SECAUCUS, N.J., July 22,
2021 /PRNewswire/ -- Quest Diagnostics Incorporated (NYSE:
DGX), the world's leading provider of diagnostic information
services, announced today financial results for the second quarter
ended June 30, 2021.
"We had another strong quarter, with a faster than expected
recovery in our base business," said Steve
Rusckowski, Chairman, CEO and President. "This was the first
quarter since 2019 that organic base testing revenues grew in the
quarter, driven by contributions from new hospital lab management
contracts as well as people returning to the healthcare system. We
are well-positioned to continue our momentum and support the return
to health care in the coming months, which is reflected in the
outlook we have provided for the remainder of
2021."
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
|
2021
|
|
2020
|
|
Change
|
|
2021
|
|
2020
|
|
Change
|
|
|
(dollars in millions,
except per share data)
|
|
Reported:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
revenues
|
$
|
2,550
|
|
|
$
|
1,827
|
|
|
39.5
|
%
|
|
$
|
5,270
|
|
|
$
|
3,649
|
|
|
44.4
|
%
|
|
Diagnostic Information
Services revenues
|
$
|
2,474
|
|
|
$
|
1,764
|
|
|
40.2
|
%
|
|
$
|
5,117
|
|
|
$
|
3,508
|
|
|
45.9
|
%
|
|
Revenue per
requisition
|
|
|
|
|
(3.6)
|
%
|
|
|
|
|
|
8.1
|
%
|
|
Requisition
volume
|
|
|
|
|
45.2
|
%
|
|
|
|
|
|
34.7
|
%
|
|
Organic
requisition volume
|
|
|
|
|
40.1
|
%
|
|
|
|
|
|
30.0
|
%
|
|
Operating income
(a)
|
$
|
533
|
|
|
$
|
283
|
|
|
88.4
|
%
|
|
$
|
1,193
|
|
|
$
|
458
|
|
|
160.5
|
%
|
|
Operating income as a
percentage of net revenues (a)
|
20.9
|
%
|
|
15.5
|
%
|
|
5.4
|
%
|
|
22.6
|
%
|
|
12.5
|
%
|
|
10.1
|
%
|
|
Net income
attributable to Quest Diagnostics (a)
|
$
|
631
|
|
|
$
|
185
|
|
|
240.5
|
%
|
|
$
|
1,100
|
|
|
$
|
284
|
|
|
287.0
|
%
|
|
Diluted EPS (a)
(b)
|
$
|
4.96
|
|
|
$
|
1.36
|
|
|
264.2
|
%
|
|
$
|
8.38
|
|
|
$
|
2.09
|
|
|
300.7
|
%
|
|
Cash provided by
operations
|
$
|
460
|
|
|
$
|
355
|
|
|
30.1
|
%
|
|
$
|
1,191
|
|
|
$
|
602
|
|
|
97.8
|
%
|
|
Capital
expenditures
|
$
|
84
|
|
|
$
|
82
|
|
|
2.5
|
%
|
|
$
|
170
|
|
|
$
|
165
|
|
|
2.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
(a):
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income
|
$
|
584
|
|
|
$
|
294
|
|
|
98.0
|
%
|
|
$
|
1,292
|
|
|
$
|
519
|
|
|
148.8
|
%
|
|
Operating income as a
percentage of net revenues
|
22.9
|
%
|
|
16.1
|
%
|
|
6.8
|
%
|
|
24.5
|
%
|
|
14.2
|
%
|
|
10.3
|
%
|
|
Net income
attributable to Quest Diagnostics
|
$
|
405
|
|
|
$
|
193
|
|
|
109.5
|
%
|
|
$
|
913
|
|
|
$
|
321
|
|
|
184.3
|
%
|
|
Diluted EPS
(b)
|
$
|
3.18
|
|
|
$
|
1.42
|
|
|
123.9
|
%
|
|
$
|
6.96
|
|
|
$
|
2.36
|
|
|
194.5
|
%
|
|
|
|
(a)
|
For further details
impacting the year-over-year comparisons related to operating
income, operating income as a percentage of net revenues, net
income attributable to Quest Diagnostics, and diluted EPS, see note
2 of the financial tables attached below.
