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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
February 13, 2002
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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 February 13, 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
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(Registrant)
By /s/ BRADFORD T. SMITH
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Bradford T. Smith
Executive Vice President
and Secretary
Date: February 13, 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, 2000 and subsequent
filings, and will be available in the Form 10-K for the year ended
December 31, 2001, when filed.
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 84%
Independent Clinical Labs 39% LabCorp($2.2b) 16%
Physician Offices 12%
Source: Company estimates, industry reports & 2001YE revenue
for LabCorp
Profile of LabCorp
- Nationwide network of 24 primary testing locations and 900
patient service centers
- Conducts tests on 280,000 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
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
POSITITVE OUTCOMES: Hepatitis ALPHA:
(being tested) - Real-time PCR - PCR Plasma
CENTER FOR GENETIC VIROLOGICS:
SERVICES: - HIV Phenotyping
- Expanded Genetics
Capabilities in VIRCO:
Southwest - HIV Phenotyping
Financial Performance
Price & Volumes: Trends by Payor Type
1999 2000 2001
PPA Accessions PPA Accessions PPA Accessions
$ millions $ millions $ millions
----------------- ---------------- -----------------
Client (Physicians) 21.67 27.0 22.70 27.1 24.46 27.9
Patient 92.56 2.3 102.87 2.2 111.28 2.5
Third Party 27.75 11.7 29.80 10.3 31.59 12.2
(MC/MD/Insurance)
Managed Care
- Capitated 9.37 8.4 8.89 10.6 8.90 11.9
- Fee for service 39.28 12.7 42.32 16.0 43.45 17.2
------ ---- ------ ---- ------ ----
Total 27.41 21.1 28.97 26.6 29.27 29.1
------ ---- ------ ---- ------ ----
LabCorp Total $27.35 62.1 $28.98 66.2 $30.69 71.7
====== ==== ====== ==== ====== ====
Financial Performance
Revenue Analysis by Business Area
YTD DEC 2000
Revenue Accns %Accns PPA
$Million 000 to total $
--------- ------- -------- ------
Esoteric:
Genomic
(CMBP/NGI) 132.4 1,170.9 1.8% 113.08
Other Esoteric
(Powell CET) 179.3 4,026.7 6.1% 44.54
Core: 1,607.6 61,028.9 92.1% 26.34
------- -------- ------ -----
Total: 1,919.3 66,226.5 100.0% 28.98
======= ======== ====== =====
Financial Performance
Revenue Analysis by Business Area
YTD DEC 2001 00 vs 01
PPA
Revenue Accns %Accns PPA Incr/
$Million 000 to total $ (Decr)
--------- ------ --------- ------- ---------
Esoteric:
Genomic
(CMBP/NGI) 168.1 1,397.0 2.0% 120.35 6.4%
Other Esoteric
(Powell CET) 197.1 4,615.5 6.4% 42.70 (4.1)%
Core: 1,834.6 65,670.5 91.6% 27.94 6.1%
------- -------- ------ ------ ------
Total: 2,199.8 71,683.0 100.0% 30.69 5.9%
======= ======== ====== ====== =====
Fourth Quarter Operating Results
12/31/00* 12/31/01
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Revenue (millions) 486.1 563.8
Operating Expense 434.0 486.4
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Operating Income 52.1 77.4
===== =====
Margin 10.7% 13.7%
EBITDA 76.2 104.9
===== =====
Margin 15.7% 18.6%
Bad Debt % to revenue 10.2% 8.8%
DSO 68 58
*2000 actual excludes restructuring charge of $4.5. If this charge is
included, operating income would be $47.6 and EBITDA would be $71.7.
2001 Fourth Quarter Financial Achievements
- Increased revenues per day 14.0% (volume 10%; price 4%)
- Increased pro forma operating income 49%
- Increased EBITDA 38%
- Increased pro forma diluted EPS 76%
2001 Operating Results
2000* 2001
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Revenue (millions) 1,919.3 2,199.8
Operating Expense 1,669.2 1,832.2
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Operating Income 250.1 367.6
======= =======
Margin 13.0% 16.7%
EBITDA 339.7 468.7
======= =======
Margin 17.7% 21.3%
Bad Debt % to revenue 10.2% 9.2%
DSO 68 58
*2000 actual excludes restructuring charge of $4.5. If this charge is
included, operating income would be $245.6 and EBITDA would be $335.2.
