What changed in this filing

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Item 9A. Controls and Procedures

2023-02-21 compared with 2022-02-28 · 387 added, 416 removed, 1674 unchanged (32% of the section changed)

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Other Information

On February 24, 2022, the Company's Board of Directors increased the Company's share repurchase authorization by $1 billion.

The increased authority is an addition to the $0.7 billion that was available as of December 31, 2021 under the Company's share repurchase program.

During February 2023, the Company announced that its Board of Directors increased the Company's share repurchase authorization by $1 billion.

The increased authority is in addition to the $0.3 billion that was available as of December 31, 2022 under the Company's share repurchase program.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

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Executive Compensation

Information appearing in our Proxy Statement under the captions “2021 Director Compensation Table,” “Compensation Discussion and Analysis ,” “Information Regarding Executive Compensation” and “ Compensation Committee Report” is incorporated by reference herein.

Information appearing in our Proxy Statement under the captions “2022 Director Compensation Table,” “Compensation Discussion and Analysis,” “Information Regarding Executive Compensation” (excluding the information under the subheading "Pay Versus Performance") and “Compensation Committee Report” is incorporated by reference herein.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholders' Matters

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Financial Statements

Report of Independent Registered Public Accounting Fir m ( PCAOB ID 238 )

Report of Independent Registered Public Accounting Firm (PCAOB ID 238 )

Consolidated Balance Sheets

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Notes to Consolidated Financial Statements

Financial Statement Schedule.

Schedule II - Valuation Accounts and Reserves

3.1 Restated Certificate of Incorporation (filed as an Exhibit to the Company's current report on Form 10-Q for the quarter ended September 30, 2018 (Date of Report:

October 24, 2018) and incorporated herein by reference) (Commission File Number 001-12215)

3.2 Amended and Restated By-Laws of the Company (filed as an Exhibit to the Company's current report on Form 8-K (Date of Report:

May 17, 2019) and incorporated herein by reference) (Commission File Number 001-12215)

3.1 Restated Certificate of Incorporation (filed as an Exhibit to the Company's quarterly report on Form 10-Q for the quarter ended September 30, 2022 and incorporated herein by reference) (Commission File Number 001-12215)

3.2 Amended and Restated By-Laws of the Company, as amended November 14, 2022 (filed as an Exhibit to the Company's current report on Form 8-K (Date of Report:

November 14, 2022) and incorporated herein by reference) (Commission File Number 001-12215)

4.1 Form of 6.95% Senior Note due 2037 (filed as an Exhibit to the Company's current report on Form 8-K (Date of Report:

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May 11, 2020) and incorporated herein by reference) (Commission File Number 001-12215)

4.10 Indenture dated as of June 27, 2001, among the Company, the Subsidiary Guarantors, and the Trustee (filed as an Exhibit to the Company's current report on Form 8-K (Date of Report:

4.10 Indenture dated as of June 27, 2001, among the Company, the Subsidiary Guarantors, and The Bank of New York (filed as an Exhibit to the Company's current report on Form 8-K (Date of Report:

June 27, 2001) and incorporated herein by reference) (Commission File Number 001-12215)

4.11 First Supplemental Indenture, dated as of June 27, 2001, among the Company, the Subsidiary Guarantors, and The Bank of New York (filed as an Exhibit to the Company's current report on Form 8-K (Date of Report:

4.11 First Supplemental Indenture, dated as of June 27, 2001, among the Company, the Initial Subsidiary Guarantors, and The Bank of New York (filed as an Exhibit to the Company's current report on Form 8-K (Date of Report:

June 27, 2001) and incorporated herein by reference) (Commission File Number 001-12215)

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April 1, 2002) and incorporated herein by reference) (Commission File Number 001-12215)

4.14 Fourth Supplemental Indenture dated as of March 19, 2003, among Unilab Corporation (f/k/a Quest Diagnostics Newco Incorporated), the Company, The Bank of New York, and the Subsidiary Guarantors (filed as an Exhibit to the Company's quarterly report on Form 10-Q for the quarter ended March 31, 2003 and incorporated herein by reference) (Commission File Number 001-12215)

4.15 Fifth Supplemental Indenture dated as of April 16, 2004, among Unilab Acquisition Corporation (d/b/a FNA Clinics of America), the Company, The Bank of New York, and the Subsidiary Guarantors (filed as an Exhibit to the Company's quarterly report on Form 10-Q for the quarter ended March 31, 2004 and incorporated herein by reference) (Commission File Number 001-12215)

4.14 Fourth Supplemental Indenture dated as of March 19, 2003, among Unilab Corporation (f/k/a Quest Diagnostics Newco Incorporated), the Company, The Bank of New York, and the Additional Subsidiary Guarantors (filed as an Exhibit to the Company's quarterly report on Form 10-Q for the quarter ended March 31, 2003 and incorporated herein by reference) (Commission File Number 001-12215)

4.15 Fifth Supplemental Indenture dated as of April 16, 2004, among Unilab Acquisition Corporation (d/b/a FNA Clinics of America), the Company, The Bank of New York, and the Additional Subsidiary Guarantors (filed as an Exhibit to the Company's quarterly report on Form 10-Q for the quarter ended March 31, 2004 and incorporated herein by reference) (Commission File Number 001-12215)

4.16 Sixth Supplemental Indenture dated as of October 31, 2005, among the Company, The Bank of New York, and the Subsidiary Guarantors (filed as an Exhibit to the Company's current report on Form 8-K (Date of Report:

October 31, 2005) and incorporated herein by reference) (Commission File Number 001-12215)

4.17 Seventh Supplemental Indenture dated as of November 21, 2005, among the Company, The Bank of New York, and the Subsidiary Guarantors (filed as an Exhibit to the Company's current report on Form 8-K (Date of Report:

4.17 Seventh Supplemental Indenture dated as of November 21, 2005, among the Company, The Bank of New York, and the Additional Subsidiary Guarantors (filed as an Exhibit to the Company's current report on Form 8-K (Date of Report:

November 21, 2005) and incorporated herein by reference) (Commission File Number 001-12215)

4.18 Eighth Supplemental Indenture dated as of July 31, 2006, among the Company, The Bank of New York, and the Subsidiary Guarantors (filed as an Exhibit to the Company's current report on Form 8-K (Date of Report:

4.18 Eighth Supplemental Indenture dated as of July 31, 2006, among the Company, The Bank of New York, and the Additional Subsidiary Guarantors (filed as an Exhibit to the Company's current report on Form 8-K (Date of Report:

July 31, 2006) and incorporated herein by reference) (Commission File Number 001-12215)

4.19 Ninth Supplemental Indenture dated as of September 30, 2006, among the Company, The Bank of New York, and the Subsidiary Guarantors (filed as an Exhibit to the Company's current report on Form 8-K (Date of Report:

4.19 Ninth Supplemental Indenture dated as of September 30, 2006, among the Company, The Bank of New York, and the Additional Subsidiary Guarantors (filed as an Exhibit to the Company's current report on Form 8-K (Date of Report:

September 30, 2006) and incorporated herein by reference) (Commission File Number 001-12215)

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June 19, 2007) and incorporated herein by reference) (Commission File Number 001-12215)

4.23 Thirteenth Supplemental Indenture dated as of November 17, 2009, among the Company, The Bank of New York, and the Subsidiary Guarantors (filed as an Exhibit to the Company's current report on Form 8-K (Date of Report:

4.23 Thirteenth Supplemental Indenture dated as of November 17, 2009, among the Company, The Bank of New York Mellon, and the Subsidiary Guarantors (filed as an Exhibit to the Company's current report on Form 8-K (Date of Report:

November 17, 2009) and incorporated herein by reference) (Commission File Number 001-12215)

4.24 Fourteenth Supplemental Indenture dated as of March 24, 2011, among the Company, The Bank of New York, and the Subsidiary Guarantors (filed as an Exhibit to the Company's current report on Form 8-K (Date of Report:

4.24 Fourteenth Supplemental Indenture dated as of March 24, 2011, among the Company, The Bank of New York Mellon, and the Subsidiary Guarantors (filed as an Exhibit to the Company's current report on Form 8-K (Date of Report:

March 21, 2011) and incorporated herein by reference) (Commission File Number 001-12215)

4.25 Fifteenth Supplemental Indenture dated as of November 30, 2011, among the Company, The Bank of New York Mellon Trust Company, N.A., as successor trustee to The Bank of New York, and the Subsidiary Guarantors (filed as an Exhibit to the Company's 2011 annual report on Form 10-K and incorporated herein by reference) (Commission File Number 001-12215)

4.26 Sixteenth Supplemental Indenture dated as of March 17, 2014, between the Company, The Bank of New York Mellon Trust Company, N.A., (filed as an Exhibit to the Company's current report on Form 8-K (Date of Report:

4.25 Fifteenth Supplemental Indenture dated as of November 30, 2011, among the Company, The Bank of New York Mellon, and the Additional Subsidiary Guarantors (filed as an Exhibit to the Company's 2011 annual report on Form 10-K and incorporated herein by reference) (Commission File Number 001-12215)

4.26 Sixteenth Supplemental Indenture dated as of March 17, 2014, between the Company and The Bank of New York Mellon (filed as an Exhibit to the Company's current report on Form 8-K (Date of Report:

March 12, 2014) and incorporated herein by reference) (Commission File Number 001-12215)

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May 11, 2020) and incorporated herein by reference) (Commission File Number 001-12215)

4.32 Description of Securities (filed as an Exhibit to the Company’s 2019 annual report on Form 10-K and incorporated herein by reference) (Commission File Number 001-12215)

4.32* Description of Securities

10.1‡ Amended and Restated Employee Stock Purchase Plan, as amended, effective February 18, 2019 (filed as an Exhibit to the Company's quarterly report on Form 10-Q for the quarter ended March 31, 2019 and incorporated herein by reference) (Commission File Number 001-12215)

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10.3‡ Form of Equity Award Agreement dated as of February ___, 2021 (filed as an Exhibit to the Company’s quarterly report on Form 10-Q for the quarter ended March 31, 2021 and incorporated herein by reference) (Commission File Number 001-12215)

10.4‡ Form of Equity Award Agreement dated as of February ___, 2021 (filed as an Exhibit to the Company’s q uarterly report on Form 10-Q for the quarter ended March 31, 2021 and incorporated herein by reference) (Commission file number 001-12215)

10.4‡ Quest Diagnostics Supplemental Deferred Compensation Plan (Post 2004) amended and restated as of December 1, 2020 (filed as an Exhibit to the Company’s quarterly report on Form 10-Q for the quarter ending September 30, 2021 and incorporated herein by reference) (Commission File Number 001-12215)

10.5‡* Amendment No.

1 to Quest Diagnostics Supplemental Deferred Compensation Plan (Post 2004) (as amended and restated December 1, 2020), dated as of November 29, 2022.

10.6‡ Quest Diagnostics Supplemental Deferred Compensation Plan (Pre-2005) amended and restated December 1, 2020 (filed as an Exhibit to the Company’s 2020 annual report on Form 10-K and incorporated herein by reference) (Commission File Number 001-12215)

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10.9‡ The Quest Diagnostics Incorporated Profit Sharing Plan (Amendment and Restatement, effective as of August 15, 2021) (filed as an Exhibit to the Company’s quarterly report on Form 10-Q for the quarter ending September 30, 2021 and incorporated herein by reference) (Commission File Number 001-12215)

10.10‡* Amendment No.

1 To the Quest Diagnostics Profit Sharing Plan (as amended and restated effective August 15, 2021) dated as of December 5, 2022.

10.11‡ Quest Diagnostics Incorporated Amended and Restated Deferred Compensation Plan For Directors as amended effective February 18, 2020 (filed as an Exhibit to the Company’s 2019 annual report on Form 10-K and incorporated herein by reference) (Commission File Number 001-12215)

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Rusckowski (filed as an Exhibit to the Company’s quarterly report on Form 10-Q for the quarter ended June 30, 2019 and incorporated herein by reference) (Commission File Number 001-12215)

10.20‡* Aircraft Time Sharing Agreement dated as of February 16, 2023 between Quest Diagnostics Incorporated and James E.

21.1* Subsidiaries of Quest Diagnostics Incorporated

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32.2** Section 1350 Certification of Chief Financial Officer

99.1 Fourth Amended and Restated Receivables Sa le Agreement, dated as of October 28, 2015, between Quest Diagnostics Incorporated and the subsidiaries party thereto from time to time , as Sellers, and Quest Diagnostics Receivables Inc., as Buyer (filed as an Exhibit to the Company’s current report on Form 8-K (Date of Report:

99.1 Fourth Amended and Restated Receivables Sale Agreement, dated as of October 28, 2015, between Quest Diagnostics Incorporated and the subsidiaries party thereto from time to time, as Sellers, and Quest Diagnostics Receivables Inc., as Buyer (filed as an Exhibit to the Company’s current report on Form 8-K (Date of Report:

May 4, 2020) and incorporated herein by reference) (Commission File Number 001-12215)

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99.7 Amendment No.

4 to Sixth Amended and Restated Credit and Security Agreement, dated as of October 22, 2020 (filed a s an Exhibit to the Compan y's 2020 annual report of Form 10-K and incorporated herei n by reference) (Commission File Num ber 001-12215)

4 to Sixth Amended and Restated Credit and Security Agreement, dated as of October 22, 2020 (filed as an Exhibit to the Company's 2020 annual report of Form 10-K and incorporated herein by reference) (Commission File Number 001-12215)

99.8 Amendment No.

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99.9 Amendment No.

6 to Sixth Amended and Restated Credit and Security Agreement, dated as of October 21, 2021 (filed as an Exhibit to the Company's 2021 annual report on Form 10-K and incorporated herein by reference) (Commission File Number 001-12215)

99.10* Amendment No.

7 to Sixth Amended and Restated Credit and Security Agreement, dated as of October 20, 2022

99.10* Amendment and Restatement Agreement, dated as of November 23, 2021, relating to the Second Amended and Restated Credit Agreement, dated as of March 22, 2018, among Quest Diagnostics Incorporated, as Borrower, the lenders party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, and other agents party thereto and which includes, as Exhibit A, the Third Restated Credit Agreement

99.11 Amendment and Restatement Agreement, dated as of November 23, 2021, relating to the Second Amended and Restated Credit Agreement, dated as of March 22, 2018, among Quest Diagnostics Incorporated, as Borrower, the lenders party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, and other agents party thereto and which includes, as Exhibit A, the Third Restated Credit Agreement (filed as an Exhibit to the Company's 2021 annual report on Form 10-k and incorporated herein by reference) (Commission File Number 001-12215 )

99.12* Group Joinder Agreement, among Reprosource Fertility Diagnostics, Inc., Blueprint Genetics, Inc., and Mid America Clinical Laboratories, LLC, dated as of August 13, 2021, related to the Fourth Amended and Restated Receivables Sales Agreement, dated October 28, 2015, among Quest Diagnostics Incorporated and certain of its subsidiaries

101.INS Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

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QUEST DIAGNOSTICS INCORPORATED

/s/Stephen H.

