LabCorp fourth quarter net earnings decrease to $131.8 million

Laboratory Corporation of America^® Holdings (LabCorp^®) (NYSE: LH) today announced results for the quarter and year ended December 31, 2010. These results include the operations of Genzyme Genetics for the month of December.

“We had a great year and achieved the goals we set out at the beginning of 2010 - solid revenue and EPS growth, launch of the Beacon IT platform and meaningful bad debt reduction”

Fourth Quarter Results

Net earnings were $131.8 million compared to $142.7 million in the fourth quarter of 2009. Earnings per diluted share (EPS) were $1.26 compared to $1.33 in 2009. Earnings per diluted share, excluding restructuring and other special charges recorded in the fourth quarter of 2010 and 2009 (Adjusted EPS) were $1.34 and $1.16, respectively.

Operating income for the fourth quarter was $238.8 million compared to $215.8 million in the fourth of 2009. Operating income, excluding restructuring and other special charges recorded in the fourth quarter of 2010 and 2009 (Adjusted Operating Income) was $252.4 million and $221.9 million, or 19.5% and 19.1% of sales, respectively.

Revenues for the quarter were $1,295.4 million, an increase of 11.2% over the fourth quarter of 2009. Testing volume, measured by requisitions, increased 3.6% and revenue per requisition increased 7.3%.

Operating cash flow for the quarter was $259.2 million. The balance of cash at the end of the quarter was $230.7 million, and there were no outstanding borrowings under the Company's $500.0 million revolving credit facility. As of December 31, 2010, approximately $234.2 million of repurchase authorization remained under the Company's approved share repurchase plan.

The Company recorded restructuring and other special charges of $13.6 million during the fourth quarter of 2010, comprised of $14.8 million in professional fees and expenses associated with recent acquisitions, which are recorded in selling, general and administrative expense; offset by a restructuring credit of $1.2 million resulting from the reversal of unused severance and facility closure liabilities.

Full Year Results

Net earnings were $558.2 million, compared to $543.3 million in 2009. Earnings per diluted share (EPS) were $5.29 compared to $4.98 in 2009. Adjusted EPS were $5.55 compared to $4.89 in 2009, an increase of 13.5%.

Operating income was $978.8 million compared to $935.9 million in 2009. Adjusted Operating Income was $1,016.5 million, or 20.3% of sales, compared to $954.9 million, or 20.3% of sales, in 2009.

Revenues were $5,003.9 million, an increase of 6.6% compared to 2009. Testing volume, measured by accessions, increased 0.1%, and revenue per accession increased 6.4%.

Operating cash flow was $883.6 million, net of $16.8 million in transition payments to UnitedHealthcare.

"We had a great year and achieved the goals we set out at the beginning of 2010 - solid revenue and EPS growth, launch of the Beacon IT platform and meaningful bad debt reduction," said David P. King, Chairman and Chief Executive Officer. "We also made a significant strategic move by completing the acquisition of Genzyme Genetics. We look forward to continuing our progress on all these fronts in 2011."

Share Repurchase Program

During January 2011, the Company completed its repurchase authorization by purchasing approximately $234.2 million of stock, representing approximately 2.6 million shares. The Company announced today that its Board of Directors has authorized a new stock repurchase program under which LabCorp may purchase up to an aggregate of an additional $500 million of its Common Stock. Any purchases under LabCorp's stock repurchase programs may be made from time to time in the open market or in privately negotiated transactions and may be initiated and discontinued at any time.

Outlook for 2011

Beginning in the first quarter of 2011, the Company intends to further modify its Adjusted EPS to exclude intangible amortization associated with acquisitions (Adjusted EPS Excluding Amortization). As the Company continues to grow the business through acquisitions, it will begin using earnings excluding amortization as a measure of operational performance, growth and shareholder returns. The Company believes adjusting EPS for this amortization will provide investors with better insight into the operating performance of the business.

If the Company had made this adjustment for the fourth quarter of 2010 and 2009, Adjusted EPS Excluding Amortization would have been $1.46, compared to $1.26 for the fourth quarter of 2009. As reflected in the chart below, Adjusted EPS Excluding Amortization would have been $5.98 for the full year 2010, compared to $5.24 for the full year 2009. For the full year 2011, the amortization adjustment will increase guidance by approximately $0.50.

This Adjusted EPS Excluding Amortization will be the measure the Company requests First Call to use in compiling 2011 consensus EPS estimates. As such, to ensure comparability, the Company requests 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.

The Company expects revenue growth of approximately 9.5% - 11.5%; Adjusted EPS Excluding Amortization in the range of $6.12 to $6.32, excluding the impact of any share repurchase activity under the new share repurchase program announced today; operating cash flow of approximately $900 million; and capital expenditures in the range of $140 million to $150 million. Adjusted EPS Excluding Amortization includes $0.16 - $0.26 of dilution from the Company's acquisition of Genzyme Genetics.