ST. LOUIS, July 25, 2016 /PRNewswire/ -- Express Scripts
Holding Company (Nasdaq: ESRX) announced 2016 second quarter net
income of $720.7 million, or
$1.13 per diluted share. 2016
second quarter adjusted earnings per diluted share, as detailed in
Table 4, was $1.57.1
"As the healthcare industry changes, a primary need of payers
and patients remains the same: access to affordable medicine," said
Tim Wentworth, CEO and
President. "An increase in our expected 2017 retention rate
to a range of 96% to 98% is a direct result of our unique business
model of client alignment, the industry's most focused and
innovative solutions, and a compassionate culture of caring
employees."
Second Quarter 2016 Review
The following compares second quarter 2016 and 2015 operating
results:
- Adjusted claims of 315.3 million, down 2% – See Table 1
- Net income of $720.7 million, up
20%
- Diluted earnings per share of $1.13, up 28%
- EBITDA of $1,798.1 million, flat
from 2015 adjusted EBITDA – See Table 3
- EBITDA per adjusted claim of $5.70, up 2% from 2015 adjusted EBITDA per
adjusted claim – See Table 3
- Adjusted net income of $998.7
million, up 2% – See Tables 5
and 5A
- Adjusted diluted earnings per share of $1.57, up 9% - See Table 4
- Net cash flow provided by operating activities of $438.9 million, down 51%
As expected, revenue and operating income of $106.6 million related to a large client contract
was realized in the second quarter of 2016 compared to $141.7 million in the second quarter of 2015 due
to the structure of the contract.
In July 2016, the Company issued
senior notes consisting of: $1,000.0
million aggregate principal amount of 3.000% senior notes
due July 2023, $1,500.0 million aggregate principal amount of
3.400% senior notes due March 2027
and $1,500.0 million aggregate
principal amount of 4.800% senior notes due July 2046. The
Company used a portion of the net proceeds to repay a portion
of its 2015 two-year term loan, to complete a tender offer for its
2.650% senior notes due 2017 and to complete a tender offer for a
portion of each of the 7.125% senior notes due 2018 issued by Medco
Health Solutions, Inc., the 7.250% senior notes due 2019 issued by
Express Scripts, Inc. and the Company's 6.125% senior notes due
2041. Total cash payments related to the above, excluding
accrued interest, were $3,519.3
million, which included $132.0
million of repayment costs. During the remainder of
the third quarter, the Company intends to use the
remaining net proceeds to redeem the remaining aggregate
principal amount of 2.650% senior notes due 2017, to complete the
final settlement for the tender offer of the 7.125% senior notes
due 2018 and for general corporate purposes.
2016 Guidance
The Company narrowed 2016 adjusted earnings per diluted share
guidance from a range of $6.31 to
$6.43 to a range of $6.33 to
$6.43, which raises the mid-point from $6.37 to $6.38. The increased adjusted earnings per
diluted share guidance range represents growth of 14% to 16% over
2015. Additional details on this guidance can be found in
Table 6 including items excluded from this range.
The following table compares the current 2016 guidance to
previous 2016 guidance:
(in millions,
except per share data)
|
|
Table
6
2016 Current Range
|
Table
6
2016 Previous Range
|
Total adjusted
claims
|
Table 1
|
1,260 to
1,290
|
1,255 to
1,295
|
Adjusted
SG&A
|
Table 2
|
$1,905 to
$1,985
|
$1,905 to
$1,985
|
EBITDA
|
Table 3
|
$7,230 to
$7,430
|
$7,230 to
$7,430
|
Diluted weighted
average shares
|
|
632 to 640
|
635 to 645
|
Adjusted diluted
earnings per share
|
Table 4
|
$6.33 to
$6.43
|
$6.31 to
$6.43
|
The Company expects the following for the third quarter of
2016:
(in millions,
except per share data)
|
|
Table
6
Estimated Quarter
Ending
September 30, 2016
|
Year-Over-Year
Change
|
Total adjusted
claims
|
Table 1
|
311 to 321
|
(5%) to
(2%)
|
Adjusted diluted
earnings per share
|
Table 4
|
$1.72 to
$1.76
|
19% to 21%
|
2016 Business Outlook
The Company is increasing its expected 2017 retention rate for
the 2016 selling season to a range of 96% - 98%, excluding the
impact of the remaining Coventry business rolling off in 2017,
representing approximately 1% of claims.
About Express Scripts
Express Scripts puts medicine within reach of tens of millions
of people by aligning with plan sponsors, taking bold action and
delivering patient-centered care to make better health more
affordable and accessible.
Headquartered in St. Louis,
Express Scripts provides integrated pharmacy benefit management
services, including network-pharmacy claims processing, home
delivery pharmacy care, specialty pharmacy care, specialty benefit
management, benefit-design consultation, drug utilization review,
formulary management, and medical and drug data analysis
services. Express Scripts also distributes a full range of
biopharmaceutical products and provides extensive cost-management
and patient-care services.
For more information, visit Lab.Express-Scripts.com or follow
@ExpressScripts on Twitter.
