-----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, EMTCiYZxADnwK1BSLr9uJAl3vA8Wpfcmv+LQeF440viwIOE5gx3xDWM6kMtUrXHo dVyqxy6HGzzn1sinvQwNAw== 0000830158-00-000006.txt : 20000508 0000830158-00-000006.hdr.sgml : 20000508 ACCESSION NUMBER: 0000830158-00-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000505 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LABONE INC/ CENTRAL INDEX KEY: 0000830158 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MEDICAL LABORATORIES [8071] IRS NUMBER: 431039532 STATE OF INCORPORATION: MO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-92137 FILM NUMBER: 620670 BUSINESS ADDRESS: STREET 1: 10101 RENNER BLVD STREET 2: P. O. BOX 7568 CITY: LENEXA STATE: KS ZIP: 66219 BUSINESS PHONE: 9136483600 MAIL ADDRESS: STREET 1: 5000 W 95TH STREET STREET 2: SUITE 260 CITY: SHAWNEE MISSION STATE: KS ZIP: 66207 FORMER COMPANY: FORMER CONFORMED NAME: LAB HOLDINGS INC DATE OF NAME CHANGE: 19980406 FORMER COMPANY: FORMER CONFORMED NAME: SEAFIELD CAPITAL CORP DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: BMA CORP /MO/ DATE OF NAME CHANGE: 19910520 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 March 31, 2000 -------------- Commission file number: 0-16946 ------- LabOne, Inc. ------------ 10101 Renner Blvd Lenexa, Kansas 66219 (913) 888-1770 Incorporated in Missouri I.R.S. Employer Identification Number: 43-1039532 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 the only class of Registrant's common stock, $.01 par value, as of May 1, 2000 - 10,730,862 net of 2,319,158 shares held as treasury stock. Page 1 of 12 PART I. FINANCIAL INFORMATION ITEM 1 - Financial Statements LabOne, Inc. and Subsidiaries Consolidated Balance Sheets March 31, December 31, 2000 1999 ASSETS ------------ ------------ Current assets: Cash and cash equivalents $2,171,418 $2,983,644 Accounts receivable-trade, net of allowance for doubtful accounts of $2,782,834 in 2000 and $1,981,285 in 1999 28,336,804 26,331,960 Income taxes receivable 456,971 1,643,520 Inventories 2,315,989 3,186,853 Prepaid expenses and other current assets 2,459,577 1,772,884 Deferred income taxes 1,894,844 1,328,027 ------------ ------------ Total current assets 37,635,603 37,246,888 Property, plant and equipment 82,455,884 80,910,886 Less accumulated depreciation 39,414,283 38,106,948 ------------ ------------ Net property, plant and equipment 43,041,601 42,803,938 Other assets: Intangible assets, net of accumulated amortization 36,851,134 37,868,921 Bond issue costs, net of accumulated amortization of $27,658 in 2000 and $23,291 in 1999 164,489 168,856 Deferred income taxes - noncurrent -- 93,326 Deposits and other assets 245,911 260,795 ------------ ------------ Total assets $117,938,738 $118,442,724 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $12,049,325 $11,852,403 Accrued payroll and benefits 4,011,129 2,793,721 Other accrued expenses 839,251 727,241 Other current liabilities 596,825 551,146 Current portion of long-term debt 1,874,081 1,873,577 ------------- ------------ Total current liabilities 19,370,611 17,798,088 Deferred income taxes - noncurrent 176,568 -- Long-term payable 1,360,000 1,360,000 Long-term debt 31,251,192 28,255,139 ------------ ------------ Total liabilities 52,158,371 47,413,227 Stockholders' equity: Preferred stock, $.01 par value per share; 3,000,000 shares authorized, none issued -- -- Common stock, $.01 par value per share; 40,000,000 shares authorized, 13,050,020 shares issued 130,500 130,500 Additional paid-in capital 32,075,290 32,035,445 Equity adjustment from foreign currency translation (714,665) (750,115) Retained earnings 70,176,490 69,758,872 ------------ ------------ 101,667,615 101,174,702 Less treasury stock of 2,319,158 shares in 2000 and 1,516,527 share in 1999 35,887,248 30,145,205 ------------ ------------ Total stockholders' equity 65,780,367 71,029,497 ------------ ------------ Total liabilities and stockholders' equity $117,938,738 $118,442,724 ============ ============ 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 Subsidiaries Consolidated Statements of Earnings Three months ended March 31, 2000 1999 ---------- ---------- Sales $ 40,581,050 27,328,085 Cost of sales: Cost of sales expenses 26,045,052 15,102,056 Depreciation expense 538,304 549,283 ---------- ---------- Total cost of sales 26,583,356 15,651,339 ---------- ---------- Gross profit 13,997,694 11,676,746 Selling, general and administrative: Selling, general and administrative expenses 10,404,987 7,969,029 Depreciation expense 929,591 538,598 Amortization expense 1,036,359 680,260 ---------- ---------- Total selling, general and administrative 