CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) (USD $) | ||
In Millions | 3 Months Ended
Mar. 31, 2010 | 12 Months Ended
Dec. 31, 2009 |
Current assets: | ||
Cash and cash equivalents | 172.2 | 148.5 |
Accounts receivable, net of allowance for doubtful accounts of $169.9 and $173.1 at March 31, 2010 and December 31, 2009, respectively | 614.3 | 574.2 |
Supplies inventories | 82.5 | 90 |
Prepaid expenses and other | 74.3 | 80.1 |
Deferred income taxes | 37.7 | 42.8 |
Total current assets | 981 | 935.6 |
Property, plant and equipment, net | 488.4 | 500.8 |
Goodwill, net | 1911.1 | 1897.1 |
Intangible assets, net | 1382.1 | 1342.2 |
Investments in joint venture partnerships | 69.2 | 71.4 |
Other assets, net | 102.4 | 90.7 |
Total assets | 4934.2 | 4837.8 |
Current liabilities: | ||
Accounts payable | 169.3 | 183.1 |
Accrued expenses and other | 347.1 | 275.7 |
Noncontrolling interest | 0 | 142.4 |
Short-term borrowings and current portion of long-term debt | 370 | 417.2 |
Total current liabilities | 886.4 | 1018.4 |
Long-term debt, less current portion | 958.3 | 977.2 |
Deferred income taxes and other tax liabilities | 604 | 577.7 |
Noncontrolling interest | 145.6 | 0 |
Other liabilities | 161.3 | 158.4 |
Total liabilities | 2755.6 | 2731.7 |
Commitments and contingent liabilities | ||
Noncontrolling interest | 20.2 | 0 |
Shareholders' equity | ||
Common stock, 104.2 and 105.3 shares outstanding at March 31, 2010 and December 31, 2009, respectively | 12.4 | 12.5 |
Additional paid-in capital | 0 | 36.7 |
Retained earnings | 3002.7 | 2927.9 |
Less common stock held in treasury | -934.9 | -932.5 |
Accumulated other comprehensive income | 78.2 | 61.5 |
Total shareholders' equity | 2158.4 | 2106.1 |
Total liabilities and shareholders' equity | 4934.2 | 4837.8 |
PARENTHETICAL DATA TO THE CONDE
PARENTHETICAL DATA TO THE CONDENSED CONSOLIDATED BALANCE SHEETS (USD $) | ||
In Millions | Mar. 31, 2010
| Dec. 31, 2009
|
Current assets: | ||
Allowance for doubtful accounts | 169.9 | 173.1 |
Shareholders' equity | ||
Common stock, shares outstanding (in shares) | 104.2 | 105.3 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) (USD $) | ||
In Millions, except Per Share data | 3 Months Ended
Mar. 31, 2010 | 3 Months Ended
Mar. 31, 2009 |
Income Statement [Abstract] | ||
Net sales | 1193.6 | 1155.7 |
Cost of sales | 686.7 | 666.3 |
Gross profit | 506.9 | 489.4 |
Selling, general and administrative expenses | 246 | 233.8 |
Amortization of intangibles and other assets | 17.4 | 15.1 |
Restructuring and other special charges | 9.3 | 0 |
Operating income | 234.2 | 240.5 |
Other income (expenses): | ||
Interest expense | -14.6 | (17) |
Income from joint venture partnerships, net | 3.8 | 2.8 |
Investment income | 0.3 | 0.4 |
Other, net | -0.6 | -0.5 |
Earnings before income taxes | 223.1 | 226.2 |
Provision for income taxes | 86.9 | 90.4 |
Net earnings | 136.2 | 135.8 |
Less: Net earnings attributable to the noncontrolling interest | -3.5 | (3) |
Net earnings attributable to Laboratory Corporation of America Holdings | 132.7 | 132.8 |
Basic earnings per common share | 1.27 | 1.23 |
Diluted earnings per common share | 1.25 | 1.22 |
1_CONDENSED CONSOLIDATED STATEM
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (unaudited) (USD $) | ||||||
In Millions | Common Stock
| Additional Paid-in Capital
| Retained Earnings
| Treasury Stock
| Accumulated Other Comprehensive (Loss) Income
| Total
|
BALANCE 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 | 132.8 | 0 | 0 | 132.8 |
Other comprehensive earnings: | ||||||
Foreign currency translation adjustments | 0 | 0 | 0 | 0 | -21.1 | -21.1 |
Interest rate swap adjustments | 0 | 0 | 0 | 0 | 0.4 | 0.4 |
Tax effect of other comprehensive earnings adjustments | 0 | 0 | 0 | 0 | 7.8 | 7.8 |
Comprehensive earnings | 119.9 | |||||
