Securities registered pursuant to Section 12(b) of the Act:
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Title of Each Class
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Name of Each Exchange on Which Registered
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Common Stock, $.01 par value per share
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New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act:
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None
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Large accelerated filer
x
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Accelerated filer
o
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Non-accelerated filer
o
(Do not check if a smaller reporting company)
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Smaller reporting company
o
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Emerging growth company
o
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Documents Incorporated by Reference
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Part of Form 10-K into
which incorporated
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Document
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Portions of the registrant's Proxy Statement to be filed by April 30, 2018
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Part III
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Item
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Page
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Item 1.
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Item 1A.
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Item 1B.
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Item 2.
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Item 3.
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Item 4.
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Item 5.
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Item 6.
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Item 7.
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Item 7A.
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Item 8.
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Item 9.
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Item 9A.
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Item 9B.
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Item 10.
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Item 11.
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Item 12.
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Item 13.
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Item 14.
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Item 15.
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Item 16.
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Index to Tables
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Table 1 - Vision, Goals and Values
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3
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Table 2 - Two Point Business Strategy
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3
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Table 3 - Portfolio Growth
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4
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Table 4 - Strategies to Accelerate Growth
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4
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Table 5 - Key Professional Laboratories Services Offerings
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5
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Table 6 - Clinical Franchises
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5
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Table 7 - Consumer-Centric Initiatives to Accelerate Growth
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6
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Table 8 - Recent Consumer-Centric Initiatives
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6
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Table 9 - Five Major Themes to Drive Operational Excellence
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7
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Table 10 - Invigorate Cost Excellence Program - Flagship Programs
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7
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Table 11 - Positioned to Grow and Continue to Lead
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7
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Table 12 - Assets and Capabilities
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9
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Table 13 - New or Enhanced Disease Area Solutions
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10
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Table 14 - Sample Collaborations
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12
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Table 15 - 2017 Medical and Scientific
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13
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Table 16 - 2017 Net Revenues
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14
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Table 17 - Quanum
®
Health Information Technology Solutions
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16
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Table 18 - U.S. Clinical Testing Industry
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17
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Table 19 - Key Trends
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18
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Table 20 - Contributing to Reducing Healthcare Costs and Improving Care
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22
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Table 21 - Customers
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23
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Table 22 - Factors Considered When Selecting a Diagnostics Information Services Provider
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25
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Table 23 - 2017 Medicare and Medicaid Revenues as % of Consolidated Net Revenues
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29
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Table 24 - Key Regulatory Schemes
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30
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Table 25 - Information Available at Our Corporate Governance Webpage
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32
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Table 26 - Executive Officers
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33
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Table 4 - Strategies to Accelerate Growth
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Organic growth through:
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1. Partnerships with health plans, hospital systems and other risk bearing entities
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2. Offering the broadest access to diagnostic innovation
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3. Recognition as the consumer-friendly provider of diagnostic information services
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4. Supporting population health with data analytics and extended care services
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Additionally:
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5. Grow 1-2% per year through accretive, strategic acquisitions
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Table 6 - Clinical Franchises
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Cardiovascular, Metabolic and Endocrinology
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Oncology
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General Health and Wellness
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Prescription Drug Monitoring and Toxicology
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Infectious Diseases and Immunology
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Sports Science and Human Performance
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Neurology
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Women’s and Reproductive Health
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Table 7 - Consumer-Centric Initiatives to Accelerate Growth
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Consistent and superior consumer experience
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Retail consumer partnerships
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Information and connectivity
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Consumer testing offerings
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Table 8 - Recent Consumer-Centric Initiatives
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Enhance patient experience
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• Continued rollout of enhanced patient experience, including real-time payment determination for several major payors and electronic check-in.
• Introduced for consumers lipid testing without the need for fasting.
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Expand convenient access to testing services
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• Partnership with Safeway to expand convenient access to testing services at select Safeway locations across the United States; the number of locations significantly increased in 2017.
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Consumer-initiated testing service
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• QuestDirect
TM
, our consumer-initiated testing service, available in Colorado and Missouri. Consumer-initiated testing also is available in Arizona and Oklahoma through our joint ventures in those states.
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Expand consumer access to test results
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• >4.8 million registered users in our MyQuest
®
health portal and mobile connectivity solution. Implemented MyQuest Advanced Access
®
, which enables patients to access their historical laboratory test results and trends.
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Expand access to basic health care services
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• Launched partnership with Wal-Mart Stores to expand access to basic health care services.
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Expand sports diagnostics offering
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• Continued enhancement and expansion of our Blueprint for Athletes
®
offerings.
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Expand consumer awareness
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• Multi-year global collaboration with AncestryDNA to provide genotyping test services.
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Table 9 - Five Major Themes to Drive Operational Excellence
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Increase digital enablement
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Expand margins through cost excellence program
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Inspire and engage employees
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Transform platform for growth
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Deliver quality and service with Quest Management System
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Table 11 - Positioned to Grow and Continue to Lead
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A foundation of strong operating principles
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Unmatched size, scale and capabilities
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Leader in providing innovative solutions
and diagnostic insights
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Strong focus on quality and providing
a superior customer experience
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Strong collaborator, and strong relationships
with healthcare stakeholders
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Medical and scientific expertise
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Deliver strong value
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•
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Starting in 2012, we have made changes to our senior management team and restructured our organization to eliminate organizational barriers in our core business, provide leadership in defined geographies, eliminate three unnecessary management layers and streamline regional operations. Our organization is designed to align around future growth opportunities, to coordinate upstream and downstream units in our business for seamless execution and to leverage our company-wide infrastructure to gain more capability, value and efficiency.
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•
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We established the Quest Management System to manage our Company. This system provides a foundation for day-to-day management, and includes a common set of best-in-class business performance tools to help us
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•
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We launched our new brand - Action from Insight
TM
- recommitting to a superior customer experience.
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•
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We implemented across our entire organization our Everyday Excellence program, which includes guiding principles to support a superior customer experience and to inspire our employees to be their best every day, with every person and with every customer interaction.
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•
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We (i) offer our Leading Quest Academy, which is designed to strengthen our more senior employee leaders through a highly experiential leadership development program focused on creating a high-performance culture and sharpening the capabilities needed to lead our organization, (ii) offer a leadership training program for our supervisor-level employees and (iii) in 2017 started a new leadership training program for our manager-level employees.
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•
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Reinforcing our commitment to integrity as one of our core values, we updated our Code of Ethics to better align with our brand, goals and vision.
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•
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Employees reported higher engagement levels compared to prior years.
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the outreach laboratory testing business of PeaceHealth Laboratories in the Pacific Northwest;
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•
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the Lewisville, Texas - based laboratory businesses Med Fusion and ClearPoint, which form the basis for our first national center of excellence in precision diagnostics for oncology. As part of that acquisition, we became a preferred provider of advanced oncology diagnostics for the U.S. Oncology Network, consisting of over 1,400 independent, community-based physicians, and a preferred provider of a full range of inpatient and outpatient diagnostic services for 12 hospitals of Baylor Scott & White Health in North Texas;
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•
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the Shiel Medical Laboratory business in the greater New York City area;
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•
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certain assets of California Laboratory Associates, a clinical lab network serving patients and providers in the greater Los Angeles area; and
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•
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Cleveland HeartLab, a leader in innovative diagnostics services for managing cardiovascular disease. We established our national cardiometabolic center of excellence at Cleveland HeartLab's laboratory facility in Cleveland.
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Table 13 - New or Enhanced Disease Area Solutions
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Cardiovascular, Metabolic and Endocrinology
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For all of our cholesterol test services that involve estimates of low-density lipoprotein cholesterol (LDL-C), we introduced a novel LDL-C calculation that improves accuracy of heart disease screening and helps personalize treatment with lipid-lowering medications. The method also does not require patients to fast from food for several hours before testing, enhancing the patient experience.
Through our acquisition of Cleveland HeartLab, we are now offering novel biomarkers for cardiovascular risk assessment and management including MPO, Oxidized LDL and ADMA testing.
We have also implemented a service for health plans, health systems and others that enables them to help close gaps in care for diabetes, using our Quanum
®
offering together with our testing solutions and access points (including patient service centers and mobile resources) to engage patients in their homes and places of employment.
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General Health and Wellness
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We launched our new Blueprint for Wellness
®
solution, which enables physician telemedicine consultation and referral into care.
It also offers additional clinical solutions for participants, such as a diabetes prevention program, colon cancer testing and renal failure services.
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Infectious Diseases and Immunology
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We launched a new genetic marker, HLA-B*58:01, for evaluating risk of severe cutaneous adverse skin reactions to allopurinol, a drug used to treat gout.
We introduced the Xpert
®
MTB/RIF test providing simultaneous detection of both mycobacterium tuberculosis and rifampin resistance mutations. This test can help physicians decide on whether to remove patients with suspected tuberculosis from isolation earlier.
We introduced tree nut component testing, specific IgE blood tests that detect sensitization to specific allergens. Tree nut allergies may elicit severe and even life-threatening reactions in sensitized individuals.
We launched a Systemic Sclerosis Antibody Panel and a Myositis Specific Antibody Panel, providing support for the diagnosis and management of these chronic, multisystem, heterogeneous autoimmune diseases.
We updated our Anti-nuclear Antibody test offering to enable primary care physicians and specialists to order the right tests in sequence in order to enable diagnosis of rheumatologic disease.
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Neurology
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We introduced a novel mass spectrometry test for Alzheimer's biomarkers which offer the most specific assessment of established biomarkers (A Beta 40,42 and ApoE) in the cerebrospinal fluid to guide management, research and clinical trials.
We began to offer a new epilepsy test using next generation sequencing, providing a high quality assessment of all genes known to be involved in the disease.
We initiated implementation of an integrated dementia diagnostic solution based on our collaboration with University of California, San Francisco. This offering integrates laboratory testing, cognitive exam, MRI and clinical evaluation to help primary doctors assess and diagnose dementia to identify treatable cause, shorten time to diagnosis and eliminate waste.
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Oncology
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We updated our offering for assessment of DNA profiling of cancer - IBM Watson
®
Genomics from Quest Diagnostics - to improve performance on the variety of cancer sample types that are tested in the community setting.
We introduced PDL1 testing to be used as a companion diagnostic for immunotherapy in cancer.
We introduced EGFR testing of plasma in cancer patients. This offering enables evaluation of EFGR mutation status of a patient's lung cancer through a simple blood draw, without the need for a tissue biopsy.
In collaboration with Veracyte, we introduced thyroid cancer molecular testing services.
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Prescription Drug Monitoring and Toxicology
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We implemented testing services for common drugs in several additional laboratories, to reduce test turnaround time in response to increasing demand based on the opioid / prescription drug crisis.
We also validated an increased number of our Prescription Drug and Drugs of Abuse testing services on oral fluid samples, offering greater convenience and non-invasive testing for our patients.
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Sports Science and Human Performance
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We expanded and reconfigured the Blueprint for Athletes
TM
service, which gives athletes insights on their own biology to help improve fitness and performance.
We added at-home collection options, including "concierge collection" and the Mitra
®
Microsampling device. We also added custom coaching, to help athletes create game plans to improve performance.
We reconfigured the test services in "stacks" that feature panels of tests with results provided in easy to read action-oriented reports. The stacks include, among others, "Blueprint One" and "Endurance and Conditioning."
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Women’s and Reproductive Health
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We introduced QHerit, a new genetic pan-ethnic carrier screening panel aligned with new medical guidelines. It provides men and women with insights into the genetic risk of passing on heritable disorders to their offspring.
We also introduced Creatine Biosynthesis testing to aid in the diagnosis of genetic disease.
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Cleveland Clinic
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To speed the commercialization of biomarkers on inflammation and other disease areas discovered at Cleveland Clinic, including its Lerner Research Institute; Quest may independently develop test services for these biomarkers.
To demonstrate the clinical and economic value of these and other biomarkers.
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McKesson Specialty Health, U.S. Oncology Network and Texas Oncology
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To enhance and nationally scale a model created by Med Fusion that standardizes clinical care pathways to ensure every patient receives the best possible cancer care. One example is highlighting available diagnostics, such as next-generation sequencing panels to aid therapy selection and monitoring for cancer. This approach guides the physician, according to guidelines and within an electronic health record, to a panel individualized to the patient's cancer type and stage of disease.
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Arnold P. Gold Foundation
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To advance humanism in healthcare. Quest is a founding member of the Gold Corporate Council.
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•
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enhance the customer experience, including ease of use and patient and provider engagement;
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•
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deliver more precise, comprehensive solutions and actionable information;
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•
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provide increased and interactive insights and analytics to patients and providers;
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•
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foster greater adherence to clinical and reimbursement guidelines;
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promote population health solutions;
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tap the potential of large amounts of clinical information; and
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•
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advance the development of precision medicine.
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Customers and payers
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Our customers and payers, including clinicians, health plans, IDNs, ACOs, employers and others, have been consolidating, converging and diversifying. For example, an increased number of hospital systems are considering establishing or have established health insurance plans, and health insurance plans are considering providing or are providing healthcare services. In addition, CVS Health, a leading provider of retail medical clinics and pharmacy benefits management services, has agreed to acquire Aetna, a leading health insurance provider.
Consolidation is increasing pricing transparency and bargaining power, and may encourage internalization of clinical testing.
Physicians frequently now are employed by hospital systems, IDNs, ACOs or large group practices integrated with healthcare systems, instead of organizing physician-owned practices, which is changing the dynamics for whether clinical testing is performed in or outside of a hospital. Physicians and other clinicians also increasingly are being employed by health plans or their affiliates.
Value-based reimbursement is contributing to changes in the healthcare system. ACOs and patient-centered medical homes have grown as a means to deliver patient care. Healthcare services increasingly are being provided by non-traditional providers (
e.g
., physician assistants), in non-traditional venues (
e.g
., retail medical clinics, urgent care centers) and using new technologies (
e.g
., telemedicine).
In addition, federal healthcare reform legislation adopted in 2010, the ACA, is resulting in changes in the way that some healthcare services are purchased and delivered in the United States.
Patients are also our customers. Increasingly, patients are engaged in their own healthcare, being empowered to manage and understand their healthcare and are bearing responsibility for payment for the services provided to them. See also the discussion under the heading
Patients
in Table 21.
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Pricing transparency
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There has been a trend toward greater pricing transparency in the healthcare marketplace.
This transparency, combined with increased patient financial responsibility for medical care, is enhancing purchasing sophistication and changes in behavior in the healthcare marketplace.
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Competition
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The diagnostic information services industry remains fragmented, is highly competitive and is subject to new competition.
Competition is growing from non-traditional competitors. Increased hospital acquisitions of physician practices may enhance clinician ties to hospital-affiliated laboratories and may strengthen their competitive position.
New industry entrants with extensive resources may make acquisitions or expand into our traditional areas of operations.
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Healthcare services delivery
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Healthcare delivery is moving out of hospitals, doctor offices and other traditional locations in which it had been provided. Care is increasingly being provided in new settings, such as out-patient and home settings. For example, see the discussion of
Emerging Retail Healthcare Providers
in Table 21. This dynamic offers new opportunities and challenges for healthcare providers and reflects not only efforts to take advantage of new technologies, but also the focus, discussed in this table above under the heading
Reimbursement pressure; affordability
, on controlling the overall cost of healthcare.
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Table 20 - Contributing to Reducing Healthcare Costs and Improving Care
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• Identifying patients at risk for disease before they require urgent care, hospital treatment or expensive therapies
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• Helping clinicians to target the right medicines for the right patients (those who will benefit from the medicines)
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• Identifying treatment-related side effects
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• Early assessment of the efficacy of a therapy, enabling changes or discontinuation of ineffective therapies
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• Enabling population health management by utilizing diagnostic information, identifying gaps in proven care and delivering targeted solutions to individuals who need care
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• Identification and proactive management of individuals at risk for developing chronic diseases, to decrease progression and associated costs and morbidity
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• Providing telemedicine services along with laboratory testing to help individuals interpret and obtain appropriate advice and referrals into needed care
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Table 21 - Customers
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Health plans including managed care organizations and other health insurance providers
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These customers typically reimburse us as a contracted (or out-of-network) provider on behalf of their members. In certain locations, health plans may delegate to IPAs or other alternative delivery systems (
e.g
., physician hospital organizations, ACOs, patient-centered medical homes) the ability to negotiate for diagnostic information services on behalf of certain members.
Health plans and IPAs often require that diagnostic information services providers accept discounted fee structures or assume all or a portion of the financial risk associated with providing such services through capitated payment arrangements. Under capitated payment arrangements, we provide services at a predetermined monthly reimbursement rate for each covered member, generally regardless of the number or cost of services provided by us. Reimbursement under programs that do not provide for capitated payments is typically negotiated on a fee-for-service basis.
Reimbursement from our five largest health plans totaled approximately 18%, and no one health plan accounted for 10%, of our consolidated net revenues in 2017. Health plans typically negotiate directly or indirectly with a number of diagnostic information services providers, and represent approximately one-half of our total clinical testing volumes and one-half of our net revenues from diagnostic information services. There has been a trend of consolidation among health plans. Some health plans also have narrowed their provider networks.
We are also sometimes a member of a “complementary network.” A complementary network generally is a set of contractual arrangements that a third party will maintain with various providers that provide discounted fees for the benefit of its customers. A member of a health plan may choose to access a non-contracted provider that is a member of a complementary network; if so, the provider will be reimbursed at a rate negotiated by the complementary network.
We attempt to strengthen our relationships with health plans and increase the volume of our services for their members by offering to health plans services and programs that leverage our Company's expertise and resources, including our superior access, extensive test menu, medical staff, data, IT solutions, and wellness and population health management capabilities.
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Clinicians
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Clinicians, including primary care physicians, specialists and physician assistants, requiring diagnostic information services for patients are the primary referral source for our services when patients choose their diagnostic information services provider.
In recent years, there has been a marked increase in the number of physician practices owned by IDNs and hospital systems. There also has been a notable increase in some branches of medicine of the establishment of very large "rolled-up" specialty physician practice groups. Hospitals that own physician practices may require the practices to refer outreach testing to the hospital's affiliated laboratory. Large specialty physician groups may encourage their members to refer testing to other members of the group. In each case, referrals to independent diagnostic services providers may be reduced.
Clinicians determine which laboratory to recommend or use based on a variety of factors, including those set forth in table 22.
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Hospitals
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We believe that we are the industry's leader in servicing hospitals. We provide services to hospitals throughout the United States, including advanced testing services, in some cases helping manage their laboratories and serving as the medical directors of the hospital's histology or clinical laboratory, including through our Professional Laboratory Services offerings.
Hospitals generally maintain an on-site laboratory to perform the significant majority of clinical testing for their patients (inpatients and outpatients) and refer certain testing to outside service providers, which typically charge the hospitals on a negotiated fee-for-service basis. Fee schedules for hospital reference testing services often are negotiated on behalf of hospitals by group purchasing organizations.
Hospitals also provide outreach testing, and historically were able to negotiate higher reimbursement rates with health plans than commercial clinical laboratories for comparable services. They may seek to leverage their relationships with community clinicians by encouraging the clinicians to send their outreach testing to the hospital's laboratory. Increased hospital acquisitions of physician practices may enhance clinician ties to hospital-affiliated laboratories and may strengthen their competitive position.
We also have joint venture arrangements with leading hospitals or IDNs in several metropolitan areas. These joint venture arrangements, which provide diagnostic information services for affiliated hospitals as well as for unaffiliated clinicians and other local healthcare providers, serve as our principal facilities in their service areas. Typically, we have either a majority ownership interest in, or day-to-day management responsibilities for, our joint venture relationships.
