UNILAB CORP /DE/
10-Q/A, 1999-05-07
MEDICAL LABORATORIES
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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                               AMENDMENT NO. 1 TO
                                    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, 1999

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 April 23, 1999,  40,819,653 shares of Registrant's Common Stock, par value
$.01 per share, were outstanding.

Page 1 of 11 pages


<PAGE>



                               UNILAB CORPORATION

             Form 10-Q for the Quarterly Period Ended March 31, 1999


                                      INDEX

                                                                       Page

Part I      -     FINANCIAL INFORMATION:

       Item 1.        Financial Statements

                      Balance Sheets - March 31, 1999                     3
                      and December 31, 1998.

                      Statements of Operations -
                      Three-month periods ended March 31, 1999
                      and March 31, 1998.                                 4

                      Statements of Cash Flows -
                      Three-month periods ended March 31, 1999
                      and March 31, 1998.                                 5

                      Notes to Financial Statements.                      6

       Item 2.        Management's Discussion and Analysis of
                      Financial Condition and Results of
                      Operations                                          8

Part II     -     OTHER INFORMATION:

         Item 6.      Exhibits and Reports on Form 8-K                   10

                      Signatures                                         11



<PAGE>

<TABLE>

                               UNILAB CORPORATION
                                 BALANCE SHEETS
                      MARCH 31, 1999 AND DECEMBER 31, 1998
                  (amounts in thousands, except per share data)
<CAPTION>

                                                              March 31,    December 31,
                                                                1999         1998
Assets                                                      (Unaudited)                  
<S>                                                      <C>             <C>  
Current Assets:
Cash and cash equivalents                                  $27,470         $20,137
Accounts receivable, net                                    43,471          41,326
Inventory of supplies                                        3,232           3,055
Prepaid expenses and other current assets                    1,575           1,045         
- -------------------------------------------------------------------------------------------
Total current assets                                        75,748          65,563
Property and Equipment, net                                 11,274          11,277
Goodwill, net                                               56,447          56,949
Other Intangible Assets, net                                 2,221           2,370
Other Assets                                                 5,565           6,301         
- -------------------------------------------------------------------------------------------
                                                          $151,255         $142,460         
- -------------------------------------------------------------------------------------------

Liabilities and Shareholders' Equity                                                       
- -------------------------------------------------------------------------------------------
Current Liabilities:
Current portion of long-term debt                           $1,176          $1,206
Accounts payable and accrued liabilities                    16,466          14,533
Accrued payroll and benefits                                 7,762           6,892         
- -------------------------------------------------------------------------------------------
Total current liabilities                                   25,404          22,631         
- -------------------------------------------------------------------------------------------
Long-Term Debt, net of current portion                     136,882         137,170
Other Liabilities                                            4,163           4,026
Commitments and Contingencies

Shareholders' Equity (Deficit):
Convertible preferred stock, $.01 par value
   Issued and Outstanding - 364 at March 31
   and December 31                                               4               4

Common stock, $.01 par value
   Issued and Outstanding - 40,728 at March 31
   and 40,708 at December 31                                   407             407

Additional paid-in capital                                 228,435         228,395

Accumulated deficit                                      (244,040)       (250,173)         
- -------------------------------------------------------------------------------------------
Total shareholders' deficit                               (15,194)        (21,367)         
- -------------------------------------------------------------------------------------------
                                                         $151,255         $142,460         
- -------------------------------------------------------------------------------------------
<FN>

The accompanying notes are an integral part of  these financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>

                               UNILAB CORPORATION
                            STATEMENTS OF OPERATIONS
                   THREE MONTHS ENDED MARCH 31, 1999 AND 1998
                  (amounts in thousands, except per share data)
                                   (Unaudited)
<CAPTION>

                                                     Three Months Ended March 31,
                                                      1999           1998    
<S>                                                <C>              <C>  
Revenue                                              $63,559          $54,530
- -----------------------------------------------------------------------------

Direct Laboratory and Field Expenses:
   Salaries, wages and benefits                       18,455           16,823
   Supplies                                            8,827            7,613
   Other operating expenses                           15,416           13,129
- -----------------------------------------------------------------------------
                                                      42,698           37,565

