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 ------------------ (Date of earliest event reported) LABORATORY CORPORATION OF AMERICA HOLDINGS ------------------------------------------ (Exact name of registrant as specified in its charter) DELAWARE 1-11353 13-3757370 -------------- ----------- -------------- (State or Other (Commission (IRS Employer Jurisdiction of File Number) Identification Incorporation) Number) 358 SOUTH MAIN STREET, BURLINGTON, NORTH CAROLINA 27215 ------------------------------------------------------- (Address of principal executive offices) 336-229-1127 ------------ (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 ------------------------------------------ (Registrant) By:/s/ BRADFORD T. SMITH ---------------------------------- 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 -------- ----------- --------------- 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 -------- -------- Revenue 590.1 712.2 Operating Expense 473.7 587.5 ------- ------- Operating Income 116.4 124.7 ------- ------- Margin 19.7% 17.5% EBITDA* 137.6 165.7 ------- ------- 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 ------ ---- ------ ---- ------ ---- 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 -------------- ------ -------- ----- ------- All Genomic/ Esoteric 158.3 2,910.3 15.6% 54.39 Core 431.8 15,823.9 84.4% 27.29 -------------- ------ --------- ------ ------ Total: 590.1 18,734.2 100.0% 31.50 ----------------------------------------------------------- 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% -------------- ------ --------- ----- ------ ------ Total: 712.2 21,312.1 100.0% 33.42 6.1% --------------------------------------------------------------------- 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 ---------- 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