Quest Diagnostics 2008 Annual Report Download - page 69

Interest payments on our long-term debt have been calculated after giving effect to our interest rate swap
agreements, using the interest rates as of December 31, 2008 applied to the December 31, 2008 balances, which
are assumed to remain outstanding through their maturity dates.
As of December 31, 2008, our total liabilities for unrecognized tax benefits were approximately $71 million,
which were excluded from the table above. Based upon the expiration of statutes of limitations, settlements
and/or the conclusion of tax examinations, we believe it is reasonably possible that this amount may decrease by
up to $34 million within the next twelve months. For the remainder, we cannot make reasonably reliable
estimates of the timing of the future payments of these liabilities. See Note 4 to the Consolidated Financial
Statements for information regarding our contingent tax liability reserves.
As of December 31, 2008, the reserve for the settlement and related matters in connection with the
investigation of NID of $316 million has been excluded from the table above. See Note 14 to the Consolidated
Financial Statements for additional information.
Our credit agreements relating to our senior unsecured revolving credit facility and our term loan due May
2012 contain various covenants and conditions, including the maintenance of certain financial ratios, that could
impact our ability to, among other things, incur additional indebtedness. We do not expect these covenants to
adversely impact our ability to execute our growth strategy or conduct normal business operations.
Unconsolidated Joint Ventures
We have investments in unconsolidated joint ventures in Phoenix, Arizona; Indianapolis, Indiana; and
Dayton, Ohio, which are accounted for under the equity method of accounting. We believe that our transactions
with our joint ventures are conducted at arm’s length, reflecting current market conditions and pricing. Total net
revenues of our unconsolidated joint ventures equal less than 6% of our consolidated net revenues. Total assets
associated with our unconsolidated joint ventures are less than 2% of our consolidated total assets. We have no
material unconditional obligations or guarantees to, or in support of, our unconsolidated joint ventures and their
operations.
Requirements and Capital Resources
We estimate that we will invest approximately $200 million during 2009 for capital expenditures to support
and expand our existing operations, principally related to investments in information technology, equipment, and
facility upgrades. During 2008, we continued to make investments in support of our plans to develop and deploy
standard systems across both the AmeriPath practices and our clinical laboratories. We have completed the
enhancements to the AmeriPath laboratory and billing systems and began deployment of the enhanced systems
during the second quarter of 2008. These investments will enable significant productivity gains and improved
customer service.
In June 2008, we amended our existing receivables securitization facility and increased it from $375 million
to $400 million. The secured receivables credit facility was supported by back-up facilities provided on a
committed basis by two banks: (a) $125 million, which matured on December 13, 2008 and (b) $275 million,
which originally matured on June 10, 2009.
In December 2008, we replaced the $125 million portion of our secured receivables credit facility and
amended the existing receivables securitization facility to increase it from $400 million to $500 million. The
secured receivables credit facility continues to be supported by back-up facilities provided on a committed basis
by two banks: (a) $225 million, which matures on December 11, 2009 and (b) $275 million, which also matures
on December 11, 2009. Interest on the secured receivables credit facility is based on rates that are intended to
approximate commercial paper rates for highly-rated issuers.
As of December 31, 2008, $1.3 billion of borrowing capacity was available under our existing credit
facilities, consisting of $500 million available under our secured receivables credit facility and $750 million
available under our senior unsecured revolving credit facility. No borrowings are currently outstanding under
either facility.
We believe the banks participating in our various credit facilities are predominantly highly-rated banks, and
that the entire amounts under the credit facilities are currently available to us. Should one or several banks no
longer participate in either of our credit facilities, we would not expect it to impact our ability to fund
operations. We expect to continue to generate positive cash flow despite a slowing economy, and have only $5
million of debt maturing over the next twelve months. We expect to be able to fund payments associated with
the agreement in principle related to NID, out of cash on-hand and available credit facilities.
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