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 March 31, 1998
----- 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
LAB HOLDINGS, INC.
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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 Street, Suite 260
Shawnee Mission, KS 64141
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(Address of principal (Zipcode)
executive offices)
Registrant's telephone number, including area code (913) 648-3600
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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
May 8, 1998: $1 par value common - 6,489,103
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
LAB HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
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(unaudited)
March 31, December 31,
1998 1997
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(In thousands)
ASSETS
Current assets:
Cash and cash equivalents $ 15,430 22,129
Short-term investments 6,524 2,648
Accounts and notes receivable 15,423 12,608
Current income taxes 339 1,400
Inventories 1,894 2,203
Real estate available for sale 3,515 3,515
Prepaid expenses and other current assets 2,418 2,459
Deferred income taxes 3,334 3,386
----------------------
Total current assets 48,877 50,348
Property, plant and equipment 11,335 10,441
Intangible assets 12,435 13,058
Deferred income taxes 825 858
Other assets 80 81
----------------------
$ 73,552 74,786
======================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,339 3,367
Accrued payroll and benefits 2,979 4,530
Other accrued expenses 550 423
Other current liabilities 248 303
----------------------
Total liabilities 8,116 8,623
----------------------
Minority interests 9,479 9,476
----------------------
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 1,772
Retained earnings 77,365 78,103
Accumulated other comprehensive income (loss) (536) (544)
----------------------
86,101 86,831
Less cost of 1,010,897 shares of treasury stock 30,144 30,144
----------------------
Total stockholders' equity 55,957 56,687
----------------------
$ 73,552 74,786
======================
See accompanying notes to consolidated financial statements and
management's discussion and analysis of financial condition and results of
operations.
LAB HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements Of Operations
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(unaudited)
Three months ended
March 31,
1998 1997
- ----------------------------------------------------------------------------
(in thousands except share amounts)
Sales $ 23,333 17,740
Cost of sales 12,959 9,450
---------------------
Gross profit 10,374 8,290
Selling, general and administrative 7,859 8,446
---------------------
Earnings (loss) from operations 2,515 (156)
Investment income - net 367 3,805
Other income (expense) (1) 112
---------------------
Earnings before income taxes 2,881 3,761
Income taxes 1,304 6,314
---------------------
Earnings (loss) before minority interests 1,577 (2,553)
Minority interests 369 268
---------------------
Earnings (loss) from
continuing operations 1,208 (2,821)
Earnings from discontinued healthcare business -- 604
---------------------
Net earnings (loss) $ 1,208 (2,217)
=====================
Basic earnings (loss) per share
Earnings (loss) from
continuing operations $ .19 (.43)
Earnings from discontinued
healthcare business -- .09
----------------------
Net earnings (loss) $ .19 (.34)
======================
Diluted earnings (loss) per share
Earnings (loss) from
continuing operations $ .18 (.43)
Earnings from discontinued
healthcare business -- .09
----------------------
Net earnings (loss) $ .18 (.34)
======================
Dividends $ .30 .30
Book value $ 8.62 18.78
Weighted average shares outstanding 6,489,103 6,487,238
Shares outstanding end of period 6,489,103 6,489,103
See accompanying notes to consolidated financial statements and management's
discussion and analysis of financial condition and results of operations.
LAB HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statement of Stockholders' Equity and Comprehensive Income
Three Months Ended March 31, 1998 (unaudited)
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Comprehensive Stockholders'
Income Equity
- ---------------------------------------------------------------------------
(in thousands)
Common stock:
Balance, beginning and end of period $ 7,500
--------
Paid-in capital:
Balance, beginning and end of period 1,772
--------
Retained earnings:
Balance, beginning of year 78,103
Net earnings 1,208 1,208
Cash dividends paid -------- (1,946)
--------
Balance, end of period 77,365
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Accumulated other comprehensive income (loss)
Balance, beginning of year (544)
Foreign currency translation 8
Tax expense -
--------
8 8
-------- --------
Balance, end of period (536)
--------
Less:
Treasury stock:
Balance, beginning and end of period 30,144
--------
Totals $ 1,216 55,957
======== ========
See accompanying notes to consolidated financial statements and
management's discussion and analysis of financial condition and results of
operations.
