CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (USD $) | ||
In Millions | Sep. 30, 2009
| Dec. 31, 2008
|
Current assets: | ||
Cash and cash equivalents | 126.8 | 219.7 |
Accounts receivable, net of allowance for doubtful accounts of $178.7 and $161.0 at September 30, 2009 and December 31, 2008, respectively | 636.9 | 631.6 |
Supplies inventories | 81.6 | 91 |
Prepaid expenses and other | 96.3 | 83.8 |
Deferred income taxes | 35.9 | 6.7 |
Total current assets | 977.5 | 1032.8 |
Property, plant and equipment, net | 493.5 | 496.4 |
Goodwill, net | 1854.9 | 1772.2 |
Intangible assets, net | 1342.1 | 1222.6 |
Investments in joint venture partnerships | 75.2 | 72 |
Other assets, net | 86.9 | 73.5 |
Total assets | 4830.1 | 4669.5 |
Current liabilities: | ||
Accounts payable | 174.6 | 159.7 |
Accrued expenses and other | 307.2 | 266.4 |
Short-term borrowings and current portion of long-term debt | 120.8 | 120.8 |
Total current liabilities | 602.6 | 546.9 |
Long-term debt, less current portion | 1,280 | 1600.5 |
Deferred income taxes and other tax liabilities | 578.1 | 522.9 |
Other liabilities | 200.2 | 189.6 |
Total liabilities | 2660.9 | 2859.9 |
Commitments and contingent liabilities | ||
Noncontrolling interest | 140.4 | 121.3 |
Shareholders' equity | ||
Common stock, 106.5 and 108.2 shares outstanding at September 30, 2009 and December 31, 2008, respectively | 12.6 | 12.8 |
Additional paid-in capital | 128.4 | 237.4 |
Retained earnings | 2785.2 | 2384.6 |
Less common stock held in treasury | -932.5 | -929.8 |
Accumulated other comprehensive income (loss) | 35.1 | -16.7 |
Total shareholders' equity | 2028.8 | 1688.3 |
Total liabilities and shareholders' equity | 4830.1 | 4669.5 |
PARENTHETICAL DATA TO THE CONDE
PARENTHETICAL DATA TO THE CONDENSED CONSOLIDATED BALANCE SHEETS (USD $) | ||
In Millions, except Share data | Sep. 30, 2009
| Dec. 31, 2008
|
Current assets: | ||
Allowance for doubtful accounts | 178.7 | $161 |
Shareholders' equity | ||
Common stock, shares outstanding (in shares) | 106,500,000 | 108,200,000 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) | ||||
In Millions, except Per Share data | 3 Months Ended
Sep. 30, 2009 | 3 Months Ended
Sep. 30, 2008 | 9 Months Ended
Sep. 30, 2009 | 9 Months Ended
Sep. 30, 2008 |
Net sales | 1185.1 | 1135.1 | 3529.6 | 3386.1 |
Cost of sales | 687 | 673.5 | 2034.7 | 1962.2 |
Gross profit | 498.1 | 461.6 | 1494.9 | 1423.9 |
Selling, general and administrative expenses | 247.3 | 227.1 | 718.4 | 708.7 |
Amortization of intangibles and other assets | 15.9 | 14.6 | 46.2 | 43 |
Restructuring and other special charges | 0 | 17.7 | 10.2 | 33.7 |
Operating income | 234.9 | 202.2 | 720.1 | 638.5 |
Other income (expenses): | ||||
Interest expense | (15) | -16.8 | -48.2 | (54) |
Income from joint venture partnerships, net | 4.2 | 3.7 | 10.9 | 11.7 |
Investment income | 0.3 | 1 | 1.1 | 2.1 |
Other, net | -1.3 | -0.2 | -2.5 | -1.5 |
Earnings before income taxes | 223.1 | 189.9 | 681.4 | 596.8 |
Provision for income taxes | 88.5 | 75 | 271.6 | 240.2 |
Net earnings | 134.6 | 114.9 | 409.8 | 356.6 |
Less: Net earnings attributable to the noncontrolling interest | -3.2 | (3) | -9.2 | -10.2 |
Net earnings attributable to Laboratory Corporation of America Holdings | 131.4 | 111.9 | 400.6 | 346.4 |
Basic earnings per common share (in dollars per share) | 1.22 | 1.02 | 3.71 | 3.14 |
Diluted earnings per common share (in dollars per share) | 1.21 | $1 | 3.67 | 3.06 |
1_CONDENSED CONSOLIDATED STATEM
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (USD $) | ||||||
In Millions | Common Stock
| Additional Paid-in Capital
| Retained Earnings
| Treasury Stock
| Accumulated Other Comprehensive (Loss) Income
| Total
|
BALANCE AT DECEMBER 31 at Dec. 31, 2007 | 13.2 | 460.9 | 2028.3 | -897.1 | $120 | 1725.3 |
Comprehensive earnings: | ||||||
Net earnings attributable to Laboratory Corporation of America Holdings | 0 | 0 | 346.4 | 0 | 0 | 346.4 |
Other comprehensive earnings: | ||||||
Foreign currency translation adjustments | 0 | 0 | 0 | 0 | -46.6 | -46.6 |
Interest rate swap adjustments | 0 | 0 | 0 | 0 | 6.4 | 6.4 |
Tax effect of other comprehensive earnings adjustments | 0 | 0 | 0 | 0 | 15.4 | 15.4 |
Comprehensive earnings | 0 | 321.6 | ||||
Issuance of common stock under employee stock plans | 0.1 | 53.2 | 0 | 0 | 0 | 53.3 |
Surrender of restricted stock awards and performance shares | 0 | 0 | 0 | -32.7 | 0 | -32.7 |
Conversion of zero-coupon convertible debt | 0 | 0.1 | 0 | 0 | 0 | 0.1 |
Stock compensation | 0 | 27 | 0 | 0 | 0 | 27 |
Value of noncontrolling interest put | 0 | (123) | 0 | 0 | 0 | (123) |
Income tax benefit from stock options exercised | 0 | 19.1 | 0 | 0 | 0 | 19.1 |
Purchase of common stock | -0.5 | -221.9 | -108.2 | 0 | 0 | -330.6 |
BALANCE AT SEPTEMBER 30 at Sep. 30, 2008 | 12.8 | 215.4 | 2266.5 | -929.8 | 95.2 | 1660.1 |
Other comprehensive earnings: | ||||||
BALANCE AT DECEMBER 31 at Dec. 31, 2008 | 12.8 | 237.4 | 2384.6 | -929.8 | -16.7 | 1688.3 |
Comprehensive earnings: | ||||||
Net earnings attributable to Laboratory Corporation of America Holdings | 0 | 0 | 400.6 | 0 | 0 | 400.6 |
Other comprehensive earnings: | ||||||
Foreign currency translation adjustments | 0 | 0 | 0 | 0 | 83.7 | 83.7 |
Interest rate swap adjustments | 0 | 0 | 0 | 0 | 1.1 | 1.1 |
Tax effect of other comprehensive earnings adjustments | 0 | 0 | 0 | 0 | (33) | (33) |
Comprehensive earnings | 0 | 452.4 | ||||
Issuance of common stock under employee stock plans | 0 | 18.1 | 0 | 0 | 0 | 18.1 |
