Cover Page
Cover Page - shares | 9 Months Ended | |
Sep. 30, 2020 | Oct. 15, 2020 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Sep. 30, 2020 | |
Document Transition Report | false | |
Entity File Number | 001-12215 | |
Entity Registrant Name | Quest Diagnostics Inc | |
Entity Central Index Key | 0001022079 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q3 | |
Amendment Flag | false | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 16-1387862 | |
Entity Address, Address Line One | 500 Plaza Drive | |
Entity Address, City or Town | Secaucus, | |
Entity Address, State or Province | NJ | |
Entity Address, Postal Zip Code | 07094 | |
City Area Code | (973) | |
Local Phone Number | 520-2700 | |
Title of 12(b) Security | Common Stock, $0.01 Par Value | |
Trading Symbol | DGX | |
Security Exchange Name | NYSE | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 134,765,984 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Millions, $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Income Statement [Abstract] | ||||
Net revenues | $ 2,786 | $ 1,956 | $ 6,435 | $ 5,800 |
Operating costs and expenses and other operating income: | ||||
Cost of services | 1,580 | 1,264 | 4,071 | 3,773 |
Selling, general and administrative | 396 | 362 | 1,103 | 1,108 |
Amortization of intangible assets | 27 | 23 | 77 | 72 |
Other operating expense (income), net | 65 | (6) | 8 | (21) |
Total operating costs and expenses, net | 2,068 | 1,643 | 5,259 | 4,932 |
Operating income | 718 | 313 | 1,176 | 868 |
Other income (expense): | ||||
Interest expense, net | (42) | (44) | (124) | (133) |
Other income, net | 77 | 1 | 74 | 13 |
Total non-operating income (expense), net | 35 | (43) | (50) | (120) |
Income from continuing operations before income taxes and equity in earnings of equity method investees | 753 | 270 | 1,126 | 748 |
Income tax expense | (177) | (62) | (269) | (175) |
Equity in earnings of equity method investees, net of taxes | 15 | 18 | 33 | 48 |
Income (loss) from continuing operations | 591 | 226 | 890 | 621 |
Income from discontinued operations, net of taxes | 0 | 0 | 0 | 20 |
Net income | 591 | 226 | 890 | 641 |
Less: Net income attributable to noncontrolling interests | 23 | 11 | 38 | 36 |
Net income attributable to Quest Diagnostics | 568 | 215 | 852 | 605 |
Amounts attributable to Quest Diagnostics’ common stockholders: | ||||
Income from continuing operations | 568 | 215 | 852 | 585 |
Income from discontinued operations, net of taxes | 0 | 0 | 0 | 20 |
Net income attributable to Quest Diagnostics | $ 568 | $ 215 | $ 852 | $ 605 |
Earnings per share attributable to Quest Diagnostics’ common stockholders - basic: | ||||
Income from continuing operations (in dollars per share) | $ 4.20 | $ 1.59 | $ 6.33 | $ 4.33 |
Income from discontinued operations (in dollars per share) | 0 | 0 | 0 | 0.15 |
Net income (in dollars per share) | 4.20 | 1.59 | 6.33 | 4.48 |
Earnings per share attributable to Quest Diagnostics’ common stockholders - diluted: | ||||
Income from continuing operations (in dollars per share) | 4.14 | 1.56 | 6.25 | 4.27 |
Income from discontinued operations (in dollars per share) | 0 | 0 | 0 | 0.15 |
Net income (in dollars per share) | $ 4.14 | $ 1.56 | $ 6.25 | $ 4.42 |
Weighted average common shares outstanding: | ||||
Basic (in Shares) | 135 | 135 | 134 | 135 |
Diluted (in Shares) | 137 | 137 | 136 | 136 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Statement of Comprehensive Income [Abstract] | ||||
Net income | $ 591 | $ 226 | $ 890 | $ 641 |
Other comprehensive income (loss): | ||||
Foreign currency translation adjustment | 10 | (6) | (6) | (6) |
Net change in available-for-sale debt securities, net of taxes | 0 | 8 | 0 | 8 |
Net deferred gain on cash flow hedges, net of taxes | 3 | 1 | 3 | 2 |
Other comprehensive income (loss) | 13 | 3 | (3) | 4 |
Comprehensive income | 604 | 229 | 887 | 645 |
Less: Comprehensive income attributable to noncontrolling interests | 23 | 11 | 38 | 36 |
Comprehensive income attributable to Quest Diagnostics | $ 581 | $ 218 | $ 849 | $ 609 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Millions | Sep. 30, 2020 | Dec. 31, 2019 |
Assets | ||
Cash and cash equivalents | $ 1,605 | $ 1,192 |
Accounts receivable, net of allowance for credit losses of $27 and $15 as of September 30, 2020 and December 31, 2019, respectively | 1,421 | 1,063 |
Inventories | 205 | 123 |
Prepaid expenses and other current assets | 117 | 112 |
Total current assets | 3,348 | 2,490 |
Property, plant and equipment, net | 1,544 | 1,453 |
Operating lease right-of-use assets | 535 | 518 |
Goodwill | 6,880 | 6,619 |
Intangible assets, net | 1,192 | 1,121 |
Investments in equity method investees | 480 | 482 |
Other assets | 164 | 160 |
Total assets | 14,143 | 12,843 |
Liabilities and Stockholders' Equity | ||
Accounts payable and accrued expenses | 1,686 | 1,041 |
Current portion of long-term debt | 555 | 804 |
Current portion of long-term operating lease liabilities | 148 | 145 |
Total current liabilities | 2,389 | 1,990 |
Long-term debt | 4,018 | 3,966 |
Long-term operating lease liabilities | 428 | 413 |
Other liabilities | 782 | 711 |
Commitments and contingencies | ||
Redeemable noncontrolling interest | 80 | 76 |
Quest Diagnostics stockholders’ equity: | ||
Common stock, par value $0.01 per share; 600 shares authorized as of both September 30, 2020 and December 31, 2019; 217 shares issued as of both September 30, 2020 and December 31, 2019 | 2 | 2 |
Additional paid-in capital | 2,801 | 2,722 |
Retained earnings | 8,800 | 8,174 |
Accumulated other comprehensive loss | (42) | (39) |
Treasury stock, at cost; 82 and 84 shares as of September 30, 2020 and December 31, 2019, respectively | (5,161) | (5,218) |
Total Quest Diagnostics stockholders' equity | 6,400 | 5,641 |
Noncontrolling interests | 46 | 46 |
Total stockholders' equity | 6,446 | 5,687 |
Total liabilities and stockholders' equity | $ 14,143 | $ 12,843 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) shares in Millions, $ in Millions | Sep. 30, 2020 | Dec. 31, 2019 |
Statement of Financial Position [Abstract] | ||
Allowance for doubtful accounts | $ 27 | $ 15 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (in shares) | 600 | 600 |
Common stock, shares issued (in shares) | 217 | 217 |
Treasury stock (in shares) | 82 | 84 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Millions | 9 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Cash flows from operating activities: | ||
Net income | $ 890 | $ 641 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 263 | 247 |
Provision for credit losses | 18 | 9 |
Deferred income tax provision | 12 | 15 |
Stock-based compensation expense | 63 | 44 |
Other, net | (60) | (44) |
Changes in operating assets and liabilities: | ||
Accounts receivable | (355) | (113) |
Accounts payable and accrued expenses | 514 | 80 |
Income taxes payable | 95 | 9 |
Termination of interest rate swap agreements | 40 | 0 |
Other assets and liabilities, net | (16) | 7 |
Net cash provided by operating activities | 1,464 | 895 |
Cash flows from investing activities: | ||
Business acquisitions, net of cash acquired | (329) | (56) |
Capital expenditures | (256) | (228) |
Increase in investments and other assets | (19) | (27) |
Net cash used in investing activities | (604) | (311) |
Cash flows from financing activities: | ||
Proceeds from borrowings | 749 | 1,484 |
Repayments of debt | (1,002) | (1,448) |
Purchases of treasury stock | (75) | (153) |
Exercise of stock options | 144 | 98 |
Employee payroll tax withholdings on stock issued under stock-based compensation plans | (13) | (16) |
Dividends paid | (222) | (215) |
Distributions to noncontrolling interest partners | (34) | (39) |
Other financing activities, net | 6 | 4 |
Net cash used in financing activities | (447) | (285) |
Net change in cash and cash equivalents and restricted cash | 413 | 299 |
Cash and cash equivalents and restricted cash, beginning of period | 1,192 | 135 |
Cash and cash equivalents and restricted cash, end of period | $ 1,605 | $ 434 |
CONSOLIDATED STATEMENTS OF STOC
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) shares in Millions, $ in Millions | Total | Common Stock | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Treasury Stock, at Cost | Non-controlling Interests |
Balance, shares at Dec. 31, 2018 | 135 | ||||||
Balance, value at Dec. 31, 2018 | $ 5,267 | $ 2 | $ 2,667 | $ 7,602 | $ (59) | $ (4,996) | $ 51 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Net income | 637 | 605 | 32 | ||||
Other comprehensive income (loss), net of taxes | 4 | 4 | |||||
Dividends declared | (215) | (215) | |||||
Distributions to noncontrolling interest partners | (34) | (34) | |||||
Issuance of common stock under benefit plans | 19 | 7 | 12 | ||||
Stock-based compensation expense | 44 | 43 | 1 | ||||
Exercise of stock options, shares | 2 | ||||||
Exercise of stock options, value | 98 | 4 | $ 94 | ||||
Shares to cover employee payroll tax withholdings on stock issued under stock-based compensation plans | (16) | (16) | |||||
Purchases of treasury stock, shares | (2) | (1.6) | |||||
Purchases of treasury stock, value | (150) | $ (150) | |||||
Balance, shares at Sep. 30, 2019 | 135 | ||||||
Balance, value at Sep. 30, 2019 | 5,654 | $ 2 | 2,705 | 7,992 | (55) | (5,039) | 49 |
Balance, Value at Dec. 31, 2018 | 77 | ||||||
Redeemable Non-controlling Interest [Abstract] | |||||||
Net income | 4 | ||||||
Distributions to noncontrolling interest partners | (5) | ||||||
Balance, Value at Sep. 30, 2019 | 76 | ||||||
Balance, shares at Jun. 30, 2019 | 135 | ||||||
Balance, value at Jun. 30, 2019 | 5,509 | $ 2 | 2,686 | 7,849 | (58) | (5,020) | 50 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Net income | 225 | 215 | 10 | ||||
Other comprehensive income (loss), net of taxes | 3 | 3 | |||||
Dividends declared | (72) | (72) | |||||
Distributions to noncontrolling interest partners | (11) | (11) | |||||
Issuance of common stock under benefit plans | 6 | 3 | 3 | ||||
Stock-based compensation expense | 12 | 12 | |||||
Exercise of stock options, shares | 1 | ||||||
Exercise of stock options, value | 32 | 4 | 28 | ||||
Purchases of treasury stock, shares | (1) | ||||||
Purchases of treasury stock, value | (50) | (50) | |||||
Balance, shares at Sep. 30, 2019 | 135 | ||||||
Balance, value at Sep. 30, 2019 | 5,654 | $ 2 | 2,705 | 7,992 | (55) | (5,039) | 49 |
Balance, Value at Jun. 30, 2019 | 76 | ||||||
Redeemable Non-controlling Interest [Abstract] | |||||||
Net income | 1 | ||||||
Distributions to noncontrolling interest partners | (1) | ||||||
Balance, Value at Sep. 30, 2019 | 76 | ||||||
Balance, shares at Dec. 31, 2019 | 133 | ||||||
Balance, value at Dec. 31, 2019 | 5,687 | $ 2 | 2,722 | 8,174 | (39) | (5,218) | 46 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Net income | 883 | 852 | 31 | ||||
Other comprehensive income (loss), net of taxes | (3) | (3) | |||||
Dividends declared | (226) | (226) | |||||
Distributions to noncontrolling interest partners | (31) | (31) | |||||
Issuance of common stock under benefit plans, shares | 1 | ||||||
Issuance of common stock under benefit plans | 17 | 7 | 10 | ||||
Stock-based compensation expense | 63 | 63 | |||||
Exercise of stock options, shares | 2 | ||||||
Exercise of stock options, value | 144 | 22 | $ 122 | ||||
Shares to cover employee payroll tax withholdings on stock issued under stock-based compensation plans | (13) | (13) | |||||
Purchases of treasury stock, shares | (1) | (0.7) | |||||
Purchases of treasury stock, value | (75) | $ (75) | |||||
Balance, shares at Sep. 30, 2020 | 135 | ||||||
Balance, value at Sep. 30, 2020 | 6,446 | $ 2 | 2,801 | 8,800 | (42) | (5,161) | 46 |
Balance, Value at Dec. 31, 2019 | 76 | ||||||
Redeemable Non-controlling Interest [Abstract] | |||||||
Net income | 7 | ||||||
Distributions to noncontrolling interest partners | (3) | ||||||
Balance, Value at Sep. 30, 2020 | 80 | ||||||
Balance, shares at Jun. 30, 2020 | 134 | ||||||
Balance, value at Jun. 30, 2020 | 5,881 | $ 2 | 2,764 | 8,307 | (55) | (5,187) | 50 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Net income | 586 | 568 | 18 | ||||
Other comprehensive income (loss), net of taxes | 13 | 13 | |||||
Dividends declared | (75) | (75) | |||||
Distributions to noncontrolling interest partners | (22) | (22) | |||||
Issuance of common stock under benefit plans, shares | 1 | ||||||
Issuance of common stock under benefit plans | 4 | 1 | 3 | ||||
Stock-based compensation expense | 32 | 32 | |||||
Exercise of stock options, value | 27 | 4 | 23 | ||||
Balance, shares at Sep. 30, 2020 | 135 | ||||||
Balance, value at Sep. 30, 2020 | 6,446 | $ 2 | $ 2,801 | $ 8,800 | $ (42) | $ (5,161) | $ 46 |
Balance, Value at Jun. 30, 2020 | 77 | ||||||
Redeemable Non-controlling Interest [Abstract] | |||||||
Net income | 5 | ||||||
Distributions to noncontrolling interest partners | (2) | ||||||
Balance, Value at Sep. 30, 2020 | $ 80 |
DESCRIPTION OF BUSINESS
DESCRIPTION OF BUSINESS | 9 Months Ended |
Sep. 30, 2020 | |
Description of Business (Abstract) | |
DESCRIPTION OF BUSINESS | DESCRIPTION OF BUSINESS Background |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended |
Sep. 30, 2020 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The interim unaudited consolidated financial statements reflect all adjustments which in the opinion of management are necessary for a fair statement of results of operations, comprehensive income, financial condition, cash flows and stockholders' equity for the periods presented. Except as otherwise disclosed, all such adjustments are of a normal recurring nature. Operating results for the interim periods are not necessarily indicative of the results that may be expected for the full year. These interim unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company’s 2019 Annual Report on Form 10-K. The year-end balance sheet data was derived from the audited consolidated financial statements as of December 31, 2019, but does not include all the disclosures required by accounting principles generally accepted in the United States (“GAAP”). The accounting policies of the Company are the same as those set forth in Note 2 to the audited consolidated financial statements contained in the Company’s 2019 Annual Report on Form 10-K except for the impact of the adoption of new accounting standards discussed under New Accounting Pronouncements. A novel strain of coronavirus (“COVID-19”) continues to spread and severely impact the economy of the United States and other countries around the world. Since March 2020, federal, state and local governmental policies and initiatives designed to reduce the transmission of COVID-19 have resulted in, among other things, a significant reduction in physician office visits, the cancellation of elective medical procedures, customers closing or severely curtailing their operations (voluntarily or in response to government orders), and the adoption of work-from-home policies, all of which have had, and the Company believes will continue to have, an impact on the Company’s consolidated results of operations, financial position, and cash flows. Additionally, beginning during the second quarter of 2020, the Company experienced growing demand for COVID-19 molecular and antibody testing services and has expanded its capacity in order to satisfy such demand. As a result, operating results for the three and nine months ended September 30, 2020 may not be indicative of the results that may be expected for the full year. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Earnings Per Share The Company's unvested restricted stock units that contain non-forfeitable rights to dividends are participating securities and, therefore, are included in the earnings allocation in computing earnings per share using the two-class method. Basic earnings per common share is calculated by dividing net income, adjusted for earnings allocated to participating securities, by the weighted average number of common shares outstanding. Diluted earnings per common share is calculated by dividing net income, adjusted for earnings allocated to participating securities, by the weighted average number of common shares outstanding after giving effect to all potentially 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 and its Amended and Restated Non-Employee Director Long-Term Incentive Plan. 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 Pronouncements Adoption of New Accounting Standards On January 1, 2020, the Company adopted a new accounting standard issued by the Financial Accounting Standards Board ("FASB") which aligns the requirements for deferring implementation costs incurred in a cloud computing arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The adoption of this standard, which the Company elected to do on a prospective basis, did not have a material impact on the Company's consolidated results of operations, financial position or cash flows. On January 1, 2020, the Company adopted a new accounting standard issued by the FASB that changes the impairment model for most financial instruments, including trade receivables, from an incurred loss method to a new forward-looking approach, based on expected losses. The estimate of expected credit losses requires entities to incorporate considerations of historical information, current information and reasonable and supportable forecasts. The adoption of this new standard, which was done using a modified retrospective transition approach, did not have a material impact on the Company's consolidated results of operations, financial position or cash flows. See Note 15 for further details on the Company's allowance for credit losses policy. New Accounting Standards to be Adopted In March 2020, the FASB issued a new accounting standard which provides temporary optional guidance to ease the potential burden in accounting for reference rate reform due to the risk of cessation of the London Interbank Offered Rate ("LIBOR"). The amendments apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The pronouncement is effective immediately and can be applied through December 31, 2022. The adoption of this standard is not expected to have a material impact on the Company’s consolidated results of operations, financial position or cash flows. |
