LabCorp 2011 Annual Report Download - page 12

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LABORATORY CORPORATION OF AMERICA
Management’s Discussion and Analysis
of Financial Condition and Results of Operations (in millions)
Amortization of Intangibles and Other Assets
Years Ended December 31, % Change
2011 2010 2009 2011 2010
Amortization of intangibles
and other assets $85.8 $72.7 $62.6 18.0% 16.1%
The increase in amortization of intangibles and other assets
over the three year period ended December 31, 2011 primarily
reflects the impact of acquisitions closed during all three years.
Restructuring and Other Special Charges
Years Ended December 31,
2011 2010 2009
Restructuring and other special charges $80.9 $12.0 $13.5
During 2011, the Company recorded net restructuring
charges of $44.6. Of this amount, $27.4 related to severance
and other personnel costs, and $22.0 primarily related to
facility-related costs associated with the ongoing integration
of certain acquisitions including Genzyme Genetics and
Westcliff. These restructuring initiatives are expected to
provide annualized cost savings of approximately $99.7.
These charges were offset by restructuring credits of $4.8
resulting from the reversal of unused severance and facility
closure liabilities. In addition, the Company recorded fixed
assets impairment charges of $18.9 primarily related to
equipment, computer systems and leasehold improvements
in closed facilities. The Company also recorded special charges
of $14.8 related to the write-off of certain assets and liabilities
related to an investment made in prior years, along with a $2.6
write-off of an uncollectible receivable from a past installment
sale of one of the Company’s lab operations.
During 2010, the Company recorded net restructuring
charges of $5.8 primarily related to work force reductions
and the closing of redundant and underutilized facilities. Of
this amount, $8.0 related to severance and other employee
costs in connection with certain work force reductions and
$3.1 related to contractual obligations associated with leased
facilities and other facility related costs. These restructuring
initiatives are expected to provide annualized cost savings of
approximately $34.7. The Company also reduced its prior
restructuring accruals by $5.3, comprised of $4.7 of previously
recorded facility costs and $0.6 of employee severance
benefits as a result of changes in cost estimates on the
restructuring initiatives. In addition, the Company recorded a
special charge of $6.2 related to the write-off of development
costs incurred on systems abandoned during the year.
During 2009, the Company recorded net restructuring
charges of $13.5 primarily related to the closing of redundant
and underutilized facilities. 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 restructur-
ing 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 restructur-
ing initiatives primarily resulting from favorable settlements on
lease buyouts and severance payments that were not required
to achieve the planned reduction in work force.
Interest Expense
Years Ended December 31, % Change
2011 2010 2009 2011 2010
Interest expense $87.5 $70.0 $62.9 25.0% 11.3%
The increase in interest expense for 2011 as compared to
2010 is primarily due to interest incurred during 2011 in
connection with the senior notes offering of $925.0 in
November 2010, which was outstanding for all of 2011.
Certain interest related costs decreased due to lower average
borrowings outstanding during 2011 as compared with 2010
primarily due to principal payments on the prior Term Loan
Facility and the settlement of approximately $155.1 of the
zero-coupon subordinated notes during the year. In addition,
the effective interest rate on the Term Loan Facility was lower
in 2011 as compared with 2010 due to the expiration of the
interest rate swap on March 31, 2011. In conjunction with
the repayment and cancellation of its old credit agreement
in December 2011, the Company recorded approximately
$1.0 of unamortized debt costs as interest expense in the
Company’s Consolidated Statements of Operations. The
Company recorded $7.0 of bridge financing fees in the 2010
period related to the signing of the definitive agreement to
acquire Genzyme Genetics in September 2010.
Equity Method Income
Years Ended December 31, % Change
2011 2010 2009 2011 2010
Equity method income $9.5 $10.6 $13.8 (10.4)% (23.2)%