ST. LOUIS, Oct. 31, 2018 /PRNewswire/ -- Express
Scripts Holding Company (Nasdaq: ESRX) announced consolidated 2018
third quarter net income of $1,071.6
million or $1.89 per diluted
share. Consolidated 2018 third quarter adjusted earnings per
diluted share were $2.43, which
represents growth of 28% over consolidated 2017 third quarter
adjusted earnings per diluted share./1
"Our momentum is strong: we achieve industry-leading drug trend,
specialized care for patients and breakthrough pharmacy and
healthcare solutions, which have helped us achieve strong client
retention and increased interest from prospects. Across the board
we are driving strong results, as we did in the third quarter,"
said Tim Wentworth, President and
CEO. "As we look ahead to our planned combination with Cigna,
we will offer greater affordability and differentiation through our
relentless focus on patient care, cost containment and continuous
innovation while delivering quality health outcomes for our
patients and clients."
Business Outlook
The Company now expects its 2019 retention rate for the 2018
selling season to exceed 98%, an all-time high/2 for the
Company. "We continue to earn the trust of those we serve through
our ability to predict marketplace trends, create advantage for our
clients, and develop innovative solutions that generate greater
value. With trust comes the ability to help even more people
achieve better outcomes. Now, more than ever, prospects and clients
alike need more innovation, service and care, and we are well
positioned to deliver. We are retaining our clients, winning
prospects, and enrolling clients in more solutions and, as a
result, expect to grow core business adjusted claims by 2% to 3% in
2019. From taking on the toughest challenges to uncovering
innovative opportunities, Express Scripts is championing better
healthcare every day," said Wentworth.
On March 8, 2018, the Company
entered into an Agreement and Plan of Merger (the "Merger
Agreement") with Cigna Corporation ("Cigna") and certain
subsidiaries of Cigna, whereby Cigna will acquire Express Scripts
in a cash and stock transaction. On August 24, 2018, at its special meeting of
stockholders, Express Scripts' stockholders approved the adoption
of the Merger Agreement. On September 17,
2018, the U.S. Department of Justice cleared the proposed
merger with Cigna. The merger is expected to be completed by
December 31, 2018. Until the closing,
we continue to operate as an independent company.
Third Quarter 2018
Overview/3
(in millions,
except per claim data)
|
Q3
2018
|
Q3 2018 vs.
Q3 2017 Change
|
(Consolidated,
as reported)
|
Attributable to
Transitioning Clients1
|
Core
(Excluding
Transitioning Clients)
|
Excluding
Transitioning
Clients
|
Adjusted
claims
|
334.6
|
54.5
|
280.1
|
(2.2%)
|
Revenues1
|
25,563.2
|
4,492.9
|
21,070.3
|
5.3%
|
Net Income
|
1,071.6
|
N/A
|
N/A
|
N/A
|
Adjusted
EBITDA
|
2,037.7
|
643.5
|
1,394.2
|
4.1%
|
Adjusted EBITDA per
adjusted claim
|
$6.09
|
N/A
|
$4.98
|
6.4%
|
|
See "Footnotes to
Press Release," below. See Table 6.
|
Core Business Third Quarter 2018 Review/3
During the third quarter, the Company generated $1,394.2 million in core business adjusted
EBITDA, representing growth of 4.1% over the comparable quarter
2017 core business adjusted EBITDA. Growth in the core came
from product upsells and supply chain initiatives, including the
performance of the Company's SafeguardRx suite of solutions, as
well as, contributions from eviCore and Accredo, partially offset
by lower claims volume and delays in specialty generic
launches.
Consolidated Third Quarter 2018 Review/3
The following compares consolidated third quarter 2018 and 2017
operating results:
- Adjusted claims of 334.6 million, down 2.6%
- GAAP net income of $1,071.6
million, up 27.3%
- GAAP earnings per diluted share of $1.89, up 29.5%
- Adjusted EBITDA of $2,037.7
million, up 4.6%
- Adjusted net income of $1,380.7
million, up 26.3%
- Adjusted earnings per diluted share of $2.43, up 27.9%
- Net cash flow provided by operating activities of $759.4 million, down 60%
Total adjusted claims in the third quarter of 2018 were down
2.6% from the comparable quarter in 2017 due primarily to the
previously disclosed losses of certain public sector clients in the
core business, but were consistent with the Company's previously
provided guidance range for the quarter.
