001-12215 | 16-1387862 | |
(Commission File Number) | (I.R.S. Employer Identification No.) | |
500 Plaza Drive Secaucus, NJ | 07094 | |
(Address of principal executive offices) | (Zip Code) | |
(973) 520-2700 | ||
(Registrant's telephone number, including area code) |
• | The Company’s expected compound annual growth rate (“CAGR”) for revenues and adjusted diluted earnings per share excluding amortization during the four year period ended December 31, 2022. |
• | The Company’s capabilities and strategic initiatives under way to accelerate the Company’s growth, including: |
◦ | Delivering more than 2% revenue CAGR through strategically aligned accretive acquisitions. |
◦ | Capitalizing on the Company’s expanded access to more than 43 million incremental insured lives. |
◦ | Strengthening the Company’s relationships with hospital health systems. |
◦ | Expanding access to innovation with advanced diagnostics. |
◦ | Enhancing the Company’s position as the consumer lab provider of choice. |
◦ | Extending diagnostic data services. |
• | The Company’s strategy to drive operational excellence and to continue to generate cost savings of approximately 3% per year. |
• | The Company’s capital deployment strategy, including its focus on returning a majority of free cash flow to shareholders through share repurchases and dividends. |
Exhibit Number | |
99.1 |
• | Provides outlook for 2019-2022, extending the company's targeted 3-5% revenue compound annual growth rate (CAGR) and updating its adjusted earnings goal to a 4-6% CAGR |
• | Raises dividend by 6% to an annual rate of $2.12 per share, the company’s eighth dividend increase since 2011 |
• | Updates outlook for full year 2018. Reported revenues now expected to be approximately $7.57 billion. Reported diluted EPS now expected to be greater than $5.34 and adjusted diluted EPS excluding amortization expense now expected to be greater than $6.30. Cash provided by operations now expected to approximate $1.25 billion |
• | Delivering more than 2% revenue CAGR through strategically aligned accretive acquisitions |
• | Capitalizing on the company’s expanded access to more than 43 million incremental insured lives, with total access now representing more than 90% of insured lives across the U.S. |
• | Strengthening the company’s relationships with hospital health systems |
• | Expanding access to innovation with advanced diagnostics |
• | Enhancing the company’s position as the consumer lab provider of choice |
• | Extending diagnostic data services |
Current Outlook | Previous Outlook | ||||||
Low | High | Low | High | ||||
Revenues (a) (b) | Approximately $7.57 billion | Approximately $7.62 billion | |||||
Revenue increase (a) | Approximately 2.3% | Approximately 3% | |||||
Reported diluted EPS | Greater than $5.34 | $5.57 | $5.64 | ||||
Adjusted diluted EPS excluding amortization | Greater than $6.30 | $6.53 | $6.60 | ||||
Cash provided by operations | Approximately $1.25 billion | Approximately $1.3 billion billion | |||||
Capital expenditures | $350 million | $400 million | $350 million | $400 million |
(a) | The updated outlook for 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 became effective January 1, 2018. Full year 2017 revenues adjusted to reflect the new rules were $7,402 million. See note 2 of the financial tables attached below. |
(b) | As discussed in the company’s Form 10-K, recording revenues and accounts receivable involves judgement and estimation. The company follows a standard process, which considers historical denial and collection experience and other factors, to estimate contractual allowances and implicit patient price concessions, and regularly updates its estimates, recording adjustments in the current period as changes in estimates. Based on this process, during the fourth quarter the company expects to increase its reserves for revenues and accounts receivable. |
1) | The outlook for adjusted diluted EPS excluding amortization expense represents management’s estimates for the full year 2018 before the impact of special items, including ETB, and amortization expense. Further impacts to earnings related to special items may be incurred throughout the remainder of the year. 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 2018 outlook for adjusted diluted EPS excluding amortization expense to the corresponding amounts determined under GAAP: |
Diluted earnings per common share | $ | 5.34 | |
Restructuring and integration charges (a) | 0.62 | ||
Amortization expense (b) | 0.58 | ||
Other | (0.01 | ) | |
Certain income tax benefits | (0.10 | ) | |
ETB | (0.13 | ) | |
Adjusted diluted EPS excluding amortization expense | $ | 6.30 |
(a) | Represents estimated full year pre-tax charges of $115 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 | $ | 90 | |
Amortization expense included in equity in earnings of equity method investees, net of taxes | 17 | ||
Total pre-tax amortization expense | $ | 107 | |
Total amortization expense, net of an estimated tax benefit | $ | 80 |
2) | The outlook for 2.3% 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 became 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. |
Three Months Ended | Year Ended | ||||||||||||||||||
March 31, 2017 | June 30, 2017 | September 30, 2017 | December 31, 2017 | December 31, 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 recognition standard | (82 | ) | (79 | ) | (75 | ) | (71 | ) | (307 | ) | |||||||||
2017 Revenue on an adjusted basis | $ | 1,817 | $ | 1,864 | $ | 1,856 | $ | 1,865 | $ | 7,402 | |||||||||
2018 Revenue outlook: | |||||||||||||||||||
2017 Revenue on an adjusted basis | $ | 7,402 | |||||||||||||||||
2018 Equivalent revenue growth | 2.3 | % | |||||||||||||||||
2018 Revenue outlook | $ | 7,570 |