Quest Diagnostics 2008 Annual Report Download - page 109

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laboratories. The clinical testing business accounted for greater than 90% of net revenues from continuing
operations in 2008, 2007 and 2006.
All other operating segments include the Company’s non-clinical testing businesses and consist of its risk
assessment services business, its clinical trials testing business, its healthcare information technology business,
MedPlus and its diagnostics products businesses. The Company’s risk assessment business provides underwriting
support services to the life insurance industry including teleunderwriting, paramedical examinations, laboratory
testing and medical record retrieval. The Company’s clinical trials testing business provides clinical testing
performed in connection with clinical research trials on new drugs and vaccines. MedPlus is a developer and
integrator of clinical connectivity and data management solutions for healthcare organizations, physicians and
clinicians. The Company’s diagnostics products business manufactures and markets diagnostic test kits.
On April 19, 2006, the Company decided to discontinue NID’s operations and results of operations for NID
have been classified as discontinued operations for all years presented (see Note 15).
During the third quarter of 2006, the Company acquired Focus Diagnostics and Enterix, in the first quarter
of 2007, it acquired Hemocue, and in the second quarter of 2007, it acquired AmeriPath (see Note 3). Enterix
and Hemocue are included in the Company’s other operating segments. The majority of Focus Diagnostics’
operations are included in the Company’s clinical testing business, with the remainder in other operating
segments. AmeriPath’s operations are included in the Company’s clinical testing business.
At December 31, 2008, substantially all of the Company’s services are provided within the United States,
and substantially all of the Company’s assets are located within the United States.
The following table is a summary of segment information for the three years ended December 31, 2008,
2007 and 2006. Segment asset information is not presented since it is not reported to or used by the chief
operating decision maker at the operating segment level. Operating earnings (loss) of each segment represents net
revenues less directly identifiable expenses to arrive at operating income for the segment. General management
and administrative corporate expenses, including amortization of intangible assets, are included in general
corporate expenses below. The accounting policies of the segments are the same as those of the Company as set
forth in Note 2.
2008 2007 2006
Net revenues:
Clinical testing business ............................. $6,617,006 (a) $6,108,746 (b) $5,782,926
All other operating segments......................... 632,441 596,161 485,733
Total net revenues................................... $7,249,447 $6,704,907 $6,268,659
Operating earnings (loss):
Clinical testing business ............................. $1,318,904 (a) $1,191,139 (b)(c) $1,230,383 (d)
All other operating segments......................... 56,677 (e) 45,285 (f) 16,484
General corporate expenses .......................... (153,205) (145,088) (118,790)
Total operating income .............................. 1,222,376 1,091,336 1,128,077
Non-operating expenses, net ......................... (203,424)(g) (178,934)(h) (94,804)(i)
Income from continuing operations before income
taxes ............................................. 1,018,952 912,402 1,033,273
Income tax expense ................................ 386,768 (j) 358,574 407,581
Income from continuing operations ................. 632,184 553,828 625,692
Loss from discontinued operations, net of taxes . . . . (50,694)(k) (213,889)(k) (39,271)(k)
Net income ......................................... $ 581,490 $ 339,939 $ 586,421
(a) For 2008, management estimates the impact of hurricanes in the third quarter of 2008 reduced consolidated
revenue growth and the increase in operating income for the year ended December 31, 2008 by
approximately $10 million and $8 million, respectively, compared to the prior year. In addition, operating
income for 2008 includes $14.0 million of charges, primarily associated with workforce reductions.
F-37
QUEST DIAGNOSTICS INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(dollars in thousands unless otherwise indicated)