Surrender of restricted stock awards and performance shares | 0 | 0 | 0 | -2.7 | 0 | -2.7 |
Conversion of zero-coupon convertible debt | 0.1 | 11.3 | 0 | 0 | 0 | 11.4 |
Stock compensation | 0 | 26.1 | 0 | 0 | 0 | 26.1 |
Income tax benefit from stock options exercised | 0 | 0.3 | 0 | 0 | 0 | 0.3 |
Purchase of common stock | -0.3 | -164.8 | 0 | 0 | 0 | -165.1 |
BALANCE AT SEPTEMBER 30 at Sep. 30, 2009 | 12.6 | 128.4 | 2785.2 | -932.5 | 35.1 | 2028.8 |
2_CONDENSED CONSOLIDATED STATEM
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) | ||
In Millions | 9 Months Ended
Sep. 30, 2009 | 9 Months Ended
Sep. 30, 2008 |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net earnings | 409.8 | 356.6 |
Adjustments to reconcile net earnings to net cash provided by operating activities: | ||
Depreciation and amortization | 145.3 | 133.5 |
Stock compensation | 26.1 | 27 |
Loss on sale of assets | 1.5 | 0.7 |
Accreted interest on zero-coupon subordinated notes | 6.8 | 8.5 |
Cumulative earnings in excess of distribution from joint venture partnerships | -0.2 | -0.9 |
Deferred income taxes | 9.9 | 28.6 |
Change in assets and liabilities (net of effects of acquisitions): | ||
(Increase) decrease in accounts receivable (net) | 14 | -0.1 |
(Increase) decrease in inventories | 3.3 | -4.8 |
Decrease in prepaid expenses and other | 11.4 | 6.4 |
Increase in accounts payable | 14.4 | 10.6 |
Decrease in accrued expenses and other | -4.6 | -0.5 |
Net cash provided by operating activities | 637.7 | 565.6 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Capital expenditures | -77.1 | -120.4 |
Proceeds from sale of assets | 0.9 | 0.4 |
Deferred payments on acquisitions | -1.3 | -3.7 |
Purchases of short-term investments | 0 | -72.8 |
Proceeds from sale of short-term investments | 0 | 182.7 |
Acquisition of licensing technology | 0 | -0.8 |
Investment in equity affiliate | -4.3 | 0 |
Acquisition of businesses, net of cash acquired | (168) | -336.6 |
Net cash used for investing activities | -249.8 | -351.2 |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Proceeds from revolving credit facilities | 0 | 135.8 |
Payments on revolving credit facilities | 0 | (65) |
Principal payments on term loan | -37.5 | -18.7 |
Payments on zero-coupon subordinated notes | -289.4 | 0 |
Payments on vendor-financed equipment | -1.5 | 0 |
Increase (decrease) in bank overdraft | (5) | 2.5 |
Payments on long-term debt | 0 | 0.1 |
Noncontrolling interest distributions | -7.7 | -10.9 |
Excess tax benefits from stock based compensation | 0 | 15.7 |
Net proceeds from issuance of stock to employees | 18.1 | 53.3 |
Purchase of common stock | -159.1 | -333.6 |
Net cash used for financing activities | -482.1 | (221) |
Effect of exchange rate changes on cash and cash equivalents | 1.3 | -0.4 |
Net decrease in cash and cash equivalents | -92.9 | (7) |
Cash and cash equivalents at beginning of period | 219.7 | 56.4 |
Cash and cash equivalents at end of period | 126.8 | 49.4 |
BASIS OF FINANCIAL STATEMENT PR
BASIS OF FINANCIAL STATEMENT PRESENTATION | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
BASIS OF FINANCIAL STATEMENT PRESENTATION [Abstract] | |
BASIS OF FINANCIAL STATEMENT PRESENTATION | 1. BASIS OF FINANCIAL STATEMENT PRESENTATION The consolidated financial statements include the accounts of Laboratory Corporation of America Holdings (the Company) and its majority-owned subsidiaries over which it exercises control. Long-term investments in affiliated companies in which the Company exercises significant influence, but which it does not control, are accounted for using the equity method. Investments in which the Company does not exercise significant influence (generally, when the Company has an investment of less than 20% and no representation on the investees board of directors) are accounted for using the cost method. All significant inter-company transactions and accounts have been eliminated. The Company does not have any variable interest entities or special purpose entities whose financial results are not included in the condensed consolidated financial statements. The financial statements of the Companys foreign subsidiaries are measured using the local currency as the functional currency. Assets and liabilities are translated at exchange rates as of the balance sheet date. Revenues and expenses are translated at average monthly exchange rates prevailing during the period. Resulting translation adjustments are included in Accumulated other comprehensive income. The accompanying condensed consolidated financial statements of the Company are unaudited. In the opinion of management, all adjustments necessary for a fair statement of results of operations, cash flows and financial position have been made. Except as otherwise disclosed, all such adjustments are of a normal recurring nature. Interim results are not necessarily indicative of results for a full year. The year-end condensed consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by generally accepted accounting principles. The Company evaluated events occurring subsequent to September 30, 2009 for potential recognition or disclosure in the condensed consolidated financial statements through October 27, 2009. The financial statements and notes are presented in accordance with the rules and regulations of the Securities and Exchange Commission and do not contain certain information included in the Companys 2008 annual report on Form 10-K. Therefore, the interim statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Companys annual report. |
