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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
September 19, 1995
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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 File Number) (I.R.S. Employer
jurisdiction of Identification Number)
organization)
358 South Main Street 27215
Burlington, North Carolina
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(Address of principal executive offices) (Zip code)
(800) 222-7566
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(Registrant's telephone number, including area code)
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(Former Name or Former Address, if Changed Since Last Report)
Item 5. OTHER EVENTS
Press Release
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On September 19, 1995, Laboratory Corporation of America Holdings, a
Delaware corporation (the "Company"), issued a press release containing
certain financial and other information relating to the Company, a copy of
which is attached as an exhibit hereto and which is hereby incorporated
herein by reference.
Resignation of David C. Flaugh
-------------------------------
On September 19, 1995 (as described in the aforementioned Press
Release), David C. Flaugh, the then Executive Vice President and Chief
Operating Officer of the Company, resigned from the Company. Mr. David C.
Weavil has been elected to succeed Mr. Flaugh as Chief Operating Officer.
Prior to Mr. Flaugh's resignation, an amendment to Mr. Flaugh's
employment agreement, dated as of September 19, 1995, was entered into by
Mr. Flaugh and the Company, a copy of which is attached as an exhibit
hereto and is hereby incorporated herein by reference. The amendment
changes, among other things, the date upon which Mr. Flaugh is permitted
to terminate his employment with the Company for "good reason" (as defined
in the Employment Agreement). Mr. Flaugh's employment agreement (as
previously amended) has been previously filed with the Securities and
Exchange Commission.
Annual Meeting of Stockholders
------------------------------
The 1995 annual meeting of stockholders (the "1995 Annual Meeting") of
the Company was held on September 20, 1995, at The St. Regis hotel in New
York City. At the meeting, at least a majority of the outstanding shares
of the Company were voted in favor of the adoption and approval of each of
the resolutions presented to the meeting, each of which had been described
in detail in the proxy statement of the Company dated August 17, 1995
previously provided to stockholders of record as of July 24, 1995 in
connection with the 1995 Annual Meeting. The stockholders voted (i) to
elect the following persons as directors of the Company to serve until the
Company's next annual meeting and until such directors' successors are
elected and shall have qualified: James R. Maher, Thomas P. Mac Mahon,
James B. Powell M.D., Jean-Luc Belingard, Linda Gosden Robinson, David B.
Skinner, M.D. and Andrew G. Wallace, M.D., (ii) to approve and adopt the
Laboratory Corporation of America Holdings 1995 Stock Plan for Non-Employee
Directors (the "Non-Employee Director Stock Plan"), (iii) to approve and
adopt the Laboratory Corporation of America Holdings Performance Unit Plan
(the "Performance Unit Plan"), (iv) to approve and adopt the Laboratory
Corporation of America Holdings Annual Bonus Incentive Plan (the "Annual
Plan") and (v) to ratify the appointment of KPMG Peat Marwick LLP as the
Company's independent auditors for the fiscal year ending on December 31,
1995.
Action of the Board of Directors
--------------------------------
At a meeting of the Board of Directors of the Company held on
September 20, 1995, following the 1995 Annual Meeting, the Board adopted
certain resolutions, including resolutions for the appointment of the
members of the committees of the Board and of the Management Committee of
the Company, the election of the officers of the Company and the adoption
of a Synergy Bonus Plan for certain officers and employees of the Company.
The Board approved the appointment as members to (1) the Nominating
Committee of Thomas P. Mac Mahon (Chairman of the Committee), Dr. Andrew
G. Wallace and Linda Gosden Robinson, (2) the Employee Benefits Committee
of Jean-Luc Belingard (Chairman of the Committee), Linda Gosden Robinson
and Dr. David Bernt Skinner, (3) the Audit Committee of Dr. David Bernt
Skinner and Dr. Andrew G. Wallace, and (4) the Ethics and Quality
Assurance Committee of Dr. James B. Powell (Chairman of the Committee),
James R. Maher, Dr. Andrew G. Wallace and Dr. David Bernt Skinner.
The Board appointed the members of the Management Committee of the
Company as follows: Dr. James B. Powell (Chairman of the Committee),
David C. Weavil, Haywood D. Cochrane, Bradford T. Smith, Timothy J.
Brodnik, John F. Markus, Wesley R. Elingburg, Robert E. Whalen, James R.
Maher and Thomas P. Mac Mahon.
