UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
----- SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
----- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission file number 0-16946
SEAFIELD CAPITAL CORPORATION
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(Exact name of registrant as specified in its charter)
Missouri 43-1039532
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Box 7568
5000 W. 95th St. Suite 260
Shawnee Mission, KS 66207
-------------------------------- ----------------
(Address of principal (Zipcode)
executive offices)
Registrant's telephone number, including area code (913) 652-1000
--------------
P. O. Box 410949 2600 Grand Blvd. Suite 500 Kansas City, MO 64141
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(Former name, former address and 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, 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 as of
August 4, 1997: $1 par value common - 6,489,103
SEAFIELD CAPITAL CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
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June 30, December 31,
1997 1996
(unaudited)
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(in thousands)
ASSETS
Current assets:
Cash and cash equivalents $ 4,021 4,957
Short-term investments 23,510 55,208
Accounts and notes receivable 13,346 10,585
Current income taxes 599 (724)
Deferred income taxes 694 3,059
Other current assets 4,357 3,599
---------------------
Total current assets 46,527 76,684
Property, plant and equipment 17,537 17,371
Investments:
Securities 503 4,019
Oil and gas -- 1,543
Intangible assets 15,181 12,427
Deferred income taxes 821 4,622
Other assets 21 1,723
Net assets of discontinued healthcare business 51,315 48,432
Net assets of discontinued real estate operations -- 30,466
---------------------
$ 131,905 197,287
=====================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,420 3,736
Other current liabilities 4,433 6,805
---------------------
Total current liabilities 7,853 10,541
Other liabilities -- 1,403
---------------------
Total liabilities 7,853 11,944
---------------------
Minority interests 11,377 11,319
---------------------
Stockholders' equity:
Preferred stock of $1 par value.
Authorized 3,000,000 shares; none issued -- --
Common stock of $1 par value.
Authorized 24,000,000 shares;
issued 7,500,000 shares 7,500 7,500
Paid-in capital 1,772 1,748
Equity adjustment from foreign currency translation (476) (439)
Retained earnings 134,023 195,329
---------------------
142,819 204,138
Less cost of 1,010,897 shares of treasury stock
(1996-1,016,066 shares) 30,144 30,114
---------------------
Total stockholders' equity 112,675 174,024
---------------------
$ 131,905 197,287
=====================
See accompanying notes to consolidated financial statements and
management's discussion and analysis of financial condition and results of
operations.
SEAFIELD CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
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(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
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(in thousands except share amounts)
REVENUES
Healthcare services $ 4,411 1,931 7,722 3,540
Insurance services 15,897 12,836 30,326 24,505
Other -- 1,070 -- 1,086
--------------------- ---------------------
Total revenues 20,308 15,837 38,048 29,131
COSTS AND EXPENSES
Healthcare services 3,820 2,328 7,095 4,497
Insurance services 6,816 5,556 12,991 10,864
Other -- 1,196 -- 1,241
Selling, general
and administrative 10,744 7,492 19,293 14,570
--------------------- ---------------------
Loss from operations (1,072) (735) (1,331) (2,041)
Investment income - net 395 1,245 4,200 2,415
Other income (expense) (20) 145 195 156
--------------------- ---------------------
Earnings (loss) before
income taxes (697) 655 3,064 530
Income taxes 3,259 667 9,573 822
--------------------- ---------------------
Loss before
minority interests (3,956) (12) (6,509) (292)
Minority interests 330 151 598 192
--------------------- ---------------------
Loss from continuing operations (4,286) (163) (7,107) (484)
Earnings (loss) from
discontinued healthcare
business (2,946) 349 (2,342) 556
--------------------- ---------------------
Net earnings (loss) $ (7,232) 186 (9,449) 72
===================== =====================
Per share of common stock:
Loss from continuing
operations $ (.67) (.02) (1.10) (.07)
Earnings (loss) from
discontinued healthcare
business (.45) .05 (.36) .08
--------------------- ---------------------
Net earnings (loss) $ (1.12) .03 (1.46) .01
===================== =====================
Dividends $ .30 .30 .60 .60
Book value $ 17.36 28.23 17.36 28.23
Average shares outstanding 6,489,103 6,461,045 6,488,171 6,477,736
Shares outstanding
end of period 6,489,103 6,482,076 6,489,103 6,482,076
See accompanying notes to consolidated financial statements and management's
discussion and analysis of financial condition and results of operations.
SEAFIELD CAPITAL CORPORATION AND SUBSIDIARIES
Consolidated Statement of Stockholders' Equity
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(unaudited)
Six Months Ended
June 30, 1997
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(in thousands)
Common stock:
Balance, beginning and end of period $ 7,500
---------
Paid-in capital:
Balance, beginning of period 1,748
Exercise of stock options 24
---------
Balance, end of period 1,772
---------
Foreign currency translation:
Balance, beginning of period (439)
Net change during period (37)
---------
Balance, end of period (476)
---------
Retained earnings:
Balance, beginning of period 195,329
Net loss (9,449)
Dividends paid (51,857)
---------
Balance, end of period 134,023
---------
Less:
Treasury stock:
Balance, beginning of period 30,114
Exercise of stock options 30
---------
Balance, end of period 30,144
---------
Stockholders' Equity $ 112,675
=========
See accompanying notes to consolidated financial statements and
management's discussion and analysis of financial condition and results of
operations.
SEAFIELD CAPITAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
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(unaudited)
Six months ended June 30,
1997 1996
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OPERATING ACTIVITIES (in thousands)
Loss from continuing operations $ (7,107) (484)
Adjustments to reconcile loss from continuing
operations to net cash provided by operations:
Depreciation and amortization 2,954 4,524
Earnings applicable to minority interests 598 192
Change in trading portfolio, net 34,490 2,441
Change in accounts receivable (3,746) (70)
Change in accounts payable 36 (161)
Income taxes and other 6,523 1,019
------------------------
Net cash provided by operations 33,748 7,461
------------------------
INVESTING ACTIVITIES
Sales of investments available for sale 1,350 4
Purchases of investments held to maturity (10,190) (13,355)
Maturities of investments held to maturity 5,232 18,595
Additions to property, plant and equipment, net (2,391) (790)
Oil and gas investments -- 87
Net decrease in note receivable -- 183
Cost in excess of fair value of assets acquired (4,128) --
Net cash used by discontinued healthcare business (1,006) (10,000)
Net cash provided by discontinued
real estate operations 581 4,567
Other, net (623) 147
------------------------
Net cash used by investing activities (11,175) (562)
------------------------
FINANCING ACTIVITIES
Cash portion of SLH dividend (19,590) --
Regular quarterly dividend paid (3,893) (3,884)
Net issuance of treasury stock pursuant
to stock options plans (7) (273)
------------------------
Net cash used by financing activities (23,490) (4,157)
------------------------
Effect of foreign currency translation (19) --
------------------------
Net increase (decrease) in cash and cash equivalents (936) 2,742
Cash and cash equivalents - beginning of period 4,957 3,376
------------------------
Cash and cash equivalents - end of period $ 4,021 6,118
========================
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest (net of amount capitalized) $ -- --
========================
Income taxes, net $ 1,417 419
========================
Supplemental disclosures of non-cash information:
Non-cash portion of SLH Dividend $ 28,373 --
========================
See accompanying notes to consolidated financial statements and
management's discussion and analysis of financial condition and results
of operations.
