Quest Diagnostics 2012 Annual Report Download - page 113

F- 40
of government or private payers. The Company is aware of certain pending individual or class action lawsuits, and has received
several subpoenas, related to billing practices filed under the qui tam provisions of the Civil False Claims Act and/or other
federal and state statutes, regulations or other laws. The Company understands that there may be other pending qui tam claims
brought by former employees or other "whistle blowers" as to which the Company cannot determine the extent of any potential
liability.
Management cannot predict the outcome of such matters. Although management does not anticipate that the ultimate
outcome of such matters will have a material adverse effect on the Company's financial condition, given the high degree of
judgment involved in establishing loss estimates related to these types of matters, the outcome of such matters may be material
to the Company's results of operations or cash flows in the period in which the impact of such matters is determined or paid.
These matters are in different stages. Some of these matters are in their early stages. Matters may involve responding
to and cooperating with various government investigations and related subpoenas. As of December 31, 2012, the Company
does not believe that any losses related to the Other Legal Matters described above are probable. While the Company believes
that a reasonable possibility exists that losses may have been incurred related to the Other Legal Matters described above,
based on the nature and status of these matters, potential losses, if any, cannot be estimated.
Reserves for Legal Matters
Reserves for legal matters, unrelated to those described above in "Other Legal Matters", totaled less than $5 million at
both December 31, 2012 and 2011.
Reserves for General and Professional Liability Claims
As a general matter, providers of clinical testing services may be subject to lawsuits alleging negligence or other
similar legal claims. These suits could involve claims for substantial damages. Any professional liability litigation could also
have an adverse impact on the Company's client base and reputation. The Company maintains various liability insurance
coverages for, among other things, claims that could result from providing, or failing to provide, clinical testing services,
including inaccurate testing results, and other exposures. The Company's insurance coverage limits its maximum exposure on
individual claims; however, the Company is essentially self-insured for a significant portion of these claims. Reserves for such
matters, including those associated with both asserted and incurred but not reported claims, are established by considering
actuarially determined losses based upon the Company's historical and projected loss experience. Such reserves totaled
approximately $110 million and $127 million as of December 31, 2012 and 2011, respectively. Management believes that
established reserves and present insurance coverage are sufficient to cover currently estimated exposures. Management cannot
predict the outcome of any claims made against the Company. Although management does not anticipate that the ultimate
outcome of any such proceedings or claims will have a material adverse effect on the Company's financial condition, given the
high degree of judgment involved in establishing accruals for loss estimates related to these types of matters, the outcome may
be material to the Company's results of operations or cash flows in the period in which the impact of such claims is determined
or paid.
18. HELD FOR SALE AND DISCONTINUED OPERATIONS
During the fourth quarter of 2012, the Company committed to a plan to sell HemoCue. In February 2013, the
Company entered into an agreement to sell HemoCue for approximately $300 million plus estimated cash on hand at closing
and other customary working capital adjustments. The Company completed the sale of OralDNA in December 2012. As a
result, the Company's 2012 results include charges in discontinued operations for the asset impairment associated with
HemoCue and the loss on sale associated with OralDNA totaling $86 million. Discontinued operations also includes a $7.5
million income tax expense related to the re-valuation of deferred tax assets associated with HemoCue and a $4.4 million
income tax benefit related to the remeasurement of deferred taxes associated with HemoCue as a result of an enacted income
tax rate change in Sweden.
Results of operations for HemoCue and OralDNA have been reported as discontinued operations in the accompanying
consolidated financial statements and related notes to consolidated financial statements for all periods presented. At December
31, 2012, the assets and liabilities of HemoCue have been reported as held for sale in the accompanying balance sheet.
QUEST DIAGNOSTICS INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
(dollars in thousands unless otherwise indicated)