Quest Diagnostics announced today financial results for the fourth quarter and full year ended December 31, 2017.
Quest Diagnostics Reports Fourth Quarter And Full Year 2017 Financial Results; Provides Guidance For Full Year 2018; Increases Dividend 11% To $0.50 Per Quarter
|
SECAUCUS, N.J., Feb. 1, 2018 /PRNewswire/ -- Quest Diagnostics Inc. (NYSE: DGX), the world's leading provider of diagnostic information services, announced today financial results for the fourth quarter and full year ended December 31, 2017. "We delivered a strong fourth quarter, which included 4% revenue growth and 7% adjusted EPS growth," said Steve Rusckowski, Chairman, CEO and President. "In 2017 we made great progress accelerating growth and driving operational excellence. We announced seven acquisitions and exited the year exceeding our $1.3 billion goal of cumulative run rate Invigorate savings. "In 2018 our guidance for the full year is aligned with our long term outlook even before the meaningful benefit of tax reform. We expect to deliver continued acceleration of top-line growth of 4-5% and more than 20% adjusted earnings growth, driven in part by solid mid to high single digit earnings growth from operations." Mr. Rusckowski continued, "Quest is a beneficiary of recent tax legislation, which enables us to further grow earnings per share and invest in our business and our people. The benefits of tax reform will also help offset new Medicare reimbursement reductions under PAMA, which represent a headwind to our company and industry."
Three Months Ended December 31, Twelve Months Ended December 31,
2017 2016 Change 2017 2016 Change
---- ---- ------ ---- ---- ------
(dollars in millions, except per share data)
Reported:
---------
Net revenues (a) (c) $1,936 $1,861 4.1% $7,709 $7,515 2.6%
DIS revenues $1,853 $1,773 4.5% $7,370 $7,138 3.3%
Revenue per requisition 2.1% 1.0%
Requisition volume 2.4% 2.3%
Operating income (b) (c) $269 $276 (2.5)% $1,165 $1,277 (8.8)%
Operating income as a percentage of net 13.9% 14.8% (90) bps 15.1% 17.0% (190) bps
revenues (c)
Net income attributable to Quest Diagnostics (c) (d) $254 $155 64.0% $772 $645 19.8%
Diluted earnings per share (c) (d) $1.82 $1.09 67.0% $5.50 $4.51 22.0%
Cash provided by operations (e) $323 $304 6.0% $1,175 $1,069 9.9%
Capital expenditures $82 $128 (35.6)% $252 $293 (14.0)%
Adjusted:
---------
Revenues on an equivalent basis $1,936 $1,861 4.1% $7,709 $7,489 2.9%
Operating income (f) $317 $305 4.0% $1,282 $1,230 4.2%
Operating income as a percentage of net revenues 16.4% 16.4% 0 bps 16.6% 16.4% 20 bps
Net income attributable to Quest Diagnostics (d) $180 $173 4.3% $740 $682 8.6%
Diluted earnings per share excluding amortization (d) $1.40 $1.31 6.9% $5.67 $5.15 10.1%
(a) For the twelve months ended
December 31, 2016, net revenues
include $26 million related to
the Focus Diagnostics products
business, which was sold on May
13, 2016.
(b) For the twelve months ended
December 31, 2016, reported
operating income includes a
gain on escrow recovery
associated with an acquisition
and $129 million related to the
Focus Diagnostics products
business and the gain from sale
of the Focus Diagnostics
products business on May 13,
2016.
(c) 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.
(d) For 2017 and 2016, ETB impacted
income tax expense and diluted
EPS as follows:
First Second Third Fourth Total
Quarter Quarter Quarter Quarter Year
------- ------- ------- ------- ----
(dollars in millions, except per share data)
2017
----
Income tax benefit $16 $13 $7 $1 $37
Diluted EPS $0.11 $0.10 $0.04 $0.02 $0.27
2016
----
Income tax benefit $2 $2 $3 $2 $9
Diluted EPS $0.01 $0.02 $0.02 $0.01 $0.06
(e) For details impacting the year-
over-year comparisons related
to cash provided by operations,
see note 6 of the financial
tables attached below.
(f) For the twelve months ended
December 31, 2016, adjusted
operating income includes $12
million related to the Focus
Diagnostics products business.
