Express Scripts Reports Strong Third Quarter Earnings
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ST. LOUIS, Oct. 28 /PRNewswire-FirstCall/ -- Express Scripts, Inc. (Nasdaq: ESRX) announced third quarter net income from continuing operations of $196.9 million, or $0.71 per diluted share. Excluding non-recurring items in the quarter, including a legal settlement and items related to the previously announced acquisition of WellPoint's pharmacy benefit management business ("NextRx"), earnings was $0.81 per diluted share. These earnings for the quarter include $0.18 per share of dilution related to the pre-close debt and equity issuances which were completed in the second quarter of 2009. Excluding all aforementioned items, the Company had earnings of $0.99, which compares to third quarter 2008 results of $0.81, a 22% increase.
"Our third quarter results reflect an unwavering commitment to our business model of alignment. Our world-class clinical offerings enabled by our unique behavior centric approach, provides a value proposition unmatched in the marketplace," stated George Paz, president, chief executive officer and chairman. "Our results are a testament to our ability to provide plan sponsors and patients a pharmacy benefit that optimizes health outcomes while driving out waste."
Third Quarter 2009 Highlights (2009 data reflected on an adjusted basis. See Table 2)
-- Total adjusted claims of 126.3 million, up 2% from 2008
-- Gross profit increased 18% from 2008
-- EBITDA per adjusted claim was $3.38, an increase of 18% from 2008
-- Record cash flow from continuing operations of $395.3 million, up 62%
from 2008
Guidance
The Company previously provided 2009 earnings per diluted share guidance in a range of $3.72 to $3.82, 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 $3.76 to $3.82, representing 21% 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 $0.36 to $0.38 per diluted share
The Company anticipates closing the NextRx transaction in the next four to six weeks. As previously stated, the Company expects the transaction will be moderately accretive, excluding amortization costs, in 2010; however the Company will provide full 2010 guidance with its fourth quarter earnings release.
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 at http://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 Nine Months Ended
September 30, September 30,
------------------- ------------------
(in millions, except
per share data) 2009 2008 2009 2008
---- ---- ---- ----
Revenues(1) $5,619.4 $5,450.5 $16,545.5 $16,472.1
Cost of revenues (1) 5,006.8 4,930.1 14,804.8 14,983.0
------- ------- -------- --------
Gross profit 612.6 520.4 1,740.7 1,489.1
Selling, general and
administrative 254.1 189.7 646.7 547.1
----- ----- ----- -----
Operating income 358.5 330.7 1,094.0 942.0
----- ----- ------- -----
Other (expense) income:
Non-operating charges,
net - (2.0) - (2.0)
Undistributed loss
from joint venture - - - (0.3)
Interest income 2.0 2.1 4.1 10.8
Interest expense (48.0) (15.7) (142.7) (56.1)
----- ----- ------ -----
(46.0) (15.6) (138.6) (47.6)
----- ----- ------ -----
Income before income taxes 312.5 315.1 955.4 894.4
Provision for income taxes 115.6 112.1 351.8 321.1
----- ----- ----- -----
Net income from continuing
operations 196.9 203.0 603.6 573.3
Net income (loss) from
discontinued operations,
net of tax 0.7 (1.1) 0.7 (4.0)
--- ---- --- ----
Net income $197.6 $201.9 $604.3 $569.3
====== ====== ====== ======
Weighted average number
of common shares
outstanding during
the period:
Basic: 274.5 247.1 259.7 249.3
Diluted: 277.2 250.3 262.1 252.7
Basic earnings per share:
Continuing operations $0.72 $0.82 $2.32 $2.30
Discontinued operations - - - (0.02)
Net earnings 0.72 0.82 2.33 2.28
Diluted earnings per share:
Continuing operations $0.71 $0.81 $2.30 $2.27
Discontinued operations - - - (0.02)
Net earnings 0.71 0.81 2.31 2.25
(1) Includes retail pharmacy co-payments of $708.4 million and $733.7
million for the three months ended September 30, 2009 and 2008,
respectively and $2,252.2 million and $2,445.5 million for the nine
months ended September 30, 2009 and 2008, respectively.
EXPRESS SCRIPTS, INC.
