Express Scripts 2013 Annual Report Download - page 86

Express Scripts 2013 Annual Report 86
The deferred tax assets and deferred tax liabilities recorded in our consolidated balance sheet are as follows:
December 31,
(in millions) 2013 2012
Deferred tax assets:
Allowance for doubtful accounts $ 70.9 $ 61.6
Note premium 81.6 101.7
Tax attributes 85.9 62.7
Deferred compensation 6.4 12.2
Equity compensation 268.7 359.5
Accrued expenses 406.0 329.9
Federal benefit of uncertain tax positions 181.8 164.9
Investment in foreign subsidiaries — 15.6
Other 16.4 19.0
Gross deferred tax assets 1,117.7 1,127.1
Less valuation allowance (66.9)(34.7)
Net deferred tax assets 1,050.8 1,092.4
Deferred tax liabilities:
Depreciation and property differences (434.3)(444.6)
Goodwill and intangible assets (5,585.9)(6,164.7)
Prepaids (4.0)(7.7)
Other (11.8)(11.3)
Gross deferred tax liabilities (6,036.0)(6,628.3)
Net deferred tax liabilities $(4,985.2)$ (5,535.9)
As of December 31, 2013, we have deferred tax assets for state and foreign net operating loss carryforwards of
approximately $46.5 million and $29.7 million, respectively. The state and foreign net operating loss carryforwards, if
unutilized, will expire between 2014 and 2033. A valuation allowance of $64.9 million exists for a portion of these deferred tax
assets.
A reconciliation of our beginning and ending amount of unrecognized tax benefits is as follows:
(in millions) 2013 2012 2011
Balance at January 1 $ 500.8 $ 32.4 $ 57.3
Additions for tax positions related to prior years(1)(2) 637.3 392.7 7.3
Reductions for tax positions related to prior years(1) (92.0)(1.3)(30.3)
Additions for tax positions related to the current year 41.7 83.7 4.9
Reductions attributable to settlements with taxing authorities (3.5)—
(5.1)
Reductions as a result of a lapse of the applicable statute of limitations (22.8)(6.7)(1.7)
Balance at December 31 $ 1,061.5 $ 500.8 $ 32.4
(1) Includes $50.4 million additions and $8.3 million reductions of Medco income tax contingencies recorded through the
allocation of Medco’s purchase price for the quarter ended March 31, 2013.
(2) Includes $544.9 million in additions related to a claimed loss in 2012 on the disposition of Liberty.
Included in our unrecognized tax benefits are $451.4 million of uncertain tax positions that would impact our
effective tax rate if recognized.
We recorded $22.8 million of interest and penalties to the provision for income taxes in our consolidated statement
of operations for the year ended December 31, 2013 as compared to a $19.6 million charge and a $7.0 million benefit for the
years ended December 2012 and 2011, respectively. During 2013, we also recorded $2.4 million of interest and penalties
through acquisition accounting for the Merger as compared to $55.4 million in 2012. This resulted in $105.8 million and $80.6
million of accrued interest and penalties in our consolidated balance sheet as of December 31, 2013 and 2012, respectively.