Chairman of the Board, Chief Executive Officer and President

Chief Executive Officer and President

Each individual whose signature appears below constitutes and appoints Michael E.

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Signature Capacity

/s/Stephen H.

Chairman of the Board, Chief Executive Officer and President

Chief Executive Officer and President;

(Principal Executive Officer)

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/s/Michael J.

Vice President, Corporate Controller and Chief Accounting Officer

Senior Vice President, Corporate Controller and Chief Accounting Officer

(Principal Accounting Officer)

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/s/Timothy M.

/s/Stephen H.

QUEST DIAGNOSTICS INCORPORATED AND SUBSIDIARIES

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We use our extensive database of clinical lab results to derive diagnostic insights that reveal new avenues to identify and treat disease, inspire healthy behaviors and improve healthcare management.

Our diagnostic information services business ("DIS") provides 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.

We provide services to a broad range of customers, including patients, clinicians, hospitals, independent delivery networks ("IDNs"), health plans, employers, accountable care organizations ("ACOs"), and direct contract entities ("DCEs").

Our diagnostic information services business ("DIS") provides information and insights based on an industry-leading menu of routine, non-routine and advanced clinical testing and anatomic pathology testing, and other diagnostic information services.

We provide services to a broad range of customers, including patients, clinicians, hospitals, independent delivery networks ("IDNs"), health plans, employers, consumers, and accountable care organizations ("ACOs").

We offer the broadest access in the United States to diagnostic information services through our nationwide network of laboratories, patient service centers and phlebotomists in physician offices and our connectivity resources, including call centers and mobile paramedics, nurses and other health and wellness professionals.

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DS revenues $274 $294 $298

Income from continuing operations attributable to Quest Diagnostics $1,995 $1,431 $838

Diluted earnings per share from continuing operations $15.55 $10.47 $6.13

Operating income $1,428 $2,381 $1,971

Net income attributable to Quest Diagnostics $946 $1,995 $1,431

Diluted earnings per share $7.97 $15.55 $10.47

Net cash provided by operating activities $1,718 $2,233 $2,005

Capital expenditures $404 $403 $418

(a) Excludes COVID-19 testing.

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Impact of COVID-19

As a novel strain of coronavirus (COVID-19) continues to impact the economy of the United States and other countries around the world, we are committed to being a part of the coordinated public and private sector response to this unprecedented challenge.

We have made substantial investments to expand and maintain the amount of COVID-19 testing available to the country.

We have been effectively managing challenges in the global supply chain;

and, at this point, we have sufficient supplies to conduct our business.

During 2020 and 2021, our testing volume and revenues were materially impacted by the COVID-19 pandemic.

Beginning in March 2020, we experienced a material decline in base testing volume (which excludes COVID-19 testing) due to the COVID-19 pandemic.

The decrease in base testing volume was driven by federal, state and local governmental policies and initiatives designed to reduce the transmission of COVID-19, 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), increased unemployment and loss of healthcare insurance and the adoption of work-from-home policies, all of which have had, and may continue to have, an impact on our operating results, financial position and cash flows.

During May and June 2020, we began to experience a recovery in base testing volume, which continued in 2021.

The recovery has been driven by people returning to the healthcare system as well as contributions from new Professional Laboratory Services arrangements.

For the first, second, third and fourth quarters of 2021, our base testing volume, excluding volume associated with recent acquisitions, was 2.8% below, 1.9% above, 3.8% above and 4.8% above our historical first, second, third and fourth quarter of 2019 levels, respectively.

Recent agreements associated with our Professional Laboratory Services offerings contributed 5.2%, 5.8%, 5.2% and 5.6% volume growth for the first, second, third and fourth quarters of 2021 compared to 2019, respectively.

Unless there is a change in the severity of the COVID-19 pandemic, we believe that there will be a continued return to healthcare with, in some cases, patients pursuing care delayed during the COVID-19 pandemic.

Beginning in the second quarter of 2020, we experienced growing demand for COVID-19 testing services and we expanded our capacity throughout 2020 in order to satisfy the demand, which has had a significant impact on our testing volumes.

During 2021, demand for our COVID-19 testing has generally fluctuated in line with changes in the prevalence of the virus and related variants.

We expect demand to trend down in 2022 and beyond.

Additionally, our revenue per requisition has been positively impacted by COVID-19 molecular testing.

In April 2020 the Centers for Medicare and Medicaid Services ("CMS") announced that it would increase the reimbursement for certain COVID-19 molecular tests making use of high-throughput technologies developed by the private sector that allow for increased testing capacity, faster results, and more effective means of combating the spread of the virus to $100 per test, effective April 14, 2020.

Beginning January 1, 2021, Medicare changed the base reimbursement rate for COVID-19 diagnostic tests run on high-throughput technologies to $75 per test with an additional payment of $25 per test if the laboratory (1) completes the test in two calendar days or less and (2) completes the majority of its COVID-19 tests that use high throughput technology in two calendar days or less for all of its patients in the previous month.

Certain healthcare insurers have now moved to a similar reimbursement model for COVID-19 molecular tests.

We believe the COVID-19 pandemic’s impact on our consolidated results of operations, financial position and cash flows will be primarily driven by:

the severity and duration of the COVID-19 pandemic (including any variants);

healthcare insurer, government, and client payer reimbursement rates for COVID-19 molecular testing;

the COVID-19 pandemic’s impact on the U.S.

healthcare system and the U.S.

the timing, scope and effectiveness of federal, state and local governmental responses to the COVID-19 pandemic;

and effective and comprehensive COVID-19 vaccination across the U.S.

We may also be impacted by changes in the severity of the COVID-19 pandemic at different times in the various cities and regions where we operate and offer services, and by challenges faced in implementing nationwide COVID-19 vaccinations, including the degree to which the public is vaccinated and the effectiveness of vaccines at preventing infection or illness in connection with new or existing variants of COVID-19.

Even as the COVID-19 pandemic moderates over time and the business and social distancing restrictions ease, we may continue to experience similar effects to our businesses, consolidated results of operations, financial position and cash flows arising from long-term changes in behavior by consumers or other healthcare system participants and resulting from a recessionary economic environment that may persist.

In the longer term, given the many challenges that hospitals will face, we may have more opportunities to partner with hospitals to help achieve their laboratory strategies, and the COVID-19 pandemic may also be a further catalyst for consolidation in the laboratory testing industry.

Medicare Sequestration

Reimbursement for Medicare services is subject to annual reduction (sequestration) of 2% under the Budget Control Act of 2011.

Beginning in May 2020, there has been a suspension of sequestration, which has resulted in a small benefit to us in the form of higher reimbursement rates for diagnostic testing services performed on behalf of Medicare beneficiaries.

During December 2021, the suspension of Medicare sequestration was further extended through March 31, 2022 and it was reduced to 1% from April 1, 2022 to June 30, 2022, with the full annual 2% reduction in rates resuming thereafter.

Since 2020, a novel strain of coronavirus has impacted the economy of the United States and other countries around the world.

As a result of the pandemic, we have made substantial investments to expand and maintain the amount of COVID-19 testing available to the country.

We have been effectively managing challenges in the global supply chain and, at this point, we have sufficient supplies to conduct our business.

As the impact of COVID-19 moderates, we remain active in the continued response to COVID-19.

Due to the pandemic, since 2020 we have experienced significant volatility, including periods of material decline compared to prior year periods in testing volume in our base business (which excludes COVID-19 testing) and periods of significant demand for COVID-19 testing services.

Additionally, compared to pre-2020 historical levels, our revenue per requisition has been positively impacted by COVID-19 molecular testing.

Two Point Strategy

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We continued to execute our strategy and leverage our operating principles during 2022 as follows:

Acquisition of the Outreach Services Business of Mercy Health

On June 1, 2021, we completed the acquisition of the outreach laboratory services business of Mercy Health, which serves providers and patients in Arkansas, Kansas, Missouri and Oklahoma, in an all-cash transaction for $225 million.

The acquired business is included in our DIS business.

For further details, see Note 5 to the audited consolidated financial statements.

Acquisition of Assets of Labtech Diagnostics, LLC ("Labtech")

On December 13, 2021, we completed the acquisition of assets of Labtech, an independent clinical diagnostics laboratory provider serving physicians and patients primarily in South Carolina, North Carolina, Florida and Georgia, in an all cash transaction for $85 million, which consisted of cash consideration of $80 million and contingent consideration initially estimated at $5 million.

The contingent consideration arrangement is dependent upon the achievement of certain testing volume benchmarks.

Acquisition of Pack Health, LLC ("Pack Health")

On February 1, 2022, we completed the acquisition of Pack Health, a patient engagement company that helps individuals adopt healthier behaviors to improve outcomes, in an all cash transaction for $123 million, net of $4 million cash acquired, which consisted of cash consideration of $105 million and contingent consideration initially estimated at $18 million.

The acquired business is included in our DIS business.

For further details, see Note 5 to the audited consolidated financial statements.

Investments to Accelerate Growth

In addition to our normal expenditures to operate the business, we have been making additional investments to accelerate growth, particularly in the advanced diagnostics and consumer-initiated testing areas which we believe represent long term growth opportunities for us.

During 2021, such investments totaled approximately $70 million and, during 2022, such investments are expected to approximate $160 million.

Sale of Ownership Interest in Q 2 Solutions ® ("Q 2 Solutions") to IQVIA Holdings, Inc.

On April 1, 2021, we sold our 40% ownership interest in Q 2 Solutions, our clinical trials central laboratory services joint venture, to IQVIA, our joint venture partner, for $760 million in an all-cash transaction.

The sales price is subject to customary post-closing adjustments.

Prior to the transaction, we accounted for our minority interest as an equity method investment.

As a result of the transaction, during the year ended December 31, 2021, we recorded a $314 million pre-tax gain in other income, net in the consolidated statement of operations based on the difference between the net sales proceeds and the carrying value of the investment, including $20 million of cumulative translation losses which were previously recorded in accumulated other comprehensive loss.

During the year ended December 31, 2021, we also recorded $55 million of income tax expense related to the gain, consisting of $127 million of current income tax expense, partially offset by $72 million of deferred income tax benefit.

Under a multi-year agreement, we will remain the strategic preferred laboratory provider for Q 2 Solutions' clients, providing a range of lab testing capabilities to augment Q 2 Solutions' core offerings and extend its industry leading suite of services.

For further details, see Note 6 to the audited consolidated financial statements.

Accelerated Share Repurchase Agreements ("ASRs")

In April 2021, we entered into ASRs with several financial institutions to repurchase our common stock as part of our share repurchase program.

Each of the ASRs was structured to permit us to purchase shares immediately with the final purchase price of those shares determined by the volume-weighted average price of our common stock during the repurchase period, less a fixed discount.

During the year ended December 31, 2021, we paid $1.5 billion to the financial institutions and received 10.7 million shares of our common stock under the ASRs.

For further details regarding the ASRs and our repurchases of our common stock, see Note 16 to the audited consolidated financial statements.

For further details, see Notes 6 and 8 to the audited consolidated financial statements.

Invigorate Program

We are engaged in a multi-year program called Invigorate, which is designed to reduce our cost structure and improve our performance.

We currently aim annually to achieve savings and productivity improvements of approximately 3% of our costs and in 2021 we exceeded that goal.

We currently aim annually to achieve savings and productivity improvements of approximately 3% of our costs, which we believe will help offset pressures from the current inflationary environment.

Invigorate has consisted of several flagship programs, with structured plans in each, to drive savings and improve performance across the customer value chain.

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organization excellence;

technology excellence;

information technology excellence;

procurement excellence;

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further digitizing our business;

standardization and automation;

and optimization initiatives in our lab network and patient service center network.

standardization;

optimization and selecting and retaining talent.

We believe that our efforts to standardize our information technology systems, equipment and data also foster our efforts to strengthen our foundation for growth and support the value creation initiatives of our clinical franchises by enhancing our operational flexibility, empowering and enhancing the customer experience, facilitating the delivery of actionable insights and bolstering our large data platform.

For the year ended December 31, 2021, we incurred $56 million of pre-tax charges under our Invigorate program primarily consisting of systems conversion and integration costs, all of which result in cash expenditures.

Additional restructuring charges may be incurred in future periods as we identify additional opportunities to achieve further productivity improvements and savings.

For the year ended December 31, 2022, we incurred $88 million of pre-tax charges in connection with our Invigorate program and other restructuring activities, including $55 million of employee separation costs, with the remainder primarily consisting of systems conversion and integration costs.

Most of the charges will result in cash expenditures.

Additional restructuring charges may be incurred in future periods, including as we identify additional opportunities to achieve further savings and productivity improvements.

For further details of the Invigorate program and associated costs, see Note 5 to the audited consolidated financial statements.

Outlook and Trends

The healthcare system in the United States is evolving.

significant change is taking place in the system.

We expect that the evolution of the healthcare industry, including impacts of the COVID-19 pandemic, such as increased adoption of telemedicine, will continue, and that industry change is likely to be extensive.

There are a number of key trends that are having, and that we expect will continue to have, a significant impact on the diagnostic information services business in the United States and on our business.

We believe that several of the trends, including consolidation, price transparency and consumerization, are favorable to our business.

Healthcare market participants, including governments, are focusing on controlling costs, including potentially by reducing reimbursement for healthcare services, changing reimbursement for healthcare services (including but not limited to a shift from fee-for-service to capitation), changing medical coverage policies ( e.g ., healthcare benefits design), denying coverage for services, requiring preauthorization of laboratory testing, requiring co-pays, introducing laboratory spend management utilities and payment and patient care innovations such as ACOs, DCEs and patient-centered medical homes.

We expect that the evolution of the healthcare industry, including impacts of the COVID-19 pandemic, which include the increased adoption of telemedicine, will continue, and that industry change is likely to be extensive.

There are a number of key trends that we expect will continue to have a significant impact on the diagnostic information services business in the United States and on our business.

We believe that several of the trends, including increased focus on value, consolidation, price transparency and consumerization, are favorable to our business.

In recent years, there has been an ongoing trend of rising patient responsibility (including attributable to payer denials) which has resulted in an increase in our reserves for patient price concessions.

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Historically, the Medicare Clinical Laboratory Fee Schedule ("CLFS") and the Medicare Physician Fee Schedule established under Part B of the Medicare program have been subject to change, including each year.