12,370,937 9,187,887 ---------- ---------- Earnings from operations 1,626,757 2,488,859 Interest expense (495,279) (289,676) Interest income and other 25,176 141,677 ---------- ---------- Earnings before income taxes 1,156,654 2,340,860 Income tax expense 739,036 978,952 ---------- ---------- Earnings before minority interest 417,618 1,361,908 Minority interest -- 361,969 ---------- ---------- Net earnings $ 417,618 999,939 ========== ========== Basic and diluted earnings per common share* $ 0.04 0.10 ====== ====== Dividends per common share* -- 0.20 ====== ====== Basic weighted average common shares outstanding* 11,321,449 9,733,655 ========== ========== Diluted weighted average common shares outstanding*11,324,748 9,733,655 ========== ========== * Includes stock split adjustment related to the 1999 merger 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 Subsidiaries Consolidated Statement of Stockholders' Equity Three Months Ended March 31, 2000
Accumulated Additional other Total Common paid-in comprehensive Retained Treasury stockholders' Comprehensive stock capital income earnings stock equity income Balance at December 31, 1999 $130,500 32,035,445 (750,115) 69,758,872 (30,145,205) 71,029,497 Comprehensive income: Net earnings 417,618 417,618 417,618 Equity adjustment from foreign currency translation 35,450 35,450 35,450 --------- Comprehensive income 453,068 ========= Directors' stock issued under consulting agreement 39,845 39,845 Purchase of 802,631 common shares for treasury stock (5,742,043) (5,742,043) -------- ---------- --------- ---------- ---------- ---------- Balance at March 31, 2000 $130,500 32,075,290 (714,665) 70,176,490 (35,887,248) 65,780,367 ======== ========== ======= ========== ========== ==========
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 Subsidiaries Consolidated Statements of Cash Flows Three months ended March 31, 2000 1999 --------- --------- Cash provided by (used for) operations: Net earnings $ 417,618 999,939 Adjustments to reconcile net earnings to net cash provided by operations: Depreciation and amortization 2,510,894 1,775,090 Earnings applicable to minority interests -- 361,969 Provision for loss on accounts receivable 758,209 604,749 Loss (gain) on disposal of property and equipment 1,911 (287,107) Directors' stock compensation 39,845 -- Provision for deferred taxes (294,980) 831,498 Changes in: Accounts receivable (2,763,053) (1,564,816) Income taxes receivable 1,186,549 26,119 Inventories 870,864 437,719 Prepaid expenses and other current assets (686,693) 163,966 Prepaid merger expense -- (756,398) Accounts payable 196,922 145,683 Accrued payroll & benefits 1,217,408 (1,065,562) Other accrued expenses 112,010 1,041,712 Other current liabilities 45,679 69,846 ---------- ---------- Net cash provided by operations 3,613,183 2,784,407 ---------- ---------- Cash provided by (used for) investment transactions: Property, plant and equipment, net (1,706,200) (3,854,833) Acquisition of intangible assets, net (18,573) -- Other 14,884 (472,288) ---------- ---------- Net cash used for investment transactions (1,709,889) (4,327,121) ---------- ---------- Cash provided by (used for) financing transactions: Purchase of treasury stock (5,742,043) -- Proceeds from long-term debt 5,000,000 -- Payments on long-term debt (2,005,716) (2,966) Cash dividends -- (1,946,731) ---------- ---------- Net cash used for financing transactions (2,747,759) (1,949,697) ---------- ---------- Effect of foreign currency translation 32,239 14,510 ---------- ---------- Net decrease in cash and cash equivalents (812,226) (3,477,901) Cash and cash equivalents - beginning of period 2,983,644 15,223,336 ---------- ---------- Cash and cash equivalents - end of period $ 2,171,418 11,745,435 ========== ========== Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $ 478,193 326,590 Income Taxes $ 102,505 162,464 ========== ========== 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 Subsidiaries Notes to Consolidated Financial Statements March 31, 2000 and 1999 The accompanying consolidated financial statements include the accounts of LabOne, Inc. and its wholly- owned subsidiaries Lab One Canada Inc., Systematic Business Services, Inc. (SBSI) and ExamOne World Wide, Inc. All significant intercompany transactions have been eliminated in consolidation. The financial information furnished herein as of March 31, 2000 and for the periods ended March 31, 2000 and 1999 is unaudited; however, in the opinion of management, it reflects all adjustments, consisting of normal recurring adjustments, which are necessary to fairly state the Company's financial position, the results of its operations and cash flows. The balance sheet information as of December 31, 1999 has been derived from the audited financial statements as of that date. 