2008 Earnings Per Share Guidance Increased
ST. LOUIS, Feb. 21, 2008 (PRIME NEWSWIRE) -- Express Scripts, Inc. (Nasdaq:ESRX) announced fourth quarter net income of $138.5 million, or $0.54 per diluted share. Excluding non recurring items in both years, earnings per diluted share was a record $0.68, a 33 percent increase over $0.51 per diluted share last year. All per share amounts have been adjusted to reflect the Company's 2-for-1 stock split, which was effective June 22, 2007. Cash flow from operations for the fourth quarter was a record $329.0 million compared to $306.0 million for the same period last year.
For the year, the Company reported net income of $567.8 million, or $2.15 per diluted share. Excluding non-recurring items in both years, earnings per diluted share was a record $2.35, a 42 percent increase over $1.65 per diluted share last year. The Company reported record cash flow from operations of $827.3 million compared to $658.6 million in 2006.
"We enjoyed another successful year of providing innovative solutions that helped our clients better manage their drug trend," stated George Paz, president, chief executive officer and chairman. "Our outstanding results demonstrate the power of aligning interests, which means that as we save our clients and their patients money, our performance improves. As we move to the next level of alignment, enabling better health and value one consumer at a time, we will be able to deliver increased savings through lower-cost drugs and channels, better outcomes through improved therapy adherence, and a strong position around emerging specialty opportunities.
"As we look to 2008 and beyond, the fundamentals of our business remain strong. We believe we are well-positioned in the marketplace and have built a platform for delivering superior value to our clients and superior growth for our stockholders."
Last quarter, the Company announced that it would review the strategic fit of the infusion business in its product portfolio. As a result of this review, the Company is in the process of selling this business unit, which has been reclassified to discontinued operations for all current and prior periods. Accordingly, the results for the quarter and year are segregated between continuing and discontinued operations.
Fourth Quarter Review - Continuing Operations
Gross profit for the fourth quarter increased 13 percent to $465.0 million from $409.7 million last year. The increase reflects lower retail and home delivery drug purchasing costs and higher generic utilization. Generic utilization reached a record 63.7 percent compared to 59.7 percent last year. These increases were partially offset by a non-recurring inventory charge discussed below. Gross profit per adjusted claim was a record $3.60, a 14 percent increase over $3.15 for the same quarter last year.
The following table provides a reconciliation of reported operating income to adjusted operating income for the PBM and Specialty and Ancillary Services ("SAAS") segments:
Calculation of Adjusted
Operating Income
3 Months Ended
December 31, 2007
PBM SAAS Consolidated
-----------------------------
Operating income as reported $280.8 $ (1.2) $279.6
Non-recurring legal expenses -
$13 million this quarter vs.
$7 million in a normal quarter 6.0 -- 6.0
Non-recurring inventory charges in
specialty distribution, the majority
pertained to a write-off of flu-related
inventory due to the mild flu season -- 9.1 9.1
Non-recurring bad debt charge in
the SAAS segment -- 3.0 3.0
-----------------------------
Adjusted operating income $286.8 $ 10.9 $297.7
=============================
Adjusted operating income for the fourth quarter increased 23 percent to $297.7 million from $242.4 million last year. Adjusted PBM operating income excludes legal expenses of $6.0 million, which are higher than a normal quarter due to developments in some open cases. Adjusted operating income for the SAAS segment, which excludes the non-recurring charges identified in the table above, was impacted by the milder than normal flu season, and severance and other costs incurred to integrate the operations and administrative functions of the SAAS segment within the PBM segment. The combination of the PBM and specialty offerings contributed to strong adjusted operating income for the PBM segment, which increased 29 percent to $286.8 million from $222.2 million last year.
Higher generic utilization and lower retail and home delivery drug purchasing costs translated into strong EBITDA growth. Adjusted EBITDA from continuing operations increased 20 percent to $320.9 million from $267.4 million last year, and on a per adjusted claim basis set a record at $2.49, a 21 percent increase over $2.06 in the fourth quarter of 2006.
Full-year 2007 Review - Continuing Operations
Total adjusted claims for 2007 were 507.0 million. Network pharmacy claims processed were 379.9 million, home delivery prescriptions were 40.8 million, and SAAS claims were 4.7 million. Generic utilization increased to 61.8 percent from 57.6 percent last year. Gross profit for 2007 increased 20 percent to $1,766.6 million, from $1,476.2 million in 2006, while gross profit per adjusted claim increased 23 percent to $3.48 from $2.84 last year.
