UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 1998
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-11353
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LABORATORY CORPORATION OF AMERICA HOLDINGS
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(Exact name of registrant as specified in its charter)
DELAWARE 13-3757370
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
358 SOUTH MAIN STREET, BURLINGTON, NORTH CAROLINA 27215
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(Address of principal executive offices) (Zip code)
(336) 229-1127
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to
such filing requirements for the past 90 days. Yes X No ___
The number of shares outstanding of the issuer's common stock is 125,252,812
shares as of July 31, 1998, of which 61,329,256 shares are held by indirect
wholly owned subsidiaries of Roche Holding Ltd.
The number of warrants outstanding to purchase shares of the issuer's common
stock is 22,151,308 as of July 31, 1998, of which 8,325,000 are held by an
indirect wholly owned subsidiary of Roche Holding Ltd.
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LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<CAPTION>
JUNE 30, DECEMBER 31,
---------- ------------
1998 1997
---------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 15.5 $ 23.3
Accounts receivable, net 356.2 330.6
Inventories 29.9 36.0
Prepaid expenses and other 17.4 16.9
Deferred income taxes 37.5 112.0
Income taxes receivable -- 8.8
-------- --------
Total current assets 456.5 527.6
Property, plant and equipment, net 254.7 254.9
Intangible assets, net 832.8 851.3
Other assets, net 25.3 24.7
-------- --------
$1,569.3 $1,658.5
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 51.2 $ 55.9
Accrued expenses and other 145.6 140.7
Current portion of long-term debt 23.2 --
-------- --------
Total current liabilities 220.0 196.6
Revolving credit facility -- 40.0
Long-term debt, less current portion 620.6 643.8
Capital lease obligation 4.9 5.8
Other liabilities 79.4 142.3
Commitments and contingent liabilities -- --
Mandatorily redeemable preferred stock
(30,000,000 shares authorized):
Series A 8 1/2% Convertible
Exchangeable Preferred Stock, $0.10
par value, 4,363,178 and 4,363,202
shares issued and outstanding at
June 30, 1998 and December 31, 1997,
respectively (aggregate preference
value of $218.2) 212.8 212.6
Series B 8 1/2% Convertible
Pay-in-Kind Preferred Stock, $0.10
par value, 6,145,587 and 5,892,495
shares issued and outstanding at June
30, 1998 and December 31, 1997,
respectively (aggregate preference
value of $307.3) 301.5 288.3
Shareholders' equity:
Common stock, $0.01 par value;
520,000,000 shares authorized;
124,506,673 and 123,542,614
shares issued and outstanding at
June 30, 1998 and December 31,
1997, respectively 1.2 1.2
Additional paid-in capital 414.4 412.8
Accumulated deficit (285.5) (284.9)
------- -------
Total shareholders' equity 130.1 129.1
-------- --------
$1,569.3 $1,658.5
======== ========
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
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LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<CAPTION>
SIX MONTHS ENDED THREE MONTHS ENDED
JUNE 30, JUNE 30,
---------------- ------------------
1998 1997 1998 1997
------- ------ ------- -------
<S> <C> <C> <C> <C>
Net sales $ 759.1 $ 781.1 $ 386.1 $ 389.6
Cost of sales 513.5 548.9 257.8 271.7
------- ------- ------- -------
Gross profit 245.6 232.2 128.3 117.9
Selling, general and
administrative expenses 163.7 158.2 83.4 79.3
Amortization of intangibles
and other assets 15.2 15.4 7.5 7.7
------- ------- ------- -------
Operating income 66.7 58.6 37.4 30.9
Other income (expenses):
Gain/(loss)on sale of
assets 1.9 -- (0.1) --
Investment income 0.6 1.4 0.2 0.6
Interest expense (25.0) (43.9) (12.1) (21.3)
------- ------- ------- -------
Earnings before income
taxes 44.2 16.1 25.4 10.2
Provision for income taxes 22.1 9.7 12.6 6.1
------- ------- ------- -------
Net earnings 22.1 6.4 12.8 4.1
Less preferred stock
dividends 22.3 1.2 11.3 1.2
Less accretion of
mandatorily redeemable
preferred stock 0.4 -- 0.2 --
------- ------- ------- -------
Net earnings (loss)
attributable to common
shareholders $ (0.6) $ 5.2 $ 1.3 $ 2.9
======= ======= ======= =======
Basic and diluted earnings
(loss) per common share $ (0.00) $ 0.04 $ 0.01 $ 0.02
======= ======= ======= =======
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
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LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-------------------
1998 1997
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 22.1 $ 6.4
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Net decrease in restructuring
reserves (3.8) (6.4)