LAB HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
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(unaudited)
Three Months Ended
March 31,
1998 1997
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(In thousands)
OPERATING ACTIVITIES
Earnings (loss) from continuing operations $ 1,208 (2,821)
Adjustments to reconcile earnings(loss)
from continuing operations to net cash
provided by continuing operations:
Depreciation and amortization 1,452 1,498
Earnings applicable to minority interests 369 268
Change in trading portfolio, net (109) 4,088
Change in accounts receivable (2,816) (2,301)
Change in accounts payable 972 (227)
Income taxes and other, net 19 3,905
-------------------
Net cash provided by continuing
operations 1,095 4,410
Net cash used by discontinued
healthcare business -- (1,006)
Net cash provided by discontinued
real estate operations -- 581
-------------------
Total cash provided by operations 1,095 3,985
-------------------
INVESTING ACTIVITIES
Sales of investments available for sale -- 1,350
Purchases of investments held to maturity (4,467) (7,713)
Maturities of investments held to maturity 702 732
Additions to property, plant
and equipment, net (1,725) (1,174)
Acquisition of assets -- (4,121)
Other, net (367) (2,748)
-------------------
Net cash used by investing activities (5,857) (13,674)
-------------------
FINANCING ACTIVITIES
Regular quarterly dividends paid (1,946) (1,947)
Cash portion of SLH dividend -- (19,590)
Net issuance of treasury stock pursuant to
stock option plans -- (7)
-------------------
Net cash used by financing activities (1,946) (21,544)
-------------------
Effect of foreign currency translation 9 (13)
-------------------
Net decrease in cash and cash equivalents (6,699) (31,246)
Cash and cash equivalents at
beginning of period 22,129 53,328
-------------------
Cash and cash equivalents at end of period $ 15,430 22,082
===================
Supplemental disclosures of cash flow information:
Cash paid (received) during the year for:
Interest $ -- --
===================
Income taxes, net $ 109 591
===================
Supplemental disclosures of non-cash information:
SLH dividend $ -- 28,373
===================
See accompanying notes to consolidated financial statements.
LAB HOLDINGS, INC.
Notes to Consolidated Financial Statements
March 31, 1998 and 1997
(1) The interim financial information furnished herein is unaudited while
the balance sheet at December 31, 1997 is derived from audited financial
statements. In the opinion of management, the financial information
reflects all adjustments which are necessary to fairly state Lab Holdings'
financial position at March 31, 1998 and December 31, 1997 and the results
of its operations and cash flows for the periods ended March 31, 1998 and
1997. All adjustments made in the interim period were of a normal
recurring nature except the accrual of termination benefits at March 31,
1997 due to the elimination of certain Lab Holdings positions after the SLH
distribution. 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 1997 amounts have been
reclassified for comparative purposes with no effect on net earnings
(loss). See Lab Holdings' Annual Report pursuant to Section 13 to the
Securities Exchange Act of 1934 (Form 10-K as amended) for additional
information not required by this Quarter's Report (Form 10-Q).
(2) On March 3, 1997, Lab Holdings distributed to its shareholders all of
the outstanding shares of common stock of its wholly-owned subsidiary, SLH
Corporation (SLH). For each shareholder of record on February 24, 1997,
one share of SLH common stock was distributed for each four shares of Lab
Holdings common stock owned. In connection with this distribution and
pursuant to a Distribution Agreement between Lab Holdings and SLH, Lab
Holdings 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 Lab Holdings shareholders
paid no consideration for any shares of SLH stock received in the
distribution.
(3) On July 25, 1997, Lab Holdings distributed to its shareholders all of
the shares of common stock of Response Oncology, Inc. (Response) owned by
Lab Holdings. For each shareholder of record on July 11, 1997, 1.2447625
shares of Response common stock were distributed for each share of Lab
Holdings common stock outstanding. The distribution of all shares of
Response stock to Lab Holdings' shareholders was effected as a dividend.
The Lab Holdings shareholders paid no consideration for any shares of
Response stock received in the distribution.
Lab Holdings' share of Response's earnings are shown as a discontinued
business in the accompanying financial statements.
As a result of the SLH and Response distributions, Lab Holdings' principal
asset consists of its 82% ownership of LabOne, Inc. (LabOne).
