TABLES FOLLOW

Quest Diagnostics Incorporated and Subsidiaries

Consolidated Statements of Operations

For the Three Months Ended March 31, 2011 and 2010

(in millions, except per share and percentage data)

(unaudited)

Three Months Ended

March 31,

2011

2010

Net revenues

$  1,821.6

$  1,805.5

Operating costs and expenses:

Cost of services

1,097.0

1,066.4

Selling, general and administrative

447.9

430.7

Amortization of intangible assets

9.8

9.4

Other operating (income) expense, net

(0.1)

0.4

Total operating costs and expenses

1,554.6

1,506.9

Operating income

267.0

298.6

Other income (expense):

Interest expense, net

(37.9)

(36.0)

Equity earnings in unconsolidated joint ventures

7.7

8.0

Other income, net

2.2

6.0

Total non-operating expenses, net

(28.0)

(22.0)

Income from continuing operations before taxes

239.0

276.6

Income tax expense

90.6

105.4

Income from continuing operations

148.4

171.2

Loss from discontinued operations, net of taxes

(0.4)

(0.1)

Net income

148.0

171.1

Less:  Net income attributable to noncontrolling interests

7.2

8.7

Net income attributable to Quest Diagnostics

$  140.8

$  162.4

Amounts attributable to Quest Diagnostics' stockholders:

Income from continuing operations

$  141.2

$  162.5

Loss from discontinued operations, net of taxes

(0.4)

(0.1)

Net income

$  140.8

$  162.4

Earnings per share attributable to Quest Diagnostics' common stockholders - basic:

Income from continuing operations

$  0.87

$  0.90

Loss from discontinued operations

-

-

Net income

$  0.87

$  0.90

Earnings per share attributable to Quest Diagnostics' common stockholders – diluted:

Income from continuing operations

$  0.86

$  0.89

Loss from discontinued operations

-

-

Net income

$  0.86

$  0.89

Weighted average common shares outstanding:

Basic

161.5

180.2

Diluted

163.2

182.4

Operating income as a percentage of net revenues

14.7%

16.5%

Quest Diagnostics Incorporated and Subsidiaries

Consolidated Balance Sheets

March 31, 2011 and December 31, 2010

(in millions, except per share data)

March 31,

2011

December 31,

2010

(unaudited)

Assets

Current assets:

Cash and cash equivalents

$  994.2

$  449.3

Accounts receivable, net

940.4

845.3

Inventories

71.7

76.6

Deferred income taxes

140.9

142.5

Prepaid expenses and other current assets

111.4

91.7

 Total current assets

2,258.6

1,605.4

Property, plant and equipment, net

821.5

834.4

Goodwill

5,118.9

5,101.9

Intangible assets, net

795.4

796.4

Other assets

189.0

189.5

Total assets

$  9,183.4

$  8,527.6

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable and accrued expenses

$  901.4

$  865.3

Current portion of long-term debt

629.2

349.0

 Total current liabilities

1,530.6

1,214.3

Long-term debt

3,594.6

2,641.2

Other liabilities

625.6

618.1

Stockholders' equity:

Quest Diagnostics stockholders' equity:

Common stock, par value $0.01 per share; 600 shares authorized at both March 31, 2011 and December 31, 2010; 214.6 shares and 214.2 shares issued at March 31, 2011 and December 31, 2010, respectively

2.1

2.1

Additional paid-in capital

2,305.8

2,311.4

Retained earnings

3,992.4

3,867.4

Accumulated other comprehensive income

32.3

10.6

Treasury stock, at cost; 57.5 shares and 43.5 shares at March 31, 2011 and December 31, 2010, respectively

(2,923.4)

(2,158.1)

Total Quest Diagnostics stockholders' equity

3,409.2

4,033.4

Noncontrolling interests

23.4

20.6

 Total stockholders' equity

3,432.6

4,054.0

Total liabilities and stockholders' equity

$  9,183.4

$  8,527.6

Quest Diagnostics Incorporated and Subsidiaries

Consolidated Statements of Cash Flows

For the Three Months Ended March 31, 2011 and 2010

(in millions)

(unaudited)

Three Months Ended

March 31,

2011

2010

Cash flows from operating activities:

Net income

$  148.0

$  171.1

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

63.4

63.3

Provision for doubtful accounts

77.4

76.3

Deferred income tax provision

2.6

3.6

Stock compensation expense

18.9

11.1

Excess tax benefits from stock-based compensation arrangements

(4.7)

