Bio-Reference Laboratories' CEO Discusses F4Q 2012 Results - Earnings Call Transcript

Bio-Reference Laboratories (NASDAQ:BRLI)

F4Q 2012 Earnings Call

December 06, 2012 10:30 am ET


Delores Bowman - Vice President of Client Services

Marc D. Grodman - Founder, Chairman, Chief Executive Officer and President

Sam Singer - Chief Financial Officer, Chief Accounting Officer, Senior Vice President and Director


Amanda Murphy - William Blair & Company L.L.C., Research Division

Dane Leone - Macquarie Research

Raymond A. Myers - The Benchmark Company, LLC, Research Division


Good day, ladies and gentlemen, and welcome to the Bio-Reference Laboratories Inc. Fourth Quarter and Year End for Fiscal Year 2012 Earnings Conference Call. My name's Allison, and I will be your operator for today. [Operator Instructions] As a reminder, this call is being recorded for replay purposes. I'd now like to turn the call over to Ms. Delores Bowman, Investment Relations coordinator. Please proceed.

Delores Bowman

Good morning, and welcome to the Bio-Reference Laboratories Fourth Quarter and Year End for Fiscal Year 2012 Earnings Conference Call. Bio-Reference Laboratory is one of the largest independent regional full-service laboratories in the country with focused marketing capabilities in the areas of genomics, oncology, women's health, correctional health and physician office pathology. Leading us on the call today will be Dr. Marc Grodman, President and Chief Executive Officer; and Sam Singer, Chief Financial Officer.

Some of the commentary made in this presentation may relate to future results and events. Statements regarding the company's revenue and earnings guidance are based on the company's current expectation. Actual results in future periods may differ materially from those currently expected or desired because of potential of risk and uncertainties including: general economic and business conditions; future regulatory requirements and mandated pricing reimbursement; the service, customer and geographic market mix of any particular period; the company's ability to effectively manage its operating costs and collect its receivables in a timely fashion; the level of demand for the company's products and services; and the company's ability to manage its supply and delivery logistics in such an environment. Additional discussion of these and other factors affecting the company's business and prospects is contained in the company's periodic filings with the Securities and Exchange Commission.

I will now turn the call over to Dr. Marc Grodman, President and Chief Executive Officer.

Marc D. Grodman

Thank you, Delores. This is the second consecutive year that we at Bio-Reference have reported our year end results a bit earlier than originally planned. Last year, we considered it important to get the word out regarding our improving financial metrics to shareholders. This year, we believe it is also important to report our results in light of the effect that Hurricane Sandy, that it had on our operations and what it may mean for the new fiscal year. It's virtually impossible to discuss our fourth quarter without addressing the effect of the hurricane. However, through these tumultuous challenging times, the extraordinary growth of Bio-Reference remains indisputable. This is our 19th year of 20% compound annual growth, and like other years, our growth was wholly organic and across all business units. It is also an opportunity to speak about the resolve for the Bio-Reference community, which allowed us to become an incredible company of growth, innovation, service and purpose.

Sam will review the results, then I'd like to make some additional comments. Sam?

Sam Singer

Good morning, everyone. During the fourth quarter of fiscal year 2012, which ended on October 31, 2012, Bio-Reference recorded record net revenues of $176,052,000 compared to $151,297,000 in the fourth quarter of the prior fiscal year, an increase of 16%. Gross profit on revenues for the current quarter was $87,245,000, representing a gross profit margin of 50%. In the fourth quarter of the prior year, gross profit on net revenues was $74,914,000, representing a gross profit margin of 50%.

Earnings per share in net income after taxes was $0.46 per share in the current quarter versus $0.37 per share in the prior year quarter. Patient count for the current quarter increased to 2,039,000 from 1,822,000 for the prior year quarter, an increase of 12%. Our net revenue per patient for the fourth quarter just ended was $85.83 compared to $82.35 per patient in the same quarter for the prior fiscal year, an increase of 4%.

