ST. LOUIS, April 24, 2017 /PRNewswire/ -- Express
Scripts Holding Company (Nasdaq: ESRX) announced 2017 first quarter
net income of $546.3 million or
$0.90 per diluted share. The
2017 first quarter adjusted earnings per diluted share was
$1.33.*
First Quarter 2017 Results
The following compares first quarter 2017 and 2016 operating
results:
- Adjusted claims of 351.7 million, down 1% – See Table 1
- GAAP net income of $546.3
million, up 4%
- GAAP earnings per diluted share of $0.90, up 11%
- EBITDA of $1,496.2 million, up 3%
– See Table 3
- EBITDA per adjusted claim of $4.25, up 4% – See Table 3
- Adjusted net income of $805.4
million, up 2% – See Tables 5
and 5A
- Adjusted earnings per diluted share of $1.33, up 9% - See Table 4
- Net cash flow provided by operating activities of $1,000.4 million, up 33%
2017 Guidance
The Company increased its guidance for 2017 adjusted earnings
per diluted share from a range of $6.82 to
$7.02 to a range of $6.90 to
$7.04, which represents growth of 9% over 2016 adjusted
earnings per diluted share results at the mid-point of the
range.
The Company expects total adjusted claims for the second quarter
of 2017 to be in the range of 343 million to 353 million.
Adjusted earnings per diluted share for the second quarter of 2017
is estimated to be in the range of $1.70 to
$1.74, which represents growth of 8% to 11% over the second
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.
Update on Anthem Relationship
The Company's current long-term PBM contract with Anthem expires
on December 31, 2019, and Anthem is
currently engaged in a Request for Proposal (RFP) process for a PBM
service provider following the end of its contract with Express
Scripts. While the Company has not formally participated in
the RFP process, in recent months, management for the Company and
Anthem have had several conversations in which the Company proposed
providing as much as $1 billion in
annual value ($3 billion in the
aggregate) in the form of price concessions for 2017-2019 in
connection with a negotiated contract extension for the period
beyond 2019 at prevailing market rates. Although
conversations have been ongoing, the Company was recently told by
Anthem management that Anthem intends to move its business when the
Company's current contract with Anthem expires on December 31, 2019, and that Anthem is not
interested in continuing discussions regarding pricing concessions
for 2017-2019 or in receiving the Company's proposed pricing for
the period beyond 2019. As a result, today Express Scripts
has elected to provide information as to its financial performance
with and without Anthem, without any obligation to do so, in order
to demonstrate that the Company's core PBM business, excluding
Anthem, is well positioned for future growth. See Appendix A
for additional details regarding the Company's relationship with
Anthem and the history of the agreement between the parties.
"It is difficult for us to understand why Anthem has not
recognized the potential value which could be brought forth by
engaging in meaningful discussions regarding a mutually beneficial
pricing arrangement for the remaining term of our contract and
beyond," said Tim Wentworth,
President and CEO of Express Scripts. "No other party can
offer Anthem savings prior to 2020, and no other party can provide
updated pricing terms beyond 2019 without the risk and disruption
of a lengthy and complicated implementation. As our disclosure
today clearly demonstrates, Express Scripts makes well below
$3 billion annually on the Anthem
contract despite Anthem's numerous public pronouncements to the
contrary. Anthem's conflicting demands for annual PBM savings,
ranging from $700 million in
September 2015 to $3 billion in January
2016, its subsequent litigation against us, and now its
decision to discontinue discussions altogether do not make any
sense to us. We just can't explain why Anthem would choose to walk
away from an opportunity to realize $1
billion in annual savings, which we have no obligation to
provide under our current contract, in exchange for a contract
extension at prevailing market rates with a longstanding business
partner who has proven its ability to deliver value for their
members," Wentworth said.
"Express Scripts is committed to fulfilling our obligations to
serve patients and Anthem members through the remaining term of the
contract and the required one-year transition period, in accordance
with our agreement, as well as the successful implementation of any
new business added by Anthem over the next 32 months," Wentworth
added.
Contribution of Anthem, Coventry and Catamaran
While Anthem has not provided formal written notice that it does
not intend to renew its contract with the Company, based on recent
statements in conversations with Anthem management and other
actions taken by Anthem, the Company believes it is unlikely its
contract with Anthem will be extended. As a result, the
Company has elected to report Anthem's estimated 2015 and 2016 full
year and 2017 first quarter contribution to financial results in
order to provide visibility into the underlying performance of the
Company's PBM business excluding any contribution from
Anthem. The tables below provide the portion of our estimated
2015 and 2016 full year and 2017 first quarter financial results
attributable to Anthem (also see Tables 7 and 8 for further details
of 2016 full year and 2017 first quarter financial results
attributable to Anthem).
In addition to disclosing the estimated impact of the Anthem
contribution, the tables below include the estimated contribution
of the Company's remaining business with Coventry and Catamaran,
both of which were acquired and are rolling off the Company's book
of business. The Company is providing this information to assist in
an analysis of the underlying performance of the Company's core PBM
business, excluding the contributions from Coventry and Catamaran,
to which we refer together as the "Transitioning Clients," as well
as Anthem.
Full Year 2015
Overview
|
|
|
|
|
(in millions,
except per claim data)
|
Full Year
2015
(Consolidated,
as reported)
|
Anthem and
Transitioning Clients1
|
Full Year
2015
(Excluding
Anthem and
Transitioning
Clients)1
|
Full Year
2015
(Attributable to
Anthem)
|
Full Year
2015
(Attributable to
Coventry &
Catamaran)
|
Adjusted
claims
|
1,441.6
|
207.4
|
90.4
|
1,143.8
|
Revenues2
|
$101,751.8
|
$15,153.3
|
$5,517.7
|
$81,080.8
|
Net Income
|
$2,476.4
|
N/A
|
N/A
|
N/A
|
Adjusted
EBITDA3
|
$7,046.9
|
$1,862.7
|
$672.0
|
$4,512.2
|
Adjusted EBITDA per
adjusted claim3
|
$4.89
|
$8.98
|
N/A
|
$3.94
|
Adjusted EBITDA less
taxes3,4
|
$4,398.4
|
$1,162.6
|
$419.4
|
$2,816.4
|
Adjusted EBITDA less
taxes per adjusted claim3,4
|
$3.05
|
$5.61
|
N/A
|
$2.46
|
|
|
|
|
|
See "Footnotes to
Press Release," below.
