Quest Diagnostics 2007 Annual Report Download - page 86

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The following table summarizes the Company’s preliminary purchase price allocation of the cost to acquire
AmeriPath:
Estimated Fair Values as
of May 31, 2007
Current assets .................................................... $ 199,218
Property and equipment . .......................................... 127,503
Intangible assets .................................................. 564,800
Goodwill ......................................................... 1,460,687
Other assets . . .................................................... 67,685
Total assets acquired ......................................... 2,419,893
Current liabilities ................................................. 142,845
Long-term liabilities .............................................. 260,593
Long-term debt ................................................... 801,424
Total liabilities assumed ...................................... 1,204,862
Net assets acquired. .......................................... $1,215,031
The acquired amortizable intangibles are being amortized over their estimated useful lives as follows:
Estimated
Fair Value
Weighted Average
Useful Life
Customer relationships ...................................... $327,500 20 years
Tradename ................................................. 6,000 5 years
Non-compete agreement. .................................... 5,800 5 years
In addition to the amortizable intangibles noted above, $226 million was allocated to certain tradenames,
which are not subject to amortization.
Of the amount allocated to goodwill and intangible assets, approximately $100 million is expected to be
deductible for tax purposes.
2006 Acquisitions
Acquisition of Focus Diagnostics
On July 3, 2006, the Company completed its acquisition of Focus Technologies Holding Company (“Focus
Diagnostics”) in an all-cash transaction valued at $208 million, including approximately $3 million of assumed
debt. 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. The Company financed the aggregate purchase price of
$205 million, which included $0.5 million of related transaction costs, and the repayment of substantially all of
Focus Diagnostics’ outstanding debt with $135 million of borrowings under its secured receivables credit facility
and with cash on-hand.
The acquisition of Focus Diagnostics was accounted for under the purchase method of accounting. As such,
the cost to acquire Focus Diagnostics was allocated to the respective assets and liabilities acquired based on their
estimated fair values as of the closing date. The consolidated financial statements include the results of operations
of Focus Diagnostics subsequent to the closing of the acquisition.
Of the aggregate purchase price of $205 million, $142 million was allocated to goodwill, $33 million was
allocated to customer relationships that are being amortized over 10-15 years and $9.1 million was allocated to
trade names that are not subject to amortization. Substantially all of the goodwill is not expected to be deductible
for tax purposes.
Supplemental pro forma combined financial information has not been presented as the acquisition is not
material to the Company’s consolidated financial statements.
F-16
QUEST DIAGNOSTICS INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(dollars in thousands unless otherwise indicated)