Express Scripts Reports Record Third Quarter Earnings.Business Editors & Health/Medical Writers ST. LOUIS--(BUSINESS WIRE)--Oct. 23, 2002 Express Scripts, Inc. (Nasdaq:ESRX) announced third quarter net income before extraordinary items of $53.9 million, or 68 cents 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 39 percent over the same quarter of 2001, excluding the amortization of goodwill. Express Scripts generated $115.3 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 $72.5 million in the same quarter last year. During the quarter, the company repaid $85.0 million of debt, and early in the fourth quarter, the company repaid an additional $55 million. Express Scripts repurchased 664,000 shares of common stock for $30.9 million during the third quarter. To date, the company has repurchased 5.1 million shares of common stock under its share repurchase Share Repurchase A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. program, which was expanded to 10 million shares last quarter. "The financial results for the quarter reflect the strength of our business model, which makes prescription drugs prescription drug Prescription medication Pharmacology An FDA-approved drug which must, by federal law or regulation, be dispensed only pursuant to a prescription–eg, finished dose form and active ingredients subject to the provisos of the Federal Food, Drug, more affordable for the American American, river, 30 mi (48 km) long, rising in N central Calif. in the Sierra Nevada and flowing SW into the Sacramento River at Sacramento. The discovery of gold at Sutter's Mill (see Sutter, John Augustus) along the river in 1848 led to the California gold rush of workforce and their employers," stated Barrett Barrett (sometimes spelled Barret or Barratt) is a surname that has been associated with several different people, places and organisations: Barrett is a popular surname in south and west Ireland. Toan, chairman and chief executive officer. "Our business model is based on a win-win win-win adj. Of or being a situation in which the outcome benefits each of two often opposing groups: a win-win proposition for the buyer and the seller. situation - the savings we generate for our clients and members result in strong operating performance for our company. Express Scripts makes prescription drugs more affordable by securing discounts from drug manufacturers and retailers, helping plan sponsors and their members take advantage of those discounts, encouraging the use of more economical 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. and mail delivery, and promoting more appropriate use of prescription drugs." Strong Operating Results While the company enjoyed record operating results, the quarter was impacted by the anticipated loss of two clients. Prior to Express Scripts' acquisition of National Prescription Administrators NPA was formed in 1977 as a privately held full-service PBM. The company grew to become a leading provider for labor unions and government groups in the northeast United States. Express Scripts acquired NPA on April 22, 2002. (NPA (1) (Numbering Plan Area) The Bellcore/Telcordia telephone area code system in use in the U.S., Canada, Alaska, Hawaii and islands in the Caribbean. See NPA code. (2) (Network Professional Association, San Diego, CA, www.npanet. ), the State of Illinois Illinois, river, United States Illinois, river, 273 mi (439 km) long, formed by the confluence of the Des Plaines and Kankakee rivers, NE Ill., and flowing SW to the Mississippi at Grafton, Ill. It is an important commercial and recreational waterway. notified NPA that the state would not renew with NPA. In addition, Express Scripts' contract with RightCHOICE Managed Care, Inc. was not renewed 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. following the acquisition of RightChoice by WellPoint Noun 1. wellpoint - a perforated tube driven into the ground to collect water from the surrounding area well point tube, tubing - conduit consisting of a long hollow object (usually cylindrical) used to hold and conduct objects or liquids or gases Health Networks Inc., which operates its own 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. benefit manager subsidiary. Revenues for the third quarter of 2002 were $3.4 billion, a 44 percent increase over $2.4 billion for the same quarter last year. This year-to-year increase is due primarily to increased rates of utilization of prescription drugs by members, the acquisition of NPA, and drug price inflation. Mail pharmacy prescriptions increased to 7.0 million during the third quarter of 2002, a 30 percent increase compared with the same quarter last year. In addition, specialty distribution claims in the third quarter increased to 0.8 million, a 59 percent increase over last year's third quarter. Network pharmacy claims processed in the third quarter were 88.9 