Quest Diagnostics 2010 Annual Report Download - page 81

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4. FAIR VALUE MEASUREMENTS
The following tables provide summaries of the recognized assets and liabilities that are measured at fair
value on a recurring basis.
December 31, 2010 Level 1 Level 2 Level 3
Quoted Prices
in Active
Markets for
Identical
Assets/
Liabilities
Significant
Other
Observable
Inputs
Significant
Unobservable
Inputs
Basis of Fair Value Measurements
Assets:
Trading securities . . . .................................. $38,740 $38,740 $ — $ —
Cash surrender value of life insurance policies . . . ....... 20,314 — 20,314 —
Interest rate swaps . . .................................. 10,483 — 10,483 —
Available-for-sale equity securities ..................... 5,066 — — 5,066
Foreign currency forward contracts ..................... 4,527 — 4,527 —
Total . . . ............................................ $79,130 $38,740 $35,324 $5,066
Liabilities:
Deferred compensation liabilities ....................... $61,964 $ — $61,964 $ —
Foreign currency forward contracts ..................... 464 — 464 —
Total . . . ............................................ $62,428 $ — $62,428 $ —
December 31, 2009
Assets:
Trading securities . . . .................................. $33,871 $33,871 $ — $ —
Cash surrender value of life insurance policies . . . ....... 15,873 — 15,873 —
Foreign currency forward contracts ..................... 2,357 — 2,357 —
Total . . . ............................................ $52,101 $33,871 $18,230 $ —
Liabilities:
Deferred compensation liabilities ....................... $53,919 $ — $53,919 $ —
Interest rate swaps . . .................................. 14,398 — 14,398 —
Foreign currency forward contracts ..................... 311 — 311 —
Total . . . ............................................ $68,628 $ — $68,628 $ —
The Company offers certain employees the opportunity to participate in a supplemental deferred
compensation plan. A participant’s deferrals, together with Company matching credits, are invested in a variety of
participant-directed stock and bond mutual funds that are classified as trading securities. Changes in the fair value
of these securities are measured using quoted prices in active markets based on the market price per unit
multiplied by the number of units held exclusive of any transaction costs. A corresponding adjustment for
changes in fair value of the trading securities is also reflected in the changes in fair value of the deferred
compensation obligation. The deferred compensation liabilities are classified within Level 2 because their inputs
are derived principally from observable market data by correlation to the trading securities.
The Company offers certain employees the opportunity to participate in a non-qualified deferred
compensation program. A participant’s deferrals, together with Company matching credits, are “invested” at the
direction of the employee in a hypothetical portfolio of investments which are tracked by an administrator. The
Company purchases life insurance policies, with the Company named as beneficiary of the policies, for the
purpose of funding the program’s liability. Changes in the cash surrender value of the life insurance policies are
based upon earnings and changes in the value of the underlying investments. Changes in the fair value of the
deferred compensation obligation are derived using quoted prices in active markets based on the market price per
unit multiplied by the number of units. The cash surrender value and the deferred compensation obligations are
F-15
QUEST DIAGNOSTICS INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(dollars in thousands unless otherwise indicated)