Quest Diagnostics 2000 Annual Report Download - page 90

QUEST DIAGNOSTICS INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands unless otherwise indicated)
F-20
Long-term debt at December 31, 2000 and 1999 consisted of the following:
2000 1999
Senior secured variable rate bank term loans:
Term loan, payable through June 2005; 8.6% interest as of
December 31, 1999.................................................................... $ - $ 362,600
Term loan, payable through June 2006; 9.8% and 9.4% interest
as of December 31, 2000 and 1999, respectively...................... 304,288 319,425
Term loan, payable through June 2006; 10.1% and 9.8%
interest as of December 31, 2000 and 1999, respectively......... 281,304 295,300
Capital markets term loan, due August 2001; 9.2% interest as of
December 31, 1999.................................................................... - 47,674
10¾% senior subordinated notes due 2006 ...................................... 150,000 150,000
Other .................................................................................................. 34,521 41,878
Total ............................................................................................... 770,113 1,216,877
Less current portion........................................................................... 9,408 45,435
Total long-term debt ...................................................................... $ 760,705 $ 1,171,442
At the closing of the SBCL acquisition on August 16, 1999, the Company entered into a new senior secured
credit facility (the “Credit Agreement”). The Credit Agreement included the following facilities: a $250 million six-year
revolving credit facility; a $400 million amortizing term loan payable through June 2005; a $325 million term loan with
minimal amortization until maturity in June 2006; a $300 million term loan with minimal amortization until maturity in
June 2006; and a $50 million two-year capital markets term loan due August 2001, which does not amortize (collectively
the “Term Loans”). As discussed above, the proceeds from the Receivables Financing was used to completely repay
amounts outstanding under the capital markets loan, with the remainder primarily used to repay amounts outstanding
under the term loans. Up to $75 million of the revolving credit facility may be used for letters of credit. Other than the
reduction for outstanding letters of credit, which approximated $13 million, all of the revolving credit facility was
available for borrowing at December 31, 2000.
Interest is based on certain published rates plus an applicable margin that will vary depending on the financial
performance of the Company. The applicable margin was reduced by 25 basis points upon the repayment of the capital
markets term loan in the third quarter of 2000. At the option of the Company, the Company may elect to enter into Libor
based interest rate contracts for periods up to 180 days. Interest on any outstanding principal amount of the Term Loans
not covered under Libor based interest rate contracts is based on the alternate base rate which is calculated by reference to
the prime rate or federal funds rate (as those terms are defined in the Credit Agreement). Prior to the repayment of the
capital markets term loan, a commitment fee of 0.50% was payable on the unused portion of the revolving credit facility;
thereafter, the fee will range from 0.375% to 0.50% based on the financial performance of the Company. The Credit
Agreement requires the Company to mitigate the risk of changes in interest rates associated with its variable interest rate
indebtedness through the use of interest rate swap agreements. Under such arrangements, the Company converts a
portion of its variable rate indebtedness to fixed rates based on a notional principal amount. The settlement dates are
correlated to correspond to the interest payment dates of the hedged debt. During the term of the Credit Agreement, the
notional amounts under the interest rate swap agreements, plus the principal amount outstanding of the Company’s fixed
interest rate indebtedness, must be at least 50% of the Company’s net funded debt (as defined in the Credit Agreement).
As of December 31, 2000 and 1999, the aggregate notional principal amount under interest rate swap agreements, at a
fixed interest rate of 6.2% and 6.1%, respectively, totaled approximately $410 million and $450 million, respectively.
The interest rate swap agreements mature at various dates through November 2002.
The Credit Agreement is collateralized by substantially all tangible and intangible assets of the Company and
by a guaranty from, and a pledge of all capital stock and tangible and intangible assets of, all of the Company’s present
and future wholly-owned domestic subsidiaries. The borrowings under the Credit Agreement rank senior in priority of
repayment to any subordinated indebtedness.
On December 16, 1996, the Company issued $150.0 million of 10¾% senior subordinated notes due 2006 (the
“Notes”). The Notes are general unsecured obligations of the Company and are subordinated in right of payment to all
existing and future senior debt (as defined in the indenture relating to the Notes (the “Indenture”)), including all