million, a 26 percent increase over the third quarter of 2001. Network claims were slightly below the level experienced in the second quarter of 2002 reflecting normal seasonal utilization patterns and the loss of the two clients discussed above. While this resulted in slightly lower gross profits in the third quarter than the second quarter, selling, general and administrative expenses were reduced by a greater percentage, resulting in a 9 percent increase in 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. over the second quarter of 2002. Generic versions of Prinivil Prin·i·vil A trademark for the drug lisinopril. lisinopril Carace (UK), Prinivil, Zestril Pharmacologic class: Angiotensin-converting enzyme (ACE) inhibitor Therapeutic class: and Zestril Zes·tril A trademark for the drug lisinopril. lisinopril Carace (UK), Prinivil, Zestril Pharmacologic class: Angiotensin-converting enzyme (ACE) inhibitor Therapeutic class: became available in July July: see month. 2002, which contributed to a continued increase in overall generic utilization. In the third quarter of 2002, generic drugs comprised 46.0 percent of total retail prescriptions filled compared to 43.7 percent in the second quarter, while in the mail, generics were 36.3 percent compared to 34.0 percent last quarter. Selling general and administrative expenses decreased from the second quarter mainly as a result of the completion of the integration of the legacy Express Scripts, ValueRx and Diversified diversified (di·verˑ·s Pharmaceuticals Services claims processing platforms. Express Scripts eliminated three claims processing platforms in three years, and during the third quarter transferred the last tier of clients from its remaining legacy system to the company's Anchor adjudication The legal process of resolving a dispute. The formal giving or pronouncing of a judgment or decree in a court proceeding; also the judgment or decision given. The entry of a decree by a court in respect to the parties in a case. platform. The company's legacy operating system operating system (OS) Software that controls the operation of a computer, directs the input and output of data, keeps track of files, and controls the processing of computer programs. was retired at the end of the second quarter, which reduced depreciation expense in the third quarter of 2002. Increased mail penetration and higher levels of generic utilization have had a positive impact on the profitability per claim. 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 $1.02 for the third quarter of 2002, a 10 percent over the third quarter of 2001. Extraordinary losses on the early retirement of debt of $0.5 million, net of tax, and $0.4 million, net of tax, were incurred for the third quarter of 2002 and 2001, respectively. Increased Earnings Guidance Express Scripts previously announced that it expects full-year 2002 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 to be in the $2.53 to $2.56 range. The increased guidance reflects: -- Growth of mail pharmacy services -- Increased generic utilization, which benefits both clients and members, and -- Benefits from the acquisition of NPA Express Scripts also raised guidance for 2003 partially due to strong results to date from its 2003 selling season; most new sales were for fully integrated services In computer networking, IntServ or integrated services is an architecture that specifies the elements to guarantee quality of service (QoS) on networks. IntServ can for example be used to allow video and sound to reach the receiver without interruption. . The company believes its 2003 diluted earnings per share will be in the $3.10 to $3.20 range. Financial performance for 2003 will be dependent, among other things, on year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. sales results, increase in mail pharmacy prescriptions, generic utilization, growth in specialty distribution services, and the successful integration of NPA. The company's guidance for 2003 assumes the loss of a contract with a large managed care organization for mail pharmacy services only. Specialty Distribution Expands Product Offering Orphan orphan: see adoption; foundling hospital; guardian and ward. See widow & orphan. Orphan See also Abandonment. Adverse, Anthony finally, at middle age, discovers origins. [Am. Lit. Medical, Inc. selected Express Scripts' Specialty Distribution Subsidiary (SDS 1. (company) SDS - Scientific Data Systems. 