Quest Diagnostics 2008 Annual Report Download - page 89

Download and view the complete annual report

Please find page 89 of the 2008 Quest Diagnostics annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 128

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128

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 (income) 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, 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
generated 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 testing locations 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 five-year term loan facility, $780 million of borrowings under a 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 bridge loan. See Note 9 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. The consolidated financial statements include the results of operations of AmeriPath
subsequent to the closing of the acquisition.
The following table summarizes the Company’s purchase price allocation of the cost to acquire AmeriPath:
Estimated
Fair Values as of
May 31, 2007
Current assets............................................................ $ 200,930
Property and equipment . . . ............................................... 125,817
Intangible assets . ........................................................ 561,300
Goodwill ................................................................ 1,415,193
Other assets ............................................................. 67,685
Total assets acquired . ............................................... 2,370,925
Current liabilities ........................................................ 141,435
Long-term liabilities...................................................... 213,044
Long-term debt . . ........................................................ 801,424
Total liabilities assumed ............................................. 1,155,903
Net assets acquired . . . ............................................... $1,215,022
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
Non-compete agreement. .................................... 5,800 5 years
Tradename ................................................. 2,500 2 years
F-17
QUEST DIAGNOSTICS INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(dollars in thousands unless otherwise indicated)