Pursuant to the Protecting Access to Medicare Act ("PAMA"), CMS promulgated revised reimbursement schedules for 2018-2020 for clinical laboratory testing services provided under Medicare.

Under the revised Medicare Clinical Laboratory Fee Schedule (in 2021 CLFS revenues comprised 7% of our consolidated net revenues), reimbursement rates for clinical laboratory testing were reduced from 2018 - 2020.

Pursuant to the Protecting Access to Medicare Act ("PAMA"), reimbursement rates for clinical laboratory testing were reduced from 2018 - 2020.

PAMA calls for further revision of the CLFS for years after 2020, based on future surveys of market rates;

reimbursement reduction from 2024 - 2026 is capped by PAMA at 15% annually.

PAMA's next data collection and reporting period have been delayed, most recently by federal legislation adopted in 2021, which further delayed the reimbursement rate reductions and reporting requirements until 2023.

Overall, we expect total reimbursement rate pressure (i.e., unit price changes) for 2022 from all payers on a combined basis to be less than 1%.

PAMA's next data collection and reporting period have been delayed, most recently by federal legislation adopted in December 2022, which further delayed the reimbursement rate reductions and reporting requirements until January 1, 2024.

In addition, the trend of consolidating, converging and diversifying among our customers, payers and other healthcare industry participants has continued and may result in increased price transparency and bargaining power, and may encourage internalization of clinical testing.

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For a discussion of the impact of the COVID-19 pandemic on our business, see " Impact of COVID-19" above.

We believe that inflation generally has not had a material adverse effect on our results of operations or financial condition.

Given the current environment, we expect wage inflation (excluding the impact of changes in performance-based compensation) of 3% to 4% during 2022.

For additional information on our key trends, which present both opportunities and risks, see " Item 1.

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Total DIS 98% 97%

*Patients revenue includes coinsurance and deductible responsibilities but volume associated with such revenue is reported under Healthcare insurers.

*Patients revenue includes coinsurance and deductible responsibilities;

but volume associated with such revenue is reported under Healthcare insurers.

The following table shows net accounts receivable as of December 31, 2022 applicable to each customer group:

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Under capitated payment arrangements, the healthcare insurers typically reimburse us in the same month services are performed, essentially giving rise to no outstanding accounts receivable at the end of a reporting period.

If any capitated payments are not received on a timely basis, we determine the cause and make a separate determination as to whether or not the collection of the amount from the healthcare insurer is at risk and, if so, would reserve accordingly.

If any capitated

payments are not received on a timely basis, we determine the cause and make a separate determination as to whether or not the collection of the amount from the healthcare insurer is at risk and, if so, would reserve accordingly.

Government payers

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Client payers

Client payers include physicians, hospitals, ACOs, DCEs, IDNs, employers, other commercial laboratories and institutions for which services are performed on a wholesale basis, and are billed based on a negotiated fee schedule.

Client payers include physicians, hospitals, ACOs, IDNs, employers, other commercial laboratories and institutions for which services are performed on a wholesale basis, and are billed based on a negotiated fee schedule.

Credit risk and ability to pay are more of a consideration for these payers than healthcare insurers and government payers.

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We perform our annual impairment test during the fourth quarter of the fiscal year.

For the year ended December 31, 2021, we performed the qualitative assessment for our DIS and risk assessment services reporting units.

Based on the totality of the information available for each reporting unit, we concluded that it was more likely than not that the estimated fair values were greater than the carrying values of the reporting units, and as such, no further analysis was required.

As a sensitivity, in conjunction with the most recent quantitative test performed for the year ended December 31, 2020, if the estimated fair values of each of our reporting units decreased by 10%, we would have concluded that our goodwill was not impaired.

For the year ended December 31, 2022, we performed a qualitative assessment for our DIS reporting unit.

Based on the totality of the information available for the DIS reporting unit, we concluded that it was more likely than not that the estimated fair value was greater than the carrying value of the reporting unit, and as such, no further analysis was required.

As a sensitivity, in conjunction with the most recent quantitative test performed for the year ended December 31, 2020, if the estimated fair value of the DIS reporting unit decreased by 10%, we would have still concluded that the goodwill for our DIS reporting unit was not impaired.

For the year ended December 31, 2022, we updated the fair value calculation for our risk assessment reporting unit, performed a quantitative impairment test and concluded that goodwill for the reporting unit was not impaired.

As a sensitivity, if the estimated fair value of the risk assessment reporting unit decreased by 10%, we would have still concluded that the goodwill for the reporting unit was not impaired.

Results of Operations

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Amortization of intangible assets 120 103 17 15.6

Other operating (income) expense, net (2) 9 (11) NM

Other operating expense (income), net 11 (2) 13 NM

Total operating costs and expenses, net $ 8,455 $ 8,407 $ 48 0.6 %

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$ (138) $ (151) $ 13 (8.6) %

Other income, net 369 76 293 NM

Total non-operating income (expense), net $ 218 $ (87) $ 305 NM

Other (expense) income, net (55) 369 (424) NM

Total non-operating (expense) income, net $ (193) $ 218 $ (411) NM

Income tax expense $ (264) $ (597) $ 333 (55.8) %

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Amortization of intangible assets 1.1 1.0

Other operating (income) expense, net (0.1) 0.1

Other operating expense (income), net 0.1 (0.1)

Total operating costs and expenses, net

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Operating Results

Results for the year ended December 31, 2021 were affected by certain items that on a net basis increased diluted earnings per share by $1.31 as follows:

• a pre-tax gain recorded in other income, net of $314 million, or $2.02 per diluted share, on the sale of our 40% ownership interest in Q 2 Solutions;

• a net pre-tax gain of $23 million (a $39 million gain recorded in other income, net, partially offset by $16 million of costs recorded in selling, general and administrative expenses), or $0.16 per diluted share, primarily representing changes in the carrying value of our strategic investments, and a gain recognized by an equity method investee to adjust certain of its investments to fair value, partially offset by costs associated with donations, contributions and other financial support through Quest for Health Equity (our initiative with the Quest Diagnostics Foundation to reduce health disparities in underserved communities), and a non-cash impairment charge to the carrying value of an equity method investment;

• excess tax benefits associated with stock-based compensation arrangements of $19 million, or $0.14 per diluted share, recorded in income tax expense;

partially offset by

• pre-tax amortization expense of $105 million ($103 million in amortization of intangible assets and $2 million in equity in earnings of equity method investees, net of taxes) or $0.62 per diluted share;

• pre-tax charges of $61 million ($30 million in cost of services and $31 million in selling, general and administrative expenses), or $0.36 per diluted share, primarily associated with systems conversions and integration incurred in connection with further restructuring and integrating our business;

• pre-tax charges of $4 million in cost of services, or $0.03 per diluted share, representing the impact of certain items resulting from the COVID-19 pandemic, including incremental costs incurred to protect the health and safety of our employees and customers.

For the year ended December 31, 2021, diluted earnings per share benefited from the impact of the ASRs on our weighted average shares outstanding as compared to the prior year.

Results for the year ended December 31, 2022 were affected by certain items that on a net basis decreased diluted earnings per share by $1.98 as follows:

• pre-tax amortization expense of $114 million ($103 million in amortization of intangible assets and $11 million in equity in earnings of equity method investees, net of taxes) or $0.63 per diluted share;

• net pre-tax charges of $72 million ($57 million of charges in cost of services, $10 million of charges in selling, general and administrative expenses and $9 million of charges in other operating (income) expense, net, partially offset by a $4 million gain in equity in earnings of equity method investees, net of taxes), or $0.39 per diluted share, representing the impact of certain items resulting from the COVID-19 pandemic, principally including expense associated with payments to eligible employees to help offset expenses they incurred as a result of COVID-19, incremental costs incurred primarily to protect the health and safety of our employees and customers, and certain asset impairment charges;

• pre-tax charges of $58 million ($27 million in cost of services and $31 million in selling, general and administrative expenses), or $0.32 per diluted share, primarily associated with systems conversions and integration incurred in connection with further restructuring and integrating our business;

• pre-tax amortization expense of $120 million recorded in amortization of intangible assets or $0.74 per diluted share;

• pre-tax charges of $93 million recorded in selling, general and administrative expenses, or $0.59 per diluted share, representing costs associated with donations, contributions and other financial support through Quest for Health Equity (our initiative with the Quest Diagnostics Foundation to reduce health disparities in underserved communities);

• pre-tax charges of $88 million ($32 million recorded in cost of services and $56 million recorded in selling, general and administrative expenses), or $0.56 per diluted share, primarily associated with workforce reductions, systems conversions and integration incurred in connection with further restructuring and integrating our business;

• pre-tax charges of $42 million ($30 million recorded in other (expense) income, net, and $12 million recorded in equity in earnings of equity method investees), or $0.26 per diluted share, representing net losses associated with changes in the carrying value of our strategic investments ;

• net pre-tax charges of $13 million ($2 million recorded in cost of services and $11 million recorded in other operating expense (income), net), or $0.09 per diluted share, primarily representing a $14 million impairment charge on certain property, plant and equipment and a $5 million loss associated with the increase in the fair value of the contingent consideration accrual associated with previous acquisitions, partially offset by a $10 million gain from a payroll tax credit under the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") associated with the retention of employees;

partially offset by

• a pre-tax gain of $70 million, or $0.46 per diluted share, recognized in other income, net, based on the difference between the fair value and the carrying value of an equity interest;

• an income tax benefit of $18 million, recorded in income tax expense, or $0.14 per diluted share, due to a cumulative adjustment to state deferred tax liabilities related to depreciation expense;

• excess tax benefits associated with stock-based compensation arrangements of $14 million, or $0.12 per diluted share, recorded in income tax expense.

• a net pre-tax gain of $2 million (a $14 million gain in equity in earnings of equity method investees, net of taxes, partially offset by a $10 million loss in other income, net, and $2 million of charges in selling, general and administrative expenses) primarily due to a gain recognized by an equity method investee to adjust certain of its investments to fair value, a loss on retirement of debt, and, to a lesser extent, costs associated with Quest for Health Equity.

Net revenues for the year ended December 31, 2021 increased by 14.3% compared to the prior year.

DIS revenues for the year ended December 31, 2021 increased by 14.8% compared to the prior year.

For the year ended December 31, 2022, diluted earnings per share benefited from the impact of share repurchases, including under accelerated share repurchase agreements ("ASRs") entered into in April 2021 to repurchase $1.5 billion of our common stock, on our weighted average shares outstanding as compared to the prior year.

Results for the year ended December 31, 2021 were affected by certain items that on a net basis increased diluted earnings per share by $1.31 as follows:

• a pre-tax gain recorded in other (expense) income, net of $314 million, or $2.02 per diluted share, on the sale of our 40% ownership interest in Q 2 Solutions ® ("Q 2 Solutions"), our clinical trials central laboratory services joint venture, to IQVIA Holdings, Inc.

("IQVIA"), our joint venture partner (see Note 7 to the audited consolidated financial statements);

• a net pre-tax gain of $39 million recorded in other (expense) income, net, or $0.24 per diluted share, primarily due to gains associated with changes in the carrying value of our strategic investments, partially offset by a non-cash impairment charge to the carrying value of an equity method investment;

• excess tax benefits associated with stock-based compensation arrangements of $19 million, or $0.14 per diluted share, recorded in income tax expense;

partially offset by

• pre-tax amortization expense of $105 million ($103 million recorded in amortization of intangible assets and $2 million recorded in equity in earnings of equity method investees, net of taxes) or $0.62 per diluted share;

• pre-tax charges of $61 million ($30 million recorded in cost of services and $31 million recorded in selling, general and administrative expenses), or $0.36 per diluted share, primarily associated with systems conversions and integration incurred in connection with further restructuring and integrating our business;

• pre-tax charges of $16 million recorded in selling, general and administrative expenses, or $0.08 per diluted share, primarily due to costs associated with donations, contributions and other financial support through Quest for Health Equity;

• pre-tax charges of $4 million recorded in cost of services, or $0.03 per diluted share, representing the impact of certain items resulting from the COVID-19 pandemic, including incremental costs incurred to protect the health and safety of our employees and customers.

Net revenues for the year ended December 31, 2022 decreased by 8.4% compared to the prior year.

DIS revenues for the year ended December 31, 2022 decreased by 8.4% compared to the prior year.

For the year ended December 31, 2022:

• Organic revenue and acquisitions contributed approximately 13.0% and 1.8%, respectively, to DIS revenue growth compared to the prior year.

Organic revenue growth was driven by growth in the base business and, to a lesser extent, demand for COVID-19 molecular testing.

• Revenues in the base business (including the impact of recent acquisitions) increased by 20.4% compared to the prior year, which was negatively impacted as a result of the COVID-19 pandemic.

Compared to historical levels in 2019, revenues in the base business, excluding revenue associated with recent acquisitions, increased by 0.4%.

Recent agreements associated with our Professional Laboratory Services offerings contributed 2.3% revenue growth compared to 2019.

• DIS volume increased by 16.5% with organic volume and acquisitions contributing approximately 13.6% and 2.9%, respectively.

Organic volume growth was driven by growth in the base business.

• Testing volume in the base business (including the impact of recent acquisitions) continued to recover and was up 19.7% compared to the prior year, which was negatively impacted as a result of the COVID-19 pandemic.

Compared to historical levels in 2019, testing volume in the base business, excluding volume associated with recent acquisitions, increased by 2.0%.

Recent agreements associated with our Professional Laboratory Services offerings contributed 5.5% volume growth compared to 2019.

• Revenue per requisition decreased by 1.6% compared to the prior year primarily due to growth in our Professional Laboratory Services engagements, which carry a lower revenue per requisition than the average for the remainder of the DIS business, and pricing pressure of approximately 1.1%, partially offset by favorable test mix.

• The decrease in revenue compared to the prior year was driven by a decrease in COVID-19 testing, partially offset by growth in the base business and the impact of recent acquisitions.

For the year ended December 31, 2022, recent acquisitions contributed approximately 0.8% to DIS revenues.

• DIS volume decreased by 4.5% compared to the prior year driven by a decrease in COVID-19 testing, partially offset by growth in the base business and the impact of recent acquisitions, which contributed approximately 0.6% to DIS volume.

• Revenue per requisition decreased by 4.5% compared to the prior year driven in large part by the decrease in COVID-19 molecular testing and unit price pressure of approximately 0.5%, partially offset by favorable mix.

• Revenues in the base business (including the impact of recent acquisitions) increased by 5.6% compared to the prior year.

• Testing volume in the base business (including the impact of recent acquisitions) was up 2.2% compared to the prior year.

