Quest Diagnostics 2010 Annual Report Download - page 93

Under the ASR, in January 2010, the Company repurchased 4.5 million shares of the Company’s outstanding
common stock for an initial purchase price of $56.05 per share. The purchase price of these shares was subject to
an adjustment based on the volume weighted average price of the Company’s common stock during a period
following execution of the agreement. The total cost of the initial purchase was $250 million. The purchase price
adjustment was settled in the first quarter of 2010 and resulted in an additional cash payment of $0.7 million, for
a final purchase price of $251 million, or $56.21 per share.
For the year ended December 31, 2009, the Company repurchased 10.0 million shares of its common stock
at an average price of $49.83 per share for $500 million, including 4.5 million shares repurchased from SB
Holdings Capital Inc., a wholly-owned subsidiary of GlaxoSmithKline plc. (“GSK”), at an average price of
$44.33 per share for $200 million. For the year ended December 31, 2008, the Company repurchased 5.5 million
shares of its common stock at an average price of $46.09 per share for $254 million.
For the years ended December 31, 2010, 2009 and 2008, the Company reissued 2.1 million shares, 3.0
million shares and 1.5 million, respectively, for employee benefit plans.
On October 20, 2010, the Board of Directors authorized $250 million of additional share repurchases, which
have no set expiration or termination date. At December 31, 2010, $250 million remained available under the
share repurchase authorizations. In January 2011, the Board of Directors authorized $750 million of additional
share repurchases, bringing the total available under share repurchase authorizations to $1 billion.
On January 31, 2011, the Company agreed to repurchase 15.4 million shares of its common stock from SB
Holdings Capital Inc., an affiliate of GSK, at a purchase price of $54.30 per share for $835 million. See Note 18
for further details.
13. STOCK OWNERSHIP AND COMPENSATION PLANS
Employee and Non-employee Directors Stock Ownership Programs
In 2005, the Company established the ELTIP to replace the Company’s prior Employee Equity Participation
Programs established in 1999 (the “1999 EEPP”) and 1996, as amended (the “1996 EEPP”). At the Company’s
annual shareholders’ meeting in May 2009, the shareholders approved certain amendments to the ELTIP
including: (i) increasing the number of shares available for award under the ELTIP by approximately 5.2 million
shares; (ii) increasing the maximum term that the Board of Directors may establish for awards of stock options
and stock appreciation rights from seven to ten years, beginning with awards in 2009; and (iii) extending the
term of the ELTIP until the date of the 2019 annual shareholders’ meeting.
The ELTIP provides for three types of awards: (a) stock options, (b) stock appreciation rights and (c) stock
awards. The ELTIP provides for the grant to eligible employees of either non-qualified or incentive stock options,
or both, to purchase shares of Company common stock at a price of no less than the fair market value on the
date of grant. The stock options are subject to forfeiture if employment terminates prior to the end of the vesting
period prescribed by the Board of Directors. Grants of stock appreciation rights allow eligible employees to
receive a payment based on the appreciation of Company common stock in cash, shares of Company common
stock or a combination thereof. The stock appreciation rights are granted at an exercise price at no less than the
fair market value of the Company’s common stock on the date of grant. Stock options and stock appreciation
rights granted under the ELTIP expire on the date designated by the Board of Directors but in no event more
than ten years from date of grant. No stock appreciation rights have been granted under the ELTIP or the 1999
EEPP. The ELTIP allows eligible employees to receive awards of shares, or the right to receive shares, of
Company common stock, the equivalent value in cash or a combination thereof. These shares are generally
earned on achievement of financial performance goals and are subject to forfeiture if employment terminates prior
to the end of the vesting period prescribed by the Board of Directors. For performance share unit awards, the
actual amount of performance share awards earned is based on the compound annual growth rate of the
Company’s earnings per share from continuing operations over a three-year period. Key executive, managerial
and technical employees are eligible to participate in the ELTIP. The provisions of the 1999 EEPP and the 1996
EEPP were similar to those outlined above for the ELTIP. Certain options granted under the 1999 EEPP remain
outstanding.
F-27
QUEST DIAGNOSTICS INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(dollars in thousands unless otherwise indicated)