8-K 1 slidepr2ndqtr02.txt COMPANY 8-K 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 ------------------ (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 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 ------------------------------------------ (Registrant) By /s/ BRADFORD T. SMITH ---------------------------------- 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 -------- ----------- --------------- 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 -------------- ------ -------- ------ ------ All Esoteric: 241.3 4,646.1 13.1% 51.94 ------------- Core: 833.8 30,658.8 86.9% 27.20 Total: 1,075.1 35,304.9 100.0% 30.45 ------ 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% ------------- Core: 924.0 32,629.6 86.1% 28.32 4.1% ------ Total: 1,202.4 37,944.1 100.0% 31.69 4.1% ------- * 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 ------- ------- Operating Income 102.6 134.1 ------- ------- Margin 18.7% 21.9% EBITDA 128.1 156.4 ------- ------- 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 ----------- ----------- Revenue 1,075.2 1,202.4 Operating Expense 885.3 951.9 -------- -------- Operating Income 189.9 250.5 -------- -------- Margin 17.7% 20.8% EBITDA 238.4 294.0 -------- -------- 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 ------ ------ -------- 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