SECAUCUS, N.J., Sept. 10, 2020 /PRNewswire/ -- Quest
Diagnostics Incorporated (NYSE: DGX), the world's leading provider
of diagnostic information services, today updated its financial
outlook for full year 2020.
Since the company reported its financial performance for the
second quarter of 2020 on July 23,
2020, organic testing volumes in its base business
(excluding COVID-19 molecular and antibody testing and the impact
of acquisitions), continued to recover faster than anticipated
through the end of August. Organic base testing volumes declined
high single digits in July and mid-to-high single digits in August
on a percentage basis versus the prior year. COVID-19
molecular and antibody testing volumes remain consistent with the
company's previous outlook.
Updated Outlook for Full Year 2020
The company revised its full year 2020 outlook as
follows:
|
Current
Outlook
|
|
Previous
Outlook
|
|
Low
|
|
High
|
|
Low
|
|
High
|
Net
revenues
|
$8.4
billion
|
|
$8.8
billion
|
|
$8.0
billion
|
|
$8.6
billion
|
Net revenues
increase
|
8.7%
|
|
13.9%
|
|
3.5%
|
|
11.3%
|
Reported diluted
EPS
|
$7.42
|
|
$8.92
|
|
$5.66
|
|
$7.66
|
Adjusted diluted
EPS
|
$7.50
|
|
$9.00
|
|
$6.60
|
|
$8.60
|
Cash provided by
operations
|
At least
$1.45 billion
|
|
At least
$1.25 billion
|
Capital
expenditures
|
$375
million
|
|
$400
million
|
|
$375
million
|
|
$400
million
|
The company is scheduled to participate in the Wells Fargo
Virtual Healthcare Conference today at 1:20
p.m. Eastern Time. The presentation will be webcast live
during the conference and will be available on the company's
investor relations page which can be accessed at
ir.QuestDiagnostics.com. During the discussion, the company's
management plans to discuss its current perspective on the impact
of the COVID-19 pandemic.
Management continues to believe that the COVID-19 pandemic's
impact on its future operating results, cash flows and/or financial
condition will be primarily driven by a number of factors beyond
the company's knowledge and control, including: the pandemic's
severity and duration; the pandemic's impact on the U.S. healthcare
system and the U.S. economy; and the timing, scope and
effectiveness of federal, state and local governmental responses to
the pandemic.
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, 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 TABLES FOLLOW
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 throughout 2020. 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:
|
Low
|
|
High
|
Diluted
EPS
|
$
|
7.42
|
|
|
$
|
8.92
|
|
Restructuring and
integration charges (a)
|
0.50
|
|
|
0.50
|
|
COVID-19 impact
(b)
|
(0.48)
|
|
|
(0.48)
|
|
Gain on remeasurement
of equity interest (c)
|
(0.45)
|
|
|
(0.45)
|
|
Amortization expense
(d)
|
0.63
|
|
|
0.63
|
|
ETB
|
(0.12)
|
|
|
(0.12)
|
|
Adjusted diluted
EPS
|
$
|
7.50
|
|
|
$
|
9.00
|
|
|
|
|
|
|
|
|
|
|
(a) Represents
estimated full year pre-tax charges of $90 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
including income recognized attributable to the receipt of funds
from the government that were appropriated to healthcare providers
under the Coronavirus Aid, Relief and Economic Security Act,
partially offset by expense associated with a one-time payment 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
impacts, where recorded, were primarily calculated using a combined
statutory income tax rate of 25.5%.
|
|
(c) Represents
the estimated 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 its joint venture partners. As a result of the
transaction, the company will remeasure its previously held
minority interest in MACL to fair value and recognize 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
|
|
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SOURCE Quest Diagnostics