MADISON, N.J., Feb. 21 /PRNewswire-FirstCall/ -- Quest Diagnostics Incorporated , the nation’s leading provider of diagnostic testing, information and services, announced that for the fourth quarter ended December 31, 2007, income from continuing operations was $154 million, or $0.79 per diluted share, compared to $151 million, or $0.77 per diluted share, in the fourth quarter of 2006. The fourth quarter of 2007 includes the results of AmeriPath, Inc., which the company acquired on May 31, 2007.
Fourth quarter revenues were $1.8 billion, an increase of 14.3% compared to the prior-year level. The acquisition of AmeriPath increased consolidated revenues by 13.0%. Clinical testing revenues increased by 13.1%, as compared to the prior year. Revenue per requisition increased 13.7% and clinical testing volume, measured by the number of requisitions, decreased 0.6%. The acquisition of AmeriPath increased revenue per requisition by 8.3% and clinical testing volume by 5.5%. We estimate that the change in status with UnitedHealthcare reduced consolidated revenues by 5.1% and testing volume by 7.7%.
“We delivered improved results in the fourth quarter, finishing a year in which we re-established strong growth in revenues, earnings and cash flow,” said Surya N. Mohapatra, Ph.D., Chairman and CEO. “We continued building a strong foundation for the future, becoming the world leader in cancer diagnostics, acquiring a leading point-of-care-testing company and establishing a presence in the growing Indian market. Additionally, during the year we renewed or expanded relationships with most major health plans and embarked on an initiative to reduce our cost structure by $500 million, while at the same time enhancing our service offering.
“We are entering the decade of diagnostics, in which the healthcare world is moving from reliance on curative care to a reliance on early detection and prevention. The opportunities before us today are greater than they have ever been,” continued Dr. Mohapatra. “We are committed to making the appropriate investments to position our company to drive sustainable growth. The year 2008 will be one of strong revenue and earnings growth.”
For the fourth quarter, operating income was $312 million, or 17.6% of revenues, compared to $279 million, or 18% of revenues in 2006. This reflects the third consecutive quarter of improvement in operating income as a percentage of revenues.
Bad debt expense as a percentage of revenues was 4.4%. Days sales outstanding were 48 days, 2 days improved from the third quarter of 2007 and unchanged from a year ago. Cash flow from operations increased to $355 million from $306 million in 2006. During the quarter, the company reduced debt by $225 million, and made capital expenditures of $76 million.
Discontinued Operations
During the quarter, the company continued discussions with the government to settle claims associated with its investigation in connection with NID, a test kit manufacturing subsidiary closed in 2006. As a result of these discussions, during the quarter the company increased its reserve by $190 million to $241 million in connection with these claims. The company reported a loss from discontinued operations, net of taxes, of $159 million or $0.82 per diluted share for the quarter and $1.10 per diluted share for the full year (See Footnote 6).
Full Year Performance
For the full year 2007, income from continuing operations was $554 million, or $2.84 per diluted share, compared to $626 million, or $3.14 per diluted share in the prior year. Revenues were $6.7 billion, an increase of 7.0% compared to the prior-year level. The acquisition of AmeriPath increased consolidated revenues by 7.6%. The change in status with UnitedHealthcare reduced consolidated revenues by an estimated 4.8%. Results for 2007 include $0.04 per share in total first quarter charges associated with workforce reductions and the expense of in-process research and development.
Operating income for the full year was $1,091 million, or 16.3% of revenues, compared to $1,128 million, or 18.0% of revenues in 2006. Cash from operations was $927 million compared to $952 million in 2006. The decreases were principally due to the change in status with UnitedHealthcare. During 2007, the company repurchased $146 million of common stock, and made capital expenditures of $219 million. Since the AmeriPath acquisition, the company reduced debt by $417 million.
Outlook for 2008
For the full year 2008, the company expects results from continuing operations as follows: earnings per diluted share of between $3.00 and $3.20, revenue growth of approximately 9%, and operating income to approach 17% of revenues. Over the same period, the company expects cash from operations to approximate $900 million and capital expenditures of between $280 million and $300 million. The 2008 outlook anticipates investments of approximately $0.20 per share related to new information technology systems and the company’s expansion into India. These estimates exclude potential special charges.
About Quest Diagnostics
Quest Diagnostics is the 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 national 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 new diagnostic tests and advanced healthcare information technology solutions that help improve patient care. Additional company information is available at www.questdiagnostics.com.
Quest Diagnostics will hold its fourth quarter conference call on February 21, 2008 at 8:30 A.M. Eastern Time. A simulcast of the call is available by dialing 210-839-8500 -- PASSCODE: 3214469 and via the Internet at: www.questdiagnostics.com. 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 February 21 through 11 P.M. on March 20, 2008 to investors in the U.S. by dialing 866-393-1025. Investors outside the U.S. may dial 203-369- 0451. No password is required for either number.
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 Statement for Purposes of the ‘Safe Harbor’ Provisions of the Private Securities Litigation Reform Act of 1995" in Item I, Part 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 Quest Diagnostics 2006 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 2007 Quarterly Reports on Form 10-Q and other items throughout the Form 10-K and the company’s 2007 Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.
CONTACT: Laure Park, Investors, +1-973-520-2900, or Nancy Fitzsimmons,
Media, +1-973-520-2800, both of Quest Diagnostics Incorporated
Web site: http://www.questdiagnostics.com/