Net income, on a GAAP and an adjusted basis, in the third
quarter of 2018 was up from the comparable quarter in 2017 driven
by higher adjusted EBITDA and reduced income tax expense.
Earnings per diluted share, on a GAAP and an adjusted basis, in the
third quarter of 2018 were up from the comparable quarter in 2017
due to higher net income and reduced shares outstanding.
Adjusted EBITDA in the third quarter of 2018 was up 4.6% from
the comparable quarter in 2017 primarily driven by growth in our
Accredo specialty pharmacy and the inclusion of eviCore.
Net cash flow provided by operating activities in the third
quarter of 2018 was down 60% from the comparable quarter in 2017
and 25% for the first nine months of 2018 compared to same period
in 2017, primarily resulting from the timing of collections and
payments to and from pharmacies, pharmaceutical suppliers, our
clients and us.
As previously discussed, the Company suspended its share
repurchase program, in the first quarter of 2018, pursuant to the
Merger Agreement with Cigna.
For a description of the financial measures presented herein
which are not calculated or presented in accordance with GAAP, see
"Supplemental Information Regarding Non-GAAP Financial Measures"
below.
Due to the Company's pending acquisition by Cigna, the Company
will not be holding a third quarter conference call to review
results, and will no longer provide financial guidance. A
copy of the earnings release will be available at the Investor
Information section of Express Scripts' web site at
http://www.express-scripts.com/corporate.
About Express Scripts
Express Scripts is a healthcare opportunity company. Empowered
by our legacy as an industry innovator, we dare to imagine – and
deliver – a better healthcare system with improved health outcomes
and lower costs. From pharmacy and medical benefits management, to
specialty pharmacy care, and everything in between – we uncover
opportunities to make healthcare work better.
Our home base is St. Louis, but
our reach extends across the nation, helping millions of Americans.
We stand alongside those we serve, collaborating with our clients
and partners to develop personalized solutions that make a
meaningful difference.
We believe healthcare can do more. We are Champions For
BetterSM.
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
earnings per diluted share (adjusted EPS), EBITDA, adjusted EBITDA,
adjusted EBITDA per adjusted claim, adjusted net income, adjusted
income before income taxes, adjusted gross profit and adjusted
selling, general and administrative are non-GAAP financial measures
presented herein, are not calculated or presented in accordance
with GAAP, and should be considered in addition to, but not as a
substitute for, or superior to, financial measures prepared in
accordance with GAAP. The Company believes 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 business performance; (iii) planning and forecasting for
future periods; and (iv) assessing period-to-period performance
trends. Management assesses the Company's core business
operating performance using 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 the
business. Adjusted EBITDA per adjusted claim provides
management and investors with useful information about the earnings
and performance of the Company on a per unit basis.
Financial Information for our Core Business and Transitioning
Clients: The financial measures attributable to our core
business and the transitioning clients presented herein, including
adjusted EBITDA and adjusted EBITDA per adjusted claims, 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 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 each of the transitioning clients, including
interest and depreciation and amortization. Accordingly, the
Company is unable to provide net income attributable to any of the
transitioning clients or its core business excluding the
transitioning clients, and is therefore also unable to provide a
reconciliation of adjusted EBITDA to net income attributable to
transitioning clients or core business. 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 business, as discussed
above.
SAFE HARBOR STATEMENT
This press release contains forward-looking statements,
including, but not limited to, our guidance, business 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 27,
2018 and the Company's Quarterly Report on Form 10-Q filed
with the SEC on October 31,
2018. A copy of these documents 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 Each of
net income, adjusted net income, earnings per diluted share,
adjusted earnings per diluted share, EBITDA, adjusted EBITDA and
adjusted EBITDA per adjusted claim amounts are presented as
attributable to Express Scripts, excluding non-controlling
interests. For a description of the financial measures
presented herein which are not calculated or presented in
accordance with accounting principles generally accepted in the
United States ("GAAP"), see Supplemental Information Regarding
Non-GAAP Financial Measures below.
|
|
2 From the
date the Company began tracking retention rate in 2006.
|
|
3 See
Supplemental Information Regarding Non-GAAP Financial Measures and
Supplemental Tables below for additional
information.