On October 31, 2012, working capital was $151,625,000, a 22% improvement over the $124,266,000 that we reported on October 31, 2011. Our days sales outstanding on October 31, 2012, was 80 days. Our net revenues were $661,661,000 for the 12-month period ended October 31, 2012, which represents an 18% increase over the net revenues reported in the prior fiscal year. Gross profit on net revenues for the current 12-month period was $324,017,000 or 49% compared to prior fiscal year of $270,789,000 or 48%.

Income after taxes increased to $42,156,000 during the current 12-month period from $36,359,000 during the prior comparable period, a 16% increase. Earnings per share for the 12 months on income after taxes increased to $1.51 per share on a fully-diluted basis from $1.29 per share for the prior fiscal year. Patient count for the current year increased to 7,801,000 from 6,739,000 for the prior year, an increase of 16%. And our net revenue per patient increased 2% to $84.24 from $82.25 in the prior period.

Thank you, and I'll return the call to Dr. Grodman.

Marc D. Grodman

Thank you, Sam. Hurricane Sandy wreaked devastation along the eastern coastal states and had a lasting effect -- that had a lasting effect on the lives of many people. These were our neighbors, these were our friends, sometimes our employees and sometimes our clients. It's virtually impossible to discuss our fourth quarter without addressing the effect of the hurricane.

However, it is equally important to note that this natural disaster provided a challenge that tested the resolve of many. It also highlighted 2 indisputable facts: first, that the ongoing growth of Bio-Reference remains clear despite the challenges we faced; and second, that the response of Bio-Reference said volumes about the people that make up the Bio-Reference community.

Through the first 3 days when we were most effective, Bio-Reference continued to draw blood, pick up specimens, deliver results in New York, New Jersey and Connecticut as well as around the country. People came to work on Monday and left on Wednesday. The dedication and perseverance displayed as a tribute to the people of Bio-Reference, and it will be impossible to start any call about this disaster, about this ordeal without giving credit to their outstanding commitment and performance.

Hurricane Sandy affected virtually every aspect of our business. Local mail was suspended and delayed, deliveries cannot be made to the laboratory, payers were closed, access to fuel and operating materials were a major challenge. We operated our facilities on generators for 5 days, hunting daily for diesel fuel to run the generators. Physician offices closed. Many people throughout the entire tristate area are without power for up to 2 weeks or more, including employees, physician clients and providers, as well as local businesses, facilities and suppliers.

It is through this perspective that we need to see the continued strong growth that we've exhibited of almost 2 decades. The effect of the storm in the fourth quarter was clear cut. It affected operations on October 29, October 30 and October 31 to a degree unmatched in the company's history.

Based on actual revenues and expenses from the period and from literally the weeks immediately preceding the storm, as well as the analysis that occurred following the storm, we're able to estimate the loss, revenues and changes to expenses resulting from the hurricane. Our revenues increased quarter-over-quarter by 16.4%. Excluding the effects of this storm, we estimate that our revenues for the quarter were on track to increase a short of about 20%.

Our patient count, which increased 12% over last year, would've probably grown over 15% without the hurricane. I don't have to remind anyone that this growth is wholly organic and clearly validates the underlying business plan of strategy that has remained consistent for well over the past 2 decades and exemplifies our strategy going forward.

For the year based on our calculations of the effect of Hurricane Sandy, we believe that our patient count would have increased almost 17%, and total revenues would have increased well over 19%, significant increases that demonstrate the strength, our strength. Nevertheless, our revenues for the year were almost $667 million compared to $559 million in 2011.

Growth remains strong across the board in all areas. We believe that Bio-Reference is leading our industry with a commitment to innovation. We practice laboratory medicine in a way that raises and answers important and relevant clinical questions. Our success is based on anticipating those questions and adopting innovative new ways to expand our best science and better service approach.

We are a specialized national laboratory that offers one-stop shopping for specialty physicians. We are a full-service regional laboratory in the Northeast Mid-Atlantic region that has an impressive menu of managed care contracts. We have a tradition of growth and service that is extraordinary. We believe we have outstanding academic associations and cutting-edge expertise in the most relevant areas of testing today, including genetics, oncology and women's health. This expertise has been well over a decade in the making. It defines us as an enterprise.