EARNINGS PER SHARE
EARNINGS PER SHARE | 9 Months Ended |
Sep. 30, 2020 | |
Earnings Per Share, Basic and Diluted [Abstract] | |
EARNINGS (LOSS) PER SHARE | 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 September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Amounts attributable to Quest Diagnostics’ common stockholders: Income from continuing operations $ 568 $ 215 $ 852 $ 585 Income from discontinued operations, net of taxes — — — 20 Net income attributable to Quest Diagnostics’ common stockholders $ 568 $ 215 $ 852 $ 605 Income from continuing operations $ 568 $ 215 $ 852 $ 585 Less: Earnings allocated to participating securities 2 1 3 2 Earnings available to Quest Diagnostics’ common stockholders – basic and diluted $ 566 $ 214 $ 849 $ 583 Weighted average common shares outstanding – basic 135 135 134 135 Effect of dilutive securities: Stock options and performance share units 2 2 2 1 Weighted average common shares outstanding – diluted 137 137 136 136 Earnings per share attributable to Quest Diagnostics’ common stockholders - basic: Income from continuing operations $ 4.20 $ 1.59 $ 6.33 $ 4.33 Income from discontinued operations — — — 0.15 Net income $ 4.20 $ 1.59 $ 6.33 $ 4.48 Earnings per share attributable to Quest Diagnostics’ common stockholders – diluted: Income from continuing operations $ 4.14 $ 1.56 $ 6.25 $ 4.27 Income from discontinued operations — — — 0.15 Net income $ 4.14 $ 1.56 $ 6.25 $ 4.42 The following securities were not included in the calculation of diluted earnings per share due to their antidilutive effect: Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Stock options 1 2 1 3 The sum of basic and diluted earnings per share attributable to Quest Diagnostics' common stockholders for the first three quarters of 2020 did not equal the totals for the nine months ended September 30, 2020 due to quarterly fluctuations in the Company's earnings and weighted average common shares outstanding throughout the period as a result of the impact of COVID-19 (see Note 2 for further details) and the temporary cessation of repurchases under the Company's share repurchase program (see Note 10 for further details). |
RESTRUCTURING ACTIVITIES
RESTRUCTURING ACTIVITIES | 9 Months Ended |
Sep. 30, 2020 | |
Restructuring and Related Activities [Abstract] | |
RESTRUCTURING ACTIVITIES | RESTRUCTURING ACTIVITIES Invigorate Program The Company is committed to a program called Invigorate which is designed to reduce its cost structure and improve performance. Invigorate consists of several flagship programs, with structured plans in each, to drive savings and improve performance across the customer value chain. These flagship programs include: organization excellence; information technology excellence; procurement excellence; service excellence; lab excellence; and revenue services excellence. In addition to these programs, the Company identified key themes to change how it operates including reducing denials and patient concessions; further digitizing the business; standardization and automation; and optimization initiatives in the areas of lab network and patient service center network. The Invigorate program is intended to partially offset reimbursement pressures and labor and benefit cost increases; free up additional resources to invest in science, innovation and other growth initiatives; and enable the Company to improve service quality and operating profitability. Restructuring Charges The following table provides a summary of the Company's pre-tax restructuring charges for the three and nine months ended September 30, 2020 and 2019: Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Employee separation costs $ 6 $ — $ 13 $ (3) The restructuring charges incurred for the three and nine months ended September 30, 2020 were primarily associated with various workforce reduction initiatives as the Company continued to simplify and restructure its organization. The $6 million of restructuring charges incurred during the three months ended September 30, 2020 were recorded in cost of services. Of the total restructuring charges incurred during the nine months ended September 30, 2020, $9 million and $4 million were recorded in cost of services and selling, general and administrative expenses, respectively. The restructuring activity recorded in the nine months ended September 30, 2019 represents a release of the liability relating to restructuring charges recorded in prior periods, which were determined to no longer be required. Of the total restructuring release recorded in the nine months ended September 30, 2019, $(1) million and $(2) 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. |
BUSINESS ACQUISITIONS
BUSINESS ACQUISITIONS | 9 Months Ended |
Sep. 30, 2020 | |
Business Combinations [Abstract] | |
BUSINESS ACQUISITIONS | BUSINESS ACQUISITIONS On January 21, 2020, the Company completed its acquisition of Blueprint Genetics Oy ("Blueprint Genetics"), in an all cash transaction for $108 million, net of $3 million cash acquired. Blueprint Genetics is a leading specialty genetic testing company with deep expertise in gene variant interpretation based on next generation sequencing and proprietary bioinformatics. Through the acquisition, the Company acquired all of Blueprint Genetics' operations. 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 $77 million of goodwill (none of which is tax-deductible), $43 million of intangible assets, an $11 million deferred tax liability, and $2 million of property, plant and equipment and working capital. The intangible assets primarily consist of technology and customer-related assets which are being amortized over a useful life of 10 years and 15 years, respectively. On April 6, 2020, the Company completed its acquisition of select assets which constitute substantially all of the operations of Memorial Hermann Diagnostic Laboratories, the outreach laboratory division of Memorial Hermann Health System ("Memorial Hermann"), in an all cash transaction for $120 million. Memorial Hermann is a not-for-profit health system in Southeast Texas. Based on the preliminary purchase price allocation, which may be revised as additional information becomes available during the measurement period, the assets acquired primarily consist of $27 million of customer-related intangible assets and $93 million of tax-deductible goodwill. The intangible assets are being amortized over a useful life of 15 years. On August 1, 2020, the Company completed its acquisition of the remaining 56% interest in Mid America Clinical Laboratories, LLC ("MACL") from its joint venture partners in an all cash transaction for $93 million, net of $18 million cash acquired. The final consideration is subject to post closing adjustments related to working capital. MACL is the largest independent clinical laboratory provider in Indiana. Prior to the acquisition, the Company accounted for its 44% interest in MACL as an equity method investment, which was remeasured to its fair value of $87 million on the acquisition date, resulting in a gain of $70 million that was recognized in other income, net in the consolidated statements of operations. The fair value of the previously held equity interest was determined using a discounted cash flow analysis that takes into account, among other items, MACL's expected future cash flows, long-term growth rate (1.5%), and a discount rate commensurate with economic risk (7.5%). 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 consist of $84 million of goodwill (of which $47 million is tax-deductible), $74 million of intangible assets, $11 million of working capital and $11 million of property, plant and equipment. The intangible assets consist of customer-related assets which are being amortized over a useful life of 15 years. As a result of the acquisition, MACL became a wholly owned subsidiary of the Company. The acquisitions were accounted for under the acquisition method of accounting. As such, the assets acquired and liabilities assumed were recorded based on their estimated fair values as of the closing date. Supplemental pro forma combined financial information has not been presented as the impact of the acquisitions is not material to the Company's consolidated financial statements. The goodwill recorded primarily includes the expected synergies resulting from combining the operations of the acquired entities with those of the Company and the value associated with an assembled workforce and other intangible assets that do not qualify for separate recognition. All of the goodwill acquired in connection with these acquisitions has been allocated to the Company's DIS business. For further details regarding business segment information, see Note 13. |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | 9 Months Ended |
Sep. 30, 2020 | |
Fair Value Disclosures [Abstract] | |
FAIR VALUE MEASUREMENTS | 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 September 30, 2020 Total Level 1 Level 2 Level 3 Assets: Trading securities $ 60 $ 60 $ — $ — Cash surrender value of life insurance policies 45 — 45 — Available-for-sale debt securities 12 — — 12 Total $ 117 $ 60 $ 45 $ 12 Liabilities: Deferred compensation liabilities $ 114 $ — $ 114 $ — Redeemable noncontrolling interest $ 80 $ — $ — $ 80 Basis of Fair Value Measurements December 31, 2019 Total Level 1 Level 2 Level 3 Assets: Trading securities $ 59 $ 59 $ — $ — Cash surrender value of life insurance policies 43 — 43 — Available-for-sale debt securities 12 — — 12 Total $ 114 $ 59 $ 43 $ 12 Liabilities: Deferred compensation liabilities $ 110 $ — $ 110 $ — Fixed-to-variable interest rate swaps 28 — 28 — Contingent consideration 7 — — 7 Total $ 145 $ — $ 138 $ 7 Redeemable noncontrolling interest $ 76 $ — $ — $ 76 A detailed description regarding the Company's fair value measurements is contained in Note 7 to the audited consolidated financial statements in the Company's 2019 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 changes in the fair value of these securities are measured using quoted prices in active markets based on the market price per unit multiplied by the number of units held, exclusive of any transaction costs. A 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. The fair value measurements of the Company's fixed-to-variable interest rate swaps, which were terminated during April 2020 (see Note 9), were classified within Level 2 of the fair value hierarchy and were based on model-derived valuations as of a given date in which all significant inputs are observable in active markets, including certain financial information and certain assumptions regarding past, present and future market conditions. In connection with previous business acquisitions, the Company has contingent consideration liabilities that are to be paid based on the achievement of certain testing volume or revenue benchmarks. As of September 30, 2020, the fair value of these contingent consideration liabilities was immaterial. These contingent consideration liabilities are measured at fair value using an option-pricing method and are classified within Level 3 of the fair value hierarchy as the fair value is determined based on significant inputs that are not observable. Significant inputs include management’s estimate of volume or revenue and other market inputs including comparable company revenue volatility and a discount rate. A summary of the significant inputs as of September 30, 2020 is as follows: Business Acquisition Benchmark Comparable Company Revenue Volatility Discount rate Maximum Contingent Consideration Payment ReproSource, Inc. Revenue 8.5% 6.5% $ 10 For further details regarding the Company's acquisitions, see Note 6 to the audited consolidated financial statements in the Company's 2019 Annual Report on Form 10-K and Note 5 to the interim unaudited consolidated financial statements. The following table provides a reconciliation of the beginning and ending balances of liabilities using significant unobservable inputs (Level 3 of the fair value hierarchy): Contingent Consideration Balance, December 31, 2019 $ 7 Settlements (6) Total (gains)/losses included in earnings - realized/unrealized (1) Balance, September 30, 2020 $ — The $1 million net gain included in earnings associated with the change in the fair value of contingent consideration for the nine months ended September 30, 2020 is reported in other operating expense (income), net. In connection with the sale of an 18.9% noncontrolling interest in a subsidiary to UMass Memorial Medical Center ("UMass") on July 1, 2015, the Company granted UMass the right to require the Company to purchase all of its interest in the subsidiary at fair value commencing July 1, 2020. As of September 30, 2020, the redeemable noncontrolling interest was presented at its fair value. The fair value measurement of the redeemable noncontrolling interest is classified within Level 3 of the fair value hierarchy because the fair value is based on a discounted cash flow analysis that takes into account, among other items, the joint venture's expected future cash flows, long term growth rates, and a discount rate commensurate with economic risk. The carrying amounts of cash and cash equivalents, accounts receivable, and accounts payable and accrued expenses approximate fair value based on the short maturities of these instruments. As of September 30, 2020 and December 31, 2019, the fair value of the Company’s debt was estimated at $5.2 billion and $5.1 billion, respectively. Principally all of the Company's debt is classified within Level 1 of the fair value hierarchy because the fair value of the debt is estimated based on rates currently offered to the Company with identical terms and maturities, using quoted active market prices and yields, taking into account the underlying terms of the debt instruments. |
