Quest Diagnostics 2008 Annual Report Download - page 104

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defined contribution plans aggregated $78 million, $76 million and $69 million for 2008, 2007 and 2006,
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 salary in excess of their
defined contribution plan limits and for certain eligible employees, up to 95% of their variable incentive
compensation. The Company matches employee contributions up to a maximum of 6%. 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. The amounts accrued under
this plan were $25 million and $34 million at December 31, 2008 and 2007, respectively. Although the Company
is currently contributing all participant deferrals and matching amounts to a trust, the funds in the trust, totaling
$25 million and $34 million at December 31, 2008 and 2007, 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 approximately $1 million for 2008, 2007 and 2006.
13. RELATED PARTY TRANSACTIONS
At December 31, 2008, GlaxoSmithKline plc (“GSK”), the parent company of SmithKline Beecham,
beneficially owned approximately 19% of the outstanding shares of Quest Diagnostics common stock.
Quest Diagnostics is the primary provider of testing to support GSK’s clinical trials testing requirements
worldwide (as amended, the “Clinical Trials Agreements”). Net revenues, primarily derived under the Clinical
Trials Agreements were $71 million, $79 million and $87 million for 2008, 2007 and 2006, respectively. At
December 31, 2008 and 2007, accounts receivable due from GSK were $9.1 million and $10.6 million,
respectively.
In addition, in connection with the acquisition of SBCL, 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, 2008, liabilities included $13 million due to SmithKline Beecham, primarily related to tax
benefits associated with certain pre-acquisition tax loss carryforwards. At December 31, 2007, liabilities included
$27 million due to SmithKline Beecham, primarily related to tax benefits associated with indemnifiable matters.
14. COMMITMENTS AND CONTINGENCIES
Letter of Credit Lines and Contractual Obligations
The Company has a line of credit with a financial institution totaling $85 million for the issuance of letters
of credit (the “letter of credit line”). The letter of credit line, which is renewed annually, matures on November
19, 2009 and is guaranteed by the Subsidiary Guarantors.
In support of its risk management program, to ensure the Company’s performance or payment to third
parties, $89 million in letters of credit were outstanding at December 31, 2008. The letters of credit primarily
represent collateral for current and future automobile liability and workers’ compensation loss payments. In
addition, $5.3 million of bank guarantees were outstanding at December 31, 2008 in support of certain foreign
operations.
F-32
QUEST DIAGNOSTICS INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(dollars in thousands unless otherwise indicated)