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 MARCH 31, 2000
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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 13,004,405
shares as of April 30, 2000, of which 6,132,926 shares are held by indirect
wholly owned subsidiaries of Roche Holding Ltd.
<PAGE>
<TABLE>
LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<CAPTION>
March 31, December 31,
2000 1999
--------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 40.9 $ 40.3
Accounts receivable, net 368.2 348.0
Inventories 26.2 29.1
Prepaid expenses and other 37.0 37.5
Deferred income taxes 41.4 44.6
-------- --------
Total current assets 513.7 499.5
Property, plant and equipment, net 271.4 273.2
Intangible assets, net 801.6 803.9
Other assets, net 13.2 13.6
-------- --------
$1,599.9 $1,590.2
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 45.3 $ 43.6
Accrued expenses and other 120.4 107.0
Current portion of long-term debt 99.0 95.0
-------- --------
Total current liabilities 264.7 245.6
Revolving credit facility -- --
Long-term debt, less current portion 445.5 478.4
Capital lease obligation 4.2 4.4
Other liabilities 129.0 127.6
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, 4,363,015 and 4,363,178 shares
issued and outstanding at March 31, 2000
and December 31, 1999, respectively
(aggregate preference value of $218.2
at March 31, 2000 and December 31, 1999) 213.5 213.4
Series B 8 1/2% Convertible Pay-in-Kind
Preferred Stock, $0.10 par value, 7,120,124
and 6,971,970 shares issued and outstanding
at March 31, 2000 and December 31, 1999,
respectively (aggregate preference value of
$356.0 and $348.6, respectively) 355.4 345.3
Shareholders' equity:
Common stock, $0.10 par value; 52,000,000
shares authorized; 12,987,289 and
12,878,958 shares issued and outstanding
at March 31, 2000 and December 31, 1999,
respectively 1.3 1.3
Additional paid-in capital 427.3 423.9
Accumulated deficit (234.7) (245.5)
Unearned restricted stock compensation (6.0) (4.1)
Accumulated other comprehensive loss (0.3) (0.1)
-------- --------
Total shareholders' equity 187.6 175.5
-------- --------
$1,599.9 $1,590.2
======== ========
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-----------------------
2000 1999
--------- --------
<S> <C> <C>
Net sales $ 462.7 $ 417.9
Cost of sales 279.2 266.5
-------- --------
Gross profit 183.5 151.4
Selling, general and
administrative expenses 118.4 109.1
Amortization of intangibles
and other assets 7.7 7.9
-------- --------
Operating income 57.4 34.4
Other income (expenses):
Loss on sale of assets (0.4) (1.2)
Investment income 0.5 0.1
Interest expense (9.9) (10.5)
-------- --------
Earnings before income taxes 47.6 22.8
Provision for income taxes 21.9 8.7
-------- --------
Net earnings 25.7 14.1
Less preferred stock dividends (14.7) (11.0)
Less accretion of mandatorily redeemable
preferred stock (0.2) (0.2)
-------- --------
Net income attributable to
common shareholders $ 10.8 $ 2.9
======== ========
Basic earnings per common share $ 0.85 $ 0.23
========= =========
Diluted earnings per common share $ 0.75 $ 0.23
========= =========
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-----------------------
2000 1999
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 25.7 $ 14.1
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation and amortization 21.3 21.2
Amortization of deferred compensation 0.2 --
Loss on sale of assets 0.4 1.2
Deferred income taxes, net 3.1 (4.0)
Change in assets and liabilities:
Net change in restructuring reserves (1.3) (1.3)
Increase in accounts receivable, net (19.4) (8.2)
Decrease in inventories 3.0 0.3
Decrease (increase) in prepaid expenses
and other 0.4 (3.0)
Increase(decrease)in accounts payable 1.4 (6.8)
Increase in accrued expenses and other 14.2 11.6
Other, net (0.5) --
------- -------
Net cash provided by operating activities 48.5 25.1
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (10.8) (15.5)
Proceeds from sale of assets -- 0.1
Acquisition of businesses (4.4) --
Deferred payments on acquisitions -- (0.8)
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Net cash used for investing activities (15.2) (16.2)
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(continued)
<PAGE>
LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-----------------------
2000 1999
