- Fourth quarter diluted EPS grew 11% on revenue growth of 2.7%;
cash from operations totaled $360 million - Full year diluted EPS
grew 20% on revenue growth of 2.8%; cash from operations totaled $1
billion - 2010 EPS expected to be between $4.10 and $4.30 per
diluted share MADISON, N.J., Jan. 25 /PRNewswire-FirstCall/ --
Quest Diagnostics Incorporated (NYSE:DGX), the world's leading
provider of diagnostic testing, information and services, announced
that for the fourth quarter ended December 31, 2009, income from
continuing operations increased to $182 million, or $0.97 per
diluted share, compared to $170 million, or $0.87 per diluted
share, in 2008. The quarter included a $0.04 per share charge
associated with the early extinguishment of debt, which was offset
by certain non-recurring tax benefits totaling $0.04 per share.
Fourth quarter revenues increased 2.7% to $1.8 billion. Clinical
testing revenues grew 2.3% compared to the prior year. Revenue per
requisition increased 2.6% and clinical testing volume, measured by
the number of requisitions, decreased by 0.3%. Excluding the impact
of drugs-of-abuse testing, which is sensitive to hiring trends,
testing volume increased by approximately 0.5%. "We drove solid
earnings growth in the fourth quarter, completing a year of strong
performance. For the full year, earnings per share increased 20%,
revenues grew about 3% and cash flow totaled $1 billion," said
Surya N. Mohapatra, Ph.D., Chairman and Chief Executive Officer.
"Revenues grew largely as a result of increased demand for
innovative gene-based and esoteric tests, including cancer
diagnostics. Earnings grew through top-line growth combined with
continued improvements in operating efficiencies. As the leader in
a vital and growing industry that is playing an increasingly
important role in improving health outcomes and reducing overall
healthcare costs, we are well-positioned for continued growth in
2010." For the fourth quarter, operating income increased to $330
million, or 17.9% of revenues, from $317 million, or 17.6% of
revenues in 2008. Bad debt expense, as a percentage of revenues,
improved to 3.9%, compared to 4.3% at the end of 2008. Days sales
outstanding improved to 43 days, compared to 44 days a year ago.
Cash from operations totaled $360 million, compared to $363 million
in the fourth quarter of 2008. During the quarter, the company
repurchased $150 million of its common shares and made capital
expenditures of $50 million. Full Year Performance Diluted earnings
per share from continuing operations increased 20% to $3.88. Income
from continuing operations increased to $730 million, from $632
million in 2008. Revenues increased 2.8% to $7.5 billion. Operating
income for 2009 increased to $1.4 billion, or 18.2% of revenues,
from $1.2 billion, or 16.9% of revenues in 2008. Cash from
operations for 2009, which was reduced by a $308 million settlement
payment in the second quarter, was $1 billion, compared to $1.1
billion in 2008. During 2009, the company repurchased $500 million
of its common shares and made capital expenditures of $167 million.
