LabOne Reports Fourth Quarter and Year End Results

    Business Editors

    LENEXA, Kan.--(BUSINESS WIRE)--March 2, 2005--LabOne, Inc. (Nasdaq: LABS) today reported revenues of $120.1 million for its fourth quarter ended December 31, 2004, an increase of $28.1 million or 31% over the fourth quarter 2003. Compared to revenues for the same quarter last year, risk assessment services increased 8% to $66.9 million, healthcare increased 79% to $42.4 million and substance abuse testing increased 63% to $10.8 million. Excluding the impact of the acquisition of Alliance Laboratory Services in January 2004 and Northwest Toxicology in March 2004, healthcare revenues increased 13% and substance abuse testing revenues increased 21% compared to the fourth quarter last year. The Company reported net income of $7.9 million or $0.45 per diluted share compared to $5.7 million or $0.33 per diluted share for the fourth quarter 2003. Results for the fourth quarter 2004 benefited from a $1.2 million adjustment, or $0.07 per diluted share, related to state and federal income taxes, and a $0.5 million pre-tax adjustment, or $0.02 per diluted share, associated with a favorable sales tax settlement.
    For the fourth quarter 2004, operating earnings were $11.6 million compared to $9.8 million the same period last year, an increase of $1.8 million or 18%. Fourth quarter 2004 operating earnings comprised $12.6 million for risk assessment, $8.1 million for healthcare and $2.2 million for substance abuse testing, offset by $11.3 million for corporate selling, general and administrative expenses. This compares to operating earnings of $12.6 million for risk assessment, $5.5 million for healthcare and $1.1 million for substance abuse testing, offset by $9.4 million for corporate selling, general and administrative expenses for the same period in 2003. For the fourth quarter 2004, operating earnings included $1.9 million and $0.2 million associated with Alliance Laboratory Services and Northwest Toxicology, respectively.
    For the year ended December 31, 2004, the Company reported revenues of $468.2 million compared to $346.0 million last year. Compared to revenues for the prior year, risk assessment services increased 13% to $261.1 million, healthcare increased 88% to $166.7 million and substance abuse testing increased 51% to $40.4 million. For the year ended December 31, 2004, revenues attributable to the acquisitions of Alliance Laboratory Services and Northwest Toxicology were $59.2 million and $10.3 million, respectively. Net income for the year was $26.7 million or $1.53 per diluted share compared to $20.7 million or $1.23 per diluted share in 2003.
    For the year ended December 31, 2004, operating earnings were $45.1 million compared to $35.5 million last year. For the year, operating earnings comprised $51.0 million for risk assessment, $28.0 million for healthcare and $7.3 million for substance abuse testing, offset by $41.2 million for corporate selling, general and administrative expenses. This compares to operating earnings of $47.3 million for risk assessment, $17.8 million for healthcare and $4.6 million for substance abuse testing, offset by $34.2 million for corporate selling, general and administrative expenses in 2003. For the year ended December 31, 2004, operating earnings included $3.9 million and $0.9 million associated with Alliance Laboratory Services and Northwest Toxicology, respectively.
    "Laboratory testing volumes increased 28% from 9.9 million specimens in 2003, to 12.7 million in 2004," said W. Thomas Grant II, chairman, president and CEO of LabOne. "Excluding the impact of the Alliance Laboratory Services and Northwest Toxicology acquisitions, volumes during 2004 increased 7% to 10.6 million. During the year, insurance testing volumes declined by 2% compared to last year while healthcare volumes increased 77% and substance abuse testing volumes increased 44%. Excluding the impact of the Alliance Laboratory Services and Northwest Toxicology acquisitions, healthcare volumes for the year increased 19% and substance abuse volumes increased 14%. During 2004, insurance testing revenues decreased 2%, paramedical revenues increased 20% and other insurance service revenues increased 26% compared to last year. Other insurance revenues include a 37% increase in teleunderwriting revenues compared to last year. Consolidated operating income for the year was impacted by increased corporate overhead expenses, principally associated with information technology initiatives and compliance with Sarbanes-Oxley. Overall, we are pleased with the results from operations during 2004."
    LabOne will conduct its quarterly conference call with W. Thomas Grant II, chairman, president and CEO, John W. McCarty, executive vice president and CFO, and Mike Asselta, executive vice president and COO, at 11 a.m. Eastern time, March 2, 2005. To join the conference call, dial 800-818-5264. At approximately 2 p.m. Eastern time, a recording of the call will be available as a voice mail at 888-203-1112, pass code 2468263, through April 2, 2005. The audio recording will also be available on the investor info section of the Company's Web site at www.LabOne.com.

    About LabOne, Inc.

    Headquartered in the Greater Kansas City area, LabOne is a diagnostic services provider. The services and information LabOne and its subsidiaries provide include: risk assessment information services for the insurance industry; diagnostic healthcare testing to physicians, hospitals, managed care organizations and employers; and substance abuse testing services and related employee qualification products to employers and the government.

