Quest Diagnostics 2010 Annual Report Download - page 96

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defined contribution plans aggregated $79 million, $82 million and $78 million for 2010, 2009 and 2008,
respectively.
Supplemental Deferred Compensation Plans
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 $39 million and $34 million at December 31, 2010 and 2009, respectively. Although the Company
is currently contributing all participant deferrals and matching amounts to a trust, the funds in the trust, totaling
$39 million and $34 million at December 31, 2010 and 2009, respectively, are general assets of the Company
and are subject to any claims of the Company’s creditors.
The Company also offers certain employees the opportunity to participate in a non-qualified deferred
compensation program. Eligible participants are allowed to defer up to 20 thousand dollars of eligible
compensation per year. The Company matches employee contributions equal to 25%, up to a maximum of 5
thousand dollars per plan year. 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.
Each participant is fully vested in their deferred compensation and vest in Company matching contributions over
a four-year period at 25% per year. The amounts accrued under this plan were $23 million and $20 million at
December 31, 2010 and 2009, respectively. The Company purchases life insurance policies, with the Company
named as beneficiary of the policies, for the purpose of funding the program’s liability. The cash surrender value
of such life insurance policies was $20 million and $16 million at December 31, 2010 and 2009, respectively.
For the years ended December 31, 2010, 2009 and 2008, the Company’s expense for matching contributions
to these plans was $1.6 million, $0.8 million and $1.0 million, respectively.
14. RELATED PARTY TRANSACTIONS
At December 31, 2010, GSK beneficially owned approximately 18% of the outstanding shares of Quest
Diagnostics common stock. On January 31, 2011, the Company agreed to repurchase from SB Holdings Capital
Inc., an affiliate of GSK, approximately one-half of GSK’s ownership interest in the Company, or 15.4 million
shares of the Company’s common stock. In a separate transaction on January 31, 2011, GSK agreed to sell in an
underwritten offering to the public, its remaining ownership interest in the Company, or 15.4 million shares of
the Company’s common stock. Subsequent to these transactions, GSK no longer beneficially owns any shares of
Quest Diagnostics common stock. See Note 18 for further details.
Quest Diagnostics is the primary provider of testing to support GSK’s clinical trials testing requirements
under a worldwide agreement (the “Clinical Trials Agreement”). Net revenues, primarily derived under the
Clinical Trials Agreement were $63 million, $72 million and $71 million for 2010, 2009 and 2008, respectively.
At December 31, 2010 and 2009, accounts receivable due from GSK were $15.7 million and $17.3 million,
respectively.
During 2009, the Company paid SmithKline Beecham approximately $10 million related to the realization of
certain pre-acquisition net loss carryforwards that were payable to SmithKline Beecham pursuant to a tax
indemnification arrangement. Amounts due to GSK at December 31, 2010 and 2009 were not material.
15. 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, 2011 and is guaranteed by the Subsidiary Guarantors.
F-30
QUEST DIAGNOSTICS INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(dollars in thousands unless otherwise indicated)