Express Scripts Reports Third Quarter 2013 Results

              Express Scripts Reports Third Quarter 2013 Results

Increases 2013 Earnings Guidance

PR Newswire

ST. LOUIS, Oct. 24, 2013

ST. LOUIS, Oct. 24, 2013 /PRNewswire/ -- Express Scripts Holding Company
(Nasdaq: ESRX) announced 2013 third quarter net income from continuing
operations attributable to Express Scripts shareholders of $442.2 million, or
$0.54 per diluted share. Adjusted earnings per diluted share from continuing
operations attributable to Express Scripts, as detailed in Table 4, were $1.08
for the third quarter. The quarter reflects a reduction in the income tax
rate to adjust the full year rate to 38.5%, which resulted in a $0.01 increase
in diluted earnings per share.

"We continue to be positive on the long-term outlook for our industry and our
Company," stated George Paz, chairman and chief executive officer. "As the
healthcare landscape continues to evolve, we are well-positioned to help
clients and members successfully navigate a rapidly-changing environment full
of new rules and regulations. Our breadth of client solutions across
traditional pharmacy benefit management, specialty management, and Medicare
Part D is unparalleled in the industry."

Third Quarter 2013 Review 

  oAdjusted claims from continuing operations of 358.1 million, down 9% from
    the third quarter of 2012, including the expected roll-off of claims from
    UnitedHealth Group
  oAdjusted EBITDA from continuing operations attributable to Express Scripts
    of $1.7 billion, up 3% from the third quarter of 2012 - See Table 3
  oAdjusted EBITDA from continuing operations attributable to Express Scripts
    per adjusted claim of $4.63, up 13% from the third quarter of 2012 - See
    Table 3
  oInterest income includes a contractual interest payment received from a
    client for $24.9 million that is excluded from adjusted earnings per
    diluted share – See Table 4
  oAdjusted effective income tax rate for continuing operations attributable
    to Express Scripts for the quarter of 37.9%, with the full year adjusted
    effective income tax rate for continuing operations attributable to
    Express Scripts expected to be approximately 38.5% - See Table 5
  oNet cash flow provided by operating activities from continuing operations
    was $1.0 billion for the quarter, up 31% from the third quarter of 2012
  oRepurchase of 11.6 million shares of common stock for $751.5 million
    during the quarter, leaving 51.3 million shares available under the
    current share repurchase program

2013 Guidance

The Company previously provided 2013 guidance on adjusted earnings per diluted
share from continuing operations attributable to Express Scripts in the range
of $4.26 to $4.34, or growth of 14% to 16% over 2012.Based on the Company's
performance and reduced tax rate, the Company is raising the low end of the
range by $0.04. As such, the Company now anticipates achieving adjusted
earnings per diluted share from continuing operations attributable to Express
Scripts for 2013 in the range of $4.30 to $4.34, or 15% to 16% growth over
2012.

Due to delays in certain non-clientintegration activities, including the
migration of all Medco's legacy payment cycles to Express Scripts' cycles, the
Company hasadjusted its 2013 cash flow guidance range to $4.0 billion to $4.5
billion from the previous range of $4.5 billion to $5.0 billion.

Adjusted earnings per diluted share from continuing operations attributable to
Express Scripts for the fourth quarter is expected to be between $1.09 and
$1.13.

Adjusted earnings per diluted share from continuing operations attributable to
Express Scripts for 2013 exclude items as detailed in Table 6.

About Express Scripts

Express Scripts (NASDAQ: ESRX) manages more than a billion prescriptions each
year for tens of millions of patients. On behalf of our clients – employers,
health plans, unions and government health programs – we make the use of
prescription drugs safer and more affordable. Express Scripts uniquely
combines three capabilities – behavioral sciences, clinical specialization and
actionable data – to create Health Decision Science(SM), our innovative
approach to help individuals make the best drug choices, pharmacy choices and
health choices. Better decisions mean healthier outcomes.

Headquartered in St. Louis, Express Scripts provides integrated pharmacy
benefit management services, including network-pharmacy claims processing,
home delivery, specialty benefit management, benefit-design consultation,
drug-utilization review, formulary management, and medical and drug data
analysis services. The company 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 2013 guidance and our statements related to the Company's
plans, objectives, expectations (financial and otherwise) or intentions.
Actual results may differ significantly from those projected or suggested in
any forward-looking statements. Factors that may impact these forward-looking
statements can be found in the Management's Discussion and Analysis of
Financial Condition and Results of Operations in the Company's Quarterly
Report on Form 10-Q filed with the Securities and Exchange Commission ("SEC")
on or about October 24, 2013 and Item 1A – "Risk Factors" in the Company's
Annual Report on Form 10-K filed with the SEC on February 19, 2013. 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.



