Welcome to the Quest Diagnostics Fourth Quarter and Full Year 2007 Conference Call. At the request of the company, this call is being recorded. The entire contents of this call, including the presentation and question-and-answer session that will follow are the copyrighted property of Quest Diagnostics with all rights reserved. Any re-distribution, re-transmission, or re-broadcast of this call in any form without the expressed written consent of Quest Diagnostics is strictly prohibited. Now, I would like to introduce Laure Park, Vice President of Communications and Investor Relations for Quest Diagnostics. Go ahead, please.

Thank you and good morning. I am here with Surya Mohapatra, our Chairman and Chief Executive Officer; and Bob Hagemann, our Chief Financial Officer. Some of our commentary and answers to questions may contain forward-looking statements. You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date that they are made and which reflect management's current estimates, projections, expectations or beliefs and which involve risks and uncertainties that could cause actual results and outcomes to be materially different. Risks and uncertainties that may affect the future results of the company include, but are not limited to adverse results from pending or future government investigations, lawsuits or private actions, the competitive environment, changes in government regulations, changing relationships with customers, payers, suppliers and strategic partners and other factors described in the Quest Diagnostics 2006 Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. A copy of our earnings press release is available and the text of our prepared remarks will be available later today in the quarterly update section of our website at www.questdiagnostics.com. A downloadable spreadsheet with our results and supplemental revenue analysis is also available on the website. Now, here is Surya Mohapatra.

Thank you, Laure. During the quarter, we established strong growth in revenues, earnings and cash flow. Consolidated revenues grew to $1.8 billion. Operating margin grew to 17.6%, the third consecutive quarter of strong improvement. And cash flow was strong $355 million for the quarter. We entered 2007 with uncertainty regarding industrial pricing and access to health fund contracts. Over the past 12 months, we have taken many decisive actions to reduce that uncertainty and drive strong performance improvements. But these short-term issues did not paralyze us from executing our long-term growth strategy. As a result, we are a stronger company now, than compared to 12 months ago. During the year, we renewed or expanded relationships with most of the major health plans. We drove productivity improvements, while improving service and embarked on an initiative to reduce our cost structure by an additional $500 million. We continued to build our liver patient testing business by acquiring HemoCue a leader in that industry. We continue to lead with innovations both in medicine and information technology. We established a presence in the growing Indian market and with the acquisition of AmeriPath. We became the world leader in cancer diagnostics. Our longer-term goals are to grow revenue profitably above the industry growth rate, to expand operating income to 20% of revenues and to derive 10% of consolidated revenues from international business within five years. Later, I will elaborate on this growth plans, but first Bob will review our performance and guidance.

Thanks Surya. As you heard from Surya and as you've seen in our results, we've continued to make excellent progress in improving earnings over the course of the year. Despite the loss of the contract with our largest private payer intensified pricing pressure and an increased competitive environment in the quarter we managed to improve our revenues and profits over the prior year. This progress stands from the decisive actions we took in the first quarter, and the hard work throughout the year to reestablish revenue growth, streamline our operations, and enhance our service offerings. The actions we have taken and the plans we have in place, we are solidly positioned for sustaining revenue and earnings growth. In addition, we have continued our discussions with the government in an effort to reach the settlement regarding its investigation of NID, a test kit manufacturing subsidiary closed in 2006. As result of further discussions, we have increased the reserve we established in the third quarter by $190 million, $241 million, and recorded the charge as part of discontinuing the operations. While this a substantial increase to reserve, we believe that we are closer to either settling this matter or determining that an acceptable settlement cannot be reached. Even that we are in going discussions, what we can say is limited and is contained in footnote six of the earnings release. Obviously, we want to put this matter behind us quickly. However, it remains unclear as to how long it may take to bring into closure. We are committed to do what we believe is right for our company and shareholders. If we are unable to reach an acceptable settlement, we are fully prepared to litigate this matter. Now, let's turn to fourth quarter performance from continuing operations. In order assist in making…

