Cost Savings Initiatives and Other Restructuring Costs, Acquisition and Integration Activities and Legal Settlements

During 2012, 2011 and 2010, the Company recorded net charges of $5.7 million, $49.1 million and $46.0 million, respectively, relating to cost savings initiatives and other restructuring, acquisition and integration activities and legal settlements. These charges were recorded in selling, general and administrative expenses in the Company’s consolidated statements of comprehensive income.

Cost Savings Initiatives and Other Restructuring

During 2012, 2011, and 2010, the Company recorded charges of $1.7 million, $15.3 million and $6.3 million, respectively, in connection with restructuring activities, including severance costs in connection with the termination of personnel and facility leases and other costs.

During 2011 and early 2012, the Company undertook a comprehensive review of its branch structure, support infrastructure and other significant expenditures in order to reduce its ongoing operating costs given the challenging rate environment facing the Company. As a result of this effort, the Company (i) closed or divested 46 home health branches and 13 hospice branches and (ii) significantly reduced staffing levels in regional, area and corporate support functions. In connection with these activities, the Company recorded charges of $1.7 million for 2012 and $13.2 million for 2011, related to severance, facility lease and other costs.

These charges included a non-cash charge of approximately $0.4 million and $0.6 million, recorded in 2011 and 2010, respectively, associated with the acceleration of compensation expense relating to future vesting of stock options under severance agreements for certain of the Company’s former executive officers.

Acquisition and Integration Activities

During 2012, the Company recorded positive adjustments to the acquisition and integration reserves of $1.0 million, primarily relating to favorable lease settlements associated with the acquisition of Odyssey, and for 2011 and 2010 recorded charges of $7.9 million and $26.0 million, respectively, in connection with costs of acquisition and integration activities, primarily related to the Odyssey transaction. These costs consisted of legal, accounting and other professional fees and expenses, costs of obtaining required regulatory approvals, write-off of prepaid fees in connection with the termination of the Company’s 2006 credit agreement and severance costs.

Legal Settlements

For the year ended December 31, 2012, the Company recorded legal settlements of $5.0 million related to the settlement of the Wilkie wage and hour lawsuit, which is pending final court approval.

For the year ended December 31, 2011, the Company recorded legal settlements of $26.0 million related to a settlement with the United States regarding Odyssey's provision of continuous care services prior to the Company's acquisition of Odyssey in August 2010.

For the year ended December 31, 2010, the Company recorded legal settlements of $13.7 million consisting of (i) settlement costs and legal fees of $4.2 million related to a three-year old commercial contractual dispute involving the Company’s former subsidiary, CareCentrix, and (ii) incremental charges of $9.5 million in connection with an agreement between the Company and the federal government to resolve the matters which were subject to a 2003 subpoena relating to the Company’s cost reports for the 1998 to 2000 periods.

The costs incurred and cash expenditures associated with these activities during 2012, 2011 and 2010 were as follows (in thousands):



	Cost Savings and Other Restructuring			Acquisition & Integration			Legal Settlements			Total
Balance at January 3, 2010	$	646		$	—		$	3,000		$	3,646
Charge in 2010	6,269			26,040			13,694			46,003
Cash expenditures	(3,445		)	(19,561		)	(5,994		)	(29,000		)
Non-cash expenditures	(577		)	(2,495		)	1,800			(1,272		)
Balance at December 31, 2010	2,893			3,984			12,500			19,377
Charge in 2011	15,259			7,879			26,000			49,138
Cash expenditures	(7,680		)	(8,155		)	(12,500		)	(28,335		)
Non-cash expenditures	(1,801		)	—			—			(1,801		)
Balance at December 31, 2011	8,671			3,708			26,000			38,379
Charge in 2012	1,701			(989		)	4,958			5,670
Cash expenditures	(8,544		)	(1,492		)	(30,958		)	(40,994		)
Non-cash expenditures	(143		)	(216		)	—			(359		)
Balance at December 31, 2012	$	1,685		$	1,011		$	—		$	2,696

The balance of unpaid charges relating to cost savings initiatives and other restructuring, and acquisition and integration activities aggregated $2.7 million and $38.4 million at December 31, 2012 and December 31, 2011, respectively. These items were included in other accrued expenses in the Company's consolidated balance sheets with the exception of unpaid charges associated with the legal settlement regarding Odyssey's provision of continuous care services which were included in Medicare liabilities in the Company's consolidated balance sheets. These legal settlements aggregated $26.0 million at December 31, 2011 and were paid in the first quarter of 2012.