|
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)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
Revenues
|
$ 25,563.2
|
|
$ 24,683.4
|
|
$ 75,974.4
|
|
$ 74,685.8
|
Cost of
revenues
|
23,211.8
|
|
22,445.7
|
|
69,539.4
|
|
68,414.2
|
Gross profit
|
2,351.4
|
|
2,237.7
|
|
6,435.0
|
|
6,271.6
|
Selling, general and
administrative
|
862.8
|
|
759.3
|
|
2,672.6
|
|
2,360.0
|
Operating
income
|
1,488.6
|
|
1,478.4
|
|
3,762.4
|
|
3,911.6
|
Other (expense)
income:
|
|
|
|
|
|
|
|
Interest income and other
|
13.0
|
|
13.6
|
|
33.8
|
|
28.7
|
Interest expense and other
|
(151.0)
|
|
(147.7)
|
|
(456.3)
|
|
(439.9)
|
|
(138.0)
|
|
(134.1)
|
|
(422.5)
|
|
(411.2)
|
Income before income
taxes
|
1,350.6
|
|
1,344.3
|
|
3,339.9
|
|
3,500.4
|
Provision for income
taxes
|
276.8
|
|
499.3
|
|
760.8
|
|
1,299.6
|
Net
income
|
1,073.8
|
|
845.0
|
|
2,579.1
|
|
2,200.8
|
Less: Net income
attributable to non-controlling interest
|
2.2
|
|
3.3
|
|
7.0
|
|
11.0
|
Net income
attributable to Express Scripts
|
$
1,071.6
|
|
$
841.7
|
|
$
2,572.1
|
|
$
2,189.8
|
|
|
|
|
|
|
|
|
Weighted-average
number of common shares outstanding during the
period:
|
|
|
|
|
|
|
|
Basic
|
562.9
|
|
571.8
|
|
562.5
|
|
585.1
|
Diluted
|
567.9
|
|
574.7
|
|
566.8
|
|
588.4
|
|
|
|
|
|
|
|
|
Earnings per share
attributable to Express Scripts:
|
|
|
|
|
|
|
|
Basic
|
$
1.90
|
|
$
1.47
|
|
$
4.57
|
|
$
3.74
|
Diluted
|
$
1.89
|
|
$
1.46
|
|
$
4.54
|
|
$
3.72
|
EXPRESS
SCRIPTS HOLDING COMPANY
|
Unaudited
Consolidated Balance Sheet
|
|
|
|
|
|
September
30,
|
|
December
31,
|
(in
millions)
|
2018
|
|
2017
|
Assets
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
3,705.7
|
|
$
2,309.6
|
Receivables,
net
|
7,824.1
|
|
7,056.3
|
Inventories
|
2,168.9
|
|
2,124.9
|
Prepaid
expenses and other current assets
|
653.5
|
|
466.3
|
Total current assets
|
14,352.2
|
|
11,957.1
|
Property and
equipment, net
|
490.9
|
|
551.3
|
Computer
software, net
|
827.5
|
|
814.9
|
Goodwill
|
31,110.5
|
|
31,099.7
|
Other
intangible assets, net
|
8,425.5
|
|
9,625.9
|
Other
assets
|
235.0
|
|
206.9
|
Total assets
|
$
55,441.6
|
|
$
54,255.8
|
|
|
|
|
Liabilities and
stockholders' equity
|
|
|
|
Current
liabilities:
|
|
|
|
Claims and
rebates payable
|
$
10,190.2
|
|
$
10,188.5
|
Accounts
payable
|
4,412.9
|
|
3,755.7
|
Accrued
expenses
|
2,067.0
|
|
2,869.3
|
Short-term debt
and current maturities of long-term debt
|
2,021.3
|
|
1,032.9
|
Total current liabilities
|
18,691.4
|
|
17,846.4
|
Long-term
debt
|
12,974.2
|
|
14,981.5
|
Deferred
taxes
|
2,347.8
|
|
2,562.4
|
Other
liabilities
|
855.4
|
|
740.2
|
Total liabilities
|
34,868.8
|
|
36,130.5
|
|
|
|
|
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: 866.9 and 862.3, respectively; shares outstanding: 563.6
and 564.4, respectively
|
8.7
|
|
8.6
|
Additional
paid-in capital
|
23,826.8
|
|
23,537.8
|
Accumulated
other comprehensive loss
|
(6.5)
|
|
(2.9)
|
Retained
earnings
|
18,890.7
|
|
16,318.6
|
|
42,719.7
|
|
39,862.1
|
|
|
|
|
Common stock in
treasury at cost, 303.3 and 297.9 shares,
respectively
|
(22,153.8)
|
|
(21,742.5)
|
Total Express Scripts stockholders' equity
|
20,565.9
|
|
18,119.6
|
Non-controlling
interest
|
6.9
|
|
5.7
|
Total stockholders' equity
|
20,572.8
|
|
18,125.3
|
Total liabilities and stockholders' equity
|
$
55,441.6
|
|
$
54,255.8
|
