DOCUMENT AND ENTITY INFORMATION
DOCUMENT AND ENTITY INFORMATION (USD $) | |
In Billions, except Share data | 12 Months Ended
Dec. 31, 2009 |
Entity Information [Line Items] | |
Entity Registrant Name | Quest Diagnostics Incorporated |
Entity Central Index Key | 0001022079 |
Current Fiscal Year End Date | --12-31 |
Entity Well-known Seasoned Issuer | Yes |
Entity Voluntary Filers | No |
Entity Current Reporting Status | Yes |
Entity Filer Category | Large Accelerated Filer |
Entity Public Float | 8.7 |
Entity Common Stock, Shares Outstanding | 178,917,322 |
Document Information [Line Items] | |
Document Type | 10-K |
Amendment Flag | false |
Document Period End Date | 2009-12-31 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS (USD $) | ||
In Thousands | Dec. 31, 2009
| Dec. 31, 2008
|
Current assets: | ||
Cash and cash equivalents | $534,256 | $253,946 |
Accounts receivable, net of allowance for doubtful accounts of $238,206 and $261,334 at December 31, 2009 and 2008, respectively | 827,343 | 832,873 |
Inventories | 91,386 | 102,125 |
Deferred income taxes | 131,800 | 218,419 |
Prepaid expenses and other current assets | 94,640 | 89,456 |
Total current assets | 1,679,425 | 1,496,819 |
Property, plant and equipment, net | 825,946 | 879,687 |
Goodwill, net | 5,083,944 | 5,054,926 |
Intangible assets, net | 823,665 | 827,403 |
Other assets | 150,663 | 144,995 |
Total assets | 8,563,643 | 8,403,830 |
Current liabilities: | ||
Accounts payable and accrued expenses | 888,705 | 1,219,619 |
Current portion of long-term debt | 170,507 | 5,142 |
Total current liabilities | 1,059,212 | 1,224,761 |
Long-term debt | 2,936,792 | 3,078,089 |
Other liabilities | 556,175 | 475,846 |
Stockholders' equity: | ||
Common stock, par value $0.01 per share; 600,000 shares authorized at both December 31, 2009 and 2008; 214,110 shares and 214,113 shares issued at December 31, 2009 and 2008, respectively | 2,141 | 2,141 |
Additional paid-in capital | 2,302,368 | 2,262,065 |
Retained earnings | 3,216,639 | 2,561,679 |
Accumulated other comprehensive loss | (20,961) | (68,068) |
Treasury stock, at cost; 30,817 shares and 23,739 shares at December 31, 2009 and 2008, respectively | (1,510,548) | (1,152,921) |
Total Quest Diagnostics stockholders' equity | 3,989,639 | 3,604,896 |
Noncontrolling interests | 21,825 | 20,238 |
Total stockholders' equity | 4,011,464 | 3,625,134 |
Total liabilities and stockholders' equity | $8,563,643 | $8,403,830 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) | ||
In Thousands, except Per Share data | Dec. 31, 2009
| Dec. 31, 2008
|
Consolidated Balance Sheets (Parenthetical) | ||
Allowance for doubtful accounts | $238,206 | $261,334 |
Common stock, par value | 0.01 | 0.01 |
Common stock, shares authorized | 600,000 | 600,000 |
Common stock, shares, issued | 214,110 | 214,113 |
Treasury stock, shares | 30,817 | 23,739 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) | |||
In Thousands, except Per Share data | 12 Months Ended
Dec. 31, 2009 | 12 Months Ended
Dec. 31, 2008 | 12 Months Ended
Dec. 31, 2007 |
Net revenues | $7,455,243 | $7,249,447 | $6,704,907 |
Operating costs and expenses: | |||
Cost of Services | 4,321,475 | 4,256,156 | 3,969,848 |
Selling, general and administrative | 1,747,618 | 1,736,934 | 1,612,858 |
Amortization of intangible assets | 37,062 | 37,293 | 27,904 |
Other operating (income) expense, net | (10,023) | (3,312) | 2,961 |
Total operating costs and expenses | 6,096,132 | 6,027,071 | 5,613,571 |
Operating Income | 1,359,111 | 1,222,376 | 1,091,336 |
Other income (expense): | |||
Interest expense, net | (144,068) | (179,764) | (178,314) |
Equity earnings in unconsolidated joint ventures | 33,207 | 29,736 | 26,969 |
Other expense, net | (20,318) | (21,691) | (1,079) |
Total non-operating expenses, net | (131,179) | (171,719) | (152,424) |
Income from continuing operations before taxes | 1,227,932 | 1,050,657 | 938,912 |
Income tax expense | 460,474 | 386,768 | 358,574 |
Income from continuing operations | 767,458 | 663,889 | 580,338 |
Loss from discontinued operations, net of taxes | (1,236) | (50,694) | (213,889) |
Net income | 766,222 | 613,195 | 366,449 |
Less: Net income attributable to noncontrolling interests | 37,111 | 31,705 | 26,510 |
Net income attributable to Quest Diagnostics | 729,111 | 581,490 | 339,939 |
Amounts attributable to Quest Diagnostics' stockholders | |||
Income from continuing operations | 730,347 | 632,184 | 553,828 |
Loss from discontinued operations, net of taxes | (1,236) | (50,694) | (213,889) |
Net income attributable to Quest Diagnostics | $729,111 | $581,490 | $339,939 |
Earnings per share attributable to Quest Diagnostics' common stockholders - basic: | |||
Income from continuing operations | 3.92 | 3.25 | 2.87 |
Loss from discontinued operations | -0.01 | -0.26 | -1.11 |
Net income | 3.91 | 2.99 | 1.76 |
Earnings per share attributable to Quest Diagnostics' common stockholders - diluted: | |||
Income from continuing operations | 3.88 | 3.22 | 2.84 |
Loss from discontinued operations | -0.01 | -0.26 | -1.1 |
Net income | 3.87 | 2.96 | 1.74 |
Dividends per common share | 0.4 | 0.4 | 0.4 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) | |||
In Thousands | 12 Months Ended
Dec. 31, 2009 | 12 Months Ended
Dec. 31, 2008 | 12 Months Ended
Dec. 31, 2007 |
Cash flows from operating activities: | |||
Net income | $766,222 | $613,195 | $366,449 |
Adjustments to reconcile net income to net cash provided by operating activities: | |||
Depreciation and amortization | 256,687 | 264,593 | 237,879 |
Provision for doubtful accounts | 320,974 | 326,228 | 300,226 |
Provision for special charges | 0 | 72,650 | 238,781 |
Deferred income tax provision (benefit) | 83,120 | 549 | (1,575) |
Stock-based compensation expense | 75,059 | 70,581 | 56,853 |
Excess tax benefits from stock-based compensation arrangements | (5,540) | (2,420) | (13,981) |
Other, net | 29,699 | 13,772 | 8,310 |
Changes in operating assets and liabilities: | |||
Accounts receivable | (314,102) | (282,634) | (265,347) |
Accounts payable and accrued expenses | 71,754 | (4,342) | (5,431) |
Integration, settlement and other special charges | (329,607) | (8,223) | (14,013) |
Income taxes payable | 21,190 | 24,653 | 3,213 |
Other assets and liabilities, net | 21,962 | (25,553) | 15,560 |
Net cash provided by operating activities | 997,418 | 1,063,049 | 926,924 |
Cash flows from investing activities: | |||
Business acquisitions, net of cash acquired | (18,295) | 8,066 | (1,535,826) |
Capital expenditures | (166,928) | (212,681) | (219,101) |
(Increase) decrease in investments and other assets | (10,681) | 5,732 | (4,266) |
Net cash used in investing activities | (195,904) | (198,883) | (1,759,193) |
Cash flows from financing activities: | |||
Proceeds from borrowings | 1,245,525 | 22,929 | 3,754,490 |
Repayments of debt | (1,218,538) | (481,870) | (2,705,369) |
(Decrease) increase in book overdrafts | (12,094) | 14,201 | (24,950) |
Purchases of treasury stock | (499,991) | (253,997) | (145,660) |
Exercise of stock options | 87,120 | 30,511 | 80,928 |
Excess tax benefits from stock-based compensation arrangements | 5,540 | 2,420 | 13,981 |
Dividends paid | (74,748) | (77,964) | (77,327) |
Distributions to noncontrolling interests | (35,524) | (32,931) | (24,678) |
Other financing activities | (18,494) | (1,113) | (21,192) |
Net cash (used in) provided by financing activities | (521,204) | (777,814) | 850,223 |
Net change in cash and cash equivalents | 280,310 | 86,352 | 17,954 |
Cash and cash equivalents, beginning of year | 253,946 | 167,594 | 149,640 |
Cash and cash equivalents, end of year | $534,256 | $253,946 | $167,594 |
CONSOLIDATED STATEMENT OF STOCK
CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY (USD $) | |||||||
