Quest Diagnostics 2005 Annual Report Download - page 108

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QUEST DIAGNOSTICS INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(dollars in thousands unless otherwise indicated)
2005 2004 2003
Net revenues:
Clinical laboratory testing business ................................. $5,247,465 $4,910,753 $4,555,688
All other operating segments ....................................... 256,246 215,848 182,270
Total net revenues ................................................. $5,503,711 $5,126,601 $4,737,958
Operating earnings (loss):
Clinical laboratory testing business ................................. $1,083,395 (a) $ 971,395 $ 863,498 (b)
All other operating segments ....................................... (30,750)(c) 19,331 18,227
General corporate expenses ........................................ (84,534) (99,509)(d) (85,271)
Total operating income ............................................ 968,111 891,217 796,454
Non-operating expenses, net........................................ (57,657) (56,091) (58,656)
Income before income taxes ....................................... 910,454 835,126 737,798
Income tax expense ............................................... 364,177 335,931 301,081
Net income ....................................................... $ 546,277 $ 499,195 $ 436,717
2005 2004 2003
Depreciation and amortization:
Clinical laboratory testing business ................................. $ 156,920 $ 148,803 $ 134,101
All other operating segments ....................................... 13,289 11,987 10,263
General corporate ................................................. 5,915 7,936 9,539
Total depreciation and amortization ................................. $ 176,124 $ 168,726 $ 153,903
Capital expenditures:
Clinical laboratory testing business ................................. $ 204,471 $ 167,203 $ 161,421
All other operating segments ....................................... 15,889 6,543 9,706
General corporate ................................................. 3,910 2,379 3,514
Total capital expenditures .......................................... $ 224,270 $ 176,125 $ 174,641
(a) During 2005, the Company recorded a $6.2 million charge primarily related to forgiving amounts owed by
patients and physicians, and related property damage as a result of the hurricanes in the Gulf Coast.
(b) During 2003, operating income includes $3.3 million of gains on the sale of certain operating assets, par-
tially offset by a $1.1 million charge associated with the integration of Unilab (See Note 4).
(c) During the fourth quarter of 2005, NID instituted its second product hold due to quality issues. The hold
remains in effect for substantially all of NID’s products while NID works to address the issues and return
product to market. The latest product hold has caused the Company to reevaluate the financial outlook for
NID. As a result of this analysis, the Company recorded a charge of $16 million in the fourth quarter to
write off certain of NID’s assets. The charge includes the write-off of all of the goodwill associated with
NID of $7.5 million and other write-offs totaling $8.5 million, principally related to products and equip-
ment inventory. In addition, during the second quarter of 2005, in connection with its first product hold,
NID recorded a charge of approximately $3 million, principally related to products and equipment invento-
ry. These charges, coupled with the operating losses at NID stemming from the product holds, together
with the costs to rectify NID’s quality issues and comply with an ongoing government investigation and
regulatory review of NID, have reduced operating income compared to the prior year by approximately
$50 million.
(d) During 2004, the Company recorded a $10.3 million charge associated with the acceleration of certain
pension obligations in connection with the succession of the Company’s prior CEO.
F-31