EXPRESS
SCRIPTS HOLDING COMPANY
|
Unaudited
Consolidated Statement of Cash Flows
|
|
Nine Months
Ended
September 30,
|
(in
millions)
|
2018
|
|
2017
|
|
|
|
|
Cash flows from
operating activities:
|
|
|
|
Net
income
|
$
2,579.1
|
|
$
2,200.8
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
Depreciation
and amortization
|
1,500.2
|
|
1,344.2
|
Deferred income
taxes
|
(207.3)
|
|
(247.5)
|
Employee
stock-based compensation expense
|
89.7
|
|
78.0
|
Other,
net
|
20.7
|
|
24.2
|
Changes in
operating assets and liabilities:
|
|
|
|
Receivables
|
(792.5)
|
|
161.2
|
Inventories
|
(44.1)
|
|
(93.8)
|
Other current
and noncurrent assets
|
(187.1)
|
|
(88.8)
|
Claims and
rebates payable
|
(0.4)
|
|
642.6
|
Accounts
payable
|
680.1
|
|
475.4
|
Accrued
expenses
|
(750.9)
|
|
(659.3)
|
Other
noncurrent liabilities
|
100.8
|
|
144.5
|
Net cash flows
provided by operating activities
|
2,988.3
|
|
3,981.5
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
Capital
expenditures for property and equipment and computer
software
|
(241.3)
|
|
(177.3)
|
Acquisitions,
net of cash acquired
|
(26.4)
|
|
(122.7)
|
Other,
net
|
(28.3)
|
|
(11.3)
|
Net cash used
in investing activities
|
(296.0)
|
|
(311.3)
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
Repayment of
long-term debt
|
(831.4)
|
|
(650.0)
|
Treasury stock
acquired
|
(420.7)
|
|
(2,735.7)
|
Net proceeds
from employee stock plans
|
198.9
|
|
51.3
|
Commercial
paper repayments, net
|
(195.0)
|
|
-
|
Other,
net
|
(43.4)
|
|
(22.5)
|
Net cash used
in financing activities
|
(1,291.6)
|
|
(3,356.9)
|
|
|
|
|
Effect of
foreign currency translation adjustment
|
(4.6)
|
|
5.4
|
|
|
|
|
Net increase in
cash and cash equivalents
|
1,396.1
|
|
318.7
|
Cash and cash
equivalents at beginning of period
|
2,309.6
|
|
3,077.2
|
Cash and cash
equivalents at end of period
|
$
3,705.7
|
|
$
3,395.9
|
Table
1
|
Express
Scripts Holding Company Unaudited Consolidated Selected
Information
|
(in
millions)
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
September 30,
|
|
Nine Months
Ended
September 30,
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
Claims
Volume
|
|
|
|
|
|
|
|
|
Network
|
207.0
|
|
213.5
|
|
631.1
|
|
655.4
|
|
Home delivery and
specialty(3)
|
25.6
|
|
28.8
|
|
78.2
|
|
87.3
|
|
Total
claims
|
232.6
|
|
242.3
|
|
709.3
|
|
742.7
|
|
|
|
|
|
|
|
|
|
|
Adjusted
network(2)
|
260.2
|
|
259.5
|
|
784.8
|
|
790.7
|
|
Adjusted home
delivery and specialty(2)
|
74.4
|
|
84.1
|
|
227.8
|
|
254.6
|
|
Total
adjusted claims(2)
|
334.6
|
|
343.6
|
|
1,012.6
|
|
1,045.3
|
|
|
|
|
|
|
|
|
|
|
Depreciation
and Amortization (D&A):
|
|
|
|
|
|
|
|
|
Revenue
amortization(4)
|
$
55.4
|
|
$
55.4
|
|
$
166.2
|
|
$
166.2
|
|
Cost of
revenues depreciation
|
31.7
|
|
32.0
|
|
101.9
|
|
96.3
|
|
Selling,
general and administrative depreciation
|
61.3
|
|
51.3
|
|
174.0
|
|
155.3
|
|
Selling,
general and administrative amortization(4)
|
349.3
|
|
310.7
|
|
1,058.1
|
|
926.4
|
|
Total
D&A
|
$ 497.7
|
|
$ 449.4
|
|
$ 1,500.2
|
|
$ 1,344.2
|
|
|
|
|
|
|
|
|
|
|
Generic Fill
Rate*
|
|
|
|
|
|
|
|
|
Network
|
86.5%
|
|
86.5%
|
|
87.1%
|
|
86.9%
|
|
Home
delivery
|
83.9%
|
|
83.5%
|
|
84.0%
|
|
82.8%
|
|
Overall
|
86.2%
|
|
86.1%
|
|
86.7%
|
|
86.4%
|
|
|
See
Footnotes to Press Release
|
|
*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 GAAP.
