Quest Diagnostics 2006 Annual Report Download - page 111

11. PREFERRED STOCK AND COMMON STOCKHOLDERS’ EQUITY
Series Preferred Stock
Quest Diagnostics is authorized to issue up to 10 million shares of Series Preferred Stock, par value $1.00
per share. The Company’s Board of Directors has the authority to issue such shares without stockholder approval
and to determine the designations, preferences, rights and restrictions of such shares. Of the authorized shares,
1,300,000 shares have been designated Series A Preferred Stock and 1,000 shares have been designated Voting
Cumulative Preferred Stock. No shares are currently outstanding.
Preferred Share Purchase Rights
Through December 31, 2006, each share of Quest Diagnostics common stock traded with a preferred share
purchase right, which entitled 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 entitled
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 expired December 31, 2006.
Common Stock
On May 4, 2006 the Company’s Restated Certificate of Incorporation was amended to increase the number
of shares of common stock, par value $0.01 per share, from 300 million shares to 600 million shares.
Accumulated Other Comprehensive (Loss) Income
The components of accumulated other comprehensive (loss) income for 2006, 2005 and 2004 were as
follows:
Foreign
Currency
Translation
Adjustment
Market
Value
Adjustment
Deferred
Gain
Accumulated
Other
Comprehensive
(Loss) Income
Balance, December 31, 2003.................... $ (311) $ 6,258 $ - $ 5,947
Translation adjustment.......................... 1,650 - - 1,650
Market value adjustment, net of tax benefit of
$2,515 ...................................... - (3,731) - (3,731)
Balance, December 31, 2004.................... 1,339 2,527 - 3,866
Translation adjustment.......................... (3,287) - - (3,287)
Market value adjustment, net of tax benefit of
$6,057 ...................................... - (9,238) - (9,238)
Deferred gain, less reclassifications. . . ........... - - 2,454 2,454
Balance, December 31, 2005.................... (1,948) (6,711) 2,454 (6,205)
Translation adjustment.......................... 2,460 - - 2,460
Market value adjustment, net of tax benefit of
$2,501 ...................................... - (3,815) - (3,815)
Reversal of market value adjustment, net of tax
expense of $(5,053) .......................... - 7,707 - 7,707
Deferred gain reclassifications .................. - - (212) (212)
Balance, December 31, 2006.................... $ 512 $(2,819) $2,242 $ (65)
The market value adjustments for 2006, 2005 and 2004 represented unrealized holding gains (losses), net of
taxes. The reversal of market value adjustments for 2006 represents prior periods unrealized holding losses for
investments where the decline in fair value was deemed to be other than temporary in 2006 and the resulting loss
was recognized in the consolidated statements of operations. (See Note 2). The deferred gain for 2005
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QUEST DIAGNOSTICS INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(dollars in thousands unless otherwise indicated)