Amortization and depreciation                          1,897            1,985
Selling, general and administrative expenses           9,312            8,534
- -----------------------------------------------------------------------------

     Total Operating Expenses                         53,907           48,084
- -----------------------------------------------------------------------------

Operating Income                                       9,652            6,446

Third party interest, net                            (3,486)          (3,374)
- -----------------------------------------------------------------------------

Income Before Income Taxes                             6,166            3,072

Tax Provision                                              -                -
- -----------------------------------------------------------------------------

Net Income                                            $6,166           $3,072
- -----------------------------------------------------------------------------

Preferred Stock Dividends                                $33              $33

Net Income Available to Common Shareholders           $6,133           $3,039

Earnings Per Share:
Basic                                                  $0.15            $0.07
Diluted                                                $0.14           $0.07 
- -----------------------------------------------------------------------------
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>

<PAGE>

<TABLE>

                               UNILAB CORPORATION
                            STATEMENTS OF CASH FLOWS
                   THREE MONTHS ENDED MARCH 31, 1999 AND 1998
                             (amounts in thousands)
                                   (Unaudited)
<CAPTION>

                                                                 Three months ended March 31,
                                                                     1999             1998     
<S>                                                                 <C>              <C> 
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                                            $6,166           $3,072
Adjustments to reconcile net income to net
cash provided by operating activities:
   Amortization and depreciation                                       1,897            1,985
   Provision for doubtful accounts                                     4,572            3,907
Net changes in assets and liabilities affecting operations:
   Increase in Accounts receivable                                   (6,717)          (5,391)
   (Increase) decrease in Inventory of supplies                        (177)               52
   Increase in Prepaid expenses and other current assets               (530)            (169)
   Decrease in Other assets                                              579                5
   Increase in Accounts payable and accrued liabilities                1,850           1,863
   Increase in Accrued payroll and benefits                            1,092           1,249
   Other                                                                  38              83 
- ---------------------------------------------------------------------------------------------
   Net cash provided by operating activities                           8,770            6,656
- ---------------------------------------------------------------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Payments of third party debt                                        (318)            (429)
   Other                                                                (33)             (33)
- ---------------------------------------------------------------------------------------------
   Net cash used by financing activities                               (351)            (462)
- ---------------------------------------------------------------------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Capital expenditures                                              (1,086)            (631)
   Payments for acquisitions, net of cash acquired                     -                (309)
- ---------------------------------------------------------------------------------------------
   Net cash used by investing activities                             (1,086)            (940)
- ---------------------------------------------------------------------------------------------

NET INCREASE IN CASH AND CASH EQUIVALENTS                              7,333            5,254

CASH AND CASH EQUIVALENTS - Beginning of Period                       20,137           11,652
- ---------------------------------------------------------------------------------------------

CASH AND CASH EQUIVALENTS - End of Period                            $27,470          $16,906
- ---------------------------------------------------------------------------------------------

<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>


<PAGE>


                               UNILAB CORPORATION
                          NOTES TO 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.

       The accompanying interim financial statements and related notes should be
       read in conjunction with the financial  statements of Unilab  Corporation
       ("Unilab" or the  "Company") and related notes as contained in the Annual
       Report on Form 10-K for the year ended December 31, 1998.

2.     Net Income Per Share

       Basic  earnings  per common  share has been  computed by dividing the net
       income less preferred  dividends by the weighted average number of common
       shares outstanding for each period presented. The weighted average number
       of common shares used in the  calculation of basic earnings per share was
       40.7  million and 40.6  million for the three months ended March 31, 1999
       and 1998, respectively.

       Diluted  earnings  per share  includes  the effect of  additional  common
       shares  that would have been  outstanding  if dilutive  potential  common
       shares had been  issued plus a reduction  of  interest  expense  assuming
       conversion of the convertible  debt. For the three months ended March 31,
       1998,  the weighted  average  number of dilutive  stock  options were 1.5
       million,  which would have had no effect on the basic  earnings per share
       calculation.  For the three  months  ended March 31,  1999,  the weighted
       average  number  of  dilutive  stock  options  were 1.7  million  and the
       incremental  shares  from the  assumed  conversion  of the $14.0  million
       subordinated  convertible  note  were  4.7  million,  which  reduced  the
       earnings per share  calculation by $0.01.  The assumed  conversion of the
       convertible  preferred stock is excluded from the  calculation  since its
       effect would be immaterial.