|
(in
millions)
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
September 30,
|
|
Nine Months
Ended
September 30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Gross profit, as
reported
|
$ 2,351.4
|
|
$ 2,237.7
|
|
$ 6,435.0
|
|
$ 6,271.6
|
Amortization of
intangible assets (4)
|
55.4
|
|
55.4
|
|
166.2
|
|
166.2
|
Enterprise value
initiative costs (6)
|
7.2
|
|
2.4
|
|
39.9
|
|
2.4
|
Adjusted gross
profit
|
$ 2,414.0
|
|
$ 2,295.5
|
|
$ 6,641.1
|
|
$ 6,440.2
|
|
|
|
|
|
|
|
|
Selling, general and
administrative, as reported
|
$
862.8
|
|
$
759.3
|
|
$ 2,672.6
|
|
$ 2,360.0
|
Amortization of
intangible assets (4)
|
349.3
|
|
310.7
|
|
1,058.1
|
|
926.4
|
Transaction costs
(5)
|
26.0
|
|
-
|
|
82.4
|
|
-
|
Enterprise value
initiative costs (6)
|
21.0
|
|
20.9
|
|
51.6
|
|
20.9
|
Charitable
contribution costs (7)
|
-
|
|
-
|
|
30.0
|
|
-
|
Adjusted selling,
general and administrative
|
$
466.5
|
|
$
427.7
|
|
$ 1,450.5
|
|
$ 1,412.7
|
|
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 are non-GAAP financial measures, from 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,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Net income
attributable to Express Scripts, as reported
|
$ 1,071.6
|
|
$
841.7
|
|
$ 2,572.1
|
|
$ 2,189.8
|
Provision for
income taxes (8)
|
276.8
|
|
499.3
|
|
760.8
|
|
1,299.6
|
Depreciation
and amortization(4),*
|
497.7
|
|
449.4
|
|
1,500.2
|
|
1,344.2
|
Other expense
(income), net
|
138.0
|
|
134.1
|
|
422.5
|
|
411.2
|
EBITDA attributable
to Express Scripts
|
$ 1,984.1
|
|
$ 1,924.5
|
|
$ 5,255.6
|
|
$ 5,244.8
|
Adjustments to
EBITDA
|
|
|
|
|
|
|
|
Transaction costs
(5)
|
26.0
|
|
-
|
|
82.4
|
|
-
|
Enterprise value
initiative costs(6)
|
27.6
|
|
22.9
|
|
89.5
|
|
22.9
|
Charitable
contribution costs(7)
|
-
|
|
-
|
|
30.0
|
|
-
|
Adjusted EBITDA
attributable to Express Scripts
|
$ 2,037.7
|
|
$ 1,947.4
|
|
$ 5,457.5
|
|
$ 5,267.7
|
|
|
|
|
|
|
|
|
Total adjusted
claims(2)
|
334.6
|
|
343.6
|
|
1,012.6
|
|
1,045.3
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
attributable to Express Scripts, per adjusted claim
|
$
6.09
|
|
$
5.67
|
|
$
5.39
|
|
$
5.04
|
|
See
Footnotes to Press Release
|
|
* Depreciation
and amortization presented above includes accelerated depreciation
of $0.6 million and $2.0 million for the three and nine months
ended September 30, 2018, respectively, and $0.4 million for each
of the three and nine months ended September 30, 2017, related to
our enterprise value initiative.