|
|
|
(b)
|
The sum of reported
and adjusted diluted EPS for the first two quarters of 2021 did not
equal the totals for the six months ended June 30, 2021 due to both
quarterly fluctuations in the company's earnings and in the
weighted average common shares outstanding throughout the period as
a result of the impact of accelerated share repurchase agreements
("ASRs") that the company entered into during April
2021.
|
Outlook for Full Year 2021
The company estimates its full year 2021 outlook as
follows:
|
Low
|
|
High
|
|
Net
revenues
|
$9.54
billion
|
|
$9.79
billion
|
|
Net revenues
increase
|
1.1%
|
|
3.7%
|
|
Reported diluted
EPS
|
$11.48
|
|
$12.18
|
|
Adjusted diluted
EPS
|
$10.65
|
|
$11.35
|
|
Cash provided by
operations
|
At least $1.9
billion
|
|
Capital
expenditures
|
Approximately $400
million
|
|
Note on Non-GAAP Financial Measures
As used in this press release the term "reported" refers to
measures under accounting principles generally accepted in
the United States ("GAAP"). The
term "adjusted" refers to non-GAAP operating performance measures
that exclude special items such as restructuring and integration
charges, certain financial impacts resulting from the COVID-19
pandemic, amortization expense, excess tax benefits ("ETB")
associated with stock-based compensation, costs associated with
donations, contributions, and other financial support through Quest
for Health Equity, the company's initiative with the Quest
Diagnostics Foundation to reduce health disparities in underserved
communities, a gain on sale of an ownership interest in a joint
venture, and other items.
Non-GAAP adjusted measures are presented because management
believes those measures are useful adjuncts to GAAP results.
Non-GAAP adjusted measures should not be considered as an
alternative to the corresponding measures determined under GAAP.
Management may use these non-GAAP measures to evaluate our
performance period over period and relative to competitors, to
analyze the underlying trends in our business, to establish
operational budgets and forecasts and for incentive compensation
purposes. We believe that these non-GAAP measures are useful to
investors and analysts to evaluate our performance period over
period and relative to competitors, as well as to analyze the
underlying trends in our business and to assess our performance.
The additional tables attached below include reconciliations of
non-GAAP adjusted measures to GAAP measures.
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 be
accessed by dialing 888-455-0391 within the U.S. and Canada, or 773-756-0467 internationally,
passcode: 7895081; or via live webcast on the company's website at
www.QuestDiagnostics.com/investor. 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, from approximately
10:30 a.m. Eastern Time on
July 22, 2021 until midnight Eastern
Time on August 5, 2021, by
phone at 866-360-3307 for domestic callers or 203-369-0162 for
international callers. 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 empowers people to take action to improve
health outcomes. Derived from the world's largest database of
clinical lab results, our diagnostic insights reveal new avenues to
identify and treat disease, inspire healthy behaviors and improve
health care management. Quest annually serves one in three
adult Americans and half the physicians and hospitals in
the United States, and our nearly
50,000 employees understand that, in the right hands and with the
right context, our diagnostic insights can inspire actions that
transform lives. www.QuestDiagnostics.com.
Forward Looking Statements
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, impacts of
the COVID-19 pandemic and measures taken in response, adverse
results from pending or future government investigations, lawsuits
or private actions, the competitive environment, the complexity of
billing, reimbursement and revenue recognition for clinical
laboratory testing, 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.
