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
November 11, 2010
(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 the presentation at the Credit Suisse 2010 Healthcare Conference on November 11, 2010.
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 |
November 12, 2010
November 11, 2010
Phoenix, AZ
Credit Suisse 2010
Healthcare Conference
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.
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, 2009, and
subsequent SEC filings.
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, 2009, 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
Introduction
4
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
• High cost competitors
Source: Washington G-2 Reports and company estimates
$55 Billion US Lab Market
55%
14%
9%
4%
19%
Hospital Affiliated
Quest
LabCorp
Physician Office
Other Independent
Attractive Market
Diversified Payor Mix
• No customer > 9% of revenue
• Limited government exposure
8
Attractive Market
Diversified Test Mix
• Esoteric 40% of revenue with
Genzyme Genetics acquisition
• Higher priced business
9
Genzyme Genetics Acquisition
10
Acquisition Rationale
• Creates the premier genetics and
Hematology-Oncology business in the world
• Builds on our strategy of leadership in
personalized medicine
• Revenue opportunities
• Selling LabCorp’s test menu to
Genzyme accounts
• Selling Genzyme’s test menu to
LabCorp accounts
• Genzyme customer access to LabCorp’s
convenient PSC network
• Expanded use of genetic counselors
• Cost synergies
• Logistics
• Specimen collection
• G&A
Genzyme Genetics Acquisition
Increasing Importance
of Genetics
• Preconception
• Pre - and post - natal
• Identification of disease carriers
• Identification of disease predisposition
• Diagnosis of genetically caused or
influenced conditions (e.g., developmental delay)
• Disease prognosis and treatment
(especially cancer)
11
Genzyme Genetics Acquisition
Increasing Importance
of Oncology
• More sophisticated methods of cancer
testing complement traditional biopsies
• Evolution of some types of cancer from
fatal to chronic disease
• Value of diagnostics for disease prognosis,
and monitoring of progression
and recurrence
• Critical role of testing in therapy
selection
12
Competitive Position
Scale and Scope
• National infrastructure
• Broad test offering
• Managed care contracts
• Economies of scale
13
Primary LabCorp Testing Locations*
Esoteric Lab Locations
(CET, CMBP, Dianon, Esoterix, Monogram Biosciences, NGI, OTS, US Labs, Viromed)
Patient Service Centers*
Competitive Position
14
Managed Care Relationships
• Exclusive national laboratory for UnitedHealthcare
• Sole national strategic partner for WellPoint
• Significant national plans recently renewed or
extended on a multi-year basis, including
WellPoint, Cigna and Humana
• Contracted with numerous local and
regional anchor plans
Scientific
Leadership
• Introduction of new tests
• Acquisitions and licensing
• Collaborations with leading
companies and academic
institutions
Competitive Position
15
Competitive Position
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Standardized and
Efficient Processes
• Standardized lab and billing
IT systems
• Automation of pre-analytics
• Capacity rationalization
• Logistics optimization
2010 Priorities
17
Our Focus
• Profitable revenue growth
• IT and client connectivity
• Continue scientific leadership
• Maintain price
• Control costs
2010 Accomplishments
18
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 collaboration
• IL-28B
• New Monogram assays
• Maintained price
• Managed care stability
• Strong YTD 2010 results
• Controlled costs
• Gross margin expansion
• Sysmex project
2010 Accomplishments
19
Profitable Revenue Growth
• Empire contract
• In network status as of Aug 1, 2010
• New York’s largest insurer by membership
• Esoteric revenue growth
• 6.8% y/y growth YTD 9/30
• Expansion of Monogram offerings
• Acquisitions
• Genzyme Genetics
• Westcliff
• DCL
• 5.1% y/y total revenue growth YTD 9/30
• Challenging economic environment
• Positive volume growth in Q3 2010
• Positive volume growth in Q1 and Q2
2010, after adjusting for lost contracts
2010 Accomplishments
20
Improved IT and Client
Connectivity
Connectivity
• LabCorp Beacon: A superior physician
experience
• Intuitive Orders and Results
• Unread reports in bold while
abnormal values are displayed in red
abnormal values are displayed in red
• Share results via Email, Fax and Print
• Group patients according to a client’s
needs
needs
• Add notes to any report to share
critical insights
critical insights
2010 Accomplishments
21
• Powerful Analytics
•Graphical views of a patient over
time
time
•Generate trends and averages for
large populations
large populations
2010 Accomplishments
22
“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”
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
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.
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.
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.”
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
Continued Scientific
Leadership
• Clearstone collaboration
• Global clinical trials capability
• Presence in China
• Enhanced 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 Trophism)
• PhenoSense, PhenoSense GT
• HerMark
• Grew Outcome Improvement Programs
• Relaunch of CKD program
• Litholink kidney stone program
2010 Accomplishments
Maintained Price
• Managed care stability
• Contracted pricing has offset
1.9% Medicare rate decrease
• Promoted high-value tests
• Other recent benefits
• Monogram
• Canadian exchange rate
• Impact from lost government
contracts
23
Controlled Costs
• Y/Y gross margin improvement
• Sysmex contract
• Fully automated hematology
operations
• One of largest lab automation
projects ever undertaken
• Bad debt reduction of 50bp in
the first half of 2010
• Continued to optimize supply chain
• Used efficiency gains to improve
physician and patient experiences
2010 Accomplishments
24
$3,085
$3,328
$3,591
$4,068
$4,513
$4,695
$2.45
$2.80
$3.30
$4.18
$4.60
$4.89
2004
2005
2006
2007
2008
2009
Revenue ($mil)
EPS
Excellent Performance
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Revenue and
EPS Growth
• 5-year revenue CAGR of 9%
• 5-year EPS CAGR of 15%
(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
(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; $4.16 in 2008; and $4.98 in 2009.