SEAFIELD CAPITAL CORPORATION
Notes to Consolidated Financial Statements
June 30, 1997
(1) The financial information furnished herein is unaudited; however, in
the opinion of management, the financial information reflects all
adjustments which are necessary to fairly state Seafield's financial
position at June 30, 1997 and December 31, 1996 and the results of its
operations and cash flows for the six month periods ended June 30, 1997 and
1996. All adjustments made in the interim period were of a normal
recurring nature except transactions related to the discontinuance of a
healthcare business. The financial statements have been prepared in
conformity with generally accepted accounting principles appropriate in the
circumstances, and therefore included in the financial statements are
certain amounts based on management's informed estimates and judgments. The
financial information herein is not necessarily representative of a full
year's operations because levels of sales, interest rates and other factors
fluctuate throughout the fiscal year. These same considerations apply to
all year to year comparisons. Certain 1996 amounts have been reclassified
for comparative purposes with no effect on net earnings (loss). See
Seafield's Annual Report pursuant to Section 13 to the Securities Exchange
Act of 1934 (Form 10-K) for additional information not required by this
Quarter's Report (Form 10-Q).
(2) On March 3, 1997, Seafield distributed to its shareholders all of the
outstanding shares of common stock of its wholly-owned subsidiary, SLH
Corporation, on the basis of one share of common stock of SLH for each four
shares of Seafield common stock held. In connection with this distribution
and pursuant to a Distribution Agreement between Seafield and SLH, Seafield
transferred its real estate and energy businesses and miscellaneous assets
and liabilities, including two wholly-owned subsidiaries, Scout Development
Corporation and BMA Resources, Inc., to SLH. The net assets distributed to
SLH totaled approximately $48 million. The spinoff was accounted for as a
dividend.
The following unaudited consolidated pro forma information has been
prepared as if the distribution of SLH had occurred on January 1, 1997.
June 30, 1997 SLH Pro Forma
Historical Adjustments Results
-------------------------------------
(in thousands except share amounts)
Revenues $ 38,048 38,048
Expenses 39,379 253 39,126
-----------------------------------
Loss from operations (1,331) (253) (1,078)
Investment income - net 4,200 3,162 1,038
Other income (expense) 195 669 (474)
-----------------------------------
Earnings (loss) before income tax 3,064 3,578 (514)
Income taxes 9,573 5,126 4,447
-----------------------------------
Loss before minority interests (6,509) (1,548) (4,961)
Minority interests 598 598
-----------------------------------
Net loss from continuing
operations $ (7,107) (1,548) (5,559)
===================================
Per share of common stock:
Net loss from continuing
operations $ (1.10) (.86)
===================================
(3) In April 1996, Seafield loaned $10 million to its subsidiary, Response
Oncology, Inc., which was converted into 909,090 shares of Response common
stock at the election of Seafield in August 1996. In October 1996,
Seafield provided to Response a $23.5 million credit facility to finance
acquisitions and for working capital. This credit facility was converted
into Response common stock in February 1997, increasing Seafield's
ownership to approximately 67%.
On July 1, 1997, Seafield's Board of Directors declared a dividend to
Seafield's shareholders of all shares of common stock of Response owned by
Seafield. For each shareholder of record on July 11, 1997, 1.2447625
shares of Response common stock were distributed on July 25, 1997 for each
share of Seafield common stock outstanding. The distribution of all shares
of Response stock to Seafield's shareholders was effected as a dividend.
The Seafield shareholders paid no consideration for any shares of Response
stock received in the distribution.
Seafield's investment in Response and Response's earnings are shown as a
discontinued business in the accompanying financial statements at June 30,
1997.
The following unaudited consolidated pro forma balance sheet has been
prepared as if the distribution of Response had occurred on June 30, 1997.
June 30, 1997 Dividend of Pro Forma
Historical Response Results
-------------------------------------
(in thousands)
Assets
Cash and short-term investments $ 27,531 27,531
Accounts and notes receivable 13,346 13,346
Other current assets 5,650 5,650
----------------------------------
Total current assets 46,527 46,527
Property, plant and equipment 17,537 17,537
Intangible assets 15,181 15,181
Other assets 1,345 1,345
Net assets of discontinued
healthcare business 51,315 (51,315) --
----------------------------------
$ 131,905 (51,315) 80,590
==================================
Liabilities and Stockholders' Equity
Current liabilities $ 7,853 7,853
Minority interests 11,377 11,377
Stockholders' Equity
Preferred stock -- --
Common stock 7,500 7,500
Paid-in capital 1,772 1,772
Equity adjustment (476) (476)
Retained earnings 134,023 (51,315) 82,708
----------------------------------
142,819 (51,315) 91,504
Less: Cost of treasury stock 30,144 30,144
----------------------------------
Total stockholders' equity 112,675 (51,315) 61,360
----------------------------------
$ 131,905 (51,315) 80,590
===================================
(4) Cash and cash equivalents include demand deposits in banks and
overnight investments.
(5) The components of "Intangible Assets" are as follows:
June 30, 1997 December 31, 1996
------------------ -----------------
(in thousands)
Goodwill 14,703 11,688
Other 478 739
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$ 15,181 12,427
============== ==============
Effective January 30, 1997, Seafield's 82% owned subsidiary, LabOne, Inc.,
acquired certain assets, inventory and customer lists of GIB Laboratories,
Inc., a subsidiary of Prudential Insurance Company of America, for $4.6
million. The acquisition was accounted for using the purchase method.