Thanks Bob. 2007 was an important year in which we drove performance improvements and continued to build the foundation for sustained growth. We grow our business by focusing on sales, service and science. Our sales force is energized and driving results. During the fourth quarter, we accelerated underlying revenue growth by almost 3%, compared to that of the third quarter. Excluding the impact of acquisitions in United, fourth quarter revenues grew about 5%. Patients, doctors and heath plans appreciate our quality, access and convenience. We continue to expand the use of our unique appointment scheduling system for our patient service centers. One clear sign that patients and physicians care about the superior service we provide is our ability to retain the majority of the discretionary business, despite the united contract change. We see the opportunity to accelerate growth by working with payers and employers to shift more of their testing to us, which is currently going out of network or to higher price providers. We continue to lead the industry with the important new tests and the most complete testing menu for physicians. With AmeriPath, we are the clear leader in clinical pathology, anatomy pathology, as well as gene-based and esoteric testing. And our technology enables testing to move closer to the patient; we are prepared with a growing platform in near patient or point of care testing. We continue to diversify our revenue base of our $7 billion in revenues about 35% now comes from anatomy pathology and gene-based and esoteric testing, versus 26% of $4 billion revenue in 2002. Our acquisition of AmeriPath made us a clear leader in cancer diagnostics. We have strengthened our integrated offering of clinical, AP, and esoteric testing for hospitals, specialists and primary care physicians. We are excited about the opportunity to accelerate…

Thank you. [Operator Instructions]. Bill Bonello with Wachovia.

Good morning. I have a couple of follow-up questions predominantly related to your guidance for next year. First of all, just on the revenue growth, can you give us a sense of how much AmeriPath is expected to contribute to revenue growth in 09?

Bill, this is Bob. It's about 4% or so, organic revenue growth is about 5%; that's embedded in the guidance.

Okay. And the real step-up in the organic revenue growth will just be that you have annualized the negative impact from United?

Certainly that's part of it, but again as we told you, the underlying revenue growth when you strip out the impact of United has accelerated over the course of the year.

Okay perfect. And then you mention that the AmeriPath reaching a contract with UNH. Can you just tell us... I mean do you think that gives you any kind of an opportunity to recapture any of the business that you have lost?

Bill, this is Surya. AmeriPath renewed their contract at United and what it does tell us that anatomic pathology is very different from clinical pathology. And we have the premium pathologist and it is the reason why we acquired AmeriPath, but it is a specific contract for AmeriPath. And it will be kept separately.

Okay. But you can't... so you don't have the ability to say on something like path that I guess you could consider AP, you don't have the ability to sort of shift business towards AmeriPath?

No, that's not the intent of this contract, and the other thing is that we still have 20% of the United customers still with us, and you they really appreciate the service we provide.

But with that said, that doesn't mean that we aren't going to try and regains some of the United business has been lost.

Based on our account.

Based upon continuing to provide what we believe is a superior service to physician and patients.

Okay. And I will ask one last question if I can, and get back in the queue, but the investment income that you are spending next year, thank you giving breakout there. Can you give us some sense of what we should be thinking about in terms of an expected return on investment from India? I mean what should we be looking for India to contribute earnings or cash flow and sort of over what period?

Bill, it's Bob again. What I would say with respect to India is you should assume that for the next several years, it's going to be a net investment, anytime you enter a new market, you'd expect to make an investment upfront in order to have significant gains in the future. This year, our lab is going to be coming online actually this quarter, and we are going to incur a significant amount start of startup costs. But there is... as Surya said, there is tremendous opportunity there. Today it's a growing market as underserved. The middle class in India is large as the entire U.S. population. And India is going to be an important element of our growth strategy internationally. As you heard us say before, we expect international revenues to account for about 10% of our total revenues within about five years or so.

Okay, but in terms of it being a positive contribution, I mean we were really should think of that as that's really building for the future, I mean maybe three to five years out or something?

Correct, that's true. And I think it's going to take three to five years, but as we said that we are expecting $1 billion from international in five years. So India is going to be our largest investment outside the United States.

Okay, great. Thank you, I will get back in the queue.

