LabCorp 2015 Annual Report Download - page 126

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Index




The Company’s population of financial assets and liabilities subject to fair value measurements as of December 31, 2015 and 2014 are as follows:
Fair Value Measurements as of
December 31, 2015
Fair Value as of
December 31, 2015
Using Fair Value Hierarchy
Level 1
Level 2
Level 3
Noncontrolling interest put $ 14.9
$ —
$ 14.9
$ —
Interest rate swap 21.6
—
21.6
—
Cash surrender value of life insurance policies 45.5
—
45.5
—
Deferred compensation liability 46.4
—
46.4
—
Fair Value Measurements as of
December 31, 2014
Fair Value as of
December 31, 2014
Using Fair Value Hierarchy
Level 1
Level 2
Level 3
Noncontrolling interest put $ 17.7
$ —
$ 17.7
$ —
Interest rate swap 18.5
—
18.5
—
Cash surrender value of life insurance policies 41.9
—
41.9
—
Deferred compensation liability 43.4
—
43.4
—
The noncontrolling interest put is valued at its contractually determined value, which approximate fair value. During the year ended December 31, 2015,
the carrying value of the noncontrolling interest put decreased by $2.8 consisting of a $2.0 decrease in the contractually determined value and a $0.8
decrease for foreign currency translation.
The Company offers certain employees the opportunity to participate in a DCP. A participant's deferrals are allocated by the participant to one or more of
16 measurement funds, which are indexed to externally managed funds. From time to time, to offset the cost of the growth in the participant's investment
accounts, the Company purchases life insurance policies, with the Company named as beneficiary of the policies. Changes in the cash surrender value of the
life insurance policies are based upon earnings and changes in the value of the underlying investments, which are typically invested in a similar manner to
the participants' allocations. Changes in the fair value of the DCP obligation are derived using quoted prices in active markets based on the market price per
unit multiplied by the number of units. The cash surrender value and the DCP obligations are classified within Level 2 because their inputs are derived
principally from observable market data by correlation to the hypothetical investments.
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 $177.1 and $155.6 as of December 31, 2015 and 2014, respectively. The fair market value of the senior notes, based on market
pricing, was approximately $6,070.5 and $2,949.8 as of December 31, 2015 and 2014, 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. The Company's investment in equity
securities of $0.0 and $1.0 as of December 31, 2015 and 2014, respectively, is considered a Level 1 instrument, as the fair market value of this instrument is
determined using observable inputs.

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.
F-46