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DIAGNOSTEK ANNOUNCES SECOND QUARTER RESULTS

 ALBUQUERQUE, N.M., Nov. 16 ~PRNewswire~ -- Diagnostek, Inc. (NYSE: DXK) today announced its financial results for the second quarter ended Sept. 30, 1992. Revenues for the quarter and six-month period ended Sept. 30, 1992 were $82.0 million and $162.5 million, respectively, compared to $70.1 million and $139.9 million, respectively, for the comparable periods last year. A net loss for the second quarter was $870,000, or $.04 per share, compared to net income of $2.8 million, or $0.14 per share, for the same period last year. Net earnings and earnings per share for the six months ended Sept. 30, 1992 were $1.9 million and $.08 per share, compared to $5.4 million and $0.27 per share, respectively, for the same period last year.
 The second quarter results include a non-recurring charge in excess of customary levels of $3.4 million ($2.1 after tax) for bad debt expense resulting from a regular evaluation of the status of various customer accounts receivable, and a charge of $1.4 million ($851,000 after tax) related to costs incurred through Sept. 30, 1992 in connection with the company's aborted merger agreement with Medco Containment Services, Inc. Net earnings for the second quarter and six months ended Sept. 30, 1992 were favorably impacted by increased interest income. Net earnings per share, however, were unfavorably impacted by the increased number of weighted average common and common equivalent shares outstanding.
 Commenting on the second quarter and first half results, Nunzio DeSantis, Diagnostek's chairman and chief executive officer said, "Although revenues climbed as a result of a higher volume of prescription drugs dispensed and an increase in the average price per prescription, volume fell short of the company's estimates due to new customers not coming on line in the time frames or in the volumes projected, primarily as a result of the customers' uncertainty about the company's previously announced proposed merger.
 "In addition to the provisions for bad debt, operating earnings were affected by changes in the mix of business, with a larger percentage of the mail pharmacy revenues being derived from major customers from whom the company receives lower margins than from the average customer, and to a lesser extent by an increase in corporate related expenses."
 Commenting on the merger agreement with Medco Containment Services, Inc., which was terminated by Medco, Mr. DeSantis said, "We intend to vigorously pursue the litigation we commenced in the Delaware Court of Chancery to protect the best interests of our stockholders. Our complaint maintains that Medco wrongfully terminated the merger agreement and that before it signed the merger agreement, Medco was aware of the facts which led to the non-recurring charges and accounting adjustments by Diagnostek. In addition, Diagnostek maintains that Medco was aware of the loss by Diagnostek of a major customer."
 Mr. DeSantis further commented that, "Except for this one account the company's client base remains stable and that another major account recently renewed for three years. The company's underlying business remains strong, and with over $100 million in cash, a large customer base and team of experienced professionals, Diagnostek is well positioned to compete vigorously in the health care cost containment field."
 The company's mail pharmacy service business, Health Care Services, Inc., had revenues of $60.1 million for the quarter ended Sept. 30, 1992, compared to $49.8 million for the same period last year, an increase of 20 percent. Revenues for the six months ended Sept. 30, 1992 were $118.1 million compared to $98.8 million for the same period in 1991, an increase of 20 percent. HCS's operating loss was $.9 million for the quarter ended Sept. 30, 1992, compared to operating income of $4.7 million for the same period in 1991. Operating income for the six months ended Sept. 30, 1992 was $1.6 million compared to $9.4 million for the same period in 1991. Excluding the non- recurring charge for bad debt provisions, the mail pharmacy service operating income for the quarter and six months ended Sept. 30, 1992 would have been $2.5 million and $5.0 million respectively.
 The company's contract pharmacy management business, HPI Health Care Services, Inc., had revenues of $20.0 million for the second quarter of fiscal year 1993 compared to $18.5 million for the same period in fiscal year 1992, an increase of 8 percent. Revenues for the six months ended Sept. 30, 1992 were $40.2 million compared to $37.4 million for the same period last year, an increase of 7 percent. Operating income for HPI for the quarter ended Sept. 30, 1992 was $1.1 million compared to $1.2 million for the quarter ended Sept. 30, 1991, a decrease of 8 percent. For the six months ended Sept. 30, 1992, operating income was $2.5 million, compared to $2.0 million for the same period last year, an increase of 25 percent. The decrease in operating income in the quarter is primarily a result of increased operating costs incurred in the second quarter of this fiscal year attributable to increased bonuses paid to pharmacy directors. However, year-to-date, HPI operating income has increased primarily due to increased operating income derived from HPI's contract with Lovelace Medical Center.
 -0- 11~16~92
 ~CONTACT: Vincent Villanueva of Diagnostek, Inc., 505-345-8080, or Fredric Spar of Kekst and Company, 212-593-2655, for Diagnostek~
 (DXK)


CO: Diagnostek, Inc. ST: New Mexico IN: MTC SU: ERN

WB -- NY129 -- 1558 11~16~92 18:02 EST
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Publication:PR Newswire
Date:Nov 16, 1992
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