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 March 31, 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 May 2, 1995 - 13,046,349 net of 1,953,651 shares
held as treasury stock.
Page 1 of 10
PART I. FINANCIAL INFORMATION
ITEM 1 - Financial Statements
LabOne, Inc. and Subsidiary
Consolidated Balance Sheets
March 31, December 31,
1995 1994
ASSETS --------- ---------
Current assets:
Cash and cash equivalents $1,867,353 6,888,806
Short-term investments 38,836,266 34,106,026
Accounts receivable-trade, net of allowance
for doubtful accounts of $81,429 in 1995
and $81,426 in 1994 8,966,488 8,636,610
Inventories 973,663 787,339
Prepaid expenses and other current assets 1,724,609 3,007,526
Deferred income taxes 654,246 654,246
---------- ----------
Total current assets 53,022,625 54,080,553
Investments with maturities of more than one
year, at cost 510,052 508,590
Property, plant and equipment 52,987,612 52,498,807
Less accumulated depreciation 35,223,031 34,315,021
---------- ----------
Net property, plant and equipment 17,764,581 18,183,786
Other assets:
Intangible assets, net of accumulated
amortization 3,403,210 3,589,527
Deferred income taxes - noncurrent 244,543 347,264
Deposits and other assets 48,960 48,060
---------- ----------
Total assets $74,993,971 76,757,780
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $2,097,220 2,024,572
Income taxes payable (929) 131,068
Payable to Seafield Capital Corporation 29,381 113,575
Accrued payroll and benefits 1,601,378 1,915,457
Other accrued expenses 1,092,363 1,270,337
Other current liabilities 102,952 66,138
---------- ----------
Total current liabilities 4,922,365 5,521,147
Total noncurrent liabilities - -
---------- ----------
Total liabilities 4,922,365 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 13,359,569 13,347,455
Equity adjustment from foreign currency
translation (670,680) (683,383)
Retained earnings 79,462,044 80,639,340
---------- ----------
92,300,933 93,453,412
Less treasury stock of 1,956,128 shares in
1995 and 1,957,988 shares in 1994 22,229,327 22,216,779
---------- ----------
Total stockholders' equity 70,071,606 71,236,633
---------- ----------
Total liabilities and stockholders' equity $74,993,971 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
Three months ended March 31,
1995 1994
---------- ----------
Sales $14,689,459 15,266,724
Cost of sales 7,502,119 6,927,078
---------- ----------
Gross profit 7,187,340 8,339,646
Selling, general and administrative expenses 6,214,997 5,450,460
---------- ----------
Earnings from operations 972,343 2,889,186
Other income 838,242 483,461
---------- ----------
Earnings before income taxes 1,810,585 3,372,647
Income taxes 639,984 1,367,086
---------- ----------
Net earnings $1,170,601 2,005,561
========== ==========
Earnings per common share $ 0.09 0.15
====== ======
Dividends per common share $ 0.18 0.18
====== ======
Weighted average common shares outstanding 13,145,847 13,309,739
========== ==========
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
Three Months Ended March 31, 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 1,170,601 1,170,601
Cash dividends
($0.18 per share) (2,347,897) (2,347,897)
Stock options
exercised, net
(1,860 shares) 12,114 (12,548) (434)
Equity adjustment
from foreign
currency
translation 12,703 12,703
-------- ---------- -------- ---------- ----------- ----------
Balance at
March 31, 1995 $150,000 13,359,569 (670,680) 79,462,044 (22,229,327) 70,071,606
======== ========== ======== ========== =========== ==========
</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
Three months ended March 31,
1995 1994
--------- ---------
Cash provided by operations:
Net earnings $1,170,601 2,005,561
Adjustments to reconcile net earnings
to net cash provided by operations:
Depreciation and amortization 1,225,435 1,785,018
Loss (gain) on disposal of equipment 50,667 (140,423)
Provision for deferred taxes 103,835 (201,507)
Changes in:
Accounts receivable (174,594) (902,766)
Inventories (186,324) (174,443)
Prepaid expenses and other current assets 691,470 353,067
Accounts payable 72,647 (87,917)
Income taxes payable 304,166 958,786
Payable to Seafield Capital Corporation (84,194) 30,516
Accrued payroll & benefits (314,079) (781,458)
Accrued expenses (177,974) (34,503)
Other current liabilities 36,814 164,694
---------- ----------
Net cash provided by operations 2,718,470 2,974,625
---------- ----------
Cash provided by (used for) investment transactions:
Short-term investments, net (4,716,059) (10,030,808)
Purchases of investments with
maturities of more than one year (2,000) -
