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LABORATORY CORPORATION OF AMERICA
Moderator: Tom McMahon
May 9, 2002
7:00 a.m. MT
Operator: Ladies and gentlemen, thank you for standing by. Welcome to the
Laboratory Corporation of America Holdings discussion of the
acquisition of Dynacare, Inc., conference call. During the
presentation, all participants will be in a listen-only mode.
Afterwards, you will be invited to participate in the question and
answer session. At that time, if you have a question, please
press the one, followed by the four, on your telephone. As a
reminder, this conference is being recorded Thursday, May 9th,
2002. I would now like to turn the conference over to Mr. Tom
McMahon, chairman and CEO. Mr. McMahon, please go ahead.
Tom McMahon:Thank you, and good morning. Welcome to LabCorp.'s conference
call to discuss our recent announcement to acquire Dynacare.
Joining me today from LabCorp. are Brad Smith, executive vice
president, Wes Elingburg, executive vice president and chief
financial officer, Ed Dodson, senior vice president and
controller, and Pam Sherry, senior vice president, investor
relations.
Today, we plan to provide you an overview of our transaction to
acquire Dynacare and discuss why we think it is an excellent fit
with LabCorp. and our proven growth strategy. We will also
explain how our integration plan will broaden physician and
patient access to important testing technologies, and create a
more efficient organization, building value for our shareholders.
I'd now like to introduce Brad Smith, who has a few comments
before I begin.
Brad Smith: Before beginning, I'd like to point out that there will be a taped
replay of this conference call available via the telephone and
Internet. Please refer to our press release dated May 9th, 2002,
for replay information. On May 9th, the company filed an 8K that
included additional information on the Dynacare transaction, which
forms the basis for this presentation. Analysts and investors are
directed to this 8K to review this supplemental information, which
is currently available in a presentation format at our website,
www.labcorp.com.
We hope you appreciate the level of detail this presentation
provides and ask that you direct your questions to clarifying this
information. We will not be able to discuss any details of the
transaction that are not provided in 8K.
I would also like to point out that any forward-looking statements
made during this conference call are based upon current expectations and are
subject to change based upon various important factors that could affect the
company's financial results. These factors are set forth in detail in our
2001 10K and subsequent filings. Also, 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. Additional information in connection with
the proxy statement and related matters is set forth on page three
of the 8K slide presentation filed this morning.
T. McMahon: Thank you, Brad. Periodically, I will refer to page numbers,
which reflect the page numbers of the 8K presentation. Today, LabCorp.
announced a definitive agreement to acquire all of the outstanding
stock of Dynacare. We are extremely pleased to have reached this
agreement, and we plan on this call to share with you the details of
the transaction and our integration plan. Our decision to acquire
Dynacare is an excellent opportunity to bring together the strength
of both companies and leverage the new combination through increased
efficiencies. As I have said in the past, we have very specific
criteria for evaluating acquisition opportunities. These include
those that directly support our strategic objectives. Those
objectives are: to strengthen our national presence by expanding
our geographic reach, and to lead in the introduction and
commercialization of important molecular diagnostic tests.
Acquisitions must be accretive in year one, compliant, and
demonstrate no billing problems. Dynacare fits our acquisition
criteria. I'm now on slide three.
We are acquiring all of the outsourcing stock of Dynacare for a
purchase price of $23 per share. Dynacare shareholders will receive
$11.50 in cash, and .1164 shares of LabCorp common stock,
approximately 2.4 million shares, per share of Dynacare stock. We
expect the transaction to be accretive to the EPS beginning this
year. In 2002, it should add to 2 to 3 cents per share. In 2003,
it should add 20 to 25 cents per share. The total enterprise value
of the transaction is approximately $660 million, including the
Dynacare debt of $205 million. Post-closing, we intend to pay off
the Dynacare debt and replace it with new, lower-cost, investment-
grade LabCorp debt. The deal represents a valuation multiple of
about 11.4 times 2002 estimated EBITDA and a multiple of 6.4 times
EBITDA with peak synergies, which we estimate at $45 million in
2004. The boards of both companies have already approved the
transaction. Conditions for closing include regulatory approval in
both the United States and Canada, and approval by 2/3 of Dynacare's
shareholders. We expect to close late in the second quarter or
early in the third quarter. We are confident we will retain our
BBB-plus corporate credit and senior unsecured debt rating on
LabCorp
I'm on slide number four. OK, I'm on slide five. Slide five. We
intend to finance the transaction using 240 million worth of LabCorp
common stock, $200 million in cash, a $150 million bridge loan, for
which we already have a commitment, borrowing approximately $113
million under our $300 million revolver, and paying off Dynacare's
existing $195 million of senior subordinated unsecured notes.
