LabCorp 2006 Annual Report Download - page 21

Laboratory Corporation of America® Holdings 2006 19
............................... ........
.......................................
(a) Effective January 1, 2006, the Company adopted Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment (“SFAS 123(R)”), which
requires the Company to measure the cost of employee services received in exchange for all equity awards granted, based on the fair market value of the award as of
the grant date. As a result of adopting SFAS 123(R), the Company recorded approximately $23.3 in stock compensation expense relating to its stock option and employee
stock purchase plans for the year ended December 31, 2006. Net earnings for the year ended December 31, 2006, were reduced by $13.9, net of tax.
(b) During the second half of 2006, the Company recorded charges of approximately $12.3, primarily related to the acceleration of the recognition of stock compensation
due to the announced retirement of the Company’s Chief Executive Officer, effective December 31, 2006. The Company also recorded net restructuring charges of
$1.0 in the third quarter of 2006, relating to certain expense-reduction initiatives undertaken across the Company’s corporate and divisional operations.
(c) During the third and fourth quarters of 2005, the Company began to implement its plan related to the integration of Esoterix and US LABS operations into the Company’s
service delivery network. The plan was directed at reducing redundant facilities, while maintaining the goal of providing excellent customer service. In connection with the
integration plan, the Company recorded $11.9 of costs associated with the execution of the plan. The majority of these integration costs related to employee severance
and contractual obligations associated with leased facilities and equipment. Of this amount, $10.1 related to employee severance benefits for approximately 700 employees,
with the remainder primarily related to contractual obligations associated with leased facilities. Employee groups being affected as a result of this plan included those
involved in the collection and testing of specimens, as well as administrative and other support functions.
The Company also recorded a special charge of $5.0 related to forgiveness of amounts owed by patients and clients as well as other costs associated with the areas
of the Gulf Coast severely impacted by hurricanes Katrina and Rita.
(d) On January 17, 2003, the Company completed the acquisition of all of the outstanding shares of DIANON Systems, Inc. for $47.50 per share in cash, or approximately
$595.6 including transaction fees and expenses. The Company recorded net restructuring and other special charges of $1.5 for 2003 in connection with the integrations
of its recent acquisitions.
(e) On July 25, 2002, the Company completed the acquisition of all of the outstanding stock of Dynacare Inc. in a combination cash and stock transaction with a combined
value of approximately $496.4, including transaction costs. During the third quarter of 2002, the Company recorded restructuring and other special charges totaling
$17.5. These charges included a special bad debt provision of approximately $15.0 related to the acquired Dynacare accounts receivable balance and restructuring
expense of approximately $2.5 relating to Dynacare integration costs of actions that impact the Company’s existing employees and operations.
(f) Long-term obligations primarily includes the zero-coupon convertible subordinated notes, the 5½% senior notes due 2013, the 55/8% senior notes due 2015 and other long-term
obligations. The accreted balance of the zero-coupon convertible subordinated notes was $554.4, $544.4, $533.7, $523.2, and $512.9, at December 31, 2006, 2005, 2004,
2003 and 2002, respectively. The balance of the 5½% senior notes, including principal and unamortized portion of a deferred gain on an interest rate swap agreement, was
$352.6, $353.0, $353.4, $353.8, and $0, at December 31, 2006, 2005, 2004, 2003, and 2002, respectively. The principal balance of the 5
5/8% senior notes was $250.0
at December 31, 2006 and 2005 and $0 for all other years presented. The remainder of other long-term obligations consisted primarily of mortgages payable with balances
of $0.4, $1.5, $2.2, $2.5, and $3.1, at December 31, 2006, 2005, 2004, 2003, and 2002, respectively. Long-term obligations exclude amounts due to affiliates.
FIVE-YEAR SELECTED FINANCIAL DATA