LabCorp Announces 2018 Fourth Quarter and Full Year Results and Provides 2019 Guidance
- Revenue: Q4 of
$2.8 billion , up 2% over 2017; Full year of$11.3 billion , up 10% over 2017 - Diluted EPS: Q4 of
$1.56 ; Full year of$8.61 - Adjusted EPS: Q4 of
$2.52 , up 11% over 2017; Full year of$11.02 , up 20% over 2017 - 2019 Adjusted EPS guidance of
$11.00 to $11.40 - 2019 Free Cash Flow guidance of
$950 million to $1.05 billion - Commenced phase II of LabCorp Diagnostics’ LaunchPad business process improvement initiative, expected to generate
$200 million of additional net savings over the next three years - Board replaced the Company’s existing share repurchase plan with a new plan authorizing repurchase of up to
$1.25 billion of stock
“LabCorp delivered another strong year in 2018, highlighted by 10% revenue growth and 20% adjusted EPS growth,” said
Effective
Consolidated Results
Fourth Quarter Results
Revenue for the quarter was
Operating income for the quarter was
Net earnings in the quarter were
Adjusted EPS (excluding amortization, restructuring charges, and special items) were
Operating cash flow and free cash flow (operating cash flow less capital expenditures) for the quarter were
At the end of the quarter, the Company’s cash balance and total debt were
Full Year Results
Revenue was
Operating income was
Net earnings in 2018 were
Adjusted EPS (excluding amortization, restructuring charges, and special items) were
Operating cash flow and free cash flow (operating cash flow less capital expenditures) were
During the year, the Company repurchased
***
The following segment results reflect the Company’s retrospective adoption of ASC 606 on
Fourth Quarter Segment Results
LabCorp Diagnostics
Revenue for the quarter was
Excluding the disposition of businesses, revenue per requisition decreased by 0.4%, driven by the negative impact from PAMA of 1.0%. Total volume (measured by requisitions) excluding the disposition of businesses increased by 0.3%, as acquisition volume contributed 0.4% and organic volume declined by 0.1%. Excluding the impact from adverse weather and the year on year impact from the calendar, organic volume would have increased approximately 1.1%.
Adjusted operating income (excluding amortization, restructuring charges and special items) for the quarter was
In addition, the Company has started phase II of LabCorp Diagnostics’ LaunchPad initiative. The Company is focused on eliminating manual processes, digitizing the business, using technology to improve quality, operations and service, and enhancing the consumer experience, which are designed to unlock new avenues for growth and contribute to improvement in long-term margins. This initiative is expected to generate pre-tax net savings of approximately
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 2019
The following guidance assumes foreign exchange rates effective as of
- Revenue growth of 0.5% to 2.5% over 2018 revenue of
$11.33 billion , which includes the negative impact from the disposition of businesses of approximately 1% and foreign currency translation of approximately 0.4%. - The change in revenue in LabCorp Diagnostics is expected to be -4.0% to -2.0% as compared to 2018 revenue of
$7.03 billion , which includes the negative impact from the disposition of businesses of approximately 2%. Excluding the disposition of businesses, the change in revenue in LabCorp Diagnostics is expected to be approximately -2.0% to 0.0%, primarily due to organic volume growth, favorable test mix, and acquisitions, offset by the impact of PAMA of -1.6%, changes in certain managed care contracts and laboratory provider networks, as well as foreign currency translation of approximately 0.3%. - Revenue growth in Covance Drug Development of 5.0% to 9.0% over 2018 revenue of
$4.31 billion , which includes the negative impact from foreign currency translation of approximately 0.6%. - Adjusted EPS of
$11.00 to $11.40 , a change of 0% to 3% as compared to$11.02 in 2018. - Free cash flow (operating cash flow less capital expenditures) of
$950 million to $1.05 billion , compared to$925.6 million in 2018.
