Press Releases

Express Scripts Announces 2016 Third Quarter Results

ST. LOUIS, Oct. 25, 2016 /PRNewswire/ -- Express Scripts Holding Company (Nasdaq: ESRX) announced 2016 third quarter net income of $722.9 million, or $1.15 per diluted share.  2016 third quarter adjusted earnings per diluted share, as detailed in Table 4, was $1.74.1

"The healthcare industry demands that we stay ahead of future trends and deliver solutions to emerging issues facing today's market," said Tim Wentworth, CEO and President.  "Doing so deepens the trusted relationships we have built with our clients, resulting in another strong year in terms of client retention and new sales."

Third Quarter 2016 Review  

The following compares third quarter 2016 and 2015 operating results:

  • Adjusted claims of 312.2 million, down 5%, largely due to faster roll-off of the Coventry business – See Table 1
  • Net income of $722.9 million, up 9%
  • Diluted earnings per share of $1.15, up 19%
  • EBITDA of $1,948.1 million, up 8% from 2015 adjusted EBITDA – See Table 32
  • EBITDA per adjusted claim of $6.24, up 13% from 2015 adjusted EBITDA per adjusted claim – See Table 32 
  • Adjusted net income of $1,091.6 million, up 10% – See Tables 5 and 5A
  • Adjusted diluted earnings per share of $1.74, up 20% - See Table 4
  • Net cash flow provided by operating activities of $1,480.4 million, up 87%

In July 2016, the Company issued senior notes consisting of: $1,000.0 million aggregate principal amount of 3.000% senior notes due July 2023, $1,500.0 million aggregate principal amount of 3.400% senior notes due March 2027 and $1,500.0 million aggregate principal amount of 4.800% senior notes due July 2046.  The Company used the net proceeds to repay a portion of its 2015 two-year term loan, to complete a tender offer for and follow-on redemption of its 2.650% senior notes due February 2017, to complete a tender offer for a portion of each of the 7.125% senior notes due March 2018 issued by Medco Health Solutions, Inc., the 7.250% senior notes due June 2019 issued by Express Scripts, Inc. and the Company's 6.125% senior notes due November 2041 and for other general corporate purposes.  Total cash payments related to the above, excluding accrued interest, were $3,919.6 million, which included approximately $136.0 million of repayment costs. 

In August 2016, the Company settled the accelerated share repurchase ("ASR") program announced in February 2016, and received 6.2 million additional shares, resulting in a total of 38.3 million shares repurchased under the program.  Including the 6.2 million shares received under the 2016 ASR program, the Company repurchased a total of 14.1 million shares under our share repurchase program for $1,132.5 million during the quarter.

2016 Guidance

The Company narrowed its 2016 earnings per diluted share guidance from a range of $4.45 to $4.55 to a range of $4.47 to $4.53, which maintains the mid-point of $4.50 and represents growth of 26% to 27% over 2015.  The Company narrowed its 2016 adjusted earnings per diluted share guidance from a range of $6.33 to $6.43 to a range of $6.36 to $6.42, which raises the mid-point to $6.39 and represents growth of 15% to 16% over 2015.  Additional details on this guidance can be found in Table 6 including items excluded from the adjusted earnings per diluted share guidance range.

The Company expects total adjusted claims for the fourth quarter of 2016 to be in the range of 314 million to 329 million.  Diluted earnings per share for the fourth quarter of 2016 is expected to be in the range of $1.38 to $1.44, which represents growth of 22% to 27% over the fourth quarter of 2015.  Adjusted diluted earnings per share for the fourth quarter of 2016 is estimated to be in the range of $1.84 to $1.90, which represents growth of 18% to 22% over the fourth quarter of 2015. Additional details on this guidance can be found in Table 6 including items excluded from the adjusted earnings per diluted share guidance range.

2016 Business Outlook

The Company is increasing its expected 2017 retention rate for the 2016 selling season to a range of 97% - 98% from a range of 96% - 98%, excluding the impact of the remaining Coventry business rolling off in 2017, representing approximately 1% of claims.  

