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UNITED STATES
|
SECURITIES AND EXCHANGE COMMISSION
|
WASHINGTON, DC 20549
|
|
Large accelerated filer
x
|
Accelerated filer
o
|
Non-accelerated filer
o
(Do not check if a smaller reporting company)
|
Smaller reporting company
o
|
|
|
Page
|
Item 1. Financial Statements
|
|
|
|
|
|
|
Index to consolidated financial statements filed as part of this report:
|
|
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2014
|
|
2013
|
|
2014
|
|
2013
|
||||||||
Net revenues
|
$
|
1,904
|
|
|
$
|
1,788
|
|
|
$
|
5,552
|
|
|
$
|
5,390
|
|
|
|
|
|
|
|
|
|
||||||||
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of services
|
1,178
|
|
|
1,089
|
|
|
3,453
|
|
|
3,275
|
|
||||
Selling, general and administrative
|
446
|
|
|
423
|
|
|
1,301
|
|
|
1,289
|
|
||||
Amortization of intangible assets
|
24
|
|
|
20
|
|
|
71
|
|
|
59
|
|
||||
Gain on sale of royalty rights
|
—
|
|
|
(474
|
)
|
|
—
|
|
|
(474
|
)
|
||||
Other operating expense, net
|
—
|
|
|
41
|
|
|
1
|
|
|
36
|
|
||||
Total operating costs and expenses
|
1,648
|
|
|
1,099
|
|
|
4,826
|
|
|
4,185
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Operating income
|
256
|
|
|
689
|
|
|
726
|
|
|
1,205
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest expense, net
|
(41
|
)
|
|
(40
|
)
|
|
(122
|
)
|
|
(120
|
)
|
||||
Equity in earnings of equity method investees
|
7
|
|
|
5
|
|
|
19
|
|
|
18
|
|
||||
Other (expense) income, net
|
(1
|
)
|
|
3
|
|
|
3
|
|
|
7
|
|
||||
Total non-operating expenses, net
|
(35
|
)
|
|
(32
|
)
|
|
(100
|
)
|
|
(95
|
)
|
||||
|
|
|
|
|
|
|
|
||||||||
Income from continuing operations before taxes
|
221
|
|
|
657
|
|
|
626
|
|
|
1,110
|
|
||||
Income tax expense
|
82
|
|
|
245
|
|
|
234
|
|
|
413
|
|
||||
Income from continuing operations
|
139
|
|
|
412
|
|
|
392
|
|
|
697
|
|
||||
Income from discontinued operations, net of taxes
|
—
|
|
|
2
|
|
|
—
|
|
|
35
|
|
||||
Net income
|
139
|
|
|
414
|
|
|
392
|
|
|
732
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Less: Net income attributable to noncontrolling interests
|
10
|
|
|
9
|
|
|
26
|
|
|
26
|
|
||||
Net income attributable to Quest Diagnostics
|
$
|
129
|
|
|
$
|
405
|
|
|
$
|
366
|
|
|
$
|
706
|
|
|
|
|
|
|
|
|
|
||||||||
Amounts attributable to Quest Diagnostics’ stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income from continuing operations
|
$
|
129
|
|
|
$
|
403
|
|
|
$
|
366
|
|
|
$
|
671
|
|
Income from discontinued operations, net of taxes
|
—
|
|
|
2
|
|
|
—
|
|
|
35
|
|
||||
Net income
|
$
|
129
|
|
|
$
|
405
|
|
|
$
|
366
|
|
|
$
|
706
|
|
|
|
|
|
|
|
|
|
||||||||
Earnings per share attributable to Quest Diagnostics’ common stockholders - basic:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income from continuing operations
|
$
|
0.89
|
|
|
$
|
2.68
|
|
|
$
|
2.52
|
|
|
$
|
4.36
|
|
Income from discontinued operations
|
—
|
|
|
0.02
|
|
|
—
|
|
|
0.23
|
|
||||
Net income
|
$
|
0.89
|
|
|
$
|
2.70
|
|
|
$
|
2.52
|
|
|
$
|
4.59
|
|
|
|
|
|
|
|
|
|
||||||||
Earnings per share attributable to Quest Diagnostics’ common stockholders - diluted:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income from continuing operations
|
$
|
0.88
|
|
|
$
|
2.66
|
|
|
$
|
2.51
|
|
|
$
|
4.32
|
|
Income from discontinued operations
|
—
|
|
|
0.02
|
|
|
—
|
|
|
0.23
|
|
||||
Net income
|
$
|
0.88
|
|
|
$
|
2.68
|
|
|
$
|
2.51
|
|
|
$
|
4.55
|
|
|
|
|
|
|
|
|
|
||||||||
Weighted average common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic
|
145
|
|
|
150
|
|
|
144
|
|
|
153
|
|
||||
Diluted
|
145
|
|
|
151
|
|
|
145
|
|
|
155
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Dividends per common share
|
$
|
0.33
|
|
|
$
|
0.30
|
|
|
$
|
0.99
|
|
|
$
|
0.90
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2014
|
|
2013
|
|
2014
|
|
2013
|
||||||||
Net income
|
$
|
139
|
|
|
$
|
414
|
|
|
$
|
392
|
|
|
$
|
732
|
|
|
|
|
|
|
|
|
|
||||||||
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
||||||||
Currency translation
|
(5
|
)
|
|
4
|
|
|
(3
|
)
|
|
(26
|
)
|
||||
Market valuation, net of tax
|
(2
|
)
|
|
—
|
|
|
1
|
|
|
—
|
|
||||
Net deferred loss on cash flow hedges, net of tax
|
—
|
|
|
1
|
|
|
(5
|
)
|
|
1
|
|
||||
Other, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
3
|
|
||||
Other comprehensive (loss) income
|
(7
|
)
|
|
5
|
|
|
(7
|
)
|
|
(22
|
)
|
||||
|
|
|
|
|
|
|
|
||||||||
Comprehensive income
|
132
|
|
|
419
|
|
|
385
|
|
|
710
|
|
||||
Less: Comprehensive income attributable to noncontrolling interests
|
10
|
|
|
9
|
|
|
26
|
|
|
26
|
|
||||
Comprehensive income attributable to Quest Diagnostics
|
$
|
122
|
|
|
$
|
410
|
|
|
$
|
359
|
|
|
$
|
684
|
|
|
September 30,
2014 |
|
December 31,
2013 |
||||
Assets
|
|
|
|
|
|
||
Current assets:
|
|
|
|
|
|
||
Cash and cash equivalents
|
$
|
170
|
|
|
$
|
187
|
|