There's a call premium of 103.6 percent of par on these notes, which
amount to approximately $7 million.
Dynacare is an independent clinical laboratory, offering services in
certain regions of the United States and Canada. It operates 26
central laboratories, 115 rapid response labs, and 302 patient
service centers in 21 states and two Canadian provinces. Offering
over 1,000 different tests, Dynacare's network is a solid strategic
fit for LabCorp, with numerous opportunities to optimize operating
efficiencies and expand patient access to our testing network and
extensive testing menu of more than 4,000 tests.
Dynacare's operations also include six joint ventures with hospital
partners. Four are 50-percent owned and based in the United States;
two are in Canada, one 73 percent owned in Ontario, and another 43
percent owned in Alberta. Dynacare has announced they will
terminate two of the United States joint ventures during the second
quarter. The two joint ventures to be dissolved are in Pittsburgh,
Pennsylvania, and Schenectady, New York.
We're now on slide number 8, which is a display of Dynacare
locations. In combination, we believe this acquisition will enhance
our position with managed care physicians and hospital customers by
expanding testing access to more new markets.
I'd now like to turn this portion of the call over to Wes Elingberg,
to cover the details of the Dynacare financials and the financial
impact of this transaction.
Wes Elingberg:Thank you, Tom. I'm now on page nine, ``Dynacare Financials.''
Dynacare accounts for its financial statements using Canadian GAAP,
and the term ``adjusted EBITDA'' is used for purposes of comparing
Canadian and U.S. GAAP, just as EBITDA under U.S. GAAP is defined as
EBITDA, plus earnings for equity investments, plus proportional
depreciation and amortization and interest expense from such equity
investments. Ultimately, adjusted EBITDA under U.S. GAAP is very
similar EBITDA under Canadian GAAP.
Go to page ten. Dynacare has disclosed previously in public filings
the difference between their financials, prepared on a Canadian
GAAP, versus a U.S. GAAP, basis. The primary difference pertains to
the accounting for joint ventures. All financial discussions from
this point forward will on a U.S. GAAP basis.
Page eleven. As a result of the combination, we expect incremental
revenue in 2002 of $145 million to $155 million. In 2003, the
incremental revenue is expected to be $300 million to $320 million.
The expected incremental adjusted EBITDA, including synergies, for
2002, is $25 million to $30 million. For 2003, it is $85 million to
$90 million. As stated previously, incremental diluted earnings per
share for 2002 is two to three cents, and for 2003, the impact is 20
to 25 cents. Now we'll go to page 12.
Using U.S. GAAP, 2001 revenues were $2.2 billion for LabCorp, and
$238 million for Dynacare, for a combined total of approximately
$2,440,000,000. Dynacare adds 24 full-service labs to LabCorp's
existing 20, and two esoteric labs, to LabCorp's four esoteric
centers of excellence. Dynacare's 302 patient service centers,
added to LabCorp's more than 900 patient service centers, brings out
total patient service number to more than 1,200. And finally,
LabCorp has approximately 19,000 employees and offers more than
4,000 tests. Dynacare has 6,300 employees and offers over 1,000
tests.
T. McMahon: Thank you, Wes.
LabCorp is well-positioned for future revenue and profit growth,
with expanded laboratory operations, we can optimize our national
infrastructure. Additionally, approximately 20 percent of
Dynacare's revenues are from hospitals, which generally order a
higher percentage of high-value, esoteric tests. We also expect to
expand our testing opportunities to offer our extensive esoteric and
genomic capabilities to their new markets.
