Quest Diagnostics Incorporated (NYSE: DGX), the world's leading provider of diagnostic information services, announced today that for the third quarter endedSeptember 30, 2016, reported net income was $192 million, or $1.34 per diluted share, compared to $342 million, or $2.35 per diluted share, in 2015.

Adjusted net income was $182 million, compared to $172 million in 2015. Adjusted diluted EPS excluding amortization was $1.37 in the quarter, compared to $1.28 in 2015. In the third quarter of 2016, reported net income benefitted by $10 million after tax, or $0.07 per diluted share, principally associated with a gain on escrow recovery associated with an acquisition partially offset by restructuring and integration charges. In the third quarter of 2015, reported net income benefitted from the gain on the contribution to Q Squared Solutions, the clinical trials joint venture with Quintiles, totaling $189 million after tax, or $1.30 per diluted share. This benefit was partially offset by net charges of $19 million after tax, or $0.13 per diluted share, primarily related to restructuring and integration charges.

Third quarter 2016 revenues were $1.89 billion. Revenues grew 0.3% versus the prior year on a reported basis, and grew 2.1% on an equivalent basis. 2015 equivalent revenues exclude third quarter 2015 Celera and Focus Diagnostics products revenues. Diagnostic Information Services revenues grew 2.1% compared to a year ago. Volume, measured by the number of requisitions, grew 2.0% versus the prior year and revenue per requisition was flat.

"We grew reported revenues 0.3% in the third quarter and equivalent revenues were up by more than 2%, demonstrating good progress in 2016, driven in part by our expanding health system relationships," said Steve Rusckowski, President and CEO. "The relationships we've announced this year, including those with Optum, HCA, Safeway, Ancestry, IBM, and others, position us for continued accelerating growth and will help us drive operational excellence. Based on our results through the third quarter we are narrowing our EPS guidance range and are on track to meet our commitments for the year."

For the third quarter of 2016, reported operating income was $322 million, or 17.1% of revenues, compared to$631 million, or 33.6% of revenues, in 2015. Adjusted operating income was $320 million, or 17.0% of revenues, compared to $325 million, or 17.3% of revenues, in 2015. Third quarter 2015 reported operating income benefitted from the $334 million pre-tax gain on the contribution to the clinical trials joint venture. Cash provided by operations was $301 million in the third quarter of 2016, compared to $212 million in the third quarter of 2015.

Year to Date Performance

Revenues were $5.65 billion for the first nine months of 2016. Revenues grew 0.2% versus the prior year on a reported basis, and grew 2.8% on an equivalent basis. Reported net income for the first nine months of 2016 was $490 million, or $3.42 per diluted share, compared to $521 million, or $3.58 per diluted share, in 2015. Reported net income in 2016 was negatively impacted by charges of $19 million after tax, or $0.13 per diluted share, principally associated with expenses related to restructuring and integration activities and the early retirement of debt, partially offset by the gain on the sale of the company's Focus Diagnostics products business and a gain on escrow recovery associated with an acquisition. Reported net income in 2015 was favorably impacted by a net benefit of $38 million, or $0.27 per diluted share, due to the gain on the contribution to the clinical trials joint venture partially offset by charges associated with the early retirement of debt as well as restructuring and integration expenses. Adjusted net income was $509 million for the first nine months of 2016, compared to $483 million in 2015. Adjusted diluted EPS excluding amortization was $3.84 for the first nine months of 2016, compared to $3.58 in 2015.

On a reported basis, operating income was $1.0 billion, or 17.7% of revenues, compared to $1.16 billion, or 20.5% of revenues, in 2015. Adjusted operating income for the first nine months of 2016 was $925 million, or 16.4% of revenues, compared to $915 million, or 16.2% of revenues for 2015. Cash provided by operations for the nine months of 2016 was $765 million, compared to $549 million in 2015.

Outlook for Full-Year 2016

For 2016, the company estimates results, before special items, as follows:

• Revenues to be approximately $7.51 billion, an increase of approximately 0.5% over 2015 on a reported basis, and an increase of approximately 2.5% over 2015 on an equivalent basis. This compares to previous guidance of revenues between $7.47 billion and $7.54 billion. For further details, see note 9 of the financial tables.
  • Revenues on an equivalent basis for full year 2015 were $7.32 billion. This represents the company's reported revenues, excluding $85 million in 2015 clinical trials testing revenues and $84 million in revenues representing all Celera products revenue for 2015 and Focus Diagnostics products revenue subsequent to April 2015.
• Reported diluted EPS to be between $4.47 and $4.52, compared to previous guidance of $4.18 and $4.33. Adjusted diluted EPS excluding amortization to be between $5.07 and $5.12, compared to $5.02 and $5.17 previously. For further details, see note 8 of the financial tables.
• Cash provided by operations to approximate $1 billion. This compares to previous guidance of reported cash provided by operations to approximate $880 million.
• Capital expenditures to approximate $250 million, compared to previous guidance of between $250 million and $300 million.

About Quest Diagnostics

Quest Diagnostics empowers people to take action to improve health outcomes. Derived from the world's largest database of clinical lab results, our diagnostic insights reveal new avenues to identify and treat disease, inspire healthy behaviors and improve health care management. Quest annually serves one in three adult Americans and half the physicians and hospitals in the United States, and our 44,000 employees understand that, in the right hands and with the right context, our diagnostic insights can inspire actions that transform lives.www.QuestDiagnostics.com.