Good morning, ladies and gentlemen. I'm David King, Chairman of the Board of Laboratory Corporation of America Holdings and Chairman of this annual meeting. I'm happy to welcome all of you to this annual meeting of shareholders. I'd like to welcome those stockholders and other interested parties as well who are listening to the meeting on the Internet. Will the meeting please come to order? Will all persons holding proxies to be recorded, please hand them to the ushers. They will deliver them to the Inspector of Elections, and the Secretary will record the proceeding. I'd like to introduce you to the board members and officers of the company who are present today. If the directors would please stand, and I'll introduce you individually: Kerrii B. Anderson, Jean-Luc Bélingard, Dr. N. Anthony Coles, Wendy E. Lane, Thomas P. Mac Mahon, Robert E. Mittelstaedt, Jr., Dr. Arthur H. Rubenstein, M. Keith Weikel, Dr. R. Sanders Williams.
I'd also like to acknowledge our senior officers present today: Jay Boyle, Executive Vice President and Chief Operating Officer, Brad Hayes, Executive Vice President and Chief Financial Officer, Scott Walton, Executive Vice President of our Esthetic Businesses, Mark Brecher, Senior Vice President and our Chief Medical Officer, Sam Eberts, Senior Vice President and Chief Legal Officer, Lidia Fonseca, Senior Vice President and Chief Information Officer, and Lisa Hoffman Starr, Senior Vice President of Human Resources. Also in attendance are Jessica Good and Josh Adams, representing PricewaterhouseCoopers LLP, independent accountants of the company. Ms. Good and Mr. Adams will be available to answer appropriate questions during the general question and answer portion at the end of this meeting. The Board of Directors set March 14, 2011, as the date of record for this shareholders' meeting. We have here a record of shareholders as of that date.
A duplicate record has been on file at the office of the company for the last 10 days, available for inspection by any shareholder at any time during usual business hours. I have been advised by the Inspector of Elections that immediately prior to the commencement of this meeting, at least 84% of the company's issued and outstanding shares are represented by proxy at today's meeting. Since a majority of the company's shares is represented here today, a quorum is present, and the business of the meeting may proceed. I would like to ask that any shareholder making a motion or who seconds a motion, please state your name so that the record of our meeting will be complete. The Secretary has informed me that the notice for the meeting was duly and properly mailed.
The Secretary will file affidavits of mailing of the notice of meeting, proxy card, and proxy statement with the records of the meeting. There are four items on the agenda to be voted on today: one, the election of directors; two, the approval by non-binding advisory vote of executive compensation; three, the approval by non-binding advisory vote of the frequency of future non-binding executive compensation votes; and four, the ratification of the appointment of PricewaterhouseCoopers LLP as Laboratory Corporation of America Holdings Independent Accountants for the year ending December 31, 2011. There will be a discussion period relating to each item immediately after its introduction. We will attempt to ensure that everyone who wishes to speak about the item will have a chance to be heard, and a representative of management will respond to questions as appropriate.
However, in the interest of time and because each of these items has been fully discussed in the proxy statement, discussion on each item will be limited to five minutes. A ballot is available for stockholders who wish to vote in person. If you send in a proxy, you will have no need to use a ballot unless you wish to change your vote. At the end of the discussion period relating to the appointment of independent accountants, the ballots will be collected and delivered to the Inspector of Elections. The company has appointed Steve Anderson to be the Inspector of Elections. He is familiar with the duties and responsibilities of an Inspector of Elections in a stockholders' meeting. He will report the results after all proxies and ballots have been tabulated.
Although ballots are available, it will facilitate the job of the Inspector in counting the votes if you use a proxy card. Does anyone wish to have a ballot or a proxy card at this time? Very well. The first item is the election of directors. The nominees and their qualifications are described in the proxy statement dated April 1, 2011, available to all stockholders of record as of March 14, 2011. Mr. Hayes, will you please present the proposal to elect directors?
I move that the directors be elected pursuant to the following resolution: Resolved that each of David P. King, Kerrii B. Anderson, Jean-Luc Bélingard, N. Anthony Coles, Wendy E. Lane, Thomas P. Mac Mahon, Robert E. Mittelstaedt, Jr., Arthur H. Rubenstein, M. Keith Weikel, and R. Sanders-Williams be and hereby is elected as a director of the company to serve until his or her successor is duly elected and qualified.
I second the motion.
The meeting is now open for discussion relating to the election of directors. Is there any discussion? Seeing no discussion, the second item is the non-binding advisory vote on executive compensation. The company's executive compensation program is described in the proxy statement dated April 1, 2011, available to all stockholders of record as of March 14, 2011. Mr. Hayes, will you please present the proposal to vote on executive compensation?
I move that executive compensation, as outlined in the proxy statement dated April 1, 2011, be approved. Resolved that the executive compensation is approved.
I second the motion.