Dividend Increased Quest Diagnostics' Board of Directors authorized an 11% increase in its quarterly dividend from $0.45 to $0.50 per share, or $2.00 per share annually, payable on April 18, 2018 to shareholders of record of Quest Diagnostics common stock on April 4, 2018. This dividend increase is the company's seventh since 2011. Tax Reform Benefit In 2018 the company expects to realize approximately $180 million in tax savings on an adjusted basis. Of this amount, the company plans to reinvest roughly $75 million before tax back into the business and its employees, resulting in a benefit of approximately $120 million to net earnings. Investment initiatives include:
Guidance for Full Year 2018 Beginning in 2018, the company will change how it presents adjusted diluted EPS excluding amortization expense to additionally exclude ETB. The company believes this presentation provides investors with additional insight into the company's operational performance as well as the impact of TCJA. As a result, the company's presentation of 2018 adjusted diluted EPS guidance described below excludes the impact of special items, amortization expense and ETB. For the full year 2017, adjusted diluted EPS excluding amortization expense and ETB was $5.40. The company estimates full year 2018 results as follows:
Low High
--- ----
Revenues (a) $7.70 billion $7.77 billion
Revenue increase (a) 4% 5%
Reported diluted EPS $5.42 $5.62
Adjusted diluted EPS excluding
amortization expense and ETB $6.50 $6.70
Cash provided by operations Approximately $1.3
billion
Capital expenditures $350 million $400 million
(a) The outlook for 4% to 5% 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
are effective January 1, 2018.
Full year 2017 revenues adjusted to
reflect the new rules were $7,402
million. Under the new rules, the
company will report uncollectible
balances associated with patient
responsibility as a reduction in
net revenues; historically these
amounts were classified as bad debt
expense within selling, general and
administrative expenses. We do not
expect the new rules to impact net
income attributable to Quest
Diagnostics or diluted EPS.
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 gain on sale of the Focus Diagnostics products business, the effect of changes in tax law on our deferred tax assets (liabilities) and reserves, the 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 diluted EPS before the impact of special items (described above) and amortization expense; (iii) the term "adjusted diluted EPS excluding amortization expense and ETB" represents the company's diluted EPS before the impact of special items (described above), amortization expense, and ETB, (iv) 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. 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. 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 be accessed in listen-only mode by dialing 773-756-0467, 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 888-667-5784 for domestic callers or 402-220-6427 for international callers. Telephone replays will be available from approximately 10:30 a.m. Eastern Time on February 1, 2018 until midnight Eastern Time on February 15, 2018. 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. ADDITIONAL TABLES FOLLOW
Quest Diagnostics Incorporated and Subsidiaries
Consolidated Statements of Operations
For the Three and Twelve Months Ended December 31, 2017 and 2016
(in millions, except per share data)
(unaudited)
Three Months Ended December 31, Twelve Months Ended December 31,
2017 2016 2017 2016
---- ---- ---- ----
Net revenues $1,936 $1,861 $7,709 $7,515
Operating costs and expenses and other operating income:
Cost of services 1,194 1,160 4,719 4,616
Selling, general and administrative 453 400 1,750 1,681
Amortization of intangible assets 20 18 74 72
Gain on disposition of business - - - (118)
Other operating expense (income), net - 7 1 (13)
--- --- --- ---
