Express Scripts 2012 Annual Report Download - page 87

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Express Scripts 2012 Annual Report 85
Shares (in
millions)
Weighted-
Average Grant
Date Fair Value
Per Share
ESI outstanding at beginning of year(1)
1.3
$ 41.92
Medco outstanding converted at April 2, 2012
7.2
56.49
Granted
0.3
53.03
Other(2)
0.2
52.04
Released
(4.1)
52.25
Forfeited/Cancelled
(0.2)
54.49
Express Scripts outstanding at December 31, 2012
4.7
54.57
Express Scripts vested and deferred at December 31, 2012
0.2
56.49
Express Scripts non-vested at December 31, 2012
4.5
$ 54.50
(1) All outstanding awards were converted to Express Scripts awards upon consummation of the Merger at a 1:1 ratio.
(2) Represents additional performance shares issued above the original value for exceeding certain performance metrics.
Stock options and SSRs. Express Scripts grants stock options and SSRs to certain officers, directors and
employees to purchase shares of Express Scripts Holding Company common stock at fair market value on the date
of grant. ESI’s SSRs and stock options granted under both the 2000 LTIP and 2011 LTIP generally have three-year
graded vesting, with the exception of 1.0 million awards granted during the fourth quarter of 2011which cliff vest
two years from the closing date of the Merger. Medco’s options granted under the 2002 Stock Incentive Plan
generally vest over three years.
Due to the nature of the awards, we use the same valuation methods and accounting treatments for SSRs
and stock options. As of December 31, 2012 and 2011, unearned compensation related to SSRs and stock options
was $74.4 million and $32.1 million, respectively. We recorded pre-tax compensation expense related to SSRs and
stock options of $220.0 million, $34.6 million and $32.1 million in 2012, 2011 and 2010, respectively. The increase
for the year ended December 31, 2012 resulted from stock-based compensation expense acceleration associated with
the termination of certain Medco employees. The weighted-average remaining recognition period for stock options
and SSRs is 1.6 years.
A summary of the status of stock options and SSRs as of December 31, 2012, and changes during the year
ended December 31, 2012, is presented below.
Shares (in
millions)
Weighted-Average
Exercise Price Per
Share
Weighted-
Average
Remaining
Contractual
Life
Aggregate
Intrinsic Value
(in millions)
(1)
ESI outstanding at beginning of year(2)
13.7
$ 34.54
Medco outstanding converted at April 2, 2012
41.5
38.61
Granted
3.6
53.06
Exercised
(13.5)
30.82
Forfeited/cancelled
(1.1)
47.60
Outstanding at end of period
44.2
$ 40.71
6.1
$ 592.5
Awards exercisable at period end
30.2
$ 36.79
5.6
$ 522.0
(1) Amount by which the market value of the underlying stock exceeds the exercise price of the option.
(2) All outstanding awards were converted to Express Scripts awards upon consummation of the Merger at a 1:1 ratio.
For the year ended December 31, 2012, the windfall tax benefit related to stock options exercised during
the year was $45.3 million and is classified as a financing cash inflow on the consolidated statement of cash flows.