In light of continued pressure to reduce systemic healthcare costs, hospitals may change their approach to providing clinical testing services, including by seeking ways to improve profitability or to better utilize their laboratory capacity. We believe that our combination of services positions us to be an attractive partner for hospitals, offering a full range of strategic relationships.
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ACOs and IDNs
|
An ACO is a network of providers and facilities that share financial risk in providing or arranging for the provision of healthcare. An IDN is a network of providers and facilities working together in providing or arranging for the provision of healthcare. ACOs and IDNs have increased in number; their impact on the provision of healthcare services to date has varied.
ACOs and IDNs may exercise operational and financial control over providers across the continuum of care, and may function as a payer. Thus, they may be able to manage the health of a population group within a defined geography, and also may be able to influence the cost and quality of healthcare delivery, for example through owned entities and through ancillary services. ACOs may be encouraged to consider exclusive arrangements with healthcare providers that become part of the ACO, or to limit service providers to the ACO, since members of the ACO share financial risk.
We are actively engaging with ACOs and IDNs to demonstrate the value of our services.
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Employers
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Employers use tests for drugs of abuse to determine an individual's employability and his or her “fitness for duty.” Companies with high employee turnover, safety conscious environments or regulatory testing requirements provide the highest volumes of testing. Factors such as the general economy and job market can impact the utilization of drugs-of-abuse testing.
Employers also are investing in health and wellness services. We meet their needs by providing nationwide access to our customizable biometric and laboratory wellness testing, reporting and analytics, incentive management and flu shot services, and intervention solutions, directly and through health plan and health improvement providers. These services help employers, employees and others manage healthcare costs and capitalize on trends in personalized health.
We seek to grow our employer business through offering new and innovative programs to help them with their goals of (1) maintaining a safe and productive workplace, (2) improving healthcare for employees and (3) lowering healthcare costs for employees and employers.
|
•
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Operational risk - risks arising from systems, processes, people and external events that affect the Company’s operational objectives or fundamental reason for its existence, including: product life-cycle and execution; service quality and performance; information management and data protection and security, including cybersecurity; supply chain and business disruption; and other risks, including human capital and reputation.
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•
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Financial risk - risks arising from the Company’s ability to meet its financial obligations pursuant to its strategic and operational objectives, including exposure to broad market and more specific industry risk that could impact liquidity, interest rate, credit, pricing and reimbursement, and also to internal and external financial reporting.
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•
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Legal and compliance risk - risks arising from government and regulatory environment and action, legal proceedings and compliance with integrity policies and procedures.
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•
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Strategic risk - risks that will impede the Company’s plan to achieve its mission and vision and apply its core values, including changes in the broad market and Company's industry, business development and restructuring activities, competitive threats and practices, technology and product innovation, and public policy.
|
•
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“Client” fees charged to physicians, hospitals and institutions for which services are performed on a wholesale basis and which are billed on a monthly basis.
|
•
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“Patient” fees charged to individual patients and certain third-party payers on a claim-by-claim basis.
|
Physicians
|
Our pathologists are required to hold a valid license to practice medicine in the jurisdiction in which they practice.
Many of our pathologists enter into an employment agreement. These agreements have varying terms, but generally can be terminated at any time, upon advance notice. Most of the agreements contain covenants generally limiting the activities of the pathologist within a defined geographic area for a limited period of time after termination of employment; the enforceability of these covenants may be limited under state law.
Several jurisdictions, including some in which our businesses are located, prohibit business corporations from engaging in the practice of medicine. In certain jurisdictions, business corporations are prohibited from employing licensed healthcare professionals to provide services on behalf of the corporation; these laws vary. In some jurisdictions, anatomic pathology services are delivered through physician-owned entities that employ the practicing pathologists. The manner in which licensed physicians can be organized to perform medical services may be governed by the laws of the jurisdictions in which medical services are provided and by the medical boards or other entities authorized by these jurisdictions to oversee the practice of medicine.
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Privacy and Security of Health and Personal Information
|
We are subject to laws and regulations regarding protecting the security and privacy of certain healthcare and personal information, including the federal Health Insurance Portability and Accountability Act and the regulations thereunder, which establish (i) a complex regulatory framework including requirements for safeguarding protected health information and (ii) comprehensive federal standards regarding the uses and disclosures of protected health information. In addition, in May 2018, the General Data Protection Regulation will supersede current European Union data protection legislation, impose more stringent European Union data protection requirements, and provide greater penalties for noncompliance.
A healthcare provider may be required to notify individuals or the government if the provider discovers certain breaches of personal information or protected health information.
|
Drug Testing; Controlled Substances
|
All U.S. laboratories that perform drug testing for certain public sector employees and employees of certain federally regulated businesses are required to be certified as meeting the detailed performance and quality standards of the Substance Abuse and Mental Health Services Administration.
To obtain access to controlled substances used to perform drugs-of-abuse testing in the United States, laboratories must be licensed by the Drug Enforcement Administration.
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•
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increase our administrative, billing or other operating costs;
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•
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decrease the amount of reimbursement related to diagnostic information services performed;
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•
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damage our reputation; or
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•
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adversely affect important business relationships with third parties.
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Table 26 - Executive Officers
|
|
Name, Age, Title
|
Background
|
Stephen H. Rusckowski (60)
Chairman of the Board, President and Chief Executive Officer
|
Mr. Rusckowski joined the Company in May 2012 as President and Chief Executive Officer and became Chairman of the Board on January 1, 2017. From October 2006 until he joined the Company, he was Chief Executive Officer of Philips Healthcare, the largest unit of Royal Philips Electronics, and a member of the Board of Management of Royal Philips Electronics and its Executive Committee. Previously, he was CEO of the Imaging Systems business of Royal Phillips Electronics.
Before joining Philips in 2001, Mr. Rusckowski held numerous management positions with the healthcare division of Hewlett-Packard/Agilent Technologies.
Mr. Rusckowski has been a director of the Company since May 2012. He has been a director of Xerox Corporation since February 2015, and was a director of Covidien plc from December 2013 to January 2015. Mr. Rusckowski served as Chairman of the American Clinical Laboratory Association from 2013-2016.
|
Jon R. Cohen, M.D. (63)
Senior Vice President and Group Executive - Diagnostic Solutions
|
Dr. Cohen joined the company in March 2009 and served as Chief Medical Officer from then until January 2017. From May 2011 to January 2013, he also had responsibility for Hospital Services. In January 2013, Dr. Cohen assumed responsibility for anatomic pathology services, sports science and human performance and professional laboratory services, and he was responsible for the oncology clinical franchise from January 2013 until January 2017. From February 2014 to July 2015, he had responsibility for our clinical trials business.
Dr. Cohen served as the Senior Adviser to New York Governor David Patterson from 2008 to 2009, where he was responsible for all policy and strategic planning.
Previously, Dr. Cohen was a managing director, health industries advisory services, at PricewaterhouseCoopers LLP, and spent 21 years with North Shore-Long Island Jewish Health System, one of the nation's largest not-for-profit health systems, including serving as its Chief Medical Officer from 2000 to 2006.
|
Everett V. Cunningham (51)
Senior Vice President, Commercial
|
Mr. Cunningham is responsible for the commercial organization for the Company's Diagnostic Information Services business.
Prior to joining the Company in October 2012, he spent 21 years with Pfizer, Inc., where he served from June 2011 to October 2012 as Regional President, Established Products, Asia. From 2009 to 2011, Mr. Cunningham served as Regional President, West Business Unit, Primary Care. From 2007 to 2009, he served as Vice President, Human Resources, Corporate Groups. Before that Mr. Cunningham served Pfizer in a series of sales and leadership and general management roles.
|
James E. Davis (55)
Executive Vice President, General Diagnostics
|
In January 2017, Mr. Davis became Executive Vice President, General Diagnostics; previously he was Senior Vice President and Group Executive - Regional Businesses. In January 2015, he assumed responsibility for the general management of the Company's regional Diagnostic Information Services business. Mr. Davis was responsible for our products business from February 2014 until 2016. From February 2014 to January 2015, he was responsible for operations for the Company's Diagnostic Information Services business. He joined Quest Diagnostics in April 2013 as Senior Vice President, Diagnostics Solutions, with responsibility for the healthcare information technology, risk assessment, clinical trials, diagnostic products and employer solutions businesses.
Prior to joining Quest Diagnostics, from March 2012 to April 2013, Mr. Davis served as Lead Director, and then as Chief Executive Officer, of InSightec, Inc., a medical device company that designs and develops ultrasound ablation devices that are guided by magnetic resonance imaging systems.
Previously, Mr. Davis held a number of senior positions in General Electric’s healthcare business, including from 2007 to 2012 as Vice President and General Manager of GE Healthcare’s magnetic resonance imaging business. Prior to joining GE Healthcare, Mr. Davis held leadership positions in GE’s aviation business and led the development of strategic and operational improvement initiatives for clients of McKinsey & Company, Inc.
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Catherine T. Doherty (55)
Senior Vice President and Group Executive - Clinical Franchise Solutions and Marketing
|
Since January 2013, Ms. Doherty has been responsible for overseeing the development of clinical franchise solutions in the areas of cardiovascular, general health and wellness, infectious disease and immunology, and prescription drug monitoring and toxicology, as well as enterprise-wide marketing. From January 2013 to January 2017, she also was responsible for clinical franchise solutions in the areas of neurology and women's health. In February 2014, Ms. Doherty assumed responsibility for the employer solutions and risk assessment businesses. From February 2014 to January 2017, she also was responsible for the healthcare information technology business.
From May 2011 to December 2012, she served as Senior Vice President, Physician Services. Prior to May 2011, Ms. Doherty held a variety of positions of increasing responsibility since joining the Company in 1990, including Vice President, Hospital Services; Vice President, Office of the Chairman; Vice President, Finance and Administration for the Hospital business; Vice President, Communications and Investor Relations; and Chief Accounting Officer.
|
Carrie Eglinton Manner (43)
Senior Vice President, Advanced Diagnostics
|
Ms. Eglinton Manner joined the Company in January 2017. She is responsible for the Company's advanced testing activities, including overseeing the development of clinical franchise solutions in the areas of neurology, oncology and women's health.
Previously, Ms. Eglinton Manner spent over 20 years in various leadership roles in healthcare businesses at General Electric. From 2015 to 2016, she served as President and CEO of the Detection and Guidance Solutions business, delivering advanced x-ray technologies spanning the continuum of healthcare. From 2013 to 2015, Ms. Eglinton Manner served as President and CEO of OEC Surgical Mobile C-arm systems. She was President and CEO of General Electric's diagnostic pathology laboratory services business from 2012 to 2013, and President of the Maternal Infant Care Business from 2009 to 2012.
|
Mark J. Guinan (56)
Executive Vice President and Chief Financial Officer
|
Mr. Guinan joined the Company in July 2013. From 2010 until joining Quest Diagnostics in 2013, he served as Chief Financial Officer for Hill-Rom Holdings Inc., a manufacturer and provider of medical technologies and related services for the health care industry.
Previously, he had served in a number of finance and operations roles in a long career at Johnson & Johnson including 2009 to 2010 as Vice President, Chief Procurement Officer, and 2005 to 2009 as Vice President, Group Finance Pharmaceuticals. Before joining Johnson & Johnson in 1997, he held a number of financial roles at Procter & Gamble.
|
Michael E. Prevoznik (56)
Senior Vice President and General Counsel
|
Mr. Prevoznik joined the Company as Vice President and General Counsel in August 1999. In 2003, he assumed responsibility for governmental affairs. From 1999 until April 2009, Mr. Prevoznik also had responsibility for the Company's Compliance Department.
In addition, from April 2011 to January 2017, he had management responsibility for the Company's diagnostic information services activities outside the U.S., and from April 2011 to January 2013, he had management responsibility for the Company's clinical trials business.
Prior to joining the Company, Mr. Prevoznik served in positions of increasing responsibility within the compliance organization at SmithKline Beecham, most recently as Vice President, Compliance, with responsibility for coordinating all SmithKline Beecham compliance activities worldwide.
|
This Report also includes forward-looking statements that involve risks or uncertainties. Our results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including the risks we face described below and elsewhere. See “Cautionary Factors that May Affect Future Results” on page 43.
|
•
|
loss of key customers or employees;
|
•
|
difficulty in standardizing information and other systems;
|
•
|
difficulty in consolidating facilities and infrastructure;
|
•
|
failure to maintain the quality or timeliness of services that our Company has historically provided;
|
•
|
diversion of management's attention from the day-to-day business of our Company as a result of the need to deal with the foregoing disruptions and difficulties; and
|
•
|
the added costs of dealing with such disruptions.
|
•
|
billing and reimbursement of clinical testing;
|
•
|
certification or licensure of clinical laboratories;
|
•
|
the anti-self-referral and anti-kickback laws and regulations;
|
•
|
the laws and regulations administered by the FDA;
|
•
|
the corporate practice of medicine;
|
•
|
operational, personnel and quality requirements intended to ensure that clinical testing services are accurate, reliable and timely;
|
•
|
physician fee splitting;
|
•
|
relationships with physicians and hospitals;
|
•
|
safety and health of laboratory employees; and
|
•
|
handling, transportation and disposal of medical specimens, infectious and hazardous waste and radioactive materials.
|
•
|
diversion of management time and attention;
|
•
|
expenditure of large amounts of cash on legal fees, costs and payment of damages;
|
•
|
limitations on our ability to continue some of our operations;
|
•
|
enforcement actions, fines and penalties or the assertion of private litigation claims and damages;
|
•
|
decreased demand for our services; and/or
|
•
|
injury to our reputation.
|
•
|
cease developing, performing or selling solutions or services that incorporate the challenged intellectual property;
|
•
|
obtain and pay for licenses from the holder of the infringed intellectual property right;
|
•
|
redesign or re-engineer our tests;
|
•
|
change our business processes; or
|
•
|
pay substantial damages, court costs and attorneys' fees, including potentially increased damages for any infringement held to be willful.
|
•
|
changes in the local economic environment;
|
•
|
political instability;
|
•
|
social changes;
|
•
|
intellectual property legal protections and remedies;
|
•
|
trade regulations;
|
•
|
procedures and actions affecting approval, production, pricing, reimbursement and marketing of services;
|
•
|
exchange controls;
|
•
|
attracting and retaining qualified employees;
|
•
|
local market practices;
|
•
|
export and import controls;
|
•
|
weak legal systems which may affect our ability to enforce contractual rights;
|
•
|
changes in local laws or regulations; and
|
•
|
potentially longer payment and collection cycles.
|
(a)
|
Heightened competition from commercial clinical testing companies, hospitals, physicians and others.
|
(b)
|
Increased pricing pressure from customers and payers.
|
(c)
|
A decline in economic conditions.
|
(d)
|
Impact of changes in payment mix, including any shift from fee-for-service to discounted, capitated or bundled fee arrangements.
|
(e)
|
Adverse actions by government or other third-party payers, including healthcare reform that focuses on reducing healthcare costs but does not recognize the value and importance to healthcare of clinical testing or innovative solutions, unilateral reduction of fee schedules payable to us, competitive bidding, and an increase in the practice of negotiating for exclusive arrangements that involve aggressively priced capitated or fee-for-service payments by health insurers or other payers.
|
(f)
|
The impact upon our testing volume and collected revenue or general or administrative expenses resulting from our compliance with Medicare and Medicaid administrative policies and requirements of third-party payers. These include:
|
(1)
|
the requirements of payors to provide diagnosis codes for many commonly ordered tests and the possibility that third-party payers will increasingly adopt similar requirements;
|
(2)
|
inability to obtain from patients a valid advance beneficiary notice form for tests that cannot be billed without prior receipt of the form;
|
(3)
|
increased challenges in operating as a non-contracted provider with respect to health plans;
|
(4)
|
the impact of additional or expanded limited coverage policies and limits on the allowable number of test units; and
|
(5)
|
the impact of increased prior authorization programs.
|
(g)
|
Adverse results from pending or future government investigations, lawsuits or private actions. These include, in particular, monetary damages, loss or suspension of licenses, and/or suspension or exclusion from the Medicare and Medicaid programs and/or criminal penalties.
|
(h)
|
Failure to efficiently integrate acquired businesses and to manage the costs related to any such integration, or to retain key technical, professional or management personnel.
|
(i)
|
Denial, suspension or revocation of CLIA certification or other licenses for any of our clinical laboratories under the CLIA standards, revocation or suspension of the right to bill the Medicare and Medicaid programs or other adverse regulatory actions by federal, state and local agencies.
|
(j)
|
Changes in and complexity of federal, state or local laws or regulations, including changes that result in new or increased federal or state regulation of commercial clinical laboratories, tests developed by commercial clinical laboratories or other products or services that we offer or activities in which we are engaged, including regulation by the FDA.
|
(k)
|
Inability to achieve expected benefits from our acquisitions of other businesses.
|
(l)
|
Inability to achieve additional benefits from our business performance tools and efficiency initiatives.
|
(m)
|
Adverse publicity and news coverage about the diagnostic information services industry or us.
|
(n)
|
Computer or other IT system or IT security failures that affect our ability to perform testing, report test results or properly bill customers, or result in the disclosure of confidential information, including potential failures resulting from implementing common IT systems and other system conversions, telecommunications failures, malicious human acts (such as electronic break-ins or computer viruses) or natural disasters.
|
(o)
|
Development of technologies that substantially alter the practice of clinical testing, including technology changes that lead to the development of more convenient or cost-effective testing, or testing to be performed outside of a commercial clinical laboratory, such as (1) point-of-care testing that can be performed by physicians in their offices, (2) advanced testing that can be performed by hospitals in their own laboratories or (3) home testing that can be carried out without requiring the services of clinical laboratories.
|
(p)
|
Negative developments regarding intellectual property and other property rights that could prevent, limit or interfere with our ability to develop, perform or sell our tests or operate our business. These include:
|
(1)
|
Issuance of patents or other property rights to our competitors or others; and
|
(2)
|
Inability to obtain or maintain adequate patent or other proprietary rights for our products and services or to successfully enforce our proprietary rights.
|
(q)
|
Development of tests by our competitors or others which we may not be able to license, or usage of our technology or similar technologies or our trade secrets or other intellectual property by competitors, any of which could negatively affect our competitive position.
|
(r)
|
Regulatory delay or inability to commercialize newly developed or licensed tests or technologies or to obtain appropriate reimbursements for such tests.
|
(s)
|
Failure to properly bill for our services or to obtain appropriate payments for services that we do bill.
|
(t)
|
Changes in interest rates and changes in our credit ratings from Standard & Poor's, Moody's Investor Services or Fitch Ratings causing an unfavorable impact on our cost of and access to capital.
|
(u)
|
Inability to hire or retain qualified or key senior management personnel.
|
(v)
|
Terrorist and other criminal activities, hurricanes, earthquakes or other natural disasters, and health pandemics, which could affect our customers, transportation or systems, or our facilities, and for which insurance may not adequately reimburse us.
|
(w)
|
Difficulties and uncertainties in the discovery, development, regulatory environment and/or marketing of new services or solutions or new uses of existing tests.
|
(x)
|
Failure to adapt to changes in the healthcare system and healthcare delivery, including those stemming from the ACA (or its repeal, amendment or replacement), PAMA, trends in utilization of the healthcare system and increased patient financial responsibility for services.
|
(y)
|
Results and consequences of governmental inquiries.
|
(bb)
|
Political, legal, operational and other changes and challenges in international markets.
