LabCorp 2012 Annual Report Download - page 43

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LABORATORY CORPORATION OF AMERICA
Notes to Consolidated Financial Statements
The gross unrecognized income tax benefits were $36.4
and $52.7 at December 31, 2012 and 2011, respectively. It is
anticipated that the amount of the unrecognized income tax
benefits will change within the next twelve months; however,
these changes are not expected to have a significant impact
on the results of operations, cash flows or the financial
position of the Company.
The Company recognizes interest and penalties related
to unrecognized income tax benefits in income tax expense.
Accrued interest and penalties related to uncertain tax
positions totaled $9.8 and $10.8 as of December 31, 2012
and 2011, respectively. During the years ended December 31,
2012, 2011 and 2010, the Company recognized $3.0, $3.5 and
$4.5, respectively, in interest and penalties expense, which
was offset by a benefit of $3.9, $4.9 and $5.4, respectively.
The following table shows a reconciliation of the
unrecognized income tax benefits from uncertain tax
positions for the years ended December 31, 2012, 2011
and 2010:
2012 2011 2010
Balance as of January 1 $ 52.7 $ 53.6 $ 59.0
Increase in reserve for tax positions
taken in the current year 0.4 8.6 9.1
Increase (decrease) in reserve for
tax positions taken in a prior period (8.0) – (0.6)
Decrease in reserve as a result of
settlements reached with tax authorities (0.1) (0.2) (1.3)
Decrease in reserve as a result of lapses
in the statute of limitations (8.6) (9.3) (12.6)
Balance as of December 31 $ 36.4 $ 52.7 $ 53.6
As of December 31, 2012 and 2011, $37.1 and $53.3,
respectively, is the approximate amount of unrecognized
income tax benefits that, if recognized, would favorably
affect the effective income tax rate in any future periods.
The Company has substantially concluded all U.S. federal
income tax matters for years through 2008. Substantially all
material state and local, and foreign income tax matters
have been concluded through 2007 and 2001, respectively.
The Internal Revenue Service is examining the Company’s
2010 income tax return. The Company has various state
income tax examinations ongoing throughout the year.
Canada Revenue Agency is conducting an audit of the 2009
and 2010 Canadian income tax return. The Company
believes adequate provisions have been recorded related
to all open tax years.
Substantially all of the profitable foreign earnings are
repatriated on an annual basis and U.S. income taxes have
been provided accordingly. The foreign earnings not
repatriated on an annual basis are not material.
14. Stock Compensation Plans
Stock Incentive Plans
There are currently 10.3 shares authorized for issuance
under the Laboratory Corporation of America Holdings 2012
Omnibus Incentive Plan and at December 31, 2012 there
were 7.7 additional shares available for grant under the Plan.
This Plan was approved by shareholders at the 2012
annual meeting.
Stock Options
The following table summarizes grants of non-qualified
options made by the Company to officers, key employees,
and non-employee directors under all plans. Stock options
are generally granted at an exercise price equal to or greater
than the fair market price per share on the date of grant.
Also, for each grant, options vest ratably over a period of
three years on the anniversaries of the grant date, subject
to their earlier expiration or termination.
Changes in options outstanding under the plans for the
period indicated were as follows:
Weighted- Weighted-
Average Average
Exercise Remaining Aggregate
Number of Price Contractual Intrinsic
Options per Option Term Value
Outstanding at December 31, 2011 6.3 $ 73.66
Granted 1.8 84.88
Exercised (1.1) 65.35
Cancelled (0.1) 84.19
Outstanding at December 31, 2012 6.9 $ 77.62 7.1 $ 67.9
Vested and expected to vest
at December 31, 2012 6.8 $ 77.48 7.0 $ 67.7
Exercisable at December 31, 2012 3.7 $ 72.03 5.7 $ 56.6
The aggregate intrinsic value in the table above represents
the total pre-tax intrinsic value (the difference between the
Company’s closing stock price on the last trading day of 2012
and the exercise price, multiplied by the number of in-the-
money options) that would have been received by the option
holders had all option holders exercised their options on
December 31, 2012. The amount of intrinsic value will change
based on the fair market value of the Company’s stock.