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What changed in Labcorp's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Labcorp's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+587 added−564 removedSource: 10-K (2024-02-26) vs 10-K (2023-02-28)

Top changes in Labcorp's 2023 10-K

587 paragraphs added · 564 removed · 451 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

217 edited+52 added−54 removed135 unchanged
Biggest changeINCOME TAXES The sources of income before taxes, classified between domestic and foreign entities, are as follows: 2022 2021 2020 Domestic $ 1,321.0 $ 2,580.6 $ 1,846.5 Foreign 261.6 546.0 372.5 Total pre-tax income $ 1,582.6 $ 3,126.6 $ 2,219.1 The components of income tax expense attributable to continuing operations are as follows: Years Ended December 31, 2022 2021 2020 Current tax expense: Federal $ 189.4 $ 545.5 $ 455.3 State 40.1 171.9 172.8 Foreign 65.3 107.7 81.0 $ 294.8 $ 825.1 $ 709.1 Deferred tax expense/(benefit): Federal $ 7.8 $ (64.6) $ (6.7) State (5.4) (13.7) (28.1) Foreign 4.8 0.3 (12.2) 7.2 (78.0) (47.0) Total income tax expense $ 302.0 $ 747.1 $ 662.1 The effective tax rates on earnings before income taxes are reconciled to statutory U.S. income tax rates as follows: Years Ended December 31, 2022 2021 2020 Statutory U.S. rate 21.0 % 21.0 % 21.0 % State and local income taxes, net of U.S. federal income tax effect 3.7 3.9 5.3 Foreign earnings taxed at lower rates than the statutory U.S. rate (0.5) (0.5) (0.4) Tax credits (4.4) (0.1) — Impairment of assets 2.7 — 4.0 Deferred tax adjustments (1.9) (0.1) 0.1 Other (1.6) (0.3) (0.2) Effective rate 19.0 % 23.9 % 29.8 % F-30 Index LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars and shares in millions, except per share data) The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are as follows: December 31, 2022 December 31, 2021 Deferred tax assets: Accounts receivable $ 22.5 $ 22.3 Employee compensation and benefits 114.2 145.2 Operating lease liability 189.4 176.3 Acquisition and restructuring reserves 10.3 19.1 Capitalized R&D costs 54.4 — Tax loss carryforwards 242.6 184.5 Other 116.4 92.7 Total gross deferred tax assets 749.8 640.1 Less: valuation allowance (151.3) (149.2) Deferred tax assets, net of valuation allowance $ 598.5 $ 490.9 Deferred tax liabilities: Right of use asset $ (172.7) $ (166.9) Intangible assets (811.1) (823.8) Property, plant and equipment (188.0) (143.9) Other (87.9) (47.6) Total gross deferred tax liabilities $ (1,259.7) $ (1,182.2) Net deferred tax liabilities $ (661.2) $ (691.3) The table below provides a rollforward of the valuation allowance: December 31, 2022 December 31, 2021 December 31, 2020 Beginning balance $ 149.2 $ 167.6 $ 145.4 Additions charged to expense 10.2 6.8 5.8 Reductions and other adjustments (8.1) (25.2) 16.4 Ending balance $ 151.3 $ 149.2 $ 167.6 The Company has U.S. federal tax loss carryforwards of approximately $161.5, which expire periodically through 2037, as well as post-2017 carryforwards of $202.7 that are limited to 80% of taxable income and have an indefinite carryforward period.
Biggest changeINCOME TAXES The sources of income before taxes, classified between domestic and foreign entities, are as follows: 2023 2022 2021 Domestic $ 504.0 $ 1,097.9 $ 2,455.0 Foreign 64.9 139.5 432.6 Total pre-tax income $ 568.9 $ 1,237.4 $ 2,887.6 F-30 Index LABORATORY CORPORATION OF AMERICA HOLDINGS 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: Years Ended December 31, 2023 2022 2021 Current tax expense: Federal $ 183.1 $ 150.8 $ 500.0 State 38.9 25.4 156.5 Foreign 44.6 34.0 71.9 $ 266.6 $ 210.2 $ 728.4 Deferred tax expense/(benefit): Federal $ (63.1) $ 15.8 $ (36.7) State (31.6) 0.6 (9.0) Foreign 16.6 7.3 7.3 (78.1) 23.7 (38.4) Total income tax expense $ 188.5 $ 233.9 $ 690.0 The effective tax rates on earnings before income taxes are reconciled to statutory U.S. income tax rates as follows: Years Ended December 31, 2023 2022 2021 Statutory U.S. rate 21.0 % 21.0 % 21.0 % State and local income taxes, net of U.S. federal income tax effect 4.0 4.2 3.9 Foreign earnings taxed at lower rates than the statutory U.S. rate (2.2) (0.7) (0.7) Tax credits (3.8) (5.4) (0.1) Impairment of assets 10.8 3.7 — Limitation of officer compensation 1.7 1.2 0.3 Worthless stock loss (2.6) — — Deferred tax adjustments 2.7 (2.4) (0.1) Other 1.5 (2.7) (0.4) Effective rate 33.1 % 18.9 % 23.9 % The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are as follows: December 31, 2023 December 31, 2022 Deferred tax assets: Accounts receivable $ 27.9 $ 19.4 Employee compensation and benefits 81.7 96.5 Operating lease liability 191.4 182.6 Acquisition and restructuring reserves 9.2 7.0 Capitalized R&D costs 142.9 44.1 Tax loss carryforwards 246.9 241.9 Other 95.1 95.1 Total gross deferred tax assets 795.1 686.6 Less: valuation allowance (150.2) (151.3) Deferred tax assets, net of valuation allowance $ 644.9 $ 535.3 Deferred tax liabilities: Right of use asset $ (175.3) $ (170.2) Intangible assets (614.8) (605.1) Property, plant and equipment (163.5) (166.5) Other (66.2) (62.7) Total gross deferred tax liabilities $ (1,019.8) $ (1,004.5) Net deferred tax liabilities $ (374.9) $ (469.2) F-31 Index LABORATORY CORPORATION OF AMERICA HOLDINGS 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: December 31, 2023 December 31, 2022 December 31, 2021 Beginning balance $ 151.3 $ 149.2 $ 167.6 Movements charged to expense (8.9) 10.2 6.8 Reductions and other adjustments 7.8 (8.1) (25.2) Ending balance $ 150.2 $ 151.3 $ 149.2 The Company has U.S. federal tax loss carryforwards of approximately $127.0, which expire periodically through 2037, as well as post-2017 carryforwards of $179.1 that are limited to 80% of taxable income and have an indefinite carryforward period.
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.
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.
The excess of the fair value of the consideration conveyed over the fair value of the 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 excess of the fair value of the consideration conveyed over the fair value of the 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.
Share Repurchase Program During the fourth quarter of 2021, the board of directors (the Board) adopted a new 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. Under this plan, the Company commenced an Accelerated Share Repurchase (ASR) program.
During the fourth quarter of 2021, the board of directors (the Board) adopted a new 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. Under this plan, the Company commenced an Accelerated Share Repurchase (ASR) program.
A performance share grant in 2021 represents a three-year award opportunity for the period of 2021-2023 and, if earned, vests fully (to the extent earned) in the first quarter of 2024.
A performance share grant in 2021 represents a three-year award opportunity for the period 2021-2023, and if earned, vests fully (to the extent earned) in the first quarter of 2024.
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.
The Company is cooperating with 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 accordance with FASB Accounting Standards Codification Topic 450 “Contingencies,” the Company establishes reserves for judicial, regulatory, and arbitration matters outside the aggregate legal reserve if and when those matters present loss contingencies that are both probable and estimable and would exceed the aggregate legal reserve.
In accordance with 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 reasonably estimable and would exceed the aggregate legal reserve.
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: 2023 $ 0.6 2024 0.6 2025 0.5 2026 0.4 2027 0.3 Years 2028 and thereafter 1.1 Deferred Compensation Plan 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 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: 2024 $ 0.6 2025 0.5 2026 0.4 2027 0.3 2028 0.3 Years 2029 and thereafter 1.0 Deferred Compensation Plan 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.
A determination of the amount of the unrecognized deferred tax liability related to these undistributed earnings is not practicable due to the complexity and variety of assumptions necessary based on the manner in which the undistributed earnings would be repatriated. 13.
A determination of the amount of the unrecognized deferred tax liability related to these undistributed earnings is not practicable due to the complexity and variety of assumptions necessary based on the manner in which the undistributed earnings would be repatriated.
Translation adjustments are accumulated in a separate component of shareholders’ equity in the consolidated balance sheets and are included in the determination of comprehensive income 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 income in the consolidated statements of operations. 2.
Translation adjustments are accumulated in a separate component of shareholders’ equity in the consolidated balance sheets and are included in the determination of comprehensive income 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 income in the consolidated statements of operations.
The Company fully repaid the remaining 2019 Term Loan balance during the first quarter of 2021. The Company also maintains a senior revolving credit facility, which was amended and restated on April 30, 2021.
The Company fully repaid the remaining 2019 Term Loan balance during the first quarter of 2021. The Company maintains a senior revolving credit facility, which was amended and restated on April 30, 2021.
The Company maintained two plans in the United States, three 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 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.
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 mean and rest break premiums, untimely payment of wages following separation of employment, failure to maintain accurate pay records, and non-reimbursement of business expenses.
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.
For businesses that enter primarily short-term contracts, DD 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.
For businesses that enter primarily short-term contracts, BLS applies the practical expedient which allows costs to obtain a contract to be expensed when incurred if the amortization period of the assets that would otherwise have been recognized is one year or less. Amortization of assets from sales commissions is included in selling, general, and administrative expense.
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. 15. PENSION AND POSTRETIREMENT PLANS Defined Contribution Retirement Plans The Company has various U.S. defined contribution retirement plans (401K Plans).
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. defined contribution retirement plans (401K Plans).
Revenue recognized in advance of billing are recognized as unbilled services and the majority of DD'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.
Revenue recognized 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.
Leases have remaining lease terms of less than a year to 16 years, some of which include options to extend the leases for up to 15 years.
Leases have remaining lease terms of less than a year to 15 years, some of which include options to extend the leases for up to 15 years.
See Note 13 Stock Compensation Plans for assumptions used in calculating compensation expense for the Company’s stock compensation plans. 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.
See Note 14 Stock Compensation Plans for assumptions used in calculating compensation expense for the Company’s stock compensation plans. 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.
Years Buildings and building improvements 10 - 35 Machinery and equipment 3 - 10 Furniture and fixtures 5 - 10 Software 3 - 10 Leasehold improvements are amortized over the shorter of their estimated useful lives or the term of the related leases. Expenditures for repairs and maintenance are charged to operations as incurred.
Years Buildings and building improvements 10 - 55 Machinery and equipment 3 - 10 Furniture and fixtures 5 - 10 Software 3 - 10 Leasehold improvements are amortized over the shorter of their estimated useful lives or the term of the related leases. Expenditures for repairs and maintenance are charged to operations as incurred.
A participant's deferrals are allocated by the participant to one or more of 16 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.
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.
The Company assessed certain accounting matters that generally require consideration of forecasted financial information in context with the information reasonably available to the Company and the unknown future impacts of COVID-19 as of December 31, 2022, and through the date of this Annual Report.
The Company assessed certain accounting matters that generally require consideration of forecasted financial information in context with the information reasonably available to the Company and the unknown future impacts of COVID-19 as of December 31, 2023, and through the date of this Annual Report.
Cash payments and other adjustments include the reclassification of profit sharing, pension, and holiday accrual. 5. 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.
Cash payments and other adjustments include the reclassification of profit sharing, pension, and holiday accrual. 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.
Plans Year ended December 31, 2022 2021 2020 2022 2021 2020 Discount rate 2.8 % 2.4 % 3.3 % 2.1 % 1.1 % 1.7 % Salary increases N/A N/A N/A 2.0 % 2.0 % 3.1 % Expected long term rate of return 4.5 % 6.0 % 6.0 % 3.7 % 3.1 % 3.5 % 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 2022 retirement plan expense of $0.8 for the U.S.
Plans Year ended December 31, 2023 2022 2021 2023 2022 2021 Discount rate 5.5 % 2.8 % 2.4 % 4.0 % 2.1 % 1.1 % Salary increases N/A N/A N/A 2.0 % 2.0 % 2.0 % Expected long term rate of return 6.0 % 4.5 % 6.0 % 5.3 % 3.6 % 3.1 % 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 2023 retirement plan expense of $0.4 for the U.S.
The Company targets funding the minimum required contributions but may make additional contributions into the pension plans in 2023, depending upon factors such as how the funded status of those plans change or to reduce the administrative costs of the plan.
The Company targets funding the minimum required contributions but may make additional contributions into the pension plans in 2024, depending upon factors such as how the funded status of those plans change or to reduce the administrative costs of the plan.