The Board elected the following persons as officers of the Company:
Name Office
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James B. Powell, M.D. President and Chief Executive Officer
Timothy J. Brodnik Executive Vice President, Sales and
Marketing Haywood D. Cochrane, Jr. Executive Vice President
and Chief Financial Officer
Larry L. Leonard, PhD Executive Vice President
John F. Markus Executive Vice President, Compliance
Bradford T. Smith Executive Vice President, General
Counsel and Secretary
David C. Weavil Executive Vice President and Chief
Operating Officer
Robert E. Whalen Executive Vice President and Chief
Administrative Officer
John Bergstrom Senior Vice President, Managed Care
Woody Cook Senior Vice President, Operations
Craig Dawson Senior Vice President, Operations
Wesley R. Elingburg Senior Vice President, Finance
Lou Hadden Senior Vice President, Operations
James M. Kilgore, PhD Senior Vice President, Operations
Garry Latimer Senior Vice President, Hospital
Joint Ventures
J. Ronald Mott Senior Vice President, Operations
Jean S. Neff Senior Vice President, Operations
Gail S. Page Senior Vice President, Standardization
and Automation
Daniel R. Shoemaker Senior Vice President, Operations
Fred A. Simpson Senior Vice President, Operations
Timothy J. Smith, PhD Senior Vice President, Operations
Michael R. Snyder Senior Vice President, Operations
Steve Stark Senior Vice President, Operations
Ronald B. Sturgill Senior Vice President, Operations
John R. Erwin Assistant Secretary
David W. Gee Assistant Secretary
At the recommendation of the Employee Benefits Committee, the Board
also adopted the Company's Synergy Bonus Plan. The Plan is designed to
provide bonus incentives to certain employees of the Company based upon the
achievement of net savings or reductions in costs and expenses (both
divisional and Company-wide) which are attributable to or result directly
and exclusively from the merger of National Health Laboratories Holdings
Inc. and Roche Biomedical Laboratories, Inc. over the period beginning May
1, 1995 and ending April 30, 1997. The maximum aggregate bonuses payable
under the Plan over its term, if all targets are met by qualified
individuals, is $4.125 million. No participant in the Company's 1995
Performance Unit Plan is eligible to participate in the Synergy Bonus Plan.
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL
INFORMATION AND EXHIBITS
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c. Exhibits.
10 Amendment dated as of September 19, 1995 to the
Employment Agreement dated as of January 1, 1991, as
amended on April 1, 1991, June 6, 1991, January 1, 1993,
April 1, 1994, and April 28, 1995 between La Jolla
Management Corp., a Delaware corporation and a wholly-owned
subsidiary of the Company, and David C. Flaugh.
22 Press Release dated September 19, 1995 issued by the
Company.
SIGNATURES
Pursuant to the requirements of the Securities 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
Date: September 21, 1995 By: /s/ Bradford T. Smith
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Name: Bradford T. Smith
Title: Executive Vice
President, General Counsel
and Secretary
EXHIBIT INDEX
Exhibit
Number Exhibit
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10 Amendment dated as of September 19, 1995 to the
Employment Agreement dated as of January 1, 1991, as
amended on April 1, 1991, June 6, 1991, January 1, 1993,
April 1, 1994, and April 28, 1995 between La Jolla
Management Corp., a Delaware corporation and a wholly-owned
subsidiary of the Company, and David C. Flaugh.
22 Press Release dated April 28, 1995 issued by the
Company.
EXHIBIT 10
AMENDMENT TO EMPLOYMENT AGREEMENT
AMENDMENT dated as of September 19th, 1995 with respect to the
Employment Agreement (the "Employment Agreement") dated as of January 1,
1991, as amended on April 1, 1991, June 6, 1991, January 1, 1993, April 1,
1994, and April 28, 1995, by and between La Jolla Management Corp., a
Delaware corporation ("La Jolla"), and David C. Flaugh ("Executive").
The Employment agreement is hereby modified as follows:
1. Paragraph 1 of the April 28, 1995 Amendment shall be
amended by deleting December 31, 1995 and substituting
"September 19, 1995" wherever December 31, 1995 appears in
said Paragraph.
2. Paragraph 2 and 3 of the April 28, 1995 Amendment to the
Employment Agreement shall be amended by deleting "January
1, 1996" and substituting "September 20, 1995" wherever
"January 1, 1996" appears in said Paragraphs.
3. Except as expressly modified above, all other terms and
conditions of the Employment Agreement, as amended, shall
remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have duly executed
this Amendment as of the day and year first above written.
LA JOLLA MANAGEMENT CORP.
By: /s/ Bradford T. Smith
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Name: Bradford T. Smith
Title: Executive Vice President,
General Counsel and
Secretary
EXECUTIVE
/s/ David C. Flaugh
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Name: David C. Flaugh
EXHIBIT 22
[Letterhead of Laboratory Corporation of America Holdings]
Contact: Pam Sherry
Laboratory Corporation of America
619-550-0600 or
212-484-7700 (9/19 and 9/20 only)
FOR IMMEDIATE RELEASE
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LABORATORY CORPORATION OF AMERICA HOLDINGS TO UPDATE
SHAREHOLDERS AT ANNUAL MEETING ON EVENTS SINCE MERGER
Will Comment on Industry Trends, Merger Synergies, Revenues
and Earnings, Management Changes
BURLINGTON, NC, SEPTEMBER 19, 1995 -- Laboratory Corporation of
AmericaServicemark Holdings (LabCorpServicemark) (NYSE: LH) is to update
shareholders at its annual meeting tomorrow morning on events since April
28, when the merger of National Health Laboratories and Roche Biomedical
Laboratories resulted in the formation of LabCorp.
