Quest Diagnostics 2014 Annual Report Download - page 55

 

ZLWKLWVFDUU\LQJYDOXH7KHLPSOLHGIDLUYDOXHLVGHWHUPLQHGE\DOORFDWLQJWKHIDLUYDOXHRIWKHUHSRUWLQJXQLWWRDOORIWKHDVVHWV
DQGOLDELOLWLHVRIWKDWXQLWDVLIWKHUHSRUWLQJXQLWKDGEHHQDFTXLUHGLQDEXVLQHVVFRPELQDWLRQDQGWKHIDLUYDOXHRIWKHUHSRUWLQJ
XQLWZDVWKHSXUFKDVHSULFHSDLGWRDFTXLUHWKHUHSRUWLQJXQLW7KHH[FHVVRIWKHIDLUYDOXHRIWKHUHSRUWLQJXQLWRYHUWKH
DPRXQWVDVVLJQHGWRLWVDVVHWVDQGOLDELOLWLHVLVWKHLPSOLHGIDLUYDOXHRIJRRGZLOO,IWKHFDUU\LQJDPRXQWRIWKHUHSRUWLQJXQLWV
JRRGZLOOLVJUHDWHUWKDQLWVLPSOLHGIDLUYDOXHDQLPSDLUPHQWORVVZLOOEHUHFRJQL]HGLQWKHDPRXQWRIWKHH[FHVV
 2QDTXDUWHUO\EDVLVZHSHUIRUPDUHYLHZRIRXUEXVLQHVVWRGHWHUPLQHLIHYHQWVRUFKDQJHVLQFLUFXPVWDQFHVKDYH
RFFXUUHGZKLFKFRXOGKDYHDPDWHULDODGYHUVHHIIHFWRQWKHIDLUYDOXHRIWKH&RPSDQ\DQGLWVJRRGZLOO,IVXFKHYHQWVRU
FKDQJHVLQFLUFXPVWDQFHVZHUHGHHPHGWRKDYHRFFXUUHGZHZRXOGSHUIRUPDQLPSDLUPHQWWHVWRIJRRGZLOODVRIWKHHQGRIWKH
TXDUWHUFRQVLVWHQWZLWKWKHDQQXDOLPSDLUPHQWWHVWSHUIRUPHGGXULQJWKHIRXUWKTXDUWHURIRXUILVFDO\HDUHQGHG'HFHPEHUVW
DQGUHFRUGDQ\QRWHGLPSDLUPHQWORVV
 )RUWKHILVFDO\HDUVHQGHG'HFHPEHUDQGZHSHUIRUPHGVWHSRQHRIWKHJRRGZLOOLPSDLUPHQWWHVWIRUDOO
RIRXUUHSRUWLQJXQLWV%DVHGXSRQRXUPRVWUHFHQWDQQXDOLPSDLUPHQWWHVWVFRPSOHWHGGXULQJWKHIRXUWKTXDUWHURIWKHILVFDO
\HDUVHQGHG'HFHPEHUDQGZHFRQFOXGHGWKDWJRRGZLOOZDVQRWLPSDLUHG
Accounting for stock-based compensation expense
 :HUHFRUGVWRFNEDVHGFRPSHQVDWLRQDVDFKDUJHWRHDUQLQJVQHWRIWKHHVWLPDWHGLPSDFWRIIRUIHLWHGDZDUGV$VVXFK
ZHUHFRJQL]HVWRFNEDVHGFRPSHQVDWLRQFRVWRQO\IRUWKRVHVWRFNEDVHGDZDUGVWKDWDUHHVWLPDWHGWRXOWLPDWHO\YHVWRYHUWKHLU
UHTXLVLWHVHUYLFHSHULRGEDVHGRQWKHYHVWLQJSURYLVLRQVRIWKHLQGLYLGXDOJUDQWV7KHSURFHVVRIHVWLPDWLQJWKHIDLUYDOXHRI
