Second quarter revenues of $932 million grew 8% over last year, when adjusted
for the prior-year gross-up of revenues and expenses associated with the
company's network management business. Second quarter revenues grew more than 6%
from the reported prior-year level. Revenue per requisition increased 8%
compared to the prior year. Clinical testing volume, measured by the number of
requisitions, increased 1.6% over the prior year period, after adjusting for
business contributed to unconsolidated joint ventures, which reduced volume by
approximately 1.4%. As a result, reported volume during the second quarter was
slightly ahead of the prior year's level.
"Our strong performance in the quarter was driven by revenue growth and reduced
borrowing costs," said Kenneth W. Freeman, Chairman and Chief Executive Officer.
"We now expect full year earnings per share before special items to grow at
least 60% from last year to between $1.85 and $1.90 on reported revenue growth
of 6% to 8%."
Earnings before interest, taxes, depreciation, amortization and special items
(adjusted EBITDA), were $149 million, or 16% of revenues, compared to $128
million, or 14.6% of revenues, for the prior year period. The increase in
adjusted EBITDA was due to the company's revenue growth and the continued
realization of synergies associated with the integration of SmithKline Beecham
Clinical Laboratories.
Bad debt expense improved to 6% compared to 7.1% a year ago and 6.3% in the
first quarter of 2001. For the quarter, days sales outstanding were 51 days,
unchanged from the end of the first quarter. The company ended the quarter with
$174 million in cash and no borrowings outstanding under its new $325 million
revolving credit facility. Net interest expense for the quarter was reduced to
$20.5 million from $30.2 million a year ago. Capital expenditures totaled $35
million for the quarter.
For the first half of 2001, income before special items increased to $86.5
million from $49.2 million for the prior year. Diluted earnings per share before
special items were $0.89, compared to $0.53 for the prior year. After the
extraordinary loss and special charge recorded in the second quarter of 2001,
the company recorded net income of $0.63 per diluted share for the first half.
Revenues increased to $1.8 billion compared to $1.7 billion in 2000. Adjusted
EBITDA was $271 million, compared to $227 million a year ago. Capital
expenditures were $78 million.
Quest Diagnostics will discuss financial results for the second quarter during a
conference call on July 24 at 8:00 A.M. Eastern Time. To hear a simulcast of the
call over the Internet, or a replay, registered analysts may access StreetEvents
at: http://www.streetevents.com and all others may access the Quest Diagnostics
website at: http://www.questdiagnostics.com. In addition, a replay of the call
will also be available from 10 A.M. on July 24 through 5 P.M. on July 25 to
investors in the U.S. by dialing 800-839-1104. Investors outside the U.S. may
dial 402-998-1695. No password is required for either number.
Quest Diagnostics is the nation's leading provider of diagnostic testing,
information and services with annual revenues of $3.4 billion in 2000. The
company's diagnostic testing yields information that enables health care
professionals and consumers to make better decisions to improve health. Quest
Diagnostics offers patients and physicians the broadest access to diagnostic
testing services through its national network of approximately 30 full-service
laboratories, 150 rapid response laboratories and more than 1,300 patient
service centers, where specimens are collected. Quest Diagnostics is the leading
provider of esoteric testing, including gene-based testing, and is the leader in
routine medical testing, drugs of abuse testing, and non-hospital- based
anatomic pathology testing. Through partnerships with pharmaceutical,
biotechnology and information technology companies, Quest Diagnostics provides
support to help speed the development of health care insights and new
therapeutics. Additional company information can be found on the Internet at:
http://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 described in the Quest
Diagnostics Incorporated 2000 Form 10-K and subsequent filings.