EARNINGS PER SHARE
EARNINGS PER SHARE | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
EARNINGS PER SHARE [Abstract] | |
EARNINGS PER SHARE | 2. EARNINGS PER SHARE Basic earnings per share is computed by dividing net earnings by the weighted average number of common shares outstanding. Diluted earnings per share is computed by dividing net earnings including the impact of dilutive adjustments by the weighted average number of common shares outstanding plus potentially dilutive shares, as if they had been issued at the beginning of the period presented. Potentially dilutive common shares result primarily from the Companys outstanding stock options, restricted stock awards, performance share awards, and shares issuable upon conversion of zero-coupon subordinated notes. The following represents a reconciliation of basic earnings per share to diluted earnings per share: Three Months Ended September 30, Nine Months Ended September 30, 2009 2008 2009 2008 Per Per Per Per Share Share Share Share Income Shares Amount Income Shares Amount Income Shares Amount Income Shares Amount Basic earnings per share: Net earnings $ 131.4 107.6 $ 1.22 $ 111.9 109.6 $ 1.02 $ 400.6 108.0 $ 3.71 $ 346.4 110.4 $ 3.14 Dilutive effect of employeestock plans and awards -- 0.7 -- 0.7 -- 0.6 -- 1.1 Effect of convertible debt, net of tax -- 0.5 -- 1.7 -- 0.5 -- 1.7 Diluted earnings per share: Net earnings including impact of dilutive adjustments $ 131.4 108.8 $ 1.21 $ 111.9 112.0 $ 1.00 $ 400.6 109.1 $ 3.67 $ 346.4 113.2 $ 3.06 The following table summarizes the potential common shares not included in the computation of diluted earnings per share because their impact would have been antidilutive: Three Months Ended Nine Months Ended September 30, September 30, 2009 2008 2009 2008 Stock options 2.9 3.0 4.6 2.2 |
RESTRUCTURING AND OTHER SPECIAL
RESTRUCTURING AND OTHER SPECIAL CHARGES | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
RESTRUCTURING AND OTHER SPECIAL CHARGES [Abstract] | |
RESTRUCTURING AND OTHER SPECIAL CHARGES | 3.RESTRUCTURING AND OTHER SPECIAL CHARGES During the second quarter of 2009, the Company recorded net restructuring charges of $10.2 primarily related to the closing of redundant and underutilized facilities. The majority of these costs related to severance and other employee costs and contractual obligations associated with leased facilities and other facility related costs. Of this amount, $6.6 related to severance and other employee costs for employees primarily in the affected facilities, and $12.3 related to contractual obligations associated with leased facilities and other facility related costs. The Company also reduced its prior restructuring accruals by $8.7, comprised of $6.5 of previously recorded facility costs and $2.2 of employee severance benefits as a result of incurring less cost than planned on those restructuring initiatives primarily resulting from favorable settlements on lease buyouts and severance payments that were not required to achieve the planned reduction in work force. During the second and third quarters of 2008, the Company recorded charges primarily related to work force reductions and the closing of redundant and underutilized facilities. For the third quarter of 2008, the Company recorded net restructuring charges of $12.2. Of this amount, $12.2 related to severance and other employee costs in connection with the general work force reductions and $1.9 related to contractual obligations associated with leased facilities and equipment. The Company also recorded a credit of $1.9, comprised of $1.2 of previously recorded facility costs and $0.7 of employee severance benefits relating to changes in cost estimates accrued in prior periods. For the second quarter of 2008, the Company recorded restructuring charges of $16.0 primarily related to the closing of redundant and underutilized facilities. Of this amount, $6.5 related to severance and other employee costs for employees primarily in branch operations, divisional billing and management functions, and $9.5 related to contractual obligations associated with leased facilities and equipment. During the third quarter of 2008, the Company also recorded a special charge of $5.5 related to estimated uncollectible amounts primarily owed by patients in the areas of the Gulf Coast severely impacted by hurricanes similar to losses incurred during the 2005 hurricane season. |
RESTRUCTURING RESERVES
RESTRUCTURING RESERVES | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
RESTRUCTURING RESERVES [Abstract] | |
RESTRUCTURING RESERVES | 4.RESTRUCTURING RESERVES The following represents the Companys restructuring activities for the period indicated: Severance Lease and Other and Other Employee Facility Costs Costs Total Balance as of December 31, 2008 $ 11.3 $ 22.4 $ 33.7 Net restructuring charges 4.4 5.8 10.2 Cash payments and other adjustments (10.2 ) (6.2 ) (16.4 ) Balance as of September 30, 2009 $ 5.5 $ 22.0 $ 27.5 Current $ 15.9 Non-current 11.6 $ 27.5 |
BAD DEBT EXPENSE
BAD DEBT EXPENSE | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
BAD DEBT EXPENSE [Abstract] | |
BAD DEBT EXPENSE | 5. BAD DEBT EXPENSE During the second quarter of 2008, the Company recorded a $45.0 increase in its provision for doubtful accounts. The Companys estimate of the allowance for doubtful accounts was increased due to the impact of the economy, higher patient deductibles and co-payments, and acquisitions on the collectibility of accounts receivable balances. |