Accounts receivable, net of allowance for doubtful accounts of $261 and $236 at September 30, 2014 and December 31, 2013, respectively
|
953
|
|
|
852
|
|
||
Inventories
|
111
|
|
|
91
|
|
||
Deferred income taxes
|
165
|
|
|
148
|
|
||
Prepaid expenses and other current assets
|
164
|
|
|
105
|
|
||
Total current assets
|
1,563
|
|
|
1,383
|
|
||
Property, plant and equipment, net
|
888
|
|
|
805
|
|
||
Goodwill
|
6,026
|
|
|
5,649
|
|
||
Intangible assets, net
|
1,095
|
|
|
896
|
|
||
Other assets
|
229
|
|
|
215
|
|
||
Total assets
|
$
|
9,801
|
|
|
$
|
8,948
|
|
|
|
|
|
||||
Liabilities and Stockholders’ Equity
|
|
|
|
|
|
||
Current liabilities:
|
|
|
|
|
|
||
Accounts payable and accrued expenses
|
$
|
1,058
|
|
|
$
|
920
|
|
Short-term borrowings and current portion of long-term debt
|
132
|
|
|
212
|
|
||
Total current liabilities
|
1,190
|
|
|
1,132
|
|
||
Long-term debt
|
3,732
|
|
|
3,120
|
|
||
Other liabilities
|
669
|
|
|
723
|
|
||
Stockholders’ equity:
|
|
|
|
|
|
||
Quest Diagnostics stockholders’ equity:
|
|
|
|
|
|
||
Common stock, par value $0.01 per share; 600 shares authorized at both September 30, 2014 and December 31, 2013; 216 and 215 shares issued at September 30, 2014 and December 31, 2013, respectively
|
2
|
|
|
2
|
|
||
Additional paid-in capital
|
2,406
|
|
|
2,379
|
|
||
Retained earnings
|
5,581
|
|
|
5,358
|
|
||
Accumulated other comprehensive loss
|
(15
|
)
|
|
(8
|
)
|
||
Treasury stock, at cost; 71 shares at both September 30, 2014 and December 31, 2013
|
(3,792
|
)
|
|
(3,783
|
)
|
||
Total Quest Diagnostics stockholders’ equity
|
4,182
|
|
|
3,948
|
|
||
Noncontrolling interests
|
28
|
|
|
25
|
|
||
Total stockholders’ equity
|
4,210
|
|
|
3,973
|
|
||
Total liabilities and stockholders’ equity
|
$
|
9,801
|
|
|
$
|
8,948
|
|
|
Nine Months Ended September 30,
|
||||||
|
2014
|
|
2013
|
||||
Cash flows from operating activities:
|
|
|
|
|
|
||
Net income
|
$
|
392
|
|
|
$
|
732
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
||
Depreciation and amortization
|
235
|
|
|
211
|
|
||
Provision for doubtful accounts
|
224
|
|
|
204
|
|
||
Deferred income tax benefit
|
(21
|
)
|
|
(3
|
)
|
||
Stock-based compensation expense
|
38
|
|
|
24
|
|
||
Excess tax benefits from stock-based compensation arrangements
|
—
|
|
|
(3
|
)
|
||
Gain on sale of royalty rights
|
—
|
|
|
(474
|
)
|
||
Loss on sale of businesses, net
|
—
|
|
|
17
|
|
||
Other, net
|
(5
|
)
|
|
(1
|
)
|
||
Changes in operating assets and liabilities:
|
|
|
|
|
|
||
Accounts receivable
|
(260
|
)
|
|
(252
|
)
|
||
Accounts payable and accrued expenses
|
20
|
|
|
(77
|
)
|
||
Income taxes payable
|
22
|
|
|
77
|
|
||
Other assets and liabilities, net
|
(10
|
)
|
|
(13
|
)
|
||
Net cash provided by operating activities
|
635
|
|
|
442
|
|
||
|
|
|
|
||||
Cash flows from investing activities:
|
|
|
|
|
|
||
Business acquisitions, net of cash acquired
|
(725
|
)
|
|
(180
|
)
|
||
Proceeds from sale of businesses
|
—
|
|
|
296
|
|
||
Proceeds from sale of royalty rights
|
—
|
|
|
474
|
|
||
Capital expenditures
|
(219
|
)
|
|
(155
|
)
|
||
Decrease (increase) in investments and other assets
|
10
|
|
|
(2
|
)
|
||
Net cash (used in) provided by investing activities
|
(934
|
)
|
|
433
|
|
||
|
|
|
|
||||
Cash flows from financing activities:
|
|
|
|
|
|
||
Proceeds from borrowings
|
1,953
|
|
|
790
|
|
||
Repayments of debt
|
(1,466
|
)
|
|
(757
|
)
|
||
Purchases of treasury stock
|
(82
|
)
|
|
(994
|
)
|
||
Exercise of stock options
|
55
|
|
|
98
|
|
||
Excess tax benefits from stock-based compensation arrangements
|
—
|
|
|
3
|
|
||
Dividends paid
|
(139
|
)
|
|
(141
|
)
|
||
Distributions to noncontrolling interests
|
(23
|
)
|
|
(21
|
)
|
||
Other financing activities, net
|
(16
|
)
|
|
(8
|
)
|
||
Net cash provided by (used in) financing activities
|
282
|
|
|
(1,030
|
)
|
||
Net change in cash and cash equivalents
|
(17
|
)
|
|
(155
|
)
|
||
Change in cash and cash equivalents included in assets held for sale
|
—
|
|
|
17
|
|
||
Cash and cash equivalents, beginning of period
|
187
|
|
|
296
|
|
||
Cash and cash equivalents, end of period
|
$
|
170
|
|
|
$
|
158
|
|
|
|
|
Quest Diagnostics Stockholders’ Equity
|
|
|
|
|
|||||||||||||||||||||||
|
Shares of
Common Stock Outstanding |
|
Common
Stock
|
|
Additional
Paid-In
Capital
|
|
Retained
Earnings
|
|
Accumulated
Other
Compre-
hensive Loss
|
|
Treasury
Stock, at
Cost
|
|
Non-
controlling
Interests
|
|
Total Stock-
holders’
Equity
|
|||||||||||||||
Balance, December 31, 2013
|
144
|
|
|
$
|
2
|
|
|
$
|
2,379
|
|
|
$
|
5,358
|
|
|
$
|
(8
|
)
|
|
$
|
(3,783
|
)
|
|
$
|
25
|
|
|
$
|
3,973
|
|
Net income
|
|
|
|
|
|
|
|
|
|
366
|
|
|
|
|
|
|
|
|
26
|
|
|
392
|
|
|||||||
Other comprehensive loss, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
(7
|
)
|
|
|
|
|
|
|
|
(7
|
)
|
|||||||
Dividends declared
|
|
|
|
|
|
|
|
|
|
(143
|
)
|
|
|
|
