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<CONFORMED-NAME>QUEST DIAGNOSTICS INC
<CIK>0001022079
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<STATE-OF-INCORPORATION>DE
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<STREET1>ONE MALCOLM AVE
<CITY>TETERBORO
<STATE>NJ
<ZIP>07608
<PHONE>2013935000
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<STREET1>ONE MALCOLM AVE
<CITY>TETERBORO
<STATE>NJ
<ZIP>07601
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<FORMER-CONFORMED-NAME>CORNING CLINICAL LABORATORIES INC
<DATE-CHANGED>19960903
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<FILENAME>y41662e8-k.txt
<DESCRIPTION>QUEST DIAGNOSTICS
<TEXT>

<PAGE>   1

                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

--------------------------------------------------------------------------------

                                    FORM 8-K


                CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF
                       THE SECURITIES EXCHANGE ACT OF 1934


       Date of Report (Date of Earliest Event Reported): October 11, 2000


                         Commission file number 1-12215


                         QUEST DIAGNOSTICS INCORPORATED
                               One Malcolm Avenue
                               Teterboro, NJ 07608
                                  (201)393-5000


                                    DELAWARE
                            (State of Incorporation)


                                   16-1387862
                     (I.R.S. Employer Identification Number)


<PAGE>   2
         On August 16, 1999, Quest Diagnostics Incorporated (the "Company" or
"Quest Diagnostics") completed the acquisition of the clinical laboratory
business of SmithKline Beecham plc ("SmithKline Beecham") for approximately $1.3
billion. The acquisition of SmithKline Beecham Clinical Laboratories, Inc. and
certain related affiliates ("SBCL") was accounted for under the purchase method
of accounting.

         The SBCL acquisition agreements included a provision for a reduction in
the purchase price paid by Quest Diagnostics in the event that the combined
balance sheet of SBCL indicated that the net assets acquired, as of the
acquisition date, were below a prescribed level. Adjustments to the August 16,
1999 combined balance sheet of SBCL, which were subject to resolution as set
forth in the SBCL acquisition agreements and were the subject of on-going
discussions between the parties, had already been reflected by the Company in
the previously reported pro forma combined financial information to the extent
management believed that they were applicable. On October 11, 2000, the purchase
price adjustment was finalized with the result that SmithKline Beecham owed
Quest Diagnostics $98.6 million. This amount was offset by $3.6 million
separately owed by Quest Diagnostics to SmithKline Beecham, resulting in a net
payment to the Company by SmithKline Beecham of $95.0 million. This payment from
SmithKline Beecham will be recorded in the Company's historical financial
statements in the fourth quarter of 2000 as a reduction in the purchase price of
the SBCL acquisition.

         In addition to the purchase price reduction described above, the
purchase price allocation relating to the SBCL acquisition was completed in
conjunction with the preparation of the Company's quarterly report on Form 10-Q
for the fiscal quarter ended September 30, 2000. None of the adjustments,
resulting from the purchase price reduction or the completion of the purchase
price allocation, will have any impact on the Company's previously reported
historical financial statements.

         In conjunction with finalizing the SBCL purchase price adjustment,
SmithKline Beecham restated the following financial statements of SBCL as of and
for the periods indicated:

         -    The combined financial statements of SBCL as of December 31,
              1998 and 1997 and for the three years ended December 31, 1998,
              1997 and 1996.

         -    The unaudited interim combined balance sheet of SBCL as of June
              30, 1999 and the related unaudited interim combined statements of
              operations, cash flows and changes in parent's equity for the
              three and six months ended June 30, 1999 and June 25, 1998.

         The restated historical financial statements of SBCL are included in
Item 7. a. below.

         In addition, Quest Diagnostics has filed this Form 8-K to amend the pro
forma combined financial information previously reported by the Company (1) to
reflect the restated historical financial statements of SBCL prepared in
conjunction with finalizing the purchase price adjustment provided for in the
SBCL acquisition agreements, (2) to reflect the reduction in the purchase price
of the SBCL acquisition, (3) to reflect the completion of the purchase price
allocation, and (4) to revise other adjustments that had been reflected in the
previously reported pro forma combined financial information. The amendment has
no impact on any of the previously reported historical financial statements of
Quest Diagnostics, either before or after the acquisition. The restated
unaudited pro forma combined balance sheet of the Company as of June 30, 1999
and the unaudited pro forma combined statements of operations of the Company for
the three and six months ended June 30, 1999 and the year ended December 31,
1998 are included in Item 7. b. below.

         In addition, on October 11, 2000, the Company and SmithKline Beecham
agreed to terminate the Category Three Laboratory Data Access Agreement and the
related Participation Agreement that were entered into on August 16, 1999. The
Category One Laboratory Data Access Agreement remains in effect.

ITEM 5.  PRO FORMA COMPARISONS

         This Form 8-K also revises and updates the discussion of the
supplemental pro forma combined financial information of Quest Diagnostics that
was included in the sections of the following documents previously filed with
the Securities and Exchange Commission:

         -    The Company's Annual Report on Form 10-K for the fiscal year ended
              December 31, 1999 - "Management's Discussion and Analysis of
              Financial Condition and Results of Operations - Pro Forma Combined
              Financial Information";

         -    The Company's Quarterly Report on Form 10-Q for the quarter ended
              March 31, 2000 - "Management's Discussion and Analysis of
              Financial Condition and Results of Operations - Pro Forma
              Comparisons"; and

         -    The Company's Quarterly Report on Form 10-Q for the quarter ended
              June 30, 2000 - "Management's Discussion and Analysis of Financial
              Condition and Results of Operations - Pro Forma Comparisons".

         This Form 8-K has no impact on any of the previously reported
historical financial statements of Quest Diagnostics, either before or after the
acquisition.

         The supplemental pro forma combined financial information included in
the above-referenced documents is not required disclosure under Regulation S-X.
The Company has updated the pro forma combined financial information because
management believes it provides useful information in analyzing the financial
implications of the SBCL acquisition.

RECONCILIATION OF PRO FORMA NET INCOME

         Within the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1999 - "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Pro Forma Combined
<PAGE>   3
Financial Information", the Company included a table containing selected pro
forma combined financial information that the Company presented for illustrative
purposes only to assist in analyzing the financial implications of the SBCL
acquisition. The above referenced table presented pro forma combined statement
of operations data, pro forma basic and diluted earnings per common share data
and pro forma Adjusted EBITDA for each of the quarters ended March 31, 1998
through December 31, 1999.

         The following table reconciles, for each of the quarters ended March
31, 1998 through December 31, 1999, pro forma net income, as previously
reported, to pro forma net income, as restated, (1) to reflect the restated
historical financial statements of SBCL prepared in conjunction with finalizing
the purchase price adjustment provided for in the SBCL acquisition agreements,
as described above, (2) to reflect the reduction in the purchase price of the
SBCL acquisition, (3) to reflect the completion of the purchase price
allocation, and (4) to revise other adjustments that had been reflected in the
previously reported pro forma net income.

                                Reconciliation of
                    Pro Forma Combined Financial Information
                                 (IN THOUSANDS)
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                                QUARTER ENDED
                              ------------------------------------------------------------------------------------------------
                              MARCH 31,    JUNE 30,    SEPT. 30,   DEC. 31,    MARCH 31,    JUNE 30,    SEPT. 30,    DEC. 31,

                                1998         1998        1998        1998        1999         1999        1999        1999
                              ----------   ----------  ----------  ----------  ----------   ---------   ---------   ----------
<S>                          <C>          <C>         <C>          <C>         <C>         <C>          <C>         <C>
Pro forma net income (loss)
  as previously reported       $13,908      $ 7,911     $10,781     $ 9,943     $ 8,228      $(8,870)    $(12,280)   $(14,536)
                              --------     --------    --------    --------    --------     ---------   ---------   ---------
Reconciling adjustments
  increase (decrease):
Net revenues                       (43)         (43)      2,967      (9,033)         --            --          --          --

Cost of services                    --           --          --          --        (140)         (140)        281          --

Selling, general and
  administrative expenses         (550)        (550)       (550)     (5,171)       (983)       16,434       6,918          --

Interest expense, net               --           --          --          --        167            167        (334)         --

Amortization of intangible
  assets                           423          423         423         423         423           423        (256)         --

Other, net                      (4,274)      (9,656)       (701)       (295)     (9,652)           --          --          --
                              --------     --------    --------    --------    --------     ---------   ---------   ---------

Reconciling adjustments
 before taxes                    4,358        9,740       3,795      (3,990)     10,185       (16,884)     (6,609)         --

Income tax expense (benefit)     1,912        4,065       1,687      (1,427)      4,242        (6,584)     (2,746)         --
                              --------     --------    --------    --------    --------     ---------   ---------   ---------
Reconciling adjustments,
  net of tax                     2,446        5,675       2,108      (2,563)      5,943       (10,300)     (3,863)         --
                              --------     --------    --------    --------    --------     ---------   ---------   ---------

Pro forma net income
  (loss),  restated            $16,354      $13,586     $12,889     $ 7,380     $14,171      $(19,170)   $(16,143)   $(14,536)
                              ========      =======     =======     =======     =======      ========    ========    ========
</TABLE>



         The quarterly reconciling adjustments presented consist primarily of
adjustments to previously reported pro forma bad debt expense (included in
selling, general and administrative expenses), gains on the sale and license of
certain technology and assets (included in other, net), net revenues and
amortization of intangible assets, net of applicable taxes.

         The adjustments to selling, general and administrative expenses are
primarily related to bad debt charges to properly reflect the recoverability of
SBCL receivables during various periods prior to the closing of the SBCL
acquisition. The adjustments to net revenues are primarily related to revisions
for sales price adjustments. The adjustments to other, net represent gains
recognized by SBCL on the sale and license of certain technology and its
physician office-based teleprinter assets and network. As part of the
consideration for these transactions, SBCL received an ownership interest in the
buyer. This ownership interest was transferred by SBCL to SmithKline Beecham
prior to the closing of the acquisition, pursuant to the SBCL acquisition
agreements. Since SBCL did not retain the ownership interest and as a result of
management's belief that the gains were of a non-recurring nature, Quest
Diagnostics included a pro forma adjustment in its previously filed pro forma
combined financial statements to remove these gains from pro forma net income
(loss). Adjustments of this nature are excluded from the scope of the typical
pro forma adjustments acceptable under Article 11 of Regulation S-X which
provides guidance regarding the preparation and presentation of pro forma
financial statements. As such, in conjunction with revising its pro forma
combined financial information, the Company reversed the previously proposed pro
forma adjustments such that the above referenced gains are included in pro forma
net income, as restated. The adjustments to amortization of intangible assets
(which is not deductible for tax purposes) reflect the impact of (1) the SBCL
purchase price reduction and (2) revisions to the preliminary allocation of the
SBCL purchase price, primarily related to deferred tax assets acquired.
<PAGE>   4
None of the adjustments, resulting from the purchase price reduction or the
completion of the purchase price allocation, will have any impact on the
Company's previously reported historical financial statements. Additionally, the
adjustments outlined above, not previously considered in determining pro forma
Adjusted EBITDA, are discrete items which have been excluded in determining
Adjusted EBITDA. Therefore, the pro forma Adjusted EBITDA amounts, previously
reported in the supplemental pro forma combined financial information, remain
unchanged.

As a result of the matters discussed above, Quest Diagnostics hereby revises and
updates the sections of the following documents:

a.   The Company's Annual Report on Form 10-K for the fiscal year ended December
     31 1999 - "Management's Discussion and Analysis of Financial Condition and
     Results of Operations - Pro Forma Combined Financial Information" which is
     included as Exhibit 99.3.

b.   The Company's Quarterly Report on Form 10-Q for the quarter ended March 31,
     2000 - "Management's Discussion and Analysis of Financial Condition and
     Results of Operations - Pro Forma Comparisons" which is included as Exhibit
     99.4.

c.   The Company's Quarterly Report on Form 10-Q for the quarter ended June 30,
     2000 - "Management's Discussion and Analysis of Financial Condition and
     Results of Operations - Pro Forma Comparisons" which is included as Exhibit
     99.5.

ITEM 7. FINANCIAL STATEMENTS AND SCHEDULES

       Quest Diagnostics hereby amends Item 7 of its Current Report on Form 8-K
(Date of Report: August 16, 1999) in its entirety to read as follows:

a.     Financial statements of businesses acquired.

       The combined financial statements of SBCL as of December 31, 1998 and
       1997 and for the three years ended December 31, 1998, 1997 and 1996 are
       included as Exhibit 99.6.

       The unaudited interim combined balance sheet of SBCL as of June 30, 1999
       and the related unaudited interim combined statements of operations, cash
       flows and changes in parent's equity for the three and six months ended
       June 30, 1999 and June 25, 1998 are included as Exhibit 99.7.

b.     Pro forma financial information

       The unaudited pro forma combined balance sheet of the Company as of June
       30, 1999 and the unaudited pro forma combined statements of operations of
       the Company for the three and six months ended June 30, 1999, and the
       year ended December 31, 1998 are included as Exhibit 99.8.

c.     Exhibits.


                                 EXHIBIT INDEX

      EXHIBIT NO.                         DESCRIPTION
      -----------                         -----------

         99.3           The Company's Annual Report on Form 10-K for the fiscal
                        year ended December 31 1999 - "Management's Discussion
                        and Analysis of Financial Condition and Results of
                        Operations - Pro Forma Combined Financial Information"

         99.4           The Company's Quarterly Report on Form 10-Q for the
                        quarter ended March 31, 2000 - "Management's Discussion
                        and Analysis of Financial Condition and Results of
                        Operations - Pro Forma Comparisons"

         99.5           The Company's Quarterly Report on Form 10-Q for the
                        quarter ended June 30, 2000 - "Management's Discussion
                        and Analysis of Financial Condition and Results of
                        Operations - Pro Forma Comparisons"

         99.6           The combined financial statements of SBCL and
                        certain related affiliates as of December 31, 1998 and
                        1997 and for the three years ended December 31, 1998,
                        1997 and 1996.

         99.7           The unaudited interim combined balance sheet
                        of SBCL and certain related affiliates as of June 30,
                        1999 and the related unaudited interim combined
                        statements of operations, cash flows and changes in
                        parent's equity for the three and six months ended June
                        30, 1999 and June 25, 1998.

         99.8           The unaudited pro forma combined balance sheet of the
                        Company as of June 30, 1999 and the unaudited pro forma
                        combined statements of operations of the Company for the
                        three and six months ended June 30, 1999, and the year
                        ended December 31, 1998.

         99.9           Consent of Independent Accountants


     Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.

                                October 30, 2000



                                QUEST DIAGNOSTICS INCORPORATED



                                By:  /s/ ROBERT A. HAGEMANN
                                ------------------------------------------
                                Name:    Robert A. Hagemann
                                Vice President and Chief Financial Officer
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.3
<SEQUENCE>2
<FILENAME>y41662ex99-3.txt
<DESCRIPTION>MD&A 12 31 1999
<TEXT>

<PAGE>   1

                                                                    EXHIBIT 99.3

ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
  -"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
  RESULTS OF OPERATIONS - PRO FORMA COMBINED FINANCIAL INFORMATION"

     The following information revises and updates the supplemental pro forma
combined financial information of Quest Diagnostics included in the Pro Forma
Combined Financial Information section of Management's Discussion and Analysis
of Financial Condition and Results of Operations contained in the Company's Form
10-K for the fiscal year ended December 31, 1999 filed on March 30, 2000.

PRO FORMA COMBINED FINANCIAL INFORMATION

     The pro forma combined financial information for the years ended December
31, 1999 and 1998 assumes that the SBCL acquisition and borrowings under the
Credit Agreement were effected on January 1, 1998. The SBCL acquisition
agreements included a provision for a reduction in the purchase price paid by
Quest Diagnostics in the event that the combined balance sheet of SBCL indicated
that the net assets acquired, as of the acquisition date, were below a
prescribed level. On October 11, 2000, the purchase price adjustment was
finalized with the result that SmithKline Beecham owed Quest Diagnostics $98.6
million. This amount was offset by $3.6 million separately owed by Quest
Diagnostics to SmithKline Beecham, resulting in a net payment by SmithKline
Beecham of $95.0 million. This payment from SmithKline Beecham will be recorded
in the Company's historical financial statements in the fourth quarter of 2000
as a reduction in the purchase price of the SBCL acquisition.

     In addition to the purchase price reduction described above, the purchase
price allocation relating to the SBCL acquisition was completed in conjunction
with the preparation of the Company's quarterly report on Form 10-Q for the
fiscal quarter ended September 30, 2000. None of the adjustments, resulting from
the purchase price reduction or the completion of the purchase price allocation,
will have any impact on the Company's previously reported historical financial
statements.

     The accompanying pro forma combined financial information reflects the
impact of finalizing the SBCL purchase price adjustment and the revised purchase
price allocation relating to the SBCL acquisition.

     The unaudited pro forma combined financial information is presented for
illustrative purposes only to assist in analyzing the financial implications of
the SBCL acquisition and borrowings under the Credit Agreement. The unaudited
pro forma combined financial information may not be indicative of the combined
financial results of operations that would have been realized had Quest
Diagnostics and SBCL been a single entity during the periods presented. In
addition, the unaudited pro forma combined financial information is not
necessarily indicative of the future results that the combined company will
experience.

     Significant pro forma adjustments reflected in the unaudited pro forma
combined financial information include reductions in employee benefit costs and
general corporate overhead allocated to the historical results of SBCL by
SmithKline Beecham, offset by an increase in net interest expense to reflect the
Company's Credit Agreement which was used to finance the SBCL acquisition.
Amortization of goodwill, which accounts for a majority of the acquired
intangible assets, is calculated on the straight-line basis over forty years.
Income taxes have been adjusted for the estimated income tax impact of the pro
forma adjustments at the incremental tax rate of 40%. A significant portion of
the intangible assets acquired in the SBCL acquisition is not deductible for tax
purposes, which has the overall impact of increasing the effective tax rate.

     Weighted common average shares outstanding, for purposes of determining pro
forma basic and diluted earnings (loss) per common share and cash earnings per
diluted common share, have been adjusted to give effect to the common shares
issued to SmithKline Beecham in conjunction with the acquisition of SBCL and
shares of common stock granted at the closing of the SBCL acquisition to certain
employees.

     RECLASSIFICATIONS

     During the fourth quarter of 1999, the Company reclassified certain expense
items, primarily related to a portion of occupancy costs and professional
liability insurance expense, from selling, general and administrative expenses
to cost of services, to better reflect the cost of performing testing. All pro
forma financial information has been reclassified for comparative purposes to
conform with the 1999 presentation. The amounts reclassified from selling,
general and administrative expenses for the years ended December 31, 1999 and
1998 were $88.8 million and $93.5 million, respectively.



