | — | 26.7 | — | — | 26.7 | ||||||||||||||||||||||||||||||
| Net share settlement tax payments from issuance of stock to employees | — | (14.7) | — | — | (14.7) | ||||||||||||||||||||||||||||||
| Stock compensation | — | 31.6 | — | — | 31.6 | ||||||||||||||||||||||||||||||
| BALANCE AT MARCH 31, 2024 | $ | 7.7 | $ | 82.0 | $ | 8,055.3 | $ | (185.4) | $ | 7,959.6 | |||||||||||||||||||||||||
| Net earnings attributable to Labcorp Holdings Inc. | — | — | 205.3 | — | 205.3 | ||||||||||||||||||||||||||||||
| Other comprehensive earnings (loss), net of tax | — | — | — | (6.6) | (6.6) | ||||||||||||||||||||||||||||||
| Dividends declared | — | — | (60.2) | — | (60.2) | ||||||||||||||||||||||||||||||
| Net share settlement tax payments from issuance of stock to employees | — | (23.1) | — | — | (23.1) | ||||||||||||||||||||||||||||||
| Stock compensation | — | 30.8 | — | — | 30.8 | ||||||||||||||||||||||||||||||
| Purchase of common stock | — | (77.2) | (22.8) | — | (100.0) | ||||||||||||||||||||||||||||||
| BALANCE AT JUNE 30, 2024 | $ | 7.7 | $ | 12.5 | $ | 8,177.6 | $ | (192.0) | $ | 8,005.8 | |||||||||||||||||||||||||
| Net earnings attributable to Labcorp Holdings Inc. | — | — | 169.3 | — | 169.3 | ||||||||||||||||||||||||||||||
| Other comprehensive earnings (loss), net of tax | — | — | — | 78.8 | 78.8 | ||||||||||||||||||||||||||||||
| Dividends declared | — | — | (61.1) | — | (61.1) | ||||||||||||||||||||||||||||||
| Issuance of common stock under employee stock plans | — | 26.3 | — | — | 26.3 | ||||||||||||||||||||||||||||||
| Net share settlement tax payments from issuance of stock to employees | — | (0.9) | — | — | (0.9) | ||||||||||||||||||||||||||||||
| Stock compensation | — | 27.0 | — | — | 27.0 | ||||||||||||||||||||||||||||||
| Purchase of common stock | (0.1) | (64.9) | (10.0) | — | (75.0) | ||||||||||||||||||||||||||||||
| BALANCE AT SEPTEMBER 30, 2024 | $ | 7.6 | $ | — | $ | 8,275.8 | $ | (113.2) | $ | 8,170.2 | |||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
LABCORP HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(unaudited)
| Nine Months Ended September 30, | |||||||||||
| 2024 | 2023 | ||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||||||
| Net earnings | $ | 603.5 | $ | 586.0 | |||||||
| Earnings from discontinued operations, net of tax | — | (38.8) | |||||||||
| Adjustments to reconcile net earnings to net cash provided by operating activities: | |||||||||||
| Depreciation and amortization | 472.9 | 430.9 | |||||||||
| Stock compensation | 89.4 | 101.7 | |||||||||
| Operating lease right-of-use asset expense | 136.7 | 128.5 | |||||||||
| Goodwill and other asset impairments | 2.5 | 15.2 | |||||||||
| Deferred income taxes | (58.6) | (18.2) | |||||||||
| Other | 46.0 | 3.9 | |||||||||
| Change in assets and liabilities (net of effects of acquisitions and divestitures): | |||||||||||
| Increase in accounts receivable | (143.2) | (173.6) | |||||||||
| Decrease in unbilled services | 22.8 | 103.4 | |||||||||
| Decrease in supplies inventory | 2.0 | 9.7 | |||||||||
| Increase in prepaid expenses and other | (39.8) | (74.9) | |||||||||
| Decrease in accounts payable | (138.2) | (188.6) | |||||||||
| (Decrease) increase in unearned revenue | (27.9) | 50.7 | |||||||||
| Decrease in accrued expenses and other | (159.5) | (313.2) | |||||||||
| Net cash provided by continuing operating activities | 808.6 | 622.7 | |||||||||
| Net cash provided by discontinued operating activities | — | 125.4 | |||||||||
| Net cash provided by operating activities | 808.6 | 748.1 | |||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||||||
| Capital expenditures | (377.8) | (286.4) | |||||||||
| Proceeds from sale of assets | 0.6 | 0.3 | |||||||||
| Proceeds from sale of business | 13.5 | — | |||||||||
| Proceeds from sale or distribution of investments | — | 6.7 | |||||||||
| Investments in equity affiliates | (42.3) | (20.1) | |||||||||
| Acquisition of businesses, net of cash acquired | (751.2) | (516.7) | |||||||||
| Net cash used for continuing investing activities | (1,157.2) | (816.2) | |||||||||
| Net cash used for discontinued investing activities | — | (24.7) | |||||||||
| Net cash used for investing activities | (1,157.2) | (840.9) | |||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||||||
| Proceeds from senior note offerings | 2,000.0 | — | |||||||||
| Payments on senior notes | (600.0) | — | |||||||||
| Proceeds from revolving credit facilities | 2,463.7 | 1,968.5 | |||||||||
| Payments on revolving credit facilities | (2,463.7) | (1,878.9) | |||||||||
| Proceeds from accounts receivable securitization | 300.0 | — | |||||||||
| Net share settlement tax payments from issuance of stock to employees | (38.7) | (39.6) | |||||||||
| Net proceeds from issuance of stock to employees | 53.0 | 54.4 | |||||||||
| Dividends paid | (183.0) | (192.9) | |||||||||
| Purchase of common stock | (175.0) | (1,009.0) | |||||||||
| Other | (29.7) | (15.0) | |||||||||
| Net cash provided by (used for) continuing financing activities | 1,326.6 | (1,112.5) | |||||||||
| Net cash provided by discontinued financing activities | — | 1,499.7 | |||||||||
| Net cash provided by financing activities | 1,326.6 | 387.2 | |||||||||
| Effect of exchange rate changes on cash and cash equivalents | 2.5 | 3.5 | |||||||||
| Net increase in cash and cash equivalents | 980.5 | 297.9 | |||||||||
| Cash and cash equivalents at beginning of period | 536.8 | 430.0 | |||||||||
| Cash and cash equivalents at end of period | $ | 1,517.3 | $ | 727.9 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
LABCORP HOLDINGS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars and shares in millions, except per share data)
1. BASIS OF FINANCIAL STATEMENT PRESENTATION
Labcorp® Holdings Inc. (Labcorp® or the Company) is a global leader of innovative and comprehensive laboratory services that provides vital information to help doctors, hospitals, pharmaceutical companies, researchers, and patients make clear and confident decisions. By leveraging its unparalleled diagnostics and drug development capabilities, the Company provides insights and accelerates innovations to improve health and improve lives.
On April 25, 2024, the Company announced plans to implement a new public holding company structure, with Labcorp Holdings Inc. as the new holding company. On May 17, 2024, the Company completed the holding company reorganization (Reorganization) and Labcorp Holdings Inc. became the successor issuer to Laboratory Corporation of America Holdings (LCAH). The new holding company has no independent assets or operations and its sole ownership interest is in LCAH.
The Company reports its business in two segments, Diagnostics Laboratories (Dx) and Biopharma Laboratory Services (BLS), formerly Drug Development. For further financial information about these segments, see Note 12 (Business Segment Information) to the Condensed Consolidated Financial Statements. During the three months ended September 30, 2024, Dx and BLS contributed approximately 78% and 22%, respectively, of revenues to the Company. During the nine months ended September 30, 2024, Dx and BLS contributed approximately 78% and 22%, respectively, of revenues to the Company.
The accompanying condensed consolidated financial statements of the Company are unaudited. In the opinion of management, all adjustments necessary for a fair statement of results of operations, cash flows, and financial position have been made. Except as otherwise disclosed, all such adjustments are of a normal recurring nature. Interim results are not necessarily indicative of results for a full year. The year-end condensed consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by generally accepted accounting principles.
The condensed consolidated financial statements and notes are presented in accordance with the rules and regulations of the Securities and Exchange Commission (SEC) and do not contain certain information included in the Company’s fiscal year 2023 Annual Report on Form 10-K (Annual Report). Therefore, these interim statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report.