GOODWILL AND INTANGIBLE ASSETS
GOODWILL AND INTANGIBLE ASSETS | 9 Months Ended |
Sep. 30, 2020 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
GOODWILL AND INTANGIBLE ASSETS | GOODWILL AND INTANGIBLE ASSETS The changes in goodwill for the nine months ended September 30, 2020 and for the year ended December 31, 2019 were as follows: September 30, 2020 December 31, 2019 Balance, beginning of period $ 6,619 $ 6,563 Goodwill acquired during the period 258 43 Adjustments to goodwill 3 13 Balance, end of period $ 6,880 $ 6,619 Principally all of the Company’s goodwill as of September 30, 2020 and December 31, 2019 was associated with its DIS business. For the nine months ended September 30, 2020, goodwill acquired during the period was primarily associated with the acquisitions of Blueprint Genetics, Memorial Hermann and MACL (see Note 5) and adjustments to goodwill primarily related to foreign currency translation. For the year ended December 31, 2019, goodwill acquired was principally associated with the acquisitions of certain assets of the clinical laboratory services business of Boyce & Bynum Pathology Laboratories, P.C. and adjustments to goodwill primarily related to the finalization of the purchase price allocation for the acquisition of the U.S. laboratory services business of Oxford Immunotec, Inc. (see Note 6 to the audited consolidated financial statements in the Company's 2019 Annual Report on Form 10-K). Intangible assets at September 30, 2020 and December 31, 2019 consisted of the following: Weighted September 30, 2020 December 31, 2019 Cost Accumulated Net Cost Accumulated Net Amortizing intangible assets: Customer-related 17 $ 1,479 $ (617) $ 862 $ 1,367 $ (556) $ 811 Non-compete agreements 9 3 (2) 1 3 (2) 1 Technology 15 140 (63) 77 104 (56) 48 Other 9 110 (94) 16 110 (85) 25 Total 17 1,732 (776) 956 1,584 (699) 885 Intangible assets not subject to amortization: Trade names 235 — 235 235 — 235 Other 1 — 1 1 — 1 Total intangible assets $ 1,968 $ (776) $ 1,192 $ 1,820 $ (699) $ 1,121 The estimated amortization expense related to amortizable intangible assets for each of the five succeeding fiscal years and thereafter as of September 30, 2020 is as follows: Year Ending December 31, Remainder of 2020 $ 27 2021 101 2022 98 2023 96 2024 93 2025 91 Thereafter 450 Total $ 956 |
DEBT
DEBT | 9 Months Ended |
Sep. 30, 2020 | |
Debt Instruments [Abstract] | |
DEBT | DEBT Long-term debt (including finance lease obligations) as of September 30, 2020 and December 31, 2019 consisted of the following: September 30, 2020 December 31, 2019 4.75% Senior Notes due January 2020 $ — $ 500 2.50% Senior Notes due March 2020 — 300 4.70% Senior Notes due April 2021 551 554 4.25% Senior Notes due April 2024 317 308 3.50% Senior Notes due March 2025 623 593 3.45% Senior Notes due June 2026 513 490 4.20% Senior Notes due June 2029 499 499 2.95% Senior Notes due June 2030 798 798 2.80% Senior Notes due June 2031 549 — 6.95% Senior Notes due July 2037 175 175 5.75% Senior Notes due January 2040 245 245 4.70% Senior Notes due March 2045 300 300 Other 32 34 Debt issuance costs (29) (26) Total long-term debt 4,573 4,770 Less: Current portion of long-term debt 555 804 Total long-term debt, net of current portion $ 4,018 $ 3,966 Retirement of Debt During January 2020, the Company redeemed in full the outstanding indebtedness under the Company's senior notes due January 2020 and senior notes due March 2020 using proceeds from the issuance, in December 2019, of the 2.95% senior notes due June 2030, along with cash on hand. For the nine months ended September 30, 2020, the Company recorded a loss on retirement of debt, principally comprised of premiums paid, of $1 million in other income, net. May 2020 Senior Notes Offering During May 2020, the Company completed a senior notes offering, consisting of $550 million aggregate principal amount of 2.80% senior notes due June 2031 (the "2031 Senior Notes"), which were issued at an original issue discount of $1 million. The 2031 Senior Notes are unsecured obligations of the Company that rank equally with the Company's other senior unsecured obligations. The 2031 Senior Notes do not have a sinking fund requirement. The Company incurred $5 million of debt issuance costs associated with the 2031 Senior Notes, which are included as a reduction to the carrying amount of long-term debt and which are being amortized over the term of the related debt. During October 2020, the Company issued a redemption notice to the holders of the Company's $550 million aggregate principal amount of 4.70% senior notes due April 2021. The Company intends to use the net proceeds from the 2031 Senior Notes, along with cash on hand, to satisfy the redemption. See Note 18 for further details. Credit Facilities As of September 30, 2020, the Company had cash and cash equivalents on hand of $1,605 million and had $1.3 billion of borrowing capacity available under its existing credit facilities, including $529 million available under its secured receivables credit facility and $750 million available under its senior unsecured revolving credit facility. There were no outstanding borrowings under the Company's existing credit facilities as of September 30, 2020. The secured receivables credit facility was amended in October 2020 in order to extend the maturity dates for each underlying commitment by one year, while maintaining the borrowing capacity at $600 million. See Note 18 for further details. The senior unsecured revolving credit facility matures in March 2023. For further details regarding the credit facilities, see Note 13 to the audited consolidated financial statements in the Company's 2019 Annual Report on Form 10-K. The secured receivables credit facility is subject to customary affirmative and negative covenants, and certain financial covenants with respect to the receivables that comprise the borrowing base and secure the borrowings under the facility. The Company's senior unsecured revolving credit facility is also subject to certain financial covenants and limitations on indebtedness. On April 30, 2020, the Company entered into an amendment to the senior unsecured revolving credit facility in order to provide for increased flexibility. Pursuant to the amendment, the leverage ratio covenant (as defined in the senior unsecured revolving credit facility) was increased as follows: As of: Applicable Covenant: September 30, 2020 no more than 5.5 times EBITDA December 31, 2020 no more than 6.5 times EBITDA March 31, 2021 no more than 6.25 times EBITDA June 30, 2021 no more than 4.5 times EBITDA Thereafter, the leverage ratio covenant reverts to no more than 3.5 times EBITDA. During the period that the increased covenant applies, which period may be terminated early by the Company provided that it is in compliance with the historical 3.5 times EBITDA leverage ratio, the amended credit agreement contains certain additional limitations and restrictions including, but not limited to, repurchases of the Company's common stock, the amount of funds that can be used on business acquisitions, the incurrence of secured indebtedness and the payment of dividends. As of September 30, 2020, the Company was in compliance with all such applicable financial covenants. Interest on the amended senior unsecured revolving credit facility is subject to a pricing schedule that can fluctuate based on changes in the Company's credit ratings and its leverage ratio. During the nine months ended September 30, 2020, the Company borrowed $100 million under its secured receivables credit facility and $100 million under its senior unsecured revolving credit facility, both of which were repaid prior to September 30, 2020. Maturities of Long-Term Debt As of September 30, 2020, long-term debt matures as follows: Year Ending December 31, Remainder of 2020 $ 1 2021 553 2022 3 2023 2 2024 302 Thereafter 3,696 Total maturities of long-term debt 4,557 Unamortized discount (11) Debt issuance costs (29) Fair value basis adjustments attributable to hedged debt 56 Total long-term debt 4,573 Current portion of long-term debt 555 Total long-term debt, net of current portion $ 4,018 |
FINANCIAL INSTRUMENTS
FINANCIAL INSTRUMENTS | 9 Months Ended |
Sep. 30, 2020 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
FINANCIAL INSTRUMENTS | FINANCIAL INSTRUMENTS The Company uses derivative financial instruments to manage its exposure to market risks for changes in interest rates and, from time to time, foreign currencies. This strategy includes the use of interest rate swap agreements, forward-starting interest rate swap agreements, treasury lock agreements and foreign currency forward contracts to manage its exposure to movements in interest and currency rates. The Company has established policies and procedures for risk assessment and the approval, reporting and monitoring of derivative financial instrument activities. These policies prohibit holding or issuing derivative financial instruments for speculative purposes. The Company does not enter into derivative financial instruments that contain credit-risk-related contingent features or requirements to post collateral. Interest Rate Risk The Company is exposed to interest rate risk on its cash and cash equivalents and its debt obligations. Interest income earned on cash and cash equivalents may fluctuate as interest rates change; however, due to their relatively short maturities, the Company does not hedge these assets or their investment cash flows and the impact of interest rate risk is not material. The Company's debt obligations consist of fixed-rate and variable-rate debt instruments. The Company's primary objective is to achieve the lowest overall cost of funding while managing the variability in cash outflows within an acceptable range. In order to achieve this objective, the Company enters into interest rate swaps. Interest rate swaps involve the periodic exchange of payments without the exchange of underlying principal or notional amounts. Net settlements between the counterparties are recognized as an adjustment to interest expense. Interest Rate Derivatives – Cash Flow Hedges From time to time, the Company has entered into various interest rate lock agreements and forward-starting interest rate swap agreements to hedge part of the Company's interest rate exposure associated with the variability in future cash flows attributable to changes in interest rates. During March 2020, the Company entered into a forward-starting interest rate swap agreement with a financial institution for a total notional amount of $25 million. Additionally, during May 2020, the Company entered into interest rate lock agreements with several financial institutions for a total notional amount of $275 million. The forward-starting interest rate swap agreement and the interest rate lock agreements were entered into in order to hedge a portion of the Company's interest rate exposure associated with variability in future cash flows attributable to changes in interest rates over a ten-year period related to an anticipated issuance of debt and were accounted for as cash flow hedges. In connection with the issuance of the 2031 Senior Notes (see Note 8), these agreements were settled and the Company received net proceeds of $1 million. The net gain is deferred in stockholders' equity, net of taxes, as a component of accumulated other comprehensive loss, and is being amortized as an adjustment to interest expense, net over a ten The total net loss, net of taxes, recognized in accumulated other comprehensive loss, related to the Company's cash flow hedges was $1 million and $4 million as of September 30, 2020 and December 31, 2019, respectively. The net amount of deferred losses on cash flow hedges that is expected to be reclassified from accumulated other comprehensive loss into interest expense, net within the next twelve months is $1 million. Interest Rate Derivatives – Fair Value Hedges As of December 31, 2019, the Company had various fixed-to-variable interest rate swap agreements outstanding with an aggregate notional amount of $1.2 billion, which were entered into in order to convert a portion of the Company's long-term debt into variable interest rate debt. In April 2020, the Company terminated these existing fixed-to-variable interest rate swap agreements and received proceeds of $40 million. Such amount was reflected as a basis adjustment to the hedged debt instruments and is being amortized as a reduction of interest expense, net over their remaining terms. As of September 30, 2020 and December 31, 2019, the following amounts were recorded on the consolidated balance sheets related to cumulative basis adjustments for fair value hedges included in the carrying amount of long-term debt: Carrying Amount of Hedged Long-Term Debt Hedge Accounting Basis Adjustment (a) Carrying Amount of Hedged Long-Term Debt Hedge Accounting Basis Adjustment (a) Balance Sheet Classification September 30, 2020 September 30, 2020 December 31, 2019 December 31, 2019 Long-term debt $ — $ 56 $ 1,186 $ (3) (a) As of September 30, 2020, the entire balance is associated with remaining unamortized hedging adjustments on discontinued relationships. As of December 31, 2019, the balance includes $25 million of remaining unamortized hedging adjustments on discontinued relationships. The following table presents the effect of fair value hedge accounting on the Company's consolidated statements of operations for the three and nine months ended September 30, 2020 and 2019: Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Other income, net Other income, net Other income, net Other income, net Total for line item in which the effects of fair value hedges are recorded $ 77 $ 1 $ 74 $ 13 Gain (loss) on fair value hedging relationships: Hedged items (Long-term debt) $ — $ (20) $ (68) $ (76) Derivatives designated as hedging instruments $ — $ 20 $ 68 $ 76 |
STOCKHOLDERS_ EQUITY AND REDEEM
STOCKHOLDERS’ EQUITY AND REDEEMABLE NONCONTROLLING INTEREST | 9 Months Ended |
Sep. 30, 2020 | |
Stockholders' Equity Attributable to Parent [Abstract] | |
STOCKHOLDERS’ EQUITY AND REDEEMABLE NONCONTROLLING INTEREST | STOCKHOLDERS’ EQUITY AND REDEEMABLE NONCONTROLLING INTEREST Stockholders' Equity Changes in Accumulated Other Comprehensive Loss by Component Comprehensive income (loss) includes: • Foreign currency translation adjustments; • Net deferred gain on cash flow hedges, which represents deferred gains/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 9); and • Net change on available-for-sale debt securities, which represents unrealized holding gains, net of taxes on available-for-sale debt securities. For the three and nine months ended September 30, 2020 and 2019, the tax effects related to the deferred gains/losses on cash flow hedges and net change on available-for-sale debt securities were not material. Foreign currency translation adjustments related to indefinite investments in non-U.S. subsidiaries are not adjusted for income taxes. Dividend Program During each of the first three quarters of 2020, the Company's Board of Directors declared a quarterly cash dividend of $0.56 per common share. During each of the four quarters of 2019, the Company's Board of Directors declared a quarterly cash dividend of $0.53 per common share. Share Repurchase Program As of September 30, 2020, $1.2 billion remained available under the Company’s share repurchase authorizations; however, in April 2020, the Company temporarily suspended additional share repurchases under the existing authorization. The share repurchase authorization has no set expiration or termination date. Share Repurchases For the nine months ended September 30, 2020, the Company repurchased 0.7 million shares of its common stock for $75 million. For the nine months ended September 30, 2019, the Company repurchased 1.6 million shares of its common stock for $150 million. Shares Reissued from Treasury Stock For the nine months ended September 30, 2020 and 2019, the Company reissued 2.1 million shares and 1.8 million shares, respectively, from treasury stock for shares issued under the Employee Stock Purchase Plan and stock option plans. For details regarding the Company's stock ownership and compensation plans, see Note 17 to the audited consolidated financial statements in the Company's 2019 Annual Report on Form 10-K. Redeemable Noncontrolling Interest In connection with the sale of an 18.9% noncontrolling interest in a subsidiary to UMass on July 1, 2015, the Company granted UMass the right to require the Company to purchase all of its interest in the subsidiary at fair value commencing July 1, 2020. The subsidiary performs diagnostic information services in a defined territory within the state of Massachusetts. Since the redemption of the noncontrolling interest is outside of the Company's control, it has been presented outside of stockholders' equity at the greater of its carrying amount or its fair value. As of September 30, 2020 and December 31, 2019, the redeemable noncontrolling interest was presented at its fair value. For further information regarding the fair value of the redeemable noncontrolling interest, see Note 6. |