Accordingly, the purchase price was allocated to assets acquired based on
their fair values. The total cost in excess of tangible net assets
acquired was $4.1 million and is being amortized on a straight-line basis
over 15 years.
(6) The components of "Other Current Assets" are as follows:
June 30, 1997 December 31, 1996
------------------ -----------------
(in thousands)
Inventories $ 2,240 1,360
Prepaid expenses 2,117 1,997
Other current assets -- 242
-------------- --------------
$ 4,357 3,599
============== ==============
The components of "Other Current Liabilities" are as follows:
June 30, 1997 December 31, 1996
------------------ -----------------
(in thousands)
Accrued payroll and benefits $ 3,757 4,039
Accrued commissions
and consulting fees -- 403
Other accrued expenses 554 1,509
Other liabilities 122 854
-------------- --------------
$ 4,433 6,805
============== ==============
(7) Earnings per share of common stock are based on the weighted average
number of shares of common stock outstanding and the common share
equivalents of dilutive stock options, where applicable.
(8) Under the Distribution Agreement and Assignment, SLH assumed the
rights and obligations of Seafield with respect to the following legal
matter.
In 1986, a lawsuit was initiated in the Circuit Court of Jackson County,
Missouri by Seafield's former insurance subsidiary (i.e., Business Men's
Assurance Company of America) against Skidmore, Owings & Merrill (SOM)
which is an architectural and engineering firm, and a construction firm to
recover costs incurred to remove and replace the facade on the former home
office building. Because the removal and replacement costs had been
incurred prior to the sale of the insurance subsidiary, Seafield negotiated
with the buyer for an assignment of the cause of action from the insurance
subsidiary. In September 1993, the Missouri Court of Appeals reversed a
$5.7 million judgment granted in 1992 in favor of Seafield; the Court of
Appeals remanded the case to the trial court for a jury trial limited to
the question of whether or not the applicable statute of limitations barred
the claim. The Appeals Court also set aside $1.7 million of the judgment
originally granted in 1992. Subsequently, the parties waived a jury trial
and in July 1996, this case was retried to a judge. On January 21, 1997,
the judge entered a judgment in favor of Seafield. The amount of that
judgment, together with interest is approximately $5.8 million. Although
the judgment has been appealed, counsel for the Company expects that it
will be difficult for the defendants to cause the judgment to be reversed.
The final outcome is not expected until at least 1998. Settlement
arrangements with other defendants have resulted in payments to plaintiff
which have substantially offset legal fees and costs to date of
approximately $481,000. Future legal fees and costs can not reliably be
estimated. Pursuant to the Distribution Agreement, this matter was
assigned to SLH Corporation.
In the opinion of management, after consultation with legal counsel and
based upon current available information, this lawsuit is not expected to
have a material adverse impact on the consolidated financial position or
results of operations of Seafield.
Pursuant to the Distribution Agreement, SLH assumed from Seafield all of
the contingent tax liabilities described below and acquired all rights to
refunds plus any interest related to these tax years. SLH also assumed all
contingent liabilities and refunds related to any issues raised for the
years 1986-1990 whose resolution may extend to tax years beyond the 1990
tax year.
Seafield has received notices of proposed adjustments (Revenue Agent's
Reports) from the Internal Revenue Service (IRS) with respect to 1986-1990
federal income taxes. These notices claim total federal income taxes due
for the entire five year period in the approximate net amount of
$13,867,000, exclusive of interest thereon. Seafield filed protests
regarding the 1986-1990 notices of proposed adjustments.
On May 9, 1997, Seafield received a formal agreement to the issues and the
final tax computation from the IRS. The agreement provides for a tax
refund of approximately $5.8 million, before interest. The Company expects
to owe interest of approximately $700,000. The agreement is subject to
approval by the Congressional Joint Committee on Taxation. Consideration
by the Joint Committee is expected before the end of 1997.
In December 1996, the California state auditor sent Seafield an audit
report covering the 1987-1989 taxable years. The State of California has
determined to include, as a "unitary taxpayer," all majority owned non-life
insurance subsidiaries and joint ventures of Seafield. The auditor's
report was forwarded to the California Franchise Tax Board for action. In
June 1997, the California Franchise Tax Board sent a notice of taxes due
for the 1987-1989 years of $769,213 which was paid in the same month. A
billing for the interest due should be received in the third quarter and is
expected to be approximately $1 million.
(9) In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, "Earnings Per Share", which revised the calculation and
presentation provisions of Accounting Principles Board Opinion 15 and
related interpretations. Statement No. 128 is effective for Seafield's
fiscal year ending December 31, 1997. Retroactive application will be
required. Seafield believes the adoption of Statement No. 128 will not
have a significant effect on its reported earnings per share.
Statement of Financial Accounting Standards No. 129 "Disclosure of
Information about Capital Structure" is required to be implemented for
periods ending after December 15, 1997. The adoption of this standard is
not expected to have any significant impact on Seafield's financial
position or results of operations.
In June 1997, the Financial Accounting Standards Board issued Statement No.
130, "Reporting Comprehensive Income." Statement No. 130 is effective for
fiscal years beginning after December 15, 1997. Retroactive application
will be required. The adoption of this standard is not expected to have
any significant impact on Seafield's financial position or results of
operations.
In June 1997, the Financial Accounting Standards Board issued Statement No.
131, "Disclosures about Segments of an Enterprise and Related Information."
Statement No. 131 is effective for fiscal years beginning after December
15, 1997. Retroactive application will be required. The adoption of this
standard is not expected to have any significant impact on Seafield's
financial position or results of operations.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
Selected Financial Data
Three months ended Six Months Ended
June 30, June 30,
----------------------- ----------------------
1997 1996 1997 1996
---------- ---------- ---------- ---------
Revenues $20,308,000 15,837,000 38,048,000 29,131,000
Loss from operations $(1,072,000) (735,000) (1,331,000) (2,041,000)
Investment income - net $ 395,000 1,245,000 4,200,000 2,415,000
Loss from continuing
operations $(4,286,000) (163,000) (7,107,000) (484,000)
Earnings (loss) from
discontinued healthcare
business $(2,946,000) 349,000 (2,342,000) 556,000
Net earnings (loss) $(7,232,000) 186,000 (9,449,000) 72,000
Per share:
Loss from continuing
operations $ (.67) (.02) (1.10) (.07)
Earnings (loss) from
discontinued
healthcare business (.45) .05 (.36) .08
Net earnings (loss) $ (1.12) .03 (1.46) .01
Dividends per share $ .30 .30 .60 .60
Book value per share $ 17.36 28.23 17.36 28.23
SECOND QUARTER ANALYSIS
Introductory remarks about results of operations
Seafield Capital Corporation's (Seafield or Registrant) principal assets
consist of a majority ownership of LabOne, Inc. (LabOne) and approximately
$5 million in cash. Seafield had a majority ownership position in Response
Oncology, Inc. (Response). On July 25, 1997, Seafield distributed to its
shareholders all the shares of common stock of Response owned by Seafield.
