LabCorp 2012 Annual Report Download - page 23

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21
LABORATORY CORPORATION OF AMERICA
Management’s Discussion and Analysis
of Financial Condition and Results of Operations (in millions)
Quantitative and Qualitative Disclosure
About Market Risk
The Company addresses its exposure to market risks,
principally the market risk associated with changes in interest
rates, through a controlled program of risk management that
includes, from time to time, the use of derivative financial
instruments such as interest rate swap agreements. Although,
as set forth below, the Company’s zero-coupon subordinated
notes contain features that are considered to be embedded
derivative instruments, the Company does not hold or issue
derivative financial instruments for trading purposes. The
Company does not believe that its exposure to market risk
is material to the Company’s financial position or results
of operations.
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.
Borrowings under the Company’s revolving credit facility
are subject to variable interest rates, unless fixed through
interest rate swaps or other agreements.
The Company’s Ontario, Canada consolidated joint
venture operates in Canada and, accordingly, the earnings
and cash flows generated from the Ontario operations are
subject to foreign currency exchange risk.
The Company’s wholly owned subsidiary, Clearstone
Central Laboratories, has operations in China and Singapore
and, accordingly the earnings and cash flows generated
from these operations are subject to foreign currency risk.
The Company’s wholly owned subsidiary, Orchid, has
operations in the United Kingdom and, accordingly the
earnings and cash flows generated from Orchid’s United
Kingdom operation are subject to foreign currency risk.
The Alberta, Canada joint venture partnership operates
in Canada and remits the Company’s share of partnership
income in Canadian dollars. Accordingly, the cash flow
received from this affiliate is subject to foreign currency
exchange risk.