MADISON, N.J., July 20, 2011 /PRNewswire/ -- Quest Diagnostics Incorporated (NYSE: DGX), the world’s leading provider of diagnostic testing, information and services, announced today that for the second quarter ended June 30, 2011, adjusted income from continuing operations was $179 million, or $1.12 per share. For the second quarter of 2010, reported income from continuing operations was $195 million, or $1.07 per share. Income from continuing operations in 2011 was reduced by $0.10 per share of transaction and integration costs associated with the Athena Diagnostics and Celera transactions, which were completed during the second quarter. Including these items, reported income from continuing operations was $164 million, or $1.02 per diluted share.
Revenues increased 1.5% to $1.9 billion for the second quarter. The acquisitions of Athena and Celera contributed approximately 2.5% to revenue growth. Clinical testing volume, measured by the number of requisitions, decreased 0.9%, and revenue per requisition increased 1.6% compared to the prior year.
For the second quarter of 2011, adjusted operating income was $337 million, or 17.7% of revenues. For the second quarter of 2010, reported operating income was $366 million, or 19.5% of revenues. Including the impact of transaction and integration costs, reported operating income was $317 million, or 16.6% of revenues, in 2011. Cash flow from operations was $60 million, and was reduced by the Medi-Cal settlement payment and transaction and integration costs related to Athena and Celera. Before these items, cash flow was $271 million, compared to $209 million in 2010.
“During the second quarter, revenues grew 1.5%, adjusted earnings per share increased 5%, and we generated strong underlying cash flow. In addition, we began the integration of Athena and Celera into Quest Diagnostics,” said Surya N. Mohapatra, Ph.D., Chairman and CEO.
“Today we are announcing a comprehensive initiative to improve profitability in this competitive marketplace and better prepare us for the substantial growth opportunities in the future. This is designed to improve operations and make our company more agile and efficient. We expect to reduce our cost structure by $500 million over the next three years to help us reach our goal of 20% operating income.”
First Half Performance
Revenues of $3.7 billion increased 1.2% from 2010. For the first six months of 2011, adjusted income from continuing operations was $343 million, or $2.12 per diluted share, compared to adjusted income from continuing operations of $377 million, or $2.07 per diluted share, for 2010. On a reported basis, income from continuing operations was $110 million, or $0.68 per diluted share, compared to $357 million, or $1.96 per diluted share, for the first half of 2010.
Adjusted operating income for the first half of 2011 was $638 million, or 17.0% of revenues, compared to $696 million, or 18.8% of revenues, for 2010. On a reported basis, operating income was $348 million, or 9.3% of revenues, in 2011 and $664 million, or 18.1% of revenues, in 2010. Cash provided by operations was $220 million and was reduced by the Medi-Cal settlement payment and transaction and integration costs related to Athena and Celera. Before these items, cash flow was $432 million, compared to $448 million in 2010. During the first half of 2011, the company repurchased $835 million of its common shares.
Outlook for 2011 Updated
For the full-year 2011, the company now estimates results from continuing operations, before future special items, as follows:
- Revenues to grow 1.5%;
- Earnings per share to be between $4.25 and $4.35 on an adjusted basis and between $2.81 and $2.91 on a reported basis.
- Operating income as a percentage of revenues to be 17.5% on an adjusted basis and approach 14% on a reported basis;
- Cash from operations of $1.1 billion before the effect of the Medi-Cal settlement payment and transaction and integration costs, and $900 million after these items; and
- Capital expenditures of $200 million.
Quest Diagnostics will hold its second quarter conference call on July 20, 2011 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. The company suggests participants dial in approximately 10 minutes before the call. 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 800-645-7431 for domestic callers, or 203-369-3819 for international callers. No access code will be required. Telephone replays will be available until midnight Eastern Time on August 20, 2011.
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 2010 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 quarterly reports on Form 10-Q and other items throughout the Form 10-K and the company’s 2011 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 Newsroom section at www.QuestDiagnostics.com.
Note on Non-GAAP Financial Measures
As used in this press release, the term adjusted refers to the operating performance measures that exclude the estimated impact of severe weather, charges associated with workforce reductions, the Medi-Cal settlement and costs associated with the Athena Diagnostics and Celera transactions. 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.
