LABORATORY CORP OF AMERICA HOLDINGS [LH] Filings

10-Q 1 lh-20230930.htm 10-Q lh-20230930

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, 2023

☐ 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)


Delaware						13-3757370
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)


358 South Main Street
Burlington,	North Carolina	27215
(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 84.9 million shares as of October 27, 2023.

INDEX

PART I. FINANCIAL INFORMATION


Item 1.	Financial Statements (unaudited)

	Condensed Consolidated Balance Sheets	2
	September 30, 2023 and December 31, 2022

	Condensed Consolidated Statements of Operations	3
	Three and Nine Months Ended September 30, 2023 and 2022

	Condensed Consolidated Statements of Comprehensive Earnings	4
	Three and Nine Months Ended September 30, 2023 and 2022

	Condensed Consolidated Statements of Changes in Shareholders’ Equity	5
	Three and Nine Months Ended September 30, 2023 and 2022

	Condensed Consolidated Statements of Cash Flows	6
	Nine months ended September 30, 2023 and 2022

	Notes to Unaudited Condensed Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	33

Item 4.	Controls and Procedures	34

PART II. OTHER INFORMATION


Item 1.	Legal Proceedings	35

Item 1A.	Risk Factors	35

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35

Item 5.	Other Information	36

Item 6.	Exhibits	36

INDEX

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, 2023		December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	727.9	$	320.6
Accounts receivable, net	1,957.0		1,785.5
Unbilled services	108.0		211.8
Supplies inventory	461.1		470.6
Prepaid expenses and other	700.2		610.4
Current assets of discontinued operations	—		1,226.1
Total current assets	3,954.2		4,625.0
Property, plant and equipment, net	2,820.5		2,794.1
Goodwill, net	6,331.9		6,123.7
Intangible assets, net	3,275.6		3,123.6
Joint venture partnerships and equity method investments	39.5		65.7
Deferred income taxes	7.7		6.4
Other assets, net	456.6		378.4
Long-term assets of discontinued operations	—		3,038.2
Total assets	$	16,886.0	$	20,155.1

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	690.6	$	852.2
Accrued expenses and other	689.7		787.0
Unearned revenue	360.8		310.6
Short-term operating lease liabilities	162.3		163.8
Short-term finance lease liabilities	6.4		6.0
Short-term borrowings and current portion of long-term debt	991.0		301.3
Current liabilities of discontinued operations	—		657.6
Total current liabilities	2,900.8		3,078.5
Long-term debt, less current portion	4,427.6		5,038.8
Operating lease liabilities	662.4		652.9
Financing lease liabilities	80.2		83.6
Deferred income taxes and other tax liabilities	499.5		543.4
Other liabilities	423.0		401.1
Long-term liabilities of discontinued operations	—		241.3
Total liabilities	8,993.5		10,039.6
Commitments and contingent liabilities
Noncontrolling interest	19.4		18.9
Shareholders’ equity:
Common stock, 84.9 and 88.2 shares outstanding at September 30, 2023, and December 31, 2022, respectively	7.7		8.1
Additional paid-in capital	4.7		—
Retained earnings	8,069.5		10,581.7

Accumulated other comprehensive loss	(208.8)		(493.2)
Total shareholders’ equity	7,873.1		10,096.6
Total liabilities and shareholders’ equity	$	16,886.0	$	20,155.1

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

INDEX

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,
	2023		2022		2023		2022
Revenues	$	3,056.8	$	2,866.8	$	9,128.3	$	8,934.2
Cost of revenues	2,205.6		1,980.6		6,584.8		6,023.4

Gross profit	851.2		886.2		2,543.5		2,910.8
Selling, general and administrative expenses	525.5		453.2		1,488.5		1,307.6
Amortization of intangibles and other assets	55.7		49.0		160.6		149.0
Goodwill and other asset impairments	10.2		—		15.2		1.2
Restructuring and other charges	7.5		10.0		30.8		45.0
Operating income	252.3		374.0		848.4		1,408.0
Other income (expense):
Interest expense	(50.3)		(46.3)		(150.8)		(130.7)
Investment income	15.9		3.7		22.6		6.2
Equity method income (expense), net	(0.3)		1.7		(1.5)		6.5