About Express Scripts

Express Scripts puts medicine within reach of tens of millions of people by aligning with plan sponsors, taking bold action and delivering patient-centered care to make better health more affordable and accessible.

Headquartered in St. Louis, Express Scripts provides integrated pharmacy benefit management services, including network-pharmacy claims processing, home delivery pharmacy care, specialty pharmacy care, specialty benefit management, benefit-design consultation, drug utilization review, formulary management, and medical and drug data analysis services.  Express Scripts also distributes a full range of biopharmaceutical products and provides extensive cost-management and patient-care services.

For more information, visit Lab.Express-Scripts.com or follow @ExpressScripts on Twitter.

SAFE HARBOR STATEMENT

This press release contains forward-looking statements, including, but not limited to, our 2016 guidance and our statements related to the Company's plans, objectives, expectations (financial and otherwise) or intentions. Actual results may differ materially from those projected or suggested in any forward-looking statements.  Factors that may impact these forward-looking statements can be found in Management's Discussion and Analysis of Financial Condition and Results of Operations and Item 1A – "Risk Factors" in the Company's Annual Report on Form 10-K filed with the SEC on February 16, 2016.  A copy of this document can be found at the Investor Information section of Express Scripts' web site at http://www.express-scripts.com/corporate.

We do not undertake any obligation to release publicly any revisions to such forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

1 All net income, earnings per share, EBITDA, adjusted EBITDA, EBITDA per adjusted claim, adjusted EBITDA per adjusted claim, adjusted net income and adjusted earnings per share amounts are presented as attributable to Express Scripts, excluding non-controlling interest representing the share allocated to members of our consolidated affiliates.   
2 2015 Adjusted EBITDA includes certain adjustments to 2015 EBITDA.  No such adjustments have been made to 2016 EBITDA.  See Table 3.    

 

 EXPRESS SCRIPTS HOLDING COMPANY 

 Unaudited Consolidated Statement of Operations 










 Three Months Ended
September 30, 


 Nine Months Ended
September 30, 

  (in millions, except per share data) 

2016


2015


2016


2015









Revenues(*)

$ 25,410.1


$ 25,222.6


$ 75,424.2


$ 75,576.4

Cost of revenues(*)

23,136.0


23,049.1


69,141.9


69,437.7

    Gross profit 

2,274.1


2,173.5


6,282.3


6,138.7

Selling, general and administrative

858.1


1,007.3


2,669.2


3,013.2

Operating income

1,416.0


1,166.2


3,613.1


3,125.5

Other (expense) income:








    Interest income and other 

8.3


7.8


27.4


19.1

    Interest expense and other 

(273.4)


(128.4)


(548.8)


(377.1)


(265.1)


(120.6)


(521.4)


(358.0)

Income before income taxes

1,150.9


1,045.6


3,091.7


2,767.5

Provision for income taxes

422.4


378.2


1,103.9


1,046.9

Net income 

728.5


667.4


1,987.8


1,720.6

Less: Net income attributable to non-controlling interest

5.6


5.7


18.1


17.7

Net income attributable to Express Scripts

$      722.9


$      661.7


$   1,969.7


$   1,702.9









Weighted-average number of common shares outstanding during the period: 








    Basic 

622.6


676.3


632.9


693.1

    Diluted 

627.1


682.2


637.4


699.5









Earnings per share attributable to Express Scripts:








     Basic

$        1.16


$        0.98


$        3.11


$        2.46

     Diluted

$        1.15


$        0.97


$        3.09


$        2.43


(*) Includes retail pharmacy co-payments of $2,008.5 million and $2,161.5 million for the three months ended September 30, 2016 and 2015, respectively, and $6,685.9 million and $7,118.2 million for the nine months ended September 30, 2016 and 2015, respectively.