Now I'm slide number 14. The acquisition creates the leading low-
cost producer, with significant identifiable cost savings. Our
primary areas for synergy savings are the following. One, lab
capacity. Two, internalizing esoteric send-outs by redirecting
Dynacare's send-outs to our esoteric centers of excellence. Three,
converting to LabCorp's lower supply costs, and four, optimizing our
infrastructure by actions such as reducing overlapping functions and
consolidating distribution routes and patient service centers.
Synergy savings in 2002 are expected to be approximately $6 million.
And $36 million in 2003. Total savings of approximately $45 million
will be in place by 2004.
LabCorp management has a proven track record in making acquisitions
and executing synergy plans. The true meaning of a successful
execution plan is demonstrating significant increases in
profitability. With the additional volume from Dynacare, we expect
to redirect much of Dynacare's sendouts to our internal specialty
testing laboratories. Where we have redundancy in our
infrastructure, we will move to eliminate it. We will coordinate
the entire integration effort, led by a seasoned team of LabCorp
executives, with the support of Dynacare managers. LabCorp is
uniquely positioned in this industry for long-term revenue and
profit growth. We are fortunate to be part of this industry at a
time when the tremendous value of diagnostic testing is now being
realized, by physicians, managed care, hospitals, and other
industries. New advances in scientific research are pushing the
importance of testing to the forefront in health care. LabCorp has
positioned itself to effectively operate in this swiftly-changing
environment and to continue to expand access to our leading-edge
testing technologies. This concludes our remarks. We are now ready
to answer any questions on the presentation that you may have.
Operator?
Operator: Thank you. Ladies and gentlemen, if you wish to register a
question, please press the one, followed by the four on your
telephone. You will hear a three-toned prompt to acknowledge your
request. If your question has been answered and you would like to
withdraw your polling request, you may do so by pressing the one,
followed by the three. If you are using a speakerphone, please pick
up your handset before entering your request. One moment, please,
before the first question.
Bill Bonnello with US Bancorp Piper Jaffray, please go ahead with
your questions.
Bill Bonnello:Yeah, thanks. Just wanted to ask a couple of clarifying
questions on how you get to the accretion assumptions for '03. It looks like
you're probably-- it's a three-part question, but all the same thing
-- it looks like you're probably modeling a little bit of customer
attrition in that accretion assumption -- would that be safe to say.
T. McMahon: I think it's safe to say now, Bill, that we're not going to
comment on anything more specifically today. We don't have the transaction
completed -- than the numbers that we're putting out there. We're
not going to get behind those numbers today.
B. Bonnello:OK. Well, I'll ask the second question, but my guess is then
you're not going to answer that, either, whether or not the
accretion analysis includes any kind of revenue accretion in terms
of internalizing the esoteric testing -- you went through the cost
savings, but--
T. McMahon: I think at this point, until we actually own the company, Bill,
we're not really comfortable answering those details.
B. Bonnello:All right, thanks a lot.
T. McMahon: OK.
Operator: The next question will come from Deborah Lawson with Salomon Smith
Barney. Please go ahead.
Deborah Lawson:Hi, I had a couple of questions. One, could you give us any
details on any break-up terms with regard to the structure of the
deal? Secondly, could you give us a little more color on why the
two hospital JVs are being terminated? And lastly, just for those
of us that don't, or have not followed Dynacare closely, just a
little flavor on the Canadian lab market? Thanks.
T. McMahon: OK, Brad, do you want to handle?
B. Smith: Yes, there is a break-up fee in the agreement; it's similar to what
you would traditionally see. The JVs, I think you should ask
Dynacare, because that's something that they announced on their own
-- that's a relationship that they have.
D. Lawson: OK.
B. Smith: And the third, I think our intent is to continue, after the
completion of the acquisition, to have the Canadian business be run
as it's been run to date, with basically the same management team.