Tom Gallucci with Merrill Lynch.

Good morning, thank you. First just following up on that last question there, in terms of the organic growth expectations, can you give us any color on sort of volume versus price and within price, I think you said in the quarter, mostly driven by mix, we're expecting in terms of absolute pricing in 08?

Tom, as you know we tend not to provide the components of the revenue growth, what I can tell you though is we expect full price net revenue per acquisition and volume growth to be positive in 08, and that the revenue per acquisition increases will again continue to be principally driven by test mix and in the number of test order per acquisition.

Okay.

But remember, some of the pricing concessions that we had to make in 07 really go into effect in 08.

Right. On the volume side, although you won't give a specific number, maybe anecdotally can you tell us how you handled certain things like any assumptions for further deterioration of your United business or I think the LabOne contract with United is up, and I know that LabCorp is excited about an opportunity to market to CIGNA, are you seeing any changes within that customer base either at this point?

Yes, a couple of things. With respect to LabOne and that contract coming up in May, that's really at the minimus amount of revenues for us. It's only several million dollars of revenues that we generate from that. And we have actually over the course of the last year seen what we think is going to be most of an attrition on that contract. With respect to CIGNA, listen the LabCorp was on that contract previously, as well as were we, and we have not seen any significant change there in the volume associated with the CIGNA members. And as I said earlier, given that we have seen an uptick in our underlying volume over the course of this year, we expect to see some continued growth in that as we go through 2008.

Okay. And my last question would just be the cost of goods sold sequentially that's seemed deteriorate a bit, although the revenue base was sort of stable sequentially. Can you give us some further color on that line of item? Thanks.

Tom. Cost of goods sold again, I would encourage you not to look at it so much on a quarter-to-quarter basis or even SG&A on a quarter-to-quarter basis. We really manage at the operating margin line. And as I mentioned, we continue to see successive improvements about a point each quarter in 2007 in our operating margin comparisons versus the prior year. And when you strip AmeriPath now, we've actually achieved operating margins, which are in excess of the prior year. So, we feel good about the work that we've done to pull costs out. In some cases, whether it be in cost of sales or SG&A, some of actions we've taken to reduce the size of the workforce, those costs show up in there. And again that's why I encourage you not to look at on any single quarter.

Matthew Borsch with Goldman Sachs.

Hi, thanks for taking our question. This is Shelly in for Matt Borsch this morning. The first question is, I was wondering if you could give a little bit more detail behind the 2008 guidance, relative to SG&A. I am wondering not to focus too much on the improvement we saw in the quarter, but I am wondering how much further improvement there is in SG&A in 2008. And may be how is that offset by the developments in India?

Shelly, we don't give guidance for SG&A or cost of sales percentages, that's why we gave it to you operating income as a percentage of revenues. Again that's how we manage the business. And we expect that there is going to continuing improvement there. But certainly some of these investments that we are talking about will offset that. A lot the India investment will probably show up in cost of sales, but we will also see some of it in SG&A.

Okay, thanks. And then I guess relative to the 17% operating margin, then I guess that what we should be talking about. Is that lower than your expectations a quarter or two ago?

The 08 really reflects continued improvement offset by these investments, which are really being put out for future growth. So, I don't think there is really any change from what we are thinking.

Okay, great. Thanks very much.

Bill Quirk with Piper Jaffray.

Yes, thanks. Good morning. First question, thanks for the breakdown on the payer side; I was hoping to maybe flush out Medicare versus Medicaid little further obviously collective with your 17% revenue, but can you breakdown those two a little bit more please?

Well, Medicare is about 15% with Medicaid about 2% to 3%, and that's pretty consistent with what it's historically been. And when you look at the Medicare, Medicaid reimbursement on average, it's about equal to our average reimbursement for the company.

Understood. Thanks, Bob, I appreciate the color there. Separately, if my math is right, did AmeriPath slowdown little bit on a year-over-year basis in the fourth quarter? I guess first is assumption correct and secondly can you just add a little color there?