 

 EXPRESS SCRIPTS HOLDING COMPANY 

 Unaudited Consolidated Balance Sheet 






 September 30,  


 December 31,  

 (in millions) 

2016


2015

 Assets 




 Current assets: 




 Cash and cash equivalents 

$             2,304.7


$            3,186.3

 Receivables, net 

6,967.0


6,721.3

 Inventories 

1,677.4


2,023.1

 Prepaid expenses and other current assets 

173.9


128.8

    Total current assets 

11,123.0


12,059.5

 Property and equipment, net 

1,255.5


1,291.3

 Goodwill 

29,278.3


29,277.3

 Other intangible assets, net 

9,099.1


10,469.7

 Other assets 

153.4


145.5

    Total assets 

$           50,909.3


$          53,243.3





 Liabilities and stockholders' equity 




 Current liabilities: 




 Claims and rebates payable 

$             8,717.1


$            9,397.7

 Accounts payable 

3,791.1


3,451.8

 Accrued expenses 

2,286.3


2,659.4

 Current maturities of long-term debt 

1,184.0


1,646.4

    Total current liabilities 

15,978.5


17,155.3

 Long-term debt 

14,924.5


13,946.3

 Deferred taxes 

3,734.8


4,069.8

 Other liabilities 

662.5


691.4

    Total liabilities 

35,300.3


35,862.8





 Stockholders' equity: 




 Preferred stock, 15.0 shares authorized, $0.01 par value per share; no shares issued and outstanding 

-


-

 Common stock, 2,985.0 shares authorized, $0.01 par value; shares issued: 856.8 and 854.5, respectively; shares outstanding: 616.6 and 676.9, respectively 

8.6


8.5

 Additional paid-in capital 

23,175.7


22,204.7

 Accumulated other comprehensive loss 

(9.6)


(14.0)

 Retained earnings 

10,366.5


8,396.8


33,541.2


30,596.0





 Common stock in treasury at cost, 240.2 and 177.6 shares, respectively  

(17,940.9)


(13,223.2)

    Total Express Scripts stockholders' equity 

15,600.3


17,372.8

 Non-controlling interest 

8.7


7.7

    Total stockholders' equity 

15,609.0


17,380.5

    Total liabilities and stockholders' equity 

$           50,909.3


$          53,243.3

 

 EXPRESS SCRIPTS HOLDING COMPANY 

 Unaudited Consolidated Statement of Cash Flows 


 Nine Months Ended
September 30, 

 (in millions) 

2016


2015





 Cash flows from operating activities: 




 Net income 

$ 1,987.8


$ 1,720.6

 Adjustments to reconcile net income to net cash provided by operating activities: 




 Depreciation and amortization 

1,611.2


1,727.7

 Deferred income taxes 

(334.0)


(270.5)

 Employee stock-based compensation expense 

81.9


86.8

 Other, net 

(19.1)


(45.3)

 Changes in operating assets and liabilities:  




 Accounts receivable 

(270.7)


(1,468.7)

 Inventories 

345.7


382.7

 Other current and noncurrent assets 

(43.5)


(139.7)

 Claims and rebates payable 

(680.7)


250.4

 Accounts payable 

348.0


172.2

 Accrued expenses 

(327.4)


(425.0)

 Other current and noncurrent liabilities 

(28.7)


(16.9)

 Net cash flows provided by operating activities 

2,670.5


1,974.3





 Cash flows from investing activities: 




 Purchases of property and equipment 

(237.6)


(177.1)

 Other, net 

(7.6)


19.2

 Net cash used in investing activities 

(245.2)


(157.9)





 Cash flows from financing activities: 




 Proceeds from long-term debt, net of discounts 

5,986.8


5,500.0

 Repayment of long-term debt 

(5,395.0)


(3,353.3)

 Treasury stock acquired 

(3,892.7)


(5,500.0)

 Net proceeds from employee stock plans 

56.0


155.0

 Excess tax benefit relating to employee stock-based compensation 

11.1


53.0

 Other, net 

(75.7)


(58.8)

 Net cash used in financing activities 

(3,309.5)


(3,204.1)





 Effect of foreign currency translation adjustment 

2.6


(6.7)





 Net decrease in cash and cash equivalents 

(881.6)


(1,394.4)

 Cash and cash equivalents at beginning of period 

3,186.3


1,832.6

 Cash and cash equivalents at end of period 

$ 2,304.7


$    438.2

 