T. McMahon: In terms of the actual market up in Canada, we view it as a solid
market. Dynacare is clearly the industry leader up there, and they
are one of the largest testing labs, particularly in the Ontario
area, which is the largest population group in Canada. They're one
of a few major laboratories up there and have demonstrated great
success. And as Brad indicated, it's our intention to maintain the
current Dynacare management team, as is, in the Canadian market,
because of their expertise and knowledge of that market.
D. Lawson: OK, great. Thanks.
Operator: The next question will be from Tom Gallucci with Merrill Lynch.
Please go ahead.
Tom Gallucci:Good morning, everyone.
T. McMahon: Good morning, Tom.
T. Gallucci: Esoteric testing, I'm not sure if you can get into this detail,
but any idea of an order of magnitude of how much they send out, or what
the opportunity on that front might be for you, and then as a
follow-up, would there be any kind of capacity constraints in your
esoteric labs at this point, you know, given the fast growth in that
business already? And then finally, I assume that you'll bring some
new tests to their menu, as you alluded to; is there anything unique
that they'll bring to your menu of tests in that area?
T. McMahon: OK. I'll start with the last. They don't bring any unique tests
to LabCorp. What we will do is we will bring our unique capability to
their large distribution system.
In terms of our esoteric testing capacity, we signaled on other
conference calls, Tom, that there are some testing capacity issues
at LabCorp today, independent of our announcement. The capital
budget that you're familiar with includes the ability for LabCorp to
expand its capacity over the next couple years, so it's fully our
intention to expand some of our capacity in the esoteric area.
In terms of the actual numbers related to getting behind the
revenues from Dynacare, other than what we stated today, which is
about 20 percent of their business is hospital, with a good
proportion of that being esoteric, we're not going to announce any
further numbers about the company yet.
T. Gallucci:OK, thank you.
T. McMahon: OK.
Operator: The next question will be from Bob Willoughby with CS First Boston.
Please go ahead.
Bob Willoughby: Thank you. Tom, can you possibly comment on Dynacare's
motivation to sell the company at present? And secondarily, do the
synergy forecasts to date include any assumptions for some of the
debt refinancing I think you spoke to?
T. McMahon: Bob, you were breaking up -- I think your question was, one,
rationale for Dynacare to sell.
B. Willoughby: Yes.
T. McMahon: And two, debt financing -- is that included in the synergies?
B. Willoughby: Yes.
T. McMahon: The debt financing is not included in the synergies. OK, so the
numbers that you have seen, the $45 million, are operational
synergies.
B. Willoughby: OK.
T. McMahon: In terms of the rationale for Dynacare to sell, I'm going to ask
Brad to answer that, but I do think there is a press release that
Dynacare issued today, at around the same time we issued ours, which
gives a clear statement that, from Harvey Shapiro, indicating that
they feel that it's very important to connect themselves with a
major American laboratory, and as a result of doing that, they can
bring better and more testing to their patients. Brad?
B. Smith: Yeah, basically, Bob, that was my answer -- I think they state
pretty clearly in a separate press release, and that's one of the
reasons that they've put it out, and one of their founding
shareholders who helped take them public, I think, if you read their
press release, it sets forth the reason that Tom just mentioned, and
some other reasons, that make it pretty clear why they decided, at
this time, to sell.
B. Willoughby: OK. And just, I guess, in terms of incremental disclosure,
when the deal closes, would you be at that time willing to comment on
maybe page 12 there in terms of number of labs, number of employees,
patient service centers, what have you, what an action plan on that
front may look like?
T. McMahon: Well, I think what we will do once we close the transaction, which
we expect to get through in two to three months, is give you some
more detail on the $45 million. It certainly will not be our
practice to get into the deep detail on employee situations, but
certainly, as we always have in the past, we'll give you as much
detail, we think, as anybody in the industry related to our
synergies and how we'll get to $45 million.
B. Willoughby: That's great. Thank you.
T. McMahon: OK, Bob, thanks.
Operator: Your next question will be from Ricky Goldwasser from UBS Warburg.
