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

September 13, 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 Morgan Stanley Global Healthcare Conference on September 13, 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


September 13, 2010
 
 
 

 
 
September 13, 2010
New York, NY
Morgan Stanley Global
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.
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.
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 36% of revenue
 Goal of 40% in 3 - 5 years
 Higher priced business
9
 
 

 
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
 
 

 
Competitive Position
13
Standardized and
Efficient Processes
 Standardized lab and billing
 IT systems
 Automation of pre-analytics
 Capacity rationalization
 Logistics optimization
 
 

 
2010 Priorities
14
Our Focus
 Profitable revenue growth
 IT and client connectivity
 Continue scientific leadership
 Maintain price
 Control costs
 
 

 
2010 Accomplishments
15
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 1H 2010 results
 Controlled costs
  Gross margin expansion
  Sysmex project
 
 

 
2010 Accomplishments
16
Profitable Revenue Growth
 Empire contract
  In network status as of Aug 1, 2010
  New York’s largest insurer by membership
 Esoteric revenue growth
  5.1% growth in first half of 2010
  Expansion of Monogram offerings
 Acquisitions
  Westcliff
  DCL
 3.7% total revenue growth in first half of 2010
  Challenging economic environment
  Positive volume growth, after
  adjusting for lost contracts
 
 

 
2010 Accomplishments
17
Improved IT and Client
Connectivity
 LabCorp Beacon: A superior physician
 experience
 Intuitive Orders and Results
  Unread reports in bold while
 abnormal values are displayed in red
  Share results via Email, Fax and Print
  Group patients according to a client’s
 needs
  Add notes to any report to share
 critical insights
 
 

 
2010 Accomplishments
18
 Powerful Analytics
Graphical views of a patient over
time
Generate trends and averages for
large populations
 
 

 
2010 Accomplishments
19
“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
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
 Pricing discipline has offset
 1.9% Medicare rate decrease
 Promoted high-value tests
 Other recent benefits
  Monogram
  Canadian exchange rate
  Impact from lost government
  contracts
20
 
 

 
Controlled Costs
 Y/Y gross margin improvement for
 three consecutive quarters
 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
21
 
 

 
$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
22
Revenue and
EPS Growth
 9% Revenue CAGR
 15% EPS CAGR
(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
23
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
24
Cash Flow
 11% FCF CAGR
 $2.0 B+ share repurchase
 over last three years
Note: $ in Millions
 
 

 
Second Quarter and YTD 2010 Results
25
 
Three Months Ended Jun 30,
 
Six Months Ended Jun 30,
 
 
2010
 
2009
 
+/(-)
 
2010
 
2009
 
+/(-)
 
Revenue (1)
$ 1,238.4
 
$ 1,188.8
 
4.2%
 
$ 2,432.0
 
$ 2,344.5
 
3.7%
 
Adjusted Operating Income
$ 270.5
 
$ 254.9
 
6.1%
 
$ 514.0
 
$ 495.4
 
3.8%
 
Adjusted Operating Income Margin
21.8%
 
21.4%
 
 40
bp
21.1%
 
21.1%
 
 -
bp
Adjusted EPS (1)
$ 1.46
 
$ 1.30
 
12.3%
 
$ 2.76
 
$ 2.51
 
10.0%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating Cash Flow
$ 216.2
 
$ 182.4
 
18.5%
 
$ 448.2
 
$ 391.3
 
14.5%
 
Less: Capital Expenditures
$ (34.5)
 
$ (23.7)
 
45.6%
 
$ (59.0)
 
$ (54.4)
 
8.5%
 
Free Cash Flow
$ 181.7
 
$ 158.7
 
14.5%
 
$ 389.2
 
$ 336.9
 
15.5%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) During the first quarter inclement weather reduced revenue by an estimated $23 million and EPS by approximately eight cents
 
 
 
 
 
 
 

 
Reconciliation of Non-GAAP Financial Measures
26
Reconciliation of non-GAAP Financial Measures
(In millions, except per share data)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2010
 
2009
 
2010
 
2009
Adjusted Operating Income
 
 
 
 
 
 
 
 
Operating income
$ 270.5
 
$ 244.7
 
$ 504.7
 
$ 485.2
 
Restructuring and other special charges
$ -
 
$ 10.2
 
$ 9.3
 
$ 10.2
 
Adjusted operating income
$ 270.5
 
$ 254.9
 
$ 514.0
 
$ 495.4
 
 
 
 
 
 
 
 
 
Adjusted EPS
 
 
 
 
 
 
 
 
Diluted earnings per common share
$ 1.46
 
$ 1.24
 
$ 2.70
 
$ 2.46
 
Impact of restructuring and other special charges (1) (2)
$ -
 
$ 0.06
 
$ 0.06
 
$ 0.05
 
Adjusted EPS
$ 1.46
 
$ 1.30
 
$ 2.76
 
$ 2.51
 
 
 
 
 
 
 
 
 
(1) After tax impact of restructuring and other special charges for the three months and six months ended June 30, 2010 ($- million divided by
 105.4 million shares and $5.7 million divided by 105.9 million shares, respectively)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(2) After tax impact of restructuring and other special charges for the three months and six months ended June 30, 2009 ($6.0 million divided by
 109.5 and 109.4 million shares, respectively)
 
 
 
 
 
 
 
 
 

 
Supplemental Financial Information
27
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
 
 
 
 
 
 
 
 
 
 
 
 
 
Bad debt as a percentage of sales
 
5.30%
 
5.30%
 
5.30%
 
5.30%
 
5.05%
 
4.80%
Days sales outstanding
 
 52
 
 50
 
 48
 
 44
 
 46
 
 45
A/R coverage (Allow. for Doubtful Accts. / A/R)
 
19.5%
 
20.6%
 
21.9%
 
23.2%
 
21.7%
 
20.7%
 
 

 
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
28
 
 

 
©2010 LabCorp. All rights reserved. 8026-0210