LabCorp 2013 Annual Report Download - page 17

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LABORATORY CORPORATION OF AMERICA
Management’s Discussion and Analysis
of Financial Condition and Results of Operations (in millions)
The Revolving Credit Facility is available for general corporate
purposes, including working capital, capital expenditures, acquisi-
tions, 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 of not more than 3.0 to 1.0. The Company was in compliance
with all covenants in the Credit Agreement at December 31, 2013.
As of December 31, 2013, the ratio of total debt to consolidated
EBITDA was 2.4.
As of December 31, 2013, the effective interest rate on the
Revolving Credit Facility was 1.1%.
On November 1, 2013, the Company issued $700.0 in new
senior notes pursuant to the Company’s effective shelf registration
on Form S-3. The new senior notes consisted of $400.0 aggregate
principal amount of 2.50% Senior Notes due 2018 and $300.0
aggregate principal amount of 4.00% Senior Notes due 2023. The
net proceeds were used to repay all of the outstanding borrowings
under the Company’s Revolving Credit Facility and for general
corporate purposes.
The Senior Notes due 2018 and Senior Notes due 2023 bear
interest at the rate of 2.50% per annum and 4.00% per annum,
respectively, payable semi-annually on May 1 and November of
each year, commencing on May 1, 2014.
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.
During 2013, the Company purchased $1,015.6 of its stock
representing 10.4 shares. As of December 31, 2013, the Company
had remaining outstanding authorization from the Board of
Directors to purchase $1,058.5 of Company common stock.
During 2013, the Company settled notices to convert
$25.5 aggregate principal amount at maturity of its zero-coupon
subordinated notes with a conversion value of $31.8. The total cash
used for these settlements was $21.5 and the Company also issued
0.1 additional shares of common stock.
On September 12, 2013, the Company announced that for the
period of September 12, 2013 to March 11, 2014, 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 6, 2013,
in addition to the continued accrual of the original issue discount.
On January 2, 2014, 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 subordi-
nated notes at any time during the calendar quarter beginning
January 1, 2014, 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 Monday, March 31, 2014. 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.