LABORATORY CORP OF AMERICA HOLDINGS – 10-Q – MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS
Laboratory Corporation of America® Holdings together with its subsidiaries (the
Company) has made in this report, and from time to time may otherwise make in
its public filings, press releases and discussions by Company management,
forward-looking statements concerning the Company's operations, performance and
financial condition, as well as its strategic objectives. Some of these
forward-looking statements relate to future events and expectations and can be
identified by the use of forward-looking words such as "believes", "expects",
"may", "will", "should", "seeks", "approximately", "intends", "plans",
"estimates", or "anticipates" or the negative of those words or other comparable
terminology. Such forward-looking statements speak only as of the time they are
made and are subject to various risks and uncertainties and the Company claims
the protection afforded by the safe harbor for forward-looking statements
contained in the Private Securities Litigation Reform Act of 1995. Actual
results could differ materially from those currently anticipated due to a number
of factors in addition to those discussed elsewhere herein, including in the
"Risk Factors" section of the Annual Report on Form 10-K, and in the Company's
other public filings, press releases, and discussions with Company management,
including:
1.   changes in government and third-party payer regulations, reimbursement, or
coverage policies or other future reforms in the U.S. healthcare system (or in
the interpretation of current regulations), new insurance products or payment
systems, including state, regional or private insurance cooperatives (e.g.,
health insurance exchanges) affecting governmental and third-party coverage or
reimbursement for commercial laboratory testing, including the impact of the
U.S. Protecting Access to Medicare Act of 2014 (PAMA);
2.  significant monetary damages, fines, penalties, assessments, refunds,
repayments, damage to the Company's reputation, unanticipated compliance
expenditures, and/or exclusion or debarment from or ineligibility to participate
in government programs, among other adverse consequences, arising from
enforcement of anti-fraud and abuse laws and other laws applicable to the
Company in jurisdictions in which the Company conducts business;
3. significant fines, penalties, costs, unanticipated compliance expenditures
and/or damage to the Company's reputation arising from the failure to comply
with applicable privacy and security laws and regulations, including the U.S.
Health Insurance Portability and Accountability Act of 1996, the U.S. Health
Information Technology for Economic and Clinical Health Act, the European
Union's General Data Protection Regulation and similar laws and regulations in
jurisdictions in which the Company conducts business;
4.  loss or suspension of a license or imposition of fines or penalties under,
or future changes in, or interpretations of applicable licensing laws or
regulations regarding the operation of clinical laboratories and the delivery of
clinical laboratory test results, including, but not limited to, the U.S.
Clinical Laboratory Improvement Act of 1967 and the U.S. Clinical Laboratory
Improvement Amendments of 1988 and similar laws and regulations in jurisdictions
in which the Company conducts business;
5.   penalties or loss of license arising from the failure to comply with
applicable occupational and workplace safety laws and regulations, including the
U.S. Occupational Safety and Health Administration requirements, the U.S.
Needlestick Safety and Prevention Act, and similar laws and regulations in
jurisdictions in which the Company conducts business;
6.  fines, unanticipated compliance expenditures, suspension of manufacturing,
enforcement actions, damage to the Company's reputation, injunctions, or
criminal prosecution arising from failure to maintain compliance with current
good manufacturing practice regulations and similar requirements of various
regulatory agencies in jurisdictions in which the Company conducts business;
7.  sanctions or other remedies, including fines, unanticipated compliance
expenditures, enforcement actions, injunctions or criminal prosecution arising
from failure to comply with the Animal Welfare Act or applicable national, state
and local laws and regulations in jurisdictions in which the Company conducts
business;
8.  changes in testing guidelines or recommendations by government agencies,
medical specialty societies and other authoritative bodies affecting the
utilization of laboratory tests;
9.  changes in applicable government regulations or policies affecting the
approval, availability of, and the selling and marketing of diagnostic tests,
drug development, or the conduct of drug development and medical device and
diagnostic studies and trials, including regulations and policies of the U.S.
Food and Drug Administration, the U.S. Department of Agriculture, the Medicine
and Healthcare products Regulatory Agency in the United Kingdom, the National
Medical Products Administration in China, the Pharmaceutical and Medical Devices
Agency in Japan, the European Medicines Agency and similar regulations and
policies of agencies in other jurisdictions in which the Company conducts
business;
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10.  changes in government regulations or reimbursement pertaining to the
biopharmaceutical and medical device and diagnostic industries, changes in
reimbursement of biopharmaceutical products, or reduced spending on research and
development by biopharmaceutical and medical device and diagnostic customers;
11.  liabilities that result from the failure to comply with corporate
governance requirements;
12.  increased competition, including price competition, potential reduction in
rates in response to price transparency initiatives and consumerism, competitive
bidding and/or changes or reductions to fee schedules and competition from
companies that do not comply with existing laws or regulations or otherwise
disregard compliance standards in the industry;
13.   changes in payer mix or payment structure or processes, including
insurance carrier participation in health insurance exchanges, an increase in
capitated reimbursement mechanisms, the impact of clearinghouses on the claims
reimbursement process, the impact of a shift to consumer-driven health plans or
plans carrying an increased level of member cost-sharing, and adverse changes in
payer reimbursement or payer coverage policies (implemented directly or through
a third-party utilization management organization) related to specific
diagnostic tests, categories of testing or testing methodologies;
14.  failure to retain or attract managed care organization (MCO) business as a
result of changes in business models, including risk-based or network
approaches, out-sourced laboratory network management or utilization management
companies, or other changes in strategy or business models by MCOs;
15.  failure to obtain and retain new customers, an unfavorable change in the