The meeting is now open for discussion relating to executive compensation. Is there any discussion? Seeing no discussion, the third item is the non-binding advisory vote on the frequency of future non-binding executive compensation votes. The proposal addressing the frequency of non-binding votes on executive compensation is described in the proxy statement dated April 1, 2011, available to all stockholders of record as of March 14, 2011. Mr. Hayes, will you please present the proposal to vote on the frequency of future non-binding executive compensation votes?
I move that the proposal addressing the frequency of future non-binding executive compensation votes, as outlined in the proxy statement dated April 1, 2011, be approved. Resolved that future non-binding advisory votes on executive compensation be held every year.
I second the motion.
The meeting is now open for discussion relating to the frequency of non-binding executive compensation advisory votes. Is there any discussion? Seeing none, the fourth item is the ratification of the appointment of independent accountants for 2011. Mr. Hayes, will you please present the proposal to ratify the selection of accountants?
I move to ratify the appointment of the independent accountants for 2011 pursuant to the following resolution. Resolved that the appointment of PricewaterhouseCoopers LLP as independent accountants for the fiscal year ending December 31, 2011, be ratified.
I second the motion.
The meeting is now open for discussion relating to the selection of independent accountants. Is there any discussion? Seeing none, I declare the polls shall now be open for voting. Will all of those who wish to vote please mark and sign their proxies or ballots and hand them to the Inspector of Elections? As I mentioned earlier, if you have already given your proxy, you do not need to sign a ballot or a new proxy card unless you wish to change your vote. Are there any ballots or proxies to be handed forward? Seeing none, we will tabulate the votes and complete the count. I am told that the Inspector of Elections has completed the count of the votes and is ready to report the results to the Secretary. Will the Secretary please present the report of the Inspector of Elections?
The Inspector of Elections has reported to me that of the shares of Laboratory Corporation of America Holdings Common Stock outstanding on the record date and represented at the meeting, at least 96% of the shares voted are present in person or by proxy and have voted for the election of the nominated directors. At least 98% have voted to approve the company's executive compensation program. At least 90% have voted to approve the company's proposal on the frequency of future non-binding executive compensation votes. At least 99% have voted for the ratification of the appointment of independent accountants for 2011. Accordingly, the motions for the election of the nominated directors, approval of executive compensation, the frequency of future non-binding executive compensation votes, and the ratification of the appointment of independent accountants for 2011 are passed.
A final and complete tally of the votes will be provided by the Inspector of Elections.
Thank you, Mr. Eberts. The Secretary will file the final report of the Inspector of Elections with the records of the meeting in the record books of the company. This closes the formal portion of the meeting. I would now like to make a brief presentation on the company, after which I would be happy to answer any questions you may have. This presentation is also available via the Labcorp website. For those who have seen this presentation before, as we always point out, the laboratory testing industry has grown from diagnosis of simply symptoms of disease to the broader spectrum of prevention and wellness, monitoring and early diagnosis of disease, assessment at the preliminary stage of risk of disease development and progression, diagnosis, assessment of prognosis, clinical decisions regarding the appropriate treatment and therapeutic path, and monitoring and management of conditions.
We provide the full spectrum of diagnostic tools to help physicians make decisions about how best to treat their patients. We are the fastest growing national laboratory. This year, last year, for the first time, we became a $5 billion company in revenues out of approximately a $55 billion market. We perform over 4,400 different tests in clinical, anatomic, and genomic testing, serving clients in all 50 states and Canada and having an industry-leading clinical trials business. Our mission statement is to offer the highest quality laboratory testing and the most compelling value to our customers, which we execute through what we describe as our five-pillar strategy. The first pillar is that we deploy the cash that our business generates to enhance our geographic footprint and test menu or to return value to shareholders through the repurchase of our stock.
If you look at what the company has done in terms of free cash flow, our five-year free cash flow per share CAGR is approximately 16.1%, and free cash flow yield on our shares during 2010 ranged from 8%-10%. We generate over $7 of free cash flow per share in 2010, which is a very impressive number and by far leads the industry. Our key uses of cash in 2010 were, first of all, acquisitions. Obviously, Genzyme Genetics are very sizable and significant acquisitions in terms of the growth of our esoteric testing menu and our reproductive genetics and oncology business. LabWest, which enhanced our geographic footprint in California, DCL Medical Laboratories, which enhanced our footprint in Indiana, and we did, in addition to these, approximately 15 other acquisitions during 2010.
We also repurchased over $330 million worth of shares in 2010 and announced on our first quarter earnings call that we've already repurchased over $265 million of shares in the first quarter of 2011. The Genzyme Genetics acquisition, in terms of long-term thinking about the company, creates the premier genetics and oncology business in our industry, continues to build on our leadership position in personalized medicine, and generates great opportunities to increase our revenue by selling our test menu to Genzyme accounts and Genzyme test menu to LabCorp accounts, providing Genzyme customer access to our extensive patient service center network and expanding the use of Genzyme's industry-leading genetic counselor network. It also creates the opportunity to reduce the cost structure of the Genzyme business through such overlapping areas as logistics, specimen collection, general administrative expenses, and facility overlaps.
