Quest Diagnostics 1996 Annual Report Download - page 3

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immunoassay, cytogenetics and mole-
cular diagnostic testing.
With annual revenues of just over
$1.6 billion, we are a leader in the
independent laboratory testing indus-
try. As we go about solidifying our
leadership, we remain committed to
the proposition that the patient
comes first in everything we do. We
carefully chose the name “Quest
Diagnostics” to signify our dedication
to the continuing pursuit of unex-
celled quality in our core testing and
our relentless search for new knowl-
edge and medical insights. Our new
name is closely linked with a new set
of values to which our people aspire:
Quality, Integrity, Innovation,
Accountability, Collaboration, and
Leadership.
The Spin-Off
In a business environment increasing-
ly marked by tougher competition
and intense price pressure from gov-
ernment agencies and managed care
systems, the spin-off from Corning
offers the twin benefits of focus and
flexibility. As an independent compa-
ny operating in a turbulent industry,
management is now in a stronger
position to act swiftly and aggressively
to meet the challenges and seize
upon new opportunities.
Throughout the spin-off process,
Corning lived up to its promise to
launch our new company on solid
financial footing. Corning, in
essence, forgave more than $700 mil-
lion of debt attributable to the labora-
tory testing business. We worked
Last year at this time, we were
Corning Clinical Laboratories and
Corning Nichols Institute, units of
Corning Incorporated’s health ser-
vices businesses. In the spring of
1996, Corning’s Board of Directors
decided to spin off our business and
our sister operation, Corning
Pharmaceutical Services, which has
been renamed Covance Inc., as two
separate, completely independent
publicly-owned companies. We select-
ed our new name: Quest Diagnostics
Incorporated and each Corning
shareholder received one share of
Quest Diagnostics for every eight
shares of Corning stock.
Today, Quest Diagnostics encompass-
es almost 18,000 employee-owners
who, in the words of our corporate
vision, are “Dedicated people improv-
ing the health of patients through
unsurpassed diagnostic insights.” Last
year we processed approximately 60
million requests from more than
75,000 customers for testing and
analysis of human fluids and tissues.
Quest Diagnostics covers the entire
gamut of laboratory testing, all the
way from the bedside to highly eso-
teric specialized testing. At our 17
regional laboratories and 14 branch
facilities across the U.S., the bulk of
our activity is “routine” testing,
including blood counts, Pap smears,
pregnancy testing, cholesterol levels,
AIDS-related tests, and substance
abuse testing. In addition, our
Nichols Institute is a leading provider
of more complex “esoteric” testing,
serving nearly a third of the nation’s
hospitals, performing comprehensive
together to reach agreement with the
Department of Justice to settle out-
standing charges relating to the busi-
ness practices of Damon Corporation
that predated Corning’s acquisition of
Damon in 1993. The charges were
settled for $119 million, for which we
were fully reimbursed by Corning.
We made great progress in resolving
outstanding government legal issues
prior to the spin-off, and Corning is
committed to reimburse us for any
settlement costs arising from the few
outstanding identified governmental
issues that remain.
In the course of the spin-off, our com-
pany also took a $445 million write-
down for goodwill, an accounting
adjustment to value our laboratory
assets at estimated fair market value
rather than their amortized acquisi-
tion price. This special charge has no
impact on the company’s cash posi-
tion or our overall financial strength.
1996 In Review
The past year was one of dramatic
changes and significant progress.
After nearly a decade of unabated
growth, the company experienced a
period of near free-fall in 1994 and
1995. In 1996, we moved to stabilize
the business. The decline has slowed,
and we have stabilized; now at the
midpoint of our turnaround, our goal
is to increase profitability in the face
of intense market pressure.
We froze acquisition activity.
Following a period in which the com-
pany had nearly doubled its size, we