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Quest Diagnostics Reports Second Quarter 2013 Financial Results



       Quest Diagnostics Reports Second Quarter 2013 Financial Results

PR Newswire

MADISON, N.J., July 18, 2013

MADISON, N.J., July 18, 2013 /PRNewswire/ --

  o Adjusted diluted EPS from continuing operations of $1.06, vs. $1.15 in
    2012
  o Reported diluted EPS from continuing operations of $0.99, vs. $1.09 in
    2012
  o Revenues from continuing operations of $1.8 billion, 3.3% below prior year
  o Full year 2013 revenues now expected to be 1% to 2% below prior year
  o Full year 2013 EPS range narrowed to  $4.35 to $4.50
  o Sales of HemoCue and ibrutinib royalty rights for approximately $800
    million provide flexibility to drive shareholder value, consistent with
    our capital deployment strategy
  o Announces new Chief Financial Officer to join company July 29

Quest Diagnostics Incorporated (NYSE: DGX), the world's leading provider of
diagnostic information services, announced today that for the second quarter
ended June 30, 2013, adjusted income from continuing operations was $164
million, or $1.06 per diluted share, compared to $185 million, or $1.15 per
diluted share, for 2012.

(Logo: http://photos.prnewswire.com/prnh/20130717/NY48934LOGO )

For the second quarter of 2013, reported income from continuing operations was
$153 million, or $0.99 per diluted share, compared to $175 million, or $1.09
per diluted share, in 2012. Income from continuing operations in the second
quarter of 2013 was reduced by $12 million, or $0.07 per diluted share, of
restructuring and integration costs related to the company's ongoing efforts
to drive operational excellence and simplify the organization. In the second
quarter of 2012, income from continuing operations was reduced by $0.06 per
diluted share related to restructuring, integration and CEO succession costs.

Revenues from continuing operations were $1.8 billion for the second quarter,
3.3% below the prior year. Diagnostic information services revenues decreased
3.6%. Volume, measured by the number of requisitions, increased 0.1% versus
the prior year. Recent acquisitions added about 1.6% to volume and
approximately 1.1% to revenue growth. Revenue per requisition was 3.7% below
the prior year. Reduced reimbursement contributed approximately 3.2% of the
reduction, and the business mix impact of our recent toxicology acquisition
contributed the balance. 

For the second quarter of 2013, adjusted operating income from continuing
operations was $308 million, or 16.9% of revenues, compared to $349 million,
or 18.6% of revenues, for 2012. For the second quarter of 2013, reported
operating income from continuing operations was $289 million, or 15.9% of
revenues, compared to $333 million, or 17.7% of revenues, in 2012. Cash
provided by operations was $208 million, compared to $251 million in the
second quarter of 2012. 

Steve Rusckowski, President and CEO, commented: "As expected, revenues and
earnings improved from first quarter levels, but were down versus the prior
year. We saw continued revenue softness in the second quarter compared to the
prior year due to lower healthcare utilization and reductions in
reimbursement. As we've previously shared, 2013 is a building year; we are
making good progress executing our five point strategy; and we expect stronger
performance in the second half. The improvement in the second half is expected
to be driven by: easier comparisons; the impact of acquisitions; the benefit
of investments we have made to drive growth; and the excellent progress we're
making with our Invigorate cost-reduction initiative.

"Additionally, we are making very good progress delivering disciplined capital
deployment. During the quarter, we completed the acquisitions of the lab
outreach business of Dignity Health and Concentra's toxicology business, which
is consistent with our goal of contributing 1% to 2% revenue growth per year
through strategically aligned, accretive acquisitions.  In addition, we
continued to refocus on diagnostic information services through our ongoing
portfolio review. In the second quarter, we completed the sale of HemoCue, and
used the proceeds to repurchase shares. We repurchased $405 million of our
shares in the second quarter, bringing year to date share repurchases to $467
million. This morning, we completed the sale of the ibrutinib royalty rights
to Royalty Pharma for $485 million in cash. We expect to use the proceeds to
drive shareholder value, consistent with our capital deployment strategy."

