Quest Diagnostics 2003 Annual Report Download - page 92

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QUEST DIAGNOSTICS INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(dollars in thousands unless otherwise indicated)
lenders fund the borrowings through the issuance of commercial paper which matures at various dates within
one year from the date of issuance and the term of the one-year back-up facilities described below. There were
no borrowings outstanding as of December 31, 2003 and 2002.
The secured receivables credit facility has the benefit of one-year back-up facilities provided by three banks
on a committed basis. On June 27, 2003, the Company extended the expiration date of the back-up facilities of
its secured receivables credit facility from July 21, 2003 to April 21, 2004. The Company is currently in
discussions with its lenders regarding a replacement for the facility and expects to have a replacement in place
during the second quarter of 2004.
Credit Agreement
The Credit Agreement currently includes a $325 million unsecured revolving credit facility which expires in
June 2006. Interest on the unsecured revolving credit facility is based on certain published rates plus an
applicable margin that will vary over an approximate range of 50 basis points based on changes in the
Company’s credit ratings. At the option of the Company, it may elect to enter into LIBOR-based interest rate
contracts for periods up to 180 days. Interest on any outstanding amounts not covered under the LIBOR-based
interest rate contracts is based on an alternate base rate, which is calculated by reference to the prime rate or
federal funds rate (as defined in the Credit Agreement). Additionally, the Company has the ability to borrow up
to $200 million under the $325 million unsecured revolving credit facility at rates determined by a competitive
bidding process among the lenders. As of December 31, 2003, the Company’s borrowing rate for LIBOR-based
loans was LIBOR plus 1.1875%. As of December 31, 2003 and 2002, there were no borrowings outstanding
under the unsecured revolving credit facility.
Borrowings under the Credit Agreement are guaranteed by our wholly owned subsidiaries that operate
clinical laboratories in the United States (“the Subsidiary Guarantors’’). The Credit Agreement contains various
covenants, including the maintenance of certain financial ratios, which could impact the Company’s ability to,
among other things, incur additional indebtedness, repurchase shares of its outstanding common stock, make
additional investments and consummate acquisitions.
Term Loan due June 2007
As discussed in Note 3, the Company financed the cash portion of the purchase price and related
transaction costs associated with the Unilab acquisition, and the repayment of substantially all of Unilab’s
outstanding debt and related accrued interest, with the proceeds from a $450 million amortizing term loan
facility (the “term loan due June 2007’’) and cash on-hand. The term loan due June 2007 carries interest at
LIBOR plus an applicable margin that can fluctuate over a range of up to 80 basis points, based on changes in
the Company’s credit rating. At the option of the Company, it may elect to enter into LIBOR-based interest rate
contracts for periods up to 180 days. Interest on any outstanding amounts not covered under the LIBOR-based
interest rate contracts is based on an alternate base rate, which is calculated by reference to the prime rate or
federal funds rate. As of December 31, 2003, the Company’s borrowing rate for LIBOR-based loans was
LIBOR plus 1.1875%. As of December 31, 2003, the term loan due June 2007 required remaining principal
repayments of the initial amount borrowed equal to 16.18%, 16.18%, 17.19% and 18.2% in 2004 through 2007,
respectively. The term loan due June 2007 is guaranteed by the Subsidiary Guarantors and contains various
covenants similar to those under the Credit Agreement. Through December 31, 2003, the Company has repaid
$145 million of principal under the term loan due June 2007. On January 12, 2004, the Company repaid an
additional $75 million of principal under the term loan due June 2007 with the proceeds from a lower cost
term loan due December 2008. The repayment in 2004 reduces the remaining principal payments of the initial
amount borrowed equal to 9.7%, 13.0%, 13.8% and 14.6% in 2004 through 2007, respectively.
Term Loan due December 2008
On December 19, 2003, the Company entered into a new $75 million amortizing term loan facility (the
“term loan due December 2008’’), which was funded on January 12, 2004 and the proceeds of which were
used to repay $75 million under the term loan due June 2007. The term loan due December 2008 carries a
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