QUEST DIAGNOSTICS ANNOUNCES IMPROVED REVENUES AND
EARNINGS IN SECOND QUARTER OF 1999
TETERBORO, N.J., JULY 16, 1999Quest Diagnostics Incorporated
(NYSE: DGX) announced today that for the second quarter ended June 30, 1999, net income
increased to $13.1 million, or $0.43 per diluted share, compared to $8.9 million, or $0.29
per diluted share, during the 1998 period. The 1999 second quarter includes the benefit of
a favorable tax settlement, which contributed $0.04 per diluted share. Revenues were
$394.0 million compared to $366.7 million for the 1998 second quarter.
"Strong performance during the second quarter demonstrates that our efforts to
restore profitable growth are on track," said Kenneth W. Freeman, chairman and chief
executive officer.
Revenues increased by 3.2% to $378.6 million, adjusted to exclude the impact of
QuestNet, the companys laboratory network management service. Clinical testing
volume declined by 3.9%. Average revenue per requisition processed increased by 7.6% over
the prior-year period.
Earnings before interest, taxes, depreciation and amortization (EBITDA) were $46.2
million for the second quarter, compared to $44.5 million for the prior year period.
Bad debt expense, adjusted for QuestNet, improved during the quarter to 5.3% of
revenues from 5.8% for the prior year period and 5.6% for the first quarter. The number of
days sales outstanding, adjusted for QuestNet, was 54 days, compared to 61 days a year ago
and 54 days in the first quarter. Capital expenditures totaled $13.2 million for the
quarter and $25.9 million year-to-date.
For the first half of 1999, net income increased to $20.5 million from $15.5 million
for the prior year. Revenues increased to $775.9 million, or $743.1 million adjusted for
QuestNet, compared to $734.6 million in 1998. Diluted earnings per share were $0.67, or
$0.63 excluding the effect of the tax settlement, compared to $0.51 for the prior year.
EBITDA for the six-month period was $84.1 million, reflecting additional costs associated
with the introduction of QuestNet and investments in information technology and sales and
marketing capabilities, compared to $87.1 million last year, adjusted for special charges.
"I am encouraged by our strong second quarter results and also by the opportunity
that the acquisition of SmithKline Beecham Clinical Laboratories represents for our
employees, customers and shareholders," said Mr. Freeman. "During the past two
weeks, we have had continuing discussions with SmithKline Beecham, and I am hopeful that
we will resolve the remaining issues and complete the transaction."
Quest Diagnostics is one of the nations leading providers of diagnostic testing,
information and services to physicians, hospitals, managed care organizations, employers
and government agencies. 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, performs clinical studies testing, and manufactures and distributes
diagnostic test kits and instruments. Quest Informatics collects and analyzes laboratory,
pharmaceutical and other data to help large health care customers better manage the health
of their patients. QuestNet is an innovative new product offering that provides network
management services to large buyers of health care services. Additional information about
the company is available 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 1998
Form 10-K and subsequent filings.
QuestNetâ is a registered trademark of Quest Diagnostics
Incorporated.
-- Table follows --
Quest Diagnostics Incorporated and Subsidiaries
Consolidated Statements of Operations
For the Three and Six Months Ended June 30, 1999 and 1998
(in millions, except per share data)
|
Three Months
Ended June 30 |
|
Six Months
Ended June 30 |
|
1999 |
1998 |
|
1999 |
1998 |
|
|
|
|
|
|
Net revenues |
$ 394.0 |
$ 366.7 |
|
$ 775.9 |
$ 734.6 |
|
|
|
|
|
|
Costs and expenses: |
|
|
|
|
|
Cost of services |
225.7 |
217.8 |
|
452.7 |
435.8 |
Selling, general and
administrative |
131.6 |
116.1 |
|
258.6 |
236.6 |
Interest expense, net |
5.0 |
9.0 |
|
12.4 |
18.1 |
Amortization of intangible assets |
5.2 |
5.4 |
|
10.3 |
10.8 |
Other, net |
2.0 |
0.2 |
|
3.4 |
1.4 |
Total
|
369.5 |
348.5 |
|
737.4 |
702.7 |
Income before taxes |
24.5 |
18.2 |
|
38.5 |
31.9 |
Income tax expense |
11.4 |
9.3 |
|
18.0 |
16.4 |
|
|
|
|
|
|
Net income |
$ 13.1 |
$ 8.9 |
|
$ 20.5 |
$ 15.5 |
|
|
|
|
|
|
Basic net income per common share
|
$ 0.44 |
$ 0.30 |
|
$ 0.69 |
$ 0.52 |
|
|
|
|
|
|
Diluted net income per common share
|
$ 0.43 |
$ 0.29 |
|
$ 0.67 |
$ 0.51 |
|
|
|
|
|
|
Weighted average common shares outstanding
basic |
29.9 |
29.8 |
|
29.8 |
29.7 |
Weighted average common shares outstanding
diluted |
30.7 |
30.6 |
|
30.5 |
30.3 |
|
|
|
|
|
|
Notes to consolidated statements of operations:
- Net income per common share is computed by dividing net income less dividends on
preferred stock (approximately $30 thousand per quarter) by the weighted average number of
common shares outstanding. Potentially dilutive common shares primarily represent stock
options.
- Depreciation expense totaled $11.4 million and $11.8 million for the three months ended
June 30, 1999 and 1998, respectively, and $22.8 million and $23.8 million for the six
months ended June 30, 1999 and 1998, respectively.
- Net income for the six months ended June 30, 1998 includes a $2.5 million charge ($1.2
million, net of tax, or $0.04 per basic and diluted share) included in selling, general
and administrative expenses related to the Companys consolidation of its laboratory
network which was announced in December 1997.
- Net income for the three and six months ended June 30, 1999 includes $1.9 million of
interest ($1.2 million, net of tax or $0.04 per basic and diluted share) associated with a
favorable tax settlement.
- Results for the three and six months ended June 30, 1999 include the effects of
QuestNet, the companys laboratory network management service. As laboratory network
manager, Quest Diagnostics includes in its consolidated revenues and expenses the cost of
testing performed by third parties. This accounting requirement added $15.4 million and
$32.8 million to reported revenues and expenses for the three and six months ended June
30, 1999, respectively.
Quest Diagnostics Incorporated and Subsidiaries
Selected Balance Sheet Information
June 30, 1999 and December 31, 1998
(in millions)
|
June 30,
1999 |
December
31,
1998 |
Assets |
|
|
|
|
|
Cash and cash equivalents |
$ 148 |
$ 203 |
Accounts receivable, net of allowance of $69
and $71
at June 30, 1999 and December 31, 1998, respectively |
225 |
221 |
Other assets |
940 |
936 |
|
|
|
Total assets |
$ 1,313 |
$ 1,360 |
|
|
|
|
|
|
Liabilities and Stockholders Equity |
|
|
|
|
|
Short-term debt |
$ 61 |
$ 51 |
Long-term debt |
338 |
413 |
Other liabilities |
317 |
329 |
Common stockholders equity |
597 |
567 |
|
|
|
Total liabilities and stockholders
equity |
$ 1,313 |
$ 1,360 |
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