SECAUCUS, N.J., Nov. 28, 2018 /PRNewswire/ -- At a meeting
with analysts and investors at its Investor Day tomorrow, members
of the senior management team of Quest Diagnostics Incorporated
(NYSE: DGX), the world's leading provider of diagnostic information
services, will discuss the company's two-point strategy and range
of initiatives underway to accelerate growth and drive operational
excellence, and also will outline its near-and long-term financial
outlook.
"Quest Diagnostics is well positioned to accelerate growth and
drive operational excellence in 2019 based on a range of unique
capabilities and the strategic initiatives we are executing," said
Steve Rusckowski, Chairman,
President and Chief Executive Officer. "Expanded access to
health plan lives, the benefit of acquisitions and our strong brand
will drive top- and bottom-line growth, despite reimbursement
challenges related in part to PAMA. Looking ahead, over the
next four years we remain committed to our existing target to
generate a 3-5% revenue CAGR and have updated our
earnings goal to a 4-6% CAGR."
At the meeting, members of the company's senior management team
will highlight the special capabilities and strategic initiatives
underway to accelerate the company's growth, including:
- Delivering more than 2% revenue CAGR through strategically
aligned accretive acquisitions
- Capitalizing on the company's expanded access to more than 43
million incremental insured lives, with total access now
representing more than 90% of insured lives across the U.S.
- Strengthening the company's relationships with hospital health
systems
- Expanding access to innovation with advanced diagnostics
- Enhancing the company's position as the consumer lab provider
of choice
- Extending diagnostic data services
In addition, the Quest Diagnostics team will discuss the
company's strategy to drive operational excellence and continue to
generate cost savings of approximately 3% per year.
The company will reiterate its capital deployment strategy,
including its focus on returning a majority of free cash flow to
shareholders through share repurchases and dividends. In
conjunction with the meeting, Quest Diagnostics announced that its
Board of Directors has increased the company's quarterly dividend
to $0.53 per share from $0.50 per share, or by 6% to an annual rate
of $2.12 per share, commencing with the dividend payable
January 30, 2019 to holders of record
of the common stock on January 15,
2019. The dividend raise will be the company's eighth
increase since 2011.
Outlook for Full Year 2018
The company is updating its outlook for the full year
2018. The updated EPS guidance primarily reflects an increase
in reserves associated with revenue and accounts receivable (refer
to footnote (b) to the table below). The updated revenue
guidance also reflects volume softness, some of which is driven by
Hurricane Michael, California
wildfires, and the recent East Coast snowstorm. The updated
outlook is as follows:
|
|
|
Current
Outlook
|
|
Previous
Outlook
|
|
|
|
Low
|
|
High
|
|
Low
|
|
High
|
|
|
Revenues
(a)(b)
|
Approximately $7.57
billion
|
|
Approximately $7.62
billion
|
|
|
Revenue increase
(a)
|
Approximately
2.3%
|
|
Approximately
3%
|
|
|
Reported diluted
EPS
|
Greater than
$5.34
|
|
$5.57
|
|
$5.64
|
|
|
Adjusted diluted EPS
excluding amortization
|
Greater than
$6.30
|
|
$6.53
|
|
$6.60
|
|
|
Cash provided by
operations
|
Approximately $1.25
billion
|
|
Approximately $1.3
billion
|
|
|
Capital
expenditures
|
$350
million
|
|
$400
million
|
|
$350
million
|
|
$400
million
|
|
|
|
|
(a)
|
The updated outlook
for revenue growth in 2018 represents management's estimates for
2018 versus 2017 reported revenues adjusted to reflect the impact
of new revenue recognition rules that became effective January 1,
2018. Full year 2017 revenues adjusted to reflect the new rules
were $7,402 million. See note 2 of the financial tables
attached below.
|
|
(b)
|
As discussed in the
company's Form 10-K, recording revenues and accounts receivable
involves judgement and estimation. The company follows a
standard process, which considers historical denial and collection
experience and other factors, to estimate contractual allowances
and implicit patient price concessions, and regularly updates its
estimates, recording adjustments in the current period as changes
in estimates. Based on this process, during the fourth
quarter the company expects to increase its reserves for revenues
and accounts receivable.
|
Note on Non-GAAP Financial Measures
As used in this press release the term "reported" refers to
measures under the accounting principles generally accepted in
the United States ("GAAP").
The term "adjusted" refers to non-GAAP measures as follows:
(i) for the purpose of income measures the term "adjusted" refers
to operating performance measures that exclude special items such
as restructuring and integration charges, excess tax benefit
("ETB") associated with stock based compensation and other items;
and (ii) the term "adjusted diluted EPS excluding amortization"
represents the company's diluted EPS before the impact of special
items (described above) and amortization expense.
The company has provided a four-year compound annual growth rate
projection of 4-6% for adjusted diluted EPS excluding amortization,
which is a non-GAAP measure. The company is unable to present
a reconciliation of adjusted diluted EPS excluding amortization to
the most comparable GAAP measure due to the inherent uncertainty
and variability in the nature and amount of special items
referenced above.
Non-GAAP adjusted measures are presented because management
believes those measures are useful adjuncts to GAAP results.
