Quest Diagnostics Incorporated (NYSE: DGX), the world's leading provider of diagnostic testing, information and services, announced that for the third quarter ended September 30, 2010, income from continuing operations increased to $198 million, or $1.13 per diluted share, from $192 million, or $1.02 per diluted share, for the third quarter of 2009. Third quarter 2010 results include a benefit of $0.08 per share, primarily associated with the favorable resolution of tax contingencies.
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.
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 Incorporated