3.     Acquisition

       On September 16, 1998, the Company and Meris Laboratories, Inc. ("Meris")
       signed an asset purchase agreement whereby Unilab acquired  substantially
       all of the assets of Meris.  The  agreement  was  approved on October 28,
       1998 by the United States Bankruptcy Court in Los Angeles, California and
       Unilab took  possession  of the  acquired net assets on November 5, 1998.
       The  purchase  price  consisted  of  the  issuance  of  a  $14.0  million
       convertible   subordinated   note,   $2.5  million  in  cash  payable  in
       seventy-two  equal monthly  installments and the assumption of net assets
       of  $3.5  million,  consisting  primarily  of  accounts  receivable.  The
       acquisition was accounted for under the purchase method of accounting and
       the statements of operations  include the results of Meris since November
       5, 1998.

       The purchase  price was allocated to the assets  acquired  based on their
       fair value at the date of acquisition and the difference between the cost
       of  acquiring  Meris and the fair  value of the net  assets  acquired  of
       approximately  $14.9  million  was  treated as  goodwill  for  accounting
       purposes.  In  connection  with the  integration  of the  acquired  Meris
       operations with those of Unilab, the Company recorded liabilities of $1.4
       million,  primarily  related to severance (for the reduction in headcount
       of approximately  230 employees) and other employee related  liabilities.
       At March 31, 1999, approximately $0.3 million of liabilities, expected to
       be paid in the next three months of 1999, were outstanding.

       On April 5, 1999, the Company and Physicians  Clinical  Laboratory,  Inc.
       (doing  business  as  Bio-Cypher  Laboratories)  ("BCL")  signed an asset
       purchase  agreement whereby Unilab will acquire  substantially all of the
       assets of BCL. The purchase price consists of a $25.0 million convertible
       note,  the  issuance of 1.0  million  shares of Unilab  common  stock and
       approximately  $8.0  million of cash.  In  addition,  Unilab will acquire
       $12.0  million  of  assets,  the  majority  of which are  trade  accounts
       receivable,   and  assume  liabilities  of  approximately  $4.0  million.
       Completion  of  the  transaction  is  conditioned  upon  the  receipt  of
       Hart-Scott-Rodino approval and other customary closing conditions.

       The  acquisition  will be  accounted  for  under the  purchase  method of
       accounting and the  statements of operations  will include the results of
       BCL from the completion of the transaction (expected to be around May 15,
       1999).  The purchase price will be allocated to the assets acquired based
       on their fair value at the date of acquisition and the difference between
       the cost of acquiring BCL and the fair value of the net assets  acquired,
       estimated to approximate $30-$32 million, will be treated as goodwill for
       accounting purposes.

4.     Supplemental Disclosure of Cash Flow Information

        (amounts in thousands)                Three months ended March 31,
                                                  1999              1998
       Cash paid during the period for:
           Interest, net                      ($59)              $123
           Income taxes                        -                    2





Item 2.

               Management's Discussion and Analysis of Financial Condition
                           and Results of Operations

                              Results of Operations

                      Quarter Ended March 31, 1999 Compared with
                          Quarter Ended March 31, 1998

     Revenue  increased  to $63.6  million for the three  months ended March 31,
     1999 ("first  quarter  1999") from $54.5 million for the three months ended
     March 31, 1998 ("first  quarter  1998"),  representing  an increase of $9.0
     million  or  16.6%.   Approximately   $6.1  million  of  the  increase  was
     attributable to revenue generated from the acquisition of Meris,  which was
     effective as of November 5, 1998. Exclusive of the acquired Meris business,
     revenue  increased  $2.9  million,  primarily  the result of  increases  in
     reimbursement  levels  of  $1.5  million  and  additional  specimen  volume
     generating $1.4 million.

