-----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, DQf4gRTZLEqME7zpFLb5YNt3BmwzLxgbJxhCuW8mEQ/pAlhF6tjGh8awNUUED+Cb RXrAzfxB3l/n1ivqJS1l3Q== 0000816151-97-000031.txt : 19971111 0000816151-97-000031.hdr.sgml : 19971111 ACCESSION NUMBER: 0000816151-97-000031 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971110 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-Q SEC ACT: SEC FILE NUMBER: 000-15975 FILM NUMBER: 97710833 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-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For quarterly period ended September 30, 1997 ---------------------- 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) (913)-888-1770 -------------------------------- (Registrant's telephone number, including area code) N/A ------------------------------------ (Former name, former address, former fiscal year, if changed since last report) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (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 [ ] Number of shares outstanding of only class of Registrant's common stock, $.01 par value, as of October 31, 1997 - 13,124,294 net of 1,875,706 shares held as treasury stock. Page 1 of 10 PART I. FINANCIAL INFORMATION ITEM 1 - Financial Statements LabOne, Inc. and Subsidiary Consolidated Balance Sheets September 30, December 31, 1997 1996 ASSETS ------------- ----------- Current assets: Cash and cash equivalents $ 5,826,830 3,613,454 Short-term investments 16,213,004 27,781,974 Accounts receivable-trade, net of allowance for doubtful accounts of $880,917 in 1997 and $657,558 in 1996 13,230,398 9,598,707 Inventories 2,180,972 1,360,164 Prepaid expenses and other current assets 1,862,366 2,074,538 Deferred income taxes 682,206 682,206 ---------- ---------- Total current assets 39,995,776 45,111,043 Investments with maturities of more than one year, at cost 502,680 504,292 Property, plant and equipment 55,073,399 52,642,497 Less accumulated depreciation 37,618,939 35,751,529 ---------- ---------- Net property, plant and equipment 17,454,460 16,890,968 Other assets: Intangible assets, net of accumulated amortization 5,484,830 2,098,987 Deferred income taxes - noncurrent 314,365 114,683 Deposits and other assets 81,836 23,202 ---------- ---------- Total assets $63,833,947 64,743,175 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 3,030,144 2,971,376 Income taxes payable 20,522 - Payable to Seafield Capital Corporation - 26,217 Accrued payroll and benefits 3,761,936 2,802,566 Other accrued expenses 652,771 393,811 Other current liabilities 139,773 99,912 ---------- ---------- Total liabilities 7,605,146 6,293,882 Stockholders' equity: Preferred stock, $.01 par value per share; 1,000,000 shares authorized, none issued - - Common stock, $.01 par value per share; 40,000,000 shares authorized, 15,000,000 shares issued 150,000 150,000 Additional paid-in capital 13,672,694 13,546,121 Equity adjustment from foreign currency translation (598,057) (543,959) Retained earnings 65,001,652 67,494,437 ---------- ---------- 78,226,289 80,646,599 Less treasury stock of 1,885,148 shares in 1997 and 1,915,835 shares in 1996 21,997,488 22,197,306 ---------- ---------- Total stockholders' equity 56,228,801 58,449,293 ---------- ---------- Total liabilities and stockholders' equity $63,833,947 64,743,175 ========== ========== See accompanying notes to consolidated financial statements and management's discussion and analysis of financial condition and results of operations. Page 2
LabOne, Inc. and Subsidiary Consolidated Statements of Earnings Three months ended Nine Months Ended September 30, September 30, 1997 1996 1997 1996 ---------- ---------- ---------- ---------- Sales $ 19,728,262 14,768,579 57,775,736 42,814,221 Cost of sales 10,664,417 8,303,992 30,750,771 23,665,043 ---------- ---------- ---------- ---------- Gross profit 9,063,845 6,464,587 27,024,965 19,149,178 Selling, general and administrative expenses 6,749,261 5,675,856 20,279,650 17,325,950 ---------- ---------- ---------- ---------- Earnings from operations 2,314,584 788,731 6,745,315 1,823,228 Other income 288,218 434,461 997,689 1,261,529 ---------- ---------- ---------- ---------- Earnings before income taxes 2,602,802 1,223,192 7,743,004 3,084,757 Income tax expense 1,066,682 407,897 3,160,902 1,265,044 ---------- ---------- ---------- ---------- Net earnings $ 1,536,120 815,295 4,582,102 1,819,713 ========== ========== ========== ========== Earnings per common share $ 0.12 0.06 0.34 0.14 ====== ====== ===== ===== Dividends per common share $ 0.18 0.18 0.54 0.54 ====== ====== ===== ===== Weighted average common shares outstanding 13,321,213 13,276,126 13,325,123 13,256,076 ========== ========== ========== ==========
