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
July 22, 2004
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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 12. Results of Operations and Financial Conditions.
Summary information of the Company dated July 22, 2004.
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: July 22, 2004
This slide presentation 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, 2003 and subsequent
filings.
LabCorp's Investment and Performance Fundamentals
- Significant Cash Generator
- EBITDA Percentage of Sales: 26.2% YTD through June 30, 2004
- 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 78%
Independent Clinical Labs 39% LabCorp 22%
Physician Offices 12%
Source: Company estimates, industry reports and 2003 revenue
for LabCorp.
Profile of LabCorp
- A leader in the specialty (esoteric/genomic) testing market and second
largest clinical laboratory company in North America
- Conducts testing on more than 350,000 specimens daily and offers more than
4,400 routine and esoteric/genomic tests
- Provides quality lab services to more than 220,000 physicians and other
health care providers
- More than 23,000 employees nationwide
MAP OF PRIMARY TESTING LOCATIONS & PSC's
LabCorp's Strategy
To lead the industry in achieving long-term growth and profitability
by strengthening our nationwide core testing business and expanding our higher-
growth, higher-value esoteric and genomic businesses.
Strategic Approach Connects Two Key Business Areas
1) STRENGTHEN CORE TESTING
- New and Expanded Managed Care Relationships
- Selected Internal Expansion
- Acquire Core Testing Labs
2) EXPAND GENOMIC AND ESOTERIC TESTING
- Internal Development of New, Medically Necessary Tests
- Acquire High-Growth, High-Value Genomic/Esoteric Labs
- License and Partner to Bring New Tests and Technology to Market
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
PATH LABS - Alzheimer's Disease
- Hospital Esoteric
DIANON EXACT SCIENCES
- Cancer/Anatomic - Colorectal Cancer
Pathology
ATHEROTECH
- VAP Cholesterol
BIOPREDICTIVE
- Liver Fibrosis
Second Quarter Operating Results
($ in millions)
6/30/03 6/30/04
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Revenue $ 743.8 $ 784.3
Operating Expense $ 600.9 $ 620.1
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Operating Income $ 142.9 $ 164.2
------- -------
Margin 19.2% 20.9%
EBITDA $ 187.4 $ 210.8
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Margin 25.2% 26.9%
Bad Debt % to revenue 7.44% 6.25%
DSO 54 52
1) For definition of EBITDA and a reconciliation to the
most comparable measure under Generally Accepted Accounting
Principles, see Company's 2nd quarter 2004 earnings release
furnished on Form 8-K on July 22, 2004.
2004 Second Quarter Financial Achievements
- Diluted EPS of $0.70
- EBITDA margin of 26.9% of sales
- Operating cash flow of $146.7 million
- Increased revenues 5.5% (volume approx. 5.0%; price 0.5%)
- Repurchased approximately $115 million of LabCorp stock
Six-Month Operating Results
($ in millions)
YTD YTD
6/30/03 6/30/04
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Revenue $1,455.9 $1,536.8
Operating Expense $1,188.3 $1,228.3
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Operating Income $ 267.6 $ 308.5
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Margin 18.4% 20.1%
EBITDA* 353.1 401.9
------- -------
Margin 24.3% 26.2%
Bad Debt % to revenue 7.69% 6.49%
DSO 54 52
* For definition of EBITDA and a reconciliation to the
most comparable measure under Generally Accepted Accounting
Principles, see Company's 2nd quarter 2004 earnings release
furnished on Form 8-K on July 22, 2004.
