LabCorp 2012 Annual Report Download - page 51

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Amounts included in accumulated other comprehensive
earnings consist of unamortized net loss of $12.3. The
accumulated other comprehensive earnings that are
expected to be recognized as components of the post-
retirement medical plan costs during 2013 are $0.9 related
to amortization of net loss.
A summary of the changes in the accumulated
post-retirement benefit obligation follows:
2012 2011
Balance at January 1 $ 52.7 $ 42.0
Service cost for benefits earned 0.4 0.3
Interest cost on benefit obligation 2.3 2.2
Participants contributions 0.4 0.4
Actuarial loss 6.9 9.8
Benefits paid (2.0) (2.0)
Balance at December 31 $ 60.7 $ 52.7
Recorded as:
Other liabilities $ 60.7 $ 52.7
The weighted-average discount rates used in the
calculation of the accumulated post-retirement benefit
obligation were 4.2% and 4.3% as of December 31, 2012
and 2011, respectively. The health care cost trend rate was
assumed to be 7.5% and 7.0% as of December 31, 2012
and 2011, respectively, declining gradually to 5.0% in the
year 2020. The health care cost trend rate has a significant
effect on the amounts reported. The impact of a percentage
point change each year in the assumed health care cost
trend rates would change the accumulated post-retirement
benefit obligation as of December 31, 2012 by an increase
of $8.9 or a decrease of $7.4. The impact of a percentage
point change on the aggregate of the service cost and interest
cost components of the 2012 post-retirement benefit costs
results in an increase of $0.4 or decrease of $0.4.
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:
2013 $ 2.1
2014 2.2
2015 2.4
2016 2.6
2017 2.7
Years 2018-2022 15.5
17. Fair Value Measurements
The Company’s population of financial assets and liabilities
subject to fair value measurements as of December 31,
2012 and 2011 are as follows:
Fair Value Fair Value Measurements as of
as of December 31, 2012
December 31, Using Fair Value Hierarchy
2012 Level 1 Level 2 Level 3
Noncontrolling interest put $ 20.7 $ – $ 20.7 $ –
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 put $ 20.2 $ – $ 20.2 $ –
The noncontrolling interest put is valued at its contractually
determined value, which approximate fair value. During the
year ended December 31, 2012, the carrying value of the
noncontrolling interest put increased by $0.5 consisting of a
$0.4 increase in the contractually determined value and a
$0.1 increase for foreign currency translation.
The carrying amounts of cash and cash equivalents,
accounts receivable, income taxes receivable, and accounts
payable are considered to be representative of their respec-
tive fair values due to their short-term nature. The fair market
value of the zero-coupon subordinated notes, based on
market pricing, was approximately $179.1 and $190.2 as of
December 31, 2012 and 2011, respectively. The fair market
value of the senior notes, based on market pricing, was
approximately $2,720.5 and $1,624.4 as of December 31,
2012 and 2011, respectively. As of December 31, 2012 and
2011, the estimated fair market value of the Company’s variable
rate debt approximated its book value of $0.0 and $560.0,
respectively. The Company’s note and debt instruments
are considered level 2 instruments, as the fair market
values of these instruments are determined using other
observable inputs.
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
LABORATORY CORPORATION OF AMERICA
Notes to Consolidated Financial Statements