|
|
|
|
|
|
|
(143
|
)
|
|||||||
Distributions to noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(23
|
)
|
|
(23
|
)
|
|||||||
Issuance of common stock under benefit plans
|
1
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
13
|
|
|
|
|
|
14
|
|
|||||||
Stock-based compensation expense
|
|
|
|
|
|
|
36
|
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
38
|
|
|||||||
Exercise of stock options
|
1
|
|
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
58
|
|
|
|
|
|
55
|
|
|||||||
Shares to cover employee payroll tax withholdings on stock issued under benefit plans
|
|
|
|
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6
|
)
|
|||||||
Tax benefits associated with stock-based compensation plans
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|||||||
Purchases of treasury stock
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(82
|
)
|
|
|
|
|
(82
|
)
|
|||||||
Balance, September 30, 2014
|
145
|
|
|
$
|
2
|
|
|
$
|
2,406
|
|
|
$
|
5,581
|
|
|
$
|
(15
|
)
|
|
$
|
(3,792
|
)
|
|
$
|
28
|
|
|
$
|
4,210
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
|
|
|
Quest Diagnostics Stockholders’ Equity
|
|
|
|
|
||||||||||||||||||||||
|
Shares of
Common
Stock
Outstanding
|
|
Common
Stock
|
|
Additional
Paid-In
Capital
|
|
Retained
Earnings
|
|
Accumulated
Other
Compre-
hensive
Income (Loss)
|
|
Treasury
Stock, at
Cost
|
|
Non-
controlling
Interests
|
|
Total Stock-
holders’
Equity
|
|||||||||||||||
Balance, December 31, 2012
|
158
|
|
|
$
|
2
|
|
|
$
|
2,371
|
|
|
$
|
4,690
|
|
|
$
|
14
|
|
|
$
|
(2,914
|
)
|
|
$
|
23
|
|
|
$
|
4,186
|
|
Net income
|
|
|
|
|
|
|
|
|
|
706
|
|
|
|
|
|
|
|
|
26
|
|
|
732
|
|
|||||||
Other comprehensive loss, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
(22
|
)
|
|
|
|
|
|
|
|
(22
|
)
|
|||||||
Dividends declared
|
|
|
|
|
|
|
|
|
|
(137
|
)
|
|
|
|
|
|
|
|
|
|
|
(137
|
)
|
|||||||
Distributions to noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(21
|
)
|
|
(21
|
)
|
|||||||
Issuance of common stock under benefit plans
|
1
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
14
|
|
|
|
|
|
16
|
|
|||||||
Stock-based compensation expense
|
|
|
|
|
|
|
21
|
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
24
|
|
|||||||
Exercise of stock options
|
2
|
|
|
|
|
|
(7
|
)
|
|
|
|
|
|
|
|
105
|
|
|
|
|
|
98
|
|
|||||||
Shares to cover employee payroll tax withholdings on stock issued under benefit plans
|
|
|
|
|
|
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10
|
)
|
|||||||
Tax benefits associated with stock-based compensation plans
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|||||||
Purchases of treasury stock
|
(16
|
)
|
|
|
|
|
(70
|
)
|
|
|
|
|
|
|
|
(924
|
)
|
|
|
|
|
(994
|
)
|
|||||||
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
1
|
|
|||||||
Balance, September 30, 2013
|
145
|
|
|
$
|
2
|
|
|
$
|
2,306
|
|
|
$
|
5,259
|
|
|
$
|
(8
|
)
|
|
$
|
(3,716
|
)
|
|
$
|
29
|
|
|
$
|
3,872
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2014
|
|
2013
|
|
2014
|
|
2013
|
||||||||
Amounts attributable to Quest Diagnostics’ stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income from continuing operations
|
$
|
129
|
|
|
$
|
403
|
|
|
$
|
366
|
|
|
$
|
671
|
|
Income from discontinued operations, net of taxes
|
—
|
|
|
2
|
|
|
—
|
|
|
35
|
|
||||
Net income attributable to Quest Diagnostics’ common stockholders
|
$
|
129
|
|
|
$
|
405
|
|
|
$
|
366
|
|
|
$
|
706
|
|
|
|
|
|
|
|
|
|
||||||||
Income from continuing operations
|
$
|
129
|
|
|
$
|
403
|
|
|
$
|
366
|
|
|
$
|
671
|
|
Less: Earnings allocated to participating securities
|
1
|
|
|
1
|
|
|
2
|
|
|
2
|
|
||||
Earnings available to Quest Diagnostics’ common stockholders – basic and diluted
|
$
|
128
|
|
|
$
|
402
|
|
|
$
|
364
|
|
|
$
|
669
|
|
|
|
|
|
|
|
|
|
||||||||
Weighted average common shares outstanding – basic
|
145
|
|
|
150
|
|
|
144
|
|
|
153
|
|
||||
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Stock options and performance share units
|
—
|
|
|
1
|
|
|
1
|
|
|
2
|
|
||||
Weighted average common shares outstanding – diluted
|
145
|
|
|
151
|
|
|
145
|
|
|
155
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Earnings per share attributable to Quest Diagnostics’ common stockholders – basic:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income from continuing operations
|
$
|
0.89
|
|
|
$
|
2.68
|
|
|
$
|
2.52
|
|
|
$
|
4.36
|
|
Income from discontinued operations
|
—
|
|
|
0.02
|
|
|
—
|
|
|
0.23
|
|
||||
Net income
|
$
|
0.89
|
|
|
$
|
2.70
|
|
|
$
|
2.52
|
|
|
$
|
4.59
|
|
|
|
|
|
|
|
|
|
||||||||
Earnings per share attributable to Quest Diagnostics’ common stockholders – diluted:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income from continuing operations
|
$
|
0.88
|
|
|
$
|
2.66
|
|
|
$
|
2.51
|
|
|
$
|
4.32
|
|
Income from discontinued operations
|
—
|
|
|
0.02
|
