Stock-based compensation plans

9 Months Ended

Sep. 30, 2011

Stock-based compensation plans [Abstract]

Stock-based compensation plans

Note 9 — Stock-based compensation plans

          In March 2011, the Board of Directors adopted the Express Scripts, Inc. 2011 Long-Term Incentive Plan (the “2011 LTIP”), which provides for the grant of various equity awards with various terms to our officers, Board of Directors and key employees selected by the Compensation Committee of the Board of Directors. The 2011 LTIP was approved by our stockholders in May 2011 and became effective June 1, 2011. Under the 2011 LTIP, we may issue stock options, stock-settled stock appreciation rights (“SSRs”), restricted stock units, restricted stock awards, performance share awards, and other types of awards. The maximum number of shares available for awards under the 2011 LTIP is 30 million. The maximum term of stock options, SSRs, restricted stock and performance shares granted under the 2011 LTIP is 10 years. Subsequent to the effective date of the 2011 LTIP, no additional awards will be granted under the 2000 Long-Term Incentive Plan (“2000 LTIP”), which provided for the grant of various equity awards with various terms to our officers, Board of Directors and key employees selected by the Compensation Committee of the Board of Directors.

          Under our stock-based compensation plans, we have issued stock options, SSRs, restricted stock awards, restricted stock units, and performance share awards. Awards are typically settled using treasury shares. Due to the nature of the awards, we use the same valuation methods and accounting treatments for SSRs and stock options. During the first nine months of 2011, we granted 2,323,000 stock options with a weighted average fair market value of $17.71. The SSRs and stock options granted under both the 2000 LTIP and 2011 LTIP have three-year graded vesting.

          During the first nine months of 2011, we granted to certain officers and employees approximately 259,000 restricted stock units and performance shares with a weighted average fair market value of $56.53. The restricted stock units granted under both the 2000 LTIP and the 2011 LTIP have three-year graded vesting and the performance shares cliff vest at the end of the three years. The number of performance shares that ultimately vest is dependent upon achieving specific performance targets. Prior to vesting, these shares are subject to forfeiture to us without consideration upon termination of employment under certain circumstances. The original amount of performance share grants is subject to a multiplier of 2.5 based on certain performance metrics. During the first nine months of 2011, approximately 215,000 additional performance shares were granted to certain officers for exceeding certain performance metrics. The total number of non-vested restricted stock and performance share awards was 773,000 at September 30, 2011 and 950,000 at December 31, 2010.

          We recognized stock-based compensation expense of $10.9 million and $13.1 million in the three months ended September 30, 2011 and 2010, respectively and $36.2 million and $37.2 million in the nine months ended September 30, 2011 and 2010, respectively. Unamortized stock-based compensation as of September 30, 2011 was $32.9 million for stock options and SSRs and $18.0 million for restricted stock and performance shares.

          The fair value of options and SSRs granted is estimated on the date of grant using a Black-Scholes multiple option-pricing model with the following weighted average assumptions:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2011			2010			2011			2010
Expected life of option	3-5 years			3-5 years			3-5 years			3-5 years
Risk-free interest rate		0.3%-2.1	%		0.8%-1.4	%		0.3%-2.2	%		0.8%-2.4	%
Expected volatility of stock		35%-39	%		37%-41	%		35%-39	%		36%-41	%
Expected dividend yield	None			None			None			None