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EXCEL - IDEA: XBRL DOCUMENT - ORCHID CELLMARK INC | Financial_Report.xls |
EX-32 - EX-32 - ORCHID CELLMARK INC | w83654aexv32.htm |
EX-31.1 - EX-31.1 - ORCHID CELLMARK INC | w83654aexv31w1.htm |
EX-31.2 - EX-31.2 - ORCHID CELLMARK INC | w83654aexv31w2.htm |
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2011
or
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the transition period from to
Commission file number: 000-30267
ORCHID CELLMARK INC.
(Exact name of registrant as specified in its charter)
Delaware | 22-3392819 | |
(State or other jurisdiction of | (I.R.S. Employer | |
incorporation or organization) | Identification No.) | |
4390 US Route One | ||
Princeton, NJ | 08540 | |
(Address of principal executive offices) | (Zip code) |
Registrants telephone number, including area code: (609) 750-2200
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 þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files). Yes
þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of
large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act (Check one).
Large accelerated filer o | Accelerated filer o | Non-accelerated filer o | Smaller reporting company þ | |||
(Do not check if a smaller reporting company) |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act) Yes o No þ
As of August 11, 2011, the registrant had 30,143,043 shares of common stock
outstanding.
ORCHID CELLMARK INC.
INDEX TO FORM 10-Q
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EX-32 | ||||||||
EX-101 INSTANCE DOCUMENT | ||||||||
EX-101 SCHEMA DOCUMENT | ||||||||
EX-101 CALCULATION LINKBASE DOCUMENT | ||||||||
EX-101 LABELS LINKBASE DOCUMENT | ||||||||
EX-101 PRESENTATION LINKBASE DOCUMENT | ||||||||
EX-101 DEFINITION LINKBASE DOCUMENT |
Table of Contents
PART I FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
ORCHID CELLMARK INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except share and per share data)
Consolidated Balance Sheets
(In thousands, except share and per share data)
June 30, 2011 | December 31, | |||||||
(Unaudited) | 2010 | |||||||
Assets |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 7,645 | $ | 8,107 | ||||
Available-for-sale securities |
8,649 | 11,714 | ||||||
Accounts receivable, net |
11,178 | 9,781 | ||||||
Inventory |
1,740 | 1,836 | ||||||
Prepaids and other current assets |
1,101 | 1,213 | ||||||
Total current assets |
30,313 | 32,651 | ||||||
Fixed assets, net |
5,727 | 5,791 | ||||||
Goodwill |
9,429 | 9,396 | ||||||
Other intangibles, net |
3,186 | 3,901 | ||||||
Other assets |
819 | 774 | ||||||
Total assets |
$ | 49,474 | $ | 52,513 | ||||
Liabilities and Stockholders Equity |
||||||||
Current liabilities: |
||||||||
Accounts payable |
$ | 3,461 | $ | 3,282 | ||||
Accrued expenses and other current liabilities |
6,731 | 6,198 | ||||||
Deferred revenue |
1,058 | 1,014 | ||||||
Total current liabilities |
11,250 | 10,494 | ||||||
Other liabilities |
188 | 216 | ||||||
Total liabilities |
11,438 | 10,710 | ||||||
Commitments and contingencies |
||||||||
Stockholders equity: |
||||||||
Preferred stock; authorized 5,000,000 shares |
||||||||
Series A redeemable convertible preferred stock; $0.001 per share par value;
designated 5 shares; no shares issued or outstanding |
| | ||||||
Series A junior participating preferred stock; $0.001 per share par value
designated 1,000,000 shares; no shares issued or outstanding |
| | ||||||
Common stock; $0.001 per share par value; authorized 150,000,000 shares; issued
30,143,043 at June 30, 2011 and 30,098,269 at December 31, 2010 |
30 | 30 | ||||||
Additional paid-in capital |
374,270 | 373,860 | ||||||
Accumulated other comprehensive income |
737 | 36 | ||||||
Treasury stock at cost, 163,259 common shares at June 30, 2011 and December
31, 2010 |
(1,587 | ) | (1,587 | ) | ||||
Accumulated deficit |
(335,414 | ) | (330,536 | ) | ||||
Total stockholders equity |
38,036 | 41,803 | ||||||
Total liabilities and stockholders equity |
$ | 49,474 | $ | 52,513 | ||||
See accompanying notes to consolidated financial statements.
1
Table of Contents
ORCHID CELLMARK INC. AND SUBSIDIARIES
Consolidated Statements of Operations
Three and six months ended June 30, 2011 and 2010
(In thousands, except per share data)
(Unaudited)
Consolidated Statements of Operations
Three and six months ended June 30, 2011 and 2010
(In thousands, except per share data)
(Unaudited)
Three months ended | Six months ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Revenues: |
||||||||||||||||
Service revenues |
$ | 16,536 | $ | 15,684 | $ | 33,144 | $ | 29,800 | ||||||||
Other revenues |
| | 7 | 14 | ||||||||||||
Total revenues |
16,536 | 15,684 | 33,151 | 29,814 | ||||||||||||
Operating expenses: |
||||||||||||||||
Cost of service revenues |
11,827 | 10,568 | 23,152 | 19,948 | ||||||||||||
Research and development |
318 | 492 | 682 | 889 | ||||||||||||
Marketing and sales |
1,539 | 1,465 | 3,113 | 2,776 | ||||||||||||
General and administrative |
5,047 | 3,324 | 9,783 | 7,130 | ||||||||||||
Restructuring |
| 520 | | 964 | ||||||||||||
Amortization of intangible assets |
360 | 461 | 724 | 924 | ||||||||||||
Total operating expenses |
19,091 | 16,830 | 37,454 | 32,631 | ||||||||||||
Operating loss |
(2,555 | ) | (1,146 | ) | (4,303 | ) | (2,817 | ) | ||||||||
Other income |
118 | 16 | 160 | 56 | ||||||||||||
Loss before income tax expense |
(2,437 | ) | (1,130 | ) | (4,143 | ) | (2,761 | ) | ||||||||
Income tax expense |
264 | 455 | 735 | 859 | ||||||||||||
Net loss |
$ | (2,701 | ) | $ | (1,585 | ) | $ | (4,878 | ) | $ | (3,620 | ) | ||||
Basic and diluted net loss per share |
$ | (0.09 | ) | $ | (0.05 | ) | $ | (0.16 | ) | $ | (0.12 | ) | ||||
Shares used in computing
basic and diluted net loss per share |
29,976 | 29,935 | 29,965 | 29,935 | ||||||||||||
See accompanying notes to consolidated financial statements.
2
Table of Contents
ORCHID CELLMARK INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Six months ended June 30, 2011 and 2010
(In thousands)
(Unaudited)
Consolidated Statements of Cash Flows
Six months ended June 30, 2011 and 2010
(In thousands)
(Unaudited)
2011 | 2010 | |||||||
Cash flows from operating activities: |
||||||||
Net loss |
$ | (4,878 | ) | $ | (3,620 | ) | ||
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities: |
||||||||
Stock-based compensation expense |
328 | 587 | ||||||
Depreciation and amortization |
1,813 | 1,877 | ||||||
Provision for losses on accounts receivable |
78 | 14 | ||||||
Gain on sale of assets |
4 | 2 | ||||||
Changes in assets and liabilities, net of effect of acquisition: |
||||||||
Accounts receivable |
(1,460 | ) | 628 | |||||
Inventory |
95 | (218 | ) | |||||
Prepaids and other assets |
66 | 196 | ||||||
Accounts payable |
180 | 143 | ||||||
Accrued expenses and other current liabilities, including restructuring |
807 | 2,133 | ||||||
Deferred revenue |
43 | 121 | ||||||
Income taxes payable |
(274 | ) | 721 | |||||
Other liabilities |
(28 | ) | 25 | |||||
Net cash (used in) provided by operating activities |
(3,226 | ) | 2,609 | |||||
Cash flows from investing activities: |
||||||||
Purchases of available-for-sale securities |
| (2,285 | ) | |||||
Maturities of available-for-sale securities |
3,410 | | ||||||
Capital expenditures |
(897 | ) | (1,569 | ) | ||||
Net cash provided by (used in) investing activities |
2,513 | (3,854 | ) | |||||
Cash flows from financing activities: |
||||||||
Proceeds from issuance of common stock |
74 | | ||||||
Net cash provided by financing activities |
74 | | ||||||
Effect of foreign currency translation on cash and cash equivalents |
177 | (314 | ) | |||||
Net decrease in cash and cash equivalents |
(462 | ) | (1,559 | ) | ||||
Cash and cash equivalents at beginning of period |
8,107 | 8,600 | ||||||
Cash and cash equivalents at end of period |
$ | 7,645 | $ | 7,041 | ||||
See accompanying notes to consolidated financial statements.
3
Table of Contents
ORCHID CELLMARK INC. AND SUBSIDIARIES
Consolidated Statement of Stockholders Equity and Comprehensive Income (Loss)
Six months ended June 30, 2011
(In thousands)
(Unaudited)
Consolidated Statement of Stockholders Equity and Comprehensive Income (Loss)
Six months ended June 30, 2011
(In thousands)
(Unaudited)
Accumulated | ||||||||||||||||||||||||||||
Common Stock | Additional | Other | Total | |||||||||||||||||||||||||
Number | Paid-in | Comprehensive | Treasury | Accumulated | Stockholders | |||||||||||||||||||||||
of Shares | Amount | Capital | Income/Loss | Stock | Deficit | Equity | ||||||||||||||||||||||
Balance at January 1, 2011 |
30,098 | $ | 30 | $ | 373,860 | $ | 36 | $ | (1,587 | ) | $ | (330,536 | ) | $ | 41,803 | |||||||||||||
Net loss |
| | | | | (4,878 | ) | (4,878 | ) | |||||||||||||||||||
Gain on
available-for-sale securities |
| | | 5 | | | 5 | |||||||||||||||||||||
Foreign currency translation
adjustment |
| | 8 | 696 | | | 704 | |||||||||||||||||||||
Comprehensive loss |
(4,169 | ) | ||||||||||||||||||||||||||
Issuance of common stock from
exercise of stock options |
45 | | 74 | | | | 74 | |||||||||||||||||||||
Stock-based compensation expense |
| | 328 | | | | 328 | |||||||||||||||||||||
Balance at June 30, 2011 |
30,143 | $ | 30 | $ | 374,270 | $ | 737 | $ | (1,587 | ) | $ | (335,414 | ) | $ | 38,036 | |||||||||||||
See accompanying notes to consolidated financial statements.
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ORCHID CELLMARK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) Basis of Presentation
The accompanying unaudited consolidated financial statements of Orchid Cellmark Inc. and
its subsidiaries (the Company) have been prepared in accordance with accounting principles
generally accepted in the United States of America (US) for interim financial information and
with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by accounting principles generally accepted
in the US (GAAP) for complete annual financial statements. In the opinion of management, all
adjustments, consisting of normal recurring adjustments, considered necessary for a fair
presentation have been included. Interim results are not necessarily indicative of results that may
be expected for a full year.
The accompanying unaudited consolidated financial statements should be read in conjunction
with the audited consolidated financial statements and footnotes thereto included in the Companys
Annual Report on Form 10-K, for the year ended December 31, 2010, as amended (the Securities and
Exchange Commission (SEC) on March 15, 2011, as amended by Amendment No. 1 thereto, as filed with
the SEC on April 29, 2011 (collectively, the Annual Report).
There have been no changes to the Companys critical accounting policies as disclosed in the
Annual Report.
(2) Net Loss per Share
Net loss per share is computed in accordance with the Financial Accounting Standards
Boards Accounting Standards Codification (ASC) 260-10, Earnings Per Share, by dividing the net
loss for the period by the weighted average number of shares of common stock outstanding. During
each period presented, the Company has certain options that have not been included in the
calculation of diluted net loss per share because to do so would be anti-dilutive. As such, the
numerator and the denominator used in computing both basic and diluted net loss per share for each
period are equal.
(3) Fair Value Measurements and Marketable Securities
Fair value of financial and non-financial assets and liabilities is defined as an exit price,
which is the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date. The three-tier hierarchy
for inputs used to measure fair value, which prioritizes the inputs to valuation techniques used to
measure fair value, is as follows:
Level 1 quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 quoted prices for similar assets and liabilities in active markets or inputs that are
observable for the asset or liability, either directly or indirectly through market corroboration,
for substantially the full term of the financial instrument.
