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 30, 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
Laboratory Corporation of America -Registered Trademark-
Holdings (LabCorp -Registered Trademark-)(NYSE:LH) announced results
for the quarter and nine months ended September 30, 2002.
Exhibits:
99.1 Press release of the Company dated October 30, 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: October 30, 2002
Laboratory Corporation of America-Registered Trademark- Holdings
358 South Main Street
Burlington, NC 27215
Telephone: 336-584-5171
FOR IMMEDIATE RELEASE
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Contact: 336-436-4855 Shareholder Direct: 800-LAB-0401
Pamela Sherry www.labcorp.com
Investor@labcorp.com
LABORATORY CORPORATION OF AMERICA-REGISTERED
TRADEMARK- ANNOUNCES THIRD QUARTER RESULTS
Genomic Testing Drives Revenue Growth of 16.8 Percent, EBITDA
Margins of 22.3 Percent and Strong Cash Flow Increases
Burlington, NC, October 30, 2002 - Laboratory Corporation of America-
Registered Trademark-Holdings (LabCorp-Registered Trademark-) (NYSE:
LH) today announced results for the quarter and nine months ended
September 30, 2002.
Third Quarter Results:
Revenues in the third quarter were $655.2 million, an increase of 16.8
percent compared to the same period in 2001, and reflect the acquisition of
Dynacare Inc. on July 25, 2002. Testing volume, measured by accessions,
increased 13.2 percent compared to the prior year, or 4.3 percent on a pro
forma basis, assuming that Dynacare had been part of LabCorp since
January 1, 2001. Price per accession increased 3.6 percent compared to third
quarter 2001.
Net income for the quarter increased to $67.5 million, or $0.46 per diluted
share, compared to 2001 third quarter net income of $51.2 million, or $0.41
per diluted share, before special items in both periods and adjusted for the
required change in goodwill accounting (SFAS 142) and the special items.
The special items relate to a $17.5 million pre-tax restructuring charge
recorded in the third quarter of 2002 in connection with the integration of
Dynacare, which contributed to an earnings loss of $0.07 per share, and an
extraordinary item and one-time charge in the third quarter of 2001 relating
to early extinguishment of debt.
Earnings before interest, taxes, depreciation and amortization (EBITDA)
were $145.9 million for the third quarter, or 22.3 percent of net sales,
compared to $125.3 million, or 22.3 percent of net sales, for the same period
in 2001, adjusted for the special items. Bad debt expense improved to 8.4
percent of sales and days sales outstanding were 56 days. During the quarter,
the company repaid $80 million of the $200 million in debt borrowed on
July 25 in connection with the acquisition of Dynacare. Operating cash flow
was $121.1 million and the cash balance at the end of the quarter was $98.4
million.
"Our results continue to demonstrate high quality of earnings, with solid
revenue growth, substantial EBITDA margins and strong cash generation,"
said Thomas P. Mac Mahon, chairman and chief executive officer. "Since
the end of July, we have made excellent progress in integrating Dynacare.
The integration process is ahead of schedule, with significant growth
opportunities expected in selected U.S. markets."
"Additionally, LabCorp continues to concentrate on further expanding its
offering of genomic tests, with volume growth in this segment exceeding 20
percent, " noted Mr. Mac Mahon. "Over the past several years, we have
demonstrated that LabCorp's genomic strategy to build upon it's capabilities
in this arena is fundamentally sound. This strategy remains our cornerstone
for long-term revenue growth, and we expect to offer many more important
genomic tests in coming years. Recently, we announced an exclusive
agreement with Celera Diagnostics to collaborate on new tests for
Alzheimer's disease and breast and prostate cancer. This promising strategic
alliance is the latest in a series of partnerships, including exclusive
relationships with Myriad Genetics and EXACT Sciences, which continue to
solidly position LabCorp's genomics testing business for future profitable
growth."
Nine Month Results:
For the nine-month period ended September 30, 2002, revenues were
$1,857.6 million, an increase of 13.5 percent compared to the same period in
2001, and reflect the acquisition of Dynacare on July 25, 2002. Testing
volume, measured by accessions, increased 9.5 percent compared to the
prior year, or 6.5 percent on a pro forma basis, assuming that Dynacare had
been part of LabCorp since January 1, 2001. Price per accession increased
4.0 percent compared to the 2001 period.
Net income was $211.9 million, or $1.47 per diluted share, compared to
$146.8 million in 2001, or $1.18 per diluted share, before the special items
in both periods and adjusted for the required change in goodwill accounting.
EBITDA was $439.9 million, or 23.7 percent of sales, compared to $363.8
million, or 22.2 percent of sales, adjusted for special items in both years.
Operating cash flow was $326.4 million.
A live broadcast of LabCorp's quarterly conference call on October 31, 2002
will be available online at www.labcorp.com or at www.streetevents.com
beginning at 9:00 a.m. Eastern Time, with an online rebroadcast continuing
through December 1, 2002. The live call at 9:00 a.m. is also available in a
listen-only mode by dialing 212-896-6076. A telephone replay of the call
will be available through November 7, 2002 and can be heard by dialing
800-633-8284 (402-977-9140 for international callers). The access code for
the replay is 209-21-824.
The first national clinical laboratory to fully embrace genomic testing,
Laboratory Corporation of America-Registered Trademark- Holdings
(LabCorp-Registered Trademark-) has been a pioneer in commercializing
new diagnostic technologies. As a national laboratory with annual revenues
of $2.2 billion in 2001 and over 19,000 employees, the Company offers
more than 4,000 clinical tests ranging from routine analyses to sophisticated
molecular diagnostics. Serving over 200,000 clients nationwide, LabCorp
combines its expertise in innovative clinical testing technology with its
Centers of Excellence. The Center for Molecular Biology and Pathology, in
Research Triangle Park, North Carolina, offers state-of-the-art molecular
gene-based testing in infectious disease, oncology and genetics. Its National
Genetics Institute in Los Angeles is an industry leader in developing novel,
highly sensitive polymerase chain reaction (PCR) methods for testing
hepatitis C and other blood borne infectious agents. LabCorp's Minneapolis-
based ViroMed offers molecular microbial testing using real time PCR
platforms, while its Center for Esoteric Testing in Burlington, North
Carolina, performs the largest volume of specialty testing in the network.
LabCorp's clients include physicians, state and federal government,
managed care organizations, hospitals, clinics, pharmaceutical and Fortune
1000 companies, and other clinical laboratories.
Each of the above forward-looking statements is 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. Further information on potential factors that could affect LabCorp's
financial results is included in the Company's Form 10-K for the year ended
December 31, 2001 and subsequent SEC filings.
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LABORATORY CORPORATION OF AMERICA HOLDINGS
Consolidated Statements of Operations
(Dollars in millions, except per share data - shares in millions)
Three Months Ended
September 30,
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2002 2001
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Net sales $ 655.2 $ 560.9
Cost of sales 381.9 322.9
Selling, general and administrative 153.4 128.0
Amortization of intangibles and
other assets 6.2 9.7
Restructuring and other special charges 17.5 --
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Operating income 96.2 100.3
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Other income (expense) -- (0.7)
Interest income 0.9 --
Interest expense (5.3) (6.5)
Income from equity investments, net 6.2 --
Termination of interest rate swap agreement -- (8.9)
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Earnings before income taxes and
extraordinary loss 98.0 84.2
Provision for income taxes 40.7 37.9
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Net earnings before extraordinary loss $ 57.3 $ 46.3
Extraordinary loss, net of tax benefit -- 3.2
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Net earnings after extraordinary loss $ 57.3 $ 43.1
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Net earnings before extraordinary loss
and special charges $ 67.5 $ 51.2
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Diluted earnings per common share:
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Net earnings before extraordinary loss $ 0.39 $ 0.33
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Net earnings after extraordinary loss $ 0.39 $ 0.31
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Net earnings before extraordinary loss
and special charges $ 0.46 $ 0.36
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Weighted average shares oustanding 145.7 141.3
