Quest Diagnostics 2011 Annual Report Download - page 60

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December 31, 2011 included $52 million of pre-tax charges, or $0.20 per diluted share, incurred in conjunction
with further restructuring and integrating our business consisting of $42 million of pre-tax charges, principally
associated with workforce reductions, with the remainder principally professional fees. We also recorded fourth
quarter pre-tax charges of $5.6 million, or $0.02 per diluted share, associated with severance and other separation
benefits as well as accelerated vesting of certain equity awards in connection with the succession of our CEO.
Results for the year ended December 31, 2011 also included pre-tax transaction costs of $20 million, or $0.09
per diluted share, associated with the acquisitions of Athena and Celera. Of these costs, $16.9 million, primarily
related to professional fees, were recorded in selling, general and administrative expenses and $3.1 million of
financing related costs were included in interest expense, net. In addition, we estimate that the impact of severe
weather during the first quarter of 2011 adversely affected operating income for the year ended December 31,
2011 by $18.5 million, or $0.07 per diluted share.
Results for the year ended December 31, 2011 also included discrete income tax benefits of $0.11 per
diluted share, primarily associated with certain state tax planning initiatives and the favorable resolution of certain
tax contingencies. In addition, lower outstanding share counts, resulting from share repurchases, contributed $0.28
of earnings per share improvement, compared to the prior year.
Results for the year ended December 31, 2010 were affected by a number of items which impacted earnings
per diluted share by $0.17. During 2010, we recorded pre-tax charges of $27 million, or $0.09 per diluted share,
principally associated with workforce reductions in the first and fourth quarters. Results for the year ended
December 31, 2010 also included a $9.6 million fourth quarter pre-tax charge, or $0.03 per diluted share,
associated with the settlement of employment litigation. In addition, we estimate that the impact of severe
weather during the first quarter of 2010 adversely affected operating income for the year ended December 31,
2010 by $14.1 million, or $0.05 per diluted share.
Results for the year ended December 31, 2010 also included discrete income tax benefits of $0.12 per
diluted share, primarily associated with the favorable resolution of certain tax contingencies.
After considering the impact of the items noted above on the year-over-year comparisons, operating
performance in 2011 declined compared to the prior year due to reduced revenues (before acquisitions) and
higher costs principally associated with employee compensation and benefits, and investments we have made in
our sales and service capabilities.
Net Revenues
Net revenues for the year ended December 31, 2011 were 1.9% above the prior year level with the Athena
and Celera acquisitions contributing 2.2% to consolidated revenue growth.
Clinical testing revenue, which accounted for over 90% of our consolidated revenues, grew 1.1%. The
acquisitions of Athena and Celera contributed about 1.8% to clinical testing revenue growth for the year ended
December 31, 2011. Clinical testing volume, measured by the number of requisitions, was essentially unchanged
compared to the prior year period. The clinical testing volume contributed by the Athena and Celera acquisitions
had an insignificant positive impact for the year ended December 31, 2011. We believe that clinical testing
volume was adversely affected by a general slowdown in physician office visits compared to the prior year, and
severe weather in the first quarter of 2011. Published survey data estimates that physician office visits declined
approximately 4% in 2011 compared to 2010. Pre-employment drug testing volume grew about 6% during the
year ended December 31, 2011.
Revenue per requisition for the year ended December 31, 2011 was 1.1% above the prior year level.
Revenue per requisition continues to benefit from an increased mix in gene-based and esoteric testing,
particularly from the impact of the acquired operations of Athena and Celera. Offsetting this benefit was business
and payor mix changes including: an increase in lower priced drugs-of-abuse testing and a decrease in higher
priced anatomic pathology testing; price changes in connection with several large contract extensions executed in
the first half of 2010; and the 1.75% Medicare fee schedule decrease, which went into effect January 1, 2011.
Our businesses other than clinical laboratory testing accounted for approximately 9% of our net revenues for
the years ended December 31, 2011 and 2010. These businesses contain most of our international operations and
include our risk assessment services, clinical trials testing, healthcare information technology and diagnostic
products businesses. For the year ended December 31, 2011, revenue in our non-clinical testing businesses grew
by approximately 10% with approximately half of the growth from the diagnostics products operations acquired
as part of the Celera acquisition.
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