See accompanying notes to consolidated financial statements and management's discussion and analysis of financial condition and results of operations. Page 3 LabOne, Inc. and Subsidiary Consolidated Statement of Stockholders' Equity Nine Months Ended September 30, 1997
Additional Foreign Total Common paid-in currency Retained Treasury stockholders' stock capital translation earnings stock equity Balance at December 31, 1996 $150,000 13,546,121 (543,959) 67,494,437 (22,197,306) 58,449,293 Net earnings 4,582,102 4,582,102 Cash dividends ($0.54 per share) (7,074,887) (7,074,887) Stock options exercised, net (26,739 shares) 101,404 155,403 256,807 Directors' stock issued (3,948 shares) 25,169 44,415 69,584 Equity adjustment from foreign currency translation (54,098) (54,098) -------- ---------- -------- ---------- ----------- ---------- Balance at September 30, 1997 $150,000 13,672,694 (598,057) 65,001,652 (21,997,488) 56,228,801 ======== ========== ======== ========== =========== ==========
See accompanying notes to consolidated financial statements and management's discussion and analysis of financial condition and results of operations. Page 4 LabOne, Inc. and Subsidiary Consolidated Statements of Cash Flows Nine months ended September 30, 1997 1996 --------- --------- Cash provided by (used for) operations: Net earnings $ 4,582,102 1,819,713 Adjustments to reconcile net earnings to net cash provided by operations: Depreciation and amortization 3,306,525 2,861,100 (Gain) loss on disposal of property and equipment (118,771) 98,381 Directors' stock compensation 69,584 70,195 Provision for deferred taxes (204,568) (486,908) Change in short term trading portfolio, net 14,192,108 (902,783) Changes in: Accounts receivable (3,631,691) (1,544,236) Inventories (820,808) (41,662) Prepaid expenses and other current assets 212,172 898,061 Accounts payable 58,768 (100,181) Income taxes payable 20,522 (40,037) Payable to Seafield Capital Corporation (26,217) 10,406 Accrued payroll & benefits 959,370 22,056 Accrued expenses 258,960 (164,584) Other current liabilities 39,861 17,880 ---------- ---------- Net cash provided by operations 18,897,917 2,517,401 ---------- ---------- Cash provided by (used for) investment transactions: Purchases of investments held to maturity (15,893,902) (15,752,895) Proceeds from maturities of investments held to maturity 13,485,062 20,994,571 Property, plant and equipment, net (3,242,256) (981,408) Acquisition of intangible assets, net (4,128,275) - Other (58,634) 12,395 ---------- ---------- Net cash provided by (used for) investment transactions (9,838,005) 4,272,663 ---------- ---------- Cash provided by (used for) financing transactions: Issuance of treasury stock, net of proceeds from the exercise of stock options 256,807 67,544 Cash dividends (7,074,887) (7,059,182) ---------- ---------- Net cash used for financing transactions (6,818,080) (6,991,638) ---------- ---------- Effect of foreign currency translation (28,456) (1,381) ---------- ---------- Net increase (decrease) in cash and cash equivalents 2,213,376 (202,955) Cash and cash equivalents - beginning of period 3,613,454 2,993,128 ---------- ---------- Cash and cash equivalents - end of period $ 5,826,830 2,790,173 ========== ========== Supplemental disclosures of cash flow information: Cash paid during the period for income taxes $ 3,541,775 1,659,898 ========== ========== See accompanying notes to consolidated financial statements and management's discussion and analysis of financial condition and results of operations. Page 5 LabOne, Inc. and Subsidiary Notes to Consolidated Financial Statements September 30, 1997 and 1996 The accompanying consolidated financial statements include the accounts of LabOne, Inc. and its wholly-owned subsidiary Lab One Canada Inc. (a Canadian corporation). All significant intercompany transactions have been eliminated in consolidation. The financial information furnished herein is unaudited; however, in the opinion of management, it reflects all adjustments which are necessary to fairly state the Company's financial position at September 30, 1997, and December 31, 1996, and the results of its operations and cash flows for the periods ended September 30, 1997 and 1996. The financial statements have been prepared in conformity with generally accepted accounting principles appropriate in the circumstances, and included in the financial statements are certain amounts based on management's estimates and judgments. The financial information herein is not necessarily representative of a full year's operations because levels of sales, capital additions