The condensed consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries for which it exercises control. Long-term investments in affiliated companies in which the Company exercises significant influence, but which it does not control, are accounted for using the equity method. Investments in which the Company does not exercise significant influence (generally, when the Company has an investment of less than 20.0% and no representation on the investee's board of directors) are accounted for at fair value, or at cost minus impairment adjusted for observable price changes in orderly transactions for an identical or similar investment of the same issuer for those investments that do not have readily determinable fair values. All significant inter-company transactions and accounts have been eliminated. The Company does not have any significant variable interest entities or special purpose entities whose financial results are not included in the condensed consolidated financial statements.
The financial statements of the Company's operating foreign subsidiaries are measured using the local currency as the functional currency. Assets and liabilities are translated at exchange rates as of the balance sheet date. Revenues and expenses are translated at average monthly exchange rates prevailing during the period. Resulting translation adjustments are included in “Accumulated other comprehensive income (loss).”
2. DISCONTINUED OPERATIONS
On June 30, 2023 (the Distribution Date), Labcorp completed the previously announced separation (the Separation or spin-off) from the Company of Fortrea Holdings Inc. (Fortrea), formerly the Company's Clinical Development and Commercialization Services (CDCS) business, into a separate, publicly-traded company. All historical operating results of Fortrea are presented as Discontinued Operations, net of tax, in the Condensed 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.
The spin-off of Fortrea from Labcorp 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 Separation 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
LABCORP HOLDINGS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars and shares in millions, except per share data)
approximately $1,600.0 to the Company in connection with the Separation. The Company does not guarantee the Fortrea Notes following the Separation. Also in June 2023, Fortrea entered into three floating secured overnight financing rate (SOFR) credit facilities totaling $1,520.0. These are comprised of a $450.0 Revolver maturing June 30, 2028; a $500.0 Term Loan A maturing June 30, 2028; and a $570.0 Term Loan B maturing June 30, 2030.
In connection with the spin-off, the Company entered into several agreements with Fortrea on or prior to the Distribution Date that, among other things, provide a framework for the Company’s relationship with Fortrea after the spin-off, including a separation and distribution agreement, a tax matters agreement, an employee matters agreement, and a transition services agreement. These agreements contain the key provisions relating to the spin-off, including provisions relating to the principal intercompany transactions required to effect the spin-off, the conditions to the spin-off and provisions governing the relationship between Fortrea and the Company after the spin-off. The costs to provide these services are included in operating income but the service fees are included in other income.
Financial Information of Discontinued Operations
Earnings from discontinued operations, net of tax in the Consolidated Statements of Operations reflect the after-tax results of Fortrea's business and Separation-related fees, and do not include any allocation of general corporate overhead expense or interest expense of the Company.
The following table summarizes the significant line items included in Earnings from Discontinued Operations, Net of Tax in the Condensed Consolidated Statements of Operations for the nine months ended September 30, 2023:
| Nine Months Ended September 30, 2023 | |||||||||||||||||||||||
| Revenues | $ | 1,506.6 | |||||||||||||||||||||
| Cost of revenues | 1,244.5 | ||||||||||||||||||||||
| Gross profit | 262.1 | ||||||||||||||||||||||
| Selling, general and administrative expenses | 184.1 | ||||||||||||||||||||||
| Amortization of intangibles and other assets | 31.9 | ||||||||||||||||||||||
| Restructuring and other charges | 3.0 | ||||||||||||||||||||||
| Operating income | 43.1 | ||||||||||||||||||||||
| Other income (expense): | |||||||||||||||||||||||
| Other, net | 2.5 | ||||||||||||||||||||||
| Earnings before income taxes | 45.6 | ||||||||||||||||||||||
| Provision for income taxes | 6.8 | ||||||||||||||||||||||
| Net earnings attributable to Labcorp Holdings Inc. | $ | 38.8 | |||||||||||||||||||||
3. REVENUES
The Company's revenues by segment and by payers/customer groups for the three and nine months ended September 30, 2024, and 2023, were as follows:
| For the Three Months Ended September 30, 2024 | For the Three Months Ended September 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||
| North America | Europe | Other | Total | North America | Europe | Other | Total | ||||||||||||||||||||||||||||||||||||||||
| Payer/Customer | |||||||||||||||||||||||||||||||||||||||||||||||
| Dx | |||||||||||||||||||||||||||||||||||||||||||||||
| Clients | 24 | % | — | % | — | % | 24 | % | 24 | % | — | % | — | % | 24 | % | |||||||||||||||||||||||||||||||
| Patients | 10 | % | — | % | — | % | 10 | % | 9 | % | — | % | — | % | 9 | % | |||||||||||||||||||||||||||||||
| Medicare and Medicaid | 8 | % | — | % | — | % | 8 | % | 8 | % | — | % | — | % | 8 | % | |||||||||||||||||||||||||||||||
| Third party | 36 | % | — | % | — | % | 36 | % | 36 | % | — | % | — | % | 36 | % | |||||||||||||||||||||||||||||||
| Total Dx revenues by payer | 78 | % | — | % | — | % | 78 | % | 77 | % | — | % | — | % | 77 | % | |||||||||||||||||||||||||||||||
| BLS | |||||||||||||||||||||||||||||||||||||||||||||||
| Pharmaceutical, biotechnology, and medical device companies | 9 | % | 9 | % | 4 | % | 22 | % | 10 | % | 9 | % | 4 | % | 23 | % | |||||||||||||||||||||||||||||||
| Total revenues | 87 | % | 9 | % | 4 | % | 100 | % | 87 | % | 9 | % | 4 | % | 100 | % |
LABCORP HOLDINGS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars and shares in millions, except per share data)
| For the Nine Months Ended September 30, 2024 | For the Nine Months Ended September 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||
| North America | Europe | Other | Total | North America | Europe | Other | Total | ||||||||||||||||||||||||||||||||||||||||
| Payer/Customer | |||||||||||||||||||||||||||||||||||||||||||||||
| Dx | |||||||||||||||||||||||||||||||||||||||||||||||
| Clients | 24 | % | — | % | — | % | 24 | % | 24 | % | — | % | — | % | 24 | % | |||||||||||||||||||||||||||||||
| Patients | 10 | % | — | % | — | % | 10 | % | 9 | % | — | % | — | % | 9 | % | |||||||||||||||||||||||||||||||
| Medicare and Medicaid | 8 | % | — | % | — | % | 8 | % | 8 | % | — | % | — | % | 8 | % | |||||||||||||||||||||||||||||||
| Third party | 36 | % | — | % | — | % | 36 | % | 36 | % | — | % | — | % | 36 | % | |||||||||||||||||||||||||||||||
| Total Dx revenues by payer | 78 | % | — | % | — | % | 78 | % | 77 | % | — | % | — | % | 77 | % | |||||||||||||||||||||||||||||||
| BLS | |||||||||||||||||||||||||||||||||||||||||||||||
| Pharmaceutical, biotechnology, and medical device companies | 9 | % | 9 | % | 4 | % | 22 | % | 10 | % | 9 | % | 4 | % | 23 | % | |||||||||||||||||||||||||||||||
| Total revenues | 87 | % | 9 | % | 4 | % | 100 | % | 87 | % | 9 | % | 4 | % | 100 | % |
Revenues in the United States were $2,738.4 (83.4%) and $2,550.6 (83.4%) for the three months ended September 30, 2024 and 2023, respectively, and were $8,091.8 (83.6%) and $7,645.0 (83.8%) for the nine months ended September 30, 2024 and 2023, respectively.
Accounts Receivable, Unbilled Services and Unearned Revenue
The following table provides information about accounts receivable, unbilled services, and unearned revenue from contracts with customers as of September 30, 2024 and December 31, 2023:
| September 30, 2024 | December 31, 2023 | ||||||||||
| Dx accounts receivable | $ | 1,323.7 | $ | 1,135.2 | |||||||
| BLS accounts receivable | 773.7 | 810.8 | |||||||||
| Less BLS allowance for doubtful accounts | (38.9) | (32.7) | |||||||||
| Accounts receivable | $ | 2,058.5 | $ | 1,913.3 | |||||||
| Gross unbilled services | $ | 167.9 | $ | 192.9 | |||||||
| Less reserve for unbilled services | (1.6) | (7.5) | |||||||||
| Unbilled services | $ | 166.3 | $ | 185.4 | |||||||
| Unearned revenue | $ | 403.1 | $ | 421.7 |
Revenues recognized during the period that were included in the unearned revenue balance at the beginning of the period were $20.2 and $6.3 for the three months ended September 30, 2024 and 2023, respectively, and $98.0 and $79.1 for the nine months ended September 30, 2024 and 2023, respectively.
