Quest Diagnostics 2007 Annual Report Download - page 85

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The following table summarizes the Company’s purchase price allocation of the cost to acquire HemoCue:
Fair Values as of
January 31, 2007
Current assets............................................................ $ 59,323
Property, plant and equipment ............................................ 21,045
Intangible assets . ........................................................ 134,668
Goodwill ................................................................ 319,166
Other assets ............................................................. 633
Total assets acquired . ............................................... 534,835
Current liabilities ........................................................ 21,245
Long-term liabilities...................................................... 45,850
Long-term debt . . ........................................................ 123,910
Total liabilities assumed ............................................. 191,005
Net assets acquired . . . ............................................... $343,830
The acquired amortizable intangibles are being amortized over their estimated useful lives as follows:
Estimated
Fair Value
Weighted Average
Useful Life
Customer relationships ...................................... $38,046 20 years
Technology ................................................ 38,764 14 years
In addition to the amortizable intangibles noted above, $53.8 million was allocated to tradenames, which is
not subject to amortization, and $4.0 million was allocated to in-process research and development (“IPR&D”).
The IPR&D was expensed in the Company’s results of operations during the first quarter of 2007, in accordance
with FASB Interpretation No. 4, “Applicability of FASB Statement No. 2 to Business Combinations Accounted
for by the Purchase Method”, and is included in “other operating expense, net” within the consolidated statements
of operations.
Supplemental pro forma combined financial information has not been presented as the acquisition is not
material to the Company’s consolidated results of operations.
Acquisition of AmeriPath
On May 31, 2007, the Company completed its acquisition of AmeriPath Group Holdings, Inc. (“AmeriPath”),
in an all-cash transaction valued at approximately $2.0 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 and generates annual revenues of approximately $800 million.
Through the acquisition, the Company 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 United States. The Company 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 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, the Company 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. See Note 10 for further descriptions of the Company’s debt outstanding.
The acquisition of AmeriPath was accounted for under the purchase method of accounting. As such, the cost
to acquire AmeriPath was allocated to the respective assets and liabilities acquired based on their estimated fair
values as of the closing date. A preliminary allocation of the cost to acquire AmeriPath has been made to certain
assets and liabilities of AmeriPath based on preliminary estimates. The Company is continuing to assess the
estimated fair values of certain of the assets and liabilities acquired. The consolidated financial statements include
the results of operations of AmeriPath subsequent to the closing of the acquisition.
F-15
QUEST DIAGNOSTICS INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(dollars in thousands unless otherwise indicated)