PREFERRED STOCK AND COMMON SHAREHOLDERS’ EQUITY The Company is authorized to issue up to 265.0 shares of common stock, par value $0.10 per share. The Company is authorized to issue up to 30.0 shares of preferred stock, par value $0.10 per share. There were no preferred shares outstanding as of December 31, 2022 and 2021.
PREFERRED STOCK AND COMMON SHAREHOLDERS’ EQUITY The Company is authorized to issue up to 265.0 shares of Common Stock, par value $0.10 per share. The Company is authorized to issue up to 30.0 shares of preferred stock, par value $0.10 per share. There were no preferred shares outstanding as of December 31, 2023 and 2022.
When loss contingencies are not both probable and estimable, the Company does not establish separate reserves.
When loss contingencies are not both probable and reasonably estimable, the Company does not establish separate reserves.
The table below presents the fair value of derivatives on a gross basis and the balance sheet classification of those instruments: December 31, 2022 December 31, 2021 Fair Value of Derivative Fair Value of Derivative Balance Sheet Caption Asset Liability U.S. Dollar Notional Asset Liability U.S.
The table below presents the fair value of derivatives on a gross basis and the balance sheet classification of those instruments: December 31, 2023 December 31, 2022 Fair Value of Derivative Fair Value of Derivative Balance Sheet Caption Asset Liability U.S. Dollar Notional Asset Liability U.S.
On September 28, 2022, a jury rendered a verdict in favor of the Plaintiff on the remaining patent at issue, finding that the Company willfully infringed Ravgen's patent, and awarded damages of $272 million. Plaintiff has filed post-trial motions seeking enhanced damages of up to $817 million based on the finding of willfulness, as well as attorney's fees and costs.
On September 28, 2022, a jury rendered a verdict in favor of the Plaintiff on the remaining patent at issue, finding that the Company willfully infringed Ravgen's patent, and awarded damages of $272.0. Plaintiff filed post-trial motions seeking enhanced damages of up to $817.0 based on the finding of willfulness, as well as attorney's fees and costs.
Plans Year ended December 31, 2022 2021 2022 2021 Discount rate 5.5 % 2.8 % 4.8 % 1.8 % Salary increases N/A N/A 2.0 % 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.
Plans Year ended December 31, 2023 2022 2023 2022 Discount rate 5.1 % 5.5 % 4.3 % 4.8 % Salary increases N/A N/A 2.0 % 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.
The contracts are short-term in nature and the fair value of these contracts is based on market prices for comparable contracts. The fair value of these contracts is not significant as of December 31, 2022 and 2021.
The contracts are short-term in nature and the fair value of these contracts is based on market prices for comparable contracts. The fair value of these contracts is not significant as of December 31, 2023 and 2022.
DD incurs costs to fulfill contracts with customers, which are recoverable through the service fees in the contract. Contract fulfillment costs include software implementation costs and setup costs for certain services.
BLS incurs costs to fulfill contracts with customers, which are recoverable through the service fees in the contract. Contract fulfillment costs include software implementation costs and setup costs for certain services.
F-11 Index LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars and shares in millions, except per share data) 1.
F-10 Index LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars and shares in millions, except per share data) 1.
On June 24, 2021, the District Court remanded the case to the Superior Court of California, County of Los Angeles on the grounds that potential damages did not meet the Class Action Fairness Act (CAFA), 28 U.S.C. § 1332(d), jurisdictional threshold. The parties entered into a settlement agreement dated September 9, 2022, which is pending court approval.
On June 24, 2021, the District Court remanded the case to the Superior Court of California, County of Los Angeles on the grounds that potential damages did not meet the Class Action Fairness Act (CAFA), 28 U.S.C. § 1332(d), jurisdictional threshold. The parties entered into a settlement agreement dated September 9, 2022.
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 LIBOR plus 1.0706%.
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 SOFR (changed from LIBOR to SOFR during 2023) plus 1.0706%.
The Company's inventory reserve balance was $23.3 and $40.1, as of December 31, 2022 and 2021, respectively. Property, Plant and Equipment 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, as indicated below, using the straight-line method.
The Company's inventory reserve balance was $66.1 and $23.3, as of December 31, 2023 and 2022, respectively. Property, Plant and Equipment 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, as indicated below, using the straight-line method.
Credit Loss Rollforward DD estimates future expected losses on accounts receivable, unbilled services and notes receivable over the remaining collection period of the instrument.
Credit Loss Rollforward BLS estimates future expected losses on accounts receivable, unbilled services and notes receivable over the remaining collection period of the instrument.
The Company has variable lease payments that do not depend on a rate index, primarily for purchase volume commitments, which are recorded as variable cost when incurred. Total variable payments for the year ended December 31, 2022, 2021 and 2020 were $27.9 , $28.4, and $26.7, respectively.
The Company has variable lease payments that do not depend on a rate index, primarily for purchase volume commitments, which are recorded as variable cost when incurred. Total variable payments for the year ended December 31, 2023, 2022 and 2021 were $32.7 , $27.9, and $28.4, respectively. 7.
REVENUES Description of Revenues Dx attributes revenues to a geographical region based upon where the diagnostic test is performed, while DD attributes revenues to a geographical region based upon where the services are performed.
REVENUES Description of Revenues 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 U.K. pension plans were 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 two plans as of December 31, 2019. The German plan was closed to new entrants on December 31, 2009 but participants continue to accrue service credits.
The U.K. 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 credits.
The changes in common shares issued and held in treasury are summarized below: Common Shares Issued 2022 2021 2020 Common stock issued at January 1 93.1 97.5 97.2 Common stock issued under employee stock plans 0.7 0.8 0.9 Purchase of common stock (5.6) (5.2) (0.6) Common stock issued at December 31 88.2 93.1 97.5 The Company’s treasury shares are recorded at aggregate cost.
The changes in common shares issued and held in treasury are summarized below: Common Shares Issued 2023 2022 2021 Common stock issued at January 1 88.2 93.1 97.5 Common stock issued under employee stock plans 0.5 0.7 0.8 Purchase of common stock (4.8) (5.6) (5.2) Common stock issued at December 31 83.9 88.2 93.1 The Company’s treasury shares are recorded at aggregate cost.
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 $6.5 for which a full valuation allowance has been provided.
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 $8.4 for which a full valuation allowance has been provided.
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.
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.
The noncontrolling interest put is valued at its contractually determined value, which approximates fair value. During the year ended December 31, 2022, the carrying value of the noncontrolling interest put decreased by $0.2 for foreign currency translation. The Company offers certain employees the opportunity to participate in a DCP.
The noncontrolling interest put is valued at its contractually determined value, which approximates fair value. During the year ended December 31, 2023, the carrying value of the noncontrolling interest put decreased by $1.0 for foreign currency translation. The Company offers certain employees the opportunity to participate in a DCP.
In addition to diagnostic testing along with occupational and wellness testing for employers and forensic DNA analysis, Dx also offered a range of other testing services. Within the Dx segment, a revenue transaction is initiated when Dx receives a requisition order to perform a diagnostic test.
In addition to diagnostic testing along with occupational and wellness testing for employers and forensic DNA 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 order to perform a diagnostic test.
Management performed its annual goodwill and intangible asset impairment testing as of the beginning of the fourth quarter of 2022.
Management performed its annual goodwill and intangible asset impairment testing as of the beginning of the fourth quarter of 2023.
The dividend will be payable on March 13, 2023, to stockholders of record of all issued and outstanding shares of common stock as of the close of business on February 23, 2023. The declaration and payment of any future dividends will be at the discretion of the Company's Board.
The dividend will be payable on March 13, 2024, to stockholders of record of all issued and outstanding shares of Common Stock as of the close of business on February 27, 2024. The declaration and payment of any future dividends will be at the discretion of the Company's Board.
For 2022, 2021 and 2020, expense related to the Company’s stock option plan totaled $4.3, $3.6 and $3.4, respectively, and is included in selling, general and administrative expenses.
For 2023, 2022 and 2021, expense related to the Company’s stock option plan totaled $3.8, $4.3 and $3.6, respectively, and is included in selling, general and administrative expenses.
Substantially all material state and local and foreign income tax matters have been concluded through 2015 and 2012, 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.
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.
The lawsuit seeks monetary damages, civil penalties, and recovery of attorney's fees and costs. The case was removed to the U.S. District Court for the Eastern District of California. A settlement of the Bermejo I and Bermejo II lawsuits, if approved by the court, will resolve the Poole lawsuit.
The lawsuit seeks monetary damages, civil penalties, and recovery of attorney's fees and costs. The case was removed to the U.S. District Court for the Eastern District of California. A settlement of the Bermejo I and Bermejo II lawsuits, if approved by the court, will resolve the portion of the Poole lawsuit relating to service representatives and senior service representatives.
The amounts accrued under these plans were $96.9 and $104.4 at December 31, 2022, and 2021, 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. 16.
The amounts accrued under these plans were $107.4 and $96.9 at December 31, 2023, and 2022, 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.
A one percentage point increase or decrease in the expected return on plan assets would have resulted in a corresponding change in 2022 pension expense of $5.0 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.
A one percentage point increase or decrease in the expected return on plan assets would have resulted in a corresponding change in 2023 pension expense of $3.1 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.
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 2022 pension expense of $3.0 for the U.S. Plans.
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 2023 pension expense of $2.2 for the U.S. Plans.
At December 31, 2022, and 2021, receivables due from patients represented approximately 15.3% and 16.7% 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 allowances for doubtful accounts for accounts receivable from patients.
At December 31, 2023, and 2022, receivables due from patients represented approximately 20.4% and 15.3% 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 allowances for doubtful accounts for accounts receivable from patients.
Plans. A one percentage point decrease or increase in the discount rate would have resulted in a respective increase or decrease in 2022 retirement plan expense of $2.8 for the Non-U.S. Plans. Weighted average assumptions used to determine net periodic benefit obligations are as follows: U. S. Plans Non-U.S.
Plans. A one percentage point decrease or increase in the discount rate would have resulted in a respective increase or decrease in 2023 retirement plan expense of $0.7 for the Non-U.S. Plans. Weighted average assumptions used to determine net periodic benefit obligations are as follows: U. S. Plans Non-U.S.
It is anticipated that the amount of the unrecognized income tax benefits will decrease by $10.6 within the next 12 months due to statute of limitation lapses and anticipated audit settlements; however, these changes are not expected to have a significant impact on the results of operations, cash flows or the financial position of the Company.
It is anticipated that the amount of the unrecognized income tax benefits will decrease by $0.2 within the next 12 months due to statute of limitation lapses; however, these changes are not expected to have a significant impact on the results of operations, cash flows or the financial position of the Company.
A performance share grant in 2020 represents a three-year award opportunity for the period 2020-2022, and if earned, vests fully (to the extent earned) in the first quarter of 2023.
A performance share grant in 2023 represents a three-year award opportunity for the period of 2023-2025 and, if earned, vests fully (to the extent earned) in the first quarter of 2026.
These contracts often require payment to DD of expenses to wind-down the study or project, fees earned to date and, in some cases, a termination fee or a payment to DD of some portion of the fees or profits that could have been earned by DD under the contract if it had not been terminated early.
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.
The Company has foreign tax loss carryforwards of $115.7, the majority of which have indefinite carryforward periods, but a valuation allowance of $20.3 has been provided for jurisdictions where the future tax benefits of the attributes are not more likely than not to be realized.
The Company has foreign tax loss carryforwards of $117.2, the majority of which have indefinite carryforward periods, but a valuation allowance of $7.9 has been provided for jurisdictions where the future tax benefits of the attributes are not more likely than not to be realized.
F-25 Index LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars and shares in millions, except per share data) 6.
F-44 Index LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars and shares in millions, except per share data) 17.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Financial Statement Presentation Laboratory Corporation of America ® Holdings (Labcorp ® or the Company) is a leading global life sciences company that provides vital information to help doctors, hospitals, pharmaceutical companies, researchers, and patients make clear and confident decisions.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Financial Statement Presentation Laboratory Corporation of America ® Holdings (Labcorp or the Company) (Labcorp or the Company) is a global leader of innovative and comprehensive laboratory services that provides vital information to help doctors, hospitals, pharmaceutical companies, researchers, and patients make clear and confident decisions.
By leveraging its unparalleled diagnostics and drug development capabilities, the Company provides insights and accelerates innovations to improve health and improve lives. With more than 80,000 employees, the Company serves clients in more than 100 countries. The Company reports its business in two segments, Labcorp Diagnostics (Dx) and Labcorp Drug Development (DD).
By leveraging its unparalleled diagnostics and drug development capabilities, the Company provides insights and accelerates innovations to improve health and improve lives. With more than 67,000 employees, the Company serves clients in more than 100 countries. The Company reports its business in two segments, Labcorp Diagnostics (Dx) and Biopharma Laboratory Services (BLS), formerly Drug Development (DD).
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.
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.