Response's operations are now presented as a discontinued healthcare
business in Seafield's financial statements. The second quarter is the
last period in which Response will significantly impact Seafield's
financial results. The distribution of Response stock was effected as a
taxable dividend by Seafield in which Seafield utilized tax loss
carryforwards to offset the resulting $3.8 million tax liability in the
financial statements. The second quarter $2.9 million loss from
discontinued healthcare operations reflects a $3.8 million non-cash tax
expense net of $878,000 for Seafield's share of earnings by Response during
the quarter. See Notes to Consolidated Financial Statements for additional
information.
Response, previously 67%-owned by Seafield, is a publicly-traded company
(NASDAQ-ROIX). On February 26, 1997, Seafield converted a $23.5 million
Response note receivable and accrued interest into 3,020,536 shares of
Response common stock. The conversion increased Seafield's ownership of
Response shares outstanding from 56% at December 31, 1996 to approximately
67%.
Additionally Seafield had investments in real estate, energy businesses and
miscellaneous assets. On March 3, 1997, Seafield distributed to its
shareholders all of the outstanding shares of common stock of its wholly-
owned subsidiary, SLH Corporation (SLH). In connection with this
distribution and pursuant to a Distribution Agreement between Seafield and
SLH, Seafield transferred its real estate and energy businesses and
miscellaneous assets and liabilities to SLH. The SLH spin-off was
accounted for as a dividend. See Notes to Consolidated Financial
Statements for additional information.
Insurance Services Segment:
The following business is considered to be in the insurance services
segment: LabOne's risk-appraisal laboratory testing for the life insurance
industries.
LabOne, an 82% owned subsidiary of Seafield, is a publicly-traded company
(NASDAQ-LABS). LabOne provides high-quality laboratory services to
insurance companies, physicians and employers. See Healthcare Services
Segment discussion below for clinical and substance abuse laboratory
testing services.
LabOne provides risk-appraisal laboratory services to the insurance
industry. The tests performed by LabOne 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.
Testing services are also provided on specimens of individuals applying for
individual and group medical and disability policies.
Effective January 30, 1997, LabOne acquired certain assets, including
customer lists, of GIB Laboratories, Inc., a subsidiary of Prudential
Insurance Company of America. Concurrently, Prudential's individual
insurance group agreed to use LabOne as its exclusive provider of risk
assessment testing services. At the time of the purchase, GIB served
approximately 5% of the insurance laboratory testing market.
LabOne's total revenues for the second quarter of 1997 were $20.3 million,
as compared to $14.8 million in the second quarter of 1996, a 38% increase.
LabOne's insurance segment revenue increased in 1997's second quarter to
$15.9 million from $12.8 million in the same quarter of 1996. The increase
was due to an increase in market share and an increase in oral fluid
testing on applicants applying for smaller face-amount policies. The total
number of insurance applicants tested in the second quarter of 1997
increased 20% as compared to the same quarter last year. Average revenue
per applicant increased 1% during the same period due to an increase in the
number of tests requested per specimen. Insurance kit and container
revenue increased due primarily to an increase in the number of blood and
oral fluid kits sold.
LabOne's total cost of sales increased $2.8 million during the second
quarter due primarily to increases in supplies and payroll. Insurance kit
supplies increased due to the increased volume of kits sold and the
increase in cost of oral fluid kits for HIV testing. Payroll and lab
supplies increased due to the increased specimen volumes tested in each
segment.
LabOne's gross profit for the second quarter of 1997 increased $2.8 million
(40%) to $9.7 million from $6.9 million in 1996's second quarter. LabOne's
insurance segment gross profit increased to $9.1 million from $7.4 million
reflecting the above factors.
LabOne's selling, general and administrative expenses increased $1.2
million (21%) in the second quarter of 1997 as compared to the prior year
due primarily to increase in payroll expenses, travel and printing
expenses. These were partially offset by a decrease in consulting and
severance expenses.
LabOne's operating income for the second quarter of 1997 increased to $2.6
million from $1 million in 1996's second quarter. LabOne's insurance
segment operating income increased to $4.7 million from $3.2 million
reflecting the above factors.
Healthcare Services Segment:
The following businesses are included in the healthcare services segment:
the clinical and substance abuse laboratory testing services.
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 LabOne believes 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. LabOne does this
through Lab Card(TM), a Laboratory Benefits Management (LBM) program.
The Lab Card Program provides laboratory testing at reduced rates 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's Lab Card program covered approximately 1.3 million lives as of
June 30, 1997. Additionally, LabOne had a signed backlog of approximately
450,000 additional lives to be covered by the program.
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 non-regulated employers.
LabOne's rapid turnaround times and multiple testing options help clients
reduce downtime for affected employees and meet mandated drug screening
guidelines.
Clinical (diagnostic) laboratory revenues increased 134% to $2.1 million in
1997's second quarter from $900,000 in the second quarter of 1996 due to an
88% increase in testing volumes and a 25% increase in average revenue per
patient. Substance abuse testing (SAT) revenues increased 123% to $2.3
million in 1997's second quarter from $1 million in the second quarter of
1996 primarily due to increased testing volumes.
Clinical cost of sales expenses were $2 million in 1997's second quarter,
compared with $1.6 million in the second quarter of 1996 and SAT cost of
sales were $1.7 million in 1997's second quarter, compared with $800,000 in
the second quarter of 1996 primarily due to increased payroll and lab
supplies for increased testing volumes.
Clinical gross profit increased to $39,000 in 1997's second quarter from a
loss of $700,000 in the second quarter of 1996 while SAT gross profit
increased to $600,000 in 1997's second quarter from $200,000 in 1996's
second quarter.