Outlook for 2010 For 2010, the company expects results from
continuing operations as follows: earnings per diluted share of
between $4.10 and $4.30, excluding potential special charges;
revenue growth of 3% to 4%, and operating income to approach 19% of
revenues. Cash from operations is expected to approximate $1.3
billion. Capital expenditures are expected to approximate $200
million. Quest Diagnostics will hold its fourth quarter conference
call on January 25, 2010 at 8:30 A.M. Eastern Time. A simulcast of
the call is available in listen-only mode by dialing 415-228-4961,
passcode 3214469 and via the Internet at:
http://www.questdiagnostics.com/investor. Registered analysts may
access the call at: http://www.streetevents.com/. In addition, a
replay of the call may be accessed online at:
http://www.questdiagnostics.com/investor or by phone by dialing
866-428-3803 in the U.S. Investors outside the U.S. may dial
203-369-0904. No password is required for either number. The
telephone replay will be available from 10:30 A.M. on January 25
through midnight on February 22, 2010. Listeners are 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 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. 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 2008 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 2009
Quarterly Reports on Form 10-Q and other items throughout the Form
10-K and the company's 2009 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 http://www.questdiagnostics.com/. --Table Follows--
Quest Diagnostics Incorporated and Subsidiaries Consolidated
Statements of Operations For the Three and Twelve Months Ended
December 31, 2009 and 2008 (in millions, except per share and
percentage data) (unaudited) Three Months Ended Twelve Months Ended
December 31, December 31, ------------ ------------ 2009 2008 2009
2008 Net revenues $1,848.2 $1,800.3 $7,455.2 $7,249.4 Operating
costs and expenses: Cost of services 1,070.3 1,040.9 4,321.5
4,256.1 Selling, general and administrative 432.9 435.6 1,747.6
1,736.9 Amortization of intangible assets 9.5 9.3 37.1 37.3 Other
operating expense (income), net 5.1 (2.6) (10.1) (3.3) --- ----
----- ---- Total operating costs and expenses 1,517.8 1,483.2
6,096.1 6,027.0 ------- ------- ------- ------- Operating income
330.4 317.1 1,359.1 1,222.4 Other income (expense): Interest
expense, net (34.8) (43.6) (144.1) (179.7) Equity earnings in
unconsolidated joint ventures 7.7 6.6 33.3 29.7 Other expense, net
(11.0) (8.8) (20.4) (21.7) ----- ---- ----- ----- Total
non-operating expenses, net (38.1) (45.8) (131.2) (171.7) -----
----- ------ ------ Income from continuing operations before taxes
292.3 271.3 1,227.9 1,050.7 Income tax expense 101.5 93.5 460.4
386.8 ----- ---- ----- ----- Income from continuing operations
190.8 177.8 767.5 663.9 Income (loss) from discontinued operations,
net of taxes (0.2) 0.2 (1.3) (50.7) ---- --- ---- ----- Net income
190.6 178.0 766.2 613.2 Less: Net income attributable to
noncontrolling interests 9.0 8.2 37.1 31.7 --- --- ---- ---- Net
income attributable to Quest Diagnostics $181.6 $169.8 $729.1
$581.5 ====== ====== ====== ====== Amounts attributable to Quest
Diagnostics' stockholders: Income from continuing operations $181.8
$169.6 $730.4 $632.2 Income (loss) from discontinued operations,
net of taxes (0.2) 0.2 (1.3) (50.7) ---- --- ---- ----- Net income
$181.6 $169.8 $729.1 $581.5 ====== ====== ====== ====== Earnings
per share attributable to Quest Diagnostics' common stockholders -
basic: Income from continuing operations $0.98 $0.87 $3.92 $3.25
Income (loss) from discontinued operations - 0.01 (0.01) (0.26) ---
---- ----- ----- Net income $0.98 $0.88 $3.91 $2.99 ===== =====
===== ===== Earnings per share attributable to Quest Diagnostics'
common stockholders - diluted: Income from continuing operations
$0.97 $0.87 $3.88 $3.22 Income (loss) from discontinued operations
- - (0.01) (0.26) --- --- ----- ----- Net income $0.97 $0.87 $3.87
$2.96 ===== ===== ===== ===== Weighted average common shares
outstanding: Basic 184.0 193.5 185.9 194.3 Diluted 186.3 194.7
187.8 196.0 Operating income as a percentage of net revenues 17.9%
17.6% 18.2% 16.9% Quest Diagnostics Incorporated and Subsidiaries
Consolidated Balance Sheets December 31, 2009 and 2008 (in
millions, except per share data) December 31, December 31,
------------ ------------ 2009 2008 --- ---- (unaudited) Assets
------ Current assets: Cash and cash equivalents $534.3 $253.9
Accounts receivable, net 827.3 832.9 Inventories 91.4 102.1
