Express Scripts Reports Record Third Quarter Earnings; Strong Cash Flow from Operations of $161 Million.Business Editors ST. LOUIS--(BUSINESS WIRE)--Oct. 29, 2003 Express Scripts, Inc. (Nasdaq: ESRX) announced third quarter net income of $64.5 million, or $0.81 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, an increase of 21 percent over $0.67 per diluted share reported for the same quarter of 2002. The Company generated $160.8 million of cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses in the third quarter compared with $91.4 million in the same quarter last year. This increase in cash flow reflects improved operating results and working capital management, including improved inventory management resulting from implementing a new wholesale purchasing agreement. During the third quarter, the Company repurchased 530,000 shares of common stock for $33.8 million and repaid $25.0 million of debt. "While the PBM PBM - play by mail. See play by electronic mail. competitive landscape continues to evolve Evolve may refer to several terms:
Barrett is a popular surname in south and west Ireland. Toan, chairman and chief executive officer. "We have revitalized re·vi·tal·ize tr.v. re·vi·tal·ized, re·vi·tal·iz·ing, re·vi·tal·iz·es To impart new life or vigor to: plans to revitalize inner-city neighborhoods; tried to revitalize a flagging economy. our business model in 2003 to ensure that our clients understand that our interests are unequivocally aligned with theirs. This revitalization re·vi·tal·ize tr.v. re·vi·tal·ized, re·vi·tal·iz·ing, re·vi·tal·iz·es To impart new life or vigor to: plans to revitalize inner-city neighborhoods; tried to revitalize a flagging economy. resulted in Express Scripts no longer accepting pharmaceutical manufacturer funding for programs promoting the use of specific drugs. This revitalization differentiates our business model in the marketplace, and positions Express Scripts as a leader with the most value to offer to plan sponsors and their members." "The Express Scripts business model has resulted in reduced gross profit and selling, general and administrative expenses this year attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to the elimination of this pharmaceutical manufacturer funding. However, we believe our business strategy will yield long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. benefits, clearly differentiating Express Scripts from the competition, which has already allowed us to gain market share. Express Scripts' Client Pledge A Bailment or delivery of Personal Property to a creditor as security for a debt or for the performance of an act. Sometimes called bailment, pledges are a form of security to assure that a person will repay a debt or perform an act under contract. , issued earlier this year, underlines our commitment to aggressively promote the use of generic drugs generic drug, a drug sold or prescribed under the nonproprietary name of its active ingredients or under a generally descriptive name rather than under a brand or trade name. , support the use of clinically appropriate lower-cost brand-name drugs Noun 1. brand-name drug - a drug that has a trade name and is protected by a patent (can be produced and sold only by the company holding the patent) proprietary drug drug - a substance that is used as a medicine or narcotic , and never recommend switching a member to a higher cost drug." "In addition to our business model, our industry-leading generic Generic Describes the characteristics and/or experience of the total universe of a coupon of MBS sector type; that is, in contrast to a specific pool or collateral group, as in a specific CMO issue. utilization utilization, n 1. the extent to which a given group uses a particular service in a specified period. Although usually expressed as the number of services used per year per 100 or per 1000 persons eligible for the service, utilization rates may be rate, superior formulary formulary /for·mu·lary/ (for´mu-lar?e) a collection of recipes, formulas, and prescriptions. National Formulary see under N. for·mu·lar·y n. management of low-cost brand drugs, and highly-efficient, cost-effective cost-effective, n the minimal expenditure of dollars, time, and other elements necessary to achieve the health care result deemed necessary and appropriate. mail pharmacy pharmacy, art of compounding and dispensing drugs and medication. The term is also applied to an establishment used for such purposes. Until modern times medication was prepared and dispensed by the physician himself. In the 18th cent. services are also strong competitive differentiators, and reflect the alignment Alignment is the adjustment of an object in relation with other objects, or a static orientation of some object or set of objects in relation to others.
