Quest Diagnostics 2003 Annual Report Download - page 98

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QUEST DIAGNOSTICS INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(dollars in thousands unless otherwise indicated)
Defined Contribution Plan
The Company maintains a qualified defined contribution plan covering substantially all of its employees.
During the year ended December 31, 2002, the ESOP, to which the Company made annual contributions equal
to 2% of eligible compensation, was merged into the Company’s defined contribution plan and the Company
increased its maximum matching contribution for its defined contribution plan from 4% to 6% of an employee’s
eligible wages. The Company’s expense for contributions to its defined contribution plan aggregated $54 million,
$42 million and $30 million for 2003, 2002 and 2001, respectively.
Supplemental Deferred Compensation Plan
The Company’s supplemental deferred compensation plan is an unfunded, non-qualified plan that provides
for certain management and highly compensated employees to defer up to 50% of their eligible compensation.
The compensation deferred under this plan, together with Company matching amounts, are credited with
earnings or losses measured by the mirrored rate of return on investments elected by plan participants. Each
plan participant is fully vested in all deferred compensation, Company match and earnings credited to their
account. Although the Company is currently contributing all participant deferrals and matching amounts to a
trust, the funds in the trust, totaling $19.2 million and $14.8 million at December 31, 2003 and 2002,
respectively, are general assets of the Company and are subject to any claims of the Company’s creditors. The
Company’s expense for matching contributions to this plan were $0.4 million, $0.4 million and $0.6 million for
2003, 2002 and 2001, respectively.
14. RELATED PARTY TRANSACTIONS
As a result of the merger of Glaxo Wellcome and SmithKline Beecham in December 2000,
GlaxoSmithKline plc (“GSK’’) currently beneficially owns approximately 22% of the outstanding shares of
Quest Diagnostics common stock.
As part of the SBCL acquisition agreements, SmithKline Beecham and Quest Diagnostics entered into data
access agreements under which Quest Diagnostics granted SmithKline Beecham and certain affiliated companies
certain non-exclusive rights and access to use Quest Diagnostics’ proprietary clinical laboratory information
database, which were terminated as of December 31, 2002.
In addition to the contracts outlined above, GSK has a long-term contractual relationship with Quest
Diagnostics under which Quest Diagnostics is the primary provider of testing to support GSK’s and SmithKline
Beecham’s clinical trials testing requirements worldwide (the “Clinical Trials Agreements’’).
Significant transactions with GSK and SmithKline Beecham during 2003, 2002 and 2001 included:
2003 2002 2001
Net revenues, primarily derived under the Clinical Trials Agreements . . . $50,060 $32,822 $27,806
In addition, under the SBCL acquisition agreements, SmithKline Beecham has agreed to indemnify Quest
Diagnostics, on an after tax basis, against certain matters primarily related to taxes and billing and professional
liability claims.
At December 31, 2003 and 2002, accounts payable and accrued expenses included $21 million and $26
million, respectively, due to SmithKline Beecham, primarily related to tax benefits associated with indemnifiable
matters.
During 2001, the Company received $8.7 million from Corning related to certain indemnified billing-related
claims settled in 2001 and 2000.
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