LabCorp 2011 Annual Report Download - page 49

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Interest Rate Swap
The interest rate swap agreement to hedge variable interest
rate risk on the Company’s variable interest rate term loan
expired on March 31, 2011. On a quarterly basis under the
swap, the Company paid a fixed rate of interest 2.92% and
received 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
was designated as a cash flow hedge. Accordingly, the
Company recognized the fair value of the swap in the
condensed consolidated balance sheets and any changes in
the fair value were 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.
Embedded Derivatives Related to the Zero-Coupon
Subordinated Notes
The Company’s zero-coupon subordinated notes contain the
following two features that are considered to be embedded
derivative instruments under authoritative guidance in
connection with accounting for derivative instruments and
hedging activities:
1) The Company will pay contingent cash interest on the
zero-coupon subordinated notes after September 11,
2006, if the average market price of the notes equals
120% or more of the sum of the issue price, accrued
original issue discount and contingent additional principal,
if any, for a specified measurement period.
2) Holders may surrender zero-coupon subordinated notes
for conversion during any period in which the rating
assigned to the zero-coupon subordinated notes by
Standard & Poor’s Ratings Services is BB- or lower.
The Company believes these embedded derivatives had no
fair value at December 31, 2011 and 2010. These embedded
derivatives also had no impact on the consolidated statements
of operations for the years ended December 31, 2011, 2010
and 2009.
The following table summarizes the fair value and
presentation in the consolidated balance sheets for derivatives
designated as hedging instruments (interest rate swap liability
derivative) as of December 31, 2011 and 2010, respectively:
Fair Value as of
December 31,
Balance Sheet Location 2011 2010
Other liabilities $ – $ 2.4
The following table summarizes the effect of the interest
rate swap on other comprehensive income for the years
ended December 31, 2011 and 2010:
2011 2010
Effective portion of derivative gain $ 2.4 $ 8.2
19. Supplemental Cash Flow Information
Years Ended December 31,
2011 2010 2009
Supplemental schedule of cash flow information:
Cash paid during period for:
Interest $ 99.6 $ 55.5 $ 50.7
Income taxes, net of refunds 309.4 355.0 304.1
Disclosure of non-cash financing and
investing activities:
Surrender of restricted stock awards and
performance shares 6.0 2.4 2.7
Converison of zero-coupon convertible debt 36.2 1.1 11.4
Accrued repurchases of common stock – (0.5) 0.5
Purchase of equipment in accrued expenses – – 2.8
LABORATORY CORPORATION OF AMERICA
Notes to Consolidated Financial Statements