2. (tool) SDS - Schema Definition Set. ) to be the sole distributor of Xyrem This article describes the status of Xyrem as a prescription drug. To learn about the chemical and its biological mode of action, see the article on gamma-hydroxybutyric acid. (R)(sodium oxybate sodium oxybate Gamma-hydroxybutyrate, Xyrem® Neurology A neuropharmacologic used to manage narcolepsy and cataplexy, which causes abrupt loss of muscle control. See Date rape drug. ) oral solution. Xyrem (R) was approved for the treatment of cataplexy cataplexy /cat·a·plexy/ (kat´ah-plek?se) a condition marked by abrupt attacks of muscular weakness and hypotonia triggered by such emotional stimuli as mirth, anger, fear, etc., often associated with narcolepsy. , a debilitating de·bil·i·tat·ing adj. Causing a loss of strength or energy. Debilitating Weakening, or reducing the strength of. Mentioned in: Stress Reduction symptom symptom /symp·tom/ (simp´tom) any subjective evidence of disease or of a patient's condition, i.e., such evidence as perceived by the patient; a change in a patient's condition indicative of some bodily or mental state. associated with narcolepsy narcolepsy, a sleep disorder characterized by excessive daytime sleepiness and recurring unwanted episodes of sleep ("sleep attacks"). People with narcolepsy may abruptly fall asleep at almost any time, including while talking, eating, or even walking. , a chronic, neurological neurological, neurologic pertaining to or emanating from the nervous system or from neurology. neurological assessment evaluation of the health status of a patient with a nervous system disorder or dysfunction. sleep disorder Sleep disorder Any condition that interferes with sleep. At least 84 have been identified, according to the American Sleep Disorders Association. Mentioned in: Insomnia, Night Terrors . Patients with cataplexy experience a sudden loss of muscle tone triggered by strong emotions such as laughter, anger, fright or surprise, and in severe attacks, the patient may collapse and be unable to move for up to several minutes. Since the medicine is a Schedule III Schedule III or Schedule 3 is a legal category assigned to substances in certain jurisdictions:
Payment made to someone for out-of-pocket expenses has incurred. support, distribute information materials, and serve as a resource for product and educational information. Express Scripts Included in Fortune's 100 Fastest Growing Companies Express Scripts was ranked among 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. by Fortune Magazine, published in the September September: see month. 2, 2002 issue. The ranking was based on sales and earnings per share growth (minimum of 25 percent to be considered) and total return to investors over the last three years. In the survey, Express Scripts placed 65th overall -ranking 35th in revenue growth, 76th in earnings per share growth, and 66th in total return - representing three-year average annual rates of 50%, 35% and 19%, respectively. Express Scripts, Inc. is one of the largest 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 PBM - play by mail. See play by electronic mail. ) 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 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, disease management, medical and drug data analysis services, medical information management services and informed decision counseling services through its Express Health Line SM division. The company also provides distribution services for specialty pharmaceuticals through its Specialty Distribution subsidiary and sampling services through its Phoenix subsidiary. 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 acquisitions of Phoenix Marketing Group (Holdings), Inc. and NPA, 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, and risks associated with the operations of acquired businesses -- risks associated with our ability to maintain internal growth rates, 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 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 -- adverse results in regulatory matters, the adoption of new legislation or regulations (including increased costs associated with compliance with new laws New Laws: see Las Casas, Bartolomé de. and regulations, such as privacy regulations under the Health Insurance Portability and Accountability Act There are a number of piece of legislation known as the Accountability Act:
of existing legislation or regulations, or a change in the interpretation of existing legislation or regulations -- increased compliance risks relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc 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. 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 our 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 pending case which purports to be a class action, challenging Express Scripts' business practices under the Employee Retirement Income Security Act (ERISA See Employee Retirement Income Security Act. ERISA See Employee Retirement Income Security Act (ERISA). ) -- 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 and introductions of new drugs -- 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 Securities and Exchange Commission 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.
Express Scripts, Inc.