 Table 1 

  Express Scripts Holding Company Unaudited Consolidated Selected Information 

 (in millions) 










 Three Months Ended
September 30,  


 Nine Months Ended
September 30,  


2016


2015


2016


2015

Claims Volume








Network

217.0


232.8


664.3


680.1

Home delivery and specialty(1)

30.0


30.0


89.8


90.4

   Total claims 

247.0


262.8


754.1


770.5









Adjusted network

224.5


240.8


688.6


692.8

Adjusted home delivery and specialty

87.7


87.5


262.4


264.3

   Total adjusted claims(2)

312.2


328.3


951.0


957.1









 Depreciation and Amortization (D&A):  








 Revenue amortization(3)

$   55.4


$   23.8


$    145.1


$      71.4

 Cost of revenues depreciation 

27.5


25.2


85.5


101.7

 Selling, general and administrative depreciation 

46.5


124.8


155.0


327.7

 Selling, general and administrative amortization(3)

408.3


409.0


1,225.6


1,226.9

      Total D&A  

$ 537.7


$ 582.8


$ 1,611.2


$ 1,727.7









 Generic Fill Rate* 








 Network 

86.0%


85.1%


86.1%


85.2%

 Home delivery 

81.3%


80.3%


80.6%


79.6%

 Overall 

85.4%


84.5%


85.4%


84.5%









 Note: See Appendix for Footnotes 
















*The home delivery generic fill rate is currently lower than the network generic fill rate as fewer generic substitutions are available among maintenance medications (e.g., therapies for chronic conditions) commonly dispensed from home delivery pharmacies compared to acute medications, which are primarily dispensed by pharmacies in our retail networks.

 

Table 2

Express Scripts Holding Company Unaudited Adjusted Gross Profit and Adjusted SG&A Reconciliation

Provided below are reconciliations of Adjusted gross profit and Adjusted selling, general and administrative expenses, which are non-GAAP measures, to Gross profit and Selling,
general and administrative expenses, respectively, which are the most directly comparable measures calculated in accordance with U.S. generally accepted accounting principles ("GAAP").

(in millions)










 Three Months Ended
September 30,  


 Nine Months Ended
September 30,  


2016


2015


2016


2015

Gross profit, as reported

$ 2,274.1


$ 2,173.5


$ 6,282.3


$ 6,138.7

Amortization of intangible assets (3)

55.4


23.8


145.1


71.4

Transaction and integration costs (4)

-


45.2


-


140.6

Adjusted gross profit

$ 2,329.5


$ 2,242.5


$ 6,427.4


$ 6,350.7









Selling, general and administrative, as reported

$    858.1


$ 1,007.3


$ 2,669.2


$ 3,013.2

Amortization of intangible assets (3)

408.3


409.0


1,225.6


1,226.9

Transaction and integration costs (4)

-


68.2


-


197.2

Legal settlement (5)

-


-


-


60.0

Adjusted selling, general and administrative

$    449.8


$    530.1


$ 1,443.6


$ 1,529.1









 Note: See Appendix for Footnotes 
















Adjusted gross profit and adjusted selling, general and administrative expenses are non-GAAP financial measures and should be considered in addition to, but not as a substitute for, or superior to, financial measures prepared in accordance with GAAP.  Management believes that adjusted gross profit and adjusted selling, general and administrative expenses, considered along with the corresponding GAAP measures, provide management and investors with additional information about the impact of certain non-operating expenses which is useful for comparison of our gross profit and selling, general and administrative expenses to those of other companies.  Management also believes that these measures are useful in assessing period-to-period performance trends.

