How much did revenue and earnings grow in 2001?

Net sales grew 14.6% to $2,199.8 million, with approximately 8.2% from higher volume and 5.9% from higher price per accession. Net earnings rose to $179.5 million from $112.1 million, and diluted EPS rose to $2.54 from $1.61.

How is the company financing its growth and debt?

In September and October 2001, the company sold $744.0 million aggregate principal amount at maturity of zero coupon convertible subordinated notes due 2021, receiving approximately $488.6 million net, and used a portion to repay its $412.5 million term loan. In February 2002 it entered into $300 million of new senior credit facilities led by Credit Suisse First Boston, consisting of a $100 million 364-day facility and a $200 million three-year facility.

What regulatory and reimbursement risks does the company face?

About 16% of net sales in both 2001 and 2000 came from Medicare and Medicaid beneficiaries. The company states that further Medicare reimbursement reductions are likely, that it cannot predict additional reductions, and that future regulatory changes could have a material adverse effect. It also cites fraud-and-abuse laws, CLIA certification requirements, and HIPAA compliance deadlines of October 2002 for transactions and code sets and April 2003 for privacy.

Does the company pay dividends, and what is Roche's ownership position?

The company's policy is not to pay dividends in order to preserve flexibility for its acquisition strategy, and the new credit facilities will limit dividend payments. Roche held about 15.13% of common stock at December 31, 2001, and a planned March 2002 offering of approximately 7.7 million shares was expected to reduce its stake to 5.24% (4.25% if the overallotment option is exercised in full).

What is the company's competitive position?

The company describes itself as the second largest independent clinical laboratory company in the United States based on 2001 net revenues, with Quest Diagnostics as the other national independent laboratory. Quest had approximately $3.6 billion in clinical laboratory revenues in 2001. The company competes on test quality, pricing, reporting accuracy, service, and reputation, and expects continued consolidation in the industry.

LH 10-K FY2001 Annual Report — Revenue, Net Income, EPS

01—Abstract

Summary

Summary of the 10-K filed March 18, 2002. 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 2001 net revenues, operating 24 primary testing facilities and approximately 1,200 service sites serving clients in 50 states.

Net sales rose to $2,199.8 million^a in 2001 from $1,919.3 million in 2000, an increase of 14.6%, driven by 8.2% volume growth and 5.9% higher price per accession. Net earnings were $179.5 million, or $2.54 diluted earnings per share, compared with $112.1 million in 2000. Growth was supported by the Path Lab Holdings and Viro-Med acquisitions, exclusive licensing agreements with EXACT Sciences and Myriad Genetics, and continued expansion of specialty and niche testing.

The company's balance sheet strengthened during 2001. Cash and cash equivalents rose to $149.2 million, and shareholders' equity increased to $1,085.4 million^b. The company repaid its $412.5 million term loan using proceeds from $744.0 million aggregate principal amount at maturity of zero coupon convertible subordinated notes due 2021, and in February 2002 it entered into $300 million of new senior credit facilities.

Standard & Poor's upgraded the company to BBB+ in early 2002. The company does not pay dividends, and Roche's planned sale of 7.7 million shares was expected to reduce its ownership to 5.24%^c.

Key risks include Medicare and Medicaid reimbursement reductions, the company's reliance on those programs for about 16% of net sales, regulatory and fraud-and-abuse exposure, a class action regarding alleged overbilling of privately insured patients, and HIPAA compliance deadlines in 2002 and 2003. Management expects the adoption of SFAS No. 142 to reduce 2002 amortization expense by approximately $26.0 million^d.

02—Key points

Key Highlights

Net sales of $2,199.8 million in 2001, up 14.6% from $1,919.3 million in 2000
Net earnings of $179.5 million in 2001 versus $112.1 million in 2000; diluted EPS of $2.54 versus $1.61
Operating income of $367.6 million in 2001 versus $245.6 million in 2000
Operating cash flow of $316.0 million in 2001, with DSO reduced to 58 days from 68 days
Repaid $412.5 million term loan with proceeds from zero coupon convertible subordinated notes due 2021 (net proceeds approximately $488.6 million)
Acquired Path Lab Holdings (April 2001) and Viro-Med (June 2001); entered exclusive agreements with EXACT Sciences and Myriad Genetics
Entered $300 million senior credit facilities in February 2002; Standard & Poor's upgraded the company to BBB+

03—Questions

Frequently Asked Questions

How much did revenue and earnings grow in 2001?
Net sales grew 14.6% to $2,199.8 million, with approximately 8.2% from higher volume and 5.9% from higher price per accession. Net earnings rose to $179.5 million from $112.1 million, and diluted EPS rose to $2.54 from $1.61.
How is the company financing its growth and debt?
In September and October 2001, the company sold $744.0 million aggregate principal amount at maturity of zero coupon convertible subordinated notes due 2021, receiving approximately $488.6 million net, and used a portion to repay its $412.5 million term loan. In February 2002 it entered into $300 million of new senior credit facilities led by Credit Suisse First Boston, consisting of a $100 million 364-day facility and a $200 million three-year facility.
What regulatory and reimbursement risks does the company face?
About 16% of net sales in both 2001 and 2000 came from Medicare and Medicaid beneficiaries. The company states that further Medicare reimbursement reductions are likely, that it cannot predict additional reductions, and that future regulatory changes could have a material adverse effect. It also cites fraud-and-abuse laws, CLIA certification requirements, and HIPAA compliance deadlines of October 2002 for transactions and code sets and April 2003 for privacy.
Does the company pay dividends, and what is Roche's ownership position?
The company's policy is not to pay dividends in order to preserve flexibility for its acquisition strategy, and the new credit facilities will limit dividend payments. Roche held about 15.13% of common stock at December 31, 2001, and a planned March 2002 offering of approximately 7.7 million shares was expected to reduce its stake to 5.24% (4.25% if the overallotment option is exercised in full).
What is the company's competitive position?
The company describes itself as the second largest independent clinical laboratory company in the United States based on 2001 net revenues, with Quest Diagnostics as the other national independent laboratory. Quest had approximately $3.6 billion in clinical laboratory revenues in 2001. The company competes on test quality, pricing, reporting accuracy, service, and reputation, and expects continued consolidation in the industry.

04—Continue

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