-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Db9/F341bY+N2/tZedZmYMOj4dCpWU2qFQdyiVZw3gIFMQjgeijMYDVOZR3NbYs5 2zCY+kCqc8UH97h9l0yWEg== 0000920148-03-000173.txt : 20031023 0000920148-03-000173.hdr.sgml : 20031023 20031023080406 ACCESSION NUMBER: 0000920148-03-000173 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20031023 ITEM INFORMATION: FILED AS OF DATE: 20031023 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LABORATORY CORP OF AMERICA HOLDINGS CENTRAL INDEX KEY: 0000920148 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MEDICAL LABORATORIES [8071] IRS NUMBER: 133757370 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-11353 FILM NUMBER: 03953010 BUSINESS ADDRESS: STREET 1: 358 S MAIN ST CITY: BURLINGTON STATE: NC ZIP: 27215 BUSINESS PHONE: 3362291127 MAIL ADDRESS: STREET 1: 358 S MAIN ST CITY: BURLINGTON STATE: NC ZIP: 27215 FORMER COMPANY: FORMER CONFORMED NAME: NATIONAL HEALTH LABORATORIES HOLDINGS INC DATE OF NAME CHANGE: 19940314 8-K 1 slidepr3rdqtr03.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 October 23, 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 12. Regulation FD Disclosure. Summary information of the Company dated October 23, 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: October 23, 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 Investment and Performance Fundamentals - Significant Cash Generator - EBITDA Percentage of Sales: 24.3% through September 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 MAP OF PRIMARY TESTING LOCATIONS & PSC's 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 - Acquisitions (DIANON) - Licensing Demonstrated Genomic and Esoteric Strategy Execution INTERNAL ACQUISITION LICENSE/PARTNER - -------- ----------- --------------- CMBP NGI MYRIAD GENETICS - Cancer - Infectious Disease: Predictive Tests: - Genetics (Cystic Fibrosis) Hepatitis C - Breast/Ovarian and - Infectious Disease - PCR Plasma 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 ATHEROTECH Pathology - VAP Cholesterol BIOPREDICTIVE - Liver Fibrosis Third Quarter Operating Results ($ in millions) 9/30/02 9/30/03 -------- -------- Revenue 655.2 752.0 Operating Expense 541.5 613.3 ------- ------- Operating Income 113.7 138.7 ------- ------- Margin 17.4% 18.4% EBITDA 145.9 183.9 ------- ------- Margin 22.3% 24.5% Bad Debt % to revenue 8.4% 7.0% DSO 56 53 1) Q3 '03 and '02 results above exclude restructuring and other one-time charges relating to the Company's integration of its DIANON and Dynacare acquisitions. 2) For definition of EBITDA and a reconciliation to the most comparable measure under Generally Accepted Accounting Principles, see Company's 3rd Quarter 2003 earnings release furnished on Form 8-K on October 23, 2003. 2003 Third Quarter Financial Achievements - Increased revenues 14.8% (volume approximately 9.3%; price approximately 5.5%) - EBITDA margins of 24.5% - Diluted EPS of $0.59* - Operating cash flow of $161.9 million - Repurchased approximately $63 million of LabCorp stock - Paid down $60 million in debt * Before restructuring and other one-time charges Key Third Quarter Highlights - Genomic testing revenues increased approx. 40% period-over-period, driven primarily by strong volume growth - Overall pricing continues to increase, driven by both increased PPA in core and esoteric areas and by continuing mix shift to higher-priced esoteric tests Nine-Month Operating Results ($ in millions) YTD YTD 9/30/02 9/30/03 -------- -------- Revenue 1,857.6 2,207.9 Operating Expense 1,493.4 1,801.6 ------- ------- Operating Income 364.2 406.3 ------- ------- Margin 19.6% 18.4% EBITDA 439.9 537.0 ------- ------- Margin 23.7% 24.3% Bad Debt % to revenue 8.6% 7.5% DSO 56 53 1) YTD '03 and '02 results above exclude restructuring and other one-time charges relating to the Company's integration of its DIANON and Dynacare acquisitions. 2) For definition of EBITDA and a reconciliation to the most comparable measure under Generally Accepted Accounting Principles, see Company's 3rd Quarter 2003 earnings release furnished on Form 8-K on October 23, 2003. 