0.5

Other, net

3.5

8.7

Changes in operating assets and liabilities:

 Accounts receivable

(171.3)

(115.3)

 Accounts payable and accrued expenses

(47.1)

(81.9)

 Income taxes payable

78.7

98.4

 Other assets and liabilities, net

(8.8)

3.4

Net cash provided by operating activities

160.6

239.2

Cash flows from investing activities:

Capital expenditures

(39.0)

(39.8)

Increase in investments and other assets

(1.8)

(2.8)

Net cash used in investing activities

(40.8)

(42.6)

Cash flows from financing activities:

Proceeds from borrowings

1,818.3

-

Repayments of debt

(576.9)

(0.7)

Purchases of treasury stock

(835.0)

(250.7)

Exercise of stock options

53.8

19.7

Excess tax benefits from stock-based compensation arrangements

4.7

(0.5)

Dividends paid

(17.1)

(18.4)

Distributions to noncontrolling interests

(5.3)

(5.5)

Other financing activities, net

(17.4)

(11.6)

Net cash provided by (used in) financing activities

425.1

(267.7)

Net change in cash and cash equivalents

544.9

(71.1)

Cash and cash equivalents, beginning of period

449.3

534.3

Cash and cash equivalents, end of period

$  994.2

$  463.2

Cash paid during the period for:

Interest

$  55.0

$  35.3

Income taxes

$  10.6

$  6.8

Notes to Financial Tables

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

Three Months Ended

March 31,

2011

2010

(in millions, except per share data)

Amounts attributable to Quest Diagnostics' common stockholders:

Income from continuing operations                           

$  141.2

$  162.5

Loss from discontinued operations                         

(0.4)

(0.1)

Net income available to common stockholders                 

$  140.8

$  162.4

Income from continuing operations                           

$  141.2

$  162.5

Less: Earnings allocated to participating securities             

0.6

0.7

Earnings available to Quest Diagnostics' common stockholders – basic and diluted

$   140.6

$   161.8

Weighted average common shares outstanding - basic         

161.5

180.2

Effect of dilutive securities:

Stock options and performance share units                    

1.7

2.2

Weighted average common shares outstanding - diluted         

163.2

182.4

Earnings per share attributable to Quest Diagnostics' common stockholders - basic:

Income from continuing operations                          

$  0.87

$  0.90

Loss from discontinued operations                          

-

-

Net income                                             

$  0.87

$  0.90

Earnings per share attributable to Quest Diagnostics' common stockholders - diluted:

Income from continuing operations                          

$  0.86

$  0.89

Loss  from discontinued operations                         

-

-

Net income                                             

$  0.86

$  0.89

2) 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 estimated impact of severe weather, restructuring charges, and transaction costs related to the acquisition of Athena Diagnostics and the pending acquisition of Celera Corporation.  Adjusted measures are presented because management believes those measures are useful adjuncts to reported results under accounting principles generally accepted in the United States of America 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 March 31, 2011

(dollars in millions, except for

earnings per share)

As
Reported

Severe
Weather

(a)

Restructuring
Charges

(b)

Transaction
Costs

(c)

As
Adjusted

Operating income

$  267.0

$  18.5

$  13.3

$  2.3

$  301.1

Operating income as a % of net revenues

14.7%

0.8%

0.7%

0.1%

16.3%

Income from continuing operations (d)

141.2

11.3

8.1

3.8

164.4

Diluted earnings per common share

0.86

0.07

0.05

0.02

1.00

(a)  Represents an estimate of the impact of severe weather.

(b)  Results for the three months ended March 31, 2011 include $13.3 million of pre-tax restructuring charges, or $0.05 per diluted share, principally associated with workforce reductions.  Of these costs, $9.0 million and $4.3 million were included in cost of services and selling, general and administrative expenses, respectively.  

(c)  Results for the three months ended March 31, 2011 include $4.7 million of pre-tax transaction costs, or $0.02 per diluted share, associated with the acquisition of Athena Diagnostics and the pending acquisition of Celera Corporation.  Of these costs, $2.3 million, primarily related to professional and filing fees, was recorded in selling, general, and administrative expenses and $2.4 million of financing related costs were recorded in interest expense, net.

(d)  For the estimated impact of severe weather and the impact of restructuring charges, income tax expense of $7.2 million and $5.2 million, respectively, was calculated using a combined federal and state rate of 39%.  Income tax expense of $0.9 million associated with transaction costs was calculated by applying a combined federal and state rate of 39% to those costs for which a tax benefit has been recorded.

