Express Scripts 2015 Annual Report Download - page 65

63 Express Scripts 2015 Annual Report
Bank credit facilities. In April 2015, we entered into a credit agreement (the “2015 credit agreement”) providing for a
five-year $2,000.0 million revolving credit facility (the “2015 revolving facility”), a two-year $2,500.0 million term loan (the
“2015 two-year term loan”) and a five-year $3,000.0 million term loan (the “2015 five-year term loan”). We used the proceeds,
which included $1,100.0 million drawn on the 2015 revolving facility in addition to the 2015 two-year term loan and the 2015
five-year term loan, to repay our 2011 term loan (reflected in table above), terminate the commitments under our 2011
revolving facility, enter into an accelerated share repurchase program and for other general corporate purposes. At
December 31, 2015, no amounts were drawn under the 2015 revolving facility. In 2015, we repaid $500.0 million under the
2015 two-year term loan. We make quarterly principal payments on the 2015 five-year term loan. At December 31, 2015,
$150.0 million of the 2015 credit agreement, and a proportionate amount of unamortized financing costs, was considered
current maturities of long-term debt.
The 2015 credit agreement requires interest to be paid, at our option, at LIBOR or an adjusted base rate, plus, in each
case, applicable margin. Depending on our consolidated leverage ratio, the applicable margin over LIBOR ranges from 0.900%
to 1.300% for the 2015 revolving facility, 0.875% to 1.375% for the 2015 two-year term loan and 1.000% to 1.500% for the
2015 five-year term loan. The applicable margin over the adjusted base rate ranges from 0.000% to 0.300% for the 2015
revolving facility, 0.000% to 0.375% for the 2015 two-year term loan and 0.000% to 0.500% for the 2015 five-year term loan.
We are required to pay commitment fees on the 2015 revolving facility, which range from 0.100% to 0.200% of the revolving
loan commitments, depending on our consolidated leverage ratio.
In August 2015, we entered into a one-year credit agreement, providing for an uncommitted $150.0 million revolving
credit facility (the “2015 credit facility”). In December 2014, we entered into three separate one-year credit agreements, each
providing for an uncommitted $150.0 million revolving credit facility (the “2014 credit facilities”). During 2015, two of the
three 2014 credit facilities were terminated. In October 2015, an amendment was executed to extend the one remaining 2014
credit facility’s termination date to April 2016 and to decrease the uncommitted credit facility to $130.0 million. As of
December 31, 2015, no amounts were drawn under the 2015 credit facility or the one remaining 2014 credit facility. The credit
facilities require interest to be paid at LIBOR plus an agreed upon rate at the time of borrowing.
Financing costs. As of December 31, 2015, we adopted ASU 2015-03 and ASU 2015-15. As a result, 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 reclassified from “Other intangible assets, net” to “Other assets” on our consolidated balance sheet as of
December 31, 2014. Comparatively, net financing costs of $48.1 million related to our senior notes and term loans are reflected
as a reduction in the carrying value of our long-term debt, and net financings costs of $6.6 million related to our 2015 revolving
facility are reflected in “Other assets” on our consolidated balance sheet as of December 31, 2015. Following is the gross
amount recognized and the related weighted-average period of amortization of our financing costs:
Financing costs
(in millions)
Weighted-
average period
of amortization
(in years)
June 2009 Senior Notes $ 13.3 5.2
May 2011 Senior Notes 10.9 5.0
November 2011 Senior Notes 29.9 12.1
February 2012 Senior Notes 22.5 6.2
June 2014 Senior Notes 18.6 6.6
2015 credit agreement 28.0 4.0
Financing costs of $36.1 million related to the 2011 term loan were written off during 2015, of which only $9.2
million had not previously been amortized.
Covenants. Our bank financing arrangements and senior notes contain certain customary covenants that restrict our
ability to incur additional indebtedness, create or permit liens on assets and engage in mergers or consolidations. The covenants
related to bank financing arrangements also include, among other things, a maximum leverage ratio. The 7.125% senior notes
due 2018 issued by Medco are also subject to an interest rate adjustment in the event of a downgrade in the ratings to below
investment grade. At December 31, 2015, we were in compliance with all covenants associated with our debt instruments.