Level 3 unobservable inputs based on the Companys assumptions used to measure assets and
liabilities at fair value.
A financial asset or liabilitys classification within the hierarchy is determined based on the
lowest level input that is significant to the fair value measurement. The assessment of the
significance of a particular input to the fair value measurement requires judgment, and may affect
the valuation of the assets and liabilities being measured and their placement within the fair
value hierarchy.
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The following is a schedule of marketable securities (in thousands):
Quoted Prices in | Significant | |||||||||||||||
Active Markets | Significant Other | Observable Inputs | ||||||||||||||
June 30, 2011 | (Level 1) | Inputs (Level 2) | (Level 3) | |||||||||||||
June 30, 2011
Available-for-sale
securities |
$ | 8,649 | $ | 8,649 | $ | | $ | | ||||||||
December 31, 2010
Available-for-sale
securities |
$ | 11,714 | $ | 11,714 | $ | | $ | | ||||||||
(4) Inventory
Inventory is comprised of the following at June 30, 2011 and December 31, 2010 (in
thousands):
December 31, | ||||||||
June 30, 2011 | 2010 | |||||||
Raw materials |
$ | 1,403 | $ | 1,491 | ||||
Work in progress |
322 | 335 | ||||||
Finished goods |
15 | 10 | ||||||
$ | 1,740 | $ | 1,836 | |||||
Raw materials consist mainly of reagents, enzymes, chemicals and plates used in DNA
testing. Work in progress consists mainly of casework not yet completed and DNA testing kits that
are being processed. Finished goods consist mainly of DNA testing kits that have not yet been
shipped.
(5) Goodwill and Other Intangible Assets
The following table sets forth the activity for goodwill during the six months ended June
30, 2011 (in thousands):
Balance as of January 1, 2011 |
$ | 9,396 | ||
Effect of foreign currency translation |
33 | |||
Balance as of June 30, 2011 |
$ | 9,429 | ||
Goodwill is evaluated for impairment on an annual basis, or more frequently if impairment
indicators arise, using a fair-value based test that compares the fair value of the asset to its
carrying value.
The following table sets forth the Companys other intangible assets at June 30,
2011 and December 31, 2010 (in thousands):
June 30, 2011 | December 31, 2010 | |||||||||||||||||||||||
Accumulated | Accumulated | |||||||||||||||||||||||
Cost (1) | Amortization | Net | Cost (1) | Amortization | Net | |||||||||||||||||||
Customer list |
$ | 7,270 | $ | (5,953 | ) | $ | 1,317 | $ | 7,238 | $ | (5,823 | ) | $ | 1,415 | ||||||||||
Patents and know-how |
4,900 | (3,864 | ) | 1,036 | 4,898 | (3,655 | ) | 1,243 | ||||||||||||||||
Trademark/tradename |
4,267 | (3,666 | ) | 601 | 4,241 | (3,467 | ) | 774 | ||||||||||||||||
Base technology |
6,021 | (5,789 | ) | 232 | 6,006 | (5,537 | ) | 469 | ||||||||||||||||
Non-compete agreements |
20 | (20 | ) | | 20 | (20 | ) | | ||||||||||||||||
Totals |
$ | 22,478 | $ | (19,292 | ) | $ | 3,186 | $ | 22,403 | $ | (18,502 | ) | $ | 3,901 | ||||||||||
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(1) | Cost includes the cumulative historical effect of foreign currency translation on intangible assets acquired in a prior business combination. This cumulative historical effect of foreign currency translation amounted to $214 thousand and $139 thousand as of June 30, 2011 and December 31, 2010, respectively. |
Amortization expense associated with intangible assets was $360 thousand and $724 thousand,
respectively, for the three and six months ended June 30, 2011. Amortization expense associated
with intangible assets was $461 thousand and $924 thousand, respectively, for the three and six
months ended June 30, 2010.
(6) Fixed Assets
Fixed assets are comprised of the following at June 30, 2011 and December 31, 2010 (in
thousands):
June 30, | December 31, | |||||||
2011 | 2010 | |||||||
Laboratory equipment |
$ | 13,514 | $ | 13,128 | ||||
Leasehold improvements |
8,465 | 8,086 | ||||||
Computers and software |
5,415 | 5,120 | ||||||
Furniture and fixtures |
1,727 | 1,947 | ||||||
29,121 | 28,281 | |||||||
Less accumulated depreciation and amortization |
(23,394 | ) | (22,490 | ) | ||||
$ | 5,727 | $ | 5,791 | |||||
Depreciation expense associated with fixed assets was $594 thousand and $1.1 million,
respectively, for the three and six months ended June 30, 2011. Depreciation expense associated
with fixed assets was $468 thousand and $954 thousand, respectively, for the three and six months
ended June 30, 2010.
(7) Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities are comprised of the following at June 30,
2011 and December 31, 2010 (in thousands):
June 30, | December 31, | |||||||
2011 | 2010 | |||||||
VAT and other taxes |
$ | 2,904 | $ | 2,747 | ||||
Professional fees |
696 | 313 | ||||||
Employee compensation |
1,152 | 1,394 | ||||||
Restructuring |
57 | 290 | ||||||
Facility related accruals |
523 | 374 | ||||||
Other |
1,399 | 1,080 | ||||||
$ | 6,731 | $ | 6,198 | |||||
(8) Restructuring
The consolidation of the Companys East Lansing, Michigan paternity testing operations
into its Dayton, Ohio facility and the consolidation of its Nashville CODIS testing operation into
its Dallas, Texas facility were both substantially completed as of December 31, 2010. As such, no
additional restructuring charges were incurred in the first six months of 2011, as compared to $964
thousand for the six months ended June 30, 2010. The Company announced the planned East Lansing
consolidation on October 20, 2009 and completed this consolidation during the quarter ended March
31, 2010. The Company announced the planned Nashville consolidation on January 14, 2010 and
completed this consolidation during the quarter ended September 30, 2010. The expenses in 2010
related primarily to employee severance costs and facility closure costs.
The restructuring liability is included as part of accrued expenses and other current
liabilities on the Companys consolidated balance sheet.
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As of June 30, 2011 and December 31, 2010, the Company had approximately $57
thousand and $290 thousand, respectively, in restructuring accruals outstanding that are related to
severance and facility obligations.
A summary of the restructuring activity is as follows (in thousands):
Total | ||||
Restructuring liability as of December 31, 2010 |
$ | 290 | ||
Cash payments in the six months ended June 30, 2011 |
(233 | ) | ||
Restructuring liability as of June 30, 2011 |
$ | 57 | ||
(9) Income Taxes
The Company recognizes interest and penalties related to uncertain tax positions in
income tax expense. The tax years 2007 through 2009 remain open to examination by taxing
authorities in the United Kingdom (UK) and the tax years 2007 through 2009 remain open to
examination by the US taxing authorities. In addition, the US taxing authorities may examine the
tax years from the Companys inception in 1995 through 2006, but are barred from adjusting the tax
liabilities in excess of the net operating losses generated in any of those tax years.
(10) Recently Issued Accounting Pronouncements
In June 2011, the Financial Accounting Standards Board (FASB) issued new guidance on the
presentation of comprehensive income. Specifically, the new guidance allows an entity to present
components of net income and other comprehensive income in one continuous statement, referred to as
the statement of comprehensive income, or in two separate, but consecutive statements. The new
guidance eliminates the current option to report other comprehensive income and its components in
the statement of changes in stockholders equity. Although the new guidance changes the
presentation of comprehensive income, there are no changes to the components that are recognized in
net income or other comprehensive income under current accounting guidance. This new guidance is
effective for fiscal years and interim periods beginning after December 15, 2011. The Company does
not believe its adoption of the new guidance in the first quarter of fiscal 2012 will have an
impact on its consolidated financial position, results of operations or cash flows.
(11) Comprehensive Loss
Comprehensive income is comprised of net earnings, foreign currency translation adjustments,
and unrealized gains and losses on available-for-sale securities. Total comprehensive loss for the
three months ended June 30, 2011 and 2010 was $2.7 million and $1.6 million, respectively, and
total comprehensive loss for the six months ended June 30, 2011 and 2010 was $4.2 million and $4.4
million, respectively. The difference from net loss for the three and six months ended June 30,
2011 and 2010 consists of foreign currency translation adjustments and unrealized gains and losses
on available-for-sale securities. Accumulated other comprehensive loss as reflected in the
consolidated balance sheets includes cumulative foreign currency translation adjustments of $704
thousand and unrealized gain on available-for-sale securities of $5 thousand.
(12) Agreement and Plan of Merger
On April 5, 2011, the Company entered into an Agreement and Plan of Merger (the Merger
Agreement), with Laboratory Corporation of America Holdings, a Delaware corporation (LabCorp),
and OCM Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of LabCorp
(Purchaser), pursuant to which LabCorp will acquire the Company in a two-step transaction.
Pursuant to the Merger Agreement, and subject to its terms and conditions, on April 19, 2011,
Purchaser commenced a cash tender offer to purchase all outstanding shares of the Companys common
stock, par value $0.001 per share (the Common Stock), including, to the extent outstanding, the
associated preferred stock purchase rights (the Rights) issued under the Rights Agreement, dated
July 27, 2001, as amended (the Rights Agreement), between the Company and American Stock Transfer
& Trust Company, as rights agent, at a purchase price of $2.80 per share, net to the seller in
cash, without interest thereon and subject to any required tax withholding. At the close of
business on May 16, 2011, the Rights Agreement and the Rights expired pursuant to their terms. As
a result, the Rights are no longer outstanding and the Purchasers tender offer is only for the
outstanding shares of Common Stock (the Shares). On June 15, 2011, the Company, LabCorp and the
Purchaser entered into Amendment No. 1 to the Merger Agreement to amend the Merger Agreement to
allow for extensions of the Purchasers tender offer of one or more successive periods of not more
than 30 calendar days each under Sections 1.1(e)(i) and 1.1(e)(ii) of the Merger Agreement.
Unless
extended as set forth in filings with the SEC, the tender offer is currently scheduled to expire at 5:00 p.m., New York City
time, on Friday, September 9, 2011, after which time, if all conditions to the tender offer have been
satisfied or waived, Purchaser will accept for payment all Shares validly tendered pursuant to the
offer and not validly withdrawn. The Purchaser may extend the tender offer past this time in
certain circumstances as required or permitted by the Merger Agreement, as amended, and applicable
law. If successful, the tender offer will be followed by the merger of Purchaser into the Company,
with the Company being
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the surviving corporation and becoming a wholly owned subsidiary of LabCorp. In the merger,
Shares not purchased in the tender offer (other than Shares held by stockholders who properly
demand and perfect their appraisal rights under Delaware law) will be converted into the right to
receive the same $2.80 per share cash payment, without interest, paid in the tender offer.
In addition, the Merger Agreement, as amended, includes termination provisions for both the
Company and LabCorp and provides that, in connection with the termination of the Merger Agreement,
as amended, under certain circumstances, the Company would be obligated to pay LabCorp a
termination fee of $2.5 million and reimburse LabCorp for certain out-of-pocket expenses up to $0.5
million. The consummation of the tender offer and the merger are subject to conditions, including
the Purchasers acquisition of a majority of the outstanding shares of the Companys Common Stock
on a fully-diluted basis and the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust
Improvement Act of 1976, as amended (the HSR Act).
Neither the tender offer nor the merger is subject to a financing
condition. On May 17, 2011, both the Company and LabCorp received a request from the US Federal
Trade Commission (the FTC) for additional information under the HSR Act, in connection with the tender offer. As a
result, the waiting period under the HSR Act was extended. The
Company and LabCorp are cooperating with the FTCs requests for additional information. The Company can provide no assurance
that these transactions will be completed. Except where explicitly stated otherwise, information
contained in this report does not take into account, or give any effect to, the impact of the
proposed transactions with LabCorp. For additional details regarding the Merger Agreement, as
amended, and the tender offer, please see the Companys Current Report on Form 8-K, filed with the
SEC on April 6, 2011, and the Companys Solicitation/Recommendation Statement on Schedule 14D-9
relating to the tender offer, including amendments on Schedule 14D-9/A, filed with the SEC.
