UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended - December 31, 1995
Commission file number 0-15975
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LabOne, Inc.
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(Exact name of Registrant as specified in its charter)
Delaware 48-0952323
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
10310 West 84th Terrace
Lenexa, Kansas 66214
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(Address of principal executive offices) (ZIP Code)
Registrant's telephone number, including area code: 913-888-1770
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common stock, $0.01 par value
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(Title of Class)
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 / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. / /
Approximate aggregate market value of voting stock held by non-affiliates
of Registrant: $33,892,000 (based on closing price as of March 1, 1996, of
$14.88). The non-inclusion of shares held by directors, officers and
beneficial owners of more than 5% of the outstanding stock shall not be deemed
to constitute an admission that such persons are affiliates of the Registrant
within the meaning of the Securities and Exchange Act of 1934.
Number of shares outstanding of the only class of Registrant's common
stock as of March 1, 1996: $0.01 par value common - 13,055,471 shares net of
1,944,529 shares held as treasury stock.
DOCUMENTS INCORPORATED BY REFERENCE:
The information included under the captions entitled "Information
Concerning Nominees for Election as Directors," "Security Ownership of
Management," "Security Ownership of Certain Beneficial Owners," and "Executive
Compensation," in the Company's definitive proxy statement to be filed with
the Commission pursuant to Regulation 14A with respect to its annual meeting
of stockholders to be held May 9, 1996, is incorporated into Part III of this
Annual Report on Form 10-K.
The exhibit list for this Form 10-K begins on page 16.
Page 1 of 70
PART I
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ITEM 1. BUSINESS
General
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LabOne, Inc., a Delaware corporation, was established in 1972 to provide
laboratory services for the insurance industry. LabOne, Inc., together with
its wholly-owned subsidiaries Lab One Canada Inc. (formerly Head Office
Reference Laboratory Limited) and HORL (UK) Limited (hereinafter collectively
referred to as either LabOne or the Company), is the largest provider of such
services in the United States and Canada. (See Note 7 of Notes to
Consolidated Financial Statements for financial information regarding foreign
operations.) In 1994, the company expanded its testing offerings to include
the healthcare market. The Company provides high-quality laboratory services
to insurance companies, physicians and employers nationwide.
LabOne provides risk-appraisal laboratory services to the insurance industry.
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
specimens of individual life insurance policy applicants. The Company also
provides testing services on specimens of individuals applying for individual
and group medical and disability policies.
LabOne's clinical testing services are provided to the healthcare industry to
aid in the diagnosis and treatment of patients. LabOne operates only one
highly automated and centralized laboratory, which has significant economic
advantages over other conventional laboratory competitors. LabOne markets its
clinical testing services to the payers of healthcare--insurance companies and
self-insured groups. The Company does this through Lab Card(TM), a Laboratory
Benefits Management (LBM) program.
The Lab Card Program provides laboratory testing at a reduced rate as compared
to traditional laboratories. It uses a unique benefit design that shares the
cost savings with the patient, creating an incentive for the patient to help
direct laboratory work to LabOne. Under the Program, the patient incurs no
out-of-pocket expense when the Lab Card is used, and the insurance company or
self-insured group receives substantial savings on its laboratory charges.
LabOne is certified by the Substance Abuse and Mental Health Services
Administration (SAMHSA) to perform substance abuse testing services for
federally regulated employers and is currently marketing these services
throughout the country to both regulated and nonregulated employers. The
Company's rapid turnaround and multiple testing options help clients reduce
downtime for affected employees and meet mandated drug screening guidelines.
Services Provided by the Company
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Insurance Applicant Testing:
In order to establish the appropriate level of premium payments or to
determine whether to issue a policy, an insurance company requires objective
means of evaluating the insurance risk posed by policy applicants. Because
decisions of this type are based on statistical probabilities of mortality and
2
morbidity, an insurance company generally requires quantitative data
reflecting the applicant's general health. Standardized laboratory testing,
tailored to the needs of the insurance industry and reported in a uniform
format, provides an insurance company with an efficient means of evaluating
the mortality and morbidity risks posed by policy applicants. The use of
standardized urinalysis and blood testing has proven a cost-effective
alternative to individualized physician examinations, which utilize varying
testing procedures and reports.
Standardized laboratory testing can also be used to verify responses on a
policy application to such questions as whether the applicant is a user of
tobacco products, certain controlled substances or certain prescription drugs.
Insurance companies generally offer a premium discount for nonsmokers and
often rely on testing to determine whether an applicant is a user of tobacco
products. Cocaine use has been associated with increased risk of accidental
death and cardiovascular disorders, and as a result of the increasing abuse in
the United States and Canada, insurance companies are testing a greater number
of policy applicants to detect its presence. Therapeutic drug testing also
detects the presence of certain prescription drugs that are being used by an
applicant to treat a life-threatening medical condition that may not be
revealed by a physical examination.
LabOne's insurance testing services consist of certain specimen profiles that
provide insurance companies with specific information that may indicate liver
or kidney disorders, diabetes, the risk of cardiovascular disease, bacterial
or viral infections and other health risks. The Company also offers tests to
detect the presence of antibodies to human immunodeficiency virus (HIV),
nicotine, cocaine and certain medications associated with life-threatening
medical conditions that may not be revealed by a routine physical examination.
Insurance specimens are normally collected from individual insurance
applicants by independent paramedical personnel using LabOne's custom-designed
collection kits and containers. These kits and containers are delivered
to LabOne's laboratory via overnight delivery services or mail, coded for
identification and processed according to each client's specifications.
Results are generally transmitted to the insurance company's underwriting
department that same evening.
Patient Testing:
The Company began offering laboratory testing services to the healthcare
industry in May 1994. Clinical laboratory tests are generally requested by
physicians and other healthcare providers to diagnose and monitor diseases
and other medical conditions through the detection of substances in blood
and other specimens. Laboratory testing is generally categorized as either
clinical testing, which is performed on bodily fluids including blood and
urine, or anatomical pathology testing, which is performed on tissue.
Clinical and anatomical pathology tests are frequently performed as part
of regular physical examinations and hospital admissions in connection with
the diagnosis and treatment of illnesses. The most frequently requested
tests include blood chemistry analyses, blood cholesterol level tests,
urinalyses, blood cell counts, PAP smears and AIDS-related tests.
3
Clinical specimens are collected at the physician's office or other specified
sites. The Company's couriers pick up the specimens and deliver them to local
airports for express transport to the Kansas laboratory. Specimens are coded
for identification and processed. The Company's testing menu includes the
majority of tests requested by its clients. Tests not performed in-house are
sent to reference laboratories for testing, and results are entered into the
Company's computer system along with all other completed results.
In 1994, LabOne signed an agreement with PCS Health Systems (PCS), a
subsidiary of Eli Lilly, to market an integrated and fully managed system of
laboratory testing and administrative services to payers of laboratory
services throughout the United States. The result of this agreement is a
program called Lab Card, which offers both payers and the covered population
substantial cost savings on high-quality laboratory testing services. Lab
Card utilizes PCS's point-of-service, real-time eligibility verification
system. The testing is performed at LabOne's centralized laboratory facility
in Kansas.
Substance Abuse Testing:
LabOne has provided quality laboratory testing services to the insurance
industry for 24 years. Certification by SAMHSA in 1994 enables the Company
to offer substance abuse testing services to federally regulated industries.
Specimens for substance abuse testing are typically collected by independent
agencies who use LabOne's forms and collection supplies. Specimens are sealed
with bar-coded, tamper-evident seals and shipped overnight to the Company.
Automated systems monitor the specimens throughout the screening and
confirmation process. Negative results are available immediately after
testing is completed. Initial positive specimens are verified by the gas
chromatography/mass spectrometry method, and results are generally available
within 24 hours. Results are transmitted electronically to the client's
secured computer, printer or fax machine.
The following table summarizes the Company's revenues from services provided
to the insurance and healthcare (clinical and substance abuse testing)
markets (dollars in thousands):
Year ended December 31,
1995 1994 1993
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Insurance $ 52,544 92% $ 60,260 99% $ 69,378 100%
Healthcare 4,485 8% 466 1% - 0%
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Total $ 57,029 $ 60,726 $ 69,378
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Operations
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The Company's operations are designed to facilitate the testing of a large
number of specimens and to report the results to our clients, generally within
24 hours of receipt of specimens.
4
The Company has internally developed, custom-designed laboratory and business
processing systems. These systems enable each client company to customize its
own testing and reflex requirements by several parameters to satisfy its
particular needs. It is a centralized network system that provides an
automated link between LabOne's testing equipment, data processing equipment
and the clients' computer systems. This system offers LabOne's clients the
ability to customize their testing activities to best meet their needs.
As a result of the number of tests it has performed over the past several
years, LabOne has compiled and maintains a large statistical data base of test
results. These summary statistics are useful to the actuarial and
underwriting departments of an insurance client in comparing that client's
test results to the results obtained by the Company's entire client base.
Company-specific and industry-wide reports are frequently distributed to
clients on subjects such as coronary risk analysis, cholesterol and drugs of
abuse.
The Company considers the confidentiality of its test results to be of primary
importance and has established procedures to ensure confidentiality of test
results.
Substantially all of the reagents and materials used by the Company in
conducting its testing are commercially purchased and are readily available
from multiple sources.
Regulatory Affairs/Quality Improvement
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The objective of the regulatory affairs/quality improvement department is to
ensure that accurate and reliable test results are released to our clients.
This is accomplished by incorporating both internal and external quality
assurance programs in each area of the laboratory. In addition, our quality
assurance specialists share the responsibility with all LabOne employees of an
ongoing commitment to quality and safety in all laboratory operations.
Internal quality and education programs are designed to identify opportunities
for improvement in laboratory services and to meet all required safety
training and education issues. These programs help ensure the reliability and
confidentiality of test results.
Procedure manuals in all areas of the laboratory help maintain uniformity and
accuracy and meet regulatory guidelines. Tests on control samples with known
results are performed frequently to maintain and verify accuracy in the
testing process. Complete documentation provides record keeping for employee
reference and meets regulatory requirements. All employees are thoroughly
trained to meet standards mandated by OSHA in order to maintain a safe work
environment. Superblind(TM) controls are used to challenge every aspect of
service at LabOne. Specimens requiring special handling are evaluated and
verified by control analysis personnel. A computer edit program is used to
review and verify clinically abnormal results and all positive HIV antibody
and drugs-of-abuse records.
As an external quality assurance program, LabOne participates in a number of
proficiency programs established by the College of American Pathologists, the
American Association of Bioanalysts and the Centers for Disease Control.
5
LabOne is accredited by the College of American Pathologists and is licensed
under the Clinical Laboratory Improvement Amendments (CLIA) of 1988. LabOne
has additional licenses for HIV and substance abuse testing from the state of
Kansas and all other states where such licenses are required. LabOne is
certified by SAMHSA to perform testing to detect drugs of abuse in federal
employees and in workers governed by federal regulations.
Technology Development
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The technology development department evaluates new commercially available
tests and technologies or develops new assays and compares them to competing
products in order to select the most accurate laboratory procedures. Total
technology development expenditures are not considered significant to the
Company as a whole.
Sales and Marketing
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LabOne's client base currently consists primarily of insurance companies in
the United States and Canada. The Company believes that its ability to
provide prompt and accurate results on a cost-effective basis and its
responsiveness to customer needs have been important factors in servicing
existing business.
All of the sales representatives for the insurance market have significant
business experience in the insurance industry or clinical laboratory-related
fields. These representatives call on major clients several times each year,
usually meeting with a medical director or vice president of underwriting. An
important part of the Company's marketing effort is directed toward providing
its existing clients and prospects with information pertaining to the
actuarial benefits of, and trends in, laboratory testing. The Company's sales
representatives and its senior management also attend underwriters' and
medical directors' meetings sponsored by the insurance industry.
The sales representatives for the clinical industry are experienced in this
market and currently work in the geographic areas which they represent.
Marketing efforts are directed at insurance carriers, as well as self-insured
companies and other organizations nationwide.
Substance abuse marketing efforts are primarily directed at Fortune 1000
companies, occupational health clinics and third party administrators. The
Company's strategy is to offer quality service at competitive prices.
The sales force focuses on the ability of LabOne to offer multiple reporting
methods, next flight out options, dedicated client service representatives
and reporting of negative results before 8:00 A.M.
Legislation and Regulation
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In the past, legislation was introduced in several states that, if enacted,
may restrict or ban all AIDS-related testing for insurance purposes in those
states. The introduction of legislation to restrict or ban all AIDS-related
testing does not ensure its passage into law. There can be no assurance,
however, that such legislation will not be enacted in the future.
A few states have enacted legislation or regulations which have had the effect
of reducing or eliminating the volume of laboratory tests requested by medical
insurers in those states. It is likely that the trend will continue as more
states enact legislation relating to healthcare and medical insurance.
6
The Food and Drug Administration (FDA) may exert broader regulatory control
over LabOne's business and all testing laboratories. The areas of possible
increased control that could impact LabOne's business include (1) whether FDA
premarket notification or clearance may be required for LabOne's continued
commercial distribution and use of a blood and urine specimen collection kit,
and (2) a draft FDA compliance policy guide stating that certain products
routinely used by laboratories may require FDA approval or clearance.
Competition
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The Company believes that the insurance laboratory testing market is
approximately a $100 million industry. LabOne currently controls over half
the market, with three other main competitors, Osborn Laboratories, Inc.,
Clinical Reference Laboratory and GIB Laboratories, maintaining a majority of
the remaining market. The insurance laboratory testing industry continues to
be increasingly competitive. The primary focus of the competition has been on
pricing. This continued competition has resulted in a decrease in LabOne's
average price per test. It is anticipated that prices will continue to
decline in 1996.
Although competition has dramatically increased in the past few years, LabOne
has maintained its position as the market leader. The Company believes its
leading position in the insurance laboratory testing market is due in part to
its focused commitment of resources to the life and health insurance industry.
LabOne has continued to maintain its market leadership through the client
relationships that it has developed over its 24-year history, its reputation
for providing quality products and services at competitive prices, and its
battery of tests which are tailored specifically to an insurance company's
needs.
The clinical laboratory testing market is a $40 billion industry which is
highly fragmented and very competitive. The Company faces competition from
numerous independent clinical laboratories and hospital- or physician-owned
laboratories. Many of the Company's competitors are significantly larger and
have substantially greater financial resources than the Company. LabOne is
currently working to establish a sound client base in this environment.
LabOne's business plan is to be the premier low-cost provider of high-quality
laboratory services to self-insured employers and insurance companies in the
healthcare market. The Company feels that its superior quality and
centralized, low-cost operating structure enable it to compete effectively
in this market.
LabOne competes in the substance abuse testing market nationwide. The
Company's major competitors are the three major clinical chains, LabCorp,
Corning Clinical Laboratories and Smith Kline Beecham Laboratories, who
collectively constitute approximately two-thirds of the substance abuse
testing market.
Foreign Markets
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In 1977, LabOne opened Head Office Reference Laboratory Limited, a subsidiary,
in Toronto, Canada. During 1994, LabOne consolidated all Canadian laboratory
testing into the Kansas laboratory. In 1995, the name was changed to Lab One
Canada Inc., which continues to market insurance testing services to Canadian
clients, with laboratory testing performed in the United States.
