QUEST DIAGNOSTICS INCORPORATED MADISON, N.J., Jan. 29, 2015 /PRNewswire/ --
-- Fourth quarter revenues from continuing operations of $1.9 billion, up
7.2% versus prior year
-- Adjusted diluted EPS from continuing operations of $1.08, up 4.9% versus
prior year
-- Reported diluted EPS from continuing operations of $1.26, up 30% versus
prior year
-- Dividend increased 15% to $0.38 per quarter
-- Full year 2015 revenues to grow 2% to 3%
-- Full year 2015 adjusted diluted EPS excluding amortization expense
expected to be between $4.70 and $4.85
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Quest Diagnostics Incorporated (NYSE: DGX), the world's leading provider of diagnostic information services, announced today that for the fourth quarter ended December 31, 2014, adjusted income from continuing operations grew to $158 million, or $1.08 per diluted share, compared to $151 million, or $1.03 per diluted share, for 2013.
For the fourth quarter of 2014, reported income from continuing operations was $185 million, or $1.26 per diluted share. Income from continuing operations in the fourth quarter of 2014 benefited from the favorable resolution of tax contingencies of $44 million, or $0.30 per diluted share. This benefit was partially offset by $17 million, or $0.12 per diluted share, of charges primarily related to restructuring and integration costs and ongoing efforts to drive operational excellence. In the fourth quarter of 2013, reported income from continuing operations was $143 million, or $0.97 per diluted share.
Revenues from continuing operations were $1.9 billion for the fourth quarter of 2014, 7.2% higher than the prior year. Organic revenues from continuing operations increased for the fourth quarter by 0.6% compared to the prior year. Diagnostic information services revenues increased 7.1% compared to a year ago; volume, measured by the number of requisitions, increased 8.8% versus a year ago; and revenue per requisition was 1.5% lower than a year ago. Excluding acquisitions, revenue per requisition for diagnostic information services was essentially unchanged from a year ago.
For the fourth quarter of 2014, adjusted operating income from continuing operations grew modestly to $283 million, or 15.0% of revenues, compared to $282 million, or 16.1% of revenues, for the fourth quarter of 2013. For the fourth quarter of 2014, reported operating income from continuing operations was $257 million, or 13.7% of revenues, compared to $270 million, or 15.3% of revenues in the fourth quarter of 2013. Cash provided by operations was $303 million in the fourth quarter of 2014.
"We ended 2014 strong, and in the fourth quarter generated growth in revenues and EPS," said Steve Rusckowski, President and CEO. "The 2015 outlook we are providing today is based on our expectations for strengthening operational performance and an improving business environment. Further, based on our ability to continue to generate strong cash flow, today we are announcing the fourth increase in our dividend since 2011."
Full Year 2014 Performance
Revenues from continuing operations were $7.4 billion for the full year 2014, an increase of 4% compared to the prior year. Adjusted income from continuing operations was $598 million, or $4.10 per diluted share, compared to $612 million, or $4.00 per diluted share, in 2013.
Reported income from continuing operations for the full year 2014 was $551 million, or $3.78 per diluted share. In 2013, reported income from continuing operations was $814 million, or $5.31 per diluted share, including a gain of approximately $300 million on the sale of ibrutinib royalty rights.
Adjusted operating income from continuing operations for the full year 2014 was $1.1 billion, or 15.0% of revenues, compared to $1.2 billion, or 16.2% of revenues, for 2013. Reported operating income from continuing operations was $983 million, or 13.2% of revenues, compared to $1.5 billion, or 20.6% of revenues, in 2013. Cash from operations was $938 million for the full year 2014. Capital expenditures for 2014 were $308 million.
Dividend Increased
Quest Diagnostics' Board of Directors authorized a 15% increase in its quarterly dividend from $0.33 to $0.38 per share, or $1.52 per share annually, payable on April 22, 2015, to shareholders of record of Quest Diagnostics common stock on April 8, 2015.
Outlook for Full Year 2015
At its November 5, 2014 Investor Day the company indicated it would begin to present adjusted diluted EPS excluding amortization expense, which the company believes provides investors with better insight into its underlying operating performance. As a result, the company's presentation of 2015 adjusted diluted EPS guidance described below excludes the impact of special items and amortization expense. For the full year 2014, adjusted diluted EPS excluding amortization expense was $4.50.