Property, plant and equipment, net (669,283) (712,190)
Other (900) 16,332
---------- ----------
Net cash used for investment transactions (5,388,242) (10,726,666)
---------- ----------
Cash provided by (used for) financing transactions:
Issuance of treasury stock, net of proceeds
from the exercise of stock options (434) 7,185
Cash dividends (2,347,897) (2,332,916)
---------- ----------
Net cash used for financing transactions (2,348,331) (2,325,731)
---------- ----------
Effect of foreign currency translation (3,350) (148,298)
---------- ----------
Net decrease in cash and cash equivalents (5,021,453) (10,226,070)
Cash and cash equivalents - beginning of period 6,888,806 11,514,400
---------- ----------
Cash and cash equivalents - end of period $1,867,353 1,288,330
========== ==========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Income Taxes $252,437 308,703
========== ==========
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
March 31, 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 March 31, 1995, and
December 31, 1994, and the results of its operations and cash flows for
the periods ended March 31, 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.
RESULTS OF OPERATIONS
- ---------------------
Selected financial data:
Three months ended March 31, % Increase
1995 1994 (Decrease)
----------- ----------- --------
Sales $ 14,689,459 15,266,724 (4%)
Net earnings 1,170,601 2,005,561 (42%)
Earnings per common share $0.09 0.15
Cash dividends per common share $0.18 0.18
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 diagnosing and treatment of patients. The Company has
established a network of Patient Service Centers (PSCs) and affiliations with
other centers in Northern California, Des Moines and the Kansas City area for
the collection of specimens for testing. This network became operational
during the fourth quarter of 1994. Additionally, the Company maintains its
own courier fleet to retrieve specimens for transport to the laboratory.
LabOne is certified by the Substance Abuse and Mental Health Services
Administration (SAMHSA, formerly NIDA) 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.
During December 1994, the FDA gave premarket approval to Epitope, Inc. with
respect to its OraSure(Registered) specimen collection kit for oral fluid
HIV-1 antibody testing. This approval enables LabOne to resume oral fluid
HIV-1 antibody testing in the United States.
In March 1995, LabOne and Epitope entered into a new supply and distribution
agreement to market OraSure kits. LabOne maintains the non-exclusive right
to purchase kits and use them for purposes of risk assessment of applicants
in connection with the underwriting of insurance. LabOne no longer retains
the exclusive rights for insurance testing services in Canada. In addition,
LabOne no longer retains first refusal rights for exclusive insurance testing
services in other foreign countries.
Page 7
Due to the lower collection expense associated with the OraSure kit, the
potential exists for a significant expansion of the testing market.
Conversely, the device also has the potential to cannibalize part of the
existing blood and urine testing market. The net impact of the approval
of the OraSure device cannot be determined at this time.
FIRST QUARTER ANALYSIS
Revenue in the first quarter 1995 was $14.7 million as compared to $15.3
million in the same period last year. The decrease of $0.6 million (4%) can
be attributed primarily to decreases in insurance laboratory revenue of $1.1
million, partially offset by substance-abuse and clinical laboratory testing
revenues of $0.7 million. The total number of applicants tested in the
first quarter 1995 decreased by 6% as compared to the same quarter last year.
Average revenue per applicant declined 3% during the first quarter 1995 as
compared to the first quarter 1994.
Cost of sales increased $0.6 million (8%) in the first quarter 1995 as
compared to the first quarter 1994. This increase is primarily due to
increases in payroll, laboratory supplies, PSC rent expense and outside
laboratory services, all related to the clinical expansion. These were
partially offset by decreases in depreciation and specimen collection kit
expenses. Clinical and substance-abuse testing cost of sales during the
first quarter 1995 was $2.1 million.
Selling, general and administrative expenses increased $0.8 million (14%) in
the first quarter 1995 as compared to the prior year due to increases in
payroll, commission and bonus expenses and legal fees. These were partially
offset by decreases in depreciation and repairs and maintenance expense.
