UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM10-K
00 Annual Report Pursuant to Section 13 or 15( d) of the Securities Exchange Act of 1934
For the fiscal year ended December 31 , 2024
or
0 Transition report pursuant to Section 13 or 15( d) of the Securities Exchange Act of 1934
Delaware
For the transition period from ___ to __ _
Commission file number- 1-1 1353
LABCORP HOLDINGS INC.
(Exact name of registrant as specified in its charter)
99-2588107
(State or other jurisdiction of incorporation or organization)
358 South Main Street
(I.R.S. Employer Identification No.)
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 Act:
Title of each class
Trading Symbol
Name of exchange on wbich registered
Common Stock, $0.10 par value
LH
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes 00 No
D
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15( d) of the Act. Yes D No 00
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 00 NoD
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 00 No D
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 12\b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer
00
Accelerated filer
0
Smaller reporting company
Emerging growth company
0
0
0
If 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. D
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the
effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.
7262(b)) by the registered public accounting firm that prepared or issued its audit report. 00
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the
registrant included in the filing reflect the correction of an error to previously issued financial statements. 0
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-
based compensation received by any of the Registrant's executive officers during the relevant recovery period pursuant to
§240.100-l(b). 0
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes D No 00
As of June 28, 2024, the aggregate market value of the voting and non-voting common equity held by non-affiliates of the
registrant computed by reference to the closing price as of the last business day of the registrant's most recently completed
second fiscal quarter was approximately $16.4 billion.
As of february 24, 2025, there were 83.7 million shares of the registrant's common stock, $0.10 par value, outstanding.
DOCUMENTS IN CORPORA TED B Y REFERENCE
Portions of the Registrant's Notice of Annual Meeting and Proxy Statement to be filed! no later than 120 days following
December 31, 2024, are incorporated by reference into Part ITT.
2
Item I.
Item lA.
Item lB.
Item 1C.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 9C.
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Item 15.
Item 16.
TABLE OF CONTENTS
Part I
Business
Risk Factors
Unresolved StaffComments
Cybersecurity
Properties
Legal Proceedings
Mine Safety Disclosures
Part II
Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of
Equity Securities
[Reserved]
Management's Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Part III
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services
Exhibits and Financial Statement Schedules
Form 10-K Summary
Signatures
Index to Consolidated Financial Statements
Part IV
3
Page
7
29
43
43
45
46
46
47
49
49
58
59
59
59
61
61
62
62
62
62
62
63
67
68
F- 1
FORWARD-LOOKING STA 'IEMENTS
In this Annual Report on Form 1 0-K (Annual Report), Labcorp® Holdings lnc. together with its subsidiaries (Labcorp or the
Company), has made, and from time to time may otherwise make in its public filings, press releases and discussions by
Company management, forward-looking statements concerning the Company's operations, performance and financial
condition, as well as its strategic objectives. Some of these forward-looking statements relate to future events and expectations
and can be identified by the use of forward-looking words such as "believes", "expects", "may", "will", "should", "seeks",
"approximately", "intends", "plans", "estimates", or "anticipates" or the negative of those words or other comparable
tenninology. Such forward-looking statements speak only as of the time they are made and are subject to various risks and
uncertainties and the Company claims the protection afforded by the safe harbor for forward-looking statements contained in
the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from those currently anticipated due
to a number of factors in addition to those discussed elsewhere herein, including in the "Risk Factors" section of this Annual
Report, and in the Company's other public filings, press releases, and discussions with Company management, including:
1.
changes in government and third-party payer regulations, reimbursement, or coverage policies or other future reforms
in the United States (U.S.) healthcare system (or in the interpretation of current regulations), new insurance or payment
systems, including state, regional or private insurance cooperatives (e.g., health insurance exchanges) affecting
governmental and third-party coverage or reimbursement for commercial laboratory testing, including the impact of
the U.S. Protecting Access to Medicare Act of2014;
2.
significant monetary damages, fines, penalties, assessments, refunds, repayments, damage to the Company's
reputation, unanticipated compliance expenditures, and/or exclusion or debarment from or ineligibility to participate in
government programs, among other adverse consequences, arising from enforcement of anti-fraud and abuse laws and
other laws applicable to the Company in jurisdictions in which the Company conducts business;
3.
significant fines, penalties, costs, unanticipated compliance expenditures, and/or damage to the Company's reputation
arising from the failure to comply with applicable privacy and security laws and regulations, including the U.S. Health
Insurance Portability and Accountability Act of 1996, the U.S. Health Information Technology for Economic and
Clinical Health Act, the European Union's General Data Protection Regulation, and similar laws and regulations in
jurisdictions in which the Company conducts business;
4.
loss or suspension of a license or imposition of fines or penalties under, or future changes in, or interpretations of
applicable licensing laws or regulations regarding the operation of clinical laboratories, the development and
commercialization of Laboratory-developed tests (LOTs), and the delivery of clinical laboratory test results, including,
but not limited to, the U.S. Clinical Laboratory Improvement Act of 1967, the U.S. Clinical Laboratory Improvement
Amendments of 1988, the European Union In Vitro Diagnostics Regulation, and similar laws and regulations in
jurisdictions in which the Company conducts business;
5.
penalties or loss of license arising from the failure to comply with applicable occupational and workplace safety laws
and regulations, including the U.S. Occupational Safety and Health Administration requirements, the U.S. Needlestick
Safety and Prevention Act, and similar laws and regulations in jurisdictions in which the Company conducts business~
6.
fines, unanticipated compliance expenditures, suspension of manufacturing, enforcement actions, damage to the
Company's reputation, injunctions, or criminal prosecution arising from failure to maintain compliance with current
good manufacturing practice regulations and similar requirements of various regulatory agencies in jurisdictions in
which the Company conducts business;
7.
sanctions or other remedies, including fines, unanticipated compliance expenditures, enforcement actions, injunctions
or criminal prosecution arising from failure to comply with the Animal Welfare Act or applicable national, state, and
local laws and regulations in jurisdictions in which the Company conducts business;
8.
changes in testing guidelines or recommendations by government agencies, medical specialty societies, and other
authoritative bodies affecting the development, validation, approval, clearance, commercialization, or utilization of
laboratory tests;
9.
changes in and failure to comply with the applicable regulations of pharmaceutical and medical device regulators
affecting the approval, availability of, and the selling and marketing of diagnostic tests including LOTs, drug
development, or the conduct of drug development and medical device and diagnostic studies and trials, including
regulations and policies of the U.S. Food and Drug Administration (FDA), the U.S. Department of Agriculture, the
Medicine and Healthcare products Regulatory Agency in the United Kingdom, the National Medical Products
Administration in China, the Pharmaceutical and Medical Devices Agency in Japan, the European Union, the
European Medicines Agency, and similar regulations and policies of agencies in other jurisdictions in which the
Company conducts business;
4
10.
changes in government regulations or reimbursement pertaining to the pharmaceutical, biotechnology and medical
device and diagnostic industries, changes in reimbursement of pharmaceutical products, or reduced spending on
research and development by phannaceutical, biotechnology and medical device, and diagnostic customers;
11.
liabilities that result from the failure to comply with corporate governance requirements;
12.
increased competition, including price competition, potential reduction in rates in response to price transparency
initiatives and consumerism, competitive bidding and/or changes or reductions to fee schedules, and competition from
companies that do not comply with existing applicable laws or regulations or otherwise disregard compliance
standards in the industry;
13.
changes in payer mix or payment structure or process, including insurance carrier participation in health insurance
exchanges, an increase in capitated reimbursement mechanisms, the impact of clearinghouses on the claims
reimbursement process, the impact of a shift to consumer-driven health plans or plans carrying an increased level of
member cost-sharing, and adverse changes in payer reimbursement or payer coverage policies (implemented directly
or through a third-party utilization management organization) related to specific dEagnostic tests, categories of testing,
or testing methodologi·es;
14.
failure to retain or attract business from managed care organizations (MCOs) as a result of changes in business models,
including risk based or network approaches, out-sourced laboratory network management or utilization management
companies, or other changes in strategy or business models by MCOs;
15.
failure to obtain and retain new customers, an unfavorable change in the mix of testing services ordered, or a reduction
in tests ordered, specimens submitted, or services requested by existing customers, and delays in payments from
customers;
16.
consolidation and convergence of customers, competitors, and suppliers, potentially causing material shifts in
insourcing, utilization, pricing, reimbursement, and supply chain access;
17.
failure to invest in or effectively develop and deploy new systems, system modifications or enhancements required in
response to evolving market, business, and customer trends and needs;
18.
customers choosing to insource services that are or could be purchased from the Company;
19.
failure to identify, successfully close, and effectively integrate and/or manage acquisitions of new businesses or failure
to maintain key customers and/or employees as a result of uncertainty surrounding the integration of acquisitions;
20.
inability to achieve the expected benefits and synergies of newly acquired businesses, including due to items not
discovered in the due diligence process, and the impact on the Company's cash position, levels of indebtedness, and
stock price;
21.
termination, loss, delay, reduction in scope, or increased costs of contracts, including large contracts and multiple
contracts;
22.
liability arising from errors or omtsstons in the performance of testing and other services or other contractual
arrangements;
23.
changes or disruption in the provision or transportation of services or supplies provided by third parties; or their
termination for failure to follow the Company's performance standards and requirements;
24.
damage or disruption to the Company's facilities;
25.
damage to the Company's reputation, loss of business, or other harm from acts of animal rights activists or potential
harm and/or liability arising from animal research activities;
26.
adverse results in litigation matters;
27.
inability to attract, retain, and develop experienced and qualified personnel or the loss of significant personnel as a
result of illness, increased competition for talent, wage growth, or other market factors beyond the Company's control;
28.
failure to develop or acquire licenses for new or improved technologies, such as point-of-care testing, mobile health
technologies, and digital pathology, or potential use of new technologies by customers and/or consumers to perfonn
their own tests;
29.
substantial costs arising from the inability to commercialize newly licensed tests or technologies or to obtain
appropriate coverage or reimbursement for such tests;
5
30.
failure to obtain, maintain, and enforce intellectual property rights for protection of the Company's offerings and
defend against challenges to those rights;
31.
scope, validity, and enforceability of patents and other proprietary rights held by third parties that may impact the
Company's ability to develop, perform, or market the Company's offerings or operate its business;
32.
business interruption, receivables impairment, delays in cash collection impacting days sales outstanding, supply chain
disruptions or inventory obsolescence, increases in material cost or other operating costs, or other impacts on the
business due to natural disasters, including adverse weather, fires and earthquakes; geopolitical crises, including
terrorism and war; public health crises and disease epidemics and pandemics, including but not limited to the
continued impact of COVID-19; and other events beyond the Company's control;
33.
discontinuation or recalls of existing products used in the performance of testing;
34.
a fail.ure in the Company's information technology systems, including with respect to testing turnaround time and
billing processes, the failure of the Company or its third-party suppliers and vendors to maintain the security of
business information or systems or to protect against cybersecurity incidents such as denial of service attacks,
malware, ransomware, and computer viruses, delays or failures in the development and implementation of the
Company's automation platforms, or adverse effects from the use of or regulation of artificial intelligence (AI) and
machine learning tools, any of which could result in a negative effect on the Company's performance of services, a
loss of business or increased costs, delays in cash collections, damages to the Company's reputation, significant
litigation exposure, an inability to meet required financial reporting deadlines, or the failure to meet future regulatory
or customer information technology, data security, and connectivity requirements;
35.
business interruption, increased costs, and other adverse effects on the Company's operations due to the unionization of
employees, union strikes, work stoppages, general labor unrest, or failure to comply with labor or employment laws;
36.
failure to maintain the Company's days sales outstanding levels, cash collections (in light of increasing levels of patient
responsibility), profitability and/or reimbursement arising from unfavorable changes in third-party payer policies,
payment delays introduced by third-party utilization management organizations, and increasing levels of patient
payment responsibility;
37.
impact on the Company's revenues, cash collections, and the availability of credit for general liquidity or other
financing needs arising from a significant deterioration in the economy or financial markets or in the Company's credit
ratings by Standard & Poor's and/or Moody's;
38.
failure to maintain the expected capital structure for the Company, including failure to maintain the Company's
investment grade rating, or leverage ratio covenants under its revolving credit facility;
39.
changes in reimbursement by foreign governments and foreign currency fluctuations;
40.
inability to obtain certain billing information from physicians, resulting in increased costs and complexity, a temporary
disruption in receipts, and ongoing reductions in reimbursements and revenues;
41.
expenses and risks associated with international operations, including, but not limited to, compliance with the U.S.
Foreign Corrupt Practices Act (FCPA), the U.K. Bribery Act, other applicable anti-corruption laws and regulations,
trade sanction laws and regulations, and economic, political, legal and other operational risks associated with foreign
jurisdictions;
42.
failure to achieve expected efficiencies, benefits, and savings in connection with the Company's business process
improvement initiatives;
43.
changes in tax laws and regulations or changes in their interpretation;
44.
changing global economic conditions and government and regulatory changes; and
45.
risks associated with the impacts and expected benefits and costs of the completed spin-off of Fortrea Holdings Inc.
(Spin-off), including, but not limited to, factors that could adversely affect the Company's ability to realize the
expected benefits of the Spin-off, the failure of the Spin-off to qualify as a tax-free transaction for U.S. federal income
tax purposes.
Except as may be required by applicable law, the Company undertakes no obligation to publicly update or revise any
torward-looking statements, whether as a result of new information, future events or otherwise. Given these uncertainties, one
should not put undue reliance on any forward-looking statements.
6
PART I
Item 1.
BUSINESS
Labcorp® Holdings Inc. (Labcorp or the Company) is a global leader of innovative and comprehensive naboratory services
that provides vital information to help doctors, hospitals, pharmaceutical companies, researchers, and patients make clear and
confident decisions. By leveraging its unparaUeled diagnostics and drug development capabilities, the Company provides
insights and accelerates innovations to improve health and improve lives. The Company's nearly 70,000 employees serve
clients in approximately 100 countries, provided support for more than 75% of the new drugs and therapeutic products
approved in 2024 by the FDA, and performed more than 700 million tests annually for patients around the world.
On April 25, 2024, Laboratory Corporation of America Holdings (LCAH) announced plans to implement a new public
holding company structure, with Labcorp Holdings Inc. as the holding company. On May 17, 2024, the Company completed
the holding company reorganization (Reorganization) and became the successor issuer to LCAH. Labcorp Holdings Inc. has no
independent assets or operations and its sole ownership interest is in LCAH.
The Company is organized under two segments, consisting of Diagnostics Laboratories (Dx), which includes routine testing
and specialty/esoteric testing, and Biopharma Laboratory Services (BLS), consisting of Early Development Research
Laboratories (ED) and Central Laboratory Services. The Company's strength in science, technology, and innovation, as well as
its global scale, enable it to play a leading role in advancing healthcare across the globe.
The significant reach, breadth, and advancement of the Company's offerings have resulted in Base Business revenue growth
of 4.9% from 2023 through 2024 and 7.4% versus 2019 compound annual growth rate (CAGR). Base Business includes the
Company's business operations except for COVID-19 PCR testing (COVm-19 Testing).
For the year ended December 31, 2024, the Company generated revenues of $13,008.9 million, diluted earnings per share
from continuing operations of$8.84, and had a total operating cash flow provided by continuing operations of$1,585.8 million.
The Company believes that science, technology, and innovation drive ilts continued success, differentiate the Company, and
are foundational to its future. They are critical to the Company's ability to carry out its mission to improve health and improve
lives.
Spin-off of Fortrea Holdings 1!nc.
On June 30, 2023, the Company completed the previously announced separation (Spin-off) of its former clinical
development and commercialization services (CDCS) business, Fortrea Holdings Inc. (Fornea), 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
(Common Stock). Each holder of record of Common Stock received one share of Fortrea common stock for every share of
Common Stock.
Upon closing of the Spin-off, Fortrea made a cash distribution to the Company of approximately $1,600.0 million. In 2023,
these proceeds were mainly used to repurchase approximately $1,000.0 mmion in the aggregate of Common Stock pursuant to
accelerated share repurchase agreements and paying down $300.0 million of debt that matured in 2023. The remaining funds
were used in 2024 to support continued programs to return value to shareholders, through cash dividends and/or share
repurchases.
As a result of the Spin-off, all current and historical operating results ofFortrea are presented as Earnings from discontinued
operations, net of tax, in the Consolidated Statements of Operations and the Company has recast its BLS segment results to
exclude the historical results of the CDCS business for all periods presented.
Enterprise Strategy
Through leadership in science, technology and innovation, the Company provides vital information and services to help its
customers make clear and confident health decisions and helps millions of people improve health and improve lives.
The Company is expanding its role in the rapidly evolving healthcare market by strengthening its positions across its
portfolio of capabilities, growing strategic opportunities that drive new business, and ditierentiating its unique offerings,
capabilities, and financial performance. The Company is focused on two near-term strategic opportunities for growth across
both Dx and BLS:
I. Be the Partner of Choice for Health Systems and Local and Regional Laboratories
The Company expects industry consolidation to continue, as hospitals and health systems focus on investing in core patient
care services. The depth and the breadth of opportunity and the quality of the pipeline is robust, and the Company is optimistic
7
about continued expansion. The Company seeks partnerships that meet financial criteria, including being accretive in the first
year, returning each transaction's cost of capital within three years, and providing a clear path to improve margins.
The Company signed or completed 10 collaboration transactions with health systems and local and regional laboratories i.n
2024. The Company believes it is an attractive partner for hospitals and health systems for multiple reasons, including its:
innovative offerings in high growth specialty areas;
industry-leading test portfolio and national presence;
unique data and analytics capabilities; and
ability to integrate a hospital's laboratory services seamlessly.
2.
Lead in the Development, Licensing, and Scaling of Specialty Testing
The Company is focused on four primary specialty testing areas: oncology, women's health, autoimmune disease, and
neurology, which the Company believes represent significant growth areas. The development of specialty tests and companion
diagnostics (CDx) are attractive to health systems partners and biopharma as they continue to develop more products in
specialty areas and cell and gene therapy. The Company has demonstrated its ability to provide comprehensive portfolios in
these four areas, which comprise more than half of clinical trials conducted in its Central Laboratory Services business.
Longer-term, the Company is focused on three enterprise-wide strategic priorities to drive growth:
1.
Establish leadership and partnership capabilities in cell and gene therapy
Cell and gene therapy is a growing focus of biopharma pipelines, with approximately 2,000 clinical trials being conducted
globally and representing approximately 20% of all biopharma drug pipelines. The Company expects the cell and gene therapy
market to grow at a substantially higher rate than other types of therapies. over the next five years. As cell and gene therapies
expand, the Company has an opportunity to leverage its strong drug deveEopment capabilities, scientific expertise, and pharma
relationships to become a development lab of choice. Longer-term as these therapies develop, the Company believes it can
harness its diagnostic assets to support biopharma in commercializing cell and gene therapies and scaling these therapies
through its hospital and health system business over time.
2.
Expand Consumer-centric Capabilities
Consumerism trends, such as greater choice, convenience, and transparency, continue to have a growing influence across the
healthcare landscape and present new opportunities for growth. Through its core customer groups, the Company has
approximately 175 million patient encounters per year and has invested in modem capabilities to digitize and improve the
patient journey across patient service centers. Through the Labcorp OnDemand™ channel, the Company has also demonstrated
its ability to connect with consumers directly and is now offering 75 health and wellness tests through Labcorp OnDemand.
Across its core businesses, the Company has an opportunity to make strategic investments to continue to enhance the customer
experience through its patient portal, patient service center network, and other consumer-focused initiatives, and to capitalize on
select direct revenue streams that require elevated consumer capabilities. The Company's scaled operations, trusted brand,
scientific leadership, and broad customer base are key differentiators that will support its efforts to expand over time to meet the
evolving needs of its customer groups.
3.
Expand Global Reach, Including Through Companion Diagnostics
International expansion of specialized diagnostics remains a key opportunity for future growth as the Company continues to
add to its pipeline of specialty diagnostics. The Company is already a key partner to biopharma in CDx. As its pipeline of
specialty diagnostics grows, the Company will seek to leverage its scientific leadership in new markets thro1.11gh a differentiated
set of capabilities, including:
a global central laboratory footprint;
innovative science and technology;
a comprehensive and competitive testing portfolio; and
deep customer relationships in diagnostics and biopharma laboratory services.
As CDx continues to become more important for serving customers across the enterprise, the Company has a unique set of
capabilities to be an end-to-end partner to biopharma and will continue to expand these capabilities to fuel further targeted
growth internationally.
Capital Allocation
The Company believes it has a strong track record of deploying capital to investments that enhance the Company's business
and return capital to shareholders.
8
During 2024, the Company invested $839.0 million in strategic business acquisitions. The acquisitions have enhanced the
Company's service offerings, expanded its customer and revenue mix, and strengthened and broadened the scope of its
geographic presence. The Company continues to evaluate acquisition opportunities that leverage the Company's core
competencies, complement existing scientific and technological capabilities, increase the Company's presence in key
geographic, therapeutic and strategic areas, and meet or exceed the Company's financial criteria.
During 2024, the Company repurchased 1.1 million shares of Common Stock at an average price of $219.57 per share for a
total cost of $250.1 million and paid dividends of $243.1 million. At the end of 2024, the Company had outstanding
authorization from its Board of Directors (Board) to purchase up to $1,280.4 million maximum value of Common Stock.
During 2024, capital expenditures were $489.9 million, or 3.8% of the Company's revenues. The Company expects this
level of spending to remain consistent in 2025, primarily in connection with projects to support growth in the Company's core
businesses, facility expansion and updates, projects related to its LaunchPad initiative, and further acquisition integration
initiatives.
The Company will continue to evaluate opportunities for strategic deployment of capital in light of market conditions.
Seasonality and External Factors
The Company experiences seasonality across its business. For example, testing volume generally declines during the year-
end holiday period and other major holidays and can also decline due to inclement weather or natural disasters. Testing volumes
can also be impacted by changes in the global economy, exchange rate fluctuations, political and regulatory changes, the
progress of ongoing studies and the startup of new studies, as well as the level of expenditures made by the pharmaceutical,
biotechnology and medical device industries in research and design (R&D). Declines in testing volume reduce revenues,
operating margins, and cash flows.
In 2024, approximately 13.7% of the Company's revenues were billed in currencies other than the U.S. dollar, with the
Swiss franc, British pound, Canadian dollar, and the euro representing the largest components of its currency exposure.
Given the seasonality and ·changing economic factors impacting the business, comparison of the results for successive
quarters may not accurately reflect trends or results for the full year.
Company Reporting
The Company's Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and all
amendments to those reports are made available free of charge through the Investor Relations section of the Company's website
at www.labcorp.com as soon as reasonably practicable after such material is electronically filed with, or furnished to, the U.S.
Securities and Exchange Commission (SEC). Additionally, the SEC maintains a website at http://www.sec.gov that contains
reports, proxy and information statements, and other information regarding issuers, including the Company, that file
electronically with the SEC.
The matters discussed in this "Business" section should be read in conjunction with the Consolidated Financial Statements
found in Item 8 of Part II of this Annual Report, which include additional fmancial information about the Company. This
Annual Report includes forward-looking statements that involve risks or uncertainties. The Company's results could differ
materially from those anticipated in these forward-looking statements as a result of certain factors, including the risk factors
described in Item lA of Part I of this Annual Report and elsewhere. For more information about forward-looking statements,
see "Forward-Looking Statements" included prior to Part I in this Annual Report.
9
The Company's Business
For the year ended December 31, 2024, the Company's revenues were $13,008.9 million, an increase of 7.0% from
$12,161.6 million in 2023. The 7.0% increase in revenues for the year ended December 31 , 2024, as. compared to the
corresponding period in 2023, was primarily due to organic revenue of 3.9%, acquisitions, net of divestitures of 2.8%, and
favorable foreign currency translation of 0.2%. The 3.9% increase in organic revenue was due to a 4.9% increase in the
Company's organic Base Business, partially offset by an 1.0% decrease in COVID-19 Testing.
In Millions, Except Per Share Data
Revenues
Gross profit
Operating income
Net earnings attributable to Labcorp Holdings Inc.
Cash flows provided by continuing operating activities
Basic earnings per common share from continuing operations
Diluted earnings per common share from continuing operations
Year Ended December 31,
$
$
$
$
$
$
$
2024
2023
13,008.9
$
12,161.6
3,624.4
$
3,364.9
1,086.7
$
725.6
746.0 $
418.0
1,585.8
8.89
8.84
$
$
$
1,202.3
4.35
4.33
The Company reports its business in two segments, Ox and BLS. In 2024, Ox and BLS contributed 78% and 22%,
respectively, of revenues to the Company, and in 2023 contributed 77% and 23%, respectively. Nearly all of Ox's revenues are
generated in the U.S., with a smaller portion in Canada and a relatively small amount in the rest of the world. BLS's revenues
are nearly evenly split between the U.S. and the rest of the world, with approximately 41% derived from the U.S. and
approximately 59% from other countries. Although this allocation of revenues provides some protection from economic shifts
in any one country, it is still heavily tilted towards the U.S. As a result, to further diversify its operations, the Company may
explore select business opportunities outside the U.S. The Company's revenues by segment payers/customer groups and by
geography for the years ended December 31, 2024 and 2023 are as follows:
Payer/Customer
Dx
Clients
Patients
Medicare and Medicaid
Third party
Total Dx revenues by payer
BLS
Pharmaceutical, biotechnology and medical device companies
Total revenues
Year Ended December 31,2024
North
America
Europe
Other
Total
-------
24%
-%
-%
24 'Y<
10%
-
%
-
%
10 'Y<
8%
-%
-%
8'Y<
36%
-
%
-%
36 %
----~
78%
-
%
-%
78%
9%
9%
4%
22 'Y<
----~
87%
9 %
4%
100%
Diagnostics Laboratories Segment
Year Ended December 31, 2023
North
America Europe
Other
Total
-------
24%
-%
-%
24 'Y<
9%
-
%
-
%
9'Y<
8%
-%
-%
8o/.
36 %
-%
-
%
36 o/.
77 % ----=% ----=% ----:r7"o/c
10%
9%
4 %
23 o/.
87 % ----r% ----:i%
I 00 o/.
During 2024, the Ox segment generated $10,144.3 million in revenues and $1,606.3 million in segment operating income,
resulting in an operating margin of 15.8%.
In Millions
Revenues
Ox segment operating income
Year Ended December 31,
2024
2023
$
10,144.3
$
$
1,606.3
$
9,415.1
1,591.3
Dx offers a comprehensive menu of frequently requested core testing and specialty testing through an integrated network of
primary and specialty laboratories across the U.S. and Canada. This network is supported by a sophisticated information
technology system, with more than 80,000 electronic interfaces to deliver test results, nimble and efficient logistics, and local
labs offering rapid response testing.
Dx also provides patient access points that are strategically and conveniently located throughout the U.S., including more
than 2,200 patient service centers (PSCs) and more than 6,800 in-office phlebotomists located in customer offices and facilities.
10
Although testing for healthcare purposes and customers who provide healthcare services represents the most significant portion
of the clinical laboratory industry, clinical laboratories also perform testing for other purposes and customers, including
employment and occupational testing, deoxyribonucleic acid testing to determine parentage and to assist in immigration
eligibility determinations, environmental testing, wellness testing, toxicology testing, pain management testing, and medical
drug monitoring. Dx offers an expansive test menu that includes a wide range of clinical, anatomic pathology, genetic and
genomic tests, and regularly adds new tests and improves the methodology of existing tests to enhance patient care. Dx also
offers more than 75 consumer-initiated wellness tests available online through its Labcorp OnDemand platform.
As part of an ongoing commitment to be an efficient and high-value provider of laboratory services, Dx implemented and
has maintained a comprehensive business process improvement initiative !known as LaunchPad. The initiative was designed to
reengineer the Company's systems and processes to create a sustainable and more efficient business model, and to improve the
experience of all stakeholders.
The Dx business can be categorized into the following components:
Service
Key Features
Testing Operations
and Productivity
Testing and R elated
Services
Development of New
Tests
Technology-E nabled
Services and
Support
• Network ofPSCs offering specimen collection services
• Comprehensive, nimble supply chain for transferring specimens across the entire life cycle of a
patient sample
• One- to two- day turnaround time for most test results, with the vast majority of results delivered
electronically to healthcare providers and to patients who have a Labcorp Patient™ account
• Rigorous standard of quality - 25 regional/specialty labs bold International Organization for
Standardization (ISO) 15189 certification, five labs bold ISO 13485 certification, and two labs
hold both
• Standard Testing Services - frequently-ordered tests used in regular patient care include blood
chemistry analyses, urinalyses, blood cell counts, thyroid tests, PAP tests, hemoglobin AI C,
prostate-specific antigen (PSA), tests for sexually transmitted diseases (e.g., chlamydia, gonorrhea,
trichomoniasis, human immunodeficiency (HIV), and hepatitis C (HCV)), vitamin D,
microbiology cultures and procedures, and alcohol and other substance abuse tests
• Specialty Testing Services - industry leader in gene-based and esoteric testing; advanced tests
that target specific diseases and use new technologies; services include anatomic pathology/
oncology, cardiovascular disease, coagulation, diagnostic genetics, endocrinology, infectious
disease, women's health, pharmacogenetics, parentage and donor testing, occupational testing
services, medical drug monitoring services, chronic disease programs, and kidney stone prevention
• Dx offers a range of health and wellness services to employers and MCOs, including health fairs,
on-site and at-home testing, vaccinations and health screenings
• Nearly 100 new tests launched in 2024
• Active diagnostics and therapeutics research division: approximately 750 studies, articles, and
presentations produced in 2024
• Continuous investing, internally and externally, in new testing technologies and advanced testing
capabilities
A range of services and support using proprietary technologies to improve the customer and patient
experience and provide convenient access to data and analytics, including:
• More than 6.7 million enhanced clinical decision support (CDS) reports delivered to physicians
and health systems
• Online and mobile applications improving the patient experience by allowing patients to learn
about the Company's offerings, schedule PSC visits, check-in upon PSC arrival, complete
documentation, access tests and test results, and manage their accounts
• Online applications for providers, MCOs and accountable care organizations (ACOs) to obtain test
results and population and health management data
Effect of U.S. Market Changes on the Clinical Laboratory Business
The delivery of, and reimbursement for, healthcare continues to change in the U.S., impacting all stakeholders, including the
clinical laboratory business. Medicare (which principally serves patients who are 65 and older), Medicaid (which principally
serves low-income patients), and insurers have increased their efforts to control the cost, utilization, and delivery of healthcare
services. Measures to regulate healthcare delivery in general and clinical laboratories in particular have resulted in reduced
prices, added costs, increased coverage denials and claims edits, and decreased test utilization for the clinical laboratory
11
industry by imposing new, increasingly complex regulatory and administrative requirements. The government also has
continued to adjust the Medicare and Medicaid fee schedules at the national and local level, and the Company believes that
pressure to reduce government reimbursement will continue.
Fees for most laboratory services reimbursed by Medicare are established in the Clinical Laboratory Fee Schedule (CLFS)
and fees for other testing reimbursed by Medicare, primarily related to pathology, are covered by the Physician Fee Schedule
(PFS). During 2024, approximately 8.8% of Dx's revenue was reimbursed under the CLFS (8.8% in 2023), and approximately
0.4% was reimbursed under the PFS (0.4% in 2023). Dx has experienced governmental reimbursement reductions as a direct
result of several Congressional acts and regulatory initiatives, including those designed to control healthcare expenses
reimbursed by government programs through a combination of reductions to fee schedules, incentives to physicians to
participate in alternative payment models such as risk-sharing, and new methods to establish and adjust fees.
The most significant ofthes·e developments was the Protecting Access to Medicare Act {PAMA). Beginning in 2018, under
PAMA, the Centers for Medicare and Medicaid Services (CMS) of the U.S. Department of Health and Human Services (HHS)
set the CLFS using the weighted median of reported private payer prices paid to certain laboratories that receive a majority of
their Medicare revenue from the CLFS and PFS and that bill Medicare under their own National Provider Identifier (NPI).
Applicable labs, including Dx, were required to begin reporting their test-specific private payer payment amounts to CMS
during the first quarter of 2017. CMS used that private market data to calculate weighted median prices for each test (based on
applicable current procedural technology (CPT) codes) to represent the new CLFS rates beginning in 2018, subject to certain
phase-in limits. For 2018 through 2020, a test price could not be reduced by more than I 0.0% per year. P AMA resulted in a net
reduction in reimbursement revenue of approximately $245.0 million between 2018-2020 from all payers affected by the CLFS.
Since 2021, the implementaition of additional P AMA reporting and reimbursement changes have been delayed each year by
legislators. Pursuant to PAMA as amended, for 2026 through 2028, a CLJFS test price cannot be reduced by more than 15.0%
per year (excluding non-PAMA reimbursement changes). CLFS rates for 2029 and subsequent periods will not be subject to
phase-in limits. The phase-in of rates for Clinical Diagnostic Laboratory Tests (CDLTs) established in 2018 will resume in
2026. New CLFS rates will be established in 2027 based on data from 2019 to be reported in 2026. New CLFS rates will be
established in 2030 based on data from 2028 to be reported in 2029. CLFS rates for Advanced Diagnostic Laboratory Tests will
be updated annually. Unless implementation ofPAMA is further delayed or changed, additional reductions in reimbursements
of $100.0 million are expected for 2026 from all payers affected by the CLFS.
The American Clinical Laboratory Association (ACLA) filed a federal civil action in 2017 challenging the legal basis for the
data collection methodology CMS used to derive the data from which the median prices were calculated. On July 15, 2022, the
U.S. Court of Appeals for the D.C. Circuit ruled in favor of ACLA on the merits, finding that CMS harmed laboratories by
collecting data in an arbitrary and capricious manner, but refused to grant relief due toP AMA's statutory bar on judicial review
of establishment of the rates.
Since the initial data collection, CMS has revised its PAMA regulations to increase the number of hospital outreach labs that
will be required to report private market data in future collections. Reports by the U.S. Government Accountability Office
(GAO), the HHS Office of Inspector General (OIG), and the Medicare Payment Advisory Commission (MedP A C) on P AMA
implementation have identified certain instances of actual or potential increased Medicare expenditures under P AMA, as well
as potential alternative methodologies for data collection under PAMA, which could result in further efforts to amend P AMA
by Congress.
ACLA has continued to work with Congress on potential legislative reform of PAMA, which if adopted could reduce the
negative impact of PAMA as currently implemented by CMS. Under the Laboratory Access for Beneficiaries Act, MedPAC
was required to conduct a study and make recommendations to Congress on ways to improve data collection, reporting, and ratte
setting under PAMA to achieve, in a less burdensome manner, CLFS rates that accurately and fairly reflect private market rates.
MedPAC's June 2021 report to Congress included an analysis of potential statistical sampling methodologies that could
accomplish that objective, and ACLA incorporated the concept in PAMA reform proposals to Congress. On June 22, 2022, the
Saving Access to Laboratory Services Act (SALSA), was introduced in both the U.S. Senate and the U.S. House of
Representatives to provide for permanent reform of PAMA incorporating many of ACLA's proposals. SALSA was re-
introduced in the US. Senate on March 28, 2023, and in the U.S. House of Representatives on March 29, 2023. ACLA is
considering amendments and alternatives to SALSA that remain under evaluation. The Company supports the ongoing efforts
to prevent or Jessen the negative impact of the changes to the CLFS pursuant to PAMA, and the full impact of those efforts, but
what the long-term effect will be on the CLFS rates is not yet known.
Further healthcare reform could occur in 2025, including changes to the Patient Protection and Affordable Care Act (ACA)
and Medicare and Medicaid reform, as well as administrative requirements that may continue to affect coverage,
reimbursement, and utilization of laboratory services in ways that are currently unpredictable.
12
In addition, market-based changes have affected and will continue to affect the clinical laboratory business. Reimbursement
from commercial payers for diagnostic testing may shift away from traditional, fee-for-service models to alternatives, including
value-based, bundled pay-for-performance, and other risk-sharing payment models. The growth of the managed care sector and
consolidation ofMCOs present various challenges and opportunities to Dx and other clinical laboratories. Dx's ability to attract
and retain MCO customers has become even more important as the impact of various healthcare reform initiatives continues,
including expanded health insurance exchanges and ACOs.
The Company serves many MCOs. These organizations have different contracting philosophies, which are influenced by the
design of their products. Some MCOs contract with a limited number of clinical laboratories and engage in direct negotiation of
rates. Other MCOs adopt broader networks with generally uniform fee structures for participating clinical laboratories. In some
cases, those fee structures are specific to independent clinical laboratories, while the fees paid to hospital-based and physician-
office laboratories may be different and are typically higher. MCOs may also offer managed Medicare or managed Medicaid
plans. In addition, some MCOs use capitation rates to fix the cost of laboratory testing services for their enrollees. Under a
capitated reimbursement arrangement, the clinical laboratory receives a per-member, per-month payment for an agreed upon
menu of laboratory tests or bas·ed upon the proportionate share earned by the clinical laboratory from a capitation pool. When
the agreed upon reimbursement is based solely on an established rate per member, revenu·e is not impacted! by the volume of
testing performed. Under a capitation pool arrangement, the aggregate value of an established rate per member is distributed
based on the volume and complexity of the procedures performed by laboratories participating in the agreement. For the year
ended December 31, 2024, capita ted contracts with MCOs accounted for approximately $366.0 million, or 3.6%, of Dx's
revenues.
In addition to reductions in test reimbursement, the Company also anticipates potential declines in test volumes as a result of
increased controls over the utilization of laboratory services by Medicare, Medicaid, and other third-party payers, particularly
MCOs. MCOs are implementing, directly or through third parties, various types of laboratory benefit management programs,
which may include laboratory networks, utilization management tools (such as prior authorization and/or prior notification),
and claims edits, which impact coverage and reimbursement of clinical laboratory tests. Some of these programs address
clinical laboratory testing broadly, while others are focused on certain types of testing, including molecular, genetic, and
toxicology testing. In addition, continued movement by patients into consumer-driven health plans may have an impact on the
utilization of laboratory testing.
Helping to balance the overall negative market changes regarding reimbursement discussed above, the Company believes
that the volume of clinical laboratory testing is positively influenced by several factors, incl11.1ding an increase in the number and
types of tests that are readily available (due to advances in technology and increased cost efficiencies) for the diagnosis of
disease, and the general aging of the U.S. population. Periodic infectious disease outbreaks such as the SARS-CoV-2 virus also
have the potential to generate additional testing volume in the future and enhance stakeholders' appreciation for the value of
laboratory testing in combating future potential outbreaks. Dx believes that its enhanced and growing menu of tests, focus on
high-potential clinical areas, leading position with CDx, broad geographic footprint, and operating efficiency make it well
positioned for growth due to a number of market factors, primarily related to a continued drive to improve outcomes and reduce
costs across the healthcare system, including but not limited to greater price transparency required under "surprise billing" laws
and regulations requiring disclosure of hospital charges.
Biopharma Laboratory Services Segment
During 2024, the BLS segment generated $2,922.6 million in revenues and $458.9 million in segment operating income,
resulting in an operating margin of 15.7%.
In Millions
Revenues
BLS segment operating income
Year Ended December 31,
$
$
2024
2023
2,922.6
$
458.9
$
2,774.2
396.3
BLS provides drug development, medical device and CDx development solutions from early-stage research to clinical
development, along with support for crop protection and chemical testing, through its ED and Central Laboratory Services
businesses. Its customers are comprised of pharmaceutical, biotechnology, medical device, and diagnostic companies across the
world. With a global network of operations, BLS offers deep expertise in early development and clinjcal trials in each
therapeutic area. BLS had provided support for more than 75% of the new drugs and therapeutic products approved in 2024 by
the FDA, including 86% of those specific to oncology, 74% of those submitted by biotechnology companies, and 80% of those
submitted by leading and large pharmaceutical companies. Through its industry-leading central laboratory business, it supports
clinical trial activity in approximately 100 countries.
13
Service
Key Features
Early Development
Research
Laboratories
Central Laboratory
Services
Technology Solutions
Human Capital
Missiotr atrd Culture
• Lead optimization: connects early discovery activities to regulated preclinical studies
• Analytical services: bioanalytical testing seJrVices offering appropriate dose and frequency of
drug administration
• Safety assessment: general, genetic, and immunotoxicology services; nonclinical pathology;
safety pharmacology services; preclinical medical device services; respiratory services; and
developmental and reproductive toxicology (DART) studies
• Chemistry manufacturing services: robust, cost-effective solutions in the areas of safety,
identity, strength, quality, and purity assessments for biologics
• Early phase development solutions: focused, multidisciplinary teams of experts that craft
integrated solutions to identify and develop lead drug candidates and reduce development
challenges
• Crop protection and chemical testing: Consulting services for chemical manufacturers and
other firms engaged in the development of modem crop protection technology
• Clinical laboratory services for individuals participating in clinical studies
• Provided to biopharmaceutical customers through its global network of central laboratories in
the U.S., Europe, and Asia
• Operates world's Eargest automated clinical trial sample collection kit production lines that
enable kits to be produced with 5.5 sigma precision
• 6 ISO 15189-certified laboratories
Proprietary digital tools and services providing customers with greater access to key insights and
result.s, enhanced transparency, quality, and speed of clinical trial patient recruitment, resulting in
reduced costs and increased market potential for customers:
• Metrics and benchmarking applications for monitoring patient recruitment for clinical site
selection, protocon design, and optimization
• Ability to communicate with patients in the U.S. who may be eligible for clinical trials
The Company believes in the power of science to change lives. The Company's culture centers around its mission to
improve health and improve lives. The Company's nearly 70,000 employees located across 17 countries are essential to the
Company's ability to innovate and advance science and technology to empower patients, providers, and pharmaceutical
companies to make clear and confident decisions. Engaging the collective expertise and passion of its employees across the
globe is vital to achieving the Company's mission, which permeates its performance-driven, collaborative, inclusive, customer-
centered, and inquisitive culture.
Workforce Demographics
The Company's global talent is core to its ability to innovate and meet a wide range of patient and customer needs. The
Company's employees are globally dispersed, with 89% in the U.S. and Canada, 5% in Asia, and 6% jn Europe. Of the
Company's global workforce, 87% of employees are full time, and 13% are part time. Approximately 71% of the Company's
employees globally are women. Of the U.S.-based employees, approximately 52% of the team are people of color. About 2.5%
of the Company's global workforce is employed under a collective bargaining agreement. Depending on business demand and
the availability of talent, the Company supplements up to 8% of its workforce with contingent workers.
In 2024, the Company made investments in its talent to support retention and enable the Company's growth. For the fourth
consecutive year, hiring outpaced voluntary attrition, both globally and in the U.S.