GeneDx, our genetic sequencing laboratory, has shown strong growth, as strong as any part of Bio-Reference. But the expertise we had gained at GeneDx has had an immeasurable value in other testing areas such as in oncology and women's health. In conjunction with our expertise in oncology through GenPath, our connectivity solution, CareEvolve, which is being utilized in nearly 200 installations around the country by other laboratories, has enabled us to introduce StormPath.

StormPath is an innovative virtual pathology system that allows us to work in partnership with hospital-based pathologists around the country. This is only the first step in our long-range plan to work in a more expansive manner with providers. Already, our informatics physician analysis programs are providing useful insights to some of our larger providers. We're also sequencing solid tumors in a cost-effective manner to allow patients to identify their eligibility for clinical trials when the information could be used in a most effective manner. We provide exome sequencing for children who need a diagnosis when all their avenues have been exhausted, delivering unquestioned leadership in the field of cardiac genetics.

GenPath Women's Health has been successful not because it is built on one test, but because we understand that to assume a leadership in this area, we must offer cutting-edge solutions in all clinically relevant areas for all obstetricians and gynecologists, including in the areas of women's cancer, women's infectious diseases and prenatal genetics.

As I mentioned earlier, there was virtually no financial metric unaffected by the effects of Hurricane Sandy over the last few days of October. We calculate the effect on net income was about $0.06 a share. Revenue per patient for the period was $85.83, and the gross margin was the same as it was last year -- was the same this year and last year despite having lost almost a full percentage point in gross margin due to the storm.

SG&A expenses including -- excluding sales, marketing and bad debt, demonstrated leverage in the fourth quarter despite the effects of the storm, and sales and marketing served minor leverage and they've all been due to the effects of the storm. Bad debt for the period was relatively consistent with approximately 13.5% that has been for both the prior quarter and the prior year and the full year.

Even with regard to measurements of cash collections, Hurricane Sandy had a profound effect. Not only was net income lower due to the storm, but our cash collections were affected since our post office was unable to deliver mail that came in after October 29 until the beginning of November. Nevertheless, in comparison to the prior year, we did well.

DSOs at the end of the fourth quarter were 80 days, down from 91 days in the fourth quarter of the prior year. Cash flow from operations for Q4 '11 was over $16.5 million, and free cash flow was over $10 million. While the current quarter was a bit lower than the same period last year, last year's quarterly results benefited from a particularly weak cash collections in the prior third quarter as we highlighted last year. It is therefore interesting to compare both cash flow from operations and free cash flow between fiscal year 2011 and fiscal year 2012.

Cash flow from operations for the year increased from around $21 million in fiscal year 2011 to $53 million in fiscal year 2012, while free cash flow increased from around $12 million in 2011 to $28 million in fiscal year 2012.

To put matters in perspective, to put our metrics in perspective and where we have been, Bio-Reference, a company that has achieved 19 years of 20% compound annual growth, that is an innovative leader in the areas of cancer, genetics women's health, ended its fiscal year 2012 on October 31, 2012, with virtually no debt other than its leasing and equipment obligations. Now like all financial statements, this is a slice of time and just one snapshot at one point, but it certainly bears witness to the fiscal soundness of the company.

For the quarter, the tax rate was around 44%, and this is similar to last year. We expect it to be unchanged for the coming year, and again approximately around 44%. We're the first publicly-traded clinical laboratory to report the effect of Hurricane Sandy on our business. We will also be the last when we report the first quarter of 2013, since the effects of the hurricane clearly have extended into November. And we're the only publicly traded -- clinical-traded laboratory with an October fiscal year.

This storm devastated homes, businesses, property throughout the area and caused massive power outages as well as the shutdown of airports and river crossings and limited travel. In early November, the effects of the storm in the New York metropolitan area remained significant. Major clinics were closed for more than an entire week. Physician offices had no power, and in some cases, were destroyed and need to be rebuilt. The lack of fuel, we've talked about this on other quarters, affected all commerce and were the deterrent to patient visits even if providers were open, resulting in lighter volumes. I mean, everyone who here -- many of you on the call who lived through this, knows and lives and recognizes and respects and remembers the lines over at gas stations.