|
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,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
(per diluted
share)
|
Diluted EPS
attributable to Express Scripts, as reported
|
$
1.89
|
|
$
1.46
|
|
$
4.54
|
|
$
3.72
|
|
|
|
|
|
|
|
|
Excluding items
indicated:
|
|
|
|
|
|
|
|
Amortization of
intangible assets (4),*
|
0.71
|
|
0.64
|
|
2.16
|
|
1.86
|
Transaction costs
(5),*
|
0.05
|
|
-
|
|
0.15
|
|
-
|
Enterprise value
initiative costs (6),*
|
0.05
|
|
0.04
|
|
0.16
|
|
0.04
|
Charitable
contribution costs (7),*
|
-
|
|
-
|
|
0.05
|
|
-
|
Discrete tax items
(8)
|
(0.07)
|
|
0.01
|
|
(0.04)
|
|
0.03
|
Tax impact of
excluded items (10)
|
(0.20)
|
|
(0.25)
|
|
(0.60)
|
|
(0.70)
|
|
|
|
|
|
|
|
|
Diluted EPS
attributable to Express Scripts, adjusted
|
$
2.43
|
|
$
1.90
|
|
$
6.42
|
|
$
4.95
|
|
See
Footnotes to Press Release
|
|
*Presented on a
pre-tax basis.
|
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, 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
September 30, 2018
|
|
Nine Months
Ended
September 30, 2018
|
|
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
|
$
1,350.6
|
|
$
276.8
|
|
|
|
$
3,339.9
|
|
$
760.8
|
|
|
Net income
attributable to non-controlling interest
|
(2.2)
|
|
-
|
|
|
|
(7.0)
|
|
-
|
|
|
Income before income
taxes attributable to Express Scripts
|
1,348.4
|
|
276.8
|
|
20.5%
|
|
3,332.9
|
|
760.8
|
|
22.8%
|
|
|
|
|
|
|
|
|
|
|
|
|
Excluding items
indicated:
|
|
|
|
|
|
|
|
|
|
|
|
Discrete tax
items(8)
|
-
|
|
41.5
|
|
|
|
-
|
|
25.8
|
|
|
Transaction costs
(5)
|
26.0
|
|
6.1
|
|
|
|
82.4
|
|
19.4
|
|
|
Enterprise value
initiative costs(6)
|
28.2
|
|
6.7
|
|
|
|
91.5
|
|
21.6
|
|
|
Charitable
contribution costs (7)
|
-
|
|
-
|
|
|
|
30.0
|
|
7.1
|
|
|
Loss on Disposal
(9)
|
-
|
|
-
|
|
|
|
1.8
|
|
0.4
|
|
|
Amortization of
intangible assets(4)
|
404.7
|
|
95.5
|
|
|
|
1,224.3
|
|
288.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income
taxes attributable to Express Scripts, as adjusted
|
$
1,807.3
|
|
$
426.6
|
|
23.6%
|
|
$
4,762.9
|
|
$ 1,124.0
|
|
23.6%
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net income
attributable to Express Scripts
|
$
1,380.7
|
|
|
|
|
|
$
3,638.9
|
|
|
|
|
|
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, 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
September 30, 2017
|
|
Nine Months
Ended
September 30, 2017
|
|
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
|
$
1,344.3
|
|
$
499.3
|
|
|
|
$
3,500.4
|
|
$
1,299.6
|
|
|
Net income
attributable to non-controlling interest
|
(3.3)
|
|
-
|
|
|
|
(11.0)
|
|
-
|
|
|
Income before income
taxes attributable to Express Scripts
|
1,341.0
|
|
499.3
|
|
37.2%
|
|
3,489.4
|
|
1,299.6
|
|
37.2%
|
|
|
|
|
|
|
|
|
|
|
|
|
Excluding items
indicated:
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of
intangible assets(4)
|
366.1
|
|
134.8
|
|
|
|
1,092.6
|
|
402.1
|
|
|
Enterprise value
initiative costs(6)
|
23.3
|
|
8.5
|
|
|
|
23.3
|
|
8.5
|
|
|
Discrete tax
items(8)
