TETERBORO, N.J., APRIL 14, 1998—Quest
Diagnostics Incorporated (NYSE: DGX) announced today that for the first quarter ended
March 31, 1998, net income increased to $6.6 million, or $0.22 per share, from $4.0
million, or $0.14 per share during the 1997 period. Revenues were $367.9 million compared
to $388.1 million for the prior year period. The 1998 results include a $2.5 million
pretax charge, representing the final costs associated with the consolidation plan
announced in December, 1997.
"Efforts to standardize our operations across the country are
showing results," said Kenneth W. Freeman, chairman and chief executive officer.
"Cost reductions outpaced the revenue decline for the second consecutive quarter, and
cash generation remained strong. However, volume weakness continues. Intensive efforts are
underway to stabilize our volume by the end of this year and produce new sources of
profitable growth. "
During the quarter, revenues declined 5.2% from the previous year,
primarily due to competitive pressures, changes in reimbursement policies, and actions
taken on unprofitable accounts. Clinical testing volume, measured by the number of
requisitions, declined 8.1% for the same reasons.
Average price per requisition remained stable and reflected a 3.1%
increase over the prior year period. Total operating costs for the quarter declined from
the year-earlier period by $24.8 million, reflecting ongoing efforts to reduce capacity
and align costs with business conditions.
Earnings before interest, taxes, depreciation and amortization (EBITDA)
were $40.1 million for the first quarter, compared to $38.6 million for the prior year
period. Excluding the $2.5 million charge, EBITDA was $42.6 million. The number of days
sales outstanding, a measure of billing and collection efficiency, improved to 58 days,
compared to 63 days at the end of 1997. Capital expenditures totaled $10 million for the
quarter.
"While we are encouraged by our first quarter results, we expect
business challenges to intensify," said Mr. Freeman. "New Medicare requirements,
which we began to comply with April 1, are likely to change physician ordering patterns
and put additional pressure on revenues and earnings. Given the uncertainty surrounding
the impact of these requirements, we continue to expect second quarter results will fall
below last year's level. However, we remain confident that full-year earnings will be
significantly greater than last year."
Quest Diagnostics Incorporated is one of the nation's leading providers
of diagnostic testing, information and services with laboratories across the United
States. The wide variety of tests performed on human tissue and fluids help doctors and
hospitals diagnose, treat and monitor disease. Its Nichols Institute unit conducts
research, specializes in esoteric testing using genetic screening and other advanced
technologies, supports laboratory testing for clinical studies, and manufactures and
distributes diagnostic test kits and instruments. Quest Informatics uses innovative data
mining technology to help large insurers and health care providers monitor populations of
patients and identify those at risk for certain diseases. Additional company information
can be found on the Internet at: www.questdiagnostics.com.
The statements in this press release which are not historical facts or
information may be forward-looking statements. These forward-looking statements involve
risks and uncertainties that could cause the outcome to be materially different. Certain
of these risks and uncertainties are listed in the Quest Diagnostics Incorporated 1997
Form 10-K.
-- Table follows –
Quest Diagnostics Incorporated and Subsidiaries
Consolidated Statements of Operations
For the Three Months Ended March 31, 1998 and 1997
(in millions, except per share data)
|
Three Month Period March 31 |
|
1998 |
|
1997 |
|
|
|
|
Net revenues |
$ 367.9 |
|
$ 388.1 |
|
|
|
|
Costs and expenses: |
|
|
|
Cost of services |
218.0 |
|
239.3 |
Selling, general and administrative |
120.5 |
|
124.0 |
Interest expense, net |
9.1 |
|
10.6 |
Amortization of intangible assets |
5.4 |
|
6.0 |
Other, net |
1.2 |
|
(0.2) |
Total |
354.2 |
|
379.7 |
Income before taxes |
13.7 |
|
8.4 |
Income tax expense |
7.1 |
|
4.4 |
Net income |
$ 6.6 |
|
$ 4.0 |
|
|
|
|
Basic and diluted net income per common share |
$ 0.22 |
|
$ 0.14 |
|
|
|
|
Weighted average common shares outstanding |
29.7 |
|
28.9 |
Notes to consolidated statements of operations:
(1) Earnings per share are computed by dividing net income less
dividends on preferred stock (approximately $30 thousand per quarter) by the weighted
average number of common shares outstanding. Basic and diluted earnings per share are
based upon the weighted average number of shares outstanding during the period.
Potentially dilutive common shares, which primarily result from stock options, are
insignificant and do not impact earnings per share.
(2) Net income includes a $2.5 million charge ($1.2 million, net of
tax, or $0.04 per share) included in selling, general and administrative expenses related
to the Company's consolidation of its laboratory network which was announced in
December 1997.