Selling, general and administrative expenses due to clinical and
substance-abuse testing during the first quarter were $0.8 million.
Nonoperating income increased $0.4 million primarily due to an increase in
investment income.
The effective income tax rate for the first quarter 1995 was 35.3% as compared
to 40.5% during the same quarter in 1994. This decrease is primarily due to
an increase in tax exempt investment income in 1995 and lower applicable tax
rates.
The combined effect of the above factors resulted in net earnings of $1.2
million or $0.09 per share in the first quarter 1995 as compared to $2.0
million or $0.15 per share in the same period last year.
FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES
LabOne's working capital position decreased by $0.5 million to $48.1 million
at March 31, 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 after changes in working capital. The dividend paid during the
first quarter 1995 was $2.3 million or $0.18 per share.
Page 8
Net additions to property, plant and equipment were $0.7 million in the first
quarter 1995 and 1994. There were no treasury stock purchases in the first
quarter, however 1,860 shares of treasury stock were issued for exercised
options. The total number of shares held in treasury at March 31, 1995, was
approximately 2.0 million at a total cost of $22.2 million or $11.36 per share.
In February 1995, LabOne's Board of Directors declared the first quarter 1995
dividend of $0.18 per common share. This dividend was paid on March 2, 1995,
to stockholders of record as of February 21, 1995, and totaled approximately
$2.3 million. 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.
The Company had no borrowings in the first quarter 1995. At March 31, 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 March 31, 1995, LabOne had total
cash and investments of $41.2 million as compared to $41.5 million at December
31, 1994.
PART II. OTHER INFORMATION
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 first quarter 1995 Form 10-Q.
(b) Reports on Form 8-K
A Form 8-K current report dated February 15, 1995 was filed with the
commission reporting under Other Events that LabOne was advised by
Seafield Capital Corporation (Seafield) that Seafield has retained
Alex. Brown & Sons Incorporated as financial adviser to assist Seafield
in considering strategic alternatives to maximize Seafield shareholder
value. Seafield is a holding company that owns 82% of LabOne, as well
as a number of other investments and cash equivalents.
LabOne has been informed that one alternative that Seafield expects to
pursue is a cash-option merger of Seafield into LabOne. In such a merger,
Seafield shareholders would have the option of receiving cash as well as
shares of LabOne. The merger would most likely be preceded by Seafield's
distribution to its shareholders, or other disposition by Seafield, of
its other assets. Seafield's Board has also announced that it will
consider other business combination proposals that are presented to it.
LabOne has appointed a special committee of independent directors to
consider any merger or other proposal that may be presented to it by
Seafield. LabOne has been advised by Seafield that if a definitive
merger agreement is reached, it is anticipated that such a merger would
not occur until the early part of 1996 because of the time required to
complete anticipated Seafield asset sales as well as shareholder and
other approvals. LabOne cautioned that there can be no assurance that
a merger with Seafield will occur.
Page 9
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: May 11, 1995 By /s/ Kurt E. Gruenbacher
---------------------------
Kurt E. Gruenbacher
V.P. Finance and CAO
Date: May 11, 1995 By /s/ Robert D. Thompson
---------------------------
Robert D. Thompson
Executive V.P. Finance,
CFO and Treasurer
Page 10
<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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 1,867,353
<SECURITIES> 38,836,266
<RECEIVABLES> 9,047,917
<ALLOWANCES> 81,429
<INVENTORY> 973,663
<CURRENT-ASSETS> 53,022,625
<PP&E> 52,987,612
<DEPRECIATION> 35,223,031
<TOTAL-ASSETS> 74,993,971
<CURRENT-LIABILITIES> 4,922,365
<BONDS> 0
<COMMON> 150,000
0
0
<OTHER-SE> 69,921,606
<TOTAL-LIABILITY-AND-EQUITY> 74,993,971
<SALES> 14,689,459
<TOTAL-REVENUES> 14,689,459
<CGS> 7,502,119
<TOTAL-COSTS> 7,502,119
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,810,585
<INCOME-TAX> 639,984
<INCOME-CONTINUING> 1,170,601
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,170,601
<EPS-PRIMARY> 0.09
<EPS-DILUTED> 0.09
</TABLE>
