form8k.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.  20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

July 25, 2011
(Date of earliest event reported)

LABORATORY CORPORATION OF
AMERICA HOLDINGS
(Exact Name of Registrant as Specified in its Charter)

Delaware
  
1-11353
  
13-3757370
(State or other jurisdiction of Incorporation)
  
(Commission File Number)
  
(I.R.S. Employer Identification No.)

358 South Main Street,
        
Burlington, North Carolina
  
27215
  
336-229-1127
(Address of principal executive offices)
  
(Zip Code)
  
(Registrant’s telephone number including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[  ]
Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[  ]
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[  ]
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[  ]
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 7.01
Regulation FD Disclosure
 
Summary information of the Company in connection with non-deal related meetings at Deutsche Bank Securities in Chicago, IL and Kansas City, MO on July 26-27, 2011.

 
 
 
SIGNATURES


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 hereunto duly authorized.

LABORATORY CORPORATION OF AMERICA HOLDINGS
Registrant


 
By:
/s/ F. SAMUEL EBERTS III
   
F. Samuel Eberts III
   
Chief Legal Officer and Secretary


 
July 25, 2011
 
 
 
 
 
July 26-27, 2011
Chicago, IL and Kansas City, MO
 
Deutsche Bank Securities
NDR
 
 
 
 
2
This slide presentation contains forward-looking
statements which are subject to change based on
various important factors, including without limitation,
competitive actions in the marketplace and adverse
actions of governmental and other third-party payors.
Actual results could differ materially from those
suggested by these forward-looking statements.
Further information on potential factors that could
affect the Company’s financial results is included in
the Company’s Form 10-K for the year ended
December 31, 2010, and subsequent SEC filings.
Forward Looking Statement
 
 
 
Introduction
3
Leading National
Lab Provider
• Fastest growing national lab
• $55 billion market
• Clinical, Anatomic and Genomic Testing
• Serving clients in all 50 states and Canada
• Foremost clinical trials testing business
 
 
 
4
Introduction
 
 
 
Valuable Service
• Small component of total cost
 influences large percentage
 of clinical decisions
• Screening, early detection,
 and monitoring reduce
 downstream costs
• Companion diagnostics
 improve drug efficacy and
 reduce adverse drug effects
Attractive Market
5
 
 
 
Attractive Market
6
Growth Drivers
• Aging population
• Industry consolidation
• Advances in genomics
• Pharmacogenomics/
 companion diagnostics
• Cost pressures
Source: CDC National Ambulatory Medical Care Survey and Company Estimates
 
 
 
Attractive Market
7
Opportunity to
Take Share
• Approximately 5,000
 independent labs
• Less efficient, higher cost
 competitors
Source: Washington G-2 Reports and Company estimates
$55 Billion US Lab Market
 
 
 
Attractive Market
Diversified Payor Mix
• No customer > 9% of revenue
• Limited government exposure
8
 
 
 
Attractive Market
Diversified Test Mix
With Genzyme GeneticsSM*
acquisition, esoteric testing
comprises approximately
40% of revenue
9
*GENZYME GENETICSSM and its logo are trademarks of Genzyme Corporation and used by Esoterix
Genetic Laboratories, LLC, a wholly-owned subsidiary of LabCorp, under license. Esoterix Genetic
Laboratories and LabCorp are operated independently from Genzyme Corporation.
 
