Quest Diagnostics 2010 Annual Report Download - page 64

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, 2010, 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 $220 million during 2011 for capital expenditures, including
assets under capitalized leases, to support and expand our existing operations, principally related to investments in
information technology, equipment, and facility upgrades.
As of December 31, 2010, $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. After funding the Repurchase, which closed on
February 4, 2011, $700 million of borrowing capacity was available under our existing credit facilities, consisting
of $25 million available under our secured receivables credit facility and $675 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 borrowing capacity under the credit facilities described above is 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 that we will be able to replace our existing secured receivable credit facility and
our senior unsecured revolving credit facility with alternative arrangements prior to their expiration.
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 and other obligations, 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 making in sales, service, science and information technology 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, exisiting credit facilities and access to additional financing 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.
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