EXPRESS SCRIPTS HOLDING COMPANY
Unaudited Consolidated Statement of Operations
                           Three Months Ended         Nine Months Ended
                           September 30,              September 30,
 (in millions, except per 2013          2012          2013         2012
share data)
Revenues^(*)               $ 25,915.6    $ 26,761.6    $ 78,317.4   $ 66,349.2
Cost of revenues^(*)       23,921.4      24,658.7      72,246.0     61,335.0
 Gross profit          1,994.2       2,102.9       6,071.4      5,014.2
Selling, general and       1,118.7       1,282.2       3,348.5      3,127.2
administrative
Operating income           875.5         820.7         2,722.9      1,887.0
Other (expense) income:
 Equity income from     6.3           5.1           23.1         9.4
joint venture
 Interest income      25.7          1.4           28.4         6.0
 Interest expense and   (127.4)       (155.2)       (470.4)      (461.6)
other
                           (95.4)        (148.7)       (418.9)      (446.2)
Income before income taxes 780.1         672.0         2,304.0      1,440.8
Provision for income taxes 326.5         256.1         896.0        602.5
Net income from continuing 453.6         415.9         1,408.0      838.3
operations
Net loss from discontinued (15.5)        (20.0)        (41.3)       (19.2)
operations, net of tax
Net income                 438.1         395.9         1,366.7      819.1
Less: Net income
attributable to            11.4          4.5           24.0         10.3
non-controlling interest
Net income attributable to $   426.7  $   391.4  $  1,342.7  $  
Express Scripts                                                     808.8
Weighted average number of
common shares
outstanding during the
period:
 Basic                 810.2         812.9         814.7        702.4
 Diluted               822.9         829.6         828.0        718.9
Basic earnings per share:
 Continuing operations $          $          $         $   
attributable to Express    0.55         0.51         1.70        1.18
Scripts
 Discontinued
operations attributable to (0.02)        (0.02)        (0.05)       (0.03)
Express Scripts
 Net earnings
attributable to Express    0.53          0.48          1.65         1.15
Scripts
Diluted earnings per
share:
 Continuing operations $          $          $         $   
attributable to Express    0.54         0.50         1.67        1.15
Scripts
 Discontinued
operations attributable to (0.02)        (0.02)        (0.05)       (0.03)
Express Scripts
 Net earnings
attributable to Express    0.52          0.47          1.62         1.13
Scripts
Amounts attributable to
Express Scripts
shareholders:
 Income from                                                    $  
continuing operations, net $   442.2  $   411.4  $  1,384.0  828.0
of tax
 Discontinued          (15.5)        (20.0)        (41.3)       (19.2)
operations, net of tax
 Net income                                                     $  
attributable to Express    $   426.7  $   391.4  $  1,342.7  808.8
Scripts shareholders

^(*) Includes retail pharmacy co-payments of $2,966.5 million and $3,348.9
million for the three months ended September 30, 2013 and 2012, respectively,
and $9,845.2 million and $8,364.6 million for the nine months ended September
30, 2013 and 2012, respectively.





EXPRESS SCRIPTS HOLDING COMPANY
Unaudited Consolidated Balance Sheet
                                            September 30,   December 31,
(in millions)                             2013              2012
Assets
Current assets:
Cash and cash equivalents                 $            $     
                                            1,722.3          2,793.1
Restricted cash and investments           19.2              19.6
Receivables, net                          5,112.4           5,425.8
Inventories                               1,643.6           1,652.1
Deferred taxes                            422.7             400.6
Prepaid expenses and other current assets 179.0             194.3
Current assets of discontinued operations 125.0             271.4
 Total current assets                   9,224.2           10,756.9
Property and equipment, net               1,629.2           1,632.1
Goodwill                                  29,306.3          29,320.4
Other intangible assets, net              14,525.9          16,037.9
Other assets                              56.6              56.1
Noncurrent assets of discontinued          20.8              307.8
operations
 Total assets                           $             $    
                                            54,763.0         58,111.2
Liabilities and Stockholders' Equity
Current liabilities:
Claims and rebates payable                $            $     
                                            6,459.7          7,440.0
Accounts payable                          2,573.4           2,898.9
Accrued expenses                          1,496.7           1,632.9
Current maturities of long-term debt      631.6             934.9
Current liabilities of discontinued        64.8              150.7
operations
 Total current liabilities              11,226.2          13,057.4
Long-term debt                            13,482.0          14,980.1
Deferred taxes                            5,589.0           5,936.5
Other liabilities                         746.3             692.9
Noncurrent liabilities of discontinued     0.4               48.6
operations
 Total liabilities                      31,043.9          34,715.5
Stockholders' Equity:
Preferred stock, 15.0 shares authorized,
$0.01 par value per share;and no shares    -                 -
issued and outstanding
Common stock, 2,985.0 shares authorized,
$0.01 par value per share;shares issued:
830.7 and 818.1, respectively;shares       8.3               8.2
outstanding: 805.8 and 818.1, respectively
Additional paid-in capital                21,820.2          21,289.7
Accumulated other comprehensive income    15.4              18.9
Retained earnings                         3,410.9           2,068.2
                                            25,254.8          23,385.0
Common stock in treasury at cost, 24.9 and (1,552.5)         -
zero shares, respectively
 Total Express Scripts stockholders'     23,702.3          23,385.0
equity
Non-controlling interest                  16.8              10.7
 Total stockholders' equity             23,719.1          23,395.7
 Total liabilities and stockholders'     $             $    
equity                                     54,763.0         58,111.2





EXPRESS SCRIPTS HOLDING COMPANY
Unaudited Consolidated Statement of Cash Flows
                                                        Nine Months Ended
                                                        September 30,
(in millions)                                         2013       2012
Cash flows from operating activities:
Net income                                            $ 1,366.7  $   819.1
Net loss from discontinued operations, net of tax     41.3       19.2
 Net income from continuing operations            1,408.0    838.3
Adjustments to reconcile net income to net cash
provided by operating activities:
 Depreciation and amortization                   1,824.0    1,270.0
 Deferred income taxes                           (376.2)    (338.0)
 Employee stock-based compensation expense       131.2      341.6
 Other, net                                      25.8       43.7
Changes in operating assets and liabilities:
 Accounts receivable                             194.5      417.1
 Inventories                                     8.6        (358.1)
 Other current and noncurrent assets             37.3       31.5
 Claims and rebates payable                      (980.3)    (647.2)
 Accounts payable                                (320.5)    142.7
 Other current and noncurrent liabilities        (109.3)    303.8
Net cash provided by operating activities - continuing 1,843.1    2,045.4
operations
Net cash (used in) provided by operating activities -  (20.7)     9.3
discontinued operations
Net cash flows provided by operating activities       1,822.4    2,054.7
Cash flows from investing activities:
 Proceeds from sale of business                  313.0      31.5
 Purchases of property and equipment             (274.6)    (101.9)
 Acquisitions, net of cash acquired              (14.5)     (10,326.0)
 Other                                           (11.8)     (16.2)
Net cash provided by (used in) investing activities -  12.1       (10,412.6)
continuing operations
Acquisitions, cash acquired - discontinued operations -          42.4
Net cash used in investing activities - discontinued   (2.1)      (4.1)
operations
Net cash provided by (used in) investing activities   10.0       (10,374.3)
Cash flows from financing activities:
 Repayment of long-term debt                     (1,773.7)  (2,710.6)
 Treasury stock acquired                         (1,552.5)  -
 Net proceeds from employee stock plans          383.6      276.5
 Excess tax benefit relating to employee stock    23.2       30.4
compensation
 Distributions paid to non-controlling interest  (18.0)     (5.3)
 Proceeds from long-term debt, net of discounts  -          7,458.9
 Repayment of revolving credit line, net         -          (1,000.0)
 Proceeds from accounts receivable financing      -          600.0
facility
 Repayment of accounts receivable financing       -          (600.0)
facility
 Other                                           15.4       (103.2)
Net cash (used in) provided by financing activities -  (2,922.0)  3,946.7
continuing operations
Net cash used in financing activities - discontinued   -          (1.3)
operations
Net cash (used in) provided by financing activities   (2,922.0)  3,945.4
Effect of foreign currency translation adjustment     (4.5)      2.6
Less: cash decrease (increase) attributable to         23.3       (47.3)
discontinued operations
Net decrease in cash and cash equivalents             (1,070.8)  (4,418.9)
Cash and cash equivalents at beginning of period      2,793.1    5,620.1
Cash and cash equivalents at end of period            $ 1,722.3  $ 1,201.2