First Half Performance

Revenues from continuing operations were $3.6 billion for the first six months
of 2013, 4.9% below the prior year. Adjusted income from continuing operations
was $307 million, or $1.95 per diluted share, compared to $353 million, or
$2.20 per diluted share, in 2012. On a reported basis, income from continuing
operations was $268 million, or $1.71 per diluted share, compared to $331
million, or $2.06 per diluted share, in 2012.

Adjusted operating income from continuing operations for the first half of
2013 was $579 million, or 16.1% of revenues, compared to $667 million, or
17.6% of revenues, for 2012. On a reported basis, operating income from
continuing operations was $516 million, or 14.3 % of revenues, compared to
$631 million, or 16.7% of revenues, in 2012. Cash provided by operations was
$255 million, compared to $412 million in the first six months of 2012.

Outlook for 2013

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

  o Revenues now expected to be 1% to 2% below the prior year, compared to
    previous guidance approximating the prior year level;
  o Earnings per diluted share now expected to be between $4.35 to $4.50,
    compared to previous guidance of between $4.35 and $4.55;
  o Cash provided by operations to approach $1 billion, compared to previous
    guidance that it would approximate $1 billion;  and
  o Capital expenditures to approximate $250 million, unchanged

"We lowered our full-year revenue guidance to reflect softer healthcare
utilization," Mr. Rusckowski said. "Despite our reduced outlook for revenues,
we maintained our EPS guidance within the previous range due to our confidence
in our ability to deliver additional savings through our Invigorate
initiative."

Note on Non-GAAP Financial Measures

As used in this press release, the term "adjusted" refers to the operating
performance measures that exclude restructuring and integration charges and
CEO succession costs. 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 800-856-2254 for domestic
callers or 402-280-9961 for international callers. Telephone replays will be
available from 10:30 a.m. Eastern Time on July 18 until midnight Eastern Time
on August 16, 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
information 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. Additional company information is available at
QuestDiagnostics.com.

Contacts: 
Dan Haemmerle (investors) at 973-520-2900
Gary Samuels or Wendy Bost (media) at 973-520-2800

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 2012 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 2013 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.

TABLES FOLLOW

 

Quest Diagnostics Incorporated and Subsidiaries

Consolidated Statements of Operations

For the Three and Six Months Ended June 30, 2013 and 2012

(in millions, except per share and percentage data)

(unaudited)
                            Three Months Ended        Six Months Ended

                            June 30,                  June 30,
                            2013         2012         2013         2012
Net revenues                $ 1,815.7    $ 1,878.4    $ 3,602.4    $ 3,787.0
Operating costs and
expenses:
Cost of services            1,093.7      1,101.9      2,185.5      2,211.1
Selling, general and        418.5        424.1        866.4        907.3
administrative
Amortization of intangible  19.8         18.8         39.0         37.6
assets
Other operating (income)    (5.0)        0.2          (4.2)        (0.2)
expense, net
Total operating costs and   1,527.0      1,545.0      3,086.7      3,155.8
expenses
Operating income            288.7        333.4        515.7        631.2
Other income (expense):
Interest expense, net       (39.9)       (41.8)       (79.8)       (83.9)
Equity earnings in
unconsolidated joint        7.3          7.4          13.4         15.0
ventures
Other income (expense), net 0.3          (1.3)        3.6          3.4
Total non-operating         (32.3)       (35.7)       (62.8)       (65.5)
expenses, net
Income from continuing      256.4        297.7        452.9        565.7
operations before taxes
Income tax expense          94.5         113.7        167.8        216.3
Income from continuing      161.9        184.0        285.1        349.4
operations
Income from discontinued    12.8         2.5          33.1         5.5
operations, net of taxes
Net income                  174.7        186.5        318.2        354.9
Less: Net income
attributable to             9.2          8.8          16.9         18.1
noncontrolling interests
Net income attributable to  $ 165.5      $ 177.7      $ 301.3      $ 336.8
Quest Diagnostics
Amounts attributable to
Quest Diagnostics' common
stockholders:
Income from continuing      $ 152.7      $ 175.2      $ 268.2      $ 331.3
operations
Income from discontinued    12.8         2.5          33.1         5.5
operations, net of taxes
Net income                  $ 165.5      $ 177.7      $ 301.3      $ 336.8
Earnings per share
attributable to Quest
Diagnostics' common

