Quest Diagnostics 2007 Annual Report Download - page 87

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Acquisition of Enterix
On August 31, 2006, the Company completed its acquisition of Enterix Inc. (“Enterix”), a privately held
Australia-based company that developed and manufactures the InSure Fecal Immunochemical Test, a Food and
Drug Administration (“FDA”)-cleared test for use in screening for colorectal cancer and other sources of lower
gastrointestinal bleeding, for approximately $44 million in cash. The acquisition is not material to the Company’s
consolidated financial statements.
2005 Acquisition
Acquisition of LabOne, Inc.
On November 1, 2005, the Company completed its acquisition of LabOne, Inc. (“LabOne”) in a transaction
valued at approximately $947 million, including approximately $138 million of assumed debt of LabOne. LabOne
provides health screening and risk assessment services to life insurance companies, as well as clinical diagnostic
testing services to healthcare providers and drugs-of-abuse testing to employers.
Under the terms of the merger agreement, the Company paid $43.90 per common share in cash or $768
million in total to acquire all of the outstanding common shares of LabOne. In addition, the Company paid $33
million in cash for outstanding stock options of LabOne. Pursuant to the terms of the merger agreement, upon the
change in control of LabOne, LabOne’s outstanding stock options became fully vested and exercisable and were
cancelled in exchange for the right to receive an amount, for each share subject to the stock option, equal to the
excess of $43.90 per share over the exercise price per share of such option. The aggregate purchase price of
$810 million includes transaction costs of approximately $9 million.
In conjunction with the acquisition of LabOne, the Company repaid approximately $127 million of debt,
representing substantially all of LabOne’s existing outstanding debt as of November 1, 2005.
The Company financed the all cash purchase price and related transaction costs associated with the LabOne
acquisition, and the repayment of substantially all of LabOne’s outstanding debt with the net proceeds from a
$900 million private placement of senior notes (see Note 10) and cash on-hand.
Through the acquisition of LabOne, the Company acquired all of LabOne’s operations, including its health
screening and risk assessment services for life insurance companies, its clinical diagnostic testing services, and its
drugs-of-abuse testing for employers.
Pro Forma Combined Financial Information
The following unaudited pro forma combined financial information for the years ended December 31, 2007
and 2006 assumes that the AmeriPath acquisition and related financing, including the Company’s June 2007
senior notes offering, were completed on January 1, 2006. The unaudited pro forma combined financial
information for the year ended December 31, 2005 assumes that the LabOne acquisition was completed on
January 1, 2005. Supplemental pro forma combined financial information for HemoCue, Focus and Enterix has
not been presented as the acquisitions are not material to the Company’s consolidated results of operations (in
thousands, except per share data).
2007 2006 2005
Net revenues ................................................. $7,038,781 $7,020,980 $5,889,615
Net income .................................................. 263,255 593,677 547,643
Basic earnings per common share:
Net income .................................................. $ 1.36 $ 3.01 $ 2.71
Weighted average common shares outstanding – basic. . . ....... 193,241 196,985 201,833
Diluted earnings per common share:
Net income .................................................. $ 1.35 $ 2.98 $ 2.66
Weighted average common shares outstanding – diluted . ....... 195,262 199,542 205,530
The unaudited pro forma combined financial information presented above reflects certain reclassifications to
the historical financial statements of AmeriPath and LabOne to conform the acquired companies’ accounting
policies and classification of certain costs and expenses to that of Quest Diagnostics. These adjustments had no
impact on pro forma net income. Pro forma results for the year ended December 31, 2007 exclude transaction
F-17
QUEST DIAGNOSTICS INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(dollars in thousands unless otherwise indicated)