SECAUCUS, N.J., Feb. 4, 2021 /PRNewswire/ -- Quest Diagnostics
Incorporated (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,
2020.
"In a year dominated by the pandemic, Quest brought critical
COVID-19 testing to our country, and delivered record revenues,
earnings and cash from operations for the fourth quarter and full
year 2020," said Steve Rusckowski,
Chairman, CEO and President. "Declines in our base business
recovered rapidly throughout the summer and fall; however the
recovery stalled at the end of November and into December due to
the surge in COVID-19 infections across the country. Continued high
demand for COVID-19 testing drove our performance through the
second half of the year.
"In light of the company's strong financial position, we have
increased our dividend and our share repurchase authorization while
maintaining flexibility to pursue our M&A strategy," Mr.
Rusckowski continued. "Given the ongoing uncertainty regarding the
trajectory of the virus and its impact on COVID-19 testing trends
as well as further recovery of our base business, we are providing
an outlook for the first six months of 2021. We expect to provide
additional updates as the year progresses."
Mr. Rusckowski continued: "The pandemic has tested our nearly
50,000 employees and they have responded as heroes, by developing
COVID-19 tests, building test capacity, innovating new testing
models with our retail partners, transporting specimens, delivering
results and of course, supporting our customers. I'm proud of what
we have achieved and optimistic about what we can accomplish in
2021."
|
Three Months Ended
December 31,
|
|
Twelve Months
Ended December 31,
|
|
2020
|
|
2019
|
|
Change
|
|
2020
|
|
2019
|
|
Change
|
|
(dollars in millions,
except per share data)
|
Reported:
|
|
|
|
|
|
|
|
|
|
|
|
Net
revenues
|
$
|
3,002
|
|
|
$
|
1,926
|
|
|
55.8
|
%
|
|
$
|
9,437
|
|
|
$
|
7,726
|
|
|
22.1
|
%
|
Diagnostic information
services revenues
|
$
|
2,922
|
|
|
$
|
1,844
|
|
|
58.4
|
%
|
|
$
|
9,139
|
|
|
$
|
7,405
|
|
|
23.4
|
%
|
Revenue per
requisition
|
|
|
|
|
25.2
|
%
|
|
|
|
|
|
16.2
|
%
|
Requisition
volume
|
|
|
|
|
26.8
|
%
|
|
|
|
|
|
6.6
|
%
|
Organic requisition
volume
|
|
|
|
|
22.3
|
%
|
|
|
|
|
|
4.5
|
%
|
Operating income
(a)
|
$
|
795
|
|
|
$
|
363
|
|
|
119.1
|
%
|
|
$
|
1,971
|
|
|
$
|
1,231
|
|
|
60.2
|
%
|
Operating income as a
percentage of net revenues (a)
|
26.5
|
%
|
|
18.8
|
%
|
|
7.7
|
%
|
|
20.9
|
%
|
|
15.9
|
%
|
|
5.0
|
%
|
Income from
continuing operations attributable to Quest Diagnostics
(a)
|
$
|
579
|
|
|
$
|
253
|
|
|
129.0
|
%
|
|
$
|
1,431
|
|
|
$
|
838
|
|
|
70.8
|
%
|
Diluted EPS (a)
(b)
|
$
|
4.21
|
|
|
$
|
1.86
|
|
|
126.9
|
%
|
|
$
|
10.47
|
|
|
$
|
6.13
|
|
|
70.8
|
%
|
Cash provided by
operations
|
$
|
541
|
|
|
$
|
348
|
|
|
55.4
|
%
|
|
$
|
2,005
|
|
|
$
|
1,243
|
|
|
61.3
|
%
|
Capital
expenditures
|
$
|
162
|
|
|
$
|
172
|
|
|
(5.9)
|
%
|
|
$
|
418
|
|
|
$
|
400
|
|
|
4.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted:
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income
|
$
|
860
|
|
|
$
|
329
|
|
|
161.8
|
%
|
|
$
|
2,210
|
|
|
$
|
1,316
|
|
|
68.0
|
%
|
Operating income as a
percentage of net revenues
|
28.6
|
%
|
|
17.0
|
%
|
|
11.6
|
%
|
|
23.4
|
%
|
|
17.0
|
%
|
|
6.4
|
%
|
Income from
continuing operations attributable to Quest Diagnostics
|
$
|
615
|
|
|
$
|
228
|
|
|
170.0
|
%
|
|
$
|
1,527
|
|
|
$
|
896
|
|
|
70.4
|
%
|
Diluted EPS
(b)
|
$
|
4.48
|
|
|
$
|
1.67
|
|
|
167.7
|
%
|
|
$
|
11.18
|
|
|
$
|
6.56
|
|
|
70.4
|
%
|
|
|
(a)
|
For further details
impacting the year-over-year comparisons related to operating
income, operating income as a percentage of net revenues, income
from continuing operations attributable to Quest Diagnostics, and
diluted EPS, see note 2 of the financial tables attached
below.