• Revenue per requisition in the base business increased by 3.0% compared to the prior year primarily due to favorable test and payer mix.

DS revenues for the year ended December 31, 2022 decreased by 7.0% compared to the prior year primarily due to lower revenues associated with our risk assessment services offered to the life insurance industry.

Cost of Services

Cost of services consists principally of costs for obtaining, transporting and testing specimens as well as facility costs used for the delivery of our services.

Cost of services increased by $775 million for the year ended December 31, 2021 compared to the prior year.

The increase was primarily driven by higher variable expenses related to increased testing volumes, higher compensation and benefits costs (primarily related to wage increases), and, to a lesser extent, additional operating costs associated with our acquisitions.

Cost of services decreased by $129 million for the year ended December 31, 2022 compared to the prior year.

The decrease was primarily driven by lower supplies and collection expenses associated with reduced COVID-19 testing volumes, partially offset by higher compensation and benefits costs (primarily related to wage increases) and additional costs associated with our acquisitions.

Selling, General and Administrative Expenses ("SG&A")

SG&A consists principally of the costs associated with our sales and marketing efforts, billing operations, credit loss expense and general management and administrative support, as well as administrative facility costs.

SG&A increased by $177 million for the year ended December 31, 2021, compared to the prior year, primarily driven by higher variable expenses to support our increase in testing volumes, investments in our strategic growth initiatives and higher compensation and benefit costs (including headcount and wage increases).

SG&A increased by $147 million for the year ended December 31, 2022, compared to the prior year, primarily driven by additional costs associated with investments in our strategic growth initiatives, costs associated with donations, contributions and other financial support through Quest for Health Equity, and higher compensation and benefits costs (including headcount and wage increases), partially offset by $42 million of lower costs associated with changes in the value of our deferred compensation obligations.

The changes in the value of our deferred compensation obligations is largely offset by changes in the value of the associated investments, which are recorded in other (expense) income, net.

For further details regarding our deferred compensation plans, see Note 18 to the audited consolidated financial statements.

Amortization of Intangible Assets

For the year ended December 31, 2021, amortization expense was flat compared to the prior year.

Other Operating (Income) Expense, Net

Other operating (income) expense, net includes miscellaneous income and expense items and other charges related to operating activities.

For the year ended December 31, 2020, other operating (income) expense, net primarily represents impairment charges due to the impact of the COVID-19 pandemic.

For the year ended December 31, 2022, amortization expense increased by $17 million compared to the prior year primarily due to an adjustment to the useful life of a customer-related intangible asset and, to a lesser extent, the impact of recent acquisitions.

Other Operating Expense (Income), Net

Other operating expense (income), net includes miscellaneous income and expense items and other charges related to operating activities.

For the year ended December 31, 2022, other operating expense (income), net includes a $14 million impairment charge on certain property, plant and equipment and a $5 million loss associated with the increase in the fair value of the contingent consideration accrual associated with previous acquisitions, partially offset by a $10 million gain from a payroll tax credit under the CARES Act associated with the retention of employees.

Interest Expense, Net

Interest expense, net decreased by $12 million for the year ended December 31, 2021 compared to the prior year, primarily due to lower average outstanding indebtedness and, to a lesser extent, lower interest rates due to recent refinancing transactions, including the termination of our interest rate swap agreements in April 2020, which resulted in a deferred gain that is being amortized as a reduction of interest expense, net over the remaining term of the associated debt.

Other Income, Net

Interest expense, net decreased by $13 million for the year ended December 31, 2022 compared to the prior year, primarily due to increased interest income resulting from the impact of rising interest rates on our cash and cash equivalents.

Other (Expense) Income, Net

Other income, net represents miscellaneous income and expense items related to non-operating activities, such as gains and losses associated with investments and other non-operating assets.

For the year ended December 31, 2021, other income, net included a $314 million pre-tax gain on the sale of our 40% ownership interest in Q 2 Solutions, our clinical trials central laboratory services joint venture, to IQVIA, our joint venture partner (see Note 6 to the audited consolidated financial statements), $39 million in gains associated with changes in the carrying value of our strategic investments, and $17 million in gains associated with investments in our deferred compensation plans.

For the year ended December 31, 2020, other income, net included a $70 million gain recognized as a result of the remeasurement of our previously held equity interest in Mid America Clinical Laboratories, LLC ("MACL") to fair value (see Note 5 to the audited consolidated financial statements) and $15 million in gains associated with investments in our deferred compensation plans, partially offset by a $9 million loss on the retirement of debt, principally due to premiums paid.

For the year ended December 31, 2022, other (expense) income, net included $30 million of losses associated with changes in the carrying value of our strategic investments and $25 million of losses associated with investments in our deferred compensation plans.

For the year ended December 31, 2021, other (expense) income, net included a $314 million pre-tax gain on the sale of our 40% ownership interest in Q 2 Solutions, our clinical trials central laboratory services joint venture, to IQVIA, our joint venture partner (see Note 7 to the audited consolidated financial statements), $39 million in gains associated with changes in the carrying value of our strategic investments, and $17 million in gains associated with investments in our deferred compensation plans.

Income Tax Expense

Income tax expense for the years ended December 31, 2022 and 2021 was $264 million and $597 million, respectively.

The increase in income tax expense compared to the prior year was primarily driven by an increase in income before income taxes and equity in earnings of equity method investees.

The decrease in income tax expense compared to the prior year was primarily driven by a decrease in income before income taxes and equity in earnings of equity method investees.

The effective income tax rate for the years ended December 31, 2022 and 2021 was 21.4% and 23.0%, respectively.

The year ended December 31, 2022 includes an $18 million income tax benefit due to a cumulative adjustment to state deferred tax liabilities related to depreciation expense, which impacted the effective income tax rate by 1.5%.

The effective income tax rate for the year ended December 31, 2021 benefited from a lower effective income tax rate, 17.6%, on the gain on the sale of our 40% ownership interest in Q 2 Solutions.

The effective income tax rate for the year ended December 31, 2020 benefited from a lower effective income tax rate, 11.8%, associated with a $70 million gain recognized as a result of the remeasurement of our previously held equity interest in MACL to fair value.

In addition, the effective income tax rates benefited from $14 million and $19 million of excess tax benefits associated with stock-based compensation arrangements for the years ended December 31, 2022 and 2021, respectively.

Equity in Earnings of Equity Method Investees, Net of Taxes

For the year ended December 31, 2021, there was a $3 million increase in equity in earnings of equity method investees, net of taxes, compared to the prior year primarily due to the demand for COVID-19 testing services and recovery in the base business of the investees, partially offset by lower equity earnings as a result of the sale of our 40% ownership interest in Q 2 Solutions.

For the year ended December 31, 2022, there was a $34 million decrease in equity in earnings of equity method investees, net of taxes, compared to the prior year primarily due to $21 million of lower equity earnings in the current year period associated with changes in the carrying value of strategic investments of an equity method investee and lower demand for COVID-19 testing services at our diagnostic information services joint venture, partially offset by a non-cash impairment to the carrying value of an equity method investment of $8 million in the prior year period.

Quantitative and Qualitative Disclosures About Market Risk

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As of December 31, 2022 and 2021, the fair value of our debt was estimated at approximately $ 3.7 billion and $ 4.4 billion, respectively, principally using quoted prices in active markets and yields for the same or similar types of borrowings, taking into account the underlying terms of the debt instruments.

As of December 31, 2021 and 2020, the estimated fair value exceeded the carrying value of the debt by $403 million and $597 million, respectively.

As of December 31, 2022 and 2021, the estimated fair value (was less than) exceeded the carrying value of the debt by $(318) million and $403 million, respectively.

A hypothetical 10% increase in interest rates (representing 51 basis points as of December 31, 2022 and 23 basis points as of December 31, 2021) would potentially reduce the estimated fair value of our debt by approximately $120 million and $89 million as of December 31, 2022 and 2021, respectively.

Borrowings under our secured receivables credit facility and our senior unsecured revolving credit facility are subject to variable interest rates.

Interest on our secured receivables credit facility is based on either commercial paper rates for highly rated issuers, or London Interbank Offered Rate ("LIBOR"), plus a spread.

As of December 31, 2021, interest on our senior unsecured revolving credit facility is based on certain published rates plus an applicable margin based on changes in our public debt ratings.

Interest on our secured receivables credit facility is based on either commercial paper rates for highly-rated issuers or the Term Secured Overnight Financing Rate ("Term SOFR"), plus a spread.

Interest on our senior unsecured revolving credit facility is based on certain published rates plus an applicable margin based on changes in our public debt ratings.

As such, our borrowing cost under this credit arrangement is subject to fluctuations in interest rates and changes in our public debt ratings.

As of December 31, 2022, the borrowing rates under these debt instruments were:

for our secured receivables credit facility, commercial paper rates for highly-rated issuers or LIBOR, plus a spread of 0.725% to 0.80%;

and for our senior unsecured revolving credit facility, LIBOR plus 1.00 %.

for our secured receivables credit facility, commercial paper rates for highly-rated issuers or the Term SOFR, plus a spread of 0.725 % to 0.80 %;

and for our senior unsecured revolving credit facility, London Interbank Offered Rate ("LIBOR"), plus 1.00 %.

As of December 31, 2022, there were no borrowings outstanding under either our $ 525 million secured receivables credit facility or our $750 million senior unsecured revolving credit facility.

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Equity investments that do not have readily determinable fair values (which consist of investments in preferred and common shares of private companies) are measured at cost minus impairment, if any, plus or minus changes resulting from observable price changes.

During the year ended December 31, 2021, certain of our equity investments became publicly-traded and, based on the readily determinable fair values of such investments, we recognized gains of $39 million in other income, net in our consolidated statement of operations.

For further details, see Notes 2 and 7 to the audited consolidated financial statements.

We regularly evaluate equity investments that do not have readily determinable fair values to determine if there are any indicators that the investments are impaired.

The carrying value of our equity investments that do not have readily determinable fair values was $4 million as of December 31, 2022.

We do not hedge our equity price risk.

As of December 31, 2021, a 10% change in the fair values of our equity investments with readily determinable fair values would have impacted our consolidated income before income taxes and equity in earnings of equity method investees by $4 million.

The impact of an adverse movement in equity prices on our holdings in privately held companies cannot be easily quantified, as our ability to realize returns on investments depends on,

among other things, the enterprises’ ability to raise additional capital or derive cash inflows from continuing operations or through liquidity events such as initial public offerings, mergers or private sales.

In conjunction with the preparation of our audited consolidated financial statements for the year ended December 31, 2022, we considered whether the carrying values of our investments were impaired and concluded that no such impairment existed.

We do not hedge our equity price risk.

The impact of an adverse movement in equity prices on our holdings in privately held companies cannot be easily quantified, as our ability to realize returns on investments depends on, among other things, the enterprises’ ability to raise additional capital or derive cash inflows from continuing operations or through liquidity events such as initial public offerings, mergers or private sales.

Liquidity and Capital Resources

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Net cash provided by operating activities $ 1,718 $ 2,233 $ (515)

Net cash provided by (used in) investing activities 21 (772) 793

Net cash (used in) provided by investing activities (543) 21 (564)

Net cash used in financing activities (1,732) (2,540) 808

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Cash Flows from Operating Activities

Net cash provided by operating activities for the year ended December 31, 2021 was $2,233 million, and increased $228 million compared to the prior year primarily as a result of:

• higher operating income in 2021 as compared to 2020;

• the timing of movements in our working capital accounts;

Net cash provided by operating activities for the year ended December 31, 2022 was $1,718 million, and decreased $515 million compared to the prior year primarily as a result of:

• lower operating income in 2022 as compared to 2021;

partially offset by

• a $349 million increase in income tax payments due to higher income in 2021 as compared to 2020, as well as timing of payments;

• higher performance-based compensation payments in 2021 compared to 2020.

• a $426 million decrease in income tax payments in 2022 as compared to 2021.

Days sales outstanding ("DSO"), a measure of billing and collection efficiency, was 47 days as of December 31, 2022 and 48 days as of December 31, 2021.

Recent changes in our DSO are partially due to fluctuations in our monthly revenue due to the impact of the COVID-19 pandemic.

Cash Flows from Investing Activities

Net cash provided by investing activities for the year ended December 31, 2021 was $21 million, compared to net cash used in investing activities of $772 million for the year ended December 31, 2020.

This $793 million change in cash provided by (used in) investing activities was primarily a result of $755 million of net cash proceeds received during 2021 from the sale of our 40% ownership interest in Q 2 Solutions.

Net cash used in investing activities for the year ended December 31, 2022 was $543 million, compared to net cash provided by investing activities of $21 million for the year ended December 31, 2021.

This $564 million change in cash (used in) provided by investing activities was primarily a result of $755 million of net cash proceeds received in 2021 from the sale of our 40% ownership interest in Q 2 Solutions, partially offset by a $187 million decrease in net cash paid for acquisitions.

Cash Flows from Financing Activities

Net cash used in financing activities for the year ended December 31, 2022 was $1,732 million, compared to $2,540 million for the year ended December 31, 2021.

This $1,273 million increase in cash used in financing activities was primarily a result of:

• a $1,874 million increase in repurchases of our common stock (see "Share Repurchases" for further details);

This $808 million decrease in cash used in financing activities was primarily a result of:

• a $791 million decrease in repurchases of our common stock (see "Share Repurchases" for further details);

and, to a lesser extent,

• a $103 million change in bank overdrafts, which are generally settled in cash the following day;

• a $60 million decrease in proceeds from the exercise of stock options, which was a result of a decrease in the volume of stock options exercised compared to the prior year;

• a $41 million increase in distributions to noncontrolling interest partners;

partially offset by

• $805 million of net debt repayments (repayments of debt less proceeds from borrowings) in 2020 compared to $2 million of net debt repayments in 2021.

During the year ended December 31, 2021, there were no borrowings or repayments under our secured receivables credit facility or senior unsecured revolving credit facility.

During January 2020, we redeemed in full the outstanding indebtedness under our senior notes due January 2020 and senior notes due March 2020 using net proceeds from the issuance, in December 2019, of the $800 million aggregate principal amount of 2.95% senior notes due June 2030, along with cash on hand.

During May 2020, we completed the issuance of the $550 million aggregate principal amount of 2.80% senior notes due June 2031, the net proceeds from which were used during November 2020, along with cash on hand, to redeem in full the outstanding indebtedness under our senior notes due April 2021.

Additionally, during the year ended December 31, 2020, we borrowed $100 million under our secured receivables credit facility and $100 million under our senior unsecured revolving credit facility, both of which were repaid prior to December 31, 2020.

• a $26 million decrease in distributions to noncontrolling interest partners.