7
The following table summarizes the revenue, profit and assets applicable to
the Company's domestic operations and its subsidiary, Lab One Canada Inc.
Year ended December 31,
1995 1994* 1993
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(in millions)
Sales:
United States $50.8 $53.0 59.8
Canada 6.2 7.7 9.6
Operating Profit:
United States 2.1 5.8 14.1
Canada 0.3 1.1 2.6
Identifiable Assets:
United States 64.4 71.3 75.9
Canada 5.7 5.5 5.2
* 1994 data includes restructuring charges of $1.6 million. (See
Note 9 of Notes to Consolidated Financial Statements.)
Employees
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As of March 1, 1996, the Company had 509 full-time employees, representing a
decrease of 49 employees from the same time in 1995. None of the Company's
employees are represented by a labor union. The Company believes its
relations with employees are good.
ITEM 2. PROPERTIES
The Company's corporate headquarters is located in Lenexa, Kansas,
approximately 12 miles from Kansas City, Missouri. This facility is owned by
the Company and occupied by the administration, information systems, insurance
client services and sales departments. There is no debt associated with this
building.
The Company's laboratory testing facility is in Overland Park, Kansas, less
than two miles from corporate headquarters. This building is also owned by
the Company and is occupied by laboratory operations and clinical client
services. There is no debt associated with this facility. The testing
laboratory has certain enhancements that improve the efficiency of operations.
All automated testing equipment requiring purified water is linked directly to
a centralized water-purification system. The laboratory is also equipped with
a sensor-detecting ventilation system which eliminates Ohot spotsO caused by
the high-temperature output of laboratory and computer processing equipment.
In addition, a full-time alternative power source is on-line in the event of
electrical power shortage. These back-up power sources allow specimen testing
and data processing to continue until full power is restored, thus assuring
LabOne's clients of our continuous laboratory operation.
8
The Company leases a building in Lenexa, Kansas, approximately two miles from
corporate headquarters, for use as a secured warehouse and purchasing and
distribution center. The lease is for five years through August 1998. This
lease contains options to cancel at one or two years prior to the end of the
lease term.
The Company also leases 18 locations in Northern California and 11 in the
Midwest which serve as LabOne Service Centers (LSCs). These facilities, which
provide specimen collection services for patients, are typically located in a
medical office building and are leased for up to five years.
Lab One Canada Inc. leases a building in Toronto, Ontario, Canada, which is
used for administration, sales and client services. This lease expires in
November 1997. Part of the leased property is currently unused due to the
transfer of the laboratory operations to the Kansas facility. The future
expenses of the unused property were accrued as a portion of the restructuring
charge incurred during 1994.
LabOne believes that all of the above facilities are suitable for their
intended use and that the space is adequate to handle certain increased
volumes that may occur in the foreseeable future.
ITEM 3. LITIGATION
In the normal course of business, LabOne had certain lawsuits pending at
December 31, 1995. In the opinion of management, after consultation with
legal counsel and based upon currently available information, none of these
lawsuits are expected to have a material impact on the financial condition or
results of operations of the Company.
No provisions for loss related to litigation are included in the accompanying
consolidated financial statements.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
None
PART II
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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Registrant's common stock is traded in the national over-the-counter
market and is listed in the NASDAQ National Market System maintained by the
National Association of Securities Dealers. As of March 1, 1996, the
outstanding shares were held by approximately 455 shareholders of record.
The Company paid quarterly dividends of $0.18 per common share in 1995 and
1994. The Board of Directors reviews the dividend policy on a periodic basis.
There are currently no restrictions that would limit the Company's ability to
make future dividend payments.
9
The following are the high and low closing prices of the stock for each
quarter of 1995 and 1994:
1995 1994
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High Low High Low
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1st Quarter $16.00 13.00 $23.50 17.00
2nd Quarter 15.50 12.75 24.25 17.75
3rd Quarter 15.00 11.50 20.75 17.75
4th Quarter 15.25 10.63 19.25 14.50
ITEM 6. SELECTED FINANCIAL DATA
The following table summarizes certain selected financial information and
operating data regarding the Company. This information should be read in
conjunction with Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS and Item 14. (a) (1) and (2),
CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES. The balance sheet data as of
December 31, 1995, 1994, 1993, 1992, and 1991, and the statement of earnings
data for each of the years in the five-year period ended December 31, 1995,
have been derived from the Company's Consolidated Financial Statements, which
have been audited by KPMG Peat Marwick LLP, the Company's independent
certified public accountants.
Years Ended December 31,
(in thousands, except per share amounts)
1995 1994* 1993 1992 1991
Statement of Earnings Data: -------- ------ ------ ------ ------
Sales $ 57,029 60,726 69,378 74,437 75,739
Cost of sales 29,934 29,073 30,019 31,647 32,377
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Gross profit 27,095 31,653 39,359 42,790 43,362
Selling, general and
administrative expenses 24,711 24,761 22,695 22,776 22,345
-------- ------ ------ ------ ------
Earnings from operations 2,385 6,893 16,664 20,014 21,017
Other income 2,365 1,640 870 1,666 724
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Earnings before income taxes 4,750 8,533 17,534 21,680 21,741
Income taxes 1,953 2,846 6,968 8,347 8,452
-------- ------ ------ ------ ------
Net earnings $ 2,797 5,687 10,566 13,333 13,289
======== ====== ====== ====== ======
Earnings per common share $ 0.21 0.43 0.80 1.02 1.02
======== ====== ====== ====== ======
Dividends per common share $ 0.72 0.72 0.72 0.72 0.18
======== ====== ====== ====== ======
Balance Sheet Data:
Working capital $44,233 48,559 48,649 42,724 25,846
Total assets 70,048 76,758 81,130 81,661 78,890
Long term debt - - - - -
Stockholders' equity 64,864 71,237 74,764 72,851 69,355
*1994 selling, general and administrative expenses include a restructuring
charge of $1.6 million. (See Note 9 of Notes to Consolidated Financial
Statements.)
10
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
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1995 Compared to 1994
Net sales decreased approximately 6% in 1995 to $57.0 million from $60.7
million in 1994 due to decreases in insurance laboratory and kit revenue,
partially offset by increases in healthcare (clinical and substance abuse
testing) laboratory revenues. Insurance laboratory revenues declined due to
decreases in the volume and price of tests performed. The total number of
insurance applicants tested by LabOne during 1995 decreased 10% as compared to
1994. This decline was due to market competition, a reduction in the total
number of life insurance applications written in the industry, and regulations
restricting the use of laboratory testing for underwriting of medical
insurance. Average revenue per applicant declined 5% primarily due to a
decrease in prices as a result of continued competitive pressures. During
the fourth quarter 1994, LabOne initiated a price stabilization plan. The
purpose of the plan was to increase prices by promoting service. The initial
result of this action was a slight increase in the average revenue per
applicant. However, prices subsequently declined during 1995. Healthcare
revenues were $4.5 million during 1995, as compared to $0.5 million in 1994.
Cost of sales increased $0.9 million (3%) in 1995 as compared to the prior
year. This increase is due to increases in payroll and outside lab services
related to clinical and substance abuse testing, and LabOne Service Center
(LSC) expenses. LSC expenses increased due to the LSC expansion as well as a
write-off for closing nonperforming locations. These were partially offset
by decreases in Lab One Canada expenses due to closing the laboratory in 1994.
Lab One Canada continues to market testing services with laboratory testing
performed in the United States. Healthcare costs of sales expenses were $8.6
million during 1995, as compared to $4.0 million in 1994.
In September 1995, LabOne reduced staff by 7% resulting in additional expenses
of $0.5 million. The work force reduction was considered necessary to improve
the cost structure of its insurance testing operations and meet clients'
requirements for lower cost laboratory services. It is expected the annual
savings from the reduction in staff and LSC locations will result in labor
savings and reduced LSC operating expenses of $2.4 million.
As a result of the above factors, gross profit decreased from $31.7 million in
1994 to $27.1 million in 1995.
Selling, general and administrative expenses decreased $0.1 million in 1995 as
compared to the prior year, primarily due to expenses related to the one-time
restructuring charge of $1.6 million incurred in 1994. (See 1994 Compared to
1993.) Depreciation and maintenance expenses also declined in 1995. These
declines were partially offset by increases in commission, bad debt and third
party billing expenses. Healthcare overhead expenses were $5.8 million during
1995, as compared to $3.1 million in 1994.
Operating income fell from $6.9 million in 1994 to $2.4 million in 1995. The
$4.5 million reduction is primarily attributable to a $1.3 million decrease in
the insurance segment operating income and a $3.3 million increase in the
healthcare segment operating loss.
11
Nonoperating income increased $0.7 million due to an increase in investment
income, partially offset by an increase in other expenses.
The effective income tax rate increased from 33.4% during 1994 to 41.1% in
1995 due primarily to a 1994 tax adjustment related to the closure of the
HORL(UK) operations and a 1995 tax adjustment related to repatriation of
foreign-sourced income.
The combined effect of the above factors resulted in net earnings of $2.8
million, or $0.21 per share, in the year ended December 31, 1995, as compared
to $5.7 million, or $0.43 per share, in the same period last year.
1994 Compared to 1993
Healthcare (clinical and substance abuse testing) expenses disclosed in this
section have been modified to conform with current year presentation based on
segment reporting requirements for 1995.
Net sales decreased approximately 12% in 1994 to $60.7 million from $69.4
million in 1993, primarily due to a decrease in laboratory revenue.
Laboratory testing revenue decreased as the result of an 8% decrease in the
number of applicants tested and a 7% decrease in the average revenue per
applicant. Average revenue per applicant decreased primarily due to a
decrease in prices as a result of continued competitive pressures. The total
volume of applicants tested decreased primarily due to a decline in the number
of life insurance applications written in the industry. Healthcare laboratory
testing generated revenue of $0.5 million during 1994. Insurance kit revenue
decreased $0.9 million due to lower sales volumes.
Cost of sales decreased 3%, or $0.9 million, in 1994 from the prior year.
This is primarily due to decreases in insurance kit expenses, depreciation and
amortization expense, and net postage expense. Insurance kit expenses
decreased due to the lower sales volumes. These decreases were partially
offset by increases in payroll and healthcare expansion expenses. Cost of
sales expenses related to the healthcare expansion were $4.0 million in 1994.
As a result of the above factors, gross profit decreased from $39.4 million
in 1993 to $31.7 million in 1994.
Selling, general and administrative expenses increased $2.1 million (9%) in
1994 due primarily to expenses related to the third quarter restructuring
charge of $1.6 million, which includes charges for consolidating Canadian
laboratory operations into the Kansas facility and for severance payments
resulting from elimination of several insurance testing administrative
positions. These changes resulted in future annual cost savings of $1.7
million due to elimination of Canadian laboratory payroll and a reduction in
depreciation and U.S. administrative payroll expenses. Selling, general and
administrative expenses related to the healthcare expansion were $3.1 million
in 1994.
Operating income fell from $16.7 million in 1993 to $6.9 million in 1994. The
$9.8 million reduction is primarily attributable to a $3.2 million decrease in
the insurance segment operating income and a $6.6 million operating loss in
the healthcare segment.
Other income (expense), net increased $0.8 million primarily due to recovery
of a nonoperating expense from the prior year.
12
The effective income tax rate declined from 39.7% during 1993 to 33.4% in
1994 due primarily to tax adjustments related to the closure of the HORL(UK)
operations and certain U.S. tax adjustments.
The combined effect of the above factors resulted in net earnings of $5.7
million, or $0.43 per share, in the year ended December 31, 1994, as compared
to $10.6 million, or $0.80 per share, in 1993.
TRENDS
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The following is management's analysis of certain existing trends that have
been identified as potentially affecting the future financial results of the
Company. Due to the potential for a rapid rate of change in any number of
factors associated with the insurance and healthcare laboratory testing
industries, it is difficult to quantify with any degree of certainty LabOne's
future volumes, sales or net earnings.
In the last several years, there has been a decline in the number of life
insurance applications written in the industry. In addition, the insurance
laboratory testing industry continues to be highly competitive. The primary
focus of the competition has been on pricing. LabOne continues to maintain its
market leadership by providing quality products and services at competitive
prices. Management expects prices and volume may continue to decline during
1996 due to competitive pressures and a reduction in the number of life
insurance applications written. These trends may have a continuing material
impact on earnings from operations.
During December 1994, the FDA gave premarket approval to Epitope, Inc. with
respect to its specimen collection kit for oral fluid HIV-1 antibody testing.
In December 1995, Epitope announced that the FDA had issued a letter stating
that the oral fluid Western Blot test was approvable as a confirmation for the
oral fluid HIV-1 antibody test. If approved, this may allow for the initial
screen and the Western Blot confirmation test to be performed on the same
specimen. Due to the lower collection expense associated with oral fluid
collection devices, the potential exists for an expansion of the testing
market. Currently, there are approximately 13.5 million individual life
insurance policies sold in the United States annually. However, laboratory
services are provided on only approximately 4.5 million of these policy
applicants. The noninvasive nature of oral specimen collection allows for
low-cost agent collection, making testing much more affordable on smaller face
value insurance policies. Conversely, the device also has the potential to
cannibalize part of the existing blood and urine testing market. The
net impact of oral fluid testing cannot be determined at this time.
There are companies currently developing and seeking FDA approval for home
HIV test products. If approved, these products would allow individuals
to confidentially determine their HIV status prior to applying for insurance.
To avoid accepting these high-risk policies, the insurance companies may elect
to lower the threshold at which laboratory tests are requested to prevent
writing policies on HIV-positive applicants. Most insurance laboratory
testing is performed on policies of $100,000 or greater, representing about
one-third of all policy applicants. The $25,000 to $99,999 range represents
approximately one-quarter of current insurance policy applicants. If the
FDA does approve any home testing kit for HIV, the potential exists for a
significant expansion of laboratory testing for lower policy amounts.
13
LabOne entered the clinical and SAMHSA-certified substance abuse testing
markets during 1994. The Company continues to add new customers in both
fields. The Company's Lab Card program covered approximately 280,000 lives
at December 31, 1995, including The Guardian Life Insurance Company of America
(The Guardian) and Principal Healthcare of Kansas City (Principal). The
Guardian has stated its intention to roll out the Lab Card Program in 16
states covering approximately 500,000 additional lives starting in the
second or third quarter 1996.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
LabOne's working capital position declined from $48.6 million at December 31,
1994, to $44.2 million at December 31, 1995. This decrease is the result of
dividends paid and capital additions exceeding cash provided by operations and
net maturities of long-term investments. Net cash provided by operations
increased by $7.8 million, primarily a result of conversion of short-term
investments, partially offset by the decrease in net earnings.
During 1995, LabOne paid quarterly dividends of $0.18 per common share. The
Board of Directors reviews this policy on a periodic basis. The total amount
of dividends paid during 1995 was $0.72 per share, or $9.4 million. Although
cash dividends paid currently exceed net cash provided by operations, there
are no immediate restrictions that would limit the Company's ability to make
future dividend payments.
