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
April 28, 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 April 28, 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: April 28, 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, 2002 and subsequent
filings.
LabCorp's Industry-leading Financial Indicators
- EBITDA Percentage of Sales: 22.5% in 2002
- Strong Balance Sheet
- Investment Grade Credit Ratings
The Clinical Laboratory Testing Market
US 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 & 2002 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
- Approximately 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
1) CORE TESTING
- Managed Care
- Selected Internal Expansion
- Acquisitions (Dynacare)
2) GENOMIC/ESOTERIC
- Internal Development
- Licensing
- Acquisitions (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
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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
- Alzheimer's Disease
PATH LABS
Hospital Esoteric EXACT SCIENCES
- Colorectal Cancer
DIANON
Cancer ALPHA THERAPEUTICS
- PCR Plasma
VIROLOGICS
- HIV Phenotyping
Genomic/Cancer 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)
First Quarter Operating Results
($ in millions)
3/31/02 3/31/03
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Revenue 590.1 712.2
Operating Expense 473.7 587.5
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Operating Income 116.4 124.7
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Margin 19.7% 17.5%
EBITDA* 137.6 165.7
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Margin 23.3% 23.3%
Bad Debt % to revenue 8.8% 8.0%
DSO 58 55
* For definition of EBITDA and a reconciliation to the
most comparable measure under Generally Accepted Accounting
Principles, see Company's 1st Quarter 2003 earnings release
furnished on Form 8-K on April 28, 2003.
2003 First Quarter Financial Achievements
- Increased revenues 20.7% (volume approximately 14.5%; price 6.1%)
- EBITDA margins of 23.3%
- Diluted EPS of $0.51
- Operating cash flow of $135 million
- Repurchased $34 million of LabCorp stock
- Paid down $115 million in debt
Financial Performance
Price & Volumes: Trends by Payor Type
2001 2002 YTD Mar 2003
PPA Accessions PPA Accessions PPA Accessions
----- ---------- ---- ---------- ---- -----------
$ millions $ millions $ millions
----------------- ---------------- -----------------
Client (Physicians) 24.46 27.9 26.27 29.6 27.49 7.8
Patient 111.28 2.5 119.93 2.3 113.50 0.6
Third Party 31.59 12.2 31.87 14.8 34.70 4.3
(MC/MD/Insurance)
Managed Care
- Capitated 8.90 11.9 9.28 13.1 10.00 3.2
- Fee for service 43.45 17.2 44.79 19.3 45.61 5.4
------ ---- ------ ---- ------ ----
Total 29.27 29.1 30.75 32.4 32.29 8.6
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LabCorp Total $30.69 71.7 $31.71 79.1 $33.42 21.3
====== ==== ====== ==== ====== ====
Financial Performance
Revenue Analysis by Business Area
YTD MAR 2002
Revenue Accns %Accns PPA
$Million 000 to total $
--------- ------- -------- ------
Genomic 46.3 404.8 2.2% 114.34
Identity/Gene
Probes 30.9 768.8 4.1% 40.24
-------------- ------ -------- ------ ------
All Genomic 77.2 1,173.6 6.3% 65.80
Other Esoteric 57.5 1,379.6 7.4% 41.65
Histology 23.6 357.1 1.9% 66.13
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All Genomic/
Esoteric 158.3 2,910.3 15.6% 54.39
Core 431.8 15,823.9 84.4% 27.29
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Total: 590.1 18,734.2 100.0% 31.50
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YTD MAR 2003 03 vs 02
PPA
Revenue Accns %Accns PPA Incr/
$Million 000 to total $ (Decr)
--------- ------- --------- ------- ---------
Genomic 67.7 549.2 2.6% 123.36 7.9%
Identity/Gene
Probes 38.1 864.2 4.0% 44.04 9.4%
-------------- ------ -------- ----- ------ -----
All Genomic 105.8 1,413.4 6.6% 74.86 13.8%
Other Esoteric 59.5 1,445.5 6.8% 41.12 (1.3)%
Histology 45.7 501.1 2.4% 91.25 38.0%
-------------- ------- ------- ----- ------ ------
All Genomic/
Esoteric 211.0 3,360.0 15.8% 62.79 15.4%
Core 501.2 17,952.1 84.2% 27.92 2.3%
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Total: 712.2 21,312.1 100.0% 33.42 6.1%
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Key First Quarter Highlights
- Acquisition of DIANON
- Genomic testing revenues increased approx. 46% period-over-period, driven
primarily by strong volume growth
- 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 2003
- Revenue growth of approximately 22% compared to 2002
- Adjusted EBITDA margins of approximately 24% of sales
- EPS growth of approximately 22.5% compared to 2002
- Free cash flow of approximately $380 to $400 million (net of
Cap Ex of approximately $90 million)
- Net interest expense of $35 million
Opportunity for Investors
- Long-term industry trends appear favorable
- Visible growth drivers
- Low P/E relative to market valuations
- Significant free cash flow - multiple opportunities
to increase shareholder value
- Strong balance sheet - Investment Grate ratings (S&P,
Moody's)
- Solid growth potential driven by genomic strategy
Other Financial Information
March 31, 2003
($ in 000's)
Q1 03
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Depreciation $ 21,873.0
Amortization $ 8,464.0
Capital expenditures $ 16,164.0
Cash flows from operations $135,017.0
Bad debt as a percentage of sales 8.00%
Effective interest rate on debt:
Zero coupon-subordinated notes 2.00%
5 1/2% Senior Notes (including
effect of interest rate swap) 3.98%
Revolving credit facility 2.14%
Days sales outstanding 55