<PAGE>   2
                    PRO FORMA COMBINED FINANCIAL INFORMATION

                      (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                                       QUARTER ENDED
                              ------------------------------------------------------------------------------------------------
                              MARCH 31,    JUNE 30,    SEPT. 30,   DEC. 31,    MARCH 31,    JUNE 30,    SEPT.30,     DEC. 31,
                                1998         1998        1998        1998        1999         1999        1999        1999
                              ----------   ----------  ----------  ----------  ----------   ---------   ---------   ----------
<S>                            <C>          <C>         <C>         <C>         <C>          <C>         <C>         <C>
STATEMENT OF OPERATIONS DATA:
Net revenues................   $737,237     $744,111    $769,592    $770,691    $823,450     $837,533    $819,301    $814,526
Costs and expenses:
 Cost of services...........    461,156      482,488     476,422     487,280     537,000      550,521     524,398     520,420
 Selling, general and
  administrative............    210,501      199,616     224,215     225,023     224,542      255,634     238,401     229,601
 Interest expense, net......     31,700       31,733      31,653      31,466      31,847       29,890      30,852      30,058
 Amortization of intangible
  assets....................     11,565       11,551      11,715      11,606      11,279       11,405      10,904      11,659
 Provisions for
  restructuring and other
  special charges...........         --           --          --          --          --       15,813      30,282      43,103
  Minority share of income..        461          435         412         709       1,130        1,471       1,191       1,639
 Other, net.................    (11,078)     (10,318)       (708)     (1,215)     (9,648)         126        (782)     (3,312)
                                -------     --------    --------    --------    ---------    --------    --------    --------
  Total.....................    704,305      715,505     743,709     754,869     796,150      864,860     835,246     833,168
                               -------     --------    --------    --------    --------     ---------    --------    --------
Income (loss) before taxes
   and extraordinary loss...     32,932       28,606      25,883      15,822      27,300      (27,327)    (15,945)    (18,642)
Income tax expense (benefit)     16,578       15,020      12,994       8,442      13,129       (8,157)     (1,941)     (4,106)
                               --------     --------    --------    --------    --------     ---------    ---------   --------
Income (loss) before
   extraordinary loss......      16,354       13,586      12,889       7,380      14,171      (19,170)    (14,004)    (14,536)
Extraordinary loss, net of
   taxes...................          --           --          --          --          --           --      (2,139)         --
                               --------     --------    --------    --------    --------     ---------    --------    --------
Net income (loss)..........     $16,354      $13,586     $12,889      $7,380     $14,171     $(19,170)   $(16,143)   $(14,536)
                               ========     ========    ========    ========    ========     =========    ========    ========

Income (loss) before
   extraordinary loss and
   special items (a).......     $13,790      $ 7,793     $12,469     $ 7,203     $ 8,380     $( 9,682)   $  4,166     $ 9,717

------------------------------------------------------------------------------------------------------------------------------

Basic earnings (loss) per
  common share:
Net income (loss) .........   $   0.38     $   0.31    $   0.30    $   0.17    $   0.33     $  (0.44)   $  (0.37)   $  (0.33)
Income (loss) before
   extraordinary loss......   $   0.38     $   0.31    $   0.30    $   0.17    $   0.33     $  (0.44)   $  (0.32)   $  (0.33)
Income (loss) before
   extraordinary loss and
   special items (a).......   $   0.32     $   0.18    $   0.29    $   0.17    $   0.19     $  (0.22)   $   0.10    $   0.22
 Weighted average common
  shares outstanding -
  basic (c)................     43,035       43,130      43,033      42,925      43,044       43,248      43,435      43,653

------------------------------------------------------------------------------------------------------------------------------

Diluted earnings (loss)
  per common share:
Net income (loss) .........   $   0.38     $   0.31    $   0.30    $   0.17    $   0.33     $  (0.44)   $  (0.37)   $  (0.33)
Income (loss) before
   extraordinary loss......   $   0.38     $   0.31    $   0.30    $   0.17    $   0.33     $  (0.44)   $  (0.32)   $  (0.33)
Income (loss) before
   extraordinary loss and
   special items (a).......   $   0.32     $   0.18    $   0.29    $   0.17    $   0.19     $  (0.22)   $   0.09    $   0.22
Cash earnings before
   extraordinary loss and
   special items (b).......   $   0.56     $   0.42    $   0.53    $   0.41    $   0.43     $   0.02    $   0.32    $   0.45
Weighted average common
   shares outstanding -
   diluted (c).............     43,309       43,881      43,434      43,136      43,506       43,933      44,228      44,685

------------------------------------------------------------------------------------------------------------------------------

Adjusted EBITDA (d)........    $87,485      $82,306     $84,638     $75,909     $80,667      $85,016     $86,599     $85,096
</TABLE>

(a)  Special items, for purposes of determining pro forma income before
     extraordinary loss and special items and cash earnings before extraordinary
     loss and special items, included the provisions for restructuring and other
     special charges reflected on the face of the pro forma combined financial
     information, a $3.0 million gain recorded on the sale of an investment in
     the fourth quarter of 1999 and non-recurring gains of $9.7 million and
     $14.9 million, respectively, recognized by SBCL during 1999 and 1998 from
     the sale and license of certain technology and its physician office-based
     teleprinter assets and network.

(b)  Cash earnings per common share is calculated as cash earnings less
     preferred dividends, divided by weighted average common shares outstanding
     on a diluted basis. Cash earnings represents income (loss) before
     extraordinary loss, special items and amortization of all intangible
     assets, net of applicable taxes. Cash earnings per common share is
     presented and discussed because it highlights the impact on earnings of the
     non-cash charges associated with the amortization of intangible assets from
     various acquisitions, which is significant for the Company.  Cash earnings
     per common share 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
     activities as an indicator of cash flows or as a measure of liquidity.

(c)  Both basic and diluted weighted average common shares outstanding have been
     presented on a pro forma basis giving effect to the shares issued to
     SmithKline Beecham and the shares granted at closing to employees.
     Potentially dilutive common shares primarily represent stock options.
     During periods in which net income available for common stockholders is
     negative, diluted weighted average common shares outstanding will equal
     basic weighted average common shares outstanding, since the incremental
     shares would have an anti-dilutive effect on earnings (loss) per common
     share.

<PAGE>   3
(d)  Pro forma Adjusted EBITDA represents income (loss) before income taxes, net
     interest expense, depreciation and amortization and special items.  Special
     items included the provisions for restructuring and other special charges
     reflected on the face of the pro forma combined financial information, a
     $3.0 million gain recorded on the sale of an investment in the fourth
     quarter of 1999, non-recurring gains of $9.7 million and $14.9 million,
     respectively, recognized by SBCL during 1999 and 1998 from the sale and
     license of certain technology and its physician office-based teleprinter
     assets and network, a $2.5 million charge included in selling, general and
     administrative expenses in the first quarter of 1998, and discrete income
     and expense items recorded by SBCL prior to the closing of the acquisition,
     which have not been reflected on the face of the pro forma financial
     information.  Management believes that the discrete income and expense
     items are of a non-recurring nature and limit the overall comparability of
     the pro forma results for 1999 and 1998. See Pro Forma Combined Results of
     Operations. 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 leveraged 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.

         PRO FORMA COMBINED RESULTS OF OPERATIONS

         On a pro forma basis, assuming that SBCL had been acquired by Quest
Diagnostics on January 1, 1998, income before extraordinary loss and special
items was $12.6 million in 1999, compared to $41.3 million in 1998. Special
items for 1999 included $89.2 million of restructuring and other special
charges, a $3.0 million gain on the sale of an investment and a $9.7 million
gain recognized by SBCL on the sale of its physician office-based teleprinter
assets and network recorded in other, net. Special items for 1998 included a
$14.9 million gain recorded by SBCL from the sale and license of certain
technology which was recorded in other, net and a $2.5 million charge included
in selling, general and administrative expenses related to a plan to consolidate
the Company's laboratory network announced in the fourth quarter of 1997.

         A special review of the SBCL pre-closing financial statements, called
for in the SBCL acquisition agreements, was conducted to assess the
recoverability of assets and the adequacy of liabilities existing prior to the
closing date of the acquisition. This special review resulted in adjustments,
primarily related to the recoverability of SBCL receivables and accrued
liabilities during various periods prior to the closing of the SBCL acquisition.
In addition, SBCL recorded other income and expense items prior to the closing
of the SBCL acquisition. Management believes that the adjustments resulting from
the special review and the other income and expense items, both of which have
not been reflected on the face of the pro forma combined financial information,
are of a non-recurring nature and limit the comparability of results between the
periods presented. In the discussions that follow, these matters are
collectively referred to as discrete income and expense items.

         Discrete expense items for the year ended December 31, 1999, totaled
$46.6 million, including a $22.4 million bad debt charge to reflect the reduced
recoverability of SBCL receivables, as a result of the special review of the
SBCL financial statements; $7.1 million of losses related to a customer contract
accounted for as a loss contract beginning in the third quarter of 1999; $5.6
million of costs, for which SmithKline Beecham is obligated to indemnify the
Company, associated with two incidents, the most significant of which is related
to a SBCL employee who allegedly reused certain needles when drawing blood from
patients; and $11.5 million of expenses, recorded by SBCL prior to the
acquisition, primarily to record liabilities necessary to properly present the
closing balance sheet of SBCL. Discrete income and expense items for the year
ended December 31, 1998 totaled net pre-tax profits of $15.0 million, including
$14.3 million of pre-tax profits primarily related to the favorable settlement
of a contract dispute, and $6.8 million of adjustments to reduce SBCL's bad debt
expense. These items were partially offset by a $6.1 million reduction in net
revenues recorded by SBCL, primarily related to revised estimates for sales
price adjustments. The decline in income before extraordinary loss and special
items was primarily due to the discrete income and expense items discussed
above. Excluding the impact of the discrete income and expense items, income
before extraordinary loss and special items for 1999 and 1998 was $40.5 million
and $32.2 million, respectively.

         Pro forma results for the year ended December 31, 1999 included the
effects of testing performed by third parties under the Company's laboratory
network management arrangements which added $154.0 million to both pro forma net
revenues and cost of services for the year ended December 31, 1999.

         NET REVENUES

         Excluding the effect of the testing performed by third parties under
the Company's laboratory network management arrangements in 1999, pro forma net
revenues in 1999 increased by $119.2 million or 3.9% from the prior year period.
Excluding the impact of the discrete income and expense items in 1998, which
represented a $6.1 million reduction in net revenues, pro forma revenue growth
was 3.7%, due to improvements in both average revenue per requisition and volume
of clinical testing of 3.3% and 1.1%, respectively, and a 22.6% increase in
clinical trials testing revenues which contributed approximately 0.4% to the
consolidated revenue increase. These increases were partially offset by a
reduction in revenues of 1.0% associated with the treatment in 1999 of a
customer contract as a loss contract.

         Prior to the acquisition of SBCL, Quest Diagnostics experienced
increases in average revenue per requisition primarily due to a number of
factors, including: a shift from capitated volume to fee-for-service volume;
contract renewals and new business negotiated on more favorable terms as part of
the Company's account profitability strategy; and higher value-added test
offerings. The increase in average revenue per requisition experienced by Quest
Diagnostics was partially offset by declines in average revenue per requisition
related to the growth in managed care business at SBCL. The improvements in
volume were primarily attributable to the growth in managed care business at
SBCL, partially offset by volume declines at Quest Diagnostics reflecting the
impact of increased competition for managed care business, actions taken on
unprofitable accounts and severe weather in the first quarter of 1999 in certain
service areas.


<PAGE>   4


         OPERATING COSTS AND EXPENSES

         The following discussion and analysis regarding pro forma operating
costs, including cost of services, selling, general and administrative expenses
and bad debt expense exclude the effect of testing performed by third parties
under the Company's laboratory network management arrangements and the treatment
of a customer contract as a loss contract. As discussed above, losses associated
with this contract amounted to $7.1 million in 1999. In addition, as discussed
above, operating costs and expenses included (1) a charge in the first quarter
of 1998 of $2.5 million included in selling, general and administrative expenses
that represented the final costs associated with the Company's consolidation
plan announced in the fourth quarter of 1997, (2) discrete expense items
totaling $39.5 million in 1999 and (3) discrete income items totaling $6.8
million in 1998. Total pro forma operating costs in 1999 increased by $179.1
million from the prior year period. Operating costs unrelated to volume
increased during 1999, principally due to additional investments in information
technology and sales and marketing capabilities, and employee compensation
costs.

         Cost of services, as a percentage of net revenues, was 62.3% in 1999,
compared to 62.4% in 1998. Excluding discrete income and expense items, which
increased cost of services by $7.8 million in 1999, cost of services as a
percentage of net revenues was 62.1%.

         Selling, general and administrative expenses, as a percentage of net
revenues, were 30.5% in 1999, compared to 29.1% in the prior year. Discrete
expense items included in selling, general and administrative expenses were
$31.7 million or 1.0% of net revenues, in 1999, of which $22.4 million
represented a bad debt charge, reflecting the reduced recoverability of SBCL
receivables, as a result of the special review of the SBCL financial statements.
Bad debt expense for the year ended December 31, 1998 was impacted by discrete
income items which reduced bad debt expense by $6.8 million. Excluding the
impact of discrete income and expense items in both 1999 and 1998, bad debt
expense was 7.6% of net revenues in 1999, compared to 8.0% in the prior year
period. The remaining increase in selling, general and administrative expenses
was principally due to additional investments made in 1999 in information
technology and sales and marketing capabilities, litigation expenses and
employee compensation costs.

         INTEREST EXPENSE, NET

         Net interest expense decreased in 1999 by $3.9 million, as compared to
the prior year. Net interest expense for 1999 included $1.9 million of interest
income associated with a favorable state tax settlement. The remaining reduction
in net interest expense is primarily due to the repayment of long term debt
under the Credit Agreement between the closing of the SBCL acquisition and the
end of 1999.

         PROVISIONS FOR RESTRUCTURING AND OTHER SPECIAL CHARGES

         During the second, third and fourth quarters of 1999, the Company
recorded provisions for restructuring and other special charges totaling $15.8
million ($9.5 million, net of tax), $30.3 million ($18.2 million, net of tax)
and $43.1 million ($26.1 million, net of tax), respectively, principally
incurred in connection with the acquisition and planned integration of SBCL.

         The special charge in the second quarter of 1999 of $15.8 million was
primarily to record a provision in the results of SBCL to reflect a contract as
a loss contract.

         Of the total special charge recorded in the third quarter of 1999,
$19.8 million represented stock-based employee compensation of which $17.8
million related to special one-time grants of the Company's common stock to
certain individuals of the combined company, and $2.0 million related to the
accelerated vesting of restricted stock grants made in previous years due to the
completion of the SBCL acquisition. In addition, during the third quarter of
1999, the Company incurred $9.2 million of professional and consulting fees
related to integration planning activities. The remainder of the third quarter
charge represented costs incurred in conjunction with the Company's planned
offering of new senior subordinated notes, the proceeds of which were expected
to be used to repay the Company's existing Notes. During the third quarter of
1999, the Company decided not to proceed with the offering due to unsatisfactory
market conditions.
<PAGE>   5

         Of the $43.1 million charge recorded in the fourth quarter of 1999,
$36.4 million represented costs related to planned integration activities
affecting Quest Diagnostics' operations and employees which were discussed
above. In addition, the Company recorded $3.5 million of special recognition
awards granted in the fourth quarter of 1999 to certain employees involved in
the transaction and integration planning processes of the SBCL acquisition. The
remainder of the fourth quarter special charge was primarily attributable to
professional and consulting fees incurred in connection with integration related
planning activities.

         MINORITY SHARE OF INCOME

         Minority share of income for 1999 increased from the prior year level,
primarily due to the Company's contribution of its Pittsburgh, Pennsylvania and
St. Louis, Missouri businesses to two new corporate joint ventures in the fourth
quarter of 1998. During both 1999 and 1998, the Company maintained a 51%
controlling ownership interest in both of these affiliated companies.

         OTHER, NET

         Other, net for 1999 increased from the prior year level. The year ended
December 31, 1998 included a $14.9 million gain recognized by SBCL on the sale
and license of certain technology and $10.9 million of discrete income items
primarily associated with the favorable settlement of a contract dispute. The
year ended December 31, 1999 included a $9.7 million gain recognized by SBCL on
the sale of its physician office-based teleprinter assets and network in the
first quarter of 1999, a reduction in equity losses of $3.6 million, primarily
associated with a joint venture in Arizona in which the Company holds a 49%
interest, and a gain of $3.0 million associated with the sale of an investment
in the fourth quarter of 1999.

         INCOME TAXES

         The Company's effective tax rate was significantly impacted by goodwill
amortization, the majority of which is not deductible for tax purposes, and had
the effect of increasing the overall tax rate or reducing the tax benefit rate.

         EXTRAORDINARY LOSS

         In conjunction with the acquisition of SBCL, the Company repaid the
entire amount outstanding under its then existing credit agreement. The
extraordinary loss recorded in the third quarter of 1999 represented $3.6
million ($2.1 million, net of tax) of deferred financing costs written off in
connection with the extinguishment of the related credit agreement.

         CASH EARNINGS PER SHARE AND ADJUSTED EBITDA

         Pro forma cash earnings per common share is calculated as cash earnings
less preferred dividends, divided by diluted weighted average common shares
outstanding. Pro forma cash earnings represents income (loss) before
extraordinary loss, special items and amortization of all intangible assets, net
of applicable taxes. For purposes of determining pro forma cash earnings per
common share, 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 in the first quarter of 1999, a $3.0
million gain related to the sale of an investment in the fourth quarter of 1999
and a $14.9 million gain recorded by SBCL on the sale and license of certain
technology during 1998. Cash earnings per common share is presented and
discussed because it highlights the impact on earnings of the non-cash charges
associated with the amortization of intangible assets from various acquisitions,
which is significant for the Company. Cash earnings per common share 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 activities as an indicator of cash flows or as a
measure of liquidity.

<PAGE>   6
         Pro forma cash earnings per common share was $1.21 in 1999, compared to
$1.91 in the prior year. The decrease in pro forma cash earnings per common
share is primarily due to the discrete income and expense items which are
discussed above. Excluding the discrete income and expense items, pro forma cash
earnings per common share would have been $1.84 and $1.71, respectively, for
1999 and 1998.

         Pro forma Adjusted EBITDA represents income (loss) before extraordinary
loss, income taxes, net interest expense, depreciation and amortization and
special items. For the purposes of calculating pro forma Adjusted EBITDA,
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 in the first quarter of 1999, a $3.0 million gain
related to the sale of an investment in the fourth quarter of 1999, a $14.9
million gain recorded by SBCL on the sale and license of certain technology
during 1998, a charge of $2.5 million recorded in selling, general and
administrative expenses in 1998 related to the consolidation of the Company's
laboratory network announced in the fourth quarter of 1997, $46.6 million of
discrete expense items in 1999 and $15.0 million of net pre-tax profits
representing discrete income and expense items for 1998, 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 leveraged 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.

         Pro forma Adjusted EBITDA for 1999 improved to $337.4 million, or 10.9%
of net revenues (adjusted to exclude the effects of the testing performed by
third parties under the Company's laboratory network management arrangements and
the loss contract), from $330.3 million, or 11.2% of net revenues in the prior
year period.


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.4
<SEQUENCE>3
<FILENAME>y41662ex99-4.txt
<DESCRIPTION>MD&A 03 31 2000
<TEXT>

<PAGE>   1


                                                                    EXHIBIT 99.4

QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2000 -
  "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
  RESULTS OF OPERATIONS - PRO FORMA COMPARISONS"

     The following information revises and updates the supplemental pro forma
combined financial information of Quest Diagnostics included in the Pro Forma
Comparisons section of Management's Discussion and Analysis of Financial
Condition and Results of Operations contained in the Company's Quarterly Report
on Form 10-Q for the fiscal quarter ended March 31, 2000, filed on April 27,
2000.

