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Express Scripts Reports Strong Second Quarter Earnings
Date:7/29/2009

ST. LOUIS, July 29 /PRNewswire-FirstCall/ -- Express Scripts, Inc. (Nasdaq: ESRX) announced second quarter net income from continuing operations of $192.0 million, or $0.74 per diluted share. Excluding non-recurring items in the quarter, primarily related to the previously announced acquisition of WellPoint's pharmacy benefit management business ("NextRx"), earnings per diluted share was $0.88, up 16% from $0.76 for the same period last year. These earnings for the quarter include $0.05 per share of dilution related to the pre-close debt and equity issuances which were completed on June 9 and 10, 2009, respectively.

"The continued execution of our business model, which aligns our interests with those of plan sponsors and patients, again resulted in savings for our clients and members and a strong quarter for our shareholders," stated George Paz, president, chief executive officer and chairman.

"We have made significant progress during the quarter toward closing the NextRx transaction by clearing regulatory hurdles and securing favorable financing. We look forward to completing the acquisition in the fourth quarter and commencing our alliance with WellPoint, where together we plan to tackle the nation's priority to improve health outcomes and reduce waste," stated Paz.

Second Quarter 2009 Highlights (2009 data reflected on an adjusted basis. See Table 2)

  • Gross profit increased 18% from 2008.
  • EBITDA per adjusted claim was $3.20, an increase of 20% from the prior year.
  • In June, the Company raised $4.1 billion of cash to pre-fund the NextRx acquisition (26.5 million new shares and $2.5 billion of new public debt).

2009 Guidance

The Company previously provided 2009 earnings per diluted share guidance in a range of $3.67 to $3.77, which excluded any impact related to the NextRx transaction. Due to strong underlying fundamentals in the core business, the Company now believes 2009 earnings on the same basis will be in a range of $3.72 to $3.82, representing 20% to 23% growth over 2008.

The following factors are not reflected in the guidance range above:

  • NextRx results post-close
  • 2009 financing costs related to the NextRx transaction of $0.41 per diluted share
  • Estimated net non-recurring items for the year, mainly pertaining to the NextRx transaction, in a range of $0.30 to $0.32 per diluted share

See Table 4 for further details.

About Express Scripts

Express Scripts, Inc. is one of the largest PBM companies in North America, providing PBM services to thousands of client groups, including managed-care organizations, insurance carriers, employers, third-party administrators, public sector, workers' compensation, and union-sponsored benefit plans.

Express Scripts provides integrated PBM services, including network-pharmacy claims processing, home delivery services, benefit-design consultation, drug-utilization review, formulary management, and medical- and drug-data analysis services. The Company also distributes a full range of biopharmaceutical products directly to patients or their physicians, and provides extensive cost-management and patient-care services.

Express Scripts is headquartered in St. Louis, Missouri. More information can be found athttp://www.express-scripts.com, which includes expanded investor information and resources. More information on the Center for Cost-Effective Consumerism can be found at http://www.consumerology.org.

SAFE HARBOR STATEMENT

This press release contains forward-looking statements, including, but not limited to, statements related to the Company's plans, objectives, expectations (financial and otherwise) or intentions. Actual results may differ significantly from those projected or suggested in any forward-looking statements. Factors that may impact these forward-looking statements can be found in the Management's Discussion and Analysis of Financial Condition and Results of Operations in our Form 10-Q on file with the SEC. A copy of this form can be found at the Investor Relations section of Express Scripts' web site at http://www.express-scripts.com.

We do not undertake any obligation to release publicly any revisions to such forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

FINANCIAL TABLES FOLLOW

                             EXPRESS SCRIPTS, INC.
                 Unaudited Consolidated Statement of Operations

                                 Three Months Ended      Six Months Ended
                                     June 30,                June 30,
                                -------------------      -----------------
    (in millions, except per
     share data)                   2009      2008         2009       2008
                                   ----      ----         ----       ----

    Revenues(1)                 $5,503.3  $5,530.8    $10,926.1  $11,021.6
    Cost of revenues (1)         4,909.3   5,028.2      9,798.0   10,052.9
                                 -------   -------      -------   --------
        Gross profit               594.0     502.6      1,128.1      968.7
     Selling, general and
      administrative               214.0     185.9        392.6      357.5
                                   -----     -----        -----      -----
     Operating income              380.0     316.7        735.5      611.2
                                   -----     -----        -----      -----
     Other (expense) income:
        Undistributed loss from
         joint venture                 -      (0.1)           -       (0.4)
        Interest income              1.2       3.3          2.1        8.7
        Interest expense           (77.6)    (17.0)       (94.7)     (40.3)
                                   -----     -----        -----      -----
                                   (76.4)    (13.8)       (92.6)     (32.0)
                                   -----     -----        -----      -----
     Income before income
      taxes                        303.6     302.9        642.9      579.2
     Provision for income
      taxes                        111.6     111.0        236.2      209.1
                                   -----     -----        -----      -----
     Net income from continuing
      operations                   192.0     191.9        406.7      370.1
     Net income (loss) from
      discontinued operations,
      net of tax                     0.3      (1.7)           -       (2.8)
                                     ---      ----          ---       ----
     Net income                   $192.3    $190.2       $406.7     $367.3
                                  ======    ======       ======     ======