In 1988, LabOne's Board authorized the Company to enter the market from time
to time for the purpose of acquiring shares of the Company's common stock in
an amount not to exceed $25.0 million. As of December 31, 1995, the Company
had acquired 2,099,235 shares of LabOne as treasury stock at a total cost of
$22.7 million, leaving $2.3 million for potential future stock purchases.
No shares have been purchased since 1990.
During 1995, the Company invested $2.9 million in additional property, plant
and equipment, as compared to $3.4 million in 1994 and $3.7 million in 1993.
Of the amounts spent in 1995 and 1994, approximately $1.4 million and $1.8
million, respectively, were for the diversification into the clinical and
substance abuse testing markets. Additional investments in property, plant
and equipment in 1996 are expected to be consistent with the amount spent in
1995. At December 31, 1995, the Company had no material commitments for
capital expenditures.
The Company had no short-term borrowings during 1995. The Company has an
unsecured line of credit of $5.0 million that may be used for general
corporate purposes, of which the full amount is currently available.
LabOne's line of credit has a stated rate equivalent to the prime rate which
was 8.5% at December 31, 1995. There are no debt restrictions related
to this line of credit. Management expects to be able to fund operations,
capital asset additions, treasury stock purchases, if any, and future dividend
payments from a combination of cash flow, cash reserves and short-term
borrowings. Total cash and investments at December 31, 1995, were $37.6
million, as compared to $41.5 million at December 31, 1994. Included in
LabOne's investments at year-end are $23.8 million of short-term investments
classified as trading securities and recorded at market value. All other
short- and long-term investments are classified as held-to-maturity and
recorded at amortized cost.
14
In February 1995, LabOne was advised by Seafield Capital Corporation
(Seafield) that Seafield had 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 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 of Directors 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 late 1996 because of the time
required to complete anticipated Seafield asset sales as well as shareholder
and other approvals. There can be no assurance that a merger with Seafield
will occur.
PENDING ACCOUNTING PRONOUNCEMENTS
- ---------------------------------
LabOne will be required to implement Statement of Financial Accounting
Standard (SFAS) No. 123, "Accounting for Stock-Based Compensation," in 1996.
LabOne does not presently expect to adopt the optional accounting treatment
based on the estimated fair value of employee stock options allowed by SFAS
No. 123. However, presentation of pro forma disclosures of net earnings and
earnings per share as if the optional accounting method had been utilized will
be required in 1996.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See ITEM 14.(a).
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
15
PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information included under the captions entitled "Information Concerning
Nominees for Election as Directors," "Security Ownership of Management,"
"Security Ownership of Certain Beneficial Owners," and "Executive
Compensation," in the Company's definitive proxy statement to be filed with
the Commission pursuant to Regulation 14A with respect to its annual meeting
of stockholders to be held May 9, 1996, is incorporated into Items 10, 11,
12 and 13 above by reference.
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) and (2) -- The following consolidated financial statements and
schedules are attached as a separate section of this report entitled
"Consolidated Financial Statements and Schedules":
INDEPENDENT AUDITORS' REPORT
CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Balance Sheets, December 31, 1995, and 1994
Consolidated Statements of Earnings, Years Ended
December 31, 1995, 1994, and 1993
Consolidated Statements of Stockholders' Equity,
Years Ended December 31, 1995, 1994, and 1993
Consolidated Statements of Cash Flows, Years Ended
December 31, 1995, 1994, and 1993
Notes to Consolidated Financial Statements
SCHEDULES:
Schedule II - Valuation and qualifying accounts
All other schedules are omitted because they are not applicable, not
required, or the information is included in the Consolidated Financial
Statements or the notes thereto.
16
(b) Reports on Form 8-K
A Form 8-K current report dated October 24, 1995, was filed with the
commission reporting under Other Events the resignation of Bert Hood
as Chairman, President and Chief Executive Officer of the Company. W.
Thomas Grant II, Chairman and Chief Executive Officer of Seafield Capital
Corporation, filled the vacancies left by Hood.
A Form 8-K current report dated November 10, 1995, was filed with the
commission reporting under Other Events the appointment of Thomas J.
Hespe, Executive Vice President of Sales, to the LabOne Board of
Directors.
(c) Exhibits required by Item 601 of Regulation S-K
(Exhibits follow the Schedules):
Page
----
3.1* Articles of Incorporation - attached as Exhibit (3) to the
Registrant's Form 10-K Annual Report dated March 28, 1988.
3.2* Certificate of Amendment of Articles of Incorporation -
attached as Exhibit (3.2) to the Registrant's Form 10-K
Annual Report dated March 14, 1994.
3.3* Bylaws - attached as Exhibit (3) to the Registrant's
Form 10-K Annual Report dated March 28, 1988.
10.1* Registrant's Long Term Incentive Plan as amended-
attached as Exhibit (10.1) to the Registrant's
Form 10-K Annual Report dated March 19, 1992. **
10.2* Amendment to paragraphs 6 (d) and 24 (d) of the
Registrant's Long Term Incentive Plan - attached
as Exhibit (10.2) to the Registrant's Form 10-K
Annual Report dated March 14, 1994. **
10.3* Amendment to paragraph 3 of the Registrant's Long
Term Incentive Plan - attached as Exhibit (10.3)
to the Registrant's Form 10-K Annual Report dated
March 14, 1994. **
10.4 Amendment to paragraph 3 of the Registrant's Long 43
Term Incentive Plan, Adopted February 10, 1995. **
10.5* Registrant's Stock Plan for nonemployee directors -
attached as Exhibit (A) to the Registrant's Proxy
Statement dated April 10, 1992. ***
10.6 Registrant's Annual Incentive Plan. ** 44
10.7* Services Agreement, dated January 1, 1993, between
Seafield Capital Corporation and the Registrant -
attached as Exhibit (10.6) to the Registrant's Form
10-K Annual Report dated March 14, 1994.
17
Page
----
10.8* Services Agreement, dated January 1, 1993, between
Business Men's Assurance Company of America and
the Registrant - attached as Exhibit (10.7) to the
Registrant's Form 10-K Annual Report dated March 14,
1994.
10.9 Amendment to Services Agreement between the Registrant 45
and Business Men's Assurance Company of America dated
September 15, 1995.
10.10* Form of Employment Agreement between the Registrant
and its executive officers and certain key employees -
attached as Exhibit (10) to the Registrant's Form 10-K
Annual Report dated March 28, 1988. **
10.11 Amended Employment Agreement between the Registrant 46
and Robert D. Thompson dated November 1, 1995. **
10.12* Employment Agreement between the Registrant and
Gregg R. Sadler - attached as Exhibit (10.14) to
the Registrant's Form 10-K Annual Report dated
March 14, 1994. **
10.13 Amendment to Employment Agreement between the Registrant 59
and Gregg R. Sadler dated November 1, 1995. **
10.14 Employment Agreement between the Registrant and 60
Thomas J. Hespe, dated November 1, 1995. **
10.15* Employment Agreement between the Registrant and
Carl W. Ludvigsen, Jr. - attached as Exhibit (10.6)
to the Registrant's Form 10-K Annual Report dated
March 14, 1994. **
10.16* Employment Agreement between the Registrant and
Robert F. Thompson - attached as Exhibit (10.17)
to the Registrant's Form 10-K Annual Report dated
March 23, 1995. **
10.17* Employment Agreement between the Registrant and
Bert H. Hood as amended - attached as Exhibit (10.9)
to the Registrant's Form 10-K Annual Report dated
March 14, 1994. **
10.18* Employment Agreement between the Registrant and
Danial J. Roberts as amended - attached as Exhibit
(10.10) to the Registrant's Form 10-K Annual Report
dated March 14, 1994. **
10.19* Form of Amendments to Employment Agreements between
the Registrant and Bert H. Hood, Robert F. Thompson and
Daniel J. Roberts, - attached as Exhibit (10.18) to the
Registrant's Form 10-K Annual Report dated March 23, 1995. **
18
Page
----
10.20* Severance Agreement between the Registrant and
Mark S. Patterson - attached as Exhibit (10.2)
to the Registrant's Form 10-Q Quarterly Report
dated November 10, 1994. **
10.21* Severance Agreement between the Registrant and
Kenneth A. Stelzer - attached as Exhibit (10.1)
to the Registrant's Form 10-Q Quarterly Report
dated November 10, 1994. **
10.22 Promissory Note Agreement from Bert H. Hood to the 68
Registrant dated September 7, 1995. **
10.23* Promissory Note Agreement from Bert H. Hood to
the Registrant - attached as Exhibit (10.3) to
the Registrant's Form 10-Q Quarterly Report dated
November 10, 1994. **
11. Statement regarding computation of per share
earnings - see Note 1 of Notes to Consolidated
Financial Statements, "Earnings Per Share."
21. Subsidiaries of Registrant - see Note 1 of Notes
to Consolidated Financial Statements, "Principles of
Consolidation and Basis of Presentation."
23. Consents of experts and counsel - independent 69
accountants' consent.
24. Powers of Attorney. 70
27. Financial Data Schedule - as submitted electronically by
the Registrant in conjunction with this 1995 Form 10-K.
99. Proxy Statement for Annual Shareholders Meeting to be
held May 9, 1996 - to be filed.
* Incorporated by reference pursuant to Rule 12b-23
** Management Compensatory Plan
*** Non-Management Director Compensatory Plan
These exhibits may be obtained by stockholders of Registrant upon written
request to LabOne, Inc., 10310 W. 84th Terrace, Lenexa, KS 66214.
(d) Not applicable
19
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act
of 1934, Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
LabOne, Inc.
By: /s/ Robert D. Thompson By: /s/ Kurt E. Gruenbacher
---------------------- -----------------------
Robert D. Thompson Kurt E. Gruenbacher
Title: Executive V.P. Finance, CFO Title: V.P. Finance and CAO
and Treasurer
Date: March 21, 1996 Date: March 21, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant on March 21, 1996 in the capacities indicated.
By: /s/ W. Thomas Grant II By: /s/ Robert D. Thompson
---------------------- ----------------------
W. Thomas Grant II Robert D. Thompson
Title: Chairman of the Board, Title: Executive V.P. Finance,
President and Chief Executive CFO and Treasurer
Officer
By: /s/ Gregg R. Sadler By: /s/ Thomas J. Hespe
------------------- -------------------
Gregg R. Sadler Thomas J. Hespe
Title: Executive V.P. Administration, Title: Executive V.P. Sales and
Secretary and Director Marketing and Director
By: /s/ Kurt E. Gruenbacher By: */s/ William D. Grant
----------------------- ---------------------
Kurt E. Gruenbacher William D. Grant
Title: V.P. Finance and CAO Title: Director
By: */s/ P. Anthony Jacobs By: */s/ John E. Walker
---------------------- -------------------
P. Anthony Jacobs John E. Walker
Title: Director Title: Director
By: */s/ James R. Seward By: */s/ R. Dennis Wright
-------------------- ---------------------
James R. Seward R. Dennis Wright
Title: Director Title: Director
By: */s/ Richard S. Schweiker By: */s/ Joseph H. Brewer
------------------------- ---------------------
Richard S. Schweiker Joseph H. Brewer
Title: Director Title: Director
*By: /s/ Gregg R. Sadler
-------------------
Gregg R. Sadler
Attorney-in-fact
20
LABONE, INC. AND SUBSIDIARIES
Consolidated Financial Statements and Schedules
December 31, 1995, 1994 and 1993
(With Independent Auditors' Report Thereon)
21
LABONE, INC. AND SUBSIDIARIES
Consolidated Financial Statements and Schedules
Index
-----
Page
INDEPENDENT AUDITORS' REPORT 23
CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Balance Sheets, December 31, 1995 and 1994 24
Consolidated Statements of Earnings, Years ended
December 31, 1995, 1994 and 1993 26
Consolidated Statements of Stockholders' Equity,
Years ended December 31, 1995, 1994 and 1993 27
Consolidated Statements of Cash Flows, Years ended
December 31, 1995, 1994 and 1993 28
Notes to Consolidated Financial Statements 29
SCHEDULE:
Schedule II - Valuation and Qualifying Accounts 41
22
INDEPENDENT AUDITORS' REPORT
----------------------------
The Board of Directors
LabOne, Inc.:
We have audited the accompanying consolidated balance sheets of LabOne, Inc.
and subsidiaries as of December 31, 1995 and 1994 and the related
consolidated statements of earnings, stockholders' equity and cash flows
for each of the years in the three-year period ended December 31, 1995.
These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of LabOne,
Inc. and subsidiaries as of December 31, 1995 and 1994, and the results of
their operations and their cash flows for each of the years in the three-year
period ended December 31, 1995, in conformity with generally accepted
accounting principles.
/s/KPMG Peat Marwick LLP
Kansas City, Missouri
January 30, 1996
23
LABONE, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1995 and 1994
Assets 1995 1994
------ ---------- ----------
Current assets:
Cash and cash equivalents $ 2,993,128 6,888,806
Short-term investments (note 11) 34,111,752 34,106,026
Accounts receivable-trade, net of allowance
for doubtful accounts of $329,995 in 1995
and $81,426 in 1994 7,727,286 8,636,610
Inventories 1,533,257 787,339
Prepaid expenses and other current assets 2,883,127 3,007,526
Deferred income taxes 167,586 654,246
---------- ----------
Total current assets 49,416,136 54,080,553
---------- ----------
Investments with maturities of more than one
year, at cost (note 11) 506,441 508,590
---------- ----------
Property, plant and equipment:
Land 1,540,807 1,495,833
Building 11,940,493 11,836,420
Laboratory equipment 17,134,151 17,569,024
Data processing equipment and software 16,347,813 15,724,026
Office and transportation equipment 4,992,257 4,900,395
Leasehold improvements 1,018,126 973,109
---------- ----------
52,973,647 52,498,807
Less accumulated depreciation 35,885,928 34,315,021
---------- ----------
Net property, plant and equipment 17,087,719 18,183,786
---------- ----------
Other assets:
Intangible assets, net of accumulated
amortization (note 2) 2,844,257 3,589,527
Deferred income taxes-noncurrent (note 3) 152,520 347,264
Deposits and other assets 40,761 48,060
---------- ----------
$ 70,047,834 76,757,780
========== ==========
(Continued)
24
LABONE, INC. AND SUBSIDIARIES
Consolidated Balance Sheets, Continued
Liabilities and Stockholders' Equity 1995 1994
------------------------------------ ---------- ----------
Current liabilities:
Accounts payable $ 2,108,376 2,024,572
Income taxes payable 50,560 131,068
Payable to Seafield Capital Corporation (note 8) 75,223 113,575
Accrued payroll and benefits 1,972,475 1,915,457
Other accrued expenses 902,297 1,270,337
Other current liabilities 74,574 66,138
---------- ----------
Total current liabilities 5,183,505 5,521,147
---------- ----------
Stockholders' equity:
Preferred stock, $0.01 par value per share;
1,000,000 shares authorized, none issued - -
Common stock, $0.01 par value per share;
40,000,000 shares authorized, 15,000,000
shares issued (note 5) 150,000 150,000
Additional paid-in capital 13,377,728 13,347,455
Equity adjustment from foreign currency
translation (545,818) (683,383)
Retained earnings 74,040,870 80,639,340
---------- ----------
87,022,780 93,453,412
Less treasury stock of 1,945,984 shares in
1995 and 1,957,988 shares in 1994, at cost 22,158,451 22,216,779
---------- ----------
Total stockholders' equity 64,864,329 71,236,633
---------- ----------
$ 70,047,834 76,757,780
========== ==========
See accompanying notes to consolidated financial statements.
