Quest Diagnostics 2007 Annual Report Download - page 95

Term Loan due December 2008
On December 19, 2003, the Company entered into a $75 million amortizing term loan facility (the “Term
Loan due December 2008”), which was funded on January 12, 2004. Interest under the Term Loan due
December 2008 is based on LIBOR plus an applicable margin that can fluctuate over a range of up to 119 basis
points, based on changes in the Company’s public debt 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, 2007 and 2006, the Company’s
borrowing rate for LIBOR-based loans was LIBOR plus 0.55% and 0.50%, respectively. The Term Loan due
December 2008 requires principal repayments of the initial amount borrowed equal to 20% on each of the third
and fourth anniversary dates of the funding and the remainder of the outstanding balance on December 31, 2008.
The Term Loan due December 2008 is guaranteed by the Subsidiary Guarantors and contains various covenants
similar to those under the Credit Facility.
Senior Notes
In conjunction with its 2001 debt refinancing, the Company completed a $550 million senior notes offering
in June 2001 (the “2001 Senior Notes”). The 2001 Senior Notes were issued in two tranches: (a) $275 million
aggregate principal amount of 6
3
⁄ 4 % senior notes due 2006 (“Senior Notes due 2006”), issued at a discount of
approximately $1.6 million and (b) $275 million aggregate principal amount of 7
1
⁄ 2 % senior notes due 2011
(“Senior Notes due 2011”), issued at a discount of approximately $1.1 million. On July 12, 2006, the Company
repaid the $275 million outstanding under the Senior Notes due 2006. After considering the discount, the
effective interest rate on the Senior Notes due 2011 is 7.6%. The Senior Notes due 2011 require semiannual
interest payments. The Senior Notes due 2011 are unsecured obligations of the Company and rank equally with
the Company’s other unsecured senior obligations. The Senior Notes due 2011 are guaranteed by the Subsidiary
Guarantors and do not have a sinking fund requirement.
On October 31, 2005, the Company completed its $900 million private placement of senior notes (the “2005
Senior Notes”). The 2005 Senior Notes were priced in two tranches: (a) $400 million aggregate principal amount
of 5.125% senior notes due November 2010 (“Senior Notes due 2010”); and (b) $500 million aggregate principal
amount of 5.45% senior notes due November 2015 (“Senior Notes due 2015”). The Company used the net
proceeds from the 2005 Senior Notes, together with cash on-hand, to pay the cash purchase price and transaction
costs of the LabOne acquisition and to repay $127 million of LabOne’s debt. The Senior Notes due 2010 and
2015 were issued at a discount of $0.8 million and $1.6 million, respectively. After considering the discounts, the
effective interest rates on the Senior Notes due 2010 and 2015 are approximately 5.3% and 5.6%, respectively.
The 2005 Senior Notes require semiannual interest payments, which commenced on May 1, 2006. The 2005
Senior Notes are unsecured obligations of the Company and rank equally with the Company’s other unsecured
senior obligations. The 2005 Senior Notes are guaranteed by the Subsidiary Guarantors. Under a registration
rights agreement executed in connection with the offering and sale of the 2005 Senior Notes and related
guarantees, the Company filed a registration statement which was declared effective on February 16, 2006, to
enable the holders of the 2005 Senior Notes to exchange the notes and guarantees for publicly registered notes
and guarantees and all the holders exchanged the notes and guarantees for publicly registered notes and
guarantees.
On June 22, 2007, the Company completed an $800 million senior notes offering (the “2007 Senior Notes”).
The 2007 Senior Notes were priced in two tranches: (a) $375 million aggregate principal amount of 6.40% senior
notes due July 2017 (the “Senior Notes due 2017”), issued at a discount of approximately $0.8 million and (b)
$425 million aggregate principal amount of 6.95% senior notes due July 2037 (the “Senior Notes due 2037”),
issued at a discount of approximately $4.7 million. After considering the discounts, the effective interest rates on
the Senior Notes due 2017 and the Senior Notes due 2037 are approximately 6.4% and 7.0%, respectively. The
2007 Senior Notes require semiannual interest payments, which will commence on January 1, 2008. The 2007
Senior Notes are unsecured obligations of the Company and rank equally with the Company’s other unsecured
obligations. The 2007 Senior Notes do not have a sinking fund requirement and are guaranteed by the Subsidiary
Guarantors.
F-25
QUEST DIAGNOSTICS INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(dollars in thousands unless otherwise indicated)