Non-GAAP adjusted measures should not be considered as an
alternative to the corresponding measures determined under
GAAP. Management may use these non-GAAP measures to evaluate
our performance period over period and relative to competitors, to
analyze the underlying trends in our business, to establish
operational budgets and forecasts and for incentive compensation
purposes. We believe that these non-GAAP measures are useful
to investors and analysts to evaluate our performance period over
period and relative to competitors, as well as to analyze the
underlying trends in our business and to assess our
performance. The additional tables attached below include
reconciliations of adjusted measures to GAAP measures.
Webcast Attendance
A live webcast of the event will be broadcast simultaneously on
the Investor Relations page of the Quest Diagnostics website for
all interested parties. To access the webcast or a replay of
the event, visit: www.QuestDiagnostics.com/investor. The
webcast will begin promptly at 8:00 am
ET and conclude at 12:30 pm
ET. A replay will be available following the
meeting.
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 45,000
employees understand that, in the right hands and with the right
context, our diagnostic insights can inspire actions that transform
lives. www.QuestDiagnostics.com.
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 or strategic partners and other factors discussed
in the company's most recently filed Annual Report on Form 10-K and
in any of the company's subsequently filed Quarterly Reports on
Form 10-Q and Current Reports on Form 8-K, including those
discussed in the "Business," "Risk Factors," "Cautionary Factors
that May Affect Future Results" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" sections
of those reports.
This earnings release, including the attached financial tables,
is available online in the Newsroom section
at www.QuestDiagnostics.com.
TABLES FOLLOW
1)
|
The outlook for
adjusted diluted EPS excluding amortization expense represents
management's estimates for the full year 2018 before the impact of
special items, including ETB, and amortization expense.
Further impacts to earnings related to special items may be
incurred throughout the remainder of the year. Additionally,
the amount of ETB is dependent upon employee stock option exercises
and the company's stock price, which are difficult to
predict. The following table reconciles our 2018 outlook for
adjusted diluted EPS excluding amortization expense to the
corresponding amounts determined under GAAP:
|
|
|
|
|
Diluted earnings per
common share
|
$
|
5.34
|
|
Restructuring and
integration charges (a)
|
0.62
|
|
Amortization expense
(b)
|
0.58
|
|
Other
|
(0.01)
|
|
Certain income tax
benefits
|
(0.10)
|
|
ETB
|
(0.13)
|
|
Adjusted diluted EPS
excluding amortization expense
|
$
|
6.30
|
|
|
|
|
|
|
|
(a)
|
Represents estimated
full year pre-tax charges of $115 million primarily associated with
systems conversions, integration and workforce reductions incurred
in connection with further restructuring and integrating our
business. Income tax benefits were calculated using a
combined tax rate of 25.5%.
|
|
|
(b)
|
Represents the
estimated impact of amortization expense for 2018 on the
calculation of adjusted diluted EPS excluding amortization
expense. Amortization expense used in the calculation is as
follows (dollars in millions):
|
|
|
|
|
Amortization of
intangible assets
|
$
|
90
|
|
Amortization expense
included in equity in earnings of equity method investees, net of
taxes
|
17
|
|
Total pre-tax
amortization expense
|
$
|
107
|
|
|
|
Total amortization
expense, net of an estimated tax benefit
|
$
|
80
|
|
|
|
2)
|
The outlook for 2.3%
revenue growth in 2018 represents management's estimates for 2018
versus 2017 reported revenues adjusted to reflect the impact of new
revenue recognition rules that became effective January 1,
2018. Under the new rules, the company will report
uncollectible balances associated with patient responsibility as a
reduction in net revenues when historically these amounts were
classified as bad debt expense within selling, general and
administrative expenses.
|
|
The following tables
reconcile our 2017 net revenues determined under previous revenue
recognition rules with 2017 net revenue adjusted to reflect the
impact of the new revenue recognition rules:
|
|
|
|
Three Months
Ended
|
|
Year
Ended
|
|
March 31,
2017
|
|
June 30,
2017
|
|
September 30,
2017
|
|
December 31,
2017
|
|
December 31,
2017
|
|
(dollars in
millions)
|
2017 Revenue on an
adjusted basis:
|
|
|
|
|
|
|
|
|
Net
revenues
|
$
|
1,899
|
|
|
$
|
1,943
|
|
|
$
|
1,931
|
|
|
$
|
1,936
|
|
|
$
|
7,709
|
|
Adjustment for
adoption of new revenue
recognition standard
|
(82)
|
|
|
(79)
|
|
|
(75)
|
|
|
(71)
|
|
|
(307)
|
|
2017 Revenue on an
adjusted basis
|
$
|
1,817
|
|
|
$
|
1,864
|
|
|
$
|
1,856
|
|
|
$
|
1,865
|
|
|
$
|
7,402
|
|
|
|
|
|
|
|
|
|
|
|
2018 Revenue
outlook:
|
|
|
|
|
|
|
|
2017 Revenue on an
adjusted basis
|
|
|
|
|
|
|
|
|
$
|
7,402
|
|
2018 Equivalent
revenue growth
|
|
|
|
|
|
|
|
|
2.3
|
%
|
2018 Revenue
outlook
|
|
|
|
|
|
|
|
|
$
|
7,570
|
|
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SOURCE Quest Diagnostics