Unaudited Consolidated Statement of Operations
(in Thousands, Except Per Share Data)
Three months ended Nine months ended
September 30, September 30,
---------------------- ----------------------
2002 2001 2002 2001
---------- ---------- ---------- ----------
Revenues $3,426,198 $2,381,252 $9,577,905 $6,719,135
Cost of revenues 3,214,736 2,236,799 8,979,682 6,279,499
---------- ---------- ---------- ----------
Gross profit (1) 211,462 144,453 598,223 439,636
Selling, general and
administrative (1) 112,162 84,222 329,860 266,610
---------- ---------- ---------- ----------
Operating income 99,300 60,231 268,363 173,026
---------- ---------- ---------- ----------
Other (expense) income:
Undistributed loss
from joint venture (1,224) (435) (3,294) (1,093)
Interest income 1,391 1,837 3,770 5,521
Interest expense (11,753) (8,417) (31,535) (26,190)
---------- ---------- ---------- ----------
(11,586) (7,015) (31,059) (21,762)
---------- ---------- ---------- ----------
Income before income
taxes 87,714 53,216 237,304 151,264
Provision for income
taxes 33,777 20,653 90,698 60,378
---------- ---------- ---------- ----------
Income before
extraordinary items 53,937 32,563 146,606 90,886
Extraordinary items,
net of taxes (495) (372) (495) (372)
---------- ---------- ---------- ----------
Net income $53,442 $32,191 $146,111 $90,514
========== ========== ========== ==========
Basic earnings per
share (2):
Before extraordinary
items $0.70 $0.41 $1.88 $1.16
Extraordinary items $(0.01) $ -- $(0.01) $ --
---------- ---------- ---------- ----------
Net income $0.69 $0.41 $1.87 $1.16
========== ========== ========== ==========
Weighted average number
of common shares
outstanding during the
period - basic (2) 77,829 78,382 77,962 77,978
========== ========== ========== ==========
Diluted earnings per
share (2):
Before extraordinary
items $0.68 $0.40 $1.84 $1.13
Extraordinary items $(0.01) $ -- $(0.01) $ --
---------- ---------- ---------- ----------
Net income $0.67 $0.40 $1.83 $1.13
========== ========== ========== ==========
Weighted average number
of common shares
outstanding during the
period - diluted (2) 79,449 80,612 79,786 80,156
========== ========== ========== ==========
Reconciliation of prior
year under FAS 142
Goodwill amortization,
net of tax $6,543 $19,625
Net income before
extraordinary items $39,106 $110,511
Extraordinary items,
net of tax $(372) $(372)
Net income $38,734 $110,139
Net income before
extraordinary items
per share:
Basic $0.50 $1.42
Diluted $0.49 $1.38
Net income per share:
Basic $0.49 $1.41
Diluted $0.48 $1.37
EBITDA (3) $112,498 $80,869 $334,836 $231,864
========== ========== ========== ==========
See Notes to Unaudited Consolidated Statement of Operations
EXPRESS SCRIPTS, INC.
Notes to Unaudited Consolidated Statement of Operations
(in thousands)
General: Certain reclassifications have been made to prior years
financial statements to conform with the current quarter's
presentation.
(1) Includes depreciation and amortization expense of:
3 months ended 9 months ended
September 30, September 30,
--------------- ----------------
2002 2001 2002 2001
------ ------- ------- -------
Gross Profit $5,691 $4,506 $22,663 $11,557
Selling, general and administrative $7,507 $16,132 $43,810 $47,281
(2) Earnings per share and weighted average shares outstanding
have been restated to reflect the two-for-one stock split
effective June 22, 2001.
(3) EBITDA is earnings before other income (expense), 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 incur
and service indebtedness. EBITDA, however, should not be
considered as an alternative to net income as a measure of
operating performance, as an alternative to cash flow or a
measure of liquidity. In addition, our calculation of EBITDA
may not be identical to that used by other companies.
EXPRESS SCRIPTS, INC.