F-8 Index LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS (In Millions, Except Per Share Data) Years Ended December 31, 2022 2021 2020 Net earnings $ 1,280.6 $ 2,379.5 $ 1,557.0 Foreign currency translation adjustments (336.4) (104.6) 264.1 Net benefit plan adjustments 44.8 91.7 (65.7) Other comprehensive earnings (loss) before tax (291.6) (12.9) 198.4 (Provision) benefit for income tax related to items of comprehensive earnings (9.7) (17.1) 12.1 Other comprehensive earnings (loss), net of tax (301.3) (30.0) 210.5 Comprehensive earnings 979.3 2,349.5 1,767.5 Less: Net earnings attributable to the noncontrolling interest (1.5) (2.2) (0.9) Comprehensive earnings attributable to Laboratory Corporation of America Holdings $ 977.8 $ 2,347.3 $ 1,766.6 The accompanying notes are an integral part of these consolidated financial statements.
F-7 Index LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS (In Millions, Except Per Share Data) Years Ended December 31, 2023 2022 2021 Net earnings $ 419.2 $ 1,280.6 $ 2,379.5 Foreign currency translation adjustments 183.1 (336.4) (104.6) Net benefit plan adjustments 14.6 44.8 91.7 Other comprehensive earnings (loss) before tax 197.7 (291.6) (12.9) Provision for income tax related to items of comprehensive earnings (1.8) (9.7) (17.1) Other comprehensive earnings (loss), net of tax 195.9 (301.3) (30.0) Comprehensive earnings 615.1 979.3 2,349.5 Less: Net earnings attributable to the noncontrolling interest (1.2) (1.5) (2.2) Comprehensive earnings attributable to Laboratory Corporation of America Holdings $ 613.9 $ 977.8 $ 2,347.3 The accompanying notes are an integral part of these consolidated financial statements.
As of December 31, 2022, 2021 and 2020 there are $44.0, $51.5 and $46.7, 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 IRS examination for tax years 2019 and 2020.
As of December 31, 2023, 2022 and 2021 there are $29.9, $37.5 and $38.7, 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 IRS examination for tax years 2019 and 2020.
For the year ended December 31, 2022, the Company recognized a partial plan settlement charge of $3.0 as a component of Other, net. The amounts recognized in accumulated other comprehensive earnings are as follows: U. S. Plans Non-U.S.
For the year ended December 31, 2023, the Company recognized a partial plan settlement charge of $10.9 as a component of Other, net. The amounts recognized in accumulated other comprehensive earnings are as follows: U. S. Plans Non-U.S.
A summary of the net assets acquired in 2021 for these businesses is included below: F-22 Index LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars and shares in millions, except per share data) Amounts Acquired During Year Ended December 31, 2021 Accounts receivable $ 10.8 Unbilled services 3.2 Inventories 1.6 Prepaid expenses and other 3.0 Property, plant and equipment 56.6 Goodwill 298.4 Intangible assets 198.5 Total assets acquired 572.1 Accounts payable 2.5 Accrued expenses and other 3.9 Unearned revenue 6.6 Other liabilities 62.2 Total liabilities acquired 75.2 Net assets acquired $ 496.9 Unaudited Pro Forma Information for 2021 Acquisitions Had the aggregate of the Company's 2021 acquisitions been completed as of January 1, 2020, the Company's pro forma results would have been as follows: Years Ended December 31, 2021 2020 Revenues $ 16,216.6 $ 14,112.8 Net earnings attributable to Laboratory Corporation of America Holdings 2,378.3 1,554.5 2020 During the year ended December 31, 2020, the Company acquired various businesses and related assets for approximately $267.6 in cash (net of cash acquired).
A summary of the net assets acquired in 2021 for these businesses is included below: F-23 Index LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars and shares in millions, except per share data) Amounts Acquired During Year Ended December 31, 2021 Accounts receivable $ 10.8 Unbilled services 3.2 Inventories 1.6 Prepaid expenses and other 3.0 Property, plant and equipment 56.6 Goodwill 298.4 Intangible assets 198.5 Total assets acquired 572.1 Accounts payable 2.5 Accrued expenses and other 3.9 Unearned revenue 6.6 Other liabilities 62.2 Total liabilities acquired 75.2 Net assets acquired $ 496.9 Unaudited Pro Forma Information for 2021 Acquisitions Had the aggregate of the Company's 2021 acquisitions been completed as of January 1, 2021, the Company's pro forma results would have been as follows: Years Ended December 31, 2021 Revenues $ 13,231.8 Earnings from continuing operations 2,198.6 5.
Supplies Inventory Inventories, consisting primarily of purchased laboratory and customer supplies and finished goods, are stated at the lower of cost (first-in, first-out) or net realizable value. Supplies accounted for $412.8 and $371.5 and finished goods accounted for $57.8 and $29.9 of total inventory at December 31, 2022, and 2021, respectively.
Supplies Inventory Inventories, consisting primarily of purchased laboratory and customer supplies and finished goods, are stated at the lower of cost (first-in, first-out) or net realizable value. Supplies accounted for $385.1 and $412.8 and finished goods accounted for $89.5 and $57.8 of total inventory at December 31, 2023, and 2022, respectively.
The fair value of the employee’s purchase right and the assumptions used in its calculation are as follows: 2022 2021 2020 Fair value of the employee’s purchase right $ 62.50 $ 59.89 $ 35.49 Valuation assumptions Risk free interest rate 1.3% 0.1% 0.1% Expected volatility 0.3 0.3 0.3 Expected dividend yield 0.9% —% —% 14.
The fair value of the employee’s purchase right and the assumptions used in its calculation are as follows: 2023 2022 2021 Fair value of the employee’s purchase right $ 49.19 $ 62.50 $ 59.89 Valuation assumptions Risk free interest rate 5.0% 1.3% 0.1% Expected volatility 0.3 0.3 0.3 Expected dividend yield 1.4% 0.9% —% 15.
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 .
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).
Selling, general and administrative expenses consist primarily of administrative payroll and related benefit charges, advertising and promotional expenses, administrative travel and an allocation of facility charges and information technology costs. Cost of advertising is expensed as incurred.
Selling, General and Administrative Expenses Selling, general and administrative expenses consist primarily of administrative payroll and related benefit charges, advertising and promotional expenses, administrative travel and an allocation of facility charges and information technology costs. Cost of advertising is expensed as incurred. Research and Development The Company expenses R&D costs as incurred.
The Complaint sought damages on behalf of a class of all affected Company customers. On December 16, 2021, the Court granted in part and denied in part the Company's Motion to Dismiss.
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.
Fair Value Measurement of Level 3 Pension Assets Annuities Balance at January 1, 2021 $ 58.7 Actual return on plan assets 39.2 Balance at December 31, 2021 97.9 Actual return on plan assets (37.8) Balance at December 31, 2022 $ 60.1 Investment Policies 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.
Fair Value Measurement of Level 3 Pension Assets Annuities Balance at January 1, 2022 $ 81.3 Actual return on plan assets (31.2) Balance at December 31, 2022 50.1 Actual return on plan assets 2.7 Balance at December 31, 2023 $ 52.8 Investment Policies 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.
Accounts receivable balances (gross) from Medicare and Medicaid were $85.8 and $94.5 at December 31, 2022, and 2021, respectively.
Accounts receivable balances (gross) from Medicare and Medicaid were $86.5 and $85.8 at December 31, 2023, and 2022, respectively.
Refer to Note 15 Pension and Postretirement Plans for additional information regarding the Company's net periodic benefit cost. 12.
Refer to Note 16 Pension and Postretirement Plans for additional information regarding the Company's net periodic benefit cost. 13.
There were no capitated accounts receivable balances from the Ontario government sponsored healthcare plan at December 31, 2022. The balance was CAD 7.2 at December 31, 2021. The portion of the Company's accounts receivable due from patients comprises the largest portion of credit risk.
The capitated accounts receivable balance from the Ontario government sponsored healthcare plan was CAD 5.5 at December 31, 2023. There were no capitated accounts receivables from the Ontario government sponsored healthcare plan at December 31, 2022. The portion of the Company's accounts receivable due from patients comprises the largest portion of credit risk.
During 2021, the Company recorded net restructuring charges of $43.1. The charges were comprised of $16.3 in severance and other personnel costs and $28.0 in facility-related costs primarily associated with general integration activities. The charges were offset by the reversal of previously established liability of $0.4 in unused severance and $0.8 in unused facility-related costs.
During 2021, the Company recorded net restructuring charges of $24.0. The charges were comprised of $12.4 in severance and other personnel costs, $12.0 in facility-related costs primarily associated with general integration activities. The charges were offset by the reversal of a previously established liability of $0.3 in unused severance and $0.2 in unused facility-related costs.
There can be no assurance that the estimates and assumptions used in the Company's goodwill and intangible asset impairment testing performed as of the beginning of the fourth quarter of 2022 or at the end of the year will prove to be accurate predictions of the future, if, for example, (i) the businesses do not perform as projected, (ii) overall economic conditions in 2023 or future years F-15 Index LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars and shares in millions, except per share data) vary from current assumptions (including changes in discount rates), (iii) business conditions or strategies for a specific reporting unit change from current assumptions, including loss of major customers, (iv) investors require higher rates of return on equity investments in the marketplace or (v) enterprise values of comparable publicly traded companies, or actual sales transactions of comparable companies, were to decline, resulting in lower multiples of revenues and EBITDA.
There can be no assurance that the estimates and assumptions used in the Company's goodwill and intangible asset impairment testing performed as of the beginning of the fourth quarter of 2023 will prove to be accurate predictions of the future, if, for example, (i) the businesses do not perform as projected, (ii) overall economic conditions in 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 EBITDA.
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 and reimbursable out-of-pocket costs.
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.
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.
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.
Resulting translation adjustments are included in “Accumulated other comprehensive income.” Reimbursable Out-of-Pocket Expenses DD 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 DD are reflected in cost of revenues, while the reimbursements received are reflected in revenues in the consolidated statements of operations.
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, while the reimbursements received are reflected in revenues in the consolidated statements of operations.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

135 edited+36 added−31 removed94 unchanged
Biggest changePotential 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 Europe.
Biggest changeIn 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 Europe. The Company expects to make changes to its business practices and to incur additional costs associated with compliance with these evolving and complex regulations.
The Company operates in some 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 program including policies, procedures, training and safeguards in the engagement and management of third parties acting on the Company’s behalf.
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 program including policies, procedures, training and safeguards in the engagement and management of third parties acting on the Company’s behalf.
In addition, the Company may be adversely affected by other risks of expanded 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 property rights; and procedures and actions affecting approval, production, pricing, reimbursement and marketing of products and services.
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 property rights; and procedures and actions affecting approval, production, pricing, reimbursement and marketing of products and services.
The regulations establish a complex regulatory framework on a variety of subjects, including: • 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 activities; • 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.
The regulations establish a complex framework on a variety of subjects, including: • 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 activities; • 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.
Changes in key management, or the ability to attract 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.
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.
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 could lead to civil and criminal penalties, exclusion from participation in Medicare and Medicaid and possible prohibitions or restrictions on the use of its laboratories.
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, and others could lead to civil and criminal penalties, exclusion from participation in Medicare and Medicaid and possible prohibitions or restrictions on the use of its laboratories.
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 (OFCCP) compliance, and unlawful workplace harassment and discrimination.
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.
In addition, the Company faces increased cybersecurity risks due to the number of employees that continue to work remotely, which increased significantly as a result of the COVID-19 pandemic, and which remains at levels higher than prior to the pandemic as a result of changes in the workplace and to management and employee expectations.
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.
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 research services in the drug development industry create liability risks.
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 addition, federal and state laws that protect the privacy and security of patient information may be subject to enforcement and interpretations by various governmental authorities and courts, resulting in complex compliance issues.
Federal and state laws that protect the privacy and security of patient information may be subject to enforcement and interpretations by various governmental authorities and courts, resulting in complex compliance issues.
Despite network security measures and other precautions the Company has taken, including the development of disaster recovery plans, its information technology systems are potentially vulnerable to physical or electronic break-ins, computer viruses, fire, natural disaster, power loss, telecommunications failures, cybersecurity breaches and similar disruptions, and there may not be adequate protections, mitigation plans or redundant facilities available in the event of such system failures.
Despite network security measures and other precautions the Company has taken, including the development of disaster recovery plans, its information technology systems are potentially vulnerable to physical or electronic break-ins, computer viruses, fire, natural disaster, power loss, telecommunications failures, cybersecurity incidents and similar disruptions, and there may not be adequate protections, mitigation plans or redundant facilities available in the event of such system failures.
The Company has also experienced and expects to continue to experience similar attempts to attack and penetrate the systems of third-party suppliers and vendors to whom the Company has provided data, like the 2019 AMCA data breach.
The Company has also experienced and expects to continue to experience similar attempts to penetrate the systems of third-party suppliers and vendors to whom the Company has provided data, like the 2019 AMCA data breach.
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, fines, unanticipated compliance expenditures, suspension of manufacturing, and civil, criminal or administrative sanctions and/or remedies against DD, including suspension of its laboratory operations, which could have a material adverse effect upon the Company.
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, fines, 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.
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 DD 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.
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.
