UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For quarterly period ended March 31, 1996
------------------
Commission file number: 0-15975
LabOne, Inc.
----------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 48-0952323
---------- --------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
10310 West 84th Terrace
Lenexa, Kansas 66214
----------------------------- -------
(Address of principal executive offices) (Zip Code)
(913)-888-1770
--------------------------------
(Registrant's telephone number, including area code)
N/A
------------------------------------
(Former name, former address, former fiscal year,
if changed since last report)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes [X] No [ ]
Number of shares outstanding of only class of Registrant's common stock,
$.01 par value, as of May 1, 1996 - 13,077,594 net of 1,922,406 shares
held as treasury stock.
Page 1 of 10
<TABLE> PART I. FINANCIAL INFORMATION
ITEM 1 - Financial Statements
LabOne, Inc. and Subsidiary
Consolidated Balance Sheets
<S> <C> <C>
March 31, December 31,
1996 1995
ASSETS --------- ---------
Current assets:
Cash and cash equivalents $ 8,374,240 2,993,128
Short-term investments 26,933,406 34,111,752
Accounts receivable-trade, net of allowance for doubtful
accounts of $393,138 in 1996 and $329,995 in 1995 7,938,264 7,727,286
Inventories 1,753,834 1,533,257
Prepaid expenses and other current assets 2,385,889 2,883,127
Deferred income taxes 257,389 167,586
---------- ----------
Total current assets 47,643,022 49,416,136
Investments with maturities of more than one year, at cost 505,903 506,441
Property, plant and equipment 52,756,862 52,973,647
Less accumulated depreciation 36,247,650 35,885,928
---------- ----------
Net property, plant and equipment 16,509,212 17,087,719
Other assets:
Intangible assets, net of accumulated amortization 2,657,939 2,844,257
Deferred income taxes - noncurrent 329,667 152,520
Deposits and other assets 32,161 40,761
---------- ----------
Total assets $67,677,904 70,047,834
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,676,261 2,108,376
Income taxes payable 292,302 50,560
Payable to Seafield Capital Corporation 26,556 75,223
Accrued payroll and benefits 1,964,628 1,972,475
Other accrued expenses 906,623 902,297
Other current liabilities 94,456 74,574
---------- ----------
Total liabilities 4,960,826 5,183,505
Stockholders' equity:
Preferred stock, $.01 par value per share;
1,000,000 shares authorized, none issued - -
Common stock, $.01 par value per share; 40,000,000 shares
authorized, 15,000,000 shares issued 150,000 150,000
Additional paid-in capital 13,474,337 13,377,728
Equity adjustment from foreign currency translation (572,175) (545,818)
Retained earnings 71,910,230 74,040,870
---------- ----------
84,962,392 87,022,780
Less treasury stock of 1,932,237 shares in
1996 and 1,945,984 shares in 1995 22,245,314 22,158,451
---------- ----------
Total stockholders' equity 62,717,078 64,864,329
---------- ----------
Total liabilities and stockholders' equity $67,677,904 70,047,834
========== ==========
See accompanying notes to consolidated financial statements and management's
discussion and analysis of financial condition and results of operations.
Page 2
</TABLE>
LabOne, Inc. and Subsidiary
Consolidated Statements of Earnings
Three months ended March 31,
1996 1995
---------- ----------
Sales $13,277,845 14,689,459
Cost of sales 7,477,322 7,502,119
---------- ----------
Gross profit 5,800,523 7,187,340
Selling, general and administrative expenses 5,785,338 6,214,997
---------- ----------
Earnings from operations 15,185 972,343
Other income 371,462 838,242
---------- ----------
Earnings before income taxes 386,647 1,810,585
Income tax expense 167,302 639,984
---------- ----------
Net earnings $ 219,345 1,170,601
========== ==========
Earnings per common share $ 0.02 0.09
====== ======
Dividends per common share $ 0.18 0.18
====== ======
Weighted average common shares outstanding 13,189,724 13,145,847
========== ==========
See accompanying notes to consolidated financial statements and management's
discussion and analysis of financial condition and results of operations.
Page 3
LabOne, Inc. and Subsidiary
Consolidated Statement of Stockholders' Equity
Three Months Ended March 31, 1996
<TABLE>
<CAPTION>
Additional Foreign Total
Common paid-in currency Retained Treasury stockholders'
stock capital translation earnings stock equity
<S> <C> <C> <C> <C> <C> <C>
Balance at
December 31, 1995 $150,000 13,377,728 (545,818) 74,040,870 (22,158,451) 64,864,329
Net earnings 219,345 219,345
Cash dividends
($0.18 per share) (2,349,985) (2,349,985)
Stock options
exercised, net
(13,747 shares) 96,609 (86,863) 9,746
Equity adjustment
from foreign
currency
translation (26,357) (26,357)
-------- ---------- -------- ---------- ----------- ----------
Balance at
March 31, 1996 $150,000 13,474,337 (572,175) 71,910,230 (22,245,314) 62,717,078
======== ========== ======== ========== =========== ==========
</TABLE>
See accompanying notes to consolidated financial statements and management's
discussion and analysis of financial condition and results of operations.
