MADISON, N.J., Oct. 22, 2015 /PRNewswire/ -- Quest Diagnostics Incorporated (NYSE: DGX), the world's leading provider of diagnostic information services, announced today that for the quarter ended September 30, 2015, adjusted net income was $172 million compared to $161 million for 2014. Adjusted diluted EPS excluding amortization was $1.28 in the third quarter of 2015, compared to $1.20 in 2014.
For the third quarter of 2015, reported net income was $342 million, or $2.35 per diluted share, compared to $129 million, or $0.88 per diluted share, in 2014. Reported net income in the third quarter of 2015 benefitted from the previously discussed gain on the contribution to Q Squared Solutions, the clinical trials joint venture with Quintiles, totaling $189 million after tax, or $1.30 per diluted share. This benefit was partially offset by net charges of $19 million after tax, or $0.13 per diluted share, primarily related to restructuring and integration costs and ongoing efforts to drive operational excellence. In the third quarter of 2014, reported net income was reduced by charges of $32 million after tax, or $0.22 per diluted share, primarily related to restructuring and integration costs associated with acquisitions and ongoing efforts to drive operational excellence.
Third quarter 2015 revenues were $1.88 billion. Revenues grew by 0.9% from the prior year on an equivalent basis, which adjusts for the clinical trials business contributed to the joint venture. On a reported basis, revenues were lower by 1.3% compared to a year ago due to the contribution of clinical trials testing business to the joint venture. Diagnostic information services revenue was flat to the prior year. Volume, measured by the number of requisitions, was lower than the prior year by 0.2%, while revenue per requisition grew by approximately 0.2% versus the prior year.
For the third quarter of 2015, adjusted operating income was $325 million, or 17.3% of revenues, compared to $304 million, or 16.0% of revenues, for 2014. Reported operating income was $631 million, or 33.6% of revenues, in 2015, compared to $256 million, or 13.4% of revenues, in 2014. Third quarter 2015 reported operating income benefitted from the $334 million pre-tax gain on the contribution to the clinical trials joint venture. Third quarter reported cash provided by operations was $212 million in 2015, compared to $271 million in 2014. The reduction from a year ago is largely attributable to a payment against certain tax reserves in the third quarter of 2015.
"We delivered another good quarter as we grew equivalent revenues by 1% and both adjusted operating income and earnings by 7%," said Steve Rusckowski, President and Chief Executive Officer. "We are pleased with the progress we're making to grow our business and we are investing in the future to capture the power of data analytics and enable precision medicine. Our new relationship with Inovalon enables us to create further value from information assets by delivering real-time insights to physicians at the point of service. We also completed our joint venture with Quintiles in July, and separately announced new companion diagnostic solutions in October for two recent FDA approved therapies for non-small cell lung cancer. We are on track to meet our expectations for the full-year 2015 and are narrowing our EPS guidance to $4.75 to $4.80."
Year to Date Performance
Revenues were $5.64 billion for the first nine months of 2015, an increase of 1.7% on a reported basis over 2014 and 2.3% on an equivalent basis. Adjusted net income was $483 million for the first nine months of 2015 and grew by 9.8% compared to $440 million in 2014. Adjusted diluted EPS excluding amortization was $3.58 for the first nine months of 2015 and grew by 7.8%, compared to $3.32 in 2014. Reported net income for the first nine months of 2015 was $521 million, or $3.58 per diluted share, compared to $366 million, or $2.51 per diluted share, in 2014. Reported net income in 2015 benefitted from the net gain on the contribution to the clinical trials joint venture by $189 million.
Adjusted operating income for the first nine months of 2015 was $915 million, or 16.2% of revenues, compared to $836 million, or 15.1% of revenues, for 2014. On a reported basis, operating income was $1.16 billion, or 20.5% of revenues, benefitting from the gain on the contribution to the clinical trials joint venture. In 2014, reported operating income was $726 million, or 13.1% of revenues. Adjusted cash provided by operations for the first nine months of 2015 was $642 million. Reported cash provided by operations for the nine months of 2015 was $539 million and was negatively impacted by after tax cash charges associated with the company's debt refinancing as well as the previously mentioned payment against certain tax reserves. In the first nine months of 2014, reported cash provided by operations was $635 million.
Outlook for 2015
For the full year 2015, the company now estimates results, before special items, as follows:
- Revenue expected to approximate $7.49 billion, compared to previous guidance of between $7.49 billion and $7.57 billion.
- Adjusted diluted EPS excluding amortization to be between $4.75 and $4.80, compared to previous guidance of $4.70 to $4.85.
- Adjusted cash provided by operations to exceed $850 million, unchanged.
- Capital expenditures to approximate $275 million, compared to previous guidance of $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 gain on the contribution to the clinical trials joint venture, charges on retirement of debt and related refinancing charges, restructuring and integration charges, charges in equity earnings in equity method investees 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; (iii) the term "adjusted cash provided by operations" represents cash provided by operations before the cash impact of charges on retirement of debt; and (iv) reference to "revenues on an equivalent basis" represents 2014 reported revenues excluding clinical trials revenues reported in the third and fourth quarters of 2014 when comparing to 2015 results. 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.
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