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Laboratory Corp. of America Holdings Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: October 30, 2012 09:03AM

Laboratory Corp. of America Holdings (LH) filed Quarterly Report for the period ended 2012-09-30. Laboratory Corporation Of America Holdings has a market cap of $8.15 billion; its shares were traded at around $84.95 with a P/E ratio of 12.4 and P/S ratio of 1.5. Laboratory Corporation Of America Holdings had an annual average earning growth of 14.8% over the past 10 years. GuruFocus rated Laboratory Corporation Of America Holdings the business predictability rank of 5-star.



Highlight of Business Operations:

During the third quarter of 2012 the Company was able to grow its revenue in a challenging economic environment. Net sales for the three months ended September 30, 2012 increased 1.1% in comparison to the same period in 2011 on a 1.4% increase in volume and a 0.3% decrease in revenue per requisition. The Company's acquisition of Orchid in December 2011 increased revenue and volume by 1.1% and 0.3%, respectively, in the third quarter of 2012 compared to 2011. The Company's acquisition of MEDTOX on July 31, 2012 increased revenue and volume by 1.7% and 2.4%, respectively, in the third quarter of 2012 compared to 2011. The third quarter of 2012 had one less revenue day than the third quarter of 2011. On a per day basis, volume increased by 3.1% in the third quarter of 2012 compared to the third quarter of 2011.

The increase in net sales for the three months ended September 30, 2012 as compared with the corresponding 2011 period was driven primarily by the MEDTOX and Orchid acquisitions along with positive revenue per requisition growth in routine testing and Ontario, Canada. Volume growth for genomic and esoteric testing was primarily due to the incremental revenue and volume from MEDTOX and Orchid as well as growth in the recently launched NuSwabsm series of women's health tests. Genomic and esoteric testing volume as a percentage of total volume decreased from 23.9% in 2011 to 23.7% in 2012. The decline in price in genomic and esoteric testing is a result of a lower mix of reproductive and histology testing during the quarter. Net sales of the Ontario partnership were $81.7 for the three months ended September 30, 2012 compared to $75.8 in the corresponding 2011 period, an increase of $5.9, or 7.8%. Net sales of the Ontario partnership were negatively impacted by a stronger U.S. dollar in 2012 as compared with 2011. In Canadian dollars, net sales of the Ontario partnership increased by CN$7.0, or 9.4%.

Selling, general and administrative expenses as a percentage of net sales decreased to 20.1% in the third quarter of 2012 as compared to 20.2% in 2011. The decrease in selling, general and administrative expenses as a percentage of net sales is partially due to expense management and to efficiencies from acquired operations that are being integrated into the Company's operating cost structure. Additionally, bad debt expense decreased to 4.3% of net sales in the third quarter of 2012 as compared with 4.5% in 2011 primarily due to improved collection trends resulting from process improvement programs within the Company's billing department and field operations. These decreases in selling, general and administrative expenses were partially offset by $9.0 in fees from the MEDTOX acquisition recorded during the third quarter of 2012.

The increase in net sales for the nine months ended September 30, 2012 as compared with the corresponding 2011 period was driven primarily by the MEDTOX and Orchid acquisitions and by contributions from the milder winter weather experienced in the first quarter of 2012, along with positive volume growth in genomic and esoteric testing and Ontario, Canada. Genomic and esoteric testing volume as a percentage of total volume increased from 23.7% in 2011 to 24.0% in 2012. Volume growth for genomic and esoteric testing was primarily due to the incremental volume from Orchid as well as growth in the NuSwabsm series of women's health tests. The decline in price in genomic and esoteric testing is a result of a lower mix of reproductive and histology testing. Net sales of the Ontario partnership were $248.2 for the nine months ended September 30, 2012 compared to $230.7 in the corresponding 2011 period, an increase of $17.5, or 7.6%. Net sales of the Ontario partnership were negatively impacted by a stronger U.S. dollar in 2012 as compared with 2011. In Canadian dollars, net sales of the Ontario partnership increased by CN$23.3, or 10.3%.

Selling, general and administrative expenses as a percentage of net sales decreased to 19.6% in the nine month period of 2012 compared to 21.3% in 2011. The decrease in selling, general and administrative expenses as a percentage of net sales is partially due to expense management and to efficiencies from acquired operations that are being integrated into the Company's operating cost structure. Additionally, bad debt expense decreased to 4.4% of net sales in the first nine months of 2012 as compared with 4.6% in 2011 primarily due to improved collection trends resulting from process improvement programs within the Company's billing department and field operations. During the first nine months of 2011, the Company recorded the settlement of the Hunter Labs litigation in California for $34.5 ($49.5 settlement less previously recorded reserves of $15.0) in selling, general and administrative expenses. These decreases in selling, general and administrative expenses were partially offset by $9.9 in fees from the MEDTOX acquisition recorded during the first nine months of 2012.

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