LabCorp 2014 Annual Report Download - page 59

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2.298% to hedge against changes in the fair value of a portion of the Company's long term debt. These derivative financial
instruments are accounted for as fair value hedges of the senior notes due 2020. These interest rate swaps are included in other
long term assets and added to the value of the senior notes, with an aggregate fair value of $18.5 at December 31, 2014. As the
specific terms and notional amounts of the derivative financial instruments match those of the fixed-rate debt being hedged, the
derivative instruments are assumed to be perfectly effective hedges and accordingly, there is no impact to the Company's
Consolidated Statements of Operations. There were no derivative instruments designated as accounting hedges in 2012.
On August 23, 2012, the Company issued $1,000.0 in new senior notes pursuant to an 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 former Revolving Credit Facility. The remaining proceeds were used for other general corporate
purposes.
On July 31, 2012, the Company completed its acquisition of MEDTOX for $236.4 in cash, excluding transaction fees. The
acquisition was financed through borrowings from the Company’s Revolving Credit Facility and cash on hand.
Operating Activities
In 2014, the Company’s operations provided $739.0 of cash, reflecting the Company’s solid business results. In 2013, the
Company's operations provided $818.7 of cash. The decrease in cash provided from operations in 2014 as compared with 2013
is primarily attributable to lower net earnings and the timing of certain working capital items. The Company continues to focus
on efforts to increase cash collections from all payers and to generate ongoing improvements to the claim submission processes.
Investing Activities
Capital expenditures were $203.5, $202.2, and $173.8 for 2014, 2013, and 2012, respectively. The increase in capital spending
in 2014 was related to certain integration and cost savings initiatives started by the Company. The Company expects capital
expenditures of approximately $185.0 to $205.0 in 2015. Such expenditures are expected to be funded by cash flow from operations,
as well as borrowings under the Company’s former Revolving Credit Facility as needed.
The Company remains committed to growing its business through a combination of internal development initiatives, technology
licensing and partnership transactions and selected business acquisitions. Excluding Covance, the Company has invested a total
of $579.5 over the past three years in strategic business acquisitions, including LipoScience, Inc. and Bode Technology Group,
Inc. in 2014. These acquisitions have helped strengthen the Company’s geographic presence along with expanding capabilities in
the specialty testing operations. The Company believes the acquisition market remains attractive with a number of opportunities
to strengthen its scientific capabilities, grow esoteric testing capabilities and increase presence in key geographic areas.
The Company has invested a total of $2.5 over the past three years in licensing new testing technologies and had $30.0 net
book value of capitalized patents, licenses and technology as of December 31, 2014. While the Company continues to believe its
strategy of entering into licensing and technology distribution agreements with the developers of leading-edge technologies will
provide future growth in revenues, there are certain risks associated with these investments. These risks include, but are not limited
to, the failure of the licensed technology to gain broad acceptance in the marketplace and/or that insurance companies, managed
care organizations, or Medicare and Medicaid will not approve reimbursement for these tests at a level commensurate with the
costs of running the tests. Any or all of these circumstances could result in impairment in the value of the related capitalized
licensing costs.
Financing Activities
On November 2, 2014, in connection with entering into the Merger Agreement with Covance, the Company entered into a
bridge facility commitment letter. Under the bridge facility commitment letter, the lenders agreed to provide a $4,250.0 senior
unsecured bridge term loan credit facility consisting of a $3,850.0 364-day unsecured debt bridge tranche and a $400.0 60-day
unsecured cash bridge tranche for the purpose of financing all or a portion of the cash consideration and the fees and expenses
in connection with the transactions contemplated by the Merger Agreement. The bridge facility was permitted to be drawn only
in a single drawing on the closing date of the Acquisition.
On December 19, 2014, the Company entered into a five-year term loan credit facility in the principal amount of $1,000.0 for
the purpose of financing a portion of the cash consideration and the fees and expenses in connection with the transactions
contemplated by the Merger Agreement. Pursuant to the bridge facility commitment letter, upon the Company’s entry into the
term loan credit facility, the $4,250.0 bridge facility was reduced to a $3,250.0 commitment, comprised of a $2,850.0 364-day