LabCorp Announces 2018 Second Quarter Results and Updates 2018 Guidance
- Q2 revenue of
$2.9 billion , up 13% over$2.5 billion last year - Q2 diluted EPS of
$2.27 , up 28% from$1.78 last year; Q2 adjusted EPS of$2.98 , up 23% over$2.43 last year - Q2 free cash flow of
$280 million , up 16% over$241 million last year - 2018 adjusted EPS guidance of
$11.35 to $11.65 , up 23% to 26% over 2017 - 2018 free cash flow guidance of
$1.1 billion to $1.2 billion
“We delivered another quarter of strong growth and disciplined capital deployment across our integrated enterprise, with double-digit increases in revenue and adjusted EPS over last year,” said
Effective
Consolidated Results
Second Quarter Results
Revenue for the quarter was
Operating income for the quarter was
Net earnings in the quarter were
Operating cash flow for the quarter was
At the end of the quarter, the Company’s cash balance and total debt were
Year-To-Date Results
Revenue was
Operating income was
Net earnings in the first half of 2018 were
Operating cash flow was
***
The following segment results reflect the Company’s retrospective adoption of ASC 606 on
Second Quarter Segment Results
LabCorp Diagnostics
Revenue for the quarter was
Adjusted operating income (excluding amortization, restructuring charges and special items) for the quarter was
Covance Drug Development
Revenue for the quarter was
Adjusted operating income (excluding amortization, restructuring charges and special items) for the quarter was
Net orders and net book-to-bill during the trailing twelve months were
***
Outlook for 2018
In the following guidance, all financial results in 2017 and comparisons to financial results in 2017 have been restated in this press release as if the Company had adopted ASC 606 on
- Revenue growth of 10.5% to 11.5% over 2017 revenue of
$10.31 billion , which includes the benefit of approximately 50 basis points of foreign currency translation. This is in-line with the prior guidance of 10.0% to 12.0%, as the increased revenue guidance in Covance Drug Development is offset by the previously-announced divestiture of the Food Solutions business. - Revenue growth in LabCorp Diagnostics of 3.0% to 4.5% over 2017 revenue of
$6.86 billion , which includes the negative impact of PAMA as well as the benefit of approximately 20 basis points of foreign currency translation. This is lower than the prior guidance of 3.5% to 5.5% due to the previously-announced divestiture of the Food Solutions business. - Revenue growth in Covance Drug Development of 23.0% to 26.0% over 2017 revenue of
$3.45 billion , which includes the benefit of approximately 110 basis points of foreign currency translation. This is an increase over the prior guidance of 21.0% to 25.0% due to higher investigator and other pass-through revenues, partially offset by the change in foreign currency translation. - Adjusted EPS of
$11.35 to $11.65 , which is an increase of approximately 22.7% to 25.9% over 2017 adjusted EPS of$9.25 , and a narrowing of the range compared to prior guidance of$11.30 to $11.70 . - Free cash flow (operating cash flow less capital expenditures) of
$1.1 billion to $1.2 billion , compared to$1.1 billion in 2017, unchanged from prior guidance.
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 operating income, free cash flow, and certain segment information. 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 growth and shareholder returns, as well as in comparing the Company’s financial results with the financial results of other companies. However, the Company notes that these adjusted measures may be different from and not directly comparable to the measures presented by 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 furnishing a Current Report on Form 8-K that will include additional information on its business and operations. This information will also be available in the investor relations section of the Company's website at www.labcorp.com. Analysts and investors are directed to the Current Report on Form 8-K and the website to review this supplemental information.
