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
February 23, 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 Barclays Capital in New York, NY on February 24, 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 |
February 23, 2011
February 24, 2011
New York, NY
Barclays Capital
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.
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, and will be available in
the Company’s Form 10-K for year ended
December 31, 2010, when filed.
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, and will be available in
the Company’s Form 10-K for year ended
December 31, 2010, when filed.
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
• 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.
LLC, a wholly-owned subsidiary of LabCorp, under license. Esoterix Genetic Laboratories and LabCorp are operated
independently from Genzyme Corporation.
Competitive Position
Scale and Scope
• National infrastructure
• Broad test offering
• Managed care contracts
• Economies of scale
10
Primary LabCorp Testing Locations*
Esoteric Lab Locations
(CET, CMBP, Dianon, Esoterix, Monogram Biosciences, NGI, OTS, US Labs, Viromed)
Patient Service Centers*
Competitive Position
11
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
12
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) |
Competitive Position
13
Most Efficient and
Lowest Cost Provider
Lowest Cost Provider
• Standardized lab and billing IT systems
• Automation of pre-analytics
• Supply chain optimization
• Sysmex fully automated hematology
operations
• Gross margin improvement
• Bad debt reduction of 50bp in 2010
2010 Accomplishments
14
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 2010 results
2011 Priorities
15
Our Focus
• Operating objectives
• Genzyme Genetics integration
• LabCorp Beacon rollout
• Continue scientific leadership
• Financial objectives
• Profitable revenue growth
• Maintain price
• Control costs
2011 Priorities - Genzyme Genetics Integration
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
2011 Priorities - Genzyme Genetics Integration
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)
17
2011 Priorities - Genzyme Genetics Integration
Increasing Importance
of Oncology
• 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
2011 Priorities - Beacon Rollout
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Intuitive Order Entry
•Streamlined Ordering
Provider, Diagnosis, Test and
Collection information are all displayed
in a single screen
Provider, Diagnosis, Test and
Collection information are all displayed
in a single screen
•Requisition and Account Logic
Automatically generates requisitions
with appropriate account numbers
Automatically generates requisitions
with appropriate account numbers
•Key Time-saving Features
• Send to PSC
• Standing orders
• Electronic add-on testing
• User-defined pick lists
2011 Priorities - Beacon Rollout
20
AccuDraw Integration
•Reduce Errors
•Reduce Training Time
•Proven Results
Success in LabCorp Patient Service
Centers will be extended to
customers
Success in LabCorp Patient Service
Centers will be extended to
customers
2011 Priorities - Beacon Rollout
21
Unified Results
•Centralizes Lab Connectivity
View lab reports from DIANON
Systems, Esoterix, LabCorp,
Litholink, USLabs, and CMBP
View lab reports from DIANON
Systems, Esoterix, LabCorp,
Litholink, USLabs, and CMBP
•Share Results
Email, fax, print and annotations
make it easy to share critical
information
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
Supports physician decision making,
enhances the timeliness of patient
care and facilitates follow-up with
abnormal results in red and unread
reports in bold
2011 Priorities - Beacon Rollout
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
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 the results for phone or
email follow up
Access patient demographics
directly from the results for phone or
email follow up
2011 Priorities - Beacon Rollout
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
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
Providers can filter their entire
patient population on
demographics and test results to
identify trends and patients at risk
•View Lab History
2011 Priorities - Scientific Leadership
24
“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
Continue Scientific
Leadership
• 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 collaboration
• Global clinical trials capability
• Presence in China
Excellent Performance
25
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.
