How large is the Company's business and where does it operate?

The Company operates 32 primary laboratories and over 1,300 service sites, employs about 23,500 people, and processes more than 355,000 patient specimens daily. It serves clients in all 50 states, the District of Columbia, Puerto Rico, and three provinces in Canada, and is described as the second largest independent clinical laboratory company in the U.S. based on 2004 net revenues.

What is the Company's strategic focus?

The strategy centers on expanding national coverage, setting service standards, and leading in genomic and other advanced testing. It also includes building oncology testing through DIANON and US LABS and licensing new technologies from partners such as EXACT Sciences, Celera, Correlogic, and Atherotech.

What regulatory and reimbursement risks does the filing identify?

The filing states that Medicare and Medicaid made up about 20% of 2004 net sales. It notes that the MMA froze the clinical lab fee schedule CPI update for 2004 through 2008, that Medicare reimbursement reductions are expected to continue from time to time, and that competitive acquisition demonstrations could significantly affect the industry if implemented.

Are there material pending legal matters?

A putative securities class action filed in June 2003 is consolidated and pending, and management says it is premature to assess the outcome. The Company is also appealing a patent case in which a judgment and attorney's fees totaling approximately $7.8 million were paid. The Company states that its other claims are not expected to have a material adverse effect.

LH 10-K FY2005 Annual Report — Revenue, Net Income, EPS

01—Abstract

Summary

Summary of the 10-K filed March 3, 2005. Cited figures are marked; the original filing is the authoritative source.

Laboratory Corporation of America Holdings and its subsidiaries, headquartered in Burlington, North Carolina, describes itself as the second largest independent clinical laboratory company in the United States based on 2004 net revenues.

The Company operates 32 primary laboratories and over 1,300 service sites, employs approximately 23,500 people, and processes more than 355,000 patient specimens daily. Its growth strategy centers on genomic and advanced testing, oncology testing built on the DIANON and US LABS acquisitions, and licensing agreements with technology partners such as EXACT Sciences, Celera, and Correlogic. Financially, net sales for 2004 were $3,084.8 million^a, up from $2,939.4 million in 2003, and net earnings rose to $363.0 million from $321.0 million.

Diluted earnings per share were $2.45^b, compared with $2.11 in 2003. Net cash provided by operating activities was $538.1 million, and the Company repurchased $378.1 million of common stock during 2004 under its repurchase programs. Total shareholders' equity was $1,999.3 million at year-end 2004.

The filing also flags material risks. Medicare and Medicaid represented about 20%^c of 2004 net sales, and the MMA froze the clinical lab fee schedule CPI update for 2004 through 2008.

A securities class action filed in June 2003 remains pending, and the Company is appealing a patent judgment of approximately $7.8 million^d. The US LABS acquisition, for approximately $155 million in cash, closed on February 3, 2005.

02—Key points

Key Highlights

Net sales of $3,084.8 million in 2004, up from $2,939.4 million in 2003 (an increase of 4.9%, as stated in the filing).
Net earnings of $363.0 million in 2004 versus $321.0 million in 2003; diluted EPS of $2.45 versus $2.11.
Net cash provided by operating activities of $538.1 million in 2004, compared with $564.3 million in 2003, which included about $50 million of one-time tax credits.
Share repurchases of $368.1 million in 2004 under the programs authorized in December 2003 and October 2004, with a remaining $122.0 million capacity under the October 2004 program at year-end.
Acquisition of US LABS for approximately $155 million in cash, completed February 3, 2005, adding anatomic pathology and oncology testing capacity.
Medicare and Medicaid accounted for about 20% of 2004 net sales, and the MMA imposed a CPI update freeze on the clinical lab fee schedule for 2004 through 2008.
Pending securities class action alleging artificially inflated stock prices between February 13 and October 3, 2002; management says it is too early to assess the outcome.

03—Questions

Frequently Asked Questions

How large is the Company's business and where does it operate?
The Company operates 32 primary laboratories and over 1,300 service sites, employs about 23,500 people, and processes more than 355,000 patient specimens daily. It serves clients in all 50 states, the District of Columbia, Puerto Rico, and three provinces in Canada, and is described as the second largest independent clinical laboratory company in the U.S. based on 2004 net revenues.
What is the Company's strategic focus?
The strategy centers on expanding national coverage, setting service standards, and leading in genomic and other advanced testing. It also includes building oncology testing through DIANON and US LABS and licensing new technologies from partners such as EXACT Sciences, Celera, Correlogic, and Atherotech.
What regulatory and reimbursement risks does the filing identify?
The filing states that Medicare and Medicaid made up about 20% of 2004 net sales. It notes that the MMA froze the clinical lab fee schedule CPI update for 2004 through 2008, that Medicare reimbursement reductions are expected to continue from time to time, and that competitive acquisition demonstrations could significantly affect the industry if implemented.
Are there material pending legal matters?
A putative securities class action filed in June 2003 is consolidated and pending, and management says it is premature to assess the outcome. The Company is also appealing a patent case in which a judgment and attorney's fees totaling approximately $7.8 million were paid. The Company states that its other claims are not expected to have a material adverse effect.

04—Continue

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