 

 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
September 30,   


 Nine Months Ended
September 30,  


2016


2015


2016


2015

Net income attributable to Express Scripts, as reported

$    722.9


$    661.7


$ 1,969.7


$ 1,702.9

  Provision for income taxes (6)

422.4


378.2


1,103.9


1,046.9

  Depreciation and amortization (3)*

537.7


582.8


1,611.2


1,727.7

  Other expense, net

265.1


120.6


521.4


358.0

EBITDA attributable to Express Scripts, as reported

1,948.1


1,743.3


5,206.2


4,835.5

Adjustments to EBITDA








Transaction and integration costs (4)*

-


65.0


-


219.4

Legal settlement (5)

-


-


-


60.0

EBITDA/Adjusted EBITDA attributable to Express Scripts

$ 1,948.1


$ 1,808.3


$ 5,206.2


$ 5,114.9









Total adjusted claims(2)

312.2


328.3


951.0


957.1









EBITDA/Adjusted EBITDA attributable to Express Scripts, per adjusted claim

$      6.24


$      5.51


$      5.47


$      5.34










 Note: See Appendix for Footnotes 


















EBITDA and adjusted EBITDA are non-GAAP financial measures and should be considered in addition to, but not as a substitute for, or superior to, financial measures prepared in accordance with GAAP.  EBITDA is a widely accepted indicator of a company's ability to service indebtedness and is frequently used to evaluate a company's performance.  Adjusted EBITDA is EBITDA excluding transaction and integration costs and a legal settlement as these charges are not considered an indicator of ongoing company performance.  Management believes that EBITDA and Adjusted EBITDA, considered along with the corresponding GAAP measure, provide management and investors with useful information about the earnings impact of certain non-operating expenses which is useful for comparison of our earnings to those of other companies.  We believe that these measures are also useful in assessing period-to-period performance trends.  In addition, our definition and calculation of EBITDA and Adjusted EBITDA may not be comparable to that used by other companies.










EBITDA per adjusted claim and Adjusted EBITDA per adjusted claim are calculated by dividing EBITDA and Adjusted EBITDA, as applicable, by the adjusted claim volume for the period.  This measure is used as an indicator of EBITDA and Adjusted EBITDA, as applicable, performance on a per unit basis.  EBITDA and Adjusted EBITDA, as applicable, and, as a result, EBITDA and Adjusted EBITDA, as applicable, per adjusted claim, are each affected by the changes in claims volume between retail and home delivery and the relative representation of brand-name, generic and specialty pharmacy drugs, as well as the level of efficiency in the business.


*  Depreciation and amortization for the three and nine months ended September 30, 2015 presented above includes $48.4 million and $118.4 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
September 30,  


 Nine Months Ended
September 30,  


2016


2015


2016


2015


 (per diluted share) 

Diluted EPS attributable to Express Scripts, as reported

$ 1.15


$ 0.97


$ 3.09


$ 2.43









Excluding items indicated: 








Transaction and integration costs (4)

-


0.10


-


0.30

Legal settlement (5)

-


-


-


0.05

Debt redemption costs (7)

0.12


-


0.13


0.01

Discrete tax items (6)

-


(0.02)


(0.05)


0.02

Amortization of intangible assets (3)

0.47


0.40


1.35


1.16









Diluted EPS attributable to Express Scripts, adjusted

$ 1.74


$ 1.45


$ 4.52


$ 3.97









 Note: See Appendix for Footnotes 
















Adjusted diluted EPS attributable to Express Scripts is a non-GAAP financial measure and should be considered in addition to, but not as a substitute for, or superior to, financial measures prepared in accordance with GAAP.  Management believes that adjusted diluted EPS attributable to Express Scripts, considered along with the corresponding GAAP measure, provides management and investors with useful information about the earnings impact of certain non-operating expenses which is useful for comparison of our earnings to those of other companies.  We believe that these measures are also useful in assessing period-to-period performance trends. 

 

 Table 5 

 Express Scripts Holding Company Unaudited Adjusted Net Income and Adjusted Effective Income Tax Rate Reconciliation 

 Provided below are reconciliations of Income before income taxes attributable to Express Scripts, as adjusted, and Adjusted net income attributable to Express Scripts, which are non-GAAP measures, to Income before income taxes, which is the most directly comparable measure calculated in accordance with GAAP. 