Credit Loss Rollforward
The Company estimates future expected losses on accounts receivable, unbilled services and notes receivable over the remaining collection period of the instrument. The rollforward for the allowance for credit losses for the nine months ended September 30, 2024, was as follows:
| Accounts Receivable | Unbilled Services | Note and Other Receivables | Total | ||||||||||||||||||||
| Balance as of December 31, 2023 | $ | 32.7 | $ | 7.5 | $ | 0.7 | $ | 40.9 | |||||||||||||||
| Plus, credit loss expense | 7.7 | — | — | 7.7 | |||||||||||||||||||
| Less, write offs | 1.5 | 5.9 | — | 7.4 | |||||||||||||||||||
| Balance as of September 30, 2024 | $ | 38.9 | $ | 1.6 | $ | 0.7 | $ | 41.2 |
The credit loss expense in the first nine months was primarily related to the collection risk from several biotech receivable balances.
4. BUSINESS ACQUISITIONS AND DISPOSITIONS
During the nine months ended September 30, 2024, the Company acquired several businesses and related assets for cash of approximately $751.2. These acquisitions consisted of the clinical and outreach businesses of Baystate Medical Center ($120.2), Providence Medical Foundation ($54.9), and Westpac Labs, Inc. ($97.7), and selected assets of the Invitae
LABCORP HOLDINGS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars and shares in millions, except per share data)
Corporation ($240.8) and BioReference Health (237.6). The preliminary purchase considerations for these acquisitions were allocated under the acquisition method of accounting to the estimated fair market value of the net assets acquired, including approximately $393.6 in identifiable intangible assets. A residual amount of tax deductible goodwill of approximately $349.5 was recorded as of September 30, 2024. The amortization period for non-compete agreements and customer list assets acquired from these businesses are 5 and 15 years, respectively. The purchase price allocations for the Invitae and BioReference Health acquisitions have not been finalized as of September 30, 2024. The preliminary valuation of acquired assets and assumed liabilities, include the following:
| Baystate Medical Center | Providence Medical Foundation | Westpac Labs, Inc. | Invitae Corporation | BioReference Health | Measurement Period Adjustments During the Nine Months Ended September 30, 2024 | Amounts Acquired During the Nine Months Ended September 30, 2024 | |||||||||||||||||||||||
| Inventories | — | — | 1.8 | 12.1 | — | — | 13.9 | ||||||||||||||||||||||
| Property, plant and equipment | 7.2 | 0.9 | — | 76.7 | 9.1 | (3.9) | 90.0 | ||||||||||||||||||||||
| Goodwill | 70.7 | 25.9 | 45.1 | 100.4 | 107.4 | (7.4) | 342.1 | ||||||||||||||||||||||
| Intangible assets | 79.5 | 29.0 | 50.8 | 113.2 | 121.1 | 7.4 | 401.0 | ||||||||||||||||||||||
| Total assets acquired | $ | 157.4 | $ | 55.8 | $ | 97.7 | $ | 302.4 | $ | 237.6 | $ | (3.9) | $ | 847.0 | |||||||||||||||
| Unearned revenue | — | — | — | 3.3 | — | — | 3.3 | ||||||||||||||||||||||
| Lease liabilities | 7.2 | 0.9 | — | 58.3 | — | (3.9) | 62.5 | ||||||||||||||||||||||
| Other liabilities | — | — | — | — | — | — | |||||||||||||||||||||||
| Total liabilities acquired | 7.2 | 0.9 | — | 61.6 | — | (3.9) | 65.8 | ||||||||||||||||||||||
| Net assets acquired | $ | 150.2 | $ | 54.9 | $ | 97.7 | $ | 240.8 | $ | 237.6 | $ | — | $ | 781.2 | |||||||||||||||
| Less escrow payment made in 2023 | 30.0 | — | — | — | — | — | 30.0 | ||||||||||||||||||||||
| Cash paid for acquisitions | $ | 120.2 | $ | 54.9 | $ | 97.7 | $ | 240.8 | $ | 237.6 | $ | — | $ | 751.2 |
On September 17, 2024, the Company announced that it entered into an agreement with Cinven, Inc. to acquire a 15% minority interest in SYNLAB, a leader in medical diagnostic services and specialty testing in Europe, for approximately $155.9 (€140.0). The transaction is anticipated to close in early 2025, subject to customary closing conditions for a transaction of this type, including applicable regulatory approvals. The Company will acquire the minority interest through an intermediate holding company that will be established to hold the investment with SYNLAB and will be represented on the holding company board with Cinven, Inc. and other investors.
During the nine months ended September 30, 2023, the Company acquired several businesses and the related assets for approximately $516.7 in cash. These acquisitions consisted of the clinical and outreach business of Jefferson Health ($108.0), Enzo BioChem ($112.8), Providence Health & Services - Oregon ($110.0), Tuffts Medicine ($157.0), and other small acquisitions for $28.9. The preliminary purchase considerations for these acquisitions were allocated under the acquisition method of accounting to the estimated fair market value of the net assets acquired, including approximately $284.6 in identifiable intangible assets. A residual amount of non-tax deductible goodwill of approximately $230.5 was recorded as of September 30, 2023. The amortization period for non-compete agreements and customer list assets acquired from these businesses are 5 and 15 years, respectively.
LABCORP HOLDINGS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars and shares in millions, except per share data)
During the nine months ended September 30, 2023, the Company recorded several measurement period adjustments for 2022 acquisitions, relating to final valuations and deferred tax true-ups. The adjustments include the following:
| Business Acquisitions | Measurement Period Adjustments During Nine Months Ended September 30, 2023 | Amounts Acquired During the Nine Months Ended September 30, 2023 | |||||||||
| Cash and cash equivalents | $ | — | $ | 0.2 | $ | 0.2 | |||||
| Accounts receivable | (3.0) | — | (3.0) | ||||||||
| Inventories | 1.3 | — | 1.3 | ||||||||
| Prepaid expenses and other | 0.4 | 0.6 | 1.0 | ||||||||
| Property, plant and equipment | 4.7 | (1.5) | 3.2 | ||||||||
| Goodwill | 230.5 | (29.4) | 201.1 | ||||||||
| Intangible assets | 284.6 | 19.5 | 304.1 | ||||||||
| Other assets | 2.1 | — | 2.1 | ||||||||
| Total assets acquired | $ | 520.6 | $ | (10.6) | $ | 510.0 | |||||
| Accrued expenses and other | 3.9 | (8.3) | (4.4) | ||||||||
| Deferred income taxes | — | (2.3) | (2.3) | ||||||||
| Total liabilities acquired | 3.9 | (10.6) | (6.7) | ||||||||
| Net assets acquired | $ | 516.7 | $ | — | $ | 516.7 | |||||
Pro Forma Information
Had the Company's total 2024 and 2023 acquisitions been completed as of January 1, the Company's pro forma results would have been as follows:
| Three Months Ended September 30, | Three Months Ended September 30, | Nine Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||||||||
| Revenues | $ | 3,333.8 | $ | 3,152.7 | 9,999.9 | $ | 9,354.4 | ||||||||||||||||||||||
| Net earnings from continuing operations attributable to Labcorp Holdings Inc. | $ | 172.2 | $ | 174.8 | 613.1 | $ | 582.7 | ||||||||||||||||||||||
Dispositions
During the nine months ended September 30, 2024, the Company sold the assets of its Beacon Laboratory Benefit Solutions, Inc. for $13.5 and recorded a gain of $4.9.
5. EARNINGS PER SHARE
Basic earnings per share is computed by dividing net earnings attributable to the Company by the weighted average number of shares of the Company's common stock outstanding. Diluted earnings per share is computed by dividing net earnings including the impact of dilutive adjustments by the weighted average number of common shares outstanding plus potentially dilutive shares, as if they had been issued at the earlier of the date of issuance or the beginning of the period presented. Potentially dilutive common shares result primarily from the Company’s outstanding stock options, restricted stock awards, restricted stock units, and performance share awards.
LABCORP HOLDINGS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars and shares in millions, except per share data)
The following represents a reconciliation of basic earnings per share to diluted earnings per share for the three and nine months ended September 30:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Earnings | Shares | Per Share Amount | Earnings | Shares | Per Share Amount | Earnings | Shares | Per Share Amount | Earnings | Shares | Per Share Amount | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Basic earnings per share: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net earnings | $ | 169.3 | 84.0 | $ | 2.02 | $ | 183.3 | 86.6 | $ | 2.12 | $ | 602.6 | 84.0 | $ | 7.17 | $ | 546.3 | 87.9 | $ | 6.22 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Dilutive effect of employee stock options and awards | — | 0.4 | — | 0.4 | — | 0.5 | — | 0.4 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net earnings including impact of dilutive adjustments | $ | 169.3 | 84.4 | $ | 2.00 | $ | 183.3 | 87.0 | $ | 2.11 | $ | 602.6 | 84.5 | $ | 7.13 | $ | 546.3 | 88.3 | $ | 6.19 |
Diluted earnings per share represent the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. These potential shares include dilutive stock options and unissued restricted stock awards.