Clinical selling, general and administrative expenses, including
allocations, were $1.9 million as compared to $1.2 million in 1996. SAT
expenses, including allocations, were $700,000 compared to $500,000 in
1996. The overhead allocations to clinical and SAT testing segments were
$800,000 in 1997's second quarter compared to allocations of $500,000 in
1996.
The clinical segment operating loss of $1.9 million in 1997's second
quarter was approximately the same as in 1996's second quarter. The SAT
segment operating loss improved from $300,000 in 1996's second quarter to
$200,000 in 1997's second quarter.
Other:
Seafield's oil and gas investments were distributed to the SLH on March 3,
1997. In 1996's second quarter, revenue of $1.1 million and expenses of
$1.2 million were recorded.
During 1997's second quarter, Seafield significantly reduced its corporate
structure and overhead cost as the SLH and Response distributions were
finalized. The increase in general and administrative expenses to $10.7
million in 1997's second quarter from $7.5 million in 1996's second quarter
reflects both LabOne's increased costs associated with increased testing
volumes discussed above and one-time costs related to Seafield's corporate
structure reductions including position eliminations and related severance.
Investment Income - Net:
Other investments contributing earnings include venture capital and
liquidity investments. The return on short-term investments is included in
the investment income line in the consolidated statements of operations.
Investment income totaled $395,000 in 1997's first quarter, compared to
$1.2 million in the second quarter of 1996, primarily reflecting decreased
funds available for investments resulting from the SLH asset distribution
in March 1997.
Miscellaneous Items:
The other income/(loss) line includes LabOne gains and losses on equipment
disposals and other items.
Taxes:
LabOne's effective tax rate declined from 47% in 1996's second quarter to
41% in the second quarter of 1997 due to exit taxes on an intercompany
dividend from LabOne's Canadian subsidiary in 1996. During 1997's second
quarter, approximately $3.2 million of unused deferred income tax assets
not utilized in the Response distribution were written off. Seafield has
approximately $5 million of tax capital loss carryforwards available for
future usage.
The combined effect of the above factors resulted in the second quarter
1997 loss from continuing operations of $4.3 million, compared with a
$163,000 loss in the second quarter of 1996.
Discontinued Operations:
Healthcare Business:
On July 25, 1997, Seafield distributed to its shareholders all the shares
of common stock of Response owned by Seafield. Response's operations are
now presented as a discontinued healthcare business in Seafield's financial
statements. The second quarter is the last period in which Response will
significantly impact Seafield's financial results. The distribution of
Response stock was effected as a taxable dividend by Seafield in which
Seafield utilized tax loss carryforwards to offset the resulting $3.8
million tax liability in the financial statements. The second quarter $2.9
million loss from discontinued healthcare operations reflects a $3.8
million non-cash tax expense net of $878,000 for Seafield's share of
earnings by Response during the quarter. On February 26, 1997, Seafield
converted its Response note receivable and accrued interest into Response
common stock. The conversion increased Seafield's ownership of Response
shares outstanding from 56% at December 31, 1996 to approximately 67%.
For the second quarter of 1997, Response's revenues were $25.6 million, a
70% increase, as compared to $15.1 million for the second quarter of 1996.
Net earnings for the quarter were $1.2 million, a 123% increase over net
earnings of $544,000 for the comparable quarter in 1996. Response's second
quarter 1997 included an income tax provision of $744,000, as compared to
none recorded in the second quarter of 1996, consequent to a net operating
loss carryforward. EBITDA (earnings before interest, taxes, depreciation
and amortization) for the second quarter of 1997 was $3.9 million, a 122%
increase over EBITDA of $1.8 million in the second quarter of 1996.
Growth in Response's revenues in the second quarter of 1997 was largely
driven by an increase in revenue from the Practice Management Division
which began operating in January 1996. This division owns the nonmedical
assets and manages the business aspects of oncology practices. The number
of physicians in practice management relationships with Response increased
from 12 on June 30, 1996 to 40 on June 30, 1997.
YEAR TO DATE ANALYSIS
Insurance Services Segment:
LabOne's total revenues for the first six months of 1997 were $38 million,
as compared to $28 million in the first six months of 1996. The increase
of $10 million is due to increases in insurance laboratory revenue of $3.8
million, clinical laboratory revenue of $2 million, SAT revenue of $2.1
million and kit revenue of $2 million. See Healthcare Segment below for
clinical and SAT revenue discussion. LabOne's total number of insurance
applicants tested in the six-month period increased by 21% as compared with
last year's first six months, while average revenue per applicant declined
1%. Kit and container revenue increased due primarily to an increase in
the number of full blood and oral fluid kits sold and the increased price
of oral fluid kits for HIV testing.
LabOne's total cost of sales increased $4.7 million during the first six
months due primarily to increases in payroll, laboratory supplies and kit
expenses. Payroll increased 21% and lab supplies increased 32% due to
larger volume of all specimen types processed. Insurance kit expense
increased due to the higher volume of kits sold and the increase in cost of
oral fluid kits for HIV testing.
LabOne's gross profit for the first six months of 1997 increased to $18
million from $12.7 million in 1996's first six months. LabOne's insurance
segment gross profit increased to $17.4 million from $13.7 million
reflecting the above factors.
LabOne's selling, general and administrative expenses increased $1.9
million (16%) in the first six months of 1997, as compared to the prior
year's first six months due primarily to increases in payroll expenses,
travel and printing expenses. Payroll expense increased due to bonus
accruals and a 13% increase in headcount.
LabOne's operating income for the first six months of 1997 increased to
$4.4 million from $1 million in 1996's first six months. LabOne's
insurance segment operating income increased to $3.5 million reflecting the
above factors.
Healthcare Services Segment:
Clinical laboratory revenues increased to $3.7 million in 1997's first six
months from $1.7 million in the first six months of 1996 due to increased
testing volumes and higher revenue per patient. SAT revenues increased to
$4.1 million in 1997's first six months from $1.9 million in the first six
months of 1996 primarily due to a 121% increase in testing volumes.
Clinical cost of sales expenses were $4 million in 1997's first six months,
as compared with $3.1 million in the first six months of 1996. SAT cost of
sales were $3.1 million in 1997's first six months, as compared to $1.5
million in the first six months of 1996.
Clinical gross profit improved from a loss of $1.4 million in the first six
months of 1996 to a loss of $300,000 in 1997's first six months. SAT gross
profit increased to $900,000 in 1997's first six months from $400,000 in
1996's first six months.