 
 
Mission Statement
10
We Will Offer The Highest Quality
Laboratory Testing and Most
Compelling Value to Our
Customers
We Will Execute This Mission
Through Our Five Pillar Strategy
 
 
 
Five Pillar Strategy
Pillar One
11
Deploy Cash to Enhance
Footprint and Test Menu
and to Buy Shares
 
 
 
Five Pillar Strategy—Pillar One
Strong Cash Generation
Strong Cash Generation
Cash Flow
• 6-year FCF CAGR of 9.4%
• Strategic acquisitions
• $2.0 B+ share repurchase
 over last three years
Note: $ in millions and Free Cash Flow is a non-GAAP metric
12
 
 
 
Five Pillar Strategy—Pillar One
Impressive FCF Trend
Free Cash Flow Per Share
• 6-year FCF Per Share CAGR of 16.1%
• FCF Yield ranged from approximately
 8% to 10% in 2010
Note: Free Cash Flow Per Share and Free Cash Flow Yield are non-GAAP metrics
FCF Yield range noted above was calculated using trailing twelve month Free Cash Flow, weighted average diluted share
counts and closing stock prices during 2010
13
 
 
 
Five Pillar Strategy—Pillar One
Competitive Position
Scale and Scope
• National infrastructure
• Broad test offering
• Managed care contracts
• Economies of scale
14
Primary LabCorp Testing Locations*
Esoteric Lab Locations
(CET, CMBP, Dianon, Esoterix, Monogram Biosciences, NGI, OTS, US Labs, Viromed)
Patient Service Centers*
 
 
 
Five Pillar Strategy—Pillar One
Key Uses of Cash
15
Key Uses of Cash
• Acquisitions
 • Genzyme Genetics
 • Westcliff (LabWest, Inc)
 • DCL
• Share Repurchase
 • $337.4 million in 2010
 • $325.5 million in first half of 2011
 
 
 
Five Pillar Strategy—Pillar One
Genzyme Genetics Aquisition
16
Acquisition Rationale
• Creates the premier genetics and
 oncology business in the industry
• Builds on our strategy of leadership in
 personalized medicine
• Generates revenue opportunities
 • Selling LabCorp’s test menu to
  Genzyme Genetics accounts
 • Selling Genzyme Genetics’ test menu to
  LabCorp accounts
 • Genzyme Genetics customer access to
  LabCorp’s convenient PSC network
 • Expanded use of genetic counselors
• Creates cost synergies
 • Logistics
 • Specimen collection
 • G&A
 • Facility overlap
 
 
 
Five Pillar Strategy—Pillar One
Importance of Genetics
• Preconception
• Pre- and post-natal
• Identification of disease carriers
• Identification of disease predisposition
•  Diagnosis of genetically caused or
  influenced conditions
 (eg, developmental delay)
• Disease prognosis and treatment
  (especially cancer)
17
 
 
 
• More sophisticated methods of cancer
  testing complement traditional biopsies
• Value of diagnostics for disease prognosis,
  and monitoring of progression and recurrence
• Critical role of testing in therapy
  selection
18
Five Pillar Strategy—Pillar One
Importance of Oncology
 
 
 
19
Five Pillar Strategy
Pillar Two
Enhance IT Capabilities
To Improve Physician
and Patient Experience
 
 
 
Five Pillar Strategy—Pillar Two
LabCorp Beacon™ | Physician
Experience
20
Intuitive Order Entry
•Streamlined Ordering
Provider, Diagnosis, Test and
Collection information are all displayed
in a single screen
•Requisition and Account Logic
Automatically generates requisitions
with appropriate account numbers
•Key Time-saving Features
 • Send to PSC
 • Standing orders
 • Electronic add-on testing
 • User-defined pick lists
 
 
 
21
Unified Results
•Centralizes Lab Connectivity
View lab reports from DIANON
Systems, Esoterix, LabCorp,
Litholink, US Labs, and CMBP
•Share Results
Email, fax, print and annotations
make it easy to share critical
information
•Visual Cues
Supports physician decision making,
enhances the timeliness of patient
care and facilitates follow-up with
abnormal results in red and unread
reports in bold
Five Pillar Strategy—Pillar Two
LabCorp Beacon™ | Physician
Experience
 
 
 
22
Results on the Go
•Clear, Concise Reports
Physicians and staff can quickly
access results via iPhone® or
iPad™ including alerts for abnormal
or critical lab results
•Connect to Patients
Access patient demographics
directly from results for phone or
email follow up
Five Pillar Strategy—Pillar Two
LabCorp Beacon™ | Physician
Experience
 