   stockholders - basic:
Income from continuing      $ 0.99       $ 1.10       $ 1.72       $ 2.08
operations
Income from discontinued    0.08         0.02         0.21         0.04
operations
Net income                  $ 1.07       $ 1.12       $ 1.93       $ 2.12
Earnings per share
attributable to Quest
Diagnostics' common

   stockholders - diluted:
Income from continuing      $ 0.99       $ 1.09       $ 1.71       $ 2.06
operations
Income from discontinued    0.08         0.02         0.21         0.04
operations
Net income                  $ 1.07       $ 1.11       $ 1.92       $ 2.10
Weighted average common
shares outstanding:
Basic                       152.7        158.5        155.4        158.4
Diluted                     154.1        159.8        156.7        159.7
Operating income as a       15.9      %  17.7      %  14.3      %  16.7      %
percentage of net revenues

 

Quest Diagnostics Incorporated and Subsidiaries

Consolidated Balance Sheets

June 30, 2013 and December 31, 2012

(in millions, except per share data)
                                              June 30, 2013  December 31, 2012
                                              (unaudited)
Assets
Current assets:
Cash and cash equivalents                     $  148.3       $    295.6
Accounts receivable, net                      946.8          867.0
Inventories                                   89.4           93.1
Deferred income taxes                         158.8          174.2
Prepaid expenses and other current assets     126.4          91.0
Current assets held for sale                  —              40.2
Total current assets                          1,469.7        1,561.1
Property, plant and equipment, net            751.8          755.8
Goodwill                                      5,665.8        5,535.8
Intangible assets, net                        929.4          872.2
Other assets                                  219.4          204.6
Non-current assets held for sale              —              354.4
Total assets                                  $  9,036.1     $    9,283.9
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses         $  915.9       $    1,016.2
Short-term borrowings and current portion of  374.8          9.4
long-term debt
Current liabilities held for sale             —              22.0
Total current liabilities                     1,290.7        1,047.6
Long-term debt                                3,121.6        3,354.2
Other liabilities                             685.3          635.5
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 June 30, 2013 and

   December 31, 2012; 215.4 shares and 215.1  2.2            2.2
shares issued at June 30, 2013 and December
31,

   2012, respectively
Additional paid-in capital                    2,326.9        2,370.7
Retained earnings                             4,898.3        4,690.4
Accumulated other comprehensive (loss) income (12.8)         14.3
Treasury stock, at cost; 63.5 shares and 56.7
shares at June 30, 2013 and December 31,
2012,                                         (3,302.7)      (2,914.5)

   respectively
Total Quest Diagnostics stockholders' equity  3,911.9        4,163.1
Noncontrolling interests                      26.6           22.7
Total stockholders' equity                    3,938.5        4,185.8
Total liabilities and stockholders' equity    $  9,036.1     $    9,283.9

 

Quest Diagnostics Incorporated and Subsidiaries

Consolidated Statements of Cash Flows

For the Six Months Ended June 30, 2013 and 2012

(in millions)