|
Location
|
|
Leased or Owned
|
Sacramento, California (laboratory)
|
|
Leased
|
West Hills, California (laboratory)
|
|
Leased
|
San Juan Capistrano, California (laboratory)
|
|
Owned
|
Tampa, Florida (laboratory)
|
|
Owned
|
Atlanta, Georgia (laboratory)
|
|
Owned
|
Chicago, Illinois (2) (laboratories)
|
|
One owned, one leased
|
Marlborough, Massachusetts (laboratories)
|
|
Leased
|
Baltimore, Maryland (laboratory)
|
|
Owned
|
Teterboro, New Jersey (laboratory)
|
|
Owned
|
Philadelphia, Pennsylvania (laboratory)
|
|
Leased
|
Dallas, Texas (laboratory)
|
|
Leased
|
Chantilly, Virginia (laboratory)
|
|
Leased
|
Lenexa, Kansas (laboratory)
|
|
Owned
|
Greensboro, North Carolina (laboratory)
|
|
Leased
|
Lewisville, Texas (laboratory)
|
|
Leased
|
Cleveland, Ohio (laboratory)
|
|
Leased
|
|
|
Dividends
Declared
|
|||||||||
|
High
|
Low
|
|
||||||||
2016
|
|
|
|
|
|
||||||
First Quarter
|
$
|
72.64
|
|
|
$
|
59.66
|
|
|
$
|
0.40
|
|
Second Quarter
|
81.41
|
|
|
70.92
|
|
|
0.40
|
|
|||
Third Quarter
|
86.85
|
|
|
80.27
|
|
|
0.40
|
|
|||
Fourth Quarter
|
93.57
|
|
|
79.12
|
|
|
0.45
|
|
|||
|
|
|
|
|
|
||||||
2017
|
|
|
|
|
|
||||||
First Quarter
|
$
|
100.00
|
|
|
$
|
90.13
|
|
|
$
|
0.45
|
|
Second Quarter
|
111.87
|
|
|
96.91
|
|
|
0.45
|
|
|||
Third Quarter
|
112.97
|
|
|
91.67
|
|
|
0.45
|
|
|||
Fourth Quarter
|
102.62
|
|
|
90.10
|
|
|
0.45
|
|
ISSUER PURCHASES OF EQUITY SECURITIES
|
||||||||||||||
Period
|
|
Total Number of
Shares
Purchased
|
|
Average Price
Paid per Share
|
|
Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs
|
|
Approximate
Dollar Value of
Shares that May
Yet Be Purchased
Under the Plans
or Programs
(in thousands)
|
||||||
October 1, 2017 – October 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Share Repurchase Program (A)
|
|
41,965
|
|
|
$
|
95.32
|
|
|
41,965
|
|
|
$
|
1,013,116
|
|
Employee Transactions (B)
|
|
936
|
|
|
$
|
91.20
|
|
|
N/A
|
|
|
N/A
|
|
|
November 1, 2017 – November 30, 2017
|
|
|
|
|
|
|
|
|
||||||
Share Repurchase Program (A)
|
|
860,463
|
|
|
$
|
92.97
|
|
|
860,463
|
|
|
$
|
933,116
|
|
Employee Transactions (B)
|
|
179
|
|
|
$
|
93.75
|
|
|
N/A
|
|
|
N/A
|
|
|
December 1, 2017 – December 31, 2017
|
|
|
|
|
|
|
|
|
||||||
Share Repurchase Program (A)
|
|
162,496
|
|
|
$
|
98.46
|
|
|
162,496
|
|
|
$
|
917,117
|
|
Employee Transactions (B)
|
|
763
|
|
|
$
|
96.15
|
|
|
N/A
|
|
|
N/A
|
|
|
Total
|
|
|
|
|
|
|
|
|
||||||
Share Repurchase Program (A)
|
|
1,064,924
|
|
|
$
|
93.90
|
|
|
1,064,924
|
|
|
$
|
917,117
|
|
Employee Transactions (B)
|
|
1,878
|
|
|
$
|
93.45
|
|
|
N/A
|
|
|
N/A
|
|
(A)
|
Since the share repurchase program's inception in May 2003, our Board of Directors has authorized $8.0 billion of share repurchases of our common stock through
December 31, 2017
. The share repurchase authority has no set expiration or termination date.
|
(B)
|
Includes: (1) shares delivered or attested to in satisfaction of the exercise price and/or tax withholding obligations by holders of stock options (granted under the Company's Amended and Restated Employee Long-Term Incentive Plan) who exercised options; and (2) shares withheld (under the terms of grants under the Long-Term Incentive Plan) to offset tax withholding obligations that occur upon the delivery of outstanding common shares underlying restricted share units and performance share units.
|
|
|
Closing DGX Price
|
|
Total Shareholder Return
|
|
Performance Graph Values
|
|||||||||||||||||
Date
|
|
|
DGX
|
|
S&P 500
|
|
S&P 500 H.C.
|
|
DGX
|
|
S&P 500
|
|
S&P 500 H.C.
|
||||||||||
12/31/2013
|
|
$53.54
|
|
(6.24
|
)%
|
|
32.39
|
%
|
|
35.05
|
%
|
|
$
|
93.76
|
|
|
$
|
132.39
|
|
|
$
|
135.05
|
|
12/31/2014
|
|
$67.06
|
|
28.06
|
%
|
|
13.69
|
%
|
|
25.34
|
%
|
|
$
|
120.06
|
|
|
$
|
150.51
|
|
|
$
|
169.27
|
|
12/31/2015
|
|
$71.14
|
|
8.35
|
%
|
|
1.38
|
%
|
|
6.89
|
%
|
|
$
|
130.09
|
|
|
$
|
152.59
|
|
|
$
|
180.93
|
|
12/30/2016
|
|
$91.90
|
|
31.89
|
%
|
|
11.96
|
%
|
|
(2.69
|
)%
|
|
$
|
171.58
|
|
|
$
|
170.84
|
|
|
$
|
176.06
|
|
12/29/2017
|
|
$98.49
|
|
9.16
|
%
|
|
21.83
|
%
|
|
22.08
|
%
|
|
$
|
187.30
|
|
|
$
|
208.14
|
|
|
$
|
214.93
|
|
See page
54
.
|
See page
59
.
|
See page
78
.
|
(a)
|
Documents filed as part of this Report.
|
1.
|
Index to financial statements and supplementary data filed as part of this Report.
|
Item
|
Page
|
Financial Statements
|
|
2.
|
Financial Statement Schedule.
|
3.
|
Exhibits
|
(b)
|
Exhibits filed as part of this Report.
|
(c)
|
None.
|
|
QUEST DIAGNOSTICS INCORPORATED
|
|
|
(Registrant)
|
|
|
|
|
|
By:
|
/s/Stephen H. Rusckowski
|
|
|
Stephen H. Rusckowski
|
|
|
Chairman of the Board, President and Chief Executive Officer
|
Signature
|
|
Capacity
|
/s/Stephen H. Rusckowski
Stephen H. Rusckowski
|
|
Chairman of the Board, President and Chief Executive Officer
(Principal Executive Officer)
|
|
|
|
/s/Mark J. Guinan
Mark J. Guinan
|
|
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
|
|
|
|
/s/Robert A. Klug
Robert A. Klug
|
|
Vice President, Corporate Controller and Chief Accounting Officer
(Principal Accounting Officer)
|
|
|
|
/s/Jenne K. Britell, Ph.D.
Jenne K. Britell, Ph.D.
|
|
Director
|
|
|
|
/s/Vicky B. Gregg
Vicky B. Gregg
|
|
Director
|
|
|
|
/s/Jeffrey M. Leiden, M.D., Ph. D.
Jeffrey M. Leiden, M.D., Ph. D.
|
|
Director
|
|
|
|
/s/Timothy L. Main
Timothy L. Main
|
|
Director
|
|
|
|
/s/Gary M. Pfeiffer
Gary M. Pfeiffer
|
|
Director
|
|
|
|
/s/Timothy M. Ring
Timothy M. Ring
|
|
Director
|
|
|
|
/s/Daniel C. Stanzione, Ph.D.
Daniel C. Stanzione, Ph.D.
|
|
Director
|
|
|
|
/s/Gail R. Wilensky, Ph.D.
Gail R. Wilensky, Ph.D.
|
|
Director
|
|
Year Ended December 31,
|
||||||||||||||||||
|
2017
|
|
2016
|
|
2015
|
|
2014
|
|
2013
|
||||||||||
|
(dollars in millions, except per share data)
|
||||||||||||||||||
Operations Data:
|
(a) (b) (c)
|
|
(a) (d) (e)
|
|
(a) (f) (g)
|
|
(a) (h) (i)
|
|
(a) (j) (k)
|
||||||||||
Net revenues
|
$
|
7,709
|
|
|
$
|
7,515
|
|
|
$
|
7,493
|
|
|
$
|
7,435
|
|
|
$
|
7,146
|
|
Operating income
|
1,165
|
|
|
1,277
|
|
|
1,399
|
|
|
983
|
|
|
1,475
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Income from continuing operations
|
824
|
|
|
696
|
|
|
753
|
|
|
587
|
|
|
848
|
|
|||||
Income from discontinued operations, net of taxes
|
—
|
|
|
—
|
|
|
—
|
|
|
5
|
|
|
35
|
|
|||||
Net income
|
824
|
|
|
696
|
|
|
753
|
|
|
592
|
|
|
883
|
|
|||||
Less: Net income attributable to noncontrolling interests
|
52
|
|
|
51
|
|
|
44
|
|
|
36
|
|
|
34
|
|
|||||
Net income attributable to Quest Diagnostics
|
$
|
772
|
|
|
$
|
645
|
|
|
$
|
709
|
|
|
$
|
556
|
|
|
$
|
849
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Amounts attributable to Quest Diagnostics' stockholders:
|
|
|
|
|
|
|
|
|
|
||||||||||
Income from continuing operations
|
$
|
772
|
|
|
$
|
645
|
|
|
$
|
709
|
|
|
$
|
551
|
|
|
$
|
814
|
|
Income from discontinued operations, net of taxes
|
—
|
|
|
—
|
|
|
—
|
|
|
5
|
|
|
35
|
|
|||||
Net income
|
$
|
772
|
|
|
$
|
645
|
|
|
$
|
709
|
|
|
$
|
556
|
|
|
$
|
849
|
|
Earnings per share attributable to Quest Diagnostics' common stockholders - basic:
|
|
|
|
|
|
|
|
|
|
||||||||||
Income from continuing operations
|
$
|
5.63
|
|
|
$
|
4.58
|
|
|
$
|
4.92
|
|
|
$
|
3.80
|
|
|
$
|
5.35
|
|
Income from discontinued operations
|
—
|
|
|
—
|
|
|
—
|
|
|
0.03
|
|
|
0.23
|
|
|||||
Net income
|
$
|
5.63
|
|
|
$
|
4.58
|
|
|
$
|
4.92
|
|
|
$
|
3.83
|
|
|
$
|
5.58
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Earnings per share attributable to Quest Diagnostics' common stockholders - diluted:
|
|
|
|
|
|
|
|
|
|
||||||||||
Income from continuing operations
|
$
|
5.50
|
|
|
$
|
4.51
|
|
|
$
|
4.87
|
|
|
$
|
3.78
|
|
|
$
|
5.31
|
|
Income from discontinued operations
|
—
|
|
|
—
|
|
|
—
|
|
|
0.03
|
|
|
0.23
|
|
|||||
Net income
|
$
|
5.50
|
|
|
$
|
4.51
|
|
|
$
|
4.87
|
|
|
$
|
3.81
|
|
|
$
|
5.54
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Dividends per common share
|
$
|
1.80
|
|
|
$
|
1.65
|
|
|
$
|
1.52
|
|
|
$
|
1.32
|
|
|
$
|
1.20
|
|
|
Year Ended December 31,
|
||||||||||||||||||
|
2017
|
|
2016
|
|
2015
|
|
2014
|
|
2013
|
||||||||||
|
(dollars in millions)
|
||||||||||||||||||
Balance Sheet Data (at end of year):
|
(a) (b) (c)
|
|
(a) (d) (e)
|
|
(a) (f) (g)
|
|
(a) (h) (i)
|
|
(a) (j) (k)
|
||||||||||
Cash and cash equivalents
|
$
|
137
|
|
|
$
|
359
|
|
|
$
|
133
|
|
|
$
|
192
|
|
|
$
|
187
|
|
Total assets
|
10,503
|
|
|
10,100
|
|
|
9,962
|
|
|
9,857
|
|
|
8,930
|
|
|||||
Long-term debt
|
3,748
|
|
|
3,728
|
|
|
3,492
|
|
|
3,224
|
|
|
3,102
|
|
|||||
Total debt
|
3,784
|
|
|
3,734
|
|
|
3,651
|
|
|
3,742
|
|
|
3,314
|
|
|||||
Redeemable noncontrolling interest
|
80
|
|
|
77
|
|
|
70
|
|
|
—
|
|
|
—
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Other Data:
|
|
|
|
|
|
|
|
|
|
||||||||||
Net cash provided by operating activities
|
$
|
1,175
|
|
|
$
|
1,069
|
|
|
$
|
821
|
|
|
$
|
944
|
|
|
$
|
667
|
|
Net cash (used in) provided by investing activities
|
(805
|
)
|
|
(152
|
)
|
|
(362
|
)
|
|
(1,025
|
)
|
|
328
|
|
|||||
Net cash (used in) provided by financing activities
|
(592
|
)
|
|
(691
|
)
|
|
(518
|
)
|
|
86
|
|
|
(1,121
|
)
|
|||||
Capital expenditures
|
252
|
|
|
293
|
|
|
263
|
|
|
308
|
|
|
231
|
|
|||||
Purchases of treasury stock
|
465
|
|
|
590
|
|
|
224
|
|
|
132
|
|
|
1,037
|
|
|||||
Dividends paid
|
247
|
|
|
223
|
|
|
212
|
|
|
187
|
|
|
185
|
|
(a)
|
During the third quarter of 2006, we completed the wind down of NID, a test kit manufacturing subsidiary. As a result, the NID operations have been classified as discontinued operations for all periods presented. We will continue to report NID as a discontinued operation until uncertain tax benefits associated with NID are resolved.
|
(b)
|
On May 1, 2017, we completed the acquisition of the outreach laboratory service business of PeaceHealth Laboratories ("PHL"). On July 14, 2017, we completed the acquisition of Med Fusion, LLC and Clearpoint Diagnostic Laboratories, LLC ("Med Fusion"). On September 28, 2017, we completed the acquisition of the outreach laboratory service businesses of two hospitals of Hartford HealthCare Corporation ("HHC"), The William W. Backus Hospital and The Hospital of Central Connecticut. On December 1, 2017, we completed the acquisition of Cleveland HeartLab, Inc. ("CHL"). On December 7, 2017, we completed the acquisition of certain assets of the clinical and anatomic pathology laboratory business of Shiel Holdings, LLC ("Shiel"). Consolidated operating results for 2017 include the results of operations of PHL, Med Fusion, HHC, CHL and Shiel subsequent to the closing of the applicable acquisition. For further details regarding our acquisitions, see Note 5 to the consolidated financial statements.
|
(c)
|
Operating income included:
|
•
|
pre-tax charges of $105 million, primarily associated with systems conversions, integration and workforce reductions incurred in connection with further restructuring and integrating our business; and
|
•
|
pre-tax charges of $12 million, primarily a result of non-cash asset impairment charges and incremental costs incurred as a result of hurricanes and costs incurred related to certain legal matters.
|
•
|
a net pre-tax gain of $2 million, primarily a result of a gain on the sale of an interest in an equity method investment partially offset by non-cash asset impairment charges associated with an investment;
|
•
|
$1 million of pre-tax restructuring and integration charges associated with our Q
2
Solutions joint venture;
|
•
|
a provisional estimated income tax benefit of $106 million associated with the Tax Cuts and Jobs Act, including a deferred income tax benefit of $115 million primarily due to the remeasurement of our net deferred tax liabilities and reserves at the new combined federal and state tax rate, partially offset by $9 million of current tax expense primarily due to the mandatory repatriation toll charge on undistributed foreign earnings and profits;
|
•
|
excess tax benefits associated with stock-based compensation arrangements of
$37 million
; and
|
•
|
income tax expense of $3 million primarily a result of recording a valuation allowance against certain net operating loss carryforwards in a geography impacted by hurricanes.
|
(d)
|
On February 29, 2016, we completed the acquisition of the outreach laboratory service business of Clinical Laboratory Partners, LLC ("CLP"), a wholly-owned subsidiary of HHC. Consolidated operating results for 2016 include the results of operations of CLP subsequent to the closing of the acquisition. On May 13, 2016, we completed the Focus Sale: our Focus Diagnostics products business has not been classified as a discontinued operation. For further details regarding dispositions, see Note 6 to the consolidated financial statements.
|
(e)
|
Operating income included:
|
•
|
a pre-tax gain of $118 million associated with the Focus Sale;
|
•
|
pre-tax charges of $78 million, primarily associated with systems conversions and integration incurred in connection with further restructuring and integrating our business; and
|
•
|
a net pre-tax gain of $7 million, primarily a result of a non-taxable gain on an escrow recovery associated with an acquisition, partially offset by costs associated with winding down subsidiaries, non-cash asset impairment charges and costs incurred related to certain legal matters.
|
•
|
income tax expense of $84 million associated with the Focus Sale, consisting of $91 million of current income tax expense and a deferred income tax benefit of $7 million;
|
•
|
$48 million of pre-tax charges on the retirement of debt associated with the March 2016 cash tender offer and the related income tax benefit of $18 million;
|
•
|
non-cash asset impairment charges of $7 million associated with certain investments;
|
•
|
$4 million of pre-tax restructuring and integration charges associated with our Q
2
Solutions joint venture; and
|
•
|
excess tax benefits associated with stock-based compensation arrangements of
$9 million
.
|
•
|
$47 million of pre-tax cash charges, or $30 million after the related cash tax benefit, on the retirement of debt associated with the March 2016 cash tender offer;
|
•
|
$54 million of proceeds received from the termination of interest rate swap agreements; and
|
•
|
$91 million of income taxes paid in connection with the Focus Sale.
|
(f)
|
On August 3, 2015, we completed the acquisition of MemorialCare Health System's laboratory outreach business ("MemorialCare"). On November 16, 2015, we completed the acquisition of the business assets of Superior Mobile Medics, Inc. ("Superior Mobile Medics"). Consolidated operating results for 2015 include the results of operations of MemorialCare and Superior Mobile Medics subsequent to the closing of the applicable acquisition. In July 2015, we contributed our clinical trials testing business to a newly formed global clinical trials central laboratory services joint venture with IQVIA Holdings Inc., Q
2
Solutions ("Clinical Trials Contribution"). Our clinical trials testing business was not classified as a discontinued operation.
|
(g)
|
Operating income included:
|
•
|
pre-tax gain of $334 million associated with the Clinical Trials Contribution;
|
•
|
pre-tax charges of $105 million, primarily associated with workforce reductions and professional fees incurred in connection with further restructuring and integrating our business; and
|
•
|
net pre-tax charges of $33 million primarily associated with non-cash asset impairment charges and other costs associated with winding down our Celera products business and another subsidiary, costs incurred related to certain legal matters and a pre-tax gain of $13 million associated with a decrease in the fair value of the contingent consideration accrual associated with our Summit Health, Inc. ("Summit Health") acquisition.
|
•
|
$144 million of pre-tax charges on retirement of debt associated with the March 2015 cash tender offer and the April 2015 redemption and the related income tax benefit of $57 million;
|
•
|
deferred income tax expense of $145 million associated with the gain on the Clinical Trials Contribution;
|
•
|
$58 million deferred income tax benefit associated with winding down a subsidiary; and
|
•
|
$5 million of pre-tax restructuring and integration charges associated with our Q
2
Solutions joint venture.