Other, net	21.1		(17.6)		(2.7)		(62.8)
Earnings from continuing operations before income taxes	238.7		315.5		716.0		1,227.2
Provision for income taxes	55.1		38.2		168.8		260.8
Earnings from continuing operations	183.6		277.3		547.2		966.4
Earnings from discontinued operations, net of tax	—		75.9		38.8		237.8
Net earnings	183.6		353.2		586.0		1,204.2
Less: Net earnings attributable to the noncontrolling interest	(0.3)		(0.4)		(0.9)		(1.2)
Net earnings attributable to Laboratory Corporation of America Holdings	$	183.3	$	352.8	$	585.1	$	1,203.0

Basic earnings per common share:
Basic earnings per common share continuing operations	$	2.12	$	3.07	$	6.22	$	10.50
Basic earnings per common share discontinued operations	$	—	$	0.84	$	0.44	$	2.59
Basic earnings per common share	$	2.12	$	3.91	$	6.66	$	13.09

Diluted earnings per common share:
Diluted earnings per common share continuing operations	$	2.11	$	3.06	$	6.19	$	10.45
Diluted earnings per common share discontinued operations	$	—	$	0.84	$	0.44	$	2.57
Diluted earnings per common share	$	2.11	$	3.90	$	6.63	$	13.02

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

INDEX

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,

	2023		2022		2023		2022
Net earnings	$	183.6	$	353.2	$	586.0	$	1,204.2
Foreign currency translation adjustments	(56.0)		(256.5)		43.8		(572.2)
Net benefit plan adjustments	1.1		1.3		3.4		4.2

Other comprehensive earnings (loss) before tax	(54.9)		(255.2)		47.2		(568.0)
Provision (benefit) for income tax related to items of comprehensive earnings	(0.2)		(0.3)		(0.8)		(1.1)
Other comprehensive earnings (loss), net of tax	(55.1)		(255.5)		46.4		(569.1)
Comprehensive earnings	128.5		97.7		632.4		635.1
Less: Net earnings attributable to the noncontrolling interest	(0.3)		(0.4)		(0.9)		(1.2)
Comprehensive earnings attributable to Laboratory Corporation of America Holdings	$	128.2	$	97.3	$	631.5	$	633.9

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

INDEX

LABORATORY CORPORATION OF AMERICA HOLDINGS 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, 2021	$	8.5	$	—	$	10,456.8	$	(191.9)	$	10,273.4
Net earnings attributable to Laboratory Corporation of America Holdings	—		—		491.6		—		491.6
Other comprehensive earnings (loss), net of tax	—		—		—		(73.0)		(73.0)
Issuance of common stock under employee stock plans	—		18.2		—		—		18.2
Net share settlement tax payments from issuance of stock to employees	—		(27.3)		—		—		(27.3)
Stock compensation	—		38.2		—		—		38.2

BALANCE AT MARCH 31, 2022	$	8.5	$	29.1	$	10,948.4	$	(264.9)	$	10,721.1
Net earnings attributable to Laboratory Corporation of America Holdings	—		—		358.6		—		358.6
Other comprehensive earnings (loss), net of tax	—		—		—		(240.6)		(240.6)
Dividends declared	—		—		(68.6)		—		(68.6)
Issuance of common stock under employee stock plans	—		0.9		—		—		0.9
Net share settlement tax payments from issuance of stock to employees	—		(10.1)		—		—		(10.1)
Stock compensation	—		39.4		—		—		39.4
Purchase of common stock	(0.2)		(59.3)		(340.5)		—		(400.0)
BALANCE AT JUNE 30, 2022	$	8.3	$	—	$	10,897.9	$	(505.5)	$	10,400.7
Net earnings attributable to Laboratory Corporation of America Holdings	—		—		352.8		—		352.8
Other comprehensive earnings (loss), net of tax	—		—		—		(255.5)		(255.5)
Dividends declared	—		—		(66.4)		—		(66.4)
Issuance of common stock under employee stock plans	—		31.5		—		—		31.5
Net share settlement tax payments from issuance of stock to employees	—		(7.2)		—		—		(7.2)
Stock compensation	—		36.3		—		—		36.3
Purchase of common stock	(0.1)		(60.6)		(339.3)		—		(400.0)
BALANCE AT SEPTEMBER 30, 2022	$	8.2	$	—	$	10,845.0	$	(761.0)	$	10,092.2








