Quest Diagnostics 2003 Annual Report Download - page 84

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QUEST DIAGNOSTICS INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(dollars in thousands unless otherwise indicated)
identified. Of the $736 million allocated to goodwill, approximately $85 million is expected to be deductible for
tax purposes.
Acquisition of American Medical Laboratories, Incorporated
On April 1, 2002, the Company completed its acquisition of all of the outstanding voting stock of
American Medical Laboratories, Incorporated, (“AML’’) and an affiliated company of AML, LabPortal, Inc.
(“LabPortal’’), a provider of electronic connectivity products, in an all-cash transaction with a combined value
of approximately $500 million, which included the assumption of approximately $160 million in debt.
Through the acquisition of AML, Quest Diagnostics acquired all of AML’s operations, including two
full-service laboratories, 51 patient service centers, and hospital sales, service and logistics capabilities. The
all-cash purchase price of approximately $335 million and related transaction costs, together with the repayment
of approximately $150 million of principal and related accrued interest, representing substantially all of AML’s
debt, was financed by Quest Diagnostics with cash on-hand, $300 million of borrowings under its secured
receivables credit facility and $175 million of borrowings under its unsecured revolving credit facility. During
2002, Quest Diagnostics repaid all of the $475 million in borrowings related to the acquisition of AML.
The acquisition of AML was accounted for under the purchase method of accounting. As such, the cost to
acquire AML has been allocated to the assets and liabilities acquired based on estimated fair values as of the
closing date. The consolidated financial statements include the results of operations of AML subsequent to the
closing of the acquisition.
The following table summarizes the Company’s purchase price allocation related to the acquisition of AML
based on the estimated fair value of the assets acquired and liabilities assumed on the acquisition date.
Fair Values
as of
April 1, 2002
Current assets ............................................................. $ 83,403
Property, plant and equipment .............................................. 31,475
Goodwill .................................................................. 426,314
Other assets ............................................................... 8,211
Total assets acquired ..................................................... 549,403
Current portion of long-term debt ........................................... 11,834
Other current liabilities ..................................................... 51,403
Long-term debt ............................................................ 139,465
Other liabilities ............................................................ 4,925
Total liabilities assumed.................................................. 207,627
Net assets acquired ...................................................... $341,776
Based on management’s review of the net assets acquired and consultations with valuation specialists, no
intangible assets meeting the criteria under SFAS No. 141, “Business Combinations’’, were identified. Of the
$426 million allocated to goodwill, approximately $17 million is expected to be deductible for tax purposes.
Acquisition of LabPortal
The all-cash purchase price for LabPortal of approximately $4 million and related transaction costs,
together with the repayment of all of LabPortal’s outstanding debt of approximately $7 million and related
accrued interest, was financed by Quest Diagnostics with cash on-hand. The acquisition of LabPortal was
accounted for under the purchase method of accounting. As such, the cost to acquire LabPortal has been
allocated to the assets and liabilities acquired based on estimated fair values as of the closing date, including
approximately $8 million of goodwill. The consolidated financial statements include the results of operations of
LabPortal subsequent to the closing of the acquisition.
F-15