SUPPLEMENTAL CASH FLOW & OTHER
SUPPLEMENTAL CASH FLOW & OTHER DATA | 9 Months Ended |
Sep. 30, 2020 | |
Supplemental Cash Flow Elements [Abstract] | |
SUPPLEMENTAL CASH FLOW & OTHER DATA | SUPPLEMENTAL CASH FLOW AND OTHER DATA Supplemental cash flow and other data for the three and nine months ended September 30, 2020 and 2019 was as follows: Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Depreciation expense $ 62 $ 59 $ 186 $ 175 Amortization expense 27 23 77 72 Depreciation and amortization expense $ 89 $ 82 $ 263 $ 247 Interest expense $ (42) $ (45) $ (126) $ (136) Interest income — 1 2 3 Interest expense, net $ (42) $ (44) $ (124) $ (133) Interest paid $ 33 $ 58 $ 136 $ 149 Income taxes paid $ 148 $ 65 $ 168 $ 148 Accounts payable associated with capital expenditures $ 55 $ 24 $ 55 $ 24 Dividends payable $ 76 $ 72 $ 76 $ 72 Businesses acquired: Fair value of assets acquired $ 126 $ — $ 377 $ 61 Fair value of liabilities assumed (9) — (29) — Fair value of net assets acquired 117 — 348 61 Merger consideration receivable/payable 2 — 2 (5) Cash paid for business acquisitions 119 — 350 56 Less: Cash acquired 18 — 21 — Business acquisitions, net of cash acquired $ 101 $ — $ 329 $ 56 Leases: Leased assets obtained in exchange for new operating lease liabilities $ 40 $ 38 $ 119 $ 116 Leased assets obtained in exchange for new finance lease liabilities $ — $ 1 $ — $ 1 In March 2020, in response to the COVID-19 pandemic, the Coronavirus Aid, Relief, and Economic Security Act (" CARES Act") was signed into law. The CARES Act provides numerous tax provisions and other stimulus measures, including temporary changes regarding the prior and future utilization of net operating losses, temporary changes to the prior and future limitations on interest deductions, temporary suspension of certain payment requirements for the employer portion of social security taxes, technical corrections from prior tax legislation for tax depreciation of certain qualified improvement property, and the creation of certain payroll tax credits associated with the retention of employees. The CARES Act also includes a number of benefits that are applicable to the Company and other healthcare providers including, but not limited to, the appropriation of $100 billion to health care providers for related expenses or lost revenues that are attributable to the COVID-19 pandemic. In April 2020 and August 2020, the Company received approximately $65 million and $73 million, respectively, of funds that were distributed to healthcare providers for related expenses or lost revenues that are attributable to the COVID-19 pandemic under the CARES Act. In October 2020, the Company announced that it plans to return the entire $138 million of funds received. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 9 Months Ended |
Sep. 30, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIES Letters of Credit The Company can issue letters of credit totaling $100 million under its secured receivables credit facility and $150 million under its senior unsecured revolving credit facility. For further discussion regarding the Company's secured receivables credit facility and senior unsecured revolving credit facility, see Note 13 to the audited consolidated financial statements in the Company's 2019 Annual Report on Form 10-K and Note 8 to the interim unaudited consolidated financial statements. In support of its risk management program, to ensure the Company’s performance or payment to third parties, $71 million in letters of credit under the secured receivables credit facility were outstanding as of September 30, 2020. The letters of credit primarily represent collateral for current and future automobile liability and workers’ compensation loss payments. Contingent Lease Obligations The Company remains subject to contingent obligations under certain real estate leases, including leases that were entered into by certain predecessor companies of a subsidiary prior to the Company's acquisition of the subsidiary. No liability has been recorded for any of these potential contingent obligations. For further details, see Note 18 to the audited consolidated financial statements in the Company’s 2019 Annual Report on Form 10-K. Certain Legal Matters The Company may incur losses associated with these proceedings and investigations, but it is not possible to estimate the amount of loss or range of loss, if any, that might result from adverse judgments, settlements, fines, penalties, or other resolution of these proceedings and investigations based on the stage of these proceedings and investigations, the absence of specific allegations as to alleged damages, the uncertainty as to the certification of a class or classes and the size of any certified class, if applicable, and/or the lack of resolution of significant factual and legal issues. The Company has insurance coverage rights in place (limited in amount; subject to deductible) for certain potential costs and liabilities related to these proceedings and investigations. 401(k) Plan Lawsuit In June 2020, a putative class action lawsuit, House Johnson v. Quest Diagnostics Incorporated, et. al , was filed in the U.S. District Court for New Jersey against the Company and other defendants with respect to the Company’s 401(k) plan. The complaint alleges, among other things, that the fiduciaries of the 401(k) plan breached their duties by failing to disclose the expenses and risks of plan investment options, allowing unreasonable administration expenses to be charged to plan participants, and selecting and retaining high cost and poor performing investments. In July 2020, a putative class action lawsuit, Rice, et. al v. Quest Diagnostics Incorporated, et. al , was filed in the U.S. District Court for New Jersey. The plaintiffs in the Rice case named the same defendants as those named in the House Johnson case and alleged substantially similar claims to those made in the House Johnson matter. In October 2020, the court consolidated the two lawsuits and plaintiffs filed a consolidated amended complaint. The Company plans to vigorously defend this matter. AMCA Data Security Incident . On June 3, 2019, the Company reported that Retrieval-Masters Creditors Bureau, Inc./American Medical Collection Agency (“AMCA”) had informed the Company and Optum360 LLC that an unauthorized user had access to AMCA’s system between August 1, 2018 and March 30, 2019 (the “AMCA Data Security Incident”). Optum360 provides revenue management services to the Company, and AMCA provided debt collection services to Optum360. AMCA first informed the Company of the AMCA Data Security Incident on May 14, 2019. AMCA’s affected system included financial information (e.g., credit card numbers and bank account information), medical information and other personal information (e.g., social security numbers). Test results were not included. Neither Optum360’s nor the Company’s systems or databases were involved in the incident. AMCA also informed the Company that information pertaining to other laboratories’ customers was also affected. Following announcement of the AMCA Data Security Incident, AMCA sought protection under the U.S. bankruptcy laws. Numerous putative class action lawsuits were filed against the Company related to the AMCA Data Security Incident. The U.S. Judicial Panel on Multidistrict Litigation transferred the cases still pending to, and consolidated them for pre-trial proceedings in, the U.S. District Court for New Jersey. In November 2019, the plaintiffs in the multidistrict proceeding filed a consolidated putative class action complaint against the Company and Optum360 that named additional individuals as plaintiffs and that asserted a variety of common law and statutory claims in connection with the AMCA Data Security Incident. In January 2020, the Company moved to dismiss the consolidated complaint. In addition, certain federal and state governmental authorities are investigating, or otherwise seeking information and/or documents from the Company related to the AMCA Data Security Incident and related matters, including the Office for Civil Rights of the U.S. Department of Health and Human Services, Attorneys General offices from numerous states and the District of Columbia, and certain U.S. senators. Other Legal Matters In the normal course of business, the Company has been named, from time to time, as a defendant in various legal actions, including arbitrations, class actions and other litigation, arising in connection with the Company's activities as a provider of diagnostic testing, information and services. These actions could involve claims for substantial compensatory and/or punitive damages or claims for indeterminate amounts of damages, and could have an adverse impact on the Company's client base and reputation. The Company is also involved, from time to time, in other reviews, investigations and proceedings by governmental agencies regarding the Company's business which may result in adverse judgments, settlements, fines, penalties, injunctions or other relief. The federal or state governments may bring claims based on the Company's current practices, which it believes are lawful. In addition, certain federal and state statutes, including the qui tam provisions of the federal False Claims Act, allow private individuals to bring lawsuits against healthcare companies on behalf of government or private payers. The Company is aware of lawsuits, and from time to time has received subpoenas, related to billing practices based on the qui tam provisions of the Civil False Claims Act or other federal and state statutes, regulations or other laws. The Company understands that there may be other pending qui tam claims brought by former employees or other "whistle blowers" as to which the Company cannot determine the extent of any potential liability. Management cannot predict the outcome of such matters. Although management does not anticipate that the ultimate outcome of such matters will have a material adverse effect on the Company's financial condition, given the high degree of judgment involved in establishing loss estimates related to these types of matters, the outcome of such matters may be material to the Company's consolidated results of operations or cash flows in the period in which the impact of such matters is determined or paid. These matters are in different stages. Some of these matters are in their early stages. Matters may involve responding to and cooperating with various government investigations and related subpoenas. As of September 30, 2020, the Company does not believe that material losses related to legal matters are probable. Reserves for legal matters totaled $1 million as of both September 30, 2020 and December 31, 2019, respectively. Reserves for General and Professional Liability Claims |
BUSINESS SEGMENT INFORMATION
BUSINESS SEGMENT INFORMATION | 9 Months Ended |
Sep. 30, 2020 | |
Segment Reporting [Abstract] | |
BUSINESS SEGMENT INFORMATION | BUSINESS SEGMENT INFORMATION The Company's DIS business is the only reportable segment based on the manner in which the Chief Executive Officer, who is the Company's chief operating decision maker ("CODM"), assesses performance and allocates resources across the organization. The DIS business provides diagnostic information services to a broad range of customers, including patients, clinicians, hospitals, IDNs, health plans, employers and ACOs. The Company is the world's leading provider of diagnostic information services, which includes providing information and insights based on the industry-leading menu of routine, non-routine and advanced clinical testing and anatomic pathology testing, and other diagnostic information services. The DIS business accounted for greater than 95% of net revenues in 2020 and 2019. All other operating segments include the Company's DS businesses, which consist of its risk assessment services and healthcare information technology businesses. The Company's DS businesses are the leading provider of risk assessment services for the life insurance industry and offer healthcare organizations and clinicians robust information technology solutions. As of September 30, 2020, substantially all of the Company’s services were provided within the United States, and substantially all of the Company’s assets were located within the United States. The following table is a summary of segment information for the three and nine months ended September 30, 2020 and 2019. Segment asset information is not presented since it is not used by the CODM at the operating segment level. Operating earnings (loss) of each segment represents net revenues less directly identifiable expenses to arrive at operating income (loss) for the segment. General corporate activities included in the table below are comprised of general management and administrative corporate expenses, amortization and impairment of intangible assets and other operating income and expenses, net of certain general corporate activity costs that are allocated to the DIS and DS businesses. The accounting policies of the segments are the same as those of the Company as set forth in Note 2 to the audited consolidated financial statements contained in the Company’s 2019 Annual Report on Form 10-K and Note 2 to the interim unaudited consolidated financial statements. Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Net revenues: DIS business $ 2,709 $ 1,877 $ 6,217 $ 5,561 All other operating segments 77 79 218 239 Total net revenues $ 2,786 $ 1,956 $ 6,435 $ 5,800 Operating earnings (loss): DIS business $ 840 $ 345 $ 1,325 $ 963 All other operating segments 16 10 29 31 General corporate activities (138) (42) (178) (126) Total operating income 718 313 1,176 868 Non-operating income (expense), net 35 (43) (50) (120) Income from continuing operations before income taxes and equity in earnings of equity method investees 753 270 1,126 748 Income tax expense (177) (62) (269) (175) Equity in earnings of equity method investees, net of taxes 15 18 33 48 Income from continuing operations 591 226 890 621 Income from discontinued operations, net of taxes — — — 20 Net income 591 226 890 641 Less: Net income attributable to noncontrolling interests 23 11 38 36 Net income attributable to Quest Diagnostics $ 568 $ 215 $ 852 $ 605 |
RELATED PARTIES
RELATED PARTIES | 9 Months Ended |