     The following table summarizes the Company's unaudited historical results
of operations for the three months ended March 31, 2000 and 1999 and the
Company's unaudited pro forma combined results of operations for the three
months ended March 31, 1999 (in thousands, except per share data):

<TABLE>
<CAPTION>
                                                   Three Months Ended March 31,
                                               -----------------------------------
                                                     Historical          Pro Forma
                                               ----------------------    ---------
                                                  2000        1999         1999
                                               ----------  ----------    ---------
<S>                                            <C>         <C>           <C>
NET REVENUES                                    $857,479    $381,841      $823,450
COSTS AND EXPENSES:
  Cost of services                               529,037     237,408       537,000
  Selling, general and administrative            249,835     116,600       224,542
  Interest expense, net                           29,763       7,359        31,847
  Amortization of intangible assets               11,940       5,094        11,279
  Minority share of income                         2,136       1,130         1,130
  Other, net                                        (428)        172        (9,648)
                                                --------    --------      --------
    Total                                        822,283     367,763       796,150
                                                --------    --------      --------
INCOME BEFORE TAXES                               35,196      14,078        27,300
INCOME TAX EXPENSE                                17,387       6,645        13,129
                                                --------    --------      --------
NET INCOME                                      $ 17,809    $  7,433      $ 14,171
                                                ========    ========      ========
BASIC NET INCOME PER COMMON SHARE               $   0.40    $   0.25      $   0.33
                                                ========    ========      ========
DILUTED NET INCOME PER COMMON SHARE             $   0.39    $   0.24      $   0.33
                                                ========    ========      ========
CASH EARNINGS BEFORE SPECIAL ITEMS PER
  DILUTED COMMON SHARE                          $   0.63    $   0.39      $   0.43
                                                ========    ========      ========
WEIGHTED AVERAGE COMMON SHARES
  OUTSTANDING -- BASIC                            44,131      29,716        43,044

WEIGHTED AVERAGE COMMON SHARES
  OUTSTANDING -- DILUTED                          45,616      30,280        43,506

ADJUSTED EBITDA                                 $ 99,526    $ 37,919      $ 80,667
</TABLE>


PRO FORMA COMPARISONS

     The pro forma combined financial information for the three months
ended March 31, 1999 assumes that the SBCL acquisition and borrowings under the
Credit Agreement were effected on January 1, 1999. The SBCL acquisition
agreements included a provision for a reduction in the purchase price paid by
Quest Diagnostics in the event that the combined balance sheet of SBCL indicated
that the net assets acquired, as of the acquisition date, were below a
prescribed level. On October 11, 2000, the purchase price adjustment was
finalized with the result that SmithKline Beecham owed Quest Diagnostics $98.6
million. This amount was offset by $3.6 million separately owed by Quest
Diagnostics to SmithKline Beecham, resulting in a net payment by SmithKline
Beecham of $95.0 million. This payment from SmithKline Beecham will be recorded
in the historical financial statements of the Company in the fourth quarter of
2000 as a reduction in the purchase price of the SBCL acquisition.

     In addition to the purchase price reduction described above, the purchase
price allocation relating to the SBCL acquisition was completed in conjunction
with the preparation of the Company's quarterly report on Form 10-Q for the
fiscal quarter ended September 30, 2000. None of the adjustments, resulting from
the purchase price reduction or the completion of the purchase price allocation,
will have any impact on the Company's previously reported historical financial
statements.

     The accompanying pro forma combined financial information reflects the
impact of finalizing the SBCL purchase price adjustment and the revised purchase
price allocation relating to the SBCL acquisition.

     The unaudited pro forma combined financial information is presented for
illustrative purposes only to assist in analyzing the financial implications of
the SBCL acquisition and borrowings under the Credit Agreement. The unaudited
pro forma combined financial information may not be indicative of the combined
financial results of operations that would have been realized had Quest
Diagnostics and SBCL been a single entity during the periods presented. In
addition, the unaudited pro forma combined financial information is not
necessarily indicative of the future results that the combined company will
experience.

     Significant pro forma adjustments reflected in the unaudited pro forma
combined financial information include reductions in employee benefit costs and
general corporate overhead allocated to the historical results of SBCL by
SmithKline Beecham, offset by an increase in net interest expense to reflect the
Company's Credit Agreement which was used to finance the SBCL acquisition.
Amortization of goodwill, which accounts for a majority of the acquired
intangible assets, is calculated on the straight-line basis over forty years.
Income taxes have been adjusted for the estimated income tax impact of the pro
forma adjustments at the incremental tax rate of 40%. A significant portion of
the intangible assets acquired in the SBCL acquisition is not deductible for tax
purposes, which has the overall impact of increasing the effective tax rate.

     Weighted average common shares outstanding, for purposes of determining pro
forma basic and diluted earnings (loss) per common share and cash earnings per
diluted common share, have been adjusted to give effect to the common shares
issued to SmithKline Beecham in conjunction with the acquisition of SBCL and
shares of common stock granted at the closing of the SBCL acquisition to certain
employees.

     HISTORICAL THREE MONTHS ENDED MARCH 31, 2000 COMPARED WITH
     PRO FORMA THREE MONTHS ENDED MARCH 31, 1999

     The following discussion and analysis compares the Company's historical
results of operations for the three months ended March 31, 2000 to the pro forma
combined results of operations for the three months ended March 31, 1999,
assuming that SBCL had been acquired by Quest Diagnostics on January 1, 1999.
All references in this section to the three months ended March 31, 2000 refer to
the historical results of Quest Diagnostics for such period. All references in
this section to the three months ended March 31, 1999 refer to the pro forma
combined results of Quest Diagnostics for such period.

     Net income for the three months ended March 31, 2000 increased to $17.8
million from $14.2 million for the prior year period. Results for the three
months ended March 31, 2000 included $1.4 million of costs related to the
integration of
<PAGE>   2
SBCL which were expensed as incurred in 2000. Special items for the three months
ended March 31, 1999 represented a $9.7 million gain recognized by SBCL on the
sale of its physician office-based teleprinter assets and network which was
recorded in other, net.

     A special review of the SBCL pre-closing financial statements, called for
in the SBCL acquisition agreements, was conducted to assess the recoverability
of assets and the adequacy of liabilities existing prior to the closing date of
the acquisition. This special review resulted in adjustments, primarily related
to the recoverability of SBCL receivables and accrued liabilities during various
periods prior to the closing of the SBCL acquisition. In addition, SBCL recorded
other income and expense items prior to the closing of the SBCL acquisition.
Management believes that the adjustments resulting from the special review and
the other income and expense items, both of which have not been reflected on the
face of a pro forma combined financial information, are of a non-recurring
nature and limit the comparability of results between the periods presented. In
the discussions that follow, these matters are collectively referred to as
discrete income and expense items.

      Discrete income and expense items for the three months ended March 31,
1999, resulted in a reduction in pre-tax profit of $0.6 million, including $1.7
million of losses related to a customer contract accounted for as a loss
contract beginning in the third quarter of 1999, offset in large part by $1.1
million in expense reductions, the majority of which related to bad debt
expense. Excluding the impact of the discrete income and expense items, income
before special items was $8.7 million for the three months ended March 31, 1999.

     Results for the three months ended March 31, 2000 and 1999 included the
effects of testing performed by third parties under the Company's laboratory
network management arrangements. As laboratory network manager, Quest
Diagnostics included in its consolidated revenues and expenses the cost of
testing performed by third parties. This treatment added $32.4 million and $41.3
million to both reported revenues and cost of services for the three months
ended March 31, 2000 and 1999, respectively. This treatment also serves to
increase cost of services as a percentage of net revenues and decrease selling,
general and administrative expenses as a percentage of net revenues. During the
first quarter of 2000, the Company and Aetna US Healthcare terminated one of the
Company's laboratory network management arrangements, and entered into a new
non-exclusive contract, effective April 1, 2000, under which the Company will no
longer be responsible for the cost of testing performed by third parties.

     NET REVENUES

     Net revenues for the three months ended March 31, 2000 increased by $34.0
million, or 4.1% from the prior year level due to improvements in volume of
clinical testing and average revenue per requisition of 6.1% and 2.3%,
respectively. Approximately one quarter of the volume increase was the result of
an extra day in February 2000 due to leap year. The remaining portion of the
volume increase was primarily attributable to strong sales to existing and new
customers, as a result of the Company's ability to leverage its value
proposition of offering expanded patient access, broad testing capabilities and
superior quality. Contributing to the increase in average revenue per
requisition was a shift to higher value testing and fee-for-service revenues.
These increases were partially offset by a reduction in revenues of 2.6%
associated with the treatment of a customer contract as a loss contract,
beginning in the third quarter of 1999.

     OPERATING COSTS AND EXPENSES

     The following discussion and analysis regarding operating costs, including
cost of services, selling, general and administrative expenses and bad debt
expense exclude the effect of testing performed by third parties under the
Company's laboratory network management arrangements, and the revenues and
expenses associated with a customer contract treated as a loss contract,
beginning in the third quarter of 1999. As discussed above, losses associated
with this contract amounted to $1.7 million for the three months ended March 31,
1999. Operating costs and expenses for the three months ended March 31, 2000
included $1.4 million of integration related costs which were expensed as
incurred in 2000. As discussed above, operating costs and expenses for the three
months ended March 31, 1999 included discrete income items totaling $1.1
million. Total operating costs for the first quarter of 2000 increased by $49.3
million from the prior year period principally associated with the volume
increase noted above.

     Cost of services, as a percentage of net revenues, decreased to 60.2% for
the first quarter of 2000 from 62.2% for the prior year period, primarily due to
an increase in average revenue per requisition and to a lesser extent, the
impact of the SBCL integration to date on the cost structure of the Company.

     Selling, general and administrative expenses, as a percentage of net
revenues, were 30.3% for the three months ended March 31, 2000, compared to
29.5% in the prior year period. Discrete income items reduced selling, general
and administrative expenses by $1.0 million or 0.1% of net revenues for the
three months ended March 31, 1999 of which $0.7 million represented reductions
to SBCL's bad debt expense as a result of the special review of the SBCL
financial statements. Excluding the impact of the discrete income items in 1999,
bad debt expense for both the first quarter of 2000 and 1999 was 7.6% of net
revenues.

<PAGE>   3
     INTEREST EXPENSE, NET

     Net interest expense decreased in the first quarter of 2000 by $2.1
million, when compared to the prior year period, primarily due to the repayment
of long term debt under the Credit Agreement between the closing of the SBCL
acquisition and the end of the first quarter of 2000, partially offset by an
increase in variable interest rates.

     MINORITY SHARE OF INCOME

     Minority share of income for the first quarter of 2000 increased from the
prior year level, primarily due to improved performance at the Company's joint
ventures in Pittsburgh, Pennsylvania and Erie, Pennsylvania.

     OTHER, NET

     Other, net for the first quarter of 2000 increased from the prior year
level, primarily due to 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.

     INCOME TAXES

     The Company's effective tax rate was significantly impacted by goodwill
amortization, the majority of which is not deductible for tax purposes, and had
the effect of increasing the overall tax rate.

     CASH EARNINGS PER SHARE AND ADJUSTED EBITDA

     Pro forma cash earnings per common share is calculated as pro forma cash
earnings less preferred dividends, divided by pro forma diluted weighted average
common shares outstanding. Cash earnings represents income before special items
and amortization of all intangible assets, net of applicable taxes, presented on
a pro forma basis. Special items for the three months ended March 31, 1999
included a $9.7 million gain recognized by SBCL on the sale of its physician
office-based teleprinter assets and network which was recorded in other, net.
Cash earnings per common share is presented and discussed because it highlights
the impact on earnings of the non-cash charges associated with the amortization
of intangible assets from various acquisitions, which is significant for the
Company. Cash earnings per common share 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
activities as an indicator of cash flows or as a measure of liquidity.

     Cash earnings per diluted common share was $0.63 for the first quarter of
2000, compared to pro forma cash earnings per common share of $0.43 for the
prior year period. The increase was primarily related to improvements in the
operating performance of the Company and a reduction in net interest expense.
Excluding the impact of the discrete income and expense items for the first
quarter of 1999, as discussed above, pro forma cash earnings per common share
would have been $0.44.


     Adjusted EBITDA represents income before income taxes, net interest
expense, depreciation and amortization and special items. For the purposes of
calculating pro forma Adjusted EBITDA, special items for the three months ended
March 31, 2000 included $1.4 million of costs related to the integration of SBCL
which were included in operating expenses and expensed as incurred in 2000.
Special items for the three months ended March 31, 1999 included a $9.7 million
gain recognized by SBCL on the sale of its physician office-based teleprinter
assets and network and discrete income and expense items which resulted in a
reduction in pre-tax profit of $0.6 million, as 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
leveraged 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.
<PAGE>   4
     Excluding the revenue impacts of the testing performed by third parties
under the Company's laboratory network management arrangements and the loss
contract, Adjusted EBITDA for the three months ended March 31, 2000 improved to
$99.5 million, or 12.1% of net revenues, as compared to pro forma Adjusted
EBITDA of $80.7 million, or 10.6% of net revenues, in the prior year period. The
increase in Adjusted EBITDA was primarily related to improvements in the
operating performance of the Company.

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.5
<SEQUENCE>4
<FILENAME>y41662ex99-5.txt
<DESCRIPTION>MD&A 06 30 2000
<TEXT>

<PAGE>   1

                                                                EXHIBIT 99.5

QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2000 -
   "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
   OF OPERATIONS - PRO FORMA COMPARISONS"

         The following information revises and updates the supplemental pro
forma combined financial information of Quest Diagnostics included in the Pro
Forma Comparisons section of Management's Discussion and Analysis of Financial
Condition and Results of Operations contained in the Company's Quarterly Report
on Form 10-Q for the fiscal quarter ended June 30, 2000, filed on August 3,
2000.

         The following table summarizes the Company's unaudited historical
results of operations for the three and six months ended June 30, 2000 and 1999
and the Company's unaudited pro forma combined results of operations for the
three and six months ended June 30, 1999 (in thousands, except per share data):

<TABLE>
<CAPTION>
                                                THREE MONTHS ENDED JUNE 30,                  SIX MONTHS ENDED JUNE 30,
                                            ------------------------------------     -----------------------------------------
                                                   HISTORICAL          PRO FORMA               HISTORICAL            PRO FORMA
                                            ----------------------     ---------     -------------------------      ----------
                                              2000          1999         1999            2000           1999           1999
                                            --------      --------     ---------     -----------      --------      ----------
<S>                                        <C>           <C>          <C>           <C>              <C>           <C>
NET REVENUES.............................   $877,113      $394,034      $837,533      $1,734,592      $775,875      $1,660,983
                                            --------      --------      --------      ----------      --------      ----------

COST AND EXPENSES:
  Cost of services.......................    520,437       236,071       550,521       1,049,474       473,478       1,087,521
  Selling, general and administrative....    252,846       121,230       255,634         502,681       237,831         480,176
  Interest expense, net..................     30,204         5,008        29,890          59,967        12,367          61,737
  Amortization of intangible assets......     11,954         5,219        11,405          23,894        10,313          22,684
  Provision for special charges..........      2,100            --        15,813           2,100            --          15,813
  Minority share of income...............      5,240         1,471         1,471           5,376         2,601           2,601
  Other, net.............................     (1,881)          528           126          (2,309)          700          (9,522)
                                            --------      --------      --------      ----------      --------      ----------
    Total................................    818,900       369,527       864,860       1,641,183       737,290       1,661,010
                                            --------      --------      --------      ----------      --------      ----------
INCOME (LOSS) BEFORE TAXES...............     58,213        24,507       (27,327)         93,409        38,585             (27)
INCOME TAX EXPENSE (BENEFIT).............     28,045        11,420        (8,157)         45,432        18,065           4,972
                                            --------      --------      --------      ----------      --------      ----------
NET INCOME (LOSS)........................   $ 30,168      $ 13,087      $(19,170)     $   47,977      $ 20,520      $   (4,999)
                                            ========      ========      ========      ==========      ========      ==========
BASIC NET INCOME (LOSS) PER
  COMMON SHARE...........................   $   0.68      $   0.44      $  (0.44)     $     1.08      $   0.69      $    (0.12)

DILUTED NET INCOME (LOSS) PER
  COMMON SHARE...........................   $   0.64      $   0.43      $  (0.44)     $     1.03      $   0.67      $    (0.12)

CASH EARNINGS BEFORE SPECIAL ITEMS
  PER DILUTED COMMON SHARE...............   $   0.90      $   0.57      $   0.02      $     1.53      $   0.95      $     0.44

WEIGHTED AVERAGE COMMON SHARES
  OUTSTANDING -- BASIC...................     44,577        29,920        43,248          44,354        29,819          43,146

WEIGHTED AVERAGE COMMON SHARES
  OUTSTANDING -- DILUTED.................     46,981        30,729        43,933          46,299        30,505          43,720

ADJUSTED EBITDA..........................   $127,844      $ 46,178      $ 85,016      $  227,370      $ 84,097      $  165,683
</TABLE>

PRO FORMA COMPARISONS

         The pro forma combined financial information for the three and six
months ended June 30, 1999 assumes that the SBCL acquisition and borrowings
under the Credit Agreement were effected on January 1, 1999. The SBCL
acquisition agreements included a provision for a reduction in the purchase
price paid by Quest Diagnostics in the event that the combined balance sheet of
SBCL indicated that the net assets acquired, as of the acquisition date, were
below a prescribed level. On October 11, 2000, the purchase price adjustment was
finalized with the result that SmithKline Beecham owed Quest Diagnostics $98.6
million. This amount was offset by $3.6 million separately owed by Quest
Diagnostics to SmithKline Beecham, resulting in a net payment by SmithKline
Beecham of $95.0 million. This payment from SmithKline Beecham will be recorded
in the historical financial statements of the Company in the fourth quarter of
2000 as a reduction in the purchase price of the SBCL acquisition.

         In addition to the purchase price reduction described above, the
purchase price allocation relating to the SBCL acquisition was completed in
conjunction with the preparation of the Company's quarterly report on Form 10-Q
for the fiscal quarter ended September 30, 2000. None of the adjustments,
resulting from the purchase price reduction or the completion of the purchase
price allocation, will have any impact on the Company's previously reported
historical financial statements.

         The accompanying pro forma combined financial information reflects the
impact of finalizing the SBCL purchase price adjustment and the revised purchase
price allocation relating to the SBCL acquisition.

         The unaudited pro forma combined financial information is presented for
illustrative purposes only to assist in analyzing the financial implications of
the SBCL acquisition and borrowings under the Credit Agreement. The unaudited
pro forma combined financial information may not be indicative of the combined
financial results of operations that would have been realized had Quest
Diagnostics and SBCL been a single entity during the periods presented. In
addition, the unaudited pro forma combined financial information is not
necessarily indicative of the future results that the combined company will
experience.

         Significant pro forma adjustments reflected in the unaudited pro forma
combined financial information include reductions in employee benefit costs and
general corporate overhead allocated to the historical results of SBCL by
SmithKline Beecham, offset by an increase in net interest expense to reflect the
Company's Credit Agreement which was used to finance the SBCL acquisition.
Amortization of goodwill, which accounts for a majority of the acquired
intangible assets, is calculated on the straight-line basis over forty years.
Income taxes have been adjusted for the estimated income tax impact of the pro
forma adjustments at the incremental tax rate of 40%. A significant portion of
the intangible assets acquired in the SBCL acquisition is not deductible for tax
purposes, which has the overall impact of increasing the effective tax rate.

         Weighted average common shares outstanding, for purposes of determining
pro forma basic and diluted earnings (loss) per common share and cash earnings
per diluted common share, have been adjusted to give effect to the common shares
issued to SmithKline Beecham in conjunction with the acquisition of SBCL and
shares of common stock granted at the closing of the SBCL acquisition to certain
employees.

HISTORICAL THREE AND SIX MONTHS ENDED JUNE 30, 2000 COMPARED WITH
   PRO FORMA THREE AND SIX MONTHS ENDED JUNE 30, 1999

         The following discussion and analysis compares the Company's
historical results of operations for the three and six months ended June 30,
2000 to the pro forma combined results of operations for the three and six
months ended June 30, 1999, assuming that the SBCL acquisition and borrowings
under the Credit Agreement were effected January 1, 1999. All references in this
section to the three and six months ended June 30, 2000 refer to the historical
results of Quest Diagnostics for such periods. All references in this section to
the three and six months ended June 30, 1999 refer to the pro forma combined
results of Quest Diagnostics for such periods.