This volume decrease was not attributable to any trends, it was the result of a natural disaster. Volumes have come back to pre-Sandy levels, by and large. But given that this phase was clearly more spread out over a great amount of time than the 3 discrete days at the end of the quarter, its full impact will be more difficult to assess and not fully appreciated until we review the first quarter of fiscal year 2013 in its entirety.

Nonetheless, we expect the impact in the first quarter of fiscal 2013 will be somewhere around $0.03 to $0.05 a share. None of this, however, has any impact on the long-term value we've created. Our strategy of innovation will continue unabated, our level of service and commitment to our clients had never been stronger and is demonstrated by our performance during the storm. We expect that level of growth, historically strong in the past, to continue in the future.

There's some other issues I'd like to raise with regard to the laboratory industry specifically and explain how they have or do not have relevance to Bio-Reference. On November 1, 2012, Medicare announced the physician fee schedule that will be in effect for calendar year 2013. While there are several adjustments throughout the fee schedule that may affect laboratories, the company determined that the effect of the changes to Bio-Reference should not be significant.

While the company, just talk for a second about a CPT Code 88305, while the company bills 88305 for CPT code often done in anatomical pathology, the most basic part of it by just preparing and looking and reviewing the slide, the decrease in the reimbursement is expected to have a minimal effect even though the reimbursement rate here was significant. We just don't do that much.

Based on 2012 billings, the company's total 88305 billings to Medicare was calculated at less than 7/10 of 1% of total billings and the reduction to net income in 2012 based on 2013 rates would have been just under 2/10 of 1%. While there may be some commercial payers that will follow lead of Medicare, since the practices of hundreds of significant payers would vary dramatically, Bio-Reference does not any -- expect any changes made by commercial payers that will be significant on Bio-Reference's revenues.

The second issue is molecular pathology codes. In addition to the physician fee schedule, CMS has announced it'll be formalizing and setting rates on a bit over 100 procedures that fall into category of molecular diagnostics. In theory, this is good. In theory, it leads to greater transparency. The company has continually analyzed these codes. They will be included in this category and is determined that the overall revenues that have received some of these subject codes is probably somewhere less than 3% of total revenues.

Many of these associated codes were already being paid under contract, professional bill or by certain payers that will not be affected by any changes in Medicare. The company has always implemented conservative billing policies and are seeking reimbursement for these tests and does not expect any significant impact from the reimbursement changes that will probably take effect for these molecular diagnostic tests. These tests are expected to be reimbursed at a pattern which may include some prices set by contractors. But even that is not clear at this time, because it would require contractors to come up with a new price schedule considering that they've never done it before, and the deadline has to be done in 3 weeks. It's not easy to do. So regardless of when implementation is done, based on what we have, this should not have significant effect on our revenues.

The last issue is laboratory exchange -- is laboratory changes under Medicare in general. And given the ongoing negotiations taking place in Washington concerning the resolution of the fiscal cliff and the resolution of the perspective as sheer cost to physician fee schedule, there are a number of issues that remain. I'm no greater to see it than anyone else. I could certainly see the conflicts that are ahead. I can say, however, that we have been here before. As an industry, we've made concessions in the past, and I'm sure that as an industry, we are ready for an active exchange.

But the lines have not even been set yet. And the outcome of these negotiations is clearly unknown. I have faith that whatever the outcome, Bio-Reference's ability to grow and build value will not be compromised.

Last year, our Board of Directors passed a stock repurchase resolution at that time to buy back 1 million shares of our common stock through October 31, 2012. That plan expired at that date. During this program, we purchased 285,450 shares. We believe that a stock repurchase resolution is a way for the company to exhibit its confidence in itself, and at the same time, offer a potential benefit to shareholders. Accordingly, we have announced today that our Board of Directors has approved a new stock repurchase program authorizing a repurchase of up to the remaining 714,550 shares of our common stock in the over-the-counter market at prevailing market rates through October 31, 2013.

