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

During the third quarter and first nine months of 2011, the Company recorded charges relating to cost savings initiatives, acquisition and integration activities, other restructuring and legal settlements of $9.8 million and $34.9 million, respectively, and $22.8 million and $40.7 million for the corresponding periods in 2010, which were recorded in selling, general and administrative expenses in the Company's consolidated statements of operations.

Cost Savings Initiatives

During the third quarter of 2011, the Company undertook a comprehensive review of its branch structure, support infrastructure and other significant spend areas in order to reduce its ongoing operating costs given the challenging rate environment the Company is facing. As a result of this effort, the Company has announced (i) the closing or divestiture of 33 home health branches and 9 hospice branches and (ii) significant reductions in staffing levels in regional, area and corporate support functions. In connection with these activities, the Company expects to record charges of $20 million to $25 million in the fourth quarter of 2011, related to severance costs, facility lease and other costs. During the third quarter and first nine months of 2011, the Company recorded charges of $0.8 million in connection with these cost savings initiatives.

Acquisition and Integration Activities

During the third quarter and first nine months of 2011, the Company recorded charges of $2.5 million and $7.3 million, respectively, compared to $21.5 million and $23.5 million during the third quarter and first nine months of 2010, 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, severance costs and facility lease costs. Additional acquisition and integration costs to be incurred during 2011 primarily relate to the Odyssey acquisition and are expected to range between $1.0 million and $2.0 million for the remainder of 2011.

Other Restructuring

During the first nine months of 2011, the Company recorded charges of $1.8 million, as compared to $1.3 million for the third quarter of 2010 and $3.5 million for the first nine months of 2010, in connection with other restructuring activities, including severance costs in connection with the termination of personnel and facility lease and other costs. These charges included non-cash charges of approximately $0.4 million and $0.6 million, recorded in the first nine months of 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.

Legal Settlements

During the third quarter and first nine months of 2011, the Company recorded charges of $6.5 million and $25.0 million, respectively, related to discussion of potential legal settlements associated with certain of the investigations assumed in connection with the Odyssey transaction. See Note 14 for additional information.

During the first nine months of 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 in principle, subject to final approvals, 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 settlement costs related to CareCentrix reflect a tax benefit of $1.8 million which was reimbursed to the Company from CareCentrix during the third quarter of 2011. Such benefit was classified in prepaid expenses and other current assets in the Company's consolidated balance sheet as of December 31, 2010. See Note 14 for additional information.

The costs incurred and cash expenditures associated with these activities by component were as follows (in thousands):


	Cost Savings Initiatives				Acquisition & Integration				Other Restructuring				Legal Settlements				Total
Ending balance at January 3, 2010		$	—			$	—			$	646			$	3,000			$	3,646
Charge in first quarter 2010			—				—				357				15,134				15,491
Cash expenditure			—				—				(396	)			(751	)			(1,147	)

Ending balance at April 4, 2010			—				—				607				17,383				17,990
Charge in second quarter 2010			—				2,034				1,882				(1,440	)			2,476
Cash expenditure			—				(471	)			(316	)			(5,222	)			(6,009	)
Non-cash expenditures			—				—				(577	)			1,800				1,223

Ending balance at July 4, 2010			—				1,563				1,596				12,521				15,680
Charge in third quarter 2010			—				21,451				1,313				—				22,764
Cash expenditure			—				(17,860	)			(998	)			—				(18,858	)

Ending balance at October 3, 2010		$	—			$	5,154			$	1,911			$	12,521			$	19,586


Ending balance at December 31, 2010		$	—			$	3,984			$	2,893			$	12,500			$	19,377
Charge in first quarter 2011			—				2,506				1,259				—				3,765
Cash expenditure			—				(2,346	)			(1,490	)			—				(3,836	)

Ending balance at March 31, 2011			—				4,144				2,662				12,500				19,306
Charge in second quarter 2011			—				2,242				504				18,500				21,246
Cash expenditure			—				(2,198	)			(788	)			(12,500	)			(15,486	)
Non-cash expenditures			—				—				(407	)			—				(407	)

Ending balance at June 30, 2011			—				4,188				1,971				18,500				24,659
Charge in third quarter 2011			824				2,520				—				6,500				9,844
Cash expenditure			(265	)			(1,491	)			(445	)			—				(2,201	)

Ending balance at September 30, 2011		$	559			$	5,217			$	1,526			$	25,000			$	32,302

The balance of unpaid charges relating to cost savings initiatives, acquisition and integration activities, other restructuring and legal settlements approximated $32.3 million at September 30, 2011, which were included in other accrued expenses in the Company's consolidated balance sheets. The balance of unpaid charges relating to acquisition and integration activities and other restructuring approximated $6.9 million at December 31, 2010, which were included in other accrued expenses in the Company's consolidated balance sheets. Unpaid charges associated with the government subpoena and investigation were included in Medicare liabilities in the Company's consolidated balance sheets and aggregated $12.5 million at December 31, 2010, which was paid in the second quarter of 2011. See Note 14 for additional information.