(13) Legal Proceedings
On or about November 21, 2001, a complaint was filed in the United States District Court
for the Southern District of New York naming the Company as a defendant, along with certain of the
Companys former officers and underwriters. An amended complaint was filed on April 19, 2002. The
complaint, as amended, purportedly was filed on behalf of persons purchasing the Companys stock
between May 4, 2000 and December 6, 2000, and alleges violations of Sections 11, 12(a)(2) and 15 of
the Securities Act of 1933, as amended, and Sections 10(b) and 20(a) of the Securities Exchange Act
of 1934, as amended, and Rule 10b-5 promulgated thereunder. The amended complaint alleges that, in
connection with the Companys May 5, 2000 initial public offering (the IPO), the defendants
failed to disclose additional and excessive commissions purportedly solicited by and paid to the
underwriter defendants in exchange for allocating shares of the Companys stock to preferred
customers and alleged agreements among the underwriter defendants and preferred customers tying the
allocation of IPO shares to agreements to make additional aftermarket purchases at pre-determined
prices. Plaintiffs claim that the failure to disclose these alleged arrangements made the Companys
registration statement on Form S-1 filed with the SEC in May 2000 and the prospectus, a part of the
registration statement, materially false and misleading. On or about July 15, 2002, the Company
filed a motion to dismiss all of the claims against the Company and the Companys former officers.
On October 9, 2002, the Court dismissed without prejudice only the Companys former officers, Dale
R. Pfost and Donald R. Marvin, from the litigation in exchange for the Company entering into a
tolling agreement with plaintiffs executive committee. On February 19, 2003, the Company received
notice of the Courts decision to dismiss the Section 10(b) claims against the Company. Plaintiffs
and the defendant issuers involved in related IPO securities litigation, including us, have agreed
in principal on a settlement that, upon a one-time surety payment by the defendant issuers
insurers, would release the defendant issuers and the individual officers and directors from claims
and any future payments or out-of-pocket costs. On March 10, 2005, the Court issued a memorandum
and order (i) preliminarily approving the settlement, contingent on the parties agreement on
modifications of the proposed bar order in the settlement documents, (ii) certifying the parties
proposed settlement classes, (iii) certifying the proposed class representatives for the purposes
of the settlement only and (iv) setting a further hearing for the purposes of (a) making a final
determination as to the form, substance and program of notice of proposed settlement and (b)
scheduling a public fairness hearing in order to determine whether the settlement can be finally
approved by the Court. On April 24, 2006, the Court held a fairness hearing and took the motion for
final approval under advisement. On October 5, 2009, the Court granted the plaintiffs motion for
an order of final approval of the settlement, plan of allocation and certification of the class.
Such settlement does not require any payment by the Company to the plaintiffs. The defendant
issuers share of the settlement amount is funded by the insurers. Notices of appeal have been
filed by six groups of appellants. None of the notices state the basis for appeal.
In related proceedings against the underwriters, the United States Court of Appeals for the
Second Circuit ruled on December 5, 2006 that the certification by the District Court for the
Southern District of New York of class actions against the underwriters in six focus cases was
vacated and remanded for further proceedings. In so doing, the Second Circuit ruled that the
cases pending on this appeal may not be certified as class actions. On April 6, 2007, the Second
Circuit denied the plaintiffs petition for rehearing, and no further appeals have been taken.
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As a result of the Second Circuits ruling, the plaintiffs and the issuers stipulated on June
22, 2007 that the Stipulation and Agreement of Settlement with Defendant Issuers and Individuals,
which was originally submitted to the Court on June 10, 2004, was terminated, which resolved the
motion for final approval of the class action settlement with the issuers and individual
defendants. The Court entered the parties stipulation as an Order on June 25, 2007. As a result
of these developments, the plaintiffs have filed amended complaints against the underwriters and
focus case issuers and individuals and are attempting to certify a class action.
In response to the amended complaints, the underwriters and focus case issuers moved to
dismiss the amended complaints. On March 26, 2008, the motion to dismiss was granted in part and
denied in part. As a result, the Court will proceed with the plaintiffs amended complaints
against the underwriters and focus case issuers to determine whether class actions can be
certified.
The Company is a defendant in litigation pending in the United States District Court for the
Southern District of New York entitled Enzo Biochem, Inc. et al. (Enzo) v. Amersham PLC, et al.
(Amersham), filed in October 2002. By their complaint, plaintiffs allege that certain defendants
(i) breached their distributorship agreements by selling certain products for commercial
development (which they allege was not authorized), (ii) infringed plaintiffs patents through the
sale and use of certain products, and (iii) are liable for unfair competition and tortious
interference with contractual relations. The Company did not have a contractual relationship with
plaintiffs, but the Company is alleged to have purchased the product at issue from one of the other
defendants. The Company has sold the business unit that was allegedly engaged in the unlawful
conduct. As a result, there is no relevant injunctive relief to be sought from the Company. The
complaint seeks damages in an undisclosed amount. Most of the fact discovery in the case has been
taken, and a Markman hearing to construe the patent claims was conducted in early July 2005. On
July 17, 2006, the Court ruled in the Companys favor on the construction of the patents asserted
against the Company, and the co-defendants, including the Company, moved for summary judgment on
all claims against us in January 2007. A hearing on the defendants motions for summary judgment
occurred on July 17-18, 2007, and the Court reserved ruling on the motions, taking them under
advisement. Such matter has been delayed due to the death of the judge and the assignment of a new
judge.
In other litigation brought by Enzo against another defendant under the same patents asserted
against the Company, a Connecticut Federal Court has invalidated the patents asserted there and
asserted against the Company in the New York case. That decision was reversed in part by the Court
of Appeals on March 26, 2010. The United States Supreme Court denied further review in June 2011.
As a result of these developments, the Enzo v. Amersham case has been stayed pending the outcome of
the Connecticut Federal Court case, which is scheduled for trial in early 2012.
On April 11, 2011, a putative class action lawsuit was filed by a single plaintiff in the
Superior Court of New Jersey Chancery Division, Mercer County (Docket No. C 000032 11) against the
Company, LabCorp, Purchaser and individual members of the Companys Board of Directors. This
action, captioned Bruce Ballard v. Orchid Cellmark, et al., alleges that (i) individual members of
the Companys Board of Directors violated their fiduciary duties to the Companys stockholders,
including the duties of loyalty, care, candor, and good faith, and failed to maximize value for the
Companys stockholders by agreeing to the Merger Agreement, and (ii) the Company, LabCorp, and
Purchaser aided and abetted the individual defendants in the breach of their fiduciary duties. The
plaintiff seeks (i) to enjoin the acquisition of the Company by Purchaser and LabCorp or, in the
alternative, to rescind the Merger Agreement to the extent already implemented, (ii) an order
requiring the Companys Board of Directors and LabCorp to disclose all material information related
to the Merger Agreement, and (iii) monetary damages in an unspecified amount. The Company believes
the allegations described in the complaint are entirely without merit, and the defendants intend to
vigorously defend such action.
On April 13, 2011, a putative class action lawsuit was filed by a single plaintiff in the
Court of Chancery for the State of Delaware (Case No. 6373-VCN) against the Company, LabCorp,
Purchaser, and individual members of the Companys Board of Directors. The action, styled Herbert
Silverberg v. Thomas Bologna, et al., alleges that (i) individual members of the Companys Board of
Directors violated their fiduciary duties of care and loyalty owed to the Companys stockholders by
(a) failing to properly value the Company, (b) failing to maximize the Companys value, (c)
agreeing to terms in the Merger Agreement and other terms that favor LabCorp, and (d) putting
LabCorps interests above those of the Companys stockholders; and (ii) LabCorp and Purchaser aided
and abetted the individual defendants in the breach of their fiduciary duties. The plaintiff seeks
(i) to enjoin the acquisition of the Company by Purchaser and LabCorp and the implementation of
deal protection devices in the Merger Agreement and deployment of the Companys poison pill, and
(ii) monetary damages in an unspecified amount. The Company believes the allegations described in
the complaint are entirely without merit, and the defendants intend to vigorously defend such
action.
On April 18, 2011, a putative class action lawsuit was filed by a single plaintiff in the
Court of Chancery for the State of Delaware (Case No. 6389-VCN) against the Company, LabCorp,
Purchaser, and individual members of the Companys
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Board of Directors. The action, styled Gene Nannetti v. Thomas Balogna [sic], et al., alleges
that (i) individual members of the Companys Board of Directors violated their fiduciary duties of
good faith, independence, and loyalty owed to the Companys stockholders by (a) failing to maximize
the Companys value, (b) failing to properly value the Company, and (c) ignoring or not protecting
against conflicts of interest resulting from their interrelationships or connections with the
proposed sale of the Company, and (ii) the Company, LabCorp, and Purchaser aided and abetted the
individual defendants in the breach of their fiduciary duties. The plaintiff seeks (i) to enjoin
the acquisition of the Company by Purchaser and LabCorp or, in the alternative, to rescind the sale
of the Company and award plaintiff rescissory damages, and (ii) an accounting of all profits and
any special benefits allegedly improperly received by the defendants in an unspecified amount. The
Company believes the allegations described in the complaint are entirely without merit, and the
defendants intend to vigorously defend such action.
On April 29, 2011, a putative class action lawsuit was filed by a single plaintiff in the
Court of Chancery for the State of Delaware (Case No. 6433-VCN) against the Company, LabCorp,
Purchaser, and individual members of the Companys Board of Directors. The action, styled Bruce
Locke vs. Orchid Cellmark Inc., et al., alleges that (i) individual members of the Companys Board
of Directors violated their fiduciary duties of good faith, loyalty, fair dealing, due care and
candor owed to the Companys stockholders by (a) failing to secure the best transaction available
for the Companys stockholders and (b) agreeing to unreasonable and preclusive deal protection
measures that will deter superior offers for the Company, and (ii) LabCorp aided and abetted the
individual defendants in the breach of their fiduciary duties by, among other things, (a) entering
into the Merger Agreement and (b) otherwise rendering substantial assistance to the Companys Board
of Directors in connection with the breaches. The plaintiff seeks (i) to enjoin the acquisition of
the Company by Purchaser and LabCorp, (ii) rescission, to the extent already implemented, of the
acquisition of the Company by Purchaser and LabCorp, or alternatively, the awarding of rescissory
damages and appropriate compensatory damages to the Companys stockholders, (iii) to require the
individual defendants to properly exercise their fiduciary duties to the Companys stockholders,
(iv) to require the individual defendants to disclose all material information relating to the
proposed transaction and (v) fees and costs, among other relief. The Company believes the
allegations described in the complaint are entirely without merit, and the defendants intend to
vigorously defend such action.
The three actions pending in the Court of Chancery of the State of Delaware have been
consolidated into one action, captioned In re Orchid Cellmark Inc. Shareholder Litigation, Docket
Number 6373-VCN. On May 4, 2011, the plaintiffs filed a motion for preliminary injunction seeking
to enjoin the tender offer.
On May 2, 2011, the Company received a copy of a complaint regarding a putative class action
lawsuit that was filed on April 19, 2011 by a single plaintiff in the Superior Court of New Jersey,
Chancery Division in Mercer County (Docket No. L-1083-11) against the Company, LabCorp,
Purchaser, and individual members of the Companys board of directors. The action, captioned
Harrison Kletzel v. Orchid Cellmark Inc., et al., alleges that (i) individual members of the
Companys board of directors violated their fiduciary duties of good faith, loyalty, and due care
owed to the Companys stockholders by (a) failing to undertake an appropriate evaluation of the
Companys worth as a merger candidate or in liquidation, (b) failing to engage in a meaningful
auction process and (c) failing to act independently, and, (ii) LabCorp, the Company and Purchaser
aided and abetted the individual defendants in the breach of their fiduciary duties. The plaintiff
seeks (i) to enjoin the acquisition of the Company by Purchaser and LabCorp, (ii) to enjoin the
implementation of the deal protection devices in the Merger Agreement and deployment of the
Companys poison pill, (iii) to direct the individual defendants to exercise their fiduciary duties
to maximize stockholder value in any proposed sale of the Company, (iv) to impose a constructive
trust, in favor of the plaintiff and members of the proposed class, upon any benefits improperly
received by defendants as a result of their wrongful conduct, and (v) monetary damages in an
unspecified amount as well fees and costs, among other relief.
On May 2, 2011, a punitive class action lawsuit was filed by a single plaintiff in the
United States District Court for the District of New Jersey against the Company, LabCorp,
Purchaser, and individual members of the Companys Board of Directors (Docket No.