|
•
|
$146 million of pre-tax cash charges, or $89 million after the related cash tax benefit, on the retirement of debt associated with the March 2015 cash tender offer and April 2015 redemption;
|
•
|
payments associated with an additional payroll cycle in 2015; and
|
•
|
an income tax payment in the third quarter of 2015 associated with certain tax contingencies.
|
•
|
$51 million of deferred acquisition consideration payments, primarily to UMass Memorial Medical Center ("UMass"), related to the business acquisition in 2013; and
|
•
|
$63 million of proceeds from the sale of a noncontrolling interest in a subsidiary to UMass.
|
(h)
|
On March 7, 2014, we completed the acquisition of Solstas Lab Partners Group ("Solstas"). On April 18, 2014, we completed the acquisition of Summit Health. On April 16, 2014, we completed the acquisition of the outreach laboratory service operations of Steward Healthcare, LLC ("Steward"). Consolidated operating results for 2014 include the results of operations of Solstas, Summit Health and Steward subsequent to the closing of the applicable acquisition.
|
(i)
|
Operating income included:
|
•
|
pre-tax charges of $121 million, primarily associated with workforce reductions and professional fees incurred in connection with further restructuring and integrating our business;
|
•
|
pre-tax charges of $24 million principally associated with costs related to certain legal matters; and
|
•
|
pre-tax gain of $9 million associated with a decrease in the fair value of the contingent consideration accrual associated with our Summit Health acquisition.
|
(j)
|
On January 2, 2013, we completed the acquisition of the clinical outreach and anatomic pathology businesses of UMass. On May 15, 2013, we completed the acquisition of the toxicology and clinical laboratory business of Advanced Toxicology Network ("ATN") from Concentra, a subsidiary of Humana Inc. On June 22, 2013, we completed the acquisition of certain lab-related clinical outreach service operations of Dignity Health ("Dignity"), a hospital system in California. On October 7, 2013, we completed the acquisition of ConVerge Diagnostic Services, LLC ("ConVerge"), a leading full-service laboratory providing clinical, cytology and anatomic pathology testing services to patients, physicians and hospitals in New England. Consolidated operating results for 2013 include the results of operations of UMass, ATN, Dignity and ConVerge subsequent to the closing of the applicable acquisition. In September 2013, we completed the sale of our Enterix products business, which was not classified as a discontinued operation.
|
(k)
|
Operating income included:
|
•
|
pre-tax charges of $115 million, primarily associated with workforce reductions and professional fees incurred in connection with further restructuring and integrating our business;
|
•
|
pre-tax gain on sale of the ibrutinib royalty rights of $474 million; and
|
•
|
pre-tax loss of $40 million associated with the sale of the Enterix products business.
|
•
|
gain of $14 million (including foreign currency translation adjustments, partially offset by income tax expense and transaction costs) associated with the sale of our HemoCue products business; and
|
•
|
discrete tax benefits of $20 million associated with favorable resolution of certain tax contingencies related to our NID business.
|
•
|
income tax payments of $175 million associated with the sale of the ibrutinib royalty rights; and
|
•
|
$70 million of income tax payments which were deferred from the fourth quarter of 2012 under a program offered to companies whose principal place of business was in states most affected by Hurricane Sandy.
|
•
|
proceeds from the sale of the ibrutinib royalty rights of $474 million, net of transaction costs; and
|
•
|
proceeds from the sales of HemoCue and Enterix of $296 million.
|
•
|
Our total net revenues of
$7.71 billion
were
2.6%
above the prior year. The Focus Sale negatively impacted revenue growth by 0.3% and we estimate that hurricanes negatively impacted revenue growth by approximately 0.4%.
|
•
|
In our DIS business:
|
◦
|
Revenues of
$7.4 billion
increased by
3.3%
compared to the prior year.
|
◦
|
Volume, measured by the number of requisitions, increased 2.3% compared to the prior year.
|
◦
|
Revenue per requisition increased 1.0% compared to the prior year.
|
•
|
DS revenues of
$339 million
were
10.0%
below the prior year primarily due to the Focus Sale.
|
•
|
Net income attributable to Quest Diagnostics' stockholders was
$772 million
, or
$5.50
per diluted share, in
2017
, compared to
$645 million
, or
$4.51
per diluted share, in 2016. The increase of
22.0%
in diluted earnings per share was primarily due to a tax benefit recorded as a result of the Tax Cuts and Jobs Act ("TCJA"). We estimate that hurricanes negatively impacted diluted earnings per share by approximately $0.14.
|
•
|
Net cash provided by operating activities was
$1.2 billion
in
2017
, compared to
$1.1 billion
in the prior year.
|
•
|
revenues and accounts receivable associated with DIS;
|
•
|
reserves for general and professional liability claims;
|
•
|
reserves for other legal proceedings;
|
•
|
accounting for and recoverability of goodwill; and
|
•
|
accounting for stock-based compensation expense.
|
|
% of
|
|
% of
|
|
DIS
|
|
DIS
|
|
Volume
|
|
Revenues
|
|
|
|
|
Healthcare Insurers (including coinsurance and deductible responsibilities)
|
47
|
|
51
|
Government Payers
|
15
|
|
17
|
Client Payers
|
37
|
|
29
|
Patients
|
1
|
|
3
|
|
% of
|
|
Consolidated
|
|
Net Accounts
|
|
Receivable
|
|
|
Healthcare Insurers
|
19
|
Government Payers
|
14
|
Client Payers
|
42
|
Patients (including coinsurance and deductible responsibilities)
|
20
|
Total DIS
|
95
|
•
|
DIS business;
|
•
|
Risk assessment services business which is part of our DS businesses
|
|
|
|
|
|
|
|
$ Increase (Decrease)
|
|
% Increase (Decrease)
|
||||||||||||||||
|
2017
|
|
2016
|
|
2015
|
|
2017 vs. 2016
|
|
2016 vs. 2015
|
|
2017 vs. 2016
|
|
2016 vs. 2015
|
||||||||||||
|
(dollars in millions, except per share data)
|
||||||||||||||||||||||||
Net revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
DIS business
|
$
|
7,370
|
|
|
$
|
7,138
|
|
|
$
|
6,965
|
|
|
$
|
232
|
|
|
$
|
173
|
|
|
3.3
|
%
|
|
2.5
|
%
|
DS businesses
|
339
|
|
|
377
|
|
|
528
|
|
|
(38
|
)
|
|
(151
|
)
|
|
(10.0
|
)
|
|
(28.5
|
)
|
|||||
Total net revenues
|
$
|
7,709
|
|
|
$
|
7,515
|
|
|
$
|
7,493
|
|
|
$
|
194
|
|
|
$
|
22
|
|
|
2.6
|
%
|
|
0.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Operating costs and expenses and other operating income:
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Cost of services
|
$
|
4,719
|
|
|
$
|
4,616
|
|
|
$
|
4,657
|
|
|
$
|
103
|
|
|
$
|
(41
|
)
|
|
2.2
|
%
|
|
(0.9
|
)%
|
Selling, general and administrative
|
1,750
|
|
|
1,681
|
|
|
1,679
|
|
|
69
|
|
|
2
|
|
|
4.1
|
|
|
0.1
|
|
|||||
Amortization of intangible assets
|
74
|
|
|
72
|
|
|
81
|
|
|
2
|
|
|
(9
|
)
|
|
2.5
|
|
|
(10.7
|
)
|
|||||
Gain on disposition of business
|
—
|
|
|
(118
|
)
|
|
(334
|
)
|
|
118
|
|
|
216
|
|
|
NM
|
|
|
NM
|
|
|||||
Other operating expense (income), net
|
1
|
|
|
(13
|
)
|
|
11
|
|
|
14
|
|
|
(24
|
)
|
|
NM
|
|
|
NM
|
|
|||||
Total operating costs and expenses, net
|
$
|
6,544
|
|
|
$
|
6,238
|
|
|
$
|
6,094
|
|
|
$
|
306
|
|
|
$
|
144
|
|
|
4.9
|
%
|
|
2.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Operating income
|
$
|
1,165
|
|
|
$
|
1,277
|
|
|
$
|
1,399
|
|
|
$
|
(112
|
)
|
|
$
|
(122
|
)
|
|
(8.8
|
)%
|
|
(8.7
|
)%
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Interest expense, net
|
$
|
(151
|
)
|
|
$
|
(143
|
)
|
|
$
|
(153
|
)
|
|
$
|
8
|
|
|
$
|
(10
|
)
|
|
5.3
|
%
|
|
(6.3
|
)%
|
Other income (expense), net
|
16
|
|
|
(48
|
)
|
|
(143
|
)
|
|
(64
|
)
|
|
(95
|
)
|
|
NM
|
|
|
NM
|
|
|||||
Total non-operating expenses, net
|
$
|
(135
|
)
|
|
$
|
(191
|
)
|
|
$
|
(296
|
)
|
|
$
|
(56
|
)
|
|
$
|
(105
|
)
|
|
(29.1
|
)%
|
|
(35.1
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Income tax expense
|
$
|
(241
|
)
|
|
$
|
(429
|
)
|
|
$
|
(373
|
)
|
|
$
|
(188
|
)
|
|
$
|
56
|
|
|
(43.9
|
)%
|
|
15.3
|
%
|
Effective income tax rate
|
23.4
|
%
|
|
39.5
|
%
|
|
33.8
|
%
|
|
-1610 bps
|
|
|
570 bps
|
|
|
NM
|
|
|
NM
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Equity in earnings of equity method investees, net of taxes
|
$
|
35
|
|
|
$
|
39
|
|
|
$
|
23
|
|
|
$
|
(4
|
)
|
|
$
|
16
|
|
|
(9.6
|
)%
|
|
73.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net income attributable to Quest Diagnostics' stockholders
|
$
|
772
|
|
|
$
|
645
|
|
|
$
|
709
|
|
|
$
|
127
|
|
|
$
|
(64
|
)
|
|
19.8
|
%
|
|
(9.1
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Diluted earnings per common share attributable to Quest Diagnostics’ common stockholders
|
$
|
5.50
|
|
|
$
|
4.51
|
|
|
$
|
4.87
|
|
|
$
|
0.99
|
|
|
$
|
(0.36
|
)
|
|
22.0
|
%
|
|
(7.4
|
)%
|
|
2017
|
|
2016
|
|
2015
|
|||
|
|
|
|
|
|
|||
Net revenues:
|
|
|
|
|
|
|||
DIS business
|
95.6
|
%
|
|
95.0
|
%
|
|
93.0
|
%
|
DS businesses
|
4.4
|
|
|
5.0
|
|
|
7.0
|
|
Total net revenues
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
|
|
|
|
|
|||
Operating costs and expenses and other operating income:
|
|
|
|
|
|
|
|
|
Cost of services
|
61.2
|
%
|
|
61.4
|
%
|
|
62.1
|
%
|
Selling, general and administrative
|
22.7
|
|
|
22.4
|
|
|
22.4
|
|
Amortization of intangible assets
|
1.0
|
|
|
1.0
|
|
|
1.1
|
|
Gain on disposition of business
|
—
|
|
|
(1.5
|
)
|
|
(4.4
|
)
|
Other operating expense (income), net
|
—
|
|
|
(0.3
|
)
|
|
0.1
|
|
Total operating costs and expenses, net
|
84.9
|
%
|
|
83.0
|
%
|
|
81.3
|
%
|
|
|
|
|
|
|
|||
Operating income
|
15.1
|
%
|
|
17.0
|
%
|
|
18.7
|
%
|
|
|
|
|
|
|
|||
Bad debt
|
4.1
|
%
|
|
4.1
|
%
|
|
4.0
|
%
|
•
|
excess tax benefits associated with stock-based compensation arrangements of
$37 million
, or
$0.27
per diluted share, recorded in income tax expense;
|
•
|
a provisional estimated income tax benefit of $106 million, or $0.77 per diluted share, associated with the TCJA, including a deferred income tax benefit of $115 million primarily due to the remeasurement of our net deferred tax liabilities and reserves at the new combined federal and state tax rate, partially offset by $9 million of current tax expense primarily due to the mandatory repatriation toll charge on undistributed foreign earnings and profits;
|
•
|
pre-tax charges of $106 million ($45 million in cost of services, $60 million in selling, general and administrative expenses and $1 million in equity in earnings of equity method investees, net of taxes), or $0.47 per diluted share, primarily associated with systems conversions, integration and workforce reductions incurred in connection with further restructuring and integrating our business; and
|
•
|
net pre-tax charges of $10 million ($5 million in cost of services, $7 million in selling, general and administrative expenses and $2 million in other income (expense), net), or $0.07 per diluted share primarily associated with non-cash asset impairment charges associated with an investment, non-cash asset impairment charges and incremental costs incurred as a result of hurricanes, and costs incurred related to certain legal matters, partially offset by gain on the sale of an interest in an equity method investment.
|
•
|
excess tax benefits associated with stock-based compensation arrangements of
$9 million
, or
$0.06
per diluted share, recorded in income tax expense;
|
•
|
pre-tax gain of $118 million, or $0.24 per diluted share, related to the Focus Sale recorded in gain on disposition of business;
|
•
|
pre-tax charges of $82 million ($40 million in cost of services, $37 million in selling, general and administrative expenses, $1 million in other operating expense (income), net and $4 million in equity in earnings of equity method investees, net of taxes), or $0.35 per diluted share, primarily associated with systems conversions and integration costs in connection with further restructuring and integrating our business;
|
•
|
pre-tax charges of $48 million, or $0.21 per diluted share, related to the 2016 loss on retirement of debt associated with the March 2016 cash tender offer ("2016 Tender Offer"), in which we purchased $73 million of our Senior Notes due 2037 and $127 million of our Senior Notes due 2040, recorded in other income (expense), net; and
|
•
|
pre-tax costs of $6 million in selling, general and administrative expenses, a net pre-tax gain of $13 million in other operating expense (income), net and pre-tax costs of $7 million in other income (expense), net that on a combined basis benefited diluted earnings per share by $0.06, primarily a result of a non-taxable gain on an escrow recovery associated with an acquisition, partially offset by costs associated with winding down subsidiaries, non-cash asset impairment charges and costs incurred related to certain legal matters.
|
•
|
pre-tax gain of $334 million, or $1.30 per diluted share, related to the Clinical Trials Contribution recorded in gain on disposition of business;
|
•
|
pre-tax charges of $150 million ($6 million in interest expense, net and $144 million in other income (expense), net), or $0.62 per diluted share, related to the loss on retirement of debt and related refinancing charges in connection with the: March 2015 cash tender offer ("2015 Tender Offer"), in which we purchased $250 million aggregate principal amount of our Senior Notes due 2037 and Senior Notes due 2040; and the April 2015 redemption ("2015 Redemption"), in which we redeemed all of our $500 million Senior Notes due November 2015, $150 million, or 50%, of our Senior Notes due April 2016 and all of our $375 million Senior Notes due July 2017;
|
•
|
pre-tax charges of $110 million, or $0.46 per diluted share, related to restructuring costs primarily associated with workforce reductions, integration costs associated with acquisitions and professional fees associated with further restructuring and integrating our business ($63 million in cost of services, $42 million in selling, general and administrative expenses and $5 million in equity in earnings of equity method investees, net of taxes);
|
•
|
a deferred income tax benefit of $58 million, or $0.40 per diluted share, associated with winding down a subsidiary; and
|
•
|
net pre-tax costs of $31 million ($2 million in cost of services, $21 million in selling, general and administrative expenses, $10 million in other operating expense (income), net and $(2) million in other income (expense), net), or $0.14 per diluted share, primarily associated with non-cash asset impairment charges and other costs associated with Celera Products and winding down of another subsidiary as well as costs incurred related to certain legal matters, partially offset by a pre-tax gain of $13 million associated with a decrease in the fair value of the contingent consideration accrual associated with our Summit Health, Inc. acquisition.
|
|
2017
|
|
2016
|
|
2015
|
||||||
|
(dollars in millions)
|
||||||||||
Net cash provided by operating activities
|
$
|
1,175
|
|
|
$
|
1,069
|
|
|
$
|
821
|
|
Net cash used in investing activities
|
(805
|
)
|
|
(152
|
)
|
|
(362
|
)
|
|||
Net cash used in financing activities
|
(592
|
)
|
|
(691
|
)
|
|
(518
|
)
|
|||
Net change in cash and cash equivalents
|
$
|
(222
|
)
|
|
$
|
226
|
|
|
$
|
(59
|
)
|
•
|
a decrease in 2017 tax payments associated with the realization of a $62 million deferred tax benefit in 2017 and a $91 million tax payment in 2016 related to the Focus Sale;
|
•
|
$47 million of payments made in 2016 related to the retirement of debt; and
|
•
|
improved operating performance in 2017; partially offset by
|
•
|
$54 million of proceeds received in the third quarter of 2016 from the termination of interest swap agreements.
|
•
|
$99 million decrease in payments related to the retirement of debt, principally comprised of premiums paid, associated with the 2016 Tender Offer as compared to the 2015 Tender Offer and 2015 Redemption;
|
•
|
an additional payroll cycle in 2015;
|
•
|
$54 million of proceeds received in 2016 from the termination of interest rate swap agreements;
|
•
|
$25 million decrease in restructuring payments;
|
•
|
$24 million decrease in interest paid; and
|
•
|
improved operating performance.
|
•
|
$442 million increase in cash paid for business acquisitions; and
|
•
|
$269 million decrease in proceeds from the disposition of businesses, primarily a result of the Focus Sale in 2016; partially offset by
|
•
|
$41 million decrease in capital expenditures; and
|
•
|
$25 million release of escrow proceeds received in 2017 associated with the Focus Sale.
|
•
|
$270 million increase in proceeds from the disposition of business, principally related to the Focus Sale in 2016; and
|
•
|
$33 million decrease in investment in equity method investee, related to cash included in our Clinical Trials Contribution in 2015; partially offset by
|
•
|
$72 million increase in cash paid for business acquisitions in 2016, principally a result of the CLP acquisition in 2016; and
|
•
|
$30 million increase in capital expenditures.
|
•
|
$125 million decrease in repurchases of our common stock (see "Share Repurchases" for further details) in 2017;
|
•
|
$80 million increase in bank overdrafts, which are generally settled in cash the following business day; and
|
•
|
$57 million increase in proceeds from the exercise of stock options, which was a result of an increase in the volume of stock options exercised over the past year; partially offset by
|
•
|
$23 million in net borrowings (proceeds from borrowings less repayments of debt) in 2017, compared to $145 million in net borrowings in 2016; and
|
•
|
$24 million increase in dividends paid.
|
•
|
$366 million increase in repurchases of our common stock (discussed in "
Share Repurchases
" below); and
|
•
|
$63 million decrease in proceeds from the sale of noncontrolling interest in a subsidiary, as a result of the sale of noncontrolling interest in a subsidiary to UMass Memorial Medical Center ("UMass") in 2015; partially offset by
|
•
|
$145 million in net borrowings (proceeds from borrowings less repayments of debt) in 2016, compared to $84 million in net repayments in 2015; and
|
•
|
$51 million decrease in payment of deferred acquisition consideration principally a result of a payment to UMass in 2015 related to the business acquisition in 2013.
