-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TChBJSqtpoKEdQO+Wd/QFJfRjTUxcBsKSeTZyocqy0jCGEfzIKlu8CdopYnLEtAg GS0UhyB4Fsa4pAHlKe+9kg== 0000816151-96-000003.txt : 19960322 0000816151-96-000003.hdr.sgml : 19960322 ACCESSION NUMBER: 0000816151-96-000003 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960321 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: LABONE INC CENTRAL INDEX KEY: 0000816151 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MEDICAL LABORATORIES [8071] IRS NUMBER: 480952323 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-15975 FILM NUMBER: 96537121 BUSINESS ADDRESS: STREET 1: 10310 W 84TH TERR CITY: LENEXA STATE: KS ZIP: 66214 BUSINESS PHONE: 9138888397 MAIL ADDRESS: STREET 1: 10310 W 84TH TERRACE CITY: LENEXA STATE: KS ZIP: 66214 FORMER COMPANY: FORMER CONFORMED NAME: HOME OFFICE REFERENCE LABORATORY INC DATE OF NAME CHANGE: 19940405 10-K 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended - December 31, 1995 Commission file number 0-15975 ------- LabOne, Inc. ---------------------------------------------------- (Exact name of Registrant as specified in its charter) Delaware 48-0952323 --------------------------- --------------- (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 10310 West 84th Terrace Lenexa, Kansas 66214 -------------------------------------- -------- (Address of principal executive offices) (ZIP Code) Registrant's telephone number, including area code: 913-888-1770 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common stock, $0.01 par value ----------------------------- (Title of Class) 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 / / Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. / / Approximate aggregate market value of voting stock held by non-affiliates of Registrant: $33,892,000 (based on closing price as of March 1, 1996, of $14.88). The non-inclusion of shares held by directors, officers and beneficial owners of more than 5% of the outstanding stock shall not be deemed to constitute an admission that such persons are affiliates of the Registrant within the meaning of the Securities and Exchange Act of 1934. Number of shares outstanding of the only class of Registrant's common stock as of March 1, 1996: $0.01 par value common - 13,055,471 shares net of 1,944,529 shares held as treasury stock. DOCUMENTS INCORPORATED BY REFERENCE: The information included under the captions entitled "Information Concerning Nominees for Election as Directors," "Security Ownership of Management," "Security Ownership of Certain Beneficial Owners," and "Executive Compensation," in the Company's definitive proxy statement to be filed with the Commission pursuant to Regulation 14A with respect to its annual meeting of stockholders to be held May 9, 1996, is incorporated into Part III of this Annual Report on Form 10-K. The exhibit list for this Form 10-K begins on page 16. Page 1 of 70 PART I ------ ITEM 1. BUSINESS General - ------- LabOne, Inc., a Delaware corporation, was established in 1972 to provide laboratory services for the insurance industry. LabOne, Inc., together with its wholly-owned subsidiaries Lab One Canada Inc. (formerly Head Office Reference Laboratory Limited) and HORL (UK) Limited (hereinafter collectively referred to as either LabOne or the Company), is the largest provider of such services in the United States and Canada. (See Note 7 of Notes to Consolidated Financial Statements for financial information regarding foreign operations.) In 1994, the company expanded its testing offerings to include the healthcare market. The Company provides high-quality laboratory services to insurance companies, physicians and employers nationwide. LabOne provides risk-appraisal laboratory services to the insurance industry. The tests performed by the Company are specifically designed to assist an insurance company in objectively evaluating the mortality and morbidity risks posed by policy applicants. The majority of the testing is performed on specimens of individual life insurance policy applicants. The Company also provides testing services on specimens of individuals applying for individual and group medical and disability policies. LabOne's clinical testing services are provided to the healthcare industry to aid in the diagnosis and treatment of patients. LabOne operates only one highly automated and centralized laboratory, which has significant economic advantages over other conventional laboratory competitors. LabOne markets its clinical testing services to the payers of healthcare--insurance companies and self-insured groups. The Company does this through Lab Card(TM), a Laboratory Benefits Management (LBM) program. The Lab Card Program provides laboratory testing at a reduced rate as compared to traditional laboratories. It uses a unique benefit design that shares the cost savings with the patient, creating an incentive for the patient to help direct laboratory work to LabOne. Under the Program, the patient incurs no out-of-pocket expense when the Lab Card is used, and the insurance company or self-insured group receives substantial savings on its laboratory charges. LabOne is certified by the Substance Abuse and Mental Health Services Administration (SAMHSA) to perform substance abuse testing services for federally regulated employers and is currently marketing these services throughout the country to both regulated and nonregulated employers. The Company's rapid turnaround and multiple testing options help clients reduce downtime for affected employees and meet mandated drug screening guidelines. Services Provided by the Company - -------------------------------- Insurance Applicant Testing: In order to establish the appropriate level of premium payments or to determine whether to issue a policy, an insurance company requires objective means of evaluating the insurance risk posed by policy applicants. Because decisions of this type are based on statistical probabilities of mortality and 2 morbidity, an insurance company generally requires quantitative data reflecting the applicant's general health. Standardized laboratory testing, tailored to the needs of the insurance industry and reported in a uniform format, provides an insurance company with an efficient means of evaluating the mortality and morbidity risks posed by policy applicants. The use of standardized urinalysis and blood testing has proven a cost-effective alternative to individualized physician examinations, which utilize varying testing procedures and reports. Standardized laboratory testing can also be used to verify responses on a policy application to such questions as whether the applicant is a user of tobacco products, certain controlled substances or certain prescription drugs. Insurance companies generally offer a premium discount for nonsmokers and often rely on testing to determine whether an applicant is a user of tobacco products. Cocaine use has been associated with increased risk of accidental death and cardiovascular disorders, and as a result of the increasing abuse in the United States and Canada, insurance companies are testing a greater number of policy applicants to detect its presence. Therapeutic drug testing also detects the presence of certain prescription drugs that are being used by an applicant to treat a life-threatening medical condition that may not be revealed by a physical examination. LabOne's insurance testing services consist of certain specimen profiles that provide insurance companies with specific information that may indicate liver or kidney disorders, diabetes, the risk of cardiovascular disease, bacterial or viral infections and other health risks. The Company also offers tests to detect the presence of antibodies to human immunodeficiency virus (HIV), nicotine, cocaine and certain medications associated with life-threatening medical conditions that may not be revealed by a routine physical examination. Insurance specimens are normally collected from individual insurance applicants by independent paramedical personnel using LabOne's custom-designed collection kits and containers. These kits and containers are delivered to LabOne's laboratory via overnight delivery services or mail, coded for identification and processed according to each client's specifications. Results are generally transmitted to the insurance company's underwriting department that same evening. Patient Testing: The Company began offering laboratory testing services to the healthcare industry in May 1994. Clinical laboratory tests are generally requested by physicians and other healthcare providers to diagnose and monitor diseases and other medical conditions through the detection of substances in blood and other specimens. Laboratory testing is generally categorized as either clinical testing, which is performed on bodily fluids including blood and urine, or anatomical pathology testing, which is performed on tissue. Clinical and anatomical pathology tests are frequently performed as part of regular physical examinations and hospital admissions in connection with the diagnosis and treatment of illnesses. The most frequently requested tests include blood chemistry analyses, blood cholesterol level tests, urinalyses, blood cell counts, PAP smears and AIDS-related tests. 3 Clinical specimens are collected at the physician's office or other specified sites. The Company's couriers pick up the specimens and deliver them to local airports for express transport to the Kansas laboratory. Specimens are coded for identification and processed. The Company's testing menu includes the majority of tests requested by its clients. Tests not performed in-house are sent to reference laboratories for testing, and results are entered into the Company's computer system along with all other completed results. In 1994, LabOne signed an agreement with PCS Health Systems (PCS), a subsidiary of Eli Lilly, to market an integrated and fully managed system of laboratory testing and administrative services to payers of laboratory services throughout the United States. The result of this agreement is a program called Lab Card, which offers both payers and the covered population substantial cost savings on high-quality laboratory testing services. Lab Card utilizes PCS's point-of-service, real-time eligibility verification system. The testing is performed at LabOne's centralized laboratory facility in Kansas. Substance Abuse Testing: LabOne has provided quality laboratory testing services to the insurance industry for 24 years. Certification by SAMHSA in 1994 enables the Company to offer substance abuse testing services to federally regulated industries. Specimens for substance abuse testing are typically collected by independent agencies who use LabOne's forms and collection supplies. Specimens are sealed with bar-coded, tamper-evident seals and shipped overnight to the Company. Automated systems monitor the specimens throughout the screening and confirmation process. Negative results are available immediately after testing is completed. Initial positive specimens are verified by the gas chromatography/mass spectrometry method, and results are generally available within 24 hours. Results are transmitted electronically to the client's secured computer, printer or fax machine. The following table summarizes the Company's revenues from services provided to the insurance and healthcare (clinical and substance abuse testing) markets (dollars in thousands): Year ended December 31, 1995 1994 1993 ----------- ----------- ----------- Insurance $ 52,544 92% $ 60,260 99% $ 69,378 100% Healthcare 4,485 8% 466 1% - 0% ------ ------ ------ Total $ 57,029 $ 60,726 $ 69,378 ====== ====== ====== Operations - ---------- The Company's operations are designed to facilitate the testing of a large number of specimens and to report the results to our clients, generally within 24 hours of receipt of specimens. 4 The Company has internally developed, custom-designed laboratory and business processing systems. These systems enable each client company to customize its own testing and reflex requirements by several parameters to satisfy its particular needs. It is a centralized network system that provides an automated link between LabOne's testing equipment, data processing equipment and the clients' computer systems. This system offers LabOne's clients the ability to customize their testing activities to best meet their needs. As a result of the number of tests it has performed over the past several years, LabOne has compiled and maintains a large statistical data base of test results. These summary statistics are useful to the actuarial and underwriting departments of an insurance client in comparing that client's test results to the results obtained by the Company's entire client base. Company-specific and industry-wide reports are frequently distributed to clients on subjects such as coronary risk analysis, cholesterol and drugs of abuse. The Company considers the confidentiality of its test results to be of primary importance and has established procedures to ensure confidentiality of test results. Substantially all of the reagents and materials used by the Company in conducting its testing are commercially purchased and are readily available from multiple sources. Regulatory Affairs/Quality Improvement - -------------------------------------- The objective of the regulatory affairs/quality improvement department is to ensure that accurate and reliable test results are released to our clients. This is accomplished by incorporating both internal and external quality assurance programs in each area of the laboratory. In addition, our quality assurance specialists share the responsibility with all LabOne employees of an ongoing commitment to quality and safety in all laboratory operations. Internal quality and education programs are designed to identify opportunities for improvement in laboratory services and to meet all required safety training and education issues. These programs help ensure the reliability and confidentiality of test results. Procedure manuals in all areas of the laboratory help maintain uniformity and accuracy and meet regulatory guidelines. Tests on control samples with known results are performed frequently to maintain and verify accuracy in the testing process. Complete documentation provides record keeping for employee reference and meets regulatory requirements. All employees are thoroughly trained to meet standards mandated by OSHA in order to maintain a safe work environment. Superblind(TM) controls are used to challenge every aspect of service at LabOne. Specimens requiring special handling are evaluated and verified by control analysis personnel. A computer edit program is used to review and verify clinically abnormal results and all positive HIV antibody and drugs-of-abuse records. As an external quality assurance program, LabOne participates in a number of proficiency programs established by the College of American Pathologists, the American Association of Bioanalysts and the Centers for Disease Control. 5 LabOne is accredited by the College of American Pathologists and is licensed under the Clinical Laboratory Improvement Amendments (CLIA) of 1988. LabOne has additional licenses for HIV and substance abuse testing from the state of Kansas and all other states where such licenses are required. LabOne is certified by SAMHSA to perform testing to detect drugs of abuse in federal employees and in workers governed by federal regulations. Technology Development - ---------------------- The technology development department evaluates new commercially available tests and technologies or develops new assays and compares them to competing products in order to select the most accurate laboratory procedures. Total technology development expenditures are not considered significant to the Company as a whole. Sales and Marketing - ------------------- LabOne's client base currently consists primarily of insurance companies in the United States and Canada. The Company believes that its ability to provide prompt and accurate results on a cost-effective basis and its responsiveness to customer needs have been important factors in servicing existing business. All of the sales representatives for the insurance market have significant business experience in the insurance industry or clinical laboratory-related fields. These representatives call on major clients several times each year, usually meeting with a medical director or vice president of underwriting. An important part of the Company's marketing effort is directed toward providing its existing clients and prospects with information pertaining to the actuarial benefits of, and trends in, laboratory testing. The Company's sales representatives and its senior management also attend underwriters' and medical directors' meetings sponsored by the insurance industry. The sales representatives for the clinical industry are experienced in this market and currently work in the geographic areas which they represent. Marketing efforts are directed at insurance carriers, as well as self-insured companies and other organizations nationwide. Substance abuse marketing efforts are primarily directed at Fortune 1000 companies, occupational health clinics and third party administrators. The Company's strategy is to offer quality service at competitive prices. The sales force focuses on the ability of LabOne to offer multiple reporting methods, next flight out options, dedicated client service representatives and reporting of negative results before 8:00 A.M. Legislation and Regulation - -------------------------- In the past, legislation was introduced in several states that, if enacted, may restrict or ban all AIDS-related testing for insurance purposes in those states. The introduction of legislation to restrict or ban all AIDS-related testing does not ensure its passage into law. There can be no assurance, however, that such legislation will not be enacted in the future. A few states have enacted legislation or regulations which have had the effect of reducing or eliminating the volume of laboratory tests requested by medical insurers in those states. It is likely that the trend will continue as more states enact legislation relating to healthcare and medical insurance. 