Total operating costs and expenses, net 1,667 1,585 6,544 6,238
----- ----- ----- -----
Operating income 269 276 1,165 1,277
Other income (expense):
Interest expense, net (39) (36) (151) (143)
Other income (expense), net 4 2 16 (48)
Total non-operating expenses, net (35) (34) (135) (191)
--- --- ---- ----
Income before income taxes and equity in earnings of equity method investees 234 242 1,030 1,086
Income tax benefit (expense) 23 (84) (241) (429)
Equity in earnings of equity method investees, net of taxes 10 9 35 39
--- --- --- ---
Net income 267 167 824 696
Less: Net income attributable to noncontrolling interests 13 12 52 51
Net income attributable to Quest Diagnostics $254 $155 $772 $645
---- ---- ---- ----
Earnings per share attributable to Quest Diagnostics' common stockholders:
Basic $1.86 $1.11 $5.63 $4.58
----- ----- ----- -----
Diluted $1.82 $1.09 $5.50 $4.51
----- ----- ----- -----
Weighted average common shares outstanding:
Basic 136 138 137 140
Diluted 139 141 140 142
Quest Diagnostics Incorporated and Subsidiaries
Consolidated Balance Sheets
December 31, 2017 and 2016
(in millions, except per share data)
(unaudited)
December 31, December 31,
2017 2016
------------- -------------
Assets
------
Current assets:
Cash
and
cash
equivalents $137 $359
Accounts
receivable,
net 924 926
Inventories 95 82
Prepaid
expenses
and
other
current
assets 150 155
Assets
held
for
sale - 9
--- ---
Total
current
assets 1,306 1,531
Property,
plant
and
equipment,
net 1,145 1,029
Goodwill 6,335 6,000
Intangible
assets,
net 1,119 949
Investment
in
equity
method
investees 462 443
Other
assets 136 148
Total
assets $10,503 $10,100
------- -------
Liabilities and
Stockholders' Equity
---------------------
Current liabilities:
Accounts
payable
and
accrued
expenses $1,021 $975
Current
portion
of
long-
term
debt 36 6
Total
current
liabilities 1,057 981
Long-
term
debt 3,748 3,728
Other
liabilities 663 654
Redeemable
noncontrolling
interest 80 77
Stockholders' equity:
Quest Diagnostics
stockholders' equity:
Common
stock, both both
par December December
value 31, 31,
$0.01 2017 2017
per and and
share; 2016; 2016
600 216
shares shares
authorized issued
as of 2 2
Additional
paid-
in
capital 2,612 2,545
Retained
earnings 7,138 6,613
Accumulated
other
comprehensive
loss (48) (72)
Treasury
stock, 2017
at and
cost; 2016,
81 respectively
shares
and 79
shares
as of
December
31, (4,783) (4,460)
------ ------
Total
Quest
Diagnostics
stockholders'
equity 4,921 4,628
Noncontrolling
interests 34 32
--- ---
Total
stockholders'
equity 4,955 4,660
Total
liabilities
and
stockholders'
equity $10,503 $10,100
------- -------
Quest Diagnostics Incorporated and Subsidiaries
Consolidated Statements of Cash Flows
For the Twelve Months Ended December 31, 2017 and 2016
(in millions)
(unaudited)
Twelve Months Ended
December 31,
2017 2016
---- ----
Cash flows from operating
activities:
Net income $824 $696
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and
amortization 270 249
Provision for
doubtful
accounts 315 308
Deferred income
tax provision 9 37
Stock-based
compensation
expense 79 69
Gain on
disposition of
business - (118)
Other, net (6) (6)
Changes in operating assets
and liabilities:
Accounts
receivable (298) (343)
Accounts payable
and accrued
expenses (8) 56
Income taxes
payable 16 42
Termination of
interest rate
swap agreements - 54
Other assets and
liabilities,
net (26) 25
Net cash
provided by
operating
activities 1,175 1,069
----- -----
Cash flows from investing
activities:
Business
acquisitions,
net of cash
acquired (581) (139)
Proceeds from
disposition of
business 1 270
Escrow proceeds
associated with
disposition of
business 25 -
Capital
expenditures (252) (293)
Decrease in
investments and
other assets 2 10
Net cash used in
investing
activities (805) (152)
---- ----
Cash flows from financing
activities:
Proceeds from
borrowings 205 1,869
Repayments of
debt (182) (1,724)
Purchases of
treasury stock (465) (590)
Exercise of
stock options 130 73