The following table provides a reconciliation of reported operating income to adjusted operating income for the PBM and SAAS segments:
Calculation of Adjusted
Operating Income
Year Ended
December 31, 2007
PBM SAAS Consolidated
------------------------------
Operating income as reported $1,037.5 $ 23.5 $1,061.0
Non-recurring legal expenses 6.0 -- 6.0
Non-recurring inventory charges in
specialty distribution, the majority
pertained to a write-off of
flu-related inventory due to the
mild flu season -- 9.1 9.1
Q1 settlement of contractual issue
with supply chain vendor (9.0) -- (9.0)
Q3 and Q4 non-recurring items,
majority of which pertained to bad
debt charge in specialty distribution
line of business -- 21.5 21.5
------------------------------
Adjusted operating income $1,034.5 $ 54.1 $1,088.6
==============================
Adjusted operating income increased 32 percent to $1,088.6 million from $825.8 million last year. Adjusted EBITDA from continuing operations increased 28 percent to $1,186.1 million from $925.6 million last year, and on a per adjusted claim basis, was $2.34, a 31 percent increase over 2006.
Discontinued Operations
The Company reported a net loss from discontinued operations of $27.6 million, or $0.11 per diluted share in the fourth quarter. Excluding non-recurring impairment and restructuring costs, the adjusted loss was $3.7 million or $0.01 per diluted share. For the year, the net loss from discontinued operations was $32.7 million, or $0.12 per diluted share. Excluding the non-recurring impairment and restructuring costs, the adjusted loss was $8.8 million, or $0.03 per diluted share. For additional information, see Table 3 below, or the Annual Report on Form 10-K for the year ended December 31, 2007 filed with the SEC on February 21, 2008.
2008 Earnings Guidance
"The decision to sell the infusion business will allow us to focus on improving the quality and affordability of specialty drug therapy for clients and patients," added Paz. "Our expanded specialty offering has helped us secure more customers in our PBM segment, thereby contributing to the strong results we have enjoyed there. We are well-positioned in the specialty marketplace and will continue to innovate and execute to meet the needs of the marketplace."
As a result of strong underlying trends, the Company believes its 2008 earnings per diluted share from continuing operations will be in a range of $2.92 to $3.00. Lower drug purchasing costs, greater generic utilization, and lower interest costs contributed approximately equally to this increased guidance. The midpoint of this guidance range reflects growth of 24.4 percent over the 2007 adjusted diluted earnings per share from continuing operations of $2.38. Cash flow from operations is expected to be in a range of $875 to $975 million.
Express Scripts, Inc. is one of the largest PBM companies in North America, providing PBM services to over 50 million members through 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, disease 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.
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 include but are not limited to:
* results in regulatory matters, the adoption of new legislation or
regulations (including increased costs associated with compliance
with new laws and regulations), more aggressive enforcement of
existing legislation or regulations, or a change in the
interpretation of existing legislation or regulations
* costs and uncertainties of adverse results in litigation, including
a number of pending class action cases that challenge certain of
our business practices
* continued pressure on margins resulting from client demands for
lower prices, enhanced service offerings and/or higher service
levels
* the possible termination of, or unfavorable modification to,
contracts with key clients or providers, some of which could have a
material impact on the Company's financial results
* investigations of certain PBM practices and pharmaceutical pricing,
marketing and distribution practices currently being conducted by
various regulatory agencies and state attorneys general
* the possible loss, or adverse modification of the terms, of
contracts with pharmacies in our retail pharmacy network
* uncertainties associated with our acquisitions, which include
integration risks and costs, uncertainties associated with client
retention and repricing of client contracts, and uncertainties