Unaudited Consolidated Balance Sheet
September 30, December 31,
(in millions, except share data) 2009 2008
---- ----
Assets
Current assets:
Cash and cash equivalents $3,942.4 $530.7
Restricted cash and investments 8.1 4.8
Short-term investments 1,202.7 8.4
Receivables, net 1,249.8 1,155.9
Inventories 184.2 203.0
Deferred taxes 126.2 118.2
Prepaid expenses and other
current assets 29.6 22.8
---- ----
Total current assets 6,743.0 2,043.8
Property and equipment, net 265.7 222.2
Goodwill 2,870.3 2,881.1
Other intangible assets, net 317.2 332.6
Other assets 32.9 29.5
---- ----
Total assets $10,229.1 $5,509.2
========= ========
Liabilities and Stockholders' Equity
Current liabilities:
Claims and rebates payable $1,400.9 $1,380.7
Accounts payable 585.1 496.4
Accrued expenses 524.2 420.5
Current maturities of long-term debt 540.1 420.0
Current liabilities of
discontinued operations 5.6 4.1
--- ---
Total current liabilities 3,055.9 2,721.7
Long-term debt 3,472.2 1,340.3
Other liabilities 393.5 369.0
----- -----
Total liabilities 6,921.6 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: 345,274,000 and
318,958,000, respectively;
shares outstanding: 274,720,000 and
247,649,000, respectively 3.5 3.2
Additional paid-in capital 2,244.0 640.8
Accumulated other comprehensive income 14.2 6.2
Retained earnings 3,965.3 3,361.0
------- -------
6,227.0 4,011.2
Common stock in treasury at cost,
70,554,000 and
71,309,000 shares, respectively (2,919.5) (2,933.0)
-------- --------
Total stockholders' equity 3,307.5 1,078.2
------- -------
Total liabilities and stockholders'
equity $10,229.1 $5,509.2
========= ========
EXPRESS SCRIPTS, INC.
Unaudited Condensed Consolidated Statement of Cash Flows
Nine Months
Ended
September 30,
---------------
(in millions) 2009 2008
---- ----
Cash flows from operating activities:
Net income $604.3 $569.3
Net (income) loss from discontinued
operations, net of tax (0.7) 4.0
---- ---
Net income from continuing operations 603.6 573.3
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 73.5 72.9
Deferred financing fees 59.0 1.8
Non-cash adjustments to net income 77.1 98.8
Changes in operating assets and liabilities:
Claims and rebates payable 20.2 33.7
Other net changes in operating
assets and liabilities 80.0 (53.4)
---- -----
Net cash provided by operating
activities - continuing operations 913.4 727.1
Net cash provided by operating
activities - discontinued operations 13.1 1.9
---- ---
Net cash flows provided by operating activities 926.5 729.0
----- -----
Cash flows from investing activities:
Purchase of short-term investments (1,198.9) -
Purchases of property and equipment (90.5) (59.9)
Acquisition, net of cash - (246.5)
Short-term investments transferred from cash - (49.3)
Proceeds from sale of businesses - 27.7
Other 5.4 (0.9)
--- ----
Net cash used in investing activities (1,284.0) (328.9)
-------- ------
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 (240.1) (180.1)
Tax benefit relating to employee
stock compensation 7.7 39.2
Treasury stock acquired - (494.4)
Net proceeds from employee stock plans 7.1 29.2
--- ----
Net cash provided by (used in) financing activities 3,765.9 (606.1)
------- ------
Effect of foreign currency translation adjustment 3.3 (1.6)
--- ----
Net increase (decrease) in cash and cash equivalents 3,411.7 (207.6)
Cash and cash equivalents at beginning of period 530.7 434.7
----- -----
Cash and cash equivalents at end of period $3,942.4 $227.1
======== ======
Table 1
Unaudited Consolidated Selected Information
(in millions)
Three Months Nine Months
Ended Ended
September September
30, 30,
------------- ------------
Claims Volume 2009 2008 2009 2008
---- ---- ---- ----
Network 95.2 91.5 284.1 285.8
Home Delivery & Specialty 10.3 10.6 30.4 31.6
Other(1) 0.9 0.8 2.4 2.4
--- --- --- ---
Total claims 106.4 102.9 316.9 319.8
----- ----- ----- -----
Total adjusted claims(2) 126.3 123.5 376.0 381.1
===== ===== ===== =====
Depreciation and Amortization (D&A):
Gross profit D&A $5.8 $5.7 $18.9 $20.0
Selling, general & administrative D&A 18.0 17.6 54.6 52.9
---- ---- ---- ----
Total D&A $23.8 $23.3 $73.5 $72.9
===== ===== ===== =====
Generic Fill Rate
Network 69.6% 67.3% 69.2% 66.9%
Home Delivery 58.3% 57.2% 57.5% 56.0%
Overall 68.3% 66.2% 67.9% 65.7%
--------- ---- ---- ---- ----
(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 Nine Months
Ended Ended
September September
30, 30,
------------- ---------------
2009 2008 2009 2008
---- ---- ---- ----
Net income from continuing
operations, as reported $196.9 $203.0 $603.6 $573.3
Provision for income taxes 115.6 112.1 351.8 321.1
Depreciation and amortization 23.8 23.3 73.5 72.9
Interest expense, net 46.0 13.6 138.6 45.3
Undistributed loss from
joint venture - - - 0.3
Non-operating charges, net - 2.0 - 2.0
-- --- -- ---
EBITDA from continuing
operations, as reported 382.3 354.0 1,167.5 1,014.9
Non-recurring transaction
related costs (2) 9.6 - 21.3 -
Non-recurring legal settlement (3) 35.0 - 35.0 -
Non-recurring benefit related to
insurance recovery (4) - - (15.0) -
-- -- ----- --
Adjusted EBITDA from
continuing operations $426.9 $354.0 $1,208.8 $1,014.9
Total adjusted claims 126.3 123.5 376.0 381.1
Adjusted EBITDA per adjusted claim $3.38 $2.87 $3.21 $2.66
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) 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) incurred in Q2 2009 and $9.6
million ($6.1 million net of tax) incurred in Q3 2009, included in
selling, general and administrative expense.
