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Quest Diagnostics Reports Fourth Quarter And Full Year 2012 Financial Results; Announces 2013 Guidance

Quest Diagnostics Reports Fourth Quarter And Full Year 2012 Financial Results;
                           Announces 2013 Guidance

-- Full year record cash from operations of $1.2 billion and expanded
operating margins

-- Fourth quarter adjusted diluted EPS from continuing operations of $1.01,
vs. $1.20 in 2011

-- Fourth quarter reported diluted EPS from continuing operations of $0.87 vs.
$1.16 in 2011

-- Fourth quarter revenues from continuing operations of $1.8 billion, 4%
below prior year

-- 2013 guidance before special items: Diluted EPS between $4.35 - $4.55;
revenues to grow between 0% and 1%

PR Newswire

MADISON, N.J., Jan. 23, 2013

MADISON, N.J., Jan.23, 2013 /PRNewswire/ -- Quest Diagnostics Incorporated
(NYSE: DGX), the world's leading provider of diagnostic information services,
announced today that for the fourth quarter ended December 31, 2012, adjusted
income from continuing operations was $163 million, or $1.01 per diluted
share, compared to adjusted income from continuing operations of $191 million,
or $1.20 per diluted share, for 2011. In the fourth quarter of 2012, as
previously announced, Hurricane Sandy reduced revenues by an estimated $21
million, operating income by an estimated $16 million and earnings per diluted
share by an estimated $0.06. Fourth quarter results include a benefit of $0.02
per share in 2012 and $0.08 in 2011 associated with discrete tax items.

For the fourth quarter of 2012, reported income from continuing operations was
$140 million, or $0.87 per diluted share, compared to reported income from
continuing operations of $184 million, or $1.16 per diluted share, in 2011.
Income from continuing operations in the fourth quarter of 2012 was reduced by
$0.14 per diluted share related to restructuring and integration costs. In the
fourth quarter of 2011, income from continuing operations was reduced by $0.02
per diluted share related to restructuring and integration costs and by $0.02
per diluted share related to CEO succession costs.

Revenues from continuing operations were $1.8 billion for the fourth quarter,
4.0% below the prior year. Diagnostic information services revenues decreased
4.4%. Volume, measured by the number of requisitions, declined 2.4% versus the
prior year and revenue per requisition was 2.0% below the prior year. The
impact of Hurricane Sandy in the quarter is estimated to have reduced
diagnostic information services revenues by 1.3% and volume by 1.0%.

For the fourth quarter of 2012, adjusted operating income from continuing
operations was $301 million, or 17.0% of revenues, compared to $332 million,
or 17.9% of revenues, for 2011. Reported operating income from continuing
operations was $265 million, or 14.9% of revenues, compared to $320 million,
or 17.3% of revenues, in 2011. Cash provided by operations was $380 million,
and benefited $90 million due to the timing of tax payments. Cash from
operations was $338 million in the fourth quarter of 2011. During the fourth
quarter of 2012, the company reduced outstanding debt by $147 million and
repurchased $50 million of its common shares.

"During the fourth quarter, continued strong progress in our Invigorate
cost-reduction initiative enabled us to mitigate some of the impact of revenue
softness, which was exacerbated by the impact of Hurricane Sandy," said Steve
Rusckowski, President and CEO. "In late 2012, we unveiled our new strategic
plan to improve performance and build value for our shareholders. We have
moved aggressively on all five elements of our plan, starting with our first
strategic goal of refocusing on our core diagnostic information services
business. We sold OralDNA and announced the planned sale of HemoCue. We
continued to pursue a disciplined approach to capital deployment, announcing a
substantial increase in our dividend, repurchasing shares, and investing in
strategic opportunities as exemplified by our new relationship with UMass
Memorial Health Care."

In connection with the company's strategy to refocus on diagnostic information
services, the company sold OralDNA and announced its plan to sell its HemoCue
diagnostic products business. As a result, its consolidated income statements
for the full-year 2012 and 2011 reflect the operating results of these
businesses as discontinued operations.

Full Year 2012 Performance

For the full year 2012, revenues from continuing operations were $7.4 billion,
essentially unchanged from the prior year. Adjusted income from continuing
operations was $701 million, or $4.36 per diluted share, compared to $704
million, or $4.38 per diluted share, in 2011. On a reported basis, income from
continuing operations was $630 million, or $3.92 per diluted share, compared
to $459 million, or $2.85 per diluted share, in 2011.