     The Company  experienced a 2.7%  increase,  exclusive of the acquired Meris
     business, in the average reimbursement received for each specimen processed
     during the first quarter 1999 versus the comparable prior year period.  The
     increase in  reimbursement  levels is  primarily  due to increases in rates
     charged  to  managed  care  clients,  replacement  of  the  Company's  most
     unprofitable  accounts with other reasonably priced business and changes in
     test mix to more  sophisticated  testing  procedures  for HIV and  sexually
     transmitted diseases. Exclusive of the acquired Meris business, the Company
     experienced a 2.6% increase in the number of specimens processed during the
     first quarter 1999 versus the first  quarter 1998.  The increase was due to
     core volume growth.

     Earnings before interest,  taxes,  depreciation and amortization ("EBITDA")
     were $11.5  million for the first quarter 1999, an increase of 37% compared
     to the $8.4 million EBITDA for the first quarter 1998.

     Salaries,  wages and  benefits  increased  to $18.5  million  for the first
     quarter 1999 from $16.8 million for the first quarter 1998. As a percentage
     of revenue,  salaries,  wages and benefits  decreased to 29.0% in the first
     quarter 1999 from 30.9% in the first quarter 1998.  The decrease  primarily
     reflects the economies of scale  associated with processing a significantly
     higher specimen  volume (11.8% volume increase  including the effect of the
     Meris acquisition) without the same corresponding increase in headcount.

     Supplies expense  increased to $8.8 million for the first quarter 1999 from
     $7.6  million  for the first  quarter  1998.  As a  percentage  of revenue,
     supplies expense were consistent at approximately 14.0%. In addition, other
     operating  expenses  increased to $15.4  million for the first quarter 1999
     from $13.1  million for the first quarter 1998. As a percentage of revenue,
     other operating expenses were consistent at approximately 24.2%.

     Amortization  and  depreciation  expense  decreased to $1.9 million for the
     first quarter 1999 from $2.0 million from the first quarter 1998  primarily
     due to the  expiration of certain  non-compete  agreements  and  laboratory
     computer equipment becoming fully depreciated in early 1998.

     Selling,  general and administrative expenses increased to $9.3 million for
     the first  quarter 1999 from $8.5 million for the first  quarter 1998. As a
     percentage  of  revenue,   selling,  general  and  administrative  expenses
     decreased  to 14.7% in the  first  quarter  1999  from  15.7% in the  first
     quarter  1998.  Such decrease  continues the trend  realized by the Company
     throughout  1998 and 1997 and also  reflects  the  economies  of scale  and
     efficiencies gained from the Meris acquisition.

     Third party interest  expense,  net increased to $3.5 million for the first
     quarter 1999 from $3.4 million for the first quarter 1998  primarily due to
     the additional  interest expense incurred on the $14.0 million  convertible
     subordinated note issued in connection with the Meris acquisition.

Year 2000 Update

     As stated in the  Company's  Annual  Report on Form 10-K for the year ended
     December 31, 1998, the Company expected to have  modifications to all major
     systems  completed by the end of the first quarter 1999. All  modifications
     to laboratory and accounting systems in order for such systems to recognize
     and  perform  date  calculations  in the year  2000  have  been  completed.
     Modifications  to billing systems are primarily  complete,  with some minor
     adjustments, expected to be completed by the middle of June, needed to make
     such billing systems fully compliant.

Liquidity and Capital Resources

     Net cash  provided by operating  activities  was $8.8 million for the first
     quarter  1999 and  reflects an  improvement  of $2.1 million over the first
     quarter  1998  when net cash  provided  by  operating  activities  was $6.7
     million. The improvement in 1999 was primarily due to an improvement in the
     Company's operating performance.

     Net cash  used by  financing  activities  was $0.4  million  for the  first
     quarter 1999, resulting primarily from scheduled principal repayments under
     capital lease obligations.

     Net cash  used by  investing  activities  was $1.1  million  for the  first
     quarter 1999, resulting from fixed asset additions.