In Thousands | Additional Paid-In Capital
| Common Stock
| Retained Earnings
| Accumulated Other Comprehensive (Loss) Income
| Treasury Stock
| Noncontrolling Interest
| Total
|
Common Stock, Shares, Outstanding, Beginning Balance at Dec. 31, 2006 | 193,949 | ||||||
Balance at Dec. 31, 2006 | $2,185,073 | $2,138 | $1,800,255 | ($65) | ($968,230) | $19,632 | $3,038,803 |
Net income | 339,939 | 26,510 | 366,449 | ||||
Currency translation | 30,820 | 30,820 | |||||
Market valuation, net of tax benefit | (36) | (36) | |||||
Reversal of market adjustment, net of tax expense | 802 | 802 | |||||
Deferred loss, less reclassifications | (6,242) | (6,242) | |||||
Dividends declared | (77,304) | (77,304) | |||||
Distributions to noncontrolling interests | (24,678) | (24,678) | |||||
Issuance of common stock under benefit plans | (1,974) | 21,989 | 20,015 | ||||
Issuance of common stock under benefit plans | 462 | ||||||
Stock-based compensation expense | 56,853 | 56,853 | |||||
Exercise of stock options | (39,230) | 120,158 | 80,928 | ||||
Exercise of stock options | 2,447 | ||||||
Shares to cover employee payroll tax withholdings on stock issued under benefit plans | (1,229) | (1) | (1,230) | ||||
Shares to cover employee payroll tax withholdings on stock issued under benefit plans | (24) | ||||||
Tax benefit associated with stock-based compensation plans | 16,703 | 16,703 | |||||
Adjustment upon adoption of change in accounting for income taxes | (10,441) | (5,146) | (15,587) | ||||
Reimbursement from Corning Incorporated | 2,345 | 2,345 | |||||
Purchase of treasury stock | (2,794) | ||||||
Purchase of treasury stock | (145,660) | (145,660) | |||||
Other | 2,725 | 2,725 | |||||
Common Stock, Shares, Outstanding, Ending Balance at Dec. 31, 2007 | 194,040 | ||||||
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest, Ending Balance at Dec. 31, 2007 | 2,210,825 | 2,137 | 2,057,744 | 25,279 | (971,743) | 21,464 | 3,345,706 |
Net income | 581,490 | 31,705 | 613,195 | ||||
Currency translation | (94,326) | (94,326) | |||||
Market valuation, net of tax benefit | (398) | (398) | |||||
Reversal of market adjustment, net of tax expense | 2,161 | 2,161 | |||||
Deferred loss, less reclassifications | (784) | (784) | |||||
Dividends declared | (77,555) | (77,555) | |||||
Distributions to noncontrolling interests | (32,931) | (32,931) | |||||
Issuance of common stock under benefit plans | 81 | 4 | 18,248 | 18,333 | |||
Issuance of common stock under benefit plans | 913 | ||||||
Stock-based compensation expense | 63,055 | 7,526 | 70,581 | ||||
Exercise of stock options | (18,148) | 48,659 | 30,511 | ||||
Exercise of stock options | 987 | ||||||
Shares to cover employee payroll tax withholdings on stock issued under benefit plans | (962) | (1,614) | (2,576) | ||||
Shares to cover employee payroll tax withholdings on stock issued under benefit plans | (56) | ||||||
Tax benefit associated with stock-based compensation plans | 6,881 | 6,881 | |||||
Purchase of treasury stock | (5,510) | ||||||
Purchase of treasury stock | (253,997) | (253,997) | |||||
Other | 333 | 333 | |||||
Common Stock, Shares, Outstanding, Ending Balance at Dec. 31, 2008 | 190,374 | ||||||
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest, Ending Balance at Dec. 31, 2008 | 2,262,065 | 2,141 | 2,561,679 | (68,068) | (1,152,921) | 20,238 | 3,625,134 |
Net income | 729,111 | 37,111 | 766,222 | ||||
Currency translation | 49,586 | 49,586 | |||||
Reversal of market adjustment, net of tax expense | 290 | 290 | |||||
Deferred loss, less reclassifications | (2,553) | (2,553) | |||||
Other | (216) | (216) | |||||
Dividends declared | (74,151) | (74,151) | |||||
Distributions to noncontrolling interests | (35,524) | (35,524) | |||||
Issuance of common stock under benefit plans | 1,868 | 17,913 | 19,781 | ||||
Issuance of common stock under benefit plans | 711 | ||||||
Stock-based compensation expense | 61,005 | 14,054 | 75,059 | ||||
Exercise of stock options | (27,272) | 114,392 | 87,120 | ||||
Exercise of stock options | 2,376 | ||||||
Shares to cover employee payroll tax withholdings on stock issued under benefit plans | (2,144) | (3,995) | (6,139) | ||||
Shares to cover employee payroll tax withholdings on stock issued under benefit plans | (135) | ||||||
Tax benefit associated with stock-based compensation plans | 6,846 | 6,846 | |||||
Purchase of treasury stock | (10,033) | ||||||
Purchase of treasury stock | (499,991) | (499,991) | |||||
Common Stock, Shares, Outstanding, Ending Balance at Dec. 31, 2009 | 183,293 | ||||||
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest, Ending Balance at Dec. 31, 2009 | $2,302,368 | $2,141 | $3,216,639 | ($20,961) | ($1,510,548) | $21,825 | $4,011,464 |
1_CONSOLIDATED STATEMENT OF STO
CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY (Parenthetical) (USD $) | |||
In Thousands | 1/1/2009 - 12/31/2009
| 1/1/2008 - 12/31/2008
| 1/1/2007 - 12/31/2007
|
CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY (Parenthetical) | |||
Tax benefit (expense) on reversal of market adjustment | ($1,257) | ($510) | |
Tax benefit (expense) on market valuation | ($190) | $261 | $24 |
DESCRIPTION OF BUSINESS
DESCRIPTION OF BUSINESS | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
DESCRIPTION OF BUSINESS | |
DESCRIPTION OF BUSINESS | 1. DESCRIPTION OF BUSINESS Quest Diagnostics Incorporated and its subsidiaries (Quest Diagnostics or the Company) is the worlds leading provider of diagnostic testing, information and services, providing insights that enable patients, physicians and others to make better healthcare decisions. Quest Diagnostics offers patients and physicians the broadest access to diagnostic laboratory services through the Companys nationwide network of laboratories and patient service centers. The Company provides interpretive consultation through the largest medical and scientific staff in the industry, with approximately 900 M.D.s and Ph.D.s primarily located in the United States. Quest Diagnostics is the leading provider of clinical testing, including gene-based testing and other esoteric testing, anatomic pathology services and testing for drugs-of-abuse, and the leading provider of risk assessment services for the life insurance industry. The Company is also a leading provider of testing for clinical trials. The Companys diagnostics products business manufactures and markets diagnostic test kits and specialized point-of-care testing. Quest Diagnostics empowers healthcare organizations and clinicians with state-of-the-art information technology solutions that can improve patient care and medical practice. During 2009, Quest Diagnostics processed approximately 148 million requisitions through its extensive network of laboratories in virtually every major metropolitan area throughout the United States. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The consolidated financial statements include the accounts of all entities controlled by the Company through its direct or indirect ownership of a majority voting interest and the accounts of any variable interest entities where the Company is subject to a majority of the risk of loss from the variable interest entitys activities, or entitled to receive a majority of the entitys residual returns or both. The Companys relationships with variable interest entities were not material at both December 31, 2009 and 2008. Investments in entities which the Company does not control, but in which it has a substantial ownership interest (generally between 20% and 49%) and can exercise significant influence, are accounted for using the equity method of accounting. As of December 31, 2009 and 2008, the Companys investments in affiliates accounted for under the equity method of accounting totaled $46.3 million and $38.4 million, respectively. The Companys share of equity earnings from investments in affiliates, accounted for under the equity method, totaled $33.2 million, $29.7 million and $27.0 million, respectively, for 2009, 2008 and 2007. All significant intercompany accounts and transactions are eliminated in consolidation. Basis of Presentation On January 1, 2009, the Company adopted a new accounting standard issued by the Financial Accounting Standards Board (FASB) that establishes accounting and reporting standards for noncontrolling interests in a subsidiary in consolidated financial statements. In accordance with this new standard, the Company has provided a new presentation on the face of the consolidated financial statements to separately classify noncontrolling interests within the equity section of the consolidated balance sheets and to separately report the amounts attributable to controlling and noncontrolling interests in the consolidated statements of operations, comprehensive income and changes in equity for all periods presented. The adoption of this standard did not impact earnings per share attributable to Quest Diagnostics common stockholders. In June 2009, the FASB issued the FASB Accounting Standards Codification (the ASC). The ASC has become the single source of non-governmental accounting principles generally accepted in the United States (GAAP) recognized by the FASB in the preparation of financial statements. The ASC does not supersede the rules or regulations of the Securities and Exchange Commission (SEC), therefore, the rules and interpretive releases of the SEC continue to be additional sources of GAAP for the Company. The Company adopted the ASC as of July 1, 2009. The ASC does not change GAAP and did not have an effect on the Companys financial position, results of operations or cash flows. During the third quarter of 2006, the Company completed its wind-down of NID, a test kit manufacturing subsidiary, and classified the operations of NID as discontinued operations. The accompanying consolidated statements of operations and related disclosures have been prepared to report the results of NID as discontinued operations for all p |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
FAIR VALUE MEASUREMENTS | |
FAIR VALUE MEASUREMENTS | 3. FAIR VALUE MEASUREMENTS The following tables provide summaries of the recognized assets and liabilities that are measured at fair value on a recurring basis. Basis of Fair Value Measurements Quoted Prices in Active Markets for Identical Assets / Liabilities Significant Other Observable Inputs Significant Unobservable Inputs December 31, 2009 Level 1 Level 2 Level 3 Assets: Trading securities $ 33,871 $ 33,871 $ - $ - Cash surrender value of life insurance policies 15,873 - 15,873 - Foreign currency forward contracts 2,357 - 2,357 - Total $ 52,101 $ 33,871 $ 18,230 $ - Liabilities: Interest rate swaps $ 14,398 $ - $ 14,398 $ - Foreign currency forward contracts 311 - 311 - Deferred compensation liabilities 53,919 - 53,919 - Total $ 68,628 $ - $ 68,628 $ - December 31, 2008 Assets: Trading securities $ 25,383 $ 25,383 $ - $ - Cash surrender value of life insurance policies 11,767 - 11,767 - Foreign currency forward contracts 2,617 - 2,617 - Available-for-sale securities 255 233 22 - Total $ 40,022 $ 25,616 $ 14,406 $ - Liabilities: Interest rate swaps $ 5,888 $ - $ 5,888 $ - Foreign currency forward contracts 4,142 - 4,142 - Deferred compensation liabilities 39,304 - 39,304 - Total $ 49,334 $ - $ 49,334 $ - The Company offers certain employees the opportunity to participate in a supplemental deferred compensation plan. A participants deferrals, together with Company matching credits, are invested in a variety of participant-directed stock and bond mutual funds that are classified as trading securities. Changes in the fair value of these securities are measured using quoted prices in active markets based on the market price per unit multiplied by the number of units held exclusive of any transaction costs. A corresponding adjustment for changes in fair value of the trading securities is also reflected in the changes in fair value of the deferred compensation obligation. The deferred compensation liabilities are classified within Level 2 because their inputs are derived principally from observable market data by correlation to the trading securities. The Company offers certain employees the opportunity to participate in a non-qualified deferred compensation program. A participants deferrals, together with Company matching credits, are invested at the direction of the employee in a hypothetical portfolio of investments which are tracked by an administrator. The Company purchases life insurance policies, with the Company named as beneficiary of the policies, for the purpose of funding the programs liability. Changes in the cash surrender value of the life insurance policie |
BUSINESS ACQUISITIONS
BUSINESS ACQUISITIONS | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
BUSINESS ACQUISITIONS | |
BUSINESS ACQUISITIONS | 4. BUSINESS ACQUISITIONS 2007 Acquisitions Acquisition of HemoCue On January 31, 2007, the Company completed its acquisition of POCT Holding AB (HemoCue), a Sweden-based company specializing in point-of-care testing, in an all-cash transaction valued at approximately $450 million, including $113 million of assumed debt. HemoCue is the leading international provider in point-of-care testing for hemoglobin, with a growing share in professional glucose and microalbumin testing. In conjunction with the acquisition of HemoCue, the Company repaid approximately $113 million of debt, representing substantially all of HemoCues existing outstanding debt as of January 31, 2007. The Company financed the aggregate purchase price of $344 million, which includes transaction costs of approximately $7 million, of which $2 million was paid in 2006, and the repayment of substantially all of HemoCues outstanding debt with the proceeds from a $450 million term loan and cash on-hand. On May 31, 2007, the Company refinanced this term loan. In July 2009 and January 2008, the Company received payments of approximately $21 million and $23 million, respectively from an escrow fund established at the time of the acquisition which reduced the aggregate purchase price to $300 million. The consolidated financial statements include the results of operations of HemoCue subsequent to the closing of the acquisition. Acquisition of AmeriPath On May 31, 2007, the Company completed its acquisition of AmeriPath Group Holdings, Inc. (AmeriPath), in an all-cash transaction valued at approximately $2.0 billion, including approximately $780 million of assumed debt and related accrued interest. AmeriPath is a leading provider of anatomic pathology and esoteric testing, and generated annual revenues of approximately $800 million. Through the acquisition, the Company acquired all of AmeriPaths operations. The Company financed the all-cash purchase price and related transaction costs, together with the repayment of approximately $780 million of principal and related accrued interest representing substantially all of AmeriPaths debt, as well as the refinancing of the term loan used to finance the acquisition of HemoCue, with $1.6 billion of borrowings under a five-year term loan facility, $780 million of borrowings under a one-year bridge loan, and cash on-hand. In June 2007, the Company completed an $800 million senior notes offering. The net proceeds of the senior notes offering were used to repay the $780 million bridge loan. See Note 10 for further descriptions of the Companys debt outstanding. The consolidated financial statements include the results of operations of AmeriPath subsequent to the closing of the acquisition. During 2008, the Company decreased the amount of goodwill recorded in connection with the acquisition of AmeriPath by approximately $45 million from $1.46 billion to $1.42 billion, primarily as a result of changes in judgments regarding the realization of certain pre-acquisition net operating loss carryforwards. Pro Forma Combined Financial Information The following unaudited pro forma combined financial information for the ye |