A conference call discussing LabCorp's quarterly results will be held today at
About LabCorp
LabCorp (NYSE: LH), an
This press release contains forward-looking statements including but not limited to statements with respect to estimated 2018 guidance and the related assumptions, the impact of various factors on operating and financial results, expected savings and synergies (including from the LaunchPad initiative and from acquisitions), and the opportunities for future growth. Each of the forward-looking statements is subject to change based on various important factors, including without limitation, competitive actions and other unforeseen changes and general uncertainties in the marketplace, changes in government regulations, including healthcare reform, customer purchasing decisions, including changes in payer regulations or policies, other adverse actions of governmental and third-party payers, changes in testing guidelines or recommendations, adverse results in material litigation matters, the impact of changes in tax laws and regulations, failure to maintain or develop customer relationships, our ability to develop or acquire new products and adapt to technological changes, failure in information technology, systems or data security, employee relations, and the effect of exchange rate fluctuations. Actual results could differ materially from those suggested by these forward-looking statements. The Company has no obligation to provide any updates to these forward-looking statements even if its expectations change. Further information on potential factors, risks and uncertainties that could affect operating and financial results is included in the Company’s Form 10-K for the year ended
- End of Text -
- Tables to Follow -
| LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES | ||||||||||||||||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||||||
| (Dollars in Millions, except per share data) | ||||||||||||||||||||
| For the Three Months Ended | For the Six Months Ended | |||||||||||||||||||
| June 30, | June 30, | |||||||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||||||
| Revenues | $ | 2,866.3 | $ | 2,528.2 | $ | 5,714.6 | $ | 4,941.9 | ||||||||||||
| Cost of revenues | 2,031.2 | 1,750.2 | 4,100.5 | 3,451.4 | ||||||||||||||||
| Gross profit | 835.1 | 778.0 | 1,614.1 | 1,490.5 | ||||||||||||||||
| Selling, general and administrative expenses | 395.2 | 357.7 | 792.2 | 700.6 | ||||||||||||||||
| Amortization of intangibles and other assets | 58.5 | 51.4 | 120.8 | 99.0 | ||||||||||||||||
| Restructuring and other special charges | 12.2 | 39.1 | 26.5 | 43.0 | ||||||||||||||||
| Operating income | 369.2 | 329.8 | 674.6 | 647.9 | ||||||||||||||||
| Other income (expense): | ||||||||||||||||||||
| Interest expense | (63.1 | ) | (55.0 | ) | (126.6 | ) | (107.4 | ) | ||||||||||||
| Equity method income, net | 3.0 | 4.5 | 5.5 | 6.8 | ||||||||||||||||
| Investment income | 0.8 | 0.4 | 1.4 | 0.7 | ||||||||||||||||
| Other, net | 2.8 | (0.5 | ) | (0.7 | ) | (3.6 | ) | |||||||||||||
| Earnings before income taxes | 312.7 | 279.2 | 554.2 | 544.4 | ||||||||||||||||
| Provision (benefit) for income taxes | 78.6 | 94.1 | 147.6 | 176.0 | ||||||||||||||||
| Net earnings | 234.1 | 185.1 | 406.6 | 368.4 | ||||||||||||||||
|
Less: Net earnings attributable to the noncontrolling interest |
(0.3 | ) | (0.3 | ) | 0.4 | (0.6 | ) | |||||||||||||
|
Net earnings attributable to Laboratory Corporation of America Holdings |
$ | 233.8 | $ | 184.8 | $ | 407.0 | $ | 367.8 | ||||||||||||
| Basic earnings per common share | $ | 2.29 | $ | 1.80 | $ | 3.99 | $ | 3.59 | ||||||||||||
| Diluted earnings per common share | $ | 2.27 | $ | 1.78 | $ | 3.94 | $ | 3.54 | ||||||||||||
| Weighted average basic shares outstanding | 101.9 | 102.4 | 101.9 | 102.5 | ||||||||||||||||
| Weighted average diluted shares outstanding | 103.0 | 103.7 | 103.3 | 104.0 | ||||||||||||||||
| LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES | ||||||||||||
| CONSOLIDATED BALANCE SHEETS | ||||||||||||
| (Dollars in Millions, except per share data) | ||||||||||||
| June 30, | December 31, | |||||||||||
| 2018 | 2017 | |||||||||||
| ASSETS | ||||||||||||
| Current assets: | ||||||||||||
| Cash and cash equivalents | $ | 221.4 | $ | 316.6 | ||||||||
| Accounts receivable | 1,520.3 | 1,531.0 | ||||||||||
| Unbilled services | 351.3 | 316.5 | ||||||||||
| Inventory | 230.7 | 227.2 | ||||||||||
| Prepaid expenses and other | 286.1 | 308.8 | ||||||||||
| Current assets held for sale | 411.4 | 33.7 | ||||||||||
| Total current assets | 3,021.2 | 2,733.8 | ||||||||||
| Property, plant and equipment, net | 1,710.9 | 1,706.6 | ||||||||||
| Goodwill | 7,423.3 | 7,400.9 | ||||||||||
| Intangible assets, net | 4,049.5 | 4,166.1 | ||||||||||
| Joint venture partnerships and equity method investments | 58.9 | 58.4 | ||||||||||
| Deferred income tax assets | 1.7 | 1.9 | ||||||||||
| Other assets, net | 239.0 | 217.5 | ||||||||||
| Long-term assets held for sale | - | 387.8 | ||||||||||
| Total assets | $ | 16,504.5 | $ | 16,673.0 | ||||||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||||||
| Current liabilities: | ||||||||||||
| Accounts payable | $ | 488.1 | $ | 573.9 | ||||||||
| Accrued expenses and other | 739.9 | 793.3 | ||||||||||
| Unearned revenue | 393.3 | 380.8 | ||||||||||
| Current portion of long-term debt | 417.8 | 417.5 | ||||||||||
| Current liabilities held for sale | 82.4 | 20.2 | ||||||||||
| Total current liabilities | 2,121.5 | 2,185.7 | ||||||||||
| Long-term debt, less current portion | 6,039.4 | 6,344.6 | ||||||||||
| Deferred income taxes and other tax liabilities | 914.1 | 875.5 | ||||||||||
| Other liabilities | 371.8 | 376.0 | ||||||||||
| Long-term liabilities held for sale | - | 66.3 | ||||||||||
| Total liabilities | 9,446.8 | 9,848.1 | ||||||||||
| Commitments and contingent liabilities | - | - | ||||||||||
| Noncontrolling interest | 20.0 | 20.8 | ||||||||||
| Shareholders' equity: | ||||||||||||
| Common stock | 12.0 | 12.0 | ||||||||||
| Additional paid-in capital | 1,934.8 | 1,989.8 | ||||||||||
| Retained earnings | 6,603.1 | 6,196.1 | ||||||||||
| Less common stock held in treasury | (1,105.2 | ) | (1,060.1 | ) | ||||||||
| Accumulated other comprehensive income | (407.0 | ) | (333.7 | ) | ||||||||
| Total shareholders' equity | 7,037.7 | 6,804.1 | ||||||||||
| Total liabilities and shareholders' equity | $ | 16,504.5 | $ | 16,673.0 | ||||||||
| LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES | ||||||||||||||||||||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||||||||||||||||
| (Dollars in Millions) | ||||||||||||||||||||||||
| For the | For the | For the | For the | |||||||||||||||||||||
| Three Months Ended | Three Months Ended | Six Months Ended | Six Months Ended | |||||||||||||||||||||
| June 30, | June 30, | June 30, | June 30, | |||||||||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||||||||||||||
| Net earnings | $ | 234.1 | $ | 185.1 | $ | 406.6 | $ | 368.4 | ||||||||||||||||
|
Adjustments to reconcile net earnings to net cash provided by operating activities: |
||||||||||||||||||||||||
| Depreciation and amortization | 138.5 | 127.0 | 281.3 | 255.1 | ||||||||||||||||||||
| Stock compensation | 26.2 | 25.0 | 52.0 | 52.7 | ||||||||||||||||||||
| Loss / (Gain) on sale of assets | (2.0 | ) | 0.1 | (0.3 | ) | 0.6 | ||||||||||||||||||
| Accreted interest on zero-coupon subordinated notes | 0.1 | - | 0.1 | 0.2 | ||||||||||||||||||||
|
Cumulative earnings less than (in excess of) distributions from equity affiliates |
(0.8 | ) | (4.1 | ) | (1.3 | ) | (4.0 | ) | ||||||||||||||||
| Asset impairment | - | 15.1 | 2.3 | 15.1 | ||||||||||||||||||||
| Deferred income taxes | - | (23.3 | ) | 36.0 | (4.6 | ) | ||||||||||||||||||
| Change in assets and liabilities: | ||||||||||||||||||||||||
