- Total revenues of $1.9 billion, up 3.5%;
- Diluted earnings of $1.00 per share, up 20%;
- 2009 EPS outlook increased to between $3.70 and $3.80
MADISON, N.J., July 21 /PRNewswire-FirstCall/ -- Quest Diagnostics
Incorporated (NYSE: DGX), the world's leading provider of diagnostic testing,
information and services, announced that for the second quarter ended June 30,
2009, income from continuing operations rose to $188 million, or $1.00 per
diluted share, from $162 million, or $0.83 per diluted share, for the second
quarter of 2008. These results include a previously disclosed benefit
associated with an insurance recovery of $0.05 per share, offset by charges of
$0.04 per share associated with the company's recently completed debt
repurchase and an investment writeoff.
Second quarter revenues increased 3.5% to $1.9 billion. Clinical testing
revenues increased 4.0% compared to the prior year. Revenue per requisition
increased 4.6%. Underlying growth in clinical testing volume, measured by the
number of requisitions, accelerated in the second quarter compared to recent
quarters. Reported testing volume decreased 0.6%, reflecting a 24% decline in
drugs-of-abuse testing volume, which is sensitive to hiring trends, and which
reduced the company's consolidated volume by 1.7%. Changes associated with
hospital lab management agreements that the company exited further reduced
consolidated volume by about 0.7%.
"Our focus on esoteric and gene-based testing and providing superior
service to patients and customers helped us accelerate revenue growth, improve
our operating margin, and increase earnings per share 20% during the second
quarter," said Surya N. Mohapatra, Ph.D., Chairman and Chief Executive
Officer. "Quest Diagnostics' growth is being driven by increased demand in
testing for cancer, sexually transmitted diseases and allergies. In addition,
we added several important new tests during the quarter that will help drive
future growth. Based on the strong performance in the first half, we are
raising earnings guidance for the full year."
For the second quarter, operating income increased to $359 million, or
18.9% of revenues, and included the $15.5 million insurance recovery.
Operating income was $308 million, or 16.8% of revenues, for the second
quarter of 2008.
For the second quarter of 2009, bad debt expense as a percentage of
revenues was 4.4%, compared to 4.5% in the first quarter and unchanged from
the prior year. Days sales outstanding improved to 43 days, compared to 46
days at the end of the second quarter of 2008 and 44 days at the end of last
year. Cash flow used in operations, which reflects the $308 million payment
related to the previously announced NID settlement, was $9 million. In the
second quarter of 2008, cash provided by operations was $213 million. During
the quarter, the company made capital expenditures of $36 million.
First Half Performance
For the first six months of 2009, income from continuing operations
increased to $357 million, or $1.89 per diluted share, from $303 million, or
$1.54 per diluted share for the first half of 2008. Revenues increased 2.4% to
$3.7 billion.
Operating income for the first half of 2009 increased to $680 million, or
18.3% of revenues, compared to $588 million, or 16.2% of revenues for 2008.
Cash provided by operations, which was reduced by $308 million related to the
payment of the NID settlement, was $264 million compared to $371 million for
2008. During the first half of 2009, the company repurchased $250 million of
its common shares, and made capital expenditures of $76 million.
Outlook for 2009
For 2009, the company today increased its estimated earnings per diluted
share from continuing operations to between $3.70 and $3.80. Previously, the
company estimated diluted earnings per share of between $3.65 and $3.75. The
company expects revenue growth of approximately 3% and operating income of
approximately 18% of revenues. Cash from operations is expected to approximate
$1 billion before the payment of the previously announced NID settlement, or
approximately $700 million after such payment. Capital expenditures are
expected to approximate $200 million.
Quest Diagnostics will hold its second quarter conference call on July 21,
2009 at 8:30 A.M. Eastern Time. The public may access the conference call
through a live audio webcast available on Quest Diagnostics' Investor
Relations Internet site at www.QuestDiagnostics.com/investor. The conference
call can also be accessed in listen-only mode by dialing 415-228-4961,
passcode 3214469. Registered analysts may access the call at:
www.streetevents.com. In addition, a replay of the call may be accessed online
at www.QuestDiagnostics.com/investor or by phone in the U.S. at 866-395-9177.
International callers can dial 203-369-0501. No access code will be required
for either call. The telephone replay will be available from 10:30 a.m.
Eastern Time on July 21 until midnight Eastern Time on August 22, 2009.
About Quest Diagnostics
Quest Diagnostics is the world's leading provider of diagnostic testing,
information and services that patients and doctors need to make better
healthcare decisions. The company offers the broadest access to diagnostic
testing services through its network of laboratories and patient service
centers, and provides interpretive consultation through its extensive medical
and scientific staff. Quest Diagnostics is a pioneer in developing innovative
diagnostic tests and advanced healthcare information technology solutions that
help improve patient care. Additional company information is available at
www.QuestDiagnostics.com.