mix of testing services ordered, or a reduction in tests ordered, specimens
submitted or services requested by existing customers, and delays in payment
from customers;
16.  consolidation and convergence of customers, competitors, and suppliers,
potentially causing material shifts in insourcing, utilization, pricing,
reimbursement and supply chain access;
17.  failure to effectively develop and deploy new systems, system modifications
or enhancements required in response to evolving market and business needs;
18.  customers choosing to insource services that are or could be purchased from
the Company;
19.   failure to identify, successfully close, and effectively integrate and/or
manage acquisitions of new businesses or failure to maintain key customers
and/or employees as a result of uncertainty surrounding the integration of
acquisitions;
20.  inability to achieve the expected benefits and synergies of newly-acquired
businesses, including due to items not discovered in the due diligence process,
and the impact on the Company's cash position, levels of indebtedness and stock
price;
21.  termination, loss, delay, reduction in scope or increased costs of
contracts, including large contracts and multiple contracts;
22.  liability arising from errors or omissions in the performance of testing
services, contract research services, or other contractual arrangements;
23.  changes or disruption in the provision or transportation of services or
supplies provided by third parties; or their termination for failure to follow
the Company's performance standards and requirements;
24.   damage or disruption to the Company's facilities;
25. damage to the Company's reputation, loss of business, or other harm from
acts of animal rights activists or potential harm and/or liability arising from
animal research activities;
26.  adverse results in litigation matters;
27.   inability to attract and retain experienced and qualified personnel or the
loss of significant personnel as a result of illness, increased competition for
talent, or other market factors;
28.  failure to develop or acquire licenses for new or improved technologies,
such as point-of-care testing, mobile health technologies, and digital
pathology, or potential use of new technologies by customers and/or consumers to
perform their own tests;
29.  substantial costs arising from the inability to commercialize newly
licensed tests or technologies or to obtain appropriate coverage or
reimbursement for such tests;
30.  failure to obtain, maintain and enforce intellectual property rights for
protection of the Company's products and services and defend against challenges
to those rights;
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31.  scope, validity and enforceability of patents and other proprietary rights
held by third parties that may impact the Company's ability to develop, perform,
or market the Company's products or services or operate its business;
32.  business interruption, receivable impairment, delays in cash collection
impacting days sales outstanding, supply chain disruptions or inventory
obsolescence, increases in material cost or other operating costs, or other
impacts on the business due to natural disasters, including adverse weather,
fires and earthquakes; political crises, including terrorism and war; public
health crises and disease epidemics and pandemics; changes in the global
economy; and other events outside of the Company's control;
33.  discontinuation or recalls of existing testing products;
34.  a failure in the Company's information technology systems, including with
respect to testing turnaround time and billing processes, or the failure of the
Company or its third-party suppliers and vendors to maintain the security of
business information or systems or to protect against cybersecurity attacks such
as denial of service attacks, malware, ransomware and computer viruses, or
delays or failures in the development and implementation of the Company's
automation platforms, any of which could result in a negative effect on the
Company's performance of services, a loss of business or increased costs,
damages to the Company's reputation, significant litigation exposure, an
inability to meet required financial reporting deadlines, or the failure to meet
future regulatory or customer information technology, data security and
connectivity requirements;
35.  business interruption, increased costs, and other adverse effects on the
Company's operations due to the unionization of employees, union strikes, work
stoppages, general labor unrest or failure to comply with labor or employment
laws;
36.   failure to maintain the Company's days sales outstanding levels, cash
collections (in light of increasing levels of patient responsibility),
profitability and/or reimbursement arising from unfavorable changes in
third-party payer policies, payment delays introduced by third party utilization
management organizations, and increasing levels of patient payment
responsibility;
37.  impact on the Company's revenues, cash collections and the availability of
credit for general liquidity or other financing needs arising from a significant
deterioration in the economy or financial markets or in the Company's credit
ratings by Standard & Poor's and/or Moody's;
38.  failure to maintain the expected capital structure for the Company,
including failure to maintain the Company's investment grade rating, or leverage
ratio covenants under its revolving credit facility;
39.  changes in reimbursement by foreign governments and foreign currency
fluctuations;
40.   inability to obtain certain billing information from physicians, resulting
in increased costs and complexity, a temporary disruption in receipts and
ongoing reductions in reimbursements and revenues;
41.  expenses and risks associated with international operations, including, but
not limited to, compliance with the U.S. Foreign Corrupt Practices Act, the U.K.
Bribery Act, other applicable anti-corruption laws and regulations, trade
sanction laws and regulations, and economic, political, legal and other
operational risks associated with foreign jurisdictions;
42.  failure to achieve expected efficiencies and savings in connection with the
Company's business process improvement initiatives;
43.  changes in tax laws and regulations or changes in their interpretation;
44.  global economic conditions and government and regulatory changes; and
45. effects, duration, and severity of the ongoing COVID-19 pandemic, including
the impact on operations, personnel, supplies, liquidity, collections, as well
as the impact of past or future actions or omissions by the Company or
governments in response to the COVID-19 pandemic including, but not limited to,
emerging government vaccine and testing mandates, and damage to the Company's
reputation or loss of business resulting from the perception of the Company's
response to the COVID-19 pandemic, including the availability and accuracy and
timeliness of delivery of any tests that the Company develops, collaborates on
or provides for the detection of COVID-19, and the availability and timeliness
of its drug development services.