Taletrt ltritiatives
The Company's talent initiatives support the development of inclusive leadership and culture, enhancing the team member
experience, and supporting community engagement and patient focus. Highlights for 2024 include:
Launch of a listening strategy, including measuring employee experience, inclusion, and well-being;
Supporting our Employee Resource Groups (ERGs), which are created and led by employee volunteers and open to all
employees. ERGs are important resources to foster cross-connections, encourage belonging, support career
development, and champion employee voices. The Company now has nine unique ERGs - with 118 local chapters
across eight countries (United States, Belgium, China, Switzerland, Germany, India, Singapore, and United Kingdom)
14
with 7,900 participating employees, representing a growth of 43% participation compared to the year prior. Each ERG
has executive sponsorship from senior leadership;
Recognition of locally relevant celebrations of cultural events reflecting the breadth of different cultures,
constituencies, and observances throughout the year;
Continued deployment of anti-harassment training to employees around the world;
Continued support of mentoring programs, including a formal mentoring initiative;
Continued opportunities for greater engagement between employees and management, including quarterly global town
halls, which are held virtually and are open to all employees, interactions with front-line employees on visits to the
Company's facilities, and in-person town halls with employees across business units and functions;
Harmonization of the U.S. paid holiday policy to now recognize six company-designated holidays and one floating
holiday - providing a more consistent and inclusive experience for eligible U.S. non-exempt employees. By offering
the flexibility of a floating holiday, the Company aims to better accommodate the unique needs, beliefs, and
backgrounds of our workforce; and
Received several awards, such as Silver Military Friendly Award, Best Place to Work for Disability Inclusion, and
Forbes' Best Places to Work for DiversEty.
Rewards
The Company operates in a complex, global, and dynamic healthcare industry and believes that its compensation and
benefits programs are comprehensive and flexible to attract and retain the caliber of talent needed for the sustained growth and
success of the business.
The Company regularly monitors market activity and employee movement within and outside of the healthcare industry to
maintain competitiveness. In 2024, the Company awarded $93 million in annual merit increases to recognize its talent and
foster pay competitiveness in the market.
Employee Well-being
The Company believes that its investments in compensation and employee well-being are crucial to maintammg
comprehensive positioning and a productive, engaged workforce. The Company fulfills its commitment to employee well-being
by investing in a variety of holistic tools and resources to support its employees' physical, emotional, and financial well-being.
In early 2024, the Company re-launched its wellness program making it more inclusive of both domestic and international
employees. This new program, called "Best You", translates easily into the different languages of our international employees
and can be tailored to local ne·eds by "Best You Champions" that are present in most countries where the• Company has in-
office employees. The Company is integrating Best You into the fabric of our company worldwide. The Company has outreach
programs to support its ERGs and other groups in providing wellness support to members.
Tn support ofBest You, the Company continwes to offer zero-cost telehealth and implemented free virtual Primary care visits
for medical, dermatological, and behavioral treatment as part of its medical plans in the U.S., employer matching 40l(k)
contributions, financial wellness workshops, and custom stress management strategies for teams around the world.
The Company also understands the importance of providing mental health resources to support employees and their
families. In 2024, the Company implemented a global employee assistance program (EAP) solution to support employee mental
health across the globe. Tn addition, a suite of People Leader Mental Health Trainings was expanded to further support
employees. Best You wellbeing breaks were leveraged by leaders for their teams across the globe, with sessions such as guided
meditations and stretch breaks. In partnership with EAP providers, the Company recognized World Kindness Day in November
2024 with events and education throughout the whole month, including videos from our executive leadership team educating
and supporting a culture of Kindness, which also helps build an inclusive culture committed to the Company's mission and
strategy.
Additional efforts in support of employee wellbeing include:
Reducing the cost of monthly medical insurance contributions by $240 per year for more than 17,500 employees in the
U.S. earning less than $50,000 per year who participate in Company medical plans;
Offering free annual wellness screenings for U.S. employees and covered spouses/domestic partners focusing on
identifying metabolic conditions that can increase the risk of heart attack, stroke and diabetes. Nearly 28,000 U.S.
employees and their covered spouses completed the no-cost screening and earned an annual medical plan contribution
discount of up to $4,560;
15
Providing up to $1,000 in health reimbursement arrangement and health savings account contributions, available to
approximately 31,000 employees and their spouses or domestic partners to encourage health and wellness education
and activities;
Reimbursing up to $300 in fitness-related expenses for more than 13,000 employees across the U.S. and Canada;
Providing free Colo Fit™ kits to over 5,000 employees to enhance colon cancer awareness and screenings;
Offering Weight Watclhers at no cost to employees and adding Weight Watchers Clinic access to support weight health
with more than 7,400 employees actively engaged; and
Expanding $0 MDLIVE services to include Virtual Primary Care alongside Urgent Care, Behavioral Health, and
Dermatology for U.S. medical plan participants.
The Company's No Charge Laboratory Testing program enables eligible U.S. employees and their covered dependents to
offset any outstanding balance for most lab work sent to a Company facility or patient service center, following insurance claim
processing. Additionally, the Company offers global initiatives to encourage sustainable transportation through programs such
as discounted transportation vouchers, reduced-·cost bicycle leases, and mileage reimbursement for bicycle commuters, with
benefits varying by country.
To enable its employees to establish ownership in the Company, the Company offers an employee stock purchase plan that
permits substantially all U.S., Canada, and United Kingdom employees to purchase Common Stock at a 15% discount.
Development and Training
As an organization that pursues answers to the world's most critical healthcare questions, the Company supports its
employees with a work environment that emphasizes continuous learning and development. Through these learning and
development opportunities, the Company encourages learning, growth, and innovation to deliver better patient care and new
solutions for its customers. The Company provides professional skills training and role specific training, along with formal and
informal mentoring and job rotations. The Company on boards and develops new hires through extensive training provided by a
dedicated team of technical skill trainers with different departments and functions.
2024 Training Milestones:
Provided more than 13,000 courses, many of which are available virtually within the global learning management
system;
Completed over 1.1 million hours oftraining, primarily consisting of regulatory and technical training;
Offered mentoring programs that nearly 2,800 employees participated in as either mentors or mentees; and
Completed more than 15,000 hours of professional development.
As a leader in science, the Company has almost 12,000 science-based jobs and leverages several internal scientific forums to
help scientists at all levels of experience continuously learn, innovate, and advance their skills in the healthcare industry.
Through these forums, those in scientific roles are staying current in their fields of study, sharing their knowledge with others,
and helping to expand the skills and experience of their colleagues.
The Company's ongoing investment in the development of its people stems from a continuing commitment to build a highly
talented team. In addition to traditional tuition reimbursement, over the past four years Labcorp Education Advantage has
actively supported employees in their pursuit of higher education by covering tuition costs for healthcare or life science degree
programs that contribute to their career advancement within the Company. To date, more than 1,800 employees have benefited
from this initiative, while also avoiding student loan debt.
To assist with creating a pipeline of future medical lab scientists to support its customers, the Company established the
Labcorp School of Medical Laboratory Sciences. The National Accrediting Agency of Clinical Laboratory Sciences approved
the Company's application, which allowed the Company to host an inaugural class of students as part of its accreditation
process. In September 2024, five students across three U.S. sites joined the inaugural class. The Company is providing training
to students tuition free to support them in obtaining certification for technical careers that are in high demand. Students have the
option to work in the Company's laboratories outside of school hours.
Health and Safety
The nature of the Company's business requires employees to work directly with patients and animals. This includes the
handling, processing, and testing of human or animal specimens on a daily basis. As the health and safety of employees is a
primary concern, the Company has established numerous employee health and safety protocols, including engineering and
administrative controls, policies, procedures, processes, and training to minimize the potential for, and the severity of, work-
related injuries and illnesses.
16
In 2024, the Company reduced its work-related injury rate per 100 employees by 14.2% and its work-related lost work
injury rate per 100 employees by 24.7%. The Company completed a Corporate EHS Audit on 11 significant laboratory
facilities, allowing it to assess locations against common expectations and performance criteria. The Company also completed
nearly 120,000 safety training sessions covering topics that included bloodbome pathogen, chemical safety, and employee
health and safety general awareness.
Community Engagement
Labcorp fosters a culture of giving back beyond the scope of day-to-day tasks. The Access for All initiative leads
community engagement efforts of Labcorp and its employees to make a positive impact across the globe. The Labcorp
Charitable Foundation extends Labcorp's commitment to Access for All by investing in programs in communities across the
globe in the areas of health, education and community.
In 2024, colleagues continued to support the Company's global Employee Giving Campaign. Through the campaign,
colleagues are able to collectively support the following charities: American Cancer Society, American Heart Association,
American Diabetes Association, American Red Cross, United Way, National Urban League, Project HOPE, and new in 2024 to
expand Labcorp's global reach, the International Committee of the Red Cross. These agencies align with Labcorp's mission to
improve health and improve lives by leading the way in healthcare research, providing services to benefit the underserved, and
supporting those affected by disaster. Additionally, The Labcorp Charitable Foundation offers a match opportunity for
contributions made through the campaign.
Labcorp, its employees and The Labcorp Charitable Foundation are committed to expanding access to healthcare, education,
housing, and community support through strategic philanthropy and volunteerism. The Company's initiatives address social
determinants of health while fostering science, technology, engineering, and math education, particularly in underserved
communities. By investing in tlhe well-being of those Labcorp serves, the Company helps build stronger communities, remove
barriers to healthcare and create opportunities for success.
Throughout the year, whether through fmancial grants or employee volunteerism, the Company is focused on providing
Access for All. Labcorp's employees assisted in building homes, collecting food, serving meals, and providing essential items
to help in underserved communities. The Company financially supported patient assistance programs and community education
programs to help improve health of the patients it serves.
Dynacare, a Labcorp company committed to Canada's health and wellness, continued their efforts to raise awareness about
type 2 diabetes and provide testing to those that need it most. During Diabetes Awareness Month, Dynacare partnered with
Diabetes Canada to organize five mobile clinics in communities that are most at risk of developing diabetes.
Continuing efforts to make a positive impact, colleagues from across the globe teamed up to serve their communities
through the Healthy Communities Contest. This contest ran for three months and encouraged Labcorp employees to unite in
acts of kindness to advance Access for All through volunteerism. In return, three teams were selected for their chosen charity to
receive a grant from The Labcorp Charitable Foundation.
The Labcorp Charitable Foundation, a private, charitable 50l(c)(3) organization established and supported by the Company,
invested in more than 200 programs in 2024 that align with the Company's strategic mission to improve health and improve
lives by supporting efforts tha1t increase access to health services, particl!llarly for underserved populations across the globe.
Through a partnership with Project HOPE, the Labcorp Charitable Foundation supported a rural health program in China to
increase access to pediatric and cancer care services.
The Laboorp Charitable Foundation remained committed to providing relief to communities in need following disaster
through support of the American Red Cross Disaster Responder Program. This ongoing commitment supports enables the
American Red Cross to provide individual emergency assistance, disaster preparedness, food, shelter and relief items, health
and emotional support, and community recovery leading up to and following a disaster or crisis. The Foundation also matched
employee donations made to qualified health and humanitarian organizations.
Additionally, in response to the devastation caused by storms such as Hurricanes Helene and Milton along the U.S. East
Coast, Labcorp employees mobilized to raise funds, organize donation drives and directly assist impacted communities.
ln 2024, Labcorp continued to empower its employees to serve as agents of positive change, aligning their personal values
with the Company's mission of enhancing health, through two signature employee engagement programs. Double Your
Donation offers a 1: 1 match by The Labcorp Charitable Foundation for Labcorp employee donations to qualifying non-profit
organizations. Dollars for Doers encourages Labcorp employees to support their communities through volunteer service by
offering a monetary donation from The Labcorp Charitable Foundation in recognition of their volunteer or board service to
eligible non-profit organizations.
17
Customers
The Company provides its services to a broad range of customers across Dx and BLS. The primary customer groups
serviced by the Company include:
Payers - Health Plans. The Company serves many health plans, including MCOs, employer plans, and other health
insurance providers, each of which operates on a national, regional, or local basis. In certain locations, health plans
may delegate to independent physician associations (IPAs) or other alternative delivery systems (e.g., ACOs) the
ability to negotiate for services on behalf of certain members.
Pharmaceutical, Biotechnology, Medical Device, a11d Diag11ostics Companies and Contract Research Organizations
(CROs). The Company provides services to hundreds of pharmaceutical, biotechnology, medical device, and
diagnostics companies and CROs ranging from the world's largest multi-nationals to emerging, small and mid-market
companies.
Physicia11s, Large Provider Organizations, and Other Healthcare Providers. Physicians and other healthcare
providers who are authorized to order clinical laboratory testing for their patients are a primary source of requests for
Dx's testing services. These physicians and other providers may practice in a range of settings, including sma11
medical practices, community-based clinics, and large, multidisciplinary organizations.
Hospitals and Health Systems. The Company provides hospitals and health systems with services ranging from core
and specialty testing to supply chain and technical support services, and the opportunity to be a research partner for
participation in studies and clinical trials with BLS. In some cases, a hospital's on-site laboratory may be operated or
managed by an outside contractor or independent laboratory, including the Company.
Other Customers. The Company serves a broad range of other customers, including, but not limited to, governmental
agencies, employers, patients and consumers, crop protection and chemical companies, academic institutions,
independent clinical laboratories, and retailers.
Sales, Marketing, and Customer Service
The Company offers its services through a sales force focused on serving the specific needs of customers in different market
segments. The Company's sales force is responsible for both new sales and for customer retention and relationship building.
For Dx, these market segments have different representatives focused on each segment in order to better understand and
respond to the unique needs of each segment. These include clinical areas, such as primary care, oncology, women's health,
autoimmune diseases, neurology, infectious diseases, endocrinology, gastroenterology, rheumatology and other specialties;
payers, such as ACOs, MCOs, and employers, and customers, such as physicians and physician organizations, and hospitals and
health systems. The BLS global sales organization provides customer coverage across the pharmaceutical, biotechnology, and
medical device industries for services including lead optimization, preclinical safety assessment, analytical services, clinical
trial enablement through data insights, central laboratory services, biomarker testing, COx, and technology solutions. As part of
the Company•s ongoing strategic priority to maximize the value of its unique leadership in both diagnostics and biopharma
laboratory services, sales representatives from each business segment work together on outreach to potential customers of both
businesses, including hospitals and health systems that may purchase testing and participate in clinical trials, or pharmaceutical,
biotechnology, or medical device companies whose studies may benefit from use of Dx's specialty testing, companion
diagnostics, and network of PSCs.
Market Opportunity
Dx
The Company believes that in 2024, the U.S. clinical laboratory testing industry gernerated revenues of more than $80
billion. The clinical laboratory industry consists primarily of three types of providers: hospital-based laboratories, physician-
office laboratories, and independent clinical and anatomical pathology laboratories, such as those operated by Dx.
The clinical laboratory business is intensely competitive, and the Company believes that both competition and consolidation
in the clinical laboratory business will continue. CMS has estimated that, as of March 2024 (the most recent data available as of
the filing of this report), there were nearly 320,000 clinical laboratories of all types, including approximately 9,200 hospital-
based laboratories, just under 123,000 physician-office laboratories, and approximately 8,500 independent clinical and
anatomic pathology laboratories in the U.S. Dx competes with all of those laboratories. In addition, an increasing number of
health system laboratories have been expanding their operations and business, resulting in greater competition for testing from
physicians within those systems and from unaffiliated physicians in the health system laboratories' service areas.
18
Dx believes that the selection of a laboratory is primarily based on the following factors, all of which the Company believes
Dx competes favorably in:
brand strength and reputation;
leadeTship in science, technology, and innovation;
patient satisfaction levels;
national scale, and local presence with access to testing within I 0 miles of most households;
quality, timeliness, and consistency in reporting test results;
contractual relationships with MCOs;
number and type of tests performed;
connectivity solutions offered; and
pricing of the laboratory's services.
In addition to the factors listed above, the Company believes that the operational and economic efticienc·ies provided by its
integrated service and logistics network, large-scale automated testing, and regular introduction of new technologies will allow
the Company to compete effectively with other providers of laboratory services.
BLS
The Company believes that in 2024, the global pharmaceutical industry spent more than $200 billion on R&D. Drug
development services businesses like BLS typically derive most of their revenue from R&D, as well as marketing expenditures,
of the pharmaceutical, biotechnology, and medical device industries.
Outsourcing of R&D services to CROs and other service providers remains integral to the drug development process. The
pharmaceutical market will continue to fe.el the pressure to improve return on investment, increase R&D productivity, stay
abreast of scientific advancements and comply with stringent government regulations and attempts to reduce and control the
price of prescription drugs, all supporting the outsourcing model. In the face of mounting complexity, tlhe investment and
amount of time required to develop new products are significant and have been increasing. These trends create opportunities for
BLS and other companies providing drug development services that can help make the development process more efficient.
The drug development industry has many participants ranging from hundreds of small providers to a limited number of large
companies with global capabilities. BLS competes against these small and large businesses, as well as in-house departments of
pharmaceutical, biotechnology, medical device, and diagnostic companies, and to a lesser extent, selected academic research
centers, universities, and teaching hospitals.
BLS believes that the selection of a drug development partner is primarily based on the following factors, all of which the
Company believes it competes favorably in:
Quality
reputation for quality and regulatory compliance;
efficient, timely perfonnance;
expertise and experience in operations;
application of technology and innovation;
specific therapeutic and scientific expertise;
data and analytical capabilities;
ability to enhance patient recruitment;
scope of service offerings;
strengths in various geographic markets;
price;
quality of facilities;
quality of relationships;
size and scale;
ability to support decentralized clinical trials;
ability to develop CDx; and
access to talent.
Dx and BLS have comprehensive quality systems and processes appropriate for their respective businesses. The Company's
quality programs are overseen by Dx's National Office of Quality, BLS's Global Regulatory Compliance and Quality
Assurance Unit, BLS's central laboratory services expanded laboratory management services department, and the Company's
global supply chain management department and project management staff. The Company has procedures for monitoring its
internal performance, as well as that of its vendors, suppliers, and other key stakeholders. In addition, various groups and
19
departments within the Company provide oversight to monitor and control vendor products and performance and play an
essential role in the Company's approach to quality through improvements in processes and automation.
Virtually all facets of the Company's services are subject to quality programs and procedures, including accuracy and
reproducibility of tests, turnaround time, customer service, marketing communications, data integrity, patient satisfaction, and
billing. The Company's quality programs include measures that compare current performance against desired performance
goals to monitor critical aspects of service to its customers and patients. This includes licensing, credentialing, training,
competency assessments of professional and technical staff, and internal auditing. In addition to the Company's own quality
programs, the Company's laboratories, facilities, and processes are subject to on-site regulatory agency inspections and
accreditation evaluations, surveys and proficiency testing by local or national government agencies and independent external
accrediting programs, and inspections and audits by customers.
Thirty-five of the Company' s laboratories have received ISO 15189, ISO 17025, ISO 13485 and/or ISO 14791 accreditation,
demonstrating that they meet international standards for quality and technical competence.
Information Systems
The Company is committed to developing and commercializing technology-enabled solutions it believes will support its
operations and provide better care. The Company operates standard platforms for its core business services and its fmancial and
reporting systems. These standard systems provide consistency within workflows and information as well as a high level of
system availability, security, and stability. The primary laboratory systems include standardized support for molecular
diagnostics, digital pathology, and enhanced specialty laboratory solutions. The Company's centralized information systems are
responsible for operational efficiencies, enabling the Company to achieve consistent, structured, and standardized operating
results and effective patient care.
The information systems used by Dx and BLS are discussed in more detail in the sections dedicated to each of those
segments. The Company's cybersecurity processes and systems are discussed in more detail under "Cybersecurity" in Item lC.
For several years the Company has deployed AI and machine learning tools to supplement its existing data analysis projects
and support greater efficiency in its operations. The Company is currently evaluating and testing various additional applications
of AI and machine learning tools, while also implementing policies and processes to provide appropriate oversight over the use
of AI and machine learning tools by the Company.
Intellectual Property Rights
The Company relies on a combination of patents, trademarks, copyrights, trade secrets, and nondisclosure and non-
competition agreements to establish and protect its proprietary technology. The Company has filed and obtained numerous
patents in the U.S. and abroad, and regularly files patent applications, when appropriate, to establish and protect its proprietary
technology. Occasionally, the Company also licenses U.S. and non-U.S. patents, patent applications, technology, trade secrets,
know-how, copyrights, and trademarks owned by others. The Company believes, however, that no single patent, technology,
trademark, intellectual property asset, or license is material to its business as a whole.
Patents covering the Company's technologies are subject to challenges. Issued patents may be successfully challenged,
invalidated, circumvented, or declared unenforceable so that patent rights would not create an effective competitive barrier. Tn
addition, the laws of some countries may not protect proprietary rights to the same extent as do the laws of the U.S.
Parties may file claims asserting that the Company's technologies infringe on their intellectual property. The Company
cannot predict whether parties will assert such claims against it, or whether those claims win harm its business. If the Company
is forced to defend against such claims, the Company could face costly litigation and diversion of management's attention and
resources. As result of such disputes, the Company may have to develop costly non-infringing technology or enter into
licensing agreements. These agreements, if necessary, may require fmancial or other terms that could have an adverse effect on
the Company's business and fmancial condition.
Regulation and Reimbursement
General
Because the Company operates in multiple distinct environments and in a variety of locations worldwide, it is subject to
numerous, and sometimes overlapping, regulatory requirements. Both the clinical laboratory and the biopharma laboratory
businesses are subject to significant governmental regulation at the international, national, state, and local levels. As described
below, these regulations concern licensure and operation of clinical laboratories, claims submission and reimbursement for
laboratory services, healthcare fraud and abuse, biopharma laboratory services, security and confidentiality of health
information, quality, and environmental and occupational safety.
20
Regulation of Clinical Laboratories
Virtually all clinical laboratories operating in the U.S. must be certified by the federal government or by a federally
approved accreditation agency. In most cases, that certification is regulated by CMS through the Clinical Laboratory
Improvement Act of 1967 and the Clinical Laboratory Improvement Amendments of 1988 (CLIA), which requires that
applicable clinical laboratories meet quality assurance, quality control, and personnel standards. Laboratories also must undergo
proficiency testing and are subject to inspections. Clinical laboratories in locations other than the U.S. are generally subject to
comparable regulation in their r,espective jurisdictions.
Standards for testing under CLIA are based on the complexity of the tests performed by the laboratory, with tests classified
as "high complexity," "moderate complexity," or "waived." Laboratories performing high-complexity testing are required to
meet more stringent requirements than moderate-complexity laboratories. Laboratories performing only waived tests, which are
tests determined by the FDA to have a low potential for error and requiring little oversight, may apply for a certificate of waiver
exempting them from most CLTA requirements. All major and many smaller Company facilities hold CLIA certificates to
perform high-complexity testing. The Company's remaining smaller testing sites hold CLIA certificates to perform moderate-
complexity testing or a certificate of waiver. The sanctions for failure to comply with CLIA requirements include suspension,
revocation, or limitation of a laboratory's CLIA certificate, which is necessary to conduct business, cancellation or suspension
of the laboratory's approval to receive Medicare and/or Medicaid reimbursement, as well as significant fines and/or criminal
penalties. The loss or suspension of a CLIA certification, imposition of a fine or other penalties, or future changes in the CLIA
law or regulations (or interpretation of the law or regulations) could have a material adverse effect on the Company.
The Company is also subject to state and local laboratory regulation. CLIA provides that a state may adopt laboratory
regulations different from or more stringent than those under federal law, and a number of states have implemented their own
laboratory regulatory requirements. State laws may require that laboratory personnel meet certain qualifications, specify certain
quality controls, or require maintenance of certain records.
The Company believes that it is in compliance in all material respects with all laboratory requirements applicable to its
laboratories operating both within the U.S. and in other countries. The Company's laboratories have continuing programs to
maintain operations in compliance with all such regulatory requirements, but no assurances can be given that the Company's
laboratories will pass all future licensure or certification inspections.
FDA and Other Regulatory Agency Laws and Regulations
Various regulatory agencies, including CMS and the FDA in the U.S., regulate the development, testing, manufacturing,
labeling, advertising, marketing, distribution, storage, import, export, performance, and surveillance of diagnostic and
therapeutic offerings, including certain offerings provided by the Company and the development of therapeutic products that
comprise the majority of BLS's business. The FDA and other regulatory agencies periodically inspect and review the
manufacturing processes and performance of diagnostic and therapeutic products, while CMS, certain state programs, and
accreditation entities inspect and review the facilities, personnel, and procedures of clinical laboratories and their laboratory
operations. The FDA and other regulatory agencies also periodically inspect test facilities that perform tests on samples from
preclinical studies and on human subjects enrolled in such clinical studies of drugs, biologics, and medical devices. These
agencies have the authority to take various administrative and legal actions for noncompliance, such as fines, withdrawal of
product approval, warning or untitled letters, seizures, recalls, injunctions, and other civil and criminal sanctions.
Since 2014, there have been ongoing discussions and advocacy between stakeholders, including the clinical laboratory
industry, the FDA, and Congress, about potential FDA regulation of laboratory-developed tests (LOTs), which are assays
developed and performed in-house by clinical laboratories and can be made available to the public without pre-market review
by the FDA, with limited exceptions that require LOTs to follow pre-market requirements, such as during the COVID-19 public
health emergency.
On September 29, 2023, the FDA released a proposed rule to regulate LOTs as medical devices, which was formally
published in the Federal Register on October 3, 2023. The proposed rule sought to make explicit that in vitro diagnostic
products (IVDs) are devices under the Federal Food, Drug and Cosmetic Act, including when the manufacturer of the IVD is a
clinical laboratory. In conjunction with this proposed rule and issuance of new regulations, the FDA proposed a policy by
which the FDA would phase out its general enforcement discretion approach for LOTs over a period of four years after the
publication of a final rule so that LOTs manufactured by a clinical laboratory would, over the transition period, fall under the
existing enforcement approach for IVDs. The proposed rule would not grandfather existing tests or exempt academic medical
centers or small laboratories, but the FDA requested public comments on whether it should include those features in a final rule.
ACLA disputes FDA's assertion that LOTs are medical devices and filed comments in December 2023 opposing the proposed
rule and urging its withdrawal for the reasons set forth in ACLA's comments. Both ACLA and the Company have urged FDA
21
to continue working with Congress and stakeholders toward enactment of appropriate legislation instead of pursuing device
regulation of LDTs through rulemaking.
On May 6, 2024, the FDA published a final rule adopting its proposal to regulate LDTs as medical devices over a four-year
phase-in period, but with certain changes related to ongoing enforcement discretion for certain categories of LDTs. The final
rule became effective on July 5, 2024, and in the absence of a successful legal challenge, the first phase of compliance
obligations will begin on May 6, 2025. Most notably, under the final rule, the FDA intends to exercise enforcement discretion
and generally not enforce premarket review and most quality system requirements (except for records requirements) for tests
currently marketed as LDTs that were first marketed prior to the issuance of the final rule, as long as they are not significantly
modified; intends to exercise enforcement discretion and generally not enforce premarket review and most quality system
requirements (except for records requirements) for LDTs offered by a laboratory integrated within a healthcare system to meet
an unmet need of patients receiving care within the same healthcare system; intends to exercise enforcement discretion and
generally not enforce premarket review requirements for tests that are approved by the New York State Clinical Laboratory
Evaluation Program (NYS CLEP); and intends to exercise enforcement discretion and generally not enforce premarket review
requirements for certain modifications made to 510(k)-cleared and de novo classified tests iby CLIA-certified, high-complexity
laboratories, even if that 51 O(k) clearance or classification is held by a different manufacturer. However, the FDA noted that it
could change these enforcement discretion policies at any time in the future. The Company expects to be in material compliance
with the fmal rule at applicable compliance dates if the final rule remains in force.
On May 29, 2024, ACLA and its member company, HealthTrackRx, filed a civil action in the U.,S. District Court for the
Eastern District of Texas against the Secretary of the HHS seeking to overturn the final rule on grounds that HHS (and by
delegation, FDA) lacks jurisdiction to regulate LDTs as medical devices and that even if such jurisdiction exists, the rule is
unlawfully arbitrary and capricious. A similar civil action filed by the Association for Molecular Pathology has been
consolidated with the ACLA action.
On November 21, 2024, ACLA submitted a formal request to the transition team for then President-elect Donald Trump to
announce a policy of non-enforcement of the final rule together with a notice of intent to rescind the rule through notice and
comment rulemaking. Discussions with Congress and other stakeholders on potential legislative alternatives to the fmal rule are
ongoing.
There are similar national and regional regulatory agencies and regulations in the jurisdictions outside of the U.S. in which
the Company operates. For example, the European Union (EU) Medical Device Regulation (EU MDR) which became
applicable on May 26, 2021, and the In Vitro Diagnostics Regulation (IVDR), which became applicable on May 26, 2022,
established a new legislative framework for medical devices and in vitro diagnostic deviJces (IVDs), including a rule-based
classification and quality and safety standards. ln contrast to the former Regulation, the IVDR also applies to lVDs used in
diagnostic and therapeutic services provided outside the EU to patients based in the EU. After the new EU MDR and IVDR had
come into force, it soon emerged that the transitional periods originally specified therein were not sufficiently long and were
extended for the MDR up to December 31,2028, and up to December 31,2029, depending on the risk class of the device.
BLS's laboratory facilities and Dx's clinical laboratory facilities that perform testing services in support of preclinical
studies and clinical trials must conform to a range of standards and regulations, including good laboratory practice (GLP) and
good clinical practice (GCP), current good manufacturing practice (cGMP), human subject protection and investigational
product exemption regulations, and quality system regulation (QSR) requirements, as applicable. The preclinical and clinical
testing intended to support applications for research or marketing, and the studies that the Company conducts, are subject to
periodic inspections by the FDA, as well as other pharmaceutical and medical device regulators in the jurisdictions outside the
U.S. in which the Company operates, which may include, without limitation, the Medicines and Healthcare products Regulatory
Agency (MHRA) in the United Kingdom (UK), the European Union, the European Medicines Agency, the National Medical
Products Administration in China, and the Pharmaceuticals and Medical Devices Agency in Japan, to determine compliance
with GLP, GCP, and cGMP, as well as other applicable standards and regulations. If a regulatory agency determines during an
inspection that the Company's equipment, facilities, laboratories, operations, or processes do not comply with applicable
regulations and GLP, GCP and/or cGMP standards, the regulatory agency may issue a formal notice (e.g .• Form FDA 483),
which may be followed by a warning letter or other enforcement actions if observations are not addressed satisfactorily.
Noncompliance may result in, among other things, unanticipated compliance expenditures, the regulatory agency seeking civil,
criminal or administrative sanctions, and/or other remedies against the Company, including suspension of :its operations, and
related customer contractual claims and other liabilities.
The FDA Modernization Act 2.0 was enacted in December 2022 as Section 3209 of the Consolidated Appropriations Act,
2023. This Act amended Section 505 of the Federal Food, Drug and Cosmetic Act to clarify the methods manufacturers and
sponsors can use to investigate the safety and efficacy of a drug or the toxicity of a biosimilar biologic product to include tests
on animals, as well as certain tests that are not performed on animals. Specifically, the Act replaces a statutory reference to
"tests on animals" as a viable option for preclinical testing with a reference to "nonclinical tests", which includes animal testing,
22
cell-based assays, microphysiological systems, or bioprinted or computer models. The Act does not eliminate animal testing or
require the use of non-animal models. FDA previously had the authority to allow non-animal data to be considered during
safety and efficacy reviews of new drugs and had previously issued related guidance. However, many procedures intended to
reduce animal tests are still in various stages of development. Such alternative methodologies must first be validated before
FDA will approve of their use instead of validated animal models, so the practical impact of the Act is likely to be limited for
some time.
Additionally, certain BLS services and activities, such as chemistry, manufacturing, and controls (CMC) services, must
conform to cGMP. BLS is subject to periodic inspections by the FDA and the MHRA, as well as other regulatory agencies in
the jurisdictions outside the U.S. in which the Company operates, in order to assess, among other things, cGMP compliance. If
a regulatory agency identifies deficiencies during an inspection, it may jssue a formal notice, which may be followed by a
warning letter if observations are not addressed satisfactorily. Failure to maintain compliance with cGMP regulations and other
applicable requirements of various regulatory agencies could result in, among other things, fines, warnings or untitled letters,
unanticipated compliance expenditures, suspension of manufacturing, enforcement actions, product seizures or recalls,
injunctions, or criminal prosecution.
Some Dx offerings are regulated as medical devices by the FDA and other similar national regulatory agencies in
jurisdictions outside the U.S. in which the Company operates. The FDA defines a medical device in part as an instrument,
apparatus, implement, machine, contrivance, implant, in vitro reagent, or other similar or related article which is intended for
the diagnosis of disease or other conditions or in the cure, mitigation, treatment, or prevention of disease in man. FDA
regulatory requirements include: all of the relevant elements of the QSR, which requires manufacturers to follow stringent
design, testing, control, documentation, and other quality assurance procedures; labeling regulations; restrictions on promotion
and advertising; Medical Device Reporting regulations, which require the manufacturer to report to the FDA if its device may
have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a
death or serious injury if it were to recur; the Reports of Corrections and Removals regulations, which require manufacturers to
report certain recalls and field actions to the FDA;, and other post-market requirements.
On January 31, 2024, the FDA issued a fmal rule amending the device current good manufacturing practice (CGMP)
requirements of the QSR to incorporate by reference the quality management system requirements of the international standard
specific for medical device quality management systems set by the International Organization for Standardjzation (ISO), ISO
13485:2016. The revised regulation is now referred to as the Quality Management System Regulation (QMSR).The FDA has
determined that the requirements in ISO 13485 are substantially similar to the requirements of the former QSR regulation, but
the final rule establishes additional requirements that clarify certain expectations and certain concepts used in ISO 13485 to
avoid inconsistencies with other applicable FDA requirements. The FDA will begin to enforce the QMSR requirements on the
effective date, February 2, 2026.
To ensure compliance with regulatory requirements, medical device manufacturers are subject to market surveillance and
periodic, pre-scheduled and unannounced inspections by the FDA. Failure to comply with applicable regulatory requirements
can result in enforcement action by the FDA, which may include sanctions, operating restrictions, partial suspension, or total
shutdown of production, refusal to grant clearance or approvals of new devices, withdrawal of clearance or approval, and civil
or criminal prosecution.
Animal Welfare Laws and Regulations
The conduct of animal research at BLS's facilities in the U.S. must be in compliance with the Animal Welfare Act (A WA),
which governs the care and use of warm-blooded animals for research in the U.S., other than laboratory rats, mice, and
chickens, and is enforced through periodic inspections by the U.S. Department of Agricult1Ure (USDA). The A W A establishes
facility standards regarding several aspects of animal welfare, including housing, ventilation, lighting, feeding and watering,
handling, veterinary care, and recordkeeping. BLS complies with licensing and registration requirement standards set by the
USDA and similar agencies in foreign jurisdictions such as the European Union, the UK, and China for the care and use of
regulated species. If the USDA determines that BLS's equipment, facilities, laboratories, or processes do not comply with
applicable A W A standards, it may issue an inspection report documenting the deficiencies and setting deadlines for any
required corrective actions. The USDA may impose fines, suspend and/or revoke licenses and registrations, or confiscate
research animals. Other countries where the Company conducts business have similar laws and regulations with which the
Company must also comply. In addition, certain of BLS's animal-related activities may be subject to regulation by the U.S.
Centers for Disease Control and Prevention, the Office of Laboratory Animal Welfare of the National Institutes of Health, the
U.S. Fish and Wildlife Service, and similar organizations in other jurisdictions in which the Company operates.
23
Payment for Clinical Laboratory Services
In 2024, Dx derived approximately I 0.5% of its revenue directly from traditional Medicare and Medicaid programs. In
addition, Dx's other commercial laboratory testing business that is not directly related to Medicare or Medicaid nevertheless
depends significantly on continued participation in these programs and in other government healthcare programs, in part
because customers often want a single laboratory to perform all of their testing services. In recent years, both governmental and
private-sector payers have made efforts to contain or reduce healthcare costs, including for clinical laboratory services.
Reimbursement under the PFS is capped at different rates in each Medicare Administrative Contractor's jurisdiction.
Pursuant to P AMA, unless modified by Congress, reimbursement under the CLFS is set at a national rate that is updated every
three years for most tests. State Medicaid programs are prohibited from paying more than the Medicare fee schedule limit for
clinical laboratory services furnished to Medicaid recipients. Laboratories primarily bill and are reimbursed by Medicare and
Medicaid directly for covered tests performed on behalf of Medicare and Medicaid beneficiaries. For beneficiaries that
participate in managed Medicare and managed Medicaid plans, laboratory bills are submitted to and paid by MCOs that manage
those plans. Approximately 8.8% ofDx's revenue is reimbursed directly by Medicare under the CLFS.
Many pathology services performed by Dx are reimbursed by Medicare under the PFS. The PFS assigns relative value units
to each procedure or service, and a conversion factor is applied to calculate the reimbursement. The PFS is also subject to
adjustment on an annual basis. Such adjustments can impact both the conversion factor and relative value units. The Sustainable
Growth Rate (SGR), the formula previously used to calculate the fee schedule conversion factor, would have resulted in
significant decreases in payment for most physician services for each year since 2003. However, Congress intervened
repeatedly to prevent these payment reductions, and the conversion factor was increased or frozen for the subsequent year. The
Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) permanently replaced the SGR formula and transitioned
PFS reimbursement to a value-based payment system. MACRA retroactively avoided a 21.2% reduction in PFS reimbursement
that had been scheduled for April l, 2015, and provided for PFS conversion factor increases of 0.5% from July 1, 2015 to
December 31, 2015, and 0.5% in each of years 2016-2019, followed by no updates for 2020 through 2025, and updates that
vary based on participation in alternative payment models in subsequent years. These changes to the conversion factor may be
offset by reductions to the relative value units, as was the case with the 2016 PFS reductions. For 2022, Congress increased the
conversion factor by 3.0% over the amount announced in the final rule, instead of allowing a 3.75% reduction to take effect. In
the Consolidated Appropriations Act of2023, Congress mitigated PFS cuts in 2023 and 2024 by 2.5% and 1.25%, respectively,
that would otherwise have been reduced by 4.47% in 2023 based on the conversion factor put forward in the 2023 Medicare
PFS Final Rule. Approximately 0.4% ofDx's revenue is reimbursed under the PFS.
In addition to changes in reimbursement rates, Dx is also impacted by changes in coverage policies for laboratory tests and
annual CPT coding revisions. Medicare, Medicaid and private payer diagnosis code r·equirements and payment policies
negatively impact Dx's ability to be paid for some of the tests it performs. Further, some payers require additional information
to process claims, employ third-party utilization management tools, or have implemented prior authorization policies which
delay or prohibit payment.
Future changes in national, state, and local laws and regulations (or in the interpretation of current regulations) affecting
government payment for clinical laboratory testing could have a material adverse effect on the Company.
Further healthcare reform could occur in 2025, including changes to the ACA and Medicare reform, as well as
administrative requirements that may continue to affect coverage, reimbursement, and utilization of laboratory services in ways
that are currently unpredictable.
Privacy, Security and Confidentiality of Health Information afld Other Personal Information
In the U.S., the Health Insurance Portability and Accountability Act of 1996 (HIPAA) was designed to address issues related
to the security and confidentiality of health information and to improve the efficiency and effectiveness of the healthcare system
by facilitating the electronic exchange of information in certain financial and administrative transactions. These regulations
apply to health plans and healili.care providers that conduct standard transactions electronically and healthcare clearinghouses
(covered entities). Six such regulations include: (i) the Transactions and Code Sets Rule; (ii) the Privacy Rule; (iii) the Security
Rule; (iv) the Standard Unique Employer Identifier Rule; (v) the National Provider Identifier Rule; and (vi) the Health Plan
Identifier Rule. The Company, which may act as a HIPAA covered entity in certain circumstances, believes that it is in
compliance in all material respects with each of the HIP AA Rules identified above.
The U.S. Health Information Technology for Economic and Clinical Health Act (HITECH) strengthened and expanded the
HIP AA Privacy and Security Rules and their restrictions on use and disclosure of protected health information (PHI). HITECH
includes, but is not limited to, prohibitions on exchanging PHI for remuneration and additional restrictions on the use of PHI for
marketing. HITECH also imposes a number of Privacy Rule requirements and a majority of Security Rule provisions directly
on business associates that were previously only directly applicable to covered entities. Moreover, HITECH requires covered
24
entities to provide notice to individuals, HHS, and, as applicable, the media when unsecured PHI is breached, as that term is
defined by HITECH. Business associates are similarly required to notify covered entities of a breach.
The Privacy Rule regulates the use and disclosure of PHI by covered entities. It also sets forth certain rights that individuals
have with respect to their PHI maintained by a covered entity, such as the right to access or amend certain records containing
PHI or to request restrictions on the use or disclosure of PHI. The HIP AA Privacy Rule requires covered entities to
contractually bind third parties, known as business associates, in the event that they perform an activity or service for or on
behalf of the covered entity that involves the creation, receipt, maintenance, or transmission of PHI.
On February 6, 2014, CMS and HHS published final regulations that amended the HIPAA Privacy Rule to provide
individuals (or their personal representatives) with the right to receive copies of their test reports from laboratories subject to
HIP AA, or to request that copies of their test reports be transmitted to designated third parties.
On April 22, 2024, HHS issued a final rulemaking containing modifications to the HIP AA Privacy Rule to address the use
or disclosure of PHI in relation to the provision of reproductive health care. The Company will implement appropriate
processes to manage compliance with these changes as applicable. On December 27, 2024, HHS published a notice of
proposed rulemaking (NPRM) containing potential modifications to the HIPAA Secruity Rule addressing prescriptive
requirements for administrative, physical, and technical safeguards in response to increased cybersecurity incidents in the health
care industry. The public comment period for the NPRM is expected to close on March 7, 2025. The Company is monitoring
the NPRM process. If modifications to the HIPAA Security Rule are adopted, they may impact the Company's compliance
obligations under HIP AA.
The administrative simplification provisions of HIPAA mandate the adoption of standard unique identifiers for healthcare
providers. The intent of these provisions is to improve the efficiency and effectiveness of the electronic transmission of health
information. The National Provider Identifier Rule requires that all HIPAA-covered healthcare providers, whether they are
individuals or organizations, must obtain an NPI to identify themselves in standard HIPAA transactions. NPI replaces the
unique provider identification number and other provider numbers previously assigned by payers and other entities for the
purpose of identifying healthcare providers in standard electronic transactions.
Violations of the HIP AA provisions could result in civil and/or criminal penalties, including significant fines and up to 1 0
years in prison. HITECH also requires HHS to conduct periodic audits to confirm compliance and authorizes state attorneys
general to bring civil actions seeking either injunctions or damages in response to violations of the HIPAA privacy and security
regulations that affect the privacy of state residents.
The total cost associated with complying with the ongoing requirements of HIPAA and HITECH is not expected to be
material to the Company's operations or cash flows. However, future regulations and interpretations of HIPAA and HITECH
could impose significant costs on the Company.
The information blocking provisions (Information Blocking Rules) of tihe 21st Century Cures Act became effective on April
5, 2021. The Information Blockjng Rules prohibit covered actors, including healthcare providers, from engaging in activity that
is likely to interfere with the access, exchanges, or use of electronic health information unless such activity falls into one of
eight exceptions. The Information Blocking Rules provide for civil monetary penalties for noncompliance by healthcare
information technology vendors and, separately, "appropriate disincentives" for noncompliance by healthcare providers.