         Net income for the three months ended June 30, 2000 increased to $30.2
million from a net loss of $19.2 million for the prior year period. Net income
for the six months ended June 30, 2000 increased to $48.0 million, compared to a
net
<PAGE>   2
loss of $5.0 million for the six months ended June 30, 1999. For the three and
six months ended June 30, 2000, special items included the net special charges
reflected on the face of the statement of operations and $3.1 million and $4.5
million, respectively, of costs related to the integration of SBCL which were
expensed as incurred in 2000. Special items for the three and six months ended
June 30, 1999 included the special charges reflected on the face of the pro
forma combined statement of operations and a $9.7 million gain recognized by
SBCL on the sale of its physician office-based teleprinter assets and network
which was recorded in other, net during the first quarter of 1999.

         A special review of the SBCL pre-closing financial statements, called
for in the SBCL acquisition agreements, was conducted to assess the
recoverability of assets and the adequacy of liabilities existing prior to the
closing date of the acquisition. This special review resulted in adjustments,
primarily related to the recoverability of SBCL receivables and accrued
liabilities during various periods prior to the closing of the SBCL acquisition.
In addition, SBCL recorded other income and expense items prior to the closing
of the SBCL acquisition. Management believes that the adjustments resulting from
the special review and the other income and expense items, both of which have
not been reflected on the face of the pro forma combined financial information,
are of a non-recurring nature and limit the comparability of results between the
periods presented. In the discussions that follow, these matters are
collectively referred to as discrete income and expense items.

         Discrete expense items for the three and six months ended June 30,
1999, totaled $35.7 million and $36.2 million, respectively, including bad debt
charges of $17.4 million and $16.7 million, respectively, to reflect the reduced
recoverability of SBCL receivables, as a result of the special review of the
SBCL financial statements; $5.1 million and $7.1 million, respectively, of
losses related to a customer contract accounted for as a loss contract beginning
in the third quarter of 1999; $7.3 million of costs, recorded in the second
quarter of 1999, for which SmithKline Beecham is obligated to indemnify the
Company, associated with two incidents, the most significant of which related to
an SBCL employee who allegedly reused certain needles when drawing blood from
patients; and, $5.6 million and $5.1 million, respectively, of expenses recorded
by SBCL prior to the acquisition, primarily to record liabilities necessary to
properly present the closing balance sheet of SBCL. Excluding the impact of the
discrete expense items, income before special items was $11.7 million and $20.4
million for the three and six months ended June 30, 1999, respectively.

         Results for the three and six months ended June 30, 2000 and 1999
included the effects of testing performed by third parties under our laboratory
network management arrangements. As laboratory network manager, the Company
included in its consolidated revenues and expenses the cost of testing performed
by third parties. This treatment added $14.4 million and $46.8 million to both
reported revenues and cost of services for the three and six months ended
June 30, 2000, respectively. For the three and six months ended June 30, 1999,
this treatment added $43.1 million and $84.3 million, respectively, to both pro
forma revenues and pro forma cost of services. This treatment also serves to
increase cost of services as a percentage of net revenues and decrease selling,
general and administrative expenses as a percentage of net revenues. During the
first quarter of 2000, the Company and Aetna USHealthcare terminated one of the
Company's laboratory network management arrangements, and entered into a new
non-exclusive contract, effective April 1, 2000, under which the Company will no
longer be responsible for the cost of testing performed by third parties.

         NET REVENUES

         Net revenues for the three months ended June 30, 2000 increased by
$39.6 million or 4.7% from the prior year level primarily due to improvements in
volume of clinical testing and average revenue per requisition of 5% and 6%,
respectively. Net revenues for the six months ended June 30, 2000 increased by
$73.6 million or 4.4% from the prior year level primarily due to improvements in
volume of clinical testing and average revenue per requisition of 5% and 4%,
respectively. Revenue growth for the three and six months ended June 30, 2000
was partially offset by accounting for a customer contract as a loss contract
beginning in the second half of 1999. In addition, effective April 1, 2000, the
cost of testing performed by third parties under the terminated laboratory
network management contract with Aetna USHealthcare was no longer included in
consolidated revenues and cost of services. Adjusted for these changes, pro
forma revenue for the three and six months ended June 30, 2000 increased by
10.5% and 9.2%, respectively, compared to the prior year periods.

         The volume increase in clinical testing was primarily attributable to
strong sales to existing and new customers, as a result of improved industry
fundamentals as well as our ability to leverage our value proposition of
offering expanded patient access, broad testing capabilities and superior
quality. While our long-standing pricing discipline continued to yield results,
other factors that contributed to the increase in average revenue per
requisition included modifications to several managed care contracts to more
favorable terms, an increase in higher value testing and a shift to greater
fee-for-service reimbursement.

         OPERATING COSTS AND EXPENSES

         The following discussion and analysis regarding operating costs,
including cost of services, selling, general and administrative expenses and bad
debt expense exclude the effect of testing performed by third parties under our
laboratory
<PAGE>   3
network management arrangements, and the revenues and expenses associated with a
customer contract treated as a loss contract, beginning in the third quarter of
1999. As discussed above, losses associated with this contract amounted to $5.4
million and $7.1 million, respectively, for the three and six months ended June
30, 1999. Operating costs and expenses for the three and six months ended June
30, 2000 included $3.1 million and $4.5 million, respectively, of integration
related costs which were expensed as incurred in 2000. As discussed above,
operating costs and expenses for the three and six months ended June 30, 1999
included $30.3 million and $29.1 million, respectively, of discrete expense
items, recorded in SBCL's historical financial statements prior to the closing
of the SBCL acquisition. Total operating costs for the three and six months
ended June 30, 2000 increased by $17.7 million and $67.0 million, respectively,
from the prior year period, principally as a result of the volume increase noted
above.

         Cost of services, as a percentage of net revenues, for the three months
ended June 30, 2000 decreased to 58.7% from 62.5% for the prior year period.
Cost of services for the six months ended June 30, 2000 decreased to 59.4% from
62.3% for the prior year period. For the three and six months ended June 30,
1999, cost of services included $5.7 million and $5.6 million, respectively, of
discrete expense items. Excluding the discrete expense items, cost of services,
as a percentage of net revenues, for the three and six months ended June 30,
1999 was 61.7% and 61.9%, respectively. Excluding the impact of the discrete
expense items, the decreases in cost of services, as a percentage of net
revenues, were primarily due to an increase in average revenue per requisition
and to a lesser extent, the impact of the SBCL integration to date on our cost
structure. These decreases in cost of services were partially offset by an
increase in employee compensation costs.

         For the three and six months ended June 30, 1999, selling, general and
administrative expenses were 32.8% and 31.2%, respectively, of net revenues.
Excluding the impact of the discrete expense items of $24.5 million and $23.5
million, respectively, selling, general and administrative expenses, as a
percentage of net revenues, for the three and six months ended June 30, 1999
were 29.7% and 29.6%, respectively. For the three and six months ended June 30,
2000, selling general and administrative expenses, as a percentage of net
revenues, decreased to 29.3% and 29.8%, respectively. Excluding the impact of
the discrete expense items in 1999, the decreases in selling, general and
administrative expenses were primarily attributable to improvements in average
revenue per requisition and bad debt expense, partially offset by an increase in
employee compensation costs and investments related to our electronic commerce
strategy. As discussed above, for the three and six months ended June 30, 1999,
bad debt expense included discrete expense items of $17.4 million and $16.7
million, respectively, which represented bad debt charges, reflecting the
reduced recoverability of SBCL receivables, as a result of the special review of
the SBCL financial statements. Excluding the impact of the discrete expense
items for the three and six months ended June 30, 1999, bad debt expense was
7.5% and 7.6%, respectively, of net revenues. For the three and six months ended
June 30, 2000, bad debt expense improved to 7.1% and 7.4%, respectively, of net
revenues. This progress was primarily due to process improvements in the SBCL
billing functions, with particular focus in the areas of obtaining missing
information and reducing billing backlogs.

         INTEREST EXPENSE, NET

         Excluding $1.9 million of interest income associated with a favorable
state tax settlement in the second quarter of 1999, net interest expense for the
three and six months ended June 30, 2000 decreased by $1.6 million and $3.7
million, respectively, compared to the prior year periods. These reductions were
primarily due to the repayment of long term debt under the Credit Agreement
between the closing of the SBCL acquisition and the end of the second quarter of
2000, partially offset by an increase in variable interest rates.

         PROVISION FOR SPECIAL CHARGES

         During the second quarter of 2000, the Company recorded a net special
charge of $2.1 million. Of the special charge, $13.4 million represented the
costs to cancel certain contracts that management believed were not economically
viable as a result of the SBCL acquisition. These costs were principally
associated with the cancellation of a co-marketing agreement for clinical trials
testing services. Management believes that the cancellation of this agreement
will not have an adverse effect on net revenues. These charges were in large
part offset by a reduction in reserves attributable to a favorable resolution of
outstanding claims for reimbursements associated with billings of certain tests.
The special charge in the second quarter of 1999 of $15.8 million was primarily
to record a provision in the results of SBCL to reflect a customer contract as a
loss contract as of June 30, 1999.

         MINORITY SHARE OF INCOME

         Minority share of income for the three and six months ended June 30,
2000 increased from the prior year period, primarily due to improved performance
of the Company's joint ventures.
<PAGE>   4

         OTHER, NET

         Other, net for the six months ended June 30, 2000 increased from the
prior year period, primarily due to a $9.7 million gain recognized by SBCL on
the sale of its physician office-based teleprinter assets and network in the
first quarter of 1999.

         INCOME TAXES

         The Company's effective tax rate was significantly impacted by goodwill
amortization, the majority of which is not deductible for tax purposes, and had
the effect of increasing the overall tax rate.

         CASH EARNINGS PER SHARE AND ADJUSTED EBITDA

         Pro forma cash earnings per common share is calculated as pro forma
cash earnings less preferred dividends, divided by pro forma diluted weighted
average common shares outstanding. Cash earnings represents income (loss) before
special items and amortization of all intangible assets, net of applicable
taxes, presented on a pro forma basis. For the three and six months ended June
30, 2000 and 1999, special items represented the provision for special charges
reflected on the face of the pro forma combined statement of operations. In
addition, special items for the six months ended June 30, 1999 included 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 which was
recorded in other, net. Cash earnings per common share is presented and
discussed because it highlights the impact on earnings of the non-cash charges
associated with the amortization of intangible assets from various acquisitions,
which is significant for the Company. Cash earnings per common share 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 activities as an indicator of cash flows or as a
measure of liquidity.

         Cash earnings per common share was $0.90 and $1.53 for the three and
six months ended June 30, 2000, respectively, compared to pro forma cash
earnings per common share of $0.02 and $0.44 for the prior year periods,
respectively. These increases were primarily related to improvements in our
operating performance and to a lesser extent, the impact of the discrete expense
items in 1999, as discussed above. Excluding the discrete expense items, pro
forma cash earnings per common share was $0.50 and $0.94 for the three and six
months ended June 30, 1999, respectively.

          Adjusted EBITDA represents income (loss) before income taxes, net
interest expense, depreciation and amortization and special items. For the three
and six months ended June 30, 2000, special items included the special charges
reflected on the face of the pro forma combined statement of operations and $3.1
million and $4.5 million, respectively, of costs related to the integration of
SBCL which were included in operating expenses and expensed as incurred. For the
three and six months ended June 30, 1999 special items included the 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 which was
recorded in other, net, and discrete expense items of $35.7 million and $36.2
million, respectively, 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
leveraged 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.

         Excluding the revenue impacts of the testing performed by third parties
under the Company's laboratory network management arrangements and the loss
contract, Adjusted EBITDA for the three months ended June 30, 2000 improved to
$127.8 million, or 14.8% of net revenues, compared to pro forma Adjusted EBITDA
of $85.0 million, or 10.9% of net revenues, in the prior year period. Adjusted
EBITDA for the six months ended June 30, 2000 improved to $227.4 million, or
13.5% of net revenues, compared to pro forma Adjusted EBITDA of $165.7 million,
or 10.8% of net revenues, in the prior year period. These increases in Adjusted
EBITDA were primarily related to improvements in the operating performance of
the Company.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.6
<SEQUENCE>5
<FILENAME>y41662ex99-6.txt
<DESCRIPTION>COMBINED FINANCIAL STATEMENTS
<TEXT>

<PAGE>   1


                                                                    EXHIBIT 99.6




           SMITHKLINE BEECHAM CLINICAL LABORATORIES, INC. AND CERTAIN
                               RELATED AFFILIATES

               REPORT ON AUDITS OF COMBINED FINANCIAL STATEMENTS
            AS OF DECEMBER 31, 1998 AND 1997 AND FOR THE YEARS ENDED
                        DECEMBER 31, 1998, 1997 AND 1996



<PAGE>   2


                        REPORT OF INDEPENDENT ACCOUNTANTS




To the Board of Directors of SmithKline Beecham plc:


In our opinion, the accompanying combined balance sheets and the related
combined statements of operations, changes in parent's equity and cash flows
present fairly, in all material respects, the financial position of SmithKline
Beecham Clinical Laboratories, Inc. and certain related affiliates (the
"Company") at December 31, 1998 and December 31, 1997, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1998 in conformity with accounting principles generally accepted in
the United States of America. These financial statements are the responsibility
of the Company's management; our responsibility is to express an opinion on
these financial statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

As indicated in Note 1 to the accompanying combined financial statements, the
Company has restated its financial statements for the years ended December 31,
1998, 1997 and 1996.


/s/ PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
March 15, 1999, except as to the last paragraph under the heading Basis of
Presentation in Note 1 and the second paragraph of Note 12, for which the date
is October 11, 2000


                                        1


<PAGE>   3


  SMITHKLINE BEECHAM CLINICAL LABORATORIES, INC. AND CERTAIN RELATED AFFILIATES
                             COMBINED BALANCE SHEETS
                             (DOLLARS IN THOUSANDS)

                                     ASSETS

<TABLE>
<CAPTION>

                                                                               December 31,
                                                                  --------------------------------------

                                                                         1998                 1997
                                                                  ------------------    ----------------
                                                                     As Restated          As Restated
                                                                     -----------          -----------
<S>                                                               <C>                     <C>
Current assets:
     Cash                                                         $            -          $       8,919
     Accounts receivables (net of allowances of
         $101,396 and $84,280 respectively)                              329,102                314,270
     Inventories                                                          17,934                 15,266
     Prepaid expenses and other current assets                             9,975                  7,641
                                                                  ------------------    ----------------
          Total current assets                                           357,011                346,096

Goodwill and other intangibles, net                                      503,879                532,981
Property, plant and equipment, net                                       215,519                218,664
Other assets                                                              35,862                 21,216
                                                                  ------------------    ----------------

          Total assets                                            $    1,112,271          $   1,118,957
                                                                  ==================    ================
</TABLE>




                         LIABILITIES AND PARENT'S EQUITY

<TABLE>
<CAPTION>
<S>                                                               <C>                  <C>
Current liabilities:
     Accounts payable                                             $       39,152         $    34,429
     Current portion of long-term debt                                     2,160               2,134
     Accrued compensation and benefits                                    37,657              32,543
     Other current liabilities                                            45,644              36,762
                                                                  ------------------    ----------------
          Total current liabilities                                      124,613             105,868

Long-term debt                                                            32,902              35,140
Commitments and contingent liabilities
Parent's equity                                                          954,756             977,949
                                                                  ------------------    ----------------

          Total liabilities and Parent's equity                   $    1,112,271         $ 1,118,957
                                                                  ==================    ================
</TABLE>




The accompanying notes are an integral part of the combined financial statements


                                        2


<PAGE>   4


  SMITHKLINE BEECHAM CLINICAL LABORATORIES, INC. AND CERTAIN RELATED AFFILIATES
                        COMBINED STATEMENTS OF OPERATIONS
                             (DOLLARS IN THOUSANDS)


<TABLE>
<CAPTION>
                                                                             Years Ended December 31,
                                                                  1998                  1997                   1996
                                                          -------------------     -----------------    ------------------
                                                              As Restated            As Restated
                                                              -----------            -----------

<S>                                                           <C>                     <C>              <C>
Net revenues                                                  $ 1,567,843             $ 1,415,356          $  1,287,734

Costs and expenses:
     Cost of services                                           1,043,255                 927,710               909,114
     Provision for bad debts                                      145,009                 124,116                65,656
     Selling, general and administrative                          279,505                 252,311               232,238
     Interest expense, net                                         47,640                  46,069                45,637
     Amortization of goodwill and intangibles                      30,270                  32,879                37,439
     Other income, net                                            (25,911)                 (7,843)               (1,424)
                                                          -------------------     -----------------    ------------------

Total costs and expenses                                        1,519,768               1,375,242             1,288,660
                                                          -------------------     -----------------    ------------------

Income (loss) before taxes                                         48,075                  40,114                  (926)

Income tax expense                                                 29,347                  26,623                11,462
                                                          -------------------     -----------------    ------------------

Net income (loss)                                             $    18,728             $    13,491          $    (12,388)
                                                          ===================     =================    ==================
</TABLE>




The accompanying notes are an integral part of the combined financial statements


                                        3


<PAGE>   5


  SMITHKLINE BEECHAM CLINICAL LABORATORIES, INC. AND CERTAIN RELATED AFFILIATES
                COMBINED STATEMENTS OF CHANGES IN PARENT'S EQUITY
                             (DOLLARS IN THOUSANDS)




<TABLE>
<CAPTION>
                                                                             As Restated
                                                                          ------------------
<S>                                                                            <C>
  Balance at December 31, 1995 as previously reported                            $  997,138

  Prior year's restatement, net of tax                                               (2,500)
                                                                          -------------------

  Balance at December 31, 1995                                                      994,638

  Loss                                                                              (12,388)

  Net transfers (to) from parent                                                    (13,975)
                                                                          -------------------

  Balance at December 31, 1996                                                      968,275

  Net income                                                                         13,491

  Net transfers (to) from parent                                                     (3,817)
                                                                          -------------------

  Balance at December 31, 1997                                                      977,949

  Net income                                                                         18,728

  Net transfers (to) from parent                                                    (41,921)
                                                                          -------------------

  Balance at December 31, 1998                                                   $  954,756
                                                                          ===================
</TABLE>




The accompanying notes are an integral part of the combined financial statements


                                        4


<PAGE>   6


SMITHKLINE BEECHAM CLINICAL LABORATORIES, INC. AND CERTAIN RELATED AFFILIATES
                        COMBINED STATEMENTS OF CASH FLOWS
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                      Years Ended December 31,

CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:                                 1998                  1997               1996
                                                                      -----------------      ---------------    ----------------
                                                                         As Restated           As Restated
                                                                         -----------           -----------


<S>                                                                        <C>                   <C>                 <C>
Net income (loss)                                                          $   18,728            $  13,491           $ (12,388)
   Adjustments to reconcile net income (loss) to net
   Cash provided by operating activities:
     Depreciation and amortization                                             65,439               71,837              79,963
     Gain on sale of assets                                                   (14,773)              (6,017)             (2,827)
     Provisions for bad debts                                                 145,009              124,116              65,656
     Equity in undistributed earnings of affiliates                            (2,403)                (613)               (497)
     Changes in assets and liabilities:
          Increase in accounts receivable                                    (159,841)            (164,158)            (93,158)
          Increase in inventories                                              (2,668)                (540)             (1,143)
         (Increase) decrease in prepaid expenses and other
          current assets                                                       (2,334)               1,219              (3,329)
          Increase in accounts payable, accrued compensation and
          benefits and other current liabilities                               18,745                2,149               4,055
                                                                      ----------------- ---- --------------- -- ----------------

Net cash provided by operating activities                                      65,902               41,484              36,332
                                                                      -----------------      ---------------    ----------------

CASH FLOWS USED IN INVESTING ACTIVITIES:

Capital expenditures                                                          (35,200)             (27,978)            (33,949)
Proceeds from sale of assets                                                    4,512                5,289               9,507
Expenditures for other intangible assets                                            -               (3,955)             (1,005)
                                                                      -----------------      ---------------    ----------------

Net cash used in investing activities                                         (30,688)             (26,644)            (25,447)
                                                                      -----------------      ---------------    ----------------

CASH FLOWS USED IN FINANCING ACTIVITIES:

Net transfers to Parent                                                       (41,921)              (3,817)            (13,975)
Repayment of long-term debt                                                    (2,212)              (2,104)             (2,726)
                                                                      -----------------      ---------------    ----------------

Net cash used in financing activities                                         (44,133)              (5,921)            (16,701)
                                                                      -----------------      ---------------    ----------------
(Decrease) increase in cash                                                    (8,919)               8,919              (5,816)
Cash, beginning of year                                                         8,919                    -               5,816
                                                                      -----------------      ---------------    ----------------
Cash, end of year                                                          $        -            $   8,919           $       -
                                                                      -----------------      ---------------    ----------------

Supplemental cash flow information:
   Cash paid for:
       Interest                                                            $    2,597            $   2,299           $   2,392
   Non cash investing and financing activities:
       Stock received in exchange for assets                               $   14,457            $   6,375           $       -
       Investment acquired for note payable                                $        -            $   2,728           $       -
</TABLE>




The accompanying notes are an integral part of the combined financial statements

                                        5


<PAGE>   7


  SMITHKLINE BEECHAM CLINICAL LABORATORIES, INC. AND CERTAIN RELATED AFFILIATES
                     NOTES TO COMBINED FINANCIAL STATEMENTS
                             (DOLLARS IN THOUSANDS)


(1)    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



BASIS OF PRESENTATION

SmithKline Beecham Clinical Laboratories, Inc. is a subsidiary of SmithKline
Beecham Corporation ("SmithKline Beecham Corp"), itself an indirect subsidiary
of SmithKline Beecham plc ("SmithKline Beecham plc" or the "Parent"), a public
limited company incorporated in 1989 under the laws of England and Wales. The
other entities combined in these financial statements are also indirectly owned
subsidiaries of SmithKline Beecham plc.