|
|
|
(b)
|
The sum of reported
and adjusted diluted EPS for the four quarters of 2020 did not
equal the total for the year ended December 31, 2020 due to
quarterly fluctuations in the company's earnings and weighted
average common shares outstanding throughout the year as a result
of the impact of COVID-19 and the temporary suspension of
repurchases under the company's share repurchase
program.
|
Outlook for First Half of 2021
The company estimates its first half 2021 results as
follows:
|
Low
|
|
High
|
|
Net
revenues
|
$4.85
billion
|
|
$5.15
billion
|
|
Net revenues
increase
|
32.9%
|
|
41.1%
|
|
Reported diluted
EPS
|
$5.07
|
|
6.07
|
|
Adjusted diluted
EPS
|
$5.90
|
|
$6.90
|
|
Cash provided by
operations
|
At least $800
million
|
|
Capital
expenditures
|
Approximately $200
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 remeasurement
of an equity interest, costs associated with donations,
contributions and other financial support through Quest for Health
Equity, the company's recently announced initiative with the Quest
Diagnostics Foundation to reduce health disparities in underserved
communities, the gain on the sale and leaseback of a property, 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 tables attached below include reconciliations of
non-GAAP 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 by dialing 888-455-0391 within the U.S. and Canada, or 773-756-0467 internationally,
passcode: 7895081; or via live webcast on the company's website at
www.QuestDiagnostics.com/investor. 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 866-461-2735 for
domestic callers or 203-369-1352 for international callers. No
passcode is required. Telephone replays will be available
from approximately 10:30 a.m. Eastern
Time on February 4, 2021 until midnight Eastern Time on February 18, 2021. 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 nearly
50,000 employees understand that, in the right hands and with the
right context, our diagnostic insights can inspire actions that
transform lives. www.QuestDiagnostics.com.
Forward Looking Statements
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.
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, 2020 and 2019
(in millions, except
per share data)
(unaudited)
|
|
|
Three Months
Ended
December 31,
|
|
Twelve Months
Ended
December 31,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Net
revenues
|
$
|
3,002
|
|
|
$
|
1,926
|
|
|
$
|
9,437
|
|
|
$
|
7,726
|
|
|
|
|
|
|
|
|
|
Operating costs
and expenses and other operating expense (income):
|
|
|
|
|
|
|
|
Cost of
services
|
1,733
|
|
|
1,264
|
|
|
5,804
|
|
|
5,037
|
|
Selling, general and
administrative
|
447
|
|
|
349
|
|
|
1,550
|
|
|
1,457
|
|
Amortization of
intangible assets
|
26
|
|
|
24
|
|
|
103
|
|
|
96
|
|
Other operating
expense (income), net
|
1
|
|
|
(74)
|
|
|
9
|
|
|
(95)
|
|
Total operating costs
and expenses, net
|
2,207
|
|
|
1,563
|
|
|
7,466
|
|
|
6,495
|
|
|
|
|
|
|
|
|
|
Operating
income
|
795
|
|
|
363
|
|
|
1,971
|
|
|
1,231
|
|
|
|
|
|
|
|
|
|
Other income
(expense):
|
|
|
|
|
|
|
|
Interest expense,
net
|
(39)
|
|
|
(42)
|
|
|
(163)
|
|
|
(175)
|
|
Other income,
net
|
2
|
|
|
7
|
|
|
76
|
|
|
20
|
|
Total non-operating