In addition to the regulations described above, numerous other data protection, privacy and similar laws govern the
confidentiality, security, use, and disclosure of personal information, as well as breach notification responsibilities. These laws
vary by jurisdiction, but they most commonly regulate or restrict the coHection, use, and disclosure of medical and financial
information and other personal information. In the U.S., the Federal Trade Commission has authority to regulate unfair or
deceptive acts or practices, including with respect to data privacy and security. If the Company's public statements about
collection, use, or disclosure of personal information are perceived to be inconsistent with the Company's actual practices, the
Company may face accusations of unfairness or deception under the Federal Trade Commission Act of 1914 or state law
equivalents. In addition, some state laws are more restrictive and, therefore, are not preempted by HIPAA. Penalties for
violation of these laws may include sanctions against a laboratory's licensure, as well as civil and/or criminal penalties.
Effective August 14, 2020, the Substance Abuse and Mental Health Services Administration of HHS (SAMHSA)
announced the fmalization of proposed changes to the Confidentiality of Substance Use Disorder Patient Records regulation.
This regulation protects the confidentiality of patient records relating to the identity, diagnosis, prognosis, or treatment that are
maintained in connection with the performance of any federally assisted program or activity relating to substance use disorder
education, prevention, training, treatment, rehabilitation, or research. Under the regulation, patient identifying information may
only be released with the individual's written consent, subject to certain limited exceptions. The latest changes to this regulation
seek to better facilitate care coordination, while maintaining more stringent confidentiality of substance use disorder
information. The Company adopted changes to its policies and procedures necessary for compliance.
25
Congress and state legislatures also have been adopting legislation relating to privacy and data protection. For example, on
June 28, 2018, the California legislature passed the California Consumer Privacy Act (CCPA), which became effective January
1, 2020. The CCPA created transparency requirements and granted California residents several new rights with regard to their
personal information. In addition, in November 2020, California voters approved the California Privacy Rights Act (CPRA)
ballot initiative, which introduced significant amendments to the CCPA and established and funded a dedicated California
privacy regulator, the California Privacy Protection Agency (CPPA). The amendments to tthe CCPA introduced by the CPRA
went into effect on January 1, 2023. Implementing regulations have been introduced by the CPPA and additional regulations are
anticipated. Failure to comply with the CCPA may result in, among other things, significant civil penalties and injunctive relief,
or potential statutory or actual damages. In addition, California residents have the right to bring a private right of action in
connection with certain types of incidents. These claims may result in significant liability and potential damages. Other states
have passed legislation similar to the CCP A that generally mirror the principles and requirements of the CCP A; however, some
of these laws do not provide for a private right of action. AdditionaUy, Connecticut, Washington and Nevada have passed
legislation specific to consumer health data. The Company has developed appropriate processes to manage compliance with
these laws as applicable.
The EU General Data Protection Regulation (GDPR) establishes requirements applicable to the use and transfer of personal
data and imposes penalties for noncompliance of up to the greater of €20 million or 4% of worldwide revenue. The GDPR, as
well as the UK's implementation -- the UK General Data Protection Regulation -- requires transparency with regard to the
means and purposes of processing of personal data, collection of consent to process personal data in certain circumstances, the
ability to provide records of processing upon request by a supervisory authority or data controller, implementation of
appropriate technical and organizational measures to maintain security of personal data, notification of personal data breaches
to supervisory authorities, data controllers, and individuals within expedient time frames, and performance of data protection
impact assessments for certain processing activities. The GDPR also provides individual data subjects with certain rights, where
applicable, including the right of access, the right to rectification, the right to be forgotten, the right to restrict or object to
processing, and the right to data portability. The GDPR requires that personal data may only be transferred outside of the EU to
a country that offers an adequate level of data protection under standards set by the EU, or where such transfer is otherwise
pursuant to a legal framework approved by the EU. On July 16, 2020, the Court of Justice of the EU released its decision in
Data Protection Commission v. Facebook Ireland Limited, (Schrems II), which invalidated the EU-U.S. Privacy Shield as a
legal framework for the transfer of personal data outside of the EU, and suggesting additional safeguards for the use of Standard
Contractual Clauses (SCCs) as a legal framework for the transfer of personal data outside of the EU. On June 4, 2021, the
European Commission release updated SCCs, which, in part, adopted many of the additional safeguards highlighted in the
Schrems II decision. Companies using SCCs for the transfer of personal data outside of the EU are required to use the new
SCCs or an alternate approved form of data transfers. The Company has established processes and frameworks to manage
compliance with the GDPR and other global privacy and data protection requirements, and to manage preparation for future
enacted regulations. Compliance could impose significant costs on the Company.
In addition to the GDPR, numerous other countries have laws governing the collection, use, disclosure, and transmission
(including cross-border transfer) of personal information, including medical information. The legislative and regulatory
landscape for privacy and data protection is complex and continually evolving. Data protection regulations have been enacted
or updated in regions where the Company does business including in Asia and Europe, and in countries such as Canada, India,
and the UK. Failure to comply with these regulations may result in, among other things, civil, criminal and contractual liability,
ftnes, regulato·ry sanctions, and damage to the Company's reputation.
Potential government regulation related to AI use and ethics may also increase compliance costs and impact operations as
the Company continues to develop, test, adopt, and maintain AI within the Company's operations and in its offerings. The rapid
evolution of AI, and potential government regulation, will require the application of resources to allow the Company to
implement AI appropriately in order to minimize unintended, harmful impact, including from the exposure of Company or
third-party information or the Company relying on flawed AI outputs. The Company has implemented an AI Code of Ethics
and established an AI Ethics Board to review and help maintain compliance with AI ethical principles and regulatory
requirements in the development and use of AI systems, including generative AI tools.
Fraud and Abuse Laws and Regulations
Existing U.S. laws governing federal healthcare programs, including Medicare and Medicaid, as well as similar state laws,
impose a variety of broadly described fraud and abuse prohibitions on healthcare providers, including clinical laboratories.
These laws are interpreted liberally and enforced! aggressively by multiple government agencies, including the U.S. Department
of Justice (DOJ), OIG, and various state agencies. Historically, the clinical laboratory industry has been the focus of major
governmental enforcement initiatives. The U.S. government's enforcement efforts have been conducted under statutory
authorities such as those contained in HIPAA, which includes several provisions related to fraud and abuse enforcement,
including the establishment of a program to coordinate and fund U.S., state and local law enforcement efforts, and in the Deficit
26
Reduction Act of 2005, which included requirements directed at Medicaid fraud, including increased spending on enforcement
and financial incentives for states to adopt false claims act provisions similar to the U.S. False Claims Act. Amendments to the
False Claims Act, and other enhancements to the U.S. fraud and abuse laws enacted as part of the ACA, have further increased
fraud and abuse enforcement efforts and compliance risks. For example, the ACA established an obligation to report and
refund overpayments from Medicare or Medicaid within 60 days of identification (whether or not paid through any fault of the
recipient); failure to comply with this requirement can give rise to additional liability under the False Claims Act and Civil
Monetary Penalties statute.
The U.S. Anti-Kickback Statute prohibits knowingly providing anything of value in return for, or to induce the referral of,
Medicare, Medicaid, or other U.S. federal healthcare program business. Violations can result in imprisonment, fines, penalties,
and/or exclusion from participation in U.S. federal health care programs. The OIG has pub! ished "safe harbor" regulations that
specify certain arrangements that are protected from prosecution under the Anti-Kickback Statute if all conditions of the
relevant safe harbor are met. Failure to fit within a safe harbor does not necessarily constitute a violation of the Anti-Kickback
Statute; rather, the arrangement would be subject to scrutiny by regulators and prosecutors and would be evaluated on a case-
by-case basis. Many states have their own Medicaid anti-kickback laws, and several states also have anti-kickback laws that
apply to all payers (i.e., not just government healthcare programs).
From time to time, the OTG issues alerts and -other guidance on certain practices in the healthcare industry that implicate the
Anti-Kickback Statute or other fraud and abuse laws. OIG Special Fraud Alerts and Advisory Opinions relevant to the
Company set forth a number of practices allegedly engaged in by some clinical laboratories, healthcare providers, and
biopharrnaceuttical manufacturers that raise issues under the U.S. fraud and abuse laws, including the Anti-Kickback Statute.
These practices include: (i) providing employees to furnish valuable services for physicians (other than collecting patient
specimens for testing) that are typically the responsibility of the physicians' staff; (ii) offering or providing discounted
laboratory services billed to referral sources in return for referrals of other tests that are billed to U.S. federal healthcare
programs; (iii) providing free testing to physicians' managed care patients in situations where the referring physicians benefit
from such reduced laboratory utilization; (iv) providing free pickup and disposal ofbiohazardous waste for physicians for items
unrelated to a 1aboratory's testing services; (v) providing general-use facsimile machines or computers to physicians that are not
exclusively used in connection with the laboratory services; (vi) providing free testing for healthcare providers, their families
and their employees (i.e., so-called "professional courtesy" testing); (vii) rental of space in physician offices by equipment
suppliers or other healthcare entities to which the physicians make referrals; (viii) compensation paid by laboratories to
physicians and hospitals for blood specimen processing and for submitting patient data to registries; (ix) remuneration provided
to physicians and other health care professionals by pharmaceutical and medical device companies in connection with
company-sponsored speaker programs; (x) arrangements between telemedicine companies and healthcare professionals that
result in the fraudulent ordering or prescribing of medically unnecessary services, including prescription drugs, durable medical
equipment, and clinical laboratory testing; and (xi) the provision of free genetic and other testing sponsored by
biopharmaceutical manufacturers for use in making diagnostic or other clinical decisions related to use of the manufacturers'
products.
In addition to the Anti-Kickback Statute, in October 2018, the U.S. enacted the Eliminating Kickbacks in Recovery Act of
2018 (EKRA), as part of the Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment for Patients and
Communities Act. EKRA is an all-payer anti-kickback law that makes it a criminal offense to pay any remuneration to induce
referrals to, or in exchange for, patients using the services of a recovery home, a substance use clinical treatment facility, or
laboratory. Although it appears that EKRA was intended to reach patient brokering and similar arrangements to induce
patronage of substance use recovery and treatment, the language in EKRA is broadly written. As drafted, an EKRA prohibition
on incentive compensation to sales employees is inconsistent with the federal anti-kickback statute and regulations, which
permit payment of employee incentive compensation, a practice that is common in the industry. Significantly, EKRA permits
the U.S. Department of Justice to issue regulations clarifying EKRA's exceptions or adding additional exceptions, but such
regulations have not yet been issued, and there is no additional DOJ or other government guidance to indicate how and to what
extent it will be applied and enforced in the industry. The Company continues to work through its trade association to address
the scope of EKRA.
Under another U.S. statute, known as the Stark Law or "physician self-referral" prohibition, physicians who have a financial
or a compensation relationship with a clinical laboratory may not, unless an exception applies, refer Medicare or Medicaid
patients for testing to the laboratory, regardless of the intent of the parties. Similarly, laboratories may not bill Medicare or
Medicaid for services furnished pursuant to a prohibited self-referral. There are several Stark Law exceptions that are relevant
to arrangements involving clinical laboratories, including: (i) fair market value compensation for the provision of items or
services; (ii) payments by physicians to a laboratory for clinical laboratory services; (iii) ancillary services (including laboratory
services) provided within the referring physician's own office, if certain criteria are satisfied; (iv) physician investment in a
company whose stock is traded on a public exchange and has stockholder equity exceeding $75.0 million; and (v) certain space
27
and equipment rental arrangements that are set at a fair market value rate and satisfy other requirements. Many states have their
own self-referral laws as well, which in some cases apply to all patient referrals, not just government reimbursement programs.
In December 2020, the OIG and CMS published final rules to amend certain regulations implementing the Anti-Kickback
Statute and the Stark Law, respectively. The amendments were primarily intended to alleviate perceived impediments to
coordinated care and value-based compensation arrangements through new safe harbors to the Anti-Kickback Statute and new
exceptions to the Stark Law and have varying degrees of applicability to laboratories. The CMS final rule incorporates
laboratories and permits support for value-based arrangements, under certain conditions for purposes of the Stark Law.
However, the OIG final rule generally excludes laboratories from protection under the Anti-Kickback Statute safe harbors for
value-based arrangements.
There are a variety of other types of U.S. and state fraud and abuse laws, including laws prohibiting submission of false or
fraudulent claims and that require certain companies to disclose payments and other transfers of value to certain healthcare
professionals and providers. The Company seeks to conduct its business in compliance with all U.S. and state fraud and abuse
laws. The Company is unable to predict how these laws will be applied in the future, and no assurances can be given that its
arrangements will not be subject to scrutiny under such laws. Sanctions for violations of these laws may include exclusion from
participation in Medicare, Medicaid, and other U.S. or state healthcare programs, significant criminal and civil fines and
penalties, and loss of licensure. Any exclusion from participation in a U.S. healthcare program, or material loss of licensure,
arising from any action by any federal or state regulatory or enforcement authority, would likely have a material adverse effect
on the Company's business. In addition, any significant criminal or civil penalty resulting from such proceedings could have a
material adverse effect on the Company's business.
Enrollment andre-enrollment in U.S. healthcare programs, including Medicare and Medicaid, are subject to certain program
integrity requirements intended to protect the programs from fraud, waste, and abuse. In September 2019, CMS published a
fmal rule implementing program integrity enhancements to provider enrollment requiring Medicare, Medicaid, and Children's
Health Insurance Program (CHIP) providers and suppliers to disclose on an enrollment application or a revalidation application
any current or previous direct or indirect affiliation with a provider or supplier that (i) has uncollected debt; (ii) has been or is
subject to a payment suspension under a federal health care program; (iii) has been or is excluded by the OIG from Medicare,
Medicaid, or CHIP, or (iv) has had its Medicare, Medicaid, or CHIP billing privileges denied or revoked. This rule permits
CMS to deny enrollment based on such an affiliation when CMS determines that the affiliation poses an undue risk of fraud,
waste, or abuse. CMS is phasing in this new affiliation disclosure requirement.
In November 2021, CMS published the 2022 Medicare PFS Final Rule, which included further program integrity
requirements. CMS finalized its proposal to expand the categories of parties within the purview of the denial and revocation
provisions to include excluded administrative or management services personnel who furnish services payable by a federal
healthcare program, such as a billing specialist, accountant, or human resources specialist. CMS also codified the billing
privilege deacttivation rebuttal process, under which a provider or supplier would have 15 calendar days from receipt of written
notice of a deactivation to submit a rebuttal, and CMS could, in its discretion, extend the 15-day period to account for certain
special situations. In addition, CMS defined factors it would use to det,ermine whether revocation or suspension of billing
privileges is appropriate due to a pattern or practice of non-compliant billing, which would be: (i) the percentage of submitted
claims that were denied during the period under consideration; (ii) whether the provider or supplier has any history of final
adverse actions and the nature of any such actions; (iii) the type of billing non-compliance and the specific facts surrounding
said non-compliance (to the extent this can be determined); and (iv) any other information regarding the provider's or supplier's
specific circumstances that CMS deems relevant to the determination. This is a reduction in the number of factors that were
previously considered and a revision of some previous factors.
Environment, Health, Safety, and Sustainability
The Company is subject t>O licensing and requirements under laws and regulations relating to the protection of the
environment and employee health and safety. These laws and regulations, designed to minimize risk to employee health and
safety and to the environment, include the safe handling, use, transportation, and disposal of potentially infectious and
hazardous materials; the assessment of potential work-related risks and establishment of work practice and engineering
controls, and providing protective clothing and equipment, training, and medical surveillance.
The Company is committed to reducing its carbon footprint. The Company participates in the CDP and the EcoVadis
sustainable procurement rating processes. In 2023, the Company's greenhouse gas emission (GHG) reduction science-based
targets were accepted by the Science Based Targets initiative, and the Company has committed to reducing Scope 1 and 2 GHG
emissions 42% and Scope 3 GHG emissions by 25% by year end 2030, versus a 2020 baseline.
Energy-saving measures at Company facilities include for example, installation of energy efficient boilers, chillers,
ventilation systems, and light-emitting diode lighting, and engaging in waste-to-energy disposition. The Company is committed
28
to reducing the fuel use of its courier fleet, and in 2024 the Company added nearly 469 hybrid vehicles to its fleet, to help
achieve its goals of reducing fuel use. Funding for these and similar projects continued through 2024 and is expected to
continue through 2027.
The Company seeks to comply with all relevant environment, employee-health, and safety laws and regulations. Failure to
comply could subject the Company to various administrative and/or other enforcement actions.
Drug Testing
Drug testing for public sector employees is regulated by the SAMHSA, which has established detailed performance and
quality standards that laboratories must meet to be approved to perform drug testing on employees of U.S. government
contractors and certain other entities. To the extent that the Company's laboratories perform such testing, each must be certified
as meeting SAMHSA standards. The Company's laboratories in Research Triangle Park, North Carolina; Raritan, New Jersey;
Houston, Texas; Southaven, Mississippi; St. Paul, Minnesota; and Portland, Oregon, are all SAMHSA certified. Each
laboratory also maintains state licensure and laboratory certifications required to provide testing for private sector employers.
Controlled Substances
BLS handles controlled substances as part of the services it provides in preclinical testing. The use of controlled substances
is regulated by the U.S. Drug Enforcement Administration under the Controlled Substances Act (CSA) and its implementing
regulations. The CSA establishes, among other things, certain registration, security, recordkeeping, reporting, import, export,
and other requirements for controlled substances. The Company seeks to conduct its business in compliance with these
requirements as applicable. Violations of these rules may result in criminal and civil fines and penalties.
Compliance Program
The Company maintains a global compliance program that includes ongoing evaluation and monitoring of its compliance
with the laws and regulations of the U.S. and the other countries in which it has operations. The objective of the Company's
compliance program is to develop, implement, monitor, and update compliance safeguards, as appropriate. Although the
Company is subject to a broad! range of regulations, its compliance program has a particular focus on regulations related to
healthcare fraud and abuse, anti-kickback, physician self-referral, government reimbursement programs, anti-bribery/anti-
corruption, anti-human trafficking, and trade sanctions, among others. Emphasis is placed on developing and implementing
compliance policies and guidelines, personnel training programs, risk assessment, monitoring and auditing activities, and
providing systems for reporting and investigation of potential or actual compliance concerns. The compliance program
demonstrates the Company's commitment to conducting business at the highest standards of ethical conduct and integrity.
The Company seeks to conduct its business in compliance with all statutes, regulations, and other requirements applicable to
its clinical laboratory operations and biopharma laboratory services business. The clinical laboratory industry and biopharma
laboratory services industries are, however, subject to extensive regulation, and many of these statutes and regulations have not
been interpreted by the courts. In addition, the applicability or interpretation of statutes and regulations may not be clear in light
of emerging changes in clinical testing science, healthcare technology, and healtbcare organizations. Applicable statutes and
regulations may be interpreted or applied by a prosecutorial, regulatory, or judicial authority in a manner that would materially
adversely affect the Company. Potential sanctions for violation of these statutes and regu[ations include significant civil and
criminal penalties, fines, exclusion from participation in governmental healthcare programs, and the loss of various licenses,
certificates, and authorizations necessary to operate, as well as potential Liabilities from third-party claims, all of which could
have a material adverse effect on the Company's business.
Item IA.
RISK FACTORS
Investors should carefully consider all of the information set forth in this Annual Report, including the following risk
factors, before deciding to invest in any of the Company's securities. The risks below are not the only ones that the Company
faces. Additional risks not presently known to the Company, or that it presently deems immaterial, may also negatively impact
the Company. The Company's business, consolidated financial condition, revenues, results of operations, profitability,
reputation or cash flows could be materially impacted by any of these factors.
Risks Related to the Company's Business and Operations Including Global Economic and Geopolitical Factors
General or macro-economic factors and significant fluctuations in economic conditions in the U.S. and globally may have a
material adverse effect upon the Company.
The Company's operations are dependent upon ongoing demand for diagnostic testing and biopharn1a laboratory services by
patients, physicians, hospitals, MCOs, pharmaceutical, biotechnology and medical device companies and others. Significant
changes in global economic conditions, and an increase in the costs of goods and services, could negatively impact testing
volumes, the demand for biopharma laboratory services, cash collections, profitability, and the availability and cost of credit.
29
Pressures on and uncertainty surrounding the U.S. federal government's budget, and potential changes in budgetary priorities,
could adversely affect the fund.ing for government programs that comprise a portion of the Company's revenues. In addition,
uncertainty in the credit markets and interest rate volatility could reduce the availability and increase the cost of credit and
impact the Company's ability to meet its financing needs in the future.
Operations may be disrupted and adversely impacted by events beyond the Company's control, including natural disasters,
adverse weather, geopolitical events, public health crises, acts of terrorism, disruption to supply chain, and inaccessibility of
natural resources.
Natural disasters, such as adverse weather, fires, earthquakes, power shortages and outages, geopolitical events, such as
terrorism, war, political instability, or other conflict, public health crises and disease epidemics and pandemics, criminal
activities, disruptions to supply chains, inaccessibility of natural resources, and other disruptions or events beyond the
Company's control could negatively affect the Company's operations. Any of these events may result in a temporary decline of
testing volumes and other work in both segments. In addition, such events may temporarily interrupt the Company's ability to
transport specimens, efficiently commence, continue, or complete its work on studies, utilize information technology systems,
utilize certain laboratories, and/or to receive material from its suppliers. Such events can also affect customer operations and
thereby impact testing volume. Long-term disruptions in the infrastructure and operations caused by such events (particularly
involving locations in which the Company has operations), could harm the Company's operating results.
An inability to attract, retain, and develop experienced and qualified personnel, including key management personnel, and
increased personnel costs, could adversely affect the Company's business.
The loss of key management personnel or the inability to attract, retain, and develop experienced and qualified employees,
at the Company's clinical laboratories, drug development, and diagnostic facilities, and increased costs related to such
personnel and employees, could adversely affect the business. The success of the Company is dependent in part on the efforts of
key members of its management team. Success in maintaining the Company's leadership position in genomic and other
advanced testing and diagnostic technologies will depend in part on the Company's ability to attract and retain skilled research
professionals. In addition, the success of the Company's early discovery, clinical, and commercial laboratories also depend on
employing and retaining qualified and experienced professionals, including specialists, who perform laboratory research
activities and testing services. The same is true for patient-facing staff with specialized training required to perform activities
related to specimen collection or clinical research activities. In the future, if competition for the services of these professionals
increases, the Company may not be able to continue to attract and retain individuals in its markets. Changes in key
management, or the ability to attract, develop, and retain qualified personnel, as a result of increased competition for talent,
wage growth, or other market factors, could lead to strategic and operational challenges and uncertainties, distractions of
management from other key initiatives, and inefficiencies and increased costs, any of which could adversely affect the
Company's business, financial condition, results of operations, and cash flows.
Continued changes in healthcare reimbursement models and products (e.g., health insurance exchanges), changes in
government payment and reimbursement systems, or changes in payer mix, including an increase in third-party benefits
management and value-based payment models, could have a material adverse effect on the Company's revenues,
profitability and cash flow.
Dx testing services are billed to MCOs, Medicare, Medicaid, physicians and physician groups, hospitals, patients, and
employer groups. Most testing services are billed to a party other than the physician or other authorized person who ordered the
test. Increases in the percentage of services billed to government and MCOs could have an adverse effect on the Company' s
revenues.
The Company expects the efforts to impose reduced reimbursement, more stringent payment policies, and utilization and
cost controls by government an.d other payers to continue. If Dx cannot offset additional reductions in the payments it receives
for its services by reducing costs, increasing test volume, and/or introducing new services and procedures, it could have a
material adverse effect on the Company's revenues, profitability, and cash flows. In 2014, Congress passed PAMA, requiring
Medicare to change the way payment rates are calculated for tests paid under the CLFS, and to base the payment on the
weighted median of rates paid by private payers. Pursuant to P AMA, reimbursement rates for many clinical laboratory tests
provided under Medicare were reduced from 2018 through 2020. Enforcement of PAMA was suspended each year from 2021
through 2025, but a long-term resolution through legislation has not yet been achieved, and il:he next round of PAMA reductions
are currently on track to be implemented in 2026. Unless implementation of PAMA is further delayed or changed, additional
reductions in reimbursements of$100.0 million are expected for 2026 from all payers affected by the CLFS.
The Company's ability to attract and retain MCOs is critical given the impact of hcalthcarc reform, changes in coverage and
evolving value-based care and risk-based reimbursement delivery models (e.g., accountable care organizations (ACOs) and
Independent Physician Associations (IPAs)).
30
A portion of the managed care fee-for-service revenues is collectible from patients in tlb.e form of deductibles, coinsurance
and copayments. As patient cost-sharing continues to increase, the Company's collections may be adversely impacted.
In addition, Medicare and Medicaid and private insurers have increased their efforts to control the cost, utilization and
delivery of health care services, including commercial laboratory services. Measures to regulate healthcare delivery in general,
and clinical laboratories in particular, have resulted in reduced prices, added costs and decreased test utilization for the
commercial laboratory industry by increasing complexity and adding new regulatory and administrative requirements.
The Company has periodically experienced delays in the pricing and implementation of coding and billing changes among
various payers, including Medicaid, Medicare and commercial carriers. Payer policy changes in coverage, along with coding
and billing changes, have had a negative impact over time on revenue, revenue per requisition, and margins and cash flows. In
2024, limited coding and billing changes were implemented. While limited changes are expected to be implemented in 2025,
the Company typically expects some delays in pricing and reimbursement as new codes are introduced.
The Company expects the efforts to impose reduced reimbursement, more stringent payment policies, and utilization and
cost controls by government and other payers to continue. If Dx cannot offset additional reductions in the payments it receives
for its services by reducing costs, increasing test volume, and/or introducing new services and procedures, it could have a
material adverse effect on the Company's revenues, profitability and cash flows.
Changes in government regulation or in practices relating to the pharmaceutical, biotechnology, or medical device
industries could decrease the need for certain services that BLS provides.
BLS assists pharmaceutical, biotechnology, and medical device companies in navigating the regulatory approval process.
Changes in government regulations, such as a relaxation in regulatory requirements or the introduction of simplified approval
procedures or an increase in regulatory requirements that BLS may have difficulty satisfying or that may make its services less
competitive, could eliminate or substantially reduce the demand for its services. Also, if government efforts to contain drug and
medical product and device costs impact profits from such items, or if health insurers were to change their practices with
respect to reimbursement for those items, some of BLS's customers may spend less, or reduce their growth in spending on
R&D.
Increased competition, including price competition, could have an adverse effect on the Company's revenues and
profitability.
As further described in Item 1 and Item IA of Part I of this Annual Report, both Dx and BLS operate in competitive
industries. The commercial laboratory business is intensely competitive in terms of price, service, specialty offerings, and the
type and number of commercial laboratories. Dx and BLS compete against a wide range of businesses, as well as in-house
departments of pharmaceutical, biotechnology, medical device, and diagnostic companies, and to a lesser extent, selected
academic research centers, universities, and teaching hospitals. In addition, BLS's services periodically experience periods of
increased price competition that may have an adverse effect on the segment's profitability and consolidated revenues and net
earnings.
Failure to obtain and retain new customers, the loss of existing customers or material contracts, or a reduction in services or
tests ordered or specimens submitted by existing customers, or the inability to retain existing and/or create new relationships
with health systems could impact the Company's ability to successfully grow its business.
To maintain and grow its business, the Company needs to obtain and retain new customers and business partners. In
addition, a reduction in tests ordered or specimens submitted by existing ·customers, a decrease in demand for the Company's
services from existing customers, or the loss of existing contracts, without offsetting growth in its customer base, could impact
the Company's ability to successfully grow its business and could have a material adverse effect on the Company's revenues
and profitability. The Company competes primarily on the basis of reputation, efficient and timely performance, and leadershi.p
in science, technology and innovation. The Company's failure to successfully compete in any of these areas could result in the
loss of existing customers, an inability to gain new customers, and reduced or stagnant growth of the Company's business.
Discontinuation or recalls of products used in .the performance of testing, failure to develop or acquire licenses for new or
improved testing technologies, or the Company's customers using new technologies to replace ojj"eri11gs currently provided
by the Compa11y could adversely affect its business.
From time to time, manufacturers discontinue or recall reagents, test kits, or instruments used by the Company to perform
laboratory testing. Such discontinuations or recalls could adversely affect the Company's costs, testing volume and revenue.
The commercial laboratory industry is subject to changing technology and the introduction of new and improved test
offerings. The Company's success in maintaining a leadership position in genomic and other advanced testing technologies will
depend, in part, on its ability to develop, acquire or license new and improved technologies on favorable terms and to obtain
31
appropriate coverage and reimbursement for these technologies. The Company may not be able to negotiate acceptable
licensing arrangements, and it cannot be certain that such arrangements will yield commercially successful diagnostic tests. If
the Company is unable to license these testing methods at competitive rates, its R&D costs may increase as a result. In addition,
if the Company is unable to license new or improved technologies to expand its esoteric testing operations, its testing methods
may become outdated and testing volume and revenue may be materially and adversely affected.
In addition, advances in technology may lead to the development of more technologies, such as point-of-care testing
equipment, that can be operated by healthcare prQviders in their offices or by patients themselves without requiring the services
of commercial laboratories. Development of such technology and its use by the Company's customers could reduce the demand
for its laboratory testing services and the utilization of certain tests offered by the Company and negatively impact its revenues.
Similarly, application of artificial intelligence to testing could reduce demand for the Company's services, or competitors could
adopt use of these technologies and derive benefits from them sooner than the Company.
Manufacturers of laboratory equipment and test kits could seek to increase their sales by marketing point-of-care laboratory
equipment to physicians and by selling test kits approved by regulatory agencies for home or physician office use to both
physicians and patients. Increased approval and use of such test kits could lead to increased testing by physicians in their offices
or by patients at home, which could affect the Company's market for laboratory testing services and negatively impact its
revenues.
Changes or disruption in services, supplies, or transportation provided by third parties have impacted and could continue to
impact or adversely affect the Company's business.
The Company depends on third parties to provide supplies and services critical to the Company's business. Although the
Company has a significant proprietary network of ground and air transport capabilities, certain of the Company's businesses are
heavily reliant on third-party ground and air travel for transport of clinical trial and diagnostic testing supplies and specimens,
research products, and people. A significant disruption to these travel systems, or the Company's access to them, could have a
material adverse effect on the Company's business. The Company is also reliant on an extensive network of third-party
suppliers and vendors of certain services and products, including for certain animal populations. Disruptions to the continued
supply, or increases in costs, of these services, products, or animal populations may arise from export/import restrictions or
embargoes, political or economic instability, pressure from animal rights activists, adverse weather, natural disasters, public
health crises, transportation disruptions, cybersecurity incidents, or other causes, as well as from termination of relationships
with suppliers or vendors for their failure to follow the Company's performance standards and requirements. Disruption of
supply and services has impacted and could continue to impact or have a material adverse effect on the Company's business.
A failure to identifY suitable acquisition targets and successfully close and integrate acquisitions could have a material
adverse effect on the Company's business objectives and its revenues and profitability.
Part of the Company's strategy involves deploying capital in investments that enhance the Company's business, which
includes pursuing strategic acquisitions to strengthen the Company's scientific capabilities and enhance therapeutic expertise,
enhance esoteric testing and global drug development capabilities, and increase presence in key geographic areas. Since January
1, 2020, the Company has invested net cash of approximately $3.4 billion in strategic business acquisitions. However, the
Company cannot assure that it will be able to identify acquisition targets that are attractive to the Company or that are of a large
enough size to have a meaningful impact on the Company's operating results. Furthermore, the successful closing and
integration of a strategic acquisition entails numerous risks, including, among others:
failure to obtain regulatory clearance, including due to antitrust concerns;
loss of key customers or employees as a result of the acquisition;
• difficulty in consolidating redundant facilities and infrastructure and in standardizing information and other systems;
unidentified regulatory problems at the acquired company or business;
failure to maintain the quality of services that such companies or businesses have historically provided;
unanticipated costs and other liabilities;
• potential liabilities related to litigation relatedl to the acquired company or business, or from its prior owners;
failure to timely identify and! remediate noncompliant activities of the acquired company or business;
• potential periodic impairment of goodwill and intangible assets acquired;
• coordination of geographically separated facilities and workforces; and
• the potential disruption of the Company's ongoing business and diversion of management's resources.
The Company cannot assure that current or future acquisitions, if any, or any related integration efforts wi II be successful, or
that the Company's business will not be adversely affected by any future acquisitions, including with respect to revenues and
profitability. Even if the Company is able to successfully integrate the operations of companies and businesses that it acquires
in the future, the Company may not be able to realize the benefits that it expects from such acquisitions.
32
Unfavorable labor environments, union strikes, work stoppages, union or works council negotiations, or failure to comply
with labor or employment laws could adversely affect the Company's operations and have a material adverse effect upon the
Company's business.
The Company is a party to a limited number of collective bargaining agreements with various labor unions and is subject to
employment and labor laws and unionization activity in the U.S. Similar employment and labor obligations exist across other
countries in which it conducts business, including appropriate engagement with works councils in Europe. Disputes with regard
to the terms of labor agreements or obligations for consultation, potential inability to negotiate acceptable contracts with these
unions, unionization activity, or a failure to comply with labor or employment laws could result in, among other things, labor
unrest, strikes, work stoppages, slowdowns by the affected workers, fines and penalties. Tf any of these events were to occur, or
other employees were to become unionized, the Company could experience a significant disruption of its operations or higher
ongoing labor costs, either of which could have a material adverse effect upon the Company's business. Additionally, future
labor agreements, or renegotiation of labor agreements or provisions of labor agreements, or changes in labor or employment
laws, could compromise its service reliability and significantly increase its costs, which could have a material adverse effect
upon the Company's business. Also, the Company may incur substantial additional costs and become subject to litigation and
enforcement actions if the Company fails to comply with legal requirements affecting its workforce and labor practices,
including laws and regulations related to wage and hour practices, Office of Federal Contract Compliance Programs
compliance, and unlawful workplace harassment and discrimination.
Continued and increased consolidation of pharmaceutical, biotechnology and medical device companies, health systems,
physicians and other customers could adversely affect the Company's business.
Many healtthcare companies and providers, including pharmaceutical, biotechnology and medical device companies, health
systems, and physician practices are consolidating through mergers, acquisitions, joint ventures, and other types of transactions
and collaborations. In addition to these more traditional horizontal mergers that involve entities that previously competed
against each other, the healthcare industry is experiencing an increase in vertical mergers, which involve entities that previously
did not offer competing goods or services. As the healthcare industry consolidates, competition to provide goods and services
may become more intense, and vertical mergers may give those combined companies greater control over more aspects of
healthcare, including increased bargaining power. This competition and increased customer bargaining power may adversely
affect the price and volume of the Company's services.
In addition, as the broader healthcare industry trend of consolidation continues, including the acquisition of physician
practices by health systems, relationships with hospital-based health systems and integrated delivery networks are becoming
increasingly important. Dx has a well-established base of relationships with those systems and networks, including
collaborative agreements. Dx's inability to retain its existing relationships with those physicians as they become part of
healtbcare systems and networks and/or to create new relationships could impact its ability to successfully grow its business.
Damage or disruption to the Company's facilities or operations therein could adversely affect the Company's business.
Many of the Company's facilities or the operations conducted therein could be difficult to replace in a short period of time.
Any event that causes a disruption of the operation of these facilities might impact the Company's ability to provide services to
customers and, therefore, could have a material adverse effect on the Company's financial condition, results of operations, and
cash flows.
The failure to establish, update, or perform to appropriate quality standards could adversely affect the Company's business
and reputation.
The Company has quality control systems and processes to support the performance and delivery of its services. A failure to
establish, update, or perform in accordance with those systems or processes could adversely affect the Company's business
operations, resulting in the loss of customers, loss or suspension of licensure or certifications, imposition of sanctions or other
penalties, damage to the Company's reputation, or other adverse effects.
Risks Related to Financial Matters
The Comp(my bears jillallcial risk for conm~cts that, i11cludi11g for reaso11s beyoml the Compa11y's co11trol, may be
underpriced, subject to cost overruns, delayed, or terminated or reduced in scope.
The Company has many contracts that are structured as fixed-price for fixed-contracted services or fe.e-for-service with a
cap. The Company bears the fmancial risk if these contracts are underpriced or if contract costs exceed estimates. Such
underpricing or significant cost overruns could have an adverse effect on the Company's business, results of operations,
financial condition, and cash flows.
Many of BLS's contracts may be terminated or reduced in scope either immediately or upon notice. Cancellations may
33
occur for a variety of reasons, including:
failure of products to satisfy safety requirements;
unexpected or undesired results of the products;
insufficient clinical trial subject enrollment;
insufficient investigator recruitment;
• a customer's decision to terminate the development of a product or to end a particular study; and
• BLS's failure to perform its duties properly under the contract.
Although BLS 's contracts typically entitle the Company to receive all fees earned up to the time of termination, and often
also the costs of winding down the terminated projects, the loss, reduction in scope or delay of large or multiple contracts could
materially adversely affect BLS.
A significant increase in the Company's days sales outstanding could have an adverse effect on the Company's business,
including its cash flow, by incr:easing its bad debt or decreasing its cash flow.
Billing for laboratory services is a complex process. Laboratories bill many different payers, including doctors, patients,
health plans, Medicare, Medicaid, and employer groups, all of which have different billing requirements. A material increase in
Dx's days sales outstanding level, which could be caused by multiple reasons due to the complexity of billing for laboratory
services, could have an adverse effect on the Company's business, including potentially increasing its bad debt rate and
decreasing its cash flows. Although BLS does not face the same level of complexity in its billing processes, it could also
experience delays in billing or collection, and a material increase in BLS's days sales outstanding could have an adverse effect
on the Company's business, including potentially decreasing its cash flows.
BLS's revenues depend on the pharmaceutical, biotechnology and medical device industries.
BLS's revenues depend greatly on the expenditures made by the pharmaceutical, biotechnology and medical device
industries in R&D. In some instances, these companies are reliant on their ability to raise capital in order to fund their R&D
projects. These companies may be reliant on reimbursement for their products from governrnent programs and commercial
payers. Accordingly, economic factors and industry trends affecting BLS's customers in these industries may also affect BLS.
If these companies were to reduce the number of R&D projects they conduct or outsource, whether through the inability to raise
capital, reductions in reimbursement from governmental programs or commercial payers, industry trends, economic conditions
or otherwise, BLS could be materially adversely affected.
Foreign currency exchange fluctuations could have an adverse effect on the Company's business.
The Company has business and operations outside the U.S., and BLS derives a significant portion of its revenues from
international operations. Since the Company's Consolidated Financial Statements are denominated in U.S. dollars, fluctuations
in exchange rates from period to period will have an impact on reported results. In addition, BLS may incur costs in one
currency related to its services or products for which it is paid in a different currency. As a result, factors associated with
international operations, including changes in foreign currency exchange rates, could significantly affect BLS's results of
operations, financial condition and cash flows.
The Company's uses of financial instruments to limit its exposure to interest rate and currency exchange fluct~tatiOtrs could
expose it to risks and financial losses that may adversely affect the Company's financial condition, liquidity and results of
operations.
To limit the Company's exposure to interest rate fluctuations and currency exchange fluctuations, it has entered into, and i.n
the future may enter into for these or other purposes, financial swaps, or hedging arrangements, with various financial
counterparties. In addition to any risks related to the counterparties, there can be no assurances that the Company's hedging
activity will be effective in insulating it from the risks associated with the underlying transactions, that the Company would not
have been better off without entering into these hedges, or that the Company will not have to pay additional amounts upon
settlement.
The Company's level of indebtedness and debt service requirements could adversely affect the Company's liquidity, results
of operations and business.
At December 31, 2024, indebtedness on the Company's outstanding senior notes totaled approximately $6.2 billion in
aggregate principal, of which $1.0 billion is payable within the next ]2 months. The Company is also a party to credit
agreements relating to a $1.0 billion revolving credit facility. 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 a leverage ratio within certain limits.
The Company's level of indebtedness and debt service requirements could adversely affect its business. In particular, it
34
could increase the Company's vulnerability to sustained, adverse macroeconomic weakness, limit its ability to obtain further
financing or refinance existing debt at maturity, and limit its ability to pursue certain operational and strategic opportunities,
including large acquisitions. Additionally, the Company's cost of funds could increase due to the impact of increases in
prevailing interest rates on its variable rate debt and should the Company refinance existing debt at maturity or obtain further
financing.
The Company may also enter into additional transactions or credit facilities, including other long-term debt, which may
increase its indebtedness and result in additional restrictions upon the business. In addition, major debt rating agencies regularly
evaluate the Company's debt based on a number of factors. There can be no assurance that the Company will be able to
maintain its existing debt ratings, and failure to do so could adversely affect the Company's cost of funds, liquidity and access
to capital markets.
The Company's quarterly operating results may vary.
The Company's operating results may vary significantly from quarter to quarter and are influenced by factors over which the
Company has little control, such as:
• changes in the global economy;
• currency exchange rate fluctuations;
• the commencement, completion, delay or cancellation of large projects or contracts or groups of projects;
the progress of ongoing projects;
• adverse weather, natural disasters, geopolitical events, public health crises, hostilities or acts of terrorism, acts of vandalism,
disruption to supply chains, inaccessibility of natural resources, and other events beyond the Company's control;
the timing of and costs associated with completed acquisitions or other events; and
• changes in the utilization mix of the Company's services.
The Company believes that operating results for any particular quarter are not necessarily a meaningful indication of future
results. While fluctuations in the Company's quarterly operating results could negatively or positively affect the market price of
the Company's common stock, these fluctuations may not be related to the Company's future overall operating performance.
The Company depends on a variety of U.S. and international financial institutions to provide us with banking services. The
default or failure of one or more of the financial institutions that the Company relies on may adversely affect the Company's
business and financial condition.
The Company maintains the majority of its cash and cash equivalents in accounts with major U.S. and international financial
institutions, and its deposits at certain of these institutions exceed insured limits. Market conditions can impact the viability of
these institutions. In the event of failure of any of the financial institutions where the Company maintains its cash and cash
equivalents, there can be no assurance that the Company would be able to access uninsured funds in a timely manner or at all.
Additionally, bank payment processes could become unavailable which could temporarily impact the Company's ability to
conduct business with suppliers and pay its employees on a timely basis. Any inability to access or delay in accessing these
funds could adversely affect the Company's business and financial condition.
The Company might not be able to engage in certain desirable capital-raising or strategic transactions.
