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, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-22758
UNILAB CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 95-4415490
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
18448 Oxnard Street, Tarzana, California 91356
(Address of principal executive offices) (Zip Code)
(818) 996-7300
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
As of July 26, 1996, 36,663,006 shares of Registrant's Common Stock,
par value $.01 per share, were outstanding.
Page 1 of 14 pages
<PAGE>
UNILAB CORPORATION AND SUBSIDIARIES
Form 10-Q for the Quarterly Period Ended June 30, 1996
INDEX
Page
Part I - FINANCIAL INFORMATION:
Item 1. Financial Statements
Consolidated Balance Sheets - June 30, 3
1996 and December 31, 1995.
Consolidated Statements of Operations -
Three month and six month periods ended
June 30, 1996 and June 30, 1995. 5
Consolidated Statements of Cash Flows -
Six month periods ended June 30, 1996
and June 30, 1995. 7
Notes to Consolidated Financial Statements. 9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 12
Part II - OTHER INFORMATION:
Item 2. Changes in Securities 15
Item 4. Submission of Matters to a Vote of Security 15
Holders
Item 6. Exhibits and Reports on Form 8-K 16
Signatures 17
<PAGE>
<TABLE>
Unilab Corporation and Subsidiaries
Consolidated Balance Sheets - June 30, 1996 and December 31, 1995
(amounts in thousands)
<CAPTION>
Assets
June 30, December 31,
1996 1995
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $9,264 $70
Accounts receivable, net of
allowance for doubtful accounts
of $9,816 at June 30 and $8,454
at December 31 42,614 40,334
Amounts due from UGL/UniHolding 15,375 15,000
Inventory of supplies 2,416 2,361
Prepaid expenses and other current
assets 1,591 1,819
____________________________
Total current assets 71,260 59,584
____________________________
PROPERTY AND EQUIPMENT, net 17,747 18,326
GOODWILL, net of accumulated
amortization of $7,475 at June 30
and $5,676 at December 31 101,248 100,598
OTHER INTANGIBLE ASSETS, net of
accumulated amortization of
$18,985 at June 30 and $17,909
at December 31 11,370 12,421
OTHER ASSETS 6,476 5,245
____________________________
$208,101 $196,174
____________________________
</TABLE>
<PAGE>
<TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
<CAPTION>
June 30, December 31,
1996 1995
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Current portion of long-term debt $1,618 $21,947
Accounts payable and accrued
liabilities 25,925 27,326
_____________________________
27,543 49,273
_____________________________
LONG-TERM DEBT, net of current
portion 126,997 87,207
OTHER LIABILITIES 3,839 3,364
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Convertible Preferred Stock $.01
par value
Issued and Outstanding - 400 at
June 30 and December 31 4 4
Common stock $.01 par value
Voting - Authorized - 100,000
shares;
Issued and Outstanding - 36,663
at June 30 and 35,052 at
December 31 367 351
Non-Voting - Authorized -
5,000 shares;
Issued and Outstanding - 1,050
at December 31 - 10
Additional paid-in capital 225,505 224,020
Accumulated deficit (176,154) (168,055)
______________________________
Total shareholders' equity 49,722 56,330
______________________________
$208,101 $196,174
______________________________
<FN>
The accompanying notes are an integral part of these consolidated
financial statements.