TAXES ON INCOME
TAXES ON INCOME | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
TAXES ON INCOME | |
TAXES ON INCOME | 5. TAXES ON INCOME The Companys pre-tax income (loss) from continuing operations consisted of $1.23 billion, $1.05 billion and $946 million from U.S. operations and $1.8 million, $(1.2) million and $(7.1) million from foreign operations for the years ended December 31, 2009, 2008 and 2007, respectively. The components of income tax expense (benefit) for 2009, 2008 and 2007 were as follows: 2009 2008 2007 Current: Federal $ 350,582 $ 299,937 $ 267,138 State and local 81,292 57,750 59,625 Foreign 3,193 3,833 1,093 Deferred: Federal 30,624 20,764 23,787 State and local (3,552) 10,029 10,774 Foreign (1,665) (5,545) (3,843) Total $ 460,474 $ 386,768 $ 358,574 A reconciliation of the federal statutory rate to the Companys effective tax rate for 2009, 2008 and 2007 was as follows: 2009 2008 2007 Tax provision at statutory rate 35.0% 35.0% 35.0% State and local income taxes, net of federal benefit 4.0 4.6 4.6 Impact of foreign operations (0.7) (1.1) (0.8) Non-deductible expenses, primarily meals and entertainment expenses 0.2 0.5 0.3 Impact of noncontrolling interests (1.2) (1.2) (1.1) Other, net 0.2 (1.0) 0.2 Effective tax rate 37.5% 36.8% 38.2% The tax effects of temporary differences that give rise to significant portions of the deferred tax assets (liabilities) at December 31, 2009 and 2008 were as follows: 2009 2008 Current deferred tax assets: Accounts receivable reserves $ 72,076 $ 82,594 Liabilities not currently deductible 59,724 135,825 Total current deferred tax assets $ 131,800 $ 218,419 Non-current deferred tax assets (liabilities): Liabilities not currently deductible $ 124,296 $ 125,693 Stock-based compensation 72,248 55,413 Net operating loss carryforwards 36,354 52,394 Depreciation and amortization (421,335) (423,074) Total non-current deferred tax liabilities $ (188,437) $ (189,574) At December 31, 2009 and 2008, non-current deferred tax liabilities of $188 million and $190 million, respectively, are included in other long-term liabilities in the consolidated balance sheet. As of December 31, 2009, the Company had estimated net operating loss carryforwards for federal, state and foreign income tax purposes of $22 million, $609 million and $40 million, respectively, which expire at various dates through 2029. As of December 31, 2009 and 2008, deferred tax assets associated with net operating loss carryforwards of $48 million and $66 million, respectively, have each been reduced by a valuation allowance of $12 million and $14 million, respectively. Income taxes payable including those classified in other long-term liabilities in the consolidated balance sheets at December 31, 2 |
SUPPLEMENTAL CASH FLOW AND OTHE
SUPPLEMENTAL CASH FLOW AND OTHER DATA | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
SUPPLEMENTAL CASH FLOW & OTHER DATA | |
SUPPLEMENTAL CASH FLOW & OTHER DATA | 6. SUPPLEMENTAL CASH FLOW AND OTHER DATA 2009 2008 2007 Depreciation expense $ 219,625 $ 227,300 $ 209,975 Interest expense (146,586) (185,476) (186,329) Interest income 2,518 5,712 8,015 Interest, net (144,068) (179,764) (178,314) Interest paid 146,352 189,294 157,502 Income taxes paid 362,524 359,336 315,745 Businesses acquired: Fair value of assets acquired $ 2,954,728 Fair value of liabilities assumed 1,395,867 The fair value of assets acquired and liabilities assumed in connection with businesses acquired in 2009 and 2008 were not material. |
PROPERTY, PLANT AND EQUIPMENT
PROPERTY, PLANT AND EQUIPMENT | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
PROPERTY, PLANT AND EQUIPMENT | |
PROPERTY, PLANT AND EQUIPMENT | 7. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment at December 31, 2009 and 2008 consisted of the following: 2009 2008 Land $ 35,786 $ 35,786 Buildings and improvements 360,684 365,481 Laboratory equipment, furniture and fixtures 1,140,862 1,105,801 Leasehold improvements 374,922 348,821 Computer software developed or obtained for internal use 376,004 336,426 Construction-in-progress 51,124 57,478 2,339,382 2,249,793 Less: accumulated depreciation and amortization (1,513,436) (1,370,106) Total $ 825,946 $ 879,687 Computer software developed for internal use as of December 31, 2008 includes $76.6 million of assets, which were previously classified as laboratory equipment, furniture and fixtures. |
GOODWILL AND INTANGIBLE ASSETS
GOODWILL AND INTANGIBLE ASSETS | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
GOODWILL AND INTANGIBLES ASSETS | |
GOODWILL AND INTANGIBLE ASSETS | 8. GOODWILL AND INTANGIBLE ASSETS The changes in goodwill, net for the years ended December 31, 2009 and 2008 are as follows: 2009 2008 Balance as of January 1 $ 5,054,926 $ 5,220,104 Goodwill acquired during the year 25,973 9,260 Other purchase accounting adjustments (21,195) (120,105) Increase (decrease) related to foreign currency translation 24,240 (54,333) Balance as of December 31 $ 5,083,944 $ 5,054,926 For the years ended December 31, 2009 and 2008, goodwill acquired was associated with several immaterial acquisitions. For the year ended December 31, 2009, other purchase accounting adjustments were primarily related to a payment received from an escrow fund established at the time of the HemoCue acquisition in 2007 (see Note 4 for further discussion). For the year ended December 31, 2008, other purchase accounting adjustments were primarily related to changes in estimates regarding the realization of certain pre-acquisition net operating loss carryforwards, the reduction in certain acquired pre-acquisition tax loss contingencies, and a payment received from an escrow fund established at the time of the HemoCue acquisition (see Note 4 for further discussion). Approximately 90% of the Companys goodwill as of December 31, 2009 and 2008 was associated with its clinical testing business. Intangible assets at December 31, 2009 and 2008 consisted of the following: Weighted Average Amortization Period December 31, 2009 December 31, 2008 Amortizing intangible assets: Cost Accumulated Amortization Net Cost Accumulated Amortization Net Customer-related intangibles 19 years $ 600,460 $ (129,994) $ 470,466 $ 585,963 $ (99,384) $ 486,579 Non-compete agreements 5 years 54,854 (50,252) 4,602 54,382 (48,298) 6,084 Other 11 years 68,896 (18,867) 50,029 53,934 (13,258) 40,676 Total 18 years 724,210 (199,113) 525,097 694,279 (160,940) 533,339 Intangible assets not subject to amortization Tradenames 298,568 - 298,568 292,064 - 294,064 Total intangible assets $ 1,022,778 $ (199,113) $ 823,665 $ 988,343 $ (160,940) $ 827,403 Amortization expense related to intangible assets was $37.1 million, $37.3 million and $27.9 million for the years ended December 31, 2009, 2008 and 2007, respectively. The estimated amortization expense related to amortizable intangible assets for each of the five succeeding fiscal years and thereafter as of December 31, 2009 is as follows: Fiscal Year Ending December 31, 2010 $ 39,863 2011 38,949 2012 37,609 2013 36,612 2014 35,990 Thereafter 336,074 Total $ 525,097 |
ACCOUNTS PAYABLE AND ACCRUED EX
ACCOUNTS PAYABLE AND ACCRUED EXPENSES | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
ACCOUNTS PAYABLE AND ACCRUED EXPENSES | |
