ST. LOUIS, Feb. 14, 2017 /PRNewswire/ -- Express
Scripts Holding Company (Nasdaq: ESRX) announced 2016 fourth
quarter and full year net income of $1,434.7
million and $3,404.4 million,
respectively, or $2.34 and
$5.39 per diluted share,
respectively. 2016 fourth quarter and full year adjusted
earnings per diluted share, as detailed in Table 4, was
$1.88 and $6.39, respectively.1
"We delivered another year of successful performance, not only
through financial results, but by providing innovative solutions to
help our patients and clients drive healthier outcomes and lower
drug trends," said Tim Wentworth,
CEO and President. "In a year when the focus on drug pricing
has never been greater, Express Scripts has held the 2016 growth
rate in drug unit costs to 2.5% and lowered the patients' share of
total drug costs per prescription. The fundamentals of our
business remain strong as our clinical focus and unwavering
alignment with clients enables us to lead the industry in
developing innovative value-based solutions that our country
needs."
In October 2016, we recognized a
previously disclosed net tax benefit of approximately $511.0 million, or $0.81 per diluted share, related to the
disposition of PolyMedica Corporation (Liberty). Following
receipt of the tax benefit proceeds, the Board of
Directors authorized the use of $41.2
million, approximately 8%, or $0.04 per share net of tax, of the PolyMedica tax
benefit proceeds to reward employees for the significant
contribution this multi-year effort provided the Company and its
shareholders. This special, one-time, payment is excluded
from our fourth quarter and full year 2016 adjusted SG&A, which
impacts adjusted EBITDA and adjusted earnings per diluted
share.
Fourth Quarter and Full Year 2016 Review
The following compares fourth quarter 2016 and 2015 operating
results:
- Adjusted claims of 354.9 million, down 6%, largely due to
roll-off of the Coventry business – See Table 1
- GAAP net income of $1,434.7
million, up 85%
- GAAP earnings per diluted share of $2.34, up 107%
- Adjusted EBITDA of $2,054.2
million, up 6% from 2015 adjusted EBITDA – See Table 3
- Adjusted EBITDA per adjusted claim of $5.79, up 14% from 2015 adjusted EBITDA per
adjusted claim – See Table 3
- Adjusted net income of $1,153.0
million, up 8% – See Tables 5
and 5A
- Adjusted earnings per diluted share of $1.88, up 21% - See Table 4
- Net cash flow provided by operating activities of $2,248.9 million, down 22%
The following compares full year 2016 and 2015 operating
results:
- Adjusted claims of 1,407.6 million, down 2% – See Table 1
- Excluding the impact of the Coventry roll off, adjusted claims
were up 3%
- GAAP net income of $3,404.4
million, up 37%
- GAAP earnings per diluted share of $5.39, up 51%
- Adjusted EBITDA of $7,260.4
million, up 3% from 2015 adjusted EBITDA – See Table 3
- Adjusted EBITDA per adjusted claim of $5.16, up 6% from 2015 adjusted EBITDA per
adjusted claim – See Table 3
- Adjusted net income of $4,034.7
million, up 5% – See Tables 5
and 5A
- Adjusted earnings per diluted share of $6.39, up 16% - See Table 4
- Net cash flow provided by operating activities of $4,919.4 million, up 1%
Including shares received under our accelerated share repurchase
agreements (executed in February 2016
and April 2015), the Company
repurchased a total of 74.4 million shares under our share
repurchase program for $5,571.9
million during 2016. In December 2016, the Board of Directors of the
Company approved an increase in the authorized number of shares
that may be repurchased under the share repurchase program by an
additional 65.0 million shares.
As discussed publicly in December
2016, the Company revised its methodology for reporting
adjusted network claims beginning with the year ending December 31, 2016. Specifically, the
revised methodology includes an adjustment to reflect non-specialty
network claims filled through our 90-day programs. These claims are
now multiplied by three, as these claims, on average, typically
cover a time period three times longer than other network claims.
The change was made retrospectively for the three months and
year ended December 31, 2016 and for
the three months and year ended December 31,
2015, to facilitate a year-over-year comparison. A
recast to the revised methodology is presented in the attached
appendix and at the Investor Information section of Express
Scripts' web site at http://www.express-scripts.com/corporate.