|
|
Full Year 2016
Overview
|
|
|
|
|
(in millions,
except per claim data)
|
Full Year
2016
(Consolidated,
as reported)
|
Anthem and
Transitioning Clients1
|
Full Year
2016
(Excluding
Anthem and
Transitioning Clients)1
|
Full Year
2016
(Attributable to
Anthem)
|
Full Year
2016
(Attributable to
Coventry &
Catamaran)
|
Adjusted
claims
|
1,407.6
|
219.6
|
19.0
|
1,169.0
|
Revenues2
|
$100,287.5
|
$17,075.9
|
$1,696.9
|
$81,514.7
|
Net Income
|
$3,404.4
|
N/A
|
N/A
|
N/A
|
Adjusted
EBITDA3
|
$7,260.4
|
$2,248.0
|
$222.4
|
$4,790.0
|
Adjusted EBITDA per
adjusted claim3
|
$5.16
|
$10.24
|
N/A
|
$4.10
|
Adjusted EBITDA less
taxes3,4
|
$4,568.2
|
$1,414.4
|
$140.0
|
$3,013.8
|
Adjusted EBITDA less
taxes per adjusted claim3,4
|
$3.25
|
$6.44
|
N/A
|
$2.58
|
|
|
|
|
|
See "Footnotes to
Press Release," below.
|
|
First Quarter 2017
Overview
|
|
|
|
|
(in millions,
except per claim data)
|
Q1
2017
(Consolidated,
as reported)
|
Anthem and
Transitioning Clients1
|
Q1 2017
(Excluding
Anthem and
Transitioning
Clients)1
|
Q1
2017
(Attributable to
Anthem)
|
Q1
2017
(Attributable to
Coventry &
Catamaran)
|
Adjusted
claims
|
351.7
|
59.0
|
0.9
|
291.8
|
Revenues5
|
$24,654.9
|
$4,523.0
|
$213.0
|
$19,918.9
|
Net Income
|
$546.3
|
N/A
|
N/A
|
N/A
|
EBITDA3
|
$1,496.2
|
$495.0
|
$54.1
|
$947.1
|
EBITDA per adjusted
claim3
|
$4.25
|
$8.39
|
N/A
|
$3.25
|
EBITDA less
taxes3,4
|
$946.2
|
$313.0
|
$34.2
|
$599.0
|
EBITDA less taxes per
adjusted claim3,4
|
$2.69
|
$5.31
|
N/A
|
$2.05
|
|
|
|
|
|
See "Footnotes to
Press Release," below.
|
In the first quarter of 2017 our core PBM business, excluding
Anthem and the Transitioning Clients, had EBITDA growth of 0.5% and
EBITDA per adjusted claim growth of 2.2% when compared to the first
quarter of 2016 (see Table 7).
Our Anthem contract generated approximately $2.2 billion and $1.9
billion of adjusted EBITDA, or approximately 31% and 26% of
our total adjusted EBITDA, in 2016 and 2015, respectively.
Under the terms of our contract with Anthem, Anthem's contribution
to our profitability, as a percentage of our total EBITDA and
adjusted EBITDA, has grown and we expect it will continue to
increase and exceed its contribution to our revenues, as a
percentage of our total revenues, and that revenues, EBITDA and
adjusted EBITDA attributable to Anthem will increase as the
contract nears its termination in 2019. The contribution of
the Anthem business to our financial results reflects the
underlying structure of the 10-year contract, which was negotiated
and executed as part of Express Scripts' $4.675 billion acquisition of NextRx, Anthem's
in-house PBM, in 2009. For additional background on the
acquisition and the Anthem contract, see Appendix A attached
hereto.
Long-Term Outlook for Core PBM
"Looking forward, we will continue to invest in our business to
maintain optimal service levels, bring innovative solutions to the
marketplace to help our patients and payers and generate new
business. We believe that no one else provides the depth and
breadth of solutions we offer, and that no one else is as
singularly focused on driving out pharmacy waste, controlling
client costs and improving patient outcomes. Given Anthem's
apparent decision not to consider billions of dollars in
savings we could provide them between now and the end of 2019, we
will certainly invest those funds to better position our core
business for the future," Wentworth said.
The Company's diverse client base that represents greater than
65 million members and volume of more than one billion
adjusted prescriptions annually position the Company for
continued success, with or without Anthem as a client. The Company
remains confident in the long term growth outlook based on the
positive fundamental backdrop and a diverse set of opportunities
that leverage its core competencies. The Company's
independent, fully-aligned model has been a market leader in
lowering the cost of prescription drugs, driving out waste and
improving health outcomes for many years. In the U.S., we
have an aging population and there is an increased use of
pharmaceuticals, given their success as a cost effective treatment
modality in a fee-for-value world. The Company has a superior
suite of assets to address the needs of clients and patients,
including new industry leading value-based programs, specialty and
home delivery pharmacies, restrictive formularies and narrow
networks. Patients and payers benefit from our increased
pressure on the supply chain. This is evident today in the retail
and wholesale pharmacy markets, where price deflation for generic
drugs is becoming commonplace. It is the work performed by
Express Scripts and other PBMs that lowers pharmacy costs in the
U.S. We believe the Company's pharmacy assets will gain
market share in their respective markets, as continued investments
enable us to have the best relative cost position in the industry
and exceptional service levels to patients and payers.
Increases in generic utilization will continue to be a value
driver, with biosimilars bringing the potential to be as impactful
to the market as the generic drug wave that helped bring down
healthcare costs over the last 10 years. Medicaid, Medicare
Part D and Medicare Part B are other areas where we believe there
are opportunities to manage the government's drug spend more
effectively, but this will take many disparate parts of the
healthcare system to get aligned towards a common objective, and
Express Scripts is purpose-built to take on that challenge.
