MADISON, N.J., April 20, 2017 /PRNewswire/ -- Quest Diagnostics Incorporated (NYSE: DGX), the world's leading provider of diagnostic information services, announced today financial results for the first quarter ended March 31, 2017 and raised its full year 2017 diluted EPS outlook.
"We delivered strong growth across the board in the first quarter with gains in revenues, EPS, operating income, margins and operating cash flow," said Steve Rusckowski, Chairman, President and CEO. "Growth in the quarter was driven by expanding relationships with hospital health systems. Our agreement with PeaceHealth in the Pacific Northwest announced in the first quarter will further bolster growth later in the year."
Three Months Ended March 31, | ||||||||||
2017 | 2016 | Change | ||||||||
(dollars in millions, except per share data) | ||||||||||
Reported: | ||||||||||
Net revenues (a) (b) | $ | 1,899 | $ | 1,863 | 1.9 | % | ||||
Diagnostic Information Services revenues | $ | 1,812 | $ | 1,756 | 3.2 | % | ||||
Revenue per requisition | (0.2) | % | ||||||||
Requisition volume | 3.5 | % | ||||||||
Operating income (a) (b) | $ | 279 | $ | 257 | 8.7 | % | ||||
Operating income as a percentage of net revenues (b) | 14.7 | % | 13.8 | % | 90 bps | |||||
Net income attributable to Quest Diagnostics (b) (c) | $ | 164 | $ | 103 | 58.8 | % | ||||
Diluted EPS (b) (c) | $ | 1.16 | $ | 0.71 | 63.4 | % | ||||
Cash provided by operations (d) | $ | 196 | $ | 153 | 28.2 | % | ||||
Capital expenditures | $ | 42 | $ | 47 | (11.6) | % | ||||
Adjusted: | ||||||||||
Revenues on an equivalent basis | $ | 1,899 | $ | 1,845 | 3.0 | % | ||||
Operating income (a) | $ | 297 | $ | 281 | 5.7 | % | ||||
Operating income as a percentage of net revenues | 15.6 | % | 15.1 | % | 50 bps | |||||
Net income attributable to Quest Diagnostics (c) | $ | 175 | $ | 148 | 17.7 | % | ||||
Diluted EPS excluding amortization (c) | $ | 1.33 | $ | 1.13 | 17.7 | % |
(a) | For the three months ended March 31, 2016, net revenues and operating income include $18 million and $8 million, respectively, related to the Focus Diagnostics products business, which was sold on May 13, 2016. |
(b) | For further details impacting the year-over-year comparisons related to net revenues, operating income, operating income as a percentage of net revenues, net income attributable to Quest Diagnostics, and diluted EPS, see note 2 of the financial tables attached below. |
(c) | Excess tax benefit associated with stock-based compensation arrangements impacted income tax expense and diluted EPS as follows: |
Three Months Ended | |||||||
2017 | 2016 | ||||||
(dollars in millions, except | |||||||
Income tax benefit | $ | 16 | $ | 2 | |||
Diluted EPS | $ | 0.11 | $ | 0.01 |
(d) | For details impacting the year-over-year comparisons related to cash provided by operations, see note 4 of the financial tables attached below. |
Updated Outlook for Full Year 2017
The company revises diluted EPS estimates for full year 2017 results, reflecting higher than expected excess tax benefit related to stock-based compensation in the first quarter of 2017, and reaffirms the balance of its 2017 outlook, as follows:
Current Outlook | Previous Outlook | ||||||
Low | High | Low | High | ||||
Revenues | $7.64 billion | $7.72 billion | $7.64 billion | $7.72 billion | |||
Revenue increase on a reported basis | 1.7% | 2.7% | 1.7% | 2.7% | |||
Revenue increase on an equivalent basis (e) | 2% | 3% | 2% | 3% | |||
Reported diluted EPS | $4.73 | $4.88 | $4.65 | $4.80 | |||
Adjusted diluted EPS excluding amortization | $5.45 | $5.60 | $5.37 | $5.52 | |||
Cash provided by operations | Approximately $1.1 billion | Approximately $1.1 billion | |||||
Capital expenditures | $250 million | $300 million | $250 million | $300 million |
(e) | Reported revenues for full year 2016 were $7.52 billion. Revenues on an equivalent basis for full year 2016 were $7.49 billion which represents the company's reported revenues, excluding all Focus Diagnostics products revenue. |
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 the retirement of debt and related refinancing charges, restructuring and integration charges, and other items; (ii) the term "adjusted diluted EPS excluding amortization" represents the company's diluted EPS before the impact of special items and amortization; (iii) reference to "revenues on an equivalent basis" when comparing 2017 to 2016 represents 2016 reported revenues excluding all Focus Diagnostics products revenues.
Non-GAAP "adjusted" measures are presented because management believes those measures are useful adjuncts to GAAP results.
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