Quest Diagnostics Inc. Files 10-Q for Period Ending March 31, 2024

TL;DR

<b>Quest Diagnostics Inc. has filed its Q1 2024 10-Q report, detailing financial performance and balance sheet information.</b>

AI Summary

QUEST DIAGNOSTICS INC (DGX) filed a Quarterly Report (10-Q) with the SEC on April 24, 2024. Quest Diagnostics Inc. filed its quarterly report (10-Q) for the period ending March 31, 2024. The filing covers the first quarter of fiscal year 2024. The report includes financial data for the periods ending March 31, 2024, December 31, 2023, and March 31, 2023. Key financial statement components such as common stock, additional paid-in capital, retained earnings, and treasury stock are detailed for various dates. Information related to the 'Invigorate Program' and its impact on cost of sales and selling, general, and administrative expenses for Q1 2024 and Q1 2023 is presented.

Why It Matters

For investors and stakeholders tracking QUEST DIAGNOSTICS INC, this filing contains several important signals. This filing provides investors with the latest financial snapshot of Quest Diagnostics, crucial for understanding the company's performance in the first quarter of 2024. The inclusion of comparative data from previous periods allows for trend analysis and assessment of the company's financial trajectory.

Risk Assessment

Risk Level: low — QUEST DIAGNOSTICS INC shows low risk based on this filing. The filing is a standard quarterly report (10-Q) and does not contain unusual or high-risk disclosures.

Analyst Insight

Monitor Quest Diagnostics' financial performance and compare key metrics against prior periods and industry benchmarks to assess ongoing business health.

Key Numbers

• 2024-03-31 — Period End Date (Current reporting period)
• 2024-01-01 — Period Start Date (Current reporting period)
• 2023-03-31 — Prior Year Period End Date (Comparative period)
• 2023-01-01 — Prior Year Period Start Date (Comparative period)

Key Players & Entities

• QUEST DIAGNOSTICS INC (company) — Filer name
• 2024-03-31 (date) — Period of report
• 2024-04-24 (date) — Filed as of date
• 0001022079 (company) — Central Index Key
• SECAUCUS (location) — Business address city
• NJ (location) — Business address state
• 07094 (location) — Business address zip
• 9735202700 (phone) — Business phone

FAQ

Industry Context

Quest Diagnostics operates in the healthcare industry, specifically within the medical laboratory services sector.

Regulatory Implications

The filing is made under the Securities Exchange Act of 1934, requiring regular reporting of financial information.

What Investors Should Do

1. Review the full 10-Q filing for detailed financial statements and management discussion.
2. Analyze the 'Invigorate Program' details to understand its impact on costs and future strategy.
3. Compare Q1 2024 results with Q1 2023 to identify year-over-year performance changes.

Key Dates

• 2024-03-31: Quarterly Period End — End of the reporting period for the 10-Q filing.
• 2024-04-24: Filing Date — Date the 10-Q report was officially filed with the SEC.

Year-Over-Year Comparison

This is the initial 10-Q filing for the fiscal year 2024, providing the first quarterly update of the year.

Key Financial Figures

• $0.01 — ange on which registered Common Stock, $0.01 Par Value DGX New York Stock Exchange

Filing Documents

• dgx-20240331.htm (10-Q) — 864KB
• dgx03312024ex101.htm (EX-10.1) — 147KB
• dgx03312024ex22.htm (EX-22) — 23KB
• dgx03312024ex311.htm (EX-31.1) — 10KB
• dgx03312024ex312.htm (EX-31.2) — 10KB
• dgx03312024ex321.htm (EX-32.1) — 5KB
• dgx03312024ex322.htm (EX-32.2) — 5KB
• 0001022079-24-000099.txt (&nbsp;) — 5159KB
• dgx-20240331.xsd (EX-101.SCH) — 31KB
• dgx-20240331_cal.xml (EX-101.CAL) — 57KB
• dgx-20240331_def.xml (EX-101.DEF) — 150KB
• dgx-20240331_lab.xml (EX-101.LAB) — 477KB
• dgx-20240331_pre.xml (EX-101.PRE) — 325KB
• dgx-20240331_htm.xml (XML) — 622KB