Yes, Bill, with respect to AmeriPath, we are not breaking out specifically AmeriPath revenues or contributions. As you start to bring businesses together and you are operating as one business, it becomes a lot more difficult to do that. What I would say though is as we look at the AmeriPath opportunity and again trying to look at anything on a quarter-to-quarter basis, because you can get misleading statistics. But nothing has changed regarding our excitement about the opportunity to accelerate growth there for both AmeriPath and Quest Diagnostics. On a full year basis for AmeriPath, their organic revenue grew around... between 7% and 8%.

Okay, great. And then, so safe to assume then that we've got fairly stable trends within the employment of that group?

Yes, with respect to the pathologist, I think we've had very stable pathology engagement. And in fact the pathologists are... I think as excited as we are about the opportunity to leverage the infrastructure that Quest brings to grow the AP business.

Okay, great. Thanks very much guys,

Robert Willoughby with Banc of America.

Can you speak to the ongoing relationship on the clinical trials business, testing business with Quest, so we have heard some... share had moved away. Is there any formal contract in place? And can you give any details on that?

Robert, this is Laure. We have a formal contract in place and actually we've singed on a letter of agreement that extent that contract beyond the expiration by an additional five years. We are excited about our relationship with Glaxo and it continues strong.

That's it. Thank you

Ralph Giacobbe with Credit Suisse.

Thanks, good morning. Can you maybe talk about that $0.20 investment in the context of your 20% operating margin goal?

Sure. The first thing I would tell you is, think about it as an investment, not necessarily ongoing cost. About 13% or so is associated with upgrading systems and that's going to be an important enabler for us to realize the $500 million of savings. Yeah, these are for the most part, development and implementation cost, they are not recurring costs, whereas the $500 million will be an ongoing and is net of any ongoing cost that we are going to incur.

So 20%... is 20% excluding sort of the investment or are you saying that 20% is what you are still looking to achieve by... was it 2009?

We didn't put a specific date out there for when we expect to achieve the 20% operating income. But it's certainly our goal and these are investments that we are making today to position us to get to that 20%.

Okay. And then just on the AmeriPath and the investment in the systems. I mean is this... it sounds like there is something incremental and not incorporated in when you sort of gave the guidance initially on AmeriPath and what you thought the EBITDA contribution will be in 2008?

This is incremental to what we initially anticipated, the new systems both the lab and the billing system, which AmeriPath were deploying or now being enhanced and they are going to be connected to our Care360 system, so that physicians will have a complete electronic record of both their anatomic pathology results and their clinical pathology results. And as we look at these systems, they are also going to improve, we believe the productivity of the pathologist and the efficiency of the AmeriPath billing operations, and help us get that bad debt issue that they have got there.

Okay. And then just looking at organic growth, if I look at 4Q, strip out UNH, AmeriPath and other acquisitions; it looks like the organic growth is about 5%.

That's about right.

Is there anything else in that number I should be looking at like an Aetna impact. Was that meaningful at all?

Certainly Aetna was one of the things that helped us to accelerate the volume growth and that was a contributor to it.

Okay. So, but... I mean looking at it 5% versus your guidance for next year of 4%, maybe some of that discrepancy is sort of incremental Aetna?

No, the 4% that I mentioned was the impact with the contribution associated with AmeriPath; therefore 5% is the organic number.

Okay. All right, I see and then just my last question here. The 9% top-line assumption, just want to make sure, if there is anything else I need to be aware of in terms of... it sounds like LabOne isn't -- you don't expect that much more loss. Don't expect a whole lot from CIGNA. Is there any expectation of sort of more pull through from Aetna or anything on the acquisition side that's embedded in that number, any color there would be helpful.

I wouldn't say that there is any one specific item that's driving that number. Again, over the course of the year, we had our sales force focused on a whole bunch of things, other than just selling. There were a lot of contract changes that they need to deal with. Those are essentially set at this point and the sales force is very focused on selling at this point. And we really have no further acquisitions built into that number. That's really organic; we have 5% through organic growth.

Okay. Great thanks.