 
 
23
Trends & Analytics
•One-Click Trending
Physicians and staff can quickly view
a single test or analyte for one
patient and the trended history for
that patient
•Sort and Filter Results
Providers can filter their entire
patient population on
demographics and test results to
identify trends and patients at risk
•View Lab History
Five Pillar Strategy—Pillar Two
LabCorp Beacon™ | Physician
Experience
 
 
 
24
AccuDraw Integration
•Reduce Errors
•Reduce Training Time
•Proven Results
Success in LabCorp Patient Service
Centers will be extended to
customers
Online Appointment
Scheduling
•Patient Convenience
•Improved Service Experience
•2011 Enhancements Will Improve
Collections at the Time of
Scheduling
Five Pillar Strategy—Pillar Two
LabCorp Beacon™ | Patient Experience
 
 
 
25
Five Pillar Strategy
Pillar Three
Continue to Improve
Efficiency to Offer the
Most Compelling Value
in Laboratory Services
 
 
 
26
• Standardized lab and billing IT systems
• Automation of pre-analytics
• Supply chain optimization
• Sysmex fully automated hematology
  operations
• Consistent gross margin improvement
  (net of acquisitions)
• Full year bad debt reduction of
 50bp in 2010
Five Pillar Strategy—Pillar Three
Most Efficient Provider
 
 
 
27
Five Pillar Strategy
Pillar Four
Scientific Innovation At
Appropriate Pricing
 
 
 
28
Partner
Clinical Area
ARCA biopharma
Companion Diagnostics (Cardiovascular Disease)
BG Medicine
Cardiovascular Disease
Celera Diagnostics
Breast Cancer
Duke University
Joint Venture in biomarker development
Duke University
Lung Cancer
Exact Sciences
Colon Cancer
Intema Ltd.
Prenatal Testing
Johns Hopkins
Melanoma
MDxHealth
Companion Diagnostics (Oncology)
Medco Health Solutions
Companion Diagnostics (Research)
Merck
Companion Diagnostics (Infectious Disease)
On-Q-ity
Circulating tumor cells
University of Minnesota
Lupus
Veridex
Prostate Cancer
Yale University
Ovarian Cancer (exclusive)
Five Pillar Strategy—Pillar Four
Scientific Innovation
• Introduction of new tests
• Acquisitions and licensing
• Collaborations with leading
 companies and academic
 institutions
 
 
 
“K-RAS testing should be routinely conducted in
all colorectal cancer patients immediately after
diagnosis to ensure the best treatment strategies
for the individual Patient”
- Dr. Eric Van Cutsem, presenter at the June 2008 American
Society of Clinical Oncology meeting
FDA recommends genetic screening prior to
treatment with Abacavir
ROCKVILLE, Md -- July 24, 2008 -- The US Food and Drug Administration (FDA) has
issued an alert regarding serious, and sometimes fatal, hypersensitivity reactions (HSRs)
caused by abacavir (Ziagen) therapy in patients with a particular human leukocyte antigen
(HLA) allele, HLA-B* 5701.
Genetic tests for HLA-B*5701 are already available, and all patients should be screened for
the HLA-B*5701 allele before starting or restarting treatment with abacavir or abacavir-
containing medications.
“FDA has approved the expanded use of
Selzentry… to include adult patients with CCR5-
tropic HIV-1 virus who are starting treatment for
the first time.”
 - ViiV Healthcare Press Release, November 20th, 2009
29
Five Pillar Strategy—Pillar Four
Scientific Innovation
• Recent offerings in companion
 diagnostics and personalized medicine
 • IL-28B
 • K-RAS
 • HLA-B* 5701
 • BRAF Gene Mutation Detection
 • EGFR Mutation Analysis
 • CYP 450 2C19
 • Trofile® (CCR5 Tropism)
 • PhenoSense®, PhenoSense GT®
 • HERmark®
• Outcome Improvement Programs
 • CKD program
 • Litholink kidney stone program
• Clearstone acquisition
 • Global clinical trials capability
 • Presence in China
 