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EBITDA $ 145.9 $ 125.3
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Nine Months Ended
September 30,
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2002 2001
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Net sales $1,857.6 $1,636.0
Cost of sales 1,049.7 935.5
Selling, general and administrative 427.3 380.4
Amortization of intangibles and
other assets 16.4 29.9
Restructuring and other special charges 17.5 --
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Operating income 346.7 290.2
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Other income (expense) (0.4) (1.9)
Interest income 2.9 1.5
Interest expense (13.7) (22.8)
Income from equity investments, net 6.2 --
Termination of interest rate swap agreement -- (8.9)
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Earnings before income taxes and
extraordinary loss 341.7 258.1
Provision for income taxes 140.1 116.2
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Net earnings before extraordinary loss $ 201.6 $ 141.9
Extraordinary loss, net of tax benefit -- 3.2
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Net earnings after extraordinary loss $ 201.6 $ 138.7
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Net earnings before extraordinary loss
and special charges $ 211.8 $ 146.8
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Diluted earnings per common share:
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Net earnings before extraordinary loss $ 1.40 $ 1.00
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Net earnings after extraordinary loss $ 1.40 $ 0.98
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Net earnings before extraordinary loss
and special charges $ 1.47 $ 1.04
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Weighted average shares oustanding 143.7 140.9
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EBITDA $ 439.9 $ 363.8
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LABORATORY CORPORATION OF AMERICA HOLDINGS
Consolidated Balance Sheets
(Dollars in millions, except per share data - shares in
millions)
September 30, December 31,
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2002 2001
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Cash and cash equivalents $ 98.4 $ 149.2
Accounts receivable, net 418.7 365.5
Property, plant & equipment 355.3 309.3
Intangible assets, net 1,610.8 968.5
Other assets 170.4 137.1
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$ 2,653.6 $ 1,929.6
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Total bank debt $ 123.7 $ --
Zero coupon-subordinated notes 510.3 502.8
Other liabilities 444.4 341.3
Shareholders' equity 1,575.2 1,085.5
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$ 2,653.6 $ 1,929.6
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Notes to Financial Tables
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1) During the third quarter of 2002, the Company recorded restructuring
and other special charges of $17.5 million, principally relating to
costs that will be
incurred as part of its integration of the Dynacare acquisition, which
closed on July 25, 2002.
2) During the third quarter of 2001, the Company recorded an extraordinary
loss of $3.2 million (net of tax benefit) relating to the write-off of
unamortized bank fees associated with the Company's term debt, which was
repaid in September of 2001. The Company also recorded a charge of $8.9
million as a result of a payment made to a bank to terminate an interest
rate swap agreement tied to the Company's term loan.
3) EBITDA represents income before net interest expense, income taxes,
depreciation and amortization and before the loss on termination of an
interest rate swap agreement and extraordinary item in 2001 and
restructuring and other charges principally relating to the integration
of the Dynacare acquisition in 2002. EBITDA also includes the Company's
proportional share of the underlying EBITDA from the income from equity
investments.
4) In July 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 142, "Goodwill and Other
Intangibles" ("SFAS 142"), which the Company adopted on January 1, 2002.
The following table presents net income and diluted earnings per common
share data adjusted to exclude the amortization of goodwill, assuming
that SFAS 142 had been in effect for the periods presented (in millions,
except per share data):
Three Months Ended Nine Months Ended
September 30, 2001 September 30, 2001
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Net income:
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Adjusted net earnings before
extraordinary loss $ 52.5 $ 161.1
Adjusted net earnings after
extraordinary loss 49.3 157.9
Adjusted net earnings before
extraordinary loss and
special charges 57.4 166.0
Diluted earnings per common share:
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Adjusted earnings per common
share before extraordinary loss $ 0.37 $ 1.14
Adjusted earnings per common
share after extraordinary loss 0.35 1.12
Adjusted earnings per common
share before extraordinary loss
snd special charges 0.41 1.18