Clinical selling, general and administrative expenses were $3.7 million as
compared to $2.5 million in 1996's first six months. SAT expenses were
$1.5 million as compared to $1 million. The overhead allocations to
clinical and SAT testing segments were $1.5 million in 1997's first six
months, as compared to allocations of $900,000 in 1996's first six months.
The clinical segment operating loss increased slightly to $4 million in
1997's first six months from $3.8 million in 1996's first six months due to
increased corporate overhead allocations offsetting operating improvements
over 1996. The SAT segment improved from an operating loss of $600,000 in
1996's first six months to $500,000 in 1997's first six months.
Other:
Seafield's oil and gas investments were distributed to the SLH on March 3,
1997. In 1996's first six months, revenue of $1.1 million and expenses of
$1.2 million were recorded.
During 1997, Seafield significantly reduced its corporate structure and
overhead cost as the SLH and Response distributions were finalized. The
increase in general and administrative expenses to $19.3 million in 1997's
first six months from $14.6 million in 1996's first six months reflects
both LabOne's increased costs associated with increased testing volumes
discussed above and costs related to Seafield's corporate structure
reductions including position eliminations and related severance.
Investment Income - Net:
Other investments contributing earnings include venture capital and
liquidity investments. The return on short-term investments is included in
the investment income line in the consolidated statements of operations.
Investment income, which increased to $4.2 million in 1997's first six
months from $2.4 million in the first six months of 1996, primarily
reflects a $3 million gain on the sale of marketable common stock which was
received when a Seafield venture capital investment merged with a public
company.
Miscellaneous Items:
LabOne's gain on equipment disposals is included as a component of other
income/(loss).
Taxes:
Tax expense increased approximately $1.2 million due to the growth in taxes
on LabOne's significantly improved earnings, a write off of approximately
$5 million of the deferred income tax assets related to assets spun off in
the SLH distribution and a write off of approximately $3.2 million of
unused deferred income tax assets not utilized in the Response
distribution. Seafield has approximately $5 million of tax capital loss
carryforwards available for future usage.
Consolidated Results:
The combined effect of the above factors resulted in 1997's first six
months loss from continuing operations of $7.1 million, as compared with a
$484,000 loss in the first six months of 1996.
Discontinued Operations:
Healthcare Business:
On July 25, 1997, Seafield distributed to its shareholders all the shares
of common stock of Response owned by Seafield. Response's operations are
now presented as a discontinued healthcare business in Seafield's financial
statements. The second quarter is the last period in which Response will
significantly impact Seafield's financial results. The distribution of
Response stock was effected as a taxable dividend by Seafield in which
Seafield utilized tax loss carryforwards to offset the resulting $3.8
million tax liability in the financial statements. The second quarter $2.9
million loss from discontinued healthcare operations reflects a $3.8
million non-cash tax expense net of $878,000 for Seafield's share of
earnings by Response during the quarter. On February 26, 1997, Seafield
converted its Response note receivable and accrued interest into Response
common stock. The conversion increased Seafield's ownership of Response
shares outstanding from 56% at December 31, 1996 to approximately 67%.
For the first six months of 1997, Response's revenues were $50 million, a
76% increase over revenues of $28.4 million for the first six months of
1996. Net earnings for the first six months were $2.1 million, a 96%
increase over net earnings of $1.1 million for the comparable period in
1996. Response's first six months included an income tax provision of $1.3
million, versus none for the comparable period in fiscal 1996, consequent
to a net operating loss carryforward. EBITDA for the first six months of
1997 was $7.7 million, a 154% increase over the $3 million reported for the
comparable period in 1996.
Growth in Response's revenues for the first six months of 1997 was largely
driven by an increase in revenue from the Practice Management Division
which began operating in January 1996. This division owns the nonmedical
assets and manages the business aspects of oncology practices. The number
of physicians in practice management relationships with Response increased
from 12 on June 30, 1996 to 40 on June 30, 1997.
Real Estate:
The real estate assets were distributed pursuant to the SLH Distribution
Agreement. Real estate operations are presented as discontinued operations
in Seafield's 1996 financial statements.
Net real estate assets distributed on March 3, 1997 were $23 million. Real
estate revenues were $3.6 million in 1997's first two months prior to
distribution, compared with $8.6 million in 1996's six months. The real
estate sales revenues in 1997 include the sale of 2 residential units in
Florida and New Mexico ($1.2 million); 547 acres of land in Texas ($2.3
million); and 7 residential lots in Texas ($38,000). The real estate sales
revenues in 1996 include the sale of 23 residential units in New Mexico and
Florida ($7.6 million) and 1.5 acres of land in Kansas ($580,000).
Cost of the real estate sales in 1997 prior to distribution totaled $3.5
million, compared with a cost of approximately $8.2 million in 1996's first
six months, reflecting the mix of real estate sold during each period as
discussed above in the revenue analysis.
Publicly-Traded Subsidiary
Seafield's majority-owned entity, LabOne, is publicly-traded. At June 30,
1997, based on the market prices of publicly-traded shares of this
subsidiary, pretax unrealized gains of approximately $140 million on this
investment were not reflected in either Seafield's book value or
stockholders' equity.
LIQUIDITY AND CAPITAL RESOURCES
On June 30, 1997, at the holding company level, Seafield had available for
operations approximately $5.1 million in cash and short-term investments.
Primarily as a result the distribution of SLH in March 1997 and corporate
structure cost reductions, Seafield's working capital decreased $18.3
million during 1997 to $5.7 million at June 30, 1997.
On a consolidated basis, Seafield had $27.5 million in cash and short-term
investments at June 30, 1997. Current assets totaled approximately $46.5
million while current liabilities totaled $7.9 million. Changes in assets
and liabilities on the balance sheet resulted primarily from the SLH and
Response stock distributions.
Net cash provided by operations totaled $33.7 million in 1997's first six
months compared with net funds provided of $7.5 million in 1996's first six
months. During 1997, funds provided by changes in trading portfolios were
$34.5 million while 1996's changes in these trading portfolios provided
$2.4 million in funds. The increase in funds provided by the change in
trading portfolios included the $19.6 million cash portion of the SLH
dividend to Seafield shareholders. The change in accounts receivable
during 1997 reflects increased sales by LabOne.