The combined financial statements of SmithKline Beecham Clinical Laboratories,
Inc., and certain related affiliates ("the Company"), include the accounts of
the following:

-      SBCL Inc. (US)
-      SmithKline Beecham Clinical Laboratories Inc. (US)
-      The clinical laboratory operations of Fournex SA (Belgium)
-      The clinical laboratory operations of SmithKline Beecham Laboratoires
       Pharmaceutiques SA (France)
-      The clinical laboratory operations of SmithKline Beecham Capital BV
       (Netherlands)
-      The clinical laboratory operations of SmithKline Beecham plc (UK)

The combined financial statements reflect the assets and liabilities, results of
operations and cash flows of the Company as if the Company had existed and
operated as a separate business.

The Company's previously issued financial statements for the years ended
December 31, 1998, 1997, 1996, and 1995 have been restated to properly reflect
the provisions for bad debts and the determination of net revenues. The impact
of these adjustments on the Company's financial results as originally reported
is summarized below:

<TABLE>
<CAPTION>
                                   1998                         1997
                        ---------------------------- ---------------------------
                             As                           As
                         Previously                   Previously
                          Reported      As Restated    Reported     As Restated
                        -------------- ------------- ------------- -------------

<S>                     <C>            <C>           <C>           <C>
Net revenues            $  1,579,843   $ 1,567,843   $ 1,415,356   $ 1,415,356
Total costs and
   expenses                1,519,768     1,519,768     1,362,742     1,375,242
Income (loss)
   before taxes               60,075        48,075        52,614        40,114
Income tax expense            34,147        29,347        31,623        26,623
Net income (loss)             25,928        18,728        20,991        13,491
Parent's equity at
   the end of year           981,756       954,756       992,949       977,949

</TABLE>

<TABLE>
<CAPTION>
                                   1996                         1995
                        ---------------------------- ---------------------------
                             As                           As
                         Previously                   Previously
                          Reported      As Restated    Reported     As Restated
                        ------------- -------------- ------------- -------------

<S>                     <C>           <C>            <C>           <C>
Net revenues            $ 1,287,734   $ 1,287,734
Total costs and
   expenses               1,288,660     1,288,660
Income (loss)
   before taxes                (926)         (926)
Income tax expense           11,462        11,462
Net income (loss)           (12,388)      (12,388)
Parent's equity at
   the end of year          970,775       968,275    $   997,138   $   994,638

</TABLE>


                                        6

<PAGE>   8


  SMITHKLINE BEECHAM CLINICAL LABORATORIES, INC. AND CERTAIN RELATED AFFILIATES
               NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
                             (DOLLARS IN THOUSANDS)


PRINCIPLES OF COMBINATION

All significant intercompany accounts and transactions within the Company have
been eliminated as part of the combination. Investments in companies which are
20-50 percent owned by the Company are accounted for using the equity method of
accounting. All other investments are accounted for using the cost method.

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.

FOREIGN CURRENCY TRANSLATION

The functional currency for the Company's foreign operations is the applicable
local currency. The combined financial results of the Company are subject to
exchange rate fluctuations involving the U.S. dollar and a number of foreign
currencies. The translation from the applicable foreign currencies to U.S.
dollars is performed for balance sheet accounts using the rates of exchange at
the balance sheet date and for revenue and expense accounts using average rates
of exchange for the period. Currency translation adjustments arising on the
opening net equity of the foreign operations and the differences between average
and balance sheet exchange rates and, along with current year translations are
taken as an adjustment to Parent's equity.

INVENTORIES

Inventories are valued at the lower of cost or market and consist mainly of
laboratory testing supplies. Cost is determined by the average cost method.

FINANCIAL INSTRUMENTS

The fair value of financial instruments is determined by reference to various
market data and other valuation techniques as appropriate. Unless otherwise
disclosed, the fair value of financial instruments approximate their recorded
value.

DEBT AND EQUITY SECURITIES

The Company accounts for debt and equity securities in accordance with Statement
of Financial Accounting Standards No. 115, "Accounting for Certain Investments
in Debt and Equity Securities". The statement requires the Company's
available-for-sale securities to be reported at fair value with unrealized
holding gains and losses excluded from earnings and reported as a separate
component of Parent's equity until realized or until determination that such
losses are other than temporary. At December 31, 1998 and 1997 the historical
cost of available-for-sale securities approximated their fair value.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are carried at cost. The cost of additions and
improvements are capitalized, while maintenance and repairs are expensed as
incurred. Depreciation is computed on the straight-line method over the
estimated useful lives of the assets. Useful lives are estimated to be 20-30
years for buildings and 3-7 years for machinery and equipment. Leased property
meeting certain criteria is capitalized and the present value of the related
lease payments is recorded as a liability. Amortization of capitalized leased
assets is computed on the straight-line method over the life of the asset.


                                        7


<PAGE>   9


  SMITHKLINE BEECHAM CLINICAL LABORATORIES, INC. AND CERTAIN RELATED AFFILIATES
               NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
                             (DOLLARS IN THOUSANDS)


REVENUE RECOGNITION

The Company generally recognizes revenue for services rendered upon completion
of the testing process. Billings for services under third party payor programs,
including Medicare and Medicaid, are recorded as revenues net of allowances for
differences between amounts billed and the expected receipts under such
programs. Adjustments, based on final settlement with third party payers, are
recorded upon settlement.

The Company has entered into full risk managed care contracts with insurance
companies to provide clinical laboratory services. Revenue is recognized in
accordance with contract terms. The Company does not purchase reinsurance, as it
retains the underwriting risk under these contracts.

OTHER INCOME, NET

Other income, net includes revenues, costs and expenses derived from sources
outside of the normal course of the Company's operations. These items, primarily
represent gains on sale of assets and settlements of contract disputes.

CONCENTRATIONS OF CREDIT RISK

Concentrations of credit risk with respect to accounts receivable are limited
due to the diversity of the Company's clients, with the exception of exposures
to Medicare and Medicaid receivables. In 1998, 1997 and 1996, approximately 12%,
15% and 20%, respectively of net revenues were generated by Medicare and
Medicaid programs.

GOODWILL AND OTHER INTANGIBLES

Goodwill represents the excess of acquisition costs over the fair value of net
assets of purchased businesses and is amortized on the straight-line method over
the estimated life not to exceed 40 years. Other intangibles include covenants
not to compete, capitalized software, licenses and customer lists and are
amortized on the straight-line method over their estimated useful lives up to 20
years.

For U.S. generally accepted accounting principles purposes, the combination of
Beecham Group plc and SmithKline Beckman Corporation in 1989 was accounted for
using the purchase method. As a result of the 1989 transaction, the Company has
reflected goodwill of approximately $532,000 and identifiable intangible assets
of approximately $72,000. Management has included such amount based on its
evaluation of the respective businesses at the time of the acquisition.
Management's estimate of the allocated goodwill was based on a number of
factors, primarily the proportion of the Company's operating income to
SmithKline Beckman's operating income.


LONG-LIVED ASSETS

In the first quarter of 1996 the Company adopted Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of," which establishes criteria
for recognizing, measuring and disclosing impairments of long-lived assets,
identifiable intangibles and goodwill. The adoption of this accounting standard
did not have a material impact on the combined financial position or combined
results of operations of the Company.

The Company reviews the recoverability of its long-lived assets when events or
changes in circumstances occur that indicate that the carrying value of the
asset may not be recoverable. The Company uses an estimate of the undiscounted
cash flows of the relevant business over the remaining life of the asset in
measuring whether there is a possible impairment.


                                        8


<PAGE>   10


  SMITHKLINE BEECHAM CLINICAL LABORATORIES, INC. AND CERTAIN RELATED AFFILIATES
               NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
                             (DOLLARS IN THOUSANDS)


SEGMENT DISCLOSURE

In 1998, the Company adopted Statement of Financial Accounting Standards
("SFAS") No. 131, "Disclosures about Segments of an Enterprise and Related
Information". SFAS No. 131 establishes standards for reporting financial and
descriptive information about operating segments and related disclosures about
products and services, geographic areas and major customers. SFAS No. 131
affects disclosure only and does not affect reported earnings or cash flows.

The Company is engaged in one line of business, clinical laboratory testing. The
Company's operations are principally in the United States. Operations outside
the United States are principally in Europe. No single foreign country or
geographic region is significant to the combined operations. There were no
significant amounts of sales of services between geographic regions and no
significant amounts of United States export sales.

INCOME TAXES

The Company's US operating results are included in the consolidated federal
income tax return of SmithKline Beecham Corp. Operating results for foreign
entities are included in the applicable foreign income tax return. However, for
financial reporting purposes, the Company's provision for income taxes is
computed on a separate entity basis.

The Company uses the asset and liability approach to account for income taxes.
Under this method, deferred tax assets and liabilities are recognized for the
expected future tax consequences of differences between the carrying amounts of
assets and liabilities and their respective tax bases using tax rates in effect
for the year in which the differences are expected to reverse. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
operations in the period when the change is enacted.

COMPREHENSIVE INCOME

In 1998, the Company adopted Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income". The impact of the adoption of this
statement was not material to the combined financial statements.

(2)    RELATED PARTY TRANSACTIONS

Certain corporate services and other expenses are charged to the Company by
affiliated companies on a direct basis, based on resource usage or dedicated
support percentage. Such amounts are included in the combined statements of
operations of the Company.

The combined financial statements also include allocations from the affiliated
companies of costs for services, including certain accounting and tax, treasury
and cash management, data processing, legal and environmental, facility and risk
management, human resources and labor relations, and government and public
affairs which are not charged directly to the Company. These overhead costs have
been included in these financial statements based on the relative percentage of
operating income to the consolidated operating income which management believes
is a reasonable basis for such cost allocation. Such indirect charges are
reflected in the combined statements of operations and amounted to approximately
$7,300, $7,500 and $10,600 for the years ended December 31, 1998, 1997 and 1996,
respectively.

The U.S. operations of the Company participate in SmithKline Beecham Corp's cash
management system, and the non-U.S. operations of the Company participate in
SmithKline Beecham plc's cash management system. Accordingly, cash received from
the Company's operations is administered centrally along with the financing of
working capital requirements and capital expenditures. The combined statements
of operations include approximately $45,130, $43,542 and $43,254 for the years
ended December 31, 1998, 1997 and 1996, respectively, related to allocations of
interest costs of borrowings of the Parent, deemed to be related to the
operations of the Company.


                                        9


<PAGE>   11


  SMITHKLINE BEECHAM CLINICAL LABORATORIES, INC. AND CERTAIN RELATED AFFILIATES
               NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
                             (DOLLARS IN THOUSANDS)


The Company performed clinical laboratory testing for the Parent and its
subsidiaries. Revenues for these services were $20,034, $37,338 and $12,033 in
1998, 1997 and 1996, respectively. These amounts are included in net revenues in
the combined statements of operations.

All receivables from and payables to the Parent, or any of it's subsidiaries
have been presented as transfers to or from the Parent, as a component of
Parent's equity.

The Company is insured through its Parent's captive insurance company on a
claims made basis. Insurance premiums are paid by SmithKline Beecham Corp. and
are charged back to the Company. Reserves for incurred but not reported claims
of $26,034 and $24,560 are included in the combined balance sheets as of
December 31, 1998 and 1997, respectively, as a component of Parent's equity.

(3)    GOODWILL AND OTHER INTANGIBLES

Goodwill and other intangibles consist of the following:

<TABLE>
<CAPTION>
                                                                              December 31,
                                                              ----------------------------------------------
                                                                      1998                     1997
                                                              ---------------------    ---------------------

<S>                                                                    <C>                      <C>
       Goodwill                                                        $  616,144               $  616,144
       Customer Lists                                                      71,311                   71,311
       Non-compete agreements                                              31,390                   31,390
       Other intangibles                                                   48,675                   66,619
                                                              ---------------------    ---------------------

                                                                          767,520                  785,464
              Less accumulated amortization                              (263,641)                (252,483)
                                                              ---------------------    ---------------------

                                                                       $  503,879               $  532,981
                                                              =====================    =====================
</TABLE>


(4)   PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
                                                                              December 31,
                                                              ----------------------------------------------
                                                                      1998                     1997
                                                              ---------------------    ---------------------

<S>                                                                    <C>                      <C>
       Land and buildings                                              $  129,509               $  127,240
       Leasehold improvements                                              30,167                   29,937
       Property under capital leases                                       32,024                   32,024
       Furniture and fixtures                                              25,120                   24,589
       Machinery and equipment                                            228,579                  229,271
                                                              ---------------------    ---------------------

                                                                          445,399                  443,061
       Less accumulated depreciation and amortization                    (229,880)                (224,397)
                                                              ---------------------    ---------------------

                                                                       $  215,519               $  218,664
                                                              =====================    =====================
</TABLE>

Depreciation and amortization expense related to property, plant and equipment
was $35,169, $38,958 and $42,524 in 1998, 1997 and 1996, respectively.


                                       10


<PAGE>   12


  SMITHKLINE BEECHAM CLINICAL LABORATORIES, INC. AND CERTAIN RELATED AFFILIATES
               NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
                             (DOLLARS IN THOUSANDS)


(5)    DEBT

The Company's long-term debt at December 31, 1998 and 1997 consists of debt held
at fixed and variable rates ranging from 7.6% to 12.5% at December 31, 1998, and
obligations related to capital leases for two facilities at an imputed interest
rate of 7.1% at December 31, 1998.

The aggregate maturities of long-term debt and capital leases for the years
subsequent to December 31, 1998 are as follows:

<TABLE>
<CAPTION>
       Year                                         Long Term Debt             Capital Leases
                                                  --------------------     ------------------------

<S>                                                         <C>                        <C>
       1999                                                  $    761                    $  2,728
       2000                                                     1,411                      29,110
       2001                                                     1,396                           -
       2002                                                     2,650                           -
       Thereafter                                                   -                           -
                                                  --------------------     ------------------------
                                                             $  6,218                    $ 31,838
                                                  --------------------     ------------------------

       Imputed interest                                                                    (2,994)
                                                                           ------------------------
       Present value of minimum lease payments                                             28,844
       Less: current portion                                                                1,399
                                                                           ------------------------
       Long-term capitalized lease obligations                                           $ 27,445
                                                                           ========================


</TABLE>


In 2000, the capital leases on the two facilities expire, at which point the
Company has three options: extend the leases for three years, at which point the
Company is obligated to purchase the facilities, purchase the facilities or find
a third party to purchase the facilities.

It has been assumed that the Company will purchase the facilities at the end of
the initial lease period for the purposes of the above table. If the last option
is chosen, the Company is liable for any difference between the residual value
and the fair market value if the residual value exceeds the fair value.
SmithKline Beecham Clinical Laboratories, Inc. is a guarantor of debt related to
the aforementioned capital leases. At December 31, 1998 total guaranteed debt
outstanding approximated the Company's payables to the lessor.




                                       11


<PAGE>   13


  SMITHKLINE BEECHAM CLINICAL LABORATORIES, INC. AND CERTAIN RELATED AFFILIATES
                NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
                             (DOLLARS IN THOUSANDS)


(6)    INCOME TAXES

The components of the provision for (benefit from) income taxes for 1998, 1997
and 1996 are as follows:

<TABLE>
<CAPTION>
                             1998              1997               1996
                         --------------    --------------    ---------------
<S>                         <C>               <C>             <C>
Current:
    Federal                  $      -          $      -           $ 33,907
    State and local               990                                7,855
    Foreign                    (1,295)              142              1,214
                         --------------    --------------    ---------------
                                 (305)              142             42,976
                         --------------    --------------    ---------------

Deferred:
    Domestic                   29,652            26,481            (31,514)
    Foreign
                                    -                 -                  -
                         --------------    --------------    ---------------
                               29,652            26,481            (31,514)
                         --------------    --------------    ---------------


Total                        $ 29,347          $ 26,623           $ 11,462
                         ==============    ==============    ===============
</TABLE>

A reconciliation of the U.S. federal statutory rate to the Company's effective
tax rate is as follows:

<TABLE>
<CAPTION>
                                                           1998             1997              1996
                                                        ------------    -------------     -------------
<S>                                                       <C>              <C>             <C>
Tax provision (benefit) at statutory rate                     35.0%            35.0%           (35.0%)

State and local income taxes, net of                           5.6              5.5             23.8
  Federal tax benefit
Non-deductible goodwill amortization                          17.4             21.1            835.1
Business meals, and entertainment and other                    0.9              0.9             34.0
Impact of foreign operations                                   2.1              3.9            379.9

                                                        ------------    -------------     -------------
Effective tax rate                                            61.0%            66.4%         1,237.8%
                                                        ============    =============     =============
</TABLE>

As of December 31, 1998 and 1997, the Company recorded net deferred tax assets
comprised primarily of temporary differences related to net operating losses and
reserves. Since the Company does not file a stand-alone income tax return for
federal purposes, substantially all of the deferred tax assets and liabilities
will not be settled by the Company upon the completion of the transaction with
Quest Diagnostics, Inc. ("Quest") (Note 12). Therefore, the deferred tax assets
and liabilities have been recorded as transfers to or from Parent, which is a
component of Parent's equity. Since the Parent pays taxes on behalf of the
Company, income taxes payable or receivable have also been classified as
transfers to or from Parent, and included as a component of Parent's equity.

(7)    PENSION BENEFITS

SmithKline Beecham Clinical Laboratories, Inc. participates in the SmithKline
Beecham Corp Retirement Plan, a defined benefit pension plan covering
substantially all employees. Benefits are based on average final pay and years
of service. Information on the actuarial present value of the benefit
obligation, fair value of plan assets and pension costs is not provided as such
information is not maintained separately for employees of SmithKline Beecham
Clinical Laboratories, Inc. Pension expense allocated for 1998, 1997 and 1996
was $26,446, $18,963 and $24,875 respectively. Amounts relating to foreign
subsidiaries were not material.