</TABLE>
<PAGE>
<TABLE>
Unilab Corporation and Subsidiaries
Consolidated Statements of Operations
Three Month and Six Month Periods Ended June 30, 1996 and 1995
(amounts in thousands, except per share data)
(Unaudited)
<CAPTION>
Three months ended Six Months Ended
June 30, June 30, June 30, June 30,
1996 1995 1996 1995
_____________________________________________________________________________
<S> <C> <C> <C> <C>
Revenue $52,058 $47,913 $103,599 $90,155
______________________________________________________________________________
Operating Expenses:
Salaries, wages and benefits 17,291 15,650 34,896 29,434
Supplies 7,152 5,834 13,752 11,017
Other operating expenses 13,366 10,813 26,399 20,648
Legal and acquisition related charges - 1,200 - 2,400
Amortization and depreciation 2,905 2,258 5,724 4,129
______________________________________________________________________________
Total Operating Expenses 40,714 35,755 80,771 67,628
Selling, general and administrative
expenses 10,871 9,106 21,855 17,395
______________________________________________________________________________
Operating Income 473 3,052 973 5,132
______________________________________________________________________________
Other Income (Expenses):
Third party interest, net (3,534) (2,390) (6,299) (4,012)
Related party interest 375 (47) 750 (90)
Equity in earnings of affiliate - 75 - 250
Loss on sale of equity investment - (36,499) - (36,499)
______________________________________________________________________________
Total Other Expenses, net (3,159) (38,861) (5,549) (40,351)
______________________________________________________________________________
Loss Before Income Taxes and
Extraordinary Item (2,686) (35,809) (4,576) (35,219)
Tax Provision - - - -
______________________________________________________________________________
Loss Before Extraordinary Item (2,686) (35,809) (4,576) (35,219)
Extraordinary item - loss on early
extinguishment of debt - 1,732 3,451 1,732
______________________________________________________________________________
Net Loss ($2,686) ($37,541) ($8,027) ($36,951)
______________________________________________________________________________
Preferred Stock Dividends $36 $36 $72 $72
Net Loss Available to Common
Shareholders ($2,722) ($37,577) ($8,099) ($37,023)
Net Loss Per Share:
Loss Before Extraordinary Item ($0.07) ($1.00) ($0.12) ($0.99)
Extraordinary Item $0.00 ($0.05) ($0.10) ($0.05)
Net Loss Per Share ($0.07) ($1.05) ($0.22) ($1.04)
Weighted Average Common Shares
Outstanding 36,666 35,919 36,610 35,729
______________________________________________________________________________
<FN>
The accompanying notes are an integral part of these consolidated
financial statements.
</TABLE>
<PAGE>
<TABLE>
Unilab Corporation and Subsidiaries
Consolidated Statements of Cash Flows
Six Months Ended June 30, 1996 and 1995
(amounts in thousands)
(Unaudited)
<CAPTION>
Six months ended June 30,
1996 1995
_____________________________________________________________________________
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($8,027) ($36,951)
Adjustments to reconcile net loss to net
cash used by operating activities:
Amortization and depreciation 5,724 4,129
Provision for doubtful accounts 6,969 5,080
Equity in earnings of affiliate - (250)
Loss on sale of equity investment - 36,499
Extraordinary item - loss on early
extinguishment of debt 3,451 1,732
Changes in assets and liabilities affecting
operations, net of acquisitions:
Increase in Accounts receivable (9,249) (13,474)
Increase in Inventory of supplies (55) (381)
(Increase) decrease in Prepaid expenses and
other current assets 228 (1,659)
(Increase) decrease in Other assets 141 (194)
Increase (decrease) in Accounts payable and
accrued liabilities (1,326) 311
Other 186 40
______________________________________________________________________________
Net cash used by operating activities (1,958) (5,118)
______________________________________________________________________________
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under third party debt 123,490 42,400
Payments under third party debt (104,029) (3,095)
Financing costs under the Senior Notes (4,730) -
Financing costs under credit agreement - (3,325)
Other (25) (172)
______________________________________________________________________________
Net cash provided by financing activities 14,706 35,808
______________________________________________________________________________
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (1,895) (1,605)
Payments for acquisitions, net of cash acquired (1,659) (29,802)
Transaction fees paid related to acquisitions - (449)
______________________________________________________________________________
Net cash used by investing activities (3,554) (31,856)
______________________________________________________________________________
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 9,194 (1,166)
CASH AND CASH EQUIVALENTS - Beginning of Period 70 1,491
______________________________________________________________________________
CASH AND CASH EQUIVALENTS - End of Period $9,264 $325
______________________________________________________________________________
<FN>
The accompanying notes are an integral part of these consolidated
financial statements.
</TABLE>
<PAGE>
UNILAB CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Management Opinion
In the opinion of management, the accompanying unaudited interim financial
statements reflect all adjustments which are necessary to present fairly
the financial position, results of operations and cash flows for the
interim periods reported. All such adjustments made were of a normal
recurring nature, except for the extraordinary charge of $3.5 million
recorded in the first quarter of 1996, as discussed in note 3 below, and
a legal charge of $1.2 million recorded in the first quarter of 1995, a
$1.2 million acquisition related charge recorded in the second quarter of
1995 related to the sale of Unilab Corporation's ("Unilab" or the "Company")
equity investment and an extraordinary loss of $1.7 million recorded in the
second quarter of 1995 related to a loss upon the early extinguishment of
debt. See the Company's Annual Report on Form 10-K for the year ended
December 31, 1995 (as amended by the 1995 Annual Report on Form 10-K/A)
(collectively, the "1995 Form 10-K") for more detailed information on the
above noted charges recorded in 1995.
