Quest Diagnostics 2007 Annual Report Download - page 88

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related costs of $44 million, which were incurred and expensed by AmeriPath in conjunction with its acquisition
by Quest Diagnostics. Pro forma results for the year ended December 31, 2005 exclude $14.3 million of
transaction related costs, which were incurred and expensed by LabOne in conjunction with its acquisition by
Quest Diagnostics.
4. INTEGRATION OF ACQUIRED BUSINESSES
Integration of AmeriPath
During the fourth quarter of 2007, the Company finalized major components of its plan for the integration of
AmeriPath and recorded the related costs of the integration. These costs were not material to the Company’s
results of operations or cash flows.
Integration of LabOne
During the first quarter of 2006, the Company finalized its plan related to the integration of LabOne. The
plan focuses on rationalizing the Company’s testing capacity, infrastructure and support services in markets which
are served by both LabOne and Quest Diagnostics.
In conjunction with finalizing the LabOne integration, the Company recorded $23 million of costs during the
first quarter of 2006. The majority of these costs relate to employee severance. Employee groups affected as a
result of this plan included those involved in the testing of specimens, as well as administrative and other support
functions. Of the total costs indicated above, $21 million related to actions that impact Quest Diagnostics’
employees and its operations and were comprised principally of employee severance benefits for approximately
600 employees. These costs were accounted for as a charge to earnings and included in “other operating expense,
net” within the consolidated statements of operations.
In addition, $2.6 million of integration costs, related to actions that impact the employees and operations of
LabOne, were accounted for as a cost of the LabOne acquisition and included in goodwill during the first quarter
of 2006. Of the $2.6 million, $1.2 million related to asset write-offs with the remainder primarily associated with
employee severance benefits for approximately 95 employees.
As of December 31, 2007, accruals remaining related to the LabOne integration totaled $5.8 million.
5. TAXES ON INCOME
The Company’s pretax income (loss) from continuing operations consisted of $920 million, $1.02 billion and
$943 million from U.S. operations and approximately $(7.1) million, $8.6 million and $7.2 million from foreign
operations for the years ended December 31, 2007, 2006 and 2005, respectively.
The components of income tax expense (benefit) for 2007, 2006 and 2005 were as follows:
2007 2006 2005
Current:
Federal . . ............................................................ $267,138 $360,806 $304,117
State and local....................................................... 59,625 93,292 63,652
Foreign. . ............................................................ 1,093 4,586 2,081
Deferred:
Federal . . ............................................................ 23,787 (26,897) 2,614
State and local....................................................... 10,774 (24,206) 4,348
Foreign. . ............................................................ (3,843) - -
Total. . ............................................................ $358,574 $407,581 $376,812
F-18
QUEST DIAGNOSTICS INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(dollars in thousands unless otherwise indicated)