QUEST DIAGNOSTICS INCORPORATED MADISON, N.J., April 23, 2015 /PRNewswire/ -- Quest Diagnostics Incorporated (NYSE: DGX), the world's leading provider of diagnostic information services, announced today that for the first quarter ended March 31, 2015, adjusted net income was $141 million, compared to $122 million in 2014. Adjusted diluted EPS excluding amortization was $1.05 in the quarter, compared to $0.93 in 2014. Amortization expense was $0.09 per diluted share in both years.
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Reported net income was $61 million, or $0.42 per diluted share, compared to $104 million, or $0.71 per diluted share, in 2014. Reported net income in the first quarter of 2015 was negatively impacted by charges of $80 million after tax, or $0.54 per diluted share, principally associated with the early retirement of debt in connection with the company's recent debt refinancing. In addition, a portion of the charges were related to restructuring and integration costs and ongoing efforts to drive operational excellence. In the first quarter of 2014, reported net income was reduced by charges of $18 million after tax, or $0.13 per diluted share, comprised primarily of restructuring and integration costs.
Revenues grew 5.3% to $1.84 billion in the first quarter versus the prior year. Consolidated revenues grew 0.7% on an organic basis versus a year ago. Diagnostic Information Services revenues increased 4.9%. Volume, measured by the number of requisitions, increased 5.6% versus the prior year. Revenue per requisition was 0.7% below the prior year. Excluding acquisitions, revenue per requisition for Diagnostic Information Services was essentially unchanged from a year ago.
For the first quarter of 2015, adjusted operating income was $269 million, or 14.6% of revenues, compared to $236 million, or 13.5% of revenues, in 2014. Reported operating income was $228 million, or 12.4% of revenues, compared to $208 million, or 11.9% of revenues, in 2014. Adjusted cash provided by operations during the first quarter of 2015 was $130 million. Reported cash provided by operations of $52 million was negatively impacted by pre-tax cash charges totaling $78 million associated with the early retirement of debt in connection with the company's recent debt refinancing. In the first quarter of 2014, reported cash provided by operations was $84 million.
"We grew revenues by 5%, adjusted EPS by 13% and adjusted operating income by 14% in the first quarter despite the harsh winter in many parts of the country," said Steve Rusckowski, President and CEO. "We continue to refocus on our core diagnostic information services business and deliver disciplined capital deployment. During the quarter we announced a joint venture with Quintiles to enhance the value of our clinical trials testing business. This month we also completed the debt refinancing and made progress in our commitment to return the majority of free cash flow to shareholders. We're pleased with the continued progress we're making against our five-point strategy."
Outlook for Full-Year 2015
For 2015, the company estimates results from continuing operations, before special items, as follows:
-- Revenues to increase 2% to 3% compared to 2014;
-- Adjusted diluted EPS excluding amortization to be between $4.70 and
$4.85;
-- Adjusted cash provided by operations to approximate $850 million; and
-- Capital expenditures to approximate $300 million.
Note on Non-GAAP Financial Measures
As used in this press release: (i) for the purpose of income measures the term "adjusted" refers to operating performance measures that exclude special items such as charges on retirement of debt and related refinancing charges, restructuring and integration charges, and other items; (ii) the term "adjusted diluted EPS excluding amortization expense" represents the company's results before the impact of special items and amortization expense; and (iii) "adjusted cash provided by operations" represents cash provided by operations before the cash impact of charges on retirement of debt. Adjusted measures are presented because management believes those measures are useful adjuncts to reported results under accounting principles generally accepted in the United States. Adjusted measures should not be considered as an alternative to the corresponding measures determined under accounting principles generally accepted in the United States. The attached tables include reconciliations of adjusted measures to measures reported under accounting principles generally accepted in the United States.
Conference Call Information
Quest Diagnostics will hold its quarterly conference call to discuss financial results beginning at 8:30 a.m. Eastern Time today. The conference call can also be accessed in listen-only mode by dialing 415-228-4961, passcode 3214469. The company suggests participants dial in approximately 10 minutes before the call. A replay of the call may be accessed online at www.QuestDiagnostics.com/investor or by phone at 866-430-5847 for domestic callers or 203-369-0933 for international callers. Telephone replays will be available from 10:30 a.m. Eastern Time on April 23 until midnight Eastern Time on May 23, 2015. Anyone listening to the call is encouraged to read the company's periodic reports, on file with the Securities and Exchange Commission, including the discussion of risk factors and historical results of operations and financial condition in those reports.
