Quest Diagnostics 2000 Annual Report Download - page 92

QUEST DIAGNOSTICS INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands unless otherwise indicated)
F-22
Preferred Share Purchase Rights
Each share of Quest Diagnostics common stock trades with a preferred share purchase right, which entitles
stockholders to purchase one-hundredth of a share of Series A Preferred Stock upon the occurrence of certain events. In
conjunction with the SBCL acquisition, the Board of Directors of the Company approved an amendment to the preferred
share purchase rights. The amended rights entitle stockholders to purchase shares of Series A Preferred Stock at a
predefined price in the event a person or group (other than SmithKline Beecham) acquires 20% or more of the
Company’s outstanding common stock. The preferred share purchase rights expire December 31, 2006.
Common Stock Purchase Program
In 1998, the Board of Directors authorized a limited share purchase program which permitted the Company to
purchase up to $27 million of its outstanding common stock through 1999. Cumulative purchases under the program
through December 31, 1999 totaled $14.1 million. Shares purchased under the program were reissued in connection with
certain employee benefit plans. The Company suspended purchases of its shares when it reached a preliminary
understanding of the transaction with SmithKline Beecham on January 15, 1999.
Accumulated Other Comprehensive Income (Loss)
The components of accumulated other comprehensive income (loss) for 2000, 1999 and 1998 were as follows:
Foreign
Currency
Translation
Adjustment
Market Value
Adjustment
Accumulated
Other
Comprehensive
Income (Loss)
Balance, December 31, 1997 .................................. $ (1,170) $ (1,345) $ (2,515)
Translation adjustment ............................................ (924) - (924)
Market value adjustment, net of tax expense of $262 ...... - 401 401
Balance, December 31, 1998 .................................. (2,094) (944) (3,038)
Translation adjustment ............................................ (356) - (356)
Market value adjustment, net of tax expense of $616 ...... - 944 944
Balance, December 31, 1999 .................................. (2,450) - (2,450)
Translation adjustment ............................................ (758) - (758)
Market value adjustment, net of tax benefit of $1,469..... - (2,250) (2,250)
Balance, December 31, 2000 .................................. $ (3,208) $ (2,250) $ (5,458)
The market valuation adjustment for 1999 included holding gains, net of taxes, of $2.8 million, offset by a
reclassification adjustment, net of taxes, of $1.8 million related to the gain recognized in net income associated with the
sale of an investment during the fourth quarter of 1999. The market value adjustment for 2000 represented unrealized
holding losses, net of taxes, of $2.3 million.
14. STOCK OWNERSHIP AND COMPENSATION PLANS
Employee and Non-employee Directors Stock Ownership Programs
In conjunction with the acquisition of SBCL, the Company established the 1999 Employee Equity Participation
Program (the “1999 EEPP”) to replace the Company’s prior plan established in 1996 (the “1996 EEPP”). The 1999
EEPP provides for three types of awards: (a) stock options, (b) stock appreciation rights and (c) incentive stock awards.
The 1999 EEPP provides for the grant to eligible employees of either non-qualified or incentive stock options, or both, to
purchase shares of Quest Diagnostics’ common stock at no less than the fair market value on the date of grant. The stock
options are subject to forfeiture if employment terminates prior to the end of the prescribed vesting period, as determined
by the Board of Directors. The stock options expire on the date designated by the Board of Directors but in no event more
than eleven years from date of grant. Grants of stock appreciation rights allow eligible employees to receive a payment
based on the appreciation of Quest Diagnostics’ common stock in cash, shares of Quest Diagnostics’ common stock or a