Express Scripts 2011 Annual Report Download - page 81

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Express Scripts 2011 Annual Report 79
Subsequent to the effective date of the 2011 LTIP, no additional awards will be granted under the 2000
Long-Term Incentive Plan (the ―2000 LTIP‖), which provided for the grant of various equity awards with various
terms to our officers, Board of Directors and key employees selected by the Compensation Committee of the Board
of Directors. However, this plan is still in existence as there are outstanding grants under this plan. Under the 2000
LTIP, we have issued stock options, SSRs, restricted stock units, restricted stock awards and performance share
awards. Awards are typically settled using treasury shares. The maximum term of stock options, SSRs, restricted
stock and performance shares granted under the 2000 LTIP is 10 years.
The provisions of both the 2000 LTIP and 2011 LTIP allow employees to use shares to cover tax
withholding on stock awards. Upon vesting of restricted stock and performance shares, employees have taxable
income subject to statutory withholding requirements. The number of shares issued to employees may be reduced by
the number of shares having a market value equal to our minimum statutory withholding for federal, state and local
tax purposes.
Restricted stock and performance shares. A summary of the status of restricted stock and performance
shares as of December 31, 2011, and changes during the year ended December 31, 2011, is presented below.
2011
(share data in millions)
Shares
Weighted-
Average Grant
Date Fair Value
Outstanding at beginning of year
1.0
$ 31.95
Granted
0.8
48.72
Other(1)
0.2
55.68
Released
(0.7)
28.77
Forfeited/Cancelled
-
Outstanding at end of period
1.3
$ 41.92
(1) Represents additional performance shares issued above the original value for exceeding certain performance metrics
The restricted stock units have three-year graded vesting and the performance shares cliff vest at the end of
three years. Of the awards granted in 2011, 0.5 million were granted during the fourth quarter of 2011. These
restricted units cliff vest two years from the closing date of the proposed merger with Medco (the ―merger restricted
shares‖). In addition to the two year service requirement, vesting of the merger restricted shares is contingent upon
completion of the proposed merger. As this vesting condition does not meet probability thresholds indicated by
authoritative accounting guidance, no expense has been recorded for the merger restricted shares during the year
ended December 31, 2011. Prior to vesting, shares are subject to forfeiture to us without consideration upon
termination of employment under certain circumstances. The original value of the performance share grants is
subject to a multiplier of up to 2.5 based on certain performance metrics. Unearned compensation relating to these
awards is amortized to non-cash compensation expense over the estimated vesting periods. As of December 31,
2011 and 2010, unearned compensation related to restricted stock and performance shares was $37.2 million and
$16.5 million, respectively. We recorded pre-tax compensation expense related to restricted stock and performance
share grants of $13.9 million, $17.5 million and $16.2 million in 2011, 2010, and 2009, respectively. The fair value
of restricted shares vested during the years ended December 31, 2011, 2010 and 2009 was $20.9 million, $10.5
million and $12.4 million, respectively. The weighted average remaining recognition period for restricted stock and
performance shares is 1.5 years.
Stock options and SSRs. A summary of the status of stock options and SSRs as of December 31, 2011, and
changes during the year ended December 31, 2011, is presented below.
2011
(share data in millions)
Shares
Weighted-Average
Exercise Price
Outstanding at beginning of year
13.3
$ 27.83
Granted
3.3
52.97
Exercised
(2.4)
21.91
Forfeited/cancelled
(0.5)
40.56
Outstanding at end of period
13.7
$ 34.54
Awards exercisable at period end
7.9
$ 26.36