associated with the operations of acquired businesses
* changes in industry pricing benchmarks such as average wholesale
price ("AWP") and average manufacturer price ("AMP"), which could
have the effect of reducing prices and margins
* competition in the PBM and specialty pharmacy industries, and our
ability to consummate contract negotiations with prospective
clients, as well as competition from new competitors offering
services that may in whole or in part replace services that we now
provide to our customers
* our ability to continue to develop new products, services and
delivery channels
* increased compliance risk relating to our contracts with the DoD
TRICARE Management Activity and various state governments and
agencies
* uncertainties regarding the Medicare Part D prescription drug
benefit, including the financial impact to us to the extent that
we participate in the program on a risk-bearing basis,
uncertainties of client or member losses to other providers under
Medicare Part D, and increased regulatory risk
* our ability to maintain growth rates, or to control operating or
capital costs
* the possible loss, or adverse modification of the terms, of
relationships with pharmaceutical manufacturers, or changes in
pricing, discount or other practices of pharmaceutical
manufacturers or interruption of the supply of any pharmaceutical
products
* uncertainties associated with U.S. Centers for Medicare &
Medicaid's ("CMS") implementation of the Medicare Part B
Competitive Acquisition Program ("CAP"), including the potential
loss of clients/revenues to providers choosing to participate in
the CAP
* the use and protection of the intellectual property we use in our
business
* our leverage and debt service obligations, including the effect of
certain covenants in our borrowing agreements
* general developments in the health care industry, including the
impact of increases in health care costs, changes in drug
utilization and cost patterns and introductions of new drugs
* increase in credit risk relative to our clients due to adverse
economic trends or other factors
* our ability to attract and retain qualified employees
* other risks described from time to time in our filings with the SEC
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 Twelve months ended
December 31, December 31,
--------------------- ---------------------
(in millions, except
per share data) 2007 2006 2007 2006
--------------------- ---------------------
Revenues (1) $ 4,694.0 $ 4,500.4 $18,273.6 $17,554.0
Cost of revenues (1) 4,229.0 4,090.7 16,507.0 16,077.8
---------- ---------- ---------- ----------
Gross profit 465.0 409.7 1,766.6 1,476.2
Selling, general and
administrative 185.4 167.3 705.6 650.4
---------- ---------- ---------- ----------
Operating income 279.6 242.4 1,061.0 825.8
---------- ---------- ---------- ----------
Other (expense) income :
Non-operating charges, net -- -- (18.6) --
Undistributed loss from
joint venture (0.2) (0.4) (1.3) (1.6)
Interest income 4.1 2.4 12.2 13.7
Interest expense (29.3) (25.1) (108.4) (95.7)
---------- ---------- ---------- ----------
(25.4) (23.1) (116.1) (83.6)
---------- ---------- ---------- ----------
Income before income taxes 254.2 219.3 944.9 742.2
Provision for income taxes 88.1 72.1 344.4 266.8
---------- ---------- ---------- ----------
Net income from
continuing operations 166.1 147.2 600.5 475.4
Net (loss) income from
discontinued operations,
net of tax (27.6) -- (32.7) (1.0)
---------- ---------- ---------- ----------
Net income $ 138.5 $ 147.2 $ 567.8 $ 474.4
========== ========== ========== ==========
Weighted average number
of common shares
outstanding during
the period
- Basic: 252.3 271.0 260.4 279.6
- Diluted: 256.0 274.8 264.0 284.0
Basic earnings (loss)
per share:
Continuing operations $ 0.66 $ 0.54 $ 2.31 $ 1.70
Discontinued operations (0.11) -- (0.13) --
---------- ---------- ---------- ----------
Net earnings $ 0.55 $ 0.54 $ 2.18 $ 1.70
========== ========== ========== ==========
Diluted earnings
(loss) per share
Continuing operations $ 0.65 $ 0.54 $ 2.27 $ 1.67
Discontinued operations (0.11) -- (0.12) --
---------- ---------- ---------- ----------
Net earnings $ 0.54 $ 0.54 $ 2.15 $ 1.67
========== ========== ========== ==========
(1) Excludes estimated retail pharmacy co-payments of $904.8 and
$966.0 for the three months ended December 31, 2007 and 2006,
respectively, and $3,746.3 and $4,175.3 for the twelve months ended
