LabCorp 2009 Annual Report Download - page 26

24 LABORATORY CORPORATION OF AMERICA
LABORATORY CORPORATION OF AMERICA
Management’s Discussion and Analysis
of Financial Condition and Results of Operations
Amortization of Intangibles and Other Assets
Years Ended December 31, % Change
2009 2008 2007 2009 2008
Amortization of intangibles
and other assets $ 62.6 $ 57.9 $ 54.9 8.1% 5.5%
The increase in amortization of intangibles and other assets
over the three-year period ended December 31, 2009 primarily
reflects certain acquisitions closed during 2009 and 2008.
Restructuring and Other Special Charges
Years Ended December 31,
2009 2008 2007
Restructuring and other special charges $ 13.5 $ 37.9 $ 50.6
During 2009, the Company recorded net restructuring
charges of $13.5 primarily related to the closing of redundant
and underutilized facilities. The majority of these costs related to
severance and other employee costs and contractual obliga-
tions associated with leased facilities and other facility related
costs. Of this amount, $10.5 related to severance and other
employee costs for employees primarily in the affected facilities,
and $12.5 related to contractual obligations associated with
leased facilities and other facility related costs. The Company
also reduced its prior restructuring accruals by $9.5, comprised
of $7.3 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. These restructuring initiatives are expected to provide
annualized cost savings of approximately $24.0.
During 2008, the Company recorded net restructuring charges
of $32.4 primarily related to work force reductions and the
closing of redundant and underutilized facilities. Of this amount,
$20.9 related to severance and other employee costs in con-
nection with the general work force 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 net restructuring charges
of $50.6 primarily related to reductions in work force and consoli-
dation of redundant and underutilized facilities. 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 receiv-
able 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.
Interest Expense
Years Ended December 31, % Change
2009 2008 2007 2009 2008
Interest expense $ 62.9 $ 72.0 $ 56.6 (12.6)% 27.2%
The decrease in interest expense for 2009 as compared to
2008 was primarily driven by lower average borrowings out-
standing in 2009 due to principal payments on the Term Loan
Facility and the redemption of approximately 50% of the zero-
coupon subordinated notes in the second quarter of 2009.
Also, the Company’s zero-coupon subordinated notes did not
accrue contingent cash interest for the period March 12, 2009
through December 31, 2009. The increase in interest expense
for 2008 as compared to 2007 was primarily due to borrow-
ings outstanding under the Term Loan Facility since October
2007 and the Revolving Facility that totaled $475.0 and $70.8,
respectively, at December 31, 2008.
Income from Joint Venture Partnerships
Years Ended December 31, % Change
2009 2008 2007 2009 2008
Income from joint venture
partnerships $ 13.8 $ 14.4 $ 77.9 (4.2)% (81.5)%
Income from investments in joint venture partnerships
represents the Company’s ownership share in joint venture
partnerships. During 2007, a significant portion of this income
was derived from investments in Ontario and Alberta, Canada,
and was earned in Canadian dollars. Effective January 1, 2008,
the income from the Ontario operation is included in the