Quest Diagnostics Incorporated · NYSE:DGX
Quest Diagnostics — Investor Day (November 2014)
15 slides from Quest Diagnostics's investor day presentation, Nov 5, 2014
Slide 1: Capital Plan: Delivering and Returning Value
Capital Plan: Delivering and Returning Value Mark Guinan Senior Vice President and Chief Financial Officer November 5th, 2014
Slide 2: Safe Harbor Disclosure
| 2 Safe Harbor Disclosure The statements in this presentation 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
Slide 3: Consistent Structure to Our Plan
| 3 Consistent Structure to Our Plan Underpinning Capital Structure Return Majority of FCF to Investors Incremental Returns to Shareholders Operational Excellence Restore Growth Investments in Growth Committed Deployment Discretionary • Enabler of shareholder value creation • Maintain “strong BBB” i
Slide 4: Delivering Gradual Topline Improvement
| 4 -8.0% -6.0% -4.0% -2.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% Delivering Gradual Topline Improvement 2013 2012 2014 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Revenue Volume
Slide 5: Delivering Gradual Topline Improvement
| 5 -6.0% -5.0% -4.0% -3.0% -2.0% -1.0% 0.0% 1.0% 2.0% Delivering Gradual Topline Improvement Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2013 2012 2014 • Prescription Drug Monitoring • Health & Wellness • Infectious Disease • Anatomic Pathology Adjusted Organic Volume Organic Volume
Slide 6: Expectation of Reimbursement Pressure
| 6 Expectation of Reimbursement Pressure 3% 2013 <1% 2014 2012 Projection of 1-2% Over a 3-Year Period: 2013 - 2015 We expect reimbursement pressure to continue to be moderate between 2015 - 2017 YTD
Slide 7: Investing in Growth: $1B on acquisitions
| 7 Investing in Growth: $1B on 7 acquisitions Guidelines for Assessing Acquisitions Regional Independent Labs Specialty, Boutique Labs Hospital Outreach Converge Solstas ATN (Toxicology) Summit (Wellness) UMass Dignity Steward 2013 - 2014 Acquisitions Strategic Fit NPV ROIC EPS
Slide 8: Invigorate Savings
| 8 Invigorate Savings $- $100 $200 $300 $400 $500 $600 $700 $800 2012 2013 2014 EST ORIGINAL 2011 TARGET TARGET SHARED IN 2012 We achieved our original Phase 1 target a year early and will exceed our revised target by $100 million Run Rate Realized Savings 2017 $1.3B New Target $’s in Millions
Slide 9: Invigorate has Delivered Savings to Offset Recent Headwinds
| 9 Invigorate has Delivered Savings to Offset Recent Headwinds SAVINGS OFFSETS Reimbursement Pressure Wage Inflation Fund Incentive Comp Modest Investments to Restore Growth
Slide 10: Meet or Exceed Our Commitments to Return Cash to Shareholders
| 10 $- $200 $400 $600 $800 $1,000 $1,200 2013 2014 EST Meet or Exceed Our Commitments to Return Cash to Shareholders MAJORITY OF FREE CASH FLOW Return the Majority of Free Cash Flow to Shareholders through Dividends and Share Buybacks Share Buybacks • Repurchased >$1b of shares in past 2 years • Re
Slide 11: Report & Guide on "Cash EPS" in 2015
| 11 Report & Guide on “Cash EPS” in 2015 • Cash EPS = Adjusted Diluted EPS excluding amortization • Consistent with other healthcare companies and largest competitor • Continued investment community interest • Aid assessment of our M&A strategy • Amortization estimated to be ~$0.40 per diluted shar
Slide 12: Making Progress in an Improving Environment
| 12 MODERATE PRESSURE IMPROVING FEWER HEADWINDS REIMBURSEMENT UTILIZATION INVIGORATE Making Progress in an Improving Environment
Slide 13: Outlook
| 13 Outlook 2014 FY Guidance 3-Year CAGR Revenue Increase of ~3.5% 2% to 5% • Includes M&A • Organic growth to accelerate to market levels through period Adjusted Diluted EPS $4.03 - $4.07 8-10% • Excludes share repurchases Adjusted Diluted EPS, Excluding Amortization Coming in 2015 8-10% • Exclude
Slide 14: Key Takeaways
| 14 Key Takeaways Consistent capital structure Invigorate savings continue to be key source of value creation Organic volume and revenue performance continue to improve Commitment remains to return a majority of FCF through dividends & share buybacks
Slide 15: Non-GAAP Reconciliations
| 15 Non-GAAP Reconciliations Adjusted Diluted EPS: Low High Diluted earnings per common share 3.52$ 3.56$ Restructuring and integration charges (a) 0.41 0.41 Other (b) 0.10 0.10 Adjusted diluted EPS 4.03$ 4.07$ (b) Represents pre-tax costs of $19 million principally related to legal matters. (a) Re