SAFE HARBOR STATEMENT
This press release contains forward-looking statements,
including, but not limited to, our 2016 guidance and our statements
related to the Company's plans, objectives, expectations (financial
and otherwise) or intentions. Actual results may differ materially
from those projected or suggested in any forward-looking
statements. Factors that may impact these forward-looking
statements can be found in Management's Discussion and Analysis of
Financial Condition and Results of Operations and Item 1A – "Risk
Factors" in the Company's Annual Report on Form 10-K filed with the
SEC on February 16, 2016. A
copy of this document can be found at the Investor Information
section of Express Scripts' web site at
http://www.express-scripts.com/corporate.
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.
|
|
|
1 All net
income, earnings per share, EBITDA, adjusted EBITDA, EBITDA per
adjusted claim, adjusted EBITDA per adjusted claim, adjusted net
income and adjusted earnings per share amounts are presented as
attributable to Express Scripts, excluding non-controlling interest
representing the share allocated to members of our consolidated
affiliates.
|
EXPRESS
SCRIPTS HOLDING COMPANY
|
Unaudited
Consolidated Statement of Operations
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
June 30,
|
|
Six Months
Ended
June 30,
|
(in
millions, except per share data)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
|
Revenues(*)
|
$ 25,222.3
|
|
$ 25,454.2
|
|
$ 50,014.1
|
|
$ 50,353.8
|
Cost of
revenues(*)
|
23,061.1
|
|
23,323.0
|
|
46,005.9
|
|
46,388.6
|
Gross profit
|
2,161.2
|
|
2,131.2
|
|
4,008.2
|
|
3,965.2
|
Selling, general and
administrative
|
904.9
|
|
998.5
|
|
1,811.1
|
|
2,005.9
|
Operating
income
|
1,256.3
|
|
1,132.7
|
|
2,197.1
|
|
1,959.3
|
Other (expense)
income:
|
|
|
|
|
|
|
|
Interest income and other
|
10.3
|
|
6.0
|
|
19.1
|
|
11.3
|
Interest expense and other
|
(136.8)
|
|
(132.3)
|
|
(275.4)
|
|
(248.7)
|
|
(126.5)
|
|
(126.3)
|
|
(256.3)
|
|
(237.4)
|
Income before income
taxes
|
1,129.8
|
|
1,006.4
|
|
1,940.8
|
|
1,721.9
|
Provision for income
taxes
|
402.7
|
|
400.3
|
|
681.5
|
|
668.7
|
Net
income
|
727.1
|
|
606.1
|
|
1,259.3
|
|
1,053.2
|
Less: Net income
attributable to non-controlling interest
|
6.4
|
|
6.0
|
|
12.5
|
|
12.0
|
Net income
attributable to Express Scripts
|
$
720.7
|
|
$
600.1
|
|
$
1,246.8
|
|
$
1,041.2
|
|
|
|
|
|
|
|
|
Weighted-average number of common shares
outstanding during the period:
|
|
|
|
|
|
|
|
Basic
|
631.3
|
|
675.4
|
|
638.1
|
|
701.7
|
Diluted
|
635.7
|
|
681.4
|
|
642.7
|
|
708.3
|
|
|
|
|
|
|
|
|
Earnings per share
attributable to Express Scripts:
|
|
|
|
|
|
|
|
Basic
|
$
1.14
|
|
$
0.89
|
|
$
1.95
|
|
$
1.48
|
Diluted
|
$
1.13
|
|
$
0.88
|
|
$
1.94
|
|
$
1.47
|
|
|
|
|
|
|
|
|
|
(*) Includes retail
pharmacy co-payments of $2,136.4 million and $2,322.4 million for
the three months ended June 30, 2016 and 2015, respectively, and
$4,677.4 million and $4,956.7 million for the six months ended June
30, 2016 and 2015, respectively.
|
EXPRESS
SCRIPTS HOLDING COMPANY
|
Unaudited
Consolidated Balance Sheet
|
|
|
|
|
|
June
30,
|
|
December
31,
|
(in
millions)
|
2016
|
|
2015
|
Assets
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
1,324.4
|
|
$
3,186.3
|
Receivables,
net
|
7,373.6
|
|
6,721.3
|
Inventories
|
1,715.7
|
|
2,023.1
|
Prepaid
expenses and other current assets
|
200.8
|
|
128.8
|
Total current assets
|
10,614.5
|
|
12,059.5
|
Property and
equipment, net
|
1,249.1
|
|
1,291.3
|
Goodwill
|
29,278.6
|
|
29,277.3
|
Other
intangible assets, net
|
9,562.8
|
|
10,469.7
|
Other
assets
|
153.6
|
|
145.5
|
Total assets
|
$ 50,858.6
|
|
$
53,243.3
|
|
|
|
|
Liabilities and
stockholders' equity
|
|
|
|
Current
liabilities:
|
|
|
|
Claims and
rebates payable
|
$
8,635.9
|
|
$
9,397.7
|
Accounts
payable
|
4,197.3
|
|
3,451.8
|
Accrued
expenses
|
2,162.4
|
|
2,659.4
|
Current
maturities of long-term debt
|
4,140.9
|
|
1,646.4
|
Total current liabilities
|
19,136.5
|
|
17,155.3
|
Long-term
debt
|
11,842.6
|
|
13,946.3
|
Deferred
taxes
|
3,857.1
|
|
4,069.8
|
Other
liabilities
|
611.6
|
|
691.4
|
Total liabilities
|
35,447.8
|
|
35,862.8
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
Preferred
stock, 15.0 shares authorized, $0.01 par value per
share; no shares issued and
outstanding
|
|
|
|
-
|
|
-
|
Common stock,
2,985.0 shares authorized, $0.01 par value; shares issued: 856.4 and 854.5, respectively;
shares outstanding: 630.2 and 676.9,
respectively
|
|
|
|
|
|
|
8.6
|
|
8.5
|
Additional
paid-in capital
|
22,567.2
|
|
22,204.7
|
Accumulated
other comprehensive loss
|
(7.9)
|
|
(14.0)
|
Retained
earnings
|
9,643.6
|
|
8,396.8
|
|
32,211.5
|
|
30,596.0
|
|
|
|
|
Common stock in
treasury at cost, 226.2 and 177.6 shares,
respectively
|
(16,808.4)
|
|
(13,223.2)
|
Total Express Scripts stockholders' equity
|
15,403.1
|
|
17,372.8
|
Non-controlling
interest
|
7.7
|
|
7.7
|
Total stockholders' equity
|
15,410.8
|
|
17,380.5
|
Total liabilities and stockholders' equity
|
$ 50,858.6
|
|
$
53,243.3
|
EXPRESS
SCRIPTS HOLDING COMPANY
|
Unaudited
Consolidated Statement of Cash Flows
|
|
Six Months
Ended
June 30,
|
(in
millions)
|
2016
|
|
2015
|
|
|
|
|
Cash flows from
operating activities:
|
|
|
|
Net
income
|
$ 1,259.3
|
|
$ 1,053.2
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
Depreciation
and amortization
|
1,073.5
|
|
1,144.9
|
Deferred income
taxes
|
(212.3)
|
|
(194.0)
|
Employee
stock-based compensation expense
|
54.7
|
|
54.4
|
Other,
net
|
(4.5)
|
|
(40.0)
|
Changes in
operating assets and liabilities:
|
|
|
|
Accounts
receivable
|
(670.6)
|
|
(544.9)
|
Inventories
|
307.4
|
|
463.1
|
Other current
and noncurrent assets
|
(74.5)
|
|
(123.8)
|
Claims and
rebates payable
|
(761.8)
|
|
(274.6)
|
Accounts
payable
|
751.1
|
|
207.9
|
Accrued
expenses
|
(452.6)
|
|
(600.5)
|
Other current
and noncurrent liabilities
|
(79.6)
|
|
35.6
|
Net cash flows
provided by operating activities
|
1,190.1
|
|
1,181.3
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
Purchases of
property and equipment
|
(158.5)
|
|
(107.1)
|
Other,
net
|
(3.4)
|
|
2.2
|
Net cash used
in investing activities
|
(161.9)
|
|
(104.9)
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
Treasury stock
acquired
|
(3,320.2)
|
|
(5,500.0)
|
Proceeds from
long-term debt, net of discounts
|
1,991.0
|
|
5,500.0
|
Repayment of
long-term debt
|
(1,575.0)
|
|
(2,315.8)
|
Net proceeds
from employee stock plans
|
35.9
|
|
129.5
|
Excess tax
benefit relating to employee stock-based
compensation
|
9.7
|
|
48.3
|
Other,
net
|
(35.4)
|
|
(47.7)
|
Net cash used
in financing activities
|
(2,894.0)
|
|
(2,185.7)
|
|
|
|
|
Effect of
foreign currency translation adjustment
|
3.9
|
|
(2.3)
|
|
|
|
|
Net decrease in
cash and cash equivalents
|
(1,861.9)
|
|
(1,111.6)
|
Cash and cash
equivalents at beginning of period
|
3,186.3
|
|
1,832.6
|
Cash and cash
equivalents at end of period
|
$ 1,324.4
|
|
$
721.0
|
Table
1
|
Express
Scripts Holding Company Unaudited Consolidated Selected
Information
|
(in
millions)
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
June 30,
|
|
Six Months
Ended
June 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Claims
Volume
|
|
|
|
|
|
|
|
Network
|
221.2
|
|
228.2
|
|
447.3
|
|
447.3
|
Home delivery and
specialty(1)
|
29.5
|
|
30.2
|
|
59.8
|
|
60.4
|
Total
claims
|
250.7
|
|
258.4
|
|
507.1
|
|
507.7
|
|
|
|
|
|
|
|
|
Adjusted
network
|
229.4
|
|
232.9
|
|
464.1
|
|
452.0
|
Adjusted home
delivery and specialty(1)
|
85.9
|
|
88.3
|
|
174.7
|
|
176.8
|
Total
adjusted claims(2)
|
315.3
|
|
321.2
|
|
638.8
|
|
628.8
|
|
|
|
|
|
|
|
|
Depreciation
and Amortization (D&A):
|
|
|
|
|
|
|
|
Revenue
amortization(3)
|
$
55.4
|
|
$
23.8
|
|
$
89.7
|
|
$
47.6
|
Cost of
revenues depreciation
|
29.1
|
|
29.8
|
|
58.0
|
|
76.5
|
Selling,
general and administrative depreciation
|
55.4
|
|
125.7
|
|
108.5
|
|
202.9
|
Selling,
general and administrative amortization(3)
|
408.3
|
|
408.9
|
|
817.3
|
|
817.9
|
Total
D&A
|
$ 548.2
|
|
$ 588.2
|
|
$ 1,073.5
|
|
$ 1,144.9
|
|
|
|
|
|
|
|
|
Generic Fill
Rate*
|
|
|
|
|
|
|
|
Network
|
86.3%
|
|
85.5%
|
|
86.1%
|
|
85.3%
|
Home
delivery
|
80.9%
|
|
79.6%
|
|
80.3%
|
|
79.2%
|
Overall
|
85.6%
|
|
84.7%
|
|
85.4%
|
|
84.5%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note: See
Appendix for Footnotes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*The home delivery
generic fill rate is currently lower than the network generic fill
rate as fewer generic substitutions are available among maintenance
medications (e.g. therapies for chronic conditions) commonly
dispensed from home delivery pharmacies compared to acute
medications which are primarily dispensed by pharmacies in our
retail networks.
|
Table
2
|
Express Scripts
Holding Company Unaudited Adjusted Gross Profit and Adjusted
SG&A Reconciliation
|
Provided below are
reconciliations of Adjusted gross profit and Adjusted selling,
general and administrative expenses, which are non-GAAP measures,
to Gross profit and Selling, general and administrative expenses,
respectively, which are their most directly comparable measures
calculated in accordance with U.S. GAAP.
|
(in
millions)
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
June 30,
|
|
Six Months
Ended
June 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Gross profit, as
reported
|
$ 2,161.2
|
|
$ 2,131.2
|
|
$ 4,008.2
|
|
$ 3,965.2
|
Amortization of
intangible assets (3)
|
55.4
|
|
23.8
|
|
89.7
|
|
47.6
|
Transaction and
integration costs (4)
|
-
|
|
40.7
|
|
-
|
|
95.4
|
Adjusted gross
profit
|
$ 2,216.6
|
|
$ 2,195.7
|
|
$ 4,097.9
|
|
$ 4,108.2
|
|
|
|
|
|
|
|
|
Selling, general and
administrative, as reported
|
$
904.9
|
|
$
998.5
|
|
$ 1,811.1
|
|
$ 2,005.9
|
Amortization of
intangible assets (3)
|
408.3
|
|
408.9
|
|
817.3
|
|
817.9
|
Transaction and
integration costs (4)
|
-
|
|
88.1
|
|
-
|
|
129.0
|
Legal settlement
(5)
|
-
|
|
-
|
|
-
|
|
60.0
|
Adjusted selling,
general and administrative
|
$
496.6
|
|
$
501.5
|
|
$
993.8
|
|
$
999.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note: See
Appendix for Footnotes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company is
providing adjusted gross profit and adjusted selling, general and
administrative expenses excluding the impact of transaction,
integration and certain other costs and amortization of intangible
assets (which are non-GAAP financial measures) in order to compare
the underlying financial performance to prior periods.
|
Table
3
|
Express
Scripts Holding Company Unaudited EBITDA and Adjusted EBITDA
Reconciliation
|
(in millions,
except per claim data)
|
Provided below is a
reconciliation of EBITDA and Adjusted EBITDA attributable to
Express Scripts to net income attributable to Express
Scripts. The Company believes net income is the most directly
comparable measure under U.S. GAAP.
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
June 30,
|
|
Six Months
Ended
June 30,
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
Net income
attributable to Express Scripts, as reported
|
$
720.7
|
|
$
600.1
|
|
$ 1,246.8
|
|
$ 1,041.2
|
|
Provision for
income taxes (7)
|
402.7
|
|
400.3
|
|
681.5
|
|
668.7
|
|
Depreciation
and amortization (3)*
|
548.2
|
|
588.2
|
|
1,073.5
|
|
1,144.9
|
|
Other expense,
net
|
126.5
|
|
126.3
|
|
256.3
|
|
237.4
|
|
EBITDA attributable
to Express Scripts, as reported
|
1,798.1
|
|
1,714.9
|
|
3,258.1
|
|
3,092.2
|
|
Adjustments to
EBITDA
|
|
|
|
|
|
|
|
|
Transaction and
integration costs (4)*
|
-
|
|
79.6
|
|
-
|
|
154.4
|
|
Legal settlement
(5)
|
-
|
|
-
|
|
-
|
|
60.0
|
|
EBITDA/Adjusted
EBITDA attributable to Express Scripts
|
$ 1,798.1
|
|
$ 1,794.5
|
|
$ 3,258.1
|
|
$ 3,306.6
|
|
|
|
|
|
|
|
|
|
|
Total adjusted
claims(2)
|
315.3
|
|
321.2
|
|
638.8
|
|
628.8
|
|
|
|
|
|
|
|
|
|
|
EBITDA/Adjusted
EBITDA attributable to Express Scripts, per adjusted
claim
|
$
5.70
|
|
$
5.59
|
|
$
5.10
|
|
$
5.26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note: See
Appendix for Footnotes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company is
providing EBITDA and adjusted EBITDA excluding the impact of
certain charges (both of which are non-GAAP financial measures) in
order to compare the underlying financial performance to prior
periods.