3:11-cv-02508-AET-LHG). The action, captioned Nicholas Tsatsis v. Orchid Cellmark, Inc., alleges
that: (i) individual members of the Companys Board of Directors violated their fiduciary duties of
good faith and loyalty owed to the Companys stockholders by failing to: (a) fully inform
themselves of the Companys market value, (b) act in the interests of equity owners and (c)
maximize stockholder value; (ii) individual defendants breached their fiduciary duty through
materially inadequate disclosures and material disclosure omissions; (iii) LabCorp and the Company
aided and
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abetted the individual directors breaches of fiduciary duty because LabCorp obtained
sensitive non-public information concerning the Companys operations and thus had the advantage to
acquire the Company at an unfair price; and (iv) defendants violated section 14(e) of the Exchange
Act by failing to provide adequate disclosures in the Solicitation/Recommendation Statement dated
April 19, 2011, rendering it materially false and misleading. Plaintiff seeks: (i) to have the
Merger Agreement declared unlawful and unenforceable; (ii) to enjoin the defendants from proceeding
with the Merger Agreement or consummating the transaction unless and until the Company adopts and
implements a procedure or process, such as an auction, to obtain the highest possible price for the
Company; (iii) to rescind, to the extent already implemented, the Merger Agreement or any of the
terms thereof; and (iv) monetary damages in an unspecified amount as well as costs, fees, and
disbursements, among other relief.
On May 4, 2011, the Company first learned that a putative class action lawsuit was filed on
April 20, 2011 by a single plaintiff in the New Jersey Superior Court, Mercer County, Chancery
Division against the Company, LabCorp, Purchaser, and individual members of the Companys Board of
Directors (Docket No. L-1099-11). The action, captioned Betty Greenberg v. Orchid
Cellmark, Inc., et al., alleges that: (i) individual members of the Companys Board of Directors
violated their fiduciary duties of good faith and loyalty owed to the Companys stockholders by
failing to: (a) fully inform themselves of the Companys market value, (b) act in the
interests of equity owners and (c) maximize stockholder value; and (ii) LabCorp and the Company
aided and abetted the individual directors breaches of fiduciary duty. Plaintiff seeks: (i) to
have the Merger Agreement declared unlawful and unenforceable; (ii) to enjoin the defendants from
proceeding with the Merger Agreement or consummating the transactions unless and until the Company
adopts and implements a procedure or process, such as an auction, to obtain the highest possible
price for the Company; (iii) to rescind, to the extent already implemented, the Merger Agreement or
any of the terms thereof; and (iv) monetary damages in an unspecified amount as well as costs,
fees, disbursements, among other relief.
On May 11, 2011, the Superior Court of New Jersey Chancery Division stayed the actions filed
by the three shareholders in that court: Bruce Ballard v. Orchid Cellmark, et al. (Docket No. C
000032 11), Harrison Kletzel v. Orchid Cellmark Inc., et al., (Docket No. L-1083-11), and Betty
Greenberg v. Orchid Cellmark, Inc., et al. (Docket No. L-1099-11), finding that the allegations
were substantially similar to those made by the plaintiffs in the three actions filed in the
Delaware Court of Chancery where a motion for preliminary injunction was scheduled for argument on
May 12, 2011. Under principles of comity and fairness and in order to avoid duplicative litigation,
the Superior Court of New Jersey Chancery Division ordered the three actions pending in that court
be stayed until further order of the Court.
On May 12, 2011, the Delaware Court of Chancery denied the motion for a preliminary injunction
filed in the consolidated Silverberg, Nannetti, and Locke actions finding there was no reasonable
likelihood of success on the plaintiffs claims for breach of fiduciary duty by the individual
directors of the Companys Board of Directors and thus no attendant likelihood of success on the
plaintiffs claims for aiding and abetting a breach of fiduciary duty by the Company, LabCorp, and
the Purchaser. On May 13, 2011, the plaintiffs in these actions filed a motion to appeal, on an
expedited basis, the denial of their motion for a preliminary injunction. On May 16, 2011, the
Supreme Court of the State of Delaware refused to allow the plaintiffs appeal.
On May 12, 2011, a motion for preliminary injunction was filed in the United States District
Court of New Jersey in Tsatsis v. Orchid Cellmark, Inc., (Docket No. 3:11-cv-02508-AET-LHG),
seeking to enjoin the defendants from proceeding with the Merger Agreement or consummating the
transaction as described above in paragraph seven of this Section (i) of Item 8. On May 13, 2011,
the United States District Court of New Jersey denied the plaintiffs request for an expedited
hearing on the motion for a preliminary injunction. The Company and LabCorp opposed the request for
a preliminary injunction and the defendants filed motions to dismiss the action for failure to
state a claim. On June 24, 2011, the plaintiff filed a voluntary dismissal of this action, and on
July 7, 2011, the Court entered that dismissal.
The Company and LabCorp believe the allegations in each of the complaints described above are
entirely without merit, and the defendants intend to vigorously defend each action. However, even a
meritless lawsuit potentially may delay consummation of the transactions contemplated by the Merger
Agreement, including the Offer and the Merger.
Additionally, the Company has certain other claims against it arising from the normal course
of its business. The ultimate resolution of such matters, including those cases disclosed above, in
the opinion of management, will not have a material effect on the Companys financial position and
liquidity, but could have a material impact on its results of operations for any reporting period.
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(14) Subsequent Events
In accordance with ASC 855-10, Subsequent Events, the Company has evaluated subsequent events
through the date the accompanying consolidated financial statements were issued.
For information concerning the Merger Agreement, as amended, with LabCorp, see Note 12
Agreement and Plan of Merger above.
For information concerning lawsuits filed against the Company and the Companys directors in
connection with the Merger Agreement, as amended, see Note 13 Litigation above.
Following the announcement in December 2010 by the UKs Home Office to implement a wind down
of the Forensic Science Service (the FSS), the Association of Chief Police Officers established a
national program of work to manage and transition all forensics services from the FSS. Under this
program, in July 2011, the Company was awarded a significant amount of new DNA and forensic
casework from the East Midlands Region, the Eastern Region, the West Midlands Region and the North
East Region. The Company is currently negotiating contracts with the applicable police forces and
engaged in implementation discussions. The contracts are expected to have an initial two-year term with
additional yearly renewal options for a maximum term of five years. It is anticipated that the
Company will begin servicing this new work in the third quarter of 2011. In July 2011, the Company
was also awarded two other forensic tenders in the UK, one of which was to retain work previously
performed by the Company. The retained contract has a 32-month term, with annual reviews, and the
option of two one-year extensions. The second award has a three-year term with a one-year
extension. The Company estimates the incremental annual revenue from these awards will be
approximately $8 million (at the current exchange rate).
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Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Managements Discussion and Analysis of Financial Condition and Results of
Operations as of June 30, 2011 and for the three and six months ended June 30, 2011 and 2010 should
be read in conjunction with our unaudited Consolidated Financial Statements and related unaudited
Notes to Consolidated Financial Statements included elsewhere in this Quarterly Report on Form
10-Q, as well as our audited Consolidated Financial Statement and related Notes to Consolidated
Financial Statements contained in our Annual Report on Form 10-K, as amended, for the year ended
December 31, 2010, or the Annual Report.
OVERVIEW
We are engaged in the provision of DNA testing services that generate genetic profile
information by analyzing an organisms unique genetic identity. We focus our business on DNA
testing primarily for human identity and, to a lesser extent, agricultural and other applications.
In the human identity area, we principally provide DNA testing services for forensic, family
relationship and, to a lesser extent, security applications. Forensic DNA testing is primarily used
to confirm that a suspect committed a particular crime, to exonerate an innocent person or to
establish or maintain databases of individuals convicted of crimes or, in some instances, arrested
in connection with crimes. We are also engaged in the provision of non-DNA forensic laboratory
services. Family relationship DNA testing is used to establish whether two or more people are
genetically related. DNA testing is used by individuals and employers in security applications to
establish or store a persons genetic profile for identification purposes in the event of an
emergency or accident. In agricultural applications, we provide DNA testing services for selective
trait breeding.
We have operations in the United States, or US, and in the United Kingdom, or UK, and the
majority of our current customers are based in these two countries. Our forensic, family
relationship and security DNA testing services are conducted in both the US and the UK, while all
of our agricultural DNA testing services are conducted in the UK. Based on our review of publicly
available information regarding contract sizes and competitor activity, supplemented by industry
publications and third-party market assessment data, we believe that the US and UK are two of the
largest existing markets for DNA testing services today. In the US and UK, a significant amount of
our current testing activity is under established non-exclusive contracts with government agencies.
These contracts are usually awarded through a sealed bid process and, when awarded, typically have
a term from one to three years. We believe that our experience and reputation as a reliable
provider of services to government agencies is a valued credential that can be used in securing
both new contracts and renewing existing contracts.
Our operations in the UK accounted for 63% and 60% of our total revenues for the three months
ended June 30, 2011 and 2010, respectively, and for 65% and 60% of our total revenues for the six
months ended June 30, 2011 and 2010, respectively. In 2007, UK police forces commenced soliciting
competitive bids for all forensic testing services in a series of regional tenders. In February
2008, we were awarded, overall, a significant portion of the service packages we bid on in the
North West/South West and Wales regional tender. We were awarded work from nine of the fourteen
police forces that participated in this tender. Under the terms of the award, we are providing
forensic services, including DNA testing of database crime scene samples, forensic casework and
database testing services under the UKs Police and Criminal Evidence Act, or PACE, for multiple
police forces that collectively tendered their work. In August 2010, such contracts were extended
for a two-year term ending in 2013. In October 2010, we commenced work for five additional UK
police forces in the East Midlands region under three-year contracts awarded under the National
Forensic Procurement Project. Under the terms of the award, we are conducting DNA analysis of crime
scene samples for submission to the UKs National DNA Database. Following the announcement in December 2010 by the UKs Home Office to implement a wind down of the
Forensic Science Service, or the FSS, the Association of Chief Police Officers established a
national program of work to manage and transition all forensics services from the FSS. Under this
program, in July 2011, we were awarded a significant amount of new DNA and forensic casework from
the East Midlands Region, the Eastern Region, the West Midlands Region and the North East Region.
We are currently negotiating contracts with the applicable police forces and engaged in
implementation discussions. The contracts are expected to have an initial two-year term with additional yearly
renewal options for a maximum term of five years. It is anticipated that we will begin servicing
this new work in the third quarter of 2011. In July 2011, we were also awarded two other forensic
tenders in the UK, one of which was to retain work previously performed by us. The retained
contract has a 32-month term, with annual reviews, and the option of two one-year extensions. The
second award has a three-year term with a one-year extension. We estimate the incremental annual
revenue from these awards will be approximately $8 million (at the current exchange rate).
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Our operations in the US accounted for 37% and 40% of our total revenues for the three months
ended June 30, 2011 and 2010, respectively, and for 35% and 40% of our total revenues for the six
months ended June 30, 2011 and 2010, respectively. We continue to experience price competition in
our forensics and paternity testing businesses. We are focused on improving our operational
execution to increase throughput in our laboratories and lower aggregate operating costs. In
particular, in our forensics business we have reduced our sample processing time and decreased the
number of Combined DNA Index System, or CODIS, samples that need to be retested. In October 2009,
we announced a consolidation of our East Lansing, Michigan paternity testing operations into our
Dayton, Ohio facility, which we completed during the quarter ended March 31, 2010. In January 2010,
we announced a planned consolidation of our Nashville, Tennessee forensic DNA testing facility into
our Dallas, Texas facility, which we completed in the quarter ended September 30, 2010. We achieved
these consolidations within the time frames and range of costs previously disclosed and our
operating costs have been favorably impacted by the consolidation of these testing facilities. We
currently are focused on achieving continued operational efficiencies, cost reductions and
increased scalability from these consolidations.
Proposed Acquisition by Laboratory Corporation of America Holdings
On April 5, 2011, we entered into an Agreement and Plan of Merger, or Merger Agreement, with
Laboratory Corporation of America Holdings, or LabCorp, and OCM Acquisition Corp., a wholly owned
subsidiary of LabCorp, or the Purchaser, pursuant to which LabCorp will acquire us in a two-step
transaction. Pursuant to the Merger Agreement, and subject to its terms and conditions, on April
19, 2011, Purchaser commenced a cash tender offer to purchase all outstanding shares of our Common
Stock, including, to the extent outstanding, the Rights issued under the Rights Agreement, dated
July 27, 2001, as amended, between us and American Stock Transfer & Trust Company, as rights agent,
at a purchase price of $2.80 per share, net to the seller in cash, without interest thereon and
subject to any required tax withholding. At the close of business on May 16, 2011, the Rights
Agreement and the Rights expired pursuant to their terms. As a result, the Rights are no longer
outstanding and the Purchasers tender offer is only for the outstanding shares of Common Stock.