BALANCE AT DECEMBER 31, 2022	$	8.1	$	—	$	10,581.7	$	(493.2)	$	10,096.6
Net earnings attributable to Laboratory Corporation of America Holdings	—		—		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 Laboratory Corporation of America Holdings	—		—		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 Laboratory Corporation of America Holdings	—		—		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

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

INDEX

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

(unaudited)


	Nine Months Ended September 30,
	2023		2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings	$	586.0	$	1,204.2
Earnings from discontinued operations, net of tax	(38.8)		(237.8)
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	430.9		406.8
Stock compensation	101.7		93.2
Operating lease right-of-use asset expense	128.5		129.0
Goodwill and other asset impairments	15.2		1.2
Deferred income taxes	(18.2)		(44.8)
Other	3.9		—
Change in assets and liabilities (net of effects of acquisitions and divestitures):
Decrease (increase) in accounts receivable	(173.6)		59.8
Decrease (increase) in unbilled services	103.4		(64.6)
Decrease (increase) in supplies inventory	9.7		(47.5)
Increase in prepaid expenses and other	(74.9)		(52.7)
Increase (decrease) in accounts payable	(188.6)		112.6
Increase in unearned revenue	50.7		27.6
Decrease in accrued expenses and other	(313.2)		(429.4)
Net cash provided by continuing operating activities	622.7		1,157.6
Net cash provided by discontinued operating activities	125.4		144.7
Net cash provided by operating activities	748.1		1,302.3
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures	(286.4)		(330.2)
Proceeds from sale of assets	0.3		1.2

Proceeds from sale or distribution of investments	6.7		0.7
Proceeds from exit from swaps	—		2.9
Investments in equity affiliates	(20.1)		(6.1)
Acquisition of businesses, net of cash acquired	(516.7)		(1,013.6)
Net cash used in continuing investing activities	(816.2)		(1,345.1)
Net cash used in discontinued investing activities	(24.7)		(33.8)
Net cash used for investing activities	(840.9)		(1,378.9)
CASH FLOWS FROM FINANCING ACTIVITIES:




Proceeds from revolving credit facilities	1,968.5		—
Payments on revolving credit facilities	(1,878.9)		—


Net share settlement tax payments from issuance of stock to employees	(39.6)		(44.6)
Net proceeds from issuance of stock to employees	54.4		50.6
Dividends paid	(192.9)		(131.6)
Purchase of common stock	(1,009.0)		(800.0)
Other	(15.0)		(24.0)
Net cash used in continuing financing activities	(1,112.5)		(949.6)
Net cash provided by discontinued financing activities	1,499.7		—
Net cash provided by (used in) financing activities	387.2		(949.6)
Effect of exchange rate changes on cash and cash equivalents	3.5		(36.6)
Net increase (decrease) in cash and cash equivalents	297.9		(1,062.8)
Cash and cash equivalents at beginning of period	430.0		1,472.7

Less: Cash and cash equivalents of discontinued operations as of end of period	$	—	$	105.0
Cash and cash equivalents at end of period	$	727.9	$	304.9

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

INDEX

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

1. BASIS OF FINANCIAL STATEMENT PRESENTATION

Laboratory Corporation of America® Holdings (Labcorp® or the Company) is a global leader of innovative and comprehensive laboratory service that serves physicians, hospitals, patients and biopharmaceutical clients. The Company provides insights and advances science to improve health and improve lives through its strong diagnostics and drug development laboratory capabilities.