BUSINESS ACQUISITIONS
BUSINESS ACQUISITIONS | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
BUSINESS ACQUISITIONS [ABSTRACT] | |
BUSINESS ACQUISITIONS | 6. BUSINESS ACQUISITIONS During the nine months ended September 30 2009, the Company acquired various laboratories and related assets for approximately $168.0 in cash (net of cash acquired). The acquisition activity primarily included the acquisition of Monogram Biosciences, Inc. (Monogram) effective August 3, 2009 for approximately $160.0 in cash (net of cash acquired). The Monogram acquisition was made to enhance the Companys scientific differentiation and esoteric testing capabilities and advance the Companys personalized medicine strategy. The Monogram purchase consideration has been allocated to the estimated fair market value of the net assets acquired, including approximately $63.3 in identifiable intangible assets (primarily non-tax deductible customer list, patents and technology, and trade name) with weighted-average useful lives of approximately 15 years;net operating loss tax assets of approximately $44.8, which are expected to be realized over a period of 18 years; and residual amount of non-tax deductible goodwill of approximately $76.2. The Company will finalize its determination of the fair market value of the net assets acquired during the fourth quarter of 2009. Monogram has an active research and development department, which is primarily focused on the development of companion diagnostics technology. As a result of this acquisition, the Company incurred approximately $2.5 of research and development expenses (included in selling, general and administrative expenses) for the three and nine months ended September 30, 2009. In connection with the Monogram acquisition, the Company incurred approximately $2.7 in transaction fees and expenses (included in selling, general and administrative expenses). |
NONCONTROLLING INTEREST PUT
NONCONTROLLING INTEREST PUT | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
NONCONTROLLING INTEREST PUT [Abstract] | |
NONCONTROLLING INTEREST PUT | 7. NONCONTROLLING INTEREST PUT Effective January 1, 2008 the Company acquired additional partnership units in its Ontario, Canada (Ontario) joint venture, bringing the Companys percentage interest owned to 85.6%. Concurrent with this acquisition, the terms of the joint ventures partnership agreement were amended. The amended joint ventures partnership agreement enables the holders of the noncontrolling interest to put the remaining partnership units to the Company in defined future periods, at an initial amount equal to the consideration paid by the Company in 2008, and subject to adjustment based on market value formulas contained in the agreement. The contractual value of the put, in excess of the current noncontrolling interest of $24.1, totals $116.3 at September 30, 2009. Net sales of the Ontario joint venture for the nine month and three month periods ended September 30, 2009 were $180.5 and $63.4, respectively (CN$210.4 and CN$69.5, respectively), and $190.5 and $59.4 for the nine month and three month periods ended September 30, 2008, respectively (CN$193.5 and CN$61.8, respectively). |
GOODWILL AND INTANGIBLE ASSETS
GOODWILL AND INTANGIBLE ASSETS | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
GOODWILL AND INTANGIBLE ASSETS [Abstract] | |
GOODWILL AND INTANGIBLE ASSETS | 8. GOODWILL AND INTANGIBLE ASSETS The changes in the carrying amount of goodwill for the nine-month period ended September 30, 2009 and for the year ended December 31, 2008 are as follows: September 30, December 31, 2009 2008 Balance as of January 1 $ 1,772.2 $ 1,639.5 Goodwill acquired during the period 82.1 135.4 Adjustments to goodwill 0.6 (2.7 ) Balance at end of period $ 1,854.9 $ 1,772.2 The components of identifiable intangible assets are as follows: September 30, 2009 December 31, 2008 Gross Gross Carrying Accumulated Carrying Accumulated Amount Amortization Amount Amortization Customer lists $ 836.2 $ (326.1 ) $ 793.2 $ (294.1 ) Patents, licenses and technology 120.4 (59.8 ) 94.7 (54.2 ) Non-compete agreements 37.4 (30.0 ) 37.0 (28.2 ) Trade name 117.8 (39.7 ) 115.3 (33.4 ) Canadian licenses 685.9 -- 592.3 -- $ 1,797.7 $ (455.6 ) $ 1,632.5 $ (409.9 ) Amortization of intangible assets for the nine month and three month periods ended September 30, 2009 was $46.2 and $15.9, respectively, and $43.0 and $14.6 for the nine month and three month periods ended September 30, 2008, respectively. Amortization expense for the net carrying amount of intangible assets is estimated to be $16.2 for the remainder of fiscal 2009, $65.0 in fiscal 2010, $60.3 in fiscal 2011, $55.8 in fiscal 2012, $52.8 in fiscal 2013 and $406.1 thereafter. The Ontario operation had $685.9 and $592.3 of value assigned to the partnerships indefinite lived Canadian licenses to conduct diagnostic testing services in the province as of September 30, 2009 and December 31, 2008, respectively. |
DEBT
DEBT | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
DEBT [Abstract] | |