The following table summarizes the potential common shares not included in the computation of diluted earnings per share because their impact would have been antidilutive:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Employee stock options and awards | 0.2 | 0.2 | 0.2 | 0.4 |
6. GOODWILL AND INTANGIBLE ASSETS
The changes in the carrying amount of goodwill for the nine months ended September 30, 2024, were as follows:
| Dx | BLS | Total | |||||||||||||||||||||||||||||||||
| Balance as of December 31, 2023 | $ | 4,813.9 | $ | 1,328.6 | $ | 6,142.5 | |||||||||||||||||||||||||||||
| Goodwill acquired during the period | 349.5 | — | 349.5 | ||||||||||||||||||||||||||||||||
| Foreign currency impact and other adjustments to goodwill | (9.5) | (0.1) | (9.6) | ||||||||||||||||||||||||||||||||
| Balance as of September 30, 2024 | $ | 5,153.9 | $ | 1,328.5 | $ | 6,482.4 |
The Company assesses goodwill and indefinite-lived intangibles for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. The Company recognizes an impairment charge for the amount by which the reporting unit's carrying amount exceeds its fair value.
Although the Company believes that the current assumptions and estimates used in its goodwill analysis are reasonable, supportable, and appropriate, the Company's business could be impacted by unfavorable changes, including those that impact the existing assumptions used in the impairment analysis. Various factors could reasonably be expected to unfavorably impact existing assumptions: primarily, a worsening economic environment and protracted economic downturn and related impacts, including delays in revenue from new customers; increases in customer termination activity; or increases in operating costs. Accordingly, there can be no assurance that the estimates and assumptions made for the purposes of the goodwill impairment analysis will prove to be accurate predictions of future performance.
The Company will continue to monitor the financial performance of, and assumptions for, its reporting units. A significant increase in the discount rate, decrease in the revenue and terminal growth rates, decreased operating margin, or substantial reductions in end markets and volume assumptions, could have a negative impact on the estimated fair value of the reporting units. A future impairment charge for goodwill or intangible assets could have a material effect on the Company's consolidated financial position and results of operations.
LABCORP HOLDINGS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars and shares in millions, except per share data)
The components of identifiable intangible assets were as follows:
| September 30, 2024 | December 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||
| Gross Carrying Amount | Accumulated Amortization | Net | Gross Carrying Amount | Accumulated Amortization | Net | |||||||||||||||||||||||||||||||||||||||
| Customer relationships | $ | 4,208.6 | $ | (1,512.5) | $ | 2,696.1 | $ | 3,868.6 | $ | (1,367.2) | $ | 2,501.4 | ||||||||||||||||||||||||||||||||
| Patents, licenses, and technology | 523.8 | (292.1) | 231.7 | 526.6 | (273.3) | 253.3 | ||||||||||||||||||||||||||||||||||||||
| Non-compete agreements | 192.2 | (78.9) | 113.3 | 130.3 | (60.4) | 69.9 | ||||||||||||||||||||||||||||||||||||||
| Canadian licenses | 484.6 | — | 484.6 | 498.8 | — | 498.8 | ||||||||||||||||||||||||||||||||||||||
| Other | 34.3 | (19.3) | 15.0 | 34.1 | (15.5) | 18.6 | ||||||||||||||||||||||||||||||||||||||
| 5,443.5 | (1,902.8) | 3,540.7 | 5,058.4 | (1,716.4) | 3,342.0 |
Amortization of intangible assets for the three and nine months ended September 30, 2024, and 2023, was $63.7 and $55.7 and $186.0 and $160.6, respectively. The amortization expense for the net carrying amount of intangible assets is estimated to be $71.0 for the remainder of fiscal 2024, $260.4 in fiscal 2025, $251.4 in fiscal 2026, $240.1 in fiscal 2027, $232.2 in fiscal 2028, and $1,915.4 thereafter.
7. DEBT
Short-term borrowings and the current portion of long-term debt at September 30, 2024, and December 31, 2023, consisted of the following:
| September 30, 2024 | December 31, 2023 | ||||||||||
| 2.30% senior notes due 2024 | 400.0 | 400.0 | |||||||||
| 3.25% senior notes due 2024 | — | 600.0 | |||||||||
| 3.60% senior notes due 2025 | 1,000.0 | — | |||||||||
| Debt issuance costs | (0.5) | (1.3) | |||||||||
| Current portion of note payable | 0.4 | 1.1 | |||||||||
| Total short-term borrowings and current portion of long-term debt | $ | 1,399.9 | $ | 999.8 | |||||||
Long-term debt at September 30, 2024, and December 31, 2023, consisted of the following:
| September 30, 2024 | December 31, 2023 | ||||||||||
| 3.60% senior notes due 2025 | — | 1,000.0 | |||||||||
| 1.55% senior notes due 2026 | 500.0 | 500.0 | |||||||||
| 3.60% senior notes due 2027 | 600.0 | 600.0 | |||||||||
| 2.95% senior notes due 2029 | 650.0 | 650.0 | |||||||||
| 4.35% senior notes due 2030 | 650.0 | — | |||||||||
| 2.70% senior notes due 2031 | 442.9 | 430.4 | |||||||||
| 4.55% senior notes due 2032 | 500.0 | — | |||||||||
| 4.80% senior notes due 2034 | 850.0 | — | |||||||||
| 4.70% senior notes due 2045 | 900.0 | 900.0 | |||||||||
| Debt issuance costs | (41.1) | (26.3) | |||||||||
| AR facility | 300.0 | — | |||||||||
| Note payable | 0.3 | 0.6 | |||||||||
| Total long-term debt | $ | 5,352.1 | $ | 4,054.7 | |||||||
Credit Facilities
The Company maintains a senior revolving credit facility, which was amended and restated on January 13, 2023. It consists of a five-year facility in the principal amount of up to $1,000.0, with the option of increasing the facility by up to an additional $500.0, subject to the agreement of one or more new or existing lenders to provide such additional amounts and certain other customary conditions. The revolving credit facility also provides for a subfacility of up to $100.0 for swing line borrowings and a subfacility of up to $150.0 for issuances of letters of credit. The Company is required to pay a facility fee on the aggregate commitments under the revolving credit facility, at a per annum rate ranging from 0.10% to 0.225%, depending on the Company's debt ratings. The revolving credit facility is permitted to be used for general corporate purposes, including working capital, capital expenditures, funding of share repurchases and certain other payments, acquisitions, and other investments. The revolving credit facility also provides for the issuance of letters of credit without a reduction of the availability of borrowings
LABCORP HOLDINGS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars and shares in millions, except per share data)
under the facility. There was $0.0 outstanding on the Company's current revolving credit facility and $91.9 in outstanding letters of credit on the Company's subfacility as of September 30, 2024. As of September 30, 2024, the effective interest rate on the revolving credit facility was 6.26%. The credit facility expires on April 30, 2026.
Under the revolving credit facility, the Company is subject to negative covenants limiting subsidiary indebtedness and certain other covenants typical for investment grade-rated borrowers, and the Company is required to maintain certain leverage ratios. The Company was in compliance with all covenants in the revolving credit facility at September 30, 2024, and expects that it will remain in compliance with its existing debt covenants for the next twelve months.
On August 23, 2024, the Company and a bankruptcy-remote special purpose vehicle (SPV) entered into an accounts receivable securitization facility (AR Facility) with PNC Bank, National Association (PNC) with a three-year term. The AR Facility allows the Company to borrow from PNC an amount of up to $300.0 through August of 2027 and may increase up to $700.0, subject to the satisfaction of certain conditions.
The SPV is a variable interest entity (VIE) for which the Company is the primary beneficiary. The SPV's sole business consists of the continuous purchase of receivables from the Company which is used as collateral for the loan with PNC. Although the SPV is included in the Company's consolidated financial statements, it is a separate legal entity with separate creditors.
Upon the transfer of ownership and control of the receivables to the SPV, the Company has no retained interests in the receivables sold and they become unavailable to the Company's creditors should the relevant seller become insolvent. The Company has collection and administrative responsibilities for the receivables sold to the SPV.
During the three months ended September 30, 2024, the Company received loan proceeds of $300.0 under the AR Facility, which is included in cash from financing activities in the Condensed Consolidated Statement of Cash Flows.
