UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For quarterly period ended June 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 0-15975
LabOne, Inc.
----------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 48-0952323
---------- --------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
10310 West 84th Terrace
Lenexa, Kansas 66214
----------------------------- -------
(Address of principal executive offices) (Zip Code)
(913)-888-8397
--------------------------------
(Registrant's telephone number, including area code)
N/A
------------------------------------
(Former name, former address, former fiscal year,
if changed since last report)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes [X] No [ ]
Number of shares outstanding of only class of Registrant's common stock,
$.01 par value, as of July 27, 1995 - 13,051,925 net of 1,948,075 shares
held as treasury stock.
Page 1 of 11
PART I. FINANCIAL INFORMATION
ITEM 1 - Financial Statements
LabOne, Inc. and Subsidiary
Consolidated Balance Sheets
June 30, December 31,
1995 1994
ASSETS --------- ---------
Current assets:
Cash and cash equivalents $2,098,562 6,888,806
Short-term investments 38,432,358 34,106,026
Accounts receivable-trade, net of allowance
for doubtful accounts of $170,392 in 1995
and $81,426 in 1994 8,266,321 8,636,610
Inventories 1,174,248 787,339
Prepaid expenses and other current assets 1,879,328 3,007,526
Deferred income taxes 654,246 654,246
---------- ----------
Total current assets 52,505,063 54,080,553
Investments with maturities of more than one
year, at cost 509,515 508,590
Property, plant and equipment 53,495,426 52,498,807
Less accumulated depreciation 36,172,904 34,315,021
---------- ----------
Net property, plant and equipment 17,322,522 18,183,786
Other assets:
Intangible assets, net of accumulated
amortization 3,216,892 3,589,527
Deferred income taxes - noncurrent 416,380 347,264
Deposits and other assets 46,345 48,060
---------- ----------
Total assets $74,016,717 76,757,780
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $1,740,130 2,024,572
Income taxes payable - 131,068
Payable to Seafield Capital Corporation 58,625 113,575
Accrued payroll and benefits 2,208,139 1,915,457
Other accrued expenses 947,416 1,270,337
Other current liabilities 9,440 66,138
---------- ----------
Total current liabilities 4,963,750 5,521,147
Deferred income taxes - noncurrent 152,480 -
---------- ----------
Total liabilities 5,116,230 5,521,147
Stockholders' equity:
Preferred stock, $.01 par value per share;
1,000,000 shares authorized, none issued - -
Common stock, $.01 par value per share;
40,000,000 shares authorized, 15,000,000
shares issued 150,000 150,000
Additional paid-in capital 13,379,578 13,347,455
Equity adjustment from foreign currency
translation (574,234) (683,383)
Retained earnings 78,114,210 80,639,340
---------- ----------
91,069,554 93,453,412
Less treasury stock of 1,948,075 shares in
1995 and 1,957,988 shares in 1994 22,169,067 22,216,779
---------- ----------
Total stockholders' equity 68,900,487 71,236,633
---------- ----------
Total liabilities and stockholders' equity $74,016,717 76,757,780
========== ==========
See accompanying notes to consolidated financial statements and management's
discussion and analysis of financial condition and results of operations.
Page 2
LabOne, Inc. and Subsidiary
Consolidated Statements of Earnings
<TABLE>
<CAPTION>
Three months ended June 30, Six months ended June 30,
1995 1994 1995 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Sales $14,622,874 15,580,795 $29,312,333 30,847,519
Cost of sales 7,508,280 7,408,935 15,010,399 14,336,013
---------- ---------- ---------- ----------
Gross profit 7,114,594 8,171,860 14,301,934 16,511,506
Selling, general and
administrative expenses 5,986,157 5,879,826 12,201,154 11,330,285
---------- ---------- ---------- ----------
Earnings from operations 1,128,437 2,292,034 2,100,780 5,181,221
Other income 500,487 296,263 1,338,729 779,725
---------- ---------- ---------- ----------
Earnings before income taxes 1,628,924 2,588,297 3,439,509 5,960,946
Income taxes 628,415 720,955 1,268,399 2,088,042
---------- ---------- ---------- ----------
Net earnings $1,000,509 1,867,342 $2,171,110 3,872,904
========== ========== ========== ==========
Earnings per common share $0.08 0.14 $0.17 0.29
========== ========== ========== ==========
Dividends per common share $0.18 0.18 $0.36 0.36
========== ========== ========== ==========
Weighted average common
shares outstanding 13,143,450 13,341,498 13,144,649 13,329,411
========== ========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements and management's
discussion and analysis of financial condition and results of operations.