SmithKline Beecham Clinical Laboratories, Inc.'s expenses associated with the
Plan are funded by the Parent. Therefore, the liabilities associated with
pension expense are classified as transfers to or from Parent, and included as a
component of Parent's equity.


                                       12

<PAGE>   14

 SMITHKLINE BEECHAM CLINICAL LABORATORIES, INC. AND CERTAIN RELATED AFFILIATES
               NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
                             (DOLLARS IN THOUSANDS)

(8)        OTHER POSTRETIREMENT AND POSTEMPLOYMENT  BENEFITS

SmithKline Beecham Clinical Laboratories, Inc. participates in certain medical,
dental and life insurance programs provided to retired SmithKline Beecham Corp.
employees. Substantially all U.S. employees are covered and become eligible for
these benefits upon satisfying the appropriate age and service requirements
necessary for receipt of these benefits. Generally, non-U.S. employees receive
similar benefits from government sponsored plans.

SmithKline Beecham Clinical Laboratories, Inc.'s allocated portion of the net
periodic postretirement cost was $20,123, $16,772 and $16,965 in 1998, 1997 and
1996, respectively. SmithKline Beecham Clinical Laboratories, Inc.'s expense
associated with other post-retirement benefits are funded by the Parent.
Therefore, the liabilities associated with the related expenses are classified
as transfers to or from the Parent, and included as a component of Parent's
equity.

(9)    COMMITMENTS

The Company leases certain facilities, equipment and automobiles. Certain of the
leases provide for payment of taxes, insurance and other charges by the lessee.
Rental expense was $41,576 in 1998, $41,978 in 1997 and $42,878 in 1996.

Future minimum rental payments required under non-cancelable operating leases
that have initial or remaining terms of more than one year as of December 31,
1998 are as follows:


<TABLE>
<S>                             <C>
1999                                       $  25,851
2000                                          16,030
2001                                           8,698
2002                                           2,940
2003                                           1,353
Thereafter                                     1,169
                                ---------------------
                                           $  56,041
                                =====================
</TABLE>


(10)    CONTINGENT LIABILITIES

The Company is involved in various legal and administrative proceedings
considered normal to its business, including suits claiming damages arising from
the Company's services. The Company is also a party to legal proceedings with
regard to environmental matters.

In 1996, the Company and the U.S. government and certain states reached a
settlement with respect to the government's civil and administrative claims
arising from an investigation by the Office of the Inspector General of the U.S.
Department of Health and Human Services into the Company's billing and marketing
practices. In connection therewith, certain affiliates of the Company paid the
government $325 million which had been reserved in prior years.

The Company is also responding to claims and lawsuits from non-governmental
parties, including private insurers, self-funded employer plans and patients,
concerning similar practices as they may relate to amounts paid by those
parties. The lawsuits include ten purported class actions filed in various
jurisdictions in the United States and one non-class action complaint by a
number of insurance companies that seek damages allegedly arising from payments
they made for clinical laboratory testing services. Nine of the purported class
actions have been consolidated into one complaint which has been consolidated
with the insurers' suit, for pretrial proceedings, in the U.S. District Court
for the District of Connecticut. The other purported class action

                                       13
<PAGE>   15

 SMITHKLINE BEECHAM CLINICAL LABORATORIES, INC. AND CERTAIN RELATED AFFILIATES
               NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
                             (DOLLARS IN THOUSANDS)

remains pending in state court in Illinois. Similar claims by several other
individual third party payers have been settled. SmithKline Beecham plc has
agreed to indemnify the Company for the after-tax expense of any similar such
settlements entered into after December 31, 1998.

Although the outcome of claims, legal proceedings and other matters in which the
Company is involved cannot be predicted with any certainty, the Company does not
expect that its ultimate liability for such matters, after taking into account
provisions, tax benefits and insurance, to have a material adverse effect on its
financial condition, results of operations or cash flows.

(11)    STOCK COMPENSATION PLANS

The Company applies Accounting Principle Board Opinion No. 25, "Accounting for
Stock Issued to Employees", and related interpretations in accounting for its
plans. Accordingly, no compensation expense has been recognized for its
stock-based compensation plans other than for performance-based awards. Certain
management personnel of the Company receive SmithKline Beecham stock options.

1989 and 1991 Plans:

The Company participates in the Parent's SmithKline Beecham UK Executive Share
Option Plan 1989 and the SmithKline US Executive Share Option Plan 1989. The
Company also participates in the Parent's employee share ownership plan under
which the employees are granted options over Ordinary Shares and Ordinary Share
ADRs (American Depository Receipts) purchased in the market by the ESOT
(Employee Share Ownership Trust) established in 1991. Under these plans,
eligible employees may be granted options to subscribe for unissued Shares (or
Share ADRs),or in the case only of the 1991 Plan issued shares bought by the
ESOT, at prices no less than the higher of the average middle market price on
the five days prior to the grant or their nominal amount. Options are normally
exercisable between the third and tenth anniversaries of the date of grant.
Options are no longer granted under the US 1989 Plan. The Parent restricts the
number of shares that can be issued for sale to option holders to 5% of the
issued share capital of the Parent.

If the Company had followed the fair value method for the 1989 and 1991 stock
option plans, in accordance with Statement of Financial Accounting Standard No.
123, "Accounting for Stock-Based Compensation," pro-forma net income (loss) as
compared to net reported income (loss) would have been approximately:

<TABLE>
<CAPTION>
                                                        1998                      1997                       1996
                                                ---------------------    -----------------------    -----------------------
<S>                                                       <C>              <C>                             <C>
Net income (loss):
       - as reported                                      $  18,728        $        13,491                 $  (12,388)
       - pro forma                                        $ (12,831)       $        (3,688)                $  (17,804)

</TABLE>

The pro forma results may not be representative of the effects on reported
income for future years. The fair value of each stock option grant has been
estimated on the date of the grant using the Black Scholes option pricing model
with the following weighted average assumptions:

<TABLE>
<CAPTION>
Years Ended December 31,                            1998              1997               1996
                                                -------------     -------------      --------------

<S>                                             <C>               <C>                 <C>
     Interest rate                                      4.3%              6.5%                7.5%
     Dividend yield                                     1.4%              1.6%                2.6%
     Expected volatility                               39.0%             32.0%               22.0%
     Expected life in years                             7yrs              7yrs                7yrs
     Forfeiture rate                                    1.0%              1.0%                1.0%
     Average fair-value of options                   $ 28.05           $ 16.01              $ 8.66
</TABLE>


                                       14
<PAGE>   16

 SMITHKLINE BEECHAM CLINICAL LABORATORIES, INC. AND CERTAIN RELATED AFFILIATES
               NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
                             (DOLLARS IN THOUSANDS)

For 1998, 1997 and 1996, the Company's stock option activity in ADRs for the
1989 and 1991 stock option plan for ADRs is summarized below:

<TABLE>
<CAPTION>
                                                      1998                 1997                   1996
                                                 ----------------     ----------------      ------------------

<S>                                              <C>                  <C>                     <C>
Outstanding at beginning of year                      5,791,198            4,604,126               4,781,082
Granted                                               1,958,949            2,226,423                 581,907
Forfeited/Cancelled                                     (90,267)             (84,197)               (109,759)
Exercised                                              (914,425)            (955,154)               (649,104)
Outstanding at end of year                            6,745,455            5,791,198               4,604,126
Exercisable at end of year                            1,632,150            1,680,090               1,686,530
</TABLE>


Other Stock-Based Compensation Plans:

Certain employees of the Company participate in other stock-based compensation
plans, which under APB 25 qualify as variable plans. Expenses recognized in
relation to these plans were $6,288, $2,277 and $383 in 1998, 1997 and 1996,
respectively.

(12)    SUBSEQUENT EVENTS

On February 9, 1999, SmithKline Beecham plc entered into an agreement to sell
the Company to Quest Diagnostics in exchange for approximately $1 billion of
cash and 12.6 million shares of Quest Diagnostics common stock, which will
approximate 29.5% of Quest's Diagnostics' outstanding common stock at the
closing. As part of the purchase agreement, various compensation plans will be
altered. Also, as a result of the transaction with Quest Diagnostics the future
capital lease commitments may be accelerated due to change in control provisions
of the lease agreements.

On August 16, 1999, Quest Diagnostics completed the acquisition of the Company
from SmithKline Beecham plc for approximately $1.025 billion in cash and through
the issuance of 12,564,336 shares of common stock of Quest Diagnostics. The
agreement to sell the Company included a provision for a purchase price
adjustment. On October 11, 2000, SmithKline Beecham plc and Quest Diagnostics
announced that they agreed to a reduction in the purchase price of $98.6
million.

                                       15
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.7
<SEQUENCE>6
<FILENAME>y41662ex99-7.txt
<DESCRIPTION>UNAUDITED INTERIM COMBINED BALANCE SHEET
<TEXT>

<PAGE>   1

                                                                    EXHIBIT 99.7

       SMITHKLINE BEECHAM CLINICAL LABORATORIES, INC. AND CERTAIN RELATED
                                   AFFILIATES
                             COMBINED BALANCE SHEETS
                             (DOLLARS IN THOUSANDS)
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                               ASSETS

                                                                                     June 30,                     December 31,
                                                                                       1999                           1998
                                                                             -----------------------        ----------------------
<S>                                                                                     <C>                           <C>
Current assets:
      Cash                                                                              $         -                   $         -
      Accounts receivable (net of allowances of
         $121,507 and $101,396 respectively)                                                353,960                       329,102
      Inventories                                                                            18,436                        17,934
      Prepaid expenses and other current assets                                              12,253                         9,975
                                                                             -----------------------        ----------------------
            Total current assets                                                            384,649                       357,011

Goodwill and other intangibles, net                                                         493,467                       503,879
Property, plant and equipment, net                                                          208,730                       215,519
Other assets                                                                                 14,504                        35,862
                                                                             -----------------------        ----------------------

            Total assets                                                                $ 1,101,350                   $ 1,112,271
                                                                             =======================        ======================


<CAPTION>
                                                   LIABILITIES AND PARENT'S EQUITY

<S>                                                                                     <C>                           <C>
Current liabilities:
      Accounts payable                                                                   $   52,890                    $   39,152
      Current portion of long-term debt                                                       2,161                         2,160
      Accrued compensation and benefits                                                      27,405                        37,657
      Estimated out-of-network laboratory claims                                             51,136                             -
      Other current liabilities                                                              72,569                        45,644
                                                                             -----------------------        ----------------------
            Total current liabilities                                                       206,161                       124,613

Long-term debt                                                                               29,770                        32,902
Deferred income                                                                                 700                             -
Commitments and contingent liabilities
Parent's equity                                                                             864,719                       954,756
                                                                             -----------------------        ----------------------

            Total liabilities and Parent's equity                                       $ 1,101,350                    $1,112,271
                                                                             =======================        ======================
</TABLE>



The accompanying notes are an integral part of the combined financial statements

                                       1
<PAGE>   2


       SMITHKLINE BEECHAM CLINICAL LABORATORIES, INC. AND CERTAIN RELATED
                                   AFFILIATES
                        COMBINED STATEMENTS OF OPERATIONS
                             (DOLLARS IN THOUSANDS)
                                   (UNAUDITED)



<TABLE>
<CAPTION>
                                                             Three Months Ended               Six Months Ended
                                                          ------------------------        -------------------------
                                                          June 30,        June 25,        June 30,         June 25,
                                                            1999            1998            1999             1998
                                                          --------        --------        --------         --------

<S>                                                       <C>             <C>             <C>              <C>
Net revenues                                              $474,689        $384,194        $888,021         $730,707

Costs and expenses:
      Cost of services                                     349,122         266,410         644,415          501,761
      Provision for bad debts                               59,501          28,330          95,107           59,888
      Selling, general and administrative                   80,847          68,626         146,881          133,679
      Interest expense, net                                 11,364          11,759          22,673           23,017
      Amortization of goodwill and  intangibles              7,529           7,573          14,971           14,736
      Other expense (income), net                            1,712          (9,436)         (7,491)         (20,816)
                                                          --------        --------        --------         --------

Total costs and expenses                                   510,075         373,262         916,556          712,265
                                                          --------        --------        --------         -------

(Loss) income before taxes                                 (35,386)         10,932         (28,535)          18,442

Income tax expense                                         (12,054)          6,473          (7,214)          11,577
                                                          --------        --------        --------         --------

Net (loss) income                                         $(23,332)       $  4,459        $(21,321)        $  6,865
                                                          ========        ========        ========         ========
</TABLE>

The accompanying notes are an integral part of the combined financial statements

                                       2
<PAGE>   3



       SMITHKLINE BEECHAM CLINICAL LABORATORIES, INC. AND CERTAIN RELATED
                                   AFFILIATES
                COMBINED STATEMENTS OF CHANGES IN PARENT'S EQUITY
                             (DOLLARS IN THOUSANDS)
                                   (UNAUDITED)



<TABLE>
<CAPTION>

                                                           June 30,                       June 25,
                                                             1999                           1998
                                                    -----------------------        -----------------------

<S>                                                             <C>                             <C>
  Balance, beginning of year                                    $ 954,756                       $ 977,949

  Net (loss) income                                               (21,321)                          6,865

  Net transfers to parent                                         (68,716)                        (14,866)
                                                    -----------------------        -----------------------

  Balance, end of period                                        $ 864,719                       $ 969,948
                                                    =======================        =======================
</TABLE>

The accompanying notes are an integral part of the combined financial statements

                                       3
<PAGE>   4


       SMITHKLINE BEECHAM CLINICAL LABORATORIES, INC. AND CERTAIN RELATED
                                   AFFILIATES
                        COMBINED STATEMENTS OF CASH FLOWS
                             (DOLLARS IN THOUSANDS)
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                                                                 Six Months Ended
                                                                                 --------------------------------------------------
                                                                                       June 30,                    June 25,
CASH FLOWS FROM OPERATING ACTIVITIES:                                                    1999                        1998
                                                                                 ----------------------     -----------------------

<S>                                                                                      <C>                         <C>
Net (loss) income                                                                        $    (21,321)               $      6,865
   Adjustments to reconcile net (loss) income to net
   Cash provided by operating activities:
      Depreciation and amortization                                                            31,523                      32,034
      Gain on sale of assets                                                                   (9,296)                    (13,909)
      Provisions for bad debts                                                                 95,107                      59,888
      Equity in undistributed earnings of affiliates                                             (495)                    ( 1,123)
      Changes in assets and liabilities:
           Increase in accounts receivable                                                   (119,965)                    (61,705)
           Increase in inventories                                                               (502)                       (581)
           (Increase) decrease in prepaid expenses and other current assets                    (2,278)                        879
           (Increase) decrease in other assets                                                     43                      (1,427)
           Increase in estimated out-of-network laboratory claims                              51,136                           -
           Increase (decrease) in accounts payable, accrued compensation
           and benefits and other current liabilities                                          30,211                      (1,070)
                                                                                 ----------------------     -----------------------

Net cash provided by operating activities                                                      54,163                      19,851
                                                                                 ----------------------     -----------------------

CASH FLOWS FROM INVESTING ACTIVITIES:

Capital expenditures                                                                          (17,170)                    (13,012)
Proceeds from sale of assets                                                                    2,044                         164
                                                                                 ----------------------     -----------------------

Net cash used in investing activities                                                         (15,126)                    (12,848)
                                                                                 ----------------------     -----------------------

CASH FLOWS FROM FINANCING ACTIVITIES:

Net transfers to Parent                                                                       (35,906)                    (14,866)
Repayment of long-term debt                                                                    (3,131)                     (1,056)
                                                                                 ----------------------     -----------------------

Net cash used in financing activities                                                         (39,037)                    (15,922)
                                                                                 ----------------------     -----------------------
Increase (decrease) in cash                                                                         -                      (8,919)
Cash, beginning of year                                                                             -                       8,919
                                                                                 ----------------------     -----------------------
Cash, end of period                                                                      $          -                $          -
                                                                                 ======================     =======================

Supplemental cash flow information:
   Cash paid for:
        Interest                                                                         $      1,096                $      1,204
   Non cash investing and financing activities:
          Stock received in exchange for assets                                          $     11,000                $     13,310
          Deferred income from sale of assets                                            $        900                $          -
          Investment in stock transferred to Parent                                      $     32,810                $          -
</TABLE>

The accompanying notes are an integral part of the combined financial statements

                                       4
<PAGE>   5


       SMITHKLINE BEECHAM CLINICAL LABORATORIES, INC. AND CERTAIN RELATED
                                   AFFILIATES
                     NOTES TO COMBINED FINANCIAL STATEMENTS
                             (DOLLARS IN THOUSANDS)


(1)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

SmithKline Beecham Clinical Laboratories, Inc. is a subsidiary of SmithKline
Beecham Corporation ("SmithKline Beecham Corp"), itself an indirect subsidiary
of SmithKline Beecham plc ("SmithKline Beecham plc" or the "Parent"), a public
limited company incorporated in 1989 under the laws of England and Wales. The
other entities combined in these financial statements are also indirectly owned
subsidiaries of SmithKline Beecham plc.

The combined financial statements of SmithKline Beecham Clinical Laboratories,
Inc., and certain related affiliates ("the Company"), include the accounts of
the following:

-          SBCL Inc. (US)
-          SmithKline Beecham Clinical Laboratories Inc. (US)
-          The clinical laboratory operations of Fournex SA (Belgium)
-          The clinical laboratory operations of SmithKline Beecham Laboratoires
           Pharmaceutiques SA (France)
-          The clinical laboratory operations of SmithKline Beecham Capital BV
           (Netherlands)
-          The clinical laboratory operations of SmithKline Beecham plc (UK)

The combined financial statements reflect the assets and liabilities, results of
operations and cash flows of the Company as if the Company had existed and
operated as a separate business.

In the opinion of management, the accompanying interim combined financial
statements contain all adjustments necessary, after the restatement discussed
below, to present fairly the financial position of the Company as of June 30,
1999 and the results of operations and cash flows for the six months ended June
30, 1999 and June 25, 1998. All adjustments, except for an accrual for costs to
provide free counseling and blood tests to certain patients (see Note 3), are
normal and recurring in nature. The interim combined financial statements are
unaudited and are subject to year-end adjustment. The results of operations for
the interim period are not necessarily indicative of the results expected for
the full year. These interim combined financial statements should be read in
conjunction with the Company's audited combined financial statements as of
December 31, 1998, and for the year then ended.

The Company's previously issued financial statements for the six months ended
June 30, 1999 have been restated to properly reflect the provisions for bad
debts, determination of net revenues and an accrual for a loss contract. The
impact of these adjustments on the Company's financial results as originally
reported is summarized below:

                                       5
<PAGE>   6


       SMITHKLINE BEECHAM CLINICAL LABORATORIES, INC. AND CERTAIN RELATED
                                   AFFILIATES
               NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
                             (DOLLARS IN THOUSANDS)



<TABLE>
<CAPTION>
                                         For the Three Months Ended                        For the Six Months Ended
                                                June 30, 1999                                   June 30, 1999
                               ------------------------------------------------ -----------------------------------------------
                                    As Previously                                    As Previously
                                      Reported                 As Restated             Reported                As Restated
                               ------------------------ ----------------------- ------------------------ ----------------------

<S>                            <C>                      <C>                     <C>                      <C>
Net revenues                   $            474,689     $           474,689     $           888,021      $           888,021
Total costs and expenses                    476,875                 510,075                 883,356                  916,556
Income (loss) before taxes                   (2,186)                (35,386)                  4,665                  (28,535)
Income tax expense                            1,226                 (12,054)                  6,066                   (7,214)
Net income (loss)                            (3,412)                (23,332)                 (1,401)                 (21,321)
</TABLE>


PRINCIPLES OF COMBINATION

All significant intercompany accounts and transactions within the Company have
been eliminated as part of the combination. Investments in companies which are
20-50 percent owned by the Company are accounted for using the equity method of
accounting. All other investments are accounted for using the cost method.