Art Henderson with Jefferies & Company. Arthur I. Henderson - Jefferies & Co.: Hi. Good morning. Bob, when do the UnitedHealthcare LabOne revenues start to roll off? Is that mid year?

Well, the contract is up in May of 08. Arthur I. Henderson - Jefferies & Co.: Okay.

But again I mentioned, it's relatively the deminimus, the amount of revenues that we are generated from that contract today. Arthur I. Henderson - Jefferies & Co.: Is there... can you put a number around that or are you not comfortable doing that?

Several millions dollars. Arthur I. Henderson - Jefferies & Co.: Several millions, okay.

Triple digits. Arthur I. Henderson - Jefferies & Co.: Okay, thanks. And also in looking at the timing of the expenses that you've have talked about with relation to the IT investment in India, should we be thinking about that in anyway on a quarterly basis, will it be earlier in the year, later in the year, how should we think about that?

I would tell you that they are going to be incurred throughout the year. I, at this point, don't want to try and get too specific quarter-by-quarter. Obviously, we don't give quarterly guidance, but it's really going to be a function of the readiness in our plans and for executing and will make sure that everything is lined up before we go forward and that will drive the timing of some of those things. Arthur I. Henderson - Jefferies & Co.: And I know you mentioned to Ralph just a second ago about these being incremental. Is there anything that you have seen, as you have gotten moving ahead with the integration of AmeriPath that's been disappointing or surprising to you in some way? I mean can you characterize how you feel... I mean I know overall you feel good about it, but what has sort of struck you is being surprising to the downside.

This is Surya. Let me tell you a little bit. First of all, there was nothing surprising. We acquired AmeriPath as a game changer into the industry just like when you acquired SBCL and we remain really excited about how we can bring these two companies together. Now there are number of elements of integration around track. For example, specialty is now integrated with our hospital business. The most important thing for us to have a cultural integration and I am very happy to tell you that both companies are culturally integrated. So nobody is leaving, the pathologists are pretty excited and engaged. And they are influencing some of our strategic discussion going on about cancer diagnostics. I was worried about United contract. And we have not lost any significant customers. So, all those things are really going in the right direction. Obviously, we are a conservative management and we have lot of experience in integration. So we intentionally delayed two or three elements, and that's a deliberate delay to make sure that we build this business for long-term rather than short-term. And they are like going down the IT conversion they were on path. Because we wanted to really make sure that they have all the features and benefits, which will have both companies. Looking at the bad debt, bad debt is just only a systems issue result, a culture issue. So those are the two things that is going to take a little longer, but I am really very proud of the number of pathologists we have, and what they can do with the company and this was, when you look back, would have been... will be the game changer in this industry, so I am pretty excited about it. Arthur I. Henderson - Jefferies & Co.: Okay, that's very helpful. One last question for you, Surya, and I will jump back in the queue. How big is the Indian market right now and what is it growing at?

Okay, how big is the Indian market? Indian market in diagnostics is probably like 20 or 25 years ago in the United States. It's very a fragmented market. It's a nascent market. It's only $1 billion dollar, but because you really have this 300 million middle class, there is a lot of discretionary income. They are now moving from consumer electronics to healthcare. So if we just take 300 million middle class, it's same as the population here. So I believe that that market is going to grow at least 15% to 20% as we go forward. And we are starting from scratch and building the value proposition and we believe that this is going to be the largest return for us and that's the reason why we announced this time that in the long-term, in five years we will have 10% of our consolidated revenue from international. But we have also... as you see, we just announced our first contract yesterday from Birla Sun Life. And like any other things, it's going to take some time, but again India represents the biggest opportunity for us outside the United States.

And I think down the road, India is going to present acquisition opportunities as well. It's a very fragmented market today. And as to we have our operations up and running for a while and we start growing organically there, down the road we will look at potential acquisition opportunities.

So, get ready to visit India in coming years. Arthur I. Henderson - Jefferies & Co.: Great. Look forward to. Thank you.