expense, net
|
(37)
|
|
|
(35)
|
|
|
(87)
|
|
|
(155)
|
|
|
|
|
|
|
|
|
|
Income from
continuing operations before income taxes and equity in earnings of
equity method investees
|
758
|
|
|
328
|
|
|
1,884
|
|
|
1,076
|
|
Income tax
expense
|
(191)
|
|
|
(72)
|
|
|
(460)
|
|
|
(247)
|
|
Equity in earnings
of equity method investees, net of taxes
|
42
|
|
|
9
|
|
|
75
|
|
|
57
|
|
Income from
continuing operations
|
609
|
|
|
265
|
|
|
1,499
|
|
|
886
|
|
Income from
discontinued operations, net of taxes
|
—
|
|
|
—
|
|
|
—
|
|
|
20
|
|
Net
income
|
609
|
|
|
265
|
|
|
1,499
|
|
|
906
|
|
Less: Net income
attributable to noncontrolling interests
|
30
|
|
|
12
|
|
|
68
|
|
|
48
|
|
Net income
attributable to Quest Diagnostics
|
$
|
579
|
|
|
$
|
253
|
|
|
$
|
1,431
|
|
|
$
|
858
|
|
|
|
|
|
|
|
|
|
Amounts
attributable to Quest Diagnostics' common
stockholders:
|
|
|
|
|
|
|
|
Income from
continuing operations
|
$
|
579
|
|
|
$
|
253
|
|
|
$
|
1,431
|
|
|
$
|
838
|
|
Income from
discontinued operations, net of taxes
|
—
|
|
|
—
|
|
|
—
|
|
|
20
|
|
Net income
|
$
|
579
|
|
|
$
|
253
|
|
|
$
|
1,431
|
|
|
$
|
858
|
|
|
|
|
|
|
|
|
|
Earnings per share
attributable to Quest Diagnostics' common stockholders -
basic:
|
|
|
|
|
|
|
|
Income from
continuing operations
|
$
|
4.28
|
|
|
$
|
1.88
|
|
|
$
|
10.62
|
|
|
$
|
6.21
|
|
Income from
discontinued operations
|
—
|
|
|
—
|
|
|
—
|
|
|
0.15
|
|
Net income
|
$
|
4.28
|
|
|
$
|
1.88
|
|
|
$
|
10.62
|
|
|
$
|
6.36
|
|
|
|
|
|
|
|
|
|
Earnings per share
attributable to Quest Diagnostics' common stockholders -
diluted:
|
|
|
|
|
|
|
|
Income from
continuing operations
|
$
|
4.21
|
|
|
$
|
1.86
|
|
|
$
|
10.47
|
|
|
$
|
6.13
|
|
Income from
discontinued operations
|
—
|
|
|
—
|
|
|
—
|
|
|
0.15
|
|
Net income
|
$
|
4.21
|
|
|
$
|
1.86
|
|
|
$
|
10.47
|
|
|
$
|
6.28
|
|
|
|
|
|
|
|
|
|
Weighted average
common shares outstanding:
|
|
|
|
|
|
|
|
Basic
|
135
|
|
|
134
|
|
|
134
|
|
|
134
|
|
Diluted
|
137
|
|
|
136
|
|
|
136
|
|
|
136
|
|
|
|
|
|
|
|
|
|
Quest Diagnostics
Incorporated and Subsidiaries
Consolidated
Balance Sheets
December 31,
2020 and 2019
(in millions, except
per share data)
(unaudited)
|
|
|
December 31,
2020
|
|
December 31,
2019
|
Assets
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
|
1,158
|
|
|
$
|
1,192
|
|
Accounts receivable,
net
|
1,520
|
|
|
1,063
|
|
Inventories
|
223
|
|
|
123
|
|
Prepaid expenses and
other current assets
|
157
|
|
|
112
|
|
Total current
assets
|
3,058
|
|
|
2,490
|
|
Property, plant
and equipment, net
|
1,627
|
|
|
1,453
|
|
Operating lease
right-of-use assets
|
604
|
|
|
518
|
|
Goodwill
|
6,873
|
|
|
6,619
|
|
Intangible assets,
net
|
1,167
|
|
|
1,121
|
|
Investment in
equity method investees
|
521
|
|
|
482
|
|
Other
assets
|
176
|
|
|
160
|
|
Total
assets
|
$
|
14,026
|
|
|
$
|
12,843
|
|
|
|
|
|
Liabilities and
Stockholders' Equity
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts payable and
accrued expenses
|
$
|
1,633
|
|
|
$
|
1,041
|
|
Current portion of
long-term debt
|
2
|
|
|
804
|
|
Current portion of
long-term operating lease liabilities
|
141
|
|
|
145
|
|
Total current
liabilities
|
1,776
|
|
|
1,990
|
|
Long-term
debt
|
4,013
|
|
|
3,966
|
|
Long-term