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
Quest Diagnostics Incorporated and Subsidiaries
Consolidated Statements of Operations
For the Three Months Ended March 31, 2015 and 2014
(in millions, except per share data)
(unaudited)
Three Months Ended
March 31,
---------
2015 2014
---- ----
Net revenues $1,839 $1,746
Operating costs and expenses:
Cost of services 1,163 1,101
Selling, general
and
administrative 419 415
Amortization of
intangible assets 21 22
Other operating
expense, net 8 -
--- ---
Total operating
costs and
expenses 1,611 1,538
----- -----
Operating income 228 208
Other income (expense):
Interest expense,
net (45) (39)
Equity in earnings
of equity method
investees 7 6
Other (expense)
income, net (78) 1
Total non-
operating
expenses, net (116) (32)
---- ---
Income before
income taxes 112 176
Income tax expense 42 65
--- ---
Net income 70 111
Less: Net income
attributable to
noncontrolling
interests 9 7
Net income
attributable to
Quest Diagnostics $61 $104
--- ----
Earnings per share attributable
to Quest Diagnostics' common
stockholders:
Basic $0.42 $0.72
----- -----
Diluted $0.42 $0.71
----- -----
Weighted average common shares
outstanding:
Basic 144 144
Diluted 146 145
Quest Diagnostics Incorporated and Subsidiaries
Consolidated Balance Sheets
March 31, 2015 and December 31, 2014
(in millions, except per share data)
(unaudited)
March 31, December 31,
2015 2014
---- ----
Assets
------
Current assets:
Cash and
cash
equivalents $974 $192
Accounts
receivable,
net 949 932
Inventories 106 110
Deferred
income
taxes 158 169
Prepaid
expenses
and other
current
assets 188 200
Total
current
assets 2,375 1,603
Property,
plant and
equipment,
net 902 933
Goodwill 5,986 6,032
Intangible
assets, net 1,041 1,071
Other assets 254 238
Non-current
assets held
for sale 55 -
--- ---
Total assets $10,613 $9,877
------- ------
Liabilities and
Stockholders' Equity
---------------------
Current liabilities:
Accounts
payable and
accrued
expenses $1,046 $1,191
Current
portion of
long-term
debt 1,043 518
Total
current
liabilities 2,089 1,709
Long-term
debt 3,688 3,244
Other
liabilities 565 594
Stockholders' equity:
Quest Diagnostics
stockholders' equity:
Common
stock, par 216 shares
value $0.01 and 215
per share; shares
600 shares issued at
authorized March 31,
at both 2015 and
March 31, December
2015 and 31, 2014,
December respectively
31, 2014; 2 2
Additional
paid-in
capital 2,427 2,418
Retained
earnings 5,729 5,723
Accumulated
other
comprehensive
loss (30) (27)
Treasury
stock, at
cost; 72
shares and
71 shares
at March
31, 2015
and
December
31, 2014,
respectively (3,885) (3,815)
------ ------
Total Quest
Diagnostics
stockholders'
equity 4,243 4,301
Noncontrolling
interests 28 29
--- ---
Total
stockholders'
equity 4,271 4,330
Total
liabilities
and
stockholders'
equity $10,613 $9,877
------- ------
Quest Diagnostics Incorporated and Subsidiaries
Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 2015 and 2014
(in millions)
(unaudited)
Three Months Ended
March 31,
---------
2015 2014
---- ----
Cash flows from operating
activities:
Net income $70 $111
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and
amortization 78 75
Provision for
doubtful
accounts 79 75
Deferred income
tax provision
(benefit) 14 (10)
Stock-based
compensation
expense 12 12
Excess tax
benefits from
stock-based
compensation
arrangements (2) -
Non-cash portion
of loss on
retirement of
debt 1 -
Other, net 6 (2)
Changes in operating assets and
liabilities:
Accounts
receivable (97) (152)
Accounts payable
and accrued
expenses (120) (86)
Income taxes
payable 10 70
Other assets and
liabilities, net 1 (9)
Net cash provided
by operating
activities 52 84
--- ---
Cash flows from investing
activities:
Business
acquisitions,
net of cash
acquired - (567)
Capital
expenditures (56) (68)
Decrease
(increase) in
investments and
other assets 1 (1)
Net cash used in
investing
activities (55) (636)
--- ----
Cash flows from financing
activities:
Proceeds from
borrowings 1,389 1,513
Repayments of
debt (440) (923)
Purchases of
treasury stock (110) (32)
Exercise of stock
options 35 12
Excess tax
benefits from
stock-based
compensation
arrangements 2 -