DEBT | 9. DEBT Short-term borrowings and the current portion of long-term debt at September 30, 2009 and December 31, 2008 consisted of the following: September 30, December 31, 2009 2008 Term loan, current $ 50.0 $ 50.0 Revolving credit facility 70.8 70.8 Total short-term borrowings and current portion of long-term debt $ 120.8 $ 120.8 Long-term debt at September 30, 2009 and December 31, 2008 consisted of the following: September 30, December 31, 2009 2008 Senior notes due 2013 $ 351.4 $ 351.7 Senior notes due 2015 250.0 250.0 Term loan, non-current 387.5 425.0 Zero-coupon convertible subordinated notes 290.8 573.5 Other long-term debt 0.3 0.3 Total long-term debt $ 1,280.0 $ 1,600.5 Zero-coupon Subordinated Notes During the second quarter of 2009, the Company redeemed approximately $369.5 principal amount at maturity of its zero-coupon subordinated notes, equaling approximately fifty percent of the principal amount at maturity outstanding of the zero-coupon subordinated notes. The total cash used for these redemptions was $289.4. As a result of certain holders of the zero-coupon subordinated notes electing to convert their notes, the Company also issued 0.4 additional shares of common stock and reversed approximately $11.3 of deferred tax liability to reflect the tax benefit realized upon issuance of these shares. The Companys common stock trading price conversion feature of its zero-coupon subordinated notes was not triggered by third quarter 2009 trading prices. As a result, the zero-coupon subordinated notes may not be converted during the period of October 1, 2009 through December 31, 2009 based on this conversion feature. The Companys common stock trading price contingent cash interest feature of its zero-coupon subordinated notes was not triggered by the average market price of the Companys common stock for the five trading days ended September 9, 2009. As a result, the zero-coupon subordinated notes will not accrue contingent cash interest for the period of September 12, 2009 to March 11, 2010. Credit Facilities The balances outstanding on the Companys Term Loan Facility at September 30, 2009 and December 31, 2008 were $437.5 and $475.0, respectively. The balance outstanding on the Companys Revolving Facility at September 30, 2009 and December 31, 2008 was $70.8. The Term Loan Facility and Revolving Facility bear interest at varying rates based upon LIBOR plus a percentage based on the Companys credit rating with Standard Poors Ratings Services. The Term Loan Facility and Revolving Facility contain certain debt covenants that require that the Company maintain certain financial ratios. The Company was in compliance with all covenants as of September 30, 2009. On September 15, 2008, Lehman Brothers Holdings, Inc. (Lehman), whose subsidiaries have a $28.0 commitment in the Companys Revolving Facility, filed for bankruptcy. Accordingly, the Company does not expect Lehman will fulfill its pro rata share of |
PREFERRED STOCK AND COMMON SHAR
PREFERRED STOCK AND COMMON SHAREHOLDERS' EQUITY | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
PREFERRED STOCK AND COMMON SHAREHOLDERS' EQUITY [Abstract] | |
PREFERRED STOCK AND COMMON SHAREHOLDERS' EQUITY | 10. PREFERRED STOCK AND COMMON SHAREHOLDERS EQUITY The Company is authorized to issue up to 265.0 shares of common stock, par value $0.10 per share. The Companys treasury shares are recorded at aggregate cost. The Company is authorized to issue up to 30.0 shares of preferred stock, par value $0.10 per share. There were no preferred shares outstanding as of September 30, 2009. The changes in common shares issued and held in treasury are summarized below: Held in Issued Treasury Outstanding Common shares at December 31, 2008 130.3 (22.1 ) 108.2 Common stock issued under employee stock plans 0.3 -- 0.3 Common stock issued upon conversion of zero-coupon subordinated notes 0.4 -- 0.4 Retirement of common stock (2.4 ) -- (2.4 ) Common shares at September 30, 2009 128.6 (22.1 ) 106.5 Share Repurchase Program During the nine months ended September 30, 2009, the Company purchased 2.4 shares of its common stock at a total cost of $165.1.As of September 30, 2009, the Company had outstanding authorization from the Board of Directors to purchase approximately $180.2 of Company common stock. |
INCOME TAXES
INCOME TAXES | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
INCOME TAXES [Abstract] | |
INCOME TAXES | 11. INCOME TAXES The Company does not recognize a tax benefit, unless the Company concludes that it is more likely than not that the benefit will be sustained on audit by the taxing authority based solely on the technical merits of the associated tax position. If the recognition threshold is met, the Company recognizes a tax benefit measured at the largest amount of the tax benefit that the Company believes is greater than 50 percent likely to be realized. The gross unrecognized income tax benefits were $81.2 and $72.5 at September 30, 2009 and December 31, 2008, respectively. It is reasonably possible the Company will reverse a significant amount of the unrecognized income tax benefits during the fourth quarter of 2009. The reversal relates to certain state income tax matters that are reasonably anticipated to be closed during the fourth quarter. The anticipated decrease in the reserve for gross unrecognized income tax benefits (including interest) is estimated to be approximately $27.7. The anticipated net of tax benefit to flow through the Companys consolidated statement of operations for the fourth quarter of 2009 is estimated to be approximately $17.3. As of September 30, 2009 and December 31, 2008, $84.5 and $70.2, respectively, is the approximate amount of unrecognized income tax benefits that, if recognized, would favorably affect the effective income tax rate in future periods. 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 $17.4 and $14.2 as of September 30, 2009 and December 31, 2008, respectively. The Company has substantially concluded all U.S. federal income tax matters for years through 2004. Substantially all material state and local income tax matters have been concluded through 2002 and substantially all foreign income tax matters have been concluded through 2001. The Companys 2006 U.S. federal income tax return is currently under examination by the Internal Revenue Service. In addition, the Company has various state income tax examinations ongoing throughout the year. Management believes adequate provisions have been recorded related to all open tax years. |