6 The Food and Drug Administration (FDA) may exert broader regulatory control over LabOne's business and all testing laboratories. The areas of possible increased control that could impact LabOne's business include (1) whether FDA premarket notification or clearance may be required for LabOne's continued commercial distribution and use of a blood and urine specimen collection kit, and (2) a draft FDA compliance policy guide stating that certain products routinely used by laboratories may require FDA approval or clearance. Competition - ----------- The Company believes that the insurance laboratory testing market is approximately a $100 million industry. LabOne currently controls over half the market, with three other main competitors, Osborn Laboratories, Inc., Clinical Reference Laboratory and GIB Laboratories, maintaining a majority of the remaining market. The insurance laboratory testing industry continues to be increasingly competitive. The primary focus of the competition has been on pricing. This continued competition has resulted in a decrease in LabOne's average price per test. It is anticipated that prices will continue to decline in 1996. Although competition has dramatically increased in the past few years, LabOne has maintained its position as the market leader. The Company believes its leading position in the insurance laboratory testing market is due in part to its focused commitment of resources to the life and health insurance industry. LabOne has continued to maintain its market leadership through the client relationships that it has developed over its 24-year history, its reputation for providing quality products and services at competitive prices, and its battery of tests which are tailored specifically to an insurance company's needs. The clinical laboratory testing market is a $40 billion industry which is highly fragmented and very competitive. The Company faces competition from numerous independent clinical laboratories and hospital- or physician-owned laboratories. Many of the Company's competitors are significantly larger and have substantially greater financial resources than the Company. LabOne is currently working to establish a sound client base in this environment. LabOne's business plan is to be the premier low-cost provider of high-quality laboratory services to self-insured employers and insurance companies in the healthcare market. The Company feels that its superior quality and centralized, low-cost operating structure enable it to compete effectively in this market. LabOne competes in the substance abuse testing market nationwide. The Company's major competitors are the three major clinical chains, LabCorp, Corning Clinical Laboratories and Smith Kline Beecham Laboratories, who collectively constitute approximately two-thirds of the substance abuse testing market. Foreign Markets - --------------- In 1977, LabOne opened Head Office Reference Laboratory Limited, a subsidiary, in Toronto, Canada. During 1994, LabOne consolidated all Canadian laboratory testing into the Kansas laboratory. In 1995, the name was changed to Lab One Canada Inc., which continues to market insurance testing services to Canadian clients, with laboratory testing performed in the United States. 7 The following table summarizes the revenue, profit and assets applicable to the Company's domestic operations and its subsidiary, Lab One Canada Inc. Year ended December 31, 1995 1994* 1993 ------ ------ ------ (in millions) Sales: United States $50.8 $53.0 59.8 Canada 6.2 7.7 9.6 Operating Profit: United States 2.1 5.8 14.1 Canada 0.3 1.1 2.6 Identifiable Assets: United States 64.4 71.3 75.9 Canada 5.7 5.5 5.2 * 1994 data includes restructuring charges of $1.6 million. (See Note 9 of Notes to Consolidated Financial Statements.) Employees - --------- As of March 1, 1996, the Company had 509 full-time employees, representing a decrease of 49 employees from the same time in 1995. None of the Company's employees are represented by a labor union. The Company believes its relations with employees are good. ITEM 2. PROPERTIES The Company's corporate headquarters is located in Lenexa, Kansas, approximately 12 miles from Kansas City, Missouri. This facility is owned by the Company and occupied by the administration, information systems, insurance client services and sales departments. There is no debt associated with this building. The Company's laboratory testing facility is in Overland Park, Kansas, less than two miles from corporate headquarters. This building is also owned by the Company and is occupied by laboratory operations and clinical client services. There is no debt associated with this facility. The testing laboratory has certain enhancements that improve the efficiency of operations. All automated testing equipment requiring purified water is linked directly to a centralized water-purification system. The laboratory is also equipped with a sensor-detecting ventilation system which eliminates Ohot spotsO caused by the high-temperature output of laboratory and computer processing equipment. In addition, a full-time alternative power source is on-line in the event of electrical power shortage. These back-up power sources allow specimen testing and data processing to continue until full power is restored, thus assuring LabOne's clients of our continuous laboratory operation. 8 The Company leases a building in Lenexa, Kansas, approximately two miles from corporate headquarters, for use as a secured warehouse and purchasing and distribution center. The lease is for five years through August 1998. This lease contains options to cancel at one or two years prior to the end of the lease term. The Company also leases 18 locations in Northern California and 11 in the Midwest which serve as LabOne Service Centers (LSCs). These facilities, which provide specimen collection services for patients, are typically located in a medical office building and are leased for up to five years. Lab One Canada Inc. leases a building in Toronto, Ontario, Canada, which is used for administration, sales and client services. This lease expires in November 1997. Part of the leased property is currently unused due to the transfer of the laboratory operations to the Kansas facility. The future expenses of the unused property were accrued as a portion of the restructuring charge incurred during 1994. LabOne believes that all of the above facilities are suitable for their intended use and that the space is adequate to handle certain increased volumes that may occur in the foreseeable future. ITEM 3. LITIGATION In the normal course of business, LabOne had certain lawsuits pending at December 31, 1995. In the opinion of management, after consultation with legal counsel and based upon currently available information, none of these lawsuits are expected to have a material impact on the financial condition or results of operations of the Company. No provisions for loss related to litigation are included in the accompanying consolidated financial statements. ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS None PART II ------- ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Registrant's common stock is traded in the national over-the-counter market and is listed in the NASDAQ National Market System maintained by the National Association of Securities Dealers. As of March 1, 1996, the outstanding shares were held by approximately 455 shareholders of record. The Company paid quarterly dividends of $0.18 per common share in 1995 and 1994. The Board of Directors reviews the dividend policy on a periodic basis. There are currently no restrictions that would limit the Company's ability to make future dividend payments. 9 The following are the high and low closing prices of the stock for each quarter of 1995 and 1994: 1995 1994 -------------- -------------- High Low High Low ----- ----- ----- ----- 1st Quarter $16.00 13.00 $23.50 17.00 2nd Quarter 15.50 12.75 24.25 17.75 3rd Quarter 15.00 11.50 20.75 17.75 4th Quarter 15.25 10.63 19.25 14.50 ITEM 6. SELECTED FINANCIAL DATA The following table summarizes certain selected financial information and operating data regarding the Company. This information should be read in conjunction with Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS and Item 14. (a) (1) and (2), CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES. The balance sheet data as of December 31, 1995, 1994, 1993, 1992, and 1991, and the statement of earnings data for each of the years in the five-year period ended December 31, 1995, have been derived from the Company's Consolidated Financial Statements, which have been audited by KPMG Peat Marwick LLP, the Company's independent certified public accountants. Years Ended December 31, (in thousands, except per share amounts) 1995 1994* 1993 1992 1991 Statement of Earnings Data: -------- ------ ------ ------ ------ Sales $ 57,029 60,726 69,378 74,437 75,739 Cost of sales 29,934 29,073 30,019 31,647 32,377 -------- ------ ------ ------ ------ Gross profit 27,095 31,653 39,359 42,790 43,362 Selling, general and administrative expenses 24,711 24,761 22,695 22,776 22,345 -------- ------ ------ ------ ------ Earnings from operations 2,385 6,893 16,664 20,014 21,017 Other income 2,365 1,640 870 1,666 724 -------- ------ ------ ------ ------ Earnings before income taxes 4,750 8,533 17,534 21,680 21,741 Income taxes 1,953 2,846 6,968 8,347 8,452 -------- ------ ------ ------ ------ Net earnings $ 2,797 5,687 10,566 13,333 13,289 ======== ====== ====== ====== ====== Earnings per common share $ 0.21 0.43 0.80 1.02 1.02 ======== ====== ====== ====== ====== Dividends per common share $ 0.72 0.72 0.72 0.72 0.18 ======== ====== ====== ====== ====== Balance Sheet Data: Working capital $44,233 48,559 48,649 42,724 25,846 Total assets 70,048 76,758 81,130 81,661 78,890 Long term debt - - - - - Stockholders' equity 64,864 71,237 74,764 72,851 69,355 *1994 selling, general and administrative expenses include a restructuring charge of $1.6 million. (See Note 9 of Notes to Consolidated Financial Statements.) 10 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS - --------------------- 1995 Compared to 1994 Net sales decreased approximately 6% in 1995 to $57.0 million from $60.7 million in 1994 due to decreases in insurance laboratory and kit revenue, partially offset by increases in healthcare (clinical and substance abuse testing) laboratory revenues. Insurance laboratory revenues declined due to decreases in the volume and price of tests performed. The total number of insurance applicants tested by LabOne during 1995 decreased 10% as compared to 1994. This decline was due to market competition, a reduction in the total number of life insurance applications written in the industry, and regulations restricting the use of laboratory testing for underwriting of medical insurance. Average revenue per applicant declined 5% primarily due to a decrease in prices as a result of continued competitive pressures. During the fourth quarter 1994, LabOne initiated a price stabilization plan. The purpose of the plan was to increase prices by promoting service. The initial result of this action was a slight increase in the average revenue per applicant. However, prices subsequently declined during 1995. Healthcare revenues were $4.5 million during 1995, as compared to $0.5 million in 1994. Cost of sales increased $0.9 million (3%) in 1995 as compared to the prior year. This increase is due to increases in payroll and outside lab services related to clinical and substance abuse testing, and LabOne Service Center (LSC) expenses. LSC expenses increased due to the LSC expansion as well as a write-off for closing nonperforming locations. These were partially offset by decreases in Lab One Canada expenses due to closing the laboratory in 1994. Lab One Canada continues to market testing services with laboratory testing performed in the United States. Healthcare costs of sales expenses were $8.6 million during 1995, as compared to $4.0 million in 1994. In September 1995, LabOne reduced staff by 7% resulting in additional expenses of $0.5 million. The work force reduction was considered necessary to improve the cost structure of its insurance testing operations and meet clients' requirements for lower cost laboratory services. It is expected the annual savings from the reduction in staff and LSC locations will result in labor savings and reduced LSC operating expenses of $2.4 million. As a result of the above factors, gross profit decreased from $31.7 million in 1994 to $27.1 million in 1995. Selling, general and administrative expenses decreased $0.1 million in 1995 as compared to the prior year, primarily due to expenses related to the one-time restructuring charge of $1.6 million incurred in 1994. (See 1994 Compared to 1993.) Depreciation and maintenance expenses also declined in 1995. These declines were partially offset by increases in commission, bad debt and third party billing expenses. Healthcare overhead expenses were $5.8 million during 1995, as compared to $3.1 million in 1994. Operating income fell from $6.9 million in 1994 to $2.4 million in 1995. The $4.5 million reduction is primarily attributable to a $1.3 million decrease in the insurance segment operating income and a $3.3 million increase in the healthcare segment operating loss. 11 Nonoperating income increased $0.7 million due to an increase in investment income, partially offset by an increase in other expenses. The effective income tax rate increased from 33.4% during 1994 to 41.1% in 1995 due primarily to a 1994 tax adjustment related to the closure of the HORL(UK) operations and a 1995 tax adjustment related to repatriation of foreign-sourced income. The combined effect of the above factors resulted in net earnings of $2.8 million, or $0.21 per share, in the year ended December 31, 1995, as compared to $5.7 million, or $0.43 per share, in the same period last year. 1994 Compared to 1993 Healthcare (clinical and substance abuse testing) expenses disclosed in this section have been modified to conform with current year presentation based on segment reporting requirements for 1995. Net sales decreased approximately 12% in 1994 to $60.7 million from $69.4 million in 1993, primarily due to a decrease in laboratory revenue. Laboratory testing revenue decreased as the result of an 8% decrease in the number of applicants tested and a 7% decrease in the average revenue per applicant. Average revenue per applicant decreased primarily due to a decrease in prices as a result of continued competitive pressures. The total volume of applicants tested decreased primarily due to a decline in the number of life insurance applications written in the industry. Healthcare laboratory testing generated revenue of $0.5 million during 1994. Insurance kit revenue decreased $0.9 million due to lower sales volumes. Cost of sales decreased 3%, or $0.9 million, in 1994 from the prior year. This is primarily due to decreases in insurance kit expenses, depreciation and amortization expense, and net postage expense. Insurance kit expenses decreased due to the lower sales volumes. These decreases were partially offset by increases in payroll and healthcare expansion expenses. Cost of sales expenses related to the healthcare expansion were $4.0 million in 1994. As a result of the above factors, gross profit decreased from $39.4 million in 1993 to $31.7 million in 1994. Selling, general and administrative expenses increased $2.1 million (9%) in 1994 due primarily to expenses related to the third quarter restructuring charge of $1.6 million, which includes charges for consolidating Canadian laboratory operations into the Kansas facility and for severance payments resulting from elimination of several insurance testing administrative positions. These changes resulted in future annual cost savings of $1.7 million due to elimination of Canadian laboratory payroll and a reduction in depreciation and U.S. administrative payroll expenses. Selling, general and administrative expenses related to the healthcare expansion were $3.1 million in 1994. Operating income fell from $16.7 million in 1993 to $6.9 million in 1994. The $9.8 million reduction is primarily attributable to a $3.2 million decrease in the insurance segment operating income and a $6.6 million operating loss in the healthcare segment. Other income (expense), net increased $0.8 million primarily due to recovery of a nonoperating expense from the prior year. 12 The effective income tax rate declined from 39.7% during 1993 to 33.4% in 1994 due primarily to tax adjustments related to the closure of the HORL(UK) operations and certain U.S. tax adjustments. The combined effect of the above factors resulted in net earnings of $5.7 million, or $0.43 per share, in the year ended December 31, 1994, as compared to $10.6 million, or $0.80 per share, in 1993. TRENDS - ------ The following is management's analysis of certain existing trends that have been identified as potentially affecting the future financial results of the Company. Due to the potential for a rapid rate of change in any number of factors associated with the insurance and healthcare laboratory testing industries, it is difficult to quantify with any degree of certainty LabOne's future volumes, sales or net earnings. In the last several years, there has been a decline in the number of life insurance applications written in the industry. In addition, the insurance laboratory testing industry continues to be highly competitive. The primary focus of the competition has been on pricing. LabOne continues to maintain its market leadership by providing quality products and services at competitive prices. Management expects prices and volume may continue to decline during 1996 due to competitive pressures and a reduction in the number of life insurance applications written. These trends may have a continuing material impact on earnings from operations. During December 1994, the FDA gave premarket approval to Epitope, Inc. with respect to its specimen collection kit for oral fluid HIV-1 antibody testing. In December 1995, Epitope announced that the FDA had issued a letter stating that the oral fluid Western Blot test was approvable as a confirmation for the oral fluid HIV-1 antibody test. If approved, this may allow for the initial screen and the Western Blot confirmation test to be performed on the same specimen. Due to the lower collection expense associated with oral fluid collection devices, the potential exists for an expansion of the testing market. Currently, there are approximately 13.5 million individual life insurance policies sold in the United States annually. However, laboratory services are provided on only approximately 4.5 million of these policy applicants. The noninvasive nature of oral specimen collection allows for low-cost agent collection, making testing much more affordable on smaller face value insurance policies. Conversely, the device also has the potential to cannibalize part of the existing blood and urine testing market. The net impact of oral fluid testing cannot be determined at this time. There are companies currently developing and seeking FDA approval for home HIV test products. If approved, these products would allow individuals to confidentially determine their HIV status prior to applying for insurance. To avoid accepting these high-risk policies, the insurance companies may elect to lower the threshold at which laboratory tests are requested to prevent writing policies on HIV-positive applicants. Most insurance laboratory testing is performed on policies of $100,000 or greater, representing about one-third of all policy applicants. The $25,000 to $99,999 range represents approximately one-quarter of current insurance policy applicants. If the FDA does approve any home testing kit for HIV, the potential exists for a significant expansion of laboratory testing for lower policy amounts. 