LabCorp 2008 Annual Report Download

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2008 Annual Report
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Table of contents

  • Page 1
    This one tube 2008 Annual Report

  • Page 2
    ... for Molecular Biology and Pathology, National Genetics Institute, Inc., ViroMed Laboratories, Inc., The Center for Esoteric Testing, Litholink Corporation, DIANON Systems, Inc., US LABS, and Esoterix and its Colorado Coagulation, Endocrine Sciences, and Cytometry Associates laboratories. LabCorp...

  • Page 3
    ... of a new era of health care that is rapidly evolving. Scientific advances at the molecular and genetic level are making the concept of personalized medicine a reality - today. This new era means new opportunities and new growth. LabCorp is staking a leadership claim as the clinical laboratory for...

  • Page 4
    ... that reduces recurrence by 80 percent and cost per patient by $2,000 per year. Litholink, our proprietary program, provides highly personalized analysis, treatment, follow-up testing and ongoing support for kidney stone treatment and prevention. 2 Laboratory Corporation of America® Holdings 2008

  • Page 5
    ... generation Pap test further improves early detection capabilities by combining human review with the power of an interactive computer imaging system. Image-guided Pap testing now accounts for more than 60 percent of all Pap tests that LabCorp performs. Laboratory Corporation of America® Holdings...

  • Page 6
    ... is an enormous burden to the health care system, accounting for more than 75 percent of the nation's $2 trillion annual health care costs. Clearly, personalized outcome improvement programs, which can reduce recurrence or slow the progression of disease, meet a critical need on many levels. answer...

  • Page 7
    ... Mutation Analysis provides a predictive clinical biomarker to help physicians determine which patients are best suited for specific new therapies. For those battling this deadly disease, knowing what will work, and what will not, can be life-saving intelligence. Laboratory Corporation of America...

  • Page 8
    .... Since early detection and treatment can prevent the future development of cervical cancer, cost-effective Pap with HPV DNA tests can prevent thousands of dollars in cervical cancer treatment costs and save lives. This makes Pap with HPV DNA testing one of health care's best values. 6 Laboratory...

  • Page 9
    ... in all of health care than lab testing. LabCorp is capitalizing on this potential in new and innovative ways that are transforming our Company from a provider of data to a provider of diagnostic intelligence. Dave King President and Chief Executive Officer Laboratory Corporation of America...

  • Page 10
    ... medicine will make us, more than ever, the central player in the delivery of the right care to the right patient at the right time. LabCorp intends to continue to lead the laboratory industry in the movement toward personalized medicine and expects this leading position to be a key driver of growth...

  • Page 11
    ... with our Litholink program for kidney stone management. With an 80 percent reduction in stone recurrence and a $2,000 reduction in annual treatment cost per patient, we are able to help improve patients' lives and save the health care system money. It is gratifying that patients and payers have...

  • Page 12
    ... easier to do business with LabCorp. In early 2008, we introduced online appointment scheduling and self-check-in kiosks at select locations and plan to expand both of these patient convenience tools throughout 2009. These customer care initiatives are part of an ongoing effort to support growth by...

  • Page 13
    ... health care intelligence. In the process, we believe clinical laboratory testing will become increasingly valued for its ability to guide those who treat patients by providing high-quality, cost-effective care. A new era is well under way, as are LabCorp's strategies to capitalize on it and lead...

  • Page 14
    ...grow esoteric testing, expand outcome improvement programs, and develop and commercialize companion diagnostics, LabCorp will further differentiate itself in the clinical laboratory testing field, providing cost-effective health care solutions and, more importantly, improving and potentially saving...

  • Page 15
    ...the most sensitive, in-guideline, non-invasive colorectal cancer screening methods on the market for asymptomatic average-risk patients who are unwilling or unable to undergo a more invasive exam. We are also enhancing early detection of prostate cancer, the leading cause of cancer death in U.S. men...

  • Page 16
    ...CKD program helps to identify patients with reduced kidney function, offers physicians a sophisticated decision support tool, and provides clinicians with outcome reporting and services to ensure continued patient progress. Developed by a team of international experts, LabCorp's CKD program is based...

  • Page 17
    ...specimens to custom-designed labware, dispenses reagents, centrifuges, incubates and finally places prepared samples in the digene® assay plate. This system provides uniform processing, decreases turnaround time and reduces the labor burden associated with the HPV assay. Laboratory Corporation of...

  • Page 18
    ... Compliance 4 Nominating and Corporate Governance Chairman of Lane Holdings, Inc., an investment firm Dean and Professor, W.P . Carey School of Business, Arizona State University Arthur H. Rubenstein, MBBCh 1,3 Former Chief Executive Officer and President of Wendy's International, Inc. Executive...

  • Page 19
    Laboratory Corporation of America Table of Contents Selected Financial Data Management's Discussion and Analysis of Financial Condition and Results of Operations Report of Management on Internal Control Over Financial Reporting Report of Independent Registered Public Accounting Firm Consolidated ...