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 http://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
Forward-Looking Statements
This press release contains forward-looking statements including but not limited to statements with respect to estimated 2019 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, adverse weather conditions, 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 Twelve Months Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||
| Revenues | $ | 2,787.5 | $ | 2,744.7 | $ | 11,333.4 | $ | 10,308.0 | ||||||||
| Cost of revenues | 2,015.1 | 1,927.6 | 8,157.0 | 7,216.2 | ||||||||||||
| Gross profit | 772.4 | 817.1 | 3,176.4 | 3,091.8 | ||||||||||||
| Selling, general and administrative expenses | 396.9 | 417.3 | 1,570.9 | 1,499.2 | ||||||||||||
| Amortization of intangibles and other assets | 56.2 | 62.9 | 231.7 | 216.5 | ||||||||||||
| Restructuring and other special charges | 11.6 | 6.3 | 48.1 | 70.9 | ||||||||||||
| Operating income | 307.7 | 330.6 | 1,325.7 | 1,305.2 | ||||||||||||
| Other income (expense): | ||||||||||||||||
| Interest expense | (58.2 | ) | (67.8 | ) | (244.2 | ) | (235.1 | ) | ||||||||
| Equity method income, net | 3.1 | 1.3 | 11.6 | 11.3 | ||||||||||||
| Investment income | 3.3 | 0.7 | 7.5 | 2.1 | ||||||||||||
| Other, net | (41.4 | ) | 1.4 | 167.7 | (6.0 | ) | ||||||||||
| Earnings before income taxes | 214.5 | 266.2 | 1,268.3 | 1,077.5 | ||||||||||||
| Provision (benefit) for income taxes | 56.3 | (424.0 | ) | 384.4 | (155.4 | ) | ||||||||||
| Net earnings | 158.2 | 690.2 | 883.9 | 1,232.9 | ||||||||||||
|
Less: Net earnings attributable to the noncontrolling interest |
(0.3 | ) | (2.4 | ) | (0.2 | ) | (5.8 | ) | ||||||||
|
Net earnings attributable to Laboratory Corporation of America Holdings |
$ | 157.9 | $ | 687.8 | $ | 883.7 | $ | 1,227.1 | ||||||||
| Basic earnings per common share | $ | 1.58 | $ | 6.73 | $ | 8.71 | $ | 11.99 | ||||||||
| Diluted earnings per common share | $ | 1.56 | $ | 6.63 | $ | 8.61 | $ | 11.81 | ||||||||
| Weighted average basic shares outstanding | 100.2 | 102.2 | 101.4 | 102.4 | ||||||||||||
| Weighted average diluted shares outstanding | 101.2 | 103.7 | 102.6 | 103.9 | ||||||||||||
| LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES | |||||||
| CONSOLIDATED BALANCE SHEETS | |||||||
| (Dollars in Millions, except per share data) | |||||||
| December 31, | December 31, | ||||||
| 2018 | 2017 | ||||||
| ASSETS | |||||||
| Current assets: | |||||||
| Cash and cash equivalents | $ | 426.8 | $ | 316.6 | |||
| Accounts receivable | 1,467.9 | 1,531.0 | |||||
| Unbilled services | 394.4 | 316.5 | |||||
| Supplies inventory | 237.3 | 227.2 | |||||
| Prepaid expenses and other | 309.0 | 308.8 | |||||
| Current assets held for sale | - | 33.7 | |||||
| Total current assets | 2,835.4 | 2,733.8 | |||||
| Property, plant and equipment, net | 1,784.7 | 1,706.6 | |||||
| Goodwill, net | 7,360.3 | 7,400.9 | |||||
| Intangible assets, net | 3,911.1 | 4,166.1 | |||||
| Joint venture partnerships and equity method investments | 60.5 | 58.4 | |||||
| Deferred income taxes | 1.7 | 1.9 | |||||
| Other assets, net | 231.6 | 217.5 | |||||
| Long-term assets held for sale | - | 387.8 | |||||
| Total assets | $ | 16,185.3 | $ | 16,673.0 | |||
| LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||
| Current liabilities: | |||||||
| Accounts payable | $ | 634.6 | $ | 573.9 | |||