NEW ACCOUNTING PRONOUNCEMENTS
NEW ACCOUNTING PRONOUNCEMENTS | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
NEW ACCOUNTING PRONOUNCEMENTS [Abstract] | |
NEW ACCOUNTING PRONOUNCEMENTS | 12. NEW ACCOUNTING PRONOUNCEMENTS In June 2009, the Financial Accounting Standards Board (FASB) established authoritative United States generally accepted accounting principles (GAAP), codifying and superseding all pre-existing accounting standards and literature. This newly codified GAAP is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The Company has adopted the guidance without any impact on the consolidated financial statements. In December 2007, the FASB issued authoritative guidance requiring all entities to report noncontrolling (minority) interests in subsidiaries as equity in the consolidated financial statements. The Company adopted the guidance as of January 1, 2009 and pursuant to the provisions of the literature, the presentation and disclosure requirements have been applied retrospectively for all periods presented. Due to the nature of the noncontrolling interest put, the Company has not included the noncontrolling interest in its Ontario joint venture in the equity section of the accompanying condensed consolidated balance sheets. In December 2007, the FASB issued authoritative guidance in connection with business combinations which was intended to simplify existing guidance and converge rulemaking under U.S. GAAP with international accounting rules. The guidance applies prospectively to business combinations where the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The Company adopted the literature as of January 1, 2009, and the Company began recording acquisitions in accordance with the authoritative guidance. As a result, acquisition related costs, primarily legal and other professional services, of $3.5 and $5.0 were included in selling, general and administrative expenses for the three months and nine months ended September 30, 2009. In April 2009, the FASB issued authoritative guidance in connection with accounting for assets acquired and liabilities assumed in a business combination that arise from contingencies. The guidance addresses application issues regarding the initial recognition and measurement, subsequent measurement and accounting, and disclosure of assets and liabilities arising from contingencies in a business combination. Due to the fact that the literature is applicable to acquisitions completed after January 1, 2009 and the Company did not have any business combinations with assets and liabilities arising from contingencies in the first nine months of 2009, the adoption of the authoritative guidance did not impact the Companys consolidated financial statements. In March 2008, the FASB issued authoritative guidance in connection with disclosures about derivative instruments and hedging activities. The guidance requires additional disclosures about the objectives of using derivative instruments, the method by which the derivative instruments and related hedged items are accounted for under this authoritative guidance, and the effect of derivative instruments and related hedged items on financial position, financial performance, and cash flows. The litera |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
COMMITMENTS AND CONTINGENCIES [Abstract] | |
COMMITMENTS AND CONTINGENCIES | 13. COMMITMENTS AND CONTINGENCIES The Company was a party in a patent case originally filed by Competitive Technologies, Inc. and Metabolite Laboratories, Inc. in the United States District Court for the District of Colorado. After a jury trial, the district court entered judgment against the Company for patent infringement, with total damages and attorneys fees payable by the Company of approximately $7.8. The underlying judgment has been paid. The Company vigorously contested the judgment and appealed the case ultimately to the United States Supreme Court. On June 22, 2006, the Supreme Court dismissed the Companys appeal and the case was remanded to the District Court for further proceedings including resolution of a related declaratory judgment action initiated by the Company addressing the plaintiffs claims for post trial damages. On August 15, 2008, the District Court entered judgment in favor of the Company on all of the plaintiffs remaining claims. Metabolite Laboratories, Inc. has filed a notice of appeal and the appeal is pending. The Company does not expect the resolution of these issues to have a material adverse effect on its financial position, results of operations or liquidity. The Company is also involved in various claims and legal actions arising in the ordinary course of business. Some of these actions involve claims that are substantial in amount. These matters include, but are not limited to, intellectual property disputes, professional liability, employee related matters, and inquiries, including subpoenas and other civil investigative demands, from governmental agencies