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, 1999, for additional information not required by this Quarterly Report on Form 10-Q. Effective November 5, 1999, LabOne acquired World Wide Health Services, Inc. and World Wide Health Services of New Jersey, a provider of specimen collection and paramedical examination services to life and health insurers. These subsidiaries are operated under the name ExamOne World Wide and are included in the insurance services division of LabOne. This addition allows LabOne to expand the services it offers to its insurance industry clients. On February 11, 2000, the Company adopted a shareholder rights plan and a dividend distribution of one Right for each outstanding share of Common Stock of the Company. The rights plan replaces and modernizes a shareholder rights plan which was adopted by the Company in 1988 and expired in 1998. These rights represent the right to purchase one one-hundredth of a share of Series A Preferred Stock at an exercise price of $50 subject to adjustments, of which 300,000 shares are reserved for issuance. Forward Looking Statements - -------------------------- This Quarterly report on Form 10-Q may contain "forward-looking statements," including, but not limited to: projections of revenues, income or loss, capital expenditures, statements of plans and objectives, statements of future economic performance and statements of assumptions underlying such statements. Forward-looking statements involve known and unknown risks and uncertainties. Many factors could cause actual results to differ materially from those that may be expressed or implied in such forward-looking statements, including, but not limited to, the volume and pricing of laboratory tests performed by the Company, the extent of market acceptance of the Company's testing services in the healthcare and substance abuse testing industries, intense competition, the loss of one or more significant customers, general economic conditions and other factors detailed from time to time in the Company's reports and Page 6 LabOne, Inc. and Subsidiaries Notes to Consolidated Financial Statements March 31, 2000 and 1999 registration statements filed with the Securities and Exchange Commission, including the Cautionary Statement filed as Exhibit 99 to the Company's Annual Report on Form 10-K for the year ended December 31, 1999. Business Segment Information - ---------------------------- The company operates in three lines of business: insurance services, healthcare and substance abuse testing. The following table presents selected financial information for each segment: Three Months Ended March 31, 2000 1999 ----------- ----------- Sales: Insurance $28,199,778 $17,584,247 Healthcare 7,507,575 5,957,526 Substance abuse testing 4,873,697 3,786,312 --------- --------- Total sales $40,581,050 $27,328,085 =========== =========== Operating income (loss): Insurance $3,174,954 $4,014,225 Healthcare (575,459) (958,778) Substance abuse testing (211,792) (118,940) General corporate expense (760,947) (447,649) --------- --------- Total earnings from operations 1,626,757 2,488,859 Other expense (470,103) (147,999) --------- --------- Earnings before income taxes $1,156,654 $2,340,860 ========== ========== The Company's new facility was completed in early 1999, and the portions of the building identifiable to each segment have been allocated to those segments. Effective the second quarter, 1999, the associated depreciation expenses have been charged to the segments and are included in the operating income or loss information stated above. The insurance segment operating income includes intersegment charges of $1.0 million in the first quarter from the healthcare segment primarily for hepatitis and other miscellaneous medical testing and $0.3 million from the SAT segment for drug screening and confirmations. Indirect expenses are allocated to the operational segments based on the relative revenue of each segment on a monthly basis. General corporate expense represents unallocated expenses, principally the amortization of goodwill resulting from acquisitions. There were no other material changes in assets or in the basis of segmentation or measurement of segment operating income or loss. Page 7 LabOne, Inc. and Subsidiaries Notes to Consolidated Financial Statements March 31, 2000 and 1999 Contingencies - ------------- The Comptroller of the State of Texas has conducted an audit of LabOne for