Quest Diagnostics Incorporated (NYSE: DGX), the world's leading provider of diagnostic testing, information and services, announced that for the second quarter ended June 30, 2010, income from continuing operations increased to $195 million, or $1.07 per diluted share, compared to $188 million, or $1.00 per diluted share, in the second quarter of 2009. Results for 2009 included a benefit associated with an insurance recovery of $0.05 per share, offset by charges of $0.04 per share associated with the company's debt repurchase and an investment writeoff.
Second quarter revenues were $1.9 billion, 1.4% below the prior year level. Clinical testing revenues decreased 1.6% compared to the prior year. Revenue per requisition decreased 0.3% and clinical testing volume, measured by the number of requisitions, decreased 1.3%.
"During the second quarter, Quest Diagnostics grew earnings, but a further slowdown in physician office visits contributed to a decline in our revenues," said Surya N. Mohapatra, Ph.D., Chairman and Chief Executive Officer. "Our business continues to perform well in a number of areas, including gene-based and esoteric testing, and the long-term trends for our business are extremely favorable. However, revenue softness through the first half has made us more cautious about our full-year outlook, and we have reduced 2010 guidance accordingly. We continue to take actions to accelerate revenue growth, manage our cost structure and invest for the future."
For the second quarter, operating income improved to $366 million, or 19.5% of revenues, compared to $359 million, or 18.9% of revenues, in 2009. Bad debt expense as a percentage of revenues improved to 3.8% from 4.4% in the prior year. Days sales outstanding improved to 42 days, compared to 43 days a year ago. Cash flow from operations was $209 million. This compared to $9 million of cash used in operations during the second quarter of 2009. Cash flow in 2009 reflected a $308 million payment, or $258 million, net of tax benefits, related to the NID settlement. During the quarter just ended, the company repurchased $175 million of its common shares and made capital expenditures of $49 million.
First Half Performance
For the first six months of 2010, income from continuing operations was $357 million, or $1.96 per diluted share, compared to $357 million, or $1.89 per diluted share for the first half of 2009. Revenues of $3.7 billion decreased 0.8%.
Operating income for the first half of 2010 was $664 million, or 18.1% of revenues, compared to $680 million, or 18.3% of revenues for 2009. Cash provided by operations was $448 million compared to $264 million for 2009. Cash provided by operations in 2009 was reduced by the net impact of the NID settlement. During the first half of 2010, the company repurchased $426 million of its common shares, and made capital expenditures of $89 million.
Outlook for 2010 Updated
The company updated its full year 2010 guidance. Full year earnings per diluted share from continuing operations are expected to be between $3.90 and $4.00, compared to prior expectations of between $4.00 and $4.20. The company expects revenues to be approximately 1% below the prior year. Previously, revenues were expected to grow between 1% and 2%. Operating income is expected to approach 18% of revenues. Cash from operations is expected to be between $1.1 billion and $1.2 billion. Capital expenditures are expected to approximate $200 million.
Quest Diagnostics Incorporated