The accompanying interim financial statements and related notes should
be read in conjunction with the consolidated financial statements of Unilab
and related notes as contained in the 1995 Form 10-K.
2. Net Loss Per Share
Net loss per share is computed by dividing net loss less preferred stock
dividends by the weighted average number of common shares outstanding
plus common stock equivalents, which include options and warrants, during
the period. The assumed conversion of the convertible preferred stock is
excluded from the calculation since its effect would be immaterial.
3. Long-Term Debt
In March 1996, the Company completed an offering for $120.0 million of
Senior Notes (the "Senior Notes"). The proceeds from the Senior Notes
offering were used to retire outstanding borrowings under the Company's
then existing bank term loan and revolving line of credit facility (the
"Old Credit Facility") in the principal amount of $102.1 million, plus
accrued interest. Interest on the Senior Notes is 11% and is payable on
April 1st and October 1st of each year, commencing October 1, 1996. The
Senior Notes are due April 2006 and the Company is not required to make
any mandatory redemption or sinking fund payment with the respect to
the Senior Notes prior to maturity.
In connection with the Senior Notes offering, the Company incurred
approximately $5.0 million of financing costs (of which approximately
$4.7 million had been paid by June 30, 1996). The debt financing
costs are deferred and amortized, using the interest method, over the
term of the related debt. Upon completion of the Senior Notes offering,
the Company wrote-off $3.5 million of deferred financing costs related to
the Old Credit Facility. The $3.5 million charge has been shown as an
extraordinary loss from the early extinguishment of debt in the
statement of operations.
The Senior Notes were issued at a discount of 99.242% per note. The
aggregate discount on the Senior Notes approximated $0.9 million and
is charged to operations as additional interest expense over the life
of the Senior Notes using the interest method.
The Senior Notes are not redeemable prior to April 1, 2001, after which
the Senior Notes will be redeemable at any time at the option of the Company,
in whole or in part, at various redemption prices as set forth in the
indenture covering such Senior Notes (the "Indenture"), plus accrued
and unpaid interest, if any, to the date of redemption. In addition,
at any time prior to April 1, 1999, the Company may redeem up to $42.0
million in aggregate principal amount of the Senior Notes with the net
proceeds of one or more public offerings of common stock of the Company,
at a redemption price of 110% of the principal amount thereof, plus
accrued and unpaid interest, if any, to the redemption date.
In the event of a change in control, as defined in the Indenture, holders
of the Senior Notes will have the right to require the Company to
purchase their Notes, in whole or in part, at a price equal to 101% of
the aggregate principal amount thereof, plus accrued and unpaid interest,
if any, to the date of purchase.
The Notes are general unsecured obligations of the Company and rank
pari passu in right of payment with all unsubordinated indebtedness of
the Company. In addition, the Indenture limits the ability of the
Company to incur additional indebtedness, under certain circumstances.
In July 1996, the Company entered into an agreement with a financial
institution whereby it can sell accounts receivable up to a maximum
of $20.0 million. As collections reduce accounts receivables which
have been sold, the Company may sell new receivables to bring
the amount sold up to a maximum of $20.0 million.
As of August 2, 1996, the Company had not sold any accounts receivable
under this agreement. The termination date for the agreement is July 1999.
A commitment fee of 1/2 percent is required on the unused portion of the
available facility. The Company retains collection and administrative
responsibilities on the receivables sold as agent for the purchaser.
In addition, any accounts receivable sold, if any, will be reflected
as a reduction of account receivables in the balance sheet. The full
amount of the allowance for doubtful accounts will be retained
because the Company will retain substantially the same risk of credit
loss as if the receivables had not been sold.
In connection with the closing of this agreement, the Company expects
to reduce its available $20.0 million line of credit with a bank to
$5.0 million, which includes approximately $900,000 outstanding
standby letters of credit.