Strong Operating Results Revenues for the third quarter of 2003 were $3.2 billion, a 2 percent increase over the same quarter last year. This year-to-year increase is due primarily to drug price inflation and increased sales of prescription drugs. Lower-cost generic drugs represented over 47 percent of total prescriptions compared to 45 percent last year, which resulted in slower revenue growth due to the significant differential between the price of generic and brand drugs. Increased member co-payments also moderated revenue growth because the Company does not record co-payments made to retail pharmacies This article is a list of major pharmacies (also known as chemists and drugstores) by country. Australia Pharmacies in Australia are mostly independently-owned by pharmacists, often operated as franchises of retail brands offered by the three major as revenue. Mail pharmacy prescriptions increased to 8.2 million during the third quarter of 2003, a 16 percent increase compared with the same quarter last year. Mail claims as a percentage of total adjusted claims grew to 21 percent from 19 percent for the same period last year. "We have taken our business model to the specialty drug space to help our clients manage the costs and benefits associated with high-cost biotech bi·o·tech n. Informal Biotechnology. biotech Noun short for biotechnology Noun 1. and injectable in·ject·a·ble adj. Capable of being injected. Used of a drug. n. A drug or medicine that can be injected. drugs, with growing results," added Toan. The Company's specialty PBM business, which it offers to its PBM clients, is client-centric, and its claims are included in the PBM mail order and network claims. "Our goal is to provide the same type of value in specialty pharmacy that we provide in the PBM arena," noted Toan. Specialty distribution service ("SDS 1. (company) SDS - Scientific Data Systems. 2. (tool) SDS - Schema Definition Set. ") claims, which include products targeted to specific physicians or patient populations, increased to 0.9 million, a 13 percent increase over last year's third quarter. Retail network claims processed in the third quarter were 90.4 million, a 2 percent increase over the third quarter of 2002. Network claims were adversely impacted by normal seasonal utilization patterns and client-specific situations. One client, emerging from bankruptcy bankruptcy, in law, settlement of the liabilities of a person or organization wholly or partially unable to meet financial obligations. The purposes are to distribute, through a court-appointed receiver, the bankrupt's assets equitably among creditors and, in most , discontinued dis·con·tin·ue v. dis·con·tin·ued, dis·con·tin·u·ing, dis·con·tin·ues v.tr. 1. To stop doing or providing (something); end or abandon: providing retiree benefits, one client was lost through a competitive bidding Competitive bidding A securities offering process in which securities firms submit competing bids to the issuer for the securities the issuer wishes to sell. competitive bidding 1. process, and a one-year adj. 1. completing its life cycle within a year. Adj. 1. one-year - completing its life cycle within a year; "a border of annual flowering plants" annual phytology, botany - the branch of biology that studies plants contract with a state agency expired ex·pire v. ex·pired, ex·pir·ing, ex·pires v.intr. 1. To come to an end; terminate: My membership in the club has expired. 2. , as expected, allowing the state to process claims in the future. "Based on net new business wins to date for 2004, and the underlying fundamentals of our business, we expect revenue growth next year to exceed $1.3 billion, excluding approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $0.8 billion of retail drug costs for the Department of Defense ("DoD") TRICARE Retail Pharmacy program," noted Toan. Gross profit per adjusted claim was $1.79, consistent with the second quarter of 2003. The decrease in gross profit compared to the same quarter of 2002 is partially due to the phase out of pharmaceutical manufacturer support of drug-specific therapy substitution Substitution Arsinoë put her own son in place of Orestes; her son was killed and Orestes was saved. [Gk. Myth.: Zimmerman, 32] Barabbas robber freed in Christ’s stead. [N.T.: Matthew 27:15–18; Swed. Lit. programs. This reduced gross profit by approximately $8 million from the same period last year. In addition, gross profit continued to be negatively impacted by costs related to the operation of duplicate DUPLICATE. The double of anything. 