sales and use tax compliance for the years 1991 through 1997 and contends that LabOne's insurance laboratory services are taxable under the Texas tax code. The Texas Comptroller has issued a tax audit assessment, including interest and penalties, of approximately $1.9 million. The Company has appealed this assessment arguing that its services do not fit within the definition of insurance services under the Texas code. The Tax Division of the Comptroller of Public Accounts has moved to dismiss the case at the administrative level and has agreed to amend the audit to reduce the assessment for sales of services for applicants who were not residents of Texas and to waive the associated penalty. The revised assessment, including interest, is estimated at approximately $591,000. LabOne intends to continue its appeal in state district court. ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. RESULTS OF OPERATIONS - --------------------- SELECTED FINANCIAL DATA Three months ended March 31, % Increase 2000 1999 (Decrease) ------------------------------------------------- Sales $ 40,581,050 $ 27,328,085 48% Net earnings 417,618 999,939 (58%) Earnings per common share $0.04 $ 0.10 Cash dividends per common share $ -- $ 0.20 The Company provides high-quality laboratory testing services to insurance 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. Through its subsidiaries, SBSI and ExamOne, the Company provides paramedical services, telephone inspections, motor vehicle reports, attending physician statements, and claims investigation services to life and health insurers nationwide. LabOne's services to the healthcare industry involve clinical testing 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 the payers of healthcare (insurance companies and self-insured groups) and physicians. The Company does this through exclusive arrangements with managed care organizations and through Lab Card (R), a Laboratory Benefits Management (LBM) program. Page 8 LabOne, Inc. and Subsidiaries Notes to Consolidated Financial Statements March 31, 2000 and 1999 LabOne is certified by the Substance Abuse and Mental Health Services Administration (SAMHSA) to perform substance abuse testing services for federally regulated employers and is currently marketing these services throughout the country to both regulated and nonregulated employers. The Company's rapid turnaround times and multiple testing options help clients reduce downtime for affected employees and meet mandated drug screening guidelines. FIRST QUARTER ANALYSIS Net sales increased 48% in the first quarter 2000 to $40.6 million from $27.3 million in the first quarter 1999. The increase of $13.3 million is due to increases in insurance services revenue of $10.6 million, healthcare laboratory revenue of $1.6 million and substance abuse testing (SAT) revenue of $1.1 million. The insurance services division revenue increased $10.6 million due to the addition of ExamOne revenue and growth in laboratory, kit and information services revenue. ExamOne revenue was $6.6 million for the quarter. SBSI revenue increased $1.8 million or 95% over the first quarter 1999. Insurance laboratory testing revenue increased $0.9 million or 8%, primarily due to an increase in the total number of insurance applicants tested. Kit and container revenue increased $1.1 million due to higher volumes of all kit types sold. Healthcare revenue increased from $6.0 million to $7.5 million for the quarter due to increased testing volumes partially offset by a 6% decrease in average revenue per patient. SAT revenue increased from $3.8 million in 1999 to $4.9 million in 2000 primarily due to a 31% increase in testing volumes as compared to last year. Cost of sales increased $10.9 million or 70% in the first quarter 2000 as compared to the prior year, due to increases in outside services such as paramed collections, attending physician statements and state MVR fees; and increases in other items such as postage, payroll, lab supplies and kit supplies. Paramedical services, primarily related to ExamOne, increased $5.8 million. Payroll increased $1.8 million or 33%, due to the additional laboratory volume and the addition and expansion of ExamOne World Wide. Net freight expense increased $0.9 million, due to the increase in testing volume and an increase in the average freight cost per specimen received. Laboratory and kit supplies increased primarily due to the increased specimen volume. Healthcare cost of sales expenses were $4.9 million as compared to $3.9 million in the first quarter 1999. SAT cost of sales expenses were $3.5 million as compared to $2.8 million in