 
 
30
Five Pillar Strategy
Pillar Five
Alternative Delivery
Models
 
 
 
Revenue and
EPS Growth
• 6-year revenue CAGR of
 approximately 8.4%
• 6-year Adjusted EPS CAGR
 of approximately 14.6%
Revenue and Adjusted EPS Growth: 2004 - 2010 (1) (2)
(1) Excluding the $0.09 per diluted share impact in 2005 of restructuring and other special charges, and a
 non-recurring investment loss; excluding the $0.06 per diluted share impact in 2006 of restructuring
 and other special charges; excluding the $0.25 per diluted share impact in 2007 of restructuring and
 other special charges; excluding the $0.44 per diluted share impact in 2008 of restructuring and other
 special charges; excluding the ($0.09) per diluted share impact in 2009 of restructuring and other
 special charges; excluding the ($0.17) per diluted share impact in 2010 of restructuring and other
 special charges.
(2) EPS, as presented represents adjusted, non-GAAP financial measures. Diluted EPS, as reported in
 the Company’s Annual Report were: $2.45 in 2004; $2.71 in 2005; $3.24 in 2006; $3.93 in 2007; $4.26
 in 2008; $4.98 in 2009; and $5.29 in 2010
31
Excellent Performance
 
 
 
32
Our Results
• Profitable revenue growth
 • Empire contract
 • Esoteric growth
 • Acquisitions
• Improved IT and client connectivity
 • LabCorp Beacon
 • Enhanced experience
  for physicians and patients
• Continued scientific leadership
 • Clearstone acquisition
 • IL-28B
 • New Monogram assays
• Maintained price
 • Managed care stability
 • Strong results
2010 Accomplishments
 
 
 
Note: During both the first quarter of 2010 and the first quarter of 2011, inclement weather reduced Adjusted EPS Excluding Amortization
by approximately eight cents
 
33
Second Quarter and First Half
2011 Results
 
Three Months Ended Jun 30,
 
 
 
 
 
Six Months Ended Jun 30,
 
 
 
 
2011
 
2010
 
+/(-)
 
 
 
2011
 
2010
 
+/(-)
 
Revenue
$ 1,403.3
 
$ 1,238.4
 
13.3%
 
 
 
$2,771.7
 
$2,432.0
 
14.0%
 
Adjusted Operating Income (1)
$ 279.6
 
$ 270.5
 
3.4%
 
 
 
$543.3
 
$514.0
 
5.7%
 
Adjusted Operating Income Margin (1)
19.9%
 
21.8%
 
-190
bp
 
19.6%
 
21.1%
 
-150
bp
Adjusted EPS Excluding
Amortization(1)
$ 1.64
 
$ 1.56
 
5.1%
 
 
 
$3.18
 
$2.96
 
7.4%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating Cash Flow
$ 184.9
 
$ 216.2
 
-14.5%
 
 
 
$ 400.2
 
$ 448.2
 
-10.7%
 
Less: Capital Expenditures
$ (45.8)
 
$ (34.5)
 
32.8%
 
 
 
$ (75.2)
 
$ (59.0)
 
27.5%
 
Free Cash Flow
$ 139.1
 
$ 181.7
 
-23.4%
 
 
 
$ 325.0
 
$ 389.2
 
-16.5%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) See Reconciliation of non-GAAP Financial Measures (included herein)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Key Points
• Critical position in health care delivery
system
• Attractive market
• Consistent strategy
  • Excellent cash flow deployed to enhance
   strong competitive position
  • IT innovation to improve physician and
   patient experience
  • Most efficient provider delivering greatest
   value
  • Scientific leadership
  • Alternative delivery models
• Track record of execution and success
Conclusion
34
 