Sep. 30, 2020 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | RELATED PARTIES The Company's equity method investees primarily consist of its clinical trials central laboratory services joint venture and its diagnostic information services joint ventures, which are accounted for under the equity method of accounting. During the three months ended September 30, 2020 and 2019, the Company recognized net revenues of $10 million and $8 million, respectively, associated with diagnostic information services provided to its equity method investees. During the nine months ended September 30, 2020 and 2019, the Company recognized net revenues of $25 million and $26 million, respectively, associated with diagnostic information services provided to its equity method investees. As of both September 30, 2020 and December 31, 2019, there was $4 million of accounts receivable from equity method investees related to such services. During both the three months ended September 30, 2020 and 2019, the Company recognized net revenues of $1 million associated with diagnostic information services provided to a noncontrolling interest partner in a joint venture. During the nine months ended September 30, 2020 and 2019, the Company recognized net revenues of $2 million and $6 million, respectively, associated with diagnostic information services provided to a noncontrolling interest partner in a joint venture. As of December 31, 2019, there was $4 million of receivables from the noncontrolling interest partner included in accounts receivable and other assets related to such services. During both the three months ended September 30, 2020 and 2019, the Company recognized income of $4 million associated with the performance of certain corporate services, including transition services, for its equity method investees, classified within selling, general and administrative expenses. During both the nine months ended September 30, 2020 and 2019, the Company recognized income of $12 million associated with the performance of certain corporate services, including transition services, for its equity method investees, classified within selling, general and administrative expenses. As of September 30, 2020 and December 31, 2019, there was $2 million and $1 million, respectively, of other receivables from equity method investees included in prepaid expenses and other current assets related to these service agreements and other transition related items. In addition, accounts payable and accrued expenses as of September 30, 2020 and December 31, 2019 included $1 million and $2 million, respectively, due to equity method investees. |
REVENUE RECOGNITION AND ALLOWAN
REVENUE RECOGNITION AND ALLOWANCE FOR CREDIT LOSSES | 9 Months Ended |
Sep. 30, 2020 | |
Revenue from Contract with Customer [Abstract] | |
REVENUE RECOGITION AND ALLOWANCE FOR CREDIT LOSSES | REVENUE RECOGNITION AND ALLOWANCE FOR CREDIT LOSSES DIS Net revenues in the Company’s DIS business accounted for over 95% of the Company’s total net revenues for the three and nine months ended September 30, 2020 and 2019 and are primarily comprised of a high volume of relatively low-dollar transactions. The DIS business, which provides clinical testing services and other services, satisfies its performance obligations and recognizes revenues primarily upon completion of the testing process, when results are reported, or when services have been rendered. The Company estimates the amount of consideration it expects to be entitled to receive from customer groups, using the portfolio approach, in exchange for providing services. These estimates include the impact of contractual allowances, including payer denials and price concessions. The portfolios determined using the portfolio approach consist of the following groups of customers: healthcare insurers, government payers (Medicare and Medicaid programs), client payers and patients. DS The Company’s DS businesses primarily satisfy their performance obligations and recognize revenues when delivery has occurred or services have been rendered. The approximate percentage of net revenue by type of customer was as follows: Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Healthcare insurers: Fee-for-service 33 % 32 % 33 % 33 % Capitated 2 3 3 3 Total healthcare insurers 35 35 36 36 Government payers 10 15 12 15 Client payers 40 33 37 32 Patients 12 13 12 13 Total DIS 97 96 97 96 DS 3 4 3 4 Net revenues 100 % 100 % 100 % 100 % The approximate percentage of net accounts receivable by type of customer was as follows: September 30, 2020 December 31, 2019 Healthcare Insurers 30 % 22 % Government Payers 6 11 Client Payers 48 42 Patients (including coinsurance and deductible responsibilities) 12 20 Total DIS 96 95 DS 4 5 Net accounts receivable 100 % 100 % Allowance for Credit Losses Policy When estimating its allowance for credit losses, the Company pools its trade receivables based on the following customer types: healthcare insurers, government payers, client payers and patients. For the healthcare insurers and government payers, collection of the Company’s net revenues is normally a function of providing the complete and correct billing information within the various filing deadlines, and provided that the Company has billed the payers accurately with complete information prior to the established filing deadline, there has historically been little to no collection risk. Client payers primarily include physicians, hospitals, IDNs, ACOs, employers, other commercial laboratories and institutions for which services are performed on a wholesale basis and are billed based on negotiated fee schedules. Credit risk and ability to pay are more of a consideration for these payers. With respect to patients, implicit price concessions, which represent differences between amounts billed and the estimated consideration the Company expects to receive from patients, are recognized as a reduction of revenue. Estimates of implicit price concessions consider historical collection experience (including the period the receivables have been outstanding) and other factors including current market conditions. The Company principally estimates the allowance for credit losses by pool based on historical collection experience, the current credit worthiness of the customers, current economic conditions, expectations of future economic conditions and the period that the receivables have been outstanding. To the extent that any individual payers are identified that have deteriorated in credit quality, the Company removes the customers from their respective pools and establishes allowances based on the individual risk characteristics of such customers. Although the Company believes that its estimates for contractual allowances and patient price concessions as well as its allowance for credit losses are appropriate, it is possible that the Company will experience an impact on cash collections as a result of the impact of the COVID-19 pandemic. |
TAXES ON INCOME
TAXES ON INCOME | 9 Months Ended |
Sep. 30, 2020 | |
Income Tax Disclosure [Abstract] | |
TAXES ON INCOME | TAXES ON INCOME For the three months ended September 30, 2020 and 2019, the effective income tax rate was 23.7% and 22.9%, respectively. The effective income tax rate for the three months ended September 30, 2020, benefited from a lower effective income tax rate associated with a $70 million gain recognized as a result of the remeasurement of the Company's previously held equity interest in MACL to fair value (see Note 5); and $3 million of excess tax benefits associated with stock-based compensation arrangements. The effective income tax rate for the three months ended September 30, 2019 benefited from a $6 million income tax benefit due to the release of a valuation allowance associated with net operating loss carryforwards; and $3 million of excess tax benefits associated with stock-based compensation arrangements. For the nine months ended September 30, 2020 and 2019, the effective income tax rate was 23.9% and 23.4%, respectively. The effective income tax rate for the nine months ended September 30, 2020, benefited from a lower effective income tax rate associated with a $70 million gain recognized as a result of the remeasurement of the Company's previously held equity interest in MACL to fair value (see Note 5); and $15 million of excess tax benefits associated with stock-based compensation arrangements. The effective income tax rate for the nine months ended September 30, 2019 benefited from $11 million of excess tax benefits associated with stock-based compensation arrangements; and a $10 million income tax benefit due to the release of valuation allowances associated with net operating loss carryforwards. The effective income tax rate associated with the $70 million gain recognized as a result of the remeasurement of the Company's previously held equity interest in MACL to fair value was 11.8% due to a permanent difference in the financial reporting and tax basis of goodwill. |
DISCONTINUED OPERATIONS
DISCONTINUED OPERATIONS | 9 Months Ended |
Sep. 30, 2020 | |
Discontinued Operations and Disposal Groups [Abstract] | |
DISCONTINUED OPERATIONS | DISCONTINUED OPERATIONS During the third quarter of 2006, the Company completed the wind down of Nichols Institute Diagnostics ("NID"), a test kit manufacturing subsidiary, which was reported as a discontinued operation for the nine months ended September 30, 2019. Discontinued operations, net of taxes, for the nine months ended September 30, 2019 includes discrete tax benefits of $20 million associated with the favorable resolution of certain tax contingencies related to NID. In addition, net cash provided by operating activities in the consolidated statement of cash flows for the nine months ended September 30, 2019 included a $28 million refund from the taxing authorities related to discontinued operations. |
SUBSEQUENT EVENT
SUBSEQUENT EVENT | 9 Months Ended |
Sep. 30, 2020 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | SUBSEQUENT EVENTS During October 2020, the Company amended its $600 million secured receivables credit facility in order to extend the maturity dates for each underlying commitment by one year while maintaining the borrowing capacity under the facility at $600 million. Under the secured receivables credit facility, the Company can borrow against a $250 million loan commitment maturing October 2021 and a $250 million loan commitment maturing October 2022. Additionally, the Company can issue up to $100 million of letters of credit through October 2022. Borrowings under the facility are collateralized by certain domestic receivables. Interest on borrowings under the facility is based on either commercial paper rates for highly-rated issuers or LIBOR, plus a spread of 0.825% to 0.95%. In October 2020, the Company issued a redemption notice to the holders of the Company's $550 million aggregate principal amount of 4.70% senior notes due April 2021, to redeem such notes in November 2020. Upon redemption, the Company will recognize a loss on extinguishment of debt based on the difference between the reacquisition price of the debt and the net carrying amount. The Company will pay a redemption premium in accordance with the requirements of such notes using a treasury rate calculated on the third business day preceding the redemption date. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended |
Sep. 30, 2020 | |
Accounting Policies [Abstract] | |
Basis of Presentation | The interim unaudited consolidated financial statements reflect all adjustments which in the opinion of management are necessary for a fair statement of results of operations, comprehensive income, financial condition, cash flows and stockholders' equity for the periods presented. Except as otherwise disclosed, all such adjustments are of a normal recurring nature. Operating results for the interim periods are not necessarily indicative of the results that may be expected for the full year. These interim unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company’s 2019 Annual Report on Form 10-K. The year-end balance sheet data was derived from the audited consolidated financial statements as of December 31, 2019, but does not include all the disclosures required by accounting principles generally accepted in the United States (“GAAP”). |
Use Of Estimates | The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. |
Earnings Per Share | The Company's unvested restricted stock units that contain non-forfeitable rights to dividends are participating securities and, therefore, are included in the earnings allocation in computing earnings per share using the two-class method. Basic earnings per common share is calculated by dividing net income, adjusted for earnings allocated to participating securities, by the weighted average number of common shares outstanding. Diluted earnings per common share is calculated by dividing net income, adjusted for earnings allocated to participating securities, by the weighted average number of common shares outstanding after giving effect to all potentially 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 and its Amended and Restated Non-Employee Director Long-Term Incentive Plan. 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 Pronouncements | Adoption of New Accounting Standards On January 1, 2020, the Company adopted a new accounting standard issued by the Financial Accounting Standards Board ("FASB") which aligns the requirements for deferring implementation costs incurred in a cloud computing arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The adoption of this standard, which the Company elected to do on a prospective basis, did not have a material impact on the Company's consolidated results of operations, financial position or cash flows. On January 1, 2020, the Company adopted a new accounting standard issued by the FASB that changes the impairment model for most financial instruments, including trade receivables, from an incurred loss method to a new forward-looking approach, based on expected losses. The estimate of expected credit losses requires entities to incorporate considerations of historical information, current information and reasonable and supportable forecasts. The adoption of this new standard, which was done using a modified retrospective transition approach, did not have a material impact on the Company's consolidated results of operations, financial position or cash flows. See Note 15 for further details on the Company's allowance for credit losses policy. New Accounting Standards to be Adopted In March 2020, the FASB issued a new accounting standard which provides temporary optional guidance to ease the potential burden in accounting for reference rate reform due to the risk of cessation of the London Interbank Offered Rate ("LIBOR"). The amendments apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The pronouncement is effective immediately and can be applied through December 31, 2022. The adoption of this standard is not expected to have a material impact on the Company’s consolidated results of operations, financial position or cash flows. |
Derivative Financial Instruments | The Company uses derivative financial instruments to manage its exposure to market risks for changes in interest rates and, from time to time, foreign currencies. This strategy includes the use of interest rate swap agreements, forward-starting interest rate swap agreements, treasury lock agreements and foreign currency forward contracts to manage its exposure to movements in interest and currency rates. The Company has established policies and procedures for risk assessment and the approval, reporting and monitoring of derivative financial instrument activities. These policies prohibit holding or issuing derivative financial instruments for speculative purposes. The Company does not enter into derivative financial instruments that contain credit-risk-related contingent features or requirements to post collateral. Interest Rate Risk The Company is exposed to interest rate risk on its cash and cash equivalents and its debt obligations. Interest income earned on cash and cash equivalents may fluctuate as interest rates change; however, due to their relatively short maturities, the Company does not hedge these assets or their investment cash flows and the impact of interest rate risk is not material. The Company's debt obligations consist of fixed-rate and variable-rate debt instruments. The Company's primary objective is to achieve the lowest overall cost of funding while managing the variability in cash outflows within an acceptable range. In order to achieve this objective, the Company enters into interest rate swaps. Interest rate swaps involve the periodic exchange of payments without the exchange of underlying principal or notional amounts. Net settlements between the counterparties are recognized as an adjustment to interest expense. |