the first quarter 1999. Insurance cost of sales expenses, including the ExamOne increases noted above, were $18.1 million as compared to $9.0 million in the same quarter last year. As a result of the above factors, gross profit for the quarter increased $2.3 million, or 20%, from $11.7 million in 1999 to $14.0 million in 2000. Healthcare gross profit increased $0.6 million on an increase in revenue of $1.5 million. SAT gross profit increased $0.3 million on an increase in revenue of $1.1 million. Insurance gross profit increased $1.4 million or 17%. Page 9 LabOne, Inc. and Subsidiaries Notes to Consolidated Financial Statements March 31, 2000 and 1999 Selling, general and administrative expenses increased $3.2 million (35%) in the first quarter 2000 as compared to the prior year due primarily to increases in payroll, depreciation and amortization expense. Payroll expense increased $1.2 million, due to development efforts to improve client data exchange and statistical reporting and the expansion of lines of business necessary to accommodate future growth, including ExamOne services. Depreciation expense increased $0.4 million primarily due to the Company's new building. Amortization expense increased $0.4 million due to goodwill from the merger with Lab Holdings and the acquisition of ExamOne. Healthcare overhead expenditures were $3.2 million as compared to $3.0 million in 1999. SAT expenditures were $1.6 million as compared to $1.1 million last year. SBSI overhead expenditures increased to $1.3 million from $1.0 last year. Selling, general and administrative expenses in 1999 include a book gain of $0.3 million from the sale of the former laboratory facility. Operating income decreased from $2.5 million in the first quarter 1999 to $1.6 million in 2000. The healthcare segment improved $0.4 million to an operating loss of $0.5 million on an allocated basis. The SAT segment declined $0.1 million from an operating loss of $0.1 million in the first quarter 1999 to a loss of $0.2 million in 2000, on an allocated basis. This includes startup expenses related to oral fluid drug screening. The insurance segment operating income, including SBSI and ExamOne, declined $0.8 million. Unallocated corporate expenses increased $0.3 million due to merger amortization. Non operating expense increased $0.3 million primarily due to additional interest expense resulting from additional debt incurred to complete the 1999 merger and to finance the stock repurchase program. The combined effect of the above factors resulted in net earnings of $0.4 million or $0.04 per share in the first quarter 2000 as compared to $1.0 million or $0.10 per share in the same period last year. The weighted average number of shares outstanding in the first quarter of 2000 and 1999 were 11,324,748 and 9,733,655, respectively. The August 1999 merger of LabOne, Inc. and Lab Holdings, Inc. resulted in an increase of 1.8 million shares, offset by the first quarter repurchase of 0.8 million shares. FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES - --------------------------------------------------- LabOne's working capital position decreased by $1.2 million to $18.3 million at March 31, 2000 from $19.4 million at December 31, 1999. This decrease is primarily due to purchases of treasury stock exceeding cash provided by operations and net borrowings. Cash flow from operations increased by $0.8 million in the first quarter 2000 as compared to 1999 primarily due to changes in current accounts. Net additions to property, plant and equipment in the first quarter 2000 were $1.7 million. Additions in 1999, net of the sale of the former laboratory facility, were $3.9 million, primarily related to construction and fixtures for the new facility. During the first quarter 2000, the Company repurchased 802,631 shares of common stock for $5.7 million, for an average price of Page 10 LabOne, Inc. and Subsidiaries Notes to Consolidated Financial Statements March 31, 2000 and 1999 $7.15. The Company borrowed $5 million to pay for the repurchases, increasing the borrowings on the line of credit to $15 million. The current interest rate, plus financing fees, on the line of credit is approximately 7.0% and is based on a 30 day LIBOR rate. The total number of shares of LabOne stock held in treasury at March 31, 2000 was approximately 2.3 million at a total cost of $35.9 million or $15.47 per share. The Company expects to fund operations from a combination of cash flows from operations, cash reserves and short term borrowings. Proceeds from the industrial revenue bond have been used to finance the construction of the Company's new facility project. Interest on the bond is based on a taxable seven day variable rate and is currently approximately 7.0%. The Company expects to repay the bond over 11 years at $1.85 million per year plus interest. At March 31, 2000, LabOne had total cash and investments of $2.2 million as compared to $3.0 million at December 31, 1999. ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. A foreign currency risk exposure exists due to billing Canadian subsidiary revenue in Canadian dollars and the direct laboratory expenses associated with this revenue being incurred in US dollars. This exposure is not considered to be material. Any future material Canadian currency fluctuations against the US$ could result in a decision to hedge future foreign currency cash flows, or to increase Canadian prices. An interest rate risk exposure exists due to LabOne's liability of $18 million in industrial revenue bonds and $15 million line of credit borrowings. Interest expense incurred on these credit facilities is based on short-term rates which may fluctuate in the future. The interest rate, including all associated borrowing costs, is approximately 7.0% per annum as of May 1, 2000. PART II. OTHER INFORMATION Item 2. - Changes in Securities The information required by this Item concerning the dividend distribution by the Registrant on February 11, 2000, of one Right to purchase one one-hundredth of a share of Series A Preferred Stock for each outstanding share of Common Stock was reported in the Registrant's registration statement on form 8-A, filed February 14, 2000 (File no. 000-16946). Item 6. - Exhibits and Reports on Form 8-K (a) Exhibits 10. Employment agreement between the Registrant and John W. McCarty, dated February 28, 2000. 27. Financial Data Schedule - as filed electronically by the Registrant in conjunction with this first quarter 2000 Form 10-Q. Page 11 LabOne, Inc. and Subsidiaries Notes to Consolidated Financial Statements March 31, 2000 and 1999 (b) Reports on Form 8-K A Form 8-K current report dated January 6, 2000 was filed with the Commission reporting under Other Events that Robert D. Thompson, executive vice president, chief operating officer and chief financial officer had resigned from the company. A Form 8-K current report dated February 11, 2000 was filed with the Commission reporting under Other Events the Company's adoption of a shareholder rights plan and a dividend distribution of one Right for each outstanding share of Common Stock of the Company. The rights plan replaces and modernizes a shareholder rights plan which was adopted by the Company in 1988 and expired in 1998. A Form 8-K current report dated March 2, 2000 was filed with the Commission reporting under Other Events that John McCarty had been hired as executive vice president and chief financial officer effective April 1, 2000. 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: May 5, 2000 By /s/ Kurt E. Gruenbacher ---------------------------------- Kurt E. Gruenbacher, V.P. Finance, CAO and Treasurer Date: May 5, 2000 By /s/ John W. McCarty ---------------------------------- John W. McCarty, Executive V.P. and Chief Financial Officer Page 12 EX-10 2 EMPLOYMENT AGREEMENT -------------------- THIS EMPLOYMENT AGREEMENT ("Agreement"), made and entered into this 28th day of February, 2000, by and between LABONE, INC., a Missouri corporation ("LabOne"),and John W. McCarty("Employee"). WITNESSETH: WHEREAS, LabOne is a laboratory specializing in clinical and insurance testing and related services ("Lab Business"); and WHEREAS, Employee is knowledgeable and has substantial experience in the clinical laboratory testing business; and WHEREAS, in accordance with the terms and provisions of this 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 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 Agreement shall commence on April 1, 2000 and shall continue until terminated in accordance with the provisions of Paragraph 13 hereof. 3. Duties and Responsibilities. Employee shall serve as Chief Financial Officer of LabOne, 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 and responsibilities incidental to such positions and shall cooperate fully with the Board of Directors and Officers of LabOne. Employee shall devote all of 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 Agreement, Employee shall be paid a salary of $14,583 per 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. Employee shall also be entitled to a car allowance of $400 per calendar month. 