During the years ended December 31, 2022 and 2021, there were no borrowings or repayments under our secured receivables credit facility or our senior unsecured revolving credit facility.

For details regarding our debt and related transactions, see Note 14 to the audited consolidated financial statements.

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During each of the four quarters of 2021, our Board of Directors declared a quarterly cash dividend of $0.62 per common share.

On February 3, 2022, we announced that our Board of Directors authorized a 6.5% increase in our quarterly cash dividend from $0.62 to $0.66 per share, or $2.64 per share annually, commencing with the dividend payable in April 2022.

In February 2023, we announced that our Board of Directors authorized a 7.6% increase in our quarterly cash dividend from $0.66 to $0.71 per share, or $2.84 per share annually, commencing with the dividend payable in April 2023.

Share Repurchases

In each of February and March 2021, our Board of Directors increased the size of our share repurchase program by $1 billion.

In February 2022, our Board of Directors increased the size of our share repurchase program by $1 billion.

As of December 31, 2022, $0.3 billion remained available under our share repurchase authorization.

In February 2022, our Board of Directors authorized us to repurchase an additional $1 billion of our common stock.

In February 2023, we announced that our Board of Directors authorized us to repurchase an additional $1 billion of our common stock.

The share repurchase authorization has no set expiration or termination date.

For the year ended December 31, 2022, we repurchased 10.1 million shares of our common stock for $1.4 billion.

For the year ended December 31, 2021, we repurchased 16.0 million shares of our common stock for $2.2 billion, including 10.7 million shares repurchased under ASRs.

See "2021 Highlights" above for further details.

For the year ended December 31, 2020, we repurchased 2.7 million shares of our common stock for $325 million.

For further details regarding our share repurchases, see Note 17 to the audited consolidated financial statements.

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Equity Method Investees

Our equity method investees primarily consist of our diagnostic information services joint venture and investments in funds that purchase strategic holdings in private companies in the healthcare industry.

Our equity method investees primarily consist of a diagnostic information services joint venture and an investment in a fund that purchases strategic holdings in private companies in the healthcare industry.

Such investees are accounted for under the equity method of accounting.

Our investment in equity method investees is less than 5% of our consolidated total assets.

Our proportionate share of income before income taxes associated with our equity method investees is less than 5% of our consolidated income from continuing operations before income taxes and equity in earnings of equity method investees.

Our proportionate share of income before income taxes associated with our equity method investees is less than 5% of our consolidated income before income taxes and equity in earnings of equity method investees.

We have no material unconditional obligations or guarantees to, or in support of, our equity method investees and their operations.

In conjunction with the preparation of our audited consolidated financial statements for the year ended December 31, 2021, we considered whether the carrying values of our equity method investments were impaired and during the year ended December 31, 2021 we recorded an $8 million impairment charge for one of the investments.

In conjunction with the preparation of our audited consolidated financial statements for the year ended December 31, 2022, we considered whether the carrying values of our equity method investments were impaired and concluded that no such impairment existed.

Requirements and Capital Resources

We estimate that we will invest approximately $400 million during 2022 for capital expenditures, to support and grow our existing operations, principally related to investments in information technology;

laboratory equipment and facilities, including laboratory automations and footprint optimizations;

and investments in our advanced diagnostics and consumer growth strategies.

We estimate that we will invest approximately $400 million during 2023 for capital expenditures to support and grow our existing operations, principally related to investments in laboratory equipment and facilities, including laboratory automations and information technology to support our diagnostic offerings.

As of December 31, 2022, we had $1.2 billion of borrowing capacity available under our existing credit facilities, including $455 million available under our secured receivables credit facility and $750 million available under our senior unsecured revolving credit facility.

There were no outstanding borrowings under these credit facilities as of December 31, 2021.

There were no borrowings under these credit facilities as of December 31, 2022.

In support of our risk management program, $70 million in letters of credit under the secured receivables credit facility were outstanding as of December 31, 2022.

During the fourth quarter of 2021, we amended both our $600 million secured receivables credit facility and our $750 million senior unsecured revolving credit facility to extend the maturity dates for each underlying commitment, while maintaining the borrowing capacity.

The secured receivables credit facility includes a $250 million loan commitment which matures in October 2022, and a $250 million loan commitment and a $100 million letter of credit facility which mature in October 2023.

During October 2022, we amended our secured receivables credit facility and decreased the aggregate borrowing capacity under the secured receivables credit facility to $525 million.

The amended secured receivables credit facility includes a $425 million loan commitment, half of which matures in October 2023 and half of which matures in October 2024.

Additionally, the amended secured receivables credit facility includes a $100 million letter of credit facility which matures in October 2024.

The senior unsecured revolving credit facility matures in November 2026.

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We have assessed the impact of the cessation of LIBOR and have identified and evaluated financial instruments and other contracts that refer to LIBOR.

Our underlying exposure to LIBOR includes our existing credit facilities (see discussion above) under which we had no outstanding borrowings as of December 31, 2021.

Our underlying exposure to LIBOR includes our senior unsecured revolving credit facility (see discussion above) under which we had no outstanding borrowings as of December 31, 2022.

We expect to be able to transition all LIBOR based instruments and contracts to an alternative reference rate on or before the cessation of LIBOR and we do not believe that the cessation of LIBOR, or its replacement with an alternative reference rate or rates, will have a material impact on us.

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Impact of New Accounting Standards

The adoption of new accounting standards is discussed in Note 2 to the audited consolidated financial statements.

The impacts of recent accounting pronouncements not yet effective on our audited consolidated financial statements are discussed in Note 2 to the audited consolidated financial statements.

The adoption of new accounting standards (if any) is discussed in Note 2 to the audited consolidated financial statements.

The impacts of recent accounting pronouncements not yet effective (if any) on our audited consolidated financial statements are discussed in Note 2 to the audited consolidated financial statements.

REPORT OF MANAGEMENT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

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Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Quest Diagnostics Incorporated and its subsidiaries (the “Company”) as of December 31, 2021 and 2020, and the related consolidated statements of operations, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2021, including the related notes and financial statement schedule of valuation accounts and reserves for each of the three years in the period ended December 31, 2021 listed in the index appearing under Item 15(a)(2) (collectively referred to as the “consolidated financial statements”).

We have audited the accompanying consolidated balance sheets of Quest Diagnostics Incorporated and its subsidiaries (the “Company”) as of December 31, 2022 and 2021, and the related consolidated statements of operations, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2022, including the related notes (collectively referred to as the “consolidated financial statements”).

We also have audited the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

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600 shares authorized as of both December 31, 2022 and 2021;

162 and 217 shares issued as of December 31, 2021 and 2020, respectively

162 shares issued as of both December 31, 2022 and 2021

Additional paid-in capital 2,295 2,260

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Net revenues $ 9,883 $ 10,788 $ 9,437

Operating costs and expenses and other operating expense (income):

Operating costs and expenses and other operating income:

Cost of services 6,450 6,579 5,804

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Amortization of intangible assets 120 103 103

Other operating (income) expense, net ( 2 ) 9 ( 95 )

Other operating expense (income), net 11 ( 2 ) 9

Total operating costs and expenses, net 8,455 8,407 7,466

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Interest expense, net ( 138 ) ( 151 ) ( 163 )

Other income, net 369 76 20

Total non-operating income (expense), net 218 ( 87 ) ( 155 )

Income from continuing operations before income taxes and equity in earnings of equity method investees

2,599 1,884 1,076

Other (expense) income, net ( 55 ) 369 76

Total non-operating (expense) income, net ( 193 ) 218 ( 87 )

Income before income taxes and equity in earnings of equity method investees 1,235 2,599 1,884

Income tax expense ( 264 ) ( 597 ) ( 460 )

Equity in earnings of equity method investees, net of taxes

Income from continuing operations 2,080 1,499 886

Income from discontinued operations, net of taxes — — 20

Net income 1,015 2,080 1,499

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Net income attributable to Quest Diagnostics $ 946 $ 1,995 $ 1,431

Amounts attributable to Quest Diagnostics’ common stockholders:

Income from continuing operations $ 1,995 $ 1,431 $ 838

Income from discontinued operations, net of taxes — — 20

Net income $ 1,995 $ 1,431 $ 858

Earnings per share attributable to Quest Diagnostics’ common stockholders - basic:

Income from continuing operations $ 15.85 $ 10.62 $ 6.21

Income from discontinued operations — — 0.15

Net income $ 15.85 $ 10.62 $ 6.36

Earnings per share attributable to Quest Diagnostics’ common stockholders - diluted:

Income from continuing operations $ 15.55 $ 10.47 $ 6.13

Income from discontinued operations — — 0.15

Net income $ 15.55 $ 10.47 $ 6.28

Earnings per share attributable to Quest Diagnostics’ common stockholders:

Basic $ 8.10 $ 15.85 $ 10.62

Diluted $ 7.97 $ 15.55 $ 10.47

The accompanying notes are an integral part of these statements.

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Net deferred gain on cash flow hedges, net of taxes 1 1 3

Other comprehensive income 7 18 20

Other comprehensive (loss) income ( 7 ) 7 18

Comprehensive income 1,008 2,087 1,517

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Provision for credit losses 3 4 19

Deferred income tax (benefit) provision ( 57 ) 85 15

Deferred income tax provision (benefit) 1 ( 57 ) 85

Stock-based compensation expense 77 79 97

Gain on disposition of joint venture — ( 314 ) —

Losses (gains) on sale of property, plant and equipment 9 3 ( 70 )

Other, net 66 ( 54 ) ( 78 )

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Proceeds from disposition of joint venture — 755 —

Proceeds from disposition of property, plant, and equipment 3 3 91

Capital expenditures ( 404 ) ( 403 ) ( 418 )

Increase in investments and other assets, net ( 3 ) ( 27 ) ( 44 )

Net cash provided by (used in) investing activities 21 ( 772 ) ( 411 )

Decrease (increase) in investments and other assets, net 5 — ( 24 )

Net cash (used in) provided by investing activities ( 543 ) 21 ( 772 )

Cash flows from financing activities:

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Other financing activities, net ( 39 ) ( 38 ) 44

Net cash (used in) provided by financing activities ( 2,540 ) ( 1,267 ) 225

Net cash used in financing activities ( 1,732 ) ( 2,540 ) ( 1,267 )

Net change in cash and cash equivalents and restricted cash ( 557 ) ( 286 ) ( 34 )

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Purchases of treasury stock ( 16 ) ( 2,222 ) ( 2,222 )

Retirement of treasury stock ( 649 ) ( 3,342 ) 3,991 —

Balance, December 31, 2021 119 $ 2 $ 2,260 $ 7,649 $ ( 14 ) $ ( 3,453 ) $ 39 $ 6,483 $ 79

946 62 1,008 7

Other comprehensive income, net of tax 7 7

Other comprehensive loss, net of tax ( 7 ) ( 7 )

Dividends declared

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Issuance of common stock under benefit plans

1 ( 36 ) 64 28

Stock-based compensation expense

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( 10 ) ( 1,385 ) ( 1,385 )

Retirement of treasury stock ( 649 ) ( 3,342 ) 3,991 —

Balance, December 31, 2022 111 $ 2 $ 2,295 $ 8,290 $ ( 21 ) $ ( 4,673 ) $ 37 $ 5,930 $ 77

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The Company uses its extensive database of clinical lab results to derive diagnostic insights that reveal new avenues to identify and treat disease, inspire healthy behaviors and improve healthcare management.

The Company's diagnostic information services business ("DIS") provides 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 Company provides services to a broad range of customers, including patients, clinicians, hospitals, independent delivery networks ("IDNs"), health plans, employers, accountable care organizations ("ACOs"), and direct contract entities ("DCEs").

The Company's diagnostic information services business ("DIS") provides information and insights based on an industry-leading menu of routine, non-routine and advanced clinical testing and anatomic pathology testing, and other diagnostic information services.

The Company provides services to a broad range of customers, including patients, clinicians, hospitals, independent delivery networks ("IDNs"), health plans, employers, consumers, and accountable care organizations ("ACOs").

The Company offers the broadest access in the United States to diagnostic information services through its nationwide network of laboratories, patient service centers and phlebotomists in physician offices and the Company's connectivity resources, including call centers and mobile paramedics, nurses and other health and wellness professionals.

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Income attributable to the minority interest in the Company's majority owned and controlled consolidated subsidiaries is recorded as net income attributable to noncontrolling interests in the consolidated statements of operations and the noncontrolling interest is reflected as a separate component of consolidated stockholders' equity in the consolidated balance sheet.

Basis of Presentation

During the third quarter of 2006, the Company completed the wind down of Nichols Institute Diagnostics ("NID"), a test kit manufacturing subsidiary.

The accompanying consolidated statements of operations and related disclosures report the results of NID as discontinued operations through 2019, at which point certain income tax contingencies related to NID were resolved.

See Note 20 for a further discussion of discontinued operations.

Reclassifications

Certain amounts in the prior period financial statements have been reclassified to conform to the presentation of the current period financial statements.

Equity Method Investments

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Resulting translation adjustments are recorded as a component of accumulated other comprehensive loss within stockholders' equity.

Gains and losses from foreign currency transactions, which are denominated in a currency other than the functional currency, are included within other operating (income) expense, net in the consolidated statements of operations.

Gains and losses from foreign currency transactions, which are denominated in a currency other than the functional currency, are included within other operating expense (income), net in the consolidated statements of operations.

Foreign currency transaction gains and losses have historically not been material.

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• leasehold improvements, the lesser of the useful life of the improvement or the remaining life of the building or lease, as applicable;

• computer software developed or obtained for internal use, five to ten years .

• computer software developed or obtained for internal use, principally five to ten years .

QUEST DIAGNOSTICS INCORPORATED AND SUBSIDIARIES

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The Company performs its annual impairment test during the fourth quarter of the fiscal year.

For the year ended December 31, 2021, the Company performed a qualitative impairment test and, based on the totality of information available for the reporting units, the Company concluded that it was more-likely-than-not that the estimated fair values of the reporting units were greater than the carrying values of the reporting units and, as such, no further analysis was required.

For the year ended December 31, 2020, in accordance with its policy to perform the quantitative test on a periodic basis, the Company updated the fair value calculation of its reporting units, performed the quantitative impairment test and concluded that goodwill was not impaired.

For the years ended December 31, 2022 and 2021, the Company performed a qualitative impairment test for its DIS reporting unit and, based on the totality of information available, the Company concluded that it was more-likely-than-not that the estimated fair value of its DIS reporting unit was greater than the carrying value of the reporting unit and, as such, no further analysis was required.