|
-
|
|
(5.8)
|
|
|
|
-
|
|
(15.5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income
taxes attributable to Express Scripts, as adjusted
|
$
1,730.4
|
|
$
636.8
|
|
36.8%
|
|
$
4,605.3
|
|
$
1,694.7
|
|
36.8%
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net income
attributable to Express Scripts
|
$
1,093.6
|
|
|
|
|
|
$
2,910.6
|
|
|
|
|
|
See
Footnotes to Press Release
|
Table
6
|
Express
Scripts Holding Company Operating Results Excluding Estimate of
Contribution related to Transitioning Clients
|
|
|
|
|
|
|
|
|
|
|
|
|
(amounts in
millions except per claim figures)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Three
months ended)
|
|
September 30,
2018
|
|
September 30,
2017
|
|
Change
|
|
|
Consolidated
As Reported
|
Transitioning
Clients(1)
|
Core
business(1)
|
|
Consolidated
As Reported
|
Transitioning
Clients(1)
|
Core
business(1)
|
|
As
Reported
|
Core
business(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
claims(2)
|
Table
1
|
334.6
|
54.5
|
280.1
|
|
343.6
|
57.2
|
286.4
|
|
-2.6%
|
-2.2%
|
Revenues
|
|
$
25,563.2
|
$
4,492.9
|
$
21,070.3
|
|
$
24,683.4
|
$
4,665.7
|
$ 20,017.7
|
|
3.6%
|
5.3%
|
Net income
|
|
$
1,071.6
|
N/A
|
N/A
|
|
$
841.7
|
N/A
|
N/A
|
|
27.3%
|
N/A
|
Adjusted
EBITDA
|
Table
3
|
$
2,037.7
|
$
643.5
|
$
1,394.2
|
|
$
1,947.4
|
$
607.9
|
$
1,339.5
|
|
4.6%
|
4.1%
|
Adjusted
EBITDA/adjusted claim
|
Table
3
|
$
6.09
|
N/A
|
$
4.98
|
|
$
5.67
|
N/A
|
$
4.68
|
|
7.4%
|
6.4%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Nine
months ended)
|
|
September 30,
2018
|
|
September 30,
2017
|
|
Change
|
|
|
Consolidated
As Reported
|
Transitioning
Clients(1)
|
Core
business(1)
|
|
Consolidated
As Reported
|
Transitioning
Clients(1)
|
Core
business(1)
|
|
As
Reported
|
Core
business(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
claims(2)
|
Table
1
|
1,012.6
|
166.0
|
846.6
|
|
1,045.3
|
176.2
|
869.1
|
|
-3.1%
|
-2.6%
|
Revenues
|
|
$
75,974.4
|
$
13,449.2
|
$
62,525.2
|
|
$
74,685.8
|
$
14,289.2
|
$ 60,396.6
|
|
1.7%
|
3.5%
|
Net income
|
|
$
2,572.1
|
N/A
|
N/A
|
|
$
2,189.8
|
N/A
|
N/A
|
|
17.5%
|
N/A
|
Adjusted
EBITDA
|
Table
3
|
$
5,457.5
|
$
1,713.3
|
$
3,744.2
|
|
$
5,267.7
|
$
1,810.5
|
$
3,457.2
|
|
3.6%
|
8.3%
|
Adjusted
EBITDA/adjusted claim
|
Table
3
|
$
5.39
|
N/A
|
$
4.42
|
|
$
5.04
|
N/A
|
$
3.98
|
|
6.9%
|
11.1%
|
|
See Footnotes to
Press Release.
|
Footnotes to
Press Release
|
|
(1) The
Company's core business excludes the contributions from Anthem, as
well as Coventry and Catamaran, to which we refer together as the
"Transitioning Clients." Amounts attributable to each of the
Transitioning Clients 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 each
of the Transitioning Clients. Both direct and indirect costs were
allocated based on management's best estimates of costs
attributable to servicing each of the Transitioning Clients, and,
where appropriate, are based on actual cost or adjusted claims
attributable to each of the Transitioning Clients.