Table 1
 Express Scripts Holding Company Unaudited Consolidated Selected Information
(in millions)
                                 Three Months Ended  Nine Months Ended
                                 September 30,      September 30,
                                 2013       2012      2013         2012
Claims Volume
Continuing operations:
Network                          256.9      282.9     805.9        721.5
Home delivery and specialty^(1)  34.6       38.0      106.6        90.5
 Total claims                 291.5      320.9     912.5        812.0
Total adjusted claims -          358.1      393.7     1,117.3      984.6
continuing operations^(2)
Depreciation and Amortization
(D&A):
Revenue amortization^(3)        $  28.5   $  28.5  $   85.5  $   85.5
Cost of revenues depreciation  31.4       37.3      88.7         72.7
Selling, general and            77.3       47.2      222.7        120.5
administrative depreciation
Selling, general and            477.1      497.5     1,427.1      991.3
administrative amortization^(3)
 Total D&A - continuing     $ 614.3    $ 610.5   $ 1,824.0    $ 1,270.0
operations
Generic Fill Rate
Network                        81.6%      79.7%     81.6%        78.9%
Home delivery                  74.8%      72.2%     74.5%        70.6%
Overall                        80.8%      78.8%     80.7%        78.0%
Note: See Appendix for Footnotes





Table 2
Calculation of Express Scripts Holding Company Adjusted Gross Profit and SG&A
- Continuing Operations
(in millions)
                                Three Months Ended       Nine Months Ended
                                September 30,            September 30,
                                2013          2012        2013       2012
Gross profit, as reported       $ 1,994.2     $ 2,102.9   $ 6,071.4  $ 5,014.2
Amortization of intangible      28.5          28.5        85.5       85.5
assets ^(3)
Non-recurring transaction and   56.8          21.8        137.9      33.7
integration costs ^(4)
Adjusted gross profit           $ 2,079.5     $ 2,153.2   $ 6,294.8  $ 5,133.4
Selling, general and            $ 1,118.7     $ 1,282.2   $ 3,348.5  $ 3,127.2
administrative, as reported
Amortization of intangible      477.1         497.5       1,427.1    991.3
assets ^(3)
Non-recurring transaction and   130.8         167.6       346.2      574.6
integration costs ^(4)
Adjusted selling, general and   $  510.8    $  617.1  $ 1,575.2  $ 1,561.3
administrative

Note: See Appendix for
Footnotes
The Company is providing adjusted gross profit and adjusted selling, general
and administrative expenses (both of which are non-GAAP financial measures),
in each case, excluding the impact of non-recurring charges and amortization
of intangible assets in order to compare the underlying financial performance
to prior periods.





Table 3
Express Scripts Holding Company EBITDA and Adjusted EBITDA Reconciliation
(in millions, except per claim data)
The following is a reconciliation of net income from continuing operations
attributable to Express Scripts to EBITDA and adjusted EBITDA from continuing
operations attributable to Express Scripts, and adjusted EBITDA from
continuing operations attributable to Express Scripts per adjusted claim. The
Company believes net income is the most directly comparable measure calculated
under U.S. GAAP.
                        
                                                      Nine Months Ended
                        Three Months Ended           September 30,
                        September 30,
                        2013            2012          2013         2012
Net income from
continuing operations,  $  442.2      $  411.4    $ 1,384.0    $  828.0
attributable to Express
Scripts, as reported
 Provision for income  326.5           256.1         896.0        602.5
taxes
 Depreciation and      614.3           610.5         1,824.0      1,270.0
amortization
 Interest expense, net 101.7           153.8         442.0        455.6
 Equity income from    (6.3)           (5.1)         (23.1)       (9.4)
joint venture
EBITDA from continuing
operations,             1,478.4         1,426.7       4,522.9      3,146.7
attributable to Express
Scripts, as reported
Non-recurring
transaction and         178.5           189.4         473.0        608.3
integration costs
^(4)(*)
Adjusted EBITDA from
continuing operations,  $ 1,656.9       $ 1,616.1     $ 4,995.9    $ 3,755.0
attributable to Express
Scripts
Total adjusted claims - 358.1           393.7         1,117.3      984.6
continuing operations
Adjusted EBITDA from
continuing operations,                                $  
attributable to Express $   4.63     $   4.10   4.47        $   3.81
Scripts, per adjusted
claim