operating lease liabilities
|
499
|
|
|
413
|
|
Other
liabilities
|
847
|
|
|
711
|
|
Redeemable
noncontrolling interest
|
82
|
|
|
76
|
|
Stockholders'
equity:
|
|
|
|
Quest Diagnostics
stockholders' equity:
|
|
|
|
Common stock, par
value $0.01 per share; 600 shares authorized as of both December
31, 2020 and 2019; 217 shares issued as of both December 31, 2020
and 2019
|
2
|
|
|
2
|
|
Additional paid-in
capital
|
2,841
|
|
|
2,722
|
|
Retained
earnings
|
9,303
|
|
|
8,174
|
|
Accumulated other
comprehensive loss
|
(21)
|
|
|
(39)
|
|
Treasury stock, at
cost; 84 shares as of both December 31, 2020 and 2019
|
(5,366)
|
|
|
(5,218)
|
|
Total Quest
Diagnostics stockholders' equity
|
6,759
|
|
|
5,641
|
|
Noncontrolling
interests
|
50
|
|
|
46
|
|
Total stockholders'
equity
|
6,809
|
|
|
5,687
|
|
Total liabilities
and stockholders' equity
|
$
|
14,026
|
|
|
$
|
12,843
|
|
Quest Diagnostics
Incorporated and Subsidiaries
Consolidated
Statements of Cash Flows
For the Twelve
Months Ended December 31, 2020 and 2019
(in
millions)
(unaudited)
|
|
|
Twelve Months
Ended
December 31,
|
|
2020
|
|
2019
|
Cash flows from
operating activities:
|
|
|
|
Net income
|
$
|
1,499
|
|
|
$
|
906
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
Depreciation and
amortization
|
361
|
|
|
329
|
|
Provision for credit
losses
|
19
|
|
|
11
|
|
Deferred income tax
provision
|
85
|
|
|
15
|
|
Stock-based
compensation expense
|
97
|
|
|
56
|
|
Losses (gains) on
sale of property, plant and equipment
|
3
|
|
|
(70)
|
|
Other, net
|
(81)
|
|
|
(39)
|
|
Changes in operating
assets and liabilities:
|
|
|
|
Accounts
receivable
|
(455)
|
|
|
(63)
|
|
Accounts payable and
accrued expenses
|
452
|
|
|
73
|
|
Income taxes
payable
|
22
|
|
|
29
|
|
Termination of
interest rate swap agreements
|
40
|
|
|
—
|
|
Other assets and
liabilities, net
|
(37)
|
|
|
(4)
|
|
Net cash provided
by operating activities
|
2,005
|
|
|
1,243
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
Business
acquisitions, net of cash acquired
|
(330)
|
|
|
(58)
|
|
Proceeds from
disposition of property, plant and equipment
|
3
|
|
|
91
|
|
Capital
expenditures
|
(418)
|
|
|
(400)
|
|
Increase in
investments and other assets
|
(27)
|
|
|
(44)
|
|
Net cash used in
investing activities
|
(772)
|
|
|
(411)
|
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
Proceeds from
borrowings
|
749
|
|
|
2,281
|
|
Repayments of
debt
|
(1,554)
|
|
|
(1,449)
|
|
Purchases of treasury
stock
|
(325)
|
|
|
(353)
|
|
Exercise of stock
options
|
189
|
|
|
119
|
|
Employee payroll tax
withholdings on stock issued under stock-based compensation
plans
|
(15)
|
|
|
(16)
|
|
Dividends
paid
|
(297)
|
|
|
(286)
|
|
Distributions to
noncontrolling interest partners
|
(58)
|
|
|
(54)
|
|
Other financing
activities, net
|
44
|
|
|
(17)
|
|
Net cash (used in)
provided by financing activities
|
(1,267)
|
|
|
225
|
|
|
|
|
|
Net change in cash
and cash equivalents and restricted cash
|
(34)
|
|
|
1,057
|
|
Cash and cash
equivalents and restricted cash, beginning of period
|
1,192
|
|
|
135
|
|
Cash and cash
equivalents and restricted cash, end of period
|
$
|
1,158
|
|
|
$
|
1,192
|
|
|
|
|
|
Cash paid during
the period for:
|
|
|
|
Interest
|
$
|
201