4. Non-Voting Common Stock
At the Company's May 1996 annual meeting of stockholders, an amendment
to the Company's Certificate of Incorporation was approved and adopted
by stockholders permitting the holders of all the 1,050,000 outstanding
shares of the Company's non-voting common stock to convert such shares
into regular voting common stock. In July 1996, all of the outstanding
shares of non-voting stock were converted into shares of the Company's
voting common stock on a share for share basis.
5. Supplemental Disclosure of Cash Flow Information
(amounts in thousands) Six months ended June 30,
1996 1995
Cash paid during the period for:
Interest $3,194 $4,189
Income taxes 8 3
In addition, the Company issued Unilab common shares valued at
$1.0 million in the first quarter of 1996 in partial payment of the
purchase price for an acquisition made in 1993 and issued Unilab
common shares valued at $0.2 million in the second quarter of 1996
to the Company 401-K plan to meet the Company's matching obligation
to the plan.
<PAGE>
Item 2.
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Three and Six Month Periods Ended June 30, 1996 Compared with the Three
and Six Month Periods Ended June 30, 1995
Revenue for the three and six month periods ended June 30, 1996 increased
$4.1 million or 8.7% and $13.4 or 14.9%, respectively, versus the
comparable prior year periods. The increases were the result of
additional specimen volume generating approximately $9.5 million
and $19.7 million offset by changes in payor mix and decreases in
reimbursement levels of approximately $5.4 million and $6.3 million
during the three and six month periods ended June 30, 1996 and 1995.
The increases in specimen volume of $9.5 million and $19.7 million
were primarily attributable to growth in the Company's core business
of $6.6 million and $11.1 million and revenue from the acquisition of
Medical Laboratory Network, Inc. ("MLN") completed in May 1995 of
$2.9 million and $8.6 million. The changes in payor mix and decreases
in reimbursement levels is primarily due to a reduction in the national
fee caps for Medicare reimbursement in January 1996, an increase in
managed care business and a general softening in reimbursement levels
across most payor groups, most notably from insurance carriers.
Salaries, wages and benefits increased to $17.3 million and $34.9
million for the three and six month periods ended June 30, 1996 from
$15.7 million and $29.4 million for the comparable prior year periods.
As a percentage of revenue, salaries, wages and benefits increased to
33.2% and 33.7% for the three and six month periods ended June 30, 1996
from 32.7% and 32.6% for the comparable prior year periods. Such
increases in 1996 are consistent with the higher trends recognized
by the Company in the second half of 1995.
Supplies expense increased to $7.2 and $13.8 million for the three and
six month periods ended June 30, 1996 from $5.8 millon and $11.0 million
for the comparable prior year periods. As a percentage of revenue,
supplies expense increased to 13.7% and 13.3% for the three and six
month periods ended June 30, 1996 from 12.2% and 12.2% for the
comparable prior year periods. Such increases were the result of
increased specimen volume and slightly higher supplies cost.
Other operating expenses increased to $13.4 million and $26.4
million for the three and six month periods ended June 30, 1996
from $10.8 million and $20.6 million for the comparable prior year
periods. As a percentage of revenue, other operating expenses increased
to 25.7% and 25.5% for the three and six month periods ended June 30, 1996
from 22.6% and 22.9% for the comparable prior year periods. Such
increases were primarily due to increases in lab subcontracting
expenses due to increases in fees charged by, and volume sent to, outside
reference laboratories and increases in bad debt expenses, both being
consistent with the higher trends recognized by the Company in the
second half of 1995.
In December 1993, the Company was named as a defendant in The Trylon
Corporation v. MetWest Inc., Unilab Corporation and Does 1 through 30.
The lawsuit alleged that Unilab breached a contract, and the implied
covenants of good faith and fair dealing in connection with that
contract with respect to the sales, marketing and distribution of
blue white speculite lightsticks, a product designed for use in
connection with PAP smears to screen for cervical cancer and precancerous
conditions in women. Plaintiff sought an unspecified amount of
damages. In February 1994, the case was referred to arbitration in
accordance with the arbitration clause of the contract between the parties.
