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 22, 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 July 22, 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: July 22, 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: 24.3% through June 30, 2003
- 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 340,000 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 PRIMARY TESTING LOCATIONS & PSC's
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 Colon Cancer
(GENOSURE) - Melanoma
- Hypertension
CLINICAL TRIALS VIROMED CORRELOGIC SYSTEMS
- Drug Metabolism - Infectious Disease: - Ovarian Cancer
HIV, Hepatitis
West Nile CELERA DIAGNOSTICS
- Real-time PCR - Breast and
Prostate Cancer
- Alzheimer's Disease
PATH LABS
- Hospital Esoteric EXACT SCIENCES
- Colorectal Cancer
DIANON
- Cancer/Anatomic ALPHA THERAPEUTICS
Pathology - 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 and its innovative, proprietary reporting
format, CarePath-trademark-
- LabCorp's genomic and esoteric testing can be offered through DIANON,
expanding access to these tests
Second Quarter Operating Results
($ in millions)
6/30/02 6/30/03
-------- --------
Revenue 612.4 743.7
Operating Expense 478.3 600.8
------- -------
Operating Income 134.1 142.9
------- -------
Margin 21.9% 19.2%
EBITDA* 156.4 187.4
------- -------
Margin 25.5% 25.2%
Bad Debt % to revenue 8.8% 7.5%
DSO 58 54
* For definition of EBITDA and a reconciliation to the
most comparable measure under Generally Accepted Accounting
Principles, see Company's 2nd Quarter 2003 earnings release
furnished on Form 8-K on July 22, 2003.
2003 Second Quarter Financial Achievements
- Increased revenues 21.5% (volume approximately 16.0%; price
approximately 5.5%)
- EBITDA margins of 25.2
- Diluted EPS of $0.60
- Operating cash flow of $123.2 million
- Repurchased approximately $53 million of LabCorp stock
- Paid down $50 million in debt
Six-Month Operating Results
($ in millions)
YTD YTD
6/30/02 6/30/03
-------- --------
Revenue 1,202.4 1,455.9
Operating Expense 951.9 1,188.3
------- -------
Operating Income 250.5 267.6
------- -------
Margin 20.8% 18.4%
EBITDA* 294.0 353.1
------- -------
Margin 24.4% 24.3%
Bad Debt % to revenue 8.8% 7.7%
DSO 58 54
* For definition of EBITDA and a reconciliation to the
most comparable measure under Generally Accepted Accounting
Principles, see Company's 2nd Quarter 2003 earnings release
furnished on Form 8-K on July 22, 2003.
2003 Six-Month Financial Achievements
- Increased revenues 21.1% (volume approximately 15%; price
approximately 6%)
- EBITDA margin of 24.3%
- Diluted EPS of $1.10
- Operating cash flow of $258.2 million
- Repurchased approximately $87 million of LabCorp stock
- Paid down $165 million in debt
Financial Performance
Price & Volumes: Trends by Payor Type
2001 2002 YTD JUN 2003
PPA Accessions PPA Accessions PPA Accessions
----- ---------- ---- ---------- ---- -----------
$ millions $ millions $ millions
----------------- ---------------- -----------------
Client (Physicians) 24.46 27.9 26.27 29.6 27.20 15.9
Patient 111.28 2.5 119.93 2.3 115.87 1.3
Third Party 31.59 12.2 31.87 14.8 34.80 8.8
(MC/MD/Insurance)
Managed Care
- Capitated 8.90 11.9 9.28 13.1 9.80 6.5
- Fee for service 43.45 17.2 44.79 19.3 45.74 11.0
------ ---- ------ ---- ------ ----
Total 29.27 29.1 30.45 32.4 32.40 17.5
------ ---- ------ ---- ------ ----
LabCorp Total $30.69 71.7 $31.71 79.1 $33.44 43.5
====== ==== ====== ==== ====== ====
Financial Performance
Revenue Analysis by Business Area
YTD JUN 2002
Revenue Accns %Accns PPA
$Million 000 to total $
--------- ------- -------- ------
Genomic 96.4 850.2 2.2% 113.38
Identity/Gene
Probes 62.6 1,564.7 4.2% 39.99
-------------- ------- --------- ------ ------
All Genomic 159.0 2,414.9 6.4% 65.82
Other Esoteric 119.4 2,899.6 7.6% 41.20
Histology 47.9 739.1 2.0% 64.79
-------------- ------- --------- ----- -------
All Genomic/
Esoteric 326.3 6,053.6 16.0% 53.90
Core 876.1 31,890.5 84.0% 27.47
-------------- ------- --------- ------ ------
Total: 1,202.4 37,944.1 100.0% 31.69
-----------------------------------------------------------
YTD JUN 2003 03 vs 02
PPA
Revenue Accns %Accns PPA Incr/
$Million 000 to total $ (Decr)
--------- ------- --------- ------- ---------
Genomic 140.3 1,144.5 2.6% 122.58 8.1%
Identity/Gene
Probes 76.3 1,742.8 4.0% 43.78 9.5%
-------------- ------ -------- ----- ------ -----
All Genomic 216.6 2,887.3 6.6% 75.01 14.0%
Other Esoteric 122.6 3,008.1 7.0% 40.87 (0.8)%
Histology 97.9 1,065.2 2.4% 91.94 41.9%
-------------- ------- -------- ----- ------ -----
All Genomic/
Esoteric 437.4 6,960.6 16.0% 62.85 16.6%
Core 1,018.5 36,571.5 84.0% 27.85 1.4%
-------------- ------- -------- ----- ------ -----
Total: 1,455.9 43,532.1 100.0% 33.44 5.5%
---------------------------------------------------------------------
Key Second Quarter Highlights
- Genomic testing revenues increased approx. 45% 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 18 to 19% compared to 2002
- Adjusted EBITDA margins of approximately 24% of sales
- EPS in the range of $2.20 to $2.25
- Free cash flow of approximately $380 to $400 million (net of
Cap Ex of approximately $90 million)
- Bad debt rate of 7.0% for the second half of 2003
- Net interest expense of approximately $35 million
Opportunity for Investors
- Long-term industry trends appear favorable
- Visible growth drivers
- Low P/E relative to market valuations
- Significant free cash flow - multiple opportunities
to increase shareholder value
- Strong balance sheet - Investment Grate ratings (S&P,
Moody's)
- Solid growth potential driven by genomic strategy
Other Financial Information
June 30, 2003
($ in millions)
YTD
Q1 03 Q2 03 Jun-03
------- ------- -------
Depreciation $ 21.9 $ 22.8 $ 44.7
Amortization $ 8.5 $ 9.5 $ 18.0
Capital expenditures $ 16.2 $ 21.3 $ 37.4
Cash flows from operations $135.0 $123.2 $258.2
Bad debt as a percentage of sales 8.00% 7.50% 7.75%
Effective interest rate on debt:
Zero coupon-subordinated notes 2.00% 2.00% 2.00%
5 1/2% Senior Notes (including
effect of interest rate swap) 3.98% 4.07% 4.07%
Revolving credit facility 2.14% 1.86% 1.86%
Days sales outstanding 55 54 54