FISCAL PERIOD

The Company operates on a calendar year basis for annual reporting purposes. For
interim reporting purposes, the Company normally operates on a 13 week fiscal
period that ends on the last Thursday of the calendar quarter. Due to a delay in
the transaction with Quest Diagnostics Incorporated ("Quest") (see Note 5), the
Company completed its second quarter of 1999 on June 30, 1999. As a result,
there were 68 trading days in the second quarter of 1999 compared to 64 trading
days in the second quarter of 1998.

ESTIMATED OUT-OF-NETWORK LABORATORY CLAIMS

The Company is a party to two full risk capitated agreements with managed care
organizations (MCOs) to provide laboratory services to certain MCO members.
These services are provided by the Company and by independent laboratories under
terms of the agreements with the MCOs. Services under these arrangements are
reimbursed by the MCOs at contractually established rates. Expenses incurred
under these contracts are included in cost of services in the Company's combined
statement of operations. The estimated liability for out-of-network laboratory
claims outstanding is based upon an estimate of incurred but not reported
claims. Methods used to determine the estimates are continually revised and any
resulting adjustments are included in current operating results. The Company
does not purchase reinsurance, as it retains the underwriting risk for all
coverages under the contract.

(2)  OTHER EXPENSE (INCOME), NET

Other expense (income), net, is comprised primarily of gain on the sale of
assets of $9,296 for the six months ended June 30, 1999, and gain on the sale of
assets of $13,909 and income from a customer contract related settlement of
$7,700 for the six months ended June 25, 1998.

(3)  CONTINGENT LIABILITIES

The Company is involved in various legal and administrative proceedings
considered normal to its business, including suits claiming damages arising from
the Company's services. The Company is also a party to legal proceedings with
regard to environmental matters.

                                       6
<PAGE>   7

       SMITHKLINE BEECHAM CLINICAL LABORATORIES, INC. AND CERTAIN RELATED
                                   AFFILIATES
               NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
                             (DOLLARS IN THOUSANDS)

In 1996, the Company and the U.S. government and certain states reached a
settlement with respect to the government's civil and administrative claims
arising from an investigation by the Office of the Inspector General of the U.S.
Department of Health and Human Services into the Company's billing and marketing
practices. In connection therewith, certain affiliates of the Company paid the
government $325 million which had been reserved in prior years.

The Company is also responding to claims and lawsuits from non-governmental
parties, including private insurers, self-funded employer plans and patients,
concerning similar practices as they may relate to amounts paid by those
parties. The lawsuits include ten purported class actions filed in various
jurisdictions in the United States and one non-class action complaint by a
number of insurance companies that seek damages allegedly arising from payments
they made for clinical laboratory testing services. The ten purported class
actions have been consolidated into one complaint which has been consolidated
with the insurers' suit, for pretrial proceedings, in the U.S. District Court
for the District of Connecticut. On July 2, 1999, the District Court Judge
presiding over the consolidated litigation granted, with certain exceptions, the
Company's motions to dismiss (with prejudice) the insurance companies' second
amended complaint, thereby dismissing all of the RICO claims pending against the
Company as well as several of the other claims asserted in the litigation.
Similar claims by several other individual third party payers have been settled.
SmithKline Beecham plc has agreed to indemnify the Company for the after-tax
expense of any similar such settlements entered into after December 31, 1998.

On March 22, 1999 the Company learned that an employee at a patient service
center in Palo Alto, California had at times reused certain needles when drawing
blood from patients. The phlebotomist was immediately suspended and thereafter
dismissed. The Company is cooperating with local, state and federal health
agencies to address public health issues arising from the employee's breach of
standard medical practices and has offered free testing to approximately 15,300
patients whose blood may have been drawn by this phlebotomist to determine
whether those patients have been exposed to hepatitis B, hepatitis C or HIV. A
number of civil actions, including some purporting to be class actions, have
been filed against the Company in federal and state courts in California on
behalf of individuals who may have been affected by the phlebotomist's reuse of
needles or other alleged improper practices. An initial provision for the
estimated cost of the free counseling and follow-up blood tests for the affected
patients has been included in cost of services in the Company's combined
statement of operations for the six months ended June 30, 1999, but at this
stage the total costs associated with this matter are not yet determinable. The
stock and asset purchase agreement was amended to provide that SmithKline
Beecham plc will indemnify Quest and the Company for the out-of-pocket costs of
the counseling and testing, for liabilities arising out of the civil actions and
for other losses arising out of the conduct of this employee, other than
consequential damages.

Although the outcome of claims, legal proceedings and other matters in which the
Company is involved cannot be predicted with any certainty, the Company does not
expect that its ultimate liability for such matters, after taking into account
provisions, tax benefits and insurance, to have a material adverse effect on its
financial condition, results of operations or cash flows.

(4)  COMMITMENTS

The Company has financed two facilities with capital leases. In 2000, the
capital leases on these facilities will expire, at which point the Company has
three options: extend the leases for three years, at which point the Company is
obligated to purchase the facilities, purchase the facilities or find a third
party to purchase the facilities. If the last option is chosen, the Company is
liable for any difference between the residual value and the fair market value
if the residual value exceeds the fair value. The future minimum lease payments
due under these leases is $27,928 as of June 30, 1999 (see Note 5).


                                       7
<PAGE>   8

       SMITHKLINE BEECHAM CLINICAL LABORATORIES, INC. AND CERTAIN RELATED
                                   AFFILIATES
               NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
                             (DOLLARS IN THOUSANDS)

SmithKline Beecham Clinical Laboratories, Inc. is a guarantor of debt related to
the aforementioned capital leases. At December 31, 1998 total guaranteed debt
outstanding approximated the Company's payables to the lessor.

(5)  SALE OF THE COMPANY

On February 9, 1999, SmithKline Beecham plc entered into an agreement to sell
the Company to Quest Diagnostics in exchange for approximately $1 billion of
cash and 12.6 million shares of Quest Diagnostics common stock, which will
approximate 29.5% of Quest's Diagnostics' outstanding shares at closing. As part
of the purchase agreement, various compensation plans will be altered. Also, as
a result of the transaction with Quest Diagnostics, the future capital lease
commitments may be accelerated due to change in control provisions of the lease
agreements.

On August 16, 1999, Quest Diagnostics completed the acquisition of the Company
from SmithKline Beecham plc for approximately $1.025 billion in cash and through
the issuance of 12,564,336 shares of common stock of Quest Diagnostics. The
agreement to sell the Company includes a provision for a purchase price
adjustment. On October 11, 2000, SmithKline Beecham plc and Quest Diagnostics
announced that they agreed to a reduction in the purchase price of $98.6
million.

(6)  SUBSEQUENT EVENTS

In July 1999, the Company extended, for three years, the lease of one of its
facilities financed with a capital lease (see Note 4).

Also in July 1999, the Company obtained waivers of the change in control
provisions of the lease agreements for the two facilities financed with capital
leases (see Note 4). The provisions would have permitted the lessor to
accelerate the future capital lease commitments as a result of the transaction
with Quest (see Note 5).

                                       8
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.8
<SEQUENCE>7
<FILENAME>y41662ex99-8.txt
<DESCRIPTION>UNAUDITED PROFORMAS
<TEXT>

<PAGE>   1

                                                                    EXHIBIT 99.8

                UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

      On August 16, 1999, Quest Diagnostics Incorporated (the "Company" or
"Quest Diagnostics") completed the acquisition of the clinical laboratory
business of SmithKline Beecham plc ("SmithKline Beecham") for approximately $1.3
billion. The acquisition of SmithKline Beecham Clinical Laboratories, Inc. and
certain related affiliates ("SBCL") was accounted for under the purchase method
of accounting.

      Quest Diagnostics has filed this Form 8-K to amend the pro forma combined
financial information previously reported by the Company (1) to reflect the
restated historical financial statements of SBCL prepared in conjunction with
finalizing the purchase price adjustment provided for in the SBCL acquisition
agreements, (2) to reflect the reduction in the purchase price of the SBCL
acquisition (3) to reflect the completion of the purchase price allocation, and
(4) to revise other adjustments that had been reflected in the previously
reported pro forma combined financial information. The amendment has no impact
on any of the previously reported historical financial statements of Quest
Diagnostics, either before or after the acquisition.

      The following unaudited pro forma combined financial statements of Quest
Diagnostics have been prepared to illustrate the effects of the following
transactions:

-     Quest Diagnostics' purchase of the clinical laboratory business of
      SmithKline Beecham for approximately $1.3 billion. The purchase price was
      paid through the issuance of 12,564,336 shares of common stock of the
      Company, representing approximately 29% of the Company's then outstanding
      common stock, and the payment of $1.025 billion in cash, which includes
      $20 million payable under a non-competition agreement.

-     Quest Diagnostics' financing of the cash purchase price and transaction
      costs associated with the SBCL acquisition and its repayment of its then
      existing bank debt with cash on-hand and borrowings under the new credit
      facility.

      The SBCL acquisition agreements included a provision for a reduction in
the purchase price paid by Quest Diagnostics in the event that the combined
balance sheet of SBCL indicated that the net assets acquired, as of the
acquisition date, were below a prescribed level. On October 11, 2000, the
purchase price adjustment was finalized with the result that SmithKline Beecham
owed Quest Diagnostics $98.6 million. This amount was offset by $3.6 million
separately owed by Quest Diagnostics to SmithKline Beecham, resulting in a net
payment to the Company by SmithKline Beecham of $95.0 million. This payment
from SmithKline Beecham will be recorded in the historical financial statements
of the Company in the fourth quarter of 2000 as a reduction in the purchase
price of the SBCL acquisition.

      In addition to the purchase price reduction described above, the purchase
price allocation relating to the SBCL acquisition was completed in conjunction
with the preparation of the Company's quarterly report on Form 10-Q for the
fiscal quarter ended September 30, 2000. Adjustments to the SBCL purchase price
allocation reflected in the unaudited pro forma combined balance sheet as of
June 30, 1999 are primarily related to deferred tax assets acquired, the sale of
certain assets of SBCL to unconsolidated joint ventures of Quest Diagnostics and
accrued expenses related to pre-acquisition periods. None of the adjustments,
resulting from the purchase price reduction or the completion of the purchase
price allocation, will have any impact on the Company's previously reported
historical financial statements.

      The unaudited pro forma combined balance sheet as of June 30, 1999 gives
effect to the SBCL acquisition, the repayment of Quest Diagnostics' then
existing bank debt and the amounts borrowed under the new credit facility as if
they had occurred on June 30, 1999. The unaudited pro forma combined statements
of operations assume the SBCL acquisition, repayment of Quest Diagnostics' then
existing bank debt and borrowings under the new credit facility were effected on
the first day of the earliest period presented.

      The costs associated with severance and other integration-related
activities for 1999 and 2000, including the elimination of duplicate facilities
and related workforce reductions are included in the unaudited pro forma
combined balance sheet as of June 30, 1999. A significant portion of the
integration related costs are expected to require cash outlays.

      The unaudited pro forma combined statements of operations do not include
the impact of nonrecurring costs and synergies directly related to the SBCL
acquisition, including the costs and benefits associated with the integration of
SBCL with Quest Diagnostics.

      The pro forma adjustments, and the assumptions on which they are based,
are described in the accompanying notes to the unaudited pro forma combined
financial statements.

      The unaudited pro forma combined financial statements are presented for
illustrative purposes only to assist in analyzing the financial implications of
the SBCL acquisition. The unaudited pro forma combined financial information may
not be indicative of the combined financial results of operations that would
have been realized had Quest Diagnostics and SBCL been a single entity during
the periods presented. In addition, the unaudited pro forma combined financial
information is not necessarily indicative of the future results that the
combined company will experience. The unaudited pro forma combined financial
information is only a summary and you should read it together with the
historical financial statements and related notes of Quest Diagnostics and the
historical financial statements and related notes of SBCL.


<PAGE>   2



                 QUEST DIAGNOSTICS INCORPORATED AND SUBSIDIARIES
                   UNAUDITED PRO FORMA COMBINED BALANCE SHEET
                                  JUNE 30, 1999
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>
                                                                                        Pro Forma and
                                                      Quest                                 Other                       Adjusted
                                                   Diagnostics            SBCL           Adjustments                   Pro Forma
                                                 -----------------  ----------------- ----------------------------  ----------------
<S>                                              <C>                <C>               <C>
ASSETS
CURRENT ASSETS
   Cash......................................    $      148,478     $            -    $     1,173,364   (a)
                                                                                              (31,975)  (b)
                                                                                             (239,968)  (c)
                                                                                           (1,025,000)  (d)
                                                                                               (7,696)  (d) (2)
                                                                                              (17,203)  (f)         $            -
   Accounts receivable, net..................           224,920            353,960             (5,211)  (d) (1)            573,669

   Other current assets......................           154,409             30,689             (2,291)  (d) (1)
                                                                                                3,640   (d) (3)
                                                                                              105,388   (d) (4)
                                                                                               25,999   (d) (5)
                                                                                               7,349    (e)                325,183
                                                 --------------     --------------    ---------------               --------------
   Total current assets......................           527,807            384,649            (13,604)                     898,852
PROPERTY, PLANT AND EQUIPMENT, NET...........           243,107            208,730            (26,458)  (d) (6)
                                                                                              (10,841)  (d) (7)
                                                                                               (8,767)  (e)                405,771
INTANGIBLE ASSETS, NET.......................           482,813            493,467            356,150   (d) (8)          1,332,430
OTHER ASSETS.................................            59,080             14,504             31,975   (b)
                                                                                               (3,693)  (c)
                                                                                               95,000   (d) (1)
                                                                                               10,279   (d) (1)
                                                                                               (5,176)  (d) (2)
                                                                                               (5,037)  (d) (3)
                                                                                               32,802   (d) (4)
                                                                                               33,639   (d) (5)
                                                                                                7,205   (e)                270,578
                                                 --------------     --------------    ---------------               --------------
TOTAL ASSETS.................................    $    1,312,807     $    1,101,350    $       493,474               $    2,907,631
                                                 --------------     --------------    ---------------               --------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
   Accounts payable and accrued expenses.....    $      251,903     $      204,000    $        (1,468)  (c)
                                                                                               (1,477)  (c)
                                                                                               23,035   (d) (1)
                                                                                               55,444   (d) (5)
                                                                                               25,895   (d) (7)
                                                                                               18,373   (e)
                                                                                              (14,800)  (f)         $      560,905
   Revolving credit facility.................                 -                  -             98,364   (a)                 98,364
   Current portion of long-term debt.........            61,452              2,161             23,125   (a)
                                                                                              (61,000)  (c)                 25,738
                                                 --------------     --------------    ---------------               --------------
   Total current liabilities.................           313,355            206,161            165,491                      685,007
LONG-TERM DEBT...............................           338,391             29,770          1,051,875   (a)
                                                                                             (177,500)  (c)              1,242,536

OTHER LIABILITIES............................            63,243                700             51,446   (d) (5)
                                                                                               23,376   (d) (7)
                                                                                                9,245   (e)                148,010
PREFERRED STOCK..............................             1,000                  -                  -                        1,000
COMMON STOCKHOLDERS' EQUITY..................           596,818            864,719             (2,216)  (c)
                                                                                             (604,009)  (d) (8)
                                                                                              (21,831)  (e)
                                                                                               (2,403)  (f)                831,078
                                                 --------------     --------------    ---------------               --------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY...    $    1,312,807     $    1,101,350    $       493,474               $    2,907,631
                                                 --------------     --------------    ---------------               --------------
</TABLE>
See the accompanying notes to the unaudited pro forma combined financial
statements.


<PAGE>   3



                 QUEST DIAGNOSTICS INCORPORATED AND SUBSIDIARIES
              UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
                    FOR THE THREE MONTHS ENDED JUNE 30, 1999
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                                               Pro Forma
                                                          Quest                                and Other               Adjusted
                                                       Diagnostics           SBCL             Adjustments              Pro Forma
                                                     ----------------  ----------------  ------------------------  ----------------

<S>                                                  <C>               <C>                <C>                      <C>
NET REVENUES.....................................    $      394,034    $      474,689     $      (29,703)  (g)
                                                                                                  (1,487)  (h)     $       837,533
COSTS AND EXPENSES
   Cost of services..............................           236,071           349,122            (15,200)  (i)
                                                                                                 (12,088)  (g)
                                                                                                  (1,602)  (j)
                                                                                                  (1,635)  (h)
                                                                                                  (4,147)  (k)             550,521

   Selling, general and administrative...........           121,230           140,348             (6,542)  (g)
                                                                                                   3,588   (j)
                                                                                                    (517)  (h)
                                                                                                  (1,336)  (k)
                                                                                                  (1,137)  (l)             255,634

   Interest expense, net.........................             5,008            11,364              1,496   (m)
                                                                                                  12,022   (n)              29,890

   Amortization of intangible assets.............             5,219             7,529             (1,343)  (o)              11,405

   Special charges...............................                 -                 -             15,200   (i)
                                                                                                     613   (h)              15,813

   Other, net....................................             1,999             1,712             (1,986)  (j)
                                                                                                    (128)  (g)               1,597
                                                     --------------    --------------     --------------           ---------------
      Total......................................           369,527           510,075            (14,742)                  864,860
                                                     --------------    --------------     --------------           ---------------
INCOME (LOSS) BEFORE INCOME TAXES................            24,507           (35,386)           (16,448)                  (27,327)
INCOME TAX EXPENSE (BENEFIT).....................            11,420           (12,054)            (7,523)  (q)              (8,157)
                                                     --------------    --------------     --------------           ---------------
NET INCOME (LOSS)................................    $       13,087    $      (23,332)    $       (8,925)           $      (19,170)
                                                     --------------    --------------    ---------------           ---------------

BASIC NET INCOME (LOSS) PER COMMON SHARE (r).....    $         0.44                                                 $        (0.44)
                                                     --------------                                                --------------
DILUTED NET INCOME (LOSS) PER COMMON SHARE (r)...    $         0.43                                                 $        (0.44)
                                                     --------------                                                --------------
WEIGHTED AVERAGE COMMON SHARES
   OUTSTANDING - BASIC (r).......................            29,920                                                         43,248
                                                     --------------                                                ---------------
WEIGHTED AVERAGE COMMON SHARES
   OUTSTANDING - DILUTED (r).....................            30,729                                                         43,933
                                                     --------------                                                ---------------
</TABLE>


See the accompanying notes to the unaudited pro forma combined financial
statements.