  • Page 20
    ... by an independent registered public accounting firm. This data should be read in conjunction with the accompanying notes, the Company's consolidated financial statements and the related notes thereto, and "Management's Discussion and Analysis of Financial Condition and Results of Operations," all...

  • Page 21
    ... for all equity awards granted, based on the fair market value of the award as of the grant date. As a result of adopting SFAS 123(R), the Company recorded approximately $23.3 in stock compensation expense relating to its stock option and employee stock purchase plans for the year ended December 31...

  • Page 22
    ... and Esoteric Ontario, Canada Total $ $ $ $ 32.30 62.49 30.92 38.28 3.2% (2.0)% 100.0% 0.9% The majority of the Company's testing volume is dependent on patient visits to doctor's offices and other providers of health care. Volume of testing generally declines during the year-end holiday periods...

  • Page 23
    ... equipment. The Company also recorded a credit of $1.9, comprised of $1.2 of previously recorded facility costs and $0.7 of employee severance benefits relating to changes in cost estimates accrued in prior periods. These restructuring initiatives are expected to provide annualized cost savings of...

  • Page 24
    ... to focus on efforts to increase cash collections from all payers, as well as on-going improvements to the claim submission processes. The Company did not make any contributions to its defined benefit pension plan in 2008, 2007 and 2006. However, based upon the underlying value of the defined...

  • Page 25
    ... limited to, the risk that the licensed technology will not gain broad acceptance in the marketplace; or that insurance companies, managed care organizations, or Medicare and Medicaid will not approve reimbursement for these tests at a level commensurate with the costs of running the tests. Any or...

  • Page 26
    ... to meet both its anticipated short-term and long-term cash needs; however, the Company continually reassesses its liquidity position in light of market conditions and other relevant factors. New Accounting Pronouncements In February 2007, the FASB issued SFAS No. 159 "The Fair Value Option for...

  • Page 27
    ... of this standard did not have a material impact on our consolidated financial position and results of operations. In December 2008, the FASB issued FASB Staff Position No. FAS 132(R)-1, "Employers' Disclosures about Postretirement Benefit Plan Assets" ("FSP 132(R)-1"). FSP 132(R)-1 applies to an...

  • Page 28
    ... testing process is complete and test results are reported to the ordering physician. The Company's sales are generally billed to three types of payers - clients, patients and third parties, such as managed care companies, Medicare and Medicaid. For clients, sales are recorded on a fee-for-service...

  • Page 29
    ... payment trends and claims history, along with current and estimated future economic conditions. The Company is self-insured for professional liability claims arising in the normal course of business, generally related to the testing and reporting of laboratory test results. The Company records...

  • Page 30
    ... price competition, competitive bidding for laboratory tests and/or changes or reductions to fee schedules; 9. changes in payer mix, including an increase in capitated managed-cost health care or the impact of a shift to consumer-driven health plans; 10. failure to obtain and retain new customers...

  • Page 31
    ... Results of Operations (in millions) Quantitative and Qualitative Disclosure About Market Risk The Company addresses its exposure to market risks, principally the market risk associated with changes in interest rates, through a controlled program of risk management that includes from time to time...

  • Page 32
    ..." issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO"). Based on this assessment, the Company's management determined that, as of December 31, 2008, the Company maintained effective internal control over financial reporting. Management reviewed the results of...

  • Page 33
    ... the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that...

  • Page 34
    ...venture partnerships Other assets, net Total assets Liabilities And Shareholders' Equity Current liabilities: Accounts payable Accrued expenses and other Deferred income taxes Short-term borrowings and current portion of long... Additional paid-in capital Retained earnings Less common stock held in...

  • Page 35
    ...Net sales Cost of sales Gross profit Selling, general and administrative expenses ...Diluted earnings per common share The accompanying notes are an integral part of these consolidated financial statements. (72.0) 14.4 2.5 (2.1) 785.7 (13.3) 772.4 307.9 $ $ $ 464.5 4.23 4.16 Laboratory Corporation...

  • Page 36
    ... Comprehensive earnings Issuance of common stock under employee stock plans Surrender of restricted stock awards Adoption of FIN 48 Conversion of zero-coupon convertible debt Stock compensation Income tax benefit from stock options exercised Purchase of common stock Balance at December 31, 2007...

  • Page 37
    ... of debt issuance costs Payments on long-term lease obligations Minority interest distributions Excess tax benefits from stock based compensation Purchase of common stock Net proceeds from issuance of stock to employees Net cash used for financing activities Effect of exchange rate changes on cash...

  • Page 38
    ... Medicare and Medicaid programs. The Company has capitated agreements with certain managed care customers and recognizes related revenue based on a predetermined monthly contractual rate for each member of the managed care plan regardless of the number or cost of services provided by the Company. In...

  • Page 39
    ... of the Company's Chief Executive Officer, effective December 31, 2006. See note 15 for assumptions used in calculating compensation expense for the Company's stock compensation plans. Cash Equivalents Cash equivalents (primarily investments in money market funds, time deposits, municipal...