| Accrued expenses and other | 870.0 | 793.3 | |||||
| Unearned revenue | 356.4 | 380.8 | |||||
| Short-term borrowings and current portion of long-term debt | 17.9 | 417.5 | |||||
| Current liabilities held for sale | - | 20.2 | |||||
| Total current liabilities | 1,878.9 | 2,185.7 | |||||
| Long-term debt, less current portion | 6,041.9 | 6,344.6 | |||||
| Deferred income taxes and other tax liabilities | 940.0 | 875.5 | |||||
| Other liabilities | 334.0 | 376.0 | |||||
| Long-term liabilities held for sale | - | 66.3 | |||||
| Total liabilities | 9,194.8 | 9,848.1 | |||||
| Commitments and contingent liabilities | - | - | |||||
| Noncontrolling interest | 19.1 | 20.8 | |||||
| Shareholders' equity: | |||||||
| Common stock | 11.7 | 12.0 | |||||
| Additional paid-in capital | 1,451.1 | 1,989.8 | |||||
| Retained earnings | 7,079.8 | 6,196.1 | |||||
| Less common stock held in treasury | (1,108.1 | ) | (1,060.1 | ) | |||
| Accumulated other comprehensive loss | (463.1 | ) | (333.7 | ) | |||
| Total shareholders' equity | 6,971.4 | 6,804.1 | |||||
| Total liabilities and shareholders' equity | $ | 16,185.3 | $ | 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 | Twelve Months Ended | Twelve Months Ended | |||||||||||||
| December 31, | December 31, | December 31, | December 31, | |||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||||||
| Net earnings | $ | 158.2 | $ | 690.2 | $ | 883.9 | $ | 1,232.9 | ||||||||
|
Adjustments to reconcile net earnings to net cash provided by operating activities: |
||||||||||||||||
| Depreciation and amortization | 137.7 | 145.0 | 552.1 | 533.2 | ||||||||||||
| Stock compensation | 20.8 | 23.9 | 91.6 | 109.7 | ||||||||||||
| Loss / (gain) on sale of assets | 8.1 | (0.8 | ) | 6.2 | 1.5 | |||||||||||
| (Gain) / loss on disposition of businesses | 24.5 | - | (184.9 | ) | - | |||||||||||
| Accreted interest on zero-coupon subordinated notes | 0.1 | - | 0.2 | 0.3 | ||||||||||||
|
Cumulative earnings in excess of distributions from equity affiliates |
(1.2 | ) | 0.9 | (0.9 | ) | 0.5 | ||||||||||
| Asset impairment | - | - | 5.3 | 23.5 | ||||||||||||
| Deferred income taxes | 10.1 | (525.7 | ) | 22.2 | (525.8 | ) | ||||||||||
| Change in assets and liabilities: | ||||||||||||||||
| (Increase) decrease in accounts receivable, net | 58.7 | 87.3 | 50.2 | (13.2 | ) | |||||||||||
| (Increase) decrease in unbilled services | (75.5 | ) | 28.8 | (81.0 | ) | 4.0 | ||||||||||
| Decrease in inventories | (10.1 | ) | (10.0 | ) | (18.9 | ) | (16.4 | ) | ||||||||
| (Increase) decrease in prepaid expenses and other | (17.8 | ) | (13.6 | ) | (57.9 | ) | 19.8 | |||||||||
| Increase in accounts payable | 123.2 | 63.2 | 43.3 | 172.3 | ||||||||||||
| Increase (decrease) in deferred revenue | 60.6 | 59.7 | (33.8 | ) | 58.6 | |||||||||||
| Increase (decrease) in accrued expenses and other | (11.0 | ) | 16.1 | 27.8 | (102.8 | ) | ||||||||||
| Net cash provided by operating activities | 486.4 | 565.0 | 1,305.4 | 1,498.1 | ||||||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||||||
| Capital expenditures | (122.2 | ) | (96.1 | ) | (379.8 | ) | (312.9 | ) | ||||||||
| Proceeds from sale of assets | - | 4.3 | 50.1 | 5.5 | ||||||||||||
| Proceeds from disposition of businesses | 3.7 | - | 3.7 | - | ||||||||||||
| Proceeds from sale of HFS assets | - | - | 654.5 | - | ||||||||||||