Quest Diagnostics Incorporated and Subsidiaries
Consolidated Statements of Operations
For the Three and Six Months Ended June 30, 2001 and 2000
(in millions, except per share data)
Three Months Ended June 30, Six Months Ended June 30,
2001 2000 2001 2000
Net revenues $931.5 $877.1 $1,814.1 $1,734.6
Costs and expenses:
Cost of services 549.4 520.5 1,078.5 1,049.5
Selling, general and
administrative 256.5 252.9 509.3 502.7
Interest expense, net 20.5 30.2 43.2 60.0
Amortization of
intangible assets 12.1 12.0 23.2 23.9
Provision for special
charges 6.0 2.1 6.0 2.1
Minority share of income 2.8 3.3 3.9 5.4
Other, net (1.5) (2.1) (1.1) (2.4)
Total 845.8 818.9 1,663.0 1,641.2
Income before taxes
and extraordinary loss 85.7 58.2 151.1 93.4
Income tax expense 38.6 28.0 68.3 45.4
Income before
extraordinary loss 47.1 30.2 82.8 48.0
Extraordinary loss,
net of taxes (21.6) -- (21.6) --
Net income $25.5 $30.2 $61.2 $48.0
Income before
extraordinary loss
and special charges $50.7 $31.4 $86.5 $49.2
Basic net income
per common share:
Income before
extraordinary loss $0.51 $0.34 $0.90 $0.54
Net income $0.28 $0.34 $0.66 $0.54
Income before
extraordinary loss
and special charges $0.55 $0.35 $0.94 $0.55
Diluted net income
per common share:
Income before
extraordinary loss $0.48 $0.32 $0.85 $0.52
Net income $0.26 $0.32 $0.63 $0.52
Income before
extraordinary loss
and special charges $0.52 $0.33 $0.89 $0.53
Cash earnings
per diluted share $0.63 $0.45 $1.10 $0.77
Weighted average
common shares
outstanding - basic 92.6 89.2 92.2 88.7
Weighted average common
shares outstanding
- diluted 97.3 94.0 97.0 92.6
Adjusted EBITDA $148.8 $127.8 $271.2 $227.4
Quest Diagnostics Incorporated and Subsidiaries
Consolidated Balance Sheet Information
June 30, 2001 and December 31, 2000
(in millions)
June 30, December 31,
2001 2000
Assets
Cash and cash equivalents $174.2 $171.5
Accounts receivable, net 520.9 485.6
Intangible assets, net 1,293.5 1,261.6
Other assets 909.8 945.8
Total assets $2,898.4 $2,864.5
Liabilities and Stockholders' Equity
Short-term debt $287.7 $265.4
Long-term debt 726.7 760.7
Other liabilities 724.1 807.6
Common stockholders' equity 1,159.9 1,030.8
Total liabilities and stockholders' equity $2,898.4 $2,864.5
Notes to Financial Tables
1) Results for 2000 included the effects of testing performed by third
parties under the Company's laboratory network management
arrangements. As laboratory network manager, Quest Diagnostics
included in its consolidated revenues and expenses the cost of testing
performed by third parties. This treatment added $14.4 million and
$46.8 million to both reported revenues and cost of services for the
three and six months ended June 30, 2000, respectively. This
treatment also served to increase cost of services as a percentage of
net revenues and decrease selling, general and administrative expenses
as a percentage of net revenues.
2) During the second quarter of 2001, the Company refinanced the majority
of its indebtedness. The extraordinary loss of $36.0 million
($21.6 million, net of tax), represents the write-off of deferred
financing costs, and tender premiums paid in connection with
extinguishing the debt that was refinanced.
3) In conjunction with the Company's debt refinancing during the second
quarter of 2001, the Company recorded a special charge of $6.0 million
($3.6 million, net of tax) representing the costs to settle interest
rate swap agreements on its debt which was refinanced. During the
second quarter of 2000, the Company recorded a net special charge of
$2.1 million ($1.3 million, net of tax). Of the special charge,
$13.4 million represented the costs to cancel certain contracts that
management believed were not economically viable as a result of the
SBCL acquisition. These costs were principally associated with the
cancellation of a co-marketing agreement for clinical trials testing
services. These charges were partially offset by a reduction in
reserves attributable to a favorable resolution of outstanding claims
for reimbursements associated with billings of certain tests.
4) Depreciation expense totaled $24.5 million and $22.2 million for the
three months ended June 30, 2001 and 2000, respectively and
$47.7 million and $43.5 million for the six months ended June 30, 2001
and 2000, respectively.
5) On May 8, 2001, the Company announced a two-for-one stock split
effected by the issuance on May 31, 2001 of a stock dividend of one
new share of common stock for each share of common stock held by
stockholders of record on May 16, 2001. All references to shares and
per share data have been restated to reflect the stock split for all
periods presented.
6) 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.
7) Cash earnings per common share is calculated as cash earnings less
preferred dividends, divided by the diluted weighted average common
shares outstanding. Cash earnings represents income before
extraordinary loss, special charges and amortization of all intangible
assets, net of applicable taxes.
8) Adjusted EBITDA represents income before extraordinary loss, special
charges, income taxes, net interest expense, depreciation and
amortization. Adjusted EBITDA for 2000 also excludes $3.1 million and
$4.5 million, respectively, of costs associated with the SBCL
integration plan which were included in operating costs and expensed
as incurred during the three and six months ended June 30, 2000.
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