     Weighted average number
      of common shares
      outstanding during the
      period:
        Basic:                     256.6     248.7        252.1      250.5
        Diluted:                   258.8     252.0        254.3      253.9

     Basic earnings per share:
          Continuing
           operations              $0.75     $0.77        $1.61      $1.48
          Discontinued
           operations                  -     (0.01)           -      (0.01)
          Net earnings              0.75      0.76         1.61       1.47

     Diluted earnings per share:
          Continuing
           operations              $0.74     $0.76        $1.60      $1.46
          Discontinued
           operations                  -     (0.01)           -      (0.01)
          Net earnings              0.74      0.75         1.60       1.45

    (1) Includes retail pharmacy co-payments of $721.1 million and $824.1
    million for the three months ended June 30, 2009 and 2008, respectively
    and $1,543.8 million and $1,711.8 million for the six months ended June
    30, 2009 and 2008, respectively.



                              EXPRESS SCRIPTS, INC.
                       Unaudited Consolidated Balance Sheet

                                                   June 30,       December 31,
     (in millions, except share data)                2009             2008
                                                     ----             ----
     Assets
     Current assets:
       Cash and cash equivalents                  $3,661.0            $530.7
       Restricted cash and investments                 6.3               4.8
       Short-term investments                      1,202.0               8.4
       Receivables, net                            1,148.1           1,155.9
       Inventories                                   180.2             203.0
       Deferred taxes                                119.7             118.2
       Prepaid expenses and other current assets      24.4              22.8
                                                      ----              ----
            Total current assets                   6,341.7           2,043.8
     Property and equipment, net                     222.0             222.2
     Goodwill                                      2,882.4           2,881.1
     Other intangible assets, net                    327.0             332.6
     Other assets                                     31.0              29.5
                                                      ----              ----
            Total assets                          $9,804.1          $5,509.2
                                                  ========          ========

     Liabilities and Stockholders' Equity
     Current liabilities:
       Claims and rebates payable                 $1,354.1          $1,380.7
       Accounts payable                              480.4             496.4
       Accrued expenses                              404.3             420.5
       Current maturities of long-term debt          620.0             420.0
       Current liabilities of discontinued
        operations                                     6.9               4.1
                                                       ---               ---
            Total current liabilities              2,865.7           2,721.7
     Long-term debt                                3,471.9           1,340.3
     Other liabilities                               382.3             369.0
                                                     -----             -----
            Total liabilities                      6,719.9           4,431.0
                                                   -------           -------

     Stockholders' Equity:
       Preferred stock, 5,000,000 shares
        authorized, $0.01 par value per share;
        and no shares issued and outstanding             -                 -
       Common stock, 1,000,000,000 shares
        authorized, $0.01 par value; shares issued:
        345,296,000 and 318,958,000, respectively;
        shares outstanding: 274,415,000 and
        247,649,000, respectively                      3.5               3.2
       Additional paid-in capital                  2,228.5             640.8
       Accumulated other comprehensive income          9.9               6.2
       Retained earnings                           3,767.7           3,361.0
                                                   -------           -------
                                                   6,009.6           4,011.2
       Common stock in treasury at cost,
        70,881,000 and 71,309,000 shares,
        respectively                              (2,925.4)         (2,933.0)
                                                  --------          --------
            Total stockholders' equity             3,084.2           1,078.2
                                                   -------           -------
            Total liabilities and stockholders'
             equity                               $9,804.1          $5,509.2
                                                  ========          ========



                           EXPRESS SCRIPTS, INC.
         Unaudited Condensed Consolidated Statement of Cash Flows

                                                     Six Months Ended
                                                          June 30,
                                                        -----------
     (in millions)                                      2009    2008
                                                        ----    ----

     Cash flows from operating activities:
     Net income                                        $406.7  $367.3
     Net loss from discontinued operations, net of tax      -     2.8
                                                          ---     ---
          Net income from continuing operations         406.7   370.1
     Adjustments to reconcile net income to net cash
      provided by operating activities:
         Depreciation and amortization                   49.7    49.6
         Deferred financing fees                         57.7     1.2
         Non-cash adjustments to net income              42.5    50.3
          Changes in operating assets and liabilities:
              Claims and rebates payable                (26.6)   64.0
              Other net changes in operating assets and
               liabilities                              (11.9)  (52.4)
                                                        -----   -----
     Net cash provided by operating activities -
      continuing operations                             518.1   482.8
     Net cash (used in) provided by operating
      activities - discontinued operations               (0.1)    3.6
                                                         ----     ---
     Net cash flows provided by operating activities    518.0   486.4
                                                        -----   -----

