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
January 29, 2003,
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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 January 29, 2003.
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: January 29, 2003
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, and will be available in the Form 10-K for the year ended December 31,
2002, when filed.
The Clinical Laboratory Testing Market
U.S. Clinical Laboratory testing market is $34 - $36 billion
- Represents 3%-4% of all health care spending
- Grew at a CAGR of 5.5% from 1998-2001
- Influences/directs approximately 80% of health care spending
- Role and importance of testing are increasing
- Rapidly evolving technology, emphasis on preventative
medicine and aging of population are all driving growth
CLINICAL LABORATORY TESTING INDEPENDENT CLINICAL LABORATORIES
Hospitals 49% All others 82%
Independent Clinical Labs 39% LabCorp 18%
Physician Offices 12%
Source: Company estimates, industry reports and 2001 revenue
for LabCorp and Dynacare.
Profile of LabCorp
- Second-largest clinical laboratory company in North America and the
leader in the specialty testing market
- Offers more than 4,000 routine and specialty tests and conducts testing
on more than 325,000 specimens daily
- Serves more than 200,000 physicians and other health care providers
- More than 24,000 employees nationwide
LabCorp's Strategy
Be a national core laboratory servicing all geographic areas, and the leading
esoteric, genomic testing laboratory in North America
Strategic Approach
Core Testing
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- Managed Care
- Selected Internal Expansion
- Acquisitions (e.g., Dynacare)
Genomic/Esoteric
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- Internal Development
- Licensing
- Acquisitions (DIANON)
MAP OF COMBINED TESTING LOCATIONS (Includes Dynacare and DIANON)
MAP OF COMBINED TESTING LOCATIONS & PSC's (Includes Dynacare and DIANON)
Demonstrated Genomic Strategy Execution
- Targeted introduction of new tests
- Acquire innovative technology
- License/partner to expand testing menu
INTERNAL ACQUISITION LICENSE/PARTNER
-------- ----------- ---------------
CMBP NGI MYRIAD GENETICS
- Cancer - Infectious Disease: Predictive Tests:
- Genetics (Cystic Fibrosis) Hepatitis C - Breast/Ovarian and
- Infectious Disease - Cancer: Colon Cancer
(GENOSURE) Melanoma - Melanoma
Breast - Hypertension
CLINICAL TRIALS VIROMED CORRELOGIC SYSTEMS
- Drug metabolism - Infectious Disease: - Ovarian Cancer
HIV
Hepatitis CELERA DIAGNOSTICS
Real-time PCR - Breast and
Prostate Cancer
PATH LABS
Hospital Esoteric EXACT SCIENCES
- Colorectal Cancer
DIANON
Cancer ALPHA THERAPEUTICS
- PCR Plasma
VIROLOGICS
- HIV Phenotyping
DIANON Strategy
- LabCorp has identified cancer testing as its most important growth
opportunity over the next 3-5 years
- Diagnostic testing for cancer is expected to increase substantially-
DIANON complements LabCorp's capabilities in anatomic and gene-based
testing
- DIANON's broad testing menu (anatomic and esoteric) is supported by its
strong scientific expertise, outstanding sales capabilities and
innovative, proprietary reporting format, CarePath-trademark-
- LabCorp's genomic and esoteric testing can be offered through DIANON,
expanding access to these tests
- LabCorp's strategic cancer partnerships will be enhanced by DIANON's
sales and marketing efforts to DIANON's more than 14,000 physician
customers
- Myriad Genetics (predisposition assays for breast, ovarian cancer)
- EXACT Sciences (colorectal cancer)
- Celera Diagnostics (prostate cancer)
- Correlogic (ovarian cancer)
Nine Month Operating Results
($ in millions)
YTD 9/01 YTD 9/02
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Revenue 1,636.0 1,857.6
Operating Expense 1,345.8 1,493.4
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Operating Income 290.2 364.2
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Margin 17.7% 19.6%
EBITDA 363.8 439.9
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Margin 22.2% 23.7%
Bad Debt % to revenue 9.4% 8.6%
DSO 62 56
1) YTD 02 results above exclude restructuring and other one-time
charges relating to the Dynacare transaction.
