| DOCUMENT AND ENTITY INFORMATION | ||
| 3 Months Ended
Mar. 31, 2010 | Apr. 21, 2010
| |
| Document Type | 10-Q | |
| Amendment Flag | false | |
| Document Period End Date | 2010-03-31 | |
| Document Fiscal Year Focus | 2,010 | |
| Document Fiscal Period Focus | Q1 | |
| Entity Registrant Name | QUEST DIAGNOSTICS INC | |
| Entity Central Index Key | 0001022079 | |
| Current Fiscal Year End Date | --12-31 | |
| Entity Filer Category | Large Accelerated Filer | |
| Entity Common Stock, Shares Outstanding | 179,928,849 |
| CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) | ||
| In Thousands, except Share data | 3 Months Ended
Mar. 31, 2010 | 3 Months Ended
Mar. 31, 2009 |
| Net revenues | $1,805,503 | $1,808,006 |
| Operating costs and expenses: | ||
| Cost of services | 1,066,373 | 1,053,489 |
| Selling, general and administrative | 430,733 | 424,301 |
| Amortization of intangible assets | 9,359 | 9,005 |
| Other operating expense, net | 476 | 148 |
| Total operating costs and expenses | 1,506,941 | 1,486,943 |
| Operating income | 298,562 | 321,063 |
| Other income (expense): | ||
| Interest expense, net | (35,955) | (39,408) |
| Equity earnings in unconsolidated joint ventures | 7,964 | 8,570 |
| Other income (expense), net | 6,012 | (2,709) |
| Total non-operating expenses, net | (21,979) | (33,547) |
| Income from continuing operations before taxes | 276,583 | 287,516 |
| Income tax expense | 105,378 | 110,189 |
| Income from continuing operations | 171,205 | 177,327 |
| Loss from discontinued operations, net of taxes | (52) | (1,671) |
| Net income | 171,153 | 175,656 |
| Less: Net income attributable to noncontrolling interests | 8,705 | 8,554 |
| Net income attributable to Quest Diagnostics | 162,448 | 167,102 |
| Amounts attributable to Quest Diagnostics' stockholders: | ||
| Income from continuing operations | 162,500 | 168,773 |
| Loss from discontinued operations, net of taxes | (52) | (1,671) |
| Net income attributable to Quest Diagnostics | $162,448 | $167,102 |
| Earnings per share attributable to Quest Diagnostics' common stockholders - basic: | ||
| Income from continuing operations | 0.9 | 0.89 |
| Loss from discontinued operations | $0 | -0.01 |
| Net income | 0.9 | 0.88 |
| Earnings per share attributable to Quest Diagnostics' common stockholders - diluted: | ||
| Income from continuing operations | 0.89 | 0.89 |
| Loss from discontinued operations | $0 | -0.01 |
| Net income | 0.89 | 0.88 |
| Weighted average common shares outstanding: | ||
| Basic | 180,219 | 189,370 |
| Diluted | 182,383 | 190,698 |
| Dividends per common share | 0.1 | 0.1 |
| CONSOLIDATED BALANCE SHEETS (USD $) | ||
| In Thousands | Mar. 31, 2010
| Dec. 31, 2009
|
| Assets | ||
| Cash and cash equivalents | $463,239 | $534,256 |
| Accounts receivable, net of allowance for doubtful accounts of $239,875 and $238,206 at March 31, 2010 and December 31, 2009, respectively | 865,160 | 827,343 |
| Inventories | 79,462 | 91,386 |
| Deferred income taxes | 130,958 | 131,800 |
| Prepaid expenses and other current assets | 106,429 | 94,640 |
| Total current assets | 1,645,248 | 1,679,425 |
| Property, plant and equipment, net | 811,875 | 825,946 |
| Goodwill, net | 5,082,253 | 5,083,944 |
| Intangible assets, net | 817,454 | 823,665 |
| Other assets | 159,379 | 150,663 |
| Total assets | 8,516,209 | 8,563,643 |
| Liabilities and Stockholders' Equity | ||
| Accounts payable and accrued expenses | 906,094 | 888,705 |
| Current portion of long-term debt | 170,404 | 170,507 |
| Total current liabilities | 1,076,498 | 1,059,212 |
| Long-term debt | 2,944,789 | 2,936,792 |
| Other liabilities | 565,707 | 556,175 |
| Stockholders' equity: | ||
| Common stock, par value $0.01 per share; 600,000 shares authorized at both March 31, 2010 and December 31, 2009; 214,169 shares and 214,110 shares issued at March 31, 2010 and December 31, 2009, respectively | 2,142 | 2,141 |
| Additional paid-in capital | 2,276,306 | 2,302,368 |
| Retained earnings | 3,361,029 | 3,216,639 |
| Accumulated other comprehensive loss | (22,634) | (20,961) |
| Treasury stock, at cost; 34,303 shares and 30,817 shares at March 31, 2010 and December 31, 2009, respectively | (1,712,669) | (1,510,548) |
| Total Quest Diagnostics stockholders' equity | 3,904,174 | 3,989,639 |
| Noncontrolling interests | 25,041 | 21,825 |
| Total stockholders' equity | 3,929,215 | 4,011,464 |
| Total liabilities and stockholders' equity | $8,516,209 | $8,563,643 |
| CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) | ||
| In Thousands, except Per Share data | Mar. 31, 2010
| Dec. 31, 2009
|
| Balance sheet (Parenthetical) | ||
| Allowance for doubtful accounts | $239,875 | $238,206 |
| Common stock, par value | 0.01 | 0.01 |
| Common stock, shares authorized | 600,000 | 600,000 |
| Common stock, shares, issued | 214,169 | 214,110 |
| Treasury stock, shares | 34,303 | 30,817 |
| CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) | ||
| In Thousands | 3 Months Ended
Mar. 31, 2010 | 3 Months Ended
Mar. 31, 2009 |
| Cash flows from operating activities: | ||
| Net income | $171,153 | $175,656 |
| Adjustments to reconcile net income to net cash provided by operating activities: | ||
| Depreciation and amortization | 63,333 | 64,860 |
| Provision for doubtful accounts | 76,279 | 81,428 |
| Deferred income tax provision | 3,563 | 13,061 |
| Stock-based compensation expense | 11,127 | 14,091 |
| Benefits from stock-based compensation arrangements | 473 | (1,062) |
| Other, net | 8,708 | (2,404) |
| Changes in operating assets and liabilities: | ||
| Accounts receivable | (115,287) | (136,106) |
| Accounts payable and accrued expenses | (81,935) | (6,866) |
| Income taxes payable | 98,413 | 63,900 |
| Other assets and liabilities, net | 3,388 | 6,205 |
| Net cash provided by operating activities | 239,215 | 272,763 |
| Cash flows from investing activities: | ||
| Business acquisitions, net of cash acquired | 0 | (1,429) |
| Capital expenditures | (39,763) | (39,610) |
| Increase in investments and other assets | (2,831) | (326) |
| Net cash used in investing activities | (42,594) | (41,365) |
| Cash flows from financing activities: | ||
| Proceeds from borrowings | 0 | 50,000 |
| Repayments of debt | (699) | (50,597) |
| Purchases of treasury stock | (250,712) | (250,000) |
| Exercise of stock options | 19,739 | 10,016 |
| Benefits from stock-based compensation arrangements | (473) | 1,062 |
| Dividends paid | (18,372) | (19,041) |
| Distributions to noncontrolling interests | (5,489) | (5,007) |
| Other financing activities | (11,632) | (17,556) |
| Net cash used in financing activities | (267,638) | (281,123) |
| Net change in cash and cash equivalents | (71,017) | (49,725) |
| Cash and cash equivalents, beginning of period | 534,256 | 253,946 |
| Cash and cash equivalents, end of period | $463,239 | $204,221 |
| BASIS OF PRESENTATION | |
| 3 Months Ended
Mar. 31, 2010 | |
| BASIS OF PRESENTATION | 1. BASIS OF PRESENTATION Background 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 decisions to improve health. 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. Basis of Presentation The interim consolidated financial statements reflect all adjustments which in the opinion of management are necessary for a fair statement of financial condition, results of operations, and cash flows for the periods presented. Except as otherwise disclosed, all such adjustments are of a normal recurring nature. The interim consolidated financial statements have been compiled without audit. Operating results for the interim periods are not necessarily indicative of the results that may be expected for the full year. These interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Companys 2009 Annual Report on Form 10-K. The year-end balance sheet data was derived from the audited financial statements as of December 31, 2009, but does not include all the disclosures required by accounting principles generally accepted in the United States (GAAP). Certain reclassifications have been made to prior year amounts in the statement of cash flows to conform to the current year presentation. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Earnings Per Share The Companys unvested restricted common stock and unvested restricted stock units that contain non-forfeitable rights to dividends are participating securities and, therefore, are included in the earnings allocation in computing earnings per share using the two-class method. Bas |
| FAIR VALUE MEASUREMENTS | |
| 3 Months Ended
Mar. 31, 2010 | |
| FAIR VALUE MEASUREMENTS | 2. FAIR VALUE MEASUREMENTS The Company determines fair value measurements used in its consolidated financial statements based upon the exit price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants exclusive of any transaction costs, as determined by either the principal market or the most advantageous market. The principal market is the market with the greatest level of activity and volume for the asset or liability. Absent a principal market to measure fair value, the Company has used the most advantageous market, which is the market in which the Company would receive the highest selling price for the asset or pay the lowest price to settle the liability, after considering transaction costs. However, when using the most advantageous market, transaction costs are only considered to determine which market is the most advantageous and these costs are then excluded when applying a fair value measurement. Inputs used in the valuation techniques to derive fair values are classified based on a three-level hierarchy. The basis for fair value measurements for each level within the hierarchy is described below with Level 1 having the highest priority and Level 3 having the lowest. Level 1: Quoted prices in active markets for identical assets or liabilities. Level 2: Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs are observable in active markets. Level 3: Valuations derived from valuation techniques in which one or more significant inputs are unobservable. The following table provides a summary of the recognized assets and liabilities that are measured at fair value on a recurring basis. Basis of Fair Value Measurements Quoted Pricesin ActiveMarkets forIdenticalAssets /Liabilities SignificantOtherObservableInputs SignificantUnobservableInputs March 31, 2010 Level 1 Level 2 Level 3 Assets: Trading securities $ 35,016 $ 35,016 $ $ Cash surrender value of life insurance policies 18,476 18,476 Stock warrants 4,003 4,003 Foreign currency forward contracts 2,153 2,153 Total $ 59,648 $ 35,016 $ 20,629 $ 4,003 Liabilities: Deferred compensation liabilities $ 56,358 $ $ 56,358 $ Interest rate swaps 5,994 5,994 Foreign currency forward contracts 639 639 Total $ 62,991 $ $ 62,991 $ Basis of Fair Value Measurements Quoted Pricesin ActiveMarkets forIdenticalAssets /Liabilities SignificantOtherObservableInputs SignificantUnobservableInputs December 31, 20 |
| GOODWILL AND INTANGIBLE ASSETS | |
| 3 Months Ended
Mar. 31, 2010 | |
| GOODWILL AND INTANGIBLE ASSETS | 3. GOODWILL AND INTANGIBLE ASSETS The changes in goodwill, net for the three months ended March 31, 2010 and for the year ended December 31, 2009 are as follows: March 31,2010 December 31,2009 Balance at beginning of period $ 5,083,944 $ 5,054,926 Goodwill acquired during the year 25,973 Other purchase accounting adjustments 246 (21,195 ) (Decrease) increase related to foreign currency translation (1,937 ) 24,240 Balance at end of period $ 5,082,253 $ 5,083,944 Approximately 90% of the Companys goodwill as of March 31, 2010 and December 31, 2009 was associated with its clinical testing business. For the year ended December 31, 2009, goodwill acquired during the year was associated with several immaterial acquisitions. For the three months ended March 31, 2010, other purchase accounting adjustments were primarily related to a milestone payment on an acquisition from 2008. 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 an acquisition in 2007. Intangible assets at March 31, 2010 and December 31, 2009 consisted of the following: WeightedAverageAmortizationPeriod March 31, 2010 December 31, 2009 Cost AccumulatedAmortization Net Cost AccumulatedAmortization Net Amortizing intangible assets: Customer-related intangibles 19 years $ 600,214 $ (137,632 ) $ 462,582 $ 600,460 $ (129,994 ) $ 470,466 Non-compete agreements 5 years 54,869 (50,713 ) 4,156 54,854 (50,252 ) 4,602 Other 10 years 72,604 (20,038 ) 52,566 68,896 (18,867 ) 50,029 Total 18 years 727,687 (208,383 ) 519,304 724,210 (199,113 ) 525,097 Intangible assets not subject to amortization: Tradenames 298,150 298,150 298,568 298,568 Total intangible assets $ 1,025,837 $ (208,383 ) $ 817,454 $ 1,022,778 $ (199,113 ) $ 823,665 Amortization expense related to intangible assets was $9.4 million and $9.0 million for the three months ended March 31, 2010 and 2009, respectively. The estimated amortization expense related to intangible assets for each of the five succeeding fiscal years and thereafter as of March 31, 2010 is as follows: Fiscal Year Ending December 31, Remainder of 2010 $ 33,161 2011 40,301 2012 38,354 2013 36,778 2014 3 |
| FINANCIAL INSTRUMENTS | |
| 3 Months Ended
Mar. 31, 2010 | |
| FINANCIAL INSTRUMENTS | 4. FINANCIAL INSTRUMENTS The Company uses derivative financial instruments to manage its exposure to market risks for changes in interest rates and foreign currency. This strategy includes the use of interest rate swap agreements, forward starting interest rate swap agreements and foreign currency forward contracts to manage its exposure to movements in interest and currency rates. The Company has established policies and procedures for risk assessment and the approval, reporting and monitoring of derivative financial instrument activities. These policies prohibit holding or issuing derivative financial instruments for speculative or trading purposes. The Company does not enter into derivative financial instruments that contain credit-risk-related contingent features or requirements to post collateral. A summary of the fair values of derivative instruments in the consolidated balance sheets is stated in the table below (in thousands): March 31, 2010 December 31, 2009 Balance SheetClassification Fair Value Balance SheetClassification Fair Value Derivatives Designated as Hedging Instruments Liability Derivatives: Interest rate swaps Other liabilities $ 5,994 Other liabilities $ 14,398 Total 5,994 14,398 Derivatives Not Designated as Hedging Instruments Asset Derivatives: Other current Other current Foreign currency forward contracts assets 2,153 assets 2,357 Stock warrants Other assets 4,003 Total 6,156 2,357 Liability Derivatives: Other current Other current Foreign currency forward contracts liabilities 639 liabilities 311 Total 639 311 Total Net Derivatives Liability $ 477 $ 12,352 Interest Rate Risk The Company is exposed to interest rate risk on its cash and cash equivalents and its debt obligations. Interest income earned on cash and cash equivalents may fluctuate as interest rates change, however, due to their relatively short maturities, the Company does not hedge these assets and the impact of interest rate risk is not material. The Companys debt obligations consist of fixed-rate and variable-rate debt instruments. The Companys objective is to mitigate the variability in cash outflows that result from changes in interest rates by maintaining a balanced mix of fixed-rate and variable-rate debt obligations. In order to achieve these objectives, the Company has entered into interest rate swaps. Interest rate swaps involve the periodic exchange of payments without the exchange of underlying principal or notional amounts. Net payments are recognized as an adjustment to interest expense. The Company formally documents its hedge relationships, including identifying the hedging instruments and the hedged items, as well as its risk management objectives and strat |
| STOCKHOLDERS' EQUITY | |
| 3 Months Ended
Mar. 31, 2010 | |
| STOCKHOLDERS' EQUITY | 5. STOCKHOLDERS EQUITY Changes in stockholders equity for the three months ended March 31, 2010 were as follows: Quest Diagnostics Stockholders Equity Shares ofCommonStockOutstand-ing CommonStock AdditionalPaid-InCapital RetainedEarnings AccumulatedOtherCompre-hensive Loss TreasuryStock, atCost Compre-hensiveIncome Non-controllingInterests Total Stock-holdersEquity Balance, December 31, 2009 183,293 $ 2,141 $ 2,302,368 $ 3,216,639 $ (20,961 ) $ (1,510,548 ) $ 21,825 $ 4,011,464 Net income 162,448 $ 162,448 8,705 171,153 Currency translation (1,854 ) (1,854 ) (1,854 ) Deferred loss, less reclassifications 181 181 181 Comprehensive income $ 160,775 Dividends declared (18,058 ) (18,058 ) Distributions to noncontrolling interests (5,489 ) (5,489 ) Issuance of common stock under benefit plans 747 2 (25,090 ) 29,773 4,685 Stock-based compensation expense 10,296 831 11,127 Exercise of stock options 553 (7,863 ) 27,602 19,739 Shares to cover employee payroll tax withholdings on stock issued under benefit plans (267 ) (1 ) (5,280 ) (9,615 ) (14,896 ) Tax benefits associated with stock-based compensation plans 1,875 1,875 Purchases of treasury stock (4,460 ) (250,712 ) (250,712 ) Balance, March 31, 2010 179,866 $ 2,142 $ 2,276,306 $ 3,361,029 $ (22,634 ) $ (1,712,669 ) $ 25,041 $ 3,929,215 The deferred loss primarily represents deferred losses on the Companys interest rate swap and forward starting interest rate swap agreements, net of amounts reclassified to interest expense. Foreign currency translation adjustments are not adjusted for income taxes since they relate to indefinite investments in non-U.S. subsidiaries. Dividend Program During each of the quarters of 2010 and 2009, the Companys Board of Directors has declared a quarterly cash dividend of $0.10 per common share. Share Repurchase Plan In January 2010, the Companys Board of Directors authorized the Company to repurchase an additional $750 million of the Companys common stock. The share repurchase authorization has no set expiration or termination date. In January 2010, the Company executed an accelerated share repurchase transaction with a bank to repurchase 4.5 million shares of the Comp |
| SUPPLEMENTAL CASH FLOW AND OTHER DATA | |
| 3 Months Ended
Mar. 31, 2010 | |
| SUPPLEMENTAL CASH FLOW & OTHER DATA | 6. SUPPLEMENTAL CASH FLOW OTHER DATA Three Months EndedMarch 31, 2010 2009 Depreciation expense $ 53,974 $ 55,855 Interest expense (36,530 ) (39,844 ) Interest income 575 436 Interest expense, net (35,955 ) (39,408 ) Interest paid 35,312 47,137 Income taxes paid 6,829 31,347 |
| COMMITMENTS AND CONTINGENCIES | |
| 3 Months Ended
Mar. 31, 2010 | |
| COMMITMENTS AND CONTINGENCIES | 7. COMMITMENTS AND CONTINGENCIES 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 certain of the Companys domestic, wholly-owned subsidiaries (the Subsidiary Guarantors). In support of its risk management program, to ensure the Companys performance or payment to third parties, $72 million in letters of credit were outstanding at March 31, 2010. The letters of credit primarily represent collateral for current and future automobile liability and workers compensation loss payments. In addition, $6.4 million of bank guarantees were outstanding at March 31, 2010 in support of certain foreign operations. Contingent Lease Obligations The Company is subject to contingent obligations under certain leases and other instruments incurred in connection with real estate activities and other operations associated with LabOne, Inc., which the Company acquired in 2005, and certain of its predecessor companies. No liability has been recorded for any of these potential contingent obligations. See Note 15 to the Consolidated Financial Statements contained in the Companys 2009 Annual Report on Form 10-K for further details. Legal Matters The Company is involved in various legal proceedings. Some of the proceedings against the Company involve claims that are substantial in amount. In 2005, the Company received a subpoena from the U. S. Attorneys Office for the District of New Jersey. The subpoena seeks the production of business and financial records regarding capitation and risk sharing arrangements with government and private payers for the years 1993 through 1999. The Company cooperated with the U. S. Attorneys Office. In 2005, the Company received a subpoena from the U. S. Department of Health and Human Services, Office of the Inspector General, seeking business records including records regarding the Companys relationship with health maintenance organizations, independent physician associations, group purchasing organizations, and preferred provider organizations relating back to 1995. The Company has cooperated with the investigation. Subsequently, in November 2009, the U.S. District Court for the Southern District of New York partially unsealed a civil complaint, U. S. ex rel. Fair Laboratory Practices Associates v. Quest Diagnostics Incorporated, filed against the Company under the whistleblower provisions of the federal False Claims Act. The complaint alleges, among other things, violations of the federal Anti-Kickback Statute and the federal False Claims Act in connection with the Companys pricing of laboratory services. The complaint seeks damages for alleged false claims associated with laboratory tests reimbursed by government payors, treble damages and civil penalties. In 2006 and 2008, the Company and several of its subsidiaries received subpoenas from the California Attorney Generals Office seeking documents relating to the Companys billings to MediCal, the California Medicaid program. The Com |
| DISCONTINUED OPERATIONS | |
| 3 Months Ended
Mar. 31, 2010 | |
| DISCONTINUED OPERATIONS | 8. 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: Three Months EndedMarch 31, 2010 2009 Net revenues $ $ Income (loss) from discontinued operations before income taxes 15 (2,820 ) Income tax (expense) benefit (67 ) 1,149 Loss from discontinued operations, net of taxes $ (52 ) $ (1,671 ) The balance sheet information related to NID was not material at March 31, 2010 and December 31, 2009. |
| BUSINESS SEGMENT INFORMATION | |
| 3 Months Ended
Mar. 31, 2010 | |
| BUSINESS SEGMENT INFORMATION | 9. 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 2010 and 2009. All other operating segments include the Companys non-clinical testing businesses and consist of its risk assessment services, clinical trials testing, healthcare information technology and 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 periods presented (see Note 8). At March 31, 2010, 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 three months ended March 31, 2010 and 2009. 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 Note 2 to the Consolidated Financial Statements contained in the Companys 2009 Annual Report on Form 10-K and Note 1 to the interim consolidated financial statements. Three Months EndedMarch 31, 2010 2009 Net revenues: Clinical laboratory testing business $ 1 |
| SUMMARIZED FINANCIAL INFORMATION | |
| 3 Months Ended
Mar. 31, 2010 | |
| SUMMARIZED FINANCIAL INFORMATION | 10. 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 (QDRI) (see paragraph below), the non-guarantor subsidiaries are primarily foreign subsidiaries and less than wholly-owned subsidiaries. In conjunction with the Companys secured receivables credit facility, the Company maintains a wholly-owned non-guarantor subsidiary, 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 Statement of OperationsThree Months Ended March 31, 2010 Parent SubsidiaryGuarantors Non-GuarantorSubsidiaries Eliminations Consolidated Net revenues $ 211,221 $ 1,482,590 $ 192,336 $ (80,644 ) $ 1,805,503 Operating costs and expenses: Cost of services 122,587 879,787 63,999 1,066,373 Selling, general and administrative 23,078 314,118 100,868 (7,331 ) 430,733 Amortization of intangible assets 17 7,631 1,711 9,359 Royalty (income) expense (101,492 ) 101,492 Other operating expense (income), net 1,025 233 (782 ) 476 Total operating costs and expenses 45,215 1,303,261 165,796 (7,331 ) 1,506,941 Operating income 166,006 179,329 26,540 (73,313 ) 298,562 Non-operating (expense) income, net (30,559 ) (66,445 ) 1,712 73,313 (21,979 ) Income from continuing operations before taxes 135,447 112,884 28,252 276,583 Income tax expense 51,485 45,747 8,146 105,378 Income from continuing operations 83,962 67,137 20,106 1 |
