Third quarter revenues of $1.9 billion were 1.7% below the prior year level. Clinical testing revenues were 1.7% below the prior year. Revenue per requisition was 1.3% below the prior year, and was unchanged from the second quarter level. Clinical testing volume, measured by the number of requisitions, was 0.3% below the prior year level.
"We grew earnings in the third quarter despite continued softness in physician office visits. While revenue was down, we are confident in the future and are making progress executing our plans to accelerate profitable growth by promoting new gene-based and esoteric tests, enhancing sales effectiveness and improving operational efficiency," said Surya N. Mohapatra, Ph.D., Chairman and Chief Executive Officer. "Furthermore, we are committed to using our substantial cash flow to generate value for our shareholders through both acquisitions and share repurchases. So far this year, we have returned $750 million to our shareholders through share repurchases, and now have flexibility to make $250 million of additional repurchases in the fourth quarter."
For the third quarter, operating income was $337 million, or 18.1% of revenues, compared to $348 million, or 18.4% of revenues, for the third quarter of 2009. Bad debt expense as a percentage of revenues was 4.0%, compared to 4.4% in the prior year. Days sales outstanding were 43 days, unchanged from the beginning of the year. Cash flow from operations was $330 million compared to $374 million for 2009. During the quarter, the company repurchased $324 million of its common shares and made capital expenditures of $47 million.
Year-to-Date Performance
For the first nine months of 2010, income from continuing operations was $556 million, or $3.09 per diluted share, compared to $549 million, or $2.91 per diluted share, for the first nine months of 2009. Revenues of $5.5 billion were 1.1% below the prior year level.
Operating income for the first nine months of 2010 was $1.0 billion, or 18.1% of revenues, compared to $1.0 billion, or 18.3% of revenues, for 2009. Cash from operations was $778 million, compared to $637 million in the first nine months of 2009. Cash provided by operations in 2009 was reduced by the net impact of the NID settlement. During the first nine months of 2010, the company repurchased $750 million of its shares and made capital expenditures of $136 million.
Outlook for the Full-Year 2010 Updated
Full-year 2010 guidance, before potential special items, is:
- Earnings per diluted share from continuing operations, $3.95 to $4.00;
- Revenues, approximately 1.5% below the prior year, versus previous expectation of approximately 1% below the prior year;
- Operating income, between 17.5% and 18% of revenues;
- Cash from operations, approximately $1.1 billion; and
- Capital expenditures, approximately $200 million.
Quest Diagnostics will hold its third quarter conference call on October 20, 2010 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 866-350-3614 for domestic callers, or 203-369-0039 for international callers. No access code will be required. Telephone replays will be available from 10:30 a.m. Eastern Time on October 20 until midnight Eastern Time on November 20, 2010.
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 Newsroom section at www.QuestDiagnostics.com.
© 2000-2010 Quest Diagnostics Incorporated. All rights reserved. Quest, Quest Diagnostics, the associated logo, and all associated Quest Diagnostics marks are the registered trademarks of Quest Diagnostics.
For Quest Diagnostics: Kathleen Valentine (Investors), +1-973-520-2900, or Gary Samuels, (Media), +1-973-520-2800
TABLES FOLLOW
Quest Diagnostics Incorporated and Subsidiaries | ||||||||||
Consolidated Statements of Operations | ||||||||||
For the Three and Nine Months Ended September 30, 2010 and 2009 | ||||||||||
(in millions, except per share and percentage data) | ||||||||||
(unaudited) | ||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||
2010 | 2009 | 2010 | 2009 | |||||||
Net revenues | $ 1,864.7 | $ 1,897.2 | $ 5,544.9 | $ 5,607.0 | ||||||
Operating costs and expenses: | ||||||||||
Cost of services | 1,091.5 | 1,097.5 | 3,236.8 | 3,251.2 | ||||||
Selling, general and administrative | 426.6 | 441.6 | 1,276.7 | 1,314.7 | ||||||
Amortization of intangible assets | 9.9 | 9.2 | 28.5 | 27.6 | ||||||
Other operating (income) expense, net | (0.1) | 0.6 | 1.6 | (15.2) | ||||||
Total operating costs and expenses | 1,527.9 | 1,548.9 | 4,543.6 | 4,578.3 | ||||||
Operating income | 336.8 | 348.3 | 1,001.3 | 1,028.7 | ||||||
Other income (expense): | ||||||||||
Interest expense, net | (36.2) | (33.0) | (108.5) | (109.3) | ||||||
Equity earnings in unconsolidated joint ventures | 7.2 | 8.6 | 22.5 | 25.6 | ||||||
Other income (expense), net | 3.2 | 2.4 | 2.1 | (9.4) | ||||||
Total non-operating expenses, net | (25.8) | (22.0) | (83.9) | (93.1) | ||||||
Income from continuing operations before taxes | 311.0 | 326.3 | 917.4 | 935.6 | ||||||
Income tax expense | 102.9 | 125.2 | 333.9 | 358.9 | ||||||
Income from continuing operations | 208.1 | 201.1 | 583.5 | 576.7 | ||||||
(Loss) income from discontinued operations, net of taxes | (0.4) | |||||||||