- FINANCIAL INFORMATION

PART I - FINANCIAL INFORMATION Page

Financial Statements (unaudited)

Item 1. Financial Statements (unaudited) Index to unaudited consolidated financial statements filed as part of this report: Consolidated Statements of Operations for the Three Months Ended March 31, 2024 and 2023 2 Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2024 and 2023 3 Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023 4 Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2024 and 2023 5 Consolidated Statements of Stockholders' Equity for the Three Months Ended March 31, 2024 and 2023 6

Notes to Consolidated Financial Statements (unaudited)

Notes to Consolidated Financial Statements (unaudited) 7

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 23

Quantitative and Qualitative Disclosures About Market Risk

Item 3. Quantitative and Qualitative Disclosures About Market Risk See Item 2. "Management's Discussion and Analysis of Financial Condition and Results of Operations" 33

Controls and Procedures

Item 4. Controls and Procedures

Controls and Procedures

Controls and Procedures 33 1 Table of Contents QUEST DIAGNOSTICS INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023 (unaudited) (in millions, except per share data) Three Months Ended March 31, 2024 2023 Net revenues $ 2,366 $ 2,331 Operating costs and expenses and other operating income: Cost of services 1,595 1,560 Selling, general and administrative 440 439 Amortization of intangible assets 29 26 Other operating expense, net 2 1 Total operating costs and expenses, net 2,066 2,026 Operating income 300 305 Other income (expense): Interest expense, net ( 43 ) ( 35 ) Other income, net 9 7 Total non-operating expense, net ( 34 ) ( 28 ) Income before income taxes and equity in earnings of equity method investees 266 277 Income tax expense ( 66 ) ( 65 ) Equity in earnings of equity method investees, net of taxes 8 5 Net income 208 217 Less: Net income attributable to noncontrolling interests 14 15 Net income attributable to Quest Diagnostics $ 194 $ 202 Earnings per share attributable to Quest Diagnostics' common stockholders: Basic $ 1.74 $ 1.80 Diluted $ 1.72 $ 1.78 Weighted average common shares outstanding: Basic 111 112 Diluted 112 113 The accompanying notes are an integral part of these statements. 2 Table of Contents QUEST DIAGNOSTICS INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023 (unaudited) (in millions) Three Months Ended March 31, 2024 2023 Net income $ 208 $ 217 Other comprehensive income (loss): Foreign currency translation adjustment ( 2 ) 3 Other comprehensive (loss) income ( 2 ) 3 Comprehensive income 206 220 Less: Comprehensive income attributable to noncontrolling interests 14 15 Comprehensive income attributable to Quest Diagnostics $ 192 $ 205 The accompanying notes are an integral part of these statements. 3 Table of Conten

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (in millions, unless otherwise indicated) 1. DESCRIPTION OF BUSINESS Background Quest Diagnostics Incorporated and its subsidiaries ("Quest Diagnostics" or the "Company") work across the healthcare ecosystem to create a healthier world, one life at a time. The Company's diagnostic information services ("DIS") business provides diagnostic insights from the results of its laboratory testing to empower people, physicians, and organizations to take action to improve health outcomes. Derived from one of the world's largest databases of de-identifiable clinical lab results, the diagnostic insights reveal new avenues to identify and treat disease, inspire healthy behaviors and improve healthcare management. In the right hands and with the right context, the diagnostic insights can inspire actions that transform lives and create a healthier world. The Company provides services to a broad range of customers within its primary customer channels - physicians (including those associated with accountable care organizations and Federally Qualified Health Centers), hospitals, and patients and consumers. Other customers include health plans, employers, emerging retail healthcare providers, government agencies, pharmaceutical companies and other commercial clinical laboratories. The Company offers broad access to clinical testing through a nationwide network of laboratories, patient service centers, phlebotomists in physician offices, and connectivity resources, including call centers and mobile phlebotomists, nurses and other health and wellness professionals. The Company's large in-house staff of medical and scientific experts, including medical directors, scientific directors, genetic counselors and board-certified geneticists, provide medical and scientific consultation to healthcare providers and patients regarding the Company's tests and test results, and help them best utilize Quest Diagnostics' services to improv

