Outlook

As discussed in the Overview, we believe that the underlying fundamentals of the diagnostic testing industry will continue to improve and that the growth in the market for laboratory testing will accelerate over the long term. We believe that in the short term, the market will continue to expand, despite the negative impact which the current levels of unemployed and uninsured, and healthcare plan design changes are having on our business. As the leading national provider of diagnostic testing, information and related services with the most extensive network of laboratories and patient service centers throughout the United States, we expect to further enhance patient access and customer service. We provide a broad range of benefits for customers including: continued improvements in quality; convenience and accessibility; a broad test menu; and a broad range of information technology products to help providers and insurers better manage their patients’ health.

We continue to invest in areas that are differentiating us from our competitors, including: Six Sigma quality, which is benefiting margins by improving efficiencies and is beginning to attract new business by improving service quality; state-of-the-art electronic client connectivity options that enhance customer loyalty; and new tests and testing techniques including gene-based testing. We also pursue selective acquisitions when they make strategic and economic sense. While there are fewer large acquisition opportunities available as a result of industry consolidation, there remain numerous regional and local acquisition opportunities. Additionally, we see an opportunity to use our strong customer service capabilities to expand our current position in many markets around the country.

Our credit profile continues to improve. Our strong cash generation and balance sheet position us well to take advantage of 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.

Impact of New Accounting Standards

In January 2003, the FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities”, as revised in December 2003. The impact of this accounting standard is discussed in Note 2 to the Consolidated Financial Statements.