Adjusted operating income from continuing operations for 2012 was $1.3
billion, or 17.8% of revenues, compared to $1.3 billion, or 17.5% of revenues,
for 2011. On a reported basis, operating income from continuing operations was
$1.2 billion, or 16.3% of revenues, compared to $987 million, or 13.4% of
revenues, in 2011. Cash provided by operations was $1.2 billion. In 2011, cash
provided by operations was $895 million and was reduced by the Medi-Cal
settlement payment. During 2012, the company reduced outstanding debt by $654
million and repurchased $200 million of its common shares.

Outlook for 2013

For 2013, the company estimates results from continuing operations, before
special items, as follows:

  oRevenue growth of between 0% and 1%;
  oEarnings per diluted share to be between $4.35 and $4.55
  oCash provided by operations to approximate $1 billion
  oCapital expenditures to approximate $250 million

"In 2013 our focus will continue to be driving operational excellence and
restoring growth," said Mr. Rusckowski. "We will build on the positive
momentum of our 2012 Invigorate performance in 2013. We expect results from
our efforts to restore growth to gradually build throughout 2013, and
anticipate continued revenue softness in the first half, with improvement
thereafter."

Note on Non-GAAP Financial Measures

As used in this press release, the term "adjusted" refers to the operating
performance measures that exclude the Medi-Cal charge, restructuring and
integration charges, transaction costs related to acquisitions and CEO
succession costs. Adjusted results do not exclude the impact of Hurricane
Sandy in 2012 or the impact of severe weather in 2011. The GAAP to non-GAAP
reconciliation for full year 2011 has been revised to reflect this change in
treatment. Adjusted measures are presented because management believes those
measures are useful adjuncts to reported results under accounting principles
generally accepted in the United States. Adjusted measures should not be
considered as an alternative to the corresponding measures determined under
accounting principles generally accepted in the United States.

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
also be accessed in listen-only mode by dialing 415-228-4961, passcode
3214469. 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 by phone at 800-835-4610 for domestic
callers, or 203-369-3352 for international callers. Telephone replays will be
available from 10:30 a.m. Eastern Time on January 23 until midnight Eastern
Time on February 23, 2013.

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 is the world's leading provider of diagnostic
informationservices 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
providesinterpretive 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
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," "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 2011 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 Quarterly Reports on Form
10-Q and other items throughout the Form 10-K and the company's 2012 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 www.QuestDiagnostics.com.

Contacts:
Kathleen Valentine (Investors): 973-520-2900
Wendy Bost (Media): 973-520-2800

TABLES FOLLOW



Quest Diagnostics Incorporated and Subsidiaries
Consolidated Statements of Operations
For the Three and Twelve Months Ended December 31, 2012 and 2011
(in millions, except per share and percentage data)
(unaudited)
                            Three Months              Twelve Months
                            Ended December 31,        Ended December 31,
                            2012         2011         2012         2011
Net revenues                $ 1,773.8    $ 1,848.2    $ 7,382.6    $ 7,391.9
Operating costs and
expenses:
Cost of services            1,072.6      1,068.8      4,364.7      4,362.9
Selling, general and        421.0        441.0        1,745.2      1,743.1
administrative
Amortization of intangible  18.5         17.8         74.7         61.2
assets
Other operating (income)    (3.3)        0.2          (2.8)        238.1
expense, net
Total operating costs and   1,508.8      1,527.8      6,181.8      6,405.3
expenses
Operating income            265.0        320.4        1,200.8      986.6
Other income (expense):
Interest expense, net       (40.0)       (42.6)       (164.7)      (169.6)
Equity earnings in
unconsolidated joint        6.0          6.1          25.6         29.0
ventures
Other income, net           0.6          3.5          6.7          2.8
Total non-operating         (33.4)       (33.0)       (132.4)      (137.8)
expenses, net
Income from continuing      231.6        287.4        1,068.4      848.8
operations before taxes
Income tax expense          81.6         93.8         401.9        354.7
Income from continuing      150.0        193.6        666.5        494.1
operations
Income (loss) from
discontinued operations,    (84.4)       5.3          (74.4)       11.6
net of taxes
Net income                  65.6         198.9        592.1        505.7
Less: Net income
attributable to             9.8          9.4          36.4         35.1
noncontrolling interests
Net income attributable to  $ 55.8       $ 189.5      $ 555.7      $ 470.6
Quest Diagnostics
Amounts attributable to
Quest Diagnostics' common
stockholders:
Income from continuing      $ 140.2      $ 184.2      $ 630.1      $ 459.0
operations
Income (loss) from
discontinued operations,    (84.4)       5.3          (74.4)       11.6
net of taxes
Net income                  $ 55.8       $ 189.5      $ 555.7      $ 470.6
Earnings per share
attributable to Quest
Diagnostics' common
 stockholders - basic:
Income from continuing      $ 0.88       $ 1.17       $ 3.96       $ 2.88
operations
Income (loss) from          (0.53)       0.03         (0.47)       0.07
discontinued operations
Net income                  $ 0.35       $ 1.20       $ 3.49       $ 2.95
Earnings per share
attributable to Quest
Diagnostics' common
 stockholders -
diluted:
Income from continuing      $ 0.87       $ 1.16       $ 3.92       $ 2.85
operations
Income (loss) from          (0.53)       0.03         (0.46)       0.07
discontinued operations
Net income                  $ 0.34       $ 1.19       $ 3.46       $ 2.92
Weighted average common
shares outstanding:
Basic                       158.7        157.8        158.6        158.7
Diluted                     160.1        159.1        160.1        160.2
Operating income as a       14.9      %  17.3      %  16.3      %  13.4      %
percentage of net revenues





