XML 46 R14.htm IDEA: XBRL DOCUMENT

FAIR VALUE MEASUREMENTS

12 Months Ended

Dec. 31, 2019

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table provides a summary of the recognized assets and liabilities that are measured at fair value on a recurring basis:



			Basis of Fair Value Measurements
	Total		Level 1		Level 2		Level 3
December 31, 2019
Assets:
Trading securities	$	59	$	59	$	—	$	—
Cash surrender value of life insurance policies	43		—		43		—
Available-for-sale debt securities	12		—		—		12
Total	$	114	$	59	$	43	$	12

Liabilities:
Deferred compensation liabilities	$	110	$	—	$	110	$	—
Fix-to-variable interest rate swaps	28		—		28		—
Contingent consideration	7		—		—		7
Total	$	145	$	—	$	138	$	7

Redeemable noncontrolling interest	$	76	$	—	$	—	$	76

December 31, 2018
Assets:
Trading securities	$	53	$	53	$	—	$	—
Cash surrender value of life insurance policies	34		—		34		—
Total	$	87	$	53	$	34	$	—

Liabilities:
Deferred compensation liabilities	$	96	$	—	$	96	$	—
Fix-to-variable interest rate swaps	93		—		93		—
Contingent consideration	14		—		—		14
Total	$	203	$	—	$	189	$	14

Redeemable noncontrolling interest	$	77	$	—	$	—	$	77

The Company offers certain employees the opportunity to participate in a non-qualified supplemental deferred compensation plan. A participant's deferrals, together with Company matching credits, are invested in a variety of participant-directed stock and bond mutual funds that are classified as trading securities. The trading securities are classified within Level 1 of the fair value hierarchy because the changes in the fair value of these securities are measured using quoted prices in active markets based on the market price per unit multiplied by the number of units held, exclusive of any transaction costs. A corresponding adjustment for changes in fair value of the trading securities is also reflected in the changes in fair value of the deferred compensation obligation. The deferred compensation liabilities are classified within Level 2 of the fair value hierarchy because their inputs are derived principally from observable market data by correlation to the trading securities.

The Company offers certain employees the opportunity to participate in a non-qualified deferred compensation program. A participant's deferrals, together with Company matching credits, are “invested” at the direction of the employee in a hypothetical portfolio of investments which are tracked by an administrator. The Company purchases life insurance policies, with the Company named as beneficiary of the policies, for the purpose of funding the program's liability. Changes in the cash surrender value of the life insurance policies are based upon earnings and changes in the value of the underlying investments.

Changes in the fair value of the deferred compensation 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 deferred compensation obligation are classified within Level 2 of the fair value hierarchy because their inputs are derived principally from observable market data by correlation to the hypothetical investments. Deferrals under the plan currently may only be made by participants who made deferrals under the plan in 2017.

The Company's available-for-sale debt securities are measured at fair value using discounted cash flows. These fair value measurements are classified within Level 3 of the fair value hierarchy as the fair value is based on significant inputs that are not observable. Significant inputs include cash flows projections and a discount rate.

The fair value measurements of the Company's fixed-to-variable interest rate swaps classified within Level 2 of the fair value hierarchy, are model-derived valuations as of a given date in which all significant inputs are observable in active markets including certain financial information and certain assumptions regarding past, present and future market conditions.

In connection with previous business acquisitions, the Company has contingent consideration obligations that are to be paid based on the achievement of certain testing volume or revenue benchmarks. As of December 31, 2019, the fair value of these contingent consideration liabilities totaled $7 million. These contingent consideration liabilities are measured at fair value using an option-pricing method and are classified within Level 3 of the fair value hierarchy as the fair value is determined based on significant inputs that are not observable. Significant inputs include management’s estimate of volume or revenue and other market inputs including comparable company revenue volatility and a discount rate. A summary of the significant inputs is as follows:



Business Acquisition	Benchmark	Comparable Company Revenue Volatility	Discount rate	Maximum Contingent Consideration Payment

Shiel	Volume	6.9%	4.5%	$	15
ReproSource	Revenue	8.5%	6.5%	$	10
Boyce & Bynum	Volume	8.0%	7.2%	$	25

The following table provides a reconciliation of the beginning and ending balances of liabilities using significant unobservable inputs (Level 3):



	Contingent Consideration

Balance, December 31, 2017	$	7
Purchases, additions and issuances	19
Settlements	(1		)
Total (gains)/losses included in earnings - realized/unrealized	(11		)
Balance, December 31, 2018	14
Purchases, additions and issuances	6
Settlements	(1		)
Total (gains)/losses included in earnings - realized/unrealized	(12		)
Balance, December 31, 2019	$	7

The $12 million and $11 million net gains included in earnings associated with the changes in the fair value of contingent consideration for the years ended December 31, 2019 and 2018, respectively, is reported in other operating (income) expense, net.

In connection with the sale of an 18.9% noncontrolling interest in a subsidiary to UMass Memorial Medical Center ("UMass") on July 1, 2015, the Company granted UMass the right to require the Company to purchase all of its interest in the subsidiary at fair value commencing July 1, 2020. As of December 31, 2019, the redeemable noncontrolling interest was presented at its fair value. The fair value measurement of the redeemable noncontrolling interest is classified within Level 3 of the fair value hierarchy because the fair value is based on a discounted cash flow analysis that takes into account, among other

items, the joint venture's expected future cash flows, long term growth rates, and a discount rate commensurate with economic risk.

The carrying amounts of cash and cash equivalents, accounts receivable and accounts payable and accrued expenses approximate fair value based on the short maturities of these instruments. As of December 31, 2019 and 2018, the fair value of the Company’s debt was estimated at $5.1 billion and $4.0 billion, respectively. Principally all of the Company's debt is classified within Level 1 of the fair value hierarchy because the fair value of the debt is estimated based on rates currently offered to the Company with identical terms and maturities, using quoted active market prices and yields, taking into account the underlying terms of the debt instruments.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details