Note: See Appendix for
Footnotes
The Company is providing EBITDA and adjusted EBITDA from continuing operations
attributable to Express Scripts excluding the impact of non-recurring charges
(both of which are non-GAAP financial measures) in order to compare the
underlying financial performance to prior periods.
EBITDA from continuing operations attributable to Express Scripts is earnings
before other income (expense), interest, taxes, depreciation and amortization,
or alternatively calculated as operating income from continuing operations
plus depreciation and amortization less non-controlling interest. EBITDA from
continuing operations attributable to Express Scripts is presented because it
is a widely accepted indicator of a company's ability to service indebtedness
and is frequently used to evaluate a company's performance. EBITDA from
continuing operations attributable to Express Scripts, however, should not be
considered as an alternative to net income from continuing operations, as a
measure of operating performance, as an alternative to cash flow, as a measure
of liquidity or as a substitute for any other measure computed in accordance
with accounting principles generally accepted in the United States. In
addition, our definition and calculation of EBITDA from continuing operations
attributable to Express Scripts may not be comparable to that used by other
companies.
Adjusted EBITDA from continuing operations attributable to Express Scripts per
adjusted claim is a supplemental measurement used by analysts and investors to
help evaluate overall operating performance. We have calculated adjusted
EBITDA from continuing operations attributable to Express Scripts excluding
certain charges recorded each year, as these charges are not considered an
indicator of ongoing company performance. Adjusted EBITDA from continuing
operations attributable to Express Scripts per adjusted claim is calculated by
dividing adjusted EBITDA from continuing operations attributable to Express
Scripts by the adjusted claim volume for the period. This measure is used as
an indicator of adjusted EBITDA attributable to Express Scripts performance on
a per-unit basis. Adjusted EBITDA from continuing operations attributable to
Express Scripts, and as a result, adjusted EBITDA from continuing operations
attributable to Express Scripts per adjusted claim, are each affected by the
changes in claim volumes between retail and home delivery, the relative
representation of brand-name, generic and specialty pharmacy drugs, as well as
the level of efficiency in the business.
* Non-recurring transaction and integration costs presented in this table
exclude $9.1 million for the three months and $11.1 million for the nine
months ended September 30, 2013 related to depreciation which does not impact
the calculation of EBITDA.





Table 4
Calculation of Express Scripts Holding Company Adjusted EPS from Continuing
Operations
                                       Three Months Ended  Nine Months Ended
                                       September 30,      September 30,
                                       2013        2012     2013       2012
                                       (per diluted share)
EPS from continuing operations
attributable to Express Scripts, as    $ 0.54      $ 0.50   $ 1.67     $ 1.15
reported
Non-recurring items:
Transaction and integration costs ^(4) 0.14        0.14     0.36       0.50
Interest payment^(5)                   (0.02)      -        (0.02)     -
Debt redemption costs ^(6)             -           -        0.05       -
Pre-close financing costs ^(7)         -           -        -          0.07
Discrete tax items ^(8)                0.05        -        0.04       0.06
Amortization of intangible assets ^(3) 0.37        0.39     1.11       0.90
EPS from continuing operations
attributable to Express Scripts,       $ 1.08      $ 1.03   $ 3.21     $ 2.68
adjusted

Note: See Appendix for
Footnotes
The Company is providing EPS and adjusted EPS, which excludes the impact of
certain non-recurring items and amortization of intangible assets (which is a
non-GAAP financial measure) in order to compare the underlying financial
performance to prior periods.