Issuance of common stock under employee stock plans | 0 | 5.7 | 0 | 0 | 0 | 5.7 |
Surrender of restricted stock awards | 0 | 0 | 0 | -2.7 | 0 | -2.7 |
Stock compensation | 0 | 7.2 | 0 | 0 | 0 | 7.2 |
Income tax benefit adjustments related to stock options exercised | 0 | -0.4 | 0 | 0 | 0 | -0.4 |
BALANCE at Mar. 31, 2009 | 12.8 | 249.9 | 2517.4 | -932.5 | -29.6 | 1,818 |
BALANCE at Dec. 31, 2009 | 12.5 | 36.7 | 2927.9 | -932.5 | 61.5 | 2106.1 |
Comprehensive earnings: | ||||||
Net earnings attributable to Laboratory Corporation of America Holdings | 0 | 0 | 132.7 | 0 | 0 | 132.7 |
Other comprehensive earnings: | ||||||
Foreign currency translation adjustments | 0 | 0 | 0 | 0 | 25.5 | 25.5 |
Interest rate swap adjustments | 0 | 0 | 0 | 0 | 1.1 | 1.1 |
Tax effect of other comprehensive earnings adjustments | 0 | 0 | 0 | 0 | -9.9 | -9.9 |
Comprehensive earnings | 149.4 | |||||
Issuance of common stock under employee stock plans | 0 | 18.1 | 0 | 0 | 0 | 18.1 |
Surrender of restricted stock awards | 0 | 0 | 0 | -2.4 | 0 | -2.4 |
Stock compensation | 0 | 8.7 | 0 | 0 | 0 | 8.7 |
Value of noncontrolling interest put | 0 | -17.2 | 0 | 0 | 0 | -17.2 |
Income tax benefit adjustments related to stock options exercised | 0 | 1.4 | 0 | 0 | 0 | 1.4 |
Purchase of common stock | -0.1 | -47.7 | -57.9 | 0 | 0 | -105.7 |
BALANCE at Mar. 31, 2010 | 12.4 | $0 | 3002.7 | -934.9 | 78.2 | 2158.4 |
2_CONDENSED CONSOLIDATED STATEM
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (USD $) | ||
In Millions | 3 Months Ended
Mar. 31, 2010 | 3 Months Ended
Mar. 31, 2009 |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net earnings | 136.2 | 135.8 |
Adjustments to reconcile net earnings to net cash provided by operating activities: | ||
Depreciation and amortization | 50 | 47.3 |
Stock compensation | 8.7 | 7.2 |
Loss on sale of assets | 0.5 | 0.3 |
Accreted interest on zero-coupon subordinated notes | 1.5 | 2.8 |
Cumulative earnings less than distribution from joint venture partnerships | 0.4 | 0.6 |
Deferred income taxes | 10 | 10.3 |
Change in assets and liabilities (net of effects of acquisitions): | ||
Increase in accounts receivable (net) | -38.4 | -38.4 |
Decrease in inventories | 7.7 | 7.7 |
Decrease in prepaid expenses and other | 5 | 13.7 |
Increase (decrease) in accounts payable | -14.8 | 15.1 |
Increase in accrued expenses and other | 65.2 | 6.5 |
Net cash provided by operating activities | 232 | 208.9 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Capital expenditures | -24.5 | -30.7 |
Proceeds from sale of assets | 1.6 | 0 |
Deferred payments on acquisitions | -1.4 | -0.4 |
Investment in equity affiliate | 0 | -4.3 |
Acquisition of businesses, net of cash acquired | -32.2 | -5.9 |
Net cash used for investing activities | -56.5 | -41.3 |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Proceeds from revolving credit facilities | 65 | 0 |
Payments on revolving credit facilities | (120) | 0 |
Principal payments on term loan | -12.5 | -12.5 |
Payments on vendor-financed equipment | -1.3 | 0 |
Decrease in bank overdraft | 0 | -3.9 |
Proceeds from sale of interest in consolidated subsidiary | 137.5 | 0 |
Cash paid to acquire an interest in a consolidated subsidiary | -137.5 | 0 |
Noncontrolling interest distributions | -2.8 | (2) |
Tax benefit adjustments related to stock based compensation | 0.9 | -0.4 |
Net proceeds from issuance of stock to employees | 18.1 | 5.7 |
Purchase of common stock | -100.3 | 0 |
Net cash used for financing activities | -152.9 | -13.1 |
Effect of exchange rate changes on cash and cash equivalents | 1.1 | (1) |
Net increase in cash and cash equivalents | 23.7 | 153.5 |
Cash and cash equivalents at beginning of period | 148.5 | 219.7 |
Cash and cash equivalents at end of period | 172.2 | 373.2 |
BASIS OF FINANCIAL STATEMENT PR
BASIS OF FINANCIAL STATEMENT PRESENTATION | |
3 Months Ended