|
|
—
|
|
|
0.23
|
|
||||
Net income
|
$
|
0.88
|
|
|
$
|
2.68
|
|
|
$
|
2.51
|
|
|
$
|
4.55
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||
|
2014
|
|
2013
|
|
2014
|
|
2013
|
||||
Stock options and performance share units
|
—
|
|
|
2
|
|
|
3
|
|
|
2
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2014
|
|
2013
|
|
2014
|
|
2013
|
||||||||
Employee separation costs
|
$
|
14
|
|
|
$
|
24
|
|
|
$
|
28
|
|
|
$
|
66
|
|
Facility-related costs
|
2
|
|
|
5
|
|
|
6
|
|
|
6
|
|
||||
Asset impairment charges
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
||||
Accelerated vesting of stock-based compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Total restructuring charges
|
$
|
16
|
|
|
$
|
29
|
|
|
$
|
35
|
|
|
$
|
73
|
|
|
Employee Separation Costs
|
|
Facility-Related Costs
|
|
Total
|
||||||
|
|
|
|
|
|
||||||
Balance, December 31, 2013
|
$
|
31
|
|
|
$
|
5
|
|
|
$
|
36
|
|
Current period charges
|
28
|
|
|
6
|
|
|
34
|
|
|||
Less:
|
|
|
|
|
|
||||||
Cash payments
|
(36
|
)
|
|
(3
|
)
|
|
(39
|
)
|
|||
|
|
|
|
|
|
||||||
Balance, September 30, 2014
|
$
|
23
|
|
|
$
|
8
|
|
|
$
|
31
|
|
|
Solstas
|
|
|
|
Summit Health
|
|
|
||||
Cash
|
$
|
572
|
|
|
|
|
$
|
124
|
|
|
|
Estimated fair value of contingent consideration
|
—
|
|
|
|
|
22
|
|
|
|
||
Transaction related costs due to sellers
|
—
|
|
|
|
|
5
|
|
|
|
||
Total consideration
|
$
|
572
|
|
|
|
|
$
|
151
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Solstas
|
|
Summit Health
|
||||||||
Allocation of purchase price:
|
Fair Value
|
|
Weighted Average Useful Life (in years)
|
|
Fair Value
|
|
Weighted Average Useful Life (in years)
|
||||
Cash and cash equivalents
|
$
|
9
|
|
|
|
|
$
|
1
|
|
|
|
Accounts receivable, net
|
48
|
|
|
|
|
9
|
|
|
|
||
Current deferred income taxes
|
7
|
|
|
|
|
—
|
|
|
|
||
Other current assets
|
13
|
|
|
|
|
16
|
|
|
|
||
Property, plant and equipment, net
|
48
|
|
|
|
|
6
|
|
|
|
||
Goodwill
|
266
|
|
|
|
|
91
|
|
|
|
||
Intangible assets:
|
|
|
|
|
|
|
|
||||
Customer relationships
|
203
|
|
|
20
|
|
33
|
|
|
15
|
||
Software
|
—
|
|
|
|
|
3
|
|
|
4
|
||
Trade name
|
7
|
|
|
2
|
|
2
|
|
|
1
|
||
Total intangible assets
|
210
|
|
|
|
|
38
|
|
|
|
||
Non-current deferred income taxes
|
42
|
|
|
|
|
—
|
|
|
|
||
|
|
|
|
|
|
|
|
||||
Total assets acquired
|
643
|
|
|
|
|
161
|
|
|
|
||
|
|
|
|
|
|
|
|
||||
Current liabilities
|
59
|
|
|
|
|
10
|
|
|
|
||
Non-current deferred income taxes
|
4
|
|
|
|
|
—
|
|
|
|
||
Other non-current liabilities
|
8
|
|
|
|
|
—
|
|
|
|
||
|
|
|
|
|
|
|
|
||||
Total liabilities assumed
|
71
|
|
|
|
|
10
|
|
|
|
||
|
|
|
|
|
|
|
|
||||
Net assets acquired
|
$
|
572
|
|
|
|
|
$
|
151
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||
|
2013
|
|
2014
|
|
2013
|
||||||
|
|
|
|
|
|
||||||
Pro forma net revenues
|
$
|
1,911
|
|
|
$
|
5,637
|
|
|
$
|
5,740
|
|
|
|
|
|
|
|
||||||
Pro forma income from continuing operations
|
$
|
417
|
|
|
$
|
390
|
|
|
$
|
703
|
|
|
|
|
|
|
|
||||||
Earnings per share attributable to Quest Diagnostics’ common stockholders - basic:
|
|
|
|
|
|
||||||
Pro forma income from continuing operations
|
$
|
2.71
|
|
|
$
|
2.51
|
|
|
$
|
4.40
|
|
|
|
|
|
|
|
||||||
Earnings per share attributable to Quest Diagnostics’ common stockholders - diluted:
|
|
|
|
|
|
||||||
Pro forma income from continuing operations
|
$
|
2.70
|
|
|
$
|
2.50
|
|
|
$
|
4.36
|
|
|
|
|
Basis of Fair Value Measurements
|
||||||||||||
|
|
|
Quoted
Prices in
Active
Markets for
Identical
Assets /
Liabilities
|
|
Significant
Other
Observable
Inputs
|
|
Significant
Unobservable
Inputs
|
||||||||
September 30, 2014
|
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|||||||
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Trading securities
|
$
|
49
|
|
|
$
|
49
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Cash surrender value of life insurance policies
|
30
|
|
|
—
|
|
|
30
|
|
|
—
|
|
||||
Available-for-sale equity securities
|
11
|
|
|
11
|
|
|
—
|
|
|
—
|
|
||||
Interest rate swaps
|
9
|
|
|
—
|
|
|
9
|
|
|
—
|
|
||||
Put option
|
2
|
|
|
—
|
|
|
—
|
|
|
2
|
|
||||
Total
|
$
|
101
|
|
|
$
|
60
|
|
|
$
|
39
|
|
|
$
|
2
|
|
|
|
|
|
|
|
|
|
||||||||
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Deferred compensation liabilities
|
$
|
84
|
|
|
$
|
—
|
|
|
$
|
84
|
|
|
$
|
—
|
|
Contingent consideration
|
26
|
|
|
—
|
|
|
—
|
|
|
26
|
|
||||
Interest rate swaps
|
21
|
|
|
—
|
|
|
21
|
|
|
—
|
|
||||
Call option
|
6
|
|
|
—
|
|
|
—
|
|
|
6
|
|
||||
Forward starting interest rate swaps
|
8
|
|
|
—
|
|
|
8
|
|
|
—
|
|
||||
Total
|
$
|
145
|
|
|
$
|
—
|
|
|
$
|
113
|
|
|
$
|
32
|
|
|
|
|
Basis of Fair Value Measurements
|
||||||||||||
|
|
|
Quoted
Prices in
Active
Markets for
Identical
Assets /
Liabilities
|
|
Significant
Other
Observable
Inputs
|
|
Significant
Unobservable
Inputs
|
||||||||
December 31, 2013
|