(4) Cash and cash equivalents include demand deposits in banks, money
market investments and overnight investments that are stated at cost, which
approximates market value.
(5) Basic earnings per share is computed using the weighted average number
of common shares and diluted earnings per share is computed using the
weighted average number of common shares and dilutive stock options.
Earnings available to common shareholders was adjusted to reflect the
Company's share of LabOne's earnings based on a diluted ownership after
taking into account LabOne's common stock equivalents. The following table
reconciles net earnings and weighted average shares used to computed basic
and diluted earnings per share.
March 31, 1998
-----------------------------------
Earnings from
Continuing Per Share
Operations Shares Amount
-----------------------------------
Basic earnings per share $ 1,208,000 6,489,103 $ .19
Effect of dilutive securities:
Lab Holdings stock options -- --
LabOne stock options (23,000) --
-----------------------------------
Dilutive earnings per share $ 1,185,000 6,489,103 $ .18
===================================
March 31, 1997
-----------------------------------
Loss from
Continuing Per Share
Operations Shares Amount
-----------------------------------
Basic loss per share $(2,821,000) 6,487,238 $(.43)
Effect of dilutive securities:
Lab Holdings stock options -- --
LabOne stock options -- --
-----------------------------------
Dilutive loss per share $(2,821,000) 6,487,238 $(.43)
===================================
Computation of dilutive loss per share at March 31, 1997 did not include
the effect of stock options because to do so would have been antidilutive.
(6) LabOne operates in three lines of business: insurance risk appraisal
testing, clinical diagnostic testing and substance abuse testing. The
following table presents the Company's selected financial information for
each segment.
Three Months Ended
March 31,
1998 1997
------------------
(in thousands)
Sales
Insurance risk appraisal testing $ 16,822 14,429
Clinical diagnostic testing 3,654 1,541
Substance abuse testing 2,857 1,770
------------------
Total sales $ 23,333 17,740
==================
Operating Income (Loss)
Insurance risk appraisal testing $ 5,212 4,311
Clinical diagnostic testing (1,935) (2,104)
Substance abuse testing (179) (310)
General corporate expense (583) (2,053)
------------------
Earnings (loss) from operations 2,515 (156)
Investment income - net 367 3,805
Other income (expense) (1) 112
------------------
Earnings before income taxes $ 2,881 3,761
==================
There were no material changes in asset levels by segment or in the basis
of segmentation or measurement of segment operating income or loss.
(7) The Company adopted the provisions of the Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" on January
1, 1998. Comprehensive income is defined as any change in equity from
transactions and other events originating from non-owner sources. For Lab
Holdings, those changes are composed of reported net income and changes in
unrealized foreign currency translation adjustments. The components of
comprehensive income are as follows.
March 31,
1998 1997
------------------
(in thousands)
Net earnings (loss) $ 1,208 (2,217)
------------------
Other comprehensive income
Foreign currency translation 8 (27)
Tax expense -- --
------------------
Total other comprehensive income 8 (27)
------------------
Total Comprehensive Income $ 1,216 (2,244)
==================
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,
-----------------------
1998 1997
---------- ----------
Sales $23,333,000 17,740,000
Earnings (Loss) from
operations $ 2,515,000 (156,000)
Investment income - net $ 367,000 3,805,000
Earnings (Loss) from
continuing operations $ 1,208,000 (2,821,000)
Earnings from discontinued
healthcare business $ -- 604,000
Net earnings (loss) $ 1,208,000 (2,217,000)
Basic earnings per share:
Earnings (loss) from continuing
operations $ .19 (.43)
Earnings (loss) from discontinued
healthcare business -- .09
Net earnings (loss) $ .19 (.34)
Dividends per share $ .30 .30
Book value per share $ 8.62 18.78
Introductory remarks about results of operations
Lab Holdings, Inc.'s (Lab Holdings or Registrant) principal assets consist
of a majority ownership of LabOne, Inc. (LabOne) and approximately $5.2
million in cash and short-term investments. Prior to October 20, 1997, Lab
Holdings was named Seafield Capital Corporation (Seafield). Seafield
changed its name to Lab Holdings for better identification with its primary
asset, the 82% ownership of LabOne.
Lab Holdings had a majority ownership position in Response Oncology, Inc.
