Quest Diagnostics 2000 Annual Report Download - page 69

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49
Adjusted EBITDA
Adjusted EBITDA represents income (loss) before extraordinary loss, income taxes, net interest expense,
depreciation, amortization and special items. For the year ended December 31, 2000, special items included the special
charges reflected on the face of the historical statement of operations and $8.9 million of costs related to the integration
of SBCL which were included in operating expenses and expensed as incurred in 2000. For the year ended December 31,
1999, special items included the provisions for restructuring and other special charges reflected on the face of the pro
forma combined statement of operations, a $9.7 million gain recognized by SBCL on the sale of its physician office-
based teleprinter assets and network during the first quarter of 1999, a $3.0 million gain related to the sale of an
investment in the fourth quarter of 1999 and $46.6 million of discrete expense items, which are discussed above.
Adjusted EBITDA is presented and discussed because management believes that Adjusted EBITDA is a useful adjunct to
net income and other measurements under accounting principles generally accepted in the United States since it is a
meaningful measure of a company’s performance and ability to meet its future debt service requirements, fund capital
expenditures and meet working capital requirements. Adjusted EBITDA is not a measure of financial performance under
accounting principles generally accepted in the United States and should not be considered as an alternative to (i) net
income (or any other measure of performance under accounting principles generally accepted in the United States) as a
measure of performance or (ii) cash flows from operating, investing or financing activities as an indicator of cash flows
or as a measure of liquidity.
Adjusted EBITDA for the year ended December 31, 2000 improved to $459.4 million, or 13.4% of net revenues,
compared to pro forma Adjusted EBITDA of $337.4 million, or 10.9% of net revenues, excluding the impact of the
testing performed by third parties under our laboratory network management arrangements and the loss contract, in the
prior year period. The increase in Adjusted EBITDA was primarily related to improvements in the operating
performance of the Company.