Senior Notes
On September 23, 2024, LCAH entered into an indenture with U.S. Bank Trust Company, National Association, as trustee (the Trustee) (the Indenture). Also, on September 23, 2024, the Company, LCAH, and the Trustee entered into certain first, second, and third supplemental indentures to the Indenture under each of which LCAH issued, and the Company guaranteed, $650.0 aggregate principal amount of 4.35% Senior Notes due 2030 (the 2030 Notes), $500.0 aggregate principal amount of 4.55% Senior Notes due 2032 (the 2032 Notes) and $850.0 aggregate principal amount of 4.80% Senior Notes due 2034, respectively (the 2034 Notes and, together with the 2030 Notes and the 2032 Notes, the Notes), totaling $2,000.0. Interest on the Notes is payable semi-annually on April 1 and October 1 of each year, commencing April 1, 2025. Net proceeds from the offering of the Notes were approximately $1,982.1 after deducting underwriting discounts and other estimated expenses of the offering. The net proceeds will be used to redeem or repay indebtedness and, to the extent not used for such purpose, for other general corporate purposes. Indebtedness to be redeemed or repaid at or prior to maturity were the Company's 2.30% senior notes due 2024, its 3.60% senior notes due 2025 and $350.0 of borrowings under its revolving credit facility.
8. PREFERRED STOCK AND COMMON SHAREHOLDERS’ EQUITY
The Company is authorized to issue up to 265.0 shares of common stock, par value $0.10 per share. The Company is authorized to issue up to 30.0 shares of preferred stock, par value $0.10 per share. There were no preferred shares outstanding as of September 30, 2024, and December 31, 2023.
The changes in common shares issued during the nine months ended September 30, 2024 are summarized below:
| Issued and Outstanding | |||||||||||||||||
| Common shares at December 31, 2023 | 83.9 | ||||||||||||||||
| Shares issued under employee stock plans | 0.6 | ||||||||||||||||
| Shares repurchased | (0.8) | ||||||||||||||||
| Common shares at September 30, 2024 | 83.7 |
Share Repurchase Program
When the Company repurchases shares of Common Stock, 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.
During the nine months ended September 30, 2024, the Company purchased 0.8 shares of its common stock at an average price of $211.63 for a total cost of $175.0. On July 24, 2024, the Board adopted a new share repurchase plan authorizing up to
LABCORP HOLDINGS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars and shares in millions, except per share data)
$1,000.0 of the Company's shares in addition to the remaining amount outstanding under the previous plan. As of September 30, 2024, the Company had outstanding authorization from the board of directors to purchase up to $1,355.4 of the Company's common stock.
Dividends
For the nine months ended September 30, 2024, the Company paid $183.0 in common stock dividends. On October 10, 2024, the Company announced a cash dividend of $0.72 per share of common stock for the third quarter, or approximately $61.0 in the aggregate. The dividend will be payable on December 13, 2024, to stockholders of record of all issued and outstanding shares of common stock as of the close of business on November 26, 2024. The declaration and payment of any future dividends will be at the discretion of the Company's board of directors.
Accumulated Other Comprehensive Earnings (Loss)
The components of accumulated other comprehensive earnings (loss) during the nine months ended September 30, 2024 were as follows:
| Foreign Currency Translation Adjustments | Net Benefit Plan Adjustments | Accumulated Other Comprehensive Earnings (Loss) | |||||||||||||||||||||
| Balance as of December 31, 2023 | $ | (47.6) | $ | (11.7) | $ | (59.3) | |||||||||||||||||
| Current year adjustments | (53.2) | (2.6) | (55.8) | ||||||||||||||||||||
| Amounts reclassified from accumulated other comprehensive income | — | 2.5 | 2.5 | ||||||||||||||||||||
| Tax effect of adjustments | — | (0.6) | (0.6) | ||||||||||||||||||||
| Balance as of September 30, 2024 | $ | (100.8) | $ | (12.4) | $ | (113.2) |
9. COMMITMENTS AND CONTINGENCIES
The Company (and/or its subsidiaries and affiliates) is involved from time to time in various claims and legal actions, including arbitrations, class actions, and other litigation (including those described in more detail below), arising in the ordinary course of business. Some of these actions involve claims that are substantial in amount. These matters include, but are not limited to, intellectual property disputes, commercial and contract disputes, professional liability claims, employee-related matters, transaction-related disputes, securities and corporate law matters, and inquiries, including subpoenas and other civil investigative demands, from governmental agencies, Medicare or Medicaid payers and managed care organizations (MCOs) reviewing billing practices or requesting comment on allegations of billing irregularities that are brought to their attention through billing audits or third parties. The Company receives civil investigative demands or other inquiries from various governmental bodies in the ordinary course of its business. Such inquiries can relate to the Company or other parties, including physicians and other health care providers. The Company works cooperatively to respond to appropriate requests for information.
The Company also is named from time to time in suits brought under the qui tam provisions of the False Claims Act and comparable state laws. These suits typically allege that the Company has made false statements and/or certifications in connection with claims for payment from U.S. federal or state healthcare programs. The suits may remain under seal (hence, unknown to the Company) for some time while the government decides whether to intervene on behalf of the qui tam plaintiff. Such claims are an inevitable part of doing business in the healthcare field today.
The Company believes that it is in compliance in all material respects with all statutes, regulations, and other requirements applicable to its commercial laboratory operations and biopharma laboratory services. These industries are, however, subject to extensive regulation, and the courts have not interpreted many of the applicable statutes and regulations. 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.
Many of the current claims and legal actions against the Company are in preliminary stages, and many of these cases seek an indeterminate amount of damages. 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
LABCORP HOLDINGS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars and shares in millions, except per share data)
probable and reasonably estimable. When loss contingencies are not both probable and reasonably estimable, the Company does not establish separate reserves.
The Company is unable to estimate a range of reasonably probable loss for the proceedings described in more detail below in which damages either have not been specified or, in the Company's judgment, are unsupported and/or exaggerated and (i) the proceedings are in early stages, (ii) there is uncertainty as to the outcome of pending appeals or motions, (iii) there are significant factual issues to be resolved, and/or (iv) there are novel legal issues to be presented. For these proceedings, however, the Company does not believe, based on currently available information, that the adverse outcomes are probable and reasonably estimable, and it does not believe they will have a material adverse effect on the Company's financial statements.
The Company has received various subpoenas and other civil investigative demands related to Medicaid billing. In October 2013, the Company received a Civil Investigative Demand from the State of Texas Office of the Attorney General requesting documents related to its billing to Texas Medicaid. The Company cooperated with this request. On October 5, 2018, the Company received a second Civil Investigative Demand from the State of Texas Office of the Attorney General requesting documents related to its billing to Texas Medicaid. The Company cooperated with this request. On January 26, 2021, the Company was notified that a qui tam Petition was pending under seal in the District Court, 250th Judicial District, Travis County, Texas, and that the State of Texas had intervened. On April 14, 2021, the Petition was unsealed. The Petition alleges that the Company submitted claims for reimbursement to Texas Medicaid that were higher than permitted under Texas Medicaid’s alleged “best price” regulations, and that the Company offered remuneration to Texas health care providers in the form of discounted pricing for certain laboratory testing services in exchange for the providers’ referral of Texas Medicaid business to the Company. The Petition seeks actual and double damages and civil penalties, as well as recovery of costs, attorney's fees, and legal expenses. On August 1, 2022, the District Court entered an order granting the Company's Motion for Partial Summary Judgment with respect to the claim that the Company submitted claims for reimbursement to Texas Medicaid that were higher than permitted under Texas Medicaid's alleged “best price” regulations. Plaintiffs filed a Notice of Non-Suit and Motion for Entry of Final Judgment and, on November 11, 2022, the court entered a Judgment. Plaintiffs filed a Notice of Appeal with respect to the court's order granting the Company's Motion for Partial Summary Judgment, referenced above. The Company will vigorously defend the lawsuit.
On August 31, 2015, the Company was served with a putative class action lawsuit, Patty Davis v. Laboratory Corporation of America, et al., filed in the Circuit Court of the Thirteenth Judicial Circuit for Hillsborough County, Florida. The complaint alleges that the Company violated the Florida Consumer Collection Practices Act by billing patients who were collecting benefits under the Workers' Compensation Statutes. The lawsuit seeks injunctive relief and actual and statutory damages, as well as recovery of attorney's fees and legal expenses. In April 2017, the Circuit Court granted the Company’s Motion for Judgment on the Pleadings. The Plaintiff appealed the Circuit Court’s ruling to the Florida Second District Court of Appeal. On October 16, 2019, the Florida Second District Court of Appeal reversed the Circuit Court’s dismissal, but certified a controlling issue of Florida law to the Florida Supreme Court. On February 17, 2020, the Florida Supreme Court accepted jurisdiction of the lawsuit. The court held oral arguments on December 9, 2020. On May 26, 2022, the Florida Supreme Court issued an opinion approving the result of the Florida Second District Court of Appeal in favor of the Plaintiff. The Company will vigorously defend the lawsuit.