For the year ended December 31, 2022, the Company updated the fair value calculation of its risk assessment services reporting unit, performed the quantitative impairment test and concluded that goodwill for the reporting unit was not impaired.

For the year ended December 31, 2021, the Company performed a qualitative impairment test for its risk assessment reporting unit and, based on the totality of information available, the Company concluded that it was more-likely-than-not that the estimated fair value of the reporting unit was greater than the carrying value of the reporting unit and, as such, no further analysis was required.

Intangible Assets

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as well as participant-directed investments of deferred employee compensation and related Company matching contributions held in trusts pursuant to the Company's supplemental deferred compensation plans (see Note 18).

These investments are measured at fair value with both realized and unrealized gains and losses recorded in current earnings within other income, net in the consolidated statements of operations.

For the years ended December 31, 2021, 2020 and 2019, gains from all equity investments with readily determinable fair values totaled $ 56 million, $ 8 million, and $ 10 million, respectively.

The carrying values of these investments was $ 121 million at December 31, 2021, of which $ 44 million was included in prepaid expenses and other current assets and $ 77 million was included in other assets in the consolidated balance sheet.

The carrying values of these investments was $ 67 million at December 31, 2020, which was included in other assets in the consolidated balance sheet.

These investments are measured at fair value with both realized and unrealized gains and losses recorded in current earnings within other (expense) income, net in the consolidated statements of operations.

For the years ended December 31, 2022, 2021 and 2020, (losses)/gains from all equity investments with readily determinable fair values totaled $( 55 ) million, $ 56 million, and $ 8 million, respectively.

See Note 8 for a discussion of the fair value of such investments.

• Equity investments that do not have readily determinable fair values, which consist of investments in preferred and common shares of privately held companies.

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no impairment charges were recognized related to these investments for the years ended December 31, 2022, 2021 and 2020.

The carrying value of these investments was $ 4 million and $ 25 million at December 31, 2021 and 2020, respectively.

The carrying value of these investments was $ 4 million at both December 31, 2022 and 2021.

Such amounts were included in other assets in the consolidated balance sheet.

• Available-for-sale debt securities of privately-held companies.

These investments are measured at fair value with unrealized gains and losses presented in other comprehensive income (loss).

These investments are measured at fair value with unrealized gains and losses presented in other comprehensive (loss) income.

The carrying amount of these investments was $ 2 million and $ 1 million at December 31, 2022 and 2021, respectively.

Such amounts were included in other assets in the consolidated balance sheet.

See Note 8 for a discussion of the fair value of such investments.

Derivative Financial Instruments

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The Company does not enter into derivative financial instruments that contain credit risk-related contingent features or requirements to post collateral.

QUEST DIAGNOSTICS INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

(in millions unless otherwise indicated)

Interest Rate Risk

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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 debt instruments and, from time to time, variable-rate debt instruments.

The Company's debt obligations consist of fixed-rate and, from time to time, 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.

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The Company accounts for these derivatives as either an asset or liability measured at its fair value.

The fair value is based upon model-derived valuations in which all significant inputs are observable in active markets including certain financial information and certain assumptions regarding past, present and future market conditions.

For a derivative instrument that has been formally designated as a fair value hedge, fair value gains or losses on the derivative instrument along with offsetting fair value gains or losses on the hedged item that are attributable to the risk being hedged are reported in other income, net in the consolidated statements of operations.

The fair value is based upon model-derived valuations in which all significant inputs are observable in active markets including certain financial

QUEST DIAGNOSTICS INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

(in millions unless otherwise indicated)

information and certain assumptions regarding past, present and future market conditions.

For a derivative instrument that has been formally designated as a fair value hedge, fair value gains or losses on the derivative instrument along with offsetting fair value gains or losses on the hedged item that are attributable to the risk being hedged are reported in other (expense) income, net in the consolidated statements of operations.

For derivatives that have been formally designated as a cash flow hedge, the change in the fair value of the derivatives is recorded in accumulated other comprehensive loss.

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New Accounting Standards To Be Adopted

In March 2020, the Financial Accounting Standards Board 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

In March 2020, the Financial Accounting Standards Board ("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 was effective immediately and, due to an accounting standards update which the FASB issued in December 2022, can be applied to contract modifications through December 31, 2024.

To the extent that, prior to December 31, 2024, the Company enters into any contract modifications for which the optional expedients are applied, 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.

QUEST DIAGNOSTICS INCORPORATED AND SUBSIDIARIES

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(in millions unless otherwise indicated)

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.

REVENUE RECOGNITION

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Client Payers

Credit risk and ability to pay are more of a consideration for these payers than healthcare insurers and government payers.

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(in millions unless otherwise indicated)

The approximate percentage of net revenue by type of customer was as follows:

The approximate percentage of net revenues by type of customer was as follows:

Year Ended December 31,

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Client payers 33 33 38

Patients 12 11 13

Patients (including coinsurance and deductible responsibilities) 12 12 11

Total DIS 97 97 97

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Allowance for Credit Losses

Balance, January 1, 2020 $ 15

Balance, December 31, 2020 $ 28

Provision for credit losses 4

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Amounts attributable to Quest Diagnostics’ common stockholders:

Income from continuing operations $ 1,995 $ 1,431 $ 838

Income from discontinued operations, net of taxes — — 20

Net income attributable to Quest Diagnostics' common stockholders $ 1,995 $ 1,431 $ 858

Income from continuing operations $ 1,995 $ 1,431 $ 838

Net income attributable to Quest Diagnostics $ 946 $ 1,995 $ 1,431

Earnings allocated to participating securities 4 7 6

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Weighted average common shares outstanding – diluted 118 128 136

Earnings per share attributable to Quest Diagnostics’ common stockholders - basic:

Income from continuing operations $ 15.85 $ 10.62 $ 6.21

Income from discontinued operations — — 0.15

Net income $ 15.85 $ 10.62 $ 6.36

Earnings per share attributable to Quest Diagnostics’ common stockholders - diluted:

Income from continuing operations $ 15.55 $ 10.47 $ 6.13

Income from discontinued operations — — 0.15

Net income $ 15.55 $ 10.47 $ 6.28

In April 2021, the Company entered into ASRs with several financial institutions to repurchase $ 1.5 billion of the Company's common stock as part of the Company's share repurchase program.

See Note 16 for further details.

Earnings per share attributable to Quest Diagnostics’ common stockholders:

Basic $ 8.10 $ 15.85 $ 10.62

Diluted $ 7.97 $ 15.55 $ 10.47

The following securities were not included in the calculation of diluted earnings per share due to their antidilutive effect:

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Stock options and performance share units — — 1

QUEST DIAGNOSTICS INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

(in millions unless otherwise indicated)

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;

field and customer 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 price concessions;

further digitizing the business;

standardization;

optimization and selecting and retaining talent.

The Invigorate program is intended to offset reimbursement pressures and labor and benefit cost increases;

free up additional resources to invest in 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 years ended December 31, 2022, 2021 and 2020:

2022 2021 2020

Employee separation costs $ 55 $ 11 $ 14

Facility-related costs — 1 —

Asset impairment charges 14 — —

Total restructuring charges $ 69 $ 12 $ 14

The restructuring charges incurred for the years ended December 31, 2022, 2021 and 2020 were primarily associated with various workforce reduction initiatives as the Company continued to restructure its organization.

Additionally, during the year ended December 31, 2022, the Company fully impaired certain property, plant and equipment (see Note 8).

Of the total restructuring charges incurred during the year ended December 31, 2022, $ 19 million, $ 36 million and $ 14 million were recorded in cost of services, selling, general and administrative expenses and other operating expense (income), net, respectively.

Of the total restructuring charges incurred during the year ended December 31, 2021, $ 8 million and $ 4 million were recorded in cost of services and selling, general and administrative expenses, respectively.

Of the total restructuring charges incurred during the year ended December 31, 2020, $ 9 million and $ 5 million were recorded in cost of services and selling, general and administrative expenses, respectively.

The employee separation costs for all periods presented were primarily recorded in the Company's DIS business.

The following table summarizes the activity of the restructuring liability during 2022 and 2021, which is included in accrued expenses in Note 13:

Employee Separation Costs Facility-Related Costs Total

Balance, December 31, 2020

Income statement expense 12 1 13

Cash payments ( 12 ) ( 1 ) ( 13 )

Balance, December 31, 2021

Income statement expense 55 — 55

Cash payments ( 18 ) — ( 18 )

Balance, December 31, 2022

$ 44 $ — $ 44

QUEST DIAGNOSTICS INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

(in millions unless otherwise indicated)

BUSINESS ACQUISITIONS

2022 Acquisitions

During 2022, the Company completed acquisitions for an aggregate purchase price of $ 162 million, net of cash acquired, including the acquisition discussed below.

The 2022 acquisitions resulted in goodwill of $ 121 million, of which $ 103 million is deductible for tax purposes.

These acquisitions also resulted in $ 45 million of intangible assets, principally comprised of customer-related intangible assets.

Acquisition of Pack Health, LLC

On February 1, 2022, the Company acquired Pack Health, LLC ("Pack Health"), a patient engagement company that helps individuals adopt healthier behaviors to improve outcomes, in an all cash transaction for $ 123 million, net of $ 4 million cash acquired, which consisted of cash consideration of $ 105 million and contingent consideration initially estimated at $ 18 million.

The contingent consideration arrangement was dependent upon the achievement of certain revenue benchmarks.

Based on the purchase price allocation, the assets acquired and liabilities assumed consist of $ 96 million of goodwill (of which $ 78 million was tax-deductible on the acquisition date), $ 30 million of intangible assets, $ 5 million of operating lease right-of-use assets, $ 5 million of operating lease liabilities and $( 3 ) million of working capital.

The intangible assets consist primarily of customer-related assets which are being amortized over a useful life of 15 years.

For further details regarding the fair value of the contingent consideration, see Note 8.

2021 Acquisitions

During 2021, the Company completed acquisitions for an aggregate purchase price of $ 346 million, net of cash acquired, including the acquisitions discussed below.

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Acquisition of the outreach laboratory services business of Mercy Health

QUEST DIAGNOSTICS INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

(in millions unless otherwise indicated)

On June 1, 2021, the Company completed the acquisition of the outreach laboratory services business of Mercy Health ("Mercy Health"), which serves providers and patients in Arkansas, Kansas, Missouri and Oklahoma, in an all-cash transaction for $ 225 million.

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 $ 54 million of customer-related intangible assets and $ 171 million of tax-deductible goodwill.

Based on the purchase price allocation, the assets acquired primarily consist of $ 171 million of tax-deductible goodwill and $ 54 million of customer-related intangible assets.

The intangible assets are being amortized over a useful life of 15 years.

Acquisition of assets of Labtech Diagnostics, LLC ("Labtech")

On December 13, 2021, the Company completed the acquisition of assets of Labtech, an independent clinical diagnostic laboratory provider serving physicians and patients primarily in South Carolina, North Carolina, Florida and Georgia, in an all cash transaction for $ 85 million, which consisted of cash consideration of $ 80 million and contingent consideration initially estimated at $ 5 million.

The contingent consideration arrangement is dependent upon the achievement of certain testing volume benchmarks.

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 $ 41 million of intangible assets, $ 40 million of goodwill (of which $ 35 million is tax deductible), $ 11 million of property, plant and equipment, $ 9 million of finance lease liabilities, $ 6 million of operating lease right-of-use assets, $ 6 million of operating lease liabilities, and $ 2 million of inventories.

Acquisition of assets of Labtech Diagnostics, LLC

On December 13, 2021, the Company completed the acquisition of assets of Labtech Diagnostics, LLC ("Labtech"), an independent clinical diagnostic laboratory provider serving physicians and patients primarily in South Carolina, North Carolina, Florida and Georgia, in an all cash transaction for $ 95 million, which consisted of cash consideration of $ 80 million and contingent consideration estimated at $ 15 million.

The contingent consideration arrangement was dependent upon the achievement of certain testing volume benchmarks.

Based on the purchase price allocation, which was finalized during the three months ended March 31, 2022, the assets acquired and liabilities assumed consist of $ 48 million of goodwill (of which $ 33 million was tax deductible on the acquisition date), $ 44 million of intangible assets, $ 11 million of property, plant and equipment, $ 9 million of finance lease liabilities, $ 6 million of operating lease right-of-use assets, $ 6 million of operating lease liabilities, and $ 1 million of inventories.

The intangible assets consist primarily of customer-related assets which are being amortized over a useful life of 15 years.

For further details regarding the fair value of the contingent consideration, see Note 8.

2020 Acquisitions

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Net revenues attributable to the 2020 acquisitions were $ 127 million for the year ended December 31, 2020.

QUEST DIAGNOSTICS INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

(in millions unless otherwise indicated)

Acquisition of Blueprint Genetics Oy

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Memorial Hermann is a not-for-profit health system in Southeast Texas.

Based on the purchase price allocation, the assets acquired primarily consist of $ 27 million of customer-related intangible assets and $ 93 million of tax-deductible goodwill.

Based on the purchase price allocation, the assets acquired primarily consist of $ 93 million of tax-deductible goodwill and $ 27 million of customer-related intangible assets.

The intangible assets are being amortized over a useful life of 15 years.

Acquisition of the Remaining 56 % Interest in Mid America Clinical Laboratories, LLC

QUEST DIAGNOSTICS INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

(in millions unless otherwise indicated)

On August 1, 2020, the Company completed the 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.

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.

MACL was 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 (expense) 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 took 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 %).

2 unchanged sentences

As a result of the acquisition, MACL became a wholly owned subsidiary of the Company.

2019 Acquisitions

During 2019, the Company completed acquisitions for an aggregate purchase price of $ 63 million, including the acquisition discussed below.

The 2019 acquisitions resulted in goodwill of $ 43 million, of which $ 36 million is deductible for tax purposes.

These acquisitions also resulted in $ 21 million of intangible assets, principally comprised of customer-related intangible assets.

Acquisition of the Clinical Laboratory Services Business of Boyce & Bynum Pathology Laboratories, P.C.

On February 11, 2019, the Company completed the acquisition of certain assets of the clinical laboratory services business of Boyce & Bynum Pathology Laboratories, P.C.

in an all cash transaction for $ 61 million, which consisted of cash consideration of $ 55 million and contingent consideration initially estimated at $ 6 million.

The contingent consideration arrangement was dependent upon the achievement of certain testing volume benchmarks.

During 2019, the liability was reduced to $ 0 as a result of updated testing volume forecasts for the earn-out period compared to the testing volume target included in the contingent consideration arrangement, resulting in a $ 6 million gain recorded in other operating (income) expense, net.

