Laboratory Corporation of America Holdings (LabCorp) 1st-Quarter Net Down 8.9 Pct on Higher Costs
Published: Apr 19, 2013
First Quarter Results
Net earnings were $147.2 million and earnings per diluted share (EPS) were $1.56 in the first quarter of 2013. Non-GAAP earnings per diluted share, excluding amortization, restructuring and other special charges recorded in the first quarter of 2013 (Adjusted EPS Excluding Amortization) were $1.74. Inclement weather reduced EPS and Adjusted EPS Excluding Amortization by approximately $0.04.
Operating income for the quarter was $262.0 million. Non-GAAP operating income excluding restructuring and other special charges recorded in the quarter (Adjusted Operating Income) was $269.5 million, or 18.7% of revenue. Margins were negatively affected by weather, Medicare payment reductions and the number of days in the quarter.
Revenues for the quarter were $1,440.9 million, an increase of 1.2% over the first quarter of 2012. Testing volume, measured by requisitions, increased 1.1% and revenue per requisition increased 0.2%. On a per day basis, revenue increased 2.9% and testing volume increased 2.7% over the first quarter of 2012. Inclement weather reduced volume growth by approximately 0.5%.
Operating cash flow for the quarter was $198.2 million. The balance of cash at the end of the quarter was $185.8 million, and there were $30.0 million of borrowings outstanding under the Company’s $1 billion revolving credit facility. During the quarter, the Company repurchased $113.9 million of stock, representing 1.3 million shares. As of March 31, 2013, $954.1 million of repurchase authorization remained under the Company’s previously approved share repurchase plan.
The Company recorded restructuring and other special charges of $7.5 million during the first quarter of 2013.
“We delivered another solid quarter, highlighted by revenue growth of approximately 3.0% per day,” said David P. King, Chairman and Chief Executive Officer. “We continue to execute our strategic initiatives, and we remain pleased with the performance of our business, particularly Medtox, our most recent acquisition.”
Outlook for 2013
The Company is reaffirming its 2013 guidance, expecting revenue growth in the range of approximately 2.0% to 3.0%; Adjusted EPS Excluding Amortization of $6.85 to $7.15, which includes a negative impact of approximately $0.35 due to Medicare payment reductions and excludes the impact of any share repurchase activity after March 31, 2013; operating cash flow of approximately $870 million to $900 million; and capital expenditures of approximately $200 million to $220 million. The Company’s capital expenditure guidance is higher than historical levels due to near-term investments in facility consolidation and the replacement of a major testing platform.
Use of Adjusted Measures
The Company has provided in this press release and accompanying tables “adjusted” financial information that has not been prepared in accordance with GAAP, including Adjusted EPS, Adjusted EPS Excluding Amortization, Adjusted Operating Income, and Free Cash Flow. The Company believes these adjusted measures are useful to investors as a supplement to, but not as a substitute for, GAAP measures, in evaluating the Company’s operational performance. The Company further believes that the use of these non-GAAP financial measures provides an additional tool for investors in evaluating operating results and trends, and in comparing the Company’s financial results with other companies. Reconciliations of these non-GAAP measures to the most comparable GAAP measures are included in the tables accompanying this press release.
The Company today is filing an 8-K that will include additional information on its business and operations. This information will also be available on the Company's Web site. Analysts and investors are directed to this 8-K and the Web site to review this supplemental information.
A conference call discussing LabCorp's quarterly results will be held today at 9:00 a.m. Eastern Time and is available by dialing 866-202-0886 (617-213-8841 for international callers). The access code is 96415501. A telephone replay of the call will be available through April 26, 2013 and can be heard by dialing 888-286-8010 (617-801-6888 for international callers). The access code for the replay is 15533574. A live online broadcast of LabCorp’s quarterly conference call on April 19, 2013 will be available at http://www.labcorp.com/ or at http://www.streetevents.com/ beginning at 9:00 a.m. Eastern Time. This webcast will be archived and accessible continuing through May 17, 2013.
Laboratory Corporation of America® Holdings, an S&P 500 company, is a pioneer in commercializing new diagnostic technologies and the first in its industry to embrace genomic testing. With annual revenues of $5.7 billion in 2012, over 34,000 employees worldwide, and more than 220,000 clients, LabCorp offers more than 4,000 tests ranging from routine blood analyses to reproductive genetics to companion diagnostics. LabCorp furthers its scientific expertise and innovative clinical testing technology through its LabCorp Specialty Testing Group: The Center for Molecular Biology and Pathology, National Genetics Institute, ViroMed Laboratories, Inc., The Center for Esoteric Testing, Litholink Corporation, Integrated Genetics, Integrated Oncology, DIANON Systems, Inc., Monogram Biosciences, Inc., Colorado Coagulation, Cellmark Forensics, MedTox, and Endocrine Sciences. LabCorp conducts clinical trials testing through its LabCorp Clinical Trials division. LabCorp clients include physicians, government agencies, managed care organizations, hospitals, clinical labs, and pharmaceutical companies. To learn more about our organization, visit our Web site at: www.labcorp.com.
This press release contains forward-looking statements. Each of the forward-looking statements is subject to change based on various important factors, including without limitation, competitive actions in the marketplace and adverse actions of governmental and other third-party payors. Actual results could differ materially from those suggested by these forward-looking statements. Further information on potential factors that could affect LabCorp’s financial results is included in the Company’s Form 10-K for the year ended December 31, 2012, and subsequent SEC filings.
Notes to Financial Tables
1) During the first quarter of 2013, the Company recorded net restructuring and other special charges of $7.5 million. The charges included $7.6 million in severance and other personnel costs along with $1.8 million in costs associated with facility closures and general integration initiatives. The Company reversed previously established reserves of $0.6 million in unused severance and $1.3 million in unused facility-related costs. The after tax impact of these charges decreased net earnings for the quarter ended March 31, 2013, by $4.7 million and diluted earnings per share by $0.05 ($4.7 million divided by 94.5 million shares).
2) During the first quarter of 2012, the Company recorded a net credit of $3.6 million in restructuring and other special charges. The Company reversed previously established reserves of $3.8 million in unused severance and $2.4 million in unused facility-related costs. This net credit also includes charges of $1.7 million in severance and other personnel costs along with $0.9 million in facility-related costs primarily related to ongoing integration activities for Orchid and Genzyme Genetics. The after tax impact of the net credit increased net earnings for the quarter ended March 31, 2012, by $2.2 million and diluted earnings per share by $0.02 ($2.2 million divided by 99.1 million shares).
3) The Company continues to grow the business through acquisitions and uses Adjusted EPS Excluding Amortization as a measure of operational performance, growth and shareholder returns. The Company believes adjusting EPS for amortization provides investors with better insight into the operating performance of the business. For the quarters ended March 31, 2013 and 2012, intangible amortization was $19.5 million and $21.4 million, respectively ($12.0 million and $13.1 million net of tax, respectively) and decreased EPS by $0.13 ($12.0 million divided by 94.5 million shares) and $0.13 ($13.1 million divided by 99.1 million shares), respectively.
Laboratory Corporation of America® Holdings
Stephen Anderson, 336-436-5076