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QUEST DIAGNOSTICS INCORPORATED AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED(dollars in thousands unless otherwise indicated)
12. PREFERRED STOCK AND COMMON STOCKHOLDERS’ EQUITY
Series
Preferred Stock
Quest Diagnostics is authorized to issue up to
10 million shares of Series Preferred Stock, par value $1.00 per share. The Company’s Board of Directors has the
authority to issue such shares without stockholder approval and to determine
the designations, preferences, rights and restrictions of such shares. Of the authorized shares, 1,300,000 shares
have been designated Series A Preferred Stock and 1,000 shares have been
designated Voting Cumulative Preferred Stock. No shares have been issued, other than the Voting Cumulative Preferred
Stock.
Voting
Cumulative Preferred Stock
During the fourth quarter of 2001, the Company
redeemed all of the then issued and outstanding shares of preferred stock for
$1 million plus accrued dividends. The Voting Cumulative Preferred Stock is
generally entitled to one vote per share, voting together as one class with the
Company’s common stock. Whenever
dividends on the Voting Cumulative Preferred Stock are in arrears, no dividends
or redemptions or purchases of shares may be made with respect to any stock
ranking junior as to dividends or liquidation to the Voting Cumulative
Preferred Stock until all such amounts have been paid. The Voting Cumulative Preferred Stock is not
convertible into shares of any other class or series of stock of the
Company. The Voting Cumulative
Preferred Stock ranks senior to the Quest Diagnostics common stock and the
Series A Preferred Stock.
Preferred
Share Purchase Rights
Each share of Quest Diagnostics common stock
trades with a preferred share purchase right, which entitles stockholders to
purchase one-hundredth of a share of Series A Preferred Stock upon the
occurrence of certain events. In
conjunction with the SBCL acquisition, the Board of Directors of the Company
approved an amendment to the preferred share purchase rights. The amended rights entitle stockholders to
purchase shares of Series A Preferred Stock at a predefined price in the event
a person or group (other than SmithKline Beecham) acquires 20% or more of the
Company’s outstanding common stock. The
preferred share purchase rights expire December 31, 2006.
Accumulated
Other Comprehensive Income (Loss)
The components of accumulated other
comprehensive income (loss) for 2003, 2002 and 2001 were as follows:
|
|
 |
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2000....................................................... |
$(3,208) |
$(2,250) |
$(5,458) |
|
Translation adjustment............................................................... |
(1,178) |
- |
(1,178) |
|
Market value adjustment, net of tax expense of
$2,093.......... |
- |
3,166 |
3,166 |
|
Balance, December 31, 2001....................................................... |
(4,386) |
916 |
(3,470) |
|
Translation adjustment............................................................... |
1,906 |
- |
1,906 |
|
Market value adjustment, net of tax benefit of
$2,627............ |
- |
(3,960) |
(3,960) |
|
Balance, December 31, 2002....................................................... |
(2,480) |
(3,044) |
(5,524) |
|
Translation adjustment............................................................... |
2,169 |
- |
2,169 |
|
Market value adjustment, net of tax expense of
$6,201.......... |
- |
9,302 |
9,302 |
|
Balance, December 31, 2003....................................................... |
$ (311) |
$ 6,258 |
$ 5,947 |
The market value adjustments for 2003, 2002 and
2001 represented unrealized holding gains (losses), net of taxes.
For the year ended December 31, 2001, other
comprehensive income included the cumulative effect of the change in accounting
for derivative financial instruments upon adoption of SFAS 133, as amended,
which reduced comprehensive income by approximately $1 million. In addition, in
conjunction with the Company’s debt refinancing, the interest rate swap
agreements were terminated and the losses reflected in stockholders’ equity as
a component of comprehensive income were reclassified to earnings and reflected
within the loss on debt extinguishment in the consolidated statements of
operations for the year ended December 31, 2001 (see Note 7).
Dividend Policy
Through October 20, 2003, the
Company never declared or paid cash dividends on its common stock. On October 21, 2003, the Company’s Board of
Directors declared a quarterly cash dividend of $0.15 per common share. The initial $15.4 million quarterly dividend
was paid on January 23, 2004 to shareholders of record on January 8, 2004.
Share Repurchase Plan
In May 2003, the Company’s Board of Directors authorized a
share repurchase program, which permits the Company to purchase up to $300
million of its common stock. In October
2003, the Board of Directors increased the share repurchase authorization by an
additional $300 million. Through
December 31, 2003, the Company has repurchased 4.0 million shares of its common
stock at an average price of $64.54 per share for a total of $258 million under
the program. |