The Company's ability to engage in certain transactions could be limited or restricted in order to preserve, for U.S. federal
income tax purposes, the tax-free qualification of the Fortrea spin-off and certain related transactions under Sections 355 and
368(a)(l)(D) of the Internal Revenue Code. Even if the Spin-off and certain related transactions otherwise qualify for tax-free
treatment under Section 355 of the Code, they may result in corporate-level taxable gain to the Company if there is a 50% or
greater change in ownership, by vote or value, of shares of the Company's stock, Fortrea's stock, or the stock of a successor of
either occurring as part of a plan or series of related transactions that includes the Spin-off, which is generally presumed to
include any acquisitions or issuances of stock within two years of the Spin-off. To avoid realizing such taxable gain, the
Company may be restricted or limited in its capital-raising or in the strategic transactions that it elects to pursue during such
time period.
The spin-off of Fortrea may not achieve the intended results.
On June 30, 2023, the Company completed the previously announced spin-off of Fortrea. The Spin-off poses risks and
challenges that could impact the Company's business, including, but not limited to, the failure to receive tax.-free treatment for
U.S. federal income purposes, and potential exposure to unexpected claims, liabilities, or costs under the Company's
agreements with Fortrea in connection with the Spin-off.
35
Risks Related to Technology and Cybersecurity
Failure to maintain the security of customer-r:elated information or compliance with security requirements could damage
the Company's reputation with customers, cause it to incur substantial additional costs and become subject to litigation and
enforcement actions.
The Company receives, stores, transmits, and processes certain personal and financial information about its customers. [n
addition, the Company depends upon the secure transmission of confidential information over public networks, including
information permitting cashless payments. The Company also works with third-party service providers and vendors that provide
technology systems and services that are used in connection with the receipt, storage, transmission, and processing of customer
personal and financial information. A compromise of the Company's systems, or those of the Company's third-party service
providers and vendors, that results in customer personal information being obtained or altered by unauthorized persons, or the
Company's third party's failure to comply with security requirements, including but not limited to security standards for
payment cards (e.g., the Payment Card Industry Data Security Standard), could adversely affect the Company's reputation with
its customers and others, as well as the Company's results of operations, fmancial condition and liquidity. It could also result in
litigation against the Company and the imposition of fines and penalties. For example, in connection with the AMCA Incident
(as defined below under "Cybersecurity" in Item !C) the Company has incurred, and expects to continue to incur, costs, and the
Company is involved in pending and threatened litigation, as well as various government and regulatory inquiries and
processes. For additional information about the AMCA Incident, see Note 15 Commitments and Contingencies to the
Consolidated Financial Statements of Part III oftthe Annual Report.
Failure in the Company's information technology systems or delays or failures in the development and implementation of
new systems or updates or enhancemellts to existing systems could disrupt the Company's operations or customer
relationships.
The Company's operations and customer relationships depend, in part, on the continued performance of its information
technology systems. An information technology or process failure could impede the processing of data, delivery of data and
services, customer orders, and day-to-day management of the business, and could result in the corruption or loss of data.
Despite security measures and other precautions the Company has taken, including the development of contingency and disaster
recovery plan::>, it::; information technology ~y~tems are potentially vulnerable to phy::;ical break-in::;, fin:, natural di~a~ter, power
loss, telecommunications failures, cybersecurity incidents and similar disruptions, and there may not be adequate protections,
mitigation, backups, and/or redundant facilities available in the event these threats are realized. In addition, the Company may
experience system failures, or interruptions, including cybersecurity incidents, as it integrates the information technology
systems of newly acquired businesses. Failures or interruption of the Company's systems in one or more of its operations could
result in interruptions of service, disrupt the Company's ability to process laboratory requisitions, perform testing, provide test
results or drug development data in a timely manner, and/or conduct timely billing operations. Such system failures could
require the Company to transfer operations to an alternative provider of se!l'Vices, which could result in delays in the delivery of
offerings to customers and other operations. Additionally, significant delays in the planned delivery of system enhancements or
improvements, or inadequate performance of the systems once they are complete, could damage the Company's reputation and
harm the business. Furthermore, failure of the Company's information technology systems could adversely affect the
Company's business, profitability, financial condition, and reputation.
Cybersecurity incidents and unauthorized access to the Company's o.r its customers' data could harm the Company's
reputation and adversely affect its business.
The Company has previously experienced and expects to continue to experience attempts by unauthorized parties to
compromise the Company's cybersecurity controls, like the 2018 ransomware attack. The Company has also experienced and
expects to continue to experience similar attempts by threat actors to penetrate the systems of third-party suppliers and vendors
to whom the Company has provided data, like the 2019 AMCA data breach. These attempts, if successful, could result in the
misappropriation or compromise of personal information or proprietary or confidential information stored within the Company's
systems or within the systems of third parties, create system disruptions or cause shutdowns. Threat actors have a variety of
attack methods, including without limitation, by developing and deploying viruses, worms, and other malicious software
programs that attack the Company's systems, the systems of third-parties, or otherwise exploit any security vulnerabilities. In
addition, the increased use of AI by threat actors is enhancing the scale s·ophistication and effectiveness of their cyberattacks.
Outside parties may also attempt to fraudulently induce employees to take actions, including the release of confidential or
sensitive information or to make fraudulent payments through illegal electronic spamming, phishing, spear phishing, and other
tactics.
The Company has implemented a formal cybersecurity program; however, because the techniques used by threat actors to
obtain unauthorized access, disable or degrade service, or sabotage systems continue to evolve (and often are not recognized
until launched against a target), the Company may be unable to anticipate and/or implement appropriate controls needed to
36
protect against these evolving threats. In addition, as cyber threats continue to evolve including the use of AI by threat actors to
compromise systems, the Company may be required to expend additional resources to continue to enhance the Company's
cybersecurity measures or to investigate and remediate any cybersecurity vulnerabilities. The Company's remediation efforts
may not be sufficient and could result in interruptions, delays, cessation of service, loss of data integrity, loss of confidentiality,
and/or loss of data. This could also impact the cost and availability of cyber insurance to the Company. Cybersecurity incidents
affecting the Company's or third parties' security measures and the unauthorized dissemination of personal, proprietary or
confidential information about the Company or its customers or other third parties could expose customers' private information.
Such incidents could expose customers to the risk of financial or medical identity theft or expose the Company or other third
parties to a risk of loss or misuse of this information, result in litigation and potential liability for the Company, damage the
Company's brand and reputation, or otherwise harm the Company's bus.iness. Any of these incidents could have a material
adverse effect on the Company's business, regulatory compliance, financial condition, reputation, and/or results of operations.
In addition, the Company faces increased cybersecurity risks due to the number of employees that continue to work
remotely, which remains at levels higher than prior to the COVID-19 pandemic as a result of changes in the workplace and to
management and employee expectations. Increased levels of remote access create additional opportunities for cybercriminals to
exploit vulnerabilities, and employees may be more susceptible to phishing and social engineering attempts. In addition,
technological resources may become strained due to the number of remote users.
The use of AI and machine learning tools in our operations and the services of our third-parties may introduce risks that
could adversely affect our business, financial condition, and reputation.
The Company and its third parties leverage AI and machine learning tools to increase productivity and innovation. The
Company also faces potential risks from the use of AI and machine learning tools. The Company, or its customers' sensitive,
proprietary, or confidential information could be leaked, disclosed, or revealed as a result of or in connection with employees'
or vendors' use of generative AI technologies. In addition, the Company may use AI outputs to inform certain decisions, and AI
models may create incomplete, inaccurate, or otherwise flawed outputs, some of which may appear correct. Due to the potential
flaws in the use of AI, the Company could make incorrect decisions, including decisions that could bias certain individuals or
classes of individuals and adversely impact their rights. The rapid development of AI tools could render obsolete certain
technologies or tools we currently use, or otherwise provide competitors with a technological edge. New or evolving legislation
or regulations might impose restrictions on how AI and machine learning tools can be used, requiring the Company to adapt its
tools or face various penalties for non-compliance, including potential disgorgement of data and associated! capabilities. As a
result, the Company could face adverse consequences, including exposure to reputational and competitive harm, customer loss,
and legal liabilities. The AI tools may also be subject to additional, and as yet unidentified, security threats.
Any cybersecurity incidents affecting the information technology systems of third parties that provide services to the
Company could have a material adverse effect on the Company's operations.
The Company depends on third parties to provide services critical to the Company's business, including supplies, ground
and air transport of clinical and diagnostic testing supplies and specimens, research products, and people, among other services
and depends on them to comply with applicable laws and regulations. Third parties that provide services to the Company are
subject to similar risks related to security of customer-related information and compliance with U.S., state, local, or
international environmental, health and safety, amd privacy and security laws and regulations as the Company. Any failure by
third parties to comply with applicable laws, or any failure of third parties to provide services more generally, could have a
material impact on the Company, whether because of the loss of the ability to receive services from the third parties, legal
liability of the Company for the actions or inactions of third parties, or otherwise.
In addition, third parties to whom the Company outsources certain services or functions may process personal data, or other
confidential information of the Company. A cybersecurity incident affecting these third parties, like the AMCA Incident, could
also harm the Company's business, results of operations and reputation.
Risks Related to Regulatory and Compliance Matters
Changes in payer regulations or policies, insurance regulations or approvals, or changes in laws, regulations, or policies in
the U.S. or globally, including ·Ch(mges in their interpretation, may adversely affect the Company.
U.S. and state government payers, such as Medicare and Medicaid, as well as insurers, including MCOs, have increased
their efforts to control the cost, utilization and delivery of healthcare services. From time to time, Congress has considered and
implemented changes in Medicare fee schedutes in conjunction with budgetary legislation. The first phase of reductions
pursuant to PAMA came into effect on January 1, 20 18, and will continue subject to ce:rtain delays in implementation and
phase-in limits through 2027, and without limitations for subsequent periods. Further reductions due to changes in policy
regarding coverage of tests or other requirements for payment, such as prior authorization, diagnosis code and other claims
edits, may be implemented from time to time. Medicare reimbursement for pathology services performed by Dx, which are paid
37
for under the PFS, is also subject to statutory and regulatory reduction. R·eductions in the reimbursement rates and changes in
payment policies of other third-party payers may occur as well. Such changes in the past have resulted in reduced payments as
well as added costs and have decreased test utilization for the commercial laboratory industry by adding more complex new
regulatory and administrative requirements. Further changes in third-party payer regulations, policies, or laboratory benefit or
utilization management programs may have a material adverse effect on Dx's business. Actions by federal and state agencies
regulating insurance, including healthcare exchanges, or changes in other laws, regulations, or policies may also have a material
adverse effect upon Dx's business.
The Company could face significant monetary damages and penalties ami/or exclusion from government programs if it
violate.'> anti-fraud and abuse law.'>.
The Company is subject to extensive government regulation at the federal, state, and local levels in the U.S. and other
countries where it operates. The Company's failure to meet governmental requirements under these regulations, including those
relating to billing practices and financial relationships with physicians, hospitals, and health systems, biopharmaceutical
manufacturers, and others could lead to civil and criminal penalties, exclus.ion from participation in Medicare and Medicaid and
possible prohilbitions or restrictions on the use of its laboratories. While the Company believes that it is in material compliance
with all statutory and regulatory requirements, there is a risk that government authorities might take a contrary position. This
risk includes, but is not limited to, the potential that government enforcement authorities may take a contrary position with
respect to the Eliminating Kickbacks in Recovery Act, given the lack of associated regulations to clarify or add exceptions.
Such occurrences, regardless of their outcome, could damage the Company's reputation and adversely affect important business
relationships.
The Company's business could be harmed from the loss or suspension of a license or imposition of a fine or penalties under,
or future changes in, or interpretations of, the law or regulations of CLIA, Medicare, Medicaid or other national, state, or
local agencies in the U.S. and other countries where the Company operates laboratories.
The commercial laboratory testing industry is subject to extensive U.S. regulation, and many of these statutes and
regulations have not been interpreted by the courts. CLIA extends federal oversight to virtually all clinical laboratories
operating in the U.S. by requiring that they be certified by the federal government or by a federally approved accreditation
agency. The sanction for failure to comply with CLIA requirements may be suspension, revocation, or limitation of a
laboratory's CLIA certificate, which is necessary to conduct business, as well as significant fines and/or criminal penalties. In
addition, the Company is subject to regulation under state law. State laws may require that laboratories and/or laboratory
personnel meet certain qualifications, specify certain quality controls or require maintenance of certain records. The Company
also operates laboratories outside of the U.S. and is subject to laws goveming its laboratory operations in the other countries
where it operates.
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's business. Potential sanctions for violation of these statutes and regulations
include significant fines and the suspension or loss of various licenses, certificates, and authorizations, which could have a
material adverse effect on the Company's business. In addition, compliance with future legislation could impose additional
requirements on the Company, which may be costly.
Failure of the Company or its third-party service providers to comply with privacy and data security laws and regulatio11s
could result in fines, penalties and damage to the Company's reputatio11 with customers and have a material adverse effect
upon the Company's business.
If the Company and its third-party service providers do not comply with existing or mew laws and regulations related to
protecting the privacy and security of personal or health information, it could be subject to monetary fines, civil penalties,
litigation, or criminal sanctions.
In the U.S., the Health Insurance Portability and Accountability Act of 1996, the U.S. Health Information Technology for
Economic and Clinical Health (HITECH) Act, and their implementing privacy and security regulations (collectively, HIPAA)
establish comprehensive standards with respect to the use and disclosure of protected health information (PHI), by covered
entities as well as their "business associates" as defined in HTPAA, in addition to setting standards to protect the confidentiality,
integrity and security of PHI.
HIPAA restricts the Company's ability to use or disclose PHI, without patient authorization, for purposes other than
payment, treatment or healthcare operations (as defined by HIPAA), except for disclosures for various public policy purposes
and other permitted purposes outlined in the privacy regulations. HIPAA provides for significant fines and other penalties for
wrongful use or disclosure of PHI in violation of the privacy and security regulations, including potential civil and criminal
fines and penalties. The regulations establish a complex framework on a variety of subjects, including:
38
the circumstances under which the use and disclosure of PHI are permitted or required without a specific authorization by
the patient, including, but not limited to, treatment purposes, activities to obtain payments for the Company's services, and
its healthcare operations actEvities;
a patient's rights to access, amend and receive an accounting of certain disclosures of PHI;
• the content of notices of privacy practices for PHI;
• administrative, technical and physical safeguards required of entities that use or receive PHI; and
• the protection of computing systems maintaining electronic PHI.
In addition to the existing requirements under HIP AA, HHS issued an NPRM regarding revising the HIP AA Security Rule,
which, if adopted, would impose increased requirements on regulated entities such as the Company. The Company has
implemented policies and procedures designed to comply with the HIP AA privacy and security requirements as applicable. The
privacy and security regulations establish a "floor" and do not supersede state laws that are more stringent. Therefore, the
Company is required to comply with both additional federal privacy and security regulations and varying state privacy and
security laws. To the extent applicable, newer laws like the California Consumer Privacy Act (CCPA) as amended by the
California Privacy Rights Act (CPRA), the Washington My Health My Data Act, and similar consumer privacy laws in other
states, may impose additional obligations on the Company. Federal and state laws that protect the privacy and security of
patient information may be subject to enforcement and interpretations by various governmental authorities aod courts, resulting
io complex compliance issues. In addition, laws regulating artificial intelligence and machine learning, including the use of
algorithms and automated processing, may impact the Company and lead to increases in the cost of compliance.
Noncompliance with these laws could result in the imposition of fines, penalties, or orders to stop certain activities, and
potentially expose the Company to actions for the wrongful use or disclosure of health information or other personal
information.
The Company may also be required to comply with the data privacy and security laws of other countries in which it operates
or with which it transfers and receives data. For example, the EU's General Data Protection Regulation (GDPR) includes
compliance obligations for subject companies and imposes penalties for noncompliance of up to the greater of €20 million or
4% of worldwide revenue for the most serious breaches of data protection obligations, and similar obligations exist under the
UK GDPR. The Company has established processes and frameworks to manage compliance with the GDPR. Potential fines and
penalties in the event of a violation of the GDPR could have a material adverse effect on the Company's business and
operations. In addition, similar data protection regulations addressing access, use, disclosure and transfer of personal data have
been enacted or updated in regions where the Company does business, including in Asia, Latin America, and other parts of
Europe.
The Company may be required to make changes to its business practices and to incur additional costs associated with
compliance with these evolving and complex regulations.
The Company's international operations could subject it to additional risks and expenses that could adversely impact the
business or results of operations.
The Company's international operations expose it to risks from potential failure to comply with foreign laws and regulations
that differ from those under which the Company operates in the U.S. In addition, the Company may be adversely affected by
other risks of operations in foreign countries, including, but not limited to: changes in reimbursement by foreign governments
for services provided by the Company; compliance with export controls and trade regulations; changes in tax policies or other
foreign laws; compliance with foreign labor and employee relations laws and regulations; restrictions on currency repatriation;
judicial systems that less strictly enforce contractual rights; countries that do not have clear or well-established laws and
regulations concerning issues relating to commercial laboratory testing or drug development services; countries that provide
less protection for intellectual prope1ty rights; and procedures and actions affecting approval, production, pricing,
reimbursement and marketing of its offerings. Further, international operations could subject the Company to additional
expenses that the Company may not fully anticipate, including those related to enhanced time and resources necessary to
comply with foreign laws and regulations, difficulty in collecting accounts receivable and longer collection periods, and
difficulties and costs of staffing and managing foreign operations. In some countries, the Company's success will depend in part
on its ability to form relationships with local partners. The Company's inability to identify appropriate partners or reach
mutually satisfactory arrangements could adversely affect the business and operations.
International operations may increase the Company's exposure to liabilities under applicable anti-corruption laws.
Anti-corruption laws in the countries where the Company conducts business, including the FCP A, UK Bribery Act, and
similar laws in other jurisdictions, prohibit companies and their intermediaries from engaging in bribery including improperly
offering, promising, paying or authorizing the giving of anything of value to individuals or entities for the purpose of corruptly
obtaining or retaining business. The Company operates in parts of the world where corruption may be common and where anti-
corruption laws may conflict to some degree with local customs and practices. The Company maintains an anti-corruption
39
program including policies, procedures, training and safeguards in the engagement and management of third parties acting on
the Company' s behalf. Despite these safeguards, the Company cannot guarantee protection from corrupt acts committed by
employees or third parties associated with the Company. Violations or allegations of violations of anti-corruption laws could
have a significant adverse effect on the business or results of operations.
Failure to comply with the regulations of pharmaceutical and medical device regulators, such as the FDA, the Medicines
and Healthcare products Regulatory Agency in the United Kingdom, the European Union, the European Medicines Agency,
the National Medical Products Administration in China, and the Pharmaceuticals and Medical Devices Agency in Japan,
could result in fines, penalties, and sanctions against BLS and have a material adverse effect upon the Company.
The operation of BLS's preclinical laboratory facilities and central laboratory operations must conform to good laboratory
practice (GLP) and good clinical practice (GCP), as applicable, as well .as all other applicable standards and regulations, as
further described in Item 1 of Part I of this Annual Report. The business operations of BLS's clinical and preclinical
laboratories also require the import, export and use of medical devices, in vitro diagnostic devices, reagents, and human and
animal biological products. Such activities are subject to numerous applicable local and international regulations with which
BLS must comply. IfBLS does not comply, BLS could potentially be subject to civil, criminal or administrative sanctions and/
or remedies, including suspension of its ability to conduct preclinical and clinical studies, and to import or export to or from
certain countries, which could have a material adverse effect upon the Company.
Additionally, certain BLS services and activities must conform to current good manufacturing practice (cGMP), as further
described in Item l of Part I of this Annual Report. Failure to maintain compliance with GLP, GCP, or cGMP regulations and
other applicable requirements of various regulatory agencies could result in warning or untitled letters, fmes, unanticipated
compliance expenditures, suspension of manufacturing, and civil, criminal or administrative sanctions and/or remedies against
BLS, including suspension of its laboratory operations, which could have a material adverse effect upon the Company.
Increased regulations and restrictions on the import of research animals, limitations of supply of research animals, and
actions of animal rights activists may have an adverse effect on the Company.
BLS's preclinical services utilize animals in preclinical testing of the safety and efficacy of drugs and devices. Such
activities are required for the development of new medicines and medical devices under regulatory regimes in the U.S., Europe,
Japan, and other countries. Increased regulations and restrictions on the import of research animals into various countries, as
well as limitations of supply could impact BLS 's ability to conduct preclinical research and could have an adverse effect on
BLS's financial condition, results of operations, and cash flows. In addition, acts of vandalism and other acts by animal rights
activists who object to the use of animals in drug development could have an adverse effect on the Company.
Animal populations may suffer diseases that ca11 damage BLS's inventory, harm its reputation, or result in other liability.
It is important that research products be free of diseases, including infectious diseases. The presence of diseases can distort
or compromise the quality of research results, cause loss of animals in BLS's inventory, result in harm to humans or outside
animal populations if the disease is not contained to animals in inventory, or result in other losses. Such results could harm
BLS's reputation or have an adverse effect on BLS's financial condition, results of operations, and cash flows.
Failure to conduct animal research in compliance with animal welfare laws and regulations could result in sanctions and/or
remedies against BLS and have a material adverse effect upon the Company.
The conduct of animal research at BLS's facilities must be in compliance with applicable laws and regulations in the
jurisdictions in which those activities are conducted. These laws and regulations include the U.S. Animal Welfare Act (A WA),
which governs the care and use of warm-blooded animals for research in the U.S. other than laboratory rats, mice and chickens,
and is enforced through periodic inspections by the U.S. Department of Agriculture (USDA). The A W A establishes facility
standards regarding several aspects of animal welfare, including housing, ventilation, lighting, feeding and watering, handling,
veterinary care, and recordkeeping. Similar laws and regulations apply in other jurisdictions in which BLS conducts animal
research, including the UK, EU, and China. BLS complies with licensing and registration requirement standards set by these
laws and regulations in the jurisdictions in which it conducts animal research. If an enforcement agency determines that BLS's
equipment, facilities, laboratories or processes do not comply with applicable standards, it may issue an inspection report
documenting the deficiencies and setting deadlines for any required corrective actions. For noncompliance, the agency may take
action against BLS that may include fines, suspension and/or revocation of animal research licenses, or confiscation of research
animals.
U.S. Food a11d Drug Administration (FDA) regulation of laboratory-developed tests (LDTs) and regulation by other
countries of diagnostic offerings could have a material adverse effect upon the Company's business.
The FDA h.as regulatory responsibility for instruments, test kits, reagents and other devices used by clinical laboratories. The
FDA enforces laws and regulations that govern the development, testing, manufacturing, performance, labeling, advertising,
40
marketing, distribution, and surveillance of diagnostics, and it regularly inspects and reviews the manufacturing processes and
performance of diagnostics. Dx 's point-of-care testing devices are subject to regulation by the FDA.
Historically, LDTs developed by high complexity clinical laboratories have been generally offered as services to health care
providers under the CLIA regulatory framework administered by CMS, without the requirement for FDA clearance or approval.
On April 29, 2024, the FDA released a final rule purporting to clarify its authority to regulate LDTs as medical devices under
the federal Food, Drug, and Cosmetic Act, under which it will phase out its general enforcement discretion approach for LDTs
under a four-year period subject to certain continuing enforcement discretion policies. The final rule was published on May 6,
2024, and became effective on July 5, 2024. In the absence of a successful legal challenge, the first phase of compliance
obligations will begin on May 6, 2025. On May 29, 2024, the American Clinical Laboratory Association {ACLA) and its
member company, HealthTrackRx, filed a lawsuit against the FDA in the United States District Court for the Eastern District of
Texas, challenging the FDA's final rule. While the lawsuit may change the final rule or delay or prevent its enforcement, the
issuance of the final rule presents an increased risk of FDA enforcement actions for laboratory tests offered by companies
without FDA clearance or approval that do not fall within the ongoing enforcement discretion policies. However, the outcome
and its ultimate impact on the Company's business remain difficult to predict at this time.
Current FDA regulation of the Company's diagnostic offerings and the potential for future increased regulation of the
Company's LOTs could result in increased costs and administrative and legal actions for noncompliance, including warning
letters, fines, penalties, suspensions, recalls, injunctions, and other civil and criminaE sanctions, and could impair the
development and commercialization of new tests, which could have a material adverse effect upon the Company.
Regulation of diagnostics offerings in jurisdictions outside the U.S. in which the Company operates may impact laboratory
testing offered by the Company in both Dx and BLS. For example, the European Union In Vitro Diagnostics Regulation
(Regulation (EU) 20171746 (EU IVDR)) established a new legislative framework for in vitro diagnostic devices that are used in
certain circumstances and includes a rule-based classification and quality and safety standards. The EU IVDR, where applicable
to BLS 's services, could impact BLS 's ability to support trials, result in increased costs and administrative and legal actions,
and have an adverse effect.
Failure to comply with U.S., state, local, or international environmental, health and safety laws and regulations, including
the U.S. Occupational Safety and Health Administration Act and the U.S. Needlestick Safety and Prevention Act, could
result in fines, penalties and loss of licensure, a1zd have a material adverse efect upon the Company.
As previously discussed in Item 1 of Part 1 of this Annual Report, the Company is subject to licensing and regulation under
laws and regulations relating to the protection of the environment and human health and safety, including laws and regulations
relating to the handling, transportation and disposal of medical specimens, infectious and hazardous waste and radioactive
materials, as well as regulations relating to the safety and health of laboratory employees. Failure to comply with these laws and
regulations could subject the Company to denial of the right to conduct business, fines, criminal penalties and/or other
enforcement actions that would have a material adverse effect on its business. In addition, compliance with future legislation
could impose additional requirements on the Company that may be costly.
Views on matters relating to corporate responsibility and governance and the perception of the Company's activities in these
areas by stakeholders may impact the Company's business and reputation.
Governmental authorities, non-governmental organizations, customers, investors, external stakeholders, and employees are
sensitive to matters of corporate responsibility and governance, such as environmental sustainability. This focus on these
concerns may lead to new requirements that could result in increased costs associated with developing, manufacturing, and
distributing the Company's offerings. The Company's ability to compete could also be affected by changing preferences and
requirements on these matters and the Company's ability to meet them. If the Company does not meet the evolving and varied
preferences and requirements of governmental authorities and others on these matters, the Company could experience reduced
demand for its offerings, loss of customers, and other negative impacts on the Company's business and results of operations.
Risks Related to Legal Matters
Adverse results in materiallitiKation matters could have a material adverse efect upon the Company's business.
The Company is currently and may continue to be subject in the ordinary course of business to legal actions related to,
among other things, intellectual property disputes, contract disputes, data and privacy issues, professional liability and
employee-related matters, which may be or may become material. The Company also has received and may in the future
receive inquiries and requests for information from governmental agencies and bodies, including Medicare or Medicaid payers,
requesting comment and/or information on various matters, including allegations of billing irregularities, billing and pricing
arrangements, or privacy practices that are brought to its attention through audits or third parties. Legal actions can result in
41
substantial monetary damages as well as damage to the Company's reputation with customers, which cou1d have a material
adverse effect upon its business.
The failure to successfully obtain, maintain, a11d enforce intellectual property rights and defend against challenges to the
Company's intellectual property rights could adversely affect the Compatry.
Many of the Company's offerings and processes rely on intellectual property, including patents, copyrights, trademarks, and
trade secrets. In some cases, that intellectual property is owned by another party and licensed to the Company, sometimes
exclusively. The value of the Company's intellectual property relies in part on the Company's ability to maintain its proprietary
rights to such intellectual property. The Company has been in the past and may be unable in the future to obtain or maintain the
proprietary rights to its intellectual property, to prevent attempted infringement against its intellectual property, or to defend
against claims that it is infringing on another party's intellectual property, and the Company could be adversely affected.
For example, in October 2020, Ravgen Inc. filed a patent infringement lawsuit against the Company alleging infringement
of two Ravgen-owned U.S. patents. In September 2022, a jury rendered a verdict in favor of Ravgen on the remaining patent at
issue and awarded damages of $272.0 million. In May 2023, the court awarded Ravgen additional enhanced damages in the
amount of $100.0 million, and in January 2025, the court awarded Raygen post-verdict supplemental damages of $2.6 million,
an ongoing royalty of $100 per test through the life of the patent as issue, pre- and post-judgement interest, and other relief. 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 that decision was upheld
on appeal before the U.S. Court of Appeals for the Federal Circuit in January 2025.
Adverse effects resulting from the failure to successfully obtain, maintain, and enforce intellectual property rights and
defend against challenges to the Company's intellectual property rights could include the Company having to abandon, alter
and/or delay the deployment of offerings or processes that rely on such intellectual property; having to procure and pay for
licenses from the holders of intellectual property rights that the Company seeks to use, having to pay damages, fines, court costs
and attorney's fees in connection with intellectual property litigation, and reputational damage.
Changes in tax laws and regulations or the interpretation of such may have a significant impact on the financial position,
results of operations, and cash flows of the Company.
U.S. and foreign governments continue to review, reform and modify tax laws, including with respect to the Organisation
for Economic Co-operation and Development's base erosion and profit shifting initiative. Changes in tax laws and regulations
could result in material changes to the domestic and foreign taxes that the Company is required to provide for and pay.
In addition, the Company is subject to regular audits with respect to its various tax returns and processes in the jurisdictions
in which it operates. Errors or omissions in tax returns, process failures or differences in interpretation of tax laws by tax
authorities and. the Company may lead to litigation, payments of additional taxes, penalties and interest.
Contract services in the drug development industry create liability risks.
In contracting to work on drug development trials and studies, BLS faces potential risks inherent to the provision of
diagnostic information services for clinical trial participants. Users of BLS for clinical trials may have a greater sensitivity to
errors than the users of services or products that are intended for other purposes, such as research only. Other potential
liabilities may include:
• Errors or omissions that create harm to clinical trial subjects during a trial or to consumers of a drug after the trial is
completed and regulatory approval of the drug has been granted;
• Risks that animals in BLS 's facilities may be infected with diseases that may be harmful and even lethal to themselves and
humans despite preventive measures contained in BLS's business policies, including those for the quarantine and handling
of imported animals; and
• Errors and omissions during a trial or study that may undermine the usefulness of a trial or study, or data from the trial or
study or that may delay the entry of a drug to the market.
While BLS endeavors to include in its contracts provisions entitling it to be indemnified and entitling it to a limitation of
liability, these provisions are not always successfully obtained and, even if obtained, do not uniformly protect BLS against
liability arising from certain of its own actions. BLS could be materially and adversely affected if it were required to pay
damages or bear the costs of defending any claim that is not covered by a contractual indemnification provision, or in the event
that a party which must indemnify it does not fulfill its indemnification obligations, or in the event that BLS is not successful in
limiting its liability or in the event that the damages and costs exceed BLS's insurance cov,erage. BLS may also be required to
agree to contract provisions with clinical site selection or its customers related to the conduct of clinical trials, and BLS could
42
be materially and adversely affected if it were required to indemnify a site or customer against claims pursuant to such contract
terms. There can be no assurance that BLS will be able to maintain sufficient insurance coverage on acceptable terms.
Item lB.
UNRESOLVED STAFF COMMENTS
None.
Item IC.
CYBERSECURITY
Risk Management and Strategy
Protecting the information maintained by the Company about its patients, customers, colleagues, and partners against
external and :internal threats is a priority for the Company. Accordingly, the Company invests in the development and
implementation of cybersecurity policies, control standards, and control procedures, including a risk management and
assessment program, security and event monitoring capabilities, an incident response plan, and other detection, prevention, and
protection capabilities, including practices and tools to monitor and mitigate external and insider threats. The Company engages
in a risk monitoring process through its Office of Information Security (OIS) within the Information Technology organization
that seeks to identify the likelihood and impact of threats to its systems and data, and assesses the effectiveness of the controls
in place.
The Company has implemented a formal cybersecurity program aligned to the Secure Controls Framework (SCF), a
cybersecurity and privacy framework that consolidates and maps controls across multiple regulations, standards, and best
practices. The Company's program includes the evaluation of the cybersecurity posture of third-party suppliers and vendors that
have access to the Company's data or information technology systems. Consistent with business requirements, components of
the Company's information technology and controls are assessed by independent third parties against various frameworks and
standards. With the assistance of these frameworks and standards, the Company assesses risks from cybersecurity threats,
monitors its information systems for potential vulnerabilities, assesses those systems pursuant to the Compa.ny's cybersecurity
policies, control standards, and control procedures, and implements appropriate mitigation measures. Mitigation of identified
threats and vulnerabilities may be delayed.
The Company has implemented an Incident Response Plan (IR Plan), which is aligned to its overall crisis management
program. The IR Plan provides a framework for responding to and managing cybersecurity incidents. The IR Plan outlines
incident response requirements, reporting processes, protocols for incident evaluation, and procedures for notifying and
escalating information to the Company's senior management, and the Board and/or appropriate Board conunittees, as
applicable. The IR Plan is reviewed, tested, and updated under the leadership of the Company's Chief Information and
Technology Officer (CliO) and Chieflnformation Risk Officer (CIRO).
The Company's cybersecurity team also provides enterprise-wide cybersecurity training for employees to maintain and
continuously improve the Company's mitigation against human-driven risk. Cybersecurity training is conducted annually, in
addition to periodic simulations and exercises to test the efficacy of this training, and expanded training is required for specific
roles.
Engagement with External Cybersecurity Professionals
The Company engages with third parties to assess the effectiveness of, and assist with, its cybersecurity risk and response
systems and processes. These third parties include cybersecurity assessors, consultants, and professionals who help identify,
verify, and validate cybersecurity risks and support mitigation or incident response plans as needed.
Oversight of Third-Party Service Providers
The Company's processes also are designed to evaluate the cybersecurity threat risks associated with its. use of third-party
service providers that have applicable levels of access to the Company's data or information technology systems. The Company
performs due diligence on thirdl parties that have access to its systems, data, or facilities that house such systems or data, and it
monitors cybersecurity threat risks identified through such due diligence.
Cybersecurity Incident Impact
The Company describes whether and how risks from identified cybersecurity threats, including as a result of any previous
cybersecurity incidents, have materially affected or are reasonably likely to materially affect it, including its business and
operating results, financial condition, and impact on the Company's reputation and customer relationships under the "Risks
Related to Technology and Cybersecurity" heading and subheadings thereunder in Part I, Item lA. "Risk Factors" of this
Annual Report, which disclosures are incorporated by reference herein.
43
In July 2018, the Company experienced a ransomware incident which affected certain Dx information technology systems.
The incident also temporarily affected certain other information technology systems involved in conducting Company-wide
operations. An investigation determined that the ransomware did not and could not transfer patient or client data outside of
Company systems and that ther,e was no theft or misuse of patient or client data. This incident did not have a material effect on
the Company.
On May 14, 2019, Retrieval-Masters Credit Bureau, Inc. d/b/a/ American Medical Collections 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 is involved in pending and threatened
litigation related to the AMCA Incident, as well as various government and regulatory inquiries and processes. For additional
information about the AMCA Incident, see Note 15 Commitments and Contingencies to the Consolidated Financial Statements
"Cybersecurity" and "Risk Factors - Risks Related to Technology and Cybersecurity".
Governance
The Company's board of directors has oversight responsibility for the Company's enterprise risk management process and it
delegates oversight responsibility for certain significant functional areas of risk management to the board's committees. The
Audit Committee of the board of directors is responsible for oversight and review of the Company's cybersecurity and other
information technology risks, controls, and procedures, including the potential impact of such risks on the Company's business,
financial results, operations, and reputation, as well as the Company's plans to mitigate cybersecurity risks and to respond to
cybersecurity mncidents.
The CIRO and CITO routinely present cybersecurity reports to the Audit Committee at its regularly scheduled meetings.
These reports may address cyber risks and threats, the status of projects to strengthen the Company's information security
systems, assessments of the Company's security program, prior incidents, and the emerging cyber threat landscape. In addition,
the full Board receives briefings from the CIRO and CITO on at least an annual basis.
Management is responsible for day-to-day assessment and oversight of cybersecurity risks. At the senior management level,
the CITO is responsible for overseeing the Company's information technology systems, technology capabilities, and
cybersecurity practices. The CITO has more than 15 years of experience working in information technology-related roles and is
a member of the Company's executive leadership team and reports to the Chief Executive Officer. Prior to joining the
Company, the CITO held various leadership positions with global companies.
The CIRO, under the direction of the CITO, is responsible for overseeing the OIS. In this role, the CIRO oversees the cyber
risk management function, whi,ch identifies cybersecurity threats, assesses cybersecurity risks, and supports the CITO and the
Company in managing such risks. The CIRO has over 30 years of experience in information security, and prior to joining the
Company held various chief information security officer roles, including seven years at a global healthcare company. The CIRO
has also served on the board of directors of Health-ISAC, an organization of critical infrastructure owners and operators within
the health and public health sectors. The CITO and CIRO together lead efforts to design, implement and operate controls
deemed appropriate for the management of Company information assets and systems. OIS manages the policies, control
procedures, and control standards designed to identify, detect, protect against, respond to, and recover from cybersecurity
threats and cybersecurity incidents. This group includes a cybersecurity operations team that is responsible for the information
technology security monitoring and incident response activities, the latter covering the response coordination to cybersecurity
incidents under the leadership and pursuant to the direction of the CIRO. OIS also oversees the Company's cybersecurity
training program for employees.
44
Item 2.
PROPERTIES
The Company's corporate headquarters are located in Burlington, Nortlh Carolina, and include facilities that are both owned
and leased.
Dx operates through a network of patient service centers, branches, rapid response laboratories, primary laboratories, and
specialty laboratories. The table below summarizes certain information as to Dx's principal operating and administrative
facilities at December 31, 2024.
Location
Primary Facilities:
Birmingham, Alabama
Phoenix, Arizona
Los Angeles, California
Momovia, California
San Diego, California
San Francisco, California (2)
Shelton, Connecticut
Tampa, Florida
South Bend, Indiana
Wichita, Kansas
Baltimore, Maryland
Holyoke, Massachusetts
Westborough, Massachusetts
Troy, Michigan
St. Paul, Minnesota
Raritan, New Jersey
Burlington, North Carolina (5)
Research Triangle Park, North Carolina (3)
Dublin, Ohio
Tulsa, Oklahoma
Brentwood, Tennessee
Dallas, Texas
Houston, Texas
Herndon, Virginia
Seattle, Washington
Spokane, Washington (2)
Oak Creek, Wisconsin
45
Nature of Occupancy
Leased
Owned
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Owned
Owned
Owned/Leased
Leased
Owned
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
BLS operates on a global scale. The table below summarizes certain information as to BLS's principal operating and
administrative facilities at December 31, 2024.
Location
Primary Facilities:
Mechelen, Belgium
Shanghai, China (2)
Muenster, Germany
Bangalore, India
Kawagoe, Japan
Singapore
Geneva, Switzerland (2)
Eye, United Kingdom
Harrogate, United Kingdom
Huntingdon, United Kingdom
Shardlow, United Kingdom
York, United Kingdom
Los Angeles, California
Greenfield, Indiana
Indianapolis, Indiana
Bedford, Massachusetts
Ann Arbor, Michigan
Somerset, New Jersey
Denver, Pennsylvania
Brentwood, Tennessee
Chantilly, Virginia
Madison, Wisconsin
Nature of Occupancy
Leased
Leased/Owned
Owned
Leased
Leased
Leased
Owned/Leased
Owned
Owned
Owned
Owned
Leased
Leased
Owned
Leased
Owned
Leased
Owned
Leased
Leased
Leased
Owned
AIJ of the Company's primary facilities have been built or improved for the purpose of providing commercial laboratory
testing or biopharma laboratory services. The Company believes that these existing facilities and plans for expansion are
suitable and adequate and will provide sufficient production capacity for the Company's currently foreseeable level of
operations. The Company believes that if it were unable to renew a lease or if a lease were to be terminated on any of the
facilities it presently leases, it could find alternate space at competitive market rates and readily relocate its operations to such
new locations without material disruption to its operations.
Item 3.
LEGAL PROCEEDINGS
See Note 15 Commitments and Contingencies to the Consolidated Financial Statements.
Item 4.
MINE SAFETY DISCLOSURES
Not applicable.
46
Item 5.
PART II
MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS,
AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
The Company's common stock, par value $0.10 per share, or Common Stock, trades on the New York Stock Exchange or
NYSE under tb.e symbol "LH".
Holders
On February 24,2025, there were approximately 1,038 holders of record of the Common Stock.
Transfer Agent
The transfer agent for the Company's Common Stock is Equiniti Trust Company, LLC, 48 Wall Street, Floor 23, New
York, NY 10005, telephone: 800-468-9716, website: www.https://equiniti.com/us/.
Dividends
The Company initiated a quarterly dividend beginning in the second quarter of 2022. The Company's ability to pay
dividends is primarily dependent on earnings from operations, the adequacy of capital and the availability of liquid assets for
distribution.
For the year ended December 31, 2024, the Company paid $243.1 million in Common Stock dividends. The Company
expects common dividend declarations, if made, to occur in January, April, July, and October with payment dates in March,
June, September and December, and are subject to Board approval. There can be no assurance that the Company will continue
to pay quarterly cash dividends at the current rate or at all.
47
Common Stock Performance
The graph below shows the cumulative total return assuming an investment of $100 on December 31, 2{) 19, in each of the
Company's Common Stock, the Standard & Poor's, (S&P) 500 Index and the S&P 500 Health Care Index, and assuming that
all dividends were reinvested. For the purpose of this graph, the distribution of I 00% of the outstanding Common Stock of
Fortrea to the Company's shareholders, pursuant to which Fortrea became an independent company, is treated as a non-taxable
cash dividend of $33.11 per share, an amount equal to the opening price of Fortrea common stock when it began trading on
June 20, 2023, that was deemed! reinvested in the Company's Common Stock at the closing price on June 20, 2023.
Labcorp Holdings Inc.
S&P 500 Index
S&P 500 Health Care Index
260
240
220
II) 200
(.)
·;::::
~ 180
..><:
(.)
B 160
(/}
>< 140
II)
-.:;)
s;::
,_ 120
100
80
60
Comparison of Cumulative Total Return
12/2019
12/2020
12/2021
12/2022
$
100.00 $
120.32
$
185.74 $
140.40
$
100.00 $
118.40
$
152.39 $
124.79
$
100.00
$
113.45
$
143.09 $
140.29
Comparison of Cumulative Total Return
12/2023
12/2024
$
159.82 $
163.37
$
157.59 $
197.02
$
143.18 $
146.87
12/2019
12/2020
12/2021
12/2022
12/2023
12/2024
Period Ending
------ Labcorp Holdings Inc.
----- S&P 500 Index
----.- S&P 500 Health Care Index
Issuer Purchases of Equity Securities (all amounts in millions, except per share amounts)
The following table sets forth information with respect to purchases of shares of the Company's Common Stock made
during the quarter ended December 31, 2024, by or on behalf of the Company:
Total Number
Average
Total Number of Shares
Maximum Dollar Value of
of Shares
Price Paid
Repurchased as Part of
Shares that May Yet Be
Re£urchased
Per Share
Publici~ Announced Pro~am Re£urchased Under the Pro~ram
October 1 - October 31
$
$
1,355.4
November I - November 30
0.3
$
240.63
0.3
$
1,280.4
December 1 - December 31
$
$
1,280.4
0.3
$
240.63
0.3
During the year ended December 31, 2024, the Company purchased 1.1 shares of its Common Stock at an average price per
share of $219.57 for a total cost of $250.1. When the Company repurchases shares, the amount paid to repurchase the shares in
excess of the par or stated value is allocated to additional paid-in-capital unless subject to limitation or the balance in additional
paid-in-capital is exhausted. Remaining amounts are recognized as a reduction in retained earnings. At the end of 2024, the
Company had outstanding authorization from its Board to purchase up to $1,280.4 maximum value of the Company's Common
Stock. The repurchase authorization has no expiration date.