Amanda Murphy with William Blair. Amanda Murphy - William Blair & Company, L.L.C.: Hi, good morning. In addition to the international expansion, do you see an opportunity as to...

Amanda, we can't hear you. Can you speak up please? Amanda Murphy - William Blair & Company, L.L.C.: I'm sorry. Is that better?

That's better. Amanda Murphy - William Blair & Company, L.L.C.: Okay, sorry. In addition to the international expansion, do you see an opportunity to gain market share in the U.S. so and if so what strategies do you have in place to do so?

Absolutely. As you remember we are the leader, but we only have 15% of the market share, there is lot of growth opportunities. As we mentioned that we are in medical service business, and the most important thing for our customer is quality and reputation. And because of our superior service, we still have 20% of United, and we are reorganizing our sales organization, they are focused, and our goal is to really grow and gain our market share in the U.S., and 15% is not where we are going to stop. Amanda Murphy - William Blair & Company, L.L.C.: Okay. And then in terms of working with health plans to control leakage, are you seeing anything new or any new willingness out of health plans to implement to all to help control that metrics?

Yes. We look at collaboration and both health plans and also we are collaborating on how we really persuade the doctors to send the sample to us. And it's an active engagement between often health plans and it's something, which you have to constantly work on.

And it's not only the health plans that we are looking to do that and employers as well are looking to drive more of the work in network, so that they can realize the savings associated with that as well, and there is opportunities for us to work with payers and the employers jointly in that effort. Amanda Murphy - William Blair & Company, L.L.C.: The things like co-pays and things like that the employers are looking at?

Certainly design is part of it, but just education yes, can drive a lot of it as well. Amanda Murphy - William Blair & Company, L.L.C.: Okay. Thank you very much.

Kemp Dolliver with Cowen & Company. Kemp Dolliver - Cowen & Company: Hi, thanks. First question relates to AmeriPath; and at the time of the acquisition, you had set out a goal for this year that the implied multiple would have... or the effective multiple would be ten times EBITDA. And given IT spending and the like, I am... you are still trying to reconcile whether that's still... you are going to achieve that this year and if not how much of a variance we are likely to see?

Kemp, as I mentioned the IT spend is incremental to what we initially anticipated and while this year AmeriPath was somewhat dilutive or maybe a little more dilutive than we had anticipated and lot of it being associated with bad debt. We are expecting significant improvements in 2008, but we are not providing a specific 2008 impact as I said earlier, when you start to bring two companies together and you operate it as one business. It becomes really difficult to break it out. And frankly we've never done that for an acquisition in the past and AmeriPath is really not going to be any different. Kemp Dolliver - Cowen & Company: Okay. And Bob, I think you did give this earlier, but I wasn't sure I understood the numbers. How much of the incremental IT spending does... would relate directly to the things you want to do at AmeriPath?

The $0.20, about $0.13 is system's development and deployment, what I would characterize as the majority of that being AmeriPath. Kemp Dolliver - Cowen & Company: That's great, thanks. The second question relates to India; looking past this year, when you talk about the three to five year impact overtime, does that contemplate opening additional labs or are we in a situation where this year you've got the cost of entering the county, the cost of starting up one lab and that over the next few years, it's going to be a matter mainly of how well this lab does?

No, Kemp, India is a very large country and some cities have five to ten million people, more than Sweden and Finland. So, we have to have other laboratories. We are cautious as far as our expansion, but our goal, as we said that for the next several years, we will invest in India and make sure that we establish ourselves in the major metropolitan area and provide esoteric testing for hospitals and specialists and do clinical trials. So, you will see we will build other laboratories, and also we will acquire companies there. Kemp Dolliver - Cowen & Company: Is the profitability there likely to be comparable to U.S.?

Well, again we are just starting and the model is very different, because obviously there is no managed care organization there or private payers, but it's too early to say exactly whether it will have the same profit over there as the U.S. Kemp Dolliver - Cowen & Company: Okay. Thanks.

Dave Brampton with Trove Partners. [ph]:

Just a follow-up on... exactly who are the payers? Is there any government healthcare?