2. It is usually applied to agreements, letters, receipts, and the like, when two originals are made of either of them. Each copy has the same effect. mail order facilities located in Tempe, Arizona Tempe (pronounced /tɛm.'piː/) is a city in Maricopa County, Arizona, USA, with a population of 169,712 according to 2006 Census Bureau estimates. . The operation of duplicate facilities during the start-up Start-up The earliest stage of a new business venture. phase was driven by our commitment to deliver the highest service standards to our clients, which also contributed to Express Scripts' strong selling season. The Company expects to integrate these facilities during 2004. "The increasing use of mail pharmacy, generic drugs and our specialty distribution services offer particularly good opportunities to generate savings for our clients on prescription drug spending and stronger operating performance for our company," noted Toan. Selling, general and administrative ("SGA SGA abbr. small for gestational age Small-for-gestational-age (SGA) A term used to describe newborns who are below the 10th percentile in height or weight for their estimated gestational age. ") expenses decreased to $93.3 million from $112.2 million for the same quarter last year due to realizing the benefits resulting from the integration of previous acquisitions, and lower SGA expenses needed to support the drug-specific therapy substitution programs that were phased out. In addition, the decrease resulted from lower bad debt expense and contributions made to the Express Scripts Foundation last year. As a result, operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. for the third quarter increased 14 percent to $113.5 million, from $99.3 million in the third quarter of 2002. EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become per adjusted claim was $1.09, compared to $1.00 for the same quarter last year. 2003 and 2004 Outlook Express Scripts is enjoying a strong selling season for 2004. In addition, 10 of Express Scripts' top 50 clients were up for renewal effective January January: see month. 2004, and the Company was successful in renewing re·new v. re·newed, re·new·ing, re·news v.tr. 1. To make new or as if new again; restore: renewed the antique chair. 2. 100 percent of this business. Based on net new business wins to date, and the underlying fundamentals of the business, the Company expects revenue growth next year to exceed $1.3 billion, excluding approximately $0.8 billion of retail drug costs for the DoD TRICARE Retail Pharmacy program discussed below. New business wins have come from all segments including state governments, self-funded employer groups employer group Association of employers Managed care An entity with a current group benefits agreement in effect with a health plan to provide covered health care services to its employee-subscribers and eligible dependents. , Blue Cross Blue Shield Blue Shield A US not-for-profit health care insurer that is a reimbursement intermediary for physicians. Cf Blue Cross. plans, large health maintenance organizations, health insurers, third party administrators, and union-sponsored benefit plans. As mentioned above, Express Scripts was awarded the largest competitively-bid contract of the year with the DoD for the TRICARE Retail Pharmacy ("TRRx TRRx TRICARE Retail Pharmacy (US DoD) ") program to provide retail pharmacy services for the approximate ap·prox·i·mate v. To bring together, as cut edges of tissue. adj. 1. Relating to the contact surfaces, either proximal or distal, of two adjacent teeth; proximate. 2. Close together. 2.5 million DoD beneficiaries that use the retail pharmacy benefit. Express Scripts will process over 30 million additional retail network prescriptions in the first full year of this contract. "This program complements our mail contract with the DoD, and we are proud to serve our armed forces in making prescription drugs safer and more affordable," said Toan. In addition to this growth in membership, the Company's financial performance will continue to benefit from increased mail and generic utilization, improved formulary compliance with low-cost brands, increased productivity, growth in specialty distribution and capital structure improvements. Based on these strong fundamentals, the Company believes its 2003 diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of , including the $0.04 per share charge incurred in the second quarter resulting from the early retirement of debt, will be between $3.14 and $3.16. While Express Scripts has not completed its selling season for 2004, the Company believes its 2004 diluted earnings per share will increase 20 percent to 25 percent over 2003, excluding any charges associated with the early retirement of debt. The Company is evaluating refinancing Refinancing An extension and/or increase in amount of existing debt. alternatives for its existing bank credit facility and optional redemption of the Senior Notes, which are first callable Callable Applies mainly to convertible securities. Redeemable by the issuer before the scheduled maturity under specific conditions and at a stated price, which usually begins at a premium to par and declines annually. in June June: see month. 2004. Express Scripts Recognized for Consistent Financial Performance At the close of trading on September September: see month. 