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Quest Diagnostics Reports First Quarter 2013 Financial Results


4/17/2013 6:35:22 AM

MADISON, N.J., April 17, 2013 /PRNewswire/ --

  • Adjusted diluted EPS from continuing operations of $0.89, vs. $1.05 in 2012
  • Reported diluted EPS from continuing operations of $0.72, vs. $0.97 in 2012
  • Revenues from continuing operations of $1.8 billion, 6.4% below prior year
  • Full year 2013 adjusted EPS and cash flow guidance unchanged
  • Full year 2013 revenues now expected to approximate the prior year level

Quest Diagnostics Incorporated (NYSE: DGX), the world's leading provider of diagnostic information services, announced today that for the first quarter ended March 31, 2013, adjusted income from continuing operations was $143 million, or $0.89 per diluted share, compared to $169 million, or $1.05 per diluted share, for 2012.

For the first quarter of 2013, reported income from continuing operations was $116 million, or $0.72 per diluted share, compared to $156 million, or $0.97 per diluted share, in 2012. Income from continuing operations in the first quarter of 2013 was reduced by $45 million, or $0.17 per diluted share, related to restructuring and integration costs. In the first quarter of 2012, income from continuing operations was reduced by $0.08 per diluted share related to restructuring, integration and CEO succession costs.

Revenues from continuing operations were $1.8 billion for the first quarter, 6.4% below the prior year. Diagnostic information services revenues decreased 6.7%. Volume, measured by the number of requisitions, declined 3.4% versus the prior year, with approximately 2% due to fewer business days and approximately 0.5% due to the comparison with an unseasonably mild winter in 2012. The UMass acquisition added about 1% to both volume and revenue growth. Revenue per requisition was 3.4% below the prior year, principally driven by reduced reimbursement.

For the first quarter of 2013, adjusted operating income from continuing operations was $272 million, or 15.2% of revenues, compared to $318 million, or 16.7% of revenues, for 2012. For the first quarter of 2013, reported operating income from continuing operations was $227 million, or 12.7% of revenues, compared to $298 million, or 15.6% of revenues, in 2012. Cash provided by operations, which was reduced by the deferral of approximately $70 million in tax payments from the fourth quarter of 2012, was $47 million, compared to $161 million in the first quarter of 2012. During the first quarter of 2013, the company repurchased $62 million of its common shares.

Steve Rusckowski, President and CEO, commented: "Our results for the quarter reflect our previously stated expectation for revenue softness during the first half of 2013, with gradual improvement throughout the remainder of the year. Contributors to the first quarter's revenue softness include a challenging year-over-year comparison; continued weakness in healthcare utilization; and reductions in reimbursement driven by Medicare and commercial payers.

"Our primary focus in 2013 is driving operational excellence and restoring growth, which are two elements of our five-point strategy. We continued to make excellent progress with our Invigorate cost-reduction initiative, which mitigated much of the bottom line impact from the revenue softness. Additionally, we are refocusing on diagnostic information services and delivering disciplined capital deployment. We completed the previously announced sale of HemoCue and plan to deploy the $300 million in proceeds into share repurchases. In addition, we announced the planned acquisition of outreach testing operations of Dignity Health in California and Nevada, and expect to complete additional fold-in acquisitions, consistent with our goal of contributing 1-2% revenue growth per year through strategically aligned, accretive acquisitions."

Outlook for 2013

"While performance in the first quarter was adversely impacted by a number of factors, our efforts to restore growth, which are building momentum, coupled with easier year-over-year comparisons for the remainder of the year and the expectation of additional acquisitions, give us confidence in our full year outlook for 2013," Mr. Rusckowski said.

For 2013, the company estimates results from continuing operations, before special items, as follows:

  • Revenues now expected to approximate the prior year level, compared to previous guidance of 0% to 1% growth;
  • Earnings per diluted share to be between $4.35 and $4.55, unchanged;
  • Cash provided by operations to approximate $1 billion, unchanged; and
  • Capital expenditures to approximate $250 million, unchanged

Note on Non-GAAP Financial Measures

As used in this press release, the term "adjusted" refers to the operating performance measures that exclude restructuring and integration charges and CEO succession costs. Adjusted measures are presented because management believes those measures are useful adjuncts to reported results under accounting principles generally accepted in the United States. Adjusted measures should not be considered as an alternative to the corresponding measures determined under accounting principles generally accepted in the United States.

Conference Call Information

Quest Diagnostics will hold its quarterly conference call to discuss financial results beginning at 8:30 a.m. Eastern Time today. The conference call can also be accessed in listen-only mode by dialing 415-228-4961, passcode 3214469. The company suggests participants dial in approximately 10 minutes before the call. A replay of the call may be accessed online at www.QuestDiagnostics.com/investor or by phone at 800-835-4373 for domestic callers, or 402-280-1657 for international callers. Telephone replays will be available from 10:30 a.m. Eastern Time on April 17 until midnight Eastern Time on May 15, 2013.

Anyone listening to the call is encouraged to read the company's periodic reports, on file with the Securities and Exchange Commission, including the discussion of risk factors and historical results of operations and financial condition in those reports.

About Quest Diagnostics

Quest Diagnostics is the world's leading provider of diagnostic information 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 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," "Risk Factors," "Cautionary Factors that May Affect Future Results," "Legal Proceedings," "Management's Discussion and Analysis of Financial Condition and Results of Operations," and "Quantitative and Qualitative Disclosures About Market Risk" in the company's 2012 Annual Report on Form 10-K and other factors discussed in the company's Current Reports on Form 8-K.

This earnings release, including the attached financial tables, is available online in the Newsroom section at www.QuestDiagnostics.com.

TABLES FOLLOW


Quest Diagnostics Incorporated and Subsidiaries

Consolidated Statements of Operations

For the Three Months Ended March 31, 2013 and 2012

(in millions, except per share and percentage data)

(unaudited)



Three Months Ended

March 31,


2013


2012

Net revenues

$

1,786.6



$

1,908.7






Operating costs and expenses:




Cost of services

1,091.8



1,109.2


Selling, general and administrative

447.9



483.3


Amortization of intangible assets

19.3



18.8


Other operating expense (income), net

0.6



(0.4)


Total operating costs and expenses

1,559.6



1,610.9






Operating income

227.0



297.8






Other income (expense):




Interest expense, net

(39.9)



(42.1)


Equity earnings in unconsolidated joint ventures

6.1



7.6


Other income, net

3.4



4.8


Total non-operating expenses, net

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