Net gain on disposals (1.9) --
Depreciation and amortization 42.7 43.8
Deferred income taxes, net 15.0 7.4
Change in assets and liabilities,
net of effects of acquisitions:
Increase in accounts receivable,
net (27.4) (12.5)
Decrease in inventories 6.0 3.3
Increase in prepaid expenses
and other (0.5) (1.2)
Change in income taxes
receivable/payable, net 8.8 59.4
Decrease in accounts
payable (4.7) (13.1)
Increase in accrued expenses
and other 11.0 (6.3)
Other, net (1.8) (6.4)
------ ------
Net cash provided by operating
activities 65.5 74.4
------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (28.7) (7.8)
Proceeds from sale of assets 12.3 --
Refund of lease guaranty 8.0 --
Acquisition of businesses (10.4) --
------ ------
Net cash used for investing
activities (18.8) (7.8)
------ ------
(continued)
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LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
SIX MONTHS ENDED
JUNE 30,
--------------------
1998 1997
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<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from revolving credit
facilities $ 10.0 $ 25.0
Payments on revolving credit
facilities (50.0) (321.0)
Payment on loan from affiliate -- (187.0)
Payments on long-term debt -- (68.8)
Payments on long-term lease obligations (0.8) --
Deferred payments on acquisitions (6.0) (1.8)
Net proceeds from sale of redeemable
preferred stock -- 487.1
Net proceeds form issuance of stock to
employee stock plan -- 1.4
Payment of preferred stock dividends (9.2) --
Cash received for issuance of common
stock 1.5 --
------ ------
Net cash used for financing activities (54.5) (65.1)
------ ------
Net (decrease) increase in cash
and cash equivalents (7.8) 1.5
Cash and cash equivalents at
beginning of period 23.3 29.3
------ ------
Cash and cash equivalents at
end of period $ 15.5 $ 30.8
====== ======
Supplemental schedule of cash
flow information:
Cash (paid) received during the period
for:
Interest $(25.7) $(46.1)
Income taxes 13.7 60.7
Disclosure of non-cash financing
and investing activities:
Preferred stock dividends 13.0 0.7
Accretion of mandatorily redeemable
preferred stock 0.4 --
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
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LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
1. BASIS OF FINANCIAL STATEMENT PRESENTATION
The condensed consolidated financial statements include the accounts of
Laboratory Corporation of America Holdings and its wholly owned subsidiaries
(the "Company") after elimination of all material intercompany accounts and
transactions.
The accompanying condensed consolidated financial statements of the Company
are unaudited. In the opinion of management, all adjustments (which include
only normal recurring accruals) necessary for a fair presentation of such
financial statements have been included. Interim results are not
necessarily indicative of results for a full year.
The financial statements and notes are presented in accordance with the
rules and regulations of the Securities and Exchange Commission and do not
contain certain information included in the Company's annual report.
Therefore, the interim statements should be read in conjunction with the
consolidated financial statements and notes thereto contained in the
Company's annual report.
2. EARNINGS PER SHARE
Basic and diluted earnings (loss) per share are based upon the weighted
average number of shares outstanding during the three- and six- months ended
June 30, 1998 of 124,506,673 shares and 124,452,465 shares, respectively,
and the weighted average number of shares outstanding during the three- and
six-months ended June 30, 1997 of 122,935,080.
The effect of conversion of the Company's redeemable preferred stock, or
exercise of certain of the Company's stock options or warrants was not
included in the computation of diluted earnings per common share as it would
have been anti-dilutive for all applicable periods presented.
3. RESTRUCTURING RESERVES
The following represents the Company's restructuring reserves activities
for the period indicated:
Asset Lease and
Severance revaluations other facility
costs and write-offs obligations Total
--------- -------------- -------------- -----
Balance at
December 31, 1997 3.7 4.0 30.9 38.6
Cash payments (1.0) (0.4) (2.4) (3.8)
------ ------ ------ ------
Balance at
June 30, 1998 $ 2.7 $ 3.6 $ 28.5 $ 34.8
====== ====== ====== ======
Current $ 18.6
Non-current 16.2
------
$ 34.8
======
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LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
4. BUSINESS ACQUISITION
During June, the Company completed its acquisition of certain of the assets
of Medlab, Inc. for an aggregate purchase price of approximately $9.3.