25, 2003, Express Scripts was added to the S&P 500 Index, which includes 500 leading companies in leading industries of the U.S. economy. "We are pleased that S&P has included Express Scripts in this world-renowned world-re·nowned adj. Widely known and acclaimed. index, which recognizes our strength, stability and market position in the health care sector," noted Toan. Express Scripts placed 68th overall in the ranking of the 100 fastest-growing companies in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. published by Fortune Magazine, in the September 1, 2003 issue. The ranking was based on earnings growth, revenue growth, and total investment returns over the last three years. Other Matters The Securities and Exchange Commission ("SEC") previously announced plans to review prior filings of each of the Fortune 500 companies. The Company previously announced it had received a comment letter from the SEC with respect to its Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for 2001 and subsequent quarterly reports on Form 10-Q Form 10-Q See 10-Q. . Most issues raised by the SEC relate to disclosure and reclassification Reclassification The process of changing the class of mutual funds once certain requirements have been met. These requirements are generally placed on load mutual funds. Reclassification is not considered to be a taxable event. matters, including whether the pharmacy benefit management A Pharmacy Benefit Manager (PBM) is a third party administrator of prescription drug programs. They are primarily responsible for processing and paying prescription drug claims. ("PBM") business should be comprised of two separate segments or a single segment representing an integrated product. None of these issues would affect Express Scripts' consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: results of operations, which include gross profit and net income, or the consolidated balance sheet consolidated balance sheet A balance sheet in which assets and liabilities of a parent company and its controlled subsidiaries are combined, thereby presenting balance sheet items for the parent and its subsidiaries as if they were a single firm. and consolidated statement of cash flows. An additional issue raised in the SEC comment letter is whether the Company should include in revenue co-payments paid by clients' members to retail network pharmacies with respect to prescriptions filled in one of the Company's retail networks. The Company does not include such co-payments in revenue or cost of revenue. If the Company is required to include retail co-payments in revenue and cost of revenue, it would result in an increase in reported revenue and cost of revenue for the nine months ended September 30, 2003 and 2002 of approximately 23 percent to 29 percent (excluding member co-payments on plans wherein where·in adv. In what way; how: Wherein have we sinned? conj. 1. In which location; where: the country wherein those people live. 2. the Company does not include ingredient
An ingredient is something that forms part of a mixture (in a general sense). costs in revenue). Thus, Express Scripts' consolidated results of operations, which include gross profit and net income, and the consolidated balance sheet and consolidated statement of cash flows would not be affected. The Company is in discussions with the SEC about the issues raised in the comment letter. Express Scripts, Inc. is one of the largest PBM companies in North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. providing PBM services to over 50 million members through facilities in eight states and Canada Canada (kăn`ədə), independent nation (2001 pop. 30,007,094), 3,851,787 sq mi (9,976,128 sq km), N North America. Canada occupies all of North America N of the United States (and E of Alaska) except for Greenland and the French islands of . Express Scripts serves thousands of client groups, including managed care organizations, insurance carriers, third-party administrators, employers and union-sponsored benefit plans. Express Scripts provides integrated PBM services, including network pharmacy claims processing, mail pharmacy services, benefit design consultation, drug utilization review drug utilization review Health insurance A study of drug prescriptions to evaluate appropriateness and cost-effectiveness of drug therapy , formulary management, disease management, medical and drug data analysis services, and medical information management services. The Company also provides distribution services for specialty pharmaceuticals through its Specialty Distribution. Express Scripts is headquartered in St. Louis Louis, titular duke of Burgundy Louis, 1682–1712, titular duke of Burgundy; grandson of King Louis XIV of France. He became heir to the throne on the death (1711) of his father, Louis the Great Dauphin. , Missouri Missouri, state, United States Missouri (mĭz  r`ē, –ə), one of the midwestern states of the United States. .
More information can be found at http://www.express-scripts.com, which
includes expanded investor information and resources.
