Quest Diagnostics Inc. (NYSE:DGX) Q4 2014 Earnings Conference Call - Final Transcript

Jan 29, 2015 • 08:30 am ET

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Quest Diagnostics Inc. (NYSE:DGX) Q4 2014 Earnings Conference Call - Final Transcript

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Presentation
Operator
operator

Welcome to the Quest Diagnostics fourth-quarter and full-year 2014 conference call. At the request of the Company this call is being recorded. The entire contents of the call including the presentation and question-and-answer session that will follow are the copyrighted property of Quest Diagnostics with all rights reserved. Any redistribution, retransmission or rebroadcast of this call in any form without the express written consent of Quest Diagnostics is strictly prohibited. Now I would like to introduce Dan Haemmerle, Executive Director of Investor Relations for Quest Diagnostics.

Executive
Dan Haemmerle

Thank you and Good morning. I am here with Steve Rusckowski, our President and Chief Executive Officer, and Mark Guinan, our Chief Financial Officer.

(Forward-Looking Cautionary Statements)

Our earnings press release is available and the text of our prepared remarks will be available later today in the investor relations quarterly update section of our website at www.QuestDiagnostics.com. A PowerPoint presentation and spreadsheet with our results, supplemental analysis are also available on the website. Now here is Steve Rusckowski.

Executive
Steve Rusckowski

Thanks, Dan, and thanks everyone for joining us today. This morning I will provide you with highlights of the quarter. We will share industry trends and also we will review our progress that we are making executing on our 5-point strategy. Then Mark will provide more detail on the results.

Executive
Steve Rusckowski

and take you through guidance. We continue to make progress on our path forward delivering solid revenue and EPS growth in the fourth quarter and the full year. In the quarter, revenues grew 7% to $1.9 billion, adjusted EPS increased 5% to $1.08 and cash from operations was strong at $303 million. For the full-year 2014, revenues grew 4% to $7.4 billion. Adjusted EPS increased 2.5% to $4.10 a share and we generated $938 million in cash.

Our performance reflects improved execution and a stable business environment. That combined with our ability to generate substantial and predictable cash flow has enabled us to raise our quarterly dividend 15% to $0.38 a share. This is the fourth time we have raised the dividend since 2011. Before I get into our performance, I would like to talk about industry dynamics, specifically utilization, reimbursement and regulation.

To start with in utilization, we continued to see signs of modest increase in utilization. We are encouraged by the progress on exchange enrollment as the result of the Affordable Care Act. During the fourth quarter, we continued to see stability in test volumes on what we are calling a same provider basis. On reimbursement, we will see less government pressure on the clinical lab fee schedule in 2015 than we have seen in the previous two years.

At this time our industry is focused on effectively implementing the Doc Fix legislation also known as Protecting Access to Medicare Act of 2014 or PAMA, which calls for an orderly review of the clinical lab fee schedule. Our industry trade association, the American Clinical Lab Association, ACLA, continues to work closely with the centers for Medicare and Medicaid services on the rulemaking process.

We are