Medlab, Inc. is located in Wilmington, Delaware and has annual sales of
approximately $22.0.
5. NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income," and SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information." Both Statements are
effective for fiscal years beginning after December 15, 1997. SFAS No. 130
establishes standards for reporting and display of comprehensive income and
its components in financial statements. SFAS No. 131 establishes standards
for the way that public business enterprises report information about
operating segments in annual financial statements and requires that those
enterprises report selected information about operating segments in interim
financial reports issued to shareholders. SFAS No. 131 requires
presentation of segment information under the "management approach," which
aligns segments disclosure with the way that management organizes the
segments within the enterprise for making operational decisions and
assessing performance.
In February 1998, the Financial Accounting Standards Board issued SFAS No.
132, "Employers' Disclosures About Pensions and Other Postretirement
Benefits." This Statement is effective for fiscal years beginning after
December 15, 1997. The objective of SFAS No. 132 is to provide financial
statement users with more comparable, understandable and concise information
concerning the employer's obligations to fund retirement plans and provide
postretirement benefits. The Statement only applies to disclosures and
does not address the measurement of the employer's obligation.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities". This
Statement is effective for fiscal years beginning after June 15, 1999 and
standardizes the accounting for derivative instruments by requiring that an
entity recognize those items as assets or liabilities and measure them at
fair value.
The Company has no elements of other comprehensive income, as defined in
SFAS No. 130, for the six months ended June 30, 1998 and 1997. Management
has not yet completed its assessment of how the other standards listed
above will impact existing disclosures. The Company will adopt these
standards in the required periods.
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LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN MILLIONS)
OVERVIEW
This quarterly report on Form 10-Q contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended. In
addition, from time to time, the Company or its representatives have made or
may make forward-looking statements, orally or in writing. Such forward-
looking statements may be included in, but are not limited to, various
filings made by the Company with the Securities and Exchange Commission,
press releases or oral statements made by or with the approval of an
authorized executive officer of the Company. Actual results could differ
materially from those projected or suggested in any forward-looking
statements as a result of a wide variety of factors and conditions, which
have been described in the section of the Company's Annual Report on Form 10-
K for the year ended December 31, 1997, entitled, "Cautionary Statement for
Purposes of the `Safe Harbor' Provisions of the Private Securities
Litigation Reform Act of 1995" and other documents the Company files from
time to time with the Securities and Exchange Commission including the
Company's quarterly reports on Form 10-Q and current reports on Form 8-K,
and shareholders are specifically referred to these documents with regard to
factors and conditions that may affect future results.
RESULTS OF OPERATIONS
Three Months ended June 30, 1998 compared with Three Months ended June 30,
1997.
Net sales for the three months ended June 30, 1998 were $386.1, a decrease
of approximately 1% from $389.6 reported in the comparable 1997 period. The
sales decline was a result of lower testing volume, attributable to changes
in physicians ordering patterns caused by new government and private
reimbursement policies, and hospitals aggressively competing in the
outpatient testing market. The Company's price per accession increased 3.5%
in comparison to the corresponding 1997 quarter.
Cost of sales, which includes primarily laboratory and distribution costs,
was $257.8 for the three months ended June 30, 1998 compared to $271.7 in
the corresponding 1997 period, a decrease of $13.9. Cost of sales decreased
approximately $2.3 due to the decrease in volume, approximately $4.4 due to
a decrease in personnel expenses and approximately $7.2 primarily relating
to testing supplies, maintenance, outside reference testing, and rental
expense categories as a result of the Company's cost reduction programs.
Cost of sales
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LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN MILLIONS)
as a percentage of net sales was 66.8% for the three months ended June 30,
1998 and 69.7% in the corresponding 1997 period. The decrease in the cost
of sales percentage of net sales primarily resulted from the cost reduction
efforts mentioned above.
Selling, general and administrative expenses increased to $83.4 for the
three months ended June 30, 1998 from $79.3 in the same period in 1997.
This increase is primarily due to higher personnel expenses, and selling and
marketing related expenses. Total bad debt expense decreased approximately
$0.2, or 0.1% of net sales, from the comparable 1997 period. As a
percentage of net sales, selling, general and administrative expenses were
21.6% and 20.4% for the three months ended June 30, 1998 and 1997,
respectively. The increase in the selling, general and administrative
percentage primarily resulted from the factors noted above.
The amortization of intangibles and other assets was $7.5 and $7.7 for the
three months ended June 30, 1998 and 1997, respectively.
