Quest Diagnostics 2007 Annual Report Download - page 35

increase sales to both physicians and patients of test kits approved by the FDA for point-of-care testing or home
use. Development of such technology and its use by our customers would reduce the demand for our laboratory-
based testing services and negatively impact our net revenues.
Our outstanding debt may impair our financial and operating flexibility.
As of December 31, 2007, we had approximately $3.4 billion of long-term debt outstanding. Except for
outstanding letters of credit and operating leases, we do not have any off-balance sheet financing arrangements in
place or available. Our debt agreements contain various restrictive covenants. These restrictions could limit our
ability to use operating cash flow in other areas of our business because we must use a portion of these funds to
make principal and interest payments on our debt. We have obtained ratings on our debt from Standard and
Poor’s and Moody’s Investor Services. There can be no assurance that any rating so assigned will remain for any
given period of time or that a rating will not be lowered or withdrawn entirely by a rating agency if in that
rating agency’s judgment future circumstances relating to the basis of the rating, such as adverse changes in our
Company or our industry, so warrant. If such ratings are lowered, the borrowing costs on our senior unsecured
revolving credit facility, secured receivables facility and term loan would increase. Changes in our credit ratings,
however, do not require repayment or acceleration of any of our debt.
We or our subsidiaries may incur additional indebtedness in the future. Our ability to make principal and
interest payments will depend on our ability to generate cash in the future. If we incur additional debt a greater
portion of our cash flows may be needed to satisfy our debt service obligations and if we do not generate
sufficient cash to meet our debt service requirements, we may need to seek additional financing. In this case, it
may be more difficult, or we may be unable, to obtain financing on terms that are acceptable to us. As a result,
we would be more vulnerable to general adverse economic, industry and capital markets conditions as well as the
other risks associated with indebtedness.
Our ability to attract and retain qualified employees is critical to the success of our business and the
failure to do so may materially adversely affect our performance.
Our people are a critical resource and competition for qualified employees is strong. If we were to lose, or
to fail to attract and retain, key management personnel or qualified skilled technical or professional employees at
our clinical laboratories, research centers or manufacturing facilities, the Company’s earnings and revenues could
be adversely affected. In addition, if we were to lose, or to fail to attract and retain, skilled pathologists with
positive relationships with their respective local medical communities, particularly those with subspecialties, the
Company’s earnings and revenues could be adversely affected.
Failure to establish, and perform to, appropriate quality standards to assure that the highest level of
quality is observed in the performance of our testing services and in the design, manufacture and
marketing of our products could adversely affect the results of our operations and adversely impact our
reputation.
The provision of clinical testing services, including anatomic pathology services, and related services, and
the design, manufacture and marketing of diagnostic products involve certain inherent risks. The services that we
provide and the products that we design, manufacture and market are intended to provide information for
healthcare providers in providing patient care. Therefore, users of our services and products may have a greater
sensitivity to errors than the users of services or products that are intended for other purposes.
Manufacturing or design defects, unanticipated use of our products, or inadequate disclosure of risks relating
to the use of the product can lead to injury or other adverse events. These events could lead to recalls or safety
alerts relating to our products (either voluntary or required by governmental authorities) and could result, in
certain cases, in the removal of a product from the market. Any recall could result in significant costs as well as
negative publicity that could reduce demand for our products. Personal injuries relating to the use of our products
can also result in product liability claims being brought against us. In some circumstances, such adverse events
could also cause delays in new product approvals.
Similarly, negligence in performing our services can lead to injury or other adverse events. We may be sued
under physician liability or other liability law for acts or omissions by our pathologists, laboratory personnel and
hospital employees who are under the supervision of our hospital-based pathologists. We are subject to the
attendant risk of substantial damages awards and risk to our reputation.
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