Quest Diagnostics 2010 Annual Report Download - page 95

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference
between the Company’s closing common stock price on the last trading day of 2010 and the exercise price,
multiplied by the number of in-the-money options) that would have been received by the option holders had all
option holders exercised their options on December 31, 2010. This amount changes based on the fair market
value of the Company’s common stock. Total intrinsic value of options exercised in 2010, 2009 and 2008 was
$22 million, $44 million and $20 million, respectively.
As of December 31, 2010, there was $12 million of unrecognized stock-based compensation cost related to
stock options which is expected to be recognized over a weighted average period of 1.8 years.
The following summarizes the activity relative to stock awards, including restricted stock awards, restricted
stock units and performance share units, for 2010, 2009 and 2008:
Shares
(in thousands)
Weighted
Average
Grant Date
Fair Value
Shares
(in thousands)
Weighted
Average
Grant Date
Fair Value
Shares
(in thousands)
Weighted
Average
Grant Date
Fair Value
2010 2009 2008
Shares outstanding,
beginning of year . . 2,747 $50.27 1,505 $49.77 677 $52.24
Shares granted . . ..... 876 55.44 917 51.36 843 47.60
Shares vested . . . ..... (742) 51.48 (360) 51.06 (175) 51.67
Shares forfeited and
canceled ........... (130) 52.34 (60) 50.67 (62) 50.16
Adjustment to
estimate of
performance share
units to be earned . . (611) 51.33 745 50.35 222 52.39
Shares outstanding,
end of year . . . ..... 2,140 $51.54 2,747 $50.27 1,505 $49.77
As of December 31, 2010, there was $35 million of unrecognized stock-based compensation cost related to
nonvested stock awards, which is expected to be recognized over a weighted average period of 1.7 years. Total
fair value of shares vested was $41.2 million, $16.4 million and $8.4 million for the years ended December 31,
2010, 2009 and 2008, respectively. The amount of unrecognized stock-based compensation cost is subject to
change based on revisions, if any, to management’s best estimates of the achievement of the performance goals
specified in such awards and the resulting number of shares that will be earned at the end of the performance
periods.
For the years ended December 31, 2010, 2009 and 2008, stock-based compensation expense totaled $54
million, $75 million and $71 million, respectively. Income tax benefits related to stock-based compensation
expense totaled $21 million, $29 million and $28 million for the years ended December 31, 2010, 2009 and
2008, respectively.
Employee Stock Purchase Plan
Under the Company’s Employee Stock Purchase Plan (“ESPP”), which was approved by the Company’s
shareholders at the 2006 Annual Meeting of Shareholders, substantially all employees can elect to have up to
10% of their annual wages withheld to purchase Quest Diagnostics common stock. The purchase price of the
stock is 85% of the market price of the Company’s common stock on the last business day of each calendar
month. Under the ESPP, the maximum number of shares of Quest Diagnostics common stock which may be
purchased by eligible employees is 5 million. Approximately 464, 445 and 436 thousand shares of common stock
were purchased by eligible employees in 2010, 2009 and 2008, respectively.
Defined Contribution Plans
The Company maintains qualified defined contribution plans covering substantially all of its employees, and
matches employee contributions up to a maximum of 6%. The Company’s expense for contributions to its
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QUEST DIAGNOSTICS INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(dollars in thousands unless otherwise indicated)