Table 5
Calculation of Express Scripts Holding Company Adjusted Effective Income Tax
Rate for Continuing Operations
(in millions)
                  Three Months Ended            Nine Months Ended
                  September 30, 2013            September 30, 2013
                  Income   Provision  Adjusted   Income   Provision  Adjusted
                  before   for        effective  before   for        effective
                  income   income     income     income   income     income
                  taxes    taxes      tax rate   taxes    taxes      tax rate
Income from
continuing        780.1    326.5                 2,304.0  896.0
operations, as
reported
Non-controlling   (11.4)   -                     (24.0)   -
interest
Total continuing
operations
attributable to   768.7    326.5                 2,280.0  896.0
Express Scripts,
as reported
Non-recurring
items:
Transaction and
integration       187.6    72.2                  484.1    188.8
costs^(4)
Interest payment  (24.9)   (9.7)                 (24.9)   (9.7)
^(5)
Debt redemption   -        -                     68.5     26.9
costs^(6)
Discrete tax               (38.7)                -        (29.7)
items^(8)
Amortization of
intangible        505.6    194.3                 1,512.6  590.1
assets^(3)
Total continuing
operations
attributable to   1,437.0  544.6      37.9%      4,320.3  1,662.4    38.5%
Express Scripts,
as adjusted

Note: See Appendix for Footnotes.
The Company is providing adjusted effective income tax rate for continuing
operations attributable to Express Scripts excluding the impact of
non-recurring items and amortization of intangible assets (which is a non-GAAP
financial measure) in order to compare the underlying financial performance to
prior periods.





Table 6
Express Scripts Holding Company 2013 Guidance Information
                                    Estimated
                                    Year Ending
                                    December 31, 2013
                                    Current Guidance    Previous Guidance
Adjusted EPS from continuing
operations attributable to Express  $4.30 - $4.34         $4.26 - $4.34
Scripts*
Year over year growth               15% - 16%             14% - 16%
Total adjusted claims               Up 5-6% from 2012     Up 5-6% from 2012
Depreciation                        $395 - $405 million   $410 - $425 million
Selling, general and administrative Approximately 8%      Approximately 8%
                                    decline**             decline
Non-controlling interest            $30 million           $25 million
Effective income tax rate on        Approximately 38.5%   Approximately 38.8%
continuing operations
EBITDA from continuing operations
attributable to Express Scripts    Up 15-18% from 2012   Up 15-18% from 2012
per adjusted claim
Diluted weighted average            Lower end of 825-835  Lower end of 825-835
sharesoutstanding during the       million shares        million shares
period
Cash flow from continuing           $4.0 billion - $4.5  $4.5 billion - $5.0
operations                          billion***            billion
(*) GAAP items not included in
guidance:
Amortization of intangible assets   $1.50
^(9)
Transaction, integration and other  To be determined
non-recurring costs^(10)

*The full-year impact of transaction, integration and other non-recurring
costs have yet to be determined. Accordingly, the Company is unable to include
these charges in the list of GAAP items not included in guidance for 2013
revised adjusted EPS from continuing operations or to provide a reconciliation
to the corresponding GAAP measure.
** Selling, general and administrative expense is expected to decline
approximately 8% from $2,338.2 million on an adjusted basis in 2012 (as recast
for discontinued operations).
***Due to delays in certain non-clientintegration activities, including the
migration of Medco's legacy payment cycles to Express Scripts' cycles, the
Company hasadjusted its 2013 cash flow guidance range to $4.0 billion to $4.5
billion from the previous range of $4.5 billion to $5.0 billion.
Note: See Appendix for Footnotes





Appendix
Footnotes
^(1) Includes home delivery, specialty and other including: (a) drugs
distributed through patient assistance programs (b) drugs we distribute to
other PBMs' clients under limited distribution contracts with pharmaceutical
manufacturers and (c) FreedomFP claims.
^(2) Total adjusted claims reflect home delivery claims multiplied by 3, as
home delivery claims typically cover a time period 3 times longer than retail
claims.
^(3) Amortization of intangible assets includes the following items:

Amortization of legacy Express Scripts intangible assets include amounts in
both revenues and selling, general and administrative expense.