     Cash flows from investing activities:
         Purchase of short-term investments          (1,198.9)      -
         Purchases of property and equipment            (32.0)  (30.1)
         Other                                            5.4    (0.7)
                                                          ---    ----
     Net cash used in investing activities           (1,225.5)  (30.8)
                                                     --------   -----

     Cash flows from financing activities:
         Proceeds on long-term debt, net of
          discounts                                   2,491.6       -
         Net proceeds from stock issuance             1,569.1       -
         Deferred financing fees                        (69.5)      -
         Repayment of long-term debt                   (160.1) (120.0)
         Tax benefit relating to employee stock
          compensation                                    2.9    25.4
         Treasury stock acquired                            -  (494.4)
         Net proceeds from employee stock plans           2.2    15.3
                                                          ---    ----
     Net cash provided by (used in) financing
      activities                                      3,836.2  (573.7)
                                                      -------  ------

     Effect of foreign currency translation
      adjustment                                          1.6    (0.8)
                                                          ---    ----

     Net increase (decrease) in cash and cash
      equivalents                                     3,130.3  (118.9)
     Cash and cash equivalents at beginning of
      period                                            530.7   434.7
                                                        -----   -----
     Cash and cash equivalents at end of period      $3,661.0  $315.8
                                                     ========  ======



                                  Table 1
                Unaudited Consolidated Selected Information
                               (in millions)


                                       Three Months Ended   Six Months Ended
                                            June 30,            June 30,
                                          -------------      -------------
     Claims Volume                        2009     2008      2009     2008
                                          ----     ----      ----     ----
     Network                              94.7     96.1     188.9    194.3
     Home Delivery & Specialty            10.2     10.6      20.1     21.0
     Other(1)                              0.7      0.8       1.5      1.6
                                           ---      ---       ---      ---
       Total claims                      105.6    107.5     210.5    216.9
                                         -----    -----     -----    -----

      Total adjusted claims(2)           125.6    128.0     249.7    257.6
                                         =====    =====     =====    =====

     Depreciation and Amortization (D&A):
     Gross profit D&A                     $6.7     $7.4     $13.1    $14.3
     Selling, general &
      administrative D&A                  18.4     17.8      36.6     35.3
                                          ----     ----      ----     ----
          Total D&A                      $25.1    $25.2     $49.7    $49.6
                                         =====    =====     =====    =====

     Generic Fill Rate
     Network                              69.2%    67.0%     69.1%    66.7%
     Home Delivery                        57.2%    56.8%     57.1%    55.4%
     Overall                              67.8%    65.9%     67.8%    65.5%

    (1) Other claims represent:  (a) drugs distributed through patient
    assistance programs (b) drugs distributed where we have been selected by
    the pharmaceutical manufacturer as part of a limited distribution network
    and (c) Emerging Market claims.

    (2) Total adjusted claims reflect home delivery claims multiplied by 3,
    as home delivery claims are typically 90 day claims.



                                  Table 2
                           EBITDA Reconciliation
                    (in millions, except per claim data)

    The following is a reconciliation of net income from continuing
    operations to EBITDA(1) from continuing operations.  The Company
    believes net income is the most directly comparable measure
    calculated under Generally Accepted Accounting Principles.

                                      Three Months Ended   Six Months Ended
                                           June 30,            June 30,
                                         -------------      --------------
                                         2009     2008      2009      2008
                                         ----     ----      ----      ----
     Net income from continuing
      operations, as reported          $192.0    $191.9    $406.7   $370.1
       Provision for income taxes       111.6     111.0     236.2    209.1
       Depreciation and amortization     25.1      25.2      49.7     49.6
       Interest expense, net             76.4      13.7      92.6     31.6
       Undistributed loss from joint
        venture                             -       0.1         -      0.4
                                          ---       ---       ---      ---
     EBITDA from continuing operations,
      as reported                       405.1     341.9     785.2    660.8
    Non-recurring benefit related to
     insurance recovery (2)             (15.0)        -     (15.0)       -
    Non-recurring transaction related
     costs (3)                           11.7         -      11.7        -
                                         ----       ---      ----      ---
     Adjusted EBITDA from continuing
      operations                       $401.8    $341.9    $781.9   $660.8

     Total adjusted claims              125.6     128.0     249.7    257.6

     Adjusted EBITDA per adjusted
      claim                             $3.20     $2.67     $3.13    $2.57

    The Company is providing EBITDA excluding the impact of non-recurring
    charges in order to compare the underlying financial performance to prior
    periods.