(Response). On July 25, 1997, Lab Holdings distributed to its shareholders
all the shares of common stock of Response owned by Lab Holdings. The
distribution of Response stock was effected as a taxable dividend by Lab
Holdings. Response's 1997 operations are presented as a discontinued
healthcare business in Lab Holdings' financial statements.
Response, previously 67%-owned by Lab Holdings, is a publicly-traded
company (NASDAQ-ROIX). On February 26, 1997, Lab Holdings converted a
$23.5 million Response note receivable and accrued interest into 3,020,536
shares of Response common stock. The conversion increased Lab Holdings'
ownership of Response shares outstanding from 56% at December 31, 1996 to
approximately 67%.
Additionally, Lab Holdings had investments in real estate, energy
businesses and miscellaneous assets. On March 3, 1997, Lab Holdings
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 Lab
Holdings and SLH, Lab Holdings transferred its real estate and energy
businesses and miscellaneous assets and liabilities to SLH. The SLH spin-
off was accounted for as a dividend.
LabOne provides high-quality laboratory services to insurance companies,
physicians and employers.
LabOne provides risk-appraisal laboratory services to the insurance
industry. The tests performed 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. LabOne 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 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(trademark) 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.
Additionally, BlueCross BlueShield of Tennessee selected LabOne to provide
routine outpatient laboratory testing services for BlueCare members
throughout Tennessee effective February 1, 1998. BlueCare is BlueCross
BlueShield of Tennessee's plan for Tenncare participants and covers
approximately 350,000 members. LabOne's LBM programs, including BlueCare
and the Lab Card program, have more than 1.9 million lives enrolled.
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 times and multiple testing options help clients
reduce downtime for affected employees and meet mandated drug screening
guidelines.
FIRST QUARTER ANALYSIS
Net sales increased 32% in the first quarter 1998 to $23.3 million from
$17.7 million in the first quarter 1997. The increase of $5.6 million is
due to increases in insurance segment revenue of $2.4 million, clinical
revenue of $2.1 million and substance abuse testing (SAT) revenue of $1.1
million. The total number of insurance applicants tested in the first
quarter 1998 increased by 17% as compared to the same quarter last year due
to growth in market share and oral fluid testing volumes. Average revenue
per applicant decreased 2%. Kit and container revenue increased due
primarily to an increase in the number of oral fluid and full blood kits
sold. Clinical diagnostic testing revenue increased from $1.5 million in
1997 to $3.7 million in 1998 due to increases in testing volumes and in
average revenue per patient. SAT revenue increased from $1.8 million to
$2.9 million for the quarter due to increased testing volumes as compared
to last year.
Cost of sales increased $3.5 million or 37% in the first quarter 1998 as
compared to the prior year, due primarily to increases in supplies, inbound
freight and outside laboratory and collection services. Lab supplies
increased due to the increased specimen volumes tested in each segment.
Insurance kit supplies increased due to the higher volume of kits sold and
the increase in cost of oral fluid kits for HIV testing. Inbound freight
and outside laboratory and collection services increased due to the
increased specimen volumes and expense related to the February start-up of
BlueCare. Clinical cost of sales expenses were $3.4 million as compared to
$1.9 million in the first quarter 1997. SAT cost of sales expenses were
$2.1 million as compared to $1.4 million in the first quarter 1997.
As a result of the above factors, gross profit for the quarter increased
$2.1 million (25%) from $8.3 million in 1997 to $10.4 million in 1998.
Insurance gross profit increased $1.1 million or 13%. Clinical gross
profit increased $600,000 to $300,000 for the quarter. SAT gross profit
increased $400,000 to $800,000 for the quarter.
LabOne's selling, general and administrative expenses increased $1 million
(16%) in the first quarter 1998 as compared to the prior year due primarily
to increases in payroll expenses. These were partially offset by a
decrease in depreciation and printing expenses. Clinical overhead
expenditures, including allocations, were $2.2 million as compared to $1.7
million in 1997. SAT expenditures were $1 million as compared to $700,000
last year. The overhead allocation to the clinical and SAT testing
segments for the first quarter 1998 was $1.1 million as compared to an
allocation of $700,000 in 1997. These increases are due to increased
testing revenue in those segments.