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

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GENERAL (dollars in millions, except per share data)

Revenues for the nine months ended September 30, 2021, were $12,064.8, an
increase of 27.1% from $9,488.7 during the nine months ended September 30, 2020.
The increase in revenues was due to organic growth of 25.2%, acquisitions of
0.8%, and favorable foreign currency translation of 1.2%. The 25.2% increase in
organic revenue includes a 18.2% contribution from the company's organic Base
Business and a 7.0% increase from COVID-19 Testing. Base Business includes the
Company's business operations except for PCR and antibody COVID-19 testing
(COVID-19 Testing).
The Company defines organic growth as the increase in revenue, excluding revenue
from acquisitions for the first twelve months after the close of each
acquisition.
As previously reported, in March 2021, the Company announced that its board of
directors and management had commenced a review of the Company's structure and
capital allocation strategy to ensure that it is best positioned to unlock
shareholder value while the Company continues to support patients and customers
around the world. The board of directors has engaged Goldman Sachs & Co. LLC as
its financial advisor to support the process. There can be no assurances
regarding the outcome or timing of the review process. The Company expects to
provide an update in the fourth quarter, though it does not undertake any
obligation to provide updates on this process until a conclusion is reached.

RESULTS OF OPERATIONS (dollars in millions)

Three months ended September 30, 2021, compared with three months ended
September 30, 2020
Revenues
                                                  Three Months Ended September 30,
                                                      2021                2020                  Change
Dx                                               $   2,617.5          $  2,704.2                     (3.2) %
DD                                                   1,459.5             1,241.9                     17.5  %
Intercompany eliminations and other                    (14.4)              (50.0)                   (71.2) %
Total                                            $   4,062.6          $  3,896.1                      4.3  %


Total revenues for the three months ended September 30, 2021, were $4,062.6, an
increase of 4.3% over $3,896.1 in the third quarter of 2020. The increase was
due to organic Base Business growth of 3.4%, acquisitions of 0.4%, and favorable
foreign currency translation of 0.5%. The 3.4% increase in organic revenue is
driven by a 10.2% increase in the company's organic Base Business, partially
offset by a 6.8% decrease in COVID-19 Testing.
Dx revenues for the three months ended September 30, 2021, were $2,617.5, a
decrease of 3.2% over $2,704.2 in the third quarter of 2020. The decrease was
due to organic Base Business reduction of 3.9%, partially offset by acquisitions
of 0.4%, and favorable foreign currency translation of 0.3%. The decrease in
organic revenue was due to a 9.7% reduction from COVID-19 Testing, partially
offset by a 5.8% increase in the Base Business.
Total volume (measured by requisitions) for the three months ended September 30,
2021, increased by 0.2% as acquisition volume contributed 0.2% and organic
volume decreased by 0.1%. The organic volume was impacted by a 5.9% decrease in
COVID-19 Testing, partially offset by a 5.9% increase in Base Business.
Price/mix decreased by 3.4% due to lower COVID-19 Testing of 3.8%, partially
offset by acquisitions of 0.2% and favorable currency translation of 0.3%.
Organic Base Business volume was up 7.7% while price/mix was up 1.3%.
DD revenues for the three months ended September 30, 2021, were $1,459.5, an
increase of 17.5% over $1,241.9 in the third quarter of 2020. The increase was
due to organic Base Business growth of 19.9%, acquisitions of 0.4%, and
favorable foreign currency translation of 1.0%, partially offset by lower
COVID-19 Testing performed through its Central Laboratories business of 3.5% and
divestitures of 0.3%. Drug Development's Base Business benefited from
broad-based demand, including COVID-19 vaccine and therapeutic work.
Cost of Revenues
                                                       Three Months Ended September 30,
                                                           2021                   2020                 Change
Cost of revenues                                    $       2,677.1           $  2,336.7                   14.6  %
Cost of revenues as a % of revenues                            65.9   %     

60.0 %

Cost of revenues increased 14.6 % during the three months ended September 30,
2021, as compared with the corresponding period in 2020. Cost of revenues as a
percentage of revenues during the three months ended September 30, 2021,
increased to 65.9% as compared to 60.0% in the corresponding period in 2020.
This increase was primarily due to the impact of COVID-19 Testing.
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Selling, General and Administrative Expenses

                                                             Three Months 

Ended September 30,

                                                                 2021                  2020                 Change
Selling, general and administrative expenses              $        519.9           $    419.5                   23.9  %

