Company Raises 2008 Earnings Per Share and Cash Flow Guidance
Announces Increase in Share Repurchase Authorization
ST. LOUIS, July 30, 2008 (PRIME NEWSWIRE) -- Express Scripts, Inc. (Nasdaq:ESRX) announced second quarter net income from continuing operations of $191.9 million, or $0.76 per diluted share, representing a 33% increase over $0.57 on an adjusted basis for the same quarter last year.
The Company reported second quarter cash flow from continuing operations of $234.5 million compared to $96.4 million for the second quarter of 2007. During the quarter, Express Scripts repurchased 5.3 million shares of common stock for $373.3 million, and to date, the Company has repurchased 114.0 million shares. The Board approved an increase in the share repurchase program by an additional 15 million shares to an aggregate program of 135 million shares.
"We are pleased with our outstanding results for the quarter and are greatly encouraged by recent feedback from the marketplace," stated George Paz, president, chief executive officer and chairman. "First, our differentiated business model of alignment was reaffirmed by the recent win of the Department of Defense TRICARE Pharmacy Program. This win provides undeniable validation of our ability to drive to lowest net cost, enable better health and value, and achieve unprecedented member satisfaction. Secondly, as we continue to syndicate our new advanced consumer strategy initiative, the traction in the marketplace has exceeded our expectations."
Q2 2008 Financial Highlights (comparative data for 2007 is reflected on an adjusted basis - see table 2 below)
* The Company's industry-leading generic utilization rate increased to 65.9% from 61.1% last year. * Consolidated gross profit increased 15% to $504.4 million from $439.1 million in the second quarter of 2007. * EBITDA increased 18% to $341.9 million from $289.0 million last year and EBITDA per adjusted claim increased 17% to $2.67 from $2.29 last year. * Net income from continuing operations increased 26% to $191.9 million from $152.0 million in the second quarter of 2007.
2008 Guidance
The Company now believes its 2008 earnings per diluted share from continuing operations will be in a range of $3.03 to $3.10. Cash flow from operations is expected to be in a range of $1.0 billion to $1.1 billion.
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.
EXPRESS SCRIPTS, INC.
Unaudited Consolidated Statement of Operations
Three months ended Six months ended
June 30, June 30,
------------------ ------------------
(in millions, except per 2008 2007 2008 2007
share data) -------- -------- -------- --------
Revenues(1) $4,706.7 $4,574.8 $9,309.8 $9,082.8
Cost of revenues(1) 4,202.3 4,135.7 8,336.8 8,223.6
-------- -------- -------- --------
Gross profit 504.4 439.1 973.0 859.2
Selling, general and
administrative 187.7 176.0 361.8 343.6
-------- -------- -------- --------
Operating income 316.7 263.1 611.2 515.6
-------- -------- -------- --------
Other income (expense):
Non-operating gain (charges),
net -- 4.2 -- (18.8)
Undistributed loss from joint
venture (0.1) (0.4) (0.4) (0.8)
Interest income 3.3 2.6 8.7 5.4
Interest expense (17.0) (25.6) (40.3) (47.8)
-------- -------- -------- --------
(13.8) (19.2) (32.0) (62.0)
-------- -------- -------- --------
Income before income taxes 302.9 243.9 579.2 453.6
Provision for income taxes 111.0 89.2 209.1 165.9
-------- -------- -------- --------
Net income from continuing
operations 191.9 154.7 370.1 287.7
Net loss from discontinued
operations, net of tax (1.7) (2.0) (2.8) (1.3)
-------- -------- -------- --------
Net income $ 190.2 $ 152.7 $ 367.3 $ 286.4
======== ======== ======== ========
Weighted average number of
common shares outstanding
during the period:
Basic: 248.7 263.6 250.5 267.6
Diluted: 252.0 267.0 253.9 271.1
Basic earnings per share:
Continuing operations $ 0.77 $ 0.59 $ 1.48 $ 1.08
Discontinued operations (0.01) (0.01) (0.01) 0.00
Net earnings 0.76 0.58 1.47 1.07
Diluted earnings per share:
Continuing operations $ 0.76 $ 0.58 $ 1.46 $ 1.06
Discontinued operations (0.01) (0.01) (0.01) 0.00
Net earnings 0.75 0.57 1.45 1.06
(1) Excludes estimated retail pharmacy co-payments of $872.4 and
$943.9 for the three months ended June 30, 2008 and 2007,
respectively, and $1,817.5 and $1,932.1 for the six months ended
June 30, 2008 and 2007, respectively. These are amounts we instructed
retail pharmacies to collect from members. We have no information
regarding actual co-payments collected.
EXPRESS SCRIPTS, INC.