Yes, there are some government payers like the dormant, depends railways, there are some companies and hospitals, they the insurers, but mainly it's like Brazil. It's mainly paid by the private payers... sorry, private patients and some employers.

And what is the approximate revenue per accession now?

It's too... we are just opening the lab right now.

But there are people in business, I assume you have done some kind of work.

No, lab is not yet operational.

Your lab, but there must be other people in the business.

Yes. I am, but you cannot really take their numbers to do certain things, we obviously have a different model, and we want to provide esoteric testing, and some of the labs they don't provide those tests.

Right, I mean that's the important point. We are coming in with gene-based and esoteric testing and the high-end testing, this isn't going to be just a routine laboratory there, and obviously the revenue per rep will be very different.

Is your lab open? I am sorry, I didn't quite get it?

It's going to open, go on line this quarter.

And do have the price list on routine testing available?

You are asking me the question, of course they are available, but obviously it's a local price list with a local market and...

How does it compare to U.S. prices?

Of course, it's lower than U.S. prices. You are paying in dollars, and rupees will be very different.

The costs will also be lower there as well.

And is there any currency hedging you contemplate?

Right now there is no business there, there is no hedging related to it, but certainly it's a vehicle that we consider for any foreign exchange risk that we got.

Thank you.

Levon Von Reden with Hockey Capital. [ph]:

Just a couple of house keeping questions. Could you talk a little bit about your D&A and tax rate expectations for 08?

What was the question?

Yes, could you talk about your depreciation and amortization and your tax rate for 08?

The tax rate for 08, the tax rate for 08 will be significantly different than it is for this year, which is just over 39% for the most part of our operations, the vast majority today are still domestic and you got 35% federal rate and then you have a state rates net of the federal benefits, which puts you in the 39% to 40% range or so.

And your depreciation and amortization?

Amortization runs about $9 million a quarter, and then obviously depreciation...

We don't give specific guidance on depreciation when you can take a look at what it ran in the fourth quarter and run your own models.

Okay. And since I got you on the line, for the free cash flow that you are expecting in a 08, uses of that maybe give some top-line expectation as well.

Certainly, as you know, we are going to be deploying some of the cash to deliver, that's one of the commitments we made to our lenders when we levered up to complete the AmeriPath transaction. But certainly, as we get back in line with the credit statistics that we target, then our excess cash flow generally, our first choice would be to have a go towards growth. And when those growth opportunities aren't available, then to share repurchases. And that's essentially the way historically operated the business, but again in 08, you will see us with the focus on repaying some of the debt, and getting the credit stats down and to more manageable levels.

Thank you.

Bill Bonello with Wachovia.

Well, great, thanks. Just a couple of follow-up questions; just on some of the other investments that you have done, can you give us any sense? And I know you said you don't break out specific initiatives, but just wondering if you can give us any sense of the current contribution from the three big acquisitions that were completed over the last couple of years, so AmeriPath, Focus, HemoCue. I mean are they still net-net a drag on earnings, are they contributing to earnings? How do we think about sort of return on invested capital for that? I guess it was about 3 billion of spend.

Bill, you should think at this point, the ones that we completed AmeriPath... LabOne, which is totally integrated right now; Focus, which is fully integrated. Those are generating returns that are in line with what we had anticipated. There were a lot of synergies involved in the LabOne deal, which we have now fully realized and the Focus transaction, which really about accelerating growth on the hospital side, as well as in the product side, and we are certainly seeing that from that acquisition.

And how about HemoCue?

HemoCue is one that is just beginning to ramp up. As you heard, we've got some products that was just approved by the FDA, and that's really a business that we acquire because of its product portfolio and its pipeline of new products, and we expect over the next several years that that's really going to ramp up and be a nice contributor.

And Bill, take for example Focus, we acquired it to be the number one in infectious disease, but we are number one in clinical trails of vaccine. So some things you recognize ahead of time and some times you do certain things and then it provides the accession capabilities at the end of the day. We want to be wherever there is testing, it doesn't really matter who they are; the center piece of the company is going to be testing.