Based on management's assumptions regarding healthcare trends,
inflation, patent expirations, industry utilization growth and the
overall environment for healthcare services, the Company is
targeting a compounded annual EBITDA growth rate from 2017 through
2020 in the range of 2% to 4% for the core PBM, which excludes any
contribution from Anthem and the Transitioning Clients.
The Company expects to continue to generate significant cash
flow from operations. Furthermore, the Company is committed
to maintaining a 2.0x debt-to-EBITDA ratio and strong investment
grade ratings. Similar to past periods, the Company's
leverage ratio could move higher or lower on a short-term basis
depending on the Company's needs to fund strategic initiatives.
Aside from gradually paying down debt over the next two and a half
years to achieve our leverage targets, the Company's priorities for
deploying capital remain the same: to fund internal growth, make
strategic acquisitions and return cash to its shareholders.
Conference Call Details
The Company will hold its quarterly conference call to discuss
2017 first quarter financial results and the other matters
discussed in this press release on Tuesday,
April 25, 2017, at 8:30 a.m.
EDT (7:30 a.m. CDT). 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 with GAAP. Adjusted
EPS, EBITDA, adjusted EBITDA, EBITDA per adjusted claim, adjusted
EBITDA per adjusted claim, adjusted EBITDA less taxes, adjusted
EBITDA less taxes 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. 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. EBITDA per adjusted claim and adjusted
EBITDA per adjusted claim provide management and investors with
useful information about the earnings and performance of the
Company on a per unit basis. Adjusted EBITDA less taxes and
adjusted EBITDA less taxes per adjusted claim provide investors
additional measures of the contribution of the Anthem business
after tax. See Appendix A.
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 second quarter and
full-year 2017 GAAP financial results. With respect to adjusted
EPS, amortization of intangible assets is expected to be
approximately $0.39 and $1.56 per share for the second quarter and
full-year 2017, respectively.
Financial Information for Anthem and Transitioning Clients;
Long-Term Outlook for Core PBM: The financial measures
attributable to Anthem and the Transitioning Clients presented
herein, including EBITDA, adjusted EBITDA, EBITDA per adjusted
claim, adjusted EBITDA per adjusted claim, EBITDA less taxes,
EBITDA less taxes per adjusted claim, adjusted EBITDA less taxes
and adjusted EBITDA less taxes per adjusted claim are also non-GAAP
financial measures. These measures 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. These
measures represent operating results attributable to specific
clients of the Company; however, they are not regularly reviewed by
our Chief Executive Officer to assess the performance of any of
these clients or make decisions about resources to be allocated to
any such client. These measures also reflect management's estimates
as to allocation of costs of its PBM business to Anthem and each of
the Transitioning Clients and may not be indicative of costs
actually incurred as a result of servicing each of these
clients. However, management is unable to reasonably estimate
the allocation of certain key items that would impact net income
attributable to Anthem and each of the Transitioning Clients,
including interest and depreciation and amortization.
Accordingly, the Company is unable to provide net income
attributable to any of Anthem and the Transitioning Clients or its
core PBM business excluding Anthem and the Transitioning Clients,
and is unable to provide a reconciliation of either EBITDA or
adjusted 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
long-term outlook for the core PBM, as discussed above.
SAFE HARBOR STATEMENT
This press release contains forward-looking statements,
including, but not limited to, our 2017 guidance, long-term outlook
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 and the Company's Quarterly Report on Form 10-Q filed
with the SEC on April 24, 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. As stated above, based on Anthem's
recent statements, the Company believes it is unlikely that it will
extend its contract with Anthem. We do not currently intend
to release publicly any updates regarding our relationship with
Anthem after the date hereof, whether as a result of renewed
discussions with Anthem or otherwise.
Appendix A
Background on Our Relationship with
Anthem
Express Scripts and Anthem entered into their existing contract
in 2009, as part of the same transaction in which Express Scripts
purchased NextRx, Anthem's in-house PBM which at the time was
sanctioned by CMS. The acquisition followed a competitive bidding
process, led by a leading healthcare investment banking firm, to
divest Anthem's PBM business and to select a long-term PBM
partner. Several companies competed for Anthem's PBM business
under a range of different pricing structures. Anthem chose
Express Scripts, a buyer that was willing to undertake the task of
righting the ship and provide significant upfront value, as the
winning bidder.
As with any long-term contractual relationship, when the 10-year
PBM contract was entered into by Express Scripts and Anthem, both
parties assumed a level of risk. Express Scripts leveraged
its balance sheet and agreed to raise capital during one of the
tightest debt markets in recent history in order to deliver a
$4.675 billion up-front payment to
Anthem and was immediately faced with the daunting integration of a
CMS-sanctioned plan as well as uncertainties around trends in the
PBM business model (e.g., generic fill rate, supply chain pricing,
etc.). In exchange, Anthem accepted an exclusive PBM
arrangement and 10-year pricing terms. During negotiations between
the parties in 2009, Express Scripts presented Anthem with a range
of transaction structures, including a lower up-front payment
coupled with lower pricing terms. Anthem prioritized the
larger, $4.675 billion upfront
payment option over lower pricing for PBM services. Following
receipt of the payment Anthem elected to ramp up share repurchases,
utilizing a significant portion of the cash, which could have
potentially been leveraged to provide more competitive rates, value
and savings for its clients and members over the term of the
agreement, and/or invest in its business to create enhanced
pharmacy service offerings or operating efficiencies.
The structure of the contract subjected Express Scripts to
significant execution risk over the 10-year term. Pricing under the
contract was underwritten based on assumptions around a number of
variables, including the number of pharmacy claims Anthem would
deliver, utilization rates for generic drugs, prevailing terms and
pricing for procurement from brand and generic drug manufacturers,
the growth of specialty pharmacy product utilization, as well as
Express Scripts' ability to negotiate discounts from the supply
chain, and to generate operating efficiencies. Express Scripts
dedicated significant resources for the various integrations of the
Anthem business, due to its complexity — which consists of more
than 50,000 individual plan types, more than 130,000 fully-insured
and administrative-services-only groups, 490 Medicare groups, 1,600
Medicaid groups and approximately 650 products in the Public
Exchanges — as well as getting Anthem out from under CMS sanctions,
all at a substantial cost to Express Scripts.