On December 29, 2021, the Company was served with a putative class action lawsuit, Nathaniel J. Nolan, et al. v. Laboratory Corporation of America Holdings, filed in the U.S. District Court for the Middle District of North Carolina. The complaint alleges that the Company's patient acknowledgement of estimated financial responsibility form is misleading. The lawsuit seeks a declaratory judgment under the consumer protection laws of Nevada and Florida that the form is materially misleading and deceptive, an injunction barring the use of the form, damages on behalf of an alleged class, and attorney's fees and expenses. On February 28, 2022, the Company filed a Motion to Dismiss all claims. On February 13, 2023, the court entered an order granting the Company's Motion to Dismiss. On March 13, 2023, Plaintiffs filed a Notice of Appeal. On April 10, 2024, the U.S. Court of Appeals for the Fourth Circuit issued an order affirming in part, reversing in part, and remanding the case to the District Court for further proceedings. The Company will vigorously defend the lawsuit.
On April 1, 2019, Covance Research Products was served with a Grand Jury Subpoena issued by the Department of Justice (DOJ) in Miami, Florida requiring the production of documents related to the importation into the United States of live non-human primate shipments originating from or transiting through China, Cambodia, and/or Vietnam from April 1, 2014 through March 28, 2019. The Company is cooperating with the DOJ.
On May 14, 2019, Retrieval-Masters Creditors Bureau, Inc. d/b/a American Medical Collection Agency (AMCA), an external collection agency, notified the Company about a security incident AMCA experienced that may have involved certain personal information about some of the Company’s patients (the AMCA Incident). The Company referred patient balances to
LABCORP HOLDINGS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars and shares in millions, except per share data)
AMCA only when direct collection efforts were unsuccessful. The Company’s systems were not impacted by the AMCA Incident. Upon learning of the AMCA Incident, the Company promptly stopped sending new collection requests to AMCA and stopped AMCA from continuing to work on any pending collection requests from the Company. AMCA informed the Company that it appeared that an unauthorized user had access to AMCA’s system between August 1, 2018, and March 30, 2019, and that AMCA could not rule out the possibility that personal information on AMCA’s system was at risk during that time period. Information on AMCA’s affected system from the Company may have included name, address, and balance information for the patient and person responsible for payment, along with the patient’s phone number, date of birth, referring physician, and date of service. The Company was later informed by AMCA that health insurance information may have been included for some individuals, and because some insurance carriers utilize the Social Security Number as a subscriber identification number, the Social Security Number for some individuals may also have been affected. No ordered tests, laboratory test results, or diagnostic information from the Company were in the AMCA affected system. The Company notified individuals for whom it had a valid mailing address. For the individuals whose Social Security Number was affected, the notice included an offer to enroll in credit monitoring and identity protection services that was provided free of charge for 24 months.
Twenty-three putative class action lawsuits were filed against the Company related to the AMCA Incident in various U.S. District Courts. Numerous similar lawsuits have been filed against other health care providers who used AMCA. These lawsuits were consolidated into a multidistrict litigation in the District of New Jersey. On November 15, 2019, the Plaintiffs filed a Consolidated Class Action Complaint in the U.S. District Court of New Jersey. The consolidated Complaint generally alleged that the Company did not adequately protect its patients’ data and failed to timely notify those patients of the AMCA Incident. The Complaint asserted various causes of action, including but not limited to negligence, breach of implied contract, unjust enrichment, and the violation of state data protection statutes. The Complaint sought damages on behalf of a class of all affected Company customers. On January 22, 2020, the Company filed Motions to Dismiss all claims. On December 16, 2021, the court granted in part and denied in part the Company's Motion to Dismiss. On March 31, 2022, the Plaintiffs filed an Amended Complaint alleging claims for negligence, negligence per se, breach of confidence, invasion of privacy, and various state statutory claims, including a claim under the California Confidentiality of Medical Information Act. The Company filed a Motion to Dismiss certain claims of the Amended Complaint. On May 5, 2023, the court granted in part and denied in part the Company's Motion to Dismiss. The Company will vigorously defend the remaining claims in the multi-district litigation.
The Company was served with a shareholder derivative lawsuit, Raymond Eugenio, Derivatively on Behalf of Nominal Defendant, Laboratory Corporation of America Holdings v. Lance Berberian, et al., filed in the Court of Chancery of the State of Delaware on April 23, 2020. The complaint asserts derivative claims on the Company’s behalf against the Company’s board of directors and certain executive officers. The complaint generally alleges that the defendants failed to ensure that the Company utilized proper cybersecurity safeguards and failed to implement a sufficient response to data security incidents, including the AMCA Incident. The complaint asserts derivative claims for breach of fiduciary duty and seeks relief including damages, certain disclosures, and certain changes to the Company’s internal governance practices. On June 2, 2020, the Company filed a Motion to Stay the lawsuit due to its overlap with the multi-district litigation referenced above. On July 2, 2020, the Company filed a Motion to Dismiss. On July 14, 2020, the court entered an order staying the lawsuit pending the resolution of the multi-district litigation. The Company will vigorously defend the lawsuit.
Certain governmental entities have requested information from the Company related to the AMCA Incident. The Company received a request for information from the Office for Civil Rights (OCR) of the Department of Health and Human Services. On April 28, 2020, OCR notified the Company of the closure of its inquiry. The Company has also received requests from a multi-state group of state Attorneys General and is cooperating with these requests for information.
On January 31, 2020, the Company was served with a putative class action lawsuit, Luke Davis and Julian Vargas, et al. v. Laboratory Corporation of America Holdings, filed in the U.S. District Court for the Central District of California. The lawsuit alleges that visually impaired patients are unable to use the Company's touchscreen kiosks at Company patient service centers in violation of the Americans with Disabilities Act and similar California statutes. The lawsuit seeks statutory damages, injunctive relief, and attorney's fees and costs. On March 20, 2020, the Company filed a Motion to Dismiss Plaintiffs' Complaint and to Strike Class Allegations. In August 2020, the Plaintiffs filed an Amended Complaint. On April 26, 2021, the Plaintiffs and the Company each filed Motions for Summary Judgment and the Plaintiffs filed a Motion for Class Certification. On May 23, 2022, the court entered an order granting Plaintiffs’ Motion for Class Certification. On June 6, 2022, the Company filed a Petition for Permission to Appeal the Order Granting Class Certification with the U.S. Court of Appeals for the Ninth Circuit. On September 22, 2022, the Ninth Circuit granted the Company's Petition for Permission to Appeal the Order Granting Class Certification. On February 8, 2024, the Ninth Circuit affirmed the trial court’s decision to certify both a California damages class and a nationwide injunctive class. On March 25, 2024, the Company filed a Petition for Rehearing En Banc with the Ninth Circuit. On April 18, 2024, the Ninth Circuit denied the Petition for Rehearing En Banc. On September 13, 2024, the
LABCORP HOLDINGS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars and shares in millions, except per share data)
Company filed a Petition for Writ of Certiorari with the United States Supreme Court. The Company will vigorously defend the lawsuit.
On October 16, 2020, Ravgen Inc. filed a patent infringement lawsuit, Ravgen Inc. v. Laboratory Corporation of America Holdings, in the U.S. District Court for the Western District of Texas, alleging infringement of two Ravgen-owned U.S. patents. The lawsuit seeks monetary damages, enhancement of those damages for willfulness, and recovery of attorney’s fees and costs. On September 28, 2022, a jury rendered a verdict in favor of the Plaintiff on the remaining patent at issue, finding that the Company willfully infringed Ravgen's patent, and awarded damages of $272.0. Plaintiff filed post-trial motions seeking enhanced damages of up to $817.0 based on the finding of willfulness, as well as attorney's fees and costs. On May 12, 2023, the court issued an order granting Plaintiff's motion in part and awarding enhanced damages of $100.0. The Company strongly disagrees with the verdict, based on a number of legal factors, and will vigorously defend the lawsuit through the appeal process. On June 4, 2021, the Company also instituted proceedings before the Patent Trial and Appeal Board of the U.S. Patent and Trademark Office challenging the validity of the Ravgen patent at issue in the trial. In November 2022, the Patent Trial and Appeal Board issued a decision upholding the validity of the Ravgen patent, and the Company has filed an appeal of this decision.
