LabCorp 2013 Annual Report Download - page 14

10
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
2013 2012 2011 2013 2012
Amortization of intangibles
and other assets $ 81.7 $ 86.3 $ 85.8 (5.3)% 0.6%
The decrease in amortization of intangibles and other assets
over the three year period ended December 31, 2013 primarily
reflects the net impact of acquisitions closed during all three years
offset by adjustments to the fair value of deferred acquisition pay-
ments. During 2012, the Company recorded $6.2 in accelerated
amortization relating to the termination of a licensing agreement.
Restructuring and Other Special Charges
Years Ended December 31,
2013 2012 2011
Restructuring and other special charges $ 21.8 $ 25.3 $ 80.9
During 2013, the Company recorded net restructuring charges
of $21.8. The charges were comprised of $15.4 in severance and
other personnel costs and $9.5 in facility-related costs primarily
associated with general integration activities. These charges were
offset by the reversal of previously established reserves of $0.7 in
unused severance and $2.4 in unused facility-related costs.
During 2012, the Company recorded net restructuring charges
of $25.3. These charges were comprised of $16.2 in severance and
other personnel costs and $19.6 in facility-related costs primarily
associated with the ongoing integration activities of Orchid and
the Integrated Genetics business and costs associated with the
previously announced termination of an executive vice president.
These charges were offset by the reversal of previously established
reserves of $6.3 in unused severance and $4.2 in unused facility-
related costs.
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 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 improve-
ments 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.
From time to time, the Company implements cost savings
initiatives. These initiatives result from the integration of recently
acquired businesses and from reducing the number of facilities and
employees in an effort to balance the Company’s cost of operations
with current test volume trends while maintaining the high quality
of its services that the marketplace demands. It is difficult to
determine the nature, timing and extent of these activities until
adequate planning has been completed and reviewed. The
continuing economic downturn being experienced in the U.S. and
globally has had an impact on the Company’s business. The
Company believes that any restructuring costs which may be
incurred in future periods will be more than offset by subsequent
savings realized from these potential actions and that any related
restructuring charges will not have a material impact on the
Company’s operations or liquidity.
As part of the Clearstone integration, the Company also recorded
a 6.9 loss on the disposal of one of its European subsidiaries in
Other, net under Other income (expenses) during 2012.
Years Ended December 31, Change
2013 2012 2011 2013 2012
Interest expense $ 96.5 $ 94.5 $ 87.5 2.1% 8.0%
The increase in interest expense for 2013 as compared with
2012 is primarily due to the issuance of $700.0 of senior notes in
November 2013 and $1,000.0 of senior notes in August 2012, net of
the payoff of the 5.5% senior notes due 2013 and the reductions in
borrowings under the Revolving Credit Facility due to paydowns
with proceeds from the 2012 and 2013 issuances. This increase was
also partially offset by a decrease in interest expense on the senior
notes due 2020 as a result of entering into a fixed to floating interest
rate swap in the third quarter of 2013.
The increase in interest expense for 2012 as compared with
2011 is primarily due to the issuance of $1,000.0 of senior notes in
August 2012. This increase was partially offset by the settlement
of approximately $155.1 of the zero-coupon subordinated notes
during 2011. In addition, during December 2011, the Company
replaced its existing term loan facility (the “Term Loan Facility”)
with a new revolving credit facility (the “Revolving Credit Facility”),
which is described further in “Note 11 to Consolidated Financial
Statements. ” The new Revolving Credit Facility had a lower effective
interest rate during 2012 compared with the effective interest rate
on the Term Loan Facility during 2011.