Allowance for Credit Losses Policy | Allowance for Credit Losses Policy When estimating its allowance for credit losses, the Company pools its trade receivables based on the following customer types: healthcare insurers, government payers, client payers and patients. For the healthcare insurers and government payers, collection of the Company’s net revenues is normally a function of providing the complete and correct billing information within the various filing deadlines, and provided that the Company has billed the payers accurately with complete information prior to the established filing deadline, there has historically been little to no collection risk. Client payers primarily include physicians, hospitals, IDNs, ACOs, employers, other commercial laboratories and institutions for which services are performed on a wholesale basis and are billed based on negotiated fee schedules. Credit risk and ability to pay are more of a consideration for these payers. With respect to patients, implicit price concessions, which represent differences between amounts billed and the estimated consideration the Company expects to receive from patients, are recognized as a reduction of revenue. Estimates of implicit price concessions consider historical collection experience (including the period the receivables have been outstanding) and other factors including current market conditions. The Company principally estimates the allowance for credit losses by pool based on historical collection experience, the current credit worthiness of the customers, current economic conditions, expectations of future economic conditions and the period that the receivables have been outstanding. To the extent that any individual payers are identified that have deteriorated in credit quality, the Company removes the customers from their respective pools and establishes allowances based on the individual risk characteristics of such customers. Although the Company believes that its estimates for contractual allowances and patient price concessions as well as its allowance for credit losses are appropriate, it is possible that the Company will experience an impact on cash collections as a result of the impact of the COVID-19 pandemic. |
EARNINGS PER SHARE (Tables)
EARNINGS PER SHARE (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Earnings Per Share, Basic and Diluted [Abstract] | |
Schedule of Earnings Per Share, Basic and Diluted | The computation of basic and diluted earnings per common share was as follows (in millions, except per share data): Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Amounts attributable to Quest Diagnostics’ common stockholders: Income from continuing operations $ 568 $ 215 $ 852 $ 585 Income from discontinued operations, net of taxes — — — 20 Net income attributable to Quest Diagnostics’ common stockholders $ 568 $ 215 $ 852 $ 605 Income from continuing operations $ 568 $ 215 $ 852 $ 585 Less: Earnings allocated to participating securities 2 1 3 2 Earnings available to Quest Diagnostics’ common stockholders – basic and diluted $ 566 $ 214 $ 849 $ 583 Weighted average common shares outstanding – basic 135 135 134 135 Effect of dilutive securities: Stock options and performance share units 2 2 2 1 Weighted average common shares outstanding – diluted 137 137 136 136 Earnings per share attributable to Quest Diagnostics’ common stockholders - basic: Income from continuing operations $ 4.20 $ 1.59 $ 6.33 $ 4.33 Income from discontinued operations — — — 0.15 Net income $ 4.20 $ 1.59 $ 6.33 $ 4.48 Earnings per share attributable to Quest Diagnostics’ common stockholders – diluted: Income from continuing operations $ 4.14 $ 1.56 $ 6.25 $ 4.27 Income from discontinued operations — — — 0.15 Net income $ 4.14 $ 1.56 $ 6.25 $ 4.42 |
Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share | The following securities were not included in the calculation of diluted earnings per share due to their antidilutive effect: Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Stock options 1 2 1 3 |
RESTRUCTURING ACTIVITIES (Table
RESTRUCTURING ACTIVITIES (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Restructuring and Related Activities [Abstract] | |
Schedule of Pre-Tax Restructuring and Integration Charges | The following table provides a summary of the Company's pre-tax restructuring charges for the three and nine months ended September 30, 2020 and 2019: Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Employee separation costs $ 6 $ — $ 13 $ (3) |
FAIR VALUE MEASUREMENTS (Tables
FAIR VALUE MEASUREMENTS (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Fair Value Disclosures [Abstract] | |
Fair Value, Measurement Inputs | 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 September 30, 2020 Total Level 1 Level 2 Level 3 Assets: Trading securities $ 60 $ 60 $ — $ — Cash surrender value of life insurance policies 45 — 45 — Available-for-sale debt securities 12 — — 12 Total $ 117 $ 60 $ 45 $ 12 Liabilities: Deferred compensation liabilities $ 114 $ — $ 114 $ — Redeemable noncontrolling interest $ 80 $ — $ — $ 80 Basis of Fair Value Measurements December 31, 2019 Total Level 1 Level 2 Level 3 Assets: Trading securities $ 59 $ 59 $ — $ — Cash surrender value of life insurance policies 43 — 43 — Available-for-sale debt securities 12 — — 12 Total $ 114 $ 59 $ 43 $ 12 Liabilities: Deferred compensation liabilities $ 110 $ — $ 110 $ — Fixed-to-variable interest rate swaps 28 — 28 — Contingent consideration 7 — — 7 Total $ 145 $ — $ 138 $ 7 Redeemable noncontrolling interest $ 76 $ — $ — $ 76 Business Acquisition Benchmark Comparable Company Revenue Volatility Discount rate Maximum Contingent Consideration Payment ReproSource, Inc. Revenue 8.5% 6.5% $ 10 |
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation | The following table provides a reconciliation of the beginning and ending balances of liabilities using significant unobservable inputs (Level 3 of the fair value hierarchy): Contingent Consideration Balance, December 31, 2019 $ 7 Settlements (6) Total (gains)/losses included in earnings - realized/unrealized (1) Balance, September 30, 2020 $ — |
GOODWILL AND INTANGIBLE ASSETS
GOODWILL AND INTANGIBLE ASSETS (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Changes in Goodwill, Net | The changes in goodwill for the nine months ended September 30, 2020 and for the year ended December 31, 2019 were as follows: September 30, 2020 December 31, 2019 Balance, beginning of period $ 6,619 $ 6,563 Goodwill acquired during the period 258 43 Adjustments to goodwill 3 13 Balance, end of period $ 6,880 $ 6,619 |
Intangible Assets Excluding Goodwill | Intangible assets at September 30, 2020 and December 31, 2019 consisted of the following: Weighted September 30, 2020 December 31, 2019 Cost Accumulated Net Cost Accumulated Net Amortizing intangible assets: Customer-related 17 $ 1,479 $ (617) $ 862 $ 1,367 $ (556) $ 811 Non-compete agreements 9 3 (2) 1 3 (2) 1 Technology 15 140 (63) 77 104 (56) 48 Other 9 110 (94) 16 110 (85) 25 Total 17 1,732 (776) 956 1,584 (699) 885 Intangible assets not subject to amortization: Trade names 235 — 235 235 — 235 Other 1 — 1 1 — 1 Total intangible assets $ 1,968 $ (776) $ 1,192 $ 1,820 $ (699) $ 1,121 |
Future Amortization Expense Intangible Assets | The estimated amortization expense related to amortizable intangible assets for each of the five succeeding fiscal years and thereafter as of September 30, 2020 is as follows: Year Ending December 31, Remainder of 2020 $ 27 2021 101 2022 98 2023 96 2024 93 2025 91 Thereafter 450 Total $ 956 |
DEBT (Tables)
DEBT (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Debt Instruments [Abstract] | |
Long-term Debt | Long-term debt (including finance lease obligations) as of September 30, 2020 and December 31, 2019 consisted of the following: September 30, 2020 December 31, 2019 4.75% Senior Notes due January 2020 $ — $ 500 2.50% Senior Notes due March 2020 — 300 4.70% Senior Notes due April 2021 551 554 4.25% Senior Notes due April 2024 317 308 3.50% Senior Notes due March 2025 623 593 3.45% Senior Notes due June 2026 513 490 4.20% Senior Notes due June 2029 499 499 2.95% Senior Notes due June 2030 798 798 2.80% Senior Notes due June 2031 549 — 6.95% Senior Notes due July 2037 175 175 5.75% Senior Notes due January 2040 245 245 4.70% Senior Notes due March 2045 300 300 Other 32 34 Debt issuance costs (29) (26) Total long-term debt 4,573 4,770 Less: Current portion of long-term debt 555 804 Total long-term debt, net of current portion $ 4,018 $ 3,966 |
Schedule of Leverage Ratio Covenants | Pursuant to the amendment, the leverage ratio covenant (as defined in the senior unsecured revolving credit facility) was increased as follows: As of: Applicable Covenant: September 30, 2020 no more than 5.5 times EBITDA December 31, 2020 no more than 6.5 times EBITDA March 31, 2021 no more than 6.25 times EBITDA June 30, 2021 no more than 4.5 times EBITDA |
Schedule of Maturities of Long-term Debt | As of September 30, 2020, long-term debt matures as follows: Year Ending December 31, Remainder of 2020 $ 1 2021 553 2022 3 2023 2 2024 302 Thereafter 3,696 Total maturities of long-term debt 4,557 Unamortized discount (11) Debt issuance costs (29) Fair value basis adjustments attributable to hedged debt 56 Total long-term debt 4,573 Current portion of long-term debt 555 Total long-term debt, net of current portion $ 4,018 |
FINANCIAL INSTRUMENTS (Tables)
FINANCIAL INSTRUMENTS (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Schedule of Debt Instrument Fair Value Basis Adjustment Attributable to Hedged Debt | As of September 30, 2020 and December 31, 2019, the following amounts were recorded on the consolidated balance sheets related to cumulative basis adjustments for fair value hedges included in the carrying amount of long-term debt: Carrying Amount of Hedged Long-Term Debt Hedge Accounting Basis Adjustment (a) Carrying Amount of Hedged Long-Term Debt Hedge Accounting Basis Adjustment (a) Balance Sheet Classification September 30, 2020 September 30, 2020 December 31, 2019 December 31, 2019 Long-term debt $ — $ 56 $ 1,186 $ (3) |
Schedule of Fair Value Hedge Accounting on the Statement of Operations | The following table presents the effect of fair value hedge accounting on the Company's consolidated statements of operations for the three and nine months ended September 30, 2020 and 2019: Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Other income, net Other income, net Other income, net Other income, net Total for line item in which the effects of fair value hedges are recorded $ 77 $ 1 $ 74 $ 13 Gain (loss) on fair value hedging relationships: Hedged items (Long-term debt) $ — $ (20) $ (68) $ (76) Derivatives designated as hedging instruments $ — $ 20 $ 68 $ 76 |
SUPPLEMENTAL CASH FLOW & OTHE_2
SUPPLEMENTAL CASH FLOW & OTHER DATA (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Supplemental Cash Flow Elements [Abstract] | |
Supplemental Cash Flow and Other Data | Supplemental cash flow and other data for the three and nine months ended September 30, 2020 and 2019 was as follows: Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Depreciation expense $ 62 $ 59 $ 186 $ 175 Amortization expense 27 23 77 72 Depreciation and amortization expense $ 89 $ 82 $ 263 $ 247 Interest expense $ (42) $ (45) $ (126) $ (136) Interest income — 1 2 3 Interest expense, net $ (42) $ (44) $ (124) $ (133) Interest paid $ 33 $ 58 $ 136 $ 149 Income taxes paid $ 148 $ 65 $ 168 $ 148 Accounts payable associated with capital expenditures $ 55 $ 24 $ 55 $ 24 Dividends payable $ 76 $ 72 $ 76 $ 72 Businesses acquired: Fair value of assets acquired $ 126 $ — $ 377 $ 61 Fair value of liabilities assumed (9) — (29) — Fair value of net assets acquired 117 — 348 61 Merger consideration receivable/payable 2 — 2 (5) Cash paid for business acquisitions 119 — 350 56 Less: Cash acquired 18 — 21 — Business acquisitions, net of cash acquired $ 101 $ — $ 329 $ 56 Leases: Leased assets obtained in exchange for new operating lease liabilities $ 40 $ 38 $ 119 $ 116 Leased assets obtained in exchange for new finance lease liabilities $ — $ 1 $ — $ 1 |
BUSINESS SEGMENT INFORMATION (T
BUSINESS SEGMENT INFORMATION (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Segment Reporting [Abstract] | |
Summary of Segment Reporting Information by Segment | The following table is a summary of segment information for the three and nine months ended September 30, 2020 and 2019. Segment asset information is not presented since it is not used by the CODM at the operating segment level. Operating earnings (loss) of each segment represents net revenues less directly identifiable expenses to arrive at operating income (loss) for the segment. General corporate activities included in the table below are comprised of general management and administrative corporate expenses, amortization and impairment of intangible assets and other operating income and expenses, net of certain general corporate activity costs that are allocated to the DIS and DS businesses. The accounting policies of the segments are the same as those of the Company as set forth in Note 2 to the audited consolidated financial statements contained in the Company’s 2019 Annual Report on Form 10-K and Note 2 to the interim unaudited consolidated financial statements. Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Net revenues: DIS business $ 2,709 $ 1,877 $ 6,217 $ 5,561 All other operating segments 77 79 218 239 Total net revenues $ 2,786 $ 1,956 $ 6,435 $ 5,800 Operating earnings (loss): DIS business $ 840 $ 345 $ 1,325 $ 963 All other operating segments 16 10 29 31 General corporate activities (138) (42) (178) (126) Total operating income 718 313 1,176 868 Non-operating income (expense), net 35 (43) (50) (120) Income from continuing operations before income taxes and equity in earnings of equity method investees 753 270 1,126 748 Income tax expense (177) (62) (269) (175) Equity in earnings of equity method investees, net of taxes 15 18 33 48 Income from continuing operations 591 226 890 621 Income from discontinued operations, net of taxes — — — 20 Net income 591 226 890 641 Less: Net income attributable to noncontrolling interests 23 11 38 36 Net income attributable to Quest Diagnostics $ 568 $ 215 $ 852 $ 605 |
REVENUE RECOGNITION AND ALLOW_2
REVENUE RECOGNITION AND ALLOWANCE FOR CREDIT LOSSES (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Revenue from Contract with Customer [Abstract] | |
Disaggregation of Revenue | The approximate percentage of net revenue by type of customer was as follows: Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Healthcare insurers: Fee-for-service 33 % 32 % 33 % 33 % Capitated 2 3 3 3 Total healthcare insurers 35 35 36 36 Government payers 10 15 12 15 Client payers 40 33 37 32 Patients 12 13 12 13 Total DIS 97 96 97 96 DS 3 4 3 4 Net revenues 100 % 100 % 100 % 100 % |
Accounts Receivable Disaggregation | The approximate percentage of net accounts receivable by type of customer was as follows: September 30, 2020 December 31, 2019 Healthcare Insurers 30 % 22 % Government Payers 6 11 Client Payers 48 42 Patients (including coinsurance and deductible responsibilities) 12 20 Total DIS 96 95 DS 4 5 Net accounts receivable 100 % 100 % |
EARNINGS PER SHARE (Details)
