Impact of COVID-19 and Foreign Exchange Rates

9 Months Ended

Sep. 30, 2022

Unusual or Infrequent Items, or Both [Abstract]

IMPACT OF COVID-19 AND FOREIGN EXCHANGE RATES

IMPACT OF COVID-19 AND FOREIGN EXCHANGE RATES

Impact of COVID-19

We continue to be a part of the coordinated public and private sector response to SARS-CoV-2, a novel strain of coronavirus, referred to as COVID-19. There continues to be a high level of uncertainty relating to how the pandemic will evolve, how governments and consumers will react, and whether the pandemic will have a longer-term effect on the healthcare industry and patient habits. BioReference is providing COVID-19 solutions, including diagnostic molecular testing and serology antibody testing, to meet the testing needs of its customers, including physicians, health systems, long-term care facilities, governments, schools, employers, professional sports teams and entertainment venues, as well as the general public through relationships with retail pharmacy chains.

Throughout the pandemic, we have managed our company-wide lab operations specimen acquisition, logistics, procurement, customer service, and initiatives to manage our cost structure to match the ever changing COVID-19 testing volumes and to manage efficiency gains in our core clinical lines of business. We anticipate that COVID-19 will continue to impact our business in 2022 and, overall, we expect COVID-19 test demand to continue to decline in 2022 as compared to 2021.

Revenue from services for the nine months ended September 30, 2022 decreased by $628.1 million as compared to 2021 due to lower COVID-19 testing volumes. Excluding COVID-19 test volumes, for the nine months ended September 30, 2022, routine clinical test volume decreased 2.2% as compared to volumes for the nine months ended September 30, 2021.

In March 2022, the U.S. Health Resources and Services Administration ("HRSA") informed providers that, after March 22, 2022, it would stop accepting claims for testing and treatment for uninsured individuals under the HRSA COVID-19 Uninsured Program and that claims submitted prior to that date would be subject to eligibility and availability of funds. For the nine months ended September 30, 2022, revenue for testing of uninsured individuals under the HRSA COVID-19 Uninsured Program represented approximately 5.4% of our COVID-19 testing revenue.

Foreign Currency Exchange Rates

Approximately 22.0% of revenue for the nine months ended September 30, 2022, and approximately 7.3% of revenue for the nine months ended September 30, 2021, were denominated in currencies other than the U.S. Dollar (USD). Our 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 consolidated financial results. In the third quarter of 2022 and the year ended December 31, 2021, the most significant currency exchange rate exposures were the Euro and Chilean Peso. Gross accumulated currency translation adjustments recorded as a separate component of shareholders’ equity were $54.6 million and $27.1 million at September 30, 2022 and December 2021, respectively.

We are subject to foreign currency transaction risk for fluctuations in exchange rates during the period of time between the consummation and cash settlement of transactions. We limit foreign currency transaction risk through hedge transactions with foreign currency forward contracts. Under these forward contracts, for any rate above or below the fixed rate, we receive or pay the difference between the spot rate and the fixed rate for the given amount at the settlement date. At September 30, 2022, we had 127 open foreign exchange forward contracts relating to inventory purchases on letters of credit with various amounts maturing monthly through October 2022 with a notional value totaling approximately $7.2 million. At December 31, 2021, we had 33 open foreign exchange forward contracts relating to inventory purchases on letters of credit with various amounts maturing monthly through January 2022 with a notional value totaling approximately $2.6 million.