Selling, general and administrative expenses as a % of
revenues

                                                            12.8   %             10.8  %


During the three months ended September 30, 2021, the Company incurred $9.6 of
retention bonuses, $5.2 of acquisition and divestiture related costs, $2.8 in
management transition costs, and $2.0 in COVID-related costs. In addition, the
Company recorded $1.8 of non-capitalized costs associated with the
implementation of a major system as part of its LaunchPad business process
improvement initiative and $4.0 related to miscellaneous other items. These
items increased selling, general and administrative expenses by $25.4.
During the three months ended September 30, 2020, the Company incurred $2.4 in
acquisition and divestiture costs, $1.9 in COVID-related costs and $1.8 in
management transition costs. In addition, the Company recorded $0.2 of
non-capitalized costs associated with the implementation of a major system as
part of its LaunchPad business process improvement initiative and $0.7 related
to miscellaneous other items. These items increased selling, general and
administrative expenses by $7.0.
Excluding these charges, selling, general and administrative expenses as a
percentage of revenues were 12.2% and 10.6% during the three months ended
September 30, 2021, and 2020, respectively, primarily due to the impact of
COVID-19 Testing.
Goodwill and Other Asset Impairments
                                                         Three Months Ended 

September 30,

                                                             2021                 2020                 Change
Goodwill and other asset impairments                   $           -          $     23.5                   (99.9) %


During the three months ended September 30, 2020, the Company recorded goodwill
and other asset impairment charges of $10.1 and $17.7 for customer relationships
and technology intangible assets, respectively, due to the loss of a contract
from a DD prior acquisition. The Company reversed the $5.0 charge for the
estimated loss related to the DD floating rate secured note receivable due 2022
from Envigo. The Company also recorded an impairment for a note receivable
related to a Dx investment of $0.7 during the three months ended September 30,
2020. There were no goodwill and other asset impairments for the three months
ended September 30, 2021.
Amortization of Intangibles and Other Assets
                                                            Three Months Ended September 30,
                                                                2021                   2020                 Change
Dx                                                      $            29.3          $     25.9                   13.3  %
DD                                                                   62.9                36.3                   73.2  %
Total amortization of intangibles and other assets      $            92.2          $     62.2                   48.3  %


The increase in amortization of intangibles and other assets primarily reflects
the impact of acquisitions occurring after September 30, 2020, and $30.2 of
accelerated amortization related to the Covance trade name as a result of a
rebranding initiative, partially offset by lower amortization due to the
impairment of intangible assets in 2020.
Restructuring and Other Special Charges
                                                             Three Months 

Ended September 30,

                                                                 2021                   2020                 Change
Restructuring and other charges                          $             6.5          $      7.1                   (9.1) %


During the three months ended September 30, 2021, the Company recorded net
restructuring and other charges of $6.5: $3.3 within Dx and $3.2 within DD. The
charges were comprised of $3.3 related to severance and other personnel costs
and $3.7 in facility closures, lease terminations, and general integration
activities. The charges were adjusted by the reversal of previously established
liability of $0.5 in unused facility-related costs.
During the three months ended September 30, 2020, the Company recorded net
restructuring and other special charges of $7.1: $1.6 within Dx and $5.5 within
DD. The charges were comprised of $2.3 related to severance and other personnel
costs, $3.0 for a DD lab facility and equipment impairment, and $4.0 in facility
closures, impairment of operating lease right-of-use assets, and general
integration initiatives. The charges were offset by the reversal of previously
established reserves of $0.1 and $2.1 in unused severance and facility-related
costs, respectively.


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Interest Expense
                            Three Months Ended September 30,
                                   2021                       2020        Change
Interest expense   $           (42.2)                       $ (51.4)      (18.0) %


The decrease in interest expense for the three months ended September 30, 2021,
as compared with the corresponding period in 2020, is primarily due to lower
outstanding debt and a lower average cost of debt.
Equity Method Income
                                      Three Months Ended September 30,
                                              2021                        2020       Change
Equity method income, net   $             8.4                            $ 3.0       173.6  %


 Equity method income represents the Company's ownership share in joint venture
partnerships along with equity investments in other companies in the health care
industry. The increase in income for the three months ended September 30, 2021,
as compared with the corresponding period in 2020, was primarily due to the
write off or write down of certain of the Company's investments in 2020, which
was primarily due to the negative impact of the COVID-19 global pandemic, and to
increased profitability of the Company's joint ventures in 2021.
Other, net
                      Three Months Ended September 30,
                             2021                       2020        Change
Other, net   $           31.9                         $ (54.2)      159.0  %


 The change in other, net for the three months ended September 30, 2021, as
compared to the three months ended September 30, 2020, is primarily due to the
$55.9 of funding from the Public Health and Social Services Emergency Fund for
provider relief that was appropriated by Congress to the U.S. Department of
Health and Human Services (HHS) in the Coronavirus Aid, Relief, and Economic
Security Act (CARES Act Provider Relief Funds) in the second quarter of 2020.
The Company returned these funds to the government in the fourth quarter of
2020. This funding in 2020 was partially offset by the $5.2 write off or write
down of certain of the Company's investments due to the negative impact of the
COVID-19 global pandemic in 2020. During the three months ended September 30,
2021, the Company recorded investment gains of $36.9. In addition, foreign
currency transaction gains of $0.4 were recognized for the three months ended
September 30, 2021, and losses of $1.9 were recognized in the corresponding
period of 2020.
Income Tax Expense
                                                       Three Months Ended September 30,
                                                           2021                  2020                 Change
Income tax expense                                  $        180.4           $    243.4                   (25.9) %