25
LABONE, INC. AND SUBSIDIARIES
Consolidated Statements of Earnings
Years ended December 31, 1995, 1994 and 1993
1995 1994 1993
---------- ---------- ----------
Sales $ 57,029,424 60,725,982 69,377,511
Cost of sales 29,934,033 29,072,508 30,018,455
---------- ---------- ----------
Gross profit 27,095,391 31,653,474 39,359,056
Selling, general and administrative
expenses (notes 8 and 9) 24,710,709 24,760,918 22,694,920
---------- ---------- ----------
Earnings from operations 2,384,682 6,892,556 16,664,136
---------- ---------- ----------
Other income (expenses):
Investment income 2,565,463 1,328,493 1,545,713
Other income (expense), net (3,144) 371,749 (732,320)
Gain (loss) on disposal of equipment (196,827) (59,778) 56,213
---------- ---------- ----------
Total other income (expenses) 2,365,492 1,640,464 869,606
---------- ---------- ----------
Earnings before income taxes 4,750,174 8,533,020 17,533,742
---------- ---------- ----------
Income taxes (note 3):
Current 1,259,416 4,043,568 7,689,582
Deferred 693,703 (1,197,676) (721,776)
---------- ---------- ----------
Total income taxes 1,953,119 2,845,892 6,967,806
---------- ---------- ----------
Net earnings $ 2,797,055 5,687,128 10,565,936
========== ========== ==========
Earnings per common share $ .21 .43 .80
==== ==== ====
Weighted average common shares
and common share equivalents
outstanding 13,133,861 13,276,590 13,154,070
========== ========== ==========
See accompanying notes to consolidated financial statements.
26
<TABLE>
LABONE, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
Years ended December 31, 1995, 1994 and 1993
<CAPTION>
Foreign Total
Additional currency stock-
Common paid-in transla- Retained Treasury holders'
stock capital tion earnings stock equity
-------- ---------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1992 150,000 12,687,986 (535,793) 83,055,268 (22,506,633) 72,850,828
Net earnings - - - 10,565,936 - 10,565,936
Cash dividends ($.72 per share) - - - (9,316,001) - (9,316,001)
Adjustment from foreign
currency translation - - 111,095 - - 111,095
Net issuance of 43,846 shares
of treasury stock - 51,102 - - 500,970 552,072
-------- ---------- --------- ---------- ---------- ----------
Balance at December 31, 1993 150,000 12,739,088 (424,698) 84,305,203 (22,005,663) 74,763,930
Net earnings - - - 5,687,128 - 5,687,128
Cash dividends ($.72 per share) - - - (9,352,991) - (9,352,991)
Adjustment from foreign
currency translation - - (258,685) - - (258,685)
Net issuance of 81,590 shares
of treasury stock - 608,367 - - (211,116) 397,251
-------- ---------- --------- ---------- ---------- ----------
Balance at December 31, 1994 $150,000 13,347,455 (683,383) 80,639,340 (22,216,779) 71,236,633
Net earnings - - - 2,797,055 - 2,797,055
Cash dividends ($.72 per share) - - - (9,395,525) - (9,395,525)
Adjustment from foreign
currency translation - - 137,565 - - 137,565
Net issuance of 12,004 shares
of treasury stock - 30,273 - - 58,328 88,601
-------- ---------- --------- ---------- ---------- ----------
Balance at December 31, 1995 $150,000 13,377,728 (545,818) 74,040,870 (22,158,451) 64,864,329
======== ========== ========= ========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
27
<TABLE> <CAPTION> LABONE, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 1995, 1994 and 1993
<S> <C> <C> <C>
1995 1994 1993
Cash provided by operations: ---------- ---------- ----------
Net earnings $ 2,797,055 5,687,128 10,565,936
Adjustments to reconcile net earnings to net
cash provided by operations:
Depreciation and amortization 4,191,435 6,620,930 9,019,582
Deferred income taxes 693,703 (1,197,676) (721,776)
(Gain) loss on disposal of equipment 196,827 59,778 (56,213)
Directors' stock compensation 77,890 72,807 107,548
Change in short term trading securities, net (3,446,170) (13,686,663) -
Changes in:
Accounts receivable 909,324 (577,791) 755,253
Inventories (745,918) (3,271) 788,938
Prepaid expenses and other current assets 124,399 21,199 (268,526)
Accounts payable 83,804 (50,150) (573,223)
Income taxes payable (80,508) 37,943 (948,976)
Payable to Seafield Capital Corporation (38,352) 113,575 (230,545)
Accrued payroll and benefits 57,018 (399,092) (275,834)
Accrued expenses (398,040) 569,709 (8,919)
Other current liabilities 8,436 (632,381) 66,293
---------- ---------- ----------
Net cash provided by (used for) operations 4,430,903 (3,363,955) 18,219,538
---------- ---------- ----------
Cash provided by (used for) investment transactions:
Purchases of investments held to maturity (65,568,743) (79,501,640) -
Proceeds from maturities of investments held to maturity 69,459,252 90,601,588 -
Short-term investments, net - - 4,751,259
Purchases of investments with maturities of more than one year - - (6,451,378)
Proceeds from maturities of investments with maturities
of more than one year - - 5,750,000
Property, plant and equipment additions, net (2,860,612) (3,399,579) (3,733,867)
other 7,299 252,430 178,181
---------- ---------- ----------
Net cash provided by investment transactions 1,037,196 7,952,799 494,195
---------- ---------- ----------
Cash provided by (used for) financing transactions:
Proceeds from exercise of stock options 10,711 324,444 444,524
Cash dividends (9,395,525) (9,352,991) (9,316,001)
---------- ---------- ----------
Net cash used for financing activities (9,384,814) (9,028,547) (8,871,477)
---------- ---------- ----------
Effect of foreign currency translation 21,037 (185,891) 165,163
---------- ---------- ----------
Net increase (decrease) in cash and cash equivalents (3,895,678) (4,625,594) 10,007,419
Cash and cash equivalents at beginning of year 6,888,806 11,514,400 1,506,981
---------- ---------- ----------
Cash and cash equivalents at end of year $ 2,993,128 6,888,806 11,514,400
========== ========== ==========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ - 685 -
========== ========== ==========
Income taxes $ 1,570,574 3,660,955 8,703,323
========== ========== ==========
See accompanying notes to consolidated financial statements.
28
</TABLE>
LABONE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1995, 1994 and 1993
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
Principles of Consolidation and Basis of Presentation
- -----------------------------------------------------
The accompanying consolidated financial statements include the accounts of
LabOne, Inc. (LabOne or the Company), its wholly-owned Canadian subsidiary,
Lab One Canada Inc. (formerly Head Office Reference Laboratory Limited), and
its wholly-owned United Kingdom subsidiary, HORL(UK) Limited. During 1994,
the Company disposed of the UK subsidiary. All significant intercompany
transactions have been eliminated in consolidation. LabOne was 82%-owned by
Seafield Capital Corporation (Seafield) at December 31, 1995. Prior to 1994,
LabOne and its wholly-owned subsidiaries were engaged primarily in laboratory
testing for insurance companies. During 1994 LabOne began marketing
laboratory testing services to the healthcare (clinical and substance abuse)
industry.
Cash and Cash Equivalents
- -------------------------
Cash and cash equivalents include demand deposits in banks, marketable
securities with original maturities of three months or less and overnight
investments that are stated at cost, which approximates market value.
Investment Securities
- ---------------------
LabOne determines the appropriate classification of debt and equity securities
at the time of purchase. Securities are classified as held-to-maturity when
LabOne has the intent and ability to hold the securities to maturity. Held-
to-maturity securities are stated at amortized cost and investment income is
included in earnings.
LabOne classifies certain highly liquid securities as trading securities.
Trading securities are stated at fair value and unrealized holding gains and
losses are included in income.
Inventories
- -----------
Inventories consist of completed specimen collection kits and various
materials used in the assembly of specimen collection kits for sale to
clients. Inventory is valued at the lower of cost (first-in, first-out) or
market.
29
LABONE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Property, Plant and Equipment
- -----------------------------
Property, plant and equipment is stated at cost. Depreciation is being
provided on a straight-line basis over the estimated useful lives of the
assets as follows:
Buildings 30 years
Laboratory equipment 3-10 years
Data processing equipment 3- 8 years
Office equipment 5-10 years
Leasehold improvements 30 years
Equipment acquired after December 31, 1987, is being depreciated on a
straight-line basis over three to five years.
Intangible Assets
- -----------------
Intangible assets are recorded at their acquisition cost and are being
amortized as follows:
The patent process utilized in coating the plates on which blood and urine
testing is performed is being amortized on a straight-line basis over the
remaining life of the patent (184 months at date of acquisition).
The excess of cost over fair value of assets acquired is being amortized
on a straight-line basis over a period of twenty years.
Impairment of Long-lived Assets
- -------------------------------
When facts and circumstances indicate potential impairment, LabOne evaluates
the recoverability of asset carrying values of long-lived assets, including
intangibles, using estimates of undiscounted future cash flows over remaining
asset lives. When impairment is indicated, any impairment loss is measured by
the excess of carrying values over fair values.
Use of Estimates in the Preparation of Financial Statements
- -----------------------------------------------------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
30
LABONE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Income Taxes
- ------------
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective
tax bases. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates is recognized
in income in the period that includes the enactment date.
Earnings Per Share
- ------------------
Earnings per share is computed using the weighted average number of common
shares issued and the common share equivalents of dilutive stock options, less
treasury stock.
Line of Credit
- --------------
The Company has a $5,000,000 line of credit as of December 31, 1995, which
bears interest at the prime rate (8.5% at December 31, 1995). The line of
credit was not used in 1995.
(2) INTANGIBLE ASSETS
-----------------
The cost and accumulated amortization of intangible assets at December 31,
1995 and 1994 are as follows:
1995 1994
--------- ---------
Patent $ 8,000,000 8,000,000
Accumulated amortization 6,739,102 6,217,366
--------- ---------
1,260,898 1,782,634
--------- ---------
Excess of cost over fair value of assets acquired 4,470,684 4,470,684
Accumulated amortization 2,887,325 2,663,791
--------- ---------
1,583,359 1,806,893
--------- ---------
Intangible assets, net of accumulated
amortization $ 2,844,257 3,589,527
========= =========
31
LABONE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(3) INCOME TAXES
------------
The components of income taxes and deferred taxes applicable to temporary
differences are as follows (for the years ended December 31):
1995 1994 1993
---------- --------- ---------
Current:
Federal $ 1,007,007 2,728,116 5,477,239
State 66,852 546,264 900,778
Foreign 185,557 769,188 1,311,565
---------- --------- ---------
1,259 416 4,043,568 7,689,582
---------- --------- ---------
Deferred:
Federal 475,021 (846,527) (479,719)
State 124,499 (146,539) (153,312)
Foreign 94,183 (204,610) (88,745)
---------- --------- ---------
693,703 (1,197,676) (721,776)
---------- --------- ---------
$ 1,953,119 2,845,892 6,967,806
========== ========= =========
Total income taxes differ from the amounts computed by applying the statutory
income tax rate to earnings before income taxes for the following reasons
(for the years ended December 31):
1995 1994 1993
---------- --------- ---------
Application of statutory income
tax rate (34% for 1995 and
1994 and 35% for 1993) $ 1,615,059 2,901,227 6,136,810
Foreign taxes, net 84,472 189,456 426,429
Write-off of investment in
UK subsidiary - (193,229) -
State income taxes, net 126,292 263,819 485,853
Repatriation of foreign source
income 193,229
Tax-exempt interest (137,099) (245,069) (206,242)
Other, net 71,166 (70,312) 124,956
---------- --------- ---------
$ 1,953,119 2,845,892 6,967,806
========== ========= =========
32
LABONE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The tax effects of temporary differences that create significant portions of
the deferred tax assets and deferred tax liabilities at December 31, 1995
and 1994 are presented below:
1995 1994
--------- ---------
Current income tax assets:
Repatriation of foreign source income $ (220,798) -
Accrued vacation 272,210 261,687
Severance pay accrual - 211,495
Unrealized loss on trading securities - 80,883
Accrued medical claims 62,162 63,645
Bad debts 31,081 31,822
Other accruals 2,738 4,302
Inventory adjustment 12,685 -
Other items 7,508 412
--------- ---------
Total current income tax assets $ 167,586 654,246
========= =========
Deferred noncurrent tax assets
(liabilities):
Depreciation and amortization $ 262,515 249,149
Other items (109,995) 98,115
--------- ---------
Total deferred tax assets $ 152,520 347,264
========= =========
A valuation allowance for deferred tax assets was not necessary at December
31, 1995 or 1994.
(4) BENEFIT PLANS
-------------
LabOne maintains a money purchase pension plan for all employees who have
completed one-half year of service and have attained age twenty and one-half
years. The plan is a defined contribution plan under which LabOne contributes
a percentage of a participant's annual compensation. LabOne has contributed
7% of a participant's annual compensation up to the maximum social security
wage base plus an additional 5.7% of the amounts in excess of the annual
maximum wage base. Participants become 100% vested after five plan years of
service. Each participant's account is 100% vested in the event of disability
or death while employed by LabOne. Normal retirement age under the plan is
sixty-five. LabOne's contributions to the plan were $1,187,000, $1,008,000
and $1,065,000 for the years ended December 31, 1995, 1994 and 1993,
respectively.
33
LABONE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
In 1987, LabOne adopted a profit sharing plan for all employees who have
completed three months of service and have attained the age of twenty and
one-half years. Effective January 1, 1991, the plan was amended to include
employees who have completed six months of service and a minimum of 500 hours
of service. The plan is intended to include a qualified cash or deferred
arrangement under Section 401(k) of the Internal Revenue Code of 1986.
Subject to certain limits imposed by law, each participant may generally
make tax deferred contributions to the plan not in excess of 10% of annual
compensation. LabOne contributes on behalf of each participant an amount
equal to 50% of the participant's annual contributions, but not in excess of
5% of the participant's annual compensation. A participant is fully vested at
all times with respect to the portion of the account attributable to the
participant's own contributions. The plan provides for the vesting of 100% of
a participant's account attributable to LabOne contributions upon completion
of five plan years of service. Each participant's account is 100% vested upon
disability, death or the attainment of age sixty-five while employed by
LabOne. The normal retirement age under the plan is age sixty-five. Plan
assets contributed by employees can be invested in LabOne common stock or
various investment instruments. LabOne contributions are invested in LabOne
common stock. LabOne's contributions to the plan for the years ended December
31, 1995, 1994 and 1993 were $488,000, $446,000 and $408,000, respectively.
(5) STOCK OPTIONS
-------------
In 1987, the Board of Directors of LabOne approved a long-term incentive plan
which provided for granting awards, including stock options, for not more than
1,000,000 shares of LabOne common stock. LabOne has granted certain stock
options which entitle the grantee to purchase shares for a price equal to the
fair market value at date of grant with option periods up to ten years.