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|||||||
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Trading securities
|
$
|
50
|
|
|
$
|
50
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Cash surrender value of life insurance policies
|
29
|
|
|
—
|
|
|
29
|
|
|
—
|
|
||||
Put option
|
4
|
|
|
—
|
|
|
—
|
|
|
4
|
|
||||
Forward starting interest rate swaps
|
2
|
|
|
—
|
|
|
2
|
|
|
—
|
|
||||
Total
|
$
|
85
|
|
|
$
|
50
|
|
|
$
|
31
|
|
|
$
|
4
|
|
|
|
|
|
|
|
|
|
||||||||
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Deferred compensation liabilities
|
$
|
84
|
|
|
$
|
—
|
|
|
$
|
84
|
|
|
$
|
—
|
|
Interest rate swaps
|
34
|
|
|
—
|
|
|
34
|
|
|
—
|
|
||||
Call option
|
8
|
|
|
—
|
|
|
—
|
|
|
8
|
|
||||
Total
|
$
|
126
|
|
|
$
|
—
|
|
|
$
|
118
|
|
|
$
|
8
|
|
|
Fair Value Measurements Using Significant Unobservable Inputs
(Level 3) |
||
|
Contingent Consideration
|
||
Balance, December 31, 2013
|
$
|
—
|
|
Purchases, additions and issuances
|
26
|
|
|
Total gains (losses) - realized/unrealized:
|
|
||
Included in earnings
|
—
|
|
|
Transfers in and out of Level 3
|
—
|
|
|
Balance, September 30, 2014
|
$
|
26
|
|
|
September 30,
2014 |
|
December 31,
2013 |
||||
Balance at beginning of period
|
$
|
5,649
|
|
|
$
|
5,536
|
|
Goodwill acquired during the period
|
377
|
|
|
150
|
|
||
Write-off associated with sale of a business during the period
|
—
|
|
|
(37
|
)
|
||
Balance at end of period
|
$
|
6,026
|
|
|
$
|
5,649
|
|
|
Weighted
Average
Amortization
Period
(in years)
|
|
September 30, 2014
|
|
December 31, 2013
|
||||||||||||||||||||
|
|
|
Cost
|
|
Accumulated
Amortization
|
|
Net
|
|
Cost
|
|
Accumulated
Amortization
|
|
Net
|
||||||||||||
Amortizing intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Customer-related intangibles
|
18
|
|
$
|
928
|
|
|
$
|
(245
|
)
|
|
$
|
683
|
|
|
$
|
670
|
|
|
$
|
(210
|
)
|
|
$
|
460
|
|
Non-compete agreements
|
4
|
|
43
|
|
|
(35
|
)
|
|
8
|
|
|
43
|
|
|
(27
|
)
|
|
16
|
|
||||||
Technology
|
14
|
|
119
|
|
|
(36
|
)
|
|
83
|
|
|
119
|
|
|
(28
|
)
|
|
91
|
|
||||||
Other
|
8
|
|
152
|
|
|
(76
|
)
|
|
76
|
|
|
141
|
|
|
(57
|
)
|
|
84
|
|
||||||
Total
|
16
|
|
1,242
|
|
|
(392
|
)
|
|
850
|
|
|
973
|
|
|
(322
|
)
|
|
651
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Intangible assets not subject to amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Trade names
|
|
|
244
|
|
|
—
|
|
|
244
|
|
|
244
|
|
|
—
|
|
|
244
|
|
||||||
Other
|
|
|
1
|
|
|
—
|
|
|
1
|
|
|
1
|
|
|
—
|
|
|
1
|
|
||||||
Total intangible assets
|
|
$
|
1,487
|
|
|
$
|
(392
|
)
|
|
$
|
1,095
|
|
|
$
|
1,218
|
|
|
$
|
(322
|
)
|
|
$
|
896
|
|
Year Ending December 31,
|
|
|
|
Remainder of 2014
|
$
|
24
|
|
2015
|
84
|
|
|
2016
|
74
|
|
|
2017
|
72
|
|
|
2018
|
64
|
|
|
2019
|
62
|
|
|
Thereafter
|
470
|
|
|
Total
|
$
|
850
|
|
|
September 30,
2014 |
|
December 31,
2013 |
||||
|
|
|
|
||||
Floating Rate Senior Notes due March 2014
|
$
|
—
|
|
|
$
|
200
|
|
5.45% Senior Notes due November 2015
|
500
|
|
|
500
|
|
||
3.20% Senior Notes due April 2016
|
305
|
|
|
307
|
|
||
6.40% Senior Notes due July 2017
|
375
|
|
|
375
|
|
||
2.70% Senior Notes due April 2019
|
300
|
|
|
—
|
|
||
4.75% Senior Notes due January 2020
|
520
|
|
|
520
|
|
||
4.70% Senior Notes due April 2021
|
544
|
|
|
533
|
|
||
4.25% Senior Notes due April 2024
|
305
|
|
|
—
|
|
||
6.95% Senior Notes due July 2037
|
421
|
|
|
421
|
|
||
5.75% Senior Notes due January 2040
|
439
|
|
|
439
|
|
||
Other
|
45
|
|
|
37
|
|
||
|
|
|
|
||||
Total long-term debt
|
3,754
|
|
|
3,332
|
|
||
Less: current portion of long-term debt
|
22
|
|
|
212
|
|
||
|
|
|
|
||||
Total long-term debt, net of current portion
|
$
|
3,732
|
|
|
$
|
3,120
|
|
Year Ending December 31,
|
|
||
Remainder of 2014
|
$
|
4
|
|
2015
|
520
|
|
|
2016
|
309
|
|
|
2017
|
381
|
|
|
2018
|
4
|
|
|
2019
|
301
|
|
|
Thereafter
|
2,226
|
|
|
|
|
||
Total maturities of long-term debt
|
3,745
|
|
|
Unamortized discount
|
(21
|
)
|
|
Fair value basis adjustments attributable to hedged debt
|
30
|
|
|
|
|
||
Total long-term debt
|
3,754
|
|
|
Current portion of long-term debt
|
22
|
|
|
|
|
||
Total long-term debt, net of current portion
|
$
|
3,732
|
|
|
September 30, 2014
|
|
December 31, 2013
|
||||||||
|
Balance Sheet
Classification
|
|
Fair Value
|
|
Balance Sheet
Classification
|
|
Fair Value
|
||||
Derivatives Designated as Hedging Instruments
|
|
|
|
|
|
|
|
|
|
||
Asset Derivatives:
|
|
|
|
|
|
|
|
|
|
||
Interest rate swaps
|
Other assets
|
|
$
|
9
|
|
|
Other assets
|
|
$
|
—
|
|
Forward starting interest rate swaps
|
Other assets
|
|
—
|
|
|
Other assets
|
|
2
|
|
||
Total Asset Derivatives
|
|
|
9
|
|
|
|
|
2
|
|
||
|
|
|
|
|
|
|
|
||||
Liability Derivatives:
|
|
|
|
|
|
|
|
||||
Interest rate swaps
|
Other liabilities
|
|
21
|
|
|
Other liabilities
|
|
34
|
|
||
Forward starting interest rate swaps
|