The statements in this press release which are not historical facts may be
forward-looking statements. Readers are cautioned not to place undue reliance
on forward-looking statements, which speak only as of the date that they are
made and which reflect management's current estimates, projections,
expectations or beliefs and which involve risks and uncertainties that could
cause actual results and outcomes to be materially different. Risks and
uncertainties that may affect the future results of the company include, but
are not limited to, adverse results from pending or future government
investigations, lawsuits or private actions, the competitive environment,
changes in government regulations, changing relationships with customers,
payers, suppliers and strategic partners and other factors discussed in
"Business" in Part I, Item 1, "Risk Factors" and "Cautionary Factors that May
Affect Future Results" in Part I, Item 1A, "Legal Proceedings" in Part I, Item
3, "Management's Discussion and Analysis of Financial Condition and Results of
Operations" in Part II, Item 7 and "Quantitative and Qualitative Disclosures
About Market Risk" in Part II, Item 7A in the company's 2008 Annual Report on
Form 10-K and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Quantitative and Qualitative Disclosures About
Market Risk" in the company's 2009 Quarterly Report on Form 10-Q and other
items throughout the Form 10-K and the company's 2009 Quarterly Report on Form
10-Q and Current Reports on Form 8-K.
Estimated cash from operations before the payment of the previously
announced NID settlement is presented because management believes that it is a
useful adjunct to estimated cash from operations under accounting principles
generally accepted in the United States since it is a meaningful measure of
the company's ongoing operating performance. Estimated cash from operations
before the payment of the previously announced NID settlement 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 estimated cash
from operations. See footnote 7 to the attached tables.
This earnings release, including the attached financial tables, is
available online in the Press Room section at www.QuestDiagnostics.com.
TABLES FOLLOW
Quest Diagnostics Incorporated and Subsidiaries
Consolidated Statements of Operations
For the Three and Six Months Ended June 30, 2009 and 2008
(in millions, except per share and percentage data)
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2009 2008 2009 2008
Net revenues $1,901.8 $1,837.9 $3,709.8 $3,622.5
Operating costs and
expenses:
Cost of services 1,100.2 1,083.5 2,153.7 2,142.1
Selling, general and
administrative 448.8 438.0 873.1 873.1
Amortization of intangible
assets 9.4 9.9 18.4 19.2
Other operating income, net (15.9) (1.6) (15.8) (0.3)
Total operating costs and
expenses 1,542.5 1,529.8 3,029.4 3,034.1
Operating income 359.3 308.1 680.4 588.4
Other income (expense):
Interest expense, net (36.9) (45.4) (76.3) (93.0)
Equity earnings in
unconsolidated joint
ventures 8.4 7.6 17.0 15.6
Other (expense) income, net (9.1) 0.5 (11.8) (0.5)
Total non-operating
expenses, net (37.6) (37.3) (71.1) (77.9)
Income from continuing
operations before taxes 321.7 270.8 609.3 510.5
Income tax expense 123.5 100.8 233.7 192.7
Income from continuing
operations 198.2 170.0 375.6 317.8
Income (loss) from
discontinued operations,
net of taxes 0.1 (0.9) (1.6) (2.0)
Net income 198.3 169.1 374.0 315.8
Less: Net income
attributable to
noncontrolling interests 10.1 7.8 18.7 14.9
Net income attributable
to Quest Diagnostics $188.2 $161.3 $355.3 $300.9
Amounts attributable to
Quest Diagnostics'
stockholders:
Income from continuing
operations $188.1 $162.2 $356.9 $302.9
Income (loss) from
discontinued operations,
net of taxes 0.1 (0.9) (1.6) (2.0)
Net income $188.2 $161.3 $355.3 $300.9
Earnings per share
attributable to Quest
Diagnostics' common
stockholders - basic:
Income from continuing
operations $1.01 $0.83 $1.90 $1.56
Income (loss) from
discontinued operations - - (0.01) (0.01)
Net income $1.01 $0.83 $1.89 $1.55
Earnings per share
attributable to Quest
Diagnostics' common
stockholders - diluted:
Income from continuing
operations $1.00 $0.83 $1.89 $1.54
Income (loss) from
discontinued operations - (0.01) (0.01) (0.01)
Net income $1.00 $0.82 $1.88 $1.53
Weighted average common
shares outstanding:
Basic 185.3 194.5 187.3 194.3
Diluted 187.0 196.1 188.9 196.0
Operating income as a
percentage of net revenues 18.9% 16.8% 18.3% 16.2%
Quest Diagnostics Incorporated and Subsidiaries