2017 Guidance
The Company reaffirms its 2017 adjusted earnings per diluted
share guidance in the range of $6.82 to
$7.02, which represents growth of 8% over 2016 adjusted
earnings per diluted share results at the mid-point of the
range. The Company expects total adjusted claims for the
first quarter of 2017 to be in the range of 345 million to 355
million. Adjusted earnings per diluted share for the first
quarter of 2017 is estimated to be in the range of $1.30 to $1.34, which represents growth of 7% to
10% over the first quarter of 2016. Additional details
on this guidance can be found in Table 6. For a discussion of
the financial measures presented herein which are not calculated or
presented in accordance with U.S. generally accepted accounting
principles ("GAAP"), see "Supplemental Information Regarding
Non-GAAP Financial Measures" below.
The Company will hold its quarterly conference call to discuss
2016 fourth quarter and full year financial results on Wednesday, February 15, 2017, at 8:30 a.m. EST (7:30 a.m.
CST). The call includes a slide presentation and is
being webcast via the Internet and can be accessed at the Investor
Relations section of Express Scripts' web site at
http://www.express-scripts.com/corporate.
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.
Supplemental Information Regarding Non-GAAP Financial
Measures
The following provides supplemental information regarding the
non-GAAP financial measures presented herein, including the
reconciliation of such measures to the most directly comparable
financial measures calculated in accordance GAAP. Adjusted EPS,
EBITDA, adjusted EBITDA, adjusted EBITDA per adjusted claim,
adjusted net income, adjusted income before income taxes, adjusted
gross profit and adjusted selling, general and administrative are
non-GAAP financial measures presented herein, are not calculated or
presented in accordance with GAAP, and should be considered in
addition to, but not as a substitute for, or superior to, financial
measures prepared in accordance with GAAP. The Company
believes that these non-GAAP financial measures provide management
and investors with useful information about the earnings impact of
certain expenses and are useful for (i) comparison of our earnings
to those of other companies; (ii) a better understanding of the
Company's ongoing core performance; (iii) planning and forecasting
for future periods; and (iv) assessing period-to-period performance
trends. EBITDA and adjusted EBITDA also provide a useful
basis for assessing the Company's ability to fund both its
operating activities and reinvestments into the business, as well
as service indebtedness. Management assesses the Company's
operating performance using EBITDA and adjusted EBITDA in order to
better isolate the impact of certain expenses that may not be
comparable between periods or indicative of the ongoing performance
of our core operations. Adjusted EBITDA per adjusted claim
provides management and investors with useful information about the
earnings and performance of the Company on a per unit basis.
2017 Guidance Information: Due to the inherent
difficulty of forecasting the timing and amount of certain items
that would impact EPS and net income, including discrete tax items,
the Company is unable to reasonably estimate the related impact of
such items to EPS and net income, the GAAP financial measures most
directly comparable to adjusted EPS and EBITDA, respectively.
Accordingly, the Company is unable to provide a reconciliation of
2017 guidance for either adjusted EPS to EPS or EBITDA to net
income. For the same reasons, the Company is unable to address the
probable significance of the unavailable information, which could
have a significant impact on the Company's first quarter and
full-year 2017 GAAP financial results. With respect to adjusted
EPS, amortization of intangible assets is expected to be
approximately $0.38 and $1.54 per share for the first quarter and
full-year 2017, respectively.