Quest Diagnostics Incorporated and Subsidiaries
Consolidated Balance Sheets
December 31, 2012 and 2011
(in millions, except per share data)
                                          December31, 2012  December31, 2011
                                          (unaudited)
Assets
Current assets:
Cash and cash equivalents                 $    295.6         $    164.9
Accounts receivable, net                  867.0              906.5
Inventories                               93.1               89.1
Deferred income taxes                     174.2              153.3
Prepaid expenses and other current assets 91.0               87.4
Current assets held for sale              40.2               —
Total current assets                      1,561.1            1,401.2
Property, plant and equipment, net        755.8              799.8
Goodwill                                  5,535.8            5,795.8
Intangible assets, net                    872.2              1,035.6
Other assets                              204.6              281.0
Non-current assets held for sale          354.4              —
Total assets                              $    9,283.9       $    9,313.4
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses     $    1,016.2       $    906.8
Short-term borrowings and current portion 9.4                654.4
of long-term debt
Current liabilities held for sale         22.0               —
Total current liabilities                 1,047.6            1,561.2
Long-term debt                            3,354.2            3,370.5
Other liabilities                         635.5              666.7
Non-current liabilities held for sale     60.8               —
Stockholders' equity:
Quest Diagnostics stockholders' equity:
Common stock, par value $0.01 per share;
600 shares authorized at both December
31, 2012 and                              2.2                2.1
 2011; 215.1 shares and 214.6
shares issued at December 31, 2012 and
2011, respectively
Additional paid-in capital                2,370.7            2,347.5
Retained earnings                         4,690.4            4,263.6
Accumulated other comprehensive income    14.3               (8.0)
(loss)
Treasury stock, at cost; 56.7 shares and
57.2 shares at December 31, 2012 and      (2,914.5)          (2,912.3)
2011, respectively
Total Quest Diagnostics stockholders'     4,163.1            3,692.9
equity
Noncontrolling interests                  22.7               22.1
Total stockholders' equity                4,185.8            3,715.0
Total liabilities and stockholders'       $    9,283.9       $    9,313.4
equity





