LabCorp 2009 Annual Report Download - page 48

46 LABORATORY CORPORATION OF AMERICA
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 entity’s 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 becomes effective as
of the beginning of the first annual reporting period beginning
after November 15, 2009 and should be applied prospectively
for interim and annual periods during that period going forward.
The Company is currently evaluating the impact the adoption
of the authoritative guidance could have on its consolidated
financial statements.
In August 2009, the FASB issued authoritative guidance in
connection with measuring liabilities at fair value. The guidance
addresses the impact of transfer restrictions on the fair value of
a liability and the ability to use the fair value of a liability that is
traded as an asset as an input to the valuation of the underlying
liability. The literature also clarifies the application of certain
valuation techniques. Those clarifications include when to make
adjustments to fair value. The guidance became effective in the
Company’s quarter ended December 31, 2009. The adoption
of the authoritative guidance did not have an impact on the
Company’s consolidated financial statements as of and for the
year ended December 31, 2009.
2. Business Acquisitions
During the year ended December 31, 2009, the Company
acquired various laboratories and related assets for approxi-
mately $212.6 in cash (net of cash acquired). The acquisition
activity primarily included the acquisition of Monogram Biosci-
ences, Inc. (“Monogram”) effective August 3, 2009 for approxi-
mately $160.0 in cash (net of cash acquired). The Monogram
acquisition was made to enhance the Company’s scientific dif-
ferentiation and esoteric testing capabilities and advance the
Company’s personalized medicine strategy.
The Monogram purchase consideration has been allocated
to the estimated fair market value of the net assets acquired,
including approximately $63.5 in identifiable intangible assets
(primarily non-tax deductible customer relationships, patents
and technology, and trade name) with weighted-average useful
lives of approximately 15 years; net operating loss tax assets of
approximately $44.8, which are expected to be realized over a
period of 18 years; and residual amount of non-tax deductible
goodwill of approximately $83.6.
Monogram has an active research and development
department, which is primarily focused on the development
of companion diagnostics technology. As a result of this
acquisition, the Company incurred approximately $5.2 of
research and development expenses (included in selling,
general and administrative expenses) for the year ended
December 31, 2009.
In connection with the Monogram acquisition, the Company
incurred approximately $2.7 in transaction fees and expenses
(included in selling, general and administrative expenses).
During the year ended December 31, 2008, the Company
acquired various laboratories and related assets for approximately
$203.9 in cash (net of cash acquired). These acquisitions were
made primarily to extend the Company’s geographic reach in
important market areas or acquire scientific differentiation and
esoteric testing capabilities.
Effective January 1, 2008 the Company acquired additional
partnership units in its Ontario, Canada (“Ontario”) joint venture
for approximately $140.9 in cash (net of cash acquired), bringing
the Company’s percentage interest owned 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. The amended joint venture’s partnership
agreement also 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.
The initial difference of $123.0 between the value of the put and
the underlying noncontrolling interest was recorded as additional
noncontrolling interest liability and as a reduction to additional
paid-in capital in the consolidated financial statements. The
contractual value of the put, in excess of the current noncon-
trolling interest of $23.5, totals $118.9 at December 31, 2009.
In December 2009, the Company received notification from
the holders of the noncontrolling interest in the Ontario joint
venture that they intend to put their remaining partnership units
to the Company in accordance with the terms of the joint
LABORATORY CORPORATION OF AMERICA
Notes to Consolidated Financial Statements