Express Scripts Reports Strong First Quarter Earnings.Company Raises 2007 Guidance for Both Earnings Per Share and Cash Flow ST. LOUIS -- Express Scripts, Inc. (Nasdaq: ESRX) announced first quarter net income of $133.7 million, or $0.97 per diluted share. Excluding non-recurring items that are discussed below, earnings per diluted share was $1.04, a 49 percent increase over $0.70 per diluted share for the same quarter last year. Express Scripts reported first quarter 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 of $155.6 million compared to $41.0 million for the same quarter last year. The Company previously announced that its Board had approved an increase in the 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. authorization, which will enable the repurchase of up to 14.1 million shares, or $1 billion, whichever occurs first. This open-market repurchase program will begin promptly. "I am pleased by the strong start to 2007, which reflects the dedication of our employees who are focused on serving our clients and patients," stated George Paz, president, chief executive officer and chairman. "Express Scripts' fundamental business model continues to produce outstanding results. We have considerable room to run in saving plan sponsors and patients money through greater use of generics, home delivery and specialty pharmacy." First Quarter Review Generic utilization reached a record 60.3 percent compared to 56.3 percent last year. Total adjusted claims for the quarter were 128.0 million. Retail network claims processed in the first quarter were 96.8 million, home delivery claims were 10.0 million, and Specialty and Ancillary Services ("SAAS (Software-As-A-Service) Software that is rented rather than purchased. Instead of buying software and paying for periodic upgrades, SaaS is subscription based, and all upgrades are provided during the term of the subscription. ") claims were 1.2 million. Adjusted gross profit for the first quarter, which excludes a $9.0 million non-recurring benefit discussed below, increased 21 percent to $417.1 million from $344.6 million last year. The increase reflects higher generic utilization and lower retail and home delivery drug purchasing costs. Adjusted gross profit per adjusted claim was a record $3.26, a 28 percent increase over $2.55 for the same quarter last year. Adjusted 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. increased 33 percent to $244.4 million from $183.5 million last year. Operating income for the SAAS segment decreased $3.7 million sequentially from $20.1 million in the fourth quarter of 2006 to $16.4 million in the first quarter. The vast majority of this decrease was a result of the expected migration of members in Patient Assistance Programs to Medicare Part D and other discount programs. Express Scripts believes it is well-positioned to capitalize on Cap´i`tal`ize on` v. t. 1. To turn (an opportunity) to one's advantage; to take advantage of (a situation); to profit from; as, to capitalize on an opponent's mistakes s>. the growth opportunities inherent in the specialty pharmacy marketplace. Higher generic utilization and lower retail and home delivery drug purchasing costs translated into strong 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 growth. Adjusted EBITDA increased 29 percent to $270.3 million from $209.3 million last year and reached a record $2.11 per adjusted claim, a 36 percent increase over $1.55 last year. During the quarter, the Company recorded a non-recurring charge of $23.0 million representing transaction costs Transaction Costs Costs incurred when buying or selling securities. These include brokers' commissions and spreads (the difference between the price the dealer paid for a security and the price they can sell it). for the terminated proposal to acquire Caremark, net of the special dividend received on the Company's shares of Caremark stock. A $9.0 million non-recurring benefit was also recorded during the quarter resulting from the settlement of a contractual item with a supply chain vendor. These items resulted in a net non-recurring charge of $14.0 million ($8.9 million net of tax), or $0.07 per diluted share. In addition, the Company will record a non-recurring gain of $4.3 million in the second quarter resulting from the sale of its CVS/Caremark shares in April 2007. 2007 Earnings Guidance As a result of strong underlying trends, including lower drug purchasing costs and higher generic utilization, the increased share repurchase program, and other productivity improvements, the Company is raising its 2007 earnings guidance. Express Scripts is increasing its previous 2007 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 guidance from a range of $4.14 to $4.26 to a range of $4.29 to $4.41. This guidance range excludes the non-recurring items discussed above. The Company is also increasing its guidance on cash flow from operations in 2007 from a range of $700 to $800 million to $750 to $850 million. In addition, changes to Average Wholesale Price ("AWP AWP Awaiting Parts (military equipment status) AWP Average Wholesale Price AWP Annual Work Plan AWP Associated Writing Programs AWP Amusement with Prizes AWP Any Willing Provider AWP Aerial Work Platform ") as contemplated by a settlement proposed by First DataBank First DataBank, Inc. (FDB), currently owned by Hearst Corporation, is a publisher of pharmaceutical industry market information and information technology. The firm, headquartered in San Bruno, California, is best known for its controversial drug pricing surveys of the McKesson may occur later than originally expected. As time has passed, the Company believes that the marketplace has gained a better understanding that if AWP is reduced, discounts off of the AWP reference price would be adjusted in order to achieve the pricing originally intended by both parties to the contract. In assessing the risks and opportunities inherent in its forecast, the Company believes there is a potential upside of $0.14 to $0.16 per diluted share to the above earnings guidance range. The biggest item providing this upside would be the reduction of the allowance for the potential impact of the AWP settlement. This potential upside of $0.14 to $0.16 per diluted share would be realized in the second half of 2007, with the majority occurring in the fourth quarter. Express Scripts, Inc. is one of the largest 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 thousands of client groups, including managed-care organizations, insurance carriers, employers, third-party administrators, public sector, 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 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, and medical- and drug-data analysis services. The Company also distributes a full range of injectable in·ject·a·ble adj. Capable of being injected. Used of a drug. n. A drug or medicine that can be injected. and infusion 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 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: * uncertainties associated with our acquisitions, which include integration risks and costs, uncertainties associated with 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 uncertainties associated with the operations of acquired businesses * costs and uncertainties of 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 pending class action cases that challenge certain of our business practices * investigations of certain PBM practices and pharmaceutical pricing, marketing and distribution practices currently being conducted by the U.S. Attorney offices in Philadelphia and Boston, and by 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. including the Department of Labor, and various state attorneys general * changes in average wholesale price ("AWP"), which could reduce prices and margins, including the impact of a proposed settlement in a class action case involving First DataBank, an AWP reporting service * uncertainties regarding the implementation of the Medicare Part D prescription drug 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, 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 * uncertainties associated with U.S. Centers for Medicare & Medicaid's ("CMS (1) See content management system and color management system. (2) (Conversational Monitor System) Software that provides interactive communications for IBM's VM operating system. ") 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 * our ability to maintain 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 higher service levels, and the possible termination of, or unfavorable modification to, contracts with key clients or providers * 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 * 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), more aggressive enforcement of existing legislation or regulations, or a change in the interpretation of existing legislation or regulations * increased compliance relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc our contracts with the DoD TRICARE Management Activity and various state governments and agencies * 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 * the possible loss, or adverse modification of the terms, of contracts with pharmacies in our retail pharmacy network * 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 * 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 * increase in credit risk relative to our clients due to adverse economic trends * our ability 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 after the date hereof or to reflect the occurrence of unanticipated events. FINANCIAL TABLES FOLLOW [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] |
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