|
|
|
|
|
|
|
|
|
|
EBITDA attributable
to Express Scripts is net income before provision for income taxes,
depreciation and amortization and other expense. EBITDA
attributable to Express Scripts 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 attributable to Express Scripts, 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 attributable to Express Scripts may not be comparable to
that used by other companies.
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
attributable to Express Scripts is a supplemental measurement used
by analysts and investors to help evaluate overall operating
performance. Adjusted EBITDA attributable to Express Scripts
is calculated excluding transaction and integration costs recorded
each year and a legal settlement as these charges are not
considered an indicator of ongoing company performance.
|
|
EBITDA and Adjusted
EBITDA attributable to Express Scripts per adjusted claim is
calculated by dividing EBITDA and Adjusted EBITDA, as applicable,
by the adjusted claim volume for the period. This measure is
used as an indicator of EBITDA and Adjusted EBITDA, as applicable,
attributable to Express Scripts performance on a per unit
basis. EBITDA and Adjusted EBITDA, as applicable,
attributable to Express Scripts, and, as a result, EBITDA and
Adjusted EBITDA, as applicable, attributable to Express Scripts per
adjusted claim, are each affected by the changes in claims volume
between retail and home delivery and the relative representation of
brand-name, generic and specialty pharmacy drugs, as well as the
level of efficiency in the business.
|
|
* Depreciation
and amortization for the three and six months ended June 30, 2015
presented above includes $49.2 million and $70.0 million,
respectively, of depreciation related to the integration of Medco
Health Solutions, Inc. ("Medco") which is not included in
transaction and integration costs.
|
Table
4
|
Express
Scripts Holding Company Unaudited Adjusted Diluted EPS
Reconciliation
|
Provided below
is a reconciliation of Adjusted diluted EPS attributable to Express
Scripts, which is a non-GAAP measure, to Diluted EPS attributable to Express Scripts, which is
its most directly comparable measure calculated in accordance with
U.S. GAAP.
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
June 30,
|
|
Six Months
Ended
June 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
|
(per diluted
share)
|
|
|
Diluted EPS
attributable to Express Scripts, as reported
|
$
1.13
|
|
$
0.88
|
|
$
1.94
|
|
$
1.47
|
|
|
|
|
|
|
|
|
Excluding items
indicated:
|
|
|
|
|
|
|
|
Transaction and
integration costs (4)
|
-
|
|
0.12
|
|
-
|
|
0.20
|
Legal settlement
(5)
|
-
|
|
-
|
|
-
|
|
0.05
|
Debt redemption costs
(6)
|
-
|
|
0.01
|
|
0.01
|
|
0.01
|
Discrete tax items
(7)
|
(0.02)
|
|
0.04
|
|
(0.05)
|
|
0.04
|
Amortization of
intangible assets (3)
|
0.46
|
|
0.39
|
|
0.89
|
|
0.76
|
|
|
|
|
|
|
|
|
Diluted EPS
attributable to Express Scripts, adjusted
|
$
1.57
|
|
$
1.44
|
|
$
2.79
|
|
$
2.53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note: See
Appendix for Footnotes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company is
providing diluted EPS attributable to Express Scripts and adjusted
diluted EPS attributable to Express Scripts excluding the impact of
transaction, integration and certain other costs and amortization
of intangible assets (which are non-GAAP financial measures) in
order to compare the underlying financial performance to prior
periods.
|
Table
5
|
Express
Scripts Holding Company Unaudited Adjusted Net Income and Adjusted
Effective Income Tax Rate Reconciliation
|
Provided below
are reconciliations of Income before income taxes attributable to
Express Scripts, as adjusted, and Adjusted net income attributable
to Express Scripts, which are
non-GAAP measures, to Income before income taxes, which is the most
directly comparable measure calculated in accordance with U.S.
GAAP.
|
(in
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
June 30, 2016
|
|
Six Months
Ended
June 30, 2016
|
|
Income
before
income
taxes
|
|
Provision
for income
taxes
|
|
Effective
income tax
rate
|
|
Income
before
income
taxes
|
|
Provision
for income
taxes
|
|
Effective
income tax
rate
|
Income before income
taxes, as reported
|
$ 1,129.8
|
|
$
402.7
|
|
|
|
$ 1,940.8
|
|
$
681.5
|
|
|
Net income
attributable to non-controlling interest
|
(6.4)
|
|
-
|
|
|
|
(12.5)
|
|
-
|
|
|
Income before income
taxes attributable to Express Scripts
|
1,123.4
|
|
402.7
|
|
35.8%
|
|
1,928.3
|
|
681.5
|
|
35.3%
|
|
|
|
|
|
|
|
|
|
|
|
|
Excluding items
indicated:
|
|
|
|
|
|
|
|
|
|
|
|
Debt redemption costs
(6)
|
-
|
|
-
|
|
|
|
9.7
|
|
3.6
|
|
|
Discrete tax
items(7)
|
-
|
|
13.8
|
|
|
|
-
|
|
33.5
|
|
|
Amortization of
intangible assets(3)
|
463.7
|
|
171.9
|
|
|
|
907.0
|
|
336.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income
taxes attributable to Express Scripts, as adjusted
|
$ 1,587.1
|
|
$
588.4
|
|
37.1%
|
|
$ 2,845.0
|
|
$
1,054.9
|
|
37.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net income
attributable to Express Scripts*
|
$
998.7
|
|
|
|
|
|
$ 1,790.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note: See
Appendix for Footnotes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company is
providing adjusted net income attributable to Express Scripts, net
of tax and adjusted effective income tax rate attributable to
Express Scripts excluding the impact of certain costs and
amortization of intangible assets (which are non-GAAP financial
measures) in order to compare the underlying financial performance
to prior periods.
|
|
|
|
|
|
|
|
|
|
|
|
|
* Adjusted net income
attributable to Express Scripts is income before income taxes
attributable to Express Scripts, as adjusted, excluding provision
for income taxes of $588.4 million and $1,054.9 million for the
three and six months ended June 30, 2016, respectively.
|
Table
5A
|
Express
Scripts Holding Company Unaudited Adjusted Net Income and Adjusted
Effective Income Tax Rate Reconciliation
|
Provided below
are reconciliations of Income before income taxes attributable to
Express Scripts, as adjusted, and Adjusted net income attributable
to Express Scripts, which are
non-GAAP measures, to Income before income taxes, which is the most
directly comparable measure calculated in accordance with U.S.
GAAP.
|
(in
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
June 30, 2015
|
|
Six Months
Ended
June 30, 2015
|
|
Income
before
income
taxes
|
|
Provision
for income
taxes
|
|
Effective
income tax
rate
|
|
Income
before
income
taxes
|
|
Provision
for income
taxes
|
|
Effective
income tax
rate
|
Income before income
taxes, as reported
|
$ 1,006.4
|
|
$
400.3
|
|
|
|
$ 1,721.9
|
|
$
668.7
|
|
|
Net income
attributable to non-controlling interest
|
(6.0)
|
|
-
|
|
|
|
(12.0)
|
|
-
|
|
|
Income before income
taxes attributable to Express Scripts
|
1,000.4
|
|
400.3
|
|
40.0%
|
|
1,709.9
|
|
668.7
|
|
39.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
Excluding items
indicated:
|
|
|
|
|
|
|
|
|
|
|
|
Transaction and
integration costs(4)
|
128.8
|
|
48.5
|
|
|
|
224.4
|
|
84.4
|
|
|
Legal
Settlement(5)
|
-
|
|
-
|
|
|
|
60.0
|
|
22.5
|
|
|
Debt redemption costs
(6)
|
9.2
|
|
3.5
|
|
|
|
9.2
|
|
3.5
|
|
|
Discrete tax
items(7)
|
-
|
|
(23.4)
|
|
|
|
-
|
|
(25.7)
|
|
|
Amortization of
intangible assets(3)
|
432.7
|
|
163.1
|
|
|
|
865.5
|
|
325.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income
taxes attributable to Express Scripts, as adjusted
|
$ 1,571.1
|
|
$
592.0
|
|
37.7%
|
|
$ 2,869.0
|
|
$
1,078.8
|
|
37.6%
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net income
attributable to Express Scripts
|
$
979.1
|
|
|
|
|
|
$ 1,790.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note: See
Appendix for Footnotes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company is
providing adjusted net income attributable to Express Scripts, net
of tax and adjusted effective income tax rate attributable to
Express Scripts excluding the impact of transaction, integration
and certain other costs and amortization of intangible assets
(which are non-GAAP financial measures) in order to compare the
underlying financial performance to prior periods.
|
|
|
|
|
|
|
|
|
|
|
|
|
* Adjusted net income
attributable to Express Scripts is income before income taxes
attributable to Express Scripts, as adjusted, excluding provision
for income taxes of $592.0 million and $1,078.8 million for the
three and six months ended June 30, 2015, respectively.
|
Table
6
|
Express
Scripts Holding Company Unaudited 2016 Guidance
Information
|
|
|
|
|
|
Estimated
Year Ending
December 31, 2016
|
|
Estimated
Year Ending
December 31, 2016
|
(in
millions, except per share and per claim data)
|
Current
Guidance
|
|
Previous
Guidance
|
Diluted EPS
attributable to Express Scripts*
|
$4.45 to
$4.55
|
|
$4.53 to
$4.61
|
Year over year
growth
|
25%-28%
|
|
27%-29%
|
|
|
|
|
Adjusted Diluted
EPS attributable to Express Scripts**
|
$6.33 to
$6.43
|
|
$6.31 to
$6.43
|
Year over year
growth
|
14%-16%
|
|
14%-16%
|
|
|
|
|
Total adjusted
claims
|
1,260 to
1,290
|
|
1,255 to
1,295
|
|
|
|
|
Selling, general
and administrative
|
$3,520 to
$3,640
|
|
$3,520 to
$3,640
|
|
|
|
|
Adjusted selling,
general and administrative***
|
$1,905 to
$1,985
|
|
$1,905 to
$1,985
|
|
|
|
|
Operating
income
|
$5,135 to
$5,250
|
|
$5,135 to
$5,250
|
|
|
|
|
EBITDA
attributable to Express Scripts****
|
$7,230 to
$7,430
|
|
$7,230 to
$7,430
|
|
|
|
|
Diluted weighted
average shares outstanding during the period
|
632 to 640
|
|
635 to 645
|
|
|
|
|
Net cash flow
provided by operating activities
|
$4,600 to
$5,100
|
|
$4,600 to
$5,100
|
|
|
|
|
|
|
|
|
|
Estimated
Three Months Ending
September 30, 2016
|
|
|
(in
millions, except per share and per claim data)
|
Current
Guidance
|
|
|
Diluted EPS
attributable to Express Scripts*
|
$1.14 to
$1.18
|
|
|
Year over year
growth
|
18%-22%
|
|
|
|
|
|
|
Adjusted Diluted
EPS attributable to Express Scripts**
|
$1.72 to
$1.76
|
|
|
Year over year
growth
|
19%-21%
|
|
|
|
|
|
|
Total adjusted
claims
|
311 to 321
|
|
|
|
|
|
|
|
|
|
|
|
*Diluted EPS
attributable to Express Scripts excludes the impact of
future discrete tax items and certain other income and
expenses associated with the operation of our business, which
cannot be forecast without unreasonable effort. When the Company
reports results of operations for subsequent periods, Diluted EPS
attributable to Express Scripts is expected to be revised to
reflect the impact of realized discrete tax items and such other
realized income and expenses, which are not included in current
guidance. Estimated 2016 Diluted EPS attributable to
Express Scripts was revised upward to reflect the impact from
discrete tax benefits of $0.05 and downward to reflect the impact
from debt redemption costs of $0.01 realized during the six months
ended June 30, 2016, respectively, neither of which was included in
the Company's previous guidance (See Table 4).
|
|
|
|
|
**The Company is
unable to reasonably estimate the GAAP items not included in
adjusted diluted EPS attributable to Express Scripts and the
information is not available without unreasonable effort.
This is due to the inherent difficulty of forecasting the timing
and amount of reconciling items, including discrete tax items, that
would impact diluted earnings per share, the most directly
comparable forward-looking GAAP financial measure, and accordingly,
the Company is unable to provide the probable significance of the
unavailable information. Estimated 2016 Adjusted Diluted EPS
attributable to Express Scripts excludes amortization of intangible
assets per diluted share in the range of approximately $1.80 and
approximately $0.12 of costs related to the early redemption of
senior notes in July of 2016, including repayment costs and
write-off of discounts, premiums and deferred financing fees.
Estimated three months ending September 30, 2016 Adjusted Diluted
EPS attributable to Express Scripts excludes amortization of
intangible assets per diluted share in the range of approximately
$0.46 and approximately $0.12 of costs related to the early
redemption of senior notes in July of 2016, including
repayment costs and write-off of discounts, premiums and deferred
financing
fees.
|
|
|
|
|
***Estimated 2016
Adjusted selling, general and administrative is selling, general
and administrative as reported under GAAP, excluding amortization
of intangible assets in the range of $1,615 million to $1,655
million.
|
|
****The Company is
unable to reasonably estimate the GAAP items not included in EBITDA
attributable to Express Scripts and the information is not
available without unreasonable effort. This is due to the
inherent difficulty of forecasting the timing and amount of
reconciling items, including discrete tax items, that would impact
net income, the most directly comparable GAAP financial measure,
and accordingly, the Company is unable to provide the probable
significance of the unavailable information. As such, the
Company is providing a reconciliation to Operating Income, which is
the most directly comparable GAAP measure. Estimated 2016
EBITDA attributable to Express Scripts is estimated 2016 Operating
Income excluding depreciation and amortization in the range of $300
million to $350 million, selling, general and administrative
amortization of intangible assets in the range of $1,615 million to
$1,655 million and revenue amortization of intangible assets of
approximately $200 million and including net income attributable to
non-controlling interest of $20 million to $25
million.