| Decrease (Increase) in accounts receivable | 66.8 | (23.5 | ) | 13.2 | (50.2 | ) | ||||||||||||||||||
| Increase in unbilled services | (13.7 | ) | (27.5 | ) | (36.5 | ) | (37.1 | ) | ||||||||||||||||
| Increase in inventories | (6.1 | ) | (5.6 | ) | (4.7 | ) | (0.7 | ) | ||||||||||||||||
| Decrease (Increase) in prepaid expenses and other | 6.6 | 21.0 | (27.2 | ) | 4.8 | |||||||||||||||||||
| (Decrease) Increase in accounts payable | (31.5 | ) | 7.0 | (91.3 | ) | 8.6 | ||||||||||||||||||
| (Decrease) Increase in unearned revenue | (17.9 | ) | (7.2 | ) | 8.3 | (10.0 | ) | |||||||||||||||||
| (Decrease) Increase in accrued expenses and other | (33.1 | ) | 21.4 | (116.5 | ) | (62.5 | ) | |||||||||||||||||
| Net cash provided by operating activities | 367.2 | 310.5 | 522.0 | 536.4 | ||||||||||||||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||||||||||||||
| Capital expenditures | (87.2 | ) | (69.3 | ) | (159.7 | ) | (141.5 | ) | ||||||||||||||||
| Proceeds from sale of assets | 0.6 | 0.2 | 0.7 | 1.0 | ||||||||||||||||||||
| Proceeds from sale of held for sale assets | 49.1 | - | 49.1 | - | ||||||||||||||||||||
| Acquisition of licensing technology | - | (1.1 | ) | - | (2.3 | ) | ||||||||||||||||||
| Investments in equity affiliates | (5.4 | ) | (5.0 | ) | (7.3 | ) | (26.1 | ) | ||||||||||||||||
| Acquisitions of businesses, net of cash acquired | (79.1 | ) | (416.2 | ) | (79.1 | ) | (568.0 | ) | ||||||||||||||||
| Net cash used for investing activities | (122.0 | ) | (491.4 | ) | (196.3 | ) | (736.9 | ) | ||||||||||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||||||||||||||
| Payments on term loan | (295.0 | ) | - | (295.0 | ) | - | ||||||||||||||||||
| Proceeds from revolving credit facilities | 165.0 | 520.0 | 394.7 | 749.7 | ||||||||||||||||||||
| Payments on revolving credit facilities | (180.0 | ) | (307.0 | ) | (394.7 | ) | (440.7 | ) | ||||||||||||||||
| Payments on zero-coupon subordinated notes | - | (0.3 | ) | - | (23.2 | ) | ||||||||||||||||||
| Payments on long-term lease obligations | (2.3 | ) | (2.0 | ) | (5.1 | ) | (4.3 | ) | ||||||||||||||||
| Noncontrolling interest distributions | (0.3 | ) | (0.2 | ) | (5.9 | ) | (0.5 | ) | ||||||||||||||||
| Deferred acquisition costs | - | (0.1 | ) | - | (1.5 | ) | ||||||||||||||||||
| Net proceeds from issuance of stock to employees | 14.6 | 4.4 | 43.0 | 31.4 | ||||||||||||||||||||
| Purchase of common stock | (75.0 | ) | (108.0 | ) | (150.0 | ) | (256.0 | ) | ||||||||||||||||
| Net cash provided by (used for) financing activities | (373.0 | ) | 106.8 | (413.0 | ) | 54.9 | ||||||||||||||||||
| Effect of exchange rate changes on cash and cash equivalents | (12.6 | ) | 8.4 | (7.9 | ) | 11.8 | ||||||||||||||||||
| Net decrease in cash and cash equivalents | (140.4 | ) | (65.7 | ) | (95.2 | ) | (133.8 | ) | ||||||||||||||||
| Cash and cash equivalents at beginning of period | 361.8 | 365.3 | 316.6 | 433.6 | ||||||||||||||||||||
| Cash and cash equivalents included in assets held for sale | - | - | - | (0.2 | ) | |||||||||||||||||||
| Cash and cash equivalents at end of period | $ | 221.4 | $ | 299.6 | $ | 221.4 | $ | 299.6 | ||||||||||||||||
| LABORATORY CORPORATION OF AMERICA HOLDINGS | ||||||||||||||||
| Condensed Combined Non-GAAP Pro Forma Segment Information | ||||||||||||||||
| (Dollars in millions) | ||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||
|
LabCorp Diagnostics |
||||||||||||||||
| Revenue | $ | 1,814.0 | $ | 1,721.1 | $ | 3,584.2 | $ | 3,360.8 | ||||||||
| Adjusted Operating Income | $ | 376.0 | $ | 375.5 | $ | 740.0 | $ | 717.3 | ||||||||
| Adjusted Operating Margin | 20.7 | % | 21.8 | % | 20.6 | % | 21.3 | % | ||||||||
|
Covance Drug Development |
||||||||||||||||
| Revenue | $ | 1,054.2 | $ | 807.5 | $ | 2,132.6 | $ | 1,581.7 | ||||||||
| Adjusted Operating Income | $ | 123.4 | $ | 88.5 | $ | 231.4 | $ | 156.6 | ||||||||
| Adjusted Operating Margin | 11.7 | % | 11.0 | % | 10.9 | % | 9.9 | % | ||||||||
|
Consolidated |