Quest Diagnostics Incorporated and Subsidiaries
Consolidated Statements of Cash Flows
For the Twelve Months Ended December 31, 2012 and 2011
(in millions)
(unaudited)
                                                        Twelve Months Ended
                                                        December 31,
                                                        2012        2011
Cash flows from operating activities:
Net income                                              $  592.1    $  505.7
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization                           286.6       281.1
Provision for doubtful accounts                         268.6       279.6
Deferred income tax provision                           6.5         28.6
Stock-based compensation expense                        50.3        71.9
Excess tax benefits from stock-based compensation       (4.0)       (4.5)
arrangements
Provision for special charge                            —           236.0
Asset impairment and loss on sale of business           86.3        —
Other, net                                              (7.7)       8.6
Changes in operating assets and liabilities:
Accounts receivable                                     (243.0)     (306.7)
Accounts payable and accrued expenses                   (13.2)      (17.6)
Settlement of special charge                            —           (241.0)
Income taxes payable                                    100.6       39.1
Termination of interest rate swap agreements            71.8        —
Other assets and liabilities, net                       (7.8)       14.7
Net cash provided by operating activities               1,187.1     895.5
Cash flows from investing activities:
Business acquisitions, net of cash acquired             (50.6)      (1,298.6)
Sale of securities acquired in business acquisition     —           213.5
Capital expenditures                                    (182.2)     (161.5)
Decrease in investments and other assets                15.7        3.2
Net cash used in investing activities                   (217.1)     (1,243.4)
Cash flows from financing activities:
Proceeds from borrowings                                715.0       2,689.4
Repayments of debt                                      (1,369.4)   (1,710.3)
Purchases of treasury stock                             (200.0)     (935.0)
Exercise of stock options                               162.1       136.8
Excess tax benefits from stock-based compensation       4.0         4.5
arrangements
Dividends paid                                          (108.1)     (64.7)
Distributions to noncontrolling interests               (37.8)      (35.7)
Other financing activities, net                         12.1        (21.5)
Net cash (used in) provided by financing activities     (822.1)     63.5
Net change in cash and cash equivalents                 147.9       (284.4)
Less: Cash included in assets held for sale             (17.2)      —
Cash and cash equivalents, beginning of period          164.9       449.3
Cash and cash equivalents, end of period                $  295.6    $  164.9
Cash paid during the period for:
Interest                                                $  163.1    $  161.8
Income taxes                                            $  305.4    $  285.3



Notes to Financial Tables

1)The computation of basic and diluted earnings per common share is as
follows:



                                       Three Months Ended  Twelve Months Ended
                                       December 31,        December 31,
                                       2012      2011      2012       2011
                                       (in millions, except per share data)
Amounts attributable to Quest
Diagnostics' common stockholders:
Income from continuing operations      $ 140.2   $ 184.2   $  630.1   $ 459.0
Income (loss) from discontinued        (84.4)    5.3       (74.4)     11.6
operations, net of taxes
Net income available to common         $ 55.8    $ 189.5   $  555.7   $ 470.6
stockholders
Income from continuing operations      $ 140.2   $ 184.2   $  630.1   $ 459.0
Less: Earnings allocated to            0.6       1.0       2.5        2.9
participating securities
Earnings available to Quest
Diagnostics' common stockholders -     $ 139.6   $ 183.2   $  627.6   $ 456.1
basic and diluted
Weighted average common shares         158.7     157.8     158.6      158.7
outstanding - basic
Effect of dilutive securities:
Stock options and performance share    1.4       1.3       1.5        1.5
units
Weighted average common shares         160.1     159.1     160.1      160.2
outstanding - diluted
Earnings per share attributable to
Quest Diagnostics' common stockholders
- basic:
Income from continuing operations      $ 0.88    $ 1.17    $  3.96    $ 2.88
Income (loss) from discontinued        (0.53)    0.03      (0.47)     0.07
operations
Net income                             $ 0.35    $ 1.20    $  3.49    $ 2.95
Earnings per share attributable to
Quest Diagnostics' common stockholders
- diluted:
Income from continuing operations      $ 0.87    $ 1.16    $  3.92    $ 2.85
Income (loss) from discontinued        (0.53)    0.03      (0.46)     0.07
operations
Net income                             $ 0.34    $ 1.19    $  3.46    $ 2.92



   Adjusted amounts for operating income, operating income as a percentage of
   net revenues, income from continuing operations, and diluted earnings per
   common share represent the Company's results before the Medi-Cal charge,
   restructuring and integration charges, transaction costs related to the
   acquisitions of Athena Diagnostics and Celera Corporation, and CEO
   succession costs. Adjusted measures are presented because management
2) believes those measures are useful adjuncts to reported results under
   accounting principles generally accepted in the United States when
   comparing results of operations from period to period. Adjusted measures
   should not be considered as an alternative to the corresponding measures
   determined under accounting principles generally accepted in the United
   States. The following tables reconcile reported results to adjusted
   results:



                               Three Months Ended December 31, 2012
                               (dollars in millions, except per share data)
                                            Restructuring
                                            & Integration Charges
                               As Reported  (a)                    As Adjusted
Operating income               $  265.0     $      36.4            $  301.4
Operating income as a % of net 14.9      %  2.1             %      17.0      %
revenues
Income from continuing         140.2        22.3                   162.5
operations (b)
Diluted earnings per common    0.87         0.14                   1.01
share



     Represents costs primarily associated with workforce reductions and
(a) professional fees incurred in connection with further restructuring and
     integrating our business.
(b) For the restructuring and integration charges, income tax benefits were
     calculated using a combined federal and state rate of 38.7%.





                 Twelve Months Ended December 31, 2012
                 (dollars in millions, except per share data)
                              Restructuring &      CEO Succession
                              Integration Charges  Costs
                 As Reported  (c)                  (d)             As Adjusted
Operating income $ 1,200.8    $     106.0          $   10.1        $ 1,316.9
Operating income
as a % of net    16.3      %  1.4            %     0.1        %    17.8      %
revenues
Income from
continuing       630.1        65.0                 6.1             701.2
operations (e)
Diluted earnings 3.92         0.40                 0.04            4.36
per common share



      Represents costs primarily associated with workforce reductions and
(c)   professional fees incurred in connection with further restructuring and
      integrating our business.
(d) Principally represents accrued severance and accelerated vesting of
      equity awards in connection with the succession of our prior CEO.
      For both the restructuring and integration charges, and CEO succession
(e)   costs, income tax benefits were calculated using a combined federal and
      state rate of 38.7%.





                 Three Months Ended December 31, 2011
                 (dollars in millions, except per share data)
                              Restructuring &      CEO Succession
                              Integration Charges  Costs
                 As Reported  (f)                  (g)             As Adjusted
Operating income $  320.4     $     5.5            $    5.6        $  331.5
Operating income
as a % of net    17.3      %  0.3           %      0.3        %    17.9      %
revenues
Income from
continuing       184.2        3.4                  3.4             191.0
operations (h)
Diluted earnings 1.16         0.02                 0.02            1.20
per common share



      Includes $8.7 million of pre-tax costs principally associated with
      professional fees incurred in conjunction with further restructuring and
(f) integrating our business. The remainder is primarily associated with the
      reversal of certain previously established reserves for restructuring
      activities, principally associated with workforce reductions.
(g)  Principally represents accrued severance and accelerated vesting of
      equity awards in connection with the succession of our prior CEO.
      For both the restructuring and integration charges, and CEO succession
(h)  costs, income tax benefits were calculated using a combined federal and
      state rate of 38.7%.





           Twelve Months Ended December 31, 2011
           (dollars in millions, except per share data)
                      Medi-Cal    Restructuring  Transaction  CEO
                      Settlement  & Integration  Costs        Succession
                                  Charges                     Costs
           As         (i)         (j)            (k)          (l)         As Adjusted
           Reported
Operating  $ 986.6    $  236.0    $   52.1       $  16.9      $  5.6      $ 1,297.2
income
Operating
income as  13.4    %  3.1      %  0.7        %   0.2      %   0.1     %   17.5      %
a % of net
revenues
Income
from
continuing 459.0      194.7       31.9           15.2         3.4         704.2
operations
(m)
Diluted
earnings   2.85       1.22        0.20           0.09         0.02        4.38
per common
share



(i)  Represents the first quarter 2011 pre-tax charge of $236 million
      associated with the Medi-Cal settlement.
      Represents costs incurred in conjunction with further restructuring and
(j) integrating our business, and includes $41.6 million of pre-tax charges,
      principally associated with workforce reductions, with the remainder
      principally professional fees.
      Includes $20.0 million of pre-tax transaction costs, associated with the
      acquisitions of Athena Diagnostics and Celera Corporation. Of these
(k)  costs, $16.9 million, primarily related to professional fees, was
      recorded in selling, general, and administrative expenses and $3.1
      million of financing related costs were recorded in interest expense,
      net.
(l) Principally represents accrued severance and accelerated vesting of
      equity awards in connection with the succession of our prior CEO.
      Income tax benefit of $41.3 million associated with the Medi-Cal charge
      was calculated by applying a combined federal and the applicable state
      tax rate of 36% to the portion of the settlement for which a tax benefit
      has been recorded. Income tax benefit of $4.8 million associated with
(m)  transaction costs was calculated by applying a combined federal and
      state rate of 38.7% to those costs for which a tax benefit has been
      recorded. For the impact of restructuring and integration charges,
      income tax benefits were calculated using a combined federal and state
      rate of 38.7%.



