Quest Diagnostics 2006 Annual Report Download - page 86

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Outlook
As discussed in the Overview, despite the continued consolidation among healthcare insurers, and their
continued efforts to reduce reimbursement for providers of diagnostic testing, we believe that the underlying
fundamentals of the diagnostic testing industry will continue to improve and that over the long term the industry
will continue to grow. As the leading provider of diagnostic testing, information and services with the most
extensive network of laboratories and patient service centers throughout the United States, we believe we are well
positioned to benefit from the growth expected in our industry.
We believe our focus on Six Sigma quality and the investments we are continuing to make in sales, service,
science and information technology will over the long-term further differentiate us and strengthen our industry
leadership position. While we expect that changes in some payer relationships will cause 2007 revenue and
earnings to be below the level of 2006, we expect to return to growing revenues and profits in 2008. We will do
this by continuing to provide a differentiated service offering at competitive prices and continuing to improve the
efficiency of our business. In addition we plan to leverage our knowledge and expertise in diagnostic testing to
expand into international markets, and point-of-care (near patient) testing.
Our strong cash generation, balance sheet and credit profile position us well to take advantage of these
growth opportunities.
Inflation
We believe that inflation generally does not have a material adverse effect on our results of operations or
financial condition because the majority of our contracts are short term.
Impact of New Accounting Standards
In July 2006, the FASB issued FASB Interpretation No. 48 “Accounting for Uncertainty in Income Taxes”.
In September 2006, the FASB issued SFAS No. 157 “Fair Value Measurements” and SFAS No. 158 “Employers’
Accounting for Defined Benefit Pension and Other Post-Retirement Plans”. In February 2007, the FASB issued
SFAS No. 159 “The Fair Value Option for Financial Assets and Financial Liabilities”. In August 2006, the
Securities and Exchange Commission (“SEC”) issued new requirements for “Executive Compensation and Related
Person Disclosure”, and in September 2006 the SEC released Staff Accounting Bulletin No. 108 “Considering the
Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements”.
The impact of these accounting standards is discussed in Note 2 to the Consolidated Financial Statements.
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