During the first several years of the contract, the Anthem
business underperformed Express Scripts' financial expectations, as
Anthem's prescription claims volume was significantly below
Anthem's originally forecasted amounts. Over time, however,
Express Scripts reversed this initial economic
underperformance. For example, Express Scripts' ability to
achieve greater-than-expected generic fill rates and additional
leverage through improved management of the supply chain,
particularly following the Medco acquisition in 2012, created
additional value that was unforeseeable in 2009. A portion of
this value continues to flow through to Anthem, as a result of the
improved pricing Express Scripts provided following the parties'
periodic pricing review in 2012 and in new business where Express
Scripts has routinely provided exception pricing outside the
contractual pricing terms, to help Anthem compete for new
business.
In early 2016, with less than two-thirds of the contract
completed, Anthem management made public statements stating a
belief that it was entitled to more than $3
billion in annual price concessions from Express Scripts –
an amount that is not supportable under the terms of the contract
and that substantially exceeds the annual profit contribution of
the Anthem business. Although not required by the contract,
in 2015, Express Scripts offered to share significant value –
$700 million of annual price
concessions – with Anthem. Additionally – consistent with
standard industry practice – Express Scripts also offered Anthem
billions of dollars in additional value if Anthem modernized its
outdated benefit plans in line with prevailing industry
trends. Suggestions included using narrower pharmacy networks
and more restrictive formularies to capture greater rebates from
pharmaceutical companies and greater discounts from retail
pharmacies to obtain better pricing. Despite these efforts,
in March 2016, Anthem filed a lawsuit
against the Company in which Anthem attempted to construct a right
to require complete repricing under the contract, notwithstanding
their acceptance of the $4.675
billion up-front payment.
In recent months, management of the organizations had several
conversations in which Express Scripts proposed as much as
$3 billion of value in the form of
price concessions over the remaining term of the contract in
connection with an extension which would be priced at prevailing
market rates. The Company believed that Anthem would, at a
minimum, engage in meaningful discussions around such an
arrangement with the Company – the only party positioned to provide
such early value to Anthem and its clients, one of a small number
of potential bidders with the scale and expertise sufficient to
handle Anthem's PBM business, and the only PBM service provider
that would allow them to avoid the cost, risk and client and
patient disruption which can result from transitioning more than
50,000 individual plan designs and over 15 million individual
members to a different PBM platform. As such, Express Scripts
was surprised when it was informed by Anthem management that Anthem
intends to move its business without fully pursuing discussions
with Express Scripts.
*All net income, adjusted net income, earnings per diluted
share, adjusted earnings per diluted share, EBITDA, adjusted
EBITDA, EBITDA per adjusted claim, adjusted EBITDA per adjusted
claim, EBITDA less taxes, adjusted EBITDA less taxes, EBITDA less
taxes per adjusted claim and adjusted EBITDA less taxes per
adjusted claim 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
March 31,
|
(in
millions, except per share data)
|
2017
|
|
2016
|
|
|
|
|
Revenues*
|
$ 24,654.9
|
|
$ 24,791.8
|
Cost of
revenues*
|
22,782.2
|
|
22,944.8
|
Gross profit
|
1,872.7
|
|
1,847.0
|
Selling, general and
administrative
|
818.1
|
|
906.2
|
Operating
income
|
1,054.6
|
|
940.8
|
Other (expense)
income:
|
|
|
|
Interest income and other
|
6.3
|
|
8.8
|
Interest expense and other
|
(145.7)
|
|
(138.6)
|
|
(139.4)
|
|
(129.8)
|
Income before income
taxes
|
915.2
|
|
811.0
|
Provision for income
taxes
|
364.9
|
|
278.8
|
Net
income
|
550.3
|
|
532.2
|
Less: Net income
attributable to non-controlling interest
|
4.0
|
|
6.1
|
Net income
attributable to Express Scripts
|
$
546.3
|
|
$
526.1
|
|
|
|
|
Weighted-average
number of common shares
|
|
|
|
outstanding
during the period:
|
|
|
|
Basic
|
601.0
|
|
645.0
|
Diluted
|
605.1
|
|
649.7
|
|
|
|
|
Earnings per share
attributable to Express Scripts:
|
|
|
|
Basic
|
$
0.91
|
|
$
0.82
|
Diluted
|
$
0.90
|
|
$
0.81
|
|
|
|
|
* Includes retail
pharmacy co-payments of $2,466.3 million and $2,541.0 million for
the three months ended March 31, 2017 and 2016,
respectively.