On June 30, 2023 (the Distribution Date), Labcorp completed the previously announced separation (the Separation) of Fortrea Holdings Inc. (Fortrea) from the Company, see Note 2 (Discontinued Operations) to the condensed consolidated financial statements. The remainder of the Drug Development segment has been renamed as the Biopharma Laboratory Services segment. All current and historical operating results of Fortrea are presented as Discontinued Operations, net of tax, in the consolidated statement of operations. All historical assets and liabilities of Fortrea are classified as current and long-term assets of discontinued operations and current and long-term liabilities of discontinued operations in the accompanying balance sheet as of December 31, 2022. 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 Company reports its business in two segments, Diagnostics Laboratories (Dx) and Biopharma Laboratory Services (BLS). 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, 2023, Dx and BLS contributed approximately 77% and 23%, respectively, of revenues to the Company. During the nine months ended September 30, 2023, Dx and BLS contributed approximately 77% and 23%, respectively, of revenues to the Company.

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).”

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 2022 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.

2. DISCONTINUED OPERATIONS

A discontinued operation may include a component or a group of components of the Company's operations. A disposal of a component or a group of components is reported in discontinued operations if the disposal represents a strategic shift that has or will have a major effect on the Company's operations and financial results when the following occurs: (1) a component (or group of components) meets the criteria to be classified as held for sale; (2) the component or group of components is disposed of by sale; or (3) the component or group of components is disposed of other than by sale (for example, by abandonment or in a distribution to owners in a spin-off). For any component classified as held for sale or disposed of by sale or other than by sale, qualifying for presentation as a discontinued operation, the Company reports the results of operations of the discontinued operations (including any gain or loss recognized on the disposal or loss recognized on classification as held for sale of a

INDEX

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

discontinued operation), less applicable income taxes (benefit), as a separate component in the consolidated statement of operations for current and all prior periods presented. The Company also reports assets and liabilities associated with discontinued operations as separate line items on the consolidated balance sheet for prior periods.

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 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 Consolidated Statements of Operations for the three and nine months ended September 30, 2023 and 2022:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Revenues	$	—	$	739.5	$	1,506.6	$	2,268.5
Cost of revenues	—		566.0		1,244.5		1,764.0
Gross profit	—		173.5		262.1		504.5
Selling, general and administrative expenses	—		56.8		184.1		152.5
Amortization of intangibles and other assets	—		16.2		31.9		49.7

Restructuring and other charges	—		5.1		3.0		27.1
Operating income	—		95.4		43.1		275.2
Other income (expense):
Interest expense	—		—		(0.5)		(0.3)

Investment income (expense)	—		0.4		(1.2)		1.0
Other, net	—		10.3		4.2		35.0
Earnings before income taxes	—		106.1		45.6		310.9
Provision for income taxes	—		30.2		6.8		73.1


Net earnings attributable to Laboratory Corporation of America Holdings	$	—	$	75.9	$	38.8	$	237.8

INDEX

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

The following table summarizes the carrying value of the significant classes of assets and liabilities classified as discontinued operations as of December 31, 2022:


	December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	109.4
Accounts receivable, net	436.5
Unbilled services	583.6

Prepaid expenses and other	96.6
Total current assets	1,226.1
Property, plant and equipment, net	162.1
Goodwill, net	1,997.3
Intangible assets, net	823.3
Deferred income taxes	1.2
Other assets, net	54.3
Total assets	$	4,264.3

LIABILITIES
Current liabilities:
Accounts payable	$	82.6
Accrued expenses and other	281.8
Unearned revenue	271.5
Short-term operating lease liabilities	21.7
Total current liabilities	657.6
Operating lease liabilities	26.8
Deferred income taxes and other tax liabilities	192.8
Other liabilities	21.7
Total liabilities	898.9

3. REVENUES

The Company's revenues by segment and by payers/customer groups for the three and nine months ended September 30, 2023, and 2022, were as follows:


	For the Three Months Ended September 30, 2023								For the Three Months Ended September 30, 2022
	North America		Europe		Other		Total		North America		Europe		Other		Total
Payer/Customer
Dx
Clients	24	%	—	%	—	%	24	%	23	%	—	%	—	%	23	%
Patients	9	%	—	%	—	%	9	%	8	%	—	%	—	%	8	%
Medicare and Medicaid	8	%	—	%	—	%	8	%	8	%	—	%	—	%	8	%
Third party	36	%	—	%	—	%	36	%	38	%	—	%	—	%	38	%
Total Dx revenues by payer	77	%	—	%	—	%	77	%	77	%	—	%	—	%	77	%
BLS




Pharmaceutical, biotechnology and medical device companies	10	%	9	%	4	%	23	%	10	%	9	%	4	%	23	%
Total revenues	87	%	9	%	4	%	100	%	87	%	9	%	4	%	100	%

INDEX

LABORATORY CORPORATION OF AMERICA HOLDINGS 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, 2023								For the Nine Months Ended September 30, 2022
	North America		Europe		Other		Total		North America		Europe		Other		Total
Payer/Customer
Dx
Clients	24	%	—	%	—	%	24	%	22	%	—	%	—	%	22	%
Patients	9	%	—	%	—	%	9	%	8	%	—	%	—	%	8	%
Medicare and Medicaid	8	%	—	%	—	%	8	%	8	%	—	%	—	%	8	%
Third party	36	%	—	%	—	%	36	%	39	%	—	%	—	%	39	%
Total Dx revenues by payer	77	%	—	%	—	%	77	%	77	%	—	%	—	%	77	%
BLS




Pharmaceutical, biotechnology and medical device companies	10	%	9	%	4	%	23	%	10	%	9	%	4	%	23	%
Total revenues	87	%	9	%	4	%	100	%	87	%	9	%	4	%	100	%

Revenues in the U.S. were $2,550.6 (83.4%) and $2,392.4 (83.5%) for the three months ended September 30, 2023, and 2022, respectively, and for the nine months ended September 30, 2023, and 2022, were $7,645.0 (83.8%) and $7,454.0 (83.4%), 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:


	September 30, 2023		December 31, 2022
Dx accounts receivable	$	1,160.0	$	1,046.9
BLS accounts receivable	829.8		769.3
Less BLS allowance for doubtful accounts	(32.8)		(30.7)
Accounts receivable	$	1,957.0	$	1,785.5

Gross unbilled services	$	116.9	$	222.3
Less reserve for unbilled services	(8.9)		(10.5)
Unbilled services	$	108.0	$	211.8

Unearned revenue	$	360.8	$	310.6

Revenues recognized during the period that were included in the unearned revenue balance at the beginning of the period were $6.3 and $9.3 for the three months ended September 30, 2023 and 2022, respectively, and $79.1 and $65.9 for the nine months ended September 30, 2023, and 2022, 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, 2023, is as follows:


	Accounts Receivable		Unbilled Services		Note and Other Receivables		Total
Balance as of December 31, 2022	$	30.7	$	10.5	$	0.7	$	41.9
Plus, credit loss expense	6.2		—		—		6.2

Less, write offs	(4.1)		(1.6)		—		(5.7)
Balance as of September 30, 2023	$	32.8	$	8.9	$	0.7	$	42.4

The credit loss expense in the first nine months primarily related to the collection risk from several biotech receivable balances in the first quarter.

4. BUSINESS ACQUISITIONS

During the nine months ended September 30, 2023, the Company acquired several businesses and related assets for cash of approximately $516.7. These acquisitions consisted of the clinical and outreach businesses of Jefferson Health ($108.0), Enzo BioChem ($112.8), Providence Health & Services - Oregon ($110.0), Tufts Medicine ($157.0), and other smaller acquisitions

INDEX

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

($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. The purchase price allocations for these acquisitions have not been finalized as of September 30, 2023. The preliminary valuation of acquired assets and assumed liabilities, include the following:


	Business Acquisitions		Measurement Period Adjustments		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