As a result of the Consolidated Appropriations Act, 2023, which became law in December 2022, the data reporting requirements and Medicare reimbursement cuts that would have occurred under PAMA in 2023 were delayed by one additional year, and the Company will not experience an incremental reimbursement rate impact due to PAMA in 2023.
As a result of the Consolidated Appropriations Act, 2023, which became law in December 2022, the data reporting requirements and Medicare reimbursement cuts that would have occurred under PAMA in 2023 were delayed by one additional year, and the Company did not experience an incremental reimbursement rate impact due to PAMA in 2023.
Risks Related to Financial Matters The Company bears financial risk for contracts that, including for reasons beyond the Company's control, 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 fee-for-service with a 40 Index cap.
Risks Related to Financial Matters The Company bears financial risk for contracts that, including for reasons beyond the Company's control, 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 fee-for-service with a cap.
As previously discussed in Item 1 of Part I 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.
As previously discussed in Item 1 of Part I 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 46 Index materials, as well as regulations relating to the safety and health of laboratory employees.
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 DD’s customers may spend less, or reduce their growth in spending on R&D.
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.
Cancellations may 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 • DD’s failure to perform its duties properly under the contract.
Cancellations may 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.
The EU IVDR, where applicable to DD's services, could impact DD'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.
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.
Discontinuation or recalls of existing testing products; failure to develop or acquire licenses for new or improved testing technologies; or the Company’s customers using new technologies to perform their own tests could adversely affect the Company’s business. 38 Index From time to time, manufacturers discontinue or recall reagents, test kits or instruments used by the Company to perform laboratory testing.
Discontinuation or recalls of existing testing products; failure to develop or acquire licenses for new or improved testing technologies; or the Company’s customers using new technologies to perform their own tests could adversely affect the Company’s business. From time to time, manufacturers discontinue or recall reagents, test kits, or instruments used by the Company to perform laboratory testing.
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 research and development (R&D) costs may increase as a result.
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.
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.
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 44 Index 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.
DD’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 are also reliant on reimbursement for their products from government programs and commercial payers.
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 are also reliant on reimbursement for their products from government programs and commercial payers.
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 can damage DD's inventory, harm its reputation, or result in other liability.
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 can damage BLS's inventory, harm its reputation, or result in other liability.
For additional information about the AMCA Incident, see Note 14 Commitments and Contingencies to the Consolidated Financial Statements of Part III of the 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 enhancements to existing systems could disrupt the Company’s operations or customer relationships.
For additional information about the AMCA Incident, see Note 15 Commitments and Contingencies to the Consolidated Financial Statements of Part III of the 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 enhancements to existing systems could disrupt the Company’s operations or customer relationships.
If DD does not comply, DD 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.
If BLS 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.
However, because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently and often are not recognized until launched against a target, the Company may be unable to anticipate all of these techniques or to implement adequate preventive 47 Index measures.
However, because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently and often are not recognized until launched against a target, the Company may be unable to anticipate all of these techniques or to implement adequate preventive measures.
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 more important. Dx has a well-established base of relationships with those systems and networks, including collaborative agreements.
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.
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 DD’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.
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 breaches 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 business.
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 business.
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.
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 42 Index receive services from the third parties, legal liability of the Company for the actions or inactions of third parties, or otherwise.
Dx's inability to retain its existing relationships with those physicians as they become part of healthcare 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 could adversely affect the Company’s business.
Dx's inability to retain its existing relationships with those physicians as they become part of healthcare 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.
While DD 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 DD against liability arising from certain of its own actions.
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.
On February 20, 2020, the FDA issued a statement with a table of pharmacogenetic associations setting forth certain gene-drug interactions that the agency has determined are supported by the scientific literature to help ensure that claims being made for pharmacogenetic tests are grounded in sound science, thereby reducing the risk of enforcement actions with respect to LDTs offering claims consistent with the table.
In February 2020, the FDA issued a statement with a table of pharmacogenetic associations setting forth certain gene-drug interactions that the agency determined are supported by the scientific literature to help ensure that claims being made for pharmacogenetic tests are grounded in sound science, thereby reducing the risk of enforcement actions with respect to LDTs offering claims consistent with the table.
Increased regulations and restrictions on the import of research animals, limitations of supply of research animals, and actions of animal rights activists may have an adverse effect on the Company. DD's preclinical services utilize animals in preclinical testing of the safety and efficacy of drugs and devices.
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.
Many of DD’s contracts, in particular, provide for services on a fixed-price or fee-for-service with a cap basis and they may be terminated or reduced in scope either immediately or upon notice.
Many of BLS’s contracts, in particular, provide for services on a fixed-price or fee-for-service with a cap basis and they may be terminated or reduced in scope either immediately or upon notice.
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, cyber attacks, 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.
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.
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 products, services 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; and having to pay damages, fines, court costs and attorney's fees in connection with intellectual property litigation.
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 products, services or processes that rely on such intellectual property; having to procure and pay 47 Index 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.
The Company’s operations are dependent upon ongoing demand for diagnostic testing and drug development services by patients, physicians, hospitals, MCOs, pharmaceutical, biotechnology and medical device companies and others.
The Company’s operations are dependent upon ongoing demand for diagnostic testing and drug development services by 33 Index patients, physicians, hospitals, MCOs, pharmaceutical, biotechnology and medical device companies and others.
The conduct of animal research at DD’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.
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.
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 new product introductions.
Such discontinuations or recalls could adversely affect the Company’s costs, testing volume and revenue. 36 Index The commercial laboratory industry is subject to changing technology and new product introductions.
Risks Related to Regulatory and Compliance Matters Changes, including changes in interpretation, in payer regulations, policies or approvals, or changes in laws, regulations or policies in the U.S. or globally, may adversely affect the Company.
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 changes in their interpretation, may adversely affect the Company.
Additionally, certain DD services and activities must conform to current good manufacturing practice (cGMP), as further described in Item 1 of Part I of this Annual Report.
Additionally, certain BLS services and activities must conform to current good manufacturing practice (cGMP), as further described in Item 1 of Part I of this Annual Report.
Risks Related to the Company's Business Including Global Economic and Sociopolitical Factors General or macro-economic factors in the U.S. and globally may have a material adverse effect upon the Company, and significant fluctuations in the economy, recession, inflation and an increase in the costs of goods and services could negatively impact testing volumes, drug development services, cash collections, profitability and the availability and cost of credit.
Risks Related to the Company's Business Including Global Economic and Sociopolitical Factors General or macro-economic factors in the U.S. and globally may have a material adverse effect upon the Company, and significant fluctuations in global economic conditions and an increase in the costs of goods and services could negatively impact testing volumes, drug development services, cash collections, profitability, and the availability and cost of credit.
Accordingly, economic factors and industry trends affecting DD’s customers in these industries may also affect DD. 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, DD could be materially adversely affected.
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.
Although DD 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 DD’s days sales outstanding could have an adverse effect on the Company’s business, including potentially decreasing its cash flows. DD’s revenues depend on the pharmaceutical, biotechnology and medical device industries.
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.
For noncompliance, the agency may take action against DD that may include fines, suspension and/or revocation of animal research licenses, or confiscation of research animals. U.S.
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.
DD 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 DD is not successful in limiting its liability or in the event that the damages and costs exceed DD's insurance coverage.
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 coverage.
Failure to comply with the regulations of pharmaceutical and medical device regulatory agencies, such as the FDA, the Medicines and Healthcare Products Regulatory Agency in the United Kingdom (U.K.), the European Medicines Agency, the National Medical Products Administration in China (NMPA), and the Pharmaceuticals and Medical Devices Agency in Japan, could result in fines, penalties, and sanctions against DD and have a material adverse effect upon the Company.
Failure to comply with the regulations of pharmaceutical and medical device regulatory agencies, such as the FDA, the Medicines and Healthcare Products Regulatory Agency in the United Kingdom, the European Medicines Agency, the National Medical Products Administration in China (NMPA), 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.
Regulation of diagnostics products in jurisdictions outside the U.S. in which the Company operates may impact laboratory testing offered by the Company in both Dx and DD.
Regulation of diagnostics products in jurisdictions outside the U.S. in which the Company operates may impact laboratory testing offered by the Company in both Dx and BLS.
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, access to natural resources, and other disruptions or events outside of the Company’s control could negatively affect the Company’s operations.
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.
In addition, DD 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 DD's results of operations, financial condition and cash flows.
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.
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 44 Index reach mutually satisfactory arrangements could adversely affect the business and operations. Expanded international operations may increase the Company’s exposure to liabilities under the anti-corruption laws.
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.
Dx's 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.
Diagnostics Laboratories' (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 first phase of reductions pursuant to PAMA came into effect on January 1, 2018, and will continue annually subject to certain delays in implementation and phase-in limits through 2026, and without limitations for subsequent periods.
The first phase of reductions pursuant to PAMA came into effect on January 1, 2018, and will continue subject to certain delays in implementation and phase-in limits through 2027, and without limitations for subsequent periods.
Such results could harm DD’s reputation or have an adverse effect on DD'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 DD and have a material adverse effect upon the Company.
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 business operations of DD’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 DD must comply.
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.
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 breach or cyber attack affecting these third parties, like the AMCA Incident, could also harm the Company's business, results of operations and reputation.
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.
The AWA 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 DD conducts animal research, including the UK, EU, and China.
The AWA establishes facility standards regarding several aspects of animal welfare, including housing, ventilation, lighting, feeding and watering, handling, 45 Index veterinary care, and recordkeeping. Similar laws and regulations apply in other jurisdictions in which BLS conducts animal research, including the UK, EU, and China.
Current FDA regulation of the Company’s diagnostic products and the potential for future increased regulation of the Company’s LDTs in the future could result in increased costs and administrative and legal actions for noncompliance, including warning letters, fines, penalties, product suspensions, product recalls, injunctions, and other civil and criminal sanctions, which could have a material adverse effect upon the Company.
Current FDA regulation of the Company’s diagnostic products and the potential for future increased regulation of the Company’s LDTs in the future could result in increased costs and administrative and legal actions for noncompliance, including warning letters, fines, penalties, product suspensions, product recalls, injunctions, and other civil and criminal sanctions, and could impair the development and commercialization of new tests, which could have a material adverse effect upon the Company.
Security breaches and unauthorized access to the Company's or its customers’ data could harm the Company’s reputation and adversely affect its business. The Company has experienced and expects to continue to experience attempts by computer programmers and hackers to attack and penetrate the Company’s layered security controls, like the 2018 ransomware attack.
Cybersecurity incidents and unauthorized access to the Company's or its customers’ data could harm the Company’s reputation and adversely affect its business. The Company has experienced and expects to continue to experience attempts by computer programmers and hackers to penetrate the Company’s layered cybersecurity controls, like the 2018 ransomware attack.
The operation of DD's preclinical laboratory facilities and clinical trial 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 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.
This could also impact the cost and availability of cyber insurance to the Company. Breaches of 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.
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.
DD complies with licensing and registration requirement standards set by these 45 Index laws and regulations in the jurisdictions in which it conducts animal research. If an enforcement agency determines that DD’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.
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.
HIPAA and HITECH provide 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.
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.
Such system failures could require the Company to transfer operations to an alternative provider of services, which could result in a delays in the delivery of products and services to customers.
Such system failures could require the 41 Index Company to transfer operations to an alternative provider of services, which could result in delays in the delivery of products and services to customers.
For example, in October 2020, Ravgen Inc. filed a patent infringement lawsuit against the Company alleging infringement of two Ravgen-owned U.S. patents, and in September 2022, a jury rendered a verdict in favor of Ravgen on the remaining patent at issue, finding that the Company willfully infringed Ravgen's patent, and awarded damages of $272 million.
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 million.
Any of these disruptions or breaches of security could have a material adverse effect on the Company’s business, regulatory compliance, financial condition and results of operations.
Any of these disruptions or incidents could have a material adverse effect on the Company’s business, regulatory compliance, financial condition and results of operations.
DD may also be required to agree to contract provisions with clinical trial sites or its customers related to the conduct of clinical trials, and DD could be materially and adversely affected if it were required to indemnify a site or customer against claims pursuant to such contract terms.
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 be materially and adversely affected if it were required to indemnify a site or customer against claims pursuant to such contract terms.
Since 2018, the Company has invested net cash of approximately $2.9 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.
Since 2019, the Company has invested net cash of approximately $3.5 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.
Even if the Company is able to successfully integrate the operations of businesses that it may acquire in the future, the Company may not be able to realize the benefits that it expects from such acquisitions.
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.
Although its contracts often entitle it to receive the costs of winding down the terminated projects, as well as all fees earned up to the time of termination, the loss, reduction in scope or delay of a large contract or the loss, delay or conclusion of multiple contracts could materially adversely affect DD.
Although BLS' contracts often entitle the Company to receive the costs of winding down the terminated projects, as well as all fees earned up to the time of termination, the loss, reduction in scope or delay of a large contract or the loss, delay or conclusion of multiple contracts could materially adversely affect BLS.
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. Reimbursement for pathology services performed by Dx is also subject to statutory and regulatory reduction.
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 for under the PFS, is also subject to statutory and regulatory reduction.
Changes in regulations such as a relaxation in regulatory requirements or the introduction of simplified approval procedures, or an increase in regulatory requirements that DD has difficulty satisfying or that make its services less competitive, could eliminate or substantially reduce the demand for its services.
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.
Even without issuance of a finalized LDT oversight framework, in light of the April 4, 2019, FDA warning letter issued to Inova Genomics Laboratory related to certain LDTs that Inova offered, as well as the February 2020 pharmacogenetics statement and the failure to pass diagnostic reform legislation in 2022, there may be an increased risk of FDA enforcement actions for laboratory tests offered by companies without FDA clearance or approval.
Even without issuance of a finalized LDT oversight framework, in light of the April 4, 2019, FDA warning letter issued to Inova Genomics Laboratory related to certain LDTs that Inova offered, the February 2020 pharmacogenetics statement, and the 2023 proposed rule, there may be an increased risk of FDA enforcement actions for laboratory tests offered by companies without FDA clearance or approval.
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; 39 Index • difficulty in consolidating redundant facilities and infrastructure and in standardizing information and other systems; • unidentified regulatory problems; • failure to maintain the quality of services that such companies have historically provided; • unanticipated costs and other liabilities; • potential liabilities related to litigation including the acquired companies; • potential periodic impairment of goodwill and intangible assets acquired; • coordination of geographically separated facilities and workforces; and • the potential disruption of the ongoing business and diversion of management's resources.
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; 37 Index • 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 related 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.
In particular, it 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.
The Company’s level of indebtedness and debt service requirements could adversely affect its business. In particular, it 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.
In November 2022, the Patent Trial and Appeal Board issued a decision upholding the validity of the Ravgen patent, and the Company has filed an appeal of this decision.
Patent and Trademark Office challenging the validity of the Ravgen patent at issue in the trial. In November 2022, the Patent Trial and Appeal Board issued a decision upholding the validity of the Ravgen patent, and the Company has filed an appeal of this decision.
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.
Anti-corruption laws in the countries where the Company conducts business, including the FCPA, U.K. 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.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeLocation Nature of Occupancy Primary Facilities: Mechelen, Belgium Leased Beijing, China Leased Shanghai, China (2) Owned/Leased Muenster, Germany Owned Pune, India Leased Bangalore, India Leased Singapore Leased Geneva, Switzerland Owned Eye, United Kingdom Owned Harrogate, United Kingdom Owned Huntingdon, United Kingdom Owned Leeds, United Kingdom Owned Maidenhead, United Kingdom Leased Shardlow, United Kingdom Owned York, United Kingdom Leased San Francisco, California Leased Daytona Beach, Florida Leased Greenfield, Indiana Owned Indianapolis, Indiana Leased Bedford, Massachusetts Owned Ann Arbor, Michigan Leased Minneapolis, Minnesota Leased Princeton, New Jersey Leased Somerset, New Jersey Owned Dallas, Texas Leased Chantilly, Virginia Leased Madison, Wisconsin Owned All of the Company’s primary laboratory and drug development facilities have been built or improved for the purpose of providing commercial laboratory testing or drug development services.
Biggest changeLocation Nature of Occupancy Primary Facilities: Mechelen, Belgium Leased Shanghai, China (2) Leased/Owned Muenster, Germany Owned Bangalore, India Leased Kawagoe, Japan Leased Singapore Leased Geneva, Switzerland (2) Owned/Leased Eye, United Kingdom Owned Harrogate, United Kingdom Owned Huntingdon, United Kingdom Owned Shardlow, United Kingdom Owned York, United Kingdom Leased Los Angeles, California Leased Greenfield, Indiana Owned Indianapolis, Indiana Leased Bedford, Massachusetts Owned Ann Arbor, Michigan Leased Somerset, New Jersey Owned Denver, Pennsylvania Leased Brentwood, Tennessee Leased Chantilly, Virginia Leased Madison, Wisconsin Owned All of the Company’s primary facilities have been built or improved for the purpose of providing commercial laboratory testing or biopharma laboratory services.
Location Nature of Occupancy Primary Facilities: Birmingham, Alabama Leased Phoenix, Arizona Owned Los Angeles, California Leased Monrovia, California Leased San Diego, California Leased San Francisco, California Leased Shelton, Connecticut Leased Tampa, Florida Leased South Bend, Indiana Leased Wichita, Kansas Leased Westborough, Massachusetts Leased Troy, Michigan Leased St.
Location Nature of Occupancy Primary Facilities: Birmingham, Alabama Leased Phoenix, Arizona Owned Los Angeles, California Leased Monrovia, California Leased San Diego, California Leased San Francisco, California Leased Shelton, Connecticut Leased Tampa, Florida Leased South Bend, Indiana Leased Wichita, Kansas Leased Baltimore, Maryland Leased Westborough, Massachusetts Leased Troy, Michigan Leased St.
LEGAL PROCEEDINGS See Note 14 Commitments and Contingencies to the Consolidated Financial Statements. Item 4. MINE SAFETY DISCLOSURES Not applicable. 52 Index PART II
LEGAL PROCEEDINGS See Note 15 Commitments and Contingencies to the Consolidated Financial Statements. Item 4. MINE SAFETY DISCLOSURES Not applicable. 52 Index PART II
The table below summarizes certain information as to Dx's principal operating and administrative facilities as of December 31, 2022.
The table below summarizes certain information as to Dx's principal operating and administrative facilities as of December 31, 2023.
Paul, Minnesota Owned Raritan, New Jersey Owned Burlington, North Carolina (5) Owned/Leased Research Triangle Park, North Carolina (3) Leased Dublin, Ohio Owned Tulsa, Oklahoma Leased Brentwood, Tennessee Leased Dallas, Texas Leased Houston, Texas Leased Herndon, Virginia Leased Seattle, Washington Leased Spokane, Washington (2) Leased Oak Creek, Wisconsin Leased 51 Index Labcorp Drug Development (DD) operates on a global scale.
Paul, Minnesota Owned Raritan, New Jersey Owned Burlington, North Carolina (5) Owned/Leased Research Triangle Park, North Carolina (3) Leased Dublin, Ohio Owned Tulsa, Oklahoma Leased Brentwood, Tennessee Leased Dallas, Texas Leased Houston, Texas Leased Herndon, Virginia Leased Seattle, Washington Leased Spokane, Washington (2) Leased Oak Creek, Wisconsin Leased 51 Index Biopharma Laboratory Services (BLS) operates on a global scale.
The table below summarizes certain information as to DD's principal operating and administrative facilities as of December 31, 2022.
The table below summarizes certain information as to BLS's principal operating and administrative facilities as of December 31, 2023.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeComparison of Cumulative Total Return 12/2017 12/2018 12/2019 12/2020 12/2021 12/2022 Laboratory Corporation of America Holdings $ 100.00 $ 79.22 $ 106.06 $ 127.61 $ 196.98 $ 148.91 S&P 500 Index $ 100.00 $ 95.62 $ 125.72 $ 148.85 $ 191.58 $ 156.88 S&P 500 Health Care Index $ 100.00 $ 106.47 $ 128.64 $ 145.93 $ 184.07 $ 180.47 53 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, 2022, by or on behalf of the Company: Total Number of Shares Repurchased Average Price Paid Per Share Total Number of Shares Repurchased as Part of Publicly Announced Program Maximum Dollar Value of Shares that May Yet Be Repurchased Under the Program October 1 - October 31 0.9 $ 211.91 0.9 $ 635.5 November 1 - November 30 0.5 225.65 0.5 531.5 December 1 - December 31 — — — — 1.4 $ 216.48 1.4 $ 531.5 During the fourth quarter of 2021, the Board adopted a new share repurchase plan authorizing repurchase of up to $2,500.0 of the Company's shares in addition to the remaining amount outstanding under the previous plan.
Biggest changeComparison of Cumulative Total Return 12/2018 12/2019 12/2020 12/2021 12/2022 12/2023 Laboratory Corporation of America Holdings $ 100.00 $ 133.88 $ 161.09 $ 248.66 $ 187.97 $ 213.97 S&P 500 Index $ 100.00 $ 131.49 $ 155.68 $ 200.37 $ 164.08 $ 207.21 S&P 500 Health Care Index $ 100.00 $ 120.82 $ 137.07 $ 172.89 $ 169.51 $ 173.00 53 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, 2023, by or on behalf of the Company: Total Number of Shares Repurchased Average Price Paid Per Share Total Number of Shares Repurchased as Part of Publicly Announced Program Maximum Dollar Value of Shares that May Yet Be Repurchased Under the Program October 1 - October 31 — $ — — $ 531.5 November 1 - November 30 — — — 531.5 December 1 - December 31 1.1 206.85 1.1 530.4 1.1 $ 206.85 1.1 $ 530.4 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.
Common Stock Performance The graph below shows the cumulative total return assuming an investment of $100 on December 31, 2017, in each of the Company’s Common Stock, the Standard & Poor’s, or S&P Composite-500 Stock Index and the S&P 500 Health Care Index, or Peer Group, and assuming that all dividends were reinvested.
Common Stock Performance The graph below shows the cumulative total return assuming an investment of $100 on December 31, 2018, in each of the Company’s Common Stock, the Standard & Poor’s, or S&P 500 Index and the S&P 500 Health Care Index, and assuming that all dividends were reinvested.
Item 5. 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 the symbol “LH.” Holders On February 27, 2023, there were approximately 1,249 holders of record of the Common Stock.
Item 5. 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 the symbol “LH.” Holders On February 23, 2024, there were approximately 1,188 holders of record of the Common Stock.
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, 2022, the Company paid $195.2 in common stock dividends.
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, 2023, the Company paid $254.0 million in Common Stock dividends.
At the end of 2021, the Company had outstanding authorization from the Board to purchase $1,631.5 of Company common stock. During the year ended December 31, 2022, the Company purchased 4.7 shares of its common stock at an average price of $233.48 for a total cost of $1,100.0.
At the end of 2023, the Company had outstanding authorization from the Board to purchase up to $530.4 of the Company's Common Stock. The repurchase authorization has no expiration date. During the year ended December 31, 2022, the Company purchased 4.7 shares of its Common Stock at an average price per share of $233.48 for a total cost of $1,100.0.
Transfer Agent The transfer agent for the Company's Common Stock is American Stock Transfer & Trust Company, Shareholder Services, 6201 Fifteenth Avenue, Brooklyn, NY 11219, telephone: 800-937-5449, website: www.amstock.com. Dividends The Company initiated a quarterly dividend beginning in the second quarter of 2022.
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.
Removed
On December 13, 2021, the Company entered into ASR Agreements with Goldman Sachs & Co. LLC and Barclays Bank PLC to repurchase the Company’s common stock (Common Stock), as part of the Company’s common stock repurchase program.
Added
For the purpose of this graph, the distribution of 100% of the outstanding Common Stock of Fortrea Holdings Inc.
Removed
Under the ASR Agreements, $1,000.0 was paid to the banks in December 2021 and the Company received 80% of the shares calculated at the price at the inception of the Agreements, approximately 2.7 shares. When the forward contract was settled during 2022, the Company received 0.9 shares, which were retired in 2022 .
Added
(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.
Removed
At the end of 2022, the Company had outstanding authorization from the Board to purchase up to $531.5 of the Company's common stock. The repurchase authorization has no expiration date.
Added
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. Item 6. SELECTED FINANCIAL DATA Not applicable.
Removed
On February 7, 2023, the board of directors adopted a new share repurchase plan authorizing up to $1,000.0 of the Company's shares in addition to the remaining amount outstanding under the previous plan. The repurchase authorization has no expiration. Item 6. SELECTED FINANCIAL DATA Not applicable.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeWhile 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.
Biggest changeCritical Accounting Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported periods. 61 Index 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.
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.
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.
Forecasts of individual reporting unit cash flows involve management's estimates and assumptions regarding: • Annual cash flows, on a debt-free basis, arising from future revenues and profitability, changes in working capital, capital spending and income taxes for at least a five-year forecast period. • A terminal growth rate for years beyond the forecast period.
Forecasts of individual reporting unit cash flows involve management's estimates and assumptions regarding: • Annual cash flows, on a debt-free basis, arising from future revenues and profitability, changes in working capital, capital spending and income taxes for at least a five-year forecast period. 64 Index • A terminal growth rate for years beyond the forecast period.
The goodwill reflects management's expectations of the ability to gain access to and penetrate the acquired entities' historical patient base and the benefits of being able to leverage operational efficiencies with favorable growth opportunities based on positive demographic trends in the market. 62 Index Income Taxes The Company accounts for income taxes utilizing the asset and liability method.
The goodwill reflects management's expectations of the ability to gain access to and penetrate the acquired entities' historical patient base and the benefits of being able to leverage operational efficiencies with favorable growth opportunities based on positive demographic trends in the market. Income Taxes The Company accounts for income taxes utilizing the asset and liability method.