-------- --------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt (29.0) (11.6)
Payments on long-term lease obligations (0.2) (0.4)
Payment of preferred stock dividends (4.6) (4.6)
Net proceeds from issuance of stock to
employees 1.3 1.3
------- -------
Net cash used for financing activities (32.5) (15.3)
------- -------
Effect of exchange rate changes on cash
and cash equivalents (0.2) --
Net increase (decrease) in cash and
cash equivalents 0.6 (6.4)
Cash and cash equivalents at
beginning of period 40.3 22.7
------- -------
Cash and cash equivalents at
end of period $ 40.9 $ 16.3
------- -------
Supplemental schedule of cash
flow information:
Cash paid during the period
for:
Interest $ 12.7 $ 13.3
Income taxes, net of refunds 1.9 3.4
Disclosure of non-cash financing
and investing activities:
Preferred stock dividends 10.1 6.4
Accretion of mandatorily redeemable
preferred stock 0.2 0.2
Unrealized loss on securities available-
for-sale (net of tax) -- (0.5)
Acquisition liabilities assumed 1.8 --
</TABLE>
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
<PAGE>
<TABLE>
LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
Additional
Common Paid-in Accumulated
Stock Capital Deficit
-------- ------------ ------------
<S> <C> <C> <C>
PERIOD ENDED MARCH 31, 1999
Balance at beginning of year $ 1.2 $ 415.7 $ (260.5)
Comprehensive income:
Net income -- -- 14.1
Other comprehensive income:
Change in valuation allowance
on securities, net of tax -- -- --
------- -------- --------
Comprehensive income -- -- 14.1
Issuance of common stock -- 1.3 --
Preferred stock dividends -- -- (11.0)
Accretion of mandatorily
redeemable preferred stock -- -- (0.2)
------- -------- --------
BALANCE AT MARCH 31, 1999 $ 1.2 $ 417.0 $ (257.6)
======= ======== ========
PERIOD ENDED MARCH 31, 2000
Balance at beginning of year $ 1.3 $ 423.9 $ (245.5)
Comprehensive income:
Net income -- -- 25.7
Other comprehensive income:
Foreign currency translation
adjustments -- -- --
Change in valuation allowance
on securities, net of tax -- -- --
------- -------- --------
Comprehensive income -- -- 25.7
Issuance of common stock -- 1.3 --
Issuance of restricted stock awards -- 2.1 --
Amortization of unearned
restricted stock compensation -- -- --
Preferred stock dividends -- -- (14.7)
Accretion of mandatorily
redeemable preferred stock -- -- (0.2)
------- -------- --------
BALANCE AT MARCH 31, 2000 $ 1.3 $ 427.3 $ (234.7)
======= ======== ========
<PAGE>
Unearned Accumulated
Restricted Other Total
Stock Comprehensive Shareholders'
Compensation Loss Equity
------------ ------------- ------------
<S> <C> <C> <C>
PERIOD ENDED MARCH 31, 1999
Balance at beginning of year $ -- $ (2.0) $ 154.4
Comprehensive income:
Net income -- -- 14.1
Other comprehensive income:
Change in valuation allowance
on securities, net of tax -- (0.5) (0.5)
------- -------- --------
Comprehensive income -- (0.5) 13.6
Issuance of common stock -- -- 1.3
Preferred stock dividends -- -- (11.0)
Accretion of mandatorily
redeemable preferred stock -- -- (0.2)
------- -------- --------
BALANCE AT MARCH 31, 1999 $ -- $ (2.5) $ 158.1
======= ======== ========
PERIOD ENDED MARCH 31, 2000
Balance at beginning of year $ (4.1) $ (0.1) $ 175.5
Comprehensive income:
Net income -- -- 25.7
Other comprehensive income:
Foreign currency translation
adjustments -- (0.2) (0.2)
Change in valuation allowance
on securities, net of tax -- -- --
------- -------- --------
Comprehensive income -- (0.2) 25.5
Issuance of common stock -- -- 1.3
Issuance of restricted stock awards (2.1) -- --
Amortization of unearned
restricted stock compensation 0.2 -- 0.2
Preferred stock dividends -- -- (14.7)
Accretion of mandatorily
redeemable preferred stock -- -- (0.2)
------- -------- --------
BALANCE AT MARCH 31, 2000 $ (6.0) $ (0.3) $ 187.6
======= ======== ========
</TABLE>
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
<PAGE>
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 financial statements of the Company's foreign subsidiary are measured
using the local currency as the functional currency. Assets and liabilities
are translated at exchange rates as of the balance sheet date. Revenues and
expenses are translated at average monthly exchange rates prevailing during
the year. Resulting translation adjustments are included in "Accumulated
other comprehensive loss."