<PAGE>   4



                 QUEST DIAGNOSTICS INCORPORATED AND SUBSIDIARIES
              UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
                     FOR THE SIX MONTHS ENDED JUNE 30, 1999
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                                       Pro Forma and
                                                       Quest                         Other Adjustments            Adjusted
                                                    Diagnostics           SBCL                                    Pro Forma
                                                  ----------------  ---------------- ------------------------  ------------------

<S>                                               <C>               <C>               <C>                      <C>
NET REVENUES..................................... $      775,875    $      888,021    $       (2,913)  (h)     $     1,660,983

COSTS AND EXPENSES
   Cost of services..............................        473,478           644,415           (15,200)  (i)
                                                                                              (3,439)  (j)
                                                                                              (3,408)  (h)
                                                                                              (8,325)  (k)           1,087,521

   Selling, general and administrative...........        237,831           241,988             6,170   (j)
                                                                                              (1,168)  (h)
                                                                                              (2,665)  (k)
                                                                                              (1,980)  (l)             480,176

   Interest expense, net.........................         12,367            22,673             3,304   (m)
                                                                                              23,393   (n)              61,737

   Amortization of intangible assets.............         10,313            14,971            (2,600)  (o)              22,684

   Special charges...............................              -                 -            15,200   (i)
                                                                                                 613   (h)              15,813

   Other, net....................................          3,301            (7,491)           (2,731)  (j)              (6,921)(p)
                                                  --------------    --------------    --------------           ---------------
      Total......................................        737,290           916,556             7,164                 1,661,010
                                                  --------------    --------------    --------------           ---------------
INCOME (LOSS) BEFORE INCOME TAXES................         38,585           (28,535)          (10,077)                      (27)
INCOME TAX EXPENSE (BENEFIT).....................         18,065            (7,214)           (5,879)  (q)               4,972
                                                  --------------    --------------    --------------           ---------------
NET INCOME (LOSS)................................ $       20,520    $      (21,321)   $       (4,198)          $        (4,999)
                                                  --------------    --------------   ---------------            --------------

BASIC NET INCOME (LOSS) PER COMMON SHARE (r)..... $         0.69                                               $         (0.12)
                                                  --------------                                               ---------------
DILUTED NET INCOME (LOSS) PER COMMON SHARE (r)... $         0.67                                               $         (0.12)
                                                  --------------                                               ---------------
WEIGHTED AVERAGE COMMON SHARES
   OUTSTANDING - BASIC (r).......................         29,819                                                        43,146
                                                  --------------                                               ---------------
WEIGHTED AVERAGE COMMON SHARES
   OUTSTANDING - DILUTED (r).....................         30,505                                                        43,720
                                                  --------------                                               ---------------
</TABLE>


See the accompanying notes to the unaudited pro forma combined financial
statements.




<PAGE>   5


                 QUEST DIAGNOSTICS INCORPORATED AND SUBSIDIARIES
              UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
                      FOR THE YEAR ENDED DECEMBER 31, 1998
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                        Quest                          Pro Forma and              Adjusted
                                                     Diagnostics           SBCL      Other Adjustments            Pro Forma
                                                   ----------------  --------------- ------------------------  ------------------

<S>                                                <C>               <C>               <C>                     <C>
NET REVENUES.....................................  $    1,458,607    $    1,567,843           (4,819)  (h)     $     3,021,631

COSTS AND EXPENSES
   Cost of services..............................         896,793         1,043,255           (4,573)  (j)
                                                                                              (4,697)  (h)
                                                                                             (23,432)  (k)           1,907,346

   Selling, general and administrative...........         445,885           424,514            6,932   (j)
                                                                                              (3,000)  (h)
                                                                                              (7,699)  (k)
                                                                                              (7,277)  (l)             859,355

   Interest expense, net.........................          33,403            47,640            7,673   (m)
                                                                                              37,836   (n)             126,552

   Amortization of intangible assets.............          21,697            30,270           (5,530)  (o)              46,437

   Other, net....................................           6,968           (25,911)          (2,359)  (j)             (21,302)(p)
                                                   --------------    --------------   --------------           ---------------
      Total......................................       1,404,746         1,519,768           (6,126)                2,918,388
                                                   --------------    --------------   --------------           ---------------
INCOME (LOSS) BEFORE INCOME TAXES................          53,861            48,075            1,307                   103,243
INCOME TAX EXPENSE (BENEFIT).....................          26,976            29,347           (3,289)  (q)              53,034
                                                   --------------    --------------   --------------           ---------------
NET INCOME (LOSS)................................  $       26,885    $       18,728   $        4,596           $        50,209
                                                   --------------    --------------   --------------           ---------------

BASIC NET INCOME (LOSS) PER COMMON SHARE (r).....  $         0.90                                              $          1.16
                                                   --------------                                              ---------------
DILUTED NET INCOME (LOSS) PER COMMON SHARE (r)...
                                                   $         0.89                                              $          1.15
                                                   --------------                                              ---------------
WEIGHTED AVERAGE COMMON SHARES
   OUTSTANDING - BASIC (r).......................          29,684                                                       43,031
                                                   --------------                                              ---------------
WEIGHTED AVERAGE COMMON SHARES
   OUTSTANDING - DILUTED (r).....................          30,229                                                       43,440
                                                   --------------                                              ---------------
</TABLE>


See the accompanying notes to the unaudited pro forma combined financial
statements.




<PAGE>   6


                 QUEST DIAGNOSTICS INCORPORATED AND SUBSIDIARIES
           NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)

BALANCE SHEET PRO FORMA ADJUSTMENTS
(a)   Reflects the gross cash proceeds of $1,173.4 million in debt under the new
      credit facility to finance the cash purchase price and transaction costs
      associated with the SBCL acquisition, and to repay Quest Diagnostics' then
      existing bank debt. At the close of the transaction on August 16, 1999,
      Quest Diagnostics borrowed $1,132.5 million under the new credit facility
      (including $57.5 million under the revolving credit facility) to fund the
      cash portion of the purchase price of the SBCL acquisition and pay
      transaction costs. As of September 30, 1999, Quest Diagnostics had repaid
      the entire amount borrowed under the revolving credit facility at closing.

(b)   Reflects the reduction in gross proceeds associated with the payment of
      deferred financing costs totaling $36.9 million, less amounts paid through
      June 30, 1999 of $4.9 million which were capitalized and recorded in the
      Quest Diagnostics historical balance sheet as of June 30, 1999 within
      other assets.

(c)   Reflects the repayment of Quest Diagnostics' then existing bank debt, plus
      accrued interest payable of $1.5 million as of June 30, 1999. The
      unamortized balance of deferred financing costs related to such debt of
      approximately $3.7 million was charged to common stockholders' equity, net
      of taxes of $1.5 million.

(d)   Reflects the purchase of SmithKline Beecham's clinical laboratory business
      and the payment of transaction costs associated with the SBCL acquisition.
      The allocation of acquisition cost to the SBCL assets and liabilities
      acquired under the purchase method of accounting is as follows (in
      millions):

<TABLE>
<S>                                                                        <C>          <C>      <C>            <C>
Cash portion of the purchase price                                                                              $      1,005.0
Non-compete consideration                                                                                                 20.0
                                                                                                                --------------
TOTAL CASH CONSIDERATION BEFORE ADJUSTMENTS                                                                            1,025.0
Purchase Price Adjustment                                                                                                (98.6) (1)
Value of shares of common stock of Quest Diagnostics issued to
   SmithKline Beecham                                                                                                    260.7
                                                                                                                --------------
ADJUSTED PURCHASE PRICE                                                                                                1,187.1
TRANSACTION COSTS                                                                                                         12.9  (2)
                                                                                                                --------------
TOTAL ACQUISITION COSTS                                                                                                1,200.0

   ESTIMATED NET ASSETS ACQUIRED:
   Accounts receivable, net                                                  $ 354.0
   Adjustment to purchase price allocation                                      (5.2)  (1)
                                                                           -----------
                                                                                                  $  348.8
   Other current assets                                                         30.7
   Adjustment to purchase price allocation                                      (2.3)  (1)
   Net assets held for sale                                                      3.6   (3)
   Current deferred tax asset                                                  105.4   (4)
   Due from SmithKline Beecham                                                  26.0   (5)
                                                                           -----------
                                                                                                     163.4

   Property, plant and equipment                                               208.7
   Purchase accounting adjustment                                              (26.5)  (6)
   Write-off of fixed assets due to integration activities                     (10.8)  (7)
                                                                           -----------
                                                                                                     171.4

   Other assets                                                                 14.5
   Investment in joint venture                                                  (5.0)  (3)
   Adjustment to purchase price allocation                                      10.3   (1)
   Noncurrent deferred tax asset                                                32.8   (4)
   Due from SmithKline Beecham                                                  33.6   (5)
   Amount separately owed by Quest Diagnostics to SmithKline Beecham            (3.6)  (1)
                                                                            --------
                                                                                                      82.6
                                                                                                 ---------
      Total tangible assets acquired                                                                 766.2
                                                                                                 ---------

   Accounts payable and accrued expenses                                       204.0
   Indemnified liabilities                                                      55.4   (5)
   Adjustment to purchase price allocation                                      23.0   (1)
   Accrued costs to integrate SBCL and Quest Diagnostics                        25.9   (7)
                                                                            --------
                                                                                                     308.3

   Long-term debt, including current maturities                                                       31.9


</TABLE>


<PAGE>   7

<TABLE>
<S>                                                                        <C>          <C>      <C>            <C>
   Other liabilities                                                              .7
   Indemnified liabilities                                                      51.4      (5)
   Accrued costs to integrate SBCL and Quest Diagnostics                        23.4      (7)
                                                                            --------
                                                                                                     75.5
                                                                                                 --------
      Total liabilities                                                                             415.7
                                                                                                 --------
Net tangible assets acquired                                                                                          350.5
                                                                                                                -----------
ESTIMATED INTANGIBLE ASSETS                                                                                           849.5
SBCL intangible assets recorded at June 30, 1999                                                                      493.4
                                                                                                                -----------
PRO FORMA ADJUSTMENT - INTANGIBLE ASSETS                                                                        $     356.1     (8)
                                                                                                                -----------
</TABLE>

1.         The SBCL acquisition agreements included a provision for a reduction
           in the purchase price paid by Quest Diagnostics in the event that the
           combined balance sheet of SBCL indicated that the net assets
           acquired, as of the acquisition date, were below a prescribed level.
           On October 11, 2000, the purchase price adjustment was finalized with
           the result that SmithKline Beecham owed Quest Diagnostics $98.6
           million. This amount was offset by $3.6 million separately owed by
           Quest Diagnostics to SmithKline Beecham, resulting in a net payment
           to the Company by SmithKline Beecham of $95.0 million. This payment
           from SmithKline Beecham will be recorded in the historical financial
           statements of the Company in the fourth quarter of 2000 as a
           reduction in the purchase price of the SBCL acquisition.

           In addition to the purchase price reduction described above, the
           purchase price allocation relating to the SBCL acquisition was
           completed in conjunction with the preparation of the Company's
           quarterly report on Form 10-Q for the fiscal quarter ended September
           30, 2000. Adjustments to the SBCL purchase price allocation reflected
           in the unaudited pro forma combined balance sheet as of June 30, 1999
           are primarily related to deferred tax assets acquired, the sale of
           certain assets of SBCL to unconsolidated joint ventures of Quest
           Diagnostics and accrued expenses related to pre-acquisition periods.
           None of the adjustments, resulting from the purchase price reduction
           or the completion of the purchase price allocation, will have any
           impact on the Company's previously reported historical financial
           statements.

           The accompanying unaudited pro forma combined financial information
           reflects the impact of finalizing the SBCL purchase price adjustment,
           as discussed above, and the revised purchase price allocation
           relating to the SBCL acquisition.


2.         These costs consist primarily of fees and expenses of investment
           bankers, attorneys and accountants, printing costs, SEC filing fees
           and other related charges. Through June 30, 1999, approximately $5.2
           million of these costs had been paid and were included in the Quest
           Diagnostics historical balance sheet as of June 30, 1999 within other
           assets. For purposes of preparing the June 30, 1999 unaudited pro
           forma combined balance sheet, the remaining estimated fees of $7.7
           million were assumed paid on June 30, 1999.

3.         In conjunction with the acquisition of SBCL, Quest Diagnostics sold
           its newly acquired interest that SBCL held in a joint venture in
           Mexico. The adjustment records the joint venture at fair value in the
           pro forma combined balance sheet as of June 30, 1999 within other
           current assets.

4.         Represents pro forma adjustment to record the deferred tax position
           associated with the acquired assets and liabilities of SBCL.

5.         Liabilities for which the obligation is being retained by SmithKline
           Beecham through an indemnity to Quest Diagnostics, are recoverable
           from SmithKline Beecham on an after-tax basis. Quest Diagnostics has
           recorded an estimate for the indemnified liabilities, which primarily
           relate to taxes and billing and professional liability claims, in the
           pro forma combined balance sheet as of June 30, 1999 with a net
           receivable due from SmithKline Beecham.

6.         Reflects the pro forma adjustment primarily to adjust the historical
           net book values of SBCL to their respective estimated fair values at
           the date of closing.

7.         Costs to realize the benefits associated with the elimination of
           duplicate facilities and other integration related activities of SBCL
           are estimated at approximately $60.1 million. Approximately $49.3
           million is primarily related to employee termination costs and
           contractual obligations including those related to facilities and
           equipment leases. The remaining $10.8 million is attributable to
           write-offs of fixed assets for which management believes there is no
           future economic benefit as a result of the SBCL acquisition.

8.         Based on the preliminary allocation of the acquisition cost above,
           the SBCL acquisition will result in $849.5 million of intangible
           assets. Based on SBCL's historical financial statements, a pro forma
           adjustment of $356.1 million was reflected in the unaudited pro forma
           combined balance sheet at June 30, 1999. The decrease in common
           stockholders' equity of $604.0 million represents the elimination of
           SBCL's historical net equity of $864.7 million, offset by the value
           of the 12.6 million shares of Quest Diagnostics common stock issued
           to SmithKline Beecham of $260.7 million.

(e)   Reflects the restructuring charge of $36.4 million for the estimated costs
      associated with the elimination of excess capacity and other integration
      activities of Quest Diagnostics. Of the total charge, $27.6 million
      represents accrued liabilities primarily attributable to work force
      reductions and the costs to exit leased facilities of Quest Diagnostics.
      The remaining $8.8 million is due to the write-off of Quest Diagnostics'
      fixed assets which management believes there is no future economic benefit
      as a result of the SBCL acquisition.

(f)   Assuming the SBCL acquisition had closed on June 30, 1999, Quest
      Diagnostics would have incurred $37.0 million of special charges in
      conjunction with the acquisition of SBCL. Of the total, $19.8 million
      represents stock based employee compensation related to special one-time
      grants of the Company's common stock, and accelerated vesting, due


<PAGE>   8
      to the completion of the SBCL acquisition, of stock grants made in
      previous years; $3.5 million represented special recognition awards to
      certain employees involved in the transaction and integration planning
      processes of the SBCL acquisition; and $1.5 million represented costs
      incurred by the Company in conjunction with its planned offering of new
      senior subordinated notes, the proceeds of which were expected to repay
      the Company's existing senior subordinated notes. The Company decided not
      to proceed with the offering due to unsatisfactory market conditions. The
      remainder of the special charge was primarily attributable to professional
      and consulting fees incurred in connection with integration related
      planning activities.

STATEMENT OF OPERATIONS PRO FORMA ADJUSTMENTS
(g)   SBCL's historical interim financial statements are presented based on a
      thirteen week fiscal period that ends on the last Thursday of the calendar
      quarter. As a result, SBCL's historical interim results of operations
      reflect 68 business days in the second quarter of 1999 compared to 64
      business days in the second quarter of 1998 and 59 business days in the
      first quarter of 1999. In order to provide more meaningful comparisons,
      Quest Diagnostics recorded this pro forma adjustment to reflect SBCL's
      historical interim results of operations on a calendar quarter consistent
      with that of Quest Diagnostics. The impact of these adjustments serves to
      decrease SBCL's reported historical results for the second quarter of 1999
      while favorably impacting SBCL's historical results for the first quarter
      of 1999.

(h)   Reflects adjustments primarily to account for certain contracts as loss
      contracts.

(i)   Pro forma adjustment to reclassify the provision recorded in the
      historical results of SBCL to account for a customer contract as a loss
      contract.

(j)   In order to provide more meaningful comparisons, Quest Diagnostics
      recorded this pro forma adjustment to classify certain costs and expenses
      in the historical financial statements of SBCL on a basis consistent with
      that of Quest Diagnostics. These adjustments are primarily associated with
      the classification of occupancy costs, professional liability insurance
      expenses and research and development costs.

(k)   Reflects a net reduction in employee benefits, principally related to
      certain benefit plans sponsored by SmithKline Beecham which were not
      assumed by Quest Diagnostics under the stock and asset agreement.
      Responsibility for the costs and liabilities associated with those plans
      will remain with SmithKline Beecham.

(l)   The pro forma adjustment reflects a reduction in expenses related to
      general corporate overhead which was charged to the historical combined
      financial statements of SBCL and related affiliates from SmithKline
      Beecham.

(m)   The pro forma adjustment reflects a reduction in interest income
      recognized by Quest Diagnostics in the respective period. Assuming the
      SBCL acquisition and anticipated borrowings took place on January 1, 1998,
      average cash balances for the periods presented would have been lower,
      resulting in significantly lower amounts of interest income earned on cash
      and cash equivalents.

(n)   The pro forma adjustment to interest expense, net represents the
      difference between the combined historical interest expense (consisting of
      the interest incurred by Quest Diagnostics on its then existing bank debt,
      and the intercompany interest expense charged and allocated to SBCL by
      SmithKline Beecham), and the assumed interest expense under the new credit
      facility. For purposes of calculating the pro forma net interest expense
      adjustment, the debt was assumed to consist of $1,100.0 million of
      borrowings under the new credit facility. The weighted average assumed
      interest rate on the borrowings for the new credit facility, including the
      estimated impact to maintain interest rate hedge agreements covering a
      notional amount of not less than 50% of its net funded debt, and the
      impact of the amortization of deferred financing costs, was approximately
      9.8%. If the interest rate in the new credit facility fluctuates by 1/8%,
      interest expense fluctuates by approximately $1.4 million annually.
      Depending on market conditions at the time that the interest rate hedge
      agreements are completed, and the ability of Quest Diagnostics to generate
      cash flow, the interest rates and amounts borrowed under the new credit
      facility may vary from that indicated above.

(o)   Reflects the pro forma impact on the amortization of intangible assets.
      Amortization of the goodwill, which accounts for a majority of the
      acquired intangible assets, is calculated on the straight-line basis over
      forty years.

(p)   Pro forma net income for the six months ended June 30, 1999 included a
      $9.7 million gain recognized by SBCL from the sale of its physician
      office-based teleprinter assets and network which was recorded in other,
      net. Pro forma net income for the year ended December 31, 1998 included
      approximately $25.8 million of gains recorded by SBCL in 1998, the
      majority of which resulted from gains recognized from the sale and license
      of certain technology and from a favorable settlement of a contract
      dispute which were recorded in other, net.

(q)   The pro forma adjustment to income tax expense represents the estimated
      income tax impact of the pro forma adjustments at the incremental tax rate
      of 40%. On an annual basis, approximately $4.0 million of the pro forma
      adjustment to amortization of intangible assets is deductible for tax
      purposes.

<PAGE>   9

(r)   Basic net income per common share is calculated by dividing net income
      (loss), less preferred stock dividends(approximately $30 per quarter), by
      the weighted average number of common shares outstanding. Diluted net
      income per common share is calculated by dividing net income (loss), less
      preferred stock dividends, by the weighted average number of common shares
      outstanding after giving effect to all potentially dilutive common shares
      outstanding during the period. Potentially dilutive common shares
      primarily represent outstanding stock options. Basic and diluted net
      income per share on a pro forma basis gives effect to the 12.6 million
      shares of Quest Diagnostics common stock issued to SmithKline Beecham and
      to the shares issued to certain employees (as a result of the special
      one-time grant and accelerated vesting), assuming the SBCL acquisition
      closed on January 1, 1998.

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.9
<SEQUENCE>8
<FILENAME>y41662ex99-9.txt
<DESCRIPTION>CONSENT OF INDEPENDENT AUDITORS
<TEXT>

<PAGE>   1


                                                                    EXHIBIT 99.9

                       CONSENT OF INDEPENDENT ACCOUNTANTS


We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 333-17077, 333-17079, 333-17083, 333-60477,
333-66177, 333-74103 and 333-85713) of Quest Diagnostics Incorporated of our
report dated March 15, 1999, except as to the last paragraph under the heading
Basis of Presentation in Note 1 and the second paragraph of Note 12, for which
the date is October 11, 2000, relating to the financial statements of SmithKline
Beecham Clinical Laboratories, Inc. and certain related affiliates, which
appears in this Form 8-K of Quest Diagnostics Incorporated.


/s/ PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
October 30, 2000

</TEXT>
</DOCUMENT>
</SUBMISSION>