Page 3
LabOne, Inc. and Subsidiary
Consolidated Statement of Stockholders' Equity
Six Months Ended June 30, 1995
<TABLE>
<CAPTION>
Additional Foreign Total
Common paid-in currency Retained Treasury stockholders'
stock capital translation earnings stock equity
<S> <C> <C> <C> <C> <C> <C>
Balance at
December 31, 1994 $150,000 13,347,455 (683,383) 80,639,340 (22,216,779) 71,236,633
Net earnings 2,171,110 2,171,110
Cash dividends
($0.36 per share) (4,696,240) (4,696,240)
Stock options
exercised, net
(9,913 shares) 32,123 47,712 79,835
Equity adjustment
from foreign
currency
translation 109,149 109,149
-------- ---------- -------- ---------- ----------- ----------
Balance at
June 30, 1995 $150,000 13,379,578 (574,234) 78,114,210 (22,169,067) 68,900,487
======== ========== ======== ========== =========== ==========
</TABLE>
See accompanying notes to consolidated financial statements and management's
discussion and analysis of financial condition and results of operations.
Page 4
LabOne, Inc. and Subsidiary
Consolidated Statements of Cash Flows
Six months ended June 30,
1995 1994
--------- ---------
Cash provided by operations:
Net earnings $2,171,110 3,872,904
Adjustments to reconcile net earnings
to net cash provided by operations:
Depreciation and amortization 2,339,006 3,704,103
Loss (gain) on disposal of equipment 127,525 (88,397)
Directors' stock compensation 79,458 77,321
Provision for deferred taxes 92,882 (512,323)
Changes in:
Accounts receivable 525,573 (551,162)
Inventories (386,909) (204,991)
Prepaid expenses and other current assets 849,384 149,131
Accounts payable (284,442) (86,566)
Income taxes payable (7,538) (93,125)
Payable to Seafield Capital Corporation (54,950) 61,671
Accrued payroll & benefits 292,682 (396,592)
Accrued expenses (322,921) 100,495
Other current liabilities (56,698) 21,906
---------- ----------
Net cash provided by operations 5,364,162 6,054,375
---------- ----------
Cash provided by (used for) investment transactions:
Short-term investments, net (4,219,652) (7,394,699)
Purchases of investments with
maturities of more than one year (2,000) (2,114,021)
Property, plant and equipment, net (1,256,344) (1,778,926)
Other 1,715 13,218
---------- ----------
Net cash used for investment transactions (5,476,281) (11,274,428)
---------- ----------
Cash provided by (used for) financing transactions:
Issuance of treasury stock, net of proceeds
from the exercise of stock options 377 122,819
Cash dividends (4,696,240) (4,667,661)
---------- ----------
Net cash used for financing transactions (4,695,863) (4,544,842)
---------- ----------
Effect of foreign currency translation 17,738 (145,888)
---------- ----------
Net decrease in cash and cash equivalents (4,790,244) (9,910,783)
Cash and cash equivalents - beginning of period 6,888,806 11,514,400
---------- ----------
Cash and cash equivalents - end of period $2,098,562 1,603,617
========== ==========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Income Taxes $1,368,775 2,995,146
========== ==========
See accompanying notes to consolidated financial statements and management's
discussion and analysis of financial condition and results of operations.
Page 5
LabOne, Inc. and Subsidiary
Notes to Consolidated Financial Statements
June 30, 1995 and 1994
The accompanying consolidated financial statements include the accounts
of LabOne, Inc. and its wholly-owned subsidiary Head Office Reference
Laboratory Limited (a Canadian corporation). All significant intercompany
transactions have been eliminated in consolidation.