Okay, and then just on the HemoCue mentioning the FDA approval. Can you give us any update on your progress towards getting those tests CLIA waived?

The applications have been filed and are moving, I guess at the timeline you progress. So, they are moving forward on... once we've got with the FDA clearance, we are able to start actually marketing those in a moderate complexity environment as well even without the CLIA waiver.

Okay. But maybe year end on the CLIA waiver or...

It's tough to put.

Yes. It is FDA; so obviously, it is difficult to know the date.

Okay. And then just I wanted... somebody asked about this, but I guess I am still a little confused than the stack you gave around that the cost savings. I thought I heard you say that you were exiting the year with $100 million and then I thought in previous calls you had said you were at a run rate of $200 million, but I might not be comparing apples-to-apples in the numbers you are giving.

Bill, this is Bob. You heard both numbers right, but they are separate numbers. Through the first half as of the end of June, we have reduced our cost structure by approximately $200 million associated with the change in volume from United contract. We then said that on top of that, we are going to reduce our cost by another $500 million by the end of 2009. Of that $500 million we have realized $100 million on an annualized basis as we exited 07, and we are going to see the remainder of that the $400 million or so, realized by the end of 09 or as we exit 09.

Okay, and again that 100 is a net number?

Correct.

Okay, that's great. Okay, thank you very much.

Your last question is from Tom Gallucci with Merrill Lynch.

Thanks. Just a couple of quick follow-up, so I guess just on the spend, Bob, the $0.20 or so. What's the timeframe to do the system implementations, I guess in particular? It sounds like India will be the net investment for a couple of few years. Will IT all be done in 08 or should we expect there will be some more as we look into 09?

There will be more in 09, Tom. The big cost that we are incurring this year is on the development side, and I think we will have all the development done in 08, and then it becomes implementation costs beyond that.

Right. Just on 08 guidance, interest expense... can you offer any number there? You said you are going to pay down some debt, and you have got a very fair amount of variable rate and obviously rates have come down a bit. So, can you sort of frame what you are thinking about on that line item?

Again, we haven't given guidance on the components, but as you heard we say earlier, you should expect that we are going to continue to reduce our debt levels. And as you know, interest rates are moving down although we have a significant piece of our debt, that's fixed rate. And in fact even a portion of that was floating has been converted to fixed earlier in the year.

So, do you have a number that's maybe the total that's either variable or fixed at this point including those hedging?

You should be able to take a look at that. We are going to be filing our 10-K later this week and all that details will be laid out in there, but the vast majority of it is fixed.

Okay. And then I just had one more just to make sure I understand on... I know it's a sensitive issue, but on NID that you talked about, if... as you couldn't come to a settlement, you'd be prepared to litigate, but you've got $241 million reserve at this point. So, I guess just simply is that sort of the minimum we should be thinking about. And if you can come to a settlement, hopefully that's the right range. But if you have to go litigate, obviously the government must be looking for some bigger than that?

As you see disclosed in the footnote that we have got there, we indicate that that is what we believe the minimum estimate of the liability. But you also heard me say is we are much closer to either settling this or determining that, we are not going to be able to reach a settlement, in which case we are fully prepared to litigate it.

And when you come to that conclusion, if it's not a settlement and the gross litigation and that will be sort of a newsworthy and I guess you will let us know.

I would imagine it would be.

Okay. Thank you very much.

Thank you participating in the Quest Diagnostics fourth quarter and full year conference call. A transcript of prepared remarks on this call will be posted later today on Quest Diagnostics website at www.questdiagnostic.com. A replay of the call will be available from 10:30 AM on February 21st through 11:00 PM on March 28, 2008 to investors in the U.S. by dialing 866-393-1025. Investors outside the U.S. may dial 203-369-0451. No passcode is required for either number. In addition, registered analysts and investors may access an online replay of the call at www.streetevents.com. The call will also be available to the media and individual investors at Quest Diagnostics website. The online replay will be available 24 hours a day, beginning at noon. Good bye.