    (1) EBITDA  is earnings before taxes, depreciation and amortization, net
    interest and other income (expense); or alternatively calculated as
    operating income plus depreciation and amortization.  EBITDA is presented
    because it is a widely accepted indicator of a company's ability to
    service indebtedness and is frequently used to evaluate a company's
    performance.  EBITDA, however, should not be considered as an alternative
    to net income, as a measure of operating performance, as an alternative
    to cash flow, as a measure of liquidity or as a substitute for any other
    measure computed in accordance with accounting principles generally
    accepted in the United States. In addition, our definition and
    calculation of EBITDA may not be comparable to that used by other
    companies.

    (2) Non-recurring benefit related to insurance recovery of $15.0 million
    ($9.5 million, net of tax), included as a reduction to selling, general
    and administrative expense.

    (3) Transaction related costs include those costs directly related to our
    pending acquisition of NextRx, primarily comprised of professional fees
    of $11.7 million ($7.4 million net of tax), included in selling, general
    and administrative expense.



                                      Table 3
                            Calculation of Adjusted EPS

                                         Three Months Ended   Six Months Ended
                                               June 30             June 30
                                            --------------       -----------
                                            2009      2008       2009   2008
                                            ----      ----       ----   ----
                                                    (per diluted share)
    GAAP EPS from continuing operations     $0.74    $0.76      $1.60  $1.46

    Items included in GAAP results:

    Non-recurring benefit related to
     insurance recovery (1)                 (0.04)              (0.04)

    Non-recurring transaction related
     costs (2)                               0.03                0.03

    Non-recurring termination of bridge
     financing(3)                            0.15                0.15
                                             ----                ----

    Adjusted EPS from continuing operations $0.88    $0.76      $1.74  $1.46

    Other items included in GAAP results:
    Impact of pre-closing financing of
     NextRx acquisition (4)                 $0.05               $0.05

    The Company is providing diluted earnings per share excluding the impact
    of non-recurring charges in order to compare the underlying financial
    performance to prior periods.

    (1) Non-recurring benefit related to insurance recovery of $15.0 million
    ($9.5 million, net of tax), included as a reduction to selling, general
    and administrative expense.

    (2) Transaction related costs include those costs directly related to our
    pending acquisition of NextRx, primarily comprised of professional fees
    of $11.7 million ($7.4 million net of tax), included in selling, general
    and administrative expense.

    (3) Financing costs include bridge loan fees of $58.4 million ($36.9
    million net of tax) included in interest expense.  These fees were
    incurred to terminate the temporary bridge financing once permanent
    financing was secured.

    (4) Impact from financing of NextRx transaction completed in June 2009
    (26.45 million shares and $2.5 billion of public debt).  Costs included
    $9.1 million interest expense, offset by $0.5 million of interest income
    (total, net $5.4 million after tax).



                                    Table 4
                           2009 Guidance Information

                                      Estimated
                                     Year Ended              Year Ended
                                  December 31, 2009      December 31, 2008
                                  ------------------     ------------------
    Rollforward of previously
     provided 2009 guidance:

    Prior 2009 EPS guidance
     (excluding the impact of
     NextRx)                     $3.67   to   $3.77

    Stronger base business
     fundamentals (1)             0.05         0.05


    Revised 2009 EPS
     guidance (excluding the
     impact of NextRx)           $3.72   to   $3.82               $3.10
                                 -----        -----               -----

    GAAP items not included
     in guidance:

    Non-recurring benefit
     related to insurance
     recovery (2)                $0.04        $0.04

    Q2 non-recurring charges
     related to the NextRx
     transaction (3)             (0.18)       (0.18)

    Q3 / Q4 non-recurring
     charges related to the
     NextRx transaction (3)      (0.16)  to   (0.18)

    Impact of transaction
     financing (4)               (0.41)       (0.41)

    NextRx results post-
     close (5)                    TBD based on closing date

    (1) Due to stronger underlying fundamentals expected for remainder of
    the year, the Company raised guidance by $0.05 per diluted share.

    (2) The Company incurred a non-recurring gain related to an insurance
    recovery (unrelated to the NextRx transaction). See Table 3.

    (3) The Company incurred other non-recurring charges related to the
    transaction which are described in more detail in Table 3. The Company
    estimates further costs to be incurred in Q3 / Q4 2009 of $70 million -
    $80 million primarily for professional fees (banking, legal and
    accounting) and IT build out.

    (4) The Company completed financing for the proposed NextRx acquisition
    during Q2 ($2.5 billion public offering of senior notes and issuance of
    26.45 million shares of common stock).  The incremental interest expense
    for the year is expected to be $82.6 million, which will be partially
    offset by interest income in an amount that will vary based on the closing
    date of the acquisition.

    (5) NextRx results of operations are not included in guidance, and will
    vary based on the closing date of the acquisition.




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SOURCE Express Scripts, Inc.
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