In September 1995, the arbitrator rendered an award in favor of
Trylon of approximately $437,000. In November 1995, the arbitrator
reduced the award to Trylon to approximately $374,000 (comprised of
approximately $313,000 principal award plus interest of approximately
$61,000) and granted Trylon's request for payment of legal fees of
approximately $1.4 million (payment of such legal fees of $1.4 million
was made in the first quarter of 1996). The Company recorded a $1.2
million charge during the first quarter of 1995 related to the expected
cost, consisting primarily of legal fees, in defending itself against
such lawsuit and another $2.0 million charge during the fourth quarter
of 1995 reflecting the costs associated with the conclusion of this
arbitration, including the fees of Trylon's counsel and counsel for
the Company.
The Company recorded an acquisition charge of $1.2 million in the second
quarter of 1995 in connection with the acquisition of MLN. Such charges
related to the integration of the acquired MLN operations with those
of the Company.
Selling, general and administrative expenses increased to $10.9 million
and $21.9 million for the three and six months period ended June 30, 1996
from $9.1 million and $17.4 million from the comparable prior year periods.
As a percentage of revenue, selling, general and administrative expenses
increased to 20.9% and 21.1% for the three and six month periods ended
June 30, 1996 from 19.0% and 19.3% for the comparable prior year periods.
Such increase was primarily due to personnel added in sales and marketing
throughout the latter half of 1995.
Amortization and depreciation expense increased to $2.9 million and
$5.7 million for the three and six month periods ended June 30, 1996
from $2.3 million and $4.1 million from the comparable prior year periods
primarily due to the additional amortization expense resulting from the
acquisition of MLN in May 1995 and additional depreciation expense
primarily resulting from depreciation started in the second half of 1995
on approximately $3.0 million of computer equipment and software.
Third party interest expense increased to $3.5 million and $6.3 million
for the three and six month periods ended June 30, 1996 from $2.4 million
and $4.0 million for the comparable prior year periods primarily due to
increased borrowings by the Company used to finance the acquisition of
MLN and to pay related transaction fees and expenses in May 1995 and
increased indebtedness incurred by the Company under the Senior Notes
offering in March 1996.
Related party interest income of $375,000 and $750,000 for the three
and six months periods ended June 30, 1996 reflect interest income on
the $15.0 million promissory note the Company received upon the sale of
its 40% equity investment in UGL to UGL for $30.0 million. The sale
was effective June 30, 1995 and the Company ceased recording equity
earnings from UGL after April 30, 1995. The sale resulted in a
one-time charge by the Company during the three and six month periods
ended June 30, 1995 of approximately $36.5 million.
Upon completion of the Senior Notes offering, the Company wrote off
$3.5 million of deferred financing costs related to the Company's
Old Credit Facility. In addition, upon completion of a credit agreement
in May 1995 entered into in connection with the MLN acquisition,
the Company wrote-off $1.7 million of deferred financing costs related
to a previous credit facility.
Liquidity and Capital Resources
Net cash used by operating activities was $2.0 million for the six
months ended June 30, 1996 and reflects an decrease of $3.1 million
over the comparable prior year period when net cash used by operating
activities was $5.1 million. The change was primarily due to a decrease
in the growth of accounts receivable offset by a reduction in net
income before extroardinary item and loss on sale of the Company's
equity investment in UGL.
Net cash provided by financing activities was $14.7 million for the
six months ended June 30, 1996, primarily resulting from approximately
$4.4 million of borrowing under the Company's Old Credit Facility used
for working capital purposes and approximately $17.0 million of
additional indebtedness incurred in connection with the Senior Notes
offering offset primarily by $2.0 million of scheduled principal
repayments under the Company's Old Credit Facility and capital lease
obligations and payment of approximately $4.7 million of financing costs
incurred in connection with the Senior Notes offering.
Net cash used by investing activities was $3.6 million for the six
months ended June 30, 1996, primarily resulting from $1.9 million of
capital expenditures and $1.7 million of payments made on smaller
acquisitions completed in 1996 and 1995.
The Company had $9.3 million of cash and cash equivalents on hand at
June 30, 1996. Cash and cash equivalents on hand and additional
borrowing capabilities of $20.0 million under the agreement to sell
accounts receivable and any proceeds received from the Company's
$15.0 million promissory note due from UGL/UniHolding Corp. received
upon sale of the Company's equity investment in UGL in 1995 are
expected to be sufficient to meet anticipated operating requirements,
debt repayments and provide funds for capital for the foreseeable
future.
