Quest Diagnostics 2006 Annual Report Download - page 110

Agreements, which had an original maturity date of November 9, 2005, were entered into to hedge part of the
Company’s interest rate exposure associated with the minimum amount of debt securities that were issued in the
fourth quarter of 2005. In connection with the Company’s private placement of its Senior Notes due 2015 on
October 25, 2005, the Treasury Lock Agreements were settled and the Company received $2.5 million,
representing the gain on the settlement of the Treasury Lock Agreements. These gains are deferred in
stockholders’ equity (as a component of comprehensive income) and amortized as an adjustment to interest
expense over the term of the Senior Notes due 2015.
Debentures due June 2034
In connection with the acquisition of LabOne in November 2005, the Company assumed $103.5 million of
3.50% convertible senior debentures of LabOne due June 15, 2034 (the “Debentures due June 2034”). As a result
of the change in control of LabOne, the holders of the debentures had the right from November 1, 2005 to
December 1, 2005 to: (i) have their debentures repurchased by LabOne for 100% of the principal amount of the
debentures, plus accrued and unpaid interest thereon through November 30, 2005; or (ii) have their debentures
converted into the amount the respective holder would have received if the holder had converted the debentures
prior to November 1, 2005, plus an additional premium. As a result of the change in control of LabOne, and as
provided in the indenture to the debentures, the conversion rate increased so that each $1,000 principal amount of
the debentures was convertible into cash in the amount of $1,280.88 if converted by December 1, 2005. As a
result of the change in control of LabOne, of the total outstanding principal balance of the Debentures due June
2034 of $103.5 million, $99 million of principal was converted for $126.8 million in cash, reflecting a premium
of $27.8 million. The remaining outstanding principal of the Debentures due June 2034 totaling $4.5 million was
adjusted to its estimated fair value of $2.9 million, reflecting a discount of $1.6 million based on the net present
value of the estimated remaining obligations, at current interest rates. The Debentures due June 2034 are no
longer convertible into shares of common stock of LabOne or the Company. The Debentures due June 2034
require semi-annual interest payments in June and December.
Letter of Credit Lines
The Company has two lines of credit with two financial institutions totaling $85 million for the issuance of
letters of credit (the “letter of credit lines”). The letter of credit lines mature in December 2007 and are
guaranteed by the Subsidiary Guarantors. As of December 31, 2006, there are $67 million of outstanding letters
of credit under the letter of credit lines.
As of December 31, 2006 long-term debt, maturing in each of the years subsequent to December 31, 2007,
is as follows:
Year ending December 31,
2008.......................................................................... $ 61,797
2009.......................................................................... 1,788
2010.......................................................................... 399,473
2011.......................................................................... 274,503
2012.......................................................................... -
Thereafter..................................................................... 501,544
Total long-term debt ........................................................ $1,239,105
F-23
QUEST DIAGNOSTICS INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(dollars in thousands unless otherwise indicated)