2001 Financial Achievements
- Increased revenues 14.6% (volume 8.6%; price 6.0%)
- Increased EBITDA 38%
- Increased pro forma diluted EPS 60%
- DSO decline of 10 days from December 2000 to 58 days
- Repaid all outstanding bank debt with $500 million raised by
issuance of convertible subordinated notes
2001 Accomplishments
- Acquired Path Lab and ViroMed
- - Completed two-for-one stock split
- Successful offering of 12.0 million Roche-owned shares
- New managed care agreement with MAMSI
- Entered strategic partnership with EXACT Sciences, Myriad Genetics
and Alpha Therapeutic Corporation
- First FDA approved HIV and Hepatitis C molecular
tests for plasma screening ("virtual kits")
Quarterly DSO Trend
DSO Trend December '97 through December '01
December 1997 - 79 days June 2000 - 70 days
December 1998 - 83 days September 2000 - 70 days
March 1999 - 83 days December 2000 - 68 days
June 1999 - 79 days March 2001 - 67 days
September 1999 - 76 days June 2001 - 64 days
December 1999 - 74 days September 2001 - 62 days
March 2000 - 72 days December 2001 - 58 days
Financial Guidance for 2002
- Increase overall revenues by approximately 12% compared to 2001
(8-9% volume; 3-4% price)
- EBITDA margins of approximately 23% of sales
- EPS growth of approximately 33% under existing accounting
rules for 2001
- Non-amortization of goodwill impact of $26 million, with
increase in diluted EPS of approximately $0.36 (after
applying 2002 accounting rules)
- Bad debt rate of 8.75% of sales
- Capital expenditures of approximately $85 million
- Net interest expense of $12 million
- A tax rate of approximately 44% before applying the new
2002 accounting rules, or 41.5% after applying the new rules
Growth Opportunities
Revenue
- New Tests - Cystic Fibrosis, hepatitis C, HPV, etc.
- Conversion to Monolayer Paps
- New Licenses/Partnerships - Myriad Genetics, EXACT Sciences, etc.
- Ongoing Acquisition Strategy
- Genomic Strategy/Mix Shift Leverage
- Improving Regulatory/Reimbursement Environment
Profit Improvement Opportunities
Cost Structure
- Bad Debt Reduction
- Further Operational Consolidation
- Technology Improvements - Higher throughput and Efficiencies
Value Drivers
Labcorp:
- Proven strategy for growth
- Pioneer in identifying and commercializing innovative technologies
- National infrastructure connects large scale proficiency with
wide scale technological expertise
- Strong balance sheet
Industry:
- New advances in scientific research will generate growth and
demand for molecular testing
- Aging population
Other Financial Information
December 31, 2001
($ in millions,except per share amounts)
Q1 01 Q2 01 Q3 01 Q4 01
------ ------ ------- ------
Depreciation $13.8 $14.6 $ 15.3 $ 15.9
Amortization $ 9.2 $10.9 $ 9.8 $ 11.6
Goodwill amortization $ 5.9 $ 7.3 $ 6.1 $ 6.2
Diluted EPS before goodwill amortization $ 0.70 $ 0.84 $ 0.82 $ 0.66
Capital expenditures $12.7 $20.9 $ 25.4 $ 29.1
Cash flows from operations $64.5 $74.2 $113.7 $ 63.6
Bad debt as a percentage of sales 9.70% 9.40% 9.00% 8.75%
Effective interest rate on debt 5.77% 5.67% 2.00% 2.00%
Days sales outstanding 67 64 62 58
Other Financial Information
December 31, 2001
($ in millions,except per share amounts)
YTD
Dec 01
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Depreciation $ 59.6
Amortization $ 41.5
Goodwill amortization $ 25.5
Diluted EPS before goodwill amortization $ 3.01
Capital expenditures $ 88.1
Cash flows from operations $316.0
Bad debt as a percentage of sales 9.20%
Effective interest rate on debt N/A
Days sales outstanding 58