December 31, 2007 and 2006, 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
Dec. 31, Dec. 31,
(in millions, except share data) 2007 2006
---------- ----------
Assets
Current assets:
Cash and cash equivalents $ 434.7 $ 131.0
Restricted cash and investments 2.2 --
Receivables, net 1,184.6 1,292.8
Inventories 166.1 191.4
Deferred taxes 121.1 90.5
Prepaid expenses and other current assets 18.7 18.8
Current assets of discontinued operations 40.4 47.6
---------- ----------
Total current assets 1,967.8 1,772.1
Property and equipment, net 215.5 198.0
Goodwill 2,695.3 2,679.0
Other intangible assets, net 342.0 377.9
Other assets 30.2 69.8
Non-current assets of discontinued operations 5.6 11.3
---------- ----------
Total assets $ 5,256.4 $ 5,108.1
========== ==========
Liabilities and Stockholders' Equity
Current liabilities:
Claims and rebates payable $ 1,258.9 $ 1,275.7
Accounts payable 517.3 576.1
Accrued expenses 432.5 387.8
Current maturities of long-term debt 260.1 180.1
Current liabilities of
discontinued operations 6.2 9.7
---------- ----------
Total current liabilities 2,475.0 2,429.4
Long-term debt 1,760.3 1,270.4
Other liabilities 324.7 283.4
---------- ----------
Total liabilities 4,560.0 3,983.2
---------- ----------
Stockholders' Equity:
Preferred stock, 5,000,000 shares
authorized, $0.01 par value per share; and
no shares issued and outstanding -- --
Common stock, 650,000,000 shares authorized,
$0.01 par value per share; shares issued:
318,886,000 and 159,442,000, respectively;
shares outstanding: 252,371,000 and
135,650,000, respectively 3.2 1.6
Additional paid-in capital 564.5 495.3
Accumulated other comprehensive income 20.9 11.9
Retained earnings 2,584.9 2,017.3
---------- ----------
3,173.5 2,526.1
Common stock in treasury at cost,
66,515,000 and 23,792,000 shares,
respectively (2,477.1) (1,401.2)
---------- ----------
Total stockholders' equity 696.4 1,124.9
---------- ----------
Total liabilities and stockholders' equity $ 5,256.4 $ 5,108.1
========== ==========
EXPRESS SCRIPTS, INC.
Unaudited Condensed Consolidated Statement of Cash Flows
Twelve months ended
December 31,
----------------------
(in millions) 2007 2006
---------- ----------
Cash flow from operating activities:
Net income $ 567.8 $ 474.4
Net loss (income) from discontinued operations,
net of tax 32.7 1.0
---------- ----------
Net income from continuing operations 600.5 475.4
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 97.5 99.8
Deferred income taxes 4.1 7.6
Bad debt expense 36.7 13.5
Employee stock-based compensation expense 31.6 27.6
Other, net 0.5 (0.1)
Changes in operating assets and liabilities,
net of changes resulting from acquisitions:
Receivables 71.6 35.7
Inventories 25.3 77.4
Other current and non-current assets 6.9 44.5
Claims and rebates payable (16.8) (104.2)
Other current and non-current liabilities (9.8) (3.7)
---------- ----------
Net cash provided by operating activities--
continuing operations 848.1 673.5
Net cash used in operating activities--
discontinued operations (20.8) (14.9)
---------- ----------
Net cash flows from operating activities 827.3 658.6
---------- ----------
Cash flows from investing activities:
Purchases of property and equipment (75.0) (66.6)
Acquisitions, net of cash acquired, and
investment in joint venture (14.3) 0.1
Sale (purchase) of marketable securities 34.2 (31.5)
Other (0.7) (2.8)
---------- ----------
Net cash used in investing activities--
continuing operations (55.8) (100.8)
Net cash used in investing activities--
discontinued operations (2.5) (0.2)
---------- ----------
Net cash used in investing activities (58.3) (101.0)
---------- ----------
Cash flows from financing activities:
Proceeds from long-term debt 800.0 --
Repayment of long-term debt (180.1) (110.1)
Repayments of (proceeds from) revolving
credit line, net (50.0) 50.0
Tax benefit relating to employee
stock compensation 49.4 30.4
Treasury stock acquired (1,140.3) (906.8)
Deferred financing fees (1.5) (0.4)
Net proceeds from employee stock plans 52.8 32.2
---------- ----------
Net cash used in financing activities (469.7) (904.7)
---------- ----------
Effect of foreign currency
translation adjustment 4.4 0.2
---------- ----------
Net increase (decrease) in cash and
cash equivalents 303.7 (346.9)
Cash and cash equivalents at
beginning of period 131.0 477.9
---------- ----------
Cash and cash equivalents at end of period $ 434.7 $ 131.0
========== ==========
EXPRESS SCRIPTS, INC.