The financial information furnished herein is unaudited; however, in the
opinion of management, it reflects all adjustments which are necessary to
fairly state the Company's financial position at June 30, 1995, and
December 31, 1994, and the results of its operations and cash flows for
the periods ended June 30, 1995 and 1994. The financial statements have
been prepared in conformity with generally accepted accounting principles
appropriate in the circumstances, and included in the financial statements
are certain amounts based on management's estimates and judgments.
The financial information herein is not necessarily representative of a
full year's operations because levels of sales, capital additions and
other factors fluctuate throughout the year. These same considerations
apply to all year-to-year comparisons. See the Company's Annual Report
on Form 10-K for the year ended December 31, 1994, for additional
information not required by this report Form 10-Q.
The weighted average shares includes the common stock equivalents of
stock options.
Page 6
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
<TABLE>
RESULTS OF OPERATIONS
---------------------
<CAPTION>
Selected financial data:
Three months ended June 30, Six months ended June 30,
1995 1994 %Decrease 1995 1994 %Decrease
---------- ---------- -------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Sales $14,622,874 15,580,795 6% $29,312,333 30,847,519 5%
Net earnings 1,000,509 1,867,342 46% 2,171,110 3,872,904 44%
Earnings per
common share $0.08 0.14 $0.17 0.29
Cash dividends
per common share $0.18 0.18 $0.36 0.36
</TABLE>
The Company provides risk appraisal, clinical and substance-abuse laboratory
testing services to insurance companies, physicians and employers.
LabOne provides risk appraisal laboratory testing services to the insurance
industries in the United States and Canada. The tests performed by the
Company are specifically designed to assist an insurance company in
objectively evaluating the mortality and morbidity risks posed by policy
applicants. The majority of the testing is performed on individual life
insurance policy applicants. The Company also provides testing services
on individual and group medical and disability policy applicants.
LabOne's clinical laboratory testing services are provided to the health care
industry to aid in the diagnosis and treatment of patients. The Company has
entered into contracts with several professional organizations to serve as
LabOne approved service centers for the collection of specimens for testing.
LabOne plans to continue to increase the number of these sites beyond the
base of over 200 sites in more than 30 metropolitan areas. Additionally, the
Company maintains its own courier fleet or coordinates the retrieval of
specimens for transport to the laboratory.
LabOne is certified by the Substance Abuse and Mental Health Services
Administration (SAMHSA) to perform substance-abuse testing services for
federally regulated employers. The Company markets substance-abuse testing
services throughout the country to both regulated and nonregulated employers.
The Company's 24 to 48 hour turnaround and multiple testing options help
clients reduce down time for affected employees and meet mandated drug
screening guidelines.
In July 1995, LabOne announced that it and PCS Health Systems had signed an
agreement with The Guardian Life Insurance Company of America (The Guardian)
to provide the Lab Card laboratory benefit management (LBM) program to certain
Guardian plan holders. Initially, laboratory testing services will be offered
in Northern California, involving more than 30,000 covered lives. It is
anticipated that services under this agreement will begin during the third
quarter of 1995. Subsequent to service in Northern California, LabOne
anticipates that its services may be offered to The Guardian's customer base
throughout the nation. The Guardian provides health coverage to over
1,500,000 people in the United States.
Page 7
Beginning the third quarter 1995, the Lab Card Program will be offered
nationwide through an active sales and marketing effort to insurance carriers,
as well as to self-insured and partially-insured companies and other
organizations. Through its LBM program, LabOne has developed Lab Card to
reduce the total cost of outpatient laboratory testing by as much as 50
percent. By using Lab Card, patients incur no out-of-pocket expenses for
outpatient lab work, and their employers save substantially against their
current lab expenditures. The Lab Card Program does not have the incidental
administrative costs associated with many benefit programs and is offered as
an optional benefit used at the discretion of the individual patient.
Agreements signed as of July 1, 1995, including The Guardian, bring the total
of lives covered under the Lab Card Program to more than 225,000.