|
EXPRESS
SCRIPTS HOLDING COMPANY
|
Unaudited
Consolidated Balance Sheet
|
|
|
|
|
|
March
31,
|
|
December
31,
|
(in
millions)
|
2017
|
|
2016
|
Assets
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
3,163.8
|
|
$
3,077.2
|
Receivables,
net
|
6,936.1
|
|
7,062.1
|
Inventories
|
1,755.4
|
|
1,959.0
|
Prepaid
expenses and other current assets
|
233.9
|
|
265.1
|
Total current assets
|
12,089.2
|
|
12,363.4
|
Property and
equipment, net
|
1,277.8
|
|
1,273.6
|
Goodwill
|
29,278.0
|
|
29,277.8
|
Other
intangible assets, net
|
8,274.5
|
|
8,636.9
|
Other
assets
|
136.5
|
|
193.2
|
Total assets
|
$
51,056.0
|
|
$
51,744.9
|
|
|
|
|
Liabilities and
stockholders' equity
|
|
|
|
Current
liabilities:
|
|
|
|
Claims and
rebates payable
|
$
8,786.3
|
|
$
8,836.9
|
Accounts
payable
|
3,658.0
|
|
3,875.7
|
Accrued
expenses
|
2,976.1
|
|
2,993.2
|
Current
maturities of long-term debt
|
1,621.3
|
|
722.3
|
Total current liabilities
|
17,041.7
|
|
16,428.1
|
Long-term
debt
|
13,906.2
|
|
14,846.0
|
Deferred
taxes
|
3,537.3
|
|
3,603.3
|
Other
liabilities
|
641.2
|
|
623.7
|
Total liabilities
|
35,126.4
|
|
35,501.1
|
|
|
|
|
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: 858.8
and 857.5, respectively; shares outstanding: 593.5 and 605.5,
respectively
|
|
|
|
|
|
|
8.6
|
|
8.6
|
Additional
paid-in capital
|
23,275.3
|
|
23,233.6
|
Accumulated
other comprehensive loss
|
(11.1)
|
|
(12.3)
|
Retained
earnings
|
12,347.5
|
|
11,801.2
|
|
35,620.3
|
|
35,031.1
|
|
|
|
|
Common stock in
treasury at cost, 265.3 and 252.0 shares,
respectively
|
(19,697.7)
|
|
(18,795.1)
|
Total Express Scripts stockholders' equity
|
15,922.6
|
|
16,236.0
|
Non-controlling
interest
|
7.0
|
|
7.8
|
Total stockholders' equity
|
15,929.6
|
|
16,243.8
|
Total liabilities and stockholders' equity
|
$
51,056.0
|
|
$
51,744.9
|
EXPRESS
SCRIPTS HOLDING COMPANY
|
Unaudited
Consolidated Statement of Cash Flows
|
|
Three Months
Ended
March 31,
|
(in
millions)
|
2017
|
|
2016
|
|
|
|
|
Cash flows from
operating activities:
|
|
|
|
Net
income
|
$
550.3
|
|
$
532.2
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
Depreciation
and amortization
|
445.6
|
|
525.3
|
Deferred income
taxes
|
(53.3)
|
|
(112.8)
|
Employee
stock-based compensation expense
|
27.1
|
|
27.9
|
Other,
net
|
18.6
|
|
(3.7)
|
Changes in
operating assets and liabilities:
|
|
|
|
Accounts
receivable
|
102.9
|
|
(45.4)
|
Inventories
|
203.6
|
|
289.7
|
Other current
and noncurrent assets
|
29.4
|
|
(8.1)
|
Claims and
rebates payable
|
(50.6)
|
|
(441.4)
|
Accounts
payable
|
(280.0)
|
|
229.0
|
Accrued
expenses
|
(10.5)
|
|
(232.2)
|
Other current
and noncurrent liabilities
|
17.3
|
|
(9.3)
|
Net cash flows
provided by operating activities
|
1,000.4
|
|
751.2
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
Purchases of
property and equipment
|
(45.8)
|
|
(82.6)
|
Other,
net
|
(2.3)
|
|
2.8
|
Net cash used
in investing activities
|
(48.1)
|
|
(79.8)
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
Treasury stock
acquired
|
(837.4)
|
|
(3,109.2)
|
Repayment of
long-term debt
|
(37.5)
|
|
(972.2)
|
Net proceeds
from employee stock plans
|
14.5
|
|
11.1
|
Proceeds from
long-term debt, net of discounts
|
-
|
|
1,991.0
|
Excess tax
benefit relating to employee stock-based
compensation
|
-
|
|
8.2
|
Other,
net
|
(6.1)
|
|
(19.3)
|
Net cash used
in financing activities
|
(866.5)
|
|
(2,090.4)
|
|
|
|
|
Effect of
foreign currency translation adjustment
|
0.8
|
|
3.8
|
|
|
|
|
Net increase
(decrease) in cash and cash equivalents
|
86.6
|
|
(1,415.2)
|
Cash and cash
equivalents at beginning of period
|
3,077.2
|
|
3,186.3
|
Cash and cash
equivalents at end of period
|
$ 3,163.8
|
|
$ 1,771.1
|
Table
1
|
Express
Scripts Holding Company Unaudited Consolidated Selected
Information
|
(in
millions)
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
March 31,
|
|
Year
Ended
December 31,*
|
|
2017
|
|
2016
|
|
2016
|
|
2015
|
Claims
Volume
|
|
|
|
|
|
|
|
Network
|
223.1
|
|
226.1
|
|
887.4
|
|
922.2
|
Home delivery and
specialty(6)
|
29.0
|
|
30.3
|
|
120.2
|
|
121.6
|
Total
claims
|
252.1
|
|
256.4
|
|
1,007.6
|
|
1,043.8
|
|
|
|
|
|
|
|
|
Adjusted
network(7)
|
267.1
|
|
267.5
|
|
1,056.5
|
|
1,085.8
|
Adjusted home
delivery and specialty(7)
|
84.6
|
|
88.8
|
|
351.1
|
|
355.8
|
Total
adjusted claims(7)
|
351.7
|
|
356.3
|
|
1,407.6
|
|
1,441.6
|
|
|
|
|
|
|
|
|
Depreciation
and Amortization (D&A):
|
|
|
|
|
|
|
|
Revenue
amortization(8)
|
$
55.4
|
|
$
34.3
|
|
|
|
|
Cost of
revenues depreciation
|
32.0
|
|
28.9
|
|
|
|
|
Selling,
general and administrative depreciation
|
51.2
|
|
53.1
|
|
|
|
|
Selling,
general and administrative amortization(8)
|
307.0
|
|
409.0
|
|
|
|
|
Total
D&A
|
$ 445.6
|
|
$ 525.3
|
|
|
|
|
|
|
|
|
|
|
|
|
Generic Fill
Rate**
|
|
|
|
|
|
|
|
Network
|
87.1%
|
|
85.9%
|
|
|
|
|
Home
delivery
|
82.1%
|
|
79.8%
|
|
|
|
|
Overall
|
86.5%
|
|
85.2%
|
|
|
|
|
|
|
|
|
|
|
|
|
See Footnotes to
Tables
|
|
*Provided for
reconciliation purposes.
|
|
|
|
|
|
|
|
|
**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
March 31,
|
|
2017
|
|
2016
|
Gross profit, as
reported
|
$ 1,872.7
|
|
$ 1,847.0
|
Amortization of
intangible assets (8)
|
55.4
|
|
34.3
|
Adjusted gross
profit
|
$ 1,928.1
|
|
$ 1,881.3
|
|
|
|
|
Selling, general and
administrative, as reported
|
$
818.1
|
|
$
906.2
|
Amortization of
intangible assets (8)
|
307.0
|
|
409.0
|
Adjusted selling,
general and administrative
|
$
511.1
|
|
$
497.2
|
|
|
|
|
See
Footnotes to Press Release
|
|
|
|
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, which is a non-GAAP financial measure, to net
income attributable to Express Scripts. The Company believes
net income is the most directly comparable measure under
GAAP.