During the year ended December 31, 2023, the Company purchased 4.8 shares of its Common Stock at an average price per
share of $206.85 for a total cost of $1,000.0.
48
Item 6.
[RESERVED]
Item 7.
MANAGEMENPS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL (dollars in millions)
For the year ended December 31, 2024, the Company's revenues were $13,008.9, an increase of7.0% from $12,161.6 for
the corresponding period in 2023. The 7.0% increase in revenues for the year ended December 31,2024, as compared to the
corresponding period in 2023, was primarily due to organic revenue of 3.9%, acquisitions, net of divestitures of 2.8%, and
favorable foreign currency translation of 0.2%. The 3.9% increase in organic revenue was due to a 4.9% increase in the
Company's organic Base Business (Base Business includes the Company's business operations except for COVID-19 Testing),
partially offset by a 1.0% decrease in COVID-19 Testing.
The Company defmes organic growth as the increase in revenue excluding the year over year impact of acquisitions,
divestitures, and currency. Acquisition and divestiture impact is considered for a twelve-month period following the close of
each transaction.
Separation of Fortrea Holdin~s Inc.
On June 30, 2023, Labcorp completed the previously announced separation (Spin-off) of its former Clinical Development
and Commercialization Services (CDCS) business into Fortrea.
All historical operating results of Fortrea are presented as Earnings from discontinued operations, net of tax, in the
Company's Consolidated Statements of Operations. The spin-off is expected to be treated as tax-free for the Company and its
shareholders for U.S. federal income tax purposes.
As a result of the separation of Fortrea, the Company recast segment results to exclude the historical results of the CDCS
business for all periods presented. The remaining operations of the previously reported Drug Development segment have been
renamed the Biopharrna Laboratory Services (BLS) segment.
RESULTS OF OPERATIONS (dollars in millions)
The following tables present the financial measures that management considers to be the most significant indicators of the
Company's performance. For discussion of 2023 results and comparison with 2022 results refer to "Management's Discussion
and Analysis of Financial Conditions and Results of Operations" in the Company's Annual Report on Form 10-K for the year
ended December 31,2023.
Revenues
Year Ended December 31,
2024
2023
Change
Dx
$
10,144.3
$
9,415.1
7.7%
BLS
2,922.6
2,774.2
5.3%
Intercompany eliminations and other
(58.0)
(27.7)
109.4%
Total
$
13!008.9 $
12,161.6
7.0%
Dx revenues for the year ended December 31, 2024, were $10,144.3, an increase of 7.7% compared to revenues of $9,415.1
in the corresponding period in 2023. The increase was due to organic revenue of 4.1% and acquisitions, net of divestitures of
3.7%. The 4.1% increase in organic revenue was due to a 5.4% contribution from organic Base Business, partially offset by a
1.3% decrease in COVID-19 Testing. Total Base Business growth compared to the Base Business in the prior year was 9.2%.
Total volume, measured by requisitions, increased by 5.3% as acquisitions, net of divestitures, volume contributed growth of
2.7%, and organic volume increased by 2.6%. Organic volume was impacted by a 3.3% increase in the Base Business, partially
offset by a 0.8% decrease in COVID-19 Testing. Price/mix increased by 2.5% due to organic Base Business growth of 2.1%
and acquisitions, net of divestitures, of 1.0%, partially offset by a decrease in COVID-19 Testing of 0.5%.
BLS revenues for the year ended December 31, 2024, were $2,922.6, an increase of 5.3% over revenues of $2,774.2 in the
corresponding period in 2023. The increase in revenues was primarily due to organic growth of 4.3% and favorable foreign
currency translation of 1.1 %.
49
Cost of Revenues
Year Ended December 31,
2024
2023
Change
Cost of revenues
$
9,384.5
$
8,796.7
6.7%
Cost of revenues as a % of revenues
72.1%
72.3%
Cost of revenues increased 6.7% for the year ended December 31, 2024, as compared with corresponding period in 2023,
and decreased as a percentage of revenues to 72.1% for the year ended December 31, 2024, as compared to 72.3% for
corresponding period in 2023. This decrease in cost of revenues as a percentage of revenues was primarily due to higher
organic demand and LaunchPad savings, partially offset by higher personnel costs and lower COVID-19 Testing.
Sellin~:. General and Administrative Expenses
Selling, general and administrative expenses
SG&A as a % of revenues
Year Ended December 31,
2024
2023
$
2,230.0
$
2,021.4
17.1%
16.6%
Change
10.3%
Selling, general and administrative expenses as a percentage of revenues increased to 17.1% for the year ended
December 31, 2024, as compared to 16.6% for the corresponding period in 2023. The increase in selling, general and
administrative expenses as a percentage of revenues is primarily due to higher personnel costs, a reduction in COVID-19
Testing revenues, and the impact from the Invitae transaction, partially offset by LaunchPad savings and demand.
Goodwill and Other Asset Impairments
Years Ended December 31,
2024
2023
Change
Goodwill and other asset impairments
$
5.3 $
349.0
(98.5)%
The impairment charges for the year ended December 31, 2024, were primarily due to the decommissioning of an
information system and a robotic asset. The impairment charges for the year ended December 31, 2023, were primarily
comprised of$333.6 of goodwill impairment for the ED reporting unit, which is part of the BLS segment.
Amortization of lntan~:ibles and Other Assets
Year Ended December 31,
2024
2023
Change
Amortization of intangibles and other assets
$
256.4
$
219.8
16.7%
The increase in amortization of intangibles and other assets primarily reflects additional amortization for assets acquired
subsequent to December 31, 2023.
Restructurin2 and Other Char2es
Year Ended December 31,
2024
2023
Change
Restructuring and other charges
$
46.0 $
49. 1
(6.3)%
For the year ended December 31, 2024, the Company recorded net restructuring charges of $46.0. The charges were
comprised of $43.0 in severance and other personnel costs, and $5.9 in facility-related costs primarily associated with general
integration activities. The charges were adjusted by the reversal of previously established liability of $2.5 in unused severance
and $0.4 in unused facility-related costs.
For the year ended December 31, 2023, the Company recorded net restructuring charges of $49.1. The charges were
comprised of $33.4 in severance and other personnel costs and $22.3 in facility-related costs primarily associated with general
integration activities. The charges were adjusted by the reversal of previously established liability of $1.7 in unused severance
and $4.9 in unused facility-related costs.
50
Interest Expense
Year Ended December 31,
2024
2023
Change
Interest expense
$
208.3
$
199.6
4.4%
The increase in interest expense for the year ended December 31, 2024, as compared with the corresponding period in 2023
is primarily due to higher borrowings under its revolving credit facility, senior notes, and the new accounts receivable
securitization facility.
Equity Method Income. Net
Year Ended December 31,
2024
2023
Change
Equity method income, net
$
(1.4) $
(1.4)
-%
Equity method income, net represents the Company's ownership sh.are in joint venture partnerships along with equity
investments in other companies in the health care industry, which remained flat in the year ended December 31, 2024, as
compared with the corresponding period in 2023.
Other. Net
Year Ended December 31,
2024
2023
Change
Other, net
$
60.2
$
15.5
288.4%
Other, net for the year ended December 31, 2024, was primarily due to $80.0 of transition services fees charged to Fortrea
related to administrative and IT systems support. The costs to provide these services are included in operating income, but the
service fees are included in other income. In addition, the Company recorded a $6.4 gain related to the divestiture of Beacon
Laboratory Benefit Solutions, Inc. This income was partially offset by foreign currency transaction losses of $15.3 and an $11.4
loss on investments.
Other, net for the year ended December 31, 2023, was primarily due to $46.1 of transition services fees charged to Fortrea
related to administrative and IT systems support, partially offset by pension plan settlement charges of $10.9 and a $4.8loss on
investments.
Provision for Income Taxes
Income tax expense
Income tax expense as a % of income before tax.
Year Ended December 31,
$
2024
2023
212.4
22.1 %
$
188.5
33.1 %
The decrease in effective tax rate as compared with the prior year is primarily attributable to the unfavorable impact of the
prior year goodwill impairment of the ED reporting unit, while no goodwill impairment was recognized during the year ended
December 31, 2024.
Operatin2 Results by Se2ment
Year Ended December 31,
2024
2023
Chan~e
Dx segment operating income
$ 1,606.3
$ 1,591.3
0.9%
Dx segment operating margin
15.8%
16.9%
(1.1)%
BLS segment operating income
458.9
396.3
15.8%
BLS segment operating margin
15.7 %
14.3%
1.4%
Segment operating income
2,065.2
1,987.6
3.9%
General corporate and unallocated expenses
(670.8)
(644.1)
4.1 %
Amortization of intangibles and other assets
(256.4)
(219.8)
16.7%
Restructuring and other charges
(46.0)
(49.1)
(6.3)%
Goodwill and other asset impairments
(5.3)
(349.0)
(98.5)%
Total operating income
$
1,086.7
$
725.6
49.8%
51
Dx operating income was $1,606.3 for the year ended December 31, 2024, an increase of 0.9% over operating income of
$1,591.3 in the corresponding period of 2023, and Dx operating margin decreased 110 basis points year-over-year. The
decrease in operating margin was primarily due to higher personnel costs, partially offset by organic demand.
BLS operating income was $458.9 for the year ended December 31, 2024, an increase of 15.8% from operating income of
$396.3 in the corresponding period of 2023, and BLS operating margin increased 140 basis points year over year. The increase
was primarily due to organic growth and Launch.Pad savings, partially offset by higher personnel costs.
General corporate expenses are comprised primarily of administrative services such as executive management, human
resources, legal, finance, corporate affairs, and information technology. Corporate expenses were $670.8 for the year ended
December 31, 2024, an increase of 4.1% over corporate expenses of $644 .. 1 in the corresponding period of 2023, primarily due
to higher costs related to acquisitions and personnel.
LIQUIDITY AND CAPITAL RESOURCES (dollars and shares in mimonsl
The Company's strong cash-generating capability and frnancial condition typically have provided ready access to capital
markets. The Company's principal source of liquidity is operating cash flow, supplemented by proceeds from debt offerings.
The Company's senior unsecured revolving credit facility is further discussed in Note 11 Debt to the Company's Consolidated
Financial Statements.
In summary the Company's cash flows were as follows:
Net cash provided by continuing operating activities
Net cash used for continuing investing activities
Net cash provided by (used for) continuing financing activities
Effect of exchange rate on changes in cash and cash equivalents
Net cash impact from discontinued operations
Net change in cash and cash equivalents
Cash and Cash Equivalents
$
$
Year Ended December 31,
2024
2023
1,585.8
$
1,202.3
(1,366.8)
(1,146.8)
779.9
(1,559.0)
(17.0)
9.9
1,600.4
981 .9 =$======! 0=6=.8=
Cash and cash equivalents at December 31, 2024, and 2023 totaled $1,518.7 and $536.8, respectively. Cash and cash
equivalents consist of highly liquid instmments, such as time deposits and other money market investments, which have
original maturities of three months or less.
Cash Flows f rom Operating Activities
During the year ended December 31, 2024, the Company's continuing operations provided $1,585.8 of cash as compared to
$1,202.3 in 2023. The $383.5 increase in cash provided from operations in 2024, as compared with the corresponding 2023
period, was primarily due to higher cash earnings and favorable working capital requirements.
Cash Flows f rom Investing Activities
Net cash used for continuing investing activities for the year ended December 31, 2024, was $1,366.8 as compared to
$1,146.8 for the year ended December 31, 2023. The increase in net cash used for investing activities for the year ended
December 31, 2024 as compared to the year ended December 31, 2023, was primarily due to au increase in business
acquisitions and higher capital expenditures.
Capital expenditures were $489.9 and $453·.6 for the years ended December 31, 2024, and 2023, respectively. Capital
expenditures in 2024 were 3.8% of revenues, primarily in connection with projects to support growth in the Company's core
businesses. The Company expects this level of spending to remain consistent in 2025, primarily in connection with projects to
support growth in the Company's core businesses, facility expansion and updates, projects related to its LaunchPad initiative,
and further acquisition integration initiatives.
Cash Flows f rom Financing Activities
Net cash provided by continuing fwancing activities for the year ended December 31, 2024, was $779.9 compared to cash
used in continuing frnancing activities of $1,559.0 for the year ended December 31, 2023. This movement in cash within
frnancing activities for 2024, as compared to 2023, was primarily due to $2,000.0 of proceeds from new debt securities and
$300.0 of proceeds from the new accounts receivable facility described below, partially offset by $1,000.0 of payments towards
the Company's senior notes, $250.1 of share repurchases, and $243.1 of dividends paid, compared to $1,000.0 of share
repurchases and $300.0 of payments towards the Company's senior notes, and $254.0 of dividends paid in 2023.
52
On September 23, 2024, LCAH (the Issuer) entered into a base indenture with U.S. Bank Trust Company, National
Association, as trustee (the Trustee) (the 2024 Indenture). On September 23, 2024, the Company, the Issuer and the Trustee
entered into supplemental indentures to the 2024 Indenture under which the Issuer issued, and the Company guaranteed,
$2,000.0 in debt securities, consisting of $650.0 aggregate principal amount of 4.35% senior notes due 2030, $500.0 aggregate
principal amount of 4.55% senior notes due 2032, and $850.0 aggregate principal amount of 4.80% senior notes due 2034, with
interest payable semi-annually on April 1 and October 1 of each year, commencing April 1, 2025. Net proceeds from these
offerings were approximately $1,983.0 after deducting underwriting discounts and other estimated expenses of the offering. The
net proceeds were used to redeem or repay indebtedness and, to the extent not used for such purpose, for other general
corporate purposes. Indebtedness redeemed or repaid or to be redeemed or repaid at or prior to maturity were the Company's
2.30% senior notes due December 2024, its 3.60% senior notes due February 2025, and $500.0 of borrowings under its
revolving credit facility.
On January 13, 2023, LCAH amended and restated its revolving credit facility. It consists of a five-year revolving facility in
the principal amount of up to $1 ,000.0, with the option of increasing the facility by up to an additional $500.0, subject to the
agreement of one or more new or existing lenders to provide such additional amounts and certain other customary conditions.
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 0.100% to 0.225%, depending on the Company's debt ratings. Borrowings under the revolving credit facility
will accrue interest at a per annum rate equal to, at the Company's election, either (x) a LIBOR (changed to SOFR in 2023) rate
plus a margin ranging from 0.775% to 1.275% or (y) a base rate plus a margin ranging from 0% to 0.275%, in each case,
depending on the Company's debt ratings.
On August 23, 2024, the Company and a bankruptcy-remote special purpose vehicle entered into a $300.0 three-year
accounts receivable securitization facility with PNC Bank, National Association (PNC) as administrative agent (AR Facility).
The AR Facility provides for purchases of accounts receivable by PNC in an amount of up to $300.0 through August of 2027
and may increase to up to $700 .. 0, subject to the satisfaction of certain conditions.
On January 31, 2025, the Company amended its AR Facility (AR Facility Amendment). The AR Facility Amendment
increased the amount the Company can borrow from PNC from $300.0 to $700.0 through August of2027. In addition, pursuant
to the terms of the AR Facility Amendment (i) the Toronto-Dominion Bank became a party to the underlying receivables
purchase agreement as a committed purchaser through January 2026 and (ii) MUFG Bank Ltd. and certain of its related conduit
purchasers became parties to the underlying receivables purchase agreement as purchasers and the loans or investments of such
conduit purchasers may accrue interest as specified in the AR Facility Amendment and receivables purchase agreement.
On February 18, 2025, the Company borrowed an additional $225.0 under the AR Facility Amendment, bringing the amount
outstanding under the AR Facility Amendment to $525.0.
At December 31, 2024, the Company had $1,518.7 of Cash and cash equivalents and $1,000.0 of available borrowings
under its revolving credit facility, which does not mature until 2026. Under the Company's credit facilities and indentures
relating to the Company's senior notes, the Company is subject to negative covenants limiting subsidiary indebtedness and
certain other covenants typical for investment grade-rated borrowers, and with respect to the credit facilities, the Company is
required to maintain certain leverage ratios. The Company was in compliance with all covenants under the credit facilities and
the indentures related to the Company's outstanding senior notes as of December 31, 2024. The Company expects that it will
remain in compliance with all covenants associated with its existing debt obligations for the next twelve months.
On July 24, 2024, the Board adopted a new share repurchase plan authorizing the repurchase of up to $1,000.0 maximum
value of the Company's shares in addition to the remaining amount outstanding under the previous plan. At December 3[,
2024, the Company had outstanding authorization from its Board to purchase up to $1,280.4 maximum value of Company
Common Stock. The repurchase authorization has no expiration date.
For the year ended December 31, 2024, the Company paid $243.1 in Common Stock dividends. On January 8, 2025, the
Company announced a cash dividend of $0.72 per share of Common Stock for the first quarter, or approximately $61.0 in the
aggregate. The dividend will be payable on March 12, 2025, to stockholders of record of all issued and outstanding shares of
Common Stock at the close ofbusiness on February 27, 2025. The declaration and payment of any future dividends will be at
the discretion of the Company's Board.
Guarantor Information
In connection with the Reorganization, the Company, LCAH and the Trustee entered into a seventeenth supplemental
indenture (the Seventeenth Supplemental Indenture) to the indenture, dated as of November 19, 2010, between LCAH and the
Trustee (the 2010 Indenture). In addition, the Company, LCAH and the Trustee entered into the 2024 Indenture (the 2010
Indenture, together with the 2024 Indenture, the Indentures). The Seventeenth Supplemental Indenture, among other things,
provides for the full and unconditional guarantee by the Company of LCAH's obligations under the 2010 Indenture and each
53
series of senior unsecured notes issued and outstanding thereunder, and the 2024 Indenture provides. for the full and
unconditional guarantee by the Company of LCAH's obligations and each series of senior unsecured notes issued and
outstanding, thereunder (collectively, the Labcorp Holdings Guarantees). Also, the Indentures permit the Company to satisfy
LCAH's reporting obligations so long as the Labcorp Holdings Guarantees remain in place and the Company's financial
statements and other information comply with the requirements of Rule 3-10 of Regulation S-X.
At December 31, 2024, there was $4,073.2 and $2,000.0 aggregate principal amount of issued and outstanding senior notes
of LCAH, issued under the 2010 Indenture and the 2024 Indenture, respectively, that are fully and unconditionally guaranteed
by the Company. Accordingly, pursuant to Rule 3-10 of Regulation S-X, separate consolidated financial statements ofLCAH
have not been presented. As permitted under Rule 13-01 (a)( 4)(vi) of Regulation S-X, we have excluded the summarized
financial information for LCAH because the assets, liabilities and results of operations of LCAH are not materially different
than the corresponding amou.nts in the Com]pany's Consolidated Financial Statements and management believes such
summarized financial information would be repetitive and would not provide incremental value to investors.
Credit Ratings
The investment grade debt ratings from Moody's and S&P contribute to the Company's ability to access capital markets.
Off-balance Sheet Arrangements
The Company does not have any variable interest entities or special purpose entities whose fmancial results are not included
in the Company's Consolidated Financial Statements and the Company does not have any off-balance sheet financing other
than normal, short-term leases and letters of credit.
Other Commercial Commitments
The Company has debt instruments outstanding. At December 31, 2024, the Company had total future payments of
$6,373.9, with $1,000.4 payable within 12 months.
The Company has leases for patient service centers, laboratories and testing facilities, clinical facilities, general office
spaces, vehicles, and office andllaboratory equipment. At December 31, 2024, the Company had total future lease payments of
$1 ,140.3, with $190.7 payable within 12 months.
At December 31, 2024, the Company had provided letters of credit aggregating approximately $102.7, primarily in
connection with certain insurance programs which are renewed annually.
The contractual value of the noncontrolling interest put in the Company's Ontario subsidiary totaled $14.3 and $15.5 at
December 31, 2024, and 2023, respectively, and has been classified as mezzanine equity in the Company's Consolidated
Balance Sheets.
Based on current and projected levels of cash flows from operations, coupled with availability under its revolving credit
facility, the Company believes it has sufficient liquidity to meet both its anticipated short-term and long-term cash needs for the
next 12 months and the reasonably foreseeable future; however, the Company continually reassesses its liquidity position in
light of market conditions and other relevant factors.
CRITICAL ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally accepted accounting principles in the U.S., requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during
the reported periods. While the Company believes these estimates are reasonable and consistent, they are by their very nature
estimates of amounts that will depend on future events. Accordingly, actual results could differ from these estimates. The
Company's Audit Committee periodically reviews the Company's significant accounting policies. The Company's critical
accounting po[icies arise in conjunction with the following:
Revenue recognition;
Business combinations;
Income taxes;
Goodwill and indefinite-lived assets; and
Legal contingencies.
54
Revenue Recognition
Dx
Within the Dx segment, a revenue transaction is initiated when Dx receives a requisition form to perform a diagnostic test.
The information provided on the requisition form is used to determine the party that will be billed for the testing performed and
the expected reimbursement. Dx recognizes revenue and satisfies its performance obligation for services rendered when the
testing process is complete, and the associated results are reported. The Dx segment also enters into lab management
agreements which have monthly and non-testing-based fees which are recognized each month as the services are provided.
Revenues are distributed among four payer portfolios -clients, patients, Medicare and Medicaid, and third party. Dx considers
negotiated discounts and anticipated adjustments, including historical collection experience for the payer portfolio, when
revenues are recorded.
The following are descriptions of the Dx payer portfolios:
Clients
Client payers represent the portion of Dx's revenue related to physicians, hospitals, health systems, accountable care
organizations, employers, and other entities where payment is received exclusively from the entity ordering the testing service.
Generally, client revenues are recorded on a fee-for-service basis at Dx:'s client list price, less any negotiated discount. A
portion of client billing is for laboratory management services, collection kits and other non-testing offerings. In these cases,
revenue is recognized when services are rendered or delivered.
Patients
This portfolio includes revenue from uninsured patients and member cost-share for insured patients (e.g., coinsurance,
deductibles, and non-covered services). Uninsured patients are billed based upon Dx's patient fee schedules, net of any
discounts negotiated with physjcians on behalf of their patients. Dx bills insured patients as directed by their health plan and
after consideration of the fees and terms associated with an established health plan contract.
Medicare and Medicaid
This portfolio relates to fee-for-service revenue from traditional Medicare and Medicaid programs. Net revenue from these
programs is based on the fee schedule established by the related government authority. In addition to contractual discounts,
other adjustments including anticipated payer denials are considered when determining net revenue. Any remaining adjustments
to revenue are recorded at the time of final collection and settlement. These adjustments are not material to Dx's results of
operations in any period presented.
Third Party
Third party includes revenue related to MCOs. The majority of Dx's third-party revenue is reimbursed on a fee-for-service
basis. These payers are billed at Dx's established list price and revenue is recorded net of contractual discounts. The majority of
Dx's MCO revenues are recorded based upon contractually negotiated fee schedules with revenues for non-contracted MCOs
recorded based on historical reimbursement experience.
Third-party reimbursement is also received through capitation agreements with MCOs and IPAs. Under capitated
agreements, revenue is recognized based on a negotiated per-member, per-month payment for an agreed upon menu of tests, or
based upon the proportionate share earned by Dx: from a capitation pool. When the agreed upon reimbursement is based solely
on an established rate per member, revenue is not impacted by the volume of testing performed. Under a capitation pool
arrangement, the aggregate value of an established rate per member is distributed based on the volume and complexity of the
procedures performed by laboratories participating in the agreement. Dx recognizes revenue monthly, based upon the
established capitation rate or anticipated distribution from a capitated pool.
Dx has a formal process to estimate implicit price concessions for uncollectable accounts. The majority of Dx's collection
risk is related to accounts receivable from both insured and uninsured patients who are unwilling or unable to pay. Anticipated
write-offs are recorded as adjustments to revenue at an amount considered necessary to record the segment's revenue at its net
realizable value. In addition to contractual discounts, other adjustments including anticipated payer denials and other external
factors that could affect the collectability of its receivables are considered when determining revenue and the net receivable
amount. Any remaining adjustments to revenue are recorded at the time of final collection and settlement. These adjustments
are not material to Dx's results of operations in any period presented.
BLS
BLS revenue is generally recognized over time, as the services are delivered to the customer, based on the extent of progress
towards completion of the performance obligation. The selection of the method to measure progress towards completion
requires judgment and is based on the nature of the services to be provided. The majority of BLS's contracts contain a single
55
performance obligation, as BLS provides a significant service of integrating all promises in the contract and the promises are
highly interdependent and interrelated with one another. For contracts that include multiple performance obligations, BLS
allocates the contract value to t!he goods and services based on a customer price list, if available. If a price list is not available,
BLS will estimate the transaction price using either market prices or an "expected cost plus margin" approach. The total
contract value is estimated at the beginning of the contract, and is equal to the amount expected to be billed to the customer.
These contracts generally take the fonn of fixed-price or fee-for-service arrangements subject to pricing adjustments based on
changes in scope.
Fixed-price contracts are typically recognized as revenue over time based on a proportional-performance basis, using either
input or output methods that are specific to the service provided. In an output method, revenue is determined by dividing the
actual units of output achieved by the total units of output required under the contract and multiplying that percentage by the
total contract value. When using an input method, revenue is recognized by dividing the actual costs incurred by the total
estimated cost expected to complete the contract, and multiplying that percentage by the total contract vanue. Contract costs
principally include direct labor costs, research model costs, and allocated overhead costs. The estimate of total costs expected to
complete the contract requires significant judgment and these estimates are reviewed periodically. Any adjustments to these
estimates are recognized on a cumulative catch-up basis in the period they become known.
Fee-for-service contracts are typically priced based on transaction volume or time and materials. For volume-based
contracts, the contract value is entirely variable, and revenue is recognized as the specific service is completed. For services
billed based on time and materials, revenue is recognized using the right to invoice practical expedient.
Contracts are often modified to account for changes in contract specifications and requirements. Generally, when contract
modifications create new performance obligations, the modification is considered to be a separate contract and revenue is
recognized prospectively. When contract modifications change existing performance obligations, the impact on the existing
transaction price and measure of progress for the performance obligation to which it relates is generally recognized as an
adjustment to revenue (either as an increase in or a reduction of revenue) on a cumulative catch-up basis.
Most contracts are terminable with or without cause by the customer, either immediately or upon notice. These contracts
often require payment to BLS of expenses incurred and fees earned to date and, in some cases, a termination fee or a payment to
BLS of some portion of the fees or profits that could have been earned by BLS under the contract if it had not been terminated
early. Termination fees are incl1!.1ded in revenues when services have been performed and realization is assured.
BLS incurs sales commissions in the process of obtaining contracts with customers, which are recoverable through the
service fees in the contract. Sales commissions that are payable upon contract award are recognized as assets and amortized
over the expected contract term, along with related payroll tax expense. 'fhe amortization of commission expense is based on
the weighted-average contract duration for all commissionable awards in the respective business in which the commission
expense is paid, which approximates the period over which goods and services are transferred to the customer. The amortization
period of sales commissions ranges from approximately I to 5 years, depending on the business. For businesses that enter into
primarily short-term contracts, BLS applies the practical expedient, which allows costs to obtain a contract to be expensed when
incurred if the amortization period of the assets that would otherwise have been recognized is one year or less. Amortization of
assets from sales commissions is included in selling, general, and administrative expense.
Business Combinations
The Company accounts for business combination transactions under t!he acquisition method of accounting and reports the
results of operations of the acquired entities from its respective date of acquisition. Assets acquired are recorded at their
estimated fair values as of the acquisition date. !Estimated fair values are based on various valuation methodologies, including
an income approach using primarily discounted cash flow techniques for the customer relationships intangible assets. The
aforementioned income methods utilize management's estimates of future operating results and cash flows discounted using a
weighted-average cost of capital that reflects market participant assumptions. The excess of the fair value of the consideration
conveyed over the fair value of the assets acquired are recorded as goodwill. The goodwill reflects management's expectations
of the ability to gain access to the acquired entities' historical patient base and the benefits of being able to leverage operational
efficiencies with favorable growth opportunities based on positive industry and market conditions.
Income Taxes
The Company accounts for income taxes utilizing the asset and liability method. Under this method, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax bases and for tax loss carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date. The Company does not recognize a tax benefit, unless the
Company concludes that it is more likely than not that the benefit will be slllstained on audit by the taxing authority based solely
56
on the technical merits of the associated tax position. If the recognition threshold is met, the Company recognizes a tax benefit
measured at the largest amount of the tax benefit that the Company believes is greater than 50% likely to be realized. The
Company records interest and penalties in Provis.ion for income taxes in the Consolidated Statements of Operations.
Goodwill and Indefinite-Lived Intangible Assets
The Company assesses goodwill and indefmite-lived intangible assets for impairment at least annually or whenever events
or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. The annual impairment
test for goodwill includes an option to perform a qualitative assessment of whether it is more likely than not that a reporting
unit's fair value is less than its carrying value. Reporting units are businesses with discrete financial information that is
available and reviewed by management. If the Company determines that it is more likely than not that the fair value of a
reporting unit is less than its carrying value, then the Company performs the quantitative goodwill impairment test. The
Company may also choose to bypass the qualitative assessment for any reporting unit in its goodwill assessment and proceed
directly to performing the quantitative assessment. The Company recognizes an impairment charge for the amount by which the
reporting unit's carrying amourut exceeds its fair value.
In the qualitative assessment, the Company considers relevant events and circumstances for each reporting unit, including (j)
current year results, (ii) financial performance versus management's annual and five-year strategic plans, (iii) changes in the
reporting unit carrying value since prior year, (iv) industry and market conditions in which the reporting unit operates, (v)
macroeconomic conditions, including discount rate changes, and (vi) changes in offerings provided by the reporting unit. If
applicable, performance in recent years is compared to forecasts included in prior quantitative valuations. Based on the results
of the qualitative assessment, if the Company concludes that it is not more likely than not that the fair value of the reporting unit
is less than its carrying values of the reporting unit, then no quantitative assessment is performed.
The quantitative assessment includes the estimation of the fair value of each reporting unit as compared to the carrying value
of the reporting unit. The Company estimates the fair value of a reporting unit using both income-based and market-based
valuation methods. The income-based approach is based on the reporting unit's forecasted future cash flows that are discounted
to the present value using the reporting unit's weighted-average cost of capital. For the market-based approach, the Company
utilizes a numiber of factors such as publicly available information regarding the market capitalization of the Company, as well
as operating results, business p[ans, market multiples, and present value techniques. Based upon the range of estimated values
developed from the income and market-based methods, the Company determines the estimated fair value for the reporting unit.
If the estimated fair value of the reporting unit exceeds the carrying value, the goodwill is not impaired, and 1110 further review is
required.
The income-based fair value methodology requires management's assumptions and judgments regarding economic
conditions in the markets in which the Company operates and conditions in the capital markets, many of which are outside of
management's control. At the reporting unit level, fair value estimation requires management's assumptions and judgments
regarding the effects of overall economic conditions on the specific reporting unit, along with assessment of the reporting unit's
strategies and forecasts of future cash flows. Forecasts of individual reporting unit cash flows involve management's estimates
and assumptions regarding:
Annual cash flows, on a debt-free basis, arising from future revenues and profitability, working capital changes, capital
spending and income taxes for at least a five-year forecast period.
A terminal growth rate for years beyond the forecast period. The terminal growth rate is selected based on
consideration of growth rates used in the forecast period, historical performance of the reporting unit, and economic
condiitions.
A discount rate that reflects the risks inherent in realizing the forecasted cash flows. A discount rate considers the risk-
free rate of return on long-term treasury securities, the risk premium associated with investing in equity securities of
comparable companies, the beta obtained from the comparable companies, and the cost of debt for investment grade
issuers. In addition, the discount rate may consider any specific risk in achieving the prospective financial information.
Under the market-based fair value methodology, judgment is required in evaluating market multiples and recent
transactions. Management believes that the assumptions used for its impairment tests are representative of those that would be
used by market participants performing similar valuations of the reporting units.
Management performed its annual goodwill and indefwite-lived intangible asset impairment testing as of the beginning of
the fourth quarter of 2024. The Company elected to perform a quantitative assessment for goodwill and indefinite-lived
intangible assets for each of its reporting units. Based upon the results of the quantitative assessments, the Company concluded
that the fair values of each of its reporting units, as of October 1, 2024, were greater than the carrying values.
Although the Company believes that the current assumptions and estimates used in its goodwill analysis are reasonable,
supportable, and appropriate, continued efforts to maintain or improve the performance of these businesses could be impacted
57
by unfavorable or unforeseen changes which could impact the existing assumptions used in the impairment analysis. Various
factors could reasonably be expected to unfavorably impact existing assumptions primarily delays in new customer bookings
and the related delay in revenue from new customers, increases in customer termination activity, or increases in operating costs.
Accordingly, there can be no assurance that the estimates and assumptions made for the purposes of the goodwill impairment
analysis will prove to be accurate predictions of future performance. It is possible that the Company's conclusions regarding
impairment or recoverability of goodwill or indefinite-lived intangible assets in any reporting unit could change in future
periods. There can be no assurance that the estimates and assumptions used in the Company's goodwill and indefinite-lived
intangible asset impairment testing performed as of the beginning of the fourth quarter of 2024 will prove to be accurate
predictions of the future, if, for example, (i) the businesses do not perform as projected, (ii) overall economic conditions in 2024
or future years vary from current assumptions (including changes in discount rates), (iii) business conditions or strategies for a
specific reporting unit change from current assumptions, including loss of major customers, (iv) investors require higher rates
of return on equity investments in the marketplace, or (v) enterprise values of comparable publicly traded companies, or actual
sales transactions of comparable companies, were to decline, resulting in lower multiples of revenues and earnings before
interest, taxes, depreciation, and amortization.
Legal Contingencies
The Company 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. 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 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 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 health care 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 drug development support services. The healthcare diagnostics and drug
development 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, fmes, the loss of various licenses, certificates and
authorizations, additional liabilities from third-party claims, and/or exclusion from participation in government programs.
The Company records an aggregate legal reserve, which is determined using calculations based on historical loss rates and
assessment of trends experienced in settlements and defense costs. In accordance with Financial Accounting Standards Board
(FASB) Accounting Standards Codification Topic 450 "Contingencies," the Company establishes reserves for judicial,
regulatory, and arbitration matters outside the aggregate legal reserve if and when those matters present loss contingencies that
are both probable and estimable and would exceed the aggregate legal reserve. If the reasonable estimate of a known or
probable loss is a range, and no amount within the range is a better estimate than any other, the minimum amount of the range is
accrued. If a loss is reasonably possible but not known or probable, and may be reasonably estimated, the estimated loss or
range of loss is disclosed. For more information about legal contingencies, see Note 15 Commitments and Contingencies to the
Consolidated Financial Statements.
Item 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK (dollar in millions)
Market risk is the potential loss arising from adverse changes in market rates and prices, such as foreign currency exchange
rates, interest rates and other relevant market rate or price changes. In the ordinary course of business, the Company is exposed
to various market risks, including changes in foreign currency exchange and interest rates, and the Company regularly evaluates
the exposure to such changes. The Company addresses its exposure to market risks, principally the market risks associated with
changes in foreign currency exchange rates and interest rates, through a controlled program of risk management that includes,
from time to time, the use of derivative financial instruments such as foreign currency fotward contracts, cross currency swaps
and interest ratte swap agreements. The Company does not hold or issue derivative financial instruments for trading purposes.
58
Foreign Currency Exchange Rates
Approximately 13.7% and 12.9% of the Company's revenues for the year ended December 31, 2024, and 2023,
respectively, were denominated in currencies other than the U.S. dollar (USD). The Company's Consolidated Financial
Statements are reported in USD and, accordingly, fluctuations in exchange rates will affect the translation of revenues and
expenses denominated in foreign currencies into USD for purposes of reporting the Company's consolidated financial results.
In 2024 and 2023, the most significant currency exchange rate exposures were to the Canadian Dollar, Swiss Franc, Euro, and
British Pound. Excluding the impacts from any outstanding or future hedging transactions, a hypothetical change of 10% in
average exchange rates used to translate all foreign currencies to USD would have impacted income before income taxes for
2024 by approximately $27.4. Accumulated currency translation adjustments recorded as a separate component of
Shareholders' equity were $(217. I) and $183.1 for the years ended December 31, 2024, and 2023, respectively. The Company
does not have significant operations in countries in which the economy is considered to be highly inflationary.
The Company earns revenue from service contracts over a period of several months and, in some cases, over a period of
several years. Accordingly, exchange rate fluctuations during this period may affect the Company's profitability with respect to
such contracts. The Company is also subject to foreign currency transaction risk for fluctuations in exchange rates during the
period of time between the consummation and cash settlement of transactions. The Company limits its foreign currency
transaction risk through exchange rate fluctuation provisions stated in some of its contracts with customers, or it may hedge
transaction risk with foreign currency forward contracts. At December 3 I , 2024, the Company had I 2 open foreign exchange
forward contracts with various amounts maturing monthly through January 2025 with a notional value totaling approximately
$302.4. At December 31 , 2023, the Company had 9 open foreign exchange forward contracts with various amounts maturing
monthly through January 2024 with a notional value totaling approximately $305.8.
The Company is a party to USD to Swiss Franc cross-currency swap agreements with an aggregate notional amount of
$1,200.0, $300.0 maturing in 2029, $300.0 maturing in 2031 and $600.0 maturing in 2034, as a hedge against the impact of
foreign exchange movements on its net investment in a Swiss Franc functional currency subsidiary.
Interest Rates
Some of the Company's debt is subject to interest at variable rates. As a result, fluctuations in interest rates affect the
Company's financial results. The Company attempts to manage interest rate risk and overall borrowing costs through an
appropriate mix of fixed and variable rate debt, including the utilization of derivative financial instruments, primarily interest
rate swaps.
Borrowings under the Company's term loan credit facilities and revolving credit facility are subject to variable interest rates,
unless fixed through interest rate swaps or other agreements.
In May 2021, to hedge against changes in the fair value portion of the Company's long-term debt, the Company entered into
fixed-to-variable interest rate swap agreements for the 2. 70% senior notes due 2031 with an aggregate notional value of $500.0
and variable interest rates based on three-month London Interbank Offered Rate (LIBOR), which changed to Secured Overnight
Financing Rate (SOFR) in 2023, plus 1.0706%.
Item 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements of the Company required in this item are set forth beginning on page F-1 of this
Annual Report on Form 10-K.
Item 9.
None.
Item 9A.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
As of the end of the period covered by this Annual Report, the Company carried out under the supervision and with tbe
participation of the Company's management, including the Company's principal executive officer and principal financial
officer, an evaluation of the effectiveness of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e)
and 15d-15(c) under the Securities Exchange Act of 1934, as amended). Based upon this evaluation, the Company's principal
executive officer and principal financial officer concluded that the Company's disclosure controls and procedures were
effective as of the end of the period covered by this Annual Report.
59
Changes in Internal Control over Financial Reporting
There have been no changes in the Company's internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(t)) during the quarter ended December 31, 2024, that have materially affected, or are reasonably likely to
materially affect, the Company's internal control over financial reporting.
Report of Management on Internal Control over Financial Reporting
The Company's management is responsible for establishing and maintaining adequate internal control over financial
reporting (as defined in Rules 13a-15(t) and 15d-15(f) under the Securities Exchange Act of 1934).
The internal control over financial reporting at the Company was designed to provide reasonable assurance regarding the
reliability of fmancial reporting and the preparation of financial statements for external purposes in accordance with accounting
principles generally accepted in the U.S. Internal control over financial reporting includes those policies and procedures that:
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the Company;
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements
in accordance with accounting principles generally accepted in the U.S.;
provide reasonable assurance that receipts and expenditures of the Company are being made only in accordance with
authorization of management and directors of the Company; and
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition
of assets that could have a material effect on the Company's Consolidated Financial Statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
The Company's management assessed the effectiveness of the Company's internal control over financial reporting as of
December 31, 2024. Management based this assessment on criteria for effective internal control over financial reporting
described in "Internal Control - Integrated Framework 2013" issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO). Based on this assessment, the Company's management determined that, as of December 31,
2024, the Company maintained effective internal control over financial reporting. Management reviewed the results of its
assessment with the Audit Committee of the Company's Board.
Deloitte and Touche LLP, an independent registered public accounting firm, who audited and reported on the Consolidated
Financial Statements of the Company included in this Annual Report, also audited the effectiveness of the Company's internal
control over financial reporting as of December 31, 2024, as stated in its report, which is included herein immediately preceding
the Company's audited Consolidated Financial Statements.
60
Item 9B.
OTHER INFORMATION
Insider Adoption or Termination of Trading Arrangements:
During the quarter ended December 31, 2024, none of the Company's directors or officers informed iit of the adoption,
modification or termination of a "Rule I Ob5-I trading arrangement" or "non-Rule I Ob5-I trading arrangement," as those terms
are defined in Regulation S-K, Item 408, except as described in the table below:
Name and Title
MarkS. Schroeder
President, Diagnostics Laboratories
and Chief Operations Officer
Amy B. Summy
Chief Marketing Officer
Date
Adopted
11126/2024
11126/2024
Character of Trading
Agreement
Rule 1 Ob5-1 Trading
Arrangement
Rule 1 Ob5-1 Trading
Arrangement
Aggregate Number of Shares
of Common Stock to be (Sold)
Purchased Pursuant to
Trading Agreement
Up to (10,115)
(1)(2)
Up to (1,234)
(I)
Duration
1117/2025 (3)
11/14/2025 (3)
<•> The figure presented represents the shares to be sold on the vesting of equity awards and may vary subject to the
achievement of certain performance conditions and/or shares to be withheld for tax purposes.
<2> Mr. Schroeder's plan provides for the exercise of vested stock options and the associated sale of up to 3,903 shares of the
Company's Common Stock and 76 shares of Common Stock previously acquired from an equity award vesting event.
<3> This trading arrangement permits transactions through and including the earlier to occur of (a) the completion of all sales on
the respective order entry date or (b) the date listed in the table.
Item 9C.
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
None.