2004 Six-Month Financial Achievements
- Increased revenues 5.6% (primarily volume)
- EBITDA margin of 26.2% of sales
- Diluted EPS of $1.30
- Operating cash flow of $294.3 million
- Repurchased approximately $182 million of LabCorp stock
Financial Performance
Price & Volumes: Trends by Payor Type
2002 2003 YTD Jun 2004
PPA Accessions PPA Accessions PPA Accessions
----- ---------- ---- ---------- ---- -----------
$ millions $ millions $ millions
----------------- ---------------- -----------------
Client (Physicians) 26.27 29.6 27.07 31.7 26.54 16.5
Patient 119.93 2.3 118.48 2.5 123.55 1.3
Third Party 31.87 14.8 34.25 18.1 34.08 9.4
(MC/MD/Insurance)
Managed Care
- Capitated 9.28 13.1 9.95 12.9 10.14 6.6
- Fee for service 44.79 19.3 45.68 22.7 45.77 12.1
------ ---- ------ ---- ------ ----
Total 30.45 32.4 32.74 35.6 33.12 18.7
------ ---- ------ ---- ------ ----
LabCorp Total $31.71 79.1 $33.43 87.9 $33.49 45.9
====== ==== ====== ==== ====== ====
Financial Performance
Revenue Analysis by Business Area
YTD JUN 2003
Revenue Accns %Accns PPA
$Million 000 to total $
--------- -------- -------- ------
Genomic 140.3 1,144.5 2.6% 122.58
Identity/Gene
Probes 76.3 1,742.8 4.0% 43.78
-------------- ------- --------- ------ ------
All Genomic 216.6 2,887.3 6.6% 75.01
Other Esoteric 122.9 3,008.1 6.9% 40.87
Histology 97.9 1,065.2 2.5% 91.94
-------------- ------- --------- ----- -------
All Genomic/
Esoteric 437.4 6,960.6 16.0% 62.85
Core 1,018.5 36,571.5 84.0% 27.85
-------------- ------- --------- ------ ------
Total: 1,455.9 43,532.1 100.0% 33.44
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YTD JUN 2004 04 vs 03
PPA
Revenue Accns %Accns PPA Incr/
$Million 000 to total $ (Decr)
--------- ------- --------- ------- ---------
Genomic 144.5 1,237.7 2.7% 116.73 (4.8%)
Identity/Gene
Probes 82.5 1,884.2 4.1% 43.80 0.1%)
-------------- ------ -------- ----- ------ -----
All Genomic 227.0 3,121.9 6.8% 72.71 (3.1%)
Other Esoteric 144.3 3,497.5 7.6% 41.26 1.0%
Histology 98.4 1,063.3 2.3% 92.55 0.7%
-------------- ------- -------- ----- ------ -----
All Genomic/
Esoteric 469.7 7,682.7 16.7% 61.14 (2.7%)
Core 1,067.1 38,210.6 83.3% 27.93 0.3%
-------------- ------- -------- ----- ------ -----
Total: 1,536.8 45,893.3 100.0% 33.49 0.2%
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Cash Investment Strategy
- $90 to $100 million in capital expenditures to support strategic
growth plan
- $50 to $60 million for selected acquisitions (core, esoteric or
anatomic pathology labs)
- Share repurchases - $250 million stock repurchase program
- Retain flexibility in utilizing remaining cash
Financial Guidance for 2004
- Revenue growth of approximately 5% to 7% compared to 2003,
including small acquisitions and/or new contracts
- EBITDA margins of approximately 25.5% of sales
- EPS in the range of $2.55 to $2.60
- Free cash flow* of approximately $475 to $500 million (net of
Cap Ex of approximately $100 million)
- Bad debt rate of 6.25% for the 3rd and 4th quarters of 2004
- Net interest expense of approximately $36 million
- Tax rate of 41%
* Free cash flow is defined as operating cash flow, minus capital expenditures.
Opportunity for Investors
- Long-term industry trends appear favorable
- Visible growth drivers
- Low P/E relative to market valuations
- Significant free cash flow - multiple opportunities
to increase shareholder value
- Strong balance sheet - Investment Grade ratings (S&P,
Moody's)
- Solid growth potential driven by genomic strategy
Other Financial Information
June 30, 2004
($ in millions)
Q1 04 Q2 04 YTD 2004
-------- ------- ----------
Depreciation $ 23.0 $ 23.3 $ 46.3
Amortization $ 10.3 10.5 20.8
Capital expenditures $ 20.2 22.4 42.6
Cash flows from operations $ 147.6 146.7 294.3
Bad debt as a percentage of sales 6.75% 6.25% 6.49%
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) 5.38% 5.38% 5.38%
Revolving credit facility
(weighted average) 1.95% 2.21% 2.21%
Days sales outstanding 54 52 52