 
 
35
Reconciliation of
non-GAAP Financial Measures
Reconciliation of non-GAAP Financial Measures
(In millions, except per share data)
 
 
 
 
 
 
 
 
 
Three Months Ended Jun 30,
Adjusted Operating Income
 
2011
 
2010
 
Operating income
 
$ 225.7
 
$ 270.5
 
Restructuring and other special charges (1) (2)
 
 53.9
 
 -
 
Adjusted operating income
 
$ 279.6
 
$ 270.5
 
 
 
 
 
 
Adjusted EPS Excluding Amortization
 
 
 
 
 
Diluted earnings per common share
 
$ 1.20
 
$ 1.46
 
Impact of restructuring and other special charges (1) (2)
 
 0.32
 
 -
 
Amortization expense
 
 0.12
 
 0.10
 
Adjusted EPS Excluding Amortization (3)
 
$ 1.64
 
$ 1.56
 
 
 
 
 
 
1)      During the second quarter of 2011, the Company recorded restructuring and other special charges of $53.9 million. The restructuring charges include $7.5 million in net severance and other personnel costs along with
$10.8 million in net facility-related costs primarily associated with the ongoing integration of the Genzyme Genetics and Westcliff acquisitions. The special charges also include $34.5 million ($49.5 million, net of previously
recorded reserves of $15.0 million) relating to the settlement of the Hunter Labs litigation, along with $1.1 million for legal costs associated with the planned acquisition of Orchid Cellmark incurred during the quarter, both of
which were recorded in Selling, General and Administrative Expenses in the Company’s Statement of Operations. The after tax impact of these charges decreased net earnings for the quarter ended June 30, 2011, by $32.6
million and diluted earnings per share by $0.32 ($32.6 million divided by 102.8 million shares).
 
During the first quarter of 2011, the Company recorded restructuring and other special charges of $27.9 million. The charges included $4.0 million in severance and other personnel costs along with $9.8 million in facility-
related costs associated with the integration of Genzyme Genetics. The charges also included a $14.8 million write-off of an investment made in a prior year. For the six months ended June 30, 2011, the after tax impact of
these combined charges decreased net earnings by $49.4 million and diluted earnings per share by $0.48 ($49.4 million divided by 102.6 million shares).
 
 
 
 
 
 
 
2)      During the first quarter of 2010, the Company recorded net charges of $9.3 million relating to severance payments and the closing of redundant and underutilized facilities as well as the write-off of development costs
incurred on systems abandoned during the quarter. The after tax impact of these charges decreased net earnings for the six months ended June 30, 2010, by $5.7 million and diluted earnings per share by $0.06 ($5.7 million
divided by 105.9 million shares).
 
3)      The Company continues to grow its 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 will provide investors with better insight into the operating performance of the business. For the quarters ended June 30, 2011 and 2010, intangible amortization was $21.5 million and $17.7
million, respectively ($13.0 million and $10.8 million net of tax, respectively) and decreased EPS by $0.12 ($13.0 million divided by 102.8 million shares) and $0.10 ($10.8 million divided by 105.9 million shares),
respectively. For the six months ended June 30, 2011 and 2010, intangible amortization was $43.4 million and $35.1 million, respectively ($26.5 million and $21.5 million net of tax, respectively) and decreased EPS by $0.26
($26.5 million divided by 102.6 million shares) and $0.20 ($21.5 million divided by 105.9 million shares), respectively.
 