<PAGE>
PART II - OTHER INFORMATION
Item 2. Changes in Securities
In July 1996, all 1,050,000 outstanding shares of the Company's
non-voting common stock were converted on a share for share basis
into 1,050,000 shares of the Company's regular voting common stock.
The effect of such conversion is to dilute the ownership of the other
holders of common stock by approximately 3%.
Item 4. Submission of Matters to a Vote of Security Holders
At the Company's 1996 Annual Meeting of Stockholders held on May 14, 1996,
stockholders voted upon (i) election of directors, (ii) ratification and
approval of Arthur Andersen LLP as the Company's independent auditors
for the fiscal year ending Dececember 31, 1996, (iii) ratification and
approval of the Company's Stock Option and Performance Incentive Plan,
(iv) ratification and approval of the Non-Employee Directors Stock Plan,
and (v) amendment of Section 4 of the Company's Certificate of Incorporation
to amend the conversion terms of the Company's Non-Voting Common Stock.
Shares were voted on each such matter as follows:
Election of Directors
Name For Against
Andrew Baker 24,295,445 2,812,830
Kirby L. Cramer 24,322,845 2,785,430
Michael B. Hoffman 24,247,095 2,861,180
Walker Lewis 24,246,225 2,862,050
Thomas O. Pyle 24,326,955 2,781,320
Gabriel B. Thomas 24,325,195 2,783,080
Ratification and Approval of Arthur Andersen LLP
For: 20,847,551
Against: 182,240
Abstain: 78,484
Ratification and Approval of Stock Option and Performance Incentive Plan
For: 12,158,229
Against: 8,933,047
Abstain: 183,904
Broker Non-Votes: 5,833,095
Ratification and Approval of Non-Employee Directors Stock Plan
For: 14,649,195
Against: 6,407,256
Abstain: 218,729
Broker Non-votes: 5,833,095
<PAGE>
Amendment of Section 4 of Certificate of Incorporation to Amend the
Conversion Terms of the Non-Voting Common Stock
For: 19,114,930
Against: 469,301
Abstain: 255,958
Broker Non-votes: 5,268,086
Item 6. Exhibits and Reports on Form 8-K
(A) Exhibits
Exhibit 3.1 - Amendment to the Company's Certificate of Incorporation,
dated May 14, 1996.
Exhibit 99.1 - Press Release, dated June 21, 1996, announcing the
Company's listing on the American Stock Exchange (incorporated by
reference to Exhibit 99.1 to Current Report on Form 8-K dated
June 26, 1996).
Exhibit 99.2 - Press Release August 5, 1996, announcing second quarter
earnings results.
(B) Reports on Form 8-K
Current Report on Form 8-K dated June 26, 1996 with respect to
Items 5 and 7.
<PAGE>
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.
UNILAB CORPORATION
By: /s/ Richard A. Michaelson
Date: August 5, 1996 Richard A. Michaelson
Senior Vice President - Finance,
Treasurer and Chief Financial Officer
Exhibit 3.1
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
UNILAB CORPORATION
(Pursuant to Section 242 of the General
Corporation Law of the State of Delaware)
Unilab Corporation, a corporation organized and existing under the laws
of the State of Delaware (the "Corporation"), hereby certifies as follows:
FIRST. Section 4 of the Certificate of Incorporation of the Corporation
is hereby amended by deleting the provision from Clause (a) of the
sub-section entitled "Conversion of Non-Voting Common Stock by Holder"
of the section entitled "Non-Voting Common Stock", such that Clause (a)
reads in its entirety as follows:
"(a) The holder of each share of Non-Voting Common Stock shall
have the right at any time, or from time to time, at such holder's
option, to convert such share into one fully paid and non-assessable
share of Common Stock, on and subject to the terms and conditions
hereinafter set forth";
SECOND. The foregoing amendment has been duly adopted in accordance with
the provisions of Section 242 of the General Corporation Law of the State
of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
executed by Richard A. Michaelson, its Senior Vice President, and attested
by Mark L. Bibi, its Secretary, this 14th day of May, 1996.