 (in millions) 














 Three Months Ended
September 30, 2016 


 Nine Months Ended
September 30, 2016 


Income
before
income
taxes


Provision
for income
taxes


Effective
income tax
rate


Income
before
income
taxes


Provision
for income
taxes


Effective
income tax
rate

Income before income taxes, as reported

$ 1,150.9


$     422.4




$ 3,091.7


$  1,103.9



Net income attributable to non-controlling interest

(5.6)


-




(18.1)


-



Income before income taxes attributable to Express Scripts

1,145.3


422.4


36.9%


3,073.6


1,103.9


35.9%













Excluding items indicated: 












Debt redemption costs (7)

125.9


46.7




135.6


50.3



Discrete tax items(6)

-


2.2




-


35.7



Amortization of intangible assets(3)

463.7


172.0




1,370.7


508.3















Income before income taxes attributable to Express Scripts, as adjusted

$ 1,734.9


$     643.3


37.1%


$ 4,579.9


$  1,698.2


37.1%













Adjusted net income attributable to Express Scripts*

$ 1,091.6






$ 2,881.7

















 Note: See Appendix for Footnotes 
























Adjusted net income attributable to Express Scripts is a non-GAAP financial measure and should be considered in addition to, but not as a substitute for, or superior to, financial measures prepared in accordance with GAAP.  Management believes that adjusted net income attributable to Express Scripts, considered along with the corresponding GAAP measure, provides management and investors with useful information about the earnings impact of certain non-operating expenses which is useful for comparison of our earnings to those of other companies.  We believe that these measures are also useful in assessing period-to-period performance trends. 













* Adjusted net income attributable to Express Scripts is income before income taxes attributable to Express Scripts, as adjusted, excluding provision for income taxes of $643.3 million and $1,698.2 million for the three and nine months ended September 30, 2016, respectively.

 

 Table 5A 

 Express Scripts Holding Company Unaudited Adjusted Net Income and Adjusted Effective Income Tax Rate Reconciliation 

 Provided below are reconciliations of Income before income taxes attributable to Express Scripts, as adjusted, and Adjusted net income attributable to Express Scripts, which are non-GAAP measures, to Income before income taxes, which is the most directly comparable measure calculated in accordance with GAAP. 

 (in millions) 














 Three Months Ended
September 30, 2015 


 Nine Months Ended
September 30, 2015 


Income
before
income
taxes


Provision
for income
taxes


Effective
income tax
rate


Income
before
income
taxes


Provision
for income
taxes


Effective
income tax
rate

Income before income taxes, as reported

$ 1,045.6


$     378.2




$ 2,767.5


$  1,046.9



Net income attributable to non-controlling interest

(5.7)


-




(17.7)


-



Income before income taxes attributable to Express Scripts

1,039.9


378.2


36.4%


2,749.8


1,046.9


38.1%













Excluding items indicated: 












Transaction and integration costs(4)

113.4


42.6




337.8


127.0



Legal Settlement(5)

-


-




60.0


22.5



Debt redemption costs (7)

-


-




9.2


3.5



Discrete tax items(6)

-


12.7




-


(13.0)



Amortization of intangible assets(3)

432.8


162.8




1,298.3


488.2















Income before income taxes attributable to Express Scripts, as adjusted

$ 1,586.1


$     596.3


37.6%


$ 4,455.1


$  1,675.1


37.6%













Adjusted net income attributable to Express Scripts

$    989.8






$ 2,780.0

















 Note: See Appendix for Footnotes 
























Adjusted net income attributable to Express Scripts is a non-GAAP financial measure and should be considered in addition to, but not as a substitute for, or superior to, financial measures prepared in accordance with GAAP.  Management believes that adjusted net income attributable to Express Scripts, considered along with the corresponding GAAP measure, provides management and investors with useful information about the earnings impact of certain non-operating expenses which is useful for comparison of our earnings to those of other companies.  We believe that these measures are also useful in assessing period-to-period performance trends. 













* Adjusted net income attributable to Express Scripts is income before income taxes attributable to Express Scripts, as adjusted, excluding provision for income taxes of $596.3 million and $1,675.1 million for the three and nine months ended September 30, 2015, respectively.