SAFE HARBOR Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. STATEMENT This press release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. , 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: -- risks associated with our ability to maintain our historic growth rates Growth Rates The compounded annualized rate of growth of a company's revenues, earnings, dividends, or other figures. Notes: Remember, historically high growth rates don't always mean a high rate of growth looking into the future. , or to control operating or capital costs -- continued pressure on margins resulting from client demands for lower prices, enhanced service Enhanced service is service offered over commercial carrier transmission facilities used in interstate communications, that employs computer processing applications that act on the format, content, code, protocol, or similar aspects of the subscriber's transmitted information; offerings and/or and/or conj. Used to indicate that either or both of the items connected by it are involved. Usage Note: And/or is widely used in legal and business writing. higher service levels, and the possible termination of, or unfavorable modification to, contracts with key clients or providers -- competition and continuing consolidation in the PBM industry, and our ability to consummate To carry into completion; to fulfill; to accomplish. A Common-Law Marriage is consummated when the parties live in a manner intended to bring about public recognition of their relationship as Husband and Wife. 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 -- risks associated with adverse economic conditions, which may result in lower membership growth in existing clients or in lower rates of utilization of prescription drugs -- adverse results in regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. matters, the adoption of new legislation or regulations, more aggressive enforcement of existing legislation or regulations, or a change in the interpretation of existing legislation or regulations (including, without limitation, the Compliance Guidance for Pharmaceutical Manufacturers issued by the Office of Inspector General of Health and Human Services Noun 1. Health and Human Services - the United States federal department that administers all federal programs dealing with health and welfare; created in 1979 Department of Health and Human Services, HHS relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the Federal Medicare/Medicaid Anti-Kickback Statute statute, in law, a formal, written enactment by the authorized powers of a state. The term is usually not applied to a written constitution but is restricted to the enactments of a legislature. ). -- risks associated with the operations of acquired businesses, including integration risks and costs, risks of client retention and repricing Repricing To change the price of an asset. In derivatives, it sometimes refers to the exchange of options of with different strike prices. repricing of client contracts -- increased compliance risks relating to our contracts with the Department of Defense TRICARE Plan and various state governments -- risks arising from investigations of certain PBM practices and pharmaceutical pricing, marketing and distribution practices currently being conducted by the U.S. Attorney offices in Philadelphia Philadelphia, ancient cities Philadelphia, name of several ancient cities. One was in Lydia, W Asia Minor (now W Turkey). At the foot of Mt. Tmolus and near the location of modern Alaşehir, it was founded in the 2d cent. B.C. and Boston Boston, town, England Boston, town (1991 pop. 26,495), E central England, on the Witham River. Boston's fame as a port dates from the 13th cent., when it was a Hanseatic port trading wool and wine. Having recovered from a decline in the 18th and 19th cent. , the Attorney General of the State of New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of , and other regulatory agencies regulatory agency Independent government commission charged by the legislature with setting and enforcing standards for specific industries in the private sector. The concept was invented by the U.S. -- 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 -- adverse results in litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. , including a number of purported pur·port·ed adj. Assumed to be such; supposed: the purported author of the story. pur·port  ed·ly adv.
class action cases challenging aspects of our business practices -- risks associated with the use and protection of the intellectual property we use in our business -- risks associated with our leverage and debt service obligations, including the effect of certain covenants in our borrowing agreements -- risks associated with our ability to continue to develop new products, services and delivery channels -- general developments in the health care industry, including the impact of increases in health care costs, changes in drug utilization and cost patterns, introductions of new drugs and conversion of prescription drugs to non-prescription (or over-the-counter) status -- uncertainties regarding the implementation and the ultimate terms of proposed government initiatives, including a Medicare Medicare, national health insurance program in the United States for persons aged 65 and over and the disabled. It was established in 1965 with passage of the Social Security Amendments and is now run by the Centers for Medicare and Medicaid Services. prescription drug benefit -- increase in credit risk relative to our clients due to adverse economic trends -- risks associated with our inability to attract and retain qualified personnel -- 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 CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or after the date hereof here·of adv. Of this. hereof Adverb Formal or law of or concerning this Adv. 1. hereof - of or concerning this; "the twigs hereof are physic" or to reflect the occurrence of unanticipated events. FINANCIAL TABLES FOLLOW
EXPRESS SCRIPTS, INC.