| Proceeds from exit of cross currency swap | 18.3 | - | 18.3 | - | ||||||||||||
| Acquisition of licensing technology | - | (0.2 | ) | - | (2.5 | ) | ||||||||||
| Investments in equity affiliates | (8.0 | ) | (3.0 | ) | (22.3 | ) | (36.2 | ) | ||||||||
| Acquisitions of businesses, net of cash acquired | (38.7 | ) | (83.3 | ) | (117.8 | ) | (1,882.6 | ) | ||||||||
| Net cash provided by (used for) investing activities | (146.9 | ) | (178.3 | ) | 206.7 | (2,228.7 | ) | |||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||||||
| Proceeds from senior notes offerings | - | - | - | 1,200.0 | ||||||||||||
| Payment on senior note offerings | (400.0 | ) | (0.1 | ) | (400.0 | ) | (500.1 | ) | ||||||||
| Proceeds from term loan | - | - | - | 750.0 | ||||||||||||
| Payments on term loan | - | (443.0 | ) | (295.0 | ) | (493.0 | ) | |||||||||
| Proceeds from revolving credit facilities | 18.0 | 68.5 | 467.2 | 1,392.2 | ||||||||||||
| Payments on revolving credit facilities | (18.0 | ) | (68.5 | ) | (467.2 | ) | (1,392.2 | ) | ||||||||
| Payments on zero-coupon subordinated notes | - | (0.1 | ) | (0.3 | ) | (25.2 | ) | |||||||||
| Proceeds from sale of interest in consolidated subsidiary | - | - | - | - | ||||||||||||
| Cash paid to acquire an interest in a consolidated subsidiary | - | - | - | - | ||||||||||||
| Payments on long-term debt | - | - | - | - | ||||||||||||
| Debt issuance costs | - | (1.7 | ) | - | (15.3 | ) | ||||||||||
| Payments on long-term lease obligations | (2.5 | ) | (1.7 | ) | (9.3 | ) | (7.7 | ) | ||||||||
| Noncontrolling interest distributions | (0.3 | ) | (0.2 | ) | (6.4 | ) | (1.0 | ) | ||||||||
| Deferred payments on acquisitions | - | (1.0 | ) | - | (2.6 | ) | ||||||||||
| Net share settlement tax payments from issuance of stock to employees | (1.8 | ) | (0.9 | ) | (48.0 | ) | (47.4 | ) | ||||||||
| Net proceeds from issuance of stock to employees | 1.7 | 8.4 | 69.1 | 73.6 | ||||||||||||
| Purchase of common stock | (400.0 | ) | (40.0 | ) | (700.0 | ) | (338.1 | ) | ||||||||
| Net cash provided by (used for) financing activities | (802.9 | ) | (480.3 | ) | (1,389.9 | ) | 593.2 | |||||||||
| Effect of exchange rate changes on cash and cash equivalents | (2.4 | ) | 1.3 | (12.0 | ) | 20.5 | ||||||||||
| Net increase (decrease) in cash and cash equivalents | (465.8 | ) | (92.3 | ) | 110.2 | (116.9 | ) | |||||||||
| Cash and cash equivalents at beginning of period | 892.6 | 408.9 | 316.6 | 433.6 | ||||||||||||
| Cash and cash equivalents included in assets held for sale | - | - | - | (0.1 | ) | |||||||||||
| Cash and cash equivalents at end of period | $ | 426.8 | $ | 316.6 | $ | 426.8 | $ | 316.6 | ||||||||
| LABORATORY CORPORATION OF AMERICA HOLDINGS | ||||||||||||||||
| Condensed Combined Non-GAAP Pro Forma Segment Information | ||||||||||||||||
| (Dollars in millions) | ||||||||||||||||
|
Three Months Ended December 31, |
Twelve Months Ended December 31, |
|||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||
|
LabCorp Diagnostics |
||||||||||||||||
| Revenue | $ | 1,694.4 | $ | 1,742.7 | $ | 7,030.7 | $ | 6,858.2 | ||||||||
| Adjusted Operating Income | $ | 279.3 | $ | 357.0 | $ | 1,350.9 | $ | 1,448.6 | ||||||||
| Adjusted Operating Margin | 16.5 | % | 20.5 | % | 19.2 | % | 21.1 | % | ||||||||
|
Covance Drug Development |
||||||||||||||||
| Revenue | $ | 1,099.0 | $ | 1,002.8 | $ | 4,313.1 | $ | 3,451.6 | ||||||||
