LabCorp 2007 Annual Report Download - page 55

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Notes to Consolidated Financial Statements
(Dollars and shares in millions, except per share data)
Laboratory Corporation of America® Holdings 2007 53
Postretirement Medical Plan
The Company assumed obligations under a subsidiary’s postretirement
medical plan. Coverage under this plan is restricted to a limited number
of existing employees of the subsidiary. This plan is unfunded and
the Company’s policy is to fund benefi ts as claims are incurred. The
effect on operations of the postretirement medical plan is shown in
the following table:
Years Ended December 31,
2007 2006 2005
Service cost for benefi ts earned $ 0.5 $ 0.6 $ 0.7
Interest cost on benefi t obligation 2.7 2.2 2.6
Net amortization and deferral (2.1) (2.1) (1.9)
Postretirement medical plan costs $ 1.1 $ 0.7 $ 1.4
Amounts included in accumulated other comprehensive earnings
consist of unamortized net loss of $0.8 and unrecognized prior service
credit of $3.7. The accumulated other comprehensive earnings that
is expected to be recognized as a component of the postretirement
medical plan cost during 2008 is ($1.7) related to recognition of prior
service credits.
A summary of the changes in the accumulated postretirement
benefi t obligation follows:
2007 2006
Balance at January 1 $45.8 $43.3
Service cost for benefi ts earned 0.5 0.6
Interest cost on benefi t obligation 2.7 2.2
Participants contributions 0.3 0.4
Actuarial (gain) loss (5.0) 0.8
Benefi ts paid (1.5) (1.5)
Balance at December 31 $42.8 $45.8
The weighted-average discount rates used in the calculation of the
accumulated postretirement benefi t obligation was 6.2% and 6.0% as of
December 31, 2007 and 2006, respectively. The health care cost trend
rate-medical was assumed to be 9.0% and 10.0% as of December 31,
2007 and 2006, respectively, and the trend rate-pharmacy was assumed
to be 9.0% and 12.0% as of December 31, 2007 and 2006, respectively,
declining gradually to 5.0% in the year 2012. The health care cost
trend rate has a signifi cant effect on the amounts reported. Increasing
the assumed health care cost trend rates by a percentage point in
each year would increase the accumulated postretirement benefi t
obligation as of December 31, 2007 by $6.5. The impact of a percentage
point change on the aggregate of the service cost and interest cost
components of the 2007 postretirement benefi t costs results in an
increase of $0.5 or decrease of $0.4.
The following assumed benefi t payments under the Company’s
postretirement benefi t plan, which refl ect expected future service,
as appropriate, and were used in the calculation of projected benefi t
obligations, are expected to be paid as follows:
2008 $ 1.6
2009 1.7
2010 1.9
2011 2.0
2012 2.2
Years 2013-2017 13.0
SUPPLEMENTAL CASH FLOW
INFORMATION
Years Ended December 31,
2007 2006 2005
Supplemental schedule of cash fl ow information:
Cash paid during period for:
Interest $ 40.4 $ 33.3 $ 19.3
Income taxes, net of refunds 272.4 223.2 233.3
Disclosure of non-cash fi nancing and
investing activities:
Issuance of restricted stock awards 11.9 8.9 7.3
Surrender of restricted stock awards 5.5 3.1 7.3
Accrued repurchases of common stock 3.0 – 15.0
Laboratory Corporation of America