Express Scripts 2013 Annual Report Download - page 52

Express Scripts 2013 Annual Report 52
We anticipate that our current cash balances, cash flows from operations and our revolving credit facility will be
sufficient to meet our cash needs and make scheduled payments for our contractual obligations and current capital
commitments. However, if needs arise, we may decide to secure external capital to provide additional liquidity. New sources of
liquidity may include additional lines of credit, term loans, or issuance of notes, all of which are allowable, with certain
limitations, under our existing credit agreement, or issuances of common stock. While our ability to secure debt financing in the
short term at rates favorable to us may be moderated due to various factors, including the financing incurred in connection with
the Merger, market conditions or other factors, we believe our liquidity options discussed above are sufficient to meet our cash
flow needs.
ACQUISITIONS AND RELATED TRANSACTIONS
As a result of the Merger on April 2, 2012, Medco and ESI each became 100% owned subsidiaries of Express
Scripts and former Medco and ESI stockholders became owners of Express Scripts stock, which is listed on the Nasdaq. Upon
closing of the Merger, former ESI stockholders owned approximately 59% of Express Scripts and former Medco stockholders
owned approximately 41% of Express Scripts. Per the terms of the Merger Agreement, upon consummation of the Merger on
April 2, 2012, each share of Medco common stock was converted into (i) the right to receive $28.80 in cash, without interest
and (ii) 0.81 shares of Express Scripts stock. Holders of Medco stock options, restricted stock units, and deferred stock units
received replacement awards at an exchange ratio of 1.3474 Express Scripts stock awards for each Medco award owned, which
is equal to the sum of (i) 0.81 and (ii) the quotient obtained by dividing (1) $28.80 (the cash component of the Merger
consideration) by (2) an amount equal to the average of the closing prices of ESI common stock on the Nasdaq for each of the
15 consecutive trading days ending with the fourth complete trading day prior to the completion of the Merger (see Note 3 -
Changes in business).
We regularly review potential acquisitions and affiliation opportunities. We believe available cash resources, bank
financing, additional debt financing or the issuance of additional common stock could be used to finance future acquisitions or
affiliations. There can be no assurance we will make new acquisitions or establish new affiliations in 2014 or thereafter.
STOCK REPURCHASE PROGRAM
On March 6, 2013, the Board of Directors of Express Scripts approved a share repurchase program (the “2013
Share Repurchase Program”), authorizing the repurchase of up to 75.0 million shares (as adjusted for any subsequent stock
split, stock dividend or similar transaction) of the Company’s common stock. There is no limit on the duration of the 2013
Share Repurchase Program. As part of the 2013 Share Repurchase Program, on December 9, 2013, we executed the 2013 ASR
Program (as defined and discussed below).
Including the shares repurchased through the 2013 ASR Program, we repurchased 60.4 million shares for $3,905.3
million during the year ended December 31, 2013. Repurchases during the second quarter included 1.2 million shares of
common stock for an aggregate purchase price of $68.4 million that were held on behalf of participants who acquired such
shares upon the consummation of the Merger as a result of conversion of Medco shares previously held in Medco’s 401(k)
plan. As previously announced, the Express Scripts 401(k) Plan no longer offers an investment fund option consisting solely of
shares of Express Scripts common stock, and previously held shares were to be sold on or about the first anniversary of the
Merger. This repurchase was not considered part of the 2013 Share Repurchase Program. As of December 31, 2013, there were
15.8 million shares remaining under the 2013 Share Repurchase Program, including shares repurchased under the 2013 ASR
Program. Additional share repurchases, if any, will be made in such amounts and at such times as the Company deems
appropriate based upon prevailing market and business conditions and other factors. Current year repurchases were funded
through internally generated cash.
ESI had a stock repurchase program, originally announced on October 25, 1996. In addition to the shares
repurchased through the 2011 ASR Agreement (defined below), ESI repurchased 13.0 million shares under its existing stock
repurchase program during the second quarter of 2011 for $765.7 million.
Upon consummation of the Merger on April 2, 2012, all ESI shares held in treasury were no longer outstanding and
were cancelled and retired and ceased to exist. See Note 9 - Common stock.
ACCELERATED SHARE REPURCHASE
On December 9, 2013, as part of our 2013 Share Repurchase Program, we entered into an agreement to repurchase
shares of our common stock for an aggregate purchase price of $1,500.0 million (the “2013 ASR Program”) under an
Accelerated Share Repurchase agreement (the “2013 ASR Agreement”). Under the terms of the 2013 ASR Agreement, upon
payment of the purchase price, we received an initial delivery of 20.1 million shares of our common stock at a price of $67.16