Income tax expense as a % of earnings before income
taxes

                                                         23.5   %      

25.7 %

The tax rate was favorably impacted when the Company recorded tax benefits
related to electing the Global Intangible Low Tax Income (GILTI) high-tax
exclusion retroactively for previous tax years. On July 20, 2020, the U.S.
Treasury issued and enacted final regulations related to GILTI that allows
certain U.S. taxpayers to elect to exclude foreign income that is subject to a
high effective tax rate from the GILTI inclusions. The GILTI high-tax exclusion
is an annual election and is retroactively available. During the quarter, the
Company completed a detailed analysis and took the appropriate steps to amend
its previous tax filings and to reassess its position on its 2020 and 2021 tax
years. Further, the rate was favorably impacted by foreign derived intangible
income (FDII) as the Company finalized a comprehensive study related to previous
tax filings and on its 2020 and 2021 tax years. On July 15, 2020, the U.S.
Treasury issued and enacted final regulations related to FDII that governs the
acceptable documentation reliability requirements and acceptable services that
qualify as deduction eligible income. This was partially offset by a new
uncertain tax position that was established during this quarter related to a
foreign jurisdiction.
Operating Income by Segment
                                        Three Months Ended September 30,
                                       2021                             2020         Change
    Dx operating income          $       722.7                      $   964.9        (25.1) %
    Dx operating margin                   27.6   %                       35.7  %      (8.1) %
    DD operating income                  141.6                          142.0         (0.4) %
    DD operating margin                    9.7   %                       11.4  %      (1.7) %
    General corporate expenses           (97.4)                         (59.8)        62.7  %
    Total operating income       $       766.9                      $ 1,047.1        (26.7) %


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Dx operating income was $722.7 for the three months ended September 30, 2021, a
decrease of $242.0 over operating income of $964.9 in the corresponding period
of 2020, and Dx operating margin decreased 810 basis points year-over-year. The
decrease was reduction in COVID-19 Testing and higher personnel costs, partially
offset by organic Base Business growth and LaunchPad savings. The Company
remains on track to deliver approximately $200.0 of net savings from its
three-year Dx LaunchPad initiative by the end of 2021.
DD operating income was $141.6 for the three months ended September 30, 2021, a
decrease of 0.4% over operating income of $142.0 in the corresponding period of
2020. The decrease was primarily due to lower COVID-19 Testing and higher
personnel costs, partially offset by organic Base Business growth and LaunchPad
savings. The Company continues to invest in technology and processes to drive
profitable growth in DD.
General corporate expenses are comprised primarily of administrative services
such as executive management, human resources, legal, finance, corporate
affairs, and information technology. Corporate expenses were $97.4 for the three
months ended September 30, 2021, an increase of $37.6 over corporate expenses of
$59.8 in the corresponding period of 2020, primarily due to higher personnel
costs.
Nine months ended September 30, 2021, compared with nine months ended
September 30, 2020
Revenues
                                                  Nine Months Ended September 30,
                                                      2021                2020                  Change
Dx                                               $   7,740.8          $  6,098.8                     26.9  %
DD                                                   4,392.9             3,479.4                     26.3  %
Intercompany eliminations and other                    (68.9)              (89.5)                   (23.0) %
Total                                            $  12,064.8          $  9,488.7                     27.1  %


The increase in revenues for the nine months ended September 30, 2021, as
compared with the corresponding period in 2020, was 27.1%. The increase in
revenues was due to organic growth of 25.2%, acquisitions of 0.8%, and favorable
foreign currency translation of 1.2%. The 25.2% increase in organic revenue
includes a 18.2% increase in the Company's organic Base Business and a 7.0%
contribution from COVID-19 Testing.
Dx revenues for the nine months ended September 30, 2021, were $7,740.8, an
increase of 26.9% compared to revenues of $6,098.8 during the nine months ended
September 30, 2020. The increase in revenues was primarily due to organic growth
of 25.7%, acquisitions of 0.7%, and favorable foreign currency translation of
0.5%. The 25.7% in organic revenue was due to a 10.9% contribution from COVID-19
Testing and a 14.8% increase in the Base Business.
Total volume, measured by requisitions, increased by 19.6% as organic volume
increased by 19.0% and acquisition volume contributed 0.6%. COVID-19 Testing
contributed 6.4% to organic volume growth. Price/mix increased by 7.3% due to
COVID-19 Testing of 4.5%, organic Base Business of 2.2%, favorable foreign
currency translation of 0.5%, and acquisitions of 0.2%.
DD revenues for the nine months ended September 30, 2021 were $4,392.9, an
increase of 26.3% over revenues of $3,479.4 during the nine months ended
September 30, 2020. The increase in revenues was primarily due to organic Base
Business growth of 23.7%, acquisitions of 0.9%, favorable foreign currency
translation of 2.5%, partially offset by lower COVID-19 Testing performed
through its Central Laboratories business of 0.6% and divestitures of 0.1%. Drug
Development's Base Business benefited from broad-based demand, including
COVID-19 vaccine and therapeutic work.
Cost of Revenues
                                             Nine Months Ended September 30,
                                             2021                           2020         Change
Cost of revenues                      $       7,815.5                   $ 6,440.8        21.3  %
Cost of revenues as a % of revenues              64.8   %                   