ADDITIONAL TABLES FOLLOW
Quest Diagnostics
Incorporated and Subsidiaries
|
Consolidated
Statements of Operations
|
For the Three and
Six Months Ended June 30, 2021 and 2020
|
(in millions,
except per share data)
|
(unaudited)
|
|
|
Three Months
Ended
June 30,
|
|
Six Months
Ended
June 30,
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Net
revenues
|
$
|
2,550
|
|
|
$
|
1,827
|
|
|
$
|
5,270
|
|
|
$
|
3,649
|
|
|
|
|
|
|
|
|
|
Operating costs
and expenses and other operating income:
|
|
|
|
|
|
|
|
Cost of
services
|
1,565
|
|
|
1,221
|
|
|
3,191
|
|
|
2,491
|
|
Selling, general and
administrative
|
429
|
|
|
360
|
|
|
836
|
|
|
707
|
|
Amortization of
intangible assets
|
25
|
|
|
25
|
|
|
52
|
|
|
50
|
|
Other operating
income, net
|
(2)
|
|
|
(62)
|
|
|
(2)
|
|
|
(57)
|
|
Total operating costs
and expenses, net
|
2,017
|
|
|
1,544
|
|
|
4,077
|
|
|
3,191
|
|
|
|
|
|
|
|
|
|
Operating
income
|
533
|
|
|
283
|
|
|
1,193
|
|
|
458
|
|
|
|
|
|
|
|
|
|
Other income
(expense):
|
|
|
|
|
|
|
|
Interest expense,
net
|
(38)
|
|
|
(41)
|
|
|
(76)
|
|
|
(82)
|
|
Other income
(expense), net
|
322
|
|
|
13
|
|
|
326
|
|
|
(3)
|
|
Total non-operating
income (expense), net
|
284
|
|
|
(28)
|
|
|
250
|
|
|
(85)
|
|
|
|
|
|
|
|
|
|
Income before
income taxes and equity in earnings of equity method
investees
|
817
|
|
|
255
|
|
|
1,443
|
|
|
373
|
|
Income tax
expense
|
(177)
|
|
|
(66)
|
|
|
(330)
|
|
|
(92)
|
|
Equity in earnings
of equity method investees, net of taxes
|
10
|
|
|
4
|
|
|
27
|
|
|
18
|
|
Net
income
|
650
|
|
|
193
|
|
|
1,140
|
|
|
299
|
|
Less: Net income
attributable to noncontrolling interests
|
19
|
|
|
8
|
|
|
40
|
|
|
15
|
|
Net income
attributable to Quest Diagnostics
|
$
|
631
|
|
|
$
|
185
|
|
|
$
|
1,100
|
|
|
$
|
284
|
|
|
|
|
|
|
|
|
|
Earnings per share
attributable to Quest Diagnostics' common
stockholders:
|
|
|
|
|
|
|
|
Basic
|
$
|
5.05
|
|
|
$
|
1.38
|
|
|
$
|
8.52
|
|
|
$
|
2.12
|
|
|
|
|
|
|
|
|
|
Diluted
|
$
|
4.96
|
|
|
$
|
1.36
|
|
|
$
|
8.38
|
|
|
$
|
2.09
|
|
|
|
|
|
|
|
|
|
Weighted average
common shares outstanding:
|
|
|
|
|
|
|
|
Basic
|
125
|
|
|
134
|
|
|
129
|
|
|
134
|
|
|
|
|
|
|
|
|
|
Diluted
|
127
|
|
|
136
|
|
|
131
|
|
|
135
|
|
Quest Diagnostics
Incorporated and Subsidiaries
|
Consolidated
Balance Sheets
|
June 30, 2021
and December 31, 2020
|
(in millions,
except per share data)
|
(unaudited)
|
|
|
June 30,
2021
|
|
December
31,
2020
|
Assets
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
|
560
|
|
|
$
|
1,158
|
|
Accounts receivable,
net
|
1,255
|
|
|
1,520
|
|
Inventories
|
199
|
|
|
223
|
|
Prepaid expenses and
other current assets
|
132
|
|
|
157
|
|
Total current
assets
|
2,146
|
|
|
3,058
|
|
Property, plant
and equipment, net
|
1,622
|
|
|
1,627
|
|
Operating lease
right-of-use assets
|
589
|
|
|
604
|
|
Goodwill
|
7,045
|
|
|
6,873
|
|
Intangible assets,
net
|
1,172
|
|
|
1,167
|
|
Investments in
equity method investees
|
111
|
|
|
521
|
|
Other
assets
|
176
|
|
|
176
|
|
Total
assets
|
$
|
12,861
|
|
|
$
|
14,026
|
|
|
|
|
|
Liabilities and
Stockholders' Equity
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts payable and
accrued expenses
|
$
|
1,404
|
