ADISON, N.J., July 21 /PRNewswire-FirstCall/ -- Quest Diagnostics Incorporated (NYSE: DGX - News), the world’s leading provider of diagnostic testing, information and services, announced that for the second quarter ended June 30, 2009, income from continuing operations rose to $188 million, or $1.00 per diluted share, from $162 million, or $0.83 per diluted share, for the second quarter of 2008. These results include a previously disclosed benefit associated with an insurance recovery of $0.05 per share, offset by charges of $0.04 per share associated with the company’s recently completed debt repurchase and an investment writeoff.
Second quarter revenues increased 3.5% to $1.9 billion. Clinical testing revenues increased 4.0% compared to the prior year. Revenue per requisition increased 4.6%. Underlying growth in clinical testing volume, measured by the number of requisitions, accelerated in the second quarter compared to recent quarters. Reported testing volume decreased 0.6%, reflecting a 24% decline in drugs-of-abuse testing volume, which is sensitive to hiring trends, and which reduced the company’s consolidated volume by 1.7%. Changes associated with hospital lab management agreements that the company exited further reduced consolidated volume by about 0.7%.
“Our focus on esoteric and gene-based testing and providing superior service to patients and customers helped us accelerate revenue growth, improve our operating margin, and increase earnings per share 20% during the second quarter,” said Surya N. Mohapatra, Ph.D., Chairman and Chief Executive Officer. “Quest Diagnostics’ growth is being driven by increased demand in testing for cancer, sexually transmitted diseases and allergies. In addition, we added several important new tests during the quarter that will help drive future growth. Based on the strong performance in the first half, we are raising earnings guidance for the full year.”
For the second quarter, operating income increased to $359 million, or 18.9% of revenues, and included the $15.5 million insurance recovery. Operating income was $308 million, or 16.8% of revenues, for the second quarter of 2008.
For the second quarter of 2009, bad debt expense as a percentage of revenues was 4.4%, compared to 4.5% in the first quarter and unchanged from the prior year. Days sales outstanding improved to 43 days, compared to 46 days at the end of the second quarter of 2008 and 44 days at the end of last year. Cash flow used in operations, which reflects the $308 million payment related to the previously announced NID settlement, was $9 million. In the second quarter of 2008, cash provided by operations was $213 million. During the quarter, the company made capital expenditures of $36 million.
First Half Performance
For the first six months of 2009, income from continuing operations increased to $357 million, or $1.89 per diluted share, from $303 million, or $1.54 per diluted share for the first half of 2008. Revenues increased 2.4% to $3.7 billion.
Operating income for the first half of 2009 increased to $680 million, or 18.3% of revenues, compared to $588 million, or 16.2% of revenues for 2008. Cash provided by operations, which was reduced by $308 million related to the payment of the NID settlement, was $264 million compared to $371 million for 2008. During the first half of 2009, the company repurchased $250 million of its common shares, and made capital expenditures of $76 million.
Outlook for 2009
For 2009, the company today increased its estimated earnings per diluted share from continuing operations to between $3.70 and $3.80. Previously, the company estimated diluted earnings per share of between $3.65 and $3.75. The company expects revenue growth of approximately 3% and operating income of approximately 18% of revenues. Cash from operations is expected to approximate $1 billion before the payment of the previously announced NID settlement, or approximately $700 million after such payment. Capital expenditures are expected to approximate $200 million.
Quest Diagnostics will hold its second quarter conference call on July 21, 2009 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. 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 866-395-9177. International callers can dial 203-369-0501. No access code will be required for either call. The telephone replay will be available from 10:30 a.m. Eastern Time on July 21 until midnight Eastern Time on August 22, 2009.
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” in Part I, Item 1, “Risk Factors” and “Cautionary Factors that May Affect Future Results” in Part I, Item 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 company’s 2008 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 2009 Quarterly Report on Form 10-Q and other items throughout the Form 10-K and the company’s 2009 Quarterly Report on Form 10-Q and Current Reports on Form 8-K.
Estimated cash from operations before the payment of the previously announced NID settlement is presented because management believes that it is a useful adjunct to estimated cash from operations under accounting principles generally accepted in the United States since it is a meaningful measure of the company’s ongoing operating performance. Estimated cash from operations before the payment of the previously announced NID settlement is not a measure of financial performance under accounting principles generally accepted in the United States and should not be considered as an alternative to estimated cash from operations. See footnote 7 to the attached tables.
This earnings release, including the attached financial tables, is available online in the Press Room section at www.QuestDiagnostics.com.