Our second pillar is the enhancement of our IT capabilities to improve the physician and patient experience. During 2010, our major accomplishment was the launching of the LabCorp Beacon physician product, which is a web-based product that significantly enhances the capabilities of our order entry and result delivery in physician offices, long-term trending of patients, sorting of patients for pay-for-performance purposes, and data reporting. We will continue to roll out enhancements to Beacon as we move forward in enhancing, as I said, the physician and patient experience. We continue to improve our efficiency to offer the most compelling value in laboratory services. Our major initiative in 2010 was the full implementation of our Sysmex Hematology Automated Hematology System in all of our major laboratories, leading to both substantial labor savings as well as improvements in turnaround time, reliability, accuracy, and quality.
Our fourth pillar is to continue to innovate in science at appropriate pricing. We introduce approximately 40 new tests a year in a wide range of areas from oncology to genetics to infectious disease. We bring these tests to the market at a price point where they're affordable to patients, and they, again, are all designed to improve the physician's ability to provide the patient with the highest quality diagnostics and care. Our fifth pillar is to continue to explore the alternative delivery models, many of which were created by healthcare reform, such as Accountable Care Organizations, so that we can fully integrate ourselves into the emerging models of healthcare that we will see post the healthcare reform legislation. If we look at our fourth quarter and full year 2010 results, as I mentioned, we increased revenue by 6.6%.
The first time we've ever been a $5 billion company in revenues. We increased our operating income by 6.5%, so we generated over $1 billion of operating income, and we increased our earnings per share on an adjusted basis by over 13%. We showed very strong growth in our financial metrics, and I'm pleased to say that our fourth quarter 2010 customer satisfaction levels were the best in LabCorp history. We combined continually improving financial performance with continually improving quality and service. For the first quarter of 2011, our revenue grew year-over-year by almost 15% at 14.6%, and our adjusted EPS, excluding amortization, grew by 8.6% year-over-year. Again, very impressive performance.
The adjusted EPS, excluding amortization, as we said, was dragged somewhat by the impact of the acquisitions, which have not been fully integrated into our systems, but the 14.5% top-line revenue growth, very impressive in a tough environment. Finally, in terms of our stock performance, this chart shows the three-year return for LabCorp shares versus the S&P 500 and the S&P 500 Healthcare Index. As you can see, over a three-year time period beginning in January of 2008, our shares are up 31.0% versus the S&P Healthcare Index up 1.4% and the S&P 500 down 5.9%. The financial performance and the share price performance of the company, very impressive, which we attribute to a terrific team from top to bottom, as well as the consistent and constant efforts of our now 31,000 employees, phlebotomists, couriers, lab techs.
Every person in the company contributes to both our financial success, the success of the share price, and most fundamentally to our continued commitment to improvement of patient care. That concludes my slide presentation, and at this time, I would be happy to answer any questions that you may have. We will attempt to ensure that everyone who wishes to speak will have a chance to be heard, and representatives of management will respond to questions as appropriate. In the interest of time, we will ask each individual to ask only one question at a time, and discussion on each question will be limited to five minutes. As a reminder, the Q&A session is being webcast this morning. If you do have a question, please wait for the microphone to be brought to you, state your name, and then ask your question. Are there any questions?
Sir. I'm Pat Wrayford from Warrenton. I want to congratulate you on an excellent year, and I'm really pleased with the way things are going. I want to again ask the question I've asked for a couple of years. Are you giving any additional consideration to cash dividend? A dollar would be less than 20% of earnings and less than a seventh of cash flow.
Thank you. Yes, we are always giving consideration to a cash dividend, and there currently are three reasons that at least lean us in the direction away from a cash dividend. First, the free cash flow yield on the shares, as I mentioned in the presentation, was between 7% and 10% in 2010, and at that free cash flow yield, management's view is that we are better off repurchasing our own shares than paying a dividend because of the valuation of the shares and the free cash flow characteristics. Second, we have dedicated a sizable portion of our cash flow in the last couple of years to acquisitions. We view the market as a consolidating market, again, post healthcare reform, so we think it's very important that we have cash available and that we use that cash to make strategic acquisitions to enhance the footprint of the company.
Third of all, the initiation of a dividend is something that we continue to give serious consideration to, and we continue to evaluate the views of all of our shareholders on what's the best deployment of our capital. At this point, our judgment is that the better deployment of our capital is towards acquisition and share repurchase, but that is a question that we examine frequently, and we are always open to consideration of the issue. Are there any other questions? If there are no other questions and no further business to be conducted, we will entertain a motion to adjourn the meeting.
I move that the meeting be adjourned.
I second the motion.
Will all in favor please say aye?
Aye.
Any opposed? The meeting is adjourned. Thank you all for attending this morning. Have a great day.