Quest Diagnostics Inc. Reports Second Quarter 2014 Financial Results

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MADISON, N.J., July 24, 2014 /PRNewswire/ --

  • Revenues from continuing operations of $1.9 billion, up 4.8% versus prior year
  • Adjusted diluted EPS from continuing operations of $1.08, up 1.9% versus  prior year
  • Reported diluted EPS from continuing operations of $0.92, 7% below prior year
  • Cash from operations of $280 million, up 34% versus prior year
  • Full year 2014 revenues now expected to be up 2.5% to 3.5%, versus up 2% to 4% previously
  • Full year 2014 adjusted diluted EPS range narrowed to  $4.00 to $4.10 from $3.95 to $4.15 previously

Quest Diagnostics Incorporated (NYSE: DGX), the world's leading provider of diagnostic information services, announced today that for the second quarter ended June 30, 2014, adjusted income from continuing operations was $157 million, or $1.08 per diluted share, compared to $164 million, or $1.06 per diluted share, for 2013.

Quest Diagnostics Incorporated logo.

For the second quarter of 2014, reported income from continuing operations was $133 million, or $0.92 per diluted share, compared to $152 million, or $0.99 per diluted share, in 2013. Income from continuing operations in the second quarter of 2014 was negatively impacted by $24 million, or $0.16 per diluted share, primarily related to restructuring and integration costs associated with recent acquisitions and the company's ongoing efforts to drive operational excellence and simplify the organization. In the second quarter of 2013, income from continuing operations was reduced by $0.07 per diluted share related to restructuring and integration costs.

Revenues from continuing operations were $1.9 billion for the second quarter, 4.8% better than the prior year. Diagnostic information services revenues increased 5.3% compared to a year ago.  Volume, measured by the number of requisitions, increased 7.7% versus the prior year and revenue per requisition was 2.3% below the prior year.  Acquisitions contributed approximately 7% to revenues in the quarter and reduced revenue per requisition approximately 1%.

For the second quarter of 2014, adjusted operating income from continuing operations was $296 million, or 15.5% of revenues, compared to $308 million, or 16.9% of revenues, for 2013. For the second quarter of 2014, reported operating income from continuing operations was $262 million, or 13.8% of revenues, compared to $289 million, or 15.9% of revenues, in 2013. Cash provided by operations was $280 million, compared to $208 million in the second quarter of 2013. Capital expenditures were $49 million in the second quarter of 2014.

"Quest Diagnostics grew revenues 5% and increased EPS 2%, as we continued to make good progress executing our strategy, and as underlying trends improved for pricing and volume," said Steve Rusckowski, President and CEO. "We saw strong testing growth in infectious disease, prescription drug monitoring and general health and wellness, and launched our OncoVantage solid tumor cancer panel through an exclusive relationship with Memorial Sloan Kettering Cancer Center. We are on track to meet our commitments for 2014."

First Half Performance

Revenues from continuing operations were $3.6 billion for the first six months of 2014, 1.3% better than the prior year. Adjusted income from continuing operations was $279 million, or $1.92 per diluted share, compared to $307 million, or $1.95 per diluted share, in 2013. On a reported basis, income from continuing operations was $237 million, or $1.63 per diluted share, compared to $268 million, or $1.71 per diluted share, in 2013.

Adjusted operating income from continuing operations for the first half of 2014 was $532 million, or 14.6% of revenues, compared to $579 million, or 16.1% of revenues, for 2013. On a reported basis, operating income from continuing operations was $470 million, or 12.9% of revenues, compared to $516 million, or 14.3% of revenues, in 2013. Cash provided by operations was $364 million, compared to $255 million in the first six months of 2013.

Outlook for 2014

For 2014, the company estimates results from continuing operations, before special items, as follows:

  • Revenues expected to increase 2.5% to 3.5% compared to the prior year, versus previous guidance of up 2% to 4%;
  • Adjusted diluted EPS to be between $4.00 and $4.10, versus previous guidance of between $3.95 and $4.15;
  • Cash provided by operations to approximate $900 million, unchanged; and
  • Capital expenditures to approximate $300 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, integration and other charges. 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. The attached tables include reconciliations of adjusted measures to measures reported 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 888-673-3572 for domestic callers or 402-220-6435 for international callers. Telephone replays will be available from 10:30 a.m. Eastern Time on July 24 until midnight Eastern Time on August 24, 2014.

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 needed 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 or strategic partners and other factors discussed in the Company's most recently filed Annual Report on Form 10-K and in any of the Company's subsequently filed Quarterly Reports on Form 10-Q and  Current Reports on Form 8-K, including those discussed in the "Business," "Risk Factors," "Cautionary Factors that May Affect Future Results" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections of those reports.

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

CONTACT: Investors: Dan Haemmerle, 973-520-2900; Media: Wendy Bost, 973-520-2800

 




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Quest Diagnostics Incorporated and Subsidiaries
Consolidated Statements of Operations
For the Three and Six Months Ended June 30, 2014 and 2013
(in millions, except per share and percentage data)
(unaudited)






Three Months Ended June 30,


Six Months Ended June 30,


2014



2013



2014



2013


Net revenues

$

1,902



$

1,815



$

3,648



$

3,602














Operating costs and expenses:












Cost of services

1,174



1,094



2,275



2,186


Selling, general and administrative

440



418



855



866


Amortization of intangible assets

25



20



47



39


Other operating expense (income), net

1



(6)



1



(5)


Total operating costs and expenses

1,640



1,526



3,178



3,086














Operating income

262



289



470



516














Other income (expense):












Interest expense, net

(42)



(40)



(81)



(80)


Equity in earnings of equity method investees

6



7



12



13


Other income, net

3





4



4


Total non-operating expenses, net

(33)



(33)



(65)



(63)














Income from continuing operations before taxes

229



256



405



453


Income tax expense

87



95



152



168


Income from continuing operations

142



161



253



285


Income from discontinued operations, net of taxes



13





33


Net income

142



174



253



318


Less: Net income attributable to noncontrolling interests

9



9



16



17


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