VWRFNEDVHGFRPSHQVDWLRQDZDUGVDQGUHFRJQL]LQJVWRFNEDVHGFRPSHQVDWLRQFRVWRYHUWKHLUUHTXLVLWHVHUYLFHSHULRGVLQYROYHV
VLJQLILFDQWDVVXPSWLRQVDQGMXGJPHQWV
 :HFXUUHQWO\HVWLPDWHWKHIDLUYDOXHRIVWRFNRSWLRQDZDUGVRQWKHGDWHRIJUDQWXVLQJDODWWLFHEDVHGRSWLRQYDOXDWLRQ
PRGHOZKLFKUHTXLUHVPDQDJHPHQWWRPDNHFHUWDLQDVVXPSWLRQVUHJDUGLQJLWKHH[SHFWHGYRODWLOLW\LQWKHPDUNHWSULFHRIWKH
&RPSDQ\VFRPPRQVWRFNLLGLYLGHQG\LHOGLLLULVNIUHHLQWHUHVWUDWHVDQGLYWKHSHULRGRIWLPHHPSOR\HHVDUHH[SHFWHGWR
KROGWKHDZDUGSULRUWRH[HUFLVHUHIHUUHGWRDVWKHH[SHFWHGKROGLQJSHULRG7KHH[SHFWHGYRODWLOLW\XQGHUWKHODWWLFHEDVHG
RSWLRQYDOXDWLRQPRGHOLVEDVHGRQWKHFXUUHQWDQGKLVWRULFDOLPSOLHGYRODWLOLWLHVIURPWUDGHGRSWLRQVRIRXUFRPPRQVWRFN
7KHGLYLGHQG\LHOGLVEDVHGRQWKHDSSURYHGDQQXDOGLYLGHQGUDWHLQHIIHFWDQGFXUUHQWPDUNHWSULFHRIWKHXQGHUO\LQJFRPPRQ
VWRFNDWWKHWLPHRIJUDQW7KHULVNIUHHLQWHUHVWUDWHLVEDVHGRQWKH867UHDVXU\\LHOGFXUYHLQHIIHFWDWWKHWLPHRIJUDQWIRU
ERQGVZLWKPDWXULWLHVUDQJLQJIURPRQHPRQWKWRWHQ\HDUV7KHH[SHFWHGKROGLQJSHULRGRIWKHDZDUGVJUDQWHGLVHVWLPDWHG
XVLQJWKHKLVWRULFDOH[HUFLVHEHKDYLRURIHPSOR\HHV,QDGGLWLRQZHHVWLPDWHWKHH[SHFWHGLPSDFWRIIRUIHLWHGDZDUGVDQG
UHFRJQL]HVWRFNEDVHGFRPSHQVDWLRQFRVWRQO\IRUWKRVHDZDUGVH[SHFWHGWRYHVW:HXVHKLVWRULFDOH[SHULHQFHWRHVWLPDWH
SURMHFWHGIRUIHLWXUHV,IDFWXDOIRUIHLWXUHUDWHVDUHPDWHULDOO\GLIIHUHQWIURPRXUHVWLPDWHVVWRFNEDVHGFRPSHQVDWLRQH[SHQVH
FRXOGEHVLJQLILFDQWO\GLIIHUHQWIURPZKDWZHKDYHUHFRUGHGLQWKHFXUUHQWSHULRG:HSHULRGLFDOO\UHYLHZDFWXDOIRUIHLWXUH
H[SHULHQFHDQGDGMXVWRXUHVWLPDWHVDVFRQVLGHUHGQHFHVVDU\7KHFXPXODWLYHHIIHFWRQFXUUHQWDQGSULRUSHULRGVRIDFKDQJHLQ
WKHHVWLPDWHGIRUIHLWXUHUDWHLVUHFRJQL]HGDVFRPSHQVDWLRQFRVWLQHDUQLQJVLQWKHSHULRGRIWKHFKDQJH
 7KHWHUPVRIRXUSHUIRUPDQFHVKDUHXQLWJUDQWVDOORZWKHUHFLSLHQWVRIVXFKDZDUGVWRHDUQDYDULDEOHQXPEHURIVKDUHV
EDVHGRQWKHDFKLHYHPHQWRIWKHSHUIRUPDQFHJRDOVVSHFLILHGLQWKHDZDUGV6WRFNEDVHGFRPSHQVDWLRQH[SHQVHDVVRFLDWHG
ZLWKSHUIRUPDQFHVKDUHXQLWVLVUHFRJQL]HGEDVHGRQPDQDJHPHQWVEHVWHVWLPDWHVRIWKHDFKLHYHPHQWRIWKHSHUIRUPDQFHJRDOV
VSHFLILHGLQVXFKDZDUGVDQGWKHUHVXOWLQJQXPEHURIVKDUHVWKDWZLOOEHHDUQHG,IWKHDFWXDOQXPEHURISHUIRUPDQFHVKDUH
XQLWVHDUQHGLVGLIIHUHQWIURPRXUHVWLPDWHVVWRFNEDVHGFRPSHQVDWLRQFRXOGEHVLJQLILFDQWO\GLIIHUHQWIURPZKDWZHKDYH
UHFRUGHGLQWKHFXUUHQWSHULRG7KHFXPXODWLYHHIIHFWRQFXUUHQWDQGSULRUSHULRGVRIDFKDQJHLQWKHHVWLPDWHGQXPEHURI
SHUIRUPDQFHVKDUHXQLWVH[SHFWHGWREHHDUQHGLVUHFRJQL]HGDVFRPSHQVDWLRQFRVWLQHDUQLQJVLQWKHSHULRGRIWKHFKDQJH
:KLOHWKHDVVXPSWLRQVXVHGWRFDOFXODWHDQGDFFRXQWIRUVWRFNEDVHGFRPSHQVDWLRQDZDUGVUHSUHVHQWPDQDJHPHQWVEHVW
HVWLPDWHVWKHVHHVWLPDWHVLQYROYHLQKHUHQWXQFHUWDLQWLHVDQGWKHDSSOLFDWLRQRIPDQDJHPHQWVMXGJPHQW$VDUHVXOWLIFKDQJHV
DUHPDGHWRRXUDVVXPSWLRQVDQGHVWLPDWHVRXUVWRFNEDVHGFRPSHQVDWLRQH[SHQVHFRXOGYDU\VLJQLILFDQWO\IURPSHULRGWR
SHULRG,QDGGLWLRQWKHQXPEHURIDZDUGVPDGHXQGHURXUHTXLW\FRPSHQVDWLRQSODQVFKDQJHVLQWKHGHVLJQRIWKRVHSODQVWKH
SULFHRIRXUVKDUHVDQGWKHSHUIRUPDQFHRIRXU&RPSDQ\FDQDOOFDXVHVWRFNEDVHGFRPSHQVDWLRQH[SHQVHWRYDU\IURPSHULRG
WRSHULRG
 %HJLQQLQJLQZHFKDQJHGWKHPHWKRGIRUHVWLPDWLQJWKHIDLUYDOXHRIRXUVWRFNRSWLRQDZDUGVIURPDODWWLFH
EDVHGRSWLRQYDOXDWLRQPHWKRGWRD%ODFN6FKROHVPRGHOZKLFKZLOOEHDSSOLHGSURVSHFWLYHO\WRDOOIXWXUHJUDQWVRIVWRFN
RSWLRQDZDUGV7KHFKDQJHZLOOQRWKDYHDVLJQLILFDQWHIIHFWRQRXUVWRFNEDVHGFRPSHQVDWLRQH[SHQVHUHSRUWHGLQRXU
FRQVROLGDWHGVWDWHPHQWVRIRSHUDWLRQVEHFDXVHZHJUDQWVWRFNRSWLRQDZDUGVEDVHGRQDSUHVFULEHGGROODUYDOXH

48(67',$*1267,&6)250.