Last year, we continued our guidance, which has been consistent for quite some time. We still believe that we will increase net revenues by greater than 15%. We continue to estimate that we will grow net income by around 20%. Clearly, the only proviso is that we still have not accounted for the full impact of Hurricane Sandy, but we will remain focused on our future growth and performance. We build value here and I'm thankful that the people of Bio-Reference have fully embraced the notion that the best way to build value for themselves is to build value for everyone. Our resolve and determination will not be diminished in our pursuit of providing the best results for our shareholders, physician clients and the patients they serve. I want to thank all of you for being on the call and I'm pleased to take any questions.

Question-and-Answer Session


[Operator Instructions] And your first question comes from Amanda Murphy from William Blair.

Amanda Murphy - William Blair & Company L.L.C., Research Division

I had a question on guidance for fiscal '13. So you put out the top line number of greater than 15%. So I'm just wondering, can you help us get there in terms of maybe how you're thinking about underlying utilization growth relative to market share gains or whatever else is getting you up to the 15% number. That will be helpful.

Marc D. Grodman

Amanda, we've never historically broken out the difference in growth between what is -- where the price increase or utilization increase and just market share. It's kind of hard to go in and think about over virtually 20 years in the work that we've done, about how much of this has really increased utilization. We grow by market share. Our growth over the last number of years since we've been here, more physicians, hospitals, providers choose us. So overwhelmingly, I mean, when one looks at that utilization increase, it's always in low single digits if there is any at all. If there is any and overwhelmingly, our growth is market share. It was, it has been, it will be.

Amanda Murphy - William Blair & Company L.L.C., Research Division

And in terms of the market share gains, where are the key places that you think or next year you can gain shares? Is it still women's health or is there something else?

Marc D. Grodman

It is going to be across the board that we do it as I've said a few times on the call. We grow in the regional market. We are a strong powerful growing company in the Northeast Mid-Atlantic area for a regional business. We are a strong company competing nationally in women's health, providing resources both in oncology, infectious diseases and all genetics. It's a one-stop shop and virtually cutting edge in all areas in which we would want. We believe that our growth has been strong in oncology, but it's going to be even more so with new programs, and especially now looking into the new market with StormPath to work well with hospital providers. GeneDx grows. We're finding more and more the need to be able to do testing to go solve diagnostic dilemmas, exome testing that wasn't done a year ago is now part of our offerings and a very strong part of our offerings. We, as I said before, we grow across the board. We're built for growth, it's what we think about, it's how we operate, it's how we're based.

Amanda Murphy - William Blair & Company L.L.C., Research Division

And actually speaking of hospitals, that's something that there's been a lot of discussion about in terms of hospital buying physician practices, and what that might mean to your lab and utilization and where the lab testing is being done. Have you seen any impact there on your business? And [indiscernible] obviously the new offering you have that...

Marc D. Grodman

Sure. Hospitals are buying practices. They're doing it, they're often going to be -- certainly, there are going to be certain geographic areas where they're going to go in and be more important than in others. We've seen some areas that affecting, some others that are not. But our goal in the many -- in the coming years, in the next 5 years is going to have to go be to work as life partners. We have 200 installations of CareEvolve and connectivity solutions with other labs, most of which are hospitals. We are introducing a program in hospital pathology to go be partners with hospital providers. We understand this. We see this. We see the provider as our partner in the future. We think we have the ability to size the wherewithal to be able to achieve that goal. That something that's going to be done, is not a vision that's going to be outlined today for the next 5 years. But we do see it as a trend, and we embrace it, and we look for ways to be able to go in and grow with it.

Amanda Murphy - William Blair & Company L.L.C., Research Division

And then for the hospital market that you're talking to, have you thought about or put any framework around how big that market could be for you?

Marc D. Grodman

No, no. And we're very hesitant to go put out what future market sizes are.

Amanda Murphy - William Blair & Company L.L.C., Research Division

Okay, and just last one. If you look at the revenue per patient number, it seemed to accelerate a little bit in terms of growth. Is there anything specific there or...