Dr. James B. Powell, President and Chief Executive Officer, states
in his comments to shareholders, "The spread of managed care will continue
to transform the entire landscape of American health care. There will be
increasing emphasis on delivering high quality at an affordable price by a
broad range of providers including managed-care companies, physicians and
hospital alliances. We are working swiftly and surely to create the
substantial economies of scale and deliver both the quality and efficiency
that this highly costconscious environment demands."
Dr. Powell says that the implementation of synergies ensuing from the
merger is ahead of schedule and above original projections. These
synergies, originally estimated at $90 million, are expected to result in
cost savings of approximately $110 million by mid1997. "We are moving
forward as a strong industry leader," Dr. Powell says, "well positioned to
deliver high quality in a price-driven marketplace to a broad range of
customers by offering comprehensive basic services and a value-added niche
testing menu. We believe these synergies, generated in the difficult
market environment we face validate the benefits of our merger."
Dr. Powell notes that the beneficial effects of the company's
progress in achieving synergy as a merged business are expected to be
essentially offset until early 1996 by adverse industry factors concerning
diagnostic-test utilization and pricing, driven in part by the growth of
managed-care health plans and by continued strong competitive pressures.
The greater than expected declines in utilization rates and base pricing
that negatively impacted the second quarter of this year have leveled off
but continue to be above budgeted levels.
LabCorp's third quarter results will also be negatively impacted by a
larger than anticipated weakness in its Florida operations. The company
anticipates a return to normal margins in Florida by the end of the first
quarter of 1996.
Meanwhile, LabCorp is proceeding with its program, implemented two
years ago, to acquire small and mid-size laboratories, though at a slower
pace while the company completes its merger-related synergy program.
Dr. Powell states that the combination of the above factors is having
an adverse impact on revenues and earnings near-term. He cautions that
earnings for the third quarter will likely be below 1994's third quarter
results of $0.16 per share, due principally to the growth of managed care,
pricing pressures and utilization rates below budgeted levels. At the same
time he emphasizes that the longer-term outlook for the company remains
positive. "Our success at realizing synergies indicates that we can cut
deeper into the merged company's cost base than we had originally
anticipated. Positive comparisons with previous results should begin in
the fourth quarter," Dr. Powell says. "Overall, LabCorp's strength in key
markets, economics of scale and merger-related synergies position it well
to capitalize on future growth opportunities in the health care market."
The acquisition of MedExpress earlier this year continues to yield
revenues and operating income that are in line with expectations. In
addition, since July 1, 1995, the company's business from hospital
affiliations and institutional relationships -- including agreements
relating to reference testing management, shared services and joint
marketing -- has totaled more than $20 million in contracts already
completed or likely to be signed by year-end.
Separately, LabCorp reports that David C. Flaugh has resigned as
Executive Vice President and Chief Operating Officer. "Since the merger,
we've been discussing where the person in the position of COO should be
located. The company feels that the COO needs to be in Burlington to be
most effective," Dr. Powell states. "We've had conversations with Dave
over the last three months on this issue, and Dave chose not to relocate,
for very understandable personal reasons. We accept Dave's resignation
with great regret and wish him well in his next endeavor.
"However, we will capitalize on the great depth and experience of our
current management team. Accordingly, David C. Weavil, LabCorp's current
Chief Administrative Officer and former Chief Operating Officer of Roche
Biomedical Laboratories, Inc., will succeed Mr. Flaugh as Chief Operating
Officer. Robert E. Whalen, currently Executive Vice President of LabCorp,
will assume an expanded operating role in the company and will become Chief
Administrative Officer. Our management team is fully prepared to work
together to pursue our strategic growth objectives and realize the
synergies inherent in our recently merged operations."
Dr. Powell also notes the appointments of Gail Page to Senior Vice
President, Standardization and Automation, and Mike Snyder to Senior Vice
President, Northeast Operations.
Laboratory Corporation of America Holdings is a national clinical
laboratory organization with estimated annualized revenues in excess of
$1.7 billion. The company operates 40 primary testing facilities
nationally, offering more than 1,700 different clinical assays, from
routine blood analysis to more sophisticated technologies. LabCorp
performs diagnostic tests for physicians, managed care organizations,
hospitals, clinics, nursing homes, industrial companies and other clinical
laboratories.
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