Quest Diagnostics Files Q2 2024 10-Q Report

Ticker: DGX · Form: 10-Q · Filed: Jul 24, 2024 · CIK: 1022079

Quest Diagnostics Inc 10-Q Filing Summary
FieldDetail
CompanyQuest Diagnostics Inc (DGX)
Form Type10-Q
Filed DateJul 24, 2024
Risk Levellow
Pages15
Reading Time19 min
Key Dollar Amounts$0.01
Sentimentneutral

Sentiment: neutral

Topics: 10-Q, quarterly-report, sec-filing

Related Tickers: DGX

TL;DR

Quest Diagnostics filed its Q2 10-Q, confirming compliance with SEC reporting rules.

AI Summary

Quest Diagnostics Inc. filed its quarterly report for the period ending June 30, 2024. The company, headquartered in Secaucus, NJ, is registered with the SEC under file number 001-12215 and its common stock trades on the New York Stock Exchange under the ticker symbol DGX. This filing confirms Quest Diagnostics has met its reporting obligations for the preceding 12 months and the past 90 days.

Why It Matters

This filing provides investors with an update on Quest Diagnostics' financial performance and operational status for the second quarter of 2024, crucial for understanding the company's trajectory.

Risk Assessment

Risk Level: low — The filing is a routine quarterly report and does not indicate any immediate financial distress or significant new risks.

Key Players & Entities

  • Quest Diagnostics Inc. (company) — Registrant
  • June 30, 2024 (date) — Quarterly period end date
  • 001-12215 (other) — Commission file number
  • DGX (other) — Common Stock Trading Symbol
  • New York Stock Exchange (company) — Exchange where DGX is registered
  • Secaucus, NJ (location) — Company Headquarters

FAQ

What is the commission file number for Quest Diagnostics Inc.?

The commission file number for Quest Diagnostics Inc. is 001-12215.

On which exchange is Quest Diagnostics' common stock registered?

Quest Diagnostics' common stock is registered on the New York Stock Exchange.

What is the trading symbol for Quest Diagnostics' common stock?

The trading symbol for Quest Diagnostics' common stock is DGX.

What is the primary purpose of this Form 10-Q filing?

This Form 10-Q is a quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended June 30, 2024.

Has Quest Diagnostics filed all required reports for the preceding 12 months?

Yes, the filing indicates that Quest Diagnostics has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months.

Filing Stats: 4,645 words · 19 min read · ~15 pages · Grade level 20 · Accepted 2024-07-24 16:44:27

Key Financial Figures

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

Filing Documents

- 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 and Six Months Ended June 30, 2024 and 2023 2 Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2024 and 2023 3 Consolidated Balance Sheets as of June 30, 2024 and December 31, 2023 4 Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2024 and 2023 5 Consolidated Statements of Stockholders' Equity for the Three and Six Months Ended June 30, 2024 and 2023 6

Notes to Consolidated Financial Statements (unaudited)

Notes to Consolidated Financial Statements (unaudited) 8

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 25

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" 37

Controls and Procedures

Item 4. Controls and Procedures

Controls and Procedures

Controls and Procedures 37 1 Table of Contents QUEST DIAGNOSTICS INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2024 AND 2023 (unaudited) (in millions, except per share data) Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Net revenues $ 2,397 $ 2,338 $ 4,763 $ 4,669 Operating costs and expenses and other operating income: Cost of services 1,593 1,546 3,188 3,106 Selling, general and administrative 416 416 856 855 Amortization of intangible assets 29 28 58 54 Other operating expense, net 4 — 6 1 Total operating costs and expenses, net 2,042 1,990 4,108 4,016 Operating income 355 348 655 653 Other income (expense): Interest expense, net ( 44 ) ( 37 ) ( 87 ) ( 72 ) Other income, net 3 6 12 13 Total non-operating expense, net ( 41 ) ( 31 ) ( 75 ) ( 59 ) Income before income taxes and equity in earnings of equity method investees 314 317 580 594 Income tax expense ( 74 ) ( 75 ) ( 140 ) ( 140 ) Equity in earnings of equity method investees, net of taxes — 7 8 12 Net income 240 249 448 466 Less: Net income attributable to noncontrolling interests 11 14 25 29 Net income attributable to Quest Diagnostics $ 229 $ 235 $ 423 $ 437 Earnings per share attributable to Quest Diagnostics' common stockholders: Basic $ 2.05 $ 2.08 $ 3.79 $ 3.88 Diluted $ 2.03 $ 2.05 $ 3.75 $ 3.83 Weighted average common shares outstanding: Basic 111 112 111 112 Diluted 112 114 112 114 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 AND SIX MONTHS ENDED JUNE 30, 2024 AND 2023 (unaudited) (in millions) Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Net income $ 240 $ 249 $ 448 $ 466 Other comprehensive income (loss): Foreign currency translation adjustment ( 3 ) 2 ( 5 ) 5 O