Marc D. Grodman

No. I mean, if the last few quarters, I don't put a lot of credence in that as a number. I mean, I think that it's a good number, it's a strong number. And it affect our mixes very strong with the amount of test that we do that are highly reimbursed are very strong, especially when you consider the work of GeneDx. But in the few dollars that had changed there, I don't see that as a key metric.


And your next question comes from Dane Leone of Macquarie.

Dane Leone - Macquarie Research

So the first question for me is regarding the guidance for 2013. It really comes down to the technical point that you have 20% exposure to Medicare, and we know the reimbursement cut there even if you access sequestration. And you gave us the 20 basis point potential hit for 88305. If you add those together, you get up to somewhere around 80 basis points of a pure margin hit in 2013. This year, you're around 80 basis points year-on-year of margin expansion. I'm just curious how you get to roughly 15% revenue growth, leveraging that to 20% EPS growth if you're going to have this 80 basis point margin headwind, which could negate the gains that you made this year, and really looking for color on what you could do operationally to offset that?

Marc D. Grodman

Colors in numbers, Dane, are not in black and white, they're in color and they're 3-dimensional. Just going in and changing one, there's a whole world that rotates around it. You're looking at 2 little slivers of time and say, "My God, what do you do with that?" That's not looking at what it is on utilization of business underlying it, it grows in low single digits. You think about that, that is itself affects that. Two, the company's own history of market share increases, that it's able to go in and be able to take in a lot of reimbursement changes. If you look at the last 5 years, we had changes. There were more significant. Whenever you'd asked me, whenever anyone has asked me, tell me about reimbursement of clinical laboratory industry, I say that reimbursements trend down always. So the fact is if those 2 de minimus facts, I'm saying that in itself don't hold the key for what's going to go in and happen in the future. Now the other point that you raised is certainly true, which that there's an exposure to Medicare. And remember, of the Medicare exposure that we have in the 20% of our business, it probably is more than half of it is in a physician fee schedule. Now if you believe the SGR and if you believe the cliff is going to happen, you'll see physicians are all going to be cut all over the country by 27%. We don't think that's going to happen, okay. We don't think physicians' salaries will be cut at that point. So that puts one of it aside. In terms of the other and the balance of it as a clinical fee schedule, and there may well be some changes that are going to go to occur to that. All in all, I think that with increases of utilization in market share and new initiatives and growth in those areas that are not Medicare dependent, they will be able to go make the numbers. That's why we gave an announcement, I think it's what we've done in the past.

Dane Leone - Macquarie Research

Yes. I guess the issue, the very simple issues is modeling out your guidance into 2013. Let's just say that, all right, the sales side exposure is only 10%, you still have a 50 basis point headwind, I essentially, to get to the 20% guidance on the bottom line, I had to come up with something on the order of a full point of margin expansion. I'm just wondering if you could give us anything...

Marc D. Grodman

I think that you some of them is going to be -- I mean, there are other areas in where you do with them, some of them related to volume. Increasing market share consistently, growing market share, consistently growing organic growth in market share is certainly going to go in. We never came in and I promised, that by God, that things are going to blow out and they're going to go change so dramatically. We've shown steady consistent growth based on the increase in the market share balance against, for the last 20 years, reimbursements that have trended downward. So yes, I mean, I think that we can be able to go do that. We showed margin expansion than last year. But as I say, one factor doesn't hold it. And as those things happen and we go on and negotiate and do what we can to be able to go to decrease expenses where we think it is important and opportune, but these are all on the margin, if you will, as you're saying. So I think that they don't have the same effect. But if you look at the numbers, they've been fairly consistent over this time. So I mean, I think that we can. I think that -- and I think that we will be able to do it. But volume pays for a lot of changes in reimbursement levels. If there's one thing to take from it, yes, it's one thing that is always done.


And the next question comes from Raymond Myers of Benchmark Company.

Raymond A. Myers - The Benchmark Company, LLC, Research Division

One question I have is around the impact of Sandy. You gave us some good specific guidance, but then you also said in the press release that you had not yet accounted for the full impact of Sandy. I wonder what other factors might change your current estimates?