On June 15, 2011, we, LabCorp and the Purchaser entered into Amendment No. 1 to the Merger
Agreement to amend the Merger Agreement to allow for extensions of the Purchasers tender offer of
one or more successive periods of not more than 30 calendar days each under Sections 1.1(e)(i) and
1.1(e)(ii) of the Merger Agreement
Unless
extended as set forth in filings with the Securities and Exchange
Commission, or SEC, the tender offer is currently scheduled to expire at 5:00 p.m., New York City
time, on Friday, September 9, 2011, after which time, if all conditions to the tender offer have been
satisfied or waived, Purchaser will accept for payment all shares of our Common Stock validly
tendered pursuant to the offer and not validly withdrawn. The Purchaser may extend the tender offer
past this time in certain circumstances as required or permitted by the Merger Agreement, as
amended, and applicable law. If successful, the tender offer will be followed by the merger of
Purchaser into us, with our company being the surviving corporation and becoming a wholly owned
subsidiary of LabCorp. In the merger, shares of our Common Stock not purchased in the tender offer
(other than shares of our Common Stock held by stockholders who properly demand and perfect their
appraisal rights under Delaware law) will be converted into the right to receive the same $2.80 per
share cash payment, without interest, paid in the tender offer.
In addition, the Merger Agreement, as amended, includes termination provisions for both us and
LabCorp and provides that, in connection with the termination of the Merger Agreement, as amended,
under certain circumstances, we would be obligated to pay LabCorp a termination fee of $2.5 million
and reimburse LabCorp for certain out-of-pocket expenses up to $0.5 million. The consummation of
the tender offer and the merger are subject to conditions, including the Purchasers acquisition of
a majority of the outstanding shares of our Common Stock on a fully-diluted basis. and the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust
Improvement Act of 1976, as amended, or the HSR Act.
Neither the
tender offer nor the merger is subject to a financing condition. On May 17, 2011, both we and
LabCorp received a request from the US Federal Trade Commission, or FTC, for additional information
under the HSR Act, in
connection with the tender offer. As a result, the waiting period under the HSR Act was extended.
We and LabCorp are cooperating with the FTCs requests for additional information. We can
provide no assurance that these transactions will be completed. Except where explicitly stated
otherwise, information contained in this report does not take into account, or give any effect to,
the impact of the proposed transactions with LabCorp. For additional details regarding the Merger
Agreement, as amended, and the tender offer, please see our Current
Report on Form 8-K, filed with the SEC on April 6, 2011, and our
Solicitation/Recommendation Statement on Schedule 14D-9 relating to the tender offer, including
amendments on Schedule 14D-9/A, filed with the SEC.
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Operating Highlights
Our revenues are predominately generated from DNA testing services provided to our customers.
Our costs and expenses include costs of service revenues, research and development expenses,
marketing and sales expenses, general and administrative expenses, amortization expense and other
income and expense. Costs of service revenues consist primarily of salaries and related personnel
costs, laboratory supplies, fees paid for the collection of samples, depreciation and facility
expenses. Research and development expenses consist primarily of salaries and related costs,
laboratory supplies and other expenses related to the design, development, testing and enhancement
of our services. Marketing and sales expenses consist of salaries and benefits for marketing and
sales personnel within our organization and all related costs of selling and marketing our
services. General and administrative expenses consist primarily of salaries and related expenses
for executive, finance and administrative personnel, professional fees including legal expenses,
insurance and other corporate expenses.
For the three months ended June 30, 2011, as compared to the three months ended June 30,
2010, total revenues increased by approximately 5%, while gross margin, as percentage of service
revenues, decreased to approximately 29%. For the three months ended
June 30, 2011 as compared to the same period in 2010, our UK revenues increased by approximately
10%, as measured in US dollars, primarily as a result of increased forensics revenues due to
increased volume. For the three months ended June 30, 2011, as compared to the same period in 2010, our
UK revenues were favorably impacted by approximately 10% as a result of the exchange rate movement
of the British pound as compared to the US dollar.
For the three months ended June 30, 2011, as compared to the same period in
2010, our US revenues decreased by approximately 2%. In the second quarter of 2011, our US revenues
were primarily impacted by an increase in revenues from testing services involving DNA profile
uploads into the CODIS and individual state databases, as well as an increase in revenues derived
from our forensic casework business. These increases were more than offset by a decrease in government
paternity testing services, as well as a decrease in other forensic revenues. Gross margin, as a
percentage of service revenue decreased primarily as a result of price decreases in our UK and
US-based businesses, partially offset by higher volumes in our UK and US-based operations. For the
three months ended June 30, 2011, our operating expenses, other than cost of service revenues,
increased by approximately 16% as compared to the same period in 2010, primarily as a result of
increased general and administrative expenses, primarily related to legal and professional fees
incurred in connection with the negotiation and execution of the Merger Agreement, as amended, and
related transaction costs. This increase was partially offset by decreased restructuring expenses
as well as decreased research and development expenses.
For the six months ended June 30, 2011, as compared to the six months ended June 30, 2010,
total revenues increased by approximately 11%, and gross margin, as percentage of service
revenues, decreased to approximately 29%. For the six months ended June
30, 2011 as compared to the same period in 2010, our UK revenues increased by approximately 19%, as
measured in US dollars, primarily as a result of increased forensics revenues due to increased
volume, as well as increased paternity and agriculture revenues. For the six months ended June 30,
2011, as compared to the same period in 2010, our US revenues decreased by approximately 1%. In
the six months ended June 30, 2011, our US revenues were primarily impacted by an increase in
revenues from testing services involving DNA profile uploads into the CODIS and individual state
databases. This increase was offset by a decrease in government paternity testing services, as well
as decreases in casework and other forensic revenues. Gross margin, as a percentage of service
revenue decreased primarily as a result of price decreases in both our UK and US-based business,
partially offset by higher volumes in our UK and US-based operations. For the six months ended
June 30, 2011, our operating expenses, other than cost of service revenues, increased by
approximately 13% as compared to the same period in 2010, primarily as a result of increased
general and administrative expenses, primarily related to legal and professional fees incurred in
connection with the negotiation and execution of the Merger Agreement, as amended, and related
transaction costs. This increase was partially offset by decreased restructuring expenses as well
as decreased research and development expenses.
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RESULTS OF OPERATIONS
The following table sets forth a quarter-over-quarter comparison of the components of our net loss
for the three months ended June 30, 2011 and 2010:
(In thousands) | ||||||||||||||||
2011 | 2010 | $ Change | % Change | |||||||||||||
Total revenues |
$ | 16,536 | $ | 15,684 | 852 | 5 | ||||||||||
Cost of service revenues |
11,827 | 10,568 | 1,259 | 12 | ||||||||||||
Research and development |
318 | 492 | (174 | ) | (35 | ) | ||||||||||
Marketing and sales |
1,539 | 1,465 | 74 | 5 | ||||||||||||
General and administrative |
5,047 | 3,324 | 1,723 | 52 | ||||||||||||
Restructuring |
| 520 | (520 | ) | (100 | ) | ||||||||||
Amortization of intangible assets |
360 | 461 | (101 | ) | (22 | ) | ||||||||||
Other income |
118 | 16 | 102 | >100 | ||||||||||||
Income tax expense |
264 | 455 | (191 | ) | (42 | ) | ||||||||||
Net loss |
(2,701 | ) | (1,585 | ) | (1,116 | ) | 70 |
Revenues
Total revenues for the three months ended June 30, 2011 of $16.5 million represented an
increase of $852 thousand, or approximately 5%, as compared to revenues of $15.7 million for the
comparable period in 2010.
Revenues from our UK-based testing services of $10.4 million for the three months ended June
30, 2011 increased by $981 thousand, or approximately 10%, as compared to $9.4 million for the
comparable period in 2010. For the three months ended June 30, 2011, as compared to the same period in 2010, our UK revenues were favorably impacted by approximately 10% as a result
of the exchange rate movement of the British pound as compared to the US dollar. Our UK-based
revenue increase was driven by a significant increase in forensics revenues, as well as increases
in our paternity and agriculture revenues. We expect our UK-based revenues to increase as we
begin servicing contracts resulting from our recent bid awards in the UK.
Our US service revenues for the three months ended June 30, 2011 of $6.1 million decreased by
approximately 2%, as compared to $6.2 million for the same period in 2010. For the three months
ended June 30, 2011, our US revenues were primarily impacted by an increase in revenues from
testing services involving DNA profile uploads into the CODIS and individual state databases, as
well as an increase in revenues derived from our forensic casework business. These increases were more than
offset by a decrease in government paternity testing services, as well as a decrease in other
forensic revenues.
Cost of Service Revenues
Cost of service revenues were $11.8 million, or approximately 72% of service revenues,
for the three months ended June 30, 2011, compared to $10.6 million, or approximately 67% of
service revenues, for three months ended June 30, 2010. For three months ended June 30, 2011, as
compared to the same period in 2010, our UK cost of service revenues were unfavorably impacted by
approximately 10% as a result of the exchange rate movement of the British pound as compared to the
US dollar. Cost of service revenues for the three months ended June 30, 2011, as compared to the
same period in 2010, increased due to higher personnel and lab supplies as a result of increased
volume in our UK operations. Our gross margin percentage decreased by four percentage points for
the three months ended June 30, 2011 as compared to the same period in 2010 primarily as a result
of price decreases in our UK forensic and paternity operations.
In October 2009, we announced a consolidation of our East Lansing, Michigan paternity testing
operations into our Dayton, Ohio facility, which we completed during the quarter ended March 31,
2010. In January 2010, we announced a planned consolidation of our Nashville, Tennessee forensic
DNA testing facility into our Dallas, Texas facility, which we completed in the quarter ended
September 30, 2010. We achieved these consolidations within the time frames and range of costs
previously disclosed and our operating costs have been favorably impacted by the consolidation of
these testing facilities. We currently are focused on achieving continued operational
efficiencies, cost reductions and increased scalability from these consolidations.
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Research and Development
Research and development expenses for the three months ended June 30, 2011 and 2010 were
$318 thousand and $492 thousand, respectively. The greater expenses incurred in 2010 period were
primarily due to costs incurred in the 2010 period associated with the establishment of a CODIS
laboratory at our Dallas, Texas testing facility
Marketing and Sales
Marketing and sales expenses for the three months ended June 30, 2011 and 2010 were $1.5
million and $1.5 million, respectively. The $74 thousand increase in marketing and sales expenses in 2011
was due to increased program costs and increased customer service expenses in the UK.
General and Administrative
General and administrative expenses for the three months ended June 30, 2011 and 2010
were $5.0 million and $3.3 million, respectively. The increase in general and administrative
expenses is primarily due to increased legal and professional fees, including approximately $1.3 million in legal fees incurred
in connection with the negotiation and execution of the Merger Agreement, as amended, defending the
securities derivative lawsuits filed against us in connection with the proposed acquisition, and
cooperating with the FTC to obtain clearance of the proposed acquisition under the HSR Act. We
expect general and administrative costs to continue to be significant over the next few months as a
result of the costs incurred in connection with our proposed acquisition by LabCorp.
Restructuring
During the three months ended June 30, 2011, we did not recognize any restructuring expenses
related to the consolidation of our East Lansing, Michigan paternity testing operations into our
Dayton, Ohio facility and the consolidation of our Nashville, Tennessee testing operation into our
Dallas, Texas facility, as compared to $520 thousand of restructuring expenses recognized in the
three months ended June 30, 2010. We announced the planned East Lansing consolidation on October
20, 2009 and substantially completed this consolidation during the quarter ended March 31, 2010. We
announced the planned Nashville consolidation on January 14, 2010, and substantially completed this
consolidation during the quarter ended September 30, 2010.
Amortization of Intangible Assets
During the three months ended June 30, 2011 and 2010, we recorded $360 thousand and $461
thousand of amortization expense, respectively.
Income Tax Expense
During the three months ended June 30, 2011 and 2010, we recorded income tax expense of $264
thousand and $455 thousand, respectively, primarily related to our UK business. No tax benefit was
recorded relating to our US business losses as management deemed that it was not likely that such
tax benefit would be realized.