|
|
|
Payments due by period
|
||||||||||||||||||
Contractual Obligations
|
|
Total
|
|
Less than
1 year
|
|
1-3 years
|
|
3-5 years
|
|
After 5 years
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Outstanding debt
|
|
$
|
3,806
|
|
|
$
|
30
|
|
|
$
|
1,100
|
|
|
$
|
550
|
|
|
$
|
2,126
|
|
Capital lease obligations
|
|
42
|
|
|
6
|
|
|
7
|
|
|
2
|
|
|
27
|
|
|||||
Interest payments on outstanding debt
|
|
1,560
|
|
|
162
|
|
|
294
|
|
|
204
|
|
|
900
|
|
|||||
Operating leases
|
|
659
|
|
|
177
|
|
|
238
|
|
|
117
|
|
|
127
|
|
|||||
Purchase obligations
|
|
1,925
|
|
|
286
|
|
|
485
|
|
|
418
|
|
|
736
|
|
|||||
Merger consideration obligation
|
|
7
|
|
|
7
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Total contractual obligations
|
|
$
|
7,999
|
|
|
$
|
668
|
|
|
$
|
2,124
|
|
|
$
|
1,291
|
|
|
$
|
3,916
|
|
/s/
|
PricewaterhouseCoopers LLP
|
|
|
|
Florham Park, New Jersey
|
|
February 23, 2018
|
|
2017
|
|
2016
|
||||
Assets
|
|
|
|
|
|
||
Current assets:
|
|
|
|
|
|
||
Cash and cash equivalents
|
$
|
137
|
|
|
$
|
359
|
|
Accounts receivable, net of allowance for doubtful accounts of $269 and $265 as of December 31, 2017 and 2016, respectively
|
924
|
|
|
926
|
|
||
Inventories
|
95
|
|
|
82
|
|
||
Prepaid expenses and other current assets
|
150
|
|
|
155
|
|
||
Assets held for sale
|
—
|
|
|
9
|
|
||
Total current assets
|
1,306
|
|
|
1,531
|
|
||
Property, plant and equipment, net
|
1,145
|
|
|
1,029
|
|
||
Goodwill
|
6,335
|
|
|
6,000
|
|
||
Intangible assets, net
|
1,119
|
|
|
949
|
|
||
Investments in equity method investees
|
462
|
|
|
443
|
|
||
Other assets
|
136
|
|
|
148
|
|
||
Total assets
|
$
|
10,503
|
|
|
$
|
10,100
|
|
|
|
|
|
||||
Liabilities and Stockholders’ Equity
|
|
|
|
|
|
||
Current liabilities:
|
|
|
|
|
|
||
Accounts payable and accrued expenses
|
$
|
1,021
|
|
|
$
|
975
|
|
Current portion of long-term debt
|
36
|
|
|
6
|
|
||
Total current liabilities
|
1,057
|
|
|
981
|
|
||
Long-term debt
|
3,748
|
|
|
3,728
|
|
||
Other liabilities
|
663
|
|
|
654
|
|
||
Commitments and contingencies
|
|
|
|
|
|
||
Redeemable noncontrolling interest
|
80
|
|
|
77
|
|
||
Stockholders’ equity:
|
|
|
|
|
|
||
Quest Diagnostics stockholders’ equity:
|
|
|
|
|
|
||
Common stock, par value $0.01 per share; 600 shares authorized as of both December 31, 2017 and 2016; 216 shares issued as of both December 31, 2017 and 2016
|
2
|
|
|
2
|
|
||
Additional paid-in capital
|
2,612
|
|
|
2,545
|
|
||
Retained earnings
|
7,138
|
|
|
6,613
|
|
||
Accumulated other comprehensive loss
|
(48
|
)
|
|
(72
|
)
|
||
Treasury stock, at cost; 81 shares and 79 shares as of December 31, 2017 and 2016, respectively
|
(4,783
|
)
|
|
(4,460
|
)
|
||
Total Quest Diagnostics stockholders’ equity
|
4,921
|
|
|
4,628
|
|
||
Noncontrolling interests
|
34
|
|
|
32
|
|
||
Total stockholders’ equity
|
4,955
|
|
|
4,660
|
|
||
Total liabilities and stockholders’ equity
|
$
|
10,503
|
|
|
$
|
10,100
|
|
|
2017
|
|
2016
|
|
2015
|
||||||
|
|
|
|
|
|
||||||
Net revenues
|
$
|
7,709
|
|
|
$
|
7,515
|
|
|
$
|
7,493
|
|
|
|
|
|
|
|
||||||
Operating costs and expenses and other operating income:
|
|
|
|
|
|
|
|
|
|||
Cost of services
|
4,719
|
|
|
4,616
|
|
|
4,657
|
|
|||
Selling, general and administrative
|
1,750
|
|
|
1,681
|
|
|
1,679
|
|
|||
Amortization of intangible assets
|
74
|
|
|
72
|
|
|
81
|
|
|||
Gain on disposition of business
|
—
|
|
|
(118
|
)
|
|
(334
|
)
|
|||
Other operating expense (income), net
|
1
|
|
|
(13
|
)
|
|
11
|
|
|||
Total operating costs and expenses, net
|
6,544
|
|
|
6,238
|
|
|
6,094
|
|
|||
|
|
|
|
|
|
||||||
Operating income
|
1,165
|
|
|
1,277
|
|
|
1,399
|
|
|||
|
|
|
|
|
|
||||||
Other income (expense):
|
|
|
|
|
|
|
|
|
|||
Interest expense, net
|
(151
|
)
|
|
(143
|
)
|
|
(153
|
)
|
|||
Other income (expense), net
|
16
|
|
|
(48
|
)
|
|
(143
|
)
|
|||
Total non-operating expenses, net
|
(135
|
)
|
|
(191
|
)
|
|
(296
|
)
|
|||
|
|
|
|
|
|
||||||
Income before income taxes and equity in earnings of equity method investees
|
1,030
|
|
|
1,086
|
|
|
1,103
|
|
|||
Income tax expense
|
(241
|
)
|
|
(429
|
)
|
|
(373
|
)
|
|||
Equity in earnings of equity method investees, net of taxes
|
35
|
|
|
39
|
|
|
23
|
|
|||
Net income
|
824
|
|
|
696
|
|
|
753
|
|
|||
Less: Net income attributable to noncontrolling interests
|
52
|
|
|
51
|
|
|
44
|
|
|||
Net income attributable to Quest Diagnostics
|
$
|
772
|
|
|
$
|
645
|
|
|
$
|
709
|
|
|
|
|
|
|
|
||||||
Earnings per share attributable to Quest Diagnostics’ common stockholders:
|
|
|
|
|
|
|
|
||||
Basic
|
$
|
5.63
|
|
|
$
|
4.58
|
|
|
$
|
4.92
|
|
Diluted
|
$
|
5.50
|
|
|
$
|
4.51
|
|
|
$
|
4.87
|
|
|
|
|
|
|
|
||||||
Dividends per common share
|
$
|
1.80
|
|
|
$
|
1.65
|
|
|
$
|
1.52
|
|
|
2017
|
|
2016
|
|
2015
|
||||||
|
|
|
|
|
|
||||||
Net income
|
$
|
824
|
|
|
$
|
696
|
|
|
$
|
753
|
|
|
|
|
|
|
|
||||||
Other comprehensive income (loss):
|
|
|
|
|
|
||||||
Currency translation
|
20
|
|
|
(34
|
)
|
|
(15
|
)
|
|||
Investment adjustments, net of taxes
|
3
|
|
|
(2
|
)
|
|
—
|
|
|||
Net deferred loss on cash flow hedges, net of tax
|
1
|
|
|
2
|
|
|
3
|
|
|||
Other
|
—
|
|
|
—
|
|
|
1
|
|
|||
Other comprehensive income (loss)
|
24
|
|
|
(34
|
)
|
|
(11
|
)
|
|||
|
|
|
|
|
|
||||||
Comprehensive income
|
848
|
|
|
662
|
|
|
742
|
|
|||
Less: Comprehensive income attributable to noncontrolling interests
|
52
|
|
|
51
|
|
|
44
|
|
|||
Comprehensive income attributable to Quest Diagnostics
|
$
|
796
|
|
|
$
|
611
|
|
|
$
|
698
|
|
|
2017
|
|
2016
|
|
2015
|
||||||
Cash flows from operating activities:
|
|
|
|
|
|
|
|
||||
Net income
|
$
|
824
|
|
|
$
|
696
|
|
|
$
|
753
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|||
Depreciation and amortization
|
270
|
|
|
249
|
|
|
304
|
|
|||
Provision for doubtful accounts
|
315
|
|
|
308
|
|
|
297
|
|
|||
Deferred income tax provision
|
9
|
|
|
37
|
|
|
112
|
|
|||
Stock-based compensation expense
|
79
|
|
|
69
|
|
|
52
|
|
|||
Gain on disposition of business
|
—
|
|
|
(118
|
)
|
|
(334
|
)
|
|||
Other, net
|
(6
|
)
|
|
(6
|
)
|
|
6
|
|
|||
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|||
Accounts receivable
|
(298
|
)
|
|
(343
|
)
|
|
(262
|
)
|
|||
Accounts payable and accrued expenses
|
(8
|
)
|
|
56
|
|
|
(24
|
)
|
|||
Income taxes payable
|
16
|
|
|
42
|
|
|
(41
|
)
|
|||
Termination of interest rate swap agreements
|
—
|
|
|
54
|
|
|
—
|
|
|||
Other assets and liabilities, net
|
(26
|
)
|
|
25
|
|
|
(42
|
)
|
|||
Net cash provided by operating activities
|
1,175
|
|
|
1,069
|
|
|
821
|
|
|||
|
|
|
|
|
|
||||||
Cash flows from investing activities:
|
|
|
|
|
|
|
|
||||
Business acquisitions, net of cash acquired
|
(581
|
)
|
|
(139
|
)
|
|
(67
|
)
|
|||
Proceeds from disposition of business
|
1
|
|
|
270
|
|
|
—
|
|
|||
Escrow proceeds associated with disposition of business
|
25
|
|
|
—
|
|
|
—
|
|
|||
Capital expenditures
|
(252
|
)
|
|
(293
|
)
|
|
(263
|
)
|
|||
Investment in equity method investee
|
—
|
|
|
—
|
|
|
(33
|
)
|
|||
Decrease in investments and other assets
|
2
|
|
|
10
|
|
|
1
|
|
|||
Net cash used in investing activities
|
(805
|
)
|
|
(152
|
)
|
|
(362
|
)
|
|||
|
|
|
|
|
|
||||||
Cash flows from financing activities:
|
|
|
|
|
|
|
|
||||
Proceeds from borrowings
|
205
|
|
|
1,869
|
|
|
2,453
|
|
|||
Repayments of debt
|
(182
|
)
|
|
(1,724
|
)
|
|
(2,537
|
)
|
|||
Purchases of treasury stock
|
(465
|
)
|
|
(590
|
)
|
|
(224
|
)
|
|||
Exercise of stock options
|
130
|
|
|
73
|
|
|
60
|
|
|||
Employee payroll tax withholdings on stock issued under stock-based compensation plans
|
(23
|
)
|
|
(10
|
)
|
|
(7
|
)
|
|||
Dividends paid
|
(247
|
)
|
|
(223
|
)
|
|
(212
|
)
|
|||
Distributions to noncontrolling interests
|
(51
|
)
|
|
(41
|
)
|
|
(42
|
)
|
|||
Sale of noncontrolling interest in subsidiary
|
4
|
|
|
—
|
|
|
63
|
|
|||
Payment of deferred business acquisition consideration
|
(3
|
)
|
|
—
|
|
|
(51
|
)
|
|||
Other financing activities, net
|
40
|
|
|
(45
|
)
|
|
(21
|
)
|
|||
Net cash used in financing activities
|
(592
|
)
|
|
(691
|
)
|
|
(518
|
)
|
|||
|
|
|
|
|
|
||||||
Net change in cash and cash equivalents
|
(222
|
)
|
|
226
|
|
|
(59
|
)
|
|||
Cash and cash equivalents, beginning of year
|
359
|
|
|
133
|
|
|
192
|
|
|||
Cash and cash equivalents, end of year
|
$
|
137
|
|
|
$
|
359
|
|
|
$
|
133
|
|
|
|
Quest Diagnostics Stockholders’ Equity
|
|
|
|
|
|
|||||||||||||||||||||
|
Shares of
Common Stock Out-
standing
|
Common
Stock
|
Additional
Paid-In
Capital
|
Retained
Earnings
|
Accumulated
Other
Comprehensive
Loss
|
Treasury
Stock, at
Cost
|
Non-
controlling
Interests
|
Total Stock-holders’
Equity
|
|
|
Redeemable Non-controlling Interest
|
|||||||||||||||||
Balance, December 31, 2014
|
144
|
|
$
|
2
|
|
$
|
2,418
|
|
$
|
5,723
|
|
$
|
(27
|
)
|
$
|
(3,815
|
)
|
$
|
29
|
|
$
|
4,330
|
|
|
|
$
|
—
|
|
Net income
|
|
|
|
|
|
|
709
|
|
|
|
|
|
42
|
|
751
|
|
|
|
2
|
|
||||||||
Other comprehensive loss, net of tax
|
|
|
|
|
|
|
|
|
(11
|
)
|
|
|
|
|
(11
|
)
|
|
|
|
|||||||||
Dividends declared
|
|
|
|
|
|
|
(219
|
)
|
|
|
|
|
|
|
(219
|
)
|
|
|
|
|||||||||
Distributions to noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
(42
|
)
|
(42
|
)
|
|
|
|
|
||||||||
Issuance of common stock under benefit plans
|
1
|
|
|
|
6
|
|
|
|
|
|
15
|
|
|
|
21
|
|
|
|
|
|||||||||
Stock-based compensation expense
|
|
|
|
|
48
|
|
|
|
|
|
4
|
|
|
|
52
|
|
|
|
|
|||||||||
Exercise of stock options
|
1
|
|
|
|
|
|
|
|
|
|
60
|
|
|
|
60
|
|
|
|
|
|||||||||
Shares to cover employee payroll tax withholdings on stock issued under stock-based compensation plans
|
|
|
|
|
(7
|
)
|
|
|
|
|
|
|
|
|
(7
|
)
|
|
|
|
|||||||||
Tax benefits associated with stock-based compensation plans
|
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
5
|
|
|
|
|
|||||||||
Purchases of treasury stock
|
(3
|
)
|
|
|
|
|
|
|
|
|
(224
|
)
|
|
|
(224
|
)
|
|
|
|
|||||||||
Sale of redeemable noncontrolling interest
|
|
|
11
|
|
|
|
|
|
11
|
|
|
|
54
|
|
||||||||||||||
Adjustment to fair value
|
|
|
|
(14
|
)
|
|
|
|
(14
|
)
|
|
|
14
|
|
||||||||||||||
Balance, December 31, 2015
|
143
|
|
$
|
2
|
|
$
|
2,481
|
|
$
|
6,199
|
|
$
|
(38
|
)
|
$
|
(3,960
|
)
|
$
|
29
|
|
$
|
4,713
|
|
|
|
$
|
70
|
|
Net income
|
|
|
|
|
|
|
645
|
|
|
|
|
|
44
|
|
689
|
|
|
|
7
|
|
||||||||
Other comprehensive loss, net of tax
|
|
|
|
|
|
|
|
|
(34
|
)
|
|
|
|
|
(34
|
)
|
|
|
|
|||||||||
Dividends declared
|
|
|
|
|
|
|
(231
|
)
|
|
|
|
|
|
|
(231
|
)
|
|
|
|
|||||||||
Distributions to noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
(41
|
)
|
(41
|
)
|
|
|
|
|
||||||||
Issuance of common stock under benefit plans
|
|
|
|
|
7
|
|
|
|
|
|
15
|
|
|
|
22
|
|
|
|
|
|||||||||
Stock-based compensation expense
|
|
|
|
|
65
|
|
|
|
|
|
4
|
|
|
|
69
|
|
|
|
|
|||||||||
Exercise of stock options
|
1
|
|
|
|
2
|
|
|
|
|
|
71
|
|
|
|
73
|
|
|
|
|
|||||||||
Shares to cover employee payroll tax withholdings on stock issued under stock-based compensation plans
|
|
|
|
|
(10
|
)
|
|
|
|
|
|
|
|
|
(10
|
)
|
|
|
|
|||||||||
Purchases of treasury stock
|
(7
|
)
|
|
|
|
|
|
|
|
|
(590
|
)
|
|
|
(590
|
)
|
|
|
|
|||||||||
Balance, December 31, 2016
|
137
|
|
$
|
2
|
|
$
|
2,545
|
|
$
|
6,613
|
|
$
|
(72
|
)
|
$
|
(4,460
|
)
|
$
|
32
|
|
$
|
4,660
|
|
|
|
$
|
77
|
|
Net income
|
|
|
|
|
|
|
772
|
|
|
|
|
|
45
|
|
817
|
|
|
|
7
|
|
||||||||
Other comprehensive income, net of tax
|
|
|
|
|
|
|
|
|
24
|
|
|
|
|
|
24
|
|
|
|
|
|||||||||
Dividends declared
|
|
|
|
|
|
|
(247
|
)
|
|
|
|
|
|
|
(247
|
)
|
|
|
|
|||||||||
Distributions to noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
(47
|
)
|
(47
|
)
|
|
|
(4
|
)
|
||||||||
Issuance of common stock under benefit plans
|
|
|
|
|
11
|
|
|
|
|
|
12
|
|
|
|
23
|
|
|
|
|
|||||||||
Stock-based compensation expense
|
|
|
|
|
75
|
|
|
|
|
|
4
|
|
|
|
79
|
|
|
|
|
|||||||||
Exercise of stock options
|
3
|
|
|
|
4
|
|
|
|
|
|
126
|
|
|
|
130
|
|
|
|
|
|||||||||
Shares to cover employee payroll tax withholdings on stock issued under stock-based compensation plans
|
|
|
|
|
(23
|
)
|
|
|
|
|
|
|
|
|
(23
|
)
|
|
|
|
|||||||||
Purchases of treasury stock
|
(5
|
)
|
|
|
|
|
|
|
|
|
(465
|
)
|
|
|
(465
|
)
|
|
|
|
|||||||||
Sale of noncontrolling interest
|
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
4
|
|
|
|
|
|||||||||
Balance, December 31, 2017
|
135
|
|
$
|
2
|
|
$
|
2,612
|
|
$
|
7,138
|
|
$
|
(48
|
)
|
$
|
(4,783
|
)
|
$
|
34
|
|
$
|
4,955
|
|
|
|
$
|
80
|
|
•
|
buildings and improvements, ranging up to
thirty-one and a half
years;
|
•
|
laboratory equipment and furniture and fixtures, ranging from
five
to
twelve
years;
|
•
|
leasehold improvements, the lesser of the useful life of the improvement or the remaining life of the building or lease, as applicable; and
|
•
|
computer software developed or obtained for internal use,
five
years.
|
•
|
Trading securities represent participant-directed investments of deferred employee compensation and related Company matching contributions held in trusts pursuant to the Company's supplemental deferred compensation plans (see Note 16). Trading securities are carried at fair value with both realized and unrealized gains and losses recorded currently in earnings as a component of non-operating expenses within other income (expense), net in the consolidated statements of operations. For the years ended
December 31, 2017
,
2016
and
2015
, gains from trading equity securities totaled
$8 million
,
$3 million
, and
$0 million
, respectively.
|
•
|
Available-for-sale equity securities consists of an investment in registered shares of a public corporation. Available-for-sale equity securities are carried at fair value with unrealized gains and losses, net of tax, recorded as a component of accumulated other comprehensive loss within stockholders' equity and realized gains and losses recorded in other income (expense), net in the consolidated statements of operations. As of
December 31, 2017
, the Company had gross unrealized gains from available-for-sale equity securities of
$0 million
.
|
•
|
Other investments do not have readily determinable fair values and consist of investments in preferred and common shares of privately held companies and are accounted for under the cost method.