13 LabOne entered the clinical and SAMHSA-certified substance abuse testing markets during 1994. The Company continues to add new customers in both fields. The Company's Lab Card program covered approximately 280,000 lives at December 31, 1995, including The Guardian Life Insurance Company of America (The Guardian) and Principal Healthcare of Kansas City (Principal). The Guardian has stated its intention to roll out the Lab Card Program in 16 states covering approximately 500,000 additional lives starting in the second or third quarter 1996. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- LabOne's working capital position declined from $48.6 million at December 31, 1994, to $44.2 million at December 31, 1995. This decrease is the result of dividends paid and capital additions exceeding cash provided by operations and net maturities of long-term investments. Net cash provided by operations increased by $7.8 million, primarily a result of conversion of short-term investments, partially offset by the decrease in net earnings. During 1995, LabOne paid quarterly dividends of $0.18 per common share. The Board of Directors reviews this policy on a periodic basis. The total amount of dividends paid during 1995 was $0.72 per share, or $9.4 million. Although cash dividends paid currently exceed net cash provided by operations, there are no immediate restrictions that would limit the Company's ability to make future dividend payments. In 1988, LabOne's Board authorized the Company to enter the market from time to time for the purpose of acquiring shares of the Company's common stock in an amount not to exceed $25.0 million. As of December 31, 1995, the Company had acquired 2,099,235 shares of LabOne as treasury stock at a total cost of $22.7 million, leaving $2.3 million for potential future stock purchases. No shares have been purchased since 1990. During 1995, the Company invested $2.9 million in additional property, plant and equipment, as compared to $3.4 million in 1994 and $3.7 million in 1993. Of the amounts spent in 1995 and 1994, approximately $1.4 million and $1.8 million, respectively, were for the diversification into the clinical and substance abuse testing markets. Additional investments in property, plant and equipment in 1996 are expected to be consistent with the amount spent in 1995. At December 31, 1995, the Company had no material commitments for capital expenditures. The Company had no short-term borrowings during 1995. The Company has an unsecured line of credit of $5.0 million that may be used for general corporate purposes, of which the full amount is currently available. LabOne's line of credit has a stated rate equivalent to the prime rate which was 8.5% at December 31, 1995. There are no debt restrictions related to this line of credit. Management expects to be able to fund operations, capital asset additions, treasury stock purchases, if any, and future dividend payments from a combination of cash flow, cash reserves and short-term borrowings. Total cash and investments at December 31, 1995, were $37.6 million, as compared to $41.5 million at December 31, 1994. Included in LabOne's investments at year-end are $23.8 million of short-term investments classified as trading securities and recorded at market value. All other short- and long-term investments are classified as held-to-maturity and recorded at amortized cost. 14 In February 1995, LabOne was advised by Seafield Capital Corporation (Seafield) that Seafield had retained Alex. Brown & Sons Incorporated as financial adviser to assist Seafield in considering strategic alternatives to maximize Seafield shareholder value. Seafield is a holding company that owns 82% of LabOne, as well as a number of other investments and cash equivalents. LabOne has been informed that one alternative Seafield expects to pursue is a cash-option merger of Seafield into LabOne. In such a merger, Seafield shareholders would have the option of receiving cash as well as shares of LabOne. The merger would most likely be preceded by Seafield's distribution to its shareholders, or other disposition by Seafield, of its other assets. Seafield's Board of Directors has also announced that it will consider other business combination proposals that are presented to it. LabOne has appointed a special committee of independent directors to consider any merger or other proposal that may be presented to it by Seafield. LabOne has been advised by Seafield that if a definitive merger agreement is reached, it is anticipated that such a merger would not occur until late 1996 because of the time required to complete anticipated Seafield asset sales as well as shareholder and other approvals. There can be no assurance that a merger with Seafield will occur. PENDING ACCOUNTING PRONOUNCEMENTS - --------------------------------- LabOne will be required to implement Statement of Financial Accounting Standard (SFAS) No. 123, "Accounting for Stock-Based Compensation," in 1996. LabOne does not presently expect to adopt the optional accounting treatment based on the estimated fair value of employee stock options allowed by SFAS No. 123. However, presentation of pro forma disclosures of net earnings and earnings per share as if the optional accounting method had been utilized will be required in 1996. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA See ITEM 14.(a). ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None 15 PART III -------- ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT ITEM 11. EXECUTIVE COMPENSATION ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information included under the captions entitled "Information Concerning Nominees for Election as Directors," "Security Ownership of Management," "Security Ownership of Certain Beneficial Owners," and "Executive Compensation," in the Company's definitive proxy statement to be filed with the Commission pursuant to Regulation 14A with respect to its annual meeting of stockholders to be held May 9, 1996, is incorporated into Items 10, 11, 12 and 13 above by reference. PART IV ------- ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) (1) and (2) -- The following consolidated financial statements and schedules are attached as a separate section of this report entitled "Consolidated Financial Statements and Schedules": INDEPENDENT AUDITORS' REPORT CONSOLIDATED FINANCIAL STATEMENTS: Consolidated Balance Sheets, December 31, 1995, and 1994 Consolidated Statements of Earnings, Years Ended December 31, 1995, 1994, and 1993 Consolidated Statements of Stockholders' Equity, Years Ended December 31, 1995, 1994, and 1993 Consolidated Statements of Cash Flows, Years Ended December 31, 1995, 1994, and 1993 Notes to Consolidated Financial Statements SCHEDULES: Schedule II - Valuation and qualifying accounts All other schedules are omitted because they are not applicable, not required, or the information is included in the Consolidated Financial Statements or the notes thereto. 16 (b) Reports on Form 8-K A Form 8-K current report dated October 24, 1995, was filed with the commission reporting under Other Events the resignation of Bert Hood as Chairman, President and Chief Executive Officer of the Company. W. Thomas Grant II, Chairman and Chief Executive Officer of Seafield Capital Corporation, filled the vacancies left by Hood. A Form 8-K current report dated November 10, 1995, was filed with the commission reporting under Other Events the appointment of Thomas J. Hespe, Executive Vice President of Sales, to the LabOne Board of Directors. (c) Exhibits required by Item 601 of Regulation S-K (Exhibits follow the Schedules): Page ---- 3.1* Articles of Incorporation - attached as Exhibit (3) to the Registrant's Form 10-K Annual Report dated March 28, 1988. 3.2* Certificate of Amendment of Articles of Incorporation - attached as Exhibit (3.2) to the Registrant's Form 10-K Annual Report dated March 14, 1994. 3.3* Bylaws - attached as Exhibit (3) to the Registrant's Form 10-K Annual Report dated March 28, 1988. 10.1* Registrant's Long Term Incentive Plan as amended- attached as Exhibit (10.1) to the Registrant's Form 10-K Annual Report dated March 19, 1992. ** 10.2* Amendment to paragraphs 6 (d) and 24 (d) of the Registrant's Long Term Incentive Plan - attached as Exhibit (10.2) to the Registrant's Form 10-K Annual Report dated March 14, 1994. ** 10.3* Amendment to paragraph 3 of the Registrant's Long Term Incentive Plan - attached as Exhibit (10.3) to the Registrant's Form 10-K Annual Report dated March 14, 1994. ** 10.4 Amendment to paragraph 3 of the Registrant's Long 43 Term Incentive Plan, Adopted February 10, 1995. ** 10.5* Registrant's Stock Plan for nonemployee directors - attached as Exhibit (A) to the Registrant's Proxy Statement dated April 10, 1992. *** 10.6 Registrant's Annual Incentive Plan. ** 44 10.7* Services Agreement, dated January 1, 1993, between Seafield Capital Corporation and the Registrant - attached as Exhibit (10.6) to the Registrant's Form 10-K Annual Report dated March 14, 1994. 17 Page ---- 10.8* Services Agreement, dated January 1, 1993, between Business Men's Assurance Company of America and the Registrant - attached as Exhibit (10.7) to the Registrant's Form 10-K Annual Report dated March 14, 1994. 10.9 Amendment to Services Agreement between the Registrant 45 and Business Men's Assurance Company of America dated September 15, 1995. 10.10* Form of Employment Agreement between the Registrant and its executive officers and certain key employees - attached as Exhibit (10) to the Registrant's Form 10-K Annual Report dated March 28, 1988. ** 10.11 Amended Employment Agreement between the Registrant 46 and Robert D. Thompson dated November 1, 1995. ** 10.12* Employment Agreement between the Registrant and Gregg R. Sadler - attached as Exhibit (10.14) to the Registrant's Form 10-K Annual Report dated March 14, 1994. ** 10.13 Amendment to Employment Agreement between the Registrant 59 and Gregg R. Sadler dated November 1, 1995. ** 10.14 Employment Agreement between the Registrant and 60 Thomas J. Hespe, dated November 1, 1995. ** 10.15* Employment Agreement between the Registrant and Carl W. Ludvigsen, Jr. - attached as Exhibit (10.6) to the Registrant's Form 10-K Annual Report dated March 14, 1994. ** 10.16* Employment Agreement between the Registrant and Robert F. Thompson - attached as Exhibit (10.17) to the Registrant's Form 10-K Annual Report dated March 23, 1995. ** 10.17* Employment Agreement between the Registrant and Bert H. Hood as amended - attached as Exhibit (10.9) to the Registrant's Form 10-K Annual Report dated March 14, 1994. ** 10.18* Employment Agreement between the Registrant and Danial J. Roberts as amended - attached as Exhibit (10.10) to the Registrant's Form 10-K Annual Report dated March 14, 1994. ** 10.19* Form of Amendments to Employment Agreements between the Registrant and Bert H. Hood, Robert F. Thompson and Daniel J. Roberts, - attached as Exhibit (10.18) to the Registrant's Form 10-K Annual Report dated March 23, 1995. ** 18 Page ---- 10.20* Severance Agreement between the Registrant and Mark S. Patterson - attached as Exhibit (10.2) to the Registrant's Form 10-Q Quarterly Report dated November 10, 1994. ** 10.21* Severance Agreement between the Registrant and Kenneth A. Stelzer - attached as Exhibit (10.1) to the Registrant's Form 10-Q Quarterly Report dated November 10, 1994. ** 10.22 Promissory Note Agreement from Bert H. Hood to the 68 Registrant dated September 7, 1995. ** 10.23* Promissory Note Agreement from Bert H. Hood to the Registrant - attached as Exhibit (10.3) to the Registrant's Form 10-Q Quarterly Report dated November 10, 1994. ** 11. Statement regarding computation of per share earnings - see Note 1 of Notes to Consolidated Financial Statements, "Earnings Per Share." 21. Subsidiaries of Registrant - see Note 1 of Notes to Consolidated Financial Statements, "Principles of Consolidation and Basis of Presentation." 23. Consents of experts and counsel - independent 69 accountants' consent. 24. Powers of Attorney. 70 27. Financial Data Schedule - as submitted electronically by the Registrant in conjunction with this 1995 Form 10-K. 99. Proxy Statement for Annual Shareholders Meeting to be held May 9, 1996 - to be filed. * Incorporated by reference pursuant to Rule 12b-23 ** Management Compensatory Plan *** Non-Management Director Compensatory Plan These exhibits may be obtained by stockholders of Registrant upon written request to LabOne, Inc., 10310 W. 84th Terrace, Lenexa, KS 66214. (d) Not applicable 19 SIGNATURES Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. LabOne, Inc. By: /s/ Robert D. Thompson By: /s/ Kurt E. Gruenbacher ---------------------- ----------------------- Robert D. Thompson Kurt E. Gruenbacher Title: Executive V.P. Finance, CFO Title: V.P. Finance and CAO and Treasurer Date: March 21, 1996 Date: March 21, 1996 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant on March 21, 1996 in the capacities indicated. By: /s/ W. Thomas Grant II By: /s/ Robert D. Thompson ---------------------- ---------------------- W. Thomas Grant II Robert D. Thompson Title: Chairman of the Board, Title: Executive V.P. Finance, President and Chief Executive CFO and Treasurer Officer By: /s/ Gregg R. Sadler By: /s/ Thomas J. Hespe ------------------- ------------------- Gregg R. Sadler Thomas J. Hespe Title: Executive V.P. Administration, Title: Executive V.P. Sales and Secretary and Director Marketing and Director By: /s/ Kurt E. Gruenbacher By: */s/ William D. Grant ----------------------- --------------------- Kurt E. Gruenbacher William D. Grant Title: V.P. Finance and CAO Title: Director By: */s/ P. Anthony Jacobs By: */s/ John E. Walker ---------------------- ------------------- P. Anthony Jacobs John E. Walker Title: Director Title: Director By: */s/ James R. Seward By: */s/ R. Dennis Wright -------------------- --------------------- James R. Seward R. Dennis Wright Title: Director Title: Director By: */s/ Richard S. Schweiker By: */s/ Joseph H. Brewer ------------------------- --------------------- Richard S. Schweiker Joseph H. Brewer Title: Director Title: Director *By: /s/ Gregg R. Sadler ------------------- Gregg R. Sadler Attorney-in-fact 20 LABONE, INC. AND SUBSIDIARIES Consolidated Financial Statements and Schedules December 31, 1995, 1994 and 1993 (With Independent Auditors' Report Thereon) 21 LABONE, INC. AND SUBSIDIARIES Consolidated Financial Statements and Schedules Index ----- Page INDEPENDENT AUDITORS' REPORT 23 CONSOLIDATED FINANCIAL STATEMENTS: Consolidated Balance Sheets, December 31, 1995 and 1994 24 Consolidated Statements of Earnings, Years ended December 31, 1995, 1994 and 1993 26 Consolidated Statements of Stockholders' Equity, Years ended December 31, 1995, 1994 and 1993 27 Consolidated Statements of Cash Flows, Years ended December 31, 1995, 1994 and 1993 28 Notes to Consolidated Financial Statements 29 SCHEDULE: Schedule II - Valuation and Qualifying Accounts 41 22 INDEPENDENT AUDITORS' REPORT ---------------------------- The Board of Directors LabOne, Inc.: We have audited the accompanying consolidated balance sheets of LabOne, Inc. and subsidiaries as of December 31, 1995 and 1994 and the related consolidated statements of earnings, stockholders' equity and cash flows for each of the years in the three-year period ended December 31, 1995. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of LabOne, Inc. and subsidiaries as of December 31, 1995 and 1994, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1995, in conformity with generally accepted accounting principles. /s/KPMG Peat Marwick LLP Kansas City, Missouri January 30, 1996 23 LABONE, INC. AND SUBSIDIARIES Consolidated Balance Sheets December 31, 1995 and 1994 Assets 1995 1994 ------ ---------- ---------- Current assets: Cash and cash equivalents $ 2,993,128 6,888,806 Short-term investments (note 11) 34,111,752 34,106,026 Accounts receivable-trade, net of allowance for doubtful accounts of $329,995 in 1995 and $81,426 in 1994 7,727,286 8,636,610 Inventories 1,533,257 787,339 Prepaid expenses and other current assets 2,883,127 3,007,526 Deferred income taxes 167,586 654,246 ---------- ---------- Total current assets 49,416,136 54,080,553 ---------- ---------- Investments with maturities of more than one year, at cost (note 11) 506,441 508,590 ---------- ---------- Property, plant and equipment: Land 1,540,807 1,495,833 Building 11,940,493 11,836,420 Laboratory equipment 17,134,151 17,569,024 Data processing equipment and software 16,347,813 15,724,026 Office and transportation equipment 4,992,257 4,900,395 Leasehold improvements 1,018,126 973,109 ---------- ---------- 52,973,647 52,498,807 Less accumulated depreciation 35,885,928 34,315,021 ---------- ---------- Net property, plant and equipment 17,087,719 18,183,786 ---------- ---------- Other assets: Intangible assets, net of accumulated amortization (note 2) 2,844,257 3,589,527 Deferred income taxes-noncurrent (note 3) 152,520 347,264 Deposits and other assets 40,761 48,060 ---------- ---------- $ 70,047,834 76,757,780 ========== ========== (Continued) 24 LABONE, INC. AND SUBSIDIARIES Consolidated Balance Sheets, Continued Liabilities and Stockholders' Equity 1995 1994 ------------------------------------ ---------- ---------- Current liabilities: Accounts payable $ 2,108,376 2,024,572 Income taxes payable 50,560 131,068 Payable to Seafield Capital Corporation (note 8) 75,223 113,575 Accrued payroll and benefits 1,972,475 1,915,457 Other accrued expenses 902,297 1,270,337 Other current liabilities 74,574 66,138 ---------- ---------- Total current liabilities 5,183,505 5,521,147 ---------- ---------- Stockholders' equity: Preferred stock, $0.01 par value per share; 1,000,000 shares authorized, none issued - - Common stock, $0.01 par value per share; 40,000,000 shares authorized, 15,000,000 shares issued (note 5) 150,000 150,000 Additional paid-in capital 13,377,728 13,347,455 Equity adjustment from foreign currency translation (545,818) (683,383) Retained earnings 74,040,870 80,639,340 ---------- ---------- 87,022,780 93,453,412 Less treasury stock of 1,945,984 shares in 1995 and 1,957,988 shares in 1994, at cost 22,158,451 22,216,779 ---------- ---------- Total stockholders' equity 64,864,329 71,236,633 ---------- ---------- $ 70,047,834 76,757,780 ========== ========== See accompanying notes to consolidated financial statements. 25 LABONE, INC. AND SUBSIDIARIES Consolidated Statements of Earnings Years ended December 31, 1995, 1994 and 1993 1995 1994 1993 ---------- ---------- ---------- Sales $ 57,029,424 60,725,982 69,377,511 Cost of sales 29,934,033 29,072,508 30,018,455 ---------- ---------- ---------- Gross profit 27,095,391 31,653,474 39,359,056 Selling, general and administrative expenses (notes 8 and 9) 24,710,709 24,760,918 22,694,920 ---------- ---------- ---------- Earnings from operations 2,384,682 6,892,556 16,664,136 ---------- ---------- ---------- Other income (expenses): Investment income 2,565,463 1,328,493 1,545,713 Other income (expense), net (3,144) 371,749 (732,320) Gain (loss) on disposal of equipment (196,827) (59,778) 56,213 ---------- ---------- ---------- Total other income (expenses) 2,365,492 1,640,464 869,606 ---------- ---------- ---------- Earnings before income taxes 4,750,174 8,533,020 17,533,742 ---------- ---------- ---------- Income taxes (note 3): Current 1,259,416 4,043,568 7,689,582 Deferred 693,703 (1,197,676) (721,776) ---------- ---------- ---------- Total income taxes 1,953,119 2,845,892 6,967,806 ---------- ---------- ---------- Net earnings $ 2,797,055 5,687,128 10,565,936 ========== ========== ========== Earnings per common share $ .21 .43 .80 ==== ==== ==== Weighted average common shares and common share equivalents outstanding 13,133,861 13,276,590 13,154,070 ========== ========== ========== See accompanying notes to consolidated financial statements. 26 LABONE, INC. AND SUBSIDIARIES Consolidated Statements of Stockholders' Equity Years ended December 31, 1995, 1994 and 1993
Foreign Total Additional currency stock- Common paid-in transla- Retained Treasury holders' stock capital tion earnings stock equity -------- ---------- --------- ---------- ---------- ---------- Balance at December 31, 1992 150,000 12,687,986 (535,793) 83,055,268 (22,506,633) 72,850,828 Net earnings - - - 10,565,936 - 10,565,936 Cash dividends ($.72 per share) - - - (9,316,001) - (9,316,001) Adjustment from foreign currency translation - - 111,095 - - 111,095 Net issuance of 43,846 shares of treasury stock - 51,102 - - 500,970 552,072 -------- ---------- --------- ---------- ---------- ---------- Balance at December 31, 1993 150,000 12,739,088 (424,698) 84,305,203 (22,005,663) 74,763,930 Net earnings - - - 5,687,128 - 5,687,128 Cash dividends ($.72 per share) - - - (9,352,991) - (9,352,991) Adjustment from foreign currency translation - - (258,685) - - (258,685) Net issuance of 81,590 shares of treasury stock - 608,367 - - (211,116) 397,251 -------- ---------- --------- ---------- ---------- ---------- Balance at December 31, 1994 $150,000 13,347,455 (683,383) 80,639,340 (22,216,779) 71,236,633 Net earnings - - - 2,797,055 - 2,797,055 Cash dividends ($.72 per share) - - - (9,395,525) - (9,395,525) Adjustment from foreign currency translation - - 137,565 - - 137,565 Net issuance of 12,004 shares of treasury stock - 30,273 - - 58,328 88,601 -------- ---------- --------- ---------- ---------- ---------- Balance at December 31, 1995 $150,000 13,377,728 (545,818) 74,040,870 (22,158,451) 64,864,329 ======== ========== ========= ========== ========== ==========
See accompanying notes to consolidated financial statements. 27
LABONE, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows Years ended December 31, 1995, 1994 and 1993 1995 1994 1993 Cash provided by operations: ---------- ---------- ---------- Net earnings $ 2,797,055 5,687,128 10,565,936 Adjustments to reconcile net earnings to net cash provided by operations: Depreciation and amortization 4,191,435 6,620,930 9,019,582 Deferred income taxes 693,703 (1,197,676) (721,776) (Gain) loss on disposal of equipment 196,827 59,778 (56,213) Directors' stock compensation 77,890 72,807 107,548 Change in short term trading securities, net (3,446,170) (13,686,663) - Changes in: Accounts receivable 909,324 (577,791) 755,253 Inventories (745,918) (3,271) 788,938 Prepaid expenses and other current assets 124,399 21,199 (268,526) Accounts payable 83,804 (50,150) (573,223) Income taxes payable (80,508) 37,943 (948,976) Payable to Seafield Capital Corporation (38,352) 113,575 (230,545) Accrued payroll and benefits 57,018 (399,092) (275,834) Accrued expenses (398,040) 569,709 (8,919) Other current liabilities 8,436 (632,381) 66,293 ---------- ---------- ---------- Net cash provided by (used for) operations 4,430,903 (3,363,955) 18,219,538 ---------- ---------- ---------- Cash provided by (used for) investment transactions: Purchases of investments held to maturity (65,568,743) (79,501,640) - Proceeds from maturities of investments held to maturity 69,459,252 90,601,588 - Short-term investments, net - - 4,751,259 Purchases of investments with maturities of more than one year - - (6,451,378) Proceeds from maturities of investments with maturities of more than one year - - 5,750,000 Property, plant and equipment additions, net (2,860,612) (3,399,579) (3,733,867) other 7,299 252,430 178,181 ---------- ---------- ---------- Net cash provided by investment transactions 1,037,196 7,952,799 494,195 ---------- ---------- ---------- Cash provided by (used for) financing transactions: Proceeds from exercise of stock options 10,711 324,444 444,524 Cash dividends (9,395,525) (9,352,991) (9,316,001) ---------- ---------- ---------- Net cash used for financing activities (9,384,814) (9,028,547) (8,871,477) ---------- ---------- ---------- Effect of foreign currency translation 21,037 (185,891) 165,163 ---------- ---------- ---------- Net increase (decrease) in cash and cash equivalents (3,895,678) (4,625,594) 10,007,419 Cash and cash equivalents at beginning of year 6,888,806 11,514,400 1,506,981 ---------- ---------- ---------- Cash and cash equivalents at end of year $ 2,993,128 6,888,806 11,514,400 ========== ========== ========== Supplemental disclosures of cash flow information: Cash paid during the year for: Interest $ - 685 - ========== ========== ========== Income taxes $ 1,570,574 3,660,955 8,703,323 ========== ========== ========== See accompanying notes to consolidated financial statements. 28
LABONE, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 1995, 1994 and 1993 (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ------------------------------------------ Principles of Consolidation and Basis of Presentation - ----------------------------------------------------- The accompanying consolidated financial statements include the accounts of LabOne, Inc. (LabOne or the Company), its wholly-owned Canadian subsidiary, Lab One Canada Inc. (formerly Head Office Reference Laboratory Limited), and its wholly-owned United Kingdom subsidiary, HORL(UK) Limited. During 1994, the Company disposed of the UK subsidiary. All significant intercompany transactions have been eliminated in consolidation. LabOne was 82%-owned by Seafield Capital Corporation (Seafield) at December 31, 1995. Prior to 1994, LabOne and its wholly-owned subsidiaries were engaged primarily in laboratory testing for insurance companies. During 1994 LabOne began marketing laboratory testing services to the healthcare (clinical and substance abuse) industry. Cash and Cash Equivalents - ------------------------- Cash and cash equivalents include demand deposits in banks, marketable securities with original maturities of three months or less and overnight investments that are stated at cost, which approximates market value. Investment Securities - --------------------- LabOne determines the appropriate classification of debt and equity securities at the time of purchase. Securities are classified as held-to-maturity when LabOne has the intent and ability to hold the securities to maturity. Held- to-maturity securities are stated at amortized cost and investment income is included in earnings. LabOne classifies certain highly liquid securities as trading securities. Trading securities are stated at fair value and unrealized holding gains and losses are included in income. Inventories - ----------- Inventories consist of completed specimen collection kits and various materials used in the assembly of specimen collection kits for sale to clients. Inventory is valued at the lower of cost (first-in, first-out) or market. 29 LABONE, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements Property, Plant and Equipment - ----------------------------- Property, plant and equipment is stated at cost. Depreciation is being provided on a straight-line basis over the estimated useful lives of the assets as follows: Buildings 30 years Laboratory equipment 3-10 years Data processing equipment 3- 8 years Office equipment 5-10 years Leasehold improvements 30 years Equipment acquired after December 31, 1987, is being depreciated on a straight-line basis over three to five years. Intangible Assets - ----------------- Intangible assets are recorded at their acquisition cost and are being amortized as follows: The patent process utilized in coating the plates on which blood and urine testing is performed is being amortized on a straight-line basis over the remaining life of the patent (184 months at date of acquisition). The excess of cost over fair value of assets acquired is being amortized on a straight-line basis over a period of twenty years. Impairment of Long-lived Assets - ------------------------------- When facts and circumstances indicate potential impairment, LabOne evaluates the recoverability of asset carrying values of long-lived assets, including intangibles, using estimates of undiscounted future cash flows over remaining asset lives. When impairment is indicated, any impairment loss is measured by the excess of carrying values over fair values. Use of Estimates in the Preparation of Financial Statements - ----------------------------------------------------------- The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 30 LABONE, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements Income Taxes - ------------ Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Earnings Per Share - ------------------ Earnings per share is computed using the weighted average number of common shares issued and the common share equivalents of dilutive stock options, less treasury stock. Line of Credit - -------------- The Company has a $5,000,000 line of credit as of December 31, 1995, which bears interest at the prime rate (8.5% at December 31, 1995). The line of credit was not used in 1995. (2) INTANGIBLE ASSETS ----------------- The cost and accumulated amortization of intangible assets at December 31, 1995 and 1994 are as follows: 1995 1994 --------- --------- Patent $ 8,000,000 8,000,000 Accumulated amortization 6,739,102 6,217,366 --------- --------- 1,260,898 1,782,634 --------- --------- Excess of cost over fair value of assets acquired 4,470,684 4,470,684 Accumulated amortization 2,887,325 2,663,791 --------- --------- 1,583,359 1,806,893 --------- --------- Intangible assets, net of accumulated amortization $ 2,844,257 3,589,527 ========= ========= 31 LABONE, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (3) INCOME TAXES ------------ The components of income taxes and deferred taxes applicable to temporary differences are as follows (for the years ended December 31): 1995 1994 1993 ---------- --------- --------- Current: Federal $ 1,007,007 2,728,116 5,477,239 State 66,852 546,264 900,778 Foreign 185,557 769,188 1,311,565 ---------- --------- --------- 1,259 416 4,043,568 7,689,582 ---------- --------- --------- Deferred: Federal 475,021 (846,527) (479,719) State 124,499 (146,539) (153,312) Foreign 94,183 (204,610) (88,745) ---------- --------- --------- 693,703 (1,197,676) (721,776) ---------- --------- --------- $ 1,953,119 2,845,892 6,967,806 ========== ========= ========= Total income taxes differ from the amounts computed by applying the statutory income tax rate to earnings before income taxes for the following reasons (for the years ended December 31): 1995 1994 1993 ---------- --------- --------- Application of statutory income tax rate (34% for 1995 and 1994 and 35% for 1993) $ 1,615,059 2,901,227 6,136,810 Foreign taxes, net 84,472 189,456 426,429 Write-off of investment in UK subsidiary - (193,229) - State income taxes, net 126,292 263,819 485,853 Repatriation of foreign source income 193,229 Tax-exempt interest (137,099) (245,069) (206,242) Other, net 71,166 (70,312) 124,956 ---------- --------- --------- $ 1,953,119 2,845,892 6,967,806 ========== ========= ========= 32 LABONE, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements The tax effects of temporary differences that create significant portions of the deferred tax assets and deferred tax liabilities at December 31, 1995 and 1994 are presented below: 1995 1994 --------- --------- Current income tax assets: Repatriation of foreign source income $ (220,798) - Accrued vacation 272,210 261,687 Severance pay accrual - 211,495 Unrealized loss on trading securities - 80,883 Accrued medical claims 62,162 63,645 Bad debts 31,081 31,822 Other accruals 2,738 4,302 Inventory adjustment 12,685 - Other items 7,508 412 --------- --------- Total current income tax assets $ 167,586 654,246 ========= ========= Deferred noncurrent tax assets (liabilities): Depreciation and amortization $ 262,515 249,149 Other items (109,995) 98,115 --------- --------- Total deferred tax assets $ 152,520 347,264 ========= ========= A valuation allowance for deferred tax assets was not necessary at December 31, 1995 or 1994. (4) BENEFIT PLANS ------------- LabOne maintains a money purchase pension plan for all employees who have completed one-half year of service and have attained age twenty and one-half years. The plan is a defined contribution plan under which LabOne contributes a percentage of a participant's annual compensation. LabOne has contributed 7% of a participant's annual compensation up to the maximum social security wage base plus an additional 5.7% of the amounts in excess of the annual maximum wage base. Participants become 100% vested after five plan years of service. Each participant's account is 100% vested in the event of disability or death while employed by LabOne. Normal retirement age under the plan is sixty-five. LabOne's contributions to the plan were $1,187,000, $1,008,000 and $1,065,000 for the years ended December 31, 1995, 1994 and 1993, respectively. 