ACCOUNTS PAYABLE AND ACCRUED EXPENSES | 9. ACCOUNTS PAYABLE AND ACCRUED EXPENSES Accounts payable and accrued expenses at December 31, 2009 and 2008 consisted of the following: 2009 2008 Trade accounts payable $ 207,327 $ 191,219 Accrued wages and benefits 349,252 299,374 Accrued expenses 322,676 412,106 Accrued settlement reserves 9,450 316,920 Total $ 888,705 $ 1,219,619 |
DEBT
DEBT | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
DEBT | |
DEBT | 10. DEBT Long-term debt at December 31, 2009 and 2008 consisted of the following: 2009 2008 Industrial Revenue Bonds due September 2009 $ - $ 1,800 Senior Notes due November 2010 165,482 399,724 Senior Notes due July 2011 159,170 274,724 Term Loan due May 2012 742,000 1,092,000 Senior Notes due November 2015 499,067 498,907 Senior Notes due July 2017 374,400 374,320 Senior Notes due January 2020 478,115 - Senior Notes due July 2037 420,683 420,526 Debentures due June 2034 - 3,070 Senior Notes due January 2040 243,088 - Other 25,294 18,160 Total long-term debt 3,107,299 3,083,231 Less: current portion of current debt 170,507 5,142 Total long-term debt, net of current portion $ 2,936,792 $ 3,078,089 Early Extinguishment of Debt For the years ended December 31, 2009 and 2008, the Company recorded $20.4 million and $0.9 million of pre-tax charges related to the early extinguishment of debt, primarily related to the Companys June 2009 and November 2009 debt tender offers, the repayment of borrowings outstanding under the Term Loan due 2012 in 2009 and 2008, and the 2009 repayment of the remaining principal outstanding under the Debentures due June 2034. June 2009 Debt Tender Offer On May 19, 2009, the Company commenced a cash tender offer to purchase up to $200 million aggregate principal amount of its 5.125% Senior Notes due 2010 and 7.50% Senior Notes due 2011. On June 16, 2009, the Company finalized its cash tender offer (the June 2009 Debt Tender Offer) by purchasing $174 million aggregate principal amount of its 5.125% Senior Notes Due 2010 and $26 million aggregate principal amount of its 7.50% Senior Notes due 2011 that resulted in pre-tax losses of $4.8 million and $1.5 million, respectively. The aggregate pre-tax loss of $6.3 million includes the write-off of $0.5 million of deferred financing fees and unamortized discounts and cash payments of $5.8 million related to premiums and other costs to purchase the 5.125% Senior Notes due 2010 and the 7.5% Senior Notes due 2011 and is included in other expense, net. The June 2009 Debt Tender Offer was financed with cash on-hand and $150 million of borrowings under the Secured Receivables Credit Facility discussed below. November 2009 Debt Tender Offer In connection with the 2009 Senior Notes offering which is discussed below, on November 12, 2009, the Company commenced a cash tender offer to purchase any and all of its outstanding 5.125% Senior Notes due 2010, and any and all of its outstanding 7.50% Senior Notes due 2011. On November 20, 2009, the Company finalized its cash tender offer (the November 2009 Debt Tender Offer) by purchasing $61 million aggregate principal amount of its 5.125% Senior Notes Due 2010 and $89 million aggregate principal amount of its 7.50% Senior Notes due 2011 that resulted in pre-tax losses of $2.6 million and $9.4 million, respectively. The aggregate pre-tax loss of $12.1 m |
FINANCIAL INSTRUMENTS
FINANCIAL INSTRUMENTS | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
FINANCIAL INSTRUMENTS | |
FINANCIAL INSTRUMENTS | 11. FINANCIAL INSTRUMENTS Treasury Forward Agreements In June 2007, the Company entered into forward starting interest rate swap agreements with three financial institutions for a total notional amount of $300 million to lock the interest rate of a portion of the Companys offering of its debt securities in the second quarter of 2007 (the Treasury Forward Agreements). The Treasury Forward Agreements were entered into to hedge a portion of the Companys interest rate exposure associated with the debt securities that were issued in the second quarter of 2007. In connection with the Companys 2007 Senior Notes issued in June 2007, the Treasury Forward Agreements were settled and the Company paid $3.5 million, representing the loss on the settlement of the Treasury Forward Agreements. These losses are deferred in stockholders equity, net of income taxes, as a component of accumulated other comprehensive loss, and are amortized as an adjustment to interest expense over the term of the Senior Notes due 2017. Interest Rate Swap Agreements - Cash Flow Hedges In August 2007, the Company entered into various variable-to-fixed interest rate swap agreements (the Interest Rate Swap Agreements), whereby the Company fixed the interest rates on $500 million of its Term Loan due May 2012 for periods ranging from October 2007 through October 2009. In October 2009, the remaining Interest Rate Swap Agreements, with fixed interest rates ranging from 5.13% to 5.27%, on $200 million of the Term Loan due May 2012 matured with no net settlement. During the third quarter of 2009, the Company entered into various forward starting interest rate swap agreements (the Forward Starting Interest Rate Swap Agreements) for an aggregate notional amount of $400 million. The Forward Starting Interest Rate Swap Agreements had fixed interest rates ranging from 4.120% to 4.575%. The Forward Starting Interest Rate Swap Agreements were 17 to 18 month forward agreements that covered a ten-year hedging period and were entered into to hedge part of the Companys interest rate exposure associated with forecasted new debt issuances related to the refinancing of certain debt maturing through 2011. In connection with the issuance of our 2009 Senior Notes, the Forward Starting Interest Rate Swap Agreements were terminated and the Company paid $10.5 million, representing the losses on the settlement of the Forward Starting Interest Rate Swaps. These losses are deferred in stockholders equity, net of income taxes, as a component of accumulated other comprehensive loss, and amortized as an adjustment to interest expense over the term of the Senior Notes due 2020. The Interest Rate Swap Agreements and Forward Starting Interest Rate Swap Agreements have been accounted for as cash flow hedges. Prior to their maturity or settlement, the Company recorded these derivative financial instruments as either an asset or liability measured at its fair value. The effective portion of changes in the fair value of the derivatives was recorded in accumulated other comprehensive loss. Any deferred gains or losses are reclassified from accumulated other comprehensive loss to the statement of opera |
PREFERRED STOCK AND COMMON STOC
PREFERRED STOCK AND COMMON STOCKHOLDERS' EQUITY | |
1/1/2009 - 12/31/2009
USD / shares | |
PREFERRED STOCK AND COMMON STOCKHOLDERS' EQUITY | |
