LabCorp 2009 Annual Report Download - page 13

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Shareholders
Dave King
Chairman and Chief Executive Offi cer
LABORATORY CORPORATION OF AMERICA 11
We generated operating cash fl ow totaling $862.4 million,
an increase of 10.4 percent over 2008 despite making a
contribution of $54.8 million to fund pension liabilities. We
invested $114.7 million in our business, resulting in free
cash fl ow of $747.7 million, a 19.8 percent increase over
2008. We signifi cantly improved cash collections, as
DSO (Days Sales Outstanding) decreased seven days
year-over-year to 44 days. We maintained our bad debt
rate at 5.3 percent through the year.
We also strengthened our capital structure by redeeming
half of our zero-coupon notes, eliminating uncertainty
related to potential future conversions of these securities.
We purchased nearly four million shares of our stock for
$273.5 million. We kept a tight lid on expenses, concurrently
implementing important steps in automation that yielded
improvement in our gross margin.
As impressive as LabCorp’s performance has been over
the last decade, our focus is not on past accomplishments
but on future opportunities. We will deliver greater value
to patients and investors in the years ahead, as we focus
on our strategy of leadership in transforming health care
through personalized medicine.
How will personalized medicine help LabCorp grow? The
answer to this question lies in the power of individualized
medicine to grow both our core testing and our esoteric
testing businesses. Let me elaborate on the opportunities
we see.
Growing the Core Business
The last year has seen much discussion of concepts such
as the medical home and a wired health care system.
Whatever direction health reform ends up taking, there will
be increasing emphasis on centralizing all information about
a given patient and tracking that information longitudinally.
Critical tests such as hemoglobin A1c for diabetes man-
agement and lipids for cardiovascular and vascular risk
monitoring will be relied on not merely to evaluate a patient
at a given point, but to track the patient’s health over time.
Our test menu, logistics capability, standardized testing
platform and open IT system will position LabCorp well to
benefi t from this opportunity.
In addition, we shall continue to grow the market footprint of
our core business. With more than 5,000 labs in operation
today, there continue to be ample opportunities to expand
our footprint through carefully targeted acquisitions. Also,
hospital labs perform some 50 percent of all laboratory