LabCorp 2011 Annual Report Download - page 37

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recorded as adjustments to accumulated other comprehensive
income (loss), net of tax. The fair value of the interest rate swap
agreement was the estimated amount that the Company
would have paid or received to terminate the swap agreement
at the reporting date. The fair value of the swap was a liability
of $2.4 at December 31, 2010 and was included in other
liabilities in the Company’s Consolidated Balance Sheets.
Zero-Coupon Convertible Subordinated Notes
The Company had $164.1 and $354.6 aggregate principal
amount at maturity of zero-coupon convertible subordinated
notes (the “notes”) due 2021 outstanding at December 31,
2011 and 2010, 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 conver-
sion trigger price for the fourth quarter of 2011 was $70.35.
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).
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.
The Company has registered the notes and the shares of
common stock issuable upon conversion of the notes with the
Securities and Exchange Commission.
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.
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.
LABORATORY CORPORATION OF AMERICA
Notes to Consolidated Financial Statements