SAFE HARBOR STATEMENT
This press release contains forward-looking statements,
including, but not limited to, our 2017 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 14, 2017. 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 diluted share, EBITDA,
adjusted EBITDA, adjusted EBITDA per adjusted claim, adjusted net
income and adjusted earnings per diluted 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
December 31,
|
|
Year
Ended
December 31,
|
(in
millions, except per share data)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
|
Revenues*
|
$ 24,863.3
|
|
$ 26,175.4
|
|
$
100,287.5
|
|
$
101,751.8
|
Cost of
revenues*
|
22,525.1
|
|
23,912.2
|
|
91,667.0
|
|
93,349.9
|
Gross profit
|
2,338.2
|
|
2,263.2
|
|
8,620.5
|
|
8,401.9
|
Selling, general and
administrative
|
863.5
|
|
1,049.4
|
|
3,532.7
|
|
4,062.6
|
Operating
income
|
1,474.7
|
|
1,213.8
|
|
5,087.8
|
|
4,339.3
|
Other (expense)
income:
|
|
|
|
|
|
|
|
Interest income and other
|
6.7
|
|
5.7
|
|
34.1
|
|
24.8
|
Interest expense and other
|
(146.0)
|
|
(123.2)
|
|
(694.8)
|
|
(500.3)
|
|
(139.3)
|
|
(117.5)
|
|
(660.7)
|
|
(475.5)
|
Income before income
taxes
|
1,335.4
|
|
1,096.3
|
|
4,427.1
|
|
3,863.8
|
Provision for income
taxes
|
(104.4)
|
|
317.4
|
|
999.5
|
|
1,364.3
|
Net
income
|
1,439.8
|
|
778.9
|
|
3,427.6
|
|
2,499.5
|
Less: Net income
attributable to non-controlling interest
|
5.1
|
|
5.4
|
|
23.2
|
|
23.1
|
Net income
attributable to Express Scripts
|
$
1,434.7
|
|
$
773.5
|
|
$
3,404.4
|
|
$
2,476.4
|
|
|
|
|
|
|
|
|
Weighted-average
number of common shares outstanding
during the period:
|
|
|
|
|
|
|
|
Basic
|
609.1
|
|
676.8
|
|
626.9
|
|
689.0
|
Diluted
|
613.5
|
|
682.7
|
|
631.4
|
|
695.3
|
|
|
|
|
|
|
|
|
Earnings per share
attributable to Express Scripts:
|
|
|
|
|
|
|
|
Basic
|
$
2.36
|
|
$
1.14
|
|
$
5.43
|
|
$
3.59
|
Diluted
|
$
2.34
|
|
$
1.13
|
|
$
5.39
|
|
$
3.56
|
|
* Includes retail
pharmacy co-payments of $1,883.3 million and $2,051.8 million for
the three months ended December 31, 2016 and 2015, respectively,
and $8,569.2 million and $9,170.0 million for the year ended
December 31, 2016 and 2015, respectively.
|
EXPRESS
SCRIPTS HOLDING COMPANY
|
Unaudited
Consolidated Balance Sheet
|
|
|
|
|
|
December
31,
|
|
December
31,
|
(in
millions)
|
2016
|
|
2015
|
Assets
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
3,077.2
|
|
$
3,186.3
|
Receivables,
net
|
7,062.1
|
|
6,721.3
|
Inventories
|
1,959.0
|
|
2,023.1
|
Prepaid
expenses and other current assets
|
265.1
|
|
128.8
|
Total current assets
|
12,363.4
|
|
12,059.5
|
Property and
equipment, net
|
1,273.6
|
|
1,291.3
|
Goodwill
|
29,277.8
|
|
29,277.3
|
Other
intangible assets, net
|
8,636.9
|
|
10,469.7
|
Other
assets
|
193.2
|
|
145.5
|
Total assets
|
$
51,744.9
|
|
$
53,243.3
|
|
|
|
|
Liabilities and
stockholders' equity
|
|
|
|
Current
liabilities:
|
|
|
|
Claims and
rebates payable
|
$
8,836.9
|
|
$
9,397.7
|
Accounts
payable
|
3,875.7
|
|
3,451.8
|
Accrued
expenses
|
2,993.2
|
|
2,659.4
|
Current
maturities of long-term debt
|
722.3
|
|
1,646.4
|
Total current liabilities
|
16,428.1
|
|
17,155.3
|
Long-term
debt
|
14,846.0
|
|
13,946.3
|
Deferred
taxes
|
3,603.3
|
|
4,069.8
|
Other
liabilities
|
623.7
|
|
691.4
|
Total liabilities
|
35,501.1
|
|
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 per
share; shares issued: 857.5 and
854.5, respectively; shares
outstanding: 605.5 and 676.9,
respectively
|
8.6
|
|
8.5
|
Additional
paid-in capital
|
23,233.6
|
|
22,204.7
|
Accumulated
other comprehensive loss
|
(12.3)
|
|
(14.0)
|
Retained
earnings
|
11,801.2
|
|
8,396.8
|
|
35,031.1
|
|
30,596.0
|
|
|
|
|
Common stock in
treasury at cost, 252.0 and 177.6 shares,
respectively
