In November 2013, the Company's board of directors increased the quarterly cash dividend by 12% from $0.21 per share to $0.235 per share.

In November 2012, the Company's board of directors authorized a program allowing the Company to purchase up to $750 million of its outstanding shares of common stock, subject to market conditions. During the six months ended March 31, 2014, the Company purchased 4.1 million shares of its common stock for a total of $269.8 million. The Company had $93.2 million of availability remaining under this share repurchase program as of March 31, 2014. In August 2013, the Company's board of directors authorized a new program allowing the Company to purchase up to an additional $750 million of its outstanding shares of common stock, subject to market conditions.

In March 2013, the Company, Walgreens, and Alliance Boots entered into various agreements and arrangements pursuant to which Walgreens and Alliance Boots together were granted the right to purchase a minority equity position in the Company, beginning with the right, but not the obligation, to purchase up to 19,859,795 shares of the Company's common stock (approximately 7% of the Company's common stock, on a fully diluted basis as of the date of issuance, assuming the exercise in full of the Warrants, as defined below) in open market transactions. In connection with these arrangements, Walgreens Pharmacy Strategies, LLC, a wholly owned subsidiary of Walgreens, was issued (a) a warrant to purchase up to 11,348,456 shares of the Company's common stock at an exercise price of $51.50 per share exercisable during a six month period beginning in March 2016, and (b) a warrant to purchase up to 11,348,456 shares of the Company's common stock at an exercise price of $52.50 per share exercisable during a six-month period beginning in March 2017 and Alliance Boots Luxembourg S.à.r.l., a wholly owned subsidiary of Alliance Boots, was issued (a) a warrant to purchase up to 11,348,456 shares of the Company's common stock at an exercise price of $51.50 per share exercisable during a six-month period beginning in March 2016 and (b) a warrant to purchase up to 11,348,456 shares of the Company's common stock at an exercise price of $52.50 per share exercisable during a six-month period beginning in March 2017 (collectively, the “Warrants”).

The Company valued these Warrants as of March 18, 2013 (date of issuance) and revised the valuation each subsequent quarter. As of March 31, 2014, the Warrants with an exercise price of $51.50 were valued at $15.09 per share and the Warrants with an exercise price of $52.50 were valued at $15.75 per share. In total, the Warrants were valued at $700.0 million as of March 31, 2014. Refer to “Critical Accounting Policies and Estimates – Warrants” in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2013 for a more detailed description of the accounting for the Warrants.

The Company has taken steps to mitigate the potentially dilutive effect that the exercise of the Warrants could have by hedging a portion of its future obligation to deliver common stock with a financial institution and repurchasing additional shares of its common stock for the Company's own account over time. In June 2013, the Company commenced its hedging strategy by entering into a contract with a financial institution pursuant to which it has executed a series of issuer capped call option transactions (“Capped Calls”). The Capped Calls give the Company the right to buy 60% of the shares of its common stock subject to the Warrants at specified prices at maturity, should the Warrants be exercised in 2016 and 2017 and assuming the Company's future share price does not exceed the “cap” price in the Capped Calls. If the Company's share price exceeds the “cap” price in the Capped Calls at the time the Warrants are exercised, the number of shares that will be delivered to the Company under the Capped Calls will be reduced, and accordingly, will cover less than 60% of the shares of common stock subject to the Warrants.

Through September 30, 2013, the Company purchased Capped Calls on 15.3 million shares of its common stock for a total premium of $163.4 million. During the six months ended March 31, 2014, the Company completed this hedge transaction by purchasing Capped Calls on an additional 11.9 million shares of its common stock for a total premium of $205.3 million. The Capped Calls permit the Company to acquire shares of its common stock at strike prices of $51.50 and $52.50 and have expiration dates ranging from February 2016 through October 2017. The Capped Calls permit net share settlement, which is limited by caps on the market price of the Company's common stock. The Company has accounted for the Capped Calls as equity contracts and therefore, the above premiums were recorded as a reduction to paid-in capital.

Basic earnings per share is computed on the basis of the weighted average number of shares of common stock outstanding during the periods presented. Diluted earnings per share is computed on the basis of the weighted average number of shares of common stock outstanding during the periods presented plus the dilutive effect of stock options, restricted stock, restricted stock units, and the Warrants.

	Three months ended		Six months ended
	March 31,		March 31,
(in thousands)	2014	2013	2014	2013
Weighted average common shares outstanding - basic	229,409	230,422	229,852	231,409
Dilutive effect of stock options, restricted
stock, and restricted stock units	4,863	4,165	4,985	3,898
Dilutive effect of Warrants	1,996	-	1,813	-
Weighted average common shares outstanding - diluted	236,268	234,587	236,650	235,307

The potentially dilutive stock options that were antidilutive for the three and six months ended March 31, 2014 were 2.3 million and 1.8 million, respectively. There were no potentially dilutive stock options that were antidilutive for the three and six months ended March 31, 2013.