Other liabilities
|
|
8
|
|
|
Other liabilities
|
|
—
|
|
||
Total Liability Derivatives
|
|
|
29
|
|
|
|
|
34
|
|
||
|
|
|
|
|
|
|
|
||||
Derivatives Not Designated as Hedging Instruments
|
|
|
|
|
|
|
|
|
|
||
Asset Derivatives:
|
|
|
|
|
|
|
|
|
|
||
Put option
|
Prepaid expenses and other current assets
|
|
2
|
|
|
Other assets
|
|
4
|
|
||
|
|
|
|
|
|
|
|
||||
Liability Derivatives:
|
|
|
|
|
|
|
|
||||
Call option
|
Accounts payable and accrued expenses
|
|
6
|
|
|
Other liabilities
|
|
8
|
|
||
|
|
|
|
|
|
|
|
||||
Total Net Derivatives Liabilities
|
|
|
$
|
(24
|
)
|
|
|
|
$
|
(36
|
)
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2014
|
|
2013
|
|
2014
|
|
2013
|
||||||||
Depreciation expense
|
$
|
55
|
|
|
$
|
49
|
|
|
$
|
164
|
|
|
$
|
152
|
|
Amortization expense
|
24
|
|
|
20
|
|
|
71
|
|
|
59
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Interest paid
|
51
|
|
|
52
|
|
|
133
|
|
|
136
|
|
||||
Income taxes paid
|
98
|
|
|
127
|
|
|
236
|
|
|
332
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Assets acquired under capital leases
|
2
|
|
|
—
|
|
|
12
|
|
|
2
|
|
||||
Accounts payable associated with capital expenditures
|
12
|
|
|
6
|
|
|
12
|
|
|
6
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Businesses acquired:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fair value of assets acquired
|
1
|
|
|
—
|
|
|
846
|
|
|
241
|
|
||||
Fair value of liabilities assumed
|
(1
|
)
|
|
—
|
|
|
81
|
|
|
11
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Fair value of net assets acquired
|
2
|
|
|
—
|
|
|
765
|
|
|
230
|
|
||||
Merger consideration paid (payable), net
|
—
|
|
|
—
|
|
|
(30
|
)
|
|
(50
|
)
|
||||
|
|
|
|
|
|
|
|
||||||||
Cash paid for business acquisitions
|
2
|
|
|
—
|
|
|
735
|
|
|
180
|
|
||||
Less: Cash acquired
|
—
|
|
|
—
|
|
|
10
|
|
|
—
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Business acquisitions, net of cash acquired
|
$
|
2
|
|
|
$
|
—
|
|
|
$
|
725
|
|
|
$
|
180
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2014
|
|
2013
|
|
2014
|
|
2013
|
||||||||
Depreciation expense
|
$
|
55
|
|
|
$
|
48
|
|
|
$
|
164
|
|
|
$
|
151
|
|
|
|
|
|
|
|
|
|
||||||||
Interest expense
|
(42
|
)
|
|
(41
|
)
|
|
(124
|
)
|
|
(122
|
)
|
||||
Interest income
|
1
|
|
|
1
|
|
|
2
|
|
|
2
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Interest expense, net
|
$
|
(41
|
)
|
|
$
|
(40
|
)
|
|
$
|
(122
|
)
|
|
$
|
(120
|
)
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2014
|
|
2013
|
|
2014
|
|
2013
|
||||||||
Net revenues
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
28
|
|
|
|
|
|
|
|
|
|
||||||||
Income from discontinued operations before taxes
|
—
|
|
|
3
|
|
|
—
|
|
|
25
|
|
||||
Income tax (expense) benefit
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
10
|
|
||||
Income from discontinued operations, net of taxes
|
$
|
—
|
|
|
$
|
2
|
|
|
$
|
—
|
|
|
$
|
35
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2014
|
|
2013
|
|
2014
|
|
2013
|
||||||||
Net revenues:
|
|
|
|
|
|
|
|
|
|
|
|
||||
DIS business
|
$
|
1,765
|
|
|
$
|
1,648
|
|
|
$
|
5,141
|
|
|
$
|
4,971
|
|
All other operating segments
|
139
|
|
|
140
|
|
|
411
|
|
|
419
|
|
||||
Total net revenues
|
$
|
1,904
|
|
|
$
|
1,788
|
|
|
$
|
5,552
|
|
|
$
|
5,390
|
|
|
|
|
|
|
|
|
|
||||||||
Operating earnings (loss):
|
|
|
|
|
|
|
|
|
|
|
|
||||
DIS business
|
$
|
281
|
|
|
$
|
294
|
|
|
$
|
805
|
|
|
$
|
887
|
|
All other operating segments
|
23
|
|
|
22
|
|
|
63
|
|
|
53
|
|
||||
General corporate activities
|
(48
|
)
|
|
373
|
|
|
(142
|
)
|
|
265
|
|
||||
Total operating income
|
256
|
|
|
689
|
|
|
726
|
|
|
1,205
|
|
||||
Non-operating expenses, net
|
(35
|
)
|
|
(32
|
)
|
|
(100
|
)
|
|
(95
|
)
|
||||
Income from continuing operations before taxes
|
221
|
|
|
657
|
|
|
626
|
|
|
1,110
|
|
||||
Income tax expense
|
82
|
|
|
245
|
|
|
234
|
|
|
413
|
|
||||
Income from continuing operations
|
139
|
|
|
412
|
|
|
392
|
|
|
697
|
|
||||
Income from discontinued operations, net of taxes
|
—
|
|
|
2
|
|
|
—
|
|
|
35
|
|
||||
Net income
|
139
|
|
|
414
|
|
|
392
|
|
|
732
|
|
||||
Less: Net income attributable to noncontrolling interests
|
10
|
|
|
9
|
|
|
26
|
|
|
26
|
|
||||
Net income attributable to Quest Diagnostics
|
$
|
129
|
|
|
$
|
405
|
|
|
$
|
366
|
|
|
$
|
706
|
|
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
•
|
We launched the expanded OncoVantage panels through our partnership with Memorial Sloan Kettering.
|
•
|
We offered our customers national access to Sequenom's non-invasive prenatal test.
|
•
|
We opened our diagnostic testing laboratory in Marlborough, Massachusetts, which will use advanced automation technology to improve the quality and efficiency of diagnostic testing for the New England market.
|
•
|
We repurchased $25 million of our common stock as part of our Common Stock repurchase program.