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 June 30, Six Months Ended June 30, 2024 2023 2024 2023 Amounts attributable to Quest Diagnostics' common stockholders: Net income attributable to Quest Diagnostics $ 229 $ 235 $ 423 $ 437 Less: Earnings allocated to participating securities 1 1 2 2 Earnings available to Quest Diagnostics' common stockholders – basic and diluted $ 228 $ 234 $ 421 $ 435 Weighted average common shares outstanding – basic 111 112 111 112 Effect of dilutive securities: Stock options and performance share units 1 2 1 2 Weighted average common shares outstanding – diluted 112 114 112 114 Earnings per share attributable to Quest Diagnostics' common stockholders: Basic $ 2.05 $ 2.08 $ 3.79 $ 3.88 Diluted $ 2.03 $ 2.05 $ 3.75 $ 3.83 The following securities were not included in the calculation of diluted earnings per share due to their antidilutive effect: Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Stock options and performance share units 1 — 1 — 4. RESTRUCTURING ACTIVITIES AND IMPAIRMENT CHARGES 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 acros

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED (unaudited) (in millions, unless otherwise indicated) Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Employee separation costs $ 8 $ 1 $ 14 $ 16 Asset impairment charges $ — $ 5 $ — $ 5 Total restructuring and impairment charges $ 8 $ 6 $ 14 $ 21 The restructuring and impairment charges incurred for the three and six months ended June 30, 2024 were associated with various workforce reduction initiatives as the Company continued to restructure its organization. Of the total restructuring and impairment charges incurred during the three months ended June 30, 2024, $ 4 million, and $ 4 million were recorded in cost of services and selling, general and administrative expenses, respectively. Of the total restructuring and impairment charges incurred during the six months ended June 30, 2024, $ 8 million and $ 6 million were recorded in cost of services and selling, general and administrative expenses, respectively. The restructuring and impairment charges incurred for the three and six months ended June 30, 2023 were primarily associated with various workforce reduction initiatives as the Company continued to restructure its organization. Additionally, during the three months ended June 30, 2023, the Company recorded an impairment charge for a corporate facility that was held for sale. All of the restructuring and impairment charges incurred during the three months ended June 30, 2023 were recorded in selling, general and administrative expenses. Of the total restructuring and impairment charges incurred during the six months ended June 30, 2023, $ 9 million and $ 12 million were recorded in cost of services and selling, general and administrative expenses, respectively. Charges for all periods presented were primarily recorded in the Company's DIS business. The restructuring liability as of June 30, 2024 and December 31, 2023, which is included in accounts payable and accru

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED (unaudited) (in millions, unless otherwise indicated) 5. BUSINESS ACQUISITIONS During the six months ended June 30, 2024, the Company completed acquisitions for an aggregate purchase price of $ 248 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 six months ended June 30, 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 $ 154 million, all of which is deductible for tax purposes. The acquisitions also preliminarily resulted in $ 95 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. Acquisition of select assets of PathAI Diagnostics On June 10, 2024, the Company acquired select assets of PathAI Diagnostics, a business that provides anatomic and digital pathology laboratory services, in an all-cash transaction for $ 100 million. Based on the preliminary purchase price allocation, which may be revised as additional infor

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