 
 
36
Reconciliation of
non-GAAP Financial Measures
Reconciliation of non-GAAP Financial Measures
(In millions, except per share data)
 
 
 
 
 
 
 
 
 
Six Months Ended Jun 30,
Adjusted Operating Income
 
2011
 
2010
 
Operating income
 
$ 461.5
 
$ 504.7
 
Restructuring and other special charges (1) (2)
 
 81.8
 
 9.3
 
Adjusted operating income
 
$ 543.3
 
$ 514.0
 
 
 
 
 
 
Adjusted EPS Excluding Amortization
 
 
 
 
 
Diluted earnings per common share
 
$ 2.44
 
$ 2.70
 
Impact of restructuring and other special charges (1) (2)
 
 0.48
 
 0.06
 
Amortization expense
 
 0.26
 
 0.20
 
Adjusted EPS Excluding Amortization (3)
 
$ 3.18
 
$ 2.96
 
 
 
 
 
 
1)      During the second quarter of 2011, the Company recorded restructuring and other special charges of $53.9 million. The restructuring charges include $7.5 million in net severance and other personnel costs along with
$10.8 million in net facility-related costs primarily associated with the ongoing integration of the Genzyme Genetics and Westcliff acquisitions. The special charges also include $34.5 million ($49.5 million, net of previously
recorded reserves of $15.0 million) relating to the settlement of the Hunter Labs litigation, along with $1.1 million for legal costs associated with the planned acquisition of Orchid Cellmark incurred during the quarter, both of
which were recorded in Selling, General and Administrative Expenses in the Company’s Statement of Operations. The after tax impact of these charges decreased net earnings for the quarter ended June 30, 2011, by $32.6
million and diluted earnings per share by $0.32 ($32.6 million divided by 102.8 million shares).
During the first quarter of 2011, the Company recorded restructuring and other special charges of $27.9 million. The charges included $4.0 million in severance and other personnel costs along with $9.8 million in facility-
related costs associated with the integration of Genzyme Genetics. The charges also included a $14.8 million write-off of an investment made in a prior year. For the six months ended June 30, 2011, the after tax impact of
these combined charges decreased net earnings by $49.4 million and diluted earnings per share by $0.48 ($49.4 million divided by 102.6 million shares).
 
 
 
 
 
 
 
2)      During the first quarter of 2010, the Company recorded net charges of $9.3 million relating to severance payments and the closing of redundant and underutilized facilities as well as the write-off of development costs
incurred on systems abandoned during the quarter. The after tax impact of these charges decreased net earnings for the six months ended June 30, 2010, by $5.7 million and diluted earnings per share by $0.06 ($5.7 million
divided by 105.9 million shares).
 
3)      The Company continues to grow its 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 will provide investors with better insight into the operating performance of the business. For the quarters ended June 30, 2011 and 2010, intangible amortization was $21.5 million and $17.7
million, respectively ($13.0 million and $10.8 million net of tax, respectively) and decreased EPS by $0.12 ($13.0 million divided by 102.8 million shares) and $0.10 ($10.8 million divided by 105.9 million shares),
respectively. For the six months ended June 30, 2011 and 2010, intangible amortization was $43.4 million and $35.1 million, respectively ($26.5 million and $21.5 million net of tax, respectively) and decreased EPS by $0.26
($26.5 million divided by 102.6 million shares) and $0.20 ($21.5 million divided by 105.9 million shares), respectively.
 
 
 
37
Supplemental Financial Information
Laboratory Corporation of America
Other Financial Information
FY 2009, FY 2010 and Q1-Q2 2011
($ in millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Q1 09
 
Q2 09
 
Q3 09
 
Q4 09
 
Q1 10
 
Q2 10
 
Q3 10
 
Q4 10
 
Q1 11
 
Q2 11
Bad debt as a percentage of sales
 
5.3%
 
5.3%
 
5.3%
 
5.3%
 
5.0%
 
4.8%
 
4.8%
 
4.7%
 
4.7%
 
4.7%
Days sales outstanding1
 
52
 
50
 
48
 
44
 
46
 
45
 
44
 
46
 
47
 
46
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Excluding the impact from Genzyme Genetics, DSO was 43 days in Q4 of 2010, 45 days in Q1 of 2011 and 43 days in Q2 of 2011
 
 
 
©2011 LabCorp. All rights reserved. 8026-0411