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||||||||||||||||
|
2014
|
|
2013
|
|
Increase
(Decrease) |
|
% Increase
(Decrease) |
|
2014
|
|
2013
|
|
Increase
(Decrease) |
|
% Increase
(Decrease) |
||||||||||||||
|
(dollars in millions, except per share amounts)
|
||||||||||||||||||||||||||||
Net revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
DIS business
|
$
|
1,765
|
|
|
$
|
1,648
|
|
|
$
|
117
|
|
|
7.1
|
%
|
|
$
|
5,141
|
|
|
$
|
4,971
|
|
|
$
|
170
|
|
|
3.4
|
%
|
DS businesses
|
139
|
|
|
140
|
|
|
(1
|
)
|
|
(0.7
|
)
|
|
411
|
|
|
419
|
|
|
(8
|
)
|
|
(2.1
|
)
|
||||||
Total net revenues
|
$
|
1,904
|
|
|
$
|
1,788
|
|
|
$
|
116
|
|
|
6.5
|
%
|
|
$
|
5,552
|
|
|
$
|
5,390
|
|
|
$
|
162
|
|
|
3.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Cost of services
|
$
|
1,178
|
|
|
$
|
1,089
|
|
|
$
|
89
|
|
|
8.2
|
%
|
|
$
|
3,453
|
|
|
$
|
3,275
|
|
|
$
|
178
|
|
|
5.5
|
%
|
Selling, general and administrative
|
446
|
|
|
423
|
|
|
23
|
|
|
5.4
|
|
|
1,301
|
|
|
1,289
|
|
|
12
|
|
|
0.9
|
|
||||||
Amortization of intangible assets
|
24
|
|
|
20
|
|
|
4
|
|
|
17.2
|
|
|
71
|
|
|
59
|
|
|
12
|
|
|
19.1
|
|
||||||
Gain on sale of royalty rights
|
—
|
|
|
(474
|
)
|
|
474
|
|
|
NM
|
|
|
—
|
|
|
(474
|
)
|
|
474
|
|
|
NM
|
|
||||||
Other operating expense, net
|
—
|
|
|
41
|
|
|
(41
|
)
|
|
NM
|
|
|
1
|
|
|
36
|
|
|
(35
|
)
|
|
NM
|
|
||||||
Total operating costs and expenses
|
$
|
1,648
|
|
|
$
|
1,099
|
|
|
$
|
549
|
|
|
50.1
|
%
|
|
$
|
4,826
|
|
|
$
|
4,185
|
|
|
$
|
641
|
|
|
15.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Operating income
|
$
|
256
|
|
|
$
|
689
|
|
|
$
|
(433
|
)
|
|
(62.9
|
)%
|
|
$
|
726
|
|
|
$
|
1,205
|
|
|
$
|
(479
|
)
|
|
(39.8
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Interest expense, net
|
$
|
(41
|
)
|
|
$
|
(40
|
)
|
|
$
|
(1
|
)
|
|
3.0
|
%
|
|
$
|
(122
|
)
|
|
$
|
(120
|
)
|
|
$
|
(2
|
)
|
|
1.7
|
%
|
Equity in earnings of equity method investees
|
7
|
|
|
5
|
|
|
2
|
|
|
41.6
|
|
|
19
|
|
|
18
|
|
|
1
|
|
|
5.9
|
|
||||||
Other (expense) income, net
|
(1
|
)
|
|
3
|
|
|
(4
|
)
|
|
NM
|
|
|
3
|
|
|
7
|
|
|
(4
|
)
|
|
NM
|
|
||||||
Total non-operating expenses, net
|
$
|
(35
|
)
|
|
$
|
(32
|
)
|
|
$
|
(3
|
)
|
|
9.4
|
%
|
|
$
|
(100
|
)
|
|
$
|
(95
|
)
|
|
$
|
(5
|
)
|
|
4.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Income tax expense
|
$
|
82
|
|
|
$
|
245
|
|
|
$
|
(163
|
)
|
|
(66.5
|
)%
|
|
$
|
234
|
|
|
$
|
413
|
|
|
$
|
(179
|
)
|
|
(43.3
|
)%
|
Effective income tax rate
|
37.3
|
%
|
|
37.4
|
%
|
|
(0.1
|
)%
|
|
NM
|
|
|
37.4
|
%
|
|
37.3
|
%
|
|
0.1
|
%
|
|
NM
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Income from discontinued operations, net of taxes
|
$
|
—
|
|
|
$
|
2
|
|
|
$
|
(2
|
)
|
|
NM
|
|
|
$
|
—
|
|
|
$
|
35
|
|
|
$
|
(35
|
)
|
|
NM
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Income from continuing operations attributable to Quest Diagnostics' stockholders
|
$
|
129
|
|
|
$
|
403
|
|
|
$
|
(274
|
)
|
|
(68.0
|
)%
|
|
$
|
366
|
|
|
$
|
671
|
|
|
$
|
(305
|
)
|
|
(45.4
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Diluted earnings per common share from continuing operations attributable to Quest Diagnostics’ common stockholders
|
$
|
0.88
|
|
|
$
|
2.66
|
|
|
$
|
(1.78
|
)
|
|
(66.9
|
)%
|
|
$
|
2.51
|
|
|
$
|
4.32
|
|
|
$
|
(1.81
|
)
|
|
(41.9
|
)%
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||
|
2014
|
|
2013
|
|
2014
|
|
2013
|
||||
|
|
|
|
|
|
|
|
||||
Net revenues:
|
|
|
|
|
|
|
|
||||
DIS business
|
92.7
|
%
|
|
92.2
|
%
|
|
92.6
|
%
|
|
92.1
|
%
|
DS businesses
|
7.3
|
|
|
7.8
|
|
|
7.4
|
|
|
7.9
|
|
Total net revenues
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
||||
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
|
||
Cost of services
|
61.9
|
%
|
|
60.9
|
%
|
|
62.2
|
%
|
|
60.7
|
%
|
Selling, general and administrative
|
23.4
|
|
|
23.7
|
|
|
23.4
|
|
|
23.9
|
|
Amortization of intangible assets
|
1.3
|
|
|
1.1
|
|
|
1.3
|
|
|
1.1
|
|
Gain on sale of royalty rights
|
—
|
|
|
(26.5
|
)
|
|
—
|
|
|
(8.8
|
)
|
Other operating expense, net
|
—
|
|
|
2.2
|
|
|
—
|
|
|
0.7
|
|
Total operating costs and expenses
|
86.6
|
%
|
|
61.4
|
%
|
|
86.9
|
%
|
|
77.6
|
%
|
|
|
|
|
|
|
|
|
||||
Operating income
|
13.4
|
%
|
|
38.6
|
%
|
|
13.1
|
%
|
|
22.4
|
%
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||||||||||
|
|
|
Increase
(Decrease) |
|
|
|
Increase
(Decrease) |
||||||||||||||||
|
2014
|
|
2013
|
|
|
2014
|
|
2013
|
|
||||||||||||||
|
(dollars in millions)
|
||||||||||||||||||||||
Net revenues
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
28
|
|
|
$
|
(28
|
)
|
Income from discontinued operations before taxes
|
—
|
|
|
3
|
|
|
(3
|
)
|
|
—
|
|
|
25
|
|
|
(25
|
)
|