For 2015, the company estimates results from continuing operations, before special items as follows:
-- Revenues to increase approximately 2% to 3%, compared to 2014;
-- Adjusted diluted EPS excluding amortization expense to be between $4.70
and $4.85;
-- 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, for the purpose of earnings the term "adjusted" refers to the operating performance measures that exclude the gain on sale of ibrutinib royalty rights, restructuring and integration charges, favorable resolution of tax contingencies, loss on sale of the Enterix business and other items. For 2015 guidance and the presentation of 2014 full year results, adjusted diluted EPS excluding amortization expense represents the Company's results before the impact of special items and amortization expense. 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 operating performance 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 866-498-3465 for domestic callers or 203-369-1791 for international callers. Telephone replays will be available from approximately 10:30 a.m. Eastern Time today until midnight Eastern Time on March 1, 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 is the world's leading provider of diagnostic information services needed to make better healthcare decisions. The company offers the broadest access to diagnostic testing services through its network of laboratories and patient service centers, and provides interpretive consultation through its extensive medical and scientific staff. Quest Diagnostics is a pioneer in developing innovative diagnostic tests and advanced healthcare information technology solutions that help improve patient care. Additional company information is available at 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.
Contacts: Dan Haemmerle (investors) at 973-520-2900 and Dennis Moynihan (media) at 973-520-2800
TABLES FOLLOW
Quest Diagnostics Incorporated and Subsidiaries
Consolidated Statements of Operations
For the Three and Twelve Months Ended December 31, 2014 and 2013
(in millions, except per share data)
(unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
------------ ------------
2014 2013 2014 2013
---- ---- ---- ----
Net revenues $1,883 $1,756 $7,435 $7,146
Operating costs and expenses:
Cost of services 1,184 1,051 4,637 4,326
Selling, general and administrative 427 415 1,728 1,704
Amortization of intangible assets 23 20 94 79
Gain on sale of royalty rights - - - (474)
Other operating (income) expense, net (8) - (7) 36
--- --- --- ---
Total operating costs and expenses 1,626 1,486 6,452 5,671
----- ----- ----- -----
Operating income 257 270 983 1,475
Other income (expense):
Interest expense, net (42) (39) (164) (159)
Equity in earnings of equity method investees 7 6 26 24
Other income, net 1 1 4 8
Total non-operating expenses, net (34) (32) (134) (127)
--- --- ---- ----
Income from continuing operations before taxes 223 238 849 1,348
Income tax expense 28 87 262 500
--- --- --- ---
Income from continuing operations 195 151 587 848
Income (loss) from discontinued operations, net of taxes 5 - 5 35
--- --- --- ---
Net income 200 151 592 883
Less: Net income attributable to noncontrolling interests 10 8 36 34
Net income attributable to Quest Diagnostics $190 $143 $556 $849
---- ---- ---- ----
Amounts attributable to Quest Diagnostics' common stockholders:
Income from continuing operations $185 $143 $551 $814
Income (loss) from discontinued operations, net of taxes 5 - 5 35
Net income $190 $143 $556 $849
---- ---- ---- ----
Earnings per share attributable to Quest Diagnostics' common stockholders - basic:
Income from continuing operations $1.27 $0.98 $3.80 $5.35
Income (loss) from discontinued operations 0.03 (0.01) 0.03 0.23
Net income $1.30 $0.97 $3.83 $5.58
----- ----- ----- -----
Earnings per share attributable to Quest Diagnostics' common stockholders - diluted:
Income from continuing operations $1.26 $0.97 $3.78 $5.31
Income (loss) from discontinued operations 0.03 - 0.03 0.23
Net income $1.29 $0.97 $3.81 $5.54
----- ----- ----- -----
Weighted average common shares outstanding:
Basic 145 146 145 152
Diluted 146 146 145 153
Quest Diagnostics Incorporated and Subsidiaries
Consolidated Balance Sheets
December 31, 2014 and 2013
(in millions, except per share data)
(unaudited)
December 31, December 31,
2014 2013
------------- -------------
Assets
------
Current assets:
Cash and
cash
equivalents $192 $187
Accounts
receivable,
net 932 852
Inventories 110 91
Deferred
income
taxes 169 148
Prepaid
expenses
and
other
current
assets 200 105
Total
current
assets 1,603 1,383
Property,
plant and
equipment,
net 933 805
Goodwill 6,032 5,649
Intangible
assets,
net 1,071 896
Other
assets 238 215