EARNINGS PER SHARE (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Amounts attributable to Quest Diagnostics’ common stockholders: | ||||
Income from continuing operations | $ 568 | $ 215 | $ 852 | $ 585 |
Income from discontinued operations, net of taxes | 0 | 0 | 0 | 20 |
Net income attributable to Quest Diagnostics | 568 | 215 | 852 | 605 |
Less: Earnings allocated to participating securities | 2 | 1 | 3 | 2 |
Earnings available to Quest Diagnostics’ common stockholders – basic and diluted | $ 566 | $ 214 | $ 849 | $ 583 |
Weighted average common shares outstanding - basic | 135 | 135 | 134 | 135 |
Stock options and performance share units | 2 | 2 | 2 | 1 |
Weighted average common shares outstanding - diluted | 137 | 137 | 136 | 136 |
Earnings per share attributable to Quest Diagnostics’ common stockholders - basic: | ||||
Income from continuing operations (in dollars per share) | $ 4.20 | $ 1.59 | $ 6.33 | $ 4.33 |
Income from discontinued operations (in dollars per share) | 0 | 0 | 0 | 0.15 |
Net income (in dollars per share) | 4.20 | 1.59 | 6.33 | 4.48 |
Earnings per share attributable to Quest Diagnostics’ common stockholders - diluted: | ||||
Income from continuing operations (in dollars per share) | 4.14 | 1.56 | 6.25 | 4.27 |
Income from discontinued operations (in dollars per share) | 0 | 0 | 0 | 0.15 |
Net income (in dollars per share) | $ 4.14 | $ 1.56 | $ 6.25 | $ 4.42 |
Stock options | 1 | 2 | 1 | 3 |
RESTRUCTURING ACTIVITIES (Pre-T
RESTRUCTURING ACTIVITIES (Pre-Tax Restructuring and Integration Charges) (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Restructuring and Related Activities [Abstract] | ||||
Employee separation costs | $ 6 | $ 0 | $ 13 | $ (3) |
RESTRUCTURING ACTIVITIES (Narra
RESTRUCTURING ACTIVITIES (Narrative) (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | |
Accounts Payable and Accrued Liabilities | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring reserve | $ 9 | $ 9 | $ 9 | |
Cost of services | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Total restructuring charges | $ 6 | 9 | $ (1) | |
Selling, general and administrative | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Total restructuring charges | $ 4 | $ (2) |
BUSINESS ACQUISITIONS (Details)
BUSINESS ACQUISITIONS (Details) - USD ($) | Aug. 01, 2020 | Jul. 31, 2020 | Apr. 06, 2020 | Jan. 21, 2020 | Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | Dec. 31, 2018 |
Business Acquisition [Line Items] | ||||||||||
Cash acquired from acquisition | $ 18,000,000 | $ 0 | $ 21,000,000 | $ 0 | ||||||
Goodwill | $ 6,880,000,000 | $ 6,880,000,000 | $ 6,619,000,000 | $ 6,563,000,000 | ||||||
Customer Relationships | ||||||||||
Business Acquisition [Line Items] | ||||||||||
Intangible assets, useful life | 17 years | |||||||||
Blueprint Genetics Oy | ||||||||||
Business Acquisition [Line Items] | ||||||||||
Cash paid for business acquisitions | $ 108,000,000 | |||||||||
Cash acquired from acquisition | 3,000,000 | |||||||||
Goodwill | 77,000,000 | |||||||||
Goodwill, expected tax deductible amount | 0 | |||||||||
Intangible assets | 43,000,000 | |||||||||
Deferred tax liabilities | 11,000,000 | |||||||||
Property, plant and equipment and working capital | $ 2,000,000 | |||||||||
Blueprint Genetics Oy | Technology | ||||||||||
Business Acquisition [Line Items] | ||||||||||
Intangible assets, useful life | 10 years | |||||||||
Blueprint Genetics Oy | Customer Relationships | ||||||||||
Business Acquisition [Line Items] | ||||||||||
Intangible assets, useful life | 15 years | |||||||||
Laboratory Services Business, Memorial Hermann | ||||||||||
Business Acquisition [Line Items] | ||||||||||
Cash paid for business acquisitions | $ 120,000,000 | |||||||||
Goodwill | 93,000,000 | |||||||||
Goodwill, expected tax deductible amount | 93,000,000 | |||||||||
Laboratory Services Business, Memorial Hermann | Customer Relationships | ||||||||||
Business Acquisition [Line Items] | ||||||||||
Intangible assets | $ 27,000,000 | |||||||||
Intangible assets, useful life | 15 years | |||||||||
MACL | ||||||||||
Business Acquisition [Line Items] | ||||||||||
Cash paid for business acquisitions | $ 93,000,000 | |||||||||
Cash acquired from acquisition | 18,000,000 | |||||||||
Goodwill | 84,000,000 | |||||||||
Goodwill, expected tax deductible amount | 47,000,000 | |||||||||
Intangible assets | $ 74,000,000 | |||||||||
Percentage of interests acquired | 56.00% | |||||||||
Equity interest in acquiree, percentage | 44.00% | |||||||||
Equity interest in acquiree, fair value | $ 87,000,000 | |||||||||
Long-term growth rate used to determine fair value | 1.50% | |||||||||
Dicount rate used to determine fair value | 7.50% | |||||||||
Working capital | $ 11,000,000 | |||||||||
Property, plant and equipment, net | 11,000,000 | |||||||||
MACL | Other Income, Net | ||||||||||
Business Acquisition [Line Items] | ||||||||||
Equity interest in acquiree, remeasurement gain | $ 70,000,000 | |||||||||
MACL | Customer Relationships | ||||||||||
Business Acquisition [Line Items] | ||||||||||
Intangible assets, useful life | 15 years |
FAIR VALUE MEASUREMENTS (Recogn
FAIR VALUE MEASUREMENTS (Recognized Assets and Liabilities at Fair Value) (Details) - Recurring Basis - USD ($) $ in Millions | Sep. 30, 2020 | Dec. 31, 2019 |
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Trading securities | $ 60 | $ 59 |
Cash surrender value of life insurance policies | 45 | 43 |
Available-for-sale debt securities | 12 | 12 |
Total | 117 | 114 |
Deferred compensation liabilities | 114 | 110 |
Contingent consideration | 7 | |
Total | 145 | |
Redeemable noncontrolling interest | 80 | 76 |
Fixed-to-variable interest rate swaps | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Derivative liability | 28 | |
Quoted Prices in Active Markets for Identical Assets / Liabilities, Level 1 | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Trading securities | 60 | 59 |
Cash surrender value of life insurance policies | 0 | 0 |
Available-for-sale debt securities | 0 | 0 |
Total | 60 | 59 |
Deferred compensation liabilities | 0 | 0 |
Contingent consideration | 0 | |
Total | 0 | |
Redeemable noncontrolling interest | 0 | 0 |
Quoted Prices in Active Markets for Identical Assets / Liabilities, Level 1 | Fixed-to-variable interest rate swaps | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Derivative liability | 0 | |
Significant Other Observable Inputs, Level 2 | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Trading securities | 0 | 0 |
Cash surrender value of life insurance policies | 45 | 43 |
Available-for-sale debt securities | 0 | 0 |
Total | 45 | 43 |
Deferred compensation liabilities | 114 | 110 |
Contingent consideration | 0 | |
Total | 138 | |
Significant Other Observable Inputs, Level 2 | Fixed-to-variable interest rate swaps | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Derivative liability | 28 | |
Significant Unobservable Inputs, Level 3 | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Trading securities | 0 | 0 |
Cash surrender value of life insurance policies | 0 | 0 |
Available-for-sale debt securities | 12 | 12 |
Total | 12 | 12 |
Deferred compensation liabilities | 0 | 0 |
Contingent consideration | 7 | |
Total | 7 | |
Redeemable noncontrolling interest | $ 80 | 76 |
Significant Unobservable Inputs, Level 3 | Fixed-to-variable interest rate swaps | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Derivative liability | $ 0 |
FAIR VALUE MEASUREMENTS (Narrat
FAIR VALUE MEASUREMENTS (Narrative) (Details) - USD ($) $ in Millions | 9 Months Ended | ||
Sep. 30, 2020 | Dec. 31, 2019 | Jul. 01, 2015 | |
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||
Fair value of debt | $ 5,200 | $ 5,100 | |
UMass Joint Venture | |||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||
Ownership percentage by noncontrolling owners | 18.90% | ||
Fair Value, Inputs, Level 3 | Contingent Consideration | |||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||
Total (gains)/losses included in earnings - realized/unrealized | 1 | ||
Fair Value, Inputs, Level 3 | Contingent Consideration | Other Operating (Income) Expense | |||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||
Total (gains)/losses included in earnings - realized/unrealized | $ 1 |
FAIR VALUE MEASUREMENTS (Busine
FAIR VALUE MEASUREMENTS (Business Acquisition) (Details) - ReproSource, Inc. $ in Millions | Sep. 30, 2020USD ($) |
Business Acquisition [Line Items] | |
Maximum Contingent Consideration Payment | $ 10 |
Comparable Company Revenue Volatility | |
Business Acquisition [Line Items] | |
Measurement input | 0.085 |
Discount rate | |
Business Acquisition [Line Items] | |
Measurement input | 0.065 |
FAIR VALUE MEASUREMENTS (Reconc
FAIR VALUE MEASUREMENTS (Reconciliation of Beginning and Ending Balances of Assets and Liabilities Unobservable Inputs) (Details) - Significant Unobservable Inputs, Level 3 - Contingent Consideration $ in Millions | 9 Months Ended |
Sep. 30, 2020USD ($) | |
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | |
Balance, December 31, 2019 | $ 7 |
Settlements | (6) |
Total (gains)/losses included in earnings - realized/unrealized | (1) |
Balance, September 30, 2020 | $ 0 |
GOODWILL AND INTANGIBLE ASSET_2
GOODWILL AND INTANGIBLE ASSETS (Goodwill) (Details) - USD ($) $ in Millions | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020 | Dec. 31, 2019 | |
Goodwill [Roll Forward] | ||
Goodwill, Balance at beginning of period | $ 6,619 | $ 6,563 |
Goodwill acquired during the period | 258 | 43 |
Adjustments to goodwill | 3 | 13 |
Goodwill, Balance at end of period | $ 6,880 | $ 6,619 |
GOODWILL AND INTANGIBLE ASSET_3
GOODWILL AND INTANGIBLE ASSETS (Schedules) (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | |
Finite-Lived and Indefinite-lived Intangible Assets [Line Items] | |||||
Intangible assets, Cost | $ 1,968 | $ 1,968 | $ 1,820 | ||
Intangible assets, Accumulated Amortization | (776) | (776) | (699) | ||
Total intangible assets, Net | 1,192 | 1,192 | 1,121 | ||
Amortization expense | 27 | $ 23 | 77 | $ 72 | |
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract] | |||||
Remainder of 2020 | 27 | 27 | |||
2021 | 101 | 101 | |||
2022 | 98 | 98 | |||
2023 | 96 | 96 | |||
2024 | 93 | 93 | |||
2025 | 91 | 91 | |||
Thereafter | 450 | 450 | |||
Total | 956 | 956 | |||
Intangible Assets Not Subject to Amortization - Tradenames | |||||
Finite-Lived and Indefinite-lived Intangible Assets [Line Items] | |||||
Intangible assets, Cost | 235 | 235 | 235 | ||
Total intangible assets, Net | 235 | 235 | 235 | ||
Intangible Assets Not Subject to Amortization - Other | |||||
Finite-Lived and Indefinite-lived Intangible Assets [Line Items] | |||||
Intangible assets, Cost | 1 | 1 | 1 | ||
Total intangible assets, Net | 1 | $ 1 | 1 | ||
Customer-related intangibles | |||||
Finite-Lived and Indefinite-lived Intangible Assets [Line Items] | |||||
Weighted Average Amortization Period | 17 years | ||||
Intangible assets, Cost | 1,479 | $ 1,479 | 1,367 | ||
Intangible assets, Accumulated Amortization | (617) | (617) | (556) | ||
Total intangible assets, Net | 862 | $ 862 | 811 | ||
Non-compete agreements | |||||
Finite-Lived and Indefinite-lived Intangible Assets [Line Items] | |||||
Weighted Average Amortization Period | 9 years | ||||
Intangible assets, Cost | 3 | $ 3 | 3 | ||
Intangible assets, Accumulated Amortization | (2) | (2) | (2) | ||
Total intangible assets, Net | 1 | $ 1 | 1 | ||
Technology | |||||
Finite-Lived and Indefinite-lived Intangible Assets [Line Items] | |||||
Weighted Average Amortization Period | 15 years | ||||
Intangible assets, Cost | 140 | $ 140 | 104 | ||
Intangible assets, Accumulated Amortization | (63) | (63) | (56) | ||
Total intangible assets, Net | 77 | $ 77 | 48 | ||
Other | |||||
Finite-Lived and Indefinite-lived Intangible Assets [Line Items] | |||||
Weighted Average Amortization Period | 9 years | ||||
Intangible assets, Cost | 110 | $ 110 | 110 | ||
Intangible assets, Accumulated Amortization | (94) | (94) | (85) | ||
Total intangible assets, Net | 16 | $ 16 | 25 | ||
Total Amortizing Intangible Assets | |||||
Finite-Lived and Indefinite-lived Intangible Assets [Line Items] | |||||
Weighted Average Amortization Period | 17 years | ||||
Intangible assets, Cost | 1,732 | $ 1,732 | 1,584 | ||
Intangible assets, Accumulated Amortization | (776) | (776) | (699) | ||
Total intangible assets, Net | $ 956 | $ 956 | $ 885 |
DEBT (Long-Term Debt) (Details)
DEBT (Long-Term Debt) (Details) - USD ($) $ in Millions | Sep. 30, 2020 | May 31, 2020 | Dec. 31, 2019 |
Debt Instrument [Line Items] | |||
Total long-term debt | $ 4,573 | $ 4,770 | |
Debt issuance costs | (29) | (26) | |
Less: Current portion of long-term debt | 555 | 804 | |
Total long-term debt, net of current portion | 4,018 | 3,966 | |
Other | |||
Debt Instrument [Line Items] | |||
Other | $ 32 | 34 | |
Senior Notes | 4.75% Senior Notes due January 2020 | |||
Debt Instrument [Line Items] | |||
Debt instrument, interest rate | 4.75% | ||
Total long-term debt | $ 0 | 500 | |
Senior Notes | 2.50% Senior Notes due March 2020 | |||
Debt Instrument [Line Items] | |||
Debt instrument, interest rate | 2.50% | ||
Total long-term debt | $ 0 | 300 | |
Senior Notes | 4.70% Senior Notes due April 2021 | |||
Debt Instrument [Line Items] | |||
Debt instrument, interest rate | 4.70% | ||
Total long-term debt | $ 551 | 554 | |
Senior Notes | 4.25% Senior Notes due April 2024 | |||
Debt Instrument [Line Items] | |||
Debt instrument, interest rate | 4.25% | ||
Total long-term debt | $ 317 | 308 | |
Senior Notes | 3.50% Senior Notes due March 2025 | |||
Debt Instrument [Line Items] | |||
Debt instrument, interest rate | 3.50% | ||
Total long-term debt | $ 623 | 593 | |
Senior Notes | 3.45% Senior Notes due June 2026 | |||
Debt Instrument [Line Items] | |||
Debt instrument, interest rate | 3.45% | ||
Total long-term debt | $ 513 | 490 | |
Senior Notes | 4.20% Senior Notes due June 2029 | |||
Debt Instrument [Line Items] | |||
Debt instrument, interest rate | 4.20% | ||
Total long-term debt | $ 499 | 499 | |
Senior Notes | 2.95% Senior Notes due June 2030 | |||
Debt Instrument [Line Items] | |||
Debt instrument, interest rate | 2.95% | ||
Total long-term debt | $ 798 | 798 | |
Senior Notes | 2.80% Senior Notes due June 2031 | |||
Debt Instrument [Line Items] | |||
Debt instrument, interest rate | 2.80% | 2.80% | |
Total long-term debt | $ 549 | 0 | |
Senior Notes | 6.95% Senior Notes due July 2037 | |||
Debt Instrument [Line Items] | |||
Debt instrument, interest rate | 6.95% | ||
Total long-term debt | $ 175 | 175 | |
Senior Notes | 5.75% Senior Notes due January 2040 | |||
Debt Instrument [Line Items] | |||
Debt instrument, interest rate | 5.75% | ||
Total long-term debt | $ 245 | 245 | |
Senior Notes | 4.70% Senior Notes due March 2045 | |||
Debt Instrument [Line Items] | |||
Debt instrument, interest rate | 4.70% | ||
Total long-term debt | $ 300 | $ 300 |
DEBT (Retirement of Debt) (Deta
DEBT (Retirement of Debt) (Details) $ in Millions | 9 Months Ended |
Sep. 30, 2020USD ($) | |
Other Nonoperating Income (Expense) | |
Debt Instrument [Line Items] | |
Loss on extinguishment | $ 1 |
Senior Notes | 2.95% Senior Notes due June 2030 | |
Debt Instrument [Line Items] | |
Debt instrument, interest rate | 2.95% |
DEBT (Senior Notes Offering) (D
DEBT (Senior Notes Offering) (Details) - USD ($) | Oct. 23, 2020 | Sep. 30, 2020 | May 31, 2020 | Dec. 31, 2019 |
Debt Instrument [Line Items] | ||||
Discount | $ 11,000,000 | |||
Long-term debt | $ 4,573,000,000 | $ 4,770,000,000 | ||
Senior Notes | 2.80% Senior Notes due June 2031 | ||||
Debt Instrument [Line Items] | ||||
Face amount | $ 550,000,000 | |||
Debt instrument, interest rate | 2.80% | 2.80% | ||
Discount | $ 1,000,000 | |||
Debt issuance costs | $ 5,000,000 | |||
Long-term debt | $ 549,000,000 | 0 | ||
Senior Notes | 4.70% Senior Notes due April 2021 | ||||
Debt Instrument [Line Items] | ||||
Debt instrument, interest rate | 4.70% | |||
Long-term debt | $ 551,000,000 | $ 554,000,000 | ||