Net Loss
For the three months ended June 30, 2011, we reported a net loss of $2.7 million, which
represents an increase of $1.1 million compared to a net loss of $1.6 million for the three months
ended June 30, 2010.
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The following table sets forth a comparison of the components of our net loss for the six months
ended June 30, 2011 and 2010:
(In thousands) | ||||||||||||||||
2011 | 2010 | $ Change | % Change | |||||||||||||
Total revenues |
$ | 33,151 | $ | 29,814 | 3,337 | 11 | ||||||||||
Cost of service revenues |
23,152 | 19,948 | 3,204 | 16 | ||||||||||||
Research and development |
682 | 889 | (207 | ) | (23 | ) | ||||||||||
Marketing and sales |
3,113 | 2,776 | 337 | 12 | ||||||||||||
General and administrative |
9,783 | 7,130 | 2,653 | 37 | ||||||||||||
Restructuring |
| 964 | (964 | ) | (100 | ) | ||||||||||
Amortization of intangible assets |
724 | 924 | (200 | ) | (22 | ) | ||||||||||
Other income |
160 | 56 | 104 | >100 | ||||||||||||
Income tax expense |
735 | 859 | (124 | ) | (14 | ) | ||||||||||
Net loss |
(4,878 | ) | (3,620 | ) | (1,258 | ) | 35 |
Revenues
Total revenues for the six months ended June 30, 2011 of $33.2 million represented an
increase of $3.3 million, or approximately 11%, as compared to revenues of $29.8 million for the
same period in 2010.
Revenues from our UK-based testing services of $21.4 million for the six months ended June 30,
2011 increased by $3.4 million, or approximately 19%, as compared to $18.0 million for the same
period in 2010. For the six months ended June 30, 2011, as compared to the same period in 2010, our
UK revenues were favorably impacted by approximately 6% as a result of the exchange rate movement
of the British pound as compared to the US dollar. Our UK-based revenue increase was driven by a
significant increase in forensics revenues, as well as increases in our paternity and agriculture
businesses.
Our US service revenues for the six months ended June 30, 2011 of $11.7 million decreased by
approximately 1%, as compared to $11.8 million for the same period in 2010. For the six months
ended June 30, 2011, our US revenues were impacted by an increase in revenues from testing services
involving DNA profile uploads into the CODIS and individual state databases, as well as an increase
in revenues derived from our private paternity testing services. These increases were more than offset by a
decrease in government paternity testing services, as well as a decrease in other forensic
revenues.
During the six months ended June 30, 2011 and 2010, we recognized $7 thousand and $14
thousand, respectively, in other revenues, specifically license revenues.
Cost of Service Revenues
Cost of service revenues were $23.2 million, or approximately 70% of service revenues,
for the six months ended June 30, 2011, compared to $19.9 million, or approximately 67% of service
revenues, for six months ended June 30, 2010. For six months ended June 30, 2011, as compared to
the same period in 2010, our UK cost of service revenues were unfavorably impacted by approximately
6% as a result of the exchange rate movement of the British pound as compared to the US dollar.
Cost of service revenues for the six months ended June 30, 2011, as compared to the comparable
period in 2010, increased due to higher personnel and lab supplies as a result of increased volume
in our UK operations. In October 2009, we announced a consolidation of our East Lansing, Michigan
paternity testing operations into our Dayton, Ohio facility, which we completed during the quarter
ended March 31, 2010. In January 2010, we announced a planned consolidation of our Nashville,
Tennessee forensic DNA testing facility into our Dallas, Texas facility, which we completed in the
quarter ended September 30, 2010. We achieved these consolidations within the time frames and range
of costs previously disclosed and our operating costs have been favorably impacted by the
consolidation of these testing facilities. Our gross margin percentage decreased by three
percentage points in the first half of 2011 as compared to the same period in 2010 primarily as a
result of price decreases in our UK forensic operations.
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Research and Development
Research and development expenses for the six months ended June 30, 2011 and 2010 were
$682 thousand and $889 thousand, respectively. The greater expenses incurred in the 2010 period
were primarily due to costs incurred in the 2010 period associated with the establishment of a
CODIS laboratory at our Dallas, Texas testing facility.
Marketing and Sales
Marketing and sales expenses for the six months ended June 30, 2011 and 2010 were $3.1
million and $2.8 million, respectively. The increase in marketing and sales expenses in 2011 was
due to increased program costs and increased customer service expenses in the UK.
General and Administrative
General and administrative expenses for the six months ended June 30, 2011 and 2010 were
$9.8 million and $7.1 million, respectively. The increase in general and administrative expenses in
2011 was primarily due to the $750 thousand to settle the litigation with Genetic Technologies
Limited in the first quarter of 2011, as well as increased legal and professional fees, including approximately $1.7 million in
legal fees incurred in connection with the negotiation and execution of the Merger Agreement, as
amended, defending the securities derivative lawsuits filed against us in connection with the
proposed acquisition, and cooperating with the FTC to obtain clearance of the proposed acquisition
under the HSR Act.
Restructuring
During the six months ended June 30, 2011, we did not recognize any restructuring expenses
related to the consolidation of our East Lansing, Michigan paternity testing operations into our
Dayton, Ohio facility and the consolidation of our Nashville, Tennessee testing operation into our
Dallas, Texas facility, as compared to $964 thousand of restructuring expenses recognized in the
six months ended June 30, 2010.
Amortization of Intangible Assets
During the six months ended June 30, 2011 and 2010, we recorded $724 thousand and $924
thousand of amortization expense, respectively.
Income Tax Expense
During the six months ended June 30, 2011 and 2010, we recorded income tax expense of $735
thousand and $859 thousand, respectively, primarily related to our UK business. No tax benefit was
recorded relating to our US business losses as management deemed that it was not likely that such
tax benefit would be realized.
Net Loss
For the six months ended June 30, 2011, we reported a net loss of $4.9 million, which
represents an increase of $1.3 million compared to a net loss of $3.6 million for the six months
ended June 30, 2010.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 2011, we had $16.3 million in cash, cash equivalents and
available-for-sale securities, as compared to $19.8 million as of December 31, 2010. Working
capital decreased to $19.1 million at June 30, 2011 from $22.2 million at December 31, 2010. The
decrease in cash was primarily a result of the increased net loss incurred during the first six
months of 2011, as well as an increase in our accounts receivable in the first six months of 2011.
Sources of Liquidity
Our primary sources of liquidity have been issuances of our securities and other capital
raising activities.
The following table sets forth a comparison of the components of our liquidity and
capital resources for the six months ended June 30, 2011 and 2010:
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(In thousands) | ||||||||||||||||
2011 | 2010 | $ Change | % Change | |||||||||||||
Cash provided by (used) in: |
||||||||||||||||
Operating activities |
$ | (3,226 | ) | $ | 2,609 | $ | (5,835 | ) | > | (100) | ||||||
Investing activities |
2,513 | (3,854 | ) | 6,367 | >100 | |||||||||||
Financing activities |
74 | | 74 | 100 |
Net cash used in operations for the six months ended June 30, 2011 was $3.2 million, compared with
net cash provided by operations of $2.6 million for the comparable period in the prior year. The
change in operating cash flows was mainly a result of the increased net loss as well as increased
accounts receivable in the first six months of 2011. Investing activities during the six months
ended June 30, 2011 consisted of the maturity of available-for-sale securities and investing
activities during the six months ended June 30, 2010 consisted of the purchase of
available-for-sale securities, as well as capital expenditures. Financing activities during the six
months ended June 30, 2011 consisted of stock options exercised.
Expected Uses of Liquidity in 2011
Throughout 2011, we plan to continue making investments in our business. We expect the
following to be significant uses of liquidity: cost of service revenues, salaries and related
personnel costs, laboratory supplies, fees for the collection of samples, facility expenses,
marketing expenses and general and administrative costs, including any increases thereto resulting
from our proposed acquisition by LabCorp and the related litigation. Actual expenditures may vary
substantially from our estimates. We expect to make capital expenditures related to the expansion
of our UK facilities in Abingdon and Chorley. In addition, we may make additional investments in
future acquisitions of businesses or technologies which would increase our capital expenditures.
We believe that our existing cash on hand will be sufficient to fund our operations at least
through the next twelve months. We may need to raise additional capital through debt or equity
financing to fund future growth opportunities or to operate our ongoing business activities if our
future results of operations fall below our expectations or if our proposed acquisition by LabCorp
is not consummated. However, we may not be able to raise additional funds or raise funds on terms
that are acceptable to us. If future financing is not available to us, or is not available on terms
acceptable to us, we may not be able to fund our future needs. If we raise funds through equity or
convertible securities, our stockholders may experience dilution and our stock price may decline.
We cannot assure you that our business or operations will not change in a manner that
would consume available resources more rapidly than anticipated. We also cannot assure you that we
will not require substantial additional funding before we can achieve profitable operations or if
our proposed acquisition by LabCorp is not consummated. We also may need additional capital if we
seek to acquire other businesses or technologies.
Commitments and Contingencies
There were no material changes during the six months ended June 30, 2011 to our contractual
obligations and commercial commitments as reported in the Annual Report.
Off-Balance Sheet Arrangements
None.
Critical Accounting Policies
There were no changes during the six months ended June 30, 2011 to our critical
accounting policies as reported in the Annual Report.
Recently Issued Accounting Pronouncements
In June 2011, the Financial
Accounting Standards Board, or FASB, issued new guidance on the
presentation of comprehensive income. Specifically, the new guidance allows an entity to present
components of net income and other comprehensive income in one continuous statement, referred to as
the statement of comprehensive income, or in two separate, but consecutive statements. The new
guidance eliminates the current option to report other comprehensive income and its components in
the statement of changes in stockholders equity. Although the new guidance changes the
presentation of comprehensive income, there are no changes to the components that are recognized in
net income or other comprehensive income under current accounting guidance. This new guidance is
effective for fiscal years and interim periods beginning after December 15, 2011. We do not believe
our adoption of the new guidance in the first quarter of fiscal 2012 will have an impact on our
consolidated financial position, results of operations or cash flows.
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Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Sensitivity
Our exposure to market risk is principally confined to our cash equivalents and
available-for-sale securities, which are conservative in nature, with a focus on preservation of
capital. Due to the short-term nature of our investments and our investment policies and
procedures, we have determined that the risks associated with interest rate fluctuations related to
these financial instruments are not material to our business. As of June 30, 2011, we had no
short-term or long-term debt obligations.
Foreign Currency Risk
Our business derives a substantial portion of its revenues from international operations.
We record the majority of our foreign operational transactions, including all cash inflows and
outflows, in the local currency, British pound. We record all of our US operational transactions,
including cash inflows and outflows, in US dollars. We expect that international sales will
continue to represent a significant portion of our revenues. The significant percentage of our
revenues derived from our UK operations makes us vulnerable to future fluctuations in the exchange
rate between the British pound and the US dollar. However, all of our operating expenses related
to our UK operations also are subject to exchange rate fluctuations and thus provide a natural
hedge against such exchange rate movements. Currently, there is no material adverse impact to our
financial results from exchange rate movements.
Item 4. CONTROLS AND PROCEDURES
(a) Disclosure Controls and Procedures. As of June 30, 2011, we conducted an evaluation under
the supervision and with the participation of our management, including our President and Chief
Executive Officer and Vice President and Chief Financial Officer, of the effectiveness of the
design and operation of our disclosure controls and procedures. The term disclosure controls and
procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934,
as amended, or the Exchange Act, means controls and other procedures of a company that are designed
to ensure that information required to be disclosed by the company in the reports it files or
submits under the Exchange Act is recorded, processed, summarized and reported, within the time
periods specified in the SECs rules and forms. Disclosure controls and procedures include, without
limitation, controls and procedures designed to ensure that information required to be disclosed by
a company in the reports that it files or submits under the Exchange Act is accumulated and
communicated to the companys management, including its principal executive and principal financial
officers, or persons performing similar functions, as appropriate, to allow timely decisions
regarding required disclosure. Based on this evaluation, our President and Chief Executive Officer
and Vice President and Chief Financial Officer concluded as of June 30, 2011 that our disclosure
controls and procedures were adequate and effective.
