Filed by: Quest Diagnostics Incorporated
This communication is filed pursuant to Rules 165 and 425
promulgated under the Securities Act of 1933, as amended.
Subject Company: Unilab Corporation
Commission File No.: 0-22758
FORWARD-LOOKING STATEMENTS:
This communication contains certain forward-looking statements under the Private
Securities Litigation Reform Act of 1995. These forward-looking statements,
which may include, but are not limited to, statements concerning the financial
condition, results of operations and businesses of Quest Diagnostics and Unilab
and the benefits expected to result from the contemplated transaction, are based
on management's current expectations and estimates and involve risks and
uncertainties that could cause actual results or outcomes to differ materially
from those contemplated by the forward-looking statements.
Factors that could cause or contribute to such differences may include, but are
not limited to, the risk that the conditions relating to the required minimum
tender of Unilab shares or regulatory clearance might not be satisfied in a
timely manner or at all, risks relating to the integration of the technologies
and businesses of Quest Diagnostics and Unilab, unanticipated expenditures,
changing relationships with customers, suppliers and strategic partners,
conditions of the economy and other factors described in the most recent reports
on Form 10-Q, most recent reports on Form 10-K and other periodic reports filed
by Quest Diagnostics and Unilab with the Securities and Exchange Commission.
ADDITIONAL INFORMATION:
Quest Diagnostics intends to file a Registration Statement on Form S-4 and a
Schedule TO, and Unilab plans to file a Solicitation/Recommendation Statement on
Schedule 14D-9, with the Securities and Exchange Commission in connection with
the transaction. Quest Diagnostics and Unilab expect to mail a Prospectus, which
is part of the Registration Statement on Form S-4, the
Solicitation/Recommendation Statement on Schedule 14D-9 and related exchange
offer materials, including a letter of election and transmittal, to stockholders
of Unilab upon commencement of the exchange offer.
In addition, Quest Diagnostics intends to file a Statement on Schedule 13D
relating to its agreement with Kelso Investment Associates VI, L.P. and KEP VI,
LLC. Investors and stockholders of Unilab are urged to read all of these
documents carefully when they are available. These documents contain important
information about the transaction and should be read before any decision is made
with respect to the exchange offer. Investors and stockholders will be able to
obtain free copies of these documents through the website maintained by the
Securities and Exchange Commission at www.sec.gov. Free copies of these
documents may also be obtained from Quest Diagnostics, by directing a request to
Quest Diagnostics Incorporated at 1 Malcolm Avenue, Teterboro, NJ 07608, or from
Unilab, by directing a request to Unilab Corporation at 18448 Oxnard Street,
Tarzana, CA 91356.
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In addition to the Registration Statement on Form S-4,
Schedule TO, Prospectus, Solicitation/Recommendation Statement on Schedule 14D-9
and related exchange offer materials, both Quest Diagnostics and Unilab file
annual, quarterly and special reports, proxy Statements and other information
with the Securities and Exchange Commission. You may read and copy any reports,
Statements or other information filed by Quest Diagnostics or Unilab at the SEC
public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549 or at
any of the Securities and Exchange Commission's other public reference rooms in
New York, New York and Chicago, Illinois. Please call the Securities and
Exchange Commission at 800-SEC-0330 for further information on the public
reference rooms. Quest Diagnostics' and Unilab's filings with the Securities and
Exchange Commission are also available to the public from commercial
document-retrieval services and at the website maintained by the Securities and
Exchange Commission at www.sec.gov.
UNILAB SPECIAL INVESTOR CALL
TUESDAY, April 2, 2002, 9:00 AM EST
888-769-9404 PASSWORD: INVESTOR
Conference operator: Welcome to the Quest Diagnostics investor conference call.
At the request of the company, this call is being recorded. The entire contents
of this call, including the presentation and question and answer session that
will follow, are the copyrighted property of Quest Diagnostics, with all rights
reserved. Any redistribution, retransmission or rebroadcast of this call in any
form without the express written consent of Quest Diagnostics is strictly
prohibited. Now I'd like to introduce Cathy Doherty, vice president of
communications and public affairs, for Quest Diagnostics. Go ahead, please.
Cathy Doherty: Thank you for joining us. I am here with Ken Freeman, chairman
and chief executive officer of Quest Diagnostics. We are also joined by Bob
Hagemann, our chief financial officer. Bob Whalen, Unilab's CEO, joins us by
telephone from California. Ken Freeman will make a few brief remarks on our news
so that we can get right to your questions.
We are currently in a quiet period and will not be commenting today on financial
results for the first quarter until we release earnings on April 18. At that
time we will also provide updated guidance.
Some of our commentary and answers to questions may contain forward-looking
statements that are based on current expectations. Actual results could be
materially different from our expectations due to factors that are detailed in
our Year 2001 10-K and subsequent filings, as well as from unanticipated events.
Now, here is Ken Freeman.
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Ken Freeman: Thank you, Cathy.
Early this morning, we took another exciting step to accelerate profitable
growth by announcing a definitive agreement to acquire Unilab Corporation in a
transaction valued at 1.1 billion dollars, including about 200 million dollars
in Unilab debt.