67.9 %

Cost of revenues increased 21.3% during the nine months ended September 30,
2021, as compared with the corresponding period in 2020. Cost of revenues as a
percentage of revenues during the nine months ended September 30, 2021,
decreased to 64.8% as compared to 67.9% in the corresponding period in 2020.
This decrease was primarily due to organic Base Business growth, impact of
COVID-19 Testing, and acquisitions, partially offset by higher personnel costs.



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Selling, General and Administrative Expenses

                                                              Nine Months 

Ended September 30,

                                                                 2021                   2020                 Change
Selling, general and administrative expenses              $       1,408.4           $  1,211.3                   16.3  %

Selling, general and administrative expenses as a % of
revenues

                                                             11.7   %             12.8  %


During the nine months ended September 30, 2021, the Company incurred $17.4 of
acquisition and divestiture related costs, $9.6 in retention bonuses, $7.8 in
COVID-related costs and $5.6 in management transition costs. In addition, the
Company recorded $4.6 of non-capitalized costs associated with the
implementation of a major system as part of its LaunchPad business process
improvement initiative and $17.2 related to miscellaneous other items. These
items increased selling, general and administrative expenses by $62.2.
During the nine months ended September 30, 2020, the Company incurred $15.3 in
acquisition and divestiture costs, $5.8 in COVID-related costs, and $12.4 in
management transition costs. In addition, the Company recorded $1.3 of
non-capitalized costs associated with the implementation of a major system as
part of its LaunchPad business process improvement initiative and $1.7 related
to miscellaneous other items. These charges were offset by insurance proceeds of
$10.0 related to the 2018 ransomware attack. These items increased selling,
general and administrative expenses by $26.5.
Excluding these charges, selling, general and administrative expenses as a
percentage of revenues were 11.2% and 12.5% during the nine months ended
September 30, 2021, and 2020, respectively, primarily due to leveraging the
Company's infrastructure on higher revenue.
Goodwill and Other Asset Impairments
                                                         Nine Months Ended 

September 30,

                                                            2021                   2020                  Change
Goodwill and other asset impairments                  $            -          $     460.9                   (100.0) %


During the nine months ended September 30, 2020, the Company recorded goodwill
and other asset impairment charges of $460.9. The Company recorded goodwill
impairment of $418.7 within DD and $3.7 within Dx. The Company also recorded
impairment charges of $2.7 for a DD tradename, $10.1 and $17.7, respectively,
for DD customer relationships and DD technology due to the loss of a contract
from a prior acquisition, $7.3 for Dx software and $0.7 for the impairment of
the a Dx investment. There were no goodwill and other asset impairments for the
nine months ended September 30, 2021.
Amortization of Intangibles and Other Assets
                                                            Nine Months Ended September 30,
                                                                2021                   2020                 Change
Dx                                                      $            85.8          $     77.3                   10.9  %
DD                                                                  190.9               107.3                   78.0  %
Total amortization of intangibles and other assets      $           276.7          $    184.6                   49.9  %


The increase in amortization of intangibles and other assets primarily reflects
the impact of acquisitions occurring after September 30, 2020, and $87.4 of
accelerated amortization related to the Covance trade name as a result of a
rebranding initiative, partially offset by lower amortization due to the
impairment of intangible assets in 2020.
Restructuring and Other Special Charges
                                           Nine Months Ended September 30,
                                                  2021                       2020       Change
Restructuring and other charges   $           35.3                         

$ 38.9 (9.4) %

During the nine months ended September 30, 2021, the Company recorded net
restructuring and other charges of $35.3: $16.8 within Dx and $18.5 within DD.
The charges were comprised of $13.6 related to severance and other personnel
costs and $22.4 in facility closures, lease terminations, and general
integration activities. The charges were adjusted by an decrease of $0.1 of
previously established severance liabilities and the reversal of previously
established liability of $0.7 in unused facility-related costs.
During the nine months ended September 30, 2020, the Company recorded net
restructuring and other special charges of $38.9: $13.4 within Dx and $25.5
within DD. The charges were comprised of $12.8 related to severance and other
personnel costs, $11.0 for a DD lab facility impairment, and $24.0 in costs
associated with facility closures, impairment of operating lease right-of-use
assets, and general integration initiatives. The charges were offset by the
reversal of previously established liability of $1.1 and $7.8 in unused
severance costs and facility-related costs, respectively.