33 LABONE, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements In 1987, LabOne adopted a profit sharing plan for all employees who have completed three months of service and have attained the age of twenty and one-half years. Effective January 1, 1991, the plan was amended to include employees who have completed six months of service and a minimum of 500 hours of service. The plan is intended to include a qualified cash or deferred arrangement under Section 401(k) of the Internal Revenue Code of 1986. Subject to certain limits imposed by law, each participant may generally make tax deferred contributions to the plan not in excess of 10% of annual compensation. LabOne contributes on behalf of each participant an amount equal to 50% of the participant's annual contributions, but not in excess of 5% of the participant's annual compensation. A participant is fully vested at all times with respect to the portion of the account attributable to the participant's own contributions. The plan provides for the vesting of 100% of a participant's account attributable to LabOne contributions upon completion of five plan years of service. Each participant's account is 100% vested upon disability, death or the attainment of age sixty-five while employed by LabOne. The normal retirement age under the plan is age sixty-five. Plan assets contributed by employees can be invested in LabOne common stock or various investment instruments. LabOne contributions are invested in LabOne common stock. LabOne's contributions to the plan for the years ended December 31, 1995, 1994 and 1993 were $488,000, $446,000 and $408,000, respectively. (5) STOCK OPTIONS ------------- In 1987, the Board of Directors of LabOne approved a long-term incentive plan which provided for granting awards, including stock options, for not more than 1,000,000 shares of LabOne common stock. LabOne has granted certain stock options which entitle the grantee to purchase shares for a price equal to the fair market value at date of grant with option periods up to ten years. In January 1991, the LabOne Board of Directors approved a stock option exchange plan that was ratified by the stockholders at the May 1991 LabOne stockholders' meeting. The new plan reduced the number of shares outstanding under the long-term incentive plan, set exercise dates beginning in January 1992 and reduced the option prices to $9.875 per share, which was the quoted market value on January 2, 1991. In May 1991, the stockholders of LabOne approved a 300,000 share increase in the number of shares that may be issued under the long-term incentive plan. The plan thus provides for granting awards, including stock options, for not more than 1,300,000 shares of LabOne common stock. In February 1993, the stockholders of LabOne approved a 500,000 share increase in the number of shares that may be issued under the long-term incentive plan. The plan thus provides for granting awards, including stock options, for not more than 1,800,000 shares of LabOne common stock. 34 LABONE, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements In May 1995, the stockholders of LabOne approved a 350,000 share increase in the number of shares that may be issued under the long-term incentive plan. The plan thus provides for granting awards, including stock options, for not more than 2,150,000 shares of LabOne common stock. A summary of the stock option activity for the three years ended December 31, 1995 is as follows: Number of shares Option price ---------- ------------ Outstanding at December 31, 1992 971,283 9.88 - 18.00 Granted 460,000 14.38 - 14.75 Exercised (43,055) 9.88 - 11.13 Terminated or forfeited (17,622) 9.88 - 11.13 --------- Outstanding at December 31, 1993 1,370,606 9.88 - 18.00 Granted 292,259 18.50 - 23.88 Exercised (220,055) 9.88 - 14.75 Terminated or forfeited (125,742) 9.88 - 23.88 --------- Outstanding at December 31, 1994 1,317,068 9.88 - 23.88 Granted 497,000 11.63 - 14.13 Exercised (43,511) 9.88 - 11.13 Terminated or forfeited (198,390) 11.13 - 23.88 --------- Outstanding at December 31, 1995 1,572,167 9.88 - 23.88 ========= Options for 881,696 shares ranging from $9.88 to $23.88 per share were exercisable at December 31, 1995. Statement of Financial Accounting Standards (SFAS No. 123, "Accounting for Stock-Based Compensation," will require pro forma disclosures in 1996 of net earnings and earnings per share as if a new accounting method based on the estimated fair value of employee stock options had been adopted. LabOne does not presently expect to adopt the optional accounting treatment allowed by SFAS No. 123. (6) OTHER COMMITMENTS ----------------- LabOne has several noncancelable operating leases, primarily for land and buildings, and other commitments that expire over the next several years. Rental expense for these operating leases during 1995, 1994 and 1993 amounted to $861,000, $803,000 and $417,000, respectively. 35 LABONE, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements Future minimum lease payments and other commitments under these agreements as of December 31, 1995, are: Year Amount ---- --------- 1996 $ 817,463 1997 633,047 1998 247,513 1999 104,054 2000 18,716 (7) FOREIGN OPERATIONS ------------------ The following summarizes financial information for LabOne's wholly-owned Canadian subsidiary, Lab One Canada Inc., for the years ended December 31: 1995 1994 1993 ---------- ---------- ---------- Revenues $ 6,223,939 7,676,929 9,566,165 Operating earnings 289,223 1,118,895 2,640,764 Total assets 5,747,329 5,494,958 5,242,517 (8) RELATED PARTY TRANSACTIONS -------------------------- LabOne has entered into certain transactions with Seafield Capital Corporation (Seafield). Seafield, which was formerly BMA Corporation, sold Business Men's Assurance Company of America (BMA) to Generali-Assicurazioni Generali S.p.A. (Generali) in July 1990. The following is a summary of the transactions with related parties: Under a Services Agreement among Seafield, LabOne, BMA and Generali, which became effective July 31, 1990, and later replaced with service agreements dated January 1, 1993, Seafield and BMA agreed to make available, and LabOne agreed to purchase, certain services from Seafield and BMA. LabOne agreed to retain the services of certain of Seafield's senior management to provide policy advice to LabOne and to attend certain functions on behalf of LabOne. LabOne also agreed to retain the services of BMA's reinsurance sales representatives to promote LabOne's laboratory testing services as part of their regular sales activities. In consideration for these services, LabOne agreed to pay Seafield a percentage of LabOne's sales equal to 0.20% of annual sales up to $50 million, plus 0.125% of annual sales of $50 million or more, but less than $100 million, plus .0625% of annual sales of $100 million or more. LabOne has agreed to pay BMA $50,000 for the years ended December 31, 1994 and 1993, and $25,000 per year thereafter. 36 LABONE, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements The agreements were effective until December 31, 1993 and are being renewed automatically for successive one-year terms until terminated. Allocated expenses from Seafield, including charges under the Services Agreement, for the years ended and the amounts payable at December 31 are as follows: 1995 1994 1993 ------- ------- ------- Allocated expenses for the year $ 75,223 113,575 124,218 ======= ======= ======= Amount payable at December 31 $ 75,223 113,575 - ======= ======= ======= (9) RESTRUCTURING CHARGES --------------------- Selling, general and administrative expenses in the year ended December 31, 1994, include a restructuring charge of $1,562,000. The charge includes severance payments to executives, a write-off of fixed assets, provision for loss on lease commitments, and severance payments related to closing the Canadian laboratory testing facility. The restructuring charge reduced 1994 net income by $1,041,000 or $0.08 per share (10) LITIGATION ---------- In the normal course of business, LabOne had certain lawsuits pending at December 31, 1995. In the opinion of management, after consultation with legal counsel and based upon current available information, none of these lawsuits are expected to have a material impact on the Company and financial position or results of operations. 37 LABONE, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (11) INVESTMENT SECURITIES --------------------- A summary of investment securities information relating to quoted market values and unrealized holding gains and losses at December 31, 1995 and 1994, is as follows:
1995 ------------------------------------------------------------------ Amount at which carried Unrealized Unrealized Maturities less Amortized in the balance holding holding than one year cost Market sheet gains losses ------------------ ---------- ---------- ---------- -------- --------- Trading Securities: Vanguard Admiral Money Market $ 21,220,587 21,220,587 21,220,587 - - Vanguard Municipal Bond Fund-Money Market 2,594,704 2,594,704 2,594,704 - - ---------- ---------- ---------- -------- --------- Total Trading Securities 23,815,291 23,815,291 23,815,291 - - Held-to-Maturity investments: Canadian government notes 3,954,460 3,954,460 3,954,460 - - Obligations of states and political subdivisions 6,342,001 6,331,046 6,342,001 - 10,955 ---------- ---------- ---------- -------- --------- Total Held-to-Maturity investments 10,296,461 10,285,506 10,296,461 - 10,955 ---------- ---------- ---------- -------- --------- Total short-term investments $ 34,111,752 34,100,797 34,111,752 - 10,955 ========== ========== ========== ======== ========= Maturities more than one year ------------------ Held-to-maturity investments: Obligations of states and political subdivisions $ 506,441 508,750 506,441 2,309 - ========== ========== ========== ======== ========= 38 LABONE, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 1994 ------------------------------------------------------------------ Amount at which carried Unrealized Unrealized Maturities less Amortized in the balance holding holding than one year cost Market sheet gains losses ------------------ ---------- ---------- ---------- -------- --------- Trading securities: Vanguard Short-term U. S. Treasury Portfolio $ 10,313,685 10,188,338 10,188,338 - 125,347 Vanguard Municipal Bond Fund-Money Market 10,258,776 10,180,783 10,180,783 - 77,993 ---------- ---------- ---------- -------- --------- Total trading securities 20,572,461 20,369,121 20,369,121 - 203,340 Held-to-maturity investments: U.S. Treasury securities 3,030,938 3,069,375 3,030,938 38,437 - Canadian government notes 3,325,790 3,325,790 3,325,790 - - Obligations of states and political subdivisions 7,380,117 7,404,768 7,380,177 32,170 7,579 ---------- ---------- ---------- -------- --------- Total held-to-maturity investments 13,736,905 13,799,933 13,736,905 70,607 7,579 ---------- ---------- ---------- -------- --------- Total short-term investments $ 34,309,366 34,169,054 34,106,026 70,607 210,919 ========== ========== ========== ======== ========= Maturities more than one year ------------------ Held-to-maturity investments: Obligations of states and political subdivisions $ 508,590 512,165 508,590 3,575 - ========== ========== ========== ======== =========
(12) Business Segment Information ---------------------------- The company operates principally in two lines of business, insurance and, since 1994, healthcare. The insurance line of business involves risk- appraisal laboratory services to the insurance industry. The tests performed by the Company are specifically designed to assist an insurance company in objectively evaluating the mortality and morbidity risks posed by policy applicants. The healthcare line of business involves clinical and substance abuse testing services. Clinical testing services are provided to the healthcare industry to aid in the diagnosis and treatment of patients. Substance abuse testing services are provided to both regulated and nonregulated employers who employ drug screening guidelines. 39 LABONE, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements Operating income (loss) of each line of business is computed as sales less identifiable and allocated expenses. In computing operating income (loss) of lines of business, none of the following items have been added or deducted: general corporate expenses, investment income or other income (expenses). Operating income for the insurance line of business included a restructuring charge of $1,562,000 for the year ended December 31, 1994 (see note 9). Identifiable assets by line of business are those assets that are used in the Company's operations in each line of business. General corporate assets are principally cash and investment securities. Following is a summary of line of business information as of and for the years ended December 31, 1995 and 1994: 1995 1994 ---------- ---------- Sales: Insurance $ 52,544,434 60,259,528 Healthcare 4,484,990 466,454 ---------- ---------- Total sales $ 57,029,424 60,725,982 ========== ========== Operating income (loss): Insurance $ 12,412,226 13,697,382 Healthcare (9,858,308) (6,631,257) General corporate expenses (169,236) (173,569) Investment income 2,565,463 1,328,493 Other income (expense) (199,971) 311,971 ---------- ---------- Earning before income taxes 4,750,174 8,533,020 Income taxes (1,953,119) (2,845,892) ---------- ---------- Net earnings $ 2,797,055 5,687,128 ========== ========== Identifiable assets: Insurance $ 25,028,933 28,991,339 Healthcare 6,598,266 4,226,000 General corporate assets 38,420,635 43,540,441 ---------- ---------- Total assets $ 70,047,834 76,757,780 ========== ========== Capital expenditures: Insurance $ 1,416,044 1,597,367 ========== ========== Healthcare $ 1,444,568 1,802,212 ========== ========== Depreciation and amortization: Insurance $ 3,152,595 5,650,001 ========== ========== Healthcare $ 1,392,738 653,660 ========== ========== 40 LABONE, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (13) QUARTERLY FINANCIAL DATA (UNAUDITED) ------------------------------------ A summary of unaudited quarterly results of operations for 1995 and 1994 is as follows (in thousands except per share data): Three months ended March 31 June 30 September 30 December 31 1995: ------- ------- ------- ------- Sales $ 14,689 14,623 13,656 14,061 ====== ====== ====== ====== Gross profit $ 7,187 7,115 6,217 6,576 ====== ====== ====== ====== Earnings before income taxes $ 1,811 1,629 403 907 ====== ====== ====== ====== Net earnings $ 1,171 1,001 270 356 ====== ====== ====== ====== Earnings per share $ 0.09 0.08 0.02 0.03 ====== ====== ====== ====== Dividends per share $ 0.18 0.18 0.18 0.18 ====== ====== ====== ====== 1994: Sales $ 15,267 15,581 14,467 15,412 ====== ====== ====== ====== Gross profit $ 8,340 8,172 7,543 7,598 ====== ====== ====== ====== Earnings before income taxes $ 3,373 2,588 162 2,410 ====== ====== ====== ====== Net earnings $ 2,006 1,867 281 1,533 ====== ====== ====== ====== Earnings per share $ 0.15 0.14 0.02 0.12 ====== ====== ====== ====== Dividends per share $ 0.18 0.18 0.18 0.18 ====== ====== ====== ====== 41 Schedule II ----------- LABONE, INC. AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS Years ended December 31, 1995, 1994 and 1993 Additions- charged to Balance selling, at general and Deductions- Balance beginning administrative uncollectible at end Description of year expenses accounts of year ----------- ------- ------- ------ ------ Allowance for doubtful accounts: Year ended December 31, 1995 $ 81,426 432,911 184,342 329,995 ======= ======= ======= ======= Year ended December 31, 1994 $ 81,700 22,403 22,677 81,426 ======= ======= ======= ======= Year ended December 31, 1993 $ 88,783 162 7,245 81,700 ======= ======= ======= ======= 42 EX-10 2 Exhibit 10.4 ------------ Amendment to Long-Term Incentive Plan ------------------------------------- Adopted February 10, 1995 ------------------------- RESOLVED, that the first sentence of numerical paragraph 3 of the LabOne, Inc. Long-Term Incentive Plan (the "Plan") is hereby amended to increase the maximum number of shares which may be issued under the Plan from "1,800,000" shares of common stock of the corporation to "2,150,000" shares of common stock of the corporation; 43 EX-10 3 Exhibit 10.6 ------------ LabOne Annual Incentive Plan ---------------------------- The Annual Incentive Plan is designed to motivate and reward the accomplishment of targeted operating results. Prior to the beginning of each fiscal year, the Committee establishes an earnings per share goal under the Plan based upon the Committee's judgment of reasonable earnings per share growth over the previous fiscal year. No incentive payments are made if the minimum net earnings threshold is not met. The size of the incentive pool increases pursuant to a formula established by the Committee as net earnings increase over the minimum threshold. The incentive pool is distributed in cash ratably to designated officers and managers at year end according to a pre-established weighting. The weighting is based upon senior management's subjective evaluations of each individual's potential contribution to the Company's financial and strategic goals for the year, and is reviewed and approved by the Committee. 