Second quarter revenues were $1.9 billion, 1.4% below the prior year level. Clinical testing revenues decreased 1.6% compared to the prior year. Revenue per requisition decreased 0.3% and clinical testing volume, measured by the number of requisitions, decreased 1.3%.
"During the second quarter, Quest Diagnostics grew earnings, but a further slowdown in physician office visits contributed to a decline in our revenues," said Surya N. Mohapatra, Ph.D., Chairman and Chief Executive Officer. "Our business continues to perform well in a number of areas, including gene-based and esoteric testing, and the long-term trends for our business are extremely favorable. However, revenue softness through the first half has made us more cautious about our full-year outlook, and we have reduced 2010 guidance accordingly. We continue to take actions to accelerate revenue growth, manage our cost structure and invest for the future."
For the second quarter, operating income improved to $366 million, or 19.5% of revenues, compared to $359 million, or 18.9% of revenues, in 2009. Bad debt expense as a percentage of revenues improved to 3.8% from 4.4% in the prior year. Days sales outstanding improved to 42 days, compared to 43 days a year ago. Cash flow from operations was $209 million. This compared to $9 million of cash used in operations during the second quarter of 2009. Cash flow in 2009 reflected a $308 million payment, or $258 million, net of tax benefits, related to the NID settlement. During the quarter just ended, the company repurchased $175 million of its common shares and made capital expenditures of $49 million.
First Half Performance
For the first six months of 2010, income from continuing operations was $357 million, or $1.96 per diluted share, compared to $357 million, or $1.89 per diluted share for the first half of 2009. Revenues of $3.7 billion decreased 0.8%.
Operating income for the first half of 2010 was $664 million, or 18.1% of revenues, compared to $680 million, or 18.3% of revenues for 2009. Cash provided by operations was $448 million compared to $264 million for 2009. Cash provided by operations in 2009 was reduced by the net impact of the NID settlement. During the first half of 2010, the company repurchased $426 million of its common shares, and made capital expenditures of $89 million.
Outlook for 2010 Updated
The company updated its full year 2010 guidance. Full year earnings per diluted share from continuing operations are expected to be between $3.90 and $4.00, compared to prior expectations of between $4.00 and $4.20. The company expects revenues to be approximately 1% below the prior year. Previously, revenues were expected to grow between 1% and 2%. Operating income is expected to approach 18% of revenues. Cash from operations is expected to be between $1.1 billion and $1.2 billion. Capital expenditures are expected to approximate $200 million.
Quest Diagnostics will hold its second quarter conference call on July 21, 2010 at 8:30 A.M. Eastern Time. A simulcast of the call is available by dialing 415-228-4961, passcode 3214469 and via the Internet at: www.QuestDiagnostics.com/investor. Registered analysts may access the call at: www.streetevents.com. In addition, a replay of the call will be available from 10:30 A.M. on July 21 through midnight on August 21, 2010 to investors in the U.S. by dialing 866-350-3614. Investors outside the U.S. may dial 203-369-0039. No password is required for either number.
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," "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 2009 Annual Report on Form 10-K and "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Quantitative and Qualitative Disclosures About Market Risk" and "Risk Factors" in the Company's 2010 Quarterly Reports on Form 10-Q and other items throughout the Form 10-K and the company's 2010 Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.
This earnings release, including the attached financial tables, is available online in the Press Room section at www.QuestDiagnostics.com.
Quest Diagnostics Incorporated and Subsidiaries | ||||||||||
Consolidated Statements of Operations | ||||||||||
For the Three and Six Months Ended June 30, 2010 and 2009 | ||||||||||
(in millions, except per share and percentage data) | ||||||||||
(unaudited) | ||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||
2010 | 2009 | 2010 | 2009 | |||||||
Net revenues | $ 1,874.7 | $ 1,901.8 | $ 3,680.2 | $ 3,709.8 | ||||||
Operating costs and expenses: | ||||||||||
Cost of services | 1,078.9 | 1,100.2 | 2,145.3 | 2,153.7 | ||||||
Selling, general and administrative | 419.4 | 448.8 | 850.1 | 873.1 | ||||||
Amortization of intangible assets | 9.2 | 9.4 | 18.6 | 18.4 | ||||||
Other operating expense (income), net | 1.3 | (15.9) | 1.7 | (15.8) | ||||||
Total operating costs and expenses | 1,508.8 | 1,542.5 | 3,015.7 | 3,029.4 | ||||||
Operating income | 365.9 | 359.3 | 664.5 | 680.4 | ||||||
Other income (expense): | ||||||||||
Interest expense, net | (36.3) | (36.9) | (72.3) | (76.3) | ||||||
Equity earnings in unconsolidated joint ventures | 7.3 | 8.4 | 15.3 | 17.0 | ||||||
Other expense, net | (7.1) | (9.1) | (1.1) | (11.8) | ||||||
Total non-operating expenses, net | (36.1) | (37.6) | (58.1) | (71.1) | ||||||
Income from continuing operations before taxes | 329.8 | 321.7 | 606.4 | 609.3 | ||||||
Income tax expense | 125.6 | 123.5 | 231.0 | 233.7 | ||||||
Income from continuing operations | 204.2 | 198.2 | 375.4 | 375.6 | ||||||
(Loss) income from discontinued operations, net of taxes | (0.2) | 0.1 | (0.3) | (1.6) | ||||||
Net income | 204.0 | 198.3 | 375.1 | 374.0 | ||||||
