01—Abstract
Summary
Summary of the 10-K filed March 17, 2000. Cited figures are marked; the original filing is the authoritative source.
Laboratory Corporation of America Holdings, headquartered in Burlington, North Carolina, is the second largest independent clinical laboratory company in the United States based on 1999 net revenues.
It operates 25 major laboratories and approximately 1,200 service sites, offers more than 2,000 clinical tests, and serves clients in 50 states. Net sales rose 5.3% to $1,698.7 milliona in 1999 from $1,612.6 million in 1998, with sales growth of 3.1% from price per accession and 2.2% from volume. Operating income increased to $149.7 million from $127.6 million, and net earnings were $65.4 million, or $0.12 per share, compared with $68.8 million, or $0.20 per share, in 1998.
Net earnings attributable to common shareholders were $15.0 millionb after $49.6 million of preferred stock dividends. Management cites specialty and niche testing, including esoteric, genetic, oncology and infectious disease testing, as the primary growth emphasis, and expects consolidated revenues to rise 4% to 5% in 2000. Cash flow from operations was $180.5 million in 1999, up from $125.1 million in 1998, and days sales outstanding improved to 74 days from 83 days.
Total debt repayment of about $70.3 millionc on the term loan reduced long-term obligations, which stood at $1,041.5 million including redeemable preferred stock. The company discontinued common dividends in 1994, and its credit agreement restricts dividend payments. The filing highlights regulatory and reimbursement exposure: about 20% of 1999 net sales came from Medicare and Medicaid beneficiaries, and the company states that further Medicare reductions could materially affect earnings.
A class action and related claims tied to the 1996 government settlement remain pending, with outcomes that cannot presently be predicted. Management believes the Year 2000 project was completed with only minor, quickly remediated issues.
02—Key points
Key Highlights
- Net sales increased 5.3% to $1,698.7 million in 1999, with 3.1% from price per accession and 2.2% from volume.
- Operating income rose to $149.7 million from $127.6 million, and gross profit increased to $629.1 million from $563.4 million.
- Net earnings were $65.4 million ($0.12 per share) versus $68.8 million ($0.20 per share) in 1998; $49.6 million of preferred dividends reduced earnings to common shareholders.
- Operating cash flow was $180.5 million in 1999, up from $125.1 million in 1998; days sales outstanding improved to 74 from 83.
- Total shareholders' equity grew to $175.5 million; long-term obligations and redeemable preferred stock totaled $1,041.5 million.
- About 20% of 1999 net sales derived from Medicare and Medicaid beneficiaries; the company states further Medicare reimbursement reductions could have a material adverse effect.
- Management expects 2000 consolidated revenues to increase 4% to 5% and capital expenditures of $65.0 million to $75.0 million.
03—Questions
Frequently Asked Questions
How did the company perform financially in 1999?
Net sales grew 5.3% to $1,698.7 million, operating income rose to $149.7 million, and net earnings were $65.4 million, or $0.12 per share, compared with $68.8 million, or $0.20 per share, in 1998. Earnings to common shareholders were reduced by $49.6 million of preferred stock dividends.
What drives the company's growth strategy?
Management emphasizes higher-margin specialty and niche testing, including esoteric, genetic, oncology and infectious disease testing, as well as hospital alliances, which it describes as generally more profitable than its core business.
What are the main regulatory and reimbursement risks?
About 20% of 1999 net sales came from Medicare and Medicaid tests. The filing notes that Medicare reimbursement reductions will continue from time to time, that CLIA and fraud-and-abuse rules could be interpreted adversely, and that the company cannot predict future legislation.
Does the company pay dividends, and what is its debt position?
The company discontinued common dividends in 1994 and has not paid any since, and its credit agreement restricts dividend payments. During 1999 it repaid about $70.3 million on its term loan, and no balances were outstanding on its revolving credit facility at year end.
What litigation could affect the company?
A class action brought on behalf of patients, private insurers and benefit plans seeks reimbursement for testing during the period covered by the 1996 Government Settlement. No damages amount has been specified, and the ultimate outcome cannot presently be predicted.
04—Continue