Total
assets $9,877 $8,948
------ ------
Liabilities and
Stockholders' Equity
---------------------
Current liabilities:
Accounts
payable
and
accrued
expenses $1,191 $920
Current
portion
of long-
term
debt 518 212
Total
current
liabilities 1,709 1,132
Long-
term
debt 3,244 3,120
Other
liabilities 594 723
Stockholders' equity:
Quest Diagnostics
stockholders'
equity:
Common
stock, December and 2013
par 31, 2014
value and
$0.01 2013;
per 215
share; shares
600 issued
shares at both
authorized December
at both 2 2
Additional
paid-in
capital 2,418 2,379
Retained
earnings 5,723 5,358
Accumulated
other
comprehensive
loss (27) (8)
Treasury
stock,
at cost;
71
shares
at both
December
31, 2014
and 2013 (3,815) (3,783)
------ ------
Total
Quest
Diagnostics
stockholders'
equity 4,301 3,948
Noncontrolling
interests 29 25
--- ---
Total
stockholders'
equity 4,330 3,973
Total
liabilities
and
stockholders'
equity $9,877 $8,948
------ ------
Quest Diagnostics Incorporated and Subsidiaries
Consolidated Statements of Cash Flows
For the Twelve Months Ended December 31, 2014 and 2013
(in millions)
(unaudited)
Twelve Months Ended
December 31,
------------
2014 2013
---- ----
Cash flows from operating
activities:
Net income $592 $883
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation and
amortization 314 283
Provision for
doubtful
accounts 296 270
Deferred income
tax provision 23 19
Stock-based
compensation
expense 51 28
Excess tax
benefits from
stock-based
compensation
arrangements - (4)
Gain on sale of
royalty rights - (474)
Asset impairment
and loss on
sale of
businesses, net - 17
Other, net (12) 2
Changes in operating
assets and liabilities:
Accounts
receivable (312) (247)
Accounts payable
and accrued
expenses 68 (21)
Income taxes
payable (84) (93)
Other assets and
liabilities,
net 2 (11)
Net cash
provided by
operating
activities 938 652
--- ---
Cash flows from investing
activities:
Business
acquisitions,
net of cash
acquired (728) (213)
Proceeds from
sale of
businesses - 296
Proceeds from
sale of royalty
rights - 474
Capital
expenditures (308) (231)
Decrease in
investments and
other assets 11 2
Net cash (used
in) provided by
investing
activities (1,025) 328
------ ---
Cash flows from financing
activities:
Proceeds from
borrowings 2,018 896
Repayments of
debt (1,647) (900)
Purchases of
treasury stock (132) (1,037)
Exercise of
stock options 78 138
Excess tax
benefits from
stock-based
compensation
arrangements - 4
Dividends paid (187) (185)
Distributions to
noncontrolling
interests (31) (32)
Other financing
activities, net (7) 10
Net cash
provided by
(used in)
financing
activities 92 (1,106)
--- ------
Net change in
cash and cash
equivalents 5 (126)
Change in cash
and cash
equivalents
included in
assets held for
sale - 17
Cash and cash
equivalents,
beginning of
period 187 296
--- ---
Cash and cash
equivalents,
end of period $192 $187
---- ----
Cash paid during the
period for:
Interest $170 $167
Income taxes $327 $568
Notes to Financial Tables
1) The computation of basic
and diluted earnings per
common share is as follows:
Three Months Ended Twelve Months Ended
December 31, December 31,
------------ ------------
2014 2013 2014 2013
---- ---- ---- ----
(in millions, except per share data)
Amounts attributable to Quest Diagnostics' common stockholders:
Income from continuing operations $185 $143 $551 $814
Income (loss) from discontinued operations, net of taxes 5 - 5 35
Net income available to common stockholders $190 $143 $556 $849
---- ---- ---- ----
Income from continuing operations $185 $143 $551 $814
Less: Earnings allocated to participating securities - 1 2 3
Earnings available to Quest Diagnostics' common stockholders - basic and diluted $185 $142 $549 $811
---- ---- ---- ----
Weighted average common shares outstanding - basic 145 146 145 152
Effect of dilutive securities:
Stock options and performance share units 1 - - 1
Weighted average common shares outstanding - diluted 146 146 145 153
--- --- --- ---
Earnings per share attributable to Quest Diagnostics' common stockholders - basic:
Income from continuing operations $1.27 $0.98 $3.80 $5.35
Income (loss) from discontinued operations 0.03 (0.01) 0.03 0.23
Net income $1.30 $0.97 $3.83 $5.58
----- ----- ----- -----
Earnings per share attributable to Quest Diagnostics' common stockholders - diluted:
Income from continuing operations $1.26 $0.97 $3.78 $5.31
Income (loss) from discontinued operations 0.03 - 0.03 0.23
Net income $1.29 $0.97 $3.81 $5.54
----- ----- ----- -----
Earnings per common share are
computed independently for each
quarterly period. Therefore,
the sum of quarterly earnings
per common share may not equal
earnings per common share for
the twelve months ended December
31, 2014 and 2013.
