Express Scripts 2015 Annual Report Download - page 60

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Express Scripts 2015 Annual Report
Net income attributable to non-controlling interest. Net income attributable to non-controlling interest represents the
share of net income allocated to members of our consolidated affiliates.
Employee stock-based compensation. Grant-date fair values of stock options are estimated using a Black-Scholes
valuation model and grant-date fair values of restricted stock units and performance shares are estimated based on the grant-
date stock price. Compensation expense is reduced based on estimated forfeitures with adjustments recorded at the time of
vesting for actual forfeitures. Forfeitures are estimated based on experience. We use an accelerated method of recognizing
compensation cost for awards. Unearned compensation relating to these awards is amortized to non-cash compensation expense
over the estimated vesting periods. See Note 9 - Employee benefit plans and stock-based compensation plans for more
information regarding stock-based compensation plans.
Pension plan. We have elected to determine the projected benefit obligation for the cash balance pension plan as the
value of the benefits to which employees participating in the plan would be entitled if they separated from service immediately.
The amount by which the projected benefit obligation exceeds the fair value of the pension plan assets is recorded in “Other
liabilities” on our consolidated balance sheet. See Note 10 - Pension benefits for more information regarding pension plans.
Earnings per share. Basic earnings per share (“EPS”) is computed using the weighted-average number of common
shares outstanding during the period. Diluted EPS is computed in the same manner as basic EPS, but adds the number of
additional common shares that would have been outstanding for the period if the dilutive potential common shares had been
issued. All shares are calculated under the “treasury stock” method. Following is the reconciliation between the number of
weighted-average shares used in the basic and diluted EPS calculations as of December 31, 2015, 2014 and 2013:
(in millions) 2015 2014 2013
Weighted-average number of common shares outstanding during the
period – basic 689.0 750.3 808.6
Dilutive common stock equivalents:(1)(2)
Outstanding stock options, stock-settled stock appreciation rights,
restricted stock units and executive deferred compensation units 6.3 8.8 13.0
Weighted-average number of common shares outstanding during the
period – diluted 695.3 759.1 821.6
(1) In January 2016, we settled the 2015 ASR Agreement and received 9.1 million additional shares, resulting in a total of
64.2 million shares received under the 2015 ASR Agreement. For the year ended December 31, 2015, the 9.1 million
shares are not included in the calculation of diluted weighted-average common shares outstanding because the effect is
anti-dilutive. See Note 8 - Common stock for further description.
(2) Excludes equity awards of 2.4 million, 2.4 million and 3.5 million for the years ended December 31, 2015, 2014 and
2013, respectively. These were excluded because the effect is anti-dilutive.
Foreign currency translation. The financial statements of our foreign subsidiaries are translated into United States
dollars using the exchange rate at each balance sheet date for assets and liabilities and a weighted-average exchange rate for
each period for revenues, expenses, gains and losses. The functional currency for our foreign subsidiaries is the local currency
and cumulative translation adjustments ((debit) credit balances of $(14.0) million and $2.1 million at December 31, 2015 and
2014, respectively) are recorded within the “accumulated other comprehensive (loss) income” component of stockholders’
equity.
Comprehensive loss. Comprehensive loss includes foreign currency translation adjustments. We recognized foreign
currency translation losses of $16.1 million, $9.6 million and $7.2 million for the years ending December 31, 2015, 2014 and
2013, respectively.
New accounting guidance. In November 2015, the FASB issued authoritative guidance containing changes to the
balance sheet presentation of deferred taxes, allowing for classification of all deferred tax assets and liabilities as long-term.
This statement is effective for financial statements issued for annual periods beginning after December 15, 2016, with early
adoption permitted. We have elected to prospectively adopt ASU 2015-17 as of December 31, 2015, as part of a simplification
initiative. Prior periods have not been retrospectively adjusted for adoption of this statement.
In April and August 2015, the FASB issued authoritative guidance containing changes to the balance sheet
presentation of debt issuance costs. This statement is effective for financial statements issued for annual periods beginning after
December 15, 2015, with early adoption permitted. We have elected to adopt ASU 2015-03 and ASU 2015-15 as of December
31, 2015, with retrospective application to all statements of financial position presented. Net financing costs of $50.6 million
related to our senior notes and term loans have been reclassified from “Other intangible assets, net” to a reduction in the
carrying value of our long-term debt, and net financing costs of $3.7 million related to our 2011 revolving facility have been