and Medicare or Medicaid payers and managed care payers reviewing billing practices or requesting comment on allegations of billing irregularities that are brought to their attention through billing audits or third parties. The Company receives civil investigative demands or other inquiries from various governmental bodies in the ordinary course of its business. Such inquiries can relate to the Company or other healthcare providers. The Company works cooperatively to respond to appropriate requests for information. As previously reported, on May 22, 2006 the Company received a subpoena from the California Attorney General seeking documents related to billing to the states Medicaid program. The Company subsequently reported during the third quarter of 2008 that it received a request from the California Attorney General for additional information. On March 20, 2009, a qui tam lawsuit, California ex rel. Hunter Laboratories, LLC et al. v. Quest Diagnostics Incorporated, et al., which was joined by the California Attorney General and to which the previous subpoena related, was unsealed. The lawsuit was brought against the Company and several other major laboratories operating in California and alleges that the defendants improperly billed the state Medicaid program. During 2009, the Company received subpoenas from two state agencies requesting documents related to its billing to Medicaid in those states. The Company also responded to subpoenas from the Office of Inspector Generals regional offices in New York and Massachusetts regarding certai |
PENSION AND POSTRETIREMENT PLAN
PENSION AND POSTRETIREMENT PLANS | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
PENSION AND POSTRETIREMENT PLANS [Abstract] | |
PENSION AND POSTRETIREMENT PLANS | 14. PENSION AND POSTRETIREMENT PLANS Substantially all employees of the Company are covered by a defined benefit retirement plan (the Company Plan). The benefits to be paid under the Company Plan are based on years of credited service and average final compensation. The Companys policy is to fund the Company Plan with at least the minimum amount required by applicable regulations. The Company has a second non-qualified defined benefit retirement plan (the PEP) that covers its senior management group that provides for the payment of the difference, if any, between the amount of any maximum limitation on annual benefit payments under the Employee Retirement Income Security Act of 1974 and the annual benefit that would be payable under the Company Plan but for such limitation. This plan is an unfunded plan. The effect on operations for the Company Plan and the PEP is summarized as follows: Three Months Ended Nine Months Ended September 30, September 30, 2009 2008 2009 2008 Service cost for benefits earned $ 5.2 $ 4.9 $ 15.6 $ 15.1 Interest cost on benefit obligation 4.6 4.3 13.7 12.9 Expected return on plan assets (4.3 ) (5.5 ) (12.9 ) (16.6 ) Net amortization and deferral 3.0 0.7 9.0 2.1 Defined benefit plan costs $ 8.5 $ 4.4 $ 25.4 $ 13.5 For the nine months ended September 30, 2008, the Company did not make any contributions to the Company Plan. However, based upon the underlying value of the Company Plans assets and the amount of the Company Plans benefit obligation as of December 31, 2008, the Company made contributions of $50.2 during the nine months ended September 30, 2009. The Company plans to contribute an additional $4.6 to the Company Plan during 2009. Due to the stock markets performance in 2008, the fair value of assets in the Company Plan decreased significantly from January 1, 2008 to December 31, 2008. As a result, the Companys projected pension expense for the Company Plan and the nonqualified supplemental retirement plan will increase from $19.5 in 2008 to $33.8 in 2009. On October 14, 2009, the Company received approval from its Board of Directors to freeze any additional service-based credits for any years of service after December 31, 2009, on the Company Plan and the PEP. Both plans will be closed to new entrants. Current participants in the Company Plan and the PEP will stop earning service-based credits, but will continue to earn interest credits. In addition, effective January 1, 2010, all employees eligible for the Companys 401k plan will receive a 3% non-elective contribution (NEC). The NEC replaces the Company match, which will be discontinued. Employees are not required to make a contribution to the 401k plan in order to receive the NEC. The NEC will be non-forfeitable and vests immediately. The 401k plan will also provide discretionary service credits of 1% to 3% of pay for eligible long service employees. The Company believes these changes to the Company Plan, the PEP and its 401k plan wi |
SUPPLEMENTAL CASH FLOW INFORMAT
SUPPLEMENTAL CASH FLOW INFORMATION | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
SUPPLEMENTAL CASH FLOW INFORMATION [Abstract] | |
SUPPLEMENTAL CASH FLOW INFORMATION | 15. SUPPLEMENTAL CASH FLOW INFORMATION Nine Months Ended September 30, 2009 2008 Supplemental schedule of cash flow information: Cash paid during period for: Interest $ 39.6 $ 42.9 Income taxes, net of refunds 214.9 153.6 Disclosure of non-cash financing and investing activities: Accrued repurchases of common stock $ 6.0 $ (3.0 ) Purchase of equipment in accrued expenses 2.8 -- |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
FAIR VALUE MEASUREMENTS [Abstract] | |
