Quest Diagnostics 2012 Annual Report Download - page 61

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58
Cost of Services
Cost of services as a percentage of revenues for the year ended December 31, 2012 was essentially unchanged
compared to the prior year period. Restructuring and integration activities and higher costs associated with employee
compensation and benefits, which served to increase the percentage were offset by actions we have taken to reduce our cost
structure under our Invigorate program.
Selling, General and Administrative Expenses
Selling, general and administrative expenses as a percentage of net revenues for the year ended December 31, 2012
was essentially unchanged compared to the prior year period. Restructuring and integration activities, investments we have
made in our commercial sales organization, costs incurred in connection with the succession of our prior CEO and higher costs
associated with employee compensation and benefits served to increase the percentage compared to the prior year. This was
offset by actions we have taken to reduce our cost structure under our Invigorate program and transaction costs associated with
the Athena and Celera acquisitions that were incurred during the 2011.
For the year ended December 31, 2012, bad debt expense as a percentage of net revenues improved compared to the
prior year period, primarily as a result of continued improvement efforts in this area.
Amortization of Intangible Assets
The increase in amortization of intangible assets for the year ended December 31, 2012, compared to the prior year
period, primarily reflects the impact of amortization of intangible assets acquired as part of the Athena, Celera and S.E.D.
acquisitions.
Other Operating (Income) Expense, net
Other operating (income) expense, net includes special charges, and miscellaneous income and expense items related
to operating activities, and for the years ended December 31, 2012 and 2011 consisted of the following:
Increase
(Decrease)2012 2011
(dollars in millions)
Medi-Cal charge recorded in connection with the California Lawsuit $ — $ 236.0 $ (236.0)
Foreign currency transaction losses, net 1.7 1.6 0.1
Other operating (income) expense items, net (4.6) 0.5 (5.1)
Total other operating (income) expense, net $ (2.9) $ 238.1 $ (241.0)
Operating Income
Increase
(Decrease)2012 2011
(dollars in millions)
Operating income $ 1,200.8 $ 986.6 $ 214.2
Operating income as a % of net revenues 16.3% 13.4% 2.9%
The impact of the Medi-Cal charge in the first quarter of 2011 served to decrease operating income as a percentage of
net revenues in 2011 and is the principal driver of the improved operating income as a percentage of net revenues for the year
ended December 31, 2012. Also contributing to the improvement was realized savings associated with our Invigorate program.
These improvements were partially offset by higher costs associated with restructuring and integration activities, costs incurred
in connection with the succession of our prior CEO, an increase in operating expenses associated with the acquired operations
of Athena, Celera and S.E.D. and investments we have made in our commercial sales organization.