This acquisition will establish Quest Diagnostics as the leading provider of
diagnostic testing in California, the nation's largest market. Customers will
see expanded access to laboratory testing services and greater convenience with
one-stop shopping for all of their diagnostic testing needs. Further
strengthening our distribution network will make us an even more attractive
partner with diagnostic discovery companies. And, we will add seasoned
management talent to our team.
The terms are summarized in this morning's press release, and we will be filing
the merger agreement today as part of a Form 8-K. So I would like to spend the
next few minutes sharing my enthusiasm about this transaction - and how we
expect it to benefit our employees, customers and shareholders.
The benefits to our customers are compelling. Combining our two companies will
significantly enhance customer service in California. Customers will access
diagnostic testing services through a combined network of about 50
rapid-response laboratories and 500 conveniently located patient service
centers, by far the largest in the state. This combination will give Unilab
customers access to innovative technologies and an expanded esoteric testing
menu from our Nichols Institute, based in San Juan Capistrano. Customers will
also have available direct physician-to-physician consultations with the
industry's most extensive network of medical and scientific specialists.
Additionally, physician and hospital customers will benefit from our
state-of-the-art electronic connectivity services.
The transaction creates value for Quest Diagnostics shareholders as well. Unilab
meets our three ground rules for acquisitions--full compliance with the law,
well managed, and accretive to earnings per share during the first year.
o Unilab has a strong regulatory compliance program that is very similar to
our own.
o In addition, Unilab is well managed, with profitability levels among the
highest in the industry.
o Assuming a late-second-quarter close, the transaction will be modestly
accretive to earnings during 2002--approximately 2 to 3 cents per share,
before an anticipated pretax charge related to the transaction of up to 20
million
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dollars, most of which will be cash costs. We anticipate significant
synergies--approximately 30 million dollars on an annualized
basis--following the completion of the integration within two years after
the closing. We see the biggest opportunities for synergies in eliminating
duplicate infrastructure, internalizing esoteric testing, and reducing bad
debt.
This morning, Standard and Poors reaffirmed our rating of Triple B Minus with a
positive outlook and we expect Moody's will also, at a minimum, reaffirm our
rating and outlook.
Now, I'd like to introduce Bob Whalen, who will share his perspective on our
news.
Bob Whalen: Thank you, Ken.
Joining together with Quest Diagnostics is great for Unilab shareholders.
Investors will have the opportunity to become shareholders in the premier
laboratory company in our industry, a company with tremendous growth
opportunities and a strong track record for creating shareholder value. In
addition, Unilab shareholders will have the opportunity to share in the value
created by combining our two companies.
Our customers in California will benefit from expanded access to lab services
throughout the state. In addition, they will have direct access to Nichols
Institute, Quest Diagnostics' world-renowned esoteric testing laboratory and
research and development center. Physician and hospital customers will be able
to consult with nearly 300 M.D.s and Ph.D.s--the most extensive network of
medical and scientific specialists in the industry.
Personally, I am thrilled to be joining a company focused on quality with strong
vision and values and I am excited about leading the combined local operation in
California - a market I am very familiar with. I have led successful
integrations before, and look forward to creating benefits for customers and
value for shareholders.
Ken Freeman: Thanks, Bob.
As you know, we have demonstrated our ability to effectively integrate acquired
companies, and so has Unilab. I am very pleased that Bob will lead the
integration of our California operations and be responsible for our local
California business. Bob is a seasoned laboratory industry executive with a
strong track record of results during his more than 30-year career. We
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will use the proven integration approach that has served us so well through
previous acquisitions.
In this case, while detailed integration planning has not yet started, our
strategy anticipates closing certain facilities to rationalize capacity in
California. As a result, some positions will be eliminated over time, which we
expect to address primarily through normal voluntary attrition, as we have done
in past integrations. And also, as in the past, we will treat all employees with
fairness, dignity and respect, consistent with our values.
Our growth initiatives, focused on Six Sigma quality, genomics and customer
connectivity, coupled with selective acquisitions, are building on a strong
foundation to deliver sustainable long-term profitable growth. Our strategic
growth plan uniquely positions Quest Diagnostics by:
o Broadening our geographic presence;
o Expanding our access and distribution network;
o Enhancing customer service to meet the special needs of hospital and
esoteric testing customers; and
o Accelerating the development of innovative new tests and technologies.
Putting it all together, we remain committed to our financial goals: achieving
sustainable double-digit revenue growth, EBITDA margins in excess of 20% and
continuing to deliver earnings per share growth of at least 30%. The
acquisitions of AML and Unilab provide a clear path to deliver in excess of 30%
earnings per share growth this year and next. They also provide additional fuel
as we drive to deliver outstanding returns for our shareholders well into the
future.
We are excited about the opportunities this transaction creates.
Now, let's open up the call for your questions.
Operator?
AFTER QUESTIONS STOP, OPERATOR:
Operator: Thank you for participating in the Quest Diagnostics investor
conference call. Investors in the U.S. may listen to a replay of this call by
dialing 800-925-2388. The replay will open today at 11 a.m. Eastern Time and
will continue until through 5 P.M. on May 17. Investors outside the U.S. may
dial 402-220-4111. No password is required for either number. In addition,
registered analysts may access an on-line replay of the call through
StreetEvents at www.streetevents.com. The call
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will also be available to the media and individual investors at
www.questdiagnostics.com. The on-line replay will be available 24 hours a day,
beginning at noon.
Goodbye.
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