UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
July 24, 2002
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(Date of earliest event reported)
LABORATORY CORPORATION OF AMERICA HOLDINGS
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(Exact name of registrant as specified in its charter)
DELAWARE 1-11353 13-3757370
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(State or Other (Commission (IRS Employer
Jurisdiction of File Number) Identification
Incorporation) Number)
358 SOUTH MAIN STREET, BURLINGTON, NORTH CAROLINA 27215
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(Address of principal executive offices)
336-229-1127
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(Registrant's telephone number, including area code)
ITEM 9. Regulation FD Disclosure.
Summary information of the Company dated July 24, 2002.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange
Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned hereunto duly
authorized.
LABORATORY CORPORATION OF AMERICA HOLDINGS
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(Registrant)
By /s/ BRADFORD T. SMITH
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Bradford T. Smith
Executive Vice President
and Secretary
Date: July 24, 2002
This information contains forward-looking statements which are
subject to change based on various important factors, including
without limitation, competitive actions in the marketplace and
adverse actions of governmental and other third-party payors. Actual
results could differ materially from those suggested by these forward-
looking statements. Further information on potential factors that
could affect the Company's financial results is included in the
Company's Form 10-K for the year ended December 31, 2001 and subsequent
filings.
How Laboratory Testing Works
Laboratory Testing is the "Gateway to Quality Health Care":
1) Patient visits doctor;
2) Doctor orders laboratory tests with diagnosis information;
3) Doctor or patient service center (PSC) draws sample;
4) Laboratory performs tests;
5) Test results reported to doctor;
6) Doctor makes diagnosis and treatment begins
The Clinical Laboratory Testing Market
US market is approximately $34-36 billion
CLINICAL LABORATORY TESTING INDEPENDENT CLINICAL LABORATORIES
Hospitals 49% All others 82.5%
Independent Clinical Labs 39% LabCorp($2.2b) 17.5%
Physician Offices 12%
Source: Company estimates, industry reports & 2001YE revenue
for LabCorp
Profile of LabCorp*
- Nationwide network of 24 primary testing locations and over 900
patient service centers
- Conducts tests on approximately 300,000 specimens daily
- Offers more than 4,000 test procedures
- Serves over 200,000 physicians and other health care
providers
- More than 19,000 employees nationwide
*Does not include Dynacare
MAP OF LABCORP's PRIMARY TESTING LOCATIONS & PSC's
2002 Strategic Goals
- Maintain national coverage for all key customers
- Expand upon leading position in genomic testing
- Evaluate appropriate acquisition candidates
GENOMIC STRATEGY
UTILIZE DNA TESTING LEADERSHIP TO EXECUTE GENOMIC LEADERSHIP STRATEGY
- Targeted introduction of new tests
- Acquire innovative technology
- License/Partner to expand menu
GENOMIC STRATEGY UPDATE
INTERNAL ACQUISITION LICENSE/PARTNER
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CMBP: NGI: MYRIAD GENETICS:
- Cancer - Infectious Disease Predictive tests:
- Genetics Hepatitis C - Breast/Ovarian and
- Infectious Disease - Cancer: Colon Cancer
(GENOSURE) Melanoma - Melanoma
Breast - Hypertension
CLINICAL TRIALS: VIROMED: EXACT SCIENCES:
- Drug metabolism - Infectious Disease - Colorectal Cancer
HIV, Hepatitis
- Real-time PCR
CENTER FOR GENETIC ALPHA:
SERVICES: - PCR Plasma
- Expanded Genetics
Capabilities in
Southwest
PATHLABS: VIROLOGICS:
- Cancer - HIV Phenotyping
- Hospital Esoteric
VIRCO:
- HIV Phenotyping
Financial Performance
Price & Volumes: Trends by Payor Type
2000 2001 YTD JUN 2002
PPA Accessions PPA Accessions PPA Accessions
----- ---------- ---- ---------- ---- -----------
$ millions $ millions $ millions
----------------- ---------------- -----------------
Client (Physicians) 22.70 27.1 24.46 27.9 25.66 14.1
Patient 102.87 2.2 111.28 2.5 120.47 1.1
Third Party 29.80 10.3 31.59 12.2 32.99 6.8
(MC/MD/Insurance)
Managed Care
- Capitated 8.89 10.6 8.90 11.9 9.20 6.4
- Fee for service 42.32 16.0 43.45 17.2 44.59 9.5
------ ---- ------ ---- ------ ----
Total 28.97 26.6 29.27 29.1 30.24 15.9
------ ---- ------ ---- ------ ----
LabCorp Total $28.98 66.2 $30.69 71.7 $31.69 37.9
====== ==== ====== ==== ====== ====
Financial Performance
Revenue Analysis by Business Area
YTD JUN 2001
Revenue Accns %Accns PPA
$Million 000 to total $
--------- ------- -------- ------
Prior Genomic 81.7 677.6 1.9% 120.55
Add'l Genomic* 53.2 1,274.2 3.6% 41.76
Other Esoteric 106.4 2,694.3 7.6% 39.51
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All Esoteric: 241.3 4,646.1 13.1% 51.94
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Core: 833.8 30,658.8 86.9% 27.20
Total: 1,075.1 35,304.9 100.0% 30.45
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YTD JUN 2002 02 vs 01
PPA
Revenue Accns %Accns PPA Incr/