| Adjusted Operating Income | $ | 153.5 | $ | 110.9 | $ | 516.2 | $ | 361.2 | ||||||||
| Adjusted Operating Margin | 14.0 | % | 11.1 | % | 12.0 | % | 10.5 | % | ||||||||
|
Consolidated |
||||||||||||||||
| Revenue | $ | 2,787.5 | $ | 2,744.7 | $ | 11,333.4 | $ | 10,308.0 | ||||||||
| Adjusted Segment Operating Income | $ | 432.8 | $ | 467.9 | $ | 1,867.1 | $ | 1,809.8 | ||||||||
| Unallocated corporate expense | $ | (37.9 | ) | $ | (35.2 | ) | $ | (143.8 | ) | $ | (137.4 | ) | ||||
| Consolidated Adjusted Operating Income | $ | 394.9 | $ | 432.7 | $ | 1,723.3 | $ | 1,672.4 | ||||||||
| Adjusted Operating Margin | 14.2 | % | 15.8 | % | 15.2 | % | 16.2 | % | ||||||||
Results for the three months and twelve months ended
| LABORATORY CORPORATION OF AMERICA HOLDINGS | |||||||||||||||||
| Reconciliation of Non-GAAP Financial Measures | |||||||||||||||||
| (Dollars in millions, except per share data) | |||||||||||||||||
| Three Months Ended
December 31, |
Twelve Months Ended
December 31, |
||||||||||||||||
|
Adjusted Operating Income |
2018 | 2017 | 2018 | 2017 | |||||||||||||
| Operating income | $ | 307.7 | $ | 330.6 | $ | 1,325.7 | $ | 1,305.2 | |||||||||
| Costs related to ransomware attack | - | - | 12.6 | - | |||||||||||||
| Acquisition and divestiture-related costs | 11.6 | 14.1 | 54.7 | 43.9 | |||||||||||||
| Restructuring and other special charges | 11.6 | 6.3 | 48.1 | 70.9 | |||||||||||||
| Consulting fees and executive transition expenses | 5.3 | 15.3 | 9.6 | 24.2 | |||||||||||||
| Special tax reform bonus for employees | - | - | 31.1 | - | |||||||||||||
| LaunchPad system implementation costs | 2.5 | 3.5 | 9.8 | 11.7 | |||||||||||||
| Amortization of intangibles and other assets | 56.2 | 62.9 | 231.7 | 216.5 | |||||||||||||
| Adjusted operating income | $ | 394.9 | $ | 432.7 | $ | 1,723.3 | $ | 1,672.4 | |||||||||
|
Adjusted EPS |
|||||||||||||||||
| Diluted earnings per common share | $ | 1.56 | $ | 6.63 | $ | 8.61 | $ | 11.81 | |||||||||
| Net (gain) loss on disposition of buinesses | 0.12 | - | (1.10 | ) | - | ||||||||||||
| Restructuring and special items | 0.23 | 0.23 | 1.17 | 0.98 | |||||||||||||
| Pension settlement charge | 0.05 | - | 0.05 | - | |||||||||||||
| Write-off of venture investment | 0.04 | - | 0.04 | - | |||||||||||||
| Tax reform act adjustments | 0.01 | (5.00 | ) | 0.44 | (5.00 | ) | |||||||||||
| Deferred tax merger revaluation | 0.08 | - | 0.08 | - | |||||||||||||
| Amortization expense | 0.43 | 0.41 | 1.73 | 1.41 | |||||||||||||
| Adjusted EPS | $ | 2.52 | $ | 2.27 | $ | 11.02 | $ | 9.20 | |||||||||
|
Free Cash Flow: |
|||||||||||||||||
| Net cash provided by operating activities (1) | $ | 486.4 | $ | 565.0 | $ | 1,305.4 | $ | 1,498.1 | |||||||||
| Less: Capital expenditures | (122.2 | ) | (96.1 | ) | (379.8 | ) | (312.9 | ) | |||||||||
| Free cash flow | $ | 364.2 | $ | 468.9 | $ | 925.6 | $ | 1,185.2 | |||||||||
|
(1) Operating cash flow in 2017 has been reduced by $0.0 million and $8.7 million for the three and twelve months ended December 31, 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. In addition, operating cash flow increased by $45.1 million for the six months ended June 30, 2018, and $0.9 million and $47.4 million for the three and twelve months ended December 31, 2017, respectively, for the reclassification of tax payments for net share settlements relating to employee stock vesting from operating activities to financing activities.
