Quest Diagnostics 2015 Annual Report Download - page 73

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69
Contractual Obligations and Commitments
The following table summarizes certain of our contractual obligations as of December 31, 2015 (dollars in millions):
Payments due by period
Contractual Obligations Total Less than
1 year 1-3 years 3-5 years After 5 years
Outstanding debt $ 3,625 $ 150 $ — $ 1,100 $ 2,375
Capital lease obligations 22 9 10 3 —
Interest payments on outstanding debt 1,820 137 268 241 1,174
Operating leases 677 182 232 111 152
Purchase obligations 206 96 84 6 20
Merger consideration obligation 4 2 2 — —
Total contractual obligations $ 6,354 $ 576 $ 596 $ 1,461 $ 3,721
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, 2015 applied to the December 31, 2015 balances, which are assumed to remain
outstanding through their maturity dates.
A full description of the terms of our indebtedness and related debt service requirements and our future payments
under certain of our contractual obligations is contained in Note 13 to the consolidated financial statements. A full discussion
and analysis regarding our minimum rental commitments under noncancelable operating leases and noncancelable
commitments to purchase product or services at December 31, 2015 is contained in Note 17 to the consolidated financial
statements. Merger consideration obligation includes consideration owed, including any contingent consideration at maximum
payout, on the Steward acquisition. A full discussion and analysis regarding our acquisitions and the related merger
consideration obligations as of December 31, 2015 is contained in Note 5 to the consolidated financial statements. A full
discussion regarding the fair value of the contingent consideration associated with our acquisitions is discussed in Note 7 to the
consolidated financial statements.
As of December 31, 2015, our total liabilities associated with unrecognized tax benefits were approximately $91
million, which were excluded from the table above. We believe it is reasonably possible that these liabilities may decrease by
less than $5 million within the next twelve months, primarily as a result of payments, 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. Additionally, it is reasonably possible that within the next 12 months, as result of ongoing
negotiations with tax authorities and the expiration of statutes of limitations, our total liabilities associated with unrecognized
tax benefits will further decrease and beneficially impact the effective tax rate for continuing operations. However, due to the
inherent uncertainty of the negotiations and the resulting outcomes, we are not able to estimate the effective tax rate impact at
this time. For further details regarding the contingent tax liability reserves, see Note 8 to the consolidated financial statements.
In connection with the sale of an 18.9% noncontrolling interest in a subsidiary to UMass, we granted UMass the right
to require us to purchase all of its interest in the subsidiary at fair value commencing July 1, 2020. In connection with the
transaction, we received consideration of $68 million, including $50 million associated with the call option exercise price. As
of December 31, 2015, the fair value of the redeemable noncontrolling interest on the consolidated balance sheet was $70
million, which was excluded from the table above. Since the redemption of the noncontrolling interest is outside of our control,
we cannot make a reasonably reliable estimate of the timing of the future payment, if any, of the redeemable noncontrolling
interest. For further details regarding the redeemable noncontrolling interest, see Note 15 to the consolidated financial
statements.
Our credit agreements 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, 2015, 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.
QUEST DIAGNOSTICS 2015 ANNUAL REPORT ON FORM 10-K