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
March 31,
|
|
Year
Ended
December 31,*
|
|
2017
|
|
2016
|
|
2016
|
|
2015
|
Net income
attributable to Express Scripts, as reported
|
$
546.3
|
|
$
526.1
|
|
$
3,404.4
|
|
$
2,476.4
|
Provision for
income taxes (9)
|
364.9
|
|
278.8
|
|
999.5
|
|
1,364.3
|
Depreciation
and amortization** (8)
|
445.6
|
|
525.3
|
|
2,154.6
|
|
2,359.1
|
Other expense,
net
|
139.4
|
|
129.8
|
|
660.7
|
|
475.5
|
EBITDA attributable
to Express Scripts, as reported
|
$
1,496.2
|
|
$
1,460.0
|
|
$
7,219.2
|
|
$
6,675.3
|
Adjustments to
EBITDA
|
|
|
|
|
|
|
|
Transaction and
integration costs**(10)
|
-
|
|
-
|
|
-
|
|
311.6
|
Other compensation
costs(10)
|
-
|
|
-
|
|
41.2
|
|
-
|
Legal
Settlement(10)
|
-
|
|
-
|
|
-
|
|
60.0
|
Adjusted EBITDA
attributable to Express Scripts
|
-
|
|
-
|
|
$
7,260.4
|
|
$
7,046.9
|
|
|
|
|
|
|
|
|
Applied income
taxes(4)
|
$
550.0
|
|
$
541.3
|
|
$
2,692.2
|
|
$
2,648.5
|
EBITDA/Adjusted
EBITDA less taxes attributable to Express
Scripts(4)
|
$
946.2
|
|
$
918.7
|
|
$
4,568.2
|
|
$
4,398.4
|
|
|
|
|
|
|
|
|
Total adjusted
claims(7)
|
351.7
|
|
356.3
|
|
1,407.6
|
|
1,441.6
|
|
|
|
|
|
|
|
|
EBITDA/Adjusted
EBITDA attributable to Express Scripts, per adjusted
claim
|
$
4.25
|
|
$
4.10
|
|
$
5.16
|
|
$
4.89
|
|
|
|
|
|
|
|
|
EBITDA/Adjusted
EBITDA less taxes attributable to Express Scripts, per adjusted
claim
|
$
2.69
|
|
$
2.58
|
|
$
3.25
|
|
$
3.05
|
|
|
|
|
|
|
|
|
See
Footnotes to Press Release
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*Provided for
reconciliation purposes.
|
|
|
|
|
|
|
|
|
**Depreciation and
amortization for the year ended December 31, 2015 presented above
includes $205.2 million of depreciation related to the integration
of Medco Health Solutions, Inc. 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
March 31,
|
|
2017
|
|
2016
|
|
(per diluted
share)
|
Diluted EPS
attributable to Express Scripts, as reported
|
$
0.90
|
|
$
0.81
|
|
|
|
|
Excluding items
indicated:
|
|
|
|
Debt redemption costs
(11),*
|
-
|
|
0.02
|
Discrete tax items
(9)
|
0.05
|
|
(0.03)
|
Amortization of
intangible assets (8),*
|
0.60
|
|
0.68
|
Tax impact of
excluded items (12)
|
(0.22)
|
|
(0.26)
|
|
|
|
|
Diluted EPS
attributable to Express Scripts, adjusted
|
$
1.33
|
|
$
1.22
|
|
|
|
|
See
Footnotes to Press Release
|
|
|
|
|
|
|
|
*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 ended March 31, 2017 and
2016.
|
Table 5
Express Scripts Holding Company Unaudited Adjusted Net Income
and
Adjusted Effective Income Tax Rate Reconciliation (in
millions) Presented below is a reconciliation of adjusted
net income attributable to Express Scripts taxes, which is a
non-GAAP financial measure, to income before income taxes, which is
its most directly comparable measure calculated in accordance with
GAAP.
|
|
|
|
|
|
|
|
Three Months
Ended
March 31, 2017
|
|
Income
before
income
taxes
|
|
Provision
for income
taxes
|
|
Effective
income tax
rate
|
Income before income
taxes, as reported
|
$
915.2
|
|
$
364.9
|
|
|
Net income
attributable to non-controlling interest
|
(4.0)
|
|
-
|
|
|
Income before income
taxes attributable to Express Scripts
|
911.2
|
|
364.9
|
|
40.0%
|
|
|
|
|
|
|
Excluding items
indicated:
|
|
|
|
|
|
Discrete tax
items(9)
|
-
|
|
(29.9)
|
|
|
Amortization of
intangible assets(8)
|
362.4
|
|
133.2
|
|
|
|
|
|
|
|
|
Income before income
taxes attributable to Express Scripts, as adjusted
|
$ 1,273.6
|
|
$
468.2
|
|
36.8%
|
|
|
|
|
|
|
Adjusted net income
attributable to Express Scripts
|
$
805.4
|
|
|
|
|
|
|
|
|
|
|
See
Footnotes to Press Release
|
|
|
|
|
|
Table 5A
Express Scripts Holding Company Unaudited Adjusted Net Income
and
Adjusted Effective Income Tax Rate Reconciliation
(in millions)
Presented below is a reconciliation of adjusted net income
attributable to Express Scripts taxes, which is a non-GAAP
financial measure, to income before income taxes, which is its most
directly comparable measure calculated in accordance with
GAAP.