Marc D. Grodman

We have to go in and see what the -- I mean, right now, clients and many of the clients were closed, patient volumes were low. We think they've come back to pre-existing levels. But there are some areas and clients that still remain closed. There are some areas and some volumes that are still think have more to be able to go. We still need to be able to discern clearly what is growth impact and where we've grown versus what in fact, are certain lighter areas. So only after seeing the effect of the entire few months, seeing comparison account-by-accounts in November, December, January, we'd be able to go in and understand the full impact of that. Again, as I say, the big difference, if you can, theoretically is 3 days clear. You know what you did the previous Monday, Tuesday, Wednesday, you see what that is now. The aftermath was not being as clear in volume. Now you have accounts that is light or close and what the impact of that is. We know more now than what we did on November 10. Again, we'll know more on December 15 than what we know now. But we won't be reporting again on December 15. And so when we go in and get a full sense of what was already related in volume changes to Sandy and understand what that effect is. That's why we are saying that there will be an effect but that we're not going to go pinpoint what we think they are now, because we don't know enough now.

Raymond A. Myers - The Benchmark Company, LLC, Research Division

Now that you've received your mail for the last 3 days of the last quarter, how much accounts receivable did you collect in this last...

Marc D. Grodman

Yes, I wouldn't. You know what, there's a lot of things that we give out, a daily cash receipts, I don't think we're going to go there, okay. I mean, there's a point where you can't go there, I will tell you that it was amazing, is that when we went and we had people go in and walk into the post office where we are here in Elmwood Park, there was no one there because there was no mail. And in the station where we get mail from, which is from Teterboro, they had been flooded and closed for days. I mean, I don't know whether people see the devastation, both at the Jersey Shore and Staten Island, the south shore of Long Island. Post offices were closed, some were underwater. It was remarkable to live through this. And so there was simply nothing. And I have to tell you even to this day, to this day, there still is mail. Which when mail was supposed to go in, it is mailed on the Friday before, comes in, the post office is underwater, you never quite sure know everything that you were supposed to get. It was a total disruption of services unlike anything that I've ever seen. I've said before in conference calls in my first call that we ever planned was for September 11, 2001. We obviously canceled that on that day. It was a devastation and loss of lives. Many ways for many people, we stopped. So many things stopped functioning for that time. And we can only guess, FedEx, many areas were underwater, things had to be picked up at the airport. It was remarkable. So anyway, it's not -- it is by no means clean cut, and that's why those 3 days versus expected volumes, that's clear. We feel very comfortable in giving you the estimates, that's why we needed more time for the first quarter.

Raymond A. Myers - The Benchmark Company, LLC, Research Division

Yes, absolutely. And it's a testament to the fact that you were able to stay open through that period. A question I have kind of stepping back a little bit. We have declining Medicare reimbursement. The storm creates a lot of short-term impact for you and your competitors, particularly in the Northeast geography where you're concentrated. Can you talk about the consolidation that I understand it may be accelerating throughout the pathology industry, and how is Bio-Reference positioning itself to potentially either cope with that or potentially benefit from the trend of consolidation?

Marc D. Grodman

We don't really take part of that. I think that are included for those laboratories in the area of anatomical pathology who do rely on 88305s, there are going to be opportunities. They're certainly going to find ways, there'll be opportunities there for people who want to be able to think that being part of a large company will be better, will not. In one of them, but it's not a market in terms of pure AP that we have really pursued to any great extent. We don't buy customer list. We don't buy companies for the sake of having customer lists. Because we figured that if they wanted to use us, they would use us originally. I think that whenever we use consolidation, whenever people do buy customer lists, there are opportunities in those areas. But it really is something that kind of goes along where you said from what our business plan is.


We have no further questions at this time for you. [Operator Instructions].

Marc D. Grodman

Well, great. Well, listen. I want to thank everybody for being on the call. Again, this was the second year that we announced a little bit earlier than we normally did. I want to wish everybody a joyous holiday season, a healthy holiday, new year, a sane new year for all us, and I look forward to speaking with you all next year. My best wishes to all. Bye-bye.


Thank you. Ladies and gentlemen, thank you for joining today's conference. This concludes the presentation. You may now disconnect and goodbye.

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