LabCorp 2012 Annual Report Download - page 15

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LABORATORY CORPORATION OF AMERICA
Management’s Discussion and Analysis
of Financial Condition and Results of Operations (in millions)
Financing Activities
On December 21, 2011, the Company entered into a
Credit Agreement (the “Credit Agreement”) providing for
the Revolving Credit Facility, a five-year $1,000.0 senior
unsecured revolving credit facility with Bank of America,
N.A., acting as Administrative Agent, Barclays Capital as
Syndication Agent, and a group of financial institutions as
lending parties. As part of the new Revolving Credit Facility,
the Company repaid all of the outstanding principal balances
of $318.8 on its existing term loan facility and $235.0 on
its existing revolving credit facility. In conjunction with the
repayment and cancellation of its old credit facility, the
Company recorded approximately $1.0 of remaining
unamortized debt costs as interest expense in the
accompanying Consolidated Statements of Operations
for the year ended December 31, 2011.
The balances outstanding on the Company’s Revolving
Credit Facility at December 31, 2012 and December 31,
2011 were $0.0 and $560.0, respectively. The Revolving
Credit Facility bears interest at varying rates based upon a
base rate or LIBOR plus (in each case) a percentage based
on the Company’s debt rating with Standard & Poor’s and
Moody’s Rating Services. The Revolving Credit Facility is
classified as long-term debt due to the expiration date of
the agreement on December 21, 2016.
The Revolving Credit Facility is available for general
corporate purposes, including working capital, capital
expenditures, acquisitions, funding of share repurchases
and other restricted payments permitted under the Credit
Agreement. The Credit Agreement also contains limitations
on aggregate subsidiary indebtedness and a debt covenant
that requires that the Company maintain on the last day of
any period of four consecutive fiscal quarters, in each case
taken as one accounting period, a ratio of total debt to
consolidated EBITDA (Earnings Before Interest, Taxes,
Depreciation, and Amortization) of not more than 3.0 to 1.0.
The Company was in compliance with all covenants in the
Credit Agreement at December 31, 2012. As of December 31,
2012, the ratio of total debt to consolidated EBITDA was
2.0 to 1.0.
As of December 31, 2012, the effective interest rate on
the Revolving Credit Facility was 1.2%.
On August 23, 2012, the Company issued $1,000.0 in
new senior notes pursuant to the Company’s effective shelf
registration statement on Form S-3. The new senior notes
consisted of $500.0 aggregate principal amount of 2.20%
Senior Notes due 2017 and $500.0 aggregate principal
amount of 3.75% Senior Notes due 2022. The net proceeds
were used to repay $625.0 of the outstanding borrowings
under the Company’s Revolving Credit Facility. The remaining
proceeds are available for other general corporate purposes.
The Senior Notes due 2017 and Senior Notes due
2022 bear interest at the rate of 2.20% per annum and
3.75% per annum, respectively, payable semi-annually on
February 23 and August 23 of each year, commencing
February 23, 2013.
On October 28, 2010, in conjunction with the
acquisition of Genzyme Genetics, the Company entered
into a $925.0 Bridge Term Loan Credit Agreement, among
the Company, the lenders named therein and Citibank,
N.A., as administrative agent (the “Bridge Facility”). The
Company replaced and terminated the Bridge Facility in
November 2010 by making an offering in the debt capital
markets. On November 19, 2010, the Company sold $925.0
in debt securities, consisting of $325.0 aggregate principal
amount of 3.125% Senior Notes due May 15, 2016 and
$600.0 aggregate principal amount of 4.625% Senior Notes
due November 15, 2020. Beginning on May 15, 2011, interest
on the Senior Notes due 2016 and 2020 is payable semi-
annually on May 15 and November 15. On December 1, 2010,
the acquisition of Genzyme Genetics was funded by the
proceeds from the issuance of these Notes ($915.4) and
with cash on hand.
During 2012, the Company purchased $516.5 of its stock
representing 5.9 shares. As of December 31, 2012, the
Company had remaining outstanding authorization from the
Board of Directors to purchase $68.0 of Company common
stock. On February 8, 2013, the Company announced the
Board of Directors authorized the purchase of $1,000.0 of
additional shares of the Company’s common stock.
During 2012, the Company settled notices to convert
$9.8 aggregate principal amount at maturity of its zero-
coupon subordinated notes with a conversion value of $12.0.
The total cash used for these settlements was $8.2 and the
Company also issued forty-one thousand additional shares
of common stock.