6I
PART III
Item 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required by the item regarding directors is incorporated by reference to the Company's Definitive Proxy
Statement to be filed with the Securities and Exchange Commission in connection with the Annual Meeting of Stockholders to
be held in 2025 (2025 Proxy Statement) under the caption Election of Directors. Information regarding executive officers is
incorporated by reference to the Company's 2025 Proxy Statement under the caption Executive Officers. Information
concerning the Company's Audit Committee, including the designation of audit committee financial experts is incorporated by
reference to the Company's 2025 Proxy Statement under the captions Corporate Governance and Delinquent Section 16(a)
Reports, respectively. Information concerning the Company's code of ethics is incorporated by reference to the Company's
2025 Proxy Statement under the caption Corporate Governance Policies and Procedures.
Insider Trading Arrangements and Policies
The Company is committed to promoting high standards of ethical business conduct and compliance with applicable laws,
rules and regulations. As part of this commitment, the Company has adopted the Insider Trading Policy governing the purchase,
sale, and/or other dispositions of its securities by the Company's directors, officers, employees and designated contractors, as
well as by Labcorp Holdings Inc. itself, that the Company believes is reasonably designed to promote compliance with insider
trading laws, rules and regulations, and the exchange listing standards applicable to us. A copy of our insider trading policy is
filed as Exhibit 19.1 to this Form I 0-K.
ltemll.
EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference to information in the 2025 Proxy Statement under the
captions "Executive Compensation" and "Director Compensation."
Item 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
See Note 14 Stock Compensation Plans to the Consolidated Financial Statements for a discussion of the Company's stock
compensation plans. Except for the above referenced footnote, the information called for by this item is incorporated by
reference to information in the 2025 Proxy Statement under the captions "Security Ownership of Certain Beneficial Holders
and Management," "Compensation Discussion & Analysis" and "Executive Compensation."
Item 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
The information required by this item is incorporated by reference to information in the 2025 Proxy Statement under the
captions "Board Independence" and "Related Party Transactions."
Item 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this item is incorporated by reference to information in the 2025 Proxy Statement under the
caption "Fees to Independent Registered Public Accounting Firm."
62
PART IV
Item 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) List of documents filed as part of this Annual Report:
Consolidated Financial Statements and Report of Independent Registered Public Accounting Firm
(1)
included herein:
See Index on page F-1
(2)
Financial Statement Schedules:
All schedules are omitted as they are inapplicable or the required information is furnished in the
Consolidated Financial Statements or notes thereto.
(3)
Index to and List of Exhibits
2.1 t*
Separation and Distribution Agreement, dated June 29, 2023, by and between Laboratory Corporation of
America Holdings and Fortrea Holdings Inc. (incorporated herein by reference to Exhibit 2.1 to the Company's
Current Report on Form 8-K filed on July 3, 2023).
2.2
Agreement and Plan of Merger, dated May 17, 2024, by and among Laboratory Corporation of America
Holdings, Labcorp Holdings Inc. and Radiance Merger Sub Inc. (incorporated by reference to Exhibit 2.1 to the
Company's Current Report on Form 8-K filed on May 17, 2024)
3.1
Amended and Restated Certificate of Incorporation of Lab corp Holdings Inc. (incorporated by reference to
Exhibit 3.1 to the Company's Current Report on Form 8-Kl2B filed on May 17, 2024).
3.2
Amended and Restated By-Laws of Labcorp Holdings Inc. (incorporated by reference to Exhibit 3.2 to the
Company's Current Report on Form 8-K filed on May 17, 2024).
4.1
Indenture, dated as of November 19, 2010, between the Company and U.S. Bank National Association, as trustee
(incorporated herein by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed on
November 19, 2010).
4.2
Ninth Supplemental Indenture, dated as of January 30, 2015, between the Company and U.S. Bank National
Association, as trustee, including the form of the 2025 Notes (incorporated herein by reference to Exhibit 4.4 to
the Company's Current Report on Form 8-K filed on January 30, 2015).
4.3
Tenth Supplemental Indenture, dated as of January 30,2015, between the Company and U.S. Bank National
Association, as trustee, including the form of the 2045 Notes (incorporated herein by reference to Exhibit 4.5 to
the Company's Current Report on Form 8-K filed on January 30, 2015).
4.4
Twelfth Supplemental Indenture, d.ated as of August 22, 2017, between the Company and U.S. Bank National
Association, as trustee, including the form of the 2027 Notes (incorporated by reference to Exhibit 4.3 to the
Company's Current Report on Form 8-K filed on August 22, 2017).
4.5
Fourteenth Supplemental Indenture, dated as of November 25, 2019, between the Company and U.S. Bank
National Association, as trustee, including the form of the 2029 Notes (incorporated herein by reference to
Exhibit 4.3 to the Company's Current Report on Form 8-K filed on November 25, 2019).
4.6
Fifteenth Supplemental Indenture, dated as ofMay 26, 2021, between the Company and U.S. Bank National
Association, as trustee, including the form of the 2026 Notes (incorporated herein by reference to Exhibit 4.2 to
the Company's Current Report on Form 8-K filed on May 26, 2021).
4.7
Sixteenth Supplemental Indenture, dated as of May 26,2021, between the Company and U.S. Bank National
Association, as trustee, including the form of the 2031 Notes (incorporated herein by reference to Exhibit 4.3 to
the Company's Current Report on Form 8-K filed on May 26, 2021).
4.8
Seventeenth Supplemental Indenture dated as of May 17, 2024, by and among Laboratory Corporation of
America Holdings, as issuer, Labcorp Holdings Inc., as guarantor, and U.S. Bank National Trust Company
Association, as trustee (incorporated by reference to Exhibit. 4.2 to the Company's Current Report on Form 8-K
filed on May 17, 2024).
4.9
Description of the Registrant's securities registered pursuant to Section 12 of the Securities Exchange Act of
1934 (incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K12B filed on May
17, 2024).
4.10
New Holding Company Guarantee, dated May 17, 2024, by Labcorp Holdings Inc. (incorporated by reference to
Exhibit 4.3 to the Company's Current Report on Form 8-K filed on May 17, 2024).
4.11
Indenture, dated as of September 23, 2024, between Laboratory Corporation of America Holdings, as issuer, and
U.S. Bank Trust Company, National Association, as trustee (incorporated by reference to Exhibit 4.1 to the
Company's Current Report on Form 8-K filed on September 23, 2024).
63
4.12
4.13
4.14
10.1 +
10.3
10.4
10.9+
10.15+
10.16
First Supplemental Indenture, dated as of September 23, 2024, among Laboratory Corporation of America
Holdings, as issuer, Labcorp Holdjngs Inc., as guarantor, and U.S. Bank Trust Company, National Association,
as trustee, including the form of the 2030 Notes (incorporated by reference to Exhibit 4.2 to the Company's
Current Report on Form 8-K filed on September 23, 2024).
Second Supplemental Indenture, dated as of September 23, 2024, among Laboratory Corporation of America
Holdings, as issuer, Labcorp Holdings Inc., as guarantor, and U.S. Bank Trust Company, National Association,
as trustee, including the form of the 2032 Notes (incorporated by reference to Exhibit 4.3 to the Company's
Current Report on Form 8-K filed on September 23, 2024).
Third Supplemental Indenture, dated as of September 23, 2024, among Laboratory Corporation of America
Holdings, as issuer, Labcorp Holdings Inc., as guarantor, and U.S. Bank Trust Company, National Association,
as trustee, including the fonn of the 2034 Notes (incorporated by reference to Exhibit 4.4 to the Company's
Current Report on Form 8-K filed on September 23, 2024).
Labcorp Holdings Inc. Amended and Restated 2016 Omnibus Incentive Plan (incorporated by reference to
Exhibit 10.4 to the Company's Current Report on Form 8-K12B filed on May 17, 2024).
Labcorp Holdings Inc. Amended and Restated 2016 Employee Stock Purchase Plan (incorporated by reference to
Exhibit 10.5 to the Company's Current Report on Form 8-K12B filed on May 17, 2024).
Assignment and Assumption Agreement, dated as of May 17, 2024, by and among Laboratory Corporation of
America Holdings, Labcorp Holdings Inc. and Adam H. Schechter (incorporated by reference to Exhibit 10.2 to
the Company's Current Report on Form 8-Kl2B filed on May 17, 2024).
Assignment and Assumption Agreement, dated as of May I 7, 2024, by and among Laboratory Corporation of
America Holdings, Labcorp Holdings Inc. and Radiance Merger Sub Inc. (incorporated by reference to Exhibit
10.3 to the Company's Current Report on Form 8-Kl2B filed on May 17, 2024).
National Health Laboratories Incorporated Pension Equalization Plan (incorporated herein by reference to the
Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992).
Laboratory Corporation of America Holdings Amended and Restated New Pension Equalization Plan
(incorporated herein by reference to Exhibit I 0.1 to the Company's Quarterly Report on Form 1 0-Q for the
period ended September 30, 2004).
First Amendment to the Laboratory Corporation of America Holdings Amended and Restated New Pension
Equalization Plan (incorporated herein by reference to Exhibit 10.2 to the Company's Quarterly Report on Form
1 0-Q for the period ended September 30, 2004).
Second Amendment to the Laboratory Corporation of America Holdings Amended and Restated New Pension
Equalization Plan (incorporated herein by reference to Exhibit 10.4 to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 2004).
Third Amendment to the Laboratory Corporation of America Amended and Restated New Pension Equalization
Plan (incorporated herein by reference Exhibit I 0.6 to the Company's Quarterly Report on Form I 0-Q for the
period ended June 30, 2005).
Laboratory Corporation of America Holdings Deferred Compensation Plan (incorporated herein by reference to
Exhibit I 0.22 the Company's Annual Report on Form I 0-K for the fiscal year ended December 31 , 2004).
First Amendment to the Laboratory Corporation of America Holdings Deferred Compensation Plan
(incorporated herein by reference to Exhibit 10.23 to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 2004).
Second Amendment to the Laboratory Corporation of America Holdings Deferred Compensation Plan
(incorporated herein by reference to Exhibit 10.8 to the Company's Quarterly Report on Form 10-Q for the
period ended June 30, 2005).
Third Amendment to the Laboratory Corporation of America Holdings Deferred Compensation Plan
(incorporated herein by reference to Exhibit 10.28 to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 2006).
Fourth Amendment to the Laboratory Corporation of America Holdings Deferred Compensation Plan
(incorporated herein by reference to Exhibit 10.34 to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 2007).
Amended and Restated Laboratory Corporation of America Holdings Master Senior Executive Severance Plan
(incorporated by reference to 10.1 to the Company's Quarterly Report on Fom1 10-Q for the period ended March
31, 2024).
Third Amended and Restated Credit Agreement, dated as of April 30, 2021, among the Company, Bank of
America N.A., as administrative agent, and the lenders party thereto (incorporated herein by reference to Exhibit
10.1 to the Company's Quarterly Report on Form 10-Q tiled on May 4, 2021).
64
10.17
10.18
10.19
10.20
10.21
10.22
10.23
10.24
10.25 ..
16.1
16.2
19.1 ..
Amendment No. l, dated as of January 13, 2023, to the Third Amended and Restated Credit Agreement
(originally dated as of April 30, 2021), among the Company, Bank of America, N.A., as administrative agent,
and lenders party thereto (incorporated by reference to Exhibit I 0.12 to the Company's Annual Report on Form
1 0-K for the fiscal year ended December 31, 2022).
Guarantor Joinder Agreement, dated May 17, 2024, by and between Labcorp Holdings Inc. and Bank of
America, N.A. (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K12B
filed on May 17, 2024).
Term Loan Credit Agreement, dated June 3, 2019, by and among Laboratory Corporation of America Holdings,
Bank of America, N.A., as administrative agent, and the lenders party thereto (incorporated by reference to
Exhibit I 0.1 to the Company's Current Report on Form 8-K filed on June 3, 20 19).
Amendment No. I , dated as of May 7, 2020, to the Term Loan Credit Agreement, dated June 3, 2019, among
Laboratory Corporation of America Holdings, Bank of America, N.A. as administrative agent, and the lenders
party thereto (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the
period ended March 31, 2020).
Receivables Purchase Agreement, dated as of August 23, 2024, by and among Labcorp Receivables, LLC, as
seller, persons from time to time party hereto, as purchasers, PNC Bank National Association, as administrative
agent, Laboratory Corporation of America Holdings, as Servicer, and PNC Capital Markets, as structuring agent
(incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on August 23,
2024).
First Amended Receivables Purchase Agreement, dated as of January 31, 2025, by and among Labcorp
Receivables, LLC, as seller, persons from time to time party hereto, as purchasers, PNC Bank National
Association, as administrative agent, Laboratory Corporation of America Holdings, as Servicer, and PNC Capital
Markets, as structuring agent (incorporated by reference to Exhibit I 0.1 to the Company's Current Report on
Form 8-K filed on January 31, 2025).
Sale and Contribution Agreement, dated as of August 23, 2024, by and among each of the persons from time to
time party hereto, as originators, Laboratory Corporation of America Holdings, as an originator and as servicer,
and Labcorp Receivable LLC, as buyer (incorporated by reference to Exhibit 10.2 to the Company's Current
Report on Form 8.-K filed on August 23, 2024).
Performance Guaranty, dated as August 23, 2024, by Labcorp Holdings, Inc., in favor of PNC Bank National
Association, as administrative agent (incorporated by reference to Exhibit 10.3 to the Company's Current Report
on Form 8-K filed on August 23, 2024).
Aircraft Time Sharing Agreement by and between Laboratory Corporation of America Holdings and Adam H.
Schechter on November 18, 2024.
Letter of PricewaterhouseCoopers LLP, dated November 5, 2020 (incorporated by reference to Exhibit 16.1 to
the Company's Current Report on Form 8-K filed on November 5, 2020).
Letter of PricewaterhouseCoopers LLP, dated March 3, 2021 (incorporated by reference to Exhibit 16.1 to the
Company's Current Report on Form 8-K/A filed on March 3, 2021).
Insider Trading Policy, revised March 2023
65
21.1 **
22.1 **
23.1 **
24.1 **
24.2**
24.3**
24.4**
24.5**
24.6**
24.7**
24.8**
24.9**
31.1 **
31.2**
32**
97
10l.INS**
10l.SCH**
JOI.CAL**
101.DEF**
10l.LAB**
10l.PRE**
104**
+
t
*
**
List of Subsidiaries of the Company
Subsidiary Issuers of Guaranteed Securities
Consent ofDeloitte & Touche LLP, an independent registered public accounting flllll
Power of Attorney ofKerrii B. Anderson
Power of Attorney of Jeffrey A. Davis
Power of Attorney of D. Gary Gilliland, M.D., Ph.D.
Power of Attorney of Kirsten M. Kliphouse
Power of Attorney ofGarheng Kong, M.D., Ph.D.
Power of Attorney of Peter M. Neupert
Power of Attorney ofRichelle P. Parham
Power of Attorney of Paul B. Rothman, M.D.
Power of Attorney of Kathryn E. Wengel
Certification by the Chief Executive Officer pursuant to Rule 13a- 14(a) or Rule l5d-14(a)
Certification by the Chief Financial Officer pursuant to Rule l3a-14(a) or Rule 15d-14(a)
Written Statement of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of2002 (18 U.S.C. Section 1350)
Incentive Compensation Recoupment Policy, effective October 11, 2023 (incorporated by reference to Exhibit 97
to the Company's Annual Report on Form I 0-K for the fiscal year ended December 31, 2023).
Inline XBRL Instance Document - The instance document does not appear in the Interactive Data File because
its XBRL tags are embedded within the Inline XBRL document.
Jnline XBRL Tax.onomy Extension Schema
Inline XBRL Taxonomy Extension Calculation Linkbase
Inline XBRL Taxonomy Extension Definition Linkbase
Inline XBRL Taxonomy Extension Label Linkbase
lnline XBRL Taxonomy Extension Presentation Linkbase
Cover Page Interactive Data File (embedded within the Inline XBRL document)
Management contracts or compensatory plans or arrangements
Certain schedules have been omitted pursuant to Item 60l(a)(5) of Regulation S-K. The registrant agrees to
furnish supplementally copies of any of the omitted schedules to the Securities and Exchange Commission upon
its request.
Certain portions of this exhibit have been redacted pursuant to Item 60I(b)(2)(ii) and Item 601(b)(IO)(iv) of
Regulation S-K, as applicable. The Company agrees to furnish supplementally an unredacted copy of the exhibit
t.o the Commission upon its request.
Filed or furnished herewith, as required
66
Item 16.
FORM 10-K SUMMARY
None.
67
SIGNATURES
Pursuant to the requirements of Section 13 or 15( d) of the Securities Exchange Act of 1934, the registrant has duly caused this
Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: February 25, 2025
LABCORP HOLDINGS INC.
Registrant
By:
/s/ ADAM H. SCHECHTER
Adam H. Schechter
President and Chief Executive Officer
68
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report has been signed below by the
following persons on behalf of the registrant on February 25, 2025 in the capacities indicated.
Signature
Is/ ADAM H. SCHECHTER
Adam H. Schechter
Is/ JULIA A. WANG
Julia A. Wang
Is/ PETER J. WILKINSON
Peter J. Wilkinson
*
Kerri i B. Anderson
*
Jeffrey A. Davis
*
D. Gary Gilliland, M.D., Ph.D.
*
Kirsten M. Kliphouse
*
Garheng Kong, M.D., Ph.D.
*
Peter M. Neupert
*
Richelle Parham
*
Paul B. Rothman, M. D.
*
Kathryn E. Wengel
President and Chief Executive Officer
(Principal Executive Officer)
Executive Vice President, Chief Financial Officer
(Principal Financial Officer)
Senior Vice President, Chief Accounting Officer
(Principal Accounting Officer)
Director
Director
Director
Director
Director
Director
Director
Director
Director
*Sandra D. van der Vaart, by her signing her name hereto, does hereby sign this Annual Report on behalf of the directors of the
Registrant after whose typed names asterisks appear, pursuant to powers of attorney duly executed by such directors and filed
with the SEC.
By:
Is/ SANDRA D. VAN ])ER V AART
Sandra D. van der V aart
Attorney-in-fact
69
[THIS PAGE INTENTIONALLY LEFT BLANK]
LABCORP HOLDINGS INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm PCAOB ID No. 34
Deloitte & Touche LLP
Consolidated Financial Statements:
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Earnings
Consolidated Statements of Changes in Shareholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
F-1
Page
F-2
F-5
F-6
F-7
F-8
F-9
F-10
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors ofLabcorp Holdings Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets ofLabcorp Holdings Inc. and subsidiaries (the "Company") as
of December 31, 2024, and 2023, the related consolidated statements of operations, comprehensive earnings, changes in
shareholders' equity, and cash flows, for each of the three years in the period ended December 31, 2024, and the related notes
(collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material
respects, the financial position ofthe Company as ofDecember 31,2024, and 2023, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 2024, in conformity with accounting principles generally
accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company's internal control over financial reporting as of December 31, 2024, based on criteria established in
Internal Control -
Integrated Framework (201 3) issued by the Committee of Sponsoring Organizations of the Treadway
Commission and our report dated February 25, 2025, expressed an unqualified opinion on the Company's internal control over
financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on
the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to
error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and ]performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included
evaluating tbe accounting principles used and significant estimates made by management, as well as evaluating tbe overall
presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that
was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that
are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The
communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and
we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the
accounts or disclosures to which it relates.
Valuation of Labcorp Diagnostics (Dx) Segme11t Net Accounts Receivable- Refer to Note 3 to the consolidated financial
statements
Critical Audit Matter Description
The Company recognizes Dx revenue and accounts receivable net of negotiated discounts and anticipated adjustments,
including historical collection experience for each of its four payer portfolios (clients, patients, Medicare & Medicaid, and
third-party). Management has a fonnal process to estimate implicit price concessions for uncollectable accounts. Anticipated
write-offs are recorded as adjustments to revenue at an amount considered necessary to record revenue at its net realizable
value. In addition to negotiated contractual discounts, other adjustments including anticipated payer denials and other external
factors that could affect the collectability of its receivables are considered when determining revenue and the net receivable
amount.
F-2
Given the significant judgment and estimates necessary to determine the net realizable value of accounts receivable related to
the Dx segment, auditing such estimates required extensive audit effort and a high degree of auditor judgment when performing
audit procedures and evaluating the results of those procedures.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to Dx Net Accounts Receivable included the following, among others:
We tested the effectiveness of controls over the valuation of net accounts receivable.
We evaluated management's methodology for recording Dx net accounts receivable by performing a retrospective
comparison of actual cash collected to the prior year estimate of net accounts receivable.
We developed an independent estimate of net accounts receivable by taking into consideration historical collections,
write-offs, and other relevant internal and external factors.
We tested the completeness and accuracy of underlying historical data used as an input to our independent estimate.
/s/ Deloitte & Touche LLP
Raleigh, North Carolina
February 25, 2025
We have served as the Company's auditor since 2021.
F-3
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors ofLabcorp Holdings Inc.
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Labcorp Holdings Inc. and subsidiaries (the "Company") as of
December 31, 2024, based on criteria established in Internal Control- Integrated Framework (201 3) issued by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material
respects, effective internal control over frnancial reporting as of December 31, 2024, based on criteria established in Internal
Control- Integrated Framework (201 3) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated financial statements as of and for the year ended December 31, 2024, of the Company and our
report dated February 25, 2025, expressed an unqualified opinion on those financial statements.
Basis for Opinion
The Company's management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying Report of
Management on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company's
internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards ofthe PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effe.ctive internal control over financial reporting was maintained in all
material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit
provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of frnancial statements for external purposes in accordance with generally
accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of frnancial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the Company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Deloitte & Touche LLP
Raleigh, North Carolina
February 25, 2025
F-4
PART I - FINANCIAL INFORMATION
Item 1. Financial Information
LABCORP H OLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
Current assets:
Cash and cash equivalents
Accounts receivable, net
Unbilled services
Supplies inventory
Prepaid expenses and other
Total current assets
Property, plant and equipment, net
Goodwill, net
Intangible assets, net
(In M illions, Except Per Share Data)
Joint venture partnerships and equity method investments
Other assets, net
Total assets
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable
Accrued expenses and other
Unearned revenue
Short-term operating lease liabilities
Short-term finance lease liabilities
Short-term borrowings and current portion of long-term debt
Total current liabilities
Long-term debt, less current portion
Operating lease liabilities
Financing lease liabilities
Deferred income taxes and other tax liabilities
Other liabilities
Total liabilities
Commitments and contingent liabilities
Noocontrolling interest
Shareholders' equity:
Common stock, 83.4 and 83.9 shares outstanding at December 31, 2024, and 2023,
respectively
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Total shareholders' equity
Total liabilities and shareholders' equity
$
$
$
$
December 31,
2024
2023
1,518.7
$
536.8
1,944.1
1,913.3
152.9
185.4
493.2
474.6
697.6
655.3
4,806.5
3,765.4
3,045.4
2,911.8
6,369.7
6,142.5
3,488.9
3,342.0
16.3
26.9
652.2
536.5
18 379.0 =$===
16=7=25=. =1
875.8
871.2
392.2
184.6
6.1
1,000.3
3,330.2
5,331.2
676.3
74.3
383.1
517.4
10,312.5
14.3
7.6
2.8
8,303.4
(261.6)
8,052.2
18,379.0
$
$
827.5
804.0
421.7
165.8
6.4
999.8
3,225.2
4,054.7
648.9
78.6
417.9
409.3
8,834.6
15.5
7.7
38.4
7,888.2
(59.3)
7,875.0
16,725.1
The accompanying notes are an integral part of these Consolidated Financial Statements.
F-5
LABCORP HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Millions, Except Per Share Data)
Year Ended December 31,
Revenues
Cost of revenues
Gross profit
Selling, general and administrative expenses
Amortization of intangibles and other assets
Goodwill and other asset impa£rments
Restructuring and other charges
Operating income
Other (expense) income:
Interest expense
Investment income
Equity method (loss) income, net
Other, net
Earnings from continuing operations before income taxes
Provision for income taxes
Earnings from continuing operations
Earnings from discontinued operations, net of tax
Net earnings
Less: Net earnings attributable to the noncontrolling interest
Net earnings attributable to Labcorp Holdings Inc.
Basic earnings per common share:
Basic earnings per common share from continuing operations
Basic earnings per common share from discontinued operations
Basic earnings per common share
Diluted earnings per common share:
Diluted earnings per common share from continuing operations
Diluted earnings per common share from discontinued operations
Diluted earnings per common share
$
$
$
$
$
$
$
$
2024
2023
13,008.9 $ 12,161.6
9,384.5
8,796.7
3,624.4
3,364.9
2,230.0
2,021.4
256.4
2 19.8
5.3
349.0
46.0
49.1
1,086.7
725.6
(208.3)
(199.6)
22.3
28.8
(1.4)
(1.4)
60.2
15.5
959.5
568.9
212.4
188.5
747.1
380.4
38.8
747.1
419.2
(1.1)
(1.2)
746.0
$
418.0
8.89
$
4.35
$
0.45
8.89
$
4.80
8.84
$
4.33
$
0.44
8.84
$
4.77
The accompanying notes are an integral part of these Consolidated Financial Statements.
F-6
2022
$
11,863.9
8,155.0
3,708.9
1,763.1
193.6
261.7
54.0
1,436.5
(179.8)
7.5
5.4
(32.2)
1,237.4
233.9
1,003.5
277.1
1,280.6
(1.5)
$
1,279.1
$
11.00
$
3.04
$
14.05
$
10.94
$
3.03
$
13.97
LABCORP HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS
(In Millions, Except Per Share Data)
Years Ended December 31,
2024
2023
2022
Net earnings
$
747.1
$
419.2
$ 1,280.6
Foreign currency translation adjustments
(217.1)
183.1
(336.4)
Net benefit plan adjustments
20.7
14.6
44.8
Other comprehensive (loss) earnings before tax
(196.4)
197.7
(291.6)
Provision for income tax related to items of comprehensive earnings
(5.9)
(1.8)
(9.7)
Other comprehensive (loss) earnings, net of tax
(202.3)
195.9
(301.3)
Comprehensive earnings
544.8
615.1
979.3
Less: Net earnings attributabJ,e to the noncontrolling interest
(l.l)
(1.2)
(1.5)
Comprehensive earnings attributable to Labcorp Holdings Inc.
$
543.7
$
613.9
$
977.8
The accompanying notes are an integral part of these Consolidated Financial Statements.
F-7
LABCORP HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(In Millions)
Accumulated
Additional
Other
Total
Common
Paid-in
Retained
Comprehensive
Shareholders'
Stock
Ca~ital
Eaminis
Eaminis (Loss)
E~ui~
BALANCE AT DECEMBER 31, 2021
$
8.5
$
$ 10,456.8
$
(191.9) $
10,273.4
Net earnings attributable to Labcorp Holdings Inc.
1,279.1
1,279.1
Other comprehensive loss, net of tax
(301.3)
(301.3)
Dividends declared
(198.7)
(198.7)
Issuance of common stock under employee stock plans
50.6
50.6
Net share settlement tax payments from issuance of stock to employees
(50.6)
(50.6)
Stock compensation
144.1
144.1
Purchase of common stock
(0.4)
(144.1)
(955.5)
(1,100.0)
BALANCE AT DECEMBER 31, 2022
8.1
10,5·81.7
(493.2)
10,096.6
Net earnings attributable to Labcorp Holdings Inc.
4 18.0
418.0
Other comprehensive earnings, net of tax
195.9
195.9
Fortrea Holdings Inc. spin-off
(1,970.0)
238.0
(1,732.0)
Dividends declared
(256.1)
(256.1)
Issuance of common stock under employee stock plans
55.2
55.2
Net share settlement tax payments from issuance of stock to employees
(40.9)
(40.9)
Stock compensation
147.3
147.3
Purchase of common stock
(0.4)
(123.2)
(885.4)
(1,009.0)
BALANCE AT DECEMBER 31, 2023
7.7
38.4
7,888.2
(59.3)
7,875.0
Net earnings attributable to Labcorp Holdings Inc.
746.0
746.0
Other comprehensive loss, net of tax
(202.3)
(202.3)
Dividends declared
(242.9)
(242.9)
Issuance of common stock under employee stock plan
56.2
56.2
Net share settlement tax payments from issuance of stock to employees
(46.4)
(46.4)
Stock compensation
116.7
116.7
Purchase of common stock
(0.1)
(162.1)
(87.9)
(250.1)
BALANCE AT DECEMBER 31, 2024
$
7.6
$
2.8
$
8,303.4
$
(261.6) $
8,052.2
The accompanying notes are an integral part of these Consolidated Financial Statements.
F-8
LABCORP HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Millions)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings
Earnings from discontinued operations
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization
Stock compensation
Operating lease right-of-use asset expense
Goodwill and other asset impairments
Deferred income taxes
Other, net
Change in assets and liabilities (net of effects of acquisitions and divestitures):
(Increase) decrease in accounts receivable
Decrease (increase) in unbilled services
Increase in supplies inventory
Increase in prepaid expenses and other
Increase (decrease) in accounts payable
(Decrease) increase in unearned revenue
Decrease in accrued expenses and other
Net cash provided by continuing operating activities
Net cash provided by discontinued operating activities
Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures
Purchase of investments
Proceeds from sale of assets
Proceeds from sale or distribution of investments
Proceeds from exit from swaps
Proceeds from sale of business
Acquisition of businesses, net of cash acquired
Net cash used for continuing investing activities
Net cash used for discontinued investing activities
Net cash used for investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from senior note offerings
Payments on senior notes
Proceeds from accounts receivable securitization
Proceeds from revolving credit facilities
Payments on revolving credit facilities
Net share settlement tax payments from issuance of stock to employees
Net proceeds from issuance of stock to employees
Dividends paid
Purchase of common stock
Other
Net cash provided by (used for) continuing financing activities
Net cash provided by discontinued financing activities
Net cash provided by (used for) financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Less cash and cash equivalents of discontinued operations at the end of the period
Cash and cash equivalents at end of period
Year Ended! December 31,
2024
$ 747.1
643.5
116.7
185.3
5.3
(20.1)
62.1
(52.3)
30.4
(12.6)
(54.5)
72.1
(24.6)
(112.6)
1,585.8
1,585.8
(489.9)
(55.0)
2.0
15.1
(839.0)
(I ,366.8)
(1,366.8)
2,000.0
(1 ,000.0)
300.0
2,463.7
(2,463.7)
(46.4)
56.2
(243.1)
(250.1)
(36.7)
779.9
779.9
(17.0)
981.9
536.8
$ 1,518.7
2023
$ 419.2
(38.8)
577.3
128.7
168.0
349.0
(78.1)
38.9
(103.8)
28.5
(0.7)
(25.8)
(42.4)
105.5
(323.2)
1,202.3
125.4
1,327.7
(453.6)
(29.0)
0.6
6.7
(671.5)
(1,146.8)
{24.72
(1,171.5)
(300.0)
2,488.2
(2,488.2)
(39.8)
54.4
(254.0)
(1,000.0)
(19.6)
(1,559.0)
1,499.7
(59.3)
9.9
106.8
430.0
$ 536.8
2022
$1,280.6
(277.1)
537.2
116.8
172.5
261.7
26.3
23.0
46.5
(23.4)
(45.5)
(244.1)
285.4
67.8
(462.9)
1,764.8
191.1
1,955.9
(429.3)
(17.4)
1.4
5.2
2.9
1.6
(1,164.0)
(1,599.6)
{52.62
(1,652.2)
787.4
(787.4)
(50.6)
50.6
(195.2)
(1,100.0)
(27.0)
(1,322.2)
(1,322.2)
(24.2)
(1,042.7)
1,472.7
109.4
$ 320.6
The accompanying notes are an integral part of these Consolidated Financial Statements.
F-9
LABCORP HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in millions, except per share data)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Financial Statement Presentation
Labcorp® Holdings Inc. (Labcorp, LID, 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. With nearly 70,000 employees, the
Company serves clients in approximately 100 countries.
On April 25, 2024, Laboratory Corporation of America Holdings (LCAH) announced plans to implement a new public
holding company structure, with Labcorp as the holding company. On May 17, 2024, the Company completed the holding
company reorganization (Reorganization) and became the successor issuer. Labcorp Holdings Inc. has no independent assets or
operations and its sole ownership interest is in LCAH.
The Company reports its business in two segments, Labcorp Diagnostics (Dx) and Biopharma Laboratory Services (BLS),
consisting of Early Development Research Laboratories (ED) and Central Laboratory Services. In 2024, Dx and BLS
contributed 78% and 22%, respectively, of revenues to the Company, and in 2023 contributed 77% and 23%, respectively.
These Consolidated Financial Statements include the accounts of the Company and jts 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% 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 variable interest entities or special purpose entities whose financial results are not included in these Consolidated
Financial Statements.
The financial statements olf 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 year. Resulting translation adjustments are included in
Accumulated other comprehensive income.
On June 30, 2023, the Company completed the separation (Spin-oft) of Fortrea Holdings Inc. (Fortrea), formerly the
Company's Clinical Development and Commercialization Services (CDCS) business, into a separate, publicly traded company.
All current and historical operating results of Fortrea are presented as Earnings from discontinued operations, net of tax, in the
Consolidated Statements of Operations. As a result of the Spin-off, the Company recast segment results to exclude the historical
results of the CDCS business for all periods presented. The remaining operations of the previously reported Drug Development
segment has been renamed the BLS segment.
Reimbursable Out-of-Pocket Expenses
BLS pays on behalf of its customers certain out-of-pocket costs for which the Company is reimbursed at cost, without mark-
up or profit. Out-of-pocket costs paid by BLS are reflected in Cost of revenues in the Consolidated Statements of Operations,
while the reimbursements received are reflected in Revenues in the Consolidated Statements of Operations.
Cost of Revenues
Cost of revenue includes direct labor and related benefit charges, reimbursable expenses, other direct costs, shipping and
handling fees, and an allocation of facility charges and information technology costs.
Selling, General and Administrative Expenses
Selling, general and administrative expenses consist primarily of administrative payroll and related benefit charges,
administrative travel, and an allocation of facility charges and information technology costs.
F-10
Use of Estimates
LABCORP HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in millions, except per share data)
The preparation of financial statements in conformity with generally accepted accounting principles in the United States
(U.S.), requires the Company to make estimates. and assumptions that affect the reported 111mounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and
expenses during the reported periods. Significant estimates include implicit price concessions, revenue estimates, the allowance
for credit losses, deferred tax assets, fair values of acquired assets and assumed liabilities in business combinations, fair value of
goodwill and indefinite-lived intangible assets, amortization lives for acquired intangible assets, and accmals for self-insurance
reserves, litigation reserves and pensions. Actual results could materially differ from those estimates.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and
cash equivalents and accounts receivable.
The Company maintains cash and cash equivalents with various major financial institutions. The Company believes all
financial institutions holding its cash are of high credit quality and does not believe the Company is subject to unusual credit
risk beyond the normal credit risk associated with commercial banking relationships. The total Cash and cash equivalent
balances that exceeded the balances insured by the Federal Deposit Insurance Commission, were approximately $1,516.0 and
$534.7 at December 31,2024, and 2023, respectively.
Substantially all of the Company's accounts receivable are with companies in the healthcare or pharmaceutical industry and
individuals. However, concentrations of credit risk are mitigated due to the number of the Company's customers as well as their
dispersion across many different geographic regions.
Although Dx has receivables due from U.S. and state governmental agencies, the Company does not believe that such
receivables represent a credit risk since the related healthcare programs are funded by U.S. and state governments, and payment
is primarily dependent upon submitting appropriate documentation. Accounts receivable balances (gross) from Medicare and
Medicaid were $97.4 and $86.5 at December 31, 2024, and 2023, respectively.
For the Company's operations in Ontario, Canada, the Ontario Ministry of Health and Long-Term Care (Ministry)
determines wlho can establish a licensed community medical laboratory and caps the amount that each of these licensed
laboratories can bill the government sponsored healthcare plan. The Ontario government-sponsored healthcare plan covers the
cost of commercial laboratory testing performed by the licensed laboratories. The provincial government discounts the annual
testing volumes based on certain utilization discounts and establishes an annual maximum it will pay for all community
laboratory tests. The agreed-upon reimbursement rates are subject to Ministry review at the end of year and can be adjusted (at
the government's discretion) based upon the actual volume and mix of test work performed by the licensed healthcare providers
in the province during the year. The capitated accounts receivable balance from the Ontario government sponsored healthcare
plan was Canadian Dollar 6.4 and 5.5 at December 31, 2024, and 2023, respectively.
The portion of the Company's accounts receivable due from patients comprises the largest portion of credit risk. At
December 31, 2024, and 2023, receivables due from patients represented approximately 24.5% and 20.4% of the Company's
consolidated gross accounts receivable, respectively. The Company applies assumptions and judgments including historical
collection experience and reasonable and supportable forecasts for assessing collectability and determining the allowance for
credit losses for accounts receivable from patients.
Earnings per Share
Basic earnings per common share (Basic EPS) is computed by dividing Net earnings attributable to Labcorp Holdings Inc.
by the weighted-average number of common shares outstanding. Diluted earnings per common share (Diluted EPS) is
computed by dividing Net earnings attributable to Labcorp Holdings Inc., and if applicable, 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, and performance share awards.
F-11
LABCORP HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in millions, except per share data)
The following represents a reconciliation of Basic EPS to Diluted EPS:
Year Ended December 31,
2024
2023
Basi.c
Dilutive Diluted
Basic
Dilutive Diluted
EPS
Effect
EPS
EPS
Effect
EPS
Net earnings attributable to LHT
$746.0
$746.0 $418.0
$418.0 $
Weighted-average common shares outstanding
83.9
0.5
84.4
87.1
0.5
87.6
Per common share amount
$ 8.89
$ 8.84
$ 4.80
$ 4.77 $
2022
Basic
Dilutive
Diluted
EPS
Effect
EPS
1,279.1
$1,279.1
91.1
0.5
91.6
14.05
$ 13.97
The following table summarizes the potential common shares not included in the computation of Diluted EPS because their
impact would have been antidilutive:
Employee stock options and awards
Stock Compensation Plans
Year Ended December 31,
2024
2023
2022
0.2
0.2
0.2
The Company measures stock compensation cost for all equity awards at fair value on the date of grant and recognizes
compensation expense over the service period for awards expected to vest. The fair value of restricted stock units is determined
based on the number of shares granted and the quoted price of the Company's Common Stock on the grant date. To estimate the
fair value of stock option awards, the Black-Scholes model is used, which relies on various key assumptions, including risk-free
interest rate, expected term, and expected volatility. The grant date fair value of performance awards is based on a Monte Carlo
simulated fair value for the relative (as compared to the peer companies) total shareholder return component of the performance
awards. Such value is recognized as an expense over the service period and the Company's determination of whether it is
probable that the performance targets will be achieved. At the end of each reporting period, the Company reassesses the
probability of achieving performance targets. Forfeitures are recognized as a reduction of compensation expense in earnings in
the period in which they occur.
Cash Equivalents
Cash and cash equivalents consist of highly liquid instruments, such as commercial paper, time deposits, and other money
market instruments, which have maturities when purchased of three months or less.
Supplies Inventory
Supplies inventory, consisting primarily of purchased laboratory and customer supplies and frnished goods, are stated at the
lower of cost (first-in, first-out) or net realizable value. Supplies accounted for $384.2 and $385.1 and finished goods accounted
for $109.0 and $89.5 of total Supplies inventory at December 31, 2024, and 2023, respectively. The Company's inventory
reserve balance was $43.8 and $66.1, as of December 31,2024, and 2023, respectively.
Property, Plant and Equipment, Net
Property, plant and equipment are recorded at cost. Depreciation and amortization expense is computed on all classes of
assets based on their estimated useful lives using the straight-line method.
Expenditures for repairs and maintenance are charged to operations as incurred. Retirements, sales, and other disposals of
assets are recorded by removing the cost and accumulated depreciation from the related accounts with any resulting gain or loss
reflected in the Consolidated Statements of Operations.
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying
amounts may not be recoverable. If the carrying value is no longer recoverable based upon the undiscounted future cash flows
of the asset, the amount of the impairment is the difference between the carrying amount and the fair value of the asset.
Capitalized Software Costs
The Company capitalizes purchased software that is ready for service and capitalizes software development costs incurred
on significant projects starting from the time that the preliminary project stage is completed, and the Company commits to
funding a project until the project is substantially complete and the software is ready for its intended use. Capitalized software
costs are included in Property, plant and equipment, net within the Consolidated Balance Sheets and are mainly comprised of
direct material and service costs and payroll and payroll-related costs. Computer software maintenance costs related to software
F-12
LABCORP HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in millions, except per share data)
development are expensed as incurred. Capitalized software costs are amortized using the straight-line method over the
estimated useful life of the underlying system ranging from three to fifteen years, generally five years. Amortization begins
once the underlying system is substantially complete and ready for its intended use.
Goodwill and lndefmite-lived Intangible Assets
The Company assesses goodwill and indefinite-lived intangible assets for impairment at least annually or whenever events
or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. The annual impairment
test for goodwill includes an option to perform a qualitative assessment of whether it is more likely than not that a reporting
unit's fair value is less than its carrying value. Reporting units are businesses with discrete financial information that is
available and reviewed by management. If the Company determines that it is more likely than not that the fair value of a
reporting unit is less than its carrying value, then the Company performs the quantitative goodwill impairment test. The
Company may also choose to bypass the qualitative assessment for any reporting unit in its goodwill assessment and proceed
directly to performing the quantitative assessment. The Company recognizes an impairment charge for the amount by which the
reporting unit's carrying amount exceeds its fair value.
In the qualitative assessment, the Company considers relevant events and circumstances for each reporting unit, including (i)
current year results, (ii) financial performance versus management's annual and five-year strategic plans, (iii) changes in the
reporting unit carrying value since prior year, (iv) industry and market conditions in which the reporting unit operates, (v)
macroeconomic conditions, including discount rate changes, and (vi) changes in offerings provided by the reporting unit. If
applicable, performance in recent years is compared to forecasts included in prior quantitative valuations. Based on the results
of the qualitative assessment, if the Company concludes that it is not more likely than not that the fair value of the reporting unit
is less than its carrying values of the reporting unit, then no quantitative assessment is performed.
The quantitative assessment includes the estimation of the fair value of each reporting unit as compared to the carrying value
of the reporting unit. The Company estimates the fair value of a reporting unit using both income-based and market-based
valuation methods. The income-based approach is based on the reporting unit's forecasted future cash flows that are discounted
to the present value using the reporting unit's weighted-average cost of capital. For the market-based approach, the Company
utilizes a numlber of factors such as publicly available information regarding the market capitalization of the Company, as well
as operating results, business p[ans, market multiples, and present value techniques. Based upon the range of estimated values
developed from the income and market-based methods, the Company determines the estimated fair value for the reporting unit.
If the estimated fair value of the reporting unit exceeds the carrying value, the goodwill is not impaired, and no further review is
required.
Management performed its annual goodwill and indefinite-lived intangible asset impairment testing as of the beginning of
the fourth quarter of 2024. The Company elected to perform a quantitative assessment for goodwill and indefinite-lived
intangible assets for each of its reporting units. Based upon the results of the quantitative assessments, the Company concluded
that the fair values of each of its reporting units, as of October I, 2024, were greater than the carrying values.
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.
Intangible Assets, Net
Intangible assets with finite lives are amortized on a straight-line basis over the expected periods to be benefited such as
legal life for patents and technology, contractual lives for non-compete agreements and customer relationships.