By: /s/ Richard A. Michaelson
Name: Richard A. Michaelson
Title: Senior Vice President
Attest:
By: /s/ Mark L. Bibi
Name: Mark L. Bibi
Title: Secretary
Exhibit 99.2
PRESS RELEASE UNILAB CORPORATION
(AMEX:ULB)
18448 Oxnard Street
Tarzana, CA 91356
For Further Information:
Richard A. Michaelson
Phone: (818) 758-6607
IMMEDIATE RELEASE
August 6, 1996
UNILAB CORPORATION ANNOUNCES SECOND QUARTER RESULTS
TARZANA, CA, August 6, 1996 -- UNILAB Corporation (AMEX:ULB) announced
today that net sales for the quarter ending June 30, 1996 increased to
$52.1 million from $47.9 million in the same period last year. The
Company reported a net loss for the second quarter of 1996 of $2.7 million,
or $0.07 per common share, compared to a net loss of $37.6 million, or
$1.05 per common share, inclusive of approximately $39 million in
nonrecurring charges primarily related to divestiture and acquisition
activities, in the same year ago period.
For the six months ended June 30, 1996, net sales were $103.6 million
compared to $90.2 million in the same period last year. The net loss for
the six months was $8.1 million, or $0.22 per common share, which included
a $3.5 million extraordinary charge associated with the early extinguishment
of debt. This compares with a net loss of $37.0 million, or $1.04 per
common share, for the six months ended June 30, 1995, inclusive of the
approximately $39 million in charges noted above.
Andrew Baker, Chairman and Chief Executive Officer of Unilab, remarked, "Our
second quarter results reflect the ongoing challenges faced in the clinical
laboratory testing market. EBITDA for the second quarter of $3.4 million,
roughly flat with the first quarter, was negatively affected by continued
price erosion, which was only partially offset by stronger volumes and
expense improvements. We are continuing to take actions to drive our
average costing lower, at the same time as we focus on improving our
reimbursement levels and the profitability of our managed
care business."
The Company also announced the signing of a new three year $20 million
facility for the sale of receivables, with terms that are generally
more attractive than the Company's current financing arrangements.
Unilab Corporation is the largest provider of clinical laboratory testing
services in California through its primary testing facilities in Los
Angeles, San Jose and Sacramento and over 200 regional service and testing
facilities located throughout the state.
- tables to follow -
<PAGE>
<TABLE>
Unilab Corporation
Consolidated Statement of Operations
(amounts in thousands, except per share data)
<CAPTION>
Three months ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenue $52,058 $47,913 $103,599 $90,155
Operating Expenses, Excluding
Legal Charge and Acquisition
Related Charges 51,585 43,661 102,626 82,623
Legal and Acquisition Related
Charges - 1,200 - 2,400
Operating Income 473 3,052 973 5,132
Other Income (Expenses):
Interest Expense, net (3,159) (2,437) (5,549) (4,102)
Equity in Earnings of Affiliate - 75 - 250
Loss on Sale of Equity Investment - (36,499) - (36,499)
Loss Before Income Taxes and (2,686) (35,809) (4,576) (35,219)
Extraordinary Item
Extraordinary Item - Loss on Early
Extinguishment of Debt - 1,732 3,451 1,732
Net Loss (2,686) (37,541) (8,027) (36,951)
Preferred Stock Dividends 36 36 72 72
Net Loss Available to
Common Shareholders ($2,722) ($37,577) ($8,099) ($37,023)
Net Loss per Share:
Loss Before Extraordinary Item ($0.07) ($1.00) ($0.12) ($0.99)
Extraordinary Item - (0.05) (0.10) (0.05)
Net Loss ($0.07) ($1.05) ($0.22) ($1.04)
Weighted Average Common
Shares Outstanding 36,666 35,919 36,610 35,729
</TABLE>
<PAGE>
Unilab Corporation
Consolidated Balance Sheet
June 30, December 31,
1996 1995
(amounts in thousands)
Cash and Cash Equivalents $9,264 $70
Accounts Receivable, net 42,614 40,334
Amounts Due from UGL/UniHoldings 15,375 15,000
Other Current Assets 4,007 4,180
Total Current Assets 71,260 59,584
Fixed Assets, net 17,747 18,326
Goodwill and Other Intangible Assets 112,618 113,019
Other Assets 6,476 5,245
Total Assets $208,101 $196,174
Total Current Liabilities $27,543 $49,273
Long-term Debt, net of current portion 126,997 87,207
Other Liabilities 3,839 3,364
Total Shareholders Equity 49,722 56,330
Total Liabilities and Shareholders' Equity $208,101 $196,174
