LabCorp 2011 Annual Report Download - page 48

46
assumed health care cost trend rates would change the
accumulated post-retirement benefit obligation as of Decem-
ber 31, 2011 by an increase of $9.4 or a decrease of $7.7.
The impact of a percentage point change on the aggregate
of the service cost and interest cost components of the 2011
post-retirement benefit costs results in an increase of $0.4 or
decrease of $0.3.
The following assumed benefit payments under the
Company’s post-retirement benefit plan, which reflect
expected future service, as appropriate, and were used in
the calculation of projected benefit obligations, are expected
to be paid as follows:
2012 $ 1.9
2013 1.9
2014 2.0
2015 2.2
2016 2.3
Years 2017-2021 13.4
17. Fair Value Measurements
The Company’s population of financial assets and liabilities
subject to fair value measurements as of December 31, 2011
and 2010 are as follows:
Fair Value Fair Value Measurements as of
as of December 31, 2011
December 31, Using Fair Value Hierarchy
2011 Level 1 Level 2 Level 3
Noncontrolling interest puts $ 20.2 $ – $ 20.2 $ –
Derivatives
Embedded derivatives
related to the zero-coupon
subordinated notes $ – $ – $ – $ –
Total fair value of derivatives $ – $ – $ – $ –
Fair Value Fair Value Measurements as of
as of December 31, 2010
December 31, Using Fair Value Hierarchy
2010 Level 1 Level 2 Level 3
Noncontrolling interest put $ 168.7 $ – $ 168.7 $ –
Derivatives
Embedded derivatives
related to the zero-coupon
subordinated notes $ – $ – $ – $ –
Interest rate swap liability 2.4 – 2.4 –
Total fair value of derivatives $ 2.4 $ – $ 2.4 $ –
The noncontrolling interest puts are valued at their contractually
determined values, which approximate fair values. The fair
values for the embedded derivatives and interest rate swap
are based on observable inputs or quoted market prices
from various banks for similar instruments.
The carrying amounts of cash and cash equivalents, accounts
receivable, income taxes receivable, and accounts payable are
considered to be representative of their respective fair values
due to their short-term nature. The fair market value of the
zero-coupon subordinated notes, based on market pricing,
was approximately $190.2 and $419.5 as of December 31, 2011
and 2010, respectively. The fair market value of the senior notes,
based on market pricing, was approximately $1,624.4 and
$1,549.8 as of December 31, 2011 and 2010, respectively.
As of December 31, 2011 and 2010, the estimated fair market
value of the Company’s variable rate debt of $0.0 and $370.1,
respectively, was estimated by calculating the net present
value of related cash flows, discounted at current market rates.
18. Derivative Instruments and
Hedging Activities
The Company addresses its exposure to market risks, principally
the market risk associated with changes in interest rates,
through a controlled program of risk management that includes,
from time to time, the use of derivative financial instruments
such as interest rate swap agreements (see Interest Rate
Swap section below). Although the Company’s zero-coupon
subordinated notes contain features that are considered to be
embedded derivative instruments (see Embedded Derivative
section below), the Company does not hold or issue derivative
financial instruments for trading purposes. The Company does
not believe that its exposure to market risk is material to the
Company’s financial position or results of operations.
LABORATORY CORPORATION OF AMERICA
Notes to Consolidated Financial Statements