Quest Diagnostics 2005 Annual Report Download - page 104

QUEST DIAGNOSTICS INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(dollars in thousands unless otherwise indicated)
The following relates to options outstanding at December 31, 2005:
Options Outstanding Options Exercisable
Weighted Average
Remaining Weighted Weighted
Range of Shares Contractual Life Average Shares Average
Exercise Price (in thousands) (in years) Exercise Price (in thousands) Exercise Price
$ 3.97 - $ 5.10 ..... 86 2.5 $ 4.36 86 $ 4.36
$ 6.46 - $ 9.58 ..... 842 3.7 6.84 842 6.84
$15.03 - $22.38 ..... 245 4.4 15.26 245 15.26
$23.27 - $34.79 ..... 5,457 6.6 26.35 4,320 26.42
$35.01 - $52.50 ..... 7,895 7.2 42.45 3,160 39.59
$52.62 - $53.27 ..... 523 6.4 53.25 7 52.84
The following summarizes the activity relative to incentive stock awards granted in 2005, 2004 and 2003
(shares in thousands):
2005 2004 2003
Incentive shares, beginning of year ....................................... - 576 1,470
Incentive shares granted ................................................. 113 - 204
Incentive shares vested .................................................. (1) (538) (1,066)
Incentive shares forfeited and canceled ................................... (5) (38) (32)
Incentive shares, end of year ............................................ 107 - 576
Weighted average fair value of incentive shares at grant date .............. $49.71 $ - $ 24.94
Employee Stock Purchase Plan
Under the Company’s Employee Stock Purchase Plan (“ESPP’’), substantially all employees can elect to
have up to 10% of their annual wages withheld to purchase Quest Diagnostics common stock. The purchase
price of the stock is 85% of the lower of its beginning-of-quarter or end-of-quarter market price. In 2005, the
Company’s ESPP was amended such that effective July 1, 2005, the purchase price of the stock will be 85% of
the market price of the Company’s common stock on the last business day of each calendar month. Under the
ESPP, the maximum number of shares of Quest Diagnostics common stock which may be purchased by eligible
employees is 8 million. The ESPP will terminate effective December 31, 2006. The Company plans to submit
for approval by the shareholders at its 2006 Annual Meeting of Shareholders an extension of the plan.
Approximately 409, 460 and 544 thousand shares of common stock were purchased by eligible employees in
2005, 2004 and 2003, respectively.
Defined Contribution Plan
The Company maintains a qualified defined contribution plan covering substantially all of its employees,
and matches employee contributions up to a maximum of 6%. The Company’s expense for contributions to its
defined contribution plan aggregated $64 million, $62 million and $54 million for 2005, 2004 and 2003,
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 in
excess of their defined contribution plan limits. In addition, certain members of senior management have an
additional opportunity to defer up to 95% of their variable incentive 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
$25.7 million and $20.9 million at December 31, 2005 and 2004, respectively, are general assets of the
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