||||||
Income tax (expense) benefit
|
—
|
|
|
(1
|
)
|
|
1
|
|
|
—
|
|
|
10
|
|
|
(10
|
)
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Income from discontinued operations, net of taxes
|
$
|
—
|
|
|
$
|
2
|
|
|
$
|
(2
|
)
|
|
$
|
—
|
|
|
$
|
35
|
|
|
$
|
(35
|
)
|
|
Nine Months Ended September 30,
|
||||||
|
2014
|
|
2013
|
||||
|
(dollars in millions)
|
||||||
Net cash provided by operating activities
|
$
|
635
|
|
|
$
|
442
|
|
Net cash (used in) provided by investing activities
|
(934
|
)
|
|
433
|
|
||
Net cash provided by (used in) financing activities
|
282
|
|
|
(1,030
|
)
|
||
|
|
|
|
||||
Net change in cash and cash equivalents
|
$
|
(17
|
)
|
|
$
|
(155
|
)
|
|
|
Payments due by period
|
||||||||||||||||||
|
|
(in millions)
|
||||||||||||||||||
Contractual Obligations
|
|
Total
|
|
Remainder of 2014
|
|
1-3 years
|
|
3-5 years
|
|
After 5 years
|
||||||||||
Outstanding debt
|
|
$
|
3,816
|
|
|
$
|
110
|
|
|
$
|
806
|
|
|
$
|
375
|
|
|
$
|
2,525
|
|
Capital lease obligations
|
|
39
|
|
|
4
|
|
|
23
|
|
|
10
|
|
|
2
|
|
|||||
Interest payments on outstanding debt
|
|
1,822
|
|
|
36
|
|
|
308
|
|
|
243
|
|
|
1,235
|
|
|||||
Operating leases
|
|
733
|
|
|
56
|
|
|
322
|
|
|
155
|
|
|
200
|
|
|||||
Purchase obligations
|
|
240
|
|
|
26
|
|
|
130
|
|
|
58
|
|
|
26
|
|
|||||
Merger consideration obligations
|
|
83
|
|
|
3
|
|
|
78
|
|
|
2
|
|
|
—
|
|
|||||
Total contractual obligations
|
|
$
|
6,733
|
|
|
$
|
235
|
|
|
$
|
1,667
|
|
|
$
|
843
|
|
|
$
|
3,988
|
|
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)
|
||||||
July 1, 2014 – July 31, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Share Repurchase Program (A)
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
771,003
|
|
Employee Transactions (B)
|
|
1,368
|
|
|
$
|
60.16
|
|
|
N/A
|
|
|
N/A
|
|
|
August 1, 2014 – August 31, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Share Repurchase Program (A)
|
|
273,116
|
|
|
$
|
61.55
|
|
|
273,116
|
|
|
$
|
754,193
|
|
Employee Transactions (B)
|
|
4,064
|
|
|
$
|
61.80
|
|
|
N/A
|
|
|
N/A
|
|
|
September 1, 2014 – September 30, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Share Repurchase Program (A)
|
|
129,617
|
|
|
$
|
63.03
|
|
|
129,617
|
|
|
$
|
746,023
|
|
Employee Transactions (B)
|
|
235
|
|
|
$
|
62.77
|
|
|
N/A
|
|
|
N/A
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Share Repurchase Program (A)
|
|
402,733
|
|
|
$
|
62.03
|
|
|
402,733
|
|
|
$
|
746,023
|
|
Employee Transactions (B)
|
|
5,667
|
|
|
$
|
61.45
|
|
|
N/A
|
|
|
N/A
|
|
(A)
|
In August 2013, our Board of Directors authorized the Company to repurchase an additional $1 billion of the Company’s common stock, increasing the total available authorization at that time to approximately $1.3 billion. The share repurchase authorization has no set expiration or termination date. Since the share repurchase program’s inception in May 2003, our Board of Directors has authorized $6.5 billion of share repurchases of our common stock through
September 30, 2014
.
|
(B)
|
Includes: (1) shares delivered or attested to in satisfaction of the exercise price and/or tax withholding obligations by holders of stock options (granted under the Company’s Amended and Restated Employee Long-Term Incentive Plan and its Amended and Restated Non-Employee Director Long-Term Incentive Plan, collectively the “Stock Compensation Plans”) who exercised options; and (2) shares withheld (under the terms of grants under the Stock Compensation Plans) to offset tax withholding obligations that occur upon the delivery of common shares underlying restricted stock units and performance share units.
|
Item 6.
|
Exhibits
|
31.1
|
Rule 13a-14(a) Certification of Chief Executive Officer
|
|
|
31.2
|
Rule 13a-14(a) Certification of Chief Financial Officer
|
|
|
32.1
|
Section 1350 Certification of Chief Executive Officer
|
|
|
32.2
|
Section 1350 Certification of Chief Financial Officer
|
|
|
101.INS
|
dgx-20140930.xml
|
|
|
101.SCH
|
dgx-20140930.xsd
|
|
|
101.CAL
|
dgx-20140930_cal.xml
|
|
|
101.DEF
|
dgx-20140930_def.xml
|
|
|
101.LAB
|
dgx-20140930_lab.xml
|
|
|
101.PRE
|
dgx-20140930_pre.xml
|
|
|
|
|
By
|
/s/ Stephen H. Rusckowski
|
|
|
Stephen H. Rusckowski
|
|
|
President and Chief Executive Officer
|
|
|
|
|
|
|
|
By
|
/s/ Mark J. Guinan
|
|
|
Mark J. Guinan
|
|
|
Senior Vice President and Chief Financial Officer
|
|
|
|
|
No information found
* THE VALUE IS THE MARKET VALUE AS OF THE LAST DAY OF THE QUARTER FOR WHICH THE 13F WAS FILED.
FUND | NUMBER OF SHARES | VALUE ($) | PUT OR CALL |
---|
DIRECTORS | AGE | BIO | OTHER DIRECTOR MEMBERSHIPS |
---|
No information found
No Customers Found
Price
Yield
Owner | Position | Direct Shares | Indirect Shares |
---|