Intangible assets with finite lives are reviewed for impairment whenever events or changes in circumstances indicate that the
carrying amounts may not be recoverable. If the carrying value is no longer recoverable based upon the undiscounted future
F- 13
LABCORP HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in millions, except per share data)
cash flows of the asset, the amount of the impairment is the difference between the carrying amount and the fair value of the
asset.
Debt Issuance Costs
The costs related to the issuance of debt are capitalized, netted against the related debt for presentation purposes and
amortized to interest expense over the terms of the related debt.
Professional Liability
The Company is self-insured (up to certain limits) for professional liability claims arising in the normal course of business,
generally related to laboratory testing and reporting of test results. The Company estimates a liability that represents the
ultimate exposure for aggregate losses below those limits. The liability is based on assumptions and factors for known and
incurred but not reported claims, including the frequency and payment trends of historical claims.
Leases
All leases with a lease term greater than 12 months are recorded as an obligation on the balance sheet with a corresponding
right-of-use (ROU) asset. Both finance and operating leases are reflected as liabilities on the commencement date of the lease
based on the present value of the lease payments to be made over the lease term. Right-of-use assets are valued at the initial
measurement of the lease liability, plus any initial direct costs or rent prepayments, minus lease incentives and any deferred
lease payments. The classification will determine whether lease expense is recognized based on an effective interest method or
on a straight-line basis over the term of the lease.
A certain number of these leases contain rent escalation clauses either fixed or adjusted periodically for inflation or market
rates that are factored into the Company's determination of lease payments. The Company also has variable lease payments that
do not depend! on a rate or index, for items such as volume purchase commitments, which are recorded as variable cost when
incurred. As most of the Company's leases do not provide an implicit rate, the Company estimates an incremental borrowing
rate based on the credit quality of the Company and by comparing interest rates available in the market for similar borrowings,
and adjusting this amount based on the impact of collateral over the term of each lease. The Company uses this rate to discount
payments to present value. Some operating leases contain renewal options, some of which also include options to early
terminate the leases. The exercise of these options is at the Company's discretion and the Company evaluates each renewal
option to determine if it is reasonably possible to be exercised and should be included in the accounting lease term.
Income Taxes
The Company accounts for income taxes utilizing the asset and liability method. Under this method deferred tax assets and
liabilities are recogn.ized for the future tax consequences attributable to differences between the fmancial statement carrying
amounts of existing assets and liabilities and their respective tax bases and for tax loss carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date. The Company does not recognize a tax benefit unless the
Company concludes that it is more likely than not that the benefit will be sustained on audit by the taxing authority based solely
on the technical merits of the associated tax position. If the recognition threshold is met, the Company recognizes a tax benefit
measured at the largest amount of the tax benefit that the Company believes is greater than 50% likely to be realized. The
Company records interest and penalties in Provision for income taxes in the Consolidated Statements of Operations.
Derivative Financial Instruments
The Company addresses its exposure to market risks, principally the market risk associated with changes in interest rates
and currency exchange rates, tlhrough a controlled program of risk management that includes, from time to time, the use of
derivative financial instruments. The Company does not hold or issue derivative financial instruments for trading purposes. The
Company does not believe that its exposure to market risk is material to the Company's financial position or results of
operations.
Interest rate swap agreements, which have been used by the Company from time to time in the management of interest rate
exposure, are accounted for at fair value. These derivative financial instruments are accounted for as fair value hedges that
increase or decrease the value of the Company's senior notes with the offset being recorded as a component of other long-term
assets or liabilities, as applicable. As the specific terms and notional amounts of the derivative financial instruments match
those of the fixed-rate debt being hedged, the derivative instruments are assumed to be perfectly effective hedges and
F- 14
LABCORP HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in millions, except per share data)
accordingly, there is no impact to the Company's Consolidated Statements of Operations. Cash flows from the interest rate
swaps are incllllding in operating activities within the Consolidated Statements of Cash Flows.
Cross currency swap agreements, which have been used by the Company to hedge the foreign currency exposure of its net
investment in a foreign subsidiary denominated in non-U.S. currency, are accounted for at fair value. 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 Foreign currency translation adjustments within the Consolidated Statements of Comprehensive Earnings.
Foreign currency forward contracts, which have been used by the Company to hedge foreign currency receivables, are
recognized as assets or liabilities at their fair value. These contracts do not qualify for hedge accounting and the changes in fair
value are recorded directly to earnings. The contracts are short-term in nature and the fair value of these contracts is based on
market prices for comparable contracts.
Fair Value of Financial Instruments
Fair value measurements for financial assets and liabilities are determined based on the assumptions that a market
participant would use in pricing an asset or liability. A three-tiered fair value hierarchy draws distinctions between market
participant assumptions based on (i) observable inputs such as quoted prices in active markets (Level 1), (ii) inputs other than
quoted prices in active markets that are observable either directly or indirectly (Level 2), and (iii) unobservable inputs that
require the Company to use present value and other valuation techniques in the determination of fair value (Level3).
Foreign Currencies
For subsidiaries outside of the U.S. that operate in a local currency environment, income and expense items are translated to
U.S. dollars at the monthly average rates of exchange prevailing during the period, assets and liabilities are translated at period-
end exchange rates and equity accounts are translated at historical exchange rates. Translation adjustments are accumulated in a
separate component of Shareholders' equity in the Consolidated Balance Sheets and are included in the determination of
comprehensive earnings in the Consolidated Statements of Comprehensive Earnings and Consolidated Statements of Changes
in Shareholders' Equity. Transaction gains and losses are included in the determination of Net earnings in the Consolidated
Statements of Operations.
2.
DISCONTINUED OPERATIONS
On June 30, 2023 (the Distribution Date), Labcorp completed the previously announced separation from the Company of
Fortrea, formerly the Company's CDCS business, into a separate, publicly traded company. All historical operating results of
Fortrea are presented as Earnings from discontinued operations, net of tax, in the Consolidlated 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 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.
ln 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 and the service fees earned are included in Other, net in the Consolidated Statements of Operations.
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 Spin-off-related fees, and do not include any allocation of general corporate overhead expense or
interest expense of the Company.
F- 15
LABCORP HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in millions, except per share data)
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 years ended December 31, 2023, and 2022:
Revenues
Cost of revenues
Gross profit
Selling, general and administrative expenses
Amortization of intangibles and other assets
Goodwill and other asset impairments
Restructuring and other charges
Operating income
Other income (expense):
Interest expense
Investment income (expense)
Other, net
Earnings before income taxes
Provision for income taxes
Net eamings attributable to Labcorp Holdings Inc.
3. REVENUES
Description of Revenues
$
$
Year Ended December 31,
2023
2022
1,506.6
$
3,012.9
1 244.5
2 336.7
262.1
676.2
184.1
233.5
31.9
65.7
9.8
3.0
29.8
43.1
337.4
(0.5)
(0.5)
(1.2)
1.4
4.2
6.9
45.6
345.2
6.8
68.1
38.8
$
277.1
Dx attributes revenues to a geographical region based upon where the diagnostic test is performed, while BLS attributes
revenues to a geographical region based upon where the services are performed. The Company's revenue by segment payers/
customer groups is as follows:
Payer/Customer
Dx
Clients
Patients
Medicare and Medicaid
Third party
Total Dx revenues by payer
BLS
Phannaceutical,
biotechnology and medical
device companies
Total revenues
Year Ended December 31,2024
North
America
Europe
Other
Total
-------
24%
-
%
-%
24 'X
10%
-
%
-
%
10 'X
8%
-
%
-
%
8'X
36%
-
%
-
%
36 %
------~
78%
-%
-%
78%
9%
9 %
4%
22 'X
------~
87 %
9 %
4%
100%
Year Ended December 31, 2023
Year Ended December 31,2022
North
North
America Europe
Other
Total
America Europe
Other
Total
-------
-------
24%
-%
-%
24 o/<
22%
-
%
-%
22 o/<
9%
-
%
-
%
9o/<
8%
-
%
-
%
8o/<
8%
-
%
-
%
So/<
8%
-
%
-
%
So/<
36%
-
%
-
%
36 %
39%
-
%
-
%
39 o/<
------~
77%
-%
-%
77%
77 % ----=% ---=% ----:r7"o/,
10%
9 %
4 %
23 o/<
10%
9 %
4 %
23 o/<
------~
87%
9 %
4 %
100 %
87% ~
----:r%
100 o/<
Revenues in the U.S. were $10,858.3 (83.5%), $10,177.7 (83.7%), and $9,930.3 (83.7%) for the years ended December 31,
2024, 2023, and 2022.
The following is a description of the current revenue recognition policies of the Company:
DxRevenues
Dx offers a comprehensive menu of frequently requested and specialty diagnostic tests through an integrated network of
primary and specialty laboratories across the U.S. In addition to diagnostic testing along with occupational and wellness testing
for employers and forensic deoxyribonucleic acid analysis, Dx also offered a range of other testing services.
Within the Dx segment, a majority of the revenue transactions initiated when Dx receives a requisition form to perform a
diagnostic test. The information provided on the requisition form is used to determine the party that will be billed for the testing
F-16
LABCORP HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in millions, except per share data)
performed and the expected reimbursement. Dx recognizes revenue and satisfies its performance obligation for services
rendered when the testing process is complete, and the associated results are reported. The Dx segment also enters into
agreements that have monthly and non-testing-based fees which are recognized each month as the services are provided.
Revenues are distributed among four payer portfolios: clients, patients, Medicare and Medicaid, and third party. Dx
considers negotiated discounts and anticipated adjustments, including historical collection experience for the payer portfolio,
when revenues are recorded.
The following are descriptions of the Dx payer portfolios:
Clients
Client payers represent the portion of Dx's revenue related to physicians, hospitals, health systems, accountable care
organizations (ACOs), employers, and other entities where payment is received exclusively from the entity ordering the testing
service. Generally, client sales are recorded on a fee-for-service basis at Dx's client list price, less any negotiated discount. A
portion of client billing is for laboratory management services, collection kits and other non-testing offerings. In these cases,
revenue is recognized when services are rendered or delivered.
Patients
This portfolio includes revenue from uninsured patients and member cost-share for insured patients (e.g., coinsurance,
deductibles, and non-covered services). Uninsured patients are billed based upon Dx's patient list fee schedules, net of any
discounts negotiated with physicians on behalf of their patients. Dx bills insured patients as directed by their health plan and
aft.er consideration of the fees and terms associated with an established health plan contract.
Medicare and Medicaid
This portfolio relates to fee-for-service revenue from traditional Medicare and Medicaid programs. Revenue from these
programs is based on the fee schedule established by the related government authority. In addition to contractual discounts,
other adjustments including anticipated payer denials are considered when determining revenue. Any remaining adjustments to
revenue are recorded at the time of final collection and settlement. These adjustments are not material to Dx's results of
operations in any period presented.
Third Party
Third party includes revenue related to managed care organizations (MCOs). The majority of Dx's third-party revenue is
reimbursed on a fee-for-service basis. These payers are billed at Dx's established list price and revenue is recorded net of
contractual discounts. The majority of Dx's MCO sales are recorded based upon contractually negotiated fee schedules with
sales for non-contracted MCOs recorded based on historical reimbursement experience.
In addition to contractual discounts, other adjustments including anticipated payer denials are considered when determining
revenue. Any remaining adjustments to revenue are recorded at the time of final collection and settlement. These adjustments
are not material to Dx's results of operations in any period presented.
Third-party reimbursement is also received through capitation agreements with MCOs and independent physician
associations. Under capitated agreements, revenue is recognized based on a negotiated per-member, per-month payment for an
agreed upon menu of tests, or based upon the proportionate share earned by Dx from a capitation pool. When the agreed upon
reimbursement is based solely on an established rate per member, revenue is not impacted lby the volume of testing performed.
Under a capitation pool arrangement, the aggregate value of an established rate per member is distributed based on the volume
and complexity of the procedures performed by laboratories participating in the agreement. Dx recognizes revenue monthly,
based upon the established capitation rate or anticipated distribution from a capitated pool.
BLS Revenues
BLS revenue is generally recognized over time, as the services are delivered to the customer, based on the· extent of progress
towards completion of the performance obligation. The selection of the method to measure progress towards completion
requires judgment and is based on the nature of the services to be provided. The majority of the segment's contracts contain a
single performance obligation, as the segment provides a significant service of integrating all promises in the contract and the
promises are highly interdependent and interrelated with one another. For contracts that include multiple performance
obligations, BLS allocates the contract value to the goods and services based on a customer price list, if available. If a price list
is not available, BLS will estimate the transaction price using either market prices or an "expected cost plus margin" approach.
The total contract value is estimated at the beginning of the contract, and is equal to the amount expected to be billed to the
F- 17
LABCORP HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in millions, except per share data)
customer. These contracts generally take the form of fixed-price or fee-for-service arrangements subject to pricing adjustments
based on changes in scope. Fixed-price contracts are typically recognized as revenue over time based on a proportional-
performance basis, using either input or output methods that are specific to the service provided. In an output method, revenue
is determined by dividing the actual units of output achieved by the total units of output required under the contract and
multiplying that percentage by the total contract value. When using an input method, revenue is recognized by dividing the
actual costs incurred by the total estimated cost expected to complete the contract, and multiplying that percentage by the total
contract value. Contract costs principally include direct labor costs, research model costs, and allocated overhead. The estimate
of total costs expected to complete the contract requires significant judgment, and these estimates are reviewed periodically.
Any adjustments to the estimates are recognized on a cumulative catch-up basis in the period they become known.
Fee-for-service contracts are typically priced based on transaction volume or time and materials. For volume-based
contracts, the contract value is entirely variable, and revenue is recognized as the specific service is completed. For services
billed based on time and materials, revenue is recognized using the right to invoice practical expedient.
Contracts are often modified to account for changes in contract specifications and requirements. Generally, when contract
modifications create new performance obligations, the modification is considered to be a separate contract and revenue is
recognized prospectively. When contract modifications change existing performance obligations, the impact on the existing
transaction price and measure of progress for the performance obligation to which it relates is generally recognized as an
adjustment to revenue (either as an increase in or a reduction of revenue) on a cumulative catch-up basis.
Most contracts are terminable with or without cause by the customer, either immediately or upon notice. These contracts
often require payment to BLS of expenses, fees earned to date and, in some cases, a termination fee or a payment to BLS of
some portion of the fees or profits that could have been earned by BLS under the contract if it had not been terminated early.
Termination fees are included in revenues when services have been performed and realization is assured.
BLS incurs sales commissions in the process of obtaining contracts with customers, which are recoverable through the
service fees in the contract. Sales commissions that are payable upon contract award are recognized as assets and amortized
over the expected contract term, along with related payroll tax expense. The amortization of commission expense is based on
the weighted-average contract duration for all commissionable awards in the respective business in which the commission
expense is paid, which approximates the period over which goods and services are transferred to the customer. The amortization
period of sales commissions ranges from approximately 1 to 5 years, depending on the business. For businesses that enter into
primarily short-term contracts, BLS applies the practical expedient, which allows costs to obtain a contract to be expensed when
incurred if the amortization period of the assets that would otherwise have been recognized is one year or less. Amortization of
assets from sales commissions is included in Selling, general, and administrative expense in the Consolidated Statements of
Operations.
Accounts Receivable, Unbilled Services, and Unearned Revenue
Differences in the timing of revenue recognition and associated billing and cash collections result in recording accounts
receivable, unbilled services, and unearned revenue in the Consolidated Balance Sheets. Payments received in advance of
services being provided are contract liabilities recognized as unearned revenue. Revenue r'ecognized in advance of billing are
recognized as unbilled services and the majority of BLS's unbilled services represent unbilled receivables. Once a customer is
invoiced, the contract asset is reduced for the amount billed, and a corresponding accounts receivable is recognized. All contract
assets are billable to customers within one year from the respective balance sheet date.
F-18
LABCORP HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in millions, except per share data)
The following table provides information about accounts receivable, unbilled services, and unearned revenue from contracts
with customers:
December 31,
2024
2023
Dx accounts receivable
$
1,259.3
$
1,135.2
BLS accounts receivable
729.5
810.8
Less BLS allowance for credit losses
(44.7)
(32.7)
Accounts receivable, net
$
1,944. 1 $
I 913.3
Gross unbilled services
$
160.5
$
192.9
Less reserve for unbilled services
(7.6)
(7.5)
Unbilled services
$
152.9
$
185.4
Unearned revenue
$
392.2
$
421.7
Revenue recognized during the period that was included in the unearned revenue balance at the beginning of the period, for
the years ended December 31, 2024, 2023, and 2022 was $113.0, $78.9, and $99.7, respectively.
Credit Loss Rollforward
BLS estimates future expected losses on accounts receivable and unbilled services over the remaining collection period of
the instrument. The roll forward for the allowance for credit losses is as follows:
Accounts
Unbilled
Receivable
Services
Total
Allowance for credit losses at December 3 l, 2022
$
30.8
$
10.5 $
41.3
Credit loss expense
6.3
6.3
Write~offs
(4.4)
(3.0)
(7.4)
Allowance for credit losses at December 31, 2023
32.7
7.5
40.2
Credit loss expense
14.6
0.1
14.7
Write-offs
(2.2)
(2.2)
Foreign currency impact
(0.4)
(0.4)
Allowance for credit losses at December 31, 2024
$
44.7
$
7.6
$
52.3
The credit loss expense in the year ended December 31, 2024, was mainly related to the collection risk for specific
biotechnology receivable balances.
F- 19
LABCORP HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in millions, except per share data)
4. BUSINESS ACQUISITIONS AND DISPOSITIONS
2024
During the year ended December 31, 2024, the Company acquired several businesses and related assets for cash of
approximately $839.0. These acquisitions consisted of the clinical and outreach businesses of Baystate Medical Center
($ 120.5), Providence Medical Foundation ($55.1), Westpac Labs, Inc. ($97.7), Invitae Corporation ($240.8), BioReference
Health ($237.6), and other business acquisitions ($87.9). 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 $440.3 in identifiable intangible assets. A residual amount of tax deductible goodwill of approximately $299.9
was recorded as of December 31, 2024. The weighted-average amortization period for non-compete agreements, customer
relationships, trade names, and technology assets acquired from these businesses are 5.0, 14.4, 2.0, and 11.0 years, respectively.
The purchase price allocations for these acquisitions were preliminary at December 31, 2024. The valuation of acquired assets
and assumed liabilities include the following:
Amounts
Acquired
Baystate Providence Westpac
Other
During the
Measurement
Year Ended
Medical
Medical
Labs,
lnvitae BioReference
Business
Period
December 31,
Center Foundation
Inc.
Core.
Health
Ac9uisitioos Adjustments
2024
Inventories
$
$
$
1.8 $
12.1 $
$
$
2.0 $
15.9
Prepaid expenses and other
8.4
8.4
Property, plant and equipment
7.2
0.9
76.7
9.1
1.3
28.1
123.3
Goodwill
70.7
25.9
45.1
100.4
107.4
41.0
(90.6)
299.9
Intangible assets
79.8
29.2
50.8
113.2
121.1
46.2
44.3
484.6
Total assets acquired
157.7
56.0
97.7
302.4
237.6
88.5
(7.8)
932.1
Accrued expenses and other
(3.9)
(3.9)
Unearned revenue
3.3
(3.3)
Lease liabilities
7.2
0.9
58.3
0.6
67.0
Total liabilities acquired
7.2
0.9
61.6
0.6
(7.2)
63.1
Net assets acquired
150.5
55.1
97.7
240.8
237.6
87.9
(0.6)
869.0
Less 2023 escrow payment
30.0
30.0
Cash paid for acquisitions
$
120.5 $
55.1 $
97.7 $ 240.8 $
237.6 $
87.9 $
(0.6l $
839.0
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.
Unaudited Pro Forma Information for 2024 Acquisitions
Had the aggregate of the Company's 2024 acquisitions been completed at January 1, 2023, the Company's pro forma results
would have been as follows:
Year Ended December 31,
2024
2023
Revenues
$
13,353.6
$
12,716.4
Net earnings attributable to LHI
$
761.8
$
423.3
Dispositions
During the year ended December 31, 2024, the Company sold the assets of its Beacon Laboratory Benefit Solutions, Inc. for
$13.5 and recorded a gain of$6.4.
F-20
2023
LABCORP HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in millions, except per share data)
During the year ended December 31 , 2023, the Company acquired several businesses and related assets for cash of
approximately $671.5. 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 $340.8 in
identifiable intangible assets and a residual amount of tax-deductible goodwill of approximately $296.9. The goodwill reflects
the Company's expectations to utilize the acquired businesses' workforce and established reRationships and the benefits of being
able to leverage operational efficiencies with favorable growth opportunities in these markets. The amortization period for non-
compete agreements and customer list assets acquired from these businesses are 5 and 15 years, respectively. These acquisitions
were made primarily to extend the Company's geographic reach in important market areas and to partner with hospitals and
health systems. The purchase price allocations for these acquisitions were preliminary at December 31, 2023. The preliminary
valuation of acquired assets and assumed liabilities, include the following:
Amounts
Acquired
Providence
During the
Health and
Other
Measurement Year Ended
Jefferson
Enzo
Services -
Tufts
Business
Period
December 31,
Health
BioChem
Oregon
Medicine Legacy Acquisitions Adjustments
2023
Accounts receivable
$
$
(2.8) $
$
$
$
2.0 $
0.2 $
(0.6)
Inventories
1.3
1.3
Prepaid expenses and other
0.4
0.2
0.3
0.6
1.5
Property, plant and equipment
4.7
3.3
6.5
(1.5)
13.0
Goodwill
50.8
54.1
50.7
73.8
49.0
18.5
(29.4)
267.5
Intangible assets
57.2
61.1
57.2
83.2
55.2
26.9
19.5
360.3
Other assets
2.2
17.9
20.1
Total assets acquired
110.2
112.8
113.9
157.0
107.7
72.1
(10.6)
663.1
Accounts payable
1.2
1.2
Accrued expenses and other
3.9
1.2
(8.3)
(3.2)
Deferred income taxes
(2.3)
(2.3)
Other liabilities
(4.1)
(4. 1)
Total liabilities acquired
3.9
(1.7)
(10.6)
(8.4)
Net assets acquired
$ 110.2 $ 112.8 $
110.0 $ 157.0 $ 107.7 $
73.8 $
-
$
671.5
Unaudited Pro Forma Information for 2023 Acquisitions
Had the aggregate of the Company's 2023 acquisitions been completed at January 1, 2022, the Company's pro forma results
would have been as follows:
Revenues
Earnings from continuing operations
2022
$
$
Year Ended December 31,
2023
2022
12,350.1
$
397.2
$
12,126.3
1,030.3
During the year ended December 31, 2022, the Company acquired various businesses and related assets for approximately
$1,164.0 in cash (net of cash a·cquired). The purchase consideration for all acquisitions year to date has been allocated to the
estimated fair market value of the net assets acquired, including approximately $542.3 in identifiable intangible assets and a
residual amount of non-tax-deductible goodwill of approximately $598.5. The amortization periods for intangible assets
acquired from these transactions range from 15 to 19 years for customer :relationships, 15 years for patents and technology, 5
years for non-compete agreements, and 5 to I 0 years for trade names. These acquisitions were made primarily to extend the
Company's geographic reach in important market areas and enhance the Company's scientific differentiation. The excess of the
fair value of the consideration conveyed over the fair value ofthe net assets acquired was recorded as goodwill. The goodwill
reflects the Company's expectations to utilize the acquired businesses' workforce and established relationships and the benefits
of being able to leverage operational efficiencies with favorable growth opportunities in these markets. The purchase price
allocation for several of these transactions were preliminary at December 31, 2022. The areas of the purchase price allocation
F-21
LABCORP HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in millions, except per share data)
that were not yet finalized related primarily to Property, plant and equipment, Intangible assets, Goodwill and Deferred income
taxes. A summary of the net assets acquired in 2022 for these businesses is included below:
Preliminary
Personal
Preliminary
Measurement
Amounts Acquired
Genome
Ascension
Other
Period
During Year Ended
Diagnostics I nc.
Healthcare
Acquisitions
Adjustments
December 31,2022
Accounts receivable
$
4.1 $
$
(1.3) $
(2.3) $
0.5
Unbilled services
2.9
(3.2)
(0.3)
Inventories
2.5
24.6
27.1
Prepaid expenses and other
1.2
0.4
0.3
1.9
Property, plant and equipment
9.9
43.5
0.1
53.5
Deferred income taxes
17.5
15.2
32.7
Goodwill
346.8
125.0
126.7
(40.4)
558.1
Intangible assets
136.6
233.2
172.5
30.4
572.7
Other assets
12.5
2.3
(2.3)
12.5
Total assets acquired
534.0
426.7
300.6
(2.6)
1,258.7
Accounts payable
3.8
(O.l)
3.7
Accrued expenses and other
57.3
15.4
0.1
72.8
Unearned revenue
3.3
(2.6)
0.7
Lease liabilities
2.9
2.9
Other liabilities
14.6
14.6
Total liabilities acquired
79.0
2.9
15.4
(2.6)
94.7
Net assets acquired
$
455.0 $
423.8 $
285.2 $
-$
1,164.0
Unaudited Pro Forma Information for 2022 Acquisitions
Had the aggregate of the Company's 2022 acquisitions been completed at January 1, 2021, the Company's pro forma results
would have been as follows:
Year Ended December 31,
2022
2021
Revenues
$
11,984.7
$
13,325.7
Earnings from continuing operations
$
1,006.8
$
2,182.4
5. RESTRUCTURING AND OTHER CHARGES
Restructuring and other charges represent amounts incurred in connection with the elimination of redundant positions and
facilities within the organization in connection with cost saving initiatives, the spin-off of Fortrea, and acquisitions or
dispositions of businesses by the Company.
During 2024, the Company recorded net restructuring charges of $46.0. The charges were comprised of $43.0 in severance
and other personnel costs and S5.9 in facility-reEated costs primarily associated with general integration activities. The charges
were offset by the reversal of a previously established liability of $2.5 in unused severance and $0.4 in unused facility-related
costs.
During 2023, the Company recorded net restructuring charges of $49.1. The charges were comprised of $33.4 in severance
and other personnel costs and $22.3 in facility-related costs primarily associated with general integration activities. The charges
were offset by the reversal of a previously established liability of $1.7 in unused severance and $4.9 in unused facility-related
costs.
During 2022, the Company recorded net restructuring charges of $54.0. The charges were comprised of $24.8 in severance
and other personnel costs and $31.1 in facility-related costs primarily associated with general integration activities. The charges
were offset by the reversal of a previously established liability of $1.4 in unused severance and $0.5 in unused facility-related
costs.
F-22
LABCORP HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in millions, except per share data)
The following represents the Company's restructuring activities:
Severance and Other
Lease and Other
Employee Costs
Facility Costs
Total
Liability balance at December 31, 2022
$
2.1
$
9.4
$
11.5
Restructuring charges
33.4
22.3
55.7
Reduction of prior restructuring accruals
(1. 7)
(4.9)
(6.6)
Cash payments and other adjustments
(26.2)
(13.8)
(40.0)
Liability balance at December 31, 2023
7.6
13.0
20.6
Restructuring charges
43.0
5.9
48.9
Reduction of prior restructuring accruals
(2.5)
(0.4)
(2.9)
Cash payments and other adjustments
(39.7)
(5.6)
(45.3)
Liability balance at December 31, 2024
$
8.4
$
12.9
$
21.3
Liability balance classified as current
$
10.9
Liability balance classified as non-current
10.4
Total liability balance as of December 31,2024
$
21.3
The non-current portion of the restructuring liability balance is expected to be paid out over 8.7 years.
6. LEASES
The Company has operating and finance leases for patient service centers, laboratories and testing facilities, clinical
facilities, general office spaces, vehicles, and office and laboratory equipment. Leases have remaining lease terms of less than a
year to 20 years, some of which include options to extend the leases for up to 20 years.
The components of lease expense were as follows:
Operating lease cost
Finance lease cost:
Amortization of right-of-use assets
Interest on lease liabilities
Total finance lease cost
Supplemental cash flow information related to leases was as follows:
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows used from operating leases
Operating cash flows used from finance leases
Financing cash flows used from finance leases
ROU assets obtained in exchange for lease obligations:
Operating leases
Finance leases
F-23
$
$
~
$
$
$
$
$
Year Ended Decemlber 31,
2024
2023
2022
220.9 $
202.6 $
198.1
7.5
$
7.1
$
8.0
4.4
4.8
5.2
II.~
~
II.~
~
13.2
Year Ended December 31,
2024
2023
2022
(229.7) $
(209.7) $
(200.2)
(4.4) $
(4.8) $
(5.2)
(11.9) $
(12.6) $
(12.3)
226.8 $
106.4
$
159.2
23.9 $
2.3
$
LABCORP HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in millions, except per share data)
Supplemental balance sheet infonnation related to leases was as follows:
Operating Leases:
Operating lease ROU assets (included in Property, plant and equipment, net)
Short-term operating lease liabilities
Operating lease liabilities
Total operating lease liabilities
Finance Leases:
Finance lease ROU assets (included in Other assets)
Short-term finance lease liabilities
Financing lease liabilities
Total finance lease liabilities
Weighted-average Remaining Lease Term (in Years):
Operating leases
Finance leases
Weighted-average Discount Rate:
Operating leases
Finance leases
Maturities of lease liabilities are as follows:
2025
2026
2027
2028
2029
Thereafter
Total lease payments
Less imputed interest
Less current portion
Total maturities, due beyond one year
December 31,
2024
2023
$
784.5
$
737.1
$
184.6
$
165.8
676.3
648.9
$
860.9
$
814.7
$
64.1
$
69.5
$
6.1
$
6.4
74.3
78.6
$
80.4
$
85.0
8.2
8.4
14.1
14.7
4.4%
4.1%
5.2%
5.3%
December 31, 2024
Operating Leases
Finance Leases
$
216.5
$
9.9
$
167.7
124.0
94.1
73.0
8.9
8.6
8.0
7.6
351.4
70.6
1,026.7
113.6
(165.8)
(33.2)
(184.6)
(6.1)
676.3 =$=====74=.3=
The Company elected, for all classes of underlying assets, to account for lease components and non-lease components as a
single lease component.
Rent expense for short term leases with a term less than one year for the years ended December 31, 2024, 2023, and 2022
amounted to $31.1, $31.9, $22.2, respectively. The Company has variable lease payments that do not depend on a rate index,
primarily for purchase volume commitments, wlhich are recorded as variable cost when incurred. Total variable payments for
the year ended December 31,2024, 2023, and 2022 were $32.4, $32.7, and. $27.9, respectively.
F-24
LABCORP HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in millions, except per share data)
7. PROPERTY, PLANT ANID EQUIPMENT, NET
Range of Useful
Lives (in Years)
Land
$
Buildings and building improvements
10
55
Machinery and equipment
3
10
Software
3
10
Furniture and fixtures
5
10
Leasehold im]provements 1
Construction :in progress
Operating lease ROU assets
Less accumulated depreciation
$
December 31,
2024
112.3
1,098.4
2,108.2
1,023.1
105.9
550.6
333.4
784.5
6,116.4
(3,071.0)
3!045.4
2023
$
98.8
1,083.8
2,008.0
924.7
106.5
515.8
342.2
737.1
5,816.9
(2,905.1)
$
2,911.8
1 Leasehold improvements are amortized over the shorter of their estimated useful lives or the term of the related leases.
Depreciation expense and amortization of Property, plant and equipment was $387.1, $361.1 and $343.6 for 2024, 2023 and
2022, respectively, including software amortization of$87.6, $76.6, and $75.7 for 2024, 2023 and 2022, respectively.
8. GOODWILL AND INTANGIBLE ASSETS
The changes in the carrying amount of Goodwill, net of impairment, were as follows:
Beginning balance
Goodwill acquired during the year
Impairment
Foreign currency impact and other
adjustments to goodwill
Ending balance
$
$
Dx
!December
31,2024
4,813.9
$
299.9
(11.3)
5,102.5
$
BLS
December
December
31,2023
31, 2024
4,533.5
$
1,328.6 $
296.9
~16.5)
~61.4)
4,813.9 $
1,267.2
$
Total
December
December
December
31,2023
31,2024
31,2023
1,590.2 $ 6,142.5
$ 6,123.7
299.9
296.9
(333.6)
(333.6)
72.0
(72.7)
55.5
1,328.6 $ 6,369.7
$ 6,142.5
During 2024, the Company did not record a goodwill or intangible asset impairment charge. During 2023, the Company
recorded goodwill and other asset impairment charges of $349.0 which was primarily comprised of $333.6 of goodwill
impairment for the ED reporting unit. During 2022, the Company recorded goodwill and other asset impairment charges of
$261.7 which was primarily comprised of goodwill impairment for the ED reporting unit and the impairment of a technology
intangible asset.
The cumulative goodwill impainnent for the Company through December 31, 2024, and 2023 was $648.5 and relates
entirely to the ED reporting unit, which has no remaining goodwill balance, of the BLS segment.
The components of identifiable intangible assets are as follows:
Range of
December 31, 2024
December 31,2023
Useful
Gross
Net
Gross
Net
Lives
Carrying Accumulated Carrying
Carrying
Accumulated
Carrying
(in Years)
Amount
Amortization
Amount
Amount
Amortization
Amount
Customer relationships
10 - 36 $ 4,114.7 $
(1,540.7) $2,574.0 $ 3,868.6 $
{1,367.2) $ 2,501.4
Patents, licenses, and technology 1
3 - 15
646.9
(298.3)
348.6
526.6
(273.3)
253.3
Non-compete agreements
3 - 5
180.2
(83.9)
96.3
130.3
(60.4)
69.9
Other defrnite-lived intangible assets
- 15
39.9
(21.5)
18.4
34.1
(15.5)
18.6
Canadian licenses
451.6
451.6
498.8
498.8
$ 5!433.3 $
{1 1944.42 $31488.9 $ 51058.4 $
{1!716.42 $ 3z342.0
Includes $105.9 and $87.5 of indefinite-lived intangible assets at December 31, 2024, and 2023, respectively.
F-25
LABCORP HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in millions, except per share data)
A summary of intangible assets acquired during 2024, and their respective weighted-average amortization periods are as
follows:
Customer relationships
Non-compete agreements
Trade name
Technology
Amount
$
309.6
55.5
5.8
107.0
$
477.3
Weighted-average
Amortization Period
14.4
5.0
2.0
11.0
Amortization of intangible assets was $256.4, $219.8 and $193.6 in 2024, 2023, and 2022, respectively. Amortization
expense of intangible assets is estimated to be $271.6 in 2025, $261.2 in 2026, $248.3 in 2027, $240.6 in 2028,$226.9 in 2029,
and $1,682.8 thereafter.
9. ACCRUED EXPENSES AND OTHER
December 31,
2024
2023
Employee compensation and benefits
$
495.4 $
431.4
Accrued taxes payable
152.7
127.5
Other
223.1
245.1
$
871.2
$
804.0
10. OTHER LIABILITIES
2024
December 31,
2023
Deferred compensation plan obligation
$
132.5
$
107.4
Defined-benefit plan obligation
59.5
64.5
Worker's compensation and auto
46.5
41.4
Cross currency swaps liability
142.7
53.7
Other
136.2
142.3
$
517.4
$
409.3
11. DEBT
Short-term borrowings and current portion of long-term debt consisted of the following:
2024
December 31,
2o23
3.60% senior notes due 2025
$
1,000.0 $
2.30% senior notes due 2024
400.0
3.25% senior note due 2024
600.0
Debt issuance costs
(0.1)
(1.3)
Current portion of note payable
0.4
l.l
Total short-term borrowings and current portion of long-term debt
$
1,000.3 $
999.8
F-26
LABCORP HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in millions, except per share data)
Long-term debt consisted of the following:
3.60% senior notes due 2025
1.55% senior notes due 2026
3.60% senior notes due 2027
2.95% senior notes due 2029
4.35% senior notes due 2030
2. 70% senior notes due 203 1
4.55% senior notes due 2032
4.80% senior notes due 2034
4.70% senior notes due 2045
Debt issuance costs
ARFacility
Note payable
2024
$
December 31,
$
500.0
600.0
650.0
650.0
423.2
500.0
850.0
900.0
(42.3)
300.0
0.3
Total long-term debt
$
5,331.2
$
Credit Facilities
2023
1,000.0
500.0
600.0
650.0
430.4
900.0
(26.3)
0.6
4,054.7
The Company maintains a senior revolving credit facility, which was amended and restated on January 13, 2023. It consists
of a five-year revolving facility in the principal amount of up to $1 ,000.0, with the option of increasing the facility by up to an
additional $500.0, subject to the agreement of one or more new or existing lenders to provide such additional amounts and
certain other customary conditions. 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. There were no balances outstanding on the Company's current revolving credit facility at December 31, 2024, or
December 31, 2023. At December 31, 2024, the effective interest rate on the revolving credit facility was 5.47%. The credit
facility expires on April 30, 2026.
Under the Company's revolving credit facility, the Company is subject to negative covenants limiting subsidiary
indebtedness and certain other covenants typical for investment grade-rated borrowers and the Company is required to maintain
certain leverage ratios. The Company was in compliance with all covenants in its term loans and the revolving credit facility at
December 31, 2024, and expects that it will remain in compliance with its existing debt covenants for the next twelve months.
There were $102.7 in outstanding letters of credit at December 31, 2024.
On August 23, 2024, the Company and a bankruptcy-remote special purpose vehicle (SPY) entered into an accounts
receivable securitization facility with PNC Bank, National Association (PNC) with a three-year term (AR Facility). 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 SPY is a variable interest entity for which the Company is the primary beneficiary. The SPY'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 SPY
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 SPY, 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 SPY.
During the year ended December 31, 2024, the Company received loan proceeds of $300.0 under the AR Facility, which is
included in financing activities in the Consolidated Statements of Cash Flows.
On January 31, 2025, the Company amended its AR Facility (AR Facility Amendment). The AR Facility Amendment
increased the .amount the Company can borrow from $300.0 to $700.0 through August of 2027. In addition, pursuant to the
terms of the AR Facility Amendment (i) the Toronto-Dominion Bank became a party to the underlying receivables purchase
agreement as a committed purchaser through January 2026. and (ii) MUFG Bank Ltd. and certain of its related conduit
purchasers became parties to the underlying receivables purchase agreement as purchasers and the loans or investments of such
F-27
LABCORP HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in millions, except per share data)
conduit purchasers may accrue interest as specified in the AR Facility Amendment and receivables purchase agreement.
On February 18, 2025, the Company borrowed an additional $225.0 under the AR Facility Amendment, bringing the amount
outstanding under the A.R facility Amendment to $525.0.
Senior Notes
On September 23, 2024, LCAH (the Issuer) entered into a base indenture with U.S. Bank Trust Company, National
Association, as trustee (the Trustee) (the 2024 Indenture). On September 23, 2024, the Company, the Issuer and the Trustee
entered into supplemental indentures to the 2024 Indenture under which the Issuer issued, and the Company guaranteed,
$2,000.0 in debt securities, consisting of $650.0 aggregate principal amount of 4.35% senior notes due 2030, $500.0 aggregate
principal amount of 4.55% senior notes due 2032, and $850.0 aggregate principal amount of 4.80% senior notes due 2034 with
interest payable semi-annually on April I and October 1 of each year, commencing April 1, 2025. Net proceeds from the
offering were $1,983.0 after deducting underwrEting discounts and other estimated expenses of the offering. The net proceeds
were used to redeem or repay indebtedness and, to the extent not used for such purpose, for other general corporate purposes.
Indebtedness redeemed or repaid or to be redeemed or repaid at or prior to maturity were the Company's 2.30% senior notes
due December 2024, its 3.60% senior notes due February 2025, and $500.0 of borrowings under its revolving credit facility.
Scheduled payments of long-term debt are as follows:
2025
2026
2027
2028
2029
Thereafter
Total scheduled payments
Less current portion
Long-term debt, due beyond one year
12. PREFERRED STOCK AND COMMON SHAREHOLDERS' EQUITY
December 31, 2024
$
1,000.4
500.0
900.0
650.0
3,323.5
6,373.9
(1,000.4)
$
5 373.5
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 at
December 31, 2024, and 2023.
The changes in the Company's shares of Common Stock issued and held in treasury are summarized below:
Beginning balance
Shares issued under employee stock plans
Shares repurchased
Ending balance
Share Repurchase Program
Year Ended December 31,
2024
2023
2022
83.9
88.2
93.1
0.6
0.5
0.7
---:?-(=-
1.+1)
(4.8)
(5.6)
===83==.4=
83.9
88.2
On July 24, 2024, the Company's board of directors (Board) adopted a new share repurchase plan authorizing the
repurchase of up to $1,000.0 maximum value of the Company's shares in addition to the remaining amount outstanding under
the previous plan. During the twelve months ended December 31, 2024, the Company purchased 1.1 shares of its Common
Stock at an average price of $219.57 for a total cost of $250.1. At December 31, 2024, the Company had outstanding
authorization from its Board to iiJUrchase up to $1,280.4 maximum value of the Company's Common Stock.
On August 8, 2023, the Company entered into accelerated share repurchase agreements (collectively, the ASR Agreements)
with two different banks, Goldman Sachs & Co. LLC and Morgan Stanley & Co. LLC (collectively, the Financial Institutions),
to repurchase approximately $1,000.0 in the aggregate of the Company's Common Stock, as part of the Company's Common
Stock repurchase program. The remaining repurchase authorization has no expiration date.
Under the ASR Agreements, the Company made an aggregate payment of$1,000.0 to the Financial Institutions and received
an aggregate initial number of approximately 3.7 shares of Common Stock from the Financial institutions, which were removed
F-28
LABCORP HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in millions, except per share data)
from the outstanding share count in connection with entering into the ASR Agreements .. In December 2023, the Company
received 1.1 shares of its Common Stock as a final settlement from the Financial Institutions. The average daily volume
weighted-average price less discount per share was $206.85. The Company has accrued $9.0 of excise tax related to this
accelerated share repurchase which was paid in April 2024. During the year ended December 31, 2023, the Company
repurchased 4.8 shares of Common Stock at an average price of $206.85 per share for a total cost of $1 ,000.0.
During the fourth quarter of 2021, the Company's Board adopted a share repurchase plan authorizing up to $2,500.0 of the
Company's shares in addition to the remaining amount outstanding under the previous plan.
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 in the Company's Consolidated Balance
Sheets.
Dividends
The Company started declaring quarterly cash dividends in the second quarter of 2022, with a total of $2.88 per share
declared in 2024 and 2023 and $2.16 per share declared in 2022.
On January 8, 2025, the Company announced a cash dividend of $0.72 per share of Common Stock for the first quarter of
2025, or approximately $61.0 in the aggregate. The dividend will be payable on March 12,2025, to stockholders of record of all
issued and outstanding shares of Common Stock at the close of business on February 27, 2025. The declaration and payment of
any future dividends will be at the discretion of the Company's Board.