SECOND QUARTER ANALYSIS
Revenue in the second quarter 1995 was $14.6 million as compared to $15.6
million in the same period last year. The decrease of $1.0 million (6%) can
be attributed primarily to a decrease in insurance laboratory revenue of $1.9
million, partially offset by an increase in clinical and substance-abuse
laboratory testing (SAT) revenues of $1.0 million. The total number of
applicants tested in the second quarter 1995 decreased by 9% as compared to
the same quarter last year primarily due to a national decline in the number
of life insurance policies written. Average revenue per insurance applicant
declined 7% during the second quarter 1995 as compared to the second quarter
1994 due to continued competitive pressures.
Cost of sales increased $0.1 million (1%) in the second quarter 1995 as
compared to the second quarter 1994. This increase is due primarily to
increases in payroll, rent expense, clinical kit supplies and outside lab
services, all related to the clinical expansion. These were partially offset
by a decrease Canadian expenses, depreciation expense and net postage. The
Company consolidated its Canadian laboratory testing with the Lenexa, Kansas
facility during the third quarter 1994, resulting in a decrease in costs of
sales. Clinical and SAT cost of sales expenditures during the second quarter
1995 were $2.0 million.
Selling, general and administrative expenses increased $0.1 million (2%) in
the second quarter 1995 as compared to the prior year due primarily to
increases in commission expense, consulting, travel and entertainment expenses
and bad debt accruals. These were partially offset by decreases in
depreciation and payroll taxes and benefits expense. Clinical and SAT
overhead expenditures during the second quarter 1995 were $1.0 million.
Nonoperating income increased $0.2 million due to an increase in investment
income.
The effective income tax rate for the second quarter 1995 was 38.6% as
compared to 27.9% during the same quarter in 1994. During the second quarter
1994, the tax rate was impacted by a tax adjustment of $0.2 million related to
the closure and liquidation of the HORL (UK) operations.
The combined effect of the above factors resulted in net earnings of $1.0
million or $0.08 per share in the second quarter 1995 as compared to $1.9
million or $0.14 per share in the same period last year.
Page 8
YEAR TO DATE ANALYSIS
Total revenue in the first six months of 1994 was $29.3 million as compared to
$30.8 million in the same period last year. The decrease of $1.5 million or
5% can be attributed primarily to a 7% decrease in the total number of
applicants tested in the six month period and a 5% decrease in the average
revenue per applicant. These decreases were partially offset by increases in
clinical and substance-abuse testing revenue.
Cost of sales increased $0.7 million (5%) year to date as compared to the
prior year. This increase is due primarily to increases in payroll, rent
expense, laboratory supplies and outside lab services, all related to the
clinical expansion. These were partially offset by a decrease in Canadian
expenses, depreciation expense and net postage expense. Clinical and SAT cost
of sales expenditures for the year were $4.1 million.
Selling, general and administrative expenses increased $0.9 million (8%) in
the six month period ended June 30, 1995, as compared to the prior year due
to increases in commission expense, payroll, consulting and travel and
entertainment expenses. These were partially offset by decreases in
depreciation and repairs and maintenance expense. Clinical and SAT overhead
expenditures during the six month period were $2.0 million.
The effective income tax rate increased from $35.0% during the first six
months of 1994 to 36.9% during the same period in 1995. The prior year was
impacted by a tax adjustment related to the closure and liquidation of the
HORL (UK) operations.
The combined effect of the above factors resulted in net earnings of $2.2
million or $0.17 per share in the six month period ended June 30, 1995, as
compared to $3.9 million or $0.29 per share in the same period last year.
FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES
LabOne's working capital position decreased by $1.1 million to $47.5 million
at June 30, 1995, from $48.6 million at December 31, 1994. This decrease is
primarily due to dividends paid and capital additions exceeding cash provided
by operations. The dividend paid during the second quarter 1995 was $2.3
million or $0.18 per share.
Net additions to property, plant and equipment were $0.6 million in the second
quarter 1995 as compared to $1.1 million in 1994. There were no treasury
stock purchases in the second quarter, however 2,477 shares of treasury stock
were issued for exercised options, and 5,576 shares were issued for directors'
stock compensation. The total number of shares held in treasury at June 30,
1995, was approximately 1.9 million at a total cost of $22.2 million or $11.38
per share.