44 EX-10 4 Exhibit 10.9 ------------ AMENDMENT TO SERVICE AGREEMENT ------------------------------ THIS AMENDMENT ("Amendment"), made and entered into this 15th day of September, 1995, by and between LabOne, Inc. ("LabOne," formerly Home Office Reference Laboratory, Inc.) and Business Men's Assurance Company of America (BMA). WITNESSETH: WHEREAS, LabOne and BMA are parties to a Service Agreement dated January 1, 1993, (the "Agreement"); and WHEREAS, the parties desire to amend the Agreement; NOW, THEREFORE, in consideration of the mutual promises herein contained, the sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Subsection (3.1) of the Service Agreement is hereby amended and substituting therefor the following: 3.1 PRICES AND BILLING FOR SERVICES. LabOne shall pay BMA a flat fee of $25,000 per year, effective January 1, 1995, payable on the last day of the year. IN WITNESS WHEREOF, the parties have executed this Amendment as of the day and year first above written. LabOne, Inc. By: /s/ Kurt Gruenbacher ------------------------------- Kurt Gruenbacher V.P. Finance & CAO Business Men's Assurance Company of America By: /s/ John E. Walker ------------------------------ John E. Walker Managing Director - Reinsurance 45 EX-10 5 Exhibit 10.11 ------------- AMENDED EMPLOYMENT AGREEMENT ---------------------------- THIS AMENDED EMPLOYMENT AGREEMENT ("Agreement"), made as of November 1, 1995, by and between LabOne, Inc., a Delaware corporation (hereinafter referred to as "LabOne") and Robert D. Thompson, a resident of the State of Kansas (hereinafter referred to as "Officer"); WITNESSETH: WHEREAS, LabOne and Officer entered into an Employment Agreement as of August 5, 1993, as amended November 9, 1993 and December 30, 1994 ("Employment Agreement"); and WHEREAS, the parties desire to amend and restate the said Employment Agreement in its entirety; NOW, THEREFORE, in consideration of the continuation of employment of Officer with LabOne for the term of this Agreement and of the mutual promises, covenants, representations and warranties contained herein, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, agree that the Employment Agreement is hereby amended and restated in its entirety to read as follows: SECTION I EMPLOYMENT AND TERM 1.1 EMPLOYMENT. LabOne hereby employs Officer and Officer hereby accepts such employment and agrees to perform the duties described in Section 2 of this Agreement. 1.2 TERM. (a) BASE TERM. The term of employment shall commence on November 1, 1995 and shall continue for a period of eighteen (18) months (the "Base Term"), or until terminated as otherwise provided herein. (b) TERMINATION SUBSEQUENT TO CHANGE IN CONTROL. Notwithstanding any other provision of this Agreement to the contrary, in the event that (i) a change of control of LabOne shall occur at any time during which Officer is in the full-time employment of LabOne or its successor and (ii) within one (1) year after such a change in control, Officer's employment with LabOne or its successor is terminated by LabOne or its successor for any reason other than permanent disability, death or normal retirement, or is voluntarily terminated by Officer for any reason at his sole discretion, LabOne will promptly pay to Officer as termination compensation the lump sum amount described below. 46 The lump sum compensation payable shall be equal to three (3) times the average annual compensation includable in Officer's gross income for the most recent five (5) taxable years ending before the date of the change in control. If Officer has been an employee of LabOne for less than 5 years, Officer's lump sum payment shall be equal to 3 times the average annual compensation includable in Officer's gross income based on the portion of the 5 year period during which Officer performed services for LabOne. To the extent that any amount required to be paid hereunder would constitute an "excess parachute payment" within the meaning of Section 280G(b) of the Internal Revenue Code of 1986, that excess amount need not be paid. For purposes of this Section 1.2(b), a "change of control" shall be deemed to have taken place if there shall have occurred (i) the sale or other disposition resulting in the transfer of legal or beneficial ownership of, or the right to vote, more than fifty percent (50%) of the outstanding capital stock of LabOne to one or more third-party purchasers unaffiliated with Seafield Capital Corporation, its shareholders or affiliates (as the term "affiliate" is defined in Rule 12b-2 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934), except in connection with an underwritten public offering of the common stock of LabOne, (ii) a merger or consolidation of LabOne with or into any entity other than Seafield Capital Corporation or its affiliates, (iii) a sale or other transfer of substantially all of the assets of LabOne to any person or entity other than Seafield Capital Corporation or its affiliates, (iv) the sale or other disposition resulting in the transfer of legal or beneficial ownership of, or the right to vote, more than fifty percent (50%) of the outstanding capital stock of Seafield Capital Corporation to one or more third-party purchasers (other than the affiliates of Seafield Capital Corporation), except in connection with an underwritten public offering of the common stock of Seafield Capital Corporation, (v) a merger or consolidation of Seafield Capital Corporation with or into any entity other than the affiliates of Seafield Capital Corporation, or (vi) a sale or other transfer of substantially all of the assets of Seafield Capital Corporation to any person or entity other than the affiliates of Seafield Capital Corporation. In the event of termination of employment under the circumstances described above, LabOne shall pay to Officer the installments of his base salary through the date of termination of employment, any annual incentive bonus for the previous year if such has been approved but not paid and the lump sum amount as termination compensation described above, and any remaining term of this Agreement shall be cancelled. Such payments to Officer and the arrangements provided for by any stock 47 option or other agreement between LabOne and Officer in effect at the time and by any other applicable plan of LabOne will constitute the entire obligation of LabOne to Officer with respect to such termination, and will also constitute full settlement of any claim under law or in equity that Officer might otherwise assert against LabOne or any of its employees on account of such termination. (c) ANNUAL EXTENSION. Commencing on May 1, 1997 (the "Extension Date") and on each succeeding anniversary of such Extension Date, unless LabOne notifies Officer in accordance with the immediately following sentence that Officer's employment under this Agreement will not be extended, this Agreement and Officer's employment under this Agreement shall automatically and without further action be extended for one (1) year from such Extension Date or anniversary thereof on the same terms and conditions as are set forth herein. If LabOne elects not to extend Officer's employment under this Agreement as provided in the preceding sentence, it shall do so by notifying Officer in writing at least sixty (60) days prior to the Extension Date or the applicable anniversary thereof. If LabOne elects not to extend Officer's employment under this Agreement as provided above, such election shall be treated as a termination of Officer without cause within the meaning of Section 9.1(e) of this Agreement and LabOne shall pay to Officer, in addition to any other sums which may be due to Officer, the lump sum severance payment provided for in Section 9.1(e). SECTION 2 DUTIES 2.1 GENERAL DUTIES. Officer shall serve LabOne in the capacities of Executive Vice President-Finance, Chief Financial Officer and Treasurer, reporting directly to the Chairman of the Board of Directors of LabOne. Officer shall be responsible for performing the duties generally required of such positions and such other duties in relation to LabOne consistent with Officer's positions as shall from time to time be assigned to Officer by the Board of Directors or the Chairman of the Board of Directors. 2.2 FULL TIME. During the term hereof, Officer agrees to devote his full time, attention and skill to the performance of his duties. 2.3 BEST EFFORTS. Officer agrees that he will at all times faithfully, industriously and to the best of his ability, experience and talents, perform all of the duties that may be required of and from him as described above. 2.4 INDEMNIFICATION AND D & 0 INSURANCE. LabOne shall provide to Officer coverage under LabOne's director and officer liability insurance and indemnification By-laws, as fully and to the same extent as the same are provided to similar executive officers of LabOne. 48 SECTION 3 BASE SALARY 3.1 ANNUAL BASE SALARY. LabOne shall pay Officer, and Officer shall accept from LabOne in full payment for Officer's full time services hereunder, compensation at the rate of Two Hundred Thousand ($200,000) per annum, payable monthly in periodic equal installments during the year. Such salary shall be reviewed from time to time, but not less often than annually, by the Board of Directors of LabOne and will be subject to such increases, but not decreases, as the Board of Directors of LabOne may determine, having due regard for the efforts of Officer and the results, both financial and otherwise, of LabOne's operations during Officer's tenure. 3.2 REIMBURSEMENT OF EXPENSES. LabOne shall reimburse Officer for such reasonable out-of-pocket expenses as are incurred by Officer in order to render the services contemplated hereunder. 3.3 TAX WITHHOLDINGS. LabOne shall deduct from the compensation payable to Officer all federal, state, and local income tax, social security, FICA, FUTA and other withholdings as required by law. SECTION 4 BONUSES AND FRINGE BENEFITS 4.1 SPECIAL BONUS. As an incentive to induce Officer to continue his employment with LabOne for the term of this Agreement, LabOne shall pay to Officer upon his execution of this Agreement a special one-time bonus of Fifty Thousand Dollars ($50,000). 4.2 ANNUAL INCENTIVE BONUS. During the term hereof, Officer shall be eligible to receive an annual incentive bonus based upon the performance of LabOne in relation to predetermined financial goals established by the Compensation Committee of the Board of Directors of LabOne. Bonuses for less than a full year of service may be granted at the discretion of the Compensation Committee. 4.3 STOCK OPTION. Simultaneously with the execution and delivery of this Agreement, the Long-Term Incentive Plan Committee of the Board of Directors of LabOne has granted to Officer under the LabOne Long-Term Incentive Plan a non-qualified stock option agreement for Fifty Thousand (50,000) shares of the common stock of LabOne. 49 4.4 OTHER FRINGE BENEFITS. Officer shall be entitled to an annual vacation consistent with LabOne's vacation policies for similar executive officers and to participate in such fringe benefit programs as LabOne may make available from time to time to similar executive officers, which shall include reasonable hospital and major medical insurance coverage, long term disability and life insurance in amounts and on terms no less favorable than those provided to similar executive officers of LabOne. SECTION 5 NON-COMPETITION 5.1 RESTRICTIVE COVENANTS. In consideration for Officer's employment with LabOne and in further consideration for the compensation provided to Officer in Sections 3 and 4 hereof, Officer agrees that during the term of his employment pursuant to this Agreement, and for a period of two (2) years after the termination for any reason of his employment pursuant to this Agreement, he will not, without the prior written consent of LabOne, directly or indirectly, individually or in concert with others, or through the medium of any other corporation, partnership, syndicate, association, joint venture, or other entity or as an employee, officer, director, agent, consultant or affiliate, compete with LabOne, within the hereinafter described region, in (i) the urine or blood chemistry testing or analysis business for the insurance industry, or (ii) the urine or blood chemistry container or other supply business for the insurance industry, or (iii) the clinical laboratory testing or substance abuse testing businesses, or (iv) any other business engaged in by LabOne as of the date of the termination of Officer's employment with LabOne, and Officer will not solicit or accept any such business described in any of subparts (i) through (iv) above and which competes with LabOne from any customer who is served by LabOne as of the date of the termination of Officer's employment pursuant hereto, or cause or induce any present or future employee of LabOne to leave the employ of LabOne to accept employment with Officer or with any such entity or person. The region referred to above shall consist of any territory in which LabOne or any of its representatives or agents, as of the date of the termination of Officer's employment pursuant hereto, provides, sells, offers for sale or solicits the sale of urine or blood chemistry testing or analysis, or urine or blood chemistry containers or other supplies related thereto, or clinical laboratory or substance abuse testing, or other services or products. LabOne and Officer agree that in the event that any provision of this Section 5.1 is void or constitutes an unreasonable restriction against Officer, such provision shall not be rendered void, but shall apply with respect to such time or territory or to such other extent as may constitute a reasonable restriction under the circumstances. The 50 foregoing provisions shall not prohibit Officer from owning not more than 3% of the total shares of all classes of stock outstanding of any publicly held company. 5.2 INJUNCTIVE RELIEF. LabOne shall be entitled to appropriate injunctive relief in any court of competent jurisdiction to enforce its rights under Sections 5, 6, 7 and 8 of this Agreement, in addition to any other rights and remedies available to LabOne at law or in equity, it being agreed that any violation of Sections 5, 6, 7 or 8 of this Agreement by Officer is reasonably likely to cause irreparable damage to LabOne which will be difficult or impossible to value in monetary damages. 5.3 CHARITABLE ACTIVITIES. Nothing in this Section 5 shall be construed as preventing Officer from engaging in charitable, professional, religious or civic activities such as serving on a school board, or as a member of or officer of a professional organization, provided such activity or organization does not compete directly with LabOne. SECTION 6 CONFIDENTIAL INFORMATION 6.1 CONFIDENTIALITY. During the term of and at any time after the termination of this Agreement, Officer will hold in trust and confidence and will not divulge, disclose or convey to any person, firm, corporation or other entity and will keep secret and confidential all trade secrets, proprietary information and confidential information heretofore or hereafter acquired by him concerning LabOne, Head Office Reference Laboratory Ltd., or Seafield Capital Corporation, and will not use for himself or others the same in any manner, except to the extent that such information should become no longer a trade secret, proprietary or confidential. Such trade secrets, proprietary information and confidential information shall be deemed to include, but shall not be limited to, information, whether written or not: (a) of a technical nature, such as but not limited to, technology, inventions, discoveries, improvements, processes, formulae, ideas, know-how, methods, compositions, computer software programs or research projects, including the identity of research organizations and researchers, (b) of a business nature, such as but not limited to information concerning costs, profits, supplies, suppliers, marketing, sales or lists of customers, and 51 (c) pertaining to future developments, such as but not limited to information concerning research and development or future marketing methods. The restrictions contained above shall not apply to: (i) information which at the time of disclosure by LabOne to Officer is in the public domain; or (ii) information which at the time of disclosure by LabOne to Officer constituted confidential information hereunder, but which thereafter becomes part of the public domain by publication or otherwise through no fault of Officer. SECTION 7 DEVELOPMENTS 7.1 DEVELOPMENTS. Officer will promptly disclose to LabOne (in form satisfactory to LabOne) all information, technology, inventions, discoveries, improvements, processes, formulae, ideas, know-how, methods, compositions, research projects, computer software programs and developments, whether or not patentable or copyrightable (collectively "Information"), that Officer by himself or in conjunction with any other person or entity conceives, makes, develops or acquires during the term of this Agreement, and that: (a) are or relate or pertain to the assets, properties, or existing or contemplated business or research activities of LabOne, or (b) are suggested by, arise out of or result from, directly or indirectly, Officer's association with LabOne, or (c) arise out of or result, directly or indirectly, in part or fully, from the use of LabOne's time, labor, materials facilities or other resources (collectively "Developments"). Any Information fitting within any of the descriptions contained in subsections (a), (b) or (c) of this Section 7.1 that is disclosed to any other person, firm or other entity by Officer or used in any manner by Officer within one (1) year following the termination of this Agreement shall be presumed to have been conceived, made, developed or acquired during the term of this Agreement and, thus, to constitute a Development. 