 





 Table 6 

 Express Scripts Holding Company Unaudited 2016 Guidance Information 






Estimated
Year Ending
December 31, 2016 


Estimated
Year Ending
December 31, 2016 

  (in millions, except per share and per claim data) 

 Current Guidance 


 Previous Guidance 

Diluted EPS attributable to Express Scripts*

$4.47 to $4.53


$4.45 to $4.55

Year over year growth 

26%-27%


25%-28%





Adjusted Diluted EPS attributable to Express Scripts**

$6.36 to $6.42


$6.33 to $6.43

Year over year growth 

15%-16%


14%-16%





Total adjusted claims

1,265 to 1,280


1,260 to 1,290





Selling, general and administrative

$3,535 to $3,605


$3,520 to $3,640





Adjusted selling, general and administrative***

$1,905 to $1,965


$1,905 to $1,985





Operating income

$5,105 to $5,180


$5,135 to $5,250





EBITDA attributable to Express Scripts****

$7,230 to $7,330


$7,230 to $7,430





Diluted weighted average shares outstanding during the period

630 to 635


632 to 640





Net cash flow provided by operating activities

$4,600 to $5,100


$4,600 to $5,100










Estimated
 Three Months Ending
 December 31, 2016 



  (in millions, except per share and per claim data) 

 Current Guidance 



Diluted EPS attributable to Express Scripts*

$1.38 to $1.44



Year over year growth 

22%-27%







Adjusted Diluted EPS attributable to Express Scripts**

$1.84 to $1.90



Year over year growth 

18%-22%







Total adjusted claims

314 to 329




*Diluted EPS attributable to Express Scripts excludes the impact of future discrete tax items which cannot be forecast without unreasonable effort, and accordingly, the Company is unable to provide the probable significance of the unavailable information. When the Company reports results of operations for subsequent periods, Diluted EPS attributable to Express Scripts is expected to reflect the impact of realized discrete tax items which is not included in current guidance.  Estimated 2016 Diluted EPS attributable to Express Scripts reflects the impact from discrete tax benefits per diluted share of $0.05 realized during the nine months ended September 30, 2016 (See Table 4).  


**Adjusted Diluted EPS attributable to Express Scripts excludes adjustments for future discrete tax items and certain other income and expenses associated with the operation of the business.  These GAAP items cannot be reasonably estimated due to the inherent difficulty of forecasting the timing and amount of reconciling items, including discrete tax items, that would impact diluted earnings per share, the most directly comparable forward-looking GAAP financial measure, and accordingly, the Company is unable to provide the probable significance of the unavailable information.  Estimated 2016 Adjusted Diluted EPS attributable to Express Scripts excludes amortization of intangible assets per diluted share of approximately $1.81.  Estimated three months ending December 31, 2016 Adjusted Diluted EPS attributable to Express Scripts excludes amortization of intangible assets per diluted share of approximately $0.46.    


***Estimated 2016 Adjusted selling, general and administrative is selling, general and administrative as reported under GAAP, excluding amortization of intangible assets in the range of $1,630 million to $1,640 million. 


****The Company is unable to reasonably estimate the GAAP items not included in EBITDA attributable to Express Scripts and the information is not available without unreasonable effort.  This is due to the inherent difficulty of forecasting the timing and amount of reconciling items, including discrete tax items, that would impact net income, the most directly comparable GAAP financial measure, and accordingly, the Company is unable to provide the probable significance of the unavailable information.  As such, the Company is unable to provide a reconciliation to Net Income, which is the most directly comparable GAAP measure, and therefore, is providing instead a reconciliation to Operating Income.  Estimated 2016 EBITDA attributable to Express Scripts is estimated 2016 Operating Income excluding depreciation and amortization in the range of $315 million to $335 million, selling, general and administrative amortization of intangible assets in the range of $1,630 million to $1,640 million and revenue amortization of intangible assets of approximately $200 million and including net income attributable to non-controlling interest of $20 million to $25 million. 

 Appendix 

 Footnotes 


(1) Includes home delivery, specialty and other including:  (a) drugs distributed through patient assistance programs, (b) drugs distributed to clients of other PBMs under limited distribution contracts with pharmaceutical manufacturers and (c) Freedom Fertility claims. 


