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Press release from Business Wire

Laboratory Corporation of America® Holdings Announces Second Quarter 2011 Results

<p class='bwalignc'> <i><b>Strong Volume and Revenue Growth Drives Adjusted EPS Excluding Amortization of $1.64</b></i> </p> <p class='bwalignc'> </p>

Thursday, July 21, 2011

Laboratory Corporation of America® Holdings Announces Second Quarter 2011 Results06:45 EDT Thursday, July 21, 2011 BURLINGTON, N.C. (Business Wire) -- Laboratory Corporation of America® Holdings (LabCorp®) (NYSE: LH) today announced results for the quarter ended June 30, 2011. Second Quarter Results Net earnings were $122.9 million and earnings per diluted share (EPS) were $1.20 in the second quarter of 2011. Earnings per diluted share, excluding amortization, restructuring and other special charges recorded in the second quarter of 2011 and 2010 (Adjusted EPS Excluding Amortization) were $1.64 and $1.56, respectively. Operating income for the second quarter was $225.7 million. Operating income excluding restructuring and other special charges recorded in the second quarter of 2011 and 2010 (Adjusted Operating Income) was $279.6 million and $270.5 million, respectively. Revenues for the quarter were $1,403.3 million, an increase of 13.3% over the second quarter of 2010. Testing volume, measured by requisitions, increased 4.8% and revenue per requisition increased 8.1%. Operating cash flow for the quarter was $184.9 million. The balance of cash at the end of the quarter was $118.9 million, and there were no borrowings outstanding under the Company's $500.0 million revolving credit facility. During the quarter, the Company repurchased approximately $60.5 million of stock, representing approximately 0.6 million shares. As of June 30, 2011, approximately $408.5 million of repurchase authorization remained under the Company's approved share repurchase plan. The Company recorded restructuring and other special charges of $53.9 million during the second quarter of 2011. 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 recently-announced 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. Year To Date Results Net earnings were $250.0 million and earnings per diluted share were $2.44 in the first half of 2011. Adjusted EPS Excluding Amortization in the first half of 2011 and 2010 were $3.18 and $2.96, respectively. Operating income was $461.5 million in the first half of 2011. Adjusted Operating Income was $543.3 million, or 19.6% of sales, compared to $514.0 million, or 21.1% of sales, in the first half of 2010. Revenues were $2,771.7 million, an increase of 14.0% compared to the same period in 2010. Compared to the first half of 2010, testing volume, measured by accessions, increased 5.4%, and revenue per accession increased 8.2%. Operating cash flow for the first six months of 2011 was $400.2 million. “We delivered another very strong quarter despite mounting economic headwinds,” said David P. King, Chairman and Chief Executive Officer. “We are very pleased with our second quarter and year-to-date results, and we will continue to execute our five-pillar strategy to enhance shareholder value.” Outlook for 2011 The Company is reaffirming its 2011 revenue guidance, expecting revenue growth of approximately 9.5% – 11.5%, and its 2011 Adjusted EPS Excluding Amortization guidance of $6.17 to $6.32, excluding the impact of any share repurchase activity after June 30, 2011. The Company is also reaffirming its 2011 operating cash flow guidance of approximately $900 million, excluding the Hunter Labs settlement, and expects 2011 capital expenditures of approximately $150 million. As previously mentioned, the Company has modified its Adjusted EPS to exclude intangible amortization associated with acquisitions (Adjusted EPS Excluding Amortization). As the Company continues to grow its business through acquisitions, it will use Adjusted Earnings 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. The chart below reconciles the impact of excluding amortization from our guidance and 2010 results.             2010   2011 Adjusted EPS - previous calculation $5.55 $5.67 - $5.82 Addback of amortization1 $0.43 $0.50 Adjusted EPS Excluding Amortization - new calculation $5.98 $6.17 - $6.32   (1) Tax-effected intangible amortization, substantially all related to acquisitions of businesses and technology As previously announced, this Adjusted EPS Excluding Amortization is the measure the Company requests First Call to use in compiling 2011 consensus EPS estimates. As such, to ensure comparability, the Company continues to request research analysts to also provide estimates on this basis. The Company will provide reconciliation tables in future earnings releases so that investors can clearly see these adjustments. Use of Adjusted Measures The Company has provided in this press release “adjusted” financial information that has not been prepared in accordance with GAAP, including Adjusted EPS Excluding Amortization and Adjusted Operating Income. The Company believes these adjusted measures are useful to investors as a supplement to, but not as a substitute for, GAAP measures, in evaluating the Company's operational performance. The Company further believes that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating operating results and trends, and in comparing the Company's financial results with other companies. Reconciliations of these non-GAAP measures to the most comparable GAAP measures are included in the tables accompanying this press release. The Company today is filing an 8-K that will include additional information on its business and operations. This information will also