and other factors fluctuate throughout the year. These same considerations apply to all year- to-year comparisons. See the Company's Annual Report on Form 10-K for the year ended December 31, 1996, for additional information not required by this report Form 10-Q. The weighted average shares includes the common stock equivalents of stock options. In February 1997, the Financial Accounting Standards Board issued Statement No. 128, "Earnings Per Share" which revises the calculation and presentation provisions of Accounting Principles Board Opinion 15 and related interpretations. Statement No. 128 is effective for the Company's fiscal year ending December 31, 1997. Retroactive application will be required. The Company believes the adoption of Statement No. 128 will not have a significant effect on its reported earnings per share. In February 1997, the Financial Accounting Standards Board issued Statement No. 129, "Disclosure of Information About Capital Structure" effective for the Company's fiscal year ending December 31, 1997. The Company believes the adoption of Statement No. 129 will not have any significant impact. Effective January 30, 1997, LabOne acquired certain assets, inventory and customer lists, of GIB Laboratories, Inc., a subsidiary of Prudential Insurance Company of America, for $4.6 million. Concurrently, Prudential's Individual Insurance Group made a multi-year commitment to use LabOne as its exclusive provider of risk assessment testing services. The acquisition was accounted for using the purchase method. Accordingly, the purchase price was allocated to assets acquired based on their fair values. The total cost in excess of tangible net assets acquired was $4.1 million and is being amortized on a straight-line basis over 15 years. Page 6 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. RESULTS OF OPERATIONS Selected Financial Data: Three Months Ended % Increase Nine Months Ended % Increase September 30, September 30, 1997 1996 1997 1996 ----------- ----------- -------- ----------- ----------- -------- Sales $ 19,728,262 14,768,579 34% $ 57,775,736 42,814,221 35% Net earnings 1,536,120 815,295 88% 4,582,102 1,819,713 152% Earnings per common share $0.12 0.06 $0.34 0.14 Cash dividends per common share $0.18 0.18 $0.54 0.54
The Company provides high-quality laboratory services to insurance companies, managed care companies, physicians and employers. 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 the Company believes has significant economic advantages over other conventional laboratory competitors. LabOne markets its clinical testing services to healthcare payers, such as PPO's and HMO's, through the Lab Card(TM) Program. The Lab Card Program, a Laboratory Benefits Management (LBM) program, provides laboratory testing to insurance companies and self-insured groups at reduced rates as compared to traditional laboratories. It uses a unique benefit design that shares the cost savings with the patient, creating an incentive for the patient to help direct laboratory work to LabOne. Under the Program, the patient incurs no out-of-pocket expense when the Lab Card is used, and the payer receives substantial savings on its laboratory charges. The Company's Lab Card Program covered approximately 1.4 million lives as of September 30, 1997. Additionally, LabOne had a signed backlog of approximately 400,000 additional lives to be covered by the Program. LabOne is certified by the Substance Abuse and Mental Health Services Administration (SAMHSA) to perform substance abuse testing services for federally regulated employers and is currently marketing these services throughout the country to both regulated and nonregulated employers. The Company's rapid turnaround times and multiple testing options help clients reduce downtime for affected employees and meet mandated drug screening guidelines. Effective January 30, 1997, LabOne acquired certain assets, including customer lists, of GIB Laboratories, Inc., a subsidiary of Prudential Insurance Company of America. Concurrently, Prudential's Individual Insurance Group agreed to use LabOne as its exclusive provider of risk assessment testing services. At the time of the purchase, GIB served approximately 5% of the insurance laboratory testing market. Page 7 THIRD QUARTER ANALYSIS Net sales increased 34% to $19.7 million in the third quarter 1997 from $14.8 million in the third quarter 1996 due to increases in all business segments. Insurance segment revenue increased to $15.2 million during the third quarter 1997 as compared to $12.4 million in the same quarter last year. The increase was due to an increase in market share and an increase in oral