|
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Notes to Reconciliation of Non-GAAP Financial Measures
| 1) | During the fourth quarter of 2018, the Company recorded net restructuring and other special charges of $11.6 million. The charges included $9.8 million in severance and other personnel costs along with $3.0 million in costs associated with facility closures and general integration initiatives. The Company reversed previously established reserves of $0.6 million in unused severance reserves and $0.6 million in unused facility reserves. | |
| The Company incurred business process integration and other related costs of $11.6 million primarily relating to the Chiltern acquisition as well as the sale of the Company’s U.S. forensic testing business during the quarter. The Company also recorded $5.3 million in management transition costs. In addition, the Company recorded $2.5 million of non-capitalized costs associated with the implementation of a major system as part of its LaunchPad business process improvement initiative. These items increased cost of revenue by $1.0 million and selling, general and administrative expenses by $18.3 million for the quarter ended December 31, 2018. | ||
| The after-tax impact of these charges decreased net earnings for the quarter ended December 31, 2018, by $23.3 million and diluted earnings per share by $0.23 ($23.3 million divided by 101.2 million shares). | ||
| During the first three quarters of 2018, the Company recorded net restructuring and other special charges of $36.5 million. The charges included $29.7 million in severance and other personnel costs along with $6.5 million in costs associated with facility closures and general integration initiatives and $2.3 million in impairment to land held for sale. The Company reversed $0.9 million in unused severance reserves and $1.1 million in unused facility reserves. | ||
| The Company incurred integration and other related costs of $43.1 million primarily relating to the Chiltern acquisition as well as the sale of the Company’s Food Solutions business. As a direct result of the ransomware attack experienced during July, the Company incurred $12.6 million in consulting fees and employee overtime incurred during the recovery period following the attack. The Company also incurred net $4.3 million in consulting expenses relating to fees incurred as part of its integration and management transition costs. The Company paid a special one-time bonus of $31.1 million to its non-bonus eligible employees in recognition of the benefits the Company is receiving from the passage of the Tax Cuts and Jobs Act of 2017 (TCJA). In addition, the Company incurred $7.3 million of non-capitalized costs associated with the implementation of a major system as part of its LaunchPad business process improvement initiative. These combined items increased cost of sales by $32.7 million and selling, general and administrative expenses by $85.0 million for the year ended December 31, 2018. | ||
| The after-tax impact of these combined restructuring and other special charges decreased net earnings for the year ended December 31, 2018, by $120.7 million and diluted earnings per share by $1.17 ($120.7 million divided by 102.6 million shares). | ||
| 2) |
During the fourth quarter of 2018, the Company recorded a net loss on disposition of its U.S. forensics business in other income and expense of $24.5 million, with associated income tax expense of $15.9 million. During the third quarter of 2018, the Company recorded a net gain on disposition of businesses in other income and expense of $209.4 million, with associated income tax expense of $84.1 million. These dispositions decreased net earnings by $8.7 million and diluted earnings per share by $0.08 for the quarter ($8.7 million divided by 101.2 million shares) and increased net earnings by $116.6 million and diluted earnings per share by $1.14 for the year ended December 31, 2018 ($116.6 million divided by 102.6 million shares). |
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| 3) |
During the fourth quarter of 2018, one of the Company’s venture fund investments ceased operations. As a result, the Company wrote-off its $5.2 million investment, recorded in Other, net in Other income (expense). The after-tax impact of this write-off decreased net earnings for the quarter and the year ended December 31, 2018 by $3.8 million and diluted earnings per share by $0.04 ($3.8 million divided by 101.2 million shares and $3.8 million divided by 102.6 million shares). |
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| 4) |
During the fourth quarter of 2018, the Company recorded a settlement charge on one of its pensions plans, triggered by lump sum cash-outs in December, recorded in other income and expense of $7.5 million, with associated income tax expense of $1.9 million. This non-cash settlement charge decreased net earnings by $5.6 million and diluted earnings per share by $0.06 for the quarter and $0.05 for the year ended December 31, 2018 ($5.6 million divided by 101.2 million shares and $5.6 million divided by 102.6 million shares, respectively). |