Deferred income taxes 131.8 218.4 Prepaid expenses and other
current assets 94.6 89.5 ---- ---- Total current assets 1,679.4
1,496.8 Property, plant and equipment, net 825.9 879.7 Goodwill,
net 5,083.9 5,054.9 Intangible assets, net 823.7 827.4 Other assets
150.7 145.0 ----- ----- Total assets $8,563.6 $8,403.8 ========
======== Liabilities and Stockholders' Equity
------------------------------------ Current liabilities: Accounts
payable and accrued expenses $888.7 $1,219.6 Current portion of
long-term debt 170.5 5.1 ----- --- Total current liabilities
1,059.2 1,224.7 Long-term debt 2,936.8 3,078.1 Other liabilities
556.2 475.9 Stockholders' equity: Quest Diagnostics stockholders'
equity: Common stock, par value $0.01 per share; 600 shares
authorized at both December 31, 2009 and 2008; 214.1 shares issued
at both December 31, 2009 and 2008 2.1 2.1 Additional paid-in
capital 2,302.4 2,262.1 Retained earnings 3,216.6 2,561.7
Accumulated other comprehensive loss (21.0) (68.1) Treasury stock,
at cost; 30.8 shares and 23.7 shares at December 31, 2009 and 2008,
respectively (1,510.5) (1,152.9) -------- -------- Total Quest
Diagnostics stockholders' equity 3,989.6 3,604.9 Noncontrolling
interests 21.8 20.2 ---- ---- Total stockholders' equity 4,011.4
3,625.1 ------- ------- Total liabilities and stockholders' equity
$8,563.6 $8,403.8 ======== ======== Quest Diagnostics Incorporated
and Subsidiaries Consolidated Statements of Cash Flows For the Year
Ended December 31, 2009 and 2008 (in millions) (unaudited) Twelve
Months Ended December 31, ------------ 2009 2008 ---- ---- Cash
flows from operating activities: Net income $766.2 $613.2
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization 256.7 264.6
Provision for doubtful accounts 321.0 326.2 Provision for special
charge - 72.7 Deferred income tax provision 83.1 0.5 Stock
compensation expense 75.1 70.6 Excess tax benefits from stock-based
compensation arrangements (5.5) (2.4) Other, net 29.7 13.8 Changes
in operating assets and liabilities: Accounts receivable (314.1)
(282.6) Accounts payable and accrued expenses 71.8 (4.3)
Integration, settlement and other special charges (329.6) (8.2)
Income taxes payable 21.2 24.7 Other assets and liabilities, net
21.8 (25.7) ---- ----- Net cash provided by operating activities
997.4 1,063.1 ----- ------- Cash flows from investing activities:
Business acquisitions, net of cash acquired (18.3) 8.1 Capital
expenditures (166.9) (212.7) (Increase) decrease in investments and
other assets (10.7) 5.7 ----- --- Net cash used in investing
activities (195.9) (198.9) ------ ------ Cash flows from financing
activities: Proceeds from borrowings 1,245.5 22.9 Repayments of
debt (1,218.5) (481.9) (Decrease) increase in book overdrafts
(12.1) 14.2 Purchases of treasury stock (500.0) (254.0) Exercise of
stock options 87.1 30.5 Excess tax benefits from stock-based
compensation arrangements 5.5 2.4 Dividends paid (74.7) (78.0)
Distributions to noncontrolling interests (35.5) (32.9) Other
financing activities (18.4) (1.1) ----- ---- Net cash used in
financing activities (521.1) (777.9) ------ ------ Net change in
cash and cash equivalents 280.4 86.3 Cash and cash equivalents,
beginning of period 253.9 167.6 ----- ----- Cash and cash
equivalents, end of period $534.3 $253.9 ====== ====== Cash paid
during the period for: Interest $146.4 $189.3 Income taxes $362.5
$359.3 Notes to Financial Tables 1) On January 1, 2009, the Company
adopted a new accounting standard related to noncontrolling
interests in consolidated financial statements, the provisions of
which, among other things, require that minority interests be
renamed "net income attributable to noncontrolling interests" and
that a company present a consolidated net income measure that
includes the amount attributable to such noncontrolling interests
for all periods presented. The adoption of this standard did not
impact earnings per share attributable to Quest Diagnostics' common
stockholders. 2) On January 1, 2009, the Company adopted a new
accounting standard related to determining whether instruments
granted in share-based payment transactions are participating
securities. Under this standard, the Company's unvested restricted
common stock and unvested restricted stock units that contain
non-forfeitable rights to dividends are participating securities
that are included in the computation of earnings per share pursuant
to the two-class method. Earnings per share calculations for all
prior periods have been presented based on the two-class method.