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.
Anticipated 62 Index 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.
In accordance with FASB Accounting Standards 64 Index Codification Topic 450 “Contingencies,” the Company establishes reserves for judicial, regulatory, and arbitration matters outside the aggregate legal reserve if and when those matters present loss contingencies that are both probable and estimable and would exceed the aggregate legal reserve.
In accordance with 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.
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 61 Index the volume and complexity of the procedures performed by laboratories participating in the agreement.
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.
There can be no assurance that the estimates and assumptions used in the Company's goodwill and intangible asset impairment testing performed as of the beginning of the fourth quarter of 2022 or at the end of the year 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 2022 or future years vary from current assumptions (including changes in discount rates), (iii) business conditions or strategies for a specific reporting unit change from current assumptions, including loss of major customers, (iv) investors require higher rates of return on equity investments in the marketplace or (v) enterprise values of comparable publicly traded companies, or actual sales transactions of comparable companies, were to decline, resulting in lower multiples of revenues and EBITDA.
There can be no assurance that the estimates and assumptions used in the Company's goodwill and intangible asset impairment testing performed as of the beginning of the fourth quarter of 2023 will prove to be accurate predictions of the future, if, for example, (i) the businesses do not perform as projected, (ii) overall economic conditions in 2023 or future years vary from current assumptions (including changes in discount rates), (iii) business conditions or strategies for a specific reporting unit change from current assumptions, including loss of major customers, (iv) investors require higher rates of return on equity investments in the marketplace or (v) enterprise values of comparable publicly traded companies, or actual sales transactions of comparable companies, were to decline, resulting in lower multiples of revenues and EBITDA.
This increase in cost of revenues as a percentage of revenues was primarily due to a reduction in 56 Index higher margin COVID-19 Testing, higher personnel expenses, and other inflationary costs, partially offset by organic Base Business growth and LaunchPad savings.
This increase in cost of revenues as a percentage of revenues was primarily due to a reduction in higher margin COVID-19 Testing, higher personnel expenses, and other inflationary costs, partially offset by organic Base Business growth and LaunchPad savings.
Interest on these notes is payable semi-annually in arrears on June 1 and December 1 of each year, commencing on 59 Index December 1, 2021. Net proceeds from the offering of these notes were $989.4 after deducting underwriting discounts and other expenses of the offering.
Interest on these notes is payable semi-annually in arrears on June 1 and December 1 of each year, commencing on December 1, 2021. Net proceeds from the offering of these notes were $989.4 after deducting underwriting discounts and other expenses of the offering.
Potential sanctions for violation of these statutes and regulations include significant civil and criminal penalties, fines, the loss of various licenses, certificates and authorizations, additional liabilities from third-party claims, and/or exclusion from participation in government programs.
Potential sanctions for violation of these 65 Index statutes and regulations include significant civil and criminal penalties, fines, the loss of various licenses, certificates and authorizations, additional liabilities from third-party claims, and/or exclusion from participation in government programs.
The Company expects capital expenditures in 2023 to be approximately 3.5% of revenues, primarily in connection with projects to support growth in the Company's core businesses, facility updates, projects related to LaunchPad, and further acquisition integration initiatives.
The Company expects capital expenditures in 2024 to be approximately 3.5% of revenues, primarily in connection with projects to support growth in the Company's core businesses, facility updates, projects related to LaunchPad, and further acquisition integration initiatives.
The 7.5% decrease in organic revenue was due to a 10.0% decrease in COVID-19 Testing, partially offset by a 2.5% increase in the Company's organic Base Business. Dx revenues for the year ended December 31, 2022, were $9,203.5, a decrease of 11.2% compared to revenues of $10,363.6 in the corresponding period in 2021.
The 10.0% decrease in organic revenue was due to a 12.3% decrease in COVID-19 Testing, partially offset by a 2.3% increase in the Company's organic Base Business. Dx revenues for the year ended December 31, 2022, were $9,203.5, a decrease of 11.2% compared to revenues of $10,363.6 in the corresponding period in 2021.
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 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.
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.
During the third quarter, the Company completed a detailed domestic research and development tax credit analysis for the 2019, 2020, and 2021 tax years that resulted in an incremental income tax benefit. The prior year effective tax rate was favorably impacted by stock-based compensation arrangements that was offset by the deferred revaluation related to the U.K. rate change.
During the third quarter of 2022, the Company completed a detailed domestic research and development tax credit analysis for the 2019, 2020, and 2021 tax years that resulted in an incremental income tax benefit. The 2021 effective tax rate was favorably impacted by stock-based compensation arrangements that was offset by the deferred revaluation related to the U.K. rate change.
The decrease was primarily due to lower organic revenue of 12.1% and unfavorable foreign currency translation of 0.1%, partially offset by acquisitions of 1.1%. The 12.1% decrease in organic revenue was due to a 15.6% decrease in COVID-19 Testing, partially offset by a 3.4% contribution from organic Base Business.
The decrease was primarily due to lower organic revenue of 12.1% and unfavorable foreign currency translation of 0.1%, partially offset by acquisitions of 1.1%. The 12.1% decrease in organic revenue was due to a 15.6% decrease in COVID-19 Testing, partially offset by a 3.4% increase in organic Base Business.
Interest Expense Years Ended December 31, 2022 2021 Change Interest expense $ 180.3 $ 212.1 (15.0) % The decrease in interest expense for 2022 as compared with the corresponding period in 2021 is primarily due to the costs of redeeming the outstanding 3.20% senior notes due February 1, 2022 and the 3.75% notes due August 23, 2022 and issuing the new senior notes in 2021 and lower outstanding debt partially offset by a higher average cost of debt in 2022. 57 Index Equity Method Income, Net Years Ended December 31, 2022 2021 Change Equity method income, net $ 5.4 $ 26.5 (79.7) % Equity method income, net represents the Company's ownership share in joint venture partnerships along with equity investments in other companies in the health care industry.
The decrease in interest expense for 2022 as compared with the corresponding period in 2021 is primarily due to the costs of redeeming the outstanding 3.20% senior notes due February 1, 2022 and the 3.75% notes due August 23, 2022 and issuing the new senior notes in 2021 and lower outstanding debt partially offset by a higher average cost of debt in 2022. 57 Index Equity Method Income, Net Years Ended December 31, Change 2023 2022 2021 2023 2022 Equity method income, net $ (1.4) $ 5.4 $ 26.5 (125.9) % (79.6) % Equity method income, net represents the Company's ownership share in joint venture partnerships along with equity investments in other companies in the health care industry.
Price/mix decreased by 3.7% due to lower COVID-19 Testing of 5.2% and unfavorable foreign currency translation of 0.1%, partially offset by higher Base Business of 1.4% and acquisitions of 0.2%. DD revenues for the year ended December 31, 2022, were $5,710.2, a decrease of 2.3% over revenues of $5,845.5 in the corresponding period in 2021.
Price/mix decreased by 3.7% due to lower COVID-19 Testing of 5.2% and unfavorable foreign currency translation of 0.1%, partially offset by higher Base Business of 1.4% and acquisitions of 0.2%. BLS revenues for the year ended December 31, 2022, were $2,697.3, a decrease of 5.7% over revenues of $2,860.7 in the corresponding period in 2021.
For more information about legal contingencies, see Note 14 Commitments and Contingencies to the Consolidated Financial Statements.
For more information about legal contingencies, see Note 15 Commitments and Contingencies to the Consolidated Financial Statements.
The contractual value of the noncontrolling interest put in the Company's Ontario subsidiary totaled $15.0 and $16.3 at December 31, 2022, and 2021, respectively, and has been classified as mezzanine equity in the Company's consolidated balance sheet.
The contractual value of the noncontrolling interest put in the Company's Ontario subsidiary totaled $15.5 and $15.0 at December 31, 2023, and 2022, respectively, and has been classified as mezzanine equity in the Company's consolidated balance sheet.
Amortization of Intangibles and Other Assets Years Ended December 31, 2022 2021 Change Amortization of intangibles and other assets $ 259.3 $ 369.6 (29.8) % The decrease in amortization of intangibles and other assets for the year ended December 31, 2022 is primarily due to $88.4 in amortization acceleration of certain intangible assets related to trade names as a result of the Company's rebranding initiative recognized during 2021, partially offset by the impact of acquisitions.
The decrease in amortization of intangibles and other assets for the year ended December 31, 2022 is primarily due to $88.4 in amortization acceleration of certain intangible assets related to trade names as a result of the Company's rebranding initiative recognized during 2021, partially offset by the impact of acquisitions.
The decrease in revenues was primarily due to unfavorable foreign currency translation of 2.6% and lower COVID-19 Testing of 0.6%, partially offset by organic base business growth of 0.5%, and acquisitions net of divestitures of 0.3%.
The decrease in revenues was primarily due to unfavorable foreign currency translation of 2.8%, lower organic base business growth of 2.3%, lower COVID-19 Testing of 1.3%, partially offset by acquisitions net of divestitures of 0.7%.
These contracts often require payment to DD of expenses to wind-down the study or project, fees earned to date and, in some cases, a termination fee or a payment to DD of some portion of the fees or profits that could have been earned by DD under the contract if it had not been terminated early.
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.
The net proceeds were used to redeem, prior to maturity, the Company's outstanding 3.20% senior notes due February 1, 2022 and 3.75% senior notes due August 23, 2022.
The net proceeds were used to redeem, prior to maturity, the Company's outstanding 3.20% senior notes due 2022 and 3.75% senior notes due 2022.
Other, Net Years Ended December 31, 2022 2021 Change Other, net $ (25.3) $ 42.5 159.8 % The change in Other, net for the year ended December 31, 2022, as compared to the year ended December 31, 2021, was primarily due to investment losses of $19.6 compared to $61.8 of investment gains in the corresponding period of 2021.
The change in Other, net for the year ended December 31, 2022, as compared to the year ended December 31, 2021, was primarily due to investment losses of $19.6 compared to $61.8 of investment gains in the corresponding period of 2021.
The increase in selling, general and administrative expenses as a percentage of revenues is primarily due to a decrease in higher margin COVID-19 Testing and higher personnel costs, partially offset by LaunchPad savings.
Selling, general and administrative expenses as a percentage of revenues increased to 14.9% in 2022 compared to 12.9% in 2021. The increase in selling, general and administrative expenses as a percentage of revenues is primarily due to a decrease in higher margin COVID-19 Testing and higher personnel costs, partially offset by LaunchPad savings.
Other Commercial Commitments As of December 31, 2022, the Company provided letters of credit aggregating approximately $84.5, primarily in connection with certain insurance programs which are renewed annually.
Other Commercial Commitments As of December 31, 2023, the Company provided letters of credit aggregating approximately $91.3, primarily in connection with certain insurance programs which are renewed annually.
Cash and cash equivalents consist of highly liquid instruments, such as time deposits and other money market investments, which have original maturities of three months or less. Cash Flows from Operating Activities During the year ended December 31, 2022, the Company's operations provided $1,955.9 of cash as compared to $3,109.6 in 2021.
Cash and cash equivalents consist of highly liquid instruments, such as time deposits and other money market investments, which have original maturities of three months or less. Cash Flows from Operating Activities During the year ended December 31, 2023, the Company's continuing operations provided $1,202.3 of cash as compared to $1,764.8 in 2022 and $2,846.3 in 2021.
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 and reimbursable out-of-pocket costs.
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 costs.
Following the planned spin-off, the Company believes that Labcorp will be positioned to: • invest in R&D and innovation to develop and launch diagnostic advancements globally in key clinical areas including oncology, Alzheimer's, and autoimmune and liver disease through organic and inorganic opportunities; • bring together its global health and patient data and provide insights to enable customers to innovate; • utilize its worldwide laboratory network to serve a broad, growing and global customer base including pharmaceutical and biotechnology companies, physicians, health systems, consumers, and other start-ups and laboratories that require lab services or diagnostic testing; and • launch innovative tests globally, providing patients, physicians, health systems and pharmaceutical companies with access to its advanced science, technology and diagnostic capabilities.
Following the spin-off, the Company believes that it is positioned to: • invest in R&D and innovation to develop and launch diagnostic advancements globally in key clinical areas including oncology, women's health, autoimmune disease and neurology through organic and inorganic opportunities; • utilize its worldwide laboratory network to serve a broad, growing and global customer base including pharmaceutical and biotechnology companies, physicians, health systems, consumers, and other start-ups and laboratories that require lab services or diagnostic testing; and • launch innovative tests globally, providing patients, physicians, health systems and pharmaceutical companies with access to its advanced science, technology and diagnostic capabilities.
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.
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.
This movement in cash within financing activities for 2022, as compared to 2021, was primarily a result of $1,100.0 in share repurchases in 2022 compared to $1,668.5 in 2021 and the commencement of quarterly dividend payments in the second quarter of 2022.
This movement in cash within financing activities for 2023, as compared to 2022, was primarily a result of $1,000.0 of share repurchases and $300.0 in senior note repayments in 2023 compared to $1,100.0 of share repurchases in 2022 and the commencement of quarterly dividend payments in the second quarter of 2022.