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. REVERSE STOCK SPLIT
During May 2000, the Company's stockholders approved a 1-for-10 reverse
stock split. As a result of the approval of the reverse stock split, the
number of authorized shares of common stock decreased from 520,000,000 to
52,000,000 and the par value increased from $0.01 to $0.10. All references to
common stock, common shares outstanding, average number of common shares
outstanding, stock options, restricted shares and per share amounts in the
Consolidated Financial Statements and Notes to Consolidated Financial
Statements have been restated to reflect the 1-for-10 common stock split on a
retroactive basis.
3. BUSINESS ACQUISITIONS
During March, the Company completed the acquisition of all of the stock
of San Diego-based POISONLAB, Inc.'s occupational substance abuse and clinical
toxicology testing business for $4.4 in cash and future payments of $1.8 which
are contingent upon performance of the business.
During April, the Company completed the acquisition of certain clinical
testing assets of Bio-Diagnostics Laboratories, which is based in Torrance,
California, for approximately $8.5 in cash and future payments of $2.1.
<PAGE>
LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
4. EARNINGS PER SHARE
Basic and diluted earnings per share are based upon the weighted average
number of shares outstanding during the three months ended March 31, 2000 of
12,755,152 shares and 34,414,149 shares, respectively. Dilutive shares
include the Company's redeemable preferred stock, restricted stock awards and
certain of the Company's stock options for the three months ended March 31,
2000.
For the three months ended March 31, 1999, basic and diluted earnings per
share are based upon the weighted average number of shares outstanding of
12,613,947. The effect of conversion of the Company's redeemable preferred
stock, or exercise of the Company's stock options was not included in the
computation of diluted earnings per common share as it would have been anti-
dilutive for the three months ended March 31, 1999.
The following table summarizes the potential common shares not included
in the computation of dilutive earnings per share because their impact would
have an antidilutive effect on earnings per share:
MARCH 31, MARCH 31,
2000 1999
--------- ---------
Stock Options 739,212 971,471
Series A convertible exchangeable
preferred stock -- 7,933,043
Series B convertible pay-in-kind
preferred stock -- 11,901,355
Effective April 28, 2000, all of the Company's 2,215,131 outstanding
warrants expired and are not included in the table above.
5. RESTRUCTURING CHARGES
The following represents the Company's restructuring activities for the
period indicated:
Total
-------
Balance at
December 31, 1999 $ 26.8
Cash payments (1.3)
------
Balance at
March 31, 2000 $ 25.5
======
Current $ 11.7
Non-current 13.8
------
$ 25.5
======
<PAGE>
LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
6. INTEREST RATE SWAP
The existing rate collar transaction and swap have effectively changed
the interest exposure on $500.0 of floating rate debt to a weighted average
fixed interest rate of 6.29%. The notional amounts of the agreements are used
to measure interest to be paid or received and do not represent the amount of
exposure to credit loss.
7. LONG-TERM DEBT
On March 31, 2000, the Company made a scheduled payment of approximately
$29.0 on its term loan facility. The interest rate that the Company pays
on its debt is linked to the Company's financial performance. The first
quarter performance has enabled the Company to lower the interest rate that
the Company pays on its long term debt from LIBOR plus 50 to LIBOR plus 37.5
basis points.
8. RESTRICTED STOCK PLAN
Effective June 16, 1999, the Company's shareholders approved the issuance
of shares of Common Stock to key employees under a restricted stock plan.
During 2000 and 1999, 51,800 and 162,000 shares have been issued under this
plan, respectively. Restrictions limit the sale or transfer of these shares
during a six-year period when the restrictions lapse. Upon issuance of stock
under the plan, unearned compensation equivalent to the market value at the
date of grant is charged to shareholders' equity as unearned restricted stock
compensation and subsequently amortized to expense over the six-year vesting
period. The plan provides for accelerated vesting of outstanding shares in
percentages of 33.3%, 66.7% or 100%, if certain predefined profitability
targets are achieved as of December 31, 2001 for the shares issued in 1999 and
as of December 31, 2002 for the shares issued in 2000.
9. COMMITMENTS AND CONTINGENCIES
The Company is involved in two litigations which purport to be class
actions 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, professional liability, employee-related matters,
<PAGE>
LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN MILLIONS)
inquiries from governmental agencies and Medicare or Medicaid carriers
requesting comment on allegations of billing irregularities that have been
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
is not expected to have a material adverse effect on the financial position,
results of operations or liquidity of the Company.