Consolidated Balance Sheets
June 30, 2009 and December 31, 2008
(in millions, except per share data)
June 30, December 31,
2009 2008
(unaudited)
Assets
Current assets:
Cash and cash equivalents $119.3 $253.9
Accounts receivable, net 896.5 832.9
Inventories 79.7 102.1
Deferred income taxes 154.0 218.4
Prepaid expenses and other current assets 89.5 89.5
Total current assets 1,339.0 1,496.8
Property, plant and equipment, net 843.8 879.7
Goodwill, net 5,067.3 5,054.9
Intangible assets, net 819.3 827.4
Other assets 142.0 145.0
Total assets $8,211.4 $8,403.8
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses $818.9 $1,219.6
Short-term borrowings and current portion
of long-term debt 205.0 5.1
Total current liabilities 1,023.9 1,224.7
Long-term debt 2,877.8 3,078.1
Other liabilities 544.1 475.9
Stockholders' equity:
Quest Diagnostics stockholders' equity:
Common stock, par value $0.01 per share;
600 shares authorized at both June 30,
2009 and December 31, 2008; 214.1 shares
issued at both June 30, 2009 and December
31, 2008 2.1 2.1
Additional paid-in capital 2,273.2 2,262.1
Retained earnings 2,879.7 2,561.7
Accumulated other comprehensive loss (55.6) (68.1)
Treasury stock, at cost; 28.4 shares and
23.7 shares at June 30, 2009 and December
31, 2008, respectively (1,358.3) (1,152.9)
Total Quest Diagnostics stockholders' equity 3,741.1 3,604.9
Noncontrolling interests 24.5 20.2
Total stockholders' equity 3,765.6 3,625.1
Total liabilities and stockholders' equity $8,211.4 $8,403.8
Quest Diagnostics Incorporated and Subsidiaries
Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 2009 and 2008
(in millions)
(unaudited)
Six Months Ended
June 30,
2009 2008
Cash flows from operating activities:
Net income $374.0 $315.8
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 130.0 132.7
Provision for doubtful accounts 165.4 167.6
Deferred income tax provision (benefit) 57.0 (6.1)
Stock compensation expense 33.2 36.8
Excess tax benefits from stock-based
compensation arrangements (1.8) (1.2)
Other, net 9.5 (4.8)
Changes in operating assets and liabilities:
Accounts receivable (228.4) (213.6)
Accounts payable and accrued expenses 4.1 (40.1)
Integration, settlement and other special
charges (320.0) (4.2)
Income taxes payable 8.1 2.2
Other assets and liabilities, net 32.5 (13.9)
Net cash provided by operating activities 263.6 371.2
Cash flows from investing activities:
Business acquisitions, net of cash
acquired (12.1) 19.9
Capital expenditures (76.0) (94.8)
(Increase) decrease in investments and
other assets (6.0) 5.9
Net cash used in investing activities (94.1) (69.0)
Cash flows from financing activities:
Proceeds from borrowings 510.0 20.0
Repayments of debt (511.2) (304.1)
Decrease in book overdrafts (19.7) (4.2)
Purchases of treasury stock (250.0) -
Exercise of stock options 17.2 11.6
Excess tax benefits from stock-based
compensation arrangements 1.8 1.2
Dividends paid (37.6) (38.9)
Distributions to noncontrolling interests (14.5) (11.8)
Financing costs paid (0.1) (0.2)
Net cash used in financing activities (304.1) (326.4)
Net change in cash and cash equivalents (134.6) (24.2)
Cash and cash equivalents, beginning of
period 253.9 167.6
Cash and cash equivalents, end of period $119.3 $143.4
Cash paid during the period for:
Interest $76.9 $99.6
Income taxes $167.5 $193.2
Notes to Financial Tables
1) On January 1, 2009, the Company adopted Statement of Financial
Accounting Standard No. 160, "Noncontrolling Interests in Consolidated
Financial Statements, an Amendment of ARB No. 51" ("SFAS 160"), the provisions
of which, among other things, require that minority interests be renamed "Net
income attributable to noncontrolling interests" and that a company present a
consolidated net income measure that includes the amount attributable to such
noncontrolling interests for all periods presented. The adoption of SFAS 160
did not impact earnings per share attributable to Quest Diagnostics' common
stockholders.
2) On January 1, 2009, the Company adopted FASB Staff Position No. EITF
03-6-1, "Determining Whether Instruments Granted in Share-Based Payment
Transactions Are Participating Securities." Under this standard, the
Company's unvested restricted common stock and unvested restricted stock units
that contain non-forfeitable rights to dividends are participating securities
that are included in the computation of earnings per share pursuant to the
two-class method. Earnings per share calculations for all prior periods have
been presented based on the two-class method.
