LabCorp 2009 Annual Report Download - page 52

50 LABORATORY CORPORATION OF AMERICA
11. Debt
Short-term borrowings and current portion of long-term debt
at December 31, 2009 and 2008 consisted of the following:
December 31, December 31,
2009 2008
Zero-coupon convertible subordinated notes $ 292.2 $ –
Term loan, current 50.0 50.0
Revolving credit facility 75.0 70.8
Total short-term borrowings and
current portion of long-term debt $ 417.2 $ 120.8
Long-term debt at December 31, 2009 and 2008 consisted
of the following:
December 31, December 31,
2009 2008
Senior notes due 2013 $ 351.3 $ 351.7
Senior notes due 2015 250.0 250.0
Term loan, non-current 375.0 425.0
Zero-coupon convertible subordinated notes – 573.5
Other long-term debt 0.9 0.3
Total long-term debt $ 977.2 $ 1,600.5
Credit Facilities
On October 26, 2007, the Company entered into senior
unsecured credit facilities with Credit Suisse, acting as Admin-
istrative Agent, and a group of financial institutions totaling
$1,000.0. The credit facilities consist of a five-year Revolving
Facility in the principal amount of $500.0 and a five-year, $500.0
Term Loan Facility. The balances outstanding on the Company’s
Term Loan Facility at December 31, 2009 and 2008 were $425.0
and $475.0, respectively. The balances outstanding on the
Company’s Revolving Facility at December 31, 2009 and 2008
were $75.0 and $70.8, respectively. The senior unsecured credit
facilities bear interest at varying rates based upon LIBOR plus a
percentage based on the Company’s credit rating with Standard
& Poor’s Ratings Services. The remaining quarterly principal
repayments of the Term Loan Facility range from $12.5 to $18.8
from March 31, 2010 to September 30, 2012 with $243.8 due
on the maturity date of October 26, 2012. At December 31,
2009, future principal repayments under the Term Loan facility
are as follows: 2010 – $50.0, 2011 – $75.0 and 2012 – $300.0.
The senior credit facilities are available for general corporate
purposes, including working capital, capital expenditures, acqui-
sitions, funding of share repurchases and other payments. The
agreement contains certain debt covenants which require that
the Company maintain a leverage ratio of no more than 2.5 to
1.0 and an interest coverage ratio of at least 5.0 to 1.0. Both ratios
are calculated in relation to EBITDA (Earnings Before Interest,
Taxes, Depreciation, and Amortization). The credit agreement
allows payment of dividends provided that the Company is
not in default (as defined in the agreement) and its leverage
ratio is less than 2.0 to 1.0. The Company is in compliance
with all covenants at December 31, 2009.
On September 15, 2008, Lehman Brothers Holdings, Inc.
(“Lehman”), whose subsidiaries had a $28.0 commitment in
the Company’s Revolving Facility, filed for bankruptcy. During
the fourth quarter of 2009, another bank assumed Lehman’s
commitment in the Company’s Revolving Facility.
On March 31, 2008, the Company entered into a three-year
interest rate swap agreement to hedge variable interest rate
risk on the Company’s variable interest rate term loan. Under
the swap the Company will, on a quarterly basis, pay a fixed
rate of interest (2.92%) and receive a variable rate of interest
based on the three-month LIBOR rate on an amortizing
notional amount of indebtedness equivalent to the term loan
balance outstanding. The swap has been designated as a
cash flow hedge. Accordingly, the Company recognizes the
fair value of the swap in the consolidated balance sheet and
any changes in the fair value are recorded as adjustments to
accumulated other comprehensive income, net of tax. The fair
value of the interest rate swap agreement is the estimated
amount that the Company would pay or receive to terminate
the swap agreement at the reporting date. The fair value of the
swap was a liability of $10.6 and $13.5 at December 31, 2009
and 2008, respectively, and is included in other liabilities in the
consolidated balance sheets.
As of December 31, 2009, the effective interest rates on
the Term Loan Facility and Revolving Facility were 3.67% and
0.58%, respectively.
Zero-Coupon Convertible Subordinated Notes
The Company had $368.8 and $738.3 aggregate principal
amount at maturity of zero-coupon convertible subordinated
notes (the “notes”) due 2021 outstanding at December 31, 2009
and 2008, respectively. The notes, which are subordinate to the
Company’s bank debt, were sold at an issue price of $671.65
per $1,000 principal amount at maturity (representing a yield
to maturity of 2.0% per year). Each one thousand dollar principal
amount at maturity of the notes is convertible into 13.4108 shares
LABORATORY CORPORATION OF AMERICA
Notes to Consolidated Financial Statements