Quest Diagnostics 2012 Annual Report Download - page 66

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63
Operating Income
Increase
(Decrease)2011 2010
(dollars in millions)
Operating income $ 986.6 $ 1,283.6 $ (297.0)
Operating income as a % of net revenues 13.4% 17.7% (4.3)%
For the year ended December 31, 2011, the impacts of the Medi-Cal charge, restructuring and integration related costs
associated with actions we took to adjust our cost structure, costs incurred in connection with the succession of our prior CEO,
and transaction costs related to the Athena and Celera acquisitions, served to decrease operating income as a percent of net
revenues by 4.1%. For the year ended December 31, 2010, the impact of restructuring and integration related costs, and the
settlement of employment litigation served to decrease operating income as a percent of net revenues by 0.5%.
The remaining year-over-year decrease in operating income as a percentage of net revenues was primarily attributable
to higher costs associated with employee compensation and benefits, and investments we made in our sales and service
capabilities. These decreases were partially offset by actions we took to reduce our cost structure and an improvement in bad
debt expense as a percentage of net revenues, compared to the prior year.
Interest Expense, net
Increase
(Decrease)2011 2010
(dollars in millions)
Interest expense, net $ 169.6 $ 143.5 $ 26.1
Interest expense, net for the year ended December 31, 2011 increased from the prior year period primarily due to
incremental debt of approximately $1.0 billion, used to partially fund $935 million of share repurchases and approximately
$1.1 billion paid for acquisitions. In addition, for the year ended December 31, 2011, interest expense, net included $3.1
million of financing commitment fees related to the acquisition of Celera which were expensed. See Note 12 to the
Consolidated Financial Statements for further details regarding our senior notes offering.
Other Income, net
Other income, net represents miscellaneous income and expense items related to non-operating activities, such as
gains and losses associated with investments and other non-operating assets. For the years ended December 31, 2011 and 2010,
other income, net consisted of the following:
Increase
(Decrease)2011 2010
(dollars in millions)
Investment gains associated with our supplemental deferred compensation plans $ 0.3 $ 5.7 $ (5.4)
Other income (expense) items, net 2.5 (0.4) 2.9
Total other income, net $ 2.8 $ 5.3 $ (2.5)
Income Tax Expense
Increase
(Decrease)
2011 2010
(dollars in millions)
Income tax expense $ 354.7 $ 430.1 $ (75.4)
Effective income tax rate 41.8% 36.6% 5.2%