Employee payroll
tax
withholdings on
stock issued
under stock-
based
compensation
plans (23) (10)
Dividends paid (247) (223)
Distributions to
noncontrolling
interests (51) (41)
Sale of
noncontrolling
interest in
subsidiary 4 -
Payment of
deferred
business
acquisition
consideration (3) -
Other financing
activities, net 40 (45)
Net cash used in
financing
activities (592) (691)
---- ----
Net change in
cash and cash
equivalents (222) 226
Cash and cash
equivalents,
beginning of
period 359 133
--- ---
Cash and cash
equivalents,
end of period $137 $359
---- ----
Cash paid during the period
for:
Interest $159 $148
Income taxes $243 $361
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,
2017 2016 2017 2016
---- ---- ---- ----
(in millions, except per share data)
Amounts attributable to Quest Diagnostics' common stockholders:
Net income attributable to Quest Diagnostics $254 $155 $772 $645
Less: Earnings allocated to participating securities 1 - 3 3
Earnings available to Quest Diagnostics' common stockholders - basic and diluted $253 $155 $769 $642
---- ---- ---- ----
Weighted average common shares outstanding - basic 136 138 137 140
Effect of dilutive securities:
Stock options and performance share units 3 3 3 2
Weighted average common shares outstanding - diluted 139 141 140 142
--- --- --- ---
Earnings per share attributable to Quest Diagnostics' common stockholders:
Basic $1.86 $1.11 $5.63 $4.58
----- ----- ----- -----
Diluted $1.82 $1.09 $5.50 $4.51
----- ----- ----- -----
2) The following tables reconcile reported results to adjusted results:
Three Months Ended Twelve Months Ended
December 31, December 31,
2017 2016 2017 2016
---- ---- ---- ----
(dollars in millions, except per share data)
Adjusted operating income:
--------------------------
Operating income $269 $276 $1,165 $1,277
Gain on disposition of business (a) - - - (118)
Restructuring and integration charges (b) 42 23 105 78
Other (c) 6 6 12 (7)
Adjusted operating income $317 $305 $1,282 $1,230
---- ---- ------ ------
Adjusted operating income as a percentage of net revenues:
----------------------------------------------------------
Operating income as a percentage of net revenues 13.9% 14.8 % 15.1% 17.0%
Gain on disposition of business (a) - - - (1.5)
Restructuring and integration charges (b) 2.2 1.2 1.4 1.0
Other (c) 0.3 0.4 0.1 (0.1)
Adjusted operating income as a percentage of net revenues 16.4% 16.4 % 16.6% 16.4%
---- ---- --- ---- ----
Adjusted net income:
--------------------
Net income attributable to Quest Diagnostics $254 $155 $772 $645
Gain on disposition of business (a) - - - (118)
Retirement of debt and related refinancing charges (d) - - - 48
Restructuring and integration charges (b) 42 24 106 82
Other (c) 6 6 10 -
Income tax (benefit) expense associated with the special items (e) (122) (12) (148) 25
Adjusted net income $180 $173 $740 $682
---- ---- ---- ----
Adjusted diluted EPS excluding amortization expense:
----------------------------------------------------
Diluted earnings per common share $1.82 $1.09 $5.50 $4.51
Gain on disposition of business (a) (e) - - - (0.24)
Retirement of debt and related refinancing charges (d) (e) - - - 0.21
Restructuring and integration charges (b) (e) 0.19 0.10 0.47 0.35
Certain income tax benefits (e) (0.77) - (0.77) -
Other (c) (e) 0.05 0.03 0.07 (0.06)
Amortization expense (f) 0.11 0.09 0.40 0.38
Adjusted diluted EPS excluding amortization expense 1.40 1.31 5.67 5.15
ETB (g) (0.02) (0.01) (0.27) (0.06)
----- ----- ----- -----
Adjusted diluted EPS excluding amortization expense and ETB $1.38 $1.30 $5.40 $5.09
----- ----- ----- -----
Revenue on an equivalent basis:
-------------------------------
Net revenues $1,936 $1,861 $7,709 $7,515
Excluded revenue (h) - - - (26)
---
Revenue on an equivalent basis $1,936 $1,861 $7,709 $7,489
------ ------ ------ ------
(a) For the twelve months ended
December 31, 2016, represents
the pre-tax gain on the sale
of our Focus Diagnostics
products business.