In May 1995, LabOne's Board of Directors declared the second quarter 1995
dividend of $0.18 per common share. This dividend was paid on June 2, 1995,
to stockholders of record as of May 21, 1995. The Board will review the
dividend payment policy on a periodic basis. There are currently no
restrictions that would limit the Company's ability to make future dividend
payments.
Page 9
The Company had no borrowings in the second quarter 1995. At June 30, 1995,
LabOne had a total unsecured line of credit of $1.0 million that may be used
for general corporate purposes, of which the full amount is currently
available. The Company expects to fund operations, capital additions and
future dividend payments from a combination of cash reserves, cash flow from
operations and short-term borrowings. At June 30, 1995, LabOne had total cash
and investments of $41.0 million as compared to $41.5 million at December 31,
1994.
PART II. OTHER INFORMATION
Item 4. - Submission of Matters to a Vote of Security Holders.
(a) The annual stockholders' meeting was held on May 11, 1995.
(c) Brief description of each matter voted:
(1) Election of directors. For Messrs. Brewer, Jacobs, Patterson,
Rifkind, Sadler, Schweiker, Seward, Walker and Wright, there were
12,419,057 shares voted in favor thereof and 220,827 shares
withheld. For Messrs. Balzer and Hood, there were 12,417,414 shares
voted in favor thereof and 222,470 shares withheld. For Mr. W.
Thomas Grant, there were 12,419,049 shares voted in favor thereof
and 220,835 shares withheld, and for Mr. William D. Grant, there
were 12,418,857 shares voted in favor thereof and 221,027 shares
withheld. (There were 0 abstentions and 0 broker nonvotes for all
directors.)
(2) Election to approve an increase in the maximum number of shares
which may be issued under the corporation's Long-Term Incentive
Plan. Of the shares voted, 11,619,376 were voted in favor thereof
and 495,234 were opposed. There were 12,174 abstentions and 513,100
broker nonvotes.
(3) Election to ratify the appointment of KPMG Peat Marwick LLP as
independent certified public accountants of the corporation and its
subsidiaries for the present fiscal year. Of the 12,639,883 shares
voted, 12,626,313 were voted in favor thereof and 6,385 were
opposed. There were 7,185 abstentions and 0 broker nonvotes.
Item 6. - Exhibits and Reports on Form 8-K
(a) Exhibits
27. Financial Data Schedule - as filed electronically by the
Registrant in conjunction with this second quarter 1995 Form 10-Q.
(b) Reports on Form 8-K
A Form 8-K current report dated May 17, 1995, was filed with the
commission reporting under Other Events that Robert D. Thompson,
Executive V.P. Finance, CFO and Treasurer was appointed to fill a
vacancy in the LabOne Board of Directors.
Page 10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
LabOne, Inc.
Date: August 10, 1995 By /s/ Kurt E. Gruenbacher
---------------------------
Kurt E. Gruenbacher
V.P. Finance and CAO
Date: August 10, 1995 By /s/ Robert D. Thompson
---------------------------
Robert D. Thompson
Executive V.P. Finance,
CFO and Treasurer
Page 11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
first quarter 1995 10-Q for LabOne, Inc. and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<CIK> 0000816151
<NAME> LABONE, INC.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 2,098,562
<SECURITIES> 38,432,358
<RECEIVABLES> 8,436,713
<ALLOWANCES> 170,392
<INVENTORY> 1,174,248
<CURRENT-ASSETS> 52,505,063
<PP&E> 53,495,426
<DEPRECIATION> 36,172,904
<TOTAL-ASSETS> 74,016,717
<CURRENT-LIABILITIES> 4,963,750
<BONDS> 0
<COMMON> 150,000
0
0
<OTHER-SE> 68,750,487
<TOTAL-LIABILITY-AND-EQUITY> 74,016,717
<SALES> 0
<TOTAL-REVENUES> 29,312,333
<CGS> 0
<TOTAL-COSTS> 15,010,399
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,439,509
<INCOME-TAX> 1,268,399
<INCOME-CONTINUING> 2,171,110
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,171,110
<EPS-PRIMARY> 0.17
<EPS-DILUTED> 0.17
</TABLE>