Ricky Goldwasser: Good morning. I have two questions. You mentioned that you
are going to redirect Dynacare's esoteric send-out. Are they
sending any of their existing volume to LabCorp?
T. McMahon: No.
R. Goldwasser: So this is an all-new opportunity?
T. McMahon: Yes.
R. Goldwasser: And secondly, do you see any opportunities to reprice any
existing Dynacare contracts?
T. McMahon: Ricky, at this point, we're not going to discuss the pricing. And
as we go out over time, as we understand more about the pricing, and
what their activities are, we will probably be able to comment on
that, but we're not going to do that until after the transaction
closes.
R. Goldwasser: Right -- but in terms of their mix shift, is there some
opportunity there, is there a larger portion in capitated vis a vis
fee-for-service?
T. McMahon: Can't comment on that yet, Ricky.
R. Goldwasser: OK. And lastly, I understand that your conversion for Synthed
[sp] at the end of the quarter was 60 percent; do you have the
numbers for Dynacare?
T. McMahon: I'm sorry, I didn't understand that, Ricky -- what did you say was
60 percent?
R. Goldwasser: Sixty percent was your conversion of Pap Smear volume to thin
layer?
T. McMahon: Oh, I don't have-- I don't have that information right now.
R. Goldwasser: Thank you.
T. McMahon: OK, thank you.
Operator: The next question will be from David Lewis with Thomas Weisel
Partners. Please go ahead.
David Lewis: Good morning.
T. McMahon: Good morning, David.
D. Lewis: It sounds like you don't want to give specific pricing
information - could you comment on a macro perspective, on what you see as
maybe the differences in the pricing environment between the Canadian
market and the U.S. market, as you bring new tests to market, and
then one quick follow-up?
T. McMahon: No, I won't comment on that, but good try, David. I'm not going
to discuss any pricing issues of this transaction at this time.
D. Lewis: Fair enough, Tom. The second question is on the joint ventures --
obviously Dynacare has announced plans for two joint ventures. The
remaining two U.S. joint ventures, are there specific plans that you
have for those?
T. McMahon: Yes. We-- our specific plans are to continue to them.
D. Lewis: OK, thank you very much.
T. McMahon: Great.
Operator: Your next question will be from Matthew Buten with Argus Partners.
Please go ahead.
Matthew Buten:Congratulations. My questions were asked.
T. McMahon: Thank you, Matt.
Operator: Your next question will be from Blair Schultz from K2 Investments.
Blair Schultz: Good morning, guys.
T. McMahon: Good morning, Blair.
B. Schultz: I missed earlier you guys mentioning the two shut-downs of the lab
facilities. What were they again?
T. McMahon: The two joint ventures.
B. Schultz: OK, they're two joint ventures. Are you concerned at all over
the overlap in regards to antitrust issues?
T. McMahon: Brad?
B. Smith: I think the answer is no, we think there's plenty of competition.
It's a very competitive market. Obviously antitrust approval is
something in a deal this size that something we'll-- we have to get
before we can close the deal, and we're confident that we'll be able
to successfully go through that process.
B. Schultz: OK. I know it's an overlap, quickly, between Illinois and Chicago,
and I think two or three cities in Texas. If forced to divest a few
labs, is that a possibility for you guys?
B. Smith: I don't think that's something we really are prepared to discuss
on this call. We've signed the agreement, we're going to go through
the process, and we're confident to be able to get the deal done as
we've agreed with Dynacare.
B. Schultz: OK, perfect. Thanks, guys.
Operator: Your next question will be from David Zimbalist with Morgan
Stanley. Please go ahead.
David Zimbalist: Hi. Curious to know if your forecast of synergies are net of
costs related to the integration, and if not, what your projected
cash costs for integration would be?
T. McMahon: David, these synergies are net of what we call ``contra
synergies,'' so we anticipate there will be incremental costs in order to get
these synergies, and these are already built into the numbers.
D. Zimbalist: OK. So, the ongoing, merger-related costs, you're talking about
incorporating into these forecasts?