     The Company  had $27.5  million of cash and cash  equivalents  at March 31,
     1999.  On April 1, 1999,  $6.6  million for  interest on $120.0  million of
     senior  notes was due,  and such amount was paid from the $27.5  million of
     cash and cash equivalents on hand.  Management  believes that the amount of
     cash and cash  equivalents  available  at March 31,  1999 and the cash flow
     expected  from  operations  will  be  sufficient  for the  Company  to meet
     anticipated  requirements for working capital,  interest payments,  capital
     expenditures and scheduled  principal payments under capital lease and debt
     obligations for the foreseeable future.


                           PART II - OTHER INFORMATION


Item 6.         Exhibits and Reports on Form 8-K

(A)             Exhibits

                Exhibit  99.1 - Press  Release,  dated May 4,  1999, announcing
                first quarter earnings results.

(B)             Reports on Form 8-K

                Amendment to Current  Report on form 8-K(A),  dated January 18,
                1999 with respect to Items 2 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/ Brian D. Urban               
Date:  May 5, 1999                       Brian D. Urban
                                         Executive Vice President,
                                         Chief Financial Officer and Treasurer





<TABLE> <S> <C>

<ARTICLE> 5
<CIK> 0000899714
<NAME> UNILAB CORPORATION
<MULTIPLIER> 1,000
       
<S>                             <C>
<PERIOD-TYPE>                   3-MOS
<FISCAL-YEAR-END>                          DEC-31-1998
<PERIOD-END>                               MAR-31-1999
<CASH>                                          27,470
<SECURITIES>                                         0
<RECEIVABLES>                                   54,514
<ALLOWANCES>                                  (11,043)
<INVENTORY>                                      3,232
<CURRENT-ASSETS>                                75,748
<PP&E>                                          43,329
<DEPRECIATION>                                (32,054)
<TOTAL-ASSETS>                                 151,255
<CURRENT-LIABILITIES>                           25,404
<BONDS>                                        119,367
                                0
                                          4
<COMMON>                                           407
<OTHER-SE>                                    (14,783)
<TOTAL-LIABILITY-AND-EQUITY>                   151,255
<SALES>                                         63,559
<TOTAL-REVENUES>                                63,559
<CGS>                                                0
<TOTAL-COSTS>                                   38,126
<OTHER-EXPENSES>                                11,209
<LOSS-PROVISION>                                 4,572
<INTEREST-EXPENSE>                               3,486
<INCOME-PRETAX>                                  6,166
<INCOME-TAX>                                         0
<INCOME-CONTINUING>                              6,166
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                     6,166
<EPS-PRIMARY>                                     0.15
<EPS-DILUTED>                                     0.14
        

</TABLE>

                                                                   Exhibit 99.1

PRESS RELEASE                               UNILAB CORPORATION

                                            (AMEX:ULB)
                                            18448 Oxnard Street
                                            Tarzana, CA 91356
                                            www.Unilab.com

                                            For Further Information:
                                            Melissa Mahoney
                                            Phone: (818) 758-6607
                                            e-mail: [email protected]



IMMEDIATE RELEASE
May 4th, 1999

         UNILAB CORPORATION ANNOUNCES FIRST QUARTER RESULTS

TARZANA,  CA, May 4, 1999 -- UNILAB  Corporation (AMEX: ULB) reported today that
net income for the quarter ended March 31, 1999 was $6.2  million,  or $0.14 per
common share,  compared to net income of $3.1 million, or $0.07 per common share
in the same period last year, and $0.25 per common share earned during full year
1998.  The  Company  reported  net sales of $63.6  million for the  quarter,  an
increase of 16.6% from $54.5 million in the same period last year.

Earnings before Interest,  Taxes,  Depreciation and Amortization ("EBITDA") were
$11.5 million for the quarter,  or 18.2% of sales,  compared to $8.4 million, or
15.5% of sales, for the same period last year.

"Our first quarter  results reflect the strength of our underlying base business
plus the  integrated  benefits of the Meris  acquisition  made during the fourth
quarter  of 1998"  said  David  Weavil,  Unilab's  Chairman  and  CEO.  "We have
successfully  continued  with  our  proven  strategies  for  managing  the  core
business, while at the same time proceeding with our growth plans."