5. Relocation Expenses. LabOne will reimburse Employee in an amount up to $50,000 for his expenses of relocating his residence from Scottsdale, Arizona to the Greater Kansas City Area. Relocation Expense shall include: costs associated with the sale of Employee's residence in Phoenix, Arizona; moving of contents; and up to three house-hunting trips in Kansas City. 6. Stock Option. Employee shall be entitled to a grant of a Non- Qualified Stock Option under the LabOne, Inc. 1997 Long-Term Incentive Plan for Seventy Thousand (70,000) shares of the common stock of LabOne, at an option price equal to the fair market value per share of the common stock of LabOne on earlier of the date of grant or date of first employment, as determined by the Long-Term Incentive Plan Committee, such Stock Option Agreement to be in the form attached hereto as Exhibit A. 7. Annual Incentive Bonus and Other Fringe Benefits. During the term hereof, Employee shall be eligible to receive an annual incentive bonus based upon the performance of LabOne in relation to pre-determined financial goals established by the Compensation Committee of the Board of Directors of LabOne, after consultation with Employee. Employee shall be eligible for a bonus for three-fourths (3/4) of a year of service for the year 2000. Employee shall also be entitled to participate in such fringe benefit programs as LabOne may make available from time to time to its 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 other executive officers of LabOne. 8. Inventions. All inventions, products, discoveries, improvements, processes, manufacturing, marketing and service methods and techniques, formulae, design, styles, specifications, databases, computer programs (whether in source code or object code), know-how, strategies and data, whether or not patentable or registrable under copyright or similar statutes, made, developed or created by Employee (whether or not at the request or suggestion of LabOne, alone or in conjunction with others, and whether during regular hours at work or otherwise) during Employee's period of employment with LabOne (collectively, "Inventions"), shall be promptly and fully disclosed by Employee to an appropriate executive of LabOne. Employee hereby assigns, transfers and conveys to LabOne all rights in and to all Inventions as its exclusive property. Employee shall give evidence and promptly execute and/or deliver to an appropriate executive of LabOne, without any additional compensation therefor, all papers, drawings, models, programs, data, documents and other material: (a) pertaining to or in any way relating to or evidencing any Inventions, or (b) 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 Inventions, or to obtain any extension, validation, reissue, 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 Employee in complying with the provisions of this Section. EMPLOYEE IS HEREBY NOTIFIED THAT the provisions of this Paragraph 8 shall not apply to an Invention for which no equipment, supplies, facility or trade secret information of LabOne was used and which was developed entirely on Employee's own time, unless: (i) the Invention relates directly to the business of LabOne or to its actual or demonstratively anticipated research or development, or (ii) the Invention results from any work performed by Employee for LabOne. 9. 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 Agreement. 10. Confidentiality. During the term of and at any time after the termination of his employment pursuant to this 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 or its subsidiaries, and will not use the same for himself or others 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 and not approved for disclosure by the Board of Directors for LabOne: (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. 11. Restrictive Covenants. In consideration of Employee's employment with LabOne and in further consideration of the compensation provided to Employee hereunder and the post-termination payments, if any, provided for in Paragraph 13 hereof, Employee 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, Employee will not, without the prior written consent of LabOne, directly or indirectly, individually or in concert with other, or through the medium of any other corporation, partnership, syndicate, association, joint venture, or other entity or as an employee, officer, director, agent, consultant, partner, member or otherwise: (a) solicit, accept, divert or service, or attempt to solicit, accept, divert or service, any business similar to the type and character of business then engaged in by LabOne from any person, corporation or other entity who was as of the date of the termination of Employee's employment a customer of LabOne, (b) solicit, induce or encourage any employee, contractor or agent of LabOne to terminate employment or any other relationship with LabOne or to compete with LabOne in any manner, or (c) compete with LabOne in the Lab Business or in any other business conducted by LabOne as of the date of termination of Employer's employment. It is understood and agreed that Paragraph 11(c) shall apply only with respect to the following geographic area: All territory in which LabOne or its representatives or agents, as of the date of the termination of Employee's employment pursuant hereto, sells or offers for sale LabOne's products or services. 