fluid testing on applicants applying for smaller face-amount policies. The total number of insurance applicants tested in the third quarter 1997 increased by 22% as compared to the same quarter last year. Average revenue per applicant decreased less than 1%. Insurance kit and container revenue increased, due primarily to an increase in the number of blood and oral fluid kits sold. Clinical (diagnostic) laboratory revenue increased 81% from $1.0 million in the third quarter 1996 to $1.8 million in 1997 due to a 79% increase in testing volumes. Substance abuse testing (SAT) revenue increased 106% from $1.3 million in the third quarter 1996 to $2.7 million in 1997, primarily due to increased testing volumes. Cost of sales increased 28% or $2.4 million in the third quarter 1997 as compared to the prior year, due primarily to increases in supplies and payroll resulting from higher testing volumes. Insurance kit supplies increased due to the higher volume of kits sold and the increase in cost of oral fluid kits for HIV testing. Payroll and lab supplies increased due to the increased specimen volumes tested in each segment. Clinical cost of sales expenses were $2.2 million as compared to $1.7 million in the third quarter 1996. SAT cost of sales expenses were $2.0 million as compared to $1.0 million in the third quarter 1996. As a result of the above factors, gross profit for the quarter increased $2.6 million (40%) from $6.5 million in 1996 to $9.1 million in 1997. Clinical gross profit increased $0.3 million in the third quarter to a loss of $0.4 million in 1997 from a loss of $0.7 million in the third quarter 1996. SAT gross profit increased to $0.8 million in the third quarter 1997 from $0.3 million last year. Selling, general and administrative expenses increased $1.1 million (19%) in the third quarter 1997 as compared to the prior year, due primarily to increases in payroll expenses, travel and printing expenses. These were partially offset by a decrease in consulting and severance expenses. Clinical expenses, including allocated overhead, were $1.8 million as compared to $1.3 million in 1996. SAT expenditures, including allocations, were $0.9 million as compared to $0.6 million last year. Operating income increased from $0.8 million in the third quarter 1996 to $2.3 million in 1997. The insurance segment increased $1.5 million to 4.6 million. The clinical segment declined $0.1 million to an operating loss of $2.2 million. The SAT segment improved $0.2 million from an operating loss of $0.3 million in the third quarter 1996 to a loss of $0.1 million in 1997. The effective income tax rate increased from 33% in 1996 to 41% in 1997 due primarily to foreign tax adjustments in 1996. The combined effect of the above factors resulted in net earnings of $1.5 million, or $0.12 per share, in the third quarter 1997 as compared to $0.8 million, or $0.06 per share, in the same period last year. Page 8 YEAR-TO-DATE ANALYSIS Revenue in the nine month period ended September 30, 1997 was $57.8 million as compared to $42.8 million in the same period last year. The increase of $15.0 million is due to increases in insurance segment revenue of $8.6 million, SAT revenue of $3.6 million and clinical laboratory revenue of $2.8 million. The total number of insurance applicants tested in the nine month period increased by 21% as compared to last year, while average revenue per applicant declined less than 1%. Kit and container revenue increased $2.7 million due primarily to an increase in the number of full blood and oral fluid kits sold and the increased price of oral fluid kits for HIV testing. Clinical laboratory revenue increased from $2.7 million during the first nine months of 1996 to $5.5 million for the same period in 1997 due to increased testing volumes and higher revenue per patient. SAT revenue increased from $3.2 million in 1996 to $6.8 million in 1997 due to a 117% increase in testing volumes. Cost of sales increased $7.1 million year to date as compared to the prior year. This increase is due primarily to increases in payroll, laboratory supplies and kit expenses. Payroll increased 21%, and lab supplies increased 32% due to the larger volume of all specimen types processed. Insurance kit expense increased due to the higher volume of kits sold and the increase in cost of oral fluid kits for HIV testing. Clinical cost of sales expenses were $6.1 million as compared to $4.7 million during the first nine months of 1996. SAT cost of sales expenses were $5.1 million as compared to $2.5 million during 1996. As a result of the above factors, gross profit for the first nine months increased from $19.1 million in 1996 to $27.0 million in 1997. Clinical gross profit improved from a loss of $2.1 million in 1996 to a loss of $0.7 million in 1997. SAT gross profit increased to $1.7 million in the first nine months of 1997 from $0.7 million last year. Selling, general and administrative expenses increased $3.0 million (17%) in the nine month period ended September 30, 1997 as compared to the prior year, due primarily to increases in payroll expenses, travel and printing expenses. Payroll expense increased due to bonus accruals and a 20% increase in employees. Clinical expenditures were $5.5 million as compared to $3.8 million in 1996. SAT expenses increased from $1.6 million in 1996 to $2.3 million in 1997. Operating income increased from $1.8 million in the first nine months of 1996 to $6.7 million in 1997, primarily due to an increase in the insurance segment operating income of $4.9 million. The clinical segment had an operating loss of $6.2 million for the nine month period ended September 30, 1997 due to increased corporate overhead allocations offsetting operating improvements over 1996. The SAT segment improved from an operating loss of $0.9 million in 1996 to a loss of $0.6 million in 1997. Investment income decreased $0.4 million primarily due to less funds available for investment. Other nonoperating income increased $0.2 million. The combined effect of the above factors resulted in net earnings of $4.6 million, or $0.34 per share, in the nine month period ended September 30, 1997 as compared to $1.8 million, or $0.14 per share, in the same period last year. Page 9 FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES LabOne's working capital position decreased by $6.4 million to $32.4 million at September 30, 1997, from $38.8 million at December 31, 1996. This decrease is primarily due to dividends paid, the purchase of GIB laboratory assets and customer lists, and equipment purchases exceeding operating cash flow. Net trade accounts receivable increased 38% over the balance at December 31, 1996, primarily due to a 35% increase in sales in 1997. Net additions to property, plant and equipment and intangibles were $7.4 million in the nine month period as compared to $1.0 million in 1996. The increase is primarily due to the purchase of the assets and customer lists of GIB Laboratories and purchases supporting expanded laboratory capacity. The Company held approximately 1.9 million shares of stock in treasury at September 30, 1997, at a total cost of $22.0 million, or $11.67 per share. In August 1997, LabOne's Board of Directors declared the regular quarterly dividend of $0.18 per common share. This dividend was paid on September 3, 1997, to stockholders of record as of August 26, 1997, and totaled approximately $2.4 million. The board will review the dividend payment policy on a periodic basis. There are currently no restrictions that would limit the Company's ability to make future dividend payments. The Company had no borrowings during 1997. The Company expects to fund operations and future dividend payments from a combination of cash reserves and cash flow from operations. At September 30, 1997, LabOne had total cash and investments of $22.5 million as compared to $31.9 million at December 31, 1996. In October 1997, LabOne announced that it had purchased approximately 54 acres of land at Renner Ridge Corporate Park in Lenexa, Kansas. LabOne is planning to construct a 280,000 square foot facility to house all of its corporate, laboratory and warehouse operations. This project is expected to cost approximately $27.5 million and will be financed with an industrial revenue bond. PART II. OTHER INFORMATION Item 5. - Exhibits and Reports on Form 8-K (a) Exhibits 27. Financial Data Schedule - as filed electronically by the Registrant in conjunction with this third quarter 1997 Form 10-Q. (b) Reports on Form 8-K None SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. LabOne, Inc. Date: November 7, 1997 By /s/ Kurt E. Gruenbacher Kurt E. Gruenbacher, V.P. Finance and CAO Date: November 7, 1997 By /s/ Robert D. Thompson Robert D. Thompson, Executive V.P., COO, CFO and Treasurer Page 10 EX-27 2
5 This schedule contains summary financial information extracted from the third quarter 1997 Form 10-Q for LabOne, Inc. and is qualified in its entirety by reference to such financial statements. 0000816151 LABONE, INC. 9-MOS DEC-31-1997 SEP-30-1997 5,826,830 16,213,004 14,111,315 880,917 2,180,972 39,995,776 55,073,399 37,618,939 63,833,947 7,605,146 0 0 0 150,000 56,078,801 63,833,947 0 57,775,736 0 30,750,771 0 0 0 7,743,004 3,160,902 4,582,102 0 0 0 4,582,102 0.34 0.34
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