(b) Changes in Internal Control over Financial Reporting. There were no changes in our
internal control over financial reporting during the quarter ended June 30, 2011 that have
materially affected, or are reasonably likely to materially affect, our internal control over
financial reporting.
(c) Limitations on the Effectiveness of Controls. Our disclosure controls and procedures are
designed to provide reasonable assurance of achieving their objectives and our President and Chief
Executive Officer and Vice President and Chief Financial Officer have concluded that our disclosure
controls and procedures are adequate and effective at that reasonable assurance level. However, our
management, including our President and Chief Executive Officer and Vice President and Chief
Financial Officer, does not expect that our disclosure controls and procedures or our internal
control over financial reporting will prevent all error and all fraud. A control system, no matter
how well conceived and operated, can provide only reasonable, not absolute, assurance that the
objectives of the control system are met. Further, the design of a control system must reflect the
fact that there are resource constraints, and the benefits of controls must be considered relative
to their costs. Because of the inherent limitations in all control systems, no evaluation of
controls can provide absolute assurance that all control issues and instances of fraud, if any,
within an organization have been detected. These inherent limitations include the realities that
judgments in decision-making can be faulty, and that breakdowns can occur because of simple error
or mistake.
Additionally, controls can be circumvented by the individual acts of some persons, by
collusion of two or more people, or by management override of the control. The design of any system
of controls also is based in part upon certain assumptions about the likelihood of future events,
and there can be no assurance that any design will succeed in achieving our stated goals under all
potential future conditions. Over time, controls may become inadequate because of changes in
conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of
the
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inherent limitations in a cost-effective control system, misstatements due to error or fraud
may occur and not be detected.
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements. Such statements
are based on managements current expectations and are subject to a number of factors and
uncertainties that could cause actual results or outcomes to differ materially from those described
in such forward-looking statements. These statements address or may address the following subjects:
| our belief that our experience and reputation as a reliable provider of services to government agencies is a valued credential that can be used in securing both new contracts and renewing existing contracts; | ||
| our belief that the US and UK will continue to be some of the largest existing markets for DNA testing services; | ||
| our anticipation that our existing cash on hand will be sufficient to fund our operations at least through the next twelve months; | ||
| our belief that litigation claims arising against us from the normal course of business will not have a material effect on our financial position and liquidity, but could have a material impact on our results of operations for any reporting period; | ||
| our plan to continue to make investments in our business; | ||
| our expectation about our significant uses of liquidity; | ||
| our expectation of increased UK-based revenues as a result of recent bid awards; | ||
| our expectation that the contracts awarded by the East Midlands Region, the Eastern Region, the West Midlands Region and the North East Region will have an initial two-year term with additional yearly renewal options for a maximum term of five years; | ||
| our anticipation that we will begin servicing the new work awarded by the East Midlands Region, the Eastern Region, the West Midlands Region and the North East Region in the third quarter of 2011; | ||
| our estimate that the incremental annual revenue from the three recent forensic awards in the UK will be approximately $8 million (at the current exchange rate); | ||
| our belief that the allegations described in the putative class action lawsuits filed in connection with the Merger Agreement, as amended, are entirely without merit, and that the defendants intend to vigorously defend each action; | ||
| our expectation that general and administrative costs will increase over the next few months as a result of the increase in costs incurred in connection with our proposed acquisition by LabCorp, including defending the securities derivative lawsuits filed against us in connection with the proposed acquisition and cooperating with the FTC to obtain clearance of the proposed acquisition under the HSR Act; | ||
| our expectation that UK sales will continue to represent a significant portion of our revenues; and | ||
| our expectation that our disclosure controls and procedures or our internal control over financial reporting will not prevent all error and all fraud. |
While management makes its best efforts to be accurate in making forward-looking
statements, such statements are subject to risks and uncertainties that could cause actual results
to vary materially, including the risks and uncertainties discussed throughout this Quarterly
Report on Form 10-Q and the cautionary information set forth under the heading Risk Factors
appearing in Item 1A of the Annual Report, as supplemented by subsequent Quarterly Reports on Form
10-Q. Except as required by law, we undertake no obligation to publicly update or revise
forward-looking statements to
reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to
reflect the occurrence of unanticipated events.
PART II OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
On or about November 21, 2001, a complaint was filed in the United States District Court
for the Southern District of New York naming us as a defendant, along with certain of our former
officers and underwriters. An amended complaint was filed on April 19, 2002. The complaint, as
amended, purportedly was filed on behalf of persons purchasing our stock between May 4, 2000 and
December 6, 2000, and alleges violations of Sections 11, 12(a)(2) and
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15 of the Securities Act of
1933, as amended, and Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended,
and Rule 10b-5 promulgated thereunder. The amended complaint alleges that, in connection with the
our May 5, 2000 initial public offering, or IPO, the defendants failed to disclose additional and
excessive commissions purportedly solicited by and paid to the underwriter defendants in exchange
for allocating shares of our stock to preferred customers and alleged agreements among the
underwriter defendants and preferred customers tying the allocation of IPO shares to agreements to
make additional aftermarket purchases at pre-determined prices. Plaintiffs claim that the failure
to disclose these alleged arrangements made our registration statement on Form S-1 filed with the
SEC in May 2000 and the prospectus, a part of the registration statement, materially false and
misleading. On or about July 15, 2002, we filed a motion to dismiss all of the claims against us
and our former officers. On October 9, 2002, the Court dismissed without prejudice only our former
officers, Dale R. Pfost and Donald R. Marvin, from the litigation in exchange for our entering into
a tolling agreement with plaintiffs executive committee. On February 19, 2003, we received notice
of the Courts decision to dismiss the Section 10(b) claims against us. Plaintiffs and the
defendant issuers involved in related IPO securities litigation, including us, have agreed in
principal on a settlement that, upon a one-time surety payment by the defendant issuers insurers,
would release the defendant issuers and the individual officers and directors from claims and any
future payments or out-of-pocket costs. On March 10, 2005, the Court issued a memorandum and order
(i) preliminarily approving the settlement, contingent on the parties agreement on modifications
of the proposed bar order in the settlement documents, (ii) certifying the parties proposed
settlement classes, (iii) certifying the proposed class representatives for the purposes of the
settlement only and (iv) setting a further hearing for the purposes of (a) making a final
determination as to the form, substance and program of notice of proposed settlement and (b)
scheduling a public fairness hearing in order to determine whether the settlement can be finally
approved by the Court. On April 24, 2006, the Court held a fairness hearing and took the motion for
final approval under advisement. On October 5, 2009, the Court granted the plaintiffs motion for
an order of final approval of the settlement, plan of allocation and certification of the class.
Such settlement does not require any payment by us to the plaintiffs. The defendant issuers share
of the settlement amount is funded by the insurers. Notices of appeal have been filed by six groups
of appellants. None of the notices state the basis for appeal.
In related proceedings against the underwriters, the United States Court of Appeals for the
Second Circuit ruled on December 5, 2006 that the certification by the District Court for the
Southern District of New York of class actions against the underwriters in six focus cases was
vacated and remanded for further proceedings. In so doing, the Second Circuit ruled that the
cases pending on this appeal may not be certified as class actions. On April 6, 2007, the Second
Circuit denied the plaintiffs petition for rehearing, and no further appeals have been taken.
As a result of the Second Circuits ruling, the plaintiffs and the issuers stipulated on June
22, 2007 that the Stipulation and Agreement of Settlement with Defendant Issuers and Individuals,
which was originally submitted to the Court on June 10, 2004, was terminated, which resolved the
motion for final approval of the class action settlement with the issuers and individual
defendants. The Court entered the parties stipulation as an Order on June 25, 2007. As a result of
these developments, the plaintiffs have filed amended complaints against the underwriters and
focus case issuers and individuals and are attempting to certify a class action.
In response to the amended complaints, the underwriters and focus case issuers moved to
dismiss the amended complaints. On March 26, 2008, the motion to dismiss was granted in part and
denied in part. As a result, the Court will proceed with the plaintiffs amended complaints
against the underwriters and focus case issuers to determine whether class actions can be
certified.
We are a defendant in litigation pending in the United States District Court for the Southern
District of New York entitled Enzo Biochem, Inc. et al. or Enzo, v. Amersham PLC, et al., or
Amersham, filed in October 2002. By their
complaint, plaintiffs allege that certain defendants (i) breached their distributorship
agreements by selling certain products for commercial development (which they allege was not
authorized), (ii) infringed plaintiffs patents through the sale and use of certain products, and
(iii) are liable for unfair competition and tortious interference with contractual relations. We
did not have a contractual relationship with plaintiffs, but we are alleged to have purchased the
product at issue from one of the other defendants. We sold the business unit that was allegedly
engaged in the unlawful conduct. As a result, there is no relevant injunctive relief to be sought
from us. The complaint seeks damages in an undisclosed amount. Most of the fact discovery in the
case has been taken, and a Markman hearing to construe the patent claims was conducted in early
July 2005. On July 17, 2006, the Court ruled in our favor on the construction of the patents
asserted against us, and the co-defendants, including us, moved for summary judgment on all claims
against us in January 2007. A hearing on the defendants motions for summary judgment occurred on
July 17-18, 2007, and the Court reserved ruling on the motions, taking them under advisement. Such
matter has been delayed due to the death of the judge and the assignment of a new judge.
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In other litigation brought by Enzo against another defendant under the same patents asserted
against the Company, a Connecticut Federal Court has invalidated the patents asserted there and
asserted against the Company in the New York case. That decision was reversed in part by the Court
of Appeals on March 26, 2010. The United States Supreme Court denied further review in June 2011.
As a result of these developments, the Enzo v. Amersham case has been stayed pending the outcome of
the Connecticut Federal Court case, which is scheduled for trial in early 2012.
On April 11, 2011, a putative class action lawsuit was filed by a single plaintiff in the
Superior Court of New Jersey Chancery Division, Mercer County (Docket No. C 000032 11) against us,
LabCorp, Purchaser and individual members of our Board of Directors. This action, captioned Bruce
Ballard v. Orchid Cellmark, et al., alleges that (i) individual members of our Board of Directors
violated their fiduciary duties to our stockholders, including the duties of loyalty, care, candor,
and good faith, and failed to maximize value for our stockholders by agreeing to the Merger
Agreement, and (ii) we, LabCorp, and Purchaser aided and abetted the individual defendants in the
breach of our and their respective fiduciary duties. The plaintiff seeks (i) to
enjoin the acquisition of us by Purchaser and LabCorp or, in the alternative, to rescind the Merger
Agreement to the extent already implemented, (ii) an order requiring our Board of Directors and
LabCorp to disclose all material information related to the Merger Agreement, and (iii) monetary
damages in an unspecified amount. We believe the allegations described in the complaint are
entirely without merit, and the defendants intend to vigorously defend such action.
On April 13, 2011, a putative class action lawsuit was filed by a single plaintiff in the
Court of Chancery for the State of Delaware (Case No. 6373-VCN) against us, LabCorp, Purchaser, and
individual members of our Board of Directors. The action, styled Herbert Silverberg v. Thomas
Bologna, et al., alleges that (i) individual members of our Board of Directors violated their
fiduciary duties of care and loyalty owed to our stockholders by (a) failing to properly value us,
(b) failing to maximize our value, (c) agreeing to terms in the Merger Agreement and other terms
that favor LabCorp, and (d) putting LabCorps interests above those of our stockholders; and (ii)
LabCorp and Purchaser aided and abetted the individual defendants in the breach of their fiduciary
duties. The plaintiff seeks (i) to enjoin the acquisition of us by Purchaser and LabCorp and the
implementation of deal protection devices in the Merger Agreement and deployment of our poison
pill, and (ii) monetary damages in an unspecified amount. We believe the allegations described in
the complaint are entirely without merit, and the defendants intend to vigorously defend such
action.
On April 18, 2011, a putative class action lawsuit was filed by a single plaintiff in the
Court of Chancery for the State of Delaware (Case No. 6389-VCN) against us, LabCorp, Purchaser, and
individual members of our Board of Directors. The action, styled Gene Nannetti v. Thomas Balogna
[sic], et al., alleges that (i) individual members of our Board of Directors violated their
fiduciary duties of good faith, independence, and loyalty owed to our stockholders by (a) failing
to maximize our value, (b) failing to properly value us, and (c) ignoring or not protecting against
conflicts of interest resulting from their interrelationships or connections with the proposed sale
of us, and (ii) we, LabCorp, and Purchaser aided and abetted the individual defendants in the
breach of our and their respective fiduciary duties. The plaintiff seeks (i) to enjoin the
acquisition of us by Purchaser and LabCorp or, in the alternative, to rescind the sale of us and
award plaintiff rescissory damages, and (ii) an accounting of all profits and any special benefits
allegedly improperly received by the defendants in an unspecified amount. We believe the
allegations described in the complaint are entirely without merit, and the defendants intend to
vigorously defend such action.
