LabCorp third quarter revenues increase 7.7% to $1,276.5 million

Laboratory Corporation of America^® Holdings (LabCorp^®) (NYSE: LH) today announced results for the quarter ended September 30, 2010.

“We continue to execute our strategic priorities, generating solid growth in volume, revenue and profit”

Third Quarter Results

Net earnings were $140.0 million compared to $131.4 million in the third quarter of 2009. Earnings per diluted share (EPS) were $1.34 compared to $1.21 in 2009. Earnings per diluted share, excluding restructuring and other special charges recorded in the third quarter of 2010 and 2009 (Adjusted EPS) were $1.47 and $1.22, respectively.

Operating income for the third quarter was $235.3 million compared to $234.9 million in the third of 2009. Operating income, excluding restructuring and other special charges recorded in the third quarter of 2010 and 2009 (Adjusted Operating Income) was $250.1 million and $237.6 million, or 19.6% and 20.0% of sales, respectively.

Revenues for the quarter were $1,276.5 million, an increase of 7.7%. Testing volume, measured by requisitions, increased 1.9% and revenue per requisition increased 5.7%.

• The continuing impact of previously discussed lost contracts during 2009 reduced volume by 1.4% in the quarter. Excluding the impact from these lost contracts, volume increased 3.3% in the quarter.
• The growth in revenue per requisition is attributable to test mix shift and increases in tests per requisition. The revenue per requisition growth was also impacted by lost contracts and the recognition of deferred revenue resulting from an amendment to a customer contract, which together improved revenue per requisition by 2.5%. Excluding the impact from these items, revenue per requisition increased 3.2% in the quarter.

Operating cash flow for the quarter was $176.2 million, which is net of $0.2 million in transition payments to UnitedHealthcare. The balance of cash at the end of the quarter was $96.9 million, and there was $65.0 million outstanding under the Company's $500.0 million revolving credit facility. During the quarter, the Company repurchased approximately $115.8 million of stock, representing approximately 1.5 million shares. As of September 30, 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 $21.8 million during the third quarter of 2010, comprised of $10.9 million in professional fees and expenses associated with recent acquisitions; $7.0 million in bridge financing fees associated with the signing of an asset purchase agreement for Genzyme Genetics; and $3.9 million in severance-related liabilities associated with workforce reduction initiatives.

Year To Date Results

Net earnings were $426.4 million in the first nine months of 2010 compared to $400.6 million in the first nine months of 2009. Earnings per diluted share (EPS) were $4.05 compared to $3.67 in 2009. Adjusted EPS were $4.23 compared to $3.74 in 2009.

Operating income was $740.0 million compared to $720.1 million in the first nine months of 2009. Adjusted Operating Income was $764.2 million, or 20.6% of sales, compared to $733.0 million, or 20.8% of sales, in the first nine months of 2009.

Revenues were $3,708.5 million, an increase of 5.1% compared to the same period in 2009. Compared to the first nine months of 2009, testing volume, measured by accessions, decreased 1.0%, and revenue per accession increased 6.1%. The continuing impact of the previously discussed lost contracts reduced volume by 1.9% in the first nine months of 2010. Excluding the impact from these lost contracts and a 0.4% negative impact from weather in the first quarter, volume increased 1.3% in the first nine months of 2010.

Operating cash flow for the first nine months was $624.4 million, net of $16.8 million in transition payments to UnitedHealthcare.

"We continue to execute our strategic priorities, generating solid growth in volume, revenue and profit," said David P. King, Chairman and Chief Executive Officer. "While we expect continued economic uncertainty in the coming year, we remain excited about our future growth opportunities and confident in the effectiveness of the strategies we are employing to capitalize on them."

Outlook for 2010

The Company is updating its 2010 guidance, expecting revenue growth of approximately 5.0%; Adjusted EPS in the range of $5.52 to $5.57, excluding the impact of any share repurchase activity after September 30, 2010, compared to prior guidance of $5.40 to $5.55; operating cash flow of approximately $870 million, excluding transition payments to UnitedHealthcare; and capital expenditures of approximately $135 million. This updated guidance does not include any impact from the Genzyme Genetics acquisition.