LabCorp 2011 Annual Report Download - page 45

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decides whether to intervene on behalf of the qui tam plaintiff.
Such claims are an inevitable part of doing business in the
health care field today.
The Company believes that it is in compliance in all material
respects with all statutes, regulations and other requirements
applicable to its clinical laboratory operations. The clinical
laboratory testing industry is, however, subject to extensive
regulation, and the courts have not interpreted many of
these statutes and regulations. There can be no assurance
therefore that those applicable statutes and regulations will
not be interpreted or applied by a prosecutorial, regulatory or
judicial authority in a manner that would adversely affect the
Company. Potential sanctions for violation of these statutes
and regulations include significant fines and the loss of various
licenses, certificates and authorizations.
Under the Company’s present insurance programs,
coverage is obtained for catastrophic exposure as well as
those risks required to be insured by law or contract. The
Company is responsible for the uninsured portion of losses
related primarily to general, professional and vehicle liability,
certain medical costs and workers’ compensation. The
self-insured retentions are on a per occurrence basis without
any aggregate annual limit. Provisions for losses expected
under these programs are recorded based upon the
Company’s estimates of the aggregated liability of claims
incurred. At December 31, 2011, the Company had provided
letters of credit aggregating approximately $37.4, primarily in
connection with certain insurance programs. The Company’s
availability under its Revolving Credit Facility is reduced by the
amount of these letters of credit.
The Company leases various facilities and equipment under
non-cancelable lease arrangements. Future minimum rental
commitments for leases with non-cancelable terms of one
year or more at December 31, 2011 are as follows:
Operating
2012 $ 161.4
2013 134.5
2014 102.7
2015 63.3
2016 42.9
Thereafter 97.9
Total minimum lease payments 602.7
Less:
Amounts included in restructuring and acquisition related accruals (12.7)
Non-cancelable sub-lease income –
Total minimum operating lease payments $ 590.0
Rental expense, which includes rent for real estate, equipment
and automobiles under operating leases, amounted to $220.2,
$202.1 and $182.9 for the years ended December 31, 2011,
2010 and 2009, respectively.
At December 31, 2011, the Company was a guarantor on
approximately $0.9 of equipment leases. These leases were
entered into by a joint venture in which the Company owns
a 50% interest and have a remaining term of approximately
two years.
16. Pension and Postretirement Plans
Pension Plans
In October 2009, the Company received approval from its
Board of Directors to freeze any additional service-based
credits for any years of service after December 31, 2009 on
the defined benefit retirement plan (the “Company Plan”) and
the nonqualified supplemental retirement plan (the “PEP”).
Both plans have been closed to new participants. Employees
participating in the Company Plan and the PEP no longer earn
service-based credits, but continue to earn interest credits.
In addition, effective January 1, 2010, all employees eligible
for the defined contribution retirement plan (the “401K Plan”)
receive a minimum 3% non-elective contribution (“NEC”)
concurrent with each payroll period. The NEC replaces the
Company match, which has been discontinued. Employees
are not required to make a contribution to the 401K Plan to
receive the NEC. The NEC is non-forfeitable and vests
immediately. The 401K Plan also permits discretionary
contributions by the Company of 1% to 3% of pay for eligible
employees based on service.
The Company believes these changes to the Company
Plan, the PEP and its 401K Plan align the Company’s retirement
plan strategy with prevailing industry practices and reduce the
impact of market volatility on the Company Plan.
The Company’s 401K Plan covers substantially all
employees. Prior to 2010, Company contributions to the
plan were based on a percentage of employee contributions.
In 2011 and 2010, the Company made non-elective and
discretionary contributions to the plan. The cost of this plan
was $44.3, $40.6 and $15.2 in 2011, 2010 and 2009,
respectively. The increase in 401K costs and contributions
was due to the non-elective and discretionary contributions
made by the Company in 2011 and 2010.
LABORATORY CORPORATION OF AMERICA
Notes to Consolidated Financial Statements