Acquisitions, restructuring and rising interest expenses left Laboratory Corporation of America Holdings with falling income despite slightly higher revenue in its first quarter.
LabCorp reported $700,000 in earnings, down about 99% from $113.1 million the year before, even with new revenue from its February acquisition of Covance, a Princeton, N.J. drug development services company.
Revenue was up 23.9% at $1.77 billion, compared with last year's $1.43 billion. The Covance deal largely drove that growth. Just 5% was from improvements in the clinical laboratory business and acquisitions of companies merged with other LabCorp divisions.
But the company saw less profit because of a nearly 50% jump in costs, including $113.4 million related to the Covance deal, $6 million related to the company's Project LaunchPad cost-cutting initiative and $19.3 million related to corporate restructuring.
The company reported operating income of $130.2 million, down 36% from the year before, but interest expenses amounting to $104.3 million brought its bottom line down to $700,000.
LabCorp reported pro forma results by lab segment, as if the Covance deal closed on Jan. 1, 2014.
LabCorp Diagnostics, which includes Covance's nutritional chemistry and food safety business, would have reported $301.1 million in adjusted operating income, up 13% compared with the first quarter the year before. Revenue in the division would have been $1.48 billion, up 5%.
Covance Drug Development, which includes LabCorp's clinical trial services business, reported pro forma revenue of $624.6 million, down 2% year over year in the pro forma results. Adjusted operating income would have been $72.3 million, down 6%, mostly due to currency and mix.
LabCorp expects to realize $35 million in cost synergies this year as a result of the Covance deal.