Laboratory of America : Q4 2018 8-K

8-K FURNISHED FEBRUARY 7, 2019

FORWARD LOOKING STATEMENT

This presentation contains forward-looking statements including but not limited to statements with respect to estimated 2019 guidance and the related assumptions, the impact of various factors on operating and financial results, expected savings and synergies (including from the LaunchPad initiative and as a result of acquisitions), and the opportunities for future growth.

This presentation contains forward-looking statements which are subject to change based on various important factors, including without limitation, competitive actions and other unforeseen changes and general uncertainties in the marketplace, changes in government regulations, including health care reform, customer purchasing decisions, including changes in payer regulations or policies, other adverse actions of governmental and third-party payers, changes in testing guidelines or recommendations, adverse results in material litigation matters, the impact of changes in tax laws and regulations, failure to maintain or develop customer relationships, our ability to develop or acquire new products and adapt to technological changes, failures in information technology systems or data security, adverse weather conditions, challenges in implementing business process changes, employee relations, and the effect of exchange rate fluctuations on international operations.

Actual results could differ materially from those suggested by these forward-looking statements. Laboratory Corporation of America Holdings (the "Company") has no obligation to provide any updates to these forward-looking statements even if its expectations change. Further information on potential factors, risks and uncertainties that could affect the operating and financial results of the Company is included in the Company's Form 10-K for the year ended December 31, 2017, and subsequent Forms 10-Q, including in each case under the heading risk factors, and in the Company's other filings with the SEC. The information in this presentation should be read in conjunction with a review of the Company's filings with the SEC including information in the Company's Form 10-K for the year ended December 31, 2017, and subsequent Forms 10-Q, under the heading MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

USE OF ADJUSTED MEASURES AND ADOPTION OF ASC 606

The Company has provided in this presentation "adjusted" financial information that has not been prepared in accordance with GAAP, including Adjusted EPS, Adjusted Operating Income, Adjusted EBITDA, Free Cash Flow, and certain segment information. The Company believes these adjusted measures are useful to investors as a supplement to, but not as a substitute for, GAAP measures, in evaluating the Company's operational performance. The Company further believes that the use of these non-GAAP financial measures provides an additional tool for investors in evaluating operating results and trends, and growth and shareholder returns, as well as in comparing the Company's financial results with the financial results of other companies. However, the Company notes that these adjusted measures may be different from and not directly comparable to the measures presented by other companies. Reconciliations of these non-GAAP measures to the most comparable GAAP measures are included in the tables accompanying this presentation.

Effective January 1, 2018, the Company adopted the FASB-issued converged standard on revenue recognition (ASC 606), using the full retrospective method. Unless otherwise indicated, all financial results in 2017 and comparisons to financial results in 2017 have been restated in this presentation as if the Company had adopted ASC 606 on January 1, 2017. This accounting change affects the Company's Diagnostics and Drug Development businesses differently; for the enterprise, the accounting change increases revenue, lowers earnings, and has no impact on cash flow.

FOURTH QUARTER CONSOLIDATED RESULTS(1)

(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)

Restated for ASC 606
and ASU 2017-17
4Q18	4Q17	% Change
Revenue	$2,787.5	$2,744.7	1.6%(5)
Adjusted Operating Income(2) (3)	$394.9	$432.7	(8.7%)
Adjusted Operating Margin	14.2%	15.8%	(160 bps)
Adjusted EPS(2) (3)	$2.52	$2.27	11.0%
Operating Cash Flow(4)	$486.4	$565.0	(13.9%)
Less: Capital Expenditures	($122.2)	($96.1)	(27.2%)
Free Cash Flow(4)	$364.2	$468.9	(22.3%)

• (1) The table presented above reflects the application of ASU 2017-17 (presentation of net periodic pension cost) for all periods presented. This application increased LabCorp Diagnostics adjusted operating income in the fourth quarter of 2017 by $0.8 million and reduced Covance Drug Development adjusted operating income by $1.2 million. These reclassifications have no impact on the Company's net earnings or its EPS.

• (2) Adjusted operating income excludes amortization, restructuring charges, and special items. Adjusted EPS exclude amortization, restructuring charges, and special items.

• (3) See Reconciliation of non-GAAP Financial Measures on slides 15 - 19.

• (4) Operating cash flow decreased by approximately $105 million for the three months ended December 31, 2018 due to the net tax payment for the disposition of businesses (the Company realized gross proceeds from the disposition of businesses of $658.2 million in cash reflected in Cash Flows from Investing Activities).

  Operating cash flow increased by $0.9 million for the three months ended December 31, 2017 for the reclassification of tax payments for net share settlements relating to employee stock vesting from operating activities to financing activities.

• (5) The increase in revenue was primarily due to organic growth of 2.9% and acquisitions of 0.7%, partially offset by the negative impact

from the disposition of businesses of 1.6%, and foreign currency translation of approximately 40 basis points.

Restated for ASC 606 and ASU 2017-17

Ended 12/31/17	% Change
Revenue	$11,333.4	$10,308.0	9.9%
Adjusted Operating Income(2) (3)	$1,723.3	$1,672.4	3.0%
Adjusted Operating Margin	15.2%	16.2%	(100 bps)
Adjusted EPS(2) (3)	$11.02	$9.20	19.8%
Operating Cash Flow(4) (5)	$1,305.4	$1,498.1	(12.9%)
Less: Capital Expenditures	($379.8)	($312.9)	(21.4%)
Free Cash Flow(4) (5)	$925.6	$1,185.2	(21.9%)

(6)

Twelve Months Ended 12/31/18

Twelve Months

• (1) The table presented above reflects the application of ASU 2017-17 (presentation of net periodic pension cost) for all periods presented. This application increased LabCorp Diagnostics adjusted operating income in the full year 2017 by $2.6 million and reduced Covance Drug Development adjusted operating income by $4.7 million. These reclassifications have no impact on the Company's net earnings or its EPS.

• (2) Adjusted operating income excludes amortization, restructuring charges, and special items. Adjusted EPS exclude amortization, restructuring charges, and special items.

• (3) See Reconciliation of non-GAAP Financial Measures on slides 15 - 19.

• (4) Operating cash flow in 2018 decreased by approximately $105 million for the three and twelve months ended December 31, 2018 due to the net tax payment for the disposition of businesses (the Company realized gross proceeds from the disposition of businesses of $658.2 million in cash reflected in Cash Flows from Investing Activities).

• (5) Operating cash flow in 2017 has been reduced by $0.0 million and $8.7 million for the three and twelve months ended December 31, 2017 as the result of implementation of ASU 2016-18. These amounts represent the historical payments made upon conversion of the Company's zero-coupon subordinated notes deemed to be accreted interest. In addition, operating cash flow increased by $45.1 million for the six months ended June 30, 2018, and $0.9 million and $47.4 million for the three and twelve months ended December 31, 2017, respectively, for the reclassification of tax payments for net share settlements relating to employee stock vesting from operating activities to financing activities.

• (6) The increase in revenue was due to acquisitions of 7.6%, organic growth of 2.7%, and the benefit from foreign currency translation of approximately 30 basis points, partially offset by the impact from the disposition of businesses of 0.7%.