|
|
|
$
|
192
|
|
Income
taxes
|
$
|
360
|
|
|
$
|
202
|
|
Notes to Financial
Tables
|
|
1) The
computation of basic and diluted earnings per common share is as
follows:
|
|
|
Three Months
Ended
December 31,
|
|
Twelve Months
Ended
December 31,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
(in millions, except
per share data)
|
Amounts
attributable to Quest Diagnostics' common
stockholders:
|
|
|
|
|
|
|
|
Income from
continuing operations
|
$
|
579
|
|
|
$
|
253
|
|
|
$
|
1,431
|
|
|
$
|
838
|
|
Income from
discontinued operations, net of taxes
|
—
|
|
|
—
|
|
|
—
|
|
|
20
|
|
Net income
attributable to Quest Diagnostics' common stockholders
|
$
|
579
|
|
|
$
|
253
|
|
|
$
|
1,431
|
|
|
$
|
858
|
|
|
|
|
|
|
|
|
|
Income from
continuing operations
|
$
|
579
|
|
|
$
|
253
|
|
|
$
|
1,431
|
|
|
$
|
838
|
|
Less: Earnings
allocated to participating securities
|
3
|
|
|
1
|
|
|
6
|
|
|
3
|
|
Earnings available to
Quest Diagnostics' common stockholders - basic and
diluted
|
$
|
576
|
|
|
$
|
252
|
|
|
$
|
1,425
|
|
|
$
|
835
|
|
|
|
|
|
|
|
|
|
Weighted average
common shares outstanding - basic
|
135
|
|
|
134
|
|
|
134
|
|
|
134
|
|
Effect of dilutive
securities:
|
|
|
|
|
|
|
|
Stock options and
performance share units
|
2
|
|
|
2
|
|
|
2
|
|
|
2
|
|
Weighted average
common shares outstanding - diluted
|
137
|
|
|
136
|
|
|
136
|
|
|
136
|
|
|
|
|
|
|
|
|
|
Earnings per share
attributable to Quest Diagnostics' common stockholders -
basic:
|
|
|
|
|
|
|
|
Income from
continuing operations
|
$
|
4.28
|
|
|
$
|
1.88
|
|
|
$
|
10.62
|
|
|
$
|
6.21
|
|
Income from
discontinued operations
|
—
|
|
|
—
|
|
|
—
|
|
|
0.15
|
|
Net income
|
$
|
4.28
|
|
|
$
|
1.88
|
|
|
$
|
10.62
|
|
|
$
|
6.36
|
|
|
|
|
|
|
|
|
|
Earnings per share
attributable to Quest Diagnostics' common stockholders -
diluted:
|
|
|
|
|
|
|
|
Income from
continuing operations
|
$
|
4.21
|
|
|
$
|
1.86
|
|
|
$
|
10.47
|
|
|
$
|
6.13
|
|
Income from
discontinued operations
|
—
|
|
|
—
|
|
|
—
|
|
|
0.15
|
|
Net income
|
$
|
4.21
|
|
|
$
|
1.86
|
|
|
$
|
10.47
|
|
|
$
|
6.28
|
|
2) The
following tables reconcile reported GAAP results to non-GAAP
adjusted results:
|
|
|
Three Months Ended
December 31, 2020
(dollars in millions, except per share data)
|
|
Operating
income
|
|
Operating
income as a
percentage of
net revenues
|
|
Income tax
expense (e)
|
|
Equity in
earnings of
equity method
investees, net
of taxes
|
|
Income from
continuing
operations
attributable to
Quest
Diagnostics
|
|
Diluted
EPS
|
As
reported
|
$
|
795
|
|
|
26.5
|
%
|
|
$
|
(191)
|
|
|
$
|
42
|
|
|
$
|
579
|
|
|
$
|
4.21
|
|
Restructuring and
integration charges (a)
|
15
|
|
|
0.5
|
|
|
(5)
|
|
|
—
|
|
|
10
|
|
|
0.07
|
|
COVID-19 impact
(b)
|
22
|
|
|
0.6
|
|
|
(4)
|
|
|
(2)
|
|
|
14
|
|
|
0.10
|
|
Amortization
expense
|
26
|
|
|
0.9
|
|
|
(7)
|
|
|
2
|
|
|
21
|
|
|
0.16
|
|
Other (c)
|
2
|
|
|
0.1
|
|
|
1
|
|
|
(14)
|
|
|
(1)
|
|
|
—
|
|
ETB
|
—
|
|
|
—
|
|
|
(8)
|
|
|
—
|
|
|
(8)
|
|
|
(0.06)
|
|
As
adjusted
|
$
|
860
|
|
|
28.6
|
%
|
|
$
|
(214)
|
|
|
$
|
28
|
|
|
$
|
615
|
|
|
$
|
4.48
|
|
|
|
|
Twelve Months
Ended December 31, 2020
(dollars in millions, except per share data)
|
|
Operating
income
|
|
Operating
income as a
