Quest Diagnostics(DGX) - 2024 Q2 - Quarterly Report

Financial Performance - Net income attributable to Quest Diagnostics for the three months ended June 30, 2024, was $229 million, compared to$235 million for the same period in 2023, representing a decrease of approximately 2.6%[28] - The company reported basic earnings per share of $2.05 for the three months ended June 30, 2024, down from$2.08 in the same period of 2023, reflecting a decline of 1.4%[28] - Net revenues for Q2 2024 were $2,397 million, a 2.5$2,338 million in Q2 2023[74] - Diagnostic Information Services (DIS) revenues were $2,333 million, up 2.8$2,268 million in the same period last year[74] - Operating income increased to $355 million, reflecting a 1.9$348 million in Q2 2023[74] - Net income attributable to Quest Diagnostics was $229 million, a decrease of 2.4$235 million in Q2 2023[74] - Diluted earnings per share were $2.03, down 1.0$2.05 in the prior year[74] - For the six months ended June 30, 2024, net revenues increased by 2.0% compared to the prior year period[121] Cash and Investments - Quest Diagnostics' cash and cash equivalents and restricted cash at the end of the period were $271 million, an increase from$126 million at the beginning of the period[11] - The company utilized $413 million in net cash for investing activities during the six months ended June 30, 2024, compared to$840 million in the same period of 2023, indicating a reduction of 50.9%[10] - The company reported cash paid for business acquisitions of $106 million for the three months ended June 30, 2024, compared to$578 million for the same period in 2023, a decrease of 81.7%[40] - The company plans to acquire LifeLabs for approximately $985 million, including net debt, with the transaction expected to close by the end of 2024[72] - The company has entered into definitive agreements to acquire LifeLabs and select assets of laboratory services businesses from Allina Health and OhioHealth, expected to close in the second half of 2024[164] Debt and Financing - As of June 30, 2024, long-term debt decreased to$8 million from $13 million as of December 31, 2023, representing a 38.5$(44) million, compared to $(37) million for the same period in 2023, reflecting an increase of 18.9$61 million for the three months ended June 30, 2024, from $48 million in the same period of 2023, a rise of 27.1$(516) million, a change of $629 million compared to the prior year period[157] - As of June 30, 2024, the company had$1.2 billion of borrowing capacity available under existing credit facilities, with no outstanding borrowings[165] Operational Efficiency - Quest Diagnostics aims to achieve 3% annual cost savings and productivity improvements through its Invigorate program, which focuses on various operational efficiencies[19] - The Invigorate program aims to achieve 3% annual cost savings and productivity improvements to counter inflationary pressures[95] - The company incurred $27 million in pre-tax charges related to restructuring and integration activities during the first half of 2024[77] - Restructuring and impairment charges for the three months ended June 30, 2024, totaled$8 million, compared to $6 million for the same period in 2023, reflecting an increase of 33.3$16 million as of June 30, 2024, up from $12 million at the end of 2023[20] Acquisitions - The company acquired select assets of PathAI Diagnostics for$100 million on June 10, 2024, which included $55 million of tax-deductible goodwill and$39 million of customer-related intangible assets[22] - During June 2023, Quest Diagnostics acquired Haystack Oncology, with a contingent consideration obligation of up to $150 million based on revenue benchmarks and reimbursement coverage from CMS[26] - The company completed the acquisition of select assets from Lenco Diagnostic Laboratories, enhancing its service capabilities[75] Revenue and Cost Analysis - Total operating costs and expenses for the three months ended June 30, 2024 were 85.2$82 million compared to the prior year period, driven by higher supplies expenses and wage increases[124] - SG&A for the three months ended June 30, 2024 was consistent with the prior year period, with recent acquisitions offset by lower benefit costs[109] Tax and Equity - The effective income tax rate for the six months ended June 30, 2024 was 24.2%, compared to 23.5% in the prior year[132] - The effective income tax rate for the three months ended June 30, 2024 was 23.4%, slightly lower than 23.5% for the same period in 2023[143] - Income tax expense for the six months ended June 30, 2024 and 2023 was $140 million for both periods[144] - Equity in earnings of equity method investees decreased by$4 million for the six months ended June 30, 2024, primarily due to net losses associated with strategic investments[133] - Equity in earnings of equity method investees, net of taxes, decreased by $7 million for the three months ended June 30, 2024, primarily due to$9 million of net losses associated with changes in the carrying value of strategic investments[145] Miscellaneous - Days sales outstanding was 50 days as of June 30, 2024, consistent with the previous period[156] - The company has not repurchased any shares of its common stock during the six months ended June 30, 2024, consistent with the same period in 2023[56] - The company has $1.0 billion remaining under its share repurchase authorization, which has no set expiration date[161] - The proportionate share of income before income taxes from equity method investees is less than 5% of the company's consolidated income before income taxes[162] - The company believes its cash and cash equivalents, along with cash from operations and borrowing capacity, will provide sufficient financial flexibility for future obligations and growth opportunities[166]