(unaudited)
                                                     Six Months Ended June 30,
                                                     2013          2012
Cash flows from operating activities:
Net income                                           $  318.2      $  354.9
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization                        142.0         144.0
Provision for doubtful accounts                      139.4         147.2
Deferred income tax benefit                          (11.0)        (11.3)
Stock-based compensation expense                     16.5          34.2
Excess tax benefits from stock-based compensation    (2.7)         (3.9)
arrangements
Other, net                                           (23.5)        0.3
Changes in operating assets and liabilities:
Accounts receivable                                  (213.3)       (181.9)
Accounts payable and accrued expenses                (68.2)        (87.7)
Income taxes payable                                 (34.5)        28.6
Other assets and liabilities, net                    (7.6)         (12.3)
Net cash provided by operating activities            255.3         412.1
Cash flows from investing activities:
Business acquisitions, net of cash acquired          (179.9)       (50.6)
Proceeds from sale of business                       266.0         —
Capital expenditures                                 (104.7)       (77.4)
Increase in investments and other assets             (0.8)         (2.6)
Net cash used in investing activities                (19.4)        (130.6)
Cash flows from financing activities:
Proceeds from borrowings                             578.1         685.0
Repayments of debt                                   (414.8)       (899.6)
Purchases of treasury stock                          (511.6)       (100.0)
Exercise of stock options                            63.3          90.6
Excess tax benefits from stock-based compensation    2.7           3.9
arrangements
Dividends paid                                       (95.3)        (54.0)
Distributions to noncontrolling interests            (13.4)        (15.8)
Other financing activities, net                      (9.4)         17.2
Net cash used in financing activities                (400.4)       (272.7)
Net change in cash and cash equivalents              (164.5)       8.8
Add: Decrease in cash and cash equivalents included  17.2          —
in assets held for sale
Cash and cash equivalents, beginning of period       295.6         164.9
Cash and cash equivalents, end of period             $  148.3      $  173.7
Cash paid during the period for:
Interest                                             $  84.0       $  82.0
Income taxes                                         $  204.9      $  202.8

 

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,
                        2013            2012         2013          2012
                        (in millions, except per share data)
 Amounts attributable
 to Quest Diagnostics'
 common stockholders:
 Income from continuing $   152.7       $  175.2     $  268.2      $  331.3
 operations
 Income from
 discontinued           12.8            2.5          33.1          5.5
 operations, net of
 taxes
 Net income available   $   165.5       $  177.7     $  301.3      $  336.8
 to common stockholders
 Income from continuing $   152.7       $  175.2     $  268.2      $  331.3
 operations
 Less: Earnings
 allocated to           0.6             0.7          0.9           1.3
 participating
 securities
 Earnings available to
 Quest Diagnostics'
 common stockholders -  $   152.1       $  174.5     $  267.3      $  330.0
 basic

    and diluted
 Weighted average
 common shares          152.7           158.5        155.4         158.4
 outstanding - basic
 Effect of dilutive
 securities:
 Stock options and
 performance share      1.4             1.3          1.3           1.3
 units
 Weighted average
 common shares          154.1           159.8        156.7         159.7
 outstanding - diluted
 Earnings per share
 attributable to Quest
 Diagnostics' common

    stockholders -
 basic:
 Income from continuing $   0.99        $  1.10      $  1.72       $  2.08
 operations
 Income from
 discontinued           0.08            0.02         0.21          0.04
 operations
 Net income             $   1.07        $  1.12      $  1.93       $  2.12
 Earnings per share
 attributable to Quest
 Diagnostics' common

    stockholders -
 diluted:
 Income from continuing $   0.99        $  1.09      $  1.71       $  2.06
 operations
 Income from
 discontinued           0.08            0.02         0.21          0.04
 operations
 Net income             $   1.07        $  1.11      $  1.92       $  2.10

 

   Adjusted amounts for operating income, operating income as a percentage of
   net revenues, income from continuing operations attributable to Quest
   Diagnostics' stockholders, and diluted earnings per common share represent
   the Company's results before the impact of the restructuring and
   integration charges and first and second quarter 2012 costs associated with
   the succession of our prior CEO.  Adjusted measures are presented because
2) management 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 June 30, 2013
                                  (dollars in millions, except per share data)
                                                  Restructuring

                                                  and Integration

                                                  Charges
                                  As Reported     (a)              As Adjusted
 Operating income                 $   288.7       $    18.8        $  307.5
 Operating income as a % of net   15.9        %   1.0         %    16.9      %
 revenues
 Income from continuing
 operations attributable to Quest
 Diagnostics'                     $   152.7       $    11.5        $  164.2

    stockholders (b)
 Diluted earnings per common      0.99            0.07             1.06
 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 38.4%.

