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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
OCTOBER 22, 2001
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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 October 22, 2001.
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,
General Counsel, Secretary
and Compliance Officer
Date: October 22, 2001
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.
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
The Clinical Laboratory Testing Market
US market is approximately $32-34 billion
CLINICAL LABORATORY TESTING INDEPENDENT CLINICAL LABORATORIES
Hospitals 49% All others 85%
Independent Clinical Labs 39% LabCorp($1.919b) 15%
Physician Offices 12%
Source: Company estimates, industry reports & 2000YE revenue
for LabCorp
2001 Strategic Goals
- Maintain national coverage for all key customers
- Expand upon leading position in genomic testing
- Evaluate appropriate acquisition candidates
- Continue to move to single billing system
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: VIRCO:
- Cancer - Infectious Disease - HIV Genotyping &
- Genetics Hepatitis C Phenotyping
- Infectious Disease - Cancer:
(GENOSURE) Melanoma VIROLOGICS:
Breast - HIV Phenotyping
CLINICAL TRIALS: VIRO-MED: EXACT SCIENCES:
- Drug metabolism - Infectious Disease - Colorectal Cancer
HIV
POSITITVE OUTCOMES: Hepatitis ALPHA:
(being tested) - Extra Capacity - PCR Plasma
- Real-time PCR
CENTER FOR GENETIC SERVICES:
- Expanded Genetics
Capabilities in Southwest
Financial Performance
Price & Volumes: Trends by Payor Type
YTD SEPT
1999 2000 2001
PPA Accessions PPA Accessions PPA Accessions
$ millions $ millions $ millions
----------------- ---------------- -----------------
Client (Physicians) 21.67 27.0 22.70 27.1 23.90 21.1
Patient 92.56 2.3 102.87 2.2 111.57 1.9
Third Party 27.75 11.7 29.80 10.3 32.37 8.8
(MC/MD/Insurance)
Managed Care
- Capitated 9.37 8.4 8.89 10.6 8.90 8.9
- Fee for service 39.28 12.7 42.32 16.0 43.24 12.8
------ ---- ------ ---- ------ ----
Total 27.41 21.1 28.97 26.6 29.15 21.7
------ ---- ------ ---- ------ ----
LabCorp Total $27.35 62.1 $28.98 66.2 $30.56 53.5
====== ==== ====== ==== ====== ====
Financial Performance
Revenue Analysis by Business Area
YTD SEPT 2000
Revenue Accns %Accns PPA
$Million 000 to total $
--------- ------- -------- ------
Esoteric:
Genomic
(CMBP/NGI) 94.6 858.5 1.7% 110.24
Other Esoteric
(Powell CET) 134.9 3,000.4 6.0% 44.98
Core: 1,203.8 46,181.4 92.3% 26.06
------- -------- ------ -----
Total: 1,433.3 50,040.3 100.0% 28.64
======= ======== ====== =====
Financial Performance
Revenue Analysis by Business Area
YTD SEPT 2001 00 vs 01
PPA
Revenue Accns %Accns PPA Incr/
$Million 000 to total $ (Decr)
--------- ------ --------- ------- ---------
Esoteric:
Genomic
(CMBP/NGI) 123.3 1,029.9 1.9% 119.71 8.6%
Other Esoteric
(Powell CET) 146.9 3,470.1 6.5% 42.34 (5.9)%
Core: 1,365.8 49,036.3 91.6% 27.85 6.9%
------- -------- ------ ------ ------
Total: 1,636.0 53,536.3 100.0% 30.56 6.7%
======= ======== ====== ====== =====
Third Quarter Operating Results
09/30/00 09/30/01
-------- --------
Revenue 488.1 560.9
Operating Expense 418.8 460.6
----- -----
Operating Income 69.3 100.3
===== =====
Margin 14.2% 17.9%
EBITDA 92.1 125.4
===== =====
Margin 18.9% 22.3%
Bad Debt % to revenue 10.2% 9.0%
DSO 70 62
2001 Third Quarter Financial Achievements
- Increased revenues 14.9% (volume 8.6%; price 6.3%)
- Increased EBITDA 36.1%
- Increased diluted EPS 55.3%*
- Repaid $412.5 million in outstanding bank debt with
proceeds from the issuance of zero coupon
convertible subordinated notes
* Before extraordinary item and one-time charge for early
extinguishment of debt
Nine Month Operating Results
YTD 9/00 YTD 9/01
-------- --------
Revenue 1,433.3 1,636.0
Operating Expense 1,235.4 1,345.8
------- -------
Operating Income 198.0 290.2
======= =======
Margin 13.8% 17.7%
EBITDA 263.5 363.8
======= =======
Margin 18.4% 22.2%
Bad Debt % to revenue 10.2% 9.4%
DSO 70 62
2001 YTD Accomplishments
- Acquired Path Lab in New England
- Acquired Viro-Med in Minneapolis
- 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
- Entered strategic partnership with Alpah Therapeutic
Corporation for plasma testing
- First FDA approved HIV and Hepatitis C molecular
tests for Plasma Screening ("virtual kits")
2001 Nine Month Financial Achievements
- Increased revenues 14.2% (volume 7.2%; price 7.0%)
- Increased EBITDA 38.1%
- Increased diluted EPS 57.1%*
- DSO decline of 6 days from December 2000
- Repaid all outstanding bank debt with $500 million raised by
issuance of convertible subordinated notes
* Before extraordinary item and one-time charge for early
extinguishment of debt
Quarterly DSO Trend
DSO Trend December '97 through September '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
Financial Goals for 2001
- Increase overall revenues by approximately 13.5% compared to 2000
- Bad debt rate of 9.0% of sales in fourth quarter
- EBITDA margins of approximately 21% of sales
- EPS growth of approximately 55% compared to 2000
- Lower DSO to the mid 60's range
Financial Goals for 2002
- Increase overall revenues by approximately 12% compared
- to 2001
- Bad debt rate of 9.0% of sales
- EPS growth of approximately 33% compared to 2001 under existing
accounting rules
- Lower DSO to the 60 day range
- Nonamortization of goodwill impact of $26 million, with increase
in diluted EPS of approximately $0.36
Opportunity for Investors
- A proven strategy for growth
- LabCorp is a pioneer in identifying and commercializing
innovative technologies-the first to fully embrace molecular
diagnostics
- LabCorp's national infrastructure connects large scale
proficiency with wide scale technological expertise
- New advances in scientific research will generate growth and
demand for molecular testing
- Strong balance sheet
Other Financial Information
September 30, 2001
($ in millions,except per share amounts)
Q1 01 Q2 01 Q3 01
----- ----- -----
Depreciation $13.8 $14.6 $ 15.3
Amortization $ 9.2 $10.9 $ 9.1
Goodwill amortization $ 6.0 $ 7.8 $ 6.6
Diluted EPS before goodwill amortization $ 0.70 $ 0.84 $ 0.82
Capital expenditures $12.7 $20.9 $ 25.4
Cash flows from operations $64.5 $74.2 $113.7
Bad debt as a percentage of sales 9.70% 9.40% 9.00%
Effective interest rate on debt 5.77% 5.67% 2.00%
Days sales outstanding 67 64 62
Other Financial Information
September 30, 2001
($ in millions,except per share amounts)
YTD
Sept 01
-------
Depreciation $ 43.7
Amortization $ 29.9
Goodwill amortization $ 20.4
Diluted EPS before goodwill amortization $ 2.36
Capital expenditures $ 59.0
Cash flows from operations $252.4
Bad debt as a percentage of sales 9.36%
Effective interest rate on debt N/A
Days sales outstanding 62