On April 29, 2011, a putative class action lawsuit was filed by a single plaintiff in the
Court of Chancery for the State of Delaware (Case No. 6433-VCN) against us, LabCorp, Purchaser, and
individual members of our Board of
Directors. The action, styled Bruce Locke vs. Orchid Cellmark Inc., et al., alleges that (i)
certain individual members of our Board of Directors violated their fiduciary duties of good faith,
loyalty, fair dealing, due care and candor owed to our stockholders by (a) failing to secure the
best transaction available for our stockholders and (b) agreeing to unreasonable and preclusive
deal protection measures that will deter superior offers for us, and (ii) LabCorp aided and abetted
the individual defendants in the breach of their fiduciary duties by, among other things, (a)
entering into the Merger Agreement and (b) otherwise rendering substantial assistance to our Board
of Directors in connection with the breaches. The plaintiff seeks (i) to enjoin the acquisition of
us by Purchaser and LabCorp, (ii) rescission, to the extent already implemented, of the acquisition
of us by Purchaser and LabCorp, or alternatively, the awarding of rescissory damages and
appropriate compensatory damages to our stockholders, (iii) to require the individual defendants to
properly exercise their fiduciary duties to our stockholders, (iv) to require the individual
defendants to disclose all material information relating to the proposed transaction and (v) fees
and costs, among other relief. We believe the allegations described in the complaint are entirely
without merit, and the defendants intend to vigorously defend such action.
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The three actions pending in the Court of Chancery of the State of Delaware have been
consolidated into one action, captioned In re Orchid Cellmark Inc. Shareholder Litigation, Docket
Number 6373-VCN. On May 4, 2011, the plaintiffs filed a motion for preliminary injunction seeking
to enjoin the tender offer.
On May 2, 2011, we received a copy of a complaint regarding a putative class action lawsuit
that was filed on April 19, 2011 by a single plaintiff in the Superior Court of New Jersey,
Chancery Division in Mercer County (Docket No. L-1083-11) against us, LabCorp, Purchaser, and
individual members of our board of directors. The action, captioned Harrison Kletzel v. Orchid
Cellmark Inc., et al., alleges that (i) individual members of our board of directors violated their
fiduciary duties of good faith, loyalty, and due care owed to our stockholders by (a) failing to
undertake an appropriate evaluation of the our worth as a merger candidate or in liquidation, (b)
failing to engage in a meaningful auction process and (c) failing to act independently, and, (ii)
we, LabCorp, and Purchaser aided and abetted the individual defendants in the breach of our and
their respective fiduciary duties. The plaintiff seeks (i) to enjoin the acquisition of us by
Purchaser and LabCorp, (ii) to enjoin the implementation of the deal protection devices in the
Merger Agreement and deployment of our poison pill, (iii) to direct the individual defendants to
exercise their fiduciary duties to maximize stockholder value in any proposed sale of us, (iv) to
impose a constructive trust, in favor of the plaintiff and members of the proposed class, upon any
benefits improperly received by defendants as a result of their wrongful conduct, and (v) monetary
damages in an unspecified amount as well fees and costs, among other relief.
On May 2, 2011, a putative class action lawsuit was filed by a single plaintiff in the United
States District Court for the District of New Jersey against us, LabCorp, the Purchaser, and
individual members of our Board of Directors (Docket No. 3:11-cv-02508-AET-LHG). The action,
captioned Nicholas Tsatsis v. Orchid Cellmark, Inc., alleges that: (i) individual members of our
Board of Directors violated their fiduciary duties of good faith and loyalty owed to our
stockholders by failing to: (a) fully inform themselves of our market value, (b) act in the
interests of equity owners and (c) maximize shareholder value; (ii) individual defendants breached
their fiduciary duty through materially inadequate disclosures and material disclosure omissions;
(iii) we and LabCorp aided and abetted the individual directors breaches of fiduciary duty because
LabCorp obtained sensitive non-public information concerning our operations and thus had the
advantage to acquire us at an unfair price; and (iv) defendants violated section 14(e) of the
Exchange Act by failing to provide adequate disclosures in the Solicitation/Recommendation
Statement dated April 19, 2011, rendering it materially false and misleading. Plaintiff seeks: (i)
to have the Merger Agreement declared unlawful and unenforceable; (ii) to enjoin the defendants
from proceeding with the Merger Agreement or consummating the transaction unless and until we adopt
and implement a procedure or process, such as an auction, to obtain the highest possible price for
us; (iii) to rescind, to the extent already implemented, the Merger Agreement or any of the terms
thereof; and (iv) monetary damages in an unspecified amount as well as costs, fees, and
disbursements, among other relief. We believe the allegations described in the complaint are
entirely without merit, and the defendants intend to vigorously defend such action.
On May 4, 2011, we first learned that a putative class action lawsuit was filed on April 20,
2011 by a single plaintiff in the New Jersey Superior Court, Mercer County, Chancery Division
against us, LabCorp, Purchaser, and individual members of our Board of Directors (Docket No.
L-1099-11). The action, captioned Betty Greenberg v. Orchid Cellmark, Inc., et al., alleges that:
(i) individual members of our Board of Directors violated their fiduciary duties of good faith and
loyalty owed to our stockholders by failing to: (a) fully inform themselves of the our market
value, (b) act in the interests of equity owners and (c) maximize stockholder value; and (ii)
we and LabCorp aided and abetted the individual directors breaches of fiduciary duty. Plaintiff
seeks: (i) to have the Merger Agreement declared unlawful and unenforceable; (ii) to enjoin the
defendants from proceeding with the Merger Agreement or consummating the transactions unless and
until we adopt and implement a procedure or process, such as an auction, to obtain the highest
possible price for us; (iii) to rescind, to the extent already implemented, the Merger Agreement or
any of the terms thereof; and (iv) monetary damages in an unspecified amount as well as costs,
fees, disbursements, among other relief.
On May 11, 2011, the Superior Court of New Jersey Chancery Division stayed the actions filed
by the three shareholders in that court: Bruce Ballard v. Orchid Cellmark, et al. (Docket No. C
000032 11), Harrison Kletzel v. Orchid Cellmark Inc., et al., (Docket No. L-1083-11), and Betty
Greenberg v. Orchid Cellmark, Inc., et al. (Docket No. L-1099-11), finding that the allegations
were substantially similar to those made by the plaintiffs in the three actions filed in the
Delaware Court of Chancery where a motion for preliminary injunction was scheduled for argument on
May 12, 2011. Under principles of comity and fairness and in order to avoid duplicative litigation,
the Superior Court of New Jersey Chancery Division ordered the three actions pending in that court
be stayed until further order of the Court.
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On May 12, 2011, the Delaware Court of Chancery denied the motion for a preliminary injunction
filed in the consolidated Silverberg, Nannetti, and Locke actions finding there was no reasonable
likelihood of success on the plaintiffs claims for breach of fiduciary duty by the individual
directors of our Board of Directors and thus no attendant likelihood of success on the plaintiffs
claims for aiding and abetting a breach of fiduciary duty by us, LabCorp, and the Purchaser. On
May 13, 2011, the plaintiffs in these actions filed a motion to appeal, on an expedited basis, the
denial of their motion for a preliminary injunction. On May 16, 2011, the Supreme Court of the
State of Delaware refused to allow the plaintiffs appeal.
On May 12, 2011, a motion for preliminary injunction was filed in the United States District
Court of New Jersey in Tsatsis v. Orchid Cellmark, Inc., (Docket No. 3:11-cv-02508-AET-LHG),
seeking to enjoin the defendants from proceeding with the Merger Agreement or consummating the
transaction as described above in paragraph seven of this Section (i) of Item 8. On May 13, 2011,
the United States District Court of New Jersey denied the plaintiffs request for an expedited
hearing on the motion for a preliminary injunction. We and LabCorp opposed the request for a
preliminary injunction and the defendants filed motions to dismiss the action for failure to state
a claim. On June 24, 2011, the plaintiff filed a voluntary dismissal of this action, and on July 7,
2011, the Court entered that dismissal.
We and LabCorp believe the allegations in each of the complaints described above are entirely
without merit, and the defendants intend to vigorously defend each action. However, even a
meritless lawsuit potentially may delay consummation of the transactions contemplated by the Merger
Agreement, including the Offer and the Merger.
Additionally, we may have certain other claims against us arising from the normal course of
our business. The ultimate resolution of such matters, including those cases disclosed above, in
the opinion of management, will not have a material effect on our financial position and liquidity,
but could have a material impact on our results of operations for any reporting period.
Item 1A. RISK FACTORS
There have not been any material changes to the risk factors
disclosed under the heading Risk Factors appearing in Item 1A of the Annual Report, as
supplemented by our Quarterly Report on Form 10-Q for the quarter ended March 31, 2011.
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Not applicable.
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
Item 4. [RESERVED.]
Item 5. OTHER INFORMATION
Following the announcement in December 2010 by the UKs Home Office to implement a wind down
of the FSS, the Association of Chief Police Officers established a national program of work to
manage and transition all forensics services from the FSS. Under this program, in July 2011, we
were awarded a significant amount of new DNA and forensic casework from the East Midlands Region,
the Eastern Region, the West Midlands Region and the North East Region. We are currently
negotiating contracts with the applicable police forces and engaged in implementation discussions.
The contracts are expected to have an initial two-year term with additional yearly renewal options for a
maximum term of five years. It is anticipated that we will begin servicing this new work in the
third quarter of 2011. In July 2011, we were also awarded two other forensic tenders in the UK,
one of which was to retain work previously performed by us. The retained contract has a 32-month
term, with annual reviews, and the option of two one-year extensions. The second award has a
three-year term with a one-year extension. We estimate the incremental annual revenue from these
awards will be approximately $8 million (at the current exchange rate).
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Item 6. EXHIBITS
The following is a list of exhibits filed as part of this Quarterly Report on Form 10-Q.
Exhibit | ||
Number | Description | |
2.1(1)
|
Agreement and Plan of Merger, dated April 5, 2011, by and among Laboratory Corporation of America Holdings, OCM Acquisition Corp., and the Company (filed as Exhibit 2.1). | |
2.2(2)
|
Amendment No. 1 to the Agreement and Plan of Merger dated April 5, 2011 by and among Laboratory Corporation of America Holdings, OCM Acquisition Corp., and the Company (filed as Exhibit (d)(4)). | |
4.1(1)
|
Second Amendment, dated April 5, 2011, to Rights Agreement, dated as of July 27, 2001, as amended on March 31, 2003, between the Company and American Stock Transfer & Trust Company, as rights agent (filed as Exhibit 4.1). | |
31.1
|
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
31.2
|
Certification of Principal Financial and Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
32
|
Certifications of Principal Executive Officer and Principal Financial and Accounting Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
101*
|
The following materials from the Companys Quarterly Report on Form 10-Q for the quarter ended June 30, 2011, formatted in XBRL (eXtensible Business Reporting Language); (i) Consolidated Balance Sheets as of June 30, 2011 and December 31, 2010, (ii) Consolidated Statements of Operations for the three and six months ended June 30, 2011 and 2010, (iii) Consolidated Statements of Cash Flows for the six months ended June 30, 2011 and 2010, (iv) Consolidated Statement of Stockholders Equity and Comprehensive Income/Loss for the six months ended June 30, 2011 and (v) Notes to Consolidated Financial Statements. |
* | Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections. | |
(1) | Previously filed with the SEC as Exhibits to, and incorporated herein by reference from, the Companys Current Report on Form 8-K as filed with the SEC on April 6, 2011 (File No. 000-30267). | |
(2) | Previously filed with the SEC as an Exhibit to, and incorporated herein by reference from, Amendment No. 6 to the Schedule TO of Laboratory Corporation of America Holdings and OCM Acquisition Corp. filed with the SEC on June 16, 2011 (File No. 005-59033). |
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SIGNATURE
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.
ORCHID CELLMARK INC. | ||||
Date: August 15, 2011 | By: | /s/ James F. Smith | ||
James F. Smith | ||||
Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) | ||||
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