|
|
|
|
|
|
|
|
Three Months
Ended
March 31, 2016
|
|
Income
before
income
taxes
|
|
Provision
for income
taxes
|
|
Effective
income tax
rate
|
Income before income
taxes, as reported
|
$
811.0
|
|
$
278.8
|
|
|
Net income
attributable to non-controlling interest
|
(6.1)
|
|
-
|
|
|
Income before income
taxes attributable to Express Scripts
|
804.9
|
|
278.8
|
|
34.6%
|
|
|
|
|
|
|
Excluding items
indicated:
|
|
|
|
|
|
Debt redemption costs
(11)
|
9.7
|
|
3.6
|
|
|
Discrete tax
items(9)
|
-
|
|
19.7
|
|
|
Amortization of
intangible assets(8)
|
443.3
|
|
164.4
|
|
|
|
|
|
|
|
|
Income before income
taxes attributable to Express Scripts, as adjusted
|
$ 1,257.9
|
|
$
466.5
|
|
37.1%
|
|
|
|
|
|
|
Adjusted net income
attributable to Express Scripts
|
$
791.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
Footnotes to Press Release
|
|
|
|
|
|
|
|
|
|
Table
6
|
Express
Scripts Holding Company Unaudited 2017 Guidance
Information
|
Adjusted diluted EPS
and EBITDA are non-GAAP financial measures. For a discussion
of the financial measures presented herein that are not calculated
or presented in accordance with U.S. generally accepted accounting
principles ("GAAP"), see "Supplemental Information Regarding
Non-GAAP Financial Measures" above.
|
|
|
|
|
|
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
|
$6.90 to
$7.04
|
|
$6.82 to
$7.02
|
Year over year
growth
|
8%-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
|
575 to 595
|
|
580 to 600
|
|
|
|
|
Net cash flow
provided by operating activities
|
$4,700 to
$5,200
|
|
$4,700 to
$5,200
|
|
|
|
|
|
|
|
|
|
Estimated
Three Months Ending
June 30, 2017
|
|
|
(in
millions, except per share data)
|
Current
Guidance
|
|
|
Adjusted Diluted
EPS attributable to Express Scripts
|
$1.70 to
$1.74
|
|
|
Year over year
growth
|
8%-11%
|
|
|
|
|
|
|
Total adjusted
claims
|
343 to 353
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Table
7
|
Express
Scripts Holding Company Operating Results Excluding Estimate of
Contribution related to Anthem, Coventry and
Catamaran
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(amounts in
millions except per claim figures)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q1
2017
|
|
|
|
|
Q1
2016
|
|
Q1 2017
Change
|
|
|
Consolidated
As Reported
Q1 2017
|
Anthem(1)
|
Coventry &
Catamaran(1)
|
Excluding
Anthem,
Coventry &
Catamaran(1)
|
|
Consolidated
As Reported
Q1 2016
|
Anthem(1) (Table 8)
|
Coventry
&Catamaran(1) (Table 8)
|
Excluding
Anthem,
Coventry &
Catamaran(1)
|
|
As
Reported
|
Excluding
Anthem,
Coventry &
Catamaran(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
claims
|
Table
1
|
351.7
|
59.0
|
0.9
|
291.8
|
|
356.3
|
54.5
|
5.6
|
296.2
|
|
-1.3%
|
-1.5%
|
Revenues(5)
|
|
$
24,654.9
|
$ 4,523.0
|
$
213.0
|
$
19,918.9
|
|
$
24,791.8
|
$ 4,096.7
|
$
457.5
|
$
20,237.6
|
|
-0.6%
|
-1.6%
|
Net income
|
|
$
546.3
|
N/A
|
N/A
|
N/A
|
|
$
526.1
|
N/A
|
N/A
|
N/A
|
|
3.8%
|
N/A
|
EBITDA(3)
|
Table
3
|
$
1,496.2
|
$
495.0
|
$
54.1
|
$
947.1
|
|
$
1,460.0
|
$
467.9
|
$
50.0
|
$
942.1
|
|
2.5%
|
0.5%
|
EBITDA/adjusted
claim(3)
|
Table
3
|
$
4.25
|
$
8.39
|
N/A
|
$
3.25
|
|
$
4.10
|
$
8.59
|
N/A
|
$
3.18
|
|
3.7%
|
2.2%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Footnotes to
Press Release.
|
|
|
|
|
|
|
|
|
|
|
|
Table
8
|
|
|
|
|
|
Express
Scripts Holding Company - Estimate of Anthem, Coventry and
Catamaran Contribution by Quarter
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(amounts in
millions except per claim figures)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Anthem(1),(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
Q1
2016
|
Q2
2016
|
Q3
2016
|
Q4
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
Claims
|
|
54.5
|
54.2
|
54.3
|
56.6
|
|
|
|
|
|
Revenues
|
|
$
4,096.7
|
$
4,354.9
|
$
4,243.0
|
$
4,381.3
|
|
|
|
|
|
Adjusted
EBITDA*
|
|
$
467.9
|
$
644.7
|
$
572.1
|
$
563.3
|
|
|
|
|
|
Adjusted
EBITDA/adjusted claim*
|
|
$
8.59
|
$
11.89
|
$
10.54
|
$
9.95
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Coventry and
Catamaran(1),(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
Q1
2016
|
Q2
2016
|
Q3
2016
|
Q4
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
Claims
|
|
5.6
|
4.9
|
4.6
|
3.9
|
|
|
|
|
|
Revenues
|
|
$
457.5
|
$
471.9
|
$
411.5
|
$
356.0
|
|
|
|
|
|
Adjusted
EBITDA*
|
|
$
50.0
|
$
49.5
|
$
49.3
|
$
73.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined
Contribution(1),(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
Q1
2016
|
Q2
2016
|
Q3
2016
|
Q4
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
Claims
|
|
60.1
|
59.1
|
58.9
|
60.5
|
|
|
|
|
|
Revenues
|
|
$
4,554.2
|
$
4,826.8
|
$
4,654.5
|
$
4,737.3
|
|
|
|
|
|
Adjusted
EBITDA*
|
|
$
517.9
|
$
694.2
|
$
621.4
|
$
636.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core PBM
(Excluding Anthem and Transitioning
Clients)(1),(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
Q1
2016
|
Q2
2016
|
Q3
2016
|
Q4
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
Claims
|
|
296.2
|
290.2
|
288.2
|
294.4
|
|
|
|
|
|
Revenues
|
|
$ 20,237.6
|
$ 20,395.5
|
$ 20,755.6
|
$ 20,126.0
|
|
|
|
|
|
Adjusted
EBITDA*
|
|
$
942.1
|
$
1,103.9
|
$
1,326.7
|
$
1,417.3
|
|
|
|
|
|
Adjusted
EBITDA/adjusted claim*
|
|
$
3.18
|
$
3.80
|
$
4.60
|
$
4.81
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(*) Adjusted
EBITDA with respect to Q1, Q2 and Q3 2016 is equal to
"EBITDA" as no adjustments to EBITDA were made for these
periods.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Footnotes to
Press Release
|
Footnotes to
Press Release
|
|
(1) Amounts
attributable to Anthem and each of the Transitioning Clients,
including amounts set forth in "Long-Term Outlook," are based on
management's estimates regarding, among other items, cost
allocation and may not be indicative of costs actually incurred as
a result of servicing Anthem and each of the Transitioning Clients.