    Forward-Looking Statements

    This press release may contain "forward-looking statements." Forward-looking statements often can be identified by the use of forward-looking terminology, such as "could," "should," "will," "will be," "intended," "continue," "believe," "may," "hope," "anticipate," "goal," "forecast," "plan," "estimate" or variations thereof. Forward-looking statements are not guarantees of future performance or results. 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, contractual and logistical limitations, the volume, pricing and mix of services provided by the Company, intense competition, the loss of one or more significant customers, government reimbursement policies, general economic conditions and other factors detailed from time to time in the Company's reports and registration statements filed with the Securities and Exchange Commission ("SEC"), including the Company's 2003 Annual Report on Form 10-K and the Company's Form S-3 Registration Statement filed with the SEC on September 10, 2004.

Financial Highlights (in thousands, except per share data, unaudited)

Three months ended Year ended December 31, December 31, 2004 2003 % change 2004 2003 % change ------------------ --------- ------------------- ---------

Sales $120,090 $92,014 31% $468,236 $346,020 35% Net earnings $7,943 $5,749 38% $26,724 $20,732 29% Basic earnings per share $0.46 $0.37 $1.56 $1.44 Diluted earnings per share $0.45 $0.33 $1.53 $1.23 Total assets $343,222 $237,622 Working capital $73,728 $48,056

CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share data, unaudited)

December 31, December 31, 2004 2003 ------------- ------------ Assets Current assets: Cash and cash equivalents $24,070 $4,651 Accounts receivable, net of allowance for doubtful accounts of $4,594 in 2004 and $6,123 in 2003 73,027 57,928 Inventories 7,473 5,472 Prepaid expenses and other current assets 6,506 5,202 Deferred income taxes 5,556 4,990 ------------- ------------ Total current assets 116,632 78,243

Property, plant and equipment, net 62,860 47,405 Goodwill 138,163 99,103 Intangible assets, net 20,860 11,345 Other long-term assets 4,707 1,526 ------------- ------------

Total assets $343,222 $237,622 ============= ============

Liabilities and Stockholders' Equity Current liabilities: Accounts payable $20,467 $13,617 Accrued payroll and benefits 17,131 11,769 Other accrued expenses 3,381 2,787 Current portion of long-term debt 1,925 2,014 ------------- ------------ Total current liabilities 42,904 30,187

Deferred income taxes 8,694 5,619 Long-term debt 111,549 56,094 Other 108 21 ------------- ------------ Total liabilities 163,255 91,921

Commitments and contingencies

Stockholders' equity: Common stock, $0.01 par value per share. Authorized 40,000,000 shares; issued 18,027,729 shares in 2004 and 2003 180 180 Additional paid-in capital 87,027 84,066 Retained earnings 102,974 76,250 Accumulated other comprehensive loss (94) (245) Treasury stock of 796,260 shares in 2004 and 1,144,840 shares in 2003, at cost (10,120) (14,550) ------------- ------------ Total stockholders' equity 179,967 145,701 ------------- ------------

Total liabilities and stockholders' equity $343,222 $237,622 ============= ============

CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data, unaudited)

Three months ended Year ended December 31, December 31, 2004 2003 2004 2003 --------- -------- --------- ---------

Sales $120,090 $92,014 $468,236 $346,020 Cost of sales: Cost of sales expenses 79,479 62,554 313,607 232,602 Depreciation and amortization 1,801 1,181 6,736 4,473 --------- -------- --------- --------- Total cost of sales 81,280 63,735 320,343 237,075 --------- -------- --------- --------- Gross profit 38,810 28,279 147,893 108,945

Selling, general and administrative: Selling, general and administrative expenses 24,374 16,600 92,394 66,832 Depreciation and amortization 2,870 1,854 10,372 6,564 --------- -------- --------- --------- Total selling, general and administrative 27,244 18,454 102,766 73,396 --------- -------- --------- --------- Operating earnings 11,566 9,825 45,127 35,549

Other income (expense): Interest income 106 6 228 117 Interest expense (1,330) (860) (5,144) (3,017) Other, net 259 (15) 224 56 --------- -------- --------- --------- Total other expense, net (965) (869) (4,692) (2,844) --------- -------- --------- --------- Earnings before income taxes 10,601 8,956 40,435 32,705 Provision for income taxes 2,658 3,207 13,711 11,973 --------- -------- --------- ---------

Net earnings $7,943 $5,749 $26,724 $20,732 ========= ======== ========= =========

Preferred stock dividends $- $(351) $- $(2,699) --------- -------- --------- ---------

Net earnings available to common shareholders $7,943 $5,398 $26,724 $18,033 ========= ======== ========= =========

Earnings per common share: Basic $0.46 $0.37 $1.56 $1.44 Diluted $0.45 $0.33 $1.53 $1.23

Weighted average common shares outstanding: Basic 17,199 14,609 17,079 12,476 Diluted 17,536 17,269 17,478 16,893

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CONTACT: LabOne, Inc. John McCarty, 913-577-1244 john.mccarty@LabOne.com

KEYWORD: MISSOURI KANSAS INDUSTRY KEYWORD: INSURANCE MEDICAL EARNINGS CONFERENCE CALLS SOURCE: LabOne, Inc.

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