Quest Diagnostics 1999 Annual Report Download - page 3

During 1999 we established Quest Diagnostics as the nation’s clear industry leader
in diagnostic testing.
Through the acquisition of SmithKline Beecham Clinical Laboratories (SBCL), we
took a major step to enhance our leadership position and growth prospects for the
future. Building upon our solid performance in 1999, we begin the new century with
powerful momentum and aggressive plans for expanding our core business and
developing new growth opportunities.
Performance Summary
In 1999, net income excluding special items increased to $41.2 million, or $1.15
per diluted share, on revenues of $2.2 billion, compared to 1998 net income of $26.9
million, or $0.89 per diluted share, on revenues of $1.5 billion. After special items
principally associated with the acquisition of SBCL, the company reported a net loss of
$3.4 million, or $0.10 per diluted share.
As anticipated, 1999 was a year in which we started to record improvement in all of our
key operating metrics. We showed modest revenue growth, increased operating margins
and continued to generate substantial cash flow. Between the completion of the SBCL
transaction in August and the end of the year, strong cash generation enabled us to
repay more than $100 million in acquisition-related debt.
Many year-over-year comparisons are complicated by accounting items related
to the acquisition. However, when we compare the 1999 base business results with the
prior year, the improvement is dramatic.
Our Strategy for Success
Looking ahead, we have embarked upon a three-phase business strategy. First, we
intend to capitalize on our position in diagnostic testing. By any measure, we stand
today as the leader in our core business. We are the only truly national provider of
clinical testing services, serving all of the nation’s 50 largest metropolitan areas. We
have the leading market share in clinical laboratory testing, anatomic pathology testing,
esoteric testing, and testing for drugs of abuse, and we are building a strong position in
clinical trials testing and medical information.
We see substantial opportunities for growth in our core business. Although we are the
market leader, our share is only 8% of the total U.S. market. By providing unsurpassed
quality, service and value, we believe we can capture increased market share.
CHAIRMAN’S LETTER
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