Unaudited Consolidated Balance Sheet
June 30, Dec. 31,
(in millions, except share data) 2008 2007
--------- ---------
Assets
Current assets:
Cash and cash equivalents $ 315.8 $ 434.7
Restricted cash and investments 3.5 2.2
Receivables, net 1,185.9 1,184.6
Inventories 168.3 166.1
Deferred taxes 113.2 121.1
Prepaid expenses and other current assets 22.9 18.7
Current assets of discontinued operations 3.2 40.4
--------- ---------
Total current assets 1,812.8 1,967.8
Property and equipment, net 211.8 215.5
Goodwill 2,694.0 2,695.3
Other intangible assets, net 323.5 342.0
Other assets 38.4 30.2
Non-current assets of discontinued operations -- 5.6
--------- ---------
Total assets $ 5,080.5 $ 5,256.4
========= =========
Liabilities and Stockholders' Equity
Current liabilities:
Claims and rebates payable $ 1,322.8 $ 1,258.9
Accounts payable 508.5 517.3
Accrued expenses 384.8 432.5
Current maturities of long-term debt 300.1 260.1
Current liabilities of discontinued operations 3.3 6.2
--------- ---------
Total current liabilities 2,519.5 2,475.0
Long-term debt 1,600.3 1,760.3
Other liabilities 332.9 324.7
--------- ---------
Total liabilities 4,452.7 4,560.0
--------- ---------
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 per share; shares issued:
318,919,000 and 318,886,000, respectively;
shares outstanding: 246,627,000 and
252,371,000, respectively 3.2 3.2
Additional paid-in capital 603.0 564.5
Accumulated other comprehensive income 18.5 20.9
Retained earnings 2,952.2 2,584.9
--------- ---------
3,576.9 3,173.5
Common stock in treasury at cost, 72,291,000
and 66,515,000 shares, respectively (2,949.1) (2,477.1)
--------- ---------
Total stockholders' equity 627.8 696.4
--------- ---------
Total liabilities and stockholders' equity $ 5,080.5 $ 5,256.4
========= =========
EXPRESS SCRIPTS, INC.
Unaudited Condensed Consolidated Statement of Cash Flows
Six months ended
June 30,
------------------
(in millions) 2008 2007
-------- --------
Cash flows from operating activities:
Net income $ 367.3 $ 286.4
Net loss from discontinued operations, net of tax 2.8 1.3
-------- --------
Net income from continuing operations 370.1 287.7
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 49.6 51.5
Non-cash adjustments to net income 51.5 16.9
Changes in operating assets and liabilities:
Claims and rebates payable 64.0 (77.4)
Other net changes in operating assets and
liabilities (52.4) (23.4)
-------- --------
Net cash provided by operating activities --
continuing operations 482.8 255.3
Net cash provided by (used in) operating
activities -- discontinued operations 3.6 (4.0)
-------- --------
Net cash flows provided by operating activities 486.4 251.3
-------- --------
Cash flows from investing activities:
Purchases of property and equipment (30.1) (29.0)
Sale of marketable securities -- 34.2
Other (0.7) (0.6)
-------- --------
Net cash (used in) provided by investing
activities--continuing operations (30.8) 4.6
Net cash provided by (used in) investing
activities--discontinued operations -- (0.9)
-------- --------
Net cash (used in) provided by investing
activities (30.8) 3.7
-------- --------
Cash flows from financing activities:
Proceeds from long-term debt -- 600.0
Repayment of long-term debt (120.0) (80.1)
Repayments of revolving credit line, net -- (50.0)
Tax benefit relating to employee stock
compensation 25.4 39.3
Treasury stock acquired (494.4) (826.7)
Net proceeds from employee stock plans 15.3 42.1
Deferred financing fees -- (1.3)
-------- --------
Net cash used in financing activities (573.7) (276.7)
-------- --------
Effect of foreign currency translation adjustment (0.8) 1.9
-------- --------
Net decrease in cash and cash equivalents (118.9) (19.8)
Cash and cash equivalents at beginning of period 434.7 131.0
-------- --------
Cash and cash equivalents at end of period $ 315.8 $ 111.2
======== ========
EXPRESS SCRIPTS, INC.
