LabCorp 2013 Annual Report Download - page 37

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LABORATORY CORPORATION OF AMERICA
Notes to Consolidated Financial Statements
On July 31, 2012, the Company completed its acquisition of
MEDTOX Scientific, Inc. (“MEDTOX”), a provider of high quality spe-
cialized laboratory testing services and on-site/point-of-collection
testing (POCT) devices, for $236.4 in cash, excluding transaction
fees. The MEDTOX acquisition was made to extend the Company’s
specialty toxicology testing group and enhance the Company’s
scientific differentiation and esoteric testing capabilities.
The MEDTOX purchase consideration has been allocated to the
estimated fair market value of the net assets acquired, including
approximately $78.0 in identifiable intangible assets (primarily
non-tax deductible customer relationships, trade names and
trademarks) with weighted-average useful lives of approximately
18 years; $33.2 in deferred tax liabilities (relating to identifiable
intangible assets); and a residual amount of non-tax deductible
goodwill of approximately $154.2.
During the year ended December 31, 2012, the Company also
acquired various other laboratories and related assets for approxi-
mately $95.8 in cash (net of cash acquired). These acquisitions were
made primarily to extend the Company’s geographic reach in
important market areas and/or enhance the Company’s scientific
differentiation and esoteric testing capabilities.
In April 2011, the Company and Orchid Cellmark Inc. (“Orchid”)
announced that they had entered into a definitive agreement and
plan of merger under which the Company would acquire all of the
outstanding shares of Orchid in a cash tender offer for $2.80 per share
for a total purchase price to stockholders and option holders of
approximately $85.4. The tender offer and the merger were subject
to customary closing conditions set forth in the agreement and
plan of merger, including the acquisition in the tender offer of a
majority of Orchid’s fully diluted shares and the expiration or early
termination of the waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (“HSR Act”). The
Company received lawsuits filed by putative classes of shareholders
of Orchid in New Jersey and Delaware state courts and federal
court in New Jersey alleging breaches of fiduciary duty and/or
other violations of state law arising out of the proposed acquisition
of Orchid. Both Orchid and the Company were named in the
lawsuits. The lawsuits were subsequently dismissed.
On December 8, 2011, the Company announced that it had
reached an agreement with the U.S. Federal Trade Commission
allowing the Company to complete its acquisition of Orchid. Under
the terms of the proposed consent decree that was accepted by
the FTC for public comment, the Company was required to divest
certain assets of Orchid’s U.S. government paternity business
following closing of the acquisition. On December 16, 2011, the
Company sold those assets to DNA Diagnostics Center, a privately
held provider of DNA paternity testing. The Company completed
its acquisition of Orchid on December 15, 2011. It has recorded
a $2.8 non-deductible loss on the divestiture of Orchid’s U.S.
government paternity business in Other Income and Expense in
the accompanying Consolidated Statements of Operations.
The Orchid purchase consideration has been allocated to the
estimated fair market value of the net assets acquired, including
approximately $28.8 in identifiable intangible assets (primarily
non-tax deductible customer relationships, trade names and
trademarks) with weighted-average useful lives of approximately
12 years; $9.1 in deferred tax liabilities (relating to identifiable
intangible assets); net operating loss tax assets of approximately
$20.4, which are expected to be realized over a period of
20 years; and a residual amount of non-tax deductible goodwill
of approximately $27.4.
During the twelve months ended December 31, 2011, the
Company also acquired various laboratories and related assets for
approximately $51.9 in cash (net of cash acquired). These acqui-
sitions were made primarily to extend the Company’s geographic
reach in important market areas and/or enhance the Company’s
scientific differentiation and esoteric testing capabilities.
On October 14, 2011, the Company issued notice to a
noncontrolling interest holder in its Other segment of its intent
to purchase the holder’s partnership units in accordance with
the terms of the partnership agreement. On November 28, 2011,
this purchase was completed for a total purchase price of
$147.9 (CN$151.7) as outlined in the partnership agreement
(CN$147.8 plus certain adjustments relating to cash distribution
hold backs made to finance recent business acquisitions and capital
expenditures). The purchase of these additional partnership units
brought the Company’s percentage interest owned to 98.2%.
Contingent consideration liabilities associated with the
Company’s business acquisitions are recorded at fair value based
upon the estimated probability assessment of the earn-out criteria.
Changes in the fair value of contingent consideration liabilities are
recognized in earnings until the arrangement is settled.