|
Appendix
|
Footnotes
|
|
(1) Includes home
delivery, specialty and other including: (a) drugs
distributed through patient assistance programs, (b) drugs
distributed to clients of other PBMs under limited distribution
contracts with pharmaceutical manufacturers and (c) Freedom
Fertility claims.
|
|
(2) Total adjusted
claims (a) includes an adjustment to certain network claims to
reflect an approximate 30-day equivalent fill and (b) reflects home
delivery claims multiplied by 3, as home delivery claims typically
cover a time period 3 times longer than network
claims.
|
|
(3) Amortization of
intangible assets includes the following items:
|
|
Amortization of
legacy Express Scripts, Inc. ("ESI") intangible assets include
amounts in both revenues and selling, general and administrative
expense.
|
|
Revenue amortization
is related to the customer contract with Anthem which commenced
upon closing of the NextRx acquisition in 2009. Amortization
of intangibles that arises in connection with consideration given
to a customer by a vendor is characterized as a reduction of
revenues. Intangible amortization of $55.4 million ($34.8
million net of tax) and $23.8 million ($14.8 million net of tax) is
included as a reduction to revenue for the three months ended June
30, 2016 and 2015, respectively. Intangible
amortization of $89.7 million ($56.4 million net of tax) and $47.6
million ($29.7 million net of tax) is included as a reduction to
revenue for the six months ended June 30, 2016 and 2015,
respectively. The Company's 10-year agreement with Anthem
under which we provide pharmacy benefit management services to
Anthem and its designated affiliates was previously amortized using
a modified pattern of benefit method over an estimated useful life
of 15 years. Beginning in March 2016, we began amortizing our
agreement with Anthem over the remaining term of the contract (i.e.
using a modified pattern of benefit over an estimated useful life
of 10 years from the time the agreement was executed in 2009),
which resulted in an additional $31.7 million of revenue
amortization recognized for the three months ended June 30, 2016
and $42.2 million of revenue amortization recognized for the six
months ended June 30, 2016.
|
|
Other legacy ESI
intangible amortization of $9.5 million ($6.0 million net of tax)
and $9.4 million ($5.9 million net of tax) for the three months
ended June 30, 2016 and 2015, is included in selling, general and
administrative expense. Other legacy ESI intangible
amortization of $18.9 million ($11.9 million net of tax) and $18.8
million ($11.8 million net of tax) for the six months ended June
30, 2016 and 2015, is included in selling, general and
administrative expense.
|
|
Amortization of
intangible assets related to the acquisition of Medco of $398.8
million ($251.0 million net of tax) and $399.5 million ($248.9
million net of tax) for the three months ended June 30, 2016 and
2015, is included in selling, general and administrative expense,
respectively. Amortization of intangible assets related to
the acquisition of Medco of $798.4 million ($502.4 million net of
tax) and $799.1 million ($498.6 million net of tax) for the six
months ended June 30, 2016 and 2015, is included in selling,
general and administrative expense,
respectively.
|
|
(4) Transaction and
integration costs include those costs directly related to the
acquisition of Medco.
|
|
Costs of $40.7
million ($25.3 million net of tax) are primarily composed of
integration-related activities, and are included in gross profit
for the three months ended June 30, 2015. Costs of $95.4
million ($59.5 million net of tax) are primarily composed of
integration-related activities, and are included in gross profit
for the six months ended June 30,
2015.
|
|
Costs of $88.1
million ($55.0 million net of tax) are primarily composed of
professional fees, integration-related activities and severance
costs, and are included in selling, general and administrative
expense for the three months ended June 30, 2015. Costs of
$129.0 million ($80.5 million net of tax) are primarily composed of
professional fees, integration-related activities and severance
costs, and are included in selling, general and administrative
expense for the six months ended June 30,
2015.
|
|
(5) Charge
related to a legal settlement of $60.0 million ($37.5 million net
of tax) is included in selling, general and administrative expense
for the six months ended June 30, 2015.
|
|
(6) Debt redemption
costs, which include write-off of discounts, write-off of deferred
financing costs and interest accrued from February 25, 2016 to the
redemption date incurred for the early redemption of senior notes,
totaled $9.7 million ($6.1 million net of tax) and are included in
interest expense for the six months ended June 30, 2016. Debt
redemption costs, which include write-off of deferred financing
fees incurred for the early repayment of the 2011 term loan,
totaled $9.2 million ($5.7 million net of tax) and are included in
interest expense for the three and six months ended June 30,
2015.
|
|
(7) Provision for
income taxes includes discrete tax benefits of $13.8 million and
$33.5 million for the three and six months ended June 30, 2016,
respectively, and discrete tax charges of $23.4 million and $25.7
million for the three and six months ended June 30 2015,
respectively. The 2016 net discrete tax benefits and
2015 net discrete tax charges relate primarily to changes in
unrecognized tax benefits.
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/express-scripts-announces-2016-second-quarter-results-narrows-2016-full-year-adjusted-diluted-eps-guidance-range-raises-mid-point-provides-2016-third-quarter-guidance-300303481.html
SOURCE Express Scripts Holding Company