|
|
2017
|
|
2016
|
||||
|
|
|
|
||||
Available-for-sale equity securities
|
$
|
2
|
|
|
$
|
3
|
|
Trading equity securities
|
58
|
|
|
51
|
|
||
Other investments
|
9
|
|
|
6
|
|
||
Total
|
$
|
69
|
|
|
$
|
60
|
|
•
|
Foreign currency translation adjustments;
|
•
|
Investment adjustments, which represent unrealized holding gains (losses), net of tax on available for sale securities, net of other-than-temporary impairment amounts reclassified to other income (expense), net; and
|
•
|
Net deferred loss on cash flow hedges, which represents deferred losses, net of tax on interest rate related derivative financial instruments designated as cash flow hedges, net of amounts reclassified to interest expense (see Note 15).
|
|
Year Ended December 31, 2017
|
|
Year Ended December 31, 2016
|
||||||||||||||||||||
|
As Reported
|
|
Adjustment for ASU on Revenue Recognition
|
|
As Adjusted
|
|
As Reported
|
|
Adjustment for ASU on Revenue Recognition
|
|
As Adjusted
|
||||||||||||
Net revenues
|
$
|
7,709
|
|
|
$
|
(307
|
)
|
|
$
|
7,402
|
|
|
$
|
7,515
|
|
|
$
|
(301
|
)
|
|
$
|
7,214
|
|
Selling, general and administrative expenses
|
$
|
1,750
|
|
|
$
|
(307
|
)
|
|
$
|
1,443
|
|
|
$
|
1,681
|
|
|
$
|
(301
|
)
|
|
$
|
1,380
|
|
Net income attributable to Quest Diagnostics
|
$
|
772
|
|
|
$
|
—
|
|
|
$
|
772
|
|
|
$
|
645
|
|
|
$
|
—
|
|
|
$
|
645
|
|
|
2017
|
|
2016
|
|
2015
|
||||||
Amounts attributable to Quest Diagnostics’ common stockholders:
|
|
|
|
|
|
|
|
||||
Net income attributable to Quest Diagnostics
|
$
|
772
|
|
|
$
|
645
|
|
|
$
|
709
|
|
Less: Earnings allocated to participating securities
|
3
|
|
|
3
|
|
|
3
|
|
|||
Earnings available to Quest Diagnostics’ common stockholders – basic and diluted
|
$
|
769
|
|
|
$
|
642
|
|
|
$
|
706
|
|
|
|
|
|
|
|
||||||
Weighted average common shares outstanding – basic
|
137
|
|
|
140
|
|
|
144
|
|
|||
Effect of dilutive securities:
|
|
|
|
|
|
|
|
||||
Stock options and performance share units
|
3
|
|
|
2
|
|
|
1
|
|
|||
Weighted average common shares outstanding – diluted
|
140
|
|
|
142
|
|
|
145
|
|
|||
|
|
|
|
|
|
||||||
Earnings per share attributable to Quest Diagnostics’ common stockholders:
|
|
|
|
|
|
|
|
||||
Basic
|
$
|
5.63
|
|
|
$
|
4.58
|
|
|
$
|
4.92
|
|
Diluted
|
$
|
5.50
|
|
|
$
|
4.51
|
|
|
$
|
4.87
|
|
|
2017
|
|
2016
|
|
2015
|
|||
|
|
|
|
|
|
|||
Stock options
|
2
|
|
|
1
|
|
|
2
|
|
|
2017
|
|
2016
|
|
2015
|
||||||
|
|
|
|
|
|
||||||
Employee separation costs
|
$
|
29
|
|
|
$
|
9
|
|
|
$
|
38
|
|
Facility-related costs
|
1
|
|
|
2
|
|
|
1
|
|
|||
Asset impairment charges
|
3
|
|
|
—
|
|
|
—
|
|
|||
Total restructuring charges
|
$
|
33
|
|
|
$
|
11
|
|
|
$
|
39
|
|
|
Employee Separation Costs
|
|
Facility-Related Costs
|
|
Total
|
||||||
|
|
|
|
|
|
||||||
Balance, December 31, 2015
|
$
|
16
|
|
|
$
|
3
|
|
|
$
|
19
|
|
Income statement expense
|
9
|
|
|
2
|
|
|
11
|
|
|||
Cash payments
|
(19
|
)
|
|
(2
|
)
|
|
(21
|
)
|
|||
Balance, December 31, 2016
|
6
|
|
|
3
|
|
|
9
|
|
|||
Income statement expense
|
29
|
|
|
1
|
|
|
30
|
|
|||
Cash payments
|
(14
|
)
|
|
(3
|
)
|
|
(17
|
)
|
|||
Balance, December 31, 2017
|
$
|
21
|
|
|
$
|
1
|
|
|
$
|
22
|
|
|
|
|
Basis of Fair Value Measurements
|
||||||||||||
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
December 31, 2017
|
|
|
|
|
|
|
|
||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Trading securities
|
$
|
58
|
|
|
$
|
58
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Cash surrender value of life insurance policies
|
37
|
|
|
—
|
|
|
37
|
|
|
—
|
|
||||
Available-for-sale equity securities
|
2
|
|
|
2
|
|
|
—
|
|
|
—
|
|
||||
Total
|
$
|
97
|
|
|
$
|
60
|
|
|
$
|
37
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
||||||||
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Deferred compensation liabilities
|
$
|
103
|
|
|
$
|
—
|
|
|
$
|
103
|
|
|
$
|
—
|
|
Interest rate swaps
|
89
|
|
|
—
|
|
|
89
|
|
|
—
|
|
||||
Contingent consideration
|
7
|
|
|
—
|
|
|
—
|
|
|
7
|
|
||||
Total
|
$
|
199
|
|
|
$
|
—
|
|
|
$
|
192
|
|
|
$
|
7
|
|
|
|
|
|
|
|
|
|
||||||||
December 31, 2016
|
|
|
|
|
|
|
|
||||||||
Assets:
|
|
|
|
|
|
|
|
|
|||||||
Trading securities
|
$
|
51
|
|
|
$
|
51
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Cash surrender value of life insurance policies
|
32
|
|
|
—
|
|
|
32
|
|
|
—
|
|
||||
Available-for-sale equity securities
|
3
|
|
|
3
|
|
|
—
|
|
|
—
|
|
||||
Total
|
$
|
86
|
|
|
$
|
54
|
|
|
$
|
32
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
||||||||
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Deferred compensation liabilities
|
$
|
91
|
|
|
$
|
—
|
|
|
$
|
91
|
|
|
$
|
—
|
|
Interest rate swaps
|
88
|
|
|
—
|
|
|
88
|
|
|
—
|
|
||||
Contingent consideration
|
3
|
|
|
—
|
|
|
—
|
|
|
3
|
|
||||
Total
|
$
|
182
|
|
|
$
|
—
|
|
|
$
|
179
|
|
|
$
|
3
|
|
|
Contingent Consideration
|
||
|
|
||
Balance, December 31, 2015
|
$
|
3
|
|
Purchases, additions and issuances
|
—
|
|
|
Balance, December 31, 2016
|
3
|
|
|
Purchases, additions and issuances
|
6
|
|
|
Settlements
|
(2
|
)
|
|
Balance, December 31, 2017
|
$
|
7
|
|
|
2017
|
|
2016
|
|
2015
|
||||||
Current:
|
|
|
|
|
|
||||||
Federal
|
$
|
226
|
|
|
$
|
346
|
|
|
$
|
231
|
|
State and local
|
5
|
|
|
45
|
|
|
27
|
|
|||
Foreign
|
1
|
|
|
1
|
|
|
3
|
|
|||
Deferred:
|
|
|
|
|
|
||||||
Federal
|
(20
|
)
|
|
33
|
|
|
104
|
|
|||
State and local
|
27
|
|
|
4
|
|
|
7
|
|
|||
Foreign
|
2
|
|
|
—
|
|
|
1
|
|
|||
Total
|
$
|
241
|
|
|
$
|
429
|
|
|
$
|
373
|
|
|
2017
|
|
2016
|
|
2015
|
|||
|
|
|
|
|
|
|||
Tax provision at statutory rate
|
35.0
|
%
|
|
35.0
|
%
|
|
35.0
|
%
|
State and local income taxes, net of federal benefit
|
3.8
|
|
|
3.3
|
|
|
2.6
|
|
Gains and losses on book and tax basis difference
|
(0.1
|
)
|
|
3.3
|
|
|
(2.7
|
)
|
Impact of noncontrolling interests
|
(1.9
|
)
|
|
(1.8
|
)
|
|
(1.6
|
)
|
Impact of equity earnings
|
1.1
|
|
|
1.0
|
|
|
0.7
|
|
Excess tax benefits on stock-based compensation arrangements
|
(3.6
|
)
|
|
(0.8
|
)
|
|
—
|
|
Return to provision true-ups
|
(2.0
|
)
|
|
(0.8
|
)
|
|
(0.2
|
)
|
Impact of TCJA enactment
|
(10.4
|
)
|
|
—
|
|
|
—
|
|
Other, net
|
1.5
|
|
|
0.3
|
|
|
—
|
|
Effective tax rate
|
23.4
|
%
|
|
39.5
|
%
|
|
33.8
|
%
|
|
2017
|
|
2016
|
||||
Non-current deferred tax assets (liabilities):
|
|
|
|
||||
Accounts receivable reserves
|
$
|
63
|
|
|
$
|
94
|
|
Liabilities not currently deductible
|
129
|
|
|
189
|
|
||
Stock-based compensation
|
41
|
|
|
58
|
|
||
Basis differences in investments, joint ventures and subsidiaries
|
(79
|
)
|
|
(87
|
)
|
||
Net operating loss carryforwards, net of valuation allowance
|
83
|
|
|
120
|
|
||
Depreciation and amortization
|
(403
|
)
|
|
(533
|
)
|
||
Total non-current deferred tax liabilities, net
|
$
|
(166
|
)
|
|
$
|
(159
|
)
|
|
2017
|
|
2016
|
|
2015
|
||||||
|
|
|
|
|
|
||||||
Balance, beginning of year
|
$
|
98
|
|
|
$
|
91
|
|
|
$
|
122
|
|
Additions:
|
|
|
|
|
|
||||||
For tax positions of current year
|
5
|
|
|
3
|
|
|
5
|
|
|||
For tax positions of prior years
|
23
|
|
|
12
|
|
|
5
|
|
|||
Reductions:
|
|
|
|
|
|
||||||
Changes in judgment
|
(2
|
)
|
|
(1
|
)
|
|
(11
|
)
|
|||
Expirations of statutes of limitations
|
(6
|
)
|
|
(7
|
)
|
|
(3
|
)
|
|||
Settlements
|
(3
|
)
|
|
—
|
|
|
(27
|
)
|
|||
Balance, end of year
|
$
|
115
|
|
|
$
|
98
|
|
|
$
|
91
|
|
|
2017
|
|
2016
|
|
2015
|
||||||
|
|
|
|
|
|
||||||
Depreciation expense
|
$
|
196
|
|
|
$
|
177
|
|
|
$
|
223
|
|
Amortization expense
|
74
|
|
|
72
|
|
|
81
|
|
|||
Depreciation and amortization expense
|
$
|
270
|
|
|
$
|
249
|
|
|
$
|
304
|
|
|
|
|
|
|
|
||||||
Interest expense
|
$
|
(153
|
)
|
|
$
|
(144
|
)
|
|
$
|
(154
|
)
|
Interest income
|
2
|
|
|
1
|
|
|
1
|
|
|||
Interest expense, net
|
$
|
(151
|
)
|
|
$
|
(143
|
)
|
|
$
|
(153
|
)
|
|
|
|
|
|
|
||||||
Interest paid
|
$
|
159
|
|
|
$
|
148
|
|
|
$
|
172
|
|
Income taxes paid
|
$
|
243
|
|
|
$
|
361
|
|
|
$
|
319
|
|
|
|
|
|
|
|
||||||
Assets acquired under capital leases
|
$
|
7
|
|
|
$
|
—
|
|
|
$
|
3
|
|
Accounts payable associated with capital expenditures
|
$
|
26
|
|
|
$
|
9
|
|
|
$
|
15
|
|
Dividends payable
|
$
|
61
|
|
|
$
|
62
|
|
|
$
|
55
|
|
|
|
|
|
|
|
||||||
Businesses acquired:
|
|
|
|
|
|
|
|
||||
Fair value of assets acquired
|
$
|
657
|
|
|
$
|
139
|
|
|
$
|
63
|
|
Fair value of liabilities assumed
|
58
|
|
|
—
|
|
|
—
|
|
|||
Fair value of net assets acquired
|
599
|
|
|
139
|
|
|
63
|
|
|||
Merger consideration paid (payable), net
|
(6
|
)
|
|
—
|
|
|
4
|
|
|||
Cash paid for business acquisitions
|
593
|
|
|
139
|
|
|
67
|
|
|||
Less: Cash acquired
|
12
|
|
|
—
|
|
|
—
|
|
|||
Business acquisitions, net of cash acquired
|
$
|
581
|
|
|
$
|
139
|
|
|
$
|
67
|
|
|
2017
|
|
2016
|
||||
|
|
|
|
||||
Land
|
$
|
29
|
|
|
$
|
28
|
|
Buildings and improvements
|
430
|
|
|
379
|
|
||
Laboratory equipment and furniture and fixtures
|
1,594
|
|
|
1,462
|
|
||
Leasehold improvements
|
544
|
|
|
533
|
|
||
Computer software developed or obtained for internal use
|
934
|
|
|
834
|
|
||
Construction-in-progress
|
140
|
|
|
193
|
|
||
|
3,671
|
|
|
3,429
|
|
||
Less: Accumulated depreciation and amortization
|
(2,526
|
)
|
|
(2,400
|
)
|
||
Total
|
$
|
1,145
|
|
|
$
|
1,029
|
|
|
2017
|
|
2016
|
||||
|
|
|
|
||||
Balance, beginning of year
|
$
|
6,000
|
|
|
$
|
5,905
|
|
Goodwill acquired during the year
|
335
|
|
|
95
|
|
||
Balance, end of year
|
$
|
6,335
|
|
|
$
|
6,000
|
|
|
Weighted
Average
Amortization
Period (in years)
|
|
December 31, 2017
|
|
December 31, 2016
|
||||||||||||||||||||
|
|
Cost
|
|
Accumulated
Amortization
|
|
Net
|
|
Cost
|
|
Accumulated
Amortization
|
|
Net
|
|||||||||||||
Amortizing intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Customer-related
|
18
|
|
$
|
1,210
|
|
|
$
|
(404
|
)
|
|
$
|
806
|
|
|
$
|
971
|
|
|
$
|
(346
|
)
|
|
$
|
625
|
|
Non-compete agreements
|
7
|
|
7
|
|
|
(5
|
)
|
|
2
|
|
|
6
|
|
|
(4
|
)
|
|
2
|
|
||||||
Technology
|
17
|
|
95
|
|
|
(45
|
)
|
|
50
|
|
|
93
|
|
|
(40
|
)
|
|
53
|
|
||||||
Other
|
10
|
|
105
|
|
|
(80
|
)
|
|
25
|
|
|
103
|
|
|
(70
|
)
|
|
33
|
|
||||||
Total
|
17
|
|
1,417
|
|
|
(534
|
)
|
|
883
|
|
|
1,173
|
|
|
(460
|
)
|
|
713
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Intangible assets not subject to amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Trade names
|
|
|
235
|
|
|
—
|
|
|
235
|
|
|
235
|
|
|
—
|
|
|
235
|
|
||||||
Other
|
|
|
1
|
|
|
—
|
|
|
1
|
|
|
1
|
|
|
—
|
|
|
1
|
|
||||||
Total intangible assets
|
|
|
$
|
1,653
|
|
|
$
|
(534
|
)
|
|
$
|
1,119
|
|
|
$
|
1,409
|
|
|
$
|
(460
|
)
|
|
$
|
949
|
|
Year Ending December 31,
|
|
|
|
2018
|
$
|
82
|
|
2019
|
81
|
|
|
2020
|
81
|
|
|
2021
|
74
|
|
|
2022
|
72
|
|
|
Thereafter
|
493
|
|
|
Total
|
$
|
883
|
|
|
2017
|
|
2016
|
||||
|
|
|
|
||||
Accrued wages and benefits (including incentive compensation)
|
$
|
325
|
|
|
$
|
316
|
|
Accrued expenses
|
246
|
|
|
254
|
|
||
Trade accounts payable
|
224
|
|
|
231
|
|
||
Overdrafts
|
71
|
|
|
30
|
|
||
Dividend payable
|
61
|
|
|
62
|
|
||
Accrued interest
|
46
|
|
|
46
|
|
||
Accrued insurance
|
32
|
|
|
31
|
|
||
Income taxes payable
|
9
|
|
|
3
|
|
||
Merger consideration payable
|
7
|
|
|
2
|
|
||
Total
|
$
|
1,021
|
|
|
$
|
975
|
|
|
2017
|
|
2016
|
||||
|
|
|
|
||||
Secured Receivables Credit Facility (2.27% at December 31, 2017)
|
$
|
30
|
|
|
$
|
—
|
|
2.70% Senior Notes due April 2019
|
300
|
|
|
300
|
|
||
4.75% Senior Notes due January 2020
|
514
|
|
|
521
|
|
||
2.50% Senior Notes due March 2020
|
300
|
|
|
299
|
|
||
4.70% Senior Notes due April 2021
|
559
|
|
|
563
|
|
||
4.25% Senior Notes due April 2024
|
303
|
|
|
307
|
|
||
3.50% Senior Notes due March 2025
|
566
|
|
|
568
|
|
||
3.45% Senior Notes due June 2026
|
470
|
|
|
469
|
|
||
6.95% Senior Notes due July 2037
|
174
|
|
|
174
|
|
||
5.75% Senior Notes due January 2040
|
244
|
|
|
244
|
|
||
4.70% Senior Notes due March 2045
|
300
|
|
|
300
|
|
||
Other
|
44
|
|
|
13
|
|
||
Debt issuance costs
|
(20
|
)
|
|
(24
|
)
|
||
Total long-term debt
|
3,784
|
|
|
3,734
|
|
||
Less: Current portion of long-term debt
|
36
|
|
|
6
|
|
||
Total long-term debt, net of current portion
|
$
|
3,748
|
|
|
$
|
3,728
|
|
Year Ending December 31,
|
|
||
2018
|
$
|
36
|
|
2019
|
304
|
|
|
2020
|
803
|
|
|
2021
|
552
|
|
|
2022
|
—
|
|
|
Thereafter
|
2,153
|
|
|
Total maturities of long-term debt
|
3,848
|
|
|
Unamortized discount
|
(11
|
)
|
|
Debt issuance costs
|
(20
|
)
|
|
Fair value basis adjustments attributable to hedged debt
|
(33
|
)
|
|
Total long-term debt
|
3,784
|
|
|
Less: Current portion of long-term debt
|
36
|
|
|
Total long-term debt, net of current portion
|
$
|
3,748
|
|
|
|
Notional Amount
|
||||||
Debt Instrument
|
|
2017
|
|
2016
|
||||
|
|
|
|
|
||||
4.25% Senior Notes due April 2024
|
|
250
|
|
|
250
|
|
||
3.50% Senior Notes due March 2025
|
|
600
|
|
|
600
|
|
||
3.45% Senior Notes due June 2026
|
|
350
|
|
|
350
|
|
||
|
|
$
|
1,200
|
|
|
$
|
1,200
|
|
Balance Sheet Classification
|
|
Carrying Amount of Hedged Long-Term Debt
|
Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Long-Term Debt
|
|
||||||
|
December 31, 2017
|
|
December 31, 2017
|
|
||||||
Long-term debt
|
|
$
|
1,132
|
|
|
$
|
(33
|
)
|
(a)
|
|
December 31, 2017
|
|
December 31, 2016
|
||||||||
|
Balance Sheet
Classification
|
|
Fair Value
|
|
Balance Sheet
Classification
|
|
Fair Value
|
||||
Derivatives Designated as Hedging Instruments
|
|
|
|
|
|
|
|
|
|
||
Interest rate swaps
|
Other liabilities
|
|
$
|
89
|
|
|
Other liabilities
|
|
$
|
88
|
|
•
|
Foreign currency translation adjustments;
|
•
|
Investment adjustments, which represent unrealized holding gains (losses), net of tax on available for sale securities, net of other-than-temporary impairment amounts reclassified to other income (expense), net;
|
•
|
Net deferred loss on cash flow hedges, which represents deferred losses, net of tax on interest rate related derivative financial instruments designated as cash flow hedges, net of amounts reclassified to interest expense (see Note 14).