(b) For the three and twelve months
ended December 31, 2017,
represents costs primarily
associated with systems
conversions, integration and
workforce reductions incurred
in connection with further
restructuring and integrating
our business. For the three and
twelve months ended December
31, 2016, represents costs
primarily associated with
systems conversions and
integration incurred in
connection with further
restructuring and integrating
our business. The following
table summarizes the pre-tax
impact of restructuring and
integration charges on the
company's consolidated
statements of operations:
Three Months Ended Twelve Months Ended
December 31, December 31,
2017 2016 2017 2016
---- ---- ---- ----
(dollars in millions)
Cost of services $14 $15 $45 $40
Selling, general and administrative 28 7 60 37
Other operating expense, net - 1 - 1
Operating income $42 $23 $105 $78
--- --- ---- ---
Equity in earnings of equity method investees, net of taxes $ - $1 $1 $4
--- --- --- --- ---
(c) For the three months ended
December 31, 2017, primarily
represents non-cash asset
impairment charges and
incremental costs incurred as a
result of the hurricanes. For
the twelve months ended
December 31, 2017, primarily
represents non-cash asset
impairment charges associated
with an investment, non-cash
asset impairment charges and
incremental costs incurred as a
result of hurricanes and costs
incurred related to certain
legal matters, partially offset
by gain on the sale of an
interest in an equity method
investee. For the three months
ended December 31, 2016,
primarily represents non-cash
asset impairment charges. For
the twelve months ended
December 31, 2016, primarily
represents a gain on escrow
recovery associated with an
acquisition, partially offset
by costs associated with
winding down subsidiaries, non-
cash asset impairment charges
and costs incurred related to
certain legal matters. The
following table summarizes the
pre-tax impact of these other
items on the company's
consolidated statement of
operations:
Three Months Ended Twelve Months Ended
December 31, December 31,
2017 2016 2017 2016
---- ---- ---- ----
(dollars in millions)
Cost of Sales $2 $ - $5 $ -
Selling, general and administrative 4 - 7 6
Other operating expense (income), net - 6 - (13)
--- --- --- ---
Operating income $6 $6 $12 $(7)
--- --- --- ---
Other non-operating (income) expense, net $ - $ - $(2) $7
--- --- --- --- --- ---
(d) For the twelve months ended
December 31, 2016, represents
charges associated with the March
2016 cash tender offer where the
company purchased $200 million of
its 6.95% Senior Notes due July
2037 and 5.75% Senior Notes due
January 2040. The pre-tax
charges associated with the
retirement of debt and related
refinancing charges are recorded
in other income (expense), net on
the company's consolidated
statement of operations.
(e) For gain on disposition of
business, income tax expense
resulted in a combined tax rate
of 71.4%, which was significantly
in excess of the statutory rate
primarily due to a lower tax
basis in the assets sold,
specifically the goodwill
associated with the disposition.
For the retirement of debt and
related refinancing charges,
income tax benefits were
calculated such that the combined
tax rate was 38.9% for 2016. For
the restructuring and integration
charges and other items, income
tax impacts, where recorded, were
primarily calculated using
combined tax rates of 38.7% for
both 2017 and 2016. For the
three and twelve months ended
December 31, 2017, other items
also includes the impact of
recording a valuation allowance
against certain net operating
loss carryforwards in a geography
impacted by hurricanes. The
following table summarizes the
income tax (benefit) expense
associated with the special
items:
Three Months Ended Twelve Months Ended
December 31, December 31,
2017 2016 2017 2016
---- ---- ---- ----
(dollars in millions)
Gain on disposition of business $ - $ - $ - $84
Retirement of debt and related refinancing charges - - - (18)
Restructuring and integration charges (16) (9) (41) (32)
Other - (3) (1) (9)
Certain income tax benefits (1) (106) - (106) -
$(122) $(12) $(148) $25
----- ---- ----- ---
(1) -For the three and twelve months
ended December 31, 2017, certain
income tax benefits represents the
net tax benefit associated with the
TCJA. The company recorded an
estimated net income tax benefit of
$106 million associated with the
TCJA, including a deferred income tax
benefit of $115 million primarily due
to the remeasurement of net deferred
tax liabilities and reserves at the
new combined tax rate of 25.5%,
partially offset by $9 million of
current tax expense primarily due to
the mandatory repatriation toll
charge on undistributed foreign
earnings and profits.
(f) Represents the impact of amortization
expense on diluted earnings per
common share, net of the income tax
benefit. The income tax benefit was
primarily calculated using a combined
tax rate of 38.7% for both 2017 and
2016. The pre-tax amortization
expense that is excluded from the
calculation of adjusted diluted EPS
excluding amortization expense is
recorded in the company's statements
of operations as follows:
Three Months Ended Twelve Months Ended
December 31, December 31,
2017 2016 2017 2016
---- ---- ---- ----
(dollars in millions)
Amortization of intangible assets $20 $18 $74 $72
Equity in earnings of equity method investees, net of taxes 4 4 16 16
$24 $22 $90 $88
--- --- --- ---
(g) Represents the impact of ETB
recorded in income tax
expense.
