Quest Diagnostics 2013 Annual Report Download - page 112

Download and view the complete annual report

Please find page 112 of the 2013 Quest Diagnostics annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 131

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131

F- 40
Supplemental Deferred Compensation Plans
The Company has a supplemental deferred compensation plan that 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. Prior to 2012,
the Company matched employee contributions up to a maximum of 6%. As of January 1, 2012, the maximum Company
matching contribution was reduced from 6% to 5% of eligible employee compensation. 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 Company maintained another unfunded, non-qualified supplemental deferred
compensation plan that was not material. The amounts accrued under the Company's deferred compensation plans were $50
million and $52 million at December 31, 2013 and 2012, respectively. Although the Company is currently contributing all
participant deferrals and matching amounts to trusts, the funds in these trusts, totaling $50 million and $52 million at
December 31, 2013 and 2012, 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 of eligible compensation per year. The Company
matches employee contributions equal to 25%, up to a maximum of $5 thousand 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 $34
million and $30 million at December 31, 2013 and 2012, 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 $29 million and $25 million at December 31, 2013 and 2012, respectively.
For the years ended December 31, 2013, 2012 and 2011, the Company's expense for matching contributions to these
plans were not material.
17. 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., a wholly-owned
subsidiary of GSK, approximately one-half of GSK's ownership interest in the Company, or 15.4 million shares of the
Company's common stock, at a purchase price of $54.30 per share for $835 million (the “Repurchase”).
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 (the “Offering”). The
Company did not sell any shares of common stock in the Offering, which closed on February 4, 2011, and did not receive any
of the proceeds. Subsequent to the Repurchase and the Offering, GSK no longer beneficially owned any shares of Quest
Diagnostics common stock.
18. 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 18, 2014.
In support of its risk management program, to ensure the Company’s performance or payment to third parties, $59
million in letters of credit were outstanding at December 31, 2013. The letters of credit primarily represent collateral for current
and future automobile liability and workers’ compensation loss payments.
QUEST DIAGNOSTICS INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
(in millions unless otherwise indicated)