Consolidated revenues and Transitioning Clients revenues include
intangible amortization related to the customer contract with
Anthem of $55.4 million for each of the three months ended
September 30, 2018 and 2017. Consolidated revenues and
Transitioning Clients revenues include intangible amortization
related to the customer contract with Anthem of $166.2 million for
each of the nine months ended September 30, 2018 and
2017.
|
|
(2) Total adjusted
network claims includes an adjustment to reflect non-specialty
network claims filled through our 90-day programs. These
claims are 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, as
home delivery claims typically cover a time period three times
longer than unadjusted network claims.
|
|
(3) Includes
home delivery and specialty claims including drugs distributed to
other PBMs' clients under limited distribution contracts with
pharmaceutical manufacturers and Freedom Fertility
claims.
|
|
(4) Amortization of
intangible assets includes amounts in both revenues and selling,
general and administrative expense.
Revenue amortization is related to the customer contract with
Anthem, which commenced upon closing 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 ($42.3 million net of tax) and $55.4 million ($34.9 million
net of tax) is included as a reduction to revenue for the three
months ended September 30, 2018 and 2017, respectively.
Intangible amortization of $166.2 million ($127.0 million net of
tax) and $166.2 million ($105.0 million net of tax) is included as
a reduction to revenue for the nine months ended September 30, 2018
and 2017, respectively.
Selling, general, and administrative expense includes the
amortization of other intangible assets and computer software
acquired through business combinations, of $349.3 million ($266.9
million net of tax) and $310.7 million ($196.4 million net of tax)
for the three months ended September 30, 2018 and 2017,
respectively. Selling, general, and administrative expense
includes the amortization of other intangible assets and computer
software acquired through business combinations, of $1,058.1
million ($808.4 million net of tax) and $926.4 million ($585.5
million net of tax) for the nine months ended September 30, 2018
and 2017,
respectively.
|
|
(5) Transaction costs
include those costs directly related to the acquisition of eviCore
and the proposed transaction with Cigna. Costs of $26.0 million
($19.9 million net of tax) and $82.4 million ($63.0 million net of
tax) are primarily composed of professional fees and other
compensation costs, and are included in selling, general and
administrative expense for the three and nine months ended
September 30, 2018, respectively.
|
|
(6) Costs included in
cost of revenues (gross profit), primarily comprised of
professional fees, severance and other business activity charges in
connection with the enterprise value initiative, are $7.2 million
($5.5 million net of tax) and $39.9 million ($30.5 million net of
tax) for the three and nine months ended September 30, 2018,
respectively, and $2.4 million for both the three and nine months
ended September 30, 2017.
Costs included in selling, general and administrative, primarily
comprised of professional fees, severance and other business
activity charges in connection with the enterprise value
initiative, are $21.0 million ($16.0 million net of tax) and $51.6
million ($39.4 million net of tax) for the three and nine months
ended September 30, 2018, respectively, and $20.9 million for both
the three and nine months ended September 30, 2017.
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(7) Costs
included in selling, general and administrative, related to certain
charitable contributions made as a result of the tax savings
received as part of the 2017 federal tax reform, are $30.0 million
($22.9 million net of tax) for the nine months ended September 30,
2018.
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(8) Provision for
income taxes includes discrete income tax benefits of $41.5 million
and $25.8 million for the three months and nine months ended
September 30, 2018, respectively, and includes discrete income tax
charges of $5.8 million and $15.5 million for the three months and
nine months ended September 30, 2017, respectively. The 2018
net discrete income tax benefits primarily relate to changes in our
unrecognized tax benefits as a result of lapses of statutes of
limitations. The 2017 discrete income tax charges primarily
relate to additions in our unrecognized tax benefits on prior year
tax positions and a revaluation of our deferred tax attributes due
to changes in effective tax rates offset by a reduction in our
unrecognized tax benefits due to settlement of prior year
examinations and prior year claims.
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(9) In December
2017, the Company sold UBC for approximately $150.0 million, which
included both cash and a note receivable. The Company
recorded a $1.8 million ($1.4 million net of tax) loss on disposal
which is reported within interest expense and other for the nine
months ended September 30, 2018. The loss on disposal has an
immaterial impact to the adjusted diluted earnings per share
reconciliation, see Table 4.
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(10) 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.
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SOURCE Express Scripts Holding Company