(h) For the twelve months ended
December 31, 2016, excluded
revenue represents reported
revenue for the Focus
Diagnostics products
business, which was sold on
May 13, 2016.
3) Other operating expense (income), net
includes miscellaneous income and
expense items related to operating
activities. For the three months
ended December 31, 2016, other
operating expense (income), net
principally consists of non-cash
asset impairment charges. Other
operating expense (income), net for
the twelve months ended December 31,
2016, principally consists of a gain
on an escrow recovery associated
with an acquisition, partially
offset by non-cash asset impairment
charges.
4) Other income (expense), net
represents miscellaneous income and
expense items related to non-
operating activities, such as gains
and losses associated with
investments, other non-operating
assets and early retirement of debt.
For the twelve months ended
December 31, 2017, other income
(expense), net includes a $7 million
gain on the sale of an interest in
an equity method investment, which
is partially offset by non-cash
asset impairment charges associated
with certain investments of $6
million. For the twelve months
ended December 31, 2016, other
income (expense), net includes $48
million of charges on the retirement
of debt associated with the March
2016 cash tender offer and non-cash
asset impairment charges associated
with certain investments of $7
million.
5) For the three months ended December
31, 2017, the company repurchased
1.0 million shares of its common
stock for $100 million. For the
twelve months ended December 31,
2017, the company repurchased 4.6
million shares of its common stock
for $465 million. At December 31,
2017, $917 million remained
available under the company's share
repurchase authorizations.
6) For the twelve months ended December
31, 2017, net cash provided by
operations benefited from a $62
million decrease in 2017 tax
payments associated with the
realization of a deferred tax
benefit and improved operating
performance. For the twelve months
ended December 31, 2016, net cash
provided by operations included $91
million of income taxes paid
associated with the sale of Focus
Diagnostics products and $47 million
of pre-tax cash charges, or $30
million after the related cash tax
benefit, related to the retirement
of debt, which were partially offset
by $54 million of proceeds received
from the termination of interest
rate swap agreements.
7) The outlook for adjusted diluted EPS
excluding amortization expense and
ETB represents management's
estimates for the full year 2018
before the impact of special items,
amortization expense and ETB.
Further impacts to earnings related
to special items may be incurred
throughout 2018. Additionally, the
amount of ETB is dependent upon
employee exercise behavior 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 and ETB to the
corresponding amount determined
under GAAP:
Low High
--- ----
Diluted earnings per common share $5.42 $5.62
Restructuring and integration
charges (a) 0.59 0.59
Amortization expense (b) 0.53 0.53
ETB (c) (0.04) (0.04)
----- -----
Adjusted diluted EPS excluding
amortization expense and ETB $6.50 $6.70
----- -----
(a) Represents estimated full year
pre-tax charges of $110
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 $82
Amortization expense included in
equity in earnings of equity
method investees, net of taxes 16
Total pre-tax amortization
expense $98
---
Total amortization expense, net
of an estimated tax benefit $73
---
(c) Represents the estimated
impact of ETB.
8) The outlook for 4% to 5% 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
are 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 table reconciles our
2017 net revenues determined under
current 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, June 30, September 30, December 31, December 31,
2017 2017 2017 2017 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 (82) (79) (75) (71) (307)
recognition rules
2017 Revenue on an adjusted basis $1,817 $1,864 $1,856 $1,865 $7,402
------ ------ ------ ------ ------
2018 Revenue outlook: Low High
--------------------- --- ----
2017 Revenue on an adjusted basis $7,402 $7,402
2018 Equivalent revenue growth 4% 5%
2018 Revenue outlook $7,698 $7,772
------ ------
View original content with multimedia:http://www.prnewswire.com/news-releases/quest-diagnostics-reports-fourth-quarter-and-full-year-2017-financial-results-provides-guidance-for-full-year-2018-increases-dividend-11-to-050-per-quarter-300591487.html SOURCE Quest Diagnostics |
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Company Codes: NYSE:DGX |
