Quest Diagnostics 2011 Annual Report Download - page 62

Selling, General and Administrative Expenses
The increase in selling, general and administrative expenses as a percentage of net revenues for the year
ended December 31, 2011 compared to the prior year primarily reflects the impact of severe weather, a $9.4
million increase in pre-tax charges, primarily associated with restructuring and integration activities, costs incurred
in connection with the succession of our CEO, higher costs associated with employee compensation and benefits,
and investments we have made in our sales force. In addition, selling, general and administrative expenses for the
year ended December 31, 2011 included pre-tax transaction costs of $16.9 million, primarily related to
professional fees associated with the acquisitions of Athena and Celera. These increases have been partially offset
by actions we have taken to reduce our cost structure and an improvement in bad debt expense as a percentage
of net revenues, primarily reflecting continued strong performance in our billing operations and collection metrics.
Amortization of Intangible Assets
The increase in amortization of intangible assets for the year ended December 31, 2011 compared to the
prior year reflects the impact of amortization of intangible assets acquired as part of the Athena and Celera
acquisitions.
Other Operating Expense (Income), net
Other operating expense (income), net includes special charges, and miscellaneous income and expense items
related to operating activities, and for the years ended December 31, 2011 and 2010, consisted of the following:
2011 2010
Change:
Increase (Decrease)
(dollars in millions)
Medi-Cal charge recorded in connection with the California Lawsuit . ...... $236.0 $ — $236.0
Settlement of employment litigation....................................... — 9.6 (9.6)
Foreign currency transaction losses, net . .................................. 2.2 1.9 0.3
Other operating expense (income) items, net .............................. 0.6 (2.2) 2.8
Total other operating expense (income), net . ......................... $238.8 $ 9.3 $229.5
Operating Income
$
% Net
Revenues $
% Net
Revenues $
% Net
Revenues
2011 2010
Change:
Increase (Decrease)
(dollars in millions)
Operating income . ............................. $995.0 13.2% $1,295.5 17.6% $(300.5) (4.4)%
For the year ended December 31, 2011, the impacts of the Medi-Cal charge, severe weather, restructuring
and integration related costs associated with actions we have taken to adjust our cost structure, costs incurred in
connection with the succession of our CEO, and transaction costs related to the Athena and Celera acquisitions,
served to decrease operating income as a percent of net revenues by 4.4%. For the year ended December 31,
2010, the impacts of severe weather, restructuring and integration related costs, and the settlement of employment
litigation served to decrease operating income as a percent of net revenues by 0.7%.
The remaining year-over-year decrease in operating income as a percentage of net revenues is primarily
attributable to higher costs associated with employee compensation and benefits, and investments we have made
in our sales and service capabilities. These decreases have been partially offset by actions we have taken to
reduce our cost structure and an improvement in bad debt expense as a percentage of net revenues, compared to
the prior year.
Interest Expense, net
2011 2010
Change:
Increase (Decrease)
(dollars in millions)
Interest expense, net. ................................................... $170.6 $146.1 $24.5
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