In January 1991, the LabOne Board of Directors approved a stock option
exchange plan that was ratified by the stockholders at the May 1991 LabOne
stockholders' meeting. The new plan reduced the number of shares outstanding
under the long-term incentive plan, set exercise dates beginning in January
1992 and reduced the option prices to $9.875 per share, which was the quoted
market value on January 2, 1991.
In May 1991, the stockholders of LabOne approved a 300,000 share increase in
the number of shares that may be issued under the long-term incentive plan.
The plan thus provides for granting awards, including stock options, for not
more than 1,300,000 shares of LabOne common stock.
In February 1993, the stockholders of LabOne approved a 500,000 share increase
in the number of shares that may be issued under the long-term incentive plan.
The plan thus provides for granting awards, including stock options, for not
more than 1,800,000 shares of LabOne common stock.
34
LABONE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
In May 1995, the stockholders of LabOne approved a 350,000 share increase in
the number of shares that may be issued under the long-term incentive plan.
The plan thus provides for granting awards, including stock options, for not
more than 2,150,000 shares of LabOne common stock.
A summary of the stock option activity for the three years ended December 31,
1995 is as follows:
Number
of shares Option price
---------- ------------
Outstanding at December 31, 1992 971,283 9.88 - 18.00
Granted 460,000 14.38 - 14.75
Exercised (43,055) 9.88 - 11.13
Terminated or forfeited (17,622) 9.88 - 11.13
---------
Outstanding at December 31, 1993 1,370,606 9.88 - 18.00
Granted 292,259 18.50 - 23.88
Exercised (220,055) 9.88 - 14.75
Terminated or forfeited (125,742) 9.88 - 23.88
---------
Outstanding at December 31, 1994 1,317,068 9.88 - 23.88
Granted 497,000 11.63 - 14.13
Exercised (43,511) 9.88 - 11.13
Terminated or forfeited (198,390) 11.13 - 23.88
---------
Outstanding at December 31, 1995 1,572,167 9.88 - 23.88
=========
Options for 881,696 shares ranging from $9.88 to $23.88 per share were
exercisable at December 31, 1995.
Statement of Financial Accounting Standards (SFAS No. 123, "Accounting for
Stock-Based Compensation," will require pro forma disclosures in 1996 of
net earnings and earnings per share as if a new accounting method based on
the estimated fair value of employee stock options had been adopted. LabOne
does not presently expect to adopt the optional accounting treatment allowed
by SFAS No. 123.
(6) OTHER COMMITMENTS
-----------------
LabOne has several noncancelable operating leases, primarily for land and
buildings, and other commitments that expire over the next several years.
Rental expense for these operating leases during 1995, 1994 and 1993 amounted
to $861,000, $803,000 and $417,000, respectively.
35
LABONE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Future minimum lease payments and other commitments under these agreements as
of December 31, 1995, are:
Year Amount
---- ---------
1996 $ 817,463
1997 633,047
1998 247,513
1999 104,054
2000 18,716
(7) FOREIGN OPERATIONS
------------------
The following summarizes financial information for LabOne's wholly-owned
Canadian subsidiary, Lab One Canada Inc., for the years ended December 31:
1995 1994 1993
---------- ---------- ----------
Revenues $ 6,223,939 7,676,929 9,566,165
Operating earnings 289,223 1,118,895 2,640,764
Total assets 5,747,329 5,494,958 5,242,517
(8) RELATED PARTY TRANSACTIONS
--------------------------
LabOne has entered into certain transactions with Seafield Capital Corporation
(Seafield). Seafield, which was formerly BMA Corporation, sold Business Men's
Assurance Company of America (BMA) to Generali-Assicurazioni Generali S.p.A.
(Generali) in July 1990. The following is a summary of the transactions with
related parties:
Under a Services Agreement among Seafield, LabOne, BMA and Generali, which
became effective July 31, 1990, and later replaced with service agreements
dated January 1, 1993, Seafield and BMA agreed to make available, and LabOne
agreed to purchase, certain services from Seafield and BMA. LabOne agreed to
retain the services of certain of Seafield's senior management to provide
policy advice to LabOne and to attend certain functions on behalf of LabOne.
LabOne also agreed to retain the services of BMA's reinsurance sales
representatives to promote LabOne's laboratory testing services as part of
their regular sales activities. In consideration for these services, LabOne
agreed to pay Seafield a percentage of LabOne's sales equal to 0.20% of annual
sales up to $50 million, plus 0.125% of annual sales of $50 million or more,
but less than $100 million, plus .0625% of annual sales of $100 million or
more. LabOne has agreed to pay BMA $50,000 for the years ended December 31,
1994 and 1993, and $25,000 per year thereafter.
36
LABONE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The agreements were effective until December 31, 1993 and are being renewed
automatically for successive one-year terms until terminated.
Allocated expenses from Seafield, including charges under the Services
Agreement, for the years ended and the amounts payable at December 31 are as
follows:
1995 1994 1993
------- ------- -------
Allocated expenses for the year $ 75,223 113,575 124,218
======= ======= =======
Amount payable at December 31 $ 75,223 113,575 -
======= ======= =======
(9) RESTRUCTURING CHARGES
---------------------
Selling, general and administrative expenses in the year ended December 31,
1994, include a restructuring charge of $1,562,000. The charge includes
severance payments to executives, a write-off of fixed assets, provision
for loss on lease commitments, and severance payments related to closing the
Canadian laboratory testing facility. The restructuring charge reduced 1994
net income by $1,041,000 or $0.08 per share
(10) LITIGATION
----------
In the normal course of business, LabOne had certain lawsuits pending at
December 31, 1995. In the opinion of management, after consultation with
legal counsel and based upon current available information, none of these
lawsuits are expected to have a material impact on the Company and financial
position or results of operations.
37
LABONE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(11) INVESTMENT SECURITIES
---------------------
<TABLE>
A summary of investment securities information relating to quoted market values and unrealized
holding gains and losses at December 31, 1995 and 1994, is as follows:
<CAPTION>
1995
------------------------------------------------------------------
Amount at
which carried Unrealized Unrealized
Maturities less Amortized in the balance holding holding
than one year cost Market sheet gains losses
------------------ ---------- ---------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C>
Trading Securities:
Vanguard Admiral Money
Market $ 21,220,587 21,220,587 21,220,587 - -
Vanguard Municipal Bond
Fund-Money Market 2,594,704 2,594,704 2,594,704 - -
---------- ---------- ---------- -------- ---------
Total Trading Securities 23,815,291 23,815,291 23,815,291 - -
Held-to-Maturity investments:
Canadian government notes 3,954,460 3,954,460 3,954,460 - -
Obligations of states and
political subdivisions 6,342,001 6,331,046 6,342,001 - 10,955
---------- ---------- ---------- -------- ---------
Total Held-to-Maturity
investments 10,296,461 10,285,506 10,296,461 - 10,955
---------- ---------- ---------- -------- ---------
Total short-term
investments $ 34,111,752 34,100,797 34,111,752 - 10,955
========== ========== ========== ======== =========
Maturities more
than one year
------------------
Held-to-maturity investments:
Obligations of states and
political subdivisions $ 506,441 508,750 506,441 2,309 -
========== ========== ========== ======== =========
38
LABONE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
<CAPTION> 1994
------------------------------------------------------------------
Amount at
which carried Unrealized Unrealized
Maturities less Amortized in the balance holding holding
than one year cost Market sheet gains losses
------------------ ---------- ---------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C>
Trading securities:
Vanguard Short-term U. S.
Treasury Portfolio $ 10,313,685 10,188,338 10,188,338 - 125,347
Vanguard Municipal Bond
Fund-Money Market 10,258,776 10,180,783 10,180,783 - 77,993
---------- ---------- ---------- -------- ---------
Total trading securities 20,572,461 20,369,121 20,369,121 - 203,340
Held-to-maturity investments:
U.S. Treasury securities 3,030,938 3,069,375 3,030,938 38,437 -
Canadian government notes 3,325,790 3,325,790 3,325,790 - -
Obligations of states and
political subdivisions 7,380,117 7,404,768 7,380,177 32,170 7,579
---------- ---------- ---------- -------- ---------
Total held-to-maturity
investments 13,736,905 13,799,933 13,736,905 70,607 7,579
---------- ---------- ---------- -------- ---------
Total short-term
investments $ 34,309,366 34,169,054 34,106,026 70,607 210,919
========== ========== ========== ======== =========
Maturities more
than one year
------------------
Held-to-maturity investments:
Obligations of states and
political subdivisions $ 508,590 512,165 508,590 3,575 -
========== ========== ========== ======== =========
</TABLE>
(12) Business Segment Information
----------------------------
The company operates principally in two lines of business, insurance and,
since 1994, healthcare. The insurance line of business involves risk-
appraisal laboratory services to the insurance industry. 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 healthcare line of business involves clinical and substance
abuse testing services. Clinical testing services are provided to the
healthcare industry to aid in the diagnosis and treatment of patients.
Substance abuse testing services are provided to both regulated and
nonregulated employers who employ drug screening guidelines.
39
LABONE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Operating income (loss) of each line of business is computed as sales less
identifiable and allocated expenses. In computing operating income (loss)
of lines of business, none of the following items have been added or deducted:
general corporate expenses, investment income or other income (expenses).
Operating income for the insurance line of business included a restructuring
charge of $1,562,000 for the year ended December 31, 1994 (see note 9).
Identifiable assets by line of business are those assets that are used in
the Company's operations in each line of business. General corporate assets
are principally cash and investment securities.
Following is a summary of line of business information as of and for the
years ended December 31, 1995 and 1994:
1995 1994
---------- ----------
Sales:
Insurance $ 52,544,434 60,259,528
Healthcare 4,484,990 466,454
---------- ----------
Total sales $ 57,029,424 60,725,982
========== ==========
Operating income (loss):
Insurance $ 12,412,226 13,697,382
Healthcare (9,858,308) (6,631,257)
General corporate expenses (169,236) (173,569)
Investment income 2,565,463 1,328,493
Other income (expense) (199,971) 311,971
---------- ----------
Earning before income taxes 4,750,174 8,533,020
Income taxes (1,953,119) (2,845,892)
---------- ----------
Net earnings $ 2,797,055 5,687,128
========== ==========
Identifiable assets:
Insurance $ 25,028,933 28,991,339
Healthcare 6,598,266 4,226,000
General corporate assets 38,420,635 43,540,441
---------- ----------
Total assets $ 70,047,834 76,757,780
========== ==========
Capital expenditures:
Insurance $ 1,416,044 1,597,367
========== ==========
Healthcare $ 1,444,568 1,802,212
========== ==========
Depreciation and amortization:
Insurance $ 3,152,595 5,650,001
========== ==========
Healthcare $ 1,392,738 653,660
========== ==========
40
LABONE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(13) QUARTERLY FINANCIAL DATA (UNAUDITED)
------------------------------------
A summary of unaudited quarterly results of operations for 1995 and 1994 is as
follows (in thousands except per share data):
Three months ended
March 31 June 30 September 30 December 31
1995: ------- ------- ------- -------
Sales $ 14,689 14,623 13,656 14,061
====== ====== ====== ======
Gross profit $ 7,187 7,115 6,217 6,576
====== ====== ====== ======
Earnings before income taxes $ 1,811 1,629 403 907
====== ====== ====== ======
Net earnings $ 1,171 1,001 270 356
====== ====== ====== ======
Earnings per share $ 0.09 0.08 0.02 0.03
====== ====== ====== ======
Dividends per share $ 0.18 0.18 0.18 0.18
====== ====== ====== ======
1994:
Sales $ 15,267 15,581 14,467 15,412
====== ====== ====== ======
Gross profit $ 8,340 8,172 7,543 7,598
====== ====== ====== ======
Earnings before income taxes $ 3,373 2,588 162 2,410
====== ====== ====== ======
Net earnings $ 2,006 1,867 281 1,533
====== ====== ====== ======
Earnings per share $ 0.15 0.14 0.02 0.12
====== ====== ====== ======
Dividends per share $ 0.18 0.18 0.18 0.18
====== ====== ====== ======
41
Schedule II
-----------
LABONE, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
Years ended December 31, 1995, 1994 and 1993
Additions-
charged to
Balance selling,
at general and Deductions- Balance
beginning administrative uncollectible at end
Description of year expenses accounts of year
----------- ------- ------- ------ ------
Allowance for doubtful accounts:
Year ended
December 31, 1995 $ 81,426 432,911 184,342 329,995
======= ======= ======= =======
Year ended
December 31, 1994 $ 81,700 22,403 22,677 81,426
======= ======= ======= =======
Year ended
December 31, 1993 $ 88,783 162 7,245 81,700
======= ======= ======= =======
42
Exhibit 10.4
------------
Amendment to Long-Term Incentive Plan
-------------------------------------
Adopted February 10, 1995
-------------------------
RESOLVED, that the first sentence of numerical paragraph 3 of the LabOne,
Inc. Long-Term Incentive Plan (the "Plan") is hereby amended to increase
the maximum number of shares which may be issued under the Plan from
"1,800,000" shares of common stock of the corporation to "2,150,000"
shares of common stock of the corporation;
43
Exhibit 10.6
------------
LabOne Annual Incentive Plan
----------------------------
The Annual Incentive Plan is designed to motivate and reward the
accomplishment of targeted operating results. Prior to the beginning of
each fiscal year, the Committee establishes an earnings per share goal
under the Plan based upon the Committee's judgment of reasonable earnings
per share growth over the previous fiscal year. No incentive payments are
made if the minimum net earnings threshold is not met. The size of the
incentive pool increases pursuant to a formula established by the Committee
as net earnings increase over the minimum threshold. The incentive pool is
distributed in cash ratably to designated officers and managers at year end
according to a pre-established weighting. The weighting is based upon
senior management's subjective evaluations of each individual's potential
contribution to the Company's financial and strategic goals for the year,
and is reviewed and approved by the Committee.
44
Exhibit 10.9
------------
AMENDMENT TO SERVICE AGREEMENT
------------------------------
THIS AMENDMENT ("Amendment"), made and entered into this 15th day
of September, 1995, by and between LabOne, Inc. ("LabOne," formerly Home
Office Reference Laboratory, Inc.) and Business Men's Assurance Company
of America (BMA).
WITNESSETH:
WHEREAS, LabOne and BMA are parties to a Service Agreement dated
January 1, 1993, (the "Agreement"); and
WHEREAS, the parties desire to amend the Agreement;
NOW, THEREFORE, in consideration of the mutual promises herein
contained, the sufficiency of which are hereby acknowledged, the parties
hereto agree as follows:
1. Subsection (3.1) of the Service Agreement is hereby amended and
substituting therefor the following:
3.1 PRICES AND BILLING FOR SERVICES. LabOne shall pay BMA a flat fee
of $25,000 per year, effective January 1, 1995, payable on the last day
of the year.
IN WITNESS WHEREOF, the parties have executed this Amendment as of
the day and year first above written.
LabOne, Inc.