 

                                  Six Months Ended June 30, 2013
                                  (dollars in millions, except per share data)
                                                  Restructuring

                                                  and Integration

                                                  Charges
                                  As Reported     (c)              As Adjusted
 Operating income                 $   515.7       $    63.3        $  579.0
 Operating income as a % of net   14.3        %   1.8         %    16.1      %
 revenues
 Income from continuing
 operations attributable to Quest
 Diagnostics'                     $   268.2       $    38.9        $  307.1

    stockholders (d)
 Diluted earnings per common      1.71            0.24             1.95
 share

 

      Represents costs primarily associated with workforce reductions and
  (c) professional fees incurred in connection with further restructuring and
      integrating our business.
  (d) For the restructuring and integration charges, income tax benefits were
      calculated using a combined federal and state rate of 38.4%.

 

                           Three Months Ended June 30, 2012
                           (dollars in millions, except per share data)
                                        Restructuring
                                                       CEO
                                        and
                                                       Succession
                                        Integration
                                                       Costs
                                        Charges
                           As Reported  (e)            (f)         As Adjusted
 Operating income          $  333.4     $   12.3       $  3.0      $  348.7
 Operating income as a %   17.7      %  0.7        %   0.2     %   18.6      %
 of net revenues
 Income from continuing
 operations attributable
 to Quest                  $  175.2     $   7.6        $  1.8      $  184.6

    Diagnostics'
 stockholders (g)
 Diluted earnings per      1.09         0.05           0.01        1.15
 common share

 

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

 

                           Six Months Ended June 30, 2012
                           (dollars in millions, except per share data)
                                        Restructuring
                                                       CEO
                                        and
                                                       Succession
                                        Integration
                                                       Costs
                                        Charges
                           As Reported  (h)            (i)         As Adjusted
 Operating income          $  631.2     $   25.4       $  10.1     $  666.7
 Operating income as a %   16.7      %  0.7        %   0.2      %  17.6      %
 of net revenues
 Income from continuing
 operations attributable
 to Quest                  $  331.3     $   15.6       $  6.1      $  353.0

    Diagnostics'
 stockholders (j)
 Diluted earnings per      2.06         0.10           0.04        2.20
 common share

 

                          Represents costs primarily associated with
             (h)          professional fees and workforce reductions incurred
                          in connection with further restructuring and
                          integrating our business.
                          Principally represents accrued severance and
             (i)          accelerated vesting of equity awards in connection
                          with the succession of our prior CEO.
                          For the restructuring and integration charges and
             (j)          CEO succession costs, 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
3) for the restructuring and integration charges and CEO succession costs on
   certain reported results for the three and six months ended June 30, 2013
   and 2012 (in millions, except per share data):

 

 Three months ended June 30, 2013 and 2012
                         Restructuring and Integration
                                                          CEO Succession Costs
                         Charges
                         2013     2012    Better (Worse)  2013  2012   Better
                                                                       (Worse)
 Cost of services        $ 6.9    $ 4.6   $   (2.3)       $ —   $  —   $   —
 Selling, general and    11.9     7.7     (4.2)           —     3.0    3.0
 administrative
 Operating income        18.8     12.3    (6.5)           —     3.0    3.0
 Income from continuing
 operations attributable
                         11.5     7.6     (3.9)           —     1.8    1.8
    to Quest
 Diagnostics'
 stockholders
 Diluted earnings per    0.07     0.05    (0.02)          —     0.01   0.01
 common share
 Six months ended June 30, 2013 and 2012
                         Restructuring and Integration
                                                          CEO Succession Costs
                         Charges
                         2013     2012    Better (Worse)  2013  2012   Better
                                                                       (Worse)
 Cost of services        $ 24.3   $ 8.6   $   (15.7)      $ —   $  —   $   —
 Selling, general and    39.0     16.8    (22.2)          —     10.1   10.1
 administrative
 Operating income        63.3     25.4    (37.9)          —     10.1   10.1
 Income from continuing
 operations attributable
                         38.9     15.6    (23.3)          —     6.1    6.1
    to Quest
 Diagnostics'
 stockholders
 Diluted earnings per    0.24     0.10    (0.14)          —     0.04   0.04
 common share