(In millions, except per claim data)
Table 1
Unaudited Operating Statistics
3 months 3 months 3 months 3 months 3 months
ended ended ended ended ended
12/31/2007 9/30/2007 6/30/2007 3/31/2007 12/31/2006
---------- --------- --------- --------- ----------
Revenues
--------
PBM 3,762.4 3,612.4 3,669.3 3,608.9 3,626.3
SAAS 931.6 882.6 906.4 900.0 874.1
--------- --------- --------- --------- ---------
Total consolidated
revenues 4,694.0 4,495.0 4,575.7 4,508.9 4,500.4
========= ========= ========= ========= =========
Claims Detail
-------------
Network (1) 96.9 92.1 94.1 96.8 97.8
Home delivery 10.3 10.2 10.2 10.0 10.3
--------- --------- --------- --------- ---------
Total PBM claims 107.2 102.3 104.3 106.8 108.1
--------- --------- --------- --------- ---------
Adjusted PBM
claims (2) 127.8 122.7 124.8 126.8 128.7
========= ========= ========= ========= =========
SAAS claims (3) 1.2 1.2 1.2 1.2 1.3
--------- --------- --------- --------- ---------
Total adjusted
claims (4) 129.0 123.9 126.0 128.0 130.0
========= ========= ========= ========= =========
Per Adjusted Claim
------------------
Adjusted
Gross profit $ 3.60 $ 3.57 $ 3.49 $ 3.21 $ 3.15
Adjusted EBITDA $ 2.49 $ 2.48 $ 2.30 $ 2.10 $ 2.06
Calculation of Adjusted EBITDA from Continuing Operations
Table 2
(In millions)
3 months 12 months
ended ended
12/31/2007 12/31/2007
---------- ----------
EBITDA (5)
-------------------
Consolidated
-------------------
EBITDA from continuing operations as reported $ 302.8 $1,158.5
Q1 Settlement of contractual item with supply
chain vendor -- (9.0)
Non-recurring inventory charges in specialty
distribution, the majority
pertained to a write-off of flu-related inventory
due to the mild flu season 9.1 9.1
Q3 and Q4 non-recurring items, majority of which
relates to bad debt charges in specialty
distribution line of business 3.0 21.5
Non-recurring legal expenses 6.0 6.0
---------- ---------
EBITDA from continuing operations, adjusted $ 320.9 $1,186.1
========== =========
The company is providing adjusted EBITDA excluding the impact of
non-recurring items, in order to compare the underlying financial
performance to prior periods.
Unaudited Earnings Excluding Non-recurring Items
(In millions, except per share data)
Table 3
Three Months Ended
December 31, 2007 December 31, 2006
---------------------- ----------------------
Non- Non-
recurring Net Diluted recurring Net Diluted
Item Income EPS Item Income EPS
---- ------ --- ---- ------ ---
Net income as reported $138.5 $ 0.54 $147.2 $ 0.54
Non-recurring charge
(benefit) to
continuing operations
Non recurring legal
charges $ 6.0 $ --
Non-recurring
inventory charges in
specialty
distribution,
the majority
pertained
to a write-off of
flu-related inventory
due to the mild
flu season 9.1 --
Non-recurring bad
debt charge in the
SAAS segment 3.0 --
Tax benefit from
change in tax rates -- (7.3)
------ ------
Total
non-recurring
charges 18.1 (7.3)
Tax benefit of
non-recurring
charges (6.3) --
------ ------
Net income impact of
non-recurring
charges 11.8 0.04 (7.3) (0.03)
Non-recurring charges
to discontinued
operations
Non-recurring
impairment and
restructuring
charges 34.0 --
Tax benefit of
impairment and
restructuring
charges (10.1) --
------ ------
Net income impact
of impairment
and restructuring
charge 23.9 0.10 -- --
-------------- --------------
Adjusted earnings $174.2 $ 0.68 $139.9 $ 0.51
============== ==============
Twelve Months Ended
December 31, 2007 December 31, 2006
---------------------- ----------------------
Non- Non-
recurring Net Diluted recurring Net Diluted
Item Income EPS Item Income EPS
---- ------ --- ---- ------ ---
Net income as reported $567.8 $ 2.15 $474.4 $ 1.67
Non-recurring charge
(benefit) to
continuing operations
Non recurring
legal charges $ 6.0 $ --
Non-recurring
inventory
charges in specialty
distribution, the
majority pertained
to a write-off of
flu-related
inventory due to the
mild flu season 9.1 --
Non-recurring items,
majority of which
