SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
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[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
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[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
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Section 240.14a-12
Laboratory Corporation of America Holdings
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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pursuant to Exchange Act Rule 0-11:1/
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Notes:
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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, 2001 and subsequent
filings.
Security holders of Dynacare Inc. are urged to read the proxy statement
regarding the proposed Plan of Arrangement when it is finalized and
distributed to security holders because it will contain important
information for making an informed decision. The definitive proxy
statement will be filed with the U.S. Securities and Exchange Commission
the ("SEC") by Dynacare, and security holders may obtain a free copy of
such proxy statement when it becomes available, and other documents filed
with the SEC by Dynacare, at the SEC's website at www.sec.gov. The definitive
proxy statement, when it becomes available, and other documents filed by
Dynacare, may also be obtained free of charge by directing a request to
Dynacare Inc., 14900 Landmark Boulevard, Suite 200, Dallas, Texas 75254,
attention: Zbig S. Biskup, Executive Vice President and Chief Financial
Officer and Secretary.
Dynacare and its directors and executive officers may be deemed to be
participants in the solicitation of proxies from the security holders of
Dynacare in favor of the transaction. The directors and executive officers
of Dynacare and their beneficial ownership of Dynacare common stock as of
April 15, 2002 are set forth in the proxy statement for the 2002 annual meeting
filed by Dynacare on April 30, 2002. LabCorp and its directors and executive
officers may be deemed to be participants in the solicitation of proxies from
the security holders of Dynacare in favor of the transaction. The directors
and executive officers of LabCorp are set forth in the proxy statement for the
2002 annual meeting filed by LabCorp on April 15, 2002. Security holders of
Dynacare may obtain additional information regarding the interests of such
participants by reading the definitive proxy statement when it becomes
available.
KEY TRANSACTION FACTS:
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Purchase Price - $23.00 per share consisting of $11.50 cash
and 0.1164 shares of LabCorp common stock
(approx. 2.4 MM shares) per share of
Dynacare stock
EPS Accretive - 2002 = $0.02 to $0.03
- 2003 = $0.20 to $0.25
Enterprise Value - $660 million
EBITDA Multiple - 11.4x 2002 EBITDA without synergies
- 6.4x with peak synergies ($45 million
in 2004)
Conditions - Regulatory approval
- Dynacare shareholder approval
Closing - Late Q2 or early Q3 2002
DYNACARE TRANSACTION SPECIFICS
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Financing structure and assumptions:
- LabCorp common stock - $240 million
- Cash - $200 million
- Bridge loan - $150 million
- Borrowings under $300 million revolver -
approximately $113 million
- Pay off Dynacare's existing $195 million
of senior unsecured notes, plus approximately
$7 million call premium
PROFILE OF DYNACARE:
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- Independent clinical laboratory offering services in
certain regions of the U.S. and Canada
- 24 primary laboratories, 2 esoteric, 115 rapid response
labs and 302 patient service centers
- Operates in 21 states in U.S. and in Canada
- Offers more than 1,000 different tests
- Current operations include four U.S. joint
ventures with hospital partners
- Dynacare has announced its plan to terminate two of
the joint ventures during the second quarter of 2002
MAP OF DYNACARE LAB LOCATIONS
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DYNACARE FINANCIALS:
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- Dynacare accounts for its financial statements using
Canadian GAAP
- The term "Adjusted EBITDA" is used for purposes
of comparing Canadian and U.S. GAAP
- Adjusted EBITDA under U.S. GAAP is being defined as
EBITDA plus earnings from equity investments
plus proportional D&A and interest expense from
such equity investments
- Ultimately, adjusted EBITDA under U.S. GAAP
is very similar to EBITDA under Canadian GAAP
DYNACARE FINANCIALS:
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Dynacare Accounting Reconciliation - Income Statements