7.2 ASSIGNMENT TO LABONE. Officer hereby assigns, transfers and conveys to LabOne all of his right, title and interest in and to any and all such Developments, which Developments shall become and remain the sole 52 and exclusive property of LabOne. At any time and from time to time, upon the request of LabOne, Officer will execute and deliver any and all instruments, documents and papers, give evidence and do any and all other acts which, in the reasonable opinion of counsel for LabOne, are or may be necessary or desirable to document such transfer, or to enable LabOne to file and process applications for and to acquire, maintain and enforce any and all patents, trademarks, registrations or copyrights with respect to any such Developments, or to obtain any extension, validation, re-issue, continuance or renewal of any such patent, trademark or copyright. LabOne will be responsible for the preparation of any such instruments, documents and papers and for the implementation of any such proceedings and will reimburse Officer for all reasonable expenses incurred by him in compliance with the provisions of this paragraph. SECTION 8 PROPERTY OF LABONE 8.1 All correspondence, notes, recordings, documents and other materials and reproductions thereof pertaining to any aspect of the business of LabOne shall be the property of and shall be delivered to and retained by LabOne upon termination of this Agreement. SECTION 9 TERMINATION 9.1 TERMINATION. Officer's employment pursuant to this Agreement shall terminate upon the occurrence of any of the following events: (a) DEATH. In the event that Officer dies during the term of this Agreement, LabOne shall pay to his executors or administrators an amount equal to the installments of his base salary payable for the month in which he dies and any annual incentive bonus for the previous year if such has been approved but not paid, and such payments, together with the arrangements provided for by any stock option or other agreement between LabOne and Officer in effect at the time and by any other applicable plan of LabOne will constitute the entire obligation of LabOne to Officer and will also constitute full settlement of any claim under law or in equity that Officer's executors, heirs or assigns or any other person claiming under or through him might otherwise assert against LabOne or any of its employees on account of his death. (b) DISABILITY. In the event that Officer continues unable to fully perform his duties and responsibilities hereunder by reason of illness, injury or mental or physical disability or incapacity for ninety 53 (90) consecutive days, during which time he shall continue to be compensated for monthly installments of base salary and any annual incentive bonus for the previous year if such has been approved but not paid, Officer's employment pursuant to this Agreement may be terminated by LabOne, and such payments, together with the arrangements provided for by any stock option or other agreement between LabOne and Officer in effect at the time and by any other applicable plan of LabOne will constitute the entire obligation of LabOne to Officer and will also constitute full settlement of any claim under law or in equity that Officer might otherwise assert against LabOne or any of its employees on account of such termination. Officer agrees, in the event of any dispute under this Section 9.1, to submit to a physical examination by a reputable licensed physician selected by LabOne and to accept LabOne's decision based on the results thereof. (c) VOLUNTARY TERMINATION. Officer's employment may be voluntarily terminated upon Officer giving sixty (60) days' prior written notice to LabOne. In the event Officer voluntarily terminates his employment, LabOne shall pay to Officer an amount equal to his base salary payable through the date of termination of employment and any annual incentive bonus for the previous year if such has been approved but not paid, and such payments, together with the arrangements provided for by any stock option or other agreement between LabOne and Officer in effect at the time and by any other applicable plan of LabOne will constitute the entire obligation of LabOne to Officer and will also constitute full settlement of any claim under law or in equity that Officer might otherwise assert against LabOne or any of its employees on account of his termination. (d) TERMINATION FOR CAUSE. Officer's employment may be terminated by LabOne at any time for cause. In the event that Officer is terminated by LabOne for cause, LabOne shall pay to Officer his base salary which may have accrued to the date of termination and any annual incentive bonus for the previous year if such has been approved but not paid, and such payments, together with the arrangements provided for by any stock option or other agreement between LabOne and Officer in effect at the time and by any other applicable plan of LabOne will constitute the entire obligation of LabOne to Officer and will also constitute full settlement of any claim under law or in equity that Officer might otherwise assert against LabOne or any of its employees on account of his termination. Only the following actions, failures or events by or affecting Officer shall constitute "cause" for termination of Officer by LabOne (i) willful and continued failure by Officer to substantially perform his duties provided herein after a written demand for substantial performance is delivered to Officer by the Board of Directors of LabOne, which demand identifies with reasonable specificity the manner in which Officer has not substantially performed his duties, and Officer fails to 54 comply with such demand within a reasonable time; (ii) the engaging by Officer of gross misconduct or gross negligence materially injurious to LabOne; or (iii) Officer's conviction of having committed a felony. Notwithstanding the foregoing, Officer shall not be deemed to have been terminated by LabOne for cause unless and until there shall have been delivered to him a copy of a resolution duly adopted by the affirmative vote of not less than a majority of the entire membership of the Board of Directors of LabOne finding that, in the good faith opinion of the Board of Directors, LabOne has cause for the termination of employment of Officer as set forth in any of clauses (i) through (iii) above and specifying the particulars thereof in reasonable detail. The findings of the Board of Directors shall not be binding on the arbitrators or other finders of fact in connection with any litigation or dispute arising out of this Agreement. (e) TERMINATION WITHOUT CAUSE. In the event that LabOne terminates Officer's employment for reasons other than death, disability, or cause as listed in subsection (d) above, then in addition to any other sums to which Officer may be entitled under this Agreement, LabOne shall pay to Officer, on or before the last day of employment, a lump sum severance payment equal to (i) the installments of base salary due for the balance of the then current term of this Agreement, plus (ii) fifty percent (50%) of the annual base salary payable to Officer by LabOne immediately prior to the termination of employment, which payments, together with the arrangements provided for by any stock option or other agreement between LabOne and Officer in effect at the time and by any other applicable plan of LabOne will constitute the entire obligation of LabOne to Officer and will also constitute full settlement of any claim under law or in equity that Officer might otherwise assert against LabOne or any of its employees on account of his termination. SECTION 10 SURVIVAL 10.1 Notwithstanding the termination of Officer's employment pursuant to the provisions of Section 9 hereof, or the expiration of the term of this Agreement, Officer's obligations under Sections 5, 6, 7 and 8 hereof, the provisions for injunctive relief against Officer in Sections 5.2 and 12.2 hereof and the provisions for arbitration in Section 12.1 hereof shall continue in full force and effect. Any right, power or obligation imposed or conferred upon LabOne or the Board of Directors of LabOne by the terms of this Agreement shall inure to the benefit of and be binding upon any person or entity into which LabOne is consolidated or merged and the Board of Directors or other governing body of any such corporation or other entity. 55 SECTION 11 ASSISTANCE IN LITIGATION 11.1 Officer shall, upon reasonable notice, furnish such information and assistance to LabOne as may reasonably be required by LabOne in connection with any litigation in which LabOne or any of its subsidiaries or affiliates is or may become a party. SECTION 12 ARBITRATION 12.1 METHODS. Except as provided in Section 12.2 below, any difference, controversy, claim or dispute between the parties arising out of this Agreement, or the breach thereof, shall be settled by binding arbitration before a panel of three arbitrators selected as follows: each party shall select one neutral arbitrator from the American Arbitration Association's approved list of arbitrators. The two arbitrators so selected by the parties shall select a third neutral arbitrator and the three so selected shall settle the dispute under the duly promulgated Commercial Arbitration Rules of the American Arbitration Association or its successor. The arbitration shall be conducted in Lenexa, Kansas. The award of the arbitrators may be entered as a judgment in any Court in the State of Kansas or in any court having jurisdiction thereof. 12.2 INJUNCTIVE RELIEF. Notwithstanding Section 12.1 above, LabOne shall be entitled to seek judicial injunctive relief to enforce its rights under Sections 5, 6, 7 and 8 of this Agreement as provided in Section 5.2 hereof. SECTION 13 MISCELLANEOUS 13.1 ASSIGNMENT BY OFFICER. This is a personal Agreement on the part of Officer and may not be sold, assigned, transferred or conveyed by Officer. This Agreement may not be sold, assigned, transferred or conveyed by LabOne except in connection with a merger, consolidation or sale of all or substantially all of the assets of LabOne and then only to the successor to LabOne's operations. 13.2 ENTIRE AGREEMENT. This Agreement contains the entire agreement among the parties hereto and there are no representations, inducements, promises, agreements, arrangements, or undertakings, oral or written, among the parties as to the subject matter covered. 56 13.3 SEVERABILITY. Should any part of this Agreement be declared invalid for any reason, such invalidity shall not affect the validity of any remaining portion hereof and such remaining portion shall continue in full force and effect as if this Agreement had been originally executed without including the invalid part. 13.4 GOVERNING LAW. This Agreement and its performance shall be interpreted and construed in accordance with the laws of the State of Kansas. 13.5 TITLES. Titles and captions in no way define, limit, extend or describe the scope of this Agreement or the intent of any provision hereof. 13.6 AMENDMENTS. No changes, alterations, modifications, additions, or qualifications to the terms of this Agreement shall be made or be binding unless made in writing and executed by the parties in the same manner as the Agreement. 13.7 NO WAIVER. Failure by either party to enforce any right granted by this Agreement shall not constitute a waiver of such right and waiver of any provision of this Agreement shall not constitute a waiver of any other provision. 13.8 NOTICES. Any notice, instrument or communication required or permitted under this Agreement shall be deemed to have been effectively given and made if in writing and when served by personal delivery to the party for whom it is intended, or three business days after being deposited, postage prepaid, registered or certified mail, return receipt requested, in the United States mail, addressed to the party for whom it is intended at the following addresses, or at such other addresses as the party to be notified may have designated in writing to the other: Officer: Robert D. Thompson 24801 W. 103rd Terrace Olathe, Kansas 66061 LabOne: LabOne, Inc. 10310 W. 84th Terrace Lenexa, Kansas 66214 Attn: Chairman of the Board of Directors 13.9 COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 57 IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the day and year first above written. LABONE, INC. By: /s/ W. Thomas Grant II ----------------------------- W. Thomas Grant II, President /s/ Robert D. Thompson ----------------------------- ROBERT D. THOMPSON 58 EX-10 6 Exhibit 10.13 ------------- AMENDMENT TO EMPLOYMENT AGREEMENT --------------------------------- THIS AMENDMENT ("Amendment"), made and entered into this 10th day of November, 1995, by and between LabOne, Inc. ("LabOne") and GREGG R. SADLER ("Officer"); WITNESSETH: WHEREAS, LabOne and Officer are parties to an Employment Agreement, dated August 19, 1993, as amended December 30, 1994 (the "Agreement"); and WHEREAS, the parties desire to further amend the Agreement; NOW, THEREFORE, in consideration of the mutual promises herein contained, the sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Clause (iv) of the third sentence of Section 9.1(d) of the Agreement is hereby amended by deleting said clause (iv) as the same now appears in its entirety: 2. The fourth sentence of Section 9.1(d) of the Agreement is hereby amended by changing the present reference to clause "iv" in said sentence to clause "iii". IN WITNESS WHEREOF, the parties have executed this Amendment as of the day and year first above written. LABONE, INC. By: /s/ W. Thomas Grant II -------------------------------- W. Thomas Grant II, President COMPANY /s/ Gregg R. Sadler -------------------------------- GREGG R. SADLER OFFICER 59 EX-10 7 Exhibit 10.14 ------------- EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT ("Employment Agreement"), made and entered into as of this 1st day of November, 1995, by and between LabOne, Inc., a Delaware corporation ("LabOne"), and Thomas J. Hespe ("Employee"). WITNESSETH: WHEREAS, LabOne is a laboratory specializing in urine and blood chemistry testing; and WHEREAS, Employee is knowledgeable and has substantial experience in the specialized business of urine and blood chemistry testing ("Lab Business"); and WHEREAS, in accordance with the terms and provisions of this Employment Agreement, LabOne desires to employ Employee to obtain the benefit of his knowledge and experience, and Employee desires to be employed by LabOne; and WHEREAS, LabOne and Employee agree that the restrictive covenants and confidentiality agreements contained in this Employment Agreement are essential to the growth and stability of the Lab Business of LabOne and to the continuing viability of the Lab Business in the event the employment of Employee is terminated, NOW, THEREFORE, in consideration of LabOne's agreement to employ Employee and the mutual promises herein contained, the parties hereto agree as follows: 1. EMPLOYMENT. LabOne hereby agrees to employ Employee, and Employee hereby agrees to accept such employment and to perform his duties and obligations hereunder, in accordance with the terms and conditions hereinafter set forth. 2. TERM. The term of Employee's employment pursuant to this Employment Agreement shall commence on the date hereof and shall continue until terminated in accordance with the provisions of paragraph 10 hereof. 3. DUTIES AND RESPONSIBILITIES. Employee shall serve as Executive Vice President-Sales, shall serve in such other capacities as the Officers or Board of Directors of LabOne may from time to time prescribe, shall perform all duties incidental to such positions and shall cooperate fully with the Board of Directors and Officers of LabOne. Employee shall devote all his business time, attention and energy to the performance of such duties and responsibilities. 4. COMPENSATION. During the term of Employee's employment pursuant to this Employment Agreement, Employee shall be paid a salary of $12,500 per 60 calendar month, or such other amount, which shall not be less than said base salary, as may from time to time be determined by LabOne, payable in arrears. 5. DEVELOPMENTS. Employee will promptly disclose to LabOne (in form satisfactory to LabOne) all information, technology, inventions, discoveries, improvements, processes, formulae, ideas, know-how, methods, compositions, research projects, computer software programs and developments, whether or not patentable or copyrightable (collectively "Information"), that Employee by himself or in conjunction with any other person or entity conceives, makes, develops or acquires during the term of his employment pursuant to the Employment Agreement, and that: (a) are or relate or pertain to the assets, properties, or existing or contemplated business or research activities or LabOne, or (b) are suggested by, arise out of or result from, directly or indirectly, Employee's association with LabOne, or (c) arise out of or result, directly or indirectly, in part or fully, from the use of LabOne's time, labor, materials, facilities or other resources, (collectively "Developments"). Any Information fitting within any of the descriptions contained in subsections (a), (b) or (c) of this paragraph 5 that is disclosed to any other person, firm or other entity by Employee or used in any manner by Employee within one (1) year following the termination of his employment pursuant to this Employment Agreement shall be presumed to have been conceived, made, developed or acquired during the term of his employment pursuant to this Employment Agreement and, thus, to constitute a Development. Employee hereby assigns, transfers and conveys to LabOne all of his right, title and interest in and to any and all such Developments, which Developments shall become and remain the sole and exclusive property of LabOne. At any time and from time to time, upon the request of LabOne, Employee will execute and deliver any and all instruments, documents and papers, give evidence and do any and all other acts which, in the opinion of counsel for LabOne, are or may be necessary or desirable to document such transfer, or to enable LabOne to file and process applications for and to acquire, maintain and enforce any and all patents, trademarks, registrations or copyrights with respect to any such Developments, or to obtain any extension, validation, re-issue, continuance or renewal of any such patent, trademark or copyright. LabOne will be responsible for the preparation of any such instruments, documents and papers and for the implementation of any such proceedings and will reimburse Employee for all reasonable expenses incurred by him in compliance with the provisions of this paragraph. 