By: /s/ Kurt Gruenbacher
-------------------------------
Kurt Gruenbacher
V.P. Finance & CAO
Business Men's Assurance
Company of America
By: /s/ John E. Walker
------------------------------
John E. Walker
Managing Director - Reinsurance
45
Exhibit 10.11
-------------
AMENDED EMPLOYMENT AGREEMENT
----------------------------
THIS AMENDED EMPLOYMENT AGREEMENT ("Agreement"), made as of November 1,
1995, by and between LabOne, Inc., a Delaware corporation (hereinafter
referred to as "LabOne") and Robert D. Thompson, a resident of the State of
Kansas (hereinafter referred to as "Officer");
WITNESSETH:
WHEREAS, LabOne and Officer entered into an Employment Agreement as of
August 5, 1993, as amended November 9, 1993 and December 30, 1994 ("Employment
Agreement"); and
WHEREAS, the parties desire to amend and restate the said Employment
Agreement in its entirety;
NOW, THEREFORE, in consideration of the continuation of employment of
Officer with LabOne for the term of this Agreement and of the mutual promises,
covenants, representations and warranties contained herein, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending
to be legally bound, agree that the Employment Agreement is hereby amended
and restated in its entirety to read as follows:
SECTION I
EMPLOYMENT AND TERM
1.1 EMPLOYMENT. LabOne hereby employs Officer and Officer hereby
accepts such employment and agrees to perform the duties described in
Section 2 of this Agreement.
1.2 TERM.
(a) BASE TERM. The term of employment shall commence on November
1, 1995 and shall continue for a period of eighteen (18) months (the "Base
Term"), or until terminated as otherwise provided herein.
(b) TERMINATION SUBSEQUENT TO CHANGE IN CONTROL. Notwithstanding any
other provision of this Agreement to the contrary, in the event that (i) a
change of control of LabOne shall occur at any time during which Officer is
in the full-time employment of LabOne or its successor and (ii) within
one (1) year after such a change in control, Officer's employment with LabOne
or its successor is terminated by LabOne or its successor for any reason
other than permanent disability, death or normal retirement, or is
voluntarily terminated by Officer for any reason at his sole discretion,
LabOne will promptly pay to Officer as termination compensation the lump
sum amount described below.
46
The lump sum compensation payable shall be equal to three (3) times
the average annual compensation includable in Officer's gross income for the
most recent five (5) taxable years ending before the date of the change
in control. If Officer has been an employee of LabOne for less than 5
years, Officer's lump sum payment shall be equal to 3 times the average
annual compensation includable in Officer's gross income based on the
portion of the 5 year period during which Officer performed services
for LabOne. To the extent that any amount required to be paid hereunder
would constitute an "excess parachute payment" within the meaning of
Section 280G(b) of the Internal Revenue Code of 1986, that excess amount
need not be paid.
For purposes of this Section 1.2(b), a "change of control" shall
be deemed to have taken place if there shall have occurred (i) the sale
or other disposition resulting in the transfer of legal or beneficial
ownership of, or the right to vote, more than fifty percent (50%) of
the outstanding capital stock of LabOne to one or more third-party
purchasers unaffiliated with Seafield Capital Corporation, its
shareholders or affiliates (as the term "affiliate" is defined in
Rule 12b-2 promulgated by the Securities and Exchange Commission
under the Securities Exchange Act of 1934), except in connection
with an underwritten public offering of the common stock of LabOne,
(ii) a merger or consolidation of LabOne with or into any entity other
than Seafield Capital Corporation or its affiliates, (iii) a sale or
other transfer of substantially all of the assets of LabOne to any
person or entity other than Seafield Capital Corporation or its
affiliates, (iv) the sale or other disposition resulting in the
transfer of legal or beneficial ownership of, or the right to vote,
more than fifty percent (50%) of the outstanding capital stock of
Seafield Capital Corporation to one or more third-party purchasers
(other than the affiliates of Seafield Capital Corporation), except
in connection with an underwritten public offering of the common
stock of Seafield Capital Corporation, (v) a merger or consolidation
of Seafield Capital Corporation with or into any entity other than
the affiliates of Seafield Capital Corporation, or (vi) a sale or
other transfer of substantially all of the assets of Seafield Capital
Corporation to any person or entity other than the affiliates of
Seafield Capital Corporation.
In the event of termination of employment under the circumstances
described above, LabOne shall pay to Officer the installments of his
base salary through the date of termination of employment, any annual
incentive bonus for the previous year if such has been approved but
not paid and the lump sum amount as termination compensation described
above, and any remaining term of this Agreement shall be cancelled.
Such payments to Officer and the arrangements provided for by any stock
47
option or other agreement between LabOne and Officer in effect at
the time and by any other applicable plan of LabOne will constitute
the entire obligation of LabOne to Officer with respect to such
termination, and will also constitute full settlement of any claim
under law or in equity that Officer might otherwise assert against
LabOne or any of its employees on account of such termination.
(c) ANNUAL EXTENSION. Commencing on May 1, 1997 (the "Extension
Date") and on each succeeding anniversary of such Extension Date, unless
LabOne notifies Officer in accordance with the immediately following
sentence that Officer's employment under this Agreement will not be
extended, this Agreement and Officer's employment under this Agreement
shall automatically and without further action be extended for one (1)
year from such Extension Date or anniversary thereof on the same terms
and conditions as are set forth herein. If LabOne elects not to extend
Officer's employment under this Agreement as provided in the preceding
sentence, it shall do so by notifying Officer in writing at least sixty
(60) days prior to the Extension Date or the applicable anniversary
thereof. If LabOne elects not to extend Officer's employment under
this Agreement as provided above, such election shall be treated as
a termination of Officer without cause within the meaning of Section
9.1(e) of this Agreement and LabOne shall pay to Officer, in addition
to any other sums which may be due to Officer, the lump sum severance
payment provided for in Section 9.1(e).
SECTION 2
DUTIES
2.1 GENERAL DUTIES. Officer shall serve LabOne in the capacities
of Executive Vice President-Finance, Chief Financial Officer and Treasurer,
reporting directly to the Chairman of the Board of Directors of LabOne.
Officer shall be responsible for performing the duties generally required
of such positions and such other duties in relation to LabOne consistent
with Officer's positions as shall from time to time be assigned to Officer
by the Board of Directors or the Chairman of the Board of Directors.
2.2 FULL TIME. During the term hereof, Officer agrees to devote
his full time, attention and skill to the performance of his duties.
2.3 BEST EFFORTS. Officer agrees that he will at all times
faithfully, industriously and to the best of his ability, experience
and talents, perform all of the duties that may be required of and from
him as described above.
2.4 INDEMNIFICATION AND D & 0 INSURANCE. LabOne shall provide
to Officer coverage under LabOne's director and officer liability
insurance and indemnification By-laws, as fully and to the same extent
as the same are provided to similar executive officers of LabOne.
48
SECTION 3
BASE SALARY
3.1 ANNUAL BASE SALARY. LabOne shall pay Officer, and Officer shall
accept from LabOne in full payment for Officer's full time services
hereunder, compensation at the rate of Two Hundred Thousand ($200,000)
per annum, payable monthly in periodic equal installments during the year.
Such salary shall be reviewed from time to time, but not less often than
annually, by the Board of Directors of LabOne and will be subject to
such increases, but not decreases, as the Board of Directors of LabOne
may determine, having due regard for the efforts of Officer and the
results, both financial and otherwise, of LabOne's operations during
Officer's tenure.
3.2 REIMBURSEMENT OF EXPENSES. LabOne shall reimburse Officer for
such reasonable out-of-pocket expenses as are incurred by Officer in
order to render the services contemplated hereunder.
3.3 TAX WITHHOLDINGS. LabOne shall deduct from the compensation
payable to Officer all federal, state, and local income tax, social
security, FICA, FUTA and other withholdings as required by law.
SECTION 4
BONUSES AND FRINGE BENEFITS
4.1 SPECIAL BONUS. As an incentive to induce Officer to continue
his employment with LabOne for the term of this Agreement, LabOne shall
pay to Officer upon his execution of this Agreement a special one-time
bonus of Fifty Thousand Dollars ($50,000).
4.2 ANNUAL INCENTIVE BONUS. During the term hereof, Officer shall
be eligible to receive an annual incentive bonus based upon the performance
of LabOne in relation to predetermined financial goals established by the
Compensation Committee of the Board of Directors of LabOne. Bonuses for
less than a full year of service may be granted at the discretion of the
Compensation Committee.
4.3 STOCK OPTION. Simultaneously with the execution and delivery
of this Agreement, the Long-Term Incentive Plan Committee of the Board
of Directors of LabOne has granted to Officer under the LabOne Long-Term
Incentive Plan a non-qualified stock option agreement for Fifty Thousand
(50,000) shares of the common stock of LabOne.
49
4.4 OTHER FRINGE BENEFITS. Officer shall be entitled to an annual
vacation consistent with LabOne's vacation policies for similar executive
officers and to participate in such fringe benefit programs as LabOne may
make available from time to time to similar executive officers, which shall
include reasonable hospital and major medical insurance coverage, long term
disability and life insurance in amounts and on terms no less favorable
than those provided to similar executive officers of LabOne.
SECTION 5
NON-COMPETITION
5.1 RESTRICTIVE COVENANTS. In consideration for Officer's employment
with LabOne and in further consideration for the compensation provided to
Officer in Sections 3 and 4 hereof, Officer agrees that during the term of
his employment pursuant to this Agreement, and for a period of two (2)
years after the termination for any reason of his employment pursuant to
this Agreement, he will not, without the prior written consent of LabOne,
directly or indirectly, individually or in concert with others, or through
the medium of any other corporation, partnership, syndicate, association,
joint venture, or other entity or as an employee, officer, director, agent,
consultant or affiliate, compete with LabOne, within the hereinafter
described region, in (i) the urine or blood chemistry testing or analysis
business for the insurance industry, or (ii) the urine or blood chemistry
container or other supply business for the insurance industry, or (iii)
the clinical laboratory testing or substance abuse testing businesses, or
(iv) any other business engaged in by LabOne as of the date of the
termination of Officer's employment with LabOne, and Officer will not
solicit or accept any such business described in any of subparts (i)
through (iv) above and which competes with LabOne from any customer who
is served by LabOne as of the date of the termination of Officer's
employment pursuant hereto, or cause or induce any present or future
employee of LabOne to leave the employ of LabOne to accept employment
with Officer or with any such entity or person. The region referred
to above shall consist of any territory in which LabOne or any of its
representatives or agents, as of the date of the termination of
Officer's employment pursuant hereto, provides, sells, offers for sale
or solicits the sale of urine or blood chemistry testing or analysis,
or urine or blood chemistry containers or other supplies related thereto,
or clinical laboratory or substance abuse testing, or other services or
products. LabOne and Officer agree that in the event that any provision
of this Section 5.1 is void or constitutes an unreasonable restriction
against Officer, such provision shall not be rendered void, but shall apply
with respect to such time or territory or to such other extent as may
constitute a reasonable restriction under the circumstances. The
50
foregoing provisions shall not prohibit Officer from owning not more than
3% of the total shares of all classes of stock outstanding of any publicly
held company.
5.2 INJUNCTIVE RELIEF. LabOne shall be entitled to appropriate
injunctive relief in any court of competent jurisdiction to enforce its
rights under Sections 5, 6, 7 and 8 of this Agreement, in addition to
any other rights and remedies available to LabOne at law or in equity,
it being agreed that any violation of Sections 5, 6, 7 or 8 of this
Agreement by Officer is reasonably likely to cause irreparable damage
to LabOne which will be difficult or impossible to value in monetary
damages.
5.3 CHARITABLE ACTIVITIES. Nothing in this Section 5 shall
be construed as preventing Officer from engaging in charitable,
professional, religious or civic activities such as serving on a
school board, or as a member of or officer of a professional organization,
provided such activity or organization does not compete directly with
LabOne.
SECTION 6
CONFIDENTIAL INFORMATION
6.1 CONFIDENTIALITY. During the term of and at any time after
the termination of this Agreement, Officer will hold in trust and
confidence and will not divulge, disclose or convey to any person,
firm, corporation or other entity and will keep secret and confidential
all trade secrets, proprietary information and confidential information
heretofore or hereafter acquired by him concerning LabOne, Head Office
Reference Laboratory Ltd., or Seafield Capital Corporation, and will
not use for himself or others the same in any manner, except to the
extent that such information should become no longer a trade secret,
proprietary or confidential. Such trade secrets, proprietary information
and confidential information shall be deemed to include, but shall not
be limited to, information, whether written or not:
(a) of a technical nature, such as but not limited to, technology,
inventions, discoveries, improvements, processes, formulae, ideas,
know-how, methods, compositions, computer software programs or research
projects, including the identity of research organizations and
researchers,
(b) of a business nature, such as but not limited to information
concerning costs, profits, supplies, suppliers, marketing, sales or lists
of customers, and
51
(c) pertaining to future developments, such as but not limited
to information concerning research and development or future marketing
methods.
The restrictions contained above shall not apply to:
(i) information which at the time of disclosure by
LabOne to Officer is in the public domain; or
(ii) information which at the time of disclosure by
LabOne to Officer constituted confidential information
hereunder, but which thereafter becomes part of the public
domain by publication or otherwise through no fault of
Officer.
SECTION 7
DEVELOPMENTS
7.1 DEVELOPMENTS. Officer will promptly disclose to LabOne
(in form satisfactory to LabOne) all information, technology,
inventions, discoveries, improvements, processes, formulae, ideas,
know-how, methods, compositions, research projects, computer software
programs and developments, whether or not patentable or copyrightable
(collectively "Information"), that Officer by himself or in conjunction
with any other person or entity conceives, makes, develops or acquires
during the term of this Agreement, and that:
(a) are or relate or pertain to the assets, properties, or existing
or contemplated business or research activities of LabOne, or
(b) are suggested by, arise out of or result from, directly or
indirectly, Officer's association with LabOne, or
(c) arise out of or result, directly or indirectly, in part or
fully, from the use of LabOne's time, labor, materials facilities or
other resources (collectively "Developments").
Any Information fitting within any of the descriptions contained
in subsections (a), (b) or (c) of this Section 7.1 that is disclosed
to any other person, firm or other entity by Officer or used in any
manner by Officer within one (1) year following the termination of this
Agreement shall be presumed to have been conceived, made, developed or
acquired during the term of this Agreement and, thus, to constitute a
Development.
7.2 ASSIGNMENT TO LABONE. Officer hereby assigns, transfers and
conveys to LabOne all of his right, title and interest in and to any and
all such Developments, which Developments shall become and remain the sole
52
and exclusive property of LabOne. At any time and from time to time, upon
the request of LabOne, Officer will execute and deliver any and all
instruments, documents and papers, give evidence and do any and all
other acts which, in the reasonable opinion of counsel for LabOne, are
or may be necessary or desirable to document such transfer, or to enable
LabOne to file and process applications for and to acquire, maintain and
enforce any and all patents, trademarks, registrations or copyrights with
respect to any such Developments, or to obtain any extension, validation,
re-issue, continuance or renewal of any such patent, trademark or copyright.
LabOne will be responsible for the preparation of any such instruments,
documents and papers and for the implementation of any such proceedings
and will reimburse Officer for all reasonable expenses incurred by him in
compliance with the provisions of this paragraph.