Test volume  increased by almost 12% this quarter  compared to the first quarter
of last year,  with a significant  portion of the increase due to the additional
volumes associated with the Meris acquisition.  Overall pricing improved by more
than 4%.  Weavil  added,  "these  increases in the  fundamental  measures of our
business  are a direct  result of the  efforts of a  dedicated  management  team
staying focused on improving  operating  performance and increasing  shareholder
value."

Weavil  continued by stating,  "We continue to maintain a keen focus on managing
our  operating  expense  base,   achieving  the   consolidation   benefits  from
acquisitions, seeking profitable organic growth and increasing prices." Staffing
expense  decreased by 2% on a percent of sales basis,  reflecting  volume driven
economies of scale, compared to the same quarter last year.

Unilab's  cash  position  at the end of the first  quarter  was  $27.5  million,
reflecting  strong  receivables  collections  that  decreased the number of days
sales outstanding ("DSO")--a measure of billing and collection efficiency--to 62
days from 67 days at the end of 1998.

The  statements  in  this  press  release  that  are  not  historical  facts  or
information may be deemed to be  forward-looking  statements.  Each of the above
forward-looking  statements  is  subject to change  based on  various  risks and
uncertainties,   including  without   limitation,   legislative  and  regulatory
developments  and competitive  actions in the  marketplace  that could cause the
outcome to be  materially  different  from  stated.  Certain of these  risks and
uncertainties are listed in the Company's 1998 Form 10-K.

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 300 regional  service and testing  facilities
located throughout the state.



                              - tables to follow -


<PAGE>



                               Unilab Corporation
                            Statements of Operations
                  (amounts in thousands, except per share data)
                                   (Unaudited)


                                                  Three months ended March 31,
                                                   1999               1998
                                                   ----               ----
1998

Revenue                                            $63,559          $54,530
                                                   -------          -------

Direct Laboratory and Field Expenses:
Salaries, Wages and Benefits                        18,455           16,823
Supplies                                             8,827            7,613
Other Operating Expenses                            15,416           13,129
                                                    ------           ------
                                                    42,698           37,565

Amortization and Depreciation                        1,897            1,985
Selling, General and Administrative Expenses         9,312            8,534
                                                     -----            -----

Total Operating Expenses                            53,907           48,084
                                                    ------           ------

Operating Income                                     9,652            6,446

Third Party Interest, net                          (3,486)          (3,374)
                                                   -------          -------

Income Before Income Taxes                           6,166            3,072
Tax Provision                                            -                -
                                                  --------        ---------

Net Income                                          $6,166           $3,072

Preferred Stock Dividends                               33               33
                                                        --               --

Net Income Available to Common Shareholders         $6,133           $3,039


Earnings per Share:
Basic                                                $0.15            $0.07
Diluted                                              $0.14            $0.07

EBITDA                                             $11,549           $8,431

<PAGE>


                               Unilab Corporation
                                 Balance Sheets
                             (amounts in thousands)


                                                   March 31,
                                                     1999          December 31,
                                                  (Unaudited)          1998

Cash and Cash Equivalents                            $27,470          $20,137
Accounts Receivable, net                              43,471           41,326
Inventory of Supplies                                  3,232            3,055
Prepaid Expenses and Other Current Assets              1,575            1,045
                                                    --------            -----
     Total Current Assets                             75,748           65,563

Property and Equipment, net                           11,274           11,277

Goodwill, net                                         56,447           56,949

Other Intangible Assets, net                           2,221            2,370

Other Assets                                           5,565            6,301
                                                       -----            -----

Total Assets                                        $151,255         $142,460
                                                    --------         --------

Total Current Liabilities                            $25,404          $22,631

Long-Term Debt, net of current portion               136,882          137,170

Other Liabilities                                      4,163            4,026

Total Shareholders' Deficit                         (15,194)         (21,367)
                                                    --------         --------

Total Liabilities and Shareholders' Deficit         $151,255         $142,460
                                                    --------         --------





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