61 6. PROPERTY OF LABONE. All correspondence, notes, recordings, documents, customer lists and other materials and reproductions thereof pertaining to any aspect of the business of LabOne shall be the property of and shall be delivered to and retained by LabOne upon termination of his employment pursuant to this Employment Agreement. 7. CONFIDENTIALITY. During the term of and at any time after the termination of his employment pursuant to this Employment Agreement, Employee will hold in trust and confidence and will not divulge, disclose or convey to any person, firm, corporation or other entity and will keep secret and confidential all trade secrets, proprietary information and confidential information heretofore or hereafter acquired by him concerning LabOne, Head Office Reference Laboratory Ltd. or Seafield Capital Corporation and will not use for himself or others the same in any manner, except to the extent that such information should become no longer a trade secret, proprietary or confidential. Such trade secrets, proprietary information and confidential information shall be deemed to include, but shall not be limited to, information, whether written or not: (a) of a technical nature, such as but not limited to, technology, inventions, discoveries, improvements, processes, formulae, ideas, know-how, methods, compositions, computer software programs or research projects, including the identity of research organizations and researchers, (b) of a business nature, such as but not limited to information concerning costs, profits, supplies, suppliers, marketing, sales or lists of customers, and (c) pertaining to future developments, such as but not limited to information concerning research and development or future marketing methods. 8. RESTRICTIVE COVENANTS. In consideration for his employment with LabOne and in further consideration for the compensation provided for in paragraph 4 and the post-termination payment, if any, provided for in paragraph 10, Employee agrees that during the term of his employment pursuant to this Employment Agreement, and for a period of two (2) years after the termination for any reason of his employment pursuant to this Employment Agreement, he will not, without the prior written consent of LabOne, directly or indirectly, individually or in concert with others, or through the medium of any other corporation, partnership, syndicate, association, joint venture, or other entity or as employee, officer, director, agent, consultant or affiliate, compete with LabOne, within the hereinafter described region, in the urine or blood chemistry testing or analysis business for the insurance or the clinical testing industry or in the urine or blood chemistry container or other supply business 62 for the said testing industries, and Employee will not solicit or accept any such business from any customer who is served by LabOne as of the date of the termination of his employment pursuant hereto. The region referred to above shall consist of any territory(ies) in which LabOne or any of its representatives or agents, as of the date of the termination of Employee's employment pursuant hereto, provides, sells, offer for sale or solicits the sale to the said laboratory testing industries urine, blood or other bodily fluid or specimens testing or analysis or urine or blood containers or other supplies related thereto. 9. JUDICIAL RELIEF. LabOne and Employee agree that in the event that any court shall finally hold that any provision of paragraph 8 of this Employment Agreement is void or constitutes an unreasonable restriction against Employee, the provisions of paragraph 8 shall not be rendered void, but shall apply with respect to such time or territory or to such other extent as such court may judicially determine or indicate constitutes a reasonable restriction under the circumstances. LabOne shall be entitled to appropriate injunctive relief in any court of competent jurisdiction to enforce its rights under paragraphs 5, 6, 7 and 8 of this Employment Agreement, in addition to any other rights and remedies available to LabOne at law or in equity, it being agreed that any violation of paragraphs 5, 6, 7 or 8 of this Employment Agreement by Employee is reasonably likely to cause irreparable damage to LabOne which will be difficult or impossible to value in monetary damages. 10. TERMINATION. Employee's employment pursuant to this Employment Agreement shall terminate upon the occurrence of any of the following events: (a) DEATH. In the event that Employee dies during the term of this Employment Agreement, LabOne shall pay to his executors or administrators an amount equal to the installments of his salary payable for the month in which he dies, and, thereafter, LabOne shall have no further liability or obligation hereunder to his executors, heirs or assigns or any other person claiming under or through him. (b) DISABILITY. In the event that Employee continues unable to fully perform his duties and responsibilities hereunder by reason of illness, injury or mental or physical disability or incapacity for ninety (90) consecutive days, during which time he shall continue to be compensated for monthly installments of salary as provided in paragraph 4 hereof, Employee's employment pursuant to this Employment Agreement may be terminated by LabOne, and LabOne shall thereafter have no further liability or obligation hereunder to Employee. Employee agrees in the event of any dispute under this paragraph to submit to a physical examination by a licensed physician selected by LabOne and to accept LabOne's decision based on the results thereof. 63 (c) VOLUNTARY TERMINATION. Employee's employment may be voluntarily terminated upon Employee giving thirty (30) days' prior written notice to LabOne. In the event Employee voluntarily terminates his employment, LabOne shall have no further liability or obligation hereunder to Employee. (d) TERMINATION FOR CAUSE. Employee's employment may be involuntarily terminated by LabOne at any time for cause. In the event that Employee is involuntarily terminated by LabOne for cause, LabOne shall thereafter have no further liability or obligation hereunder to Employee. (e) TERMINATION WITHOUT CAUSE. Employee's employment may be involuntarily terminated by LabOne at any time without cause upon LabOne giving thirty (30) days' prior written notice to Employee. In the event that Employee is involuntarily terminated without cause by LabOne, LabOne shall pay to Employee in a lump sum an amount equal to twelve (12) months' base salary. Said amount shall be paid to Employee within 30 days of LabOne's giving notice of termination to Employee and shall be determined by the aggregate of the last twelve (12) months' base salary of such Employee preceding the month LabOne transmits such notice of termination. Upon such payment, LabOne shall have no further liability or obligation hereunder to Employee. (f) TERMINATION SUBSEQUENT TO CHANGE IN CONTROL. Notwithstanding any other provision of this Agreement to the contrary, in the event that (i) a change of control of LabOne shall occur at any time during which Employee is in the full-time employment of LabOne or its successor and (ii) within one (1) year after such a change in control, Employee's employment with LabOne or its successor is terminated by LabOne or its successor for any reason other than permanent disability, death or normal retirement, or is voluntarily terminated by Employee for any reason at his sole discretion, LabOne will promptly pay to Employee as termination compensation the lump sum amount described below. The lump sum compensation payable shall be equal to three (3) times the average annual compensation includable in Employee's gross income for the most recent five (5) taxable years ending before the date of the change in control. If Employee has been an employee of LabOne for less than 5 years, Employee's lump sum payment shall be equal to 3 times the average annual compensation includable in Employee's gross income based on the portion of the 5 year period during which Employee performed services for LabOne. To the extent that any amount required to be paid hereunder would constitute an "excess parachute payment" within the meaning of Section 280G(b) of the Internal Revenue Code of 1986, that excess amount need not be paid. 64 For purposes of this paragraph 10(f), a "change of control" shall be deemed to have taken place if there shall have occurred (i) the sale or other disposition resulting in the transfer of legal or beneficial ownership of, or the right to vote, more than fifty percent (50%) of the outstanding capital stock of LabOne to one or more third-party purchasers unaffiliated with Seafield Capital Corporation, its shareholders or affiliates (as the term "affiliate" is defined in Rule 12b-2 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934), except in connection with an underwritten public offering of the common stock of LabOne, (ii) a merger or consolidation of LabOne with or into any entity other than Seafield Capital Corporation or its affiliates, or (iii) a sale or other transfer of substantially all of the assets of LabOne to any person or entity other than Seafield Capital Corporation or its affiliates. In the event of termination of employment under the circumstances described above, LabOne shall pay to Employee the installments of his base salary through the date of termination of employment, any annual incentive bonus for the previous year if such has been approved but not paid and the lump sum amount as termination compensation described in this paragraph 10(f), and any remaining term of this Agreement shall be cancelled. Such payments to Employee and the arrangements provided for by any stock option or other agreement between LabOne and Employee in effect at the time and by any other applicable plan of LabOne will constitute the entire obligation of LabOne to Employee with respect to such termination, and will also constitute full settlement of any claim under law or in equity that Employee might otherwise assert against LabOne or any of its employees on account of such termination. 11. SURVIVAL. Notwithstanding the termination of Employee's employment pursuant to the provisions of paragraph 10 hereof, Employee's obligations under paragraphs 5, 6, 7 and 8 hereof and the provisions for relief against Employee in paragraph 9 hereof shall continue in full force and effect. Any right or power conferred upon LabOne or the Board of Directors of LabOne by the terms of this Employment Agreement shall inure to the benefit of any person(s) of entity(ies) into which LabOne is consolidated, merged or liquidated, and the Board of Directors or other governing body of any such corporation of other entity. 12. LAW GOVERNING. This Employment Agreement shall be governed by and interpreted under the laws of the State of Kansas. 65 13. NOTICES. All notices and other communications required or permitted hereunder or necessary or convenient shall be deemed to have been given when mailed by certified or registered mail, postage prepaid, addressed as follows: If to Employee to: Thomas J. Hespe Seven Sturbridge Court Baldwin, MO 21013 and if to LabOne, to: W. Thomas Grant II President and Chief Executive Officer LabOne, Inc. 10310 West 84th Terrace Lenexa, Kansas 66214 or such other persons and addresses as have been furnished by Employee or LabOne to the other in writing. The failure of Employee or LabOne to require strict performance of any provision of this Employment Agreement by the other, or the forbearance to exercise any right or remedy, shall not be construed as a waiver by such party of any such right or remedy, nor shall any single or partial exercise of any right or remedy preclude any other or further exercise thereof or the exercise of any other right or remedy. 14. CONTENTS OF EMPLOYMENT AGREEMENT, AMENDMENT AND ASSIGNMENT. This Employment Agreement sets forth the entire understanding between the parties with respect to the subject matter hereof and cannot be changed, modified or terminated except in writing. All of the terms and provisions of this Employment Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective heirs, representatives, successors and assigns of the parties hereto, except that the duties and responsibilities of Employee hereunder are of a personal nature and shall not be assignable in whole or in part by Employee 15. SEVERABILITY. If any provision of this Employment Agreement or the application thereof under any circumstance is adjudicated to be invalid or unenforceable, such invalidity or unenforceability shall not affect any other provision or application of this Employment Agreement which can be given effect without the invalid or unenforceable provision or application. 16. GENDER. Masculine pronouns used herein shall refer to the masculine or feminine gender as appropriate. 66 IN WITNESS WHEREOF, the undersigned have executed this Employment Agreement as of the date first above written. LABONE, INC. By: /s/ W. Thomas Grant II ----------------------------- W. Thomas Grant II, President /s/ Thomas J. Hespe ----------------------------- THOMAS J. HESPE 67 EX-10 8 Exhibit 10.22 ------------- PROMISSORY NOTE $150,000 September 7, 1995 Lenexa, Kansas FOR VALUE RECEIVED, BERT H. HOOD ("maker") promises to pay to the order of LABONE, INC., a Delaware corporation ("payee"), at 10310 W. 84th Terrace, Lenexa, Kansas, or at such other place as payee may from time to time designate in writing, the principal sum of One Hundred Fifty Thousand Dollars ($150,000), with interest accruing on the unpaid balance of the principal sum from the date hereof until paid at a rate of seven and three-quarter percent (7.75%) per annum. The principal sum of this Promissory Note shall be paid in full on the earlier of (a) September 2, 1996, or (b) the date of the termination of employment of maker pursuant to the terms of the Employment Agreement between maker and payee, dated August 5, 1993, as amended as of November 9, 1993 ("Employment Agreement"), the terms and provisions of which are incorporated herein by reference. The principal sum of this Promissory Note may be prepaid in whole or in part at any time, without penalty, at the option of maker. Interest on this Promissory Note shall be payable quarterly on December 1, March 1, June 1 and on the day that the unpaid balance of the principal sum is paid in full. Maker agrees that any sums due payee by maker under this Promissory Note may, at the option of payee, be set off and applied against any sums due maker by payee under the Employment Agreement or otherwise. Maker waives presentment for payment, demand, protest and notice of demand, protest and nonpayment. In the event that it should become necessary in the opinion of payee to employ counsel to collect or enforce this Promissory Note, maker agrees to pay all costs, charges, disbursements and reasonable attorney's fees incurred by payee in collecting or enforcing payment of this Promissory Note. The failure of payee to exercise any option or right to which payee may be entitled shall not constitute a waiver of the right to exercise such option or right at a subsequent time. This Promissory Note has been executed and delivered in, and is to be construed and enforced according to and governed by, the laws of the State of Kansas. /s/ Bert H. Hood --------------------- BERT H. HOOD 68 EX-23 9 Exhibit 23 ---------- INDEPENDENT AUDITORS' CONSENT ----------------------------- The Board of Directors LabOne, Inc.: We consent to incorporation by reference in the Registration Statement Nos. 33-22865, 33-41681, 33-49818 and 33-51484 on Forms S-8 of LabOne, Inc. of our report dated January 30, 1996 relating to the consolidated balance sheets of LabOne, Inc. and subsidiaries as of December 31, 1995 and 1994, and the related consolidated statements of earnings, stockholders' equity and cash flows and related schedule for each of the years in the three-year period ended December 31, 1995, which report appears in the December 31, 1995, annual report on Form 10-K of LabOne, Inc. /s/KPMG Peat Marwick LLP Kansas City, Missouri March 20, 1996 69 EX-24 10 Exhibit 24 ---------- Power of Attorney The undersigned hereby appoint Gregg R. Sadler as attorney-in-fact, to execute in name and on behalf of the undersigned the Form 10-K Annual Report of LabOne, Inc., to be filed with the Securities and Exchange Commission for its fiscal year ended December 31, 1995. Dated: February 16, 1996 /s/ Joseph H. Brewer ------------------------------ Joseph H. Brewer, MD, Director /s/ William D. Grant ------------------------------ William D. Grant, Director /s/ P. Anthony Jacobs ------------------------------ P. Anthony Jacobs, Director ------------------------------ Richard A. Rifkind, MD, Director /s/ Richard S. Schweiker ------------------------------ Richard S. Schweiker, Director /s/ James R. Seward ------------------------------ James R. Seward, Director /s/ John E. Walker ------------------------------ John E. Walker, Director /s/ R. Dennis Wright ------------------------------ R. Dennis Wright, Director 70 EX-27 11
5 The schedule contains summary financial information extracted from the 1995 Form 10-K annual report for LabOne, Inc. and is qualified in its entirety by reference to such financial statements. 0000816151 LABONE, INC. YEAR DEC-31-1995 DEC-31-1995 2,993,128 34,111,752 8,057,281 329,995 1,533,257 49,416,136 52,973,647 35,885,928 70,047,834 5,183,505 0 150,000 0 0 64,714,329 70,047,834 0 57,029,424 0 29,934,033 0 0 0 4,750,174 1,953,119 2,797,055 0 0 0 2,797,055 0.21 0.21
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