Senior Notes | 4.70% Senior Notes due April 2021 | Subsequent Event | Redemption Notice | ||||
Debt Instrument [Line Items] | ||||
Face amount | $ 550,000,000 | |||
Debt instrument, interest rate | 4.70% |
DEBT (Credit Facilities) (Detai
DEBT (Credit Facilities) (Details) - USD ($) | 1 Months Ended | 9 Months Ended | ||||||
Oct. 23, 2020 | Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2021 | Jun. 30, 2021 | Mar. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Debt Instrument [Line Items] | ||||||||
Cash and cash equivalents | $ 1,605,000,000 | $ 1,192,000,000 | ||||||
Remaining borrowing capacity | 1,300,000,000 | |||||||
Proceeds from borrowings | 749,000,000 | $ 1,484,000,000 | ||||||
Credit Facilities | ||||||||
Debt Instrument [Line Items] | ||||||||
Amount outstanding | 0 | |||||||
Secured Receivables Credit Facility | ||||||||
Debt Instrument [Line Items] | ||||||||
Remaining borrowing capacity | 529,000,000 | |||||||
Proceeds from borrowings | 100,000,000 | |||||||
Extinguishment of debt | 100,000,000 | |||||||
Secured Receivables Credit Facility | Subsequent Event | ||||||||
Debt Instrument [Line Items] | ||||||||
Extension period | 1 year | |||||||
Credit facility capacity | $ 600,000,000 | |||||||
Senior Unsecured Revolving Credit Facility | ||||||||
Debt Instrument [Line Items] | ||||||||
Remaining borrowing capacity | 750,000,000 | |||||||
Proceeds from borrowings | 100,000,000 | |||||||
Extinguishment of debt | $ 100,000,000 | |||||||
Senior Unsecured Revolving Credit Facility | Maximum | ||||||||
Debt Instrument [Line Items] | ||||||||
Leverage ratio | 550.00% | |||||||
Senior Unsecured Revolving Credit Facility | Maximum | Scenario, Forecast | ||||||||
Debt Instrument [Line Items] | ||||||||
Leverage ratio | 350.00% | 450.00% | 625.00% | 650.00% |
DEBT (Maturities of Long-Term D
DEBT (Maturities of Long-Term Debt) (Details) - USD ($) $ in Millions | Sep. 30, 2020 | Dec. 31, 2019 |
Debt Instruments [Abstract] | ||
Remainder of 2020 | $ 1 | |
2021 | 553 | |
2022 | 3 | |
2023 | 2 | |
2024 | 302 | |
Thereafter | 3,696 | |
Total maturities of long-term debt | 4,557 | |
Unamortized discount | (11) | |
Debt issuance costs | (29) | $ (26) |
Fair value basis adjustments attributable to hedged debt | 56 | |
Long-term debt | 4,573 | 4,770 |
Current portion of long-term debt | 555 | 804 |
Total long-term debt, net of current portion | $ 4,018 | $ 3,966 |
FINANCIAL INSTRUMENTS (Narrativ
FINANCIAL INSTRUMENTS (Narrative) (Details) - USD ($) | 1 Months Ended | 3 Months Ended | 9 Months Ended | |||
Apr. 30, 2020 | Jun. 30, 2020 | Sep. 30, 2020 | May 31, 2020 | Mar. 31, 2020 | Dec. 31, 2019 | |
Derivative [Line Items] | ||||||
Amounts recognized in income | $ 1,000,000 | |||||
Amortization period | 10 years | |||||
Accumulated other comprehensive loss | $ (42,000,000) | $ (39,000,000) | ||||
Net amount of deferred gains and losses on cash flow hedges that is expected to be reclassified within the next 12 months | 1,000,000 | |||||
Cash Flow Hedging | ||||||
Derivative [Line Items] | ||||||
Accumulated other comprehensive loss | $ 1,000,000 | 4,000,000 | ||||
Forward Starting Interest Rate Swaps | ||||||
Derivative [Line Items] | ||||||
Notional amount | $ 25,000,000 | |||||
Interest Rate Lock Agreements | ||||||
Derivative [Line Items] | ||||||
Notional amount | $ 275,000,000 | |||||
Fixed-to-variable interest rate swaps | ||||||
Derivative [Line Items] | ||||||
Notional amount | $ 1,200,000,000 | |||||
Proceeds from derivative | $ 40,000,000 |
FINANCIAL INSTRUMENTS (Balance
FINANCIAL INSTRUMENTS (Balance Sheets) (Details) - Fair Value Hedging - USD ($) $ in Millions | Sep. 30, 2020 | Dec. 31, 2019 |
Derivative [Line Items] | ||
Deferred (gain) loss on discontinuation of fair value hedge | $ 25 | |
Long-term Debt | ||
Derivative [Line Items] | ||
Carrying Amount of Hedged Long-Term Debt | $ 0 | 1,186 |
Hedge Accounting Basis Adjustment | $ 56 | $ (3) |
FINANCIAL INSTRUMENTS (Income S
FINANCIAL INSTRUMENTS (Income Statement) (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Derivative [Line Items] | ||||
Other income, net | $ 77 | $ 1 | $ 74 | $ 13 |
Other Nonoperating Income (Expense) | ||||
Derivative [Line Items] | ||||
Hedged items (Long-term debt) | 0 | (20) | (68) | (76) |
Other Nonoperating Income (Expense) | Fair Value Hedging | ||||
Derivative [Line Items] | ||||
Derivatives designated as hedging instruments | $ 0 | $ 20 | $ 68 | $ 76 |
STOCKHOLDERS_ EQUITY AND REDE_2
STOCKHOLDERS’ EQUITY AND REDEEMABLE NONCONTROLLING INTEREST (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions | 3 Months Ended | 9 Months Ended | ||||||||
Sep. 30, 2020 | Jun. 30, 2020 | Mar. 31, 2020 | Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Jul. 01, 2015 | |
Schedule of Stockholders' Equity and Redeemable Noncontrolling Interest [Line Items] | ||||||||||
Dividends per common share | $ 0.56 | $ 0.56 | $ 0.56 | $ 0.53 | $ 0.53 | $ 0.53 | $ 0.53 | |||
Share repurchase authorization remaining available | $ 1,200 | $ 1,200 | ||||||||
Purchases of treasury stock, value | $ 50 | $ 75 | $ 150 | |||||||
Reissuance of shares for employee benefit plan | 2.1 | 1.8 | ||||||||
UMass Joint Venture | ||||||||||
Schedule of Stockholders' Equity and Redeemable Noncontrolling Interest [Line Items] | ||||||||||
Ownership percentage by noncontrolling owners | 18.90% | |||||||||
Treasury Stock, at Cost [Member] | ||||||||||
Schedule of Stockholders' Equity and Redeemable Noncontrolling Interest [Line Items] | ||||||||||
Purchases of treasury stock- shares | 0.7 | 1.6 | ||||||||
Purchases of treasury stock, value | $ 50 | $ 75 | $ 150 |
SUPPLEMENTAL CASH FLOW & OTHE_3
SUPPLEMENTAL CASH FLOW & OTHER DATA (Details) - USD ($) $ in Millions | 1 Months Ended | 3 Months Ended | 9 Months Ended | |||||
Oct. 23, 2020 | Aug. 31, 2020 | Apr. 30, 2020 | Sep. 30, 2020 | Jun. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Supplemental Cash Flow Elements [Abstract] | ||||||||
Depreciation expense | $ 62 | $ 59 | $ 186 | $ 175 | ||||
Amortization expense | 27 | 23 | 77 | 72 | ||||
Depreciation and amortization expense | 89 | 82 | 263 | 247 | ||||
Interest expense | (42) | (45) | (126) | (136) | ||||
Interest income | 0 | 1 | 2 | 3 | ||||
Interest expense, net | (42) | (44) | (124) | (133) | ||||
Interest paid | 33 | 58 | 136 | 149 | ||||
Income taxes paid | 148 | 65 | 168 | 148 | ||||
Accounts payable associated with capital expenditures | 55 | 24 | 55 | 24 | ||||
Dividends payable | 76 | 72 | 76 | 72 | ||||
Fair value of assets acquired | 126 | 377 | 61 | |||||
Fair value of liabilities assumed | (9) | 0 | (29) | 0 | ||||
Fair value of net assets acquired | 117 | 348 | 61 | |||||
Merger consideration receivable/payable | 2 | 0 | 2 | (5) | ||||
Cash paid for business acquisitions | 119 | 0 | 350 | 56 | ||||
Less: Cash acquired | 18 | 0 | 21 | 0 | ||||
Business acquisitions, net of cash acquired | 101 | 329 | 56 | |||||
Leases: | ||||||||
Leased assets obtained in exchange for new operating lease liabilities | 40 | 38 | 119 | 116 | ||||
Leased assets obtained in exchange for new finance lease liabilities | 0 | $ 1 | 0 | $ 1 | ||||
CARES Act, amount received from initial tranche | $ 65 | |||||||
CARES Act, amount received from secondary tranche | $ 73 | |||||||
Accounts payable and accrued liabilities, CARES Act proceeds | 138 | 138 | ||||||
CARES Act funds distributed to healthcare providers included in net cash provided by operating activities | $ 138 | |||||||
Other expense (income), net | ||||||||
Subsequent Event [Line Items] | ||||||||
CARES Act proceeds recognized in the statement of operations | $ 65 | |||||||
Reversal of recognition of CARES Act proceeds” | $ 65 | |||||||
Subsequent Event | ||||||||
Subsequent Event [Line Items] | ||||||||
CARES Act, funds decided to be returned | $ 138 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Details) - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 |
Debt Instrument [Line Items] | ||
Self-insurance reserves | $ 134,000,000 | $ 132,000,000 |
Secured Receivables Credit Facility | ||
Debt Instrument [Line Items] | ||
Letters of credit outstanding, amount | 71,000,000 | |
Secured Receivables Credit Facility | Letter of Credit | ||
Debt Instrument [Line Items] | ||
Credit facility capacity | 100,000,000 | |
Revolving Credit Facility | Letter of Credit | ||
Debt Instrument [Line Items] | ||
Credit facility capacity | 150,000,000 | |
Excludes general and professional liability claims | ||
Loss Contingencies [Line Items] | ||
Litigation reserves | $ 1,000,000 | $ 1,000,000 |
BUSINESS SEGMENT INFORMATION (D
BUSINESS SEGMENT INFORMATION (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Segment Reporting Information [Line Items] | ||||
Percentage of net revenues | 100.00% | 100.00% | 100.00% | 100.00% |
Total net revenues | $ 2,786 | $ 1,956 | $ 6,435 | $ 5,800 |
Total operating income | 718 | 313 | 1,176 | 868 |
Non-operating income (expense), net | 35 | (43) | (50) | (120) |
Income from continuing operations before income taxes and equity in earnings of equity method investees | 753 | 270 | 1,126 | 748 |
Income tax expense | (177) | (62) | (269) | (175) |
Equity in earnings of equity method investees, net of taxes | 15 | 18 | 33 | 48 |
Income (loss) from continuing operations | 591 | 226 | 890 | 621 |
Income from discontinued operations, net of taxes | 0 | 0 | 0 | 20 |
Net income | 591 | 226 | 890 | 641 |
Less: Net income attributable to noncontrolling interests | 23 | 11 | 38 | 36 |
Net income attributable to Quest Diagnostics | $ 568 | $ 215 | $ 852 | $ 605 |
DIS business | ||||
Segment Reporting Information [Line Items] | ||||
Percentage of net revenues | 97.00% | 96.00% | 97.00% | 96.00% |
Total net revenues | $ 2,709 | $ 1,877 | $ 6,217 | $ 5,561 |
Total operating income | $ 840 | $ 345 | $ 1,325 | $ 963 |
DIS business | Minimum | ||||
Segment Reporting Information [Line Items] | ||||
Percentage of net revenues | 95.00% | 95.00% | 95.00% | 95.00% |
All other operating segments | ||||
Segment Reporting Information [Line Items] | ||||
Total net revenues | $ 77 | $ 79 | $ 218 | $ 239 |
Total operating income | 16 | 10 | 29 | 31 |
General corporate activities | ||||
Segment Reporting Information [Line Items] | ||||
Total operating income | $ (138) | $ (42) | $ (178) | $ (126) |
RELATED PARTIES (Details)
RELATED PARTIES (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | |
Equity Method Investee | |||||
Related Party Transaction [Line Items] | |||||
Revenues | $ 10 | $ 8 | $ 25 | $ 26 | |
Receivables | 4 | 4 | $ 4 | ||
Accounts payable, related parties | 1 | 1 | 2 | ||
Dividends received | 34 | 27 | |||
Equity Method Investee | Prepaid expenses and other current assets | |||||
Related Party Transaction [Line Items] | |||||
Other accounts receivable, related parties | 2 | 2 | 1 | ||
Equity Method Investee | Selling, general and administrative | |||||
Related Party Transaction [Line Items] | |||||
Income from related party recognized | 4 | 4 | 12 | 12 | |
Joint Venture | |||||
Related Party Transaction [Line Items] | |||||
Revenues | $ 1 | $ 1 | $ 2 | $ 6 | |
Receivables | $ 4 |
REVENUE RECOGNITION AND ALLOW_3
REVENUE RECOGNITION AND ALLOWANCE FOR CREDIT LOSSES (Details) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | |
Segment Reporting Information [Line Items] | |||||
Percentage of net revenues | 100.00% | 100.00% | 100.00% | 100.00% | |
Net accounts receivable | 100.00% | 100.00% | 100.00% | ||
DIS business | |||||
Segment Reporting Information [Line Items] | |||||
Percentage of net revenues | 97.00% | 96.00% | 97.00% | 96.00% | |
Net accounts receivable | 96.00% | 96.00% | 95.00% | ||
DIS business | Healthcare Insurers | |||||
Segment Reporting Information [Line Items] | |||||
Percentage of net revenues | 35.00% | 35.00% | 36.00% | 36.00% | |
Net accounts receivable | 30.00% | 30.00% | 22.00% | ||
DIS business | Healthcare Insurers | Fee-for-service | |||||
Segment Reporting Information [Line Items] | |||||
Percentage of net revenues | 33.00% | 32.00% | 33.00% | 33.00% | |
DIS business | Healthcare Insurers | Capitated | |||||
Segment Reporting Information [Line Items] | |||||
Percentage of net revenues | 2.00% | 3.00% | 3.00% | 3.00% | |
DIS business | Government Payers | |||||
Segment Reporting Information [Line Items] | |||||
Percentage of net revenues | 10.00% | 15.00% | 12.00% | 15.00% | |
Net accounts receivable | 6.00% | 6.00% | 11.00% | ||
DIS business | Client Payers | |||||
Segment Reporting Information [Line Items] | |||||
Percentage of net revenues | 40.00% | 33.00% | 37.00% | 32.00% | |
Net accounts receivable | 48.00% | 48.00% | 42.00% | ||
DIS business | Patients | |||||
Segment Reporting Information [Line Items] | |||||
Percentage of net revenues | 12.00% | 13.00% | 12.00% | 13.00% | |
Net accounts receivable | 12.00% | 12.00% | 20.00% | ||
DIS business | Minimum | |||||
Segment Reporting Information [Line Items] | |||||
Percentage of net revenues | 95.00% | 95.00% | 95.00% | 95.00% | |
All other operating segments | DS Businesses | |||||
Segment Reporting Information [Line Items] | |||||
Percentage of net revenues | 3.00% | 4.00% | 3.00% | 4.00% | |
Net accounts receivable | 4.00% | 4.00% | 5.00% |
TAXES ON INCOME (Details)
TAXES ON INCOME (Details) - USD ($) $ in Millions | Aug. 01, 2020 | Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 |
Income Tax Disclosure [Abstract] | |||||
Effective income tax rate | 23.70% | 22.90% | 23.90% | 23.40% | |
Share-based compensation, excess tax benefit, amount | $ 3 | $ 3 | $ 15 | $ 11 | |
Income tax benefit due to the release of a valuation allowance associated with net operating loss carryforwards | $ 6 | $ 10 | |||
MACL | |||||
Business Acquisition [Line Items] | |||||
Effective tax rate on remeasurement in acquisition | 11.80% |
DISCONTINUED OPERATIONS (Detail
DISCONTINUED OPERATIONS (Details) - NID [Member] $ in Millions | 9 Months Ended |
Sep. 30, 2019USD ($) | |
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |
Gain on settling uncertain tax benefits | $ 20 |
Refund from taxing authorities related to settlement of the uncertain tax benefits | $ 28 |
SUBSEQUENT EVENT (Details)
SUBSEQUENT EVENT (Details) - USD ($) | Oct. 23, 2020 | Oct. 23, 2020 | Apr. 30, 2020 | Sep. 30, 2020 |
Subsequent Event [Line Items] | ||||
CARES Act, amount received from initial tranche | $ 65,000,000 | |||
Secured Receivables Credit Facility | Letter of Credit | ||||
Subsequent Event [Line Items] | ||||
Credit facility capacity | $ 100,000,000 | |||
Senior Notes | 4.70% Senior Notes due April 2021 | ||||
Subsequent Event [Line Items] | ||||
Debt instrument, interest rate | 4.70% | |||
Subsequent Event | ||||
Subsequent Event [Line Items] | ||||
CARES Act, funds decided to be returned | $ 138,000,000 | |||
Subsequent Event | Secured Receivables Credit Facility | ||||
Subsequent Event [Line Items] | ||||
Credit facility capacity | $ 600,000,000 | 600,000,000 | ||
Subsequent Event | Secured Receivables Credit Facility | Highly-rated issuers or LIBOR | Minimum | ||||
Subsequent Event [Line Items] | ||||
Interest rate in excess of LIBOR | 0.825% | |||
Subsequent Event | Secured Receivables Credit Facility | Highly-rated issuers or LIBOR | Maximum | ||||
Subsequent Event [Line Items] | ||||
Interest rate in excess of LIBOR | 0.95% | |||
Subsequent Event | Secured Receivables Credit Facility | Letter of Credit | ||||
Subsequent Event [Line Items] | ||||
Credit facility capacity | $ 100,000,000 | 100,000,000 | ||
Subsequent Event | Secured Receivables Credit Facility | Loan commitment maturing October 2021 | ||||
Subsequent Event [Line Items] | ||||
Credit facility capacity | 250,000,000 | 250,000,000 | ||
Subsequent Event | Secured Receivables Credit Facility | Loan commitment maturing October 2022 | ||||
Subsequent Event [Line Items] | ||||
Credit facility capacity | 250,000,000 | 250,000,000 | ||
Subsequent Event | Senior Notes | 4.70% Senior Notes due April 2021 | Redemption Notice | ||||
Subsequent Event [Line Items] | ||||
Face amount | $ 550,000,000 | $ 550,000,000 | ||
Debt instrument, interest rate | 4.70% | 4.70% |