percentage of
net revenues
|
|
Income tax
expense (e)
|
|
Equity in
earnings of
equity method
investees, net
of taxes
|
|
Income from
continuing
operations
attributable to
Quest
Diagnostics
|
|
Diluted
EPS
|
As
reported
|
$
|
1,971
|
|
|
20.9
|
%
|
|
$
|
(460)
|
|
|
$
|
75
|
|
|
$
|
1,431
|
|
|
$
|
10.47
|
|
Restructuring and
integration charges (a)
|
58
|
|
|
0.6
|
|
|
(14)
|
|
|
—
|
|
|
44
|
|
|
0.32
|
|
COVID-19 impact
(b)
|
76
|
|
|
0.8
|
|
|
(15)
|
|
|
(4)
|
|
|
53
|
|
|
0.39
|
|
Gain on remeasurement
of equity interest (d)
|
—
|
|
|
—
|
|
|
7
|
|
|
—
|
|
|
(63)
|
|
|
(0.46)
|
|
Amortization
expense
|
103
|
|
|
1.1
|
|
|
(28)
|
|
|
11
|
|
|
86
|
|
|
0.63
|
|
Other (c)
|
2
|
|
|
—
|
|
|
1
|
|
|
(14)
|
|
|
(1)
|
|
|
—
|
|
ETB
|
—
|
|
|
—
|
|
|
(23)
|
|
|
—
|
|
|
(23)
|
|
|
(0.17)
|
|
As
adjusted
|
$
|
2,210
|
|
|
23.4
|
%
|
|
$
|
(532)
|
|
|
$
|
68
|
|
|
$
|
1,527
|
|
|
$
|
11.18
|
|
|
|
|
Three Months Ended
December 31, 2019
(dollars in millions, except per share data)
|
|
Operating
income
|
|
Operating
income as a
percentage of
net revenues
|
|
Income tax
expense (e)
|
|
Equity in
earnings of
equity method
investees, net
of taxes
|
|
Income from
continuing
operations
attributable to
Quest
Diagnostics
|
|
Diluted
EPS
|
As
reported
|
$
|
363
|
|
|
18.8
|
%
|
|
$
|
(72)
|
|
|
$
|
9
|
|
|
$
|
253
|
|
|
$
|
1.86
|
|
Restructuring and
integration charges (a)
|
14
|
|
|
0.7
|
|
|
(4)
|
|
|
—
|
|
|
10
|
|
|
0.07
|
|
Other (c)
|
(72)
|
|
|
(3.8)
|
|
|
18
|
|
|
—
|
|
|
(54)
|
|
|
(0.39)
|
|
Amortization
expense
|
24
|
|
|
1.3
|
|
|
(6)
|
|
|
3
|
|
|
21
|
|
|
0.15
|
|
ETB
|
—
|
|
|
—
|
|
|
(2)
|
|
|
—
|
|
|
(2)
|
|
|
(0.02)
|
|
As
adjusted
|
$
|
329
|
|
|
17.0
|
%
|
|
$
|
(66)
|
|
|
$
|
12
|
|
|
$
|
228
|
|
|
$
|
1.67
|
|
|
|
|
Twelve Months
Ended December 31, 2019
(dollars in millions, except per share data)
|
|
Operating
income
|
|
Operating
income as a
percentage of
net revenues
|
|
Income tax
expense (e)
|
|
Equity in
earnings of
equity method
investees, net
of taxes
|
|
Income from
continuing
operations
attributable to
Quest
Diagnostics
|
|
Diluted
EPS
|
As
reported
|
$
|
1,231
|
|
|
15.9
|
%
|
|
$
|
(247)
|
|
|
$
|
57
|
|
|
$
|
838
|
|
|
$
|
6.13
|
|
Restructuring and
integration charges (a)
|
78
|
|
|
1.0
|
|
|
(21)
|
|
|
—
|
|
|
57
|
|
|
0.42
|
|
Other (c)
|
(89)
|
|
|
(1.1)
|
|
|
18
|
|
|
—
|
|
|
(71)
|
|
|
(0.50)
|
|
Amortization
expense
|
96
|
|
|
1.2
|
|
|
(26)
|
|
|
15
|
|
|
85
|
|
|
0.61
|
|
ETB
|
—
|
|
|
—
|
|
|
(13)
|
|
|
—
|
|
|
(13)
|
|
|
(0.10)
|
|
As
adjusted
|
$
|
1,316
|
|
|
17.0
|
%
|
|
$
|
(289)
|
|
|
$
|
72
|
|
|
$
|
896
|
|
|
$
|
6.56
|
|
|
|
|
|
|
|
(a)
|
For both the three
and twelve months ended December 31, 2020 and 2019, 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
December 31,
|
|
Twelve Months
Ended
December 31,
|
|
|
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
|
|
|
(dollars in
millions)
|
|
|
|
|
Cost of
services
|
$
|
6
|
|
|
$
|
6
|
|
|
$
|
27
|
|
|
$
|
35
|
|
|
|
|
|
Selling, general and
administrative
|
9
|
|
|
8
|
|
|
31
|
|
|
43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income
|
$
|
15
|
|
|
$
|
14
|
|
|
$
|
58
|
|
|
$
|
78
|
|
|
|
|
|
|
|
(b)
|
For both the three
and twelve months ended December 31, 2020, principally