   The following tables summarize the impact to the year over year comparisons
   for the Medi-Cal charge, restructuring and integration charges, transaction
3) costs, and CEO succession costs on certain reported results for the three
   and twelve months ended December31, 2012 and 2011 (in millions, except per
   share data):





Three Months ended December 31, 2012 and 2011
                       Restructuring &
                                                          CEO Succession Costs
                       Integration Charges
                       2012     2011      Better (Worse)  2012  2011   Better
                                                                       (Worse)
Cost of services       $ 22.9   $ (2.7)   $   (25.6)      $ —   $  —   $   —
Selling, general and   13.5     8.2       (5.3)           —     5.6    5.6
administrative
Operating income       36.4     5.5       (30.9)          —     5.6    5.6
Income from continuing 22.3     3.4       (18.9)          —     3.4    3.4
operations
Diluted earnings per   0.14     0.02      (0.12)          —     0.02   0.02
common share





Twelve Months ended December 31, 2012 and 2011
                       Restructuring &
                                                         CEO Succession Costs
                       Integration Charges
                       2012     2011     Better (Worse)  2012   2011   Better
                                                                       (Worse)
Cost of services       $ 51.5   $ 22.2   $   (29.3)      $  —   $  —   $   —
Selling, general and   54.5     29.9     (24.6)          10.1   5.6    (4.5)
administrative
Operating income       106.0    52.1     (53.9)          10.1   5.6    (4.5)
Income from continuing 65.0     31.9     (33.1)          6.1    3.4    (2.7)
operations
Diluted earnings per   0.40     0.20     (0.20)          0.04   0.02   (0.02)
common share
                       Medi-Cal Settlement               Transaction Costs
                       2012     2011     Better (Worse)  2012   2011   Better
                                                                       (Worse)
Cost of services       $ —      $ —      $   —           $  —   $  —   $   —
Selling, general and   —        —        —               —      16.9   16.9
administrative
Operating income       —        236.0    236.0           —      16.9   16.9
Income from continuing —        194.7    194.7           —      15.2   15.2
operations
Diluted earnings per   —        1.22     1.22            —      0.09   0.09
common share



   The Company previously announced its plan to sell its HemoCue diagnostics
   products business and completed the sale of its OralDNA
   salivary-diagnostics business. As a result, the Company's fourth quarter
   2012 results include related after-tax charges in discontinued operations
   for the estimated asset impairment associated with HemoCue and the loss on
4) sale associated with OralDNA totaling $89.5 million, or $0.56 per diluted
   share, in the period. Results of operations for HemoCue and OralDNA have
   been reported as discontinued operations in the accompanying financial
   tables and related notes to financial tables for all periods presented. At
   December 31, 2012, the assets and liabilities of HemoCue have been reported
   as held for sale on the accompanying balance sheet. 

 The Company's consolidated income statements for the full-year 2012 and 2011
 reflect the operating results of HemoCue and OralDNA as discontinued
 operations. The combined results of HemoCue and OralDNA are as follows:

 -- Revenues of $117 million in 2012 and $119 million in 2011;
 -- Operating income of $11 million in 2012 and $8 million in 2011;
 -- Net income from operations of $15 million in 2012 and $13 million in 2011;
 and
 -- Earnings per diluted share of $0.09 in 2012 and $0.08 in 2011.
 To assist in understanding how treating HemoCue and OralDNA as discontinued
 operations has impacted 2012 financial performance, the following table
 summarizes the affects on certain financial measures of such treatment, and
 presents "Proforma Adjusted Results" including HemoCue and OralDNA.





