LabCorp 2007 Annual Report Download - page 43

Notes to Consolidated Financial Statements
(Dollars and shares in millions, except per share data)
Laboratory Corporation of America® Holdings 2007 41
During the third quarter of 2006, the Company recorded net
restructuring charges of $1.0 related to certain expense-reduction
initiatives undertaken across the Company’s corporate and divisional
operations. This net charge was the result of a charge of $2.4 related
to employee severance benefi ts for approximately 180 employees
primarily in administrative and support functions, and a credit of
$1.4 related to occupying a testing facility that had previously been
shut down.
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 is directed at reducing redundant facilities while maintain-
ing excellent customer service. The Company recorded $11.9 of
costs associated with the execution of the integration 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 million related to employee
severance benefits for approximately 700 employees, with the
remainder primarily related to contractual obligations associated
with leased facilities. Employee groups 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.
RESTRUCTURING RESERVES
The following represents the Company’s restructuring activities for the
period indicated:
Severance Lease
and Other and Other
Employee Facility
Costs Costs Other Total
Balance as of January 1, 2007 $ 0.7 $ 5.7 $0.0 $ 6.4
Net restructuring charges 25.4 18.7 6.5 50.6
Cash payments and asset write-offs (17.0) (5.9) (6.5) (29.4)
Balance as of December 31, 2007 $ 9.1 $18.5 $0.0 $ 27.6
Current $ 15.8
Non-current 11.8
$ 27.6
INVESTMENTS IN JOINT
VENTURE PARTNERSHIPS
At December 31, 2007 the Company had investments in the following
joint venture partnerships:
Net Percentage
Location Investment Interest Owned
Milwaukee, Wisconsin $ 11.0 50.00%
Ontario, Canada 608.2 72.99%
Alberta, Canada 63.8 43.37%
Each of the joint venture agreements that govern the conduct
of business of these partnerships mandates unanimous agreement
between partners on all major business decisions as well as providing
other participating rights to each partner. These partnerships, including
the Ontario, Canada partnership, are accounted for under the equity
method of accounting, as the Company does not have control of these
three partnerships, due to the participating rights afforded to all partners
in each agreement. The Company has no material obligations or
guarantees to, or in support of, these unconsolidated joint ventures
and their operations.
Condensed unconsolidated fi nancial information for the joint
venture partnerships is shown in the following table.
2007 2006
As of December 31:
Current assets $ 65.9 $ 54.6
Other assets 169.9 133.6
Total assets $235.8 $188.2
Current liabilities $ 29.5 $ 24.6
Other liabilities 0.1 0.6
Total liabilities 29.6 25.2
Partners’ equity 206.2 163.0
Total liabilities and Partners equity $235.8 $188.2
2007 2006 2005
For the period January 1 – December 31:
Net sales $403.4 $361.7 $321.4
Gross profi t 190.9 165.3 144.6
Net earnings 120.9 102.0 93.1
The Company’s recorded investments in the Ontario and Alberta
joint venture partnerships at December 31, 2007, include $487.7
and $54.3, respectively of value assigned to these two partnerships’
Canadian licenses (with an indefi nite life and deductible for tax), to
conduct diagnostic testing services in their respective provinces.
Laboratory Corporation of America