Net cash used by investing activities totaled $11 million in 1997
representing LabOne's purchase of the assets and customer list of GIB
Laboratories, Inc. and purchases of investments. Net cash used by
investing activities in 1996 totaled $562,000 reflecting Response's usage
of $10 million for its acquisition of physician practices, $5 million
provided by the discontinued real estate operations and a net increase in
long-term investments of $5.2 million.
Net cash used by financing activities totaled $23.5 million in 1997
primarily due to the $19.6 million cash portion of the SLH dividend to
Seafield shareholders. The 1996 net cash used by financing activities was
$4.1 million. Seafield paid a $3.9 million regular cash dividend to its
shareholders in both 1997's and 1996's first six months.
In 1990, Seafield's board of directors rescinded a previous authorization
and passed a new authorization of up to $70 million for the acquisition of
Seafield and LabOne common stock. Up to $20 million of this authorization
could be utilized to purchase LabOne stock.
By 1994, Seafield had acquired 1,462,200 shares of LabOne's stock under the
board authorization at a cost of $17.3 million. No acquisitions of LabOne
stock have been made since 1994. At June 30, 1997, the remaining aggregate
authorization totals $7.7 million. In 1994, Seafield's board of directors
approved an additional $8.4 million authorization necessary to complete an
acquisition of Seafield shares. During 1997, treasury stock issued for
exercised options totaled 5,169 shares. No Seafield options are currently
outstanding.
Seafield is currently primarily a shell holding company. Sources of cash
are investment income and sales, borrowings and dividends from
subsidiaries. There are currently no restrictions that would limit
LabOne's ability to make future dividend payments. The primary uses of
cash for Seafield are investments and dividends to shareholders.
Seafield has received notices of proposed adjustments (Revenue Agent's
Reports) from the Internal Revenue Service (IRS) with respect to 1986-1990
federal income taxes. These notices claim total federal income taxes due
for the entire five year period in the approximate net amount of
$13,867,000, exclusive of interest thereon. Seafield filed protests
regarding the 1986-1990 notices of proposed adjustments.
On May 9, 1997, Seafield received a formal agreement to the issues and the
final tax computation from the IRS. The agreement provides for a net tax
refund of approximately $5.8 million, before interest. The Company expects
to owe interest of approximately $700,000. The agreement is subject to
approval by the Congressional Joint Committee on Taxation. Consideration
by the Joint Committee is expected before the end of 1997.
In December 1996, the California state auditor sent Seafield an audit
report covering the 1987-1989 taxable years. The State of California has
determined to include, as a "unitary taxpayer," all majority owned non-life
insurance subsidiaries and joint ventures of Seafield. The auditor's
report was forwarded to the California Franchise Tax Board for action. In
June 1997, the California Franchise Tax Board sent a notice of taxes due
for the 1987-1989 years of $769,213 which was paid in the same month. A
billing for the interest due should be received in the third quarter and is
expected to be approximately $1 million.
Pursuant to the Distribution Agreement, SLH assumed from Seafield all of
the contingent tax liabilities described above and acquired all rights to
refunds, plus any interest related to these tax years. SLH Corporation
also assumed all contingent liabilities and refunds related to any issues
raised for the years 1986-1990 whose resolution may extend to tax years
beyond the 1990 tax year.
LabOne has paid regular quarterly dividends in 1997. As an 82% owner,
Seafield has received $3.9 million of cash as dividends from LabOne in
1997. LabOne's working capital position declined from $38.8 million at
December 31, 1996, to $33 million at June 30, 1997. This decrease is
primarily due to dividends paid, and the purchase of GIB laboratory assets
and customer lists. Net trade accounts receivable increased 39% over the
balance at December 31, 1996, primarily due to increasing sales in all
three division in 1997. LabOne's cash and investments totaled $23 million
at June 30, 1997, and LabOne expects to fund operations and future dividend
payments from a combination of cash flow from operations and cash reserves.
LabOne had no borrowings during 1997.
In April 1996, Response obtained an unsecured $10 million loan from
Seafield bearing interest at the rate of prime plus 1%, which after August
1, 1996, became convertible at the election of Seafield into shares of
Response's common stock. Proceeds of the loan were used to finance a
practice management affiliation. The loan was exchanged for 909,090 shares
of common stock during August 1996.
In October 1996, Response procured a $23.5 million credit facility from
Seafield to finance acquisitions and for working capital. On February 26,
1997, the $23.5 million loan and accrued interest of $664,000 was converted
into 3,020,536 shares of Response's common stock at a rate of $8 per share.
On July 25, 1997, Seafield distributed to its shareholders, as a dividend,
all 8,077,392 shares of common stock of Response owned by Seafield.
RECENTLY ISSUED ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings Per Share", which revised the calculation and
presentation provisions of Accounting Principles Board Opinion 15 and
related interpretations. Statement No. 128 is effective for Seafield's
fiscal year ending December 31, 1997. Retroactive application will be
required. Seafield believes the adoption of Statement No. 128 will not
have a significant effect on its reported earnings per share.
Statement of Financial Accounting Standards No. 129 "Disclosure of
Information about Capital Structure" is required to be implemented for
periods ending after December 15, 1997. The adoption of this standard is
not expected to have any significant impact on Seafield's financial
position or results of operations.
In June 1997, the Financial Accounting Standards Board issued Statement No.
130, "Reporting Comprehensive Income." Statement No. 130 is effective for
fiscal years beginning after December 15, 1997. Retroactive application
will be required. The adoption of this standard is not expected to have
any significant impact on Seafield's financial position or results of
operations.
In June 1997, the Financial Accounting Standards Board issued Statement No.
131, "Disclosures about Segments of an Enterprise and Related Information."
Statement No. 131 is effective for fiscal years beginning after December
15, 1997. Retroactive application will be required. The adoption of this
standard is not expected to have any significant impact on Seafield's
financial position or results of operations.