  • Page 40
    ... The Company is self-insured for professional liability claims arising in the normal course of business, generally related to the testing and reporting of laboratory test results. The Company records a reserve for such asserted and estimated unasserted claims based on actuarial assessments of...

  • Page 41
    ... or acquire scientific differentiation and esoteric testing capabilities. Interest rate swap agreements, which are currently being used by the Company in the management of interest rate exposure, are accounted for at fair value. The Company's zero-coupon subordinated notes contain the following...

  • Page 42
    ... undertaken across the Company's corporate and divisional operations. This net charge was the result of a charge of $2.4 related to employee severance benefits for employees primarily in administrative and support functions, and a credit of $1.4 related to occupying a testing facility that had...

  • Page 43
    ... $5.5 related to estimated uncollectible amounts primarily owed by patients in the areas of the Gulf Coast severely impacted by hurricanes similar to losses incurred during the 2005 hurricane season. Gross Carrying Amount Customer lists Patents, licenses and technology Non-compete agreements Trade...

  • Page 44
    ....7 13.4 14.2 3.0 15.8 6.1 8.6 5.3 $ 239.6 Credit Facilities Employee compensation and benefits Self-insurance reserves Accrued taxes payable Royalty and license fees payable Accrued repurchases of common stock Restructuring reserves Acquisition related reserves Interest payable Other $ 140.7 48...

  • Page 45
    ... average market price of a zero-coupon subordinated note for the five trading days ended September 9, 2008, in addition to the continued accrual of the original issue discount. On October 1, 2008, the Company announced that its zero-coupon subordinated notes could be converted into Common Stock at...

  • Page 46
    ... initial purchase price of $73.40 per share. The Company used cash on hand to pay for the shares. The purchase price for these shares was subject to an adjustment based on the volume weighted average price of the Company's stock during a period following execution of the agreement. The total cost of...

  • Page 47
    ... a share of a new series of participating preferred stock at an initial purchase price of four hundred dollars. These rights will become exercisable and will detach from the Company's common stock if any person becomes the beneficial owner of 15% or more of the Company's common stock. In that event...

  • Page 48
    ...31, 2007 $ 55.0 23.0 16.9 13.6 9.7 13.0 131.2 (3.9) $ 127.3 Deferred tax assets: Employee compensation and benefits Self-insurance reserves Postretirement benefit obligation Acquisition and restructuring reserves Tax loss carryforwards Other Less valuation allowance Net deferred tax assets Deferred...

  • Page 49
    ... for grant under the Company's stock option plans. Stock Options The following table summarizes grants of non-qualified options made by the Company to officers, key employees, and non-employee directors under all plans. Stock options are generally granted at an exercise price equal to or greater...

  • Page 50
    ... cost related to nonvested restricted stock and performance share-based compensation arrangements granted under the stock incentive plans. That cost is expected to be recognized over a weighted average period of 1.9 years. Employee Stock Purchase Plan The Company has an employee stock purchase plan...

  • Page 51
    ...Company or other healthcare providers. The Company works cooperatively to respond to appropriate requests for information. As previously reported on May 22, 2006, the Company received a subpoena from the California Attorney General seeking documents related to billing to the state's Medicaid program...

  • Page 52
    ... retirement plan (the "Company Plan"). The benefits to be paid under the Company Plan are based on years of credited service and average final compensation. The Company's policy is to fund the Company Plan with at least the minimum amount required by applicable regulations. The Company did not make...

  • Page 53
    ... were used in the calculation of projected benefit obligations, are expected to be paid as follows: 2009 2010 2011 2012 2013 Years 2014-2018 $ 22.0 24.0 23.4 27.0 29.1 162.7 Balance at January 1 Service cost Interest cost Actuarial gain Amendments Benefits and administrative expenses paid Executive...

  • Page 54
    ... in millions, except per share data) The following assumed benefit payments under the Company's post-retirement benefit plan, which reflect expected future service, as appropriate, and were used in the calculation of projected benefit obligations, are expected to be paid as follows: 2009 2010 2011...

  • Page 55
    ... 15, 2008. Beginning in the first quarter of 2009, the Company will provide the additional disclosures in accordance with SFAS 161. In April 2008, the FASB issued FASB Staff Position No. FAS 142-3, "Determination of the Useful Life of Intangible Assets," which amends the factors that should be...

  • Page 56
    ... of this standard did not have a material impact on our consolidated financial position and results of operations. In December 2008, the FASB issued FASB Staff Position No. FAS 132(R)-1, "Employers' Disclosures about Postretirement Benefit Plan Assets" ("FSP 132(R)-1"). FSP 132(R)-1 applies to an...

  • Page 57
    ... 358 South Main Street Burlington, NC 27215 336-584-5171 Information Sources Information about LabCorp is available from the following Company sources: Investor Relations Contact Bill Bonello Senior Vice President Investor Relations 336-436-7732 Center for Molecular Biology and Pathology 800-533...

  • Page 58
    ฀ Laboratory Corporation of America Holdings 358 South Main Street Burlington, NC 27215 336-584-5171 www.labcorp.com ®