Unaudited Consolidated Statement of Operations
(in thousands, except per share data)
Three months ended Nine months ended
September 30, September 30,
2003 2002 2003 2002
---------- ---------- ---------- ----------
Revenues $3,248,602 $3,187,458 $9,806,780 $8,906,004
Cost of revenues 3,041,825 2,975,996 9,173,155 8,307,781
---------- ---------- ---------- ----------
Gross profit 206,777 211,462 633,625 598,223
Selling, general and
administrative 93,286 112,162 302,027 329,860
---------- ---------- ---------- ----------
Operating income 113,491 99,300 331,598 268,363
---------- ---------- ---------- ----------
Other (expense) income:
Undistributed loss
from joint venture (1,436) (1,224) (4,520) (3,294)
Interest income 756 1,391 2,345 3,770
Interest expense (8,430) (12,555) (33,172) (32,337)
---------- ---------- ---------- ----------
(9,110) (12,388) (35,347) (31,861)
---------- ---------- ---------- ----------
Income before income
taxes 104,381 86,912 296,251 236,502
Provision for income
taxes 39,839 33,470 113,054 90,391
---------- ---------- ---------- ----------
Income before
cumulative effect of
accounting change 64,542 53,442 183,197 146,111
Cumulative effect of
accounting change,
net of tax - - (1,028) -
---------- ---------- ---------- ----------
Net income $ 64,542 $ 53,442 $ 182,169 $ 146,111
========== ========== ========== ==========
Basic earnings per
share:
Before cumulative
effect of accounting
change $ 0.82 $ 0.69 $ 2.34 $ 1.87
Cumulative effect of
accounting change - - (0.01) -
---------- ---------- ---------- ----------
Net income $ 0.82 $ 0.69 $ 2.33 $ 1.87
========== ========== ========== ==========
Weighted average
number of common
shares outstanding
during the
period - Basic EPS 78,666 77,829 78,197 77,962
========== ========== ========== ==========
Diluted earnings per
share:
Before cumulative
effect of accounting
change $ 0.81 $ 0.67 $ 2.30 $ 1.83
Cumulative effect of
accounting change - - (0.01) -
---------- ---------- ---------- ----------
Net income $ 0.81 $ 0.67 $ 2.29 $ 1.83
========== ========== ========== ==========
Weighted average number
of common shares
outstanding during the
period - Diluted EPS 80,023 79,449 79,401 79,786
========== ========== ========== ==========
EXPRESS SCRIPTS, INC.
Unaudited Consolidated Balance Sheet
(in thousands, except share data)
September 30, December 31,
2003 2002
---------- ----------
Assets
Current assets:
Cash and cash equivalents $ 292,310 $ 190,654
Receivables, net 983,193 988,544
Inventories 130,113 160,483
Deferred taxes 14,979 25,686
Prepaid expenses and other current assets 24,646 28,454
---------- ----------
Total current assets 1,445,241 1,393,821
Property and equipment, net 173,116 168,973
Goodwill, net 1,420,582 1,378,436
Other intangible assets, net 235,762 251,111
Other assets 20,090 14,651
---------- ----------
Total assets $3,294,791 $3,206,992
========== ==========
Liabilities and Stockholders' Equity
Current liabilities:
Claims and rebate payable $1,155,195 $1,084,906
Accounts payable 196,211 255,245
Accrued expenses 185,583 200,356
Current maturities of long-term debt - 3,250
---------- ----------
Total current liabilities 1,536,989 1,543,757
Long-term debt 455,089 562,556
Other liabilities 124,460 97,824
---------- ----------
Total liabilities 2,116,538 2,204,137
Stockholders' equity:
Preferred stock, $0.01 par value per share,
5,000,000 shares authorized, and no
shares issued and outstanding - -
Common stock, $0.01 par value per share,
181,000,000 shares authorized, and
79,777,000 and 79,834,000 shares issued
and outstanding, respectively 797 798
Additional paid-in capital 482,754 503,746
Unearned compensation under employee
compensation plans (25,413) (8,179)
Accumulated other comprehensive income 1,744 (4,422)
Retained earnings 797,119 614,950
---------- ----------
1,257,001 1,106,893
Common Stock in treasury at cost,
1,234,000 and 1,963,000 shares,
respectively (78,748) (104,038)
---------- ----------
Total stockholders' equity 1,178,253 1,002,855
---------- ----------
Total liabilities and stockholders'
equity $3,294,791 $3,206,992
========== ==========
EXPRESS SCRIPTS, INC.
Unaudited Condensed Consolidated Statement of Cash Flows
(in thousands)
Nine months ended
September 30,
2003 2002
--------- ---------
Cash flow from operating activities:
Net income $ 182,169 $ 146,111
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 39,687 62,975
Non-cash adjustments to net income 65,548 54,625
Net changes in operating assets and liabilities (6,008) 23,253
--------- ---------
Net cash provided by operating activities 281,396 286,964
--------- ---------
Cash flows from investing activities:
Purchases of property and equipment (32,012) (32,472)
Acquisitions and joint venture 3,560 (497,229)
Other 15 655
--------- ---------
Net cash used in investing activities (28,437) (529,046)
--------- ---------
Cash flows from financing activities:
Proceeds from long-term debt 50,000 425,000
Repayment of long-term debt (160,430) (150,000)
Treasury stock acquired (79,073) (66,840)
Net proceeds from employee stock plans 35,908 21,700
Other - (3,885)
--------- ---------
Net cash (used in) provided by financing
activities (153,595) 225,975
--------- ---------
Effect of foreign currency translation
adjustment 2,292 (10)
--------- ---------
Net increase (decrease) in cash and cash
equivalents 101,656 (16,117)
Cash and cash equivalents at beginning of period 190,654 177,715
--------- ---------
Cash and cash equivalents at end of period $ 292,310 $ 161,598
========= =========
EXPRESS SCRIPTS, INC.
Table 1
Unaudited Operating Statistics
(in thousands, except per claim)
3 months 3 months 3 months
ended ended ended
9/30/2003 6/30/2003 3/31/2003
---------- ---------- ----------
Revenue Detail
--------------
Network revenues $2,201,301 $2,303,311 $2,188,208
Mail revenues 969,170 951,473 961,273
Services revenues 14,922 17,787 18,811
---------- ---------- ----------
PBM revenues 3,185,393 3,272,571 3,168,292
---------- ---------- ----------
Services revenues 26,082 28,637 27,793
Other revenues 37,127 32,989 27,896
---------- ---------- ----------
Non-PBM revenues 63,209 61,626 55,689
---------- ---------- ----------
Total revenues (1) $3,248,602 $3,334,197 $3,223,981
========== ========== ==========
Per Claim
---------
Network revenue/claim $ 24.34 $ 23.99 $ 22.64
Mail revenue/claim $ 118.83 $ 117.09 (2)$ 129.36
Claims Detail
-------------
Network (3) 90,427 96,025 96,667
SDS 896 966 889
Mail 8,156 8,126 7,431
---------- ---------- ----------
Total claims 99,479 105,117 104,987
========== ========== ==========
Adjusted claims (4) 115,791 121,369 119,849
========== ========== ==========
Margin Analysis
---------------
Gross profit margin 6.4% 6.5% 6.5%
EBITDA margin 3.9% 3.7% 3.8%
Per Adjusted Claim
------------------
Gross profit $ 1.79 $ 1.79 $ 1.75
EBITDA (5) $ 1.09 $ 1.02 $ 1.01
3 months 3 months
ended ended
12/31/2002 9/30/2002
----------- ----------
Revenue Detail
--------------
Network revenues $ 2,314,967 $2,180,451
Mail revenues 976,268 941,259
Services revenues 24,500 22,150
----------- ----------
PBM revenues 3,315,735 3,143,860
----------- ----------
Services revenues 27,071 24,432
Other revenues 21,703 19,166
----------- ----------
Non-PBM revenues 48,774 43,598
----------- ----------
Total revenues (1) $ 3,364,509 $3,187,458
=========== ==========
Per Claim
---------
Network revenue/claim $ 24.55 $ 24.54
Mail revenue/claim $ 136.96 $ 133.78
Claims Detail
-------------
Network (3) 94,289 88,869
SDS 863 794
Mail 7,128 7,036
----------- ----------
Total claims 102,280 96,699
=========== ==========
Adjusted claims (4) 116,536 110,771
=========== ==========
Margin Analysis
---------------
Gross profit margin 6.7% 6.6%
EBITDA margin 3.6% 3.5%
Per Adjusted Claim
------------------
Gross profit $ 1.93 $ 1.91
EBITDA (5) $ 1.05 $ 1.00
See Notes to Unaudited Operating Statistics
Selected Ratio Analysis
Table 2
As of As of As of
9/30/2003 6/30/2003 3/31/2003
---------- ---------- ----------
Debt to EBITDA ratio (6) 0.9x 1.0x 1.2x
EBITDA interest coverage (7) 11.0x 9.8x 10.1x
Operating cash flow interest 9.4x 7.2x 10.7x
coverage (8)
Debt to capitalization (9) 27.9% 29.7% 33.6%
As of As of
12/31/2002 9/30/2002
---------- ----------
Debt to EBITDA ratio (6) 1.2x 1.5x
EBITDA interest coverage (7) 10.3x 10.3x
Operating cash flow interest
coverage (8) 9.7x 9.9x
Debt to capitalization (9) 36.1% 39.0%
EXPRESS SCRIPTS, INC.