includes expense associated with payments to eligible employees to
help offset expenses they incurred as a result of COVID-19 and
incremental costs incurred primarily to protect the health and
safety of the company's employees and customers. The twelve
months ended December 31, 2020 also includes certain asset
impairment charges.
|
|
|
|
|
|
|
|
The following table
summarizes the pre-tax impact of these items on the company's
consolidated statements of operations:
|
|
|
|
|
|
|
|
|
Three Months
Ended
December 31,
|
|
Twelve Months
Ended
December 31,
|
|
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
|
|
(dollars in
millions)
|
|
|
|
Cost of
services
|
$
|
19
|
|
|
$
|
—
|
|
|
$
|
57
|
|
|
$
|
—
|
|
|
|
|
Selling, general and
administrative
|
2
|
|
|
—
|
|
|
10
|
|
|
—
|
|
|
|
|
Other operating
expense (income), net
|
1
|
|
|
—
|
|
|
9
|
|
|
—
|
|
|
|
|
Operating income
|
$
|
22
|
|
|
$
|
—
|
|
|
$
|
76
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in earnings of
equity method investees, net of taxes
|
$
|
(2)
|
|
|
$
|
—
|
|
|
$
|
(4)
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
attributable to noncontrolling interest
|
$
|
2
|
|
|
$
|
—
|
|
|
$
|
4
|
|
|
$
|
—
|
|
|
|
|
|
|
|
(c)
|
For the three and
twelve months ended December 31, 2020, primarily represents a
gain recognized by an equity method investee to adjust certain of
its investments to fair value, a loss on retirement of debt, and,
to a lesser extent, costs associated with Quest for Health
Equity. For the three months ended December 31, 2019,
primarily represents a gain associated with the sale and leaseback
of a property. For the twelve months ended December 31, 2019,
the pre-tax impact primarily represents a gain associated with the
sale and leaseback of a property, a gain associated with the
decrease in the fair value of the contingent consideration accruals
associated with previous acquisitions, and a gain associated with
an insurance claim for hurricane related losses, partially offset
by costs incurred related to a data security incident and non-cash
asset impairment charges.
|
|
|
|
|
|
|
|
The following table
summarizes the pre-tax impact of these other items on the company's
consolidated statement of operations:
|
|
|
|
|
|
|
|
Three Months
Ended
December 31,
|
|
Twelve Months
Ended
December 31,
|
|
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
|
|
(dollars in
millions)
|
|
|
|
Selling, general and
administrative
|
$
|
2
|
|
|
$
|
1
|
|
|
$
|
2
|
|
|
$
|
6
|
|
|
|
|
Other operating
expense (income), net
|
—
|
|
|
(73)
|
|
|
—
|
|
|
(95)
|
|
|
|
|
Operating
income
|
$
|
2
|
|
|
$
|
(72)
|
|
|
$
|
2
|
|
|
$
|
(89)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in earnings of
equity method investees, net of taxes
|
$
|
(14)
|
|
|
$
|
—
|
|
|
$
|
(14)
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income,
net
|
$
|
10
|
|
|
$
|
—
|
|
|
$
|
10
|
|
|
$
|
—
|
|
|
|
|
|
|
|
(d)
|
For the twelve months
ended December 31, 2020, the pre-tax impact represents a gain
of $70 million recognized in other income, net 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 remeasured its previously
held minority interest in MACL to fair value and recognized a
gain.