Lab Holding's selling, general and administrative expenses decreased $1.7
million (74%) to $549,000 in the first quarter 1998 from $2.2 million in
the first quarter of 1997 as Lab Holding's significantly reduced its
corporate structure after the SLH and Response distributions. Goodwill
amortization of $368,000 associated with Lab Holdings' investment in LabOne
was included in the first quarter operating results of both 1998 and 1997.
Consolidated earnings from operations increased to $2.5 million in 1998's
first quarter from a loss of $156,000 in the first quarter 1997 primarily
reflecting Lab Holdings reduction in corporate structure. LabOne's
insurance segment operating income increased $900,000. The clinical
segment improved $200,000 to an operating loss of $1.9 million. The SAT
segment improved $100,000 from an operating loss of $300,000 in the first
quarter 1997 to a loss of $200,000 in 1998.
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 decreased to $367,000 in 1998's first quarter from $3.8
million in 1997's first quarter, which primarily reflected a $3 million
gain by Lab Holdings on the sale of marketable common stock.
Miscellaneous items produced a $l,000 loss in 1998's first quarter as
compared to income of $112,000 in 1997's first quarter, which consisted of
receipts on receivables accounted for on the cost recovery method, net of
other expense items.
Tax expense decreased to $1.3 million in 1998's first quarter from $6.3
million in 1997's first quarter, which included a write-off of
approximately $5 million of the deferred income tax assets related to
assets spun off in the SLH distribution.
The combined effect of the above factors resulted in the first quarter 1998
earnings from continuing operations of $1.2 million, compared with a loss
from continuing operations of $2.8 million in the first quarter 1997.
Discontinued Operations:
Healthcare Business:
On July 25, 1997, Lab Holdings distributed to its shareholders all the
shares of common stock of Response owned by Lab Holdings. Response's
operations are presented as a discontinued healthcare business in Lab
Holdings' financial statements. The second quarter of 1997 was the last
period in which Response significantly impacted Lab Holdings' financial
results. The distribution of Response stock was effected as a taxable
dividend by Lab Holdings in which Lab Holdings utilized tax loss
carryforwards to offset a resulting tax liability in the financial
statements. The first quarter 1997's discontinued healthcare operations
reflected Lab Holdings' share of earnings by Response during the quarter
and amortization of goodwill. For the first quarter of 1997, Response's
revenues were $24.4 million, healthcare costs and expenses were $20
million, other general and administrative expense were $1.7 million and net
earnings totaled $867,000.
Publicly-Traded Subsidiary
Lab Holdings' majority-owned entity, LabOne, is publicly-traded. At March
31, 1998, based on the market prices of publicly-traded shares of this
subsidiary, pretax unrealized gains of approximately $128.9 million on this
investment were not reflected in either Lab Holdings' book value or
stockholders' equity.
LIQUIDITY AND CAPITAL RESOURCES
On March 31, 1998, at the holding company level, Lab Holdings had available
for operations approximately $5.2 million in cash and short-term
investments. Lab Holdings' working capital at March 31, 1998 equaled the
$6.3 million of working capital at December 31, 1997.
On a consolidated basis, Lab Holdings had $22 million in cash and short-
term investments at March 31, 1998. Current assets totaled approximately
$48.9 million while current liabilities totaled $8.1 million. Accounts
receivable increased $2.8 million or 22% from December 31, 1997 due to
LabOne's 32% increase in revenues for the quarter.
Net cash provided by operations totaled $1.1 million in 1998's first
quarter compared with $4 million in 1997's first quarter. During 1998, the
net cash provided by operations included $1.2 million of earnings from
continuing operations, a non-cash item of $1.5 million for depreciation and
amortization, a $972,000 increase in accounts payable, and a $2.8 million
increase in accounts receivable. During 1997, the net cash provided by
operations included a $2.8 million loss from continuing operations, a non-
cash item of $1.5 million for deprecation and amortization, a decrease in
trading portfolios of $4.1 million, a $2.3 million increase in accounts
receivable, a net change in income taxes and other of $3.9 million and
$425,000 of net cash used by discontinued healthcare and real estate
operations. The discontinued healthcare business used $1 million and
discontinued real estate operations provided $581,000.
