Quest Diagnostics 2008 Annual Report Download - page 103

value of the Company’s common stock. Total intrinsic value of options exercised in 2008, 2007 and 2006 was
$20 million, $52 million and $106 million, respectively.
As of December 31, 2008, there was $14 million of unrecognized stock-based compensation cost related to
stock options which is expected to be recognized over a weighted average period of 1.7 years.
The following summarizes the activity relative to stock awards, including restricted stock awards, restricted
stock units and performance share units, for 2008, 2007 and 2006:
Shares
(in thousands)
Weighted
Average
Grant Date
Fair Value
Shares
(in thousands)
Weighted
Average
Grant Date
Fair Value
Shares
(in thousands)
Weighted
Average
Grant Date
Fair Value
2008 2007 2006
Shares outstanding,
beginning of year . . 677 $52.24 450 $52.41 107 $49.71
Shares granted . . ..... 843 47.60 538 52.05 1,020 52.32
Shares vested . . . ..... (175) 51.67 (74) 52.30 (39) 50.26
Shares forfeited and
canceled ........... (62) 50.16 (100) 52.38 (56) 51.92
Adjustment to
estimate of
performance share
units to be earned . . 222 52.39 (137) 51.94 (582) 51.94
Shares outstanding,
end of year . . . ..... 1,505 $49.77 677 $52.24 450 $52.41
In 2008, 2007 and 2006, the Company revised its estimate of the number of performance share units
expected to be earned at the end of the performance periods as a result of revising its estimates of projected
performance and increased (reduced) the number of performance share units by 0.2 million, (0.1) million and
(0.6) million, respectively.
As of December 31, 2008, there was $23 million of unrecognized stock-based compensation cost related to
nonvested stock awards, which is expected to be recognized over a weighted average period of 1.8 years. Total
fair value of shares vested was $8.4 million, $3.8 million and $2.1 million for the year ended December 31,
2008, 2007 and 2006, respectively. The amount of unrecognized stock-based compensation cost is subject to
change based on revisions, if any, to management’s best estimates of the achievement of the performance goals
specified in such awards and the resulting number of shares that will be earned at the end of the performance
periods.
For the years ended December 31, 2008, 2007 and 2006, stock-based compensation expense totaled $71
million, $57 million and $55 million, respectively. Income tax benefits related to stock-based compensation
expense totaled $28 million, $23 million and $22 million for the year ended December 31, 2008, 2007 and 2006,
respectively.
Employee Stock Purchase Plan
Under the Company’s Employee Stock Purchase Plan (“ESPP”), which was approved by the Company’s
shareholders at the 2006 Annual Meeting of Shareholders, 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 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 5 million. Approximately 436, 448 and 474 thousand shares of common stock
were purchased by eligible employees in 2008, 2007 and 2006, respectively.
Defined Contribution Plans
The Company maintains qualified defined contribution plans covering substantially all of its employees, and
matches employee contributions up to a maximum of 6%. The Company’s expense for contributions to its
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QUEST DIAGNOSTICS INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(dollars in thousands unless otherwise indicated)