Quest Diagnostics 2009 Annual Report Download - page 67

As of December 31, 2009, our total liabilities for unrecognized tax benefits were approximately $126
million, which were excluded from the table above. We believe it is reasonably possible that our liabilities for
unrecognized tax benefits may decrease by $25 million within the next twelve months, primarily as a result of
the expiration of statues of limitations, settlements and/or the conclusion of tax examinations on certain tax
positions. For the remainder, we cannot make reasonably reliable estimates of the timing of the future payments
of these liabilities. See Note 5 to the Consolidated Financial Statements for information regarding our contingent
tax liability reserves.
Our credit agreements 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. As of December 31, 2009, we were in compliance with the various financial covenants included in
our credit agreements and 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 2010 for capital expenditures to support
and expand our existing operations, principally related to investments in information technology, equipment, and
facility upgrades.
As of December 31, 2009, $1.3 billion of borrowing capacity was available under our existing credit
facilities, consisting of $525 million available under our secured receivables credit facility and $750 million
available under our senior unsecured revolving credit 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 believe that cash and cash equivalents on-hand and cash from operations, together with our borrowing
capacity under our credit facilities, will provide sufficient financial flexibility to meet seasonal working capital
requirements and to fund capital expenditures, debt service requirements, cash dividends on common shares, share
repurchases and additional growth opportunities for the foreseeable future. We believe that our credit profile
should provide us with access to additional financing, if necessary, to fund growth opportunities that cannot be
funded from existing sources.
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, and the general economic
conditions, 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 world’s leading provider of
diagnostic testing, information and services, we believe we are well positioned to benefit from the growth
expected in our industry.
We believe our focus on delivering a superior patient experience and Six Sigma quality as well as the
investments we are continuing to make in our distribution network, our industry leading test menu and our
information technology solutions will further differentiate us over the long-term and strengthen our industry
leadership position. In addition, we plan to leverage our knowledge and expertise in diagnostic testing to further
expand into international markets and point-of-care testing.
Our strong cash generation, balance sheet and credit profile position us well to take advantage of these
growth opportunities.
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