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
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
Excellent Performance
26
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
Excellent Performance
27
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
Fourth Quarter and Full Year 2010 Results
28
(1) During the first quarter of 2010 inclement weather reduced revenue by an estimated $23 million and EPS by approximately eight cents
Three Months Ended Dec 31, | Twelve Months Ended Dec 31, | ||||||||||||||
2010 | 2009 | +/(-) | 2010 | 2009 | +/(-) | ||||||||||
Revenue | $1,295.40 | $1,165.10 | 11.2% | $5,003.90 | $4,694.70 | 6.6% | |||||||||
Adjusted Operating Income (1) | $252.40 | $221.90 | 13.7% | $1,016.50 | $954.90 | 6.5% | |||||||||
Adjusted Operating Income Margin (1) | 19.5% | 19.0% | 50 | bp | 20.3% | 20.3% | - - | bp | |||||||
Adjusted EPS (1) | $1.34 | $1.16 | 15.5% | $5.55 | $4.89 | 13.5% | |||||||||
Operating Cash Flow | $259.20 | $224.70 | 15.4% | $883.60 | $862.40 | 2.5% | |||||||||
Less: Capital Expenditures | ($32.80) | ($37.60) | -12.8% | ($126.10) | ($114.70) | 9.9% | |||||||||
Free Cash Flow | $226.40 | $187.10 | 21.0% | $757.50 | $747.70 | 1.3% | |||||||||
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
29
30
Reconciliation of non-GAAP
Financial Measures
Reconciliation of non-GAAP Financial Measures | |||||
(In millions, except per share data) | |||||
Three Months Ended Dec 31, | |||||
Adjusted Operating Income | 2010 | 2009 | |||
Operating income | $ 238.8 | $ 215.8 | |||
Restructuring and other special charges (1) (2) | 13.6 | 6.1 | |||
Adjusted operating income | $ 252.4 | $ 221.9 | |||
Adjusted EPS | |||||
Diluted earnings per common share | $ 1.26 | $ 1.33 | |||
Impact of restructuring and other special charges (1) (2) | 0.08 | (0.17) | |||
Adjusted EPS | $ 1.34 | $ 1.16 | |||
(1) During the fourth quarter of 2010, the Company recorded restructuring and other special charges of $13.6 million, consisting of $14.8 million in professional fees and expenses associated with recent acquisitions, which were offset by a net restructuring credit of $1.2 million resulting from the reversal of unused severance and facility closure liabilities. The after tax impact of these charges decreased net earnings for the three months ended December 31, 2010, by $8.3 million and diluted earnings per share by $0.08 ($8.3 million divided by 104.5 million shares). | |||||
(2) During the fourth quarter of 2009, the Company recorded net charges of $3.3 million ($2.0 million after tax) relating to severance payments for the reduction of certain management positions and the closing of redundant and underutilized facilities. The Company also adopted amendments to its employee pension plans, effective January 1, 2010, resulting in the recognition of a one-time net curtailment charge of $2.8 million ($1.7 million after tax). In addition, the Company recorded favorable adjustments of $21.5 million to its fourth quarter tax provision relating to the resolution of certain state tax issues under audit, as well as the realization of foreign tax credits. Combined, these net after tax adjustments increased net earnings for the quarter ended December 31, 2009 by $17.8 million and increased diluted earnings per share for the quarter by $0.17 ($17.8 million divided by 107.5 million shares). | |||||
31
Reconciliation of non-GAAP
Financial Measures
Reconciliation of non-GAAP Financial Measures | |||||
(In millions, except per share data) | |||||
Year Ended Dec 31, | |||||
Adjusted Operating Income | 2010 | 2009 | |||
Operating income | $ 978.8 | $ 935.9 | |||
Restructuring and other special charges (1) (2) | 37.7 | 19.0 | |||
Adjusted operating income | $ 1,016.5 | $ 954.9 | |||
Adjusted EPS | |||||
Diluted earnings per common share | $ 5.29 | $ 4.98 | |||
Impact of restructuring and other special charges (1) (2) (3) (4) | 0.26 | (0.09) | |||
Adjusted EPS | $ 5.55 | $ 4.89 | |||
(1) 2010 includes net restructuring and other special charges of $44.7 million ($27.4 million after tax), consisting of $25.7 million in professional fees and expenses associated with recent acquisitions; $7.0 million in bridge financing fees; and $12.0 million in severance related liabilities associated with workforce reduction initiatives. | |||||
(2) 2009 includes net restructuring charges of $13.5 million ($8.1 million after tax), a one-time charge of $2.8 million ($1.7 million after tax) for curtailment of employee pension plans, and $2.7 million ($1.6 million after tax) transaction fees and expenses associated with the acquisition of Monogram Biosciences. | |||||
(3) In 2009, the Company recorded favorable adjustments of $21.5 million to its fourth quarter tax provision relating to the resolution of certain state tax issues under audit, as well as the realization of foreign tax credits. In 2008, the Company recorded a $7.1 million reduction to its fourth quarter tax provision as a result of tax treaty amendments with Canada. These adjustments had no impact on operating income, but did increase net earnings by $21.5 million and $7.1 million, respectively. | |||||
(4) 2010: $27.4 million divided by 105.4 million shares | |||||
2009: $10.1 million divided by 109.1 million shares | |||||
Supplemental Financial Information
32
Laboratory Corporation of America | ||||||||||||||||
Other Financial Information | ||||||||||||||||
FY 2009 and FY 2010 | ||||||||||||||||
($ in millions) | ||||||||||||||||
Q1 09 | Q2 09 | Q3 09 | Q4 09 | Q1 10 | Q2 10 | Q3 10 | Q4 10 | |||||||||
Bad debt as a percentage of sales | 5.30% | 5.30% | 5.30% | 5.30% | 5.05% | 4.80% | 4.80% | 4.70% | ||||||||
Days sales outstanding | 52 | 50 | 48 | 44 | 46 | 45 | 44 | 43 | ||||||||
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