(US$ in millions except per share amounts)
2001 Actuals under Differing GAAPs
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Canadian U.S. Variance
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Revenues $ 402.4 $ 237.9 $(164.4)
EBITDA $ 52.9 $ 14.3 $ (38.6)
Plus: Earnings from equity investments 0.0 30.7 30.7
Plus: JV depreciation and amortization 0.0 6.4 6.4
Plus: JV interest expense 0.0 0.5 0.5
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Adjusted EBITDA $ 52.9 $ 51.8 $ (1.1)
EBIT $ 35.0 $ 3.4 $ (31.6)
Plus: Earnings from equity investments 0.0 30.7 30.7
Plus: JV interest expense 0.0 0.5 0.5
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Adjusted EBIT $ 35.0 $ 34.6 $ (0.4)
Net earnings (loss) $ 11.7 $ 17.3 $ 5.5
Earnings per share $ 0.66 $ 0.96 $ 0.31
2000 Actuals under Differing GAAPs
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Canadian U.S. Variance
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Revenues $ 352.9 $ 203.9 $(149.0)
EBITDA $ 48.1 $ 11.1 $ (37.0)
Plus: Earnings from equity investments 0.0 29.6 29.6
Plus: JV depreciation and amortization 0.0 5.5 5.5
Plus: JV interest expense 0.0 0.5 0.5
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Adjusted EBITDA $ 48.1 $ 46.7 $ (1.4)
EBIT $ 31.5 $ 0.7 $ (30.8)
Plus: Earnings from equity investments 0.0 29.6 29.6
Plus: JV interest expense 0.0 0.5 0.5
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Adjusted EBIT $ 31.5 $ 30.8 $ (0.7)
Net earnings (loss) $ 6.0 $ (0.8) $ (6.8)
Earnings per share $ 0.46 $ (0.06) $ (0.52)
1999 Actuals under Differing GAAPs
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Canadian U.S. Variance
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Revenues $ 272.7 $ 134.6 $(138.1)
EBITDA $ 43.0 $ 5.8 $ (37.3)
Plus: Earnings from equity investments 0.0 30.4 30.4
Plus: JV depreciation and amortization 0.0 5.4 5.4
Plus: JV interest expense 0.0 0.7 0.7
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Adjusted EBITDA $ 43.0 $ 42.2 $ (0.8)
EBIT $ 30.0 $ (1.2) $ (31.2)
Plus: Earnings from equity investments 0.0 30.4 30.4
Plus: JV interest expense 0.0 0.7 0.7
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Adjusted EBIT $ 30.0 $ 29.9 $ (0.1)
Net earnings (loss) $ 5.6 $ 5.4 $ (0.3)
Earnings per share $ 0.45 $ 0.43 $ (0.02)
Key Accounting Methodology Differences:
- Proportionate accounting for partnerships in Canadian GAAP versus equity
method of accounting in U.S. GAAP
- Reported revenues, EBITDA and EBIT in U.S. GAAP are lower than in Canadian
GAAP
- Adjusted EBITDA (EBITDA plus earnings from equity investments plus
proportional D&A and interest from such investments) will track very
closely to EBITDA under Canadian GAAP
- Differences in accounting for pending changes in tax law (related to timing
of recognition) can lead to differences at the net income line, as was the
case in 2000 and 2001
Note: EBITDA and EBIT figures are before severance, relocation and other
charges.
FINANCIAL IMPACT OF TRANSACTION:
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- Expected incremental revenue:
- 2002 - $145 to $155 million
- 2003 - $300 to $320 million
- Expected incremental adjusted EBITDA:
- 2002 - $25 to $30 million
- 2003 - $85 to $90 million
- Expected incremental diluted EPS
- 2002 - $0.02 to $0.03
- 2003 - $0.20 to $0.25
Notes:
Assumes transaction close date of 7/1/02
Numbers based on U.S. GAAP
Includes synergies
LABCORP - WELL POSITIONED FOR FUTURE REVENUE AND PROFIT GROWTH:
LabCorp Dynacare
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Revenues* $2.2 billion $238 million
Full-Service Labs 20 24
Esoteric Labs 4 2
Patient Service Centers 900 302
Employees 19,000 6,300
Tests Offered 4,000 1,000
* 2001 Revenues Based on U.S. GAAP
- Expanded laboratory operations
- Enhanced high-value testing opportunities with added hospital
business - approximately 20% of Dynacare revenues
- Expanded opportunities to offer LabCorp's genomic and esoteric
capabilities to new markets.
SYNERGY COMMITMENT:
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Synergy commitment - $45 million
Timing:
- 2002 - $6 million
- 2003 - $36 million
- 2004 - $45 million
Sources:
- Lab Capacity
- Esoteric Sendouts
- Supply Savings
- Infrastructure Improvements
SYNERGY PLAN:
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- Rationalize national lab capacity
- Redirect esoteric test sendouts to
LabCorp's Centers of Excellence
- Eliminate redundant infrastructure
- Talented managers from both companies will
participate in the integration process
VALUE DRIVERS:
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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