T. McMahon: Well, things like, for example, and I think it's important that I
clarify this, so that you understand -- often times, for example,
when you have redundant facilities, and you're in the closure of
facilities, you need to bring temporary people into these facilities
that you're keeping open, or that you're closing for a period of
time, and we call those ``contra-synergies.'' They're extra costs
in order to get the transaction done. And we've learned from our
prior experience to spend a lot of time figuring out what they are,
so we have built those in to our synergy numbers, so we think these
are net synergies, and they take into account additional costs of
doing business during that period.
D. Zimbalist: OK, thank you.
Operator: Your next question will be from Mark Miller with Banc of America
Securities. Please go ahead.
Mark Miller:Good morning. Most of my questions have been asked. The only
question--
T. McMahon: I hope they've been answered, Mark.
M. Miller: I'm sorry?
T. McMahon: I said I hope they've been answered.
M. Miller: Well, most of them will be awaiting the closing of the acquisition.
Will you be providing, I guess, an adjusted EBITDA margin, since
you'll be reporting in U.S. GAAP, and this would mean to lower the
margin, or have a negative impact on the margin?
W. Elingberg:We will be reporting on an adjusted EBITDA margin, and basically
on page 11 of the presentation is the guidance we've given as far as
adjusted EBITDA.
M. Miller: Right. OK.
T. McMahon: I don't think it'll lower the margins, Mark.
M. Miller: I'm sorry?
T. McMahon: I don't think it'll lower the margins.
M. Miller: Not adjusted, but unadjusted, reported.
T. McMahon: Right.
M. Miller: OK, thank you.
Operator: Your next question will be from Deborah Lawson with Salomon Smith
Barney.
D. Lawson: Hi, I just had one clarifying question -- I know that you said
that the synergies don't include any financial impact -- you know,
refinancing of debt and the like, but do the--- you said at the
outset that you expected it to be 2 to 3 cents accretive to EPS in
'02 and 20 and 25 cents in '03 -- does that assume refinancing
benefits?
W. Elingberg:Yes, that assumes the call of the Dynacare 10 3/4 percent notes
with LabCorp debt around 5 percent.
D. Lawson: OK, great. Thanks.
Operator: The next question will be from Jung Park with Dealanalytics.com.
Please go ahead.
Jung Park: Hi, Jung Park from Dealanalytics. Can you go over the U.S. and
Canadian regulatory approvals that the deal would need to receive to
close? And I have a follow-up.
[crosstalk]
T. McMahon: Is that your question? I'm sorry.
J. Park: Yes, that is.
T. McMahon: Yeah, there are the normal HSR requirements and there are similar
requirements in Canada, and again, they're pretty-- they're the
customary approvals, and we're optimistic that we're going to be
able to obtain the approvals we need to close the deal.
J. Park: OK, for the Canadian regulatory approvals, would you need both
Investment Canada and Competition Canada?
T. McMahon: I believe that's right.
J. Park: OK. And also, regarding the terms, are there any walk-away prices
or collars?
T. McMahon: No.
J. Park: OK. Thank you.
Operator: The next question will be from AJ Rice with Merrill Lynch. Please
go ahead.
AJ Rice: Hi, everybody, just a couple of questions. I may be asking them in
turn since they're different. First of all, just to follow-up on
the questions about the two JVs that you're going forward with --
does Dynacare have an agreement to do an outreach business with
those JVs that would-- that you'd have to restructure, given your
own efforts in either of those markets, are those new markets for
you?
B. Smith: I think the-- both would be taken into consideration what we need
to do to continue to those JVs, as Tom mentioned, but I don't think
we're really prepared, during this conference call, to talk about
any of our specific plans about the opportunities for us to change
or grow or modify the relationships. We're just confident that we
can continue them, based upon their current terms, but obviously we
think they also present additional opportunities for us.
AJ Rice: Where are those two JVs? I should know, but we don't cover
Dynacare unfortunately.
T. McMahon: AJ, it's Milwaukee and Tennessee.
AJ Rice: OK. Have you guys given any sense about, and I got on a little
bit late, so I may have missed this -- the amount of specimen
redirection in the routine business that you're looking at doing, as
you sort of consolidate operations and restructure?