Based on the purchase price allocation, the assets acquired principally consist of $ 41 million of goodwill (of which $ 35 million is tax deductible) and $ 20 million of customer-related intangible assets.

The intangible assets are being amortized over a useful life of 15 years.

General Information

7 unchanged sentences

("IQVIA"), its joint venture partner, for $ 760 million in an all-cash transaction.

The sales price is subject to customary post-closing adjustments.

Prior to the transaction, the Company accounted for its minority interest as an equity method investment.

As a result of the transaction, during the year ended December 31, 2021, the Company recorded a $ 314 million pre-tax gain in other income, net in the consolidated statement of operations based on the difference between the net sales proceeds and the carrying value of the investment, including $ 20 million of cumulative translation losses which were previously recorded in accumulated other comprehensive loss.

During the year ended December 31, 2021, the Company also recorded $ 55 million of income tax expense related to the gain, consisting of $ 127 million of current income tax expense, partially offset by $ 72 million of deferred income tax benefit.

As a result of the transaction, during the year ended December 31, 2021, the Company recorded a $ 314 million pre-tax gain in other (expense) income, net in the consolidated statement of operations based on the difference between the net sales proceeds and the carrying value of the investment, including $ 20 million of cumulative translation losses which were previously recorded in accumulated other comprehensive loss.

During the year ended December 31, 2021, the Company also recorded $ 55 million

QUEST DIAGNOSTICS INCORPORATED AND SUBSIDIARIES

1 unchanged sentence

(in millions unless otherwise indicated)

Under a multi-year agreement, the Company will remain the strategic preferred laboratory provider for Q 2 Solutions' clients, providing a range of lab testing capabilities to augment Q 2 Solutions' core offerings and extend its industry leading suite of services.

of income tax expense related to the gain, consisting of $ 127 million of current income tax expense, partially offset by $ 72 million of deferred income tax benefit.

FAIR VALUE MEASUREMENTS

6 unchanged sentences

Cash surrender value of life insurance policies 46 — 46 —

Equity investments 44 44 — —

Available-for-sale debt securities 2 — — 2

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Cash surrender value of life insurance policies 57 — 57 —

Equity investments 44 44 — —

Available-for-sale debt securities 1 — — 1

1 unchanged sentence

Deferred compensation liabilities $ 143 $ — $ 143 $ —

Contingent consideration 5 — — 5

Total $ 148 $ — $ 143 $ 5

Redeemable noncontrolling interest $ 79 $ — $ — $ 79

1 unchanged sentence

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.

The trading securities are classified within Level 1 of the fair value hierarchy because the changes in the fair value of these securities, which are recorded in other assets in the Company's consolidated balance sheet, 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

QUEST DIAGNOSTICS INCORPORATED AND SUBSIDIARIES

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(in millions unless otherwise indicated)

a hypothetical portfolio of investments which are tracked by an administrator.

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.

1 unchanged sentence

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.

The cash surrender value, which is recorded in other assets in the Company's consolidated balance sheet, 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.

1 unchanged sentence

Equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) with readily determinable fair values are measured at fair value in prepaid expenses and other current assets in the Company's consolidated balance sheet.

During the year ended December 31, 2021, certain of the Company's equity investments became publicly traded.

Such equity investments are now classified within Level 1 of the fair value hierarchy because the changes in the fair values of the securities are measured using quoted prices in active markets based on the market price per share multiplied by the number of shares held, exclusive of any transaction costs.

Such equity investments are classified within Level 1 of the fair value hierarchy because the changes in the fair values of the securities are measured using quoted prices in active markets based on the market price per share multiplied by the number of shares held, exclusive of any transaction costs.

The Company's available-for-sale debt securities are measured at fair value using discounted cash flows.

1 unchanged sentence

Significant inputs include cash flows projections and a discount rate.

In connection with the acquisition of Labtech (see Note 5), the Company has a contingent consideration obligation of up to $ 20 million that is to be paid based on the achievement of certain testing volume benchmarks.

As of December 31, 2021, the fair value of the contingent consideration liability totaled $ 5 million, which was measured at fair value using an option-pricing method and classified within Level 3 of the fair value hierarchy as the fair value was determined based on significant inputs that are not observable.

Significant inputs include management’s estimate of volume and other market inputs, including comparable company revenue volatility ( 7.5 %) and a discount rate ( 2.5 %).

The investments are recorded in other assets in the Company's consolidated balance sheet.

In connection with the acquisitions of Pack Health and Labtech (see Note 6), the Company has contingent consideration obligations, with a potential maximum aggregate payment of $ 40 million, that are to be paid based on the achievement of certain testing volume or revenue benchmarks.

Contingent consideration accruals are measured at fair value using either an option-pricing method or a Monte Carlo 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 ( 7.5 %) and a discount rate (ranging from 2.5 % to 3.0 %).

The following table provides a reconciliation of the beginning and ending balances of liabilities using significant unobservable inputs (Level 3):

1 unchanged sentence

Balance, December 31, 2020 $ —

Settlements ( 6 )

Total fair value adjustments included in earnings - realized/unrealized ( 1 )

Purchases, additions and issuances 5

Balance, December 31, 2021 5

Purchases, additions and issuances 28

Settlements ( 15 )

Total fair value adjustments included in earnings - realized/unrealized 5

Balance, December 31, 2022 $ 23

The $ 1 million net gain included in earnings associated with the changes in the fair value of contingent consideration for the year ended December 31, 2020 is reported in other operating (income) expense, net.

The $ 5 million net loss included in earnings associated with the change in the fair value of contingent consideration for the year ended December 31, 2022 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.

4 unchanged sentences

(in millions unless otherwise indicated)

During the year ended December 31, 2021, the Company recorded an $ 8 million impairment charge, which is included in equity in earnings of equity method investees, net of taxes, in order to adjust to fair value an investment that is accounted for under the equity method of accounting.

Following the impairment charge, the carrying value of the investment is not material.

During the year ended December 31, 2022, the Company recorded a $ 14 million impairment charge, which is included in other operating expense (income), net, in order to fully impair certain property, plant and equipment.

The fair value measurement was classified within Level 3 of the fair value hierarchy as it was based on significant inputs that are not observable, including cash flow projections.

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TAXES ON INCOME

The Company's pre-tax income from continuing operations before equity in earnings of equity method investees consisted of approximately 2.5 billion, $ 1.9 billion and $ 1.1 billion from U.S.

The Company's pre-tax income before equity in earnings of equity method investees consisted of approximately $ 1.2 billion, $ 2.5 billion and $ 1.9 billion from U.S.

operations and pre-tax income (loss) of $ 2 million, $ 148 million and $( 7 ) million from foreign operations for the years ended December 31, 2022, 2021 and 2020, respectively.

Pre-tax income from continuing operations before equity in earnings of equity method investees for U.S.

and foreign operations include pre-tax gains of $ 171 million and $ 143 million, respectively, from the sale of the Company's 40 % ownership interest in Q2 Solutions.

The components of income tax expense (benefit) for 2022, 2021 and 2020 were as follows:

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Impact of noncontrolling interests ( 1.4 ) ( 0.8 ) ( 0.9 )

Adjustment to state deferred tax liabilities ( 1.5 ) — —

Excess tax benefits on stock-based compensation arrangements ( 1.1 ) ( 0.7 ) ( 1.2 )

5 unchanged sentences

Effective tax rate 21.4 % 23.0 % 24.5 %

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets (liabilities) as of December 31, 2022 and 2021 were as follows:

QUEST DIAGNOSTICS INCORPORATED AND SUBSIDIARIES

1 unchanged sentence

(in millions unless otherwise indicated)

For the year ended December 31, 2019, the Company recognized a $ 12 million net income tax benefit due to the release of valuation allowances associated with certain net operating loss carryforwards.

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets (liabilities) as of December 31, 2021 and 2020 were as follows:

Non-current deferred tax assets (liabilities):

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The contingent liabilities for tax positions primarily relate to uncertainties associated with the realization of tax benefits derived from the allocation of income and expense among state jurisdictions, the characterization and timing of certain tax deductions associated with business combinations, certain tax credits and the deductibility of certain expenses and settlement payments.

The total amount of unrecognized tax benefits as of December 31, 2022, that, if recognized, would affect the effective income tax rate is $ 78 million.

Based upon the expiration of statutes of limitations, settlements and/or the conclusion of tax examinations, the Company believes it is reasonably possible that the total amount of unrecognized tax benefits may decrease by up to $ 13 million within the next twelve months.

QUEST DIAGNOSTICS INCORPORATED AND SUBSIDIARIES

1 unchanged sentence

(in millions unless otherwise indicated)

The total amount of unrecognized tax benefits as of December 31, 2021, that, if recognized, would affect the effective income tax rate is $ 90 million.

Accruals for interest expense on contingent tax liabilities are classified in income tax expense in the consolidated statements of operations.

Accruals for penalties have historically been immaterial.

Interest (income) expense included in income tax expense in each of the years ended December 31, 2021, 2020 and 2019 was approximately $( 2 ) million, $ 6 million and $ 5 million, respectively.

Interest expense (income) included in income tax expense in each of the years ended December 31, 2022, 2021 and 2020 was approximately $ 3 million, $( 2 ) million and $ 6 million, respectively.

As of December 31, 2022 and 2021, the Company had approximately $ 16 million and $ 20 million, respectively, accrued, net of the benefit of a federal and state deduction, for the payment of interest on uncertain tax positions.

39 unchanged sentences

Leased assets obtained in exchange for new operating lease liabilities $ 154 $ 150 $ 219

Leased assets obtained in exchange for new finance lease liabilities $ — $ — $ 1

During the year ended December 31, 2022, the Company amended a real estate lease and, based on the updated terms, the classification of the lease changed from a finance lease to an operating lease.

As a result, the Company recorded a $ 31 million operating lease right-of-use asset.

During the years ended December 31, 2022, 2021 and 2020, costs associated with donations, contributions, and other financial support through Quest for Health Equity, the Company's initiative with the Quest Diagnostics Foundation to reduce health disparities in underserved communities, were $ 93 million, $ 16 million and $ 2 million, respectively.

Such amounts are included in selling, general and administrative expenses in the Company's consolidated statement of operations.

Costs incurred during the year ended December 31, 2022 will be donated and contributed over several years.

QUEST DIAGNOSTICS INCORPORATED AND SUBSIDIARIES

11 unchanged sentences

Total $ 1,766 $ 1,707

For the year ended December 31, 2019, the Company recognized a $ 73 million gain in other operating (income) expense, net on the sale and leaseback of a property.

GOODWILL AND INTANGIBLE ASSETS

5 unchanged sentences

Principally all of the Company’s goodwill as of December 31, 2022 and 2021 was associated with its DIS business.

For the year ended December 31, 2021, goodwill acquired during the period was principally associated with the acquisitions of the assets of Mercy Health and assets of Labtech (see Note 5).

For the year ended December 31, 2021, adjustments to goodwill related to foreign currency translation.

For the year ended December 31, 2020, goodwill acquired during the period was principally associated with the acquisitions of Blueprint Genetics, assets of Memorial Hermann and MACL (see Note 5).

For the year ended December 31, 2022, goodwill acquired was principally associated with the acquisition of Pack Health (see Note 6).

For the year ended December 31, 2022, adjustments to goodwill related to an adjustment of the purchase price allocation for Labtech, partially offset by foreign currency translation.

For the year ended December 31, 2021, goodwill acquired was principally associated with the acquisitions of the assets of the outreach laboratory business of Mercy Health and the assets of Labtech (see Note 6).

For the year ended December 31, 2021, adjustments to goodwill related to foreign currency translation.

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Accrued interest 26 26

Income taxes payable 10 43

Merger consideration payable 23 5

Income taxes payable 2 10

Total $ 1,396 $ 1,600

16 unchanged sentences

Total long-term debt, net of current portion $ 3,978 $ 4,010

Finance Lease

During the year ended December 31, 2022, the Company amended a real estate lease and, based on the updated terms, the classification of the lease changed from a finance lease to an operating lease.

As of December 31, 2021, the $ 25 million carrying value of the finance lease was included in "other" in the table above.

Secured Receivables Credit Facility

During October 2021, the Company amended its $ 600 million secured receivables credit facility (the “Secured Receivables Credit Facility”), previously amended in October 2020, 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 2022 and a $ 250 million loan commitment maturing October 2023, and can issue up to $ 100 million of letters of credit (see Note 18) through October 2023.

During October 2022, the Company amended its secured receivables credit facility (the “Secured Receivables Credit Facility”), previously amended in October 2021, to extend the maturity dates for each underlying commitment by one year , while decreasing the aggregate borrowing capacity under the facility from $ 600 million to $ 525 million.

Under the Secured Receivables Credit Facility, the Company can borrow against a $ 425 million loan commitment, half of which matures in October 2023 and half of which matures in October 2024.

Additionally, the Company can issue up to $ 100 million of letters of credit (see Note 19) through October 2024.

Borrowings under the Secured Receivables Credit Facility are collateralized by certain domestic receivables.

As of December 31, 2021, interest on the borrowings under the Secured Receivables Credit Facility was based on either commercial paper rates for highly-rated issuers or LIBOR, plus a spread of 0.725 % to 0.80 %.

Interest on borrowings under the facility is based on either commercial paper rates for highly-rated issuers or the Term Secured Overnight Financing Rate, plus a spread of 0.725 % to 0.80 %.

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.

As of both December 31, 2022 and 2021, there were no outstanding borrowings under the Secured Receivables Credit Facility.

QUEST DIAGNOSTICS INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

(in millions unless otherwise indicated)

Senior Unsecured Revolving Credit Facility

During November 2021, the Company amended and restated the agreement for its $ 750 million senior unsecured revolving credit facility (the “Credit Facility” or "Senior Unsecured Revolving Credit Facility") to extend the maturity date to November 2026 while maintaining the borrowing capacity under the facility at $ 750 million.

The Company is party to a $ 750 million senior unsecured revolving credit facility (the “Credit Facility” or "Senior Unsecured Revolving Credit Facility") which matures in November 2026.

Under the Credit Facility, the Company can issue letters of credit totaling $ 150 million (see Note 19).

6 unchanged sentences

As of both December 31, 2022 and 2021, there were no outstanding borrowings under the Senior Unsecured Revolving Credit Facility.

QUEST DIAGNOSTICS INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

(in millions unless otherwise indicated)

Senior Notes Offerings

In 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 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 November 2020, the net proceeds from the 2031 Senior Notes, along with cash on hand, were used to redeem in full the outstanding indebtedness under the Company's senior notes due April 2021.

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 the net proceeds from the issuance, in December 2019, of the senior notes due June 2030.

