LabCorp 2008 Annual Report Download - page 42

Notes to Consolidated Financial Statements
(Dollars and shares in millions, except per share data)
Laboratory Corporation of America
40 Laboratory Corporation of America® Holdings 2008
In July 2006, the Company announced the retirement of its Chief Executive Officer (“CEO”),
Thomas P. Mac Mahon, effective December 31, 2006. During the second half of 2006, the
Company recorded charges of approximately $12.3, which included $11.6 related to the accel-
eration of the recognition of stock compensation and $0.7 related to the acceleration of certain
defined benefit plan obligations.
In July 2006, Mr. Mac Mahon entered into a consulting agreement with the Company
effective January 1, 2007, following the announcement of his retirement as CEO on December 31,
2006. The agreement provides for additional services to be provided by Mr. Mac Mahon following
the termination of his employment as CEO to assist the Company during a transition period.
Mr. Mac Mahon will remain as Chairman of the Board. The agreement provided for an additional
five years of age for purposes of calculating pension benefits and has an amended term until
the annual meeting of shareholders in 2009.
4) Restructuring and Other Special Charges
During 2008, the Company recorded charges primarily related to workforce reductions and the
closing of redundant and underutilized facilities. For 2008, the Company recorded net restructuring
charges of $32.4. Of this amount, $20.9 related to severance and other employee costs in
connection with the general workforce reductions and $13.4 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.
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.
During 2007, the Company recorded charges related to reductions in workforce and
consolidation of redundant and underutilized facilities. For 2007, the Company recorded net
restructuring charges of $50.6. Of this amount, $24.8 related to employee severance benefits
for employees primarily in management, administrative, technical, service and support functions
and $19.4 related to contractual obligations and other costs associated with the closure of
facilities. The charges also included a write-off of approximately $6.5 of accounts receivable
balances remaining on a subsidiary’s billing system that was abandoned during the year and
$0.9 related to settlement of a preacquisition employment liability. The Company also recorded
a credit of $1.0, comprised of $0.7 of previously recorded facility costs and $0.3 of employee
severance benefits.
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 benefits for 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.
5) Restructuring Reserves
The following represents the Company’s restructuring activities for the period indicated:
Severance Lease
and Other and Other
Employee Facility
Costs Costs Total
Balance as of January 1, 2008 $ 9.1 $ 18.5 $ 27.6
Net restructuring charges 20.2 12.2 32.4
Cash payments and other adjustments (18.0) (8.3) (26.3)
Balance as of December 31, 2008 $ 11.3 $ 22.4 $ 33.7
Current $ 24.3
Non-current 9.4
$ 33.7
6) Investments in Joint Venture Partnerships
As disclosed in note 2 (Business Acquisitions), effective January 1, 2008 the Company acquired
additional partnership units in its Ontario, Canada joint venture bringing the Company’s percentage
interest owned up to 85.6%. Concurrent with this acquisition, the terms of the joint venture’s
partnership agreement were amended. Based upon the amended terms of this agreement, the
Company began including the consolidated operating results, financial position and cash flows
of the Ontario joint venture in the Company’s consolidated financial statements on January 1, 2008.
As a result, the below disclosures in connection with investments in joint venture partnerships
do not include the Ontario joint venture as of and for the year ended December 31, 2008.
At December 31, 2008 the Company had investments in the following unconsolidated
joint venture partnerships:
Net Percentage
Location Investment Interest Owned
Milwaukee, Wisconsin $ 10.7 50.00%
Alberta, Canada 61.3 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 are accounted for under
the equity method of accounting as the Company does not have control of either of these partner-
ships. The Company has no material obligations or guarantees to, or in support of, these
unconsolidated joint ventures and their operations.