SECTION 8
PROPERTY OF LABONE
8.1 All correspondence, notes, recordings, documents and other
materials and reproductions thereof pertaining to any aspect of the
business of LabOne shall be the property of and shall be delivered to
and retained by LabOne upon termination of this Agreement.
SECTION 9
TERMINATION
9.1 TERMINATION. Officer's employment pursuant to this Agreement
shall terminate upon the occurrence of any of the following events:
(a) DEATH. In the event that Officer dies during the term of this
Agreement, LabOne shall pay to his executors or administrators an amount
equal to the installments of his base salary payable for the month in
which he dies and any annual incentive bonus for the previous year if
such has been approved but not paid, and such payments, together with
the arrangements provided for by any stock option or other agreement
between LabOne and Officer in effect at the time and by any other
applicable plan of LabOne will constitute the entire obligation of
LabOne to Officer and will also constitute full settlement of any
claim under law or in equity that Officer's executors, heirs or assigns
or any other person claiming under or through him might otherwise assert
against LabOne or any of its employees on account of his death.
(b) DISABILITY. In the event that Officer continues unable to
fully perform his duties and responsibilities hereunder by reason of
illness, injury or mental or physical disability or incapacity for ninety
53
(90) consecutive days, during which time he shall continue to be compensated
for monthly installments of base salary and any annual incentive bonus for
the previous year if such has been approved but not paid, Officer's employment
pursuant to this Agreement may be terminated by LabOne, and such payments,
together with the arrangements provided for by any stock option or other
agreement between LabOne and Officer in effect at the time and by any other
applicable plan of LabOne will constitute the entire obligation of
LabOne to Officer and will also constitute full settlement of any claim
under law or in equity that Officer might otherwise assert against LabOne
or any of its employees on account of such termination. Officer agrees,
in the event of any dispute under this Section 9.1, to submit to a
physical examination by a reputable licensed physician selected by
LabOne and to accept LabOne's decision based on the results thereof.
(c) VOLUNTARY TERMINATION. Officer's employment may be
voluntarily terminated upon Officer giving sixty (60) days' prior
written notice to LabOne. In the event Officer voluntarily terminates
his employment, LabOne shall pay to Officer an amount equal to his base
salary payable through the date of termination of employment and any
annual incentive bonus for the previous year if such has been approved
but not paid, and such payments, together with the arrangements provided
for by any stock option or other agreement between LabOne and Officer
in effect at the time and by any other applicable plan of LabOne will
constitute the entire obligation of LabOne to Officer and will also
constitute full settlement of any claim under law or in equity that
Officer might otherwise assert against LabOne or any of its employees
on account of his termination.
(d) TERMINATION FOR CAUSE. Officer's employment may be terminated
by LabOne at any time for cause. In the event that Officer is terminated
by LabOne for cause, LabOne shall pay to Officer his base salary which
may have accrued to the date of termination and any annual incentive
bonus for the previous year if such has been approved but not paid, and
such payments, together with the arrangements provided for by any stock
option or other agreement between LabOne and Officer in effect at the
time and by any other applicable plan of LabOne will constitute the
entire obligation of LabOne to Officer and will also constitute full
settlement of any claim under law or in equity that Officer might
otherwise assert against LabOne or any of its employees on account of
his termination. Only the following actions, failures or events by or
affecting Officer shall constitute "cause" for termination of Officer
by LabOne (i) willful and continued failure by Officer to substantially
perform his duties provided herein after a written demand for substantial
performance is delivered to Officer by the Board of Directors of LabOne,
which demand identifies with reasonable specificity the manner in which
Officer has not substantially performed his duties, and Officer fails to
54
comply with such demand within a reasonable time; (ii) the engaging by
Officer of gross misconduct or gross negligence materially injurious to
LabOne; or (iii) Officer's conviction of having committed a felony.
Notwithstanding the foregoing, Officer shall not be deemed to have been
terminated by LabOne for cause unless and until there shall have been
delivered to him a copy of a resolution duly adopted by the affirmative
vote of not less than a majority of the entire membership of the Board
of Directors of LabOne finding that, in the good faith opinion of the
Board of Directors, LabOne has cause for the termination of employment
of Officer as set forth in any of clauses (i) through (iii) above and
specifying the particulars thereof in reasonable detail. The findings
of the Board of Directors shall not be binding on the arbitrators or
other finders of fact in connection with any litigation or dispute
arising out of this Agreement.
(e) TERMINATION WITHOUT CAUSE. In the event that LabOne
terminates Officer's employment for reasons other than death,
disability, or cause as listed in subsection (d) above, then in
addition to any other sums to which Officer may be entitled under
this Agreement, LabOne shall pay to Officer, on or before the last
day of employment, a lump sum severance payment equal to (i) the
installments of base salary due for the balance of the then current
term of this Agreement, plus (ii) fifty percent (50%) of the annual
base salary payable to Officer by LabOne immediately prior to the
termination of employment, which payments, together with the
arrangements provided for by any stock option or other agreement
between LabOne and Officer in effect at the time and by any other
applicable plan of LabOne will constitute the entire obligation of
LabOne to Officer and will also constitute full settlement of any claim
under law or in equity that Officer might otherwise assert against LabOne
or any of its employees on account of his termination.
SECTION 10
SURVIVAL
10.1 Notwithstanding the termination of Officer's employment
pursuant to the provisions of Section 9 hereof, or the expiration of
the term of this Agreement, Officer's obligations under Sections 5, 6,
7 and 8 hereof, the provisions for injunctive relief against Officer
in Sections 5.2 and 12.2 hereof and the provisions for arbitration in
Section 12.1 hereof shall continue in full force and effect. Any right,
power or obligation imposed or conferred upon LabOne or the Board of
Directors of LabOne by the terms of this Agreement shall inure to the
benefit of and be binding upon any person or entity into which LabOne
is consolidated or merged and the Board of Directors or other governing
body of any such corporation or other entity.
55
SECTION 11
ASSISTANCE IN LITIGATION
11.1 Officer shall, upon reasonable notice, furnish such information
and assistance to LabOne as may reasonably be required by LabOne in
connection with any litigation in which LabOne or any of its subsidiaries
or affiliates is or may become a party.
SECTION 12
ARBITRATION
12.1 METHODS. Except as provided in Section 12.2 below, any
difference, controversy, claim or dispute between the parties arising
out of this Agreement, or the breach thereof, shall be settled by binding
arbitration before a panel of three arbitrators selected as follows:
each party shall select one neutral arbitrator from the American
Arbitration Association's approved list of arbitrators. The two
arbitrators so selected by the parties shall select a third neutral
arbitrator and the three so selected shall settle the dispute under
the duly promulgated Commercial Arbitration Rules of the American
Arbitration Association or its successor. The arbitration shall be
conducted in Lenexa, Kansas. The award of the arbitrators may be
entered as a judgment in any Court in the State of Kansas or in any
court having jurisdiction thereof.
12.2 INJUNCTIVE RELIEF. Notwithstanding Section 12.1 above,
LabOne shall be entitled to seek judicial injunctive relief to enforce
its rights under Sections 5, 6, 7 and 8 of this Agreement as provided
in Section 5.2 hereof.
SECTION 13
MISCELLANEOUS
13.1 ASSIGNMENT BY OFFICER. This is a personal Agreement on the
part of Officer and may not be sold, assigned, transferred or conveyed
by Officer. This Agreement may not be sold, assigned, transferred or
conveyed by LabOne except in connection with a merger, consolidation or
sale of all or substantially all of the assets of LabOne and then only
to the successor to LabOne's operations.
13.2 ENTIRE AGREEMENT. This Agreement contains the entire
agreement among the parties hereto and there are no representations,
inducements, promises, agreements, arrangements, or undertakings,
oral or written, among the parties as to the subject matter covered.
56
13.3 SEVERABILITY. Should any part of this Agreement be declared
invalid for any reason, such invalidity shall not affect the validity of
any remaining portion hereof and such remaining portion shall continue
in full force and effect as if this Agreement had been originally executed
without including the invalid part.
13.4 GOVERNING LAW. This Agreement and its performance shall be
interpreted and construed in accordance with the laws of the State of
Kansas.
13.5 TITLES. Titles and captions in no way define, limit, extend
or describe the scope of this Agreement or the intent of any provision
hereof.
13.6 AMENDMENTS. No changes, alterations, modifications, additions,
or qualifications to the terms of this Agreement shall be made or be
binding unless made in writing and executed by the parties in the same
manner as the Agreement.
13.7 NO WAIVER. Failure by either party to enforce any right
granted by this Agreement shall not constitute a waiver of such right
and waiver of any provision of this Agreement shall not constitute a
waiver of any other provision.
13.8 NOTICES. Any notice, instrument or communication required
or permitted under this Agreement shall be deemed to have been effectively
given and made if in writing and when served by personal delivery to the
party for whom it is intended, or three business days after being deposited,
postage prepaid, registered or certified mail, return receipt requested,
in the United States mail, addressed to the party for whom it is intended
at the following addresses, or at such other addresses as the party to
be notified may have designated in writing to the other:
Officer: Robert D. Thompson
24801 W. 103rd Terrace
Olathe, Kansas 66061
LabOne: LabOne, Inc.
10310 W. 84th Terrace
Lenexa, Kansas 66214
Attn: Chairman of the Board of
Directors
13.9 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
57
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the day and year first above written.
LABONE, INC.
By: /s/ W. Thomas Grant II
-----------------------------
W. Thomas Grant II, President
/s/ Robert D. Thompson
-----------------------------
ROBERT D. THOMPSON
58
Exhibit 10.13
-------------
AMENDMENT TO EMPLOYMENT AGREEMENT
---------------------------------
THIS AMENDMENT ("Amendment"), made and entered into this 10th day
of November, 1995, by and between LabOne, Inc. ("LabOne") and GREGG R.
SADLER ("Officer");
WITNESSETH:
WHEREAS, LabOne and Officer are parties to an Employment Agreement,
dated August 19, 1993, as amended December 30, 1994 (the "Agreement");
and
WHEREAS, the parties desire to further amend the Agreement;
NOW, THEREFORE, in consideration of the mutual promises herein
contained, the sufficiency of which are hereby acknowledged, the parties
hereto agree as follows:
1. Clause (iv) of the third sentence of Section 9.1(d) of the
Agreement is hereby amended by deleting said clause (iv) as the same
now appears in its entirety:
2. The fourth sentence of Section 9.1(d) of the Agreement is
hereby amended by changing the present reference to clause "iv" in
said sentence to clause "iii".
IN WITNESS WHEREOF, the parties have executed this Amendment as
of the day and year first above written.
LABONE, INC.
By: /s/ W. Thomas Grant II
--------------------------------
W. Thomas Grant II, President
COMPANY
/s/ Gregg R. Sadler
--------------------------------
GREGG R. SADLER
OFFICER
59
Exhibit 10.14
-------------
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Employment Agreement"), made and entered
into as of this 1st day of November, 1995, by and between LabOne, Inc., a
Delaware corporation ("LabOne"), and Thomas J. Hespe ("Employee").
WITNESSETH:
WHEREAS, LabOne is a laboratory specializing in urine and blood
chemistry testing; and
WHEREAS, Employee is knowledgeable and has substantial experience
in the specialized business of urine and blood chemistry testing ("Lab
Business"); and
WHEREAS, in accordance with the terms and provisions of this
Employment Agreement, LabOne desires to employ Employee to obtain the
benefit of his knowledge and experience, and Employee desires to be
employed by LabOne; and
WHEREAS, LabOne and Employee agree that the restrictive covenants
and confidentiality agreements contained in this Employment Agreement
are essential to the growth and stability of the Lab Business of LabOne
and to the continuing viability of the Lab Business in the event the
employment of Employee is terminated,
NOW, THEREFORE, in consideration of LabOne's agreement to employ
Employee and the mutual promises herein contained, the parties hereto
agree as follows:
1. EMPLOYMENT. LabOne hereby agrees to employ Employee, and
Employee hereby agrees to accept such employment and to perform his duties
and obligations hereunder, in accordance with the terms and conditions
hereinafter set forth.
2. TERM. The term of Employee's employment pursuant to this
Employment Agreement shall commence on the date hereof and shall continue
until terminated in accordance with the provisions of paragraph 10 hereof.
3. DUTIES AND RESPONSIBILITIES. Employee shall serve as Executive
Vice President-Sales, shall serve in such other capacities as the Officers
or Board of Directors of LabOne may from time to time prescribe, shall
perform all duties incidental to such positions and shall cooperate fully
with the Board of Directors and Officers of LabOne. Employee shall devote
all his business time, attention and energy to the performance of such
duties and responsibilities.
4. COMPENSATION. During the term of Employee's employment pursuant
to this Employment Agreement, Employee shall be paid a salary of $12,500 per
60
calendar month, or such other amount, which shall not be less than said
base salary, as may from time to time be determined by LabOne, payable
in arrears.
5. DEVELOPMENTS. Employee will promptly disclose to LabOne (in
form satisfactory to LabOne) all information, technology, inventions,
discoveries, improvements, processes, formulae, ideas, know-how, methods,
compositions, research projects, computer software programs and
developments, whether or not patentable or copyrightable (collectively
"Information"), that Employee by himself or in conjunction with any
other person or entity conceives, makes, develops or acquires during
the term of his employment pursuant to the Employment Agreement, and
that:
(a) are or relate or pertain to the assets, properties, or
existing or contemplated business or research activities or LabOne,
or
(b) are suggested by, arise out of or result from, directly
or indirectly, Employee's association with LabOne, or
(c) arise out of or result, directly or indirectly, in part
or fully, from the use of LabOne's time, labor, materials, facilities
or other resources, (collectively "Developments").
Any Information fitting within any of the descriptions contained
in subsections (a), (b) or (c) of this paragraph 5 that is disclosed
to any other person, firm or other entity by Employee or used in any
manner by Employee within one (1) year following the termination of his
employment pursuant to this Employment Agreement shall be presumed to
have been conceived, made, developed or acquired during the term of his
employment pursuant to this Employment Agreement and, thus, to constitute
a Development.
Employee hereby assigns, transfers and conveys to LabOne all of
his right, title and interest in and to any and all such Developments,
which Developments shall become and remain the sole and exclusive
property of LabOne. At any time and from time to time, upon the request
of LabOne, Employee will execute and deliver any and all instruments,
documents and papers, give evidence and do any and all other acts which,
in the opinion of counsel for LabOne, are or may be necessary or desirable
to document such transfer, or to enable LabOne to file and process
applications for and to acquire, maintain and enforce any and all patents,
trademarks, registrations or copyrights with respect to any such
Developments, or to obtain any extension, validation, re-issue, continuance
or renewal of any such patent, trademark or copyright. LabOne will be
responsible for the preparation of any such instruments, documents and
papers and for the implementation of any such proceedings and will reimburse
Employee for all reasonable expenses incurred by him in compliance with the
provisions of this paragraph.
61
6. PROPERTY OF LABONE. All correspondence, notes, recordings,
documents, customer lists and other materials and reproductions thereof
pertaining to any aspect of the business of LabOne shall be the property
of and shall be delivered to and retained by LabOne upon termination of
his employment pursuant to this Employment Agreement.