Cash Flows from Financing Activities Net cash used in financing activities for the year ended December 31, 2022 was $1,322.2 compared to cash used in financing activities of $2,065.8 for the year ended December 31, 2021.
Cash Flows from Financing Activities Net cash used in continuing financing activities for the year ended December 31, 2023 was $1,559.0 compared to cash used in continuing financing activities of $1,322.2 for the year ended December 31, 2022.
Corporate expenses were $438.1 for the year ended December 31, 2022, an increase of 4.2% over corporate expenses of $420.5 in the corresponding period of 2021, primarily due to higher personnel costs, bonus allocation, research and development costs, and other costs.
Corporate expenses were $468.8 for the year ended December 31, 2022, an increase of 15.9% over corporate expenses of $404.5 in the corresponding period of 2021, primarily due to higher personnel costs, bonus allocation, research and development costs, and other costs.
The Company was in compliance with all covenants under the revolving credit facility at December 31, 2022, and expects that it will remain in compliance with its existing debt covenants for the next twelve months. During 2022, the Company repurchased 5.6 shares of its common stock at an average price of $233.48 for a total cost of $1,100.0.
The Company was in compliance with all covenants under the revolving credit facility at December 31, 2023, and expects that it will remain in compliance with its existing debt covenants for the next twelve months. During 2023, the Company repurchased 4.8 shares of its Common Stock at an average price per share of $206.85 for a total cost of $1,000.0.
These changes align with how the CODM now evaluates segment performance and allocates resources. Prior periods have been conformed for comparability.
These changes align with how the chief operating decision maker now evaluates segment performance and allocates resources. Prior periods have been conformed for 58 Index comparability.
Fee-for-service contracts are typically priced based on transaction volume or time and materials. For volume based contracts the contract value is entirely variable and revenue is recognized as the specific product or service is completed. For services billed based on time and materials, revenue is recognized using the right to invoice practical expedient.
For volume-based contracts the contract value is entirely variable and revenue is recognized as the specific product or 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.
Liquidity, Capital Resources and Financial Position The Company's strong cash-generating capability and financial condition typically have provided ready access to capital markets. The Company's principal source of liquidity is operating cash flow, supplemented by proceeds from debt offerings. The Company's senior unsecured revolving credit facility is further discussed in Note 10 Debt to the Company's Consolidated Financial Statements.
Liquidity, Capital Resources and Financial Position The Company's strong cash-generating capability and financial condition typically have provided ready access to capital markets. The Company's principal source of liquidity is operating cash flow, supplemented by proceeds from debt offerings.
The decrease was due to lower organic revenue of 7.5% and foreign currency translation of 1.0%, partially offset by acquisitions net of divestitures of 0.8%. The 7.5% decrease in organic revenue was due to a 10.0% decrease in COVID-19 Testing, partially offset by a 2.5% increase in the Company's organic Base Business.
The increase was due to acquisitions of 2.3% and higher organic revenue of 0.2%, partially offset by unfavorable foreign currency translation of 0.2%. The 0.2% increase in organic revenue was due to a 10.7% contribution from organic Base Business, partially offset by a 10.5% decrease in COVID-19 Testing.
The Company continues to evaluate its outstanding debt portfolio to take advantage of market conditions that would allow the Company to reduce its interest rate or financing risk and provide a lower long-term borrowing cost.
The Company continues to evaluate its outstanding debt portfolio to take advantage of market conditions that would allow the Company to reduce its interest rate or financing risk and provide a lower long-term borrowing cost. The Company anticipates that it will refinance the $1,000.0 in debt coming due during 2024.
Selling, General and Administrative Expenses Years Ended December 31, 2022 2021 Change Selling, general and administrative expenses $ 1,996.6 $ 1,952.1 2.3 % SG&A as a % of revenues 13.4 % 12.1 % Selling, general and administrative expenses as a percentage of revenues increased to 13.4% in 2022 compared to 12.1% in 2021.
Selling, General and Administrative Expenses Years Ended December 31, Change 2023 2022 2021 2023 2022 Selling, general and administrative expenses $ 2,021.4 $ 1,763.1 $ 1,690.3 14.7 % 4.3 % SG&A as a % of revenues 16.6 % 14.9 % 12.9 % Selling, general and administrative expenses as a percentage of revenues increased to 16.6% in 2023 compared to 14.9% in 2022.
The Company elected to perform the qualitative assessment for goodwill and intangible assets for the domestic Dx reporting units and a quantitative assessment for all of the DD reporting units and the Canadian reporting unit which includes indefinite-lived assets consisting of acquired Canadian licenses.
The Company elected to perform the qualitative assessment for goodwill and intangible assets for the domestic Dx and clinical trials testing solutions (CTTS) BLS reporting units and a quantitative assessment for the early development (ED) BLS reporting unit and the Canadian reporting unit, which includes indefinite-lived assets consisting of acquired Canadian licenses.
The charges were offset by the reversal of previously established liability of $0.4 and $0.8 in unused severance costs and facility-related costs, respectively.
The charges were adjusted by the reversal of previously established liability of $0.3 in unused severance and $0.2 in unused facility-related costs.
Termination fees are included in revenues when services are performed and realization is assured. Business Combinations The Company accounts for business combination transactions under the acquisition method of accounting and reported the results of operations of the acquired entities from its respective date of acquisition. Assets acquired were recorded at their estimated fair values as of the acquisition date.
Business Combinations The Company accounts for business combination transactions under the acquisition method of accounting and reported the results of operations of the acquired entities from its respective date of acquisition. Assets acquired were recorded at their 63 Index estimated fair values as of the acquisition date.
Capital expenditures were $481.9 and $460.4 for the years ended December 31, 2022 and 2021, respectively. Capital expenditures in 2022 were 3.2% of revenues, primarily in connection with projects to support growth in the Company's core businesses.
Capital expenditures were $453.6, $429.3, and $421.5 for the years ended December 31, 2023, 2022, and 2021, respectively. Capital expenditures in 2023 were 3.7% of revenues, primarily in connection with projects to support growth in the Company's core businesses.
During the second quarter of 2021, the Company entered into fixed-to-variable interest rate swap agreements for its 2.70% senior notes due 2031 with an aggregate notional amount of $500.0 and variable interest rates based on three-month LIBOR plus 1.0706%. These instruments are designated as hedges against changes in the fair value of a portion of the Company's long-term debt.
During the second quarter of 2021, the Company entered into fixed-to-variable interest rate swap agreements for its 2.70% senior notes due 2031 with an aggregate notional amount of $500.0 and variable interest rates based on three-month LIBOR (changed to SOFR in 2023) plus 1.0706%.
Cash Flows from Investing Activities Net cash used by investing activities for the year ended December 31, 2022 was $1,652.2 as compared to net cash used by investing activities of $884.6 for the year ended December 31, 2021.
Cash Flows from Investing Activities Net cash used by continuing investing activities for the year ended December 31, 2023 was $1,146.8 as compared to net cash used by continuing investing activities of $1,599.6 for the year ended December 31, 2022 and $845.7 for the year ended December 31, 2021.
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.
Generally, when contract modifications create new performance obligations, the modification is considered to be a separate contract and revenue is recognized prospectively.
General corporate expenses are comprised primarily of administrative services such as executive management, human resources, legal, finance, corporate affairs, and information technology.
These impacts were partially offset by Base Business growth and LaunchPad savings. General corporate expenses are comprised primarily of administrative services such as executive management, human resources, legal, finance, corporate affairs, and information technology.
Restructuring and Other Charges Years Ended December 31, 2022 2021 Change Restructuring and other charges $ 83.8 $ 43.1 94.5 % During 2022, the Company recorded net restructuring charges of $83.8. The charges were comprised of $39.3 in severance and other personnel costs, $45.7 in facility-related costs primarily associated with general integration activities.
Restructuring and Other Charges Years Ended December 31, Change 2023 2022 2021 2023 2022 Restructuring and other charges $ 49.1 $ 54.0 $ 24.0 (9.1) % 125.0 % During 2023, the Company recorded net restructuring charges of $49.1. The charges were comprised of $33.4 in severance and other personnel costs, $22.3 in facility-related costs primarily associated with general integration activities.
The charges were offset by the reversal of previously established liability of $0.3 in unused severance and $0.9 in unused facility-related costs. During 2021, the Company recorded net restructuring charges of $43.1. The charges were comprised of $16.3 in severance and other personnel costs and $28.0 in facility closures, lease terminations, and general integration activities.
The charges were adjusted by the reversal of previously established liability of $1.4 in unused severance and $0.5 in unused facility-related costs. During 2021, the Company recorded net restructuring charges of $24.0. The charges were comprised of $12.4 in severance and other personnel costs, $12.0 in facility-related costs primarily associated with general integration activities.
The $1,153.7 decrease in cash provided from operations in 2022 as compared with the corresponding 2021 period was primarily due to lower cash earnings as COVID-19 revenues decreased significantly.
The $1,081.5 decrease in cash provided from operations in 2022 as compared with the corresponding 2021 period was primarily due to l ower COVID-19 Testing.
The estimate of total costs expected to complete the contract requires significant judgment and estimates are based on various assumptions of events that often span several years. These estimates are reviewed periodically and any adjustments are recognized on a cumulative catch-up basis in the period they become known.
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.
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. 60 Index Critical Accounting Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported periods.
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.
The $767.6 increase in net cash used by investing activities for the year ended December 31, 2022, was primarily due to a year over year increase of $667.1 in cash paid for acquisitions. The Company had proceeds of $87.3 from the sale of assets and disposition of businesses during 2021 in comparison to $1.4 during 2022.
The $753.9 increase in net cash used by investing activities for the year ended December 31, 2022 as compared to the year ended December 31, 2021, was primarily due to a year over year increase of $667.1 in cash paid for acquisitions and a year over year decrease in proceeds from sale of $85.9.
Goodwill and Other Asset Impairments Years Ended December 31, 2022 2021 Change Goodwill and other asset impairments $ 271.5 $ — 100.0% The 2022 impairment charges were primarily comprised of $260.0 of goodwill impairment for the early development reporting unit, which is part of the DD segment, and the impairment of a technology intangible asset.
Goodwill and Other Asset Impairments Years Ended December 31, Change 2023 2022 2021 2023 2022 Goodwill and other asset impairments $ 349.0 $ 261.7 $ — 33.4 % — % The 2023 impairment charges were primarily comprised of $333.6 of goodwill impairment for the Early Development reporting unit, which is part of the BLS segment.
Years ended December 31, 2022 and 2021 Revenues Years Ended December 31, 2022 2021 Change Dx $ 9,203.5 $ 10,363.6 (11.2) % DD 5,710.2 5,845.5 (2.3) % Intercompany eliminations (36.9) (88.2) 58.2 % Total $ 14,876.8 $ 16,120.9 (7.7) % The 7.7% decrease in revenues for the year ended December 31, 2022, as compared to the corresponding period in 2021 was due to lower organic revenue of 7.5% and unfavorable foreign currency translation of 1.0%, partially offset by acquisitions net of divestitures of 0.8%.
Years ended December 31, 2023, 2022, and 2021 Revenues Years Ended December 31, Change 2023 2022 2021 2023 2022 Dx $ 9,415.1 $ 9,203.5 $ 10,363.6 2.3 % (11.2) % BLS 2,774.2 2,697.3 2,860.7 2.9 % (5.7) % Intercompany eliminations (27.7) (36.9) (88.2) (24.9) % (58.2) % Total $ 12,161.6 $ 11,863.9 $ 13,136.1 2.5 % (9.7) % The 2.5% increase in revenues for the year ended December 31, 2023, as compared to the corresponding period in 2022 was due to acquisitions, net of divestitures of 1.7%, organic revenue of 0.6%, and favorable foreign currency translation of 0.2%.
The Company defines organic growth as the increase in revenue excluding the year over year impact of acquisitions, divestitures, and currency. Acquisition and divestiture impact is considered for a twelve-month period following the close of each transaction. Base Business includes the Company's business operations except for COVID-19 Testing.
The Company defines organic growth as the increase in revenue excluding the year over year impact of acquisitions, divestitures, and currency. Acquisition and divestiture impact is considered for a twelve-month period following the close of each transaction. On June 30, 2023, the Company completed the previously announced spin-off of Fortrea from the Company.
Off-Balance Sheet Arrangements The Company does not have transactions or relationships with “special purpose” entities, and the Company does not have any off-balance sheet financing other than normal operating leases and letters of credit.
Credit Ratings The Company’s investment grade debt ratings from Moody’s and Standard & Poor's (S&P) contribute to its ability to access capital markets. Off-Balance Sheet Arrangements The Company does not have transactions or relationships with “special purpose” entities, and the Company does not have any off-balance sheet financing other than normal operating leases and letters of credit.
The decrease in income for 2022 as compared with the corresponding period in 2021 was primarily due to the decreased profitability of the Company's joint ventures in 2022.