(2) Total adjusted claims (a) includes an adjustment to certain network claims to reflect an approximate 30-day equivalent fill and (b) reflects home delivery claims multiplied by 3, as home delivery claims typically cover a time period 3 times longer than network claims. 


(3) Amortization of intangible assets includes the following items:


Amortization of legacy Express Scripts, Inc. ("ESI") intangible assets include amounts in both revenues and selling, general and administrative expense.


Revenue amortization is related to the customer contract with Anthem which commenced upon closing of the NextRx acquisition in 2009.  Amortization of intangibles that arises in connection with consideration given to a customer by a vendor is characterized as a reduction of revenues.  Intangible amortization of $55.4 million ($34.9 million net of tax) and $23.8 million ($14.9 million net of tax) is included as a reduction to revenue for the three months ended September 30, 2016 and 2015, respectively.   Intangible amortization of $145.1 million ($91.3 million net of tax) and $71.4 million ($44.6 million net of tax) is included as a reduction to revenue for the nine months ended September 30, 2016 and 2015, respectively.  The Company's 10-year agreement with Anthem under which we provide pharmacy benefit management services to Anthem and its designated affiliates was previously amortized using a modified pattern of benefit method over an estimated useful life of 15 years.  Beginning in March 2016, we began amortizing our agreement with Anthem over the remaining term of the contract (i.e., using a modified pattern of benefit over an estimated useful life of 10 years from the time the agreement was executed in 2009), which resulted in an additional $31.7 million of revenue amortization recognized for the three months ended September 30, 2016 and $73.9 million of revenue amortization recognized for the nine months ended September 30, 2016.


Other legacy ESI intangible amortization of $9.4 million ($5.9 million net of tax) and $9.5 million ($5.8 million net of tax) for the three months ended September 30, 2016 and 2015, respectively, is included in selling, general and administrative expense.  Other legacy ESI intangible amortization of $28.3 million ($17.8 million net of tax) and $28.3 million ($17.6 million net of tax) for the nine months ended September 30, 2016 and 2015, respectively, is included in selling, general and administrative expense.  


Amortization of intangible assets related to the acquisition of Medco of $398.9 million ($250.9 million net of tax) and $399.5 million ($249.3 million net of tax) for the three months ended September 30, 2016 and 2015, respectively, is included in selling, general and administrative expense.  Amortization of intangible assets related to the acquisition of Medco of $1,197.3 million ($753.3 million net of tax) and $1,198.6 million ($747.9 million net of tax) for the nine months ended September 30, 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. 


Costs of $45.2 million ($28.2 million net of tax) are primarily composed of integration-related activities, and are included in gross profit for the three months ended September 30, 2015.  Costs of $140.6 million ($87.7 million net of tax) are primarily composed of integration-related activities, and are included in gross profit for the nine months ended September 30, 2015.    


Costs of $68.2 million ($42.6 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 September 30, 2015.  Costs of $197.2 million ($123.1 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 nine months ended September 30, 2015.  


(5)  Charge related to a legal settlement of $60.0 million ($37.5 million net of tax) is included in selling, general and administrative expense for the nine months ended September 30, 2015.


(6) Provision for income taxes includes discrete tax benefits of $2.2 million and $35.7 million for the three and nine months ended September 30, 2016, respectively, and discrete tax benefits of $12.7 million and discrete tax charges of $13.0 million for the three and nine months ended September 30 2015, respectively.  The 2016 net discrete tax benefits  and 2015 net discrete tax charges relate primarily to changes in unrecognized tax benefits.


(7) 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 $125.9 million ($79.2 million net of tax) and $135.6 million ($85.3 million net of tax) and are included in interest expense for the three and nine months ended September 30, 2016, respectively.  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 nine months ended September 30, 2015. 

 

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/express-scripts-announces-2016-third-quarter-results-300351012.html

SOURCE Express Scripts Holding Company

Eric Slusser, Chief Financial Officer, Ben Bier, Vice President, Investor Relations, (314) 810-3115, investor.relations@express-scripts.com

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