For the year ended December 31, 2020, the Company recorded a loss on retirement of debt, principally comprised of premiums paid, of $ 9 million in other income, net.

All of the senior notes are unsecured obligations of the Company and rank equally with the Company's other senior unsecured obligations.

31 unchanged sentences

Certain of the Company's lease agreements include rental payments adjusted periodically for inflation or a market rate which are included in the lease liabilities.

During the year ended December 31, 2022, the Company amended a real estate lease and, based on the updated terms, the classification of the lease changed from a finance lease to an operating lease.

As a result, the Company recorded a $ 31 million operating lease right-of-use asset.

The Company's assets and liabilities for its lease agreements as of December 31, 2022 and 2021 were as follows:

38 unchanged sentences

The Company's discount rates for its operating leases were primarily determined using the Company's incremental borrowing rate.

The Company's weighted-average discount rate for its finance leases principally reflects the implicit interest rate on a lease obligation assumed in a business combination.

See Note 9 for cash flow information on cash paid for amounts included in the measurement of lease liabilities, leased assets obtained in exchange for new operating lease liabilities, and leased assets obtained in exchange for new finance lease liabilities for the years ended December 31, 2021, 2020 and 2019.

FINANCIAL INSTRUMENTS

See Note 10 for cash flow information on cash paid for amounts included in the measurement of lease liabilities and leased assets obtained in exchange for new operating lease liabilities for the years ended December 31, 2022, 2021 and 2020.

QUEST DIAGNOSTICS INCORPORATED AND SUBSIDIARIES

1 unchanged sentence

(in millions unless otherwise indicated)

FINANCIAL INSTRUMENTS

Interest Rate Derivatives – Cash Flow Hedges

4 unchanged sentences

As of December 31, 2022 and 2021, 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 December 31, 2021 December 31, 2021 December 31, 2020 December 31, 2020

Hedge Accounting Basis Adjustment (a)

Balance Sheet Classification December 31, 2022 December 31, 2021

Long-term debt $ 26 $ 38

(a) As of both December 31, 2021 and 2020, the entire balance is associated with remaining unamortized hedging adjustments on discounted relationships.

(a) As of both December 31, 2022 and 2021, the entire balance is associated with remaining unamortized hedging adjustments on discontinued relationships.

The following table presents the effect of fair value hedge accounting on the consolidated statements of operations for the years ended December 31, 2022, 2021 and 2020, respectively:

2022 2021 2020

Other income, net Other income, net Other income, net

Other (expense) income, net Other (expense) income, net Other (expense) income, net

Total for line item in which the effects of fair value hedges are recorded $ ( 55 ) $ 369 $ 76

27 unchanged sentences

Balance, December 31, 2020 ( 27 ) 8 ( 1 ) ( 1 ) ( 21 )

Other comprehensive income before reclassifications 12 — 1 — 13

Other comprehensive loss before reclassifications ( 7 ) ( 7 ) — — ( 14 )

Amounts reclassified from accumulated other comprehensive loss

Net current period other comprehensive income 15 — 3 — 18

Net current period other comprehensive income (loss) 13 ( 7 ) 1 — 7

Balance, December 31, 2021 ( 14 ) 1 — ( 1 ) ( 14 )

1 unchanged sentence

Amounts reclassified from accumulated other comprehensive loss — — 1 — 1

Net current period other comprehensive income (loss) 13 ( 7 ) 1 — 7

Net current period other comprehensive (loss) income ( 8 ) — 1 — ( 7 )

Balance, December 31, 2022 $ ( 22 ) $ 1 $ 1 $ ( 1 ) $ ( 21 )

On April 1, 2021, the Company sold its 40 % ownership interest in Q 2 Solutions, its clinical trials central laboratory services joint venture, to IQVIA, its joint venture partner.

As a result of the transaction, during the year ended December 31, 2021, $ 20 million of cumulative translation losses were reclassified from accumulated other comprehensive loss to other income, net.

See Note 7 for further details.

Additionally, for the year ended December 31, 2020, $ 3 million of cumulative translation losses were reclassified from accumulated other comprehensive loss to other operating (income) expense, net as a result of the sale of foreign subsidiaries.

Additionally, for the year ended December 31, 2020, $ 3 million of cumulative translation losses were reclassified from accumulated other comprehensive loss to other operating expense (income), net as a result of the sale of foreign subsidiaries.

QUEST DIAGNOSTICS INCORPORATED AND SUBSIDIARIES

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During each of the four quarters of 2020, the Company's Board of Directors declared a quarterly cash dividend of $ 0.56 per common share.

On February 3, 2022, the Company announced that its Board of Directors authorized a 6.5 % increase in its quarterly cash dividend from $ 0.62 to $ 0.66 per share, or $ 2.64 per share annually, commencing with the dividend payable in April 2022.

In February 2023, the Company announced that its Board of Directors authorized a 7.6 % increase in its quarterly cash dividend from $ 0.66 to $ 0.71 per share, or $ 2.84 per share annually, commencing with the dividend payable in April 2023.

Share Repurchase Program

In each of February 2021 and March 2021, the Company's Board of Directors increased the size of its share repurchase program by $ 1 billion.

In February 2022, the Company's Board of Directors increased the size of its share repurchase program by $ 1 billion.

As of December 31, 2022, $ 0.3 billion remained available under the Company's share repurchase authorization.

In February 2022, the Company's Board of Directors authorized the Company to repurchase an additional $ 1 billion of the Company's common stock.

In February 2023, the Company announced that its Board of Directors authorized the Company to repurchase an additional $ 1 billion of the Company's common stock.

The share repurchase authorization has no set expiration or termination date.

Share Repurchases

For the year ended December 31, 2022, the Company repurchased 10.1 million shares of its common stock for $ 1.4 billion.

For the year ended December 31, 2021, the Company repurchased 16.0 million shares of its common stock for $ 2.2 billion, including shares repurchased under ASRs.

5 unchanged sentences

For the year ended December 31, 2020, the Company repurchased 2.7 million shares of its common stock for $ 325 million.

For the year ended December 31, 2019, the Company repurchased 3.5 million shares of its common stock for $ 350 million.

Shares Reissued from Treasury Stock

24 unchanged sentences

For performance share units, the actual amount of shares earned is based on the achievement of the performance goals specified in the awards.

The performance goals for awards granted for 2019 were based on the financial performance of the Company.

The performance goals for awards granted in 2020, 2021 and 2022 were based on the financial performance of the Company, as well as relative TSR.

6 unchanged sentences

For the years ended December 31, 2022, 2021 and 2020, grants under the DLTIP totaled 10 thousand shares, 12 thousand shares and 14 thousand shares, respectively.

The Company's practice has been to issue shares related to its stock-based compensation program from shares of its common stock held in treasury or by issuing new shares of its common stock.

The Company's practice had been to issue shares related to its stock-based compensation program from shares of its common stock held in treasury or by issuing new shares of its common stock.

In January 2021, the Company began to issue shares related to its ESPP and stock-based compensation program solely from common stock held in treasury.

43 unchanged sentences

The weighted average assumptions used in valuing performance share units with a market-based relative TSR goal in the periods presented were:

2022 2021 2020

Fair value at grant date $ 130.00 $ 150.15 $ 144.03

22 unchanged sentences

Approximately 216 thousand shares, 200 thousand shares and 225 thousand shares of common stock were purchased by eligible employees in 2022, 2021 and 2020, respectively.

QUEST DIAGNOSTICS INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

(in millions unless otherwise indicated)

Defined Contribution Plans

4 unchanged sentences

The Company's expense for contributions to its defined contribution plans aggregated $ 95 million, $ 93 million and $ 64 million for 2022, 2021 and 2020, respectively.

QUEST DIAGNOSTICS INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

(in millions unless otherwise indicated)

Supplemental Deferred Compensation Plans

1 unchanged sentence

The maximum Company matching contribution is 5 % of eligible employee compensation.

During 2020, the Company temporarily suspended matching contributions;

matching contributions were reinstated in the third quarter of 2020.

The compensation deferred under this plan, together with Company matching amounts, are credited with earnings or losses measured by the mirrored rate of return on investments elected by plan participants.

44 unchanged sentences

In May 2021, the court denied the Company's motion to dismiss the complaint.

Discovery is proceeding.

AMCA Data Security Incident

13 unchanged sentences

Numerous putative class action lawsuits were filed against the Company related to the AMCA Data Security Incident.

Judicial Panel on Multidistrict Litigation transferred the cases still pending to, and consolidated them for pre-trial proceedings in, the U.S.

Judicial Panel on Multidistrict Litigation transferred the cases that were then still pending to, and consolidated them for pre-trial proceedings in, the U.S.

District Court for New Jersey.

1 unchanged sentence

In January 2020, the Company moved to dismiss the consolidated complaint;

the motion to dismiss is pending.

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.

the motion to dismiss was granted in part and denied in part.

Discovery is proceeding.

In addition, the Company has been notified that numerous state attorney general offices were investigating or otherwise seeking information and/or documents, and that certain U.S.

senators were seeking information, from the Company related to the AMCA Data Security Incident.

ReproSource Fertility Diagnostics, Inc.

(“ReproSource”), a subsidiary of the Company, is subject to two putative class action lawsuits in the U.S.

District Court for Massachusetts:

ReproSource Fertility Diagnostics, Inc.

and Gordon v.

ReproSource Fertility Diagnostics, Inc.

The class actions are related to a data security incident that occurred in August 2021 in which an unauthorized party may have accessed or acquired protected health information and personally identifiable information of ReproSource patients.

The complaints generally allege that ReproSource, among other claims, failed to adequately safeguard customers’ private information.

ReproSource has moved to dismiss both complaints.

A third putative class action pertaining to the same data security incident, Trouville v.

ReproSource Fertility Diagnostics, Inc., was filed in California state court.

The Company removed the case to federal court and moved to dismiss and/or transfer it to U.S.

District Court for Massachusetts.

Quest Diagnostics Incorporated

The Company is subject to a putative class action entitled Cole, et al.

v Quest Diagnostics Incorporated , which was filed in the U.

District Court for the Eastern District of California, for allegedly conspiring with Facebook to track customers’ internet communications on Company web platforms without authorization, in violation of the California Invasion of Privacy Act and the California Confidentiality of Medical Information Act .

The complaint alleged that the Company’s actions were an invasion of privacy and contributed to a loss of value in plaintiffs’ personally identifiable information.

The Company moved to dismiss the case or, in the alternative, transfer venue to the U.S.

District Court for New Jersey.

Subsequently, plaintiffs filed an amended complaint.

Other Legal Matters

5 unchanged sentences

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.

QUEST DIAGNOSTICS INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

(in millions unless otherwise indicated)

Management cannot predict the outcome of such matters.

15 unchanged sentences

Management believes that established reserves and present insurance coverage are sufficient to cover currently estimated exposures.

QUEST DIAGNOSTICS INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

(in millions unless otherwise indicated)

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, ACOs, and DCEs.

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 provides diagnostic information services to a broad range of customers, including patients, clinicians, hospitals, IDNs, health plans, employers, consumers, and ACOs.

The Company is the world's leading provider of diagnostic information services, which includes providing information and insights based on an 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 2022, 2021 and 2020.

2 unchanged sentences

As of December 31, 2022, 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.

QUEST DIAGNOSTICS INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

(in millions unless otherwise indicated)

The following table is a summary of segment information for the years ended December 31, 2022, 2021 and 2020.

13 unchanged sentences

Total operating income 1,428 2,381 1,971

Non-operating income (expense), net 218 ( 87 ) ( 155 )

Income from continuing operations before income taxes and equity in earnings of equity method investees

2,599 1,884 1,076

Non-operating (expense) income, net ( 193 ) 218 ( 87 )

Income before income taxes and equity in earnings of equity method investees 1,235 2,599 1,884

Income tax expense ( 264 ) ( 597 ) ( 460 )

Equity in earnings of equity method investees, net of taxes 44 78 75

Income from continuing operations 2,080 1,499 886

Income from discontinued operations, net of taxes — — 20

Net income 1,015 2,080 1,499

1 unchanged sentence

Net income attributable to Quest Diagnostics $ 946 $ 1,995 $ 1,431

QUEST DIAGNOSTICS INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

(in millions unless otherwise indicated)

Depreciation and amortization expense for the years ended December 31, 2022, 2021 and 2020 were as follows:

4 unchanged sentences

Total depreciation and amortization $ 437 $ 408 $ 361

QUEST DIAGNOSTICS INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

(in millions unless otherwise indicated)

Capital expenditures for the years ended December 31, 2022, 2021 and 2020 were as follows:

4 unchanged sentences

Total capital expenditures $ 404 $ 403 $ 418

Net revenues by major service for the years ended December 31, 2021, 2020 and 2019 were as follows:

The approximate percentage of net revenues by major service for the years ended December 31, 2022, 2021 and 2020 was as follows:

2022 2021 2020

4 unchanged sentences

All other 3 3 3

Total net revenues $ 10,788 $ 9,437 $ 7,726

DISCONTINUED OPERATIONS

Discontinued operations, net of taxes, for the year ended December 31, 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 year ended December 31, 2019 included a $ 28 million refund from the taxing authorities related to discontinued operations.

Net revenues 100 % 100 % 100 %

SUBSEQUENT EVENTS

Acquisition of Pack Health, LLC

On February 1, 2022, the Company acquired Pack Health, LLC ("Pack Health"), a patient engagement company that helps individuals adopt healthier behaviors to improve outcomes, in an all cash transaction for $ 105 million with up to $ 20 million of contingent consideration if certain revenue benchmarks are achieved.

The preliminary purchase price allocation for the acquisition, which will be accounted for as a business combination, is not provided as the appraisal necessary to assess the fair values of assets acquired and liabilities assumed is not yet complete, but a significant portion of the purchase price is expected to be allocated to intangible assets and goodwill.

QUEST DIAGNOSTICS INCORPORATED AND SUBSIDIARIES

SCHEDULE II - VALUATION ACCOUNTS AND RESERVES

(in millions)

Beginning of Year Provision for Credit Losses Net Deductions

and Other Balance at

Allowance for credit losses $ 28 $ 4 $ 1 (a) $ 31

Allowance for credit losses $ 15 $ 19 $ 6 (a) $ 28

Doubtful accounts and allowances $ 15 $ 11 $ 11 (a) $ 15

(a) Primarily represents the write-off of accounts receivable, net of recoveries.

During February 2023, the Company announced that it had entered into a definitive agreement to acquire select assets of the laboratory services business of New York-Presbyterian, which serves providers and patients in New York, as well as the Tri-State Area and beyond.

The transaction, which is expected to close during the three months ended June 30, 2023, remains subject to customary closing conditions.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures