BUSINESS ACQUISITION

3 Months Ended

Mar. 31, 2014

Business Combinations [Abstract]

BUSINESS ACQUISITION

BUSINESS ACQUISITION

Acquisition of Solstas Lab Partners Group

On March 7, 2014, the Company completed its acquisition of Solstas Lab Partners Group and its subsidiaries ("Solstas") in an all-cash transaction valued at $572 million, or $563 million net of cash acquired. The Company financed the acquisition with borrowings under its secured receivables credit facility and senior unsecured revolving credit facility. Through the acquisition, the Company acquired all of Solstas' operations. Solstas is a full-service commercial laboratory based in Greensboro, North Carolina and operates in nine states throughout the Southeastern United States, including the Carolinas, Virginia, Tennessee, Georgia and Alabama.

For the three months ended March 31, 2014, Solstas contributed $25 million to the Company's consolidated net revenues and $27 million to operating expenses, which includes $3 million of integration and transaction related costs recorded in selling, general and administrative expenses.

The acquisition of Solstas was accounted for under the acquisition method of accounting. As such, the assets acquired and liabilities assumed are recorded based on their estimated fair values as of the closing date. The purchase price allocation is based upon a preliminary valuation and the Company's estimates and assumptions are subject to change within the measurement period as the valuation is finalized. Management is currently in the process of verifying data and finalizing information related to the valuation and recording of identifiable intangible assets, certain other assets and liabilities and the corresponding effect on the amount of goodwill. All of the goodwill acquired in connection with the Solstas acquisition has been allocated to the Company's DIS business.

The following table summarizes the consideration paid for Solstas and the preliminary amounts of assets acquired and liabilities assumed at the acquisition date:

	Preliminary Fair Values as of March 7, 2014
Cash and cash equivalents	$	9
Accounts receivable, net	48
Current deferred income taxes	7
Other current assets	13
Property, plant and equipment, net	51
Goodwill	269
Intangible assets	203
Non-current deferred income taxes	42
Total assets acquired	642
Current liabilities	57
Non-current deferred income taxes	4
Other non-current liabilities	9
Total liabilities assumed	70
Net assets acquired	$	572

The acquired amortizable customer relationships are being amortized over their estimated useful lives as follows:

	Fair Values		Weighted Average Useful Life (in years)
Customer relationships	$	203	20

The goodwill recorded as part of the Solstas acquisition includes the expected synergies resulting from combining the operations of the acquired business with those of the Company and the value associated with an assembled workforce that has a historical track record of identifying opportunities.

Pro Forma Combined Financial Information

The following unaudited pro forma combined financial information reflects the consolidated statement of operations of the Company as if the acquisition of Solstas had occurred as of January 1, 2013. The pro forma information includes adjustments primarily related to the amortization of intangible assets acquired, interest expense associated with debt extinguished prior to the acquisition, and integration and transaction costs related to the Solstas acquisition. The pro forma combined financial information does not include the estimated annual synergies expected to be realized upon completion of the integration of Solstas and therefore is not indicative of the results of operations as they would have been had the transaction been effected on the assumed date.

	Three Months Ended March 31,
	2014		2013
Pro forma net revenues	$	1,815	$	1,886
Pro forma income from continuing operations	$	110	$	123
Earnings per share attributable to Quest Diagnostics’ common stockholders - basic:
Pro forma income from continuing operations	$	0.71	$	0.73
Earnings per share attributable to Quest Diagnostics’ common stockholders - diluted:
Pro forma income from continuing operations	$	0.70	$	0.72