be available on the Company's Web site. Analysts and investors are directed to this 8-K and the Web site to review this supplemental information. A conference call discussing LabCorp's quarterly results will be held today at 9:00 a.m. Eastern Time and is available by dialing 877-556-5921 (617-597-5474 for international callers). The access code is 74690412. A telephone replay of the call will be available through July 28, 2011 and can be heard by dialing 888-286-8010 (617-801-6888 for international callers). The access code for the replay is 29953286. A live online broadcast of LabCorp's quarterly conference call on July 21, 2011 will be available at http://www.labcorp.com/ or at http://www.streetevents.com/ beginning at 9:00 a.m. Eastern Time. This webcast will be archived and accessible continuing through August 21, 2011. About LabCorp® Laboratory Corporation of America® Holdings, an S&P 500 company, is a pioneer in commercializing new diagnostic technologies and the first in its industry to embrace genomic testing. With annual revenues of $5.0 billion in 2010, over 31,000 employees worldwide, and more than 220,000 clients, LabCorp offers a broad test menu ranging from routine blood analyses to reproductive genetics to DNA sequencing. LabCorp furthers its scientific expertise and innovative clinical testing technology with its Centers of Excellence: The Center for Molecular Biology and Pathology, National Genetics Institute, ViroMed Laboratories, Inc., The Center for Esoteric Testing, Litholink Corporation, Genzyme GeneticsSM*, DIANON Systems, Inc., US LABS, Monogram Biosciences, Inc., and Esoterix and its Colorado Coagulation, Endocrine Sciences, and Cytometry Associates laboratories. LabCorp conducts clinical trials testing through its Esoterix Clinical Trials Services division. LabCorp clients include physicians, government agencies, managed care organizations, hospitals, clinical labs, and pharmaceutical companies. To learn more about our organization, visit our Web site at: www.labcorp.com. *Genzyme Genetics 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.This press release contains forward-looking statements. Each of the forward-looking statements is 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 LabCorp's financial results is included in the Company's Form 10-K for the year ended December 31, 2010, and subsequent SEC filings.LABORATORY CORPORATION OF AMERICA HOLDINGSConsolidated Statements of Operations(in millions, except per share data)         Three Months EndedSix Months EndedJune 30,June 30,   2011     2010     2011     2010     Net sales $ 1,403.3 $ 1,238.4 $ 2,771.7 $ 2,432.0 Cost of sales 815.1 704.8 1,615.1 1,391.5 Selling, general and administrative 322.7 245.4 605.5 491.4 Amortization of intangibles and other assets 21.5 17.7 43.4 35.1 Restructuring and other special charges   18.3     -     46.2     9.3     Operating income   225.7     270.5     461.5     504.7     Other income (expense) (0.2 ) (0.8 ) (0.1 ) (1.4 ) Investment income 0.2 0.2 0.5 0.5 Interest expense (21.0 ) (14.5 ) (45.0 ) (29.1 ) Equity method income, net   2.6     4.6     4.1     8.4   Earnings before income taxes 207.3 260.0 421.0 483.1 Provision for income taxes   80.6     102.8     163.7     189.7   Net earnings 126.7 157.2 257.3 293.4 Less net earnings attributable to noncontrolling interest   (3.8 )   (3.5 )   (7.3 )   (7.0 ) Net earnings attributable to Laboratory Corporation of America Holdings $ 122.9   $ 153.7   $ 250.0   $ 286.4     Adjusted Operating Income Operating Income $ 225.7 $ 270.5 $ 461.5 $ 504.7 Restructuring and other special charges   53.9     -     81.8     9.3   Adjusted operating income $ 279.6   $ 270.5   $ 543.3   $ 514.0     Adjusted EPS Excluding Amortization Diluted earnings per common share $ 1.20 $ 1.46 $ 2.44 $ 2.70 Impact of restructuring and other special charges 0.32 - 0.48 0.06 Amortization expense   0.12     0.10     0.26     0.20   Adjusted EPS Excluding Amortization $ 1.64   $ 1.56   $ 3.18   $ 2.96     Weighted average shares outstanding   102.8     105.4     102.6     105.9   LABORATORY CORPORATION OF AMERICA HOLDINGSConsolidated Balance Sheets(in millions, except per share data)     June 30,December 31,   2011     2010     Cash and short term investments $ 118.9 $ 230.7 Accounts receivable, net 714.8 655.6 Property, plant and equipment 586.4 586.9 Intangible assets and goodwill, net 4,320.3 4,275.4 Investments in joint venture partnerships 79.4 78.5 Other assets   348.5     360.7   $ 6,168.3   $ 6,187.8     Zero-coupon subordinated notes $ 140.1 $ 286.7 Senior notes 1,525.7 1,525.9 Term loan and credit facility 337.5 375.0 Other liabilities 1,410.4 1,365.2 Noncontrolling interest 174.8 168.7 Shareholders' equity   2,579.8     2,466.3   $ 6,168.3   $ 6,187.8     Consolidated Statement of Cash Flow Data(in millions, except per share data)   For the Six Months EndedJune 30,June 30,   2011     2010     Net cash provided by operating activities $ 400.2 $ 448.2 Net cash used for investing activities (117.3 ) (233.9 ) Net cash provided by (used for) financing activities (394.9 ) (258.4 ) Effect of exchange rates on cash   0.2     (0.6 ) Net (decrease) increase in cash (111.8 ) (44.7 ) Cash at beginning of period   230.7     148.5   Cash at end of period $ 118.9   $ 103.8     Free Cash Flow: Net cash provided by operating activities $ 400.2 $ 448.2 Less: Capital expenditures   (75.2 )   (59.0 ) Free cash flow $ 325.0   $ 389.2   Notes to Financial Tables 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 in California, 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. Laboratory Corporation of America® HoldingsStephen Anderson, 336-436-5274Investor@labcorp.com