On May 14, 2020, the Company was served with a putative class action lawsuit, Jose Bermejo v. Laboratory Corporation of America (Bermejo I) filed in the Superior Court of California, County of Los Angeles Central District, alleging that certain non-exempt California-based employees were not properly compensated for driving time or properly paid wages upon termination of employment. The Plaintiff asserts these actions violate various California Labor Code provisions and Section 17200 of the Business and Professional Code. The lawsuit seeks monetary damages, civil penalties, and recovery of attorney’s fees and costs. On June 15, 2020, the lawsuit was removed to the U.S. District Court for the Central District of California. On June 16, 2020, the Company was served with a Private Attorney General Act lawsuit by the same plaintiff in Jose Bermejo v. Laboratory Corporation of America (Bermejo II), filed in the Superior Court of California, County of Los Angeles Central District, alleging that certain Company practices violated California Labor Code penalty provisions related to unpaid and minimum wages, unpaid overtime, unpaid meal and rest break premiums, untimely payment of wages following separation of employment, failure to maintain accurate pay records, and non-reimbursement of business expenses. The second lawsuit seeks to recover civil penalties and recovery of attorney's fees and costs. On October 28, 2020, the court issued an order staying proceedings in Bermejo II pending resolution of Bermejo I. The second lawsuit seeks to recover civil penalties and recovery of attorney's fees and costs. On February 24, 2022, the parties entered into a Memorandum of Understanding of the terms of a settlement of the Bermejo I and Bermejo II lawsuits. The court granted preliminary approval of the parties’ settlement agreement of the Bermejo I lawsuit on March 17, 2023, and of the Bermejo II lawsuit on November 29, 2023. The settlement funds for the Bermejo I and Bermejo II settlements have been transferred to a claims administrator for processing. Once the claims administration is completed, the parties will seek final settlement approval from the court.
On June 14, 2021, a single plaintiff filed a Private Attorney General Act lawsuit, Becker v. Laboratory Corporation of America, in the Superior Court of California, County of Orange, alleging various violations of the California Labor Code, including that the Plaintiff was not properly compensated for work and overtime hours, not properly paid meal and rest break premiums, not reimbursed for certain business-related expenses, and received inaccurate wage statements. The lawsuit seeks monetary damages, civil penalties, and recovery of attorney’s fees and costs. On July 28, 2024, the Court issued a dismissal of the lawsuit pursuant to a settlement agreement between plaintiff and the Company.
On November 23, 2021, the Company was served with a single plaintiff Private Attorney General Act lawsuit, Poole v. Laboratory Corporation of America, filed in the Superior Court of California, County of Kern, alleging various violations of the California Labor Code, including that Plaintiff was not properly paid wages owed, not properly paid meal and rest break premiums, not reimbursed for certain business related expenses, and other allegations including the untimely payment of wages and receipt of inaccurate wage statements. The lawsuit seeks monetary damages, civil penalties, and recovery of attorney's fees and costs. The case was removed to the U.S. District Court for the Eastern District of California. A settlement of the Bermejo I and Bermejo II lawsuits, if approved by the court, will resolve the portion of the Poole lawsuit relating to service representatives and senior service representatives.
On October 5, 2020, the Company was served with a putative class action lawsuit, Williams v. LabCorp Employer Services, Inc. et al., filed in the Superior Court of California, County of Los Angeles, alleging that certain non-exempt California-based employees were not properly compensated for work and overtime hours, not properly paid meal and rest break premiums, not reimbursed for certain business-related expenses, not properly paid for driving or wait times, and received inaccurate wage statements. The Plaintiff also asserts claims for unfair competition under Section 17200 of the Business and Professional Code. On November 4, 2020, the lawsuit was removed to the U.S. District Court for the Central District of California. The lawsuit seeks monetary damages, liquidated damages, civil penalties, and recovery of attorney's fees and costs. On June 24, 2021, the
LABCORP HOLDINGS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars and shares in millions, except per share data)
District Court remanded the case to the Superior Court of California, County of Los Angeles on the grounds that potential damages did not meet the Class Action Fairness Act (CAFA), 28 U.S.C. § 1332(d), jurisdictional threshold. The parties entered into a settlement agreement which received court preliminary approval on December 13, 2023. Settlement proceeds were transferred to the settlement fund administrator in January 2024 and have been distributed by the settlement fund administrator. On September 13, 2024, the court issued its final approval of the settlement and dismissed the lawsuit.
On June 7, 2023, the Company was served with a putative class action lawsuit, Connie Howard, Yadira Yazmin Hernandez, and Deborah Reynolds, et al. v. Laboratory Corporation of America, Laboratory Corporation of America Holdings, and Meta Platforms, Inc., filed in the U.S. District Court for the Northern District of California, alleging that the Company’s website includes a tracking code created by Meta, known as the Meta Pixel, that sent information related to Plaintiffs and their online activities to Meta. Plaintiffs assert claims against the Company under California and Pennsylvania law and seek to represent classes of all persons in California, or in Pennsylvania, who allegedly entered search terms into the Company’s website and who used Facebook during a time that Plaintiffs allege the Meta Pixel was active on the Company’s website. Plaintiffs seek an injunction, damages, attorneys’ fees, and costs. On August 23, 2023, the Company filed a Motion to Dismiss. On September 5, 2023, the lawsuit was transferred to the U.S. District Court for the Middle District of North Carolina. On September 9, 2023, Plaintiffs filed an Amended Complaint. Among other things, the Amended Complaint contains allegations that in addition to the Meta Pixel, the Company's website uses Google Analytics and other online tracking technologies. On October 11, 2023, the Company filed a Motion to Dismiss the Amended Complaint. On September 27, 2024, the Court denied the Motion to Dismiss the Amended Complaint. The Company will vigorously defend the lawsuit.
On August 14, 2020, the Company was served with a Subpoena Duces Tecum issued by the State of Colorado Office of the Attorney General requiring the production of documents related to urine drug testing in all states. The Company is cooperating with this request.
On February 7, 2022, the Company was served with a Subpoena Duces Tecum issued by the DOJ in Camden, New Jersey requiring the production of documents related to non-invasive prenatal screening tests. The Company responded to the DOJ.
On June 27, 2022, the Company was served with a Subpoena Duces Tecum issued by the DOJ in Boston, Massachusetts requiring the production of documents related to urine drug testing. The Company is cooperating with the DOJ.
In April 2023, the Company received Civil Investigative Demands issued by the DOJ in Washington, D.C. requiring the production of information related to the Medicare billing rule regarding reimbursement for laboratory testing performed for hospital patients. The Company cooperated with the DOJ and entered into an agreement dated September 26, 2024 to resolve the matter.
On February 13, 2024, a putative class action lawsuit, Michael Wiggins and Teri Stevens v. Laboratory Corporation of America Holdings, was filed in the U.S. District Court for the Eastern District of Pennsylvania, alleging that the Company’s website includes a computer code created by Google that sent information to Google related to Plaintiffs and their online activities. Plaintiffs assert statutory and common law claims against the Company and seek to represent a class of all persons whose health information was allegedly shared with Google from the Company’s website before March 8, 2023. Plaintiffs seek an injunction, damages, attorneys’ fees, and costs. On April 12, 2024, the Company filed a Motion to Compel Arbitration and Stay Proceedings. On October 11, 2024, the Court granted the Motion to Compel Arbitration and Stay Proceedings. The Company will vigorously defend any arbitration proceeding.
There are various other pending legal proceedings involving the Company including, but not limited to, additional employment-related lawsuits, professional liability lawsuits, and commercial lawsuits. While it is not feasible to predict the outcome of such proceedings, in the opinion of the Company, the likelihood of loss is remote and any reasonably possible loss associated with the resolution of such proceedings is not expected to be material to the Company’s financial condition, results of operations, or cash flows, either individually or in the aggregate.
Under the Company's present insurance programs, coverage is obtained for catastrophic exposure as well as those risks required to be insured by law or contract. The Company is responsible for the uninsured portion of losses related primarily to general, professional and vehicle liability, certain medical costs and workers' compensation. The self-insured retentions are on a per-occurrence basis without any aggregate annual limit. Provisions for losses expected under these programs are recorded based upon the Company's estimates of the aggregated liability of claims incurred.