Financial Performance
Price & Volumes: Trends by Payor Type
2000 2001 YTD SEPT 2002
PPA Accessions PPA Accessions PPA Accessions
----- ---------- ---- ---------- ---- -----------
$ millions $ millions $ millions
----------------- ---------------- -----------------
Client (Physicians) 22.70 27.1 24.46 27.9 25.99 22.2
Patient 102.87 2.2 111.28 2.5 119.00 1.7
Third Party 29.80 10.3 31.59 12.2 32.49 10.7
(MC/MD/Insurance)
Managed Care
- Capitated 8.89 10.6 8.90 11.9 9.28 9.6
- Fee for service 42.32 16.0 43.45 17.2 44.72 14.4
------ ---- ------ ---- ------ ----
Total 28.97 26.6 29.27 29.1 30.52 24.0
------ ---- ------ ---- ------ ----
LabCorp Total $28.98 66.2 $30.69 71.7 $31.71 58.6
====== ==== ====== ==== ====== ====
Financial Performance
Revenue Analysis by Business Area
YTD SEPT 2001
Revenue Accns %Accns PPA
$Million 000 to total $
--------- ------- -------- ------
Prior Genomic 123.9 1,029.6 1.9% 120.38
Add'l Genomic* 83.6 2,009.5 3.8% 41.63
Other Esoteric 166.5 4,158.0 7.8% 40.04
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All Esoteric: 374.0 7,197.1 13.5% 51.98
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Core: 1,262.0 46,336.3 86.5% 27.23
Total: 1,636.0 53,533.4 100.0% 30.56
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Financial Performance
Revenue Analysis by Business Area
YTD SEPT 2002 02 vs 01
Revenue
Revenue Accns %Accns PPA Incr/
$Million 000 to total $ (Decr)
--------- ------ --------- ------- ---------
Prior Genomic 148.8 1,304.0 2.2% 114.13 20.1%
Add'l Genomic* 96.4 2,389.3 4.1% 40.36 15.3%
Other Esoteric 183.3 4,434.1 7.6% 41.32 10.1%
-------------- ------- -------- ------ ------ ------
All Esoteric: 428.5 8,127.4 13.9% 52.72 14.6%
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Core: 1,429.1 50,451.5 86.1% 28.33 13.2%
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Total: 1,857.6 58,578.9 100.0% 31.71 13.5%
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* Includes identity testing and gene probes (chlamydia and gonorrhea)
Key Highlights
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- Total revenues increased 13.5% in the first nine months of 2002 versus
same period last year (9.4% volume, 3.8% pricing)
- Esoteric testing revenues increased 14.6% year-over-year, driven
primarily by strong volume growth of 12.9%
- Overall pricing continues to increase, driven by both increased PPA in
core and esoteric areas and by continuing mix shift to higher-priced
esoteric tests
Expectations of Strategy
- Ensure long-term growth
- Shift toward higher priced tests and services
- Improve profitability
Financial Guidance for 2002*
- Revenue growth of approximately 14% compared to 2001
(approximately 10.5% volume and 3.5% price)
- Adjusted EBITDA margins of approximately 22.5% of sales (including
EBITDA from Dynacare equity investments)
- EPS of approximately $1.83
- Bad debt rate of approximately 8.4% of sales in the fourth quarter
- Free cash flow of approximately $350 million (net of Cap Ex of
approximately $85 million)
- Net interest expense of $15.5 million
- A tax rate of approximately 41.5% in the fourth quarter
*Including the impact of Dynacare, but not including restructuring charges
related to that acquisition
Preliminary Financial Guidance for 2003*
- Increase overall revenues by approximately 13% to 14% compared to 2002
- EPS growth of approximately 20% compared to 2002
*Does not include financial impact of the acquisition of DIANON Systems, Inc.
Opportunity for Investors
- Long-term industry trends appear favorable
- Visible growth drivers
- Low P/E relative to market valuations
- Significant free cash flow - multiple opportunities
to increase shareholder value
- Strong balance sheet - Investment Grade ratings
(S&P, Moody's)
- Solid growth potential driven by genomic strategy