Net cash used by investing activities in 1998's first quarter totaled $5.9
million reflecting a net increase in long-term investments of $3.8 million
and $1.7 million of additions to property, plant and equipment. Net cash
used by investing activities in 1997's first quarter totaled $13.7 million
reflecting a net increase in long-term investments of $5.6 million, $1.2
million of net additions to property, plant and equipment supporting
expanded laboratory capacity and $4.1 million of intangible asset purchases
by LabOne associated with its purchase of the assets and customer list of
GIB Laboratories, Inc.
Net cash used by financing activities of $1.9 million in 1998's first
quarter reflects Lab Holdings regular cash dividends to its shareholders.
Net cash used by financing activities in 1997's first quarter totaled $21.5
million primarily due to the $19.6 million cash transferred to SLH and
regular cash dividends of $1.9 million.
Lab Holdings is currently a holding company. Sources of cash are
investment income and subsidiary dividends. There are currently no
restrictions that would limit LabOne's ability to make future dividend
payments. The primary uses of cash for Lab Holdings are investments,
operating expenses and dividends to shareholders.
LabOne paid regular first quarter dividends in 1998 and 1997. As an 82%
owner, Lab Holdings received $1.9 million of cash as dividends from LabOne
in 1998. LabOne's working capital position declined $900,000 to $34.5
million at March 31, 1998 from $35.4 million at December 31, 1997. This
decrease is primarily due to dividends paid and capital additions exceeding
LabOne's cash provided by operations before changes in working capital.
During the first quarter of 1998, LabOne's net additions to property, plant
and equipment were $1.7 million, primarily related to construction of its
new facility and the purchase of computer equipment. Net additions in the
first quarter 1997 were $5.3 million, of which approximately $4.8 million
was related to the GIB purchase.
LabOne's new facility project is expected to cost approximately $30
million. Financing with an industrial revenue bond (IRB) arrangement is
being negotiated. The IRB is expected to be in place during the third
quarter 1998. Interest on the bond will be based on a taxable seven day
variable rate. LabOne expects to repay the bond over 12 years at $2.5
million per year plus interest. As of March 31, 1998, total capital
expenditures for this project were $5.7 million.
LabOne had no short-term borrowings in the first quarter 1998. LabOne
expects to fund operations and future dividend payments from a combination
of cash flows from operations and cash reserves.
RECENTLY ISSUED ACCOUNTING STANDARDS
No recently issued accounting standards presently exist which will require
adoption in future periods.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None.
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 March 31, 1998, the net assets of Lab Holdings, Inc. exceeded its stated
capital by $48,457,000.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Securities Holders
None.
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 was filed on January 27, 1998 to
report that Lab Holdings' 82% owned subsidiary, LabOne, Inc., had reported
a net loss of $2.4 million for the fourth quarter 1997. This loss included
a one-time, non-cash, pre-tax write off of $6.6 million related to the
anticipated sale of its current facilities.
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.
Lab Holdings, Inc.
Date May 13, 1998 By /s/ P. Anthony Jacobs
----------------------------
P. Anthony Jacobs
President and Chief Executive Officer
Date May 13, 1998 By /s/ Steven K. Fitzwater
----------------------------
Steven K. Fitzwater
Vice President, Chief Financial
and 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 March 31, 1998 and is qualified in its
entirety by reference to such 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 15,430
<SECURITIES> 6,524
<RECEIVABLES> 0<F1>
<ALLOWANCES> 0<F1>
<INVENTORY> 1,894
<CURRENT-ASSETS> 48,877
<PP&E> 0<F1>
<DEPRECIATION> 0<F1>
<TOTAL-ASSETS> 73,552
<CURRENT-LIABILITIES> 8,116
<BONDS> 0
0
0
<COMMON> 7,500
<OTHER-SE> 48,457
<TOTAL-LIABILITY-AND-EQUITY> 73,552
<SALES> 23,333
<TOTAL-REVENUES> 23,333
<CGS> 12,959
<TOTAL-COSTS> 12,959
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,881
<INCOME-TAX> 1,304
<INCOME-CONTINUING> 1,208
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,208
<EPS-PRIMARY> .19
<EPS-DILUTED> .18
<FN>
<F1>Disclosure not required on interim financial statements.
</FN>
</TABLE>