(3) Non-recurring charge related to a legal settlement of $35.0 million
($22.1 million, net of tax) in Q3 2009, included in selling, general
and administrative expense.
(4) Non-recurring benefit related to insurance recovery of $15.0 million
($9.5 million, net of tax) in Q2 2009, included as a reduction to
selling, general and administrative expense.
Table 3
Calculation of Adjusted EPS
Three Months Nine Months
Ended Ended
September September
30, 30,
--------- ---------
2009 2008 2009 2008
---- ---- ---- ----
(per diluted share)
GAAP EPS from continuing operations $0.71 $0.81 $2.30 $2.27
Items included in GAAP results:
Non-recurring transaction related costs (1) 0.02 - 0.05 -
Non-recurring termination of bridge
financing(2) - - 0.14 -
Non-recurring charge related to
legal settlement (3) 0.08 - 0.08 -
Non-recurring benefit related to
insurance recovery (4) - - (0.03) -
-- -- ----- --
Adjusted EPS from continuing operations $0.81 $0.81 $2.54 $2.27
Other items included in GAAP results:
Impact of pre-closing financing
of NextRx acquisition (5) $0.18 $- $0.23 $-
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) 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) incurred
in Q2 2009 and $9.6 million ($6.1 million net of tax) incurred in Q3
2009, included in selling, general and administrative expense.
(2) Financing costs include bridge loan fees of $58.4 million ($36.9
million net of tax) in Q2 2009 included in interest expense. These
fees were incurred to terminate the temporary bridge financing once
permanent financing was secured.
(3) Non-recurring charge related to legal settlement of $35.0 million
($22.1 million, net of tax) in Q3 2009, included in selling, general
and administrative expense.
(4) Non-recurring benefit related to insurance recovery of $15.0
million ($9.5 million, net of tax) in Q2 2009, included as a
reduction to selling, general and administrative expense.
(5) Impact from financing of NextRx transaction completed in June
2009 (26.45 million shares and $2.5 billion of public debt). Year to
date costs includes $48.8 million of interest expense, offset by $2.3
million of interest income (total, net $29.4 million after tax).
Table 4
2009 Guidance Information
Estimated
Year Year
Ended Ended
December December
31, 31,
2009 2008
----------- --------
Revised 2009 EPS guidance
(excluding the impact of NextRx
and other non-recurring items) $3.76 to $3.82 $3.10
GAAP items not included in guidance:
Q2 / Q3 non-recurring charges
related to the NextRx transaction (1) $(0.19) $(0.19)
Q4 non-recurring charges
related to the NextRx transaction (1) (0.12) to (0.14)
Q3 legal settlement (2) (0.08) (0.08)
Q2 non-recurring benefit related
to insurance recovery (3) 0.03 0.03
Full year impact of transaction
financing (4) (0.41) (0.41)
NextRx results post-close (5) TBD based on closing date
------------------------------ -------------------------
(1) 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 Q4 2009 of $50 million - $60
million, primarily for professional fees (banking, legal and
accounting) and IT build out.
(2) The Company incurred a non-recurring charge related to a legal
settlement in Q3 2009 (unrelated to the NextRx transaction). See
Table 3.
(3) The Company incurred a non-recurring gain related to an insurance
recovery in Q2 2009 (unrelated to the NextRx transaction).
See Table 3.
(4) The Company completed financing for the proposed NextRx acquisition
during Q2 2009 ($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 $88.2 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.
SOURCE Express Scripts, Inc.
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