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Labcorp Holdings Annual Report, Year Ended Dec 31, 2006

Filing Date
Filed February 27, 2007
Period End
December 31, 2006
Security
LH
In the record · 2016–202610-K1310-Q338-K382

LH filed 13 annual reports (10-K), 33 quarterly reports (10-Q) and 382 current reports (8-K) between 2016 and 2026.

  1. Restructuring8-K · Apr ’17Apr ’17
  2. Leadership change8-K · Jun ’19Jun ’19
  3. Material agreement8-K · May ’21May ’21
  4. Leadership change8-K · Dec ’25Dec ’25

01—Abstract

Summary

Summary of the 10-K filed February 27, 2007. Cited figures are marked; the original filing is the authoritative source.

Laboratory Corporation of America Holdings (now Labcorp Holdings Inc.) reported 2006 net sales of $3,590.8 milliona, up from $3,327.6 million in 2005, a 7.9% increase as stated in the filing.

Net earnings rose to $431.6 millionb from $386.2 million, and diluted earnings per share were $3.24 compared with $2.71. The filing attributes the growth to a shift in test mix toward higher-priced genomic and esoteric tests, the 2005 acquisitions of US LABS and Esoterix, and improved routine testing pricing and volume. Genomic and esoteric net sales were $1,243.2 million, with a stated growth rate of 10.0%.

The company describes itself as the second largest independent clinical laboratory company in the United States based on 2006 net revenues, with 36 primary laboratories, over 1,700 service sites and more than 25,000 employees. Its most significant 2006 development was a ten-year agreement, effective January 1, 2007, to become UnitedHealthcare's exclusive national laboratory. The company expects over $3 billionc of additional revenue from UnitedHealthcare and associated business over the term, and has committed to reimburse up to $200 million of transition costs during the first three years.

Capitated contracts accounted for $144.0 milliond, or 4.0%, of net sales, and Medicare and Medicaid beneficiaries generated about 20% of net sales. Cash flow and capital structure were solid. Operating activities provided $632.3 million, capital expenditures were $115.9 million, and the company repurchased $435.1 million of stock.

Shareholders' equity was $1,977.1 million against total assets of $4,000.8 million. Debt included $554.4 million of zero coupon convertible subordinated notes (holders may require purchase on September 11, 2011 at $819.54 per note) and $603.0 million of long-term debt. The filing cites debt ratings of Baa3 from Moody's and BBB from Standard and Poor's, and notes that the company does not expect to contribute to its defined benefit pension plan in 2007.

02—Key points

Key Highlights

  1. Net sales of $3,590.8 million in 2006, up 7.9% from $3,327.6 million in 2005; net earnings of $431.6 million versus $386.2 million.
  2. Diluted earnings per share of $3.24 in 2006 compared with $2.71 in 2005.
  3. Genomic and esoteric testing generated $1,243.2 million in net sales, with a stated growth rate of 10.0%, versus routine testing at $2,347.6 million.
  4. Ten-year exclusive national laboratory agreement with UnitedHealthcare effective January 1, 2007; the company expects over $3 billion in additional revenues and has committed up to $200 million in transition cost reimbursement.
  5. Operating cash flow of $632.3 million and capital expenditures of $115.9 million; 2007 capital expenditures are expected in the range of $130 to $170 million.
  6. Stock repurchases of $435.1 million in 2006, with about $350.2 million of authorization remaining at December 31, 2006.
  7. Approximately 20% of net sales came from Medicare and Medicaid beneficiaries, and the company cites ongoing reimbursement pressure from fee schedule freezes and potential competitive bidding.

03—Questions

Frequently Asked Questions

  1. How did revenue and earnings change in 2006?

    Net sales increased to $3,590.8 million from $3,327.6 million, a 7.9% increase as stated in the filing. Net earnings rose to $431.6 million from $386.2 million, and diluted earnings per share increased to $3.24 from $2.71. The filing attributes growth to test mix shifting toward genomic and esoteric tests, acquisitions, and improved routine testing pricing and volume.

  2. What is the significance of the UnitedHealthcare agreement?

    Effective January 1, 2007, the company became UnitedHealthcare's exclusive national laboratory under a ten-year agreement. The company expects to realize additional revenues in excess of $3 billion from UnitedHealthcare and associated business over the term. It has committed to reimburse UnitedHealthcare up to $200 million in transition costs over the first three years and has opened over four hundred patient access points and hired over twelve hundred employees in anticipation of the volume.

  3. How exposed is the company to government reimbursement changes?

    In 2006 and 2005, approximately 20% of net sales came from tests for Medicare and Medicaid beneficiaries. The filing notes that Medicare fee schedule limits have been constrained by Congressional action, including a CPI update freeze for 2004 through 2008 under the MMA, and that because much of the cost base is relatively fixed, government payment reductions directly affect net earnings and cash flows. It also describes a possible competitive acquisition program that could significantly affect the industry.

  4. What is the company's debt and liquidity position?

    At December 31, 2006, the company reported $186.9 million of cash, cash equivalents and short-term investments, $603.0 million of long-term debt, and $554.4 million of zero coupon convertible subordinated notes classified as current. Its $350.0 million unsecured revolving credit facility had no balance outstanding. The filing states the company is in compliance with its covenants and cites debt ratings of Baa3 from Moody's and BBB from Standard and Poor's.

04—Continue

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