T. McMahon: We have, but at this time, AJ, until we get the transaction
completed, we have not publicly stated where we-- where these
specimens will go. What we have publicly stated, obviously, is we
think there's $45 million worth of opportunities in terms of
synergies, and a significant part of that is exactly what you're
speaking to now.
AJ Rice: I guess -- not trying to get you to put a specific amount on the
synergy, but just having a feel for, you know, how-- I guess that
can be something that if you've got to manage the service levels
right and it takes time to direct it, is there a significant amount
of specimen redirection that has to take place here, or is there
relatively modest part of the entire--
T. McMahon: Well, in terms of-- everything is definitional. In terms of what
we intend to do, we intend to do it over a multiple-year period of
time. We've taken that into consideration, and we also recognize
that in the geographies that will occur in, there's opportunities to
redirect it pretty close to home, so we're confident that that issue
will get an awful lot of attention, as we begin to do it, once the
closing occurs.
AJ Rice: Is there any particular market where they significantly have
regional strength to boost your competitive positioning?
T. McMahon: I think at this time, AJ, we're not going to get into a discussion
of regional strengths and weaknesses. We want to make sure that we
get the transaction closed and then we're delighted to share that
kind of information.
AJ Rice: Sure. Maybe one last question -- on the contracting, are there any
significant contracts where you and Dynacare are the dual-source
contracts on at this point?
T. McMahon: No.
AJ Rice: OK. All right, thanks a lot.
T. McMahon: Thank you.
Operator: Ladies and gentlemen, as a reminder, to ask a question, you'll need
to press the one, followed by the four, on your telephone.
Bill Bonnello, please go ahead with your follow-up question.
B. Bonnello: Yeah, just in terms of your strategy going forward, obviously, one
thing that's unique about Dynacare is that they provide routine
services for certain hospitals, and that's a huge market
opportunity, I would think. Does this represent your intention, to
try and expand into that portion of the market, or not necessarily?
T. McMahon: Well, Bill, I think when we considered this opportunity, which is
something that we have had our eye on for a long time, we certainly
recognize that Dynacare has certain strengths that we don't have,
and one of those strengths is their ability to be innovative in the
hospital market. As I've said on many conference calls now over the
past four years, one of the areas that to a degree has disappointed
me is how difficult it is for a lab like LabCorp to penetrate the
hospital market. It's good business, it's esoteric business, it's
the kind of business we like, and certainly one of the reasons that
we were so interested in Dynacare was because of some of their
creative ways, over the years, to secure hospital business, so
you're absolutely correct -- this is a piece of the rationale for
this transaction.
B. Bonnello:Thanks.
Operator: Once again, ladies and gentlemen, if there are additional
questions, please press the one, followed by the four. David Zimbalist,
please go ahead with your follow-up question.
D. Zimbalist:Tom, I was wondering if you could give a little more color on
your comment that Dynacare has come up with some creative ways of
securing hospital business -- give us a little bit of insight into,
you know, what formula they managed to get right?
T. McMahon: Well, a couple of the things that they've done is they've done
joint ventures, and they entered the American market through creative
joint ventures with hospitals. Some have worked well for them, and
they were willing to take the risk and do some of those, and there's
some real success stories they have there. They've been very
successful in managing hospitals around the United States. They not
only have joint ventures with hospitals, but they've also taken on
the challenge, and have been successful, of managing hospitals, and
they've had a great emphasis on hospitals as a way of entering into
the community, and they are things that we've talked about for a
long time, and while we have been successful, it's taken longer for
us to do that, so they've, in my mind, been one of the innovative
laboratories in the United States, coming up with good rationale for
hospitals to use an independent laboratory.
D. Zimbalist: Thanks.
Operator: Gentlemen, I'm showing no further questions at this time. Please
continue with the presentation or closing remarks.
T. McMahon: Great. Thank you, Belinda, and thank you all for listening to our
conference call. Have a good day.
Operator: Thank you. Ladies and gentlemen, we thank you for your
participation and ask that you please disconnect your lines.