Medco 2014 Annual Report Download - page 82

Express Scripts 2014 Annual Report
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impactedtheCompany’seffectivetaxrate.TheInternalRevenueService(“IRS”)iscurrentlyexaminingESI’s2010and2011
andExpressScripts’combined2012consolidatedUnitedStatesfederalincometaxreturns.Ourfederalincometaxaudit
uncertaintiesprimarilyrelatetoboththevaluationandtimingofdeductions,whilevariousstateincometaxaudituncertainties
primarilyrelatetotheattributionofoveralltaxableincometothosestates.Wehavetakenpositionsincertaintaxing
jurisdictionsforwhichitisreasonablypossiblethetotalamountsofunrecognizedtaxbenefitsmaydecreasebyupto$100
millionwithinthenexttwelvemonthsasaresultofthefinalizationofincometaxauditsandlapsesofstatutesoflimitations.
TheCompanyiscurrentlypursuinganapproximate$531.0millionpotentialtaxbenefitrelatedtothedispositionof
PolyMedicaCorporation(Liberty).Nonetbenefithasbeenrecognized.Anetbenefitmaybecomerealizableinthefuture;
howeverwecannotpredictwithanycertaintytheexactamount.
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9. Common stock
Accelerated share repurchases.OnDecember9,2013,aspartofourShareRepurchaseProgramdescribedbelow,
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pershare,whichrepresented,basedontheclosingsharepriceofourcommonstockon
NasdaqonDecember9,2013,approximately90%ofthe$1,500.0millionamountofthe2013ASRProgram.Thefinal
purchasepricepershare(the“forwardprice”)andthefinalnumberofsharesreceivedwasdeterminedusingthearithmetic
meanofthedailyvolume-weightedaveragepriceoftheCompany’scommonstock(the“VWAP”)overthetermofthe2013
ASRProgramlessadiscountgrantedunderthe2013ASRAgreement.InApril2014,wesettledthe2013ASRAgreementand
received0.6millionadditionalshares,resultinginatotalof20.7millionsharesreceivedunderthe2013ASRAgreement.
The2013ASRAgreementwasaccountedforasaninitialtreasurystocktransactionandaforwardstockpurchase
contract.Werecordedthistransactionasanincreasetotreasurystockof$1,350.1million,andrecordedtheremaining$149.9
millionasadecreasetoadditionalpaid-incapitalintheconsolidatedbalancesheetatDecember31,2013.The$149.9million
recordedinadditionalpaid-incapitalwasreclassifiedtotreasurystockuponcompletionofthe2013ASRProgramonApril16,
2014.Theforwardstockpurchasecontractwasclassifiedasanequityinstrumentandwasdeemedtohaveafairvalueofzero
attheeffectivedateofthe2013ASRAgreement.Theinitialdeliveryofsharesresultedinanimmediatereductionofthe
outstandingsharesusedtocalculatetheweighted-averagecommonsharesoutstandingforbasicanddilutednetincomeper
shareontheeffectivedateofthe2013ASRAgreement.Theremaining0.6millionsharesreceivedforthesettlementtothe
ASRProgramreducedweighted-averagecommonsharesoutstandingfortheyearendedDecember31,2014.
Treasury share repurchases.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.ExpressScriptseliminatedthevalueoftreasury
shares,atcost,immediatelypriortotheMergerasareductiontoretainedearningsandpaid-incapital.
IneachofMarch2014andDecember2014,theBoardofDirectorsofExpressScriptsapprovedanincreaseinthe
authorizednumberofsharesthatmaybepurchasedunderthesharerepurchaseprogram(the“ShareRepurchaseProgram”),
originallyannouncedandexecutedduring2013.Eachauthorizationapprovedanadditional65.0million,foratotal
authorizationof205.0millionshares(includingsharespreviouslypurchased,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ShareRepurchase
Program.
Includingthesharesrepurchasedthroughthe2013ASRProgram,werepurchased62.1millionand60.4million
sharesfor$4,642.9millionand$3,905.3millionduringtheyearsendedDecember31,2014and2013,respectively.
Repurchasesduring2013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ShareRepurchase
Program.AsofDecember31,2014,therewere83.7millionsharesremainingundertheShareRepurchase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anddebt.