|
|
Foreign
Currency
Translation
Adjustment
|
|
Investment Adjustments
|
|
Net Deferred Loss on Cash Flow Hedges
|
|
Other
|
|
Accumulated Other Comprehensive Income (Loss)
|
||||||||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Balance, December 31, 2014
|
$
|
(9
|
)
|
|
$
|
(1
|
)
|
|
$
|
(15
|
)
|
|
$
|
(2
|
)
|
|
$
|
(27
|
)
|
Other comprehensive (loss) income before reclassifications
|
(15
|
)
|
|
—
|
|
|
—
|
|
|
1
|
|
|
(14
|
)
|
|||||
Amounts reclassified from accumulated other comprehensive loss
|
—
|
|
|
—
|
|
|
3
|
|
|
—
|
|
|
3
|
|
|||||
Net current period other comprehensive (loss) income
|
(15
|
)
|
|
—
|
|
|
3
|
|
|
1
|
|
|
(11
|
)
|
|||||
Balance, December 31, 2015
|
(24
|
)
|
|
(1
|
)
|
|
(12
|
)
|
|
(1
|
)
|
|
(38
|
)
|
|||||
Other comprehensive loss before reclassifications
|
(34
|
)
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
(36
|
)
|
|||||
Amounts reclassified from accumulated other comprehensive loss
|
—
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
2
|
|
|||||
Net current period other comprehensive (loss) income
|
(34
|
)
|
|
(2
|
)
|
|
2
|
|
|
—
|
|
|
(34
|
)
|
|||||
Balance, December 31, 2016
|
(58
|
)
|
|
(3
|
)
|
|
(10
|
)
|
|
(1
|
)
|
|
(72
|
)
|
|||||
Other comprehensive income before reclassifications
|
20
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
20
|
|
|||||
Amounts reclassified from accumulated other comprehensive loss
|
—
|
|
|
3
|
|
|
1
|
|
|
—
|
|
|
4
|
|
|||||
Net current period other comprehensive income
|
20
|
|
|
3
|
|
|
1
|
|
|
—
|
|
|
24
|
|
|||||
Balance, December 31, 2017
|
$
|
(38
|
)
|
|
$
|
—
|
|
|
$
|
(9
|
)
|
|
$
|
(1
|
)
|
|
$
|
(48
|
)
|
|
2017
|
|
2016
|
|
2015
|
|
|
|
|
|
|
Fair value at grant date
|
$15.98
|
|
$10.35
|
|
$11.57
|
Expected volatility
|
19.8%
|
|
21.6%
|
|
21%
|
Dividend yield
|
1.9%
|
|
2.4%
|
|
2.1%
|
Risk-free interest rate
|
2.1%
|
|
1.4%
|
|
1.7%
|
Expected holding period, in years
|
5.2
|
|
5.3
|
|
5.3
|
|
Shares
|
|
Weighted
Average Exercise Price
|
|
Weighted Average Remaining Contractual Term
(in years)
|
|
Aggregate Intrinsic Value
|
|||||
|
|
|
|
|
|
|
|
|||||
Options outstanding, beginning of year
|
9.1
|
|
|
$
|
62.27
|
|
|
|
|
|
||
Options granted
|
1.8
|
|
|
96.02
|
|
|
|
|
|
|||
Options exercised
|
(2.2
|
)
|
|
58.91
|
|
|
|
|
|
|||
Options forfeited and canceled
|
(0.2
|
)
|
|
79.74
|
|
|
|
|
|
|||
Options outstanding, end of year
|
8.5
|
|
|
$
|
70.11
|
|
|
7.1
|
|
$
|
243
|
|
|
|
|
|
|
|
|
|
|||||
Exercisable, end of year
|
4.4
|
|
|
$
|
60.81
|
|
|
5.9
|
|
$
|
166
|
|
Vested and expected to vest, end of year
|
8.3
|
|
|
$
|
69.73
|
|
|
7.1
|
|
$
|
240
|
|
|
2017
|
|
2016
|
|
2015
|
|||||||||||||||
|
Shares
|
|
Weighted
Average
Grant Date
Fair Value
|
|
Shares
|
|
Weighted
Average
Grant Date
Fair Value
|
|
Shares
|
|
Weighted
Average
Grant Date
Fair Value
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Shares outstanding, beginning of year
|
1.5
|
|
|
$
|
63.88
|
|
|
1.7
|
|
|
$
|
59.92
|
|
|
1.9
|
|
|
$
|
55.50
|
|
Shares granted
|
0.4
|
|
|
96.27
|
|
|
0.6
|
|
|
67.26
|
|
|
0.6
|
|
|
71.17
|
|
|||
Shares vested
|
(0.6
|
)
|
|
57.59
|
|
|
(0.4
|
)
|
|
58.98
|
|
|
(0.3
|
)
|
|
55.74
|
|
|||
Shares forfeited and canceled
|
—
|
|
|
—
|
|
|
(0.4
|
)
|
|
57.31
|
|
|
(0.5
|
)
|
|
58.18
|
|
|||
Shares outstanding, end of year
|
1.3
|
|
|
$
|
77.90
|
|
|
1.5
|
|
|
$
|
63.88
|
|
|
1.7
|
|
|
$
|
59.92
|
|
Year Ending December 31,
|
|
||
2018
|
$
|
177
|
|
2019
|
139
|
|
|
2020
|
99
|
|
|
2021
|
69
|
|
|
2022
|
48
|
|
|
Thereafter
|
127
|
|
|
Minimum lease payments
|
$
|
659
|
|
|
2017
|
|
2016
|
|
2015
|
||||||
Net revenues:
|
|
|
|
|
|
|
|
||||
DIS business
|
$
|
7,370
|
|
|
$
|
7,138
|
|
|
$
|
6,965
|
|
All other operating segments
|
339
|
|
|
377
|
|
|
528
|
|
|||
Total net revenues
|
$
|
7,709
|
|
|
$
|
7,515
|
|
|
$
|
7,493
|
|
|
|
|
|
|
|
||||||
Operating earnings (loss):
|
|
|
|
|
|
|
|
||||
DIS business
|
$
|
1,313
|
|
|
$
|
1,244
|
|
|
$
|
1,118
|
|
All other operating segments
|
52
|
|
|
64
|
|
|
110
|
|
|||
General corporate activities
|
(200
|
)
|
|
(31
|
)
|
|
171
|
|
|||
Total operating income
|
1,165
|
|
|
1,277
|
|
|
1,399
|
|
|||
Non-operating expenses, net
|
(135
|
)
|
|
(191
|
)
|
|
(296
|
)
|
|||
Income before income taxes and equity in earnings of equity method investees
|
1,030
|
|
|
1,086
|
|
|
1,103
|
|
|||
Income tax expense
|
(241
|
)
|
|
(429
|
)
|
|
(373
|
)
|
|||
Equity in earnings of equity method investees, net of taxes
|
35
|
|
|
39
|
|
|
23
|
|
|||
Net income
|
824
|
|
|
696
|
|
|
753
|
|
|||
Less: Net income attributable to noncontrolling interests
|
52
|
|
|
51
|
|
|
44
|
|
|||
Net income attributable to Quest Diagnostics
|
$
|
772
|
|
|
$
|
645
|
|
|
$
|
709
|
|
|
2017
|
|
2016
|
|
2015
|
||||||
|
|
|
|
|
|
||||||
DIS business
|
$
|
189
|
|
|
$
|
170
|
|
|
$
|
212
|
|
All other operating segments
|
6
|
|
|
6
|
|
|
10
|
|
|||
General corporate
|
75
|
|
|
73
|
|
|
82
|
|
|||
Total depreciation and amortization
|
$
|
270
|
|
|
$
|
249
|
|
|
$
|
304
|
|
|
2017
|
|
2016
|
|
2015
|
||||||
|
|
|
|
|
|
||||||
DIS business
|
$
|
219
|
|
|
$
|
264
|
|
|
$
|
243
|
|
All other operating segments
|
15
|
|
|
21
|
|
|
16
|
|
|||
General corporate
|
18
|
|
|
8
|
|
|
4
|
|
|||
Total capital expenditures
|
$
|
252
|
|
|
$
|
293
|
|
|
$
|
263
|
|
|
2017
|
|
2016
|
|
2015
|
||||||
|
|
|
|
|
|
||||||
Routine clinical testing services
|
$
|
4,309
|
|
|
$
|
4,179
|
|
|
$
|
4,078
|
|
Gene-based and esoteric (including advanced diagnostics) testing services
|
2,449
|
|
|
2,335
|
|
|
2,256
|
|
|||
Anatomic pathology testing services
|
612
|
|
|
624
|
|
|
631
|
|
|||
All other
|
339
|
|
|
377
|
|
|
528
|
|
|||
Total net revenues
|
$
|
7,709
|
|
|
$
|
7,515
|
|
|
$
|
7,493
|
|
2017 (a)
|
First
Quarter
|
|
Second
Quarter
|
|
Third
Quarter
|
|
Fourth
Quarter
|
|
Total
Year
|
||||||||||
|
(b)
|
|
(c)
|
|
(d)
|
|
(e)
|
|
|
||||||||||
Net revenues
|
$
|
1,899
|
|
|
$
|
1,943
|
|
|
$
|
1,931
|
|
|
$
|
1,936
|
|
|
$
|
7,709
|
|
Gross profit
|
734
|
|
|
773
|
|
|
741
|
|
|
742
|
|
|
2,990
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Net income
|
175
|
|
|
207
|
|
|
175
|
|
|
267
|
|
|
824
|
|
|||||
Less: Net income attributable to noncontrolling interests
|
11
|
|
|
14
|
|
|
14
|
|
|
13
|
|
|
52
|
|
|||||
Net income attributable to Quest Diagnostics
|
$
|
164
|
|
|
$
|
193
|
|
|
$
|
161
|
|
|
$
|
254
|
|
|
$
|
772
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Earnings per share attributable to Quest Diagnostics' stockholders:
|
|
|
|
|
|
|
|
|
|
||||||||||
Basic
|
$
|
1.19
|
|
|
$
|
1.40
|
|
|
$
|
1.18
|
|
|
$
|
1.86
|
|
|
$
|
5.63
|
|
Diluted
|
$
|
1.16
|
|
|
$
|
1.37
|
|
|
$
|
1.15
|
|
|
$
|
1.82
|
|
|
$
|
5.50
|
|
2016 (a)
|
First
Quarter
|
|
Second
Quarter
|
|
Third
Quarter
|
|
Fourth
Quarter
|
|
Total
Year
|
||||||||||
|
(f)
|
|
(g)
|
|
(h)
|
|
(i)
|
|
|
||||||||||
Net revenues
|
$
|
1,863
|
|
|
$
|
1,906
|
|
|
$
|
1,885
|
|
|
$
|
1,861
|
|
|
$
|
7,515
|
|
Gross profit
|
719
|
|
|
751
|
|
|
728
|
|
|
701
|
|
|
2,899
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Net income
|
115
|
|
|
209
|
|
|
205
|
|
|
167
|
|
|
696
|
|
|||||
Less: Net income attributable to noncontrolling interests
|
12
|
|
|
14
|
|
|
13
|
|
|
12
|
|
|
51
|
|
|||||
Net income attributable to Quest Diagnostics
|
$
|
103
|
|
|
$
|
195
|
|
|
$
|
192
|
|
|
$
|
155
|
|
|
$
|
645
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Earnings per share attributable to Quest Diagnostics' stockholders:
|
|
|
|
|
|
|
|
|
|
||||||||||
Basic
|
$
|
0.72
|
|
|
$
|
1.38
|
|
|
$
|
1.37
|
|
|
$
|
1.11
|
|
|
$
|
4.58
|
|
Diluted
|
$
|
0.71
|
|
|
$
|
1.37
|
|
|
$
|
1.34
|
|
|
$
|
1.09
|
|
|
$
|
4.51
|
|
(a)
|
In May 2016, the Company completed the sale of Focus Diagnostics (see Note 6).
|
(b)
|
Included pre-tax charges of
$18 million
, primarily associated with systems conversions and integration incurred in connection with further restructuring and integrating the Company (
$10 million
in cost of services and
$8 million
in selling, general and administrative expenses); and excess tax benefits associated with stock-based compensation arrangements of
$16 million
recorded in income tax expense.
|
(c)
|
Included pre-tax charges of
$23 million
, primarily associated with systems conversions and integration incurred in connection with further restructuring and integrating the Company (
$9 million
in cost of services,
$13 million
in selling, general and administrative expenses, and
$1 million
in equity in earnings of equity method investees, net of taxes); pre-tax gain of
$7 million
related to the sale of an interest in an equity method investment (recorded in other income (expense), net);
$2 million
in costs incurred related to certain legal matters (recorded in selling, general and administrative expenses); and excess tax benefits associated with stock-based compensation arrangements of
$13 million
recorded in income tax expense.
|
(d)
|
Included pre-tax charges of
$23 million
, primarily associated with systems conversions and integration incurred in connection with further restructuring and integrating the Company (
$12 million
in cost of services and
$11 million
in selling, general and administrative expenses); pre-tax charges of
$9 million
primarily associated with non-cash asset impairment charges and incremental costs incurred as a result of hurricanes (
$3 million
in cost of services,
$1 million
in selling, general and administrative expenses, and
$5 million
in other income (expense), net); and excess tax benefits associated with stock-based compensation arrangements of
$7 million
recorded in income tax expense.
|
(e)
|
Included pre-tax charges of
$42 million
, primarily associated with systems conversions, integration and workforce reductions incurred in connection with further restructuring and integrating the Company (
$14 million
in cost of services and
$28 million
in selling, general and administrative expenses); pre-tax charges of
$6 million
, primarily related to non-cash asset impairment charges and incremental costs incurred as a result of the hurricanes (
$2 million
in cost of services and
$4 million
in selling, general and administrative expenses); a provisional estimated income tax benefit of
$106 million
associated with the TCJA, including a deferred income tax benefit of
$115 million
primarily due to the remeasurement of net deferred tax liabilities and reserves at the new combined federal and state tax rate, partially offset by
$9 million
of current tax expense primarily due to the mandatory repatriation toll charge on undistributed foreign earnings and profits; and excess tax benefits associated with stock-based compensation arrangements of
$1 million
recorded in income tax expense.
|
(f)
|
Included pre-tax charges of
$21 million
, primarily associated with systems conversions and integration incurred in connection with further restructuring and integrating the Company (
$7 million
in cost of services,
$12 million
in selling, general and administrative expenses and
$2 million
in equity in earnings of equity method investees, net of taxes); pre-tax charges of
$1 million
, representing non-cash asset impairment charges recorded in other operating expense (income), net; pre-tax charges of
$2 million
, primarily representing costs incurred related to certain legal matters recorded in selling, general and administrative expenses; pre-tax charges of
$48 million
on retirement of debt associated with the March 2016 cash tender offer recorded in other income (expense), net (see Note 13); pre-tax charges of
$1 million
representing non-cash asset impairment charges associated with an investment recorded in other income (expense), net; and excess tax benefits associated with stock-based compensation arrangements of
$2 million
recorded in income tax expense.
|
(g)
|
Included a pre-tax gain of
$118 million
associated with the sale of Focus Diagnostics; pre-tax charges of
$19 million
, primarily associated with systems conversions and integration incurred in connection with further restructuring and integrating the Company (
$10 million
in cost of services,
$8 million
in selling, general and administrative expenses and
$1 million
in equity in earnings of equity method investees, net of taxes); pre-tax charges of
$1 million
, primarily representing costs incurred related to certain legal matters recorded in selling, general and administrative expenses; pre-tax charges of
$6 million
representing non-cash asset impairment charges associated with certain investments recorded in other income (expense), net; and excess tax benefits associated with stock-based compensation arrangements of
$2 million
recorded in income tax expense.
|
(h)
|
Included pre-tax charges of
$18 million
, primarily associated with systems conversions and integration incurred in connection with further restructuring and integrating the Company (
$8 million
in cost of services and
$10 million
in selling, general and administrative expenses); pre-tax gain of
$21 million
, principally a result of a gain on escrow recovery associated with an acquisition recorded in other operating expense (income), net; and excess tax benefits associated with stock-based compensation arrangements of
$3 million
recorded in income tax expense.
|
(i)
|
Included pre-tax charges of
$24 million
, primarily associated with systems conversions and integration incurred in connection with further restructuring and integrating the Company (
$15 million
in cost of services,
$7 million
in selling, general and administrative expenses,
$1 million
in other operating expense (income), net and
$1 million
in equity in earnings of equity method investees, net of taxes); pre-tax charges of
$6 million
representing non-cash asset impairment charges recorded in other operating expense (income), net; and excess tax benefits associated with stock-based compensation arrangements of
$2 million
recorded in income tax expense.
|
|
Balance at
Beginning of Year
|
|
Provision for Doubtful Accounts
|
|
Net Deductions
and Other
|
|
Balance at
End of Year
|
||||||||
Year Ended December 31, 2017
|
|
|
|
|
|
|
|
||||||||
Doubtful accounts and allowances
|
$
|
265
|
|
|
$
|
315
|
|
|
$
|
311
|
|
(a)
|
$
|
269
|
|
|
|
|
|
|
|
|
|
||||||||
Year Ended December 31, 2016
|
|
|
|
|
|
|
|
||||||||
Doubtful accounts and allowances
|
$
|
254
|
|
|
$
|
308
|
|
|
$
|
297
|
|
(a)
|
$
|
265
|
|
|
|
|
|
|
|
|
|
||||||||
Year Ended December 31, 2015
|
|
|
|
|
|
|
|
||||||||
Doubtful accounts and allowances
|
$
|
250
|
|
|
$
|
297
|
|
|
$
|
293
|
|
(a)
|
$
|
254
|
|
(a)
|
Primarily represents the write-off of accounts receivable, net of recoveries.