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED (unaudited) (in millions, unless otherwise indicated) dilutive common shares outstanding during the period. Potentially dilutive common shares include the dilutive effect of outstanding stock options and performance share units granted under the Company's Amended and Restated Employee Long-Term Incentive Plan ("ELTIP") and its Amended and Restated Non-Employee Director Long-Term Incentive Plan ("DLTIP"), as well as the dilutive effect of accelerated share repurchase agreements ("ASRs"), if applicable. Earnings allocable to participating securities include the portion of dividends declared as well as the portion of undistributed earnings during the period allocable to participating securities. New Accounting Standards to be Adopted In November 2023, the Financial Accounting Standards Board ("FASB") issued a new accounting standard which will require companies to disclose significant segment expenses that are regularly provided to the chief operating decision maker ("CODM"). The pronouncement is effective for annual filings for the year ended December 31, 2024 and for interim periods within the year ended December 31, 2025. The Company does not expect the adoption of this standard to have a material impact on its results of operations, financial position or cash flows. In December 2023, the FASB issued a new accounting standard which will require companies to make additional income tax disclosures. The pronouncement is effective for annual filings for the year ended December 31, 2025. The Company does not expect the adoption of this standard to have a material impact on its results of operations, financial position or cash flows. In March 2024, the Securities and Exchange Commission issued a rule which will require companies to make certain climate-related disclosures in periodic filings. The rule includes certain disclosures in the footnotes of the financial statements: capitalized costs, expenditur

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED (unaudited) (in millions, unless otherwise indicated) 3. EARNINGS PER SHARE The computation of basic and diluted earnings per common share was as follows (in millions, except per share data): Three Months Ended March 31, 2024 2023 Amounts attributable to Quest Diagnostics' common stockholders: Net income attributable to Quest Diagnostics $ 194 $ 202 Less: Earnings allocated to participating securities 1 1 Earnings available to Quest Diagnostics' common stockholders – basic and diluted $ 193 $ 201 Weighted average common shares outstanding – basic 111 112 Effect of dilutive securities: Stock options and performance share units 1 1 Weighted average common shares outstanding – diluted 112 113 Earnings per share attributable to Quest Diagnostics' common stockholders: Basic $ 1.74 $ 1.80 Diluted $ 1.72 $ 1.78 The following securities were not included in the calculation of diluted earnings per share due to their antidilutive effect: Three Months Ended March 31, 2024 2023 Stock options and performance share units 1 — 4. RESTRUCTURING ACTIVITIES Invigorate Program The Company is engaged in a multi-year program called Invigorate, which includes structured plans to drive savings and improve productivity across the value chain, including in such areas as patient services, logistics and laboratory operations, revenue services, information technology and procurement. The Invigorate program aims to deliver 3 % annual cost savings and productivity improvements to partially offset pressures from the current inflationary environment, including labor and benefit cost increases and reimbursement pressures. The Company is leveraging automation and artificial intelligence to improve productivity and also improve quality across the entire value chain, not just in the laboratory. Other areas of focus include reducing denials and patient concessions, enhancing the digital experience, and selecting

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED (unaudited) (in millions, unless otherwise indicated) Charges for all periods presented were primarily recorded in the Company's DIS business. The restructuring liability as of March 31, 2024 and December 31, 2023, which is included in accounts payable and accrued expenses, was $ 13 million and $ 12 million, respectively. 5. BUSINESS ACQUISITIONS During the three months ended March 31, 2024, the Company completed acquisitions for an aggregate purchase price of $ 148 million (including contingent consideration initially estimated at $ 6 million), net of cash acquired, including the acquisitions discussed below. Of such amount, $ 30 million was prepaid during the twelve months ended December 31, 2023. In the Company's consolidated statement of cash flows for the three months ended March 31, 2024, such $ 30 million is included in business acquisitions, net of cash acquired, with a corresponding offset in other investing activities. The acquisitions preliminarily resulted in goodwill of $ 99 million, all of which is deductible for tax purposes. The acquisitions also preliminarily resulted in $ 56 million of customer-related intangible assets. Acquisition of select assets of Lenco Diagnostic Laboratories, Inc. ("Lenco") On February 12, 2024, the Company acquired select assets of Lenco, an independent clinical diagnostic laboratory provider serving physicians in New York, in an all-cash transaction for $ 111 million. Based on the preliminary purchase price allocation, which may be revised as additional information becomes available during the measurement period, the assets acquired and liabilities assumed primarily consist of $ 75 million of tax-deductible goodwill, $ 43 million of customer-related intangible assets and $ 7 million of operating lease liabilities. The intangible assets are being amortized over a useful life of 15 years. The acquisitions were accounted for under the acquisition method

