LabCorp 2010 Annual Report Download - page 36

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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 are $18.8 from March 31,
2011 to September 30, 2012 with $243.8 due on the maturity
date of October 26, 2012. At December 31, 2010, future
principal repayments under the Term Loan facility are as follows:
2011 - $75.0 and 2012 - $300.0.
The senior credit facilities are available for general corporate
purposes, including working capital, capital expenditures,
acquisitions, 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, 2010.
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. On a
quarterly basis under the swap, the Company pays a fixed rate
of interest (2.92%) and receives 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 sheets and any changes
in the fair value are recorded as adjustments to accumulated
other comprehensive income (loss), 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 $2.4 and $10.6 at December 31, 2010 and
2009, respectively, and is included in other liabilities in the
consolidated balance sheets.
As of December 31, 2010, the effective interest rates on
the Term Loan Facility and Revolving Facility were 3.67% and
0.61%, respectively.
Zero-Coupon Convertible Subordinated Notes
The Company had $354.6 and $368.8 aggregate principal
amount at maturity of zero-coupon convertible subordinated
notes (the “notes”) due 2021 outstanding at December 31,
2010 and 2009, 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 of the Company’s common stock, subject to
adjustment in certain circumstances, if one of the following
conditions occurs:
1) If the sales price of the Company’s common stock for at
least 20 trading days in a period of 30 consecutive trading
days ending on the last trading day of the preceding quarter
reaches specified thresholds (beginning at 120% and declining
0.1282% per quarter until it reaches approximately 110%
for the quarter beginning July 1, 2021 of the accreted
conversion price per share of common stock on the last
day of the preceding quarter). The accreted conversion
price per share will equal the issue price of a note plus the
accrued original issue discount and any accrued contingent
additional principal, divided by the number of shares of
common stock issuable upon conversion of a note on that
day. The conversion trigger price for the fourth quarter of
2010 was $69.27.
2) If the credit rating assigned to the notes by Standard & Poor’s
Ratings Services is at or below BB-.
3) If the notes are called for redemption.
4) If specified corporate transactions have occurred (such as
if the Company is party to a consolidation, merger or binding
share exchange or a transfer of all or substantially all of
its assets).
Holders of the notes may require the Company to purchase
in cash all or a portion of their notes on September 11, 2011
at $819.54 per note, plus any accrued contingent additional
principal and any accrued contingent interest thereon.
The Company may redeem for cash all or a portion of the
notes at any time on or after September 11, 2006 at specified
redemption prices per one thousand dollar principal amount at
maturity of the notes.
LABORATORY CORPORATION OF AMERICA
Notes to Consolidated Financial Statements