Net interest expense was $12.1 for the three months ended June 30, 1998
compared with $21.3 for the same period in 1997. The change resulted
primarily from decreased borrowings resulting from the Company's
recapitalization in June, 1997 and payments made to reduce the Company's
revolving credit facility.
The provision for income taxes as a percentage of earnings before taxes was
49.6% for the three months ended June 30, 1998 compared to 59.8% for the
three months ended June 30, 1997. The Company's effective tax rate is
significantly impacted by non-deductible amortization of intangible assets.
As earnings before income taxes increases, this non-deductible amortization
decreases in proportion to such earnings resulting in a decrease in the
effective tax rate.
SIX MONTHS ENDED JUNE 30, 1998 COMPARED WITH SIX MONTHS ENDED
JUNE 30, 1997.
Net sales for the six months ended June 30, 1998 were $759.1, a decrease of
approximately 3% from $781.1 reported in the comparable 1997 period. Sales
declined 4.5% as a result of lower testing volume, which is a result of
industry-wide trends. The decline in sales resulting from volume declines
was partially offset by an increase in price per accession of approximately
2% from the comparable 1997 period. The increase in the price per accession
was a direct result of the Company's effort to negotiate better pricing on
new contracts, raising prices on existing contracts that do not meet Company
profitability targets and other price increases.
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LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN MILLIONS)
Cost of sales, which includes primarily laboratory and distribution costs,
was $513.5 for the six months ended June 30, 1998 compared to $548.9 in the
corresponding 1997 period, a decrease of $35.4. Cost of sales decreased
approximately $10.6 due to the decrease in volume, approximately $15.9 due
to a decrease in personnel expenses and approximately $8.9 primarily
relating to testing supplies, consulting fees, maintenance and rental
expense categories as a result of the Company's cost reduction programs.
Cost of sales as a percentage of net sales was 67.6% for the six months
ended June 30, 1998 and 70.3% in the corresponding 1997 period. The
decrease in the cost of sales percentage of net sales primarily resulted
from the cost reduction efforts mentioned above.
Selling, general and administrative expenses increased to $163.7 for the
six months ended June 30, 1998 from $158.2 in the same period in 1997. This
increase is primarily due to higher personnel expenses, and selling and
marketing related expenses. Total bad debt expense decreased approximately
$0.7, or 0.2% of net sales, from the comparable 1997 period. As a
percentage of net sales, selling, general and administrative expenses were
21.6% and 20.3% for the six months ended June 30, 1998 and 1997,
respectively. The increase in the selling, general and administrative
percentage primarily resulted from the factors noted above.
The amortization of intangibles and other assets was $15.2 and $15.4 for
the six months ended June 30, 1998 and 1997, respectively.
Net interest expense was $24.9 for the six months ended June 30, 1998
compared with $44.0 for the same period in 1997. The change resulted
primarily from decreased borrowings resulting from the Company's
recapitalization in June, 1997 and payments made to reduce the Company's
revolving credit facility.
The provision for income taxes as a percentage of earnings before taxes was
50.0% for the six months ended June 30, 1998 compared to 60.2% for the six
months ended June 30, 1997. The Company's effective tax rate is
significantly impacted by non-deductible amortization of intangible assets.
As earnings before income taxes increases, this non-deductible amortization
decreases in proportion to such earnings resulting in a decrease in the
effective tax rate.
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LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN MILLIONS)
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $65.5 and $74.4 for the six
months ended June 30, 1998 and June 30, 1997, respectively. The decrease in
cash flow from operations primarily resulted from a decrease in income tax
refunds and an increase in accounts receivable offset by improved earnings
and an increase in accrued expenses. Capital expenditures were $28.7 and
$7.8 for 1998 and 1997, respectively. The Company expects capital
expenditures to be approximately $70.0 in 1998 to further automate
laboratory and billing processes to improve efficiency. Such expenditures
are expected to be funded by cash flow from operations as well as borrowings
under the Company's credit facilities. The Company received approximately
$12.3 in proceeds from the sale of assets and an additional $8.0 refund of a
lease guaranty and made payments for business acquisitions in the amount of
approximately $10.4.
