LabCorp 2013 Annual Report Download - page 45

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LABORATORY CORPORATION OF AMERICA
Notes to Consolidated Financial Statements
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
$9.3 and $9.8 as of December 31, 2013 and 2012, respectively.
During the years ended December 31, 2013, 2012 and 2011, the
Company recognized $2.4, $3.0 and $3.5, respectively, in interest
and penalties expense, which was offset by a benefit of $2.9, $3.9
and $4.9, respectively.
The following table shows a reconciliation of the unrecognized
income tax benefits from uncertain tax positions for the years ended
December 31, 2013, 2012 and 2011:
2013 2012 2011
Balance as of January 1 $ 36.4 $ 52.7 $ 53.6
Increase in reserve for tax positions
taken in the current year 1.9 0.4 8.6
Increase (decrease) in reserve for
tax positions taken in a prior period – (8.0) –
Decrease in reserve as a result of
settlements reached with tax authorities (4.4) (0.1) (0.2)
Decrease in reserve as a result of lapses
in the statute of limitations (8.3) (8.6) (9.3)
Balance as of December 31 $ 25.6 $ 36.4 $ 52.7
As of December 31, 2013 and 2012, $25.6 and $37.1, 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 2011. Substantially all material state
and local, and foreign income tax matters have been concluded
through 2008 and 2001, respectively.
The Internal Revenue Service concluded the examination
of the Company’s 2010 and 2011 income tax returns during 2013.
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 unremitted foreign earnings as of December 31,
2013 are approximately $17.7. If repatriated to the U.S., the incre-
mental U.S. tax, net of any underlying foreign tax credit, would have
increased the Company’s overall income tax by approximately $0.5.
14. Stock Compensation Plans
Stock Incentive Plans
There are currently 10.2 shares authorized for issuance under
the Laboratory Corporation of America Holdings 2012 Omnibus
Incentive Plan and at December 31, 2013 there were 6.7 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, 2012 6.9 $ 77.62
Granted – –
Exercised (2.2) 72.02
Cancelled (0.1) 82.92
Outstanding at December 31, 2013 4.6 $ 80.18 6.4 $ 51.5
Vested and expected to vest
at December 31, 2013 4.5 $ 80.13 6.4 $ 51.3
Exercisable at December 31, 2013 3.1 $ 77.06 5.7 $ 44.2
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 2013 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, 2013. The amount
of intrinsic value will change based on the fair market value of the
Company’s stock.