Three months ended March 31, 2010

(dollars in millions, except for

earnings per share)

As
Reported

Severe
Weather

(e)

Restructuring
Charges

(f)

As
Adjusted

Operating income

$  298.6

$  14.1

$  17.3

$  330.0

Operating income as a % of net revenues

16.5%

0.6%

1.0%

18.1%

Income from continuing operations (g)

162.5

8.6

10.6

181.7

Diluted earnings per common share (h)

0.89

0.05

0.06

0.99

(e)  Represents an estimate of the impact of severe weather.

(f)  Results for the three months ended March 31, 2010 include $17.3 million of pre-tax restructuring charges, or $0.06 per diluted share, principally associated with workforce reductions. Of these costs, $4.5 million and $12.8 million were included in cost of services and selling, general and administrative expenses, respectively.

(g)  Income tax expense of $5.5 million and $6.7 million was calculated using a combined federal and state rate of 39% for the tax impacts of severe weather and restructuring charges, respectively.  

(h)  Does not foot across due to rounding.

3) The following table summarizes the impact to the year over year comparisons for the estimated impact of severe weather, restructuring charges, and transaction costs on certain reported results for the three months ended March 31, 2011 and 2010 (in millions, except for earnings per share).

Severe Weather

Restructuring Charges

Transaction Costs

2011

2010

Better

(Worse)

2011

2010

Better

(Worse)

2011

2010

Better

(Worse)

Net revenues

$  25.7

$  19.4

$  (6.3)

$  -

$  -

$  -

$  -

$  -

$  -

Operating income

18.5

14.1

(4.4)

13.3

17.3

4.0

2.3

-

(2.3)

Net income

11.3

8.6

(2.7)

8.1

10.6

2.5

3.8

-

(3.8)

Diluted earnings per common share

0.07

0.05

(0.02)

0.05

0.06

0.01

0.02

-

(0.02)

4) Other income, net represents miscellaneous income and expense items related to non-operating activities, such as gains and losses associated with investments and non-operating assets.  For the three months ended March 31, 2010, other income, net includes a gain on an investment of $4.0 million.

5) In January 2011, our Board of Directors authorized $750 million of additional share repurchases, bringing the total available under share repurchase authorizations at that date to $1 billion.  For the three months ended March 31, 2011, the Company repurchased 15.4 million shares of its common stock at a price of $54.30 per share for $835 million from SB Holdings Capital Inc., a wholly-owned subsidiary of GlaxoSmithKline plc.  As of March 31, 2011, the Company had $165 million remaining under share repurchase authorizations.  For the three months ended March 31, 2011, the Company reissued 1.4 million shares for employee benefit plans.  

6) The outlook for adjusted diluted earnings per common share and adjusted operating income as a percentage of net revenues represent management's estimates of diluted earnings per common share and operating income as a percentage of net revenues for the full year 2011 before the estimated impact of severe weather, restructuring charges, and transaction costs related to the acquisition of Athena Diagnostics and the pending acquisition of Celera Corporation.  These measures are presented because management believes they are useful adjuncts to the corresponding amounts determined under accounting principles generally accepted in the United 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 and operating income as a percentage of net revenues. Adjusted diluted earnings per common share and adjusted operating income as a percentage of net revenues are not measures of financial performance under accounting principles generally accepted in the United States and should not be considered as an alternative to the corresponding amounts determined under accounting principles generally accepted in the United States.

The following table reconciles our 2011 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 first quarter impact of severe weather, restructuring charges, and costs associated with the Athena and Celera transactions.

Outlook for 2011 Before Future Special Items

As

Reported

Severe

Weather

(a)

Restructuring

Charges

(b)

Transaction

Costs

(c)

As

Adjusted

Operating income as a % of net revenues

17.0%-17.5%

0.3%

0.2%

-%

17.5%-18.0%

Diluted earnings per common share

$4.11- $4.31

$0.07

$0.05

$0.02

$4.25-$4.45

(a)  Represents an estimate of the impact of severe weather.

(b)  Represents first quarter pre-tax restructuring charges of $13.3 million principally associated with workforce reductions.

(c)  Represents first quarter pre-tax transaction costs of $4.7 million associated with the acquisition of Athena Diagnostics and the pending acquisition of Celera Corporation. Of these costs, $2.3 million, primarily related to professional and filing fees, was recorded in selling, general, and administrative expenses and $2.4 million of financing related costs were recorded in interest expense, net.