Dividends paid (48) (43)
Distributions to
noncontrolling
interests (10) (3)
Other financing
activities, net (33) (15)
Net cash provided
by financing
activities 785 509
--- ---
Net change in
cash and cash
equivalents 782 (43)
Cash and cash
equivalents,
beginning of
period 192 187
Cash and cash
equivalents, end
of period $974 $144
---- ----
Cash paid during the period
for:
Interest $54 $52
Income taxes $19 $9
Notes to Financial Tables
1) The
computation
of basic
and diluted
earnings
per common
share is as
follows:
Three Months Ended
March 31,
---------
2015 2014
---- ----
(in millions, except per
share data)
Amounts attributable to Quest
Diagnostics' common stockholders:
Net income attributable to Quest
Diagnostics $61 $104
Less: earnings allocated to
participating securities - 1
Earnings available to Quest
Diagnostics' common stockholders -
basic and diluted $61 $103
--- ----
Weighted average common shares
outstanding -basic 144 144
Effect of dilutive securities:
Stock options and performance share
units 2 1
Weighted average common shares
outstanding -diluted 146 145
--- ---
Earnings per share attributable to
Quest Diagnostics' common
stockholders:
Basic $0.42 $0.72
----- -----
Diluted $0.42 $0.71
----- -----
2) Adjusted amounts for operating
income and net income attributable
to Quest Diagnostics represent the
company's results before the
impact of special items, such as
the charges on retirement of debt
and related refinancing charges,
restructuring and integration
charges and other items. Adjusted
diluted EPS excluding amortization
expense represents the company's
results before the impact of
special items and amortization
expense. Adjusted cash provided
by operations represents cash
provided by operations before the
cash impact of charges on
retirement of debt. Adjusted
measures are presented because
management believes those measures
are useful adjuncts to reported
results under accounting
principles generally accepted in
the United States 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 table reconciles
reported results to adjusted
results:
Three Months Ended
March 31,
---------
2015 2014
---- ----
(dollars in millions, except
per share data)
Adjusted operating
income:
------------------
Operating income $228 $208
Restructuring and
integration charges (a) 31 24
Other (b) 10 4
Adjusted operating
income $269 $236
---- ----
Adjusted operating
income as a percentage
of net revenues:
-----------------------
Operating income as a
percentage of net
revenues 12.4% 11.9%
Restructuring and
integration charges (a) 1.7 1.4
Other (b) 0.5 0.2
Adjusted operating
income as a percentage
of net revenues 14.6% 13.5%
---- ----
Adjusted net income:
--------------------
Net income attributable
to Quest Diagnostics $61 $104
Charges on retirement of
debt and related
refinancing charges (c)
(d) 53 -
Restructuring and
integration charges (d) 19 15
Other (d) 8 3
Adjusted net income $141 $122
---- ----
Adjusted diluted EPS
excluding amortization
expense:
-----------------------
Diluted earnings per
common share $0.42 $0.71
Charges on retirement of
debt and related
refinancing charges (c) 0.36 -
Restructuring and
integration charges (a) 0.13 0.11
Other (b) 0.05 0.02
Amortization expense (e) 0.09 0.09
Adjusted diluted EPS
excluding amortization
expense $1.05 $0.93
----- -----
Adjusted cash provided
by operations:
----------------------
Cash provided by
operations $52 $84
Cash charges on
retirement of debt (f) 78 -
Adjusted cash provided
by operations $130 $84
---- ---
(a) Represents costs primarily
associated with workforce
reductions and professional
fees incurred in connection
with further restructuring and
integrating our business. The
following table summarizes the
impact of restructuring and
integration charges on the
company's consolidated
statements of operations table:
Three Months Ended
March 31,
---------
2015 2014
---- ----
(dollars in millions)
Cost of services $20 $12
Selling, general and
administrative 11 12
$31 $24
--- ---
(b) For the three months ended March 31,
2015, primarily represents non-cash
impairment charges associated with our
Celera Products business and costs
incurred related to a legal matter.