During 1996 and 1997, the Company experienced a deterioration in the
timeliness of cash collections and a corresponding increase in accounts
receivable. The primary causes of this situation were the increased medical
necessity and related diagnosis code requirements from third-party payors
and the complexities in the billing process (data capture) arising from
changing requirements of private insurance companies (managed care). The
Company's cash collection rates, as a percentage of sales, have improved
1.4% as compared to the first six months of 1997. In the second quarter of
1998, the Company's days sales outstanding remained stable in comparison to
the preceding two quarters. Although the Company continues to work towards
reducing the overall number of days sales outstanding, additional changes in
requirements of third-party payors could increase the difficulty in
collections. There can be no assurance of the success of the Company's
plans to improve collections and, due to the previously mentioned factors,
to reduce accounts receivable balances.
For a discussion of legal proceedings which may impact the Company's
liquidity and capital resources see "Part II - Other Information -- Item 1:
Legal Proceedings."
Cash and cash equivalents on hand, cash flows from operations and
additional borrowing capabilities under the Amended Revolving Credit
Facility are expected to be sufficient to meet anticipated operating
requirements and provide funds for capital expenditures and working capital
for the foreseeable future.
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LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN MILLIONS)
REGULATION AND REIMBURSEMENT
On April 1, 1997, the Health Care Financing Administration's (HCFA) new
Automated Chemistry Profile Rules went into effect. The policy, which was
developed by HCFA working with the American Medical Association, eliminates
the old commonly used "19-22 test" automated chemistry profile, sometimes
referred to as a "SMAC" and replaces it with four new panels of "clinically
relevant" automated tests (each containing from 4 to 12 chemistry tests).
The Company believes that it has taken all steps necessary to be in compliance
with the new HCFA requirements.
As discussed in the First Quarter 10-Q, all major laboratory companies,
including the Company, were required to eliminate the old chemistry profiles
from their standard test requisition forms and standard test offerings by
July 1, 1998. The Company developed and implemented a new "universal" test
requisition and "standard test offerings" which successfully incorporated
all required changes by the July 1, 1998 deadline.
These new rules are intended to reduce the number of non-Medicare covered
"screening tests" which Medicare believes have in the past been
inappropriately billed to Medicare. Due to the variety of new rules
(including limited coverage rules) which have been adopted recently to
address this issue, the Company does not believe a meaningful estimate of
the potential financial impact of this new rule can be made at this time.
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LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is involved in litigation which purports to be a
class action brought on behalf of certain patients, private
insurers and benefit plans that paid for laboratory testing
services during the time frame covered by the 1996 Government
Settlement. The Company has also received certain similar claims
brought on behalf of certain other insurance companies, some of
which have been resolved for immaterial amounts. These claims for
private reimbursement are similar to the government claims settled
in 1996. However, no amount of damages has been specified at this
time and, with the exception of the above, no settlement
discussions have taken place. The Company is carefully evaluating
these claims, however, due to the early stage of the claims, the
ultimate outcome of these claims cannot presently be predicted.
The Company is also involved in certain claims and legal
actions arising in the ordinary course of business. These matters
include, but are not limited to, inquiries from governmental
agencies and Medicare or Medicaid carriers requesting comment on
allegations of billing irregularities that are brought to their
attention through billing audits or third parties. In the opinion
of management, based upon the advice of counsel and consideration
of all facts available at this time, the ultimate disposition of
these matters will not have a material adverse effect on the
financial position, results of operations or liquidity of the
Company.
Item 4. REPORT OF THE INSPECTOR OF ELECTION
On June 17, 1998 the Company held its 1998 annual meeting. The final
tabulation of the votes cast at the meeting was as follows:
FOR WITHHELD
--- --------
ELECTION OF THE MEMBERS
OF THE BOARD OF DIRECTORS:
American Stock Transfer & Trust Company
Thomas P. Mac Mahon 102,231,265 12,856,400
James B. Powell, MD 102,245,586 12,842,079
Jean-Luc Belingard 100,105,881 14,981,784
Wendy E. Lane 114,191,547 896,118
Robert E. Mittelstaedt, Jr. 114,191,091 896,574
David B. Skinner, MD 114,191,691 895,974
Andrew G. Wallace, MD 112,050,895 3,036,770
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LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES
Item 4. REPORT OF THE INSPECTOR OF ELECTION - Continued
VOTES VOTES VOTES
FOR AGAINST ABSTAINED
--- ------- ---------
RATIFICATION OF THE APPOINTMENT OF
PRICE WATERHOUSE LLP AS THE COMPANY'S
INDEPENDENT AUDITORS FOR THE FISCAL
YEAR ENDING DECEMBER 31, 1998:
American Stock Transfer & Trust
Company 114,899,348 107,460 80,857
In addition, certain shares of National Health Laboratories Holdings,
Inc. which have not been converted to Company shares were eligible to vote
at the annual meeting and were voted as follows:
FOR WITHHELD
--- --------
ELECTION OF THE MEMBERS
OF THE BOARD OF DIRECTORS:
American Stock Transfer & Trust Company
Thomas P. Mac Mahon 300 5
James B. Powell, MD 305 0
Jean-Luc Belingard 305 0
Wendy E. Lane 305 0
Robert E. Mittelstaedt, Jr. 305 0
David B. Skinner, MD 305 0
Andrew G. Wallace, MD 305 0
VOTES VOTES VOTES
FOR AGAINST ABSTAINED
----- ------- ---------
RATIFICATION OF THE APPOINTMENT OF
PRICE WATERHOUSE LLP AS THE COMPANY'S
INDEPENDENT AUDITORS FOR THE FISCAL
YEAR ENDING DECEMBER 31, 1998:
American Stock Transfer & Trust Company 305 0 0
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule (electronically
filed version only).