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED (unaudited) (in millions, unless otherwise indicated) 6. FAIR VALUE MEASUREMENTS Assets and Liabilities Measured at Fair Value on a Recurring Basis The following table provides a summary of the recognized assets and liabilities that are measured at fair value on a recurring basis: Basis of Fair Value Measurements Quoted Prices in Active Markets for Identical Assets/Liabilities Significant Other Observable Inputs Significant Unobservable Inputs March 31, 2024 Total Level 1 Level 2 Level 3 Assets: Deferred compensation trading securities $ 74 $ 74 $ — $ — Cash surrender value of life insurance policies 59 — 59 — Total $ 133 $ 74 $ 59 $ — Liabilities: Deferred compensation liabilities $ 138 $ — $ 138 $ — Contingent consideration 113 — — 113 Total $ 251 $ — $ 138 $ 113 Redeemable noncontrolling interest $ 77 $ — $ — $ 77 Basis of Fair Value Measurements December 31, 2023 Total Level 1 Level 2 Level 3 Assets: Deferred compensation trading securities $ 70 $ 70 $ — $ — Cash surrender value of life insurance policies 55 — 55 — Available-for-sale debt securities 2 — — 2 Total $ 127 $ 70 $ 55 $ 2 Liabilities: Deferred compensation liabilities $ 131 $ — $ 131 $ — Contingent consideration 104 — — 104 Total $ 235 $ — $ 131 $ 104 Redeemable noncontrolling interest $ 76 $ — $ — $ 76 A detailed description regarding the Company's fair value measurements is contained in Note 8 to the audited consolidated financial statements in the Company's 2023 Annual Report on Form 10-K. The Company offers certain employees the opportunity to participate in a non-qualified supplemental deferred compensation plan. A participant's deferrals, together with Company matching credits, are invested in a variety of participant-directed stock and bond mutual funds that are classified as trading securities. The trading securities are classified within Level 1 of the fair value hierarchy because the cha

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED (unaudited) (in millions, unless otherwise indicated) corresponding adjustment for changes in fair value of the trading securities is also reflected in the changes in fair value of the deferred compensation obligation. The deferred compensation liabilities are classified within Level 2 of the fair value hierarchy because their inputs are derived principally from observable market data by correlation to the trading securities. The Company offers certain employees the opportunity to participate in a non-qualified deferred compensation program. A participant's deferrals, together with Company matching credits, are "invested" at the direction of the employee in a hypothetical portfolio of investments which are tracked by an administrator. The Company purchases life insurance policies, with the Company named as beneficiary of the policies, for the purpose of funding the program's liability. Changes in the cash surrender value of the life insurance policies are based upon earnings and changes in the value of the underlying investments. Changes in the fair value of the deferred compensation obligation are derived using quoted prices in active markets based on the market price per unit multiplied by the number of units. The cash surrender value and the deferred compensation obligation are classified within Level 2 of the fair value hierarchy because their inputs are derived principally from observable market data by correlation to the hypothetical investments. Deferrals under the plan currently may only be made by participants who made deferrals under the plan in 2017. The Company's available-for-sale debt securities are measured at fair value using discounted cash flows. These fair value measurements are classified within Level 3 of the fair value hierarchy as the fair value is based on significant inputs that are not observable. Significant inputs include cash flows projections and a discount rate. During Ju

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