Revenue amortization is related to the customer contract with WellPoint which
consummated upon closing of the NextRx acquisition in 2009. Under U.S. GAAP
standards, amortization of intangibles that arise in connection with
consideration given to a customer by a vendor is characterized as a reduction
of revenues. Intangible amortization of $28.5 million ($17.5 million and
$17.6 million net of tax in 2013 and 2012, respectively) is included as a
reduction to revenue for the three months ended September, 2013 and 2012.
Intangible amortization of $85.5 million ($52.1 million and $51.2 million net
of tax in 2013 and 2012, respectively) is included as a reduction to revenue
for the nine months ended September 30, 2013 and 2012.
Other legacy Express Scripts intangible amortization of $10.2 million ($6.3
million net of tax) and $10.1 million ($6.3 million net of tax) is included in
selling, general and administrative expense for the three months ended
September 30, 2013 and 2012, respectively. Other legacy Express Scripts
intangible amortization of $30.5 million ($18.6 million and $18.3 million net
of tax in 2013 and 2012, respectively) is included in selling, general and
administrative expense for the nine months ended September 30, 2013 and 2012,
respectively.
Amortization of intangible assets related to the acquisition of Medco Health
Solutions, Inc. ("Medco") of $466.9 million ($287.5 million net of tax) and
$487.4 million ($301.7 million net of tax) for the three months ended
September 30, 2013 and 2012, respectively, is included in selling, general
and administrative expense. Amortization of intangible assets related to the
acquisition of Medco of $1,396.6 million ($851.8 million net of tax) and
$960.8 million ($575.5 million net of tax) for the nine months ended September
30, 2013 and 2012, respectively, is included in selling, general and
administrative expense.
^(4) Non-recurring transaction and integration costs include those costs
directly related to the acquisition of Medco.
Costs of $56.8 million ($34.9 million net of tax) and $21.8 million ($13.5
million net of tax) primarily composed of integration-related activities, are
included ingross profitfor the three months ended September 30, 2013 and
2012, respectively. Costs of $137.9 million ($84.1 million net of tax) and
$33.7 million ($20.2 million net of tax) primarily composed of
integration-related activities, are included ingross profitfor the nine
months ended September 30, 2013 and 2012, respectively.
Costs of $130.8 million ($80.5 million net of tax) and $158.9 million ($98.4
million net of tax) primarily composed of professional fees,
integration-related activities and severance costs, including stock
compensation, are included in selling, general and administrative expense in
the three months ended September 30, 2013 and 2012, respectively. Costs of
$349.7 million ($213.3 million net of tax) and $565.9 million ($339.0 million
net of tax) primarily composed of professional fees, integration-related
activities and severance costs, including stock compensation, are included in
selling, general and administrative expense in the nine months ended September
30, 2013 and 2012, respectively.
The Company recorded a net benefit of $3.5 million ($2.1 million net of tax)
within selling, general and administrative expenses for the nine months ended
September 30, 2013 in conjunction with a final settlement related to the
strategic decision to exit various businesses.

The Company recorded net charges of $8.7 million ($5.4 million and $5.0
million net of tax in the three months and nine months, respectively) within
selling, general and administrative expenses for the three months and nine
months ended September 30, 2012 in conjunction with the strategic decision to
exit various businesses.
^(5) Interest income includes a contractual interest payment received from a
client of $24.9 million ($15.2 million net of tax) for the three months and
nine months ended September 30, 2013.
^(6) Debt redemption costs and write-off of deferred financing fees incurred
for the early redemption of senior notes totaled $68.5 million ($41.6 million
net of tax) and is included in interest expense in the nine months ended
September 30, 2013.
^(7) Financing costs include fees related to the amortization of fees relating
to the August 2011 bridge loan, commitment fees related to the August 2011
credit agreement and interest and fees on the senior notes issued in
conjunction with the acquisition of Medco. Costs of $85.2 million ($51.0
million net of tax) are included in interest expense in the nine months ended
September 30, 2012, respectively.
^(8) Provision for income taxes includes discrete tax charges for continuing
operations of $38.7 million and $29.7 million for the three months and nine
months ended September 30, 2013 due to changes in unrecognized tax benefits,
the deferred tax implications of newly enacted state laws, and the deferred
tax implications related to investments in certain foreign subsidiaries for
which the Company expects to realize in the foreseeable future. Provision for
income taxes includes discrete tax benefits of $1.3 million and discrete tax
charges of $43.5 million for the three months and nine months ended September
30, 2012 due to changes in unrecognized tax benefits and the reversal of the
deferred tax asset previously established for transaction-related costs that
became nondeductible upon the consummation of the Merger.
^(9) 2013 Adjusted EPS will exclude amortization of intangible assets.
^(10) 2013 Adjusted EPS will exclude transaction, integration and other
non-recurring costs as well as any gains recognized on the sale of businesses
considered discontinued operations. The full-year impact of these costs have
yet to be determined.



SOURCE Express Scripts Holding Company

Website: http://www.express-scripts.com
Contact: Matt Harper, Interim Chief Financial Officer or David Myers, Vice
President, Investor Relations, (314) 810-3115,
investor.relations@express-scripts.com
 
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