Summary
Quest Diagnostics Inc. (DGX) reported its second-quarter 2011 financial results, which were impacted by significant acquisition activity and a substantial legal settlement. Net revenues saw a modest increase of 1.5% to $1.9 billion compared to the prior year, largely driven by the acquisitions of Athena Diagnostics and Celera Corporation. However, income from continuing operations declined by 16.1% to $163.6 million, or $1.02 per diluted share, compared to $194.9 million, or $1.07 per diluted share, in the prior year. The significant factors influencing the decline in profitability include a $236 million pre-tax charge related to the settlement of the California Lawsuit concerning Medi-Cal billing practices, and integration costs associated with the recent acquisitions. Despite these headwinds, the company's core clinical testing business continues to generate revenue, though volumes experienced a slight decrease due to market softness. Management is focusing on cost reduction initiatives and strategic investments to navigate current market conditions and improve future profitability.
Financial Highlights
57 data points| Revenue | $1.87B |
| Cost of Revenue | $1.10B |
| Gross Profit | $777.29M |
| SG&A Expenses | $462.79M |
| Operating Expenses | $1.59B |
| Operating Income | $316.85M |
| Interest Expense | $47.23M |
| Net Income | $163.14M |
| EPS (Basic) | $1.03 |
| EPS (Diluted) | $1.02 |
| Shares Outstanding (Basic) | 157.61M |
| Shares Outstanding (Diluted) | 159.35M |
Key Highlights
- 1Net revenues increased 1.5% year-over-year to $1.9 billion, driven by acquisitions.
- 2Income from continuing operations decreased 16.1% year-over-year to $163.6 million, impacting diluted EPS to $1.02.
- 3A significant $236 million pre-tax charge was recorded in Q1 2011 for the settlement of the California Lawsuit related to Medi-Cal billing.
- 4The company completed two significant acquisitions: Athena Diagnostics for $740 million and Celera Corporation for approximately $341 million (net of cash acquired).
- 5Operating income decreased by $49 million to $316.9 million, with operating margin declining to 16.6% from 19.5% year-over-year.
- 6Cash flows from operating activities were $220 million for the six months ended June 30, 2011, down from $448 million in the prior year, partly due to the Medi-Cal settlement payment.
- 7The company announced a multi-year program to reduce its cost structure by $500 million over the next three years and a restructuring plan expected to incur a $20 million charge in Q3 2011.