12. Judicial Relief. LabOne and Employee agree that in the event that any court shall finally hold that any provision of Paragraph 11 of this Agreement is void or constitutes an unreasonable restriction against Employee, the provisions of Paragraph 11 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 8, 9, 10 and 11 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 Paragraphs 8, 9, 10 or 11 of this Agreement by Employee is reasonably likely to cause irreparable damage to LabOne which will be difficult or impossible to value in monetary damages. 13. Termination. Employee's employment pursuant to this 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 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 to be 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 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. (c) Voluntary Termination. Employee's employment may be voluntarily terminated by Employee giving thirty (30) days' prior written notice to LabOne. In the event Employee voluntarily terminates 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 by 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 thirty (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 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 to Employee shall be equal to three (3) times the average annual compensation includible 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 includible in Employee'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 28OG(b) of the Internal Revenue Code of 1986, that excess amount need not be paid. For purposes of this Section (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, 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, or (iii) a sale or other transfer of substantially all of the assets of LabOne to any person or entity. 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 above. 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. 14. Survival. Notwithstanding the termination of Employee's employment pursuant to the provisions of Paragraph 13 hereof, Employee's obligations under Paragraphs 8, 9, 10 and 11 hereof and the provisions for relief against Employee in Paragraph 12 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 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. 15. Law Governing. This Agreement shall be governed by and interpreted under the laws of the State of Missouri. 16. 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: John W. McCarty, 12501 Sagamore Leawood, Kansas and if to LabOne, to: W. Thomas Grant II President and Chief Executive Officer LabOne, Inc. 10101 Renner Boulevard Lenexa, Kansas 66219, 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 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. 17. Contents of Agreement, Amendment and Assignment. This 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 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. 18. Severability. If any provision of this 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 Agreement which can be given effect without the invalid or unenforceable provision or application. 19. Gender. Masculine pronouns used herein shall refer to the masculine or feminine gender as appropriate. IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first above written. LABONE, INC. By: /s/ W. Thomas Grant II ----------------------------- W. THOMAS GRANT II, President /s/ JOHN W. McCARTY -------------------- JOHN W. McCARTY ?? EX-27 3
5 This schedule contains summary financial information extracted from the first quarter 2000 report on Form 10-Q for LabOne, Inc. and is qualified in its entirety by reference to such financial statements. 0000830158 LABONE, INC. 3-MOS DEC-31-2000 MAR-31-2000 2,171,418 0 31,119,638 2,782,834 2,315,989 37,635,603 82,635,603 39,414,283 117,938,738 19,370,611 31,251,192 0 0 130,500 65,649,867 117,938,738 0 40,581,050 0 26,583,356 0 758,209 495,279 1,156,654 739,036 417,618 0 0 0 417,618 0.04 0.04
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