|
|
|
|
|
|
|
(e)
|
For restructuring and
integration charges, COVID-19 impacts, other items and amortization
expense, income tax impacts, where recorded, were primarily
calculated using combined statutory income tax rates of 25.5% for
both 2020 and 2019. For the gain on remeasurement of equity
interest, 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. For the gain
associated with an insurance claim for hurricane related losses in
2019, there was no net income tax expense as the company was able
to utilize net operating loss carryforwards for which a valuation
allowance had previously been established. For the gain in
2019 associated with the decrease in the fair value of the
contingent consideration accruals associated with previous
acquisitions, there was no net income tax expense related to
acquisitions in which the gain is non-taxable.
|
|
|
3)
|
Discontinued
operations, net of taxes, for the twelve months ended December 31,
2019 includes discrete tax benefits of $20 million associated with
the favorable resolution of certain tax contingencies related to
Nichols Institute Diagnostics, a test kit manufacturing subsidiary
whose operations were discontinued in 2006.
|
|
|
4)
|
In November 2020, the
company lifted the temporary suspension, announced on April 22,
2020, of the company's common stock repurchase program. For
the three months ended December 31, 2020, the company
repurchased 2.0 million shares of its common stock for $250
million. For the twelve months ended December 31, 2020,
the company repurchased 2.7 million shares of its common stock for
$325 million. As of December 31, 2020, $0.9 billion
remained available under the company's share repurchase
authorizations.
|
|
|
5)
|
During the nine
months ended September 30, 2020, the company received $138 million
of funds that were appropriated to healthcare providers under the
Coronavirus Aid, Relief, and Economic Security Act. During
the three months ended December 31, 2020, the company returned
the funds and net cash provided by operating activities includes
the impact of the repayment.
|
|
|
6)
|
The outlook for
adjusted diluted EPS represents management's estimates for the
first half of 2021 before the impact of special items.
Further impacts to earnings related to special items may occur
throughout 2021. Additionally, the amount of ETB is dependent
upon employee stock option exercises and the company's stock price,
which are difficult to predict. The outlook for diluted EPS
and adjusted diluted EPS is subject to the risks and uncertainties
described under "Forward Looking Statements". The following
table reconciles our first half of 2021 outlook for adjusted
diluted EPS to the corresponding amounts determined under
GAAP:
|
|
|
|
|
|
Low
|
|
High
|
|
|
Diluted
EPS
|
$
|
5.07
|
|
|
$
|
6.07
|
|
|
|
Restructuring and
integration charges (a)
|
0.33
|
|
|
0.33
|
|
|
|
Amortization expense
(b)
|
0.32
|
|
|
0.32
|
|
|
|
Costs associated with
Quest for Health Equity (c)
|
0.28
|
|
|
0.28
|
|
|
|
ETB
|
(0.10)
|
|
|
(0.10)
|
|
|
|
Adjusted diluted
EPS
|
$
|
5.90
|
|
|
$
|
6.90
|
|
|
|
|
|
|
|
|
|
(a)
|
Represents estimated
pre-tax charges of $60 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
estimated impact of amortization expense for first half of 2021 on
the calculation of adjusted diluted EPS. Amortization expense
used in the calculation is as follows (dollars in
millions):
|
|
|
|
|
|
|
|
Amortization of
intangible assets
|
|
$
|
54
|
|
|
|
Amortization expense
included in equity in earnings of equity method investees, net of
taxes
|
|
5
|
|
|
|
|
|
|
|
|
Total pre-tax
amortization expense
|
|
$
|
59
|
|
|
|
|
|
|
|
|
Total amortization
expense, net of an estimated tax benefit using a combined statutory
income tax rate of 25.5%
|
|
$
|
44
|
|
|
|
|
|
|
|
|
|
(c)
|
Represents estimated
pre-tax charges of $50 million associated donations, contributions
and other financial support through Quest for Health Equity, the
company's recently announced initiative with the Quest Diagnostics
Foundation to reduce health disparities in underserved
communities. Income tax benefits were calculated using a
combined statutory income tax rate of 25.5%.
|
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SOURCE Quest Diagnostics