Mar. 31, 2010 | |
Notes To Financial Statements [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 for 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 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 2009 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 | |
3 Months Ended
Mar. 31, 2010 | |
Notes To Financial Statements [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 earlier of the date of issuance or 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 Three months ended March 31, 2010 March 31, 2009 Per Share Per Share Income Shares Amount Income Shares Amount Basic earnings per share: Net earnings $ 132.7 104.6 $ 1.27 $ 132.8 108.1 $ 1.23 Dilutive effect of employee stock options and awards -- 0.8 -- 0.6 Effect of convertible debt, net of tax -- 1.1 -- 0.1 Diluted earnings per share: Net earnings including impact of dilutive adjustments $ 132.7 106.5 $ 1.25 $ 132.8 108.8 $ 1.22 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 March 31, 2010 2009 Stock options 3.6 4.0 |
NEW ACCOUNTING PRONOUNCEMENTS
NEW ACCOUNTING PRONOUNCEMENTS | |
3 Months Ended
Mar. 31, 2010 | |
Notes To Financial Statements [Abstract] | |
NEW ACCOUNTING PRONOUNCEMENTS | 3. NEW ACCOUNTING PRONOUNCEMENTS In June 2009, the FASB issued authoritative guidance in connection with adding qualified special purpose entities into the scope of guidance for consolidation of variable interest entities. This literature also modifies the analysis by which a controlling interest of a variable interest entity is determined thereby requiring the controlling interest to consolidate the variable interest entity. A controlling interest exists if a party to a variable interest entity has both (i) the power to direct the activities of a variable interest entity that most significantly impact the entitys economic performance and (ii) the obligation to absorb losses of or receive benefits from the entity that could be potentially significant to the variable interest entity. The guidance became effective in the first quarter of 2010. The adoption of the authoritative guidance did not have an impact on the Companys consolidated financial statements as of and for the three months ended March 31, 2010. |
BUSINESS ACQUISITIONS
BUSINESS ACQUISITIONS | |
3 Months Ended
Mar. 31, 2010 | |
Notes To Financial Statements [Abstract] | |
BUSINESS ACQUISITIONS | 4. BUSINESS ACQUISITIONS During the three months ended March 31 2010, the Company acquired various laboratories and related assets for approximately $32.2 in cash (net of cash acquired). These acquisitions were made primarily to enhance the Companys scientific differentiation and esoteric testing capabilities. Monogram Biosciences, Inc. (acquired by the Company in August 2009) has an active research and development department, which is primarily focused on the development of oncology and infectious disease technology. As a result of this acquisition, the Company incurred approximately $3.4 of research and development expenses (included in selling, general and administrative expenses) for the three months ended March 31, 2010. |
NONCONTROLLING INTEREST PUT
NONCONTROLLING INTEREST PUT | |
3 Months Ended
Mar. 31, 2010 | |
Notes To Financial Statements [Abstract] | |
NONCONTROLLING INTEREST PUT | 5.