Quest Diagnostics 2011 Annual Report Download - page 86

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The following securities were not included in the diluted earnings per share calculation due to their
antidilutive effect (in thousands):
2011 2010 2009
Stock options and performance share units ........................... 2,259 2,886 3,559
4. BUSINESS ACQUISITIONS
Acquisition of Athena Diagnostics
On April 4, 2011, the Company completed its acquisition of Athena Diagnostics (“Athena”) in an all-cash
transaction valued at $740 million. Athena is the leading provider of advanced diagnostic tests related to
neurological conditions, and generated revenues of approximately $110 million in 2010.
Through the acquisition, the Company acquired all of Athena’s operations. The Company financed the all-
cash purchase price of $740 million and related transaction costs with a portion of the net proceeds from the
Company’s 2011 Senior Notes Offering. For the year ended December 31, 2011, transaction costs of $8.2 million
were recorded in selling, general and administrative expenses. See Note 11 for further discussion of the 2011
Senior Notes Offering.
The acquisition of Athena was accounted for under the acquisition method of accounting. As such, the assets
acquired and liabilities assumed are recorded based on their estimated fair values as of the closing date. The
consolidated financial statements include the results of operations of Athena subsequent to the closing of the
acquisition which are not material to the Company’s consolidated results of operations.
The following table summarizes the consideration paid for Athena and the amounts of assets acquired and
liabilities assumed at the acquisition date:
Fair Values
as of
April 4,
2011
Cash and cash equivalents................................... $ —
Accounts receivable......................................... 17,853
Other current assets ......................................... 13,427
Property, plant and equipment . . . ............................ 3,038
Intangible assets ............................................ 220,040
Goodwill ................................................... 563,974
Other assets . . .............................................. 135
Total assets acquired ................................... 818,467
Current liabilities ........................................... 8,511
Non-current deferred income taxes ........................... 69,956
Total liabilities assumed ................................ 78,467
Net assets acquired ..................................... $740,000
The acquired amortizable intangible assets are being amortized over their estimated useful lives as follows:
Fair Values
Weighted
Average
Useful Life
Technology .................................... $ 92,580 16 years
Non-compete agreement . . . ..................... 37,000 4 years
Tradename..................................... 34,520 10 years
Customer relationships.......................... 21,420 20 years
Informatics database............................ 34,520 10 years
$220,040
Of the amount allocated to goodwill and intangible assets, approximately $42 million is deductible for tax
purposes. All of the goodwill acquired in connection with the Athena acquisition has been allocated to the
Company’s clinical testing business. As of the acquisition date, the fair value of accounts receivable
approximated its book value.
F-14
QUEST DIAGNOSTICS INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(dollars in thousands unless otherwise indicated)