||||||||||||||||
| Revenue | $ | 2,866.3 | $ | 2,528.2 | $ | 5,714.6 | $ | 4,941.9 | ||||||||
| Adjusted Segment Operating Income | $ | 499.4 | $ | 464.0 | $ | 971.4 | $ | 873.9 | ||||||||
| Unallocated corporate expense | $ | (35.9 | ) | $ | (32.9 | ) | $ | (72.1 | ) | $ | (66.1 | ) | ||||
| Consolidated Adjusted Operating Income | $ | 463.5 | $ | 431.1 | $ | 899.3 | $ | 807.8 | ||||||||
| Adjusted Operating Margin | 16.2 | % | 17.1 | % | 15.7 | % | 16.3 | % | ||||||||
Results for the three months and six months ended
| LABORATORY CORPORATION OF AMERICA HOLDINGS | |||||||||||||||||
| Reconciliation of Non-GAAP Financial Measures | |||||||||||||||||
| (Dollars in millions, except per share data) | |||||||||||||||||
| Three Months Ended | Six Months Ended | ||||||||||||||||
| June 30, | June 30, | ||||||||||||||||
|
Adjusted Operating Income |
2018 | 2017 | 2018 | 2017 | |||||||||||||
| Operating income | $ | 369.2 | $ | 329.8 | $ | 674.6 | $ | 647.9 | |||||||||
| Acquisition-related costs | 19.7 | 8.0 | 37.6 | 12.4 | |||||||||||||
| Restructuring and other special charges | 12.2 | 39.1 | 26.5 | 43.0 | |||||||||||||
| Consulting fees and executive transition expenses | 1.4 | - | 4.5 | - | |||||||||||||
| Special tax reform bonus for employees | - | - | 31.1 | - | |||||||||||||
| LaunchPad system implementation costs | 2.5 | 2.8 | 4.2 | 5.5 | |||||||||||||
| Amortization of intangibles and other assets | 58.5 | 51.4 | 120.8 | 99.0 | |||||||||||||
| Adjusted operating income | $ | 463.5 | $ | 431.1 | $ | 899.3 | $ | 807.8 | |||||||||
|
Adjusted EPS |
|||||||||||||||||
| Diluted earnings per common share | $ | 2.27 | $ | 1.78 | $ | 3.94 | $ | 3.54 | |||||||||
| Restructuring and special items | 0.26 | 0.32 | 0.76 | 0.38 | |||||||||||||
| Tax reform act adjustments | 0.01 | - | 0.15 | - | |||||||||||||
| Amortization expense | 0.44 | 0.33 | 0.90 | 0.65 | |||||||||||||
| Adjusted EPS | $ | 2.98 | $ | 2.43 | $ | 5.75 | $ | 4.57 | |||||||||
|
Free Cash Flow: |
|||||||||||||||||
| Net cash provided by operating activities (1) | $ | 367.2 | $ | 310.5 | $ | 522.0 | $ | 536.4 | |||||||||
| Less: Capital expenditures | (87.2 | ) | (69.3 | ) | (159.7 | ) | (141.5 | ) | |||||||||
| Free cash flow | $ | 280.0 | $ | 241.2 | $ | 362.3 | $ | 394.9 | |||||||||
| (1) Operating cash flow in 2017 has been reduced by $0.1 million and $8.0 million for the three and six months ended June 30, 2017 as the result of implementation of ASU 2016-18. These amounts represent the historical payments made upon conversion of the Company's zero-coupon subordinated notes deemed to be accreted interest. | |||||||||||||||||
Notes to Reconciliation of Non-GAAP Financial Measures
1) During the second quarter of 2018, the Company recorded net restructuring and other special charges of
The Company incurred integration and other related costs of
The after tax impact of these charges decreased net earnings for the quarter ended
During the first quarter of 2018, the Company recorded net restructuring and other special charges of
The Company incurred integration and other related costs of
The after tax impact of these combined charges decreased net earnings for the six months ended
2) During the second quarter of 2017, the Company recorded net restructuring and other special charges of
The Company incurred legal and other costs of
The after tax impact of these charges decreased net earnings for the quarter ended
During the first quarter of 2017, the Company recorded net restructuring and other special charges of
The Company incurred legal and other costs of
The after tax impact of these combined charges decreased net earnings for the six months ended
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
View source version on businesswire.com: https://www.businesswire.com/news/home/20180725005323/en/
Source:
LabCorp
Investors
Scott Frommer, 336-436-5076
[email protected]
or
Media
Pattie Kushner, 336-436-8263
[email protected]