SECAUCUS, N.J., Dec. 16, 2020 /PRNewswire/ -- Quest
Diagnostics Incorporated (NYSE: DGX), the world's leading provider
of diagnostic information services, today raised its financial
outlook for full year 2020.
Since the company reported its financial performance for the
third quarter of 2020 on October 22,
COVID-19 molecular testing volumes have been significantly higher
than the previous outlook contemplated. Organic testing volumes
ordered in the company's base business (excluding COVID-19
molecular and antibody testing and the impact of acquisitions)
remained relatively steady, down mid-to-high single digits versus
the prior year in October and November, consistent with the
company's previous outlook. In early December, organic testing
volume trends declined, with volume down high single digits versus
the prior year as a number of state and local governments have
imposed new orders designed to reduce the transmission of
COVID-19.
Updated Outlook for Full Year 2020
The company raised its full year 2020 outlook as
follows:
|
Current
Outlook
|
|
Previous
Outlook
|
|
|
|
|
|
Low
|
|
High
|
Net
revenues
|
At least $9.35
billion
|
|
$8.8
billion
|
|
$9.1
billion
|
Net revenues
increase
|
At least
21.0%
|
|
13.9%
|
|
17.8%
|
Reported diluted
EPS
|
At least
$9.98
|
|
$8.22
|
|
$9.22
|
Adjusted diluted
EPS
|
At least
$10.75
|
|
$9.00
|
|
$10.00
|
Cash provided by
operations
|
At least
$1.95 billion
|
|
At least $1.75
billion
|
Capital
expenditures
|
Approximately
$420 million
|
|
Approximately $400
million
|
|
|
|
|
|
|
|
|
Note on Non-GAAP Financial Measures
As used in this press release the term "reported" refers to
measures under accounting principles generally accepted in
the United States ("GAAP"). The
term "adjusted" refers to non-GAAP operating performance measures
that exclude special items such as restructuring and integration
charges, certain financial impacts resulting from the COVID-19
pandemic, amortization expense, excess tax benefits ("ETB")
associated with stock-based compensation, a gain on the
remeasurement of an equity interest, costs associated with Quest
for Health Equity, the company's recently announced initiative to
reduce health disparities in underserved communities, and other
items.
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 table attached below includes a reconciliation of
non-GAAP adjusted measures to GAAP measures.
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 47,000
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, impacts of
the COVID-19 pandemic and measures taken in response, adverse
results from pending or future government investigations, lawsuits
or private actions, the competitive environment, the complexity of
billing, reimbursement and revenue recognition for clinical
laboratory testing, 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.
ADDITIONAL TABLE FOLLOWS
The outlook for adjusted diluted EPS represents management's
estimates for the full year 2020 before the impact of special
items. Further impacts to earnings related to special items may
occur. Additionally, the amount of ETB is dependent upon
employee stock option exercises and the company's stock price,
which are difficult to predict. The following table reconciles our
2020 outlook for adjusted diluted EPS to the corresponding amounts
determined under GAAP:
|
|
|
Diluted
EPS
|
$
|
9.98
|
|
|
Restructuring and
integration charges (a)
|
0.36
|
|
|
COVID-19 impact
(b)
|
0.38
|
|
|
Gain on remeasurement
of equity interest (c)
|
(0.46)
|
|
|
Amortization expense
(d)
|
0.63
|
|
|
Costs associated with
Quest for Health Equity (e)
|
0.02
|
|
|
ETB
|
(0.16)
|
|
|
Adjusted diluted
EPS
|
$
|
10.75
|
|
|
|
(a)
|
Represents estimated
full year pre-tax charges of $65 million primarily associated with
systems conversions and integration costs incurred in connection
with further restructuring and integrating our business.
Income tax benefits were calculated using a combined statutory
income tax rate of 25.5%.
|
|
|
|
|
(b)
|
Represents the impact
of certain items resulting from the COVID-19 pandemic, principally
including expense associated with payments to eligible employees to
help offset expenses they incurred as a result of COVID-19, certain
asset impairment charges, and incremental costs incurred primarily
to protect the health and safety of the company's employees and
customers. Income tax benefits, where recorded, were
calculated using a combined statutory income tax rate of
25.5%.
|
|
|
|
|
(c)
|
Represents a gain
recognized based on the difference between the fair value and the
carrying value of an equity interest. On August 1, 2020, the
company completed its acquisition of the remaining 56% interest in
Mid America Clinical Laboratories, LLC ("MACL") from the company's
joint venture partners. As a result of the transaction, the
company remeasured its previously held minority interest in MACL to
fair value and recognized a gain. Income tax expense was calculated
based on an effective income tax rate on the transaction of 11.8%,
which is lower than the statutory income tax rate due to a
permanent difference in the financial reporting and tax basis of
goodwill.
|
|
|
|
|
(d)
|
Represents the
estimated impact of amortization expense for 2020 on the
calculation of adjusted diluted EPS. Amortization expense used in
the calculation is as follows (dollars in millions):
|
Amortization of
intangible assets
|
$
|
103
|
|
Amortization expense
included in equity in earnings of equity method investees, net of
taxes
|
11
|
|
Total pre-tax
amortization expense
|
$
|
114
|
|
|
|
Total amortization
expense, net of an estimated tax benefit using a combined statutory
income tax rate of 25.5%
|
$
|
85
|
|
|
(e)
|
Represents costs
associated with Quest for Health Equity, the company's recently
announced initiative with the Quest Diagnostics Foundation to
reduce health disparities in underserved communities including
through a combination of donated testing services, education
programs, alliances, and financial support. Income tax
benefits were calculated using a combined statutory income tax rate
of 25.5%.
|
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SOURCE Quest Diagnostics