The Company believes that it is in compliance in all material respects
with all statutes, regulations and other requirements applicable to its
clinical laboratory operations. The clinical laboratory testing industry
is, however, subject to extensive regulation, and many of these statutes and
regulations have not been interpreted by the courts. There can be no
assurance therefore that applicable statutes and regulations might not be
interpreted or applied by a prosecutorial, regulatory or judicial authority in
a manner that would adversely affect the Company. Potential sanctions for
violation of these statutes and regulations included significant fines and the
loss of various licenses, certificates and authorizations.
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 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, 1999, 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 March 31, 2000 compared with Three Months ended March 31,
1999.
Net sales for the three months ended March 31, 2000 were $462.7, an
increase of approximately 10.7% from $417.9 for the comparable 1999 period.
The sales increase is a result of an 8.1% increase in testing volume and a
2.6% increase in price. The increase in volume occurred due to base business
growth as well as new hospital and managed care contracts and continued growth
in specialized infectious
<PAGE>
LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN MILLIONS)
disease testing. The price improved as a result of price increases, mix
changes favoring higher value tests, and the continued addition of new
business at appropriate prices.
Cost of sales, which includes primarily laboratory and distribution
costs, was $279.2 for the three months ended March 31, 2000 compared to $266.5
in the corresponding 1999 period, an increase of $12.7 or 4.8%. Cost of sales
increased $21.3 due to the increase in volume offset primarily by a decrease
of $8.0 in salaries and benefits. Cost of sales as a percentage of net sales
was 60.3% for the three months ended March 31, 2000 and 63.8% in the
corresponding 1999 period. The decrease in the cost of sales percentage of
net sales primarily resulted from the Company's continued cost reduction
efforts and cost efficiencies related to increased volume.
Selling, general and administrative expenses increased to $118.4 for the
three months ended March 31, 2000 from $109.1 in the same period in 1999.
Personnel costs increased $9.1, telephone expense increased $1.3 and other
miscellaneous costs increased $0.7. These increases were offset by a decrease
to bad debt expense of $1.8. Bad debt expense as a percentage of sales
decreased 1.6% to 10.2% for the three months ended March 31, 2000 as compared
to 11.8% for the three months ended March 31, 1999 due to improved billing and
cash collections procedures. See "Liquidity and Capital Resources." As a
percentage of net sales, selling, general and administrative expenses were
25.6% and 26.1% for the three months ended March 31, 2000 and 1999,
respectively.
The amortization of intangibles and other assets was $7.7 and $7.9 for
the three months ended March 31, 2000 and 1999, respectively.
Interest expense was $9.9 for the three months ended March 31, 2000 and
$10.5 for the same period in 1999. The decline in interest expense is a
result of the Company's reduction in long-term debt.
The provision for income taxes as a percentage of earnings before taxes
was 46.0% for the three months ended March 31, 2000 compared to 38.2% for the
three months ended March 31, 1999. During the three months ended March
31, 1999, the Company reduced its valuation allowance applied against its
deferred tax assets by $2.5, thereby reducing its provision for income taxes
as a percentage of earnings before taxes by approximately 11 percentage points.
The reduction in the effective rate, before consideration of the 1999 valuation
allowance reduction, is related to the increased earnings before taxes and the
reduced impact that non deductible goodwill has on the effective tax rate.
<PAGE>
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 $48.5 and $25.1 for the
three months ended March 31, 2000 and March 31, 1999, respectively. The
increase in cash flows from operations primarily resulted from improved earnings
and increases in accounts payable and accrued expenses. Capital expenditures
were $10.8 and $15.5 for the first three months of 2000 and 1999, respectively.
The Company's days sales outstanding (DSO) at March 31, 2000 was 72 days
compared to 74 days at the end of December 31, 1999. The Company continues to
focus on reducing its DSO through the conversion of the entire Company to a
single, centralized billing system. The Company expects that approximately
85% of billings will be converted to the new billing system by the end of the
year 2000.
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 debt service needs, capital expenditures, potential
acquisitions and working capital for the foreseeable future.
YEAR 2000 UPDATE
- ----------------
The Company has completed its Year 2000 testing and validation with costs
incurred of less that $.2 during the three months ended March 31, 2000.
<PAGE>
LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
See "Note 9 to the Company's Unaudited Condensed Consolidated
Financial Statements" for the three months ended March 31, 2000.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule (electronically filed
version only).