For the three months ended March 31,
2014, principally represents costs
incurred related to the settlement of a
legal matter.
(c) Charges on retirement of debt and
related refinancing charges represent
charges associated with the March 2015
cash tender offer (the "Tender Offer")
in which the company purchased $250
million aggregate principal amount of
its 6.95% Senior Notes due July 2037
and 5.75% Senior Notes due January 2040
($79 million pre-tax included in other
(expense) income, net and $5 million
pre-tax included in interest expense,
net).
(d) For the charges on retirement of debt
and related refinancing charges, income
tax benefits were calculated using a
combined federal and state rate of
37.3%. For the restructuring and
integration charges and other items,
income tax impacts, where recorded,
were calculated using combined federal
and state rates of 38.9% and 38.2% for
the three months ended March 31, 2015
and 2014, respectively.
(e) Represents the impact of amortization
expense, net of an estimated tax
benefit, on diluted EPS. The income
tax benefit was calculated using
combined federal and state rates of
38.9% and 38.2% for the three months
ended March 31, 2015 and 2014,
respectively.
(f) Represents pre-tax cash charges on
retirement of debt in connection with
our recent debt refinancing.
3) Other operating
expense, net
includes
miscellaneous income
and expense items
related to operating
activities. For the
three months ended
March 31, 2015,
other operating
expense, net
principally includes
non-cash impairment
charges associated
with our Celera
Products business.
4) Other (expense)
income, net
represents
miscellaneous income
and expense items
related to non-
operating
activities, such as
gains and losses
associated with
investments and
other non-operating
assets. For the
three months ended
March 31, 2015,
other (expense)
income, net includes
$79 million of pre-
tax charges on the
retirement of debt
associated with the
Tender Offer.
5) For the three months
ended March 31,
2015, the company
repurchased 1.5
million shares of
its common stock at
an average price of
$71.48 per share for
$110 million. At
March 31, 2015, $586
million remained
available under the
company's share
repurchase
authorizations.
6) The outlook for
adjusted diluted EPS
excluding
amortization expense
represents
management's
estimates for the
full year 2015
before the impact of
special items and
amortization
expense. The
outlook for adjusted
cash provided by
operations
represents
management's
estimate for the
full year 2015
before the cash
impact of charges on
retirement of debt.
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.
Adjusted diluted EPS
excluding
amortization expense
and adjusted cash
provided by
operations are not
measures of
financial
performance under
accounting
principles generally
accepted in the
United States and
should not be
considered as
alternatives to the
corresponding amount
determined under
accounting
principles generally
accepted in the
United States.
The following table
reconciles our 2015
outlook for adjusted
diluted EPS
excluding
amortization expense
and adjusted cash
provided by
operations to the
corresponding
amounts determined
under accounting
principles generally
accepted in the
United States:
Low High
--- ----
Adjusted diluted EPS excluding
amortization expense:
Diluted earnings per common share $3.83 $3.98
Charges on retirement of debt and
related refinancing charges (a) 0.36 0.36
Restructuring and integration
charges (b) 0.13 0.13
Other (c) 0.05 0.05
Amortization expense, net of tax
(d) 0.33 0.33
---- ----
Adjusted diluted EPS excluding
amortization expense $4.70 $4.85
----- -----
Adjusted cash provided by
operations:
-------------------------
Cash provided by operations $772
Cash charges on retirement of debt
(e) 78
Adjusted cash provided by
operations $850
----
(a) Represents pre-tax charges of $84
million, incurred through March
31, 2015, associated with the
retirement of debt and related
refinancing charges in connection
with the Tender Offer.
(b) Represents pre-tax charges of $31
million primarily associated with
workforce reductions and
professional fees incurred in
connection with further
restructuring and integrating our
business through March 31, 2015.
(c) Represents pre-tax charges of $10
million primarily associated with
the non-cash impairment charges
associated with our Celera
Products business and costs
incurred related to a legal
matter through March 31, 2015.
(d) Represents the full year impact of
amortization expense, estimated
at approximately $80 million or
$49 million, net of an estimated
tax benefit, on diluted earnings
per common share.
(e) Represents pre-tax cash charges
of $78 million on retirement of
debt in connection with our
recent debt refinancing incurred
through March 31, 2015.
Contacts:
Dan Haemmerle (investors) at 973-520-2900
Dennis Moynihan (media) at 973-520-2800
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SOURCE Quest Diagnostics Incorporated