Equity method income, net represents the Company's ownership share in joint venture partnerships along with equity investments in other companies in the health care industry. The decrease in income for 2022 as compared with the corresponding period in 2021 was primarily due to the decreased profitability of the Company's joint ventures in 2022.
The decrease in operating income and margin were primarily due to a reduction in COVID-19 Testing, higher personnel expense, the mix impact from Ascension, partially offset by organic Base Business growth. 58 Index DD operating income was $801.1 for the year ended December 31, 2022, a decrease of 9.7% from operating income of $887.1 in the corresponding period of 2021.
The decrease in operating income and margin were primarily due to a reduction in COVID-19 Testing, higher personnel expense, the mix impact from the integration of Ascension's laboratory business, partially offset by organic Base Business growth.
Years Ended December 31, 2022 2021 Change Dx segment operating income $ 2,025.5 $ 3,205.6 (36.8) % Dx segment operating margin 22.0 % 30.9 % (8.9) % DD segment operating income 801.1 887.1 (9.7) % DD segment operating margin 14.0 % 15.2 % (1.1) % Segment operating income 2,826.6 4,092.7 (30.9) % General corporate and unallocated expenses (438.1) (420.5) 4.2 % Amortization of intangibles and other assets (259.3) (369.6) (29.8) % Restructuring and other charges (83.8) (43.1) 94.4 % Goodwill and other asset impairments (271.5) — 100.0 % Total operating income $ 1,773.9 $ 3,259.5 (45.6) % Dx operating income was $2,025.5 for the year ended December 31, 2022, a decrease of 36.8% over operating income of $3,205.6 in the corresponding period of 2021, and Dx operating margin decreased 890 basis points in operating margin year-over-year.
Years Ended December 31, Change 2023 2022 2021 2023 2022 Dx segment operating income $ 1,591.3 $ 2,025.5 $ 3,205.6 (21.4) % (36.8) % Dx segment operating margin 16.9 % 22.0 % 30.9 % (5.1) % (8.9) % BLS segment operating income 396.3 389.1 501.0 1.8 % (22.3) % BLS segment operating margin 14.3 % 14.4 % 17.5 % (0.1) % (3.1) % Segment operating income 1,987.6 2,414.6 3,706.6 (17.7) % (34.9) % General corporate and unallocated expenses (644.1) (468.8) (404.5) 37.4 % 15.9 % Amortization of intangibles and other assets (219.8) (193.6) (229.5) 13.5 % (15.6) % Restructuring and other charges (49.1) (54.0) (24.0) (9.1) % 125.0 % Goodwill and other asset impairments (349.0) (261.7) — 33.4 % 100.0 % Total operating income $ 725.6 $ 1,436.5 $ 3,048.6 (49.5) % (52.9) % Dx operating income was $1,591.3 for the year ended December 31, 2023, a decrease of 21.4% over operating income of $2,025.5 in the corresponding period of 2022, and Dx operating margin decreased 510 basis points year-over-year.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (in millions) General During the year ended December 31, 2022, the Company's revenues were $14.9 billion, a decrease of 7.7% from $16.1 billion in 2021.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (all amounts in millions, except per share amounts or as otherwise noted) General During the year ended December 31, 2023, the Company's revenues from continuing operations were $12.2 billion, an increase of 2.5% from $11.9 billion in 2022.
If a price list is not available, DD 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.
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.
In summary the Company's cash flows were as follows: For the Year Ended December 31, 2022 2021 Net cash provided by operating activities $ 1,955.9 $ 3,109.6 Net cash used for investing activities (1,652.2) (884.6) Net cash used for financing activities (1,322.2) (2,065.8) Effect of exchange rate on changes in cash and cash equivalents (24.2) (7.3) Net change in cash and cash equivalents $ (1,042.7) $ 151.9 Cash and Cash Equivalents Cash and cash equivalents at December 31, 2022 and 2021 totaled $430.0 and $1,472.7, respectively.
The Company's senior unsecured revolving credit facility is further discussed in Note 11 Debt to the Company's Consolidated Financial Statements. 59 Index In summary the Company's cash flows were as follows: For the Year Ended December 31, 2023 2022 2021 Net cash provided by continuing operating activities $ 1,202.3 $ 1,764.8 $ 2,846.3 Net cash used for continuing investing activities (1,146.8) (1,599.6) (845.7) Net cash used for continuing financing activities (1,559.0) (1,322.2) (2,065.8) Effect of exchange rate on changes in cash and cash equivalents 9.9 (24.2) (7.3) Net cash impact from discontinued operations 1,600.4 138.5 224.4 Net change in cash and cash equivalents $ 106.8 $ (1,042.7) $ 151.9 Cash and Cash Equivalents Cash and cash equivalents at December 31, 2023 and 2022 totaled $536.8 and $320.6, respectively.
Income Tax Expense Years Ended December 31, 2022 2021 Income tax expense $ 302.0 $ 747.1 Income tax expense as a % of income before tax 19.1 % 23.9 % The current year effective tax rate was favorably impacted by the Company's research and development tax credits, changes in effective state income tax rates, and deferred tax adjustments.
The 2022 effective tax rate was favorably impacted by the Company's research and development tax credits, changes in effective state income tax rates, and deferred tax adjustments.
There were no goodwill and other asset impairments for the year ended December 31, 2021.
Impairment charges for the year ended December 31, 2022 included $260.0 of goodwill impairment for the Early Development reporting unit and the impairment of a technology intangible asset. There were no goodwill and other asset impairments for the year ended December 31, 2021.
Cost of Revenues Years Ended December 31, 2022 2021 Change Cost of revenues $ 10,491.7 $ 10,496.6 — % Cost of revenues as a % of revenues 70.5 % 65.1 % Cost of revenues were flat in 2022 as compared with 2021 and increased as a percentage of revenues to 70.5% in 2022 as compared to 65.1% in 2021.
Cost of revenues were flat in 2022 as compared with 2021 and increased as a percentage of revenues to 68.7% in 2022 as compared to 62.0% in 2021.
Based upon the results of the qualitative and quantitative assessments, the Company concluded that the fair values of each of its reporting units, as of October 1, 2022, were greater than the carrying values. For the early development reporting unit, which is part of the DD segment, the fair value of the business exceeded the book value by approximately 10%.
Based upon the results of the qualitative and quantitative assessments, the Company concluded that the fair values of its domestic Dx, CTTS and Canadian reporting units, as of October 1, 2023, were greater than the carrying values.
Management believes that the assumptions used for its impairment tests are representative of those that would be used by market participants performing similar valuations of the reporting units. Management performed its annual goodwill and intangible asset impairment testing as of the beginning of the fourth quarter of 2022.
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.
Other payments and billing adjustments may also factor into the calculation of total contract value, such as the reimbursement of out-of-pocket costs and volume-based rebates. These contracts generally take the form of fixed-price or fee-for-service arrangements subject to pricing adjustments based on changes in scope.
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 form of fixed-price or fee-for-service arrangements subject to pricing adjustments based on changes in scope.
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.
Revenue Recognition Dx Within the Dx segment, a revenue transaction is initiated when Dx receives a requisition order 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.
The majority of DD's contracts contain a single performance obligation, as DD 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, DD allocates the contract value to the goods and services based on a customer price list, if available.
The selection of the method to measure progress towards completion requires judgment and is based on the nature of the products or services to be provided. The majority of BLS's contracts contain a single performance obligation, as BLS provides a significant service of integrating all promises in the contract and the promises are highly interdependent and interrelated with one another.
Based on the quantitative impairment assessment performed in the same manner as the Company's annual quantitative assessment, the Company concluded that the fair value was less than carrying value for the early development reporting unit and recorded a goodwill impairment of $260.0 in the DD segment.
Therefore, the Company concluded that the fair value of the ED reporting unit was less than carrying value and recorded a goodwill impairment of $333.6 in the BLS segment.
This included 0.9 shares which were repurchased in 2022 but were part of the $1,000.0 ASR Program paid for in 2021. At the end of 2022, the Company had outstanding authorization from the Board to purchase $531.5 of Company common stock. The repurchase authorization has no expiration date.
The Company has accrued $9.0 of excise tax related to this accelerated share repurchase which will be paid in April 2024. At the end of 2023, the Company had outstanding authorization from the Board to purchase $530.4 of Company Common Stock. The repurchase authorization has no expiration date.
The decrease was primarily due to a reduction in COVID-19 Testing, a reduction in COVID-19 related work, the interruption of some clinical trial activity due to the Ukraine/Russia crisis, and other inflationary costs. These impacts were partially offset by Base Business growth and LaunchPad savings.
The decrease was primarily due to a reduction in COVID-19 Testing and higher personnel costs, partially offset by a demand in the Base Business.
The Company’s critical accounting policies arise in conjunction with the following: • Revenue recognition; • Business combinations; • Income taxes; • Goodwill and indefinite-lived assets; and • Legal contingencies. Revenue Recognition Dx Within the Dx segment, a revenue transaction is initiated when Dx receives a requisition order to perform a diagnostic test.
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 policies arise in conjunction with the following: • Revenue recognition; • Business combinations; • Income taxes; • Goodwill and indefinite-lived assets; and • Legal contingencies.
On January 12, 2023, the Company announced a cash dividend of $0.72 per share of common stock for the first quarter, or approximately $64.8 in the aggregate. The dividend will be payable on March 13, 2023, to stockholders of record of all issued and outstanding shares of common stock as of the close of business on February 23, 2023.
For the year ended December 31, 2023, the Company paid $254.0 in Common Stock dividends. On January 12, 2024, the Company announced a cash dividend of $0.72 per share of Common Stock for the first quarter, or approximately $61.5 in the aggregate.
The aggregate fair value of $79.7 at December 31, 2022, was included as a component of other long-term liabilities and deducted from the reported value of the senior notes. On April 30, 2021, the Company amended and restated its revolving credit facility.
These instruments are designated as hedges against changes in the fair value of a portion of the Company's long-term debt. The aggregate fair value of $69.6 at December 31, 2023, was included as a 60 Index component of other long-term liabilities and deducted from the reported value of the senior notes.
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. DD A majority of DD’s revenues are earned under contracts that are long term in nature, ranging in duration from a few months to many years.
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.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeAt December 31, 2022, the Company had 27 open foreign exchange forward contracts with various amounts maturing monthly through January 2023 with a notional value totaling approximately $629.5. At December 31, 2021, the Company had 28 open foreign exchange forward contracts with various amounts maturing monthly through January 2022 with a notional value totaling approximately $600.7.
Biggest changeAt 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. At December 31, 2022, the Company had 27 open foreign exchange forward contracts with various amounts maturing monthly through January 2023 with a notional value totaling approximately $629.5.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK (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.
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.
The Company's financial statements are reported in USD and, accordingly, fluctuations in exchange rates will affect the translation of revenues and expenses denominated in foreign currencies into USD for purposes of reporting the Company's consolidated financial results. In both 2022 and 2021, the most significant currency exchange rate exposures were to the Canadian dollar, Swiss franc, euro and British pound.
The Company's financial statements are reported in USD and, accordingly, fluctuations in exchange rates will affect the translation of revenues and expenses denominated in foreign currencies into USD for purposes of reporting the Company's consolidated financial results. In both 2023 and 2022, the most significant currency exchange rate exposures were to the Canadian dollar, Swiss franc, euro and British pound.
In May, 2021, to hedge against changes in the fair value portion of the Company's long-term debt, the Company entered into fixed-to-variable interest rate swap agreements for the 2.70% senior notes due 2031 with an aggregate notional value of $500.0 and variable interest rates based on three-month LIBOR plus 1.0706%.
In May, 2021, to hedge against changes in the fair value portion of the Company's long-term debt, the Company entered into fixed-to-variable interest rate swap agreements for the 2.70% senior notes due 2031 with an aggregate notional value of $500.0 and variable interest rates based on three-month LIBOR (changed to SOFR in 2023) plus 1.0706%. 66 Index
Gross accumulated currency translation adjustments recorded as a separate component of shareholders’ equity were $(336.4) and $(104.6) at December 31, 2022, and 2021, respectively. The Company does not have significant operations in countries in which the economy is considered to be highly inflationary.
Gross accumulated currency translation adjustments recorded as a separate component of shareholders’ equity were $183.1 and $(336.4) at December 31, 2023, and 2022, respectively. The Company does not have significant operations in countries in which the economy is considered to be highly inflationary.
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 2022 by approximately $26.9.
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 2023 by approximately $24.1.
The Company does not hold or issue derivative financial instruments for trading purposes. Foreign Currency Exchange Rates Approximately 14.7% and 15.3% of the Company's revenues for the year ended December 31, 2022 and 2021, respectively, were denominated in currencies other than the U.S. dollar (USD).
The Company does not hold or issue derivative financial instruments for trading purposes. Foreign Currency Exchange Rates Approximately 12.9% and 13.8% of the Company's revenues for the year ended December 31, 2023 and 2022, respectively, were denominated in currencies other than the U.S. dollar (USD).

Other LH 10-K year-over-year comparisons