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Interest Expense
                           Nine Months Ended September 30,
                                 2021                      2020        Change
Interest expense   $         (169.0)                    $ (159.1)       6.2  %


The increase in interest expense for the nine months ended September 30, 2021,
as compared with the corresponding period in 2020, is primarily due to the costs
of redeeming the 3.20% and 3.75% notes and issuing the new senior notes,
partially offset by lower debt.
Equity Method Income
                                     Nine Months Ended September 30,
                                            2021                       2020        Change
Equity method income, net   $           20.9                         $ (1.8)      1,255.2  %


 Equity method income represents the Company's ownership share in joint venture
partnerships along with equity investments in other companies in the health care
industry. The increase in income for the nine months ended September 30, 2021,
as compared with the corresponding period in 2020, was primarily due to the
write off or write down of certain of the Company's investments in 2020, which
was primarily due to the negative impact of the COVID-19 global pandemic, and
increased profitability of the Company's joint ventures in 2021.
Other, net
                     Nine Months Ended September 30,
                            2021                      2020        Change
Other, net   $          51.5                        $ (22.6)      327.8  %


 The change in other, net for the nine months ended September 30, 2021, as
compared to the nine months ended September 30, 2020, is primarily due to
investment activity. During the nine months ended September 30, 2020, the
Company adjusted certain of the Company's investments due to the negative impact
of the COVID-19 global pandemic in 2020. During the nine months ended
September 30, 2021, the Company recorded investment gains of $67.4 which were
partially offset by a loss on sale of a business of $6.1. In addition, foreign
currency transaction losses of $2.4 were recognized for the nine months ended
September 30, 2021, and losses of $6.4 were recognized in the corresponding
period of 2020.
Income Tax Expense
                                                       Nine Months Ended September 30,
                                                           2021                  2020                 Change
Income tax expense                                  $        614.7           $    358.0                   71.7  %

Income tax expense as a % of earnings before income
taxes

                                                         25.2   %      

36.7 %

The 2021 tax rate was favorable to the 2020 tax rate due primarily to the 2020
impairment charges which were either not deductible or the associated tax assets
required a full valuation allowance. In addition, the tax rate was favorably
impacted when the Company recorded tax benefits related to electing the GILTI
high-tax exclusion retroactively for previous tax years. On July 20, 2020, the
U.S. Treasury issued and enacted final regulations related to GILTI that allows
certain U.S. taxpayers to elect to exclude foreign income that is subject to a
high effective tax rate from the GILTI inclusions. The GILTI high-tax exclusion
is an annual election and is retroactively available. During the quarter, the
Company completed a detailed analysis and took the appropriate steps to amend
its previous tax filings and to reassess its position on its 2020 and 2021 tax
years. Further, the rate was favorably impacted by FDII as the Company finalized
a comprehensive study related to previous tax filings and on its 2020 and 2021
tax years. On July 15, 2020, the U.S. Treasury issued and enacted final
regulations related to FDII that governs the acceptable documentation
reliability requirements and acceptable services that qualify as deduction
eligible income. This was partially offset by a new uncertain tax position that
was established during this quarter related to a foreign jurisdiction.
Operating Income by Segment
                                          Nine Months Ended September 30,
                                          2021                           2020         Change
   Dx operating income             $       2,275.4                   $ 1,451.5         56.8  %
   Dx operating margin                        29.4   %                    23.8  %       5.6  %
   DD operating income (loss)                445.3                      (131.2)       439.4  %
   DD operating margin                        10.1   %                    (3.8) %      13.9  %
   General corporate expenses               (191.8)                     (168.1)       (14.1) %
   Total operating income (loss)   $       2,528.9                   $ 

1,152.2 119.5 %

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Dx operating income was $2,275.4 for the nine months ended September 30, 2021,
an increase of $823.9 over operating income of $1,451.5 in the corresponding
period of 2020, and Dx operating margin increased 560 basis points
year-over-year. The increase was primarily due to the increase in COVID-19
Testing, organic Base Business growth and LaunchPad savings, partially offset by
higher personnel costs. The Company remains on track to deliver approximately
$200.0 of net savings from its three-year Dx LaunchPad initiative by the end of
2021.
DD operating income was $445.3 for the nine months ended September 30, 2021, an
increase of $576.4 over operating loss of $131.2 in the corresponding period of
2020. The increase was primarily due to goodwill and other asset impairments in
2020 and in 2021 organic Base Business growth, and LaunchPad savings, partially
offset by lower COVID-19 Testing and higher personnel costs. The Company
continues to develop and execute new LaunchPad programs to support profitable
growth in DD.
General corporate expenses are comprised primarily of administrative services
such as executive management, human resources, legal, finance, corporate
affairs, and information technology. Corporate expenses were $191.8 for the nine
months ended September 30, 2021, an increase of $23.7 over corporate expenses of
$168.1 in the corresponding period of 2020, primarily due to higher personnel
costs.
LIQUIDITY AND CAPITAL RESOURCES (dollars and shares in millions)

The Company's strong cash-generating ability and financial condition typically
have provided ready access to capital markets. The Company's principal source of
liquidity is operating cash flow, supplemented by proceeds from debt offerings.
The Company's senior unsecured revolving credit facility is further discussed in
Note 7 Debt to the Company's Condensed Consolidated Financial Statements.
In summary, the Company's cash flows were as follows for the nine months ended
September 30, 2021, and 2020, respectively:
                                                                       Nine 