2003 Nine-Month Financial Achievements - Increased revenues 18.9% (volume approximately 13.2%; price approximately 5.7%) - EBITDA margin of 24.3% - Diluted EPS of $1.69* - Operating cash flow of $420.1 million - Repurchased approximately $150 million of LabCorp stock - Paid down $225 million in debt * Before restructuring and other special charges Financial Performance Price & Volumes: Trends by Payor Type 2001 2002 YTD SEPT 2003 PPA Accessions PPA Accessions PPA Accessions ----- ---------- ---- ---------- ---- ----------- $ millions $ millions $ millions ----------------- ---------------- ----------------- Client (Physicians) 24.46 27.9 26.27 29.6 27.22 24.1 Patient 111.28 2.5 119.93 2.3 116.53 1.9 Third Party 31.59 12.2 31.87 14.8 34.62 13.5 (MC/MD/Insurance) Managed Care - Capitated 8.90 11.9 9.28 13.1 9.82 9.8 - Fee for service 43.45 17.2 44.79 19.3 45.67 16.7 ------ ---- ------ ---- ------ ---- Total 29.27 29.1 30.45 32.4 32.48 26.5 ------ ---- ------ ---- ------ ---- LabCorp Total $30.69 71.7 $31.71 79.1 $33.43 66.0 ====== ==== ====== ==== ====== ==== Financial Performance Revenue Analysis by Business Area YTD SEPT 2002 Revenue Accns %Accns PPA $Million 000 to total $ --------- -------- -------- ------ Genomic 148.8 1,304.0 2.2% 114.13 Identity/Gene Probes 96.4 2,389.3 4.1% 40.36 - -------------- ------- --------- ------ ------ All Genomic 245.2 3,693.3 6.3% 66.40 Other Esoteric 183.2 4,434.1 7.6% 41.32 Histology 71.4 1,114.3 1.9% 64.04 - -------------- ------- --------- ----- ------- All Genomic/ Esoteric 499.8 9,241.7 15.8% 54.08 Core 1,357.8 49,337.2 84.2% 27.52 - -------------- ------- --------- ------ ------ Total: 1,857.6 58,578.9 100.0% 31.71 - ----------------------------------------------------------- YTD SEPT 2003 03 vs 02 PPA Revenue Accns %Accns PPA Incr/ $Million 000 to total $ (Decr) --------- ------- --------- ------- --------- Genomic 213.6 1,733.8 2.6% 123.21 8.0% Identity/Gene Probes 114.4 2,628.0 4.0% 43.52 7.8% - -------------- ------ -------- ----- ------ ----- All Genomic 328.0 4,361.8 6.6% 75.20 13.2% Other Esoteric 188.4 4,615.7 7.0% 40.81 (1.2)% Histology 148.4 1,619.0 2.4% 91.67 43.1% - -------------- ------- -------- ----- ------ ----- All Genomic/ Esoteric 664.8 10,596.5 16.0% 62.74 16.0% Core 1,543.1 55,451.4 84.0% 27.83 1.1% - -------------- ------- -------- ----- ------ ----- Total: 2,207.9 66,047.9 100.0% 33.43 5.4% - --------------------------------------------------------------------- Cash Investment Strategy - Investment Strategy Should Match Strategic Plan - Priority #1 - Strengthen Core Business - Standardize lab/billing IT systems - State-of-the-art analyzers (chemistry, hematology, sequencers) - Pursue selected acquisitions (i.e. Dynacare) - Priority #2 - Invest in Appropriate Acquisitions as well as Genomic/Esoteric and Anatomic Pathology Growth - NGI, ViroMed, DIANON - EXACT, Myriad, Correlogics - DIANIZING LabCorp - Priority #3 - Share Repurchases - Consider Dividends Financial Guidance for 2003 - Revenue growth of approximately 18 to 19% compared to 2002 - EBITDA margins of approximately 24% of sales - EPS in the range of $2.20 to $2.25 - Free cash flow of approximately $400 to $420 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 Preliminary Financial Guidance for 2004 - Revenue growth of approximately 4% to 7% compared to 2003 - EPS growth in the range of 11% to 15%* * Compared to the current First Call 2003 consensus EPS estimate of $2.22 as reported by Thomson Financial Opportunity for Investors - Long-term industry trends appear favorable - Visible growth drivers - Low P/E relative to market valuations - Significant free cash flow - multiple opportunities to increase shareholder value - Strong balance sheet - Investment Grade ratings (S&P, Moody's) - Solid growth potential driven by genomic strategy Other Financial Information September 30, 2003 ($ in millions) Q1 03 Q2 03 Q3 03 ---------- ---------- ---------- Depreciation $ 21,873.0 $ 22,778.0 $ 23,464.0 Amortization $ 8,464.0 $ 9,512.0 $ 9,552.0 Capital expenditures $ 16,164.0 $ 21,250.0 $ 23,055.0 Cash flows from operations $135,017.0 $123,169.0 $161,894.0 Bad debt as a percentage of sales 8.00% 7.44% 7.01% 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% 5.38% Revolving credit facility 2.14% 1.86% 1.95% Days sales outstanding 55 54 53 YTD Sept 03 ---------- Depreciation $ 68,115.0 Amortization $ 27,528.0 Capital expenditures $ 60,469.0 Cash flows from operations $420,080.0 Bad debt as a percentage of sales 7.46% Effective interest rate on debt: Zero coupon-subordinated notes 2.00% 5 1/2% Senior Notes (including effect of interest rate swap) 5.38% Revolving credit facility 1.95% Days sales outstanding 53 -----END PRIVACY-ENHANCED MESSAGE-----