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. In December 2009, the Company received notification from the holders of the noncontrolling interest in the Ontario joint venture that they intended to put their remaining partnership units to the Company in accordance with the terms of the joint ventures partnership agreement. These units were acquired on February 8, 2010 for $137.5. On February 17, 2010, the Company completed a transaction to sell the units acquired from the previous noncontrolling interest holder to a new Canadian partner for the same price. As a result of this transaction, the Company recorded a component of noncontrolling interest in other liabilities and a component in mezzanine equity. Upon the completion of these two transactions, the Companys financial ownership percentage in the joint venture partnership remained unchanged at 85.6%. Concurrent with the sale to the new partner, the partnership agreement for the Ontario joint venture was amended and restated with substantially the same terms as the previous agreement. The combined contractual value of these puts, in excess of the current noncontrolling interest of $24.8, totals $141.0 at March 31, 2010. Net sales of the Ontario joint venture were $68.9 (CN$71.7) and $55.6 (CN$69.2) for the three months ended March 31, 2010 and 2009, respectively. |
RESTRUCTURING AND OTHER SPECIAL
RESTRUCTURING AND OTHER SPECIAL CHARGES | |
3 Months Ended
Mar. 31, 2010 | |
Notes To Financial Statements [Abstract] | |
RESTRUCTURING AND OTHER SPECIAL CHARGES | 6.RESTRUCTURING AND OTHER SPECIAL CHARGES During the first quarter of 2010, the Company recorded net restructuring charges of $3.1 related to severance payments and the closing of redundant and underutilized facilities. Of this amount, $3.9 related to severance and other employee costs for employees primarily in the affected facilities, and $0.6 related to contractual obligations associated with leased facilities and other facility related costs. The Company also reduced its prior facility related restructuring accruals by $1.4 as a result of incurring less cost than planned on those restructuring initiatives primarily due to favorable settlements on lease buyouts. In addition, the Company recorded a special charge of $6.2 related to the write-off of development costs incurred on systems abandoned during the quarter. |
RESTRUCTURING RESERVES
RESTRUCTURING RESERVES | |
3 Months Ended
Mar. 31, 2010 | |
Notes To Financial Statements [Abstract] | |
RESTRUCTURING RESERVES | 7.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, 2009 $ 6.6 $ 19.0 $ 25.6 Net restructuring charges 3.9 (0.8 ) 3.1 Cash payments and other adjustments (2.6 ) (1.1 ) (3.7 ) Balance as of March 31, 2010 $ 7.9 $ 17.1 $ 25.0 Current $ 15.5 Non-current 9.5 $ 25.0 |
GOODWILL AND INTANGIBLE ASSETS
GOODWILL AND INTANGIBLE ASSETS | |
3 Months Ended
Mar. 31, 2010 | |
Notes To Financial Statements [Abstract] | |
GOODWILL AND INTANGIBLE ASSETS | 8.GOODWILL AND INTANGIBLE ASSETS The changes in the carrying amount of goodwill for the three-month period ended March 31, 2010 and for the year ended December 31, 2009 are as follows: March 31, December 31, 2010 2009 Balance as of January 1 $ 1,897.1 $ 1,772.2 Goodwill acquired during the period 14.1 124.1 Adjustments to goodwill (0.1 ) 0.8 Balance at end of period $ 1,911.1 $ 1,897.1 The components of identifiable intangible assets are as follows: March 31, 2010 December 31, 2009 Gross Gross Carrying Accumulated Carrying Accumulated Amount Amortization Amount Amortization Customer relationships $ 827.1 $ (334.6 ) $ 839.8 $ (337.1 ) Patents, licenses and technology 144.1 (65.7 ) 119.2 (62.4 ) Non-compete agreements 15.4 (5.9 ) 39.4 (30.7 ) Trade name 117.7 (43.9 ) 117.7 (41.8 ) Canadian licenses 727.9 -- 698.1 -- $ 1,832.2 $ (450.1 ) $ 1,814.2 $ (472.0 ) Amortization of intangible assets for the three month periods ended March 31, 2010 and 2009 was $17.4 and $15.1, respectively. Amortization expense for the net carrying amount of intangible assets is estimated to be $51.5 for the remainder of fiscal 2010, $64.2 in fiscal 2011, $59.7 in fiscal 2012, $56.7 in fiscal 2013, $53.9 in fiscal 2014 and $368.2 thereafter. The Ontario operation had $727.9 and $698.1 of value assigned to the partnerships indefinite lived Canadian licenses to conduct diagnostic testing services in the province as of March 31, 2010 and December 31, 2009, respectively. |
