Quest Diagnostics 2012 Annual Report Download - page 58

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Other Acquisition
On January 6, 2012, we completed the acquisition of S.E.D. Medical Laboratories ("S.E.D.") for approximately $50.5
million.
Acquisition of UMass Memorial
On January 2, 2013, we completed the acquisition of the clinical and anatomic pathology outreach laboratory
businesses of UMass Memorial Medical Center, a member of UMass Memorial Health Care.
Results of Operations
Our DIS business currently represents our one reportable business segment. The DIS business for each of the three
years in the period ended December 31, 2012 accounted for more than 90% of net revenues from continuing operations. Our
other operating segments consist of our DS businesses.
As discussed previously, during the fourth quarter of 2012, we committed to a plan to sell HemoCue, and in February
2013, we executed an agreement for its sale. In December 2012, we completed the sale of OralDNA. HemoCue and OralDNA
have been 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.
On April 19, 2006, we decided to discontinue the operations of a test kit manufacturing subsidiary, NID. During the third
quarter of 2006, we completed the wind down of NID. Therefore, the operations of NID are classified as discontinued
operations for all periods presented. Our business segment information is disclosed in Note 19 to the Consolidated Financial
Statements.
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 included in this Form 10-K for additional
information.
Settlement Related to the California Lawsuit
On May 9, 2011, we announced an agreement in principle to resolve a previously disclosed civil lawsuit brought by a
California competitor in which the State of California intervened (the “California Lawsuit”). In the lawsuit, the plaintiffs
alleged, among other things, that we overcharged Medi-Cal for testing services and violated the California False Claims Act.
Specifically, the plaintiffs alleged, among other things, that we violated certain regulations that govern billing to Medi-Cal
(“Comparable Charge” regulations). While denying liability, in order to avoid the uncertainty, expense and risks of litigation,
we agreed to resolve these matters for $241 million. On May 19, 2011, we finalized a settlement agreement and release with
the California Department of Health Care Services, the California Attorney General's Office and the qui tam relator. We agreed
to the settlement to resolve claims pertaining to the Comparable Charge allegations; we received a full release of these and all
other allegations in the complaint. We also agreed to certain reporting obligations regarding our pricing for a limited time
period and, at our option in lieu of such obligations for a transitional period, to provide Medi-Cal with a discount (the
“Transitional Discount”). The Transitional Discount, to the extent provided, ended in July 2012 and did not have a material
impact on our consolidated revenues or results of operations.
As a result of the agreement in principle, we recorded a pre-tax charge to earnings in the first quarter of 2011 of $236
million (the “Medi-Cal charge”), or $1.22 per diluted share, which represented the cost to resolve the matters noted above and
related claims, less amounts previously reserved for such matters.
We funded the $241 million payment in the second quarter of 2011 with cash on hand and borrowings under our
existing credit facilities. See Note 17 to the Consolidated Financial Statements for further details.