(In millions, except per claim and per share data)
Table 1
Unaudited Operating Statistics
---------------------------------------------------------------------
3 months 3 months 3 months 3 months 3 months
ended ended ended ended ended
6/30/2008 3/31/2008 12/31/2007 9/30/2007 6/30/2007
--------- --------- ---------- --------- ---------
Revenues
--------
PBM 3,766.6 3,670.8 3,762.4 3,612.4 3,669.3
SAAS 940.1 932.3 930.5 881.4 905.5
--------------------------------------------------
Total
consolidated
revenues 4,706.7 4,603.1 4,692.9 4,493.8 4,574.8
==================================================
Claims Detail
-------------
Network(1) 96.1 98.2 96.9 92.1 94.1
Home delivery 10.3 10.1 10.3 10.2 10.2
--------------------------------------------------
Total PBM claims 106.4 108.3 107.2 102.3 104.3
--------------------------------------------------
Adjusted PBM
claims(2) 126.9 128.5 127.8 122.7 124.8
==================================================
SAAS claims(3) 1.1 1.1 1.2 1.2 1.2
--------------------------------------------------
Total adjusted
claims(4) 128.0 129.6 129.0 123.9 126.0
==================================================
Per Adjusted Claim
------------------
Adjusted EBITDA(5) $ 2.67 $ 2.46 $ 2.49 $ 2.48 $ 2.29
---------------------------------------------------------------------
2007 Unaudited Earnings From Continuing Operations Excluding
Non-recurring Items
Table 2
---------------------------------------------------------------------
3 Months Ended 6 Months Ended
June 30, 2007 June 30, 2007
-------------- --------------
Reported income before taxes $ 243.9 $ 453.6
Non-recurring benefit-settlement of
contractual item with supply chain
vendor -- (9.0)
Transaction costs for terminated
proposal to acquire Caremark, less
special dividend received on
Caremark and gain on the sale of
Caremark stock (4.2) 18.8
-------------- --------------
Income before tax excluding
non-recurring items 239.7 463.4
Provision for income taxes 87.7 169.5
-------------- --------------
Adjusted net income from continuing
operations $ 152.0 $ 293.9
============== ==============
Weighted average number of share
outstanding during the period -
diluted 267.0 271.1
============== ==============
Diluted earnings per share excluding
non-recurring items $ 0.57 $ 1.08
Diluted earnings per share from
continuing operations as reported $ 0.58 $ 1.06
-------------- --------------
Impact of non-recurring items $ 0.01 $ (0.02)
============== ==============
---------------------------------------------------------------------
The Company is providing diluted earnings per share excluding the
impact of certain charges in order to compare the underlying financial
performance to prior periods.
EXPRESS SCRIPTS, INC.
Notes to Unaudited Operating Statistics
(in millions)
(1) Network claims exclude drug formulary only claims where we only
administer the clients formulary and approximately 0.5 million manual
claims per quarter.
(2) PBM adjusted claims represent network claims plus mail claims,
which are multiplied by 3, as mail claims are typically 90 day claims
and network claims are generally 30 day claims. Adjusted claims
calculated from the table may differ due to rounding.
(3) Specialty and Ancillary Services (SAAS) claims represent the
distribution of pharmaceuticals through Patient Assistance Programs
and the distribution of pharmaceuticals where we have been selected by
the pharmaceutical manufacturer as part of a limited distribution
network. They also represent the distribution of specialty drugs
through our CuraScript subsidiary.
(4) Total adjusted claims includes PBM adjusted claims plus SAAS
claims.
(5) The following is a reconciliation of EBITDA from continuing
operations to net income from continuing operations and to net cash
provided by operating activities from continuing operations as the
Company believes they are the most directly comparable measures
calculated under Generally Accepted Accounting Principles:
3 months ended 6 months ended
June 30, June 30,
------------------ ------------------
2008 2007 2008 2007
-------- -------- -------- --------
Net income from continuing
operations $ 191.9 $ 154.7 $ 370.1 $ 287.7
Income taxes 111.0 89.2 209.1 165.9
Depreciation and amortization* 25.2 25.9 49.6 51.5
Interest expense, net 13.7 23.0 31.6 42.4
Undistributed loss from joint
venture 0.1 0.4 0.4 0.8
Non-operating charges, net -- (4.2) -- 18.8
-------- -------- -------- --------
EBITDA from continuing
operations 341.9 289.0 660.8 567.1
Current income taxes (98.9) (87.5) (194.9) (172.2)
Interest expense less
amortization (13.1) (22.5) (30.4) (41.4)
Undistributed loss from joint
venture (0.1) (0.4) (0.4) (0.8)
Non-operating charges, net -- 4.2 -- (18.8)
Other adjustments to reconcile
net income to net cash
provided by operating
activities 4.7 (86.4) 47.7 (78.6)
-------- -------- -------- --------
Net cash provided by operating
activities from continuing
operations $ 234.5 $ 96.4 $ 482.8 $ 255.3
======== ======== ======== ========
EBITDA is earnings before other income (expense), interest, taxes,
depreciation and amortization, or 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.
* Includes depreciation and amortization expense of:
Gross profit 7.4 8.9 14.3 18.0
Selling, general and
administrative 17.8 17.0 35.3 33.5
-------- -------- -------- --------
25.2 25.9 49.6 51.5
======== ======== ======== ========