2) Adjusted amounts for
operating income, income from
continuing operations
attributable to Quest
Diagnostics' stockholders, and
diluted EPS represent the
Company's results before the
impact of the gain on sale of
ibrutinib royalty rights,
restructuring and integration
charges, favorable resolution of
tax contingencies, loss on sale
of the Enterix business and
other. Adjusted diluted EPS
excluding amortization expense
represents the Company's results
before the impact of special
items and amortization expense.
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 tables reconcile
reported results to adjusted
results:
Three Months Ended Twelve Months Ended
December 31, December 31,
------------ ------------
2014 2013 2014 2013
---- ---- ---- ----
(dollars in millions, except per share data)
Adjusted operating income:
--------------------------
Operating income $257 $270 $983 $1,475
Gain on sale of ibrutinib royalty rights (a) - - - (474)
Restructuring and integration charges (b) 30 12 121 115
Loss on sale of Enterix - - - 40
Other (c) (4) - 15 -
Adjusted operating income $283 $282 $1,119 $1,156
---- ---- ------ ------
Adjusted operating income as a percentage of net revenues:
----------------------------------------------------------
Operating income as a percentage of net revenues 13.7% 15.3% 13.2% 20.6%
Gain on sale of ibrutinib royalty rights (a) - - - (6.6)
Restructuring and integration charges (b) 1.5 0.8 1.6 1.6
Loss on sale of Enterix - - - 0.6
Other (c) (0.2) - 0.2 -
Adjusted operating income as a percentage of net revenues 15.0% 16.1% 15.0% 16.2%
---- ---- ---- ----
Adjusted income from continuing operations:
-------------------------------------------
Income from continuing operations attributable to Quest Diagnostics'
stockholders $185 $143 $551 $814
Gain on sale of ibrutinib royalty rights (d) - - - (298)
Restructuring and integration charges (d) 18 8 77 71
Favorable resolution of tax contingencies (44) - (44) -
Loss on sale of Enterix (d) - - - 25
Other (d) (1) - 14 -
Adjusted income from continuing operations $158 $151 $598 $612
---- ---- ---- ----
Adjusted diluted EPS:
---------------------
Diluted earnings per common share $1.26 $0.97 $3.78 $5.31
Gain on sale of ibrutinib royalty rights (a) - - - (1.95)
Restructuring and integration charges (b) 0.13 0.06 0.53 0.47
Favorable resolution of tax contingencies (0.30) - (0.30) -
Loss on sale of Enterix - - - 0.17
Other (c) (0.01) - 0.09 -
Adjusted diluted EPS 1.08 1.03 4.10 4.00
Amortization expense (e) 0.10 0.08 0.40 0.32
Adjusted diluted EPS excluding amortization expense $1.18 $1.11 $4.50 $4.32
----- ----- ----- -----
(a) Represents the gain, net of
transaction costs, associated
with the sale of the Company's
ibrutinib royalty rights.
(b) Represents costs primarily
associated with workforce
reductions and professional
fees incurred in connection
with further restructuring and
integrating our business.
