LabCorp 2011 Annual Report Download - page 15

13
LABORATORY CORPORATION OF AMERICA
Management’s Discussion and Analysis
of Financial Condition and Results of Operations (in millions)
During 2011, the Company repurchased $643.9 of stock
representing 7.4 shares. As of December 31, 2011, the
Company had outstanding authorization from the Board of
Directors to purchase $84.4 of Company common stock.
On February 10, 2012, the Company announced the Board
of Directors authorized the purchase of $500.0 of additional
shares of the Company’s common stock.
During 2011, the Company settled notices to convert
$190.6 aggregate principal amount at maturity of its zero-
coupon subordinated notes with a conversion value of $248.9.
The total cash used for these settlements was $155.1 and
the Company also issued 1.0 additional shares of common
stock. As a result of these conversions, the Company also
reversed approximately $36.2 of deferred tax liability to reflect
the tax benefit realized upon issuance of the shares.
On August 11, 2011, the Company notified holders of
the zero-coupon subordinated notes that pursuant to the
Indenture for the notes they have the right to require the
Company to purchase in cash all or a portion of their zero-
coupon subordinated notes on September 12, 2011 at
$819.54 per note, plus any accrued contingent additional
principal and any accrued contingent interest thereon. On
September 12, 2011, the Company announced that none
of the zero-coupon subordinated notes were tendered by
holders for purchase by the Company.
On September 13, 2011, the Company announced that
for the period of September 12, 2011 to March 11, 2012, the
zero-coupon subordinated notes will accrue contingent cash
interest at a rate of no less than 0.125% of the average market
price of a zero-coupon subordinated note for the five trading
days ended September 7, 2011, in addition to the continued
accrual of the original issue discount.
On January 3, 2012, the Company announced that its
zero-coupon subordinated notes may be converted into cash
and common stock at the conversion rate of 13.4108 per
$1,000 principal amount at maturity of the notes, subject to
the terms of the zero-coupon subordinated notes and the
Indenture, dated as of October 24, 2006 between the Company
and The Bank of New York Mellon, as trustee and conversion
agent. In order to exercise the option to convert all or a portion
of the zero-coupon subordinated notes, holders are required
to validly surrender their zero-coupon subordinated notes at
any time during the calendar quarter beginning January 1,
2012, through the close of business on the last business day
of the calendar quarter, which is 5:00 p.m., New York City
time, on Friday, March 30, 2012. If notices of conversion are
received, the Company plans to settle the cash portion of the
conversion obligation with cash on hand and/or borrowings
under the revolving credit facility.
Credit Ratings
The Company’s debt ratings of Baa2 from Moody’s and BBB+
from Standard & Poor’s contribute to its ability to access
capital markets.
Contractual Cash Obligations
Payments Due by Period
2013- 2015- 2017 and
Total 2012 2014 2016 thereafter
Operating lease obligations $ 602.7 $ 161.4 $ 237.2 $ 106.2 $ 97.9
Contingent future licensing payments(a) 43.7 9.8 18.9 12.9 2.1
Minimum royalty payments 16.5 1.9 4.5 5.1 5.0
Zero-coupon subordinated notes(b) 135.5 135.5 – – –
Scheduled interest payments on Senior Notes 380.6 71.2 113.6 84.8 111.0
Revolving credit facility 560.0 – – 560.0 –
Long-term debt, other than revolving credit facility 1,525.5 – 350.5 575.0 600.0
Total contractual cash obligations(c)(d)(e) $ 3,264.5 $379.8 $ 724.7 $ 1,344.0 $ 816.0
(a) Contingent future licensing payments will be made if certain events take place, such as the launch of a specific test, the transfer of certain technology, and when specified revenue milestones are met.
(b) As announced by the Company on January 3, 2012, holders of the zero-coupon subordinated notes may choose to convert their notes during the first quarter of 2012 subject to terms as defined in the
note agreement. See “Note 11 to Consolidated Financial Statements” and “Credit Ratings” above for further information regarding the Company’s zero-coupon subordinated notes.
(c) The table does not include obligations under the Company’s pension and postretirement benefit plans, which are included in “Note 16 to Consolidated Financial Statements.” Benefits under the Company’s
postretirement medical plan are made when claims are submitted for payment, the timing of which is not practicable to estimate.
(d) The table does not include the Company’s reserves for unrecognized tax benefits. The Company had a $63.5 and $65.8 reserve for unrecognized tax benefits, including interest and penalties, at December 31,
2011 and 2010, respectively, which is included in “Note 13 to Consolidated Financial Statements.” Substantially all of these tax reserves are classified in other long-term liabilities in the Company’s
Consolidated Balance Sheets at December 31, 2011 and 2010.
(e) The table does not include interest on the Company’s Revolving Credit Facility’s outstanding balance of $560.0 at December 31, 2011, which bears interest at 1.26%.