PREFERRED STOCK AND COMMON STOCKHOLDERS' EQUITY | 12. PREFERRED STOCK AND COMMON STOCKHOLDERS EQUITY Series Preferred Stock Quest Diagnostics is authorized to issue up to 10 million shares of Series Preferred Stock, par value $1.00 per share. The Companys Board of Directors has the authority to issue such shares without stockholder approval and to determine the designations, preferences, rights and restrictions of such shares. Of the authorized shares, 1,300,000 shares have been designated Series A Preferred Stock and 1,000 shares have been designated Voting Cumulative Preferred Stock. No shares are currently outstanding. Common Stock On May 4, 2006, the Companys Restated Certificate of Incorporation was amended to increase the number of authorized shares of common stock, par value $0.01 per share, from 300 million shares to 600 million shares. Accumulated Other Comprehensive (Loss) Income The components of accumulated other comprehensive (loss) income for 2009, 2008 and 2007 were as follows: Foreign Currency Translation Adjustment Market Value Adjustment Deferred Gain (Loss) Accumulated Other Comprehensive (Loss) Income Balance, December 31, 2006 $ 512 $ (2,819) $ 2,242 $ (65) Translation adjustment 30,820 - - 30,820 Market value adjustment, net of tax benefit of $24 - (36) - (36) Reversal of market value adjustment, net of tax expense of $(510) - 802 - 802 Deferred loss, less reclassifications - - (6,242) (6,242) Balance, December 31, 2007 31,332 (2,053) (4,000) 25,279 Translation adjustment (94,326) - - (94,326) Market value adjustment, net of tax benefit of $261 - (398) - (398) Reversal of market value adjustment, net of tax expense of $(1,257) - 2,161 - 2,161 Deferred loss, less reclassifications - - (784) (784) Balance, December 31, 2008 (62,994) (290) (4,784) (68,068) Translation adjustment 49,586 - - 49,586 Reversal of market value adjustment, net of tax expense of $(190) - 290 - 290 Deferred loss, less reclassifications - - (2,553) (2,553) Other - (216) - (216) Balance, December 31, 2009 $ (13,408) $ (216) $ (7,337) $ (20,961) The market value adjustments for 2008 and 2007 represented unrealized holding losses, net of taxes. The reversal of market value adjustments for 2009, 2008 and 2007 represented prior periods unrealized holding losses for investments where the decline in fair value was deemed to be other than temporary in 2009, 2008 and 2007, and the resulting loss was recognized in the consolidated statements of operations (see Note 2). The deferred loss for 2009 primarily represented the $10.5 million the Company paid upon settlement of the Forward Starting Interest Rate Swap Agreements, net of amounts reclassified to interest expense. The deferred loss for 20 |
STOCK OWNERSHIP AND COMPENSATIO
STOCK OWNERSHIP AND COMPENSATION PLANS | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
STOCK OWNERSHIP AND COMPENSATION PLANS | |
STOCK OWNERSHIP AND COMPENSATION PLANS | 13. STOCK OWNERSHIP AND COMPENSATION PLANS Employee and Non-employee Directors Stock Ownership Programs In 2005, the Company established the ELTIP to replace the Companys prior Employee Equity Participation Programs established in 1999 (the 1999 EEPP) and 1996, as amended (the 1996 EEPP). At the Companys annual shareholders meeting in May 2009, the shareholders approved certain amendments to the ELTIP including: (i) increasing the number of shares available for award under the ELTIP by approximately 5.2 million shares; (ii) increasing the maximum term that the Board of Directors may establish for awards of stock options and stock appreciation rights from seven to ten years, beginning with awards in 2009; and (iii) extending the term of the ELTIP until the date of the 2019 annual shareholders meeting. The ELTIP provides for three types of awards: (a) stock options, (b) stock appreciation rights and (c) stock awards. The ELTIP provides for the grant to eligible employees of either non-qualified or incentive stock options, or both, to purchase shares of Company common stock at a price of no less than the fair market value on the date of grant. The stock options are subject to forfeiture if employment terminates prior to the end of the vesting period prescribed by the Board of Directors. Grants of stock appreciation rights allow eligible employees to receive a payment based on the appreciation of Company common stock in cash, shares of Company common stock or a combination thereof. The stock appreciation rights are granted at an exercise price at no less than the fair market value of the Companys common stock on the date of grant. Stock options and stock appreciation rights granted under the ELTIP expire on the date designated by the Board of Directors but in no event more than ten years from date of grant. No stock appreciation rights have been granted under the ELTIP or the 1999 EEPP. The ELTIP allows eligible employees to receive awards of shares, or the right to receive shares, of Company common stock, the equivalent value in cash or a combination thereof. These shares are generally earned on achievement of financial performance goals and are subject to forfeiture if employment terminates prior to the end of the vesting period prescribed by the Board of Directors. For performance share unit awards granted prior to 2008, the actual amount of performance share awards earned is based on the Companys earnings per share growth for the performance period compared to that of a peer group of companies. Beginning with performance share unit awards granted in 2008, the performance measure for these awards is based on the compound annual growth rate of the Companys earnings per share from continuing operations over a three year period. Key executive, managerial and technical employees are eligible to participate in the ELTIP. The provisions of the 1999 EEPP and the 1996 EEPP were similar to those outlined above for the ELTIP. Certain options granted under the 1999 EEPP remain outstanding. The maximum number of shares of Company common stock that may be optioned or granted under the ELTIP is approximately 53 million shares. In addition, any |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
RELATED PARTY TRANSACTIONS | |
RELATED PARTY TRANSACTIONS | 14. RELATED PARTY TRANSACTIONS At December 31, 2009, GlaxoSmithKline plc (GSK), the parent company of SmithKline Beecham, beneficially owned approximately 17% of the outstanding shares of Quest Diagnostics common stock. Quest Diagnostics is the primary provider of testing to support GSKs clinical trials testing requirements under worldwide agreements (the Clinical Trials Agreements). Net revenues, primarily derived under the Clinical Trials Agreements were $72 million, $71 million and $79 million for 2009, 2008 and 2007, respectively. At December 31, 2009 and 2008, accounts receivable due from GSK were $17.3 million and $9.1 million, respectively. In addition, in connection with the acquisition of SBCL, SmithKline Beecham agreed to indemnify Quest Diagnostics, on an after tax basis, against certain matters primarily related to taxes and billing and professional liability claims. At December 31, 2009 and December 31, 2008, liabilities included $1 million and $13 million, respectively, due to SmithKline Beecham, primarily related to tax benefits associated with certain pre-acquisition tax loss carryforwards. During 2009, the Company paid SmithKline Beecham approximately $10 million related to the realization of certain pre-acquisition net loss carryforwards that were payable to SmithKline Beecham pursuant to a tax indemnification arrangement. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
COMMITMENTS AND CONTINGENCIES | |
COMMITMENTS AND CONTINGENCIES | 15. COMMITMENTS AND CONTINGENCIES Letter of Credit Lines and Contractual Obligations The Company has a line of credit with a financial institution totaling $85 million for the issuance of letters of credit (the Letter of Credit Line). The Letter of Credit Line, which is renewed annually, matures on November 19, 2010 and is guaranteed by the Subsidiary Guarantors. In support of its risk management program, to ensure the Companys performance or payment to third parties, $74 million in letters of credit were outstanding at December 31, 2009. The letters of credit primarily represent collateral for current and future automobile liability and workers compensation loss payments. In addition, $6.6 million of bank guarantees were outstanding at December 31, 2009 in support of certain foreign operations. Minimum rental commitments under noncancelable operating leases, primarily real estate, in effect at December 31, 2009 are as follows: Year ending December 31, 2010 $ 174,787 2011 133,621 2012 94,842 2013 66,743 2014 47,214 2015 and thereafter 153,800 Minimum lease payments 671,007 Noncancelable sub-lease income (5,875) Net minimum lease payments $ 665,132 Operating lease rental expense for 2009, 2008 and 2007 aggregated $189 million, $190 million and $171 million, respectively. Rent expense associated with operating leases that include scheduled rent increases and tenant incentives, such as rent holidays, is recorded on a straight-line basis over the term of the lease. The Company has certain noncancelable commitments to purchase products or services from various suppliers, mainly for telecommunications and standing orders to purchase reagents and other laboratory supplies. At December 31, 2009, the approximate total future purchase commitments are $130 million, of which $51 million are expected to be incurred in 2010, $62 million are expected to be incurred in 2011 through 2012 and the balance thereafter. Contingent Lease Obligations The Company remains subject to contingent obligations under certain real estate leases that were entered into by certain predecessor companies of a subsidiary prior to the Companys acquisition of the subsidiary. While the title to the properties and interest to the subject leases have been transferred to third parties on several occasions over the course of many years, the lessors have not released the subsidiary predecessor companies from their original obligations under the leases and therefore remain contingently liable in the event of default. The remaining terms of the lease obligations and the Companys corresponding indemnifications range from 15 to 39 years. The lease payments under certain leases are subject to market value adjustments and therefore, the total contingent obligations under the leases cannot be precisely determined but are likely to total several hundred million dollars. A claim against the Company would be made only upon the current lessees default and after a series of claims and corresponding defaults by third parties that precede the Company in the order of indemnificati |
DISCONTINUED OPERATIONS
DISCONTINUED OPERATIONS | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
DISCONTINUED OPERATIONS | |
DISCONTINUED OPERATIONS | 16. DISCONTINUED OPERATIONS During the fourth quarter of 2005, NID instituted its second voluntary product hold within a six-month period due to quality issues, which adversely impacted the operating performance of NID. As a result, the Company evaluated a number of strategic options for NID. On April 19, 2006, the Company decided to discontinue NIDs operations. During the third quarter of 2006, the Company completed its wind down of NID and classified the operations of NID as discontinued operations. Results of operations for NID have been reported as discontinued operations in the accompanying consolidated statements of operations and related disclosures for all periods presented. During the third quarter of 2007, the government and the Company began settlement discussions with respect to the governments investigation involving NID and the Company. Based on the status of settlement discussions, during 2007 the Company established a reserve, in accordance with generally accepted accounting principles, reflected in discontinued operations, of $241 million in connection with these claims. During the third quarter of 2008, the Company and NID reached an agreement in principle with the United States Attorneys Office to settle the federal government investigation involving NID and the Company regarding NID test kits and tests performed using those test kits. As a result of the agreement in principle in 2008, the Company recorded charges of $75 million in discontinued operations to increase its reserve for the settlement and related matters. On April 15, 2009, the Company finalized the resolution of the federal government investigation related to NID and entered into a final settlement agreement with the federal government. In the second quarter of 2009, the Company paid $268 million to settle the civil allegations. The Company also entered into a five-year corporate integrity agreement with the Office of Inspector General for the United States Department of Health and Human Services. In addition, NID pled guilty to a single count of felony misbranding and paid a $40 million fine. These second quarter payments totaling $308 million, which had been previously reserved, were funded out of cash on-hand and available credit facilities. During the third quarter of 2009, the Company finalized separate settlement agreements with certain states and paid approximately $6 million, which had been previously reserved for. Summarized financial information for the discontinued operations of NID is set forth below: 2009 2008 2007 Net revenues $ - $ - $ - Loss from discontinued operations before income taxes (2,361) (79,582) (250,278) Income tax benefit 1,125 28,888 36,389 Loss from discontinued operations, net of taxes $ (1,236) $ (50,694) $ (213,889) At December 31, 2008, the settlement reserve totaling $316 million is included in accounts payable and accrued expenses in the consolidated balance sheet which was paid in 2009. The deferred tax asset recorded in connection with establishing the reserve of $58 million is included i |
BUSINESS SEGMENT INFORMATION
BUSINESS SEGMENT INFORMATION | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
BUSINESS SEGMENT INFORMATION | |
BUSINESS SEGMENT INFORMATION | 17. BUSINESS SEGMENT INFORMATION Clinical testing is an essential element in the delivery of healthcare services. Physicians use clinical tests to assist in the detection, diagnosis, evaluation, monitoring and treatment of diseases and other medical conditions. Clinical testing is generally categorized as clinical laboratory testing and anatomic pathology services. Clinical laboratory testing is performed on whole blood, serum, plasma and other body fluids, such as urine, and specimens such as microbiology samples. Anatomic pathology services are principally for the detection of cancer and are performed on tissues, such as biopsies, and other samples, such as human cells. Customers of the clinical testing business include patients, physicians, hospitals, employers, governmental institutions and other commercial clinical laboratories. The clinical testing business accounted for greater than 90% of net revenues from continuing operations in 2009, 2008 and 2007. All other operating segments include the Companys non-clinical testing businesses and consist of its risk assessment services business, its clinical trials testing business, its healthcare information technology business, and its diagnostics products businesses. The Companys risk assessment business provides underwriting support services to the life insurance industry including teleunderwriting, paramedical examinations, laboratory testing and medical record retrieval. The Companys clinical trials testing business provides clinical testing performed in connection with clinical research trials on new drugs and vaccines. The Companys healthcare information technology business is a developer and integrator of clinical connectivity and data management solutions for healthcare organizations, physicians and clinicians. The Companys diagnostics products business manufactures and markets diagnostic test kits. On April 19, 2006, the Company decided to discontinue NIDs operations and results of operations for NID have been classified as discontinued operations for all years presented (see Note 16). During the first quarter of 2007 and second quarter of 2007, the Company acquired Hemocue and AmeriPath, respectively (see Note 4). Hemocue is included in the Companys other operating segments. AmeriPaths operations are included in the Companys clinical testing business. At December 31, 2009, substantially all of the Companys services are provided within the United States, and substantially all of the Companys assets are located within the United States. The following table is a summary of segment information for the years ended December 31, 2009, 2008 and 2007. Segment asset information is not presented since it is not used by the chief operating decision maker at the operating segment level. Operating earnings (loss) of each segment represents net revenues less directly identifiable expenses to arrive at operating income for the segment. General management and administrative corporate expenses, including amortization of intangible assets, are included in general corporate expenses below. The accounting policies of the segments are the same as those of the Company as set forth in N |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
SUBSEQUENT EVENTS | |
SUBSEQUENT EVENTS | 18. SUBSEQUENT EVENTS In January 2010, our Board of Directors authorized $750 million of additional share repurchases. The share repurchase authorization has no set expiration or termination date. Also, in January 2010, the Company executed an accelerated share repurchase transaction with a bank to acquire approximately 4.5 million shares of the Companys outstanding common stock, at an initial purchase price of $56.05 per share, for $250 million. The purchase price for these shares is subject to an adjustment based on the volume weighted average price of the Companys common stock during a period following the execution of the agreement. |
SUMMARIZED FINANCIAL INFORMATIO
SUMMARIZED FINANCIAL INFORMATION | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
SUMMARIZED FINANCIAL INFORMATION | |
SUMMARIZED FINANCIAL INFORMATION | 19. SUMMARIZED FINANCIAL INFORMATION The Companys Senior Notes due 2010, Senior Notes due 2011, Senior Notes due 2015, Senior Notes due 2017, Senior Notes due 2020, Senior Notes due 2037 and Senior Notes due 2040 are fully and unconditionally guaranteed, jointly and severally, by the Subsidiary Guarantors. With the exception of Quest Diagnostics Receivables Incorporated (see paragraph below), the non-guarantor subsidiaries are primarily foreign and less than wholly-owned subsidiaries. In conjunction with the Companys Secured Receivables Credit Facility, the Company maintains a wholly-owned non-guarantor subsidiary, Quest Diagnostics Receivables Incorporated (QDRI). The Company and certain of its Subsidiary Guarantors transfer certain domestic receivables to QDRI. QDRI utilizes the transferred receivables to collateralize borrowings under the Companys Secured Receivables Credit Facility. The Company and the Subsidiary Guarantors provide collection services to QDRI. QDRI uses cash collections principally to purchase new receivables from the Company and the Subsidiary Guarantors. The following condensed consolidating financial data illustrates the composition of the combined guarantors. Investments in subsidiaries are accounted for by the parent using the equity method for purposes of the supplemental consolidating presentation. Earnings (losses) of subsidiaries are therefore reflected in the parents investment accounts and earnings. The principal elimination entries relate to investments in subsidiaries and intercompany balances and transactions. Condensed Consolidating Balance Sheet December 31, 2009 Parent Subsidiary Guarantors Non- Guarantor Subsidiaries Eliminations Consolidated Assets Current assets: Cash and cash equivalents $ 464,958 $ 17,457 $ 51,841 $ - $ 534,256 Accounts receivable, net 3,461 156,102 667,780 - 827,343 Other current assets 64,354 169,233 99,109 (14,870) 317,826 Total current assets 532,773 342,792 818,730 (14,870) 1,679,425 Property, plant and equipment, net 181,790 607,951 36,205 - 825,946 Goodwill and intangible assets, net 153,145 5,308,433 446,031 - 5,907,609 Intercompany receivable (payable) 471,421 (137,227) (334,194) - - Investment in subsidiaries 5,790,333 - - (5,790,333) - Other assets 194,990 11,428 49,970 (105,725) 150,663 Total assets $ 7,324,452 $ 6,133,377 $ 1,016,742 $ (5,910,928) $ 8,563,643 Liabilities and Stockholders Equity Current liabilities: Accounts payable and accrued expenses $ 641,964 $ 239,417 $ 22,194 $ (14,870) $ 888,705 Current portion of long-term debt 165,661 2,436 2,410 - 170,507 Total current liabilities 807,625 241,853 24,604 (14,870) 1,059,212 Long-term debt 2,430,806 146,556 359,430 - 2,936,792 |
Quarterly Operating Results
Quarterly Operating Results (Unaudited) | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
Quarterly Operating Results (Unaudited) | |
QUARTERLY OPERATING RESULTS (UNAUDITED) | Quarterly Operating Results (unaudited) 2009 (a) First Quarter Second Quarter Third Quarter Fourth Quarter Total Year Net revenues $ 1,808,006 $ 1,901,818 $ 1,897,146 $ 1,848,273 $ 7,455,243 Gross profit 754,517 801,606 799,611 778,034 3,133,768 Income from continuing operations 177,327 198,281 (b) (c) (d) 201,092 (e) 190,758 (f) (g) 767,458 (Loss) income from discontinued operations, net of taxes (1,671) 88 543 (196) (1,236) Net income 175,656 198,369 201,635 190,562 766,222 Less: Net income attributable to noncontrolling interests 8,554 10,169 9,416 8,972 37,111 Net income attributable to Quest Diagnostics $ 167,102 $ 188,200 $ 192,219 $ 181,590 $ 729,111 Amounts attributable to Quest Diagnostics stockholders: Income from continuing operations $ 168,773 $ 188,112 $ 191,676 $ 181,786 $ 730,347 (Loss) income from discontinued operations, net of taxes (1,671) 88 543 (196) (1,236) Net income $ 167,102 $ 188,200 $ 192,219 $ 181,590 $ 729,111 Earnings per share attributable to Quest Diagnostics stockholders basic: Income from continuing operations $ 0.89 $ 1.01 $ 1.03 $ 0.98 $ 3.92 Loss from discontinued operations (0.01) - - - (0.01) Net income $ 0.88 $ 1.01 $ 1.03 $ 0.98 $ 3.91 Earnings per share attributable to Quest Diagnostics stockholders diluted: Income from continuing operations $ 0.89 $ 1.00 $ 1.02 $ 0.97 $ 3.88 Loss from discontinued operations (0.01) - - - (0.01) Net income $ 0.88 $ 1.00 $ 1.02 $ 0.97 $ 3.87 2008 (a) First Quarter Second Quarter Third Quarter Fourth Quarter Total Year Net revenues $ 1,784,637 $ 1,837,901 $ 1,826,603 (h) $1,800,306 $7,249,447 Gross profit 726,010 754,420 753,480 (h) 759,381 2,993,291 Income from continuing operations 147,748 170,044 (i) 168,280 (h) (i) (j) 177,817 (i) (k) 663,889 (Loss) income from discontinued operations, net of taxes (1,087) (890) (48,934) (l) 217 (50,694) Net income 146,661 169,154 119,346 178,034 613,195 Less: Net income attributable to noncontrolling interests 7,054 7,826 8,604 8,221 31,705 Net income attributable to Quest Diagnostics $ 139,607 $ 161,328 $ 110,742 $ 169,813 $ 581,490 Amounts attributable to Quest Diagnostics stockholders: Income from continuing operations 140,694 162,218 159,676 169,596 632,184 (Loss) income from d |
SCHEDULE II - VALUATION ACCOUNT
SCHEDULE II - VALUATION ACCOUNTS AND RESERVES | |
12 Months Ended
Dec. 31, 2009 USD / shares | |
SCHEDULE II - VALUATION ACCOUNTS AND RESERVES | |
SCHEDULE II - VALUATION ACCOUNTS AND RESERVES | QUEST DIAGNOSTICS INCORPORATED AND SUBSIDIARIES SCHEDULE II - VALUATION ACCOUNTS AND RESERVES (in thousands) Balance at 1-1-09 Provision for Doubtful Accounts Net Deductions and Other Balance at 12-31-09 Year ended December 31, 2009 Doubtful accounts and allowances $ 261,334 $ 320,974 $ 344,102 (a) $ 238,206 Balance at 1-1-08 Provision for Doubtful Accounts Net Deductions and Other Balance at 12-31-08 Year ended December 31, 2008 Doubtful accounts and allowances $ 250,067 $ 326,228 $ 314,961 (a) $ 261,334 Balance at 1-1-07 Provision for Doubtful Accounts Net Deductions and Other Balance at 12-31-07 Year ended December 31, 2007 Doubtful accounts and allowances $ 205,086 $ 300,226 $ 255,245 (a) $ 250,067 (a) Primarily represents the write-off of accounts receivable, net of recoveries. |