Both direct and indirect costs were allocated based on management's
best estimates of costs attributable to servicing Anthem and each
of the Transitioning Clients, and, where appropriate, are based on
actual cost or adjusted claims attributable to Anthem and each of
the Transitioning Clients. Financial measures presented for
Anthem and each of the Transitioning Clients for the year ended
December 31, 2015 represent information reported through certain
financial reporting systems, which were replaced in 2016. As a
result, management's estimates and allocation methodologies for
determining such measures for 2015 may differ from those used in
determining the comparable measures presented for the year ended
December 31, 2016, and the quarter ended March 31, 2017.
|
|
(2)
Consolidated revenues and Anthem revenues include intangible
amortization related to the customer contract with Anthem of $200.5
million and $95.1 million for the year-ended December 31, 2016 and
2015, respectively.
|
|
(3) EBITDA,
Adjusted EBITDA, EBITDA per adjusted claim, adjusted EBITDA per
adjusted claim, EBITDA less taxes, adjusted EBITDA less taxes,
EBITDA less taxes per adjusted claim and adjusted EBITDA less taxes
per adjusted claim are non-GAAP financial measures. For a
discussion of the financial measures presented herein that are not
calculated or presented in accordance with U.S. generally accepted
accounting principles ("GAAP"), see "Supplemental Information
Regarding Non-GAAP Financial Measures" above.
|
|
(4) EBITDA less
taxes and adjusted EBITDA less taxes and EBITDA less taxes per
adjusted claim and adjusted EBITDA less taxes per adjusted claim
provide investors additional measures of the contribution of the
Anthem business after tax. EBITDA less taxes and adjusted
EBITDA less taxes is calculated using the Company's adjusted
effective income tax rate for the applicable period,
respectively.
|
|
(5)
Consolidated revenues and Anthem revenues include intangible
amortization related to the customer contract with Anthem of $55.4
million and $34.3 million for the three months ended March 31, 2017
and 2016, respectively.
|
|
(6) Includes home
delivery, specialty and other including: (i) drugs
distributed through patient assistance programs, (ii) drugs
distributed to clients of other PBMs under limited distribution
contracts with pharmaceutical manufacturers and (iii) Freedom
Fertility claims.
|
|
(7) 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. See Footnotes to Press Release - Schedule A
below.
|
|
(8) 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 ($35.0
million net of tax) and $34.3 million ($21.6 million net of tax) is
included as a reduction to revenue for the three months ended March
31, 2017 and 2016, 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 and $10.5 million of
revenue amortization recognized for the three months ended March
31, 2017 and 2016, respectively and an additional $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 March 31, 2017 and 2016, 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 $299.1
million ($189.2 million net of tax) and $399.6 million ($251.4
million net of tax) for the three months ended March 31, 2017 and
2016, 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.
|
|
(9) Provision
for income taxes includes discrete tax charges of $29.9 million
and discrete tax benefits of $19.7 million for the three
months ended March 31, 2017 and 2016, respectively and includes
discrete tax benefits of $633.9 million and $79.2 million for the
year ended December 31, 2016 and 2015, respectively. The net
discrete tax items relate primarily to changes in unrecognized tax
benefits.
|
|
(10)
Transaction and integration costs include those costs directly
related to the acquisition of Medco Health Solutions, Inc.
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
$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.
Costs of $41.2
million ($25.9 million net of tax) for the year ended December 31,
2016 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.
A 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.
|
|
(11) 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 three months ended March
31, 2016.
|
|
(12) 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.
|
Footnotes to
Press Release: Schedule A
|
Express
Scripts Holding Company Unaudited 2016 Claims
Recast
|
As previously
reported in our February 14, 2017 press release and explained in
footnote (7), we changed our methodology for calculating network
claims retrospectively for 2016 and 2015. 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(6)
|
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(7)
|
234.7
|
32.8
|
267.5
|
|
229.4
|
34.0
|
263.4
|
|
224.5
|
34.9
|
259.4
|
|
Adjusted home
delivery and specialty(7)
|
88.8
|
-
|
88.8
|
|
85.9
|
-
|
85.9
|
|
87.7
|
-
|
87.7
|
|
Total
adjusted claims(7)
|
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(6)
|
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(7)
|
219.1
|
33.0
|
252.1
|
|
232.9
|
35.6
|
268.5
|
|
240.8
|
36.9
|
277.7
|
|
Adjusted home
delivery and specialty(7)
|
88.5
|
-
|
88.5
|
|
88.3
|
-
|
88.3
|
|
87.5
|
-
|
87.5
|
|
Total
adjusted claims(7)
|
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-2017-first-quarter-results-provides-update-on-anthem-relationship-and-visibility-into-core-pbm-business-excluding-contribution-from-anthem-coventry-and-catamaran-300444525.html
SOURCE Express Scripts Holding Company