DEBT
DEBT | |
3 Months Ended
Mar. 31, 2010 | |
Notes To Financial Statements [Abstract] | |
DEBT | 9.DEBT Short-term borrowings and the current portion of long-term debt at March 31, 2010 and December 31, 2009 consisted of the following: March 31, December 31, 2010 2009 Zero-coupon convertible subordinated notes $ 293.7 $ 292.2 Term loan, current 56.3 50.0 Revolving credit facility 20.0 75.0 Total short-term borrowings and current portion of long-term debt $ 370.0 $ 417.2 Long-term debt at March 31, 2010 and December 31, 2009 consisted of the following: March 31, December 31, 2010 2009 Senior notes due 2013 $ 351.2 $ 351.3 Senior notes due 2015 250.0 250.0 Term loan, non-current 356.2 375.0 Other long-term debt 0.9 0.9 Total long-term debt $ 958.3 $ 977.2 Zero-coupon Subordinated Notes On March 26, 2010, the Company announced that for the period of March 12, 2010 to September 11, 2010, 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 March 9, 2010, in addition to the continued accrual of the original issue discount. On April 6, 2010, 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 subordinated notes at any time during the calendar quarter beginning April 1, 2010, 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 Wednesday, June 30, 2010. Credit Facilities The balances outstanding on the Companys Term Loan Facility at March 31, 2010 and December 31, 2009 were $412.5 and $425.0, respectively. The balance outstanding on the Companys Revolving Facility at March 31, 2010 and December 31, 2009 was $20.0 and $75.0, respectively. 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 which require that the Company maintain certain financial ratios. The Company was in compliance with all covenants as of March 31, 2010. As of March 31, 2010, the effective interest rates on the Term Loan Facility and Revolving Facility were 3.67% and 0.58%, respectively. |
PREFERRED STOCK AND COMMON SHAR
PREFERRED STOCK AND COMMON SHAREHOLDERS' EQUITY | |
3 Months Ended
Mar. 31, 2010 | |
Notes To Financial Statements [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 March 31, 2010. The changes in common shares issued and held in treasury are summarized below: Held in Issued Treasury Outstanding Common shares at December 31, 2009 127.4 (22.1 ) 105.3 Common stock issued under employee stock plans 0.4 -- 0.4 Retirement of common stock (1.5 ) -- (1.5 ) Common shares at March 31, 2010 126.3 (22.1 ) 104.2 Share Repurchase Program As of December 31, 2009, the Company had outstanding authorization from the Board of Directors to purchase approximately $71.8 of Company common stock. On February 11, 2010, the Board of Directors authorized the purchase of $250.0 of additional shares of the Companys common stock. During the three months ended March 31, 2010, the Company purchased approximately 1.5 shares of its common stock at a total cost of approximately $105.7.As of March 31, 2010, the Company had outstanding authorization from the Board of Directors to purchase approximately $216.1 of Company common stock. |
INCOME TAXES
INCOME TAXES | |
3 Months Ended
Mar. 31, 2010 | |
Notes To Financial Statements [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% likely to be realized. The gross unrecognized income tax benefits were $61.5 and $59.0 at March 31, 2010 and December 31, 2009, 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. As of March 31, 2010 and December 31, 2009, $62.8 and $60.3, 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 $13.6 and $14.7 as of March 31, 2010 and December 31, 2009, respectively. During the first quarter of 2010, the Company closed its 2006 Internal Revenue Service examination. As a result, the Company has substantially concluded all U.S. federal income tax matters for years through 2006. Substantially all material state and local, and foreign income tax matters have been concluded through 2004 and 2001, respectively. 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. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | |
3 Months Ended
Mar. 31, 2010 | |
Notes To Financial Statements [Abstract] | |
COMMITMENTS AND CONTINGENCIES | 12. 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. filed an appeal to the Federal Circuit. After briefing and oral argument, theFederal Circuit determined that it did not have jurisdiction over the appeal. Accordingly, the Federal Circuit issued a decision transferring the appeal to the Tenth Circuit.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. A subsidiary of the Company, DIANON Systems, Inc. (DIANON), is the appellant in a wrongful termination lawsuit originally filed by G. Berry Schumann in Superior Court in the State of Connecticut.After a jury trial, the state court entered judgment against DIANON, with total damages, attorneys fees, and pre-judgment interest payable by DIANON, of approximately $10.0. DIANON filed a notice of appeal in December 2009 and is awaiting a briefing schedule. DIANON has disputed liability and intends to contest the case vigorously on appeal. The Company is involved from time to time in various claims and legal actions, including arbitrations, class actions, and other litigation, 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 |
PENSION AND POSTRETIREMENT PLAN
PENSION AND POSTRETIREMENT PLANS | |
3 Months Ended
Mar. 31, 2010 | |
Notes To Financial Statements [Abstract] | |
PENSION AND POSTRETIREMENT PLANS | 13. PENSION AND POSTRETIREMENT PLANS In October 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 defined benefit retirement plan (the Company Plan) and the non-qualified supplemental retirement plan (the PEP). Both plans have been closed to new participants. Employees participating in the Company Plan and the PEP no longer earn service-based credits, but continue to earn interest credits. In addition, effective January 1, 2010, all employees eligible for the defined contribution retirement plan (the 401K Plan) receive a minimum 3% non-elective contribution (NEC) concurrent with each payroll period. The NEC replaces the Company match, which has been discontinued. Employees are not required to make a contribution to the 401K Plan to receive the NEC. The NEC is non-forfeitable and vests immediately. The 401K Plan also permits discretionary contributions by the Companyof 1% to 3% of pay for eligible employees based on service. The Company believes these changes to the Company Plan, the PEP and its 401K plan align the Companys retirement plan strategy with prevailing industry practices and reduce the impact of market volatility on the Company Plan. As a result of the changes to the Company Plan and PEP, projected pension expense for the Company Plan and the PEP will decrease from $36.6 in 2009 to $10.4 in 2010. In addition, the Company does not plan to make contributions to the Company Plan during 2010. The implementation of the NEC will increase the Companys 401K costs and contributions by an estimated $22.5 in 2010. The effect on operations for the Company Plan and the PEP is summarized as follows: Three Months Ended March 31, 2010 2009 Service cost for benefits earned $ 0.7 $ 5.2 Interest cost on benefit obligation 4.6 4.6 Expected return on plan assets (4.7 ) (4.3 ) Net amortization and deferral 2.0 3.1 Defined benefit plan costs $ 2.6 $ 8.6 The Company assumed obligations under a subsidiarys post-retirement medical plan. Coverage under this plan is restricted to a limited number of existing employees of the subsidiary. This plan is unfunded and the Companys policy is to fund benefits as claims are incurred. The effect on operations of the post-retirement medical plan is shown in the following table: Three Months Ended March 31, 2010 2009 Service cost for benefits earned $ 0.1 $ 0.1 Interest cost on benefit obligation 0.6 0.6 Net amortization and deferral (0.2 ) (0.4 ) Post-retirement medical plan costs $ 0.5 $ 0.3 |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | |
3 Months Ended
Mar. 31, 2010 | |
Notes To Financial Statements [Abstract] | |
FAIR VALUE MEASUREMENTS | 14. FAIR VALUE MEASUREMENTS The Companys population of financial assets and liabilities subject to fair value measurements as of March 31, 2010 and December 31, 2009 are as follows: Fair value Fair Value Measurements as of as of March 31, 2010 March 31, Using Fair Value Hierarchy 2010 Level 1 Level 2 Level 3 Noncontrolling interest puts $ 165.8 $ -- $ 165.8 $ -- Derivatives Embedded derivatives related to the zero-coupon subordinated notes $ -- $ -- $ -- $ -- Interest rate swap liability 9.5 -- 9.5 -- Total fair value of derivatives $ 9.5 $ -- $ 9.5 $ -- Fair value Fair Value Measurements as of as of December 31, 2009 December 31, Using Fair Value Hierarchy 2009 Level 1 Level 2 Level 3 Noncontrolling interest put $ 142.4 $ -- $ 142.4 $ -- Derivatives Embedded derivatives related to the zero-coupon subordinated notes $ -- $ -- $ -- $ -- Interest rate swap liability 10.6 -- 10.6 -- Total fair value of derivatives $ 10.6 $ -- $ 10.6 $ -- The noncontrolling interest puts are valued at their contractually determined values, which approximate fair values. 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. 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 $374.4 and $374.6 as of March 31, 2010 and December 31, 2009, respectively. The fair market value of the senior notes, based on market pricing, was approximately $642.1 and $645.2 as of March 31, 2010 and December 31, 2009, respectively. As of March 31, 2010 and December 31, 2009, the estimated fair market value of the Companys variable rate debt of $422.4 and $486.4, 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 | |
3 Months Ended
Mar. 31, 2010 | |
Notes To Financial Statements [Abstract] | |
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES | 15. 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 $9.5 and $10.6 at March 31, 2010 and December 31, 2009, respectively, and is included in other liabilities in the condensed consolidated balance sheets. 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 March 31, 2010 and December 31, 2009. These embedded derivatives also had no impact on the condensed consolidated statements of operations for the three months ended March 31, 2010 and 2009. The following table summarizes the fair value and presentation in the consolidated balance sheets for derivatives designated as hedging instruments (interest rate swap liability derivative) |
SUPPLEMENTAL CASH FLOW INFORMAT
SUPPLEMENTAL CASH FLOW INFORMATION | |
3 Months Ended
Mar. 31, 2010 | |
Notes To Financial Statements [Abstract] | |
SUPPLEMENTAL CASH FLOW INFORMATION | 16. SUPPLEMENTAL CASH FLOW INFORMATION Three Months Ended March 31, 2010 2009 Supplemental schedule of cash flow information: Cash paid during period for: Interest $ 13.5 $ 14.1 Income taxes, net of refunds 10.6 7.6 Disclosure of non-cash financing and investing activities: Accrued repurchases of common stock $ 5.4 $ -- Purchase of equipment in accrued expenses -- 2.8 |
Document Information
Document Information | |
3 Months Ended
Mar. 31, 2010 | |
Document Information [Text Block] | |
Document Type | 10-Q |
Amendment Flag | false |
Document Period End Date | 2010-03-31 |
Entity Information
Entity Information (USD $) | |||
3 Months Ended
Mar. 31, 2010 | Apr. 22, 2010
| Jun. 30, 2009
| |
Entity [Text Block] | |||
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 | $7,400,000,000 | ||
Entity Common Stock, Shares Outstanding | 104,000,000 | ||
Document Fiscal Year Focus | 2,010 | ||
Document Fiscal Period Focus | Q1 |