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| 5) | Effective December 31, 2018, the Company merged Chiltern International, Inc. into Covance, Inc. As a result of this merger, the Company recorded a revaluation of the Chiltern deferred tax liabilities to reflect the combined legal entity’s projected effective income tax rates, increasing its provision for income taxes by $7.7 million and decreasing its diluted earnings per share for both the quarter and the year ended December 31, 2018 by $0.08 ($7.7 million divided by 101.2 million shares and $7.7 million divided by 102.6 million shares). | |
| 6) | In its continuing assessment of the impact of the passage of the TCJA in the fourth quarter of 2017, along with related actions from certain state jurisdictions, the Company recorded a net increase in its provision for income taxes (and a decrease of its net earnings) of $1.0 million for the quarter ended December 31, 2018. For the year ended December 31, 2018, the Company recorded a net increase in its provision for income taxes (and a decrease of its net earnings) of $45.0 million. These adjustments relating to the passage of the TCJA resulted in a decrease in the Company’s EPS of $0.01 for the quarter ($1.0 million divided by 101.2 million shares) and $0.44 for the year ended December 31, 2018 ($45.0 million divided by 102.6 million shares). | |
| 7) | During the fourth quarter of 2017, the Company recorded net restructuring and other special charges of $6.3 million. The charges included $8.9 million in severance and other personnel costs along with $0.9 million in costs associated with facility closures and general integration initiatives. The Company reversed previously established reserves of $3.0 million in unused severance reserves and $0.5 million in unused facilities reserves. | |
| The Company incurred legal and other costs of $14.1 million primarily relating to the acquisition of Chiltern during the quarter. The Company also recorded $15.3 million in consulting and other expenses relating to Covance and Chiltern integration initiatives. In addition, the Company incurred $3.5 million of non-capitalized cost associated with a major system as part of its LaunchPad business process improvement initiative (all recorded in selling, general and administrative expenses). | ||
| The after-tax impact of these charges decreased net earnings for the quarter ended December 31, 2017, by $24.5 million and diluted earnings per share by $0.23 ($24.5 million divided by 103.7 million shares). | ||
| During the first three quarters of 2017, the Company recorded net restructuring and other special charges of $64.6 million. The charges included $27.2 million in severance and other personnel costs along with $17.9 million in costs associated with facility closures and general integration initiatives. The Company reversed previously established reserves of $1.4 million, primarily in unused severance reserves. The Company also recognized an asset impairment loss of $20.9 million related to the termination of a software development project within the Covance Drug Development segment and the forgiveness of indebtedness for LabCorp Diagnostics customers in areas heavily impacted by hurricanes experienced during the third quarter of 2017. | ||
| The Company incurred legal and other costs of $29.8 million relating to acquisition activity during the first three quarters of 2017. The Company also recorded $8.0 million in consulting expenses relating to fees incurred as part of its Covance integration and compensation analysis, along with $0.9 million in short-term equity retention arrangements relating to the acquisition of Covance. In addition, the Company incurred $8.2 million of non-capitalized costs associated with the implementation of a major system as part of its LaunchPad business process improvement initiative (all recorded in selling, general and administrative expenses). | ||
| The after-tax impact of these combined charges decreased net earnings for the year ended December 31, 2017, by $101.4 million and diluted earnings per share by $0.98 ($101.4 million divided by 103.9 million shares). | ||
| 8) | As a result of the passage of the TCJA in the fourth quarter of 2017, the Company recorded a net reduction of its provision for income taxes of $519.0 million, resulting in a one-time increase in its EPS of $5.00 for the quarter and for the year ($519.0 million divided by 103.7 million shares and $519.0 million divided by 103.9 million shares). | |
| 9) | 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 December 31, 2018 and 2017, intangible amortization was $56.2 million and $62.9 million, respectively ($43.3 million and $42.3 million net of tax, respectively) and decreased EPS by $0.43 ($43.3 million divided by 101.2 million shares) and $0.41 ($42.3 million divided by 103.7 million shares), respectively. For the year ended December 31, 2018 and 2017, intangible amortization was $231.7 million and $216.5 million, respectively ($177.2 million and $146.4 million net of tax, respectively) and decreased EPS by $1.73 ($177.2 million divided by 102.6 million shares) and $1.41 ($146.4 million divided by 103.9 million shares), respectively. |
View source version on businesswire.com: https://www.businesswire.com/news/home/20190207005385/en/
Source:
Scott Frommer (investors) – 336-436-5076
[email protected]
Pattie Kushner (media) – 336-436-8263
[email protected]