(b) Reports on Form 8-K
(1) A current report on Form 8-K dated January 14,
2000 was filed on January 24, 2000, by the registrant and
Digene Corporation, in connection with the press release
dated January 14, 2000 announcing that an agreement was
entered into whereby the Company will utilize the Digene
Hybrid Capture II HPV Test for women with ASCUS (atypical
squamous cells of undetermined significance) or
borderline Pap smear results.
(2) A current report on Form 8-K dated February 15, 2000 was
filed on March 1, 2000, by the registrant, in connection
with the press release dated February 15, 2000 announcing
results for the quarter and twelve months ended December
31, 1999. The Company also announced that its Board of
Directors declared dividends on the Company's 8 1/2 percent
series A Convertible Exchangeable Preferred Stock and the
Company's 8 1/2 percent Series B Convertible Pay-in-Kind
Preferred Stock. In addition, the Board of Directors
announced that it has approved, subject to shareholder
approval at its annual meeting, a one-for-ten reverse
stock split. If approved by shareholders, common
shareholders will receive one new share for every ten
that they own.
(3) A current report on Form 8-K dated March 6, 2000 was
filed on March 13, 2000, by the registrant, in
connection with the press release dated March 6, 2000
announcing that it has entered into a definitive
agreement with San Diego based POISONLAB, Inc. to acquire
all of the stock of POISONLAB'S occupational substance
abuse and clinical toxicology testing business.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K - Continued
(4) A current report on Form 8-K dated March 23, 2000 was filed
on April 4, 2000, by the registrant, in connection with the
press release dated March 23, 2000 announcing the signing of
an agreement to provide ViroLogic Inc.'s phenotypic HIV drug
susceptibility assay, PhenoSense-trademark- HIV, through the
Company's national laboratory services network. This agreement
adds PhenoSense-trademark- HIV to the Company's existing
phenotyping and genotyping test menu, further expanding the
Company's extensive HIV testing services and offering
increased physician choice.
(5) A current report on Form 8-K dated April 4, 2000 was filed on
April 6, 2000, by the registrant, in connection with the press
release dated April 4, 2000 announcing that the Company signed
an extension to its existing agreement with Aetna U.S.
Heathcare to provide laboratory services to Aetna Healthcare
members.
(6) A current report on Form 8-K dated April 19, 2000 was filed on
May 3, 2000, by the registrant, in connection with the press
release dated April 19, 2000 announcing that the Company
completed the acquisition of certain clinical testing assets
of Bio-Diagnostics Laboratories (BDL). Based in Torrance,
California, BDL is the largest provider of clinical laboratory
testing services in the South Bay area of Los Angeles County.
(7) A current report on Form 8-K dated April 24, 2000 was filed on
May 3, 2000, by the registrant, in connection with the press
release dated April 24, 2000 announcing the results for the
quarter ended March 31, 2000.
(8) A current report on Form 8-K dated May 2, 2000 was filed on
May 3, 2000, by the registrant, in connection with the press
release dated May 2, 2000 announcing the results of the vote
reported during the annual meeting of stockholders. The
Company's stockholders voted in favor of the proposal to
amend the Certificate of Incorporation to effect a 1-for-10
reverse split, the approval of the 2000 Incentive Plan, the
nominees for the Board of Directors, and the ratification
of the independent accountants.
<PAGE>
SI 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)
May 10, 2000
<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> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 40,900
<SECURITIES> 0
<RECEIVABLES> 498,000
<ALLOWANCES> 129,800
<INVENTORY> 26,200
<CURRENT-ASSETS> 513,700
<PP&E> 536,300
<DEPRECIATION> 264,900
<TOTAL-ASSETS> 1,599,900
<CURRENT-LIABILITIES> 264,700
<BONDS> 445,500
568,900
0
<COMMON> 1,300
<OTHER-SE> 186,300
<TOTAL-LIABILITY-AND-EQUITY> 1,599,900
<SALES> 462,700
<TOTAL-REVENUES> 462,700
<CGS> 279,200
<TOTAL-COSTS> 279,200
<OTHER-EXPENSES> 126,100
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,900
<INCOME-PRETAX> 47,600
<INCOME-TAX> 21,900
<INCOME-CONTINUING> 25,700
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 25,700
<EPS-BASIC> 0.85
<EPS-DILUTED> 0.75
<PAGE>
</TABLE>