Page 4
LabOne, Inc. and Subsidiary
Consolidated Statements of Cash Flows
Three months ended March 31,
1996 1995
--------- ---------
Cash provided by (used for) operations:
Net earnings $ 219,345 1,170,601
Adjustments to reconcile net earnings
to net cash provided by operations:
Depreciation and amortization 969,736 1,225,435
Loss on disposal of property and equipment 98,752 50,667
Provision for deferred taxes (178,941) 103,835
Change in short term trading portfolio, net (295,160) (585,069)
Changes in:
Accounts receivable (210,978) (174,594)
Inventories (220,577) (186,324)
Prepaid expenses and other current assets 407,435 691,470
Accounts payable (432,115) 72,647
Income taxes payable 241,742 304,166
Payable to Seafield Capital Corporation (48,667) (84,194)
Accrued payroll & benefits (7,847) (314,079)
Accrued expenses (25,674) (177,974)
Other current liabilities 19,882 36,814
---------- ----------
Net cash provided by operations 536,933 2,133,401
---------- ----------
Cash provided by (used for) investment transactions:
Purchases of investments held to maturity (4,385,810) (20,119,377)
Proceeds from maturities of investments held
to maturity 11,883,041 15,986,387
Property, plant and equipment, net (317,565) (669,283)
Other 8,600 (900)
---------- ----------
Net cash provided by (used for)
investment transactions 7,188,266 (4,803,173)
---------- ----------
Cash provided by (used for) financing transactions:
Issuance of treasury stock, net of proceeds
from the exercise of stock options 9,746 (434)
Cash dividends (2,349,985) (2,347,897)
---------- ----------
Net cash used for financing transactions (2,340,239) (2,348,331)
---------- ----------
Effect of foreign currency translation (3,848) (3,350)
---------- ----------
Net increase (decrease) in cash and
cash equivalents 5,381,112 (5,021,453)
Cash and cash equivalents - beginning of period 2,993,128 6,888,806
---------- ----------
Cash and cash equivalents - end of period $ 8,374,240 1,867,353
========== ==========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Income Taxes $83,781 252,437
========== ==========
See accompanying notes to consolidated financial statements and management's
discussion and analysis of financial condition and results of operations.
Page 5
LabOne, Inc. and Subsidiary
Notes to Consolidated Financial Statements
March 31, 1996 and 1995
The accompanying consolidated financial statements include the accounts
of LabOne, Inc. and its wholly-owned subsidiary Lab One Canada Inc. (a
Canadian corporation). All significant intercompany transactions have
been eliminated in consolidation.
The financial information furnished herein is unaudited; however, in the
opinion of management, it reflects all adjustments which are necessary to
fairly state the Company's financial position at March 31, 1996, and
December 31, 1995, and the results of its operations and cash flows for
the periods ended March 31, 1996 and 1995. The financial statements have
been prepared in conformity with generally accepted accounting principles
appropriate in the circumstances, and included in the financial statements
are certain amounts based on management's estimates and judgments.
The financial information herein is not necessarily representative of a
full year's operations because levels of sales, capital additions and
other factors fluctuate throughout the year. These same considerations
apply to all year-to-year comparisons. See the Company's Annual Report
on Form 10-K for the year ended December 31, 1995, for additional
information not required by this report Form 10-Q.
The weighted average shares includes the common stock equivalents of
stock options.
Page 6
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
- ---------------------
Selected financial data:
Three months ended March 31, % Increase
1996 1995 (Decrease)
----------- ----------- --------
Sales $ 13,277,845 14,689,459 (10%)
Net earnings 219,345 1,170,601 (81%)
Earnings per common share $0.02 0.09
Cash dividends per common share $0.18 0.18
The Company provides high-quality laboratory services to insurance companies,
physicians and employers.
LabOne provides risk-appraisal laboratory services to the insurance industries
in the United States and Canada. The tests performed by the Company are
specifically designed to assist an insurance company in objectively evaluating
the mortality and morbidity risks posed by policy applicants. The majority of
the testing is performed on 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.
In March 1996, Calypte Biomedical Corporation informed LabOne that the United
States Food and Drug Administration (FDA) had issued a letter indicating that
Calypte's urine HIV-1 test was approvable. Due to the lower collection
expense associated with urine specimens, the potential exists for an expansion
of the life insurance testing market if Calypte's urine HIV-1 test is
approved. 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 four to five million of these
policy applicants. The noninvasive nature of urine specimen collection
allows for low-cost agent collection, making testing much more affordable on
Page 7
smaller face value insurance policies. Conversely, the device also has the
potential to cannibalize part of the existing blood testing market. The net
impact of urine HIV-1, if ultimately approved by the FDA, cannot be determined
at this time.
FIRST QUARTER ANALYSIS
Net sales decreased 10% in the first quarter 1996 to $13.3 million from $14.7
million in the first quarter 1995 due to decreases in insurance laboratory and
kit revenue, partially offset by increases in healthcare laboratory revenue.
Insurance revenue declined to $11.7 million during the first quarter 1996 as
compared to $14.0 million in the same quarter last year due primarily to
competitive pressures. The total number of insurance applicants tested in the
first quarter 1996 decreased by 11% as compared to the same quarter last year.