Notes to Unaudited Operating Statistics and Selected Ratio Analysis
(in thousands)
(1) During 2002, we early adopted EITF No. 02-16, "Accounting by a
Reseller for Cash Consideration Received from a Vendor." EITF 02-16
requires any consideration received from a vendor to be characterized
as a reduction of cost of revenues. As a result, revenues and cost of
revenues have been reduced by the gross amount of rebates and
administrative fees received from pharmaceutical manufacturers for
collecting, processing and reporting drug utilization data, for
monitoring formulary compliance, and for calculating and distributing
rebates to those of our clients for whom our PBM services includes
the claim processing function. Our client's portion, a majority of
such amounts, will continue to be classified as a reduction of
revenues. Our consolidated gross profit was not impacted as a result
of this adoption. The amount of the reduction in revenues and cost of
revenues is as follows:
4th Quarter 2002 3rd Quarter 2002 2nd Quarter 2002 1st Quarter 2002
$ 244,970 $ 238,740 $ 235,113 $ 198,048
(2) The decrease in mail revenue per claim beginning in the second
quarter of 2003 as compared to the first quarter of 2003 reflects
the Department of Defense ("DoD") TRICARE Management Activity mail
contract in which we earn a fee per prescription filled by our mail
order facility. Revenues and cost of revenues do not include
ingredient costs.
(3) Network claims exclude drug formulary only claims where we only
administer the clients formulary and approximately 0.5 million
manual claims per quarter.
(4) Adjusted claims represent network claims and specialty
distribution 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.
(5) The following is a reconciliation of EBITDA to net income and to
net cash provided by operating activities as the Company believes
they are the most directly comparable measure calculated under
Generally Accepted Accounting Principles:
3 months ended 9 months ended
September 30, September 30,
------------------- --------------------
2003 2002 2003 2002
-------- -------- -------- --------
Net income $ 64,542 $ 53,442 $182,169 $146,111
Income taxes 39,839 33,470 113,054 90,391
Depreciation and
amortization (a) 13,294 12,012 39,687 62,975 (b)
Interest expense, net 7,674 11,164 30,827 28,567
Undistributed loss from
joint venture 1,436 1,224 4,520 3,294
Cumulative effect of
accounting change, net
of tax - - 1,028 -
-------- -------- -------- --------
EBITDA 126,785 111,312 371,285 331,338
Current income taxes (23,752) (20,103) (78,858) (71,617)
Interest expense less
amortization (7,288) (8,937) (28,208) (25,204)
Undistributed loss from
joint venture (1,436) (1,224) (4,520) (3,294)
Other adjustments to
reconcile net income
to net cash provided by
operating activities 66,489 10,402 21,697 55,741
-------- -------- -------- --------
Net cash provided by
operating activities $160,798 $ 91,450 $281,396 $286,964
======== ======== ======== ========
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.
(a) Includes depreciation and amortization expense of:
Gross profit $ 5,145 $ 4,505 $15,556 $19,165
Selling, general and
administrative 8,149 7,507 24,131 43,810
------- ------- ------- -------
$13,294 $12,012 $39,687 $62,975
======= ======= ======= =======
(b) Includes additional depreciation of approximately $23,000 for
the 9 months ended September 30, 2002 resulting from shortening
estimated useful lives on certain assets associated with legacy
information systems.
(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
for the twelve months ended.
(8) Represents Operating Cash Flow for the twelve months ended
divided by interest for the twelve months ended. For the second
quarter of 2003, this ratio was negatively impacted by the non-
recurring charges to interest expense of $5.0 million which pertains
to the early retirement of debt.
(9) Represents debt divided by the total of debt and stockholders
equity.
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