Unaudited Consolidated Balance Sheet
(in thousands)
September 30, December 31,
2002 2001
------------ -----------
ASSETS
Current assets
Cash and cash equivalents $161,598 $177,715
Receivables, net 994,787 883,827
Inventories 123,671 122,375
Other current assets 37,460 29,286
---------- ----------
Total current assets 1,317,516 1,213,203
Property and equipment, net 156,647 165,263
Goodwill, net 1,381,833 942,280
Other intangible assets, net 251,926 165,349
Other assets 16,144 14,150
---------- ----------
Total assets $3,124,066 $2,500,245
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Claims and rebate payable $1,011,136 $910,360
Other current liabilities 431,527 335,257
---------- ----------
Total current liabilities 1,442,663 1,245,617
Long-term debt 620,884 346,119
Other long-term liabilities 89,741 76,512
---------- ----------
Total liabilities 2,153,288 1,668,248
Total stockholders' equity 970,778 831,997
---------- ----------
Total liabilities and stockholders' equity $3,124,066 $2,500,245
========== ==========
EXPRESS SCRIPTS, INC.
Unaudited Condensed Consolidated Statement of Cash Flows
(in thousands)
9 months ended
September 30,
------------------
2002 2001
-------- --------
Cash flow from operating activities:
Net income $146,111 $90,514
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 66,473 58,838
Other 98,254 18,700
-------- --------
Net cash provided by operating activities: 310,838 168,052
-------- --------
Cash flows from investing and financing activities:
Purchases of property and equipment (32,472) (36,830)
Acquisitions and joint venture (521,103) (19,582)
Treasury stock acquired (66,840) (27,055)
Repayment of long-term debt (150,000) (50,000)
Proceeds from long-term debt 425,000 --
Other 18,460 17,031
-------- --------
Net cash used in investing and
financing activities (326,955) (116,436)
-------- --------
Net (decrease) increase in cash and
cash equivalents (16,117) 51,616
Cash and cash equivalents at beginning
of period 177,715 53,204
-------- --------
Cash and cash equivalents at end
of period $161,598 $104,820
======== ========
EXPRESS SCRIPTS, INC.
Table 1
Unaudited Operating Statistics
(in thousands, except per claim)
3 months 3 months 3 months
ended ended ended
09/30/2002 06/30/2002 03/31/2002
---------- ---------- ----------
Drug Spending
---------------------------------
PBM $5,629,335 $5,539,571 $4,636,790
Specialty Dist. (SDS) 353,693 328,938 290,081
---------- ---------- ----------
Total $5,983,028 $5,868,509 $4,926,871
========== ========== ==========
Revenue Detail
---------------------------------
PBM revenues (1) $3,382,600 $3,360,382 $2,720,200
Non-PBM revenues 43,598 42,256 28,869
---------- ---------- ----------
Total revenues $3,426,198 $3,402,638 $2,749,069
========== ========== ==========
Per Claim
---------------------------------
Network revenue/claim $26.89 $26.05 $23.95
Mail revenue/claim $139.50 $137.87 $130.91
Claims Detail
---------------------------------
Network 88,869 91,610 80,112
SDS 794 759 666
Mail 7,036 6,967 6,039
---------- ---------- ----------
Total claims 96,699 99,336 86,817
========== ========== ==========
Adjusted claims (3) 110,771 113,270 98,895
========== ========== ==========
Margin Analysis
---------------------------------
Gross profit margin 6.2% 6.2% 5.8%
EBITDA margin 3.3% 3.4% 3.4%
Per Adjusted Claim
---------------------------------
Drug spend $54.01 $51.81 $49.82
Gross profit 1.91 $1.87 $1.62
EBITDA 1.02 $1.01 $0.94
3 months 3 months 3 months
ended ended ended
12/31/2001 09/30/2001 06/30/2001
---------- ---------- ----------
Drug Spending
---------------------------------
PBM $4,486,130 $3,914,546 $3,856,119
