LabCorp 2007 Annual Report Download - page 48

Notes to Consolidated Financial Statements
(Dollars and shares in millions, except per share data)
46 Laboratory Corporation of America® Holdings 2007
under the Company’s revolving line of credit. The Company used cash
on hand and the proceeds of the Senior Notes due 2015 to repay
borrowings under the Company’s revolving credit facility. Pursuant to
the agreement with the bank, the bank purchased 4.8 shares in the
open market over the period ended June 13, 2006. At the end of the
purchase period, the Company made a cash payment of $22.9 to the
bank to settle its obligation for the purchase price adjustment based
on the volume weighted average purchase price of the shares acquired
compared to the initial purchase price. The total cost of the initial
purchase was approximately $251.7, including a $1.5 cap premium
and $0.2 in commissions and other fees. The shares repurchased
under the overnight share repurchase agreement were immediately
canceled and returned to the status of authorized but unissued shares.
The Company reduced common stock and additional paid in capital
by approximately $0.5 and $251.2, respectively to record the initial
purchase price. The forward contract associated with the overnight
share repurchase transaction was accounted for in accordance with
EITF 00-19 as an equity instrument. The $22.9 paid in connection
with the price adjustment was recorded as a reduction to additional
paid in capital. The diluted net income per share calculation for the
year ended December 31, 2006 includes the potential shares of
common stock that could have been issued to settle the overnight
share repurchase transaction.
Stockholder Rights Plan
The Company adopted a stockholder rights plan effective as of
December 13, 2001 that provides that each common stockholder
of record on December 21, 2001 received a dividend of one right
for each share of common stock held. Each right entitles the holder
to purchase from the Company one-hundredth of a share of a new
series of participating preferred stock at an initial purchase price of
four hundred dollars. These rights will become exercisable and will
detach from the Company’s common stock if any person becomes the
benefi cial owner of 15% or more of the Company’s common stock. In
that event, each right will entitle the holder, other than the acquiring
person, to purchase, for the initial purchase price, shares of the
Company’s common stock having a value of twice the initial purchase
price. The rights will expire on December 13, 2011, unless earlier
exchanged or redeemed.
Accumulated Other Comprehensive Earnings
The components of accumulated other comprehensive earnings are
as follows:
Foreign Net Adoption of Accumulated
Currency Benefi t FASB Other
Translation Plan Statement Comprehensive
Adjustments Adjustments No. 158 Earnings
Balance at
December 31, 2004 $ 81.3 $ 0.4 $ – $ 81.7
Current year
adjustments 14.3 – – 14.3
Tax effect of
adjustments (5.7) – – (5.7)
Balance at
December 31, 2005 89.9 0.4 – 90.3
Current year
adjustments (1.1) – (51.2) (52.3)
Tax effect of
adjustments 0.4 – 20.3 20.7
Balance at
December 31, 2006 89.2 0.4 (30.9) 58.7
Current year
adjustments 96.9 4.0 – 100.9
Tax effect of
adjustments (38.0) (1.6) – (39.6)
Balance at
December 31, 2007 $148.1 $ 2.8 $(30.9) $120.0
INCOME TAXES
The sources of income before taxes, classifi ed between domestic and
foreign entities are as follows:
Pre-Tax Income
2007 2006 2005
Domestic $786.5 $717.4 $639.7
Foreign 15.8 3.5 1.0
Total pre-tax income $802.3 $720.9 $640.7
The provisions for income taxes in the accompanying consolidated
statements of operations consist of the following:
Years Ended December 31,
2007 2006 2005
Current:
Federal $238.9 $204.0 $186.5
State 49.9 43.2 43.0
Foreign 10.2 5.4 6.5
$299.0 $252.6 $236.0
Deferred:
Federal $ 18.8 $ 26.3 $ 13.6
State 4.2 7.5 3.1
Foreign 3.5 2.9 1.8
26.5 36.7 18.5
$325.5 $289.3 $254.5
Laboratory Corporation of America