LABCORP HOLDINGS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars and shares in millions, except per share data)
10. FAIR VALUE MEASUREMENTS
The Company’s population of financial assets and liabilities subject to fair value measurements as of September 30, 2024, and December 31, 2023, was as follows:
| Fair Value Measurements as of | |||||||||||||||||||||||||||||
| September 30, 2024 | |||||||||||||||||||||||||||||
| Balance Sheet | Fair Value as of | Using Fair Value Hierarchy | |||||||||||||||||||||||||||
| Classification | September 30, 2024 | Level 1 | Level 2 | Level 3 | |||||||||||||||||||||||||
| Noncontrolling interest put | Noncontrolling interest | $ | 15.2 | $ | — | $ | 15.2 | $ | — | ||||||||||||||||||||
| Cross currency swaps | Other liabilities | 175.4 | — | 175.4 | — | ||||||||||||||||||||||||
| Interest rate swaps | Other liabilities | 57.1 | — | 57.1 | — | ||||||||||||||||||||||||
| Cash surrender value of life insurance policies | Other assets, net | 97.9 | — | 97.9 | — | ||||||||||||||||||||||||
| Deferred compensation asset | Other assets, net | 34.3 | — | 34.3 | — | ||||||||||||||||||||||||
| Deferred compensation liability | Other liabilities | 127.3 | — | 127.3 | — | ||||||||||||||||||||||||
| Contingent consideration | Accrued expenses and other; Other liabilities | 22.0 | — | — | 22.0 | ||||||||||||||||||||||||
| Fair Value Measurements as of | |||||||||||||||||||||||||||||
| December 31, 2023 | |||||||||||||||||||||||||||||
| Balance Sheet | Fair Value as of | Using Fair Value Hierarchy | |||||||||||||||||||||||||||
| Classification | December 31, 2023 | Level 1 | Level 2 | Level 3 | |||||||||||||||||||||||||
| Noncontrolling interest put | Noncontrolling interest | $ | 15.5 | $ | — | $ | 15.5 | $ | — | ||||||||||||||||||||
| Cross currency swaps | Accrued expenses and other; Other liabilities | 109.0 | — | 109.0 | — | ||||||||||||||||||||||||
| Interest rate swaps | Other liabilities, net | 69.6 | — | 69.6 | — | ||||||||||||||||||||||||
| Cash surrender value of life insurance policies | Other assets, net | 95.4 | — | 95.4 | — | ||||||||||||||||||||||||
| Deferred compensation asset | Other assets, net | 21.1 | — | 21.1 | — | ||||||||||||||||||||||||
| Deferred compensation liability | Other liabilities | 107.4 | — | 107.4 | — | ||||||||||||||||||||||||
| Contingent consideration | Accrued expenses and other; Other liabilities | 66.1 | — | — | 66.1 |
The Company has a noncontrolling interest put related to its Ontario subsidiary that has been classified as mezzanine equity in the Company’s condensed consolidated balance sheets. The noncontrolling interest put is valued at its contractually determined value, which approximates fair value.
The Company offers certain employees the opportunity to participate in an employee-funded deferred compensation plan (DCP). A participant's deferrals are allocated by the participant to one or more of multiple measurement funds, which are indexed to externally managed funds. From time to time, to offset the cost of the growth in the participant's investment accounts, the Company purchases life insurance policies, with the Company named as beneficiary of the policies. Changes in the cash surrender value of the life insurance policies are based upon earnings and changes in the value of the underlying investments, which are typically invested in a similar manner to the participant's allocations. Changes in the fair value of the DCP obligation are derived using quoted prices in active markets based on the market price per unit multiplied by the number of units. The cash surrender value and the DCP obligations are classified within Level 2 because their inputs are derived principally from observable market data by correlation to the hypothetical investments.
Contingent accrued earn-out business acquisition consideration liabilities are measured at fair value using Level 3 valuations. These contingent consideration liabilities were recorded at fair value on the acquisition date and are remeasured quarterly based on the then assessed fair value and adjusted if necessary. The increases or decreases in the fair value of contingent consideration payable can result from changes in anticipated revenue levels and changes in assumed discount periods and rates. As the fair value measure is based on significant inputs that are not observable in the market, they are categorized as Level 3.
The carrying amounts of cash and cash equivalents, accounts receivable, income taxes receivable, and accounts payable are considered to be representative of their respective fair values due to their short-term nature. The fair market value of the senior notes, based on market pricing, was approximately $6,314.0 and $4,850.4 as of September 30, 2024, and December 31, 2023, respectively. The Company's note and debt instruments are classified as Level 2 instruments, as the fair market values of these instruments are determined using other observable inputs.
LABCORP HOLDINGS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars and shares in millions, except per share data)
Cross-Currency Swap
During the fourth quarter of 2018, the Company entered into U.S. Dollar (USD) to Swiss Franc cross-currency swap agreements with an aggregate notional value of $600.0. During the second quarter of 2022, the Company terminated $300.0 of those cross-currency swap agreements and entered into new USD to Swiss Franc cross-currency swap agreements with an aggregate notional value of $300.0 that were set to mature in 2024.
During the first quarter of 2024, the Company terminated its 2024 and 2025 USD to Swiss Franc cross currency swaps and entered into two new swaps, each with a notional value of $300.0 and maturity dates of 2031 and 2034, respectively.
During the third quarter of 2024, the Company entered into five new USD to Swiss Franc cross currency swaps, with an aggregate notional value of $600.0, of which $300.0 matures in 2029 and $300.0 matures in 2034.
The cross currency swaps, in aggregate, are included in Accrued expenses and other and other long-term liabilities, as appropriate, with an aggregate fair value of $175.4 and $109.0 as of September 30, 2024 and December 31, 2023, respectively.
Changes in the fair value of the cross-currency swaps are charged or credited through accumulated other comprehensive income in the Consolidated Balance Sheet until the hedged item is recognized in earnings. The cumulative amount of the fair value hedging adjustments are recognized as currency translation within the Condensed Consolidated Statement of Comprehensive Earnings.
11. SUPPLEMENTAL CASH FLOW INFORMATION
| Nine Months Ended September 30, | |||||||||||
| 2024 | 2023 | ||||||||||
| Cash paid during period for: | |||||||||||
| Interest | $ | 179.0 | $ | 180.3 | |||||||
| Income taxes, net of refunds | 194.5 | 181.2 | |||||||||
| Disclosure of non-cash financing and investing activities: | |||||||||||
| Change in accrued property, plant, and equipment | (35.6) | 23.1 | |||||||||
12. BUSINESS SEGMENT INFORMATION
The following table is a summary of segment information for the three and nine months ended September 30, 2024, and 2023. The “management approach” has been used to present the following segment information. This approach is based upon the way the management of the Company organizes segments within an enterprise for making operating decisions and assessing performance. Financial information is reported on the basis that it is used internally by the chief operating decision maker (CODM) for evaluating segment performance and deciding how to allocate resources to segments. The Company’s chief executive officer has been identified as the CODM.
Segment asset information is not presented because it is not used by the CODM at the segment level. The Corporate costs not allocated to segments include the costs of centralized functions, other charges such as acquisition expenses, spin-off costs, remaining unallocated costs of the CDCS business, and COVID-19 related costs unrelated to the segment. Centralized functions include corporate governance, executive management and related human resources, finance, legal, risk management, and information technology functions.
LABCORP HOLDINGS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars and shares in millions, except per share data)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||
| Revenues: | ||||||||||||||||||||||||||
| Dx | $ | 2,553.5 | $ | 2,344.7 | $ | 7,558.1 | $ | 7,068.3 | ||||||||||||||||||
| BLS | 737.7 | 719.1 | 2,155.6 | 2,079.4 | ||||||||||||||||||||||
| Intercompany eliminations and other | (9.2) | (7.0) | (34.2) | (19.4) | ||||||||||||||||||||||
| Total revenues | $ | 3,282.0 | $ | 3,056.8 | $ | 9,679.5 | $ | 9,128.3 | ||||||||||||||||||
| Operating Earnings: | ||||||||||||||||||||||||||
| Dx segment operating income | $ | 387.4 | $ | 386.3 | $ | 1,246.8 | $ | 1,237.5 | ||||||||||||||||||
| BLS segment operating income | 120.9 | 109.0 | 328.2 | 287.2 | ||||||||||||||||||||||
| Segment operating income | 508.3 | 495.3 | 1,575.0 | 1,524.7 | ||||||||||||||||||||||
| General corporate and unallocated expenses | (172.5) | (169.6) | (481.7) | (469.7) | ||||||||||||||||||||||
| Amortization of intangibles and other assets | (63.7) | (55.7) | (186.0) | (160.6) | ||||||||||||||||||||||
| Goodwill and other asset impairments | — | (10.2) | (2.5) | (15.2) | ||||||||||||||||||||||
| Restructuring and other charges | (18.0) | (7.5) | (34.6) | (30.8) | ||||||||||||||||||||||
| Total operating income | $ | 254.1 | $ | 252.3 | $ | 870.2 | $ | 848.4 |
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