Specialty Dist. (SDS) 251,746 183,299 172,918
---------- ---------- ----------
Total $4,737,876 $4,097,845 $4,029,037
========== ========== ==========
Revenue Detail
---------------------------------
PBM revenues (1) $2,590,515 $2,367,019 $2,228,852 (2)
Non-PBM revenues 19,132 14,233 18,491
---------- ---------- ----------
Total revenues $2,609,647 $2,381,252 $2,247,343
========== ========== ==========
Per Claim
---------------------------------
Network revenue/claim $23.40 $24.01 $22.46
Mail revenue/claim $123.75 $122.37 $126.06
Claims Detail
---------------------------------
Network 79,967 70,373 71,311
SDS 581 500 436
Mail 5,714 5,404 4,879
---------- ---------- ----------
Total claims 86,262 76,277 76,626
========== ========== ==========
Adjusted claims (3) 97,690 87,085 86,384
========== ========== ==========
Margin Analysis
---------------------------------
Gross profit margin 6.0% 6.1% 6.7%(4)
EBITDA margin 3.3% 3.4% 3.4%(4)
Per Adjusted Claim
---------------------------------
Drug spend $48.50 $47.06 $46.64
Gross profit $1.60 $1.66 $1.74
EBITDA $0.87 $0.93 $0.89
See Notes to Unaudited Operating Statistics
Selected Ratio Analysis
Table 2
As of As of As of
09/30/2002 06/30/2002 03/31/2002
---------- ---------- ----------
Debt to EBITDA ratio (1) 1.5x 1.8x 1.0x
Interest coverage ratio (1) 10.6x 10.7x 10.2x
Debt to enterprise value 12.8% 15.2% 7.2%
Debt to capitalization 39.0% 42.8% 28.3%
As of As of As of
12/31/2001 09/30/2001 06/30/2000
---------- ---------- ----------
Debt to EBITDA ratio (1) 1.1x 1.1x 1.4x
Interest coverage ratio (1) 9.3x 8.4x 7.5x
Debt to enterprise value 8.7% 7.4% 8.4%
Debt to capitalization 29.4% 29.8% 33.3%
(1) Uses financial information for the twelve months ended
EXPRESS SCRIPTS, INC.
Notes
Unaudited Operating Statistics (excludes non-recurring items)
General: Certain reclassifications have been made to prior years and
prior quarter's financial statements to conform with the current
quarter's presentation
(1) Our PBM revenues generally include administrative fees,
dispensing fees and ingredient costs of pharmaceuticals
dispensed from retail pharmacies included in one of our
networks or from one of our mail pharmacies, and the
associated costs are recorded in cost of revenues (the Gross
Basis). Where we only administer the contracts between our
clients and the clients' retail pharmacy networks we record as
revenues only the administrative fee we received from our
activities (the Net Basis).
(2) This increase primarily reflects the transfer of clients to
pharmacy networks managed by us (Gross Basis -- see footnote
1); higher utilization and drug costs; and new membership.
(3) Adjusted claims represent network claims plus mail claims,
which are multiplied by 3, as mail claims are typically 90 day
scripts and network claims are generally 30 day scripts.
(4) Margin analysis is not indicative of profitability -- margins
are greatly impacted by the transfer of clients to pharmacy
networks managed by us (Gross Basis) from the clients' network
(Net Basis). When we process claims for a client's pharmacy
network, all we record as revenue is an administrative fee
(Net Basis). When a client is transferred to one of our
networks, we charge the administrative fee and a fee for
managing the pharmacy network. In addition, we gross up
revenues and cost of revenues to include the ingredient cost
(Gross Basis). Thus, while the margin percentage appears to
decline because revenues are grossed up for the ingredient
cost, our actual profit per claim and net income improves due
to the fee we receive for managing the pharmacy network.
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