Average revenue per applicant declined 8% during the first quarter 1996 as
compared to 1995. Healthcare revenues increased from $0.7 million in the
first quarter 1995 to $1.6 million in 1996 due to increases in substance abuse
and diagnostic testing volumes. Insurance kit and container revenue decreased
due primarily to a decrease in the number of blood and urine kits sold.
Cost of sales remained flat in the first quarter 1996 as compared to the
prior year. Decreases in laboratory supplies, depreciation expense and
payroll expense were offset by increases in express delivery expenses,
clinical kit expenses and paramed fees. Healthcare cost of sales expenses
were $2.2 million as compared to $2.1 million in the first quarter 1995.
As a result of the above factors, gross profit for the quarter decreased
from $7.2 million in 1995 to $5.8 million in 1996.
Selling, general and administrative expenses decreased $0.4 million (7%)
in the first quarter 1996 as compared to the prior year due primarily to
decreases in bonus, payroll and depreciation expenses. These were partially
offset by an increase in severance expenses. Healthcare overhead expenditures
during the first quarter 1996 were $1.7 million as compared to $1.1 million in
1995.
Operating income declined from $1.0 million in the first quarter 1995 to
$15,000 in 1996. The insurance segment declined $1.2 million. The healthcare
segment improved $0.2 million from an operating loss of $2.5 million in the
first quarter 1995 to a loss of $2.3 million in 1996.
Nonoperating income decreased $0.5 million due primarily to investment gains
from bond instruments during the first quarter 1995.
The effective income tax rate increased from 35% in 1995 to 43% in 1996 due
primarily to taxes on an intercompany dividend from the Canadian subsidiary.
The combined effect of the above factors resulted in net earnings of
$0.2 million or $0.02 per share in the first quarter 1996 as compared
to $1.2 million or $0.09 per share in the same period last year.
FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES
LabOne's working capital position decreased by $1.5 million to $42.7 million
at March 31, 1996, from $44.2 million at December 31, 1995. This decrease is
Page 8
primarily due to dividends paid and capital additions exceeding cash provided
by operations. The dividend paid during the first quarter 1996 was $2.3
million or $0.18 per share.
Net additions to property, plant and equipment were $0.3 million in the first
quarter 1996 as compared to $0.7 million in 1995. There were no treasury
stock purchases in the first quarter, however, 13,747 shares of treasury stock
were issued for exercised options. The total number of shares held in
treasury at March 31, 1996, was approximately 1.9 million shares at a total
cost of $22.2 million or $11.51 per share.
In February 1996, LabOne's Board of Directors declared the regular quarterly
dividend of $0.18 per common share. This dividend was paid on March 4, 1996,
to stockholders of record as of February 27, 1996, and totaled approximately
$2.3 million. The board will review the dividend payment policy on a periodic
basis. There are currently no restrictions that would limit the Company's
ability to make future dividend payments.
The Company had no borrowings in the first quarter 1996. At March 31, 1996,
LabOne had a total unsecured line of credit at the prime rate of 8.25% of
$5.0 million that may be used for general corporate purposes, of which the
full amount is currently available. The Company expects to fund operations,
capital additions and future dividend payments from a combination of cash
reserves and cash flow from operations. At March 31, 1996, LabOne had total
cash and investments of $35.8 million as compared to $37.6 million at
December 31, 1995.
PART II. OTHER INFORMATION
Item 6. - Exhibits and Reports on Form 8-K
(a) Exhibits
27. Financial Data Schedule - as filed electronically by the
Registrant in conjunction with this first quarter 1996 Form 10-Q.
(b) Reports on Form 8-K
None
Page 9
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
LabOne, Inc.
Date: May 8, 1996 By /s/ Kurt E. Gruenbacher
---------------------------
Kurt E. Gruenbacher
V.P. Finance and CAO
Date: May 8, 1996 By /s/ Robert D. Thompson
---------------------------
Robert D. Thompson
Executive V.P. Finance,
CFO and Treasurer
Page 10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FIRST QUARTER 1996 10-Q FOR LabOne, Inc. AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000816151
<NAME> LABONE, INC.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 8,374,240
<SECURITIES> 26,933,406
<RECEIVABLES> 8,331,402
<ALLOWANCES> 393,138
<INVENTORY> 1,753,834
<CURRENT-ASSETS> 47,643,022
<PP&E> 52,756,862
<DEPRECIATION> 36,247,650
<TOTAL-ASSETS> 67,677,904
<CURRENT-LIABILITIES> 4,960,826
<BONDS> 0
0
0
<COMMON> 150,000
<OTHER-SE> 62,567,078
<TOTAL-LIABILITY-AND-EQUITY> 67,677,904
<SALES> 0
<TOTAL-REVENUES> 13,277,845
<CGS> 0
<TOTAL-COSTS> 7,477,322
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 386,647
<INCOME-TAX> 167,302
<INCOME-CONTINUING> 219,345
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 219,345
<EPS-PRIMARY> 0.02
<EPS-DILUTED> 0.02
</TABLE>
