Quest Diagnostics 1997 Annual Report Download - page 4

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Our advances came against the background of an industry in turmoil. Faster than anyone
predicted, powerful trends are transforming the laboratory testing business. Ongoing
consolidation throughout the health care industry is leading thousands of physicians Ñ the
traditional bedrock of our customer base Ñ to sell their practices to hospitals and health networks
eager to take on their lab work. Simultaneously, more restrictive government regulations
regarding requisitions and reimbursements are pressuring health care providers to further reduce
test utilization. The result has been intensified competition for declining volume.
Despite these challenges, including a 7.3% decline in testing volume, we had stable operating
earnings. Indeed, in the fourth quarter, excluding special charges, we achieved year-over-year
operations improvement for the first time in two years. Perhaps even more critically, we generated
more than $175 million in cash from operations during 1997 as a result of our renewed focus on
managing the fundamentals of the business.
Our progress in this fluid environment flows from an unwavering commitment to our vision and
strategic objectives. That commitment is played out each day by Quest DiagnosticsÕ employees,
people who understand that everything they do directly influences critical health care decisions
involving millions of patients across the country. Our employees are dedicated to providing
outstanding value for all of our customers: millions of patients, tens of thousands of physicians, and
thousands of other health care providers and payors. We firmly believe that satisfied employees
play an essential role in developing and sustaining satisfied customers, and that in the end, satisfied
customers yield satisfied shareholders.
Performance Summary
Quest Diagnostics reported a loss of $22.3 million for the fiscal year ending December 31, 1997.
However, excluding the impact of special consolidation-related charges, we had net income of
$17.6 million and earnings per share of $0.60 in 1997 on revenues of $1.5 billion. Along with the
year-over-year operations improvement, there were other key indicators of our continuing
turnaround:
CHAIRMANÕS LETTER
For Quest Diagnostics, 1997 marked another step forward in our continuing turnaround.
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