TETERBORO, N.J., DECEMBER 2, 1997Quest Diagnostics Incorporated
(NYSE: DGX) today announced a series of actions aimed at reducing excess capacity in its
network of clinical laboratories and improving its cost structure. The actions reflect the
need to better match lab capacity and staffing levels with business conditions.
Quest Diagnostics will convert its Regional Laboratories in Atlanta and Tampa to Local
Customer Centers with rapid-turnaround (STAT) laboratories for time-sensitive testing.
Most of the testing currently performed in Atlanta and Tampa will be transferred to
laboratories located elsewhere in its national network. In addition, Quest Diagnostics
said it would significantly reduce the size of its Regional Laboratory in St. Louis and
several smaller branch laboratories in other regions.
Client service will remain paramount throughout the Quest Diagnostics network during
the transition. Quest Diagnostics will continue to provide patients served by its
physician, hospital, managed care and employer clients with high quality, reliable lab
service through the Regional Laboratory in St. Louis and, in Atlanta and Tampa, through
Local Customer Centers with sales representatives, STAT testing capability, couriers and
phlebotomists.
"Given the overcapacity that characterizes our industry, reducing the size of
these facilities was a difficult but necessary decision," said Kenneth W. Freeman,
chairman and chief executive officer. "To improve our competitive position and
effectiveness in the rapidly changing health care marketplace, we are accelerating our
efforts to reduce our lab capacity and improve our overall efficiency and
profitability."
The charges to earnings associated with the consolidation are expected to total from
$60 million to $70 million on a pre-tax basis and from $43 million to $49 million, or
$1.46 to $1.67 per share, after taxes. The vast majority of these charges will be
recognized in the fourth quarter of 1997, ending December 31. The charges primarily cover
severance costs and the write-down of assets in Atlanta, St. Louis and Tampa, as well as
consolidation costs in several other locations. Over the next 12 months, these actions
will result in a net workforce reduction of approximately 1,000 positions, or
approximately 6% of the total workforce. Affected employees will be offered severance
benefits, including counseling services and outplacement assistance.
The total cash outlay associated with these charges, the majority of which will occur
in 1998, is expected to be approximately $40 million before taxes. The benefits of these
actions will begin to be realized in 1998; by the beginning of 1999, when the programs are
fully implemented, annual benefits are expected to be in excess of $20 million before
taxes.
Quest Diagnostics Incorporated is one of the nations 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;
and manufactures and distributes diagnostic test kits and instruments. Formerly known as
Corning Clinical Laboratories Inc., Quest Diagnostics was spun off to Corning Incorporated
stockholders in a tax-free distribution of shares on December 31, 1996.
The statements in this press release which are not historical facts or information are
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 1996 Form 10-K
and subsequent filings.