|
(18,795.1)
|
|
(13,223.2)
|
Total Express Scripts stockholders' equity
|
16,236.0
|
|
17,372.8
|
Non-controlling
interest
|
7.8
|
|
7.7
|
Total stockholders' equity
|
16,243.8
|
|
17,380.5
|
Total liabilities and stockholders' equity
|
$
51,744.9
|
|
$
53,243.3
|
EXPRESS
SCRIPTS HOLDING COMPANY
|
Unaudited
Consolidated Statement of Cash Flows
|
|
Year
Ended
December 31,
|
(in
millions)
|
2016
|
|
2015
|
|
|
|
|
Cash flows from
operating activities:
|
|
|
|
Net
income
|
$ 3,427.6
|
|
$ 2,499.5
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
Depreciation
and amortization
|
2,154.6
|
|
2,359.1
|
Deferred income
taxes
|
(497.4)
|
|
(462.1)
|
Employee
stock-based compensation expense
|
107.0
|
|
117.1
|
Other,
net
|
(36.2)
|
|
(46.3)
|
Changes in
operating assets and liabilities:
|
|
|
|
Accounts
receivable
|
(374.0)
|
|
(770.3)
|
Inventories
|
64.1
|
|
90.1
|
Other current
and noncurrent assets
|
(137.5)
|
|
78.3
|
Claims and
rebates payable
|
(560.8)
|
|
909.5
|
Accounts
payable
|
436.4
|
|
318.3
|
Accrued
expenses
|
404.2
|
|
(142.7)
|
Other current
and noncurrent liabilities
|
(68.6)
|
|
(102.2)
|
Net cash flows
provided by operating activities
|
4,919.4
|
|
4,848.3
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
Purchases of
property and equipment
|
(330.4)
|
|
(295.9)
|
Other,
net
|
(21.5)
|
|
27.4
|
Net cash used
in investing activities
|
(351.9)
|
|
(268.5)
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
Proceeds from
long-term debt, net of discounts
|
5,986.8
|
|
5,500.0
|
Repayment of
long-term debt
|
(5,932.5)
|
|
(3,390.8)
|
Treasury stock
acquired
|
(4,746.9)
|
|
(5,500.0)
|
Net proceeds
from employee stock plans
|
87.2
|
|
183.1
|
Excess tax
benefit relating to employee stock-based
compensation
|
13.0
|
|
58.2
|
Other,
net
|
(85.4)
|
|
(67.5)
|
Net cash used
in financing activities
|
(4,677.8)
|
|
(3,217.0)
|
|
|
|
|
Effect of
foreign currency translation adjustment
|
1.2
|
|
(9.1)
|
|
|
|
|
Net (decrease)
increase in cash and cash equivalents
|
(109.1)
|
|
1,353.7
|
Cash and cash
equivalents at beginning of period
|
3,186.3
|
|
1,832.6
|
Cash and cash
equivalents at end of period
|
$ 3,077.2
|
|
$ 3,186.3
|
Table
1
|
Express
Scripts Holding Company Unaudited Consolidated Selected
Information
|
(in
millions)
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
December 31,
|
|
Year
Ended
December 31,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Claims
Volume
|
|
|
|
|
|
|
|
Network
|
223.1
|
|
242.1
|
|
887.4
|
|
922.2
|
Home delivery and
specialty(1)
|
30.4
|
|
31.2
|
|
120.2
|
|
121.6
|
Total
claims
|
253.5
|
|
273.3
|
|
1,007.6
|
|
1,043.8
|
|
|
|
|
|
|
|
|
Adjusted
network(2)
|
266.2
|
|
287.5
|
|
1,056.5
|
|
1,085.8
|
Adjusted home
delivery and specialty(2)
|
88.7
|
|
91.5
|
|
351.1
|
|
355.8
|
Total
adjusted claims(2)
|
354.9
|
|
379.0
|
|
1,407.6
|
|
1,441.6
|
|
|
|
|
|
|
|
|
Depreciation
and Amortization (D&A):
|
|
|
|
|
|
|
|
Revenue
amortization(3)
|
$
55.4
|
|
$
23.7
|
|
$
200.5
|
|
$
95.1
|
Cost of
revenues depreciation
|
27.9
|
|
36.5
|
|
113.4
|
|
138.2
|
Selling,
general and administrative depreciation
|
53.4
|
|
162.3
|
|
208.4
|
|
490.0
|
Selling,
general and administrative amortization(3)
|
406.7
|
|
408.9
|
|
1,632.3
|
|
1,635.8
|
Total
D&A
|
$ 543.4
|
|
$ 631.4
|
|
$ 2,154.6
|
|
$ 2,359.1
|
|
|
|
|
|
|
|
|
Generic Fill
Rate*
|
|
|
|
|
|
|
|
Network
|
85.8%
|
|
84.8%
|
|
86.0%
|
|
85.1%
|
Home
delivery
|
81.4%
|
|
79.4%
|
|
80.8%
|
|
79.5%
|
Overall
|
85.2%
|
|
84.2%
|
|
85.3%
|
|
84.4%
|
|
|
|
|
|
|
|
|
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 the most directly comparable measures
calculated in accordance with U.S. generally accepted accounting
principles ("GAAP").
|
(in
millions)
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
December 31,
|
|
Year
Ended
December 31,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Gross profit, as
reported
|
$ 2,338.2
|
|
$ 2,263.2
|
|
$ 8,620.5
|
|
$ 8,401.9
|
Amortization of
intangible assets (3)
|
55.4
|
|
23.7
|
|
200.5
|
|
95.1
|
Transaction and
integration costs (4)
|
-
|
|
77.4
|
|
-
|
|
218.0
|
Adjusted gross
profit
|
$ 2,393.6
|
|
$ 2,364.3
|
|
$ 8,821.0
|
|
$ 8,715.0
|
|
|
|
|
|
|
|
|
Selling, general and
administrative, as reported
|
$
863.5
|
|
$ 1,049.4
|
|
$ 3,532.7
|
|
$ 4,062.6
|
Amortization of
intangible assets (3)
|
406.7
|
|
408.9
|
|
1,632.3
|
|
1,635.8
|
Transaction and
integration costs (4)
|
-
|
|
101.6
|
|
-
|
|
298.8
|
Other compensation
costs (5)
|
41.2
|
|
-
|
|
41.2
|
|
-
|
Legal settlement
(6)
|
-
|
|
-
|
|
-
|
|
60.0
|
Adjusted selling,
general and administrative
|
$
415.6
|
|
$
538.9
|
|
$ 1,859.2
|
|
$ 2,068.0
|
|
|
|
|
|
|
|
|
Note: See
Appendix for Footnotes
|
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 GAAP.
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
December 31,
|
|
Year
Ended
December 31,
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
Net income
attributable to Express Scripts, as reported
|
$
1,434.7
|
|
$
773.5
|
|
$
3,404.4
|
|
$
2,476.4
|
|
Provision for
income taxes (7)
|
(104.4)
|
|
317.4
|
|
999.5
|
|
1,364.3
|
|
Depreciation
and amortization (3)*
|
543.4
|
|
631.4
|
|
2,154.6
|
|
2,359.1
|
|
Other expense,
net
|
139.3
|
|
117.5
|
|
660.7
|
|
475.5
|
|
EBITDA attributable
to Express Scripts, as reported
|
2,013.0
|
|
1,839.8
|
|
7,219.2
|
|
6,675.3
|
|
Adjustments to
EBITDA
|
|
|
|
|
|
|
|
|
Transaction and
integration costs (4)*
|
-
|
|
92.2
|
|
-
|
|
311.6
|
|
Other compensation
costs (5)
|
41.2
|
|
-
|
|
41.2
|
|
-
|
|
Legal settlement
(6)
|
-
|
|
-
|
|
-
|
|
60.0
|
|
Adjusted EBITDA
attributable to Express Scripts
|
$
2,054.2
|
|
$
1,932.0
|
|
$
7,260.4
|
|
$
7,046.9
|
|
|
|
|
|
|
|
|
|
|
Total adjusted
claims(2)
|
354.9
|
|
379.0
|
|
1,407.6
|
|
1,441.6
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
attributable to Express Scripts, per adjusted claim
|
$
5.79
|
|
$
5.10
|
|
$
5.16
|
|
$
4.89
|
|
|
|
|
|
|
|
|
|
|
Note: See
Appendix for Footnotes
|
|
|
|
|
|
|
|
|
|
* Depreciation
and amortization for the three months and year ended December 31,
2015 presented above includes $86.8 million and $205.2 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 GAAP.
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
December 31,
|
|
Year
Ended
December 31,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
|
(per diluted
share)
|
|
|
Diluted EPS
attributable to Express Scripts, as reported
|
$
2.34
|
|
$
1.13
|
|
$
5.39
|
|
$
3.56
|
|
|
|
|
|
|
|
|
Excluding items
indicated:
|
|
|
|
|
|
|
|
Transaction and
integration costs (4),*
|
-
|
|
0.26
|
|
-
|
|
0.74
|
Other compensation
costs (5),*
|
0.06
|
|
-
|
|
0.06
|
|
-
|
Legal settlement
(6),*
|
-
|
|
-
|
|
-
|
|
0.09
|
Debt redemption costs
(8),*
|
-
|
|
-
|
|
0.22
|
|
0.01
|
Discrete tax items
(7)
|
(0.97)
|
|
(0.13)
|
|
(1.00)
|
|
(0.11)
|
Amortization of
intangible assets (3),*
|
0.75
|
|
0.63
|
|
2.90
|
|
2.49
|
Tax impact of
excluded items (9)
|
(0.30)
|
|
(0.33)
|
|
(1.18)
|
|
(1.25)
|
|
|
|
|
|
|
|
|
Diluted EPS
attributable to Express Scripts, adjusted
|
$
1.88
|
|
$
1.56
|
|
$
6.39
|
|
$
5.53
|
|
|
|
|
|
|
|
|
Note: See
Appendix for Footnotes
|
|
|
|
|
|
*Presented on a
pre-tax basis. A change to the presentation of this table was
made to reflect the tax impact of non-GAAP excluded items as a
single adjustment for the three months and year ended December 31,
2016 and 2015.
|
Table
5
|
Express
Scripts Holding Company Unaudited Adjusted Net Income and Adjusted
Effective Income Tax Rate Reconciliation
|
(in
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
December 31, 2016
|
|
Year
Ended
December 31, 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
|
$ 1,335.4
|
|
$
(104.4)
|
|
|
|
$ 4,427.1
|
|
$
999.5
|
|
|
Net income
attributable to non-controlling interest
|
(5.1)
|
|
-
|
|
|
|
(23.2)
|
|
-
|
|
|
Income before income
taxes attributable to Express Scripts
|
1,330.3
|
|
(104.4)
|
|
-7.8%
|
|
4,403.9
|
|
999.5
|
|
22.7%
|
|
|
|
|
|
|
|
|
|
|
|
|
Excluding items
indicated:
|
|
|
|
|
|
|
|
|
|
|
|
Other compensation
costs (5)
|
41.2
|
|
15.3
|
|
|
|
41.2
|
|
15.3
|
|
|
Debt redemption costs
(8)
|
-
|
|
-
|
|
|
|
135.6
|
|
50.3
|
|
|
Discrete tax
items(7)
|
-
|
|
598.2
|
|
|
|
-
|
|
633.9
|
|
|
Amortization of
intangible assets(3)
|
462.1
|
|
171.5
|
|
|
|
1,832.8
|
|
679.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income
taxes attributable to Express Scripts, as adjusted
|
$ 1,833.6
|
|
$
680.6
|
|
37.1%
|
|
$ 6,413.5
|
|
$
2,378.8
|
|
37.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net income
attributable to Express Scripts
|
$ 1,153.0
|
|
|
|
|
|
$ 4,034.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note: See
Appendix for Footnotes
|
|
|
|
Table
5A
|
Express
Scripts Holding Company Unaudited Adjusted Net Income and Adjusted
Effective Income Tax Rate Reconciliation
|
(in
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
December 31, 2015
|
|
Year
Ended
December 31, 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
|
$ 1,096.3
|
|
$
317.4
|
|
|
|
$ 3,863.8
|
|
$
1,364.3
|
|
|
Net income
attributable to non-controlling interest
|
(5.4)
|
|
-
|
|
|
|
(23.1)
|
|
-
|
|
|
Income before income
taxes attributable to Express Scripts
|
1,090.9
|
|
317.4
|
|
29.1%
|
|
3,840.7
|
|
1,364.3
|
|
35.5%
|
|
|
|
|
|
|
|
|
|
|
|
|
Excluding items
indicated:
|
|
|
|
|
|
|
|
|
|
|
|
Transaction and
integration costs(4)
|
179.0
|
|
67.2
|
|
|
|
516.8
|
|
194.2
|
|
|
Legal
Settlement(6)
|
-
|
|
-
|
|
|
|
60.0
|
|
22.5
|
|
|
Debt redemption costs
(8)
|
-
|
|
-
|
|
|
|
9.2
|
|
3.5
|
|
|
Discrete tax
items(7)
|
-
|
|
92.2
|
|
|
|
-
|
|
79.2
|
|
|
Amortization of
intangible assets(3)
|
432.6
|
|
162.4
|
|
|
|
1,730.9
|
|
650.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income
taxes attributable to Express Scripts, as adjusted
|
$ 1,702.5
|
|
$
639.2
|
|
37.5%
|
|
$ 6,157.6
|
|
$
2,314.3
|
|
37.6%
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net income
attributable to Express Scripts
|
$ 1,063.3
|
|
|
|
|
|
$ 3,843.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note: See
Appendix for Footnotes
|
|
|
|
|
|
|
|
Table
6
|
Express
Scripts Holding Company Unaudited 2017 Guidance
Information
|
|
|
|
|
|
Estimated
Year Ending
December 31, 2017
|
|
Estimated
Year Ending
December 31, 2017
|
(in
millions, except per share data)
|
Current
Guidance
|
|
Previous
Guidance
|
Adjusted Diluted
EPS attributable to Express Scripts
|
$6.82 to
$7.02
|
|
$6.82 to
$7.02
|
Year over year
growth
|
7%-10%
|
|
7%-10%
|
|
|
|
|
Total adjusted
claims
|
1,375 to
1,425
|
|
1,375 to
1,425
|
|
|
|
|
EBITDA
attributable to Express Scripts
|
$7,310 to
$7,510
|
|
$7,310 to
$7,510
|
|
|
|
|
Diluted weighted
average shares outstanding during the period
|
580 to 600
|
|
580 to 600
|
|
|
|
|
Net cash flow
provided by operating activities
|
$4,700 to
$5,200
|
|
$4,700 to
$5,200
|
|
|
|
|
|
|
|
|
|
Estimated
Three Months Ending
March 31, 2017
|
|
|
(in
millions, except per share data)
|
Current
Guidance
|
|
|
Adjusted Diluted
EPS attributable to Express Scripts
|
$1.30 to
$1.34
|
|
|
Year over year
growth
|
7%-10%
|
|
|
|
|
|
|
Total adjusted
claims
|
345 to 355
|
|
|
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
network claims includes an adjustment to reflect non-specialty
network claims filled through our 90-day programs. These
claims are now multiplied by three, as these claims, on average,
typically cover a time period three times longer than other network
claims. Home delivery claims are also multiplied by three,
consistent with prior practice, as home delivery claims typically
cover a time period three times longer than unadjusted network
claims. All other network and specialty claims are counted as
one claim. The change was made retrospectively for the three
months and year ended December 31, 2016 and for the three months
and year ended December 31, 2015, to facilitate a year-over-year
comparison. See Appendix, Schedule A.
|
|
(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 $23.7 million ($14.8 million net of tax) is
included as a reduction to revenue for the three months ended
December 31, 2016 and 2015, respectively. Intangible
amortization of $200.5 million ($126.1 million net of tax) and
$95.1 million ($59.4 million net of tax) is included as a reduction
to revenue for the year ended December 31, 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 December 31,
2016 and $105.6 million of revenue amortization recognized for the
year ended December 31, 2016.
|
|
Other legacy ESI
intangible amortization of $7.9 million ($5.0 million net of tax)
and $9.4 million ($5.9 million net of tax) for the three months
ended December 31, 2016 and 2015, respectively, is included in
selling, general and administrative expense. Other legacy ESI
intangible amortization of $36.2 million ($22.8 million net of tax)
and $37.7 million ($23.5 million net of tax) for the year ended
December 31, 2016 and 2015, respectively, is included in selling,
general and administrative expense.
|
|
Amortization of
intangible assets related to the acquisition of Medco of $398.8
million ($250.8 million net of tax) and $399.5 million ($249.5
million net of tax) for the three months ended December 31, 2016
and 2015, respectively, is included in selling, general and
administrative expense. Amortization of intangible assets
related to the acquisition of Medco of $1,596.1 million ($1,004.1
million net of tax) and $1,598.1 million ($997.4 million net of
tax) for the year ended December 31, 2016 and 2015, respectively,
is included in selling, general and administrative
expense.
|
|
(4) Transaction and
integration costs include those costs directly related to the
acquisition of Medco Health Solutions, Inc.
|
|
Costs of $77.4
million ($48.4 million net of tax) are primarily composed of
integration-related activities, and are included in gross profit
for the three months ended December 31, 2015. Costs of $218.0
million ($136.1 million net of tax) are primarily composed of
integration-related activities, and are included in gross profit
for the year ended December 31,
2015.
|
|
Costs of $101.6
million ($63.4 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 December 31, 2015. Costs
of $298.8 million ($186.5 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 year ended December 31,
2015.
|
|
(5) Costs of
$41.2 million ($25.9 million net of tax) are related to
compensation in connection with the previously disclosed net tax
benefit of approximately $511.0 million related to the disposition
of PolyMedica Corporation (Liberty). Following receipt of the
tax benefit proceeds, the Board of Directors authorized the
use of $41.2 million, approximately 8%, or $0.06 per share ($0.04
per share net of tax), of the PolyMedica tax benefit proceeds to
reward employees for the significant contribution this multi-year
effort provided the Company and its shareholders.
|
|
(6) 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 year ended December 31, 2015.
|
|
(7) Provision for
income taxes includes discrete tax benefits of $598.2 million and
$633.9 million for the three months and year ended December 31,
2016, respectively, and discrete tax benefits of $92.2 million and
discrete tax charges of $79.2 million for the three months and year
ended December 31 2015, respectively. The 2016 net discrete
tax benefits and 2015 net discrete tax charges relate
primarily to changes in unrecognized tax benefits. In October
2016, we recognized a previously disclosed impact from a net tax
benefit of approximately $511.0 million related to the disposition
of PolyMedica Corporation (Liberty).
|
|
(8) Debt redemption
costs, which include write-off of discounts, premiums, deferred
financing costs, and other costs incurred for the early redemption
of senior notes, totaled $135.6 million ($85.3 million net of tax)
and are included in interest expense for the year ended December
31, 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 year ended December 31,
2015.
|
|
(9) Represents
adjustment for the tax impact related to non-GAAP items excluded
from adjusted diluted EPS. See Table 5 and 5A for calculation
of adjusted effective income tax rate.
|
Appendix
|
Schedule
A
|
Express
Scripts Holding Company Unaudited 2016 Claims
Recast
|
Provided below
are recasts of the revised methodology for reporting network
claims.
|
(in
millions)
|
|
|
As reported
Q1 2016
|
Revision
|
Revised Q1
2016
|
|
As reported
Q2 2016
|
Revision
|
Revised Q2
2016
|
|
As reported
Q3 2016
|
Revision
|
Revised Q3
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Claims
Volume
|
|
|
|
|
|
|
|
|
|
|
|
|
Network
|
226.1
|
-
|
226.1
|
|
221.2
|
-
|
221.2
|
|
217.0
|
-
|
217.0
|
|
Home delivery and
specialty(1)
|
30.3
|
-
|
30.3
|
|
29.5
|
-
|
29.5
|
|
30.0
|
-
|
30.0
|
|
Total
claims
|
256.4
|
-
|
256.4
|
|
250.7
|
-
|
250.7
|
|
247.0
|
-
|
247.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
network(2)
|
234.7
|
32.8
|
267.5
|
|
229.4
|
34.0
|
263.4
|
|
224.5
|
34.9
|
259.4
|
|
Adjusted home
delivery and specialty(2)
|
88.8
|
-
|
88.8
|
|
85.9
|
-
|
85.9
|
|
87.7
|
-
|
87.7
|
|
Total
adjusted claims(2)
|
323.5
|
32.8
|
356.3
|
|
315.3
|
34.0
|
349.3
|
|
312.2
|
34.9
|
347.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As reported
Q1 2015
|
Revision
|
Revised Q1
2015
|
|
As reported
Q2 2015
|
Revision
|
Revised Q2
2015
|
|
As reported
Q3 2015
|
Revision
|
Revised Q3
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Claims
Volume
|
|
|
|
|
|
|
|
|
|
|
|
|
Network
|
219.1
|
-
|
219.1
|
|
228.2
|
-
|
228.2
|
|
232.8
|
-
|
232.8
|
|
Home delivery and
specialty(1)
|
30.2
|
-
|
30.2
|
|
30.2
|
-
|
30.2
|
|
30.0
|
-
|
30.0
|
|
Total
claims
|
249.3
|
-
|
249.3
|
|
258.4
|
-
|
258.4
|
|
262.8
|
-
|
262.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
network(2)
|
219.1
|
33.0
|
252.1
|
|
232.9
|
35.6
|
268.5
|
|
240.8
|
36.9
|
277.7
|
|
Adjusted home
delivery and specialty(2)
|
88.5
|
-
|
88.5
|
|
88.3
|
-
|
88.3
|
|
87.5
|
-
|
87.5
|
|
Total
adjusted claims(2)
|
307.6
|
33.0
|
340.6
|
|
321.2
|
35.6
|
356.8
|
|
328.3
|
36.9
|
365.2
|
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/express-scripts-announces-2016-fourth-quarter-and-full-year-results-300407357.html
SOURCE Express Scripts Holding Company