|
Exhibit
Number
|
Description
|
3.1
|
|
|
|
3.2
|
|
|
|
4.1
|
|
|
|
4.2
|
|
|
|
4.3
|
|
|
|
4.4
|
|
|
|
4.5
|
|
|
|
4.6
|
|
|
|
4.7
|
|
|
|
4.8
|
|
|
|
4.9
|
|
|
|
4.10
|
|
|
|
4.11
|
|
|
|
4.12
|
|
|
|
4.13
|
|
|
|
4.14
|
|
|
|
4.15
|
|
|
|
4.16
|
|
|
|
4.17
|
|
|
|
4.18
|
|
|
|
4.19
|
|
|
|
4.20
|
|
|
|
4.21
|
|
|
|
4.22
|
|
|
|
4.23
|
|
|
|
4.24
|
|
|
|
4.25
|
|
|
|
4.26
|
|
|
|
4.27
|
|
|
|
4.28
|
|
|
|
4.29
|
|
|
|
10.1‡
|
|
|
|
10.2‡
|
|
|
|
10.3‡
|
|
|
|
10.4‡*
|
|
|
|
10.5‡
|
|
|
|
10.6‡
|
|
|
|
10.7‡
|
|
|
|
10.8‡
|
|
|
|
10.9‡*
|
|
|
|
10.10‡
|
|
|
|
10.11‡
|
|
|
|
10.12‡
|
|
|
|
10.13‡
|
|
|
|
10.14‡
|
|
|
|
10.15‡
|
|
|
|
10.16‡
|
|
|
|
10.17‡
|
|
|
|
11.1
|
Statement re: Computation of Earnings Per Common Share (the calculation of per share earnings is in Part II, Item 8, Note 3 to the consolidated financial statements (Earnings Per Share) and is omitted in accordance with Item 601(b)(11) of Regulation S-K)
|
|
|
21.1*
|
|
|
|
23.1*
|
|
|
|
24.1*
|
|
|
|
31.1*
|
|
|
|
31.2*
|
|
|
|
32.1**
|
|
|
|
32.2**
|
|
|
|
101.INS*
|
dgx-20161231.xml
|
|
|
101.SCH*
|
dgx-20161231.xsd
|
|
|
ARTICLE 1.
|
|
DEFINITIONS.....................................................................................
|
1
|
|
|
|
|
|
|
1.1
|
|
Definitions.............................................................................................
|
1
|
|
|
|
|
|
|
ARTICLE 2.
|
|
PARTICIPATION................................................................................
|
3
|
|
|
|
|
|
|
2.1
|
|
Commencement of Participation...........................................................
|
3
|
|
2.2
|
|
Resumption of Participation Following Reemployment.......................
|
3
|
|
2.3
|
|
Change in Employment Status..............................................................
|
3
|
|
|
||||
ARTICLE 3.
|
|
CONTRIBUTIONS.............................................................................
|
4
|
|
|
|
|
|
|
3.1
|
|
Deferral Contributions...........................................................................
|
4
|
|
3.2
|
|
Participating Employer Contributions...................................................
|
6
|
|
3.3
|
|
Transfer of Funds...................................................................................
|
6
|
|
|
|
|
|
|
ARTICLE 4.
|
|
PARTICIPANTS' ACCOUNTS..........................................................
|
6
|
|
|
|
|
|
|
4.1
|
|
Individual Accounts...............................................................................
|
6
|
|
4.2
|
|
Accounting for Payments......................................................................
|
6
|
|
|
|
|
|
|
ARTICLE 5.
|
|
INVESTMENT OF CONTRIBUTIONS...........................................
|
7
|
|
|
|
|
|
|
5.1
|
|
Manner of Investment............................................................................
|
7
|
|
5.2
|
|
Investment Decisions.............................................................................
|
7
|
|
|
|
|
|
|
ARTICLE 6.
|
|
PAYMENT OF ACCOUNT.................................................................
|
7
|
|
|
|
|
|
|
6.1
|
|
Payment on Specified Date....................................................................
|
7
|
|
6.2
|
|
Distribution of Vested Account upon Termination of Employment......
|
7
|
|
6.3
|
|
Distribution upon Death; Beneficiaries.................................................
|
7
|
|
6.4
|
|
Payment Due to an Unforeseen Emergency..........................................
|
8
|
|
6.5
|
|
Adjustment for Investment Experience During Installment Plan..........
|
8
|
|
6.6
|
|
Section 409A and Payment Dates..........................................................
|
9
|
|
6.7
|
|
Payment in the Event of Taxation..........................................................
|
9
|
|
6.8
|
|
Valuations..............................................................................................
|
9
|
|
6.9
|
|
Spendthrift Provision.............................................................................
|
9
|
|
6.10
|
|
Facility of Payment................................................................................
|
9
|
|
6.11
|
|
Discharge of Obligations.......................................................................
|
9
|
|
6.12
|
|
Taxes......................................................................................................
|
10
|
|
|
|
|
|
|
ARTICLE 7.
|
|
AMENDMENT AND TERMINATION............................................
|
10
|
|
|
|
|
|
|
7.1
|
|
Amendment by Quest Diagnostics........................................................
|
10
|
|
7.2
|
|
Retroactive Amendments.......................................................................
|
10
|
|
7.3
|
|
Plan Termination....................................................................................
|
11
|
|
7.4
|
|
Payment upon Termination of the Plan.................................................
|
11
|
|
|
|
|
|
|
ARTICLE 8.
|
|
THE TRUST.........................................................................................
|
11
|
|
|
|
|
|
|
8.1
|
|
Establishment of Trust...........................................................................
|
11
|
|
|
|
|
|
|
ARTICLE 9.
|
|
MISCELLANEOUS............................................................................
|
11
|
|
|
|
|
|
|
9.1
|
|
Limitation of Rights...............................................................................
|
11
|
|
9.2
|
|
Furnishing Information..........................................................................
|
11
|
|
9.3
|
|
Information between the Administrator and Trustee.............................
|
11
|
|
9.4
|
|
Notices...................................................................................................
|
12
|
|
9.5
|
|
Writings and Electronic Communications.............................................
|
12
|
|
9.6
|
|
Governing Law......................................................................................
|
12
|
|
9.7
|
|
Construction...........................................................................................
|
12
|
|
9.8
|
|
Section 409A Compliance.....................................................................
|
12
|
|
9.9
|
|
Recovery of Overpayment.....................................................................
|
13
|
|
9.10
|
|
Right of Reimbursement........................................................................
|
13
|
|
9.11
|
|
Clawback...............................................................................................
|
13
|
|
|
|
|
|
|
ARTICLE 10.
|
|
PLAN ADMINISTRATION...............................................................
|
13
|
|
|
|
|
|
|
10.1
|
|
Powers and Responsibilities of the Administrator.................................
|
13
|
|
10.2
|
|
Claims and Review Procedures.............................................................
|
14
|
|
10.3
|
|
Plan's Administrative Costs...................................................................
|
15
|
|
By:
|
/s/ Jeffrey S. Shuman
|
By:
|
/s/ Stephen H. Rusckowski
|
1.
|
The first paragraph of the definition of “Deferral Compensation” in Article I of the Plan is amended as follows:
|
2.
|
Appendix A, Participating Employers, of the Plan is amended in its entirety as attached hereto.
|
Company
|
Registered Alternate Name
|
||||||||||
100% Quest Diagnostics Holdings Incorporated (DE)
|
|
||||||||||
|
100% Quest Diagnostics International Holding Limited (UK)
|
|
|||||||||
|
100% Quest Diagnostics Holdings Sarl (Luxembourg)
|
|
|||||||||
|
|
100% Quest Diagnostics Subsidiary Holdings Sarl (Luxembourg)
|
|
||||||||
|
|
100% Quest Diagnostics Holdings Ltd. (UK)
|
|
||||||||
|
100% Exam
One
Canada, Inc. (New Brunswick)
|
|
|||||||||
|
|
100% Quest Diagnostics Brasil Holdings Ltd. (UK)
|
|
||||||||
|
|
100% Quest Diagnostics Testes Forenses
do Brasil Ltda. (Brazil)
|
|
||||||||
|
|
99.9% Quest Diagnostics HTAS India Private Limited (India) (0.1% Quest Diagnostics Subsidiary Holdings SARL)
|
|
||||||||
|
|
100% Quest Diagnostics of Puerto Rico, Inc. (PR)
|
|
||||||||
|
|
100% Quest Diagnostics do Brasil Ltda. (Brazil)
|
|
||||||||
|
|
100% Quest Diagnostics Ireland Limited (Ireland)
|
|
||||||||
|
|
100% Quest Diagnostics Subsidiary Holdings Ltd. (UK)
|
|
||||||||
|
40% Q Squared Solutions Holdings Limited
(UK)
|
|
|||||||||
|
|
100% Quest Diagnostics (Shanghai) Co., Ltd. (China)
|
|
||||||||
|
100% Quest Diagnostics Clinical Laboratories, Inc. (DE)
|
Advanced Toxicology
Network
Smithkline Beecham
Clinical Laboratories
|
|||||||||
|
100% Lab
One
, LLC (MO)
|
LabOne, Inc. of Kansas
Quest Diagnostics
|
|||||||||
|
|
100% Exam
One
World Wide, Inc. (PA)
|
|
||||||||
|
100% ExamOne LLC (DE)
|
|
|||||||||
|
100% ExamOne World Wide of NJ, Inc. (NJ)
|
|
|||||||||
|
51% DGXWMT JV, LLC (DE)
|
|
|||||||||
|
100% Lab
One
of Ohio, Inc. (DE)
|
Quest Diagnostics
LabOne
|
|||||||||
|
(44%) Mid America Clinical Laboratories (IN)
|
|
|||||||||
|
(51%) Diagnostic Laboratory of Oklahoma LLC (OK)
|
|
|||||||||
|
(70%) Quest Diagnostics Domestic Holder LLC (DE) (30% Focus Diagnostics, Inc. (DE))
|
|
|||||||||
|
|
40% Q Squared Solutions Holdings, LLC (DE)
|
|
||||||||
|
100% Quest Diagnostics International LLC (DE)
|
|
|||||||||
|
|||||||||||
100% Quest Diagnostics Incorporated (MD)
|
|
||||||||||
|
100% Diagnostic Reference Services Inc. (MD)
|
|
|||||||||
|
100% Pathology Building Partnership (MD) (gen. ptnrshp.)
|
|
|||||||||
|
|||||||||||
100% Quest Diagnostics Incorporated (MI)
|
Quest Diagnostics
Incorporated
|
||||||||||
|
|
100% Quest Diagnostics India Private Limited (India)
|
|
||||||||||
100% Quest Diagnostics Infectious Disease, Inc. (DE)
|
Focus/MRL, Inc.
Quest Diagnostics
|
||||||||||
|
(30%) Quest Diagnostics Domestic Holder LLC (DE) (70% Quest Diagnostics Clinical Laboratories, Inc. (DE))
|
|
|||||||||
|
|
||||||||||
100% Quest Diagnostics Investments LLC (DE)
|
|
||||||||||
|
|
||||||||||
100% Quest Diagnostics LLC (IL)
|
Quest Diagnostics LLC
|
||||||||||
|
|
||||||||||
100% Quest Diagnostics LLC (MA)
|
Quest Diagnostics LLC
|
||||||||||
|
81.1% Quest Diagnostics Massachusetts LLC (MA)
|
|
|||||||||
|
|
||||||||||
100% Quest Diagnostics LLC (CT)
|
|
||||||||||
|
|
||||||||||
100% Quest Diagnostics Mexico Holding Company Trust (Mexico)
|
|
||||||||||
|
100% Quest Diagnostics Mexico, S de RL de CV (Mexico)
|
|
|||||||||
|
100% Quest Diagnostics Terracotta LLC (DE)
|
|
|||||||||
|
|
||||||||||
100% Quest Diagnostics Nichols Institute (CA)
|
Nichols Institute
|
||||||||||
|
|
||||||||||
100% Quest Diagnostics of Pennsylvania Inc. (DE)
|
|
||||||||||
|
51% Quest Diagnostics Venture LLC (PA)
|
|
|||||||||
|
53.5% Associated Clinical Laboratories of Pennsylvania, L.L.C. (PA)
|
|
|||||||||
|
1% Associated Clinical Laboratories, L.P. (PA)
|
|
|||||||||
|
52.97% Associated Clinical Laboratories, L.P. (PA)
|
|
|||||||||
|
|
||||||||||
100% Quest Diagnostics Receivables Inc. (DE)
|
|
||||||||||
|
|
||||||||||
100% Quest Diagnostics Turquoise LLC (DE)
|
|
||||||||||
|
|
||||||||||
100 % Quest Diagnostics Ventures LLC (DE)
|
|
||||||||||
|
|
||||||||||
100% Athena Diagnostics, Inc. (DE)
|
|
||||||||||
|
|
||||||||||
100% American Medical Laboratories, Incorporated (DE)
|
|
||||||||||
|
100% Quest Diagnostics Nichols Institute, Inc. (VA)
|
Nichols Institute
|
|||||||||
|
100% Quest Diagnostics Incorporated (NV)
|
Quest Diagnostics Incorporated of Nevada
|
|||||||||
|
|
||||||||||
100% Clearpoint Diagnostic Laboratories, LLC (TN)
|
Clearpoint Diagnostic
Laboratories
|
||||||||||
|
|
||||||||||
100% Cleveland HeartLab, Inc. (DE)
|
Cleveland HeartLab Services, Inc.
|
||||||||||
|
|
||||||||||
100% Med Fusion, LLC (TN)
|
med fusion
med fusion clin-trials
med fusion clin-labs
|
||||||||||
|
|
||||||||||
100% MetWest Inc. (DE)
|
Quest Diagnostics
Incorporated
|
||||||||||
|
49% Sonora Quest Laboratories LLC (AZ)
|
|
|||||||||
|
|
||||||||||
100% Nomad Massachusetts, Inc. (MA)
|
|
||||||||||
|
100% Laboratorio de Analisis Biomedicos, S.A. (Mexico)
|
|
100% Spectrum Holding Company, Inc. (DE)
|
|
||||||||||
|
100% Solstas Lab Partners Group, LLC (NC)
|
Solstas Lab - Birmingham
Solstas Lab - FD
Molecular
Solstas Lab - Federal Drive
Solstas Lab - Mendenhall
Oaks
Solstas Lab Partners
Solstas Lab - Trustee’s
Tower Professional
Building
|
|||||||||
|
|
100% Solstas Lab Partners, LLC (VA)
|
|
||||||||
100% Summit Health, Inc. (MI)
|
Quest Diagnostics
Incorporated
Retail Health Network
Summit Health
Independent Clinical
Laboratories
|
||||||||||
|
|
||||||||||
100% Unilab Corporation (DE)
|
Quest Diagnostics
|
||||||||||
|
|||||||||||
100% AmeriPath, Inc. (DE)
|
|
||||||||||
|
100% AmeriPath Cincinnati, Inc. (OH)
|
Richfield Laboratory of
Dermatopathology
|
|||||||||
|
100% AmeriPath Cleveland, Inc. (OH)
|
AmeriPath GI Institute
Dermpath Diagnostics
|
|||||||||
|
100% AmeriPath Consolidated Labs, Inc. (FL)
|
|
|||||||||
|
100% AmeriPath Florida, LLC (DE)
|
AmeriPath Central Florida
AmeriPath Northeast
Florida
AmeriPath Southwest
Florida
Bay Area
Dermatopathology
Dermpath Diagnostics
Dermpath Diagnostics
Bay Area
Institute for
Immunofluorescence
Institute for Podiatric
Pathology
|
|||||||||
|
100% AmeriPath Hospital Services Florida, LLC (DE)
|
|
|||||||||
|
100% AmeriPath Kentucky, Inc. (KY)
|
|
|||||||||
|
100% AmeriPath Lubbock 5.01(a) Corporation (TX)
|
AmeriPath Southwest
Texas
|
|||||||||
|
100% AmeriPath Lubbock Outpatient 5.01(a) Corporation (TX)
|
AmeriPath Marketing
USA, Inc.
|
|||||||||
|
100% AmeriPath New York, LLC (DE)
|
AmeriPath Gastrointestinal Diagnostics
AmeriPath Northeast
Dermpath Diagnostics
Dermpath Diagnostics
NE-Braintree
Ackerman Academy of Dermatopathology
Dermpath Diagnostics
New York
Dermpath Diagnostics
New England
|
|||||||||
|
100% AmeriPath PAT 5.01(a) Corporation (TX)
|
|
|||||||||
|
100% AmeriPath Pittsburgh, Inc. (PA)
|
Dermpath Diagnostics
The Dermatopathology
Laboratory
|
|
100% AmeriPath Texarkana 5.01(a) Corporation (TX)
|
AmeriPath Chappell Joyce
Pathology
Chappell Joyce Pathology
|
|||||||||
|
100% AmeriPath Texas Inc. (DE)
|
|
|||||||||
|
100% AmeriPath Tucson, Inc. (AZ)
|
|
|||||||||
|
100% Arlington Pathology Association 5.01(a) Corporation (TX)
|
|
|||||||||
|
100% Consolidated DermPath, Inc. (DE)
|
|
|||||||||
|
100% DFW 5.01(a) Corporation (TX)
|
AmeriPath North Texas
AmeriPath Dallas
AmeriPath DFW 5.01(a)
Corporation
|
|||||||||
|
100% Diagnostic Pathology Services, Inc. (OK)
|
Dermpath Diagnostics
|
|||||||||
|
100% Kailash B. Sharma, M.D., Inc. (GA)
|
|
|||||||||
|
100% Institute for Dermatopathology, Inc. (PA)
|
Dermpath Diagnostics
|
|||||||||
|
100% NAPA 5.01(a) Corporation (TX)
|
|
|||||||||
|
100% Nuclear Medicine and Pathology Associates (GA)
|
|
|||||||||
|
100% Ocmulgee Medical Pathology Association, Inc. (GA)
|
AmeriPath Georgia
Gastrointestinal
Diagnostics
Dermpath Diagnostics
|
|||||||||
|
100% Specialty Laboratories, Inc. (CA)
|
Quest Diagnostics Nichols
Institute of Valencia, Inc.
|
|||||||||
|
100% TXAR 5.01(a) Corporation (TX)
|
|
|||||||||
Additional Entities Consolidated for Accounting Purposes
|
Registered Alternate Name
|
||||||||||
A. Bernard Ackerman, M.D. Dermatopathology, PC (NY)
|
|
||||||||||
AmeriPath Indianapolis, P.C. (IN)
|
AmeriPath Indianapolis,
PSC
Dermpath Diagnostics
|
||||||||||
AmeriPath Milwaukee, S.C. (WI)
|
|
||||||||||
Colorado Pathology Consultants, P.C. (CO)
|
AmeriPath Colorado
Dermpath Diagnostics
|
||||||||||
Dermatopathology of Wisconsin, S.C. (WI)
|
|
||||||||||
Kilpatrick Pathology, P.A. (NC)
|
|
||||||||||
Diamond Occupational Health Services, P.S.C. (PR)
|
|
||||||||||
Southwest Diagnostic Laboratories, P.C. (CO)
|
|
||||||||||
St. Luke’s Pathology Associates, P.A. (KS)
|
AmeriPath Kansas City
|
By
|
/s/ PricewaterhouseCoopers LLP
|
|
|
|
PricewaterhouseCoopers LLP
|
|
|
|
Florham Park, New Jersey
|
|
February 23, 2018
|
1.
|
I have reviewed this annual report on Form 10-K of Quest Diagnostics Incorporated;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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a.
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designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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b.
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designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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c.
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evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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d.
|
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a.
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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b.
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any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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By
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/s/ Stephen H. Rusckowski
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|
|
|
Stephen H. Rusckowski
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|
Chairman, President and
|
|
Chief Executive Officer
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1.
|
I have reviewed this annual report on Form 10-K of Quest Diagnostics Incorporated;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a.
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
By
|
/s/ Mark J. Guinan
|
|
|
|
Mark J. Guinan
|
|
Executive Vice President and
|
|
Chief Financial Officer
|
Dated:
|
February 23, 2018
|
|
/s/ Stephen H. Rusckowski
|
|
|
|
|
|
|
|
|
|
Stephen H. Rusckowski
|
|
|
|
|
Chairman, President and
|
|
|
|
|
Chief Executive Officer
|
|
Dated:
|
February 23, 2018
|
|
/s/ Mark J. Guinan
|
|
|
|
|
|
|
|
|
|
Mark J. Guinan
|
|
|
|
|
Executive Vice President and
|
|
|
|
|
Chief Financial Officer
|
|