Medco 2014 Annual Report Download - page 84

Express Scripts 2014 Annual Report
82
toExpressScriptscommonstockuponclosingoftheMerger.PriortotheMerger,awardsweretypicallysettledusingtreasury
shares.UponcloseoftheMerger,treasurysharesofESIwerecancelledandsubsequentawardsweresettledbyissuanceofnew
shares.Themaximumtermofstockoptions,SSRs,restrictedstockunits,restrictedstockawardsandperformanceshares
grantedunderthe2000LTIPis10years.
Theprovisionsofboththe2000LTIPand2011LTIPallowemployeestousesharestocovertaxwithholdingon
stockawards.Uponvestingofrestrictedstockandperformanceshares,employeeshavetaxableincomesubjecttostatutory
withholdingrequirements.Thenumberofsharesissuedtoemployeesmaybereducedbythenumberofshareshavingamarket
valueequaltoourminimumstatutorywithholdingforfederal,stateandlocaltaxpurposes.
ThetaxbenefitrelatedtoemployeestockcompensationrecognizedduringtheyearsendedDecember31,2014,
2013and2012was$37.3million,$60.0millionand$153.9million,respectively.
EffectiveupontheclosingoftheMerger,theCompanyassumedthesponsorshipoftheMedcoHealthSolutions,
Inc.2002StockIncentivePlan(the“2002StockIncentivePlan”),allowingExpressScriptstoissueawardsunderthisplan.As
ofDecember31,2014,12.4millionsharesareavailableunderthisplan.Underthe2002StockIncentivePlan,Medcogranted,
and,followingtheMerger,ExpressScriptshasgrantedandmaycontinuetogrant,stockoptions,restrictedstockunitsand
othertypesofawardstoofficers,employeesanddirectors.Medco’sawardsgrantedunderthe2002StockIncentivePlanare
subjecttoacceleratedvestinguponchangeincontrolandtermination.
AspartoftheconsiderationtransferredintheMerger,ExpressScriptsissued41.5millionreplacementstock
optionstoholdersofMedcostockoptions,valuedat$706.1million,and7.2millionreplacementrestrictedstockunitsto
holdersofMedcorestrictedstockunits,valuedat$174.9million.SeeNote3-Changesinbusiness,forfurtherdescriptionof
valuation.
Restricted stock units and performance shares.ExpressScriptsgrantsrestrictedstockunitstocertainofficers,
directorsandemployeesandperformancesharestocertainofficersandemployees.Restrictedstockgrantedunderthe2000
LTIPand2011LTIP,aswellasrestrictedstockgrantedsubsequenttotheMergerunderthe2002StockIncentivePlan,
generallyhavethree-yeargradedvesting.Performancesharesgrantedunderthe2000LTIP,2011LITPandthe2002Stock
InventivePlan,aswellasrestrictedsharesgrantedpriortotheMergerunderthe2002StockIncentivePlan,generallyhave
three-yearcliffvesting.Priortovesting,sharesaresubjecttoforfeiturewithoutconsiderationuponterminationofemployment
undercertaincircumstances.Thenumberofperformancesharesthatultimatelyvestisdependentuponachievingspecific
performancetargets.Theoriginalvalueoftheperformancesharegrantsissubjecttoamultiplierofupto2.5basedoncertain
performancemetrics.
Unearnedcompensationrelatingtotheseawardsisamortizedtonon-cashcompensationexpenseoverthe
estimatedvestingperiods.AsofDecember31,2014and2013,unearnedcompensationrelatedtorestrictedstockunitsand
performanceshareswas$42.0millionand$52.5million,respectively.Werecordedpre-taxcompensationexpenserelatedto
restrictedstockunitsandperformancesharegrantsof$63.0million,$87.4millionand$190.0millionin2014,2013and2012,
respectively.ThefairvalueofrestrictedstockunitsvestedduringtheyearsendedDecember31,2014,2013and2012was
$81.9million,$136.7millionand$213.8million,respectively.Theweighted-averageremainingrecognitionperiodfor
restrictedstockunitsandperformancesharesis1.9years.
AsummaryofthestatusofrestrictedstockunitsandperformancesharesasofDecember31,2014,andchanges
duringtheyearendedDecember31,2014,ispresentedbelow.
Shares
(in millions)
Weighted-
Average Grant
Date Fair Value
Per Share
Outstandingatbeginningofyear 3.1 $56.58
Granted 0.9 76.95
Other(1) 0.1 56.50
Released (1.5)56.18
Forfeited/cancelled (0.2)63.22
OutstandingatDecember31,2014 2.4 64.06
VestedanddeferredatDecember31,2014 0.1 56.50
Non-vestedatDecember31,2014 2.3 $64.16
(1) Representsadditionalperformancesharesissuedabovetheoriginalvalueforexceedingcertainperformancemetrics.
78