Months Ended September 30,

                                                                          2021                    2020
Net cash provided by operating activities                          $        2,412.1          $   1,360.7
Net cash used for investing activities                                       (630.1)              (515.2)
Net cash used for financing activities                                     (1,057.2)              (516.4)
Effect of exchange rate changes on cash and cash equivalents                   (9.1)                 0.6
Net increase in cash and cash equivalents                          $        

715.7 $ 329.7

Cash and Cash Equivalents
Cash and cash equivalents at September 30, 2021, and 2020, totaled $2,036.5 and
$667.2, respectively. Cash and cash equivalents consist of highly liquid
instruments, such as time deposits, commercial paper, and other money market
investments, substantially all of which have original maturities of three months
or less.
Operating Activities
During the nine months ended September 30, 2021, the Company's operations
provided $2,412.1 of cash as compared to $1,360.7 during the same period in
2020. The $1,051.4 increase in cash provided from operations in 2021 as compared
with the corresponding 2020 period is primarily due to higher cash earnings and
favorable working capital.
Investing Activities
Net cash used for investing activities for the nine months ended September 30,
2021, was $630.1 as compared to $515.2 for the nine months ended September 30,
2020. The change in cash used for investing activities was primarily due to an
increase in business acquisitions and higher capital expenditures during the
nine months ended September 30, 2021, partially offset by higher proceeds from
the sale of investments and a business. Capital expenditures were $310.4 and
$282.3 for the nine months ended September 30, 2021, and 2020, respectively.
The Company continues to evaluate a robust pipeline of acquisitions and
anticipates an acceleration of acquisitions.
Financing Activities
Net cash used by financing activities for the nine months ended September 30,
2021, was $1,057.2 as compared to $516.4 for the nine months ended September 30,
2020. The change in cash flows from financing activities for the nine months
ended September 30, 2021, as compared to the nine months ended September 30,
2020, was primarily due to the repayment of the 2019 Term Loan in February 2021
and an increase of $568.5 in share repurchases.
On May 26, 2021, the Company issued new senior notes representing $1,000.0 in
debt securities and consisting of $500.0 aggregate principal amount of 1.55%
senior notes due 2026 and $500.0 aggregate principal amount of 2.70% senior
notes due 2031. Interest on these notes is payable semi-annually in arrears on
June 1 and December 1 of each year, commencing on
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December 1, 2021. Net proceeds from the offering of these notes were $989.4
after deducting underwriting discounts and other expenses of the offering. 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.
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.
The aggregate fair value of $4.0 at September 30, 2021, was included as a
component of other long-term assets and added to the reported value of the
senior notes.
On April 30, 2021, the Company amended and restated its revolving credit
facility. It consists of a five-year revolving facility in the principal amount
of up to $1,000.0, with the option of increasing the facility by up to an
additional $500.0, subject to the agreement of one or more new or existing
lenders to provide such additional amounts and certain other customary
conditions. The Company is required to pay a facility fee on the aggregate
commitments under the revolving credit facility, at a per annum rate ranging
from 0.100% to 0.225%, depending on the Company's debt ratings. Borrowings under
the revolving credit facility will accrue interest at a per annum rate equal to,
at the Company's election, either (x) a LIBOR 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.
Under the Company's revolving credit facility, the Company is subject to
negative covenants limiting subsidiary indebtedness and certain other covenants
typical for investment grade-rated borrowers and the Company is required to
maintain certain leverage ratios. The Company was in compliance with all
covenants under the revolving credit facility at September 30, 2021, and expects
that it will remain in compliance with its existing debt covenants for the next
twelve months.
At September 30, 2021, the Company had $2,036.5 of cash and $1,000.0 of
available borrowings under its revolving credit facility, which does not mature
until 2026.
For the nine months ended September 30, 2021, the Company repurchased $668.5 of
the Company's common stock and had outstanding authorization from the board of
directors to purchase up to $131.5 more of the Company's common stock with no
expiration date.
Credit Ratings
The Company's investment grade debt ratings from Moody's and from Standard and
Poor's (S&P) contribute to its ability to access capital markets. The Company's
expectation is that it will seek to maintain an investment grade debt rating
regardless of what, if anything, results from the Company's current review of
its structure and capital allocation strategy.
Contractual Cash Obligations
                                                              Payments Due by Period
                                                       Total        Short-term       Long-term
Operating lease obligations                         $   820.1      $     189.1      $   631.0
Contingent future licensing payments (a)                 19.0              4.0           15.0
Purchase obligations                                     35.6             15.6           20.0
Finance lease obligations                                96.6             10.6           86.0
Scheduled interest payments on Senior Notes (b)       1,693.6            

181.0 1,512.6

Long-term debt (c)                                    5,418.8              

1.6 5,417.2
Total contractual cash obligations (d) (e) $ 8,083.7 $ 401.9 $ 7,681.8

(a)Contingent future licensing payments will be made if certain events take
place, such as the launch of a specific test, the transfer of certain
technology, and the achievement of specified revenue milestones.
(b)Interest payments due by period for the Company's debt subject to variable
interest rates are calculated based on rates in place as of September 30, 2021.
(c)Excludes amount of debt issuance costs and fair value of swap included in the
long-term debt balance.
(d)The table does not include obligations under the Company's pension and
postretirement benefit plans.
(e)The table does not include the Company's reserve for unrecognized tax
benefits.


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