During the nine months ended September 30, 2022, the Company acquired several businesses and related assets for approximately $1,013.6 in cash. The purchase 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 $407.4 in identifiable intangible assets and a residual amount of non-tax deductible goodwill of approximately $571.3. The amortization period for intangible assets acquired from this businesses range from 5 to 23 years for customer relationships and non-compete agreements. These acquisitions were made primarily to complement and accelerate the Company’s existing liquid biopsy capabilities and enhance the Company's diagnostic footprint and capabilities. The preliminary valuation of acquired assets and assumed liabilities, include the following:


	Preliminary Personal Genome Diagnostics Inc.		Preliminary Ascension Healthcare		Other Acquisitions		Measurement Period Adjustments		Amounts Acquired During the Nine Months Ended September 30, 2022

Accounts receivable	$	4.1	$	—	$	—	$	—	$	4.1
Unbilled services	2.9		—		—		—		2.9
Inventories	2.5		24.6		—		—		27.1
Prepaid expenses and other	1.2		0.4		—		—		1.6
Property, plant and equipment	9.9		43.5		0.1		—		53.5
Deferred income taxes	—		—		—		17.7		17.7
Goodwill	285.6		161.2		62.2		62.3		571.3
Intangible assets	272.9		197.0		71.7		(134.2)		407.4
Other assets	—		—		0.8		—		0.8
Total assets acquired	579.1		426.7		134.8		(54.2)		1,086.4
Accounts payable	3.8		—		—		—		3.8
Accrued expenses and other	23.7		—		—		32.9		56.6
Unearned revenue	3.3		—		—		—		3.3
Lease liabilities	—		2.9		—		—		2.9
Deferred income taxes	17.1		—		—		(17.1)		—
Other liabilities	76.2		—		—		(70.0)		6.2
Total liabilities acquired	124.1		2.9		—		(54.2)		72.8
Net assets acquired	$	455.0	$	423.8	$	134.8	$	—	$	1,013.6

INDEX

LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Pro Forma Information

Had the Company's total 2023 and 2022 acquisitions been completed as of January 1, the Company's pro forma results would have been as follows:


	Three Months Ended September 30,		Nine Months Ended September 30,		Three Months Ended September 30,		Nine Months Ended September 30,
	2023		2023		2022		2022
Revenues	$	3,073.4	$	9,218.6	$	2,933.5	$	9,205.7
Net earnings from continuing operations attributable to Laboratory Corporation of America Holdings	$	185.2	$	597.1	$	358.5	$	1,228.7

5. EARNINGS PER SHARE

Basic earnings per share is computed by dividing net earnings attributable to the Company by the weighted average number of common shares outstanding. Diluted earnings per share is computed by dividing net earnings including the impact of dilutive adjustments by the weighted average number of common shares outstanding plus potentially dilutive shares, as if they had been issued at the earlier of the date of issuance or the beginning of the period presented. Potentially dilutive common shares result primarily from the Company’s outstanding stock options, restricted stock awards, restricted stock units, and performance share awards.

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


	Three Months Ended September 30,										Nine Months Ended September 30,
	2023					2022					2023					2022
	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	$	183.3	86.6	$	2.12	$	276.9	90.2	$	3.07	$	546.3	87.9	$	6.22	$	965.2	91.9	$	10.50
Dilutive effect of employee stock options and awards	—		0.4			—		0.5			—		0.4			—		0.5


Net earnings including impact of dilutive adjustments	$	183.3	87.0	$	2.11	$	276.9	90.7	$	3.06	$	546.3	88.3	$	6.19	$	965.2	92.4	$	10.45

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,
	2023	2022	2023	2022
Employee stock options and awards	0.2	0.2	0.4	0.2

6. GOODWILL AND INTANGIBLE ASSETS

The changes in the carrying amount of goodwill for the nine months ended September 30, 2023, are as follows:


	Dx		BLS		Total

Balance as of December 31, 2022	$	4,533.5	$	1,590.2	$	6,123.7
Goodwill acquired during the period	230.5		—		230.5