7. CONFIDENTIALITY. During the term of and at any time after the
termination of his employment pursuant to this Employment Agreement,
Employee will hold in trust and confidence and will not divulge, disclose
or convey to any person, firm, corporation or other entity and will keep
secret and confidential all trade secrets, proprietary information and
confidential information heretofore or hereafter acquired by him concerning
LabOne, Head Office Reference Laboratory Ltd. or Seafield Capital
Corporation and will not use for himself or others the same in any
manner, except to the extent that such information should become no
longer a trade secret, proprietary or confidential. Such trade secrets,
proprietary information and confidential information shall be deemed to
include, but shall not be limited to, information, whether written or
not:
(a) of a technical nature, such as but not limited to,
technology, inventions, discoveries, improvements, processes, formulae,
ideas, know-how, methods, compositions, computer software programs or
research projects, including the identity of research organizations and
researchers,
(b) of a business nature, such as but not limited to information
concerning costs, profits, supplies, suppliers, marketing, sales or lists
of customers, and
(c) pertaining to future developments, such as but not limited
to information concerning research and development or future marketing
methods.
8. RESTRICTIVE COVENANTS. In consideration for his employment
with LabOne and in further consideration for the compensation provided
for in paragraph 4 and the post-termination payment, if any, provided
for in paragraph 10, Employee agrees that during the term of his employment
pursuant to this Employment Agreement, and for a period of two (2) years
after the termination for any reason of his employment pursuant to this
Employment Agreement, he will not, without the prior written consent of
LabOne, directly or indirectly, individually or in concert with others,
or through the medium of any other corporation, partnership, syndicate,
association, joint venture, or other entity or as employee, officer,
director, agent, consultant or affiliate, compete with LabOne, within
the hereinafter described region, in the urine or blood chemistry testing
or analysis business for the insurance or the clinical testing industry
or in the urine or blood chemistry container or other supply business
62
for the said testing industries, and Employee will not solicit or accept
any such business from any customer who is served by LabOne as of the
date of the termination of his employment pursuant hereto. The region
referred to above shall consist of any territory(ies) in which LabOne or
any of its representatives or agents, as of the date of the termination
of Employee's employment pursuant hereto, provides, sells, offer for sale
or solicits the sale to the said laboratory testing industries urine,
blood or other bodily fluid or specimens testing or analysis or urine
or blood containers or other supplies related thereto.
9. JUDICIAL RELIEF. LabOne and Employee agree that in the event
that any court shall finally hold that any provision of paragraph 8 of
this Employment Agreement is void or constitutes an unreasonable
restriction against Employee, the provisions of paragraph 8 shall not
be rendered void, but shall apply with respect to such time or territory
or to such other extent as such court may judicially determine or
indicate constitutes a reasonable restriction under the circumstances.
LabOne shall be entitled to appropriate injunctive relief in any court
of competent jurisdiction to enforce its rights under paragraphs 5, 6,
7 and 8 of this Employment Agreement, in addition to any other rights
and remedies available to LabOne at law or in equity, it being agreed
that any violation of paragraphs 5, 6, 7 or 8 of this Employment
Agreement by Employee is reasonably likely to cause irreparable damage
to LabOne which will be difficult or impossible to value in monetary
damages.
10. TERMINATION. Employee's employment pursuant to this
Employment Agreement shall terminate upon the occurrence of any of
the following events:
(a) DEATH. In the event that Employee dies during the term
of this Employment Agreement, LabOne shall pay to his executors or
administrators an amount equal to the installments of his salary payable
for the month in which he dies, and, thereafter, LabOne shall have no
further liability or obligation hereunder to his executors, heirs or
assigns or any other person claiming under or through him.
(b) DISABILITY. In the event that Employee continues unable
to fully perform his duties and responsibilities hereunder by reason of
illness, injury or mental or physical disability or incapacity for ninety
(90) consecutive days, during which time he shall continue to be
compensated for monthly installments of salary as provided in paragraph
4 hereof, Employee's employment pursuant to this Employment Agreement
may be terminated by LabOne, and LabOne shall thereafter have no further
liability or obligation hereunder to Employee. Employee agrees in the
event of any dispute under this paragraph to submit to a physical
examination by a licensed physician selected by LabOne and to accept
LabOne's decision based on the results thereof.
63
(c) VOLUNTARY TERMINATION. Employee's employment may be
voluntarily terminated upon Employee giving thirty (30) days' prior
written notice to LabOne. In the event Employee voluntarily terminates
his employment, LabOne shall have no further liability or obligation
hereunder to Employee.
(d) TERMINATION FOR CAUSE. Employee's employment may be
involuntarily terminated by LabOne at any time for cause. In the
event that Employee is involuntarily terminated by LabOne for cause,
LabOne shall thereafter have no further liability or obligation
hereunder to Employee.
(e) TERMINATION WITHOUT CAUSE. Employee's employment may
be involuntarily terminated by LabOne at any time without cause upon
LabOne giving thirty (30) days' prior written notice to Employee.
In the event that Employee is involuntarily terminated without cause
by LabOne, LabOne shall pay to Employee in a lump sum an amount equal
to twelve (12) months' base salary. Said amount shall be paid to
Employee within 30 days of LabOne's giving notice of termination to
Employee and shall be determined by the aggregate of the last twelve
(12) months' base salary of such Employee preceding the month LabOne
transmits such notice of termination. Upon such payment, LabOne shall
have no further liability or obligation hereunder to Employee.
(f) TERMINATION SUBSEQUENT TO CHANGE IN CONTROL.
Notwithstanding any other provision of this Agreement to the contrary,
in the event that (i) a change of control of LabOne shall occur at any
time during which Employee is in the full-time employment of LabOne or
its successor and (ii) within one (1) year after such a change in
control, Employee's employment with LabOne or its successor is
terminated by LabOne or its successor for any reason other than
permanent disability, death or normal retirement, or is voluntarily
terminated by Employee for any reason at his sole discretion, LabOne
will promptly pay to Employee as termination compensation the lump
sum amount described below. The lump sum compensation payable shall
be equal to three (3) times the average annual compensation includable
in Employee's gross income for the most recent five (5) taxable years
ending before the date of the change in control. If Employee has been
an employee of LabOne for less than 5 years, Employee's lump sum payment
shall be equal to 3 times the average annual compensation includable in
Employee's gross income based on the portion of the 5 year period during
which Employee performed services for LabOne. To the extent that any
amount required to be paid hereunder would constitute an "excess
parachute payment" within the meaning of Section 280G(b) of the
Internal Revenue Code of 1986, that excess amount need not be paid.
64
For purposes of this paragraph 10(f), a "change of control"
shall be deemed to have taken place if there shall have occurred (i)
the sale or other disposition resulting in the transfer of legal or
beneficial ownership of, or the right to vote, more than fifty percent
(50%) of the outstanding capital stock of LabOne to one or more
third-party purchasers unaffiliated with Seafield Capital Corporation,
its shareholders or affiliates (as the term "affiliate" is defined in
Rule 12b-2 promulgated by the Securities and Exchange Commission under
the Securities Exchange Act of 1934), except in connection with an
underwritten public offering of the common stock of LabOne, (ii) a
merger or consolidation of LabOne with or into any entity other than
Seafield Capital Corporation or its affiliates, or (iii) a sale or
other transfer of substantially all of the assets of LabOne to any
person or entity other than Seafield Capital Corporation or its
affiliates.
In the event of termination of employment under the
circumstances described above, LabOne shall pay to Employee the
installments of his base salary through the date of termination of
employment, any annual incentive bonus for the previous year if such
has been approved but not paid and the lump sum amount as termination
compensation described in this paragraph 10(f), and any remaining term
of this Agreement shall be cancelled. Such payments to Employee and
the arrangements provided for by any stock option or other agreement
between LabOne and Employee in effect at the time and by any other
applicable plan of LabOne will constitute the entire obligation of
LabOne to Employee with respect to such termination, and will also
constitute full settlement of any claim under law or in equity that
Employee might otherwise assert against LabOne or any of its employees
on account of such termination.
11. SURVIVAL. Notwithstanding the termination of Employee's
employment pursuant to the provisions of paragraph 10 hereof, Employee's
obligations under paragraphs 5, 6, 7 and 8 hereof and the provisions
for relief against Employee in paragraph 9 hereof shall continue in
full force and effect. Any right or power conferred upon LabOne or
the Board of Directors of LabOne by the terms of this Employment
Agreement shall inure to the benefit of any person(s) of entity(ies)
into which LabOne is consolidated, merged or liquidated, and the Board
of Directors or other governing body of any such corporation of other
entity.
12. LAW GOVERNING. This Employment Agreement shall be governed
by and interpreted under the laws of the State of Kansas.
65
13. NOTICES. All notices and other communications required
or permitted hereunder or necessary or convenient shall be deemed to
have been given when mailed by certified or registered mail, postage
prepaid, addressed as follows:
If to Employee to: Thomas J. Hespe
Seven Sturbridge Court
Baldwin, MO 21013
and if to LabOne, to: W. Thomas Grant II
President and Chief Executive Officer
LabOne, Inc.
10310 West 84th Terrace
Lenexa, Kansas 66214
or such other persons and addresses as have been furnished by Employee
or LabOne to the other in writing. The failure of Employee or LabOne
to require strict performance of any provision of this Employment
Agreement by the other, or the forbearance to exercise any right or
remedy, shall not be construed as a waiver by such party of any such
right or remedy, nor shall any single or partial exercise of any right
or remedy preclude any other or further exercise thereof or the exercise
of any other right or remedy.
14. CONTENTS OF EMPLOYMENT AGREEMENT, AMENDMENT AND ASSIGNMENT.
This Employment Agreement sets forth the entire understanding between
the parties with respect to the subject matter hereof and cannot be
changed, modified or terminated except in writing. All of the terms
and provisions of this Employment Agreement shall be binding upon and
inure to the benefit of and be enforceable by the respective heirs,
representatives, successors and assigns of the parties hereto, except
that the duties and responsibilities of Employee hereunder are of a
personal nature and shall not be assignable in whole or in part by
Employee
15. SEVERABILITY. If any provision of this Employment Agreement
or the application thereof under any circumstance is adjudicated to be
invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provision or application of this Employment Agreement
which can be given effect without the invalid or unenforceable provision
or application.
16. GENDER. Masculine pronouns used herein shall refer to the
masculine or feminine gender as appropriate.
66
IN WITNESS WHEREOF, the undersigned have executed this
Employment Agreement as of the date first above written.
LABONE, INC.
By: /s/ W. Thomas Grant II
-----------------------------
W. Thomas Grant II, President
/s/ Thomas J. Hespe
-----------------------------
THOMAS J. HESPE
67
Exhibit 10.22
-------------
PROMISSORY NOTE
$150,000 September 7, 1995
Lenexa, Kansas
FOR VALUE RECEIVED, BERT H. HOOD ("maker") promises to pay to the order
of LABONE, INC., a Delaware corporation ("payee"), at 10310 W. 84th Terrace,
Lenexa, Kansas, or at such other place as payee may from time to time
designate in writing, the principal sum of One Hundred Fifty Thousand
Dollars ($150,000), with interest accruing on the unpaid balance of the
principal sum from the date hereof until paid at a rate of seven and
three-quarter percent (7.75%) per annum.
The principal sum of this Promissory Note shall be paid in full on the
earlier of (a) September 2, 1996, or (b) the date of the termination of
employment of maker pursuant to the terms of the Employment Agreement
between maker and payee, dated August 5, 1993, as amended as of November
9, 1993 ("Employment Agreement"), the terms and provisions of which are
incorporated herein by reference. The principal sum of this Promissory
Note may be prepaid in whole or in part at any time, without penalty, at
the option of maker.
Interest on this Promissory Note shall be payable quarterly on December 1,
March 1, June 1 and on the day that the unpaid balance of the principal
sum is paid in full. Maker agrees that any sums due payee by maker under
this Promissory Note may, at the option of payee, be set off and applied
against any sums due maker by payee under the Employment Agreement or
otherwise.
Maker waives presentment for payment, demand, protest and notice of demand,
protest and nonpayment. In the event that it should become necessary in
the opinion of payee to employ counsel to collect or enforce this Promissory
Note, maker agrees to pay all costs, charges, disbursements and reasonable
attorney's fees incurred by payee in collecting or enforcing payment of this
Promissory Note. The failure of payee to exercise any option or right to
which payee may be entitled shall not constitute a waiver of the right to
exercise such option or right at a subsequent time. This Promissory Note
has been executed and delivered in, and is to be construed and enforced
according to and governed by, the laws of the State of Kansas.
/s/ Bert H. Hood
---------------------
BERT H. HOOD
68
Exhibit 23
----------
INDEPENDENT AUDITORS' CONSENT
-----------------------------
The Board of Directors
LabOne, Inc.:
We consent to incorporation by reference in the Registration Statement Nos.
33-22865, 33-41681, 33-49818 and 33-51484 on Forms S-8 of LabOne, Inc. of our
report dated January 30, 1996 relating to the consolidated balance sheets of
LabOne, Inc. and subsidiaries as of December 31, 1995 and 1994, and the
related consolidated statements of earnings, stockholders' equity and cash
flows and related schedule for each of the years in the three-year period
ended December 31, 1995, which report appears in the December 31, 1995,
annual report on Form 10-K of LabOne, Inc.
/s/KPMG Peat Marwick LLP
Kansas City, Missouri
March 20, 1996
69
Exhibit 24
----------
Power of Attorney
The undersigned hereby appoint Gregg R. Sadler as attorney-in-fact, to execute
in name and on behalf of the undersigned the Form 10-K Annual Report of
LabOne, Inc., to be filed with the Securities and Exchange Commission for its
fiscal year ended December 31, 1995.
Dated: February 16, 1996
/s/ Joseph H. Brewer
------------------------------
Joseph H. Brewer, MD, Director
/s/ William D. Grant
------------------------------
William D. Grant, Director
/s/ P. Anthony Jacobs
------------------------------
P. Anthony Jacobs, Director
------------------------------
Richard A. Rifkind, MD, Director
/s/ Richard S. Schweiker
------------------------------
Richard S. Schweiker, Director
/s/ James R. Seward
------------------------------
James R. Seward, Director
/s/ John E. Walker
------------------------------
John E. Walker, Director
/s/ R. Dennis Wright
------------------------------
R. Dennis Wright, Director
70
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
1995 Form 10-K annual report 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> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 2,993,128
<SECURITIES> 34,111,752
<RECEIVABLES> 8,057,281
<ALLOWANCES> 329,995
<INVENTORY> 1,533,257
<CURRENT-ASSETS> 49,416,136
<PP&E> 52,973,647
<DEPRECIATION> 35,885,928
<TOTAL-ASSETS> 70,047,834
<CURRENT-LIABILITIES> 5,183,505
<BONDS> 0
<COMMON> 150,000
0
0
<OTHER-SE> 64,714,329
<TOTAL-LIABILITY-AND-EQUITY> 70,047,834
<SALES> 0
<TOTAL-REVENUES> 57,029,424
<CGS> 0
<TOTAL-COSTS> 29,934,033
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4,750,174
<INCOME-TAX> 1,953,119
<INCOME-CONTINUING> 2,797,055
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,797,055
<EPS-PRIMARY> 0.21
<EPS-DILUTED> 0.21
</TABLE>