Accumulated Other Comprehensive Earnings
The components of Accumulated other comprehensive earnings are as follows:
Balance at December 31, 2022
Fortrea Holdings Inc. spin-off
Current year adjustments
Pension settlement charge
Amounts reclassified from Accumulated other comprehensive earnings (a)
Tax effect of adjustments
Balance at December 31, 2023
Current year adjustments
Amounts reclassified from Accumulated other comprehensive earnings (a)
Tax effect of adjustments
Balance at December 31, 2024
Foreign
Currency
Translation
Adjustments
$
(462.3)
231.6
183.1
$
(47.6)
(217.1)
$
~264.72
Net
Accumulated
Benefit
Other
Plan
Comprehensive
Adjustments
Earnin~s
$
(30.9) $
(493.2)
6.4
238.0
30.1
213.2
(I 0.9)
(10.9)
(4.6)
(4.6)
(1.8)
(I .8)
$
(11.7) $
(59.3)
(2.6)
(219.7)
23.3
23.3
(5.9)
(5.9)
$
3.1
$
~261.62
(a) The amortization of prior service cost is included in the computation of net periodic benefit cost.
13. INCOME TAXES
The sources of income before taxes, classified between domestic and foreign entities, are as follows:
Year Ended December 31,
2624
2623
2622
Domestic
$
629.7 $
504.0 $
1,097.9
329.8
64.9
139.5
-:;:--=~
$
959.5
$
568.9 $
1,237.4
Foreign
Total pre-tax income
F-29
LABCORP HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in millions, except per share data)
The components of income tax expense attributable to continuing operations are as follows:
Current tax expense:
Federal
State
Foreign
Deferred tax (benefit) expense:
Federal
State
Foreign
Total income tax expense
$
$
$
Year Ended December 31,
2024
2023
2022
125.9
$
46.2
60.4
232.5
$
183.1
$
38.9
44.6
266.6
$
150.8
25.4
34.0
210.2
-----
(6.3) $
(63.1) $
15.8
(11.1)
(31.6)
0.6
(2.7)
16.6
7.3
--(~20~. *1) -=------:(:..::-78~. -='-
1) -=--~=
23~. 7~
$
212.4
$
188.5 =$==2=33=.9=
The effective tax rates on earnings before income taxes are reconciled to statutory U.S. income tax rates as follows:
Statutory U.S. rate
State and local income taxes, net of U.S. federal income tax effect
Foreign earnings taxed at lower rates than the statutory U.S. rate
Tax credits
Impairment of assets
Limitation of officer compensation
Worthless stock loss
Deferred tax adjustments
Remeasurement of deferred taxes
Change in valuation allowance
Other
Effective rate
Year E nded December 31,
2024
2023
2022
21.0%
21.0%
21.0%
2.8
4.0
4.2
(1.7)
(2.2)
(0.7)
(2.5)
(3.8)
(5.4)
10.8
3.7
0.7
1.7
1.2
(2.6)
0.9
4.6
(2.6)
1.3
(1.1)
(0.1)
(2.4)
(1.6)
0.2
2.0
2.3
(2.6)
22.1%
33.1%
18.9%
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax
liabilities are as follows:
Deferred tax assets:
Accounts receivable
Employee compensation and benefits
Operating lease liability
Acquisition and restructuring reserves
Capitalized research and design costs
Tax loss carryforwards
Other
Total gross deferred tax assets
Less: valuation allowance
Deferred tax assets, net of valuation allowance
Deferred tax liabilities:
Right of use asset
Intangible assets
Property, plant and equipment
Other
Total gross deferred tax liabilities
Net deferred tax liabilities
$
$
$
$
$
F-30
December 31,
2024
2023
33.7
$
27.9
70.8
81.7
199.3
191.4
8.9
9.2
194.7
142.9
224.0
246.9
108.6
95.1
840.0
795.1
(127.2)
(150.2)
712.8
$
644.9
(181.6) $
(175.3)
(626.7)
(614.8)
(177.7)
(163.5)
(71.7)
(66.2)
{1,057.72 $
{1,019.82
{344.9) $
{374.92
LABCORP HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in millions, except per share data)
The table below provides a rollforward of the valuation allowance:
Year Ended December 31,
2024
2023
2022
Beginning balance
$
150.2 $
151.3 $
149.2
Movements charged to expense
(22.8)
(8.9)
10.2
Reductions and other adjustments
(0.2)
7.8
(8.1)
Ending balance
$
127.2
$
150.2
$
151.3
The Company has U.S. federal tax loss carryforwards of approximately $103.0, which expire periodically through 2037, as
well as post-20 17 carryforwards of $162.5 that are limited to 80% of taxable income and have an indefinite carryforward
period. The utilization of tax loss carryforwards is limited due to change of ownership rules; however, at this time, the
Company expects to fully utilize substantially all U.S. federal tax loss carryforwards with the exception of approximately $1.9
for which a full valuation allowance has been provided. The Company has U.S. state tax loss carryforwards of$492.6, a portion
of which expire annually, and on which a valuation allowance of$210.4 has been provided. In addition to federal and state tax
loss carryforwards, the Company has other federal and state attribute carryforwards of $29.1, all of which have indefinite
carryforward periods. The Company has foreign tax loss carryforwards of $108.5, the majority of which have indefinite
carryforward periods, but a valuation allowance of $7.8 has been provided for jurisdictions where the future tax benefits of the
attributes are not more likely than not to be realized. Additionally, the Company has foreign tax loss carryforwards of $444.7
which expire periodically through 2040 that have full valuation allowances and foreign tax loss carryforwards of $10.9 which
expire periodically through 2043. In addition to the foreign net operating losses, the Company has a foreign capital loss
carryforward of $26.9 with an indefinite carryforward period and a full valuation allowance.
The valuation allowance decreased from $150.2 in 2023 to $127.2 in 2024 primarily due to releases of valuation allowances
on certain state capital losses and net operating losses as well as releases of valuation allowances on certain foreign and U.S. net
operating losses due to corporate reorganizations.
Unrecognized income tax benefits were $32.2 and $29.9 at December 31, 2024, and 2023, respectively. U is anticipated that
the amount of the unrecognized income tax benefits will decrease by $10.4 within the next 12 months due to statute of
limitation lapses and the conclrusion of various examinations; however, these changes are not expected to have a significant
impact on the results of operations, cash flows, or the fmancial position of the Company.
The Company recognizes interest and penalties related to unrecognized income tax benefits in Provision for income taxes in
the Consolidated Statements of Operations. Accrued interest and penalties related to uncertain tax positions totaled $0.2 and
$0.1 at December 31, 2024, and 2023, respectively. During the years ended December 31, 2024, 2023, and 2022, the Company
recognized $0.1, $0.0 and $0.8, respectively, in interest and penalties expense, which was offset by a benefit from reversing
previous accruals for interest and penalties of $0.0, $1.8 and $0.0, respectively.
The following table shows a reconciliation of the unrecognized income tax benefits, excluding interest and penalties, from
uncertain tax positions:
Beginning balance
Increase in reserve for tax positions taken in the current year
Increase in reserve for tax positions taken in a prior period
Decrease in reserve for tax positions taken in a prior period
Decrease in reserve as a result of settlements
Decrease in reserve as a result of lapses in the statute of limitations
Ending balance
Year Ended December 31,
2024
2o23
2022
$
29.9 $
37.5 $
39.6
2.2
1.8
1.8
3.8
10.4
10.6
(3.4)
(4.0)
(0.1)
(7.2)
(10.4)
...,....--~(.,....
0.2~
)
(8.6)
(4.1)
$
32.2
$
29.9
$
37.5
At December 31,2024,2023, and 2022, there are $32.2,$29.9 and $37.5, respectively, of tax benefits that, if recognized,
would favorably impact the effective income tax rate.
The Company has substantially concluded all U.S. federal income tax matters for years through 2018 and is currently under
Internal Revenue Service examination for tax years 2019 through 2022. Substantially all material state and local and foreign
income tax matters have been concluded through 2017 and 2018, respectively. The Company has various state and foreign
income tax examinations ongoing throughout the year. The Company believes adequate provisions have been recorded related
to all open tax years.
F-31
LABCORP HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in millions, except per share data)
As a result of the Tax Cuts and Jobs Act (TCJA), the Company was effectively taxed on all of its previously unremitted
foreign earnings. The TCJA also enacts a territorial tax system that allows, for the most part, tax-free repatriation of foreign
earnings. The Company still considers the earnings of its foreign subsidiaries to be permanently reinvested, but, if repatriation
were to occur, the Company would be required to accrue U.S. taxes, if any, and remit applicable withholding taxes as
appropriate. The Company has unremitted earnings and profits of $828.7 and $607.6 that are permanently reinvested in its
foreign subsidiaries at December 31, 2024, and 2023, respectively. A deterrnination of the amount of the unrecognized deferred
tax liability related to these undistributed earnings is not practicable due to the complexity and variety of asswmptions necessary
based on the manner in which the undistributed earnings would be repatriated.
Pillar Two legislation arising from the Organisation for Economic Co-operation and Development's base erosion and profit
shifting initiative has been enacted or substantively enacted in certain jurisdictions in which the Company operates. The
legislation was effective for the Company's financial year beginning January l, 2024. The Company is in scope of the enacted
or substantively enacted legislation and has performed an assessment of the Company's potential exposure to Pillar Two
income taxes.
The assessment of the potential exposure to Pillar Two income taxes is based on the most recent tax filings, country-by-
country reporting, and fmancial statements for the constituent entities in the Company. Based on the assessment, the Pillar Two
effective tax rates in most of the jurisdictions in which the Company operates are above 15%. However, there are a limited
number of jurisdictions where the transitional safe harbor relief does not apply, and the Pillar Two effective tax rate is close to
15%. Accordingly, the Company has provisioned for $2.7 of incremental income tax expense attributable to Pillar Two.
14. STOCK COMPENSATION PLANS
Stock Incentive Plans
In 2016, the shareholders approved the Labcorp Holdings Inc. 2016 Omnibus Incentive Plan (the Plan). Under the Plan, at
December 31, 2024, there are 9.0 shares authorized for issuance and 2.8 shares available for grant.
Stock Options
Tbe following table summarizes grants of non-qualified options made by the Company to officers, key employees, and non-
employee directors under all plans. Stock options are typically granted at an exercise pri·ce equal to or greater than the fajr
market price per share on the date of grant, vest ratably over a period of three years on the anniversaries of the grant date, and
have a contractual exercise period of I 0 years subject to their earlier expiration or terrnination.
Changes in options outstanding were as follows:
Weighted-Average
Weighted-Average
Remaining
Aggregate
Number of
Exercise Price
Contractual Term
Intrinsic
Options
per O~tion
(in Years)
Value
Outstanding at December 31, 2023
6.6 $
174.45
Granted
0.1
$
223.94
Exercised
(0.1) $
182.68
Canceled
$
230.58
Outstanding at December 31, 2024
0.6
$
180.29
5.6
$
32.1
Exercisable at December 31, 2024
0.5
$
165.99
4.7
$
31.2
Cash received by the Company from option exercises, the actual tax benefit realized for the tax deductions and the
aggregate intrinsic value of options exercised from option exercises under all share-based payment arrangements were as
follows:
Cash received by the Company
Tax benefits realized
Aggregate intrinsic value
F-32
Year Ended December 31;
2024
2023
2022
$
6.5 $
2.9 $
7.1
$
1.6 $
0.7 $
1.8
$
1.6
$
0.7 $
8.2
LABCORP HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in millions, except per share data)
The following table shows the weighted-average grant-date fair values of options issued during the respective year and the
weighted-average assumptions that the Company used to develop the fair value estimates:
Fair value per option
Weighted-average expected life (in years)
Risk free interest rate
Expected volatility
Expected dividend yield
$
Year Ended December 31,
2024
2023
2022
73.08
$
72.27
$
68.35
6.0
4.1%
30.0%
1.3%
6.0
3.4%
29.8%
1.4%
6.0
2.0%
28.6%
0.9%
The Black-Scholes model incorporates assumptions to value stock-based awards. The risk-free interest rate for periods
within the contractual life of the option is based on a zero-coupon U.S. government instrument over the contractual term of the
equity instrument. Expected volatility of the Company's stock is based on historical volatility of the Company's stock. The
Company estimates expected option terms through an analysis of actual, historical post-vesting exercise, cancellation and
expiration behavior by employees and projected post-vesting activity of outstanding options. Groups of employees and non-
employee directors that have similar exercise behavior with regard to option exercise timing and forfeiture rates are considered
separately for valuation purposes. For 2024, 2023 and 2022, expense related to the Company's stock option plan totaled $5.2,
$3.8, and $4.3, respectively, and is included in Selling, general and administrative expenses in the Consolidated Statements of
Operations.
Restricted Stock, Restricted Stock Units and Performance Shares
The Company grants restricted stock, restricted stock units, and performance shares (non-vested shares) to officers and key
employees and grants restricted stock and restricted stock units to non-employee directors. Restricted stock and units typically
vest annually in equal one-third increments beginning on the first anniversary of the grant. A performance share grant in 2022
represents a three-year award opportunity for the period 2022-2024, and if earned, vests fully (to the extent earned) in the first
quarter of2025. A performance share grant in 2023 represents a three-year award opportunity for the period of2023-2025 and,
if earned, vests fully (to the extent earned) in the first quarter of 2026. A performance share grant in 2024 represents a three-
year award opportunity for the period of 2024-2026 and, if earned, vests fully (to the extent earned) in the first quarter of 2027.
Performance share awards are subject to certain earnings per share, revenue, and total shareholder return targets, the
achievement of which may increase or decrease the number of shares which the grantee earns and therefore receives upon
vesting. Unearned restricted stock and performance share compensation is amortized to expense, when probable, over the
applicable vesting periods. For 2024, 2023, and 2022, total restricted stock, restricted stock unit, and performance share
compensation expense was $96.6, $111.1, and $97.7, respectively.
The following table shows a sununary of non-vested shares for the year ended December 31,2024:
Beginning balance
Granted
Vested
Canceled
Ending balance
Unrecognized Compensation Cost
Number of
Shares
1.0
0.5
(0.5)
(0.1)
0.9
Weighted-Average
Grant Date Fair Value
$
248.41
$
224.23
$
264.80
$
222.52
$
226.44
At December 31, 2024, there was $100.6 of total unrecognized compensation cost related to non-vested stock options,
restricted stock, restricted stock unit and performance share-based compensation arrangements granted under the Company's
stock incentive plans. That cost is expected to be recognized over a weighted-average period of 1.7 years and will be included
in Cost of revenues and Selling, general and administrative expenses in the Consolidated Statements of Operations.
Employee Stock Purchase Plan
Under the 2016 Employee Stock Purchase Plan, the Company is authorized to issue 1.8 shares of Common Stock. The plan
permits substantially all U.S., Canada, and United Kingdom employees to purchase a limited number of shares of Company
stock at 85% of market value. The Company issues Common Stock to participating employees semi-annually in January and
July of each year, although due to the spin-off of Fortrea shares for the first offering period were issued in May of 2023.
F-33
LABCORP HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in millions, except per share data)
Approximately 0.3, 0.3, and 0.2 shares were purchased by eligible employees in 2024, 2023, and 2022, respectively. For 2024,
2023, and 2022, expense related to the Company's employee stock purchase plan was $14.9, $13.8, and $14.8, respectively.
The Company uses the Black-Scholes model to calculate the fair value of the employee's purchase right. The fair value of
the employee's purchase right and the assumptions used in its calculation are as follows:
Fair value of the employee's purchase right
Valuation assumptions
Risk free interest rate
Expected volatility
Expected dividend yield
15. COMMITMENTS AND CONTINGENCIES
$
Year Ended December 31,
2024
2023
2022
47.56
$
49.19
$
62.50
5.0%
27.9%
1.3%
5.0%
30.0%
1.4%
1.3%
30.0%
0.9%
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 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 healtbcare 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
Financial Accounting Standards Board (F ASB) Accounting Standards Codification Topic 450 "Contingencies," the Company
establishes reserves for judicial, regulatory, and arbitration matters outside the aggregate legal reserve if and when those matters
present loss contingencies that are both probable and 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 r,esolved, 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 bas 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
F-34
LABCORP HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in millions, except per share data)
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 Aprill4, 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 I, 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. On
December 31, 2024, the Texas Court of Appeals issued a decision reversing the District Court's order granting the Company's
Motion for Partial Summary Judgement. 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. On or about October 31,
2024, Labcorp and the Plaintiff (on behalf of the putative class) entered into a Settlement Agreement. That settlement is
awaiting preliminary approval by the court.
On December 29, 2021, the Company was served with a putative class action lawsuit, Nathaniel J. Nolan, et a!. v.
Laboratory Corporation of America Holdings, filed in the U.S. District Court for the Mid!dle 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 tmder 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. In October 2024, the claims were resolved pursuant to a settlement.
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
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 individua[s 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
F-35
LABCORP HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in millions, except per share data)
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 agaLnst 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 consoRidated 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. On November I, 2024, Plaintiffs served their motion for class certification. The Company will
vigorously defend the remaining claims in the multi-district litigation.
The Company was served with a sharehold·er 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 Dismis~. 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, eta/. v.
Laboratory Corporation of America Holdings, flied 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 April26, 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 Bane with
the Ninth Circuit. On April l8, 2024, the Ninth Circuit denied the Petition for Rehearing En Bane. On September 13, 2024, the
Company filed a petition for Writ of Certiorari with the United States Supreme Court. On January 24, 2025, the United States
Supreme Court granted the Company's Petition for Writ of Certiorari limited to the following question: Whether a federal court
may certify a class action pursuant to Federal Rule of Civil Procedure 23(b )(3) when some members of the proposed class lack
any Article Ill injury. 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 ofTexas, alleging infringement of two Ravgen-owned U.S. patents.
The lawsuit sought 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 sole asserted patent finding that the
Company wiHfully infringed Ravgen's patent, and awarded damages of $272.0. Plaintiff file.d post-trial motions seeking
enhanced damages of up to $817.0 based on the finding ofwillfulness, as well as attorney's fees and costs. On May 12, 2023,
F-36
LABCORP HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in millions, except per share data)
the court issued an order granting Plaintiffs motion in part and awarding enhanced damages of $100.0. On January 23, 2025,
the court issued an order awarding Plaintiff post-verdict supplemental damages of $2.6, an ongoing royalty of one hundred
dollars and 00/100 cents per test through the life of the patent at issue, pre- and post-judgment interest, and other relief. In
January and February 2025, the trial court entered orders denying the Company's post-trial motions. 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 that decision was upheld on appeal before the
United States Court of Appeals for the Federal Circuit in January 2025.
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 11 pending resolution of Bermejo 1. 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' t;ettlement 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 fmal settlement approval from the court.
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 sought 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. The parties entered into a
settlement agreement in January 2025 and will seek dismissal of the action.
On June 7, 2023, the Company was served with a putative class action lawsuit, Connie Howard, Yadira Yazmin Hernandez,
and Deborah Reynolds, et a!. 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 II, 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 I4, 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 has responded
to this request.
F-37
LABCORP HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in millions, except per share data)
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 protected 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 I I, 2024, the court granted the Motion to Compel Arbitration and Stay
Proceedings. In December 2024, the claims were resolved pursuant to a settlement.
There are various other pending legal proceedings involving the Company including, but not limited to, additional
employment-related lawsuits, professional liabiEity 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 pmtion 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.
16. PENSION AND POSTRETIREMENT PLANS
Defined Contribution Retirement Plans
The Company has various U.S. defmed contribution retirement plans (401K Plans). Under these 401K Plans, employees
can contribute a portion of their salary to the plan and the Company makes minimum non-elective contributions, discretionary
contributions, and matching contributions, depending on the terms of the specific plan. On January I, 2021, all of the 401K
Plans were modified to provide for 100% match of employee contributions up to 5% of their salary. Total expense relating to
the 401K Plans for the years ended December 31, 2024, 2023, and 2022 was $153.5, $167.6, and $128.2, respectively.
Defined Benefit Pension Plans
The Company sponsors both funded and unfunded defined benefit pension plans which provide benefits based on various
criteria such as years of service and salary. The Company maintained two plans in the United States, two plans in the United
Kingdom and one in Germany.
The two plans in the United States (U.S. Plans) were closed to new entrants and the accrual of service credits at the end of
2009. The United Kingdom (UK) pension plan was closed to new entrants and the accrual of service credits for one plan as of
December 31, 2002, and the accrual of service credits for the other plan as of December 31, 2019. The German plan was closed
to new entrants on December 31, 2009, but participants continue to accrue service crediJts. The UK and German plans are
aggregated for disclosure as the Non-U.S. Plans.
F-38
Net Periodic Benefit Costs
LABCORP HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in millions, except per share data)
The components of the net periodic benefit costs for the defined benefit pension plans are as follows:
U.S. Plans
Non-U.S. Plans
Year Ended December 31,
2024
2023
2022
2024
2023
Service cost for benefit5 earned
$
3.7
$
3.9
$
2.8 $
1.5
$
1.4
Interest cost on benefit obligation
11.1
12.3
9.1
14.7
15.2
Expected return on plan assets
( 11.0)
( 11.6)
(12.9)
(16.0)
(16.7)
Net amortization and deferral
3.3
4.5
4.6
0.5
0.1
Settlements
10.9
4.1
Defined-benefit plan costs
$
7.1
$
20.0
$
7.7 $
0.7
$
2022
$
2.4
9.1
(15.8)
0.8
(1.1)
$
(4.62
Service costs are the only component of net periodic benefit costs recorded within Operating income in the Company's
Consolidated Statements of Operations. For the year ended December 31, 2023, the Company recognized a partial plan
settlement charge of$10.9 as a component ofOtlher, net in the Company's Consolidated Statements of Operations.
The amounts recognized in Accumulated other comprehensive loss in the Company's Consolidated Balance Sheets are as
follows:
U.S. Plans
Non-U.S. Plans
December 31,
2024
2023
2024
2023
Net actuarial loss in accumulated other comprehensive earnings $
30.7
$
47.2 $
12.8 $
19.1
Change in Projected Benefit Obligation
The change in the projected benefit obligation is as follows:
U.S. Plans
Non-U.S. Plans
Year E nded December 31,
2024
2023
2024
2023
Beginning balance
$
231.9 $
259.5 $
345.7 $
319.9
Service cost
3.7
3.9
1.5
1.4
Interest cost
11.1
12.3
14.7
15.2
Actuarial (gain) loss
(10.6)
11.7
(43.1)
7.0
Benefits and administrative expenses paid
(22.7)
(55.5)
(14.4)
(14.2)
Foreign currency exchange rate changes
(6.4)
16.4
Ending balance
$
213.4 $
231.9 $
298.0 $
345.7
The accumulated benefit obligation at December 31, 2024, and 2023 was $213.4 and $231.9, respectively for the U.S. Plans
and $298.0 and $345.7, respectively for the Non-U.S. Plans.
Change in Fair Value of Plan Assets
The change in plan assets is as follows:
U.S. Plans
Non-U.S. Plans
Year E nded December 31,
2024
2023
2024
2023
Beginning balance
$
195.3 $
226.8 $
335.9 $
301.2
Company contributions
10.2
7.6
14.1
Actual return on plan assets
13.7
21.6
(20.9)
18.0
Benefits and administrative expenses paid
(20.2)
(53.1)
(13.7)
(13.7)
Foreign currency exchange rate changes
(5.2)
16.3
Ending balance
$
199.0 $
195.3
$
303.7
$
335.9
F-39
LABCORP HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in millions, except per share data)
Change in Funded Status and Reconciliation of Amounts Recorded in the Consolidated Balance Sheets
The change in the funded status of the plan and a reconciliation of such funded status to the amounts reported in the
Company's Consolidated Balance Sheets is as follows:
Funded status -
(deficit) surp]us
Recorded as:
Other assets
Accrued expenses and other
Other liabilities
Assumptions
$
$
$
$
U.S. Plans
Non-U.S. Plans
December 31,
2024
2023
2024
2023
( 14.4) $
(36.6) $
5.7 $
(9.8)
18.9 $
$
33.9 $
21.5
2.6
$
2.5 $
0.7 $
0.7
30.7 $
34.1
$
27.5 $
30.6
Weighted-average assumptions used to determine net periodic benefit costs are as follows:
U.S. Plans
Non-U.S. Plans
Year Ended December 31,
2024
2023
2022
2024
2023
2022
Discount rate
5.1%
5.5 %
2.8%
3.7%
4.0%
2.1%
Salary increases
N/A
N/A
N/A
2.0%
2.0%
2.0%
Expected long term rate of return
6.0%
6.0%
4.5%
4.1%
5.3%
3.6%
Cash balance interest credit rate
4.0%
4.0%
4.0%
N/A
N/A
N/A
A one percentage point decrease or increase in the discount rate would have resulted in a respective increase or decrease in
2024 retirement plan expense of $0.2 for the U.S. Plans. A one percentage point decrease or increase in the discount rate would
have resulted in a respective increase or decrease in 2024 retirement plan expense of $0.6 for the Non-U.S. Plans.
Weighted-average assumptions used to determine net periodic benefit obligations are as follows:
Discount rate
Salary increases
U.S. Plans
Non-U.S. Plans
Year Ended December 31,
2024
2023
2024
2023
5.6%
N/A
5.1%
N/A
5.2%
2.0%
4.3%
2.0%
The discount rate is determined using the weighted-average yields on high-quality fixed income securities that have
maturities consistent with the timing of benefit payments. Lower discount rates increase the size of the benefit obligation and
generally increase pension expense in the following year; higher discount rates reduce the size of the benefit obligation and
generally reduce subsequent-year pension expense.
The expected return on plan assets is the estimated long-term rate of return that will be earned on the investments used to
fund the pension obligations. 'fo determine this. rate, the Company considers the composition of plan investments, historical
returns earned, and expectations about the future. Actual asset over/under performance compared to expected returns will
respectively decrease/increase unrecognized loss. The change in the unrecognized loss will change amortization cost in
upcoming periods. A one percentage point increase or decrease in the expected return on plan assets would have resulted in a
corresponding change in 2024 pension expense of $1.8 for the U.S. Plans. A one percentage point increase or decrease in the
expected return on plan assets would have resulted in a corresponding change in 2024 pension expense of$3.4 for the Non-U.S.
Plans.
The salary increase assumptions are used to estimate the annual rate at which pay of plan participants will grow. If the rate
of growth assumed increases, the size of the pension obligations will increase, as will the amount recorded in Accumulated
other comprehensive loss in the Company's Consolidated Balance Sheets and amortized into earnings in subsequent periods.
The Company evaluates other assumptions periodically, such as retirement age, mortality and turnover, and updates them as
necessary to reflect the Company's actual experience and expectations for the future. Differences between actual results and
assumptions utilized are record!ed in Accumulated other comprehensive income each period. These differences are amortized
F-40
LABCORP HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in millions, except per share data)
into earnings over the remaining average future service of active participating employees or the expected life of inactive
participants, as applicable.
Plan A!isets
The fair values ofthe assets by asset category are as follows:
December 31, 2024
Level of
Investments valued
Asset Category
Valuation In£ut
Fair Value
usin~ NA V £er share
Total
U.S Plans
Cash and cash equivalents
Level I
$
4.9
$
$
4.9
U.S. equity index funds
25.9
25.9
International equity index funds
10.6
10.6
Real estate
3.8
3.8
General bond index funds
153.8
153.8
Total fair value
$
4.9
$
194.1
$
199.0
Non-U.S. Plans
Cash and cash equivalents
Level I
$
4.1
$
$
4.1
Annuities
Level3
45.8
45.8
Pooled investment funds
253.8
253.8
Total fair value
$
49.9
$
253.8
$
303.7
December 31, 2023
Level of
Investments valued
Asset Category
Valuation lnput
Fair Value
using NAY per share
Total
U.S Plans
Cash and cash equivalents
Levell
$
3.3
$
$
3.3
U.S. equity index funds
27.3
27.3
International equity index funds
11.4
11.4
Real estate index fund
4.0
4.0
General bond index funds
149.3
149.3
Total fair value
$
3.3
$
192.0
$
195.3
Non-U.S. Plans
Cash and cash equivalents
Levell
$
46.2
$
$
46.2
Annuities
Level3
52.8
52.8
Pooled investment funds
236.9
236.9
Total fair value
$
99.0
$
236.9
$
335.9
The fair market value of index funds and pooled investment funds are valued using the net asset value (NA V) unit price
provided by the fund administrator. The NA V is based on the value of the underlying assets owned by the fund. The fair value
of annuity investments are based on discounted cash flow techniques using unobservable valuation inputs such as discount rates
and actuarial mortality tables.
Fair Value Measurement of Level 3 Pension Assets
Balance at January I, 2023
Actual return on plan assets
Balance at December 31, 2023
Actual retum on plan assets
Balance at December 31, 2024
Investment Policies
Annuities
$
$
50.1
2.7
52.8
(7.o)
45.8
Plan fiduciaries of various plans set investment policies and strategies, based on consultation with professional advisors,
and oversee investment allocation, which includes selecting investment managers and setting long-term strategic targets. The
F-41
LABCORP HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in millions, except per share data)
primary strategic investment objectives are balancing investment risk and return and monitoring the plan's liquidity position in
order to meet the near-tenn benefit payment and other cash needs. Target allocation percentages are established at an asset class
level by plan fiduciaries. Target allocation ranges are guidelines, not limitations, and occasionally plan fiduciaries will approve
allocations above or below a target range.
The allocation of the plan assets by asset category is as follows:
Equity securities
Debt securities
Annuities
Real estate
Other
The target allocation of the plan assets by asset category is as follows:
Equity securities
Debt securities
Annuities
Real estate
Other
Pension Funding and Cash Flows
December 31, 2024
U.S. Plans
Non-U.S. Plans
18.3%
11.3%
77.3%
68.7%
-
%
15.1%
1.9%
3.6%
2.5%
1.3%
December 31, 2024
U.S. Plans
Non-U.S. Plans
13.0% to
25.5%
10 . 0% to
20.0%
67.0% to
87.0%
60 . 0% to
70.0%
-% to
-% 10 . 0% to
20.0%
0.5% to
4.3%
-%
to
5.0%
-
% to
5.0%
- %
to
5.0%
The Company expects to make approximately $18.6 in required contributions to its defined benefit pension plans during
2025. The Company targets funding the minimum required contributions but may make additional contributions into the
pension plans in 2025, depending upon factors such as how the funded status of those plans change or to reduce the
administrative costs of the plan.
At December 31, 2024, the estimated benefit payments, which were used in the calculation of projected benefit obligations,
are expected to be paid as follows:
2025
2026
2027
2028
2029
Years 2030 to 2034
Post-employment Retiree Health and Welfare Plan
December 31,2024
U.S. Plans
Non-U.S. Plans
$
21.9 $
15.9
$
21.6 $
17.1
$
21.1
$
17.4
$
20.8
$
17.9
$
20.0
$
18.6
$
88.2
$
97.0
The Company sponsors a post-employment retiree health and welfare plan for the benefit of eligible employees at certain
U.S. subsidiaries who retire after satisfying service and age requirements. This plan is funded on a pay-as-you-go basis and the
cost of providing these benefits is shared with the retirees.
Post-retirement Medical Plan
The Company assumed obligations under a subsidiary's post-retirement medical plan. Coverage under this plan is restricted
to a limited number of existing employees of the subsidiary. This plan is unfunded and the Company's policy is to fund benefits
as claims are incurred. The effect on operations of the post-retirement medical plan is shown in the following table:
F-42
LABCORP HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in millions, except per share data)
Interest cost on benefit obligation
Net amortization and deferral
Post-retirement medical plan costs
Year Ended December 31,
2024
2023
2022
$
0.2 $
0.2 $
0.1
__
..;;(0_.2. ) --~~
~-~0~.2~
$
$
0.2 =$==0=.3=
For the year ended December 31, 2024, and 2023, amounts included in Accumulated other comprehensive loss in the
Company's Consolidated Balance Sheets consist ofunamortized net income of$0.8 and $0.8, respectively.
A summary of the changes in the accumulated post-retirement benefit obligation follows:
Beginning balance
Interest cost on benefit obligation
Actuarial loss
Benefits paid
Ending balance
Recorded as:
Accrued expenses and other
Other liabilities
Year Ended December 31,
2024
2023
$
3.6 $
3.9
0.2
0.2
(0.2)
(0.2)
-:::------""(0
,.....,.4~
)
(0 .3)
$
3.2 $
3.6
$
0.5 $
0.6
2.7
3.0
$
3.2 $
3.6
=======
The weighted-average discount rates used in the calculation of the accumulated post-retirement benefit obligation were
5.6% and 5.1% at December 31, 2024, and 2023, respectively. The healthcare cost trend rate was removed due to the
expectation of future funding to be at the same level as the previous year's funding.
The following assumed benefit payments under the Company's post-retirement benefit plan, which reflect expected future
service, as appropriate, and which were used in the calculation of projected benefit obligations, are expected to be paid as
follows:
2025
2026
2027
2028
2029
Years 2030 to 2034
Deferred Compensation Plan
December 31, 2024
$
0.5
$
0.4
$
0.3
$
0.3
$
0.3
$
0.9
The Company has Deferred Compensation Plans (DCP) under which certain of its executives may elect to defer up to
100.0% of their annual cash incentive pay and/or up to 50.0% of their annual base salary and/or eligible commissions subject to
annual limits established by the U.S. government. The DCP provides executives a tax efficient strategy for retirement savings
and capital accumulation without significant cost to the Company. The Company makes no contributions to the DCP. Amounts
deferred by a participant are credited to a bookkeeping account maintained on behalf of each participant, which is used for
measurement and determination of amounts to be paid to a participant, or his or her designated beneficiary, pursuant to the
terms of the DCP. The amounts accrued under these plans were $132.5 and $107.4 at December 31, 2024, and 2023,
respectively. Deferred amounts are the Company's general unsecured obligations and are subject to claims by the Company's
creditors. The Company's general assets may be used to fund obligations and pay DCP benefits.
F-43
LABCORP HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in millions, except per share data)
17. FAIR VALUE MEASUREMENTS
The Company's population of financial assets and liabilities subject to fair value measurements were as follows:
Noncontrolling interest put
Cross currency swaps
Interest rate swaps
Cash surrender value of life insurance policies
Deferred compensation asset
Deferred compensation liability
Contingent consideration
Noncontrolling interest put
Cross currency swaps
Interest rate swaps
Cash surrender value of life insurance policies
Deferred compensation asset
Deferred compensation liability
Contingent consideration
Fair Value Measurement ofLevel3 Liabilities
Balance at January 1, 2023
Cash payments and adjustments
Balance at December 31, 2023
Cash payments and adjustments
Balance at December 31, 2024
Consolidated Balance
Fair Value at
Sheets Classification
December 31, 2024
Noncontrolhng mterest $
14.3
Accrued expenses and
other/Other liabilities
Other liabilities
Other assets, net
Other assets, net
Other liabilities
Accrued expenses and
other/Other liabilities
Consolidated Balance
Sheets Classification
NoncontroUmg interest
Accrued expenses and
other/Other liabilities
Other liabilities
Other assets, net
Other assets, net
Other liabilities
Accrued expenses and
other/Other liabilities
$
$
$
$
$
$
142.7
76.8
102.1
35.7
132.5
10.8
Fair Value at
December 31, 2023
$
15.5
$
109.0
$
69.6
$
95.4
$
21.1
$
107.4
$
66.1
Fair Value Measurements at
December 31, 2024
Using Fair Value Hierarchy
Level I
Level2
Level3
$
$
14.3
$
$
$ 142.7
$
$
$
76.8
$
$
$ 102.1
$
$
$
35.7
$
$
$ 132.5
$
$
$
$
10.8
Fair Value Measurements at
December 31,2023
Using Fair Value Hierarchy
Level I
Level 2
Level 3
$
$
15.5
$
$
$ 109.0 $
$
$
69.6
$
$
$
95.4
$
$
$
21.1
$
$
$ 107.4
$
$
$
$
66.1
Contingent Consideration
$
77.4
( 11.3)
66.1
(55.3)
$
10.8
The Company has a noncontrolling interest put related to its Ontario subsidiary that has been classified as mezzanine equity
in the Company's Consolidated Balance Sheets. The noncontrolling interest put is valued at its contractually determined value,
which approximates fair value. During the year ended December 31, 2024, the carrying value of the noncontrolling interest put
increased by $0.5 for foreign currency translation.
The fair values of derivative financial instruments have been detennined based on market value equivalents at the balance
sheet date, taking into account the current interest rate environment and therefore were classified as Level 2 measurements in
the fair value hierarchy.
The Company offers certain employees the opportunity to participate in a 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 participants' allocations. Changes in the fair value of the DCP obligation are derived using quoted prices in active marketl;
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.
F-44
LABCORP HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in millions, except per share data)
Contingent accrued eam-owt business acquisition consideration liabilities for which fair values are measured as Level 3
instruments. 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. Although recorded at amortized
cost on the Company's Consolidated Balance Sheets, the fair market value of the Company's senior notes was $5,762.6 and
$4,850.4 at December 31, 2024, and 2023, respectively. The Company's senior notes are considered Level2 instruments, as the
fair market values of these instruments are based on observable market pricing.
18. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
Interest Rate Swap
During the second quarter of 2021, the Company entered into fixed-to-variable interest rate swap agreements for its 2. 70%
senior notes due 2031 with an aggregate notional amount of $500.0 and variable interest rates based on three-month Secured
Overnight Financing Rate (SOFR), which changed from London Interbank Offered Rate (LIBOR) to SOFR during 2023, plus
1.0706%. These agreements were designated as hedges against changes in the fair value of a portion of the Company's long-
term debt.
Cross Currency Swaps
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 tenninated $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. The initial cross-currency swap matures in 2025 and the cross currency swap entered into in
2022 matures in 2024. These instruments are designated as a hedge against the impact of foreign exchange movements on its
net investment in a Swiss subsidiary.
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 of2031 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, ofwhich, $300.0 matures in 2029 and $300.0 matures in 2034.
The table below presents the fair value of derivatives and the balance sheet classification of those instruments:
December 31, 2024
Fair Value of Derivative
u.s.
December 31, 2023
Fair Value of DerivatiVe
u.s.
Consolidated Balance Sheets Caption
Asset
Liability
Interest rate swap
""o~th~er"""'h~ab
~""'t""h'!"h-es----------- ~
$ 76.8
Dollar
Notional
$ 500.0
$ 1,200.0
Asset
LiabiliC
~
$69.
$ -
$ 109.0
Dollar
Notional
$ 500.0
$ 600.0
Cross currency swaps Accrued expenses and other/Other liabilities
$ -
$ 142.7
The table below provides information regarding the location and amount of pretax (gains) losses of derivatives designated in
fair value hedging relationships:
Amounts included in other
Amounts reclassified to the Consolidated
comprehensive income
Statement of Operations
Year Ended December 31,
Year Ended December 31,
2024
2023
2022
2024
2023
2022
Cross currency swaps
$
(33.7) $
(63.3) $
(12.9) $
-
$
-
$
0.9
F-45
LABCORP HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in millions, except per share data)
19. SUPPLEMENTAL CASH FLOW INFORMATION
Year Ended December 31,
2024
2023
2022
Supplemental schedule of cash flow information:
Cash paid during period for:
Interest
$
209.2
$
221.5
$
196.7
Income taxes, net of refunds
$
215.4
$
206.8
$
474.9
Disclosure of non-cash financing and investing activities:
Change in accrued property, plant, and equipment
$
(22.5) $
13.2
$
(5.6)
20. BUSINESS SEGMENT INFORMATION
The following table is a summary of segment information for the years ended December 31, 2024, 2023, and 2022. 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.
The Company's segment performance measure excludes the amortization of intangibles and other assets, restructuring and
other charges, goodwill and other asset impairments, and certain corporate charges for items such as transaction costs,
COVID-19 costs, and other special items. This aligns with how the CODM now evaluates segment performance and allocates
resources. Other operating expenses are comprised primarily of rent, maintenance, consulting sendouts, utilities, travel and
entertainment, and other segment expenses, including shipping costs for Dx. Segment asset information is not presented
because it is not used by the CODM.
Revenues:
Revenues
Operating Earnings:
Labor
Supplies
Shipping costs
Depreciation
Other operating expenses
Segment operating income
General corporate and unallocated expenses
Amortization of intangibles and other assets
Restructuring and other charges
Goodwill and other asset impairments
Total Operating income
Other income (expense):
Interest expense
Investment income
Equity method loss, net
Other, net
Earnings from continuing operations before income taxes
Dx
$
10,144.3
4,438.7
2,209.6
259.0
1,630.7
$
1,606.3
F-46
Year Ended December 31, 2024
BLS
$
2,922.6
1,165.3
441.9
365.8
122.6
368.1
$
458.9
Intercompany
eliminations
and other
LHI
$
(58.0) $
13,008.9
$
2,065.2
(670.8)
(256.4)
(46.0)
(5.3)
1,086.7
(208.3)
22.3
(1.4)
60.2
$
959.5
Revenues:
LABCORP HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in millions, except per share data)
Year Ended December 31,2023
Dx
Intercompany
eliminations
BLS
and other
Revenues
$
9,415.1 $
2,774.2 $
(27.7) $
Operating Earnings:
Labor
Supplies
Shipping costs
Depreciation
Other operating expenses
Segment operating income
General corporate and unallocated expenses
Amortization of intangibles and other assets
Restructuring and other charges
Goodwill and other asset impairments
Total Operating income
Other income (expense):
Interest expense
Investment income
Equity method loss, net
Other, net
Earnings from continuing operations before income taxes
Revenues:
Revenues
Operating Earnings:
Labor
Supplies
Shipping costs
Depreciation
Other operating expenses
Segment operating income
General corporate and unallocated expenses
Amortization of intangibles and other assets
Restructuring and other charges
Goodwill and other asset impairments
Total Operating income
Other income (expense):
Interest expense
Investment income
Equity method income, net
Other, net
Earnings from continuing operations before income taxes
$
$
$
F-47
4,095.7
1,094.0
2,066.0
452.2
333.0
236.1
112.5
1,426.0
386.2
1,591.3 $
396.3
$
$
Year Ended December 31, 2022
Dx
9,203.5
$
3,659.6
1,914.7
227.1
1,376.6
2,025.5 $
Intercompany
eliminations
BLS
and other
2,697.3 $
(36. 9) $
1,069.6
460.6
311.3
112.8
353.9
389.1
$
$
LHI
12,161.6
1,987.6
(644.1)
(219.8)
(49.1)
(349.0)
725.6
(199.6)
28.8
(1.4)
15.5
568.9
LHI
11,863.9
2,414.6
(468.8)
(193.6)
(54.0)
(261.7)
1,436.5
(179.8)
7.5
5.4
(32.2)
1,237.4
Depreciation:
Dx
BLS
General corporate
Total depreciation
LABCORP HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in millions, except per share data)
Year Ended December 31,
2024
2023
2022
$
259.0 $
236.1
$
227.1
122.6
112.5
112.8
5.5
8.9
3.7
-::----~-
$
387.1
~
357.5
~
343.6
Geographic distribution of Property, plant and equipment, net:
North America
Europe
Other
Total Property, plant and equipment, net
$
$
F-48
Year Ended December 31,
2024
2023
2,576.1
$
2,418.2
355.5
394.7
113.8
98.9
3 045.4
$
2,911.8