FAIR VALUE MEASUREMENTS | 16. FAIR VALUE MEASUREMENTS The Companys population of financial assets and liabilities subject to fair value measurements as of September 30, 2009 and December 31, 2008 are as follows: Fair value Fair Value Measurements as of as of September 30, 2009 September 30, Using Fair Value Hierarchy 2009 Level 1 Level 2 Level 3 Noncontrolling interest put $ 140.4 $ -- $ 140.4 $ -- Derivatives Embedded derivatives related to the zero-coupon subordinated notes $ -- $ -- $ -- $ -- Interest rate swap liability 12.4 -- 12.4 -- Total fair value of derivatives $ 12.4 $ -- $ 12.4 $ -- Fair value Fair Value Measurements as of as of December 31, 2008 December 31, Using Fair Value Hierarchy 2008 Level 1 Level 2 Level 3 Noncontrolling interest put $ 121.3 $ -- $ 121.3 $ -- Derivatives Embedded derivatives related to the zero-coupon subordinated notes $ -- $ -- $ -- $ -- Interest rate swap liability 13.5 -- 13.5 -- Total fair value of derivatives $ 13.5 $ -- $ 13.5 $ -- The noncontrolling interest put is valued at its contractually determined value, which approximates fair value. The fair values for the embedded derivatives and interest rate swap are based on observable inputs or quoted market prices from various banks for similar instruments. During 2009, the Company implemented authoritative guidance for its nonfinancial assets and liabilities that are remeasured at fair value on a non-recurring basis. The adoption of the guidance did not impact the Companys financial position or results of operations; however, it could have an impact in future periods. In addition, the Company may have additional disclosure requirements in the event the Company completes a significant acquisition or incurs impairment of the Companys assets in future periods. The carrying amounts of cash and cash equivalents, accounts receivable, income taxes receivable, and accounts payable are considered to be representative of their respective fair values due to their short-term nature. The fair market value of the zero-coupon subordinated notes, based on market pricing, was approximately $335.0 and $650.7 as of September 30, 2009 and December 31, 2008, respectively. The fair market value of the senior notes, based on market pricing, was approximately $618.2 and $539.7 as of September 30, 2009 and December 31, 2008, respectively. As of September 30, 2009 and December 31, 2008, the estimated fair market value of the Companys variable rate debt of $493.1 and $491.1, respectively, was estimated by calculating the net present value of related cash flows, discounted at current market rates. |
DERIVATIVE INSTRUMENTS AND HEDG
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES [Abstract] | |
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES | 17. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES 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 (see Interest Rate Swap section below). Although the Companys zero-coupon subordinated notes contain features that are considered to be embedded derivative instruments (see Embedded Derivative section below), 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 Companys financial position or results of operations. Interest Rate Swap The Company has an interest rate swap agreement with a remaining term of approximately two years to hedge variable interest rate risk on the Companys variable interest rate term loan. On a quarterly basis under the swap, the Company pays a fixed rate of interest (2.92%) and receives a variable rate of interest based on the three-month LIBOR rate on an amortizing notional amount of indebtedness equivalent to the term loan balance outstanding. The swap has been designated as a cash flow hedge. Accordingly, the Company recognizes the fair value of the swap in the condensed consolidated balance sheets and any changes in the fair value are recorded as adjustments to accumulated other comprehensive income (loss), net of tax. The fair value of the interest rate swap agreement is the estimated amount that the Company would pay or receive to terminate the swap agreement at the reporting date. The fair value of the swap was a liability of $12.4 and $13.5 at September 30, 2009 and December 31, 2008, respectively, and is included in other liabilities in the condensed consolidated balance sheets. The Company is exposed to credit-related losses in the event of nonperformance by the counterparty to the swap agreement. Management does not expect the counterparty to fail to meet its obligation. Embedded Derivatives Related to the Zero-Coupon Subordinated Notes The Companys 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 Poors Ratings Services is BB- or lower. The Company believes these embedded derivatives had no fair value at September 30, 2009 and December 31, 2008. These embedded derivatives also had no impact on the condensed consolidated statements of operations for the nine mo |
Document Information
Document Information | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Document Information [Line Items] | |
Document Type | 10-Q |
Amendment Flag | false |
Document Period End Date | 2009-09-30 |
Entity Information
Entity Information (USD $) | ||
9 Months Ended
Sep. 30, 2009 | Jun. 30, 2008
| |
Entity Information [Line Items] | ||
Entity Registrant Name | LABORATORY CORP OF AMERICA HOLDINGS | |
Entity Central Index Key | 0000920148 | |
Current Fiscal Year End Date | --12-31 | |
Entity Well-known Seasoned Issuer | Yes | |
Entity Voluntary Filers | No | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Public Float | $7,700,000,000 | |
Entity Common Stock, Shares Outstanding | 106,200,000 |