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LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES
(b) Reports on Form 8-K
(1) A current report on Form 8-K dated June 10, 1998
was filed on July 8, 1998, by the registrant, in
connection with the press release dated June 10, 1998
announcing the completion of its previously announced
acquisition of certain of the assets of Medlab, Inc.
(2) A current report on Form 8-K dated June 12, 1998
was filed on July 8, 1998, by the registrant, in
connection with the press release dated June 12, 1998
announcing that its Board of Directors declared dividends
on the Company's 8 1/2% Series A Convertible Exchangeable
Preferred Stock and the Company's 8 1/2% Series B
Convertible Pay-in-Kind Preferred Stock.
(3) A current report on Form 8-K dated June 23, 1998
was filed on July 8, 1998, by the registrant, in
connection with the press release dated June 23, 1998
announcing that it signed two separate laboratory service
agreements collectively covering more than 1,500,000
Florida members of the two plans. The first is a multi-
year agreement with Health Options, Inc., Blue Cross and
Blue Shield of Florida's health maintenance organization,
and the second is an agreement to become a provider
of laboratory services to Florida members of Humana
Medical Plans, Inc., a subsidiary of Humana, Inc.
(4) A current report on Form 8-K dated June 30, 1998 was
filed on July 8, 1998, by the registrant, in connection
with the press release dated June 30, 1998 announcing that
the Antivirogram-TM- and the Vircogen-TM-, two new
diagnostic testing procedures enabling physicians to
evaluate resistance of HIV to antiretroviral drugs,
will be available for commercial use on July 20, 1998
exclusively from LabCorp facilities in the U.S. These
new testing systems are an important advance in
optimizing treatment choices in the fight against
HIV/AIDS.
<PAGE>
<PAGE>
S I G N A T U R E S
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LABORATORY CORPORATION OF AMERICA HOLDINGS
Registrant
By:/s/ THOMAS P. MAC MAHON
---------------------------------
Thomas P. Mac Mahon
Chairman, President and Chief
Executive Officer
By:/s/ WESLEY R. ELINGBURG
--------------------------------
Wesley R. Elingburg
Executive Vice President, Chief
Financial Officer and
Treasurer (Principal Financial
Officer and Principal Accounting
Officer)
Date: August 14, 1998
<PAGE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM LABORATORY
CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AND
STATEMENT OF EARNINGS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000920148
<NAME> LABORATORY CORPORATION OF AMERICA HOLDINGS
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 15,500
<SECURITIES> 0
<RECEIVABLES> 552,700
<ALLOWANCES> 196,500
<INVENTORY> 29,900
<CURRENT-ASSETS> 456,500
<PP&E> 484,500
<DEPRECIATION> 229,800
<TOTAL-ASSETS> 1,569,300
<CURRENT-LIABILITIES> 220,000
<BONDS> 620,600
514,300
0
<COMMON> 1,200
<OTHER-SE> 128,900
<TOTAL-LIABILITY-AND-EQUITY> 1,569,300
<SALES> 759,100
<TOTAL-REVENUES> 759,100
<CGS> 513,500
<TOTAL-COSTS> 513,500
<OTHER-EXPENSES> 178,900
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 25,000
<INCOME-PRETAX> 44,200
<INCOME-TAX> 22,100
<INCOME-CONTINUING> 22,100
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 22,100
<EPS-PRIMARY> (0.00)
<EPS-DILUTED> (0.00)
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