Quest Diagnostics is cutting pay and benefits for executives, furloughing employees and renegotiating credit terms with its lenders as the national lab tries to stymie losses from the Covid-19 pandemic, even as it expands into much-needed antibody testing.
A surge in coronavirus testing during the last few weeks of the first quarter wasn't enough to offset a decline in all other types of laboratory tests as physicians canceled nonessential medical procedures, helping to drive an almost 40% drop in profit to $99 million, down from $164 million during the same three months the year before.
To rein in spending, the New Jersey-based diagnostics lab — one of several major U.S. private labs manufacturing a diagnostic test for Covid-19 — is suspending certain employee benefits, slashing work hours and furloughing employees. The company is maintaining its quarterly dividend but it drew $200 million in backup financing from its credit lines in April.
Shares of Quest jumped more than 5% in midday trading, but the stock is down by about 8% since Jan. 1.
As states across the U.S. started closing nonessential businesses and ordering residents to stay indoors, Quest's testing volume plunged 40% during the last two weeks of March, even with the additional Covid-19 testing, CEO Steve Rusckowski said in a statement.
The company's revenue and earnings both beat analysts' expectations. Revenue dropped 3.7% in the quarter to $1.8 billion. On an adjusted basis, which excludes restructuring charges and other items, Quest reported earnings of 94 cents per share.
Quest said it is taking steps to ensure strong financing as it weathers the Covid-19 crisis. Quest is currently negotiating with its lead lender to amend certain financial covenants of its revolving credit facility, the company said. Earlier this month, Quest borrowed $100 million from its revolver capacity of $750 million, the company said.
The company also said it borrowed $100 million in April from its secured receivables credit facility with a capacity of $529 million.
"The temporary actions we are taking, combined with our cash position and access to additional capital, put us in a strong financial position to operate in a range of scenarios as we navigate the Covid-19 crisis," Rusckowski said. "Eventually, the healthcare system will start to return to normal. When that happens, Quest will emerge from the crisis stronger with significant opportunities in front of us."
Quest, alongside LabCorp, Roche and others, is working to ramp up testing for Covid-19, which officials say is crucial to eventually reopening the American economy. Quest said it has performed about one million "molecular tests" and has begun to perform blood-based antibody testing.
"We believe antibody testing will become a critical tool to understand who has been exposed to the virus and who may have immunity," Rusckowski said. "Quest has been at the tip of the spear in responding to this crisis, and we continue to play a critical role in the next phase of containing COVID-19."