Quest Diagnostics 2012 Annual Report Download - page 49

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46
QUEST DIAGNOSTICS INCORPORATED AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Overview
Our Company
Quest Diagnostics is the world's leading provider of Diagnostic Information Services ("DIS") providing insights that
empower and enable patients, physicians, hospitals, integrated delivery networks, health plans, employers and others to make
better healthcare decisions. Over 90% of our revenues are derived from DIS with the balance derived from risk assessment
services, clinical trials testing, diagnostic products and healthcare information technology. We offer the broadest access in the
United States to DIS through our nationwide network of laboratories and Company-owned patient service centers and we are
the leading provider of DIS, including routine testing, esoteric or gene-based testing and anatomic pathology testing. We
provide interpretive consultation through the largest medical and scientific staff in the industry, with hundreds of M.D.s and
Ph.D.s, primarily located in the United States, many of whom are recognized leaders in their fields.
Through our Diagnostic Solutions ("DS") businesses, we offer a variety of solutions for life insurers and healthcare
providers. We are the leading provider of risk assessment services for the life insurance industry. In addition, we are a leading
provider of testing for clinical trials. Our diagnostics products business manufactures and markets diagnostic products. In
addition, we offer healthcare organizations and clinicians robust information technology solutions.
Recent Developments
Our New Quest
In 2012, we announced a refresh of our vision, goals and culture that we believe will be the catalyst to improving
performance through restoring growth, driving operational excellence and refocusing on our core DIS business. We introduced
a five-point strategy designed to: (1) Refocus on diagnostic information services; (2) Drive operational excellence; (3) Restore
growth; (4) Simplify the organization to enable growth and productivity; and (5) Deliver disciplined capital deployment and
strategically aligned accretive acquisitions.
During the fourth quarter of 2012, we launched a major management restructuring aimed at driving operational
excellence and restoring growth. The key element of this organizational change is to eliminate the complexity associated with
our prior structure, including reducing management layers, so that we can better focus on our customers and speed decision-
making. Our new organization is designed to align around future growth opportunities, improve execution and leverage our
company-wide infrastructure to maximize value and efficiency. The majority of the organizational changes began on January
1, 2013.
Divestiture of Businesses
During 2012, we conducted a thorough review of our portfolio and evaluated all assets of our Company to ensure a
strong strategic fit. As a result of this review, we are refocusing on our core DIS business. During the fourth quarter of 2012,
we committed to a plan to sell our diagnostic point-of-care testing business ("HemoCue"). In February 2013, we entered into
an agreement to sell HemoCue for approximately $300 million plus estimated cash on hand at closing and other customary
working capital adjustments. We plan to use the proceeds related to the HemoCue sale to repurchase approximately $300
million of our shares as part of our stock buyback program. As of December 31, 2012, the applicable assets and liabilities of
HemoCue have been classified as held for sale in the accompanying consolidated balance sheets and depreciation and
amortization of the applicable assets ceased as of such date. HemoCue is reported as discontinued operations in our
consolidated statements of operations as no significant involvement or continuing cash flows are expected from, or to be
provided to HemoCue following the consummation of the sale transaction. In addition to HemoCue, we completed the sale of
our salivary-diagnostics business ("OralDNA") in December 2012, which was also included in discontinued operations. For all
periods presented, our consolidated statements of operations have been recast to reflect the presentation of discontinued
operations. See Note 18 to the Consolidated Financial Statements for additional information.
HemoCue had revenues of $114 million for the year ended December 31, 2012, $116 million for the year ended
December 31, 2011 and $107 million for the year ended December 31, 2010. Revenues from OralDNA were not material.