(c) For the three months ended
December 31, 2014, represents a
gain of $9 million associated
with a decrease in the fair
value of the contingent
consideration accrual
associated with the Summit
Health acquisition, partially
offset by costs incurred
related to legal matters. For
the twelve months ended
December 31, 2014, represents
costs incurred related to legal
matters, partially offset by a
gain of $9 million associated
with a decrease in the fair
value of the contingent
consideration accrual
associated with the Summit
Health acquisition.
(d) For the gain on sale of
ibrutinib royalty rights,
income tax expense was
calculated using a combined
federal and state rate of
37.1%. For the restructuring
and integration charges and
other, income tax impacts,
where recorded, were calculated
using a combined federal and
state rate of 38.2%. For the
loss on sale of Enterix, income
tax benefits were calculated
using combined federal and
state rates of 35.9%.
(e) Represents the impact of
amortization expense, net of
the estimated tax benefit, on
diluted EPS. The income tax
benefit was calculated using a
combined federal and state rate
of 38.2%.
3) For the twelve months
ended December 31, 2013, gain on
sale of royalty rights represents
the sale of the Company's
ibrutinib royalty rights for $474
million, net of transaction costs.
For the twelve months ended
December 31, 2013, income tax
expense includes $176 million
associated with the gain on sale
of royalty rights.
4) Other operating (income)
expense, net includes
miscellaneous income and expense
items related to operating
activities. For the three and
twelve months ended December 31,
2014, other operating (income)
expense, net includes a gain of $9
million associated with a decrease
in the fair value of the
contingent consideration accrual
associated with the Summit Health
acquisition. For the twelve
months ended December 31, 2013,
other operating (income) expense,
net includes the pre-tax loss on
sale of Enterix of $40 million.
In addition, other operating
(income) expense, net, for the
twelve months ended December 31,
2013, includes a gain of $6
million resulting from
consideration associated with
certain non-compete agreements.
5) Other 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 December 31, 2014 and
2013, other income, net includes
gains of $2 million and $4
million, respectively, associated
with investments held in trusts
pursuant to our supplemental
deferred compensation plans.
Other income, net for the twelve
months ended December 31, 2014 and
2013, includes gains of $4 million
and $10 million, respectively,
associated with investments held
in trusts pursuant to our
supplemental deferred compensation
plans.
6) On April 9, 2013, the
Company completed the sale of its
HemoCue diagnostic products
business. As a result, income
(loss) from discontinued
operations, net of taxes, for the
twelve months ended December 31,
2013, includes a gain of $14
million (including foreign
currency translation adjustments,
partially offset by income tax
expense and transaction costs)
associated with the sale of
HemoCue. In addition, income
(loss) from discontinued
operations, net of taxes for the
twelve months ended December 31,
2013, includes discrete tax
benefits of $20 million associated
with favorable resolution of
certain tax contingencies related
to our NID business, which was
wound down in 2006.
7) For the three months ended
December 31, 2014, the Company
repurchased 0.8 million shares of
its common stock at an average
price of $64.44 per share for a
total of $50 million. For the
twelve months ended December 31,
2014, the Company repurchased 2.2
million shares of its common stock
at an average price of $59.49 per
share for a total of $132 million.
At December 31, 2014, $696
million remained available under
the Company's share repurchase
authorizations.
8) 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. This
measure is presented because
management believes it is a useful
adjunct to the corresponding
amount determined under accounting
principles generally accepted in
the United States since it is
meaningful to evaluate the
Company's ongoing operating
performance. Adjusted diluted EPS
excluding amortization expense is
not a measure of financial
performance under accounting
principles generally accepted in
the United States and should not
be considered as an alternative 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 to the corresponding amount
determined under accounting principles generally accepted in the
United States.
Low High
--- ----
Diluted
earnings
per
common
share $4.34 $4.49
Amortization
expense,
net
of
tax
(a) 0.36 0.36
---- ----
Adjusted
diluted
EPS
excluding
amortization
expense $4.70 $4.85
----- -----
(a) Represents the impact of
amortization expense, estimated
at approximately $85 million or
$52 million, net of an estimated
tax benefit, on diluted earnings
per common share.
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SOURCE Quest Diagnostics Incorporated
