Slide 1: Vote FOR the Company's Say-on-Pay Proposal
Vote FOR for the Company's Say-on-Pay Proposal The Board recommends that the Company's shareholders vote FOR for the Company's 2015 Say-on-Pay Proposal o The Company's Board of Directors firmly believes that our executive compensation program is designed to pay for performance and aligns the interes
Slide 2: Recent Performance Highlights
Recent Performance Highlights We are making good progress on the execution of our five-point strategy and the stock market has recognized this in recent quarters Restore growth o We are executing on sales and marketing excellence; growing esoteric testing; and providing professional lab services to
Slide 3: Alignment of Executive Compensation Programs
Alignment of Executive Compensation Programs The Company's executive compensation programs are aligned with shareholder interests, our strategy, and pay for performance principles o Our executive compensation programs* are designed to attract and retain talented executives in a competitive marketpla
Slide 4: Overview of Executive Pay Structure
Overview of Executive Pay Structure Our executive pay programs emphasize: i) variable over fixed pay, ii) long-term incentives over cash, and iii) the stock price as a measure of performance Executive Compensation Mix Base Salary Annual Incentive Target Long-Term Incentives 73% 15% 12% CEO Variable
Slide 5: Incentive Plan Objectives
Incentive Plan Objectives Our incentive programs provide line-of-sight to our operating plan, shareholder interests and value creation over appropriate time horizons --------------------------------------- Compensation Vehicle --------------------------------------- Senior Management Incentive Plan
Slide 6: SMIP Highlights
SMIP Highlights Annual incentives are based on performance versus target against key financial and operating goals which are linked to the Company's annual operating plan o Targets are designed to be challenging yet attainable based on conditions within our segment of the healthcare industry. o Metr
Slide 7: Performance Share Highlights
Performance Share Highlights Performance share metrics and associated weights provide strong linkages with strategic priorities over successive three-year cycles ---------------------------- -------------------------- Metrics Weight for Perf. Shares in Cydes Commencing in 2012-14 -------------------
Slide 8: Rigorous Goal Setting/Pay for Performance
Rigorous Goal Setting/Pay for Performance Historical SMIP and performance share payouts demonstrate both the rigor exercised in setting goals and alignment of executive pay with performance ----------------- ------------------------- ------------------------------- Payout History ----------------- -
Slide 9: Shareholder Support and Consistency in Approach
Shareholder Support and Consistency in Approach Our shareholders have supported our executive pay programs and our approach has remained consistent, with ongoing actions to improve alignment Shareholder and Proxy Advisor Support o Over the past two years, shareholders approved Quest's executive comp
Slide 10: ISS Rationale and Management Response
ISS Rationale and Management Response ISS contends there is a significant disconnect between CEO pay and Total Shareholder Return ("TSR") for 2012-14 o The Compensation Committee regularly reviews alignment between relative TSR and realizable pay and receives advice from its independent consultant,
Slide 11: ISS Rationale and Management Response (Continued)
ISS Rationale and Management Response (Continued) ISS also contends that certain 2014 annual incentive metrics were set at or close to 2013 metrics o In fact, 2014 targeted modest improvement with respect to target adjusted EPS, despite significant pricing headwinds in our industry. o Headwinds incl
Slide 12: ISS Rationale and Management Response (Continued)
ISS Rationale and Management Response (Continued) ISS also highlighted that our Employee Engagement performance goal in our 2014 annual incentive plan was set at the same level as 2013 o Since 2012, we have been engaged in extensive restructuring of our business operations, involving ongoing reviews
Slide 13: ISS Rationale and Management Response (Continued)
ISS Rationale and Management Response (Continued) ISS contends that the majority of executives' equity awards lack performance conditions, which is driven by that firm's view of executive stock options o Our Compensation Committee disagrees with that view, and believes that options remain an appropr
Slide 14: ISS Rationale and Management Response (Continued)
ISS Rationale and Management Response (Continued) ISS contends that the Company's failure to prospectively disclose the targets for the 2014 performance shares makes it impossible to assess the rigor of the goals for these awards o The Company's practice of not prospectively disclosing the goals for
Slide 15: Conclusion
Conclusion Vote FOR the Advisory Vote to Approve Named Executive Officer Compensation o Our Board of Directors has demonstrated its commitment to aligning executive pay with performance. o Our program has a strong foundation and reflects many best practices. o Our Compensation Committee has taken re
Slide 16: Appendix A - Quest Diagnostics Executive Pay Practices
Appendix A - Quest Diagnostics Executive Pay Practices What we do and don't do What we do o Link executive pay to performance o Maintain a clawback policy that covers both equity and cash incentive awards to current and former executive officers and key employees o Maintain share ownership and reten
Slide 17: Appendix B - Non-GAAP Reconciliation
Appendix B - Non-GAAP Reconciliation Adjusted Diluted EPS ----------------------------------------------- ------- ------- 2014 2013 ----------------------------------------------- ------- ------- Diluted earnings per common share $3.78 $5.31 ----------------------------------------------- ------- --
Slide 18: Appendix B - Non-GAAP Reconciliation
Appendix B — Non-GAAP Reconciliation Adjusted Diluted EPS 18 2014 2013 Diluted earnings percommon share $378 $531 Gain on sale of ibrutinib royalty rights (a) - (1.95) Restructuring and integration charges (b) 053 0.47 Favorable resolution of tax contingencies (0.30) - Loss on sale of Enterix - Oo”