Three Months Twelve Months Ended Ended December 31, December 31,
2009 2008 2009 2008 ---- ---- ---- ---- (in millions, except per
share data) Amounts attributable to Quest Diagnostics' common
stockholders: Income from continuing operations $181.8 $169.6
$730.4 $632.2 Income (loss) from discontinued operations (0.2) 0.2
(1.3) (50.7) ---- --- ---- ----- Net income available to common
stockholders $181.6 $169.8 $729.1 $581.5 ====== ====== ======
====== Income from continuing operations $181.8 $169.6 $730.4
$632.2 Less: Earnings allocated to participating securities (0.7)
(0.4) (2.3) (1.3) ---- ---- ---- ---- Earnings available to Quest
Diagnostics' common stockholders - basic and diluted $181.1 $169.2
$728.1 $630.9 ====== ====== ====== ====== Weighted average common
shares outstanding -basic 184.0 193.5 185.9 194.3 Effect of
dilutive securities: Stock options and performance share units 2.3
1.2 1.9 1.7 --- --- --- --- Weighted average common shares
outstanding - diluted 186.3 194.7 187.8 196.0 ===== ===== =====
===== Earnings per share attributable to Quest Diagnostics' common
stockholders -basic: Income from continuing operations $0.98 $0.87
$3.92 $3.25 Income (loss) from discontinued operations - 0.01
(0.01) (0.26) --- ---- ----- ----- Net income $0.98 $0.88 $3.91
$2.99 ===== ===== ===== ===== Earnings per share attributable to
Quest Diagnostics' common stockholders -diluted: Income from
continuing operations $0.97 $0.87 $3.88 $3.22 Income (loss) from
discontinued operations - - (0.01) (0.26) --- --- ----- ----- Net
income $0.97 $0.87 $3.87 $2.96 ===== ===== ===== ===== 3) Results
for the three months ended December 31, 2009 include $12.9 million
of pre-tax charges, or $0.04 per diluted share, associated with the
early extinguishment of debt, offset by a benefit of $0.04 per
diluted share associated with certain non-recurring tax benefits.
Results for the year ended December 31, 2009 include pre-tax
charges of $20.4 million, or $0.07 per diluted share, associated
with the early extinguishment of debt and $7.0 million, or $0.02
per diluted share, associated with the write-down of an investment.
These charges were partially offset by a $15.5 million gain, or
$0.05 per diluted share, associated with an insurance settlement
for storm-related losses and a benefit of $0.04 per diluted share
resulting from certain non-recurring tax benefits. Results for the
three months ended December 31, 2008 include pre-tax charges of
$16.2 million, or $0.05 per diluted share, recorded during the
fourth quarter of 2008 primarily associated with workforce
reductions, offset by a benefit of $0.05 per diluted share,
principally associated with the favorable resolution of various tax
contingencies. Results for the year ended December 31, 2008 include
a third quarter charge of $8.9 million, or $0.03 per diluted share,
associated with the write-down of an equity investment and pre-tax
charges of $16.2 million, or $0.05 per diluted share, primarily
associated with workforce reductions. These charges were offset in
part by favorable resolutions of various tax contingencies in 2008,
which increased diluted earnings per share by $0.08. In addition,
we estimate the impact of hurricanes in the third quarter of 2008
adversely impacted operating income for the year ended December 31,
2008 by approximately $8 million, or $0.02 per diluted share. 4)
Other operating expense (income), net represents miscellaneous
income and expense items related to operating activities, including
gains and losses associated with the disposal of operating assets
and provisions for restructurings and other special charges. For
the year ended December 31, 2009, other operating expense (income),
net includes a $15.5 million gain associated with an insurance
settlement for storm-related losses. 5) Other expense, net
represents miscellaneous income and expense items related to
non-operating activities, such as gains and losses associated with
investments and other non-operating assets. For the three months
ended December 31, 2009, other expense, net includes $12.9 million
of pre-tax charges associated with the early extinguishment of
debt. For the twelve months ended December 31, 2009, other expense,
net includes $20.4 million of pre-tax charges associated with the
early extinguishment of debt and a $7.0 million charge associated
with the write-down of an investment partially offset by gains of
$6.0 million associated with investments held in trust pursuant to
our supplemental deferred compensation plan. For the three and
twelve months ended December 31, 2008, other expense, net includes
losses of $6.9 million and $9.9 million, respectively, associated
with investments held in a trust pursuant to our supplemental
deferred compensation plan. In addition, for the twelve months
ended December 31, 2008, other expense, net includes a third
quarter charge of $8.9 million associated with the write-down of an
equity investment. 6) For the three months ended December 31, 2009,
the Company repurchased 2.6 million shares of its common stock at
an average price of $58.49 per share for $150 million. For the
twelve months ended December 31, 2009, the Company repurchased
approximately 10 million shares of its common stock at an average
price of $49.83 per share for $500 million, including 4.5 million
shares repurchased from SB Holdings Capital Inc., a wholly-owned
subsidiary of GlaxoSmithKline plc., at an average price of $44.33
per share for $200 million. For the three and twelve months ended
December 31, 2009, the Company reissued 1.1 million shares and 3.0
million shares, respectively, for employee benefit plans. 7) The
following table summarizes the approximate impact of various items
on year-over-year comparisons for certain revenue metrics reported
for the three and twelve months ended December 31, 2009: Continuing
Operations --------------------- Three Months Ended December 31,
2009 ----------------- Consolidated Revenue Revenue Volume per
Growth Growth Requisition ------ ------ ------------ Reported: 2.7%
(0.3)% 2.6% Impact on comparisons to prior year of: Drugs-of-abuse
testing (0.4)% (0.8)% 0.4% Laboratory management contracts - - -
Number of business days - - - Foreign exchange 0.2% - - Continuing
Operations --------------------- Twelve Months Ended December 31,
2009 ----------------- Consolidated Revenue Revenue Volume per
Growth Growth Requisition ------ ------ ------------ Reported: 2.8%
(0.7)% 3.9% Impact on comparisons to prior year of: Drugs-of-abuse
testing (0.7)% (1.5)% 0.8% Laboratory management contracts (0.1)%
(0.4)% 0.3% Number of business days (0.3)% (0.4)% - Foreign
exchange (0.4)% - - 8) During the third quarter of 2008, the
Company and NID reached an agreement in principle with the United
States Attorney's Office to settle the previously disclosed federal
government investigation of NID, a test kit subsidiary that was
voluntarily closed in 2006. As a result of the agreement in
principle, during 2008, the Company recorded a charge of $75
million in discontinued operations to increase its reserves for the
settlement and related matters. In the second quarter of 2009, the
Company entered into a final settlement agreement with the federal
government and paid $308 million, which had been previously
reserved, in connection with the final settlement. Contact: For
Quest Diagnostics: Kathleen Valentine (Investors), +1-973-520-2900,
or Gary Samuels, (Media),+1-973-520-2800 DATASOURCE: Quest
Diagnostics Incorporated CONTACT: For Quest Diagnostics: Kathleen
Valentine (Investors), +1-973-520-2900, or Gary Samuels,
(Media),+1-973-520-2800 Web Site: http://www.questdiagnostics.com/
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