No other recently issued accounting standards presently exist which will
require adoption in future periods.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
In 1986, a lawsuit was initiated in the Circuit Court of Jackson
County, Missouri by Seafield's former insurance subsidiary (i.e., Business
Men's Assurance Company of America) against Skidmore, Owings & Merrill
(SOM) which is an architectural and engineering firm, and a construction
firm to recover costs incurred to remove and replace the facade on the
former home office building. Because the removal and replacement costs had
been incurred prior to the sale of the insurance subsidiary, Seafield
negotiated with the buyer for an assignment of the cause of action from the
insurance subsidiary. In September 1993, the Missouri Court of Appeals
reversed a $5.7 million judgment granted in 1992 in favor of Seafield; the
Court of Appeals remanded the case to the trial court for a jury trial
limited to the question of whether or not the applicable statute of
limitations barred the claim. The Appeals Court also set aside $1.7
million of the judgment originally granted in 1992. Subsequently, the
parties waived a jury trial and in July 1996, this case was retried to a
judge. On January 21, 1997, the judge entered a judgment in favor of
Seafield. The amount of that judgment, together with interest is
approximately $5.8 million. Although the judgment has been appealed,
counsel for the Company expects that it will be difficult for the
defendants to cause the judgment to be reversed. The final outcome is not
expected until at least 1998. Settlement arrangements with other
defendants have resulted in payments to plaintiff which have substantially
offset legal fees and costs to date of approximately $481,000. Future
legal fees and costs can not reliably be estimated. Pursuant to the
Distribution Agreement, this matter was assigned to SLH Corporation.
In the opinion of management, after consultation with legal counsel and
based upon current available information, this lawsuit is not expected to
have a material adverse impact on the consolidated financial position or
results of operations of Seafield.
Seafield has received notices of proposed adjustments (Revenue Agent's
Reports) from the Internal Revenue Service (IRS) with respect to 1986-1990
federal income taxes. These notices claim total federal income taxes due
for the entire five year period in the approximate net amount of
$13,867,000, exclusive of interest thereon. Seafield filed protests
regarding the 1986-1990 notices of proposed adjustments.
On May 9, 1997, Seafield received a formal agreement to the issues and the
final tax computation from the IRS. The agreement provides for a tax
refund of approximately $5.8 million, before interest. The Company expects
to owe interest of approximately $700,000. The agreement is subject to
approval by the Congressional Joint Committee on Taxation. Consideration
by the Joint Committee is expected before the end of 1997.
In December 1996, the California state auditor sent Seafield an audit
report covering the 1987-1989 taxable years. The State of California has
determined to include, as a "unitary taxpayer," all majority owned non-life
insurance subsidiaries and joint ventures of Seafield. The auditor's
report was forwarded to the California Franchise Tax Board for action. In
June 1997, the California Franchise Tax Board sent a notice of taxes due
for the 1987-1989 years of $769,213 which was paid in the same month. A
billing for the interest due should be received in the third quarter and is
expected to be approximately $1 million.
Pursuant to the Distribution Agreement, SLH Corporation assumed from
Seafield all of the contingent tax liabilities described above and acquired
all rights to refunds plus any interest related to these tax years. SLH
Corporation also assumed all contingent liabilities and refunds related to
any issues raised for the years 1986-1990 whose resolution may extend to
tax years beyond the 1990 tax year. Seafield believes that adequate
accruals for these income tax liabilities have been made in the
accompanying consolidated financial statements.
Item 2. Changes in Securities
(a) Changes in Securities: None
(b) Under the Missouri General Corporation Law, no dividends to
stockholders may be declared or paid at a time when the net assets of the
corporation are less than its stated capital or when the payment thereof
would reduce the net assets of the corporation below its stated capital.
At June 30, 1997 the net assets of Seafield Capital Corporation exceeded
its stated capital by $105,175,000.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Securities Holders
(a) The annual meeting of shareholders was held on May 14, 1997
for the purpose of electing a board of directors and approving the
appointment of auditors. Proxies for the meeting were solicited and there
was no solicitation in opposition to management's solicitations. Holders
of 6,489,103 shares were eligible to vote and 4,878,279 shares were
represented at the meeting either in person or by proxy.
(c) All of management's nominees for directors as listed in the proxy
statement were elected with the following vote:
Director Shares Voted Shares Shares Not
For Withheld Voted
-------- ------------ -------- ----------
W. T. Grant II 4,847,289 30,990 0
P. Anthony Jacobs 4,849,290 28,989 0
David W. Kemper 4,849,290 28,989 0
Dennis R. Stephen 4,849,290 28,989 0
The shareholders approved the appointment of KPMG Peat
Marwick LLP as independent auditors for the year ending December 31, 1997
by the following vote:
Shares Voted Shares Voted Shares Shares Not
For Against Abstaining Voted
------------ ------------ ---------- ----------
4,866,236 210 11,831 2
Item 5. Other Information
None.
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 Form 10-Q.
(b) Reports on Form 8-K:
A current report on Form 8-K dated June 4, 1997 was filed to
report that Seafield's 67% owned subsidiary, Response Oncology, Inc.
(Response), had converted a previously filed Form S-2 to a Form S-3
covering 8,752,546 outstanding shares of its common stock to facilitate a
sale or other distribution of such shares by Response shareholders. It was
also reported that Seafield intends to distribute all shares of Response
owned by Seafield to its shareholders as a dividend.
A current report on Form 8-K dated July 1, 1997 was filed to
report that discussions between Seafield and its 82% owned subsidiary,
LabOne, Inc., regarding a possible merger between the two companies had
been terminated.
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.
Seafield Capital Corporation
Date August 8, 1997 By /s/ James R. Seward
----------------------------
James R. Seward
Executive Vice President
and Chief Financial Officer
Date August 8, 1997 By /s/ Steven K. Fitzwater
----------------------------
Steven K. Fitzwater
Vice President, Chief Accounting
Officer and Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Form 10-Q for the period ending June 30, 1997 and is qualified in its
entirety by reference to such 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 4,021
<SECURITIES> 23,510
<RECEIVABLES> 0<F1>
<ALLOWANCES> 0<F1>
<INVENTORY> 0
<CURRENT-ASSETS> 46,527
<PP&E> 0<F1>
<DEPRECIATION> 0<F1>
<TOTAL-ASSETS> 131,905
<CURRENT-LIABILITIES> 7,853
<BONDS> 0
0
0
<COMMON> 7,500
<OTHER-SE> 105,175
<TOTAL-LIABILITY-AND-EQUITY> 131,905
<SALES> 0
<TOTAL-REVENUES> 38,048
<CGS> 0
<TOTAL-COSTS> 39,379
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0<F1>
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,064
<INCOME-TAX> 9,573
<INCOME-CONTINUING> (7,107)
<DISCONTINUED> (2,342)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,449)
<EPS-PRIMARY> (1.46)
<EPS-DILUTED> 0<F2>
<FN>
<F1>Disclosure not required on interim financial statements
<F2>Computation not applicable
</FN>
</TABLE>
