LabCorp 2015 Annual Report Download - page 16

Index
Since 2003, the Company has repurchased approximately $5.9 billion in shares at an average price of approximately $69 per share. Following the
announcement of the Acquisition, the Company suspended its share repurchases. The Company does not anticipate resuming its share repurchase activity
until it approaches its targeted ratio of total debt to consolidated EBITDA of 2.5 to 1.0. However, the Company will continue to evaluate all opportunities for
strategic deployment of capital in light of market conditions. During 2015, the Company repaid $500.0 million of its senior notes and $285.0 million of its
term loan. In addition, the Company borrowed and repaid $460.0 million of debt within the year.
Since 2010, capital expenditures were $1.1 billion, representing approximately 3.0% of the Company’s total net revenue during the same period. The
Company expects capital expenditures in 2016 to be approximately 3.0% of net revenues primarily in connection with projects to support growth in the
Company's core businesses, projects related to Project LaunchPad and further Covance integration initiatives.
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The Company experiences seasonality in both segments of its business. For example, testing volume generally declines during the year-end holiday
period and other major holidays. Testing volume can also decline due to inclement weather, reducing net revenues and cash flows. CDD's operations are also
impacted by changes in the global economy, exchange rate fluctuations, the progress of ongoing studies and the start-up of new studies, as well as the level
of expenditures made by the pharmaceutical and biotechnology industries in R&D. Given the seasonality of the business, comparison of results for
successive quarters may not accurately reflect trends or results for the full year.
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The Company holds investments in three joint venture partnerships, two located in Alberta, Canada, and one located in Florence, South Carolina. These
businesses primarily represent partnership agreements between the Company and other independent diagnostic laboratory investors. Under these agreements,
all partners share in the profits and losses of the businesses in proportion to their respective ownership percentages. All partners are actively involved in the
major business decisions made by each joint venture. The Company does not consolidate the results of these joint ventures. Effective June 30, 2015, the
Company liquidated its interest in a joint venture partnership that had been located in Milwaukee, Wisconsin.
The first Canadian partnership is a leader in Occupational testing across Canada similar to LCD's U.S. Occupational testing services. The second Canadian
partnership has a license to conduct diagnostic testing services in the province of Alberta. Substantially all of its revenue is received as reimbursement from
the Alberta government's healthcare programs. In December 2013, Alberta Health Services (AHS), the Alberta government's healthcare program, issued a
request for proposals for laboratory services that included the scope of services performed by the Canadian partnership. In October 2014, AHS informed the
Canadian partnership that it had not been selected as the preferred proponent. In November 2014, the Canadian partnership submitted a vendor bid appeal
upon the belief that there were significant flaws and failures in the conduct of the request for proposal process, which drove to a biased conclusion. AHS
established a Vendor Bid Appeal Panel to hear the appeal, and the hearing was conducted in February 2015. In August 2015, AHS was directed to cancel the
request for proposal process. Subsequently, the Canadian partnership entered into a one-year extension through March 31, 2017 of its existing contract with
AHS. If the contract is not renewed after March 2017, then the Canadian partnership's revenues would decrease substantially and the carrying value of the
Company's investment could potentially be impaired.
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LCD offers its diagnostic services through a sales force focused on serving the specific needs of customers in different market segments. These market
segments generally include Primary Care, Obstetrics-Gynecology, Specialty Medicine (e.g., Infectious Disease, Endocrinology, Gastroenterology and
Rheumatology), Oncology and Hospitals. LCD competes primarily on the basis of quality of testing, breadth of menu, price, innovation of services,
convenience and access points throughout the nation.
CDD’s global sales activities are conducted by sales personnel in North America, Europe, South America and the Asia Pacific region. The sales force
provides client coverage across the biopharmaceutical industry for services including lead optimization, preclinical safety assessment, analytical services,
clinical solutions, central laboratories and market access solutions. Client segments called upon include global and regional pharmaceutical and biotech
companies and academic institutions. CDD positions itself as the company that delivers Solutions Made Real® to its clients, bringing high quality,
innovation, scientific depth and the ability to help clients develop drugs along the entire continuum of development.
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