Three Months Ended Six Months Ended
June 30, June 30,
2009 2008 2009 2008
(in millions, except per share data)
Amounts attributable to Quest
Diagnostics' common
stockholders:
Income from continuing operations $188.1 $162.2 $356.9 $302.9
Income (loss) from discontinued
operations 0.1 (0.9) (1.6) (2.0)
Net income available to common
stockholders $188.2 $161.3 $355.3 $300.9
Income from continuing operations $188.1 $162.2 $356.9 $302.9
Less: Earnings allocated to
participating securities (0.6) (0.4) (0.9) (0.6)
Earnings available to Quest
Diagnostics' common
stockholders - basic and diluted $187.5 $161.8 $356.0 $302.3
Weighted average common shares
outstanding - basic 185.3 194.5 187.3 194.3
Effect of dilutive securities:
Stock options and performance
share units 1.7 1.6 1.6 1.7
Weighted average common shares
outstanding - diluted 187.0 196.1 188.9 196.0
Earnings per share attributable
to Quest Diagnostics' common
stockholders - basic:
Income from continuing
operations $1.01 $0.83 $1.90 $1.56
Income (loss) from discontinued
operations - - (0.01) (0.01)
Net income $1.01 $0.83 $1.89 $1.55
Earnings per share attributable
to Quest Diagnostics' common
stockholders - diluted:
Income from continuing operations $1.00 $0.83 $1.89 $1.54
Income (loss) from discontinued
operations - (0.01) (0.01) (0.01)
Net income $1.00 $0.82 $1.88 $1.53
3) Other operating income, net represents miscellaneous income and
expense items related to operating activities including gains and losses
associated with the disposal of operating assets and provisions for
restructurings and other special charges. For the three and six months ended
June 30, 2009, other operating income, net includes a $15.5 million gain
associated with an insurance settlement for storm related losses.
4) Other (expense) income, net represents miscellaneous income and
expense items related to non-operating activities such as gains and losses
associated with investments and other non-operating assets. For the three and
six months ended June 30, 2009, other (expense) income, net includes a $7.0
million charge associated with the write-down of an investment and a $6.3
million charge associated with the early extinguishment of debt.
5) For the six months ended June 30, 2009, the Company repurchased
approximately 5.6 million shares of its common stock at an average price of
$44.48 per share for $250 million, including 4.5 million shares repurchased
from SB Holdings Capital Inc., a wholly-owned subsidiary of GlaxoSmithKline
plc., at an average price of $44.33 per share for $200 million. For the three
and six months ended June 30, 2009, the Company reissued 0.4 million shares
and 0.9 million shares, respectively, for employee benefit plans.
6) The following table summarizes the approximate impact of various items
on year-over-year comparisons for certain revenue metrics reported for the
three and six months ended June 30, 2009, and is included for informational
purposes only:
Continuing Operations
Three Months Ended Six Months Ended
June 30, 2009 June 30, 2009
Consol- Consol-
idated Revenue idated Revenue
Revenue Volume per Revenue Volume per
Growth Growth Requisition Growth Growth Requisition
Reported: 3.5% (0.6)% 4.6% 2.4% (1.2)% 4.4%
Impact on
comparisons
to prior year
of:
Drugs-of-abuse
testing (0.7)% (1.7)% 0.9% (0.7)% (1.7)% 0.9%
Laboratory
management
contracts (0.1)% (0.7)% 0.6% (0.2)% (0.8)% 0.6%
Number of
business days (0.6)% (0.6)% - (0.7)% (0.7)% -
Foreign
exchange (0.7)% - - (0.8)% - -
7) Estimated cash from operations before the payment for the NID
settlement is presented because management believes it is a useful adjunct to
estimated cash from operations under accounting principles generally accepted
in the United States since it is a meaningful measure of the Company's ongoing
operating performance. Estimated cash from operations before the payment for
the NID settlement 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 estimated cash from operations. The following
table reconciles estimated cash from operations to estimated cash from
operations before the payment for the NID settlement:
Twelve Months
Ended
December 31,
2009
(in millions)
Estimated cash from operations ~ $700
Add:
NID settlement payments 308
Estimated cash from operations before the
payment for the NID settlement ~ $1,000
SOURCE Quest Diagnostics
CONTACT: Laure Park (Investors), +1-973-520-2900, or Gary Samuels
(Media), +1-973-520-2800/
Web Site: http://www.QuestDiagnostics.com
(DGX)