LabCorp 2007 Annual Report Download - page 53

Notes to Consolidated Financial Statements
(Dollars and shares in millions, except per share data)
Laboratory Corporation of America® Holdings 2007 51
The Company leases various facilities and equipment under
non-cancelable lease arrangements. Future minimum rental commit-
ments for leases with non-cancelable terms of one year or more at
December 31, 2007 are as follows:
Operating
2008 $ 94.9
2009 71.6
2010 50.8
2011 40.5
2012 26.6
Thereafter 44.1
Total minimum lease payments 328.5
Less:
Amounts included in restructuring and acquisition related accruals (30.3)
Non-cancelable sub-lease income (1.9)
Total minimum operating lease payments $296.3
Rental expense, which includes rent for real estate, equipment
and automobiles under operating leases, amounted to $158.9, $130.9
and $119.6 for the years ended December 31, 2007, 2006 and
2005, respectively.
At December 31, 2007, the Company was a guarantor on
approximately $6.4 of equipment leases. These leases were entered
into by a joint venture in which the Company owns a fi fty percent
interest and have a remaining term of approximately four years.
PENSION AND
POSTRETIREMENT PLANS
Effective December 31, 2006, the Company adopted SFAS No. 158,
“Employers’ Accounting for Defi ned Benefi t Pension and Other Postre-
tirement Plans” (SFAS No. 158). SFAS No. 158 requires that employers
recognize on a prospective basis the funded status of their defi ned
benefi t pension and other postretirement plans on their consolidated
balance sheet and recognize as a component of other comprehensive
income, net of tax, the gains or losses and prior service costs or credits
that arise during the period but are not recognized as components
of net periodic benefi t cost. SFAS No. 158 also requires additional
disclosures in the notes to fi nancial statements. The impact of SFAS
No. 158 as of December 31, 2006, was a decrease of the Company’s
other assets by $26.4, increase of its accrued liabilities by $4.5 for
pension and postretirement medical benefi ts, which resulted in a
decrease to shareholders’ equity of approximately $30.9, net of tax in
the Company’s consolidated balance sheet as of December 31, 2006.
Pension Plans
The Company maintains a defi ned contribution retirement plan for
substantially all employees. Company contributions to the plan are
based on a percentage of employee contributions. The cost of this plan
was $14.8, $13.8 and $12.8 in 2007, 2006 and 2005, respectively.
In addition, substantially all employees of the Company are covered
by a defi ned benefi t retirement plan (the “Company Plan”). The benefi ts
to be paid under the Company Plan are based on years of credited
service and average fi nal compensation. The Company’s policy is to
fund the Company Plan with at least the minimum amount required by
applicable regulations. The Company did not make any contributions
to the Company Plan in 2007 and 2006 and at the present time, does
not plan to make any contributions in 2008.
The Company also has a nonqualifi ed supplemental retirement
plan which covers its senior management group that provides for the
payment of the difference, if any, between the amount of any maximum
limitation on annual benefi t payments under the Employee Retirement
Income Security Act of 1974 and the annual benefi t that would be
payable under the Company Plan but for such limitation. This plan is
an unfunded plan.
The effect on operations for both the defi ned benefi t retirement plan
and the nonqualifi ed supplemental retirement plan are summarized
as follows:
Years Ended December 31,
2007 2006 2005
Service cost for benefi ts earned $ 19.1 $ 17.1 $ 15.7
Interest cost on benefi t obligation 16.0 14.5 13.8
Expected return on plan assets (22.7) (21.4) (21.0)
Net amortization and deferral 2.1 4.4 1.3
CEO retirement charge – 0.7 –
Defi ned benefi t plan costs $ 14.5 $ 15.3 $ 9.8
Amounts included in accumulated other comprehensive earnings
consist of unamortized net loss of $46.6 and unrecognized prior service
cost of $3.4. The accumulated other comprehensive earnings that are
expected to be recognized as components of the defi ned benefi t plan
costs during 2008 are $1.9 related to amortization of net loss and
$0.6 related to recognition of prior service costs.
Laboratory Corporation of America