$Million 000 to total $ (Decr)
--------- ------ --------- ------- ---------
Prior Genomic 96.4 850.2 2.2% 113.38 (5.9)%
Add'l Genomic* 62.6 1,564.7 4.1% 39.99 (4.2)%
Other Esoteric 119.4 2,899.6 7.6% 41.20 4.3%
-------------- ------- -------- ------ ------ ------
All Esoteric: 278.4 5,314.5 13.9% 52.39 0.9%
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Core: 924.0 32,629.6 86.1% 28.32 4.1%
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Total: 1,202.4 37,944.1 100.0% 31.69 4.1%
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* Includes identity testing and gene probes (chlamydia and gonorrhea)
Second Quarter Operating Results
($ in millions)
6/30/01 6/30/02
-------- --------
Revenue 549.7 612.4
Operating Expense 447.1 478.3
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Operating Income 102.6 134.1
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Margin 18.7% 21.9%
EBITDA 128.1 156.4
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Margin 23.3% 25.5%
Bad Debt % to revenue 9.40% 8.75%
DSO 64 58
2002 Second Quarter Financial Achievements
- Increased revenues 11.4% (volume 7.0%; price 4.4%)
- Increased operating income 31%
- Increased EBITDA 22%
- Increased diluted EPS 31%*
- Increased operating cash flow 26%
*Compared to pro forma prior year EPS, calculated on a comparable basis
Six Month Operating Results
($ in millions)
YTD 6/01 YTD 6/02
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Revenue 1,075.2 1,202.4
Operating Expense 885.3 951.9
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Operating Income 189.9 250.5
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Margin 17.7% 20.8%
EBITDA 238.4 294.0
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Margin 22.2% 24.4%
Bad Debt % to revenue 9.6% 8.75%
DSO 64 58
2002 Six Month Financial Achievements
- Increased revenues per day 12.7% (volume 8.5%; price 4.2%)
- Increased EBITDA 23%
- Increased diluted EPS 31%*
- DSO decline of 6 days from June 2001
*Compared to pro forma prior year EPS, calculated on a comparable basis
Quarterly DSO Trend
DSO Trend December '97 through June '02
December 1997 - 79 days September 2000 - 70 days
December 1998 - 83 days December 2000 - 68 days
March 1999 - 83 days March 2001 - 67 days
June 1999 - 79 days June 2001 - 64 days
September 1999 - 76 days September 2001 - 62 days
December 1999 - 74 days December 2001 - 58 days
March 2000 - 72 days March 2002 - 60 days
June 2000 - 70 days June 2002 - 58 days
Recent Accomplishments
- Expanded Aetna Agreement in CT, NJ, and NY (including NYC)
- New genomics tests for hepatitis B and C
- Introduced Myriad's predisposition tests for a variety
of cancers and cardiac risk
- New partnership with EXACT Sciences to offer Pre-Gen Plus,
a colorectal screening test for the average risk population
- Preferred provider contract with Premier
- Acquisition of Dynacare
Dynacare 2002 Incremental Impact
- Revenues of approximately $120 million
- Adjusted EBITDA of approximately $20 million
- EPS Neutral
- Synergies of approximately $4 million
Financial Guidance for 2002*
- Revenue growth of approximately 15.5% to 16.5% compared to 2001
(volume - 12%, price - 4%)
- Adjusted EBITDA margins of approximately 23% of sales (including
EBITDA from Dynacare equity investments)
- EPS in the range of $1.90 to $1.95
- Bad debt rate of 8.3% to 8.6% of sales in the third
and fourth quarters
- Capital expenditures of approximately $85 million
- Net interest expense of $17 million
- A tax rate of approximately 41.5% in the third and fourth quarters
*Including the impact of Dynacare, but not including anticipated
restructuring charges related to that acquisition
Financial Guidance for 2003
- Increase overall revenues by approximately 16% to 17% compared to 2002
- Adjusted EBITDA margins of approximately 24% to 24.5% of sales
- EPS growth of approximately 25% to 30% compared to 2002
Growth Opportunities
Revenue:
- New Tests - Cystic Fibrosis, hepatitis B and C, HPV, etc.
- Conversion to Monolayer Paps
- New Licenses/Partnerships - Myriad Genetics, EXACT Sciences, etc.
- Ongoing Acquisition Strategy
- Genomic Strategy/Mix Shift Leverage
- Improving Regulatory/Reimbursement Environment
Profit Improvement Opportunities
Cost Structure:
- Bad Debt Reduction
- Further Operational Consolidation
- Technology Improvements - Higher Throughput and Efficiencies
- Dynacare synergies
Value Drivers
Labcorp:
- Proven strategy for growth
- Pioneer in identifying and commercializing innovative technologies
- National infrastructure connects large scale proficiency with
wide scale technological expertise
- Strong balance sheet
Industry:
- New advances in scientific research will generate growth and
demand for molecular testing
- Aging population
Other Financial Information
June 30, 2002
($ in millions,except per share amounts)
YTD
Q1 02 Q2 02 Jun-02
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Depreciation $ 16.1 $ 17.1 $ 33.2
Amortization $ 5.1 $ 5.2 $ 10.3
Capital expenditures $ 18.4 $ 19.5 $ 37.9
Cash flows from operations $112.2 $ 93.1 $205.3
Bad debt as a percentage of sales 8.75% 8.75% 8.75%
Effective interest rate on debt 2.00% 2.00% N/A
Days sales outstanding 60 58 58