$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.
Revenue and EPS Growth: 2004 - 2009 (1) (2)
Excellent Performance
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Leading Returns
• Leading returns
• Leading EBIT margin
18.2%
20.5%
21.8%
27.6%
27.5%
25.8%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
2004
2005
2006
2007
2008
2009
LabCorp ROE 2004
-
2009
Excellent Performance
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Cash Flow
• 5-year FCF CAGR of 11%
• Strategic acquisitions
• $2.0 B+ share repurchase
over last three years
Note: $ in Millions
Note: Free Cash Flow is a non-GAAP metric
Excellent Performance
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Free Cash Flow Per Share
• 5-year FCF Per Share CAGR of 18%
• FCF Yield has ranged from
8.4% to 10.4% 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
Third Quarter and YTD 2010 Results
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Three Months Ended Sep 30, | Nine Months Ended Sep 30, | |||||||||||
2010 | 2009 | +/(-) | 2010 | 2009 | +/(-) | |||||||
Revenue (1) | $1,276.5 | $1,185.1 | 7.7% | $3,708.5 | $3,529.7 | 5.1% | ||||||
Adjusted Operating Income | $250.1 | $237.6 | 5.3% | $764.2 | $733.0 | 4.3% | ||||||
Adjusted Operating Income Margin | 19.6% | 20.0% | -40 | bp | 20.6% | 20.8% | -20 | bp | ||||
Adjusted EPS (1) | $1.47 | $1.22 | 20.5% | $2.76 | $2.51 | 10.0% | ||||||
Operating Cash Flow | $176.2 | $246.4 | -28.5% | $624.4 | $637.7 | -2.1% | ||||||
Less: Capital Expenditures | ($34.3) | ($22.7) | 51.1% | ($93.3) | ($77.1) | 21.0% | ||||||
Free Cash Flow | $141.9 | $223.7 | -36.6% | $531.1 | $560.6 | -5.3% | ||||||
(1) During the first quarter of 2010 inclement weather reduced revenue by an estimated $23 million and EPS by approximately eight cents | ||||||||||||
Key Points
• Critical position in health care delivery system
• Attractive market
• Strong competitive position - well positioned to gain share
• Leadership in personalized medicine
• Excellent cash flow
• Strong balance sheet
Conclusion
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Reconciliation of Non-GAAP Financial Measures
31
Reconciliation of non-GAAP Financial Measures | |||||||||
(In millions, except per share data) | |||||||||
Three Months Ended Sep 30, | Nine Months Ended Sep 30, | ||||||||
Adjusted Operating Income | 2010 | 2009 | 2010 | 2009 | |||||
Operating income | $235.3 | $234.9 | $740.0 | $720.1 | |||||
Restructuring and other special charges (1) (2) | $14.8 | $2.7 | $24.2 | $12.9 | |||||
Adjusted operating income | $250.1 | $237.6 | $764.2 | $733.0 | |||||
Adjusted EPS | |||||||||
Diluted earnings per common share | $1.34 | $1.21 | $4.05 | $3.67 | |||||
Impact of restructuring and other special charges (1) (2) | $0.13 | $0.01 | $0.18 | $0.07 | |||||
Adjusted EPS | $1.47 | $1.22 | $4.23 | $3.74 | |||||
1) During the third quarter of 2010, the Company recorded restructuring and other special charges of $21.8 million, consisting of $10.9 million in professional fees and expenses associated with recent acquisitions; $7.0 million in bridge financing fees associated with the signing of an asset purchase agreement for Genzyme Genetics; and $3.9 million in severance related liabilities associated with workforce reduction initiatives. The after tax impact of these charges decreased net earnings for the three months ended September 30, 2010, by $13.4 million and diluted earnings per share by $0.13 ($13.4 million divided by 104.1 million shares). | |||||||||
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 combined charges decreased net earnings for the nine months ended September 30, 2010, by $19.1 million and diluted earnings per share by $0.18 ($19.1 million divided by 105.4 million shares). | |||||||||
2) During the third quarter of 2009, the Company recorded a charge of approximately $2.7 million representing fees and expenses associated with its acquisition of Monogram Biosciences. The after tax impact of this charge reduced net earnings for the three months ended September 30, 2009, by $1.6 million and diluted earnings per share by $0.01 ($1.6 million divided by 108.8 million shares). | |||||||||
During the second quarter of 2009, the Company recorded net charges of approximately $10.2 million ($6.1 million after tax) related to actions directed at reducing the Company’s redundant and underutilized facilities along with the related work force. | |||||||||
The after tax impact of these combined charges reduced net earnings for the nine months ended September 30, 2009, by $7.7 million and diluted earnings per share by $0.07 for the nine months ended September 30, 2009 ($7.7 million divided by 109.1). | |||||||||
Supplemental Financial Information
32
Laboratory Corporation of America | ||||||||||||||
Other Financial Information | ||||||||||||||
FY 2009 and Q1/Q2 2010 | ||||||||||||||
($ in millions) | ||||||||||||||
Q1 09 | Q2 09 | Q3 09 | Q4 09 | Q1 10 | Q2 10 | Q3 10 | ||||||||
Bad debt as a percentage of sales | 5.30% | 5.30% | 5.30% | 5.30% | 5.05% | 4.80% | 4.80% | |||||||
Days sales outstanding | 52 | 50 | 48 | 44 | 46 | 45 | 44 | |||||||
A/R coverage (Allow. for Doubtful Accts. / A/R) | 19.5% | 20.6% | 21.9% | 23.2% | 21.7% | 20.7% | 20.4% | |||||||
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