|
|
$
|
1,633
|
|
Current portion of
long-term debt
|
2
|
|
|
2
|
|
Current portion of
long-term operating lease liabilities
|
145
|
|
|
141
|
|
Total current
liabilities
|
1,551
|
|
|
1,776
|
|
Long-term
debt
|
4,008
|
|
|
4,013
|
|
Long-term
operating lease liabilities
|
492
|
|
|
499
|
|
Other
liabilities
|
792
|
|
|
847
|
|
Redeemable
noncontrolling interest
|
78
|
|
|
82
|
|
Stockholders'
equity:
|
|
|
|
Quest Diagnostics
stockholders' equity:
|
|
|
|
Common stock, par
value $0.01 per share; 600 shares authorized as of both June 30,
2021 and
December 31, 2020; 217 shares issued as of both June 30, 2021 and
December 31, 2020
|
2
|
|
|
2
|
|
Additional paid-in
capital
|
2,555
|
|
|
2,841
|
|
Retained
earnings
|
10,246
|
|
|
9,303
|
|
Accumulated other
comprehensive loss
|
(10)
|
|
|
(21)
|
|
Treasury stock, at
cost; 95 and 84 shares as of June 30, 2021 and December 31, 2020,
respectively
|
(6,894)
|
|
|
(5,366)
|
|
Total Quest
Diagnostics stockholders' equity
|
5,899
|
|
|
6,759
|
|
Noncontrolling
interests
|
41
|
|
|
50
|
|
Total stockholders'
equity
|
5,940
|
|
|
6,809
|
|
Total liabilities
and stockholders' equity
|
$
|
12,861
|
|
|
$
|
14,026
|
|
Quest Diagnostics
Incorporated and Subsidiaries
|
Consolidated
Statements of Cash Flows
|
For the Six Months
Ended June 30, 2021 and 2020
|
(in
millions)
|
(unaudited)
|
|
|
Six Months Ended
June 30,
|
|
2021
|
|
2020
|
Cash flows from
operating activities:
|
|
|
|
Net income
|
$
|
1,140
|
|
|
$
|
299
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
Depreciation and
amortization
|
201
|
|
|
174
|
|
Provision for credit
losses
|
2
|
|
|
13
|
|
Deferred income tax
(benefit) provision
|
(89)
|
|
|
23
|
|
Stock-based
compensation expense
|
39
|
|
|
31
|
|
Gain on disposition
of investment
|
(314)
|
|
|
—
|
|
Other, net
|
1
|
|
|
3
|
|
Changes in operating
assets and liabilities:
|
|
|
|
Accounts
receivable
|
265
|
|
|
(75)
|
|
Accounts payable and
accrued expenses
|
(199)
|
|
|
42
|
|
Income taxes
payable
|
85
|
|
|
51
|
|
Termination of
interest rate swap agreements
|
—
|
|
|
40
|
|
Other assets and
liabilities, net
|
60
|
|
|
1
|
|
Net cash provided
by operating activities
|
1,191
|
|
|
602
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
Business
acquisitions, net of cash acquired
|
(231)
|
|
|
(228)
|
|
Capital
expenditures
|
(170)
|
|
|
(165)
|
|
Proceeds from
disposition of investment
|
755
|
|
|
—
|
|
Increase in
investments and other assets
|
(10)
|
|
|
(18)
|
|
Net cash provided
by (used in) investing activities
|
344
|
|
|
(411)
|
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
Proceeds from
borrowings
|
—
|
|
|
749
|
|
Repayments of
debt
|
(1)
|
|
|
(1,001)
|
|
Purchases of treasury
stock
|
(1,910)
|
|
|
(75)
|
|
Exercise of stock
options
|
68
|
|
|
117
|
|
Employee payroll tax
withholdings on stock issued under stock-based compensation
plans
|
(22)
|
|
|
(13)
|
|
Dividends
paid
|
(156)
|
|
|
(146)
|
|
Distributions to
noncontrolling interest partners
|
(53)
|
|
|
(10)
|
|
Other financing
activities, net
|
(59)
|
|
|
(16)
|
|
Net cash used in
financing activities
|
(2,133)
|
|
|
(395)
|
|
|
|
|
|
Net change in cash
and cash equivalents and restricted cash
|
(598)
|
|
|
(204)
|
|
Cash and cash
equivalents and restricted cash, beginning of period
|
1,158
|
|
|
1,192
|
|
Cash and cash
equivalents and restricted cash, end of period
|
$
|
560
|
|
|
$
|
988
|
|
|
|
|
|
Cash paid during
the period for:
|
|
|
|
Interest
|
$
|
78
|
|
|
$
|
103
|
|
Income
taxes
|
$
|
335
|
|
|
$
|
20
|
|
Notes to Financial Tables
1) The computation of basic and diluted earnings per
common share is as follows:
|
Three Months
Ended
June 30,
|
|
Six Months
Ended
June 30,
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
(in millions, except
per share data)
|
Amounts
attributable to Quest Diagnostics' common
stockholders:
|
|
|
|
|
|
|
|
Net income
attributable to Quest Diagnostics
|
$
|
631
|
|
|
$
|
185
|
|
|
$
|
1,100
|
|
|
$
|
284
|
|
Less: earnings
allocated to participating securities
|
3
|
|
|
1
|
|
|
4
|
|
|
1
|
|
Earnings available to
Quest Diagnostics' common stockholders - basic
|
|
and diluted
|
$
|
628
|
|
|
$
|
184
|
|
|
$
|
1,096
|
|
|
$
|
283
|
|
|
|
|
|
|
|
|
|
Weighted average
common shares outstanding - basic
|
125
|
|
|
134
|
|
|
129
|
|
|
134
|
|
Effect of dilutive
securities:
|
|
|
|
|
|
|
|
Stock options and
performance share units
|
2
|
|
|
2
|
|
|
2
|
|
|
1
|
|
Weighted average
common shares outstanding - diluted
|
127
|
|
|
136
|
|
|
131
|
|
|
135
|
|
|
|
|
|
|
|
|
|
Earnings per share
attributable to Quest Diagnostics' common
stockholders:
|
|
|
|
|
|
|
|
Basic
|
$
|
5.05
|
|
|
$
|
1.38
|
|
|
$
|
8.52
|
|
|
$
|
2.12
|
|
Diluted
|
$
|
4.96
|
|
|
$
|
1.36
|
|
|
$
|
8.38
|
|
|
$
|
2.09
|
|
2) The following tables reconcile reported GAAP results to
non-GAAP adjusted results:
|
Three Months Ended
June 30, 2021
|
|
(dollars in
millions, except per share data)
|
|
Operating
income
|
|
Operating
income as a
percentage of
net revenues
|
|
Income tax
expense (e)
|
|
Equity in
earnings of
equity
method
investees, net
of taxes
|
|
Net income
attributable
to Quest
Diagnostics
|
|
Diluted
EPS
|
As
reported
|
$
|
533
|
|
|
20.9
|
%
|
|
$
|
(177)
|
|
|
$
|
10
|
|
|
$
|
631
|
|
|
$
|
4.96
|
|
Restructuring and
integration charges (a)
|
21
|
|
|
0.9
|
|
|
(5)
|
|
|
—
|
|
|
16
|
|
|
0.12
|
|
Other (b)
|
5
|
|
|
0.1
|
|
|
(1)
|
|
|
—
|
|
|
4
|
|
|
0.03
|
|
Gain on sale of
ownership in joint
venture (c)
|
—
|
|
|
—
|
|
|
55
|
|
|
—
|
|
|
(259)
|
|
|
(2.04)
|
|
Amortization
expense
|
25
|
|
|
1.0
|
|
|
(7)
|
|
|
—
|
|
|
18
|
|
|
0.15
|
|
ETB
|
—
|
|
|
—
|
|
|
(5)
|
|
|
—
|
|
|
(5)
|
|
|
(0.04)
|
|
As
adjusted
|
$
|
584
|
|
|
22.9
|
%
|
|
$
|
(140)
|
|
|
$
|
10
|
|
|
$
|
405
|
|
|
$
|
3.18
|
|
|
|
|
|
|
|
|
Six Months Ended
June 30, 2021
|
|
(dollars in
millions, except per share data)
|
|
Operating
income
|
|
Operating
income as a
percentage of
net revenues
|
|
Income tax
expense (e)
|
|
Equity in
earnings of
equity
method
investees, net
of taxes
|
|
Net income
attributable to
Quest
Diagnostics
|
|
Diluted
EPS
|
As
reported
|
$
|
1,193
|
|
|
22.6
|
%
|
|
$
|
(330)
|
|
|
$
|
27
|
|
|
$
|
1,100
|
|
|
$
|
8.38
|
|
Restructuring
and
integration charges
(a)
|
38
|
|
|
0.7
|
|
|
(9)
|
|
|
—
|
|
|
29
|
|
|
0.22
|
|
Other (b)
|
5
|
|
|
0.1
|
|
|
(4)
|
|
|
8
|
|
|
9
|
|
|
0.07
|
|
Gain on sale of
ownership in joint venture (c)
|
—
|
|
|
—
|
|
|
55
|
|
|
—
|
|
|
(259)
|
|
|
(1.98)
|
|
COVID-19 impact
(d)
|
4
|
|
|
0.1
|
|
|
(1)
|
|
|
—
|
|
|
3
|
|
|
0.03
|
|
Amortization
expense
|
52
|
|
|
1.0
|
|
|
(14)
|
|
|
2
|
|
|
40
|
|
|
0.31
|
|
ETB
|
—
|
|
|
—
|
|
|
(9)
|
|
|
—
|
|
|
(9)
|
|
|
(0.07)
|
|
As
adjusted
|
$
|
1,292
|
|
|
24.5
|
%
|
|
$
|
(312)
|
|
|
$
|
37
|
|
|
$
|
913
|
|
|
$
|
6.96
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30, 2020
|
|
(dollars in
millions, except per share data)
|
|
Operating
income
|
|
Operating
income as a
percentage of
net revenues
|
|
Income tax
expense (e)
|
|
Equity in
earnings of
equity method
investees, net
of taxes
|
|
Net income
attributable to
Quest
Diagnostics
|
|
Diluted
EPS
|
As
reported
|
$
|
283
|
|
|
15.5
|
%
|
|
$
|
(66)
|
|
|
$
|
4
|
|
|
$
|
185
|
|
|
$
|
1.36
|
|
Restructuring and
integration charges (a)
|
9
|
|
|
0.6
|
|
|
(1)
|
|
|
—
|
|
|
8
|
|
|
0.06
|
|
COVID-19 impact
(d)
|
(23)
|
|
|
(1.3)
|
|
|
10
|
|
|
(3)
|
|
|
(17)
|
|
|
(0.13)
|
|
Amortization
expense
|
25
|
|
|
1.3
|
|
|
(7)
|
|
|
3
|
|
|
21
|
|
|
0.16
|
|
ETB
|
—
|
|
|
—
|
|
|
(4)
|
|
|
—
|
|
|
(4)
|
|
|
(0.03)
|
|
As
adjusted
|
$
|
294
|
|
|
16.1
|
%
|
|
$
|
(68)
|
|
|
$
|
4
|
|
|
$
|
193
|
|
|
$
|
1.42
|
|
|
|
|
|
|
|
|
Six Months Ended
June 30, 2020
|
|
(dollars in
millions, except per share data)
|
|
Operating
income
|
|
Operating
income as a
percentage of
net revenues
|
|
Income tax
expense (e)
|
|
Equity in
earnings of
equity method
investees, net
of taxes
|
|
Net income
attributable to
Quest
Diagnostics
|
|
Diluted
EPS
|
As
reported
|
$
|
458
|
|
|
12.5
|
%
|
|
$
|
(92)
|
|
|
$
|
18
|
|
|
$
|
284
|
|
|
$
|
2.09
|
|
Restructuring and
integration charges (a)
|
25
|
|
|
0.7
|
|
|
(5)
|
|
|
—
|
|
|
20
|
|
|
0.15
|
|
COVID-19 impact
(d)
|
(14)
|
|
|
(0.4)
|
|
|
7
|
|
|
(3)
|
|
|
(13)
|
|
|
(0.10)
|
|
Amortization
expense
|
50
|
|
|
1.4
|
|
|
(14)
|
|
|
6
|
|
|
42
|
|
|
0.31
|
|
ETB
|
—
|
|
|
—
|
|
|
(12)
|
|
|
—
|
|
|
(12)
|
|
|
(0.09)
|
|
As
adjusted
|
$
|
519
|
|
|
14.2
|
%
|
|
$
|
(116)
|
|
|
$
|
21
|
|
|
$
|
321
|
|
|
$
|
2.36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
For both the three
and six months ended June 30, 2021, represents costs
primarily associated with workforce reductions, systems conversions
and integration incurred in connection with further restructuring
and integrating our business. For both the three and
six months ended June 30, 2020, represents costs
primarily associated with systems conversions and integration
incurred in connection with further restructuring and integrating
our business. The following table summarizes the pre-tax
impact of restructuring and integration charges on the company's
consolidated statements of operations:
|
|
Three Months
Ended
June 30,
|
|
Six Months
Ended
June 30,
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
(dollars in
millions)
|
Cost of
services
|
$
|
12
|
|
|
$
|
3
|
|
|
$
|
19
|
|
|
$
|
10
|
|
Selling, general and
administrative
|
9
|
|
|
6
|
|
|
19
|
|
|
15
|
|
Operating
income
|
$
|
21
|
|
|
$
|
9
|
|
|
$
|
38
|
|
|
$
|
25
|
|
(b)
|
For the three months
ended June 30, 2021, the pre-tax impact primarily represents
costs associated with donations, contributions and other financial
support through Quest for Health Equity, recorded in selling,
general and administrative expenses. For the six months ended
June 30, 2021, the pre-tax impact represents an $8 million
non-cash impairment to the carrying value of an equity method
investment recorded in equity in earnings of equity method
investees, net of taxes, and $5 million of costs associated with
donations, contributions and other financial support through Quest
for Health Equity, recorded in selling, general and administrative
expenses.
|
|
|
|
|
(c)
|
For the three and six
months ended June 30, 2021, the pre-tax impact represents a
gain of $314 million recorded in other income (expense), net
following the sale of the company's 40% ownership interest in
Q2 Solutions®, its clinical trials central laboratory
services joint venture, to IQVIA Holdings, Inc., its joint venture
partner, for $760 million in an all-cash
transaction.
|
|
|
|
|
(d)
|
For the six months
ended June 30, 2021 and both the three and six months ended
June 30, 2020, represents the impact of certain items
resulting from the COVID-19 pandemic. For the six months
ended June 30, 2021, includes incremental costs incurred to
protect the health and safety of the company's employees and
customers. For both the three and six months ended
June 30, 2020, includes $65 million of income recognized
attributable to the receipt of the initial tranche of funds from
the government that were appropriated to healthcare providers under
the Coronavirus Aid, Relief, and Economic Security Act ("CARES
Act"), partially offset by expense associated with a payment to
eligible employees to help offset expenses they incurred as a
result of COVID-19, certain asset impairment charges, and
incremental costs incurred primarily to protect the health and
safety of the company's employees and customers. During the
three months ended September 30, 2020, the company reversed the $65
million of income received from the government under the CARES Act,
which funds were returned during the three months ended December
31, 2020.
|
|
|
|
The following table
summarizes the pre-tax impact of these COVID-19 items on the
company's consolidated statements of operations:
|
|
Three Months
Ended
June 30,
|
|
Six Months
Ended
June 30,
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
(dollars in
millions)
|
Cost of
services
|
$
|
—
|
|
|
$
|
34
|
|
|
$
|
4
|
|
|
$
|
35
|
|
Selling, general and
administrative
|
—
|
|
|
5
|
|
|
—
|
|
|
8
|
|
Other operating
income, net
|
—
|
|
|
(62)
|
|
|
—
|
|
|
(57)
|
|
Operating
income
|
$
|
—
|
|
|
$
|
(23)
|
|
|
$
|
4
|
|
|
$
|
(14)
|
|
|
|
|
|
|
|
|
|
Net income
attributable to noncontrolling interest
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
3
|
|
(e)
|
For restructuring and
integration charges, COVID-19 impacts, other items and amortization
expense, income tax impacts, where recorded, were primarily
calculated using combined statutory income tax rates of 25.5% for
both 2021 and 2020. For the gain on sale of ownership in
joint venture, income tax expense on the transaction resulted in an
effective income rate of 17.6%.
|
3)
|
In April 2021, the
company entered into ASRs with several financial institutions to
repurchase $1.5 billion of the company's common stock as part
of its share repurchase program. For the three months ended
June 30, 2021, the company paid $1.5 billion to the
financial institutions and received an initial amount of 9.1
million shares of its common stock, for a value of $1.2 billion,
which represents 80% of the total value of shares to be repurchased
under the ASRs. The specific number of shares that the
company ultimately will purchase under the ASRs will be based on
the average of the daily volume-weighted average price per share of
the company's common stock during a repurchase period. There
were no other shares repurchased during three months ended
June 30, 2021. For the six months ended June 30,
2021, the company repurchased 12.5 million shares of its common
stock for $1.6 billion, including 9.1 million shares repurchased
under ASRs. In each of February and March 2021, the company's
Board of Directors increased the size of its share repurchase
program by $1 billion. As of June 30, 2021, $1.3
billion remained available under the company's share repurchase
authorization.
|
|
|
|
|
4)
|
The outlook for
adjusted diluted EPS represents management's estimates for the full
year 2021 before the impact of special items. Further impacts to
earnings related to special items may occur throughout 2021.
Additionally, the amount of ETB is dependent upon employee stock
option exercises and the company's stock price, which are difficult
to predict. The following table reconciles our full year 2021
outlook for adjusted diluted EPS to the corresponding amounts
determined under GAAP:
|
|
Low
|
|
High
|
Diluted
EPS
|
$
|
11.48
|
|
|
$
|
12.18
|
|
Restructuring and
integration charges (a)
|
0.46
|
|
|
0.46
|
|
COVID-19 impact
(b)
|
0.03
|
|
|
0.03
|
|
Amortization expense
(c)
|
0.62
|
|
|
0.62
|
|
Costs associated with
Quest for Health Equity (d)
|
0.21
|
|
|
0.21
|
|
Gain on sale of
ownership in joint venture (e)
|
(2.02)
|
|
|
(2.02)
|
|
ETB
|
(0.13)
|
|
|
(0.13)
|
|
Adjusted diluted
EPS
|
$
|
10.65
|
|
|
$
|
11.35
|
|
(a)
|
Represents estimated
pre-tax charges of $75 million primarily associated with workforce
reductions, systems conversions and integration costs incurred in
connection with further restructuring and integrating our business
and impairment charges. Income tax benefits were calculated
using a combined statutory income tax rate of 25.5%.
|
|
|
|
|
(b)
|
Represents estimated
pre-tax charges of $4 million associated with the impact of certain
items resulting from the COVID-19 pandemic. Income tax
benefits were calculated using a combined statutory income tax rate
of 25.5%.
|
|
|
|
|
(c)
|
Represents the
estimated impact of amortization expense on the calculation of
adjusted diluted EPS. Income tax benefits were calculated
using a combined statutory income tax rate of 25.5%.
|
Amortization of
intangible assets
|
$
|
104
|
|
Amortization expense
included in equity in earnings of equity method investees, net of
taxes
|
2
|
|
Total pre-tax
amortization expense
|
$
|
106
|
|
|
|
Total amortization
expense, net of an estimated tax benefit using a combined statutory
income tax rate of 25.5%
|
$
|
79
|
|
(d)
|
Represents estimated
pre-tax charges of $35 million associated with donations,
contributions and other financial support through Quest for Health
Equity. Income tax benefits were calculated using a combined
statutory income tax rate of 25.5%.
|
|
|
|
|
(e)
|
Represents a pre-tax
gain of $314 million recorded in other income (expense), net
following the sale of the company's 40% ownership in Q2
Solutions®. Income tax expense on the transaction
resulted in an effective income tax rate of 17.6%.
|
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SOURCE Quest Diagnostics