Quest Diagnostics 2007 Annual Report Download - page 56

Acquisition of AmeriPath
On May 31, 2007, we completed the acquisition of AmeriPath, in an all-cash transaction valued at
approximately $2 billion, including approximately $780 million of assumed debt and related accrued interest.
AmeriPath is a leading provider of anatomic pathology, including dermatopathology, and esoteric testing which
generates annual revenues of approximately $800 million.
Through the acquisition, we acquired all of AmeriPath’s operations. AmeriPath, with its team of
approximately 400 board certified pathologists, operates 40 outpatient anatomic pathology laboratories and
provides inpatient anatomic pathology and medical director services for approximately 200 hospitals throughout
the country. We financed the all-cash purchase price and related transaction costs, together with the repayment of
approximately $780 million of principal and related accrued interest representing substantially all of AmeriPath’s
debt, as well as the refinancing of the $450 million term loan used to finance the acquisition of HemoCue with
$1.6 billion of borrowings under a new five-year term loan facility, $780 million of borrowings under a new one-
year bridge loan, and cash on-hand. In June 2007, we completed an $800 million senior notes offering. The net
proceeds of the senior notes offering were used to repay the $780 million borrowed under the bridge loan. The
acquisition was accounted for under the purchase method of accounting.
During the fourth quarter of 2007, we finalized major components of our plan for the integration of
AmeriPath and recorded the related costs of the integration. These costs were not material to our results of
operations or cash flows.
Acquisition of HemoCue
On January 31, 2007, we acquired HemoCue, a Sweden-based company specializing in point-of-care testing,
in an all-cash transaction valued at approximately $450 million, including $113 million of assumed debt of
HemoCue. The transaction was financed through an interim credit facility, which was refinanced during the
second quarter of 2007 in connection with the financing of the AmeriPath acquisition. This acquisition did not
have a material impact on our 2007 financial results.
HemoCue is the leading international provider in point-of-care testing for hemoglobin, with a growing share
in professional glucose and microalbumin testing. HemoCue has recently received FDA clearance for a test to
determine white blood cell counts and has applied to receive CLIA-waived status. This acquisition complements
our point-of-care testing for infectious disease and cancer, including new tests for colorectal cancer screening and
Herpes Simplex Type 2. The acquisition increases our presence in the growing point-of-care testing market and
we plan to leverage HemoCue’s international presence to reach new markets around the world.
Acquisition of Enterix
On August 31, 2006, we completed the acquisition of Enterix, a privately held Australia-based company that
developed and manufactures the InSureFecal Immunochemical Test, an FDA-cleared test for use in screening
for colorectal cancer and other sources of lower gastrointestinal bleeding, for approximately $44 million in cash.
Acquisition of Focus Diagnostics
On July 3, 2006, we completed the acquisition of Focus Diagnostics in an all-cash transaction valued at
$208 million, including approximately $3 million of assumed debt. We financed the acquisition and related
transaction costs and the repayment of substantially all of Focus Diagnostics’ outstanding debt with $135 million
of borrowings under our secured receivables credit facility and with cash on-hand.
Focus Diagnostics is a leading provider of infectious and immunologic disease testing and develops and
markets diagnostic products. It offers its reference testing services and diagnostic products to large academic
medical centers, hospitals and commercial laboratories.
Critical Accounting Policies
The preparation of financial statements in conformity with accounting principles generally accepted in the
United States of America requires us to make estimates and assumptions and select accounting policies that affect
our reported financial results and the disclosure of contingent assets and liabilities.
While many operational aspects of our business are subject to complex federal, state and local regulations,
the accounting for most of our business is generally straightforward with net revenues primarily recognized upon
completion of the testing process. Our revenues are primarily comprised of a high volume of relatively low dollar
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