Medco 2014 Annual Report Download - page 62

Express Scripts 2014 Annual Report
60
Wehaverestrictedcashandinvestmentsintheamountof$9.1millionand$22.8millionatDecember31,2014and
2013,respectively.Theseamountsconsistofinvestmentsandcash,whichincludeamountsrestrictedforstateinsurance
licensureandgrouppurchasingorganizationpurposes.
Accounts receivable.Basedonourrevenuerecognitionpoliciesdescribedbelow,certainclaimsattheendofeach
periodareunbilled.AsofDecember31,2014and2013,unbilledreceivableswere$1,883.6millionand$2,618.3million,
respectively.Unbilledreceivablesaretypicallybilledtoclientswithin30daysbasedonthecontractualbillingscheduleagreed
uponwiththeclient.
Ourprimaryaccountsreceivablereserveisourallowancefordoubtfulaccounts,whichequalsourestimated
uncollectiblereceivables.Thisestimateisbasedonthecurrentstatusofeachcustomer’sreceivablebalanceaswellascurrent
economicandmarketconditions.Ourallowancefordoubtfulaccountsalsoreflectsamountsassociatedwithmemberpremiums
fortheCompany’sMedicarePartDproductofferingsandamountsforcertainsuppliesreimbursedbygovernmentagenciesand
insurancecompanies.Receivablesarewrittenoffagainsttheallowancesonlyupondeterminationthatsuchamountsarenot
recoverableandallcollectionattemptshavefailed.Weregularlyreviewandanalyzetheadequacyoftheseallowancesbasedon
avarietyoffactors,includingtheageoftheoutstandingreceivableandthecollectionhistory.Whencircumstancesrelatedto
specificcollectionpatternschange,estimatesoftherecoverabilityofreceivablesareadjusted.
AsofDecember31,2014and2013,wehavetotalaccountsreceivablereservesforcontinuingoperationsof$260.3
millionand$231.8million,respectively,whichincludesacontractualallowanceforcertainreceivablesfromthird-partypayors
basedonourcollectionexperience.IncludedinouraccountsreceivablereservesforcontinuingoperationsasofDecember31,
2014and2013isanallowancefordoubtfulaccountsforcontinuingoperationsof$165.1millionand$202.2million,
respectively.Asapercentofaccountsreceivable,ouraccountsreceivablereservesforcontinuingoperationswere4.2%and
5.4%atDecember31,2014and2013,respectively.
TheCompanyisaprovidertostateofIllinoisemployees.AsofDecember31,2014and2013,wehavean
outstandingreceivablebalanceofapproximately$212.5millionand$320.1million,respectively,fromthestateofIllinois.We
havenotrecordedareserveagainstthisreceivable,asitisassociatedwithastate,whichcontinuestomakepayments.We
believethefullreceivablebalancewillberealized.
Inventories.Inventoriesconsistofprescriptiondrugsandmedicalsupplieswhicharestatedattheloweroffirst-in
first-outcostormarket.
Property and equipment.Propertyandequipmentiscarriedatcostandisdepreciatedusingthestraight-line
methodoverestimatedusefullivesof7yearsforfurnitureand3to5yearsforequipmentandpurchasedcomputersoftware.
Buildingsareamortizedonastraight-linebasisoverestimatedusefullivesof10to35years.Leaseholdimprovementsare
amortizedonastraight-linebasisovertheremainingtermoftheleaseortheusefullifeoftheasset,ifshorter.Expendituresfor
repairs,maintenanceandrenewalsarechargedtoincomeasincurred.Expendituresthatimproveanassetorextendits
estimatedusefullifearecapitalized.Whenpropertiesareretiredorotherwisedisposedof,therelatedcostandaccumulated
depreciationareremovedfromtheaccountsandanygainorlossisincludedinincome.
Researchanddevelopmentexpendituresrelatingtothedevelopmentofsoftwareforinternalpurposesarecharged
toexpenseuntiltechnologicalfeasibilityisestablished.Thereafter,theremainingsoftwareproductioncostsuptothedate
placedintoproductionarecapitalizedandincludedaspropertyandequipment.Amortizationofthecapitalizedamounts
commencesonthedateplacedintoproductionandiscomputedonanindividualproductbasisusingthestraight-linemethod
overtheremainingestimatedeconomiclifeoftheproductbutnotmorethan5years.Reductions,ifany,inthecarryingvalue
ofcapitalizedsoftwarecoststonetrealizablevalueareexpensed.Withrespecttocapitalizedsoftwarecosts,werecorded
amortizationexpenseof$232.9million,$205.0millionand$137.6millionin2014,2013and2012,respectively.
Marketable securities.Allinvestmentsnotincludedascashandcashequivalentsareaccountedforinaccordance
withapplicableaccountingguidanceforinvestmentsindebtandequitysecurities.Managementdeterminestheappropriate
classificationofourmarketablesecuritiesatthetimeofpurchaseandre-evaluatessuchdeterminationateachbalancesheet
date.AllmarketablesecuritiesatDecember31,2014and2013wererecordedinothernoncurrentassetsonourconsolidated
balancesheet(seeNote2-Fairvaluemeasurements).
Securitiesboughtandheldprincipallyforthepurposeofsellingthemintheneartermareclassifiedastrading
securities.Tradingsecuritiesarereportedatfairvalue,whichisbaseduponquotedmarketprices,withunrealizedholdinggains
andlossesincludedinearnings.Weheldtradingsecurities,consistingprimarilyofmutualfunds,totaling$25.3millionand
$18.7millionatDecember31,2014and2013,respectively.Wemaintainourtradingsecuritiestooffsetchangesincertain
liabilitiesrelatedtoourdeferredcompensationplandescribedinNote10-Employeebenefitplansandstock-based
56