 

   Other operating (income) expense, net includes miscellaneous income and
   expense items related to operating activities.  For both the three and six
4) months ended June 30, 2013, other operating (income) expense, net includes
   a gain of $5.7 million resulting from consideration associated with certain
   non-compete agreements. 
   Other income (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 six
5) months ended June 30, 2013 and 2012, other income (expense), net includes
   gains of $3.6 million and $3.5 million, respectively, associated with
   investments held in trusts pursuant to our supplemental deferred
   compensation plans. 
   On April 19, 2013, the Company entered into an accelerated share repurchase
   agreement ("ASR") with a financial institution to repurchase $450 million
   of the Company's common stock as part of the Company's Common Stock
   repurchase program.  The ASR is structured as a combination of two
   transactions: (1) a treasury stock repurchase and (2) a forward contract
   which permits the Company to purchase shares immediately with the final
   purchase price of those shares determined by the volume weighted average
   price of the Company's common stock during the purchase period, less a
   fixed discount.  For the three months ended June 30, 2013, the Company
   repurchased 7.2 million shares of its common stock at a price of $55.92 per
   share for $405 million, which represents approximately 90 percent of the
   total shares expected to be repurchased under the ASR.  The forward
6) contract will settle the remaining shares upon the completion of the ASR in
   the third quarter of 2013.  The Company recorded this transaction as an
   increase to treasury stock of $405 million, and recorded the remaining $45
   million as a decrease to additional paid-in capital in the Company's
   Consolidated Balance Sheets at June 30, 2013.   The $45 million recorded in
   additional paid-in capital will be reclassified to treasury stock upon
   completion of the ASR.  For the six months ended June 30, 2013, the Company
   repurchased 8.3 million shares of its common stock at an average price of
   $56.16 per share for a total of $467 million, including 7.2 million shares
   repurchased in the second quarter of 2013 under the ASR. For the three and
   six months ended June 30, 2013, the Company reissued 1.1 million and 1.5
   million shares, respectively, for employee benefit plans. At June 30, 2013,
   $353 million remained available under the Company's share repurchase
   authorizations.
   On April 9, 2013, the Company completed the sale of its HemoCue diagnostic
   products business.  As a result, income from discontinued operations, net
   of taxes for the three and six months ended June 30, 2013, include a gain
7) of $13.3 million associated with the sale of HemoCue.  In addition, income
   from discontinued operations, net of taxes for the six months ended
   June 30, 2013, includes discrete tax benefits of $19.8 million associated
   with favorable resolution of certain tax contingencies related to our NID
   business, which was wound down in 2006.
   The outlook for adjusted diluted earnings per common share represents
   management's estimates for the full year 2013 before the impact of the
   restructuring and integration charges. These measures are presented because
   management believes they are useful adjuncts to the corresponding amounts
   determined under accounting principles generally accepted in the United
8) States since they are meaningful to evaluate the Company's ongoing
   operating performance and are on a basis consistent with previous estimates
   of diluted earnings per common share. Adjusted diluted earnings per common
   share is not a measure of financial performance under accounting principles
   generally accepted in the United States and should not be considered as an
   alternative to the corresponding amount determined under accounting
   principles generally accepted in the United States.
   The following table reconciles our 2013 outlook, on an adjusted basis, to
   the corresponding amounts determined under accounting principles generally
   accepted in the United States. The outlook, on an adjusted basis, excludes
   the impact of the restructuring and integration charges.

 

                                   Outlook for 2013 Before Special Items
                                                  Restructuring

                                                  and

                                                  Integration

                                                  Charges
                                   As Reported    (a)            As Adjusted
   Diluted earnings per common     $4.11 - $4.26  $0.24          $4.35 - $4.50
   share

 

        Represents pre-tax costs of $63.3 million primarily associated with
    (a) workforce reductions and professional fees incurred in connection with
        further restructuring and integrating our business. 

 

 

SOURCE Quest Diagnostics Incorporated

Website: http://www.questdiagnostics.com
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