pertained to bad debt
charges in specialty
distribution line
of business 21.5 --
Settlement of
contractual
issue with supply
chain vendor (9.0) --
Transaction costs for
terminated proposal
to acquire Caremark,
less special dividend
received on
Caremark stock and
gain on sale of
Caremark stock 18.6 --
Tax benefit from
change in tax rates -- (7.3)
------ ------
Total non-recurring
charges 46.2 (7.3)
Tax benefit of
non-recurring charges (16.8) --
------ ------
Net income impact of
non-recurring
charges 29.4 0.11 (7.3) (0.02)
Non-recurring charges
to discontinued
operations
Non-recurring
impairment
and restructuring
charges 34.0 --
Tax benefit of
impairment and
restructuring
charges (10.1) --
------ ------
Net income impact of
impairment and
restructuring charge 23.9 0.09 -- --
-------------- --------------
Adjusted earnings $621.1 $ 2.35 $467.1 $ 1.65
============== ==============
3 Months Ended 12 Months Ended
12-31-07 12-31-07
-------------- --------------
Summary of adjusted Net Diluted Net Diluted
net income from Income EPS Income EPS
continuing -------------- --------------
operations
Reported net income
from continuing
operations $166.1 $ 0.65 $600.5 $ 2.27
Net income impact of
non-recurring charges 11.8 0.04 29.4 0.11
-------------- --------------
Adjusted net income
from continuing
operations $177.9 $ 0.69 $629.9 $ 2.38
-------------- --------------
Summary of adjusted
loss from
discontinued
operations
Reported net (loss)
from discontinued
operations $(27.6) $(0.11) $(32.7) $(0.12)
Impairment and
restructuring charge,
net of tax 23.9 0.10 23.9 0.09
-------------- --------------
Adjusted loss from
discontinued
operations $ (3.7) $(0.01) $ (8.8) $(0.03)
-----------------------------------------------------
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.
Return on Invested Capital ("ROIC")
Table 4
(In millions)
2007 2006
Adjusted operating income $ 1,088.6 $ 825.8
Income tax 396.8 305.0
---------- ----------
Net operating profit after tax ("NOPLAT") $ 691.8 $ 520.8
Stockholders' equity $696.4 $ 1,124.9
Interest bearing liabilities 2,020.4 1,450.5
Long-term deferred income taxes, net 278.6 257.1
---------- ----------
Invested capital $ 2,995.4 $ 2,832.5
Average invested capital $ 2,914.0 $ 3,008.1
ROIC 23.7% 17.3%
---------- ----------
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 12 months ended
December 31, December 31,
------------------ ------------------
2007 2006 2007 2006
-------- -------- -------- --------
Net income from continuing
operations $ 166.1 $ 147.2 $ 600.5 $ 475.4
Income taxes 88.1 72.1 344.4 266.8
Depreciation and
amortization * 23.2 25.0 97.5 99.8
Interest expense, net 25.2 22.7 96.2 82.0
Undistributed loss from
joint venture 0.2 0.4 1.3 1.6
Non-operating charges, net -- -- 18.6 --
-------- -------- -------- --------
EBITDA from continuing
operations 302.8 267.4 1,158.5 925.6
Current income taxes (77.3) (77.1) (340.3) (259.2)
Interest expense less
amortization (24.6) (22.2) (94.0) (80.0)
Undistributed loss from
joint venture (0.2) (0.4) (1.3) (1.6)
Non-operating charges, net -- (18.6) --
Other adjustments to
reconcile net income to net
cash provided by operating
activities 141.6 141.8 143.8 88.7
-------- -------- -------- --------
Net cash provided by
operating activities from
continuing operations $ 342.3 $ 309.5 $ 848.1 $ 673.5
======== ======== ======== ========
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 6.6 8.8 31.7 35.4
Selling, general
and administrative 16.6 16.2 65.8 64.4
------- ------ ------ ------
23.2 25.0 97.5 99.8
======= ====== ====== ======
(6) Represents debt as of the balance sheet date divided by EBITDA
for the twelve months ended.
(7) Represents EBITDA for the twelve months ended divided by interest
expense for the twelve months ended.
(8) Represents Operating Cash Flow for the twelve months ended
divided by interest expense for the twelve months ended.
(9) Represents debt divided by the total of debt and
stockholders equity.