Three
Months      Continuing   Adjustments  Proforma     Loss on     Restructuring  CEO         Proforma
Ended       Operations   for HemoCue               Sale /      & Integration  Succession
December                 and OralDNA  Results      Impairment  Charges        Costs       Adjusted
31, 2012
(dollars
in
millions,   As Reported  (a)          (b)          (c)         (d)            (e)         Results
except per
share
data)
Net         $ 1,773.8    $  31.0      $ 1,804.8    $    —      $     —        $    —      $ 1,804.8
revenues
Operating
income      265.0        (82.7)       182.3        86.4        37.7           —           306.4
(loss)
Operating
income
(loss) as   14.9      %  (4.8)     %  10.1      %  4.8     %   2.1       %    —           17.0      %
a % of net
revenues
Income
(loss)
from        140.2        (84.5)       55.7         89.5        23.1           —           168.3
continuing
operations
(f)
Diluted
earnings
(loss) per  0.87         (0.53)       0.34         0.56        0.15           —           1.05
common
share
Twelve
Months
Ended
December
31, 2012
(dollars
in
millions,
except per
share
data)
Net         $ 7,382.6    $  116.9     $ 7,499.5    $    —      $     —        $    —      $ 7,499.5
revenues
Operating
income      1,200.8      (75.4)       1,125.4      86.4        107.8          10.1        1,329.7
(loss)
Operating
income
(loss) as   16.3      %  (1.3)     %  15.0      %  1.2     %   1.4       %    0.1     %   17.7      %
a % of net
revenues
Income
(loss)
from        630.1        (74.7)       555.4        89.5        66.3           6.1         717.3
continuing
operations
(f)
Diluted
earnings
(loss) per  3.92         (0.47)       3.45         0.56        0.42           0.04        4.47
common
share



(a)  Represents the results of HemoCue and Oral DNA included in discontinued
      operations, which include charges for asset impairment and loss on sale.
(b)  Represents the results before the treatment of HemoCue and Oral DNA as
      discontinued operations.
      Represents pre-tax charges totaling $86.4 million, for asset impairment
(c)   of HemoCue and loss on sale of OralDNA. Income (loss) from continuing
      operations includes $7.5 million income tax expense related to the
      re-valuation of deferred tax assets associated with HemoCue.
      Represents costs primarily associated with workforce reductions and
(d)  professional fees incurred in connection with further restructuring and
      integrating our business.
(e) Principally represents accrued severance and accelerated vesting of
      equity awards in connection with the succession of our prior CEO.
      For both the restructuring and integration charges, and CEO succession
(f)  costs, income tax benefits were calculated using a combined federal and
      state rate of 38.7%.



   Other operating (income) expense, net includes special charges, and
   miscellaneous income and expense items related to operating activities. For
5) the twelve months ended December31, 2011, other operating expense, net
   included a pre-tax charge of $236 million associated with the Medi-Cal
   settlement.
   Other income, 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
   December31, 2012 and 2011, other income, net includes gains of $0.5
   million and $3.8 million, respectively, associated with investments held in
6) trusts pursuant to our supplemental deferred compensation plans. For the
   twelve months ended December31, 2012 and 2011, other income, net includes
   gains of $6.5 million and $0.3 million, respectively, associated with
   investments held in trusts pursuant to our supplemental deferred
   compensation plans. For the twelve months ended December 31, 2011, other
   income, net includes a pre-tax gain of $3.2 million associated with the
   sale of an investment.
   Results for both the three and twelve months ended December 31, 2012
   include discrete tax benefits of $0.02 per diluted share. Results for the
7) three and twelve months ended December 31, 2011 include discrete tax
   benefits of $0.08 and $0.11 per diluted share, respectively, primarily
   associated with certain state tax planning initiatives and the favorable
   resolution of certain tax contingencies.
   In January 2012, our Board of Directors authorized $1.0 billion of
   additional share repurchases, bringing the total available under share
   repurchase authorizations at that time to $1.1 billion. For the three
   months ended December31, 2012, the Company repurchased 869 thousand shares
   of its common stock at an average price of $57.55 per share for $50
8) million. For the twelve months ended December31, 2012, the Company
   repurchased 3.4 million shares of its common stock at an average price of
   $58.31 per share for $200 million. For the three and twelve months ended
   December31, 2012, the Company reissued 0.5 million shares and 3.9 million
   shares, respectively, for employee benefit plans. As of December31, 2012,
   the Company had $865 million remaining under share repurchase
   authorizations.



SOURCE Quest Diagnostics Incorporated

Website: http://www.questdiagnostics.com
 
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